FIRST NATIONAL CORP /VA/ (FXNC)

CIK: 0000719402. SIC: 6022 State Commercial Banks. Latest 10-K as of: 2026-03-25.

SIC breadcrumb: Finance, Insurance, And Real Estate > Depository Institutions > SIC 6022 State Commercial Banks

SEC company page: https://www.sec.gov/edgar/browse/?CIK=719402. Latest filing source: 0001437749-26-009748.

Selected Fundamentals

Financials

Annual standardized facts from SEC companyfacts as of latest extracted filing date 2026-03-25. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0000719402.json. Derived margins, ratios, and free cash flow are computed from the extracted annual SEC facts.

Flow metrics use full-year FY periods from 10-K/10-K/A filings; balance-sheet metrics use FY-end instants. Free cash flow = operating cash flow - capital expenditures. Missing metrics are omitted rather than fabricated.

Ratios

ROE and ROA use period-end equity/assets. Liabilities / equity uses total liabilities divided by stockholders' equity. Current ratio uses current assets divided by current liabilities when both are reported.

Financial Charts

Quarterly

Quarterly standardized facts from SEC companyfacts as of latest extracted filing date 2026-05-13. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0000719402.json.

Flow metrics use discrete quarter-length periods from 10-Q/10-Q/A filings. Q4 revenue and net income are derived only when annual FY and nine-month YTD facts exist for the same fiscal year; derived Q4 values are labeled. EPS Q4 is not derived.

Quarterly Charts

Macro Cross-References

• CPIAUCSL - Consumer Price Index for All Urban Consumers: All Items in U.S. City Average
• UNRATE - Unemployment Rate
• FEDFUNDS - Federal Funds Effective Rate
• CES0500000003 - Average Hourly Earnings of All Employees, Total Private
• DFEDTARU - Federal Funds Target Range - Upper Limit
• DFEDTARL - Federal Funds Target Range - Lower Limit
• DGS3MO - Market Yield on U.S. Treasury Securities at 3-Month Constant Maturity
• DGS2 - Market Yield on U.S. Treasury Securities at 2-Year Constant Maturity
• DGS10 - Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity
• DGS30 - Market Yield on U.S. Treasury Securities at 30-Year Constant Maturity
• T10Y2Y - 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity
• CPILFESL - Consumer Price Index for All Urban Consumers: All Items Less Food and Energy
• CPIUFDSL - Consumer Price Index for All Urban Consumers: Food
• CPIENGSL - Consumer Price Index for All Urban Consumers: Energy
• CUSR0000SAH1 - Consumer Price Index for All Urban Consumers: Shelter
• PCEPI - Personal Consumption Expenditures: Chain-type Price Index
• PCEPILFE - Personal Consumption Expenditures Excluding Food and Energy: Chain-type Price Index
• PPIACO - Producer Price Index by Commodity: All Commodities
• T10YIE - 10-Year Breakeven Inflation Rate
• U6RATE - Total Unemployed, Plus All Marginally Attached Workers Plus Total Employed Part Time for Economic Reasons
• PAYEMS - All Employees, Total Nonfarm
• CIVPART - Labor Force Participation Rate
• EMRATIO - Employment-Population Ratio
• UNEMPLOY - Unemployed
• CE16OV - Employment Level
• ICSA - Initial Claims
• JTSJOL - Job Openings: Total Nonfarm
• JTSQUR - Quits: Total Nonfarm
• GDPC1 - Real Gross Domestic Product
• A191RL1Q225SBEA - Real Gross Domestic Product: Percent Change from Preceding Period
• INDPRO - Industrial Production: Total Index
• TCU - Capacity Utilization: Total Index
• HOUST - New Privately-Owned Housing Units Started: Total Units
• PERMIT - New Privately-Owned Housing Units Authorized in Permit-Issuing Places: Total Units
• RSAFS - Advance Retail Sales: Retail Trade
• PCE - Personal Consumption Expenditures
• DSPIC96 - Real Disposable Personal Income
• PSAVERT - Personal Saving Rate
• M2SL - M2
• BOPGSTB - U.S. International Trade in Goods and Services: Balance
• MSPUS - Median Sales Price of Houses Sold for the United States
• HSN1F - New One Family Houses Sold: United States
• RHORUSQ156N - Homeownership Rate in the United States
• TTLCONS - Total Construction Spending: Total Construction in the United States
• RRVRUSQ156N - Rental Vacancy Rate in the United States
• TOTALSL - Total Consumer Credit Owned and Securitized
• REVOLSL - Revolving Consumer Credit Owned and Securitized
• DRCCLACBS - Delinquency Rate on Credit Card Loans, All Commercial Banks
• GDP - Gross Domestic Product
• GPDI - Gross Private Domestic Investment
• GCE - Government Consumption Expenditures and Gross Investment
• PCEC - Personal Consumption Expenditures
• NETEXP - Net Exports of Goods and Services
• GFDEBTN - Federal Debt: Total Public Debt
• GFDEGDQ188S - Federal Debt: Total Public Debt as Percent of Gross Domestic Product
• FYFSD - Federal Surplus or Deficit
• FGRECPT - Federal Government Current Receipts
• FGEXPND - Federal Government: Current Expenditures
• MANEMP - All Employees, Manufacturing
• USCONS - All Employees, Construction
• USTRADE - All Employees, Retail Trade
• USFIRE - All Employees, Financial Activities
• USGOVT - All Employees, Government
• AWHAETP - Average Weekly Hours of All Employees, Total Private
• DGORDER - Manufacturers' New Orders: Durable Goods
• NEWORDER - Manufacturers' New Orders: Nondefense Capital Goods Excluding Aircraft
• BUSINV - Total Business Inventories
• EXPGS - Exports of Goods and Services
• IMPGS - Imports of Goods and Services
• IR - Import Price Index (End Use): All Commodities
• PPIFIS - Producer Price Index by Commodity: Final Demand

Latest quarter (10-Q)

Latest 10-Q source: 0001437749-26-016708.

Extracted structurally from real Item 2 body heading to real Item 3/4 boundary. Confidence: high. Filing date: 2026-05-13. Report date: 2026-03-31.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Statement Regarding Forward-Looking Statements

First National Corporation (the Company) makes forward-looking statements in this Form 10-Q that are subject to risks and uncertainties. These forward-looking statements include, but are not limited to, statements regarding profitability, liquidity, adequacy of capital, allowance for credit losses, interest rate sensitivity, market risk, and growth strategy, as well as certain financial and other goals.  The words “believes,” “expects,” “may,” “will,” “should,” “projects,” “contemplates,” “anticipates,” “forecasts,” “intends,” or other similar words or terms are intended to identify forward-looking statements. These forward-looking statements are subject to significant uncertainties because they are based upon or are affected by factors including:

•

general business conditions, as well as conditions within the financial markets;

•

general economic conditions, including unemployment levels, inflation and slowdowns in economic growth;

•

the Company’s branch and market expansions, technology initiatives and other strategic initiatives;

•

the impact of competition from banks and non-banks, including financial technology companies (Fintech);

•

advances and changes in technology, including artificial intelligence, and the Company’s ability to develop timely and competitive products and services and effectively manage related risks;

•

the composition of the loan and deposit portfolio, including the types of accounts and customers, may change, which could impact the amount of net interest income and noninterest income in future periods, including revenue from service charges on deposits;

•

limited availability of financing or inability to raise capital;

•

reliance on third parties for key services;

•

the Company’s credit standards and its on-going credit assessment processes might not protect it from significant credit losses;

•

the quality of the loan portfolio and the value of the collateral securing those loans;

•

prepayments of loans and securities could materially impact earnings through a reduction in interest income and fees on loans and interest income on securities;

•

the level of net charge-offs on loans and the adequacy of the allowance for credit losses on loans;

•

the concentration in loans secured by real estate may adversely affect earnings due to changes in the real estate markets;

•

demand for loan products;

•

deposit flows;

•

the ability to maintain adequate liquidity by retaining deposit customers and secondary funding sources, especially if the Company’s, or industry's, reputation become damaged;

•

the value of securities held in the Company's investment portfolio;

•

legislative or regulatory changes or actions, including the effects of changes in tax laws;

•

changes in accounting principles, policies and guidelines and elections made by the Company thereunder;

•

cyber threats, attacks or events;

•

monetary and fiscal policies of the U.S. Government, including policies of the U.S. Department of the Treasury and the Federal Reserve Board, and the effect of those policies on interest rates and business in the Company's markets;

•

changes in interest rates could have a negative impact on the value of the Company’s securities portfolio and its net interest income and an unfavorable impact on the Company’s customers’ ability to repay loans;

•

U.S. and global trade policies and tensions, including change in, or the imposition of, tariffs and/or other barriers or restrictions on trade and/or any retaliatory counter measures, and the economic impacts, volatility and uncertainty resulting therefrom, and geopolitical instability;

•

geopolitical conditions, including acts or threats of terrorism, international hostilities, or actions taken by the U.S. or other governments in response to acts or threats of terrorism and/or military conflicts, which could impact business and economic conditions in the U.S. and abroad;

•

the emergence of digital assets and payment stablecoins, and evolving legislative or regulatory frameworks, which could alter deposit flows, competition, and credit intermediation and, in turn, adversely affect the Company’s funding, liquidity, or overall financial performance;

•

political developments, including government shutdowns and other significant disruptions and changes in the funding, size, scope, and effectiveness of the federal government, its agencies and services; and

•

other factors identified in Item 1A. Risk Factors of the Company’s Form 10-K for the year ending December 31, 2025.

Because of these and other uncertainties, actual results may be materially different from the results indicated by these forward-looking statements. In addition, past results of operations do not necessarily indicate future results. The following discussion and analysis of the financial condition at March 31, 2026 and statements of income of the Company for the three months ended March 31, 2026 and 2025 should be read in conjunction with the consolidated financial statements and related notes included in Part I, Item 1, of this Form 10-Q and in Part II, Item 8, of the Form 10-K for the period ending December 31, 2025. The statements of income for the three months ended March 31, 2026 may not be indicative of the results to be achieved for the year.

35

Table of Contents

Executive Overview

The Company

First National Corporation (the Company) is the bank holding company of:

•

First Bank (the Bank). The Bank owns:

•

First Bank Financial Services, Inc.

•

Shen-Valley Land Holdings, LLC

•

McKenney Group, LLC

•

First National (VA) Statutory Trust II (Trust II)

•

First National (VA) Statutory Trust III (Trust III and, together with Trust II, the Trusts)

First Bank Financial Services, Inc. owns an interest in an entity that provides title insurance services. Shen-Valley Land Holdings, LLC was formed to hold other real estate owned and future office sites. McKenney Group, LLC owns an interest in an entity that provides insurance services. The Trusts were formed for the purpose of issuing redeemable capital securities, commonly known as trust preferred securities and are not included in the Company’s consolidated financial statements in accordance with authoritative accounting guidance because management has determined that the Trusts qualify as variable interest entities.

In March of 2025 two previously held subsidiaries of the Company, Bank of Fincastle Services, Inc. and ESF, LLC, were closed with no material impact to the financials related to the closures.

Products, Services, Customers and Locations

The Bank offers loan, deposit, and wealth management products and services. Loan products and services include consumer loans, residential mortgages, home equity loans, and commercial loans. Deposit products and services include checking accounts, treasury management solutions, savings accounts, money market accounts, certificates of deposit, and individual retirement accounts. Wealth management services include estate planning, investment management of assets, trustee under an agreement, trustee under a will, individual retirement accounts, and estate settlement. Customers include small and medium-sized businesses, individuals, estates, local governmental entities, and non-profit organizations. The Bank’s office locations are well-positioned in attractive markets along the Interstate 81, Interstate 66, and Interstate 64 corridors in the Shenandoah Valley, the Roanoke Valley, south-central regions of Virginia, the Richmond MSA, and northern North Carolina. Within this market area, there are diverse types of industry including medical and professional services, manufacturing, retail, warehousing, government, hospitality, and higher education.  The Bank’s products and services are delivered through 33 bank offices, one loan production offices, and one customer service center in a retirement community. For the location and general character of each of these offices, see Item 2 of the Company's Form 10-K for the year ended December 31, 2025. Many of the Bank’s services are also delivered through the Bank’s mobile banking platforms and a network of ATMs located throughout its market area.

In February of 2026, the Company announced plans to sell two of its banking offices and consolidate three others into nearby locations. The transactions, which include the sale of two standalone banking offices in North Carolina located in Roanoke Rapids and Louisburg, and the consolidation of three offices in Virginia into proximate existing branches, are expected to close in the second half of 2026 following receipt of required regulatory approvals, customer notification and vendor conversion availability. This will reduce the number of banking offices from 33 to 28. These actions are designed to streamline operations, reduce overhead, and allow the Bank to better allocate resources toward delivering enhanced customer service, innovative digital banking solutions, and continued support for the communities it serves. For additional information, see the Company's Form 8-K dated February 11, 2026, referenced herein at Exhibit 2.

Revenue Sources and Expense Factors

The primary source of revenue is from net interest income earned by the Bank. Net interest income is the difference between interest income and interest expense and typically represents between 75% and 85% of the Company’s total revenue. Interest income is determined by the amount of interest-earning assets outstanding during the period and the interest rates earned on those assets. The Bank’s interest expense is a function of the amount of interest-bearing liabilities outstanding during the period and the interest rates paid. In addition to net interest income, noninterest income is the other source of revenue for the Company. Noninterest income is derived primarily from service charges on deposits, fee income from wealth management services, and ATM and check card fees.

Primary expense categories are salaries and employee benefits, which comprised 56% of noninterest expenses for the three months ended March 31, 2026, followed by other operating expense, which comprised 10% of noninterest expenses. The provision for credit losses is also typically a primary expense of the Bank. The provision is determined by factors that include net charge-offs, asset quality, economic conditions, and loan growth. Changing economic conditions caused by inflation, recession, unemployment, or other factors beyond the Company’s control have a direct correlation with asset quality, net charge-offs, and ultimately the required provision for credit losses. 

Overview of Quarterly Financial Performance

Comparing the Three-Month Periods Ending March 31, 2026 and March 31, 2025

Net income increased $3.3 million to $4.9 million, or $0.54 per diluted share, for the three months ended
March 31, 2026
, compared to $1.6 million, or $0.18 per diluted share, for the same period in
2025
. Return on average assets was 0.98% and return on average equity was 10.51% for the
first
quarter of
2026
, compared to 0.32% and 3.85%, respectively, for the same period in
2025
.

The increase in net income resulted primarily from a $1.2 million increase in net interest income after provision and a decrease in noninterest expenses of $2.4 million primarily related to the Touchstone acquisition.

36

Table of Contents

Net interest income increased by $1.2 million as total interest expense decreased by $918 thousand and total interest income increased by $307 thousand. Net interest income was positively impacted by a $17.0 million, or 0.9%, increase in average earning assets with a 2-basis point increase in yield and an $8.9 million, or 0.7%, increase in interest bearing liabilities with a 30-basis point decrease in yield. Net interest income was posit

[Excerpt truncated for page length; source filing is linked above.]

Latest 10-K MD&A

Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Confidence: high. Filing date: 2026-03-25. Report date: 2025-12-31.

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operation

The following discussion and analysis of the financial condition and results of operations of the Company for the years ended December 31, 2025 and 2024 should be read in conjunction with the consolidated financial statements and related notes to the consolidated financial statements included in Item 8 of this Form 10-K.

Critical Accounting Policies

General

The Company’s consolidated financial statements and related notes are prepared in accordance with GAAP. The financial information contained within the statements is, to a significant extent, financial information that is based on measures of the financial effects of transactions and events that have already occurred. A variety of factors could affect the ultimate value that is obtained either when earning income, recognizing an expense, recovering an asset, or relieving a liability. The Bank uses historical losses as one factor in determining the inherent loss that may be present in the loan portfolio. Actual losses could differ significantly from the historical factors used. In addition, GAAP itself may change from one previously acceptable method to another. Although the economics of transactions would be the same, the timing of events that would impact transactions could change.

Presented below is a discussion of those accounting policies that management believes are the most important (Critical Accounting Policies) to the portrayal and understanding of the Company’s financial condition and results of operations. The Critical Accounting Policies require management’s most difficult, subjective, and complex judgments about matters that are inherently uncertain. In the event that different assumptions or conditions were to prevail, and depending upon the severity of such changes, the possibility of materially different financial condition or results of operations is a reasonable likelihood.

Allowance for Credit Losses on Loans

The allowance for credit losses on loans (ACLL) is established as losses are estimated to have occurred through a provision for credit losses charged to earnings. Loan losses are charged against the allowance when management determines that the loan balance is uncollectible. Subsequent recoveries, if any, are credited to the allowance. For further information about the Company’s loans and the ACLL, see Notes 1, 4, and 5 to the Consolidated Financial Statements included in this Form 10-K.

The ACLL is evaluated on a quarterly basis by management and is based on a discounted cash flow model to estimate its current expected credit losses. For the purposes of calculating its quantitative reserves, the Company has segmented its loan portfolio based on loans which share similar risk characteristics. Within the quantitative portion of the calculation, the Company utilizes at least one or a combination of loss drivers, which may include unemployment rates, home price indices, and/or gross domestic product (GDP), to adjust its loss rates over a reasonable and supportable forecast period of one year. A straight-line reversion technique is used for the following eight quarters, at which time the Company reverts to historical averages. To further adjust the allowance for credit losses for expected losses not already included within the quantitative component of the calculation, the Company may consider qualitative factors, including but not limited to: variability in the economic forecast, changes in volume and severity of adversity classified loans, changes in concentrations of credit, changes in the nature and volume of the loan segments, factors related to credit administration, and other idiosyncratic risks not embedded in the data used in the model. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

The Company performs regular credit reviews of the loan portfolio to review credit quality and adherence to underwriting standards. The credit reviews consist of reviews by its internal credit administration department and reviews performed by an independent third party. Upon origination, each loan is assigned a risk rating ranging from one to nine, with loans closer to one having less risk. This risk rating scale is the Company's primary credit quality indicator. The Company has various committees that review and ensure that the allowance for credit losses methodology is in accordance with GAAP and loss factors used appropriately reflect the risk characteristics of the loan portfolio.

The allowance for loan credit losses represents an amount which, in management’s judgement, is adequate to absorb the lifetime expected losses that may be sustained on outstanding loans at the balance sheet date based on the evaluation of the size and current risk characteristics of the loan portfolio, past events, current conditions, reasonable and supportable forecasts of future economic conditions, and prepayment experience. The allowance for loan credit losses is measured and recorded upon the initial recognition of a financial asset. The allowance for loan credit losses is reduced by charge-offs, net of recoveries of previous losses, and is increased or decreased by a provision for (or recovery of) credit losses, which is recorded in the Consolidated Statement of Income. The evaluation also considers the following risk characteristics of each loan portfolio class:

 ●

1-4 family residential mortgage loans carry risks associated with the continued creditworthiness of the borrower and changes in the value of the collateral.

 ●

Real estate construction and land development loans carry risks that the project may not be finished according to schedule, the project may not be finished according to budget, and the value of the collateral may, at any point in time, be less than the principal amount of the loan. Construction loans also bear the risk that the general contractor, who may or may not be a loan customer, may not finish the construction project as planned because of financial pressure or other factors unrelated to the project.

 ●

Commercial and industrial loans carry risks associated with the successful operation of a business because repayment of these loans may be dependent upon the profitability and cash flows of the business. In addition, there is risk associated with the value of collateral other than real estate which may depreciate over time and cannot be appraised with as much reliability.

 ●

Consumer and other loans carry risk associated with the continued creditworthiness of the borrower and the value of the collateral, if any. Consumer loans are typically either unsecured or secured by rapidly depreciating assets such as automobiles. These loans are also likely to be immediately and adversely affected by job loss, divorce, illness, personal bankruptcy, or other changes in circumstances. Other loans included in this category include loans to states and political subdivisions.

25

Table of Contents

The ACLL consists of loans individually evaluated and loans collectively evaluated. Loans that do not share risk characteristics are evaluated on an individual basis. The Company designates individually evaluated loans on nonaccrual status as collateral dependent loans, as well as other loans that management of the Company designates as having higher risk and loans for which the repayment is expected to be provided substantially through the operation or sale of the collateral. These loans do not share common risk characteristics and are not included within the collectively evaluated loans for determining the allowance for credit losses. Under CECL, for collateral dependent loans, the Company has adopted the practical expedient to measure the allowance for credit losses based on the fair value of collateral. The allowance for credit losses is calculated on an individual loan basis based on the shortfall between the fair value of the loan’s collateral, which is adjusted for liquidation costs/discounts, and amortized cost. If the fair value of the collateral exceeds the amortized cost, no allowance is required. For further information regarding the ACLL, see Notes 1 and 5 to the Consolidated Financial Statements included in this Form 10-K.

The Company estimates expected credit losses on held-to-maturity securities on an individual basis based on a Probability of Default/Loss Given Default (PD/LGD) methodology primarily using security-level credit ratings. The primary indicators of credit quality for the Company’s held-to-maturity portfolio are security type and credit ratings, which are influenced by a number of factors including obligor cash flow, geography, seniority, among other factors. The Company’s held-to-maturity securities with credit risk are municipal bonds and corporate debt securities. All other held-to-maturity securities are covered by the explicit or implied guarantee of the United States government or one if its agencies.

Management evaluates all available-for-sale securities in an unrealized loss position on a quarterly basis, and more frequently when economic or market conditions warrant such evaluation. If the Company has the intent to sell the security or it is more likely than not that the Company will be required to sell the security, the security is written down to fair value and the entire loss is recorded in earnings.

If either of the above criteria is not met, the Company evaluates whether the decline in fair value is the result of credit losses or other factors. In making the assessment, the Company may consider various factors including the extent to which fair value is less than amortized cost, downgrades in the ratings of the security by a rating agency, the failure of the issuer to make scheduled interest or principal payments and adverse conditions specific to the security. If the assessment indicates that a credit loss exists, the present value of cash flows expected to be collected are compared to the amortized cost basis of the security and any deficiency is recorded as an allowance for credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any amount of unrealized loss that has not been recorded through an allowance for credit loss is recognized in other comprehensive income.

Changes in the allowance for credit loss are recorded as a provision for (or recovery of) credit losses in the Consolidated Statements of Income. Losses are charged against the allowance for credit loss when management believes an available-for-sale security is confirmed to be uncollectible or when either of the criteria regarding intent or requirement to sell is met. 

Financial Instruments include off-balance sheet credit instruments, such as commitments to make loans and commercial letters of credit issued to meet customer financing needs. The Company’s exposure to credit losses in the event of nonperformance by the other party to the financial instrument for off-balance sheet loan commitments is represented by the contractual amount of those instruments. Such financial instruments are recorded when they are funded.

The Company records all allowance for credit losses on off-balance sheet credit exposures, unless the commitments to extend credit are unconditionally cancelable, through a charge to provision for (or recovery of) credit losses in the Consolidated Statement of Income. The allowances for credit losses on off-balance sheet credit exposures is estimated by loan segment at each balance sheet date under the current expected credit losses model using the same methodology as the loan portfolio, taking into consideration the likelihood that funding will occur as well as any third-party guarantees. The allowance for unfunded commitments is included in other liabilities on the Company’s consolidated balance sheet.

The loan portfolio includes commercial and industrial loans that were originated by a third-party and were acquired at premiums.  Premiums on performing loans are amortized into interest income and fees on loans over the life of the loans using the effective interest method. Premiums on non-performing loans are not amortized into interest income and fees on loans after loans are placed on non-accrual status and are included in the calculation of specific reserve component of the allowance for credit losses on loans for individually analyzed loans.

26

Table of Contents

Results of Operations

Executive Overview

The Company’s 2025 financial highlights:

 ●

The Company acquired Touchstone Bankshares, Inc. on October 1, 2024, and completed the operational merger in the first quarter of 2025.

 ●

Net income available to common shareholders was $17.7 million and diluted earnings per share was $1.96 compared to net income of $7.0 million and diluted earnings per share of $1.00 in 2024.

 ●

Earnings produced a return on average equity of 10.10% for 2025 compared to 5.33% for 2024.

 ●

Period end loans, net, decreased $15.2 million in 2025 as compared to 2024.

 ●

Period end deposits decreased $4.2 million in 2025 as compared to 2024.

 ●

The 2025 provision for credit losses on loans totaled $2.9 million, compared to $7.9 million in 2024.

 ●

Nonperforming assets as a percentage of total loans were 0.32% on December 31, 2025, compared to 0.50% in 2024.

 ●

The net interest margin increased to 3.88% for 2025, compared to 3.51% in 2024.

Net Income

Net income increased by $10.7 million to $17.7 million, or $1.96 per diluted share, for the year ended December 31, 2025, compared to $7.0 million, or $1.00 per diluted share, for the same period in 2024. Return on average assets was 0.87% and return on average equity was 10.10% for the year ended December 31, 2025, compared to 0.44% and 5.33%, respectively, for the year ended December 31, 2024.

The $10.7 million increase in net income resulted from a $20.8 million increase in net interest income, a $5.9 million decrease in merger expenses associated with the Touchstone acquisition, a $5.0 million decrease in provision for credit losses partially associated with the acquisition, and a $638 thousand increase in noninterest income. These favorable variances were partially offset by a $12.5 million, or 24%, increase in noninterest expense and a $3.2 million increase in income tax expense.

27

Table of Contents

The following is selected financial data for the Company for the years ended December 31, 2025 and 2024. This information has been derived from audited financial information included in Item 8 of this Form 10-K (in thousands, except ratios and per share amounts).

As of and for the years ended December 31,

2025

2024

Results of Operations

Interest and dividend income

$

99,497

$

76,319

Interest expense

26,251

23,867

Net interest income

73,246

52,452

Provision for credit losses

2,887

7,850

Net interest income after provision for credit losses

70,359

44,602

Noninterest income

17,018

16,380

Noninterest expense

65,433

52,934

Income before income taxes

21,944

8,048

Income tax expense

4,241

1,082

Net income

$

17,703

$

6,966

Key Performance Ratios

Return on average assets

0.87

%

0.44

%

Return on average equity

10.10

%

5.33

%

Net interest margin (1)

3.88

%

3.51

%

Efficiency ratio (1)

68.18

%

66.73

%

Dividend payout

32.27

%

60.54

%

Equity to assets

9.14

%

8.28

%

Per Common Share Data

Net income, basic

$

1.97

$

1.00

Net income, diluted

1.96

1.00

Cash dividends

0.635

0.605

Book value at period end

18.83

16.48

Financial Condition

Assets

$

2,037,978

$

2,010,281

Loans, net

1,435,026

1,450,195

Securities

326,034

277,329

Deposits

1,799,548

1,803,778

Shareholders’ equity

186,196

166,531

Average shares outstanding, diluted

9,015

6,971

Capital Ratios (2)

Leverage

9.13

%

7.95

%

Risk-based capital ratios:

Common equity Tier 1 capital

12.59

%

11.19

%

Tier 1 capital

12.59

%

11.19

%

Total capital

13.64

%

12.34

%

(1)

This performance ratio is a non-GAAP financial measure that the Company believes provides investors with important information regarding operational performance. Such information is not prepared in accordance with U.S. generally accepted accounting principles (GAAP) and should not be construed as such. In addition, these non-GAAP financial measures may be calculated differently and may not be comparable to similar measures provided by other companies. Management believes such financial information is meaningful to the reader in understanding operating performance but cautions that such information should not be viewed as a substitute for GAAP. See “Non-GAAP Financial Measures” included below.

(2)

All capital ratios reported are for the Bank.

For a more detailed discussion of the Company's annual performance, see "Net Interest Income,” “Provision for Credit Losses,” "Noninterest Income," "Noninterest Expense" and "Income Taxes" below.

28

Table of Contents

Non-GAAP Financial Measures

This report refers to the efficiency ratio, which is computed by dividing noninterest expense, excluding OREO expense, amortization of intangibles, and merger expenses, by the sum of net interest income on a tax-equivalent basis and noninterest income, excluding (gains)/losses on disposal of premises and equipment, and securities gains. This is a non-GAAP financial measure that the Company believes provides investors with important information regarding operational efficiency. Such information is not prepared in accordance with GAAP and should not be construed as such. Management believes, however, such financial information is meaningful to the reader in understanding operating performance, but cautions that such information not be viewed as a substitute for GAAP. The Company, in referring to its net income, is referring to income under GAAP. The components of the efficiency ratio calculation are summarized in the following table (dollars in thousands).

Efficiency Ratio

2025

2024

Total noninterest expense (GAAP)

$

65,433

$

52,934

Subtract: other real estate (gain) loss and expense, net

7

(15

)

Subtract: amortization of intangibles

(1,767

)

(461

)

Subtract: loss on disposal of premises and equipment, net

16

(47

)

Subtract: merger expenses

(2,159

)

(8,107

)

Adjusted non-interest expense (non-GAAP)

$

61,530

$

44,304

Tax-equivalent net interest income (non-GAAP)

$

73,613

$

52,821

Total noninterest income (GAAP)

17,018

16,380

Gain on subordinated debt payoff

(80

)

—

Bargain purchase gain from acquisition

(304

)

(2,920

)

Securities losses (gains), net

—

115

Adjusted income for efficiency ratio (non-GAAP)

$

90,247

$

66,396

Efficiency ratio (non-GAAP)

68.18

%

66.73

%

This report also refers to net interest margin, which is calculated by dividing tax equivalent net interest income by total average earning assets. Because a portion of interest income earned by the Company is nontaxable, the tax equivalent net interest income is considered in the calculation of this ratio. Tax equivalent net interest income is calculated by adding the tax benefit realized from interest income that is nontaxable to total interest income then subtracting total interest expense. The tax rate utilized in calculating the tax benefit for both 2025 and 2024 is 21%.  The reconciliation of tax equivalent net interest income, which is not a measurement under GAAP, to net interest income, is reflected in the table below (in thousands).

Reconciliation of Net Interest Income to Tax-Equivalent Net Interest Income

2025

2024

GAAP measures:

Interest income – loans

$

85,174

$

63,483

Interest income – investments and other

14,323

12,836

Interest expense – deposits

(24,292

)

(20,964

)

Interest expense – federal funds purchased

—

(1

)

Interest expense – subordinated debt

(1,687

)

(603

)

Interest expense – junior subordinated debt

(266

)

(270

)

Interest expense – other borrowings

(6

)

(2,029

)

Total net interest income

$

73,246

$

52,452

Non-GAAP measures:

Tax benefit realized on non-taxable interest income - loans

$

52

$

43

Tax benefit realized on non-taxable interest income - municipal securities

315

326

Total tax benefit realized on non-taxable interest income

$

367

$

369

Total tax-equivalent net interest income

$

73,613

$

52,821

29

Table of Contents

Net Interest Income

Net interest income represents the primary source of earnings for the Company. Net interest income equals the amount by which interest income on interest-earning assets, predominantly loans and securities, exceeds interest expense on interest-bearing liabilities, including deposits, other borrowings, subordinated debt, and junior subordinated debt. Changes in the volume and mix of interest-earning assets and interest-bearing liabilities, as well as their respective yields and rates, are the components that impact the level of net interest income. The net interest margin is calculated by dividing tax-equivalent net interest income by average earning assets. The provision for credit losses, noninterest income, noninterest expense and income tax expense are the other components that determine net income. Noninterest income primarily consists of income from service charges on deposit accounts, ATM and check card income, wealth management income, income from other customer services, and income from bank owned life insurance. Noninterest expense primarily consists of salaries and benefits, occupancy and equipment expenses, marketing expenses, legal and professional fees, data processing expenses, atm and check card expenses, FDIC assessments, bank franchise taxes, merger expenses and other operating expenses.

Net interest income increased $20.8 million, or 39.6%, to $73.2 million for 2025 compared to the prior year. Total interest income increased by $23.2 million and was partially offset by total interest expense, which increased by $2.4 million.  The net interest margin increased by 37-basis points to 3.88% and average earnings assets increased by $393.5 million, or 26.1%, offset by a $279.9 million, or 27.1%, increase in average interest-bearing liabilities, in each case primarily related to the acquisition of Touchstone.

The increase in total interest income was primarily attributable to a $21.7 million, or 34%, increase in interest income and fees on loans. The increase in interest income on loans was attributable to a 12-basis point increase in the yield on loans and a 31.5% increase in average loan balances compared to the prior year due to the acquisition of Touchstone. 

The increase in total interest expense was attributable to a $3.3 million increase in interest expense on deposits offset by a $2.0 million decrease in interest expense on other borrowings. Although there was a 31-basis point decrease in the cost of interest-bearing liabilities, interest expense increased due to a 31.9% increase in average interest-bearing deposits due to the acquisition of Touchstone. 

The net interest margin was 3.88% for the year ended December 31, 2025, compared to the 3.51% for the prior year as the increase in the yield on earning assets exceeded the increase in cost of funds during 2025. Net accretion income related to acquisition accounting was $1.1 million, or a six-basis point incremental increase to the net interest margin.

30

Table of Contents

The following table provides information on average interest-earning assets and interest-bearing liabilities for the years ended December 31, 2025 and 2024 as well as amounts and rates of tax equivalent interest earned and interest paid (dollars in thousands). The volume and rate analysis table analyzes the changes in net interest income for the periods broken down by their rate and volume components (in thousands).

Average Balances, Income and Expense, Yields and Rates (Taxable Equivalent Basis)

Years Ending December 31,

2025

2024

Average Balance

Interest Income/Expense

Yield/Rate

Average Balance

Interest Income/Expense

Yield/Rate

Assets

Interest-bearing deposits in other banks

$

160,064

$

6,913

4.32

%

$

124,407

$

6,490

5.22

%

Securities:

Taxable

236,181

5,923

2.51

%

221,611

4,733

2.14

%

Tax-exempt (1)

51,613

1,502

2.91

%

53,289

1,547

2.90

%

Restricted

4,377

260

5.94

%

2,522

202

8.01

%

Total securities

292,171

7,685

2.63

%

277,422

6,482

2.34

%

Loans: (2)

Taxable

1,441,319

84,982

5.90

%

1,096,312

63,320

5.78

%

Tax-exempt (1)

3,978

244

6.13

%

2,561

206

8.04

%

Total loans

1,445,297

85,226

5.90

%

1,098,873

63,526

5.78

%

Federal funds sold

892

40

4.52

%

4,244

189

4.44

%

Total earning assets

1,898,424

99,864

5.26

%

1,504,946

76,687

5.10

%

Less: allowance for credit losses on loans

(15,437

)

(13,381

)

Total nonearning assets

143,540

105,585

Total assets

$

2,026,527

$

1,597,150

Liabilities and Shareholders’ Equity

Interest-bearing deposits:

Checking

$

377,944

$

4,880

1.29

%

$

278,558

$

4,870

1.75

%

Money market accounts

332,467

7,370

2.22

%

294,818

8,265

2.80

%

Savings accounts

210,510

756

0.36

%

160,795

292

0.18

%

Certificates of deposit:

Less than $250

292,203

8,831

3.02

%

192,456

5,856

3.01

%

Greater than $250

71,438

2,455

3.44

%

46,846

1,668

3.56

%

Brokered deposits

—

—

0.00

%

288

13

4.82

%

Total interest-bearing deposits

1,284,562

24,292

1.89

%

973,761

20,964

2.15

%

Federal funds purchased

1

—

0.00

%

2

—

5.24

%

Subordinated debt

20,308

1,687

8.31

%

8,889

603

6.78

%

Junior subordinated debt

9,279

266

2.86

%

9,279

270

2.91

%

Other borrowings

137

6

4.28

%

42,486

2,029

4.78

%

Total interest-bearing liabilities

1,314,287

26,251

2.00

%

1,034,417

23,866

2.31

%

Noninterest-bearing liabilities

Demand deposits

527,756

422,981

Other liabilities

9,220

9,037

Total liabilities

1,851,263

1,466,435

Shareholders’ equity

175,264

130,715

Total liabilities and shareholders’ equity

$

2,026,527

$

1,597,150

Net interest income

$

73,613

$

52,821

Interest rate spread

3.26

%

2.79

%

Cost of funds

1.43

%

1.64

%

Interest expense as a percent of average earning assets

1.38

%

1.59

%

Net interest margin

3.88

%

3.51

%

(1)

Income and yields are reported on a taxable-equivalent basis assuming a federal tax rate of 21%. The tax-equivalent adjustment was $367 thousand for 2025, and $369 thousand for 2024.

(2)

Loans placed on a non-accrual status are reflected in the balances.

31

Table of Contents

Volume and Rate

Years Ending December 31,

2025

Volume Effect

Rate Effect

Change in Income/Expense

Interest-bearing deposits in other banks

$

1,064

$

(641

)

$

423

Loans, taxable

20,361

1,300

21,661

Loans, tax-exempt

66

(28

)

38

Securities, taxable

329

861

1,190

Securities, tax-exempt

(51

)

6

(45

)

Securities, restricted

89

(31

)

58

Federal funds sold

(152

)

4

(148

)

Total earning assets

$

21,706

$

1,471

$

23,177

Checking

$

39

$

(29

)

$

10

Money market accounts

1,418

(2,313

)

(895

)

Savings accounts

110

354

464

Certificates of deposits:

Less than $250

2,993

(18

)

2,975

Greater than $250

843

(56

)

787

Brokered deposits

(13

)

—

(13

)

Subordinated debt

923

162

1,085

Junior subordinated debt

—

(4

)

(4

)

Other borrowings

(1,833

)

(191

)

(2,024

)

Total interest-bearing liabilities

$

4,480

$

(2,095

)

$

2,385

Change in net interest income

$

17,226

$

3,566

$

20,792

Provision for Credit Losses

Provision for credit losses totaled $2.9 million in 2025, compared to a provision for credit losses of $7.9 million for the prior year. The 2025 provision was comprised of a $2.8 million provision for credit losses on loans, a $141 thousand provision for credit losses on unfunded commitments, and a $12 thousand recovery of credit losses on held-to-maturity securities. Included in the provision for credit losses for the fourth quarter of 2024 was a $3.8 million initial provision expense on non-purchased credit deteriorated (PCD) loans acquired from Touchstone.

For the year ended December 31, 2025, the provision for credit losses on loans of $2.8 million and net charge offs of $4.4 million resulted in a $1.7 million decrease in the allowance for credit losses on loans. The $4.4 million of net charge-offs included $1.3 million of loans purchased through a third-party lending program and $650 thousand of related unamortized purchase premiums on the loans. 

Outside of the initial provision expense recorded on non-PCD loans in 2024, the general reserve component of the ACLL decreased $395 thousand and the specific reserve component of the ACLL decreased $1.3 million in 2025. The decrease in the general reserve was attributable to a decrease in loans. Calculated loss rates were lower as were the inherent risks in the loan portfolio through adjustments to qualitative risk factors. The specific reserve decrease was driven by lower individually analyzed loans balances following charge-offs recorded in 2025.

For the year ended December 31, 2024, the provision for credit losses on loans of $7.8 million, the allowance for credit losses on acquired PCD loans of $386 thousand, and net charge offs of $3.8 million resulted in a $4.4 million increase in the allowance for credit losses on loans. The $3.8 million of net charge-offs included $2.3 million of loans purchased through a third-party lending program and $1.1 million of related unamortized purchase premiums on the loans.

Noninterest Income

Noninterest income totaled $17.0 million for the year, which was an increase of $638 thousand, or 3.9%, compared to $16.4 million for the prior year. The increase was primarily from increases in ATM and check card fees of $1.3 million, or 38.7%, and service charges on deposit accounts of $833 thousand, or 26.7%.  Noninterest income categories with moderate increases over the prior year included brokered mortgage fees which increased $397 thousand, or 157.5%, income from bank owned life insurance which increased $389 thousand, or 51.5%, and fees for other customer services which increased $221 thousand, or 22.9%. These increases were offset by a decrease of $2.6 million from the bargain purchase gain recognized on the acquisition of Touchstone. 

Noninterest Expense

Noninterest expense increased $12.5 million, or 23.6%, for the year ended December 31, 2025, compared to the prior year.  The increase was primarily a result of salaries and employee benefits of $8.5 million and other operating expenses of $3.0 million. Categories with moderate increases over the prior year included occupancy expense which increased $1.5 million, or 56.8%, amortization expense which increased $1.3 million, or 283.3%, equipment expense which increased $1.2 million, or 37.5%, and data processing expense which increased $858 thousand, or 61.1%. The increase was primarily driven by the Touchstone merger resulting in increased operating expenses due to operating additional branches, duplicative expenses incurred prior to system integration, and amortization expense due to time deposit accretion on time deposits acquired from Touchstone. Other operating expense increased from higher recruiting expense, directors fees, debit card promotion expense, education and training, loan collection expense, item processing expense, core deposit intangible expense, and courier and armored services. These increases were offset by a decrease in merger expenses from prior year of $5.9 million, or 73.4%.

32

Table of Contents

Income Taxes

Income tax expense increased $3.2 million during the year ended 
December 31, 2025
 compared to the prior year. The Company’s income tax expense differed from the amount of income tax determined by applying the U.S. federal income tax rate to pretax income for the years ended 
December 31, 2025
 and
2024
. The difference was a result of an increase in net permanent tax deductions, primarily comprised of tax-exempt bargain purchase gain, interest income and income from bank owned life insurance. A more detailed discussion of the Company’s tax calculation is contained in Note 12 to the Consolidated Financial Statements included in this Form 10-K.

Financial Condition

General

Total assets increased $27.7 million during the year and totaled $2.0 billion at December 31, 2025. The increase was attributable to a $53.7 million increase in securities available for sale. This increase was offset by a $15.2 million decrease in loans, net of allowance for credit losses, $6.9 million decrease in securities held to maturity, and a $4.1 million decrease in cash and due from banks.

Total liabilities increased $8.0 million during the year and totaled $1.9 billion at December 31, 2025.   The increase was attributable to other borrowings of $25.0 million from the Federal Home Loan Bank. Subordinated debt decreased by $12.9 million due to redemptions and total deposits decreased by $4.2 million.

Total shareholders' equity increased $19.7 million to $186.2 million at December 31, 2025, compared to $166.5 million at December 31, 2024. The increase was primarily attributable to a $12.0 million increase in retained earnings and $6.5 million decrease in accumulated other comprehensive loss.

Loans

The Bank is an active lender with a loan portfolio that includes commercial and residential real estate loans, commercial loans, consumer loans, construction and land development loans, and home equity loans. The Bank’s lending activity is concentrated on individuals, and small and medium-sized businesses primarily in its market areas. As a provider of community-oriented financial services, the Bank does not typically attempt to further geographically diversify its loan portfolio by undertaking significant lending activity outside its market areas.

The loan portfolio includes loans that were acquired through business combinations. Loans acquired through business combinations included unamortized discounts, net of unamortized premiums totaling $13.2 million and $14.3 million, as of December 31, 2025 and 2024, respectively, which are amortized over the life of the loans.

Loans purchased from a third-party that originated and serviced loans to health care professionals totaled $14.1 million as of December 31, 2025, which included unamortized premiums totaling $4.1 million, compared to loans totaling $19.0 million as of December 31, 2024, which included unamortized premiums totaling $5.8 million.

Loans decreased $16.9 million to $1.4 billion at December 31, 2025, compared to $1.5 billion at December 31, 2024. Other real estate loans increased by $24.8 million, construction and land development loans increased by $3.9 million, commercial, and industrial loans decreased by $23.4 million, residential real estate loans decreased by $19.9 million, and consumer and other loans decreased by $2.3 million. 

33

Table of Contents

The following table sets forth the maturities of the loan portfolio at December 31, 2025 (in thousands):

Maturity Schedule of Loans Held for Investment

December 31, 2025

Construction and Land Development

Secured by 1-4 Family Residential

Other Real Estate

Commercial and Industrial

Consumer and Other Loans

Total

Variable Rate:

Within 1 year

$

22,643

$

9,965

$

13,580

$

22,166

$

5

$

68,359

1 to 5 years

26,844

21,679

43,937

9,122

1,783

103,365

5 to 15 years

18,196

133,802

238,884

2,860

—

393,742

After 15 years

4,797

107,633

120,780

3,365

—

236,575

Fixed Rate:

Within 1 year

7,574

13,093

31,686

11,471

2,822

66,646

1 to 5 years

5,815

55,444

182,029

59,883

8,239

311,410

5 to 15 years

1,145

90,112

52,182

8,011

6,251

157,701

After 15 years

1,410

95,555

13,900

1,066

16

111,947

$

88,424

$

527,283

$

696,978

$

117,944

$

19,116

$

1,449,745

Asset Quality

Management classifies non-performing assets as non-accrual loans and OREO. OREO represents real property taken by the Bank when its customers do not meet the contractual obligation of their loans, either through foreclosure or through a deed in lieu thereof from the borrower and properties originally acquired for branch operations or expansion but no longer intended to be used for that purpose. OREO is recorded at the lower of cost or fair value, less estimated selling costs, and is marketed by the Bank through brokerage channels. The Bank had $0 and $53 thousand in assets classified as OREO at December 31, 2025 and 2024, respectively.  

Non-performing assets totaled $4.7 million and $7.0 million at December 31, 2025 and 2024, representing approximately 0.23% and 0.35% of total assets, respectively.  Non-performing assets consisted of $4.7 million and $7.0 million of non-accrual loans at December 31, 2025 and 2024, respectively. 

At December 31, 2025, 56.2% of non-performing assets were commercial and industrial loans, 42.9% were residential real estate loans, and 1.0% were construction loans. Non-performing assets could increase due to the deterioration of other loans identified by management as potential problem loans. Other potential problem loans are defined as performing loans that possess certain risks, including the borrower’s ability to pay and the collateral value securing the loan, that management has identified that may result in the loans not being repaid in accordance with their terms. Other potential problem loans totaled $6.4 million and $9.1 million at December 31, 2025 and December 31, 2024, respectively. The amount of other potential problem loans in future periods may be dependent on economic conditions and other factors influencing a customers’ ability to meet their debt requirements.

There were no loans greater than 90 days past due and still accruing at December 31, 2025. There were $365 thousand in loans greater than 90 days past due and still accruing at December 31, 2024.  

The ACLL represents management’s analysis of the existing loan portfolio and related credit risks. The provision for credit losses is based upon management’s current estimate of the amount required to maintain an adequate ACLL reflective of the risks in the loan portfolio. The allowance for credit losses on loans totaled $14.7 million at 
December 31, 2025
 and $16.4 million at 
December 31, 2024
, representing 1.02% and 1.12% of total loans, respectively. The Company determined that the historical loss analysis and the qualitative adjustment factors that established the collectively evaluated reserve component of the ACLL were appropriate at
December 31, 2025
. The collectively evaluated reserve decreased $395 thousand and the individually evaluated reserve component of the ACLL decreased $1.3 million. 

For further discussion regarding the ACLL, see “Provision for Credit Losses” above.

Recoveries of credit losses of $1.5 million and $29 thousand were recorded in the other real estate and construction and land development loans classes during the year ended December 31, 2025. The recoveries of credit losses resulted primarily from a decrease in the collectively evaluated reserve. These recoveries were offset by provision for credit losses totaling $4.3 million in the 1-4 family residential, consumer and other loans, and commercial and industrial loan classes.  For more detailed information regarding the provision for credit losses on loans, see Note 5 to the Consolidated Financial Statements included in this Form 10-K.

Loans individually evaluated for impairment totaled $4.7 million and $7.0 million at December 31, 2025 and 2024, respectively. The related allowance for credit losses required for these loans totaled $1.8 million and $3.1 million at December 31, 2025 and December 31, 2024, respectively. 

34

Table of Contents

Management believes, based upon its review and analysis, that the Bank has sufficient reserves to cover expected losses inherent within the loan portfolio. For each period presented, the provision for credit losses on loans charged to expense was based on factors that include net charge-offs, asset quality, economic conditions, and loan growth. Changing economic conditions caused by inflation, recession, unemployment, or other factors beyond the Company’s control have a direct correlation with asset quality, net charge-offs, and ultimately the required provision for credit losses. There can be no assurance, however, that an additional provision for credit losses will not be required in the future, including as a result of changes in the qualitative factors underlying management’s estimates and judgments, changes in accounting standards, adverse developments in the economy, on a national basis or in the Company’s market area, loan growth, or changes in the circumstances of particular borrowers. For further discussion regarding the ACLL, see “Critical Accounting Policies” above. The following table shows a detail of loans charged-off, recovered, and the changes in the ACLL (dollars in thousands).

Allowance for credit losses

Construction and Land Development

Secured by 1-4 Family Residential

Other Real Estate

Commercial and Industrial

Consumer and Other Loans

Total

For the year ended December 31, 2024:

Balance at beginning of year

$

312

$

3,159

$

4,698

$

3,706

$

99

$

11,974

Initial Allowance on PCD Touchstone loans

$

11

$

173

$

201

$

1

$

—

$

386

Charge-offs

(4

)

(38

)

—

(3,699

)

(293

)

(4,034

)

Recoveries

—

22

3

111

148

284

Initial Provision - Non-PCD Touchstone loans

118

1,310

1,370

143

888

3,829

Provision for (recovery of) credit losses on loans

148

(360

)

1,190

3,665

(682

)

3,961

Balance at end of year

$

585

$

4,266

$

7,462

$

3,927

$

160

$

16,400

Average loans

$

137,029

$

373,012

$

457,732

$

115,410

$

15,689

$

1,098,872

Ratio of net (recoveries) charge-offs to average loans

0.00

%

0.00

%

0.00

%

3.11

%

0.92

%

0.34

%

For the year ended December 31, 2025:

Balance at beginning of year

$

585

$

4,266

$

7,462

$

3,927

$

160

$

16,400

Charge-offs

(22

)

(59

)

(7

)

(4,221

)

(496

)

(4,805

)

Recoveries

5

31

15

168

147

366

Provision for (recovery of) credit losses on loans

(29

)

581

(1,518

)

3,314

410

2,758

Balance at end of year

$

539

$

4,819

$

5,952

$

3,188

$

221

$

14,719

Average loans

$

123,177

$

488,008

$

698,965

$

120,285

$

14,862

$

1,445,297

Ratio of net (recoveries) charge-offs to average loans

0.01

%

0.01

%

0.00

%

3.37

%

2.35

%

0.31

%

The following table shows the balance of the Bank’s ACLL allocated to each major category of loans and the ratio of related outstanding loan balances to total loans (dollars in thousands).    

Allocation of Allowance for Credit Losses

At December 31,

2025

2024

Allocation of Allowance for Credit Losses:

Real estate loans:

Construction and land development

$

539

$

585

Secured by 1-4 family

4,819

4,266

Other real estate loans

5,952

7,462

Commercial and industrial

3,188

3,927

Consumer and other loans

221

160

Total allowance for credit losses

$

14,719

$

16,400

Ratios of loans to total period-end loans:

Real estate loans:

Construction and land development

6.1

%

5.8

%

Secured by 1-4 family

36.4

%

37.3

%

Other real estate loans

48.1

%

45.8

%

Commercial and industrial

8.1

%

9.6

%

Consumer and other loans

1.3

%

1.5

%

100.0

%

100.0

%

35

Table of Contents

The following table provides information on the Bank’s non-performing assets at the dates indicated (dollars in thousands).

Non-performing Assets

At December 31,

2025

2024

Non-accrual loans

$

4,654

$

6,971

Other real estate owned

—

53

Total non-performing assets

$

4,654

$

7,024

Loans past due 90 days accruing interest

—

365

Total non-performing assets and past due loans

$

4,654

$

7,389

Non-performing assets to period end loans

0.32

%

0.50

%

The following table summarizes the Company's credit ratios on a consolidated basis as of December 31, 2025 and 2024.

Consolidated Credit Ratios

December 31, 2025

2025

2024

Total Loans

$

1,449,745

$

1,466,595

Nonaccrual loans

$

4,654

$

6,971

Allowance for credit losses (ACL)

$

14,719

$

16,400

Nonaccrual loans to total loans

0.32

%

0.48

%

ACL to total loans

1.02

%

1.12

%

ACL to nonaccrual loans

316.27

%

235.26

%

The Company purchased commercial and industrial loans between October 2021 and October 2023 from a third-party finance company that originated and serviced loans to health care professionals. The finance company operated a program that historically provided credit support to the Company through, among other things, the repurchase of their loans and unamortized loan premiums when loans did not pay according to the loan agreements. On December 31, 2025, loans purchased from the finance company totaled $14.1 million, which was comprised of $10.0 million of loan balances and unamortized premiums totaling $4.1 million. The Company determined that $2.1 million of the loans were non-accrual and thus were individually evaluated. Specific reserves on the individually evaluated loans were included in the Company’s allowance for credit losses on loans. The remaining $12.0 million of loans were considered performing and were included in the calculation of the collectively evaluated reserve component of the allowance for credit losses. Premiums are amortized over the life of the loans using the effective interest method. On December 31, 2025 and 2024, there were a total of 130 and 155 loans, respectively, purchased from the finance company included in the Company’s loan portfolio with a weighted average maturity of 6.0 and 7.0 years, respectively.

Securities

Securities totaled $326.0 million at December 31, 2025, an increase of $48.7 million, or 17.6%, from $277.3 million at the end of 2024. Investment securities are comprised of U.S. agency and mortgage-backed securities, obligations of state and political subdivisions, corporate debt securities, and restricted securities. As of December 31, 2025, neither the Company nor the Bank held any derivative financial instruments in their respective investment security portfolios. Gross unrealized gains in the available for sale portfolio totaled $363 thousand and $62 thousand at December 31, 2025 and 2024, respectively. Gross unrealized losses in the available for sale portfolio totaled $14.8 million and $22.1 million at December 31, 2025 and 2024, respectively.  Gross unrealized gains in the held to maturity portfolio totaled $98 thousand and $8 thousand at December 31, 2025 and 2024, respectively.  Gross unrealized losses in the held to maturity portfolio totaled $6.8 million and $11.0 million at December 31, 2025 and 2024, respectively.  The change in the unrealized gains and losses of investment securities from December 31, 2024 to December 31, 2025 was related to changes in market interest rates and was not related to credit concerns of the issuers.

The Company evaluated securities available for sale in an unrealized loss position for credit related impairment and determined that no allowance for credit losses was necessary at December 31, 2025 and 2024.  At December 31, 2025, the allowance for credit losses on held to maturity securities was $83 thousand.  There was a $95 thousand allowance for credit losses on held to maturity securities at December 31, 2024.

On September 1, 2022, the Bank transferred 24 securities designated as available for sale with a combined book value of $82.2 million, market value of $74.4 million, and unrealized loss of $7.8 million, to securities designated held to maturity. The unrealized loss is being amortized monthly over the life of the securities with an increase to the carrying value of securities and a decrease to the related accumulated other comprehensive loss, which is included in the shareholders’ equity section of the Company’s balance sheet. The amortization of the unrealized loss on the transferred securities totaled $957 thousand, or $756 thousand net of tax, for the year ended December 31, 2025. The amortization of the unrealized loss on the transferred securities totaled $1.0 million, or $791 thousand net of tax, for the year ended December 31, 2024. The securities selected for transfer had larger potential decreases in their fair market values in higher interest rate environments than most of the other securities in the available for sale portfolio and included U.S. Treasury, agency, municipal and commercial mortgage-backed securities. The securities were transferred to mitigate the potential unfavorable impact that higher market interest rates may have on the carrying value of the securities and on the related accumulated other comprehensive loss. Securities designated as held to maturity are carried on the balance sheet at amortized cost, while securities designated as available for sale are carried at fair market value.

36

Table of Contents

The following table shows the maturities of debt and restricted securities at amortized cost and market value at December 31, 2025 and approximate weighted average yields of such securities (dollars in thousands). Yields on state and political subdivision securities are shown on a tax equivalent basis, assuming a 21% federal income tax rate. The Company attempts to maintain diversity in its portfolio and maintain credit quality and re-pricing terms that are consistent with its asset/liability management and investment practices and policies. For further information on securities, see Note 3 to the Consolidated Financial Statements included in this Form 10-K.

Securities Portfolio Maturity Distribution/Yield Analysis

At December 31, 2025

Less than One Year

One to Five Years

Five to Ten Years

Greater than Ten Years and Equity Securities

Total

U.S. Treasury securities

Amortized cost

$

23,877

$

23,579

$

—

$

—

$

47,456

Market value

$

23,659

$

23,556

$

—

$

—

$

47,215

Weighted average yield

2.68

%

3.50

%

—

%

—

%

3.09

%

U.S. agency and mortgage-backed securities

Amortized cost

$

5,977

$

53,697

$

31,638

$

119,492

$

210,804

Market value

$

5,902

$

52,925

$

30,881

$

106,880

$

196,588

Weighted average yield

2.10

%

3.56

%

3.69

%

2.40

%

2.88

%

Obligations of state and political subdivisions

Amortized cost

$

2,316

$

16,068

$

25,062

$

29,274

$

72,720

Market value

$

2,309

$

15,361

$

22,910

$

25,741

$

66,321

Weighted average yield

3.47

%

2.49

%

2.65

%

2.55

%

2.60

%

Corporate debt securities

Amortized cost

$

—

$

—

$

3,973

$

—

$

3,973

Market value

$

—

$

—

$

3,698

$

—

$

3,698

Weighted average yield

—

%

—

%

4.85

%

—

%

4.85

%

Restricted securities

Amortized cost

$

—

$

—

$

—

$

5,624

$

5,624

Market value

$

—

$

—

$

—

$

5,624

$

5,624

Weighted average yield

—

%

—

%

—

%

4.62

%

4.62

%

Total portfolio

Amortized cost

$

32,170

$

93,344

$

60,673

$

154,390

$

340,577

Market value

$

31,871

$

91,842

$

57,489

$

138,244

$

319,446

Weighted average yield (1)

2.63

%

3.36

%

3.33

%

2.51

%

2.90

%

(1)

Yields on tax-exempt securities have been calculated on a tax-equivalent basis using the federal corporate income tax rate of 21%. The weighted average yield is calculated based on the relative amortized costs of the securities.

The above table was prepared using the contractual maturities for all securities with the exception of mortgage-backed securities (MBS) and collateralized mortgage obligations (CMO). Both MBS and CMO securities were recorded using the yield book prepayment model that incorporates four causes of prepayments including home sales, refinancing, defaults, and curtailments/full payoffs.

As of December 31, 2025, the Company did not own securities of any issuer for which the aggregate book value of the securities of such issuer exceeded twelve percent of shareholders’ equity.

37

Table of Contents

Deposits

At December 31, 2025, deposits totaled $1.8 billion, decreasing by $4.2 million, from $1.8 billion at December 31, 2024.  At December 31, 2025, noninterest-bearing demand deposits, savings and interest-bearing demand deposits, and time deposits composed 28%, 52%, and 20% of total deposits, respectively, compared to 29%, 51%, and 20% at December 31, 2024.

The following tables include a summary of average deposits and average rates paid (dollars in thousands).

Average Deposits and Rates Paid

Year Ended December 31,

2025

2024

Amount

Rate

Amount

Rate

Noninterest-bearing deposits

$

527,756

—

%

$

422,981

—

%

Interest-bearing deposits:

Interest checking

$

377,944

1.29

%

$

278,558

1.75

%

Money market

332,467

2.22

%

294,818

2.80

%

Savings

210,510

0.36

%

160,795

0.18

%

Time deposits:

Less than $250

292,203

3.02

%

192,456

3.01

%

Greater than $250

71,438

3.44

%

46,846

3.56

%

Brokered deposits

—

—

%

288

4.82

%

Total interest-bearing deposits

$

1,284,562

1.89

%

$

973,761

2.15

%

Total deposits

$

1,812,318

$

1,396,742

As of December 31, 2025 the estimated amount of total uninsured deposits was $538.2 million.  Maturities of the estimated amount of uninsured time deposits at December 31, 2025 are presented in the table below.  The estimate of uninsured deposits generally represents the portion of deposit accounts that exceed the FDIC insurance limit of $250,000 and is calculated based on the same methodologies and assumptions used for purposes of the Bank’s regulatory reporting requirements.

Maturities of Uninsured Time Deposits (in thousands)

December 31, 2025

3 months or less

$

27,619

3-6 months

12,158

6-12 months

19,791

Over 12 months

9,107

$

68,675

Liquidity

Liquidity sources available to the Bank, including interest-bearing deposits in banks, unpledged securities available for sale, at fair value, and available lines of credit totaled $819.0 million on December 31, 2025, and $758.0 million on December 31, 2024.  Available lines of credit from other institutions included in the total amount above was $556.2 million on December 31, 2025, and $562.5 million on December 31, 2024. The available lines of credit were comprised of secured and unsecured lines of credit and the Bank had $25.0 million and $0 on the lines as of December 31, 2025 and December 31, 2024, respectively.

The Bank maintains liquidity to fund loan growth and meet the potential demand from its deposit customers, including potential volatile deposits. The estimated amount of uninsured customer deposits totaled $538.2 million on December 31, 2025, and $537.0 million on December 31, 2024. Excluding municipal deposits, the estimated amount of uninsured customer deposits totaled $448.8 million on December 31, 2025, and $319.1 million on December 31, 2024. Municipal deposits are partially secured with pledged investment securities.

Subordinated Debt

See Note 10 to the Consolidated Financial Statements included in this Form 10-K, for discussion of subordinated debt.

Junior Subordinated Debt

See Note 11 to the Consolidated Financial Statements included in this Form 10-K, for discussion of junior subordinated debt.

38

Table of Contents

Off-Balance Sheet Arrangements

The Company, through the Bank, is a party to credit related financial instruments with risk not reflected in the consolidated financial statements in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, standby letters of credit, and commercial letters of credit. Such commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets. The Bank’s exposure to credit loss is represented by the contractual amount of these commitments. The Bank follows the same credit policies in making commitments as it does for on-balance sheet instruments.

At December 31, 2025 and 2024, the following financial instruments were outstanding whose contract amounts represent credit risk (in thousands):

2025

2024

Commitments to extend credit and unfunded commitments under lines of credit

$

299,104

$

271,419

Standby letters of credit

3,079

15,594

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The commitments for lines of credit may expire without being drawn upon. Therefore, the total commitment amounts do not necessarily represent future cash requirements. The amount of collateral obtained, if it is deemed necessary by the Bank, is based on management’s credit evaluation of the customer.

Unfunded commitments under commercial lines of credit, revolving credit lines, and overdraft protection agreements are commitments for possible future extensions of credit to existing customers. These lines of credit are collateralized as deemed necessary and may or may not be drawn upon to the total extent to which the Bank is committed.

Commercial and standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. Those letters of credit are primarily issued to support public and private borrowing arrangements. Essentially all letters of credit issued have expiration dates within one year. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The Bank generally holds collateral supporting those commitments if deemed necessary.

At December 31, 2025, the Bank had $4.7 million in locked-rate commitments to originate mortgage loans. Risks arise from the possible inability of counterparties to meet the terms of their contracts. The Bank does not expect any counterparty to fail to meet its obligations.

On April 21, 2020, the Company entered into interest rate swap agreements related to its outstanding junior subordinated debt. The Company uses derivatives to manage exposure to interest rate risk through the use of interest rate swaps. Interest rate swaps involve the exchange of fixed and variable rate interest payments between two parties, based on a common notional principal amount and maturity date with no exchange of underlying principal amounts.

The interest rate swaps qualified and are designated as cash flow hedges. The Company’s cash flow hedges effectively modify the Company’s exposure to interest rate risk by converting variable rates of interest on $9.0 million of the Company’s junior subordinated debt to fixed rates of interest for periods that end between June 2034 and October 2036. The cash flow hedges’ total notional amount is $9.0 million. At December 31, 2025, the cash flow hedges had a fair value of $2.3 million, which is recorded in other assets. The net gain/loss on the cash flow hedges is recognized as a component of other comprehensive income and reclassified into earnings in the same period(s) during which the hedged transactions affect earnings. The Company’s derivative financial instruments are described more fully in Note 25 to the Consolidated Financial Statements included in this Form 10-K.

Capital Resources

The adequacy of the Company’s capital is reviewed by management on an ongoing basis with reference to the size, composition, and quality of the Company’s asset and liability levels and consistent with regulatory requirements and industry standards. Management seeks to maintain a capital structure that will assure an adequate level of capital to support anticipated asset growth and absorb potential losses. The Company meets eligibility criteria of a small bank holding company in accordance with the Federal Reserve Board’s Small Bank Holding Company Policy Statement issued in February 2015 and is not obligated to report consolidated regulatory capital.

Effective January 1, 2015, the Bank became subject to capital rules adopted by federal bank regulators implementing the Basel III regulatory capital reforms adopted by the Basel Committee on Banking Supervision (the Basel Committee), and certain changes required by the Dodd-Frank Act.

The minimum capital level requirements applicable to the Bank under the final rules are as follows: a new common equity Tier 1 capital ratio of 4.5%; a Tier 1 capital ratio of 6%; a total capital ratio of 8%; and a Tier 1 leverage ratio of 4% for all institutions. The final rules also established a “capital conservation buffer” above the new regulatory minimum capital requirements. The capital conservation buffer requires a buffer of 2.5% of risk-weighted assets. This results in the following minimum capital ratios: a common equity Tier 1 capital ratio of 7.0%, a Tier 1 capital ratio of 8.5%, and a total capital ratio of 10.5%. Under the final rules, institutions are subject to limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses if its capital level falls below the buffer amount. These limitations establish a maximum percentage of eligible retained income that could be utilized for such actions. Management believes, as of December 31, 2025 and December 31, 2024, that the Bank met all capital adequacy requirements to which it is subject, including the capital conservation buffer.

39

Table of Contents

The following table summarizes the Bank’s regulatory capital and related ratios at December 31, 2025, and 2024 (dollars in thousands).

Analysis of Capital

At December 31,

2025

2024

Common equity Tier 1 capital

$

186,193

$

164,454

Tier 1 capital

186,193

164,454

Tier 2 capital

15,429

16,995

Total risk-based capital

201,622

181,449

Risk-weighted assets

1,478,549

1,469,752

Capital ratios:

Common equity Tier 1 capital ratio

12.59

%

11.19

%

Tier 1 capital ratio

12.59

%

11.19

%

Total capital ratio

13.64

%

12.35

%

Leverage ratio (Tier 1 capital to average assets)

9.13

%

7.95

%

Capital conservation buffer ratio(1)

5.64

%

4.34

%

(1)

Calculated by subtracting the regulatory minimum capital ratio requirements from the Company’s actual ratio for Common equity Tier 1, Tier 1, and Total risk based capital. The lowest of the three measures represents the Bank’s capital conservation buffer ratio.

The prompt corrective action framework is designed to place restrictions on insured depository institutions if their capital levels begin to show signs of weakness. Under the prompt corrective action requirements, which are designed to complement the capital conservation buffer, insured depository institutions are required to meet the following capital level requirements in order to qualify as “well capitalized:” a common equity Tier 1 capital ratio of 6.5%; a Tier 1 capital ratio of 8%; a total capital ratio of 10%; and a Tier 1 leverage ratio of 5%. The Bank met the requirements to qualify as "well capitalized" as of December 31, 2025 and 2024.

On September 17, 2019 the FDIC finalized a rule that introduces an optional simplified measure of capital adequacy for qualifying community banking organizations (i.e., the community bank leverage ratio (CBLR) framework), as required by the Economic Growth Act. The CBLR framework is designed to reduce burden by removing the requirements for calculating and reporting risk-based capital ratios for qualifying community banking organizations that opt into the framework. The Company did not opt into the framework.

The Company did not repurchase any shares during the year ended December 31, 2025. 

The Company issued $5.0 million of subordinated debt in June 2020. The subordinated debt issued consisted of a 5.50% fixed-to-floating rate subordinated note due 2030 issued to an institutional investor and was structured to qualify as Tier 2 capital under bank regulatory guidelines. The floating rate period for this subordinated note began July 1, 2025.  The Company assumed two subordinated debt issuances from the acquisition of Touchstone. The subordinated debt assumed consisted of an $8.0 million 6.00% fixed-to-floating rate subordinated note due 2030.  The floating rate period for this subordinated note began August 15, 2025. The subordinated debt assumed also consisted of a $10.0 million 4.00% fixed-to-floating rate subordinated note due 2032. During the fourth quarter of 2025, the Company redeemed $13 million in subordinated debt, at par, including redemptions of the 5.50% fixed-to-floating rate subordinated note due 2030 on October 1, 2025 ($5 million) and the 6.00% fixed-to-floating rate subordinated note due 2030 on November 15, 2025 ($8 million). There was no gain or loss recognized on these redemptions. These capital redemptions had minimal impact on the total risk-based capital ratio and should position the Company for improved profitability in future periods

Recent Accounting Pronouncements

See Note 1 to the Consolidated Financial Statements included in this Form 10-K, for discussion of recent accounting pronouncements.

40

Table of Contents