First National (US:FXNC)2024-08-14 18:34Financial Performance - Net income for Q2 2024 decreased by $1.1 million to $2.4 million, or $0.39 per diluted share, compared to $3.5 million, or $0.56 per diluted share, in Q2 2023[147] - For the six months ended June 30, 2024, net income decreased by $1.7 million to $5.7 million, or $0.90 per diluted share, compared to $7.4 million, or $1.17 per diluted share, for the same period in 2023[152] - Net income for the three months ended June 30, 2024, decreased by $1.1 million, or 30%, to $2.4 million, compared to $3.5 million for the same period in 2023[165] - For the six months ended June 30, 2024, net income decreased by $1.7 million, or 23%, to $5.7 million, compared to $7.4 million for the same period in 2023[166] Interest Income and Expenses - Net interest income increased by $749 thousand due to a $2.8 million rise in total interest income, partially offset by a $2.0 million increase in total interest expense[149] - Net interest income increased by $749 thousand, or 7%, to $11.5 million for the second quarter of 2024, driven by a $2.8 million increase in total interest income[167] - Total interest income for the second quarter of 2024 increased by $2.1 million, or 18%, due to a 57-basis point increase in yield on loans and a 6% increase in average loan balances[168] - Total interest expense increased by $2.0 million, with a $1.4 million increase attributed to deposits and a $603 thousand increase from other borrowings[169] - The net interest margin for the second quarter of 2024 was 3.40%, up from 3.36% for the same period in the prior year[170] - For the six months ended June 30, 2024, net interest income increased by $423 thousand, or 2%, to $22.3 million, despite a $5.2 million increase in interest expense[172] - The net interest margin for the six months ended June 30, 2024, was 3.31%, down from 3.48% for the same period in the prior year[176] Noninterest Income and Expenses - Noninterest income decreased by $198 thousand, primarily due to declines in service charges on deposits and ATM fees[151] - Noninterest income increased by $1.1 million, or 19%, to $6.7 million for the six months ended June 30, 2024, compared to the same period in 2023[185] - Total noninterest expenses increased by $1.5 million, driven by a $650 thousand rise in salaries and employee benefits and a $702 thousand increase in legal and professional expenses[152] - Noninterest expenses increased by $2.2 million, or 12%, to $20.5 million for the six-month period ended June 30, 2024, compared to the same period in 2023[187] Credit Losses - Provision for credit losses increased by $300 thousand, totaling $400 thousand for Q2 2024, compared to $100 thousand in Q2 2023[150] - The provision for credit losses increased by $300 thousand for the three months ended June 30, 2024, impacting overall profitability[165] - Provision for credit losses totaled $1.4 million for the six-month period ended June 30, 2024, compared to $100 thousand for the same period in the prior year[183] - The provision for credit losses charged to expense was based on management's judgment considering various factors, indicating a proactive approach to managing credit risk[204] Assets and Liabilities - Total assets increased to $1,448,479 thousand as of June 30, 2024, compared to $1,372,781 thousand a year earlier, reflecting a growth of 5.5%[177] - Total assets increased by $38.2 million, or 5% (annualized), to $1.5 billion as of June 30, 2024, compared to December 31, 2023[191] - Total liabilities increased by $34.6 million during the six-month period ended June 30, 2024, primarily from a $32.1 million, or 5% (annualized), increase in total deposits[192] - Loans totaled $990.0 million as of June 30, 2024, reflecting a $20.5 million (4% annualized) increase from December 31, 2023, and a $59.8 million (6%) increase from June 30, 2023[194] - Deposits reached $1.3 billion on June 30, 2024, marking a $32 million increase from December 31, 2023, and a $23.4 million (2%) increase from June 30, 2023[209] Capital and Equity - Shareholders' equity rose to $118,255 thousand, up from $111,917 thousand in the previous year, indicating a growth of 5.4%[177] - Total shareholders' equity increased by $3.6 million during the first six months of 2024, primarily from a $3.8 million increase in retained earnings[193] - The Bank's total capital to risk-weighted assets ratio was 14.13% as of June 30, 2024, exceeding the regulatory requirement of 8%[216] - The common equity Tier 1 capital ratio was 12.88% as of June 30, 2024, well above the minimum requirement of 4.5%[216] Mergers and Acquisitions - The Company entered into an agreement to acquire Touchstone Bankshares, Inc. for approximately $47.0 million in stock, expected to close in Q4 2024[146] - The Company incurred $571 thousand in merger-related expenses for the six months ended June 30, 2024, with an estimated additional $10.6 million in pre-tax merger-related expenses expected during 2024[146] Risk Management - The interest rate swap agreements are part of the Company's strategy to mitigate exposure to interest rate fluctuations[223] - The Company has $9.0 million of junior subordinated debt converted from variable to fixed interest rates through cash flow hedges, with a fair value of $2.7 million as of June 30, 2024[224] - The cash flow hedges are set to mature between June 2034 and October 2036, effectively managing interest rate risk for the Company[224] Regulatory and Compliance - There were no material changes in the Company's internal control over financial reporting during the last fiscal quarter, ensuring stability in financial reporting processes[226] - The Company maintains effective disclosure controls and procedures, as confirmed by the Chief Executive Officer and Chief Financial Officer as of June 30, 2024[225] - The Company has no material pending legal proceedings, ensuring a stable legal environment for operations[228]