3/8/25
First National Corporation (NASDAQ: FXNC) is a regional bank that operates through its subsidiary, First Bank, primarily serving communities in Virginia. With a history that stretches back more than a century, this financial institution has built a solid reputation for providing traditional banking services like loans, deposits, and wealth management.
For investors who prioritize dividend income, FXNC presents a steady, though not high-yielding, option in the banking sector. While its dividend isn’t among the highest, the company has a track record of maintaining its payouts, even through challenging economic periods. Given the current market conditions and financial performance, there’s more to this stock than just its dividend—it could offer potential for growth as well.
Key Dividend Metrics
📌 Dividend Yield: 2.70% (forward)
💰 Annual Dividend: $0.62 per share
🔄 5-Year Average Yield: 2.91%
📈 Dividend Growth: Slow but steady
💡 Payout Ratio: 60.50% (earnings cover the dividend, but limited room for large hikes)
📅 Ex-Dividend Date: February 28, 2025
💵 Next Payment Date: March 14, 2025
These numbers suggest FXNC isn’t a high-yield stock, but rather a reliable dividend payer with a cautious approach to growth. The payout ratio indicates that while the dividend is sustainable, there’s not much room for significant increases unless earnings see stronger growth.
Dividend Overview
At a 2.70% yield, FXNC sits in the middle of the pack when compared to other regional banks. Some competitors offer higher yields, but this bank has a strong history of paying dividends consistently, which gives investors confidence in its stability.
While dividend growth has been slow, FXNC has maintained a steady payout without interruptions. That kind of dependability is attractive to income investors who value consistency over rapid growth. However, the modest increases mean that those looking for a fast-growing income stream might need to look elsewhere.
One key factor to watch is how FXNC navigates changes in the interest rate environment. Banks rely heavily on loan interest income, and rate shifts can impact profitability, which in turn affects the ability to sustain or grow dividends.
Dividend Growth and Safety
FXNC’s payout ratio of 60.50% is reasonable, though slightly high for a bank. Many financial institutions prefer to keep their payouts closer to 30-50% to ensure flexibility in times of economic stress. With a higher payout ratio, FXNC still has a cushion, but it may not be able to significantly raise dividends unless earnings improve.
Compared to its five-year average yield of 2.91%, the current yield is slightly lower. This could mean the stock is trading at a premium relative to its historical valuation, which is something investors should consider when assessing entry points.
In terms of safety, the dividend is well covered by earnings, but future growth potential may be limited. Investors should keep an eye on earnings trends and overall bank performance to gauge whether the payout remains sustainable over the long term.
Chart Analysis
Recent Price Action
FXNC has been in a strong uptrend since mid-2024, with a notable breakout above the 50-day moving average around September. The stock saw a steep rise, peaking above $25 before pulling back to its current level of $22.95. The most recent price action suggests the stock is in a correction phase after a strong rally.
Moving Averages
The 50-day moving average (light blue line) had been acting as strong support during the uptrend but is now starting to flatten and roll over slightly. This could indicate a shift in momentum. The 200-day moving average (dark blue line) has remained in an upward trajectory, showing that the longer-term trend is still intact. However, with price now dipping below the 50-day moving average, traders may view this as a potential weakening of short-term bullish momentum.
Volume Analysis
Volume has been increasing during the recent decline, which suggests that there may be some profit-taking or distribution occurring. The spikes in volume during red bars indicate selling pressure is picking up. On the way up, volume had been supportive of the rally, but this shift in volume trend could be a sign of changing sentiment.
RSI Momentum
The Relative Strength Index (RSI) has fallen from overbought levels above 70 and is now approaching the lower part of the range. This signals that the stock is losing momentum, but it is not yet at an extreme oversold level. If RSI continues downward and dips below 30, it could suggest that the stock is reaching a more attractive entry point for buyers.
Support and Resistance
The key support level to watch is near $22, which coincides with previous price consolidation from early January. If the stock breaks below this level, the next potential support could be near the 200-day moving average, currently around $20. On the upside, resistance is likely near $24.50, where the stock previously struggled to hold before the recent decline.
Market Context
FXNC’s pullback comes after an extended rally, which is not unusual after such a strong move higher. Broader market conditions, interest rate trends, and sector sentiment will play a role in determining whether this dip is a buying opportunity or the start of a more prolonged downturn.
Analyst Ratings
📊 Upgrades
📈 On August 1, 2024, an analyst from Janney Montgomery Scott upgraded FXNC from neutral to buy, setting a price target of $21. This positive shift was driven by stronger-than-expected financial performance and improved loan growth. The analyst noted that FXNC’s valuation remained attractive compared to regional banking peers, and they saw potential for steady dividend growth. Additionally, an improving interest rate environment was cited as a factor that could enhance profitability over the next year.
📉 Downgrades
🔻 On October 8, 2024, Hovde Group initially gave FXNC an outperform rating, but by February 11, 2025, they revised their stance, downgrading the stock to market perform with a price target adjustment to $28.50. The reasoning behind this downgrade was tied to valuation concerns. After a significant rally in FXNC’s stock price, the firm believed much of the upside had already been priced in, reducing the likelihood of outsized gains in the near term.
📌 Consensus Price Target
💡 Analysts currently have a hold consensus rating on FXNC, with an average price target of $24.75. Price expectations range from $21 on the low end to $28.50 on the high end. This range reflects mixed sentiment, with some seeing continued growth potential while others believe the stock may be fairly valued at current levels.
These ratings indicate that while FXNC remains a stable choice, the outlook depends on market conditions, valuation, and its ability to sustain earnings growth.
Earnings Report Summary
First National Corporation (FXNC) had an eventful fourth quarter in 2024, wrapping up the year with a mix of challenges and strong underlying performance. The company reported a net loss of $933,000, or $0.10 per share, but that doesn’t tell the whole story. When adjusting for merger-related costs, FXNC actually posted operating earnings of $6.0 million, or $0.66 per share—well above the $0.47 per share analysts had expected.
One of the biggest developments in the quarter was the completed acquisition of Touchstone Bankshares on October 1. This move added $664.3 million in assets, bringing FXNC’s total assets to a solid $2.0 billion by the end of the year. The merger played a key role in strengthening the bank’s net interest margin, which climbed 40 basis points to 3.83%.
Revenue-wise, net interest income rose to $18.4 million, thanks to a larger asset base following the acquisition. Noninterest income also got a major lift, coming in at $6.4 million, largely because of a one-time $2.9 million pre-tax gain from the merger.
On the expense side, costs naturally went up due to merger-related integration efforts, pushing noninterest expenses to $21.9 million. About $7.3 million of that was tied directly to the acquisition, so while it may seem like a big jump, it’s more of a short-term impact rather than an ongoing concern. Even with these extra costs, FXNC maintained a respectable efficiency ratio of 63.97%, showing it’s still keeping operations in check.
As for loan performance, asset quality remained steady. Nonperforming assets as a percentage of total assets actually improved, dropping to 0.35% from 0.41% in the previous quarter. Meanwhile, the allowance for credit losses stood at $16.4 million, covering 1.12% of total loans, which suggests the bank is maintaining a cautious but balanced approach to risk management.
Overall, this was a quarter of transition for FXNC, but despite the headline loss, the core business looks strong. The successful integration of Touchstone Bankshares has expanded the company’s footprint and set the stage for future growth. While merger expenses made the bottom line look weaker than it really was, the underlying numbers suggest the company is in good shape heading into 2025.
Financial Health and Stability
FXNC maintains a profit margin of 12.01%, which is reasonable for a regional bank but not particularly high. One area of concern is its return on equity (ROE), which sits at 4.93%. That’s below what many investors would like to see from a financial institution, as it suggests the company isn’t maximizing profitability from its assets as efficiently as some of its peers.
On the bright side, the bank holds $162.87 million in cash against $30.45 million in debt. That’s a strong liquidity position and signals that FXNC has financial flexibility.
The most striking figure is the company’s 116.20% year-over-year revenue growth for the most recent quarter. That’s an impressive increase, but the negative operating margin of -23.68% raises questions about cost efficiency. Strong revenue growth is encouraging, but investors should pay attention to whether profitability follows suit.
Overall, FXNC appears financially stable, but its ability to drive strong earnings growth will be a key factor in its long-term success.
Valuation and Stock Performance
With a share price of $22.95, FXNC currently trades at a trailing P/E ratio of 22.95 and a forward P/E of 10.20. That forward valuation suggests earnings are expected to improve, which could make the stock look more attractive in the near future.
The price-to-book ratio of 1.24 indicates the stock is slightly above its tangible asset value. Many regional banks trade closer to 1.0x book value, so this premium suggests investors are willing to pay up for either stability or growth potential.
The stock has traded between $14.50 and $26.97 over the past year. With its 50-day moving average at $24.40, the current price suggests a recent pullback, which could present an opportunity for long-term investors. The 200-day moving average sits at $20.10, so the stock is still above that key support level.
FXNC’s valuation is reasonable for a stable dividend payer, though not an outright bargain. If earnings continue to improve, there could be upside, but those seeking deep value may find better opportunities elsewhere.
Risks and Considerations
Interest Rate Sensitivity
Banks are highly dependent on interest rates. If rates remain elevated for longer than expected, borrowing could slow, affecting FXNC’s loan growth and net interest margin.
Earnings Growth Challenges
With a low ROE of 4.93%, FXNC isn’t generating profits as efficiently as some of its peers. That could limit both stock price appreciation and dividend growth.
Regional Exposure
As a regional bank, FXNC is more vulnerable to local economic conditions. Any downturn in its core Virginia markets could impact loan performance and overall profitability.
Dividend Growth Limitations
The company’s 60.50% payout ratio means there’s not a lot of room for rapid dividend increases. Unless earnings grow meaningfully, dividend growth is likely to remain modest.
Liquidity Concerns
With an average daily trading volume of around 25,000 shares, FXNC isn’t the most liquid stock. This could make it harder to exit large positions quickly, especially during market downturns.
Final Thoughts
FXNC is a steady option for income-focused investors who value consistency over high yields or aggressive dividend growth. It offers a reasonable yield of 2.70% and has maintained its dividend payments reliably, which is appealing for those looking for a long-term holding in the banking sector.
The bank’s strong liquidity and revenue growth are positives, but its lower profitability and slow dividend growth might not appeal to every investor. The stock isn’t the cheapest in the space, but it’s also not significantly overvalued.
For those who prioritize stability and a steady income stream, FXNC could be worth considering. However, for investors looking for high-yield opportunities or rapid dividend growth, there may be better alternatives in the regional banking sector.
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