UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Table of Contents 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, 2022 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 incor ...

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, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Table of Contents 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 ...

Financial Performance - Net income for Q1 2022 increased by $1.3 million to $3.7 million, or $0.60 per diluted share, compared to $2.4 million, or $0.50 per diluted share, in Q1 2021[125]. - Total net interest income for the three months ended March 31, 2022, was $10,548 thousand, compared to $7,512 thousand for the same period in 2021, representing an increase of 40.4%[140]. - Tax-equivalent net interest income for the three months ended March 31, 2022, was $10,637 thousand, up from $7,568 thousand in the prior year, reflecting a growth of 40.4%[140]. - For the three-month period ending March 31, 2022, net interest income increased by $3.0 million, or 40%, compared to the same period of 2021, driven by a $2.9 million, or 36%, increase in total interest and dividend income[170]. - Noninterest income rose by $568 thousand, or 27%, to $2.7 million, with wealth management fees increasing by $160 thousand, or 25%[178]. Expenses and Efficiency - Total noninterest expense increased by $2.0 million, or 30%, largely due to the acquisition of The Bank of Fincastle and SmartBank's loan portfolio[126][130]. - The efficiency ratio for Q1 2022 was 64.38%, slightly improved from 64.49% in Q1 2021, indicating stable operational efficiency[138]. - Noninterest expense increased by $2.0 million, or 30%, to $8.6 million, primarily due to a $1.6 million, or 44%, increase in salaries and employee benefits[180]. Loan Losses and Allowances - The allowance for loan losses totaled $5.8 million, or 0.70% of total loans, with no provision for loan losses recorded in Q1 2022[128]. - The allowance for loan losses at March 31, 2022, included $350 thousand attributable to purchased loans[149]. - The company evaluates the allowance for loan losses quarterly, considering factors such as trends in delinquencies and charge-offs, and current economic conditions[146]. - The general component of the allowance for loan losses is based on historical loss experience adjusted for qualitative factors, calculated over the preceding twelve quarters[148]. - The allowance for loan losses was $5.8 million, representing 0.70% of total loans as of March 31, 2022[205]. Acquisitions and Growth - The acquisition of The Bank of Fincastle was completed for $33.8 million, with total assets of $267.9 million, total loans of $194.5 million, and total deposits of $236.3 million at the time of acquisition[133]. - First Bank acquired $82.0 million of loans and fixed assets from SmartBank for $83.7 million, transitioning an experienced team of bankers to First Bank[135]. - The acquisition of The Bank of Fincastle on July 1, 2021, contributed to the growth in average earning assets and overall financial performance[170]. Assets and Liabilities - Total assets increased by $28.2 million to $1.4 billion as of March 31, 2022, primarily due to an $11.2 million (1.4%) increase in loans and a $48.2 million (144.1%) increase in securities held to maturity[183]. - Total liabilities rose by $38.7 million to $1.3 billion, mainly driven by a $44.1 million increase in savings and interest-bearing demand deposits[184]. - Total shareholders' equity decreased by $10.5 million to $106.6 million, primarily due to a $13.7 million decrease in accumulated other comprehensive income[185]. - Loans, net of allowance for loan losses, increased by $11.2 million to $830.6 million, with commercial real estate loans rising by $19.4 million[186]. Credit Quality and Risk Management - Non-performing assets totaled $3.9 million, representing approximately 0.27% of total assets as of March 31, 2022[202]. - Impaired loans totaled $2.1 million as of March 31, 2022, with no related allowance for loan losses recorded[207]. - The Company had $1.6 million in loans classified as troubled debt restructurings (TDRs) as of March 31, 2022[200]. - Other potential problem loans totaled $311 thousand as of March 31, 2022, down from $1.1 million at December 31, 2021[203]. - The company performs regular credit reviews of the loan portfolio to ensure adherence to underwriting standards and assess credit quality[145]. Securities and Deposits - As of March 31, 2022, the securities portfolio totaled $366.5 million, an increase of $43.6 million, or 14.0%, from $322.9 million at December 31, 2021[211]. - The available for sale securities amounted to $284.9 million, while held to maturity securities were $81.6 million, compared to $289.5 million and $33.4 million at December 31, 2021, respectively[212]. - Deposits increased to $1.3 billion, up by $44.1 million from $1.2 billion at December 31, 2021, with noninterest-bearing demand deposits at 32% of total deposits[213]. Capital and Commitments - The Bank's total capital to risk-weighted assets ratio was 14.44% as of March 31, 2022, indicating strong capital adequacy[220]. - The Bank met the requirements to qualify as "well capitalized" with a common equity Tier 1 capital ratio of 13.79%[220]. - Commitments to extend credit amounted to $167.1 million at March 31, 2022, compared to $161.4 million at December 31, 2021[227]. - The Company has $10.9 million in locked-rate commitments to originate mortgage loans as of March 31, 2022[230]. Cash Flow and Hedges - At March 31, 2022, cash and liquid assets totaled $235.3 million, with 9.8% or $81.7 million of the loan portfolio maturing within one year[216]. - The cash flow hedges related to interest rate swaps had a fair value of $1.6 million at March 31, 2022[232]. - The Company has not authorized another stock repurchase plan as of March 31, 2022, following the suspension of the previous plan[223].

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021 Registrant's telephone number, including area code: (540) 465-9121 Securities registered pursuant to Section 12(b) of the Act: | Title of each class | Trading symbol(s) | Name of each exchange on which | | --- | --- | --- | | | | registered | | Common stock, par value $1.25 per sh ...

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 ...