FXNC Net Income Soars 147% on Strong Loan Growth Post-Merger

TL;DR

**FXNC is crushing it post-merger, with net income exploding and credit quality looking solid – buy the dip if you can find one!**

AI Summary

FIRST NATIONAL CORP /VA/ (FXNC) reported a significant increase in net income for the three and nine months ended September 30, 2025, driven by robust net interest income growth. Net income for the three months ended September 30, 2025, surged to $5.55 million, a 146.9% increase from $2.248 million in the same period of 2024. For the nine months ended September 30, 2025, net income rose to $12.199 million, up 54.4% from $7.899 million in 2024. This growth was primarily fueled by a substantial increase in interest and fees on loans, which jumped to $21.43 million for the three months and $63.661 million for the nine months in 2025, compared to $14.479 million and $41.967 million respectively in 2024. Total assets increased to $2.030 billion as of September 30, 2025, from $2.010 billion at December 31, 2024. The company's acquisition of Touchstone Bankshares, Inc. in October 2024 significantly impacted these results, contributing to increased noninterest expenses, including $2.032 million in merger expenses for the nine months ended September 30, 2025. The provision for credit losses decreased to $193 thousand for the three months and $1.936 million for the nine months ended September 30, 2025, from $1.7 million and $3.1 million in the prior year periods, indicating improved credit quality or a more favorable economic outlook. Diluted earnings per common share increased to $0.62 for the three months and $1.35 for the nine months ended September 30, 2025, from $0.36 and $1.26 respectively in 2024.

Why It Matters

FXNC's substantial net income growth and increased earnings per share signal strong operational performance and successful integration of the Touchstone Bankshares acquisition, which could attract new investors seeking growth in regional banking. The reduction in provision for credit losses suggests a healthier loan portfolio, potentially boosting investor confidence and reducing perceived risk. For employees, the expansion through acquisition and subsequent integration could mean new opportunities and job security within a larger, more robust institution. Customers of the former Touchstone Bank now benefit from a broader service network under the First Bank brand, potentially leading to enhanced offerings and competitive services in Virginia and North Carolina. This performance also indicates a strengthening regional banking market, potentially impacting local economies through increased lending capacity and community investment.

Risk Assessment

Risk Level: medium — While net income is up significantly, the company incurred $2.032 million in merger expenses for the nine months ended September 30, 2025, indicating ongoing integration costs. Additionally, total liabilities increased to $1.849 billion from $1.843 billion, and loans, net of allowance for credit losses, decreased to $1.418 billion from $1.450 billion, which could signal a slight contraction in core lending activities despite the overall interest income growth.

Analyst Insight

Investors should consider FXNC's strong net income growth and improved earnings per share as a positive indicator of successful merger integration and operational efficiency. Monitor future filings for continued reduction in merger-related expenses and sustained loan growth to confirm long-term value. The reduced provision for credit losses suggests a stable asset quality, making FXNC a potentially attractive regional bank investment.

Financial Highlights

debt To Equity

10.21

revenue

$74.27M

operating Margin

N/A

total Assets

$2.030B

total Debt

$21.241M

net Income

$12.199M

eps

$1.35

gross Margin

N/A

cash Position

$189.317M

revenue Growth

+46.1%

Revenue Breakdown

Key Numbers

• $5.55M — Net Income (3 months) (Increased 146.9% from $2.248M in Q3 2024)
• $12.199M — Net Income (9 months) (Increased 54.4% from $7.899M in 9M 2024)
• $21.43M — Interest & Fees on Loans (3 months) (Increased from $14.479M in Q3 2024)
• $63.661M — Interest & Fees on Loans (9 months) (Increased from $41.967M in 9M 2024)
• $2.030B — Total Assets (Increased from $2.010B at Dec 31, 2024)
• $193K — Provision for Credit Losses (3 months) (Decreased from $1.7M in Q3 2024)
• $1.936M — Provision for Credit Losses (9 months) (Decreased from $3.1M in 9M 2024)
• $0.62 — Diluted EPS (3 months) (Increased from $0.36 in Q3 2024)
• $1.35 — Diluted EPS (9 months) (Increased from $1.26 in 9M 2024)
• $2.032M — Merger Expense (9 months) (Incurred due to Touchstone Bankshares acquisition)

Key Players & Entities

• FIRST NATIONAL CORP /VA/ (company) — Registrant and parent company
• First Bank (company) — Wholly owned subsidiary of First National Corporation
• Touchstone Bankshares, Inc. (company) — Acquired company in October 2024 merger
• Securities and Exchange Commission (regulator) — Regulatory body for financial filings
• $5.55 million (dollar_amount) — Net income for three months ended September 30, 2025
• $12.199 million (dollar_amount) — Net income for nine months ended September 30, 2025
• $2.030 billion (dollar_amount) — Total assets as of September 30, 2025
• $2.032 million (dollar_amount) — Merger expenses for nine months ended September 30, 2025
• $0.62 (dollar_amount) — Basic earnings per common share for three months ended September 30, 2025
• $1.35 (dollar_amount) — Diluted earnings per common share for nine months ended September 30, 2025

FAQ

Risk Factors

• Credit Risk [medium — financial]: The company holds $1.419 billion in loans net of allowance for credit losses as of September 30, 2025. While the provision for credit losses decreased significantly to $193 thousand for Q3 2025 from $1.7 million in Q3 2024, ongoing credit quality of the loan portfolio remains a key financial risk.
• Integration Risk from Acquisition [medium — operational]: The acquisition of Touchstone Bankshares, Inc. in October 2024 introduces operational integration challenges. The company incurred $2.032 million in merger expenses for the nine months ended September 30, 2025, highlighting the costs and complexities associated with combining operations.
• Interest Rate Sensitivity [medium — market]: As a bank, FXNC's profitability is sensitive to changes in interest rates. Fluctuations in market interest rates can impact net interest income, the fair value of securities, and borrowing costs.
• Regulatory Compliance [high — regulatory]: The banking industry is heavily regulated. Changes in regulations or failure to comply with existing regulations could result in fines, penalties, and reputational damage.
• Securities Portfolio Valuation [low — financial]: The company holds $196.48 million in securities available for sale and $104.61 million in securities held to maturity as of September 30, 2025. Unrealized losses on these securities, particularly in the 'available for sale' category ($15.802 million as of Sept 30, 2025), can impact equity and potentially require recognition of losses if sold.

Industry Context

FIRST NATIONAL CORP /VA/ operates within the highly competitive U.S. regional banking sector. Key industry trends include ongoing consolidation, the increasing importance of digital banking services, and navigating a dynamic interest rate environment. Regional banks are focused on loan growth, deposit gathering, and managing operational efficiency while adhering to stringent regulatory requirements.

Regulatory Implications

As a financial institution, FXNC is subject to extensive regulation by federal and state authorities, including the Federal Reserve and the FDIC. Compliance with capital adequacy, liquidity, and consumer protection regulations is paramount. The acquisition of Touchstone Bankshares may also trigger additional regulatory scrutiny or integration requirements.

What Investors Should Do

1. Monitor loan growth and credit quality trends.
2. Assess the impact of the Touchstone acquisition on profitability and integration.
3. Evaluate the company's net interest margin (NIM) performance.
4. Review non-interest expense trends.

Key Dates

• 2024-10-01: Acquisition of Touchstone Bankshares, Inc. — Significantly impacted financial results, contributing to asset growth and increased expenses, but also potential for expanded market reach and revenue synergies.
• 2025-09-30: End of Q3 2025 — Reporting period for the 10-Q, showing substantial net income growth and increased loan interest income.
• 2024-09-30: End of Q3 2024 — Prior year comparison period, highlighting the significant year-over-year improvements in net income and interest income.
• 2024-12-31: End of Fiscal Year 2024 — Previous year-end balance sheet date, used as a comparison for total asset growth.

Glossary

Allowance for credit losses

An estimate of the amount of uncollectible loans in a company's loan portfolio. It is a contra-asset account that reduces the carrying value of loans on the balance sheet. (A decrease in this allowance suggests improved credit quality or a more optimistic economic outlook, positively impacting net income.)

Net interest income

The difference between the interest income generated by a bank's interest-earning assets (like loans and securities) and the interest paid out on its interest-bearing liabilities (like deposits and borrowings). (This is a primary driver of profitability for banks. FXNC saw a significant increase in this due to higher interest and fees on loans.)

Diluted earnings per common share (EPS)

A measure of a company's profit allocated to each outstanding share of common stock, assuming all convertible securities (like stock options and convertible bonds) were exercised or converted. (An increase in diluted EPS indicates improved profitability on a per-share basis for shareholders.)

Goodwill

An intangible asset that arises when one company acquires another company for a price greater than the fair value of its identifiable net assets. It represents the future economic benefits arising from assets acquired in a business combination that are not individually identified and recognized. (FXNC has $3.030 million in goodwill, primarily from the Touchstone acquisition, representing the premium paid over the fair value of acquired net assets.)

Securities available for sale

Investments in debt and equity securities that are not classified as held-to-maturity or trading securities. They are reported at fair value on the balance sheet, with unrealized gains and losses recorded in other comprehensive income. (FXNC has $196.48 million in these securities, and their fair value fluctuations impact the company's equity.)

Securities held to maturity

Investments in debt securities that the company has the intent and ability to hold until their maturity date. They are reported at amortized cost on the balance sheet. (FXNC holds $104.61 million in these securities, which are less susceptible to short-term market value fluctuations compared to 'available for sale' securities.)

Year-Over-Year Comparison

Compared to the prior year period, FIRST NATIONAL CORP /VA/ (FXNC) has demonstrated robust growth, with net income for the nine months ended September 30, 2025, increasing by 54.4% to $12.199 million. This surge was primarily driven by a substantial 53.1% increase in interest and fees on loans, reaching $63.661 million. Total assets have seen modest growth, rising to $2.030 billion from $2.010 billion at year-end 2024. The company also reported a significant decrease in the provision for credit losses, down from $3.1 million to $1.936 million for the nine-month period, suggesting improved credit conditions or risk management. However, non-interest expenses have risen, notably due to $2.032 million in merger expenses related to the Touchstone Bankshares acquisition.

Key Financial Figures

• $1.25 — ch registered Common stock, par value $1.25 per share FXNC The Nasdaq Stock Mar

Filing Documents

• fxnc20250930_10q.htm (10-Q) — 3844KB
• ex_855447.htm (EX-31.1) — 15KB
• ex_855448.htm (EX-31.2) — 15KB
• ex_855449.htm (EX-32.1) — 7KB
• ex_855450.htm (EX-32.2) — 7KB
• first1nationalcorporationa09.jpg (GRAPHIC) — 10KB
• 0001437749-25-035092.txt ( ) — 17469KB
• fxnc-20250930.xsd (EX-101.SCH) — 80KB
• fxnc-20250930_cal.xml (EX-101.CAL) — 85KB
• fxnc-20250930_def.xml (EX-101.DEF) — 617KB
• fxnc-20250930_lab.xml (EX-101.LAB) — 514KB
• fxnc-20250930_pre.xml (EX-101.PRE) — 658KB
• fxnc20250930_10q_htm.xml (XML) — 4840KB

– FINANCIAL INFORMATION

PART I – FINANCIAL INFORMATION Item 1.

Financial Statements

Financial Statements Consolidated Balance Sheets as of September 30, 2025 (unaudited) and December 31, 2024 3 Consolidated Statements of Income for the three and nine months ended September 30, 2025 and 2024 (unaudited) 4 Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2025 and 2024 (unaudited) 6 Consolidated Statements of Cash Flows for the nine months ended September 30, 2025 and 2024 (unaudited) 7 Consolidated Statements of Changes in Shareholders' Equity for the three and nine months ended September 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 38 Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 49 Item 4.

Controls and Procedures

Controls and Procedures 49

– OTHER INFORMATION

PART II – OTHER INFORMATION Item 1.

Legal Proceedings

Legal Proceedings 50 Item 1A.

Risk Factors

Risk Factors 50 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 51 Item 3. Defaults Upon Senior Securities 51 Item 4. Mine Safety Disclosures 51 Item 5. Other Information 51 Item 6. Exhibits 51 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) September 30, December 31, 2025 2024* Assets Cash and due from banks $ 23,716 $ 24,916 Interest-bearing deposits in banks 165,601 137,958 Cash and cash equivalents $ 189,317 $ 162,874 Securities available for sale, at fair value 196,476 163,847 Securities held to maturity, at amortized cost (net of allowance for credit losses, 2025, $ 83 ; 2024, $ 95 ) 104,608 109,741 Restricted securities, at cost 4,436 3,741 Loans held for sale — 409 Loans, net of allowance for credit losses, 2025, $ 14,447 ; 2024, $ 16,400 1,418,750 1,450,195 Other real estate owned, net of valuation allowance, 2025, $ 0 ; 2024, $ 0 — 53 Premises and equipment, net 34,107 34,824 Accrued interest receivable 6,238 6,020 Bank owned life insurance 38,652 37,873 Goodwill 3,030 3,030 Core deposit intangibles, net 13,661 14,986 Other assets 21,479 22,688 Total assets $ 2,030,754 $ 2,010,281 Liabilities and Shareholders' Equity Liabilities Deposits: Noninterest-bearing demand deposits $ 511,482 $ 520,153 Savings and interest-bearing demand deposits 931,241 923,726 Time deposits 366,860 359,899 Total deposits $ 1,809,583 $ 1,803,778 Subordinated debt, net of issuance cost 21,241 21,176 Junior subordinated debt 9,279 9,279 Accrued interest payable and other liabilities 9,442 9,517 Total liabilities $ 1,849,545 $ 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, 9,009,209 shares; 2024, 8,974,102 shares 11,262 11,218 Surplus 78,187 77,058 Retained earnings 104,964 96,947 Accumulated other comprehensive loss, net

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 September 30, 2025 and December 31, 2024 , the statements of income and comprehensive income for the three and nine months ended September 30, 2025 and 2024 , the cash flows for the nine months ended September 30, 2025 and 2024 , and the changes in shareholders' equity for the three and nine months ended September 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 nine months ended September 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

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 September 30, 2025 and December 31, 2024 were as follows (in thousands): September 30, 2025 Amortized Cost Gross Unrealized Gains Gross Unrealized (Losses) Fair Value Allowance for Credit Losses Securities available for sale: U.S. Treasury securities $ 34,425 $ 124 $ ( 418 ) $ 34,131 $ — U.S. agency and mortgage-backed securities 115,347 206 ( 8,911 ) 106,642 — Obligations of states and political subdivisions 62,146 30 ( 6,473 ) 55,703 — Total securities available for sale $ 211,918 $ 360 $ ( 15,802 ) $ 196,476 $ — Securities held to maturity: U.S. Treasury securities $ 9,825 $ — $ ( 31 ) $ 9,794 $ — U.S. agency and mortgage-backed securities 81,431 7 ( 6,178 ) 75,260 — Obligations of states and political subdivisions 10,435 22 ( 828 ) 9,629 — Corporate debt securities 3,000 — ( 308 ) 2,692 ( 83 ) Total securities held to maturity $ 104,691 $ 29 $ ( 7,345 ) $ 97,375 $ ( 83 ) Total securities $ 316,609 $ 389 $ ( 23,147 ) $ 293,851 $ ( 83 ) 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 86,555

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): September 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 $ 4,958 $ — $ 12,072 $ ( 418 ) $ 17,030 $ ( 418 ) U.S. agency and mortgage-backed securities 9,718 ( 78 ) 63,649 ( 8,833 ) 73,367 ( 8,911 ) Obligations of states and political subdivisions — — 48,282 ( 6,473 ) 48,282 ( 6,473 ) Total securities available for sale $ 14,676 $ ( 78 ) $ 124,003 $ ( 15,724 ) $ 138,679 $ ( 15,802 ) 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

View Full Filing

View this 10-Q filing on SEC EDGAR