FIRST COMMUNITY BANKSHARES INC /VA/
For the period ended Mar 31, 2026. Filed May 8, 2026.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2026 · Filed May 8, 2026
FCBC$45.48+0.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-09-30; filed 2025-11-07.
0001437749-25-033752
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-03-31; filed 2026-05-08.
0001437749-26-015833
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 103 previous paragraphs and 93 current paragraphs.
55 unchanged; 21 reworded; 17 added; 26 removed; 1 previous and 0 current paragraphs rearranged.
Tables are not compared: 23 previous and 23 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (17)
Current report
Immediately following the Merger, Union Bank, Inc., a wholly-owned subsidiary of Hometown, merged with and into First Community Bank, a wholly-owned subsidiary of the Company (the “Bank Merger”), with First Community Bank as the surviving bank in the Bank Merger.
Current report
Pursuant to the Agreement, each outstanding share of common stock of Hometown was converted into the right to receive 11.706 shares (the “Exchange Ratio”) of the Company's common stock, par value $1.00 per share, plus cash, without interest, in lieu of fractional shares. In connection with the transaction, the Company issued 1,029,314 common shares.
Current report
Under the terms of the Agreement, all Hometown stock appreciation rights under a stock appreciation award (except certain stock appreciation rights that were unvested as of January 1, 2025) and all Hometown dividend equivalent rights granted under the Hometown Dividend Equivalent Incentive Plan that were outstanding immediately prior to the Effective Time, to the extent not vested, became fully vested, and were canceled. The holders of stock appreciation rights received a cash payment equal to the number determined by multiplying (i) the excess, if any of (A) Average Closing Price (as defined in the Agreement) multiplied by (B) the Exchange Ratio over the applicable exercise price of the stock appreciation right, by (ii) the number of shares of Hometown common stock subject to the applicable stock appreciation right. The holders of dividend equivalent rights received a cash payment equal to the account value of the applicable dividend rights award. The stock appreciation rights that are unvested as of January 1, 2025, were assumed by the Company.
Current report
Acquisition details are described in Note 2, "Acquisitions and Divestitures" of Part I, of this Quarterly Report on Form 10Q.
Current report
Critical Accounting Policies
Current report
Net income increased $209 thousand, or 1.77%, in the first quarter of 2026 compared to the same period in 2025. The increase is primarily attributable to a $2.94 million, or 9.80%, increase in net interest income after provision for loan losses and a $1.23 million, or 12%, increase in noninterest income. These increases were partially offset by a $3.79 million, or 15.21%, increase in noninterest expense. The increase in noninterest expense was primarily driven by $2.31 million of merger-related expenses associated with the completed Hometown acquisition and a $1.03 million increase in salaries and employee benefits.
Current report
Three*-*Month Comparison. Net interest income represented 74.40% of total net interest and noninterest income in the first quarter of 2026, compared to 74.76% in the same quarter of 2025. On a GAAP basis, net interest income increased $3.00 million, or 9.89%, while on a fully taxable equivalent ("FTE") basis, it increased $3.05 million, or 10.02%. The FTE net interest margin increased 3 basis points, and the net interest spread increased 11 basis points, or 2.79%. These improvements were primarily driven by growth in average interest- earning assets and lower funding costs.
Current report
Average earning assets increased by $263.04 million, or 9.26%, driven by increases of $114.40 million in interest-bearing deposits, $109.35 million in securities available-for-sale and $39.28 million in loans. Although the average yield on earning assets declined 8 basis points, interest income increased $2.66 million, or 7.55%, reflecting higher asset volumes. The average loan to deposit ratio decreased from 90.45% to 83.18%, compared to the first quarter of 2025. Non-cash accretion income totaled $490 thousand compared to $556 thousand in the prior-year period.
Current report
Average interest-bearing liabilities, consisting of interest-bearing deposits and borrowings, increased $206.89 million, or 11.56%. However, due to a 19-basis point, or 17.27%, decline in cost of funds, interest expense decreased $384 thousand, compared to the same quarter in 2025. The largest driver of interest expense savings was time deposits which declined $416 thousand, or 30.14%, due to a $22.16 million decrease in average balance and a 54-basis point decline in yield.
Current report
Three*-*Month Comparison. The provision charged to operations increased $57 thousand, or 17.76%, in the first quarter of 2026 compared to the same period of 2025. In the first quarter of 2026, the Company recorded a provision for credit losses for loans of $300 thousand and a provision for credit losses on loan commitments of $78 thousand. This compares to a provision for credit losses on loans of $350 thousand and a recovery of provision of $29 thousand on loan commitments recorded in the first quarter of 2025. The increase in the overall provision was primarily driven by growth in unfunded loan commitments.
Current report
The following table is a reconciliation of return on average tangible common equity, a non-GAAP financial measurement for the periods indicated:
Current report
Total assets as of March 31, 2026, increased $385.30 million, or 11.82%, from December 31, 2025. The primary driver of the change in the balance sheet components was the acquisition of Hometown on January 23, 2026. Total assets of $393.81 million were acquired in the transaction increasing the Company's consolidated assets to $3.64 billion. In addition, the Company issued 1.03 million common shares in the purchase resulting in an increase in capital of $35.07 million. The purchase transaction created $1.73 million in goodwill and $8.59 million in other intangible assets. Other major balance sheet components impacted by the transaction were an increase to loans of $171.04 million and an increase of $357.72 million in deposits.
Current report
Excluding the Hometown transaction, total assets decreased $105.21 million, or 3.23%, primarily due to decreases in cash equivalents of $37.11 million, securities available-for-sale of $35.55 million and loans of $29.77 million. Total liabilities increased $4.00 million excluding the Hometown transaction. The increase was driven by a $21.33 million increase in deposits offset by a decrease in other liabilities of $17.99 million.
Current report
Available-for-sale debt securities as of March 31, 2026, increased $134.83 million, or 101.62%, compared to December 31, 2025. The net increase was primarily due to the purchase of U.S. Treasury securities.
Current report
Total loans as of March 31, 2026, increased $141.27 million, or 6.10%, compared to December 31, 2025, and was primarily due to the Hometown acquisition with the fair value of loans acquired totaling $171.04 million.
Current report
As of March 31, 2026, the balance of the ACL totaled $33.54 million, or 1.37%, of total loans. This compares to $30.76 million as of December 31, 2025, reflecting an increase of $2.78 million, or 9.04%. The increase in the ACL is primarily driven by the Hometown acquisition, which resulted in a $3.21 million addition for acquired loans. The increase was offset by net charge-offs of $731 thousand.
Current report
Total deposits as of March 31, 2026, increased $379.06 million, or 14.12%, compared to December 31, 2025. The largest increases occurred in interest bearing demand of $166.33 million, or 24.31%, and savings of $131.59 million, or 14.55%. The growth was primarily attributable to the acquisition of Hometown, which contributed $357.72 million in deposits. Excluding the Hometown acquisition, total deposits increased $21.33 million.
Removed paragraphs (26)
Previous report
Under the terms of the Merger Agreement, each share of Hometown common stock outstanding immediately prior to the effective time will be converted into the right to receive 11.706 shares of the Company's common stock, subject to customary adjustments. The completion of the Merger is subject to approval by Hometown's shareholders, receipt of required regulatory approvals, and satisfaction of other customary closing conditions.
Previous report
During the quarter ended September 30, 2025, the Company and Hometown continued to work toward satisfying the closing conditions, including activities in furtherance of receiving the required regulatory approvals. As of the date of this filing, the Merger had not yet been consummated, and the Company expects the transaction to close in January of 2026, subject to the conditions described above.
Previous report
The Company has incurred approximately $787 thousand of transaction-related costs during the nine months ended September 30, 2025, which are included in non-interest expense of the accompanying condensed consolidated statements of income. Additional merger-related expenses are expected to be incurred in future periods as the transaction progresses toward closing.
Previous report
Critical Accounting Estimates
Previous report
Economic and Trade Policy Uncertainty
Previous report
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.
Previous report
Net income decreased $768 thousand, or 5.89%, in the third quarter of 2025 compared to the same period in 2024. The decrease in net income is primarily attributable to an increase in non-interest expense of $2.10 million, or 8.69%. The increase in non-interest expense is attributable to increases in salaries and employee benefits of $1.22 million, or 9.31% and merger expense of $787 thousand. The merger expense is related to the forthcoming merger with Hometown Bank, with an anticipated completion date of January 2026. The increase in non-interest expense was partially offset by an increase in net interest income after provision for loan losses of $1.06 million, or 3.52% and noninterest income of $437 thousand, or 4.18%.
Previous report
Nine-Month Comparison.
Previous report
For the nine months ended September 30, 2025, net income declined $2.24 million, or 5.80%, compared to the same period in 2024. The decrease is primarily driven by a $3.45 million, or 3.15%, reduction in interest income and $4.22 million, or 5.82%, increase in non-interest expense. These impacts were partially offset by a $2.48 million, or 98.57%, decrease in the provision for loan losses and a $2.41 million, 8.28%, increase in non-interest income. The significant decrease in provision for loan losses is driven by a decline in the carrying value of non-performing assets and average loan balances when compared to the same period in 2024.
Previous report
Three*-*Month Comparison. Net interest income comprised 74.19% of total net interest and noninterest income in the third quarter of 2025 compared to 75.14% in the same quarter of 2024. Net interest income on a GAAP basis decreased $297 thousand, or 0.94% and net interest income on a FTE basis decreased $293 thousand, or 0.92%; when compared to the same period in 2024. The net interest margin on a FTE basis increased 2 basis points while the net interest spread increased 9 basis points, or 2.27%. The primary drivers of the increase were a 19-basis point reduction in interest expense on interest-bearing deposits and a 10 basis point decline in earning assets.
Previous report
Average earning assets decreased by $46.54 million, or 1.63%, primarily due to a $116.18 million, or 4.73%, reduction in average loan balances. This was partially offset by a $73.10 million, or 27.03%, increase in interest-bearing deposits with banks, reflecting a shift in the earning assets mix. The yield on earning assets fell by 10 basis points, or 1.94%, driven by a 18.38% decline in the average yield earned on interest-bearing deposits with banks to 4.44% from 5.44% for the same quarter in 2024. The average loan to deposit ratio decreased to 88.78% from 92.11%, due to a decline in average loan balances, indicating a more conservative lending posture. Non-cash accretion income totaled $405 thousand down from $592 thousand in the same period of 2024.
Previous report
Average interest-bearing liabilities, which consist of interest-bearing deposits and borrowings, decreased $21.71 million, or 1.21%, primarily due to a decrease in time deposits of $31.42 million, or 12.82%. This was partially offset by a $9.2 million, or 1.03% increase in savings deposits. The yield on interest-bearing liabilities decreased 19 basis points, or 16.10%, compared to the same period of 2024. The reduction is primarily due to decreases in average rates on time deposits of 34 basis points, or 15.74%, and savings deposits of 25 basis points, or 14.88%, resulting in an interest savings of $896 thousand, or 16.91%, compared to the same period in 2024.
Previous report
Nine-Month Comparison. Net interest income comprised 74.57% of total net interest and noninterest income in the nine months ending September 30, 2025, compared to 76.61% for the same period of 2024. Net interest income on a GAAP basis decreased $2.88 million, or 3.03%. Net interest income on a FTE basis decreased $2.88 million, with a percentage decrease of 3.02%. The net interest margin on a FTE basis decreased 8 basis points while the net interest spread decreased 7 basis points, or 1.72%. 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 reduction in the yield and average balance of the loan portfolio.
Previous report
Average earning assets decreased $29.64 million, or 1.04%, primarily due to a decrease in the average balance for loans of $135.06 million, or 5.40%. In addition, the average balance for available-for-sale securities decreased $36.43 million, or 21.14%. These decreases were offset by an increase in the average balance for interest-bearing balances with banks of $141.85 million, or 77.61%. The yield on earning assets decreased 11 basis points, or 2.14%, primarily due to decreases in the yield on loans of 4 basis points, or 0.76%, and a 18.61% decline in average rate of interest earned on interest-bearing deposits with banks from 5.48% to 4.46%. The average loan to deposit ratio decreased to 89.38% from 93.74% compared to the same quarter of 2024. Non-cash accretion income totaled $1.39 thousand for the first nine months of 2025 compared to $ 2.04 million reported in the same period of 2024.
Previous report
Average interest-bearing liabilities, which consist of interest-bearing deposits and borrowings, experienced a reduction in interest expense of $571 thousand, or 3.92%, compared to the same period in 2024. The decrease was primarily driven by a decline in average balance of interest-bearing deposits of $6.66 million, or 0.37%, and a decline in the average yield of 4 basis points, or 3.67%. The decrease in yield was largely attributable to a shift in the composition of average liabilities from higher-cost time deposits to lower-yielding deposits. This shift contributed to an interest expense reduction of $536 thousand, or 3.69%.
Previous report
Three*-*Month Comparison. No provision for credit losses for loans was recorded in the third quarter of 2025 compared to a provision of $1.36 million recorded in the same period of 2024. The decrease in provision was primarily attributable to a decrease in the balance of the loan portfolio, as well as a decrease in non-performing loans. There was no provision for unfunded commitments recorded during the third quarter of 2025 or 2024.
Previous report
Nine-Month Comparison. The provision charged to operations decreased $2.48 million, or 98.57%, in the nine months ending September 30, 2025, compared to the same quarter of 2024. A provision for credit losses for loans of $36 thousand was recorded in the nine months ending September 30, 2025 compared to a provision of $2.52 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 non-performing loans. A provision for the allowance for unfunded commitments of $22 thousand was recorded during the first nine months of 2025 compared to a provision of $305 thousand during the same time period of 2024.
Previous report
Nine-Month Comparison. Noninterest income comprised 25.43% of total net interest and noninterest income in the nine months ending September 30, 2025 compared to 23.39% in the same quarter of 2024. Noninterest income increased $2.41 million or 8.28%, compared to the same period in 2024. The increase is primarily attributable to an increase in service charges on deposits of $2.08 million, or 19.97%, and an increase in wealth management fees of $521 thousand, or 16.11%.
Previous report
Nine-Month Comparison. Noninterest expense increased $4.22 million, or 5.82%, in the nine months ending September 30, 2025 compared to the same quarter of 2024. The largest increase is primarily due to increases in salaries and employee benefits of $3.83 million, or 10.04%.
Previous report
Nine-Month Comparison. Income tax expense increased $17 thousand, or 0.16%. The increase is primarily due to an increase of the effective tax rate to 22.70% in the nine months ending September 30, 2025 from 21.64% in the same quarter of 2024.
Previous report
(1) FTE basis of 21%.
Previous report
Total assets as of September 30, 2025, decreased $71.60 million, or 2.20%, from December 31, 2024. The decrease in assets was primarily attributable to decreases in loan and securities available-for-sale portfolios. Total liabilities decreased $55.94 million, or 2.05%, and was primarily driven by a decrease in deposits of 60.65 million, or 2.25%. Stockholders' equity decreased $15.67 million, or 2.98%.
Previous report
Total loans as of September 30, 2025, decreased $84.78 million, or 3.51%, compared to December 31, 2024. The largest decrease occurred in the commercial loans segment with an overall decrease of $38.11 million, or 2.41%. Within this segment, the largest decreases occurred in non-farm/non-residential loans, single family non-owner occupied, and construction/development and other land development with decreases of $20.60 million, $16.29 million, and $9.14 million, respectively. These decreases were offset by an increase in commercial and industrial loans of $20.90 million. The consumer real estate segment decreased $24.33 million, or 3.27%, primarily due to a decrease in single family owner occupied of $17.60 million, or 2.71%.
Previous report
As of September 30, 2025, the balance of the ACL totaled $31.60 million, or 1.36%, of total loans. This compares to $34.83 million as of December 31, 2024, reflecting a decrease of $3.23 million. The reduction in the ACL primarily reflects a provision for credit losses of $36 thousand, offset by net charge-offs of $3.29 million during the first nine months of 2025. The lower provision also reflects an $84.78 million, or 3.51%, decline in total loan balances and a reduction in non-performing assets, driven by regional market conditions being favorable.
Previous report
Total deposits as of September 30, 2025, decreased $60.65 million, or 2.25%, compared to December 31, 2024. The largest decreases occurred in time deposits of $34.08 million, or 14.17%, interest-bearing demand deposits of $20.51 million, or 3.04% and noninterest-bearing demand deposits of $17.95 million or 2.03%. These decreases were offset by an increase in savings deposits of $11.89 million, or 1.33%.
Previous report
On July 19, 2025, the Company entered in an Agreement and Plan of Merger with Hometown Bancshares, Inc., in an all-stock transaction valued at approximately $41.5 million, based on First Community's closing share price of common stock of $40.33 as of July 18, 2025. Following the effective time of the Merger, each outstanding share of Hometown common stock will be converted to 11.706 shares of First Community's common stock, which equates to $472.10 per share of Hometown Common Stock, subject to customary closing conditions, including regulatory and shareholder approvals. First Community expects the transaction to be minimally dilutive to tangible book value per share (non-GAAP) and to provide high-single digit accretion to earnings per share. Also, the Company does not anticipate the need for additional external financing related to the transaction.
Reworded paragraphs (21)
Previous wording
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 banking institution. As of September 30, 2025, the Bank operated 52 branches in Virginia, West Virginia, North Carolina and Tennessee. As of September 30, 2025, full-time equivalent employees, calculated using the number of hours worked, totaled 586. 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.
Current wording
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 banking institution. As of March 31, 2026, the Bank operated 61 branches in Virginia, West Virginia, North Carolina and Tennessee. As of March 31, 2026, full-time equivalent employees, calculated using the number of hours worked, totaled 610. 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.
Previous wording
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 September 30, 2025, the Trust Division and FCWM managed and administered $1.75 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.
Current wording
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 March 31, 2026, the Trust Division and FCWM managed and administered $1.77 billion in combined assets under various fee-based arrangements as fiduciary or agent.
Previous wording
On July 19, 2025, the Company entered into an Agreement and Plan of Merger (the " Merger Agreement") with Hometown Bancshares, Inc., a West Virginia corporation ("Hometown"), under which the Company will acquire Hometown (the "Merger"). Hometown will cease to exist, and the Company will survive and continue to exist as a Virginia Corporation. The transaction was previously disclosed in our Form 8-K on July 19, 2025, and in Note 15, Subsequent Events, to the condensed consolidated financial statements included in our Form 10-Q for the quarter ended June 30, 2025.
Current wording
On January 23, 2026, the Company completed its previously announced merger (the “Merger”) with Hometown Bancshares, Inc. a West Virginia corporation headquartered in Middlebourne, West Virginia (“Hometown”), pursuant to an Agreement and Plan of Merger (the “Agreement”) dated July 19, 2025, by and between the company and Hometown. At the Effective Time, Hometown merged with and into the Company, with the Company as the surviving corporation in the Merger.
Previous wording
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.
Current wording
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 2025 Form 10-K. Our critical accounting estimates are detailed in the “Critical Accounting Policies” section in Part II, Item 7 of our 2025 Form 10-K.
Previous wording
Highlights of our results of operations for the three and nine months ended September 30, 2025, and financial condition as of September 30, 2025, include the following:
Current wording
Highlights of our results of operations for the three months ended March 31, 2026, and financial condition as of March 31, 2026, include the following:
Previous wording
Three*-*Month Comparison. Noninterest income comprised 25.81% of total net interest and noninterest income in the third quarter of 2025 compared to 24.86% in the same quarter of 2024. Noninterest income increased $437 thousand or 4.18%, compared to the same period of 2024. The increase is primarily attributable to an increase in wealth management fees of $300 thousand, or 28.01% and service charges on deposits of $859 thousand, or 23.46%.
Current wording
Three*-*Month Comparison. Noninterest income comprised 25.60% of total net interest and noninterest income in the first quarter of 2026 compared to 25.24% in the same quarter of 2025. Noninterest income increased $1.23 million or 12.00%, compared to the same period of 2025. The increase is primarily attributable to an increase in other service charges and fees of $603 thousand, or 18.05% and service charges on deposits of $349 thousand, or 9.10%.
Previous wording
Three*-*Month Comparison. Noninterest expense increased $2.10 million, or 8.69%, in the third quarter of 2025 compared to the same quarter of 2024. The increase was primarily due to an increase in salaries and employee benefits of $1.22 million, or 9.31% and merger expense of $787 thousand.
Current wording
Three*-*Month Comparison. Noninterest expense increased $3.79 million, or 15.21%, in the first quarter of 2026 compared to the same quarter of 2025. The increase was primarily due to an increase in merger expense of $2.31 and salaries and employee benefits of $1.03 million, or 7.74%. The merger expenses relate to the Hometown acquisition.
Previous wording
Three-Month Comparison. Income tax expense increased $165 thousand, or 4.75%. The effective tax rate increased to 22.89% in the third quarter of 2025 from 21.06% in the same quarter of 2024.
Current wording
Three-Month Comparison. Income tax expense increased $165 thousand, or 4.79%. The effective tax rate increased to 23.08% in the first quarter of 2026 from 22.57% in the same quarter of 2025.
Previous wording
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.
Current wording
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 and average tangible common equity. 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%. Average tangible common equity is calculated as GAAP total shareholders’ equity minus total intangible assets. Tangible common equity can thus be considered a more conservative valuation of the company. When considering net income, a return on average tangible common equity can be calculated. Management provides a return on average equity to facilitate the understanding of as well as to assess the quality and composition of the Company’s capital structure. This measure, along with others, is used by management to analyze capital adequacy and performance. 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.
Previous wording
Available-for-sale debt securities as of September 30, 2025, decreased $38.54 million, or 22.69%, compared to December 31, 2024. The decrease is primarily due to the maturities and calls of securities of $103 million during the first nine months of 2025 offset by purchases of $60 million. The market value of debt securities available-for-sale as a percentage of amortized cost was 92.34% as of September 30, 2025, compared to 91.97% as of December 31, 2024.
Current wording
The market value of debt securities available-for-sale as a percentage of amortized cost was 96.34% as of March 31, 2026, compared to 92.95% as of December 31, 2025.
Previous wording
Nonperforming assets as of September 30, 2025, decreased $3.64 million, or 17.70%, from December 31, 2024. Nonaccrual loans decreased $3.36 million, or 16.89%. OREO decreased $257 thousand, or 49.33%. In addition, accruing loans past due 90 days or more decreased $24 thousand from year-end. As of September 30, 2025, nonaccrual loans were largely attributed to single family owner occupied (50.58%), non-farm, non-residential (11.91%), and commercial and industrial of (9.36%). 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.
Current wording
Nonperforming assets as of March 31, 2026, increased $3.55 million, or 25.08%, from December 31, 2025 and nonaccrual loans increased $3.73 million, or 26.76%. As of March 31, 2026, nonaccrual loans were largely attributed to single family owner occupied (50.10%), single family non-owner occupied (13.52%) and commercial and industrial of (12.26%). 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.
Previous wording
Delinquent loans, comprised of loans 30 days or more past due and nonaccrual loans, totaled $27.19 million as of September 30, 2025, a decrease of $10.36 million, or 27.59%, compared to $37.55 million as of December 31, 2024. Delinquent loans as a percent of total loans totaled 1.17% as of September 30, 2025, which includes past due loans (0.46%) and nonaccrual loans (0.71%).
Current wording
Delinquent loans, comprised of loans 30 days or more past due and nonaccrual loans, totaled $35.13 million as of March 31, 2026, an increase of $7.28 million, or 26.15%, compared to $27.85 million as of December 31, 2025. Delinquent loans as a percent of total loans totaled 1.43% as of March 31, 2026, which includes past due loans (0.71%) and nonaccrual loans (0.72%).
Previous wording
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 September 30, 2025, were $2.29 million. As of September 30, 2025, $213 thousand of these loans were 30-89 days past due. Modified loans past due 90 days or more totaled $165 thousand and are included in the total for nonaccrual loans.
Current wording
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 March 31, 2026, were $2.74 million. As of March 31, 2026, $278 thousand of these loans were 30-89 days past due. Modified loans past due 90 days or more totaled $62 thousand and are included in the total for nonaccrual loans.
Previous wording
OREO, which is carried at the lesser of estimated net realizable value or cost, decreased $257 thousand, or 49.33%, as of September 30, 2025, from December 31, 2024, and consisted of 4 properties with an average holding period of approximately 14 months. The net loss on the sale of OREO totaled $4 thousand for the nine months ended September 30, 2025, compared to a net loss of $29 thousand for the same period of the prior year. The following table presents the changes in OREO during the periods indicated:
Current wording
OREO, which is carried at the lesser of estimated net realizable value or cost. As of March 31, 2026 and December 31, 2025, no OREO property was held by the Company. The following table presents the changes in OREO during the periods indicated:
Previous wording
As of September 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 nine 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.
Current wording
As of March 31, 2026, the Company also had an allowance for unfunded commitments of $433 thousand which was recorded in Other Liabilities on the Balance Sheet. During the first three months of 2026, the Company recorded a provision to provision for credit losses for loan commitments of $78 thousand. There was a recovery of provision of $29 thousand recorded in the same period of 2025.
Previous wording
Total borrowings in the form of retail repurchase agreements as of September 30, 2025, increased $523 thousand, or 57.73%, compared to December 31, 2024.
Current wording
Total borrowings in the form of retail repurchase agreements as of March 31, 2026, increased $2.00 million, or 162.03%, compared to December 31, 2025. The increase is primarily attributable to the Hometown acquisition, which included $1.31 million in securities sold under agreements to repurchase.
Previous wording
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 September 30, 2025, the Company’s cash reserves and short-term investment securities totaled $30.31 million and $10.92 million, respectively. The Company’s cash reserves and investments provide adequate working capital to meet obligations for the next twelve months.
Current wording
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 March 31, 2026, the Company’s cash reserves totaled $15.09 million. The Company’s cash reserves provide adequate working capital to meet obligations for the next twelve months.
Previous wording
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 September 30, 2025, our unencumbered cash totaled $427.71 million, unused borrowing capacity from the FHLB totaled $313.58 million, available credit from the FRB Discount Window totaled $5.86 million, available lines from correspondent banks totaled $100.00 million, and unpledged available-for-sale securities totaled $102.66 million.
Current wording
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 March 31, 2026, our unencumbered cash totaled $600.30 million, unused borrowing capacity from the FHLB totaled $299.05 million, available credit from the FRB Discount Window totaled $7.02 million, available lines from correspondent banks totaled $100.00 million, and unpledged available-for-sale securities totaled $80.66 million.
Previous wording
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 September 30, 2025, decreased $15.67 million, or 2.98%, to $510.73 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 $36.33 million. Book value per share on September 30, 2025, was $27.89 compared to $28.73 at year-end 2024.
Current wording
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 March 31, 2026, increased $20.84 million, or 4.16%, to $521.39 million from $500.55 million as of December 31, 2025. The increase was primarily attributable to the acquisition of Hometown, in connection with which the company issued 1.03 million shares of common stock, resulting in a $35.07 million increase in capital. Equity was further increased by net income of $12.03 million. These increases were partially offset by $6.00 million of common stock dividends declared and $20.33 million of common stock repurchases. Book value per share increased to $27.64 on March 31, 2026, compared to $27.30 on December 31, 2025.
Previous wording
The Company's risk-based capital ratios as of September 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 September 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 September 30, 2025.
Current wording
The Company's risk-based capital ratios as of March 31, 2026, decreased from December 31, 2025, primarily due to a decrease in capital levels. The decrease in capital was primarily driven by the repurchase of common stock. 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 an increase in assets. As of March 31, 2026, 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 March 31, 2026.
Previous wording
As of September 30, 2025, the Federal Open Market Committee had set the benchmark federal funds rate to a range of 400 to 425 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:
Current wording
As of March 31, 2026, the Federal Open Market Committee had set the benchmark federal funds rate to a range of 350 to 375 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:
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited)