First National Corporation Reports Record Third Quarter and Year to Date 2026 Financial Performance

STRASBURG, Va., Oct. 23, 2026 (GLOBE NEWSWIRE) -- First National Corporation (the “Company” or “First National”) (NASDAQ: FXNC), the bank holding company of First Bank (the “Bank”), reported consolidated net income of $6.9 million and basic and diluted earnings per common share of $0.76, for the three months ended September 30, 2026. The Company reported consolidated net income of $17.5 million and basic and diluted earnings per common share of $1.94 and $1.93, respectively, for the nine months ended September 30, 2026.

"We are extremely pleased with our record financial performance for the quarter and the year. Organic loan growth continued in the third quarter with strong new loan production in all our markets. The improved net interest margin, excellent asset quality, and expense management drove the financial performance in the third quarter. Our branch optimization process was completed as we closed and consolidated three banking offices and closed our off-site ATMs in the third quarter. In early October we completed the sale of our two North Carolina banking offices and will book a gain in the fourth quarter," said Scott C. Harvard, President and Chief Executive Officer of First National Corporation.

FINANCIAL HIGHLIGHTS FOR THIRD QUARTER OF 2026

FINANCIAL HIGHLIGHTS FOR YEAR TO DATE 2026

NET INTEREST INCOME

For the third quarter of 2026, the Company’s net interest margin fully tax equivalent ("FTE") (1) was 4.38%, compared to 4.15% for the second quarter of 2026 and 3.84% in the third quarter of 2025. The Company’s net interest margin (FTE) (1) for the third quarter of 2026 includes the impact of acquisition accounting fair value adjustments. Net accretion income related to acquisition accounting was $867 thousand, an 18-basis point incremental increase to the net interest margin for the third quarter ended September 30, 2026. Prior period acquisition accounting resulted in net accretion income of $245 thousand, or a 5-basis point incremental increase to the net interest margin for the quarter ended June 30, 2026, and net accretion income of $43 thousand, with no incremental impact to the net interest margin for the third quarter ended September 30, 2025. The increase in net accretion income as compared to prior quarters was driven by payoffs on purchased loans.

Earning asset yields for the third quarter of 2026 increased 24 basis points to 5.55% compared to the second quarter of 2026. For the third quarter of 2026, net interest income FTE (1) was $21.3 million, an increase of $1.2 million from $20.1 million in the second quarter of 2026 due to improved yields and interest income related to acquisition accounting.

The impact of acquisition accretion and amortization is reflected in the following table (dollars in thousands):

ALLOWANCE AND PROVISION FOR CREDIT LOSSES

The Company recorded no net provision for credit losses in the third quarter of 2026, compared to $426 thousand for the second quarter of 2026. The third quarter provision was comprised of a $64 thousand provision for credit losses on loans, a $79 thousand reduction in provision for credit losses on unfunded commitments, and a $15 thousand provision for credit losses on securities. Net charge-offs totaled $594 thousand in the third quarter of 2026, compared to net charge-offs of $105 thousand in the second quarter of 2026 and net charge-offs of $939 thousand in the third quarter of 2025.

The allowance for credit losses on loans totaled $14.4 million, or 0.96% of total loans on September 30, 2026, compared to $14.9 million, or 1.00% of total loans on June 30, 2026, and $14.4 million, or 1.01% of total loans on September 30, 2025. The allowance for credit losses to total loans decreased from the prior period and prior year due to declines in specific reserves on individually analyzed loans and lower calculated reserves on pooled loans. The allowance for credit losses to non-performing assets coverage was 268% on September 30, 2026, compared to 315% on June 30, 2026, and 253% on September 30, 2025.

NONINTEREST INCOME AND EXPENSE

Noninterest income increased $66 thousand to $4.1 million for the third quarter of 2026 from $4.0 million in the prior quarter. The increase in noninterest income includes increases in wealth management fees, income from bank owned life insurance, and gains on sale of loans held for sale, offset by decreases in brokered mortgage fees, loss on disposals, and other operating income compared to the prior quarter.

Noninterest expense increased $259 thousand to $16.7 million for the third quarter of 2026 from $16.4 million in the prior quarter. The increase in noninterest expense includes increases in employee benefit expense related to our above target net income as well as other real estate owned expense, offset by decreases in marketing expense, legal and professional fees, and other operating expense.

Two banking offices in Roanoke Rapids and Louisburg, North Carolina, including most of the deposit and loan accounts associated with those offices were sold in early October. The company anticipates a one-time gain on the sale of the offices in the fourth quarter of 2026. The Bank consolidated three additional banking offices and discontinued low-volume ATMs at non-branch locations during the third quarter of 2026. The consolidation resulted in other real estate owned expense of $212 thousand in the third quarter. These two closed banking offices are carried as our only other real estate owned and as non-performing assets. The sale and consolidation combined will reduce the number of banking offices from 33 to 28 by year end. The goals of these branch optimization actions are to streamline operations, improve future profitability and allocate resources to faster growing markets.

INCOME TAXES

Income tax expense was $1.7 million for the third quarter of 2026, compared to $1.4 million for the second quarter of 2026. The effective tax rate of 19.7% for the third quarter of 2026 increased slightly from 19.5% in the second quarter of 2026 due to changes in permanent tax differences.

BALANCE SHEET

On September 30, 2026, total assets were $2.075 billion, an increase of $44.1 million or 2.2% from September 30, 2025. Total assets were consistent with the prior quarter with the increase in loan growth offset by decreases in cash and cash equivalents and investment securities, and the increase from the prior year was driven by loan growth funded by decreases in cash and cash equivalents and securities held to maturity.

On September 30, 2026, loans held for investment ("LHFI") net of allowance totaled $1.486 billion, an increase of $13.4 million or 3.6% annualized from $1.472 billion on June 30, 2026, and an increase of $67.3 million or 4.7% from $1.419 billion on September 30, 2025. Net loan growth in the third quarter and for the year has been driven by increased production from newly hired bankers along with our continued focus on relationship banking.

On September 30, 2026, total investments were $306.8 million, a decrease of $16.0 million or 5.0% from June 30, 2026, and an increase of $1.3 million or 0.4% from September 30, 2025. Available for sale ("AFS") securities totaled $218.7 million on September 30, 2026, and $227.8 million on June 30, 2026, and $196.5 million on September 30, 2025. The increase compared to the prior year was driven by security purchases exceeding portfolio cashflows and utilization of excess cash. Total net unrealized losses on the AFS securities portfolio were $21.4 million on September 30, 2026, compared to $15.8 million on June 30, 2026, and $15.4 million on September 30, 2025. Held to maturity securities are carried at amortized cost and totaled $82.6 million on September 30, 2026, $89.4 million on June 30, 2026, and $104.6 million on September 30, 2025.

On September 30, 2026, total deposits were $1.829 billion, a decrease of $2.4 million or 0.5% annualized from the prior quarter, and an increase of $19.2 million or 1.1% from September 30, 2025. Average deposit balances for the third quarter declined $17.6 million or 3.8% annualized. Overall, deposit balances were relatively stable in comparison with the prior quarter and the prior year with decreases primarily in interest-bearing demand deposits. There were $25.0 million in other borrowings with the Federal Home Loan Bank on September 30, 2026 and June 30, 2026 and no borrowings on September 30, 2025.

LIQUIDITY

Liquidity sources available to the Bank, including interest-bearing deposits in banks, unpledged securities available for sale, at fair value, and available lines of credit totaled $721.6 million on September 30, 2026, $747.8 million on June 30, 2026, and $676.1 million on September 30, 2025.

The Bank maintains liquidity to fund loan growth and to meet potential demand from deposit customers, including potential volatile deposits. The estimated amount of uninsured customer deposits totaled $575.8 million on September 30, 2026, $573.8 million on June 30, 2026, and $555.0 million on September 30, 2025. Excluding municipal deposits that have collateral pledged, the estimated amount of uninsured customer deposits totaled $483.3 million on September 30, 2026, $466.9 million on June 30, 2026, and $473.4 million on September 30, 2025.

ASSET QUALITY

Non-performing assets ("NPAs") increased slightly from the prior period and improved from the prior year as previously reserved loans were charged off since the third quarter of 2025. Management classifies NPAs as non-accrual loans and other real estate owned ("OREO"). The Bank had $747 thousand in OREO on September 30, 2026, and no OREO on June 30, 2026 or September 30, 2025. The OREO increase is from the carrying values of two closed banking offices driven by the one-time event of the branch consolidation. Non-accrual loans as a percentage of total loans decreased from prior period and prior year to 0.31% on September 30, 2026. NPAs increased by $647 thousand to $5.4 million on September 30, 2026, compared to $4.7 million on June 30, 2026, but decreased by $318 thousand from $5.7 million on September 30, 2025.

Loans past due over 90 days or more and still accruing interest were $0 on September 30, 2026 and on June 30, 2026, and $388 thousand on September 30, 2025. Loans past-due 30-89 days and still accruing interest increased to $3.4 million, or 0.23% of total loans on September 30, 2026, $2.5 million, or 0.17% of total loans on June 30, 2026, and $3.6 million, or 0.25%, of total loans on September 30, 2025. The health care provider portfolio balance continues to decline with $7.9 million in loan balances and $3.0 million in remaining unamortized premiums. The portfolio has loans totaling $1.4 million currently on non-accrual that are specifically reserved at $1.0 million.

CAPITAL

During the third quarter of 2026, the Company declared and paid cash dividends of $0.17 per common share, compared to $0.17 in the second quarter of 2026 and $0.155 in the third quarter of 2025. Tangible book value per share (1) grew to $19.94 on September 30, 2026, from $19.71 per share on June 30, 2026, and $18.26 on September 30, 2025.

The following table provides capital ratios and values for the periods ended:

ABOUT FIRST NATIONAL CORPORATION

First National Corporation (NASDAQ: FXNC) is the parent company and bank holding company of First Bank, a community bank that first opened for business in 1907 in Strasburg, Virginia. The Bank offers loan and deposit products and services through its bankers, consumer and business mobile banking platforms, a network of ATMs located throughout its market area, a loan production office, a customer service center in a retirement community, and twenty-eight banking office locations located throughout the Shenandoah Valley, the Roanoke Valley, the Richmond MSA, and the south-central regions of Virginia. In addition to providing traditional banking services, the Bank operates a wealth management division under the name First Bank Wealth Management. First Bank also owns First Bank Financial Services, Inc., which owns an interest in a title insurance company.

NON-GAAP FINANCIAL MEASURES

In addition to financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), the Company uses certain non-GAAP financial measures that provide useful information for financial and operational decision making, evaluating trends, and comparing financial results to other financial institutions. The non-GAAP financial measures presented in this document include adjusted operating net income, adjusted operating non-interest expense, adjusted basic and diluted earnings per share, adjusted return on average assets, adjusted return on average equity, pre-provision pre-tax earnings, adjusted pre-provision pre-tax earnings, fully taxable equivalent interest income, the fully tax-equivalent net interest margin, the efficiency ratio, tangible book value per share, and tangible common equity to tangible assets.

The Company believes certain non-GAAP financial measures enhance the understanding of its business and performance. Non-GAAP financial measures are supplemental and not a substitute for, or more important than, financial measures prepared in accordance with GAAP and may not be comparable to those reported by other financial institutions. A reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measure is included at the end of this release.

FORWARD-LOOKING STATEMENTS

Certain information contained in this discussion may include “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements relate to the Company’s plans, objectives, strategies, expectations and intentions, including with respect to the Company's branch sales and other branch optimization initiatives, and other statements that are not historical facts, and other statements identified by words such as “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “targets,” "will," "continue," and “projects,” as well as similar expressions. Although the Company believes that its expectations with respect to the forward-looking statements are based upon reliable assumptions within the bounds of its knowledge of its business and operations, there can be no assurance that the Company will achieve the anticipated benefits of its plans and strategies or that its actual results, performance, or achievements will not differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements are subject to a number of risks and uncertainties and speak only as of the date of this release. The Company undertakes no obligations to update or revise any forward-looking statement, except as required by law. For details on factors that could affect expectations, future events, or results, see the risk factors and other cautionary language included in First National Corporation’s Annual Report on Form 10-K for the year ended December 31, 2025 and other filings with the Securities and Exchange Commission (the “SEC”).

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