First National Corporation (NasdaqCM:FXNC) entered into a letter of intent to acquire Touchstone Bankshares, Inc. (OTCPK:TSBA) from The Bank of Southside Virginia Corporation (OTCPK:BSSC), AllianceBernstein L.P. and others for $46.9 million on February 13, 2024. First National Corporation (NasdaqCM:FXNC) entered into a definitive merger agreement to acquire Touchstone Bankshares, Inc. (OTCPK:TSBA) from The Bank of Southside Virginia Corporation (OTCPK:BSSC), AllianceBernstein L.P. and others on March 25, 2024. Under the terms of the agreement, Touchstone shareholders will receive 0.8122 shares of First National stock for each share of Touchstone stock, which equates to an aggregate deal value of approximately $47.0 million, or $14.25 per share of Touchstone stock.

The total assets of combined company are expected to be approximately $2.1 billion, with $1.5 billion in loans, $1.8 billion in deposits, thirty branch offices across Virginia and two branches in North Carolina. Touchstone needs to pay termination fee equals $1.9 million. First National and First Bank will appoint three Touchstone directors to join the existing nine legacy directors on each respective Board. James Black, the President and Chief Executive Officer of Touchstone, will join First Bank as Executive Vice President and South Region President.

The transaction is subject to approval of both companies? shareholders, regulatory approvals, and other customary closing conditions and expected to close in the fourth quarter of 2024. The merger agreement has been unanimously approved by the boards of directors of each company.

First National expects the transaction to be approximately 36% accretive to earnings per share with an estimated earn-back period for tangible book value dilution of approximately 3.0 years. Hovde Group, LLC served as financial advisor and fairness opinion provider to First National. Pursuant to First National?s engagement agreement, Hovde received from First National a fairness opinion fee of $150,000 upon the delivery of the fairness opinion to First National, and upon consummation of the merger, Hovde will receive a completion fee less the fairness opinion fee of approximately one percent of the aggregate transaction value. Benjamin A. Barnhill of Nelson Mullins Riley & Scarborough, LLP provided legal counsel to First National.

Scott Clark, Avi J. Barak of Piper Sandler & Co. served as financial advisor to Touchstone. Scott Richter and Benjamin McCall of Williams Mullen served as legal counsel to Touchstone.

Piper Sandler & Co. acted as fairness opinion provider to Touchstone. Piper Sandler is acting as Touchstone?s financial advisor in connection with the transaction and will receive a fee for such services in an amount equal to 1.65% of the aggregate purchase price, which fee is contingent upon the closing of the merger.

At the time of announcement of the transaction, the value of Piper Sandler?s fee was approximately $776,000. Piper Sandler also received a $250,000 fee from Touchstone upon rendering its opinion, which opinion fee will be credited in full towards the transaction fee which will become payable to Piper Sandler upon closing of the transaction. Georgeson LLC acted as proxy solicitor for Touchstone.

Touchstone has agreed to pay Georgeson a proxy solicitation fee of approximately $10,000 plus certain expenses.