FIRST COMMUNITY CORP /SC/ (FCCO) Business

Item 1. Business.

General

First
Community Corporation, a bank holding company registered under the Bank Holding Company Act of 1956, was incorporated under the
laws of South Carolina in November 1994 primarily to own and control all of the capital stock of First Community Bank, which commenced
operations in August 1995. The Bank’s primary federal regulator is the Federal Deposit Insurance Corporation (the “FDIC”).
The Bank is also regulated and examined by the South Carolina Board of Financial Institutions (the “S.C. Board”).

Unless
otherwise mentioned or unless the context requires otherwise, references herein to “First Community,” “we,”
“us,” “our” or similar references mean First Community Corporation and its consolidated subsidiaries.
References to the “Bank” means First Community Bank.

We engage
in a commercial banking business from our main office in Lexington, South Carolina and our 21 full-service offices located in:
the Midlands of South Carolina, which includes Lexington County (6 offices), Richland County (4 offices), Newberry County (2 offices)
and Kershaw County (1 office); the Upstate of South Carolina, which includes Greenville County (2 offices), Anderson County (1
office) and Pickens County (1 office); the Piedmont Region of South Carolina, which includes York County, South Carolina (1 office)
and the Central Savannah River Area, which includes Aiken County, South Carolina (1 office); and in Augusta, Georgia, which includes
Richmond County (1 office) and Columbia County (1 office).

At December
31, 2025, we had approximately $2.1 billion in assets, $1.3 billion in loans, $1.7 billion in deposits, and $167.6 million in
shareholders’ equity.

We offer
a wide range of traditional banking products and services for professionals and small-to medium-sized businesses, including consumer
and commercial, mortgage, brokerage and investment, and insurance services. We also offer online banking to our customers. We
have grown organically and through acquisitions.

Our stock
trades on The NASDAQ Capital Market under the symbol “FCCO”.

Available
Information

We provide our
Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed
or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) on our
website at www.firstcommunitysc.com/ under the About section, under the Investors link. These filings are made accessible as soon
as reasonably practicable after they have been filed electronically with SEC. These filings are also accessible on the SEC’s
website at www.sec.gov. In addition, we make available under our Investor Relations section on our website the following, among
other things: (i) Code of Business Conduct and Ethics, which applies to our directors and all employees and (ii) the charters
of the Audit and Compliance, Human Resources and Compensation, and Nominations and Corporate Governance Committees of our board
of directors. These materials are available to the general public on our website free of charge. Printed copies of these materials
are also available free of charge to shareholders who request them in writing. Please address your request to: Investor Relations,
First Community Corporation, 5455 Sunset Boulevard, Lexington, South Carolina 29072. Statements of beneficial ownership of equity
securities filed by directors, officers, and 10% or greater shareholders under Section 16 of the Exchange Act are also available
through our website. The information on our website is not incorporated by reference into this report.

Location
and Service Area

The Bank is engaged
in a general commercial and retail banking business, emphasizing the needs of small-to-medium sized businesses, professionals
and individuals. We have a total of 13 full-service offices located in Richland, Lexington, Kershaw and Newberry Counties of South
Carolina and the surrounding areas. We refer to these counties as the “Midlands” region of South Carolina. Lexington
County is home to six of our branch offices. Richland County, in which we currently have four branches, is the third largest county
in South Carolina. Columbia is located within Richland County and is South Carolina’s capital city and is geographically
positioned in the center of the state between the industrialized Upstate region of South Carolina and the coastal city of Charleston,
South Carolina. Intersected by three major interstate highways (I-20, I-77, and I-26), Columbia’s strategic location has
contributed greatly to its commercial appeal and growth. With the acquisition of Savannah River Banking Company in 2014, we added
a branch in Aiken, South Carolina and a branch in Augusta, Georgia (Richmond County). In 2016, we opened a loan production office
in Greenville County, which we converted into a full-service office in February 2019. With the acquisition of Cornerstone Bancorp
in 2017, we added a branch in each of Greenville, Pickens, and Anderson Counties of South Carolina. Greenville County is the largest
county in South Carolina. We refer to this three-county area as the “Upstate” region of South Carolina. In 2019, we
opened a de novo branch in Evans, Georgia, a suburb of Augusta in Columbia County, Georgia. On June 27, 2024, we closed
our downtown Augusta, Georgia banking office, which we opened as a de novo branch in 2018. We refer to the three-county
area of Aiken County (South Carolina), Richmond County (Georgia) and Columbia County (Georgia) as the “CSRA” region.
On March 14, 2022, we opened a loan production office in York County, South Carolina, which has the fourth highest county median
household income in South Carolina. We converted this loan production office into a full-service banking office on October 20,
2022. We refer to York County, South Carolina and the surrounding area as the “Piedmont Region”.

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The following
table shows data as to deposits, market share and population for our four market areas (deposits in thousands):

We believe that
we serve attractive banking markets with long-term growth potential and a well-educated employment base that helps to support
our diverse and relatively stable local economy. According to S&P Global Market Intelligence, 2026 median household incomes
for each of the counties in the regions noted above were as follows:

The county estimates
noted above illustrate differences between South Carolina and Georgia in 2026 statewide median household income estimates of $74,877
and $83,364, respectively. The principal components of the economy within our market areas are service industries, government
and education, and wholesale and retail trade. The largest employers in the Midlands market area include the State of South Carolina,
Prisma Health, BlueCross BlueShield of SC, the University of South Carolina, the United States Department of the Army (Fort Jackson
Army Base), Richland County School District 1, Richland County School District 2, Lexington Medical Center, Lexington County School
District One, Southeastern Freight Lines, and Michelin North America. The largest employers in our CSRA market area include the
U.S. Army Cyber Center of Excellence & Fort Gordon, Augusta University, NSA Augusta, Wellstar MCG Health, Columbia County
Board of Education, Richmond County School System, Piedmont Hospital, Amazon, Carlisle Tire & Wheel, CB&I AREVA MOX Services,
Aiken Regional Medical Center, and the Department of Energy, Savannah River Site. The Upstate region major employers include,
among others, Prisma Health, Greenville County Schools, BMW Manufacturing Corp., Michelin North America, Milliken & Company,
Bon Secours St. Francis Health System, AnMed Health Medical Center, Clemson University, Duke Energy Corp., GE Vernova, and the
Greenville County Government. The Piedmont Region major employers include, among others, Ross Stores, Inc. – Distribution,
LPL Financial, Wells Fargo Home Mortgage, Piedmont Medical Center, Comporium, Inc., and Schaeffler Group USA, Inc. We believe
that this diversified economic base has reduced, and will likely continue to reduce, economic volatility in our market areas.
Our markets have experienced economic and population growth over the past 10 years, and we expect that the area, as well as the
service industry needed to support it, will continue to grow.

Banking
Services

We offer a full
range of deposit services that are typically available in most banks and thrift institutions, including checking accounts, NOW
accounts, savings accounts and other time deposits of various types, ranging from daily money market accounts to longer-term certificates
of deposit. The transaction accounts and time certificates are tailored to our principal market area at rates competitive to those
offered in the area. In addition, we offer certain retirement account services, such as individual retirement accounts (“IRAs”).
All deposit accounts are insured by the FDIC up to the maximum amount allowed by law (currently, $250,000, subject to aggregation
rules).

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We also offer
a full range of commercial and personal loans. Commercial loans include both secured and unsecured loans for working capital (including
inventory and receivables), business expansion (including acquisition of real estate and improvements), and the purchase of equipment
and machinery. Consumer loans include secured and unsecured loans for financing automobiles, home improvements, education, and
personal investments. We also make real estate construction and acquisition loans. We originate fixed and variable rate mortgage
loans, of which some are sold into the secondary market and some are placed in our loans held-for-investment portfolio. Our lending
activities are subject to a variety of lending limits imposed by federal law. While differing limits apply in certain circumstances
based on the type of loan or the nature of the borrower (including the borrower’s relationship to the bank), in general,
we are subject to a loans-to-one-borrower limit of an amount equal to 15% of the Bank’s unimpaired capital and surplus,
or 25% of the unimpaired capital and surplus if the excess over 15% is approved by the board of directors of the Bank and is fully
secured by readily marketable collateral. As a result, our lending limit will increase or decrease in response to increases or
decreases in the Bank’s level of capital. Based upon the capitalization of the Bank at December 31, 2025, the maximum amount
we could lend to one borrower is $29.0 million. In addition, we may not make any loans to any director, officer, employee, or
10% shareholder of the Company or the Bank unless the loan is approved by our board of directors and is made on terms not more
favorable to such person than would be available to a person not affiliated with the Bank.

Other bank services
include internet banking, cash management services, safe deposit boxes, direct deposit of payroll and social security checks,
and automatic drafts for various accounts. We offer non-deposit investment products and other investment brokerage services through
a registered representative with an affiliation through LPL Financial. We are associated with Nyce and Plus networks of automated
teller machines and MasterCard debit cards that may be used by our customers throughout South Carolina, Georgia, and other regions.
We also offer VISA and MasterCard credit card services through a correspondent bank as our agent.

We currently
do not exercise trust powers, but we can begin to do so with the prior approval of our primary banking regulators, the FDIC and
the S.C. Board.

Competition

The banking business
is highly competitive. We compete as a financial intermediary with other commercial banks, savings and loan associations, credit
unions and money market mutual funds operating in our market areas. As of June 30, 2025, there were 27 financial institutions
operating approximately 156 offices in the Midlands market, 23 financial institutions operating 95 branches in the CSRA market,
41 financial institutions operating 229 branches in the Upstate market, and 18 financial institutions operating 47 branches in
the Piedmont market. The competition among the various financial institutions is based upon a variety of factors, including interest
rates offered on deposit accounts, interest rates charged on loans, credit and service charges, the quality of services rendered,
the convenience of banking facilities and, in the case of loans to large commercial borrowers, relative lending limits. Size gives
larger banks certain advantages in competing for business from large corporations. These advantages include higher lending limits
and the ability to offer services in other areas of South Carolina and Georgia. As a result, we do not generally attempt to compete
for the banking relationships of large corporations; we instead concentrate our efforts on small-to-medium sized businesses and
individuals. We believe we have competed effectively in this market by offering quality and personal service. In addition, many
of our non-bank competitors are not subject to the same extensive federal regulations that govern bank holding companies and federally
insured banks.

Human
Capital

At December
31, 2025, we had 265 full-time, 10 part-time, and seven seasonal/on-call employees.

We believe
that our relationships with our employees are good and our employees are not represented by any collective bargaining group or
agreement. Our company’s “Why,” or purpose, is “Impacting Lives for Success and Significance,” which
guides our approach to our relationships with employees. The foundations of these interactions are embedded in our cultural beliefs:

Everyone Matters
- We value each of our employees for the unique contribution they make to our success. While there are a variety of different
positions in our company, each is an important and integral part of the work that we do. Every employee brings their own unique
and diverse talents and experiences that enhance the culture of our bank and our work.

Spirit of Service
- The energy and enthusiasm that our employees bring to their work creates a supportive work environment in which employees are
available as a resource to one another. In addition to serving our fellow co-workers, we encourage our employees to serve our
local communities. We offer company-sponsored volunteer activities, as well as provide volunteer paid time off to allow employees
to support causes that are close to their heart.

Honor and Integrity
- Trust is at the foundation of all that we do. We have a Code of Conduct and Business Ethics that all employees and board
members read and are directed to follow that sets clear expectations with regard to personal and professional behavior.

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Strong Work Ethic
- Our employees take pride in the quality of the work that they do. This commitment to excellence can be seen in the work
that is completed and their interactions with their co-workers and customers. While we work hard, we also make time for fun employee
events designed to offer the opportunity for relaxation and social interactions among co-workers.

Excellence with Humility
- Our company is blessed with dedicated and talented employees, loyal customers, supportive communities and shareholders,
each of whom invest in and believe in our vision. We are humbled by the success we have experienced and are grateful for all that
we have accomplished. We approach our work with a sincere appreciation for the opportunity to serve all of our stakeholder groups
and we recognize it is through our collective efforts that we have been successful.

Our ability to
attract, develop and retain our strong employee base is integral to our ongoing success. We believe that a good “quality
of life” at work is an important part of the overall employee experience and we are very intentional about nurturing a culture
that allows employees to reach their potential and enjoy professional success while also enjoying the work that they do in a positive
and supportive work environment grounded in our cultural beliefs.

While we believe
that our corporate culture and work environment is a competitive advantage for our company, we also recognize that employees value
and deserve competitive compensation packages. We offer competitive wages and benefits for our employees, and we regularly benchmark
our compensation to market. Our benefits package includes medical, dental, life, disability, vision and supplemental insurance
options. We also offer retirement benefits with a 401(k) plan with matching and profit sharing. In addition, we offer a generous
paid time off plan that includes paid holidays.

Our company
encourages employees to continue on a lifelong trajectory of learning, as such, we offer ongoing training to all employees through
internal and external resources and encourage employees to continue with career development specific to their role to ensure they
stay current with the most up-to-date information and best practices. To develop our current and future leaders, we created the
First Community Bank Leadership Institute, an 18-month program that provides academic and experiential learning to teach and nurture
leadership skills across our organization to support the bank now and in the future. Furthermore, we have an internal CEO Conversation
Group, which provides our current and emerging leaders with leadership conversations with our CEO. The Bank also supports the
development of employees through external educational opportunities such as various bankers’ schools that offer multi-year
development programs as well as short term training classes and industry conferences.

Information
about the Executive Officers of First Community Corporation

Executive officers
of First Community Corporation are elected by the board of directors annually and serve at the pleasure of the board of directors.
The current executive officers, and persons chosen to become executive officers, and their ages, positions with us over the past
five years, and terms of office as of March 16, 2026, are as follows:

During the past
five years, each of the executive officers listed above has served in the positions indicated or in other executive positions
with the Company or First Community Bank. Effective January 1, 2024, Messrs. Painter and Dozier were appointed Executive Vice
Presidents and Co-Chief Commercial and Retail Banking Officers. Effective July 1, 2024, Mr. Nissen became Chief Executive Officer
of First Community Bank. Effective January 1, 2025, Ms. Donley was appointed Executive Vice President and Chief Operations Officer/Chief
Risk Officer.

There are no
family relationships among any of the executive officers, and there are no arrangements or understandings between any executive
officer and any other person pursuant to which such officer was selected, other than arrangements with the Company’s Board
of Directors.

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SUPERVISION
AND REGULATION

Both the Company
and the Bank are subject to extensive state and federal banking laws and regulations that impose specific requirements or restrictions
on and provide for general regulatory oversight of virtually all aspects of our operations. These laws generally are intended
primarily for the protection of customers, depositors and other consumers, the FDIC’s Deposit Insurance Fund (the “DIF”),
and the banking system as a whole; not for the protection of our other creditors and shareholders.

The following
discussion is not intended to be a complete list of all the activities regulated by the banking laws or of the impact of those
laws and regulations on our operations. The following summary is qualified by reference to the statutory and regulatory provisions
discussed. Changes in applicable laws or regulations may have a material effect on our business and prospects. Our operations
may be affected by legislative changes and the policies of various regulatory authorities. We cannot predict the effect that fiscal
or monetary policies, economic control, or new federal or state legislation may have on our business and earnings in the future.

Legislative
and Regulatory Developments

We experienced
heightened regulatory requirements and scrutiny following the 2008 global financial crisis, and as a result of the Dodd-Frank
Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) and the Economic Growth, Regulatory Reform and
Consumer Protection Act (“Regulatory Relief Act”). In addition, newer regulatory developments implemented in response
to the COVID-19 pandemic and the bank failures in 2023 will continue to have an impact on our operations.

Capital
and Related Requirements.

Regulatory capital
rules known as the Basel III rules or Basel III, impose minimum capital requirements for bank holding companies and banks. Basel
III was released in the form of enforceable regulations by each of the applicable federal bank regulatory agencies. Basel III
is applicable to all banking organizations that are subject to minimum capital requirements, including federal and state banks
and savings and loan associations, as well as to bank and savings and loan holding companies, other than “small bank holding
companies.” A small bank holding company is generally a qualifying bank holding company or savings and loan holding company
with less than $3.0 billion in consolidated assets. More stringent requirements are imposed on “advanced approaches”
banking organizations—generally those organizations with $250 billion or more in total consolidated assets or $10 billion
or more in total foreign exposures.

Based
on the foregoing, as a small bank holding company, we are generally not subject to the capital requirements at the holding company
level unless otherwise advised by the Federal Reserve; however, our Bank remains subject to the capital requirements. Accordingly,
the Bank is required to maintain the following capital levels:

Basel III also
established a “capital conservation buffer” above the regulatory minimum capital requirements, which must consist
entirely of Common Equity Tier 1 capital, which was phased in over several years. The fully phased-in capital conservation buffer
of 2.5%, which became effective on January 1, 2019, resulted in the following effective minimum capital ratios for the Bank beginning
in 2019: (i) a Common Equity Tier 1 capital ratio of 7.0%, (ii) a Tier 1 capital ratio of 8.5%, and (iii) a total capital ratio
of 10.5%. Under Basel III, institutions are subject to limitations on paying dividends, engaging in share repurchases, and paying
discretionary bonuses if their capital levels fall below the buffer amount. These limitations establish a maximum percentage of
eligible retained income that could be utilized for such actions.

Under Basel III,
Tier 1 capital includes two components: Common Equity Tier 1 capital and additional Tier 1 capital. The highest form of capital,
Common Equity Tier 1 capital, consists solely of common stock (plus related surplus), retained earnings, accumulated other comprehensive
income, otherwise referred to as AOCI, and limited amounts of minority interests that are in the form of common stock. Additional
Tier 1 capital is primarily comprised of noncumulative perpetual preferred stock, Tier 1 minority interests and grandfathered
trust preferred securities. Tier 2 capital generally includes the allowance for credit losses up to 1.25% of risk-weighted assets,
qualifying preferred stock, subordinated debt and qualifying Tier 2 minority interests, less any deductions in Tier 2 instruments
of an unconsolidated financial institution. AOCI is presumptively included in Common Equity Tier 1 capital and often would operate
to reduce this category of capital. When implemented, Basel III provided a one-time opportunity at the end of the first quarter
of 2015 for covered banking organizations to opt out of a large part of this treatment of AOCI. We made this opt-out election
and, as a result, retained our pre-existing treatment for AOCI.

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Proposed new
rules for U.S. implementation of capital requirements under Basel IV rules, referred to as the “Basel III Endgame,”
were issued by the U.S. federal banking agencies on July 27, 2023. These proposed rules include broad-based changes to the risk-weighting
framework for various credit exposures and operational risk capital requirements. The proposed rules are generally intended to
apply only to large banking organizations with total assets of $100 billion or more, and, if finalized as proposed, are not expected
to be applicable to us. As of the date of this filing, the Basel III Endgame rules have not been finalized, and their scope, timing,
and ultimate implementation remain uncertain.

In
November 2019, the federal banking regulators adopted a simplified measure of capital adequacy for qualifying community banking
organizations with less than $10 billion in total consolidated assets (the “community bank leverage ratio framework”
or “CBLR framework”). A qualifying community banking organization that elects the CBLR framework and maintains a leverage
ratio at or above the applicable threshold is deemed to satisfy the generally applicable risk-based and leverage capital requirements
under Basel III and, if applicable, the “well capitalized” requirements for prompt corrective action purposes. We
have not elected to use the CBLR framework and currently calculate and report under the generally applicable risk-based capital
framework; however, we may evaluate the CBLR framework in the future. On November 25, 2025, the federal banking agencies proposed
changes to the CBLR framework that would, among other things, reduce the leverage ratio threshold from 9% to 8% and extend the
grace period for certain institutions that fall below the threshold; the proposal remains pending and has not been finalized as
of the date of this filing.

Acquisition
Activities.

The primary
purpose of a bank holding company is to control and manage banks. The BHCA generally requires prior approval of the Federal Reserve
for any merger involving a bank holding company or any acquisition by a bank holding company of another bank or bank holding company.
In addition, the FDIC’s prior approval is generally required for a bank to merge with another bank or to purchase the assets
of, or assume the deposits of, another bank. In acting on acquisition applications, the federal banking agencies consider, among
other factors, competitive effects, the public benefits expected to be received, post-transaction capital levels, and the applicant’s
record of meeting community credit needs, including the needs of low- and moderate-income neighborhoods, consistent with safe
and sound operation, under the CRA.

Regulatory
policy regarding bank merger review has been evolving in recent years. In July 2021, President Biden issued an executive order
encouraging federal agencies to promote competition and, among other things, to review existing merger oversight practices. In
September 2024, the OCC finalized updates to its business combination regulations and issued a policy statement clarifying its
application review principles under the Bank Merger Act. At the same time, the FDIC adopted a revised Statement of Policy on Bank
Merger Transactions emphasizing a broader evaluation of merger applications. In parallel, the DOJ withdrew the 1995 Bank Merger
Competitive Review Guidelines and indicated it would apply its general merger enforcement framework, including the 2023 Merger
Guidelines, in reviewing banking transactions.

In 2025,
the FDIC rescinded its 2024 statement of policy and reinstated the prior statement of policy while it reevaluates its merger review
framework. These developments underscore that merger review standards and supervisory expectations may continue to change, which
could affect the timing, cost, and feasibility of future acquisition opportunities.

Change
in Control.

Two statutes,
the Change in Bank Control Act (“CBCA”) and the Bank Holding Company Act, together with regulations promulgated under
them, require some form of regulatory review before any company may acquire “control” of a bank or a bank holding
company. Under the Change in Bank Control Act, a person or company is required to file a notice with the Federal Reserve if it
will, as a result of the transaction, own or control 10% or more of any class of voting securities or direct the management or
policies of a bank or bank holding company and either if the bank or bank holding company has registered securities or if the
acquirer would be the largest holder of that class of voting securities after the acquisition. For a change in control at the
holding company level, the Federal Reserve is the primary reviewing agency, and the subsidiary bank’s primary federal regulator
is provided notice and an opportunity to comment; at the bank level, only the bank’s primary federal regulator is involved.

In addition,
the Bank Holding Company Act prohibits any entity from acquiring 25% (5% if the acquirer is a bank holding company) or more of
a bank holding company’s voting securities, or otherwise obtaining control or a controlling influence over the management
or policies of a bank or bank holding company without regulatory approval. The Federal Reserve’s standards for determining
whether one company has control over another established four categories of tiered presumptions of noncontrol that are based on
the percentage of voting shares held by the investor (less than 5%, 5-9.9%, 10-14.9% and 15-24.9%) and the presence of other indicia
of control. As the percentage of ownership increases, fewer indicia of control are permitted without falling outside of the presumption
of noncontrol. These indicia of control include nonvoting equity ownership, director representation, management interlocks, business
relationship and restrictive contractual covenants. Under the standards, investors can hold up to 24.9% of the voting securities
and up to 33% of the total equity of a company without necessarily having a controlling influence. In 2024, the Federal Reserve
indicated that it may revisit certain aspects of this framework, however, as of the date of this filing, no revisions to this
framework have been finalized.

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Most recently, the
FDIC rescinded its proposed rule issued in August 2024 that would have amended its filing requirements under the CBCA. That proposal
sought to remove an exemption allowing acquisitions of voting securities in a depository institution holding company to rely on
Federal Reserve review without a separate FDIC filing. In January 2025, the FDIC withdrew the proposal, citing concerns about
duplicative requirements and the need for further consideration.

Transactions
subject to the Bank Holding Company Act are exempt from Change in Bank Control Act requirements. For state banks, state laws,
including those of South Carolina, typically require approval by the state bank regulator as well.

Transactions
with Affiliates and Insiders.

The Company
is a legal entity separate and distinct from the Bank and its other subsidiaries. Various legal limitations restrict the Bank
from lending or otherwise supplying funds to the Company or its non-bank subsidiaries. The Company and the Bank are subject to
Sections 23A and 23B of the Federal Reserve Act and Federal Reserve Regulation W.

Section
23A of the Federal Reserve Act places limits on the amount of loans or extensions of credit by a bank to any affiliate, including
its holding company, and on a bank’s investments in, or certain other transactions with, affiliates and on the amount of
advances to third parties collateralized by the securities or obligations of any affiliates of the bank. Section 23A also applies
to derivative transactions, repurchase agreements and securities lending and borrowing transactions that cause a bank to have
credit exposure to an affiliate. The aggregate of all covered transactions is limited in amount, as to any one affiliate, to 10%
of the Bank’s capital and surplus and, as to all affiliates combined, to 20% of the Bank’s capital and surplus. Furthermore,
within the foregoing limitations as to amount, each covered transaction must meet specified collateral requirements. The Bank
is forbidden to purchase low quality assets from an affiliate.

Section
23B of the Federal Reserve Act, among other things, prohibits an institution from engaging in certain transactions with certain
affiliates unless the transactions are on terms substantially the same, or at least as favorable to such institution or its subsidiaries,
as those prevailing at the time for comparable transactions with nonaffiliated companies. If there are no comparable transactions,
a bank’s (or one of its subsidiaries’) affiliate transaction must be on terms and under circumstances, including credit
standards, that in good faith would be offered to, or would apply to, nonaffiliated companies. These requirements apply to all
transactions subject to Section 23A as well as to certain other transactions.

The affiliates
of a bank include any holding company of the bank, any other company under common control with the bank (including any company
controlled by the same shareholders who control the bank), any subsidiary of the bank that is itself a bank, any company in which
the majority of the directors or trustees also constitute a majority of the directors or trustees of the bank or holding company
of the bank, any company sponsored and advised on a contractual basis by the bank or an affiliate, and any mutual fund advised
by a bank or any of the bank’s affiliates. Regulation W generally excludes all non-bank and non-savings association subsidiaries
of banks from treatment as affiliates, except to the extent that the Federal Reserve decides to treat these subsidiaries as affiliates.

The Bank is also
subject to certain restrictions on extensions of credit to executive officers, directors, certain principal shareholders, and
their related interests. Extensions of credit include derivative transactions, repurchase and reverse repurchase agreements, and
securities borrowing and lending transactions to the extent that such transactions cause a bank to have credit exposure to an
insider. Any extension of credit to an insider (i) must be made on substantially the same terms, including interest rates and
collateral requirements, as those prevailing at the time for comparable transactions with unrelated third parties and (ii) must
not involve more than the normal risk of repayment or present other unfavorable features.

The federal
banking agencies have extended the temporary relief from enforcement actions related to Regulation O multiple times. The relief,
which applies to banks and asset managers that become principal stockholders of banks, will now expire on the earlier of January
1, 2027, or the effective date of a final Federal Reserve rule revising Regulation O. This extension allows additional time for
regulators to address the treatment of bank credit extensions to complex-controlled portfolio companies that qualify as insiders.
Financial institutions and asset managers should continue monitoring updates, as a final rule could impact the relief before its
expiration.

First
Community Corporation

We own 100% of
the outstanding capital stock of the Bank, and, therefore, we are considered a bank holding company under the federal Bank Holding
Company Act. As a result, we are primarily subject to the supervision, examination and reporting requirements of the Federal Reserve
under the Bank Holding Company Act and its regulations promulgated thereunder. Moreover, as a bank holding company of a bank located
in South Carolina, we also are subject to the South Carolina Banking and Branching Efficiency Act.

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Permitted
Activities. Under the Bank Holding Company Act, a bank holding company is generally permitted to engage in, or acquire direct
or indirect control of more than 5% of the voting shares of any company engaged in, the following activities:

Activities that
the Federal Reserve has found to be so closely related to banking as to be a proper incident to the business of banking include:

As a bank
holding company, we also can elect to be treated as a “financial holding company,” which would allow us to engage
in a broader array of activities. In summary, a financial holding company can engage in activities that are financial in nature
or incidental or complementary to financial activities, including insurance underwriting, sales and brokerage activities, providing
financial and investment advisory services, underwriting services and limited merchant banking activities. We have not sought
financial holding company status but may elect such status in the future as our business matures. If we were to elect in writing
for financial holding company status, each insured depository institution we control would have to be well capitalized, well managed
and have at least a satisfactory rating under the Community Reinvestment Act (“CRA”) (discussed below).

The Federal
Reserve has the authority to order a bank holding company or its subsidiaries to terminate any of these activities or to terminate
its ownership or control of any subsidiary when it has reasonable cause to believe that the bank holding company’s continued
ownership, activity or control constitutes a serious risk to the financial safety, soundness, or stability of it or any of its
bank subsidiaries.

Source
of Strength. There are a number of obligations and restrictions imposed by law and regulatory policy on bank holding companies
with regard to their depository institution subsidiaries that are designed to minimize potential loss to depositors and to the
FDIC insurance funds in the event that the depository institution becomes in danger of defaulting under its obligations to repay
deposits. Under a policy of the Federal Reserve, a bank holding company is required to serve as a source of financial strength
to its subsidiary depository institutions and to commit resources to support such institutions in circumstances where it might
not do so absent such policy. Under the Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”),
to avoid receivership of its insured depository institution subsidiary, a bank holding company is required to guarantee the compliance
of any insured depository institution subsidiary that may become “undercapitalized” within the terms of any capital
restoration plan filed by such subsidiary with its appropriate federal banking agency up to the lesser of (i) an amount equal
to 5% of the institution’s total assets at the time the institution became undercapitalized, or (ii) the amount which is
necessary (or would have been necessary) to bring the institution into compliance with all applicable capital standards as of
the time the institution fails to comply with such capital restoration plan.

The Federal Reserve
also has the authority under the Bank Holding Company Act to require a bank holding company to terminate any activity or relinquish control
of a non-bank subsidiary (other than a non-bank subsidiary of a bank) upon the Federal Reserve’s determination that
such activity or control constitutes a serious risk to the financial soundness or stability of any subsidiary depository institution
of the bank holding company. Further, federal law grants federal bank regulatory authorities’ additional discretion to require
a bank holding company to divest itself of any bank or non-bank subsidiary if the agency determines that divestiture may aid the
depository institution’s financial condition.

In addition,
the “cross guarantee” provisions of the Federal Deposit Insurance Act (“FDIA”) require insured depository
institutions under common control to reimburse the FDIC for any loss suffered or reasonably anticipated by the FDIC as a result
of the default of a commonly controlled insured depository institution or for any assistance provided by the FDIC to a commonly
controlled insured depository institution in danger of default. The FDIC’s claim for damages is superior to claims of shareholders
of the insured depository institution or its holding company, but is subordinate to claims of depositors, secured creditors, and
holders of subordinated debt (other than affiliates) of the commonly controlled insured depository institutions.

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The FDIA
also provides that amounts received from the liquidation or other resolution of any insured depository institution by any receiver
must be distributed (after payment of secured claims) to pay the deposit liabilities of the institution prior to payment of any
other general or unsecured senior liability, subordinated liability, general creditor, or shareholder. This provision would give
depositors a preference over general and subordinated creditors and shareholders in the event a receiver is appointed to distribute
the assets of our Bank.

Any capital loans
by a bank holding company to any of its subsidiary banks are subordinate in right of payment to deposits and to certain other
indebtedness of such subsidiary bank. In the event of a bank holding company’s bankruptcy, any commitment by the bank holding
company to a federal bank regulatory agency to maintain the capital of a subsidiary bank will be assumed by the bankruptcy trustee
and entitled to a priority of payment.

Capital Requirements.
The Federal Reserve generally imposes certain capital requirements on a bank holding company under the Bank Holding Company
Act, including a minimum leverage ratio and a minimum ratio of “qualifying” capital to risk-weighted assets. If applicable,
these requirements are essentially the same as those that apply to the Bank and are described above under “Capital and Related
Requirements.” However, because the Company currently qualifies as a small bank holding company, these capital requirements
do not currently apply to the Company. Subject to certain restrictions, we are able to borrow money to make a capital contribution
to the Bank, and these loans may be repaid from dividends paid from the Bank to the Company. Our ability to pay dividends depends
on, among other things, the Bank’s ability to pay dividends to us, which is subject to regulatory restrictions as described
below in “First Community Bank—Dividends.” We are also able to raise capital for contribution to the Bank by
issuing securities without prior regulatory approval, subject to compliance with federal and state securities laws.

Dividends.
As a bank holding company, the Company’s ability to declare and pay dividends is dependent on certain federal and state
regulatory considerations, including the guidelines of the Federal Reserve. The Federal Reserve has issued a policy statement
regarding the payment of dividends by bank holding companies. In general, the Federal Reserve’s policies provide that dividends
should be paid only out of current earnings and only if the prospective rate of earnings retention by the bank holding company
appears consistent with the organization’s capital needs, asset quality and overall financial condition. The Federal Reserve’s
policies also require that a bank holding company serve as a source of financial strength to its subsidiary banks by standing
ready to use available resources to provide adequate capital funds to those banks during periods of financial stress or adversity
and by maintaining the financial flexibility and capital-raising capacity to obtain additional resources for assisting its subsidiary
banks where necessary. In addition, under the prompt corrective action regulations, the ability of a bank holding company to pay
dividends may be restricted if a subsidiary bank becomes undercapitalized. Likewise, under the proposed Basel III Endgame rules,
banks subject to the new framework could face increased capital requirements that may impact dividend policies and capital distribution
strategies. If finalized and implemented, these rules could introduce new capital constraints for institutions seeking to maintain
or increase dividend payments. These regulatory policies could affect the Company’s ability to pay dividends or otherwise
engage in capital distributions.

In addition,
since the Company is a legal entity separate and distinct from the Bank and does not conduct stand-alone operations, its ability
to pay dividends depends on the ability of the Bank to pay dividends to it, which is also subject to regulatory restrictions as
described below in “First Community Bank—Dividends.”

South Carolina
State Regulation. As a South Carolina bank holding company under the South Carolina Banking and Branching Efficiency Act,
we are subject to limitations on any sale to, or merger with, other financial institutions. We are not required to obtain the
approval of the S.C. Board prior to acquiring the capital stock of a national bank, but we must notify them at least 15 days prior
to doing so. We must receive the S.C. Board’s approval prior to engaging in the acquisition of a South Carolina state-chartered
bank or another South Carolina bank holding company.

First
Community Bank

As a South
Carolina state bank, the Bank’s primary federal regulator is the FDIC, and the Bank is also regulated and examined by the
S.C. Board. Deposits in the Bank are insured by the FDIC up to a maximum amount of $250,000. The FDIC insurance coverage limit
applies per depositor, per insured depository institution for each account ownership category.

The S.C.
Board and the FDIC regulate or monitor virtually all areas of the Bank’s operations, including:

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These agencies,
and the federal and state laws applicable to the Bank’s operations, extensively regulate various aspects of our banking
business, including, among other things, permissible types and amounts of loans, investments and other activities, capital adequacy,
branching, interest rates on loans and on deposits, the maintenance of reserves on demand deposit liabilities, and the safety
and soundness of our banking practices.

Prompt
Corrective Action. The FDICIA established a “prompt corrective action” program in which every bank is placed in
one of five regulatory categories, depending primarily on its regulatory capital levels. The FDIC and the other federal banking
regulators are permitted to take increasingly severe action as a bank’s capital position or financial condition declines
below the “Adequately Capitalized” level described below. Regulators are also empowered to place in receivership or
require the sale of a bank to another depository institution when a bank’s leverage ratio reaches two percent. Better capitalized
institutions are generally subject to less onerous regulation and supervision than banks with lesser amounts of capital. The FDIC’s
regulations set forth five capital categories, each with specific regulatory consequences. The categories are:

If the
FDIC determines, after notice and an opportunity for hearing, that the bank is in an unsafe or unsound condition, the regulator
is authorized to reclassify the bank to the next lower capital category (other than critically undercapitalized) and require the
submission of a plan to correct the unsafe or unsound condition.

If a bank
is not well capitalized, it cannot accept brokered deposits without prior regulatory approval. In addition, a bank that is not
well capitalized cannot offer an effective yield in excess of 75 basis points over interest paid on deposits of comparable size
and maturity in such institution’s normal market area for deposits accepted from within its normal market area, or national
rate paid on deposits of comparable size and maturity for deposits accepted outside the bank’s normal market area. Moreover,
the FDIC generally prohibits a depository institution from making any capital distributions (including payment of a dividend)
or paying any management fee to its parent holding company if the depository institution would thereafter be categorized as undercapitalized.
Undercapitalized institutions are subject to growth limitations (an undercapitalized institution may not acquire another institution,
establish additional branch offices, or engage in any new line of business unless determined by the appropriate federal banking
agency to be consistent with an accepted capital restoration plan, or unless the FDIC determines that the proposed action will
further the purpose of prompt corrective action) and are required to submit a capital restoration plan. The agencies may not accept
a capital restoration plan without determining, among other things, that the plan is based on realistic assumptions and is likely
to succeed in restoring the depository institution’s capital. In addition, for a capital restoration plan to be acceptable,
the depository institution’s parent holding company must guarantee that the institution will comply with the capital restoration
plan. The aggregate liability of the parent holding company is limited to the lesser of an amount equal to 5.0% of the depository
institution’s total assets at the time it became categorized as undercapitalized or the amount that is necessary (or would
have been necessary) to bring the institution into compliance with all capital standards applicable with respect to such institution
as of the time it fails to comply with the plan. If a depository institution fails to submit an acceptable plan, it is categorized
as significantly undercapitalized.

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Significantly
undercapitalized categorized depository institutions may be subject to a number of requirements and restrictions, including orders
to sell sufficient voting stock to become categorized as adequately capitalized, requirements to reduce total assets, restrictions
on deposit interest rates, orders for election of new directors or forced dismissal of executive officers, divestment of certain
subsidiaries, and cessation of receipt of deposits from correspondent banks. The appropriate federal banking agency may take any
action authorized for a significantly undercapitalized institution if an undercapitalized institution fails to submit an acceptable
capital restoration plan or fails in any material respect to implement a plan accepted by the agency. A critically undercapitalized
institution is subject to having a receiver or conservator appointed to manage its affairs and for loss of its charter to conduct
banking activities.

An insured depository
institution may not pay a management fee to a bank holding company controlling that institution or any other person having control
of the institution if, after making the payment, the institution would be undercapitalized. In addition, an institution cannot
make a capital distribution, such as a dividend or other distribution that is in substance a distribution of capital to the owners
of the institution if following such a distribution the institution would be undercapitalized. Thus, if payment of such a management
fee or the making of such would cause a bank to become undercapitalized, it could not pay a management fee or dividend to the
bank holding company.

As of
December 31, 2025, the Bank was deemed to be “well capitalized.”

Standards
for Safety and Soundness. The FDIA also requires the federal banking regulatory agencies to prescribe, by regulation
or guideline, operational and managerial standards for all insured depository institutions relating to: (i) internal controls,
information systems and internal audit systems; (ii) loan documentation; (iii) credit underwriting; (iv) interest rate risk exposure;
and (v) asset growth. The agencies also must prescribe standards for asset quality, earnings, and stock valuation, as well as
standards for compensation, fees, and benefits. The federal banking agencies have adopted regulations and Interagency Guidelines
Prescribing Standards for Safety and Soundness to implement these required standards. These guidelines set forth the safety and
soundness standards that the federal banking agencies use to identify and address problems at insured depository institutions
before capital becomes impaired. Under the regulations, if the FDIC determines that the Bank fails to meet any standards prescribed
by the guidelines, the agency may require the Bank to submit to the agency an acceptable plan to achieve compliance with the standard,
as required by the FDIC. The final regulations establish deadlines for the submission and review of such safety and soundness
compliance plans. The FDIC previously requested comments on a proposal that would amend the regulations implementing Section 29
of the Federal Deposit Insurance Act which contains brokered deposits restrictions that apply to less than well capitalized depository
institutions. In January 2025, Acting FDIC Chairman Travis Hill announced plans to withdraw the proposed amendments to Section
29 of the Federal Deposit Insurance Act. The decision to withdraw these proposals aligns with the current administration’s
broader deregulatory agenda, which includes revisiting and potentially rescinding various financial regulations established during
the previous administration.

Regulatory
Examination. The FDIC also requires the Bank to prepare annual reports on the Bank’s financial condition and to conduct
an annual audit of its financial affairs in compliance with its minimum standards and procedures.

All insured institutions
must undergo regular on-site examinations by their appropriate banking agency. The cost of examinations of insured depository
institutions and any affiliates may be assessed by the appropriate federal banking agency against each institution or affiliate
as it deems necessary or appropriate. Insured institutions are required to submit annual reports to the FDIC, their federal regulatory
agency, and state supervisor whenever applicable. The FDIC has developed a method for insured depository institutions to provide
supplemental disclosure of the estimated fair market value of assets and liabilities, to the extent feasible and practicable,
in any balance sheet, financial statement, report of condition or any other report of any insured depository institution. The
federal banking regulatory agencies prescribe, by regulation, standards for all insured depository institutions and depository
institution holding companies relating, among other things, to the following:

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Dividends.
The Company’s principal source of cash flow, including cash flow to pay dividends to its shareholders, is dividends
it receives from the Bank. Statutory and regulatory limitations apply to the Bank’s payment of dividends to the Company.
As a South Carolina chartered bank, the Bank is subject to limitations on the amount of dividends that it is permitted to pay.
Unless otherwise instructed by the S.C. Board, the Bank is generally permitted under South Carolina state banking regulations
to pay cash dividends of up to 100% of net income in any calendar year without obtaining the prior approval of the S.C. Board.
The FDIC also has the authority under federal law to enjoin a bank from engaging in what in its opinion constitutes an unsafe
or unsound practice in conducting its business, including the payment of a dividend under certain circumstances. The Bank must
also maintain the Common Equity Tier 1 capital conservation buffer of 2.5%, in excess of its minimum regulatory risk-based capital
ratios, to avoid becoming subject to restrictions on capital distributions, including dividends, as described above.

Branching.
Federal legislation permits out-of-state acquisitions by bank holding companies, interstate branching by banks, and interstate
merging by banks. The Dodd-Frank Act removed previous state law restrictions on de novo interstate branching in states
such as South Carolina and Georgia. This change effectively permits out of state banks to open de novo branches in states
where the laws of such state would permit a bank chartered by that state to open a de novo branch.

Anti-Tying
Restrictions. Under amendments to the Bank Holding Company Act and Federal Reserve regulations, a bank is prohibited from
engaging in certain tying or reciprocity arrangements with its customers. In general, a bank may not extend credit, lease, sell
property, or furnish any services or fix or vary the consideration for these on the condition that (i) the customer obtain or
provide some additional credit, property, or services from or to the bank, the bank holding company or subsidiaries thereof or
(ii) the customer may not obtain some other credit, property, or services from a competitor, except to the extent reasonable conditions
are imposed to assure the soundness of the credit extended. Certain arrangements are permissible: a bank may offer combined-balance
products and may otherwise offer more favorable terms if a customer obtains two or more traditional bank products; and certain
foreign transactions are exempt from the general rule. A bank holding company or any bank affiliate also is subject to anti-tying
requirements in connection with electronic benefit transfer services.

Community
Reinvestment Act. The Bank is subject to certain requirements and reporting obligations under the CRA, which requires federal
banking regulators to evaluate the record of each financial institution in meeting the credit needs of its local community, including
low- and moderate- income neighborhoods. The CRA further requires these criteria to be considered in evaluating mergers, acquisitions,
and applications to open a branch or facility. Failure to adequately meet these criteria could result in the imposition of additional
requirements and limitations on the Bank. Additionally, financial institutions must publicly disclose the terms of various CRA-related
agreements. In its most recent CRA examination, the Bank received a “satisfactory” rating.

In
December 2019, the FDIC and OCC issued a notice of proposed rulemaking intended to (i) clarify which activities qualify for CRA
credit; (ii) update where activities count for CRA credit; (iii) create a more transparent and objective method for measuring
CRA performance; and (iv) provide for more transparent, consistent, and timely CRA-related data collection, recordkeeping, and
reporting. However, the Federal Reserve did not join the proposed rulemaking. That proposed rulemaking was later superseded and
is no longer in effect. In January 2025, the OCC, the FDIC, and the Federal Reserve issued additional guidance clarifying that
digital and fintech-driven activities may be eligible for CRA consideration provided they meet applicable CRA criteria. This guidance
reflects efforts to modernize CRA evaluations in light of evolving banking practices.

In May 2020,
the OCC issued its final CRA rule, which was later rescinded in December 2021, replacing it with a rule based on the rules adopted
jointly by the federal banking agencies in 1995, as amended and superseded by an updated joint framework. On the same day that
the OCC announced its plans to rescind the CRA final rule, the OCC, the FDIC, and the Federal Reserve announced that they were
working together to “strengthen and modernize the rules implementing the CRA.” On May 5, 2022, the OCC, FDIC, and
Federal Reserve released a notice of proposed rulemaking regarding the CRA and invited public comment on the proposed rules. The
comment period closed on August 5, 2022. On October 24, 2023, the OCC, the FDIC, and the Federal Reserve issued a final rule to
strengthen and modernize regulations implementing the CRA. The final rule was scheduled to take effect on April 1, 2024; however,
its effectiveness was enjoined by a federal court, and compliance with the majority of the final rule’s provisions has been
deferred. Several banking industry groups filed a lawsuit seeking to invalidate the CRA final rule, arguing that the federal banking
agencies exceeded their statutory authority in adopting the rule. In March 2024, a federal judge granted an injunction preventing
the CRA final rule from taking effect. The OCC, the FDIC, and the Federal Reserve appealed the injunction. However, in March 2025,
the federal banking agencies filed an unopposed motion to stay the appeal pending completion of a new rule that would propose
rescinding the enjoined 2023 CRA Final Rule and reinstating the CRA framework that existed prior to the final rule. In April 2025,
the Fifth Circuit granted the agencies’ motion. In July 2025, the OCC, FDIC, and Federal Reserve issued a notice of proposed
rulemaking to rescind the 2023 CRA Final Rule and reinstate the prior CRA regulations; the comment period closed on August 18,
2025, and the proposal has not been finalized as of the date of this filing. Management continues to evaluate developments relating
to the CRA and their potential impact on the Bank.

16

Fair
Lending Requirements. We are subject to certain fair lending requirements and reporting obligations involving lending operations.
A number of laws and regulations provide these fair lending requirements and reporting obligations, including, at the federal
level, the Equal Credit Opportunity Act (“ECOA”), as amended by the Dodd-Frank Act, and Regulation B, as well as the
Fair Housing Act (“FHA”) and regulations implementing FHA found at 24 C.F.R. Part 100. ECOA and Regulation B prohibit
discrimination in any aspect of a credit transaction based on a number of prohibited factors, including race or color, religion,
national origin, sex, marital status, age, the applicant’s receipt of income derived from public assistance programs, and
the applicant’s exercise, in good faith, of any right under the Consumer Credit Protection Act. ECOA and Regulation B include
lending acts and practices that are specifically prohibited, permitted, or required, and these laws and regulations proscribe
data collection requirements, legal action statute of limitations, and disclosure of the consumer’s ability to receive a
copy of any appraisal(s) and valuation(s) prepared in connection with certain loans secured by dwellings. In January 2023, the
OCC revised its “Fair Lending” booklet of the Comptroller’s Handbook to incorporate clarified details and risk
factors for a variety of examination scenarios addressing fair lending and to update references to supervisory guidance, sound
risk management practices, and applicable legal standards. While this OCC guidance does not apply to the Bank explicitly, it represents
best practices guidance for the Bank. FHA prohibits discrimination in all aspects of residential real-estate related transactions
based on prohibited factors, including race or color, national origin, religion, sex, familial status, and handicap. On April
23, 2025, President Trump issued Executive Order 14281, “Restoring Equality of Opportunity and Meritocracy,” which
states that it is the policy of the United States to eliminate the use of disparate-impact liability “to the maximum degree
possible” and directs federal agencies to review and, where appropriate, revise enforcement approaches and regulations that
rely on disparate-impact theories. Following the Executive Order, the FDIC updated the Fair Lending Laws and Regulation section
of its Consumer Compliance Examination Manual to remove all references to disparate impact and how to evaluate disparate impact
risk.

Federal
fair lending laws and regulations, as interpreted by courts and regulatory agencies, continue to recognize both disparate treatment
and disparate impact theories of liability. Regulatory agencies periodically review and update supervisory guidance related to
fair lending risk management and examination practices.

In
addition to prohibiting discrimination in credit transactions on the basis of prohibited factors, these laws and regulations can
cause a lender to be liable for policies that result in a disparate treatment of or have a disparate impact on a protected class
of persons. If a pattern or practice of lending discrimination is alleged by a regulator, then the matter may be referred by the
agency to the DOJ for investigation. In December 2012, the DOJ and CFPB entered into a Memorandum of Understanding under which
the agencies have agreed to share information, coordinate investigations, and have generally committed to strengthen their coordination
efforts.

In
addition to substantive penalties and corrective measures that may be required for a violation of certain fair lending laws, the
federal banking agencies may take compliance with fair lending requirements into account when regulating and supervising other
activities of the bank, including in acting on expansionary proposals.

Financial Subsidiaries.
Under the Gramm-Leach-Bliley Act, otherwise referred to as the GLBA, subject to certain conditions imposed by their respective banking
regulators, national and state-chartered banks are permitted to form “financial subsidiaries” that may conduct financial
or incidental activities, thereby permitting bank subsidiaries to engage in certain activities that previously were impermissible. The
GLBA imposes several safeguards and restrictions on financial subsidiaries, including that the parent bank’s equity investment
in the financial subsidiary be deducted from the bank’s assets and tangible equity for purposes of calculating the bank’s
capital adequacy. In addition, the GLBA imposes new restrictions on transactions between a bank and its financial subsidiaries similar
to restrictions applicable to transactions between banks and non-bank affiliates.

Consumer Protection
Regulations. Activities of the Bank are subject to a variety of statutes and regulations—both at the federal and state
levels—designed to protect consumers. This includes Title X of the Dodd-Frank Act, which prohibits engaging in any unfair,
deceptive, or abusive acts or practices (“UDAAP”). UDAAP claims involve detecting and assessing risks to consumers
and to markets for consumer financial products and services. Interest and other charges collected or contracted for by the Bank
are subject to state usury laws and federal laws concerning interest rates. The Bank’s loan operations are also subject
to federal laws applicable to credit transactions, such as:

17

The deposit operations
of the Bank also are subject to laws, such as the following federal laws:

18

In light
of the growing concern by regulators about relationships between chartered financial institutions and their third-party service
providers, the FDIC joined the other federal supervisory agencies in issuing the Interagency Guidance on Third-Party Relationships:
Risk Management. This guidance provided risk management oversight guidelines for financial institutions to incorporate in their
ongoing relationships with third-party vendors.

The
CFPB has broad authority to regulate the offering and provision of consumer financial products and services. The CFPB has the
authority to supervise and examine depository institutions with more than $10 billion in assets for compliance with federal consumer
laws. The authority to supervise and examine depository institutions with $10 billion or less in assets, such as the Bank, for
compliance with federal consumer laws remains largely with those institutions’ primary regulators. However, the CFPB may
participate in examinations of these smaller institutions on a “sampling basis” and may refer potential enforcement
actions against such institutions to their primary regulators. As such, the CFPB may participate in examinations of the Bank.
In addition, states are permitted to adopt consumer protection laws and regulations that are stricter than the regulations promulgated
by the CFPB.

The
CFPB has issued a number of significant rules that impact nearly every aspect of the lifecycle of consumer financial products
and services, including rules regarding residential mortgage loans. These rules implement Dodd-Frank Act amendments to ECOA, TILA
and RESPA. On July 18, 2024 regulators, including the CFPB, issued interagency guidance on reconsideration of value (ROVs) of
residential real estate transactions. The CFPB continued its scrutiny of so called “pay-to-pay” and “junk fee”
regimes, proposing rules related to credit card penalties. In March 2024, the CFPB finalized a rule that addresses late fees charged
by card issuers that together with their affiliates have one million or more open credit card accounts. However, on April 15,
2025, the “Credit Card Penalty Fees Final Rule” was vacated pursuant to an order of the United States District Court
for the Northern District of Texas.

Bank regulators
take into account compliance with consumer protection laws when considering approval of proposed expansionary proposals.

Enforcement
Powers. The Bank and its “institution-affiliated parties,” including its management, employee’s agent’s
independent contractors and consultants, such as attorneys and accountants, and others who participate in the conduct of the financial
institution’s affairs, are subject to potential civil and criminal penalties for violations of law, regulations, or written
orders of a government agency. These practices can include the failure of an institution to timely file required reports or the
filing of false or misleading information or the submission of inaccurate reports. Civil penalties may be as high as $1,000,000
a day for such violations. Criminal penalties for some financial institution crimes have been increased to twenty years. In addition,
regulators are provided with greater flexibility to commence enforcement actions against institutions and institution-affiliated
parties. Possible enforcement actions include the termination of deposit insurance. Furthermore, banking agencies’ powers
to issue cease-and-desist orders have been expanded. Such orders may, among other things, require affirmative action to correct
any harm resulting from a violation or practice, including restitution, reimbursement, indemnifications or guarantees against
loss. A financial institution may also be ordered to restrict its growth, dispose of certain assets, rescind agreements or contracts,
or take other actions as determined by the ordering agency to be appropriate.

Anti-Money
Laundering and Countering the Financing of Terrorism (AML/CFT); the USA PATRIOT Act; the Office of Foreign Asset Control. Financial
institutions must maintain AML/CFT programs, including internal policies, compliance officers, training, and independent audits,
in accordance with the Bank Secrecy Act (“BSA”) and other federal laws. They must adhere to “knowing your customer”
and enhanced due diligence requirements, particularly for high-risk customers and foreign institutions, to prevent money laundering
and terrorism financing. Institutions must also report suspicious activities to law enforcement and ensure compliance with risk-based
customer due diligence procedures. The USA PATRIOT Act amended the BSA to enhance financial transparency and information-sharing
between institutions, regulators, and law enforcement. It mandates customer identification programs, increased due diligence for
non-U.S. persons, and stricter reporting of transactions over $10,000 to FinCEN. Financial institutions must also monitor and
report transactions involving individuals or entities suspected of terrorist financing. Regulators actively enforce compliance,
imposing penalties on institutions failing to meet AML/CFT obligations.

19

The
USA PATRIOT Act amended the Bank Secrecy Act and provides, in part, for the facilitation of information sharing among governmental
entities and financial institutions for the purpose of combating terrorism and money laundering by enhancing anti-money laundering
and financial transparency laws, as well as enhanced information collection tools and enforcement mechanics for the U.S. government,
including: (i) requiring standards for verifying customer identification at account opening; (ii) rules to promote cooperation
among financial institutions, regulators, and law enforcement entities in identifying parties that may be involved in terrorism
or money laundering; (iii) reports by nonfinancial trades and businesses filed with the U.S. Treasury Department’s Financial
Crimes Enforcement Network for transactions exceeding $10,000; (iv) filing suspicious activities reports if a bank believes a
customer may be violating U.S. laws and regulations; and (v) requires enhanced due diligence requirements for financial institutions
that administer, maintain, or manage private bank accounts or correspondent accounts for non-U.S. persons. Bank regulators routinely
examine institutions for compliance with these obligations and are required to consider compliance in connection with the regulatory
review of applications.

Under the USA
PATRIOT Act, the regulators can provide lists of the names of persons suspected of involvement in terrorist activities. The Bank
can be requested to search its records for any relationships or transactions with persons on those lists. If the Bank finds any
relationships or transactions, it must file a suspicious activity report and contact the applicable governmental authorities.

The Office of
Foreign Assets Control (“OFAC”), which is a division of the U.S. Department of the Treasury (the “Treasury”),
is responsible for helping to ensure that United States entities do not engage in transactions with “enemies” of the
United States, as defined by various Executive Orders and Acts of Congress. OFAC publishes lists of names of persons and organizations
with which the Bank is prohibited from engaging in business. If the Bank finds a name on any transaction, account or wire transfer
that is on an OFAC list, it must freeze such account, file a suspicious activity report, and notify the FBI. The Bank has appointed
an OFAC compliance officer to oversee the inspection of its accounts and the filing of any notifications. The Bank actively checks
high-risk OFAC areas such as new accounts, wire transfers and customer files. The Bank performs these checks utilizing software,
which is updated each time a modification is made to the lists provided by OFAC and other agencies of Specially Designated Nationals
and Blocked Persons.

In August 2023,
the FFIEC updated its BSA/AML Examination Manual to clarify risk-based compliance expectations. The FFIEC and the FDIC emphasize
oversight of third-party AML/CFT service providers, with examination enforcement actions against institutions that fail to monitor
vendors effectively.

The
Anti-Money Laundering Act of 2020 included the Corporate Transparency Act (“CTA”), which directed the Financial Crimes
Enforcement Network (“FinCEN”) to establish beneficial ownership information (“BOI”) reporting requirements
for certain legal entities. The CTA and FinCEN’s implementing regulations have been the subject of significant litigation
and subsequent regulatory action. In 2025, the U.S. Department of the Treasury announced that it would not enforce BOI reporting
penalties against U.S. citizens or domestic reporting companies, and FinCEN issued an interim final rule removing BOI reporting
requirements for U.S. companies and U.S. persons. As a result, BOI reporting requirements currently apply primarily to certain
foreign reporting companies registered to do business in the United States, subject to applicable exemptions. The scope, implementation,
and enforcement posture of the CTA remain subject to further regulatory and judicial developments.

Following
Russia’s invasion of Ukraine, OFAC imposed extensive sanctions under Executive Order 14024, including restrictions on Russian
financial institutions, expanded sovereign debt prohibitions, and increased scrutiny of sanctions evasion. FinCEN issued an alert
in March 2022, advising heightened vigilance. Sanctions enforcement continued through 2023 and 2024. Globally, the Financial Action
Task Force (“FATF”) updates its high-risk jurisdiction lists, affecting due diligence requirements for international
transactions. In October 2025, FATF removed Burkina Faso, Mozambique, Nigeria and South Africa from its lists of Jurisdictions
under Increased Monitoring. BSA/AML oversight by financial institutions continues to be a significant source of enforcement activity
by all prudential regulators and FinCEN and therefore requires ongoing focus by the Bank.

Privacy
and Data Security. There are a number of state and federal laws and regulations that govern financial privacy and cybersecurity.
At the federal level, this includes the privacy protection provisions of the Gramm-Leach-Bliley Act (“GLBA”) and related
regulations, including Regulation P, which govern the treatment of nonpublic personal information. Under these privacy protection
provisions, we are limited in our ability to disclose non-public information about consumers to nonaffiliated third parties. These
limitations require disclosure of privacy policies and notices to consumers and, in some circumstances, allow consumers to prevent
disclosure of certain personal information to a nonaffiliated third party.

20

Consumers
must be notified in the event of a data breach under applicable state laws. Multiple states and Congress are considering laws
or regulations which could create new individual privacy rights and impose increased obligations on companies handling personal
data. For example, on November 18, 2021, the federal financial regulatory agencies published a final rule that required banking
organizations and their service providers to implement new notification requirements for significant cybersecurity incidents.
Specifically, the final rule requires banking organizations to notify their primary federal regulator as soon as possible and
no later than 36 hours after the discovery of a “computer-security incident” that rises to the level of a “notification
incident” within the meaning attributed to those terms by the final rule. Banks’ service providers are required under
the final rule to notify any affected bank to or on behalf of which the service provider provides services “as soon as possible”
after determining that it has experienced an incident that materially disrupts or degrades, or is reasonably likely to materially
disrupt or degrade, covered services provided to such bank for as much as four hours. The final rule took effect on April 1, 2022
and banks and their service providers must have complied with the requirements of the rule by May 1, 2022. Effective December
9, 2022, the FTC’s amendments to GLBA’s Safeguards Rule became effective for institutions subject to the FTC’s
jurisdiction; banking organizations subject to federal banking agency oversight are subject to substantially similar information
security requirements enforced by their prudential regulators. In 2024 and 2025, federal banking agencies issued guidance emphasizing
ransomware preparedness and third-party risk management. Banks are expected to maintain robust incident response plans, conduct
resilience exercises, and strengthen cybersecurity controls. Additionally, regulators reinforced that institutions remain fully
accountable for risks posed by third-party service providers, requiring comprehensive due diligence, ongoing monitoring, and governance
oversight.

States
continue to take the lead in passing privacy focused legislation. A majority of states have now enacted some form of consumer
privacy protection laws, many of which include exemptions or partial exemptions for entities regulated under GLBA. Congress has
proposed significant privacy focused legislation largely targeting technology companies, however, to date, none of these laws
have been enacted.

The CFPB has
also taken significant actions relating to consumer privacy and consumer access to financial data. In October 2024, the CFPB issued
a final rule implementing Section 1033 of the Consumer Financial Protection Act (the “Personal Financial Data Rights Rule”),
which would require covered data providers, including banks, to make certain covered consumer financial data available to consumers
and to authorized third parties in electronic form, subject to prescribed requirements. The rule has been the subject of litigation
and related judicial and administrative developments that have delayed its implementation. In July 2025, the CFPB publicly stated
that it intended to replace or substantially revise the rule through a new rulemaking process and sought to pause pending litigation
while it pursued that process. In August 2025, the CFPB issued an advance notice of proposed rulemaking to reconsider the rule,
focusing on the scope of authorized representatives, potential cost recovery mechanisms, and data security and privacy considerations.
In October 2025, a federal district court in Kentucky issued a preliminary injunction temporarily blocking enforcement of the
rule. The rule remains subject to ongoing litigation and regulatory reconsideration, and the scope, timing and ultimate requirements
of any final rule remain uncertain.

Cybersecurity.
The federal banking regulators regularly issue new guidance and standards, and update existing guidance and standards, regarding
cybersecurity intended to enhance cyber risk management among financial institutions. Financial institutions are expected to comply
with such guidance and standards and to accordingly develop appropriate security controls and risk management processes. If we
fail to observe such regulatory guidance or standards, we could be subject to various regulatory sanctions, including financial
penalties. In 2023, the SEC issued a final rule that requires disclosure of material cybersecurity incidents, as well as cybersecurity
risk management, strategy and governance. Under this rule, banking organizations that are SEC registrants must generally disclose
information about a material cybersecurity incident within four business days of determining it is material with periodic updates
as to the status of the incident in subsequent filings, as necessary.

Under a final
rule adopted by federal banking agencies in 2021, banking organizations are required to notify their primary banking regulator
within 36 hours of determining that a “computer-security incident” has materially disrupted or degraded, or is reasonably
likely to materially disrupt or degrade, the banking organization’s ability to carry out banking operations or deliver banking
products and services to a material portion of its customer base, its businesses and operations that would result in material
loss, or its operations that would impact the stability of the United States.

State regulators
have also been increasingly active in implementing privacy and cybersecurity standards and regulations. Recently, several states
have adopted regulations requiring certain financial institutions to implement cybersecurity programs and many states have also
recently implemented or modified their data breach notification, information security and data privacy requirements. We expect
this trend of state-level activity in those areas to continue and are continually monitoring developments in the states in which
our customers are located.

Risks and exposures
related to cybersecurity attacks, including litigation and enforcement risks, are expected to be elevated for the foreseeable
future due to the rapidly evolving nature and sophistication of these threats, as well as due to the expanding use of Internet
banking, mobile banking and other technology-based products and services by us and our customers.

21

Effect of
Governmental Monetary Policies. Our earnings and financial condition are affected by domestic economic conditions and the
monetary and fiscal policies of the United States government and its agencies, particularly the Federal Reserve. The Federal Reserve
influences interest rates and overall economic activity through its open market operations, discount window lending, reserve requirements
and other monetary policy tools. Changes in monetary policy affect the levels of market interest rates, the availability and cost
of credit, the demand for loans, the fair value of securities and other earning assets, and the rates we pay on deposits and other
funding sources. Following a period of rapid monetary tightening during 2022 and 2023 to address elevated inflation, the Federal
Open Market Committee began reducing the federal funds target rate in 2024 as inflation moderated and economic growth slowed.
During 2025, the federal funds target range declined further and ended the year between 3.50% and 3.75%. The pace, magnitude and
direction of future interest rate changes remain uncertain and will depend on economic conditions, including inflation trends,
employment levels and financial market stability. Changes in interest rates and other monetary policy actions can materially affect
our net interest margin, loan demand, deposit flows, liquidity, credit quality and the market value of our investment securities
portfolio. Because these factors are beyond our control and difficult to predict, we cannot assure that future monetary policy
developments will not have an adverse effect on our results of operations or financial condition. Changes in market interest
rates can have a significant impact on the level of income and expense recorded on a large portion of our interest-earning assets
and interest-bearing liabilities, and on the market value of all interest-earning assets, other than those possessing a short
term to maturity. Furthermore, changes in market interest rates can have a significant impact on the level of mortgage originations
and related mortgage non-interest income.

Insurance
of Accounts and Regulation by the FDIC. The Bank’s deposits are insured up to applicable limits by the Deposit Insurance
Fund of the FDIC. The Dodd-Frank Act permanently increased the maximum amount of deposit insurance for banks to $250,000 per account.
As insurer, the FDIC imposes deposit insurance premiums and is authorized to conduct examinations of and to require reporting
by FDIC insured institutions. It also may prohibit any FDIC insured institution from engaging in any activity the FDIC determines
by regulation or order to pose a serious risk to the insurance fund. The FDIC also has the authority to initiate enforcement actions
against savings institutions, after giving the bank’s regulatory authority an opportunity to take such action and may terminate
the deposit insurance if it determines that the institution has engaged in unsafe or unsound practices or is in an unsafe or unsound
condition.

As an
FDIC-insured bank, the Bank must pay deposit insurance assessments to the FDIC based on its average total assets minus its average
tangible equity. The Bank’s assessment rates are currently based on its risk classification (i.e., the level of risk it
poses to the FDIC’s deposit insurance fund). Institutions classified as higher risk pay assessments at higher rates than
institutions that pose a lower risk. The initial base assessment rates currently range from approximately five basis points to
approximately 32 basis points.

In
addition to the ordinary assessments described above, the FDIC has the ability to impose special assessments in certain instances.
For example, in November 2023, the FDIC implemented a special assessment to recover the approximately $16.3 billion loss to the
Deposit Insurance Fund associated with protecting uninsured depositors following the closures of Silicon Valley Bank and Signature
Bank, New York, NY earlier in the year. However, the assessment was limited to banks with an excess of $5 billion uninsured deposits
as of December 31, 2022, so we did not receive any assessment.

The FDIC may
terminate the deposit insurance of any insured depository institution, including the Bank, if it determines, after a hearing,
that the institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or
has violated any applicable law, regulation, rule, order, or condition imposed by the FDIC. It also may suspend deposit insurance
temporarily during the hearing process for the permanent termination of insurance if the institution has no tangible capital.
If insurance of accounts is terminated, the accounts at the institution at the time of the termination, less subsequent withdrawals,
shall continue to be insured for a period of six months to two years, as determined by the FDIC. Management is not aware of any
practice, condition or violation that might lead to termination of the Bank’s deposit insurance.

Incentive
Compensation. In addition to the potential restrictions on discretionary bonus compensation under the Basel III rules, the
federal bank regulatory agencies have issued guidance on incentive compensation policies (the “Incentive Compensation Guidance”)
intended to ensure that the incentive compensation policies of financial institutions do not undermine the safety and soundness
of such institutions by encouraging excessive risk-taking. The Incentive Compensation Guidance, which covers all employees that
have the ability to materially affect the risk profile of an institution, either individually or as part of a group, is based
upon the key principles that a financial institution’s incentive compensation arrangements should comply with the following
principles: (i) provide employees incentives that appropriately balance risk and reward; (ii) be compatible with effective controls
and risk-management; and (iii) be supported by strong corporate governance, including active and effective oversight by the organization’s
board of directors.

The scope and
content of federal bank regulatory agencies’ policies on executive compensation are continuing to develop and are likely
to continue evolving in the near future. In 2016, federal agencies proposed regulations which could significantly change the regulation
of incentive compensation programs at financial institutions. The proposal would create four tiers of institutions based on asset
size. Institutions in the top two tiers would be subject to rules much more detailed and proscriptive than are currently in effect.
If interpreted aggressively by the regulators, the proposed rules could be used to prevent, as a practical matter, larger institutions
from engaging in certain lines of business where substantial commission and bonus pool arrangements are the norm. In the 2016
proposal, the top two tiers included institutions with more than $50 billion of assets, which would not currently apply to us.
In May 2024, the federal banking agencies reissued a Notice of Proposed Rulemaking under Section 956 of the Dodd-Frank Act to
strengthen oversight of incentive compensation arrangements. The proposal would apply to institutions with $1 billion or more
in total consolidated assets and includes requirements for risk-adjusted awards, mandatory deferrals, forfeiture and clawback
provisions, and enhanced governance standards. As of the date of this filing, these proposed rules have not been finalized. This
marks the latest effort to finalize rules originally proposed in 2011 and 2016, signaling continued regulatory focus on aligning
compensation practices with safety and soundness objectives. We cannot predict what final rules may be adopted, nor how they may
be implemented and, therefore, it cannot be determined at this time whether compliance with such policies will adversely affect
our ability to hire, retain and motivate our key employees.

22

In addition,
the Tax Cuts and Jobs Act (the “Tax Act”), which was signed into law in December 2017, contains certain provisions
affecting performance-based compensation. Specifically, the pre-existing exception to the $1.0 million deduction limitation applicable
to performance-based compensation was repealed. The deduction limitation is now applied to all compensation exceeding $1.0 million,
for our covered employees, regardless of how it is classified. Subsequent legislation and regulatory guidance, such as the One
Big Beautiful Bill Act in 2025, have expanded the definition of covered employees and the application of these limitations across
affiliated and controlled group entities, which may increase the number of individuals and entities subject to these limitations
which could have an adverse effect on our income tax expense and net income.

Corporate
Governance. The Dodd-Frank Act addressed many investor protection, corporate governance and executive compensation matters
that affect most U.S. publicly traded companies. The Dodd-Frank Act (i) grants stockholders of U.S. publicly traded companies
an advisory vote on executive compensation and so-called “golden parachute” payments, (ii) enhances independence requirements
for compensation committee members, (iii) requires the SEC to adopt rules directing national securities exchanges to establish
listing standards requiring all listed companies to adopt incentive-based compensation clawback policies for executive officers,
and (iv) provides the SEC with authority to adopt proxy access rules that would allow stockholders of publicly traded companies
to nominate candidates for election as a director and have those nominees included in a company’s proxy materials. The SEC
has completed the bulk (although not all) of the rulemaking necessary to implement these provisions. However, on October 26, 2022,
the SEC adopted final rules implementing the incentive-based compensation recovery (clawback) provisions of the Dodd-Frank Act.
The final rules directed the stock exchanges to establish listing standards requiring listed companies to develop and implement
a policy providing for the recovery of erroneously awarded incentive-based compensation received by current or former executive
officers and to satisfy related disclosure obligations. As of December 1, 2023, the final clawback rules from The NASDAQ Stock
Market were effective. The Company’s updated clawback policies were effective September 19, 2023.

Concentrations
in Commercial Real Estate. Concentration risk exists when FDIC-insured institutions deploy too many assets to any one industry
or segment. A concentration in commercial real estate is one example of regulatory concern. The interagency Concentrations in
Commercial Real Estate Lending, Sound Risk Management Practices guidance (“CRE Guidance”) provides supervisory criteria,
including the following numerical indicators, to assist bank examiners in identifying banks with potentially significant commercial
real estate loan concentrations that may warrant greater supervisory scrutiny: (i) total non-owner-occupied commercial real estate
loans, including loans secured by apartment buildings, investor commercial real estate, and construction and land loans, exceeding
300% or more of an institution’s total risk-based capital and the outstanding balance of the commercial real estate loan
portfolio has increased by 50% or more in the preceding three years or (ii) construction and land development loans exceeding
100% of total risk-based capital. The CRE Guidance does not limit banks’ levels of commercial real estate lending activities,
but rather guides institutions in developing risk management practices and levels of capital that are commensurate with the level
and nature of their commercial real estate concentrations. On December 18, 2015, the federal banking agencies issued a statement
to reinforce prudent risk-management practices related to commercial real estate lending, having observed substantial growth in
many commercial real estate asset and lending markets, increased competitive pressures, rising commercial real estate concentrations
in banks, and an easing of commercial real estate underwriting standards. The federal bank agencies reminded FDIC-insured institutions
to maintain underwriting discipline and exercise prudent risk-management practices to identify, measure, monitor and manage the
risks arising from commercial real estate lending. In addition, FDIC-insured institutions must maintain capital commensurate with
the level and nature of their commercial real estate concentration risk. Since 2023, the OCC, FDIC, and Federal Reserve have issued
multiple reminders and risk bulletins emphasizing prudent CRE risk management due to rising interest rates, declining office valuations,
and stress in certain property sectors.

Regulatory agencies
monitor concentrations in commercial real estate lending, including measures comparing certain commercial real estate categories
to total risk-based capital. Based on the Bank’s loan portfolio as of December 31, 2025, non-owner-occupied commercial real
estate loans and construction and land development loans were approximately 307% and 71% of total risk-based capital, respectively,
and non-owner-occupied commercial real estate loans increased by approximately 37% from December 31, 2022 to December 31, 2025.
We have established underwriting, approval and portfolio management practices designed to identify, measure and monitor commercial
real estate concentration risk, including management-level reporting, periodic stress testing and board oversight, and we review
concentration levels and related risk metrics on a regular basis.

Proposed Legislation
and Regulatory Action. From time to time, various legislative and regulatory initiatives are introduced in Congress and state
legislatures, as well as by regulatory agencies. Such initiatives may include proposals to expand or contract the powers of bank
holding companies and depository institutions or proposals to substantially change the financial institution regulatory system.
Such legislation could change banking statutes and our operating environment in substantial and unpredictable ways. If enacted,
such legislation could increase or decrease the cost of doing business, limit or expand permissible activities or affect the competitive
balance among banks, savings associations, credit unions, and other financial institutions. We cannot predict whether any such
legislation will be enacted, and, if enacted, the effect that it, or any implementing regulations, would have on our financial
condition or results of operations. A change in statutes, regulations, or regulatory policies applicable to the Company or the
Bank could have a material effect on our business.