First National Corporation posts record third quarter net income

First National Corporation (NASDAQ: FXNC) reported consolidated net income of $6.9 million for the three months ended September 30, 2026, a figure the company describes as a record for the quarter. Basic and diluted earnings per common share stood at $0.76 for the period. For the nine months ended September 30, 2026, the bank holding company of First Bank reported consolidated net income of $17.5 million, with basic earnings per share of $1.94 and diluted earnings per share of $1.93.

Scott C. Harvard, President and Chief Executive Officer of First National Corporation, attributed the performance to organic loan growth, an improved net interest margin, excellent asset quality, and expense management. Harvard noted that the branch optimization process was completed in the third quarter with the closure and consolidation of three banking offices and off-site ATMs. The company also completed the sale of two banking offices in North Carolina in early October, anticipating a gain to be booked in the fourth quarter.

Profitability metrics strengthened across the board in the third quarter. The return on average assets reached 1.32%, exceeding both the 1.09% recorded a year earlier and the 1.11% from the previous quarter. Similarly, the return on average equity climbed to 14.02%, surpassing the 12.43% seen in the same period last year and the 12.03% reported in the second quarter of 2026. The fully tax equivalent net interest margin rose to 4.38% from 4.15% in the prior quarter and 3.84% in the same period last year. This margin includes $867 thousand in net accretion income related to acquisition accounting, representing an 18-basis point incremental increase for the quarter.

Net loan growth for the third quarter was $13.6 million, reflecting a 3.7% annualized growth rate. Noninterest bearing deposits totaled $520.1 million, or 28% of deposits, which helped lower funding costs. Asset quality remained sound with non-performing assets at 0.26% of total assets.

For the year to date, basic earnings per share were $1.94 compared to $1.36 a year prior. The fully tax equivalent net interest margin was 4.19%, up from 3.85% in the same period last year. Net loan growth for the nine months reached $67.3 million, a 4.7% growth rate.

The company recorded no net provision for credit losses in the third quarter of 2026, compared to $426 thousand in the second quarter. Net charge-offs totaled $594 thousand for the quarter. The allowance for credit losses on loans was $14.4 million, or 0.96% of total loans, on September 30, 2026.

Noninterest income increased by $66 thousand to $4.1 million in the third quarter, driven by higher wealth management fees and bank-owned life insurance income. Noninterest expense rose by $259 thousand to $16.7 million, including increased employee benefit expenses tied to exceeding net income targets.

Total assets stood at $2.075 billion on September 30, 2026, an increase of $44.1 million or 2.2% from September 30, 2025. The sale and consolidation of branches will reduce the number of banking offices from 33 to 28 by year end.