First National Corporation Reports Significant Increase in Net Income and Successful Touchstone Bankshares Merger

First National Corporation reported a significant increase in its financial performance for the second quarter of 2025, with net income rising to $5.1 million, or $0.56 per diluted share, compared to $2.4 million, or $0.39 per diluted share, in the same period of 2024. This increase in net income was primarily driven by a $7.1 million rise in net interest income, which reached $18.5 million, reflecting a 61.4% increase year-over-year. The company also experienced a 55-basis point increase in its net interest margin, which improved to 3.95%. Total interest income increased by $8.1 million, while total interest expense rose by $1.1 million, indicating a favorable shift in the company's interest income dynamics.

In the first half of 2025, net income increased by $998,000 to $6.6 million, or $0.74 per diluted share, compared to $5.7 million, or $0.90 per diluted share, for the same period in 2024. The increase in net income was attributed to a $13.7 million rise in net interest income, which was partially offset by a $13 million increase in noninterest expenses, including $2 million in merger-related costs from the acquisition of Touchstone Bankshares, Inc. The company’s total assets grew to $2.041 billion, a 3.1% increase from the end of 2024, while total liabilities increased by $24.2 million, primarily due to a $25 million rise in other borrowings.

The acquisition of Touchstone Bankshares, completed on October 1, 2024, has significantly impacted First National's operations. The merger added 12 branches and expanded the company's presence in Virginia and North Carolina. Following the merger, the company incurred $2 million in merger costs during the first half of 2025. The integration of Touchstone's operations was completed in February 2025, and the combined entity now operates 33 branch offices and three loan production offices, enhancing its service offerings and market reach.

Operationally, First National reported a decrease in loans, totaling $1.428 billion as of June 30, 2025, down from $1.466 billion at the end of 2024. This decline was attributed to a strategic shift in the loan portfolio composition, with a notable increase in noninterest-bearing deposits and a slight decrease in savings and interest-bearing deposits. The company’s provision for credit losses increased to $1.7 million for the first half of 2025, reflecting the impact of higher loan balances acquired through the merger. The allowance for credit losses as a percentage of total loans was 1.05% as of June 30, 2025, compared to 1.27% a year earlier.

Looking ahead, First National Corporation remains optimistic about its growth trajectory, bolstered by the successful integration of Touchstone and the expansion of its branch network. The company anticipates continued improvements in net interest income and overall profitability, despite the challenges posed by rising interest rates and economic uncertainties. Management emphasizes the importance of maintaining strong capital ratios, which currently exceed regulatory requirements, ensuring the company is well-positioned to navigate future market conditions.