First National (FXNC) Q1 2025 earnings summary

Executive summary

• Q1 2025 net income was $1.6 million ($0.18 per diluted share), down from $3.2 million in Q1 2024, mainly due to higher noninterest expenses and merger costs; adjusted net income was $3.2 million and adjusted EPS $0.35, excluding acquisition-related items.

• Completed the Touchstone Bankshares, Inc. acquisition in October 2024, adding 12 branches and driving significant increases in assets, loans, and deposits year-over-year.

• Short-term earnings impacted by $1.9 million in pre-tax merger expenses and duplicative operating costs during system conversion.

• Return on average assets was 0.31% (GAAP) and 0.32% (GAAP), with adjusted return on average assets at 0.63%; return on average equity was 3.67% (GAAP) and 3.85% (GAAP), with adjusted return on average equity at 7.61%.

• Average earning assets increased 38.7% year-over-year, primarily due to the Touchstone merger.

Financial highlights

• Total assets reached $2.033 billion at March 31, 2025, up 40.5% year-over-year and 1.1% sequentially.

• Net loans held for investment were $1.44 billion, up 49.5% year-over-year but down 1.0% sequentially.

• Deposits totaled $1.83 billion, up 44.9% year-over-year and 1.2% from the prior quarter.

• Net interest income was $17.5 million, up $6.6 million (61%) year-over-year, with net interest margin at 3.77%, up from 3.24% a year ago.

• Noninterest income was $3.6 million, down $436 thousand (11%) year-over-year and $2.8 million sequentially due to a prior quarter one-time bargain purchase gain; adjusted, noninterest income rose 2.5% sequentially.

Outlook and guidance

• Management expects continued benefits from the Touchstone merger, including revenue synergies, cost savings, and scale, though integration costs and duplicative expenses may persist in the near term.

• The company anticipates ongoing pressure from economic conditions, competition, and interest rate changes, which could impact loan demand, deposit flows, and asset quality.