Virginia National Bankshares Corp (VABK)

CIK: 0001572334. SIC: 6021 National Commercial Banks. Latest 10-K as of: 2026-03-27.

SIC breadcrumb: Finance, Insurance, And Real Estate > Depository Institutions > SIC 6021 National Commercial Banks

SEC company page: https://www.sec.gov/edgar/browse/?CIK=1572334. Latest filing source: 0001193125-26-128416.

Selected Fundamentals

Financials

Annual standardized facts from SEC companyfacts as of latest extracted filing date 2026-03-27. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001572334.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 2026-05-12. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001572334.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: 0001193125-26-219603.

Extracted structurally from real Item 2 body heading to real Item 3/4 boundary. Confidence: high. Filing date: 2026-05-12. Report date: 2026-03-31.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the unaudited consolidated financial statements, and notes thereto, of Virginia National Bankshares Corporation included in this report and the audited consolidated financial statements, and notes thereto, of the Company included in the Company’s Form 10-K for the year ended December 31, 2025. Operating results for the three months ended March 31, 2026 are not necessarily indicative of the results for the year ending December 31, 2026 or any future period.

FORWARD-LOOKING STATEMENTS AND FACTORS THAT COULD AFFECT FUTURE RESULTS

Certain statements in this report may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including but not limited to, statements concerning future results of operations or financial position, borrowing capacity and future liquidity, future investment results, future credit exposure, future loan losses, plans and objectives for future operations, changes in laws and regulations applicable to the Company and its subsidiaries, adequacy of funding sources, actuarial expected benefit payments, valuation of foreclosed assets, regulatory requirements, economic environment and other statements contained herein regarding matters that are not historical facts. Such statements are often characterized by use of qualified words such as “expect,” “believe,” “estimate,” “project,” “anticipate,” “intend,” “will,” “should,” or words of similar meaning or their derivatives, or other statements concerning the opinions or judgment of the Company and its management about future events. These statements are not historical facts but instead are subject to numerous assumptions, risks and uncertainties, and represent only management’s belief regarding future events, many of which, by their nature, are inherently uncertain and outside management’s control. Although the Company believes that management’s expectations with respect to forward-looking statements are based upon reasonable assumptions within the bounds of its existing knowledge of the Company’s business and operations, there can be no assurance that actual future results, performance, or achievements of, or trends affecting, the Company will not differ materially from any projected future results, performance, achievements or trends expressed in or implied by such forward-looking statements. Any forward-looking statements made by the Company speak only as of the date on which such statements are made, and the Company does not undertake to update any forward-looking statements to reflect changes or events that may occur after the date of this report. The Company’s actual results and financial position may differ materially from the anticipated results and financial condition indicated in or implied by these forward-looking statements.

Factors that could cause the Company's actual results to differ materially from those in the forward-looking statements include, but are not limited to, the following: inflation, interest rates, market and monetary fluctuations; liquidity and capital requirements; market disruptions including trade restrictions, tariffs, pandemics or significant health hazards, severe weather conditions, natural disasters, terrorist activities, financial crisis, political crises, war and other military conflicts or other major events, the governmental and societal responses thereto, or the prospect of these events; changes, particularly declines, in general economic and market conditions in the local economies in which the Company operates, including the effects of declines in real estate values; the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Federal Reserve; the impact of changes in laws, regulations and guidance related to financial services, including, but not limited to, taxes, banking, securities and insurance; changes in accounting principles, standards, policies and guidelines; the financial condition of the Company’s borrowers; the Company's ability to attract, hire, train and retain qualified employees; an increase in unemployment levels; competitive pressures on loan and deposit pricing and demand; fluctuation in asset quality; assumptions that underlie the Company’s ACL; the value of securities held in the Company's investment portfolio; performance of assets under management; cybersecurity threats or attacks and the development and maintenance of reliable electronic systems; changes in technology and their impact on the marketing of new products and services and the acceptance of these products and services by new and existing customers; the willingness of customers to substitute competitors’ products and services for the Company’s products and services; the risks and uncertainties described from time-to-time in the Company’s press releases and filings with the SEC; and the Company’s performance in managing the risks involved in any of the foregoing.

Additional risk factors and uncertainties are described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 and in other reports filed from time to time by the Company with the Securities and Exchange Commission. All risk factors and uncertainties described herein and therein should be considered in evaluating any forward-looking statements. The forward-looking statements are expressly qualified by this cautionary statement, and undue reliance should not be placed on such forward-looking statements.

25

OVERVIEW

Our primary financial goal is to maximize the Company’s earnings to increase long-term shareholder value. We monitor four key financial performance measures to determine our success in realizing this goal: 1) return on average assets, 2) return on average equity, 3) net income per share, and 4) tangible book value per share (a non-GAAP financial measure).

•
ROAA for the three months ended March 31, 2026 of 1.30% increased 18 bps when compared to the ROAA of 1.12% for the three months ended March 31, 2025, as net income was higher in the current period as compared to the same period in the prior year.

•
ROAE for the three months ended March 31, 2026 was 11.34% compared to 11.05% realized in same period in the prior year.

•
Net income per diluted share was $0.97 for the three months ended March 31, 2026, compared to $0.83 for the same period in the prior year. The period over period increases were due to the rise in net income, as described below.

•
Tangible book value per share (non-GAAP) increased to $32.51 as of March 31, 2026, compared to $28.84 as of March 31, 2025. The increase is the result of total equity increasing period over period, coupled with the offsetting impact of intangible assets declining over the same period.

Refer to the Results of Operations, Non-GAAP Presentation section, later in this Management’s Discussion and Analysis for more discussion on financial performance measures determined other than in accordance with GAAP.

APPLICATION OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The accounting and reporting policies followed by the Company conform, in all material respects, to GAAP and to general practices within the financial services industry. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. While the Company bases estimates on historical experience, current information and other factors deemed to be relevant, actual results could differ from those estimates.

The Company considers accounting estimates to be critical to reported financial results if (i) the accounting estimate requires management to make assumptions about matters that are highly uncertain, and (ii) different estimates that management reasonably could have used for the accounting estimate in the current period, or changes in the accounting estimate that are reasonably likely to occur from period to period, could have a material impact on the Company’s consolidated financial statements. The Company’s accounting policies are fundamental to understanding management’s discussion and analysis of financial condition and results of operations.

For additional information regarding critical accounting policies, refer to the Application of Critical Accounting Policies and Critical Accounting Estimates section under Item 8 in the Company’s 2025 Form 10-K.

FINANCIAL CONDITION

Total assets

The total assets of the Company as of March 31, 2026 were $1.6 billion. This is a $1.6 million, or 0.1%, decrease from total assets reported at December 31, 2025.

Securities

The Company’s investment securities portfolio as of March 31, 2026 totaled $246.6 million, a decrease of $7.5 million compared with the $254.2 million reported at December 31, 2025. The decrease from year-end was the result of maturities and normal cash flow. Paydowns within the securities portfolio are being held in overnight investments to fund loan growth as demands arise. At March 31, 2026 and December 31, 2025, the investment securities holdings represented 15.0% and 15.4% of the Company’s total assets, respectively.

The Company’s investment securities portfolio included restricted securities totaling $6.2 million as of March 31, 2026 and December 31, 2025. These securities represent stock in the FRB, the FHLB, CBB Financial Corporation (the holding company for Community Bankers' Bank), and an investment in an SBA loan fund. The level of FRB and FHLB stock that the Company is required to hold is determined in accordance with membership guidelines provided by the Federal Reserve and the FHLB, respectively. Stock ownership in CBB Financial Corporation provides the Company with several benefits that are not available to non-shareholder correspondent banks. None of these restricted securities are traded on the open market and can only be redeemed by the respective issuer.

26

At March 31, 2026, the unrestricted securities portfolio totaled $240.4 million. The following table summarizes the Company's AFS securities by type as of March 31, 2026, and December 31, 2025 (dollars in thousands):

March 31, 2026

December 31, 2025

% of

% of

Balance

Total

Balance

Total

U.S. Government agencies

$

30,945

12.9

%

$

31,263

12.6

%

Mortgage-backed/CMOs

118,162

49.1

%

123,505

49.8

%

Corporate bonds

7,921

3.3

%

7,899

3.2

%

Municipal bonds

83,396

34.7

%

85,325

34.4

%

Total AFS securities

$

240,424

100.0

%

$

247,992

100.0

%

The unrestricted securities are held primarily for earnings, liquidity, and asset/liability management purposes and are reviewed quarterly for possible impairments indicating credit losses. During this review, management analyzes the length of time the fair value has been below cost, the expectation for each security’s performance, the creditworthiness of the issuer, and the Company’s intent and ability to hold the security to recovery or maturity. These factors are analyzed for each individual security.

Loan portfolio

A management objective is to grow loan balances while maintaining the asset quality of the loan portfolio. The Company seeks to achieve this objective by maintaining rigorous underwriting standards coupled with regular evaluation of the creditworthiness of, and the designation of lending limits for, each borrowing relationship. The portfolio strategies include seeking industry, loan size, and loan type diversification to minimize credit exposure and originating loans in markets with which the Company is familiar. The Company's geographical trade area includes localities in Virginia, Maryland and the District of Columbia and West Virginia.

Total loans were $1.2 billion as of March 31, 2026 and December 31, 2025. Loans as a percentage of total assets at Mar

[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: 2026-03-27. Report date: 2025-12-31.

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion provides information about the major components of the results of operations and financial condition, liquidity, and capital resources of Virginia National Bankshares Corporation. This discussion and analysis should be read in conjunction with the Consolidated Financial Statements and Notes to Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data.

Application of Critical Accounting Policies and Critical Accounting Estimates

The accounting and reporting policies followed by the Company conform, in all material respects, to GAAP and to general practices within the financial services industry. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. While the Company bases estimates on historical experience, current information, and other factors deemed to be relevant, actual results could differ from those estimates.

The Company considers accounting estimates to be critical to reported financial results if (i) the accounting estimate requires management to make assumptions about matters that are highly uncertain and (ii) different estimates that management reasonably could have used for the accounting estimate in the current period, or changes in the accounting estimate that are reasonably likely to occur from period to period, could have a material impact on the Company’s financial statements. The Company’s accounting policies are fundamental to understanding management’s discussion and analysis of financial condition and results of operations.

Following are the accounting policies and estimates that the Company considers as critical:

•
Allowance for credit losses - The Company establishes the ACL through charges to earnings in the form of a provision for credit losses. Loan losses are charged against the ACL for the difference between the carrying value of the loan and the estimated net realizable value or fair value of the collateral, if collateral dependent, when management believes that the collectability of the principal is unlikely. Subsequent recoveries, if any, are credited to the ACL. The ACL represents management’s current estimate of expected credit losses over the contractual term of loans held for investment, and is recorded at an amount that, in management’s judgment, reduces the recorded investment in loans to the net amount expected to be collected. Management’s judgment in determining the level of the ACL is based on evaluations of historical loan losses, current conditions and reasonable and supportable forecasts relevant to the collectability of loans. Various national economic variables are utilized in the development of the ACL, including the national unemployment rate and national gross domestic product. In addition, management’s estimate of expected credit losses is based on the remaining life of certain consumer loans held for investment, and changes in expected prepayment behavior may result in changes in the remaining life of loans and expected credit losses. Management also assesses the risk of credit losses arising from changes in general market, economic and business conditions; the nature and volume of the loan portfolio; the volume and severity of delinquencies and adversely classified loan balances and the value of underlying collateral in determining the recorded balance of the ACL. This evaluation is inherently subjective because it requires estimates that are susceptible to significant revision as more information becomes available. In evaluating the level of the ACL, the Company considers a range of possible assumptions and outcomes related to the various factors identified above. The level of the ACL is particularly sensitive to changes in the actual and forecasted national unemployment rate and changes in current conditions or reasonably expected future conditions affecting the collectability of loans.

Non-GAAP Presentations

The accounting and reporting policies of the Company conform to GAAP and prevailing practices in the banking industry. However, certain non-GAAP measures are used by management to supplement the evaluation of the Company’s performance. These include tangible book value per share and the following fully-taxable equivalent measures: net interest income-FTE, efficiency ratio-FTE and net interest margin-FTE. Interest on tax-exempt loans and securities is presented on a taxable-equivalent basis (which converts the income on loans and investments for which no income taxes are paid to the equivalent yield as if income taxes were paid) using the federal corporate income tax rate of 21% that was applicable for all periods presented.

Management believes that the use of these non-GAAP measures provides meaningful information about operating performance by enhancing comparability with other financial periods, other financial institutions, and between different

34

sources of interest income. The non-GAAP measures used by management enhance comparability by excluding the effects of (1) balances of intangible assets, including goodwill, that vary significantly between institutions and (2) tax benefits that are not consistent across different opportunities for investment. These non-GAAP financial measures should not be considered an alternative to, or more important than, GAAP-basis financial statements, and other banks and bank holding companies may define or calculate these or similar measures differently. Net income is discussed in Management’s Discussion and Analysis on a GAAP basis unless noted as “non-GAAP.”

A reconcilement of the non-GAAP financial measures used by the Company to evaluate and measure the Company's performance to the most directly comparable GAAP financial measures is presented below:

(Dollars in thousands, except per share data)

Reconcilement of Non-GAAP Measures:

Year Ended December 31

2025

2024

Fully taxable-equivalent measures

Net interest income (GAAP)

$

51,509

$

46,376

Fully taxable-equivalent adjustment

342

347

Net interest income (FTE) 1 (non-GAAP)

$

51,851

$

46,723

Efficiency ratio 2 (GAAP)

58.0

%

62.4

%

Impact of FTE adjustment

-0.4

%

-0.4

%

Efficiency ratio (FTE) 3 (non-GAAP)

57.6

%

62.0

%

Net interest margin (GAAP)

3.38

%

3.08

%

Fully tax-equivalent adjustment

0.02

%

0.02

%

Net interest margin (FTE) 1 (non-GAAP)

3.40

%

3.10

%

Other financial measures

Book value per share (GAAP)

$

34.15

$

29.85

Impact of intangible assets

(1.94

)

(2.15

)

Tangible book value per share (non-GAAP)

$

32.21

$

27.70

1 FTE calculations use a Federal income tax rate of 21%.

2 The efficiency ratio, GAAP basis, is computed by dividing noninterest expense by the sum of net interest income and noninterest income.

3 The efficiency ratio, FTE, is computed by dividing noninterest expense by the sum of net interest income (FTE) and noninterest income.

Results of Operations

Consolidated Return on Assets and Equity and Other Key Ratios

The ratio of net income to average total assets and average shareholders' equity and certain other ratios for the years indicated are as follows:

2025

2024

Return on average assets

1.19

%

1.06

%

Return on average equity

11.19

%

10.78

%

Average equity to average assets

10.60

%

9.80

%

Cash dividend payout ratio

39.48

%

41.80

%

Efficiency ratio (FTE) (non-GAAP)

57.60

%

62.00

%

Net income for the year ended December 31, 2025 was $19.3 million, or $3.55 per diluted share, a 13.5% increase compared to $17.0 million, or $3.15 per diluted share for the year ended December 31, 2024. This increase was the result of a $5.1 million increase in net interest income and a $1.5 million decrease in noninterest income, offset by a $282.0 thousand decrease in noninterest expense. Each component of such year-over-year changes are described in more detail below.

The efficiency ratio (FTE) (non-GAAP) was 57.6% for the year ended December 31, 2025, compared to 62.0% for the same period of 2024, increasing due to the fluctuations in net interest income, noninterest income and noninterest expense noted above.

35

The Company had two reportable segments during the 2025 period: the Bank and VNB Trust and Estate Services and three in the 2024 period: the Bank, VNB Trust and Estate Services and Masonry Capital.

•
Bank - The Bank’s commercial banking activities involve making loans, taking deposits and offering related services to individuals, businesses and charitable organizations. Loan fee income, service charges from deposit accounts, and other non-interest-related revenue, such as fees for debit cards and ATM usage and fees for treasury management services, generate additional income for this segment.

•
VNB Trust and Estate Services - This segment offers corporate trustee services, trust and estate administration, IRA administration and custody services and offers in-house investment management services. Revenue for this segment is generated from administration, service and custody fees, as well as management fees which are derived from Assets Under Management. Investment management services currently are offered through affiliated and third-party managers.

•
Masonry Capital (Masonry) - Masonry Capital offers investment management services for separately managed accounts and a private investment fund employing a value-based, catalyst-driven investment strategy. Revenue for this segment is generated from management fees which are derived from Assets Under Management and incentive income which is based on the investment returns generated on performance-based Assets Under Management. Note that the membership interests in this business line were sold to an officer of Masonry effective April 1, 2024. Subsequent to the date of sale, the Company will receive an annual revenue-share amount for a period of six years. No expenses have been or will be incurred by the Company related to Masonry subsequent to April 1, 2024.

The Bank segment earned net income of $19.6 million in 2025, a $2.3 million increase compared to the $17.2 million netted in 2024. VNB Trust and Estate Services realized a net loss of $306 thousand in 2025, compared to a net loss of $275 thousand in 2024. Masonry Capital realized a net loss of $2 thousand in 2024.

Details of the changes in the various components of net income are further discussed below.

36

Net Interest Income

Net interest income is computed as the difference between the interest income on earning assets and the interest expense on deposits and other interest bearing liabilities. Net interest income represents the principal source of revenue for the Company and accounted for 89.4% of the total revenue in 2025. Net interest margin (FTE) (non-GAAP) is the ratio of taxable-equivalent net interest income to average earning assets for the period. The level of interest rates and the volume and mix of earning assets and interest bearing liabilities impact net interest income (FTE) (non-GAAP) and net interest margin (FTE) (non-GAAP).

The following table details the average balance sheet, including an analysis of net interest income (FTE) (non-GAAP) for earning assets and interest bearing liabilities, for the years ended December 31, 2025, 2024, and 2023.

Consolidated Average Balance Sheets and Analysis of Net Interest Income (FTE) (non-GAAP)

2025

2024

2023

Interest

Average

Interest

Average

Interest

Average

(Dollars in thousands)

Average Balance

Income

Expense

Yield/

Cost

Average Balance

Income

Expense

Yield/

Cost

Average Balance

Income

Expense

Yield/

Cost

ASSETS

Interest earning assets:

Securities

Taxable securities

$

198,401

$

5,379

2.71

%

$

249,858

$

7,120

2.85

%

$

400,189

$

11,921

2.98

%

Tax exempt securities 1

65,364

1,629

2.49

%

66,399

1,649

2.48

%

66,895

1,655

2.47

%

Total securities 1

263,765

7,008

2.66

%

316,257

8,769

2.77

%

467,084

13,576

2.91

%

Loans:

Real estate

943,389

55,119

5.84

%

908,356

51,532

5.67

%

839,326

47,996

5.72

%

Commercial

258,713

12,418

4.80

%

220,276

12,430

5.64

%

100,122

5,121

5.11

%

Consumer

30,015

2,034

6.78

%

37,013

2,572

6.95

%

41,140

2,936

7.14

%

Total Loans

1,232,117

69,571

5.65

%

1,165,645

66,534

5.71

%

980,588

56,053

5.72

%

Fed funds sold

19,957

835

4.18

%

14,663

765

5.22

%

3,825

207

5.41

%

Other interest bearing deposits

8,099

174

2.15

%

8,220

206

2.51

%

15,489

501

3.23

%

Total earning assets

1,523,938

77,588

5.09

%

1,504,785

76,274

5.07

%

1,466,986

70,337

4.79

%

 Less: Allowance for credit losses

(8,516

)

(8,350

)

(7,907

)

Total non-earning assets

109,084

109,500

114,393

Total assets

$

1,624,506

$

1,605,935

$

1,573,472

LIABILITIES AND SHAREHOLDERS' EQUITY

Interest bearing liabilities:

Interest bearing deposits:

Interest checking

$

267,222

$

270

0.10

%

$

269,136

$

272

0.10

%

$

321,154

$

346

0.11

%

Money market and savings deposits

467,612

12,014

2.57

%

425,386

11,803

2.77

%

421,083

9,673

2.30

%

Time deposits

296,218

11,264

3.80

%

333,139

15,410

4.63

%

220,348

8,617

3.91

%

Total interest bearing deposits

1,031,052

23,548

2.28

%

1,027,661

27,485

2.67

%

962,585

18,636

1.94

%

Borrowings

40,005

1,860

4.65

%

36,111

1,691

4.68

%

37,286

1,934

5.19

%

Federal funds purchased

569

28

4.92

%

489

29

5.93

%

2,632

138

5.24

%

Junior subordinated debt

3,529

301

8.53

%

3,482

346

9.94

%

3,436

313

9.11

%

Total interest bearing liabilities

1,075,155

25,737

2.39

%

1,067,743

29,551

2.77

%

1,005,939

21,021

2.09

%

Non-interest bearing liabilities:

Demand deposits

367,066

370,178

418,091

Other liabilities

10,134

10,597

9,989

Total liabilities

1,452,355

1,448,518

1,434,019

Shareholders' equity

172,151

157,417

139,453

Total liabilities & shareholders'

   equity

$

1,624,506

$

1,605,935

$

1,573,472

Net interest income (FTE) (non-GAAP)

$

51,851

$

46,723

$

49,316

Interest rate spread 2

2.70

%

2.30

%

2.70

%

Cost of funds

1.78

%

2.06

%

1.48

%

Interest expense as a percentage of average earning assets

1.69

%

1.96

%

1.43

%

Net interest margin (FTE) 3 (non-GAAP)

3.40

%

3.10

%

3.36

%

(1)
Tax-exempt income for investment securities has been adjusted to a fully tax-equivalent basis (FTE), using a Federal income tax rate of 21%. Refer to the Reconcilement of Non-GAAP Measures table within the Non-GAAP Presentations earlier in this section.

(2)
Interest rate spread is the average yield earned on earning assets less the average rate paid on interest bearing liabilities.

(3)
Net interest margin (FTE) is net interest income (FTE) expressed as a percentage of average earning assets.

37

The purpose of the volume and rate analysis below is to describe the impact on the net interest income (FTE) (non-GAAP) of the Company resulting from changes in average balances and average interest rates for the periods indicated. The change in interest due to both volume and rate has been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amounts of the change in each. Interest income is reported on a tax-equivalent basis.

Volume and Rate Analysis

2025 compared to 2024

Change due to:

Increase/

(Dollars in thousands)

Volume

Rate

(Decrease)

Assets:

Securities

$

(1,434

)

$

(327

)

$

(1,761

)

Loans:

Real estate

2,021

1,566

3,587

Commercial

1,994

(2,006

)

(12

)

Consumer

(476

)

(62

)

(538

)

Total loans

3,539

(502

)

3,037

Federal funds sold

241

(171

)

70

Other interest bearing deposits

(3

)

(29

)

(32

)

Total earning assets

$

2,343

$

(1,029

)

$

1,314

Liabilities and Shareholders' equity:

Interest bearing deposits:

Interest checking

$

(2

)

-

$

(2

)

Money market and savings

1,122

(911

)

211

Time deposits

(1,591

)

(2,555

)

(4,146

)

Total interest bearing deposits

(471

)

(3,466

)

(3,937

)

Borrowings

181

(12

)

169

Federal funds purchased

4

(5

)

(1

)

Junior subordinated debt

5

(50

)

(45

)

Total interest bearing liabilities

(281

)

(3,533

)

(3,814

)

Change in net interest income

$

2,624

$

2,504

$

5,128

2024 compared to 2023

Change due to:

Increase/

(Dollars in thousands)

Volume

Rate

(Decrease)

Assets:

Securities

$

(4,316

)

$

(491

)

$

(4,807

)

Loans:

Real estate

3,919

(383

)

3,536

Commercial

6,730

579

7,309

Consumer

(288

)

(76

)

(364

)

Total loans

10,361

120

10,481

Federal funds sold

566

(8

)

558

Other interest bearing deposits:

(170

)

(125

)

(295

)

Total earning assets

$

6,441

$

(504

)

$

5,937

Liabilities and Shareholders' equity:

Interest bearing deposits:

Interest checking

$

(54

)

(20

)

$

(74

)

Money market and savings

100

2,030

2,130

Time deposits

5,005

1,788

6,793

Total interest bearing deposits

5,051

3,798

8,849

Borrowings

(59

)

(184

)

(243

)

Federal funds purchased

(125

)

16

(109

)

Junior subordinated debt

4

29

33

Total interest bearing liabilities

4,871

3,659

8,530

Change in net interest income

$

1,570

$

(4,163

)

$

(2,593

)

For 2025, net interest income (FTE) (non-GAAP) of $51.9 million was recognized, an increase of $5.1 million over 2024. Net interest income (FTE) (non-GAAP) for 2024 totaled $46.7 million, a $2.6 million decrease over the 2023 total of $49.3 million. Average earning assets increased $19.2 million or 1.3% in 2025 compared to 2024 and increased $37.8 million or 2.6% in 2024 compared to 2023. The increase in the average balance of loans in the real estate and commercial categories was the primary driver of the increase in interest income from 2024 to 2025, whereas the 2023 to 2024 change in interest

38

income was primarily driven by interest rate changes. The average balance for loans as a percentage of earnings assets for 2025 was 80.9%, compared to 77.5% and 66.8% in 2024 and 2023, respectively.

The 2025 net interest margin (FTE) (non-GAAP) improved 30 bps to 3.40% from 3.10% in 2024. The 2024 net interest margin (FTE) (non-GAAP) declined 26 bps from 3.36% in 2023. The tax-equivalent yield on average earning assets for 2025 of 5.09% was 2 bps higher than the 2024 yield of 5.07%. The 2024 tax-equivalent yield on average earning assets was 28 bps higher than the comparable 2023 yield of 4.79%. Loan yields for 2025 were 5.65%, declining 6 bps from the loan yield of 5.71% for 2024. Average loans for 2025 of $1.2 billion were $66.5 million higher than the 2024 average of $1.2 billion.

The decrease in rates paid on deposits in 2025 compared to 2024 positively impacted net interest income. Interest expense as a percentage of average earning assets decreased to 169 bps for 2025. Net interest margin will be impacted by future changes in short-term and long-term interest rate levels on deposits, as well as the impact from the competitive environment. A continuing primary driver of the Company’s low cost of funds compared to peers is the Company’s level of non-interest bearing demand deposits and low-cost deposit accounts. Following is a table illustrating the average balances of deposit accounts as a percentage of total deposit account balances.

(Dollars in thousands)

2025

2024

Average

Balance

% of Total

Deposits

Average

Balance

% of Total

Deposits

Non-interest demand deposits

$367,066

26.3%

$370,178

26.5%

Interest checking accounts

267,222

19.1%

269,136

19.3%

Money market and savings deposit accounts

467,612

33.4%

425,386

30.4%

Total non-interest and low-cost

   deposit accounts

$1,101,900

78.8%

$1,064,700

76.2%

Time deposits

296,218

21.2%

333,139

23.8%

Total deposit account balances

$1,398,118

100.0%

$1,397,839

100.0%

Provision for Credit Losses

The level of the ACL reflects changes in the size of the portfolio or in any of its components, as well as management’s continuing evaluation of industry concentrations, specific credit risks, loan loss experience, current loan portfolio quality, and economic, political and regulatory conditions. Additional information concerning management’s methodology in determining the adequacy of the ACL is contained later in this section under allowance for credit losses, in addition to Note 1 – Summary of Significant Accounting Policies and Note 5 – Allowance for Credit Losses of the Notes to Consolidated Financial Statements, found in Item 8. Financial Statements and Supplementary Data.

Based on management's continuing evaluation of the loan portfolio in 2025, the Company recorded a provision for credit losses of $137 thousand, which includes a $75 thousand provision for unfunded commitments, compared to a net recovery of provision expense of $600 thousand, which included a $118 thousand provision for unfunded commitments, in 2024. The 2025 individual differences in the balances of various pools as well as changing loss rates have resulted in only nominal changes to the overall ACL ratio. The proportionate increase in government-guaranteed loans over the respective periods is also a main driver holding the ACL as a percentage of total loans fairly steady year-over-year. The decrease in 2024 is primarily the of the impact of declining expected loss rates on most of the pools of loans within the CECL segmentation.

The ACL as a percentage of total loans was 0.67% at December 31, 2025 compared to 0.68% at December 31, 2024.

39

The following is a summary of the changes in the ACL for the years ended December 31, 2025 and 2024:

(Dollars in thousands)

2025

2024

Allowance for credit losses, January 1

$

8,455

$

8,395

Charge-offs

(453

)

(759

)

Recoveries

206

1,537

Provision for (recovery of) credit losses

62

(718

)

Allowance for credit losses, December 31

$

8,270

$

8,455

Allowance for credit losses as a percentage

   of period-end total loans

0.67

%

0.68

%

Noninterest Income

The major components of noninterest income are detailed below. Year-to-year variances are shown for each noninterest income category.

(Dollars in thousands)

For the year ended December 31

Variance

2025

2024

$

%

Noninterest income:

Wealth management fees

$

894

$

1,152

$

(258

)

-22.4

%

Deposit account fees

1,261

1,363

(102

)

-7.5

%

Debit/credit card and ATM fees

1,383

1,914

(531

)

-27.7

%

Bank owned life insurance income

1,242

1,155

87

7.5

%

Gains on sale of assets, net

278

36

242

672.2

%

Gain on early redemption of debt

-

904

(904

)

-100.0

%

Losses on sales of AFS, net

-

(4

)

4

-100.0

%

Other

1,036

1,069

(33

)

-3.1

%

Total noninterest income

$

6,094

$

7,589

$

(1,495

)

-19.7

%

Noninterest income of $6.1 million for the year ended December 31, 2025 decreased $1.5 million over the prior year, as a result of the following:

Wealth management fees decreased $258 thousand. These fees vary based on the total assets under management portfolio and market changes. Debit/credit card and ATM fees decreased $531 thousand due to decreased debit card usage. Additionally, in 2024 there was a $904 thousand gain on the early redemption of debt but this did not reoccur in 2025.

Noninterest Expense

The major components of noninterest expense are detailed below. Year-over-year variances are shown for each noninterest expense category.

(Dollars in thousands)

For the year ended December 31

Variance

2025

2024

$

%

Noninterest expense:

Salaries and employee benefits

$

15,692

$

15,933

$

(241

)

-1.5

%

Net occupancy

3,516

3,662

(146

)

-4.0

%

Equipment

755

720

35

4.9

%

Bank franchise tax

1,706

1,452

254

17.5

%

Computer software

1,096

917

179

19.5

%

Data processing

1,981

2,647

(666

)

-25.2

%

FDIC deposit insurance assessment

785

700

85

12.1

%

Marketing, advertising and promotion

761

730

31

4.2

%

Professional fees

1,146

894

252

28.2

%

Core deposit intangible amortization

1,110

1,301

(191

)

-14.7

%

Other

4,836

4,710

126

2.7

%

Total noninterest expense

$

33,384

$

33,666

$

(282

)

-0.8

%

40

Noninterest expense of $33.4 million for the year ended December 31, 2025 decreased $282 thousand from the prior year. This decrease was predominantly due to $666 thousand less in data processing expenses resulting from contract negotiations with the Company's core provider. Normal, recurring increases in salaries and employee benefits in the form of merit increases and benefit costs were offset by a reduction in headcount during 2025. At December 31, 2025, the Company had 144 full-time equivalent employees compared to 146 at December 31, 2024.

Core deposit intangible amortization expense is a result of the Merger and amounted to $1.1 million in 2025 and $1.3 million in 2024.

Provision for Income Taxes

The provision for income taxes is based upon the results of operations, adjusted for the effect of certain tax-exempt income and non-deductible expenses. In addition, certain items of income and expense are reported in different periods for financial reporting and tax return purposes. The tax effects of these temporary differences are recognized currently in the deferred income tax provision or benefit. Deferred tax assets or liabilities are computed based on the difference between the financial statement and the income tax bases of assets and liabilities using the applicable enacted marginal tax rate.

For 2025, the Company provided $4.8 million for Federal income taxes, resulting in an effective income tax rate of 20.0%. In 2024, the Company provided $3.9 million for Federal income taxes, resulting in an effective income tax rate of 18.8%. The effective income tax rates for 2025 and 2024 were lower than the U.S. statutory rate of 21% due to the effect of tax-exempt income from municipal bonds and tax-exempt interest from bank owned life insurance policies.

More information on income taxes, including net deferred taxes can be found in Note 11 – Income Taxes of the Notes to Consolidated Financial Statements which is found in Item 8. Financial Statements and Supplementary Data.

41

BALANCE SHEET ANALYSIS

Securities

The investment securities portfolio has a primary role in the management of the Company’s liquidity requirements and interest rate sensitivity, as well as generating significant interest income. Investment securities also play a key role in diversifying the Company’s balance sheet. In addition, a portion of the investment securities portfolio is pledged as collateral for public fund deposits. Changes in deposit and other funding balances and in loan production will impact the overall level of the investment portfolio.

As of December 31, 2025, the Company’s investment portfolio totaled $254.2 million, with obligations of U.S. government corporations and government-sponsored enterprises amounting to $154.8 million, or approximately 61% of the total. The Company’s investment portfolio totaled $269.7 million as of December 31, 2024.

During the year ended December 31, 2025, the Company did not sell any securities. During the year ended December 31, 2024, $49.8 million of securities were sold incurring a pre-tax loss of $4 thousand. These sales were part of strategic decisioning to reinvest proceeds into higher yielding assets. Management proactively manages the mix of earning assets and cost of funds to maximize the earning capacity of the Company.

In accordance with ASC 320, “Investments - Debt and Equity Securities,” the Company has categorized its unrestricted securities portfolio as Available for Sale. Securities classified as AFS may be sold in the future, prior to maturity. Any decision to sell a security classified as AFS would be based on various factors, including significant movements in interest rates, changes in the maturity mix of the Company’s assets and liabilities, liquidity needs, regulatory capital considerations, and other similar factors. AFS securities are carried at fair value. Net aggregate unrealized gains or losses on these securities are included, net of taxes, as a component of shareholders’ equity. All of the Company’s unrestricted securities were investment grade or better as of December 31, 2025. Management has evaluated whether the decline in fair value is the result of credit losses and has determined that no credit loss provision is required as of December 31, 2025 related to the AFS portfolio. AFS securities included gross unrealized losses of $38.9 million as of December 31, 2025.

(Dollars in thousands)

December 31, 2025

December 31, 2024

Amount

Percent

Amount

Percent

U.S. Treasury securities

$

-

0

%

$

1,493

1

%

U.S. Government agencies

31,263

13

%

29,635

11

%

MBS/CMOs

123,505

50

%

132,811

50

%

Corporate bonds

7,899

3

%

17,591

7

%

Municipal bonds

85,325

34

%

82,007

31

%

   Total available for sale securities at fair value

$

247,992

100

%

$

263,537

100

%

All mortgage-backed securities included in the above tables were issued by U.S. government agencies and corporations. At December 31, 2025, the securities issued by political subdivisions or agencies were highly rated with 98% of the municipal bonds having A+ or higher ratings. Approximately 63% of the municipal bonds are general obligation bonds, and issuers are geographically diverse. The Company held no issues that exceeded 10% of the Company’s shareholders' equity at December 31, 2025.The Company’s holdings of restricted securities totaled $6.2 million at December 31, 2025 and 2024, and consisted of stock in the Federal Reserve Bank, stock in the FHLB, and stock in CBB Financial Corporation, the holding company for Community Bankers’ Bank, and an investment in an SBA loan fund. The Bank is required to hold stock in the Federal Reserve Bank and the FHLB as a condition of membership with each of these correspondent banks. The amount of stock required to be held by the Bank is periodically assessed by each bank, and the Bank may be subject to purchase or surrender stock held in these banks, as determined by their respective calculations. Stock ownership in the bank holding company for Community Bankers’ Bank provides the Bank with several benefits that are not available to non-shareholder correspondent banks. None of these stock issues are traded on the open market and can only be redeemed by the respective issuer. Restricted stock holdings are recorded at cost.

42

The table shown below details the amortized cost and fair value of AFS securities at December 31, 2025 based upon contractual maturities, by major investment categories. Expected maturities may differ from contractual maturities because issuers have the right to call or prepay obligations. The tax-equivalent yield is based upon a federal tax rate of 21%. Refer to the Reconcilement of Non-GAAP Measures table within the Non-GAAP Presentations section earlier in Item 7.

Maturity Distribution and Average Yields

Contractual Maturities of Debt Securities

at December 31, 2025

(Dollars in thousands)

Amortized Cost

Fair Value

Weighted Average Yield (FTE)

% of Debt

Securities

U.S. Government-sponsored agencies:

After one to five years

$

24,120

$

22,120

1.34

%

After five years to ten years

10,587

9,143

1.99

%

$

34,707

$

31,263

1.54

%

12.1

%

MBS/CMOs

One year or less

$

1,341

$

1,338

2.82

%

After one year to five years

3,284

3,181

1.88

%

After five years to ten years

13,988

12,904

1.55

%

Ten years or more

123,118

106,082

1.98

%

$

141,731

$

123,505

1.95

%

49.5

%

Corporate bonds

One year or less

$

1,997

$

1,996

3.83

%

After one to five years

5,871

5,903

3.06

%

$

7,868

$

7,899

3.26

%

2.7

%

Municipal bonds

One year or less

$

500

$

500

0.70

%

After one to five years

7,118

7,017

2.51

%

After five to ten years

26,087

24,301

2.11

%

Ten years or more

68,801

53,507

2.30

%

$

102,506

$

85,325

2.26

%

35.7

%

Total Debt Securities Available for Sale

$

286,812

$

247,992

2.05

%

100.0

%

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

As stated, the preceding table reflects the distribution of the contractual maturities of the investment portfolio at December 31, 2025. Management’s investment portfolio strategy is to structure the portfolio so that it is a constant source of liquidity for the balance sheet. In order to achieve greater liquidity in the portfolio, securities that have a monthly flow of principal repayments become a key component. To illustrate the difference between contractual maturity and average life, consider the difference for the fixed rate mortgage-backed securities (MBS) component of this portfolio. At December 31, 2025, the weighted average maturity of the fixed rate MBS sector was 14.7 years, and the projected average life for this group of securities is 5.4 years.

Another indication of the investment portfolio’s liquidity potential is shown by the projected annual principal cash flow from maturities, callable bonds, and monthly principal repayments. For the next three years, the principal cash flows are estimated to be $26.4 million for 2026, $32.6 million for 2027, and $23.3 million for 2028, based upon rates remaining at current levels. This represents approximately 33% of the investment portfolio’s AFS balance at December 31, 2025 that will be available to support the future liquidity needs of the Company. Cash flow projections are subject to change based upon changes to market interest rates.

43

Loan Portfolio

The Company’s objective is to maintain the historically strong credit quality of the loan portfolio by maintaining rigorous underwriting standards. These standards coupled with regular evaluation of the creditworthiness of, and the designation of lending limits for, each borrower has helped the Company achieve this objective. The primary portfolio strategy includes seeking industry and loan size diversification in order to minimize credit exposure and originating loans in markets with which the Company is familiar. The predominant market area for loans includes Charlottesville, Albemarle County, Fauquier County, Prince William County, Winchester, Frederick County, Manassas, and the Richmond metropolitan area, as well as other areas in Virginia, Maryland, West Virginia and the District of Columbia.

The Company’s loan portfolio totaled $1.2 billion as of December 31, 2025 or 75.0% of total assets. Loan balances increased $1.6 million, or 0.1%, from the balance of $1.2 billion as of December 31, 2024. Note that all loan balances are presented net of credit and other fair value discounts, when applicable. The table below shows the composition of the loan portfolio:

(Dollars in thousands)

As of December 31,

2025

2024

Commercial loans

$

265,393

$

257,671

Real estate mortgage:

Construction and land

35,000

36,977

1-4 family residential mortgages

297,589

313,610

Commercial mortgages

613,443

593,496

Total real estate mortgage

$

946,032

$

944,083

Consumer

26,152

34,215

Total loans

$

1,237,577

$

1,235,969

Less: Allowance for credit losses

(8,270

)

(8,455

)

Net loans

$

1,229,307

$

1,227,514

At December 31, 2025, the loan-to-deposit ratio stood at 86.4%, compared to 86.8% at December 31, 2024.

Based on underwriting standards, loans may be secured in whole or in part by collateral such as liquid assets, accounts receivable, equipment, inventory and real property. The collateral securing any loan may depend on the type of loan and may vary in value based on market conditions.

The Company’s real estate loan portfolio increased by $1.9 million to a balance of $946.0 million at December 31, 2025 from $944.1 million at December 31, 2024. This category comprises 76.4% of all loans, and these loans are secured by mortgages on real property located principally in the Company's market area. Of this amount, approximately $297.6 million represented loans on 1-4 family residential properties. Commercial real estate loans totaled $613.4 million as of December 31, 2025. Sources of repayment are from the borrower’s operating profits, cash flows and liquidation of pledged collateral. The remaining real estate loans were comprised of construction and land development loans which totaled $35.0 million as of December 31, 2025.

Of the $613.4 million of commercial mortgages held on the balance sheet as of December 31, 2025, $333.7 million consists of non-owner occupied commercial real estate, $127.8 million of multifamily, and $151.9 million of owner occupied CRE. No CRE loans were over 90 days past due as of December 31, 2025.

44

The following table details the Company's levels of non-owner occupied commercial real estate as of December 31, 2025 and 2024, and along with the average loan size and % of risk ratings for each category:

As of December 31, 2025

Loan Type (dollars in thousands)

Balance

% of Total CRE

Average Loan Size

Special Mention

Sub-

standard

Nonaccrual

Hotels

$

42,870

12.85

%

$

5,359

0.00

%

0.00

%

0.00

%

Office Building

77,908

23.35

%

$

962

0.00

%

0.00

%

0.00

%

Warehouses/Industrial

63,622

19.07

%

$

2,194

0.87

%

0.00

%

0.00

%

Retail

128,548

38.52

%

$

1,978

3.04

%

0.00

%

0.00

%

Day Cares / Schools

11,655

3.49

%

$

1,295

0.00

%

0.00

%

0.00

%

All Other Commercial Buildings

9,091

2.72

%

$

826

0.00

%

0.00

%

0.00

%

Total Non-Owner Occupied CRE

$

333,694

As of December 31, 2024

Loan Type (dollars in thousands)

Balance

% of Total CRE

Average Loan Size

Special Mention

Sub-

standard

Nonaccrual

Hotels

$

45,840

14.80

%

$

5,730

0.00

%

0.00

%

0.00

%

Office Building

61,893

19.98

%

$

764

0.00

%

0.00

%

0.00

%

Warehouses/Industrial

61,243

19.77

%

$

2,110

0.00

%

0.00

%

0.00

%

Retail

120,655

38.95

%

$

1,856

0.89

%

0.00

%

0.00

%

Day Cares / Schools

10,606

3.42

%

$

1,178

14.25

%

0.00

%

0.00

%

All Other Commercial Buildings

9,520

3.08

%

$

865

0.00

%

0.00

%

0.00

%

Total Non-Owner Occupied CRE

$

309,757

As of December 31, 2025, the Company’s commercial and industrial loan portfolio totaled $265.4 million, a $7.7 million increase from the $257.7 million balance at year-end 2024. This category, representing approximately 21.4% of all loans, includes loans made to individuals and small to medium-sized businesses, as well as loans purchased in the government guaranteed market. As of December 31, 2025 and December 31, 2024, the portfolio of government guaranteed loans, included in the commercial loan balance, was $227.5 million and $218.3 million, respectively.

Consumer loans, comprised of student loans purchased, revolving credit, and other fixed payment loans, totaled $26.2 million as of December 31, 2025 or 2.1% of all loans. Consumer loans ended 2025 with balances $8.1 million lower than the prior year-end, primarily due to normal amortization within the student loan portfolio.

The following table presents the maturity/repricing distribution of the Company’s loans at December 31, 2025. The table also presents the portion of loans that have fixed interest rates or variable/floating interest rates that fluctuate over the life of the loans in accordance with changes in an interest rate index such as the Wall Street Journal prime rate or U.S. Treasury bond indices.

Maturities and Sensitivities of Loans to Changes in Interest Rates

(Dollars in thousands)

As of December 31, 2025

One Year

or Less

After One to

Five Years

After Five to

15 Years

After

15 Years

Total

Fixed Rate:

Commercial loans

$

1,538

$

15,861

$

9,350

$

1,177

$

27,926

Real estate construction and land

9,173

11,564

36

-

20,773

1-4 family residential mortgages

2,574

55,200

53,340

47,286

158,400

Commercial mortgages

54,352

224,427

5,159

-

283,938

Consumer

4,318

4,505

312

66

9,201

Total fixed rate loans

$

71,955

$

311,557

$

68,197

$

48,529

$

500,238

Variable Rate:

Commercial loans

$

180,474

$

31,951

$

20,924

$

4,118

$

237,467

Real estate construction and land

5,987

8,234

6

-

14,227

1-4 family residential mortgages

52,161

83,824

2,735

469

139,189

Commercial mortgages

109,077

206,834

9,365

4,228

329,504

Consumer

291

5,718

10,744

199

16,952

Total variable rate loans

$

347,990

$

336,561

$

43,774

$

9,014

$

737,339

Total loans

$

419,945

$

648,118

$

111,971

$

57,543

$

1,237,577

45

Total loans at December 31, 2025 and 2024 included loans purchased in connection with the Merger. These loans were recorded at estimated fair value on the date of acquisition without the carryover of the related allowance for loan loss. The following table presents the outstanding principal balance and the carrying amount of purchased loans as of December 31, 2025 and 2024:

(Dollars in thousands)

December 31, 2025

Acquired Loans -

Purchased

Credit Deteriorated

Acquired Loans - Non-Purchased Credit Deteriorated

Acquired

Loans -

Total

Outstanding principal balance

$

22,048

$

184,250

$

206,298

Carrying amount:

Commercial loans

$

-

$

2,946

$

2,946

Real estate construction and land

48

389

437

1-4 family residential mortgages

9,087

113,356

122,443

Commercial mortgages

9,688

65,926

75,614

Consumer

16

88

104

Total acquired loans

$

18,839

$

182,705

$

201,544

(Dollars in thousands)

December 31, 2024

Acquired Loans -

Purchased

Credit Deteriorated

Acquired Loans - Non-Purchased Credit Deteriorated

Acquired

Loans -

Total

Outstanding principal balance

$

25,598

$

228,376

$

253,974

Carrying amount:

Commercial loans

$

14

$

3,915

$

3,929

Real estate construction and land

564

1,605

2,169

1-4 family residential mortgages

9,380

128,386

137,766

Commercial mortgages

11,199

91,826

103,025

Consumer

23

277

300

Total acquired loans

$

21,180

$

226,009

$

247,189

Loan Asset Quality

Intrinsic to the lending process is the possibility of loss. While management endeavors to minimize this risk, it recognizes that loan losses will occur and that the amount of these losses will fluctuate depending on the risk characteristics of the loan portfolio, which in turn depend on current and future economic conditions, the financial condition of borrowers, the realization of collateral, and the credit management process.

Generally, loans are placed on non-accrual status when management believes, after considering economic and business conditions and collections efforts, that it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement, or when the loan is past due for 90 days or more, unless the debt is both well-secured and in the process of collection.

At December 31, 2025 and 2024, the Company had loans classified as non-accrual with balances of $2.2 million and $2.3 million, respectively. The non-accrual balance as of December 31, 2025 consists of fourteen loans to twelve borrowers and 100% of such balance is secured by real estate.

Loans 90 days or more past due and still accruing interest amounted to $7.0 million as of December 31, 2025, compared to $754 thousand as of December 31, 2024. The 2025 balance includes seven loans totaling $6.6 million which are 100% government-guaranteed, one loan for $391 thousand fully secured by residential real estate, and three student loans totaling $86 thousand. No CRE loans were 90 days or more past due as of December 31, 2025.

46

Allowance for Credit Losses

The relationship of the ACL to total loans and nonaccrual loans appears below:

(Dollars in thousands)

2025

2024

Total loans

$

1,237,577

$

1,235,969

Nonaccrual loans

$

2,198

$

2,267

Allowance for credit losses

$

8,270

$

8,455

Nonaccrual loans to total loans

0.18

%

0.18

%

ACL to total loans

0.67

%

0.68

%

ACL to nonaccrual loans

376.25

%

372.96

%

See Note 4 – Loans and Note 5 – Allowance for Credit Losses in the accompanying Notes to Consolidated Financial Statements included in Item 8. Financial Statements and Supplementary Data for further details regarding the Company’s loan asset quality measurements.

Activity for the ACL is provided in the following table:

As of and for the year ended December 31, 2025

(Dollars in thousands)

Commercial

Loans

Real Estate

Construction

and Land

1-4 Family Residential Mortgages

Commercial Mortgages

Consumer

Loans

Total

Allowance for Credit Losses:

Balance as of beginning of year

$

760

$

737

$

2,551

$

3,533

$

874

$

8,455

Charge-offs

(100

)

-

-

-

(353

)

(453

)

Recoveries

34

-

1

3

168

206

Provision for (recovery of) credit losses

(213

)

193

(70

)

304

(152

)

62

Balance at end of year

$

481

$

930

$

2,482

$

3,840

$

537

$

8,270

Average loans

$

258,713

$

32,397

$

305,420

$

605,572

$

30,015

$

1,232,117

Net charge-offs (recoveries) to average loans

0.03

%

0.00

%

0.00

%

0.00

%

0.62

%

0.02

%

As of and for the year ended December 31, 2024

(Dollars in thousands)

Commercial

Loans

Real Estate

Construction

and Land

1-4 Family Residential Mortgages

Commercial Mortgages

Consumer

Loans

Total

Allowance for Credit Losses:

Balance as of beginning of year

$

193

$

462

$

1,492

$

5,261

$

987

$

8,395

Charge-offs

(288

)

-

-

-

(471

)

(759

)

Recoveries

723

-

11

573

230

1,537

Provision for (recovery of) loan losses

132

275

1,048

(2,301

)

128

(718

)

Balance at end of year

$

760

$

737

$

2,551

$

3,533

$

874

$

8,455

Average loans

$

220,276

$

36,757

$

312,533

$

559,066

$

37,013

$

1,165,645

Net charge-offs (recoveries) to average loans

-0.20

%

0.00

%

0.00

%

-0.10

%

0.65

%

-0.07

%

As of December 31, 2025, the ACL was $8.3 million, a decrease of $185 thousand from $8.4 million at December 31, 2024, due to individual differences in the balances of various pools as well as changing loss rates. Management’s estimates for the ACL resulted in nominal changes to the Company’s ACL to total loans outstanding ratio of 0.67% at December 31, 2025, compared to 0.68% at December 31, 2024. The government-guaranteed loans do not require an ACL as they are 100% guaranteed.

During 2025, there were $453 thousand in loan balances charged off, with a total of $206 thousand in recoveries of previously charged-off balances, resulting in net charge-offs of negative $247 thousand. During 2024, there were $759

47

thousand in loan balances charged off, with a total of $1.5 million in recoveries of previously charged-off balances, resulting in net charge-offs of $778 thousand. The ratio of net charge-offs to average loans was 0.02% and -0.07% (net recovery) for 2025 and 2024, respectively.

The table below provides an allocation of year-end ACL by loan type; however, allocation of a portion of the allowance to one loan category does not preclude its availability to absorb losses in other categories.

Allocation of the Allowance for Credit Losses

December 31, 2025

(Dollars in thousands)

Allowance

Percentage of loans

in each category to

total loans

Commercial loans

$

481

21.44

%

Real estate construction and land

930

2.83

%

1-4 family residential mortgages

2,482

24.05

%

Commercial mortgages

3,840

49.57

%

Consumer

537

2.11

%

Total

$

8,270

100.00

%

December 31, 2024

(Dollars in thousands)

Allowance

Percentage of loans

in each category to

total loans

Commercial loans

$

760

20.85

%

Real estate construction and land

737

2.99

%

1-4 family residential mortgages

2,551

25.37

%

Commercial mortgages

3,533

48.02

%

Consumer

874

2.77

%

Total

$

8,455

100.00

%

Deposits

Depository accounts represent the Company’s primary source of funding and are comprised of demand deposits, interest bearing checking accounts, money market deposit accounts and time deposits. These deposits have been provided predominantly by individuals, businesses and charitable organizations in the Charlottesville/Albemarle County, Fauquier County, Manassas, Prince William County, Richmond and Winchester market areas.

Depository accounts held by the Company as of December 31, 2025, totaled $1.4 billion, an increase of $8.2 million or 0.6% compared to the December 31, 2024 balance.

At December 31, 2025, the balances of non-interest bearing demand deposits were $362.3 million or 25.3% of total deposits, a 3.1% decrease from $374.1 million at December 31, 2024. Interest bearing transaction and money market accounts totaled $778.1 million at December 31, 2025, an increase of $37.1 million compared to $741.0 million at December 31, 2024. The Company offers ICS®, which allows customers access to multi-million-dollar FDIC insurance on funds placed into demand deposit and/or money market deposit accounts. As of December 31, 2025, the reciprocal ICS® balances included in demand deposit and money market accounts were $60.8 million and $139.6 million, respectively. The Company’s low-cost deposit accounts, which include both non-interest and interest bearing checking accounts as well as money market accounts, represented 79.7% of total deposit account balances at December 31, 2025 compared to 78.3% of total deposit account balances at December 31, 2024.

Certificates of deposit and other time deposit balances decreased $17.1 million to $291.3 million at December 31, 2025 from the balance of $308.4 million at December 31, 2024. Included in this deposit total were reciprocal relationships under CDARS™, whereby depositors can obtain FDIC insurance on deposits up to $50 million. These reciprocal CDARS™ deposits totaled $5.8 million and $4.9 million at December 31, 2025 and 2024, respectively.

48

Deposits

Average Balances and Rates Paid

Years Ended December 31

2025

2024

Average

Average

Average

Average

(Dollars in thousands)

Balance

Rate

Balance

Rate

Non-interest bearing demand

   deposits

$

367,066

$

370,178

Interest bearing deposits:

Interest checking

267,222

0.10

%

269,136

0.10

%

Money market and savings deposits

467,612

2.57

%

425,386

2.77

%

Time deposits

296,218

3.80

%

333,139

4.63

%

Total interest bearing deposits

$

1,031,052

2.28

%

$

1,027,661

2.67

%

Total deposits

$

1,398,118

$

1,397,839

As of December 31, 2025 and 2024, the estimated amounts of total uninsured deposits were $392.0 million and $389.6 million, respectively.

Maturities of time deposits in excess of FDIC insurance limits as of December 31, 2025 were as follows:

(Dollars in thousands)

Amount

Percentage

Three months or less

$

48,225

50.0

%

Over three months to six months

29,327

30.3

%

Over six months to one year

17,877

18.5

%

Over one year

1,163

1.2

%

Totals

$

96,592

100.0

%

Borrowings

Borrowings, consisting primarily of FHLB advances and federal funds purchased, are additional sources of funds for the Company. The level of these borrowings is determined by various factors, including customer demand and the Company's ability to earn a favorable spread on the funds obtained.

The Company has a collateral dependent line of credit with the FHLB. As of December 31, 2025 and 2024, the Company had $20.0 million in outstanding advances from the FHLB.

Additional borrowing arrangements maintained by the Bank include formal federal funds lines with five correspondent banks. The Company had no federal funds purchased as of December 31, 2025 compared to $236 thousand at December 31, 2024.

Borrowings consist of the following as of December 31, 2025 and 2024.

(Dollars in thousands)

2025

2024

Federal funds purchased

$

-

$

236

FHLB advances

20,000

20,000

Total borrowings

$

20,000

$

20,236

Maximum amount at any month-end during the

   year

$

51,000

$

55,702

Annual average balance outstanding

$

40,573

$

36,600

Annual average interest rate paid

4.65

%

4.70

%

Annual interest rate at end of period

3.84

%

4.82

%

Details on available borrowing lines can be found later under Liquidity in the Asset/Liability Management section.

49

Junior Subordinated Debt

In 2006, a subsidiary of Fauquier, Fauquier Statutory Trust II, privately issued $4.0 million face amount of the trust’s Floating Rate Capital Securities in a pooled capital securities offering. Simultaneously, the trust used the proceeds of that sale to purchase $4.0 million principal amount of the Fauquier’s Floating Rate Junior Subordinated Deferrable Interest Debentures due 2036. As of December 31, 2025, total capital securities were $3.6 million, as adjusted to fair value as of the date of the Merger. The interest rate on the capital security resets every three months at 1.70% above the then current three-month CME Term SOFR plus a spread adjustment of 0.26% and is paid quarterly.

The Trust II issuance of capital securities and the respective subordinated debentures are callable at any time. The subordinated debentures are an unsecured obligation of the Company and are junior in right of payment to all present and future senior indebtedness of the Company. The capital securities are guaranteed by the Company on a subordinated basis.

ASSET/LIABILITY MANAGEMENT

The Company’s primary earnings source is its net interest income; therefore, the Company devotes significant time and resources to assist in the management of interest rate risk and asset quality. The Company’s net interest income is affected by changes in market interest rates and by the level and composition of interest-earning assets and interest bearing liabilities. The Company’s objectives in its asset/liability management are to utilize its capital effectively, to provide adequate liquidity and to enhance net interest income, without taking undue risks or subjecting the Company unduly to interest rate fluctuations. The Company takes a coordinated approach to the management of its liquidity, capital and interest rate risk. This risk management process is governed by policies and limits established by the Bank’s Asset/Liability Committee, which are reviewed and approved by the Bank’s Board of Directors. This committee, which is comprised of directors and members of management, meets to review, among other things, economic conditions, interest rates, yield curves, cash flow projections, expected customer actions, liquidity levels, capital ratios and repricing characteristics of assets, liabilities and financial instruments.

Market Risk

Market risk is the risk of loss in a financial instrument arising from adverse changes in market indices such as interest rates. The Company’s principal market risk exposure is interest rate risk. Interest rate risk is the exposure to changes in market interest rates. Interest rate sensitivity is the relationship between market interest rates and net interest income due to the repricing characteristics of assets and liabilities. The Company monitors the interest rate sensitivity of its balance sheet positions by examining its near-term sensitivity and its longer-term gap position. In its management of interest rate risk, the Company utilizes several financial and statistical tools including traditional gap analysis and sophisticated income simulation models.

A traditional gap analysis is prepared based on the maturity and repricing characteristics of interest-earning assets and interest bearing liabilities for selected time bands. The mismatch between repricings or maturities within a time band is commonly referred to as the “gap” for that period. A positive gap (asset sensitive) where interest rate sensitive assets exceed interest rate sensitive liabilities generally will result in the net interest margin increasing in a rising rate environment and decreasing in a falling rate environment. A negative gap (liability sensitive) will generally have the opposite result on the net interest margin. The Company’s balance sheet structure is primarily short-term in nature with a substantial portion of rate-sensitive assets and rate-sensitive liabilities repricing or maturing within one year, as shown in the Gap Interest Sensitivity Analysis table below.

50

Gap Interest Sensitivity Analysis

As of December 31, 2025

Within

90 to 365

One to Four

Over

Non Rate

(Dollars in thousands)

90 Days

Days

Years

Four Years

Sensitive

Total

Assets

Loans

$

191,380

$

345,338

$

556,307

$

137,725

$

6,827

$

1,237,577

Investment securities

17,414

39,126

91,346

174,769

(68,491

)

254,164

Interest bearing deposits in other banks

10,552

-

-

-

-

10,552

Non-interest-earning assets and

   allowance for loan losses

-

-

-

-

147,449

147,449

Total assets

$

219,346

$

384,464

$

647,653

$

312,494

$

85,785

$

1,649,742

Liabilities and Shareholders' Equity

Interest checking

$

7,707

$

23,122

$

92,488

$

184,978

$

-

$

308,295

Money market and savings deposits

16,072

48,217

192,867

212,659

-

469,815

Time deposits

140,371

137,619

12,917

392

-

291,299

Borrowings

-

-

20,000

-

-

20,000

Junior subordinated debt

-

3,554

-

-

-

3,554

Non-interest bearing liabilities and

   shareholders' equity

-

-

-

-

556,779

556,779

Total liabilities and shareholders' equity

$

164,150

$

212,512

$

318,272

$

398,029

$

556,779

$

1,649,742

Period gap

$

55,196

$

171,952

$

329,381

$

(85,535

)

N/A

$

470,994

Cumulative gap

$

55,196

$

227,148

$

556,529

$

470,994

N/A

$

1,309,867

Ratio of cumulative gap to cumulative

   earning assets

25.16

%

37.62

%

44.47

%

30.12

%

The Company utilizes the gap analysis to complement its income simulations modeling. However, the traditional gap analysis does not assess the relative sensitivity of assets and liabilities to changes in interest rates and other factors that could have an impact on interest rate sensitivity or net interest income.

ALCO routinely monitors simulated net interest income sensitivity over a rolling two-year horizon. It also utilizes additional tools to monitor potential longer-term interest rate risk. The income simulation models measure the Company’s net interest income volatility or sensitivity to interest rate changes utilizing statistical techniques that allow the Company to consider various factors which impact net interest income. These factors include actual maturities, estimated cash flows, repricing characteristics, deposit growth/retention and, most importantly, the relative sensitivity of the Company’s assets and liabilities to changes in market interest rates. This relative sensitivity is important to consider as the Company’s core deposit base has not been subject to the same degree of interest rate sensitivity as its assets. The core deposit costs are internally managed and tend to exhibit less sensitivity to changes in interest rates than the Company’s adjustable rate assets whose yields are based on external indices and generally change in concert with market interest rates. The Company’s interest rate sensitivity is determined by identifying the probable impact of changes in market interest rates on the yields on the Company’s assets and the rates that would be paid on its liabilities. This modeling technique involves a degree of estimation based on certain assumptions that management believes to be reasonable. Utilizing this process, management projects the impact of changes in interest rates on net interest margin. The Company has established certain policy limits for the potential volatility of its net interest margin assuming certain levels of changes in market interest rates with the objective of maintaining a stable net interest margin under various probable rate scenarios. Management generally has maintained a risk position well within the policy limits.

As market conditions vary from those assumed in the income simulation models, actual results will also differ due to: prepayment/refinancing levels likely deviating from those assumed, the varying impact of interest rate change caps or floors on adjustable rate assets, the potential effect of changing debt service levels on customers with adjustable rate loans, depositor early withdrawals and product preference changes, and other variables. Furthermore, this sensitivity analysis does not reflect actions that the ALCO might take in responding to or anticipating changes in interest rates.

51

In simulating the effects of upward and downward changes in market rates to net interest income over a rolling two-year horizon, the model utilizes a “static” balance sheet approach where balance sheet composition or mix as of the measurement date is maintained over the two-year horizon. Similarly, the base case simulation performed assumes interest rates on the measurement date are unchanged for the next 24 months. Then the simulation assumes all rate indices are instantaneously shocked upward and downward by 100 bps to 400 basis points, in 100 basis point increments.

(Dollars in thousands)

Change in Net Interest Income

Change in Yield Curve

Percentage

Amount

+400 bps

10.19

%

$

11,948

+300 bps

7.01

%

8,217

+200 bps

4.19

%

4,907

+100 bps

2.28

%

2,670

Base case

0.00

%

-

-100 bps

-2.18

%

(2,559

)

-200 bps

-2.41

%

(2,826

)

-300 bps

-2.92

%

(3,424

)

-400 bps

-4.29

%

(5,024

)

In addition to monitoring the effects to interest income, the model computes the effects to the economic value of equity using the same “static” balance sheet with immediate and parallel rate changes for the same rate change horizons. The Asset/Liability Committee monitors the results compared to policy limits that have been established.

As individual rate indices have not historically moved to the same degree, non-parallel rate shocks are also performed to add a degree of sophistication over the parallel rate shocks. In these analyses, the effects to net interest income and market value of equity are computed using eight different scenarios. Changing slopes and twists of the yield curve are achieved by incorporating both likely and unlikely change across different tenors. Since Federal funds rates may not change to the same degree or direction that longer term Treasury bonds may move, the different scenarios are analyzed so that management and the Asset/Liability Committee can monitor risks as they more severely stress the Company’s balance sheet.

The shape of the yield curve can cause downward pressure on net interest income. In general, if and to the extent that the yield curve is flatter (i.e., the differences between interest rates for different maturities are relatively smaller) than previously anticipated, then the yield on the Company’s interest earning assets and its cash flows will tend to be lower. Management believes that the current interest rate exposure is manageable and within the Company's current interest rate risk guidelines.

Liquidity

Liquidity represents the Company’s ability to provide funds to meet customer demand for loan and deposit withdrawals without impairing profitability. Effective management of balance sheet liquidity is necessary to fund growth in earning assets and to pay liability maturities and depository customers’ withdrawal requirements. The Company maintains a Liquidity Management Policy that is approved by the Board of Directors. The policy sets limits in a number of areas, including limits on the amount of non-core liabilities, and funding long-term assets with non-core liabilities.

The Bank’s customer base has provided a stable source of funds and liquidity. Limits contained within the Bank’s Investment Policy also provides for appropriate levels of liquidity through maturities and cash flows within the securities portfolio. Other sources of balance sheet liquidity are obtained from the repayment of loan proceeds and overnight investments. The Bank has numerous secondary sources of liquidity including access to borrowing arrangements from a number of correspondent banks. Available borrowing arrangements maintained by the Bank include formal federal funds lines with six major regional correspondent banks, access to advances from the Federal Home Loan Bank and access to the discount window at the Federal Reserve Bank. Access to borrowings at the discount window are dependent on the fair value of any securities pledged for advances. As of December 31, 2025, the Bank has pledged investment securities with an amortized cost of $4.0 million and a fair value of $3.3 million.

52

Borrowing Lines

As of December 31, 2025

(Dollars in thousands)

Correspondent Banks

$

119,000

Federal Home Loan Bank of Atlanta

121,592

Total Available

$

240,592

Any excess funds are sold on a daily basis in the federal funds market or maintained on account at the Federal Reserve. The Company maintained an average of $20.0 million outstanding in federal funds sold, and an average of $7.8 million at the Federal Reserve during 2025. On the liability side of the balance sheet, the Company maintained an average of $40.0 million in FHLB advances and $569 thousand in federal funds purchased during 2025. On December 31, 2025 the Company had a $20 million balance in FHLB advances and no balance outstanding in federal funds purchased. The Company intends to maintain sufficient liquidity at all times to meet its funding commitments.

Capital

The Basel III Capital Rules require banks and bank holding companies to comply with the following minimum capital ratios: (i) a ratio of common equity Tier 1 capital to risk-weighted assets of at least 4.5%, plus a 2.5% “capital conservation buffer” (effectively resulting in a minimum ratio of common equity Tier 1 to risk-weighted assets of at least 7%); (ii) a ratio of Tier 1 capital to risk-weighted assets of at least 6.0%, plus the 2.5% capital conservation buffer (effectively resulting in a minimum Tier 1 capital ratio of 8.5%); (iii) a ratio of total capital to risk-weighted assets of at least 8.0%, plus the 2.5% capital conservation buffer (effectively resulting in a minimum total capital ratio of 10.5%); and (iv) a leverage ratio of 4%, calculated as the ratio of Tier 1 capital to balance sheet exposures plus certain off-balance sheet exposures (computed as the average for each quarter of the month-end ratios for the quarter).

The Tier 1, common equity Tier 1, total capital to risk-weighted assets, and leverage ratios of the Bank were 19.36%, 19.36%, 20.19% and 12.36%, respectively, as of December 31, 2025, exceeding the minimum requirements.

With respect to the Bank, to be “well capitalized” under the PCA regulations, a bank must have the following minimum capital ratios: (i) a common equity Tier 1 capital ratio of at least 6.5%; (ii) a Tier 1 capital to risk-weighted assets ratio of at least 8.0%; (iii) a total capital to risk-weighted assets ratio of at least 10.0%; and (iv) a leverage ratio of at least 5.0%. The Bank exceeds the thresholds to be considered well capitalized as of December 31, 2025.

On September 17, 2019 the FDIC finalized a rule that introduced an optional simplified measure of capital adequacy for qualifying community banking organizations, referred to as, the community bank leverage ratio framework, as required by the EGRRCPA. 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.

In order to qualify for the CBLR framework, a community banking organization must have a Tier 1 leverage ratio of greater than 9%, less than $10 billion in total consolidated assets, and limited amounts of off-balance-sheet exposures and trading assets and liabilities. A qualifying community banking organization that opts into the CBLR framework and meets all requirements under the framework will be considered to have met the well-capitalized ratio requirements under the PCA regulations and will not be required to report or calculate risk-based capital.

The CBLR framework was made available for community banking organizations to use in their March 31, 2020 Call Report. The Company has not opted into the CBLR framework.

The Basel III capital regulations and CBLR framework are discussed in greater detail under the caption “Supervision and Regulation,” found earlier in this report under “Item 1. Business.” In addition, information regarding the Company’s risk-based capital at December 31, 2025 and December 31, 2024 is presented in Note 15 – Capital Requirements of the Notes to Consolidated Financial Statements, contained in Item 8. Financial Statements and Supplementary Data. Using the most recent capital requirements, the Bank’s capital ratios remain above the levels designated by bank regulators as "well capitalized" at December 31, 2025.

53

Impact of Inflation and Changing Prices

The Company’s financial statements included herein have been prepared in accordance with GAAP, which requires the financial position and operating results to be measured principally in terms of historical dollars without considering the change in the relative purchasing power of money over time due to inflation. Inflation affects the Company’s results of operations mainly through increased operating costs, but since nearly all of the Company’s assets and liabilities are monetary in nature, changes in interest rates affect the financial condition of the Company to a greater degree than changes in the rate of inflation. Although interest rates are greatly influenced by changes in the inflation rate, they do not necessarily change at the same rate or in the same magnitude as the inflation rate. The Company’s management reviews pricing of its products and services, in light of current and expected costs due to inflation, to mitigate the inflationary impact on financial performance.

Off-Balance Sheet Arrangements

The Company is party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments consist primarily of commitments to extend credit and standby letters of credit. Additional information concerning the Company’s off-balance sheet arrangements is contained in Note 13 of the Notes to Consolidated Financial Statements, found in Item 8. Financial Statements and Supplementary Data.

Related Party Transactions

The Company and its subsidiaries have business dealings with companies owned by directors and beneficial shareholders of the Company. In 2025 and 2024, leasing/rental expenditures of $595 thousand and $562 thousand respectively, (including reimbursements for taxes, insurance, and other expenses) were paid to an entity indirectly owned by a director of the Company.

Contractual Commitments

In the normal course of business, the Company and its subsidiaries enter into contractual obligations, including obligations on lease arrangements, contractual commitments for capital expenditures, and service contracts. The significant contractual obligations include the leasing of certain of its banking and operations offices under operating lease agreements on terms ranging from 1 to 10 years, most with renewal options. During the second quarter of 2025, the Company extended the ground lease associated with the Pantops headquarters for an additional five-year period.

Following is a schedule of future minimum rental payments under non-cancelable operating leases that have initial or remaining terms in excess of one year as of December 31, 2025:

(Dollars in thousands)

1 year or less

1-3 years

3-5 years

After 5 years

Total

Operating lease obligations

$

1,642

$

3,000

$

1,662

$

480

$

6,784