For the quarterly period ended September 30, 2021 or Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 112 West King Street, Strasburg, Virginia 22657 (Address of principal executive offices) (Zip Code) (540) 465-9121 (Registrant's telephone number, including area code) ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Securities ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2021 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 1-38874 (Exact name of registrant as specified in its charter) Virginia 54-1232965 (State or other jurisdiction of incorporat ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2021 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 1-38874 (Exact name of registrant as specified in its charter) Virginia 54-1232965 (State or other jurisdiction of incorpora ...

Part I [Business](index=5&type=section&id=Item%201.%20Business) First National Corporation, a bank holding company, offers diverse financial services through First Bank, operating under extensive regulation - First National Corporation is a bank holding company whose primary operating subsidiary is **First Bank**, a commercial bank chartered under Virginia law. The company also has subsidiaries for investment services, real estate holdings, and issuing trust preferred securities[17](index=17&type=chunk) - On February 18, 2021, the Company agreed to acquire **The Bank of Fincastle**, with the transaction expected to close in the **third quarter of 2021**. The deal involves a mix of cash and stock consideration[19](index=19&type=chunk)[20](index=20&type=chunk) - The Bank offers a comprehensive suite of products including consumer and commercial loans, various deposit accounts, and wealth management services. Its customer base includes small and medium-sized businesses, individuals, and local governmental entities[22](index=22&type=chunk) - The company competes with a wide range of financial institutions and holds the **third-largest** deposit market share (**10.53%** as of June 30, 2020) in its operating area[25](index=25&type=chunk)[26](index=26&type=chunk) - As a bank holding company, the Company is subject to extensive supervision and regulation by the **Federal Reserve** and the **Virginia State Corporation Commission (SCC)**[31](index=31&type=chunk) First Bank Regulatory Capital Ratios (December 31, 2020) | Ratio | Value (%) | | :--- | :--- | | Total capital to risk-weighted assets | 15.82 | | Tier 1 capital to risk-weighted assets | 14.57 | | Common equity Tier 1 capital to risk-weighted assets | 14.57 | | Tier 1 capital to average assets | 8.80 | | Capital conservation buffer ratio | 7.82 | [Risk Factors](index=15&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks from the COVID-19 pandemic, economic conditions, competition, operational threats, and acquisition integration - The **COVID-19 pandemic** presents a material risk, potentially impacting credit losses, operational efficiency, vendor performance, and demand for products and services[70](index=70&type=chunk)[73](index=73&type=chunk) - The company's concentration in loans secured by **real estate** creates exposure to adverse changes in real estate markets, which could affect borrowers' ability to repay and the value of collateral[102](index=102&type=chunk)[103](index=103&type=chunk) - The pending acquisition of **Fincastle** carries risks, including potential difficulties in integration, failure to realize anticipated benefits, disruption to customer relationships, and the possibility that regulatory approvals may be delayed or impose unforeseen conditions[131](index=131&type=chunk)[132](index=132&type=chunk)[134](index=134&type=chunk) - Changes in **interest rates** could adversely affect net interest income, as income is highly dependent on the spread between interest earned on assets and interest paid on liabilities[89](index=89&type=chunk) - **Cybersecurity threats** are a significant risk. A security breach could compromise confidential information, lead to liability and financial loss, and damage the company's reputation[97](index=97&type=chunk)[98](index=98&type=chunk) - The company is subject to extensive regulation, and changes in laws, accounting standards (like **CECL**), or tax rates could adversely affect business operations, financial condition, and capital levels[112](index=112&type=chunk)[114](index=114&type=chunk)[116](index=116&type=chunk) [Unresolved Staff Comments](index=33&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports that it has no unresolved comments from the SEC staff - Not applicable[146](index=146&type=chunk) [Properties](index=33&type=section&id=Item%202.%20Properties) The company's headquarters is in Strasburg, Virginia, with 14 branches and other offices operating across its market areas - The Company's headquarters is located at **112 West King Street, Strasburg, Virginia**. The Bank operates **14 branches**, a loan production office, and a customer service center in its service regions[147](index=147&type=chunk) [Legal Proceedings](index=33&type=section&id=Item%203.%20Legal%20Proceedings) The company states that there are no material pending legal proceedings to which it or its property is subject - There are no material pending legal proceedings to which the Company is a party[148](index=148&type=chunk) [Mine Safety Disclosures](index=33&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) The company reports that there are no mine safety disclosures applicable to its operations - None[149](index=149&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=34&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on Nasdaq, with dividend policy and past stock repurchase plans detailed, noting no new authorization - The Company's common stock trades on the **Nasdaq Capital Market** under the symbol '**FXNC**'[152](index=152&type=chunk) - The stock repurchase plan authorized in **2019** expired on **December 31, 2020**. The company repurchased **129,035 shares** for a total of **$2.1 million** under the **$5.0 million** plan. No new plan has been authorized due to pandemic-related economic uncertainty[154](index=154&type=chunk) - No common stock was repurchased during the three months ended **December 31, 2020**[155](index=155&type=chunk) [Selected Financial Data](index=35&type=section&id=Item%206.%20Selected%20Financial%20Data) This section presents selected financial data for the company over the last five years, including key figures from operations, ratios, and financial condition Selected Financial Data for the Year Ended December 31, 2020 (in thousands, except per share data) | Metric | 2020 | 2019 | | :--- | :--- | :--- | | **Results of Operations** | | | | Net interest income | $29,468 | $28,010 | | Provision for loan losses | $3,000 | $450 | | Net income | $8,858 | $9,556 | | **Per Common Share Data** | | | | Net income, diluted | $1.82 | $1.92 | | Cash dividends | $0.44 | $0.36 | | Book value at period end | $17.47 | $15.54 | | **Financial Condition (End of Period)** | | | | Assets | $950,932 | $800,048 | | Loans, net | $622,429 | $569,412 | | Deposits | $842,461 | $706,442 | | Shareholders' equity | $84,916 | $77,219 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=36&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management analyzes 2020 financial results, highlighting COVID-19 impacts, decreased net income due to higher loan loss provisions, and the Fincastle acquisition - Net income for **2020** was **$8.9 million**, a decrease from **$9.6 million** in **2019**. The decline was primarily due to a **$2.6 million** increase in the provision for loan losses, reflecting economic uncertainties from the **COVID-19 pandemic**[175](index=175&type=chunk)[176](index=176&type=chunk) - The Bank actively participated in the **Paycheck Protection Program (PPP)**, originating **$76.6 million** in loans during **2020**[167](index=167&type=chunk) - In response to the pandemic, the Bank implemented a loan payment deferral program and modified terms for certain commercial real estate loans totaling **$14.3 million** to provide interest-only payments[170](index=170&type=chunk)[171](index=171&type=chunk) - Total assets grew by **$150.9 million** to **$950.9 million** at year-end **2020**, primarily driven by a **$136.0 million** increase in deposits and a **$53.0 million** increase in net loans[233](index=233&type=chunk)[234](index=234&type=chunk) - Non-performing assets increased to **$6.7 million** (**0.71%** of total assets) at the end of **2020**, up from **$1.5 million** (**0.18%** of total assets) at the end of **2019**[242](index=242&type=chunk) - The Bank's capital ratios remain strong and exceed all regulatory requirements to be considered '**well capitalized**', with a total risk-based capital ratio of **15.82%** at **December 31, 2020**[289](index=289&type=chunk)[290](index=290&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=63&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company states that this disclosure is not required - Not required[301](index=301&type=chunk) [Financial Statements and Supplementary Data](index=63&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents audited consolidated financial statements, including management's internal control report and the auditor's unqualified opinion - Management asserts that the company maintained effective internal controls over financial reporting as of **December 31, 2020**, based on the **COSO framework**[306](index=306&type=chunk) - The independent auditor, **Yount, Hyde & Barbour, P.C.**, issued an **unqualified opinion**, stating the financial statements are presented fairly in all material respects. The auditor identified the **Allowance for Loan Losses** as a **Critical Audit Matter**[311](index=311&type=chunk)[317](index=317&type=chunk) Consolidated Financial Highlights (in thousands) | Metric | 2020 | 2019 | | :--- | :--- | :--- | | **Assets** | | | | Total Assets | $950,932 | $800,048 | | Loans, net | $622,429 | $569,412 | | **Liabilities & Equity** | | | | Total Deposits | $842,461 | $706,442 | | Total Shareholders' Equity | $84,916 | $77,219 | | **Income Statement** | | | | Net Interest Income | $29,468 | $28,010 | | Provision for loan losses | $3,000 | $450 | | Net Income | $8,858 | $9,556 | - Note **25** discloses a significant subsequent event: the agreement on **February 18, 2021**, to acquire **The Bank of Fincastle** for approximately **$31.6 million** in cash and stock[521](index=521&type=chunk) [Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=123&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants regarding accounting principles or financial disclosure - None[527](index=527&type=chunk) [Controls and Procedures](index=123&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2020 - The **CEO** and **CFO** concluded that the Company's disclosure controls and procedures were effective as of **December 31, 2020**[528](index=528&type=chunk) - Management assessed the Company's internal control over financial reporting as effective as of **December 31, 2020**, using the **COSO framework**[530](index=530&type=chunk) - No changes in internal control over financial reporting occurred during the **fourth quarter of 2020** that materially affected, or are reasonably likely to materially affect, these controls[531](index=531&type=chunk) [Other Information](index=123&type=section&id=Item%209B.%20Other%20Information) The company reports no other information in this section - None[532](index=532&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=124&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the 2021 Proxy Statement - Information is incorporated by reference from the Company's **Proxy Statement** for the **2021 Annual Meeting of Shareholders**[535](index=535&type=chunk) [Executive Compensation](index=124&type=section&id=Item%2011.%20Executive%20Compensation) Information on executive and director compensation is incorporated by reference from the 2021 Proxy Statement - Information is incorporated by reference from the Company's **Proxy Statement** for the **2021 Annual Meeting of Shareholders**[536](index=536&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=124&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information on security ownership of beneficial owners and management is incorporated by reference from the 2021 Proxy Statement - Information is incorporated by reference from the Company's **Proxy Statement** for the **2021 Annual Meeting of Shareholders**[537](index=537&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=124&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on related party transactions and director independence is incorporated by reference from the 2021 Proxy Statement - Information is incorporated by reference from the Company's **Proxy Statement** for the **2021 Annual Meeting of Shareholders**[538](index=538&type=chunk) [Principal Accounting Fees and Services](index=124&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information on principal accounting fees and services is incorporated by reference from the 2021 Proxy Statement - Information is incorporated by reference from the Company's **Proxy Statement** for the **2021 Annual Meeting of Shareholders**[539](index=539&type=chunk) Part IV [Exhibits, Financial Statement Schedules](index=125&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists all documents filed as exhibits to the Form 10-K, including key corporate and legal agreements - Lists all exhibits filed with the **Form 10-K**, including financial statements, schedules, and various corporate and legal documents[542](index=542&type=chunk) - Key exhibits incorporated by reference include the merger agreement with **The Bank of Fincastle** (**Exhibit 2.1**) and the form of the **5.50% Subordinated Note due 2030** (**Exhibit 4.3**)[542](index=542&type=chunk) [Form 10-K Summary](index=126&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company has not provided a summary in this section of the Form 10-K - None[544](index=544&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2020 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 0-23976 (Exact name of registrant as specified in its charter) Virginia 54-1232965 (State or other jurisdiction of incor ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2020 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 0-23976 (Exact name of registrant as specified in its charter) Virginia 54-1232965 (State or other jurisdiction of incorporat ...

PART I – FINANCIAL INFORMATION [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents unaudited consolidated financial statements and notes, detailing accounting policies and the initial impacts of the COVID-19 pandemic Consolidated Balance Sheet Summary (Unaudited) | (in thousands) | March 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | **Total Assets** | **$816,412** | **$800,048** | | Loans, net | $576,283 | $569,412 | | Securities available for sale | $128,660 | $120,983 | | **Total Liabilities** | **$737,894** | **$722,829** | | Total deposits | $720,627 | $706,442 | | **Total Shareholders' Equity** | **$78,518** | **$77,219** | Consolidated Statement of Income Summary (Unaudited) | (in thousands, except per share data) | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :--- | :--- | :--- | | Net interest income | $7,026 | $6,899 | | Provision for loan losses | $900 | $— | | Noninterest income | $2,099 | $1,985 | | Noninterest expense | $6,144 | $6,098 | | **Net income** | **$1,705** | **$2,261** | | **Diluted EPS** | **$0.34** | **$0.46** | [Notes to Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements%20%28unaudited%29) These notes detail interim financial statements, significant risks, lending operations, asset quality, capital, liquidity, and financial instruments, emphasizing COVID-19 impacts - In response to the COVID-19 pandemic, the company is participating in the Paycheck Protection Program (PPP), having approved 575 loans totaling **$74.9 million** as of April 30, 2020[34](index=34&type=chunk) - The company implemented a payment deferral program for customers affected by the pandemic, executing 464 deferrals on loan balances of **$171.0 million** as of April 30, 2020. These are not considered troubled debt restructurings under interagency guidance[33](index=33&type=chunk) Allowance for Loan Losses Activity - Q1 2020 | (in thousands) | Amount | | :--- | :--- | | Beginning Balance, Dec 31, 2019 | $4,934 | | Charge-offs | ($328) | | Recoveries | $78 | | Provision for loan losses | $900 | | **Ending Balance, Mar 31, 2020** | **$5,584** | - On April 21, 2020, the company entered into two interest rate swap agreements with notional amounts of **$5.0 million** and **$4.0 million** to convert floating-rate junior subordinated debt to fixed-rate debt, designated as cash flow hedges[127](index=127&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=41&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2020 financial results, emphasizing COVID-19's impact, including a significant loan loss provision, operational adjustments, and stable financial condition - Net income for Q1 2020 was **$1.7 million**, a decrease of **$556 thousand** from Q1 2019, primarily driven by a **$900 thousand provision for loan losses** related to the COVID-19 pandemic[147](index=147&type=chunk)[148](index=148&type=chunk) - The company suspended its stock repurchase program in March 2020 due to economic uncertainty. In Q1 2020, it repurchased **129,035 shares for $2.1 million**[140](index=140&type=chunk)[235](index=235&type=chunk) - The efficiency ratio improved to **66.50%** for Q1 2020 from **67.23%** in Q1 2019[153](index=153&type=chunk) Loan Portfolio Sectors with Expected Pressure from COVID-19 | Industry | Loan Balance (Mar 31, 2020) | Percent of Total Loans | | :--- | :--- | :--- | | Hospitality | $45,014 thousand | 7.74% | | Retail / shopping | $26,598 thousand | 4.57% | | Health care | $23,180 thousand | 3.98% | | **Total** | **$94,792 thousand** | **16.29%** | [Results of Operations](index=50&type=section&id=Results%20of%20Operations) Net interest income increased, but a significant loan loss provision was recorded due to the pandemic, while noninterest income and expenses saw modest changes - Net interest income rose to **$7.0 million** in Q1 2020 from **$6.9 million** in Q1 2019, as a 6% increase in average earning assets offset a **20 basis point decline** in the net interest margin to **3.77%**[176](index=176&type=chunk) - A provision for loan losses of **$900 thousand** was recorded in Q1 2020, with approximately **$700 thousand** attributed to adjustments in qualitative factors due to the pandemic's economic impact[184](index=184&type=chunk)[186](index=186&type=chunk) - Noninterest income increased by **$114 thousand (6%)** year-over-year, primarily due to an **$88 thousand (20%) increase** in wealth management fees from higher assets under management[187](index=187&type=chunk) [Financial Condition](index=54&type=section&id=Financial%20Condition) Total assets and net loans grew, while asset quality remained stable, though future risks in COVID-19 impacted sectors were identified - Total assets increased by **$16.4 million (2%)** to **$816.4 million** at March 31, 2020, compared to December 31, 2019[194](index=194&type=chunk) - Net loans grew by **$6.9 million (1%)** during Q1 2020, led by increases in commercial and industrial loans[197](index=197&type=chunk) - Non-performing assets were stable at **$1.5 million**, or **0.19% of total assets**, at March 31, 2020[211](index=211&type=chunk) - The allowance for loan losses increased to **0.96% of total loans** at March 31, 2020, up from **0.86%** at December 31, 2019[214](index=214&type=chunk) [Liquidity and Capital Resources](index=58&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity and capital, exceeding regulatory requirements, but suspended its stock repurchase program due to pandemic uncertainty - The Bank had access to **$237.9 million** in non-deposit sources of funds at March 31, 2020, including **$146.7 million** from the FHLB[226](index=226&type=chunk) First Bank's Regulatory Capital Ratios (March 31, 2020) | Ratio | Value | | :--- | :--- | | Total capital to risk-weighted assets | 14.98% | | Tier 1 capital to risk-weighted assets | 14.02% | | Common equity Tier 1 capital to risk-weighted assets | 14.02% | | Tier 1 capital to average assets | 10.08% | | Capital conservation buffer ratio | 6.98% | - The Bank met all requirements to be categorized as **"well capitalized"** under prompt corrective action regulations as of March 31, 2020[232](index=232&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=61&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This disclosure is not required for the company for this reporting period - The company states that this disclosure is not required[245](index=245&type=chunk) [Controls and Procedures](index=61&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during the quarter - Management, including the CEO and CFO, concluded that the Company's disclosure controls and procedures were effective as of March 31, 2020[246](index=246&type=chunk) - No changes in internal control over financial reporting that materially affected, or are reasonably likely to materially affect, such controls were identified during the last fiscal quarter[247](index=247&type=chunk) PART II – OTHER INFORMATION [Legal Proceedings](index=63&type=section&id=Item%201.%20Legal%20Proceedings) The company is not a party to any material pending legal proceedings beyond routine litigation incidental to its business - There are no material pending legal proceedings, other than ordinary routine litigation incidental to the Company's business[250](index=250&type=chunk) [Risk Factors](index=63&type=page&id=Item%201A.Risk%20Factors) A new risk factor addresses the highly uncertain and potentially adverse effects of the COVID-19 pandemic on business, financial condition, and operations - A new risk factor has been added to address the ongoing COVID-19 pandemic, noting that its effects on the business, financial condition, and operations are **highly uncertain and difficult to predict**[252](index=252&type=chunk) - Specific pandemic-related risks include potential credit losses from borrower financial stress, operational disruptions, decreased demand for products and services, and **heightened cybersecurity and fraud threats**[253](index=253&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=64&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company details Q1 2020 stock repurchase activity, including the suspension of its $5 million plan due to pandemic uncertainty Issuer Purchases of Equity Securities (Q1 2020) | Period | Total Shares Purchased | Average Price Paid Per Share | Total Shares Purchased as Part of Plan | Approx. Dollar Value Remaining in Plan | | :--- | :--- | :--- | :--- | :--- | | Jan 2020 | — | $— | — | $5,000 thousand | | Feb 2020 | 2,323 | $20.92 | 100 | $4,998 thousand | | Mar 2020 | 128,935 | $16.05 | 128,935 | $2,929 thousand | | **Total Q1** | **131,258** | **$16.14** | **129,035** | **$2,929 thousand** | [Defaults Upon Senior Securities](index=64&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) None reported - None[256](index=256&type=chunk) [Mine Safety Disclosures](index=64&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) None reported - None[256](index=256&type=chunk) [Other Information](index=64&type=section&id=Item%205.%20Other%20Information) None reported - None[256](index=256&type=chunk) [Exhibits](index=65&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including CEO/CFO certifications and XBRL financial statements - The filing includes CEO and CFO certifications pursuant to Sarbanes-Oxley Sections 302 and 1350, as well as XBRL interactive data files[257](index=257&type=chunk)[258](index=258&type=chunk)

Financial Performance - Net income for the year ended December 31, 2019, decreased by $579 thousand to $9.6 million, or $1.92 per diluted share, compared to $10.1 million, or $2.04 per diluted share, for 2018[148] - Noninterest income decreased by $605 thousand, or 7%, primarily due to lower service charges on deposit accounts and income from bank-owned life insurance[149] - Net interest income increased by $384 thousand, or 1%, driven by higher average earning asset balances, despite a decrease in net interest margin by 5 basis points to 3.88%[150] - The efficiency ratio for 2019 was 65.28%, compared to 63.05% in 2018, indicating a decline in operational efficiency[153] - The return on average assets was 1.23% and return on average equity was 13.19% for 2019, down from 1.34% and 16.36% in 2018, respectively[148] - The interest rate spread was 3.60% for 2019, compared to 3.74% in 2018, indicating a decrease in profitability from interest-earning assets[1] - Noninterest income totaled $8,552 million in 2019, up from $9,157 million in 2018, reflecting a decrease of 6.6%[255] Loan and Asset Quality - The provision for loan losses was recorded at $450 thousand for 2019, down from $600 thousand in 2018, reflecting improved asset quality[151] - The allowance for loan losses is evaluated quarterly, considering factors such as trends in delinquencies, charge-offs, and current economic conditions[162] - The provision for loan losses was $450 million in 2019, down from $600 million in 2018, indicating a reduction of 25%[255] - The allowance for loan losses totaled $4.9 million at December 31, 2019, representing 0.86% of total loans[212] - Non-performing assets totaled $1.5 million at December 31, 2019, representing 0.18% of total assets[209] - The company experienced a decrease in net charge-offs, totaling $525 thousand in 2019, down from $917 thousand in 2018[1][2] - The ratio of net charge-offs to average loans outstanding was 0.09% in 2019, down from 0.17% in 2018[217] Asset and Liability Management - Total assets increased to $776.933 million at December 31, 2019, up from $754.457 million in 2018, representing a growth of 3.1%[1] - Total loans increased to $564.042 million in 2019, up from $530.165 million in 2018, marking a growth of 6.4%[1] - Total liabilities increased by $36.5 million to $722.8 million at December 31, 2019, compared to $686.3 million at December 31, 2018[201] - Total shareholders' equity increased by $10.5 million to $77.2 million at December 31, 2019, compared to $66.7 million at December 31, 2018[202] - As of December 31, 2019, total deposits increased to $706.4 million, up by $35.9 million from $670.6 million at the end of 2018[230] Interest Income and Expenses - Tax-equivalent net interest income for 2019 was $28,217 thousand, compared to $27,833 thousand in 2018[155] - The company achieved a net interest margin of 3.88% for 2019, slightly down from 3.93% in 2018, suggesting a tightening in the margin between interest income and interest expense[1] - The cost of funds was 0.70% for 2019, up from 0.51% in 2018, indicating an increase in the expense of funding sources[1] - Noninterest expenses rose by $557 thousand, or 2%, primarily due to higher salaries and employee benefits, marketing expenses, and legal fees[149] Capital Adequacy - The Bank's regulatory capital ratios met all adequacy requirements, including a common equity Tier 1 capital ratio of 7.0% as of December 31, 2019[246] - Common equity Tier 1 capital increased to $80,505 million in 2019 from $69,688 million in 2018, representing a growth of 11.6%[248] - Total risk-based capital rose to $85,439 million in 2019, up from $74,697 million in 2018, reflecting a 14.4% increase[248] - The Common equity Tier 1 capital ratio improved to 13.99% in 2019, compared to 12.71% in 2018, indicating a 10% increase[248] - The Tier 1 leverage ratio increased to 10.13% in 2019 from 9.26% in 2018, marking a 9.4% improvement[248] Risk Management - The Bank's loan policy includes approval limits for individual loan officers based on their position and experience, with oversight from the Board Loan Committee[166] - The Bank's commercial real estate loan underwriting criteria require examination of debt service coverage ratios and the borrower's creditworthiness[173] - The Company conducts independent reviews of loans within the portfolio annually to analyze loan risk ratings and validate specific reserves on impaired loans[168] - Construction and land development loans entail significant risks, including potential cost overruns and failure to complete construction[170] - The Bank's consumer lending includes unsecured loans and lines of credit, which may entail greater risk than residential mortgage loans[175]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2019 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 0-23976 (Exact name of registrant as specified in its charter) Virginia 54-1232965 (State or other jurisdiction of incor ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2019 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 112 West King Street, Strasburg, Virginia 22657 (Address of principal executive offices) (Zip Code) For the transition period from to (I.R.S. Employer Identification No.) Commission F ...