Q3 FY2026
Filed Oct 23, 2026First National Corporation reports record third quarter and nine-month 2026 results, with GAAP net income of $6,900 thousand and basic EPS of $0.76
GAAP net income rose to $6,900 thousand from $5,550 thousand a year earlier, basic EPS rose to $0.76 from $0.62, net interest margin (FTE) widened to 4.38% from 3.84%, the efficiency ratio improved to 63.21% from 67.97%, and the provision for credit losses was nil. Deposits and the NPA ratio on a quarter-over-quarter basis moved the wrong way, which keeps the read short of a clean sweep.
Key metrics
shortened, hover for the filing’s print| Metric | Value | q/q | y/y |
|---|---|---|---|
| Net income, three months ended Sept 30, 2026GAAP | $6.9M | – | – |
| Basic earnings per common share, Q3 2026GAAP | $0.76 | – | – |
| Diluted earnings per common share, Q3 2026GAAP | $0.76 | – | – |
| Adjusted basic earnings per common share, Q3 2026non-GAAP | $0.76 | – | – |
| Adjusted diluted earnings per common share, Q3 2026non-GAAP | $0.76 | – | – |
| Total interest and dividend income, Q3 2026GAAP | $26.92M | – | – |
| Total interest expense, Q3 2026GAAP | $5.71M | – | – |
| Net interest income, Q3 2026GAAP | $21.21M | – | – |
| Tax-equivalent net interest income, Q3 2026non-GAAP | $21.30M | – | – |
| Provision for credit losses, Q3 2026GAAP | nil (printed as a dash) | – | – |
| Total noninterest income, Q3 2026GAAP | $4.08M | – | – |
| Total noninterest expense, Q3 2026GAAP | $16.70M | – | – |
| Adjusted operating noninterest expense, Q3 2026non-GAAP | $16.26M | – | – |
| Income before income taxes, Q3 2026GAAP | $8.59M | – | – |
| Income tax expense, Q3 2026GAAP | $1.69M | – | – |
| Effective tax rate, Q3 2026GAAP | 19.7% | – | – |
| Return on average assets, Q3 2026GAAP | 1.32% | – | – |
| Return on average equity, Q3 2026GAAP | 14.02% | – | – |
| Adjusted return on average equity, Q3 2026non-GAAP | 14.02% | – | – |
| Net interest margin fully tax equivalent, Q3 2026non-GAAP | 4.38% | – | – |
| Net interest margin, Q3 2026other | 4.36% | – | – |
| Efficiency ratio, Q3 2026non-GAAP | 63.21% | – | – |
| Net charge-offs, Q3 2026GAAP | $594K | – | – |
| Allowance for credit losses to period end loans, Sept 30, 2026other | 0.96% | – | – |
| Nonperforming assets to total assets, Sept 30, 2026other | 0.26% | – | – |
| Total assets, Sept 30, 2026GAAP | $2.07B | – | – |
| Loans, net of allowance, Sept 30, 2026GAAP | $1.49B | – | – |
| Total deposits, Sept 30, 2026GAAP | $1.83B | – | – |
| Noninterest-bearing demand deposits, Sept 30, 2026GAAP | $520.1M | – | – |
| Total shareholders' equity, Sept 30, 2026GAAP | $195.6M | – | – |
| Tangible book value per share, Sept 30, 2026non-GAAP | $19.94 | – | – |
| Cash dividends declared per share, Q3 2026GAAP | $0.170 | – | – |
| Common equity Tier 1 capital ratio (company), Sept 30, 2026other | 12.98% | – | – |
| Leverage ratio (company), Sept 30, 2026other | 10.00% | – | – |
| Net income, nine months ended Sept 30, 2026GAAP | $17.53M | – | – |
| Basic earnings per common share, nine months 2026GAAP | $1.94 | – | – |
| Diluted earnings per common share, nine months 2026GAAP | $1.93 | – | – |
| Adjusted basic earnings per common share, nine months 2026non-GAAP | $1.94 | – | – |
| Adjusted diluted earnings per common share, nine months 2026non-GAAP | $1.93 | – | – |
| Adjusted operating net income, nine months 2026non-GAAP | $17.53M | – | – |
| Total interest and dividend income, nine months 2026GAAP | $76.88M | – | – |
| Net interest income, nine months 2026GAAP | $59.86M | – | – |
| Provision for credit losses, nine months 2026GAAP | $876K | – | – |
| Total noninterest income, nine months 2026GAAP | $11.93M | – | – |
| Total noninterest expense, nine months 2026GAAP | $49.12M | – | – |
| Adjusted operating noninterest expense, nine months 2026non-GAAP | $47.81M | – | – |
| Income before income taxes, nine months 2026GAAP | $21.80M | – | – |
| Income tax expense, nine months 2026GAAP | $4.27M | – | – |
| Return on average assets, nine months 2026GAAP | 1.15% | – | – |
| Return on average equity, nine months 2026GAAP | 12.26% | – | – |
| Adjusted return on average equity, nine months 2026non-GAAP | 12.26% | – | – |
| Net interest margin fully tax equivalent, nine months 2026non-GAAP | 4.19% | – | – |
| Efficiency ratio, nine months 2026non-GAAP | 66.11% | – | – |
| Net charge-offs, nine months 2026GAAP | $1.24M | – | – |
Capital returns
- Cash dividends declared and paid of $0.17 per common share in Q3 2026, compared with $0.17 in Q2 2026 and $0.155 in Q3 2025 (text); cash dividends declared per share printed as $0.170, $0.170 and $0.155.
- Cash dividends declared for nine months 2026 printed as $0.510 per share, compared with $0.465 for nine months 2025.
- Tangible book value per share printed as $19.94 at Sept 30, 2026, $19.71 at June 30, 2026 and $18.26 at Sept 30, 2025.
- Share repurchases are not reported in the filing.
What drove it
- Company explanation: the net interest margin improvement was attributed to improved yields and acquisition accounting. Net accretion income related to acquisition accounting was $867 thousand in Q3 2026, an 18 basis point incremental increase to the margin, compared with $245 thousand in Q2 2026 (5 basis points).
- Company explanation: the increase in net accretion income versus prior quarters was driven by payoffs on purchased loans.
- Earning asset yields rose 24 basis points to 5.55% from Q2 2026, and net interest income FTE increased $1.2 million from $20.1 million, due to improved yields and interest income related to acquisition accounting, as the company states.
- Noninterest income increased $66 thousand to $4.1 million, which the company attributes to higher wealth management fees, bank owned life insurance income and gains on sale of loans held for sale, offset by lower brokered mortgage fees, loss on disposals and other operating income.
- Noninterest expense increased $259 thousand to $16.7 million, which the company attributes to employee benefit expense it links to above target net income and to other real estate owned expense of $212 thousand from the branch consolidation, partly offset by lower marketing, legal and professional fees and other operating expense.
- Net loan growth of $13.6 million in Q3 2026 (3.7% annualized). The company attributes loan growth to production from newly hired bankers and its relationship banking focus.
- Allowance to total loans fell to 0.96% from 1.00% at June 30, 2026, which the company attributes to lower specific reserves on individually analyzed loans and lower calculated reserves on pooled loans.
- Branch optimization: the company closed and consolidated three banking offices and closed off-site ATMs in Q3 2026. Two North Carolina offices were sold in early October, and the company expects a one-time gain in Q4 2026. Banking offices are expected to fall from 33 to 28 by year end.
Concerns
- Total deposits declined $2.4 million, or 0.5% annualized, from the prior quarter, and average deposit balances fell $17.6 million, or 3.8% annualized.
- Non-performing assets rose $647 thousand to $5.4 million from June 30, 2026, and the NPA to total assets ratio moved to 0.26% from 0.23%. The company states the increase reflects the OREO from the two closed banking offices.
- Net unrealized losses on the AFS portfolio grew to $21.4 million from $15.8 million at June 30, 2026.
- Allowance coverage of non-performing assets fell to 268% from 315% at June 30, 2026.
- Loans 30 to 89 days past due and still accruing rose to $3.4 million (0.23% of total loans) from $2.5 million (0.17%) at June 30, 2026.
- Uninsured customer deposits excluding collateralized municipal deposits rose to $483.3 million from $466.9 million at June 30, 2026.
- The health care provider portfolio carries $1.4 million on non-accrual, specifically reserved at $1.0 million, per the filing.
What to watch
- Recognition of the one-time gain on the sale of the two North Carolina banking offices in Q4 2026, which the company says it will book, with the amount not quantified in the filing.
- Whether the Q3 2026 accretion benefit of $867 thousand persists, given the company attributes the increase to payoffs on purchased loans.
- Deposit trend, given the Q3 2026 decline in total and average deposits and the reduction in interest-bearing demand balances.
- Non-performing assets and OREO levels as the remaining closed offices are carried as OREO.
- Net interest margin trajectory relative to the 4.38% FTE level reported for Q3 2026.
- Expense run rate after the Q3 2026 increase in employee benefit expense and OREO expense.
Balance sheet and cash flow
- Total assets printed as $2,074,860 thousand at Sept 30, 2026, $2,075,645 thousand at June 30, 2026 and $2,030,754 thousand at Sept 30, 2025.
- Net loans printed as $1,485,813 thousand at Sept 30, 2026, against $1,472,455 thousand at June 30, 2026 and $1,418,750 thousand at Sept 30, 2025.
- Total deposits printed as $1,828,740 thousand, against $1,831,130 thousand at June 30, 2026 and $1,809,583 thousand at Sept 30, 2025. The company describes deposit balances as relatively stable, with decreases primarily in interest-bearing demand deposits.
- Cash and cash equivalents printed as $167,576 thousand at Sept 30, 2026, $166,148 thousand at June 30, 2026 and $189,317 thousand at Sept 30, 2025.
- Other borrowings printed as $25,000 thousand at Sept 30, 2026 and June 30, 2026, and nil at Sept 30, 2025.
- Liquidity sources printed as $721.6 million at Sept 30, 2026, $747.8 million at June 30, 2026 and $676.1 million at Sept 30, 2025.
- Estimated uninsured customer deposits printed as $575.8 million at Sept 30, 2026, $573.8 million at June 30, 2026 and $555.0 million at Sept 30, 2025.
- Total net unrealized losses on AFS securities printed as $21.4 million at Sept 30, 2026, $15.8 million at June 30, 2026 and $15.4 million at Sept 30, 2025.
- Non-performing assets printed as $5.4 million at Sept 30, 2026, $4.7 million at June 30, 2026 and $5.7 million at Sept 30, 2025. OREO of $747 thousand at Sept 30, 2026, reflecting the carrying values of two closed banking offices.
- No cash flow statement is included in the filing.
Analysis
First National Corporation reported GAAP net income of $6,900 thousand and basic and diluted EPS of $0.76 for the quarter ended September 30, 2026, against $5,550 thousand and $0.62 a year earlier and $5,743 thousand and $0.64 (basic) in the second quarter. For the nine months, net income was $17,530 thousand and diluted EPS was $1.93, compared with $12,199 thousand and $1.35 a year earlier. Net interest income rose to $21,206 thousand from $18,295 thousand a year earlier and $19,981 thousand in Q2 2026. The company attributes the margin gain to improved yields and acquisition accounting, and it reports the tax-equivalent net interest margin at 4.38%, against 3.84% a year earlier and 4.15% in Q2. The company says accretion income of $867 thousand contributed 18 basis points in Q3, compared with 5 basis points in Q2, and that the increase was driven by payoffs on purchased loans.
Credit costs were low in the quarter. The provision for credit losses was nil, against $193 thousand a year earlier and $426 thousand in Q2, and net charge-offs were $594 thousand, against $939 thousand a year earlier and $105 thousand in Q2. The allowance to total loans fell to 0.96% from 1.00% in Q2, which the company attributes to lower specific reserves and lower calculated pooled reserves. Non-performing assets were $5.4 million, up from $4.7 million in Q2, and the NPA to total assets ratio was 0.26%, against 0.23% in Q2 and 0.28% a year earlier. The company ties the sequential rise to the OREO from two closed banking offices, and it notes that 30 to 89 day delinquencies also increased.
Revenue and cost lines moved in opposite directions. Total noninterest income was $4,084 thousand, against $4,500 thousand a year earlier and $4,018 thousand in Q2. Total noninterest expense was $16,696 thousand, against $15,782 thousand a year earlier and $16,437 thousand in Q2, and the efficiency ratio improved to 63.21% from 67.97% a year earlier. Adjusted operating noninterest expense is $16,262 thousand. The company explains the sequential expense increase with employee benefit expense it links to above target net income, plus $212 thousand of OREO expense from the branch consolidation. Income tax expense was $1,694 thousand, with an effective tax rate of 19.7%, against 19.5% in Q2.
On the balance sheet, total assets were $2,074,860 thousand at September 30, 2026, against $2,030,754 thousand a year earlier, and net loans were $1,485,813 thousand, against $1,418,750 thousand. Deposits declined modestly from the prior quarter to $1,828,740 thousand, and average deposits fell $17.6 million, or 3.8% annualized, with decreases concentrated in interest-bearing demand deposits. Noninterest-bearing deposits were $520,058 thousand, or 28% of deposits. Shareholders' equity rose to $195,553 thousand, and tangible book value per share reached $19.94, against $18.26 a year earlier. The common equity Tier 1 ratio at the company level was 12.98%, against 12.60% in Q2. Unrealized losses on the AFS portfolio widened to $21.4 million, which is a balance sheet item the reader should weigh against the capital base.
Capital return was steady. The company declared $0.170 per share in Q3 2026, in line with Q2 and up from $0.155 a year earlier. The filing does not disclose share repurchases or a cash flow statement. No guidance for future periods is provided in the filing, and the company says the branch sale gain will be booked in Q4 2026, without a quantified amount. The most useful next checks are the size of that gain, whether the accretion benefit persists, and the direction of deposits and non-performing assets.
Management, verbatim
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
Scott C. Harvard, President and Chief Executive Officer
Not in the filing
stated, not guessed- No prior-period outlook was supplied, so vs_prior_guidance is empty and forward guidance is not reported in the filing.
- No segment or business-line revenue breakdown is provided in the filing.
- No consolidated cash flow statement, operating cash flow or free cash flow is provided.
- Share repurchase activity is not disclosed.
- The amount of the expected Q4 2026 gain on the sale of the two North Carolina banking offices is not quantified.
- Year-over-year and quarter-over-quarter percentage changes for EPS, net income and most dollar lines are not printed, so those change fields are null.
- Prior-year effective tax rate for Q3 2025 is not printed.
- Prior-quarter and prior-year values for nine-month metrics are not applicable, so those prior_quarter fields are null.
- Share price reaction and analyst consensus estimates are not contained in the document.
- Net loan growth and total net loan change for the quarter are presented as text only and are not on a printed comparison row, so they are excluded from key_metrics.
Written by an AI language model from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure is checked against the filing text, and a metric the filing does not print, or whose value, prior period and change do not add up, is dropped from the metrics. The model can still misread a table, in the metrics or in the text, so check a number in the filing before you rely on it. Consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.