First National (FXNC) - 2024 Q1 - Quarterly Results

First Quarter 2024 Financial Results First Quarter 2024 Highlights First National Corporation reported a solid first quarter for 2024, achieving net income of $3.2 million and a strategic acquisition of Touchstone Bankshares Quarterly Performance Summary | Metric | Value | | :--- | :--- | | Net Income | $3.2 million | | Diluted EPS | $0.51 | | Return on Average Assets | 0.90% | | Return on Average Equity | 11.07% | | Tangible Book Value per Share | $18.27 | - Deposits grew by $25.4 million, an 8% annualized increase, with stable noninterest-bearing deposits making up 31% of the total[8] - The company announced a significant expansion through an agreement to acquire Touchstone Bankshares, Inc[2][8] Financial Performance Net Interest Income Net interest income slightly increased to $10.9 million, driven by higher interest income on deposits offset by increased interest expense from deposit costs and new borrowings - Net interest income increased by $41 thousand to $10.9 million quarter-over-quarter[3] - Interest income on deposits in other banks rose by $920 thousand due to a $73.7 million increase in average balances[4] - Interest expense on deposits increased by $539 thousand, reflecting a 17-basis point rise in the cost of deposits[5] - A new $50.0 million borrowing from the Federal Reserve's Bank Term Funding Program contributed $482 thousand to interest expense[5] Noninterest Income Noninterest income significantly increased to $4.0 million, primarily due to a recovery on a charged-off loan Noninterest Income Breakdown | Category | Q1 2024 | Q4 2023 | Change | | :--- | :--- | :--- | :--- | | Total Noninterest Income | $4.0M | $3.0M | +$978k | | Other Operating Income | - | - | +$1.2M | - The increase in other operating income was due to a recovery on a charged-off loan from a 2021 acquisition[6] Noninterest Expense Noninterest expense rose to $9.9 million, mainly due to an increase in salaries and employee benefits following a prior quarter's adjustment - Total noninterest expense increased by $787 thousand (9%) to $9.9 million quarter-over-quarter[9] - The primary driver was an $872 thousand increase in salaries and employee benefits, which was artificially low in Q4 2023 due to a one-time adjustment[9] Asset Quality Overview Asset quality showed mixed results with decreased past-due loans but increased nonperforming assets, while net charge-offs significantly declined Asset Quality Metrics | Metric | March 31, 2024 | December 31, 2023 | March 31, 2023 | | :--- | :--- | :--- | :--- | | Past Due Loans / Total Loans | 0.25% | 0.31% | 0.20% | | NPAs / Total Assets | 0.55% | 0.48% | 0.13% | | Net Charge-offs (Q1) | $362k | $2.7M (Q4) | $915k | | ACL on Loans / Total Loans | 1.30% | 1.24% | 0.95% | Past Due Loans Loans past due 30 days or more decreased to $2.5 million, with a significant reduction in those past due 90 days or more - Loans past due 30+ days decreased from $3.0 million to $2.5 million quarter-over-quarter[11] Nonperforming Assets (NPAs) Nonperforming assets increased to $8.0 million, primarily driven by a rise in nonaccrual commercial and industrial loans - NPAs rose by $1.2 million to $8.0 million in Q1 2024, mainly due to an increase in nonaccrual commercial and industrial loans[12] Net Charge-offs Net charge-offs substantially decreased to $362 thousand in Q1 2024, a significant reduction from the previous quarter - Net charge-offs dropped to $362 thousand in Q1 2024 from $2.7 million in Q4 2023[13] Provision for Credit Losses The provision for credit losses significantly decreased to $1.0 million in Q1 2024 compared to the prior quarter - The provision for credit losses was $1.0 million in Q1 2024, compared to $6.0 million in Q4 2023[14] Allowance for Credit Losses (ACL) The total allowance for credit losses on loans increased to $12.6 million, reflecting a strengthening of reserves ACL on Loans The allowance for credit losses on loans increased to $12.6 million, or 1.30% of total loans, driven by higher specific reserves ACL on Loans | Metric | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | ACL on Loans | $12.6M | $12.0M | | ACL as % of Total Loans | 1.30% | 1.24% | ACL on Unfunded Commitments The allowance for credit losses on unfunded commitments remained stable at $413 thousand with no new provision recorded - The allowance for credit losses on unfunded commitments remained stable at $413 thousand, with no provision recorded in Q1 2024[18] ACL on HTM Securities The allowance for credit losses on held-to-maturity securities slightly increased to $116 thousand with a minor provision - The allowance for credit losses on securities increased to $116 thousand from $107 thousand, with a $9 thousand provision in Q1 2024[19] Balance Sheet and Capital Management Liquidity The Bank's liquidity position remains strong with increased available sources, though uninsured customer deposits also rose Liquidity Metrics | Liquidity Metric | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Available Liquidity Sources | $554.8M | $512.7M | | Estimated Uninsured Deposits | $391.9M | $368.2M | Balance Sheet Analysis Total assets grew to $1.4 billion, driven by increased interest-bearing deposits, while loans and deposits also saw modest growth - Total assets increased by $27.9 million to $1.4 billion in Q1 2024[22] - Total loans grew by $3.5 million (2% annualized) to $973.0 million[23] - Total deposits increased by $25.4 million (8% annualized) to $1.3 billion[25] - Total investments decreased by $27.6 million to $273.5 million, with net unrealized losses on the AFS portfolio increasing to $22.2 million[24] Capital Ratios and Dividends The company's capital ratios remained well above regulatory requirements, and the quarterly cash dividend was maintained Capital Ratios | Capital Ratio | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Capital Ratio | 14.45% | 14.05% | | Tier 1 Capital Ratio | 13.20% | 12.82% | | Leverage Ratio | 9.19% | 9.31% | | Tangible Common Equity / Tangible Assets | 7.94% | 7.99% | - The company declared and paid a cash dividend of $0.15 per common share, consistent with the prior quarter and the same quarter last year[28] Supplementary Information Non-GAAP Financial Measures The company uses non-GAAP financial measures to provide additional insights into performance, cautioning they are supplemental and not GAAP substitutes - The report uses non-GAAP measures including the efficiency ratio and tangible common equity to tangible assets to provide useful information for decision-making[29] - These non-GAAP measures are considered supplemental and may not be comparable to those of other financial institutions[30] About the Company First National Corporation is the bank holding company for First Bank, a community bank operating through 20 branches, digital platforms, and a wealth management division - First National Corporation is the parent company of First Bank, which was founded in 1907[31] - The bank operates 20 branch offices, a loan production office, and a wealth management division[31] Forward-Looking Statements This report contains forward-looking statements subject to inherent risks and uncertainties that could cause actual results to differ materially - The report includes forward-looking statements subject to risks and uncertainties that could cause material differences in actual results[32] Consolidated Financial Tables Quarterly Performance Summary This section provides detailed unaudited financial data for the five most recent quarters, including income statements, balance sheets, and key ratios Quarterly Performance Summary (in thousands, except per share data) | (in thousands, except per share data) | Q1 2024 | Q4 2023 | Q1 2023 | | :--- | :--- | :--- | :--- | | Income Statement | | | | | Net Interest Income | $10,850 | $10,809 | $11,176 | | Provision for Credit Losses | $1,000 | $5,950 | $0 | | Noninterest Income | $4,047 | $3,069 | $2,778 | | Noninterest Expense | $9,887 | $9,100 | $9,200 | | Net Income (Loss) | $3,209 | ($851) | $3,849 | | Per Share Data | | | | | EPS, diluted | $0.51 | ($0.14) | $0.61 | | Tangible Book Value | $18.27 | $18.06 | $17.30 | | Key Ratios | | | | | Return on Average Assets | 0.90% | (0.25%) | 1.15% | | Net Interest Margin | 3.24% | 3.35% | 3.60% | | Balance Sheet (Period End) | | | | | Total Assets | $1,447,195 | $1,419,295 | $1,372,332 | | Total Loans, Net | $960,371 | $957,456 | $909,250 | | Total Deposits | $1,259,137 | $1,233,726 | $1,241,525 | | Total Shareholders' Equity | $117,816 | $116,271 | $111,811 |