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 ...

Financial Performance - Net income for the three months ended March 31, 2019, decreased by $426 thousand to $2.3 million, or $0.46 per share, compared to $2.7 million, or $0.54 per share, for the same period in 2018[118]. - Noninterest income decreased by $648 thousand, or 25%, while noninterest expenses increased by $232 thousand, or 4%, compared to the same period in 2018[119]. - Net interest income increased by $352 thousand, or 5%, driven by a higher net interest margin and higher average earning asset balances[119]. - The efficiency ratio for the three months ended March 31, 2019, was 67.23%, compared to 62.39% for the same period in 2018[123]. - Noninterest income decreased by $648 thousand, or 25%, to $2.0 million for the three months ended March 31, 2019, compared to $2.6 million for the same period in 2018[156]. - Noninterest expense increased by $232 thousand, or 4%, to $6.1 million for the quarter ended March 31, 2019, compared to $5.9 million for the same period in 2018[157]. Interest Income and Margin - Interest income from loans increased to $6.996 million for the three months ended March 31, 2019, compared to $6.305 million for the same period in 2018[124]. - Total tax-equivalent net interest income for the first quarter of 2019 was $6.951 million, up from $6.596 million in the same period of 2018[124]. - For the three months ended March 31, 2019, net interest income increased by $352 thousand, or 5%, to $6.9 million compared to $6.5 million for the first quarter of 2018[147]. - Average earning asset balances increased by 1%, and the net interest margin increased by 18 basis points to 3.97% for the quarter ended March 31, 2019, compared to 3.79% for the same period in 2018[147]. - The yield on loans increased by 29 basis points, contributing significantly to the increase in the yield on earning assets[148]. - Interest rate spread increased to 3.71% for the quarter ended March 31, 2019, compared to 3.62% for the same period in 2018[159]. Loan Losses and Provisions - The provision for loan losses was not required during the first quarter of 2019, while a provision of $100 thousand was recorded in the first quarter of 2018[121]. - The Bank did not record a provision for loan losses during the first quarter of 2019, resulting in an allowance for loan losses of $4.9 million, or 0.90% of total loans[153]. - The allowance for loan losses was $4.9 million at March 31, 2019, representing 0.90% of total loans, slightly down from $5.0 million or 0.92% at December 31, 2018[180]. - Net charge-offs totaled $63 thousand for the first quarter of 2019, compared to $154 thousand for the same period of 2018[154]. - Loans greater than 90 days past due and still accruing totaled $133 thousand at March 31, 2019, down from $235 thousand at December 31, 2018[179]. - The recorded investment in impaired loans was $2.2 million at March 31, 2019, compared to $3.4 million at December 31, 2018[174]. - Non-performing assets amounted to $1.9 million at March 31, 2019, representing 0.25% of total assets, down from $3.2 million or 0.42% at December 31, 2018[177]. - Other potential problem loans totaled $3.1 million at March 31, 2019, down from $3.5 million at December 31, 2018[178]. Assets and Liabilities - Total assets increased by $22.1 million to $775.1 million at March 31, 2019, compared to $753.0 million at December 31, 2018[159]. - Total liabilities increased by $19.1 million to $705.4 million at March 31, 2019, compared to $686.3 million at December 31, 2018[160]. - Total shareholders' equity increased by $3.1 million to $69.7 million at March 31, 2019, compared to $66.7 million at December 31, 2018[161]. - Loans, net of the allowance for loan losses, increased by $7.7 million to $545.5 million at March 31, 2019, compared to $537.8 million at December 31, 2018[162]. - Deposits increased by $13.7 million to $684.2 million at March 31, 2019, compared to $670.6 million at December 31, 2018[187]. Capital and Commitments - As of March 31, 2019, the Bank's total capital to risk-weighted assets ratio was 14.49%[194]. - The Tier 1 capital to risk-weighted assets ratio stood at 13.60% as of March 31, 2019[194]. - The Bank met the "well capitalized" requirements with a common equity Tier 1 capital ratio of 13.60%[195]. - Commitments to extend credit increased to $98.4 million at March 31, 2019, up from $91.1 million at December 31, 2018[198]. - The Bank had $10.0 million in outstanding standby letters of credit as of March 31, 2019, compared to $9.9 million at December 31, 2018[200]. - Locked-rate commitments to originate mortgage loans amounted to $4.4 million at March 31, 2019[201]. - The capital conservation buffer ratio was reported at 6.49%[194]. - The Bank's Tier 1 leverage ratio was 10.01% as of March 31, 2019[194]. - The Bank's exposure to credit loss from off-balance sheet arrangements includes commitments to extend credit and letters of credit[197]. Operational Insights - The Bank operates 14 branch offices and a loan production office, strategically located in attractive markets along major interstate corridors in Virginia[115]. - The provision for loan losses, noninterest income, and noninterest expense are key components that determine net income[146]. - The general allowance for loan losses is based on historical loss experience adjusted for qualitative factors, which may change from period to period[132]. - The Company regularly reviews each security for other-than-temporary impairment based on various criteria, including market price and issuer's financial health[133]. - 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[134]. - The Bank's commercial real estate loan underwriting criteria require an examination of debt service coverage ratios and the borrower's creditworthiness[141]. - The average recorded investment in impaired loans was $2.4 million for the three months ended March 31, 2019[182]. - Management believes the Bank has sufficient reserves to cover losses inherent within the loan portfolio[183]. - There were no material changes to the contractual obligations disclosed in the Company's Annual Report for the year ended December 31, 2018[196].

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, 2018 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 ____________________________ ...