First National Corporation Reports Q1 2025 Financial Results with Decreased Net Income

First National Corporation (the Company) reported its financial results for the first quarter of 2025, revealing a net income of $1.6 million, or $0.18 per diluted share, a decrease from $3.2 million, or $0.51 per diluted share, in the same period of 2024. The decline in net income was attributed to an increase in noninterest expenses, which rose by $8.4 million, primarily due to merger-related costs and additional operating expenses from the recent acquisition of Touchstone Bankshares, Inc. Net interest income, however, increased by $6.6 million to $17.5 million, driven by a significant rise in average earning assets and a 53-basis point increase in the net interest margin to 3.77%.

The Company experienced a substantial increase in total interest income, which rose by $7.7 million, while total interest expense increased by $1.1 million. The merger with Touchstone contributed to a 38.7% increase in average earning assets, which reached $1.89 billion. The provision for credit losses decreased to $832,000 from $1 million in the prior year, reflecting improved asset quality and lower net charge-offs. Noninterest income also saw a decline of $436,000, primarily due to a decrease in other operating income, although service charges and ATM fees increased.

Operationally, First National Corporation completed the acquisition of Touchstone on October 1, 2024, which added 12 branches and expanded its market presence in Virginia and North Carolina. The integration of Touchstone's operations was completed in February 2025, and the Company incurred merger costs totaling $1.9 million in the first quarter of 2025. The merger is expected to enhance the Company's service offerings and operational efficiency, although it has temporarily increased expenses.

As of March 31, 2025, total assets increased to $2.03 billion, a 4.6% increase from the end of 2024, while total liabilities rose by $20.9 million, primarily due to a 4.7% increase in total deposits. The Company reported a decrease in loans, totaling $1.44 billion, down from $1.47 billion at the end of 2024, reflecting a strategic focus on asset quality. The allowance for credit losses stood at $14.7 million, indicating a cautious approach to credit risk management.

Looking ahead, First National Corporation anticipates that the integration of Touchstone will yield operational efficiencies and revenue synergies, although it acknowledges potential challenges related to market conditions and competition. The Company remains committed to maintaining strong capital ratios, with a common equity Tier 1 capital ratio of 11.39%, well above regulatory requirements. The management's outlook emphasizes a focus on enhancing customer service and expanding its market presence while navigating the evolving economic landscape.