PRINCE GEORGE, Va., April 30, 2024 /PRNewswire/ -- Touchstone Bankshares, Inc. (the "Company") (OTC:TSBA), and its wholly owned subsidiary, Touchstone Bank (the "Bank"), reported unaudited results for the three months ended March 31, 2024. The Company reported net income available to common shareholders of $327 thousand for the three months ended March 31, 2024. Basic and diluted earnings per common share for the three months ended March 31, 2024, was $0.10, while return on average assets (annualized), return on average common equity (annualized) and the efficiency ratio was 0.20%, 2.93%, and 93%, respectively. By comparison, the Company reported a net (loss) available to common shareholders for the three months ended March 31, 2023 of $(196) thousand, and basic and diluted (loss) per common share was $(0.06). Return on average assets (annualized), return on average common equity (annualized), and the efficiency ratio was (0.13)%, (1.89)%, and 88%, respectively, for the three months ended March 31, 2023. The Company's results of operations for the three months ended March 31, 2024 were negatively impacted by incurring $543 thousand in merger related expenses in connection with its pending merger with First National Corporation ("First National") (NASDAQ:FXNC). Excluding the impact of the merger related expenses, for the three months ended March 31, 2024, the Company would have reported net income available to common shareholders of $756 thousand, basic and diluted earnings per common share of $0.23, and a return on average assets (annualized), a return on average common equity (annualized) and an efficiency ratio of 0.46%, 6.76%, and 84%, respectively.  As previously disclosed, on March 25, 2024, the Company and First National, the parent holding company for First Bank, entered into an Agreement and Plan of Merger (the "Agreement"), which provides that, subject to the terms and conditions set forth in the Agreement, the Company will merge with and into First National (the "Merger") with First National being the surviving corporation in the Merger. In addition, simultaneously with or immediately following the Merger of the Company with and into First National, the Bank will be merged with and into First Bank. The boards of directors of the Company and First National have unanimously approved the Agreement. The Agreement and the transactions contemplated thereby are subject to the approval of the respective shareholders of the Company and First National, regulatory approvals, and other customary closing conditions. Pursuant to the Agreement, three directors of the Company will be (i) invited to serve on the boards of directors of First National and First Bank and (ii) nominated and recommended by First National for reelection at the first annual meeting of First National shareholders following the closing of the Merger. Subject to the terms and conditions of the Agreement, the Company's shareholders, including the holders of shares of both the common stock and preferred stock (on an as-converted, one-for-one basis, which shares of preferred stock convert automatically to common stock at the effective time of the Merger) (collectively, "Company Stock"), will receive 0.8122 shares of First National common stock for each share of Company Stock (the "Merger Consideration"). Cash will also be paid in lieu of fractional shares. The Company and First National anticipate closing the mergers in the fourth quarter of 2024. Additionally, considering the proposed Merger, the Company has postponed the 2024 annual meeting of shareholders. Instead, the Company will hold a special meeting of shareholders in 2024 to consider and vote on the proposed Merger. The Company will only hold the 2024 annual meeting of shareholders if the closing of the Merger is delayed until 2025, which the Company does not expect.  James R. Black, the Company's President and CEO commented, "While our core operating results for the first quarter of 2024 were in line with management's expectations and improving, the financial industry is facing fierce headwinds. During the first quarter of 2024, the Company's net interest margin compressed 32 basis points when compared to the same period of 2023 driven by rising deposit costs given the continued higher interest rate environment, inverted yield curve, deposits shifting to higher yielding products, and competitive pressures in the marketplace. Despite these challenges, the Company continued to make progress during the quarter because of the team's resiliency, of which I am extremely proud. Our previous efforts to improve operating efficiency contributed to total noninterest expenses, excluding merger related expenses, being $585 thousand, or 10.6% lower, when compared to first quarter of 2023. The Company also experienced continued deposit growth, exceeding deposit levels from one year ago while the loan portfolio reduced slightly from December 31, 2023. Our asset quality metrics as of March 31, 2024 were pristine, with nonaccrual loans equaling $141 thousand, and capital levels continuing to be considered well capitalized by regulatory definition.  While enthusiastic about our pending partnership with First National, we remain focused on our stakeholders while simultaneously preparing for this opportunity. Our teams proven ability to navigate and stay focused on the mission will certainly prove beneficial as we transition into First National." Earnings Analysis Three Months Ended March 31, 2024, and 2023 As noted above, net income available to common shareholders for the three months ended March 31, 2024, was $327 thousand, or $0.10 per basic and diluted common share. This represents an increase of $523 thousand, or 266.8%, when compared with the net (loss) available to common shareholders of $(196) thousand, or $(0.06) per basic and diluted common share for the same period in 2023. Net interest income for the three months ended March 31, 2024, and 2023, was $5.1 million and $5.4 million, respectively, representing a decrease of $340 thousand, or 6.3%. The net interest margin decreased 32 basis points from 3.78% in the first quarter of 2023 to 3.46% for the same quarter in 2024 due primarily to material repricing on interest-bearing liabilities driven by competitive pressures in the higher interest rate environment and the negative banking industry developments associated with multiple high-profile bank failures that occurred during the first six months of 2023 and the time needed for interest-earning assets to reprice higher.  While the Company's yields on interest-earning assets continued to reprice higher as compared to prior periods, the overall cost of funds for the first quarter of 2024 increased at a slightly faster pace. As a result, net interest income decreased by $135 thousand, or 2.6%, and the net interest margin decreased by 1 basis point when compared to the fourth quarter of 2023. The Company recorded no provision for credit losses for the three months ended March 31, 2024, as compared to $1.0 million in provision for credit losses for the three months ended March 31, 2023. The provision for credit losses for the three months ended March 31, 2023, was related to the Company's previous investment in Signature Bank of New York subordinated debt that was fully charged-off in the first quarter of 2023 and subsequently sold in the fourth quarter of 2023. As of March 31, 2024, the Company's credit quality metrics remained strong with minimal nonperforming assets and past due loans. Noninterest income totaled $814 thousand for the three months ended March 31, 2024, an increase of $46 thousand, or 6.0%, when compared to the same period in 2023.  The following table is a comparison of the components of noninterest income for the three months ended March 31, 2024, and 2023: For the Three Months Ended March 31, 2024 2023  Change $   Change %  (dollars in thousands) Service charges on deposit accounts $      492 $      473 $           19 4.0 % Secondary market origination fees 58 - 58 100.0 % Bank-owned life insurance 60 75 (15) -20.0 % Other operating income 204 220 (16) -7.3 % Total  $      814 $      768 $           46 6.0 % Notable variances for the noninterest income table above are as follows: The increase in service charges on deposit accounts was primarily due to an increase in ATM and debit card interchange fees, partially offset by small business and commercial accounts receiving higher earnings credit rates which offset previous fee opportunities. The increase in secondary market origination fees was primarily due to prior year investments in personnel and related products and services, partially offset by the continued slowing of home refinancing and purchases. The decrease in other operating income was primarily due to a decrease in merchant services fees, partially offset by increases in income from other investments. Noninterest expense totaled $5.5 million for the three months ended March 31, 2024, a decrease of $42 thousand, or 0.8%, when compared to the same period in 2023.  The following table is a comparison of the components of noninterest expense for the three months ended March 31, 2024, and 2023: For the Three Months Ended March 31, 2024 2023  Change $   Change %  (dollars in thousands) Salaries and employee benefits $   2,634 $   3,082 $       (448) -14.5 % Occupancy expense 336 313 23 7.3 % Furniture and equipment expense 281 277 4 1.4 % Data processing 365 307 58 18.9 % Telecommunications 146 149 (3) -2.0 % Legal and professional fees 135 174 (39) -22.4 % FDIC insurance assessments 98 53 45 84.9 % Merger related expenses 543 - 543 100.0 % Other noninterest expenses 945 1,170 (225) -19.2 % Total  $   5,483 $   5,525 $         (42) -0.8 % Notable variances for the noninterest expense table above are as follows: The decrease in salaries and employee benefits was primarily due to managements focused efforts to streamline operations and improve efficiencies after the core conversion was completed during the first quarter of 2023. These efforts lead to a reduction in the work force that was implemented during the third quarter of 2023, with full cost savings becoming accretive in the fourth quarter of 2023. In addition, this decrease was driven by lower expenses related to bonus accruals, payroll taxes, benefit costs including 401(k) contributions, and deferred incentive compensation, which were partially offset by merit increases, wage inflation, and a lower impact from deferred loan origination costs. The increase in occupancy expense was primarily due to higher expenses related to leases, repairs and maintenance, utilities, and property taxes, which were partially offset by lower expenses related to depreciation. The increase in data processing was primarily due to additional services, as well as volume based and other one-time charges. The decrease in legal and professional fees was primarily due to lower expenses related to professional fees, which was partially offset by higher expenses related to legal, audit and compliance. The increase in FDIC insurance assessments was primarily due to growth in ...