First National (FXNC) Q2 2024 earnings summary

Executive summary

• Q2 2024 net income was $2.4M ($0.39 per share), adjusted net income $3.0M ($0.48 per share), reflecting $571K in merger-related expenses; six-month net income was $5.7M ($0.90 per share), both down year-over-year.

• Return on average assets was 0.68% (GAAP) and 0.84% (adjusted); return on average equity was 8.31% (GAAP) and 10.23% (adjusted) for Q2 2024.

• Net interest margin improved to 3.40% in Q2 2024, up 16 bps sequentially and 4 bps year-over-year.

• The company is progressing on the $47M all-stock acquisition of Touchstone Bankshares, with regulatory approval received and closing expected in Q4 2024.

• The decrease in net income was mainly due to higher noninterest expenses and increased provision for credit losses, partially offset by higher net interest income.

Financial highlights

• Net interest income for Q2 2024 increased by $749K (7%) year-over-year and $644K (6%) sequentially to $11.5M.

• Total interest income for Q2 2024 rose by $2.8M year-over-year and $721K (4%) sequentially, offset by higher interest expense.

• Provision for credit losses was $400K in Q2 2024 (up $300K year-over-year); allowance for credit losses on loans was $12.6M (1.27% of loans) at June 30, 2024.

• Noninterest income decreased $198K (7%) year-over-year and $1.4M sequentially, mainly due to a prior quarter loan recovery.

• Noninterest expenses increased by $1.5M (16%) year-over-year and $772K (8%) sequentially, driven by higher salaries, legal/professional fees, and merger costs.

Outlook and guidance

• The company expects to complete the Touchstone acquisition in Q4 2024, with $10.6M in additional pre-tax merger-related expenses anticipated during 2024.

• Post-merger, the company will expand its Richmond presence and become the ninth largest Virginia community bank by deposits.

• Management expects continued focus on integration and operational efficiency post-merger.