First National Corporation · NASDAQ:FXNC
First National — Investor Presentation (September 2016)
32 slides from First National's investor presentation, Sep 20, 2016
Slide 1: Investor Presentation September 2016
Investor Presentation September 2016 First'D National Corporation
Slide 2: Forward-Looking Statements
Forward-Looking Statements The Company makes forward-looking statements that are subject to risks and uncertainties. These forward-looking statements include statements regarding profitability, liquidity, adequacy of capital, the allowance for loan losses, interest rate sensitivity, market risk, gro
Slide 3: Corporate Profile
Corporate Profile Community bank built on people and relationships Virginia-based franchise founded in 1907, 1 hour west of Washington, DC Full service commercial bank, 14 branches, $711 million in assets in the Shenandoah Valley and central Virginia Low-cost deposit portfolio at 0.21% cost of depos
Slide 4: Locations
ions Locat
Slide 5: Attractive Virginia Markets
Projected population Attractive Virginia Markets Vibrant markets with growth opportunities Winchester MSA Harrisonburg MSA 180,000 + 180,000, -—_________ 160,000 + 160,000 + 140,000 + 140,000 120,000 + 120,000 + 100,000 + 100,000, |——______ 80,000 + 80,000 | 60,000 4 60,000 4 See Pee Staunton-Waynes
Slide 6: Experienced Team
Experienced Team Industry Executive Role Experience Years in Market Scott Harvard President/CEO 39 years 6 years Dennis Dysart Sr. EVP/COO 23 years 23 years Shane Bell EVP/CFO 22 years 14 years Samuel Crow, Jr. EVP/CCO 25 years 2 years Butch Smiley Regional President 34 years 34 years ¢ Experienced
Slide 7: Strategy
Strategy Deliver a consistent, reliable return to shareholders through an efficient operation with organic and opportunistic growth in markets where community engagement is valued. £ 2 © > & 3 ° a oe G va) =s S a Organic ff Initiatives = Grow assets without adding significant overhead Continue deplo
Slide 8: Financial Performance
Financial Performance (dollars in thousands) except per share data Balance Sheet Total assets Total net loans Deposits Total equity Balance Sheet Ratios Loans / Deposits TCE/TA Leverage ratio Total capital ratio Performance Net income Diluted EPS ROAA ROAE Net interest margin Efficiency ratio Asset
Slide 9: Peer comparison
ad C | 1.50% 16.0% 90.0% 4.50% 110.0% 35.0% 3.00% 1.60% a 1.20% 13.0% 82.0% 4.20% + 100.0% 30.0% 2.50% 7a — 1.40% 10.0% 2.00% 1.20% 0.90% 74.0% 3.90% 90.0% 25.0% 7.0% 1.50% 1.00% , 0.60% 4.0% 66.0% 3.60% 80.0% a 20.0% 1.00% 0.20% 0.30% | 1.0% ____ 58.0% 3.30% 70.0% 15.0% 0.50% 0.80% + 0.00% -2.0% 50
Slide 10: Growth by Acquisition
Growth by Acquisition * Purchased 6 branches with $186 million deposits ¢ 21,854 deposit accounts at 0.19% cost of deposits ¢ Announced on 11/19/14, completed on 4/17/15 ¢ Bargain purchase gain (no goodwill intangible) * Leveraged existing capital ¢ Hired regional President and two market executives
Slide 11: Pre-Acquisition Households
Pre-Acquisition Households Elizabeth Elkins pty jopencer Franklin, ‘Sutton Glade View eueee Clay 7 Richmond Farmvilie @ Wolf Trap, Panville Bo 1
Slide 12: Post-Acquisition Households
Post-Acquisition Households ae ae re geen ‘Elkins e n Chesapeake” 12
Slide 13: Balance Sheet Growth
Balance Sheet Growth Total assets ($mm) 7 ($8229 $518.2 $692.3 $701.0 I J $700.0 - 134% | | I 2013 2014 2015 1 1Q16 mLoans, net mSecurities, cash, fed funds 13 Other 2Q16
Slide 14: Improved Profitability
Improved Profitability 14.00% 12.00% 10.00% 8.00% ROAE 6.00% 4.00% 2.00% 0.00% Asset remix Efficiency initiatives a Branch acquisition 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 mmROAA =@-ROE 14 vvou
Slide 15: Improved Profitability: Loans, net
Loans, net Improved Profitability Earning asset growth $500.0 $450.0 $400.0 $350.0 $300.0 (in millions) 1Q15 2Q15 3Q15 mam Loans, net 4Q15 1Q16 =e=Net interest income 15 $6.2 $5.5 $4.7 $4.0 $3.2 Net Interest Income
Slide 16: Improved Profitability
Improved Profitability Expense reduction 250 200 150 FTEs 100 50 (in millions) $6.9 1Q15 2Q15 3Q15 4Q15 1Q16 mmFTEs «@Non-interest expense 16 2Q16 asuadxe 1SaJa]UI-UON
Slide 17: Improved Profitability
Improved Profitability Productivity & efficiency $4.6 $4.4 $4.2 $4.0 $3.8 $3.6 Assets / FTE $3.4 $3.2 $3.0 (dollars in millions) 83.5% 1Q15 2Q15 3Q15 mm Total Assets/Employees 17 4Q15 1Q16 2Q16 ==Efficiency Ratio Efficiency ratio
Slide 18: Earnings Per Share
Earnings Per Share 4 consecutive quarters of earnings improvement Jt $0.29 $0.30 4 Lo $0.25 5 T ag $0.20 + Ai $0.15 - TA $0.10 + wa $0.08 $0.04 7 $0.05 + $0.02 $- 1Q15 2015 3Q15 4Q15 1Q16 2Q16 (basic and diluted) 18
Slide 19: Asset Quality
Asset Quality Improved risk management Nonperforming Assets ($000) $20,000 $15,000 $ $10,000 888 $5,000 6 533 6.370 $4,499 50 | | | 2013 2014 2015 1Q16 2Q16 @ Nonaccrual loans m OREO NPAs / Assets 4.0% 3.0% 2.0% — 1.60% Oy Pkg 0.63% 0.0% : 1 r 1 1 2013 2014 2015 1Q16 2Q16 —FXNC —Peers Nonperforming
Slide 20: Growth Opportunities
Growth Opportunities Organic Initiatives Winchester MSA Harrisonburg MSA Staunton Waynesboro MSA Deposits in Deposits in Deposits in Institution Market ($000) Institution Market ($000) Institution Market ($000) BB&T Corp. $693,468 Wells Fargo & Co. $387,733 Union Bkshs Corp $374,755 Wells Fargo & Co
Slide 21: Growth Opportunities
Growth Opportunities Acquisitions Number of Virginia banks by asset size wo oO n N a k 20 15 ji 16 rn > $5B $1Bto$5B $500M to $1B $250M to < $250M $500M Source: SNL Financial 21
Slide 22: Profitability Opportunities
Profitability Opportunities Continued revenue growth and expense management Efficiency Ratio 82.0% + 80,02 80.0% + 0, 78.0% - y 76.0% + 74,89 f 74.0% + 71.62 71,89 72.0% = 70.0% + 68.0% - 66.0% T 1 T 1 2013 Y 2014 Y 2015 Y 1Q16 2Q16 VA Peer* Source: SNL Financial 22 \ * Peers defined as banks in Vir
Slide 23: Stock Profile
Stock Profile Ticker symbol Exchange OTC Current market price (1) $10.80 Common shares outstanding 4,925,599 Market capitalization $53.2 million Insider ownership 17.4% Institutional ownership 1.5% Quarterly cash dividend (2) $0.03, dividend yield 1.1% Average volume (Tm) 1,999 EPS (ra) $0.29 Tangib
Slide 24: FXNC Stock Performance (LTM)
FXNC Stock Performance (LTM) $11.00 $48.80 +29% year over year $10.50 $10.00 $9.50 $9.00 $8.50 + $8.00 $7.50 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 As of September 15, 2016 24
Slide 25: Value Proposition
Value Proposition * Significant liquidity remains available for loan and revenue growth ¢ Executing plan to improve efficiency ratio ¢ Proven track record of executing strategic plan ¢ Sixth-lowest cost of funds in the Commonwealth of Virginia ¢ Poised to take market share in attractive, growing mar
Slide 26: Appendix
Appendix
Slide 27: Diversified Loan Portfolio
Diversified Loan Portfolio 6/30/16 Loan Composition RE Construction, 7.1% Personal and other, 2.4% @RE Construction BRE 1-4 Family = CRE Other aCél @ Personal and other . iD
Slide 28: Loan Composition Detail
Loan Composition Detail 6/30/16 Loan Compositi RE Construction 1-4 CRE Mutlifamily, Family, 1.0% 1 1.0% 4.4% Other , 2.4% RE Construction CRE Farmland, Other, 6.1% 0.2% RE Home Equity, 6.9% 28 @RE Construction 1-4 Family @RE Construction Other BRE 1-4 Family O/O @RE 1-4 Family Investment BRE Home Eq
Slide 29: Loan Composition CRE Detail
Loan Composition CRE Detail ($000) ($000)| Office/Retail Buildings 6.5% 30,117 Office/Retail Buildings 5.1% 23,916 Other 2.5% 11,465) Hotel/Motel-Franchise 4.3% 20,092 Auto (Sales/R&M) 2.0% 9,140) IndustrialWarehouse 3.1% 14,320 Office/Retail Condo 1.9% 8942 Mixed Use 2.0% 9,386 Industrial/Warehouse
Slide 30: Low Cost Deposits
Low Cost Deposits 6/30/16 Deposit Composition ¢« Non-maturity deposits 79% of deposits Noninterest Time, 21.2% bearing elie ¢ Low cost funding of 9.970 0.21% *« Comprised of 63% individuals, 37% businesses ¢ $12 thousand average market, 24.9% balance ; iD
Slide 31: Driver of Value: Price / TBV by Total Assets
Driver of Value Price / tangible book value by total assets 250% ~ 200% ~ 150% - 107% 94% Price / TBV 100% ~ 50% ~ 0% T v <$500MM $500MM -$1BN $1BN - $5BN $5BN - $10BN Total assets Source: SNL Financial. U.S. banks with assets less than $10 billion 31
Slide 32: Driver of Value: Price / TBV by Efficiency Ratio
Driver of Value Price / tangible book value by efficiency ratio 250% 1929 200% + ee 1549 150% + Price / TBV 1 fo} 445 100% +~ Sh 869 87° 50% 4 0% > 100% 90% to 80% to 70% to 60% to 50% to < 50% 100% 90% 80% 70% 60% Efficiency ratio Source: SNL Financial, U.S banks with assets less than $50 billion 3
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