# First Community Bankshares Inc: Form 10-K for the period ended Dec 31, 2025 - Company: [First Community Bankshares Inc](/companies/fcbc.md) (CIK 859070) - Form: 10-K - Filed: 2026-03-06 - Accepted by EDGAR: Mar 6, 2026, 15:15 ET - Period: 2025-12-31 - Accession: 0001437749-26-007180 - Inline XBRL: yes - Main document: https://www.sec.gov/Archives/edgar/data/859070/000143774926007180/fcbc20251231c_10k.htm - All documents and exhibits: https://www.sec.gov/Archives/edgar/data/859070/000143774926007180/ ## Figures reported in this filing Standardized XBRL line items for the period ended 2025-12-31. | Line item | Period | Value | XBRL concept | | --- | --- | ---: | --- | | Interest expense | 3 months, 2025-10-01 to 2025-12-31 | $3.9m | us-gaap:InterestExpense | | Income tax | 3 months, 2025-10-01 to 2025-12-31 | $3.7m | us-gaap:IncomeTaxExpenseBenefit | | Income tax | 12 months, 2025-01-01 to 2025-12-31 | $14.3m | us-gaap:IncomeTaxExpenseBenefit | | Net income | 3 months, 2025-10-01 to 2025-12-31 | $12.5m | us-gaap:NetIncomeLoss | | Net income | 12 months, 2025-01-01 to 2025-12-31 | $48.8m | us-gaap:NetIncomeLoss | | Diluted EPS | 3 months, 2025-10-01 to 2025-12-31 | $0.68 | us-gaap:EarningsPerShareDiluted | | Diluted EPS | 12 months, 2025-01-01 to 2025-12-31 | $2.65 | us-gaap:EarningsPerShareDiluted | | Basic EPS | 3 months, 2025-10-01 to 2025-12-31 | $0.68 | us-gaap:EarningsPerShareBasic | | Basic EPS | 12 months, 2025-01-01 to 2025-12-31 | $2.66 | us-gaap:EarningsPerShareBasic | | Diluted shares (weighted) | 3 months, 2025-10-01 to 2025-12-31 | 18,390,550 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding | | Diluted shares (weighted) | 12 months, 2025-01-01 to 2025-12-31 | 18,410,451 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding | | Operating cash flow | 12 months, 2025-01-01 to 2025-12-31 | $62.7m | us-gaap:NetCashProvidedByUsedInOperatingActivities | | Capital expenditure | 12 months, 2025-01-01 to 2025-12-31 | $2.7m | us-gaap:PaymentsToAcquireProductiveAssets | | Dividends paid | 12 months, 2025-01-01 to 2025-12-31 | $60.6m | us-gaap:PaymentsOfDividendsCommonStock | | Share repurchases | 12 months, 2025-01-01 to 2025-12-31 | $1.9m | us-gaap:PaymentsForRepurchaseOfCommonStock | | Total assets | at 2025-12-31 | $3.26bn | us-gaap:Assets | | Total liabilities | at 2025-12-31 | $2.76bn | us-gaap:Liabilities | | Shareholders' equity | at 2025-12-31 | $500.5m | us-gaap:StockholdersEquity | ## Business As filed, 45,587 characters. ### General First Community Bankshares, Inc. (the “Company”), a financial holding company, was founded in 1989 and reincorporated under the laws of the Commonwealth of Virginia. The Company’s principal executive office is located in Bluefield, Virginia. The Company provides banking products and services to individual and commercial customers through its wholly owned subsidiary First Community Bank (the “Bank”), a Virginia-chartered banking institution founded in 1874. The Bank offers wealth management and investment advice through its Trust Division and wholly owned subsidiary First Community Wealth Management. Unless the context suggests otherwise, the terms “First Community,” “Company,” “we,” “our,” and “us” in this Annual Report on Form 10-K refer to First Community Bankshares, Inc. and its subsidiaries as a consolidated entity. On January 23, 2026, the Company consummated its acquisition of Hometown Bancshares, Inc. ("Hometown"), the parent company of Union Bank, Inc., a West Virginia chartered bank, with eight branches in the state of West Virginia. Following the acquisition, we operate 60 branches across the states of Virginia, West Virginia, North Carolina, and Tennessee. We’re committed to the passionate pursuit of excellence in community banking and we’ve set our sights on being the bank of choice, employer of choice, and investment of choice in the communities in which we operate. Our mission is to: - understand and anticipate customer and community financial needs and preferences by learning from our customers and engaging with our communities; - help our customers and communities achieve their financial goals and objectives by providing workable solutions delivered in a professional manner by friendly, knowledgeable people and convenient, reliable systems; - recruit, retain, and develop talented and resourceful employees by providing competitive compensation and benefits; offering first-rate continuing education; and fostering a team environment that empowers employees, encourages growth, and recognizes and rewards achievement; and - allocate shareholder resources by pursuing those investments and business opportunities that provide a superior risk-assessed return. Our operations are guided by a strategic plan that focuses on organic growth supplemented by strategic acquisitions of complementary financial institutions. ### Employees and Human Capital Resources As of December 31, 2025, we had 622 full-time employees and 28 part-time employees. The employees are not represented by a collective bargaining unit and we consider our relationship with our employees to be good. We encourage and support the growth and development of our employees and, wherever possible, seek to fill positions by promotion and transfer from within the organization. Continual learning and career development is advanced through ongoing performance and development conversations with employees, internally developed training programs and customized corporate training engagements. The safety, health and wellness of our employees is a top priority. All employees are asked not to come to work when they experience signs or symptoms of a possible communicable illness. On an ongoing basis, we further promote the health and wellness of our employees by strongly encouraging work-life balance, minimizing increases in the employee portion of health care premiums and sponsoring various wellness programs. Employee retention helps us operate efficiently and achieve one of our business objectives, which is building financial partnerships. We believe our commitment to living out our core values, actively prioritizing concern for our employees’ well-being, supporting our employees’ career goals, offering competitive wages and providing valuable fringe benefits aids in retention of our top-performing employees. In addition, nearly all of our employees are stockholders of the Company through participation in our current 401(k) plan and a former employee stock ownership plan, which aligns employee and stockholder interests by providing stock ownership on a tax-deferred basis at no investment cost to our employees. ### Market Area As of December 31, 2025, we operated 52 branch locations in Virginia, West Virginia, North Carolina, and Tennessee through our sole operating segment, Community Banking. Economic indicators in our market areas show relatively stable employment and business conditions. We serve a diverse base of individuals and businesses across a variety of industries such as education; government and health services; retail trade; construction; manufacturing; tourism; coal mining and gas extraction; and transportation. ### Competition The financial services industry is highly competitive and constantly evolving. We encounter strong competition in attracting and retaining deposit, loan, and other financial relationships in our market areas. We compete with other commercial banks, thrifts, savings and loan associations, untaxed and lesser regulated credit unions, consumer finance companies, financial technology companies, mortgage banking firms, commercial finance and leasing companies, securities firms, brokerage firms, and insurance companies. We have positioned ourselves as a regional community bank that provides an alternative to larger banks, which often place less emphasis on personal relationships, and smaller community banks, which lack the capital and resources to efficiently serve customer needs. Factors that influence our ability to remain competitive include the ability to develop, maintain, and build long-term customer relationships; the quality, variety, and pricing of products and services; the convenience of banking locations and office hours; technological developments; and industry and general economic conditions. We seek to mitigate competitive pressures with our relationship style of banking, competitive pricing, and cost efficiencies. ### Supervision and Regulation ### Overview We are subject to extensive examination, supervision, and regulation under applicable federal and state laws by various regulatory agencies. These regulations are intended to protect consumers, depositors, borrowers, deposit insurance funds, and the stability of the financial system and are not for the protection of stockholders or creditors. Applicable laws and regulations restrict our permissible activities and investments and impose conditions and requirements on the products and services we offer and the manner in which they are offered and sold. They also restrict our ability to repurchase stock or pay dividends, or to receive dividends from our banking subsidiary, and impose capital adequacy requirements on the Company and the Bank. The consequences of noncompliance with these laws and regulations can include substantial monetary and nonmonetary sanctions. The following discussion summarizes significant laws and regulations applicable to the Company and the Bank. These summaries are not intended to be complete and are qualified in their entirety by reference to the applicable statute or regulation. Changes in laws and regulations may have a material effect on our business, financial condition, or results of operations. #### First Community Bankshares, Inc. The Company is a bank holding company registered under the Bank Holding Company Act of 1956, as amended, (“BHC Act”) and a financial holding company under the Gramm-Leach-Bliley Act of 1999 (“GLB Act”). The Company elected financial holding company status in December 2006. The Company and its subsidiaries are subject to supervision, regulation, and examination by the Board of Governors of the Federal Reserve System (“Federal Reserve”). The BHC Act generally provides for umbrella regulation of financial holding companies, such as the Company, by the Federal Reserve, as well as functional regulation of financial holding company subsidiaries by applicable regulatory agencies. The Federal Reserve is granted the authority, in certain circumstances, to require reports of, examine, and adopt rules applicable to any bank holding company subsidiary. The Company is also subject to the disclosure and regulatory requirements of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, (“Exchange Act”), as administered by the Securities and Exchange Commission (“SEC”). The Company’s common stock is listed on the NASDAQ Global Select Market under the trading symbol FCBC and is subject to NASDAQ’s rules for listed companies. #### First Community Bank The Bank is a Virginia chartered bank and a member of the Federal Reserve subject to supervision, regulation, and examination by the Virginia Bureau of Financial Institutions and the Federal Reserve Board. The Bank is a member of the Federal Deposit Insurance Corporation (“FDIC”), and its deposits are insured by the FDIC to the extent provided by law. The regulations of these agencies govern most aspects of the Bank’s business, including requirements concerning the allowance for loan losses, lending and mortgage operations, interest rates received on loans and paid on deposits, the payment of dividends, loans to affiliates, mergers and acquisitions, capital, and the establishment of branches. Various consumer and compliance laws and regulations also affect the Bank’s operations. As a member bank, the Bank is required to hold stock in the Federal Reserve Bank of Richmond ("FRB") in an amount equal to 6% of its capital stock and surplus (half paid to acquire the stock with the remainder held as a cash reserve). Member banks do not have any control over the Federal Reserve as a result of owning the stock and the stock cannot be sold or traded. ### Permitted Activities under the BHC Act The BHC Act limits the activities of bank holding companies, such as the Company, to the business of banking, managing or controlling banks and other activities the Federal Reserve determines to be closely related to banking. A bank holding company that elects treatment as a financial holding company under the GLB Act, such as the Company, may engage in a broader range of activities that are financial in nature or complementary to a financial activity and do not pose a substantial risk to the safety and soundness of depository institutions or the financial system. These activities include securities underwriting, dealing, and market making; sponsoring mutual funds and investment companies; insurance underwriting and agency; merchant banking activities; and other activities that the Federal Reserve determines to be closely related to banking. In order to maintain financial holding company status, the Company and the Bank must be well-capitalized and well-managed under applicable Federal Reserve regulations and have received at least a satisfactory rating under the Community Reinvestment Act of 1977 (“CRA”). See “Prompt Corrective Action” and “Community Reinvestment Act” below. If we fail to meet these requirements, the Federal Reserve may impose corrective capital and managerial requirements and place limitations or conditions on our ability to conduct activities permissible for financial holding companies. If the deficiencies persist, the Federal Reserve may require the Company to divest the Bank or divest investments in companies engaged in activities permissible only for financial holding companies. The Company is required to give the Federal Reserve prior notice of any redemption or repurchase of its own equity securities, subject to certain exemptions, if the consideration to be paid, together with the consideration paid for any repurchases or redemptions in the preceding 12 months, is equal to 10% or more of the Company’s consolidated net worth. The Federal Reserve may oppose the transaction if it believes that the transaction would constitute an unsafe or unsound practice or would violate any law or regulation. Any redemption or repurchase of preferred stock or subordinated debt remains subject to the prior approval of the Federal Reserve Board. The Inflation Reduction Act of 2022 (the “IRA”) imposed a 1% excise tax on the fair market value of stock repurchased after December 31, 2022, by publicly traded U.S. corporations. With certain exceptions, the value of stock repurchased is determined net of stock issued in the year, including shares issued pursuant to compensatory arrangements. The BHC Act requires that bank holding companies obtain the Federal Reserve’s approval before acquiring direct or indirect ownership or control of more than 5% of the voting shares or all, or substantially all, of the assets of a bank. The regulatory authorities are required to consider the financial and managerial resources and future prospects of the bank holding company and the target bank, the convenience and needs of the communities to be served, and various competitive factors when approving acquisitions. The BHC Act also prohibits a bank holding company from acquiring direct or indirect control of more than 5% of the outstanding voting stock of any company engaged in a non-banking business unless the Federal Reserve determines it to be closely related to banking. ### Capital Requirements We are subject to various regulatory capital requirements administered by the Federal Reserve (the "Basel III Capital Rules"). The Basel III Capital Rules define qualifying capital instruments and specify minimum amounts of capital as a percentage of assets that banking organizations are required to maintain. Under the Basel III Capital Rules, risk-based capital ratios are calculated by dividing Common Equity Tier I ("CET1") capital, Tier 1 capital and total capital, respectively, by risk-weighted assets. Assets and off-balance sheet credit equivalents are assigned a risk weight based primarily on supervisory assessments of relative credit risk. The Basel Capital Rules require the Company and the Bank to maintain the following: - A minimum ratio of Common Equity Tier 1 ("CET1") to risk-weighted assets of at least 4.50%, plus a 2.50% "capital conservation buffer" that is composed entirely of CET1 capital (resulting in a minimum ratio of CET1 to risk-weighted assets of 7.00%); - A minimum ratio of Tier 1 capital to risk-weighted assets of at least 6.00%, plus the capital conservation buffer (resulting in a minimum Tier 1 capital ratio of 8.50%); - A minimum ratio of total capital (Tier 1 capital plus Tier 2 capital) to risk-weighted assets of at least 8.00%, plus the capital conservation buffer (resulting in a minimum total capital ratio of 10.50%); and - A minimum leverage ratio of 4.00%, calculated as the ratio of Tier 1 capital to average consolidated assets as reported on consolidated financial statements (known as the "leverage ratio"). The capital conservation buffer is designed to absorb losses during periods of economic stress. Banking institutions that fail to meet the effective minimum ratios once the capital conservation buffer is taken into account, as detailed above, will be subject to constraints on capital distributions, including dividends and share repurchases, and certain discretionary executive compensation. The severity of the constraints depends on the amount of the shortfall and the institution’s “eligible retained income” (that is, the greater of (i) net income for the preceding four quarters, net of distributions and associated tax effects not reflected in net income and (ii) average net income over the preceding four quarters). Basel III Capital Rules provide for a number of deductions from and adjustments to CET1. As non-advanced approaches organizations under the Basel III Capital Rules, the Company and the Bank are subject to rules that provide for simplified capital requirements relating to the threshold deductions. These include, for example, the requirement that certain deferred tax assets and significant investments in non-consolidated financial entities be deducted from CET1 to the extent that any one such category exceeds 25% of CET1. Basel III Capital Rules prescribe a standardized approach for risk weightings that expand the risk-weighting categories from the four Basel I categories (0%, 20%, 50% and 100%) to a larger and more risk-sensitive number of categories, depending on the nature of the assets, generally ranging from 0% for U.S. government and agency securities, to 600% for certain equity exposures, and resulting in higher risk weights for a variety of asset categories. In November 2019, the federal banking agencies adopted a rule revising the scope of commercial real estate mortgages subject to a 150% risk weight. Management believes that the Company and the Bank's current capital levels exceed the required capital amounts to the considered well-capitalized and also meet the fully phased-in minimum capital requirements, including the related capital conservation buffers, as required by the Basel III Capital Rules as of December 31, 2025. For additional information, see Note 20, "Regulatory Requirements and Restrictions," to the Consolidated Financial Statements in Part II, Item 8 of this report. ### Prompt Corrective Action The federal banking regulators are required to take prompt corrective action with respect to capital-deficient institutions. Agency regulations define, for each capital category, the levels at which institutions are well-capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, or critically undercapitalized. An institution may be downgraded to, or deemed to be in, a capital category that is lower than indicated by its capital ratios if the appropriate federal regulators determine that it is engaging in an unsafe or unsound practice or is in an unsafe or unsound condition. A bank’s capital category is determined solely for applying prompt corrective action regulations, and the capital category may not constitute an accurate representation of the bank’s financial condition or prospects for other purposes. The Bank was classified as well-capitalized under prompt corrective action regulations as of December 31, 2025. In order to be considered a well-capitalized institution under Basel III Capital Rules, an organization must not be subject to any written agreement, order, capital directive, or prompt corrective action directive and must maintain the following minimum capital ratios: - 6.5% CET1 to risk-weighted assets - 8.0% Tier 1 capital to risk-weighted assets - 10.0% Total capital to risk-weighted assets - 5.0% Tier 1 leverage ratio Undercapitalized institutions are required to submit a capital restoration plan to federal banking regulators. Under the Federal Deposit Insurance Act, as amended (“FDIA”), in order for the capital restoration plan to be accepted by the appropriate federal banking agency, a bank holding company must provide appropriate assurances of performance and guarantee that its subsidiary bank will comply with its capital restoration plan, subject to certain limitations. Agency regulations contain broad restrictions on certain activities of undercapitalized institutions, including asset growth, acquisitions, establishing branches, and engaging in new lines of business. With certain exceptions, a depository institution is prohibited from making capital distributions, including dividends, and is prohibited from paying management fees to its parent holding company if the institution would be undercapitalized after such distribution or payment. A significantly undercapitalized institution is subject to various requirements and restrictions, including orders to sell sufficient voting stock to become adequately capitalized, requirements to reduce total assets, and ending deposits from correspondent banks. The FDIC has limited discretion in dealing with a critically undercapitalized institution and is generally required to appoint a receiver or conservator. ### Safety and Soundness Standards Guidelines adopted by federal bank regulatory agencies establish general standards relating to internal controls and information systems, internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, and compensation. In general, the guidelines require, among other things, appropriate systems and practices to identify and manage risks and exposures. If an institution fails to meet safety and soundness standards, the regulatory agencies may require the institution to submit a written compliance plan describing the steps they would take to correct the situation and the time that such steps would be taken. If an institution fails to submit or implement an acceptable compliance plan, after being notified, the agency must issue an order directing action to correct the deficiency and may issue an order directing other actions, such as those applicable to undercapitalized institutions under the prompt corrective action provisions of the FDIA. An institution may be subject to judicial proceedings and civil money penalties if it fails to follow such an order. ### Payment of Dividends The Company is a legal entity that is separate and distinct from its subsidiaries. The Company’s principal source of cash flow is derived from dividends paid by the Bank. There are various restrictions by regulatory agencies related to dividends paid by the Bank to the Company and dividends paid by the Company to its shareholders. The payment of dividends by the Company and the Bank may be limited by certain factors, such as requirements to maintain capital above regulatory guideline minimums. Prior FRB approval is required for the Bank to declare or pay a dividend to the Company if the total of all dividends declared in any given year exceed the total of the Bank’s net profits for that year and its retained profits for the preceding two years, less any required transfers to surplus or to fund the retirement of preferred stock. Dividends paid by the Company to shareholders are subject to oversight by the Federal Reserve. Federal Reserve policy states that bank holding companies generally should pay dividends on common stock only from income available over the past year if prospective earnings retention is consistent with the organization’s expected future needs, asset quality, and financial condition. Regulatory agencies have the authority to limit or prohibit the Company and the Bank from paying dividends if the payments are deemed to constitute an unsafe or unsound practice. The appropriate regulatory authorities have stated that paying dividends that deplete a bank’s capital base to an inadequate level would be an unsafe and unsound banking practice and that banking organizations should generally pay dividends only from current operating earnings. In addition, the Bank may not declare or pay a dividend if, after paying the dividend, the Bank would be classified as undercapitalized. In the current financial and economic environment, the Federal Reserve has discouraged payout ratios that are at maximum allowable levels, unless both asset quality and capital are very strong, and has noted that bank holding companies should carefully review their dividend policy. Bank holding companies should not maintain dividend levels that undermine their ability to be a source of strength to their banking subsidiaries. ### Source of Strength Federal Reserve policy and federal law require the Company to act as a source of financial and managerial strength to the Bank. Under this requirement, the Company is expected to commit resources to support the Bank even when it may not be in a financial position to provide such resources. Because the Company is a legal entity separate and distinct from its subsidiaries, any capital loans it makes to the Bank are subordinate in right of payment to depositors and to certain other indebtedness of the Bank. In the event of the Company’s bankruptcy, any commitment by the Company to a federal bank regulatory agency to maintain the capital of the Bank will be assumed by the bankruptcy trustee and entitled to priority of payment. ### Transactions with Affiliates The Federal Reserve Act (“FRA”) and Federal Reserve Regulation W place restrictions on “covered transactions” between the Bank and its affiliates, including the Company. The term “covered transactions” includes making loans, purchasing assets, issuing guarantees, and other similar transactions. The Dodd-Frank Act expanded the definition of “covered transactions” to include derivative activities, repurchase agreements, and securities lending or borrowing activities. These restrictions limit the number of transactions with affiliates, require certain levels of collateral for loans to affiliates, and require that all transactions with affiliates be on terms that are consistent with safe and sound banking practices. In addition, these transactions must be on terms that are substantially the same, or at least as favorable to the Bank, as those prevailing at the time for similar transactions with non-affiliates. The FRA and Federal Reserve Regulation O place restrictions on loans between the Company and the Bank and their directors, executive officers, principal shareholders, affiliates, and interests of those directors, executive officers, and principal shareholders. These restrictions limit the amount of loans to one borrower and require that loans are on terms that are substantially the same as and follow underwriting procedures that are not less stringent than, those prevailing at the time for similar loans with non-insiders. In addition, the aggregate limit of loans to all insiders, as a group, cannot exceed the Bank’s total unimpaired capital and surplus. ### Deposit Insurance and Assessments Substantially all of the Bank’s deposits are insured up to applicable limits by the Deposit Insurance Fund (“DIF”) of the FDIC and are subject to quarterly deposit insurance assessments to maintain the DIF. Deposit insurance premiums are assessed using a risk-based system that places FDIC-insured institutions into one of four risk categories based on capital, supervisory ratings and other factors. The assessment rate determined by considering such information is then applied to the institution's average assets minus average tangible equity to determine the institution's insurance premium. The FDIC may change assessment rates or revise its risk-based assessment system if deemed necessary to maintain an adequate reserve ratio for the DIF. The Dodd-Frank Act required that the minimum reserve ratio for the DIF increase from 1.15% to 1.35% by September 30, 2020. Under the FDIA, the FDIC may terminate deposit insurance if it determines that the institution has engaged in unsafe and unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule, order, or condition imposed by the FDIC. In October 2022, the FDIC adopted a final rule to increase the initial base deposit insurance assessment rate schedules uniformly by 2 basis points beginning with the first quarterly assessment period of 2023. The increased assessment is expected to improve the likelihood that the DIF reserve ratio would reach the statutory minimum of 1.35% by the statutory deadline prescribed under the FDIC's amended restoration plan. In November 2023, the FDIC issued a final rule to implement a special assessment to recover losses to the DIF incurred as a result of bank failures earlier that year and the FDIC’s use of the systemic risk exception to cover certain deposits that were otherwise uninsured. The special assessment was based on estimated uninsured deposits as of December 31, 2022 (excluding the first $5.0 billion) and was assessed at a quarterly rate of 3.36 basis points, over eight quarterly assessment periods, that began in the first quarter of 2024. In June 2024, due to the increased estimate of losses, the FDIC announced that it projected that the special assessment would be collected for an additional two quarters beyond the initial eight-quarter collection period, at a lower rate. In December 2025, the FDIC adopted an interim rule to adjust the special assessment, as initial estimates showed the original eight-quarter plan might slightly over-collect compared to actual losses. The rate for the final quarter (the first quarter of 2026) was reduced from 3.36 basis points to 2.97 basis points to align with the revised loss estimates. Because the cumulative amount collected through the initial eight-quarter special assessment period is projected to equal the FDIC's loss estimate, the additional two quarters of extended assessment was removed. The interim final rule also requires the FDIC to provide an offset to regular quarterly deposit insurance assessments for institutions subject to the special assessment if the aggregate amount collected exceeds estimated losses following the resolution of pending litigation and again following the termination of the receiverships. As provided for in the special assessment rules, if losses at the termination of the receiverships exceed the amount collected, the FDIC will implement a one-time final shortfall special assessment to ensure the full amount of actual losses is recovered as required by law. This updated assessment was made under the FDIC’s final rule whereby the estimated loss pursuant to the systemic risk determination can be periodically adjusted. The special assessments are tax deductible. The extent to which any such additional future assessments will impact our future deposit insurance expense is currently uncertain ### The Volcker Rule A provision in the Dodd-Frank Act, known as the Volker Rule, amended the BHC Act to prohibit depository institutions and their affiliates from engaging in proprietary trading and from investing in, sponsoring, or having certain relationships with hedge funds or private equity funds. The Volcker Rule, which became effective in July 2015 and the implementing regulations of which were amended in 2019 and were subject to further amendment in 2020, does not significantly impact the operations of the Company and its subsidiaries, as we do not have any engagement in the businesses prohibited by the Volcker Rule. ### Community Reinvestment Act The CRA, as amended, requires depository institutions to help meet the credit needs of their market areas, including low-and moderate-income individuals and communities, consistent with safe and sound banking practices. Federal banking regulators periodically examine depository institutions and assign ratings based on CRA compliance. A rating of less than satisfactory may restrict certain operating activities, delay or deny certain transactions, or result in an institution losing its financial holding company status. The Bank received a rating of satisfactory in its most recent CRA examination. On October 24, 2023, the FDIC, the Federal Reserve, and the Office of the Comptroller of the Currency ("OCC") issued a final rule to strengthen and modernize the CRA regulations (the "2023 modernization rule"). The final rule intended, among other things, to adapt to changes in the banking industry, including the expanded role of mobile and online banking, and to tailor performance standards to account for differences in bank size and business models. Following its finalization on March 29, 2024, the 2023 modernization rule became subject to an ongoing injunction. On July 16, 2025, the FDIC, Federal Reserve and the OCC issued a joint proposal to rescind the 2023 modernization rule. The agencies continue to apply the CRA rules as they existed before the 2023 modernization, considering the injunction and pending finalization of the rescission of the 2023 modernization rule. ### Incentive Compensation Federal regulatory agencies have issued comprehensive guidance intended to ensure that the incentive compensation policies of banking organizations do not undermine the safety and soundness of such organizations by encouraging excessive risk-taking. The guidance is based on the key principles that a banking organization’s incentive compensation arrangements should (1) provide incentives that do not encourage risk taking beyond the organization’s ability to effectively identify and manage risks, (2) be compatible with effective internal controls and risk management, and (3) be supported by strong corporate governance, including active and effective oversight by the organization’s board of directors. Federal banking regulators periodically examine the incentive compensation arrangements of banking organizations and incorporate any deficiencies in the organization’s supervisory ratings, which can affect certain operating activities. The FRB may initiate enforcement actions if the organization’s incentive compensation arrangements or related risk management, control, or governance processes pose a risk to the organization’s safety and soundness and the organization is not taking prompt and effective measures to correct the deficiencies. The scope and content of the U.S. banking regulators’ policies on incentive compensation are continuing to develop. It cannot be determined at this time if or when a final rule will be adopted or if compliance with such a final rule will adversely affect the ability of the Company and its subsidiaries to hire, retain and motivate their key employees. In October 2022, the SEC adopted a final rule directing national securities exchanges and associations, including NASDAQ, to implement listing standards that require listed companies to adopt policies mandating the recovery or “clawback” of excess incentive-based compensation earned by a current or former executive officer during the three fiscal years preceding the date the listed company is required to prepare an accounting restatement, including to correct an error that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period. The NASDAQ's listing standards pursuant to the SEC's rule became effective on October 2, 2023. The Company adopted a compensation recovery policy pursuant to the NASDAQ listing standards on October 24, 2023, and was included as Exhibit 97.1 to Form 10-K for the year ended December 31, 2023. ### Anti-Tying Restrictions The Bank and its affiliates are prohibited from tying the provision of certain services, such as extensions of credit, to other services offered by the Company. ### Consumer Protection and Privacy We are subject to certain consumer laws and regulations that are designed to protect consumers in transactions with banks. These laws and regulations include the Mortgage Reform and Anti-Predatory Lending Act, the Truth in Lending Act, the Truth in Savings Act, the Home Mortgage Disclosure Act, the Electronic Funds Transfer Act, the Expedited Funds Availability Act, the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Fair Debt Collections Practices Act, the Right to Financial Privacy Act, the Fair Housing Act, the Real Estate Settlement Procedures Act, the Service Members Civil Relief Act, and various state law counterparts. These laws and regulations contain extensive customer privacy protection provisions that limit the ability of financial institutions to disclose non-public information about consumers to non-affiliated third parties and require financial institutions to disclose certain policies to consumers. ### Cybersecurity Various federal and state laws and regulations contain extensive data privacy and cybersecurity provisions, and the regulatory framework for data privacy and cybersecurity is rapidly evolving. The FRB, FDIC, and other bank regulatory agencies have adopted guidelines for safeguarding confidential, personal customer information. These guidelines require each financial institution, under the supervision and ongoing oversight of its board of directors or an appropriate committee thereof, to create, implement, and maintain a comprehensive written information security program designed to ensure the security and confidentiality of customer information, protect against any anticipated threats or hazards to the security or integrity of such information and protect against unauthorized access to or use of such information that could result in substantial harm or inconvenience to any customer. In addition, various U.S. regulators, including the FRB and the SEC, have increased their focus on cyber security through guidance, examinations, and regulations. At the federal level, the GLB Act requires financial institutions to implement policies and procedures regarding the disclosure of nonpublic personal information about consumers to non-affiliated third parties. In general, the statute requires explanations to consumers on policies and procedures regarding the disclosure of such nonpublic personal information and, except as otherwise required by law, prohibits disclosing such personal information except as provided in the financial institution’s policies and procedures. Banking organizations are required to notify their primary federal regulators within 36 hours after identifying a “computer-security incident” that the banking organization believes in good faith could materially disrupt or degrade its business or operations in a manner that would, among other things, jeopardize the viability of its operations, result in customers being unable to access their deposit and other accounts, result in a material loss of revenue, profit or franchise value, or pose a threat to the financial stability of the U.S. In 2023, the SEC issued a final rule that requires disclosure of material cybersecurity incidents, as well as cybersecurity risk management, strategy and governance. Under this rule, banking organizations that are SEC registrants must generally disclose information about a material cybersecurity incident within four business days of determining it is material with periodic updates as to the status of the incident in subsequent filings as necessary. See Item 1A. Risk Factors for a further discussion of risks related to cybersecurity and Item 1C. Cybersecurity for a further discussion of risk management strategies and governance processes related to cybersecurity. ### Bank Secrecy Act and Anti-Money Laundering The Bank is subject to the requirements of the Bank Secrecy Act of 1970 ("BSA") and the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act (“USA PATRIOT Act”) of 2001. The USA PATRIOT Act broadened existing anti-money laundering legislation by imposing new compliance and due diligence obligations focused on detecting and reporting money laundering transactions. These laws and regulations require the Bank to implement policies, procedures, and controls to detect, prevent, and report money laundering and terrorist financing and to verify the identity of our customers. Violations can result in substantial civil and criminal sanctions. In addition, provisions of the USA PATRIOT Act require the federal financial regulatory agencies to consider the effectiveness of a financial institution's anti-money laundering activities when reviewing mergers and acquisitions. The Anti-Money Laundering Act of 2020 (“AMLA”), which amends BSA, was enacted in January 2021. The AMLA is intended to be a comprehensive reform and modernization to U.S. bank secrecy and anti-money laundering laws. Among other things, it codifies a risk-based approach to anti-money laundering compliance for financial institutions; requires the development of standards for evaluating technology and internal processes for BSA compliance; expands enforcement- and investigation-related authority, including increasing available sanctions for certain BSA violations and instituting BSA whistleblower incentives and protections. ### Office of Foreign Assets Control Regulation The U.S. Department of the Treasury’s (“Treasury”) Office of Foreign Assets Control (“OFAC”) administers and enforces economic and trade sanctions against targeted foreign countries and regimes, under authority of various laws, including designated foreign countries, nationals, and others. OFAC publishes lists of specially designated targets and countries. We are responsible for, among other things, blocking accounts of, and transactions with, such targets and countries, prohibiting unlicensed trade and financial transactions with them, and reporting blocked transactions after their occurrence. Failure to comply with these sanctions could have serious legal, financial, and reputational consequences, including causing applicable bank regulatory authorities to not approve merger or acquisition transactions when regulatory approval is required or to prohibit such transactions even if approval is not required. ### Sarbanes-Oxley Act The Sarbanes-Oxley Act (“SOX Act”) of 2002 addresses a broad range of corporate governance, auditing and accounting, executive compensation, and disclosure requirements for public companies and their directors and officers. The SOX Act requires our Chief Executive Officer and Chief Financial Officer to certify the accuracy of certain information included in our quarterly and annual reports. The rules require these officers to certify that they are responsible for establishing, maintaining, and regularly evaluating the effectiveness of our financial reporting and disclosure controls and procedures; that they have made certain disclosures to the auditors and to the Audit Committee of the Board of Directors about our controls and procedures; and that they have included information in their quarterly and annual filings about their evaluation and whether there have been significant changes to the controls and procedures or other factors which would significantly impact these controls subsequent to their evaluation. Section 404 of the SOX Act requires management to undertake an assessment of the adequacy and effectiveness of our internal controls over financial reporting and requires our auditors to attest to and report on the effectiveness of these controls. ### Fair Access to Financial Services In recent years, certain states have enacted, or have proposed to enact, statues, regulations or policies that prohibit financial institutions from denying or canceling products or services to a person or business, or otherwise discriminating against a person or business in making available products or services, on the basis of certain social or political factors or other activities. In August 2025, President Trump signed Executive Order 14331, "Guaranteeing Fair Banking Access for All Americans," which states that it is the policy of the United States that no American should be denied access to financial services because of their constitutionally or statutorily protected beliefs, affiliations, or political views. The Executive Order directs the Treasury Secretary and federal banking regulators to address politicized or unlawful debanking activities. ### 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 any change could impact the regulatory structure under which we or our competitors operate and may significantly increase costs, impede the efficiency of internal business processes, require an increase in regulatory capital, require modifications to our business strategy, and limit our ability to pursue business opportunities in an efficient manner. It could also affect our competitors differently than us, including in a manner that would make them more competitive. A change in statutes, regulations or regulatory policies applicable to the Company or the Bank could have a material, adverse effect on our business, financial condition and results of operations. ### Available Information We file annual, quarterly, and current reports; proxy statements; and other information with the SEC. You may read and copy any document we file with the SEC at the SEC’s website at www.sec.gov that contains reports, proxy and information statements, and other information that issuers file electronically with the SEC. We maintain a website at www.firstcommunitybank.com that makes available, free of charge, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and other information, including any amendments to those reports as soon as reasonably practicable after such reports are filed with, or furnished to, the SEC. You are encouraged to access these reports and other information about our business from the Investor Relations section of our website. The Investor Relations section contains information about our Board of Directors, executive officers, and corporate governance policies and principles, which include the charters of the standing committees of the Board of Directors, the Insider Trading Policy, and the Standards of Conduct governing our directors, officers, and employees. Information on our website is not incorporated by reference in this report. ## Risk factors As filed, 43,683 characters. The risk factors described below discuss potential events, trends, or other circumstances that could adversely affect our business, financial condition, results of operations, cash flows, liquidity, access to capital resources, and, consequently, cause the market value of our common stock to decline. These risks could cause our future results to differ materially from historical results and expectations of future financial performance. If any of the risks occur and the market price of our common stock declines significantly, individuals may lose all, or part, of their investment in our Company. Individuals should carefully consider our risk factors and information included, or incorporated by reference, in this report before making an investment decision. There may be risks and uncertainties that we have not identified or that we have deemed immaterial that could adversely affect our business; therefore, the following risk factors are not intended to be an exhaustive list of all risks we face. ### Risks Related to the Economic Environment ### The current economic environment poses significant challenges. Our financial performance is generally highly dependent on the business environment in the markets in which we operate in and of the U.S. as a whole, which includes the ability of borrowers to pay interest, repay principal on outstanding loans, the value of collateral securing those loans, and demand for loans and other products and services we offer. A favorable business environment is generally characterized by, among other factors, economic growth, efficient capital markets, low inflation, low unemployment, high business and investor confidence, and strong business earnings. Unfavorable or uncertain economic and market conditions can be caused by declines in economic growth, business activity, and investor or business confidence; limitations on the availability, or increases, in the cost of credit and capital; increases in inflation, interest rates, or employee costs; high unemployment; natural disasters; or a combination of these or other factors. Economic conditions in the Company's market footprint, including West Virginia, Virginia, North Carolina and Tennessee, as well as in the broader U.S. economy, may be slow or uneven and are subject to significant uncertainty. Adverse changes in economic conditions, including inflationary pressures, fluctuations in interest rates, energy price volatility, changes in fiscal and monetary policy, or weakened consumer and business confidence, could negatively affect consumer and business spending, borrowing, and repayment capacity. Such conditions could result in reduced demand for loans and other financial services, deterioration in credit quality, declines in collateral values, and increased delinquencies and charge-offs. There can be no assurance that economic conditions will strengthen or remain stable, and any deterioration could materially and adversely affect the Company's business, financial condition, and results of operations. ### Regulatory Risks ***We operate in a highly regulated industry subject to examination, supervision, enforcement, and other legal actions by various federal and state governmental authorities, laws, and judicial and administrative decisions.*** Congress and federal regulatory agencies continually review banking laws, regulations, and policies. Changes to these statutes, regulations, and regulatory policies, including changes in the interpretation or implementation, may cause substantial and unpredictable effects, require additional costs, limit the types of financial services and products offered and fees charged for such services and products, or allow non-banks to offer competing financial services and products. Failure to follow laws, regulations, and policies may result in sanctions by regulatory agencies and civil money penalties, which could have material adverse effects on our reputation, business, financial condition, and results of operations. We have policies and procedures designed to prevent violations; however, there is no assurance that violations will not occur. Existing and future laws, regulations, and policies yet to be adopted may make compliance more difficult or expensive; restrict our ability to originate, broker, or sell loans; further limit or restrict commissions, interest, and other charges earned on loans we originate or sell; and adversely affect our business, financial condition, and results of operations. ***The Bank’s ability to pay dividends is subject to regulatory limitations that may affect the Company’s ability to pay expenses and dividends to shareholders.*** The Company is a legal entity that is separate and distinct from its subsidiaries. The Company depends on the Bank and its other subsidiaries for cash, liquidity, and the payment of dividends to the Company to pay operating expenses and dividends to stockholders. There is no assurance that the Bank will have the capacity to pay dividends to the Company in the future or that the Company will not require dividends from the Bank to satisfy obligations. The Bank’s dividend payment is governed by various statutes and regulations. For additional information, see “Payment of Dividends” in Item 1 of this report. The Company may not be able to service obligations as they become due if the Bank is unable to pay dividends sufficient to satisfy the Company’s obligations, including our common stock. Consequently, the inability to receive dividends from the Bank could adversely affect the Company’s financial condition, results of operations, cash flows, and prospects. ### Market and Interest Rate Risk ### We are subject to interest rate risk. Interest rate risk results principally when interest-earning assets and interest-bearing liabilities reprice at differing times, when underlying rates change at different levels or in varying degrees, when there is an unequal change in the spread between two or more rates for different maturities, and when embedded options, if any, are exercised. Our earnings and cash flows are largely dependent upon net interest income. Interest rates are highly sensitive to many factors that are beyond our control, including general economic conditions and policies of various governmental and regulatory agencies, particularly, the Federal Reserve. Changes in monetary policy and interest rates could influence the interest we receive on loans and securities and the amount of interest we pay on deposits and borrowings. Further, such changes could also affect our ability to originate loans and obtain deposits and the fair value of our financial assets and liabilities. If the interest rates paid on deposits and other borrowings increase at a faster rate than the interest rates received on loans and other investments, our net interest income and earnings could be adversely affected. Conversely, if interest rates received on loans and other investments fall more quickly than interest rates paid on deposits and other borrowings, our net interest income and earnings could also be adversely affected. ***Changes in the fair value of our investment securities may reduce stockholders’ equity.*** A decline in the estimated fair value of the Company's investment portfolio may result in a decline in stockholders’ equity, book value per common share, and tangible book value per common share. Unrealized losses are recorded even though the securities are not sold or held for sale. If a debt security is never sold and no credit impairment exists, the decrease is recovered at the security’s maturity. Equity securities have no stated maturity; therefore, declines in fair value may or may not be recovered over time. We conduct quarterly reviews of our securities portfolio to determine if unrealized losses are temporary or other than temporary. No assurance can be given that we will not need to recognize a credit loss for the decline in fair value in the future. Additional credit loss provision may materially affect our financial condition and earnings. For additional information, see Note 1, “Basis of Presentation and Significant Accounting Policies,” and Note 3, “Debt Securities,” to the Consolidated Financial Statements in Part II, Item 8 of this report. ***The repeal of the federal prohibitions on payment of interest on demand deposits could increase our interest expense.*** All federal prohibitions on the ability of financial institutions to pay interest on demand deposit accounts were repealed as part of the Dodd-Frank Act. We do not know what interest rates other institutions may offer as market interest rates begin to increase. Our interest expense will increase and net interest margin will decrease if we offer interest on demand deposits to attract additional customers or maintain current customers, which could have a material adverse effect on our business, financial condition, and results of operations. ### Credit Risk ***Our accounting estimates and risk management processes rely on analytical and forecasting models.*** The processes we use to estimate probable loan losses and to measure the fair value of financial instruments, as well as the processes used to estimate the effects of changing interest rates and other market measures on our financial condition and results of operations, depend upon analytical and forecasting models. These models reflect assumptions that may not be accurate, particularly in times of market stress or other unforeseen circumstances. Even if these assumptions are adequate, the models may prove to be inadequate or inaccurate because of other flaws in their design or their implementation. If the models we use for interest rate risk and asset/liability management are inadequate, we may incur increased or unexpected losses upon changes in market interest rates or other market measures. If the models used for determining probable loan losses are inadequate, the allowance for credit losses may not be sufficient to cover actual loan losses and an increase in the loan loss provision could materially and adversely affect our operating results. Federal regulatory agencies regularly review our loans and allowance for credit losses as an integral part of the examination process. There is no assurance that we will not, or that regulators will not require us to, increase our allowance in future periods, which could materially and adversely affect our earnings and profitability. If the models we use to measure the fair value of financial instruments are inadequate, the fair value of such financial instruments may fluctuate unexpectedly or may not accurately reflect what we could realize upon the sale or settlement of such financial instruments. Any such failure in our analytical or forecasting models could have a material adverse effect on our business, financial condition, and results of operations. For additional information, "Allowance for Credit Losses" in the "Critical Accounting Policies" section in Part II, Item 7 and Note 1, "Basis of Presentation and Significant Accounting Policies," to the Consolidated Financial Statements in Part II, Item 8 of this report. ### We are subject to credit risk associated with the financial condition of other financial institutions Credit risk is the risk of not collecting payments pursuant to the contractual terms of loans, leases and investment securities. Financial institutions are interrelated as a result of trading, clearing, counterparty, and other relationships. We have exposure to different industries and counterparties, and we routinely execute transactions with counterparties in the financial services industry, including brokers and dealers, commercial banks, investment banks, investment companies, and other institutional clients. Our ability to engage in routine funding transactions could be adversely affected by the failure, actions, and commercial soundness of other financial institutions. These transactions may expose us to credit risk if our counterparty or client defaults on their contractual obligation. Our credit risk may increase if the collateral we hold cannot be realized or liquidated at prices sufficient to recover the full amount of the loan or derivative exposure due to us. In the event of default, we may be required to provide collateral to secure the obligation to the counterparties. In the event of a bankruptcy or insolvency proceeding involving one of such counterparties, we may experience delays in recovering the assets posted as collateral or may incur a loss to the extent that the counterparty was holding collateral in excess of the obligation to such counterparty. Losses from routine funding transactions could have a material adverse effect on our financial condition and results of operations. ### Our commercial loan portfolio may expose us to increased credit risk. Commercial business and real estate loans generally have a higher risk of loss because loan balances are typically larger than residential real estate and consumer loans and repayment is usually dependent on cash flows from the borrower’s business or the property securing the loan. Our commercial business loans are primarily made to small business and middle market customers. As of December 31, 2025, commercial business and real estate loans totaled $1.53 billion, or 66.26%, of our total loan portfolio. As of the same date, our largest outstanding commercial business loan was $15.30 million and largest outstanding commercial real estate loan was $12.30 million. Commercial construction loans generally have a higher risk of loss due to the assumptions used to estimate the value of property at completion and the cost of the project, including interest. If the assumptions and estimates are inaccurate, the value of completed property may fall below the related loan amount. As of December 31, 2025, commercial construction loans totaled $63.90 million, or 2.76% our total loan portfolio. As of the same date, our largest outstanding commercial construction loan was $19.90 million. Losses from our commercial loan portfolio could have a material adverse effect on our financial condition and results of operations. ### Operational Risks ***We face strong competition from other financial institutions, financial service companies, and organizations that offer services similar to our offerings.*** Our larger competitors may have substantially greater resources and lending limits, name recognition, and market presence that allow them to offer products and services that we do not offer and to price loans and deposits more aggressively than we do. The expansion of non-bank competitors, which may have fewer regulatory constraints and lower cost structures, has intensified competitive pressures on core deposit generation and retention. For additional information, see "Competition" in Item 1 of this report. Our success depends, in part, on our ability to attract and retain customers by adapting our products and services to evolving customer needs and industry and economic conditions. Failure to perform in any of these areas could weaken our competitive position, reduce deposits and loan originations, and adversely affect our financial condition, results of operations, cash flows, and prospects. ### Liquidity risk could impair our ability to fund operations. Liquidity is essential to our business and the inability to raise funds through deposits, borrowings, equity and debt offerings, or other sources could have a materially adverse effect on our liquidity. Company specific factors such as a decline in our credit rating, an increase in the cost of capital from financial capital markets, a decrease in business activity due to adverse regulatory action or other company specific event, or a decrease in depositor or investor confidence may impair our access to funding with acceptable terms adequate to finance our activities. General factors related to the financial services industry such as a severe disruption in financial markets, a decrease in industry expectations, or a decrease in business activity due to political or environmental events may impair our access to liquidity. Additionally, negative news about us or the banking industry in general could negatively impact market and/or customer perceptions of our company, which could lead to a loss of depositor confidence and an increase in deposit withdrawals, particularly among those with uninsured deposits. Furthermore, as we and other regional banking organizations experienced in 2023, the failure of other financial institutions may cause deposit outflows as customers spread deposits among several different banks so as to maximize their amount of FDIC insurance, move deposits to banks deemed "too big to fail" or remove deposits from the banking system entirely. As of December 31, 2025, approximately 19.54% of our deposits were uninsured and we rely on these deposits for liquidity. A failure to maintain adequate liquidity could have a material adverse effect on our business, financial condition and results of operations. ***We may require additional capital in the future that may not be available when needed.*** We may need to raise additional capital to strengthen our capital position, increase our liquidity, satisfy obligations, or pursue growth objectives. Our ability to raise additional capital depends on current conditions in capital markets, which are outside our control, and our financial performance. Certain economic conditions and declining market confidence may increase our cost of funds and limit our access to customary sources of capital, such as borrowings with other financial institutions, repurchase agreements, and availability under the FRB’s Discount Window. Events that limit access to capital markets and the inability to obtain capital may have a materially adverse effect on our business, financial condition, results of operations, and market value of common stock. We cannot provide any assurance that additional capital will be available, on acceptable terms or at all, in the future. ### We may experience future goodwill impairment. We test goodwill for impairment annually, or more frequently if events or circumstances indicate there may be impairment, using either a quantitative or qualitative assessment. If we determine that the carrying amount of a reporting unit is greater than its fair value, a goodwill impairment charge is recognized for the difference, but limited to the amount of goodwill allocated to that reporting unit. Unfavorable or uncertain economic and market conditions may trigger additional impairment charges that may cause an adverse effect on our earnings and financial position. For additional information, see “Goodwill” in the “Critical Accounting Policies” section in Part II, Item 7 and Note 1, “Basis of Presentation and Significant Accounting Policies,” and Note 8, “Goodwill and Other Intangible Assets,” to the Consolidated Financial Statements in Part II, Item 8 of this report. ### We may be required to pay higher FDIC insurance premiums or special assessments. Our deposits are insured up to applicable limits by the DIF of the FDIC and we are subject to deposit insurance assessments to maintain the DIF. For additional information, see “Deposit Insurance and Assessments” in Item 1 of this report. We are unable to predict future insurance assessment rates; however, deterioration in our risk-based capital ratios or adjustments to base assessment rates may result in higher insurance premiums or special assessments. The deterioration of banking and economic conditions and financial institution failures deplete the FDIC’s DIF and reduce the ratio of reserves to insured deposits. If the DIF is unable to meet funding requirements, increases in deposit insurance premium rates or special assessments may be required. Future assessments, increases, or required prepayments related to FDIC insurance premiums may negatively affect our financial condition and results of operations. ***Our operational capabilities depend on internal and third-party systems which could fail, be breached or otherwise be compromised.*** We rely on electronic communications and information systems, including those provided by third-party service providers, to conduct our business operations. Risks associated with our reliance on internal and third-party technology include cybersecurity incidents, operational failures and service interruptions, misconduct by our employees or those of third parties, and reputational damages. The Bank cannot be certain that we will receive timely notification from our third parties of cyberattacks or other cybersecurity breaches affecting their systems. Like other financial institutions, the Bank experiences malicious cyber activity directed at our vendors and other service providers. There is no guarantee that the measures the Company takes will provide absolute security or recoverability given that the techniques used in cyberattacks are complex and frequently change and are difficult to anticipate. Our employees and third parties may expose the Company and the Bank to risk as a result of human error, misconduct, malfeasance, or a failure or breach of systems and infrastructure. For example, the Company’s ability to conduct business may be adversely affected by any significant disruptions, including to third parties service providers. Our third-party service providers include large entities with significant market presence in their respective fields; therefore, their services could be difficult to replace quickly if there are operational failures or service interruptions. ***We face cybersecurity risks which could result in the disclosure of confidential information, adversely affect the Company’s operations, cause reputational damage, and create significant legal and financial exposure.*** The Company, the Bank and its customers, regulators, and other third parties, including other financial services institutions and companies engaged in data processing, have been subject to and are likely to continue to be the target of cyberattacks, such as denial of service attacks, hacking, malware or ransomware intrusion, data corruption attempts, terrorist activities, or identity theft. Cyberattacks may expose security vulnerabilities in the Company’s systems or the systems of third parties or other security measures that could result in the unauthorized gathering, monitoring, misuse, release, loss, or destruction of confidential, proprietary, or sensitive information. A cyberattack could also damage the Company’s systems by introducing material disruptions to the Company’s or the Company’s customers’ or other third parties’ network access or business operations. As cyber threats continue to evolve, the Company may be required to expend significant additional resources to continue to modify or enhance the Company’s protective measures or to investigate and remediate any information security vulnerabilities or incidents. Despite efforts to ensure the integrity of the Company’s systems and implement controls, processes, policies and other protective measures, the Company may not be able to anticipate all security breaches, nor may the Company be able to implement sufficient preventive measures against such security breaches, which may result in material losses or other adverse consequences. Even the most advanced internal control environment may be vulnerable to compromise. Persistent attackers may succeed in penetrating defenses given enough resources, time, and motive. The techniques used by cyber criminals change frequently and may not be recognized until launched or well after a breach has occurred. In addition, the existence of cyberattacks or security breaches at third-party vendors with access to the Company’s data may not be disclosed to the Company in a timely manner. A successful penetration or circumvention of system security could cause serious negative consequences, including loss of customers and business opportunities; costs associated with maintaining business relationships after an attack or breach; significant disruption to the Company’s operations and business; misappropriation, exposure or destruction of the Company’s confidential information, intellectual property, funds and those of the Company’s customers; damage to the Company’s or the Company’s customers’ or third parties’ computers or systems; or a violation of applicable privacy laws and other laws. This could result in litigation exposure, regulatory fines, penalties, loss of confidence in the Company’s security measures, reputational damage, reimbursement or other compensatory costs, and additional compliance costs, which could adversely impact the Company’s results of operations, liquidity, and financial condition. In addition, the Company may not have adequate insurance coverage to compensate for losses from a cybersecurity event. ***Increasing fraud risk could adversely affect our business, financial condition, and reputation.*** The Company, the Bank and its customers are exposed to an increasing risk of fraud, including cyber fraud, identity theft, account takeover, and other fraudulent activities. The sophistication and frequency of these schemes continue to grow, driven by advances in technology and the proliferation of digital banking channels. Fraudulent activity can result in financial losses for us or our customers, increased operational costs, and potential legal exposure. Although the Company has enhanced security measures, including authentication protocols, transaction monitoring, and fraud detection systems, these controls may not be sufficient to prevent all fraudulent activity. Criminals continuously adapt their methods to circumvent existing safeguards, and emerging technologies such as artificial intelligence may further enhance their ability to perpetrate fraud. Significant fraud-related losses could negatively impact our earnings, capital, and liquidity. In addition, fraud incidents may harm our reputation, erode customer trust, and lead to regulatory scrutiny or enforcement actions. Failure to effectively manage and mitigate fraud risk could have a material adverse effect on our business, financial condition, and results of operations. ***We may face new operational, compliance, reputational and legal risks due to the development and use of artificial intelligence.*** The Company, the Bank and many of its third-party services providers currently use and may increasingly develop or incorporate artificial intelligence ("AI") technology in our operations, processes, products, or services. The development and use of AI present a number of opportunities for the Company, as we as risks that are difficult to predict and may evolve rapidly. AI could significantly disrupt the business models, investment strategies, operational processes, and markets in which we operate and subject us to increased competition, which could have a material adverse effect on our business, financial condition and results of operations. Some of our competitors may be more successful than us in the development and implementation of new technologies, including services and platforms based on AI, to address investor demands or improve operations. If we are unable to adequately advance our capabilities in these areas or do so at a slower pace than others in our industry, we may be at a disadvantage. The use of AI may also include the input of sensitive personal information, trade secrets, and other protected data by both us and third parties and could result in the exposure of such information. Regulatory expectations, supervisory guidance and legal standards related to AI and emerging technologies are evolving and may vary across jurisdictions. New or changing laws, regulations or supervisory interpretations could require us to modify or limit its use of AI technologies, increase compliance and governance costs, or subject the Company to additional examination, reporting, or liability risks. In addition, public perception of AI use, including concerns regarding transparency, fairness, data usage and accountability, could results in reputational harm if our use of such technologies is perceived negatively. ***We continue to encounter technological change and must effectively anticipate and implement new technology.*** The financial services industry continues to experience rapid technological change with the introduction of new, and increasingly complex, technology-driven products and services. The effective use of technology increases operational efficiency that enables financial institutions to meet rapidly evolving customer demands. Our future success depends, in large part, on our ability to provide products and services that satisfactorily meet the financial needs of our customers, as well as to realize additional efficiencies in our operations. We may fail to use technology-driven products and services effectively to better serve our customers and increase operational efficiency or sufficiently invest in technology solutions and upgrades to ensure systems are operating properly. Further, many of our competitors have substantially greater resources to invest in technology, which may adversely affect our ability to compete. In addition, technology and other changes have made it possible for non-banks to offer products and services traditionally provided by banks. In particular, the activity of fintechs/wealthtechs has grown significantly over recent years and is expected to continue to grow. Some fintechs/wealthtechs are not subject to the same regulation as we are, which may allow them to be more competitive. Fintechs/wealthtechs have and may continue to offer bank or bank-like products and a number of such organizations have applied for bank or industrial loan charters while others have partnered with existing banks to allow them to offer deposit products to their customers. Increased competition from fintechs/wealthtechs and the growth of digital banking may also lead to pricing pressures as competitors offer more low-fee and no-fee products. ### We may be subject to claims and litigation pertaining to intellectual property. Banking and other financial services companies, such as the Company, rely on technology companies to provide information technology products and services necessary to support the Company’s day-to-day operations. Technology companies often enter into litigation based on allegations of patent infringement or other violations of intellectual property rights. In addition, patent holding companies seek to monetize patents they have purchased or otherwise obtained. Competitors of the Company’s vendors, or other individuals or companies, have from time to time claimed to hold intellectual property sold to the Company by its vendors. Such claims may increase in the future as the financial services sector becomes more reliant on information technology vendors. The plaintiffs in these actions often seek injunctions and substantial damages. Regardless of the scope or validity of such patents or other intellectual property rights, or the merits of any claims by potential or actual litigants, the Company may have to engage in protracted litigation. Such litigation is often expensive, time consuming, disruptive to the Company’s operations, and distracting to management. If the Company is found to have infringed on one or more patents or other intellectual property rights, it may be required to pay substantial damages or royalties to a third party. In certain cases, the Company may consider entering into licensing agreements for disputed intellectual property, although no assurance can be given that such licenses can be obtained on acceptable terms or that litigation will not occur. These licenses may also significantly increase the Company’s operating expenses. If legal matters related to intellectual property claims were resolved against the Company or settled, the Company could be required to make payments in amounts that could have a material adverse effect on its business, financial condition, and results of operations. ### Risks Related to Our Common Stock ### The market price of our common stock may be volatile. Stock price volatility may make it more difficult for our stockholders to resell their common stock when desired. Our common stock price may fluctuate significantly due to a variety of factors that include the following: - actual or expected variations in quarterly results of operations; - recommendations by securities analysts; - operating and stock price performance of comparable companies, as deemed by investors; - news reports relating to trends, concerns, and other issues in the financial services industry; - perceptions in the marketplace about our Company or competitors; - new technology used, or services offered, by competitors; - significant acquisitions or business combinations, strategic partnerships, joint ventures, or capital commitments by, or involving, our Company or competitors; - failure to integrate acquisitions or realize expected benefits from acquisitions; - changes in government regulations; and - geopolitical conditions, such as acts or threats of terrorism or military action. General market fluctuations; industry factors; political conditions; and general economic conditions and events, such as economic slowdowns, changes in trade policy, recessions, interest rate changes, or credit loss trends, could also cause our common stock price to decrease regardless of operating results. ***The trading volume in our common stock is less than that of other larger financial services companies.*** Although our common stock is listed for trading on the NASDAQ, the trading volume in our common stock is less than that of other, larger financial services companies. 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 our 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 lower trading volume of our common stock, significant sales of our common stock or the expectation of these sales could cause our stock price to fall. ### We may not continue to pay dividends on our common stock in the future. Our common stockholders are only entitled to receive dividends when declared by our Board of Directors from funds legally available for such payments. Although we have historically declared cash dividends on our common stock, we are not required to do so, and may reduce or eliminate our common stock dividend in the future. This could adversely affect the market price of our common stock. As a financial holding company, the Company’s ability to declare and pay dividends is dependent on certain federal regulatory considerations, including the guidelines of the Federal Reserve about capital adequacy and dividends. For additional information, see “Payment of Dividends” in Item 1 of this report. ### General Risks ***We are subject to environmental liability risk associated with lending activities.*** A significant portion of our loan portfolio is secured by real property. In the ordinary course of business, we foreclose on and take title to properties that secure certain loans. Hazardous or toxic substances could be found on properties we own. If substances are present, we may be liable for remediation costs, personal injury claims, and property damage and our ability to use or sell the property would be limited. We have policies and procedures in place that require environmental reviews before initiating foreclosure actions on real property; however, these reviews may not detect all potential environmental hazards. Environmental laws that require us to incur substantial remediation costs, which could materially reduce the affected property’s value, and other liabilities associated with environmental hazards could have a material adverse effect on our financial condition and results of operations. ### Potential acquisitions may disrupt our business and dilute stockholder value. We may seek merger or acquisition partners that are culturally similar, have experienced management, and possess either significant market presence or the potential for improved profitability through financial management, economies of scale, or expanded services. Risks inherent in acquiring other banks, businesses, and banking branches may include the following: - potential exposure to unknown or contingent liabilities of the target company; - exposure to potential asset quality issues of the target company; - difficulty, expense, and delays of integrating the operations and personnel of the target company; - potential disruption to our business; - potential diversion of management’s time and attention; - loss of key employees and customers of the target company; - difficulty in estimating the value of the target company; - potential changes in banking or tax laws or regulations that may affect the target company; - unexpected costs and delays; - the target company’s performance does not meet our growth and profitability expectations; - limited experience in new markets or product areas; - increased time, expenses, and personnel as a result of strain on our infrastructure, staff, internal controls, and management; and - potential short-term decreases in profitability. We regularly evaluate merger and acquisition opportunities and conduct due diligence activities related to possible transactions with other financial institutions and financial services companies. As a result, merger or acquisition discussions and, in some cases, negotiations may take place and future mergers or acquisitions involving the payment of cash or the issuance of debt or equity securities may occur at any time. Acquisitions typically involve goodwill, a purchase premium over the acquired company’s book and market values; therefore, dilution of our tangible book value and net income per common share may occur. If we are unable to realize revenue increases, cost savings, geographic or product presence growth, or other projected benefits from acquisitions, our financial condition and results of operations may be adversely affected. ### Attractive acquisition opportunities may not be available in the future. We expect banking and financial companies, which may have significantly greater resources, to compete for the acquisition of financial service businesses. This competition could increase the price of potential acquisitions that we believe are attractive. If we fail to receive proper regulatory approval, we will not be able to consummate an acquisition. Our regulators consider our capital, liquidity, profitability, regulatory compliance, level of goodwill and intangible assets, and other factors when considering acquisition and expansion proposals. Future acquisitions may be dilutive to our earnings and equity per share of our common stock. ***We may lose members of our management team and have difficulty attracting skilled personnel.*** Our success depends, in large part, on our ability to attract and retain key employees. Competition for the best people can be intense. The unexpected loss of key personnel could have a material adverse impact on our business due to the loss of certain skills, market knowledge, and industry experience and the difficulty of promptly finding qualified replacement personnel. Certain existing and proposed regulatory guidance on compensation may also negatively affect our ability to retain and attract skilled personnel. ### Our internal controls and procedures may fail or be circumvented. We review our internal controls over financial reporting quarterly and enhance controls in response to these assessments, internal and external audit, and regulatory recommendations. A control system, no matter how well conceived and operated, includes certain assumptions and can only provide reasonable assurance that the objectives of the control system are met. These controls may be circumvented by individual acts, collusion, or management override. Any failure or circumvention related to our controls and procedures or failure to follow regulations related to controls and procedures could have a material adverse effect on our business, reputation, results of operations, and financial condition. ***We are subject to environmental, social and governance ("ESG") risks that could adversely affect the Company's results of operations, reputation, and the market price of its securities.*** The Company is subject to a variety of risks arising from ESG matters. ESG matters include environmental and climate change activism, diversity activism, and racial and social justice issues. Such matters may involve our personnel, customers, or third parties with whom we do business. Risks arising from ESG matters may adversely affect, among other things, the Company’s reputation and the market price of our securities. Further, the Company may be exposed to negative publicity based on the identity and activities of our shareholders, those to whom we lend and with which we otherwise do business, and the public’s view of the approach and requirements of our state or federal regulators, customers, and business partners with respect to ESG matters. Any such negative publicity could arise through traditional media or electronic social media platforms. The Company’s relationships and reputation with its existing and prospective customers and third parties with which we do business could be damaged if we were to become the subject of any such negative publicity. This, in turn, could have an adverse effect on the Company’s ability to attract and retain customers and employees and could have a negative impact on the market price for our securities. Certain investors have begun to consider the steps taken and resources allocated by financial institutions and other commercial organizations with respect to ESG matters when making investment decisions. Certain investors are beginning to incorporate the business risks of ESG regulation and activism and the adequacy of companies’ responses to these into their investment decisions. These shifts in investing priorities may result in adverse effects on the market price of the Company’s securities. Specifically, environmental activism may adversely impact the economic viability of many of the Company’s deposit and loan customers in our West Virginia and southwestern Virginia markets. We have customers who operate in carbon-intensive industries like coal, oil and gas that are exposed to climate activism risks and those risks created by a transition to a less carbon-dependent economy, as well as customers who operate in low-carbon industries that may be subject to risks associated with new technologies. Further, the effects of climate change activism may negatively impact regional and local economic activity, which could impact the economies of the communities the Company serves and in which we operate. The Company’s business, reputation and ability to attract and retain employees and customers may also be harmed if our response to ESG activism is perceived to be excessive or insufficient. Ongoing legislative or regulatory uncertainties and changes regarding ESG risk management and practices may result in higher regulatory, compliance, credit and reputational risks and costs and may subject us to potentially conflicting requirements. ## Cybersecurity As filed, 7,611 characters. ### Cybersecurity Risk Management and Strategy Cybersecurity risks for financial institutions have significantly increased in recent years in part because of the proliferation of new technologies to facilitate and conduct financial transactions. The Company maintains a comprehensive risk-based cybersecurity program to identify, measure, manage, and disclose material cybersecurity risks. The Company utilizes the Federal Financial Institution Examination Council’s ("FFIEC") Cybersecurity Assessment Tool ("CAT") as a diagnostic test to help identify the Company’s cyber risk level and determine the maturity of our cybersecurity program. The CAT is supplemented by an annual self-assessment and external audits and reviews, the results of which drive the development and implementation of the Company’s cybersecurity strategy to ensure that cyber risk management practices are aligned with the risk profile of the Company. The Company uses the Center for Internet Security ("CIS") Critical Security Controls framework to balance cybersecurity risk exposure with investment in mitigation strategies. This framework provides a prescriptive, prioritized set of cybersecurity safeguards that fully align with those of the National Institute of Standards and Technology, the International Standards Organization *27000* series, and the requirements and guidance from applicable regulatory authorities, including the Federal Financial Institutions Examination Council. The Company’s cybersecurity strategy is enabled by people, processes, and technology that provide multilayered defenses including advanced capabilities for early and rapid cyber threat identification, detection, protection, response, and recovery. The Company employs a team of dedicated, skilled talent to operationalize the cybersecurity strategy. The internal team is supported by arrangements with a third party to provide continuous endpoint monitoring and incident response. The Company’s entire workforce receives mandatory cybersecurity training that includes quarterly social engineering exercises and informative online courses assigned based on assessed skill gaps. The Company also provides cyber risk awareness guidance to customers and promotes customer cyber hygiene through periodic communications. The Company conducts scenario-driven test exercises simulating impacts and consequences developed through analysis of real-world cybersecurity incidents as well as known and anticipated cyber threats. These exercises are designed to assess the viability of the Company’s incident response and management programs and provide the basis for continuous improvement. The Company actively monitors and evaluates threats, events, and the performance of its business operations and continually adapts its risk mitigation activities accordingly. To that end, the Company maintains a comprehensive vulnerability management program that includes regular internal scans of the entire network to identify and measure the severity of security vulnerabilities, a team of dedicated network engineers who are responsible for fixing identified vulnerabilities within pre-defined timeframes based on severity, and at least annual independent network penetration testing by a qualified *third* party. Cyber risk monitoring also includes the Company’s arrangements with and exposure to third party service providers. We identify the criticality of our *third*-party service providers, in part, by determining their use of and access to confidential customer information. We conduct comprehensive cybersecurity reviews on all *third* parties that have access to confidential information. Our *third*-party reviews make use of technology that provides significant visibility into *third* party organizations, in real time, to assess *third* party compliance with a host of globally recognized IT security standards and frameworks and the likelihood of a cyberattack on a *third* party. The Company also maintains a robust firewall system and firewall management program to restrict inbound and outbound network traffic. A dedicated team of network engineers manages firewall rulesets and monitors firewall health and alerting. The risks from cybersecurity threats have not materially affected the Company’s business strategy, results of operations, or financial condition. Although the Company has invested substantial resources to manage and reduce cybersecurity risk, it is not possible to eliminate this risk. The Company obtains insurance that protects against certain losses, expenses, and damages associated with cybersecurity risk. See Item 1A, “Risk Factors,” for additional information regarding cybersecurity risk. ### Cybersecurity Governance The Company’s Board of Directors devotes significant time and attention to its oversight of cybersecurity risk. Select members of the Board serve on the Information Systems Steering Committee ("ISSC"), which is responsible for approving IT strategic plans and all IT-related policies and cybersecurity program, among other matters. To fulfill its responsibilities, the ISSC receives periodic reports on the cybersecurity risk management program, from executive leadership, including information security risks and incidents, emerging threats, and independent audit reports on the effectiveness of the control environment. Executive leadership is responsible for management of the cybersecurity program. A dedicated IT Security team manages daily operations of the cybersecurity program and reports directly to the Chief Risk Officer ("CRO"). The CRO chairs the Information Security Sub-Committee ("Sub-Committee"), a management committee that meets regularly to advance the cybersecurity risk management program and strategic cyber initiatives. The Sub-Committee’s actions and activities are reviewed by the ISSC at least quarterly. The Company has a management level Change Control Board ("CCB") which is responsible for reviewing and approving actions of the vulnerability management team, changes to hardware/software including the introduction of new hardware/software, and changes to firewall rulesets. The IT Security Team participates in and votes on matters brought before CCB. Additionally, the Company has a Cyber Incident Response Team ("CIRT") which includes key members of management including the CRO and the Chief Operating Officer. The CIRT is empowered to respond effectively to any cyber-specific events with escalation up to executive leadership and the Board. Members of the CIRT and other key stakeholders throughout the Company receive annual training on cyber incident preparedness and response. The CRO, Derek Bonnett, has been employed by the Corporation since 2016, having served as the Director of Internal Audit until being named the Chief Risk Officer in 2021. He has years of significant cross-functional experience in managing cybersecurity and risk operations, providing strategic leadership and investment priorities, and collaborating across lines of business to achieve effective results. Mr. Bonnett is a Certified Public Accountant, Certified Internal Auditor, and Certified Information Systems Auditor. He holds a Bachelor of Science in Business Administration with a concentration in Accounting obtained from Concord University in *2010,* from which he graduated valedictorian of his class. He is a recipient of the Executive Leadership Certificate from the University of Pennsylvania’s Wharton School of Business and is a graduate, volunteer, and Capstone Advisor to students of the American Bankers Association’s Stonier Graduate School of Banking. ## Properties As filed, 906 characters. We own our corporate headquarters located at One Community Place, Bluefield, Virginia. As of December 31, 2025, the Bank provided financial services through a network of branch locations in West Virginia (17 branches), Virginia (23 branches), North Carolina (10 branches), and Tennessee (2 branches). We own all of the branch locations with the exception of one, in West Virginia, which is being leased. As of December 31, 2025, there were no mortgages or liens against any of the properties. We believe that our properties are suitable and adequate to serve as financial services facilities. A list of all branch and ATM locations is available on our website at www.firstcommunitybank.com. Information contained on our website is not part of this report. For additional information, see Note 7, “Premises, Equipment, and Leases,” to the Consolidated Financial Statements in Part II, Item 8 of this report. ## Legal proceedings As filed, 367 characters. We are currently a defendant in various legal actions and asserted claims in the normal course of business. Although we are unable to assess the ultimate outcome of each of these matters with certainty, we are of the belief that the resolution of these actions should not have a material adverse effect on our financial position, results of operations, or cash flows. ## Management's discussion and analysis As filed, 69,030 characters. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand our financial condition, changes in financial condition, and results of operations. MD&A contains forward-looking statements and should be read in conjunction with our consolidated financial statements, accompanying notes, and other financial information included in this report. ### Executive Overview First Community Bankshares, Inc. is a financial holding company, headquartered in Bluefield, Virginia, that provides banking products and services through its wholly owned subsidiary First Community Bank (the “Bank”), a 151 year-old Virginia-chartered banking institution. Unless the context suggests otherwise, the terms “First Community,” “Company,” “we,” “our,” and “us” refer to First Community Bankshares, Inc. and its subsidiaries as a consolidated entity. As of December 31, 2025, the Bank operated 52 branches in Virginia, West Virginia, North Carolina and Tennessee. Our primary source of earnings is net interest income, the difference between interest earned on assets and interest paid on liabilities, which is supplemented by fees for services, commissions on sales, and various deposit service charges. We fund our lending and investing activities primarily through the retail deposit operations of our branch banking network supplemented by retail and wholesale repurchase agreements and Federal Home Loan Bank (“FHLB”) borrowings. We invest our funds primarily in loans to retail and commercial customers and various investment securities. The Bank offers trust management, estate administration, and investment advisory services through its Trust Division and wholly owned subsidiary First Community Wealth Management (“FCWM”). The Trust Division manages inter vivos trusts and trusts under will, develops and administers employee benefit and individual retirement plans, and manages and settles estates. Fiduciary fees for these services are charged on a schedule related to the size, nature, and complexity of the account. Revenues consist primarily of commissions on assets under management and investment advisory fees. As of December 31, 2025, the Trust Division and FCWM managed and administered $1.79 billion in combined assets under various fee-based arrangements as fiduciary or agent. On January 23, 2026, the Company completed its previously announced merger (the “Merger”) with Hometown Bancshares, Inc. a West Virginia corporation headquartered in Middlebourne, West Virginia (“Hometown”), pursuant to an Agreement and Plan of Merger (the “Agreement”) dated July 19, 2025, by and between the company and Hometown. At the Effective Time, Hometown merged with and into the Company, with the Company as the surviving corporation in the Merger. For additional information, see Note 24, “Subsequent Events,” to the Consolidated Financial Statements in Item 8, of this report. ### Critical Accounting Policies Our consolidated financial statements are prepared in conformity with generally accepted accounting principles (“GAAP”) in the U.S. and prevailing practices in the banking industry. Our accounting policies, as presented in Note 1, “Basis of Presentation and Significant Accounting Policies,” to the Consolidated Financial Statements in Item 8 of this report are fundamental in understanding MD&A and the disclosures presented in Item 8, “Financial Statements and Supplementary Data,” of this report. Management may be required to make significant estimates and assumptions that have a material impact on our financial condition or operating performance. Due to the level of subjectivity and the susceptibility of such matters to change, actual results could differ significantly from management’s assumptions and estimates. Based on the valuation techniques used and the sensitivity of financial statement amounts to the methods, assumptions, and estimates used, we have identified the allowance for loan losses and goodwill as the accounting areas that require the most subjective or complex judgments or are the most susceptible to change. ### Allowance for Credit Losses or "ACL" The ACL reflects management’s estimate of losses that will result from the inability of our borrowers to make required loan payments. Management uses a systematic methodology to determine its ACL for loans held for investment and certain off-balance-sheet credit exposures. Management considers the effects of past events, current conditions, and reasonable and supportable forecasts on the collectability of the loan portfolio. The Company’s estimate of its ACL involves a high degree of judgment; therefore, management’s process for determining expected credit losses may result in a range of expected credit losses. It is possible that others, given the same information, may at any point in time reach a different reasonable conclusion. The Company’s ACL recorded in the balance sheet reflects management’s best estimate of expected credit losses. The Company recognizes in net income the amount needed to adjust the ACL for management’s current estimate of expected credit losses. See Note 1 – "Basis of Presentation - Significant Accounting Policies" in this Annual Report on Form 10-K for further detailed descriptions of our estimation process and methodology related to the ACL. See also Note 6 — "Allowance for Credit Losses" in this Annual Report on Form 10-K, “Allowance for Credit Losses” in this MD&A. The Company uses a number of economic variables to estimate the allowance for credit losses, with the most significant driver being a forecast of the national unemployment rate. In the December 31, 2025, estimate, the Company assumed an unemployment forecast of approximately 4.5%, compared to the range of 4.0% to 4.3% utilized in the December 31, 2024, estimate. Based on a sensitivity analysis as of December 31, 2025, an increase of 1% in the unemployment forecast would result in an increase in the allowance for credit losses of approximately 9.3% ### Business Combinations The Company accounts for business combinations using the acquisition method of accounting as outlined in using Topic 805 of the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”). Under this method, all identifiable assets acquired, including purchased loans, and liabilities assumed are recorded at fair value. Any excess of the purchase price over the fair value of net assets acquired is recorded as goodwill. In instances where the price of the acquired business is less than the net assets acquired, a gain on the purchase is recorded. Fair values are assigned based on quoted prices for similar assets, if readily available, or appraisals by qualified independent parties for relevant asset and liability categories. Certain financial assets and liabilities are valued using discount models that apply current discount rates to streams of cash flow. Valuation methods require assumptions, which can result in alternate valuations, varying levels of goodwill or bargain purchase gains, or amortization expense or accretion income. Management must make estimates for the useful or economic lives of certain acquired assets and liabilities that are used to establish the amortization or accretion of some intangible assets and liabilities, such as core deposits. Fair values are subject to refinement for up to one year after the closing date of the acquisition as additional information about the closing date fair values becomes available. Acquisition and divestiture activities are included in the Company’s consolidated results of operations from the closing date of the transaction. Acquisition and divestiture related costs are recognized in noninterest expense as incurred. ### Goodwill Goodwill is tested for impairment annually, on October 31st, with additional reviews performed quarterly or more frequently if events or circumstances indicate there may be impairment. We have one reporting unit, Community Banking. If we elect to perform a qualitative assessment, we evaluate factors such as macroeconomic conditions, industry and market considerations, overall financial performance, changes in stock price, and progress towards stated objectives in determining if it is more likely than not that the fair value of our reporting unit is less than its carrying amount. If we conclude that it is more likely than not that the fair value of our reporting unit is less than its carrying amount, a quantitative test is performed; otherwise, no further testing is required. The quantitative test consists of comparing the fair value of our reporting unit to its carrying amount, including goodwill. If the fair value of our reporting unit is greater than its book value, no goodwill impairment exists. If the carrying amount of our reporting unit is greater than its calculated fair value, a goodwill impairment charge is recognized for the difference. We performed a quantitative assessment for the annual test on October 31, 2025, which resulted in no goodwill impairment. For additional information, see Note 8, “Goodwill and Other Intangible Assets,” to the Consolidated Financial Statements in Item 8 of this report. ### Non-GAAP Financial Measures In addition to financial statements prepared in accordance with GAAP, we use certain non-GAAP financial measures that provide useful information for financial and operational decision making, evaluating trends, and comparing financial results to other financial institutions. The non-GAAP financial measures presented in this report include certain financial measures presented on a fully taxable equivalent (“FTE”) basis. While we believe certain non-GAAP financial measures enhance the understanding of our business and performance, they are supplemental and not a substitute for, or more important than, financial measures prepared in accordance with GAAP and may not be comparable to those reported by other financial institutions. The reconciliations of non-GAAP to GAAP measures are presented below. We believe FTE basis is the preferred industry measurement of net interest income and provides better comparability between taxable and tax exempt amounts. We use this non-GAAP financial measure to monitor net interest income performance and to manage the composition of our balance sheet. FTE basis adjusts for the tax benefits of income from certain tax exempt loans and investments using the federal statutory income tax rate of 21%. The following table reconciles net interest income and margin, as presented in our consolidated statements of income, to net interest income on a FTE basis for the periods indicated: *(Amounts in thousands)* | | Year Ended December 31, 2025 | 2024 | 2023 | | --- | ---: | ---: | ---: | | Net interest income, GAAP | $124,613 | $126,468 | $127,684 | | FTE adjustment(1) | 449 | 451 | 454 | | Net interest income, FTE | $125,062 | $126,919 | $128,138 | | Net interest margin, GAAP | 4.40% | 4.42% | 4.43% | | FTE adjustment(1) | 0.02% | 0.02% | 0.02% | | Net interest margin, FTE | 4.42% | 4.44% | 4.45% | (1) FTE basis of 21%. ### Performance Overview Highlights of our results of operations in 2025, and financial condition as of December 31, 2025, include the following: - Annual net income of $48.79 million, or $2.65 per diluted common share was earned in 2025; a decrease of $2.81 million, or 5.45%, compared to 2024. - When adjusted for merger and non-recurring expenses, adjusted annual net income for 2025 was $51.12 million, reflecting a modest year over year decline of $1.23 million, or 2.34%. - Net interest income after provision for loan losses increased $1.67 million compared to 2024, primarily due to a $4.06 million, or 11.67%, reduction in the allowance for loan losses. The decrease is the allowance reflects a smaller loan portfolio and continued strong credit performance. - Net interest margin remained stable at 4.42%, declining only 0.45% compared to 2024. Net interest spread increased 1 basis point to 4.04% from 4.03% in 2024. - Noninterest income increased $3.50 million, or 8.88%, primarily driven by a $3.39 million increase in service charges on deposits and other service charge fees. Non-interest expense increased $7.74 million, or 8.01%, reflecting higher salaries and employee benefits of $4.73 million, merger-related expenses of $2.91 million, and an increase of $1.00 million in other operating expenses. Merger-related expenses were associated with the acquisition of Hometown, which was completed on January 23, 2026. - Annualized return on average assets ("ROA") was 1.52% for the twelve months of 2025 compared to 1.60% for the same period of 2024. Annualized return on average common equity ("ROE") was 9.64% for the twelve months of 2025 compared to 10.03% for the same period of 2024. - When adjusted for merger and non-recurring expenses, ROA was 1.59% and ROE was 10.09% for the twelve months ended 2025. Return on average tangible common equity continues to remain strong at 13.92% for the full year. - Non-performing loans to total loans decreased in 2025 to 0.61%; a 0.22% reduction when compared to 2024. Net charge-offs to annualized average loans also decreased in 2025 to $4.12 million, or 0.18%, compared to net charge-offs of $5.37 million, or 0.22%, for the same period in 2024. - The allowance for credit losses to total loans was 1.33% on December 31, 2025, compared to 1.44% on December 31, 2024. - The Company's average loan-to-deposits ratio of 88.81%, on December 31, 2025, continues to represent a stable utilization of deposit funding. - The Company repurchased 50,338 common shares during 2025 for a cost of $1.85 million, compared to 257,294 shares purchased in 2024 for a cost of $8.72 million. - Book value per share on December 31, 2025, was $27.30, a decrease of $1.43 from year-end 2024. The decrease is primarily attributable to two special dividends being declared in 2025, in the total amount of $3.07 per common share. ### Results of Operations #### Net Income The following table presents the changes in net income and related information for the periods indicated: *(Amounts in thousands, except per share data)* | | Year Ended December 31, 2025 | 2024 | 2023 | 2025 Compared to 2024 Increase% (Decrease) | Change | 2024 Compared to 2023 Increase% (Decrease) | Change | | --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | | Net income | $48,794 | $51,604 | $48,020 | $(2,810) | (5.45)% | $3,584 | 7.46% | | Basic earnings per common share | 2.66 | 2.81 | 2.67 | (0.15) | (5.34)% | 0.14 | 5.24% | | Diluted earnings per common share | 2.65 | 2.80 | 2.72 | (0.15) | (5.36)% | 0.08 | 2.94% | | Return on average assets | 1.52% | 1.60% | 1.48% | (0.08)% | (5.00)% | 0.12% | 8.11% | | Return on average common equity | 9.64% | 10.03% | 10.02% | (0.39)% | (3.89)% | 0.01% | 0.10% | *2025 Compared to 2024.* Pre-tax income declined $2.57 million, or 3.91%, compared to 2024. The decline was primarily driven by a $7.74 million increase in noninterest expense and a $1.86 million reduction in net interest income. These pressures were partially offset by a $3.52 million decrease in the provision for credit losses and a $3.50 million increase in noninterest income. The increase of noninterest expense was largely attributable to higher salaries and employee benefits of $4.73 million, along with a $2.91 million in merger-related costs associated with the Hometown acquisition. The lower provision for credit losses reflected a smaller loan portfolio and continued favorable credit performance. Growth in noninterest income was primarily due to a $3.39 million increase in service charges on deposits and other service fees. *2024 Compared to 2023.* Pre-tax income increased $3.72 million, or 6.00% compared to 2023. The increase was primarily attributable to a decrease in provision for credit losses of $4.39 million, or 54.95% offset by a decrease in net interest income of $1.22 million, or 0.95%. Provision for credit losses totaled $3.60 million for 2024 compared to $7.99 million in 2023. The provision for credit losses in 2023 included $1.61 million recorded for the day two provision for the acquisition of the Surrey loan portfolio. Net interest income totaled $126.47 million for 2024 compared to $127.68 million in 2023. The decrease in net interest income is primarily attributable to an increase in deposit interest expense due to increased rates on interest-bearing deposits. Non interest income increased $1.94 million, or 5.17% offset by an increase in non interest expense of $1.39 million, or 1.46%. #### Net Interest Income Net interest income, our largest contributor to earnings, is analyzed on a fully taxable equivalent (“FTE”) basis, a non-GAAP financial measure. For additional information, see “Non-GAAP Financial Measures” above. The following table presents the consolidated average balance sheets and net interest analysis on a FTE basis for the dates indicated: *(Amounts in thousands)* | Assets Earning assets | Year Ended December 31, 2025 Average Balance | Interest(1) | Average Yield/ Rate(1) | 2024 Average Balance | Interest(1) | Average Yield/ Rate(1) | 2023 Average Balance | Interest(1) | Average Yield/ Rate(1) | | --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | | Loans(2)(3) | $2,353,548 | $123,708 | 5.26% | $2,481,215 | $130,196 | 5.25% | $2,538,361 | $127,019 | 5.00% | | Securities available for sale | 139,276 | 4,620 | 3.32% | 171,081 | 5,547 | 3.24% | 298,389 | 8,115 | 2.72% | | Interest-bearing deposits | 338,783 | 14,656 | 4.33% | 206,629 | 10,850 | 5.25% | 46,601 | 2,485 | 5.33% | | Total earning assets | 2,831,607 | $142,984 | 5.05% | 2,858,925 | $146,593 | 5.13% | 2,883,351 | $137,619 | 4.77% | | Other assets | 377,954 | | | 374,398 | | | 369,700 | | | | Total assets | $3,209,561 | | | $3,233,323 | | | $3,253,051 | | | | **Liabilities and stockholders' equity** | | | | | | | | | | | Interest-bearing deposits | | | | | | | | | | | Demand deposits | $660,810 | $713 | 0.11% | $662,584 | $796 | 0.12% | $686,534 | $405 | 0.06% | | Savings deposits | 896,166 | 12,748 | 1.42% | 878,584 | 14,206 | 1.62% | 847,397 | 6,781 | 0.80% | | Time deposits | 220,540 | 4,460 | 2.02% | 246,035 | 4,636 | 1.88% | 267,957 | 2,155 | 0.80% | | Total interest-bearing deposits | 1,777,516 | 17,921 | 1.01% | 1,787,203 | 19,638 | 1.10% | 1,801,888 | 9,341 | 0.52% | | Borrowings | | | | | | | | | | | Federal funds purchased | - | - | - | 628 | 35 | 5.53% | 2,715 | 139 | 5.12% | | Retail repurchase agreements | 1,204 | 1 | 0.06% | 1,045 | 1 | 0.05% | 1,528 | 1 | 0.06% | | Total borrowings | 1,204 | 1 | 0.06% | 1,673 | 36 | 2.15% | 4,243 | 140 | 3.30% | | Total interest-bearing liabilities | 1,778,720 | 17,922 | 1.01% | 1,788,876 | 19,674 | 1.10% | 1,806,131 | 9,481 | 0.52% | | Noninterest-bearing demand deposits | 872,516 | | | 882,700 | | | 926,378 | | | | Other liabilities | 51,928 | | | 47,362 | | | 41,477 | | | | Total liabilities | 2,703,164 | | | 2,718,938 | | | 2,773,986 | | | | Stockholders' equity | 506,397 | | | 514,385 | | | 479,065 | | | | Total liabilities and equity | $3,209,561 | | | $3,233,323 | | | $3,253,051 | | | | Net interest income, FTE(1) | | $125,062 | | | $126,919 | | | $128,138 | | | Net interest rate spread, FTE(1) | | | 4.04% | | | 4.03% | | | 4.25% | | Net interest margin, FTE(1) | | | 4.42% | | | 4.44% | | | 4.44% | (1) FTE basis based on the federal statutory rate of 21%. (2) Nonaccrual loans are included in average balances; however, no related interest income is recognized during the period of nonaccrual. (3) Interest on loans include non-cash purchase accounting accretion of $2.08 million in 2025, $2.90 million in 2024, and $2.74 million in 2023. 24 The following table presents the impact to net interest income on a FTE basis due to changes in volume (average volume times the prior year’s average rate), rate (average rate times the prior year’s average volume), and rate/volume (average volume times the change in average rate), for the periods indicated: *(Amounts in thousands)* | Interest earned on(1): | Year Ended December 31, 2025 Compared to 2024 Dollar Increase (Decrease) due to Volume | Rate | Rate/ Volume | Total | Year Ended December 31, 2024 Compared to 2023 Dollar Increase (Decrease) due to Volume | Rate | Rate/ Volume | Total | | --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | | Loans | $(6,699) | $222 | $(11) | $(6,488) | $(2,860) | $6,176 | $(139) | $3,177 | | Securities available for sale | (1,031) | 128 | (24) | (927) | (3,462) | 1,560 | (666) | (2,568) | | Interest-bearing deposits with other banks | 6,939 | (1,911) | (1,222) | 3,806 | 8,533 | (38) | (130) | 8,365 | | Total interest-earning assets | (791) | (1,561) | (1,257) | (3,609) | 2,211 | 7,698 | (935) | 8,974 | | Interest paid on(1): | | | | | | | | | | Demand deposits | (2) | (81) | - | (83) | (14) | 420 | (15) | 391 | | Savings deposits | 284 | (1,708) | (34) | (1,458) | 250 | 6,921 | 254 | 7,425 | | Time deposits | (480) | 340 | (36) | (176) | (176) | 2,894 | (237) | 2,481 | | Federal funds purchased | - | - | (35) | (35) | - | - | (104) | (104) | | Retail repurchase agreements | - | - | - | - | - | - | - | - | | Total interest-bearing liabilities | (198) | (1,449) | (105) | (1,752) | 60 | 10,235 | (102) | 10,193 | | Change in net interest income(1) | $(593) | $(112) | $(1,152) | $(1,857) | $2,151 | $(2,537) | $(833) | $(1,219) | (1) FTE basis based on the federal statutory rate of 21%. *2025 Compared to 2024*. Net interest income represented 74.40% of total net interest and noninterest income in 2025, compared to 76.25% in 2024. The 1.85 percentage-point decline reflects a $1.85 million, or 1.47%, decrease in net interest income and a $3.50 million, or 8.88%, increase in noninterest income. On an FTE basis, net interest income decreased $1.86 million, or 1.46%. Net interest margin and net interest spread experienced modest changes year over year. Net interest margin declined 2 basis points to 4.42%, while net interest spread increased 1 basis point to 4.04%. Average earning assets decreased $27.32 million, or 0.96%, due to decreases in both the average balance of loans of $127.67 million, or 5.15%, and the average balance of securities available-for-sale of $31.80 million, or 18.59%. These decreases were offset by an increase in interest-bearing deposits with banks of $132.15 million, or 63.96%. The yield on earning assets decreased 8 basis points, or 1.56%, due to an asset balance shift from higher-yielding loans to lower-yielding interest-bearing deposit accounts held with banks. In addition, non-cash accretion decreased $813 thousand in 2025 to $2.08 million, compared to a 2024 balance of $2.90 million. The impact of non-cash purchase accounting accretion income on the FTE net interest margin was 8 basis points for 2025 compared to 10 basis points in 2024. The average loan to deposit ratio declined to 88.81% in 2025, compared to 92.93% in 2024. Average interest-bearing liabilities, which consist of interest-bearing deposits and borrowings, decreased $10.16 million, or 0.57%, primarily due to a decrease in interest-bearing deposits of $9.69 million, or 0.54%. Interest-bearing demand deposits decreased $1.77 million, or 0.27%, and time deposits decreased $25.49 million, or 10.36%. These decreases were offset by an increase in savings deposits of $17.58 million or 2.00%. The yield on interest-bearings liabilities decreased 9 basis points, or 8.18%, primarily due to an average balance shift from higher rate time deposits to lower rate savings deposits. *2024 Compared to 2023.* Net interest income comprised 76.25% of total net interest and noninterest income in 2024 compared to 77.32% in 2023. Net interest income decreased $ 1.22 million, or 0.95 %. On a FTE basis net interest income decreased $1.22 million, or 0.95%. There was no change in the FTE net interest margin; the FTE net interest spread decreased 22 basis points. The decrease was primarily driven by an increase in interest expense due to increases in rates paid on interest-bearing deposits. Average earning assets decreased $24.43 million, or 0.85%, due to decreases in both the average balance of securities available for sale of $127.31 million, or 42.67%, and the average balance of loans of $57.15 million, or 2.25%. These decreases were offset by an increase in interest-bearing deposits with banks of $160.03 million, or 343.40%. The yield on earning assets increased 36 basis points, or 7.55% and is attributable to an increase in interest income of $8.97 million, or 6.52%. Interest income for interest-bearing deposits with banks increased $8.37 million, or 336.62%. This increase was primarily driven by an increase in the average balance as noted above offset by a decrease in the yield of 8 basis points. Interest income on loans also increased $3.18 million, or 2.50%. The increase was primarily due to an increase in yield of 25 basis points offset by a decrease in the average balance of $57.15 million. Interest income on securities available for sale decreased $2.57 million, or 31.65%. The yield increased 52 basis points, however, the average balance decreased $127.31 million, or 42.67%. The average loan to deposit ratio decreased to 92.93% from 93.04% in 2023. Non-cash accretion increased $155 thousand, or 5.65% to $2.90 million. The impact of non-cash purchase accounting accretion income on the FTE net interest margin was 10 basis points for 2024 compared to 9 basis points in 2023. Average interest-bearing liabilities, which consist of interest-bearing deposits and borrowings, decreased $17.26 million, or 0.96%, primarily due to a decrease in interest-bearing deposits of $14.69 million, or 0.81%. Interest-bearing demand deposits decreased $23.95 million, or 3.49%, and time deposits decreased $21.92 million, or 8.18%. Savings deposits increased $31.19 million or 3.68%. The yield on interest-bearings liabilities increased 58 basis points and is primarily due to increased rates paid on interest-bearing deposit liabilities. #### Provision for Credit Losses *2025 Compared to 2024.* The provision charged to operations decreased $3.52 million compared to 2024. The provision expense of $72 thousand was comprised of $58 thousand related to provision expense for loans and $14 thousand related to provision expense for unfunded loan commitments. Provision for credit losses for loans of $58 thousand was recorded compared to the provision of $4.00 million recorded in 2024. The decrease in provision is due a loan portfolio balance decline of $101.33 million from 2024 to 2025, along with continued strong credit performance. As noted, a $14 thousand provision for loan commitments was recorded in 2025 compared to $405 thousand recovery of provision recorded in 2024. *2024 Compared to 2023.* The provision charged to operations decreased $4.39 million compared to the prior year. The provision expense of $3.60 million was comprised of $4.00 million related to provision expense for loans and a recovery of provision of $405 thousand for unfunded loan commitments. Provision for credit losses for loans of $4.00 million was recorded compared to the provision of $8.44 million recorded in 2023. The decrease in provision is primarily due a much smaller required credit loss provision as the loan portfolio has experienced a decrease of $156.21 million. Additionally, $1.61 million of the provision in the prior year was attributable to day two provision for the Surrey portfolio. As noted above, a recovery of provision for loan commitments was recorded in 2024 of $405 thousand compared to a recovery of provision of $450 thousand in 2023. #### Noninterest Income The following table presents the components of, and changes in, noninterest income for the periods indicated: *(Amounts in thousands)* | | Year Ended December 31, 2025 | 2024 | 2023 | 2025 Compared to 2024 Increase% (Decrease) | Change | 2024 Compared to 2023 Increase% (Decrease) | Change | | --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | | Wealth management | $4,936 | $4,485 | $4,179 | $451 | 10.06% | $306 | 7.32% | | Service charges on deposits | 16,768 | 14,012 | 13,996 | 2,756 | 19.67% | 16 | 0.11% | | Other service charges and fees | 15,024 | 14,392 | 13,647 | 632 | 4.39% | 745 | 5.46% | | Net gain on sale of securities | - | - | (21) | - | - | 21 | - | | Other operating income | 6,159 | 6,501 | 5,651 | (342) | -5.26% | 850 | 15.04% | | Total noninterest income | $42,887 | $39,390 | $37,452 | $3,497 | 8.88% | $1,938 | 5.17% | *2025 Compared to 2024*. Noninterest income comprised 25.60% of total net interest and noninterest income in 2025 compared to 23.75% in 2024, with noninterest income increasing $3.50 million, or 8.88%, in 2025. The 2025 increase is driven mostly by a $3.39 million increase in service charges on deposits and other service charges and fees. The increase is primarily attributable to increases in non-sufficient funds fees of $2.45 million and interchange income of $854 thousand. *2024 Compared to 2023.* Noninterest income comprised 23.75% of total net interest and noninterest income in 2024 compared to 22.68% in 2023. Noninterest income increased $1.94 million, or 5.17%. Other operating income increased $850 thousand, or 15.04%. Other operating income for 2024 included a gain of $825 thousand from the sale of two closed branch properties, while other operating income for the same period of 2023 included a gain of $204 thousand for the sale of one closed branch property. In addition, other operating income for 2024, included a holdback payment of $184 thousand related to a prior divestiture of an insurance agency. Other service charges and fees increased $745 thousand, or 5.46%. The increase is primarily attributable to an increase in net interchange income of $709 thousand. #### Noninterest Expense The following table presents the components of, and changes in, noninterest expense for the periods indicated: *(Amounts in thousands)* | | Year Ended December 31, 2025 | 2024 | 2023 | 2025 Compared to 2024 Increase% (Decrease) | Change | 2024 Compared to 2023 Increase% (Decrease) | Change | | --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | | Salaries and employee benefits | $56,433 | $51,702 | $49,887 | $4,731 | 9.15% | $1,815 | 3.64% | | Occupancy expense | 5,680 | 5,286 | 4,967 | 394 | 7.45% | 319 | 6.42% | | Furniture and equipment expense | 6,148 | 6,368 | 5,878 | (220) | -3.45% | 490 | 8.34% | | Service fees | 10,335 | 9,642 | 8,908 | 693 | 7.19% | 734 | 8.24% | | Advertising and public relations | 4,071 | 3,861 | 3,300 | 210 | 5.44% | 561 | 17.00% | | Professional fees | 1,265 | 1,218 | 1,567 | 47 | 3.86% | (349) | -22.27% | | Amortization of intangibles | 1,916 | 2,131 | 1,731 | (215) | -10.09% | 400 | 23.11% | | FDIC premiums and assessments | 1,445 | 1,463 | 1,511 | (18) | -1.23% | (48) | -3.18% | | Merger expense | 2,912 | - | 2,393 | 2,912 | 100.00% | (2,393) | -100.00% | | Litigation expense | - | 1,800 | 3,000 | (1,800) | -100.00% | (1,200) | -40.00% | | Other operating expense | 14,098 | 13,096 | 12,035 | 1,002 | 7.65% | 1,061 | 8.82% | | Total noninterest expense | $104,303 | $96,567 | $95,177 | $7,736 | 8.01% | $1,390 | 1.46% | *2025 Compared to 2024.* Non interest expense increased $7.74 million, or 8.01%, in 2025 compared to 2024. The increase is attributed mostly to increases in salaries and employee benefits of $4.73 million, merger expense of $2.91 million and other operating expense of $1.00 million. The increase in salaries and employee benefits is driven by a $1.27 million increase in salary expense and a $3.24 million increase in incentive compensation. The increase in merger expense is related to the Hometown acquisition. *2024 Compared to 2023.* Non interest expense increased $1.39 million, or 1.46%. Salaries and employee benefits increased $1.82 million, other operating expense increased $1.06 million, and service fees increased $734 thousand. The increases in non-interest expense is primarily due to the addition of the Surrey branches as well as inflationary increases. Non interest expense for 2023 included non-recurring expense of $2.39 million in merger charges related to the Surrey acquisition. 2024 included a non-recurring charge of $1.80 million to settle a putative class action lawsuit while 2023 included a non-recurring charge of $3.00 million to accrue for the settlement of the same lawsuit. #### Income Tax Expense The Company’s effective tax rate, income tax as a percent of pre-tax income, may vary significantly from the statutory rate due to permanent differences and available tax credits. Permanent differences are income and expense items excluded by law in the calculation of taxable income. The Company’s most significant permanent differences generally include interest income on municipal securities and increases in the cash surrender value of life insurance policies. *2025 Compared to 2024*. Income tax expense increased $241 thousand, or 1.71%, due primarily to an increase in pre-tax income. The effective tax rate increased to 22.70% in 2025 compared to 21.45% in 2024. *2024 Compared to 2023.* Income tax expense increased $136 thousand, or 0.97% and was primarily due to the increase in pre-tax income. The effective tax rate decreased to 21.45% in 2024 compared to 22.52% in 2023. ### Financial Condition Total assets as of December 31, 2025, decreased $1.57 million, or 0.05%, to $3.26 billion. The decrease is attributable mostly to a decline in loans of $101.33 million, or 4.19%, and a decline in securities available for sale of $37.16 million, or 21.88%, which is offset by an increase in cash and cash equivalents of $134.79 million, or 35.71%. Total liabilities increased $24.27 million, or 0.89%, and is primarily attributable to an increase in interest, taxes and other liabilities of $29.88 million. Stockholders' equity decreased $25.84 million, or 4.91%. The equity decrease is primarily attributable to two special dividends being declared in 2025, in the amount of $3.07 per common share. #### Investment Securities Our investment securities are used to generate interest income through the deployment of excess funds, to fund loan demand or deposit liquidation, to pledge as collateral where required, and to make selective investments for Community Reinvestment Act purposes. The composition of our investment portfolio changes from time to time as we consider our liquidity needs, interest rate expectations, asset/liability management strategies, and capital requirements. Available-for-sale debt securities as of December 31, 2025, decreased $37.16 million, or 21.88%, compared to December 31, 2024. The decrease was primarily due to the sale of $136.71 million in maturities, prepayments, and calls in securities available for sale; offset by purchases of $93.76 million. The market value of debt securities available for sale as a percentage of amortized cost was 92.95% as of December 31, 2025, compared to 91.97% as of December 31, 2024. There were no held-to-maturity debt securities as of December 31, 2025, or 2024. The following table provides information about our investment portfolio as of the dates indicated: | (Amounts in years) | December 31, 2025 | 2024 | | --- | ---: | ---: | | Average life | 6.60 | 5.69 | | Average duration | 4.19 | 3.52 | There were no holdings of any one issuer, other than the U.S. government and its agencies, in an amount greater than 10% of our total consolidated shareholders’ equity as of December 31, 2025 or 2024. Management evaluates securities for impairment where there has been a decline in fair value below the amortized cost basis of a security to determine whether there is a credit loss associated with the decline in fair value on at least a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Credit losses are calculated individually, rather than collectively, using a discounted cash flow method, whereby Management compares the present value of expected cash flows with the amortized cost basis of the security. The credit loss component would be recognized through the provision for credit losses and the creation of an allowance for credit losses. Consideration is given to (1) the financial condition and near-term prospects of the issuer including looking at default and delinquency rates, (2) the outlook for receiving the contractual cash flows of the investments, (3) the length of time and the extent to which the fair value has been less than cost, (4) our intent and ability to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value or for a debt security whether it is more-likely-than-not that we will be required to sell the debt security prior to recovering its fair value, (5) the anticipated outlook for changes in the general level of interest rates, (6) credit ratings, (7) third party guarantees, and (8) collateral values. In analyzing an issuer’s financial condition, management considers whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, the results of reviews of the issuer’s financial condition, and the issuer’s anticipated ability to pay the contractual cash flows of the investments. All of the U.S. Treasury and Agency-Backed Securities have the full faith and credit backing of the United State Government or one of its agencies. Municipal securities and all other securities that do not have a zero expected credit loss are evaluated quarterly to determine whether there is a credit loss associated with a decline in fair value. Based on the application of the new standard, and that all debt securities available for sale in an unrealized loss position as of December 31, 2025, continue to perform as scheduled, we do not believe that a provision for credit losses is necessary in 2025. We recognized no impairment charges in earnings associated with debt securities in 2025. For additional information, see Note 1, “Basis of Presentation and Significant Accounting Policies,” and Note 3, “Debt Securities,” to the Consolidated Financial Statements in Item 8, of this report. #### Loans Held for Investment Loans held for investment, our largest component of interest income, are grouped into commercial, consumer real estate, and consumer and other loan segments. Each segment is divided into various loan classes based on collateral or purpose. The general characteristics of each loan segment are as follows: - Commercial loans – This segment consists of loans to small and mid-size industrial, commercial, and service companies. Commercial real estate projects represent a variety of sectors of the commercial real estate market, including single family and apartment lessors, commercial real estate lessors, and hotel/motel operators. Commercial loan underwriting guidelines require that comprehensive reviews and independent evaluations be performed on credits exceeding predefined size limits. Updates to these loan reviews are done periodically or annually depending on the size of the loan relationship. - Consumer real estate loans – This segment consists of largely of loans to individuals within our market footprint for home equity loans and lines of credit and for the purpose of financing residential properties. Residential real estate loan underwriting guidelines require that borrowers meet certain credit, income, and collateral standards at origination. - Consumer and other loans – This segment consists of loans to individuals within our market footprint that include, but are not limited to, automobile, credit cards, personal lines of credit, boats, mobile homes, and other consumer goods. Consumer loan underwriting guidelines require that borrowers meet certain credit, income, and collateral standards at origination. Total loans held for investment, net of unearned income, as of December 31, 2025, decreased $101.33 million, or 4.19%, compared to December 31, 2024. We had no foreign loans or loan concentrations to any single borrower or industry, which are not otherwise disclosed as a category of loans that represented 10% or more of outstanding loans, as of December 31, 2025 or 2024. For additional information, see Note 4, “Loans,” to the Consolidated Financial Statements in Item 8 of this report. The following table presents the maturities and rate sensitivities of the loan portfolio as of December 31, 2025: *(Amounts in thousands)* | Commercial loans | Due in One Year or Less | Due After One Year Through Five Years | Due After Five Through Fifteen Years | Due After Fifteen Years | Total | | --- | ---: | ---: | ---: | ---: | ---: | | Construction, development, and other land(1) | $4,705 | $9,902 | $31,812 | $17,482 | $63,901 | | Commercial and industrial | 31,028 | 128,499 | 57,642 | 26,814 | 243,983 | | Multi-family residential | 12,515 | 55,875 | 83,228 | 39,868 | 191,486 | | Single family non-owner occupied | 2,880 | 10,878 | 75,947 | 82,213 | 171,918 | | Non-farm, non-residential | 45,471 | 159,441 | 305,601 | 327,945 | 838,458 | | Agricultural | 1,184 | 6,523 | 4,858 | 899 | 13,464 | | Farmland | 955 | 1,892 | 6,232 | 1,646 | 10,725 | | Total commercial loans | 98,738 | 373,010 | 565,320 | 496,867 | 1,533,935 | | Consumer real estate loans | | | | | | | Home equity lines | 5,989 | 14,194 | 56,677 | 5,904 | 82,764 | | Single family owner occupied | 2,684 | 12,946 | 164,753 | 451,965 | 632,348 | | Owner occupied construction | 5 | 16 | 350 | 5,234 | 5,605 | | Total consumer real estate loans | 8,678 | 27,156 | 221,780 | 463,103 | 720,717 | | Consumer and other loans | | | | | | | Consumer loans | 3,536 | 42,490 | 10,843 | 1,584 | 58,453 | | Other | 1,650 | - | - | - | 1,650 | | Total consumer and other loans | 5,186 | 42,490 | 10,843 | 1,584 | 60,103 | | Total loans | $112,602 | $442,656 | $797,943 | $961,554 | $2,314,755 | | **Rate sensitivities** | | | | | | | Predetermined interest rate | $62,624 | $384,593 | $526,493 | $570,279 | $1,543,989 | | Floating or adjustable interest rate | 49,978 | 58,063 | 271,450 | 391,275 | 770,766 | | Total loans | $112,602 | $442,656 | $797,943 | $961,554 | $2,314,755 | (1) Construction loans include construction to permanent loans that have not yet converted to regular principal and interest payments. #### Risk Elements We seek to mitigate credit risk by following specific underwriting practices and by ongoing monitoring of our loan portfolio. Our underwriting practices include the analysis of borrowers’ prior credit histories, financial statements, tax returns, and cash flow projections; valuation of collateral based on independent appraisers’ reports; and verification of liquid assets. We believe our underwriting criteria are appropriate for the various loan types we offer; however, losses may occur that exceed the reserves established in our allowance for loan losses. The Company has a loan review function independent of credit administration that performs a risk-based review of a sample of loans and loan relationships in the Company's commercial portfolio and conducts analytical review of credit quality on the Company's non-commercial portfolios. Nonperforming assets consist of nonaccrual loans, accrual loans contractually past due 90 days or more, modified loans past due 90 days or more, and other real estate owned ("OREO"). Prior to the adoption of ASU 2022-02, unseasoned troubled debt restructurings ("TDRs") were included in nonperforming assets. Ongoing activity in the classification and categories of nonperforming loans include collections on delinquencies, foreclosures, loan restructurings, and movements into or out of the nonperforming classification due to changing economic conditions, borrower financial capacity, or resolution efforts. For additional information, see Note 5, “Credit Quality,” to the Consolidated Financial Statements in Item 8 of this report. The following table presents the components of nonperforming assets and related information as of the periods indicated: *(Amounts in thousands)* | Nonperforming | December 31, 2025 | 2024 | 2023 | 2022 | 2021 | | --- | ---: | ---: | ---: | ---: | ---: | | Nonaccrual loans (1) | $13,941 | $19,869 | $19,356 | $15,208 | $20,768 | | Accruing loans past due 90 days or more | 212 | 149 | 104 | 142 | 87 | | TDRs'(2)(3) | - | - | - | 1,346 | 1,367 | | Total non-covered nonperforming loans | 14,153 | 20,018 | 19,460 | 16,696 | 22,222 | | OREO | - | 521 | 192 | 703 | 1,015 | | Total nonperforming assets | $14,153 | $20,539 | $19,652 | $17,399 | $23,237 | | **Additional Information** | | | | | | | Total modified loans (1) | $2,442 | $2,260 | $2,046 | $- | $- | | Total Accruing TDRs (2) | - | - | - | 7,112 | 8,652 | | Gross interest income that would have been recorded under the original terms of restructured and nonperforming loans | 868 | 1,195 | 969 | 883 | 1,129 | | Actual interest income recorded on restructured and nonperforming loans | 2 | 5 | 6 | 388 | 422 | | **Total ratios** | | | | | | | Nonperforming loans to total loans | 0.61% | 0.83% | 0.76% | 0.70% | 1.03% | | Nonperforming assets to total assets | 0.43% | 0.63% | 0.60% | 0.55% | 0.73% | | Allowance for credit losses to nonperforming loans | 217.35% | 173.97% | 185.97% | 183.01% | 125.36% | | Allowance for credit losses to total loans | 1.33% | 1.44% | 1.41% | 1.27% | 1.29% | (1) Nonaccrual loans include one modified loan past due 90 days or more of $21 thousand. (2) TDRs restructured within the past six months, and nonperforming TDRs exclude nonaccrual TDRs of $1.80 million, and $1.18 million for the two years ended December 31, 2022. They were included in nonaccrual loans as reported prior to the adoption of ASU 2022-02. (3) Total accruing TDRs exclude nonaccrual TDRs of $2.52 million, $2.34 million, and for the two years ended December 31, 2022. They were included in nonaccrual loans as reported prior to the adoption of ASU 2022-02. 31 Nonperforming assets as of December 31, 2025, decreased $6.39 million, or 31.09%, from December 31, 2024, with the largest decreases attributable to nonaccrual loans of $5.93 million, or 29.84%, and OREO of $521 thousand. As of December 31, 2025, nonaccrual loans were largely attributed to single family owner occupied $8.26 million, or 59.22%, non-farm, non-residential real estate $1.27 million, or 9.13%, and commercial and industrial loans $1.32 million, or 9.45%. Certain loans included in the nonaccrual category have been written down to estimated realizable value or assigned specific reserves in the allowance for credit losses based on management's estimate of loss at ultimate resolution. Delinquent loans, comprised of loans 30 days or more past due and nonaccrual loans, totaled $27.85 million as of December 31, 2025, a decrease of $9.70 million, or 25.83%, compared to $37.55 million as of December 31, 2024. Delinquent loans as a percent of total loans decreased in 2025 to 1.20%, compared to 1.49% in 2024. The delinquent loans consist of past due loans, or 0.60%, of total loans, and nonaccrual loans, or 0.60%, of total loans. When restructuring loans for borrowers experiencing financial difficulty, we generally make concessions in interest rates, loan terms, or amortization terms. As noted above, ASU 2022-02, eliminated and replaced the accounting guidance for borrowers experiencing financial difficulties previously applied under ASC 310-40, Receivables - Troubled Debt Restructurings by Creditors. ASU 2022-02, Financial Instruments-Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures, discloses loans for borrowers experiencing financial difficulty as modified loans. Total loans modified as of December 31, 2025, were $2.44 million as compared to $2.26 million reported as of December 31, 2024. OREO property is carried at the lesser of estimated net realizable value or cost. As of December 31, 2025, no OREO property was held by the Company. The net loss on the sale of OREO was $193 thousand in 2025, $28 thousand in 2024, and $84 thousand in 2023. The following table presents the changes in OREO during the periods indicated: *(Amounts in thousands)* | | Year Ended December 31, 2025 | 2024 | | --- | ---: | ---: | | Beginning balance | $521 | $192 | | Additions | 192 | 798 | | Disposals | (712) | (420) | | Valuation adjustments | (1) | (49) | | Ending balance | $- | $521 | #### Allowance for Credit Losses (ACL) The ACL reflects management’s estimate of losses that will result from the inability of our borrowers to make required loan payments. Management uses a systematic methodology to determine its ACL for loans held for investment and certain off-balance-sheet credit exposures. The ACL is a valuation account that is deducted from the amortized cost basis to present the net amount expected to be collected on the loan portfolio. Management considers the effects of past events, current conditions, and reasonable and supportable forecasts on the collectability of the loan portfolio. The Company’s estimate of its ACL involves a high degree of judgment; therefore, management’s process for determining expected credit losses may result in a range of expected credit losses. It is possible that others, given the same information, may at any point in time reach a different reasonable conclusion. The Company’s ACL recorded in the balance sheet reflects management’s best estimate of expected credit losses. The Company recognizes in net income the amount needed to adjust the ACL for management’s current estimate of expected credit losses. The Company’s measurement of credit losses policy adheres to GAAP as well as interagency guidance. The Company's ACL is calculated using collectively evaluated and individually evaluated loans. For collectively evaluated loans, the Company in general uses two modeling approaches to estimate expected credit losses. The Company projects the contractual run-off of its portfolio at the segment level and incorporates a prepayment assumption in order to estimate exposure at default. Financial assets that have been individually evaluated can be returned to a pool for purposes of estimating the expected credit loss insofar as their credit profile improves and that the repayment terms were not considered to be unique to the asset. In addition to its own loss experience, management also includes peer bank historical loss experience in its assessment of expected credit losses to determine the ACL. The Company utilized call report data to measure historical credit loss experience with similar risk characteristics within the segments. For the majority of segment models for collectively evaluated loans, the Company incorporated at least one macroeconomic driver either using a statistical regression modeling methodology or simple loss rate modeling methodology. Included in its systematic methodology to determine its ACL for loans held for investment and certain off-balance-sheet credit exposures, management considers the need to qualitatively adjust expected credit losses for information not already captured in the loss estimation process. These qualitative adjustments either increase or decrease the quantitative model estimation (i.e. formulaic model results). Each period, the Company considers qualitative factors that are relevant within the qualitative framework. For further discussion of our Allowance for Credit Losses - See Note 1 - "Basis of Presentation - Significant Accounting Policies". As of December 31, 2025, the balance of the ACL for loans was $30.76 million, or 1.33% of total loans. The ACL at December 31, 2025, decreased $4.06 million from the balance of $34.83 million recorded December 31, 2024. This decrease included a provision of $58 thousand and net charge-offs for the twelve months of $4.12 million. At December 31, 2025, the Company also had an allowance for unfunded commitments of $355 thousand compared to $341 thousand in 2024. The allowance for unfunded commitments is recorded in Other Liabilities on the balance sheet. During 2025, there was a provision for credit losses on unfunded commitments of $14 thousand. The provision for credit losses on unfunded commitments is recorded in provision expense on the Statement of Income. Management considered the allowance adequate as of December 31, 2025; however, no assurance can be made that additions to the allowance will not be required in future periods. For additional information, see “Allowance for Credit Losses or ("ACL")” in the “Critical Accounting Policies” section above and Note 6, “Allowance for Credit Losses,” to the Consolidated Financial Statements in Item 8 of this report. The following table presents net charge-offs by loan class, and the ratio to average loans during the periods indicated: *(Amounts in thousands)* | Commercial loans | December 31, 2025 Net (charge-offs) recoveries | Average Loans | Ratio of Net (charge-offs) recoveries to average loans | 2024 Net (charge-offs) recoveries | Average Loans | Ratio of Net (charge-offs) recoveries to average loans | 2023 Net (charge-offs) recoveries | Average Loans | Ratio of Net (charge-offs) recoveries to average loans | | --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | | Construction, development, and other land | $45 | $60,514 | 0.07% | $50 | $78,994 | 0.06% | $511 | $108,437 | 0.47% | | Commercial and industrial | (555) | 265,572 | -0.21% | (293) | 232,656 | -0.13% | (8) | 216,618 | 0.00% | | Multi-family residential | 8 | 192,633 | 0.00% | 8 | 195,335 | 0.00% | 9 | 163,797 | 0.01% | | Single family non-owner occupied | 24 | 172,563 | 0.01% | 186 | 201,599 | 0.09% | 13 | 220,316 | 0.01% | | Non-farm, non-residential | 93 | 838,974 | 0.01% | - | 872,566 | 0.00% | 443 | 863,078 | 0.05% | | Agricultural | (141) | 14,530 | -0.97% | (183) | 18,940 | -0.97% | (30) | 18,982 | -0.16% | | Farmland | 102 | 11,104 | 0.92% | 27 | 12,707 | 0.21% | 30 | 13,856 | 0.21% | | Total commercial loans | (424) | 1,555,890 | -0.03% | (205) | 1,612,797 | -0.01% | 968 | 1,605,084 | 0.06% | | Consumer real estate loans | | | | | | | | | | | Home equity lines | 163 | 78,408 | 0.21% | 145 | 80,467 | 0.18% | 123 | 77,348 | 0.16% | | Single family owner occupied | 61 | 634,720 | 0.01% | (106) | 670,292 | -0.02% | (15) | 704,217 | 0.00% | | Owner occupied construction | - | 10,303 | 0.00% | - | 11,893 | 0.00% | — | 16,778 | 0.00% | | Total consumer real estate loans | 224 | 723,431 | 0.03% | 39 | 762,652 | 0.01% | 108 | 798,343 | 0.01% | | Consumer and other loans | | | | | | | | | | | Consumer loans | (3,922) | 74,227 | -5.28% | (5,200) | 105,766 | -4.92% | (5,889) | 134,934 | -4.36% | | Total | $(4,122) | $2,353,548 | -0.18% | $(5,366) | $2,481,215 | -0.22% | $(4,813) | $2,538,361 | -0.19% | 33 The following table presents the allowance for loan losses by loan class, as of the dates indicated: *(Amounts in thousands)* | Commercial loans | December 31, 2025 Balance | Percentage of Total Allowance | 2024 Balance | Percentage of Total Allowance | | --- | ---: | ---: | ---: | ---: | | Construction, development, and other land | $1,360 | 2.76% | $2,251 | 2.99% | | Commercial and industrial | 2,995 | 10.54% | 4,862 | 9.64% | | Multi-family residential | 1,342 | 8.27% | 1,179 | 8.26% | | Single family non-owner occupied | 2,623 | 7.43% | 2,483 | 8.10% | | Non-farm, non-residential | 7,652 | 36.22% | 8,893 | 35.27% | | Agricultural | 89 | 0.58% | 600 | 0.69% | | Farmland | 52 | 0.46% | 149 | 0.51% | | Consumer real estate loans | | | | | | Home equity lines | 1,023 | 3.58% | 1,583 | 3.73% | | Single family owner occupied | 9,645 | 27.32% | 8,255 | 26.92% | | Owner occupied construction | 218 | 0.24% | 69 | 0.19% | | Consumer and other loans | | | | | | Consumer loans | 3,762 | 2.60% | 4,501 | 3.71% | | Total allowance | $30,761 | 100.00% | $34,825 | 100.00% | #### Deposits Total deposits as of December 31, 2025, decreased $5.92 million, or 0.22%, compared to December 31, 2024. The decrease was driven by a decline in time deposits of $40.17 million, or 16.70%. The decline in time deposits was offset by increases in interest bearing deposits of $8.72 million, savings/MMA deposits of $12.78 million and noninterest-bearing accounts of $12.76 million. No deposit concentrations to any single customer or industry that represented 10% or more of outstanding deposits occurred as of December 31, 2025, or 2024. The following schedule presents the contractual maturities of time deposits of $250 thousand or more as of December 31, 2025: *(Amounts in thousands)* | | | | --- | ---: | | Three months or less | $1,158 | | Over three through six months | 1,410 | | Over six through twelve months | 7,846 | | Over twelve months | 5,946 | | | $16,360 | #### Borrowings Total borrowings as of December 31, 2025, increased $308 thousand, or 34.00%, compared to December 31, 2024. Total borrowings for 2025 were comprised entirely of short-term borrowings, which consist of retail repurchase agreements. The weighted average rate of 0.06% as of December 31, 2025, increased one basis point from the weighted average rate of 0.05% as of December 31, 2024. ### Liquidity and Capital Resources ### Liquidity Liquidity is a measure of our ability to meet current and future cash flow needs as they become due. The liquidity of a financial institution reflects its ability to meet loan requests, to accommodate possible outflows in deposits and to take advantage of interest rate market opportunities. The ability of a financial institution to meet its current financial obligations is a function of its balance sheet structure that draws together all sources and uses of liquidity. The objective of our liquidity management is to manage cash flow and liquidity reserves so that they are adequate to fund our operations and to meet obligations and other commitments on a timely basis and at a reasonable cost. We seek to achieve this objective and ensure that funding needs are met by maintaining an appropriate level of liquid funds through asset/liability management, which includes managing the mix and time to maturity of financial assets and financial liabilities on our balance sheet. Poor or inadequate liquidity risk management may result in a funding deficit that could have a material impact on our operations. We maintain a liquidity risk management policy and contingency funding policy (“Liquidity Plan”) to detect potential liquidity issues and protect our depositors, creditors, and shareholders. The Liquidity Plan includes various internal and external indicators that are reviewed on a recurring basis by our Asset/Liability Management Committee (“ALCO”) of the Board of Directors. ALCO reviews liquidity risk exposure and policies related to liquidity management; ensures that systems and internal controls are consistent with liquidity policies; and provides accurate reports about liquidity needs, sources, and compliance. The Liquidity Plan involves ongoing monitoring and estimation of potentially credit sensitive liabilities and the sources and amounts of balance sheet and external liquidity available to replace outflows during a funding crisis. The liquidity model incorporates various funding crisis scenarios and a specific action plan is formulated, and activated, when a financial shock that affects our normal funding activities is identified. Generally, the plan will reflect a strategy of replacing liability outflows with alternative liabilities, rather than balance sheet asset liquidity, to the extent that significant premiums can be avoided. If alternative liabilities are not available, outflows will be met through liquidation of balance sheet assets, including unpledged securities. As of December 31, 2025, management is not aware of any events that are reasonably likely to have a material adverse effect on our liquidity, capital resources or operations. In addition, management is not aware of any regulatory recommendations regarding liquidity that would have a material adverse effect on the Company. In the ordinary course of business we have entered into contractual obligations and have made other commitments to make future payments. Refer to the accompanying notes to the Consolidated Financial Statements in Item 8 of this report for the expected timing of such payments as of December 31, 2025. These include payments related to (i) operating leases (Note - 7 Premises, Equipment, and Leases ), (ii) time deposits with stated maturity dates (Note 9 - Deposits), and (iii) commitments to extend credit and standby letters of credit (Note - 19 Litigation, Commitments, and Contingencies). As a financial holding company, the Company’s primary source of liquidity is dividends received from the Bank, which are subject to certain regulatory limitations. Other sources of liquidity include cash, investment securities, and borrowings. As of December 31, 2025, the Company’s cash reserves and short-term investment securities totaled $36.95 million and $10.93 million, respectively. The Company’s cash reserves and investments provide adequate working capital to meet obligations and projected dividends to shareholders for the next twelve months. In addition to cash on hand and deposits with other financial institutions, we rely on customer deposits, cash flows from loans and investment securities, and lines of credit from the FHLB and the FRB Discount Window to meet potential liquidity demands. These sources of liquidity are immediately available to satisfy deposit withdrawals, customer credit needs, and our operations. Secondary sources of liquidity include approved lines of credit with correspondent banks and unpledged available-for-sale securities. As of December 31, 2025, our unencumbered cash totaled $512.24 million, unused borrowing capacity from the FHLB totaled $301.81 million, available credit from the FRB Discount Window totaled $5.85 million, available lines from correspondent banks totaled $100.00 million, and unpledged available-for-sale securities totaled $102.83 million. ### Capital Resources We are committed to effectively managing our capital to protect our depositors, creditors, and shareholders. Failure to meet certain capital requirements may result in actions by regulatory agencies that could have a material impact on our operations. Total stockholders’ equity as of December 31, 2025, decreased $25.84 million, or 4.91%, to $500.55 million from $526.39 million as of December 31, 2024. The decrease is primarily due to regular quarterly and two special dividends being declared in 2025 in the combined total amount of $4.31 per common share, totaling $78.92 million in payments. In addition, the Company repurchased 50,338 shares of our common stock totaling $1.85 million. As a result, our book value per common share decreased $1.43 to $27.30 as of December 31, 2025, from $28.73 as of December 31, 2024. #### Capital Adequacy Requirements Risk-based capital guidelines, issued by state and federal banking agencies, include balance sheet assets and off-balance sheet arrangements weighted by the risks inherent in the specific asset type. Our current risk-based capital requirements are based on the international capital standards known as Basel III. Our current minimum required capital ratios are as follows: - 4.5% Common Equity Tier 1 capital to risk-weighted assets (effectively 7.00% including the capital conservation buffer) - 6.0% Tier 1 capital to risk-weighted assets (effectively 8.50% including the capital conservation buffer) - 8.0% Total capital to risk-weighted assets (effectively 10.50% including the capital conservation buffer) - 4.0% Tier 1 capital to average consolidated assets (“Tier 1 leverage ratio”) The following table presents our capital ratios as of the dates indicated: | The Company | December 31, 2025 | 2024 | 2023 | | --- | ---: | ---: | ---: | | Common equity Tier 1 ratio | 16.10% | 16.75% | 14.69% | | Tier 1 risk-based capital ratio | 16.10% | 16.75% | 14.69% | | Total risk-based capital ratio | 17.35% | 18.00% | 15.94% | | Tier 1 leverage ratio | 11.44% | 12.25% | 11.52% | | **The Bank** | | | | | Common equity Tier 1 ratio | 14.46% | 13.89% | 12.97% | | Tier 1 risk-based capital ratio | 14.46% | 13.89% | 12.97% | | Total risk-based capital ratio | 15.71% | 15.15% | 14.22% | | Tier 1 leverage ratio | 10.38% | 10.32% | 10.07% | As of December 31, 2025, we continued to meet all capital adequacy requirements and were classified as well-capitalized under the regulatory framework for prompt corrective action. Management believes there have been no conditions or events since those notifications that would change the Bank’s classification. Additionally, our capital ratios were in excess of the minimum standards under the Basel III capital rules on a fully phased-in basis, as of December 31, 2025. For additional information, see “Capital Requirements” in Part I, Item 1 and Note 20, “Regulatory Requirements and Restrictions,” to the Consolidated Financial Statements in Item 8 of this report. ### Market Risk and Interest Rate Sensitivity Market risk represents the risk of loss due to adverse changes in current and future cash flows, fair values, earnings, or capital due to movements in interest rates and other factors. Our profitability is largely dependent upon net interest income, which is subject to variation due to changes in the interest rate environment and unbalanced repricing opportunities. We are subject to interest rate risk when interest-earning assets and interest-bearing liabilities reprice at differing times, when underlying rates change at different levels or in varying degrees, when there is an unequal change in the spread between two or more rates for different maturities, and when embedded options, if any, are exercised. ALCO reviews our mix of assets and liabilities with the goal of limiting exposure to interest rate risk, ensuring adequate liquidity, and coordinating sources and uses of funds while maintaining an acceptable level of net interest income given the current interest rate environment. ALCO is also responsible for overseeing the formulation and implementation of policies and strategies to improve balance sheet positioning and mitigate the effect of interest rate changes. In order to manage our exposure to interest rate risk, we periodically review internal and third-party simulation models that project net interest income at risk, which measures the impact of different interest rate scenarios on net interest income, and the economic value of equity at risk, which measures potential long-term risk in the balance sheet by valuing our assets and liabilities at fair value under different interest rate scenarios. Simulation results show the existence and severity of interest rate risk in each scenario based on our current balance sheet position, assumptions about changes in the volume and mix of interest-earning assets and interest-bearing liabilities, and estimated yields earned on assets and rates paid on liabilities. The simulation model provides the best tool available to us and the industry for managing interest rate risk; however, the model cannot precisely predict the impact of fluctuations in interest rates on net interest income due to the use of significant estimates and assumptions. Actual results will differ from simulated results due to the timing, magnitude, and frequency of interest rate changes; changes in market conditions and customer behavior; and changes in our strategies that management might undertake in response to a sudden and sustained rate shock. As of December 31, 2025, the Federal Open Market Committee set the benchmark federal funds rate at a range of 3.50% - 3.75% basis points. The following table presents the sensitivity of net interest income from immediate and sustained rate shocks in various interest rate scenarios over a twelve-month period for the periods indicated. *(Dollars in thousands)* | Increase (Decrease) in Basis Points | December 31, 2025 Change in Net Interest Income | Percent Change | 2024 Change in Net Interest Income | Percent Change | | ---: | ---: | ---: | ---: | ---: | | 400 | $8,947 | 7.0% | $5,992 | 4.7% | | 300 | 6,681 | 5.2% | 4,492 | 3.5% | | 200 | 4,432 | 3.5% | 2,997 | 2.4% | | 100 | 2,232 | 1.7% | 1,505 | 1.2% | | (100) | (3,888) | -3.0% | (2,883) | -2.3% | | (200) | (8,748) | -6.9% | (6,325) | -5.0% | We have established policy limits for tolerance of interest rate risk in various interest rate scenarios and exposure limits to changes in the economic value of equity. As of December 31, 2025, we feel our exposure to interest rate risk was adequately mitigated for the scenarios presented. ## Market risk As filed, 139 characters. The information required in this item is incorporated by reference to “Market Risk and Interest Rate Sensitivity” in Item 7 of this report. ## Controls and procedures As filed, 3,059 characters. ### Evaluation of Disclosure Controls and Procedures In connection with this report, we conducted an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of our disclosure controls and procedures under the Exchange Act Rule 13a-15(b). Based upon that evaluation, the CEO and CFO concluded that, as of December 31, 2025, our disclosure controls and procedures were effective. Disclosure controls and procedures are our Company’s controls and other procedures that are designed to ensure that information we are required to disclose in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information we are required to disclose in the reports that we file or submit under the Exchange Act is accumulated and communicated to management, including the CEO and CFO, as appropriate, to allow timely decisions about required disclosure. Management, including the CEO and CFO, does not expect that our disclosure controls and internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our Company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, collusion of two or more people, or management’s override of the controls. ### Changes in Internal Control over Financial Reporting We assess the adequacy of our internal control over financial reporting quarterly and enhance our controls in response to internal control assessments and internal and external audit and regulatory recommendations. There were no changes in our internal control over financial reporting during the quarter ended December 31, 2025, that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. ### Management's Report on Internal Controls over Financial Reporting Management's report on the Company's internal control over financial reporting and the attestation report of Crowe, LLP, the Company's independent registered public accounting firm, on internal control over financial reporting are under the headings “Management's Assessment of Internal Control over Financial Reporting,” and “Report of Independent Registered Public Accounting Firm,” in Item 8 of this report and are incorporated in this Item 9A by reference. Filed Mar 6, 2026. Source: SEC EDGAR, the filing index for accession 0001437749-26-007180. Last ingested by Listed: Oct 28, 2026, 08:55 ET. No prices; not investment advice.