First National (FXNC) - 2025 Q3 - Quarterly Report

Financial Performance - Net income for Q3 2025 increased by $3.4 million to $5.6 million, or $0.62 per diluted share, compared to $2.2 million, or $0.36 per diluted share, in Q3 2024[148] - For the nine months ended September 30, 2025, net income increased by $4.3 million to $12.2 million, or $1.35 per diluted share, compared to $7.9 million, or $1.26 per diluted share, in the same period of 2024[155] - Net income for the three months ended September 30, 2025, increased by $3.4 million to $5.6 million, or $0.62 per diluted share, compared to $2.2 million, or $0.36 per diluted share, for the same period in 2024[171] Interest Income and Margin - Net interest income increased by $6.5 million, driven by a $7.6 million increase in total interest income, with a 38.0% increase in average earning assets of $522.8 million[151] - Net interest income for the three months ended September 30, 2025, increased by $6.5 million, or 55.7%, to $18.3 million, driven by a $7.0 million increase in interest income and fees on loans[174] - The net interest margin for the third quarter of 2025 was 3.84%, an increase of 41 basis points compared to 3.43% for the same period in the prior year[177] - Net interest income for the nine months ended September 30, 2025, increased by $20.2 million, or 59.3%, to $54.3 million, with total interest income rising by $23.4 million[178] - The net interest margin for the nine months ended September 30, 2025, was 3.85%, compared to 3.36% for the same period in the prior year, reflecting a 49 basis point increase[182] Noninterest Income and Expenses - Noninterest income rose by $1.3 million in Q3 2025, primarily from increases in service charges and fees related to the Touchstone acquisition[153] - Noninterest income increased by $1.3 million, or 40.5%, to $4.5 million for Q3 2025 compared to Q3 2024[189] - Noninterest income for the nine months ended September 30, 2025, rose by $2.1 million, or 20.8%, to $12.0 million compared to the same period in 2024[190] - Noninterest expenses increased by $5.3 million, mainly due to a $2.6 million rise in salaries and employee benefits related to the Touchstone merger[154] - Noninterest expenses increased by $5.3 million, or 50.9%, to $15.8 million for Q3 2025 compared to Q3 2024, primarily due to a $2.6 million increase in salaries and employee benefits[191] - Noninterest expenses for the nine months ended September 30, 2025, rose by $18.3 million, or 59.0%, to $49.3 million compared to the same period in 2024[192] Credit Losses and Allowance - Provision for credit losses decreased by $1.5 million in Q3 2025, totaling $193 thousand, compared to $1.7 million in Q3 2024[152] - The provision for credit losses for the three-month period ended September 30, 2025, was $193 thousand, significantly lower than $1.7 million for the same period last year[187] - The allowance for credit losses to total loans ratio decreased to 1.01% at September 30, 2025, down from 1.28% at September 30, 2024[188] - The net charge-offs for the first nine months of 2025 totaled $3.8 million, compared to $2.4 million for the same period in 2024[188] Assets and Liabilities - Total assets as of September 30, 2025, were $2,022,958 thousand, an increase from $1,449,264 thousand in the prior year[183] - Total earning assets increased to $1,897,328 thousand with an average yield of 5.26%, compared to $1,374,566 thousand and 5.08% in the prior year[183] - Total deposits reached $1.810 billion as of September 30, 2025, reflecting a $5.8 million (0.6%) increase from December 31, 2024, and a $556.3 million (44.4%) increase from September 30, 2024[210] - Total interest-bearing liabilities increased to $1,310,653 thousand with an interest expense of $6,792 thousand, resulting in a cost of funds of 2.06%[183] - Loans totaled $1.419 billion at September 30, 2025, reflecting a decrease of $31.4 million, or 8.7%, from December 31, 2024[200] Capital and Liquidity - The Bank's total capital to risk-weighted assets ratio was 13.40% as of September 30, 2025, exceeding the minimum requirement of 8.00%[218] - The Tier 1 capital to risk-weighted assets ratio was 12.36% as of September 30, 2025, above the minimum requirement of 6.00%[218] - The common equity Tier 1 capital to risk-weighted assets ratio was 12.36% as of September 30, 2025, surpassing the minimum requirement of 4.50%[218] - Liquidity sources available to the Bank totaled $783.2 million on September 30, 2025, up from $758.0 million on December 31, 2024, and $499.1 million on September 30, 2024[213] - Estimated uninsured customer deposits amounted to $555.0 million on September 30, 2025, compared to $537.0 million on December 31, 2024, and $400.1 million on September 30, 2024[214] Merger and Acquisition Costs - The Company incurred merger costs totaling $2.0 million and $7.2 million for the nine months ended September 30, 2025, and the year ended December 31, 2024, respectively[147] - Noninterest expenses for the nine months increased by $18.3 million, primarily due to merger expenses of $2.0 million and additional operating costs from the Touchstone merger[160] Tax and Shareholder Equity - The effective tax rate for Q3 2025 was 18.6%, compared to 19.5% for Q3 2024[194] - Total shareholders' equity increased by $14.7 million during the first nine months of 2025, primarily from an $8.0 million increase in retained earnings[199] Other Financial Metrics - The efficiency ratio, a non-GAAP measure, is used to assess operational efficiency, calculated by dividing noninterest expenses by the sum of net interest income and noninterest income[161] - The efficiency ratio for the three months ended September 30, 2025, was 67.97%, compared to 67.95% for the same period in 2024[165] - The company experienced a $20.2 million increase in net interest income after provision for the nine months ended September 30, 2025, offset by an $18.3 million increase in noninterest expenses[173] - The Company had commitments to extend credit totaling $288.1 million as of September 30, 2025, compared to $212.9 million at the same date in 2024[221] - The Company recognized an $80 thousand gain on the early redemption of a $500 thousand tranche of subordinated debt during the second quarter of 2025[211] - The cash flow hedges related to interest rate swaps had a fair value of $2.3 million as of September 30, 2025[225]