First National (FXNC) Q3 2024 earnings summary

Executive summary

• Q3 2024 net income was $2.2M ($0.36 EPS), down from $3.1M in Q3 2023; adjusted net income was $2.4M ($0.39 EPS) reflecting merger adjustments.

• Return on average assets was 0.62% for Q3 2024; return on average equity was 7.28%.

• Net interest margin improved to 3.43% due to proactive deposit pricing and stable noninterest-bearing deposits at 31%.

• Noninterest income rose 19% sequentially, led by ATM, check card, and wealth management fees.

• Completed Touchstone Bankshares acquisition, expanding to 33 branches and $2.1B in pro-forma assets.

Financial highlights

• Net interest income rose $1.1M (10%) in Q3 2024 and $1.5M (5%) for the nine months, driven by higher loan and deposit interest income.

• Provision for credit losses increased to $1.7M in Q3 2024 (from $0.1M), mainly due to higher projected unemployment and specific loan reserves.

• Noninterest expense increased by $675K (7%) in Q3, with $219K in merger costs; however, sequentially, noninterest expense decreased 2% to $10.5M.

• Loans grew 1.9% annualized from Q2 to $994.7M; deposits decreased 4% annualized to $1.3B.

• Tangible book value per share rose to $19.37, up from $17.38 a year ago.

Outlook and guidance

• The company expects $11.5M in additional pre-tax merger-related expenses in Q4 2024 and Q1 2025 due to the Touchstone acquisition.

• Management anticipates value creation and cost savings from the merger, with integration expected by February 2025, but notes integration risks.