Philadelphia, PA, Sept. 25, 2025 (GLOBE NEWSWIRE) -- DriveItAway Holdings, Inc. (OTC Marketplace: DWAY) ("DriveItAway" or the "Company"), a leader in digital mobility and flexible vehicle lease-to-own platforms, today announced that Mitch Fadel, former CEO of Upbound Group (NASDAQ: UPBD) and Rent-A-Center, has joined its Board of Advisors.Fadel is one of the most accomplished executives in the lease-to-own sector:During his leadership at Upbound Group and Rent-A-Center (the predecessor company of the Upboun ...

[PART I – FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) This part provides the unaudited consolidated financial statements and management's discussion and analysis for First National Corporation [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements of First National Corporation, including balance sheets, income statements, comprehensive income statements, cash flow statements, and statements of changes in shareholders' equity, along with detailed notes providing context and breakdowns of key financial items - The financial statements are prepared in accordance with U.S. GAAP for interim financial information and SEC guidance, and should be read in conjunction with the annual report on Form 10-K[18](index=18&type=chunk) [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets%20as%20of%20June%2030%2C%202025%20(unaudited)%20and%20December%2031%2C%202024) This section presents the consolidated balance sheets, detailing assets, liabilities, and shareholders' equity at specific reporting dates | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (vs. Dec 31, 2024) | | :-------------------------------- | :----------------------------- | :----------------------------- | :-------------------------------- | | Total Assets | $2,041,441 | $2,010,281 | +$31,160 | | Cash and cash equivalents | $194,315 | $162,874 | +$31,441 | | Loans, net | $1,427,836 | $1,450,195 | -$22,359 | | Total Liabilities | $1,867,909 | $1,843,750 | +$24,159 | | Total Deposits | $1,803,166 | $1,803,778 | -$612 | | Total Shareholders' Equity | $173,532 | $166,531 | +$7,001 | [Consolidated Statements of Income](index=5&type=section&id=Consolidated%20Statements%20of%20Income%20for%20the%20three%20and%20six%20months%20ended%20June%2030%2C%202025%20and%202024%20(unaudited)) This section presents the consolidated statements of income, showing revenues, expenses, and net income for the reported periods | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | YoY Change | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | YoY Change | | :-------------------------------- | :----------------------------- | :----------------------------- | :------------------------- | :----------------------------- | :----------------------------- | :------------------------- | | Total interest and dividend income | $25,165 | $17,055 | +$8,110 | $49,186 | $33,389 | +$15,797 | | Total interest expense | $6,617 | $5,561 | +$1,056 | $13,187 | $11,045 | +$2,142 | | Net interest income | $18,548 | $11,494 | +$7,054 | $35,999 | $22,344 | +$13,655 | | Provision for credit losses | $911 | $400 | +$511 | $1,743 | $1,400 | +$343 | | Total noninterest income | $3,889 | $2,686 | +$1,203 | $7,500 | $6,733 | +$767 | | Total noninterest expense | $15,191 | $10,659 | +$4,532 | $33,526 | $20,546 | +$12,980 | | Net income | $5,051 | $2,442 | +$2,609 | $6,649 | $5,651 | +$998 | | Basic EPS | $0.56 | $0.39 | +$0.17 | $0.74 | $0.90 | -$0.16 | | Diluted EPS | $0.56 | $0.39 | +$0.17 | $0.74 | $0.90 | -$0.16 | [Consolidated Statements of Comprehensive Income](index=7&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20for%20the%20three%20and%20six%20months%20ended%20June%2030%2C%202025%20and%202024%20(unaudited)) This section presents the consolidated statements of comprehensive income, including net income and other comprehensive income components | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | YoY Change | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | YoY Change | | :-------------------------------- | :----------------------------- | :----------------------------- | :------------------------- | :----------------------------- | :----------------------------- | :------------------------- | | Net income | $5,051 | $2,442 | +$2,609 | $6,649 | $5,651 | +$998 | | Total other comprehensive income (loss) | $971 | $475 | +$496 | $2,600 | -$336 | +$2,936 | | Total comprehensive income | $6,022 | $2,917 | +$3,105 | $9,249 | $5,315 | +$3,934 | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20for%20the%20six%20months%20ended%20June%2030%2C%202025%20and%202024%20(unaudited)) This section presents the consolidated statements of cash flows, categorizing cash movements from operating, investing, and financing activities | Metric (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | YoY Change | | :-------------------------------- | :----------------------------- | :----------------------------- | :------------------------- | | Net cash provided by operating activities | $8,228 | $8,336 | -$108 | | Net cash provided by investing activities | $1,332 | $9,932 | -$8,600 | | Net cash provided by financing activities | $21,881 | $30,205 | -$8,324 | | Increase in cash and cash equivalents | $31,441 | $48,473 | -$17,032 | | Cash and Cash Equivalents, Ending | $194,315 | $135,634 | +$58,681 | [Consolidated Statements of Changes in Shareholders' Equity](index=10&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Shareholders'%20Equity%20for%20the%20three%20and%20six%20months%20ended%20June%2030%2C%202025%20and%202024%20(unaudited)) This section presents the consolidated statements of changes in shareholders' equity, detailing movements in common stock, surplus, retained earnings, and other comprehensive loss | Metric (in thousands) | Balance, June 30, 2025 | Balance, June 30, 2024 | Change | | :-------------------------------- | :--------------------- | :--------------------- | :----- | | Common Stock | $11,236 | $7,851 | +$3,385 | | Surplus | $77,578 | $33,116 | +$44,462 | | Retained Earnings | $100,810 | $97,966 | +$2,844 | | Accumulated Other Comprehensive (Loss) | -$16,092 | -$19,042 | +$2,950 | | Total Shareholders' Equity | $173,532 | $119,891 | +$53,641 | [Notes to Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements%20(unaudited)) The notes provide critical context for the financial statements, detailing the impact of the Touchstone Bankshares acquisition on various financial line items and the application of accounting standards [Note 1. General](index=12&type=section&id=Note%201.%20General) This note outlines the basis of financial statement preparation, significant events, and the expected impact of recent accounting pronouncements - The financial statements are prepared in accordance with GAAP for interim information and SEC guidance, not including all annual year-end footnotes[18](index=18&type=chunk) - The Company completed the acquisition of Touchstone Bankshares, Inc. on October 1, 2024, issuing **2,673,640 shares of common stock** and incurring **$2.0 million in merger costs** during the six months ended June 30, 2025[21](index=21&type=chunk) - Recent accounting pronouncements (ASU 2024-03 and ASU 2023-09) are not expected to have a material impact on the Company's consolidated financial statements[23](index=23&type=chunk)[24](index=24&type=chunk)[25](index=25&type=chunk) [Note 2. Securities](index=14&type=section&id=Note%202.%20Securities) This note details the Company's investment securities portfolio, including available-for-sale and held-to-maturity categories, and associated unrealized gains and losses | Security Type (in thousands) | June 30, 2025 Amortized Cost | June 30, 2025 Fair Value | Dec 31, 2024 Amortized Cost | Dec 31, 2024 Fair Value | | :-------------------------------- | :----------------------------- | :----------------------- | :-------------------------- | :-------------------------- | | Securities available for sale | $206,510 | $187,579 | $185,917 | $163,847 | | Securities held to maturity | $106,527 | $97,728 | $109,835 | $98,874 | | Total Securities | $313,037 | $285,307 | $295,752 | $262,721 | - At June 30, 2025, the Company had gross unrealized losses of **$19.094 million** on available-for-sale securities and **$8.801 million** on held-to-maturity securities, primarily due to current interest rates being above purchase rates[27](index=27&type=chunk)[30](index=30&type=chunk) - **100% of the Company's investment portfolio** was considered investment grade at June 30, 2025, with a weighted-average re-pricing term of **4.9 years**[30](index=30&type=chunk) [Note 3. Loans](index=19&type=section&id=Note%203.%20Loans) This note provides a breakdown of the loan portfolio by category, changes in loan balances, and aging of past due loans | Loan Category (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :-------------------------------- | :------------ | :---------------- | :----- | | Real estate loans: Construction and land development | $78,169 | $84,480 | -$6,311 | | Real estate loans: Secured by 1-4 family residential | $544,162 | $547,167 | -$3,005 | | Real estate loans: Other real estate loans | $680,063 | $672,162 | +$7,901 | | Commercial and industrial loans | $120,700 | $141,333 | -$20,633 | | Consumer and other loans | $19,928 | $21,453 | -$1,525 | | Total loans | $1,443,022 | $1,466,595 | -$23,573 | | Allowance for credit losses | -$15,186 | -$16,400 | +$1,214 | | Loans, net | $1,427,836 | $1,450,195 | -$22,359 | - Total loans decreased by **$23.573 million** from December 31, 2024, to June 30, 2025, with significant decreases in commercial and industrial loans and construction and land development loans[42](index=42&type=chunk) | Loan Aging (in thousands) | June 30, 2025 Total Past Due | December 31, 2024 Total Past Due | | :-------------------------------- | :----------------------------- | :------------------------------- | | 30-59 Days Past Due | $3,520 | $2,436 | | 60-89 Days Past Due | $1,022 | $650 | | 90 Days or More Past Due | $3,332 | $365 | | Total Past Due | $7,874 | $3,451 | [Note 4. Allowance for Credit Losses](index=28&type=section&id=Note%204.%20Allowance%20for%20Credit%20Losses) This note details the activity in the allowance for credit losses, including charge-offs, recoveries, and provisions, and information on nonaccrual loans | Metric (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Beginning Balance, Dec 31, 2024 (2023) | $16,400 | $11,974 | | Charge-offs | -$3,025 | -$934 | | Recoveries | $176 | $89 | | Provision for (recovery of) credit losses on loans | $1,635 | $1,424 | | Ending Balance, June 30, 2025 (2024) | $15,186 | $12,553 | - Nonaccrual loans totaled **$6.796 million** at June 30, 2025, an increase from **$6.971 million** at December 31, 2024[58](index=58&type=chunk) - No loans were modified due to borrowers experiencing financial difficulty during the six months ended June 30, 2025 and 2024[66](index=66&type=chunk) [Note 5. Earnings per Common Share](index=32&type=section&id=Note%205.%20Earnings%20per%20Common%20Share) This note presents the calculation of basic and diluted earnings per common share for the reported periods | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Net income (in thousands) | $5,051 | $2,442 | $6,649 | $5,651 | | Weighted average shares outstanding – basic | 8,987,179 | 6,278,113 | 8,983,374 | 6,273,952 | | Basic EPS | $0.56 | $0.39 | $0.74 | $0.90 | | Diluted EPS | $0.56 | $0.39 | $0.74 | $0.90 | [Note 6. Fair Value Measurements](index=32&type=section&id=Note%206.%20Fair%20Value%20Measurements) This note describes the Company's fair value measurements for assets and liabilities, categorized by input levels - Fair value measurements are categorized into Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1), and Level 3 (unobservable inputs)[74](index=74&type=chunk)[75](index=75&type=chunk) | Asset/Liability (in thousands) | June 30, 2025 Fair Value | December 31, 2024 Fair Value | | :-------------------------------- | :----------------------- | :--------------------------- | | Securities available for sale | $187,579 | $163,847 | | Derivatives - cash flow hedges | $2,363 | $2,690 | | Total assets measured at fair value (recurring) | $189,942 | $166,537 | - Loans, net, had a carrying amount of **$1,427.8 million** and a fair value of **$1,397.2 million** at June 30, 2025, with fair value determined using Level 3 unobservable inputs[87](index=87&type=chunk) [Note 7. Stock Compensation Plans](index=38&type=section&id=Note%207.%20Stock%20Compensation%20Plans) This note provides details on the Company's stock incentive plan, restricted stock unit grants, and associated compensation expense - The Company's 2023 Stock Incentive Plan makes up to **325,000 shares of common stock** available for awards[89](index=89&type=chunk) - During Q1 2025, **18,455 restricted stock units** were granted to employees, with **15,061 units vested** and **5,000 forfeited**[93](index=93&type=chunk)[94](index=94&type=chunk) | Metric (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Total unrecognized pre-tax compensation expense (unvested RSUs) | $1,400 | $404 | | Compensation expense recognized (RSUs) | $445 | $202 | [Note 8. Accumulated Other Comprehensive (Loss)](index=39&type=section&id=Note%208.%20Accumulated%20Other%20Comprehensive%20(Loss)) This note details the components of accumulated other comprehensive loss, including unrealized gains/losses on securities and cash flow hedges | Metric (in thousands) | Balance at June 30, 2025 | Balance at June 30, 2024 | | :-------------------------------- | :----------------------- | :----------------------- | | Net Unrealized Gains (Losses) on Securities | -$17,958 | -$21,163 | | Change in Fair Value of Cash Flow Hedges | $1,866 | $2,121 | | Total Accumulated Other Comprehensive (Loss) | -$16,092 | -$19,042 | - The accumulated other comprehensive loss decreased by **$2.95 million** from June 30, 2024, to June 30, 2025, primarily due to unrealized holding gains on available-for-sale securities[95](index=95&type=chunk) [Note 9. Revenue Recognition](index=40&type=section&id=Note%209.%20Revenue%20Recognition) This note explains the Company's revenue recognition policies, distinguishing between in-scope and out-of-scope revenues under ASC Topic 606 - Most revenue from financial instruments (interest income, loan fees, etc.) is outside the scope of ASC Topic 606[96](index=96&type=chunk) | Noninterest Income (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Service charges on deposit accounts | $1,020 | $612 | $2,033 | $1,266 | | ATM and check card fees | $1,128 | $809 | $2,124 | $1,579 | | Wealth management fees | $867 | $879 | $1,765 | $1,762 | | Brokered mortgage fees | $183 | $32 | $293 | $70 | | Fees for other customer services | $230 | $178 | $488 | $373 | | Total in-scope of Topic 606 | $3,428 | $2,510 | $6,703 | $5,050 | | Total out-of-scope of Topic 606 | $461 | $176 | $797 | $1,683 | | Total noninterest income | $3,889 | $2,686 | $7,500 | $6,733 | [Note 10. Derivative Financial Instruments](index=42&type=section&id=Note%2010.%20Derivative%20Financial%20Instruments) This note describes the Company's use of interest rate swap agreements as cash flow hedges and their notional amounts - The Company uses interest rate swap agreements to convert variable rate junior subordinated debt into fixed rate debt, designated as cash flow hedges[105](index=105&type=chunk) | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Notional Amount (Interest rate swap contracts) | $9,000 | $9,000 | | Assets (Interest rate swap contracts) | $2,363 | $2,690 | [Note 11. Acquisition](index=42&type=section&id=Note%2011.%20Acquisition) This note provides details on the acquisition of Touchstone Bankshares, Inc., including purchase price, assets acquired, liabilities assumed, and merger costs - The Company acquired Touchstone Bankshares, Inc. on October 1, 2024, issuing **2.7 million shares of common stock** for an aggregate consideration of **$46.8 million**[110](index=110&type=chunk) - The acquisition resulted in a preliminary bargain purchase gain of **$2.9 million**[110](index=110&type=chunk)[113](index=113&type=chunk) | Acquisition Financials (in thousands) | Amount | | :-------------------------------- | :----- | | Total purchase price | $46,799 | | Fair value of total assets acquired | $664,326 | | Fair value of total liabilities assumed | $614,607 | | Fair value of net assets acquired | $49,719 | | Preliminary bargain purchase gain | $2,920 | - Merger costs totaled **$2.0 million** for the six months ended June 30, 2025[111](index=111&type=chunk) [Note 12. Segment Reporting](index=48&type=section&id=Note%2012.%20Segment%20Reporting) This note presents financial information for the Company's operating segments: Community Banking and Wealth Management Services - The Company operates in two segments: Community Banking (loans, deposits, fees) and Wealth Management Services (trustee, estate administration, investment management)[133](index=133&type=chunk) | Segment Net Income (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Community Banking | $6,056 | $5,084 | $4,751 | $2,173 | | Wealth Management | $593 | $567 | $300 | $269 | | Total Net Income | $6,649 | $5,651 | $5,051 | $2,442 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=53&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the Company's financial condition, results of operations, and liquidity, highlighting key performance drivers, the impact of the Touchstone acquisition, and future outlook - The discussion emphasizes the significant impact of the Touchstone acquisition on financial performance, including increased assets, liabilities, and operating expenses[137](index=137&type=chunk)[145](index=145&type=chunk)[149](index=149&type=chunk)[155](index=155&type=chunk) - Forward-looking statements are subject to various risks and uncertainties, including general business and economic conditions, competition, and regulatory changes[137](index=137&type=chunk)[139](index=139&type=chunk) [Cautionary Statement Regarding Forward-Looking Statements](index=53&type=section&id=Cautionary%20Statement%20Regarding%20Forward-Looking%20Statements) This section highlights that forward-looking statements are subject to significant uncertainties, including merger benefits, economic conditions, and regulatory changes - Forward-looking statements are identified by words like "believes," "expects," "may," "will," and are subject to significant uncertainties including the realization of merger benefits, economic conditions, and regulatory changes[137](index=137&type=chunk)[139](index=139&type=chunk) [Executive Overview](index=54&type=section&id=Executive%20Overview) This section provides a high-level summary of First National Corporation's business, primary revenue sources, and the impact of the recent Touchstone acquisition - First National Corporation is the bank holding company for First Bank, offering loan, deposit, and wealth management products through **33 branch offices** and **three loan production offices** in Virginia and North Carolina[142](index=142&type=chunk)[146](index=146&type=chunk) - The primary revenue source is **net interest income (70-90% of total revenue)**, supplemented by noninterest income from service charges, wealth management, and ATM/check card fees[143](index=143&type=chunk) - The acquisition of Touchstone Bankshares, Inc. on October 1, 2024, expanded the Company's presence and resulted in **$2.0 million in merger costs** for the six months ended June 30, 2025[145](index=145&type=chunk)[147](index=147&type=chunk) [Overview of Quarterly Financial Performance](index=55&type=section&id=Overview%20of%20Quarterly%20Financial%20Performance) This section summarizes key financial performance metrics for the quarter and six-month periods, including net income, EPS, and returns on assets and equity | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | YoY Change | | :-------------------------------- | :----------------------------- | :----------------------------- | :------------------------- | | Net income | $5.1 million | $2.4 million | +$2.7 million | | Diluted EPS | $0.56 | $0.39 | +$0.17 | | Return on average assets | 1.00% | 0.68% | +0.32% | | Return on average equity | 11.85% | 8.31% | +3.54% | | Metric | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | YoY Change | | :-------------------------------- | :----------------------------- | :----------------------------- | :------------------------- | | Net income | $6.6 million | $5.7 million | +$0.9 million | | Diluted EPS | $0.74 | $0.90 | -$0.16 | | Return on average assets | 0.66% | 0.79% | -0.13% | | Return on average equity | 7.90% | 9.68% | -1.78% | - The increase in net income for both periods was primarily driven by higher net interest income after provision, partially offset by increased noninterest expenses due to the Touchstone merger[149](index=149&type=chunk)[155](index=155&type=chunk) [Non-GAAP Financial Measures](index=56&type=section&id=Non-GAAP%20Financial%20Measures) This section defines and presents non-GAAP financial measures such as the efficiency ratio and net interest margin, used to assess operational performance - The efficiency ratio is a non-GAAP measure used to assess operational efficiency, calculated by dividing adjusted noninterest expense by tax-equivalent net interest income plus noninterest income[160](index=160&type=chunk) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Efficiency ratio | 65.03% | 70.64% | 70.07% | 68.09% | | Net Interest Margin | 3.95% | 3.40% | 3.86% | 3.31% | - Net interest margin is calculated by dividing tax-equivalent net interest income by total average earning assets, with a **21% tax rate** used for tax-equivalent adjustments[163](index=163&type=chunk) [Critical Accounting Policies](index=58&type=section&id=Critical%20Accounting%20Policies) This section identifies critical accounting policies involving significant management judgments and estimates, particularly for credit losses and acquired loans - Critical accounting policies involve significant management judgments and estimates, especially for the allowance for credit losses on loans, loans acquired in business combinations, and goodwill[19](index=19&type=chunk) [Lending Policies](index=58&type=section&id=Lending%20Policies) This section confirms that no material changes have occurred in the Company's lending policies since the last annual report - No material changes to the Company's lending policies have occurred since the Annual Report on Form 10-K for the year ended December 31, 2024[167](index=167&type=chunk) [Results of Operations](index=58&type=section&id=Results%20of%20Operations) This section analyzes the Company's financial performance, focusing on net income, net interest income, provision for credit losses, noninterest income, and expenses - Net interest income is the primary source of earnings, influenced by changes in volume and mix of interest-earning assets and interest-bearing liabilities, and their respective yields and rates[168](index=168&type=chunk)[169](index=169&type=chunk) - The Touchstone merger significantly impacted all aspects of the results of operations, leading to increased assets, liabilities, and associated income and expenses[175](index=175&type=chunk)[176](index=176&type=chunk)[179](index=179&type=chunk)[180](index=180&type=chunk)[191](index=191&type=chunk)[193](index=193&type=chunk) [Net Income](index=60&type=section&id=Net%20Income) This section details the Company's net income, diluted EPS, and returns on average assets and equity for the reported periods | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | YoY Change | | :-------------------------------- | :----------------------------- | :----------------------------- | :------------------------- | | Net income | $5.1 million | $2.4 million | +$2.7 million | | Diluted EPS | $0.56 | $0.39 | +$0.17 | | Return on average assets | 1.00% | 0.68% | +0.32% | | Return on average equity | 11.85% | 8.31% | +3.54% | | Metric | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | YoY Change | | :-------------------------------- | :----------------------------- | :----------------------------- | :------------------------- | | Net income | $6.6 million | $5.7 million | +$0.9 million | | Diluted EPS | $0.74 | $0.90 | -$0.16 | | Return on average assets | 0.66% | 0.79% | -0.13% | | Return on average equity | 7.90% | 9.68% | -1.78% | [Net Interest Income](index=60&type=section&id=Net%20Interest%20Income) This section analyzes the components of net interest income, including total interest income, interest expense, and net interest margin | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | YoY Change | | :-------------------------------- | :----------------------------- | :----------------------------- | :------------------------- | | Net interest income | $18,548 | $11,494 | +$7,054 (61.4%) | | Total interest income | $25,165 | $17,055 | +$8,110 | | Total interest expense | $6,617 | $5,561 | +$1,056 | | Net interest margin | 3.95% | 3.40% | +0.55% | | Metric (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | YoY Change | | :-------------------------------- | :----------------------------- | :----------------------------- | :------------------------- | | Net interest income | $36,000 | $22,344 | +$13,656 (61.1%) | | Total interest income | $49,186 | $33,389 | +$15,797 | | Total interest expense | $13,187 | $11,045 | +$2,142 | | Net interest margin | 3.86% | 3.31% | +0.55% | - The increase in interest income on loans was due to a **25-basis point increase in yield** and a **47.2% increase in average balances** for the three-month period, and a **21-basis point increase in yield** and a **48.8% increase in average balances** for the six-month period, primarily from the Touchstone merger[175](index=175&type=chunk)[179](index=179&type=chunk) [Provision for Credit Losses](index=64&type=section&id=Provision%20for%20Credit%20Losses) This section discusses the provision for credit losses and its drivers, including the impact of acquired loan balances and net charge-offs | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | YoY Change | | :-------------------------------- | :----------------------------- | :----------------------------- | :------------------------- | | Provision for credit losses | $911 | $400 | +$511 | | Metric (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | YoY Change | | :-------------------------------- | :----------------------------- | :----------------------------- | :------------------------- | | Provision for credit losses | $1,700 | $1,400 | +$300 | | Net charge-offs | $2,800 | $844 | +$1,956 | - The increase in provision for credit losses reflects the impact of higher pool loan balances acquired in the Touchstone merger and an increase in net charge-offs[187](index=187&type=chunk)[188](index=188&type=chunk) [Noninterest Income](index=64&type=section&id=Noninterest%20Income) This section analyzes the various components of noninterest income, highlighting changes in service charges, fees, and other operating income | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | YoY Change | | :-------------------------------- | :----------------------------- | :----------------------------- | :------------------------- | | Noninterest income | $3,900 | $2,700 | +$1,200 (44.8%) | | Metric (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | YoY Change | | :-------------------------------- | :----------------------------- | :----------------------------- | :------------------------- | | Noninterest income | $7,500 | $6,700 | +$800 (11.4%) | - Increases were seen in service charges, ATM and check card fees, and brokered mortgage fees, partially offset by a decrease in other operating income for the six-month period due to a loan recovery in 2024[189](index=189&type=chunk)[190](index=190&type=chunk) [Noninterest Expense](index=64&type=section&id=Noninterest%20Expense) This section details the components of noninterest expense, explaining increases primarily due to the recent acquisition | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | YoY Change | | :-------------------------------- | :----------------------------- | :----------------------------- | :------------------------- | | Noninterest expenses | $15,200 | $10,700 | +$4,500 (42.5%) | | Salaries and employee benefits | +$2,200 (37.6%) | | | | Other operating expense | +$1,200 (223.0%) | | | | Occupancy expense | +$396 (72.3%) | | | | Data processing expense | +$341 (209.2%) | | | | Amortization expense | +$436 | | | | Metric (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | YoY Change | | :-------------------------------- | :----------------------------- | :----------------------------- | :------------------------- | | Noninterest expenses | $33,500 | $20,500 | +$13,000 (63.2%) | | Salaries and employee benefits | +$5,000 (42.8%) | | | | Other operating expense | +$2,200 (143.8%) | | | | Merger expenses | +$1,600 | | | | Occupancy expense | +$930 (85.9%) | | | | Amortization expense | +$874 | | | | Data processing expense | +$857 (209.5%) | | | | Equipment expense | +$800 (62.4%) | | | - Increases were primarily due to the Touchstone merger, leading to more employees, additional branches, increased customer transactions, duplicative system expenses, and core deposit intangible amortization[191](index=191&type=chunk)[193](index=193&type=chunk) [Income Taxes](index=65&type=section&id=Income%20Taxes) This section discusses income tax expense and the effective tax rate, explaining differences from the federal statutory rate | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | YoY Change | | :-------------------------------- | :----------------------------- | :----------------------------- | :------------------------- | | Income tax expense | $1,300 | $605 | +$695 | | Effective tax rate | 20.3% | 21.8% | -1.5% | | Metric | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | YoY Change | | :-------------------------------- | :----------------------------- | :----------------------------- | :------------------------- | | Income tax expense | $1,600 | $1,500 | +$100 | | Effective tax rate | 19.2% | 20.8% | -1.6% | - Differences from the U.S. federal income tax rate are primarily due to net permanent tax deductions, including tax-exempt interest income, income from bank-owned life insurance, and nondeductible merger expenses[194](index=194&type=chunk)[196](index=196&type=chunk) [Financial Condition](index=66&type=section&id=Financial%20Condition) This section provides an overview of the Company's financial position, including assets, liabilities, equity, and key balance sheet components - Total assets increased by **$31.2 million (3.1% annualized)** to **$2.041 billion** at June 30, 2025, from December 31, 2024[197](index=197&type=chunk) - Total shareholders' equity increased by **$7.0 million**, primarily due to a **$3.9 million increase in retained earnings** and a **$2.6 million reduction in accumulated other comprehensive loss**[199](index=199&type=chunk) [General (Financial Condition Overview)](index=66&type=section&id=General%20(Financial%20Condition%20Overview)) This section provides a high-level overview of the Company's total assets, liabilities, and shareholders' equity at the reporting dates | Metric (in millions) | June 30, 2025 | December 31, 2024 | Change | | :-------------------------------- | :------------ | :---------------- | :----- | | Total Assets | $2,041 | $2,010 | +$31 | | Total Liabilities | $1,868 | $1,844 | +$24 | | Total Shareholders' Equity | $174 | $167 | +$7 | [Loans](index=66&type=section&id=Loans) This section details the total loan portfolio, its composition, and changes in balances over the reported periods | Metric (in millions) | June 30, 2025 | December 31, 2024 | June 30, 2024 | | :-------------------------------- | :------------ | :---------------- | :------------ | | Total Loans | $1,428 | $1,450 | $977 | | YoY Change (vs. June 30, 2024) | +$451 (46.1%) | | | | QoQ Change (vs. Dec 31, 2024) | -$22.4 (3.1% annualized) | | | - The loan portfolio is primarily comprised of loans secured by **one-to-four family residential real estate (38%)**, **commercial real estate (47%)**, and **commercial and industrial loans (8%)** at June 30, 2025[200](index=200&type=chunk) [Asset Quality](index=66&type=section&id=Asset%20Quality) This section assesses the quality of the Company's assets, including non-performing assets, nonaccrual loans, and management's reserve adequacy | Metric (in millions) | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Non-performing assets | $6.8 | $7.0 | | Nonaccrual loans | $6.8 | $7.1 | | OREO | $0 | $0.053 | | Other potential problem loans | $6.6 | $9.1 | - Non-performing assets represented **0.33% of total assets** at June 30, 2025, a slight decrease from **0.35%** at December 31, 2024[203](index=203&type=chunk) - Management believes the Bank has sufficient reserves to cover expected losses, with the provision for credit losses based on economic conditions, historical losses, and loan quality reports[208](index=208&type=chunk) [Securities](index=68&type=section&id=Securities) This section provides an overview of the Company's securities portfolio, including total balances and unrealized gains and losses | Metric (in millions) | June 30, 2025 | December 31, 2024 | Change | | :-------------------------------- | :------------ | :---------------- | :----- | | Total Securities | $299.6 | $277.3 | +$22.3 (8%) | | Gross unrealized gains (AFS) | $0.163 | $0.062 | +$0.101 | | Gross unrealized losses (AFS) | -$19.1 | -$22.1 | +$3.0 | | Gross unrealized gains (HTM) | $0.002 | $0.008 | -$0.006 | | Gross unrealized losses (HTM) | -$8.8 | -$11.0 | +$2.2 | - The change in unrealized gains and losses was related to changes in market interest rates, not credit concerns[210](index=210&type=chunk) [Deposits](index=68&type=section&id=Deposits) This section details the Company's total deposits, their composition, and changes in balances over the reported periods | Metric (in millions) | June 30, 2025 | December 31, 2024 | June 30, 2024 | | :-------------------------------- | :------------ | :---------------- | :------------ | | Total Deposits | $1,803 | $1,804 | $1,266 | | QoQ Change (vs. Dec 31, 2024) | -$0.612 (0.03%) | | | | YoY Change (vs. June 30, 2024) | +$537.4 (42.5%) | | | - Deposit composition at June 30, 2025: **noninterest-bearing (30%)**, **savings and interest-bearing (50%)**, and **time deposits (20%)**[211](index=211&type=chunk) [Subordinated Debt](index=68&type=section&id=Subordinated%20Debt) This section describes the Company's subordinated debt issuances, including those assumed from the Touchstone acquisition and any redemptions - The Company assumed two subordinated debt issuances from the Touchstone acquisition: an **$8.0 million fixed-to-floating rate note due 2030** and a **$10.0 million fixed-to-floating rate note due 2032**[212](index=212&type=chunk) - A **$500 thousand tranche** of the **$10.0 million issuance** was paid off for **$420 thousand**, resulting in an **$80 thousand gain on redemption** during Q2 2025[212](index=212&type=chunk) [Liquidity](index=68&type=section&id=Liquidity) This section outlines the Company's liquidity sources and estimated uninsured customer deposits | Metric (in millions) | June 30, 2025 | December 31, 2024 | June 30, 2024 | | :-------------------------------- | :------------ | :---------------- | :------------ | | Total liquidity sources | $800.2 | $758.0 | $553.3 | | Estimated uninsured customer deposits | $545.7 | $537.0 | $419.4 | | Estimated uninsured customer deposits (excl. municipal) | $451.9 | $445.5 | $324.5 | [Capital Resources](index=70&type=section&id=Capital%20Resources) This section details the Company's capital adequacy ratios and its status as "well capitalized" under regulatory frameworks - The Bank meets all capital adequacy requirements, including the capital conservation buffer, with a **Common Equity Tier 1 capital ratio of 11.81%** (minimum 7.0%)[217](index=217&type=chunk)[218](index=218&type=chunk) - The Bank qualifies as "well capitalized" under the prompt corrective action framework, exceeding the minimum requirements for Common Equity Tier 1, Tier 1, Total Capital, and Tier 1 Leverage ratios[219](index=219&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=71&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section states that quantitative and qualitative disclosures about market risk are not required for this filing - This section is not required for the current filing[227](index=227&type=chunk) [Item 4. Controls and Procedures](index=71&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of the Company's disclosure controls and procedures and states that there were no material changes to internal control over financial reporting during the last fiscal quarter - The Company's disclosure controls and procedures were effective as of June 30, 2025[228](index=228&type=chunk) - No material changes to internal control over financial reporting were identified during the last fiscal quarter[229](index=229&type=chunk)[230](index=230&type=chunk) [PART II – OTHER INFORMATION](index=73&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) This part includes information on legal proceedings, risk factors, equity sales, defaults, mine safety, other disclosures, and exhibits [Item 1. Legal Proceedings](index=73&type=section&id=Item%201.%20Legal%20Proceedings) This section states that there are no material pending legal proceedings, other than ordinary routine litigation incidental to the Company's business - No material pending legal proceedings exist, other than routine litigation[232](index=232&type=chunk) [Item 1A. Risk Factors](index=73&type=section&id=Item%201A.%20Risk%20Factors) This section confirms that there were no material changes to the Company's risk factors as disclosed in its Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes to the Company's risk factors were disclosed since the Annual Report on Form 10-K for the year ended December 31, 2024[233](index=233&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=74&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section states that there were no unregistered sales of equity securities or use of proceeds to report - No unregistered sales of equity securities or use of proceeds to report[234](index=234&type=chunk) [Item 3. Defaults Upon Senior Securities](index=74&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section states that there were no defaults upon senior securities to report - No defaults upon senior securities to report[234](index=234&type=chunk) [Item 4. Mine Safety Disclosures](index=74&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section states that there were no mine safety disclosures to report - No mine safety disclosures to report[234](index=234&type=chunk) [Item 5. Other Information](index=74&type=section&id=Item%205.%20Other%20Information) This section reports that no directors or officers adopted or terminated any Rule 10b5-1 trading arrangements during the three months ended June 30, 2025 - No directors or officers adopted or terminated any Rule 10b5-1 trading arrangements during the three months ended June 30, 2025[234](index=234&type=chunk) [Item 6. Exhibits](index=74&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications and XBRL-formatted financial statements - Exhibits include CEO and CFO certifications (Sections 302 and 1350) and XBRL-formatted financial statements[235](index=235&type=chunk)

Core Viewpoint - First National reported record adjusted earnings per share of $0.57 for Q2 2025, exceeding analyst estimates, but net interest income fell short of expectations, indicating mixed operational performance [1][2]. Financial Performance - Adjusted EPS (Non-GAAP) reached $0.57, surpassing the estimate of $0.50 and showing an 18.8% increase year-over-year from $0.48 [2]. - Revenue (Non-GAAP) was $22.4 million, slightly above the estimate of $22.3 million and a significant 57.7% increase from $14.2 million in Q2 2024 [2]. - Net interest margin improved to 3.95%, up from 3.40% in Q2 2024, reflecting better yields and careful deposit pricing [2][5]. - Efficiency ratio improved to 65.11%, a decrease from 70.64% in Q2 2024, indicating enhanced operational discipline [2][7]. - Return on average equity was 11.85%, up from 8.31% in the previous year [2]. Revenue Sources - The primary revenue source is net interest income, which is sensitive to interest rate movements, while noninterest income contributes through fees [4]. - Net interest income was reported at $18.5 million, falling short of the $22.3 million estimate, indicating challenges in revenue generation [1][6]. Loan and Deposit Growth - Net loans held for investment increased to $1.43 billion, a 46.1% rise year-over-year, primarily due to the Touchstone acquisition [8]. - Deposits reached $1.80 billion, up 42.5% year-over-year, but slightly decreased from the previous quarter, reflecting acquisition-driven growth [8]. Asset Quality - Nonperforming assets rose to $6.8 million, or 0.33% of total assets, indicating a slight increase from the previous quarter [9]. - The allowance for credit losses increased to $15.2 million, representing 1.05% of loans, signaling a cautious approach to potential loan losses [9]. Capital Strength - Total capital ratio was 12.89%, and common equity Tier 1 ratio was 11.81%, both above regulatory thresholds, indicating strong capital adequacy [10]. - Shareholders' equity climbed to $173.5 million, with tangible book value per share at $17.40, slightly down from $18.59 in Q2 2024 [10]. Shareholder Returns - The board approved a quarterly cash dividend of $0.155 per share, flat compared to the prior quarter but up 3.3% from $0.15 in Q2 2024 [12]. Future Outlook - Management did not provide explicit guidance for future quarters, focusing instead on completed integration efforts and cautious loan and deposit growth [13]. - Key areas to monitor include organic loan growth, sustainability of margin gains, and asset quality trends [14].

Second Quarter 2025 Earnings Overview [Earnings Performance and CEO Commentary](index=1&type=section&id=2.1%20Earnings%20Performance%20and%20CEO%20Commentary) First National Corporation achieved record Q2 2025 earnings, with **$0.56** basic and diluted EPS, due to net interest margin expansion and efficiency - First National Corporation reported **record second quarter 2025 earnings**[1](index=1&type=chunk) EPS Performance | Metric | Q2 2025 | Q1 2025 | YoY Change | QoQ Change | | :-------------------------------- | :------ | :------ | :--------- | :--------- | | Basic & Diluted EPS (GAAP) | $0.56 | $0.18 | +44% | +211% | | Adjusted Basic & Diluted EPS (non-GAAP) | $0.57 | $0.35 | - | +62.86% | - The CEO highlighted **net interest margin expansion** and **improved efficiency** from the Touchstone acquisition as key drivers for improved earnings, strong liquidity, and capital growth[2](index=2&type=chunk) Financial Performance Highlights [Net Interest Income and Margin](index=1&type=section&id=3.1%20Net%20Interest%20Income%20and%20Margin) Net interest income increased to **$18.5 million**, driven by higher loan yields and accretion, with FTE net interest margin expanding to **3.95%** Net Interest Income and Margin Metrics | Metric | Q2 2025 | Q1 2025 | Q2 2024 | QoQ Change | YoY Change | | :-------------------------------- | :------ | :------ | :------ | :--------- | :--------- | | Net Interest Income | $18.5M | $17.5M | $11.494M | +$1.0M | +$7.054M | | Net Interest Margin (FTE) | 3.95% | 3.77% | 3.40% | +18 bps | +55 bps | | Earning Asset Yields | 5.35% | 5.18% | 5.03% | +17 bps | +32 bps | | Acquisition Accounting Net Accretion Income | $907K | -$36K | - | +$943K | - | - The increase in earning asset yields was primarily driven by a **$1.1 million increase in accretion on purchased loans**[4](index=4&type=chunk) [Noninterest Income](index=2&type=section&id=3.2%20Noninterest%20Income) Noninterest income rose **7.7%** to **$3.9 million** in Q2 2025, primarily due to higher ATM and check card income and brokered mortgage fees Noninterest Income Metrics | Metric | Q2 2025 | Q1 2025 | Q2 2024 | QoQ Change | YoY Change | | :-------------------- | :------ | :------ | :------ | :--------- | :--------- | | Total Noninterest Income | $3.9M | $3.6M | $2.686M | +7.7% | +45.2% | | ATM and Check Card Fees | $1.128M | $0.996M | $0.809M | +13.25% | +39.43% | | Brokered Mortgage Fees | $0.183M | $0.110M | $0.032M | +66.36% | +471.88% | [Noninterest Expense](index=2&type=section&id=3.3%20Noninterest%20Expense) Total noninterest expense decreased by **$3.1 million** to **$15.2 million** in Q2 2025, mainly due to reduced merger-related expenses and lower salaries Noninterest Expense Metrics | Metric | Q2 2025 | Q1 2025 | Q2 2024 | QoQ Change | YoY Change | | :-------------------------------- | :------ | :------ | :------ | :--------- | :--------- | | Total Noninterest Expense | $15.2M | $18.3M | $10.659M | -$3.1M | +$4.541M | | Merger-Related Expenses | $92K | $1.9M | $0 | -$1.808M | +$92K | | Salaries and Employee Benefits | $8.033M | $8.689M | $5.839M | -$0.656M | +$2.194M | | Data Processing Expense | $0.504M | $0.762M | $0.163M | -$0.258M | +$0.341M | | Efficiency Ratio (non-GAAP) | 65.11% | 75.44% | 70.64% | -10.33 pp | -5.53 pp | - The decrease in noninterest expense was primarily driven by a **$1.8 million decrease in pre-tax merger-related expenses** and a **$656 thousand decrease in salaries and employee benefits**[7](index=7&type=chunk) - Operating expenses were reduced in Q2 2025 due to the **conversion to a single core banking system** in February 2025, eliminating the cost of operating two systems[7](index=7&type=chunk) Balance Sheet Analysis [Total Assets](index=2&type=section&id=4.1%20Total%20Assets) Total assets reached **$2.041 billion** at June 30, 2025, a **40.1%** year-over-year increase primarily from loans held for investment due to the Touchstone acquisition Total Assets Performance | Metric | Jun 30, 2025 | Mar 31, 2025 | Jun 30, 2024 | QoQ Change | YoY Change | | :----------- | :----------- | :----------- | :----------- | :--------- | :--------- | | Total Assets | $2.041B | $2.033B | $1.458B | +0.4% | +40.1% | - The year-over-year increase in total assets was primarily driven by **growth in loans held for investment (LHFI)**, mainly due to the Touchstone acquisition[9](index=9&type=chunk) [Loans Held for Investment (LHFI)](index=2&type=section&id=4.2%20Loans%20Held%20for%20Investment%20(LHFI)) Net loans held for investment totaled **$1.428 billion**, a slight quarterly decrease but a significant **46.1%** year-over-year increase, largely from the Touchstone acquisition Loans Held for Investment (LHFI) | Metric | Jun 30, 2025 | Mar 31, 2025 | Jun 30, 2024 | QoQ Change | YoY Change | | :-------------------------------- | :----------- | :----------- | :----------- | :--------- | :--------- | | LHFI (net of allowance) | $1.428B | $1.436B | $0.977B | -0.5% | +46.1% | - Higher than average loan payoffs more than offset **positive net production growth** in the second quarter of 2025[10](index=10&type=chunk) [Investments](index=2&type=section&id=4.3%20Investments) Total investments increased to **$299.6 million**, driven by securities purchases and an improvement in unrealized losses on available-for-sale (AFS) securities Investment Portfolio | Metric | Jun 30, 2025 | Mar 31, 2025 | Jun 30, 2024 | QoQ Change | YoY Change | | :-------------------------------- | :----------- | :----------- | :----------- | :--------- | :--------- | | Total Investments | $299.6M | $273.7M | $270.4M | +9.5% | +10.8% | | AFS Securities | $187.6M | $161.0M | $144.8M | +16.5% | +29.6% | | Total Net Unrealized Losses (AFS) | -$18.9M | -$20.1M | -$21.9M | -$1.2M | -$3.0M | - The increase in AFS securities compared to the prior quarter was driven by **securities purchases** and a **$3.1 million improvement in unrealized losses**[11](index=11&type=chunk) [Deposits](index=2&type=section&id=4.4%20Deposits) Total deposits decreased slightly to **$1.803 billion** from the prior quarter but showed a substantial **42.5%** year-over-year increase, largely from the Touchstone acquisition Deposit Balances | Metric | Jun 30, 2025 | Mar 31, 2025 | Jun 30, 2024 | QoQ Change | YoY Change | | :------------------------ | :----------- | :----------- | :----------- | :--------- | :--------- | | Total Deposits | $1.803B | $1.825B | $1.266B | -1.2% | +42.5% | | Noninterest Bearing Deposits | $541.2M | $540.4M | $397.8M | +0.15% | +36.1% | | Noninterest Bearing Deposits as % of Total | 30% | - | - | - | - | - The decrease in deposit balances from the prior quarter is primarily due to a **decrease in interest-bearing demand deposits**[12](index=12&type=chunk) [Borrowings](index=2&type=section&id=4.5%20Borrowings) Other borrowings increased to **$25.0 million** from zero in the prior quarter, consisting of Federal Home Loan Bank borrowings Other Borrowings | Metric | Jun 30, 2025 | Mar 31, 2025 | Jun 30, 2024 | | :-------------- | :----------- | :----------- | :----------- | | Other Borrowings | $25.0M | $0 | $50.0M | - Other borrowings on June 30, 2025, were **$25.0 million** with the Federal Home Loan Bank, compared to no borrowings on March 31, 2025[13](index=13&type=chunk) Liquidity Position [Available Liquidity Sources](index=3&type=section&id=5.1%20Available%20Liquidity%20Sources) Available liquidity sources for the Bank decreased to **$633.7 million** at June 30, 2025, from **$800.2 million** in the prior quarter, but remained strong year-over-year Total Liquidity Sources | Metric | Jun 30, 2025 | Mar 31, 2025 | Jun 30, 2024 | | :-------------------------------- | :----------- | :----------- | :----------- | | Total Liquidity Sources | $633.7M | $800.2M | $533.3M | [Uninsured Customer Deposits](index=3&type=section&id=5.2%20Uninsured%20Customer%20Deposits) Estimated uninsured customer deposits slightly decreased to **$545.7 million** at June 30, 2025, with municipal deposits excluded, the amount was **$451.9 million** Uninsured Customer Deposits | Metric | Jun 30, 2025 | Mar 31, 2025 | Jun 30, 2024 | | :-------------------------------- | :----------- | :----------- | :----------- | | Estimated Uninsured Customer Deposits | $545.7M | $549.3M | $419.4M | | Uninsured Customer Deposits (Excl. Municipal) | $451.9M | $458.7M | $324.5M | Asset Quality Review [Nonperforming Assets (NPAs)](index=3&type=section&id=6.1%20Nonperforming%20Assets%20(NPAs)) Nonperforming assets increased to **$6.8 million**, representing **0.33%** of total assets, an increase from the prior quarter but a decrease from the prior year Nonperforming Assets | Metric | Jun 30, 2025 | Mar 31, 2025 | Jun 30, 2024 | | :-------------------------------- | :----------- | :----------- | :----------- | | Nonperforming Assets | $6.8M | $4.9M | $8.5M | | NPAs as % of Total Assets | 0.33% | 0.24% | 0.59% | [Past Due Loans](index=3&type=section&id=6.2%20Past%20Due%20Loans) Loans past-due 30-89 days and still accruing interest decreased to **$3.2 million**, or **0.22%** of total loans, showing an improvement from the prior quarter Past Due Loans | Metric | Jun 30, 2025 | Mar 31, 2025 | Jun 30, 2024 | | :-------------------------------- | :----------- | :----------- | :----------- | | Loans 30-89 Days Past Due, Accruing | $3.2M | $5.0M | $2.4M | | % of Total Loans | 0.22% | 0.35% | 0.24% | | Loans Over 90 Days Past Due, Accruing | $0 | $0 | $0 | [Net Charge-offs](index=3&type=section&id=6.3%20Net%20Charge-offs) Net charge-offs significantly decreased to **$448 thousand** in Q2 2025 from **$2.4 million** in the prior quarter Net Charge-offs | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :-------------- | :------ | :------ | :------ | | Net Charge-offs | $448K | $2.4M | $482K | [Allowance and Provision for Credit Losses](index=3&type=section&id=6.4%20Allowance%20and%20Provision%20for%20Credit%20Losses) The allowance for credit losses on loans increased to **$15.2 million**, or **1.05%** of total loans, with provision for credit losses rising to **$911 thousand** Allowance for Credit Losses on Loans | Metric | Jun 30, 2025 | Mar 31, 2025 | Jun 30, 2024 | | :-------------------------------- | :----------- | :----------- | :----------- | | Allowance for Credit Losses on Loans | $15.2M | $14.7M | $12.6M | | % of Total Loans | 1.05% | 1.02% | 1.27% | | Allowance for Credit Losses to NPAs | 223.45% | 302.94% | 146.84% | Provision for Credit Losses | Metric | Q2 2025 | Q1 2025 | | :-------------------------------- | :------ | :------ | | Provision for Credit Losses | $911K | $832K | - The increase in provision for credit losses is primarily due to **increased specific reserves on individually analyzed loans** and an increase in the total amount of loan balances individually analyzed for impairment[20](index=20&type=chunk) Capital Adequacy [Dividends and Capital Ratios](index=4&type=section&id=7.1%20Dividends%20and%20Capital%20Ratios) The Company declared and paid cash dividends of **$0.155** per common share, with capital ratios remaining strong and slightly increasing quarter-over-quarter Cash Dividends Declared | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :-------------------- | :------ | :------ | :------ | | Cash Dividends Declared | $0.155 | $0.155 | $0.15 | First National Corporation Capital Ratios | Metric | Jun 30, 2025 | Mar 31, 2025 | Jun 30, 2024 | | :-------------------------- | :----------- | :----------- | :----------- | | Total Capital Ratio | 14.89% | 14.58% | 15.58% | | Tier 1 Capital Ratio | 12.37% | 12.07% | 13.85% | | Common Equity Tier 1 Capital Ratio | 11.74% | 11.44% | 12.97% | | Leverage Ratio | 8.99% | 8.78% | 9.88% | | Common Equity to Total Assets | 8.51% | 8.30% | 8.23% | | Tangible Common Equity to Tangible Assets | 7.73% | 7.50% | 8.03% | | Tangible Book Value Per Share | $17.40 | $16.81 | $18.59 | About First National Corporation [Company Profile and Services](index=4&type=section&id=8.1%20Company%20Profile%20and%20Services) First National Corporation is the parent company of First Bank, a community bank offering diverse loan and deposit products, wealth management, and title insurance services - First National Corporation (NASDAQ: FXNC) is the parent company of First Bank, a community bank founded in 1907 in Strasburg, Virginia[23](index=23&type=chunk) - The Bank provides loan and deposit products and services via its website, mobile banking, ATMs, three loan production offices, a customer service center, and thirty-three bank branch locations across Virginia and northern North Carolina[23](index=23&type=chunk) - First Bank also operates First Bank Wealth Management and owns First Bank Financial Services, Inc., which holds an interest in a title insurance services entity[23](index=23&type=chunk) Non-GAAP Financial Measures Explanation [Purpose and Reconciliation](index=4&type=section&id=9.1%20Purpose%20and%20Reconciliation) The Company uses non-GAAP financial measures to provide additional insights into its performance, believing they enhance understanding for decision-making and comparisons - First National Corporation uses non-GAAP financial measures to provide useful information for financial and operational decision-making, evaluating trends, and comparing financial results to other institutions[24](index=24&type=chunk) - Non-GAAP measures are supplemental, not a substitute for GAAP, and may not be comparable to those reported by other financial institutions[25](index=25&type=chunk) - A reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measure is included at the end of this release[25](index=25&type=chunk) Forward-Looking Statements [Disclaimer and Risk Factors](index=5&type=section&id=10.1%20Disclaimer%20and%20Risk%20Factors) This report contains forward-looking statements subject to risks and uncertainties, and actual results may differ materially, requiring readers to consult SEC filings for detailed risk factors - The discussion includes forward-looking statements related to the Company's plans, objectives, expectations, and intentions[27](index=27&type=chunk) - There is no assurance that actual results, performance, or achievements will not differ materially from any future results expressed or implied by such statements[27](index=27&type=chunk) - Readers should refer to the risk factors and cautionary language in First National's Annual Report on Form 10-K, Quarterly Report on Form 10-Q, and other SEC filings for details on factors that could affect expectations[27](index=27&type=chunk) Company Contacts [Investor Relations](index=5&type=section&id=11.1%20Investor%20Relations) Contact information for President and CEO, Scott C. Harvard, and Executive Vice President and CFO, Brad E. Schwartz, is provided for investor inquiries - Contacts for First National Corporation are Scott C. Harvard (President and CEO) and Brad E. Schwartz (Executive Vice President and CFO)[28](index=28&type=chunk) Supplemental Financial Tables [Income Statement Summary](index=6&type=section&id=12.1%20Income%20Statement%20Summary) This section provides a detailed unaudited income statement for the three and six months ended June 30, 2025, and comparable periods, outlining key financial figures Income Statement Highlights (in thousands) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :-------------------------------- | :------ | :------ | :------ | :------- | :------- | | Total Interest and Dividend Income | $25,165 | $24,022 | $17,055 | $49,187 | $33,389 | | Total Interest Expense | $6,617 | $6,571 | $5,561 | $13,188 | $11,045 | | Net Interest Income | $18,548 | $17,451 | $11,494 | $35,999 | $22,344 | | Provision for Credit Losses | $911 | $832 | $400 | $1,743 | $1,400 | | Total Noninterest Income | $3,889 | $3,611 | $2,686 | $7,500 | $6,733 | | Total Noninterest Expense | $15,191 | $18,335 | $10,659 | $33,526 | $20,546 | | Income Before Income Taxes | $6,335 | $1,895 | $3,121 | $8,230 | $7,131 | | Income Tax Expense | $1,284 | $297 | $679 | $1,581 | $1,480 | | Net Income | $5,051 | $1,598 | $2,442 | $6,649 | $5,651 | [Per Share Data and Key Performance Ratios](index=7&type=section&id=12.2%20Per%20Share%20Data%20and%20Key%20Performance%20Ratios) This table presents common share data, including basic and diluted EPS, weighted average shares, tangible book value, cash dividends, and key performance ratios Common Share and Per Common Share Data | Metric | Jun 30, 2025 | Mar 31, 2025 | Jun 30, 2024 | YTD 2025 | YTD 2024 | | :-------------------------------- | :----------- | :----------- | :----------- | :------- | :------- | | Earnings per common share, basic (GAAP) | $0.56 | $0.18 | $0.39 | $0.74 | $0.90 | | Adjusted earnings per common share, basic (non-GAAP) | $0.57 | $0.35 | $0.48 | $0.92 | $0.99 | | Weighted average shares, basic | 8,987,179 | 8,979,527 | 6,278,113 | 8,983,374| 6,273,952| | Tangible book value per share (non-GAAP) | $17.40 | $16.81 | $18.59 | $17.40 | $18.59 | | Cash dividends declared | $0.155 | $0.155 | $0.15 | $0.31 | $0.30 | Key Performance Ratios | Metric | Jun 30, 2025 | Mar 31, 2025 | Jun 30, 2024 | YTD 2025 | YTD 2024 | | :-------------------------------- | :----------- | :----------- | :----------- | :------- | :------- | | Return on average assets (GAAP) | 1.00% | 0.32% | 0.68% | 0.66% | 0.79% | | Adjusted return on average assets (non-GAAP) | 1.02% | 0.63% | 0.84% | 0.83% | 0.86% | | Return on average equity (GAAP) | 11.85% | 3.85% | 8.31% | 7.90% | 9.68% | | Adjusted return on average equity (non-GAAP) | 12.05% | 7.61% | 10.23% | 11.19% | 10.65% | | Net interest margin fully tax-equivalent (non-GAAP) | 3.95% | 3.77% | 3.40% | 3.86% | 3.31% | | Efficiency ratio (non-GAAP) | 65.11% | 75.44% | 70.64% | 70.01% | 68.09% | [Balance Sheet Summary and Loan Data](index=8&type=section&id=12.3%20Balance%20Sheet%20Summary%20and%20Loan%20Data) This table provides a detailed breakdown of the Company's balance sheet at various period ends, including assets, liabilities, shareholders' equity, and loan portfolio by type Balance Sheet (in thousands) | Metric | Jun 30, 2025 | Mar 31, 2025 | Dec 31, 2024 | Sep 30, 2024 | Jun 30, 2024 | | :-------------------------------- | :----------- | :----------- | :----------- | :----------- | :----------- | | Total Assets | $2,041,441 | $2,033,346 | $2,010,281 | $1,450,716 | $1,457,528 | | Cash and Cash Equivalents | $194,315 | $206,032 | $162,874 | $126,516 | $135,635 | | Securities available for sale | $187,579 | $160,976 | $163,847 | $146,013 | $144,816 | | Loans, net of allowance | $1,428,251 | $1,435,895 | $1,450,604 | $982,016 | $977,423 | | Total Deposits | $1,803,166 | $1,824,976 | $1,803,778 | $1,253,255 | $1,265,796 | | Noninterest-bearing demand deposits | $541,204 | $540,387 | $520,153 | $383,400 | $397,770 | | Other borrowings | $25,000 | $0 | $0 | $50,000 | $50,000 | | Total Liabilities | $1,867,909 | $1,864,671 | $1,843,750 | $1,325,601 | $1,337,637 | | Total Shareholders' Equity | $173,532 | $168,675 | $166,531 | $125,115 | $119,891 | Total Loans by Type (in thousands) | Loan Type | Jun 30, 2025 | Mar 31, 2025 | Dec 31, 2024 | Sep 30, 2024 | Jun 30, 2024 | | :-------------------------------- | :----------- | :----------- | :----------- | :----------- | :----------- | | Real estate loans: Construction and land development | $78,169 | $81,596 | $84,480 | $61,446 | $60,919 | | Real estate loans: Secured by 1-4 family residential | $544,577 | $550,183 | $547,576 | $351,004 | $346,976 | | Other real estate loans | $667,550 | $653,367 | $658,029 | $440,648 | $440,857 | | Commercial and industrial loans | $119,910 | $131,539 | $140,393 | $114,190 | $115,951 | | Total Loans | $1,443,437 | $1,450,630 | $1,467,004 | $994,720 | $989,976 | [Average Balances, Yields and Rates Paid (Quarterly)](index=9&type=section&id=12.4%20Average%20Balances%2C%20Yields%20and%20Rates%20Paid%20(Quarterly)) This table provides average balances, interest income/expense, and corresponding yields/rates for earning assets and interest-bearing liabilities for the three months ended June 30, 2025, and comparable periods Average Balances, Yields and Rates Paid (Three Months Ended) | Metric | Jun 30, 2025 | Mar 31, 2025 | Jun 30, 2024 | | :-------------------------------- | :----------- | :----------- | :----------- | | Average Earning Assets | $1,893,133 | $1,888,428 | $1,370,072 | | Total Earning Asset Yield | 5.35% | 5.18% | 5.03% | | Average Interest Bearing Deposits | $1,267,963 | $1,284,224 | $863,448 | | Total Interest Bearing Deposit Rate | 1.92% | 1.91% | 2.24% | | Total Interest Bearing Liabilities | $1,298,823 | $1,314,751 | $927,727 | | Total Interest Bearing Liabilities Rate | 2.04% | 2.03% | 2.41% | | Net Interest Margin FTE | 3.95% | 3.77% | 3.40% | [Average Balances, Yields and Rates Paid (Year-to-Date)](index=10&type=section&id=12.5%20Average%20Balances%2C%20Yields%20and%20Rates%20Paid%20(Year-to-Date)) This table presents average balances, interest income/expense, and corresponding yields/rates for earning assets and interest-bearing liabilities for the six months ended June 30, 2025, and the comparable period in 2024 Average Balances, Yields and Rates Paid (Six Months Ended) | Metric | Jun 30, 2025 | Jun 30, 2024 | | :-------------------------------- | :----------- | :----------- | | Average Earning Assets | $1,890,749 | $1,362,687 | | Total Earning Asset Yield | 5.27% | 4.95% | | Average Interest Bearing Deposits | $1,276,048 | $866,718 | | Total Interest Bearing Deposit Rate | 1.91% | 2.23% | | Total Interest Bearing Liabilities | $1,307,966 | $930,996 | | Total Interest Bearing Liabilities Rate | 2.03% | 2.39% | | Net Interest Margin FTE | 3.86% | 3.31% | [Non-GAAP Reconciliations](index=11&type=section&id=12.6%20Non-GAAP%20Reconciliations) These tables provide detailed reconciliations of various non-GAAP financial measures, including adjusted operating net income, EPS, pre-provision pre-tax earnings, and tangible common equity, to their GAAP counterparts Adjusted Operating Net Income (in thousands) | Metric | Jun 30, 2025 | Mar 31, 2025 | Jun 30, 2024 | YTD 2025 | YTD 2024 | | :-------------------------------- | :----------- | :----------- | :----------- | :------- | :------- | | Net income (GAAP) | $5,051 | $1,598 | $2,442 | $6,649 | $5,651 | | Adjusted operating net income (non-GAAP) | $5,133 | $3,157 | $3,008 | $8,290 | $6,217 | Adjusted Pre-Provision, Pre-Tax Earnings (in thousands) | Metric | Jun 30, 2025 | Mar 31, 2025 | Jun 30, 2024 | YTD 2025 | YTD 2024 | | :-------------------------------- | :----------- | :----------- | :----------- | :------- | :------- | | Pre-provision, pre-tax earnings | $7,246 | $2,727 | $3,521 | $9,973 | $8,531 | | Adjusted pre-provision, pre-tax, earnings | $7,338 | $4,667 | $4,092 | $12,005 | $9,102 | Tangible Common Equity and Tangible Assets (in thousands) | Metric | Jun 30, 2025 | Mar 31, 2025 | Jun 30, 2024 | YTD 2025 | YTD 2024 | | :-------------------------------- | :----------- | :----------- | :----------- | :------- | :------- | | Total assets (GAAP) | $2,041,441 | $2,033,346 | $1,457,528 | $2,041,441 | $1,457,528 | | Tangible assets (Non-GAAP) | $2,024,309 | $2,015,772 | $1,454,390 | $2,024,309 | $1,454,390 | | Total shareholders' equity (GAAP) | $173,532 | $168,675 | $119,891 | $173,532 | $119,891 | | Tangible common equity (Non-GAAP) | $156,400 | $151,101 | $116,753 | $156,400 | $116,753 | | Tangible common equity to tangible assets ratio (non-GAAP) | 7.73% | 7.50% | 8.03% | 7.73% | 8.03% |

Core Insights - First National Corporation reported a net income of $5.05 million for the second quarter of 2025, with basic and diluted earnings per share of $0.56, reflecting a significant increase of 211% from the previous period and 44% from the same quarter last year [1][6]. Financial Performance - Adjusted earnings for the second quarter of 2025 were $5.1 million, with adjusted basic and diluted earnings per share of $0.57 [1][6]. - The net interest margin (FTE) improved to 3.95%, up from 3.77% in the first quarter of 2025 and 3.40% in the second quarter of 2024 [4][6]. - Net interest income for the second quarter was $18.5 million, an increase of $1.0 million from the previous quarter [4][6]. - Non-interest income rose to $3.9 million, a 7.7% increase from the prior quarter, driven by higher ATM and check card income [5][6]. Balance Sheet Highlights - Total assets reached $2.041 billion, a 40.1% increase from the previous year, primarily due to growth in loans held for investment [9][12]. - Loans held for investment totaled $1.428 billion, up 46.1% from one year prior [10][12]. - Total deposits were $1.803 billion, reflecting a 42.5% increase from the previous year [12]. Expense Management - Non-interest expense decreased to $15.2 million, down from $18.3 million in the prior quarter, mainly due to reduced merger-related expenses and lower salaries and benefits [7][8]. - Adjusted operating non-interest expense was $14.7 million, a decrease of $1.3 million from the previous quarter [8]. Asset Quality - Nonperforming assets as a percentage of total assets increased to 0.33% from 0.24% in the previous quarter, but decreased from 0.59% a year ago [17][20]. - Net charge-offs totaled $448 thousand in the second quarter, down from $2.4 million in the first quarter of 2025 [19][32]. Capital Ratios - The total capital ratio stood at 14.89%, with a Tier 1 capital ratio of 12.37% as of June 30, 2025 [22][31]. - The tangible book value per share was $17.40, reflecting a slight increase from the previous quarter [22][31].

Core Insights - First National Corporation has appointed Chris Layne as Senior Vice President, Regional Market Executive for Richmond, responsible for business banking and development in the area [1][3][4] Company Overview - First National Corporation (NASDAQ: FXNC) is the parent company of First Bank, a community bank established in 1907, offering various loan and deposit products through multiple channels including a website, mobile banking, and 33 branch locations [7] Leadership and Experience - Chris Layne brings over 20 years of experience in commercial banking and operational transformation, with a strong background in the Richmond market [3][4] - He holds a Bachelor of Arts in Business Administration and an MBA, and is a graduate of the ABA Stonier Graduate School of Banking [3] Community Engagement - Chris Layne is a veteran of the United States Air Force and is actively involved in community service, holding positions on various boards and organizations [5] - He co-founded TEAM KRL, a nonprofit aimed at mentoring youth from low-to-moderate income backgrounds [5] Strategic Focus - Chris Layne aims to enhance customer relationships and deliver high-quality service, focusing on the unique needs of businesses and individuals in the Richmond market [6]

Financial Performance - Net income decreased to $1,598 thousand for the three months ended March 31, 2025, down 50.24% from $3,209 thousand in the prior year[12]. - Earnings per common share for the three months ended March 31, 2025, was $0.18, a decline of 64.71% from $0.51 in the prior year[12]. - The company reported a total comprehensive income of $3,227 thousand for the three months ended March 31, 2025, compared to $2,398 thousand in the same period of 2024, an increase of 34.63%[13]. - The net cash provided by operating activities was $3,527 thousand for the three months ended March 31, 2025, down from $4,703 thousand in the same period of 2024, a decrease of 24.93%[14]. - Net income for the three months ended March 31, 2025, was $1,598 million, down from $3,209 million for the same period in 2024, resulting in basic and diluted earnings per share of $0.18[73]. - Net income for the three months ended March 31, 2025, decreased by $1.6 million to $1.6 million, or $0.18 per diluted share, compared to $3.2 million, or $0.51 per diluted share, for the same period in 2024[143]. Asset and Deposit Growth - Total assets increased to $2,033,347 thousand as of March 31, 2025, up from $2,010,281 thousand at December 31, 2024, representing a growth of 1.14%[9]. - Total deposits rose to $1,824,976 thousand as of March 31, 2025, compared to $1,803,778 thousand at December 31, 2024, marking an increase of 1.17%[9]. - Cash and cash equivalents increased to $206,032 thousand as of March 31, 2025, compared to $162,874 thousand at the end of 2024, reflecting a rise of 26.00%[15]. - As of March 31, 2025, total shareholders' equity increased to $168,676,000 from $166,531,000 as of December 31, 2024, reflecting a growth of approximately 1%[16]. - The total recorded investment in loans was $665,682,000, with $661,025,000 classified as pass loans[54]. Loan and Credit Quality - Total loans decreased to $1.450 billion as of March 31, 2025, from $1.467 billion on December 31, 2024, representing a decline of 1.1%[42]. - The allowance for credit losses on loans decreased from $16.4 million on December 31, 2024, to $14.735 million on March 31, 2025, a decrease of 10.1%[42]. - The total past due loans as of March 31, 2025, amounted to $7.678 million, compared to $3.451 million on December 31, 2024, indicating an increase in past due loans[46]. - The provision for credit losses on loans for the period ending March 31, 2025, was a recovery of $735, indicating improved credit quality[59]. - Nonaccrual loans totaled $4,864 million as of March 31, 2025, compared to $6,971 million at December 31, 2024, indicating a decrease in nonaccrual loans[61]. Noninterest Income and Expenses - Noninterest income for the three months ended March 31, 2025, was $3,275,000, compared to $2,540,000 for the same period in 2024, representing an increase of approximately 28.9%[101]. - Noninterest expenses increased by $8.4 million, primarily due to a $2.8 million increase in salaries and employee benefits and a $1.9 million increase in merger expenses[134]. - Noninterest income decreased by $436 thousand primarily due to a reduction in other operating income related to a loan recovery recognized in 2024[133]. - The efficiency ratio rose to 75.44% in Q1 2025 from 65.65% in Q1 2024, reflecting an increase in noninterest expenses[142]. Merger and Acquisition Impact - The company incurred merger costs totaling $1.9 million related to the acquisition of Touchstone Bankshares, Inc. on October 1, 2024[21]. - The Company completed the acquisition of Touchstone on October 1, 2024, resulting in the issuance of 2.7 million additional shares valued at $46.8 million[109]. - The merger with Touchstone added 12 branches, expanding the Company's presence in central Virginia and into northern North Carolina[109]. - The Company recognized a preliminary bargain purchase gain of $2.9 million from the Touchstone acquisition[109]. Capital Adequacy - The Bank's total capital to risk-weighted assets ratio was 12.44% as of March 31, 2025, exceeding the minimum requirement of 8.00%[180]. - The Tier 1 capital to risk-weighted assets ratio was 11.39% as of March 31, 2025, above the minimum requirement of 6.00%[180]. - The common equity Tier 1 capital to risk-weighted assets ratio was 11.39% as of March 31, 2025, surpassing the minimum requirement of 4.50%[180]. - The Bank maintained a capital conservation buffer ratio of 4.44% as of March 31, 2025, indicating strong capital adequacy[180]. Securities and Fair Value - As of March 31, 2025, total securities amounted to $259,921 thousand, with gross unrealized losses of $29,536 thousand[26]. - The total unrealized losses for securities available for sale were $20,097 thousand as of March 31, 2025, compared to $22,132 thousand at December 31, 2024[28]. - The fair value of U.S. Treasury securities available for sale was $11,840 thousand, reflecting a gross unrealized loss of $646 thousand[26]. - The fair value of cash flow hedges decreased from $2,690,000 as of December 31, 2024, to $2,474,000 as of March 31, 2025[80].

Financial Performance - First National Corporation reported earnings of $1.52 million for Q1 2025, with adjusted earnings of $3.1 million, resulting in adjusted earnings per share of $0.35[1][4] - The company reported net income of $1,598,000 for the quarter, compared to a net loss of $933,000 in Q4 2024, marking a turnaround in profitability[30] - Basic earnings per common share for Q1 2025 was $0.18, compared to a loss of $0.10 in Q4 2024[31] - Adjusted earnings per common share for Q1 2025 was $0.35, down from $0.66 in Q4 2024[31] - Adjusted operating net income (non-GAAP) for Q1 2025 was $3,157,000, a decrease from $5,955,000 in Q4 2024[33] Asset and Deposit Growth - Total assets reached $2.033 billion, a 40.5% increase from the previous year, while total deposits increased to $1.825 billion, up 44.9% year-over-year[6][13] - Total assets as of March 31, 2025, were $2,033,346,000, an increase from $2,010,281,000 at the end of the previous quarter, representing a growth of 1.16%[35] - Total deposits rose to $1,824,976 thousand, compared to $1,803,778 thousand, reflecting an increase of 1.2%[32] - Noninterest-bearing demand deposits increased to $540,387 thousand, up from $520,153 thousand, a growth of 3.0%[32] Interest Income and Expenses - Net interest income for Q1 2025 was $17.5 million, a decrease of $908 thousand from the previous quarter, attributed to amortization on early payoffs of Touchstone loans[5] - Total interest and dividend income was $24,022,000, a decrease from $25,486,000 in the previous quarter[30] - Interest expense decreased to $6,571,000 from $7,127,000 in the previous quarter, reflecting lower borrowing costs[30] - Interest expense on deposits was $6,038,000 for the three months ended March 31, 2025, compared to $6,415,000 in the previous quarter, a decrease of 5.87%[35] Non-Interest Income and Expenses - Non-interest income decreased to $3.6 million in Q1 2025, down from $6.4 million in the prior quarter, primarily due to a one-time bargain purchase gain in Q4 2024[7] - Total noninterest income for the quarter was $3,611,000, down from $6,444,000 in the previous quarter, indicating a decline in service-related revenues[30] - Total noninterest expense was $18,335,000, a decrease from $21,929,000 in the previous quarter, showing cost management efforts[30] Credit Quality and Allowance for Credit Losses - The allowance for credit losses on loans was $14.7 million, or 1.02% of total loans, with a provision for credit losses of $832 thousand in Q1 2025[21] - Nonperforming assets as a percentage of total assets decreased to 0.24% in Q1 2025, compared to 0.35% in Q4 2024[17][18] - Provision for credit losses was $832,000, significantly lower than $4,750,000 in the previous quarter, indicating improved credit quality[30] - Nonperforming assets as of Q1 2025 totaled $4,864,000, down from $7,024,000 in Q4 2024[31] Capital and Efficiency Ratios - Total capital as of Q1 2025 was $182,563,000, up from $181,449,000 in Q4 2024[31] - Tier 1 capital to risk-weighted assets ratio for Q1 2025 was 11.39%, compared to 11.19% in Q4 2024[31] - The efficiency ratio improved to 52.0% from 61.0% in the previous quarter, demonstrating enhanced operational efficiency[30] - The efficiency ratio (non-GAAP) for Q1 2025 was 75.44%, compared to 63.97% in Q4 2024[34] Future Outlook - The company plans to continue focusing on cost management and improving operational efficiency in future quarters[28]

Core Viewpoint - First National Corporation reported earnings for Q1 2025, showing a net income of $1.52 million and adjusted earnings of $3.1 million, reflecting the impact of the Touchstone acquisition and merger-related expenses [1][4][8]. Financial Performance - The company achieved net interest income of $17.5 million for Q1 2025, a decrease of $908 thousand from the previous quarter, attributed to amortization on early payoffs of Touchstone loans [5][10]. - Non-interest income decreased to $3.6 million in Q1 2025 from $6.4 million in the prior quarter, primarily due to a one-time bargain purchase gain in Q4 2024 [7]. - Non-interest expenses decreased to $18.3 million in Q1 2025 from $21.9 million in the prior quarter, driven by a reduction in merger-related expenses [8][9]. Balance Sheet Highlights - Total assets reached $2.033 billion, up 40.5% from the previous year, primarily due to the Touchstone acquisition [6][10]. - Net loans held for investment increased to $1.436 billion, a 49.5% increase year-over-year [6][11]. - Total deposits rose to $1.825 billion, reflecting a 44.9% increase from the previous year, with non-interest bearing deposits comprising 30% of total deposits [6][13]. Asset Quality - Nonperforming assets as a percentage of total assets decreased to 0.24% as of March 31, 2025, down from 0.55% a year prior [17][18]. - The allowance for credit losses to nonperforming assets improved to 302.94% [17][21]. Capital Ratios - The total capital ratio stood at 12.44% as of March 31, 2025, compared to 14.45% a year earlier [24][35]. - The tangible book value per share increased to $16.81 from $16.55 in the previous quarter [24][32].

Company Overview - First National Corp. (FXNC) shares increased by 5.4% to $20.21 in the last trading session, following a period of 12.6% loss over the past four weeks, indicating a significant recovery in stock performance [1] - The company is expected to report quarterly earnings of $0.53 per share, reflecting a year-over-year increase of 3.9%, with revenues projected at $21.5 million, up 44.3% from the same quarter last year [3] Market Influence - The recent rally in First National Corp shares was driven by broad market strength, particularly after President Donald Trump's announcement of a 90-day suspension on tariffs for non-retaliating countries, which eased trade tensions and improved market sentiment [2] - The consensus EPS estimate for First National has remained unchanged over the last 30 days, suggesting that the stock's price movement may not sustain without trends in earnings estimate revisions [4] Industry Context - First National belongs to the Zacks Banks - Southeast industry, where another company, Hilltop Holdings (HTH), saw a 3.4% increase in its stock price, closing at $29.18, despite a 6.5% decline over the past month [4] - Hilltop Holdings has a consensus EPS estimate of $0.28 for its upcoming report, which represents a significant decline of 33.3% compared to the previous year, and currently holds a Zacks Rank of 2 (Buy) [5]