# FIRST COMMUNITY BANKSHARES INC /VA/ (FCBC) Informational only - not investment advice. CIK: 0000859070 SIC: 6022 State Commercial Banks SIC breadcrumb: [Finance, Insurance, And Real Estate](/division/H/) > [Depository Institutions](/major-group/60/) > [SIC 6022 State Commercial Banks](/industry/6022/) Latest 10-K filed: 2026-03-06 SEC page: https://www.sec.gov/edgar/browse/?CIK=859070 Filing source: https://www.sec.gov/Archives/edgar/data/859070/000143774926007180/fcbc20251231c_10k.htm ## Selected Fundamentals | Metric | Value | Unit | FY | Filed | | --- | ---: | --- | ---: | --- | | Revenue | 142535000 | USD | 2025 | 2026-03-06 | | Net income | 48794000 | USD | 2025 | 2026-03-06 | | Assets | 3259643000 | USD | 2025 | 2026-03-06 | ## Financials Annual standardized facts from SEC companyfacts as of latest extracted filing date 2026-03-06. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0000859070.json. Derived margins, ratios, and free cash flow are computed from the extracted annual SEC facts. | Metric | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | | --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | | Revenue | 94,724,000 | 95,308,000 | 98,294,000 | 94,968,000 | 114,036,000 | 105,310,000 | 114,319,000 | 137,165,000 | 146,142,000 | 142,535,000 | | Net income | 25,126,000 | 21,485,000 | 36,340,000 | 38,802,000 | 35,926,000 | 51,168,000 | 46,662,000 | 48,020,000 | 51,604,000 | 48,794,000 | | Diluted EPS | 1.45 | 1.26 | 2.18 | 2.46 | 2.02 | 2.94 | 2.82 | 2.72 | 2.80 | 2.65 | | Operating cash flow | 43,088,000 | 36,370,000 | 49,499,000 | 56,655,000 | 45,844,000 | 48,215,000 | 59,024,000 | 61,828,000 | 57,739,000 | 62,745,000 | | Capital expenditures | 1,885,000 | 2,354,000 | 2,551,000 | 8,411,000 | 3,195,000 | 3,038,000 | 1,160,000 | 2,770,000 | 2,807,000 | 2,742,000 | | Dividends paid | 10,396,000 | 11,563,000 | 21,090,000 | 15,060,000 | 17,876,000 | 18,059,000 | 18,515,000 | 21,089,000 | 22,017,000 | 60,600,000 | | Share buybacks | 23,762,000 | 1,263,000 | 34,412,000 | 16,362,000 | 21,872,000 | 28,882,000 | 21,311,000 | 23,038,000 | 8,717,000 | 1,851,000 | | Assets | 2,386,398,000 | 2,388,460,000 | 2,244,374,000 | 2,798,847,000 | 3,011,136,000 | 3,194,519,000 | 3,135,572,000 | 3,268,545,000 | 3,261,216,000 | 3,259,643,000 | | Liabilities | 2,047,341,000 | 2,037,746,000 | 1,911,517,000 | 2,370,028,000 | 2,584,406,000 | 2,766,744,000 | 2,713,587,000 | 2,765,251,000 | 2,734,824,000 | 2,759,096,000 | | Stockholders' equity | 339,057,000 | 350,714,000 | 332,857,000 | 428,819,000 | 426,730,000 | 427,775,000 | 421,985,000 | 503,294,000 | 526,392,000 | 500,547,000 | | Free cash flow | 41,203,000 | 34,016,000 | 46,948,000 | 48,244,000 | 42,649,000 | 45,177,000 | 57,864,000 | 59,058,000 | 54,932,000 | 60,003,000 | ### Ratios ROE and ROA use period-end equity/assets. Liabilities / equity uses total liabilities divided by stockholders' equity. Current ratio uses current assets divided by current liabilities when both are reported. | Metric | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | | --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | | Net margin | 26.53% | 22.54% | 36.97% | 40.86% | 31.50% | 48.59% | 40.82% | 35.01% | 35.31% | 34.23% | | Return on equity | 7.41% | 6.13% | 10.92% | 9.05% | 8.42% | 11.96% | 11.06% | 9.54% | 9.80% | 9.75% | | Return on assets | 1.05% | 0.90% | 1.62% | 1.39% | 1.19% | 1.60% | 1.49% | 1.47% | 1.58% | 1.50% | | Liabilities / equity | 6.04 | 5.81 | 5.74 | 5.53 | 6.06 | 6.47 | 6.43 | 5.49 | 5.20 | 5.51 | ## Quarterly Quarterly standardized facts from SEC companyfacts as of latest extracted filing date 2026-05-08. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0000859070.json. Flow metrics use discrete quarter-length periods from 10-Q/10-Q/A filings. Q4 revenue and net income are derived only when annual FY and nine-month YTD facts exist for the same fiscal year; derived Q4 values are labeled. EPS Q4 is not derived. | Quarter | End date | Revenue | Net income | Diluted EPS | Method | | --- | --- | ---: | ---: | ---: | --- | | 2022-Q2 | 2022-06-30 | | | 0.67 | reported discrete quarter | | 2022-Q3 | 2022-09-30 | | | 0.81 | reported discrete quarter | | 2023-Q1 | 2023-03-31 | | | 0.72 | reported discrete quarter | | 2023-Q2 | 2023-06-30 | 34,869,000 | 9,814,000 | 0.55 | reported discrete quarter | | 2023-Q3 | 2023-09-30 | 36,105,000 | 14,640,000 | 0.79 | reported discrete quarter | | 2023-Q4 | 2023-12-31 | 36,002,000 | 11,784,000 | | derived Q4 = FY annual - nine-month YTD | | 2024-Q1 | 2024-03-31 | 36,029,000 | 12,845,000 | 0.71 | reported discrete quarter | | 2024-Q2 | 2024-06-30 | 36,789,000 | 12,686,000 | 0.71 | reported discrete quarter | | 2024-Q3 | 2024-09-30 | 36,892,000 | 13,033,000 | 0.71 | reported discrete quarter | | 2024-Q4 | 2024-12-31 | 36,432,000 | 13,040,000 | | derived Q4 = FY annual - nine-month YTD | | 2025-Q1 | 2025-03-31 | 35,169,000 | 11,818,000 | 0.64 | reported discrete quarter | | 2025-Q2 | 2025-06-30 | 35,388,000 | 12,246,000 | 0.67 | reported discrete quarter | | 2025-Q3 | 2025-09-30 | 35,699,000 | 12,266,000 | 0.67 | reported discrete quarter | | 2025-Q4 | 2025-12-31 | 36,279,000 | 12,465,000 | | derived Q4 = FY annual - nine-month YTD | | 2026-Q1 | 2026-03-31 | 37,781,000 | 12,027,000 | 0.63 | reported discrete quarter | ## Macro Cross-References - [CPIAUCSL](/indicator/CPIAUCSL/): Consumer Price Index for All Urban Consumers: All Items in U.S. City Average - [UNRATE](/indicator/UNRATE/): Unemployment Rate - [FEDFUNDS](/indicator/FEDFUNDS/): Federal Funds Effective Rate - [CES0500000003](/indicator/CES0500000003/): Average Hourly Earnings of All Employees, Total Private - [DFEDTARU](/indicator/DFEDTARU/): Federal Funds Target Range - Upper Limit - [DFEDTARL](/indicator/DFEDTARL/): Federal Funds Target Range - Lower Limit - [DGS3MO](/indicator/DGS3MO/): Market Yield on U.S. Treasury Securities at 3-Month Constant Maturity - [DGS2](/indicator/DGS2/): Market Yield on U.S. Treasury Securities at 2-Year Constant Maturity - [DGS10](/indicator/DGS10/): Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity - [DGS30](/indicator/DGS30/): Market Yield on U.S. Treasury Securities at 30-Year Constant Maturity - [T10Y2Y](/indicator/T10Y2Y/): 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity - [CPILFESL](/indicator/CPILFESL/): Consumer Price Index for All Urban Consumers: All Items Less Food and Energy - [CPIUFDSL](/indicator/CPIUFDSL/): Consumer Price Index for All Urban Consumers: Food - [CPIENGSL](/indicator/CPIENGSL/): Consumer Price Index for All Urban Consumers: Energy - [CUSR0000SAH1](/indicator/CUSR0000SAH1/): Consumer Price Index for All Urban Consumers: Shelter - [PCEPI](/indicator/PCEPI/): Personal Consumption Expenditures: Chain-type Price Index - [PCEPILFE](/indicator/PCEPILFE/): Personal Consumption Expenditures Excluding Food and Energy: Chain-type Price Index - [PPIACO](/indicator/PPIACO/): Producer Price Index by Commodity: All Commodities - [T10YIE](/indicator/T10YIE/): 10-Year Breakeven Inflation Rate - [U6RATE](/indicator/U6RATE/): Total Unemployed, Plus All Marginally Attached Workers Plus Total Employed Part Time for Economic Reasons - [PAYEMS](/indicator/PAYEMS/): All Employees, Total Nonfarm - [CIVPART](/indicator/CIVPART/): Labor Force Participation Rate - [EMRATIO](/indicator/EMRATIO/): Employment-Population Ratio - [UNEMPLOY](/indicator/UNEMPLOY/): Unemployed - [CE16OV](/indicator/CE16OV/): Employment Level - [ICSA](/indicator/ICSA/): Initial Claims - [JTSJOL](/indicator/JTSJOL/): Job Openings: Total Nonfarm - [JTSQUR](/indicator/JTSQUR/): Quits: Total Nonfarm - [GDPC1](/indicator/GDPC1/): Real Gross Domestic Product - [A191RL1Q225SBEA](/indicator/A191RL1Q225SBEA/): Real Gross Domestic Product: Percent Change from Preceding Period - [INDPRO](/indicator/INDPRO/): Industrial Production: Total Index - [TCU](/indicator/TCU/): Capacity Utilization: Total Index - [HOUST](/indicator/HOUST/): New Privately-Owned Housing Units Started: Total Units - [PERMIT](/indicator/PERMIT/): New Privately-Owned Housing Units Authorized in Permit-Issuing Places: Total Units - [RSAFS](/indicator/RSAFS/): Advance Retail Sales: Retail Trade - [PCE](/indicator/PCE/): Personal Consumption Expenditures - [DSPIC96](/indicator/DSPIC96/): Real Disposable Personal Income - [PSAVERT](/indicator/PSAVERT/): Personal Saving Rate - [M2SL](/indicator/M2SL/): M2 - [BOPGSTB](/indicator/BOPGSTB/): U.S. International Trade in Goods and Services: Balance - [MSPUS](/indicator/MSPUS/): Median Sales Price of Houses Sold for the United States - [HSN1F](/indicator/HSN1F/): New One Family Houses Sold: United States - [RHORUSQ156N](/indicator/RHORUSQ156N/): Homeownership Rate in the United States - [TTLCONS](/indicator/TTLCONS/): Total Construction Spending: Total Construction in the United States - [RRVRUSQ156N](/indicator/RRVRUSQ156N/): Rental Vacancy Rate in the United States - [TOTALSL](/indicator/TOTALSL/): Total Consumer Credit Owned and Securitized - [REVOLSL](/indicator/REVOLSL/): Revolving Consumer Credit Owned and Securitized - [DRCCLACBS](/indicator/DRCCLACBS/): Delinquency Rate on Credit Card Loans, All Commercial Banks - [GDP](/indicator/GDP/): Gross Domestic Product - [GPDI](/indicator/GPDI/): Gross Private Domestic Investment - [GCE](/indicator/GCE/): Government Consumption Expenditures and Gross Investment - [PCEC](/indicator/PCEC/): Personal Consumption Expenditures - [NETEXP](/indicator/NETEXP/): Net Exports of Goods and Services - [GFDEBTN](/indicator/GFDEBTN/): Federal Debt: Total Public Debt - [GFDEGDQ188S](/indicator/GFDEGDQ188S/): Federal Debt: Total Public Debt as Percent of Gross Domestic Product - [FYFSD](/indicator/FYFSD/): Federal Surplus or Deficit - [FGRECPT](/indicator/FGRECPT/): Federal Government Current Receipts - [FGEXPND](/indicator/FGEXPND/): Federal Government: Current Expenditures - [MANEMP](/indicator/MANEMP/): All Employees, Manufacturing - [USCONS](/indicator/USCONS/): All Employees, Construction - [USTRADE](/indicator/USTRADE/): All Employees, Retail Trade - [USFIRE](/indicator/USFIRE/): All Employees, Financial Activities - [USGOVT](/indicator/USGOVT/): All Employees, Government - [AWHAETP](/indicator/AWHAETP/): Average Weekly Hours of All Employees, Total Private - [DGORDER](/indicator/DGORDER/): Manufacturers' New Orders: Durable Goods - [NEWORDER](/indicator/NEWORDER/): Manufacturers' New Orders: Nondefense Capital Goods Excluding Aircraft - [BUSINV](/indicator/BUSINV/): Total Business Inventories - [EXPGS](/indicator/EXPGS/): Exports of Goods and Services - [IMPGS](/indicator/IMPGS/): Imports of Goods and Services - [IR](/indicator/IR/): Import Price Index (End Use): All Commodities - [PPIFIS](/indicator/PPIFIS/): Producer Price Index by Commodity: Final Demand ## Latest quarter (10-Q) Latest 10-Q source: https://www.sec.gov/Archives/edgar/data/859070/000143774926015833/fcbc20260331_10q.htm Extracted structurally from real Item 2 body heading to real Item 3/4 boundary. Confidence: high Filing date: 2026-05-08 Report date: 2026-03-31 ITEM 2.     Management’s Discussion and Analysis of Financial Condition and Results of Operations Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand our financial condition, changes in financial condition, and results of operations. MD&A contains forward-looking statements and should be read in conjunction with our consolidated financial statements, accompanying notes, and other financial information included in this report and our Annual Report on Form 10-K for the year ended December 31, 2025 (the “2025 Form 10-K”). Unless the context suggests otherwise, the terms “First Community,” “Company,” “we,” “our,” and “us” refer to First Community Bankshares, Inc. and its subsidiaries as a consolidated entity. Executive Overview First Community Bankshares, Inc. (the “Company”) is a financial holding company, headquartered in Bluefield, Virginia, that provides banking products and services through its wholly owned subsidiary First Community Bank (the “Bank”), a Virginia-chartered banking institution. As of March 31, 2026, the Bank operated 61 branches in Virginia, West Virginia, North Carolina and Tennessee. As of March 31, 2026, full-time equivalent employees, calculated using the number of hours worked, totaled 610.  Our primary source of earnings is net interest income, the difference between interest earned on assets and interest paid on liabilities, which is supplemented by fees for services, commissions on sales, and various deposit service charges. We fund our lending and investing activities primarily through the retail deposit operations of our branch banking network. We invest our funds primarily in loans to retail and commercial customers and various investment securities. Our common stock is traded on the NASDAQ Global Select Market under the symbol FCBC. The Bank offers trust management, estate administration, and investment advisory services through its Trust Division and wholly owned subsidiary First Community Wealth Management Inc. (“FCWM”). The Trust Division manages inter vivos trusts and trusts under will, develops and administers employee benefit and individual retirement plans, and manages and settles estates. Fiduciary fees for these services are charged on a schedule related to the size, nature, and complexity of the account. Revenues consist primarily of investment advisory fees and commissions on assets under management and administration. As of March 31, 2026, the Trust Division and FCWM managed and administered $1.77 billion in combined assets under various fee-based arrangements as fiduciary or agent.  Recent Developments  On January 23, 2026, the Company completed its previously announced merger (the “Merger”) with Hometown Bancshares, Inc. a West Virginia corporation headquartered in Middlebourne, West Virginia (“Hometown”), pursuant to an Agreement and Plan of Merger (the “Agreement”) dated July 19, 2025, by and between the company and Hometown.  At the Effective Time, Hometown merged with and into the Company, with the Company as the surviving corporation in the Merger. Immediately following the Merger, Union Bank, Inc., a wholly-owned subsidiary of Hometown, merged with and into First Community Bank, a wholly-owned subsidiary of the Company (the “Bank Merger”), with First Community Bank as the surviving bank in the Bank Merger. Pursuant to the Agreement, each outstanding share of common stock of Hometown was converted into the right to receive 11.706 shares (the “Exchange Ratio”) of the Company's common stock, par value $1.00 per share, plus cash, without interest, in lieu of fractional shares.  In connection with the transaction, the Company issued 1,029,314 common shares. Under the terms of the Agreement, all Hometown stock appreciation rights under a stock appreciation award (except certain stock appreciation rights that were unvested as of January 1, 2025) and all Hometown dividend equivalent rights granted under the Hometown Dividend Equivalent Incentive Plan that were outstanding immediately prior to the Effective Time, to the extent not vested, became fully vested, and were canceled. The holders of stock appreciation rights received a cash  payment equal to the number determined by multiplying (i) the excess, if any of (A) Average Closing Price (as defined in the Agreement) multiplied by (B) the Exchange Ratio over the applicable exercise price of the stock appreciation right, by (ii) the number of shares of Hometown common stock subject to the applicable stock appreciation right. The holders of dividend equivalent rights received a cash payment equal to the account value of the applicable dividend rights award. The stock appreciation rights that are unvested as of January 1, 2025, were assumed by the Company. Acquisition details are described in Note 2, "Acquisitions and Divestitures" of Part I, of this Quarterly Report on Form 10Q. Critical Accounting Policies We prepare our consolidated financial statements in accordance with generally accepted accounting principles (“GAAP”) in the U.S. and conform to general practices within the banking industry. Our financial position and results of operations may require management to make significant estimates and assumptions that have a material impact on our financial condition or operating performance. Due to the level of subjectivity and the susceptibility of such matters to change, actual results could differ significantly from management’s assumptions and estimates. Estimates, assumptions, and judgments, which are periodically evaluated, are based on historical experience and other factors, including expectations of future events believed reasonable under the circumstances. These estimates are generally necessary when assets and liabilities are required to be recorded at estimated fair value, when a decline in the value of an asset carried on the financial statements at fair value warrants an impairment write-down or a valuation reserve, or when an asset or liability needs recorded based on the probability of occurrence of a future event. Carrying assets and liabilities at fair value inherently results in more financial statement volatility. Fair values and information used to record valuation adjustments for certain assets and liabilities are based on quoted market prices, when available, or third-party sources. When quoted prices or third-party information is not available, management estimates valuation adjustments primarily through the use of financial modeling techniques and appraisal estimates. Our accounting policies are fundamental in understanding MD&A and the disclosures presented in Item 1, “Financial Statements,” of this Quarterly Report on Form 10-Q. Our accounting policies are described in detail in Note 1, “Basis of Presentation and Significant Accounting Policies,” of the Notes to Consolidated Financial Statements in Part II, Item 8 of our 2025 Form 10-K. Our critical accounting estimates are detailed in the “Critical Accounting Policies” section in Part II, Item 7 of our 2025 Form 10-K. 36 Table of Contents Performance Overview Highlights of our results of operations for the three months ended March 31, 2026, and financial condition as of March 31, 2026, include the following: ● Net income of $12.03 million for the first quarter of 2026, was an increase of $209 thousand, or 1.77%, from the same quarter of 2025. ● When adjusted for merger and non-recurring expenses, net income of $13.83 million was an increase of $2.01 million, or 17.02%, from the same period in 2025. ● Net interest margin remained strong at 4.37% in the first quarter of 2026, up 3 basis points from the first quarter of 2025.  Net interest rate spread increased 11 basis points to 4.05%, driving a $3.05 million, or 10.02%, increase in tax-equivalent net interest income.  The improvement was primarily driven by an increase in the average balance of interest earnings assets and lower funding cost yields.  Average earnings assets increased $263.04 million, or 9.26%, contributing $2.67 million in additional interest income, while the yield of interest-bearing deposits declined 19 basis points, reducing interest expense by $393 thousand, or 8.07%. ● Net interest income after provision for loan losses increased $2.94 million, or 9.80%, compared to March 31, 2025. The increase is attributable to an increase in average earnings assets and decreased funding costs. ● Noninterest income increased approximately $1.23 million, or 12.00%, when compared to the same quarter of 2025. The increase is attributable primarily to an increase in other service charges and fees of $603 thousand, or 18.05%, and service charges on deposits of $349 thousand, or 9.10%. Noninterest expense increased $3.79 million, or 15.21%, when compared to the same period of 2025. The increase is attributable to merger expenses of $2.31 million and an increase in salaries and benefits of $1.03 million, or 7.74%. The merger expense is related to the recent acquisition of Hometown Bancshares, Inc. ("Hometown"). ● Annualized return on average assets ("ROA") was 1.39% for the first quarter of 2026 compared to 1.49% for the same period of 2025. Annualized return on average common equity ("ROE") was 9.29% for the first quarter of 2026 compared to 9.49% for the same period of 2025. ● When adjusted for merger and non-recurring expenses, ROA was 1.60% for the first quarter of 2026 and ROE was 10.69%. Return on average tangible common equity continues to remain strong at 15.48% for the first quarter of 2026. ● The Company completed the strategic acquisition of Hometown on January 23, 2026.  Total assets of $393.81 million were acquired in the transaction increasing the Company's consolidated assets to $3.64 billion on March 31, 2026.  In addition, the Company issued 1.03 million common shares in the purchase resulting in an increase in capital of $35.07 million.  The purchase transaction created $1.73 million goodwill and $8.59 million in other intangible assets.  Other major balance sheet components increased in the transaction with $171.04 million acquired loans and $357.72 million in deposits. ● The Company's loan portfolio increased $141.27 million, or 6.10%, from year end 2025.  Excluding the Hometown transaction, the loan portfolio decreased approximately $29.77 million, or 1.29%.  Loan production for the first quarter of 2026 was $105.07 million, an increase of $27.16 million over first quarter of 2025. ● Deposits increased $379.06 million, or 14.21%, from December 31, 2025.  Excluding the Hometown transaction, deposits increased $21.33 million, or 0.79%. ● The Company repurchased 504,652 common shares for a total cost of $20.33 million during the first quarter of 2026.  Shares repurchase activity was suspended in the third quarter of 2025 in anticipation of the acquisition of Hometown Bancshares, Inc.  and resumed upon its completion in the first quarter of 2026. ● Non-performing loans to total loans decreased to 0.72%, a 0.12% reduction when compared with the same quarter of 2025.  The company experienced net charge-offs for the first quarter of 2026 or $731 thousand, or 0.12%, of annualized average loans, compared to net charge-offs of $1.39 million, or 0.24%, of annualized average loans for the same period in 2025. ● The allowance for credit losses increased $2.78 million, primarily driven by the $3.21 million impact of the Hometown transaction. The allowance for credit losses to total loans was 1.37% on March 31, 2026, compared to 1.42% on March 31,2025. ● Book value per share on March 31, 2026, was $27.64, an increase of $0.34 from year-end 2025. 37 Table of Contents Results of Operations Net Income The following table presents the changes in net income and related information for the periods indicated: Three Months Ended (Amounts in thousands, except per March 31, Increase share data) 2026 2025 (Decrease) % [Excerpt truncated for page length; source filing is linked above.] ## Latest 10-K MD&A Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Confidence: high Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand our financial condition, changes in financial condition, and results of operations. MD&A contains forward-looking statements and should be read in conjunction with our consolidated financial statements, accompanying notes, and other financial information included in this report. Executive Overview First Community Bankshares, Inc. is a financial holding company, headquartered in Bluefield, Virginia, that provides banking products and services through its wholly owned subsidiary First Community Bank (the “Bank”), a 151 year-old Virginia-chartered banking institution. Unless the context suggests otherwise, the terms “First Community,” “Company,” “we,” “our,” and “us” refer to First Community Bankshares, Inc. and its subsidiaries as a consolidated entity.  As of December 31, 2025, the Bank operated 52 branches in Virginia, West Virginia, North Carolina and Tennessee. Our primary source of earnings is net interest income, the difference between interest earned on assets and interest paid on liabilities, which is supplemented by fees for services, commissions on sales, and various deposit service charges. We fund our lending and investing activities primarily through the retail deposit operations of our branch banking network supplemented by retail and wholesale repurchase agreements and Federal Home Loan Bank (“FHLB”) borrowings. We invest our funds primarily in loans to retail and commercial customers and various investment securities. The Bank offers trust management, estate administration, and investment advisory services through its Trust Division and wholly owned subsidiary First Community Wealth Management (“FCWM”). The Trust Division manages inter vivos trusts and trusts under will, develops and administers employee benefit and individual retirement plans, and manages and settles estates. Fiduciary fees for these services are charged on a schedule related to the size, nature, and complexity of the account. Revenues consist primarily of commissions on assets under management and investment advisory fees. As of December 31, 2025, the Trust Division and FCWM managed and administered $1.79 billion in combined assets under various fee-based arrangements as fiduciary or agent. On January 23, 2026, the Company completed its previously announced merger (the “Merger”) with Hometown Bancshares, Inc. a West Virginia corporation headquartered in Middlebourne, West Virginia (“Hometown”), pursuant to an Agreement and Plan of Merger (the “Agreement”) dated July 19, 2025, by and between the company and Hometown.  At the Effective Time, Hometown merged with and into the Company, with the Company as the surviving corporation in the Merger.  For additional information, see Note 24, “Subsequent Events,” to the Consolidated Financial Statements in Item 8, of this report. 20 Table of Contents Critical Accounting Policies Our consolidated financial statements are prepared in conformity with generally accepted accounting principles (“GAAP”) in the U.S. and prevailing practices in the banking industry. Our accounting policies, as presented in Note 1, “Basis of Presentation and Significant Accounting Policies,” to the Consolidated Financial Statements in Item 8 of this report are fundamental in understanding MD&A and the disclosures presented in Item 8, “Financial Statements and Supplementary Data,” of this report. Management may be required to make significant estimates and assumptions that have a material impact on our financial condition or operating performance. Due to the level of subjectivity and the susceptibility of such matters to change, actual results could differ significantly from management’s assumptions and estimates. Based on the valuation techniques used and the sensitivity of financial statement amounts to the methods, assumptions, and estimates used, we have identified the allowance for loan losses and goodwill as the accounting areas that require the most subjective or complex judgments or are the most susceptible to change. Allowance for Credit Losses or "ACL" The ACL reflects management’s estimate of losses that will result from the inability of our borrowers to make required loan payments. Management uses a systematic methodology to determine its ACL for loans held for investment and certain off-balance-sheet credit exposures. Management considers the effects of past events, current conditions, and reasonable and supportable forecasts on the collectability of the loan portfolio. The Company’s estimate of its ACL involves a high degree of judgment; therefore, management’s process for determining expected credit losses may result in a range of expected credit losses. It is possible that others, given the same information, may at any point in time reach a different reasonable conclusion. The Company’s ACL recorded in the balance sheet reflects management’s best estimate of expected credit losses. The Company recognizes in net income the amount needed to adjust the ACL for management’s current estimate of expected credit losses. See Note 1 – "Basis of Presentation - Significant Accounting Policies" in this Annual Report on Form 10-K for further detailed descriptions of our estimation process and methodology related to the ACL. See also Note 6 — "Allowance for Credit Losses" in this Annual Report on Form 10-K, “Allowance for Credit Losses” in this MD&A.  The Company uses a number of economic variables to estimate the allowance for credit losses, with the most significant driver being a forecast of the national unemployment rate. In the December 31, 2025, estimate, the Company assumed an unemployment forecast of  approximately 4.5%, compared to the range of 4.0% to 4.3% utilized in the December 31, 2024, estimate.  Based on a sensitivity analysis as of December 31, 2025, an increase of 1% in the unemployment forecast would result in an increase in the allowance for credit losses of approximately 9.3%  Business Combinations The Company accounts for business combinations using the acquisition method of accounting as outlined in using Topic 805 of the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”). Under this method, all identifiable assets acquired, including purchased loans, and liabilities assumed are recorded at fair value. Any excess of the purchase price over the fair value of net assets acquired is recorded as goodwill. In instances where the price of the acquired business is less than the net assets acquired, a gain on the purchase is recorded. Fair values are assigned based on quoted prices for similar assets, if readily available, or appraisals by qualified independent parties for relevant asset and liability categories. Certain financial assets and liabilities are valued using discount models that apply current discount rates to streams of cash flow. Valuation methods require assumptions, which can result in alternate valuations, varying levels of goodwill or bargain purchase gains, or amortization expense or accretion income. Management must make estimates for the useful or economic lives of certain acquired assets and liabilities that are used to establish the amortization or accretion of some intangible assets and liabilities, such as core deposits. Fair values are subject to refinement for up to one year after the closing date of the acquisition as additional information about the closing date fair values becomes available. Acquisition and divestiture activities are included in the Company’s consolidated results of operations from the closing date of the transaction. Acquisition and divestiture related costs are recognized in noninterest expense as incurred. 21 Table of Contents Goodwill  Goodwill is tested for impairment annually, on October 31st, with additional reviews performed quarterly or more frequently if events or circumstances indicate there may be impairment.  We have one reporting unit, Community Banking.  If we elect to perform a qualitative assessment, we evaluate factors such as macroeconomic conditions, industry and market considerations, overall financial performance, changes in stock price, and progress towards stated objectives in determining if it is more likely than not that the fair value of our reporting unit is less than its carrying amount. If we conclude that it is more likely than not that the fair value of our reporting unit is less than its carrying amount, a quantitative test is performed; otherwise, no further testing is required. The quantitative test consists of comparing the fair value of our reporting unit to its carrying amount, including goodwill. If the fair value of our reporting unit is greater than its book value, no goodwill impairment exists. If the carrying amount of our reporting unit is greater than its calculated fair value, a goodwill impairment charge is recognized for the difference. We performed a quantitative assessment for the annual test on October 31, 2025, which resulted in no goodwill impairment. For additional information, see Note 8, “Goodwill and Other Intangible Assets,” to the Consolidated Financial Statements in Item 8 of this report. Non-GAAP Financial Measures In addition to financial statements prepared in accordance with GAAP, we use certain non-GAAP financial measures that provide useful information for financial and operational decision making, evaluating trends, and comparing financial results to other financial institutions. The non-GAAP financial measures presented in this report include certain financial measures presented on a fully taxable equivalent (“FTE”) basis. While we believe certain non-GAAP financial measures enhance the understanding of our business and performance, they are supplemental and not a substitute for, or more important than, financial measures prepared in accordance with GAAP and may not be comparable to those reported by other financial institutions. The reconciliations of non-GAAP to GAAP measures are presented below. We believe FTE basis is the preferred industry measurement of net interest income and provides better comparability between taxable and tax exempt amounts. We use this non-GAAP financial measure to monitor net interest income performance and to manage the composition of our balance sheet. FTE basis adjusts for the tax benefits of income from certain tax exempt loans and investments using the federal statutory income tax rate of 21%. The following table reconciles net interest income and margin, as presented in our consolidated statements of income, to net interest income on a FTE basis for the periods indicated: Year Ended December 31, 2025 2024 2023 (Amounts in thousands) Net interest income, GAAP $ 124,613 $ 126,468 $ 127,684 FTE adjustment(1) 449 451 454 Net interest income, FTE $ 125,062 $ 126,919 $ 128,138 Net interest margin, GAAP 4.40 % 4.42 % 4.43 % FTE adjustment(1) 0.02 % 0.02 % 0.02 % Net interest margin, FTE 4.42 % 4.44 % 4.45 % (1) FTE basis of 21%. 22 Table of Contents Performance Overview Highlights of our results of operations in 2025, and financial condition as of December 31, 2025, include the following: ● Annual net income of $48.79 million, or $2.65 per diluted common share was earned in 2025; a decrease of $2.81 million, or 5.45%, compared to 2024.  ● When adjusted for merger and non-recurring expenses, adjusted annual net income for 2025 was $51.12 million, reflecting a modest year over year decline of $1.23 million, or 2.34%. ● Net interest income after provision for loan losses increased $1.67 million compared to 2024, primarily due to a $4.06 million, or 11.67%, reduction in the allowance for loan losses.  The decrease is the allowance reflects a smaller loan portfolio and continued strong credit performance. ● Net interest margin remained stable at 4.42%, declining only 0.45% compared to 2024.    Net interest spread increased 1 basis point to 4.04% from 4.03% in 2024.   ● Noninterest income increased $3.50 million, or 8.88%, primarily driven by a $3.39 million increase in service charges on deposits and other service charge fees.  Non-interest expense increased $7.74 million, or 8.01%, reflecting higher salaries and employee benefits of $4.73 million, merger-related expenses of $2.91 million, and an increase of $1.00 million in other operating expenses.  Merger-related expenses were associated with the acquisition of Hometown, which was completed on January 23, 2026. ● Annualized return on average assets ("ROA") was 1.52% for the twelve months of 2025 compared to 1.60% for the same period of 2024.  Annualized return on average common equity ("ROE") was 9.64% for the twelve months of 2025 compared to 10.03% for the same period of 2024. ● When adjusted for merger and non-recurring expenses, ROA was 1.59% and ROE was 10.09% for the twelve months ended 2025.  Return on average tangible common equity continues to remain strong at 13.92% for the full year. ● Non-performing loans to total loans decreased in 2025 to 0.61%; a 0.22% reduction when compared to 2024.  Net charge-offs to annualized average loans also decreased in 2025 to $4.12 million, or 0.18%, compared to net charge-offs of $5.37 million, or 0.22%, for the same period in 2024. ● The allowance for credit losses to total loans was 1.33% on December 31, 2025, compared to 1.44% on December 31, 2024.   ● The Company's average loan-to-deposits ratio of 88.81%, on December 31, 2025, continues to represent a stable utilization of deposit funding. ● The Company repurchased 50,338 common shares during 2025 for a cost of $1.85 million, compared to 257,294 shares purchased in 2024 for a cost of $8.72 million. ● Book value per share on December 31, 2025, was $27.30, a decrease of $1.43 from year-end 2024.  The decrease is primarily attributable to two special dividends being declared in 2025, in the total amount of $3.07 per common share. Results of Operations Net Income The following table presents the changes in net income and related information for the periods indicated: 2025 Compared to 2024 2024 Compared to 2023 Year Ended December 31, Increase % Increase % (Amounts in thousands, except per share data) 2025 2024 2023 (Decrease) Change (Decrease) Change Net income $ 48,794 $ 51,604 $ 48,020 $ (2,810 ) (5.45 )% $ 3,584 7.46 % Basic earnings per common share 2.66 2.81 2.67 (0.15 ) (5.34 )% 0.14 5.24 % Diluted earnings per common share 2.65 2.80 2.72 (0.15 ) (5.36 )% 0.08 2.94 % Return on average assets 1.52 % 1.60 % 1.48 % (0.08 )% (5.00 )% 0.12 % 8.11 % Return on average common equity 9.64 % 10.03 % 10.02 % (0.39 )% (3.89 )% 0.01 % 0.10 % 2025 Compared to 2024.  Pre-tax income declined $2.57 million, or 3.91%, compared to 2024.  The decline was primarily driven by a $7.74 million increase in noninterest expense and a $1.86 million reduction in net interest income.  These pressures were partially offset by a $3.52 million decrease in the provision for credit losses and a $3.50 million increase in noninterest income.  The increase of noninterest expense was largely attributable to higher salaries and employee benefits of $4.73 million, along with a $2.91 million in merger-related costs associated with the Hometown acquisition.  The lower provision for credit losses reflected a smaller loan portfolio and continued favorable credit performance.  Growth in noninterest income was primarily due to a $3.39 million increase in service charges on deposits and other service fees. 2024 Compared to 2023.  Pre-tax income increased $3.72 million, or 6.00% compared to 2023.  The increase was primarily attributable to a decrease in provision for credit losses of $4.39 million, or 54.95% offset by a decrease in net interest income of $1.22 million, or 0.95%.  Provision for credit losses totaled $3.60 million for 2024 compared to $7.99 million in 2023.  The provision for credit losses in 2023 included $1.61 million recorded for the day two provision for the acquisition of the Surrey loan portfolio. Net interest income totaled $126.47 million for 2024 compared to $127.68 million in 2023.  The decrease in net interest income is primarily attributable to an increase in deposit interest expense due to increased rates on interest-bearing deposits.  Non interest income increased $1.94 million, or 5.17% offset by an increase in non interest expense of $1.39 million, or 1.46%. 23 Table of Contents Net Interest Income Net interest income, our largest contributor to earnings, is analyzed on a fully taxable equivalent (“FTE”) basis, a non-GAAP financial measure. For additional information, see “Non-GAAP Financial Measures” above. The following table presents the consolidated average balance sheets and net interest analysis on a FTE basis for the dates indicated: Year Ended December 31, 2025 2024 2023 (Amounts in thousands) Average Balance Interest(1) Average Yield/ Rate(1) Average Balance Interest(1) Average Yield/ Rate(1) Average Balance Interest(1) Average Yield/ Rate(1) Assets Earning assets Loans(2)(3) $ 2,353,548 $ 123,708 5.26 % $ 2,481,215 $ 130,196 5.25 % $ 2,538,361 $ 127,019 5.00 % Securities available for sale 139,276 4,620 3.32 % 171,081 5,547 3.24 % 298,389 8,115 2.72 % Interest-bearing deposits 338,783 14,656 4.33 % 206,629 10,850 5.25 % 46,601 2,485 5.33 % Total earning assets 2,831,607 $ 142,984 5.05 % 2,858,925 $ 146,593 5.13 % 2,883,351 $ 137,619 4.77 % Other assets 377,954 374,398 369,700 Total assets $ 3,209,561 $ 3,233,323 $ 3,253,051 Liabilities and stockholders' equity Interest-bearing deposits Demand deposits $ 660,810 $ 713 0.11 % $ 662,584 $ 796 0.12 % $ 686,534 $ 405 0.06 % Savings deposits 896,166 12,748 1.42 % 878,584 14,206 1.62 % 847,397 6,781 0.80 % Time deposits 220,540 4,460 2.02 % 246,035 4,636 1.88 % 267,957 2,155 0.80 % Total interest-bearing deposits 1,777,516 17,921 1.01 % 1,787,203 19,638 1.10 % 1,801,888 9,341 0.52 % Borrowings Federal funds purchased - - - 628 35 5.53 % 2,715 139 5.12 % Retail repurchase agreements 1,204 1 0.06 % 1,045 1 0.05 % 1,528 1 0.06 % Total borrowings 1,204 1 0.06 % 1,673 36 2.15 % 4,243 140 3.30 % Total interest-bearing liabilities 1,778,720 17,922 1.01 % 1,788,876 19,674 1.10 % 1,806,131 9,481 0.52 % Noninterest-bearing demand deposits 872,516 882,700 926,378 Other liabilities 51,928 47,362 41,477 Total liabilities 2,703,164 2,718,938 2,773,986 Stockholders' equity 506,397 514,385 479,065 Total liabilities and equity $ 3,209,561 $ 3,233,323 $ 3,253,051 Net interest income, FTE(1) $ 125,062 $ 126,919 $ 128,138 Net interest rate spread, FTE(1) 4.04 % 4.03 % 4.25 % Net interest margin, FTE(1) 4.42 % 4.44 % 4.44 % (1) FTE basis based on the federal statutory rate of 21%.  (2) Nonaccrual loans are included in average balances; however, no related interest income is recognized during the period of nonaccrual. (3) Interest on loans include non-cash purchase accounting accretion of $2.08 million in 2025, $2.90 million in 2024, and $2.74 million in 2023. 24 Table of Contents The following table presents the impact to net interest income on a FTE basis due to changes in volume (average volume times the prior year’s average rate), rate (average rate times the prior year’s average volume), and rate/volume (average volume times the change in average rate), for the periods indicated: Year Ended Year Ended December 31, 2025 Compared to 2024 December 31, 2024 Compared to 2023 Dollar Increase (Decrease) due to Dollar Increase (Decrease) due to Rate/ Rate/ (Amounts in thousands) Volume Rate Volume Total Volume Rate Volume Total Interest earned on(1): Loans $ (6,699 ) $ 222 $ (11 ) $ (6,488 ) $ (2,860 ) $ 6,176 $ (139 ) $ 3,177 Securities available for sale (1,031 ) 128 (24 ) (927 ) (3,462 ) 1,560 (666 ) (2,568 ) Interest-bearing deposits with other banks 6,939 (1,911 ) (1,222 ) 3,806 8,533 (38 ) (130 ) 8,365 Total interest-earning assets (791 ) (1,561 ) (1,257 ) (3,609 ) 2,211 7,698 (935 ) 8,974 Interest paid on(1): Demand deposits (2 ) (81 ) - (83 ) (14 ) 420 (15 ) 391 Savings deposits 284 (1,708 ) (34 ) (1,458 ) 250 6,921 254 7,425 Time deposits (480 ) 340 (36 ) (176 ) (176 ) 2,894 (237 ) 2,481 Federal funds purchased - - (35 ) (35 ) - - (104 ) (104 ) Retail repurchase agreements - - - - - - - - Total interest-bearing liabilities (198 ) (1,449 ) (105 ) (1,752 ) 60 10,235 (102 ) 10,193 Change in net interest income(1) $ (593 ) $ (112 ) $ (1,152 ) $ (1,857 ) $ 2,151 $ (2,537 ) $ (833 ) $ (1,219 ) (1) FTE basis based on the federal statutory rate of 21%. 2025 Compared to 2024. Net interest income represented 74.40% of total net interest and noninterest income in 2025, compared to 76.25% in 2024.  The 1.85 percentage-point decline reflects a $1.85 million, or 1.47%, decrease in net interest income and a $3.50 million, or 8.88%, increase in noninterest income.  On an FTE basis, net interest income decreased $1.86 million, or 1.46%.  Net interest margin and net interest spread experienced modest changes year over year.  Net interest margin declined 2 basis points to 4.42%, while net interest spread increased 1 basis point to 4.04%.  Average earning assets decreased $27.32 million, or 0.96%, due to decreases in both the average balance of loans of $127.67 million, or 5.15%, and the average balance of securities available-for-sale of $31.80 million, or 18.59%.  These decreases were offset by an increase in interest-bearing deposits with banks of $132.15 million, or 63.96%.  The yield on earning assets decreased 8 basis points, or 1.56%, due to an asset balance shift from higher-yielding loans to lower-yielding interest-bearing deposit accounts held with banks. In addition, non-cash accretion decreased $813 thousand in 2025 to $2.08 million, compared to a 2024 balance of $2.90 million.  The impact of non-cash purchase accounting accretion income on the FTE net interest margin was 8 basis points for 2025 compared to 10 basis points in 2024.  The average loan to deposit ratio declined to 88.81% in 2025, compared to 92.93% in 2024. Average interest-bearing liabilities, which consist of interest-bearing deposits and borrowings, decreased $10.16 million, or 0.57%, primarily due to a decrease in interest-bearing deposits of $9.69 million, or 0.54%.  Interest-bearing demand deposits decreased $1.77 million, or 0.27%, and time deposits decreased $25.49 million, or 10.36%.  These decreases were offset by an increase in savings deposits of $17.58 million or 2.00%.  The yield on interest-bearings liabilities decreased 9 basis points, or 8.18%, primarily due to an average balance shift from higher rate time deposits to lower rate savings deposits. 2024 Compared to 2023.    Net interest income comprised 76.25% of total net interest and noninterest income in 2024 compared to 77.32% in 2023.  Net interest income decreased $ 1.22 million, or 0.95 %.   On a FTE basis net interest income decreased $1.22 million, or 0.95%. There was no change in the FTE net interest margin; the FTE net interest spread decreased  22  basis points.  The decrease was primarily driven by an increase in interest expense due to increases in rates paid on interest-bearing deposits. Average earning assets decreased $24.43 million, or 0.85%, due to decreases in both the average balance of securities available for sale of $127.31 million, or 42.67%, and the average balance of loans of $57.15 million, or 2.25%.  These decreases were offset by an increase in interest-bearing deposits with banks of $160.03 million, or 343.40%.  The yield on earning assets increased 36 basis points, or 7.55% and is attributable to an increase in interest income of $8.97 million, or 6.52%.  Interest income for interest-bearing deposits with banks increased $8.37 million, or 336.62%.  This increase was primarily driven by an increase in the average balance as noted above offset by a decrease in the yield of 8 basis points.  Interest income on loans also increased $3.18 million, or 2.50%.  The increase was primarily due to an increase in yield of 25 basis points offset by a decrease in the average balance of $57.15 million.  Interest income on securities available for sale decreased $2.57 million, or 31.65%.  The yield increased 52 basis points, however, the average balance decreased $127.31 million, or 42.67%.  The average loan to deposit ratio decreased to 92.93% from 93.04% in 2023.  Non-cash accretion increased $155 thousand, or 5.65% to $2.90 million.  The impact of non-cash purchase accounting accretion income on the FTE net interest margin was 10 basis points for 2024 compared to 9 basis points in 2023. Average interest-bearing liabilities, which consist of interest-bearing deposits and borrowings, decreased $17.26 million, or 0.96%, primarily due to a decrease in interest-bearing deposits of $14.69 million, or 0.81%.  Interest-bearing demand deposits decreased $23.95 million, or 3.49%, and time deposits decreased $21.92 million, or 8.18%.  Savings deposits increased $31.19 million or 3.68%.  The yield on interest-bearings liabilities increased 58 basis points and is primarily due to increased rates paid on interest-bearing deposit liabilities. 25 Table of Contents Provision for Credit Losses 2025 Compared to 2024.  The provision charged to operations decreased $3.52 million compared to 2024.  The provision expense of $72 thousand was comprised of $58 thousand related to provision expense for loans and $14 thousand related to provision expense for unfunded loan commitments.  Provision for credit losses for loans of $58 thousand was recorded compared to the provision of $4.00 million recorded in 2024.  The decrease in provision is due a loan portfolio balance decline of $101.33 million from 2024 to 2025, along with continued strong credit performance.   As noted, a $14 thousand provision for loan commitments was recorded in 2025 compared to $405 thousand recovery of provision recorded in 2024.   2024 Compared to 2023.  The provision charged to operations decreased $4.39 million compared to the prior year.  The provision expense of $3.60 million was comprised of $4.00 million related to provision expense for loans and a recovery of provision of $405 thousand for unfunded loan commitments.  Provision for credit losses for loans of $4.00 million was recorded compared to the provision of $8.44 million recorded in 2023.  The decrease in provision is primarily due a much smaller required credit loss provision as the loan portfolio has experienced a decrease of $156.21 million.  Additionally, $1.61 million of the provision in the prior year was attributable to day two provision for the Surrey portfolio.  As noted above, a recovery of provision for loan commitments was recorded in 2024 of  $405 thousand compared to a recovery of provision of $450 thousand in 2023.   Noninterest Income The following table presents the components of, and changes in, noninterest income for the periods indicated: 2025 Compared to 2024 2024 Compared to 2023 Year Ended December 31, Increase % Increase % 2025 2024 2023 (Decrease) Change (Decrease) Change (Amounts in thousands) Wealth management $ 4,936 $ 4,485 $ 4,179 $ 451 10.06 % $ 306 7.32 % Service charges on deposits 16,768 14,012 13,996 2,756 19.67 % 16 0.11 % Other service charges and fees 15,024 14,392 13,647 632 4.39 % 745 5.46 % Net gain on sale of securities - - (21 ) - - 21 - Other operating income 6,159 6,501 5,651 (342 ) -5.26 % 850 15.04 % Total noninterest income $ 42,887 $ 39,390 $ 37,452 $ 3,497 8.88 % $ 1,938 5.17 % 2025 Compared to 2024. Noninterest income comprised 25.60% of total net interest and noninterest income in 2025 compared to 23.75% in 2024, with noninterest income increasing $3.50 million, or 8.88%, in 2025.  The 2025 increase is driven mostly by a $3.39 million increase in service charges on deposits and other service charges and fees. The increase is primarily attributable to increases in non-sufficient funds fees of $2.45 million and interchange income of $854 thousand. 2024 Compared to 2023.   Noninterest income comprised 23.75% of total net interest and noninterest income in 2024 compared to 22.68% in 2023.  Noninterest income increased $1.94 million, or 5.17%.  Other operating income increased $850 thousand, or 15.04%.  Other operating income for 2024 included a gain of $825 thousand from the sale of two closed branch properties, while other operating income for the same period of 2023 included a gain of $204 thousand for the sale of one closed branch property.  In addition, other operating income for 2024, included a holdback payment of $184 thousand related to a prior divestiture of an insurance agency.  Other service charges and fees increased $745 thousand, or 5.46%.  The increase is primarily attributable to an increase in net interchange income of $709 thousand. 26 Table of Contents Noninterest Expense The following table presents the components of, and changes in, noninterest expense for the periods indicated: 2025 Compared to 2024 2024 Compared to 2023 Year Ended December 31, Increase % Increase % 2025 2024 2023 (Decrease) Change (Decrease) Change (Amounts in thousands) Salaries and employee benefits $ 56,433 $ 51,702 $ 49,887 $ 4,731 9.15 % $ 1,815 3.64 % Occupancy expense 5,680 5,286 4,967 394 7.45 % 319 6.42 % Furniture and equipment expense 6,148 6,368 5,878 (220 ) -3.45 % 490 8.34 % Service fees 10,335 9,642 8,908 693 7.19 % 734 8.24 % Advertising and public relations 4,071 3,861 3,300 210 5.44 % 561 17.00 % Professional fees 1,265 1,218 1,567 47 3.86 % (349 ) -22.27 % Amortization of intangibles 1,916 2,131 1,731 (215 ) -10.09 % 400 23.11 % FDIC premiums and assessments 1,445 1,463 1,511 (18 ) -1.23 % (48 ) -3.18 % Merger expense 2,912 - 2,393 2,912 100.00 % (2,393 ) -100.00 % Litigation expense - 1,800 3,000 (1,800 ) -100.00 % (1,200 ) -40.00 % Other operating expense 14,098 13,096 12,035 1,002 7.65 % 1,061 8.82 % Total noninterest expense $ 104,303 $ 96,567 $ 95,177 $ 7,736 8.01 % $ 1,390 1.46 % 2025 Compared to 2024.  Non interest expense increased $7.74 million, or 8.01%, in 2025 compared to 2024.  The increase is attributed mostly to increases in salaries and employee benefits of $4.73 million, merger expense of $2.91 million and other operating expense of $1.00 million.  The increase in salaries and employee benefits is driven by a $1.27 million increase in salary expense and a $3.24 million increase in incentive compensation.  The increase in merger expense is related to the Hometown acquisition.  2024 Compared to 2023.  Non interest expense increased $1.39 million, or 1.46%.  Salaries and employee benefits increased $1.82 million, other operating expense increased $1.06 million, and service fees increased $734 thousand.  The increases in non-interest expense is primarily due to the addition of the Surrey branches as well as inflationary increases.  Non interest expense for 2023 included non-recurring expense of $2.39 million in merger charges related to the Surrey acquisition.  2024 included a non-recurring charge of $1.80 million to settle a putative class action lawsuit while 2023 included a non-recurring charge of $3.00 million to accrue for the settlement of the same lawsuit. Income Tax Expense The Company’s effective tax rate, income tax as a percent of pre-tax income, may vary significantly from the statutory rate due to permanent differences and available tax credits. Permanent differences are income and expense items excluded by law in the calculation of taxable income. The Company’s most significant permanent differences generally include interest income on municipal securities and increases in the cash surrender value of life insurance policies.  2025 Compared to 2024. Income tax expense increased $241 thousand, or 1.71%, due primarily to an increase in pre-tax income.  The effective tax rate increased to 22.70% in 2025 compared to 21.45% in 2024.   2024 Compared to 2023. Income tax expense increased $136 thousand, or 0.97% and was primarily due to the increase in pre-tax income.  The effective tax rate decreased to 21.45% in 2024 compared to 22.52% in 2023.  27 Table of Contents Financial Condition Total assets as of December 31, 2025, decreased $1.57 million, or 0.05%, to $3.26 billion. The decrease is attributable mostly to a decline in loans of $101.33 million, or 4.19%, and a decline in securities available for sale of $37.16 million, or 21.88%, which is offset by an increase in cash and cash equivalents of $134.79 million, or 35.71%.  Total liabilities increased $24.27 million, or 0.89%, and is primarily attributable to an increase in interest, taxes and other liabilities of $29.88 million.  Stockholders' equity decreased $25.84 million, or 4.91%.  The equity decrease is primarily attributable to two special dividends being declared in 2025, in the amount of $3.07 per common share. Investment Securities Our investment securities are used to generate interest income through the deployment of excess funds, to fund loan demand or deposit liquidation, to pledge as collateral where required, and to make selective investments for Community Reinvestment Act purposes. The composition of our investment portfolio changes from time to time as we consider our liquidity needs, interest rate expectations, asset/liability management strategies, and capital requirements. Available-for-sale debt securities as of December 31, 2025, decreased $37.16 million, or 21.88%, compared to December 31, 2024. The decrease was primarily due to the sale of $136.71 million in maturities, prepayments, and calls in securities available for sale; offset by purchases of $93.76 million.  The market value of debt securities available for sale as a percentage of amortized cost was 92.95% as of December 31, 2025, compared to 91.97% as of December 31, 2024. There were no held-to-maturity debt securities as of December 31, 2025, or 2024.  The following table provides information about our investment portfolio as of the dates indicated: December 31, 2025 2024 (Amounts in years) Average life 6.60 5.69 Average duration 4.19 3.52 There were no holdings of any one issuer, other than the U.S. government and its agencies, in an amount greater than 10% of our total consolidated shareholders’ equity as of December 31, 2025 or 2024. 28 Table of Contents Management evaluates securities for impairment where there has been a decline in fair value below the amortized cost basis of a security to determine whether there is a credit loss associated with the decline in fair value on at least a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Credit losses are calculated individually, rather than collectively, using a discounted cash flow method, whereby Management compares the present value of expected cash flows with the amortized cost basis of the security.  The credit loss component would be recognized through the provision for credit losses and the creation of an allowance for credit losses. Consideration is given to (1) the financial condition and near-term prospects of the issuer including looking at default and delinquency rates, (2) the outlook for receiving the contractual cash flows of the investments, (3) the length of time and the extent to which the fair value has been less than cost, (4) our intent and ability to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value or for a debt security whether it is more-likely-than-not that we will be required to sell the debt security prior to recovering its fair value, (5) the anticipated outlook for changes in the general level of interest rates, (6) credit ratings, (7) third party guarantees, and (8) collateral values. In analyzing an issuer’s financial condition, management considers whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, the results of reviews of the issuer’s financial condition, and the issuer’s anticipated ability to pay the contractual cash flows of the investments. All of the U.S. Treasury and Agency-Backed Securities have the full faith and credit backing of the United State Government or one of its agencies. Municipal securities and all other securities that do not have a zero expected credit loss are evaluated quarterly to determine whether there is a credit loss associated with a decline in fair value. Based on the application of the new standard, and that all debt securities available for sale in an unrealized loss position as of December 31, 2025, continue to perform as scheduled, we do not believe that a provision for credit losses is necessary in 2025. We recognized no impairment charges in earnings associated with debt securities in 2025. For additional information, see Note 1, “Basis of Presentation and Significant Accounting Policies,” and Note 3, “Debt Securities,” to the Consolidated Financial Statements in Item 8, of this report. Loans Held for Investment Loans held for investment, our largest component of interest income, are grouped into commercial, consumer real estate, and consumer and other loan segments. Each segment is divided into various loan classes based on collateral or purpose. The general characteristics of each loan segment are as follows: ● Commercial loans – This segment consists of loans to small and mid-size industrial, commercial, and service companies. Commercial real estate projects represent a variety of sectors of the commercial real estate market, including single family and apartment lessors, commercial real estate lessors, and hotel/motel operators. Commercial loan underwriting guidelines require that comprehensive reviews and independent evaluations be performed on credits exceeding predefined size limits. Updates to these loan reviews are done periodically or annually depending on the size of the loan relationship. ● Consumer real estate loans – This segment consists of largely of loans to individuals within our market footprint for home equity loans and lines of credit and for the purpose of financing residential properties. Residential real estate loan underwriting guidelines require that borrowers meet certain credit, income, and collateral standards at origination. ● Consumer and other loans – This segment consists of loans to individuals within our market footprint that include, but are not limited to, automobile, credit cards, personal lines of credit, boats, mobile homes, and other consumer goods. Consumer loan underwriting guidelines require that borrowers meet certain credit, income, and collateral standards at origination. Total loans held for investment, net of unearned income, as of December 31, 2025, decreased $101.33 million, or 4.19%, compared to December 31, 2024.  We had no foreign loans or loan concentrations to any single borrower or industry, which are not otherwise disclosed as a category of loans that represented 10% or more of outstanding loans, as of December 31, 2025 or 2024. For additional information, see Note 4, “Loans,” to the Consolidated Financial Statements in Item 8 of this report. 29 Table of Contents The following table presents the maturities and rate sensitivities of the loan portfolio as of December 31, 2025: (Amounts in thousands) Due in One Year or Less Due After One Year Through Five Years Due After Five Through Fifteen Years Due After Fifteen Years Total Commercial loans Construction, development, and other land(1) $ 4,705 $ 9,902 $ 31,812 $ 17,482 $ 63,901 Commercial and industrial 31,028 128,499 57,642 26,814 243,983 Multi-family residential 12,515 55,875 83,228 39,868 191,486 Single family non-owner occupied 2,880 10,878 75,947 82,213 171,918 Non-farm, non-residential 45,471 159,441 305,601 327,945 838,458 Agricultural 1,184 6,523 4,858 899 13,464 Farmland 955 1,892 6,232 1,646 10,725 Total commercial loans 98,738 373,010 565,320 496,867 1,533,935 Consumer real estate loans Home equity lines 5,989 14,194 56,677 5,904 82,764 Single family owner occupied 2,684 12,946 164,753 451,965 632,348 Owner occupied construction 5 16 350 5,234 5,605 Total consumer real estate loans 8,678 27,156 221,780 463,103 720,717 Consumer and other loans Consumer loans 3,536 42,490 10,843 1,584 58,453 Other 1,650 - - - 1,650 Total consumer and other loans 5,186 42,490 10,843 1,584 60,103 Total loans $ 112,602 $ 442,656 $ 797,943 $ 961,554 $ 2,314,755 Rate sensitivities Predetermined interest rate $ 62,624 $ 384,593 $ 526,493 $ 570,279 $ 1,543,989 Floating or adjustable interest rate 49,978 58,063 271,450 391,275 770,766 Total loans $ 112,602 $ 442,656 $ 797,943 $ 961,554 $ 2,314,755 (1) Construction loans include construction to permanent loans that have not yet converted to regular principal and interest payments. 30 Table of Contents Risk Elements We seek to mitigate credit risk by following specific underwriting practices and by ongoing monitoring of our loan portfolio. Our underwriting practices include the analysis of borrowers’ prior credit histories, financial statements, tax returns, and cash flow projections; valuation of collateral based on independent appraisers’ reports; and verification of liquid assets. We believe our underwriting criteria are appropriate for the various loan types we offer; however, losses may occur that exceed the reserves established in our allowance for loan losses. The Company has a loan review function independent of credit administration that performs a risk-based review of a sample of loans and loan relationships in the Company's commercial portfolio and conducts analytical review of credit quality on the Company's non-commercial portfolios. Nonperforming assets consist of nonaccrual loans, accrual loans contractually past due 90 days or more, modified loans past due 90 days or more, and other real estate owned ("OREO"). Prior to the adoption of ASU 2022-02, unseasoned troubled debt restructurings ("TDRs") were included in nonperforming assets.  Ongoing activity in the classification and categories of nonperforming loans include collections on delinquencies, foreclosures, loan restructurings, and movements into or out of the nonperforming classification due to changing economic conditions, borrower financial capacity, or resolution efforts.  For additional information, see Note 5, “Credit Quality,” to the Consolidated Financial Statements in Item 8 of this report. The following table presents the components of nonperforming assets and related information as of the periods indicated: December 31, (Amounts in thousands) 2025 2024 2023 2022 2021 Nonperforming Nonaccrual loans (1) $ 13,941 $ 19,869 $ 19,356 $ 15,208 $ 20,768 Accruing loans past due 90 days or more 212 149 104 142 87 TDRs'(2)(3) - - - 1,346 1,367 Total non-covered nonperforming loans 14,153 20,018 19,460 16,696 22,222 OREO - 521 192 703 1,015 Total nonperforming assets $ 14,153 $ 20,539 $ 19,652 $ 17,399 $ 23,237 Additional Information Total modified loans (1) $ 2,442 $ 2,260 $ 2,046 $ - $ - Total Accruing TDRs (2) - - - 7,112 8,652 Gross interest income that would have been recorded under the original terms of restructured and nonperforming loans 868 1,195 969 883 1,129 Actual interest income recorded on restructured and nonperforming loans 2 5 6 388 422 Total ratios Nonperforming loans to total loans 0.61 % 0.83 % 0.76 % 0.70 % 1.03 % Nonperforming assets to total assets 0.43 % 0.63 % 0.60 % 0.55 % 0.73 % Allowance for credit losses to nonperforming loans 217.35 % 173.97 % 185.97 % 183.01 % 125.36 % Allowance for credit losses to total loans 1.33 % 1.44 % 1.41 % 1.27 % 1.29 % (1) Nonaccrual loans include one modified loan past due 90 days or more of $21 thousand. (2) TDRs restructured within the past six months, and nonperforming TDRs exclude nonaccrual TDRs of $1.80 million, and $1.18 million for the two years ended December 31, 2022.  They were included in nonaccrual loans as reported prior to the adoption of ASU 2022-02. (3) Total accruing TDRs exclude nonaccrual TDRs of $2.52 million, $2.34 million, and for the two years ended December 31, 2022.  They were included in nonaccrual loans as reported prior to the adoption of ASU 2022-02. 31 Table of Contents Nonperforming assets as of December 31, 2025, decreased $6.39 million, or 31.09%, from December 31, 2024, with the largest decreases attributable to nonaccrual loans of $5.93 million, or 29.84%, and OREO of $521 thousand.    As of December 31, 2025, nonaccrual loans were largely attributed to single family owner occupied $8.26 million, or 59.22%, non-farm, non-residential real estate $1.27 million, or 9.13%, and commercial and industrial loans $1.32 million, or 9.45%.  Certain loans included in the nonaccrual category have been written down to estimated realizable value or assigned specific reserves in the allowance for credit losses based on management's estimate of loss at ultimate resolution. Delinquent loans, comprised of loans 30 days or more past due and nonaccrual loans, totaled $27.85 million as of December 31, 2025, a decrease of $9.70 million, or 25.83%, compared to $37.55 million as of December 31, 2024. Delinquent loans as a percent of total loans decreased in 2025 to 1.20%, compared to 1.49% in 2024.  The delinquent loans consist of past due loans, or 0.60%, of total loans, and nonaccrual loans, or 0.60%, of total loans.  When restructuring loans for borrowers experiencing financial difficulty, we generally make concessions in interest rates, loan terms, or amortization terms.  As noted above, ASU 2022-02, eliminated and replaced the accounting guidance for borrowers experiencing financial difficulties previously applied under ASC 310-40, Receivables - Troubled Debt Restructurings by Creditors.  ASU 2022-02, Financial Instruments-Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures, discloses loans for borrowers experiencing financial difficulty as modified loans.  Total loans modified as of December 31, 2025, were $2.44 million as compared to $2.26 million reported as of December 31, 2024.   OREO property is carried at the lesser of estimated net realizable value or cost.  As of December 31, 2025, no OREO property was held by the Company.  The net loss on the sale of OREO was $193 thousand in 2025, $28 thousand in 2024, and $84 thousand in 2023. The following table presents the changes in OREO during the periods indicated: Year Ended December 31, 2025 2024 (Amounts in thousands) Beginning balance $ 521 $ 192 Additions 192 798 Disposals (712 ) (420 ) Valuation adjustments (1 ) (49 ) Ending balance $ - $ 521 Allowance for Credit Losses (ACL) The ACL reflects management’s estimate of losses that will result from the inability of our borrowers to make required loan payments. Management uses a systematic methodology to determine its ACL for loans held for investment and certain off-balance-sheet credit exposures. The ACL is a valuation account that is deducted from the amortized cost basis to present the net amount expected to be collected on the loan portfolio. Management considers the effects of past events, current conditions, and reasonable and supportable forecasts on the collectability of the loan portfolio. The Company’s estimate of its ACL involves a high degree of judgment; therefore, management’s process for determining expected credit losses may result in a range of expected credit losses. It is possible that others, given the same information, may at any point in time reach a different reasonable conclusion. The Company’s ACL recorded in the balance sheet reflects management’s best estimate of expected credit losses. The Company recognizes in net income the amount needed to adjust the ACL for management’s current estimate of expected credit losses. The Company’s measurement of credit losses policy adheres to GAAP as well as interagency guidance. The Company's ACL is calculated using collectively evaluated and individually evaluated loans. For collectively evaluated loans, the Company in general uses two modeling approaches to estimate expected credit losses. The Company projects the contractual run-off of its portfolio at the segment level and incorporates a prepayment assumption in order to estimate exposure at default. Financial assets that have been individually evaluated can be returned to a pool for purposes of estimating the expected credit loss insofar as their credit profile improves and that the repayment terms were not considered to be unique to the asset. 32 Table of Contents In addition to its own loss experience, management also includes peer bank historical loss experience in its assessment of expected credit losses to determine the ACL. The Company utilized call report data to measure historical credit loss experience with similar risk characteristics within the segments. For the majority of segment models for collectively evaluated loans, the Company incorporated at least one macroeconomic driver either using a statistical regression modeling methodology or simple loss rate modeling methodology. Included in its systematic methodology to determine its ACL for loans held for investment and certain off-balance-sheet credit exposures, management considers the need to qualitatively adjust expected credit losses for information not already captured in the loss estimation process. These qualitative adjustments either increase or decrease the quantitative model estimation (i.e. formulaic model results). Each period, the Company considers qualitative factors that are relevant within the qualitative framework.  For further discussion of our Allowance for Credit Losses - See Note 1 - "Basis of Presentation - Significant Accounting Policies". As of December 31, 2025, the balance of the ACL for loans was $30.76 million, or 1.33% of total loans. The ACL at December 31, 2025, decreased $4.06 million from the balance of $34.83 million recorded December 31, 2024. This decrease included a provision of $58 thousand and net charge-offs for the twelve months of $4.12 million.   At December 31, 2025, the Company also had an allowance for unfunded commitments of $355 thousand compared to $341 thousand in 2024. The allowance for unfunded commitments is recorded in Other Liabilities on the balance sheet.  During 2025, there was a provision for credit losses on unfunded commitments of $14 thousand.  The provision for credit losses on unfunded commitments is recorded in provision expense on the Statement of Income.   Management considered the allowance adequate as of December 31, 2025; however, no assurance can be made that additions to the allowance will not be required in future periods. For additional information, see “Allowance for Credit Losses or ("ACL")” in the “Critical Accounting Policies” section above and Note 6, “Allowance for Credit Losses,” to the Consolidated Financial Statements in Item 8 of this report. The following table presents net charge-offs by loan class, and the ratio to average loans during the periods indicated: December 31, 2025 2024 2023 (Amounts in thousands) Net (charge-offs) recoveries Average Loans Ratio of Net (charge-offs) recoveries to average loans Net (charge-offs) recoveries Average Loans Ratio of Net (charge-offs) recoveries to average loans Net (charge-offs) recoveries Average Loans Ratio of Net (charge-offs) recoveries to average loans Commercial loans Construction, development, and other land $ 45 $ 60,514 0.07 % $ 50 $ 78,994 0.06 % $ 511 $ 108,437 0.47 % Commercial and industrial (555 ) 265,572 -0.21 % (293 ) 232,656 -0.13 % (8 ) 216,618 0.00 % Multi-family residential 8 192,633 0.00 % 8 195,335 0.00 % 9 163,797 0.01 % Single family non-owner occupied 24 172,563 0.01 % 186 201,599 0.09 % 13 220,316 0.01 % Non-farm, non-residential 93 838,974 0.01 % - 872,566 0.00 % 443 863,078 0.05 % Agricultural (141 ) 14,530 -0.97 % (183 ) 18,940 -0.97 % (30 ) 18,982 -0.16 % Farmland 102 11,104 0.92 % 27 12,707 0.21 % 30 13,856 0.21 % Total commercial loans (424 ) 1,555,890 -0.03 % (205 ) 1,612,797 -0.01 % 968 1,605,084 0.06 % Consumer real estate loans Home equity lines 163 78,408 0.21 % 145 80,467 0.18 % 123 77,348 0.16 % Single family owner occupied 61 634,720 0.01 % (106 ) 670,292 -0.02 % (15 ) 704,217 0.00 % Owner occupied construction - 10,303 0.00 % - 11,893 0.00 % — 16,778 0.00 % Total consumer real estate loans 224 723,431 0.03 % 39 762,652 0.01 % 108 798,343 0.01 % Consumer and other loans Consumer loans (3,922 ) 74,227 -5.28 % (5,200 ) 105,766 -4.92 % (5,889 ) 134,934 -4.36 % Total $ (4,122 ) $ 2,353,548 -0.18 % $ (5,366 ) $ 2,481,215 -0.22 % $ (4,813 ) $ 2,538,361 -0.19 % 33 Table of Contents The following table presents the allowance for loan losses by loan class, as of the dates indicated: December 31, 2025 2024 (Amounts in thousands) Balance Percentage of Total Allowance Balance Percentage of Total Allowance Commercial loans Construction, development, and other land $ 1,360 2.76 % $ 2,251 2.99 % Commercial and industrial 2,995 10.54 % 4,862 9.64 % Multi-family residential 1,342 8.27 % 1,179 8.26 % Single family non-owner occupied 2,623 7.43 % 2,483 8.10 % Non-farm, non-residential 7,652 36.22 % 8,893 35.27 % Agricultural 89 0.58 % 600 0.69 % Farmland 52 0.46 % 149 0.51 % Consumer real estate loans Home equity lines 1,023 3.58 % 1,583 3.73 % Single family owner occupied 9,645 27.32 % 8,255 26.92 % Owner occupied construction 218 0.24 % 69 0.19 % Consumer and other loans Consumer loans 3,762 2.60 % 4,501 3.71 % Total allowance $ 30,761 100.00 % $ 34,825 100.00 % Deposits Total deposits as of December 31, 2025, decreased $5.92 million, or 0.22%, compared to December 31, 2024.  The decrease was driven by a decline in time deposits of $40.17 million, or 16.70%. The decline in time deposits was offset by increases in interest bearing deposits of $8.72 million, savings/MMA deposits of $12.78 million and noninterest-bearing accounts of $12.76 million.   No deposit concentrations to any single customer or industry that represented 10% or more of outstanding deposits occurred as of December 31, 2025, or 2024. The following schedule presents the contractual maturities of time deposits of $250 thousand or more as of December 31, 2025: (Amounts in thousands) Three months or less $ 1,158 Over three through six months 1,410 Over six through twelve months 7,846 Over twelve months 5,946 $ 16,360 Borrowings Total borrowings as of December 31, 2025, increased $308 thousand, or 34.00%, compared to December 31, 2024. Total borrowings for 2025 were comprised entirely of short-term borrowings, which consist of retail repurchase agreements.  The weighted average rate of 0.06% as of December 31, 2025, increased one basis point from the weighted average rate of 0.05% as of December 31, 2024. 34 Table of Contents Liquidity and Capital Resources Liquidity Liquidity is a measure of our ability to meet current and future cash flow needs as they become due. The liquidity of a financial institution reflects its ability to meet loan requests, to accommodate possible outflows in deposits and to take advantage of interest rate market opportunities. The ability of a financial institution to meet its current financial obligations is a function of its balance sheet structure that draws together all sources and uses of liquidity. The objective of our liquidity management is to manage cash flow and liquidity reserves so that they are adequate to fund our operations and to meet obligations and other commitments on a timely basis and at a reasonable cost. We seek to achieve this objective and ensure that funding needs are met by maintaining an appropriate level of liquid funds through asset/liability management, which includes managing the mix and time to maturity of financial assets and financial liabilities on our balance sheet. Poor or inadequate liquidity risk management may result in a funding deficit that could have a material impact on our operations. We maintain a liquidity risk management policy and contingency funding policy (“Liquidity Plan”) to detect potential liquidity issues and protect our depositors, creditors, and shareholders. The Liquidity Plan includes various internal and external indicators that are reviewed on a recurring basis by our Asset/Liability Management Committee (“ALCO”) of the Board of Directors. ALCO reviews liquidity risk exposure and policies related to liquidity management; ensures that systems and internal controls are consistent with liquidity policies; and provides accurate reports about liquidity needs, sources, and compliance. The Liquidity Plan involves ongoing monitoring and estimation of potentially credit sensitive liabilities and the sources and amounts of balance sheet and external liquidity available to replace outflows during a funding crisis. The liquidity model incorporates various funding crisis scenarios and a specific action plan is formulated, and activated, when a financial shock that affects our normal funding activities is identified. Generally, the plan will reflect a strategy of replacing liability outflows with alternative liabilities, rather than balance sheet asset liquidity, to the extent that significant premiums can be avoided. If alternative liabilities are not available, outflows will be met through liquidation of balance sheet assets, including unpledged securities. As of December 31, 2025, management is not aware of any events that are reasonably likely to have a material adverse effect on our liquidity, capital resources or operations. In addition, management is not aware of any regulatory recommendations regarding liquidity that would have a material adverse effect on the Company. In the ordinary course of business we have entered into contractual obligations and have made other commitments to make future payments. Refer to the accompanying notes to the Consolidated Financial Statements in Item 8 of this report for the expected timing of such payments as of December 31, 2025. These include payments related to (i) operating leases (Note - 7 Premises, Equipment, and Leases ), (ii) time deposits with stated maturity dates (Note 9 - Deposits), and (iii) commitments to extend credit and standby letters of credit (Note - 19 Litigation, Commitments, and Contingencies). As a financial holding company, the Company’s primary source of liquidity is dividends received from the Bank, which are subject to certain regulatory limitations. Other sources of liquidity include cash, investment securities, and borrowings. As of December 31, 2025, the Company’s cash reserves and short-term investment securities totaled $36.95 million and $10.93 million, respectively.  The Company’s cash reserves and investments provide adequate working capital to meet obligations and projected dividends to shareholders for the next twelve months. In addition to cash on hand and deposits with other financial institutions, we rely on customer deposits, cash flows from loans and investment securities, and lines of credit from the FHLB and the FRB Discount Window to meet potential liquidity demands. These sources of liquidity are immediately available to satisfy deposit withdrawals, customer credit needs, and our operations. Secondary sources of liquidity include approved lines of credit with correspondent banks and unpledged available-for-sale securities. As of December 31, 2025, our unencumbered cash totaled $512.24 million, unused borrowing capacity from the FHLB totaled $301.81 million, available credit from the FRB Discount Window totaled $5.85 million, available lines from correspondent banks totaled $100.00 million, and unpledged available-for-sale securities totaled $102.83 million. 35 Table of Contents Capital Resources We are committed to effectively managing our capital to protect our depositors, creditors, and shareholders. Failure to meet certain capital requirements may result in actions by regulatory agencies that could have a material impact on our operations. Total stockholders’ equity as of December 31, 2025, decreased $25.84 million, or 4.91%, to $500.55 million from $526.39 million as of December 31, 2024.  The decrease is primarily due to regular quarterly and two special dividends being declared in 2025 in the combined total amount of $4.31 per common share, totaling $78.92 million in payments.   In addition, the Company repurchased 50,338 shares of our common stock totaling $1.85 million.  As a result, our book value per common share decreased $1.43 to $27.30 as of December 31, 2025, from $28.73 as of December 31, 2024. Capital Adequacy Requirements Risk-based capital guidelines, issued by state and federal banking agencies, include balance sheet assets and off-balance sheet arrangements weighted by the risks inherent in the specific asset type. Our current risk-based capital requirements are based on the international capital standards known as Basel III.  Our current minimum required capital ratios are as follows: ● 4.5% Common Equity Tier 1 capital to risk-weighted assets (effectively 7.00% including the capital conservation buffer) ● 6.0% Tier 1 capital to risk-weighted assets (effectively 8.50% including the capital conservation buffer) ● 8.0% Total capital to risk-weighted assets (effectively 10.50% including the capital conservation buffer) ● 4.0% Tier 1 capital to average consolidated assets (“Tier 1 leverage ratio”) The following table presents our capital ratios as of the dates indicated: December 31, 2025 2024 2023 The Company Common equity Tier 1 ratio 16.10 % 16.75 % 14.69 % Tier 1 risk-based capital ratio 16.10 % 16.75 % 14.69 % Total risk-based capital ratio 17.35 % 18.00 % 15.94 % Tier 1 leverage ratio 11.44 % 12.25 % 11.52 % The Bank Common equity Tier 1 ratio 14.46 % 13.89 % 12.97 % Tier 1 risk-based capital ratio 14.46 % 13.89 % 12.97 % Total risk-based capital ratio 15.71 % 15.15 % 14.22 % Tier 1 leverage ratio 10.38 % 10.32 % 10.07 % As of December 31, 2025, we continued to meet all capital adequacy requirements and were classified as well-capitalized under the regulatory framework for prompt corrective action. Management believes there have been no conditions or events since those notifications that would change the Bank’s classification. Additionally, our capital ratios were in excess of the minimum standards under the Basel III capital rules on a fully phased-in basis, as of December 31, 2025. For additional information, see “Capital Requirements” in Part I, Item 1 and Note 20, “Regulatory Requirements and Restrictions,” to the Consolidated Financial Statements in Item 8 of this report. 36 Table of Contents Market Risk and Interest Rate Sensitivity Market risk represents the risk of loss due to adverse changes in current and future cash flows, fair values, earnings, or capital due to movements in interest rates and other factors. Our profitability is largely dependent upon net interest income, which is subject to variation due to changes in the interest rate environment and unbalanced repricing opportunities. We are subject to interest rate risk when interest-earning assets and interest-bearing liabilities reprice at differing times, when underlying rates change at different levels or in varying degrees, when there is an unequal change in the spread between two or more rates for different maturities, and when embedded options, if any, are exercised. ALCO reviews our mix of assets and liabilities with the goal of limiting exposure to interest rate risk, ensuring adequate liquidity, and coordinating sources and uses of funds while maintaining an acceptable level of net interest income given the current interest rate environment. ALCO is also responsible for overseeing the formulation and implementation of policies and strategies to improve balance sheet positioning and mitigate the effect of interest rate changes. In order to manage our exposure to interest rate risk, we periodically review internal and third-party simulation models that project net interest income at risk, which measures the impact of different interest rate scenarios on net interest income, and the economic value of equity at risk, which measures potential long-term risk in the balance sheet by valuing our assets and liabilities at fair value under different interest rate scenarios. Simulation results show the existence and severity of interest rate risk in each scenario based on our current balance sheet position, assumptions about changes in the volume and mix of interest-earning assets and interest-bearing liabilities, and estimated yields earned on assets and rates paid on liabilities. The simulation model provides the best tool available to us and the industry for managing interest rate risk; however, the model cannot precisely predict the impact of fluctuations in interest rates on net interest income due to the use of significant estimates and assumptions. Actual results will differ from simulated results due to the timing, magnitude, and frequency of interest rate changes; changes in market conditions and customer behavior; and changes in our strategies that management might undertake in response to a sudden and sustained rate shock. As of December 31, 2025, the Federal Open Market Committee set the benchmark federal funds rate at a range of 3.50% - 3.75% basis points. The following table presents the sensitivity of net interest income from immediate and sustained rate shocks in various interest rate scenarios over a twelve-month period for the periods indicated.  December 31, 2025 2024 Increase (Decrease) in Basis Points Change in Net Interest Income Percent Change Change in Net Interest Income Percent Change (Dollars in thousands) 400 $ 8,947 7.0 % $ 5,992 4.7 % 300 6,681 5.2 % 4,492 3.5 % 200 4,432 3.5 % 2,997 2.4 % 100 2,232 1.7 % 1,505 1.2 % (100) (3,888 ) -3.0 % (2,883 ) -2.3 % (200) (8,748 ) -6.9 % (6,325 ) -5.0 % We have established policy limits for tolerance of interest rate risk in various interest rate scenarios and exposure limits to changes in the economic value of equity. As of December 31, 2025, we feel our exposure to interest rate risk was adequately mitigated for the scenarios presented.