Sign in

You're signed outSign in or to get full access.

FN

FIRST NATIONAL CORP /VA/ (FXNC)·Q3 2025 Earnings Summary

Executive Summary

  • Record quarter: GAAP diluted EPS $0.62, adjusted diluted EPS $0.58 (in line with S&P consensus), net revenue $22.80M; NIM (FTE) 3.84% as accretion effects diminished .
  • Versus estimates: Adjusted EPS matched consensus $0.58*, GAAP EPS beat; revenue slightly missed $22.70M* consensus with $22.32M* S&P-actual/ $22.80M reported, driven by lower accretion on purchased loans and higher average interest-bearing liabilities .
  • Balance sheet/credit: Deposits $1.81B (+44% y/y), loans net $1.419B (+45% y/y), NPAs improved to 0.28% of assets; provision fell to $0.193M amid lower specific reserves .
  • Capital actions: Company called $13M of subordinated debt (minimal capital ratio impact expected) and subsequently increased the quarterly dividend to $0.17 (+9.7%) on Nov 13, a potential stock catalyst .
  • Strategic narrative: Touchstone acquisition driving scale; loan growth muted by elevated payoffs, but new banker hires in Richmond/Roanoke/Staunton support future production .

Values retrieved from S&P Global for items marked with *.

What Went Well and What Went Wrong

What Went Well

  • Record earnings with improving profitability: ROA 1.09% and ROE 12.43%; tangible book per share rose to $18.26 on earnings and AFS loss improvement .
  • Margin resilience excluding accretion: NIM (FTE) 3.84% vs 3.95% in Q2, with accretion falling to $43K; management noted NIM would have improved excluding merger accounting .
  • Asset quality improved: NPAs down to 0.28% of assets and $5.7M in NPAs; allowance coverage to NPAs increased to 253% .
  • Management quote: “We are pleased to report another record quarter… While loan growth remains muted due to higher-than-expected loan payoff volumes, we have recently added additional experienced bankers… The balance sheet remains strong with ample liquidity and capital to support future growth,” — Scott Harvard, CEO .

What Went Wrong

  • Net interest income declined $0.253M q/q (to $18.3M) as accretion fell $0.864M and average interest-bearing liabilities rose $11.8M; earning asset yields fell 9 bps q/q to 5.26% .
  • Loan growth muted: LHFI net decreased $9.5M q/q due to elevated payoffs, offsetting production; health care provider portfolio remains in workout with $1.7M non-accrual, $1.2M specific reserves .
  • Operating expenses up: Noninterest expense rose $0.592M q/q to $15.8M, driven by salaries/benefits (+$0.454M) and occupancy (+$0.081M); adjusted operating noninterest expense up $0.683M q/q to $15.35M .

Financial Results

Core P&L, EPS, Margins vs prior periods and estimates

MetricQ3 2024Q1 2025Q2 2025Q3 2025 ActualQ3 2025 Consensus*
Net Revenue ($USD Millions)$14.95 $21.06 $22.44 $22.80 $22.70*
Net Interest Income ($USD Millions)$11.75 $17.45 $18.55 $18.30 —
Noninterest Income ($USD Millions)$3.20 $3.61 $3.89 $4.50 —
Diluted EPS (GAAP, $)$0.36 $0.18 $0.56 $0.62 —
Diluted EPS (Adjusted, $)$0.39 $0.35 $0.57 $0.58 $0.58*
NIM (FTE, %)3.43% 3.77% 3.95% 3.84% —
ROA (%)0.62% 0.32% 1.00% 1.09% —
ROE (%)7.28% 3.85% 11.85% 12.43% —
Efficiency Ratio (Adj, %)67.95% 75.44% 65.11% 67.97% —

Notes:

  • Adjusted EPS/ratios exclude merger-related items and bargain purchase gains per company’s non-GAAP reconciliation .
  • S&P Global estimates marked with *; Values retrieved from S&P Global.

Estimate comparison highlights:

  • EPS: Adjusted EPS $0.58 matched consensus $0.58*; GAAP EPS $0.62 is a beat versus normalized consensus.
  • Revenue: Actual $22.32M* (S&P actual) vs $22.70M* consensus → slight miss; reported net revenue $22.80M (company) benefited from $0.304M bargain purchase gain .

Balance Sheet and Asset Quality KPIs

KPIQ3 2024Q1 2025Q2 2025Q3 2025
Total Deposits ($USD Billions)$1.253 $1.825 $1.803 $1.810
Noninterest-bearing Deposits ($USD Millions)$383.4 $540.4 $541.2 $511.5
Loans, Net ($USD Billions)$0.982 $1.436 $1.428 $1.419
Liquidity Sources ($USD Millions)$499.1 $800.2 $633.7 $676.1
NPAs (% of Assets)0.41% 0.24% 0.33% 0.28%
NPAs ($USD Millions)$5.985 $4.864 $6.796 $5.702
Allowance to Loans (%)1.28% 1.02% 1.05% 1.01%
Net Charge-offs ($USD Thousands)$1,572 $2,401 $448 $939
Provision for Credit Losses ($USD Thousands)$1,700 $832 $911 $193

Loan Composition (Selected categories, period-end)

Category ($USD Millions)Q3 2024Q1 2025Q2 2025Q3 2025
1–4 Family Residential$351.0 $550.2 $544.6 $533.5
Other Real Estate Loans$440.6 $653.4 $667.6 $671.7
Construction & Land Dev.$61.4 $81.6 $78.2 $78.5
Commercial & Industrial$114.2 $131.5 $119.9 $117.0

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Quarterly Dividend per Share ($)Q4 2025$0.155 (Q3 2025) $0.17 (declared Nov 13, 2025) Raised
Subordinated Debt Redemptions ($)Q4 2025—$5M called Oct 1; $8M called Oct 2 to redeem Nov 15; minimal impact on total risk-based capital expected Maintained capital; improves profitability
Capital Ratios OutlookQ4 2025—Management expects minimal impact from redemptions on total risk-based capital ratio Maintained

No explicit revenue/expense/NIM/tax-rate numeric guidance was provided in Q3 materials .

Earnings Call Themes & Trends

No earnings call transcript was available for Q3 2025; themes below reflect management commentary in press releases.

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Touchstone integration and scaleQ1: Completed system conversion; merger costs elevated; duplicative systems increased OpEx . Q2: Efficiency improved post-conversion; accretion boosted NIM .One year post-close, pleased with expansion; bargain purchase gain tied to tax refund; ongoing lease rationalization .Integration maturing; efficiency normalizing.
Net interest margin driversQ1: NIM (FTE) 3.77% with minor net amortization; yield down 12 bps; cost of funds down 6 bps . Q2: NIM (FTE) 3.95% aided by $0.907M accretion (+18 bps) .NIM (FTE) 3.84% with accretion only $43K; excluding accretion, NIM would have improved .Accretion impact fading; underlying NIM resilient.
Loan growth vs payoffsQ1: Loans flat q/q, payoffs impacted balances . Q2: LHFI down $7.6M q/q; payoffs offset production .LHFI down $9.5M q/q; elevated payoffs; banker hiring to rebuild pipelines .Near-term muted; medium-term rebuilding.
Deposits and liquidityQ1: Deposits +1.2% q/q; liquidity $800.2M . Q2: Deposits -1.2% q/q; liquidity $633.7M .Deposits +0.4% q/q; liquidity $676.1M; uninsured deposits $555.0M (ex-municipal $473.4M) .Liquidity stable; deposit mix manageable.
Asset qualityQ1: NPAs to assets down to 0.24%; net charge-offs $2.4M; allowances to NPAs up . Q2: NPAs rose to 0.33%; net charge-offs $0.448M .NPAs down to 0.28%; net charge-offs $0.939M; health care provider portfolio shrinking .Improving NPAs; heightened C&I/HC run-off continues.
Operating expensesQ1: Elevated due to merger costs, fraud losses; adjusted OpEx $16.0M . Q2: OpEx decreased; adjusted OpEx $14.7M .OpEx increased to $15.8M; adjusted OpEx $15.35M; plan to close non-branch leased facilities .Normalizing; targeted real estate actions to lower costs.
Capital actionsQ1/Q2: Consistent $0.155 dividend .Called $13M sub debt; increased dividend to $0.17 .Shareholder returns up; balance sheet optimization.

Management Commentary

  • Strategic: “We closed the Touchstone acquisition one year ago and we are pleased with the results as we expand into these new markets… we have recently added additional experienced bankers… [and] the balance sheet remains strong with ample liquidity and capital to support future growth.” — Scott Harvard, President & CEO .
  • Margin: “Excluding the impact of merger accounting the net interest margin would have improved in the third quarter of 2025 compared to the previous period.” .
  • Cost discipline: “The company is in the process of closing several non-branch leased facilities acquired in the Touchstone merger in the next year to reduce occupancy expense.” .
  • Capital optimization: Sub debt calls ($5M redeemed Oct 1; $8M to be redeemed Nov 15) expected to have minimal impact on total risk-based capital while improving profitability .

Q&A Highlights

  • No Q3 2025 earnings call transcript was available; therefore, Q&A themes and any guidance clarifications could not be assessed from a call [ListDocuments showed none].

Estimates Context

  • EPS: Primary EPS consensus mean $0.58* with two estimates; adjusted diluted EPS reported $0.58 matched consensus; GAAP diluted EPS $0.62 is above normalized consensus .
  • Revenue: Consensus $22.70M* (one estimate) vs S&P actual $22.32M* and company-reported net revenue $22.80M (includes $0.304M bargain purchase gain), implying a slight top-line miss on SPGI’s definition and near-in-line on company “net revenue” .
  • Target price: Consensus $23.75* (two estimates).
  • Implication: Expect modest positive revisions to GAAP EPS models given beat, offset by cautious revenue trajectory as accretion fades; OpEx run-rate and loan payoffs suggest near-term NII modestly constrained.

Values retrieved from S&P Global for items marked with *.

Key Takeaways for Investors

  • Bold beat on GAAP EPS with normalized EPS in line; margin performance looks sturdier ex-accretion, a positive for sustainability as purchase accounting rolls off .
  • Slight revenue miss vs S&P* reflects lower accretion and higher interest-bearing liabilities; watch funding mix and deposit pricing discipline to protect NIM .
  • Asset quality trending better (NPAs down, allowance coverage up), but charge-offs remain elevated vs Q2; continued attention on shrinking health care provider exposure .
  • Operating expense pressures emerged q/q; management targeting lease exits should support efficiency improvement into 2026 .
  • Capital optimization (sub debt calls) enhances forward profitability with minimal capital ratio impact; dividend increase to $0.17 underscores confidence and could support share performance .
  • Loan growth muted by payoffs; banker hires in key markets are a forward-looking lever; monitor production vs payoff dynamics through Q4/Q1 .
  • Near-term trades: Favor on dips given improving core margin ex-accretion and dividend catalyst; medium-term thesis hinges on stabilizing payoffs, cost actions, and sustained deposit mix supporting NIM.