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Included in occupancy expense in the Company's consolidated statements of income. Building and lease acquisition-related fair value adjustments amortization is included in "Occupancy expenses" in the "Noninterest expense" section of the Company’s Consolidated Statements of Income. Certificate of deposit acquisition-related fair value adjustments (accretion) amortization is included in "Interest on deposits" in the "Interest expense" section of the Company’s Consolidated Statements of Income. Collateral pledged may be comprised of cash or securities. Core deposit and other intangible premium amortization is included in "Amortization expense" in the "Noninterest expense" section of the Company’s Consolidated Statements of Income. Includes the net impact of Touchstone’s accretion adjustments of $394 thousand and $1.6 million for the twelve months ended December 31, 2024 and 2023. Includes net interest income and noninterest income. For the twelve months ended December 31, 2024, and 2023, excludes merger-related costs associated with the acquisition of Touchstone as noted below. Loan acquisition-related fair value adjustments accretion is included in "Interest and fees on loans" in the "Interest and dividend income" section of the Company’s Consolidated Statements of Income. 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0000719402 FIRST NATIONAL CORP /VA/ false --12-31 FY 2025 The Company's risk management program is designed to identify, assess, and mitigate risks across various aspects of our Company, including financial, operational, regulatory, reputational, and legal. Cybersecurity is a critical component of this program, given the increasing reliance on technology and potential of cyber threats. The Chief Risk Officer is primarily responsible for this cybersecurity component and is a key member of the risk management organization, reporting directly to the Chief Executive Officer and, as discussed below, periodically to the Audit Committee of the Board of Directors. true true true false The Chief Risk Officer is accountable for managing our enterprise information security department and delivering our information security program. The responsibilities of this department include cybersecurity risk assessment, defense operations, incident response, vulnerability assessment, threat intelligence, identity access governance, third-party risk management, and business resilience. The foregoing responsibilities are covered on a day-to-day basis by a first line of defense function, and our second line of defense function, including the Information Security Officer, provides guidance, oversight, monitoring and challenge of the first line’s activities. The second line of defense function is separated from the first line of defense function through organizational structure and ultimately reports directly to the Chief Risk Officer. The department, as a whole, consists of information security professionals with varying degrees of education and experience. Individuals within the department are generally subject to professional education and certification requirements. In particular, our Chief Risk Officer has substantial relevant expertise and formal training in the areas of information security and cybersecurity risk management. The Chief Risk Officer is accountable for managing our enterprise information security department and delivering our information security program. The responsibilities of this department include cybersecurity risk assessment, defense operations, incident response, vulnerability assessment, threat intelligence, identity access governance, third-party risk management, and business resilience. The foregoing responsibilities are covered on a day-to-day basis by a first line of defense function, and our second line of defense function, including the Information Security Officer, provides guidance, oversight, monitoring and challenge of the first line’s activities. The second line of defense function is separated from the first line of defense function through organizational structure and ultimately reports directly to the Chief Risk Officer. The department, as a whole, consists of information security professionals with varying degrees of education and experience. Individuals within the department are generally subject to professional education and certification requirements. In particular, our Chief Risk Officer has substantial relevant expertise and formal training in the areas of information security and cybersecurity risk management. true The Audit Committee of our Board of Directors is responsible for overseeing our information security and technology governance programs, including management’s actions to identify, assess, mitigate, and remediate or prevent material cybersecurity issues and risks. Our Chief Risk Officer reports to the Audit Committee of our Board of Directors regarding the information security program and the technology program, key enterprise cybersecurity initiatives, and other matters relating to cybersecurity processes. The Audit Committee of our Board of Directors reviews and approves our information security and technology policies annually. Additionally, the Audit Committee of our Board of Directors reviews our cyber security risk profile on a quarterly basis. The Audit Committee of our Board of Directors provides a report of their activities to the full Board of Directors at board meetings. The Audit Committee of our Board of Directors is responsible for overseeing our information security and technology governance programs, including management’s actions to identify, assess, mitigate, and remediate or prevent material cybersecurity issues and risks. Our Chief Risk Officer reports to the Audit Committee of our Board of Directors regarding the information security program and the technology program, key enterprise cybersecurity initiatives, and other matters relating to cybersecurity processes. The Audit Committee of our Board of Directors reviews and approves our information security and technology policies annually. Additionally, the Audit Committee of our Board of Directors reviews our cyber security risk profile on a quarterly basis. 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Subordinated debt acquisition-related fair value adjustments (accretion) amortization is included in "Interest on subordinated debt" in the "Interest Expense" section of the Company’s Consolidated Statements of Income. Included in occupancy expense in the Company's consolidated statements of income. Collateral pledged may be comprised of cash or securities. Time deposit acquisition-related fair value adjustments (accretion) amortization is included in "Interest on deposits" in the "Interest expense" section of the Company’s Consolidated Statements of Income. Generally considered not to have credit risk given the implied governmental guarantees associated with these agencies. 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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


	FORM 10-K

☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, ~~2024~~2025

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-38874

_______________________________________________________

(Exact name of registrant as specified in its charter)

_______________________________________________________

Virginia	54-1232965
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

112 West King Street, Strasburg, Virginia	22657
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (540) 465-9121

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common stock, par value $1.25 per share	FXNC	The Nasdaq Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act: None

_______________________________________________________

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this Chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "“emerging growth company" ” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	☒	Smaller reporting company	☒

		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the closing sales price on June 30, ~~2024~~2025 was $77150,~~200~~573,~~000~~153.

The number of outstanding shares of common stock as of March 2116, ~~2025~~ 2026 was 89,~~986~~040,~~696~~967.

DOCUMENTS INCORPORATED BY REFERENCE

Proxy Statement for the ~~2025~~2026 Annual Meeting of Shareholders – Part III

Table of Contents

TABLE OF CONTENTS

		Page
Part I
Item 1.	Business	4
Item 1A.	Risk Factors	12
Item 1B.	Unresolved Staff Comments	22
Item 1C.	Cybersecurity	23
Item 2.	Properties	23
Item 3.	Legal Proceedings	24
Item 4.	Mine Safety Disclosures	24
Part II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	24
Item 6.	Reserved	25
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	41
Item 8.	Financial Statements and Supplementary Data	41
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	9294
Item 9A.	Controls and Procedures	9294
Item 9B.	Other Information	9294
Item 9C.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	9294
Part III
Item 10.	Directors, Executive Officers and Corporate Governance	9395
Item 11.	Executive Compensation	9395
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	9395
Item 13.	Certain Relationships and Related Transactions, and Director Independence	9395
Item 14.	Principal Accountant Fees and Services	9395
Part IV
Item 15.	Exhibits, Financial Statement Schedules	9496
Item 16.	Form 10-K Summary	9597

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Part I

Cautionary Statement Regarding Forward-Looking Statements

First National Corporation (the Company) makes forward-looking statements in this Form 10-K 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. 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 ability of the Company and the Bank to realize the anticipated benefits of the Touchstone Bankshares, Inc. (Touchstone) merger (Merger), including expected revenue synergies and cost savings that may not be fully realized or realized within the expected time frame;

• revenues following the Merger that may be lower than expected;

• customer and employee relationships and business operations may be impacted by disruptions caused by the Merger;

•

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;

• ~~demand~~prepayments ~~for~~of ~~loan~~loans ~~products~~and securities could materially impact earnings through a reduction in interest income and fees on loans and interest income on securities;

• deposit flows;

•

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;

• 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;

•

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; • ~~geopolitical~~U.S. ~~conditions,~~and ~~including~~global ~~acts~~trade orpolicies ~~threats~~and ~~of terrorism~~tensions, ~~international~~including ~~hostilities~~change in, or ~~actions~~the ~~taken~~imposition byof, ~~the~~tariffs ~~U.S.~~ and/or other ~~governments~~barriers ~~in response to acts~~ or ~~threats~~restrictions ofon ~~terrorism~~trade and/or ~~military~~any ~~conflicts,~~retaliatory ~~which~~counter ~~could~~measures, ~~impact business~~ and the economic ~~conditions~~impacts, involatility ~~the~~and ~~U.S.~~uncertainty ~~and~~resulting ~~abroad;~~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”, below.

Because of these and other uncertainties, actual future 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.

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Item 1.

Business

General

First National Corporation (the Company) is a bank holding company incorporated under Virginia law on September 7, 1983. The Company owns all of the stock of its primary operating subsidiary, First Bank (the Bank), which is a commercial bank chartered under Virginia law. The Company’s subsidiaries are:

• ~~First Bank.~~ The Bank owns:

•

First Bank Financial Services, Inc.

• Shen-Valley Land Holdings, LLC • ~~Bank of Fincastle Services, Inc. • ESF, 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. ~~Bank of Fincastle Services, Inc. is no longer an active operating entity and was dissolved in March~~ ~~2025.~~ Shen-Valley Land Holdings, LLC ~~and ESF, LLC were~~was formed to hold other real estate owned and future office sites. ~~ESF,~~ ~~LLC closed in March of 2025 and no material impact to the financials is expected related to the closure.~~ McKenney Group, LLC owns an interest in ana now inactive entity that ~~provides~~previously provided 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.

The Bank first opened for business on July 1, 1907, under the name The Peoples National Bank of Strasburg. On January 10, 1928, the Bank changed its name to The First National Bank of Strasburg. On April 12, 1994, the Bank received approval from the Federal Reserve Bank of Richmond and the Virginia State Corporation Commission’s Bureau of Financial Institutions to convert to a state chartered bank with membership in the Federal Reserve System. On June 1, 1994, the Bank consummated such conversion and changed its name to First Bank.

OnIn ~~October~~March 1,of ~~2024,~~2025 ~~the~~two ~~Company~~previously ~~completed~~held ~~its~~subsidiaries ~~merger~~of ~~with~~the ~~Touchstone Bankshares~~Company, ~~Inc.~~Bank ~~(Touchstone),~~of ~~the~~Fincastle ~~holding~~Services, ~~company for Touchstone Bank~~Inc. ~~With~~and ~~the~~ESF, ~~acquisition of Touchstone~~LLC, ~~the~~were ~~Company~~closed ~~acquired~~with no ~~twelve~~material ~~branches~~impact into the ~~Richmond metropolitan area and~~financials ~~Southern~~related ~~Virginia~~to ~~and~~the ~~two branches in North Carolina~~closures.

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 currently represents ~~between~~the ~~50%~~largest ~~and~~component ~~60%~~ 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 4751% of noninterest expenses during ~~2024~~2025, followed by ~~merger~~other operating expenses, which comprised 1512% of noninterest expenses. The provision for credit losses is also a primary expense of the Bank. The provision is determined by factors that include net charge-offs, asset quality, loan growth, 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. 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.

Products and Services

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, and the south-central ~~regions~~ region of Virginia, including 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, ~~Federal~~ government, hospitality, and higher education. The Bank’s products and services are delivered through 33 bank branch offices, ~~three~~ one loan production ~~offices~~office, and ~~two~~a customer service ~~centers~~ center in a retirement ~~communities~~community. For the location and general character of each of these offices, see Item 2 of this Form 10-K. Many of the Bank’s services are also delivered through the Bank’s mobile banking platform, its website, www.fbvirginia.com, and a network of ATMs located throughout its market area.

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Competition

The financial services industry remains highly competitive and is constantly evolving. The Company experiences strong competition in all aspects of its business. In its market areas, the Company competes with large national and regional financial institutions, credit unions, other community banks, as well as consumer finance companies, mortgage companies, marketplace lenders and other financial technology firms, mutual funds and life insurance companies. Competition for deposits and loans is affected by various factors including interest rates offered, the number and location of branches and types of products offered, and the reputation of the institution. Credit unions have been allowed to increasingly expand their membership definitions and, because they enjoy a favorable tax status, may be able to offer more attractive loan and deposit pricing.

~~The~~In ~~Company~~addition, ~~believes~~the ~~its~~financial ~~competitive~~services ~~advantages~~industry ~~include~~continues ~~long-term customer relationships, a commitment~~ to ~~excellent~~undergo ~~customer~~rapid ~~service,~~technological ~~dedicated~~change ~~and~~with ~~loyal~~introductions ~~employees, and the support~~ of ~~and~~new ~~involvement~~technologies ~~in the communities that the Company serves. The Company focuses on providing products~~ and services ~~to individuals~~, ~~small~~including tonew ~~medium-sized~~ways ~~businesses,~~that ~~non-profit~~customers ~~organizations,~~can ~~and~~make ~~local~~payments ~~governmental~~or ~~entities~~manage ~~within~~their ~~its communities. The Company’s primary operating subsidiary~~accounts, ~~First~~including ~~Bank,~~through ~~generally~~use ~~has a strong deposit share~~ of ~~the~~stablecoins ~~markets~~and itother ~~serves.~~forms ~~According to Federal Deposit Insurance Corporation (FDIC) deposit data as~~ of ~~June 30~~cryptocurrency, ~~2024~~tokens, ~~the~~and ~~Bank~~other ~~was~~digital ~~ranked~~assets ~~second~~or ~~overall~~alternative inpayment ~~its market area with 11~~systems.~~37% of its total deposit market. This deposit market did not include the Touchstone market area as of June 30, 2024.~~

The Company's primary operating subsidiary, First Bank, believes its competitive advantages include long-term customer relationships, a commitment to excellent customer service, dedicated and loyal employees, and the support of and involvement in the communities that the Company serves. The Company focuses on providing products and services to individuals, small to medium-sized businesses, non-profit organizations, and local governmental entities within its communities.

No material part of the business of the Company is dependent upon a single or a few customers, and the loss of any single customer would not have a materially adverse effect upon the business of the Company.

Employees

At December 31, ~~2024~~2025, the Bank employed a total of ~~303~~ 308 full-time equivalent employees. The Company considers relations with its employees to be excellent.

SUPERVISION AND REGULATION

Bank holding companies and banks are extensively and increasingly regulated under both federal and state laws. The following description briefly addresses certain historic and current provisions of federal and state laws and regulations, proposed regulations, and the potential impacts on the Company and the Bank. To the extent statutory or regulatory provisions or proposals are described in this report, the description is qualified in its entirety by reference to the particular statutory or regulatory provisions or proposals.

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The Company

General. As a bank holding company registered under the Bank Holding Company Act of 1956 (the BHCA), the Company is subject to supervision, regulation, and examination by the Board of Governors of the Federal Reserve System (the Federal Reserve). The Company is also registered under the bank holding company laws of Virginia and is subject to supervision, regulation, and examination by the Virginia State Corporation Commission (the SCC).

Permitted Activities. A bank holding company is limited to managing or controlling banks, furnishing services to or performing services for its subsidiaries, and engaging in other activities that the Federal Reserve determines by regulation or order to be so closely related to banking or managing or controlling banks as to be a proper incident thereto. In determining whether a particular activity is permissible, the Federal Reserve must consider whether the performance of such an activity reasonably can be expected to produce benefits to the public that outweigh possible adverse effects. Possible benefits include greater convenience, increased competition, and gains in efficiency. Possible adverse effects include undue concentration of resources, decreased or unfair competition, conflicts of interest, and unsound banking practices. Despite prior approval, the Federal Reserve may order a bank holding company or its subsidiaries to terminate any activity or to terminate ownership or control of any subsidiary when the Federal Reserve has reasonable cause to believe that a serious risk to the financial safety, soundness or stability of any bank subsidiary of that bank holding company may result from such an activity.

Banking Acquisitions; Changes in Control. The BHCA requires, among other things, the prior approval of the Federal Reserve in any case where a bank holding company proposes to (i) acquire direct or indirect ownership or control of more than 5% of the outstanding voting stock of any bank or bank holding company (unless it already owns a majority of such voting shares), (ii) acquire all or substantially all of the assets of another bank or bank holding company, or (iii) merge or consolidate with any other bank holding company. In determining whether to approve a proposed bank acquisition, the Federal Reserve will consider, among other factors, the effect of the acquisition on competition, the public benefits expected to be received from the acquisition, the projected capital ratios and levels on a post-acquisition basis, and the acquiring institution’s performance under the Community Reinvestment Act of 1977 (the CRA).

Subject to certain exceptions, the BHCA and the Change in Bank Control Act, together with the applicable regulations, require Federal Reserve approval (or, depending on the circumstances, no notice of disapproval) prior to any person or company’s acquiring “control” of a bank or bank holding company. A conclusive presumption of control exists if an individual or company acquires the power, directly or indirectly, to direct the management or policies of an insured depository institution or to vote 25% or more of any class of voting securities of any insured depository institution. A rebuttable presumption of control exists if a person or company acquires 10% or more but less than 25% of any class of voting securities of an insured depository institution and either the institution has registered securities under Section 12 of the Securities Exchange Act of 1934 (the Exchange Act) or no other person will own a greater percentage of that class of voting securities immediately after the acquisition. The Company’s common stock is registered under Section 12 of the Exchange Act.

Source of Strength. Federal Reserve policy has historically required bank holding companies to act as a source of financial and managerial strength to their subsidiary banks. The Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act) codified this policy as a statutory requirement. ~~The federal bank regulatory agencies must still issue regulations to implement the source of strength provisions of the Dodd-Frank Act.~~ Under this requirement, the Company is expected to commit resources to support the Bank, including at times when the Company may not be in a financial position to provide such resources. Any capital loans by a bank holding company to any of its subsidiary banks are subordinate in right of payment to depositors and to certain other indebtedness of such subsidiary banks. In the event of a bank holding company’s bankruptcy, any commitment by the bank holding company to a federal bank regulatory agency to maintain the capital of a subsidiary bank will be assumed by the bankruptcy trustee and entitled to priority of payment.

Safety and Soundness. There are a number of obligations and restrictions imposed on bank holding companies and their subsidiary banks by law and regulatory policy that are designed to minimize potential loss to the depositors of such depository institutions and the Federal Deposit Insurance Corporation (FDIC) insurance fund in the event of a depository institution default. For example, under the Federal Deposit Insurance Company Improvement Act of 1991 (FDICIA), to avoid receivership of an insured depository institution subsidiary, a bank holding company is required to guarantee the compliance of any subsidiary bank that may become “undercapitalized” with the terms of any capital restoration plan filed by such subsidiary with its appropriate federal bank regulatory agency up to the lesser of (i) an amount equal to 5% of the institution’s total assets at the time the institution became undercapitalized, or (ii) the amount that is necessary (or would have been necessary) to bring the institution into compliance with all applicable capital standards as of the time the institution fails to comply with such capital restoration plan.

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Under the Federal Deposit Insurance Act (the FDIA), the federal bank regulatory agencies have adopted guidelines prescribing safety and soundness standards. These guidelines establish general standards relating to internal controls and information systems, internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth and compensation, fees and benefits. In general, the guidelines require, among other things, appropriate systems and practices to identify and manage the risk and exposures specified in the guidelines.

FDICIA, implemented through FDIC regulations (12 CFR Part 363), imposes annual audit and reporting requirements on insured depository institutions with total assets above certain thresholds to promote early identification of financial management issues. These requirements focus on audited financial statements, management’s responsibilities, and Internal Control over Financial Reporting (ICFR) assessments. On November 25, 2025, the FDIC officially adopted amendments to 12 CFR Part 363, effective January 1, 2026, to update certain regulatory thresholds that govern audit and reporting requirements. The Company will continue to provide management's attestation of effectiveness of FDICIA controls at the increased asset threshold of greater than $1 billion. Independent external auditor attestation on ICFR increased from $1 billion to $5 billion or more in assets.

Capital Requirements. Pursuant to the Small Bank Holding Company and Savings and Loan Holding Company Policy Statement, qualifying bank holding companies with total consolidated assets of less than $3 billion, such as the Company, are not subject to consolidated regulatory capital requirements. Certain capital requirements applicable to the Bank are described below under “The Bank-Capital Requirements”. Subject to its capital requirements and certain other restrictions, the Company is able to borrow money to make a capital contribution to the Bank, and such loans may be repaid from dividends paid by the Bank to the Company.

Limits on Dividends and Other Payments. The Company is a legal entity, separate and distinct from its subsidiaries. A significant portion of the revenues of the Company result from dividends paid to it by the Bank. There are various legal limitations applicable to the payment of dividends by the Bank to the Company and to the payment of dividends by the Company to its shareholders. The Bank is subject to various statutory restrictions on its ability to pay dividends to the Company. Under the current supervisory practices of the Bank’s regulatory agencies, prior approval from those agencies is required if cash dividends declared in any given year exceed net income for that year, plus retained net profits of the two preceding years. The payment of dividends by the Bank or the Company may be limited by other factors, such as requirements to maintain capital above regulatory guidelines. Bank regulatory agencies have the authority to prohibit the Bank or the Company from engaging in an unsafe or unsound practice in conducting their business. The payment of dividends, depending on the financial condition of the Bank, or the Company, could be deemed to constitute such an unsafe or unsound practice. In addition, under the current supervisory practices of the Federal Reserve, the Company should inform and consult with its regulators reasonably in advance of declaring or paying a dividend that exceeds earnings for the period (e.g., quarter) for which the dividend is being paid or that could result in a material adverse change to the Company's capital structure.

The Company’s subordinated debt is senior in right of payment compared to its common stock and all current and future junior subordinated debt obligations. Following the occurrence of any event of default on its subordinated debt, the Company may not make any payments on its junior subordinated debt; declare or pay any dividends on its common stock; redeem or otherwise acquire any of its common stock; or make any other distributions with respect to its common stock or set aside any monies or properties for such purposes. The Company is current in its interest payments on subordinated debt.

The Company's ability to pay dividends on common stock is also limited by contractual restrictions under its junior subordinated debt. Interest must be paid on the junior subordinated debt before dividends may be paid to common shareholders. The Company is current in its interest payments on junior subordinated debt; however, it has the right to defer distributions on its junior subordinated debt, during which time no dividends may be paid on its common stock. If the Company does not have sufficient earnings in the future and begins to defer distributions on the junior subordinated debt, it will be unable to pay dividends on its common stock until it becomes current on those distributions.

The Bank

General. The Bank is supervised and regularly examined by the Federal Reserve Bank of Richmond and the ~~SCC~~Virginia State Corporation Commissions's Bureau of Financial Institutions. The various laws and regulations administered by the regulatory agencies affect corporate practices, such as the payment of dividends, incurrence of debt, and acquisition of financial institutions and other companies; they also affect business practices, such as the payment of interest on deposits, the charging of interest on loans, types of business conducted, and location of offices. Certain of these law and regulations are referenced above under “The Company.”

Capital Requirements. The Federal Reserve and the other federal banking agencies have issued risk-based and leverage capital guidelines applicable to U. S. banking organizations. In addition, those regulatory agencies may from time to time require that a banking organization maintain capital above the minimum levels because of its financial condition or actual or anticipated growth.

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.

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The minimum capital level requirements applicable to the Bank under the rules are as follows: a 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 of 2.5% of risk-weighted assets. This resulted in the following minimum capital ratios beginning in 2019: 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 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, ~~2024~~2025 and December 31, ~~2023~~2024, that the Bank met all capital adequacy requirements to which it is subject, including the capital conservation buffer.

The following table shows the Bank’s regulatory capital ratios at December 31, ~~2024~~2025:

	First Bank
Total capital to risk-weighted assets		1213.3464	%
Tier 1 capital to risk-weighted assets		1112.1959	%
Common equity Tier 1 capital to risk-weighted assets		1112.1959	%
Tier 1 capital to average assets		79.9513	%
Capital conservation buffer ratio(1)		45.3464	%

(1)	Calculated by subtracting the regulatory minimum capital ratio requirements from the Bank’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 rules also contain revisions to the prompt corrective action framework, which 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, ~~2024~~2025 and December 31, ~~2023~~2024.

On September 17, 2019 the FDIC finalized a rule that introduced 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, Regulatory Relief and Consumer Protection Act (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.

In order to qualify for the CBLR framework, a community banking organization must have a tier 1 leverage ratio greater than 9%, have 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 prompt corrective action regulations and will not be required to report or calculate risk-based capital. Although the Bank ~~does~~has not ~~meet~~opted ~~the~~into ~~criteria for~~ the CBLR framework, it may opt into the CBLR framework in a future quarterly period.

~~DepositInsurance.~~On ~~Substantially~~November ~~all~~25, of2025 the Federal Reserve, the ~~deposits~~FDIC, and the Office of the ~~Bank~~Comptroller ~~are~~of ~~insured~~the upCurrency proposed to ~~applicable~~lower ~~limits~~the byCBLR ~~the~~requirement ~~Deposit~~from ~~Insurance~~9% ~~Fund~~to ~~(the~~8% ~~DIF)~~and ofextend the ~~FDIC~~length ~~and~~of ~~are~~time ~~subject~~that toa ~~deposit~~community ~~insurance~~banking ~~assessments~~organization tocan ~~maintain~~remain in the ~~DIF.~~CBLR ~~The~~framework ~~deposit~~while ~~insurance~~not ~~assessment~~meeting ~~base~~all isof ~~based~~the onqualifying ~~average~~criteria from ~~total~~two ~~assets~~quarters ~~minus~~to ~~average~~four ~~tangible~~quarters. ~~equity,~~As ~~pursuant~~the Bank tohas anot ~~rule~~opted ~~issued~~into by the CBLR ~~FDIC~~framework, it asdoes ~~required~~not byexpect ~~the~~any ~~Dodd-Frank~~changes ~~Act~~due to the proposal.

Deposit Insurance. Substantially all of the deposits of the Bank are insured up to applicable limits by the Deposit Insurance Fund (the DIF) of the FDIC and are subject to deposit insurance assessments to maintain the DIF. The deposit insurance assessment base is based on average total assets minus average tangible equity, pursuant to a rule issued by the FDIC as required by the Dodd-Frank Act.

The FDIA, as amended by the Federal Deposit Insurance Reform Act and the Dodd-Frank Act, requires the FDIC to set a ratio of deposit insurance reserves to estimated insured deposits of at least 1.35%. On October 18, 2022, the FDIC adopted a final rule that increased base deposit insurance assessment rate schedules uniformly by 2 basis points beginning in the first quarterly assessment period of 2023. The increase was instituted to account for extraordinary growth in insured deposits during the first and second quarters of 2020, which caused a substantial decrease in the “reserve ratio” of the DIF to total industry deposits. The FDIC has indicated that the new assessment rate schedules will remain in effect until the DIF reserve ratio meets or exceeds 2 percent.

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FDIC deposit insurance assessments for insured institutions with less than $10 billion in assets that have been FDIC insured for at least five years (established small banks) are calculated based on risk-based assessments using examination rulings and financial modeling to better capture the risk that an established small bank poses to the DIF and to ensure that institutions that take on greater risks have higher assessments.

Transactions with Affiliates. Pursuant to Sections 23A and 23B of the Federal Reserve Act and Regulation W, the authority of the Bank to engage in transactions with related parties or “affiliates” or to make loans to insiders is limited. Loan transactions with an affiliate generally must be collateralized and certain transactions between the Bank and its affiliates, including the sale of assets, the payment of money or the provision of services, must be on terms and conditions that are substantially the same, or at least as favorable to the Bank, as those prevailing for comparable nonaffiliated transactions. In addition, the Bank generally may not purchase securities issued or underwritten by affiliates.

Loans to executive officers, directors or to any person who directly or indirectly, or acting through or in concert with one or more persons, owns, controls or has the power to vote more than 10% of any class of voting securities of a bank (a “10% Shareholder”), are subject to Sections 22(g) and 22(h) of the Federal Reserve Act and their corresponding regulations (Regulation O) and Section 13(k) of the Exchange Act relating to the prohibition on personal loans to executives (which exempts financial institutions in compliance with the insider lending restrictions of Section 22(h) of the Federal Reserve Act). Among other things, these loans must be made on terms substantially the same as those prevailing on transactions made to unaffiliated individuals and certain extensions of credit to those persons must first be approved in advance by a disinterested majority of the entire board of directors. Section 22(h) of the Federal Reserve Act prohibits loans to any of those individuals where the aggregate amount exceeds an amount equal to 15% of an institution’s unimpaired capital and surplus plus an additional 10% of unimpaired capital and surplus in the case of loans that are fully secured by readily marketable collateral, or when the aggregate amount on all of the extensions of credit outstanding to all of these persons would exceed the Bank’s unimpaired capital and unimpaired surplus. Section 22(g) of the Federal Reserve Act identifies limited circumstances in which the Bank is permitted to extend credit to executive officers.

Prompt Corrective Action. Immediately upon becoming “undercapitalized,” a depository institution becomes subject to the provisions of Section 38 of the FDIA, which: (i) restrict payment of capital distributions and management fees; (ii) require that the appropriate federal banking agency monitor the condition of the institution and its efforts to restore its capital; (iii) require submission of a capital restoration plan; (iv) restrict the growth of the institution’s assets; and (v) require prior approval of certain expansion proposals. The appropriate federal banking agency for an undercapitalized institution also may take any number of discretionary supervisory actions if the agency determines that any of these actions is necessary to resolve the problems of the institution at the least possible long-term cost to the DIF, subject in certain cases to specified procedures. These discretionary supervisory actions include: (i) requiring the institution to raise additional capital; (ii) restricting transactions with affiliates; (iii) requiring divestiture of the institution or the sale of the institution to a willing purchaser; and (iv) any other supervisory action that the agency deems appropriate. These and additional mandatory and permissive supervisory actions may be taken with respect to significantly undercapitalized and critically undercapitalized institutions. The Bank met the definition of “well capitalized” as of December 31, ~~2024~~2025.

Community Reinvestment Act. The Bank is subject to the requirements of the CRA. The CRA imposes on financial institutions an affirmative and ongoing obligation to meet the credit needs of the local communities, including low and moderate income neighborhoods. If the Bank receives a rating from the Federal Reserve of less than "satisfactory" under the CRA, restrictions on operating activities could be imposed. The ~~In 2021, the most recent notification from the~~ Federal Reserve, assigned the Bank ~~received~~the arating of "satisfactory" at the most recent CRA ~~rating~~examination.

In October 2023, federal bank regulatory agencies jointly issued a final rule intended to strengthen and modernize the CRA regulatory framework. Most of the final rule’s new requirements are applicable beginning January 1, 2026. The remaining new requirements, including data reporting requirements, are applicable on January 1, 2027. The rule is intended to, among other things, (i) expand access to credit, investment and basic banking services in low- and moderate-income communities, (ii) adapt to changes in the banking industry, including internet and mobile banking, (iii) provide greater clarity, consistency and transparency in the application of the regulations and (iv) tailor performance standards to account for differences in bank size, business model, and local conditions.

Privacy Legislation. Several regulations issued by federal banking agencies also provide new protections against the transfer and use of customer information by financial institutions. A financial institution must provide to its customers information regarding its policies and procedures with respect to the handling of customers’ personal information. Each institution must conduct an internal risk assessment of its ability to protect customer information. These privacy provisions generally prohibit a financial institution from providing a customer’s personal financial information to unaffiliated parties without prior notice and approval from the customer.

In October 2024, the Consumer Financial Protection Bureau adopted a new rule that requires financial service providers, such as the Bank, to make certain data available to consumers upon request regarding the products or services they obtain from the provider. The rule is intended to give consumers control over their financial data, including with whom it is shared, and encourage competition in the provision of consumer financial products and services. Compliance is required beginning April 1, 2028 for depository institutions with at least $3 billion in total assets and beginning April 1, 2029 for depository institutions with at least $1.5 billion in total assets.

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Anti-Money Laundering Laws and Regulations. The Bank is subject to several federal laws that are designed to combat money laundering, terrorist financing, and transactions with persons, companies or foreign governments designated by U.S. authorities (AML laws). This category of laws includes the Bank Secrecy Act of 1970, the Money Laundering Control Act of 1986, the USA PATRIOT Act of 2001, and the Anti-Money Laundering Act of 2020. The Anti-Money Laundering Act of 2020, the most sweeping anti-money laundering legislation in 20 years, requires various federal agencies to promulgate regulations implementing a number of its provisions.

The AML laws and their implementing regulations require insured depository institutions, broker-dealers, and certain other financial institutions to have policies, procedures, and controls to detect, prevent, and report money laundering and terrorist financing. The AML laws and their regulations also provide for information sharing, subject to conditions, between federal law enforcement agencies and financial institutions, as well as among financial institutions, for counter-terrorism purposes. Federal banking regulators are required, when reviewing bank holding company acquisition and bank merger applications, to take into account the effectiveness of the anti-money laundering activities of the applicants. To comply with these obligations, the Company has implemented appropriate internal practices, procedures, and controls.

Cybersecurity. The federal banking agencies have adopted guidelines for establishing information security standards and cybersecurity programs for implementing safeguards under the supervision of a financial institution’s board of directors. These guidelines, along with related regulatory materials, increasingly focus on risk management and processes related to information technology and the use of third parties in the provision of financial products and services. The federal banking agencies expect financial institutions to establish lines of defense and ensure that their risk management processes also address the risk posed by compromised customer credentials, and also expect financial institutions to maintain sufficient business continuity planning processes to ensure rapid recovery, resumption and maintenance of the institution’s operations after a cyber-attack. If the Bank fails to meet the expectations set forth in this regulatory guidance, it could be subject to various regulatory actions and any remediation efforts may require significant resources of the Bank. In addition, all federal and state bank regulatory agencies continue to increase focus on cybersecurity programs and risks as part of regular supervisory exams.

In November 2021, the federal banking agencies approved a final rule that requires banking organizations to notify their primary regulator within 36 hours of becoming aware of a “computer-security incident” that rises to the level of a “notification incident”, among other things, the rule also requires bank service providers to notify their banking organization customers as soon as possible after becoming aware of similar incidents.

Digital Assets. In July 2025, President Trump signed into law the Guiding and Establishing National Innovation for U.S. Stablecoins Act (the “GENIUS Act”), which establishes a regulatory framework for “payment stablecoins” and their issuers. The GENIUS Act permits payment stablecoins to be issued in the United States only by “permitted payment stablecoin issuers”, including the subsidiary of an insured depository institution such as the Bank. The GENIUS Act requires federal and state regulators to issue regulations on numerous topics to interpret and implement the act. The effect of the GENIUS Act on the Company and the Bank will depend on the final form of any regulations and cannot be predicted at this time. Digital assets activities are an area of significant focus for Congress, the current Presidential administration, and federal banking regulators. Any changes in law or in the Company’s or the Bank’s supervisory frameworks relating to digital assets cannot be predicted but may have a significant effect on the Company’s business.

Consumer Laws and Regulations. The Bank is also subject to certain consumer laws and regulations issued thereunder that are designed to protect consumers in transactions with banks. These laws include the Truth in Lending Act, the Truth in Savings Act, the Electronic Funds Transfer Act, the Expedited Funds Availability Act, the Equal Credit Opportunity Act, Real Estate Settlement Procedures Act, Home Mortgage Disclosure Act, the Fair Credit Reporting Act, the Fair Housing Act and the Dodd-Frank Act, among others. The laws and related regulations mandate certain disclosure requirements and regulate the manner in which financial institutions transact business with customers. The Bank must comply with the applicable provisions of these consumer protection laws and regulations as part of its ongoing customer relations.

Incentive Compensation. In June 2010, the federal banking agencies issued comprehensive final guidance on incentive compensation policies intended to ensure that the incentive compensation policies of financial institutions do not undermine the safety and soundness of such institutions by encouraging excessive risk-taking. The Interagency Guidance on Sound Incentive Compensation Policies, which covers all employees that have the ability to materially affect the risk profile of a financial institution, either individually or as part of a group, is based upon the key principles that a financial institution’s incentive compensation arrangements should (i) provide incentives that do not encourage risk-taking beyond the institution’s ability to effectively identify and manage risks, (ii) be compatible with effective internal controls and risk management, and (iii) be supported by good corporate governance, including active and effective oversight by the financial institution’s board of directors.

The Federal Reserve will review, as part of the regular, risk-focused examination process, the incentive compensation arrangements of financial institutions, such as the Company, that are not “large, complex banking organizations.” These reviews will be tailored to each financial institution based on the scope and complexity of the institution’s activities and the prevalence of incentive compensation arrangements. The findings of the supervisory initiatives will be included in reports of examination. Deficiencies will be incorporated into the institution’s supervisory ratings, which can affect the institution’s ability to make acquisitions and take other actions. Enforcement actions may be taken against a financial institution if its incentive compensation arrangements, or related risk-management control or governance processes, pose a risk to the institution’s safety and soundness and the financial institution is not taking prompt and effective measures to correct the deficiencies. At December 31, ~~2024~~2025, the Company had not been made aware of any instances of non-compliance with the guidance.

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Effect of Governmental Monetary Policies

The Company’s operations are affected not only by general economic conditions but also by the policies of various regulatory authorities. In particular, the Federal Reserve regulates money and credit conditions and interest rates to influence general economic conditions. These policies have a significant impact on overall growth and distribution of loans, investments and deposits; they affect interest rates charged on loans or paid for time and savings deposits. Federal Reserve monetary policies have had a significant effect on the operating results of commercial banks, including the Company, in the past and are expected to do so in the future.

Future Legislation and Regulation

Congress may enact legislation from time to time that affects the regulation of the financial services industry, and state legislatures may enact legislation from time to time affecting the regulation of financial institutions chartered by or operating in those states. Federal and state regulatory agencies also periodically propose and adopt changes to their regulations or change the manner in which existing regulations are applied. The substance or impact of pending or future legislation or regulation, or the application thereof, cannot be predicted, although enactment of any proposed legislation could impact the regulatory structure under which the Company and the Bank operate and may significantly increase costs, impede the efficiency of internal business processes, require an increase in regulatory capital, require modifications to business strategy, and limit the ability to pursue business opportunities in an efficient manner. A change in statutes, regulations or regulatory policies applicable to the Company or the Bank are difficult to predict, and could have a material, adverse effect on the business, financial condition and results of operations of the Company and the Bank.

Filings with the SEC

The Company’s internet address is www.fbvirginia.com. The Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and amendments to those reports, as filed with or furnished to the Securities and Exchange Commission (the SEC), are available free of charge at www.fbvirginia.com as soon as reasonably practicable after being filed with or furnished to the SEC. A copy of any of the Company’s filings will be sent, without charge, to any shareholder upon written request to: ~~Bruce~~Brad E. ~~Thomas~~Schwartz, ~~Interim~~ Chief Financial Officer, at 112 West King Street, Strasburg, Virginia 22657. The information on the Company's website is not a part of, and is not incorporated into, this Annual Report on Form 10-K.

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Item 1A. Risk Factors

An investment in the Company’s securities involves risks. In addition to the other information set forth in this report, investors in the Company’s securities should carefully consider the factors discussed below. These factors could materially and adversely affect the Company’s business, financial condition, liquidity, results of operations and capital position, and could cause the Company’s actual results to differ materially from its historical results or the results contemplated by the forward-looking statements contained in this report, in which case the trading price of the Company’s securities could decline.

Risks Related to our Lending Activities and Economic Conditions

Our business is subject to various lending and other economic risks that could adversely affect our results of operations and financial condition.

Deterioration in economic conditions could adversely affect our business. Our business is directly affected by general economic and market conditions; broad trends in industry and finance; legislative and regulatory changes; changes in governmental monetary and fiscal policies; changes in interest rates; and inflation, all of which are beyond our control. The growth in economic activity and in the demand for goods and services, coupled with labor shortages, supply chain disruptions and other factors, has contributed to rising inflationary pressures, the Federal Reserve’s responsive interest rate hikes, and the risk of recession. A deterioration in economic conditions, in particular a prolonged economic slowdown within our geographic region or a broader disruption in the economy , could result in the following consequences, any of which could hurt our business materially: an increase in loan delinquencies; an increase in problem assets and foreclosures; a decline in demand for our products and services; a deterioration in the value of collateral for loans made by our various business segments; and changes in the fair value of financial instruments held by the Company or its subsidiaries.

Adverse changes in economic conditions in our market areas or adverse conditions in an industry on which a local market in which we do business is dependent could adversely affect our results of operations and financial condition.

We provide ~~full-service~~ banking and other financial services throughout the Company’s market areas, which include the Shenandoah Valley, Roanoke Valley, Richmond, south-central regions of Virginia, and northern North Carolina. Our loan and deposit activities are directly affected by, and our financial success depends on, economic conditions within these markets, as well as conditions in the industries on which those markets are economically dependent. A deterioration in local economic conditions or in the condition of an industry on which a local market depends could adversely affect such factors as unemployment rates, business formations and expansions and housing market conditions. Adverse developments in any of these factors could result in, among other things, a decline in loan demand, a reduction in the number of credit-worthy borrowers seeking loans, an increase in delinquencies, defaults and foreclosures, an increase in classified and nonaccrual loans, a decrease in the value of loan collateral, and a decline in the financial condition of borrowers and guarantors, any of which could adversely affect our financial condition or business.

The Company’s allowance for credit losses on loans may prove to be insufficient to absorb losses in its loan and securities portfolios.

Like all financial institutions, the Company maintains an allowance for credit losses (ACL) to provide for loans and securities that may not repay in their entirety. The Company believes that it maintains an ACL at a level adequate to absorb expected losses inherent in the loan and securities portfolios as of the corresponding balance sheet date and in compliance with applicable accounting and regulatory guidance. However, the ACL may not be sufficient to cover actual losses and future provisions for credit losses could materially and adversely affect the Company’s operating results. Accounting measurements related to impairment and the allowance for credit losses require significant estimates that are subject to uncertainty and changes relating to new information and changing circumstances. The significant uncertainties surrounding the ability of the Company’s borrowers to execute their business models successfully through changing economic environments, competitive challenges, and other factors complicate the Company’s estimates of the risk of loss and amount of loss on any loan or security. Because of the degree of uncertainty and susceptibility of these factors to change, the actual losses may vary from current estimates. ~~The Company expects fluctuations in the credit loss provisions due to the uncertain economic conditions.~~

The Company’s banking regulators, as an integral part of their examination process, periodically review the ACL and may require the Company to increase its allowance for credit losses by recognizing additional provisions for credit losses charged to expense, or to decrease the allowance for credit losses on loans by recognizing loan charge-offs, net of recoveries. Any such required additional provisions for credit losses or charge-offs could have a material adverse effect on the Company’s financial condition and results of operations.

The Company’s concentration in loans secured by real estate may adversely affect earnings due to changes in the real estate markets.

The Company offers a variety of secured loans, including commercial lines of credit, commercial term loans, real estate, construction, home equity, consumer, and other loans. Many of the Company’s loans are secured by real estate (both residential and commercial) in the Company’s market areas. A major change in the real estate markets, resulting in deterioration in the value of this collateral, or in the local or national economy, could adversely affect borrowers’ ability to pay these loans, which in turn could negatively affect the Company. Risks of loan defaults and foreclosures are unavoidable in the banking industry; the Company tries to limit its exposure to these risks by monitoring extensions of credit carefully. The Company cannot fully eliminate credit risk; thus, credit losses will occur in the future. Additionally, changes in the real estate market also affect the value of foreclosed assets, and therefore, additional losses may occur when management determines it is appropriate to sell the assets.

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The Company has a significant exposure in commercial real estate, and loans with this type of collateral are viewed as having more risk of default.

The Company’s commercial real estate portfolio consists primarily of owner-operated properties and other commercial properties. These types of loans are generally viewed as having more risk of default than residential real estate loans. They are also typically larger than residential real estate loans and consumer loans and depend on cash flows from the owner’s business or the property to service the debt. Cash flows may be affected significantly by general economic conditions, and a downturn in the local economy or in occupancy rates in the local economy where the property is located could increase the likelihood of default. Because the Company’s loan portfolio contains a number of commercial real estate loans with relatively large balances, the deterioration of one or a few of these loans could cause a significant increase in the percentage of non-performing loans. An increase in non-performing loans could result in a loss of earnings from these loans, an increase in the provision for credit losses and an increase in charge-offs, all of which could have a material adverse effect on the Company’s financial condition.

The Company’s banking regulators generally give commercial real estate lending greater scrutiny and may require banks with higher levels of commercial real estate loans to implement improved underwriting, internal controls, risk management policies, and portfolio stress testing, as well as possibly higher levels of allowances for credit losses and capital levels as a result of commercial real estate lending growth and exposures, which could have a material adverse effect on the Company’s results of operations.

The Company’s loan portfolio contains construction and development loans, and a decline in real estate values and economic conditions would adversely affect the value of the collateral securing the loans and have an adverse effect on the Company’s financial condition.

Although most of the Company’s construction and development loans are secured by real estate, the Company believes that, in the case of the majority of these loans, the real estate collateral by itself may not be a sufficient source for repayment of the loan if real estate values decline. If the Company is required to liquidate the collateral securing a construction and development loan to satisfy the debt, its earnings and capital may be adversely affected. A period of reduced real estate values may continue for some time, resulting in potential adverse effects on the Company’s earnings and capital.

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

The Company assumes credit risk by virtue of making loans and extending loan commitments and letters of credit. The Company manages credit risk through a program of underwriting standards, the review of certain credit decisions and a continuous quality assessment process of credit already extended. The Company’s exposure to credit risk is managed through the use of consistent underwriting standards that emphasize local lending while avoiding highly leveraged transactions as well as excessive industry and other concentrations. The Company’s credit administration function employs risk management techniques to help ensure that problem loans are promptly identified. While these procedures are designed to provide the Company with the information needed to implement policy adjustments where necessary and to take appropriate corrective actions, there can be no assurance that such measures will be effective in avoiding undue credit risk.

Although the Company emphasizes local lending practices, the Company has purchased certain loans through third-party lending programs. These portfolios include commercial loans and carry risks associated with the borrower, changes in the economic environment, and the vendor themselves. The Company manages these risks through policies that require minimum credit scores and other underwriting requirements, robust analysis of actual performance versus expected performance, as well as ensuring compliance with the Company's vendor management program. While these policies are designed to manage the risks associated with these loans, there can be no assurance that such measures will be effective in avoiding undue credit losses.

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 Company assumes earnings risk from the potential prepayment of loans and securities purchased at premiums. The Company’s loan portfolio includes commercial and industrial loans purchased at premiums through third-party lending programs as well as loans acquired through business combinations, which resulted in purchase premiums. Additionally, the Company purchases securities at premiums from time-to-time for its investment portfolio. Premiums on performing loans are amortized over the life of the loans and premiums on securities are amortized to the earlier of their call dates or maturity dates. Prepayments of the loans and securities would accelerate amortization expense of unamortized premiums and could result in a material decrease in earnings during future periods from a reduction of interest income and fees on loans or interest income on securities.

The Company’s focus on lending to small to mid-sized community-based businesses may increase its credit risk.

Most of the Company’s commercial business and commercial real estate loans are made to small business or middle market customers. These businesses generally have fewer financial resources in terms of capital or borrowing capacity than larger entities and have a heightened vulnerability to economic conditions. If general economic conditions in the market areas in which the Company operates negatively impact this important customer sector, the Company’s results of operations and financial condition may be adversely affected. Moreover, a portion of these loans have been made by the Company in recent years and the borrowers may not have experienced a complete business or economic cycle. Any deterioration of the borrowers’ businesses may hinder their ability to repay their loans with the Company, which could have a material adverse effect on the Company’s financial condition and results of operations.

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The Company relies upon independent appraisals to determine the value of the real estate which secures a significant portion of its loans, and the values indicated by such appraisals may not be realizable if the Company is forced to foreclose upon such loans.

A significant portion of the Company’s loan portfolio consists of loans secured by real estate. The Company relies upon independent appraisers to estimate the value of such real estate. Appraisals are only estimates of value and the independent appraisers may make mistakes of fact or judgment that adversely affect the reliability of their appraisals. In addition, events occurring after the initial appraisal may cause the value of the real estate to increase or decrease. As a result of any of these factors, the real estate securing some of the Company’s loans may be more or less valuable than anticipated at the time the loans were made. If a default occurs on a loan secured by real estate that is less valuable than originally estimated, the Company may not be able to recover the outstanding balance of the loan.

The Company depends on the accuracy and completeness of information about clients and counterparties, and its financial condition could be adversely affected if it relies on misleading information.

In deciding whether to extend credit or to enter into other transactions with clients and counterparties, the Company may rely on information furnished to it by or on behalf of clients and counterparties, including financial statements and other financial information, which the Company does not independently verify. The Company also may rely on representations of clients and counterparties as to the accuracy and completeness of that information and, with respect to financial statements, on reports of independent auditors. For example, in deciding whether to extend credit to clients, the Company may assume that a customer’s audited financial statements conform to U.S. generally accepted accounting principles (GAAP) and present fairly, in all material respects, the financial condition, results of operations, and cash flows of the customer. The Company’s financial condition and results of operations could be negatively impacted to the extent it relies on financial statements that do not comply with GAAP or are materially misleading.

Nonperforming assets take significant time to resolve and adversely affect the Company’s results of operations and financial condition.

Nonperforming assets adversely affect the Company in various ways. The Company does not record interest income on nonaccrual loans, which adversely affects its income and increases loan administration costs. When the Company receives collateral through foreclosures and similar proceedings, it is required to mark the related loan to the then fair market value of the collateral less estimated selling costs, which may result in a loss. An increase in the level of nonperforming assets also increases the Company’s risk profile, which may reduce the amount of liquidity available to the Company and require a higher level of capital in light of such risks. The Company utilizes various techniques such as workouts, restructurings, and loan sales to manage problem assets. Increases in or negative adjustments in the value of these problem assets, the underlying collateral, or in the borrowers’ performance or financial condition, could adversely affect the Company’s business, results of operations, and financial condition. In addition, the resolution of nonperforming assets requires significant commitments of time from management and staff, which can be detrimental to the performance of their other responsibilities, including origination of new loans. There can be no assurance that the Company will avoid increases in nonperforming assets in the future.

We are subject to environmental liability risk associated with our lending activities.

A significant portion of our loan portfolio is secured by real property. During the ordinary course of business, we may foreclose on and take title to properties securing certain loans. In doing so, there is a risk that hazardous or toxic substances could be found on these properties. If hazardous or toxic substances are found, we may be liable for remediation costs, as well as for personal injury and property damage. Environmental laws may require us to incur substantial expenses and may materially reduce the affected property’s value or limit our ability to use or sell the affected property. In addition, future laws or more stringent interpretations or enforcement policies with respect to existing laws may increase our exposure to environmental liability. Environmental reviews of real property before initiating foreclosure actions may not be sufficient to detect all potential environmental hazards. Remediation costs and any other financial liabilities associated with an environmental hazard could have a material adverse effect on our financial condition and results of operations.

Weakness in the secondary residential mortgage loan markets or demand for mortgage loans may adversely affect income.

Our mortgage department contributes to our noninterest income. We generate income from brokered mortgage loans and gains on sales of mortgage loans primarily from loans that we source and/or originate. Interest rates, housing inventory, housing demand, cash buyers, new mortgage lending regulations and other market conditions have a direct effect on loan originations across the industry. During ~~2023 and~~ 2024, revenues from mortgage banking decreased significantly from historical levels, primarily due to lower mortgage volumes as market interest rates increased and the demand for mortgages declined. ~~Loan~~ While brokered mortgage fees increased in 2025, loan production levels may ~~continue to~~ suffer if there is a sustained slowdown in the housing markets in which the Company conducts business or tightening credit conditions. Any sustained period of decreased activity caused by an economic downturn, fewer refinancing transactions, higher interest rates, housing price pressure, or loan underwriting restrictions would adversely affect the Company’s mortgage originations and, consequently, noninterest income from its mortgage operations. In addition, our results of operations are affected by the amount of noninterest expenses (including for personnel and systems infrastructure) associated with mortgage banking activities. During periods of reduced loan demand, our results of operations may be adversely affected to the extent that we are unable to reduce expenses commensurate with the decline in mortgage loan origination activity.

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The Company’s wealth management revenue is directly impacted by the market value of assets under management, which could adversely impact Company profitability.

A significant portion of revenue from wealth management services is based on the market value of assets under management, which may decrease due to a variety of factors including an economic slowdown. Any sustained period of lower market values of assets under management would adversely affect the Company’s wealth management revenue and, as a result, would also adversely affect the Company’s results of operations.

Risks Related to our Industry

We are subject to interest rate risk and fluctuations in interest rates may negatively affect our results of operations and financial condition.

Our profitability depends in substantial part on our net interest margin, which is the difference between the interest earned on loans, securities and other interest-earning assets, and interest paid on deposits and borrowings divided by total interest-earning assets. Changes in interest rates will affect our net interest margin in diverse ways, including the pricing of loans and deposits, the levels of prepayments, and asset quality. We are unable to predict actual fluctuations of market interest rates because many factors influencing interest rates, including changes in economic conditions and monetary policies, which are beyond our control. We believe that our current interest rate exposure is manageable and does not indicate any significant exposure to interest rate changes. Although the Company does not believe it has significant exposure to changes in interest rates, it could experience pressure on the net interest margin due to intense competition for loans and deposits from both local and national financial institutions. In addition, the Company could experience net interest margin compression if it is unable to maintain its current level of loans outstanding by continuing to originate new loans or if it experiences a decrease in deposit balances, which would require the Company to seek funding from other sources at higher rates of interest.

In addition, changes in interest rates may negatively affect both the returns on and market value of our investment securities. AsInterest ~~we experienced due to rising interest rates in 2023 and 2024, interest~~ rate changes can reduce unrealized gains or increase unrealized losses in our portfolio and thereby negatively impact our accumulated other comprehensive income and equity levels. Further, such losses could be realized into earnings should liquidity and/or business strategy necessitate the sales of securities in a loss position. Additionally, actual investment income and cash flows from investment securities that carry prepayment risk, such as mortgage-backed securities and callable securities, may materially differ from those anticipated at the time of investment or subsequently as a result of changes in interest rates and market conditions. These occurrences could have a material adverse effect on our net interest income or our results of operations.

We rely substantially on deposits obtained from customers in our target markets to provide liquidity and support growth.

We require sufficient liquidity to fund asset growth, meet customer loan requests, customer deposit maturities and withdrawals, make payments on our debt obligations as they come due and other cash commitments. Our business strategy is based primarily on access to funding from local customer deposits. Deposit levels may be affected by a number of factors, including interest rates paid by competitors, general interest rate levels, returns available to customers on alternative investments, changes in the liquidity needs of our depositors and general economic conditions that affect savings levels and the amount of liquidity in the economy, including government stimulus efforts in response to economic crises. If market interest rates rise or our competitors raise the rates they pay on deposits, our funding costs may increase, either because we raise our rates to avoid losing deposits or because we lose deposits and must rely on more expensive sources of funding. Either of these factors could reduce our net interest margin and net interest income and could have a material adverse effect on our business, financial condition, results of operations and cash flows from operations.

Further, if local customer deposits are not sufficient to fund our normal operations and growth, we may rely on secondary sources of liquidity, such as brokered deposits, borrowings from the Federal Home Loan Bank of Atlanta (FHLB), federal funds lines of credit from correspondent banks, and borrowings from the Federal Reserve Discount Window; however, there can be no assurance that these arrangements will be available to us when needed on favorable terms, or at all, or that they will be sufficient to meet future liquidity needs. For example, our ability to access borrowings from the FHLB will be dependent upon whether and the extent to which we can provide collateral to secure FHLB borrowings, and our use of brokered deposits may be limited or discouraged by our banking regulators. We also may need to raise funds through the issuance of debt or equity securities, or the sale of investment securities or loans, as additional sources of liquidity. If we are unable to access funding sufficient to support our business operations and growth strategies or are unable to access such funding on attractive terms, we may not be able to implement our business strategies or satisfy our obligations.

Consumers may increasingly decide not to use banks to complete their financial transactions, which could have a material adverse impact on our financial condition and operations.

Technology and other changes are allowing parties to complete financial transactions through alternative methods that historically have involved banks. For example, consumers can now maintain funds that would have historically been held as bank deposits in brokerage accounts, mutual funds, general-purpose reloadable prepaid cards, or in other types of assets, including crypto currencies, Stablecoins, or other digital assets. Consumers can also complete transactions such as paying bills or transferring funds directly without the assistance of banks. Large technology companies offering embedded financial services, digital wallets, and payment platforms have also increased competitive pressures and may accelerate customer migration away from traditional banking products. The process of eliminating banks as intermediaries, known as “disintermediation,” could result in the loss of fee income, as well as the loss of customer deposits and the related income generated from those deposits. The loss of these revenue streams and the loss of deposits as a lower cost source of funds could have a material adverse effect on our financial condition and results of operations.

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Competition in our primary market area may limit asset growth and profitability.

We encounter strong competition from other financial institutions in our primary market area. In addition, established financial institutions not already operating in our primary market area may open branches at future dates. In the conduct of certain aspects of our business, we also compete with credit unions, mortgage banking companies, consumer finance companies, insurance companies, real estate companies, Fintech, and other institutions, some of which are not subject to the same degree of regulation or restrictions as are imposed upon us. Many of these competitors have substantially greater resources and lending limits than we have and offer services that we do not provide. In addition, many of these competitors have numerous branch offices located throughout their extended market areas that may provide them with a competitive advantage. Finally, these institutions may have differing pricing and underwriting standards, which may adversely affect our company through the loss of business or causing a misalignment in our risk-return relationship. No assurance can be given that such competition will not have an adverse impact on the financial condition and results of operations.

The carrying value of intangible assets, such as goodwill and core deposit intangibles, may be adversely affected.

When the Company completes an acquisition, intangibles, such as goodwill and core deposit intangibles, are recorded on the date of acquisition as an asset. Current accounting guidance requires an evaluation for impairment, and the Company performs such impairment analysis at least annually. A significant adverse change in expected future cash flows, sustained adverse change in the Company’s common stock, or a decline in core deposit balances could require the asset to become impaired. If impaired, the Company would incur a charge to earnings that could have a significant impact on the results of operations.

There are risks resulting from the use of models in our business.

We rely on quantitative models to measure risks and to estimate certain financial values. Models may be used in such processes as determining the pricing of various products, grading loans and extending credit, measuring interest rate and other market risks, predicting or estimating losses, assessing capital adequacy and calculating economic and regulatory capital levels, as well as to estimate the value of financial instruments and balance sheet items. Poorly designed or implemented models present the risk that our business decisions based on information incorporating model output would be adversely affected due to the inadequacy of that information. Also, information we provide to the public or to our regulators based on poorly designed or implemented models could be inaccurate or misleading.

Risks Related to Operations and Technology

~~Combining~~The ~~the~~ Company’s ~~and~~risk-management ~~Touchstone~~framework may not be ~~more~~effective ~~difficult,~~in ~~costly~~mitigating orrisk ~~time~~and ~~consuming than we expect~~loss.

The ~~success~~Company ofmaintains ~~the~~an ~~Company’s~~enterprise ~~acquisition~~risk ofmanagement ~~Touchstone,~~program ~~which~~that ~~closed~~is ondesigned ~~October~~to 1identify, ~~2024~~quantify, ~~will depend~~monitor, ~~in part~~report, ~~on the Company’s ability to realize the anticipated benefits~~ and ~~cost~~control ~~savings from combining~~ the ~~business~~risks ~~of Touchstone into the business of the Company without material disruptions to the Company’s business or other unintended consequences~~ that ~~could~~it ~~have~~faces. aThese ~~material~~risks ~~adverse~~include ~~effect~~interest onrate, ~~the Company’s results of operations or financial condition after the merger. Among other things~~credit, ~~the combination of Touchstone’s business into the Company’s could result in the disruption of ongoing business~~liquidity, ~~inconsistencies in standards~~operations, ~~controls~~reputation, ~~procedures~~compliance, and ~~policies~~litigation. ~~that~~While ~~affect adversely~~ the Company’s ~~ability~~assesses ~~to maintain relationships with customers~~ and ~~employees~~improves orthis ~~achieve~~program ~~the~~on ~~anticipated~~an ~~benefits~~ongoing ~~of the merger. In addition~~basis, ~~the~~there ~~success~~can ofbe ~~the~~no ~~merger~~assurance ~~will~~that ~~depend~~its onapproach ~~the Company’s ability to retain the deposits~~ and ~~customers~~framework offor ~~Touchstone~~risk ~~and~~management ~~the Bank, control the incremental increase in noninterest expense arising from the merger~~ and ~~retain~~related ~~and~~controls ~~integrate~~will ~~the~~effectively ~~appropriate~~mitigate ~~personnel~~all ofrisk ~~Touchstone into the operations of the Bank,~~ and ~~reduce~~limit ~~overlapping~~losses ~~bank~~in ~~personnel~~its business. If ~~the~~conditions ~~Company~~or iscircumstances ~~not~~arise ~~able~~that toexpose ~~achieve~~flaws ~~these~~or ~~objectives,~~gaps ~~the~~in ~~anticipated benefits and cost savings of~~ the ~~merger~~Company’s ~~may~~risk-management ~~not be realized fully~~program, or atif ~~all,~~its orcontrols ~~may~~break ~~take longer to realize than expected~~down, ~~and~~ the Company’s ~~could~~results ~~experience~~of anoperations ~~adverse~~and ~~effect~~financial oncondition ~~its~~may ~~revenues,~~be ~~expenses~~adversely ~~and operating results~~affected.

~~The~~Security ~~Company’s~~breaches ~~risk-management~~and ~~framework~~other ~~may~~disruptions ~~not~~could becompromise ~~effective~~our information and expose us to liability or result in ~~mitigating~~the ~~risk~~loss of money, which could damage our reputation and ~~loss~~our business.

~~The~~We ~~Company~~rely ~~maintains~~on anthe ~~enterprise~~secure ~~risk~~processing, ~~management~~storage, ~~program~~and ~~that~~transmission isof confidential and other information in our and our vendors' computer systems and networks. While we have policies and procedures designed to ~~identify,~~prevent ~~quantify~~or limit the effect of a possible security breach, ~~monitor~~our computer systems, ~~report~~software, and ~~control~~networks, ~~the~~including ~~risks~~those ~~that~~of itour ~~faces.~~vendors, ~~These~~may ~~risks~~be ~~include~~vulnerable ~~interest~~to ~~rate,~~unauthorized ~~credit~~access, ~~liquidity,~~computer ~~operations~~viruses, ~~reputation,~~or ~~compliance~~other malicious code, and ~~litigation~~other events that could have a security impact. ~~While~~To date, the Company ~~assesses~~has ~~and~~not ~~improves~~experienced ~~this~~a ~~program~~significant oncompromise, ansignificant ~~ongoing~~data ~~basis~~loss or any material financial losses related to cybersecurity attacks, ~~there~~but ~~can~~the beCompany’s nosystems ~~assurance~~and ~~that~~those of its ~~approach~~customers and ~~framework~~third-party ~~for~~service ~~risk~~providers ~~management~~are under constant threat and it is possible that the Company could experience a significant event in the future. Risks and exposures related ~~controls~~to ~~will~~cybersecurity ~~effectively~~attacks ~~mitigate~~are ~~all~~expected ~~risk~~to remain high for the foreseeable future due to the rapidly evolving nature and ~~limit~~sophistication ~~losses~~of inthese threats, as well as due to the expanding use of internet banking, mobile banking and other technology-based products and services by the Company and its ~~business~~customers. The continued evolution and increased usage of artificial intelligence technologies may further increase these risks. If ~~conditions~~one or ~~circumstances~~more ~~arise~~such ~~that~~events ~~expose~~occur, ~~flaws~~this orpotentially ~~gaps~~could injeopardize ~~the~~our ~~Company~~customers’s ~~risk-management~~confidential ~~program~~and other information processed and stored in, orand iftransmitted ~~its~~through, ~~controls~~our ~~break~~computer ~~down~~systems and networks or those of our vendors, ~~the~~or ~~Company~~otherwise cause interruptions or malfunctions in our or our customers’s ~~results~~operations or result in the loss of ~~operations~~money. We may be required to expend significant additional resources to modify our protective measures or to investigate and ~~financial~~remediate ~~condition~~vulnerabilities or other exposures, and we may be ~~adversely~~subject ~~affected~~to litigation and financial losses that are either not insured against or not fully covered through any insurance maintained by us.

Security breaches ~~and~~in ~~other~~our ~~disruptions~~internet banking activities could further expose us to possible liability, financial loss, and damage to our reputation. Any compromise of our security also could deter customers from using our internet banking services that involve the transmission of confidential information. We have implemented security systems to provide the security and ~~expose~~authentication usnecessary to ~~liability~~effect orsecure ~~result~~transmission inof ~~the~~data. ~~loss~~These precautions may not protect our systems from compromises or breaches of ~~money~~our security measures, which could result in damage to our reputation and our business.

We rely on the secure processing, storage, and transmission of confidential and other information in our and our vendors' computer systems and networks. While we have policies and procedures designed to prevent or limit the effect of a possible security breach, our computer systems, software, and networks, including those of our vendors, may be vulnerable to unauthorized access, computer viruses, or other malicious code, and other events that could have a security impact. To date, the Company has not experienced a significant compromise, significant data loss or any material financial losses related to cybersecurity attacks, but the Company’s systems and those of its customers and third-party service providers are under constant threat and it is possible that the Company could experience a significant event in the future. Risks and exposures related to cybersecurity attacks are expected to remain high for the foreseeable future due to the rapidly evolving nature and sophistication of these threats, as well as due to the expanding use of internet banking, mobile banking and other technology-based products and services by the Company and its customers. If one or more such events occur, this potentially could jeopardize our customers’ confidential and other information processed and stored in, and transmitted through, our computer systems and networks or those of our vendors, or otherwise cause interruptions or malfunctions in our or our customers’ operations or result in the loss of money. We may be required to expend significant additional resources to modify our protective measures or to investigate and remediate vulnerabilities or other exposures, and we may be subject to litigation and financial losses that are either not insured against or not fully covered through any insurance maintained by us. 16

~~Security~~ Table ~~breaches in our internet banking activities could further expose us to possible liability, financial loss, and damage to our reputation. Any compromise~~ of our security also could deter customers from using our internet banking services that involve the transmission of confidential information. We have implemented security systems to provide the security and authentication necessary to effect secure transmission of data. These precautions may not protect our systems from compromises or breaches of our security measures, which could result in damage to our reputation and our business.Contents

16 The Company relies on other companies to provide key components of its business infrastructure.

~~Table~~Third parties provide key components of ~~Contents~~ the Company’s business operations such as data processing, recording and monitoring transactions, online banking interfaces and services, internet connections, and network access. While the Company has selected these third-party vendors carefully, it does not control their actions. Any problem caused by these third parties, including poor performance of services, failure to provide services, disruptions in communication services provided by a vendor and failure to handle current or higher volumes, could adversely affect the Company’s ability to deliver products and services to its customers and otherwise conduct its business, and may harm its reputation. Financial or operational difficulties of a third-party vendor could also hurt the Company’s operations if those difficulties affect the vendor’s ability to serve the Company. Replacing these third-party vendors could also create significant delay and expense. Accordingly, use of such third parties creates an unavoidable inherent risk to the Company’s business operations.

~~The~~Our ~~Company~~business ~~relies~~is ontechnology ~~other~~dependent, ~~companies~~and an inability to ~~provide~~successfully ~~key~~implement ~~components~~technological improvements may adversely affect our ability to be competitive and our results of ~~its~~operations ~~business~~and ~~infrastructure~~financial condition.

~~Third~~The ~~parties~~financial ~~provide~~services ~~key~~industry ~~components~~is ofundergoing ~~the~~rapid ~~Company’s~~technological ~~business~~changes ~~operations~~with ~~such~~frequent asintroductions ~~data~~of ~~processing~~new technology-driven products, ~~recording~~systems and ~~monitoring transactions~~services, ~~online~~which ~~banking~~may ~~interfaces~~require ~~and~~substantial ~~services~~initial investment to be implemented, ~~internet~~including ~~connections~~the cost of modifying or adapting existing products, systems and ~~network access~~services. ~~While~~The ~~the~~ Company ~~has~~invests ~~selected~~in ~~these~~new ~~third-party~~technology ~~vendors~~to ~~carefully~~enhance customer service, itand ~~does~~to ~~not~~increase ~~control~~efficiency ~~their~~and ~~actions~~reduce operating costs. ~~Any~~Our ~~problem~~future ~~caused~~success bywill ~~these~~depend ~~third~~in ~~parties,~~part ~~including~~upon ~~poor~~our ~~performance~~ability to create synergies in our operations through the use of ~~services,~~technology ~~failure~~and to ~~provide~~facilitate ~~services,~~the ~~disruptions~~ability inof ~~communication~~customers ~~services~~to ~~provided~~engage byin financial transactions in a ~~vendor~~manner ~~and~~that ~~failure~~enhances tothe ~~handle~~customer ~~current~~experience. We cannot give any assurance that technological improvements will increase operational efficiency or ~~higher~~that ~~volumes~~we will be able to effectively implement new technology-driven products, ~~could~~systems ~~adversely~~and ~~affect~~services ~~the~~or ~~Company’s~~be ~~ability~~successful toin ~~deliver~~marketing new products and services to ~~its~~our customers. ~~and~~A ~~otherwise~~failure ~~conduct~~to ~~its~~maintain ~~business,~~or ~~and~~enhance ~~may~~a ~~harm~~competitive ~~its~~position ~~reputation.~~with ~~Financial~~respect orto ~~operational~~technology, ~~difficulties~~whether because of a ~~third-party~~failure ~~vendor~~to ~~could~~anticipate ~~also~~customer ~~hurt~~expectations, ~~the~~substantially ~~Company’s~~fewer ~~operations~~resources ifto ~~those~~invest ~~difficulties~~in ~~affect~~technological ~~the~~improvements ~~vendor’s~~than ~~ability~~larger competitors, or because our technological developments fail to ~~serve~~perform ~~the~~as ~~Company.~~desired ~~Replacing~~or ~~these~~are ~~third-party~~not ~~vendors~~implemented in a timely manner, could ~~also~~result ~~create~~in ~~significant~~higher ~~delay~~operating costs, decreased customer satisfaction, and ~~expense~~lower market share. ~~Accordingly,~~An ~~use~~inability to effectively implement new technology and realize operational efficiencies could result in the loss of initial investments in such ~~third~~projects ~~parties~~and ~~creates~~higher anoperating ~~unavoidable~~costs. ~~inherent~~Either ~~risk~~of tothese ~~the~~outcomes ~~Company’s~~could ~~business~~have a material adverse impact on our financial condition and results of operations.

~~Our~~Further, ~~business~~the isCompany may utilize new technology, ~~dependent~~such as AI, in connection with its business and anoperations. ~~inability~~AI may be developed internally, or may be provided by third- or fourth-party service providers. Any such new technology could have a significant impact on the effectiveness of the Company's system of internal controls. Failure to successfully ~~implement~~manage ~~technological~~these ~~improvements~~risks in the development and implementation of new lines of business, products or services and/or technologies could have a material adverse effect on the Company's business, financial condition and results of operations. AI may ~~adversely~~introduce ~~affect~~the ~~our~~Company to ~~ability~~novel or intensified legal, regulatory, ethical, operational, reputational or other risks. AI usage is subject to a range of existing laws and regulations. AI is also expected to be ~~competitive~~governed by new laws and ~~our~~regulations, ~~results~~or new applications of existing laws and regulations. AI is under ongoing scrutiny by various governmental and regulatory bodies, with federal, state and international authorities either implementing or considering legal frameworks that could impact the Company's ability to leverage AI effectively. The Company may find it challenging to predict and adapt to these rapidly evolving legal requirements. AI models employed by the Company or its service providers might be flawed due to improper design, implementation, or training or outputs based on data or algorithms that are incomplete, inadequate, misleading, biased or of poor quality. These flaws may not be easily identifiable. Additionally, there is no certainty that the Company's use of AI will successfully enhance its business operations or achieve its intended outcomes, and ~~financial~~its ~~condition~~competitors may adopt AI more swiftly or effectively than the Company does.

~~The~~Loss ~~financial services industry is undergoing rapid technological changes with frequent introductions~~ of ~~new~~any ~~technology-driven products, systems and services, which may require substantial initial investment to be implemented, including the cost~~ of modifying or adapting existing products, systems and services. The Company invests in new technology to enhance customer service, and to increase efficiency and reduce operating costs. Our future success will depend in part upon our ~~ability~~key topersonnel ~~create~~could ~~synergies~~disrupt in our operations ~~through the use of technology~~ and toresult ~~facilitate the ability of customers to engage~~ in ~~financial~~reduced ~~transactions~~revenues ~~in a manner that enhances the customer experience. We cannot give any assurance that technological improvements will increase operational efficiency~~ or ~~that~~increased ~~we will be able to effectively implement new technology-driven products, systems and services or be successful in marketing new products and services to our customers~~expenses. A failure to maintain or enhance a competitive position with respect to technology, whether because of a failure to anticipate customer expectations, substantially fewer resources to invest in technological improvements than larger competitors, or because our technological developments fail to perform as desired or are not implemented in a timely manner, could result in higher operating costs, decreased customer satisfaction, and lower market share. An inability to effectively implement new technology and realize operational efficiencies could result in the loss of initial investments in such projects and higher operating costs. Either of these outcomes could have a material adverse impact on our financial condition and results of operations.

~~Loss~~We ofare ~~any~~a relationship-driven organization. A key aspect of our ~~key~~business ~~personnel~~strategy ~~could~~is ~~disrupt~~for our ~~operations~~banking officers to have primary contact with our customers. Our growth and ~~result~~development to date have been, in ~~reduced~~large ~~revenues~~part, ora ~~increased~~result ~~expenses~~of these personalized relationships with our customer base.

WeOur officers have considerable experience in the banking industry and related financial services and are aextremely ~~relationship-driven~~valuable ~~organization.~~and Awould ~~key~~be ~~aspect~~difficult ofto ~~our~~replace. ~~business~~The ~~strategy~~loss isof ~~for~~the ~~our~~services ~~senior~~of these officers tocould have ~~primary~~a ~~contact~~material ~~with~~adverse ~~our~~effect ~~customers~~upon future prospects. ~~Our~~Although ~~growth~~we believe the Company has excellent employee relations and ~~development~~provides tocompetitive ~~date~~compensation ~~have~~to ~~been~~its officers, inwe ~~large~~cannot ~~part,~~offer aany ~~result~~assurance that they and other key employees will remain employed by us. The unexpected loss of services of one or more of these ~~personalized~~key ~~relationships~~employees ~~with~~could ~~our~~have ~~customer~~a ~~base~~material adverse effect on operations and possibly result in reduced revenues or increased expenses.

~~Our senior officers have considerable experience in the banking industry and related financial services and are extremely valuable and would be difficult to replace.~~ The ~~loss~~success of ~~the~~our ~~services~~business ofstrategies ~~these~~depends ~~officers~~on ~~could~~our ~~have~~ability ~~a material adverse effect upon future prospects. Although we believe the Company has excellent employee relations and provides competitive compensation~~ to ~~its~~identify ~~senior officers, we cannot offer any assurance that they~~ and ~~other~~recruit ~~key~~individuals ~~employees~~with ~~will~~experience ~~remain employed by us. The unexpected loss of services of one or more of these key employees could have a material adverse effect on operations~~ and ~~possibly~~relationships ~~result~~ in ~~reduced~~our ~~revenues~~primary ~~or increased expenses~~markets.

The ~~success~~successful implementation of our business ~~strategies~~strategy ~~depends~~will onrequire ~~our~~us ~~ability~~to continue to ~~identify~~attract, hire, motivate and ~~recruit~~retain skilled personnel to develop new customer relationships as well as new financial products and services. The market for qualified personnel is competitive, which has contributed to salary and employee benefit costs that have risen and are expected to continue to rise, which may have an adverse effect on the Company’s net income. In addition, the process of identifying and recruiting individuals with ~~experience~~the combination of skills and ~~relationships~~attributes required to carry out our strategy is often lengthy, and we may not be able to effectively integrate these individuals into our operations. Our inability to identify, recruit and retain talented personnel to manage our operations effectively and in a timely manner could limit our ~~primary~~growth, ~~markets~~which could materially adversely affect our business.

~~The~~Difficulties ~~successful~~in ~~implementation~~combining ofthe ~~our~~operations ~~business~~of ~~strategy will require us to continue to attract, hire, motivate and retain skilled personnel to develop~~ new ~~customer~~or ~~relationships~~acquired asbank ~~well as new financial products and services. The market for qualified management personnel is competitive~~branches, loan ~~which~~production ~~has~~offices ~~contributed~~or toentities ~~salary~~with ~~and employee benefit costs that have risen and are expected to continue to rise, which may have an adverse effect on~~ the Company’s ~~net~~own ~~income.~~operations Inmay ~~addition,~~prevent the ~~process~~Company offrom ~~identifying~~achieving ~~and recruiting individuals with~~ the ~~combination~~expected ofbenefits ~~skills~~from ~~and attributes required to carry out our strategy is often lengthy, and we may not be able to effectively integrate these individuals into our operations~~acquisitions. Our inability to identify, recruit and retain talented personnel to manage our operations effectively and in a timely manner could limit our growth, which could materially adversely affect our business.

~~Difficulties~~The Company may not be able to achieve fully the strategic objectives and operating efficiencies expected in ~~combining~~opening a new branch or loan production office (LPO) or through an acquisition. Inherent uncertainties exist in integrating the operations of a new or acquired ~~bank~~entity or acquired branches or LPO's. In addition, ~~loan~~ ~~production~~the ~~offices~~markets and industries in which the Company and its potential new office locations or acquisition targets operate may be highly competitive. The Company may lose customers or the customers of acquired entities ~~with~~as a result of an acquisition; the Company’s ~~own~~may ~~operations~~lose ~~may~~key ~~prevent~~personnel, either from the acquired entity or from itself; and the Company may not be able to control the incremental increase in noninterest expense arising from a new office location or acquisition in a manner that improves its overall operating efficiencies. These factors could contribute to the Company’s not achieving the expected benefits from its new branch or LPO locations or acquisitions within desired time frames, or at all. Future business acquisitions could be material to the Company, and it may issue additional shares of common stock to support those acquisitions, which would dilute current shareholders’ ownership interests. Acquisitions could also require the Company to use substantial cash or other liquid assets or to incur debt; the Company could therefore become more susceptible to economic downturns and competitive pressures.

The Company may not be able to achieve fully the strategic objectives and operating efficiencies expected in opening a new branch or loan production office (LPO) or through an acquisition. Inherent uncertainties exist in integrating the operations of a new or acquired entity or acquired branches or LPO's. In addition, the markets and industries in which the Company and its potential new office locations or acquisition targets operate may be highly competitive. The Company may lose customers or the customers of acquired entities as a result of an acquisition; the Company may lose key personnel, either from the acquired entity or from itself; and the Company may not be able to control the incremental increase in noninterest expense arising from a new office location or acquisition in a manner that improves its overall operating efficiencies. These factors could contribute to the Company’s not achieving the expected benefits from its new branch or LPO locations or acquisitions within desired time frames, or at all. Future business acquisitions could be material to the Company, and it may issue additional shares of common stock to support those acquisitions, which would dilute current shareholders’ ownership interests. Acquisitions could also require the Company to use substantial cash or other liquid assets or to incur debt; the Company could therefore become more susceptible to economic downturns and competitive pressures. 17

17Table of Contents

~~Table~~The inability of ~~Contents~~ the Company to successfully manage its growth or implement its growth strategy may adversely affect the Company’s results of operations and financial conditions.

The ~~inability~~Company ofmay ~~the~~not ~~Company~~be able to successfully ~~manage~~implement its growth strategy if it is unable to expand market share in existing locations, identify attractive markets, locations, or ~~implement~~opportunities ~~its~~to expand in the future. In addition, the ability to manage growth ~~strategy~~successfully ~~may~~depends ~~adversely~~on ~~affect~~whether the Company’s ~~results~~can ofmaintain ~~operations~~adequate capital levels, maintain cost controls, effectively manage asset quality, and ~~financial~~successfully ~~conditions~~integrate any expanded business divisions or acquired businesses into the organization.

~~The~~As the Company ~~may~~continues ~~not be able~~ to ~~successfully~~ implement its growth strategy ifby itopening isnew ~~unable~~branches toor ~~expand~~acquiring ~~market~~branches ~~share~~or inbanks, ~~existing~~it ~~locations,~~expects ~~identify~~to ~~attractive~~incur ~~markets~~increased personnel, ~~locations~~occupancy, orand ~~opportunities~~other tooperating ~~expand~~expenses. inIn the ~~future.~~case Inof ~~addition~~new branches, the ~~ability~~Company must absorb those higher expenses while it begins to ~~manage~~generate ~~growth~~new ~~successfully~~deposits. ~~depends~~In onthe ~~whether~~case of acquired branches, the Company ~~can~~must ~~maintain~~absorb ~~adequate~~higher ~~capital~~expenses ~~levels~~while it begins deploying the newly assumed deposit liabilities. With either new branches opened, ~~maintain~~or ~~cost~~branches ~~controls~~acquired, ~~effectively~~there ~~manage~~would ~~asset~~be ~~quality,~~a time lag involved in deploying new deposits into attractively priced loans and ~~successfully~~other ~~integrate~~higher ~~any~~yielding ~~expanded~~earning ~~business~~assets. ~~divisions~~Thus, orthe ~~acquired~~Company’s ~~businesses~~plans ~~into~~to expand could depress earnings in the ~~organization~~short run, even if it efficiently executes a branching strategy leading to long-term financial benefits.

AsFailure ~~the Company continues~~ to ~~implement~~maintain ~~its~~effective ~~growth~~systems ~~strategy~~of byinternal ~~opening new branches or acquiring branches or banks, it expects to incur increased personnel, occupancy,~~ and ~~other~~disclosure ~~operating~~controls ~~expenses.~~could Inhave the case of new branches, the Company must absorb those higher expenses while it begins to generate new deposits. In the case of acquired branches, the Company must absorb higher expenses while it begins deploying the newly assumed deposit liabilities. With either new branches opened, or branches acquired, there would be a ~~time~~material ~~lag~~adverse ~~involved~~effect inon ~~deploying new deposits into attractively priced loans and other higher yielding earning assets. Thus,~~ the Company’s ~~plans~~results toof ~~expand~~operation ~~could~~and ~~depress earnings in the short run, even if it efficiently executes a branching strategy leading to long-term~~ financial ~~benefits~~condition.

~~Failure~~Effective internal and disclosure controls are necessary for the Company to ~~maintain~~provide ~~effective~~reliable ~~systems~~financial ofreports ~~internal~~and effectively prevent fraud, and ~~disclosure~~to ~~controls~~operate ~~could~~successfully ~~have~~as a ~~material~~public ~~adverse~~company. ~~effect~~If onthe Company cannot provide reliable financial reports or prevent fraud, its reputation and operating results would be harmed. As part of the Company’s ~~results~~ongoing monitoring of ~~operation~~internal ~~and~~controls, it may discover material weaknesses or significant deficiencies in its internal controls that require remediation. A “material weakness” is a deficiency, or a combination of deficiencies, in internal controls over financial ~~condition~~reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis.

~~Effective~~The ~~internal~~Company ~~and~~continually ~~disclosure~~works ~~controls~~on ~~are~~improving ~~necessary~~its ~~for~~internal controls. However, the Company tocannot ~~provide~~be ~~reliable~~certain ~~financial~~that ~~reports~~these ~~and~~measures ~~effectively~~will ~~prevent~~ensure ~~fraud,~~that it implements and tomaintains ~~operate~~adequate ~~successfully~~controls asover aits ~~public~~financial ~~company.~~processes Ifand ~~the~~reporting. ~~Company~~Any ~~cannot~~failure ~~provide~~to ~~reliable~~maintain ~~financial~~effective ~~reports~~controls or ~~prevent~~to ~~fraud,~~timely ~~its~~implement ~~reputation~~any ~~and~~necessary ~~operating~~improvement ~~results would be harmed. As part~~ of the Company’s ~~ongoing~~internal ~~monitoring~~and ofdisclosure ~~internal~~ controls could, itamong ~~may~~other ~~discover~~things, ~~material~~result ~~weaknesses or significant deficiencies~~ in ~~its~~losses ~~internal~~from ~~controls~~fraud ~~that~~or ~~require~~error, ~~remediation.~~harm Athe ~~“material~~Company’s ~~weakness” is a deficiency~~reputation, or acause ~~combination~~investors ofto ~~deficiencies,~~lose confidence in ~~internal~~the ~~controls~~Company’s ~~over~~reported financial ~~reporting~~information, ~~such~~all ~~that~~of ~~there~~which iscould ahave ~~reasonable possibility that~~ a material ~~misstatement~~adverse ofeffect aon ~~company~~the Company’s ~~annual~~results orof ~~interim~~operation and financial ~~statements will not be prevented or detected on a timely basis~~condition.

The Company continually works on improving its internal controls. However, the Company cannot be certain that these measures will ensure that it implements and maintains adequate controls over its financial processes and reporting. Any failure to maintain effective controls or ~~to timely implement~~ any ~~necessary improvement~~ of ~~the~~its ~~Company’s~~subsidiaries ~~internal~~is ~~and~~a ~~disclosure~~defendant ~~controls could, among other things, result in losses~~ from ~~fraud~~time ~~or error, harm the Company’s reputation, or cause investors~~ to ~~lose~~time ~~confidence~~ in ~~the Company’s reported financial information, all of which could have~~ a ~~material~~variety ~~adverse effect on the Company’s results~~ of ~~operation~~litigation and ~~financial~~other ~~condition~~actions.

The Company or any of its subsidiaries ismay abe ~~defendant~~involved from time to time in a variety of litigation arising out of its business, and ~~other~~the Company operates in a legal and regulatory environment that exposes it to potential significant litigation risk. The Company’s insurance may not cover all claims that may be asserted against it in legal or administrative actions or costs that it may incur defending such actions, and any claims asserted against it, regardless of merit or eventual outcome, may harm the Company’s reputation. Should the ultimate judgments or settlements and/or costs incurred in any litigation exceed any applicable insurance coverage, they could have a material adverse effect on the Company’s financial condition and results of operation for any period.

The Company oris ~~any~~subject ~~of its subsidiaries may be involved from time~~ to time in a variety of litigation arising out of its business, and the Company operates in a legal and regulatory environment that exposes it to potential significant litigation risk. The Company’s insurance may not cover all claims ~~that may be asserted against it in legal or administrative actions or costs that it may incur defending such actions,~~ and ~~any claims asserted against it, regardless of merit or eventual outcome, may harm the Company’s reputation. Should the ultimate judgments or settlements and/or costs incurred in any~~ litigation ~~exceed~~pertaining ~~any~~to ~~applicable~~fiduciary ~~insurance coverage, they could have a material adverse effect on the Company’s financial condition and results of operation for any period~~responsibility.

~~The~~From ~~Company~~time isto ~~subject~~time, tocustomers make claims and ~~litigation~~take legal action pertaining to the performance of the Company’s fiduciary ~~responsibility~~responsibilities. Whether customer claims and legal action related to the performance of the Company’s fiduciary responsibilities are founded or unfounded, if such claims and legal actions are not resolved in a manner favorable to the Company, they may result in significant financial liability and/or adversely affect the market perception of the Company and its products and services, as well as impact customer demand for those products and services. Any financial liability or reputation damage could have a material adverse effect on the Company’s business, which, in turn, could have a material adverse effect on the Company’s financial condition and results of operations.

From time to time, customers make claims and take legal action pertaining to the performance of the Company’s fiduciary responsibilities. Whether customer claims and legal action related to the performance of the Company’s fiduciary responsibilities are founded or unfounded, if such claims and legal actions are not resolved in a manner favorable to the Company, they may result in significant financial liability and/or adversely affect the market perception of the Company and its products and services, as well as impact customer demand for those products and services. Any financial liability or reputation damage could have a material adverse effect on the Company’s business, which, in turn, could have a material adverse effect on the Company’s financial condition and results of operations. 18

18Table of Contents

~~Table~~The soundness of ~~Contents~~ other financial institutions could adversely affect the Company.

The Company’s ability to engage in routine funding transactions could be adversely affected by the actions and commercial soundness of other financial institutions. Financial services institutions are interrelated as a result of trading, clearing, counterparty, or other relationships. As a result, defaults by, or even rumors or questions about, one or more financial services institutions, or the financial services industry generally, have led to market-wide liquidity problems and could lead to losses or defaults by the Company or by other institutions. Many of these transactions expose the Company to credit risk in the event of default of its counterparty or client. There is no assurance that any such losses would not materially and adversely affect the Company’s results of operations.

~~The~~In ~~Company’s~~addition, ~~ability~~financial tochallenges ~~engage~~at inother ~~routine~~banking ~~funding~~institutions ~~transactions~~ could belead ~~adversely~~to ~~affected~~depositor byconcerns ~~the~~that ~~actions~~spread ~~and~~within ~~commercial~~the ~~soundness~~banking ofindustry. ~~other~~In ~~financial~~March ~~institutions.~~2023, ~~Financial~~Silicon ~~services~~Valley ~~institutions~~Bank ~~are~~and ~~interrelated~~Signature asBank aexperienced ~~result~~large ofdeposit ~~trading,~~outflows ~~clearing,~~coupled ~~counterparty,~~with orinsufficient ~~other~~liquidity ~~relationships.~~to Asmeet awithdrawal ~~result~~demands, ~~defaults~~resulting ~~by,~~in orthe ~~even~~institutions ~~rumors~~being orplaced ~~questions~~into ~~about,~~FDIC ~~one~~receiverships. orIn ~~more~~the ~~financial services institutions~~aftermath, orthere ~~the~~was ~~financial~~substantial ~~services~~market ~~industry~~disruption ~~generally,~~and ~~have~~concern ~~led~~that todiminished ~~market-wide~~depositor ~~liquidity~~confidence ~~problems~~could ~~and~~spread ~~could~~across ~~lead~~the tobanking ~~losses~~industry, orleading ~~defaults~~to bydeposit ~~the~~outflows ~~Company~~that orcould bydestabilize other institutions. ~~Many~~While ofpublic ~~these~~confidence ~~transactions~~in ~~expose~~ the ~~Company~~banking tosystem ~~credit~~has ~~risk~~stabilized, indeposit ~~the~~outflows ~~event~~caused ofby ~~default~~reputational ofconcerns ~~its counterparty~~ or ~~client.~~events ~~There~~affecting isthe nobanking ~~assurance~~industry ~~that~~generally ~~any~~could ~~such losses would not materially and~~ adversely affect the Company’s liquidity, financial condition, and results of operations.

InThe ~~addition,~~operational ~~financial~~functions ~~challenges~~of atbusiness ~~other~~counterparties ~~banking~~over ~~institutions~~which ~~could lead to depositor concerns that spread within~~ the ~~banking~~Company ~~industry.~~may Inhave ~~March 2023~~limited, ~~Silicon~~or ~~Valley~~no ~~Bank~~control ~~and~~may ~~Signature~~experience ~~Bank~~disruptions experienced large deposit outflows coupled with insufficient liquidity to meet withdrawal demands, resulting in the institutions being placed into FDIC receiverships. In the aftermath, there was substantial market disruption and concern that ~~diminished depositor confidence~~ could spread across the banking industry, leading to deposit outflows that could destabilize other institutions. While public confidence in the banking system has stabilized, deposit outflows caused by reputational concerns or events affecting the banking industry generally could adversely ~~affect~~impact the Company~~’s liquidity, financial condition, and results of operations~~.

~~The~~Every ~~operational~~year, ~~functions~~retailers and service providers are the target of ~~business~~data ~~counterparties~~systems ~~over~~incursions which result in the thefts of credit and debit card information, online account information, and other financial data of their customers and users. These incursions affect cards issued and deposit accounts maintained by many banks, including the Company. ~~may~~Although ~~have~~our ~~limited~~systems are not breached in such incursions, orthese noevents ~~control~~can cause the Company to reissue a significant number of cards and take other costly steps to avoid significant theft loss to the Company and its customers. In some cases, the Company may ~~experience~~be ~~disruptions~~required ~~that~~to ~~could~~reimburse ~~adversely~~customers ~~impact~~for the losses they incur. Other possible points of intrusion or disruption not within the Company’s control include internet service providers, electronic mail portal providers, social media portals, distant-server (“cloud”) service providers, electronic data security providers, telecommunications companies, and smart phone manufacturers.

~~Every~~Severe ~~year~~weather, ~~retailers and service providers are the target of data systems incursions which result in the thefts of credit and debit card information~~pandemics, ~~online~~natural ~~account information~~disasters, ~~and~~acts ~~other financial data~~ of ~~their~~war ~~customers~~or ~~and users. These incursions affect cards issued and deposit accounts maintained by many banks~~terrorism, ~~including the Company. Although our systems are not breached in such incursions, these events can cause the Company to reissue a significant number of cards~~ and ~~take~~ other ~~costly~~external ~~steps~~events tocould ~~avoid~~significantly ~~significant~~impact ~~theft~~our ~~loss to the Company and its customers~~business. In some cases, the Company may be required to reimburse customers for the losses they incur. Other possible points of intrusion or disruption not within the Company’s control include internet service providers, electronic mail portal providers, social media portals, distant-server (“cloud”) service providers, electronic data security providers, telecommunications companies, and smart phone manufacturers.

Severe weather, pandemics, natural disasters, and other environmental risks, acts of war or terrorism, and other adverse external events could ~~significantly~~have a significant impact on our ability to conduct business. In addition, such events could affect the stability of our deposit base, cause economic or market uncertainty, negatively impact consumer confidence, impair the ability of borrowers to repay outstanding loans, impair the value of collateral securing loans, cause significant property damage, result in loss of revenue, and/or cause us to incur additional expenses. The occurrence of any such event in the future could have a material adverse effect on our business, which, in turn, could have a material adverse effect on our financial condition and results of operations.

~~Severe~~Risks ~~weather,~~Related ~~pandemics, natural disasters, and other environmental risks, acts of war or terrorism, and other adverse external events could have a significant impact on our ability~~ to ~~conduct business. In addition, such events could affect~~ the ~~stability~~Regulation of ~~our deposit base, cause economic or market uncertainty, negatively impact consumer confidence, impair~~ the ability of borrowers to repay outstanding loans, impair the value of collateral securing loans, cause significant property damage, result in loss of revenue, and/or cause us to incur additional expenses. The occurrence of any such event in the future could have a material adverse effect on our business, which, in turn, could have a material adverse effect on our financial condition and results of operations.Company

~~Risks~~Compliance ~~Related~~with tolaws, ~~the~~regulations ~~Regulation~~and ofsupervisory ~~the~~guidance, ~~Company~~both new and existing, may adversely affect our business, financial condition and results of operations.

~~Compliance~~We ~~with~~are subject to numerous laws, regulations and ~~supervisory~~supervision ~~guidance,~~from both ~~new~~federal and ~~existing~~state agencies. Failure to comply with these laws and regulations could result in financial, ~~may~~structural ~~adversely~~and ~~affect~~operational ~~our~~penalties, ~~business~~including receivership. In addition, ~~financial~~establishing ~~condition~~systems and ~~results~~processes ofto ~~operations~~achieve compliance with these laws and regulations may increase our costs and/or limit our ability to pursue certain business opportunities.

WeLaws ~~are~~and ~~subject~~regulations, toand ~~numerous~~any ~~laws,~~interpretations ~~regulations~~ and ~~supervision~~applications ~~from~~with ~~both~~respect ~~federal~~thereto, ~~and~~generally ~~state~~are ~~agencies.~~intended ~~Failure~~ to ~~comply~~benefit ~~with~~consumers, ~~these~~borrowers ~~laws~~ and ~~regulations~~depositors, ~~could~~but ~~result~~not instockholders. ~~financial,~~The ~~structural~~legislative and ~~operational~~regulatory ~~penalties,~~environment ~~including~~is ~~receivership.~~beyond Inour ~~addition~~control, ~~establishing~~may ~~systems~~change rapidly and ~~processes~~unpredictably toand ~~achieve~~may ~~compliance~~negatively ~~with~~influence ~~these~~our ~~laws~~revenues, ~~and~~costs, ~~regulations~~earnings, ~~may~~and ~~increase~~capital ~~our~~levels. ~~costs~~Our ~~and/or~~success ~~limit~~depends on our ability to ~~pursue~~maintain ~~certain~~compliance ~~business~~with ~~opportunities~~both existing and new laws and regulations.

~~Laws~~We ~~and~~expect ~~regulations,~~that ~~and~~financial ~~any~~institutions ~~interpretations~~will ~~and~~remain ~~applications~~heavily ~~with~~regulated ~~respect~~in ~~thereto,~~the ~~generally~~near ~~are~~future ~~intended~~and tothat ~~benefit~~additional ~~consumers,~~laws ~~borrowers~~or ~~and~~regulations ~~depositors,~~may ~~but~~be ~~not~~adopted ~~stockholders~~further regulating specific banking practices. ~~The~~Future ~~legislative~~legislation, regulation and ~~regulatory~~government ~~environment~~policy iscould ~~beyond~~affect ~~our~~the ~~control~~banking industry as a whole, ~~may~~including ~~change~~the ~~rapidly~~Company’s business and ~~unpredictably~~results ~~and~~of ~~may~~operations, ~~negatively~~in ~~influence~~ways ~~our~~that ~~revenues,~~are ~~costs,~~difficult ~~earnings~~to predict. In addition, ~~and~~the ~~capital~~Company’s ~~levels.~~results ~~Our~~of ~~success~~operations ~~depends~~could onbe ~~our~~adversely ~~ability~~affected toby ~~maintain~~changes ~~compliance~~in ~~with~~the ~~both~~way in which existing statutes and ~~new~~regulations ~~laws~~are interpreted or applied by courts and ~~regulations~~government agencies.

We expect that financial institutions will remain heavily regulated in the near future and that additional laws or regulations may be adopted further regulating specific banking practices. Future legislation, regulation and government policy could affect the banking industry as a whole, including the Company’s business and results of operations, in ways that are difficult to predict. In addition, the Company’s results of operations could be adversely affected by changes in the way in which existing statutes and regulations are interpreted or applied by courts and government agencies. 19

19Table of Contents

~~Table~~Our earnings are significantly affected by the fiscal and monetary policies of ~~Contents~~ the federal government and its agencies.

~~Our~~The ~~earnings~~policies ~~are~~of the Federal Reserve affect us significantly. ~~affected~~The byFederal Reserve regulates the ~~fiscal~~supply of money and ~~monetary~~credit in the United States. Its policies directly and indirectly influence the rate of interest earned on loans and paid on borrowings and interest-bearing deposits and can also affect the ~~federal~~value ~~government~~of financial instruments we hold. Those policies determine to a significant extent our cost of funds for lending and ~~its~~investing. ~~agencies~~Changes in those policies are beyond our control and are difficult to predict. Federal Reserve policies can also affect our borrowers, potentially increasing the risk that they may fail to repay their loans. For example, a tightening of the money supply by the Federal Reserve could reduce the demand for a borrower's products and services. This could adversely affect the borrower’s earnings and ability to repay a loan, which could have a material adverse effect on our financial condition and results of operations.

The ~~policies~~Company ofis ~~the~~subject Federal Reserve affect us significantly. The Federal Reserve regulates the supply of money and credit in the United States. Its policies directly and indirectly influence the rate of interest earned on loans and paid on borrowings and interest-bearing deposits and can also affect the value of financial instruments we hold. Those policies determine to astringent ~~significant~~capital ~~extent our cost of funds for lending~~ and ~~investing.~~liquidity ~~Changes~~requirements inas those policies are beyond our control and are difficult to predict. Federal Reserve policies can also affect our borrowers, potentially increasing the risk that they may fail to repay their loans. For example, a ~~tightening~~result of the ~~money~~Basel ~~supply~~III byregulatory ~~the~~capital ~~Federal~~reforms ~~Reserve could reduce the demand for a borrower's products~~ and ~~services. This could adversely affect~~ the ~~borrower’s~~Dodd-Frank ~~earnings and ability to repay a loan~~Act, which could ~~have~~adversely aaffect ~~material adverse effect on~~ our ~~financial condition and~~ results of operations and future growth.

The Company is subject to ~~stringent~~ capital adequacy guidelines and ~~liquidity~~other regulatory requirements asspecifying aminimum ~~result~~amounts and types of capital which each must maintain. From time to time, regulators implement changes to these regulatory capital adequacy guidelines. Under the Dodd-Frank Act, the federal banking agencies have established stricter capital requirements and leverage limits for banking organizations, such as the Bank, that are based on the Basel III regulatory capital reforms. ~~and~~These stricter capital requirements were fully implemented on January 1, 2019. While the ~~Dodd-Frank~~Economic Growth Act and recent federal banking regulations established a simplified leverage capital framework for smaller banks, ~~which~~these more stringent capital requirements could, ~~adversely~~among ~~affect~~other ~~our~~things, ~~results~~result in lower returns on equity, require the raising of ~~operations~~additional capital and adversely affect future growth opportunities. In addition, if the Company fails to meet these minimum capital guidelines and/or other regulatory requirements, the Company’s financial condition could be materially and adversely affected.

~~The~~Legislative ~~Company~~or ~~is subject to capital adequacy guidelines and other~~ regulatory ~~requirements specifying minimum amounts and types of capital which each must maintain. From time to time, regulators implement~~ changes toor ~~these regulatory capital adequacy guidelines. Under the Dodd-Frank Act~~actions, ~~the~~or ~~federal~~significant ~~banking agencies have established stricter capital requirements and leverage limits for banking organizations~~litigation, such as the Bank, that are based on the Basel III regulatory capital reforms. These stricter capital requirements were fully implemented on January 1, 2019. While the Economic Growth Act and recent federal banking regulations established a simplified leverage capital framework for smaller banks, these more stringent capital requirements could, ~~among other things, result in lower returns on equity, require the raising of additional capital and~~ adversely affect ~~future growth opportunities. In addition, if~~ the Company ~~fails to meet these minimum capital guidelines and/~~or ~~other~~the ~~regulatory~~businesses ~~requirements,~~in which the Company’s ~~financial~~is ~~condition could be materially and adversely affected~~engaged.

~~Legislative~~The orCompany ~~regulatory~~is subject to extensive state and federal regulation, supervision, and legislation that govern almost all aspects of its operations. Laws and regulations change from time to time and are primarily intended for the protection of consumers, depositors, and the FDIC’s DIF. The impact of any changes to laws and regulations or other actions by regulatory agencies may negatively affect the Company or its ability to increase the value of its business. Such changes could include higher capital requirements, and increased insurance premiums, increased compliance costs, reductions of noninterest income, and limitations on services that can be provided. Actions by regulatory agencies or significant litigation, against the Company could ~~adversely~~cause it to devote significant time and resources to defend itself and may lead to liability or penalties that materially affect the Company orand ~~the~~its ~~businesses~~shareholders. Future changes in ~~which~~the laws or regulations or their interpretations or enforcement could be materially adverse to the Company isand ~~engaged~~its shareholders.

The Company isexpects ~~subject~~the toTrump ~~extensive~~administration ~~state~~will ~~and~~implement ~~federal~~a ~~regulation,~~regulatory ~~supervision,~~agenda ~~and legislation~~ that ~~govern~~could ~~almost~~reduce ~~all~~and ~~aspects~~streamline ofcertain ~~its~~prudential ~~operations. Laws~~ and ~~regulations~~regulatory ~~change~~requirements ~~from~~applicable ~~time~~ to ~~time~~banking ~~and~~organizations ~~are~~at ~~primarily~~a ~~intended~~federal ~~for~~level. ~~the~~At ~~protection~~this ~~of consumers~~time, ~~depositors~~however, ~~and~~it ~~the~~is ~~FDIC’s~~unclear ~~DIF.~~what ~~The~~the ~~impact~~impacts ~~of any changes~~ to ~~laws and regulations or other actions by regulatory agencies may negatively affect~~ the ~~Company~~rulemaking, orsupervision, ~~its~~examination, ~~ability~~and toenforcement ~~increase~~priorities ~~the value~~ of ~~its~~the ~~business.~~federal ~~Such~~banking ~~changes~~agencies ~~could~~will ~~include higher capital requirements~~be, ~~and~~what ~~increased insurance premiums~~laws, ~~increased compliance costs~~regulations, ~~reductions~~and ofpolicies ~~noninterest~~may ~~income~~change, and ~~limitations~~whether onfuture ~~services~~changes ~~that~~or ~~can~~uncertainty besurrounding ~~provided.~~future ~~Actions~~changes bywill ~~regulatory~~adversely ~~agencies~~affect ~~or significant litigation against~~ the Company’s ~~could~~operating ~~cause~~environment, ~~it to devote significant time~~ and ~~resources~~therefore ~~to defend itself and may lead to liability or penalties that materially affect the Company and~~ its ~~shareholders.~~business, ~~Future~~financial ~~changes~~condition, ~~in the laws or regulations or their interpretations or enforcement could be materially adverse to the Company~~ and ~~its~~results ~~shareholders~~of operations.

~~The~~See ~~Company expects that~~ the ~~Trump~~section ~~administration will seek to implement a regulatory agenda that is significantly different than that~~ of ~~the~~this ~~Biden~~report ~~administration,~~entitled ~~impacting~~“Supervision ~~the~~and ~~rulemaking,~~Regulation” ~~supervision,~~for ~~examination,~~additional ~~and~~information ~~enforcement~~on ~~priorities of~~ the ~~federal~~statutory ~~banking agencies. At this time, it is unclear what laws, regulations,~~ and ~~policies~~regulatory ~~may~~issues ~~change~~that ~~and whether future changes or uncertainty surrounding future changes will adversely~~ affect the Company’s ~~operating environment and therefore its~~ business~~, financial condition, and results of operations~~.

~~See~~Changes ~~the~~in ~~section~~accounting ofstandards ~~this~~could ~~report~~impact ~~entitled~~reported ~~“Supervision~~earnings and ~~Regulation” for additional information on the statutory and regulatory issues that affect the Company’s business~~capital.

~~Changes~~The inauthorities that promulgate accounting standards, ~~could~~including the Financial Accounting Standards Board (the FASB), the SEC, and other regulatory authorities, periodically change the financial accounting and reporting standards that govern the preparation of the Company’s consolidated financial statements. These changes are difficult to predict and can materially impact ~~reported~~how ~~earnings~~the Company records and reports its financial condition and results of operations. In some cases, the Company could be required to apply a new or revised standard retroactively, resulting in the restatement of financial statements for prior periods. Such changes could also impact the capital levels of the Company and the Bank or require the Company to incur additional personnel or technology costs. For more information regarding recent accounting pronouncements and their effects on the Company, see “Recent Accounting Pronouncements” in Note 1 of the consolidated financial included in Item 8 of this Form 10-K.

The authorities that promulgate accounting standards, including the Financial Accounting Standards Board (the FASB), the SEC, and other regulatory authorities, periodically change the financial accounting and reporting standards that govern the preparation of the Company’s consolidated financial statements. These changes are difficult to predict and can materially impact how the Company records and reports its financial condition and results of operations. In some cases, the Company could be required to apply a new or revised standard retroactively, resulting in the restatement of financial statements for prior periods. Such changes could also impact the capital levels of the Company and the Bank or require the Company to incur additional personnel or technology costs. For more information regarding recent accounting pronouncements and their effects on the Company, see “Recent Accounting Pronouncements” in Note 1 of the consolidated financial included in Item 8 of this Form 10-K. 20

20Table of Contents

~~Table~~Changes in tax rates applicable to the Company may cause impairment of ~~Contents~~ deferred tax assets.

~~Changes~~The inCompany ~~tax~~determines ~~rates~~deferred ~~applicable~~income taxes using the balance sheet method. Under this method, each asset and liability are examined to determine the ~~Company~~difference ~~may~~between ~~cause~~its ~~impairment~~book basis and its tax basis. The difference between the book basis and the tax basis of each asset and liability is multiplied by the Company’s marginal tax rate to determine the net deferred tax asset or liability. Deferred income tax expense results from changes in deferred tax assets and liabilities between periods.

The marginal tax rate applicable to the Company, ~~determines~~as ~~deferred~~with all entities subject to federal income ~~taxes~~tax, ~~using~~is based on the ~~balance~~Company’s ~~sheet~~taxable ~~method~~income. ~~Under~~If ~~this~~the ~~method,~~Company’s ~~each~~taxable ~~asset~~income ~~and~~declines ~~liability~~such ~~are~~that ~~examined~~the toCompany’s ~~determine~~marginal tax rate declines, the ~~difference~~change ~~between~~in ~~its~~deferred ~~book~~income ~~basis~~tax assets and ~~its~~liabilities ~~tax~~would ~~basis.~~result ~~The~~in ~~difference~~an ~~between~~expense during the ~~book~~period ~~basis~~that ~~and~~a ~~the~~lower marginal tax ~~basis~~rate ofoccurs. ~~each~~If ~~asset~~changes ~~and~~in ~~liability~~tax isrates ~~multiplied~~and bylaws are enacted, the Company’s ~~marginal~~will ~~tax~~recognize ~~rate~~the tochanges ~~determine~~in the ~~net~~period ~~deferred~~in which they occur. Changes in tax ~~asset~~rates orand ~~liability.~~laws ~~Deferred~~could ~~income~~impair the Company’s deferred tax assets and result in an expense ~~results~~associated ~~from~~with ~~changes~~the change in deferred tax assets and liabilities ~~between periods~~.

~~The~~Evolving ~~marginal~~expectations ~~tax~~from ~~rate applicable to the Company~~customers, ~~as with all entities subject to federal income tax~~regulators, ~~is based on the Company’s taxable income. If the Company’s taxable income declines such that the Company’s marginal tax rate declines~~investors, ~~the change in deferred income tax assets~~ and ~~liabilities~~other ~~would~~stakeholders ~~result~~with inrespect anto ~~expense~~environmental, ~~during~~social ~~the period that a lower marginal tax rate occurs. If changes in tax rates~~ and ~~laws~~governance ~~are~~(ESG) ~~enacted,~~practices ~~the~~may ~~Company~~impose ~~will~~additional ~~recognize~~costs ~~the~~on ~~changes in~~ the ~~period in which they occur. Changes in tax rates and laws could impair the~~ Company’s ~~deferred~~or ~~tax~~expose ~~assets~~it ~~and~~to ~~result~~new inor anadditional ~~expense associated with the change in deferred tax assets and liabilities~~risks.

~~Increasing~~Companies are facing increasing scrutiny from customers, regulators, investors, and ~~evolving~~other stakeholders related to corporate social responsibility, environmental concerns, governance and related practices. Failure to act responsibly or in line with regulatory and stakeholder expectations ~~from~~in ~~customers~~a number of areas, such as climate risk, human capital and hiring practices, human rights, support for local communities, and corporate governance and transparency, could negatively impact the Company’s reputation, ability to do business with certain partners, and stock price. The rules, regulations and expectations of regulators, customers, investors, associates, and other stakeholders with respect to ~~environmental~~these matters continue to evolve, ~~social~~which could result in increases to the Company’s overall operational costs and ~~governance~~increased ~~(ESG)~~management ~~practices~~time and attention. Further, as these rules, regulations and expectations continue to evolve, the Company’s stakeholders may ~~impose~~have ~~additional~~differing ~~costs~~views on related matters. Scrutiny, or the perception that the Company’s efforts are too ambitious or misdirected, could expose itthe Company to ~~new~~the risk of investigations, litigation and other proceedings or ~~additional~~reputational ~~risks~~harm. If the Company is unable to meet its social- or environmentally-related goals or evolving and divergent stakeholder expectations and industry standards, it could negatively impact the value of the Company’s brand, the cost of its operations and/or relationships with customers, investors or employees, any of which could adversely affect its business and results.

~~Companies~~Climate ~~are~~change ~~facing increasing scrutiny from customers, regulators, investors,~~ and ~~other stakeholders~~ related tolegislative ~~ESG practices~~ and ~~disclosures,~~regulatory ~~especially~~initiatives asmay they relate to climate risk, hiring practices, the diversity of the work force, racial and social justice issues, support for local communities, and corporate governance and transparency. New rules and regulations also could result in new or more stringent forms of ESG oversight and reporting, diligence, and disclosure. Complying with ESG-related rules, regulations and/or stakeholder expectations could result in increases to the Company’s overall operational ~~costs~~changes and ~~increased~~expenditures ~~management~~that ~~time and attention. Further, failure to adapt to or comply with regulatory requirements or investor or stakeholder expectations and standards or to act responsibly in these areas~~ could ~~negatively~~significantly impact the Company’s ~~reputation, ability to do~~ business ~~with certain partners, and stock price~~. Conversely, if efforts around diversity and inclusion and other ESG-related areas are perceived as too ambitious, the Company may be subject to investigations, litigation and other proceedings and its reputation may be damaged. Adverse incidents could impact the value of the Company’s brand, the cost of its operations and/or relationships with customers, investors or employees, any of which could adversely affect its business and results.

~~Climate~~The current and anticipated effects of climate change continue to raise concerns for the state of the global environment. As a result, the Company and ~~related~~its ~~legislative~~customers will need to respond to new laws and ~~regulatory~~regulations as well as consumer and business preferences resulting from climate change concerns. While the Trump administration has shifted federal policy to reduce the emphasis on climate change initiatives ~~may~~and ~~result~~environmental inregulations, ~~operational~~state and local regulations or guidance relating to climate change, as well as changes in consumers’ and ~~expenditures~~businesses’ ~~that~~behaviors and business preferences, could ~~significantly~~affect ~~impact~~our business operations. Among other things, the Company’s ~~business~~and its customers could face cost increases, compliance-related risks, asset value reductions and operating process changes.

The ~~current~~lack ~~and anticipated effects~~ of ~~climate~~empirical ~~change~~data ~~are~~surrounding ~~creating an increasing level of concern for~~ the ~~state~~credit ofand ~~the~~other ~~global~~financial ~~environment.~~risks Asposed aby ~~result,~~climate ~~political~~change ~~and~~render ~~social~~it ~~attention~~impossible to ~~the~~predict ~~issue~~how ofspecifically climate change ~~has~~may ~~increased.~~impact ~~Federal~~the ~~and~~Company’s ~~state~~financial ~~legislatures~~condition and ~~regulatory~~results ~~agencies~~of ~~have~~operations; ~~continued~~however, tothe ~~propose~~physical ~~and~~effects ~~advance~~of ~~numerous~~climate ~~legislative~~change ~~and~~may ~~regulatory~~also ~~initiatives~~directly ~~seeking~~impact ~~to mitigate~~ the ~~effects of climate change~~Company. ~~The~~Specifically, ~~federal~~unpredictable ~~banking~~and ~~agencies~~more ~~have~~frequent ~~emphasized~~weather ~~that~~disasters ~~climate-related~~may ~~risks~~adversely ~~are~~impact ~~faced~~the byvalue ~~banking organizations~~ of ~~all~~real ~~types~~property ~~and~~securing ~~sizes~~the ~~and~~loans ~~are~~ in the ~~process of enhancing supervisory expectations regarding banks~~Bank’s ~~risk~~loan ~~management practices~~portfolio. ~~In December 2021~~Additionally, ~~the~~if ~~Office~~insurance ofobtained ~~the~~by ~~Comptroller~~borrowers ofis ~~the~~insufficient ~~Currency~~to ~~(OCC)~~cover ~~published~~any ~~proposed~~losses ~~principles~~sustained ~~for~~to ~~climate~~the ~~risk~~collateral, ~~management~~or byif ~~banking~~insurance ~~organizations~~coverage ~~with~~is ~~more~~otherwise ~~than~~unavailable ~~$100~~to ~~billion~~borrowers, inthe ~~assets.~~collateral ~~The~~securing ~~OCC~~loans ~~also~~may ~~has~~be ~~appointed~~negatively ~~its~~impacted ~~first~~by ~~ever Climate Change Risk Officer and established an internal~~ climate ~~risk~~change, ~~implementation~~which ~~committee~~could inimpact ~~order to assist with these initiatives and to support~~ the ~~agency~~Company’s ~~efforts~~financial tocondition ~~enhance~~and ~~its~~results ~~supervision~~ of ~~climate change risk management~~operations. ~~Similar~~ ~~and even more expansive initiatives are expected~~Further, ~~including potentially increasing supervisory expectations with respect to banks’ risk management practices, accounting for~~ the effects of climate change inmay ~~stress~~negatively ~~testing~~impact ~~scenarios~~regional and ~~systemic~~local ~~risk~~economic ~~assessments~~activity, ~~revising~~which ~~expectations~~could ~~for~~lead ~~credit~~to ~~portfolio~~an ~~concentrations~~adverse ~~based~~effect on ~~climate-related~~customers ~~factors~~ and ~~encouraging~~impact ~~investment~~the bycommunities ~~banks~~ in ~~climate-related~~which ~~initiatives and lending to communities disproportionately impacted by~~ the ~~effects~~Company ofoperates. Overall, climate change., Toits ~~the~~effects ~~extent~~and ~~that these initiatives lead to~~ the ~~promulgation~~resulting, ofunknown ~~new~~impact ~~regulations~~could orhave ~~supervisory~~a ~~guidance~~material ~~applicable~~adverse toeffect ~~the~~on ~~Company,~~ the Company’s ~~would~~financial ~~likely~~condition ~~experience increased compliance costs~~ and ~~other~~results ~~compliance-related~~of ~~risks~~operations.

The lack of empirical data surrounding the credit and other financial risks posed by climate change render it impossible to predict how specifically climate change may impact the Company’s financial condition and results of operations; however, the physical effects of climate change may also directly impact the Company. Specifically, unpredictable and more frequent weather disasters may adversely impact the value of real property securing the loans in the Bank’s loan portfolio. Additionally, if insurance obtained by borrowers is insufficient to cover any losses sustained to the collateral, or if insurance coverage is otherwise unavailable to borrowers, the collateral securing loans may be negatively impacted by climate change, which could impact the Company’s financial condition and results of operations. Further, the effects of climate change may negatively impact regional and local economic activity, which could lead to an adverse effect on customers and impact the communities in which the Company operates. Overall, climate change, its effects and the resulting, unknown impact could have a material adverse effect on the Company’s financial condition and results of operations. 21

21Table of Contents

~~Table~~Risks ofRelated ~~Contents~~ to The Company’s Securities

~~Risks~~The ~~Related~~Company torelies ~~The~~on ~~Company’s~~dividends ~~Securities~~from its subsidiaries for substantially all of its revenue.

The Company is a bank holding company that conducts substantially all of its operations through the Bank. As a result, the Company relies on dividends from ~~its~~the ~~subsidiaries~~Bank for substantially all of its ~~revenue~~revenues. There are various regulatory restrictions on the ability of the Bank to pay dividends or make other payments to the Company. Also, the Company’s right to participate in a distribution of assets upon a subsidiary’s liquidation or reorganization is subject to the prior claims of the subsidiary’s creditors. In the event the Bank is unable to pay dividends to the Company, the Company may not be able to service debt, pay obligations, or pay a cash dividend to the holders of its common stock and the Company’s business, financial condition, and results of operations may be materially adversely affected. Further, although the Company has historically paid a cash dividend to the holders of its common stock, holders of the common stock are not entitled to receive dividends, and regulatory or economic factors may cause the Company’s Board of Directors to consider, among other things, the reduction of dividends paid on the Company’s common stock even if the Bank continues to pay dividends to the Company.

~~The~~Future ~~Company~~issuances ~~is a bank holding company that conducts substantially all~~ of ~~its operations through~~ the ~~Bank. As a result, the~~ Company relies on dividends from the Bank for substantially all of its revenues. There are various regulatory restrictions on the ability of the Bank to pay dividends or make other payments to the Company. Also, the Company’s right to participate in a distribution of assets upon a subsidiary’s liquidation or reorganization is subject to the prior claims of the subsidiary’s creditors. In the event the Bank is unable to pay dividends to the Company, the Company may not be able to service debt, pay obligations, or pay a cash dividend to the holders of its common stock ~~and~~could ~~the Company’s business, financial condition, and results of operations may be materially~~ adversely ~~affected.~~affect ~~Further, although~~ the ~~Company~~market ~~has~~price ~~historically paid a cash dividend to the holders~~ of ~~its common stock, holders of~~ the common stock ~~are not entitled to receive dividends,~~ and ~~regulatory~~could orbe economic factors may cause the Company’s Board of Directors to consider, among other things, the reduction of dividends paid on the Company’s common stock even if the Bank continues to pay dividends to the Companydilutive.

~~Future~~The ~~issuances~~Company is not restricted from issuing additional authorized shares of common stock, including any securities that are convertible into or exchangeable for, or that represent the ~~Company’s~~right to receive, shares of common stock. Issuances of a substantial number of shares of common stock, or the expectation that such issuances might occur, including in connection with acquisitions by the Company, could materially adversely affect the market price of the shares of common stock and could be dilutive to shareholders. Because the Company’s decision to issue common stock in the future will depend on market conditions and other factors, it cannot predict or estimate the amount, timing, or nature of possible future issuances of its common stock. Accordingly, the Company’s shareholders bear the risk that future issuances will reduce the market price of the common stock and dilute their stock holdings in the Company.

~~The~~Current ~~Company~~economic isconditions ~~not restricted from issuing additional authorized shares of common stock, including any securities that are convertible into~~ or exchangeable for, or that represent the right to receive, shares of common stock. Issuances of a substantial number of shares of common stock, or the expectation that such issuances might occur, including in connection with acquisitions by the Company, could materially adversely affect the market price of the shares of common stock and could be dilutive to shareholders. Because the Company’s decision to issue common stock in the future will depend on market conditions and other factors, itmay ~~cannot~~cause ~~predict~~volatility orin ~~estimate~~ the ~~amount, timing, or nature of possible future issuances of its common stock. Accordingly, the~~ Company’s ~~shareholders bear the risk that future issuances will reduce the market price of the~~ common stock ~~and dilute their stock holdings in the Company~~value.

~~Current~~The ~~economic~~value ~~conditions~~of orpublicly ~~other~~traded stocks in the financial services sector can be volatile. The value of the Company’s common stock can also be affected by a variety of factors ~~may~~such ~~cause~~as ~~volatility~~expected results of operations, actual results of operations, actions taken by shareholders, news or expectations based on the performance of others in the financial services industry and expected impacts of a changing regulatory environment. These factors not only impact the value of the Company’s common stock ~~value~~but could also affect the liquidity of the stock given the Company’s size, geographical footprint, and industry.

~~The~~Future ~~value~~sales of ~~publicly~~our ~~traded stocks in the financial services sector can be volatile. The value of the Company’s~~ common stock ~~can also be affected~~ by ~~a variety of factors such as expected results of operations, actual results of operations, actions taken by~~ shareholders, ~~news~~ or ~~expectations based on~~ the ~~performance~~perception ofthat ~~others~~those insales ~~the~~could ~~financial~~occur ~~services~~may ~~industry~~cause ~~and~~our ~~expected impacts of a changing regulatory environment. These factors not only impact the value of the Company’s~~ common stock ~~but~~price ~~could~~to ~~also affect the liquidity of the stock given the Company’s size, geographical footprint, and industry~~decline.

~~Future~~Although ~~sales~~our common stock is listed for trading on NASDAQ Capital Market stock exchange, the trading volume in our common stock may be lower than that of other larger financial institutions. A public trading market having the desired characteristics of depth, liquidity and orderliness depends on the presence in the marketplace of willing buyers and sellers of the common stock at any given time. This presence depends on the individual decisions of investors and general economic and market conditions over which we have no control. Given the potential for lower relative trading volume in our common stock, bysignificant ~~shareholders~~sales of the common stock in the public market, or the perception that those sales ~~could~~may occur, ~~may~~could cause the trading price of our common stock ~~price~~ to decline or to be lower than it otherwise might be in the absence of these sales or perceptions.

~~Although~~The ~~our~~Company’s ~~common~~subordinated ~~stock~~debt isand ~~listed~~junior ~~for~~subordinated ~~trading~~debt onare ~~NASDAQ~~superior ~~Capital~~to ~~Market~~its ~~stock exchange, the trading volume in our~~ common stock ~~may be lower than that of other larger financial institutions. A public trading market having the desired characteristics of depth~~, liquidity and orderliness depends on the presence in the marketplace of willing buyers and sellers of the common stock at any given time. This presence depends on the individual decisions of investors and general economic and market conditions over which ~~we have no control. Given the potential for lower relative trading volume in our common stock, significant sales of the common stock in the public market, or the perception that those sales~~ may ~~occur,~~limit ~~could~~its ~~cause~~ability ~~the~~to ~~trading~~pay ~~price~~dividends ofon ~~our~~ common stock ~~to decline or to be lower than it otherwise might be~~ in the ~~absence of these sales or perceptions~~future.

The Company’'s ability to pay dividends on common stock is also limited by contractual restrictions under its subordinated debt and junior subordinated debt. ~~are~~Interest ~~superior~~must be paid on the subordinated debt and junior subordinated debt before dividends may be paid to common shareholders. The Company is current in its ~~common~~interest ~~stock~~payments on subordinated debt and junior subordinated debt; however, it has the right to defer distributions on its junior subordinated debt, during which time no dividends may ~~limit~~be paid on its ~~ability~~common stock. If the Company does not have sufficient earnings in the future and begins to defer distributions on the junior subordinated debt, it will be unable to pay dividends on its common stock inuntil ~~the~~it ~~future~~becomes current on those distributions.

The Company'’s ~~ability~~governing todocuments ~~pay~~and ~~dividends~~Virginia onlaw ~~common~~contain ~~stock~~anti-takeover isprovisions ~~also~~that ~~limited~~could bynegatively ~~contractual~~affect ~~restrictions under~~ its ~~subordinated debt and junior subordinated debt. Interest must be paid on the subordinated debt and junior subordinated debt before dividends may be paid to common~~ shareholders. The Company is current in its interest payments on subordinated debt and junior subordinated debt; however, it has the right to defer distributions on its junior subordinated debt, during which time no dividends may be paid on its common stock. If the Company does not have sufficient earnings in the future and begins to defer distributions on the junior subordinated debt, it will be unable to pay dividends on its common stock until it becomes current on those distributions.

The Company’s ~~governing~~Articles ~~documents~~of Incorporation and the Virginia ~~law~~Stock Corporation Act contain certain provisions designed to enhance the ability of the Board of Directors to deal with attempts to acquire control of the Company. These provisions and the ability to set the voting rights, preferences, and other terms of any series of outstanding preferred stock and preferred stock that may be issued, may be deemed to have an anti-takeover ~~provisions~~effect and may discourage takeovers (which certain shareholders may deem to be in their best interest). To the extent that such takeover attempts are discouraged, temporary fluctuations in the market price of the Company’s common stock resulting from actual or rumored takeover attempts may be inhibited. These provisions also could ~~negatively~~discourage ~~affect~~or ~~its~~make more difficult a merger, tender offer, or proxy contest, even though such transactions may be favorable to the interests of shareholders and could potentially adversely affect the market price of the Company’s common stock.

~~The~~Item Company’s Articles of Incorporation and the Virginia Stock Corporation Act contain certain provisions designed to enhance the ability of the Board of Directors to deal with attempts to acquire control of the Company1B. ~~These~~Unresolved ~~provisions~~Staff and the ability to set the voting rights, preferences, and other terms of any series of outstanding preferred stock and preferred stock that may be issued, may be deemed to have an anti-takeover effect and may discourage takeovers (which certain shareholders may deem to be in their best interest). To the extent that such takeover attempts are discouraged, temporary fluctuations in the market price of the Company’s common stock resulting from actual or rumored takeover attempts may be inhibited. These provisions also could discourage or make more difficult a merger, tender offer, or proxy contest, even though such transactions may be favorable to the interests of shareholders and could potentially adversely affect the market price of the Company’s common stock.Comments

~~Item~~Not 1Bapplicable. ~~Unresolved Staff Comments~~

~~Not applicable.~~ 22

22Table of Contents

~~Table~~Item of1C. ~~Contents~~ Cybersecurity

~~Item~~Risk ~~1C.~~Management ~~Cybersecurity~~and Strategy

The Company's risk management program is designed to identify, assess, and mitigate risks across various aspects of our Company, including financial, operational, regulatory, reputational, and legal. Cybersecurity is a critical component of this program, given the increasing reliance on technology and potential of cyber threats. The Chief Risk ~~Management~~Officer is primarily responsible for this cybersecurity component and ~~Strategy~~is a key member of the risk management organization, reporting directly to the Chief Executive Officer and, as discussed below, periodically to the Audit Committee of the Board of Directors.

The ~~Company's~~objective ~~risk~~for ~~management~~managing ~~program~~cybersecurity risk is ~~designed~~to avoid or minimize the impacts of external threat events or other efforts to ~~identify~~penetrate, ~~assess,~~disrupt ~~and~~or ~~mitigate~~misuse ~~risks~~our ~~across~~systems ~~various~~or ~~aspects~~information. The structure of our ~~Company,~~information ~~including~~security ~~financial,~~program ~~operational~~is designed around the National Institute of Standards and Technology (NIST) Cybersecurity Framework, regulatory, ~~reputational~~guidance, and ~~legal~~other industry standards. ~~Cybersecurity~~In isaddition, awe ~~critical~~leverage ~~component~~certain ofindustry ~~this~~and ~~program~~government associations, ~~given~~third-party ~~the~~benchmarking, ~~increasing~~audits, ~~reliance~~and onthreat ~~technology~~intelligence ~~and~~feeds ~~potential~~to offacilitate ~~cyber~~and ~~threats~~promote program effectiveness. The Chief Risk Officer, isalong ~~primarily~~with ~~responsible~~key ~~for~~members ~~this~~of ~~cybersecurity~~the ~~component~~information ~~and~~security isteam, aregularly ~~key~~collaborates ~~member~~with ofpeer ~~the~~banks, ~~risk~~industry ~~management organization~~groups, ~~reporting~~and ~~directly~~policymakers to ~~the~~discuss ~~Chief~~cybersecurity ~~Executive~~trends ~~Officer~~and issues and, asidentify ~~discussed~~best ~~below,~~practices. The information security program is periodically toreviewed ~~the~~by ~~Audit~~such ~~Committee~~personnel ofwith the ~~Board~~goal of ~~Directors~~addressing changing threats and conditions.

The ~~objective~~Company employs ~~for~~an ~~managing~~in-depth, ~~cybersecurity~~layered, ~~risk~~defensive isstrategy tothat ~~avoid~~embraces ora ~~minimize~~“trust ~~the~~by ~~impacts~~design” ofphilosophy ~~external~~when ~~threat~~designing ~~events~~new orproducts, ~~other~~services, ~~efforts~~and totechnology. ~~penetrate~~We leverage people, ~~disrupt~~processes, orand ~~misuse~~technology as part of our ~~systems~~efforts orto ~~information~~manage and maintain cybersecurity controls. ~~The~~We ~~structure~~also employ a variety of ~~our~~preventative ~~information~~and ~~security~~detective ~~program~~tools isdesigned to monitor, block, and provide alerts regarding suspicious activity, as well as to report on suspected advanced persistent threats. We have established processes and systems designed ~~around~~to ~~the~~mitigate ~~National~~cyber ~~Institute~~risk, ofincluding ~~Standards~~regular and ~~Technology~~on-going ~~(NIST)~~education ~~Cybersecurity~~and ~~Framework~~training for employees, ~~regulatory~~preparedness ~~guidance~~simulations and tabletop exercises, and ~~other~~recovery ~~industry~~and ~~standards~~resilience tests. InWe ~~addition,~~engage wein ~~leverage~~regular ~~certain~~assessments ~~industry~~of our infrastructure, software systems, and ~~government~~network ~~associations~~architecture, using internal cybersecurity experts and third-party ~~benchmarking~~specialists. We also maintain a third-party risk management program designed to identify, ~~audits~~assess, and ~~threat~~manage ~~intelligence~~risks, ~~feeds~~including tocybersecurity ~~facilitate~~risks, associated with external service providers and ~~promote~~our ~~program~~supply ~~effectiveness~~chain. ~~The~~We ~~Chief~~also ~~Risk~~actively ~~Officer,~~monitor ~~along~~our ~~with~~email ~~key~~gateways ~~members~~for malicious phishing email campaigns and monitor remote connections as a significant portion of our workforce has the ~~information~~option ~~security~~to ~~team,~~work ~~regularly~~remotely. ~~collaborates~~We ~~with~~leverage ~~peer~~internal ~~banks,~~and ~~industry~~external ~~groups,~~auditors and ~~policymakers~~independent external partners to ~~discuss~~periodically ~~cybersecurity~~review ~~trends~~our ~~and~~processes, ~~issues~~systems, and ~~identify~~controls, ~~best~~including ~~practices.~~with ~~The~~respect to our information security program, isto ~~periodically~~assess ~~reviewed~~their bydesign ~~such~~and ~~personnel~~operating ~~with~~effectiveness ~~the~~and ~~goal~~make ofrecommendations ~~addressing~~to ~~changing~~strengthen ~~threats~~our ~~and~~risk ~~conditions~~management program.

~~The~~We ~~Company employs~~maintain an ~~in-depth,~~Incident ~~layered,~~Response ~~defensive strategy~~ Plan that ~~embraces~~provides a ~~“trust~~documented byframework ~~design”~~for ~~philosophy~~responding ~~when designing new products, services, and technology. We leverage people, processes, and technology as part of our efforts~~ to ~~manage~~actual ~~and~~or ~~maintain~~potential cybersecurity ~~controls.~~incidents, Weincluding ~~also~~timely ~~employ~~notification ~~a variety~~ of ~~preventative~~ and ~~detective~~escalation ~~tools designed~~ to ~~monitor,~~the ~~block,~~appropriate ~~and~~Board-approved ~~provide~~management ~~alerts regarding suspicious activity~~committees, as ~~well~~discussed asfurther tobelow, ~~report on suspected advanced persistent threats. We have established processes~~ and ~~systems designed~~ to ~~mitigate~~the ~~cyber~~Audit ~~risk,~~Committee ~~including regular and on-going education and training for employees, preparedness simulations and tabletop exercises, and recovery and resilience tests. We engage in regular assessments~~ of our ~~infrastructure,~~Board ~~software~~of ~~systems, and network architecture, using internal cybersecurity experts and third-party specialists~~Directors. WeThe Incident ~~also~~Response ~~maintain~~Plan ais ~~third-party~~coordinated ~~risk~~through ~~management~~the ~~program~~Information ~~designed~~Security toOfficer ~~identify, assess,~~ and ~~manage~~key ~~risks,~~members ~~including~~of ~~cybersecurity~~management ~~risks,~~are ~~associated~~embedded ~~with~~into ~~external~~the ~~service~~Incident ~~providers~~Response ~~and~~Plan ~~our~~by ~~supply~~its ~~chain~~design. WeThe ~~also~~Incident ~~actively~~Response ~~monitor~~Plan ~~our~~facilitates ~~email~~coordination ~~gateways~~across ~~for~~multiple ~~malicious~~parts ~~phishing email campaigns and monitor remote connections as a significant portion~~ of our ~~workforce~~organization ~~has the option to work remotely. We leverage internal~~ and ~~external~~is ~~auditors~~evaluated ~~and~~at ~~independent~~least external partners to periodically review our processes, systems, and controls, including with respect to our information security program, to assess their design and operating effectiveness and make recommendations to strengthen our risk management programannually.

WeNotwithstanding ~~maintain~~these andefensive ~~Incident~~measures ~~Response~~and ~~Plan that~~processes, ~~provides~~the athreat ~~documented~~posed ~~framework~~by ~~for~~cyber-attacks ~~responding~~is tosevere. ~~actual~~Internal orsystems, ~~potential cybersecurity incidents~~processes, ~~including~~and ~~timely~~controls ~~notification~~are ofdesigned ~~and escalation~~ to ~~the~~mitigate ~~appropriate~~loss ~~Board~~from cyber-~~approved~~attacks ~~management committees~~and, aswhile ~~discussed~~we ~~further~~have ~~below,~~experienced ~~and~~cybersecurity toincidents in the ~~Audit~~past, ~~Committee~~to ofdate, ~~our~~risks ~~Board~~from ofcybersecurity ~~Directors.~~threats ~~The Incident~~have ~~Response~~not ~~Plan~~materially isaffected ~~coordinated~~our ~~through~~company. ~~the~~For ~~Information~~further ~~Security~~discussion ~~Officer and key members~~ of ~~management~~risks ~~are~~from ~~embedded~~cybersecurity ~~into~~threats, see the ~~Incident~~section ~~Response~~captioned ~~Plan~~“Risks byRelated ~~its~~to ~~design.~~Operations ~~The Incident Response Plan facilitates coordination across multiple parts of our organization~~ and isTechnology” ~~evaluated~~in atItem ~~least~~1A. ~~annually~~Risk Factors.

Notwithstanding these defensive measures and processes, the threat posed by cyber-attacks is severe. Internal systems, processes, and controls are designed to mitigate loss from cyber-attacks and, while we have experienced cybersecurity incidents in the past, to date, risks from cybersecurity threats have not materially affected our company. For further discussion of risks from cybersecurity threats, see the section captioned “Risks Related to Operations and Technology” in Item 1A. Risk Factors.Governance

~~Governance~~The Chief Risk Officer is accountable for managing our enterprise information security department and delivering our information security program. The responsibilities of this department include cybersecurity risk assessment, defense operations, incident response, vulnerability assessment, threat intelligence, identity access governance, third-party risk management, and business resilience. The foregoing responsibilities are covered on a day-to-day basis by a first line of defense function, and our second line of defense function, including the Information Security Officer, provides guidance, oversight, monitoring and challenge of the first line’s activities. The second line of defense function is separated from the first line of defense function through organizational structure and ultimately reports directly to the Chief Risk Officer. The department, as a whole, consists of information security professionals with varying degrees of education and experience. Individuals within the department are generally subject to professional education and certification requirements. In particular, our Chief Risk Officer has substantial relevant expertise and formal training in the areas of information security and cybersecurity risk management.

The ~~Chief~~Audit ~~Risk~~Committee ~~Officer~~of ~~is accountable for managing~~ our ~~enterprise~~Board ~~information~~of ~~security~~Directors ~~department~~is ~~and~~responsible ~~delivering~~for overseeing our information security ~~program.~~and ~~The~~technology ~~responsibilities~~governance ofprograms, ~~this~~including ~~department~~management’s ~~include~~actions ~~cybersecurity~~to ~~risk assessment~~identify, ~~defense operations~~assess, ~~incident response~~mitigate, ~~vulnerability~~and ~~assessment,~~remediate ~~threat~~or ~~intelligence,~~prevent ~~identity~~material ~~access~~cybersecurity ~~governance,~~issues ~~third-party risk management,~~ and ~~business resilience~~risks. ~~The~~Our ~~foregoing~~Chief ~~responsibilities~~Risk ~~are~~Officer ~~covered~~reports ~~on a day-~~to~~-day~~ ~~basis~~the byAudit aCommittee ~~first line~~ of ~~defense~~our ~~function,~~Board ~~and~~of ~~our~~Directors ~~second~~regarding ~~line~~the ofinformation ~~defense~~security ~~function,~~program ~~including~~and the ~~Information~~technology ~~Security Officer~~program, ~~provides~~key ~~guidance,~~enterprise ~~oversight~~cybersecurity initiatives, ~~monitoring~~ and ~~challenge~~other ofmatters ~~the~~relating ~~first~~to ~~line’s~~cybersecurity ~~activities~~processes. The ~~second~~Audit ~~line~~Committee of ~~defense~~our ~~function~~Board ~~is separated from the first line~~ of ~~defense~~Directors ~~function~~reviews ~~through organizational structure~~ and ~~ultimately~~approves ~~reports~~our ~~directly~~information tosecurity ~~the~~and ~~Chief~~technology ~~Risk~~policies ~~Officer~~annually. ~~The department~~Additionally, asthe aAudit ~~whole,~~Committee ~~consists~~ of ~~information~~our ~~security~~Board ~~professionals with varying degrees~~ of ~~education~~Directors ~~and~~reviews ~~experience.~~our ~~Individuals~~cyber ~~within~~security ~~the~~risk ~~department~~profile ~~are~~on ~~generally~~a ~~subject~~quarterly tobasis. ~~professional~~The ~~education~~Audit ~~and~~Committee ~~certification~~of ~~requirements. In particular,~~ our ~~Chief~~Board ~~Risk~~of ~~Officer~~Directors ~~has~~provides ~~substantial~~a ~~relevant~~report ~~expertise~~of ~~and~~their ~~formal~~activities ~~training~~to in the ~~areas~~full Board of ~~information~~Directors ~~security~~at ~~and~~board ~~cybersecurity risk management~~meetings.

~~The~~Item Audit Committee of our Board of Directors is responsible for overseeing our information security and technology governance programs, including management’s actions to identify, assess, mitigate, and remediate or prevent material cybersecurity issues and risks2. Our Chief Risk Officer provides quarterly reports to the Audit Committee of our Board of Directors regarding the information security program and the technology program, key enterprise cybersecurity initiatives, and other matters relating to cybersecurity processes. The Audit Committee of our Board of Directors reviews and approves our information security and technology policies annually. Additionally, the Audit Committee of our Board of Directors reviews our cyber security risk profile on a quarterly basis. The Audit Committee of our Board of Directors provides a report of their activities to the full Board of Directors at each board meeting.Properties

~~Item~~The 2Company, through its primary operating subsidiary, First Bank, owns or leases buildings that are used in the normal course of business. ~~Properties~~The Company’s headquarters is located at 112 West King Street, Strasburg, Virginia. The Bank owns or leases various other offices in the counties and cities in which it operates. At December 31, 2025, the Bank operated 33 branches throughout the Shenandoah Valley, south-central regions of Virginia, the Richmond and Roanoke market areas, and northern North Carolina. The Bank also operates a loan production office and a customer service center in a retirement community. The Company’s operations center is in Strasburg, Virginia. All of the Company’s properties are in good operating condition and are adequate for the Company’s present and future needs. See Note 1, “Nature of Banking Activities and Significant Accounting Policies,” Note 7, “Premises and Equipment,” and Note 18, "Lease Commitments," in the “Notes to Consolidated Financial Statements” contained in Item 8 of this Form 10-K for information with respect to the amounts at which Bank premises and equipment are carried and commitments under long-term leases.

The Company, through its primary operating subsidiary, First Bank, owns or leases buildings that are used in the normal course of business. The Company’s headquarters is located at 112 West King Street, Strasburg, Virginia. The Bank owns or leases various other offices in the counties and cities in which it operates. At December 31, 2024, the Bank operated 33 branches throughout the Shenandoah Valley, south-central regions of Virginia, the Richmond and Roanoke market areas, and northern North Carolina. The Bank also operates three loan production offices and two customer service centers in retirement communities. The Company’s operations center is in Strasburg, Virginia. All of the Company’s properties are in good operating condition and are adequate for the Company’s present and future needs. See Note 1, “Nature of Banking Activities and Significant Accounting Policies,” Note 7, “Premises and Equipment,” and Note 18, "Lease Commitments," in the “Notes to Consolidated Financial Statements” contained in Item 8 of this Form 10-K for information with respect to the amounts at which Bank premises and equipment are carried and commitments under long-term leases. 23

23Table of Contents

~~Table~~Item of3. ~~Contents~~ Legal Proceedings

~~Item~~There 3.are ~~Legal~~no ~~Proceedings~~material pending legal proceedings to which the Company is a party or to which the property of the Company is subject.

~~There~~Item ~~are~~4. noMine ~~material~~Safety ~~pending legal proceedings to which the Company is a party or to which the property of the Company is subject.~~Disclosures

~~Item 4~~None. ~~Mine Safety Disclosures~~

~~None.~~Part II

~~Part~~Item II5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

~~Item 5.~~ Market ~~for~~Information ~~Registrant’s Common Equity, Related Stockholder Matters~~ and ~~Issuer Purchases of Equity Securities~~Holders

Shares of the common stock of the Company are traded on the Nasdaq Capital Market ~~Information~~stock exchange under the symbol “FXNC.” As of March 16, 2025 the Company had 1,374 shareholders of record and ~~Holders~~approximately 2,225 beneficial owners of shares of common stock.

~~Shares~~Dividend of the common stock of the Company are traded on the Nasdaq Capital Market stock exchange under the symbol “FXNC.” As of March 21, 2025 the Company had 1,406 shareholders of record and approximately 1,600 beneficial owners of shares of common stock.Policy

~~Dividend~~A ~~Policy~~discussion of certain limitations on the ability of the Bank to pay dividends to the Company and the ability of the Company to pay dividends on its common stock, is set forth in Part I., Item 1—Business, of this Form 10-K under the headings “Supervision and Regulation - Limits on Dividends and Other Payments” and Item 1A—Risk Factors, “The Company’s subordinated debt and junior subordinated debt are superior to its common stock, which may limit the Company's ability to pay dividends on common stock in the future.”

AThe ~~discussion~~Company’s offuture ~~certain~~dividend ~~limitations~~policy onis ~~the~~subject ~~ability of the Bank~~ to ~~pay dividends to~~ the ~~Company~~discretion ~~and~~of ~~the~~its ~~ability~~Board of ~~the~~Directors ~~Company~~and towill ~~pay~~depend ~~dividends~~upon ona ~~its~~number ~~common~~of ~~stock~~factors, isincluding ~~set~~future ~~forth~~earnings, infinancial ~~Part I.~~condition, ~~Item 1—Business,~~liquidity ofand ~~this~~capital ~~Form~~requirements ~~10-K~~of ~~under~~both the ~~headings~~Company ~~“Supervision~~ and ~~Regulation~~the -Bank, ~~Limits~~applicable ongovernmental ~~Dividends~~regulations and ~~Other~~policies ~~Payments”~~ and ~~Item~~other ~~1A—Risk~~factors ~~Factors,~~deemed ~~“The~~relevant ~~Company’s~~by ~~subordinated debt and junior subordinated debt are superior to its common stock, which may limit~~ the ~~Company's~~Board ~~ability~~of ~~to pay dividends on common stock in the future~~Directors.”

~~The~~Issuer ~~Company’s~~Purchases ~~future dividend policy is subject to the discretion~~ of ~~its~~Equity Board of Directors and will depend upon a number of factors, including future earnings, financial condition, liquidity and capital requirements of both the Company and the Bank, applicable governmental regulations and policies and other factors deemed relevant by the Board of Directors.Securities

~~Issuer~~There ~~Purchases~~was no authorized repurchase plan, and the Company did not make any repurchases of ~~Equity~~common ~~Securities~~stock during 2025.

~~There was no authorized repurchase plan and related repurchase of common stock during 2024.~~ 24

24Table of Contents

~~Table~~Item of6. ~~Contents~~ [Reserved]

Item 67. ~~[Reserved]~~Management’s Discussion and Analysis of Financial Condition and Results of Operation

~~Item~~The 7.following ~~Management’s~~discussion ~~Discussion~~and analysis of the financial condition and ~~Analysis~~results of ~~Financial~~operations ~~Condition~~of the Company for the years ended December 31, 2025 and ~~Results~~2024 should be read in conjunction with the consolidated financial statements and related notes to the consolidated financial statements included in Item 8 of ~~Operation~~this Form 10-K.

~~The~~ Critical ~~following~~Accounting discussion and analysis of the financial condition and results of operations of the Company for the years ended December 31, 2024 and 2023 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.Policies

~~Critical Accounting Policies~~ General

~~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.

~~The~~Presented ~~Company’s~~below ~~consolidated~~is ~~financial~~a ~~statements~~discussion ~~and~~of ~~related~~those ~~notes~~accounting ~~are~~policies ~~prepared~~that inmanagement ~~accordance~~believes ~~with~~are ~~GAAP.~~the ~~The~~most ~~financial~~important ~~information~~(Critical ~~contained~~Accounting ~~within~~Policies) ~~the statements is,~~ to athe ~~significant~~portrayal ~~extent,~~and ~~financial~~understanding ~~information that is based on measures~~ of the Company’s financial ~~effects~~condition ~~of transactions~~ and ~~events~~results ~~that~~of ~~have already occurred~~operations. AThe ~~variety~~Critical ofAccounting ~~factors~~Policies ~~could~~require ~~affect~~management’s ~~the~~most ~~ultimate~~difficult, ~~value that is obtained either when earning income~~subjective, ~~recognizing~~and ancomplex ~~expense,~~judgments ~~recovering~~about anmatters ~~asset,~~that orare ~~relieving~~inherently ~~a liability~~uncertain. ~~The~~In ~~Bank uses historical losses as one factor in determining~~ the ~~inherent~~event ~~loss~~ that ~~may~~different beassumptions ~~present~~or inconditions ~~the~~were ~~loan~~to ~~portfolio.~~prevail, ~~Actual~~and ~~losses~~depending ~~could~~upon ~~differ significantly from~~ the ~~historical~~severity ~~factors~~of ~~used.~~such ~~In addition~~changes, ~~GAAP itself may change from one previously acceptable method to another. Although~~ the ~~economics~~possibility of ~~transactions~~materially ~~would~~different befinancial ~~the~~condition ~~same,~~or ~~the~~results ~~timing~~ of ~~events~~operations ~~that~~is ~~would~~a ~~impact~~reasonable ~~transactions could change~~likelihood.

~~Presented~~Allowance ~~below~~for isCredit aLosses ~~discussion~~on 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.Loans

~~Allowance~~The allowance for ~~Credit~~credit ~~Losses~~losses on ~~Loans~~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 ~~allowance~~ACLL ~~for~~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 ~~(ACLL)~~which isshare ~~established~~similar asrisk ~~losses~~characteristics. ~~are~~Within ~~estimated~~the toquantitative ~~have~~portion ~~occurred~~of ~~through~~the calculation, the Company utilizes at least one or a ~~provision~~combination ~~for~~of ~~credit losses~~loss ~~charged~~drivers, which may include unemployment rates, home price indices, and/or gross domestic product (GDP), to ~~earnings~~adjust its loss rates over a reasonable and supportable forecast period of one year. ~~Loan~~A ~~losses~~straight-line ~~are~~reversion ~~charged~~technique ~~against~~is used for the ~~allowance~~following ~~when~~eight ~~management~~quarters, ~~determines~~at ~~that~~which time the ~~loan~~Company ~~balance~~reverts isto ~~uncollectible~~historical averages. ~~Subsequent~~To ~~recoveries~~further adjust the allowance for credit losses for expected losses not already included within the quantitative component of the calculation, ifthe ~~any~~Company may consider qualitative factors, ~~are~~including ~~credited~~but not limited to: variability in the ~~allowance.~~economic ~~For~~forecast, ~~further~~changes ~~information~~in ~~about~~volume ~~the~~and ~~Company’s~~severity of adversity classified loans, changes in concentrations of credit, changes in the nature and volume of the ~~ACLL~~loan segments, ~~see~~factors ~~Notes 1,~~related 4to credit administration, and ~~5 to~~other ~~the~~idiosyncratic ~~Consolidated~~risks ~~Financial~~not ~~Statements~~embedded ~~included~~in the data used in ~~this~~the ~~Form~~model. This ~~10-K~~evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

The ~~ACLL~~Company isperforms ~~evaluated~~regular oncredit areviews ~~quarterly~~of ~~basis~~the byloan ~~management~~portfolio ~~and~~to isreview ~~based~~credit ~~on a~~quality ~~discounted~~and ~~cash~~adherence ~~flow model~~ to ~~estimate~~underwriting ~~its~~standards. ~~current~~The ~~expected~~ credit ~~losses.~~reviews ~~For~~consist ~~the purposes~~ of ~~calculating~~reviews by its ~~quantitative~~internal ~~reserves,~~credit ~~the~~administration ~~Company~~department ~~has~~and ~~segmented~~reviews ~~its~~performed ~~loan~~by ~~portfolio~~an ~~based~~independent onthird ~~loans which share similar risk characteristics~~party. ~~Within~~Upon ~~the quantitative portion of the calculation~~origination, ~~the~~each ~~Company~~loan ~~utilizes~~is atassigned ~~least one or~~ a ~~combination~~risk ofrating ~~loss~~ranging ~~drivers,~~from ~~which~~one ~~may~~to ~~include unemployment rates~~nine, ~~home~~with ~~price~~loans ~~indices,~~closer ~~and/or gross domestic product (GDP),~~ to ~~adjust~~one ~~its~~having ~~loss~~less ~~rates over a reasonable and supportable forecast period of one year~~risk. AThis ~~straight-line~~risk ~~reversion~~rating ~~technique~~scale is ~~used for~~ the ~~following~~Company's ~~eight~~primary ~~quarters,~~credit atquality ~~which~~indicator. ~~time~~The ~~the~~ Company ~~reverts~~has tovarious ~~historical~~committees ~~averages.~~that Toreview ~~further~~and ~~adjust~~ensure that the allowance for credit losses ~~for~~methodology ~~expected~~is ~~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~~accordance ~~economic~~with ~~forecast,~~GAAP ~~changes in volume~~ and ~~severity~~loss offactors ~~adversity~~used ~~classified~~appropriately ~~loans,~~reflect ~~changes in concentrations of credit, changes in~~ the ~~nature~~risk ~~and~~characteristics ~~volume~~ of the loan ~~segments, factors related to credit administration, and other idiosyncratic risks not embedded in the data used in the model~~portfolio. ~~This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.~~

The ~~Company~~allowance ~~performs~~for ~~regular~~loan credit ~~reviews~~losses ofrepresents ~~the~~an ~~loan~~amount ~~portfolio~~which, toin ~~review~~management’s ~~credit~~judgement, ~~quality~~is ~~and~~adequate ~~adherence~~ to ~~underwriting~~absorb ~~standards.~~the ~~The~~lifetime ~~credit~~expected ~~reviews~~losses ~~consist~~that ofmay ~~reviews~~be bysustained ~~its~~on ~~internal~~outstanding ~~credit~~loans ~~administration~~at ~~department~~the ~~and~~balance ~~reviews~~sheet ~~performed~~date bybased anon ~~independent~~the ~~third~~evaluation ~~party.~~of ~~Upon~~the ~~origination,~~size ~~each~~and ~~loan~~current isrisk ~~assigned~~characteristics aof ~~risk~~the ~~rating~~loan ~~ranging~~portfolio, ~~from~~past ~~one~~events, tocurrent ~~nine~~conditions, ~~with~~reasonable ~~loans~~and ~~closer~~supportable toforecasts ~~one~~of ~~having~~future ~~less~~economic ~~risk~~conditions, and prepayment experience. ~~This~~The ~~risk~~allowance ~~rating~~for ~~scale~~loan credit losses is measured and recorded upon the ~~Company's~~initial ~~primary~~recognition ~~credit~~of ~~quality~~a ~~indicator~~financial asset. The ~~Company~~allowance ~~has~~for ~~various~~loan ~~committees~~credit ~~that~~losses ~~review~~is reduced by charge-offs, net of recoveries of previous losses, and ~~ensure~~is ~~that~~increased ~~the~~or ~~allowance~~decreased by a provision for (or recovery of) credit losses, ~~methodology~~which is recorded in ~~accordance~~the ~~with~~Consolidated ~~GAAP~~Statement ~~and~~of ~~loss~~Income. The ~~factors~~evaluation ~~used~~also ~~appropriately~~considers ~~reflect~~ the following risk characteristics of ~~the~~each loan portfolio. class:

~~The~~● ~~allowance~~1-4 ~~for~~family ~~loan~~residential ~~credit~~mortgage ~~losses~~loans ~~represents~~carry anrisks ~~amount~~associated ~~which,~~with inthe ~~management’s~~continued ~~judgement,~~creditworthiness isof ~~adequate~~the toborrower ~~absorb~~and changes in the ~~lifetime~~value ~~expected~~of ~~losses~~the collateral. ● Real estate construction and land development loans carry risks that the project may not be ~~sustained~~finished onaccording ~~outstanding~~to ~~loans~~schedule, at the ~~balance~~project ~~sheet~~may ~~date~~not ~~based~~be onfinished according to budget, and the ~~evaluation~~value of the ~~size~~collateral ~~and~~may, ~~current~~at ~~risk~~any ~~characteristics~~point in time, be less than the principal amount of the loan. ~~portfolio,~~Construction ~~past~~loans ~~events~~also bear the risk that the general contractor, ~~current~~who ~~conditions~~may or may not be a loan customer, ~~reasonable~~may ~~and~~not ~~supportable~~finish ~~forecasts~~the construction project as planned because of ~~future~~financial ~~economic~~pressure ~~conditions,~~or ~~and~~other ~~prepayment~~factors ~~experience~~unrelated to the project. ~~The~~● ~~allowance~~Commercial ~~for~~and ~~loan~~industrial ~~credit~~loans ~~losses~~carry isrisks ~~measured~~associated ~~and~~with ~~recorded~~the successful operation of a business because repayment of these loans may be dependent upon the ~~initial~~profitability ~~recognition~~and cash flows of athe ~~financial~~business. ~~asset~~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. ~~The~~● ~~allowance~~Consumer ~~for~~and ~~loan~~other ~~credit~~loans ~~losses~~carry isrisk ~~reduced~~associated bywith ~~charge-offs,~~the ~~net~~continued creditworthiness of ~~recoveries~~the borrower and the value of ~~previous~~the ~~losses~~collateral, ~~and~~if isany. ~~increased~~Consumer loans are typically either unsecured or ~~decreased~~secured by arapidly ~~provision~~depreciating ~~for~~assets ~~(or~~such ~~recovery~~as ~~of)~~automobiles. ~~credit~~These ~~losses~~loans are also likely to be immediately and adversely affected by job loss, ~~which~~divorce, isillness, ~~recorded~~personal inbankruptcy, ~~the~~or ~~Consolidated~~other ~~Statement~~changes ofin ~~Income~~circumstances. ~~The~~ ~~evaluation~~Other ~~also~~loans ~~considers~~included ~~the~~in ~~following~~this ~~risk~~category ~~characteristics~~include ofloans ~~each~~to ~~loan~~states ~~portfolio~~and ~~class:~~political subdivisions.

● 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 be unable to 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

25Table of Contents

~~Table~~ The ACLL consists of ~~Contents~~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 ~~ACLL~~Company ~~consists~~estimates ofexpected ~~loans~~credit ~~individually~~losses ~~evaluated and~~on ~~loans~~held-to-maturity ~~collectively evaluated.~~securities ~~Loans that do not share risk characteristics are evaluated~~ on an individual basis. ~~The~~based ~~Company~~on ~~designates~~a ~~individually~~Probability ~~evaluated~~of ~~loans~~Default/Loss onGiven ~~nonaccrual~~Default ~~status~~(PD/LGD) asmethodology ~~collateral~~primarily ~~dependent~~using ~~loans,~~security-level ascredit ~~well~~ratings. asThe ~~other~~primary ~~loans~~indicators ~~that management~~ of ~~the~~credit ~~Company~~quality ~~designates as having higher risk and loans~~ for ~~which~~ the ~~repayment~~Company’s ~~is expected~~ held-to-maturity beportfolio ~~provided~~are ~~substantially~~security ~~through~~type ~~the~~and ~~operation~~credit orratings, ~~sale~~which ~~of the collateral. These loans do not share common risk characteristics and~~ are ~~not~~influenced ~~included~~by ~~within~~a ~~the~~number ~~collectively~~of ~~evaluated~~factors ~~loans~~including ~~for~~obligor ~~determining~~cash ~~the~~flow, ~~allowance~~geography, ~~for credit losses. Under CECL~~seniority, ~~for~~among ~~collateral~~other ~~dependent~~factors. ~~loans,~~The ~~the~~ Company’s ~~has adopted the practical expedient~~ held-to-maturity ~~measure~~securities ~~the~~with ~~allowance for~~ credit ~~losses~~risk ~~based~~are onmunicipal ~~the~~bonds ~~fair~~and ~~value~~corporate ofdebt ~~collateral~~securities. ~~The~~All ~~allowance~~other ~~for~~held-to-maturity ~~credit~~securities ~~losses~~are iscovered ~~calculated~~by ~~on an individual loan basis based on~~ the ~~shortfall~~explicit ~~between~~or ~~the~~implied ~~fair~~guarantee ~~value~~ of the ~~loan’s~~United ~~collateral,~~States ~~which~~government isor ~~adjusted~~one ~~for~~if ~~liquidation~~its ~~costs/discounts, and amortized cost~~agencies. 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~~Management ~~Company~~evaluates ~~estimates~~all ~~expected credit losses on held~~available-tofor-~~maturity~~sale securities onin an ~~individual~~unrealized ~~basis~~loss ~~based~~position on a ~~Probability~~quarterly ofbasis, ~~Default/Loss~~and ~~Given~~more ~~Default~~frequently ~~(PD/LGD)~~when ~~methodology~~economic ~~primarily~~or ~~using~~market ~~security-level~~conditions ~~credit~~warrant ~~ratings~~such evaluation. ~~The~~If ~~primary~~the ~~indicators~~Company ofhas ~~credit quality for~~ the ~~Company’s~~intent ~~held-~~to~~-maturity~~ ~~portfolio~~sell ~~are~~the security ~~type~~or ~~and~~it ~~credit~~is ~~ratings,~~more ~~which~~likely ~~are~~than ~~influenced~~not bythat athe ~~number~~Company ofwill ~~factors~~be ~~including~~required ~~obligor~~to ~~cash~~sell ~~flow,~~the ~~geography~~security, ~~seniority,~~the ~~among~~security ~~other~~is ~~factors.~~written ~~The~~down ~~Company’s held-~~to~~-maturity~~ ~~securities~~fair ~~with~~value ~~credit risk are municipal bonds~~ and ~~corporate debt securities. All other held-to-maturity securities are covered by~~ the ~~explicit~~entire orloss ~~implied~~is ~~guarantee~~recorded ofin ~~the United States government or one if its agencies~~earnings.

~~Changes in~~If either of the ~~allowance~~above ~~for~~criteria ~~credit~~is ~~loss are~~not ~~recorded~~met, asthe ~~provision~~Company ~~for~~evaluates ~~(or~~whether ~~recovery~~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 ~~Consolidated~~ratings ~~Statements~~of the security by a rating agency, the failure of ~~Income~~the issuer to make scheduled interest or principal payments and adverse conditions specific to the security. ~~The~~If ~~Company~~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 ~~losses~~loss, onlimited ~~held-to-maturity~~by ~~securities~~the ofamount ~~$132 thousand~~that ~~upon~~the ~~adoption~~fair value is less than the amortized cost basis. Any amount of ~~ASC~~unrealized ~~326~~loss that has not been recorded through an allowance for credit loss is recognized in other comprehensive income.

~~Management~~Changes ~~evaluates~~in ~~all~~the ~~available-~~allowance for~~-sale~~ ~~securities~~credit ~~in an unrealized~~ loss ~~position~~are onrecorded as a ~~quarterly~~provision ~~basis,~~for ~~and~~(or ~~more~~recovery ~~frequently~~of) ~~when~~credit ~~economic~~losses orin ~~market~~the ~~conditions~~Consolidated ~~warrant~~Statements ~~such~~of ~~evaluation~~Income. IfLosses ~~the~~are ~~Company~~charged ~~has~~against the ~~intent~~allowance tofor ~~sell~~credit ~~the~~loss ~~security~~when ormanagement itbelieves isan ~~more~~available-for-sale ~~likely~~security ~~than~~is ~~not~~confirmed ~~that~~to ~~the Company will~~ be ~~required~~uncollectible toor ~~sell~~when ~~the~~either ~~security,~~of the ~~security~~criteria isregarding ~~written~~intent ~~down~~or requirement to ~~fair~~sell ~~value and the entire loss~~ is ~~recorded in earnings~~met.

IfFinancial ~~either~~Instruments ofinclude ~~the~~off-balance ~~above~~sheet ~~criteria~~credit ~~is not met~~instruments, ~~the~~such ~~Company~~as ~~evaluates~~commitments ~~whether~~to ~~the~~make ~~decline~~loans inand ~~fair~~commercial ~~value~~letters ~~is the result~~ of credit ~~losses~~issued orto ~~other~~meet ~~factors.~~customer Infinancing ~~making~~needs. ~~the~~The ~~assessment, the~~ Company’s ~~may~~exposure ~~consider various factors including the extent~~ to ~~which~~credit ~~fair~~losses ~~value is less than amortized cost, downgrades~~ in the ~~ratings~~event of ~~the~~nonperformance ~~security~~ by ~~a rating agency,~~ the ~~failure~~other ofparty ~~the issuer~~ to ~~make scheduled interest or principal payments and adverse conditions specific to~~ the ~~security.~~financial Ifinstrument ~~the~~for ~~assessment~~off-balance ~~indicates~~sheet ~~that~~loan acommitments ~~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~~represented ~~as an allowance for credit loss, limited~~ by the ~~amount~~contractual ~~that the fair value is less than the amortized cost basis. Any~~ amount of ~~unrealized~~those ~~loss~~instruments. ~~that~~Such ~~has~~financial ~~not~~instruments ~~been~~are recorded ~~through~~when anthey ~~allowance~~are ~~for credit loss is recognized in other comprehensive income~~funded.

~~Changes~~The inCompany ~~the~~records all allowance for credit ~~loss~~losses on off-balance sheet credit exposures, unless the commitments to extend credit are ~~recorded~~unconditionally ascancelable, through a charge to provision for (or recovery of) credit losses in the Consolidated ~~Statements~~Statement of Income. ~~Losses~~The ~~are~~allowances ~~charged~~for ~~against~~credit ~~the~~losses ~~allowance~~on ~~for~~off-balance sheet credit ~~loss~~exposures ~~when~~is ~~management~~estimated ~~believes~~by anloan ~~available-for-sale~~segment ~~security~~at iseach ~~confirmed~~balance tosheet bedate ~~uncollectible~~under orthe ~~when~~current ~~either~~expected ofcredit losses model using the ~~criteria~~same ~~regarding~~methodology ~~intent~~as orthe ~~requirement~~loan toportfolio, ~~sell~~taking into consideration the likelihood that funding will occur as well as any third-party guarantees. The allowance for unfunded commitments is ~~met~~included in other liabilities on the Company’s consolidated balance sheet.

~~Financial~~ The ~~Instruments~~loan ~~include~~portfolio ~~off-balance~~includes ~~sheet~~commercial ~~credit~~and ~~instruments,~~industrial ~~such~~loans asthat ~~commitments~~were tooriginated ~~make~~by ~~loans~~a third-party and ~~commercial~~were ~~letters~~acquired ofat ~~credit~~premiums. Premiums ~~issued~~on toperforming ~~meet~~loans ~~customer~~are ~~financing~~amortized ~~needs.~~into ~~The~~interest ~~Company’s~~income ~~exposure~~and tofees ~~credit~~on ~~losses~~loans inover the ~~event~~life of ~~nonperformance~~the byloans using the ~~other~~effective ~~party~~interest tomethod. ~~the~~Premiums ~~financial~~on ~~instrument~~non-performing ~~for~~loans ~~off-balance~~are ~~sheet~~not ~~loan~~amortized ~~commitments~~into isinterest ~~represented~~income byand fees on loans after loans are placed on non-accrual status and are included in the ~~contractual~~calculation ~~amount~~of specific reserve component of ~~those~~the ~~instruments.~~allowance ~~Such~~for ~~financial~~credit ~~instruments~~losses ~~are~~on ~~recorded~~loans ~~when~~for ~~they~~individually ~~are~~analyzed ~~funded~~loans.

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. 26

~~The~~ Table 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.Contents

26Results of Operations

~~Table~~Executive ~~of Contents~~ Overview

~~Acquisition~~The ~~Accounting~~ Company’s 2025 financial highlights:

● The Company ~~accounts~~acquired ~~for~~Touchstone ~~mergers~~Bankshares, ~~and~~Inc. ~~acquisitions~~on ~~that~~October ~~qualify as a business combination under ASC 805~~1, ~~Business~~ ~~Combinations~~2024, ~~which~~and ~~requires~~completed the ~~use~~operational ofmerger in the ~~acquisition~~first ~~method~~quarter of ~~accounting~~2025. ~~Under~~● ~~the~~Net ~~acquisition~~income ~~method,~~available weto ~~record~~common ~~all~~shareholders ~~identifiable~~was ~~assets~~$17.7 ~~acquired,~~million ~~including~~and ~~intangible~~diluted ~~assets~~earnings ~~and~~per ~~the~~share ~~liabilities~~was ~~assumed~~$1.96 atcompared ~~their~~to ~~fair~~net ~~values~~income as of ~~the acquisition date~~$7.0 ~~Determining~~million ~~fair~~and ~~values~~diluted ofearnings ~~net~~per ~~assets~~share ~~acquired~~of ~~often~~$1.00 ~~involves~~in ~~estimates~~2024. ~~based~~● onEarnings ~~third-party~~produced ~~valuations,~~a ~~such~~return ~~as appraisals or internal valuations based~~ on ~~discounted~~average ~~cash~~equity ~~flow~~of ~~analysis or other valuation techniques~~10.10% ~~These~~for ~~methodologies~~2025 ~~are~~compared ~~inherently~~to ~~subjective~~5.33% ~~and~~for ~~involve~~2024. ~~significant~~● ~~assumptions,~~Period ~~adjustments,~~end ~~and judgement around the selection of assumptions including~~loans, ~~among others~~net, ~~discount~~decreased ~~rates,~~$15.2 ~~future~~million ~~expected~~in ~~cash~~2025 ~~flows,~~as ~~market~~compared ~~conditions,~~to ~~and~~2024. ~~other~~● ~~future~~Period ~~events~~end ~~that~~deposits ~~are~~decreased ~~highly~~$4.2 ~~subjective~~million in ~~nature~~2025 ~~and~~as ~~subject~~compared to ~~change~~2024. ● The ~~determination~~2025 ofprovision ~~the~~for ~~useful~~credit ~~lives~~losses ~~over~~on ~~which~~loans antotaled ~~intangible~~$2.9 ~~asset~~million, ~~will~~compared beto ~~amortized~~$7.9 ismillion ~~also~~in ~~subjective~~2024. ~~While~~● ~~the~~Nonperforming ~~selected~~assets ~~fair~~as ~~values~~a ~~represent~~percentage ~~our best estimate~~ of ~~fair~~total ~~value~~loans aswere of0.32% ~~the~~on ~~acquisition~~December ~~date~~31, ~~these~~2025, ~~estimates~~compared ~~are~~to ~~inherently uncertain~~0.50% Inin ~~addition,~~2024. ~~the~~● ~~acquisition~~The ~~method~~net ofinterest ~~accounting~~margin ~~allows~~increased ~~for a measurement period~~ to ~~adjust~~3.88% ~~acquisition accounting~~ for ~~up to one year after the acquisition date~~2025, ~~for~~compared ~~new~~to ~~information that existed at the acquisition date but may not have been known or available at that time~~3.51% ~~For further information, refer to Note 2 “Acquisitions”~~ in ~~Part I, Item 1 of this Annual Report~~2024.

~~Acquired~~Net loans are recorded at their fair value at acquisition date without carryover of the acquiree’s previously established ACLL, as credit discounts are included in the determination of fair value. The fair value of the loans is determined using market participant assumptions in estimating the amount and timing of both principal and interest cash flows expected to be collected on the loans and then applying a market-based discount rate to those cash flows. During evaluation upon acquisition, acquired loans are also classified as either PCD or Non-PCD. Acquired loans are subject to the Company’s ACLL policy upon acquisition. Income

~~For~~Net ~~Non-PCD~~income ~~loans,~~increased ~~the~~by ~~difference~~$10.7 ~~between~~million ~~the~~to ~~fair~~$17.7 ~~value~~million, ~~and~~or ~~unpaid~~$1.96 ~~principal~~per ~~balance~~diluted ofshare, for the ~~loan~~year atended ~~acquisition~~December ~~date~~31, ~~(premium~~2025, compared orto ~~discount)~~$7.0 ismillion, ~~amortized~~ or ~~accreted~~$1.00 ~~into~~per ~~interest~~diluted ~~income~~share, ~~over~~for the ~~life~~same ofperiod ~~the~~in ~~loans~~2024. inReturn ~~accordance~~on ~~with~~average ~~ASC~~assets ~~310-20,~~was ~~Receivables~~0.87% –and ~~Nonrefundable~~return ~~Fees~~on ~~and~~average ~~Other~~equity ~~Costs~~was 10.10% Iffor the ~~acquired~~year ~~performing~~ended ~~loan~~December ~~has~~31, ~~revolving privileges~~2025, itcompared isto ~~accounted~~0.44% ~~for~~and ~~using~~5.33%, ~~the straight-line method; otherwise~~respectively, for the ~~effective~~year ~~interest~~ended ~~method~~December is31, ~~used~~2024.

~~PCD~~The ~~loans~~$10.7 ~~are~~million ~~loans~~increase ~~that~~in ~~have~~net ~~experienced~~income ~~more-than-insignificant~~resulted ~~credit~~from ~~deterioration~~a ~~since origination~~$20.8 ~~PCD~~million ~~loans~~increase ~~are~~in ~~recorded~~net atinterest ~~the~~income, a ~~amount paid~~$5.9 Anmillion ~~ACLL~~decrease isin ~~determined~~merger ~~using~~expenses ~~the~~associated ~~same~~with ~~methodology~~the asTouchstone ~~other~~acquisition, ~~loans~~a ~~held for investment (LHFI)~~$5.0 ~~The~~million decrease ~~sum~~in ofprovision ~~the~~for ~~loan’s~~credit ~~purchase~~losses ~~price~~partially ~~and~~associated ~~ACLL~~with ~~becomes its initial amortized cost basis. The difference between~~ the ~~initial~~acquisition, ~~amortized cost basis~~ and ~~the par value of the loan is~~ a ~~noncredit~~$638 ~~discount~~thousand orincrease ~~premium,~~in ~~which~~noninterest ~~is amortized into interest~~ income. These ~~over~~favorable ~~the~~variances ~~life~~were ofpartially ~~the~~offset ~~loan~~by ~~under ASC 310-20, Receivables – Nonrefundable Fees and Other Costs~~a $12.5 ~~If the loan has revolving privileges~~million, ~~the~~or ~~discount/premium is amortized/accreted using the straight-line method; otherwise~~24%, ~~the~~increase ~~effective~~in ~~interest~~noninterest ~~method~~expense isand a ~~used~~$3.2 ~~Subsequent~~million ~~changes~~increase toin ~~the~~income ~~ACLL~~tax ~~are recorded through provision~~ expense.

~~Goodwill~~27

~~The~~Table ~~Company reviews the carrying value~~ of goodwill at least annually or more frequently if certain impairment indicators exist. In testing goodwill for impairment, the Company first considers qualitative factors to determine whether the existence of events or circumstances lead to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events and circumstances, the Company concludes that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then no further testing would be required and the goodwill of the reporting unit would not be impaired. If the Company elects to bypass the qualitative assessment or if we conclude that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then the fair value of the reporting unit will be compared with its carrying value to determine whether an impairment exists. The Company evaluated goodwill as of June 30, 2024 and determined there was no impairment. Contents

~~Results~~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 ~~Operations~~ this Form 10-K (in thousands, except ratios and per share amounts).

Executive Overview

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	%

~~The~~(1) This performance ratio is a non-GAAP financial measure that the Company’s ~~2024~~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 ~~highlights:~~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.

● The Company completed the acquisition of Touchstone Bankshares, Inc. on October 1. ● Net income available to common shareholders was $7.0 million and diluted earnings per share was $1.00 compared to net income of $9.6 million and diluted earnings per share of $1.53 in 2023. ● Earnings produced a return on average equity of 5.33% for 2024 compared to 8.59% for 2023. ● Period end loans, net, grew $493.1 million in 2024 as compared to 2023. ● Period end deposits grew $570.1 million in 2024 as compared to 2023. ● The 2024 provision for credit losses on loans totaled $7.9 million, compared to $6.(2) ~~million~~All incapital ~~2023.~~ratios ●reported ~~Nonperforming~~are ~~assets as a percentage of total loans were 0.50% at December 31, 2024, compared to 0.70% in 2023. ● The net interest margin increased ten basis points to 3.51%~~ for ~~2024,~~the ~~compared to 3~~Bank.~~41% in 2023.~~

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.

Net income decreased by $2.6 million to $7.0 million, or $1.00 per diluted share, for the year ended December 31, 2024, compared to $9.6 million, or $1.53 per diluted share, for the same period in 2023. Return on average assets was 0.44% and return on average equity was 5.33% for the year ended December 31, 2024, compared to 0.71% and 8.59%, respectively, for the year ended December 31, 2023. 28

~~The~~ Table ~~$2.6 million~~of decrease in net income resulted from a $8.1 million increase in merger expenses associated with the Touchstone acquisition and a $1.7 million increase in provision for credit losses partially associated with the acquisition. These unfavorable variances were partially offset by a $9.0 million, or 21%, increase in net interest income, a $4.6 million, or 39%, increase in noninterest income, and a $1.1 million decrease in income tax expense. Contents

27 Non-GAAP Financial Measures

~~Table~~This report refers to the efficiency ratio, which is computed by dividing noninterest expense, excluding OREO expense, amortization of ~~Contents~~ 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).

The following is selected financial data for the Company for the years ended December 31, 2024 and 2023. 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).

	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	%

As of and for the years ended December 31,
	2024			2023
Results of Operations
Interest and dividend income	$	76,319		$	57,719
Interest expense		23,867			14,306
Net interest income		52,452			43,413
Provision for credit losses		7,850			6,150
Net interest income after provision for credit losses		44,602			37,263
Noninterest income		16,380			11,784
Noninterest expense		52,934			37,242
Income before income taxes		8,048			11,805
Income tax expense		1,082			2,181
Net income	$	6,966		$	9,624
Key Performance Ratios
Return on average assets		0.44	%		0.71	%
Return on average equity		5.33	%		8.59	%
Net interest margin (1)		3.51	%		3.41	%
Efficiency ratio (1)		66.73	%		67.69	%
Dividend payout		60.54	%		39.05	%
Equity to assets		8.28	%		7.97	%
Per Common Share Data
Net income, basic	$	1.00		$	1.54
Net income, diluted		1.00			1.53
Cash dividends		0.605			0.600
Book value at period end		16.48			18.06
Financial Condition
Assets	$	2,010,281		$	1,419,295
Loans, net		1,450,195			957,456
Securities		277,329			303,179
Deposits		1,803,778			1,233,726
Shareholders’ equity		166,531			116,271
Average shares outstanding, diluted		6,971			6,279
Capital Ratios (2)
Leverage		7.95	%		9.31	%
Risk-based capital ratios:
Common equity Tier 1 capital		11.19	%		12.82	%
Tier 1 capital		11.19	%		12.82	%
Total capital		12.34	%		14.05	%

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).

(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.

	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

~~(2) All capital ratios reported are for the Bank.~~ 29

~~For~~ Table ~~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.~~Contents

28 Net Interest Income

~~Table~~Net interest income represents the primary source of ~~Contents~~ 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.

~~Non~~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-~~GAAP~~basis ~~Financial~~points ~~Measures~~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.

~~This~~The ~~report~~increase ~~refers~~in tototal ~~the~~interest ~~efficiency~~income ~~ratio,~~was ~~which~~primarily isattributable ~~computed~~to bya ~~dividing~~$21.7 ~~noninterest expense~~million, ~~excluding~~or ~~OREO expense~~34%, ~~amortization~~increase ofin ~~intangibles, and merger expenses, by the sum of net~~ interest income ~~on a tax-equivalent basis~~ and ~~noninterest~~fees ~~income, excluding (gains)/losses~~ on ~~disposal~~loans. ofThe ~~premises~~increase ~~and~~in ~~equipment,~~interest ~~and~~income ~~securities~~on ~~gains.~~loans ~~This~~was isattributable to a ~~non~~12-~~GAAP~~basis ~~financial~~point ~~measure~~increase ~~that~~in the ~~Company~~yield ~~believes~~on ~~provides~~loans ~~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~~31.5% ~~The~~increase ~~Company,~~ in ~~referring~~average toloan ~~its~~balances ~~net~~compared ~~income, is referring~~ to ~~income under GAAP. The components of~~ the ~~efficiency~~prior ~~ratio~~year ~~calculation~~due ~~are~~to ~~summarized in~~ the ~~following~~acquisition ~~table~~of ~~(dollars in thousands)~~Touchstone.

	Efficiency Ratio
	2024			2023
Total noninterest expense (GAAP)	$	52,934		$	37,242
Subtract: other real estate (gain) loss and expense, net		(15	)		199
Subtract: amortization of intangibles		(461	)		(18	)
Subtract: loss on disposal of premises and equipment, net		(47	)		—
Subtract: merger expenses		(8,107	)		—
Adjusted non-interest expense (non-GAAP)	$	44,304		$	37,423
Tax-equivalent net interest income (non-GAAP)	$	52,821		$	43,738
Total noninterest income (GAAP)		16,380			11,784
(Gain) loss on disposal of premises and equipment		—			(47	)
Gain on sale of other investment		—			(186	)
Bargain purchase gain from acquisition		(2,920	)		—
Securities losses (gains), net		115			—
Adjusted income for efficiency ratio (non-GAAP)	$	66,396		$	55,289
Efficiency ratio (non-GAAP)		66.73	%		67.69	%

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.

~~This~~The ~~report also refers to~~ net interest margin, ~~which~~was is3.88% ~~calculated~~for bythe ~~dividing~~year ~~tax~~ended December ~~equivalent~~31, ~~net~~2025, ~~interest~~compared ~~income~~to bythe ~~total average earning assets~~3.51% ~~Because~~for athe ~~portion~~prior ofyear ~~interest~~as ~~income earned by~~ the ~~Company~~increase isin ~~nontaxable,~~ the ~~tax~~yield ~~equivalent~~on ~~net~~earning ~~interest~~assets ~~income~~exceeded isthe ~~considered~~increase in ~~the~~cost ~~calculation~~ of ~~this~~funds ~~ratio~~during 2025. ~~Tax~~Net ~~equivalent~~accretion ~~net interest~~ income isrelated ~~calculated by adding the tax benefit realized from interest income that is nontaxable~~ to ~~total~~acquisition ~~interest~~accounting ~~income~~was ~~then subtracting total interest expense~~$1.1 ~~The tax rate utilized in calculating the tax benefit for both 2024 and 2023 is 21%. The reconciliation of tax equivalent net interest income~~million, ~~which~~or ~~is not~~ a ~~measurement~~six-basis ~~under~~point ~~GAAP,~~incremental increase to the net interest ~~income, is reflected in the table below (in thousands)~~margin.

	Reconciliation of Net Interest Income to Tax-Equivalent Net Interest Income
	2024			2023
GAAP measures:
Interest income – loans	$	63,483		$	49,293
Interest income – investments and other		12,836			8,426
Interest expense – deposits		(20,964	)		(13,660	)
Interest expense – federal funds purchased		(1	)		—
Interest expense – subordinated debt		(603	)		(277	)
Interest expense – junior subordinated debt		(270	)		(271	)
Interest expense – other borrowings		(2,029	)		(98	)
Total net interest income	$	52,452		$	43,413
Non-GAAP measures:
Tax benefit realized on non-taxable interest income - loans	$	43		$	—
Tax benefit realized on non-taxable interest income - municipal securities		326			325
Total tax benefit realized on non-taxable interest income	$	369		$	325
Total tax-equivalent net interest income	$	52,821		$	43,738

29Table of Contents

~~Table~~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 ~~Contents~~ 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).

Net Interest Income

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	%

~~Net~~(1) ~~interest~~Income ~~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,~~yields ~~exceeds~~are ~~interest~~reported ~~expense~~ on ~~interest-bearing~~a ~~liabilities, including deposits, other borrowings, subordinated debt, and junior subordinated debt. Changes in the volume and mix of interest~~taxable-~~earning~~equivalent ~~assets~~basis ~~and~~assuming ~~interest-bearing~~a ~~liabilities,~~federal astax ~~well~~rate ~~as their respective yields and rates, are the components that impact the level~~ of ~~net interest income~~21%. The ~~net interest margin is calculated by dividing~~ tax-equivalent ~~net~~adjustment ~~interest~~was ~~income~~$367 bythousand ~~average earning assets. The provision~~ for ~~credit losses~~2025, ~~noninterest income, noninterest expense~~ and ~~income~~$369 ~~tax~~thousand ~~expense~~for ~~are the other components that determine net income~~2024. Noninterest income and expense primarily consists of income from service charges on deposit accounts, ATM and check card income, wealth management income, income from other customer services, income from bank owned life insurance, and general and administrative expenses.

~~Net~~(2) ~~interest~~Loans ~~income~~placed ~~increased~~on ~~$9.0~~a million, or 21%, to $52.5 million for 2024 compared to the prior year. Total interest income increased by $18.6 million and was partially offset by total interest expense, which increased by $9.6 million. The net interest margin increased by 10non-~~basis~~accrual ~~points~~status toare ~~3.51%~~reflected ~~and average earnings assets increased by $224.0 million, or 17%, offset by a $186.2 million, or 22%, increase~~ in ~~average interest-bearing liabilities, in each case primarily related to~~ the ~~acquisition of Touchstone~~balances.

The increase in total interest income was primarily attributable to a $14.2 million, or 29%, increase in interest income and fees on loans. The increase in interest income on loans was attributable to a 52-basis point increase in the yield on loans and a 17% increase in average loan balances compared to the prior year in part due to the acquisition of Touchstone. 31

~~The~~ Table increase in total interest expense was attributable to a $7.3 million increase in interest expense on deposits. The higher interest expense on deposits resulted from a 51-basis point increase in the cost of interest-bearing deposits and a 17% increase in average interest-bearing deposits in part due to the acquisition of Touchstone. The increase in the cost of deposits was also impacted by a change in the composition of the deposit portfolio as lower cost deposit balances decreased, while higher cost deposit balances increased.Contents

The net interest margin was 3.51% for the year ended December 31, 2024, compared to the 3.41% for the prior year as the increase in the yield on earning assets exceeded the increase in cost of funds during 2024. Net accretion income related to acquisition accounting was $408 thousand, or a three-basis point incremental increase to the net interest margin.

	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

30 Provision for Credit Losses

~~Table~~Provision for credit losses totaled $2.9 million in 2025, compared to a provision for credit losses of ~~Contents~~ $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.

~~The~~For ~~following~~the ~~table~~year ~~provides~~ended ~~information~~December on31, ~~average~~2025, ~~interest-earning~~the ~~assets~~provision ~~and interest-bearing liabilities~~ for ~~the~~credit ~~years~~losses ~~ended~~on ~~December~~loans ~~31,~~of ~~2024~~$2.8 ~~and~~million ~~2023 as~~and ~~well~~net ascharge ~~amounts~~offs ~~and rates~~ of ~~tax~~$4.4 ~~equivalent~~million ~~interest~~resulted ~~earned~~in ~~and~~a ~~interest~~$1.7 ~~paid~~million ~~(dollars~~decrease in ~~thousands)~~the allowance for credit losses on loans. The ~~volume~~$4.4 million ~~and~~of ~~rate~~net ~~analysis~~charge-offs ~~table~~included ~~analyzes~~$1.3 ~~the~~million ~~changes~~of inloans ~~net~~purchased ~~interest~~through ~~income~~a ~~for~~third-party ~~the~~lending ~~periods~~program ~~broken~~and ~~down~~$650 bythousand ~~their~~of ~~rate~~related ~~and~~unamortized ~~volume~~purchase ~~components~~premiums ~~(in~~on ~~thousands)~~the loans.

Average Balances, Income and Expense, Yields and Rates (Taxable Equivalent Basis)
	Years Ending December 31,
	2024								2023
	Average Balance			Interest Income/Expense		Yield/Rate			Average Balance			Interest Income/Expense		Yield/Rate
Assets
Interest-bearing deposits in other banks	$	124,407		$	6,490		5.22	%	$	36,050		$	1,809		5.02	%
Securities:
Taxable		221,611			4,733		2.14	%		252,470			5,286		2.09	%
Tax-exempt (1)		53,289			1,547		2.90	%		53,524			1,545		2.89	%
Restricted		2,522			202		8.01	%		1,923			111		5.79	%
Total securities		277,422			6,482		2.34	%		307,917			6,942		2.25	%
Loans: (2)
Taxable		1,096,312			63,320		5.78	%		937,013			49,293		5.26	%
Tax-exempt (1)		2,561			206		8.04	%		—			—		0.00	%
Total loans		1,098,873			63,526		5.78	%		937,013			49,293		5.26	%
Federal funds sold		4,244			189		4.44	%		—			—		0.00	%
Total earning assets		1,504,946			76,687		5.10	%		1,280,980			58,044		4.53	%
Less: allowance for credit losses on loans		(13,381	)							(8,994	)
Total nonearning assets		105,585								91,353
Total assets	$	1,597,150							$	1,363,339
Liabilities and Shareholders’ Equity
Interest-bearing deposits:
Checking	$	278,558		$	4,870		1.75	%	$	269,551		$	4,538		1.68	%
Money market accounts		294,818			8,265		2.80	%		219,655			4,882		2.22	%
Savings accounts		160,795			292		0.18	%		173,075			211		0.12	%
Certificates of deposit:
Less than $250		187,664			5,656		3.01	%		84,387			1,641		1.94	%
Greater than $250		46,846			1,668		3.56	%		82,184			2,275		2.77	%
Brokered deposits		5,080			213		4.20	%		3,061			113		3.70	%
Total interest-bearing deposits		973,761			20,964		2.15	%		831,913			13,660		1.64	%
Federal funds purchased		2			—		5.24	%		15			1		5.90	%
Subordinated debt		8,889			603		6.78	%		4,997			277		5.54	%
Junior subordinated debt		9,279			270		2.91	%		9,279			271		2.92	%
Other borrowings		42,486			2,029		4.78	%		1,973			97		4.90	%
Total interest-bearing liabilities		1,034,417			23,866		2.31	%		848,177			14,306		1.69	%
Noninterest-bearing liabilities
Demand deposits		422,981								397,932
Other liabilities		9,037								5,147
Total liabilities		1,466,435								1,251,256
Shareholders’ equity		130,715								112,083
Total liabilities and shareholders’ equity	$	1,597,150							$	1,363,339
Net interest income				$	52,821							$	43,738
Interest rate spread							2.79	%							2.84	%
Cost of funds							1.64	%							1.15	%
Interest expense as a percent of average earning assets							1.59	%							1.12	%
Net interest margin							3.51	%							3.41	%

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.

~~(1)~~For ~~Income~~the ~~and~~year ~~yields~~ended ~~are~~December ~~reported~~31, 2024, the provision for credit losses on aloans ~~taxable-equivalent~~of ~~basis~~$7.8 ~~assuming~~million, the aallowance ~~federal~~for ~~tax~~credit ~~rate~~losses on acquired PCD loans of ~~21%~~$386 thousand, and net charge offs of $3.8 ~~The~~million ~~tax-equivalent~~resulted ~~adjustment~~in ~~was~~a $~~368~~4.4 ~~thousand~~million increase in the allowance for ~~2024,~~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 $~~325~~1.1 ~~thousand~~million ~~for~~of ~~2023~~related unamortized purchase premiums on the loans.

~~(2)~~Noninterest ~~Loans placed on a non-accrual status are reflected in the balances.~~Income

31 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.

~~Table~~Noninterest ~~of Contents~~ Expense

	Volume and Rate
	Years Ending December 31,
	2024
	Volume Effect			Rate Effect			Change in Income/Expense
Interest-bearing deposits in other banks	$	4,605		$	75		$	4,680
Loans, taxable		8,870			5,158			14,028
Loans, tax-exempt		206			—			206
Securities, taxable		(688	)		135			(553	)
Securities, tax-exempt		14			(11	)		3
Securities, restricted		41			50			91
Federal funds sold		189			—			189
Total earning assets	$	13,237		$	5,407		$	18,644
Checking	$	147		$	184		$	331
Money market accounts		1,918			1,465			3,383
Savings accounts		(13	)		95			82
Certificates of deposits:
Less than $250		2,768			1,248			4,016
Greater than $250		(1,804	)		1,196			(608	)
Brokered deposits		83			17			100
Federal funds purchased		(1	)		—			(1	)
Subordinated debt		253			73			326
Junior subordinated debt		—			(2	)		(2	)
Other borrowings		1,935			(2	)		1,933
Total interest-bearing liabilities	$	5,286		$	4,274		$	9,560
Change in net interest income	$	7,951		$	1,133		$	9,084

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%.

~~Provision for Credit Losses~~ 32

~~Provision~~ Table ~~for credit losses totaled $7.9 million in 2024, compared to a provision for credit losses~~ of $6.2 million for the prior year. The provision was comprised of a $7.8 million provision for credit losses on loans which includes $3.8 million Day-One provision on Non-PCD loans purchased from Touchstone, a $73 thousand provision for credit losses on unfunded commitments, and a $12 thousand recovery of credit losses on held-to-maturity securities.Contents

~~For~~ Income 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. Taxes

~~The~~ Income ~~general~~tax ~~reserve~~expense ~~component~~increased of$3.2 million during the ~~ACLL~~year ~~increased~~ended December ~~$4.1~~31, ~~million~~2025 compared ~~and~~to the ~~specific~~prior ~~reserve~~year. ~~component~~The Company’s income tax expense differed from the amount of income tax determined by applying the ~~ACLL~~U.S. ~~increased~~federal ~~$374~~income ~~thousand~~tax rate to pretax income for the years ended December 31, 2025 and 2024 . The difference was a result of an increase in ~~the~~net ~~general~~permanent ~~reserve~~tax ~~was~~deductions, ~~attributable~~primarily tocomprised ~~loan~~of ~~growth.~~tax-exempt ~~Calculated~~bargain ~~loss~~purchase ~~rates~~gain, interest ~~were~~income ~~lower~~and asincome ~~were~~from ~~the~~bank ~~inherent~~owned ~~risks~~life ininsurance. ~~the~~A ~~loan~~more ~~portfolio~~detailed ~~through~~discussion ~~adjustments~~of tothe ~~qualitative~~Company’s ~~risk~~tax ~~factors.~~calculation ~~The~~is ~~specific~~contained ~~reserve~~in ~~increased~~Note by12 ~~$374~~to ~~thousand~~the ~~from~~Consolidated ~~individually~~Financial ~~evaluated~~Statements ~~loan~~included ~~relationships~~in this Form 10-K.

~~For~~Financial the year ended December 31, 2023, the provision for credit losses on loans of $6.0 million, the adjustment for the adoption of ASU 2016-13 of $2.1 million, and net charge offs of $3.6 million resulted in a $4.5 million increase in the allowance for credit losses on loans. The $3.6 million of net charge-offs included $1.7 million of loans purchased through a third-party lending program and $830 thousand of related unamortized purchase premiums on the loans. Condition

~~Noninterest Income~~General

~~Noninterest~~Total ~~income~~assets ~~totaled~~increased $1627.47 million ~~for~~during the year, ~~which~~and ~~was~~totaled ~~a increase of~~ $42.60 ~~million,~~billion orat December ~~39%~~31, ~~compared to $11~~2025.8 ~~million for the prior year.~~ The increase was ~~primarily~~attributable ato ~~result of~~ a ~~bargain purchase gain of~~ $253.97 million ~~related~~increase toin ~~the~~securities ~~Touchstone~~available ~~acquisition and~~for asale. ~~recovery~~This onincrease awas ~~purchased~~offset ~~loan~~by ofa $115.2 million~~. Noninterest~~ ~~income~~decrease ~~categories~~in ~~with~~loans, ~~moderate~~net ~~increases~~of ~~over~~allowance ~~the~~for ~~prior~~credit ~~year included brokered mortgage fees which increased $133 thousand~~losses, ~~or 112%, fees for other customer services which increased~~ $~~196~~6.9 ~~thousand, or 25%, wealth management fees~~million ~~which~~decrease in ~~increased~~securities ~~$497~~held ~~thousand,~~to ~~or 16%~~maturity, and ~~service charges on deposits~~a ~~which increased~~ $~~342 thousand, or 12%~~4. ~~Categories~~1 ~~that~~million ~~decreased~~decrease ~~over~~in ~~the~~cash ~~prior year included gain on sale of other investment which decreased $146 thousand, or 78%,~~ and ~~ATM~~due ~~and~~from ~~check card fees which decreased $144 thousand, or 4%~~banks.

~~Noninterest~~Total ~~Expense~~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.

~~Noninterest~~Total ~~expense~~shareholders' equity increased $1519.7 million, orto ~~42%,~~$186.2 ~~for~~million ~~the~~at ~~year ended~~ December 31, ~~2024~~2025, compared to ~~the prior year. The increase was primarily a result of merger expenses of~~ $8166.15 million ~~and~~at ~~core~~December ~~deposit~~31, ~~intangible amortization expense of $443 thousand~~2024. ~~Categories~~The ~~with~~increase ~~moderate~~was ~~increases~~primarily ~~over~~attributable ~~the~~to ~~prior year included salaries and employee benefits which increased~~ a $412.10 million, orincrease ~~19%,~~in ~~equipment~~retained ~~expense~~earnings ~~which increased $754 thousand, or 32%, legal~~ and ~~professional expense which increased~~ $~~346~~6.5 ~~thousand,~~million ordecrease ~~21%,~~in ~~occupancy~~accumulated ~~expense which increased $419 thousand, or 19%, FDIC assessment increased by $227 thousand, or 36%, and~~ other ~~operating~~comprehensive ~~expense which increased $706 thousand, or 16%~~loss. Each of these line items included the operating expenses of Touchstone for the last three months of 2024. Other operating expense increased from higher recruiting expense, directors fees, card cash expense, education and training, loan collection expense, item processing expense, and courier and armored services.

~~The Company estimates that it will incur additional pre-tax merger related expenses of approximately $4.2 million during the first quarter of 2025.~~Loans

32 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.

~~Table~~The loan portfolio includes loans that were acquired through business combinations. Loans acquired through business combinations included unamortized discounts, net of ~~Contents~~ 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.

~~Income~~Loans ~~Taxes~~ 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.

~~Income~~Loans ~~tax expense~~ decreased $116.19 million ~~during~~to ~~the~~$1.4 billion ~~year~~at ~~ended~~ December 31, ~~2024~~ 2025, compared to ~~the prior year~~$1.5 ~~The~~billion ~~Company’s~~at ~~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 year ended~~ December 31, 2024 ~~and 2023~~. ~~The~~Other ~~difference~~real ~~was~~estate aloans ~~result~~increased ofby an$24.8 ~~increase~~million, inconstruction ~~net~~and ~~permanent~~land ~~tax~~development ~~deductions,~~loans ~~primarily~~increased ~~comprised~~by of$3.9 ~~tax-exempt~~million, ~~bargain purchase gain~~commercial, ~~interest~~ ~~income~~ and ~~income~~industrial ~~from~~loans ~~bank~~decreased ~~owned~~by ~~life insurance~~$23.4 Amillion, ~~more~~residential ~~detailed~~real ~~discussion~~estate ofloans ~~the~~decreased ~~Company’s~~by ~~tax~~$19.9 ~~calculation~~million, isand ~~contained~~consumer inand ~~Note~~other 12loans todecreased ~~the~~by ~~Consolidated~~$2.3 ~~Financial Statements included in this Form 10-K~~million.

~~Financial Condition~~ 33

~~General~~ Table of Contents

~~Total~~The ~~assets~~following ~~increased~~table ~~$591.0~~sets ~~million~~forth ~~during~~ the ~~year~~maturities ~~and~~of ~~totaled~~the ~~$2.0~~loan ~~billion~~portfolio at December 31, ~~2024. The increase was primarily attributable to a $493.1 million increase in loans, net of allowance, a $68.0 million increase in interest-bearing deposits in banks, and a~~2025 ~~$11.0 million increase~~ (in ~~securities~~ available for sale, which were partially offset by a $38.5 million decrease in securities held to maturity. The increase in the loan portfolio was impacted by $479.7 million of loans acquired on October 1, 2024, through the acquisition of Touchstone.thousands):

Total liabilities increased $540.7 million during the year and totaled $1.8 billion at December 31, 2024. The increase was attributable to the acquisition of Touchstone, on October 1, 2024, which added total liabilities of $614.6 million, and growth of the Bank's deposit portfolio. Total deposits increased by $570.1 million, which included $555.4 million in total deposits acquired from Touchstone. Noninterest-bearing demand deposits increased $140.9 million, savings and interest-bearing deposits increased $261.6 million, and time deposits increased $167.6 million. Other borrowings decreased $50.0 million as the Company repaid borrowed funds from the Federal Reserve Bank through their Bank Term Funding Program.

	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

~~Total~~Asset shareholders' equity increased $50.3 million to $166.5 million at December 31, 2024, compared to $116.3 million at December 31, 2023. The increase was primarily attributable to the issuance of common stock in the amount of $3.3 million and surplus of $43.5 million in the acquisition of Touchstone. Other notable increases include a $2.7 million increase in retained earnings. Quality

~~Loans~~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.

~~The~~Non-performing ~~Bank~~assets istotaled an$4.7 ~~active~~million ~~lender with a loan portfolio that includes commercial~~ and ~~residential~~$7.0 ~~real~~million ~~estate~~at ~~loans,~~December ~~commercial loans~~31, ~~consumer~~2025 and ~~loans~~2024, ~~construction~~representing ~~and~~approximately ~~land~~0.23% ~~development loans,~~ and ~~home equity loans~~0.35% ~~The~~of ~~Bank’s~~total ~~lending activity is concentrated on individuals~~assets, ~~and small and medium~~respectively. Non-~~sized~~performing ~~businesses primarily~~assets inconsisted ~~its~~of ~~market areas~~$4.7 Asmillion aand ~~provider~~$7.0 million of ~~community~~non-~~oriented~~accrual ~~financial~~loans ~~services,~~at ~~the~~December ~~Bank~~31, ~~does~~2025 and ~~not~~2024, ~~typically attempt to further geographically diversify its loan portfolio by undertaking significant lending activity outside its market areas~~respectively.

~~The~~At ~~Bank~~December ~~actively~~31, ~~participated~~2025, ~~as a lender in the U~~56.S.2% ~~Small~~of ~~Business~~non-performing ~~Administration’s~~assets ~~(SBA)~~were ~~Paycheck~~commercial ~~Protection~~and ~~Program~~industrial ~~(PPP)~~loans, to42.9% ~~support~~were ~~local~~residential ~~small~~real ~~businesses~~estate loans, and ~~non-profit~~1.0% ~~organizations~~were byconstruction ~~providing forgivable~~ loans. ~~Loan~~Non-performing ~~fees~~assets ~~received~~could ~~from~~increase ~~the~~due ~~SBA~~to ~~are accreted by~~ the ~~Bank~~deterioration ~~into income evenly over the life~~ of ~~the~~other loans, ~~net~~identified ofby ~~loan~~management ~~origination~~as ~~costs,~~potential ~~through~~problem ~~interest and fees on~~ loans. ~~PPP~~Other ~~loans~~potential ~~totaled~~problem ~~$66~~loans ~~thousand~~are ~~and~~defined ~~$128~~as ~~thousand~~performing atloans ~~December~~that ~~31,~~possess ~~2024~~certain ~~and 2023~~risks, ~~respectively;~~including ~~with~~the ~~$66~~borrower’s ~~thousand~~ability ~~scheduled~~ to ~~mature~~pay inand the ~~first~~collateral ~~and~~value ~~second~~securing ~~quarters~~the ofloan, ~~2026.~~that ~~The~~management ~~Company~~has ~~believes~~identified ~~these~~that ~~loans~~may ~~will~~result ~~ultimately~~in bethe ~~forgiven~~loans ~~and~~not being repaid ~~by the SBA~~ in accordance with ~~the~~their terms. ofOther ~~the~~potential ~~program.~~problem Itloans istotaled ~~the~~$6.4 ~~Company’s~~million ~~understanding~~and ~~that~~$9.1 ~~loans~~million at ~~funded~~December ~~through~~31, ~~the~~2025 and ~~PPP~~December ~~program~~31, ~~are~~2024, ~~fully~~respectively. ~~guaranteed~~The byamount ~~the~~of ~~U.S.~~other ~~government.~~potential ~~Should~~problem ~~those~~loans ~~circumstances~~in ~~change,~~future ~~the~~periods ~~Company~~may ~~could~~ be ~~required~~dependent toon ~~establish~~economic ~~additional~~conditions ~~ACLL~~and ~~through~~other ~~additional~~factors ~~provision~~influencing ~~for~~a ~~credit~~customers’ ~~losses~~ability ~~charged~~ to ~~earnings~~meet their debt requirements.

~~The~~There ~~loan~~were ~~portfolio~~no ~~includes~~ loans ~~that~~greater ~~were~~than ~~acquired~~90 ~~through~~days ~~business~~past ~~combinations.~~due ~~Loans~~and ~~acquired~~still ~~through~~accruing ~~business~~at ~~combinations~~December ~~included unamortized discounts~~31, ~~net~~2025. There ofwere ~~unamortized premiums totaling~~ $~~14.3~~365 ~~million~~thousand in ~~and~~loans ~~$1.9~~greater ~~million,~~than as90 ofdays ~~December~~past ~~31,~~due ~~2024~~ and ~~2023,~~still ~~respectively,~~accruing ~~which~~at ~~are~~December ~~amortized~~31, ~~over the life of the loans~~2024.

~~Loans~~ The ~~purchased~~ACLL ~~from~~represents amanagement’s ~~third-party~~analysis ~~that~~of ~~originated~~the existing loan portfolio and ~~serviced~~related ~~loans~~credit risks. The provision for credit losses is based upon management’s current estimate of the amount required to ~~health~~maintain ~~care~~an ~~professionals~~adequate ACLL reflective of the risks in the loan portfolio. The allowance for credit losses on loans totaled $1914.07 million asat December of31, 2025 and $16.4 million at December 31, 2024 , ~~which~~representing ~~included~~1.02% ~~unamortized~~and ~~premiums~~1.12% ~~totaling~~of ~~$5.8~~total ~~million~~loans, ~~compared~~respectively. toThe ~~loans~~Company ~~totaling~~determined ~~$24.6~~that ~~million~~the ashistorical loss analysis and the qualitative adjustment factors that established the collectively evaluated reserve component of the ACLL were appropriate at December 31, ~~2023,~~2025 . The collectively ~~which~~evaluated reserve ~~included~~decreased $395 ~~unamortized~~thousand ~~premiums~~and ~~totaling~~the individually evaluated reserve component of the ACLL decreased $71.93 million.

~~Loans~~For ~~increased~~further ~~$497.6~~discussion ~~million~~regarding ~~to $1.5 billion at December 31, 2024, compared to $969.4 million at December 31, 2023 in large part due to~~ the ~~Touchstone acquisition. Other real estate loans increased by $224.9 million~~ACLL, ~~residential~~see ~~real~~“Provision ~~estate~~for ~~loans increased by $203.2 million, construction and land development loans increased by $31.8~~Credit ~~million,~~Losses” ~~commercial, and industrial loans increased by $28~~above.~~3 million, and consumer and other loans increased by $9.4 million.~~

33 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.

~~Table~~Loans ofindividually ~~Contents~~ 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.

~~The following table sets forth the maturities of the loan portfolio at December 31, 2024 (in thousands):~~ 34

	Maturity/Repricing Schedule of Loans Held for Investment
	December 31, 2024
	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	$	22,992	$	11,621	$	14,848	$	23,207	$	315	$	72,983
1 to 5 years		11,765		18,021		28,690		7,065		2,269		67,810
5 to 15 years		21,069		142,070		213,707		3,718		—		380,564
After 15 years		4,417		145,840		130,101		2,508		—		282,866
Fixed Rate:
Within 1 year		5,507		8,310		23,185		7,516		4,223		48,741
1 to 5 years		8,471		54,752		203,896		82,022		10,743		359,884
5 to 15 years		6,706		85,299		57,075		13,912		3,876		166,868
After 15 years		3,553		81,663		660		1,385		27		87,288
	$	84,480	$	547,576	$	672,162	$	141,333	$	21,453	$	1,467,004

Table of Contents

~~Asset~~Management ~~Quality~~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).

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 $53 thousand and $0 in assets classified as OREO at December 31, 2024 and 2023, respectively.

	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	%

~~Non-performing~~The ~~assets~~following ~~totaled~~table ~~$7.0~~shows ~~million~~the ~~and~~balance ~~$6.8 million at December 31, 2024 and 2023, representing approximately 0.35% and 0.48%~~ of ~~total~~the ~~assets,~~Bank’s ~~respectively. Non-performing~~ACLL ~~assets~~allocated ~~consisted~~to ofeach ~~$7.0~~major ~~million~~category of ~~non-accrual~~ loans atand ~~December~~the ~~31,~~ratio ~~2024. Non-performing~~of ~~assets~~related ~~consisted~~outstanding ofloan ~~$6.8~~balances ~~million~~to oftotal ~~non-accrual~~ loans at(dollars ~~December~~in ~~31, 2023~~thousands).

At December 31, 2024, 68% of non-performing assets were commercial and industrial loans, 31% were residential real estate loans, and 1% 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 $9.1 million and $287 thousand at December 31, 2024 and December 31, 2023, 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.

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	%

There were $365 thousand in loans greater than 90 days past due and still accruing at December 31, 2024. There were $524 thousand in loans greater than 90 days past due and still accruing at December 31, 2023. 35

~~The~~ Table ~~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 $16.4 million at Contents December 31, 2024 and $12.0 million at December 31, 2023 , representing 1.12% and 1.24% 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, 2024 . The allowance for credit losses on loans as a percentage of total loans decreased to 1.12% at December 31, 2024 compared to 1.24% at December 31, 2023. While the collectively evaluated reserve increased $4.1 million and the individually evaluated reserve component of the ACLL increased $374 thousand, the increased reserve was impacted by an increase in total loans of $497.6 million, or 51.3%, during the same period.

~~For~~The ~~further~~following ~~discussion~~table ~~regarding~~provides information on the ~~ACLL,~~Bank’s ~~see~~non-performing ~~“Provision~~assets ~~for~~at ~~Credit Losses”~~the ~~above~~dates indicated (dollars in thousands).

Recoveries of credit losses of $682 thousand and $360 thousand were recorded in the 1-4 family residential and consumer and other loans classes during the year ended December 31, 2024. 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 $5.0 million in the construction and land development, other real estate, 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.

	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	%

~~Loans~~The ~~individually~~following ~~evaluated~~table ~~for~~summarizes ~~impairment totaled~~the ~~$7.0 million~~Company's ~~and $6.8 million at December 31, 2024 and 2023, respectively. The related allowance for~~ credit ~~losses required~~ratios ~~for~~on ~~these~~a ~~loans~~consolidated ~~totaled~~basis ~~$3.1~~as ~~million~~of ~~and $2.7 million at~~ December 31, ~~2024 and~~2025 ~~December 31, 2023, respectively.~~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	%

~~Table~~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 ~~Contents~~ 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.

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).Securities

	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, 2023:
Balance at beginning of year	$	546		$	1,108		$	3,609		$	1,874		$	309		$	7,446
Adjustment to allowance for adoption of ASU 2016-13		(313	)		1,409			1,702			(387	)		(225	)		2,186
Charge-offs		—			(59	)		(34	)		(3,452	)		(448	)		(3,993	)
Recoveries		—			47			14			145			212			418
Provision for (recovery of) credit losses		79			654			(593	)		5,526			251			5,917
Balance at end of year	$	312		$	3,159		$	4,698		$	3,706		$	99		$	11,974
Average loans	$	49,950		$	337,278		$	427,094		$	112,822		$	9,868		$	937,012
Ratio of net (recoveries) charge-offs to average loans		0.00	%		0.00	%		0.00	%		2.93	%		2.39	%		0.38	%
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		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	%

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 ~~following~~Company ~~table~~evaluated ~~shows~~securities ~~the~~available ~~balance~~for ofsale ~~the~~in ~~Bank’s~~an ~~ACLL~~unrealized ~~allocated~~loss toposition ~~each~~for ~~major~~credit ~~category~~related ofimpairment ~~loans~~and determined that no allowance for credit losses was necessary at December 31, 2025 and 2024. At December 31, 2025, the ~~ratio~~allowance offor ~~related~~credit ~~outstanding~~losses ~~loan~~on ~~balances~~held to ~~total~~maturity ~~loans~~securities ~~(dollars~~was in$83 ~~thousands)~~thousand. There was a $95 thousand allowance for credit losses on held to maturity securities at December 31, 2024.

Allocation of Allowance for Credit Losses
	At December 31,
	2024			2023
Allocation of Allowance for Credit Losses:
Real estate loans:
Construction and land development	$	585		$	312
Secured by 1-4 family		4,266			3,159
Other real estate loans		7,462			4,698
Commercial and industrial		3,927			3,706
Consumer and other loans		160			99
Total allowance for credit losses	$	16,400		$	11,974
Ratios of loans to total period-end loans:
Real estate loans:
Construction and land development		5.8	%		5.4	%
Secured by 1-4 family		37.3	%		35.5	%
Other real estate loans		45.8	%		46.1	%
Commercial and industrial		9.6	%		11.7	%
Consumer and other loans		1.5	%		1.2	%
		100.0	%		100.0	%

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.

3536

Table of Contents

The following table ~~provides~~shows ~~information~~the onmaturities ~~the~~of ~~Bank’s~~debt ~~non-performing~~and ~~assets~~restricted securities at ~~the~~amortized ~~dates~~cost ~~indicated~~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.

	Non-performing Assets
	Securities Portfolio Maturity Distribution/Yield Analysis
	At December 31,
	At December 31, 2025
	2024			2023
	Less than One Year			One to Five Years			Five to Ten Years			Greater than Ten Years and Equity Securities			Total
Non-accrual loans	$	6,971		$	6,763
U.S. Treasury securities
Other real estate owned		53			—
Amortized cost	$	23,877		$	23,579		$	—		$	—		$	47,456
Total non-performing assets	$	7,024		$	6,763
Market value	$	23,659		$	23,556		$	—		$	—		$	47,215
Loans past due 90 days accruing interest		365			524
Weighted average yield		2.68	%		3.50	%		—	%		—	%		3.09	%
Total non-performing assets and past due loans	$	7,389		$	7,287
U.S. agency and mortgage-backed securities
Non-performing assets to period end loans		0.50	%		0.75	%
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	%

~~The~~(1) ~~following~~Yields ~~table~~on ~~summarizes~~tax-exempt ~~the~~securities ~~Company's~~have ~~credit~~been ~~ratios~~calculated on a ~~consolidated~~tax-equivalent basis asusing ~~of December~~the ~~31,~~federal ~~2024~~corporate ~~and 2023~~income tax rate of 21%. The weighted average yield is calculated based on the relative amortized costs of the securities.

	Consolidated Credit Ratios
	December 31, 2024
	2024			2023
Total Loans	$	1,466,595		$	969,430
Nonaccrual loans	$	6,971		$	6,763
Allowance for credit losses (ACL)	$	16,400		$	11,974
Nonaccrual loans to total loans		0.48	%		0.70	%
ACL to total loans		1.12	%		1.24	%
ACL to nonaccrual loans		235.26	%		177.05	%

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.

~~The~~As 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, ~~2024~~2025, ~~loans purchased from~~ the ~~finance~~Company ~~company~~did ~~totaled~~not ~~$19.0~~own ~~million,~~securities ~~which was comprised~~ of ~~$13.2~~any ~~million~~issuer of loan balances and unamortized premiums totaling $5.8 million. The Company determined that $2.6 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~~which ~~losses on loans. The remaining $16.4 million of loans were considered performing and were included in~~ the ~~calculation~~aggregate ofbook ~~the~~value ~~collectively evaluated reserve component~~ of the ~~allowance~~securities ~~for credit losses. Premiums are amortized over the life~~ of ~~the~~such ~~loans~~issuer ~~using~~exceeded ~~the~~twelve ~~effective~~percent ~~interest method. On December 31, 2024 and 2023, there were a total~~ of ~~155 and 172 loans, respectively, purchased from the finance company included in the Company~~shareholders’s ~~loan portfolio with a weighted average maturity of 7~~equity.~~0 and 7.5 years, respectively.~~

~~Securities~~ 37

~~Securities~~ Table ~~totaled $277.3 million at December 31, 2024, a decrease~~ of $25.9 million, or 8.5%, from $303.2 million at the end of 2023. 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, 2024, 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 $62 thousand and $61 thousand at December 31, 2024 and 2023, respectively. Gross unrealized losses in the available for sale portfolio totaled $22.1 million and $20.7 million at December 31, 2024 and 2023, respectively. Gross unrealized gains in the held to maturity portfolio totaled $95 thousand and $107 at December 31, 2024 and 2023, respectively. Gross unrealized losses in the held to maturity portfolio totaled $11.0 million and $10.8 million at December 31, 2024 and 2023, respectively. The change in the unrealized gains and losses of investment securities from December 31, 2023 to December 31, 2024 was related to changes in market interest rates and was not related to credit concerns of the issuers.Contents

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, 2024 and 2023. At December 31, 2024, the allowance for credit losses on held to maturity securities was $95 thousand. There was a $107 thousand allowance for credit losses on held to maturity securities at December 31, 2023.Deposits

OnAt ~~September~~December 131, ~~2022~~2025, ~~the~~deposits ~~Bank~~totaled ~~transferred 24 securities designated as available for sale with a combined book value of~~ $821.~~2 million~~8 billion, ~~market~~decreasing ~~value~~by of $~~74.~~4 ~~million, and unrealized loss of $7~~.82 million, tofrom 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 $1.08 billion ~~million,~~at ~~or $791 thousand net of tax, for the year ended~~ December 31, 2024. At ~~The~~December ~~securities~~31, ~~selected~~2025, ~~for~~noninterest-bearing ~~transfer~~demand ~~had~~deposits, ~~larger~~savings ~~potential~~and ~~decreases in their fair market values in higher~~ interest-bearing ~~rate~~demand ~~environments~~deposits, ~~than most of the other securities in the available for sale portfolio~~ and ~~included~~time ~~U.S.~~deposits ~~Treasury~~composed 28%, ~~agency~~52%, ~~municipal~~ and ~~commercial~~20% ~~mortgage-backed~~of ~~securities.~~total ~~The~~deposits, ~~securities~~respectively, ~~were~~compared ~~transferred~~ to ~~mitigate~~29%, ~~the~~51%, ~~potential unfavorable impact that higher market interest rates may have on the carrying value of the securities~~ and on20% ~~the related accumulated other comprehensive loss. Securities designated as held to maturity are carried on the balance sheet~~ at ~~amortized~~December ~~cost~~31, ~~while securities designated as available for sale are carried at fair market value~~2024.

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

Table of Contents

	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

~~The~~As ~~following table shows the maturities~~ of ~~debt and restricted securities at amortized cost and market value at~~ December 31, ~~2024 and~~2025 ~~approximate~~the ~~weighted~~estimated ~~average yields~~ amount of ~~such~~total ~~securities~~uninsured ~~(dollars~~deposits inwas ~~thousands)~~$538.2 ~~Yields~~million. Maturities onof ~~state~~the ~~and~~estimated ~~political~~amount ~~subdivision~~of ~~securities~~uninsured ~~are~~time ~~shown~~deposits onat December ~~a tax equivalent basis~~31, ~~assuming~~2025 aare ~~21%~~presented ~~federal~~in ~~income~~the ~~tax~~table ~~rate~~below. The ~~Company~~estimate ~~attempts~~of touninsured ~~maintain~~deposits ~~diversity~~generally inrepresents ~~its~~the ~~portfolio~~portion ~~and~~of ~~maintain~~deposit ~~credit~~accounts ~~quality and re-pricing terms~~ that ~~are~~exceed ~~consistent~~the ~~with~~FDIC ~~its~~insurance ~~asset/liability~~limit ~~management~~of ~~and~~$250,000 ~~investment practices~~ and ~~policies.~~is ~~For~~calculated ~~further~~based ~~information~~ on ~~securities,~~the ~~see~~same ~~Note~~methodologies ~~3 to~~and ~~the~~assumptions ~~Consolidated~~used ~~Financial~~for ~~Statements~~purposes ~~included~~of inthe ~~this~~Bank’s ~~Form~~regulatory ~~10-K~~reporting requirements.

	Securities Portfolio Maturity Distribution/Yield Analysis
Maturities of Uninsured Time Deposits (in thousands)
	At December 31, 2024
	December 31, 2025
	Less than One Year			One to Five Years			Five to Ten Years			Greater than Ten Years and Equity Securities			Total
3 months or less	$	27,619
U.S. Treasury securities
3-6 months		12,158
Amortized cost	$	—		$	22,115		$	—		$	—		$	22,115
6-12 months		19,791
Market value	$	—		$	21,195		$	—		$	—		$	21,195
Over 12 months		9,107
Weighted average yield		—	%		2.24	%		—	%		—	%		2.24	%
	$	68,675
U.S. agency and mortgage-backed securities
Amortized cost	$	384		$	25,063		$	28,893		$	142,695		$	197,035
Market value	$	380		$	23,484		$	27,748		$	123,700		$	175,312
Weighted average yield		2.51	%		2.36	%		3.88	%		2.58	%		2.74	%
Obligations of state and political subdivisions
Amortized cost	$	1,452		$	13,898		$	21,925		$	36,328		$	73,603
Market value	$	1,445		$	12,906		$	19,173		$	30,141		$	63,665
Weighted average yield		3.20	%		2.57	%		2.49	%		2.56	%		2.53	%
Corporate debt securities
Amortized cost	$	—		$	—		$	3,000		$	—		$	3,000
Market value	$	—		$	—		$	2,550		$	—		$	2,550
Weighted average yield		—	%		—	%		4.50			—	%		4.50	%
Restricted securities
Amortized cost	$	—		$	—		$	—		$	3,741		$	3,741
Market value	$	—		$	—		$	—		$	3,741		$	3,741
Weighted average yield		—	%		—	%		—	%		5.14	%		5.14	%
Total portfolio
Amortized cost	$	1,836		$	61,076		$	53,818		$	182,764		$	299,494
Market value	$	1,825		$	57,585		$	49,471		$	157,582		$	266,463
Weighted average yield (1)		3.05	%		2.36	%		3.34	%		2.62	%		2.71	%

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

~~The~~Liquidity ~~above~~sources ~~table~~available ~~was~~to ~~prepared~~the ~~using~~Bank, ~~the~~including ~~contractual~~interest-bearing ~~maturities~~deposits ~~for~~in ~~all~~banks, unpledged securities ~~with~~available ~~the~~for ~~exception~~sale, at fair value, and available lines of ~~mortgage-backed~~credit ~~securities~~totaled ~~(MBS)~~$819.0 million on December 31, 2025, and ~~collateralized~~$758.0 ~~mortgage~~million ~~obligations~~on ~~(CMO)~~December 31, 2024. Available ~~Both~~lines ~~MBS~~of ~~and~~credit ~~CMO~~from ~~securities~~other ~~were~~institutions ~~recorded~~included ~~using~~in the ~~yield~~total ~~book~~amount ~~prepayment~~above ~~model~~was ~~that~~$556.2 ~~incorporates~~million on ~~four~~December ~~causes~~31, of2025, and ~~prepayments~~$562.5 ~~including~~million ~~home~~on ~~sales,~~December ~~refinancing~~31, ~~defaults~~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 ~~curtailments/full~~December ~~payoffs~~31, 2024, respectively.

AsThe 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 ~~Company~~estimated ~~did~~amount ~~not~~of ~~own~~uninsured ~~securities~~customer ofdeposits ~~any~~totaled ~~issuer~~$448.8 ~~for~~million on ~~which~~December ~~the~~31, ~~aggregate~~2025, ~~book~~and ~~value~~$319.1 ofmillion ~~the~~on ~~securities~~December of31, ~~such~~2024. ~~issuer~~Municipal ~~exceeded~~deposits ~~ten~~are ~~percent~~partially ofsecured ~~shareholders’~~with ~~equity~~pledged investment securities.

37 Subordinated Debt

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

~~Deposits~~Junior Subordinated Debt

AtSee ~~December~~Note ~~31, 2024, deposits totaled $1.8~~11 ~~billion,~~to ~~increasing~~the byConsolidated ~~$570.1~~Financial ~~million,~~Statements ~~from~~included ~~$1.2~~in ~~billion~~this atForm ~~December 31, 2023. At December 31, 2024, noninterest~~10-~~bearing demand deposits~~K, ~~savings~~for ~~and~~discussion ~~interest-bearing demand deposits, and time deposits composed 29%, 51%, and 20%~~ of ~~total~~junior ~~deposits,~~subordinated ~~respectively, compared to 31%, 54%, and 15% at December 31, 2023~~debt.

~~The following tables include a summary of average deposits and average rates paid (dollars in thousands).~~ 38

	Average Deposits and Rates Paid
	Year Ended December 31,
	2024					2023
	Amount		Rate			Amount		Rate
Noninterest-bearing deposits	$	422,981		—	%	$	397,932		—	%
Interest-bearing deposits:
Interest checking	$	278,558		1.75	%	$	269,551		1.68	%
Money market		294,818		2.80	%		219,655		2.22	%
Savings		160,795		0.18	%		173,075		0.12	%
Time deposits:
Less than $250		187,664		3.01	%		84,387		1.94	%
Greater than $250		46,846		3.56	%		82,184		2.77	%
Brokered deposits		5,080		4.20	%		3,061		3.70	%
Total interest-bearing deposits	$	973,761		2.15	%	$	831,913		1.64	%
Total deposits	$	1,396,742				$	1,229,845

Table of Contents

~~The~~Off-Balance ~~table~~Sheet ~~above includes brokered deposits greater than $100 thousand.~~Arrangements

AsThe ~~of December~~Company, 31through the Bank, ~~2024~~is a party to credit related financial instruments with risk not reflected in the ~~estimated~~consolidated ~~amount of~~financial ~~total~~statements ~~uninsured~~in ~~deposits~~the ~~was~~normal ~~$537.0 million. Maturities~~course of business to meet the ~~estimated~~financing ~~amount~~needs of ~~uninsured~~its ~~time~~customers. ~~deposits~~These ~~at December~~financial 31instruments include commitments to extend credit, ~~2024~~standby ~~are~~letters ~~presented~~of incredit, ~~the~~and ~~table~~commercial ~~below~~letters of credit. ~~The~~ ~~estimate~~Such commitments involve, to varying degrees, elements of ~~uninsured~~credit ~~deposits~~and ~~generally~~interest ~~represents~~rate ~~the~~risk ~~portion~~in excess of ~~deposit~~the ~~accounts~~amount ~~that~~recognized ~~exceed~~in the ~~FDIC~~consolidated ~~insurance~~balance ~~limit~~sheets. ofThe ~~$250,000~~Bank’s ~~and~~exposure to credit loss is ~~calculated~~represented ~~based~~by onthe contractual amount of these commitments. The Bank follows the same ~~methodologies~~credit ~~and~~policies ~~assumptions~~in ~~used~~making ~~for~~commitments ~~purposes~~as ofit ~~the~~does ~~Bank’s~~for ~~regulatory~~on-balance ~~reporting~~sheet ~~requirements~~instruments.

Maturities of Uninsured Time Deposits
	December 31, 2024
3 months or less	$	22,482
3-6 months		11,226
6-12 months		17,692
Over 12 months		6,064
	$	57,464

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

Liquidity

	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

~~Liquidity~~Commitments ~~sources available~~ to ~~the~~extend ~~Bank,~~credit ~~including~~are ~~interest-bearing~~agreements ~~deposits~~to inlend ~~banks,~~to ~~unpledged~~a ~~securities~~customer ~~available~~as ~~for~~long ~~sale,~~as atthere ~~fair~~is ~~value,~~no ~~unpledged~~violation ~~securities~~of ~~held-to-maturity,~~any atcondition ~~par,~~established ~~and~~in ~~available~~the ~~lines~~contract. ofCommitments ~~credit~~generally ~~totaled~~have ~~$758.0~~fixed ~~million~~expiration ondates ~~December~~or ~~31,~~other ~~2024,~~termination clauses and ~~$512.7~~may ~~million~~require onpayment ~~December~~of ~~31,~~a ~~2023~~fee. ~~Available~~ The commitments for lines of credit ~~from~~may ~~other~~expire ~~institutions~~without ~~included~~being indrawn upon. Therefore, the total ~~amount~~commitment ~~above~~amounts ~~was~~do ~~$562.5~~not ~~million on~~necessarily ~~December~~represent ~~31,~~future ~~2024, and~~cash ~~$351~~requirements.4 ~~million on December 31, 2023.~~ The ~~available~~amount ~~lines~~ of ~~credit~~collateral ~~were~~obtained, ~~comprised~~if ofit ~~secured~~is ~~and~~deemed ~~unsecured~~necessary ~~lines~~by ~~of credit and~~ the Bank, ~~had~~is ~~no borrowings~~based on ~~the~~management’s ~~lines~~credit asevaluation of ~~December~~ ~~31,~~the ~~2024 and December 31, 2023~~customer.

~~The~~Unfunded ~~Bank~~commitments ~~maintains~~under ~~liquidity~~commercial tolines ~~fund~~of ~~loan~~credit, ~~growth~~revolving ~~and~~credit ~~meet~~lines, ~~the~~and ~~potential~~overdraft ~~demand~~protection ~~from~~agreements ~~its~~are ~~deposit~~commitments ~~customers,~~for ~~including~~possible ~~potential~~future ~~volatile~~extensions ~~deposits. The estimated amount~~ of ~~uninsured~~credit ~~customer deposits~~to ~~totaled~~existing ~~$537~~customers.0 ~~million on~~These ~~December~~lines ~~31,~~of ~~2024, and~~credit ~~$368.2~~are ~~million~~collateralized onas ~~December~~deemed ~~31,~~necessary ~~2023.~~and ~~Excluding~~may ~~municipal~~or ~~deposits,~~may ~~the~~not ~~estimated~~be ~~amount~~drawn ofupon ~~uninsured~~to ~~customer~~the ~~deposits~~total ~~totaled~~extent ~~$319.1 million on~~to ~~December~~which ~~31,~~the ~~2024,~~Bank ~~and~~is ~~$286~~committed.~~2 million on December 31, 2023.~~

~~Subordinated~~Commercial ~~Debt~~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.

~~See~~At ~~Note~~December ~~10 to~~31, 2025, the ~~Consolidated~~Bank ~~Financial~~had ~~Statements~~$4.7 ~~included~~million in ~~this~~locked-rate ~~Form~~commitments ~~10-K,~~to ~~for~~originate ~~discussion~~mortgage loans. Risks arise from the possible inability of ~~subordinated~~counterparties ~~debt~~to meet the terms of their contracts. The Bank does not expect any counterparty to fail to meet its obligations.

~~Junior~~On ~~Subordinated~~April ~~Debt~~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.

~~See~~The ~~Note~~interest 11rate 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~~, for discussion of junior subordinated debt~~.

38 Capital Resources

~~Table~~The adequacy of ~~Contents~~ 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.

~~Off-Balance~~Effective ~~Sheet~~January ~~Arrangements~~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 ~~Company,~~minimum ~~through~~capital level requirements applicable to the Bank, isunder the final rules are as follows: a ~~party~~new tocommon ~~credit~~equity ~~related~~Tier ~~financial~~1 ~~instruments~~capital ~~with~~ratio ~~risk~~of ~~not~~4.5%; ~~reflected~~a inTier ~~the~~1 ~~consolidated~~capital ~~financial~~ratio ~~statements~~of in6%; ~~the~~a ~~normal~~total ~~course~~capital ratio of ~~business~~8%; toand ~~meet~~a Tier 1 leverage ratio of 4% for all institutions. The final rules also established a “capital conservation buffer” above the ~~financing~~new ~~needs~~regulatory minimum capital requirements. The capital conservation buffer requires a buffer of ~~its~~2.5% ~~customers~~of risk-weighted assets. ~~These~~This results ~~financial~~in ~~instruments~~the ~~include~~following ~~commitments~~minimum tocapital ~~extend~~ratios: ~~credit~~a common equity Tier 1 capital ratio of 7.0%, ~~standby~~a ~~letters~~Tier 1 capital ratio of ~~credit~~8.5%, and ~~commercial~~a ~~letters~~total capital ratio of ~~credit~~10.5%. ~~Such~~Under ~~commitments~~the ~~involve~~final rules, institutions are subject to ~~varying~~limitations ~~degrees~~on paying dividends, ~~elements~~engaging ofin ~~credit~~share repurchases, and ~~interest~~paying ~~rate~~discretionary ~~risk~~bonuses inif ~~excess~~its ofcapital level falls below the buffer amount. ~~recognized~~These inlimitations ~~the~~establish ~~consolidated~~a ~~balance~~maximum ~~sheets.~~percentage ~~The~~of ~~Bank’s~~eligible ~~exposure~~retained income tothat ~~credit~~could ~~loss~~be isutilized ~~represented~~for bysuch ~~the~~actions. ~~contractual~~Management ~~amount~~believes, as of ~~these~~December ~~commitments.~~31, ~~The~~2025 and ~~Bank~~December ~~follows~~31, 2024, that the ~~same~~Bank ~~credit~~met ~~policies~~all incapital ~~making~~adequacy ~~commitments~~requirements asto which it ~~does~~is ~~for~~subject, ~~on-balance~~including ~~sheet~~the ~~instruments~~capital conservation buffer.

~~At December 31, 2024 and 2023, the following financial instruments were outstanding whose contract amounts represent credit risk (in thousands):~~ 39

	2024		2023
Commitments to extend credit and unfunded commitments under lines of credit	$	271,419	$	194,242
Stand-by letters of credit	$	15,594	$	11,615

Table of Contents

~~Commitments~~The tofollowing ~~extend~~table ~~credit~~summarizes ~~are agreements to lend to a customer as long as there is no violation of any condition established in~~ the ~~contract.~~Bank’s ~~Commitments~~regulatory ~~generally~~capital ~~have fixed expiration dates or other termination clauses~~ and ~~may~~related ~~require~~ratios ~~payment~~at ofDecember ~~a fee. The commitments for lines of credit may expire without being drawn upon. Therefore~~31, ~~the total commitment amounts do not necessarily represent future cash requirements. The amount of collateral obtained~~2025, ifand 2024 (dollars itin ~~is deemed necessary by the Bank, is based on management’s credit evaluation of the customer~~thousands).

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.

	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	%

~~Commercial~~(1) ~~and~~Calculated ~~standby letters of credit are conditional commitments issued~~ by ~~the~~subtracting ~~Bank to guarantee~~ the ~~performance~~regulatory ofminimum acapital ~~customer~~ratio torequirements afrom ~~third~~the ~~party.~~Company’s ~~Those~~actual ~~letters~~ratio offor ~~credit~~Common ~~are~~equity ~~primarily~~Tier ~~issued~~1, toTier ~~support~~1, ~~public~~ and ~~private~~Total ~~borrowing~~risk ~~arrangements.~~based ~~Essentially all letters of credit issued have expiration dates within one year~~capital. The ~~credit~~lowest ~~risk involved in issuing letters~~ of ~~credit is essentially~~ the ~~same~~three asmeasures ~~that~~represents ~~involved~~the ~~in extending loan facilities to customers. The~~ Bank’s ~~generally~~capital ~~holds~~conservation ~~collateral~~buffer ~~supporting those commitments if deemed necessary~~ratio.

AtThe ~~December~~prompt ~~31,~~corrective ~~2024,~~action ~~the~~framework ~~Bank~~is ~~had~~designed ~~$2.3 million~~to inplace ~~locked-rate~~restrictions ~~commitments~~on insured depository institutions if their capital levels begin to ~~originate~~show ~~mortgage~~signs ~~loans~~of weakness. ~~Risks~~Under ~~arise~~the ~~from~~prompt corrective action requirements, which are designed to complement the ~~possible~~capital ~~inability~~conservation ofbuffer, ~~counterparties~~insured depository institutions are required to meet the ~~terms~~following capital level requirements in order to qualify as “well capitalized:” a common equity Tier 1 capital ratio of ~~their~~6.5%; ~~contracts~~a Tier 1 capital ratio of 8%; a total capital ratio of 10%; and a Tier 1 leverage ratio of 5%. The Bank ~~does~~met ~~not~~the ~~expect~~requirements ~~any~~to ~~counterparty~~qualify toas ~~fail~~"well tocapitalized" ~~meet~~as ~~its~~of ~~obligations~~December 31, 2025 and 2024.

On ~~April~~September 2117, ~~2020,~~2019 the ~~Company~~FDIC ~~entered~~finalized ~~into~~a ~~interest~~rule ~~rate~~that ~~swap~~introduces ~~agreements~~an ~~related~~optional tosimplified ~~its~~measure ~~outstanding~~of ~~junior~~capital ~~subordinated~~adequacy ~~debt.~~for ~~The~~qualifying ~~Company~~community ~~uses~~banking ~~derivatives~~organizations to(i.e., ~~manage~~the ~~exposure~~community tobank ~~interest~~leverage ~~rate~~ratio ~~risk~~(CBLR) ~~through~~framework), ~~the~~as ~~use~~required ofby ~~interest~~the ~~rate~~Economic ~~swaps~~Growth Act. ~~Interest~~The ~~rate~~CBLR ~~swaps~~framework ~~involve~~is ~~the~~designed ~~exchange~~to ofreduce ~~fixed~~burden ~~and~~by ~~variable~~removing ~~rate~~the ~~interest~~requirements ~~payments~~for ~~between~~calculating ~~two~~and ~~parties,~~reporting risk-based oncapital aratios ~~common~~for ~~notional~~qualifying ~~principal~~community ~~amount~~banking ~~and~~organizations ~~maturity~~that ~~date~~opt ~~with~~into nothe ~~exchange~~framework. ofThe ~~underlying~~Company ~~principal~~did ~~amounts~~not opt into the framework.

The ~~interest rate swaps qualified and are designated as cash flow hedges. The~~ Company’s ~~cash~~did ~~flow~~not ~~hedges~~repurchase ~~effectively~~any ~~modify~~shares ~~the~~during ~~Company’s exposure to interest rate risk by converting variable rates of interest on $9.0 million of~~ the ~~Company’s~~year ~~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~~ ended December 31, ~~2024, the cash flow hedges had a fair value of $2~~2025.7 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~~The ~~Resources~~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

~~The~~Recent ~~adequacy~~Accounting 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.Pronouncements

~~Effective~~See ~~January~~Note 1, ~~2015, the Bank became subject~~ to ~~capital rules adopted by federal bank regulators implementing~~ the ~~Basel~~Consolidated ~~III~~Financial ~~regulatory~~Statements ~~capital~~included ~~reforms~~in ~~adopted~~this byForm ~~the Basel Committee on Banking Supervision (the Basel Committee)~~10-K, ~~and~~for ~~certain~~discussion ~~changes~~of ~~required~~recent byaccounting ~~the Dodd-Frank Act~~pronouncements.

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 was phased-in over four years and, as fully implemented effective January 1, 2019, requires a buffer of 2.5% of risk-weighted assets. This results in the following minimum capital ratios beginning in 2019: 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, 2024 and December 31, 2023, that the Bank met all capital adequacy requirements to which it is subject, including the capital conservation buffer. 40

39Table of Contents

~~Table~~Item of7A. ~~Contents~~ Quantitative and Qualitative Disclosures About Market Risk

~~The~~Not ~~following table summarizes the Bank’s regulatory capital and related ratios at December 31, 2024, and 2023 (dollars in thousands)~~required.

	Analysis of Capital
	At December 31,
	2024			2023
Common equity Tier 1 capital	$	164,454		$	129,840
Tier 1 capital		164,454			129,840
Tier 2 capital		16,995			12,493
Total risk-based capital		181,449			142,333
Risk-weighted assets		1,469,752			1,012,843
Capital ratios:
Common equity Tier 1 capital ratio		11.19	%		12.82	%
Tier 1 capital ratio		11.19	%		12.82	%
Total capital ratio		12.35	%		14.05	%
Leverage ratio (Tier 1 capital to average assets)		7.95	%		9.31	%
Capital conservation buffer ratio(1)		4.34	%		6.05	%

Item 8.

Financial Statements and Supplementary Data

~~(1)~~The ~~Calculated~~Consolidated byFinancial ~~subtracting~~Statements ~~the~~and ~~regulatory~~related ~~minimum~~footnotes ~~capital~~of ~~ratio requirements from~~ the Company’s ~~actual~~are ~~ratio~~presented ~~for~~below ~~Common~~followed ~~equity~~by ~~Tier~~the 1,financial ~~Tier~~statements ~~1, and Total risk based capital. The lowest~~ of the ~~three measures represents the Bank’s capital conservation buffer ratio~~Parent.

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, 2024 and 2023. 41

On Table ~~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.Contents

The Company did not repurchase any shares during the year ended December 31, 2024.

To the Shareholders	March 25, 2026
First National Corporation
Strasburg, Virginia

~~The~~MANAGEMENT’S ~~Company issued~~REPORT ~~$5.0~~REGARDING ~~million~~THE ofEFFECTIVENESS ~~subordinated~~OF ~~debt~~INTERNAL in June 2020. The purpose of the issuance was primarily to further strengthen holding company liquidity and to remain a source of strength for the Bank in the event of a severe economic downturn. The Company used the proceeds of the issuance for general corporate purposes. 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 begins July 1, 2025, accordingly the related interest expense could increase during the floating rate period. The Company assumed two subordinated debt issuances from the acquisition of Touchstone. The subordinated debt assumed consisted of a $8.0 million issuance at a 6.00% fixed-to-floating rate subordinated note callable due 2030. The floating rate period for this subordinated note begins August 15, 2025, accordingly the related interest expense could increase during the floating rate period. The subordinated debt assumed also consisted of a $10.0 million issuance at a 4.00% fixed-to-floating rate subordinated note due 2032.CONTROLS

~~First~~OVER ~~Bank~~FINANCIAL ~~remained well-capitalized at December 31, 2024.~~REPORTING

~~Recent~~The ~~Accounting~~management ~~Pronouncements~~of First National Corporation (the Company) is responsible for the preparation, integrity and fair presentation of the financial statements included in the annual report as of December 31, 2025. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America and reflect management’s judgments and estimates concerning the effects of events and transactions that are accounted for or disclosed.

~~See~~Management ~~Note~~is 1also responsible for establishing and maintaining an effective internal control structure over financial reporting. The Company’s internal control over financial reporting includes those policies and procedures that pertain to the ~~Consolidated~~Company’s ~~Financial~~ability ~~Statements~~to ~~included~~record, process, summarize and report reliable financial data. The internal control system contains monitoring mechanisms, and appropriate actions are taken to correct identified deficiencies. Management believes that internal controls over financial reporting, which are subject to scrutiny by management and the Company’s internal auditor, support the integrity and reliability of the financial statements. Management recognizes that there are inherent limitations in ~~this~~the ~~Form~~effectiveness ~~10-K~~of any internal control system, ~~for~~including ~~discussion~~the possibility of ~~recent~~human ~~accounting~~error ~~pronouncements~~and the circumvention or overriding of internal controls. Accordingly, even effective internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation. In addition, because of changes in conditions and circumstances, the effectiveness of internal control over financial reporting may vary over time.

40 In order to ensure that the Company’s internal control structure over financial reporting is effective, management assessed these controls as they conformed to accounting principles generally accepted in the United States of America and related call report instructions as of December 31, 2025. This assessment was based on criteria for effective internal control over financial reporting as described in “Internal Control - Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, management believes that the Company maintained effective internal controls over financial reporting as of December 31, 2025. Management’s assessment did not determine any material weakness within the Company’s internal control structure. The Company’s annual report does not include an attestation report of the Company’s registered public accounting firm, Yount, Hyde & Barbour. P.C. (YHB), regarding internal control over financial reporting. Management’s report was not subject to attestation by YHB pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in its annual report.

~~Table~~The December 31, 2025 end of ~~Contents~~ year consolidated financial statements have been audited by the independent registered public accounting firm of YHB. Personnel from YHB were given unrestricted access to all financial records and related data, including minutes of all meetings of the Board of Directors and Committees thereof.

~~Item~~Management ~~7A.~~believes ~~Quantitative~~that all representations made to the independent auditors were valid and ~~Qualitative~~appropriate. ~~Disclosures~~The ~~About~~resulting ~~Market~~report ~~Risk~~from YHB accompanies the consolidated financial statements.

~~Not~~The ~~required~~Board of Directors of the Company, acting through its Audit Committee (the Committee), is responsible for the oversight of the Company’s accounting policies, financial reporting and internal control. The Audit Committee of the Board of Directors is comprised entirely of outside directors who are independent of management. The Audit Committee is responsible for the appointment and compensation of the independent auditors and approves decisions regarding the appointment or removal of members of the internal audit function. The Committee meets periodically with management, the independent auditors, and the internal auditor to ensure that they are carrying out their responsibilities. The Committee is also responsible for performing an oversight role by reviewing and monitoring the financial, accounting, and auditing procedures of the Company in addition to reviewing the Company’s financial reports. The independent auditors and the internal auditor have full and unlimited access to the Audit Committee, with or without the presence of the management of the Company, to discuss the adequacy of internal control over financial reporting, and any other matters which they believe should be brought to the attention of the Audit Committee.

~~Item~~/s/ 8Scott C. ~~Financial~~Harvard ~~Statements~~/s/ ~~and~~Brad ~~Supplementary~~E. ~~Data~~Schwartz Scott C. Harvard Brad E. Schwartz President Executive Vice President Chief Executive Officer Chief Financial Officer

~~The Consolidated Financial Statements and related footnotes of the Company are presented below followed by the financial statements of the Parent.~~ 42

41Table of Contents

~~Table~~Report of ~~Contents~~ Independent Registered Public Accounting Firm

To the Shareholders	March 31, 2025
First National Corporation
Strasburg, Virginia

To the Shareholders and Board of Directors of First National Corporation

~~MANAGEMENT’S~~Opinion ~~REPORT~~on ~~REGARDING~~the ~~THE~~Financial ~~EFFECTIVENESS OF INTERNAL CONTROLS~~Statements

~~OVER~~We ~~FINANCIAL~~have ~~REPORTING~~audited the accompanying consolidated balance sheets of First National Corporation and its subsidiaries (the “Company”) as of December 31, 2025 and 2024, the related consolidated statements of income, comprehensive income, changes in shareholders' equity and cash flows for the years then ended, and the related notes to the consolidated financial statements (collectively, the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

~~The~~Basis ~~management of First National Corporation (the Company) is responsible~~ for the preparation, integrity and fair presentation of the financial statements included in the annual report as of December 31, 2024. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America and reflect management’s judgments and estimates concerning the effects of events and transactions that are accounted for or disclosed.Opinion

~~Management~~These ~~is also responsible for establishing and maintaining an effective internal control structure over~~ financial ~~reporting.~~statements ~~The~~are ~~Company’s~~the ~~internal~~responsibility ~~control~~of ~~over financial reporting includes those policies and procedures that pertain to~~ the Company’s ~~ability to record, process, summarize and report reliable financial data~~management. ~~The~~Our ~~internal~~responsibility ~~control~~is ~~system contains monitoring mechanisms, and appropriate actions are taken~~ to ~~correct~~express ~~identified~~an ~~deficiencies.~~opinion ~~Management~~on ~~believes that internal controls over financial reporting, which are subject to scrutiny by management and~~ the Company’s ~~internal~~financial ~~auditor,~~statements ~~support~~based ~~the~~on ~~integrity~~our ~~and reliability of the financial statements~~audits. ~~Management~~We ~~recognizes~~are ~~that~~a ~~there~~public ~~are~~accounting ~~inherent~~firm ~~limitations~~registered inwith the ~~effectiveness~~Public ofCompany ~~any~~Accounting ~~internal~~Oversight ~~control~~Board ~~system,~~(United ~~including~~States) ~~the~~(PCAOB) ~~possibility of human error~~ and ~~the~~are ~~circumvention~~required orto ~~overriding~~be ofindependent ~~internal~~with ~~controls.~~respect ~~Accordingly,~~to ~~even~~the ~~effective~~Company ~~internal~~in ~~control~~accordance ~~over financial reporting can provide only reasonable assurance~~ with ~~respect to financial statement preparation~~U.S. Infederal ~~addition,~~securities ~~because~~laws ofand ~~changes~~the inapplicable ~~conditions~~rules and ~~circumstances,~~regulations ~~the effectiveness~~ of ~~internal~~the ~~control~~Securities ~~over~~and ~~financial~~Exchange ~~reporting~~Commission ~~may~~and ~~vary~~the ~~over time~~PCAOB.

AsWe ~~permitted~~conducted byour ~~the~~audits ~~guidance~~in ~~issued~~accordance bywith the ~~Office~~standards of the ~~Chief~~PCAOB. ~~Accountant~~Those ofstandards ~~the~~require ~~Securities~~that ~~and~~we ~~Exchange~~plan ~~Commission,~~and ~~management~~perform ~~excluded~~ the ~~operations~~audit ofto ~~Touchstone~~obtain ~~from~~reasonable ~~its~~assurance ~~assessment~~about ofwhether ~~internal~~the ~~control over~~ financial ~~reporting~~statements asare free of ~~December~~material 31misstatement, ~~2024.~~whether ~~Touchstone~~due ~~was~~to ~~merged~~error ~~with~~or ~~and~~fraud. ~~into~~The ~~the~~ Company, ~~however,~~is ~~Touchstone's~~not ~~legacy~~required ~~operations~~to ~~utilized~~have, ~~separate~~nor ~~accounting~~were ~~systems~~we ~~from~~engaged ~~October~~to 1perform, ~~2024~~an ~~(the~~audit ~~date~~ of ~~acquisition)~~its ~~through~~internal ~~December~~control ~~31,~~over ~~2024~~financial reporting. ~~Touchstone's~~As ~~accounting~~part ~~systems~~of ~~were~~our ~~converted~~audits ~~during~~we ~~the~~are ~~first~~required ~~quarter~~to obtain an understanding of ~~2025.~~internal ~~Assets~~control ~~acquired~~over ~~from~~financial ~~Touchstone~~reporting ~~represented~~but ~~approximately~~not ~~31.41%~~for the purpose of expressing an opinion on the effectiveness of the Company’s ~~consolidated~~internal ~~assets~~control asover offinancial ~~the~~reporting. ~~date~~Accordingly, ofwe ~~acquisition~~express no such opinion.

InOur ~~order~~audits toincluded ~~ensure~~performing ~~that~~procedures ~~the~~to ~~Company’s~~assess ~~internal~~the ~~control~~risks ~~structure~~of ~~over~~material ~~financial~~misstatement ~~reporting~~of isthe ~~effective~~financial statements, ~~management~~whether ~~assessed~~due ~~these controls as they conformed~~ to ~~accounting~~error ~~principles~~or ~~generally~~fraud, ~~accepted in the United States of America~~ and ~~related~~performing ~~call~~procedures ~~report~~that ~~instructions~~respond asto ofthose ~~December 31, 2024~~risks. ~~This~~Such ~~assessment~~procedures ~~was~~included ~~based~~examining, on ~~criteria~~a ~~for~~test ~~effective~~basis, ~~internal~~evidence ~~control~~regarding ~~over~~the ~~financial~~amounts ~~reporting~~and asdisclosures ~~described~~ in ~~“Internal Control - Integrated Framework (2013)” issued by~~ the ~~Committee~~financial ~~of Sponsoring Organizations of the Treadway Commission (COSO)~~statements. ~~Based~~Our onaudits ~~this~~also ~~assessment,~~included ~~management~~evaluating ~~believes that~~ the ~~Company~~accounting ~~maintained~~principles ~~effective~~used ~~internal~~and ~~controls~~significant ~~over~~estimates ~~financial~~made ~~reporting~~by ~~as of December 31~~management, ~~2024.~~as ~~Management’s~~well ~~assessment~~as ~~did~~evaluating ~~not determine any material weakness within~~ the ~~Company’s~~overall ~~internal~~presentation ~~control structure. The Company’s annual report does not include an attestation report~~ of the ~~Company’s registered public accounting firm, Yount, Hyde & Barbour. P.C. (YHB), regarding internal control over~~ financial ~~reporting~~statements. ~~Management’s~~We ~~report~~believe ~~was not subject to attestation by YHB pursuant to rules of the Securities and Exchange Commission~~ that ~~permit~~our ~~the~~audits ~~Company to~~ provide ~~only~~a ~~management’s~~reasonable ~~report~~basis infor ~~its~~our ~~annual report~~opinion.

~~The~~Critical ~~2024 end~~Audit of year consolidated financial statements have been audited by the independent registered public accounting firm of YHB. Personnel from YHB were given unrestricted access to all financial records and related data, including minutes of all meetings of the Board of Directors and Committees thereof.Matter

~~Management~~The ~~believes~~critical audit matter communicated below is a matter arising from the current period audit of the financial statements that ~~all~~was ~~representations~~communicated ~~made~~or required to be communicated to the ~~independent~~audit ~~auditors~~committee ~~were~~and ~~valid~~that: (1) relates to accounts or disclosures that are material to the financial statements and ~~appropriate~~(2) involved our especially challenging, subjective, or complex judgments. The ~~resulting~~communication ~~report~~of ~~from~~the ~~YHB~~critical ~~accompanies~~audit ~~the~~matter ~~consolidated~~does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

~~The~~Allowance ~~Board~~for ofCredit ~~Directors~~Losses ~~of the Company, acting through its Audit Committee~~ (~~the Committee~~ACL), is– ~~responsible~~Collectively ~~for~~Evaluated the oversight of the Company’s accounting policies, financial reporting and internal control. The Audit Committee of the Board of Directors is comprised entirely of outside directors who are independent of management. The Audit Committee is responsible for the appointment and compensation of the independent auditors and approves decisions regarding the appointment or removal of members of the internal audit function. The Committee meets periodically with management, the independent auditors, and the internal auditor to ensure that they are carrying out their responsibilities. The Committee is also responsible for performing an oversight role by reviewing and monitoring the financial, accounting, and auditing procedures of the Company in addition to reviewing the Company’s financial reports. The independent auditors and the internal auditor have full and unlimited access to the Audit Committee, with or without the presence of the management of the Company, to discuss the adequacy of internal control over financial reporting, and any other matters which they believe should be brought to the attention of the Audit Committee.Loans

~~/s/~~Description ~~Scott~~of C.the ~~Harvard /s/ Bruce E. Thomas Scott C. Harvard Bruce E. Thomas President Senior Vice President Chief Executive Officer Interim Chief Financial Officer~~Matter

42 As further described in Notes 1 and 5 to the financial statements, the allowance for credit losses (“ACL”) is a valuation allowance that represents management’s best estimate of expected credit losses on loans measured at amortized cost considering available information, from internal and external sources, relevant to assessing collectability over the loans’ contractual terms. Loans which share common risk characteristics are pooled and collectively evaluated by the Company using historical data, as well as assessments of current conditions and reasonable and supportable forecasts of future conditions. The Company’s ACL related to collectively evaluated loans represented $12.9 million of the total recorded ACL of $14.7 million as of December 31, 2025. The collectively evaluated ACL consists of quantitative and qualitative components.

Filing Compare · FIRST NATIONAL CORP /VA/