Holding company loses $945,000 in the second quarter
By James Heffernan -- email@example.com
STRASBURG -- The holding company for First Bank has suspended cash dividends on its common stock, citing the need to strengthen its balance sheet and position the company for future growth.
"It was a difficult decision to eliminate the dividend to loyal stockholders," First National Corp. President and CEO Scott Harvard says in a statement issued late Monday. "However, in the current economic environment it is imperative that strong companies like First National Corporation and First Bank maintain solid capital levels."
The company reported a net loss of $945,000 for the April-June quarter. After paying an elective dividend to the U.S. Treasury in exchange for its 2009 investment in the bank, the loss available to common shareholders for the quarter totaled $1.2 million, or 40 cents per share, compared with a profit of $532,000, or 18 cents per share, for the same period last year.
The year-over-year difference in earnings is primarily the result of an increase in the bank's provision for loan losses.
"Although the allowance for loan losses was increased substantially in the fourth quarter of 2010 to prudently deal with problem loans, the Company increased the allowance again in the second quarter," Harvard says. The additional reserves reflect lower loan collateral values, an increase in charge-offs and the company's concerns about continued weakness in the economy, he says.
In response to the current operating environment, First National has launched a number of initiatives in the past four months, including bringing Harvard, an executive with a wealth of experience in community banking in Virginia, on board. Harvard replaced longtime president and CEO Harry S. Smith, who recently became Winchester market president for Richmond-based Union First Market Bank.
First Bank also has initiated a search for an experienced chief credit officer to join its management team, introduced a new menu of customer checking products and enlisted a credit risk management firm to help with loan policies and procedures, according to the statement.
The bank closed its branch on West Reservoir Road in Woodstock in April.