• First National Corporation Reports Second Quarter Financial Results

    Источник: Nasdaq GlobeNewswire / 31 июл 2024 07:00:01   America/New_York

    STRASBURG, Va., July 31, 2024 (GLOBE NEWSWIRE) -- First National Corporation (the “Company” or “First National”) (NASDAQ: FXNC), reported unaudited consolidated net income of $2.4 million and basic and diluted earnings per common share of $0.39 for the second quarter of 2024 and adjusted net income(1) of $3.0 million and adjusted basic and diluted earnings per common share(1) of $0.48.

    (Dollars in thousands, except earnings per share) Three Months Ended 
      Jun 30, 2024  Mar 31, 2024  Jun 30, 2023 
    Net income $2,442  $3,209  $3,505 
    Basic and diluted earnings per share $0.39  $0.51  $0.56 
    Return on average assets  0.68%  0.90%  1.02%
    Return on average equity  8.31%  11.07%  12.56%
                 
    Non-GAAP Measures:            
    Adjusted net income (1) $3,008  $3,209  $3,505 
    Adjusted diluted earnings per share (1) $0.48  $0.51  $0.56 
    Adjusted return on average assets (1)  0.84%  0.90%  1.02%
    Adjusted return on equity (1)  10.23%  11.07%  12.56%
    Net interest margin (1)  3.40%  3.24%  3.36%
    Efficiency ratio (1)  70.65%  65.65%  68.37%
                 

    “The Company finished an eventful first half of the year with solid second quarter financial performance in a very challenging banking environment,” said Scott C. Harvard, President and CEO. Harvard continued, “We continue to make progress on the recently announced acquisition of Touchstone Bankshares, Inc., receiving regulatory approval from the Federal Reserve, preparing for the August 29 special meetings of shareholders, and remaining on schedule for a fourth quarter closing. Excluding $571 thousand in merger related expenses, the Company reported adjusted net income of $3.0 million for the quarter, experienced a $13.7 million increase in noninterest-bearing deposits, and benefited from a 16-basis point increase in the net interest margin.”

    SECOND QUARTER HIGHLIGHTS

    Key highlights of the three months ended June 30, 2024, are as follows. Comparisons are to the three-month period ended March 31, 2024, unless otherwise stated:

    • Net interest margin(1) improved 16 basis points to 3.40%
    • Loans increased $17.0 million, or 7% annualized
    • Deposits increased $6.7 million, or 2% annualized
    • Noninterest-bearing deposits were stable at 31% of total deposits
    • Merger expenses totaled $571 thousand
    • Tangible book value per share (1) increased to $18.59

    MERGER WITH TOUCHSTONE BANKSHARES, INC.

    On March 26, 2024, the Company and Touchstone Bankshares, Inc. (Touchstone) announced they had entered into a definitive merger agreement for First National to acquire Touchstone in an all-stock transaction. Each outstanding share of Touchstone will be converted into 0.8122 shares of First National’s common stock. The merger is anticipated to close in the fourth quarter of 2024, pending the satisfaction of customary closing conditions, including approval by the Bureau of Financial Institutions division of the State Corporation Commission of the Commonwealth of Virginia, and from the shareholders of Touchstone and the shareholders of First National at their respective special meetings of shareholders that are scheduled on August 29, 2024. With the acquisition of Touchstone, the Company would expand its presence in the Richmond area with the addition of seven branches in the market and is expected to become the ninth largest Virginia community bank as ranked by deposits. During the second quarter of 2024, the Company incurred pre-tax merger costs of approximately $571 thousand related to the planned merger with Touchstone. 

    NET INTEREST INCOME

    Net interest income increased $644 thousand, or 6%, to $11.5 million for the second quarter of 2024 compared to the first quarter of 2024. Total interest income increased by $721 thousand, or 4%, and was partially offset by a $77 thousand, or 1%, increase in total interest expense.

    The $721 thousand increase in total interest income was attributable to a $520 thousand increase in interest and fees on loans and a $291 thousand increase in interest income on deposits in other banks, which were partially offset by a $90 thousand decrease in interest income on securities. The increase in interest and fees on loans was attributable to a 15-basis point increase in the yield on the loan portfolio and an $11.3 million increase in the average balance of loans. The increase in interest income on deposits in other banks was attributable to a $15.6 million increase in average balances. The decrease in interest income on securities was primarily attributable to an $18.0 million decrease in the average balance of total securities.

    The $77 thousand increase in total interest expense was primarily attributable to a $49 thousand increase in interest expense on deposits. The increase in interest expense on deposits resulted from a 3-basis point increase in the cost of interest-bearing deposits. The total cost of funds was 1.69% for the second quarter of 2024, which was a 1-basis point increase compared to the first quarter of 2024.

    NONINTEREST INCOME

    Noninterest income totaled $2.7 million for the second quarter of 2024, which was a $1.4 million decrease from the first quarter of 2024 and was primarily attributable to a decrease in other operating income. Other operating income decreased $1.3 million from a recovery on a charged-off loan that was recognized in the first quarter of 2024. The recovery was from a loan that was acquired through a business combination in a prior year. Income from service charges on deposits and income from fees for other customer services also decreased but were partially offset by an increase in ATM and check card fees. 

    NONINTEREST EXPENSE

    Noninterest expense totaled $10.7 million for the second quarter of 2024, which was an increase of $772 thousand or 8% over the first quarter of 2024. The increase was primarily attributable to a $672 thousand increase in legal and professional fees, which included $562 thousand of merger-related costs. Merger expenses totaled $571 thousand for the second quarter of 2024.

    ASSET QUALITY

    Overview

    Loans that were past due greater than 30 days and still accruing interest as a percentage of total loans were 0.24% on June 30, 2024, 0.23% on March 31, 2024, and 0.10% on June 30, 2023. Nonperforming assets (“NPAs”) as a percentage of total assets increased to 0.59% on June 30, 2024, compared to 0.55% on March 31, 2024, and 0.05% on June 30, 2023. Annualized net charge-offs as a percentage of total loans were 0.20% for the second quarter of 2024 and 0.15% for the first quarter of 2024, while annualized net recoveries were 0.04% of total loans for the second quarter of 2023. The allowance for credit losses on loans totaled $12.6 million, or 1.27% of total loans on June 30, 2024, $12.6 million, or 1.30% of total loans on March 31, 2024, and $8.9 million, or 0.95% of total loans on June 30, 2023.

    Past Due Loans

    Loans past due greater than 30 days and still accruing interest totaled $2.4 million on June 30, 2024, $2.5 million on March 31, 2024, and $970 thousand on June 30, 2023. There were no loans greater than 90 days past due and still accruing on June 30, 2024, compared to $175 thousand on March 31, 2024, and $226 thousand on June 30, 2023.

    Nonperforming Assets

    NPAs increased to $8.5 million on June 30, 2024 from $8.0 million on March 31, 2024, and $722 thousand on June 30, 2023, and represented 0.59%, 0.55%, and 0.05% of total assets, respectively. The increases were primarily attributable to an increase in nonaccrual commercial and industrial loans.

    Net Charge-offs

    Net charge-offs totaled $482 thousand for the second quarter of 2024 and $362 thousand for the first quarter of 2024. Net recoveries totaled $96 thousand for the second quarter of 2023.

    Provision for Credit Losses

    The provision for credit losses totaled $400 thousand for the second quarter of 2024, $1.0 million for the first quarter of 2024, and $100 thousand in the second quarter of 2023. The second quarter 2024 provision was comprised of a $432 thousand provision for credit losses on loans, a $6 thousand recovery of credit losses on held-to-maturity securities, and a $26 thousand recovery of credit losses on unfunded commitments.

    Allowance for Credit Losses on Loans

    The allowance for credit losses on loans totaled $12.6 million on June 30, 2024, $12.6 million on March 31, 2024, and $8.9 million on June 30, 2023. During the second quarter of 2024, the specific reserve component of the allowance increased by $182 thousand, while the general reserve component of the allowance decreased by $131 thousand.

    The following table provides the changes in the allowance for credit losses on loans for the three-month periods ended (dollars in thousands):

      Jun 30, 2024  Mar 31, 2024  Jun 30, 2023 
    Allowance for credit losses on loans, beginning of period $12,603  $11,974  $8,717 
    Net (charge-offs) recoveries  (482)  (362)  96 
    Provision for credit losses on loans  432   991   45 
    Allowance for credit losses on loans, end of period $12,553  $12,603  $8,858 
                 

    The allowance for credit losses on loans as a percentage of total loans totaled 1.27% on June 30, 2024, 1.30% on March 31, 2024, and 0.95% on June 30, 2023.

     Allowance for Credit Losses on Unfunded Commitments

    The allowance for credit losses on unfunded commitments totaled $387 thousand on June 30, 2024 and $413 thousand on March 31, 2024. There was a $26 thousand recovery of credit losses on unfunded commitments in the second quarter of 2024. There was no provision for credit losses on unfunded commitments in the first quarter of 2024 and the provision for credit losses on unfunded commitments totaled $197 thousand for the second quarter of 2023.
      
    Allowance for Credit Losses on Securities 

    The allowance for credit losses on securities held-to-maturity (“HTM”) totaled $110 thousand on June 30, 2024, compared to $116 thousand on March 31, 2024, and $144 thousand on June 30, 2023. The recovery of credit losses on securities totaled $6 thousand for the second quarter of 2024 compared to a provision of credit losses on securities of $9 thousand and $11 thousand for the first quarter of 2024 and the second quarter of 2023, respectively.

    LIQUIDITY

    Liquidity sources available to the Bank, including interest-bearing deposits in banks, unpledged securities available for sale, at fair value, unpledged securities held-to-maturity, at par, that were eligible to be pledged to the Federal Reserve Bank through its Bank Term Funding Program, and available lines of credit totaled $533.3 million on June 30, 2024, $554.8 million on March 31, 2024, and $561.7 million on June 30, 2023.

    The Bank maintains liquidity to fund loan growth and to meet potential demand from deposit customers. The estimated amount of uninsured customer deposits totaled $419.4 million on June 30, 2024, $391.9 million on March 31, 2024, and $343.0 million on June 30, 2023. Excluding municipal deposits, the estimated amount of uninsured customer deposits totaled $324.5 million on June 30, 2024, $308.6 million on March 31, 2024, and $257.7 million on June 30, 2023.

    BALANCE SHEET

    Assets totaled $1.5 billion on June 30, 2024, which was a $10.3 million, or 3% (annualized), increase from March 31, 2024, and an $83.3 million, or 6%, increase from June 30, 2023. The increase in total assets from the first quarter of 2024 was primarily due to a $17.1 million increase in loans, net of the allowance for credit losses on loans, which was partially offset by a $5.3 million decrease in interest-bearing deposits in banks. Total assets increased from June 30, 2023 primarily from a $64.5 million increase in interest-bearing deposits in banks and a $56.1 million increase in loans, net of the allowance for credit losses on loans, which were partially offset by a $28.2 million decrease in securities held to maturity and an $11.9 decrease in securities available for sale (“AFS”).

    At June 30, 2024, loans totaled $990.0 million, an increase of $17.0 million or 7% (annualized) from $973.0 million, at March 31, 2024. Quarterly average loans totaled $982.0 million, an increase of $11.3 million or 5% (annualized) from the first quarter of 2024. At June 30, 2024, loans increased $59.8 million, or 6%, from one year ago, and quarterly average loans increased $59.0 million, or 6%, when comparing the second quarter of 2024 to the same period in 2023.

    At June 30, 2024, total investments were $268.3 million, a decrease of $5.2 million from March 31, 2024, and a decrease of $40.1 million from June 30, 2023. AFS securities totaled $144.8 million at June 30, 2024, $147.7 million at March 31, 2024, and $156.7 million at June 30, 2023. At June 30, 2024, total net unrealized losses on the AFS securities portfolio were $21.9 million, a decrease of $266 thousand from total net unrealized losses on AFS securities of $22.2 million at March 31, 2024. HTM securities are carried at cost and totaled $123.6 million at June 30, 2024, $125.9 million at March 31, 2024, and $151.7 million at June 30, 2023, and had net unrealized losses of $11.4 million at June 30, 2024, a decrease of $501 thousand from net unrealized losses on HTM securities of $11.9 at March 31, 2024.

    At June 30, 2024, total deposits were $1.3 billion, an increase of $6.7 million or approximately 2% (annualized) from March 31, 2024. Quarterly average deposits increased from the first quarter of 2024 by $14.0 million or 5% (annualized). Total deposits increased $23.4 million or 2% from June 30, 2023, and quarterly average deposits for the second quarter of 2024 increased $17.0 million or 5% from the second quarter of 2023. Total deposits increased from the prior quarter due to a $13.7 million increase in noninterest-bearing deposits and $5.2 million increase in time deposits, which were partially offset by a $12.3 million decrease in interest-bearing demand deposits.

    On June 30, 2024 and March 31, 2024, other borrowings totaled $50.0 million and were comprised of funds borrowed from the Federal Reserve Bank through their Bank Term Funding Program. On June 30, 2024, other borrowings had a fixed interest rate of 4.76% and a maturity date of January 15, 2025. The Bank benefited from the borrowing with a reduction in interest rate risk and an increase in net interest income. There were no other borrowings on June 30, 2023.

    The following table provides capital ratios at the periods ended:

      Jun 30, 2024  Mar 31, 2024  Jun 30, 2023 
    Total capital ratio (2)  14.13%  14.45%  14.88%
    Tier 1 capital ratio (2)  12.88%  13.20%  13.93%
    Common equity Tier 1 capital ratio (2)  12.88%  13.20%  13.93%
    Leverage ratio (2)  9.17%  9.19%  9.72%
    Common equity to total assets (3)  8.23%  8.14%  8.21%
    Tangible common equity to tangible assets (3)  8.03%  7.94%  8.00%
                 

    During the second quarter of 2024, the Company declared and paid cash dividends of $0.15 per common share, which was consistent with the first quarter of 2024 and the second quarter of 2023. 

    NON-GAAP FINANCIAL MEASURES

    In addition to financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), the Company uses certain non-GAAP financial measures that provide useful information for financial and operational decision making, evaluating trends, and comparing financial results to other financial institutions. The non-GAAP financial measures presented in this document include adjusted net income, adjusted basic and diluted earnings per share, adjusted return on average assets, adjusted return on average equity, fully taxable equivalent interest income, the net interest margin, the efficiency ratio, tangible book value per share, and tangible common equity to tangible assets.

    The Company believes certain non-GAAP financial measures enhance the understanding of its business and performance. Non-GAAP financial measures are supplemental and not a substitute for, or more important than, financial measures prepared in accordance with GAAP and may not be comparable to those reported by other financial institutions. A reconciliation of non-GAAP financial measures is included at the end of this release.

    ABOUT FIRST NATIONAL CORPORATION

    First National Corporation (NASDAQ: FXNC) is the parent company and bank holding company of First Bank, a community bank that first opened for business in 1907 in Strasburg, Virginia. The Bank offers loan and deposit products and services through its website, www.fbvirginia.com, its mobile banking platform, a network of ATMs located throughout its market area, a loan production office, a customer service center in a retirement community, and 20 bank branch office locations located throughout the Shenandoah Valley, the central regions of Virginia, the Roanoke Valley, and in the city of Richmond. In addition to providing traditional banking services, the Bank operates a wealth management division under the name First Bank Wealth Management. First Bank also owns First Bank Financial Services, Inc., which owns an interest in an entity that provides title insurance services. 

    FORWARD-LOOKING STATEMENTS

    Certain information contained in this communication may include “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements relate to our plans, objectives, expectations and intentions, are not historical facts, and identified by words such as “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “targets,” and “projects,” as well as similar expressions. Although First National believes that its expectations with respect to the forward-looking statements are based upon reliable assumptions within the bounds of its knowledge of its business and operations, there can be no assurance that actual results, performance or achievements of First National will not differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. For details on other factors that could affect expectations or could cause results to differ materially from those described in the forward-looking statements, see the risk factors and other cautionary language appearing in First National’s Annual Reports on Form 10-K most recently filed with the U.S. Securities and Exchange Commission (the “SEC”) and Quarterly Reports on Form 10-Q filed with the SEC for the first quarter of 2024, available at the SEC’s Internet site (http://www.sec.gov), and may include additional or updated disclosures of such material risks in subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K that First National may file with the SEC after the date of this communication.

    In addition to factors previously disclosed in the reports filed by First National with the SEC, additional risks and uncertainties may include, but are not limited to: (1) the risk that the cost savings and any revenue synergies from the proposed Merger may not be realized or take longer than anticipated to be realized, (2) disruption from the proposed Merger of customer, supplier, employee or other business partner relationships, (3) the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement, (4) the failure to obtain the necessary approval by the shareholders of Touchstone and First National, (5) the possibility that the costs, fees, expenses and charges related to the proposed Merger may be greater than anticipated, (6) the ability of First National to obtain required governmental approvals of the proposed Merger, (7) reputational risk and the reaction of each of the parties’ customers, suppliers, employees or other business partners to the proposed Merger, (8) the failure of the closing conditions in the merger agreement to be satisfied, or any unexpected delay in closing the proposed Merger, (9) the risks relating to the integration of Touchstone’s operations into the operations of First National, including the risk that such integration will be materially delayed or will be more costly or difficult than expected, (10) the risk of potential litigation or regulatory action related to the proposed Merger, (11) the risk of expansion into new geographic or product markets, (12) the dilution caused by First National’s issuance of additional shares of its common stock in the proposed Merger, and (13) general competitive, economic, political and market conditions. 

    All subsequent written and oral forward-looking statements concerning First National, Touchstone or any person acting on their behalf is expressly qualified in their entirety by the cautionary statements above. Neither First National nor Touchstone undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date the forward-looking statements are made.

    ADDITIONAL INFORMATION ABOUT THE ACQUISITION AND WHERE TO FIND IT

    In connection with the proposed Merger, on July 9, 2024, First National filed a registration statement on Form S-4 with the SEC, which includes a joint proxy statement of First National and Touchstone and a prospectus of First National, as well as other relevant documents regarding the proposed transaction.

    SHAREHOLDERS OF FIRST NATIONAL AND TOUCHSTONE ARE ADVISED TO READ THE REGISTRATION STATEMENT AND THE JOINT PROXY STATEMENT/PROSPECTUS AND ANY OTHER DOCUMENTS FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION REGARDING FIRST NATIONAL, TOUCHSTONE AND THE PROPOSED MERGER TRANSACTION.

    Shareholders may obtain free copies of these documents, once they are filed, and other documents filed with the SEC on the SEC’s website at http://www.sec.gov. Shareholders will also be able to obtain these documents, once they are filed, free of charge, by requesting them in writing from Scott C. Harvard, First National Corporation, 112 West King Street, Strasburg, Virginia 22657, or by telephone at (540) 465-9121, or from James Black, Touchstone Bankshares, Inc., 4300 Crossings Boulevard, PO Box 2230, Prince George, VA 23875, or by telephone at (804) 324-7384.

    PARTICIPANTS IN THE SOLICITATION

    First National, Touchstone and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from the shareholders of First National and Touchstone in connection with the proposed transaction. Information about the directors and executive officers of First National is available in First National’s proxy statement dated March 29, 2024, for its 2024 Annual Meeting of Shareholders, and other documents filed by First National with the SEC. Additional information regarding the interests of those persons and other persons who may be deemed participants in the transaction may be obtained by reading the joint proxy statement/prospectus regarding the proposed transaction when it becomes available. You may obtain free copies of each document as described in the preceding paragraph.

    This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or proxy in favor of the transaction, the merger agreement, or the transactions contemplated thereby, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction.

    CONTACTS

    Scott C. Harvard M. Shane Bell
    President and CEO Executive Vice President and CFO
    (540) 465-9121 (540) 465-9121
    sharvard@fbvirginia.com   sbell@fbvirginia.com 
       


    FIRST NATIONAL CORPORATION
    Performance Summary
    (in thousands, except share and per share data)
    (unaudited)

                         
       For the Three Months Ended  For the Six Months Ended 
      Jun 30, 2024  Mar 31, 2024  Jun 30, 2023  Jun 30, 2024  Jun 30, 2023 
    Income Statement                    
    Interest income                    
    Interest and fees on loans $14,004  $13,484  $11,886  $27,488  $23,398 
    Interest on deposits in banks  1,579   1,288   759   2,867   1,103 
    Taxable interest on securities  1,134   1,224   1,306   2,358   2,645 
    Tax-exempt interest on securities  306   305   307   611   613 
    Dividends  32   33   28   65   55 
    Total interest income $17,055  $16,334  $14,286  $33,389  $27,814 
    Interest expense                    
    Interest on deposits $4,820  $4,771  $3,402  $9,591  $5,618 
    Interest on subordinated debt  69   69   69   138   138 
    Interest on junior subordinated debt  66   68   67   134   134 
    Interest on other borrowings  606   576   3   1,182   3 
    Total interest expense $5,561  $5,484  $3,541  $11,045  $5,893 
    Net interest income $11,494  $10,850  $10,745  $22,344  $21,921 
    Provision for credit losses  400   1,000   100   1,400   100 
    Net interest income after provision for credit losses $11,094  $9,850  $10,645  $20,944  $21,821 
    Noninterest income                    
    Service charges on deposit accounts $612  $654  $683  $1,266  $1,329 
    ATM and check card fees  809   770   848   1,579   1,648 
    Wealth management fees  879   883   749   1,762   1,525 
    Fees for other customer services  178   195   220   373   416 
    Brokered mortgage fees  32   38   35   70   35 
    Income from bank owned life insurance  149   151   135   300   284 
    Other operating income  27   1,356   214   1,383   425 
    Total noninterest income $2,686  $4,047  $2,884  $6,733  $5,662 
    Noninterest expense                    
    Salaries and employee benefits $5,839  $5,871  $5,189  $11,710  $10,535 
    Occupancy  548   535   524   1,083   1,052 
    Equipment  691   591   571   1,282   1,158 
    Marketing  273   195   248   468   516 
    Supplies  115   116   147   231   295 
    Legal and professional fees  1,124   452   422   1,576   765 
    ATM and check card expense  368   361   425   729   825 
    FDIC assessment  203   177   212   380   318 
    Bank franchise tax  261   262   262   523   516 
    Data processing expense  163   246   252   409   454 
    Amortization expense  5   4   4   9   9 
    Other real estate owned (income) expense, net        (219)     (216)
    Net losses on disposal of premises and equipment     49      49    
    Other operating expense  1,069   1,028   1,121   2,097   2,131 
    Total noninterest expense $10,659  $9,887  $9,158  $20,546  $18,358 
    Income before income taxes $3,121  $4,010  $4,371  $7,131  $9,125 
    Income tax expense  679   801   866   1,480   1,771 
    Net income $2,442  $3,209  $3,505  $5,651  $7,354 
                         

    FIRST NATIONAL CORPORATION
    Performance Summary
    (in thousands, except share and per share data)
    (unaudited)

                         
       For the Three Months Ended   For the Six Months Ended 
      Jun 30, 2024  Mar 31, 2024  Jun 30, 2023  Jun 30, 2024  Jun 30, 2023 
    Common Share and Per Common Share Data                    
    Earnings per common share, basic $0.39  $0.51  $0.56  $0.90  $1.17 
    Adjusted earnings per common share, basic (1)  0.48   0.51   0.56  $0.99  $1.17 
    Weighted average shares, basic  6,278,113   6,269,790   6,269,668   6,273,952   6,271,779 
    Earnings per common share, diluted $0.39  $0.51  $0.56  $0.90  $1.17 
    Adjusted earnings per common share, diluted (1)  0.48   0.51   0.56  $0.99  $1.17 
    Weighted average shares, diluted  6,289,405   6,282,534   6,277,161   6,285,970   6,279,127 
    Shares outstanding at period end  6,280,406   6,277,373   6,250,613   6,280,406   6,250,613 
    Tangible book value per share at period end (1) $18.59  $18.27  $17.55  $18.59  $17.55 
    Cash dividends $0.15  $0.15  $0.15  $0.30  $0.30 
                         
    Key Performance Ratios                    
    Return on average assets  0.68%  0.90%  1.02%  0.79%  1.09%
    Adjusted return on average assets (1)  0.84%  0.90%  1.02%  0.86%  1.09%
    Return on average equity  8.31%  11.07%  12.56%  9.68%  13.39%
    Adjusted return on average equity (1)  10.23%  11.07%  12.56%  10.65%  13.39%
    Net interest margin  3.40%  3.24%  3.36%  3.31%  3.48%
    Efficiency ratio (1)  70.65%  65.65%  68.37%  68.09%  66.92%
                         
    Average Balances                    
    Average assets $1,448,478  $1,431,612  $1,372,781  $1,438,219  $1,362,526 
    Average earning assets  1,370,187   1,361,172   1,290,828   1,368,811   1,279,357 
    Average shareholders’ equity  118,255   116,628   111,917   117,388   110,787 
                         
    Asset Quality                    
    Loan charge-offs $521  $413  $110  $934  $1,085 
    Loan recoveries  39   51   206   90   266 
    Net charge-offs (recoveries)  482   362   (96)  844   819 
    Non-accrual loans  8,549   8,015   677   8,549   677 
    Other real estate owned, net        45      45 
    Nonperforming assets (5)  8,549   8,015   722   8,549   722 
    Loans 30 to 89 days past due, accruing  2,399   2,279   970   2,399   970 
    Loans over 90 days past due, accruing     175   226      226 
    Special mention loans  1,380      2,754   1,380   2,754 
    Substandard loans, accruing  279   485   418   279   418 
                         
    Capital Ratios (2)                    
    Total capital $147,500  $145,977  $144,278  $147,004  $144,278 
    Tier 1 capital  134,451   133,341   135,079   134,451   135,079 
    Common equity Tier 1 capital  134,451   133,341   135,079   134,451   135,079 
    Total capital to risk-weighted assets  14.13%  14.45%  14.88%  14.55%  14.88%
    Tier 1 capital to risk-weighted assets  12.88%  13.20%  13.93%  13.31%  13.93%
    Common equity Tier 1 capital to risk-weighted assets  12.88%  13.20%  13.93%  13.31%  13.93%
    Leverage ratio  9.17%  9.19%  9.72%  9.17%  9.72%
                         


    FIRST NATIONAL CORPORATION
    Performance Summary
    (in thousands, except share and per share data) (unaudited)

      For the Period Ended 
      Jun 30, 2024  Mar 31, 2024  Dec 31, 2023  Sep 30, 2023  Jun 30, 2023 
    Balance Sheet                    
    Cash and due from banks $16,729  $14,476  $17,194  $17,168  $17,697 
    Interest-bearing deposits in banks  118,906   124,232   69,967   32,931   54,379 
    Securities available for sale, at fair value  144,816   147,675   152,857   148,175   156,745 
    Securities held to maturity, at amortized cost (net of allowance for credit losses)  123,497   125,825   148,244   149,948   151,677 
    Restricted securities, at cost  2,112   2,112   2,078   2,077   1,803 
    Loans, net of allowance for credit losses  977,423   960,371   957,456   943,603   921,336 
    Other real estate owned, net              45 
    Premises and equipment, net  22,205   21,993   22,142   21,363   21,556 
    Accrued interest receivable  4,916   4,978   4,655   4,502   4,248 
    Bank owned life insurance  24,802   24,652   24,902   24,734   24,559 
    Goodwill  3,030   3,030   3,030   3,030   3,030 
    Core deposit intangibles, net  108   113   117   122   127 
    Other assets  18,984   17,738   16,653   18,567   17,022 
    Total assets $1,457,528  $1,447,195  $1,419,295  $1,366,220  $1,374,224 
                         
    Noninterest-bearing demand deposits $397,770  $384,092  $379,208  $403,774  $396,137 
    Savings and interest-bearing demand deposits  665,208   677,458   662,169   646,980   670,005 
    Time deposits  202,818   197,587   192,349   184,419   176,226 
    Total deposits $1,265,796  $1,259,137  $1,233,726  $1,235,173  $1,242,368 
    Other borrowings  50,000   50,000   50,000       
    Subordinated debt, net  4,998   4,998   4,997   4,997   4,996 
    Junior subordinated debt  9,279   9,279   9,279   9,279   9,279 
    Accrued interest payable and other liabilities  7,564   5,965   5,022   4,792   4,721 
    Total liabilities $1,337,637  $1,329,379  $1,303,024  $1,254,241  $1,261,364 
                         
    Preferred stock $  $  $  $  $ 
    Common stock  7,851   7,847   7,829   7,826   7,813 
    Surplus  33,116   33,021   32,950   32,840   32,601 
    Retained earnings  97,966   96,465   94,198   95,988   93,805 
    Accumulated other comprehensive (loss), net  (19,042)  (19,517)  (18,706)  (24,675)  (21,359)
    Total shareholders’ equity $119,891  $117,816  $116,271  $111,979  $112,860 
    Total liabilities and shareholders’ equity $1,457,528  $1,447,195  $1,419,295  $1,366,220  $1,374,224 
                         
    Loan Data                    
    Mortgage real estate loans:                    
    Construction and land development $60,919  $53,364  $52,680  $50,405  $49,282 
    Secured by farmland  8,911   9,079   9,154   7,113   3,563 
    Secured by 1-4 family residential  346,976   347,014   344,369   340,773   337,601 
    Other real estate loans  440,857   436,006   438,118   426,065   418,409 
    Loans to farmers (except those secured by real estate)  349   332   455   667   714 
    Commercial and industrial loans (except those secured by real estate)  115,951   113,230   112,619   116,463   112,088 
    Consumer installment loans  5,068   4,808   4,753   4,596   4,505 
    Deposit overdrafts  365   251   222   368   251 
    All other loans  10,580   8,890   7,060   6,049   3,781 
    Total loans $989,976  $972,974  $969,430  $952,499  $930,194 
    Allowance for credit losses  (12,553)  (12,603)  (11,974)  (8,896)  (8,858)
    Loans, net $977,423  $960,371  $957,456  $943,603  $921,336 
                         

    FIRST NATIONAL CORPORATION
    Non-GAAP Reconciliations
    (in thousands, except share and per share data)
    (unaudited) 

                         
       For the Three Months Ended   For the Six Months Ended 
      Jun 30, 2024  Mar 31, 2024  Jun 30, 2023  Jun 30, 2024  Jun 30, 2023 
    Adjusted Net Income                    
    Net income (GAAP) $2,442  $3,209  $3,505  $5,651  $7,354 
    Add: Merger-related expenses  571         571    
    Subtract: Tax effect of adjustment (4)  (5)        (5)   
    Adjusted net income (1) $3,008  $3,209  $3,505  $6,217  $7,354 
                         
    Adjusted Earnings Per Share, Basic                    
    Weighted average shares, basic  6,278,113   6,269,790   6,269,668   6,273,952   6,271,779 
    Basic earnings per share (GAAP) $0.39  $0.51  $0.56  $0.90  $1.17 
    Adjusted earnings per share, basic (1) $0.48  $0.51  $0.56  $0.99  $1.17 
                         
    Adjusted Earnings Per Share, Diluted                    
    Weighted average shares, diluted  6,289,405   6,282,534   6,277,161   6,285,970   6,279,127 
    Diluted earnings per share (GAAP) $0.39  $0.51  $0.56  $0.99  $1.17 
    Adjusted diluted earnings per share (1) $0.48  $0.51  $0.56  $0.99  $1.17 
                         
    Adjusted Performance Ratios                    
    Average assets $1,448,478  $1,431,612  $1,372,781  $1,438,219  $1,362,526 
    Return on average assets (GAAP)  0.68%  0.90%  1.02%  0.79%  1.09%
    Adjusted return on average assets (1)  0.84%  0.90%  1.02%  0.86%  1.09%
                         
    Average shareholders’ equity $118,255  $116,628  $111,917  $117,388  $110,787 
    Return on average equity (GAAP)  8.31%  11.07%  12.56%  9.68%  13.39%
    Adjusted return on average equity (1)  10.23%  11.07%  12.56%  10.65%  13.39%
                         
    Net Interest Margin                    
    Tax-equivalent net interest income $11,587  $10,931  $10,826  $22,518  $22,084 
    Average earning assets  1,370,187   1,361,172   1,290,828   1,368,811   1,279,357 
    Net interest margin (1)  3.40%  3.24%  3.36%  3.31%  3.48%
                         
    Efficiency Ratio                    
    Total noninterest expense $10,659  $9,887  $9,158  $20,546  $18,358 
    Add: other real estate owned income, net        219      216 
    Subtract: amortization of intangibles  (4)  (4)  (4)  (8)  (9)
    Subtract: loss on disposal of premises and equipment, net     (49)     (49)   
    Subtract: merger expenses  (571)        (571)   
    Subtotal $10,084  $9,834  $9,373  $19,918  $18,565 
    Tax-equivalent net interest income $11,587  $10,931  $10,826  $22,518  $22,084 
    Total noninterest income  2,686   4,047   2,884   6,733   5,662 
    Subtotal $14,273  $14,978  $13,710  $29,251  $27,746 
                         
    Efficiency ratio (1)  70.65%  65.65%  68.37%  68.09%  66.91%
                         

    FIRST NATIONAL CORPORATION
    Non-GAAP Reconciliations (continued)
    (in thousands, except share and per share data)
    (unaudited)

      For the Three Months Ended  For the Six Months Ended 
      Jun 30, 2024  Mar 31, 2024  Jun 30, 2023  Jun 30, 2024  Jun 30, 2023 
    Tax-Equivalent Net Interest Income                    
    GAAP measures:                    
    Interest income – loans $14,004  $13,484  $11,886  $27,488  $23,398 
    Interest income – investments and other  3,051   2,850   2,400   5,901   4,416 
    Interest expense – deposits  (4,820)  (4,771)  (3,402)  (9,591)  (5,618)
    Interest expense – subordinated debt  (69)  (69)  (69)  (138)  (138)
    Interest expense – junior subordinated debt  (66)  (68)  (67)  (134)  (134)
    Interest expense – other borrowings  (606)  (576)  (3)  (1,182)  (3)
    Net interest income $11,494  $10,850  $10,745  $22,344  $21,921 
    Non-GAAP measures:                    
    Add: Tax benefit realized on non-taxable interest income – loans (4) $12  $  $  $12  $ 
    Add: Tax benefit realized on non-taxable interest income – municipal securities (4)  81   81   81   162   163 
    Tax benefit realized on non-taxable interest income $93  $81  $81  $174  $163 
    Tax-equivalent net interest income (1) $11,587  $10,931  $10,826  $22,518  $22,084 
                         
    Tangible Common Equity and Tangible Assets                    
    Total assets $1,457,528  $1,447,195  $1,374,224  $1,457,528  $1,374,224 
    Subtract: goodwill  (3,030)  (3,030)  (3,030)  (3,030)  (3,030)
    Subtract: core deposit intangibles, net  (108)  (113)  (127)  (108)  (127)
    Tangible assets $1,454,390  $1,444,052  $1,371,067  $1,454,390  $1,371,067 
                         
    Total shareholders’ equity $119,891  $117,816  $112,860  $119,891  $112,860 
    Subtract: goodwill  (3,030)  (3,030)  (3,030)  (3,030)  (3,030)
    Subtract: core deposit intangibles, net  (108)  (113)  (127)  (108)  (127)
    Tangible common equity $116,753  $114,673  $109,703  $116,753  $109,703 
                         
    Tangible common equity to tangible assets ratio (1)  8.03%  7.94%  8.00%  8.03%  8.00%
                         
    Tangible Book Value Per Share                    
    Tangible common equity $116,753  $114,673  $109,703  $116,753  $109,703 
    Common shares outstanding, ending  6,280,406   6,277,373   6,250,613   6,280,406   6,250,613 
    Tangible book value per share (1) $18.59  $18.27  $17.55  $18.59  $17.55 

    (1) Non-GAAP financial measure that management believes is useful in evaluating the financial results of the Company - refer to the Non-GAAP reconciliations contained in this release.

    (2) Capital ratios are for First Bank.

    (3) Capital ratios presented are for First National Corporation.

    (4)  The tax rate utilized in calculating the tax benefit is 21%.

    (5) Nonperforming assets are comprised of nonaccrual loans and other real estate owned.


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