On July 31, 2024, First National Corp (FXNC, Financial) released its 8-K filing for the second quarter of 2024. The bank holding company, which operates First Bank, reported unaudited consolidated net income of $2.4 million and basic and diluted earnings per share (EPS) of $0.39. This falls short of the analyst estimate of $0.44 per share for the quarter.
Company Overview
First National Corp is a bank holding company of First Bank, a commercial bank offering a range of financial services including loans, deposits, and wealth management. The bank's loan products include personal loans, residential mortgages, home equity loans, and commercial loans. Deposit products encompass checking and savings accounts, while the wealth management division provides estate planning, investment management, retirement accounts, and estate settlement services.
Performance and Challenges
First National Corp's performance in the second quarter of 2024 reflects a challenging banking environment. The company reported a net income of $2.4 million, a decrease from $3.2 million in the previous quarter and $3.5 million in the same quarter last year. The basic and diluted EPS of $0.39 also fell short of the $0.51 reported in Q1 2024 and $0.56 in Q2 2023.
Scott C. Harvard, President and CEO, commented,
The Company finished an eventful first half of the year with solid second quarter financial performance in a very challenging banking environment."
Financial Achievements
Despite the challenges, First National Corp achieved several financial milestones. The net interest margin improved by 16 basis points to 3.40%, and loans increased by $17.0 million, or 7% annualized. Deposits also saw a modest increase of $6.7 million, or 2% annualized. The company reported adjusted net income of $3.0 million, excluding $571 thousand in merger-related expenses.
Income Statement Highlights
| Metric | Q2 2024 | Q1 2024 | Q2 2023 |
|---|---|---|---|
| Net Income | $2.4 million | $3.2 million | $3.5 million |
| Basic and Diluted EPS | $0.39 | $0.51 | $0.56 |
| Net Interest Margin | 3.40% | 3.24% | 3.36% |
| Efficiency Ratio | 70.65% | 65.65% | 68.37% |
Balance Sheet and Cash Flow
Assets totaled $1.5 billion as of June 30, 2024, marking a 3% annualized increase from March 31, 2024, and a 6% increase from June 30, 2023. Loans increased by $17.0 million, or 7% annualized, from the previous quarter. Total deposits were $1.3 billion, a 2% annualized increase from Q1 2024.
Asset Quality
Nonperforming assets (NPAs) as a percentage of total assets increased to 0.59% from 0.55% in Q1 2024 and 0.05% in Q2 2023. The allowance for credit losses on loans totaled $12.6 million, or 1.27% of total loans, compared to $12.6 million, or 1.30%, in the previous quarter.
Merger with Touchstone Bankshares, Inc.
First National Corp is progressing with its acquisition of Touchstone Bankshares, Inc., which is expected to close in the fourth quarter of 2024. The merger will expand First National's presence in the Richmond area, adding seven branches and making it the ninth largest Virginia community bank by deposits.
Analysis
First National Corp's Q2 2024 earnings report highlights both achievements and challenges. While the company has made strides in improving its net interest margin and increasing loans and deposits, it faces headwinds from rising nonperforming assets and merger-related expenses. The upcoming merger with Touchstone Bankshares, Inc. presents both opportunities for growth and potential integration challenges.
For more detailed financial information, visit the 8-K filing.
Explore the complete 8-K earnings release (here) from First National Corp for further details.
