FXNC Net Income Soars 107% on Strong Loan Growth Post-Merger

Ticker: FXNC · Form: 10-Q · Filed: Aug 13, 2025 · CIK: 719402

First National CORP /Va/ 10-Q Filing Summary
FieldDetail
CompanyFirst National CORP /Va/ (FXNC)
Form Type10-Q
Filed DateAug 13, 2025
Risk Levelmedium
Pages16
Reading Time19 min
Key Dollar Amounts$1.25
Sentimentbullish

Sentiment: bullish

Topics: Regional Banking, Mergers & Acquisitions, Earnings Growth, Loan Portfolio, Interest Income, Financial Performance, Virginia Banking

Related Tickers: FXNC

TL;DR

**FXNC's post-merger growth is paying off, with net income more than doubling, making it a strong buy for regional bank exposure.**

AI Summary

FIRST NATIONAL CORP /VA/ (FXNC) reported a significant increase in net income for the three months ended June 30, 2025, reaching $5.051 million, a 106.8% increase from $2.442 million in the same period of 2024. For the six months ended June 30, 2025, net income rose to $6.649 million, up 17.6% from $5.651 million in 2024. Total interest and dividend income surged to $25.165 million for the three months, a 47.6% increase from $17.055 million in 2024, primarily driven by a 54.2% increase in interest and fees on loans to $21.594 million. However, interest expense also increased by 18.9% to $6.617 million. The company completed the acquisition of Touchstone Bankshares, Inc. on October 1, 2024, which expanded its branch network to thirty-three offices in Virginia and North Carolina. Merger-related expenses totaled $2.032 million for the six months ended June 30, 2025. Total assets grew to $2.041 billion as of June 30, 2025, from $2.010 billion at December 31, 2024. The allowance for credit losses on loans decreased to $15.186 million from $16.400 million, while the provision for credit losses increased to $911 thousand for the three months, up from $400 thousand in 2024.

Why It Matters

This filing reveals FXNC's successful integration of Touchstone Bankshares, driving substantial growth in net interest income and overall profitability. The significant increase in loan interest income suggests effective asset deployment in a rising rate environment, which is crucial for investor confidence in regional banks. While merger expenses impacted the bottom line, the underlying operational improvements and expanded market presence in Virginia and North Carolina position FXNC more competitively against larger regional players. Employees benefit from a larger, more stable institution, and customers gain access to an expanded branch network and services. The market will watch how FXNC leverages its increased scale to sustain growth and manage credit quality.

Risk Assessment

Risk Level: medium — While net income and interest income show strong growth, the provision for credit losses increased by 127.75% to $911 thousand for the three months ended June 30, 2025, compared to $400 thousand in 2024. Additionally, the company incurred $2.032 million in merger expenses for the six months ended June 30, 2025, which, while expected, represents a significant non-recurring cost that could impact short-term profitability metrics.

Analyst Insight

Investors should consider FXNC a strong candidate for a long position, given the substantial net income growth and successful integration of Touchstone Bankshares. Monitor future filings for continued loan growth and stabilization of credit loss provisions, as well as the impact of new accounting pronouncements like ASU 2024-03 on financial disclosures.

Financial Highlights

revenue
$25.165M
total Assets
$2.041B
total Debt
$55.447M
net Income
$5.051M
eps
$0.56
cash Position
$194.315M
revenue Growth
+47.6%

Revenue Breakdown

SegmentRevenueGrowth
Interest and fees on loans$21.594M+54.2%
Interest on deposits in banks$1.891M+20%
Interest and dividends on securities$1.709M+19.6%

Key Numbers

Key Players & Entities

FAQ

What were FIRST NATIONAL CORP /VA/'s net income figures for Q2 2025?

FIRST NATIONAL CORP /VA/ reported net income of $5.051 million for the three months ended June 30, 2025, a significant increase from $2.442 million in the same period of 2024.

How did the acquisition of Touchstone Bankshares, Inc. impact FXNC's operations?

The acquisition of Touchstone Bankshares, Inc. on October 1, 2024, expanded FXNC's branch network to thirty-three offices across Virginia and North Carolina. This merger contributed to increased interest and fees on loans, which rose by 54.2% to $21.594 million for the three months ended June 30, 2025.

What was the total interest and dividend income for FIRST NATIONAL CORP /VA/ in Q2 2025?

For the three months ended June 30, 2025, FIRST NATIONAL CORP /VA/ generated $25.165 million in total interest and dividend income, marking a 47.6% increase compared to $17.055 million in the prior year's quarter.

What were the merger expenses incurred by FXNC in the first half of 2025?

FIRST NATIONAL CORP /VA/ incurred merger costs totaling $2.032 million for the six months ended June 30, 2025, related to the acquisition of Touchstone Bankshares, Inc.

How has FXNC's asset base changed as of June 30, 2025?

Total assets for FIRST NATIONAL CORP /VA/ increased to $2.041 billion as of June 30, 2025, up from $2.010 billion at December 31, 2024, reflecting growth primarily in cash and cash equivalents and securities available for sale.

What is the current risk level for FXNC based on this 10-Q filing?

The risk level is assessed as medium. While the company shows strong growth, the provision for credit losses increased by 127.75% to $911 thousand for the three months ended June 30, 2025, and significant merger expenses of $2.032 million were incurred.

What should investors do with this information about FIRST NATIONAL CORP /VA/?

Investors should consider FXNC for a long position, given the substantial net income growth and successful integration of Touchstone Bankshares. It is advisable to monitor future filings for sustained loan growth and stabilization of credit loss provisions.

What was the basic earnings per common share for FXNC in Q2 2025?

Basic earnings per common share for FIRST NATIONAL CORP /VA/ was $0.56 for the three months ended June 30, 2025, an increase from $0.39 in the same period of 2024.

How many shares of common stock were outstanding for FIRST NATIONAL CORP /VA/ as of August 7, 2025?

As of August 7, 2025, there were 8,989,138 shares of common stock, par value $1.25 per share, of FIRST NATIONAL CORP /VA/ outstanding.

What new accounting pronouncements might affect FIRST NATIONAL CORP /VA/ in the future?

The FASB issued ASU 2024-03, 'Expense Disaggregation Disclosures,' which requires public companies to disclose specific information about certain costs and expenses. This ASU is effective for annual reporting periods beginning after December 15, 2026, and FXNC does not expect a material impact.

Risk Factors

Industry Context

The banking industry is characterized by intense competition, stringent regulatory oversight, and sensitivity to macroeconomic conditions, particularly interest rate movements. Consolidation through mergers and acquisitions remains a trend as institutions seek scale and diversification. Digital transformation and evolving customer expectations are also key drivers shaping the competitive landscape.

Regulatory Implications

First National Corp. operates within a highly regulated environment. Compliance with capital adequacy requirements, consumer protection laws, and anti-money laundering regulations is paramount. Changes in monetary policy and banking supervision can significantly impact profitability and operational strategies.

What Investors Should Do

  1. Monitor loan loss provisions and allowance trends.
  2. Analyze the impact of the Touchstone Bankshares acquisition.
  3. Evaluate interest rate sensitivity and net interest margin trends.
  4. Review the fair value of investment securities.

Key Dates

Glossary

Allowance for credit losses on loans
An estimate of the amount of loans that are expected to be uncollectible. It is a contra-asset account that reduces the carrying value of loans on the balance sheet. (A decrease in this allowance suggests management's improved outlook on loan quality, but the increase in provision for credit losses warrants attention.)
Provision for credit losses
The amount charged to earnings during a period to cover estimated loan losses. It is an expense that increases the allowance for credit losses. (The significant increase in Q2 2025 suggests a more conservative stance or anticipation of future credit issues.)
Goodwill
An intangible asset that arises when a company acquires another company for a price greater than the fair value of its net identifiable assets. It represents the future economic benefits arising from assets acquired in a business combination that are not individually identified and recognized. (The presence of goodwill indicates past acquisitions, and its value is subject to impairment testing.)
Core deposit intangibles, net
An intangible asset representing the value of a bank's core deposits (e.g., checking, savings, money market accounts) over market-rate deposits. It arises from acquisitions. (This intangible asset reflects the value derived from the acquired bank's stable deposit base.)
Securities available for sale
Debt and equity securities that are not classified as held-to-maturity or trading securities. They are reported at fair value, with unrealized gains and losses included in other comprehensive income. (Fluctuations in the fair value of these securities can impact the company's equity through other comprehensive income.)
Securities held to maturity
Debt securities that the company has the intent and ability to hold until maturity. They are reported at amortized cost. (These securities are less susceptible to short-term market fluctuations but do not reflect current market values on the balance sheet.)

Year-Over-Year Comparison

Compared to the prior year, First National Corp. has demonstrated robust revenue growth, with total interest and dividend income increasing by 47.6% in Q2 2025. This surge, primarily from loans, has led to a significant 106.8% increase in net income for the quarter. However, the company also experienced a notable rise in interest expense (18.9%) and incurred substantial merger-related expenses ($2.032 million) due to the Touchstone Bankshares acquisition, which are important factors to consider alongside the positive top-line performance.

Filing Stats: 4,776 words · 19 min read · ~16 pages · Grade level 19.1 · Accepted 2025-08-13 13:34:24

Key Financial Figures

Filing Documents

– FINANCIAL INFORMATION

PART I – FINANCIAL INFORMATION Item 1.

Financial Statements

Financial Statements Consolidated Balance Sheets as of June 30, 2025 (unaudited) and December 31, 2024 3 Consolidated Statements of Income for the three and six months ended June 30, 2025 and 2024 (unaudited) 4 Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2025 and 2024 (unaudited) 6 Consolidated Statements of Cash Flows for the six months ended June 30, 2025 and 2024 (unaudited) 7 Consolidated Statements of Changes in Shareholders' Equity for the three and six months ended June 30, 2025 and 2024 (unaudited) 9

Notes to Consolidated Financial Statements (unaudited)

Notes to Consolidated Financial Statements (unaudited) 11 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 37 Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 48 Item 4.

Controls and Procedures

Controls and Procedures 48

– OTHER INFORMATION

PART II – OTHER INFORMATION Item 1.

Legal Proceedings

Legal Proceedings 49 Item 1A.

Risk Factors

Risk Factors 49 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 50 Item 3. Defaults Upon Senior Securities 50 Item 4. Mine Safety Disclosures 50 Item 5. Other Information 50 Item 6. Exhibits 50 2 Table of Contents

– FINANCIAL INFORMATION

PART I – FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements FIRST NATIONAL CORPORATION Consolidated Balance Sheets (in thousands, except share and per share data) (unaudited) June 30, December 31, 2025 2024* Assets Cash and due from banks $ 34,435 $ 24,916 Interest-bearing deposits in banks 159,880 137,958 Cash and cash equivalents $ 194,315 $ 162,874 Securities available for sale, at fair value 187,579 163,847 Securities held to maturity, at amortized cost (net of allowance for credit losses, 2025, $ 97 ; 2024, $ 94 ) 106,430 109,741 Restricted securities, at cost 5,624 3,741 Loans held for sale 415 409 Loans, net of allowance for credit losses, 2025, $ 15,186 ; 2024, $ 16,400 1,427,836 1,450,195 Other real estate owned, net of valuation allowance, 2025, $ 0 ; 2024, $ 0 — 53 Premises and equipment, net 34,530 34,824 Accrued interest receivable 6,143 6,020 Bank owned life insurance 38,367 37,873 Goodwill 3,030 3,030 Core deposit intangibles, net 14,102 14,986 Other assets 23,070 22,688 Total assets $ 2,041,441 $ 2,010,281 Liabilities and Shareholders' Equity Liabilities Deposits: Noninterest-bearing demand deposits $ 541,204 $ 520,153 Savings and interest-bearing demand deposits 900,658 923,726 Time deposits 361,304 359,899 Total deposits $ 1,803,166 $ 1,803,778 Other borrowings 25,000 — Subordinated debt, net of issuance cost 21,148 21,176 Junior subordinated debt 9,279 9,279 Accrued interest payable and other liabilities 9,316 9,517 Total liabilities $ 1,867,909 $ 1,843,750 Commitments and contingencies Shareholders' Equity Preferred stock, par value $ 1.25 per share; authorized 1,000,000 shares; none issued and outstanding $ — $ — Common stock, par value $ 1.25 per share; authorized 16,000,000 shares; issued and outstanding, 2025, 8,989,138 shares; 2024, 8,974,102 shares 11,236 11,218 Surplus 77,578 77,058 Retained earnings 100,810 96,947 Accumulated othe

Notes to Consolidated Financial Statements (Unaudited)

Notes to Consolidated Financial Statements (Unaudited) Note 1. General Basis of Presentation The accompanying unaudited consolidated financial statements of First National Corporation (the Company) and its subsidiary, First Bank (the Bank), have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and in accordance with guidance provided by the Securities and Exchange Commission (SEC). Accordingly, they do not include all of the information and footnotes required by GAAP for annual year-end financial statements. All significant intercompany balances and transactions have been eliminated. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments and reclassifications of a normal and recurring nature considered necessary to present fairly the financial positions at June 30, 2025 and December 31, 2024 , the statements of income and comprehensive income for the three and six months ended June 30, 2025 and 2024 , the cash flows for the six months ended June 30, 2025 and 2024 , and the changes in shareholders' equity for the three and six months ended June 30, 2025 and 2024 . The statements should be read in conjunction with the consolidated financial statements and related notes included in the Annual Report on Form 10 -K for the year ended December 31, 2024 . Operating results for the three and six months ended June 30, 2025 are not necessarily indicative of the results that may be expected for the year ending December 31, 2025 . Certain items in the prior period financial statements have been reclassified to conform to the current presentation. These reclassifications had no effect on prior year net income or shareholders' equity. Significant Accounting Policies and Estimates Application of the principles of GAAP and practices within the banking industry requires management to make estimates, assumptions, and judgements that affect the a

Notes to Consolidated Financial Statements (Unaudited)

Notes to Consolidated Financial Statements (Unaudited) Note 2. Securities The Company invests in U.S. Treasury securities, U.S. agency and mortgage-backed securities, obligations of state and political subdivisions, and corporate debt securities. Amortized co sts, gross unrealized gains and losses, allowance for credit losses, an d fair values of debt securities at June 30, 2025 and December 31, 2024 were as follows (in thousands): June 30, 2025 Amortized Cost Gross Unrealized Gains Gross Unrealized (Losses) Fair Value Allowance for Credit Losses Securities available for sale: U.S. Treasury securities $ 39,319 $ 33 $ ( 545 ) $ 38,807 $ — U.S. agency and mortgage-backed securities 104,600 122 ( 10,062 ) 94,660 — Obligations of states and political subdivisions 62,591 8 ( 8,487 ) 54,112 — Total securities available for sale $ 206,510 $ 163 $ ( 19,094 ) $ 187,579 $ — Securities held to maturity: U.S. Treasury securities $ 9,759 $ — $ ( 64 ) $ 9,695 $ — U.S. agency and mortgage-backed securities 83,126 — ( 7,116 ) 76,010 — Obligations of states and political subdivisions 10,642 2 ( 1,202 ) 9,442 — Corporate debt securities 3,000 — ( 419 ) 2,581 ( 97 ) Total securities held to maturity $ 106,527 $ 2 $ ( 8,801 ) $ 97,728 $ ( 97 ) Total securities $ 313,037 $ 165 $ ( 27,895 ) $ 285,307 $ ( 97 ) December 31, 2024 Amortized Cost Gross Unrealized Gains Gross Unrealized (Losses) Fair Value Allowance for Credit Losses Securities available for sale: U.S. Treasury securities $ 12,483 $ — $ ( 795 ) $ 11,688 $ — U.S. agency and mortgage-backed securities 110,480 57 ( 12,498 ) 98,039 — Obligations of states and political subdivisions 62,954 5 ( 8,839 ) 54,120 — Total securities available for sale $ 185,917 $ 62 $ ( 22,132 ) $ 163,847 $ — Securities held to maturity: U.S. Treasury securities $ 9,632 $ — $ ( 125 ) $ 9,507 $ — U.S. agency and mortgage-backed securities 86,554 — ( 9,282 )

Notes to Consolidated Financial Statements (Unaudited)

Notes to Consolidated Financial Statements (Unaudited) Information pertaining to available for sale securities with gross unrealized losses aggregated by investment category and length of time that individual securities have been in a continuous loss position is as follows (in thousands): June 30, 2025 Less than 12 months 12 months or more Total Fair Value Unrealized (Loss) Fair Value Unrealized (Loss) Fair Value Unrealized (Loss) Securities available for sale: U.S. Treasury securities $ 13,823 $ ( 10 ) $ 11,953 $ ( 535 ) $ 25,776 $ ( 545 ) U.S. agency and mortgage-backed securities 2,302 ( 34 ) 65,191 ( 10,028 ) 67,493 ( 10,062 ) Obligations of states and political subdivisions 2,371 ( 27 ) 48,635 ( 8,460 ) 51,006 ( 8,487 ) Total securities available for sale $ 18,496 $ ( 71 ) $ 125,779 $ ( 19,023 ) $ 144,275 $ ( 19,094 ) December 31, 2024 Less than 12 months 12 months or more Total Fair Value Unrealized (Loss) Fair Value Unrealized (Loss) Fair Value Unrealized (Loss) Securities available for sale: U.S. Treasury securities $ — $ — $ 11,688 $ ( 795 ) $ 11,688 $ ( 795 ) U.S. agency and mortgage-backed securities 23,445 ( 237 ) 67,800 ( 12,261 ) 91,245 ( 12,498 ) Obligations of states and political subdivisions 4,839 ( 135 ) 47,776 ( 8,704 ) 52,615 ( 8,839 ) Total securities available for sale $ 28,284 $ ( 372 ) $ 127,264 $ ( 21,760 ) $ 155,548 $ ( 22,132 ) The tables above provide information about available for sale securities that have been in an unrealized loss position for less than twelve consecutive months and securities that have been in an unrealized loss position for twelve consecutive months or more. Management evaluates securities to determine whether the impairment is due to credit-related factors or noncredit-related factors at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to the extent to whic

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