Quarterly Report for Quarter Ending June 30, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations

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 and our Annual Report on Form 10-K for the year ended December 31, 2024 (the "2024 Form 10-K"). 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.

Executive Overview

First Community Bankshares, Inc. (the "Company") 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 Virginia chartered bank institution. As of June 30, 2025, the Bank operated 53 branches in Virginia, West Virginia, North Carolina and Tennessee. As of June 30, 2025, full-time equivalent employees, calculated using the number of hours worked, totaled 594. 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. We invest our funds primarily in loans to retail and commercial customers and various investment securities. Our common stock is traded on the NASDAQ Global Select Market under the symbol FCBC.

The Bank offers trust management, estate administration, and investment advisory services through its Trust Division and wholly owned subsidiary First Community Wealth Management Inc. ("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 investment advisory fees and commissions on assets under management and administration. As of June 30, 2025, the Trust Division and FCWM managed and administered $1.66 billion in combined assets under various fee-based arrangements as fiduciary or agent. The Bank also offers a full range of commercial and personal insurance products through its strategic partnership with Bankers Insurance, LLC.

Critical Accounting Estimates

We prepare our consolidated financial statements in accordance with generally accepted accounting principles ("GAAP") in the U.S. and conform to general practices within the banking industry. Our financial position and results of operations may require management 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. Estimates, assumptions, and judgments, which are periodically evaluated, are based on historical experience and other factors, including expectations of future events believed reasonable under the circumstances. These estimates are generally necessary when assets and liabilities are required to be recorded at estimated fair value, when a decline in the value of an asset carried on the financial statements at fair value warrants an impairment write-down or a valuation reserve, or when an asset or liability needs recorded based on the probability of occurrence of a future event. Carrying assets and liabilities at fair value inherently results in more financial statement volatility. Fair values and information used to record valuation adjustments for certain assets and liabilities are based on quoted market prices, when available, or third-party sources. When quoted prices or third-party information is not available, management estimates valuation adjustments primarily through the use of financial modeling techniques and appraisal estimates.

Our accounting policies are fundamental in understanding MD&A and the disclosures presented in Item 1, "Financial Statements," of this Quarterly Report on Form 10-Q. Our accounting policies are described in detail in Note 1, "Basis of Presentation and Significant Accounting Policies,"of the Notes to Consolidated Financial Statements in Part II, Item 8 of our 2024 Form 10-K. Our critical accounting estimates are detailed in the "Critical Accounting Estimates" section in Part II, Item 7 of our 2024 Form 10-K.

Performance Overview

Highlights of our results of operations for the three and six months ended June 30, 2025, and financial condition as of June 30, 2025, include the following:

	●	Net interest margin for the second quarter of 2025 remained strong at 4.37%. The yield on earning assets decreased 16 basis points from the same period of 2024 and is primarily attributable to a decrease in interest income of $1.40 million. Interest income on loans decreased $2.05 million, which was primarily due to a decrease in the average balance for loans of $134.85 million. Additionally, the yield on loans decreased 6 basis points. The decrease in interest income on loans was somewhat offset by an increase in interest income on interest-bearing deposits with banks of $840 thousand. Interest expense on interest-bearing liabilities decreased $145 thousand, which is primarily attributable to a decrease in average balance, as well as a decrease in yield of 3 basis points.
	●	There was a recovery of provision for credit losses for the quarter ending June 30, 2025, of $285 thousand compared to a provision of $144 thousand for the same period of 2024. The decrease is primarily due to a decrease in net charge-offs for the quarter of $553 thousand compared to the same period in 2024 and a reduction in loan balance period over period of $119.99 million.
	●	Noninterest income increased approximately $998 thousand, or 10.68%, when compared to the same quarter of 2024. The increase is primarily attributable to an increase in service charges on deposits of $692 thousand, or 20.19%. Noninterest expense increased $558 thousand, or 2.24%, when compared to the same period of 2024. The increase is attributable to increases in salaries and benefits of $1.86 million, or 14.87%, other operating expense of $328 thousand, or 10.84%, and advertising and public relations of $221 thousand, or 23.67%.

	●	Net income of $12.25 million for the second quarter of 2025, was a decrease of $440 thousand, or 3.47%, from the same quarter of 2024. Net income of $24.06 million for the first six months of 2025, was a decrease of $1.47 million, or 5.75%, from the same period of 2024.
	●	Annualized return on average assets ("ROA") was 1.53% for the second quarter of 2025 compared to 1.58% for the same period of 2024. Annualized return on average assets ("ROA") for the six months ended June 30, 2025, was 1.51% compared to 1.59% for the same period of 2024. Annualized return on average common equity ("ROE") was 9.84% for the second quarter of 2025 compared to 10.02% for the same period of 2024. Annualized return on average common equity ("ROE") was 9.67% for the six months ended June 30, 2025, compared to 10.10% for the same period of 2024.
	●	Consolidated assets totaled $3.18 billion at June 30, 2025.
	●	Loans decreased $62.81 million, or 2.60%, from December 31, 2024. Securities available for sale decreased $37.31 million, or 21.97%, from December 31, 2024. Deposits decreased $55.88 million, or 2.08%, which was due to a decrease in interest-bearing demand deposits and declining higher-rate time deposits. Stockholder equity decreased $23.56 million, or 4.48% primarily due to the payment of a special cash dividend in the first quarter of 2025. The net effect of these balance sheet changes resulted in an increase in cash and cash equivalents of $17.60 million, or 4.66%.
	●	The Company repurchased 50,338 common shares during the second quarter of 2025 at a cost of $1.85 million; there were no shares repurchased in the first quarter of 2025. The Company purchased 155,044 common shares during the second quarter of 2024 at a total cost of $5.28 million; a total of 244,440 common shares was purchased during the first six months of 2024 at a total cost of $8.25 million.
	●	Total non-performing assets as of June 30, 2025, were $19.17 million, compared with $20.54 million as of December 31, 2024, and $19.93 million as of June 30, 2024. The Company has realized a declining trend in non-performing assets since September 30, 2024.
	●	Non-performing loans to total loans remained the same at 0.80% when compared with the same quarter of 2024. The Company experienced net charge-offs for the second quarter of 2025 of $472 thousand, or 0.08% of annualized average loans, compared to net charge-offs of $1.03 million, or 0.16%, of annualized average loans for the same period in 2024.
	●	The allowance for credit losses to total loans was 1.40% at June 30, 2025, compared to 1.44% at December 31, 2024 and 1.41% at June 30, 2024.
	●	Book value per share at June 30, 2025, was $27.46, a decrease of $1.27 from year-end 2024. The decrease is primarily attributable to the payment of the special cash dividend in the first quarter of 2025 of $2.07 per share totaling approximately $37.93 million.

Economic and Trade Policy Uncertainty

In the second quarter of 2025, the United States implemented new tariffs as part of U.S. trade policy. Other countries have responded with retaliatory actions or plans for retaliatory actions. Some of these tariff announcements have since been followed by announcements of limited exemptions and temporary pauses. The duration and extent of the tariffs and any reciprocal tariffs, as well as any available opportunities to lessen the impact, continue to evolve. To date, these actions have not had a material impact on our results of operations, financial condition or cash flows.

Results of Operations

Net Income

The following table presents the changes in net income and related information for the periods indicated:

		Three Months Ended																Six Months Ended
(Amounts in thousands, except per		June 30,								Increase								June 30,								Increase
share data)		2025				2024				(Decrease)				% Change				2025				2024				(Decrease)				% Change
Net income		$	12,246			$	12,686			$	(440	)			-3.47	%		$	24,064			$	25,531			$	(1,467	)			-5.75	%
Basic earnings per common share			0.67				0.69				(0.02	)			-2.90	%			1.31				1.39				(0.08	)			-5.76	%
Diluted earnings per common share			0.67				0.71				(0.04	)			-5.63	%			1.31				1.42				(0.11	)			-7.75	%
Return on average assets			1.53	%			1.58	%			-0.05	%			-3.16	%			1.51	%			1.59	%			-0.08	%			-5.03	%
Return on average common equity			9.84	%			10.02	%			-0.18	%			-1.80	%			9.67	%			10.10	%			-0.43	%			-4.26	%

Three-Month Comparison.

Net income decreased $440 thousand, or 3.47%, in the second quarter of 2025 compared to the same period in 2024. The decrease is primarily attributable to a decrease in net interest income of $1.26 million, or 3.93%; as well as an increase in non-interest expense of $558 thousand, or 2.24%. The decreases in income were offset by an increase in total noninterest income of $998 thousand, or 10.68%, as well as a decrease in provision for credit losses of $429 thousand, or 297.92%, compared to the same period in 2024.

Six-Month Comparison.

Net income decreased $1.47 million, or 5.75%, in the first six months of 2025 compared to the same period in 2024. The decrease is primarily attributable to a decrease in net interest income of $2.59 million, or 4.07%, as well as an increase in non-interest expense of $2.12 million, or 4.38%. The decreases in income were offset by an increase in total noninterest income of $1.97 million, or 10.58%, as well as a decrease in provision for credit losses of $1.12 million, or 96.88%, compared to the same period in 2024.

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" below. The following tables present the consolidated average balance sheets and net interest analysis on a FTE basis for the dates indicated:

AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited)

		Three Months Ended June 30,
		2025												2024
		Average								Average Yield/				Average								Average Yield/
(Amounts in thousands)		Balance				Interest(1)				Rate(1)				Balance				Interest(1)				Rate(1)
Assets
Earning assets
Loans(2)(3)		$	2,364,362			$	30,731				5.21	%		$	2,499,212			$	32,777				5.27	%
Securities available-for-sale			128,457				1,053				3.29	%			144,755				1,242				3.45	%
Interest-bearing deposits			333,872				3,722				4.47	%			210,432				2,883				5.51	%
Total earning assets			2,826,691				35,506				5.04	%			2,854,399				36,902				5.20	%
Other assets			377,879												373,029
Total assets		$	3,204,570											$	3,227,428
Liabilities and stockholders' equity
Interest-bearing deposits
Demand deposits		$	657,888			$	177				0.11	%		$	664,707			$	174				0.10	%
Savings deposits			895,024				3,322				1.49	%			874,420				3,582				1.65	%
Time deposits			228,485				1,232				2.16	%			246,291				1,121				1.83	%
Total interest-bearing deposits			1,781,397				4,731				1.07	%			1,785,418				4,877				1.10	%
Borrowings
Retail repurchase agreements			1,293				-				0.07	%			1,002				-				0.04	%
Total borrowings			1,293				-				0.07	%			1,002				-				0.04	%
Total interest-bearing liabilities			1,782,690				4,731				1.06	%			1,786,420				4,877				1.10	%
Noninterest-bearing demand deposits			877,346												884,681
Other liabilities			45,310												47,123
Total liabilities			2,705,346												2,718,224
Stockholders' equity			499,224												509,204
Total liabilities and stockholders' equity		$	3,204,570											$	3,227,428
Net interest income, FTE(1)						$	30,775											$	32,025
Net interest rate spread											3.97	%											4.10	%
Net interest margin, FTE(1)											4.37	%											4.51	%

(1)	Interest income and average yield/rate are presented on a FTE, non-GAAP, basis using the federal statutory income tax rate of 21%.
(2)	Nonaccrual loans are included in the average balance; however, no related interest income is recorded during the period of nonaccrual.
(3)	Interest on loans includes non-cash and accelerated purchase accounting accretion of $430 thousand and $661 thousand for the three months ended June 30, 2025 and 2024, respectively.

AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited)

		Six Months Ended June 30,
		2025												2024
		Average								Average Yield/				Average								Average Yield/
(Amounts in thousands)		Balance				Interest(1)				Rate(1)				Balance				Interest(1)				Rate(1)
Assets
Earning assets
Loans(2)(3)		$	2,379,630			$	61,488				5.21	%		$	2,524,159			$	66,278				5.28	%
Securities available-for-sale			138,804				2,314				3.36	%			191,882				2,974				3.12	%
Interest-bearing deposits			315,011				6,984				4.47	%			138,458				3,798				5.52	%
Total earning assets			2,833,445				70,786				5.04	%			2,854,499				73,050				5.15	%
Other assets			375,846												373,322
Total assets		$	3,209,291											$	3,227,821
Liabilities and stockholders' equity
Interest-bearing deposits
Demand deposits		$	658,268			$	357				0.11	%		$	665,291			$	336				0.10	%
Savings deposits			893,096				6,633				1.50	%			870,252				6,995				1.62	%
Time deposits			233,343				2,612				2.26	%			248,133				1,911				1.55	%
Total interest-bearing deposits			1,784,707				9,602				1.09	%			1,783,676				9,242				1.04	%
Borrowings
Retail repurchase agreements			1,183				0				0.06	%			1,065				-				0.05	%
Federal funds purchased			-				-				-				1,264				35				5.52	%
Total borrowings			1,183				0				0.06	%			2,329				35				3.02	%
Total interest-bearing liabilities			1,785,890				9,602				1.08	%			1,786,005				9,277				1.04	%
Noninterest-bearing demand deposits			868,714												885,813
Other liabilities			52,698												47,710
Total liabilities			2,707,302												2,719,528
Stockholders' equity			501,989												508,293
Total liabilities and stockholders' equity		$	3,209,291											$	3,227,821
Net interest income, FTE(1)						$	61,184											$	63,773
Net interest rate spread											3.96	%											4.11	%
Net interest margin, FTE(1)											4.35	%											4.49	%

(1)	Interest income and average yield/rate are presented on a FTE, non-GAAP, basis using the federal statutory income tax rate of 21%.
(2)	Nonaccrual loans are included in the average balance; however, no related interest income is recorded during the period of nonaccrual.
(3)	Interest on loans includes non-cash and accelerated purchase accounting accretion of $986 thousand and $1.44 million for the six months ended June 30, 2025 and 2024, respectively.

The following table presents the impact to net interest income on an FTE basis due to changes in volume (change in 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:

		Three Months Ended																Six Months Ended
		June 30, 2025 Compared to 2024																June 30, 2025 Compared to 2024
		Dollar Increase (Decrease) due to																Dollar Increase (Decrease) due to
										Rate/																Rate/
(Amounts in thousands)		Volume				Rate				Volume				Total				Volume				Rate				Volume				Total
Interest earned on (1)
Loans		$	(3,537	)		$	(764	)		$	2,255			$	(2,046	)		$	(3,795	)		$	(874	)		$	(121	)		$	(4,790	)
Securities available-for-sale			(280	)			(117	)			208				(189	)			(823	)			234				(71	)			(660	)
Interest-bearing deposits with other banks			3,382				(1,087	)			(1,456	)			839				4,843				(720	)			(937	)			3,186
Total interest earning assets			(435	)			(1,968	)			1,007				(1,396	)			225				(1,360	)			(1,129	)			(2,264	)
Interest paid on
Demand deposits			(4	)			11				(3	)			4				(4	)			27				(1	)			22
Savings deposits			169				(691	)			262				(260	)			184				(514	)			(32	)			(362	)
Time deposits			(162	)			407				(134	)			111				(114	)			874				(59	)			701
Federal funds purchased			-				-				-				-				-				-				(35	)			(35	)
Retail repurchase agreements			-				1				(1	)			0				-				-				0				0
FHLB advances and other borrowings
Total interest-bearing liabilities			3				(272	)			124				(145	)			66				387				(127	)			326
Change in net interest income (1)		$	(438	)		$	(1,696	)		$	883			$	(1,251	)		$	159			$	(1,747	)		$	(1,002	)		$	(2,590	)

(1)	FTE basis based on the federal statutory rate of 21%.

Three-Month Comparison. Net interest income comprised 74.78% of total net interest and noninterest income in the second quarter of 2025 compared to 77.35% in the same quarter of 2024. Net interest income on a GAAP basis decreased $1.26 million, or 3.93%. Net interest income on a FTE basis decreased $1.25 million, with a percentage decrease of 3.91%. The net interest margin on a FTE basis decreased 14 basis points while the net interest spread on a FTE basis decreased 13 basis points. The decrease in both the net interest margin and the net interest spread was primarily the result of a decrease in interest income driven by a decrease in the yield and average balance in both the loan and the securities available for sale portfolios.

Average earning assets decreased $27.71 million, or 0.97%, primarily due to a decrease in the average balance for loans of $134.85 million, or 5.40%. In addition, the average balance for available-for-sale securities decreased $16.30 million, or 11.26%. These decreases to earning assets were offset by an increase in the average balance for interest-bearing balances with banks of $123.44 million, or 58.66%. The yield on earning assets decreased 16 basis points, or 3.08%, with loans experiencing a decrease of 6 basis points and securities available for sale experiencing a decrease of 16 basis points. The average loan to deposit ratio decreased to 88.93% from 93.60% reported in the same quarter of 2024. Non-cash accretion income was $430 thousand for the second quarter compared to $661 thousand reported in the same period of 2024.

Average interest-bearing liabilities, which consist of interest-bearing deposits and borrowings, decreased $3.73 million, or 0.21%, primarily due to a decrease in time deposits of $17.81 million, or 7.23%, and a decrease in demand deposits of $6.82 million, or 1.03%. The decreases in average interest-bearing liabilities were offset by an increase in average saving deposits of $20.60 million, of 2.36%. The yield on interest-bearing liabilities decreased 4 basis points and is primarily due to the decrease in yield on savings deposits.

Six-Month Comparison. Net interest income comprised 74.77% of total net interest and noninterest income in the six months ending June 30, 2025 compared to 77.36% for the same period of 2024. Net interest income on a GAAP basis decreased $2.59 million, or 4.07%. Net interest income on a FTE basis decreased $2.59 million, with a percentage decrease of 4.06%. The net interest margin on a FTE basis decreased 14 basis points while the net interest spread on a FTE basis decreased 16 basis points. The decrease in both the net interest margin and the net interest spread was primarily the result of a decrease in interest income driven by a decrease in the yield and average balance in both the loan and the securities available for sale portfolios.

Average earning assets decreased $21.05 million, or 0.74%, primarily due to a decrease in the average balance for loans of $144.53 million, or 5.73%. In addition, the average balance for available-for-sale securities decreased $53.08 million, or 27.66%. These decreases to earning assets were offset by an increase in the average balance for interest-bearing balances with banks of $176.55 million, or 127.51%. The yield on earning assets decreased 11 basis points, or 2.14%, primarily due to a decrease in the yield on loans of 7 basis points, or 1.33%. The average loan to deposit ratio decreased to 89.68% from 94.56% reported in the same quarter of 2024. Non-cash accretion income was $986 thousand for the first six months of 2025 compared to $ 1.44 million reported in the same period of 2024.

Average interest-bearing liabilities, which consist of interest-bearing deposits and borrowings, experienced an increase in interest expense of $326 thousand, or 3.52%, primarily due to an increase in the average balance of deposits of $1.03 million, or 0.06%. The yield on interest-bearing liabilities increased 4 basis points primarily due to the increase in yield on time deposits.

Provision for Credit Losses

Three-Month Comparison. The provision charged to operations decreased $429 thousand, or 297.92%, in the second quarter of 2025 compared to the same quarter of 2024. There was a recovery of provision for credit losses for loans of $292 thousand was recorded in the second quarter of 2025 compared to the provision of $449 thousand recorded in the same period of 2024. The decrease in provision was primarily due to a decrease in the balance of the loan portfolio, as well as a decrease in net charge-offs. There was a provision recorded for the allowance for unfunded commitments during the second quarter of 2025 of $7 thousand. A recovery of provision for the allowance for unfunded commitments was recorded during the second quarter of 2024, in the amount of $305 thousand.

Six-Month Comparison. The provision charged to operations decreased $1.12 million, or 96.88%, in the six months ending June 30, 2025 compared to the same quarter of 2024. Provision for credit losses for loans of $58 thousand was recorded in the six months ending June 30, 2025 compared to the provision of $1.46 million recorded in the same period of 2024. As noted above, the decrease was primarily due to a decrease in the balance of loan portfolio, as well as a decrease in net charge-offs. There was a recovery of provision for the allowance for unfunded commitments during the first six months of 2025 of $22 thousand. Compared to a recovery of provision for unfunded commitments of $305 thousand during the first six months of 2024.

Noninterest Income

The following table presents the components of, and changes in, noninterest income for the periods indicated:

		Three Months Ended																Six Months Ended
		June 30,								Increase				%				June 30,								Increase				%
		2025				2024				(Decrease)				Change				2025				2024				(Decrease)				Change
(Amounts in thousands)
Wealth management		$	1,222			$	1,064			$	158				14.85	%		$	2,384			$	2,163			$	221				10.22	%
Service charges on deposits			4,120				3,428				692				20.19	%			7,956				6,738				1,218				18.08	%
Other service charges and fees			3,791				3,670				121				3.30	%			7,131				7,120				11				0.15	%
Other operating income			1,207				1,180				27				2.29	%			3,098				2,580				518				20.08	%
Total noninterest income		$	10,340			$	9,342			$	998				10.68	%		$	20,569			$	18,601			$	1,968				10.58	%

Three-Month Comparison. Noninterest income comprised 25.22% of total net interest and noninterest income in the second quarter of 2025 compared to 22.65% in the same quarter of 2024. Noninterest income increased $998 thousand or 10.68%. The increase is primarily attributable to an increase in service charges on deposits of $692 thousand, or 20.19%.

Six-Month Comparison. Noninterest income comprised 25.23% of total net interest and noninterest income in the six months ending June 30, 2025 compared to 22.64% in the same quarter of 2024. Noninterest income increased $1.97 million or 10.58%. The increase is primarily attributable to an increase in service charges on deposits of $1.22 million, or 18.08%, and an increase in other operating income of $518 thousand, or 20.08%.

Noninterest Expense

The following table presents the components of, and changes in, noninterest expense for the periods indicated:

		Three Months Ended																Six Months Ended
		June 30,								Increase				%				June 30,								Increase				%
		2025				2024				(Decrease)				Change				2025				2024				(Decrease)				Change
(Amounts in thousands)
Salaries and employee benefits		$	14,349			$	12,491			$	1,858				14.87	%		$	27,684			$	25,072			$	2,612				10.42	%
Occupancy expense			1,290				1,309				(19	)			-1.45	%			2,866				2,687				179				6.66	%
Furniture and equipment expense			1,587				1,687				(100	)			-5.93	%			3,162				3,232				(70	)			-2.17	%
Service fees			2,475				2,427				48				1.98	%			4,959				4,876				83				1.70	%
Advertising and public relations			1,154				933				221				23.69	%			2,209				1,729				480				27.76	%
Professional fees			360				330				30				9.09	%			732				702				30				4.27	%
Amortization of intangibles			526				530				(4	)			-0.75	%			1,050				1,060				(10	)			-0.94	%
FDIC premiums and assessments			361				364				(3	)			-0.82	%			723				733				(10	)			-1.36	%
Litigation expense			-				1,800				(1,800	)			-100.00	%			-				1,800				(1,800	)			-100.00	%
Other operating expense			3,353				3,026				327				10.81	%			7,014				6,392				622				9.73	%
Total noninterest expense		$	25,455			$	24,897			$	558				2.24	%		$	50,399			$	48,283			$	2,116				4.38	%

Three-Month Comparison. Noninterest expense increased $558 thousand, or 2.24%, in the second quarter of 2025 compared to the same quarter of 2024. The increase was primarily due to an increase in salaries and employee benefits of $1.86 million, or 14.87%.

Six-Month Comparison. Noninterest expense increased $2.12 million, or 4.38%, in the six months ending June 30, 2025 compared to the same quarter of 2024. The largest increases were primarily due to increases in salaries and employee benefits of $2.61 million, or 10.42%, and other operating expense of $622 thousand, or 9.73%.

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.

Three-Month Comparison. Income tax expense increased $54 thousand, or 1.53%. The effective tax rate increased to 22.63% in the second quarter of 2025 from 21.75% in the same quarter of 2024.

Six-Month Comparison. Income tax expense decreased $148 thousand, or 2.06%. The decrease is primarily due to the decrease in net income before taxes. The effective tax rate increased to 22.60% in the six months ending June 30, 2025 from 21.93% in the same quarter of 2024.

Non-GAAP Financial Measures

In addition to financial statements prepared in accordance with GAAP, we use certain non-GAAP financial measures that management believes provide investors with important information useful in understanding our operational performance and comparing our financial measures with other financial institutions. The non-GAAP financial measure presented in this report includes net interest income on a FTE basis. 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. The FTE basis adjusts for the tax benefits of income from certain tax exempt loans and investments using the federal statutory rate of 21%. While we believe certain non-GAAP financial measures enhance understanding of our business and performance, they are supplemental and not a substitute for, or more important than, financial measures prepared on a GAAP basis. Our non-GAAP financial measures may not be comparable to those reported by other financial institutions. The reconciliations of non-GAAP to GAAP measures are presented below.

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:

		Three Months Ended June 30,								Six Months Ended June 30,
		2025				2024				2025				2024
(Amounts in thousands)
Net interest income, GAAP		$	30,657			$	31,912			$	60,955			$	63,541
FTE adjustment(1)			118				113				229				232
Net interest income, FTE			30,775				32,025				61,184				63,773
Net interest margin, GAAP			4.35	%			4.49	%			4.33	%			4.47	%
FTE adjustment(1)			0.02	%			0.02	%			0.02	%			0.02	%
Net interest margin, FTE			4.37	%			4.51	%			4.35	%			4.49	%

(1) FTE basis of 21%.

Financial Condition

Total assets as of June 30, 2025, decreased $80.20 million, or 2.46%, from December 31, 2024. The decrease in assets was primarily driven by decreases in the loans and securities available-for-sale portfolios. Total liabilities decreased $56.64 million, or 2.07%, and was primarily driven by a decrease in deposits. Stockholders' equity decreased $23.56 million, or 4.48%.

Investment Securities

Our investment securities are used to generate interest income through the employment of excess funds, to provide liquidity, to fund loan demand or deposit liquidation, and to pledge as collateral where required. 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 June 30, 2025, decreased $37.31 million, or 21.97%, compared to December 31, 2024. The decrease is primarily due to the maturities and calls of securities of $90.45 million during the first six months of 2025 offset by purchases of $50.11 million. The market value of debt securities available-for-sale as a percentage of amortized cost was 91.52% as of June 30, 2025, compared to 91.97% as of December 31, 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. U.S. Treasury Securities, Agency-Backed Securities including GNMA, FHLMC, FNMA, FHLB, FFCB and SBA. 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. All debt securities available-for-sale in an unrealized loss position as of June 30, 2025 continue to perform as scheduled and we do not believe that a provision for credit losses is necessary.

Loans Held for Investment

Loans held for investment, which generates the 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 following table presents loans, net of unearned income, by loan class as of the dates indicated:

		June 30, 2025								December 31, 2024								June 30, 2024
(Amounts in thousands)		Amount				Percent				Amount				Percent				Amount				Percent
Loans held for investment
Commercial loans
Construction, development, and other land		$	64,441				2.74	%		$	72,319				2.99	%		$	81,693				3.30	%
Commercial and industrial			249,674				10.61	%			232,854				9.64	%			205,858				8.32	%
Multi-family residential			189,267				8.04	%			199,521				8.26	%			196,311				7.94	%
Single family non-owner occupied			185,042				7.86	%			195,588				8.10	%			209,442				8.47	%
Non-farm, non-residential			840,642				35.73	%			852,223				35.27	%			870,513				35.20	%
Agricultural			14,077				0.60	%			16,676				0.69	%			19,513				0.79	%
Farmland			11,170				0.47	%			12,311				0.51	%			13,606				0.55	%
Total commercial loans			1,554,313				66.05	%			1,581,492				65.46	%			1,596,936				64.57	%
Consumer real estate loans
Home equity lines			84,629				3.60	%			90,227				3.73	%			88,608				3.58	%
Single family owner occupied			634,898				26.98	%			650,306				26.92	%			676,904				27.37	%
Owner occupied construction			4,775				0.20	%			4,491				0.19	%			4,731				0.19	%
Total consumer real estate loans			724,302				30.78	%			745,024				30.84	%			770,243				31.14	%
Consumer and other loans
Consumer loans			72,325				3.07	%			87,758				3.63	%			104,503				4.23	%
Other			2,337				0.10	%			1,815				0.08	%			1,586				0.06	%
Total consumer and other loans			74,662				3.17	%			89,573				3.71	%			106,089				4.29	%
Total loans held for investment, net of unearned income			2,353,277				100.00	%			2,416,089				100.00	%			2,473,268				100.00	%
Less: allowance for credit losses			33,020								34,825								34,885
Total loans held for investment, net of unearned income and allowance		$	2,320,257							$	2,381,264							$	2,438,383

Total loans as of June 30, 2025, decreased $62.81 million, or 2.60%, compared to December 31, 2024. The largest decrease occurred in the commercial loans segment with an overall decrease of $27.18 million, or 1.72%. Within this segment, the largest decreases occurred in non-farm, non-residential loans, single family non-owner occupied, and multi-family residential loans with decreases of $11.58 million, $10.55 million, and $10.25 million, respectively. These decreases were offset by an increase in commercial and industrial loans of $16.82 million. The consumer real estate segment decreased $20.72 million, or 2.78%, primarily due to a decrease in single family owner occupied of $15.41 million, or 2.37%.

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 credit losses. We track certain credit quality indicators that include: trends related to the risk rating of commercial loans, the level of classified commercial loans, net charge-offs, nonperforming loans, and general economic conditions. The Company's loan review function performs an independent credit analysis on a risk-based sample of commercial loan relationships annually and performs a qualitative review of a sample of smaller commercial and retail loans.

Nonperforming assets consist of nonaccrual loans, accrual loans contractually past due 90 days or more, and modified loans past due 90 days or more, and OREO. 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.

The following table presents the components of nonperforming assets and related information as of the periods indicated:

		June 30, 2025				December 31, 2024				June 30, 2024
(Amounts in thousands)
Nonperforming
Nonaccrual loans		$	18,084			$	19,869			$	19,815
Accruing loans past due 90 days or more			568				149				19
Modified loans past due 90 days or more not included in nonaccrual			-				-				-
Total nonperforming loans			18,652				20,018				19,834
OREO			455				521				100
Total nonperforming assets		$	19,107			$	20,539			$	19,934
Additional Information
Total modified loans		$	2,129			$	2,260			$	2,290
Asset Quality Ratios:
Nonperforming loans to total loans			0.79	%			0.83	%			0.80	%
Nonperforming assets to total assets			0.60	%			0.63	%			0.62	%
Allowance for credit losses to nonperforming loans			177.03	%			173.97	%			175.88	%
Allowance for credit losses to total loans			1.40	%			1.44	%			1.41	%

Nonperforming assets as of June 30, 2025, decreased $1.43 million, or 6.97%, from December 31, 2024. Nonaccrual loans decreased $1.79 million, or 8.98%. OREO decreased $66 thousand, or 12.67%. In addition, accruing loans past due 90 days or more increased $419 thousand from year-end. As of June 30, 2025, nonaccrual loans were largely attributed to single family owner occupied (45.37%), non-farm, non-residential (14.19%), and single family non-owner occupied of (9.39%). 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 $28.92 million as of June 30, 2025, a decrease of $8.62 million, or 22.98%, compared to $37.55 million as of December 31, 2024. Delinquent loans as a percent of total loans totaled 1.23% as of June 30, 2025, which includes past due loans (0.46%) and nonaccrual loans (0.77%).

When restructuring loans for borrowers experiencing financial difficulty, we generally make concessions with respect to interest rates, loan terms, or amortization terms. Total loans modified as of June 30, 2025, were $2.13 million. As of June 30, 2025, $322 thousand of these loans were 30-89 days past due. Modified loans past due 90 days or more totaled $58 thousand and are included in the total for nonaccrual loans.

OREO, which is carried at the lesser of estimated net realizable value or cost, decreased $66 thousand, or 12.67%, as of June 30, 2025, from December 31, 2024, and consisted of 5 properties with an average holding period of approximately 9 months. The net loss on the sale of OREO totaled $93 thousand for the six months ended June 30, 2025, compared to a net loss of $32 thousand for the same period of the prior year. The following table presents the changes in OREO during the periods indicated:

		Six Months Ended June 30,
		2025				2024
(Amounts in thousands)
Beginning balance January 1		$	521			$	192
Additions			191				272
Disposals			(257	)			(315	)
Valuation adjustments			-				(14	)
Other adjustments			-				(35	)
Ending balance		$	455			$	100

Allowance for Credit Losses

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 and Significant Accounting Policies,"of the Notes to Consolidated Financial Statements in Part II, Item 8 of our 2024 Form 10-K.

As of June 30, 2025, the balance of the ACL for loans was $33.02 million, or 1.40% of total loans. The ACL at June 30, 2025, decreased $1.81 million from the balance of $34.83 million recorded at December 31, 2024. This decrease included a provision of $36 thousand offset by net charge-offs for the six months of $1.86 million.

At June 30, 2025, the Company also had an allowance for unfunded commitments of $319 thousand which was recorded in Other Liabilities on the Balance Sheet. During the first six months of 2025, the Company recorded a recovery of provision for credit losses for loan commitments of $22 thousand There was a recovery of provision of $305 thousand recorded in the same period of 2024.

Deposits

Total deposits as of June 30, 2025, decreased $55.88 million, or 2.08%, compared to December 31, 2024. The largest decreases in deposits occurred in interest-bearing demand of $26.18 million, or 3.88%, time deposits of $18.42 million, or 7.66%, and noninterest-bearing demand deposits of $9.82 million or 1.11%.

Total borrowings in the form of retail repurchase agreements as of June 30, 2025, increased $110 thousand, or 12.14%, compared to December 31, 2024.

Liquidity and Capital Resources

Liquidity

Liquidity is a measure of our ability to convert assets to cash or raise cash to meet financial obligations. We believe that liquidity management should encompass an overall balance sheet approach that draws together all sources and uses of liquidity. 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 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 June 30, 2025, the Company's cash reserves and short-term investment securities totaled $395.06 million and $10.91 million, respectively. The Company's cash reserves and investments provide adequate working capital to meet obligations 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 Federal Reserve Bank ("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 June 30, 2025, our unencumbered cash totaled $395.06 million, unused borrowing capacity from the FHLB totaled $326.43 million, available credit from the FRB Discount Window totaled $5.84 million, available lines from correspondent banks totaled $100.00 million, and unpledged available-for-sale securities totaled $104.22 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 June 30, 2025, decreased $23.56 million, or 4.48%, to $502.83 million from $526.39 million as of December 31, 2024. The decrease in capital is primarily attributable to the payment of the special cash dividend in the first quarter of 2025 of $2.07 per share totaling approximately $37.93 million in addition to the regular cash dividends paid in first and second quarter of $0.31 per share. The decrease was offset by net income of $24.06 million. Book value per share at June 30, 2025, was $27.46 compared to $28.73 at year-end 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. A description of the Basel III capital rules is included in Part I, Item 1 of the 2024 Form 10-K. Our current 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:

		June 30, 2025						December 31, 2024
		Company			Bank			Company			Bank
Common equity Tier 1 ratio		16.04%			14.29%			16.75%			13.89%
Tier 1 risk-based capital ratio		16.04%			14.29%			16.75%			13.89%
Total risk-based capital ratio		17.30%			15.54%			18.00%			15.15%
Tier 1 leverage ratio		11.63%			10.37%			12.25%			10.32%

The Company's risk-based capital ratios as of June 30, 2025, decreased from December 31, 2024, primarily due to a decrease in capital levels. The decrease in capital was primarily driven by the payment of a special cash dividend of $2.07 per share totaling approximately $37.93 million during the first quarter of 2025. While the Company's risk-based capital ratios decreased, the Bank's risk-based capital ratios increased. The increase in the Bank's risk-based capital ratios was primarily due to a decrease in risk-weighted assets. As of June 30, 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 that would change the Bank's classification. Additionally, our capital ratios were in excess of the minimum standards under the Basel III capital rules as of June 30, 2025.

Off-Balance Sheet Arrangements

We extend contractual commitments with off-balance sheet risk in the normal course of business to meet the financing needs of our customers. Our exposure to credit loss in the event of nonperformance by other parties to financial instruments is the same as the contractual amount of the instrument. The following table presents our off-balance sheet arrangements as of the dates indicated:

		June 30, 2025				December 31, 2024
(Amounts in thousands)
Commitments to extend credit		$	249,688			$	252,225
Standby letters of credit and financial guarantees (1)			125,417				125,561
Total off-balance sheet risk		$	375,105			$	377,786

(1)	Includes FHLB letters of credit

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 simulation and third-party 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 June 30, 2025, the Federal Open Market Committee had set the benchmark federal funds rate to a range of 425 to 450 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:

		June 30, 2025								December 31, 2024
Increase (Decrease) in Basis Points		Change in Net Interest Income				Percent Change				Change in Net Interest Income				Percent Change
(Dollars in thousands)
200		$	2,674				2.1	%		$	2,997				2.4	%
100			1,350				1.1	%			1,505				1.2	%
(100)			(2,818	)			(2.2	)%			(2,883	)			-2.3	%
(200)			(6,451	)			(5.1	)%			(6,325	)			-5.0	%

Inflation and Changing Prices

Our consolidated financial statements and related notes are presented in accordance with GAAP, which requires the measurement of results of operations and financial position in historical dollars. Inflation may cause a rise in price levels and changes in the relative purchasing power of money. These inflationary effects are not reflected in historical dollar measurements. The primary effect of inflation on our operations is increased operating costs. In management's opinion, interest rates have a greater impact on our financial performance than inflation. Interest rates do not necessarily fluctuate in the same direction, or to the same extent, as the price of goods and services; therefore, the effect of inflation on businesses with large investments in property, plant, and inventory is generally more significant than the effect on financial institutions.

Astronomic federal government spending alongside labor shortages and supply chain complications have contributed to rising inflation. The timing and impact of inflation and rising interest rates on our business and related financial results will depend on future developments, which are highly uncertain and difficult to predict.

Subsequent Event

As reported on Form 8-K filed with the SEC on July 21, 2025, the Company, along with Hometown Bancshares, Inc. ("Hometown") announced the execution of an Agreement and Plan of Merger (the "Agreement") whereby the Company will acquire Hometown and its banking subsidiary, Union Bank, Inc for a total valuation of approximately $41.5 million based on closing price for the Company's common stock of $40.33 as of July 18, 2025. Pursuant to the terms of the Agreement, Hometown shareholders will receive 11.706 shares of the Company common stock for each share of Hometown common stock that they own as of the closing date. Currently, the transaction is expected to close in the first quarter of 2026. Please refer to Note 15 of the Notes to Condensed Consolidated Financial Statements for more information on this acquisition.