FCCO 10-K

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 fcco: Number

 UNITED STATES

 SECURITIES
AND EXCHANGE COMMISSION

 Washington,
D.C. 20549

 Form

 (Mark
 One)

 x

 Annual
 Report under Section 13 or 15(d) of the Securities Exchange Act of 1934

 For
 the fiscal year ended December 31, 2024

 Or

 o

 Transition Report under
 Section 13 or 15(d) of the Securities Exchange Act of 1934

 For
 the transition period from to

 Commission
file number: 000-28344

 First Community Corporation

 (Exact
name of registrant as specified in its charter)

 South Carolina

 57-1010751

 (State or other jurisdiction
 of incorporation or organization)

 (I.R.S. Employer Identification
 No.)

 5455 Sunset Blvd.,

 Lexington, South Carolina

 29072

 (Address of principal
 executive offices)

 (Zip Code)

 803 - 951-2265

 Registrant's
telephone number, including area code

 Securities registered
pursuant to Section 12(b) of the Act:

 Title
 of each class

 Trading
 Symbol

 Name
 of each exchange on which registered

 Common stock, $1.00 par value per share

 FCCO

 The NASDAQ Capital Market

 Securities
registered pursuant to Section 12(g) of the Act: None

by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x

by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.

Yes o No x

by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for past 90 days. Yes x
 No o

 Indicate by
check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to
Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes x
No o

by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer,"
"smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

 Large
 accelerated filer o

 Accelerated
 Filer o

 Non-accelerated Filer x

 Smaller reporting company x

 Emerging growth company o

 If an emerging
growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with
any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report. o

 If securities
are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements. o

by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). o

by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

 As of June 28, 2024, the aggregate
market value of the registrant's common stock held by non-affiliates of the registrant was $ 126,159,566 based on the closing
price of $17.25 on June 28, 2024, as reported on The NASDAQ Capital Market. 7,671,056
shares of the registrant's common stock were issued and outstanding as of March 14, 2025.

 Documents
Incorporated by Reference

 Portions of
the registrant's Definitive Proxy Statement for its 2025 Annual Meeting of Shareholders are incorporated by reference into
Part III, Items 10-14 of this Form 10-K.

 TABLE
OF CONTENTS

 Page
 No.

 PART
 I

 Item
 1. Business

 Item
 1A. Risk Factors

 Item
 1B. Unresolved Staff Comments

 Item
 1C. Cybersecurity

 Item
 2. Properties

 Item
 3. Legal Proceedings

 Item
 4. Mine Safety Disclosures

 PART
 II

 Item
 5. Market for Registrant's Common Equity, Related Shareholder Matters, and Issuer Purchases of Equity Securities

 Item
 6. [Reserved]

 Item
 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

 Item
 7A. Quantitative and Qualitative Disclosures about Market Risk

 Item
 8. Financial Statements and Supplementary Data

 Balance Sheets

 Statements of Income

 Statements of Comprehensive Income (Loss)

 Statements of Changes in Shareholders' Equity

 Statements of Cash Flows

 Notes
 to Consolidated Financial Statements

 Item
 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 Item
 9A. Controls and Procedures

 Item
 9B. Other Information

 Item
 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

 PART
 III

 Item
 10. Directors, Executive Officers and Corporate Governance

 Item
 11. Executive Compensation

 Item
 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters

 Item
 13. Certain Relationships and Related Transactions, and Director Independence

 Item
 14. Principal Accountant Fees and Services

 PART
 IV

 Item
 15. Exhibits, Financial Statement Schedules

 SIGNATURES

 CAUTIONARY
STATEMENT REGARDING
 FORWARD-LOOKING STATEMENTS

 This report, including information
included or incorporated by reference in this report, contains statements which constitute "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking
statements may relate to, among other matters, the financial condition, results of operations, plans, objectives, future performance,
and the business of our company. Forward-looking statements are based on many assumptions and estimates and are not guarantees
of future performance. Our actual results may differ materially from those anticipated in any forward-looking statements, as they
will depend on many factors about which we are unsure, including many factors which are beyond our control. The words "may,"
"approximately," "is likely," "would," "could," "should," "will,"
"expect," "anticipate," "predict," "project," "potential," "continue,"
"assume," "believe," "intend," "plan," "forecast," "goal,"
and "estimate," as well as similar expressions, are meant to identify such forward-looking statements. Potential risks
and uncertainties that could cause our actual results to differ materially from those anticipated in our forward-looking statements
include, without limitation, those described under the heading "Risk Factors" in this Annual Report on Form 10-K for
the year ended December 31, 2024 as filed with the U.S. Securities and Exchange Commission (the "SEC") and the following:

 credit losses as a result of, among other
 potential factors, changes in real estate values, interest rates, unemployment, or in customer payment behavior or other factors;

 the amount of our loan portfolio collateralized
 by real estate and weaknesses in the real estate market;

 restrictions or conditions imposed by our
 regulators on our operations;

 the adequacy of the level of our allowance
 for credit losses and the amount of credit loss provisions required in future periods;

 examinations by our regulatory authorities,
 including the possibility that the regulatory authorities may, among other things, require us to increase our allowance for
 credit losses, write-down assets, or take other actions;

 risks associated with actual or potential
 information gatherings, investigations or legal proceedings by customers, regulatory agencies or others;

 reduced earnings due to higher credit impairment
 charges resulting from decline in the value of our securities portfolio, specifically as a result of increasing default rates,
 and loss severities on the underlying real estate collateral;

 increases in competitive pressure in the
 banking and financial services industries;

 changes in the interest rate environment,
 which are affected by many factors beyond our control, including inflation, recession, unemployment, money supply, domestic
 and international events and changes in the United States and other financial markets, and that could reduce anticipated or
 actual margins; temporarily reduce the market value of our available-for-sale investment securities and temporarily reduce
 accumulated other comprehensive income or increase accumulated other comprehensive loss, which temporarily could reduce shareholders'
 equity;

 enterprise risk management may not be effective
 in mitigating risk and reducing the potential for losses;

 changes in political conditions or the
 legislative or regulatory environment, including governmental initiatives affecting the financial services industry, including
 as a result of the presidential administration and congressional elections;

 general economic conditions resulting in,
 among other things, a deterioration in credit quality;

 changes occurring in business conditions
 and inflation, including the impact of inflation on us, including a decrease in demand for new mortgage loan and commercial
 real estate loan originations and refinancings, an increase in competition for deposits, and an increase in non-interest expense,
 which may have an adverse impact on our financial performance;

 changes in access to funding or increased
 regulatory requirements with regard to funding, which could impair our liquidity;

 FDIC assessment which has increased, and
 may continue to increase, our cost of doing business;

 cybersecurity risk related to our dependence
 on internal computer systems and the technology of outside service providers, as well as the potential impacts of third party
 security breaches, which subject us to potential business disruptions or financial losses resulting from deliberate attacks
 or unintentional events;

 changes in deposit flows, which may be
 negatively affected by a number of factors, including rates paid by competitors, general interest rate levels, regulatory
 capital requirements, and returns available to customers on alternative investments;

 changes in technology, including the increasing
 use of artificial intelligence;

 our current and future products, services,
 applications and functionality and plans to promote them;

 changes in monetary and tax policies, including
 potential changes in tax laws and regulations;

 changes in accounting standards, policies,
 estimates and practices as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the SEC
 and the Public Company Accounting Oversight Board;

 our assumptions and estimates used in applying
 critical accounting policies, which may prove unreliable, inaccurate or not predictive of actual results;

 the rate of delinquencies and amounts of
 loans charged-off;

 the rate of loan growth in recent years
 and the lack of seasoning of a portion of our loan portfolio;

 our ability to maintain appropriate levels
 of capital, including levels of capital required under the capital rules implementing Basel III;

 our ability to successfully execute our
 business strategy;

 our ability to attract and retain key personnel;

 our ability to retain our existing customers,
 including our deposit relationships;

 our use of brokered deposits may be an
 unstable and/or expensive deposit source to fund earning asset growth;

 our ability to obtain brokered deposits
 as an additional funding source could be limited;

 adverse changes in asset
 quality and resulting credit risk-related losses and expenses;

 risks associated with complex
 and changing regulatory environments, including, among others, with respect to data privacy, artificial intelligence,
 information security, climate change or other environmental, social and governance matters, and labor matters, relating
 to our operations;

 the potential effects of events beyond
 our control that may have a destabilizing effect on financial markets and the economy, such as epidemics and pandemics, war
 or terrorist activities, such as the war in Ukraine, the Middle East conflict, and the conflict between China and Taiwan,
 disruptions in our customers' supply chains, disruptions in transportation, essential utility outages or trade disputes
 and related tariffs, and disruptions caused by widespread cybersecurity incidents;

 disruptions due to flooding, fires, severe
 weather or other natural disasters; and

 other risks and uncertainties described
 under "Risk Factors" below.

 Because
of these and other risks and uncertainties, our actual future results may be materially different from the results indicated by
any forward-looking statements. For additional information with respect to factors that could cause actual results to differ from
the expectations stated in the forward-looking statements, see "Risk Factors" under Part I, Item 1A of this Annual
Report on Form 10-K. In addition, our past results of operations do not necessarily indicate our future results. Therefore, we
caution you not to place undue reliance on our forward-looking information and statements.

 All forward-looking
statements in this report are based on information available to us as of the date of this report. Although we believe that the
expectations reflected in our forward-looking statements are reasonable, we cannot guarantee that these expectations will be achieved.
We undertake no obligation to publicly update or otherwise revise any forward-looking statements, whether as a result of new information,
future events, or otherwise, except as required by applicable law.

 Summary
of Material Risks

 An investment in our securities involves
risks, including those summarized below. For a more complete discussion of the material risks facing our business, see Item 1A—Risk
Factors.

 Economic and Geographic-Related
Risks

 Our business may be adversely affected
 by economic conditions.

 C redit
and Interest Rate Risks

 Our decisions regarding credit risk and
 allowance for credit losses may significantly harm our business.

 We may have higher credit losses than we
 have allowed for in our allowance for credit losses.

 Our concentration of credit exposure in
 commercial real estate means that challenges in this market could harm our business, financial condition, and results of operations.

 Limits imposed by bank regulators on commercial
 and multi-family real estate lending could restrict our growth and harm our earnings.

 Repayment of our commercial business loans
 is often dependent on the cash flows of the borrower, which may be unpredictable, and the collateral securing these loans
 may fluctuate in value.

 Our focus on lending to small to mid-sized
 community-based businesses may increase our credit risk.

 Our underwriting decisions may materially
 and adversely affect our business.

 Our financial condition could suffer if
 we rely on misleading information from our clients or counterparties.

 If we fail to effectively manage credit
 risk, our business and financial condition will suffer.

 Changes in prevailing interest rates may
 reduce our profitability.

 Capital and Liquidity Risks

 Changes in the financial markets could
 impair the value of our investment portfolio.

 The Bank must adhere
 to strict capital requirements, which could become even stricter in the future.

 Risks Related to Our Industry

 Inflationary pressures and rising prices
 may affect our results of operations and financial condition.

 The Federal Reserve has implemented significant
 economic strategies that have affected interest rates, inflation, asset values, and the shape of the yield curve.

 Adverse developments
 affecting the financial services industry, such as bank failures or concerns involving liquidity, may have a material adverse
 effect on our operations

 Higher FDIC deposit insurance premiums
 and assessments could adversely affect our financial condition.

 We could experience a loss due to competition
 with other financial institutions or nonbank companies.

 We may be adversely affected by the soundness
 of other financial institutions.

 Failure to keep pace with technological
 changes could adversely affect our business.

 New lines of business or new products and
 services may subject us to additional risk.

 Consumers may decide not to use banks to
 complete their financial transactions.

 We use brokered deposits, which may be
 an unstable and costly source of funding for asset growth.

 Our ability to obtain brokered deposits
 as an additional funding source may become limited.

 Consumers may decide
 not to use banks to complete their financial transactions.

 Risks Related to Our Strategy

 We may be adversely affected by risks associated
 with future mergers and acquisitions, including execution risk, which could disrupt our business and dilute shareholder value.

 We may be exposed to difficulties in combining
 the operations of acquired businesses into our own operations, which may prevent us from achieving the expected benefits from
 our acquisition activities.

 New or acquired banking office facilities
 and other facilities may not be profitable.

 Risks Related to Our Human

 We are dependent on key individuals, and
 the loss of one or more of these individuals could limit our growth and adversely affect our prospects.

 Operational Risks

 System or infrastructure failures, including
 cyber-attacks, could disrupt our operations, lead to the disclosure of confidential information, harm our reputation, or increase
 costs and losses.

 Our information systems may experience
 failure, interruption or breach in security.

 Increased fraud risk could adversely impact
 our business.

 Our use of third party vendors and our
 other ongoing third party business relationships are subject to increasing regulatory requirements and attention.

 If we fail to maintain our reputation,
 our performance may be harmed.

 L egal,
Accounting, Regulatory and Compliance Risks

 We are subject to extensive regulation
 that could restrict our activities, have an adverse impact on our operations, and impose financial requirements or limitations
 on the conduct of our business.

 Federal, state and local consumer lending
 laws may restrict our ability to originate certain mortgage loans or increase our risk of liability with respect to such loans
 and could increase our cost of doing business.

 Failure to comply with federal and state
 fair lending laws could result in significant penalties for us.

 Changes in accounting standards could materially
 affect our financial statements.

 The Federal Reserve may require us to commit
 capital resources to support the Bank.

 We face risks related to the adoption of
 future legislation and potential changes in federal regulatory agency leadership, policies, and priorities.

 We are involved in various claims and lawsuits
 related to our business. Litigation is uncertain, making it difficult to determine the expenses and ultimate exposure for
 many of these matters.

 We may become involved in suits, legal
 proceedings, investigations, and proceedings by governmental and self-regulatory agencies, which could have adverse consequences.

 Changes in tax laws and regulations or
 their interpretations could negatively impact us.

 A reduction in our ability to realize deferred
 tax assets could negatively affect our operating results.

 R isks
Related to an Investment In our Common Stock

 Our ability to pay cash dividends
is limited, and future dividends may not be able to be paid even if we desire to.

 Our stock price may be volatile,
which could result in losses to our investors and litigation against us.

 Future sales of stock by
shareholders, or the expectation of such sales, could lower our stock price.

 We may need to raise capital
under unfavorable terms due to economic or other circumstances. Issuing common stock could dilute existing shareholders'
ownership and book value per share, potentially impacting our ability to obtain additional capital.

 Provisions of our articles
of incorporation and bylaws, South Carolina law, and state and federal banking regulations, could delay or prevent a takeover
by a third party.

 An investment in our common
stock is not an insured deposit.

 General Risks

 Regulatory shifts and evolving stakeholder
 expectations on ESG practices may create compliance uncertainties, reputational risks, and operational complexities.

 Climate change could have a material adverse
 impact on us and our customers.

 Our historical operating results may not
 be indicative of our future operating results.

 A downgrade of the U.S. credit
 rating could harm our business, results of operations, and financial condition.

 PART
I

 Item 1. Business.

 General

 First
Community Corporation, a bank holding company registered under the Bank Holding Company Act of 1956, was incorporated under the
laws of South Carolina in November 1994 primarily to own and control all of the capital stock of First Community Bank, which commenced
operations in August 1995. The Bank's primary federal regulator is the Federal Deposit Insurance Corporation (the "FDIC").
The Bank is also regulated and examined by the South Carolina Board of Financial Institutions (the "S.C. Board").

 Unless
otherwise mentioned or unless the context requires otherwise, references herein to "First Community," the "Company"
"we," "us," "our" or similar references mean First Community Corporation and its consolidated
subsidiaries. References to the "Bank" means First Community Bank.

 We engage
in a commercial banking business from our main office in Lexington, South Carolina and our 21 full-service offices located in:
the Midlands of South Carolina, which includes Lexington County (6 offices), Richland County (4 offices), Newberry County (2 offices)
and Kershaw County (1 office); the Upstate of South Carolina, which includes Greenville County (2 offices), Anderson County (1
office) and Pickens County (1 office); the Piedmont Region of South Carolina, which includes York County, South Carolina (1 office)
and the Central Savannah River Area, which includes Aiken County, South Carolina (1 office); and in Augusta, Georgia, which includes
Richmond County (1 office) and Columbia County (1 office).

31, 2024, we had approximately $2.0 billion in assets, $1.2 billion in loans, $1.7 billion in deposits, and $144.5 million in
shareholders' equity.

 We offer
a wide range of traditional banking products and services for professionals and small-to medium-sized businesses, including consumer
and commercial, mortgage, brokerage and investment, and insurance services. We also offer online banking to our customers. We
have grown organically and through acquisitions.

 Our stock
trades on The NASDAQ Capital Market under the symbol "FCCO".

 Available
Information

 We provide our
Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed
or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act") on our
website at www.firstcommunitysc.com/ under the About section, under the Investors link. These filings are made accessible as soon
as reasonably practicable after they have been filed electronically with SEC. These filings are also accessible on the SEC's
website at www.sec.gov. In addition, we make available under our Investor Relations section on our website the following, among
other things: (i) Code of Business Conduct and Ethics, which applies to our directors and all employees and (ii) the charters
of the Audit and Compliance, Human Resources and Compensation, and Nominations and Corporate Governance Committees of our board
of directors. These materials are available to the general public on our website free of charge. Printed copies of these materials
are also available free of charge to shareholders who request them in writing. Please address your request to: Investor Relations,
First Community Corporation, 5455 Sunset Boulevard, Lexington, South Carolina 29072. Statements of beneficial ownership of equity
securities filed by directors, officers, and 10% or greater shareholders under Section 16 of the Exchange Act are also available
through our website. The information on our website is not incorporated by reference into this report.

 Location
and Service Area

 The Bank is engaged
in a general commercial and retail banking business, emphasizing the needs of small-to-medium sized businesses, professionals
and individuals. We have a total of 13 full-service offices located in Richland, Lexington, Kershaw and Newberry Counties of South
Carolina and the surrounding areas. We refer to these counties as the "Midlands" region of South Carolina. Lexington
County is home to six of our branch offices. Richland County, in which we currently have four branches, is the third largest county
in South Carolina. Columbia is located within Richland County and is South Carolina's capital city and is geographically
positioned in the center of the state between the industrialized Upstate region of South Carolina and the coastal city of Charleston,
South Carolina. Intersected by three major interstate highways (I-20, I-77, and I-26), Columbia's strategic location has
contributed greatly to its commercial appeal and growth. With the acquisition of Savannah River Banking Company in 2014, we added
a branch in Aiken, South Carolina and a branch in Augusta, Georgia (Richmond County). In 2016, we opened a loan production office
in Greenville County, which we converted into a full-service office in February 2019. With the acquisition of Cornerstone Bancorp
in 2017, we added a branch in each of Greenville, Pickens, and Anderson Counties of South Carolina. Greenville County is the largest
county in South Carolina. We refer to this three-county area as the "Upstate" region of South Carolina. In 2019, we
opened a de novo branch in Evans, Georgia, a suburb of Augusta in Columbia County, Georgia. On June 27, 2024, we closed
our downtown Augusta, Georgia banking office, which we opened as a de novo branch in 2018. We refer to the three-county
area of Aiken County (South Carolina), Richmond County (Georgia) and Columbia County (Georgia) as the "CSRA" region.
On March 14, 2022, we opened a loan production office in York County, South Carolina, which has the second highest county median
household income in South Carolina. We converted this loan production office into a full-service banking office on October 20,
2022. We refer to York County, South Carolina and the surrounding area as the "Piedmont Region".

table shows data as to deposits, market share and population for our four market areas (deposits in thousands):

 Total

 Estimated

 Total Market Deposits (2)

 Our Market Deposits (2)

 Offices

 Population (1)

 June 30, 2024

 June 30, 2024

 Market
 Share

 Midlands Region

 860,314

 $
 27,993,573

 $
 1,231,216

 4.40
 %

 CSRA Region

 556,483

 $
 10,377,142

 $
 143,268

 1.38
 %

 Upstate Region

 931,563

 $
 25,001,836

 $
 204,445

 0.82
 %

 Piedmont Region (3)

 305,751

 $
 4,742,429

 $
 31,190

 0.66
 %

 (1)

 Population data is 2025 total population
 from S&P Global Market Intelligence.

 (2)

 All deposit data is based on June 30, 2024
 data sourced from S&P Global Market Intelligence.

 (3)

 Our full-service banking office in the
 Piedmont Region opened on October 20, 2022.

 We believe that
we serve attractive banking markets with long-term growth potential and a well-educated employment base that helps to support
our diverse and relatively stable local economy. According to S&P Global Market Intelligence, 2025 median household incomes
for each of the counties in the regions noted above were as follows:

 Richland County, SC

 $
 64,520

 Lexington County, SC

 $
 74,805

 Newberry County, SC

 $
 62,392

 Kershaw County, SC

 $
 62,464

 Greenville County, SC

 $
 73,698

 Anderson County, SC

 $
 63,945

 Pickens County, SC

 $
 58,326

 Aiken County, SC

 $
 67,850

 Richmond County, GA

 $
 51,339

 Columbia County, GA

 $
 95,838

 York County, SC

 $
 89,527

 The county estimates
noted above compare to 2025 statewide median household income estimates of $67,758 and $75,118 for South Carolina and Georgia,
respectively. The principal components of the economy within our market areas are service industries, government and education,
and wholesale and retail trade. The largest employers in the Midlands market area include the State of South Carolina, Prisma
Health, BlueCross BlueShield of SC, the University of South Carolina, the United States Department of the Army (Fort Jackson Army
Base), Richland County School District 1, Richland County School District 2, Lexington Medical Center, Lexington County School
District One, Southeastern Freight Lines, and Michelin North America. The largest employers in our CSRA market area include the
U.S. Army Cyber Center of Excellence & Fort Gordon, Augusta University, NSA Augusta, Wellstar MCG Health, Columbia County
Board of Education, Richmond County School System, Piedmont Hospital, Amazon, Carlisle Tire & Wheel, CB&I AREVA MOX Services,
Aiken Regional Medical Center, and the Department of Energy, Savannah River Site. The Upstate region major employers include,
among others, Prisma Health, Greenville County Schools, BMW Manufacturing Corp., Michelin North America, Milliken & Company,
Bon Secours St. Francis Health System, AnMed Health Medical Center, Clemson University, Duke Energy Corp., GE Vernova, and the
Greenville County Government. The Piedmont Region major employers include, among others, Ross Stores, Inc. – Distribution,
LPL Financial, Wells Fargo Home Mortgage, Piedmont Medical Center, Comporium, Inc., and Schaeffler Group USA, Inc. We believe
that this diversified economic base has reduced, and will likely continue to reduce, economic volatility in our market areas.
Our markets have experienced economic and population growth over the past 10 years, and we expect that the area, as well as the
service industry needed to support it, will continue to grow.

Services

 We offer
a full range of deposit services that are typically available in most banks and thrift institutions, including checking accounts,
NOW accounts, savings accounts and other time deposits of various types, ranging from daily money market accounts to longer-term
certificates of deposit. The transaction accounts and time certificates are tailored to our principal market area at rates competitive
to those offered in the area. In addition, we offer certain retirement account services, such as individual retirement accounts
("IRAs"). All deposit accounts are insured by the FDIC up to the maximum amount allowed by law (currently, $250,000,
subject to aggregation rules).

 We also offer
a full range of commercial and personal loans. Commercial loans include both secured and unsecured loans for working capital (including
inventory and receivables), business expansion (including acquisition of real estate and improvements), and the purchase of equipment
and machinery. Consumer loans include secured and unsecured loans for financing automobiles, home improvements, education, and
personal investments. We also make real estate construction and acquisition loans. We originate fixed and variable rate mortgage
loans, of which some are sold into the secondary market and some are placed in our loans held-for-investment portfolio. Our lending
activities are subject to a variety of lending limits imposed by federal law. While differing limits apply in certain circumstances
based on the type of loan or the nature of the borrower (including the borrower's relationship to the bank), in general,
we are subject to a loans-to-one-borrower limit of an amount equal to 15% of the Bank's unimpaired capital and surplus,
or 25% of the unimpaired capital and surplus if the excess over 15% is approved by the board of directors of the Bank and is fully
secured by readily marketable collateral. As a result, our lending limit will increase or decrease in response to increases or
decreases in the Bank's level of capital. Based upon the capitalization of the Bank at December 31, 2024, the maximum amount
we could lend to one borrower is $26.6 million. In addition, we may not make any loans to any director, officer, employee, or
10% shareholder of the Company or the Bank unless the loan is approved by our board of directors and is made on terms not more
favorable to such person than would be available to a person not affiliated with the Bank.

 Other bank services
include internet banking, cash management services, safe deposit boxes, direct deposit of payroll and social security checks,
and automatic drafts for various accounts. We offer non-deposit investment products and other investment brokerage services through
a registered representative with an affiliation through LPL Financial. We are associated with Nyce and Plus networks of automated
teller machines and MasterCard debit cards that may be used by our customers throughout South Carolina, Georgia, and other regions.
We also offer VISA and MasterCard credit card services through a correspondent bank as our agent.

 We currently
do not exercise trust powers, but we can begin to do so with the prior approval of our primary banking regulators, the FDIC and
the S.C. Board.

 Competition

 The banking business
is highly competitive. We compete as a financial intermediary with other commercial banks, savings and loan associations, credit
unions and money market mutual funds operating in our market areas. As of June 30, 2024, there were 27 financial institutions
operating approximately 158 offices in the Midlands market, 21 financial institutions operating 90 branches in the CSRA market,
41 financial institutions operating 230 branches in the Upstate market, and 18 financial institutions operating 47 branches in
the Piedmont market. The competition among the various financial institutions is based upon a variety of factors, including interest
rates offered on deposit accounts, interest rates charged on loans, credit and service charges, the quality of services rendered,
the convenience of banking facilities and, in the case of loans to large commercial borrowers, relative lending limits. Size gives
larger banks certain advantages in competing for business from large corporations. These advantages include higher lending limits
and the ability to offer services in other areas of South Carolina and Georgia. As a result, we do not generally attempt to compete
for the banking relationships of large corporations; we instead concentrate our efforts on small-to-medium sized businesses and
individuals. We believe we have competed effectively in this market by offering quality and personal service. In addition, many
of our non-bank competitors are not subject to the same extensive federal regulations that govern bank holding companies and federally
insured banks.

 Human

31, 2024, we had 260 full-time, 10 part-time, and eight seasonal/on-call employees.

 We believe
that our relationships with our employees are good and our employees are not represented by any collective bargaining group or
agreement. Our company's "Why," or purpose, is "Impacting Lives for Success and Significance," which
guides our approach to our relationships with employees. The foundations of these interactions are embedded in our cultural beliefs:

 Everyone Matters
 - We value each of our employees for the unique contribution they make to our success. While there are a variety of different
positions in our company, each is an important and integral part of the work that we do. Every employee brings their own unique
and diverse talents and experiences that enhance the culture of our bank and our work.

 Spirit of Service
- The energy and enthusiasm that our employees bring to their work creates a supportive work environment in which employees are
available as a resource to one another. In addition to serving our fellow co-workers, we encourage our employees to serve our
local communities. We offer company sponsored volunteer activities, as well as provide Volunteer paid time off to allow employees
to support causes that are close to their heart.

 Honor and Integrity
 - Trust is at the foundation of all that we do. We have a Code of Conduct and Business Ethics that all employees and board
members read and are directed to follow that sets clear expectations with regard to personal and professional behavior.

 Strong Work Ethic
 - Our employees take pride in the quality of the work that they do. This commitment to excellence can be seen in the work
that is completed and their interactions with their co-workers and customers. While we work hard, we also make time for fun employee
events designed to offer the opportunity for relaxation and social interactions among co-workers.

 Excellence with Humility
 - Our company is blessed with dedicated and talented employees, loyal customers, supportive communities and shareholders,
each of whom invest in and believe in our vision. We are humbled by the success we have experienced and are grateful for all that
we have accomplished. We approach our work with a sincere appreciation for the opportunity to serve all of our stakeholder groups
and we recognize it is through our collective efforts that we have been successful.

 Our ability to
attract, develop and retain our strong employee base is integral to our ongoing success. We believe that a good "quality
of life" at work is an important part of the overall employee experience and we are very intentional about nurturing a culture
that allows employees to reach their potential and enjoy professional success while also enjoying the work that they do in a positive
and supportive work environment grounded in our cultural beliefs.

 While we believe
that our corporate culture and work environment is a competitive advantage for our company, we also recognize that employees value
and deserve competitive compensation packages. We offer competitive wages and benefits for our employees and we regularly benchmark
our compensation to market. Our benefits package includes medical, dental, life, disability, vision and supplemental insurance
options. We also offer retirement benefits with a 401(k) plan with matching and profit sharing. In addition, we offer a generous
paid time off plan that includes paid holidays.

 Our company
encourages employees to continue on a lifelong trajectory of learning, as such, we offer ongoing training to all employees through
internal and external resources and encourage employees to continue with career development specific to their role to ensure they
stay current with the most up-to-date information and best practices. To develop our current and future leaders, we created the
First Community Bank Leadership Institute, an 18-month program that provides academic and experiential learning to teach and nurture
leadership skills across our organization to support the bank now and in the future. Furthermore, we have an internal CEO Conversation
Group, which provides our current and emerging leaders with leadership conversations with our CEO. The Bank also supports the
development of employees through external educational opportunities such as various bankers' schools that offer multi-year
development programs as well as short term training classes and industry conferences.

 Information
about the Executive Officers of First Community Corporation

 Executive officers
of First Community Corporation are elected by the board of directors annually and serve at the pleasure of the board of directors.
The current executive officers, and persons chosen to become executive officers, and their ages, positions with us over the past
five years, and terms of office as of March 14, 2025, are as follows:

 Name
 (age)

 Position
 and Five Year History with Company

 With
 the
 Company
 Since

 (66)

 Chief Executive
 Officer and President, Director

 1994

 J. Ted Nissen (63)

 Executive Vice
 President, Chief Banking Officer, and Director; Chief Executive Officer, President, and Director of First Community Bank

 1995

 Robin D. Brown (57)

 Chief Human Resources
 and Marketing Officer

 1994

 Sarah T. Donley (59)

 Chief Operations
 Officer/Chief Risk Officer; formerly Senior Vice President and Controller of First Community Bank

 1997

 John F. (Jack) Walker
 (59)

 Chief Credit Officer

 2009

 D. Shawn Jordan (57)

 Chief Financial
 Officer

 2019

 Vaughan R. Dozier,
 Jr. (44)

 Co-Chief Commercial
 and Retail Banking Officer, formerly Senior Vice President and Regional Market President of First Community Bank

 2008

 Joseph A. (Drew) Painter
 (47)

 Co-Chief Commercial
 and Retail Banking Officer, formerly Senior Vice President and Regional Market President of First Community Bank

 2003

 On December 14,
2023, we announced promotions and additions to our Executive Leadership Team. Effective January 1, 2024, Joseph A. "Drew"
Painter and Vaughan R. Dozier, Jr. became Executive Vice Presidents in the roles of Co-Chief Commercial and Retail Banking Officers.
In their roles as Co-Chief Commercial and Retail Banking Officers, Mr. Painter and Mr. Dozier are responsible for leading the
Bank's network of banking offices.

 Effective July
1, 2024, J. Ted Nissen became the CEO of the Bank while still retaining the role of President and joined the boards of directors
of the Company and the Bank. Michael C. "Mike" Crapps continues in his role as President and CEO of the Company. In
his role as CEO of the Bank, Mr. Nissen is responsible for the leadership of day-to-day operations of the Bank including its mortgage
and financial planning lines of business. Mr. Crapps continues to focus on board governance, investor relations, strategy development
and growth decisions, client retention and prospecting, and leadership development.

 Effective January
1, 2025, Sarah T. Donley, former Senior Vice President and Controller of First Community Bank and a 27-year employee of the Bank,
succeeded Ms. Tanya Butts (who retired effective December 31, 2024) as Executive Vice President and Chief Operations Officer/Chief
Risk Officer.

 None of the above
officers are related and there are no arrangements or understandings between them and any other person pursuant to which any of
them was elected as an officer, other than arrangements or understandings with the directors or officers of the Company acting
solely in their capacities as such.

 SUPERVISION
AND REGULATION

 Both the Company
and the Bank are subject to extensive state and federal banking laws and regulations that impose specific requirements or restrictions
on and provide for general regulatory oversight of virtually all aspects of our operations. These laws generally are intended
primarily for the protection of customers, depositors and other consumers, the FDIC's Deposit Insurance Fund (the "DIF"),
and the banking system as a whole; not for the protection of our other creditors and shareholders.

discussion is not intended to be a complete list of all the activities regulated by the banking laws or of the impact of those
laws and regulations on our operations. The following summary is qualified by reference to the statutory and regulatory provisions
discussed. Changes in applicable laws or regulations may have a material effect on our business and prospects. Our operations
may be affected by legislative changes and the policies of various regulatory authorities. We cannot predict the effect that fiscal
or monetary policies, economic control, or new federal or state legislation may have on our business and earnings in the future.

 Legislative
and Regulatory Developments

 We experienced
heightened regulatory requirements and scrutiny following the 2008 global financial crisis, and as a result of the Dodd-Frank
Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act") and the Economic Growth, Regulatory Reform and
Consumer Protection Act ("Regulatory Relief Act"). In addition, newer regulatory developments implemented in response
to the COVID-19 pandemic and the bank failures in 2023 will continue to have an impact on our operations.

and Related Requirements.

 Regulatory capital
rules known as the Basel III rules or Basel III, impose minimum capital requirements for bank holding companies and banks. Basel
III was released in the form of enforceable regulations by each of the applicable federal bank regulatory agencies. Basel III
is applicable to all banking organizations that are subject to minimum capital requirements, including federal and state banks
and savings and loan associations, as well as to bank and savings and loan holding companies, other than "small bank holding
companies." A small bank holding company is generally a qualifying bank holding company or savings and loan holding company
with less than $3.0 billion in consolidated assets. More stringent requirements are imposed on "advanced approaches"
banking organizations—generally those organizations with $250 billion or more in total consolidated assets or $10 billion
or more in total foreign exposures.

 Based
on the foregoing, as a small bank holding company, we are generally not subject to the capital requirements at the holding company
level unless otherwise advised by the Federal Reserve; however, our Bank remains subject to the capital requirements. Accordingly,
the Bank is required to maintain the following capital levels:

 a Common Equity Tier
 1 risk-based capital ratio of 4.5%;

 a Tier 1 risk-based
 capital ratio of 6%;

 a total risk-based
 capital ratio of 8%; and

 a leverage ratio
 of 4%.

 Basel III also
established a "capital conservation buffer" above the regulatory minimum capital requirements, which must consist
entirely of Common Equity Tier 1 capital, which was phased in over several years. The fully phased-in capital conservation buffer
of 2.5%, which became effective on January 1, 2019, resulted in the following effective minimum capital ratios for the Bank beginning
in 2019: (i) a Common Equity Tier 1 capital ratio of 7.0%, (ii) a Tier 1 capital ratio of 8.5%, and (iii) a total capital ratio
of 10.5%. Under Basel III, institutions are subject to limitations on paying dividends, engaging in share repurchases, and paying
discretionary bonuses if their capital levels fall below the buffer amount. These limitations establish a maximum percentage of
eligible retained income that could be utilized for such actions.

 Under Basel III,
Tier 1 capital includes two components: Common Equity Tier 1 capital and additional Tier 1 capital. The highest form of capital,
Common Equity Tier 1 capital, consists solely of common stock (plus related surplus), retained earnings, accumulated other comprehensive
income, otherwise referred to as AOCI, and limited amounts of minority interests that are in the form of common stock. Additional
Tier 1 capital is primarily comprised of noncumulative perpetual preferred stock, Tier 1 minority interests and grandfathered
trust preferred securities. Tier 2 capital generally includes the allowance for credit losses up to 1.25% of risk-weighted assets,
qualifying preferred stock, subordinated debt and qualifying Tier 2 minority interests, less any deductions in Tier 2 instruments
of an unconsolidated financial institution. AOCI is presumptively included in Common Equity Tier 1 capital and often would operate
to reduce this category of capital. When implemented, Basel III provided a one-time opportunity at the end of the first quarter
of 2015 for covered banking organizations to opt out of a large part of this treatment of AOCI. We made this opt-out election
and, as a result, retained our pre-existing treatment for AOCI.

 Proposed new
rules for U.S. implementation of capital requirements under Basel IV rules, more recently referred to as the "Basel III
Endgame," were issued by the U.S. federal banking agencies on July 27, 2023. These proposed rules include broad-based changes
to the risk-weighting framework for various credit exposures and operational risk capital requirements. However, the proposed
rules generally apply only to large banking organizations with total assets of $100 billion or more, and are expected to not be
applicable to us. Recent regulatory developments have introduced uncertainty regarding the implementation of the Basel III Endgame
rules. Changes in leadership and evolving policy priorities within regulatory agencies have led to speculation about potential
delays or modifications to the final rulemaking process.

 As part
of its response to the impact of the COVID-19 pandemic, in the first quarter of 2020, U.S. federal regulatory authorities issued
an interim final rule that provided banking organizations that adopted the credit impairment model, the Current Expected Credit
Loss, or CECL, during the 2020 calendar year with the option to delay for two years the estimated impact of CECL on regulatory
capital relative to regulatory capital determined under the prior incurred loss methodology, followed by a three-year transition
period to phase out the aggregate amount of the capital benefit provided during the initial two-year delay (i.e., a five-year
transition in total). In connection with our adoption of CECL on January 1, 2023, we did not elect to utilize the five-year CECL
transition.

 In November 2019,
the federal banking regulators published final rules implementing a simplified measure of capital adequacy for certain banking
organizations that have less than $10 billion in total consolidated assets. Under the final rules, which went into effect on January
1, 2020, depository institutions and depository institution holding companies that have less than $10 billion in total consolidated
assets and meet other qualifying criteria, including a leverage ratio of greater than 9%, off-balance-sheet exposures of 25% or
less of total consolidated assets, and trading assets plus trading liabilities of 5% or less of total consolidated assets, are
deemed "qualifying community banking organizations" and are eligible to opt into the "community bank leverage
ratio framework." A qualifying community banking organization that elects to use the community bank leverage ratio framework
and that maintains a leverage ratio of greater than 9% is considered to have satisfied the generally applicable risk-based and
leverage capital requirements under the Basel III rules and, if applicable, is considered to have met the "well capitalized"
ratio requirements for purposes of its primary federal regulator's prompt corrective action rules, discussed below. We do
not have any immediate plans to elect to use the community bank leverage ratio framework but may make such an election in the
future.

 Acquisition
Activities.

 The primary
purpose of a bank holding company is to control and manage banks. The BHCA generally requires the prior approval of the Federal Reserve
for any merger involving a bank holding company or any acquisition by a bank holding company of another bank or bank holding company.
In addition, the prior approval of the FDIC is required for a bank to merge with another bank or purchase the assets or assume
the deposits of another bank. In determining whether to approve a proposed bank acquisition, federal bank regulators will consider,
among other factors, the effect of the acquisition on competition, the public benefits expected to be received from the acquisition,
the projected capital ratios and levels on a post-acquisition basis, and the acquiring institution's record of addressing
the credit needs of the communities it serves, including the needs of low and moderate income neighborhoods, consistent with the
safe and sound operation of the bank, under the CRA.

 On
July 9, 2021, President Biden issued an Executive Order on Promoting Competition in the American Economy. Among other initiatives,
the Executive Order encouraged the federal banking agencies to review their current merger oversight practices under the BHCA
and the Bank Merger Act and adopt a plan for revitalization of such practices. In December 2021, the U.S. Department of Justice
("DOJ") (in consultation with the Federal Reserve, the Office of the Comptroller of the Currency (the "OCC"),
and FDIC announced that it was seeking additional public comments on whether and how the DOJ should revise the 1995 Bank Merger
Competitive Review Guidelines. The comment period closed on February 15, 2022. In March 2022, the FDIC published a Request for
Information seeking information and comments regarding the laws, practices, rules, regulations, guidance, and statements of policy
that apply to merger transactions involving one or more insured depository institutions, including the merger between an insured
depository institution and a noninsured institution. In a May 2022 speech, the acting head of the OCC announced that he had asked
his staff to work with DOJ and other federal banking agencies to review the agency's frameworks to analyze bank mergers.
In May 2022, the CFPB announced the establishment of an Office of Competition and Innovation.

 On
September 17, 2024, the FDIC approved a final Statement of Policy on Bank Merger Transactions, updating its approach to evaluating
bank mergers under the Bank Merger Act. The new policy emphasizes a principles-based evaluation, focusing on factors such as the
effect of the transaction on competition, financial stability, and the convenience and needs of the community to be served. The
OCC concurrently approved a final rule updating its regulations for business combinations involving national banks and federal
savings associations, including a policy statement summarizing the principles used during its review of Bank Merger Act applications.
Importantly, the Federal Reserve did not join with the FDIC and the OCC in this updated guidance. Additionally, the DOJ announced
its withdrawal from the 1995 Bank Merger Competitive Review Guidelines, indicating that it would apply its 2023 Merger Guidelines
to the banking industry.

 These
developments reflect a heightened regulatory focus on bank mergers, with an emphasis on maintaining competition, ensuring financial
stability, and addressing community needs. However, given the shift in administration under President Trump, regulatory priorities
may change. Financial institutions considering mergers or acquisitions should monitor potential regulatory shifts under the new
administration, as changes in policy priorities may impact the level of scrutiny and the application of existing regulatory frameworks.

 Change
in Control.

 Two statutes,
the Change in Bank Control Act and the Bank Holding Company Act, together with regulations promulgated under them, require some
form of regulatory review before any company may acquire "control" of a bank or a bank holding company. Under the
Change in Bank Control Act, a person or company is required to file a notice with the Federal Reserve if it will, as a result
of the transaction, own or control 10% or more of any class of voting securities or direct the management or policies of a bank
or bank holding company and either if the bank or bank holding company has registered securities or if the acquirer would be the
largest holder of that class of voting securities after the acquisition. For a change in control at the holding company level,
both the Federal Reserve and the subsidiary bank's primary federal regulator must approve the change in control; at the
bank level, only the bank's primary federal regulator is involved.

the Bank Holding Company Act prohibits any entity from acquiring 25% (5% if the acquirer is a bank holding company) or more of
a bank holding company's voting securities, or otherwise obtaining control or a controlling influence over the management
or policies of a bank or bank holding company without regulatory approval. The Federal Reserve's standards for determining
whether one company has control over another established four categories of tiered presumptions of noncontrol that are based on
the percentage of voting shares held by the investor (less than 5%, 5-9.9%, 10-14.9% and 15-24.9%) and the presence of other indicia
of control. As the percentage of ownership increases, fewer indicia of control are permitted without falling outside of the presumption
of noncontrol. These indicia of control include nonvoting equity ownership, director representation, management interlocks, business
relationship and restrictive contractual covenants. Under the standards, investors can hold up to 24.9% of the voting securities
and up to 33% of the total equity of a company without necessarily having a controlling influence. In 2024, the Federal Reserve
indicated it may revisit certain aspects of this framework to address evolving market structures and investor behavior, though
no formal rulemaking has been issued.

 In August 2024,
the FDIC proposed amendments to its regulations implementing the Change in Bank Control Act. The proposed rule aims to remove
certain existing exemptions and seeks public comment on the FDIC's overall approach to changes in control affecting FDIC-supervised
institutions. If adopted, these amendments could result in more transactions being subject to the Change in Bank Control Act notice
requirements and FDIC review.

 Transactions
subject to the Bank Holding Company Act are exempt from Change in Control Act requirements. For state banks, state laws, including
those of South Carolina, typically require approval by the state bank regulator as well.

 Transactions
with Affiliates and Insiders.

is a legal entity separate and distinct from the Bank and its other subsidiaries. Various legal limitations restrict the Bank
from lending or otherwise supplying funds to the Company or its non-bank subsidiaries. The Company and the Bank are subject to
Sections 23A and 23B of the Federal Reserve Act and Federal Reserve Regulation W.

 Section
23A of the Federal Reserve Act places limits on the amount of loans or extensions of credit by a bank to any affiliate, including
its holding company, and on a bank's investments in, or certain other transactions with, affiliates and on the amount of
advances to third parties collateralized by the securities or obligations of any affiliates of the bank. Section 23A also applies
to derivative transactions, repurchase agreements and securities lending and borrowing transactions that cause a bank to have
credit exposure to an affiliate. The aggregate of all covered transactions is limited in amount, as to any one affiliate, to 10%
of the Bank's capital and surplus and, as to all affiliates combined, to 20% of the Bank's capital and surplus. Furthermore,
within the foregoing limitations as to amount, each covered transaction must meet specified collateral requirements. The Bank
is forbidden to purchase low quality assets from an affiliate.

 Section
23B of the Federal Reserve Act, among other things, prohibits an institution from engaging in certain transactions with certain
affiliates unless the transactions are on terms substantially the same, or at least as favorable to such institution or its subsidiaries,
as those prevailing at the time for comparable transactions with nonaffiliated companies. If there are no comparable transactions,
a bank's (or one of its subsidiaries') affiliate transaction must be on terms and under circumstances, including credit
standards, that in good faith would be offered to, or would apply to, nonaffiliated companies. These requirements apply to all
transactions subject to Section 23A as well as to certain other transactions.

 The affiliates
of a bank include any holding company of the bank, any other company under common control with the bank (including any company
controlled by the same shareholders who control the bank), any subsidiary of the bank that is itself a bank, any company in which
the majority of the directors or trustees also constitute a majority of the directors or trustees of the bank or holding company
of the bank, any company sponsored and advised on a contractual basis by the bank or an affiliate, and any mutual fund advised
by a bank or any of the bank's affiliates. Regulation W generally excludes all non-bank and non-savings association subsidiaries
of banks from treatment as affiliates, except to the extent that the Federal Reserve decides to treat these subsidiaries as affiliates.

 The Bank is also
subject to certain restrictions on extensions of credit to executive officers, directors, certain principal shareholders, and
their related interests. Extensions of credit include derivative transactions, repurchase and reverse repurchase agreements, and
securities borrowing and lending transactions to the extent that such transactions cause a bank to have credit exposure to an
insider. Any extension of credit to an insider (i) must be made on substantially the same terms, including interest rates and
collateral requirements, as those prevailing at the time for comparable transactions with unrelated third parties and (ii) must
not involve more than the normal risk of repayment or present other unfavorable features.

 The federal
banking agencies have extended the temporary relief from enforcement actions related to Regulation O multiple times, most recently
on December 27, 2024. The relief, which applies to banks and asset managers that become principal stockholders of banks, will
now expire on the earlier of January 1, 2026, or the effective date of a final Federal Reserve rule revising Regulation O. This
extension allows additional time for regulators to address the treatment of bank credit extensions to complex-controlled portfolio
companies that qualify as insiders. Financial institutions and asset managers should continue monitoring updates, as a final rule
could impact the relief before its expiration.

 First
Community Corporation

 We own 100% of
the outstanding capital stock of the Bank, and, therefore, we are considered to be a bank holding company under the federal Bank
Holding Company Act. As a result, we are primarily subject to the supervision, examination and reporting requirements of the Federal
Reserve under the Bank Holding Company Act and its regulations promulgated thereunder. Moreover, as a bank holding company of
a bank located in South Carolina, we also are subject to the South Carolina Banking and Branching Efficiency Act.

 Permitted
Activities. Under the Bank Holding Company Act, a bank holding company is generally permitted to engage in, or acquire direct
or indirect control of more than 5% of the voting shares of any company engaged in, the following activities:

 banking or managing
 or controlling banks;

 furnishing services
 to or performing services for our subsidiaries; and

 any activity that the Federal Reserve determines
 to be so closely related to banking as to be a proper incident to the business of banking;

 Activities that
the Federal Reserve has found to be so closely related to banking as to be a proper incident to the business of banking include:

 factoring accounts
 receivable;

 making, acquiring,
 brokering or servicing loans and usual related activities;

 leasing personal or
 real property;

 operating a non-bank
 depository institution, such as a savings association;

 trust company functions;

 financial and investment
 advisory activities;

 conducting discount
 securities brokerage activities;

 underwriting and dealing
 in government obligations and money market instruments;

 providing specified
 management consulting and counseling activities;

 performing selected
 data processing services and support services;

 acting as agent or
 broker in selling credit life insurance and other types of insurance in connection with credit transactions; and

 performing selected insurance underwriting
 activities.

 As a bank
holding company, we also can elect to be treated as a "financial holding company," which would allow us to engage
in a broader array of activities. In summary, a financial holding company can engage in activities that are financial in nature
or incidental or complimentary to financial activities, including insurance underwriting, sales and brokerage activities, providing
financial and investment advisory services, underwriting services and limited merchant banking activities. We have not sought
financial holding company status but may elect such status in the future as our business matures. If we were to elect in writing
for financial holding company status, each insured depository institution we control would have to be well capitalized, well managed
and have at least a satisfactory rating under the Community Reinvestment Act ("CRA") (discussed below).

 The Federal
Reserve has the authority to order a bank holding company or its subsidiaries to terminate any of these activities or to terminate
its ownership or control of any subsidiary when it has reasonable cause to believe that the bank holding company's continued
ownership, activity or control constitutes a serious risk to the financial safety, soundness, or stability of it or any of its
bank subsidiaries.

 Source
of Strength. There are a number of obligations and restrictions imposed by law and regulatory policy on bank holding companies
with regard to their depository institution subsidiaries that are designed to minimize potential loss to depositors and to the
FDIC insurance funds in the event that the depository institution becomes in danger of defaulting under its obligations to repay
deposits. Under a policy of the Federal Reserve, a bank holding company is required to serve as a source of financial strength
to its subsidiary depository institutions and to commit resources to support such institutions in circumstances where it might
not do so absent such policy. Under the Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"),
to avoid receivership of its insured depository institution subsidiary, a bank holding company is required to guarantee the compliance
of any insured depository institution subsidiary that may become "undercapitalized" within the terms of any capital
restoration plan filed by such subsidiary with its appropriate federal banking agency up to the lesser of (i) an amount equal
to 5% of the institution's total assets at the time the institution became undercapitalized, or (ii) the amount which is
necessary (or would have been necessary) to bring the institution into compliance with all applicable capital standards as of
the time the institution fails to comply with such capital restoration plan.

 The Federal Reserve
also has the authority under the Bank Holding Company Act to require a bank holding company to terminate any activity or relinquish
control of a nonbank subsidiary (other than a nonbank subsidiary of a bank) upon the Federal Reserve's determination that
such activity or control constitutes a serious risk to the financial soundness or stability of any subsidiary depository institution
of the bank holding company. Further, federal law grants federal bank regulatory authorities' additional discretion to require
a bank holding company to divest itself of any bank or nonbank subsidiary if the agency determines that divestiture may aid the
depository institution's financial condition.

the "cross guarantee" provisions of the Federal Deposit Insurance Act ("FDIA") require insured depository
institutions under common control to reimburse the FDIC for any loss suffered or reasonably anticipated by the FDIC as a result
of the default of a commonly controlled insured depository institution or for any assistance provided by the FDIC to a commonly
controlled insured depository institution in danger of default. The FDIC's claim for damages is superior to claims of shareholders
of the insured depository institution or its holding company, but is subordinate to claims of depositors, secured creditors, and
holders of subordinated debt (other than affiliates) of the commonly controlled insured depository institutions.

 The FDIA
also provides that amounts received from the liquidation or other resolution of any insured depository institution by any receiver
must be distributed (after payment of secured claims) to pay the deposit liabilities of the institution prior to payment of any
other general or unsecured senior liability, subordinated liability, general creditor, or shareholder. This provision would give
depositors a preference over general and subordinated creditors and shareholders in the event a receiver is appointed to distribute
the assets of our Bank.

 Any capital loans
by a bank holding company to any of its subsidiary banks are subordinate in right of payment to deposits and to certain other
indebtedness of such subsidiary bank. In the event of a bank holding company's bankruptcy, any commitment by the bank holding
company to a federal bank regulatory agency to maintain the capital of a subsidiary bank will be assumed by the bankruptcy trustee
and entitled to a priority of payment.

Requirements. The Federal Reserve generally imposes certain capital requirements on a bank holding company under the Bank
Holding Company Act, including a minimum leverage ratio and a minimum ratio of "qualifying" capital to risk-weighted
assets. If applicable, these requirements are essentially the same as those that apply to the Bank and are described above under
"Capital and Related Requirements." However, because the Company currently qualifies as a small bank holding company,
these capital requirements do not currently apply to the Company. Subject to certain restrictions, we are able to borrow money
to make a capital contribution to the Bank, and these loans may be repaid from dividends paid from the Bank to the Company. Our
ability to pay dividends depends on, among other things, the Bank's ability to pay dividends to us, which is subject to
regulatory restrictions as described below in "First Community Bank—Dividends." We are also able to raise capital
for contribution to the Bank by issuing securities without having to receive regulatory approval, subject to compliance with federal
and state securities laws.

 Dividends.
As a bank holding company, the Company's ability to declare and pay dividends is dependent on certain federal and state
regulatory considerations, including the guidelines of the Federal Reserve. The Federal Reserve has issued a policy statement
regarding the payment of dividends by bank holding companies. In general, the Federal Reserve's policies provide that dividends
should be paid only out of current earnings and only if the prospective rate of earnings retention by the bank holding company
appears consistent with the organization's capital needs, asset quality and overall financial condition. The Federal Reserve's
policies also require that a bank holding company serve as a source of financial strength to its subsidiary banks by standing
ready to use available resources to provide adequate capital funds to those banks during periods of financial stress or adversity
and by maintaining the financial flexibility and capital-raising capacity to obtain additional resources for assisting its subsidiary
banks where necessary. In addition, under the prompt corrective action regulations, the ability of a bank holding company to pay
dividends may be restricted if a subsidiary bank becomes undercapitalized. These regulatory policies could affect the Company's
ability to pay dividends or otherwise engage in capital distributions.

since the Company is a legal entity separate and distinct from the Bank and does not conduct stand-alone operations, its ability
to pay dividends depends on the ability of the Bank to pay dividends to it, which is also subject to regulatory restrictions as
described below in "First Community Bank—Dividends."

 South Carolina
State Regulation. As a South Carolina bank holding company under the South Carolina Banking and Branching Efficiency Act,
we are subject to limitations on any sale to, or merger with, other financial institutions. We are not required to obtain the
approval of the S.C. Board prior to acquiring the capital stock of a national bank, but we must notify them at least 15 days prior
to doing so. We must receive the S.C. Board's approval prior to engaging in the acquisition of a South Carolina state-chartered
bank or another South Carolina bank holding company.

 First
Community Bank

 As a South
Carolina state bank, the Bank's primary federal regulator is the FDIC, and the Bank is also regulated and examined by the
S.C. Board. Deposits in the Bank are insured by the FDIC up to a maximum amount of $250,000. The FDIC insurance coverage limit
applies per depositor, per insured depository institution for each account ownership category.

 The S.C.
Board and the FDIC regulate or monitor virtually all areas of the Bank's operations, including:

 security devices and
 procedures;

 adequacy of capitalization
 and allowance for credit losses;

 loans;

 investments;

 borrowings;

 deposits;

 mergers;

 issuances of securities;

 payment of dividends;

 interest rates payable
 on deposits;

 interest rates or
 fees chargeable on loans;

 establishment of branches;

 corporate reorganizations;

 maintenance of books
 and records; and

 adequacy of staff training to carry on
 safe lending and deposit gathering practices.

 These agencies,
and the federal and state laws applicable to the Bank's operations, extensively regulate various aspects of our banking
business, including, among other things, permissible types and amounts of loans, investments and other activities, capital adequacy,
branching, interest rates on loans and on deposits, the maintenance of reserves on demand deposit liabilities, and the safety
and soundness of our banking practices.

 Prompt
Corrective Action. The FDICIA established a "prompt corrective action" program in which every bank is placed in
one of five regulatory categories, depending primarily on its regulatory capital levels. The FDIC and the other federal banking
regulators are permitted to take increasingly severe action as a bank's capital position or financial condition declines
below the "Adequately Capitalized" level described below. Regulators are also empowered to place in receivership or
require the sale of a bank to another depository institution when a bank's leverage ratio reaches two percent. Better capitalized
institutions are generally subject to less onerous regulation and supervision than banks with lesser amounts of capital. The FDIC's
regulations set forth five capital categories, each with specific regulatory consequences. The categories are:

 Well Capitalized—The
 institution exceeds the required minimum level for each relevant capital measure. A well capitalized institution (i) has a
 total risk-based capital ratio of 10% or greater, (ii) has a Tier 1 risk-based capital ratio of 8% or greater, (iii) has a
 common equity Tier 1 risk-based capital ratio of 6.5% or greater, (iv) has a leverage capital ratio of 5% or greater, and
 (v) is not subject to any order or written directive to meet and maintain a specific capital level for any capital measure.

 Adequately Capitalized—The
 institution meets the required minimum level for each relevant capital measure. No capital distribution may be made that would
 result in the institution becoming undercapitalized. An adequately capitalized institution (i) has a total risk-based capital
 ratio of 8% or greater, (ii) has a Tier 1 risk-based capital ratio of 6% or greater, (iii) has a common equity Tier 1 risk-based
 capital ratio of 4.5% or greater, and (iv) has a leverage capital ratio of 4% or greater.

 Undercapitalized—The
 institution fails to meet the required minimum level for any relevant capital measure. An undercapitalized institution (i)
 has a total risk-based capital ratio of less than 8%, (ii) has a Tier 1 risk-based capital ratio of less than 6%, (iii) has
 a common equity Tier 1 risk-based capital ratio of less than 4.5%, or (iv) has a leverage capital ratio of less than 4%.

 Significantly Undercapitalized—The
 institution is significantly below the required minimum level for any relevant capital measure. A significantly undercapitalized
 institution (i) has a total risk-based capital ratio of less than 6%, (ii) has a Tier 1 risk-based capital ratio of less than
 4%, (iii) has a common equity Tier 1 risk-based capital ratio of less than 3%, or (iv) has a leverage capital ratio of less
 than 3%.

 Critically Undercapitalized—The
 institution fails to meet a critical capital level set by the appropriate federal banking agency. A critically undercapitalized
 institution has a ratio of tangible equity to total assets that is equal to or less than 2%.

 If the
FDIC determines, after notice and an opportunity for hearing, that the bank is in an unsafe or unsound condition, the regulator
is authorized to reclassify the bank to the next lower capital category (other than critically undercapitalized) and require the
submission of a plan to correct the unsafe or unsound condition.

 If a bank
is not well capitalized, it cannot accept brokered deposits without prior regulatory approval. In addition, a bank that is not
well capitalized cannot offer an effective yield in excess of 75 basis points over interest paid on deposits of comparable size
and maturity in such institution's normal market area for deposits accepted from within its normal market area, or national
rate paid on deposits of comparable size and maturity for deposits accepted outside the bank's normal market area. Moreover,
the FDIC generally prohibits a depository institution from making any capital distributions (including payment of a dividend)
or paying any management fee to its parent holding company if the depository institution would thereafter be categorized as undercapitalized.
Undercapitalized institutions are subject to growth limitations (an undercapitalized institution may not acquire another institution,
establish additional branch offices, or engage in any new line of business unless determined by the appropriate federal banking
agency to be consistent with an accepted capital restoration plan, or unless the FDIC determines that the proposed action will
further the purpose of prompt corrective action) and are required to submit a capital restoration plan. The agencies may not accept
a capital restoration plan without determining, among other things, that the plan is based on realistic assumptions and is likely
to succeed in restoring the depository institution's capital. In addition, for a capital restoration plan to be acceptable,
the depository institution's parent holding company must guarantee that the institution will comply with the capital restoration
plan. The aggregate liability of the parent holding company is limited to the lesser of an amount equal to 5.0% of the depository
institution's total assets at the time it became categorized as undercapitalized or the amount that is necessary (or would
have been necessary) to bring the institution into compliance with all capital standards applicable with respect to such institution
as of the time it fails to comply with the plan. If a depository institution fails to submit an acceptable plan, it is categorized
as significantly undercapitalized.

 Significantly
undercapitalized categorized depository institutions may be subject to a number of requirements and restrictions, including orders
to sell sufficient voting stock to become categorized as adequately capitalized, requirements to reduce total assets, and cessation
of receipt of deposits from correspondent banks. The appropriate federal banking agency may take any action authorized for a significantly
undercapitalized institution if an undercapitalized institution fails to submit an acceptable capital restoration plan or fails
in any material respect to implement a plan accepted by the agency. A critically undercapitalized institution is subject to having
a receiver or conservator appointed to manage its affairs and for loss of its charter to conduct banking activities.

 An insured
depository institution may not pay a management fee to a bank holding company controlling that institution or any other person
having control of the institution if, after making the payment, the institution would be undercapitalized. In addition, an institution
cannot make a capital distribution, such as a dividend or other distribution that is in substance a distribution of capital to
the owners of the institution if following such a distribution the institution would be undercapitalized. Thus, if payment of
such a management fee or the making of such would cause a bank to become undercapitalized, it could not pay a management fee or
dividend to the bank holding company.

 As of
December 31, 2024, the Bank was deemed to be "well capitalized."

 Standards
for Safety and Soundness. The FDIA also requires the federal banking regulatory agencies to prescribe, by regulation
or guideline, operational and managerial standards for all insured depository institutions relating to: (i) internal controls,
information systems and internal audit systems; (ii) loan documentation; (iii) credit underwriting; (iv) interest rate risk exposure;
and (v) asset growth. The agencies also must prescribe standards for asset quality, earnings, and stock valuation, as well as
standards for compensation, fees, and benefits. The federal banking agencies have adopted regulations and Interagency Guidelines
Prescribing Standards for Safety and Soundness to implement these required standards. These guidelines set forth the safety and
soundness standards that the federal banking agencies use to identify and address problems at insured depository institutions
before capital becomes impaired. Under the regulations, if the FDIC determines that the Bank fails to meet any standards prescribed
by the guidelines, the agency may require the Bank to submit to the agency an acceptable plan to achieve compliance with the standard,
as required by the FDIC. The final regulations establish deadlines for the submission and review of such safety and soundness
compliance plans. The FDIC requested comments on a proposal that would amend the regulations implementing Section 29 of the FDIC.
Section 29 contains brokered deposits restrictions that apply to less than well capitalized depository institutions. The proposed
changes include: (i) modifying the definition of "deposit broker;" (ii) eliminating the exclusive deposit placement
arrangement exception; and (ii) revising the interpretation of the primary purpose exception to consider a third party's
intent in placing customer funds at a particular insured depository institution. The FDIC extended the comment-period, which concluded
on November 21, 2024. The proposed changes aimed to enhance the safety and soundness of the banking system by ensuring consistent
reporting of brokered deposits and reducing operational challenges for insured depository institutions. However, the regulatory
landscape concerning brokered deposits is undergoing significant changes under the Trump Administration. In January 2025, Acting
FDIC Chairman Travis Hill announced plans to withdraw the proposed amendments to Section 29 of the FDIC. The decision to withdraw
these proposals aligns with the administration's broader deregulatory agenda, which includes revisiting and potentially
rescinding various financial regulations established during the previous administration.

 Regulatory
Examination. The FDIC also requires the Bank to prepare annual reports on the Bank's financial condition and to conduct
an annual audit of its financial affairs in compliance with its minimum standards and procedures.

 All insured institutions
must undergo regular on-site examinations by their appropriate banking agency. The cost of examinations of insured depository
institutions and any affiliates may be assessed by the appropriate federal banking agency against each institution or affiliate
as it deems necessary or appropriate. Insured institutions are required to submit annual reports to the FDIC, their federal regulatory
agency, and state supervisor when applicable. The FDIC has developed a method for insured depository institutions to provide supplemental
disclosure of the estimated fair market value of assets and liabilities, to the extent feasible and practicable, in any balance
sheet, financial statement, report of condition or any other report of any insured depository institution. The federal banking
regulatory agencies prescribe, by regulation, standards for all insured depository institutions and depository institution holding
companies relating, among other things, to the following:

 internal controls;

 information systems
 and audit systems;

 loan documentation;

 credit underwriting;

 interest rate risk
 exposure; and

 asset quality.

 Dividends.
 The Company's principal source of cash flow, including cash flow to pay dividends to its shareholders, is dividends
it receives from the Bank. Statutory and regulatory limitations apply to the Bank's payment of dividends to the Company.
As a South Carolina chartered bank, the Bank is subject to limitations on the amount of dividends that it is permitted to pay.
Unless otherwise instructed by the S.C. Board, the Bank is generally permitted under South Carolina state banking regulations
to pay cash dividends of up to 100% of net income in any calendar year without obtaining the prior approval of the S.C. Board.
The FDIC also has the authority under federal law to enjoin a bank from engaging in what in its opinion constitutes an unsafe
or unsound practice in conducting its business, including the payment of a dividend under certain circumstances. The Bank must
also maintain the Common Equity Tier 1 capital conservation buffer of 2.5%, in excess of its minimum regulatory risk-based capital
ratios, to avoid becoming subject to restrictions on capital distributions, including dividends, as described above.

 Branching.
 Federal legislation permits out-of-state acquisitions by bank holding companies, interstate branching by banks, and interstate
merging by banks. The Dodd-Frank Act removed previous state law restrictions on de novo interstate branching in states
such as South Carolina and Georgia. This change effectively permits out of state banks to open de novo branches in states
where the laws of such state would permit a bank chartered by that state to open a de novo branch.

 Anti-Tying
Restrictions. Under amendments to the Bank Holding Company Act and Federal Reserve regulations, a bank is prohibited from
engaging in certain tying or reciprocity arrangements with its customers. In general, a bank may not extend credit, lease, sell
property, or furnish any services or fix or vary the consideration for these on the condition that (i) the customer obtain or
provide some additional credit, property, or services from or to the bank, the bank holding company or subsidiaries thereof or
(ii) the customer may not obtain some other credit, property, or services from a competitor, except to the extent reasonable conditions
are imposed to assure the soundness of the credit extended. Certain arrangements are permissible: a bank may offer combined-balance
products and may otherwise offer more favorable terms if a customer obtains two or more traditional bank products; and certain
foreign transactions are exempt from the general rule. A bank holding company or any bank affiliate also is subject to anti-tying
requirements in connection with electronic benefit transfer services.

 Community
Reinvestment Act. The Bank is subject to certain requirements and reporting obligations under the CRA, which requires federal
banking regulators to evaluate the record of each financial institution in meeting the credit needs of its local community, including
low- and moderate- income neighborhoods. The CRA further requires these criteria to be considered in evaluating mergers, acquisitions,
and applications to open a branch or facility. Failure to adequately meet these criteria could result in the imposition of additional
requirements and limitations on the Bank. Additionally, financial institutions must publicly disclose the terms of various CRA-related
agreements. In its most recent CRA examination, the Bank received a "satisfactory" rating.

 In
December 2019, the FDIC and OCC issued a notice of proposed rulemaking intended to (i) clarify which activities qualify for CRA
credit; (ii) update where activities count for CRA credit; (iii) create a more transparent and objective method for measuring
CRA performance; and (iv) provide for more transparent, consistent, and timely CRA-related data collection, recordkeeping, and
reporting. However, the Federal Reserve did not join the proposed rulemaking. In January 2025, the OCC, FDIC, and Federal Reserve
issued additional guidance clarifying that digital and fintech-driven activities may be eligible for CRA credit provided they
meet established criteria. This guidance reflects efforts to modernize CRA evaluations in light of evolving banking practices.

 In
May 2020, the OCC issued its final CRA rule, which was later rescinded in December 2021, replacing it with a rule based on the
rules adopted jointly by the federal banking agencies in 1995, as amended and superseded by an updated joint framework. On the
same day that the OCC announced its plans to rescind the CRA final rule, the OCC, the FDIC, and the Federal Reserve announced
that they are working together to "strengthen and modernize the rules implementing the CRA." On May 5, 2022, the OCC,
FDIC, and Federal Reserve released a notice of proposed rulemaking regarding the CRA and invited public comment on the proposed
rules. The comment period closed on August 5, 2022. On October 24, 2023, the OCC, the FDIC, and the Federal Reserve issued the
final rule to strengthen and modernize regulations implementing the CRA. The final rule took effect on April 1, 2024; however,
compliance with the majority of the final rule's provisions will not be required until January 1, 2026, and the data reporting
requirements of the final rule will not take effect until January 1, 2027. The final rules, among other things, include: (i) applying
four new performance tests to evaluate the CRA performance of large banks (assets of $2 billion or more): the Retail Lending Test,
Retail Services and Products Test, Community Development Financing Test, and Community Development Services Test; (ii) retaining
a strategic plan option, with modifications to reflect the new performance tests and updates to the approval standards; (iii)
clarifying community development activities by updating the definition of community development, providing a process by which
banks may request confirmation that an activity is eligible for community development consideration, and providing for a publicly
available interagency illustrative list of qualifying community development activities; (iv) updating delineation requirements
for facility-based assessment areas and establishing new retail lending assessment areas for certain large banks; (v) updating
data collection, maintenance, and reporting requirements for large banks, tailoring those requirements based on large bank asset
size and leveraging existing data where possible, while not imposing new data collection and reporting requirements for small
and intermediate banks; and (vi) continuing public file and public notice disclosure requirements and creating a new public comment
process to facilitate public engagement. Several banking industry groups filed a lawsuit seeking to invalidate the CRA final rule,
in which they argued that the federal banking agencies exceeded their statutory authority in adopting the CRA final rule. In March
2024, a federal judge granted an injunction to extend the CRA final rule's effective date, originally set for April 1, 2024.
The effective date will be extended each day the injunction remains in place, pending the resolution of the lawsuit. Management
has and will continue to evaluate any changes to the CRA's regulations and their impact to the Bank.

 Fair
Lending Requirements. We are subject to certain fair lending requirements and reporting obligations involving lending operations.
A number of laws and regulations provide these fair lending requirements and reporting obligations, including, at the federal
level, the Equal Credit Opportunity Act ("ECOA"), as amended by the Dodd-Frank Act, and Regulation B, as well as the
Fair Housing Act ("FHA") and regulations implementing FHA found at 24 C.F.R. Part 100. ECOA and Regulation B prohibit
discrimination in any aspect of a credit transaction based on a number of prohibited factors, including race or color, religion,
national origin, sex, marital status, age, the applicant's receipt of income derived from public assistance programs, and
the applicant's exercise, in good faith, of any right under the Consumer Credit Protection Act. ECOA and Regulation B include
lending acts and practices that are specifically prohibited, permitted, or required, and these laws and regulations proscribe
data collection requirements, legal action statute of limitations, and disclosure of the consumer's ability to receive a
copy of any appraisal(s) and valuation(s) prepared in connection with certain loans secured by dwellings. In January 2023, the
OCC revised its "Fair Lending" booklet of the Comptroller's Handbook to incorporate clarified details and risk
factors for a variety of examination scenarios addressing fair lending and to update references to supervisory guidance, sound
risk management practices, and applicable legal standards. While this OCC guidance does not apply to the Bank explicitly, it represents
best practices guidance for the Bank. FHA prohibits discrimination in all aspects of residential real-estate related transactions
based on prohibited factors, including race or color, national origin, religion, sex, familial status, and handicap.

 In
addition to prohibiting discrimination in credit transactions on the basis of prohibited factors, these laws and regulations can
cause a lender to be liable for policies that result in a disparate treatment of or have a disparate impact on a protected class
of persons. If a pattern or practice of lending discrimination is alleged by a regulator, then the matter may be referred by the
agency to the DOJ for investigation. In December 2012, the DOJ and CFPB entered into a Memorandum of Understanding under which
the agencies have agreed to share information, coordinate investigations, and have generally committed to strengthen their coordination
efforts.

 In
addition to substantive penalties and corrective measures that may be required for a violation of certain fair lending laws, the
federal banking agencies may take compliance with fair lending requirements into account when regulating and supervising other
activities of the bank, including in acting on expansionary proposals.

Subsidiaries. Under the Gramm-Leach-Bliley Act, otherwise referred to as the GLBA, subject to certain conditions imposed by
their respective banking regulators, national and state-chartered banks are permitted to form "financial subsidiaries"
that may conduct financial or incidental activities, thereby permitting bank subsidiaries to engage in certain activities that
previously were impermissible. The GLBA imposes several safeguards and restrictions on financial subsidiaries, including that
the parent bank's equity investment in the financial subsidiary be deducted from the bank's assets and tangible equity
for purposes of calculating the bank's capital adequacy. In addition, the GLBA imposes new restrictions on transactions
between a bank and its financial subsidiaries similar to restrictions applicable to transactions between banks and non-bank affiliates.

 Consumer Protection
Regulations. Activities of the Bank are subject to a variety of statutes and regulations—both at the federal and state
levels—designed to protect consumers. This includes Title X of the Dodd-Frank Act, which prohibits engaging in any unfair,
deceptive, or abusive acts or practices ("UDAAP"). UDAAP claims involve detecting and assessing risks to consumers
and to markets for consumer financial products and services. Interest and other charges collected or contracted for by the Bank
are subject to state usury laws and federal laws concerning interest rates. The Bank's loan operations are also subject
to federal laws applicable to credit transactions, such as:

 the Dodd-Frank Act
 that created the Consumer Financial Protection Bureau ("CFPB"), an independent regulatory authority housed within
 the Federal Reserve, which has broad rule-making authority over a wide range of consumer laws that apply to insured depository
 institutions;

 the Truth-In-Lending
 Act ("TILA") and Regulation Z, governing disclosures of credit terms to consumer borrowers and including substantial
 requirements for mortgage lending and servicing, as mandated by the Dodd-Frank Act;

 the Home Mortgage
 Disclosure Act ("HMDA") and Regulation C, requiring financial institutions to provide information to enable the
 public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing
 needs of the community it serves, and requiring collection and disclosure of data about applicant and borrower characteristics
 to assist in identifying possible discriminatory lending patterns and enforcing antidiscrimination statutes;

 the Equal Credit
 Opportunity Act ("ECOA") and Regulation B, prohibiting discrimination on the basis of race, color, religion, or
 other prohibited factors in any aspect of a credit transaction;

 the Fair Credit Reporting
 Act, as amended by the Fair and Accurate Credit Transactions Act, and Regulation V, governing the use of consumer reports,
 provision of information to credit reporting agencies, certain identity theft protections, and certain credit and other disclosures,
 and requiring banks to have in place an "identity theft red flags" program to detect, prevent and mitigate identity
 theft.

 the Fair Debt Collection
 Practices Act and Regulation F, governing the manner in which consumer debts may be collected by collection agencies and intending
 to eliminate abusive, deceptive, and unfair debt collection practices;

 the Real Estate Settlement Procedures Act
 ("RESPA") and Regulation X, which governs various aspects of residential mortgage loans, including the settlement
 and servicing process, dictates certain disclosures to be provided to consumers, and imposes other requirements related to
 compensation of service providers, insurance escrow accounts, and loss mitigation procedures;

 The Secure and Fair
 Enforcement for Mortgage Licensing Act ("SAFE Act") which mandates a nationwide licensing and registration system
 for residential mortgage loan originators. The SAFE Act also prohibits individuals from engaging in the business of a residential
 mortgage loan originator without first obtaining and maintaining annually registration as either a federal or state licensed
 mortgage loan originator;

 The Homeowners Protection
 Act ("HPA"), or the PMI Cancellation Act, provides requirements relating to private mortgage insurance (PMI) on
 residential mortgages, including the cancelation and termination of PMI, disclosure and notification requirements, and the
 requirement to return unearned premiums;

 The Fair Housing
 Act ("FHA") prohibits discrimination in all aspects of residential real-estate related transactions based on race
 or color, national origin, religion, sex, and other prohibited factors;

 The Servicemembers
 Civil Relief Act ("SCRA") and Military Lending Act ("MLA"), providing certain protections for servicemembers,
 members of the military, and their respective spouses, dependents and others;

 Section 106(c)(5)
 of the Housing and Urban Development Act requires making home ownership available to eligible homeowners; and

 the rules and regulations
 of the various federal agencies charged with the responsibility of implementing such federal laws.

 The deposit operations
of the Bank also are subject to laws, such as the following federal laws:

 the FDIA, which,
 among other things, imposes a minimum amount of deposit insurance available per account to $250,000 and imposes other limits
 on deposit-taking;

 the Right to Financial
 Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for
 complying with administrative subpoenas of financial records;

 the Electronic Funds
 Transfer Act and Regulation E, which governs the rights, liabilities, and responsibilities of consumers and financial institutions
 using electronic fund transfer services, and which generally mandates disclosure requirements, establishes limitations on
 liability applicable to consumers for unauthorized electronic fund transfers, dictates certain error resolution processes,
 and applies other requirements relating to automatic deposits to and withdrawals from deposit accounts;

 the Check Clearing
 for the 21st Century Act (also known as "Check 21"), which gives "substitute checks," such as digital
 check images and copies made from that image, the same legal standing as the original paper check;

 The Expedited Funds
 Availability Act ("EFA Act") and Regulation CC, setting forth requirements to make funds deposited into transaction
 accounts available according to specified time schedules, disclose funds availability policies to customers, and relating
 to the collection and return of checks and electronic checks, including the rules regarding the creation or receipt of substitute
 checks; and

 the Truth in Savings
 Act ("TISA") and Regulation DD, which requires depository institutions to provide disclosures so that consumers
 can make meaningful comparisons about depository institutions and accounts.

 In light
of the growing concern by regulators about relationships between chartered financial institutions and their third-party service
providers, the FDIC joined the other federal supervisory agencies in passing the Interagency Guidance on Third-Party Relationships:
Risk Management. This new guidance provided risk management oversight guidelines for financial institutions to incorporate in
their ongoing relationships with third party vendors.

 The
CFPB has broad authority to regulate the offering and provision of consumer financial products and services. The CFPB has the
authority to supervise and examine depository institutions with more than $10 billion in assets for compliance with federal consumer
laws. The authority to supervise and examine depository institutions with $10 billion or less in assets, such as the Bank, for
compliance with federal consumer laws remains largely with those institutions' primary regulators. However, the CFPB may
participate in examinations of these smaller institutions on a "sampling basis" and may refer potential enforcement
actions against such institutions to their primary regulators. As such, the CFPB may participate in examinations of the Bank.
In addition, states are permitted to adopt consumer protection laws and regulations that are stricter than the regulations promulgated
by the CFPB.

 The
CFPB has issued a number of significant rules that impact nearly every aspect of the lifecycle of consumer financial products
and services, including rules regarding residential mortgage loans. These rules implement Dodd-Frank Act amendments to ECOA, TILA
and RESPA. On July 18, 2024 regulators, including the CFPB, issued interagency guidance on reconsideration of value (ROVs) of
residential real estate transactions. The CFPB continued its scrutiny of so called "pay-to-pay" and "junk fee"
regimes, proposing rules related to credit card penalties. In March 2024, the CFPB finalized a rule that addresses late fees charged
by card issuers that together with their affiliates have one million or more open credit card accounts. Further, the CFPB proposed
rulemaking related to Residential Property Assessed Clean Energy Financing, quality control standards for automated valuation
models, and personal financial data rights (discussed in more detail above). The CFPB's focus on fees was emphasized through
its ongoing enforcement activity, including a notable enforcement action taken against Bank of America that required the payment
of more than $100 million to customers, with similar size fines paid to both the CFPB and the OCC.

 In February 2025,
President Trump took significant actions affecting the CFPB. He dismissed Director Rohit Chopra and appointed Treasury Secretary
Scott Bessent as Acting Director. Subsequently, Office of Management and Budget Director Russell Vought was named Acting Director,
during which time the CFPB's operations were halted, its headquarters closed, and its employees instructed to cease work.
These moves have been met with legal challenges and public debate regarding the future of the agency.

 Bank regulators
take into account compliance with consumer protection laws when considering approval of a proposed expansionary proposals.

 Enforcement
Powers. The Bank and its "institution-affiliated parties," including its management, employee's agent's
independent contractors and consultants, such as attorneys and accountants, and others who participate in the conduct of the financial
institution's affairs, are subject to potential civil and criminal penalties for violations of law, regulations, or written
orders of a government agency. These practices can include the failure of an institution to timely file required reports or the
filing of false or misleading information or the submission of inaccurate reports. Civil penalties may be as high as $1,000,000
a day for such violations. Criminal penalties for some financial institution crimes have been increased to twenty years. In addition,
regulators are provided with greater flexibility to commence enforcement actions against institutions and institution-affiliated
parties. Possible enforcement actions include the termination of deposit insurance. Furthermore, banking agencies' powers
to issue cease-and-desist orders have been expanded. Such orders may, among other things, require affirmative action to correct
any harm resulting from a violation or practice, including restitution, reimbursement, indemnifications or guarantees against
loss. A financial institution may also be ordered to restrict its growth, dispose of certain assets, rescind agreements or contracts,
or take other actions as determined by the ordering agency to be appropriate.

 Anti-Money
Laundering and Countering the Financing of Terrorism (AML/CFT); the USA PATRIOT Act; the Office of Foreign Asset Control. Financial
institutions must maintain AML/CFT programs, including internal policies, compliance officers, training, and independent audits,
in accordance with the Bank Secrecy Act ("BSA") and other federal laws. They must adhere to know your customer and
enhanced due diligence requirements, particularly for high-risk customers and foreign institutions, to prevent money laundering
and terrorism financing. Institutions must also report suspicious activities to law enforcement and ensure compliance with risk-based
customer due diligence procedures. The USA PATRIOT Act amended the BSA to enhance financial transparency and information-sharing
between institutions, regulators, and law enforcement. It mandates customer identification programs, increased due diligence for
non-U.S. persons, and stricter reporting of transactions over $10,000 to FinCEN. Financial institutions must also monitor and
report transactions involving individuals or entities suspected of terrorist financing. Regulators actively enforce compliance,
imposing penalties on institutions failing to meet AML/CFT obligations.

 The
USA PATRIOT Act amended the Bank Secrecy Act and provides, in part, for the facilitation of information sharing among governmental
entities and financial institutions for the purpose of combating terrorism and money laundering by enhancing anti-money laundering
and financial transparency laws, as well as enhanced information collection tools and enforcement mechanics for the U.S. government,
including: (i) requiring standards for verifying customer identification at account opening; (ii) rules to promote cooperation
among financial institutions, regulators, and law enforcement entities in identifying parties that may be involved in terrorism
or money laundering; (iii) reports by nonfinancial trades and businesses filed with the U.S. Treasury Department's Financial
Crimes Enforcement Network for transactions exceeding $10,000; (iv) filing suspicious activities reports if a bank believes a
customer may be violating U.S. laws and regulations; and (v) requires enhanced due diligence requirements for financial institutions
that administer, maintain, or manage private bank accounts or correspondent accounts for non-U.S. persons. Bank regulators routinely
examine institutions for compliance with these obligations and are required to consider compliance in connection with the regulatory
review of applications.

 Under the USA
PATRIOT Act, the regulators can provide lists of the names of persons suspected of involvement in terrorist activities. The Bank
can be requested to search its records for any relationships or transactions with persons on those lists. If the Bank finds any
relationships or transactions, it must file a suspicious activity report and contact the applicable governmental authorities.

 The Office of
Foreign Assets Control ("OFAC"), which is a division of the U.S. Department of the Treasury (the "Treasury"),
is responsible for helping to ensure that United States entities do not engage in transactions with "enemies" of the
United States, as defined by various Executive Orders and Acts of Congress. OFAC publishes lists of names of persons and organizations
with which the Bank is prohibited from engaging in business. If the Bank finds a name on any transaction, account or wire transfer
that is on an OFAC list, it must freeze such account, file a suspicious activity report, and notify the FBI. The Bank has appointed
an OFAC compliance officer to oversee the inspection of its accounts and the filing of any notifications. The Bank actively checks
high-risk OFAC areas such as new accounts, wire transfers and customer files. The Bank performs these checks utilizing software,
which is updated each time a modification is made to the lists provided by OFAC and other agencies of Specially Designated Nationals
and Blocked Persons.

 In
August 2023, the FFIEC updated its BSA/AML Examination Manual to clarify risk-based compliance expectations. The FDIC emphasizes
oversight of third-party AML/CFT service providers, with enforcement actions against institutions that fail to monitor vendors
effectively.

 The
Anti-Money Laundering Act of 2020 led to FinCEN's Corporate Transparency Act ("CTA"), requiring many corporate
entities to disclose beneficial ownership information. Court rulings deeming the CTA unconstitutional, creating uncertainty regarding
its future enforcement. However, on February 18, 2025, a federal judge lifted this previous nationwide injunction that had blocked
the enforcement of the CTA. In response, FinCEN announced that reporting companies are now required to comply with the CTA's
beneficial ownership information reporting requirements. To provide entities additional time to meet these obligations, FinCEN
has extended the filing deadline to March 21, 2025. FinCEN also indicated plans to assess options for further modifying deadlines
and intends to initiate a process to revise the BOI reporting rule to reduce burdens for lower-risk entities, including many U.S.
small businesses.

 Following
Russia's invasion of Ukraine, OFAC imposed extensive sanctions under Executive Order 14024, including restrictions on Russian
financial institutions, expanded sovereign debt prohibitions, and increased scrutiny of sanctions evasion. FinCEN issued an alert
in March 2022, advising heightened vigilance. Sanctions enforcement continued through 2023 and 2024. Globally, the Financial Action
Task Force ("FATF") updates its high-risk jurisdiction lists, affecting due diligence requirements for international
transactions. In October 2023, FATF removed Albania, Cayman Islands, Jordan, and Panama from its monitoring list and added Bulgaria.

 Privacy
and Data Security. There are a number of state and federal laws and regulations that govern financial privacy and cybersecurity.
At the federal level, this includes the privacy protection provisions of the Gramm-Leach-Bliley Act ("GLBA") and related
regulations, including Regulation P, which govern the treatment of nonpublic personal information. Under these privacy protection
provisions, we are limited in our ability to disclose non-public information about consumers to nonaffiliated third parties. These
limitations require disclosure of privacy policies and notices to consumers and, in some circumstances, allow consumers to prevent
disclosure of certain personal information to a nonaffiliated third party.

 Consumers
must be notified in the event of a data breach under applicable state laws. Multiple states and Congress are considering laws
or regulations which could create new individual privacy rights and impose increased obligations on companies handling personal
data. For example, on November 18, 2021, the federal financial regulatory agencies published a final rule that will impose upon
banking organizations and their service providers new notification requirements for significant cybersecurity incidents. Specifically,
the final rule requires banking organizations to notify their primary federal regulator as soon as possible and no later than
36 hours after the discovery of a "computer-security incident" that rises to the level of a "notification incident"
within the meaning attributed to those terms by the final rule. Banks' service providers are required under the final rule
to notify any affected bank to or on behalf of which the service provider provides services "as soon as possible"
after determining that it has experienced an incident that materially disrupts or degrades, or is reasonably likely to materially
disrupt or degrade, covered services provided to such bank for as much as four hours. The final rule took effect on April 1, 2022
and banks and their service providers must have complied with the requirements of the rule by May 1, 2022. Effective December
9, 2022, the FTC's amendments to GLBA's Safeguards Rule went into effect and financial institutions are continuing
to implement this rule including its ongoing monitoring and risk assessment protocols.

 States
continue to take the lead in passing privacy focused legislation. Nine additional states passed some form of consumer privacy
protection laws, only some of which include an exemption for entities regulated under GLBA. Congress has proposed significant
privacy focused legislation largely targeting technology companies, however, to date, none of these laws have been passed.

 The CFPB also
took additional action related to consumer privacy. In October 2024, the CFPB issued a final rule implementing Section 1033 of
the Consumer Financial Protection Act, requiring banks to provide consumers with access to their financial transaction data upon
request. This rule is expected to require updates to data access policies by 2026.

 Cybersecurity.
 The federal banking regulators regularly issue new guidance and standards, and update existing guidance and standards, regarding
cybersecurity intended to enhance cyber risk management among financial institutions. Financial institutions are expected to comply
with such guidance and standards and to accordingly develop appropriate security controls and risk management processes. If we
fail to observe such regulatory guidance or standards, we could be subject to various regulatory sanctions, including financial
penalties. In 2023, the SEC issued a final rule that requires disclosure of material cybersecurity incidents, as well as cybersecurity
risk management, strategy and governance. Under this rule, banking organizations that are SEC registrants must generally disclose
information about a material cybersecurity incident within four business days of determining it is material with periodic updates
as to the status of the incident in subsequent filings, as necessary.

 Under a final
rule adopted by federal banking agencies in 2021, banking organizations are required to notify their primary banking regulator
within 36 hours of determining that a "computer-security incident" has materially disrupted or degraded, or is reasonably
likely to materially disrupt or degrade, the banking organization's ability to carry out banking operations or deliver banking
products and services to a material portion of its customer base, its businesses and operations that would result in material
loss, or its operations that would impact the stability of the United States.

 State regulators
have also been increasingly active in implementing privacy and cybersecurity standards and regulations. Recently, several states
have adopted regulations requiring certain financial institutions to implement cybersecurity programs and many states have also
recently implemented or modified their data breach notification, information security and data privacy requirements. We expect
this trend of state-level activity in those areas to continue and are continually monitoring developments in the states in which
our customers are located.

 Risks and exposures
related to cybersecurity attacks, including litigation and enforcement risks, are expected to be elevated for the foreseeable
future due to the rapidly evolving nature and sophistication of these threats, as well as due to the expanding use of Internet
banking, mobile banking and other technology-based products and services by us and our customers.

 Effect of
Governmental Monetary Policies. Our earnings are affected by domestic economic conditions and the monetary and fiscal policies
of the United States government and its agencies. The Federal Reserve's monetary policies have had, and are likely to continue
to have, an important impact on the operating results of commercial banks through its power to implement national monetary policy
in order, among other things, to curb inflation or combat a recession. The monetary policies of the Federal Reserve have major
effects upon the levels of bank loans, investments and deposits through its open market operations in United States government
securities and through its regulation of the discount rate on borrowings of member banks and the reserve requirements against
member bank deposits. It is not possible to predict the nature or impact of future changes in monetary and fiscal policies. In
response to the COVID-19 pandemic, in 2020, the Federal Open Market Committee ("FOMC") reduced the target federal
funds rate range to between 0.0% and 0.25%; however, due in part to rising inflation, throughout 2022 the target federal funds
rate range increased to between 4.25% and 4.50%. Throughout 2023, the target federal funds rate range increased to between 5.25%
and 5.50%.

 In
early 2024, with signs of moderating inflation and a slowing growth outlook, the FOMC initiated a gradual easing of monetary policy,
reducing the target range to approximately 4.0% to 4.25% by the end of 2024. In January 2025, amid mixed economic signals, the
FOMC maintained this target range while emphasizing its readiness to adjust policy further as economic conditions evolve.

 Changes
in market interest rates can have a significant impact on the level of income and expense recorded on a large portion of our interest-earning
assets and interest-bearing liabilities, and on the market value of all interest-earning assets, other than those possessing a
short term to maturity. Furthermore, changes in market interest rates can have a significant impact on the level of mortgage originations
and related mortgage non-interest income.

 Insurance
of Accounts and Regulation by the FDIC. The Bank's deposits are insured up to applicable limits by the Deposit Insurance
Fund of the FDIC. As insurer, the FDIC imposes deposit insurance premiums and is authorized to conduct examinations of and to
require reporting by FDIC insured institutions. It also may prohibit any FDIC insured institution from engaging in any activity
the FDIC determines by regulation or order to pose a serious risk to the insurance fund. The FDIC also has the authority to initiate
enforcement actions against savings institutions, after giving the bank's regulatory authority an opportunity to take such
action and may terminate the deposit insurance if it determines that the institution has engaged in unsafe or unsound practices
or is in an unsafe or unsound condition.

 As an
FDIC-insured bank, the Bank must pay deposit insurance assessments to the FDIC based on its average total assets minus its average
tangible equity. The Bank's assessment rates are currently based on its risk classification (i.e., the level of risk it
poses to the FDIC's deposit insurance fund). Institutions classified as higher risk pay assessments at higher rates than
institutions that pose a lower risk.

 In
addition to the ordinary assessments described above, the FDIC has the ability to impose special assessments in certain instances.
For example, in November 2023, the FDIC implemented a special assessment to recover the approximately $16.3 billion loss to the
Deposit Insurance Fund associated with protecting uninsured depositors following the closures of Silicon Valley Bank and Signature
Bank earlier in the year. However, the assessment was limited to banks with an excess of $5 billion uninsured deposits as of December
31, 2022, so we did not receive any assessment.

 The FDIC may
terminate the deposit insurance of any insured depository institution, including the Bank, if it determines after a hearing that
the institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has
violated any applicable law, regulation, rule, order, or condition imposed by the FDIC. It also may suspend deposit insurance
temporarily during the hearing process for the permanent termination of insurance if the institution has no tangible capital.
If insurance of accounts is terminated, the accounts at the institution at the time of the termination, less subsequent withdrawals,
shall continue to be insured for a period of six months to two years, as determined by the FDIC. Management is not aware of any
practice, condition or violation that might lead to termination of the Bank's deposit insurance.

 Incentive
Compensation. In addition to the potential restrictions on discretionary bonus compensation under the Basel III rules, the
federal bank regulatory agencies have issued guidance on incentive compensation policies (the "Incentive Compensation Guidance")
intended to ensure that the incentive compensation policies of financial institutions do not undermine the safety and soundness
of such institutions by encouraging excessive risk-taking. The Incentive Compensation Guidance, which covers all employees that
have the ability to materially affect the risk profile of an institution, either individually or as part of a group, is based
upon the key principles that a financial institution's incentive compensation arrangements should comply with the following
principles: (i) provide employees incentives that appropriately balance risk and reward; (ii) be compatible with effective controls
and risk-management; and (iii) be supported by strong corporate governance, including active and effective oversight by the organization's
board of directors.

 The scope and
content of federal bank regulatory agencies' policies on executive compensation are continuing to develop and are likely
to continue evolving in the near future. In 2016, federal agencies proposed regulations which could significantly change the regulation
of incentive compensation programs at financial institutions. The proposal would create four tiers of institutions based on asset
size. Institutions in the top two tiers would be subject to rules much more detailed and proscriptive than are currently in effect.
If interpreted aggressively by the regulators, the proposed rules could be used to prevent, as a practical matter, larger institutions
from engaging in certain lines of business where substantial commission and bonus pool arrangements are the norm. In the 2016
proposal, the top two tiers included institutions with more than $50 billion of assets, which would not currently apply to us.
No final rule has been adopted as of this filing. We cannot predict what final rules may be adopted, nor how they may be implemented
and, therefore, it cannot be determined at this time whether compliance with such policies will adversely affect our ability to
hire, retain and motivate our key employees.

the Tax Cuts and Jobs Act (the "Tax Act"), which was signed into law in December 2017, contains certain provisions
affecting performance-based compensation. Specifically, the pre-existing exception to the $1.0 million deduction limitation applicable
to performance-based compensation was repealed. The deduction limitation is now applied to all compensation exceeding $1.0 million,
for our covered employees, regardless of how it is classified, which could have an adverse effect on our income tax expense and
net income.

Governance. The Dodd-Frank Act addressed many investor protection, corporate governance and executive compensation matters
that affect most U.S. publicly traded companies. The Dodd-Frank Act (i) grants stockholders of U.S. publicly traded companies
an advisory vote on executive compensation and so-called "golden parachute" payments, (ii) enhances independence requirements
for compensation committee members, (iii) requires the SEC to adopt rules directing national securities exchanges to establish
listing standards requiring all listed companies to adopt incentive-based compensation clawback policies for executive officers,
and (iv) provides the SEC with authority to adopt proxy access rules that would allow stockholders of publicly traded companies
to nominate candidates for election as a director and have those nominees included in a company's proxy materials. The SEC
has completed the bulk (although not all) of the rulemaking necessary to implement these provisions. However, on October 26, 2022,
the SEC adopted final rules implementing the incentive-based compensation recovery (clawback) provisions of the Dodd-Frank Act.
The final rules directed the stock exchanges to establish listing standards requiring listed companies to develop and implement
a policy providing for the recovery of erroneously awarded incentive-based compensation received by current or former executive
officers and to satisfy related disclosure obligations. As of December 1, 2023, the final clawback rules from The NASDAQ Stock
Market were effective. The Company's updated clawback policies were effective September 19, 2023.

 Concentrations
in Commercial Real Estate. Concentration risk exists when FDIC-insured institutions deploy too many assets to any one industry
or segment. A concentration in commercial real estate is one example of regulatory concern. The interagency Concentrations in
Commercial Real Estate Lending, Sound Risk Management Practices guidance ("CRE Guidance") provides supervisory criteria,
including the following numerical indicators, to assist bank examiners in identifying banks with potentially significant commercial
real estate loan concentrations that may warrant greater supervisory scrutiny: (i) total non-owner-occupied commercial real estate
loans, including loans secured by apartment buildings, investor commercial real estate, and construction and land loans, exceeding
300% or more of an institution's total risk-based capital and the outstanding balance of the commercial real estate loan
portfolio has increased by 50% or more in the preceding three years or (ii) construction and land development loans exceeding
100% of total risk-based capital. The CRE Guidance does not limit banks' levels of commercial real estate lending activities,
but rather guides institutions in developing risk management practices and levels of capital that are commensurate with the level
and nature of their commercial real estate concentrations. On December 18, 2015, the federal banking agencies issued a statement
to reinforce prudent risk-management practices related to commercial real estate lending, having observed substantial growth in
many commercial real estate asset and lending markets, increased competitive pressures, rising commercial real estate concentrations
in banks, and an easing of commercial real estate underwriting standards. The federal bank agencies reminded FDIC-insured institutions
to maintain underwriting discipline and exercise prudent risk-management practices to identify, measure, monitor and manage the
risks arising from commercial real estate lending. In addition, FDIC-insured institutions must maintain capital commensurate with
the level and nature of their commercial real estate concentration risk. Based on the Bank's loan portfolio as of December
31, 2024, its non-owner occupied commercial loans and its construction and land development loans were approximately 305% and
82% of total risk-based capital, respectively. Furthermore, our three-year growth in non-owner occupied commercial real estate
loans was 46% from December 31, 2021 to December 31, 2024. We have expertise and a long history in originating and managing commercial
real estate loans. We have a strong credit underwriting process, which includes management and Board oversight. We perform rigorous
monitoring, stress testing, and reporting of these portfolios at the management and Board levels, and we continue to monitor the
level of the concentration in commercial real estate loans within the Bank's loan portfolio monthly. Management will continue
to monitor the level of the concentration in commercial real estate loans within the Bank's loan portfolio.

 Proposed Legislation
and Regulatory Action. From time to time, various legislative and regulatory initiatives are introduced in Congress and state
legislatures, as well as by regulatory agencies. Such initiatives may include proposals to expand or contract the powers of bank
holding companies and depository institutions or proposals to substantially change the financial institution regulatory system.
Such legislation could change banking statutes and our operating environment in substantial and unpredictable ways. If enacted,
such legislation could increase or decrease the cost of doing business, limit or expand permissible activities or affect the competitive
balance among banks, savings associations, credit unions, and other financial institutions. We cannot predict whether any such
legislation will be enacted, and, if enacted, the effect that it, or any implementing regulations, would have on our financial
condition or results of operations. A change in statutes, regulations, or regulatory policies applicable to the Company or the
Bank could have a material effect on our business.

 Item 1A. Risk Factors.

 There
are risks, many beyond our control, which could cause our results to differ significantly from management's expectations.
Some of these risk factors are described below. Any factor described in this Annual Report on Form 10-K could, by itself or together
with one or more other factors, adversely affect our business, results of operations and/or financial condition. Additional risks
and uncertainties not currently known to us or that we currently consider to not be material also may materially and adversely
affect us. In assessing these risks, you should also refer to other information disclosed in our SEC filings, including the financial
statements and notes thereto. The risks discussed below also include forward-looking statements, and actual results may differ
substantially from those discussed or implied in these forward-looking statements.

 Economic and Geographic-Related
Risks

 Our business may be
adversely affected by economic conditions generally.

 Our
financial performance generally, and in particular the ability of borrowers to pay interest on and repay principal of outstanding
loans and the value of collateral securing those loans, as well as demand for loans and other products and services we offer and
whose success we rely on to drive our growth, is highly dependent upon the business environment in the primary markets where we
operate and in the U.S. as a whole. Unlike larger banks that are more geographically diversified, we are a regional bank that
provides banking and financial services to customers primarily in South Carolina and Georgia. The economic conditions in these
local markets may be different from, and in some instances worse than, the economic conditions in the U.S. as a whole. In 2024
and early 2025, continued regional economic uncertainty—exacerbated by persistent inflation, supply chain disruptions, and
subdued consumer spending—has further increased the risks in our primary markets.

 Some elements
of the business environment that affect our financial performance include short-term and long-term interest rates, the prevailing
yield curve, inflation and price levels, monetary and trade policy, unemployment and the strength of the domestic economy and
the local economy in the markets in which we operate. Unfavorable market conditions can result in a deterioration in the credit
quality of our borrowers and the demand for our products and services, an increase in the number of loan delinquencies, defaults
and charge-offs, foreclosures, additional provisions for credit losses, adverse asset values of the collateral securing our loans
and an overall material adverse effect on the quality of our loan portfolio. The majority of our loan portfolio is secured by
real estate. A decline in real estate values can negatively impact our ability to recover our investment should the borrower become
delinquent. Loans secured by stock or other collateral may be adversely impacted by a downturn in the economy and other factors
that could reduce the recoverability of our investment. Unsecured loans are dependent on the solvency of the borrower, which can
deteriorate, leaving us with a risk of loss. Unfavorable or uncertain economic and market conditions can be caused by declines
in economic growth, business activity or investor or business confidence, limitations on the availability or increases in the
cost of credit and capital, increases in inflation or interest rates, high unemployment, natural disasters, epidemics and pandemics,
or a combination of these or other factors.

there are continuing concerns related to, among other things, the level of U.S. government debt and fiscal actions that may be
taken to address that debt, a potential resurgence of economic and political tensions with China, the war in Ukraine, and the
Middle East conflict, all of which may have a destabilizing effect on financial markets and economic activity. Economic pressure
on consumers and overall economic uncertainty may result in changes in consumer and business spending, borrowing, and saving habits.
These economic conditions and/or other negative developments in the domestic or international credit markets or economies may
significantly affect the markets in which we do business, the value of our loans and investments, and our ongoing operations,
costs, and profitability. Declines in real estate values and sales volumes and high unemployment or underemployment may also result
in higher than expected loan delinquencies, increases in our levels of nonperforming and classified assets and a decline in demand
for our products and services. These negative events may cause us to incur losses and may adversely affect our capital, liquidity,
and financial condition.

 In
2023 and 2024, concerns about the financial condition of certain U.S. banking institutions led to multiple bank failures, including
Silicon Valley Bank, Signature Bank, First Republic Bank, and most recently, Republic First Bank in April 2024. The FDIC intervened
in each case, transferring assets to acquiring institutions. While our business and depositor profile differ from these banks,
financial sector volatility, particularly in times of stress, may impact our stock price and operations. The long-term regulatory
and market consequences of these failures remain uncertain but could include increased FDIC assessments and further bank closures.
To date, these events have not materially affected our deposit balances.

 Credit and Interest Rate
Risk

 Our decisions regarding credit
risk and allowance for credit losses may materially and adversely affect our business.

 Making loans
and other extensions of credit is an essential element of our business. Although we seek to mitigate risks inherent in lending
by adhering to specific underwriting practices, our loans and other extensions of credit may not be repaid. The risk of nonpayment
is affected by a number of factors, including:

 the
 duration of the credit;

 in
 the case of a collateralized loan, risks resulting from uncertainties about the future value of the collateral

 credit
 risks of a particular customer;

 changes
 in economic and industry conditions; and

 We attempt to
maintain an appropriate allowance for credit losses to provide for potential losses in our loan portfolio. We periodically determine
the amount of the allowance based on consideration of several factors, including:

 an
 ongoing review of the quality, mix, and size of our overall loan portfolio;

 regular
 reviews of loan delinquencies and loan portfolio quality; and

 our
 historical credit loss experience;

 the
 amount and quality of collateral, including guarantees, securing the loans.

 evaluation
 of economic conditions;

 There
is no precise method of predicting credit losses; therefore, we face the risk that charge-offs in future periods will exceed our
allowance for credit losses and that additional increases in the allowance for credit losses will be required. Additions to the
allowance for credit losses would result in a decrease of our net income, and possibly our capital.

 Federal
and state regulators periodically review our allowance for credit losses and may require us to increase our provision for credit
losses or recognize further loan charge-offs, based on judgments different than those of our management. Any increase in the amount
of our provision or loans charged-off could have a negative effect on our operating results.

 We may have higher credit
losses than we have allowed for in our allowance for credit losses.

 Our actual credit
losses could exceed our allowance for credit losses. Our average loan size continues to increase and reliance on our historic
allowance for credit losses may not be adequate. As of December 31, 2024, approximately 84.8% of our loan portfolio (excluding
loans held for sale) is composed of construction (12.5%), commercial mortgage (65.2%) and commercial (7.1%) loans. Repayment of
such loans is generally considered more subject to market risk than residential mortgage loans. Industry experience shows that
a portion of loans will become delinquent, and a portion of loans will require partial or entire charge-off. Regardless of the
underwriting criteria utilized, losses may be experienced as a result of various factors beyond our control, including, changes
in market conditions affecting the value of loan collateral and problems affecting the credit of our borrowers. If we suffer credit
losses that exceed our allowance for credit losses, our financial condition, liquidity, or results of operations could be materially
and adversely affected.

 We have a concentration
of credit exposure in commercial real estate and challenges faced by the commercial real estate market could adversely affect
our business, financial condition, and results of operations.

31, 2024, we had approximately $921.0 million in loans outstanding to borrowers whereby the collateral securing the loan was commercial
real estate, representing approximately 75.5% of our total loans outstanding as of that date. Approximately $283.7 million, or
23.2% of our total loans, and 30.8% of our commercial real estate loans are secured by owner-occupied properties. Commercial real
estate loans are generally viewed as having more risk of default than residential real estate loans. They are also typically larger
than residential real estate loans and consumer loans and depend on cash flows from the owner's business or the property
to service the debt. Cash flows may be affected significantly by general economic conditions, and a downturn in the local economy
or in occupancy rates in the local economy where the property is located could increase the likelihood of default. Because our
loan portfolio contains a number of commercial real estate loans with relatively large balances, the deterioration of one or a
few of these loans could cause a significant increase in our level of non-performing loans. An increase in non-performing loans
could result in a loss of earnings from these loans, an increase in the related provision for credit losses and an increase in
charge-offs, all of which could have a material adverse effect on our financial condition and results of operations.

 Our commercial
real estate loans have grown 3.5%, or $31.2 million, since December 31, 2023. The banking regulators give commercial real estate
lending greater scrutiny, and they may require banks with higher levels of commercial real estate loans to implement more stringent
underwriting, internal controls, risk management policies and portfolio stress testing, as well as possibly higher levels of allowances
for credit losses and capital levels as a result of commercial real estate lending growth and exposures. We have expertise and
a long history in originating and managing commercial real estate loans. We have a strong credit underwriting process, which includes
management and board oversight. We perform rigorous monitoring, stress testing, and reporting of these portfolios at the management
and board levels, and we continue to monitor the level of the concentration in commercial real estate loans within the Bank's
loan portfolio monthly.

 Imposition of limits
by the bank regulators on commercial and multi-family real estate lending activities could curtail our growth and adversely affect
our earnings.

 The 2006
"Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices" (the "CRE Guidance")
provides that a bank's commercial real estate lending exposure could receive increased supervisory scrutiny where (i) total
non-owner-occupied commercial real estate loans, including loans secured by apartment buildings, investor commercial real estate,
and construction and land loans, represent 300% or more of an institution's total risk-based capital, and the outstanding
balance of the commercial real estate loan portfolio has increased by 50% or more during the preceding 36 months, or (ii) construction
and land development loans exceed 100% of total risk-based capital. Our total non-owner-occupied commercial real estate loans
represented 305% of the Bank's total risk-based capital at December 31, 2024, and our construction and land development
loans represented 82% of the Bank's total risk-based capital at December 31, 2024. Furthermore, our three-year growth in
non-owner occupied commercial real estate loans was 46% from December 31, 2021 to December 31, 2024. We have expertise and a long
history in originating and managing commercial real estate loans. We have a strong credit underwriting process, which includes
management and board oversight. We perform rigorous monitoring, stress testing, and reporting of these portfolios at the management
and board levels, and we continue to monitor the level of the concentration in commercial real estate loans within our loan portfolio
monthly.

 In December
2015, the regulatory agencies released a statement on prudent risk management for commercial real estate lending that indicated,
among other things, the intent to continue "to pay special attention" to commercial real estate lending activities
and concentrations going forward. More recently, in 2024, the FDIC and the Federal Reserve reaffirmed their commitment to stringent
oversight of CRE exposures in response to evolving market conditions. In early 2025, preliminary guidance from regulators suggested
that any further acceleration in CRE loan growth or deterioration in loan performance could prompt the imposition of additional
limits or remedial actions, which, if implemented, could curtail our growth and adversely affect our earnings.

 Repayment of our commercial
business loans is often dependent on the cash flows of the borrower, which may be unpredictable, and the collateral securing these
loans may fluctuate in value.

31, 2024, commercial business loans comprised 7.1% of our total loan portfolio. Our commercial business loans are originated primarily
based on the identified cash flow and general liquidity of the borrower and secondarily on the underlying collateral provided
by the borrower and/or repayment capacity of any guarantor. The borrower's cash flow may be unpredictable, and collateral
securing these loans may fluctuate in value. Although commercial business loans are often collateralized by equipment, inventory,
accounts receivable, or other business assets, the liquidation of collateral in the event of default is often an insufficient
source of repayment because accounts receivable may be uncollectible and inventories may be obsolete or of limited use. In addition,
business assets may depreciate over time, be difficult to appraise, and fluctuate in value based on the success of the business.
Accordingly, the repayment of commercial business loans depends primarily on the cash flow and credit worthiness of the borrower
and secondarily on the underlying collateral value provided by the borrower and liquidity of the guarantor. If these borrowers
do not have sufficient cash flows or resources to pay these loans as they come due or the value of the underlying collateral is
insufficient to fully secure these loans, we may suffer losses on these loans that exceed our allowance for credit losses.

 Our focus on lending
to small to mid-sized community-based businesses may increase our credit risk.

 Most of our commercial
business and commercial real estate loans are made to small business or middle market customers. These businesses generally have
fewer financial resources in terms of capital or borrowing capacity than larger entities and have a heightened vulnerability to
economic conditions. If general economic conditions in the markets in which we operate negatively impact this important customer
sector, our results of operations and financial condition and the value of our common stock may be adversely affected. Moreover,
a portion of these loans have been made by us in recent years and the borrowers may not have experienced a complete business or
economic cycle. Furthermore, the deterioration of our borrowers' businesses may hinder their ability to repay their loans
with us, which could have a material adverse effect on our financial condition and results of operations.

 Our underwriting decisions
may materially and adversely affect our business.

 While
we generally underwrite the loans in our portfolio in accordance with our own internal underwriting guidelines and regulatory
supervisory guidelines, in certain circumstances we have made loans which exceed either our internal underwriting guidelines,
supervisory guidelines, or both. As of December 31, 2024, approximately $16.6 million of our loans, or 9.3% of the Bank's
regulatory capital (Tier 1 Capital plus allowance for credit losses), had loan-to-value ratios that exceeded regulatory supervisory
guidelines, of which three loans totaling approximately $606 thousand had loan-to-value ratios of 100% or more. In addition, supervisory
limits on commercial loan-to-value exceptions are set at 30% of the Bank's tier 1 capital plus allowance for credit losses.
At December 31, 2024, $5.5 million of our commercial loans, or 3.1% of the Bank's regulatory capital, exceeded the supervisory
loan-to-value ratio. The number of loans in our portfolio with loan-to-value ratios in excess of supervisory guidelines, our internal
guidelines, or both could increase the risk of delinquencies and defaults in our portfolio, which could have a material adverse
effect on our financial condition and results of operations.

 We depend on the accuracy
and completeness of information about clients and counterparties and our financial condition could be adversely affected if we
rely on misleading information.

 In deciding
whether to extend credit or to enter into other transactions with clients and counterparties, we may rely on information furnished
to us by or on behalf of clients and counterparties, including financial statements and other financial information, which we
do not independently verify. We also may rely on representations of clients and counterparties as to the accuracy and completeness
of that information and, with respect to financial statements, on reports of independent auditors. For example, in deciding whether
to extend credit to clients, we may assume that a customer's audited financial statements conform with GAAP and present
fairly, in all material respects, the financial condition, results of operations and cash flows of the customer. Our financial
condition and results of operations could be negatively impacted to the extent we rely on financial statements that do not comply
with GAAP or are materially misleading.

 If we fail to effectively
manage credit risk and interest rate risk, our business and financial condition will suffer.

 We must effectively
manage credit risk. There are risks inherent in making any loan, including risks with respect to (i) the period of time over which
the loan may be repaid, (ii) proper loan underwriting and guidelines, (iii) changes in economic and industry conditions, (iv)
the credit risks of individual borrowers, and (v) risks resulting from uncertainties as to the future value of collateral. There
is no assurance that our credit risk monitoring and loan approval procedures are or will be adequate or will reduce the inherent
risks associated with lending. Our credit administration personnel, policies and procedures may not adequately adapt to changes
in economic or any other conditions affecting customers and the quality of our loan portfolio. Any failure to manage such credit
risks may materially adversely affect our business and our consolidated results of operations and financial condition.

 Changes in prevailing interest
rates may reduce our profitability.

 Our results of
operations depend in large part upon the level of our net interest income, which is the difference between interest income from
interest-earning assets, such as loans and investment securities, which include mortgage-backed securities, and interest expense
on interest-bearing liabilities, such as deposits and borrowings. Depending on the terms and maturities of our assets and liabilities,
we believe a significant change in interest rates could potentially have a material adverse effect on our profitability. Many
factors cause changes in interest rates, including governmental monetary policies and domestic and international economic and
political conditions. While we intend to manage the effects of changes in interest rates by adjusting the terms, maturities, and
pricing of our assets and liabilities, our efforts may not be effective, and our financial condition and results of operations
could suffer.

 Capital and Liquidity Risks

 Changes in the financial markets
could impair the value of our investment portfolio.

 Our investment
securities portfolio is a significant component of our total earning assets. Total investment securities averaged $491.0 million
in 2024, as compared to $541.1 million in 2023. This represents 27.5% and 33.2% of the average earning assets for the years ended
December 31, 2024 and 2023, respectively. At December 31, 2024, the portfolio was 26.6% of earning assets compared to 29.6% of
earning assets at December 31, 2023. Turmoil in the financial markets could impair the market value of our investment portfolio,
which could adversely affect our net income and possibly our capital.

 On June 1, 2022,
we reclassified $224.5 million in investments to held-to-maturity (HTM) from available-for-sale (AFS). These securities were transferred
at fair value at the time of the transfer, which became the new cost basis for the securities held to maturity. The pretax unrealized
net holding loss on the available for sale securities on the date of transfer totaled approximately $16.7 million and continued
to be reported as a component of accumulated other comprehensive loss. This net unrealized loss is being amortized to interest
income over the remaining life of the securities as a yield adjustment. There were no gains or losses recognized as a result of
this transfer. The remaining pretax unrealized net holding loss on these investments was $12.3 million ($9.7 million net of tax)
and $14.0 million ($11.1 million net of tax) at December 31, 2024 and 2023, respectively.

 During the three
months ended September 2023, we sold $39.9 million of book value U.S. Treasuries in our available-for-sale investment securities
portfolio. While this sale created a one-time pre-tax loss of $1.2 million, it provided additional liquidity which was used to
pay down borrowings and fund loan growth. The weighted average book yield of the securities sold was 1.75% and the projected earn
back period was 1.6 years. Such measures transitioned the balance sheet to be more efficient, improved net interest margin, and
positioned us for higher earnings in the future.

 Our HTM investments
totaled $209.4 million and represented approximately 42.6% of our total investments at December 31, 2024. Our AFS investments
totaled $279.6 million, or approximately 56.9% of our total investments at December 31, 2024. Investments at cost totaled $2.7
million, or approximately 0.5% of our total investments at December 31, 2024. The effective duration on our total investment securities
portfolio was 3.5 at December 31, 2024.

 Securities which
have unrealized losses were not considered to be credit loss impaired at December 31, 2024 or at December 31, 2023 and we believe
it is more likely than not we will be able to hold these until they mature or recover our current book value. We currently maintain
adequate liquidity which supports our ability to hold these investments until they mature, or until there is a market price recovery.
However, if we were to cease to have the ability and intent to hold these investments until maturity or the market prices do not
recover, and we were to sell these securities at a loss, it could adversely affect our net income and our capital.

 The Bank is subject
to strict capital requirements, which could be amended to be more stringent, in the future.

 The Bank
is subject to regulatory requirements specifying minimum amounts and types of capital that we must maintain and an additional
capital conservation buffer. From time to time, the regulators change these regulatory capital adequacy guidelines. If we fail
to meet these capital guidelines and other regulatory requirements, we or our subsidiaries may be restricted in the types of activities
we may conduct and we may be prohibited from taking certain capital actions, such as paying dividends, repurchasing or redeeming
capital securities, and paying certain bonuses. In particular, the capital requirements applicable under Basel III require the
Bank to satisfy additional, more stringent, capital adequacy standards than it had in the past. Failure to meet minimum capital
requirements could result in certain mandatory and possible additional discretionary actions by regulators that, if undertaken,
could have an adverse material effect on our financial condition and results of operations. In addition, these requirements could
have a negative impact on our ability to lend, grow deposit balances, make acquisitions, make capital distributions in the form
of dividends or share repurchases, or pay certain bonuses needed to attract and retain key personnel. Higher capital levels could
also lower our return on equity.

 Risks Related to Our Industry

 Inflationary
pressures and rising prices may affect our results of operations and financial condition.

 In
2021 through 2022, inflation rose to levels not seen for over 40 years, reaching 7.0% and 6.5%, respectively. The annual inflation
rate decreased to 3.4% in 2023 and to 2.9% in 2024; however, during the latter part of 2024 and into early 2025, the annual inflation
rate averaged approximately 4.2%, although some moderation has been observed in early 2025. Nonetheless, persistently higher input
costs, wage pressures, and ongoing supply chain disruptions may challenge our customers' ability to service their debt,
thereby potentially increasing our credit risk. Inflation could lead to increased costs to our customers, making it more difficult
for them to repay their loans or other obligations increasing our credit risk. Sustained higher interest rates by the Federal
Reserve may be needed to tame persistent inflationary price pressures, which could push down asset prices and weaken economic
activity. A deterioration in economic conditions in the United States and our markets could result in an increase in loan delinquencies
and non-performing assets, decreases in loan collateral values and a decrease in demand for our products and services, all of
which, in turn, would adversely affect our business, financial condition and results of operations.

 The Federal
Reserve has implemented significant economic strategies that have affected interest rates, inflation, asset values, and the shape
of the yield curve.

 In
recent years, the Federal Reserve has maintained a relatively tight monetary policy to address persistent inflationary pressures,
resulting in elevated short-term interest rates. In mid-2024, as inflation began to moderate, the Federal Reserve signaled a gradual
recalibration of its policy stance, though it remains cautious amid ongoing economic uncertainty.

 Effects
on the yield curve often are most pronounced at the short end of the curve, which is of particular importance to us and other
banks. Among other things, easing strategies are intended to lower interest rates, expand the money supply, and stimulate economic
activity, while tightening strategies are intended to increase interest rates, discourage borrowing, tighten the money supply,
and restrain economic activity. Recent periods have demonstrated that when short-term rates rise more rapidly than long-term rates,
the yield curve can invert—an occurrence that, while relatively uncommon, may signal potential economic slowdowns or increased
recessionary risks.

 It
is unclear how long it will take for long-term rates to catch up. Many external factors may interfere with the effects of these
plans or cause them to be changed, sometimes quickly. Such factors include significant economic trends or events as well as significant
international monetary policies and events. Elevated interest rates, combined with an inverted or flattening yield curve, can
increase borrowing costs, depress asset values, and reduce loan demand—factors that may adversely affect our operating results
and financial condition. Moreover, unexpected shifts in domestic or international economic policies, or abrupt changes in market
conditions, could lead to rapid alterations in the yield curve and further impact the broader financial system.

 Adverse
developments affecting the financial services industry, such as the 2023 and 2024 bank failures or concerns involving liquidity,
may have a material adverse effect on our operations.

 The
high-profile bank failures in 2023 and 2024 involving Silicon Valley Bank, Signature Bank, First Republic Bank, and Republic First
Bank caused general uncertainty and concern regarding the liquidity adequacy of the banking sector. Although we were not directly
affected by these bank failures, the resulting speed and ease in which news, including social media commentary, led depositors
to withdraw or attempt to withdraw their funds from these and other financial institutions, which then caused the stock prices
of many financial institutions to become volatile. In 2024 and into 2025, continued concerns regarding the stability of certain
regional banks and potential liquidity risks have further contributed to market volatility and investor caution. Additional bank
failures could have an adverse effect on our financial condition and results of operations, either directly or through an adverse
impact on certain of our customers. Further, with the risk of any additional bank failures, we may face the potential for reputational
risk, deposit outflows, increased costs and competition for liquidity, and increased credit risk which, individually or in the
aggregate, could have a material adverse effect on our business, financial condition and results of operations.

 Higher
FDIC deposit insurance premiums and assessments could adversely affect our financial condition.

 Our deposits
are insured up to applicable limits by the Deposit Insurance Fund of the FDIC and are subject to deposit insurance assessments
to maintain deposit insurance. As an FDIC-insured institution, we are required to pay quarterly deposit insurance premium assessments
to the FDIC. Although we cannot predict what the insurance assessment rates will be in the future, either deterioration in our
risk-based capital ratios or adjustments to the base assessment rates could have a material adverse impact on our business, financial
condition, results of operations, and cash flows.

 We could experience a
loss due to competition with other financial institutions or nonbank companies.

 We face substantial
competition in all areas of our operations from a variety of different competitors, both within and beyond our principal markets,
many of which are larger and may have more financial resources. Such competitors primarily include national, regional, community,
and internet banks within the various markets in which we operate. We also face competition from many other types of financial
institutions, including, without limitation, savings and loans, credit unions, finance companies, brokerage firms, insurance companies,
and other financial intermediaries. The financial services industry could become even more competitive as a result of legislative
and regulatory changes and continued consolidation. In addition, as customer preferences and expectations continue to evolve,
technology has lowered barriers to entry and made it possible for banks to offer products and services in more areas in which
they do not have a physical location and for nonbanks, such as FinTech companies, to offer products and services traditionally
provided by banks, such as automatic transfer and automatic payment systems. Banks, securities firms, and insurance companies
can merge under the umbrella of a financial holding company, which can offer virtually any type of financial service, including
banking, securities underwriting, insurance (both agency and underwriting), and merchant banking. Many of our competitors have
fewer regulatory constraints and may have lower cost structures. Additionally, due to their size, many competitors may be able
to achieve economies of scale and, as a result, may offer a broader range of products and services as well as better pricing for
those products and services than we can.

 Our ability to
compete successfully depends on a number of factors, including, among other things:

 our ability to develop,
 maintain, and build upon long-term customer relationships based on top quality service, high ethical standards, and safe,
 sound assets;

 our ability to expand
 our market position;

 the scope, relevance,
 and pricing of the products and services we offer to meet our customers' needs and demands;

 the rate at which
 we introduce new products and services relative to our competitors;

 customer satisfaction
 with our level of service; and

 industry and general
 economic trends.

 Failure to perform in any of these
areas could significantly weaken our competitive position, which could adversely affect our growth and profitability, which, in
turn, could have a material adverse effect on our business, financial condition and results of operations.

 We may be adversely
affected by the soundness of other financial institutions.

services institutions are interrelated as a result of trading, clearing, counterparty, or other relationships. We have exposure
to many different industries and counterparties, and routinely execute transactions with counterparties in the financial services
industry, including commercial banks, brokers and dealers, investment banks, and other institutional clients. Many of these transactions
expose us to credit risk in the event of a default by a counterparty or client. In addition, our credit risk may be exacerbated
when the collateral held by the bank cannot be realized upon or is liquidated at prices not sufficient to recover the full amount
of the credit or derivative exposure due to the bank. Any such losses could have a material adverse effect on our financial condition
and results of operations.

 Failure to keep pace
with technological change could adversely affect our business.

 The financial
services industry is continually undergoing rapid technological change with frequent introductions of new technology-driven products
and services. The effective use of technology increases efficiency and enables financial institutions to better serve customers
and to reduce costs. Our future success depends, in part, upon our ability to address the needs of our customers by using technology
to provide products and services that will satisfy customer demands, as well as to create additional efficiencies in our operations.
Many of our competitors have substantially greater resources to invest in technological improvements. We may not be able to effectively
implement new technology-driven products and services or be successful in marketing these products and services to our customers.
In addition, we depend on internal and outsourced technology to support all aspects of our business operations. Failure to successfully
keep pace with technological changes could have a material adverse impact on our business, financial condition, and results of
operations. In 2024 and early 2025, the pace of technological change has accelerated, and the rapid evolution of cybersecurity
threats, as well as the need to integrate new digital platforms, has increased the risks associated with failure to adapt.

 The development and
use of AI presents risks and challenges that may adversely impact our business.

 The development
and use of AI by us or our third-party vendors poses significant risks. The evolving legal and regulatory landscape—covering
intellectual property, privacy, consumer protection, employment, and more—could force costly changes and heighten non-compliance
risks. AI models, especially generative ones, might produce biased, inaccurate, or harmful outputs, disclose confidential information,
or infringe on intellectual property rights. Moreover, their inherent complexity limits transparency, complicating oversight and
error reduction. Reliance on third-party models further exposes us to risks associated with unauthorized training data and their
risk management practices. Any of these issues could lead to legal liabilities, reputational harm, and adverse impacts on our
business.

 New lines of business
or new products and services may subject us to additional risk.

 From time
to time, we may implement new lines of business or offer new products and services within existing lines of business. There are
substantial risks and uncertainties associated with these efforts, particularly in instances where the markets are not fully developed.
In developing and marketing new lines of business and/or new products and services, we may invest significant time and resources.
Initial timetables for the introduction and development of new lines of business and/or new products or services may not be achieved,
and price and profitability targets may not prove feasible. External factors, such as compliance with regulations, competitive
alternatives, and shifting market preferences, may also impact the successful implementation of a new line of business and/or
a new product or service. Furthermore, any new line of business and/or new product or service could have a significant impact
on the effectiveness of our system of internal controls. Failure to successfully manage these risks in the development and implementation
of new lines of business and/or new products or services could have a material adverse effect on our business, financial condition,
and results of operations.

 Consumers may decide
not to use banks to complete their financial transactions.

 Technology and
other changes are allowing parties to complete financial transactions through alternative methods that historically have involved
banks. For example, consumers can now maintain funds that would have historically been held as bank deposits in brokerage accounts,
mutual funds or general-purpose reloadable prepaid cards. Consumers can also complete transactions such as paying bills and/or
transferring funds directly without the assistance of banks. The process of eliminating banks as intermediaries, known as "disintermediation,"
could result in the loss of fee income, as well as the loss of customer deposits and the related income generated from those deposits.
The loss of these revenue streams and the lower cost of deposits as a source of funds could have a material adverse effect on
our financial condition and results of operations.

 We
use brokered deposits which may be an unstable and/or expensive deposit source to fund earning asset growth.

 We
use brokered deposits as a source of funding to support our asset growth, to augment deposits generated from our branch network
and to assist in the management of our interest rate risk. We have established policies and procedures with respect to the use
of brokered deposits, which require, among other things, that (i) we limit the amount of brokered deposits as a percentage of
total deposits, and (ii) our Asset/Liability Committee of the board of directors and our board of directors monitor our use of
brokered deposits on a regular basis, including interest rates and the total volume of such deposits in relation to our total
deposits. In the event that our funding strategies call for the use of additional brokered deposits, there can be no assurance
that such sources will be available, or will remain available, or that the cost of such funding sources will be reasonable. Additionally,
if the Bank is no longer considered well capitalized, our ability to access new brokered deposits or retain existing brokered
deposits could be affected by market conditions, regulatory requirements or a combination thereof, which could result in most,
if not all, brokered deposit sources being unavailable. The inability to utilize brokered deposits as a source of funding could
have an adverse effect on our financial position, results of operations and liquidity.

 Further,
if, as a result of competitive pressures, market interest rates, alternative investment opportunities that present more attractive
returns to customers, general economic conditions or other events, the balance of our deposits decreases relative to our overall
banking operations, we may need to rely more heavily on wholesale or other sources of external funding, or may have to increase
deposit rates to maintain deposit levels in the future. Any such increased reliance on wholesale funding, or increases in funding
rates in general, could have a negative impact on our net interest income and, consequently, on our results of operations and
financial condition.

 Our
ability to obtain brokered deposits as an additional funding source could be limited.

31, 2024, brokered deposits comprised $10.4 million (0.6%) of our total deposits, down from $48.1 million (3.2%) at year-end 2023.
We use brokered certificates of deposit to extend deposit maturities and manage interest rate risk. Unlike non-brokered CDs, these
deposits cannot be withdrawn early except in limited circumstances, improving our maturity management. FDIC regulations restrict
brokered deposits based on capital levels. While we currently qualify as "well capitalized" and face no such limits,
a decline in our capital ratios could restrict our ability to replace maturing brokered deposits. Any future regulatory changes
or capital constraints could increase our funding costs and impact liquidity.

 Risks Related to Our Strategy

 We may be adversely
affected by risks associated with future mergers and acquisitions, including execution risk, which could disrupt our business
and dilute shareholder value.

 From time to
time, we may seek to acquire other financial institutions or parts of those institutions. We may also expand into new markets,
like we did in York County, South Carolina, which we refer to as the Piedmont Region, in 2022, or lines of business or offer new
products or services. These activities would involve a number of risks, including:

 the potential inaccuracy of the estimates
 and judgments used to evaluate credit, operations, management, and market risks with respect to a target institution;

 regulatory approvals could be delayed,
 impeded, restrictively conditioned, or denied due to existing or new regulatory issues we have, or may have, with regulatory
 agencies, including, without limitation, issues related to anti-money laundering/Bank Secrecy Act compliance, fair lending
 laws, fair housing laws, consumer protection laws, unfair, deceptive, or abusive acts or practices regulations, CRA issues,
 and other similar laws and regulations;

 the time and costs of evaluating new markets,
 hiring or retaining experienced local management, including those from competitors, and opening new offices and the time lags
 between these activities and the generation of sufficient assets and deposits to support the costs of the expansion;

 difficulty or unanticipated expense associated
 with converting the operating systems of the acquired or merged company;

 the incurrence and possible impairment
 of goodwill and other intangible assets associated with an acquisition or merger and possible adverse effects on our results
 of operations; and

 the risk of loss of key employees and customers
 of the Company or the acquired or merged company.

 If we do not
successfully manage these risks, our merger and acquisition activities could have a material adverse effect on our business, financial
condition, and results of operations, including short-term and long-term liquidity, and our ability to successfully implement
our strategic plan.

 We may be exposed to difficulties
in combining the operations of acquired businesses into our own operations, which may prevent us from achieving the expected benefits
from our acquisition activities.

 We may not be
able to fully achieve the strategic objectives and operating efficiencies that we anticipate in our acquisition activities. Inherent
uncertainties exist in integrating the operations of an acquired business. In addition, the markets and industries in which we
and our potential acquisition targets operate are highly competitive. We may lose customers or the customers of acquired entities
as a result of an acquisition. We also may lose key personnel from the acquired entity as a result of an acquisition. We may not
discover all known and unknown factors when examining a company for acquisition during the due diligence period. These factors
could produce unintended and unexpected consequences. Undiscovered factors as a result of acquisitions, pursued by non-related
third party entities, could bring civil, criminal, and financial liabilities against us, our management, and the management of
those entities acquired. These factors could contribute to us not achieving the expected benefits from acquisitions within desired
time frames.

 New or acquired banking office
facilities and other facilities may not be profitable.

 We may not be
able to identify profitable locations for new banking offices. The costs to start up new banking offices or to acquire existing
branches, and the additional costs to operate these facilities, may increase our non-interest expense and decrease our earnings
in the short term.. It may be difficult to adequately and profitably manage our growth through the establishment or purchase of
additional banking offices and we can provide no assurance that any such banking offices will successfully attract enough deposits
to offset the expenses of their operation. In addition, any new or acquired banking offices will be subject to regulatory approval,
and there can be no assurance that we will succeed in securing such approval.

 Risks Related to Our Human Capital

 We are dependent on
key individuals, and the loss of one or more of these key individuals could curtail our growth and adversely affect our prospects.

 Michael
C. Crapps, our president and chief executive officer, and Mr. Nissen, the Bank's president and chief executive officer,
each have extensive and long-standing ties within our primary market area and substantial experience with our operations, and
each has contributed significantly to our business. If we lose the services of Mr. Crapps or Mr. Nissen, each would be difficult
to replace, and our business and development could be materially and adversely affected. Our success also depends, in part, on
our continued ability to attract and retain experienced loan originators, as well as other management personnel. Competition for
personnel is intense, and we may not be successful in attracting or retaining qualified personnel. Our failure to compete for
these personnel, or the loss of the services of several of such key personnel, could adversely affect our business strategy and
materially and adversely affect our business, results of operations, and financial condition.

 Operational Risks

 A failure in or breach
of our operational or security systems or infrastructure, or those of our third party vendors and other service providers or other
third parties, including as a result of cyber attacks, could disrupt our businesses, result in the disclosure or misuse of confidential
or proprietary information, damage our reputation, increase our costs, and cause losses.

 We rely heavily
on communications and information systems to conduct our business. Information security risks for financial institutions such
as ours have increased in recent years in part because of the proliferation of new technologies, the use of the internet and telecommunications
technologies to conduct financial transactions, and the increased sophistication and activities of organized crime, hackers, and
terrorists, activists, and other external parties. As customer, public, and regulatory expectations regarding operational and
information security have increased, our operating systems and infrastructure must continue to be safeguarded and monitored for
potential failures, disruptions, and breakdowns. Our business, financial, accounting, and data processing systems, or other operating
systems and facilities may stop operating properly or become disabled or damaged as a result of a number of factors, including
events that are wholly or partially beyond our control. For example, there could be electrical or telecommunication outages, natural
disasters such as earthquakes, tornadoes, and hurricanes, disease pandemics, events arising from local or larger scale political
or social matters, including terrorist acts, and as described below, cyber attacks.

 As noted above,
our business relies on our digital technologies, computer and email systems, software, and networks to conduct its operations.
Although we have information security procedures and controls in place, our technologies, systems, networks, and our customers'
devices may become the target of cyber attacks or information security breaches that could result in the unauthorized release,
gathering, monitoring, misuse, loss, or destruction of our or our customers' or other third parties' confidential
information. Third parties with whom we do business or that facilitate our business activities, including financial intermediaries,
or vendors that provide service or security solutions for our operations, and other unaffiliated third parties, could also be
sources of operational and information security risk to us, including from breakdowns or failures of their own systems or capacity
constraints.

 While we have
disaster recovery and other policies, plans and procedures designed to prevent or limit the effect of the failure, interruption
or security breach of our information systems, there can be no assurance that any such failures, interruptions or security breaches
will not occur or, if they do occur, that they will be adequately addressed. Our risk and exposure to these matters remains heightened
because of the evolving nature of these threats. As a result, cybersecurity and the continued development and enhancement of our
controls, processes, and practices designed to protect our systems, computers, software, data, and networks from attack, damage
or unauthorized access remain a focus for us. As threats continue to evolve, we may be required to expend additional resources
to continue to modify or enhance our protective measures or to investigate and remediate information security vulnerabilities.
Disruptions or failures in the physical infrastructure or operating systems that support our businesses and clients, or cyber
attacks or security breaches of the networks, systems or devices that our clients use to access our products and services could
result in client attrition, regulatory fines, penalties or intervention, reputation damage, reimbursement or other compensation
costs, and/or additional compliance costs, any of which could have a material effect on our results of operations or financial
condition.

 Our information systems may
experience failure, interruption or breach in security.

 In the ordinary
course of business, we rely on electronic communications and information systems to conduct our operations and to store sensitive
data. Any failure, interruption or breach in security of these systems could result in significant disruption to our operations.
Information security breaches and cybersecurity-related incidents include, but are not limited to, attempts to access information,
including customer and company information, malicious code, computer viruses and denial of service attacks that could result in
unauthorized access, theft, misuse, loss, release or destruction of data (including confidential customer information), account
takeovers, unavailability of service or other events. These types of threats may derive from human error, fraud or malice on the
part of external or internal parties or may result from accidental technological failure. Our technologies, systems, networks
and software have been and continue to be subject to cybersecurity threats and attacks, which range from uncoordinated individual
attempts to sophisticated and targeted measures directed at us. Any failures related to upgrades and maintenance of our technology
and information systems could further increase our information and system security risk. Our increased use of cloud and other
technologies also increases our risk of being subject to a cyber-attack. The risk of a security breach or disruption, particularly
through cyber-attack or cyber-intrusion, has increased as the number, intensity and sophistication of attempted attacks and intrusions
from around the world have increased. Our customers, employees and third parties that we do business with have been, and will
continue to be, targeted by parties using fraudulent emails and other communications in attempts to misappropriate passwords,
bank account information or other personal information or to introduce viruses or other malware programs to our information systems,
the information systems of our merchants or third-party service providers and/or our customers' personal devices, which
are beyond our security control systems. Though we endeavor to mitigate these threats through product improvements, use of encryption
and authentication technology and customer and employee education, such cyber-attacks against us, our merchants, our third-party
service providers and our customers remain a serious issue.

 Although we make
significant efforts to maintain the security and integrity of our information systems and have implemented various measures to
manage the risks of a security breach or disruption, there can be no assurance that our security efforts and measures will be
effective or that attempted security breaches or disruptions would not be successful or damaging. Even well protected information,
networks, systems and facilities remain potentially vulnerable to attempted security breaches or disruptions because the techniques
used in such attempts are constantly evolving and generally are not recognized until launched against a target, and in some cases
are designed not to be detected and, in fact, may not be detected. Accordingly, we may be unable to anticipate these techniques
or to implement zero risk security barriers or other preventative measures, and thus it is virtually impossible for us to entirely
mitigate this risk. Furthermore, in the event of a cyber-attack, we may be delayed in identifying or responding to the attack,
which could increase the negative impact of the cyber-attack on our business, financial condition and results of operations. While
we maintain specific "cyber" insurance coverage, which would apply in the event of various breach scenarios, the amount
of coverage may not be adequate in any particular case. Furthermore, because cyber threat scenarios are inherently difficult to
predict and can take many forms, some breaches may not be covered under our cyber insurance coverage. A security breach or other
significant disruption of our information systems or those related to our customers, merchants or our third-party vendors, including
as a result of cyber-attacks, could (i) disrupt the proper functioning of our networks and systems and therefore our operations
and/or those of our customers (ii) result in the unauthorized access to, and destruction, loss, theft, misappropriation
or release of confidential, sensitive or otherwise valuable information of ours or our customers (iii) result in a violation
of applicable privacy, data breach and other laws, subjecting us to additional regulatory scrutiny and exposing us to civil litigation,
enforcement actions, governmental fines and possible financial liability (iv) require significant management attention and
resources to remedy the damages that result or (v) harm our reputation or cause a decrease in the number of customers that
choose to do business with us. The occurrence of any of the foregoing could have a material adverse effect on our business, financial
condition and results of operations.

 Increased fraud risk
could adversely impact our business

 Fraud
schemes are becoming more sophisticated, often involving criminal networks and techniques such as check fraud, ATM skimming, phishing,
and identity theft. Fraudsters may also exploit online banking to establish accounts for fraudulent activities. While technologies
like chip cards help mitigate some risks, criminals continue to target other sources of personal data.

 We have
increased investments in fraud prevention, but losses may still occur, potentially harming our customers, reputation, and financial
condition. Fraud-related costs—including regulatory scrutiny, legal liability, and business disruption—could materially
impact our operations.

 Our use of third party
vendors and our other ongoing third party business relationships are subject to increasing regulatory requirements and attention.

 We regularly
use third party vendors as part of our business and have substantial ongoing business relationships with other third parties.
These types of third party relationships are subject to increasingly demanding regulatory requirements and attention by our bank
regulators. Recent regulation requires us to enhance our due diligence, ongoing monitoring and control over our third party vendors
and other ongoing third party business relationships. We expect that our regulators will hold us responsible for deficiencies
in our oversight and control of our third party relationships and in the performance of the parties with which we have these relationships.
As a result, if our regulators conclude that we have not exercised adequate oversight and control over our third party vendors
or other ongoing third party business relationships or that such third parties have not performed appropriately, we could be subject
to enforcement actions, including civil money penalties or other administrative or judicial penalties or fines as well as requirements
for customer remediation, any of which could have a material adverse effect on our business, financial condition or results of
operations.

 Negative public opinion
surrounding the Bank and the financial institutions industry generally could damage our reputation and adversely impact our earnings.

 Reputation risk,
or the risk to our business, earnings and capital from negative public opinion surrounding the Bank and the financial institutions
industry generally, is inherent in our business. Negative public opinion can result from our actual or alleged conduct in any
number of activities, including lending practices, corporate governance, mergers and acquisitions, and from actions taken by government
regulators and community organizations in response to those activities. Negative public opinion can adversely affect our ability
to keep and attract clients and employees, could impair the confidence of our investors, counterparties and business partners
and can affect our ability to effect transactions and can expose us to litigation and regulatory action. Although we take steps
to minimize reputation risk, this risk will always be present given the nature of our business.

 Legal, Accounting, Regulatory
and Compliance Risks

 We are subject to extensive
regulation that could restrict our activities, have an adverse impact on our operations, and impose financial requirements or
limitations on the conduct of our business.

 We
operate in a highly regulated industry and are subject to examination, supervision, and comprehensive regulation by various regulatory
agencies. We are subject to Federal Reserve regulation. The Bank is subject to extensive regulation, supervision, and examination
by our primary federal regulator, the FDIC, the regulating authority that insures customer deposits; and by our state regulator,
the S.C. Board. Also, as a member of the Federal Home Loan Bank (the "FHLB"), the Bank must comply with applicable
regulations of the Federal Housing Finance Board and the FHLB. Regulation by these agencies is intended primarily for the protection
of our depositors and the deposit insurance fund and not for the benefit of our shareholders. The Bank's activities are
also regulated under consumer protection laws applicable to our lending, deposit, and other activities. A sufficient claim against
us under these laws could have a material adverse effect on our results of operations. Regulatory developments in 2023 and early
2024 have led to enhanced expectations in areas such as cybersecurity, data privacy, digital asset management, and anti-money
laundering. These evolving requirements are increasing our compliance costs and the complexity of our regulatory obligations.

 Failure
to comply with laws, regulations or policies could also result in heightened regulatory scrutiny and in sanctions by regulatory
agencies (such as a memorandum of understanding, a written supervisory agreement or a cease and desist order), civil money penalties
and/or reputation damage. Any of these consequences could restrict our ability to expand our business or could require us to raise
additional capital or sell assets on terms that are not advantageous to us or our shareholders and could have a material adverse
effect on our business, financial condition, and results of operations. While we have policies and procedures designed to prevent
any such violations, such violations may occur despite our best efforts.

 Federal, state, and
local consumer lending laws may restrict our ability to originate certain mortgage loans or increase our risk of liability with
respect to such loans and could increase our cost of doing business.

 Federal,
state, and local laws have been adopted that are intended to eliminate certain lending practices considered "predatory."
These laws prohibit practices such as steering borrowers away from more affordable products, selling unnecessary insurance to
borrowers, repeatedly refinancing loans and making loans without a reasonable expectation that the borrowers will be able to repay
the loans irrespective of the value of the underlying property. Loans with certain terms and conditions and that otherwise meet
the definition of a "qualified mortgage" may be protected from liability to a borrower for failing to make the necessary
determinations. In either case, we may find it necessary to tighten our mortgage loan underwriting standards in response to the
CFPB rules, which may constrain our ability to make loans consistent with our business strategies. It is our policy not to make
predatory loans and to determine borrowers' ability to repay, but the law and related rules create the potential for increased
liability with respect to our lending and loan investment activities. They increase our cost of doing business and, ultimately,
may prevent us from making certain loans and cause us to reduce the average percentage rate or the points and fees on loans that
we do make.

 We are subject to federal
and state fair lending laws, and failure to comply with these laws could lead to material penalties.

 Federal and state
fair lending laws and regulations, such as the Equal Credit Opportunity Act and the Fair Housing Act, impose nondiscriminatory
lending requirements on financial institutions. The DOJ, CFPB and other federal and state agencies are responsible for enforcing
these laws and regulations. Private parties may also have the ability to challenge an institution's performance under fair
lending laws in private class action litigation. A successful challenge to our performance under the fair lending laws and regulations
could adversely impact our rating under the CRA and result in a wide variety of sanctions, including the required payment of damages
and civil money penalties, injunctive relief, imposition of restrictions on merger and acquisition activity and restrictions on
expansion activity, which could negatively impact our reputation, business, financial condition, and results of operations.

 Changes in accounting
standards could materially affect our financial statements.

 Our accounting
policies and methods are fundamental to how we record and report our financial condition and results of operations. From time
to time, FASB, the SEC and our regulators change the financial accounting and reporting standards, or the interpretation thereof,
and guidance that govern the preparation and disclosure of external financial statements. Such changes are beyond our control,
can be hard to predict and could materially impact how we report and disclose our financial condition and results of operations.
In some cases, we could be required to apply a new or revised standard retrospectively, or apply an existing standard differently,
also retrospectively, which could potentially result in a need to revise or restate prior period financial statements.

 The Federal Reserve may require
us to commit capital resources to support the Bank.

 The Federal Reserve
requires a bank holding company to act as a source of financial and managerial strength to a subsidiary bank and to commit resources
to support such subsidiary bank. Under the "source of strength" doctrine, the Federal Reserve may require a bank holding
company to make capital injections into a troubled subsidiary bank and may charge the bank holding company with engaging in unsafe
and unsound practices for failure to commit resources to such a subsidiary bank. In addition, the Dodd-Frank Act directs the federal
bank regulators to require that all companies that directly or indirectly control an insured depository institution serve as a
source of strength for the institution. Under these requirements, in the future, we could be required to provide financial assistance
to our Bank if the Bank experiences financial distress.

 A capital injection
may be required at times when we do not have the resources to provide it, and therefore we may be required to borrow the funds.
In the event of a bank holding company's bankruptcy, the bankruptcy trustee will assume any commitment by the holding company
to a federal bank regulatory agency to maintain the capital of a subsidiary bank. Moreover, bankruptcy law provides that claims
based on any such commitment will be entitled to a priority of payment over the claims of the holding company's general
unsecured creditors, including the holders of its note obligations. Thus, any borrowing that must be done by the holding company
in order to make the required capital injection becomes more difficult and expensive and will adversely impact the holding company's
cash flows, financial condition, results of operations and prospects.

 We face risks related to the
adoption of future legislation and potential changes in federal regulatory agency leadership, policies, and priorities.

 In 2025, the
U.S. political landscape remains uncertain, with the Republicans holding the majority in both the U.S. House of Representatives
and the U.S. Senate. A unified Republican Congress has created conditions for potential shifts in policy, though partisan division
may still result in challenges to enacting sweeping reforms. Under the Biden Administration, Congressional committees with jurisdiction
over the banking sector pursued oversight and legislative initiatives in a variety of areas, including addressing climate-related
risks, promoting diversity and equality within the banking industry and addressing other Environmental, Social, and Governance
matters, improving competition in the banking sector and enhancing oversight of bank mergers and acquisitions, establishing a
regulatory framework for digital assets and markets, and oversight of pandemic responses and economic recovery. The Trump Administration,
alongside a unified Republican Congress, may pursue policies or changes that (i) reverse or suspend key actions implemented under
the Biden Administration, (ii) promote deregulation by easing regulatory burdens on financial institutions, (iii) adopt a technology-forward
approach, and (iv) take a more favorable stance on bank mergers and acquisitions, potentially streamlining the approval process
to encourage consolidation within the banking sector. The prospects for the enactment of major banking reform legislation remain
unclear at this time.

 Furthermore,
leadership changes within federal banking agencies and financial regulators continue to shape the regulatory environment. Since
the change in presidential administration in 2020, key positions across agencies—including the Comptroller of the Currency,
CFPB, CFTC, SEC, and the U.S. Treasury—experienced significant turnover. While some leadership positions were filled, others
remained vacant, leading to ongoing shifts in regulatory priorities and enforcement approaches. In early 2025, additional turnover
and policy realignments within these agencies have further contributed to regulatory uncertainty in the financial services sector.
The unified Republican government could further alter the composition of these agencies, introducing new leadership and new policies
and rules that could significantly impact the banking sector. The potential impact of the unified Republican government on additional
changes in agency structure, personnel, policies and priorities on the financial services sector, including the Company and the
Bank, cannot be fully predicted at this time. Regulations and laws may be modified at any time, and new legislation may be enacted
that will affect us. Any future changes in federal and state laws and regulations, as well as the interpretation and implementation
of such laws and regulations, could affect us in substantial and unpredictable ways, including those listed above or other ways
that could have a material adverse effect on our business, financial condition or results of operations.

 We are party to various claims
and lawsuits incidental to our business. Litigation is subject to many uncertainties such that the expenses and ultimate exposure
with respect to many of these matters cannot be ascertained.

 From time to
time, we, our directors, and our management are or may be the subject of various claims and legal actions by customers, employees,
shareholders and others. Whether such claims and legal actions are legitimate or unfounded, if such claims and legal actions are
not resolved in our favor, they may result in significant financial liability and/or adversely affect the market perception of
us and our products and services as well as impact customer demand for those products and services. In light of the potential
cost, reputational damage and uncertainty involved in litigation, we have in the past and may in the future settle matters even
when we believe we have a meritorious defense. Certain claims may seek injunctive relief, which could disrupt the ordinary conduct
of our business and operations or increase our cost of doing business. Our insurance or indemnities may not cover all claims that
may be asserted against us. Any judgments or settlements in any pending litigation or future claims, litigation or investigation
could have a material adverse effect on our business, reputation, financial condition, and results of operations.

 From time to time, we
are, or may become, involved in suits, legal proceedings, information-gatherings, investigations and proceedings by governmental
and self-regulatory agencies that may lead to adverse consequences.

 Many aspects
of the banking business involve a substantial risk of legal liability. From time to time, we are, or may become, the subject of
information-gathering requests, reviews, investigations and proceedings, and other forms of regulatory inquiry, including by bank
regulatory agencies, self-regulatory agencies, the SEC and law enforcement authorities. The results of such proceedings could
lead to significant civil or criminal penalties, including monetary penalties, damages, adverse judgements, settlements, fines,
injunctions, restrictions on the way we conduct our business or reputational harm.

 We could be adversely affected
by changes in tax laws and regulations or the interpretations of such laws and regulations.

 We are subject
to the income tax laws of the U.S., and its states and municipalities in which we do business. These tax laws are complex and
may be subject to different interpretations. We must make judgments and interpretations about the application of these inherently
complex tax laws when determining our provision for income taxes, our deferred tax assets (DTAs) and liabilities, and our valuation
allowance. Changes to the tax laws, administrative rulings or court decisions could increase our provision for income taxes and
reduce our net income. In addition, our ability to continue to record our DTAs is dependent on our ability to realize their value
through future projected earnings. Future changes in tax laws or regulations could adversely affect our ability to record our
DTAs. Loss of part or all of our DTAs would have a material adverse effect on our financial condition and results of operations.

 Our ability to realize deferred
tax assets may be reduced, which may adversely impact our results of operations.

 Deferred tax
assets are reported as assets on our balance sheet and represent the decrease in taxes expected to be paid in the future because
of net operating losses ("NOLs") and tax credit carryforwards and because of future reversals of temporary differences
in the bases of assets and liabilities as measured by enacted tax laws and their bases as reported in the financial statements.
As of December 31, 2024, we had net deferred tax assets of $12.0 million. Realization of deferred tax assets is dependent upon
the generation of sufficient future taxable income during the periods in which existing deferred tax assets are expected to become
deductible for federal income tax purposes. Based on projections of future taxable income in periods in which deferred tax assets
are expected to become deductible, management determined that the realization of our net deferred tax asset was more likely than
not. As a result, we did not recognize a valuation allowance on our net deferred tax asset as of December 31, 2024. If it becomes
more likely than not that some portion or the entire deferred tax asset will not be realized, a valuation allowance must be recognized.
Our deferred tax asset may be further reduced in the future if estimates of future income or our tax planning strategies do not
support the amount of the deferred tax assets. Charges to establish a valuation allowance with respect to our deferred tax asset
could have a material adverse effect on our financial condition and results of operations.

 Risks Related to an Investment
in Our Common Stock

 Our ability to pay cash
dividends is limited, and we may be unable to pay future dividends even if we desire to do so.

 The Federal
Reserve has issued a policy statement regarding the payment of dividends by bank holding companies. In general, the Federal Reserve's
policies provide that dividends should be paid only out of current earnings and only if the prospective rate of earnings retention
by the bank holding company appears consistent with the organization's capital needs, asset quality and overall financial
condition. The Federal Reserve's policies also require that a bank holding company serve as a source of financial strength
to its subsidiary banks by standing ready to use available resources to provide adequate capital funds to those banks during periods
of financial stress or adversity and by maintaining the financial flexibility and capital-raising capacity to obtain additional
resources for assisting its subsidiary banks where necessary. In addition, under the prompt corrective action regulations, the
ability of a bank holding company to pay dividends may be restricted if a subsidiary bank becomes undercapitalized. These regulatory
policies could affect our ability to pay dividends or otherwise engage in capital distributions.

 Our ability to
pay cash dividends may be limited by regulatory restrictions, by our Bank's ability to pay cash dividends to the Company
and by our need to maintain sufficient capital to support our operations. As a South Carolina-chartered bank, the Bank is subject
to limitations on the amount of dividends that it is permitted to pay. Unless otherwise instructed by the S.C. Board, the Bank
is generally permitted under South Carolina state banking regulations to pay cash dividends of up to 100% of net income in any
calendar year without obtaining the prior approval of the S.C. Board. If our Bank is not permitted to pay cash dividends to us,
it is unlikely that we would be able to pay cash dividends on our common stock. Moreover, holders of our common stock are entitled
to receive dividends only when, and if declared by our board of directors. Although we have historically paid cash dividends on
our common stock, we are not required to do so and our board of directors could reduce or eliminate our common stock dividend
in the future.

 Our stock price may
be volatile, which could result in losses to our investors and litigation against us.

 Our stock
price has been volatile in the past and several factors could cause the price to fluctuate substantially in the future. These
factors include but are not limited to: actual or anticipated variations in earnings, changes in analysts' recommendations
or projections, our announcement of developments related to our businesses, operations and stock performance of other companies
deemed to be peers, new technology used or services offered by traditional and non-traditional competitors, news reports of trends,
irrational exuberance on the part of investors, new federal banking regulations, and other issues related to the financial services
industry. Our stock price may fluctuate significantly in the future, and these fluctuations may be unrelated to our performance.
General market declines or market volatility in the future, especially in the financial institutions sector, could adversely affect
the price of our common stock, and the current market price may not be indicative of future market prices. Stock price volatility
may make it more difficult for you to resell your common stock when you want and at prices you find attractive. Moreover, in the
past, securities class action lawsuits have been instituted against some companies following periods of volatility in the market
price of its securities. We could in the future be the target of similar litigation. Securities litigation could result in substantial
costs and divert management's attention and resources from our normal business.

 Future sales of our
stock by our shareholders or the perception that those sales could occur may cause our stock price to decline.

 Although our
common stock is listed for trading on The NASDAQ Capital Market, the trading volume in our common stock is lower than that of
other larger financial services companies. A public trading market having the desired characteristics of depth, liquidity, and
orderliness depends on the presence in the marketplace of willing buyers and sellers of our common stock at any given time. This
presence depends on the individual decisions of investors and general economic and market conditions over which we have no control.
Given the relatively low trading volume of our common stock, significant sales of our common stock in the public market, or the
perception that those sales may occur, could cause the trading price of our common stock to decline or to be lower than it otherwise
might be in the absence of those sales or perceptions.

 Economic and other circumstances
may require us to raise capital at times or in amounts that are unfavorable to us. If we have to issue shares of common stock,
they will dilute the percentage ownership interest of existing shareholders and may dilute the book value per share of our common
stock and adversely affect the terms on which we may obtain additional capital.

 We may need to
incur additional debt or equity financing in the future to make strategic acquisitions or investments or to strengthen our capital
position. Our ability to raise additional capital, if needed, will depend on, among other things, conditions in the capital markets
at that time, which are outside of our control and our financial performance. We cannot provide assurance that such financing
will be available to us on acceptable terms or at all, or if we do raise additional capital that it will not be dilutive to existing
shareholders.

 If we determine,
for any reason, that we need to raise capital, subject to applicable NASDAQ rules, our board generally has the authority, without
action by or vote of the shareholders, to issue all or part of any authorized but unissued shares of stock for any corporate purpose,
including issuance of equity-based incentives under or outside of our equity compensation plans. Additionally, we are not restricted
from issuing additional common stock or preferred stock, including any securities that are convertible into or exchangeable for,
or that represent the right to receive, common stock or preferred stock or any substantially similar securities. The market price
of our common stock could decline as a result of sales by us of a large number of shares of common stock or preferred stock or
similar securities in the market or from the perception that such sales could occur. If we issue preferred stock that has a preference
over the common stock with respect to the payment of dividends or upon liquidation, dissolution or winding-up, or if we issue
preferred stock with voting rights that dilute the voting power of the common stock, the rights of holders of the common stock
or the market price of our common stock could be adversely affected. Any issuance of additional shares of stock will dilute the
percentage ownership interest of our shareholders and may dilute the book value per share of our common stock. Shares we issue
in connection with any such offering will increase the total number of shares and may dilute the economic and voting ownership
interest of our existing shareholders.

 Provisions of our articles
of incorporation and bylaws, South Carolina law, and state and federal banking regulations, could delay or prevent a takeover
by a third party.

 Our articles
of incorporation and bylaws could delay, defer, or prevent a third party takeover, despite possible benefit to the shareholders,
or otherwise adversely affect the price of our common stock. Our governing documents:

 authorize a class of preferred stock that
 may be issued in series with terms, including voting rights, established by the board of directors without shareholder approval;

 authorize 20,000,000 shares of common stock
 and 10,000,000 shares of preferred stock that may be issued by the board of directors without shareholder approval;

 classify our board with staggered three-year
 terms, preventing a change in a majority of the board at any annual meeting;

 require advance notice of proposed nominations
 for election to the board of directors and business to be conducted at a shareholder meeting;

 grant the board of directors the discretion,
 when considering whether a proposed merger or similar transaction is in the best interests of the Company and our shareholders,
 to take into account the effect of the transaction on our employees, clients and suppliers and upon the communities in which
 we are located, to the extent permitted by South Carolina law;

 provide that the number of directors shall
 be fixed from time to time by resolution adopted by a majority of the directors then in office, but may not consist of fewer
 than nine nor more than 25 members; and

 provide that no individual who is or becomes
 a "business competitor" or who is or becomes affiliated with, employed by, or a representative of any individual,
 corporation, or other entity which the board of directors, after having such matter formally brought to its attention, determines
 to be in competition with us or any of our subsidiaries (any such individual, corporation, or other entity being a "business
 competitor") shall be eligible to serve as a director if the board of directors determines that it would not be in our
 best interests for such individual to serve as a director (any financial institution having branches or affiliates within
 the counties in which we operate is presumed to be a business competitor unless the board of directors determines otherwise).

the South Carolina business combinations statute provides that a 10% or greater shareholder of a resident domestic corporation
cannot engage in a "business combination" (as defined in the statute) with such corporation for a period of two years
following the date on which the 10% shareholder became such, unless the business combination or the acquisition of shares is approved
by a majority of the disinterested members of such corporation's board of directors before the 10% shareholder's share
acquisition date. This statute further provides that at no time (even after the two-year period subsequent to such share acquisition
date) may the 10% shareholder engage in a business combination with the relevant corporation unless certain approvals of the board
of directors or disinterested shareholders are obtained or unless the consideration given in the combination meets certain minimum
standards set forth in the statute. The law is very broad in its scope and is designed to inhibit unfriendly acquisitions, but
it does not apply to corporations whose articles of incorporation contain a provision electing not to be covered by the law. Our
articles of incorporation do not contain such a provision. An amendment of our articles of incorporation to that effect would,
however, permit a business combination with an interested shareholder even though such status was obtained prior to the amendment.

 Finally, the
Change in Bank Control Act and the Bank Holding Company Act generally require filings and approvals prior to certain transactions
that would result in a party acquiring control of the Company or the Bank.

 An investment in our
common stock is not an insured deposit.

 Our common stock
is not a bank deposit and, therefore, is not insured against loss by the FDIC, any other deposit insurance fund or by any other
public or private entity. An investment in our common stock is inherently risky for the reasons described in this "Risk
Factors" section and elsewhere in this report and is subject to the same market forces that affect the price of common stock
in any company. As a result, if you acquire our common stock, you may lose some or all of your investment.

 General Risk Factors

 Evolving
ESG expectations could increase costs and risks

 Regulatory,
investor, and stakeholder expectations around environmental, social, and governance ("ESG") practices continue to
evolve, potentially increasing compliance costs and operational burdens. Recent shifts in U.S. policies have altered the landscape
of ESG practices. The Trump Administration has rolled back several climate initiatives and withdrawn from international agreements,
such as the Paris Climate Accord. These changes may reduce certain compliance requirements but also introduce uncertainty regarding
future regulations. Stakeholders, including investors and customers, continue to scrutinize corporate ESG practices, and failure
to meet their evolving expectations could impact our reputation and financial performance. Additionally, state-level regulations
and international standards may impose differing ESG requirements, leading to potential operational complexities.

 Climate change could
have a material adverse impact on us and our customers.

 We are
exposed to risks of physical impacts of climate change and risks arising from the process of transitioning to a less carbon-dependent
economy. Climate change-related physical risks include increased severity and frequency of adverse weather events, such as extreme
storms and flooding, and longer-term shifts in climate patterns, such as rising temperatures and sea levels and changes in precipitation
amount and distribution. Such physical risks may have adverse impacts on us, both directly on our business operations and as a
result of impacts on our borrowers and counterparties, such as declines in the value of loans, investments, real estate and other
assets, disruptions in business operations and economic activity, including supply chains, and market volatility.

 The risks
associated with climate change are rapidly changing and evolving, making them difficult to assess due to limited data and other
uncertainties. We could experience increased expenses resulting from strategic planning, litigation, and technology and market
changes, and reputational harm as a result of negative public sentiment, regulatory scrutiny, and reduced investor and stakeholder
confidence due to our response to climate change and our climate change strategy, which, in turn, could have a material negative
impact on our business, results of operations, and financial condition.

 Our historical operating
results may not be indicative of our future operating results.

 We may
not be able to sustain our historical rate of growth, and, consequently, our historical results of operations will not necessarily
be indicative of our future operations. Various factors, such as economic conditions, regulatory and legislative considerations,
and competition, may also impede our ability to expand our market presence. If we experience a significant decrease in our historical
rate of growth, our results of operations and financial condition may be adversely affected because a high percentage of our operating
costs are fixed expenses.

 A downgrade of the U.S.
credit rating could negatively impact our business, results of operations and financial condition.

 Recent developments
have heightened concerns about the U.S. credit rating and its potential impact on our business. In August 2023, Fitch Ratings
downgraded the U.S. long-term credit rating from "AAA" to "AA+", citing expected fiscal deterioration, a high
and growing government debt burden, and erosion of governance standards. Subsequently, in November 2023, Moody's Investors Service
revised its outlook on U.S. ratings to negative, reflecting large fiscal deficits and a decline in debt affordability. These downgrades
underscore the potential risks associated with U.S. fiscal policy, including political polarization and challenges in managing
the national debt. Such factors could lead to increased borrowing costs, market volatility, and a potential decline in investor
confidence. These conditions may adversely affect our business operations, financial condition, and results.

 Item 1B. Unresolved Staff
Comments.

 Not applicable.

 Item 1C. Cybersecurity

 Our risk management
program is designed to identify, assess, and mitigate risks across various aspects of our company, including financial, operational,
regulatory, reputational, and legal. Cybersecurity is a critical component of this program, given the increasing reliance on technology
and potential for cyber threats. Our Information Security Officer has primary oversight of the cybersecurity component of the
Bank's risk management program, together with our Director of Information Technology Infrastructure. Both of these individuals
are key members of senior management, reporting directly to the Chief Operations/Chief Risk Officer and as discussed below, periodically
to the Audit & Compliance Committee of our board of directors.

 Our objective
for managing cybersecurity risk is to avoid or minimize the impacts of external threat events or other efforts to penetrate, disrupt
or misuse our systems or information. The structure of our information security program is designed around the National Institute
of Standards and Technology ("NIST") Cybersecurity Framework, regulatory guidance, and other industry standards. In
addition, we leverage certain industry and government associations, third-party benchmarking, audits, and threat intelligence
feeds to facilitate and promote program effectiveness. Our Information Security Officer and Director of Information Technology
Infrastructure and Chief Operations/Chief Risk Officer along with other key members of management regularly collaborate with expert
resources, industry groups, and regulators to discuss cybersecurity trends and issues and identify best practices. The information
security program is periodically reviewed and reported upon to the Audit & Compliance Committee of the Board with the goal
of addressing changing threats, risks, and conditions.

 We employ an
in-depth, layered, defensive strategy that embraces a "trust by design" philosophy when designing new products, services,
and technology. We leverage people, processes, and technology as part of our efforts to manage and maintain cybersecurity controls.
We also employ a variety of preventative, detective and corrective controls/tools designed to monitor, block, and provide alerts
regarding suspicious activity, as well as to report on suspected advanced persistent threats. We have established processes and
systems designed to mitigate cyber risk, including regular and ongoing education and training, preparedness simulations, tabletop
exercises, and recovery and resilience tests. We engage in regular assessments of our infrastructure, software systems, and network
architecture, using internal cybersecurity measures and third-party specialists. We also maintain a third-party risk management
program designed to identify, assess, and manage risks, including cybersecurity risks, associated with external service providers
and our supply chain. We actively monitor our email gateways for malicious phishing email campaigns and monitor remote connections.
We leverage internal and external auditors and independent external partners to periodically review our processes, systems, and
controls, including with respect to our information security program, to assess their design and operating effectiveness and make
recommendations to strengthen our risk management program.

 We maintain an
Incident Response Program that provides a documented framework for responding to actual or potential cybersecurity incidents,
including timely notification of and escalation to the appropriate executive officers, Board-approved committees, regulators,
law enforcement and the Audit & Compliance Committee of our board of directors. The Incident Response Plan is coordinated
through the Information Security Officer and key members of management are embedded into the Plan by its design. The Incident
Response Plan facilitates coordination across multiple parts of our organization and is evaluated at least annually.

 Notwithstanding
our defensive measures and processes, the threat posed by cyber attacks is severe. Our internal systems, processes, and controls
are designed to mitigate loss from cyber attacks. To date, cybersecurity threats have not materially affected our company, but
we remain diligent, nonetheless. For further discussion of risks from cybersecurity threats, see the section captioned "Our
Information Systems May Experience Failure, Interruption or Breach in Security" in Item 1A. Risk Factors.

 Governance

 Our Information
Security Officer is accountable for oversight, risk assessment and reporting on our information security program, leveraging the
Director of Information Technology Infrastructure and other resources as needed. Responsibilities include cybersecurity risk assessment,
defense operations, incident response, vulnerability assessment, threat intelligence, identity access governance, third-party
risk management, board training, employee training, and business resilience. The foregoing responsibilities are covered on a day-to-day
basis by a first line of defense function, and our second line of defense function, including the Information Security Officer,
provides guidance, oversight, monitoring and challenge of the first line's activities. The second line of defense function
is separated from the first line of defense function through organizational structure and ultimately reports directly to the board
of directors with a functional reporting line to the Chief Operations/Risk Officer. Both the first line of defense and the second
line of defense are subject to experience and professional education requirements. In particular, our Information Security Officer
has substantial relevant expertise and formal training in the areas of information security and cybersecurity risk management.
Our board of directors has approved management committees including the Information Technology Steering Committee, which focuses
on technology impact and business impact. This committee provides oversight and governance of the technology program and the information
security program. This committee is chaired jointly by the Information Security Officer and Director of Information Technology
Infrastructure and made up of key departmental managers from throughout the entire company. Two executive leadership team members
oversee this committee.

 The Information
Security Officer reports summaries of key issues, including significant cybersecurity and/or privacy incidents, to the Audit &
Compliance Committee of our board of directors on a quarterly basis (or more frequently as may be required by the Incident Response
Plan).The Audit & Compliance Committee of our board of directors is responsible for overseeing our information security and
technology programs, including management's actions to identify, assess, mitigate, and remediate or prevent material cybersecurity
issues and risks. Our Information Security Officer also provides quarterly reports to the Audit & Compliance Committee of
our board of directors regarding the information security program and the technology program, key enterprise cybersecurity initiatives,
and other matters relating to cybersecurity processes. The executive leadership team and the board of directors review and approve
our information security and technology budgets and strategies annually.

 Additionally,
the Audit & Compliance Committee of our board of directors reviews our cyber security risk profile on a quarterly basis and
provides a report to the full board of directors at no later than the next board meeting after their meetings.

 Item 2. Properties.

 Our principal
place of business as well as the Bank's is located at 5455 Sunset Boulevard, Lexington, South Carolina 29072. In addition,
we currently operate 21 full-service offices located in the South Carolina counties of Lexington County (6 offices), Richland
County (4 offices), Newberry County (2 offices), Kershaw County (1 office), Aiken County (1 office), Greenville County (2 offices),
Anderson County (1 office), Pickens County (1 office), York County (1 office), and in the Georgia counties of Richmond County
(1 office) and Columbia County (1 office). All of these properties are owned by the Bank except for the downtown Augusta, Georgia
(Richmond County), Greenville, South Carolina, and York County, South Carolina full-service branch offices, which are leased by
the Bank. Although the properties owned are generally considered adequate, we have a continuing program of modernization, expansion
and, when necessary, occasional replacement of facilities. We closed one office in downtown Augusta, Georgia on June 27, 2024.

 Item 3. Legal Proceedings.

 In the
ordinary course of operations, we may be a party to various legal proceedings from time to time. We do not believe that there
is any pending or threatened proceeding against us, which, if determined adversely, would have a material effect on our business,
results of operations, or financial condition.

 Item 4. Mine Safety Disclosures.

 Not applicable.

 PART
II

 Item 5. Market for Registrant's
Common Equity, Related Shareholder Matters, and Issuer Purchases of Equity Securities.

 As of
February 28, 2025, there were approximately 1,716 shareholders of record of our common stock. Our common stock trades on The NASDAQ
Capital Market under the trading symbol of "FCCO."

 Quarterly Common Stock
Price Ranges and Dividends

table sets forth the high and low sales price information as reported by NASDAQ for the periods indicated, and the dividends per
share declared on our common stock in each such quarter. All information has been adjusted for any stock splits and stock dividends
effected during the periods presented.

 High

 Low

 Dividends

 2024

 Quarter ended March 31, 2024

 $

 21.90

 $

 16.00

 $

 0.14

 Quarter ended June 30, 2024

 $

 18.33

 $

 15.40

 $

 0.14

 Quarter ended September 30, 2024

 $

 23.30

 $

 16.06

 $

 0.15

 Quarter ended December 31, 2024

 $

 26.48

 $

 20.49

 $

 0.15

 2023

 Quarter ended March 31, 2023

 $

 22.25

 $

 18.30

 $

 0.14

 Quarter ended June 30, 2023

 $

 21.50

 $

 16.30

 $

 0.14

 Quarter ended September 30, 2023

 $

 20.00

 $

 16.77

 $

 0.14

 Quarter ended December 31, 2023

 $

 22.00

 $

 17.00

 $

 0.14

 Dividend Policy

 We currently
intend to continue to pay quarterly cash dividends on our common stock, subject to approval by our board of directors, although
we may elect not to pay dividends or to change the amount of such dividends. The payment of dividends is a decision of our board
of directors based upon then-existing circumstances, including our rate of growth, profitability, financial condition, existing
and anticipated capital requirements, the amount of funds legally available for the payment of cash dividends, regulatory constraints
and such other factors as the board determines relevant. The Company is a legal entity separate and distinct from the Bank. The
Federal Reserve has issued a policy statement on the payment of cash dividends by bank holding companies, which expresses the
Federal Reserve's view that a bank holding company generally should pay cash dividends only to the extent that the holding
company's net income for the past year is sufficient to cover both the cash dividends and a rate of earnings retention that
is consistent with the holding company's capital needs, asset quality, and overall financial condition. The Federal Reserve
has also indicated that a bank holding company should not maintain a level of cash dividends that places undue pressure on the
capital of its bank subsidiaries, or that can be funded only through additional borrowings or other arrangements that undermine
the bank holding company's ability to act as a source of strength.

ability to pay dividends is generally limited by the ability of the Bank to pay dividends to the Company. As a South Carolina-chartered
bank, the Bank is subject to limitations on the amount of dividends that it is permitted to pay. Unless otherwise instructed by
the S.C. Board, the Bank is generally permitted under South Carolina state banking regulations to pay cash dividends of up to
100% of net income in any calendar year without obtaining the prior approval of the S.C. Board. In addition, the Bank must maintain
a capital conservation buffer, above its regulatory minimum capital requirements, consisting entirely of Common Equity Tier 1
capital, in order to avoid restrictions with respect to its payment of dividends to the Company.

 Unregistered Sales of Equity
Securities

 Pursuant to our
Amended and Restated Non-Employee Director Deferred Compensation Plan, non-employee directors may elect to defer all or any part
of annual retainer fees payable in respect of the following calendar year to the director for his or her service on the board
of directors or any committee of the board of directors. During the year, a number of deferred stock units are credited quarterly
to the director's account equal to (i) the otherwise payable amount divided by (ii) the fair market value of a share of
our common stock on the last trading day of such calendar quarter. In general, a director's vested account balance will
be distributed in a lump sum of our common stock on the 30th day following the participants separation from service. During the
year ended December 31, 2024, we credited an aggregate of 8,533 deferred stock units to accounts for directors who elected to
defer monthly fees or annual retainer fees for 2024. These deferred stock units include dividend equivalents in the form of additional
stock units. The deferred stock units were issued pursuant to an exemption from registration under the Securities Act of 1933
in reliance upon Section 4(a)(2) of the Securities Act of 1933.

 Repurchases of Equity Securities

 On
April 20, 2022, we announced that our board of directors approved the repurchase of up to 375,000 shares of our common stock.
No repurchases were made under such repurchase plan before it expired at the market close on December 31, 2023.

 On
May 14, 2024, we announced that our board of directors approved a plan to utilize up to $7.1 million of capital to repurchase
shares of our common stock (the "2024 Repurchase Plan"), which represented approximately 5.3% of our shareholders'
equity at the time of the announcement. No repurchases have been made under the 2024 Repurchase Plan. The 2024 Repurchase Plan
expires at the market close on May 13, 2025.

 Item 6. [Reserved].

 Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations.

discussion and analysis identifies significant factors that have affected our financial position and operating results during
the periods included in the accompanying financial statements. We encourage you to read this discussion and analysis in conjunction
with the financial statements and the related notes and the other statistical information also included in this Annual Report
on Form 10-K.

 Overview

 We are headquartered
in Lexington, South Carolina and serve as the bank holding company for the Bank. We engage in a general commercial and retail
banking business characterized by personalized service and local decision making, emphasizing the banking needs of small to medium-sized
businesses, professionals and individuals. We operate from our main office in Lexington, South Carolina, and our 21 full-service
offices located in the South Carolina counties of Lexington County (6 offices), Richland County (4 offices), Newberry County (2
offices), Kershaw County (1 office), Aiken County (1 office), Greenville County (2 offices), Anderson County (1 office), Pickens
County (1 office), and York County (1 office); and in the Georgia counties of Richmond County (1 office) and Columbia County (1
office).

discussion describes our results of operations for 2024, as compared to 2023 and 2022, and also analyzes our financial condition
as of December 31, 2024, as compared to December 31, 2023. Like most community banks, we derive most of our income from interest
we receive on our loans and investments. A primary source of funds for making these loans and investments is our deposits, on
which we pay interest. Consequently, one of the key measures of our success is our amount of net interest income, or the difference
between the income on our interest-earning assets, such as loans and investments, and the expense on our interest-bearing liabilities,
such as deposits and borrowings.

 We have included
a number of tables to assist in our description of these measures. For example, the "Average Balances" table shows
the average balance during 2024, 2023 and 2022 of each category of our assets and liabilities, as well as the yield we earned
or the rate we paid with respect to each category. A review of this table shows that our loans typically provide higher interest
yields than do other types of interest earning assets, which is why we intend to channel a substantial percentage of our earning
assets into our loan portfolio. Similarly, the "Rate/Volume Analysis" table helps demonstrate the impact of changing
interest rates and changing volume of assets and liabilities during the years shown. We also track the sensitivity of our various
categories of assets and liabilities to changes in interest rates, and we have included a "Sensitivity Analysis Table"
to help explain this. Finally, we have included a number of tables that provide detail about our investment securities, our loans,
our deposits and our borrowings.

 There
are risks inherent in all loans, so we maintain an allowance for credit losses to absorb expected losses in 2024 and probable
losses in 2023 and 2022 on existing loans that may become uncollectible. We establish and maintain this allowance by charging
a provision for credit losses against our operating earnings. In the following section, we have included a detailed discussion
of this process, as well as several tables describing our allowance for credit losses and the allocation of this allowance among
our various categories of loans.

 In addition to
earning interest on our loans and investments, we earn income through fees and other expenses we charge to our customers. We describe
the various components of this noninterest income, as well as our noninterest expense, in the following discussion. The discussion
and analysis also identifies significant factors that have affected our financial position and operating results during the periods
included in the accompanying financial statements. We encourage you to read this discussion and analysis in conjunction with the
financial statements and the related notes and the other statistical information also included in this report.

 Critical Accounting Estimates

 We have
adopted various accounting policies that govern the application of accounting principles generally accepted in the United States
and with general practices within the banking industry in the preparation of our financial statements. Our significant accounting
policies are described in the notes to our consolidated financial statements in this report.

 Certain
accounting policies inherently involve a greater reliance on the use of estimates, assumptions, and judgments and, as such, have
a greater possibility of producing results that could be materially different than originally reported, which could have a material
impact on the carrying values of our assets and liabilities and our results of operations. We consider these accounting policies
and estimates to be critical accounting policies. We have identified the determination of the allowance for credit losses,
income taxes and deferred tax assets and liabilities, goodwill and other intangible assets, and derivative instruments to be the
accounting areas that require the most subjective or complex judgments and, as such, could be most subject to revision as new
or additional information becomes available or circumstances change, including overall changes in the economic climate and/or
market interest rates Therefore, management has reviewed and approved these critical accounting policies and estimates and has
discussed these policies with our Audit and Compliance Committee.

 As of
January 1, 2023, we adopted Financial Accounting Standards Board ("FASB") Accounting Standard Update ("ASU")
2016-13 Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASC
326"), which changed the methodology, accounting policies and inputs used in determining the allowance for credit losses
("ACL"). We believe the allowance for credit losses is the critical accounting policy that requires the most significant
judgment and estimates used in preparation of our consolidated financial statements.

for credit losses represents our best estimate of credit losses on financial assets. The allowance for credit losses is assessed
at least quarterly and adjustments are recorded in the provision for credit losses. These losses are estimated using historical
loss rates and a projection of reasonable and supportable macroeconomic forecast, combined with additional qualitative factors.
At December 31, 2024 and 2023, we held an allowance for credit losses for our held-to-maturity investment securities, our loans
held-for-investment and our unfunded commitments that are not unconditionally cancelable.

for credit losses represents an amount which we believe will be adequate to absorb expected losses (2024 and 2023) and probable
losses (2022) on existing financial assets that may become uncollectible. Our judgment as to the adequacy of the allowance for
credit losses is based on assumptions about future events, which we believe to be reasonable, but which may or may not prove to
be accurate. There can be no assurance that charge-offs of financial assets in future periods will not exceed the allowance for
credit losses as estimated at any point in time or that provisions for credit losses will not be significant to a particular accounting
period.

for credit losses represents management's best estimate for our expected losses at December 31, 2024 and 2023 and probable
losses at December 31, 2022, but significant downturns in circumstances relating to asset quality and economic conditions could
result in a requirement for additional allowance for credit losses. Likewise, an upturn in asset quality and improved economic
conditions may allow a reduction in the required allowance for credit losses. In either instance, unanticipated changes could
have a significant impact on results of operations. In addition, regulatory agencies, as an integral part of their examination
process, periodically review our allowance for credit losses. Such agencies may require us to recognize additions to the allowance
for credit losses based on their judgments about information available to them at the time of their examination.

 Income Taxes, Deferred Tax Assets,
and Deferred Tax Liabilities

 We are subject
to the income tax laws of the U.S., its states, and the municipalities in which we operate. These tax laws are complex and subject
to different interpretations by the taxpayer and the relevant government taxing authorities.

 Income taxes
are provided for the tax effects of the transactions reported in our consolidated financial statements and consist of taxes currently
due plus deferred taxes related to differences between the tax basis and accounting basis of certain assets and liabilities, including
available-for-sale securities, allowance for credit losses, write-downs of OREO properties, write-downs on premises held-for-sale,
accumulated depreciation, net operating loss carry forwards, accretion income, deferred compensation, intangible assets, and pension
plan and post-retirement benefits. The deferred tax assets and liabilities represent the future tax return consequences of those
differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Deferred tax
assets and liabilities are reflected at income tax rates applicable to the period in which the deferred tax assets or liabilities
are expected to be realized or settled. A valuation allowance is recorded when it is "more likely than not" that a
deferred tax asset will not be realized. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are
adjusted through the provision for income taxes.

 In establishing
our provision for income taxes, our deferred tax assets and liabilities, and our valuation allowance, we must make judgments and
interpretations about the application of these inherently complex tax laws. We must also make estimates about when in the future
certain items will affect taxable income in the various tax jurisdictions. Disputes over interpretations of the tax laws may be
subject to review/adjudication by the court systems of the various tax jurisdictions or may be settled with the taxing authority
upon examination or audit. Although we believe that the judgments and estimates used are reasonable, and we believe our estimates
have been reasonably accurate, actual results could differ, and we may be exposed to losses or gains that could be material. To
the extent we prevail in matters for which reserves have been established, or are required to pay amounts in excess of our reserves,
our effective income tax rate in a given financial statement period could be materially affected. An unfavorable tax settlement
would result in an increase in our effective income tax rate in the period of resolution. A favorable tax settlement would result
in a reduction in our effective income tax rate in the period of resolution.

 Goodwill and Other Intangible

 Goodwill
represents the cost in excess of fair value of the net assets we acquired (including identifiable intangibles) in purchase transactions.
Other intangible assets represent premiums paid for acquisitions of core deposits (core deposit intangibles)

 We
test our goodwill for impairment by evaluating whether the carrying amount exceeds the asset's fair value. This test is
done annually or more frequently if events and circumstances indicate the asset might be impaired.

 Derivative Instruments

 We
utilize derivative instruments to manage risks such as interest rate risk or market risk. Our Derivatives Policy prohibits using
derivatives for speculative purposes.

 Accounting
for derivatives differs significantly depending on whether a derivative is designated as an accounting hedge, which is a transaction
intended to reduce a risk associated with a specific asset or liability or future expected cash flow at the time it is purchased.
In order to qualify as an accounting hedge, a derivative must be designated as such at inception by management and meet certain
criteria. Management must also continue to evaluate whether the instrument effectively reduces the risk associated with that item.
To determine if a derivative instrument continues to be an effective hedge, we must make assumptions and judgments about the continued
effectiveness of the hedging strategies and the nature and timing of forecasted transactions. If our hedging strategy was to become
ineffective, hedge accounting would no longer apply and the reported results of operations or financial condition could be materially
affected.

 Financial Highlights

 As of or For the Years Ended December 31,

 (Dollars in thousands except per share amounts)

 2024

 2023

 2022

 Balance Sheet Data:

 Total assets

 $
 1,958,021

 $
 1,827,688

 $
 1,672,946

 9,662

 4,433

 1,779

 Loans

 Deposits

 1,675,901

 1,511,001

 1,385,382

 Total common shareholders' equity

 118,361

 Total shareholders' equity

 118,361

 Average shares outstanding, basic

 7,617

 7,568

 7,528

 Average shares outstanding, diluted

 7,702

 7,647

 7,608

 Results of Operations:

 Interest income

 $
 89,422

 $
 72,697

 $
 51,117

 37,382

 23,805

 3,174

 52,040

 48,892

 47,943

 1,129

 (152
)

 Net interest income after provision for (release of) credit losses

 51,231

 47,763

 48,095

 Non-interest income

 11,569

 Non-interest expenses

 47,465

 43,144

 41,253

 Income before taxes

 17,770

 15,040

 18,411

 Income tax expense

 3,815

 3,197

 3,798

 Net income available to common shareholders

 Per Share Data:

 Basic earnings per common share

 $
 1.83

 $
 1.56

 $
 1.94

 Diluted earnings per common share

 1.81

 1.55

 1.92

 Book value at period end

 18.90

 17.23

 15.62

 Tangible book value at period end (non-GAAP)

 16.93

 15.23

 13.59

 Dividends per common share

 0.58

 0.56

 0.52

 Asset Quality Ratios:

 Non-performing assets to total assets (3)

 0.04
 %

 0.05
 %

 0.35
 %

 Non-performing loans to period end loans

 0.02
 %

 0.02
 %

 0.50
 %

 Net charge-offs (recoveries) to average loans

 0.01
 %

 0.00
 %

 (0.03
)%

 Allowance for credit losses to period-end total loans

 1.08
 %

 1.08
 %

 1.16
 %

 Allowance for credit losses to non-performing assets

 1,683.70
 %

 1,492.36
 %

 194.41
 %

 Selected Ratios:

 Return on average assets

 0.74
 %

 0.68
 %

 0.88
 %

 Return on average common equity:

 10.17
 %

 9.59
 %

 11.99
 %

 Return on average tangible common equity (non-GAAP):

 11.44
 %

 10.95
 %

 13.73
 %

 Efficiency Ratio (non-GAAP) (1)

 71.56
 %

 71.23
 %

 68.60
 %

 Noninterest income to operating revenue (2)

 21.20
 %

 17.57
 %

 19.44
 %

 Net interest margin (tax equivalent)

 2.92
 %

 3.01
 %

 3.14
 %

 Equity to assets

 7.38
 %

 7.17
 %

 7.08
 %

 Tangible common shareholders' equity to tangible assets (non-GAAP)

 6.66
 %

 6.39
 %

 6.21
 %

 Tier 1 risk-based capital (Bank) (4)

 12.87
 %

 12.53
 %

 13.49
 %

 Total risk-based capital (Bank) (4)

 13.94
 %

 13.58
 %

 14.54
 %

 Leverage (Bank) (4)

 8.40
 %

 8.45
 %

 8.63
 %

 Average loans to average deposits (5)

 74.35
 %

 73.25
 %

 64.92
 %

 (1)

 The efficiency ratio is a key performance
 indicator in our industry. The ratio is calculated by dividing non-interest expense by net interest income on a tax equivalent
 basis and non-interest income, excluding loss on sale of securities, gain on sale of other assets, loss on early extinguishment
 of debt, and other non-recurring noninterest income. The efficiency ratio is a measure of the relationship between operating
 expenses and net revenue.

 (2)

 Operating revenue is defined as net interest
 income plus noninterest income.

 (3)

 Includes non-accrual loans, loans >
 90 days delinquent and still accruing interest and other real estate owned ("OREO").

 (4)

 As a small bank holding company, we are
 generally not subject to the capital requirements at the holding company level unless otherwise advised by the Federal Reserve;
 however, our Bank remains subject to capital requirements.

 (5)

 Includes loans held for sale.

 Certain
financial information presented above is determined by methods other than in accordance with GAAP. These non-GAAP financial measures
include "efficiency ratio," "tangible book value at period end," "return on average tangible common
equity" and "tangible common shareholders' equity to tangible assets." The "efficiency ratio"
is defined as non-interest expense by net interest income on a tax equivalent basis and non-interest income, excluding loss on
sale of securities, gain on sale of other assets, loss on early extinguishment of debt, and other non-recurring noninterest income.
The efficiency ratio is a measure of the relationship between operating expenses and net revenue. "Tangible book value at
period end" is defined as total equity reduced by recorded intangible assets divided by total common shares outstanding.
"Return on average tangible common equity" is defined as net income on an annualized basis divided by average total
equity reduced by average recorded intangible assets. "Tangible common shareholders' equity to tangible assets"
is defined as total common equity reduced by recorded intangible assets divided by total assets reduced by recorded intangible
assets. Our management believes that these non-GAAP measures are useful because they enhance the ability of investors and management
to evaluate and compare our operating results from period-to-period in a meaningful manner. Non-GAAP measures have limitations
as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of our results as reported
under GAAP.

 The table
below provides a reconciliation of non-GAAP measures to GAAP for the three years ended December 31:

 2024

 2023

 2022

 Tangible book value, dollars in thousands

 Tangible common equity (non-GAAP)

 $
 129,411

 $
 115,818

 $
 102,963

 Effect to adjust for intangible assets

 15,083

 15,241

 15,398

 Book value (GAAP)

 $

 $

 $
 118,361

 Tangible book value per common share, dollars

 Tangible common equity per common share (non-GAAP)

 $
 16.93

 $
 15.23

 $
 13.59

 Effect to adjust for intangible assets

 1.97

 2.00

 2.03

 Book value per common share (GAAP)

 $
 18.90

 $
 17.23

 $
 15.62

 Return on average tangible common equity

 Return on average tangible common equity (non-GAAP)

 11.44
 %

 10.95
 %

 13.73
 %

 Effect to adjust for intangible assets

 (1.27
)%

 (1.36
)%

 (1.74
)%

 Return on average common equity (GAAP)

 10.17
 %

 9.59
 %

 11.99
 %

 Tangible common shareholders' equity to tangible assets

 Tangible common equity to tangible assets (non-GAAP)

 6.66
 %

 6.39
 %

 6.21
 %

 Effect to adjust for intangible assets

 0.72
 %

 0.78
 %

 0.87
 %

 Common equity to assets (GAAP)

 7.38
 %

 7.17
 %

 7.08
 %

 Results of Operations

 Year Ended December 31, 2024 and
2023

 Our net income
for the twelve months ended December 31, 2024 was $14.0 million, or $1.81 diluted earnings per common share, as compared to $11.8
million, or $1.55 diluted earnings per common share, for the twelve months ended December 31, 2023. The $2.1 million increase
in net income between the two periods is primarily due to an increase in net interest income of $3.1 million, a decrease in provision
for credit losses of $320 thousand, and an increase in non-interest income of $3.6 million, partially offset by an increase in
non-interest expense of $4.3 million and an increase in income tax expense of $618 thousand.

 The increase in net interest income results
 from an increase of $154.9 million in average earning assets partially offset by a nine basis point decline in the net interest
 margin between the two periods.

 The $809 thousand
 provision for credit losses during the twelve months ended December 31, 2024 is primarily related to a $86.5 million increase
 in loans held-for-investment partially offset by a $43.7 million decrease in unfunded commitments net of unconditionally cancellable
 commitments and a reduction of two basis points in our qualitative factors for our reasonable and supportable forecast alternative
 scenarios qualitative factor. This reduction was driven by an improvement in externally calculated economic forecasts that
 flow into our model.

 The $1.1 million provision for credit losses
 during the twelve months ended December 31, 2023 is primarily related to a $153.2 million increase in loans held-for-investment
 and a $50.9 million increase in unfunded commitments net of unconditionally cancellable commitments partially offset by a
 reduction of five basis points in our qualitative factors (four basis points in our changes in total of past due, rated, and
 non-accrual / changes in total of 30-89 days past due and other loans especially mentioned qualitative factor and one basis
 point in our reasonable and supportable forecast alternative scenarios qualitative factor). The one basis point reduction in
 our reasonable and supportable forecast alternative scenarios factor was driven by an improvement in externally calculated
 economic forecasts that flow into our model.

 The $3.6 million increase in non-interest
 income is primarily related to an increase in mortgage banking income of $962 thousand, an increase in investment advisory
 fees of $1.7 million, a decrease in loss on sale of securities of $1.2 million, and an increase of $88 thousand in other non-interest
 income partially offset by a loss on early extinguishment of debt of $229 thousand and by a decrease in gain on sale of assets
 of $146 thousand.

 o

 The increase in mortgage
 banking income was primarily driven by higher secondary market production and higher gain on sale margin during the twelve
 months ended 2024 compared to the prior year period.

 o

 The
 increase in investment advisory fees was primarily driven by higher assets under management during the twelve months ended
 December 31, 2024 compared to the prior year period.

 o

 The
 increase in other non-interest income was primarily related to an increase in gains on insurance proceeds of $73 thousand
 and an increase in rental income of $25 thousand partially offset by a loss on disposition of assets on the closing of our
 downtown Augusta, Georgia banking office of $6 thousand.

 o

 Loss
 on sale of securities improved by $1.2 million to zero during the twelve months ended December 31, 2024 compared to a loss
 of $1.2 million during the same period in 2023. The $1.2 million loss on sale of securities during 2023 was related
 to the $39.9 million sale of book value U.S. Treasuries in our available-for-sale investment securities portfolio.

 o

 The
 loss on early extinguishment of debt of $229 thousand was related to an early payoff of $35.0 million in FHLB advances.

 The increase in non-interest
 expense is primarily related to an increase of $3.4 million in salaries and employee benefits, an increase in FDIC insurance
 assessments of $273 thousand, an increase of $215 thousand in other real estate expense, and an increase of $597 thousand
 in other non-interest expense, partially offset by a decline of $63 thousand in occupancy expense, and a decline of $115 thousand
 in equipment.

 o

 The increase in other
 non-interest expense was primarily driven by increases of $224 thousand in core banking and electronic processing, $206 thousand
 in ATM/debit card processing, $252 thousand in software subscriptions and services, legal and professional fees of $163 thousand
 and $80 thousand in shareholder expense, partially offset by declines of $51 thousand in correspondent services, $223 thousand
 in debit card and fraud losses, and $95 thousand in loan processing and closing costs.

 Our effective tax
 rate was 21.5% during the twelve months ended December 31, 2024 compared to 21.3% during the twelve months ended December
 31, 2023.

 o

 The effective tax rates were affected by
 a $149 thousand non-recurring reduction to income tax during the twelve months ended December 31, 2024 and by a $122 thousand
 non-recurring reduction to income tax during the twelve months ended December 31, 2023. Furthermore, we purchased
 $500 thousand of South Carolina State Tax Credits for $432.5 thousand in November 2024, which created a $67.5 thousand non-recurring
 benefit to income taxes during the twelve months ended November 2024.

 Year Ended December 31, 2023 and
2022

 Our net income
for the twelve months ended December 31, 2023 was $11.8 million, or $1.55 diluted earnings per common share, as compared to $14.6
million, or $1.92 diluted earnings per common share, for the twelve months ended December 31, 2022. The $2.8 million decline in
net income between the two periods is primarily due to a $1.1 million decline in non-interest income, a $1.9 million increase
in total non-interest expense and a $1.3 million increase in provision for credit losses, partially offset by a $949 thousand
increase in net interest income and a $601 thousand reduction in income tax expense.

 The increase in net interest income results
 from an increase of $90.7 million in average earning assets partially offset by an 11 basis points decline in the net interest
 margin between the two periods.

 The $1.1 million
 provision for credit losses during the twelve months ended December 31, 2023 is primarily related to a $153.2 million increase
 in loans held-for-investment and a $50.9 million increase in unfunded commitments net of unconditionally cancellable commitments
 partially offset by a reduction of five basis points in our qualitative factors (four basis points in our changes in total
 of past due, rated, and non-accrual / changes in total of 30-89 days past due and other loans especially mentioned qualitative
 factor and one basis point in our reasonable and supportable forecast alternative scenarios qualitative factor).

 The $152 thousand in release of credit
 losses during the twelve months ended December 31, 2022 is primarily related to the following: a decrease in our COVID-19
 qualitative factor in our allowance for loan losses methodology and net recoveries during the twelve months ended December
 31, 2022 partially offset by increases in our economic conditions qualitative factor due to inflation, supply chain bottlenecks,
 labor shortages in certain industries, and the war in Ukraine; an increase in our changes in staff qualitative factor due
 to the addition of a new team and new market in York County, South Carolina in March 2022; an increase in our change in total
 of past due, rated, and non-accrual loans qualitative factor due to a $4.1 million loan being moved to non-accrual status
 in June 2022; and loan growth.

 The decline in non-interest income is primarily
 related to a decline in mortgage banking income of $494 thousand and a 2023 $1.2 million loss on sale of securities partially
 offset by an increase of $196 thousand in gains on sale of other real estate owned, $114 thousand in other non-recurring non-interest
 income, and $177 thousand in other non-interest income.

 o

 The increase in other
 non-recurring income was largely related to the bank owned life insurance claim of $93 thousand and gains on insurance proceeds
 of $28 thousand during the twelve months ended December 31, 2023. We recorded $7 thousand in other non-recurring income related
 to gains on insurance proceeds during the twelve months ended December 31, 2022.

 o

 The
 increase in other non-interest income was primarily related to increases of $65 thousand in ATM debit card income, $48 thousand
 in rental income, and $26 thousand in bankcard fees.

 The increase in non-interest
 expense is primarily related to increased salaries and employee benefits expense of $507 thousand, increased occupancy expense
 of $155 thousand, increased equipment expense of $223 thousand, increased marketing and public relations expense of $237 thousand,
 increased FDIC Insurance assessments of $436 thousand, increased ATM/debit card processing of $189 thousand, increased software
 subscriptions and services of $112 thousand, increased telephone expense of $131 thousand, increased debit card and fraud
 losses of $137 thousand, increased director fees of $113 thousand, and increased other expense of $123 thousand, partially
 offset by lower other real estate expense of $420 thousand, lower investment advisory services expense of $80 thousand and
 lower legal and professional fees of $135 thousand.

 Our effective tax
 rate was 21.3% during the twelve months ended December 31, 2023 compared to 20.6% during the twelve months ended December
 31, 2022.

 o

 The effective tax rates were affected by
 a $122 thousand non-recurring reduction to income tax during the twelve months ended December 31, 2023 and by a $153 thousand
 non-recurring reduction to income tax expense during the twelve months ended December 31, 2022.

 Net Interest Income

 Net interest
income is our primary source of revenue. Net interest income is the difference between income earned on assets and interest paid
on deposits and borrowings used to support such assets. Net interest income is determined by the rates earned on our interest-earning
assets and the rates paid on our interest-bearing liabilities, the relative amounts of interest-earning assets and interest-bearing
liabilities, and the degree of mismatch and the maturity and repricing characteristics of our interest-earning assets and interest-bearing
liabilities.

 Year Ended December 31, 2024 and
2023

 Net interest
income increased $3.1 million, or 6.4%, to $52.0 million for the twelve months ended December 31, 2024 from $48.9 million for
the twelve months ended December 31, 2023. Our net interest margin declined by nine basis points to 2.91% during the twelve months
ended December 31, 2024 from 3.00% during the twelve months ended December 31, 2023. Our net interest margin, on a taxable equivalent
basis, was 2.92% for the twelve months ended December 31, 2024 compared to 3.01% for the twelve months ended December 31, 2023.
Average earning assets increased $154.9 million, or 9.5%, to $1.8 billion for the twelve months ended December 31, 2024 compared
to $1.6 billion in the same period of 2023.

 The increase in net
 interest income was primarily due to a higher level of average earning assets partially offset by lower net interest margin.

 The increase in average
 earning assets was due to increases in total loans and interest-bearing deposits in other banks, partially offset by declines
 in securities and other fed funds sold.

 Earning asset yield
 growth, which included the benefit of a pay-fixed/receive-floating interest rate swap (the "Pay-Fixed Swap Agreement")
 described below, was more than offset by the rising cost of funding, leading to the net interest margin compression. However,
 our net interest margin expanded from the low of 2.77% in the month of February 2024 to 3.04% in month of December 2024. Our
 cost of funds and cost of deposits peaked in 2024 during the month of August 2024 at 2.23% and 2.05%, respectively. Our
 cost of funds and cost of deposits were 1.98% and 1.87%, respectively, during the month of December 2024.

 o

 Investment securities represented 27.5%
 of average total earning assets for the twelve months ended December 31, 2024 compared to 33.2% during the same period in
 2023.

 o

 Short-term investments represented 6.2%
 of average total earning assets for the twelve months ended December 31, 2024 compared to 2.6% during the same period in 2023.

 o

 Loans represented 66.3% of average total
 earning assets for the twelve months ended December 31, 2024 compared to 64.2% during the same period in 2023.

 o

 During 2023, market interest rates increased
 significantly due to an increase in inflation. During 2024, market interest rates declined as inflation cooled. The target
 range of federal funds was 4.25% - 4.50% at December 31, 2024 compared to 5.25% - 5.50% at December 31, 2023.

 o

 Effective May 5, 2023, we entered into
 Pay-Fixed Swap Agreement for a notional amount of $150.0 million that was designated as a fair value hedge in order to hedge
 the risk of changes in the fair value of the fixed rate loans included in the closed loan portfolio. This fair value hedge
 converts the hedged loans from a fixed rate to a synthetic floating SOFR rate. The Pay-Fixed Swap Agreement will mature on
 May 5, 2026 and we will pay a fixed coupon rate of 3.58% while receiving the overnight SOFR rate. This interest rate
 swap positively impacted interest on loans by $2.4 million and $1.6 million during the twelve months ended December 31, 2024
 and 2023, respectively. During the twelve months ended December 31, 2024, the swap benefited loan yields with an increase
 of 21 basis points and net interest margin with an increase of 14 basis points. During the twelve months ended December 31,
 2023, the swap benefited loan yields with an increase of 16 basis points and net interest margin with an increase of 10 basis
 points.

 Average loans
increased $136.9 million, or 13.1%, to $1.2 billion for the twelve months ended December 31, 2024 from $1.0 billion for the same
period in 2023. Average loans represented 66.3% of average earning assets during the twelve months ended December 31, 2024 compared
to 64.2% of average earning assets during the same period in 2023. Our loan (including loans held-for-sale) to deposit ratio on
average during 2024 was 74.4%, as compared to 73.2% during 2023. This increase was due to the growth rate on our average loans
(including loans held-for-sale) of 13.1% in 2024 exceeding the growth rate on our deposits of 11.4% during the same time period.
The loan to deposit ratio (including loans held-for-sale) declined to 73.4% at December 31, 2024 as compared to 75.3% at December
31, 2023. Our growth in loans of $91.8 million or 8.1% from December 31, 2023 to December 31, 2024 was exceeded by our growth
in deposits of $164.9 million or 10.4% during the same period.

 The growth in
our average deposits of $162.9 million and securities sold under agreements to repurchase of $2.6 million compared to the growth
in our average loans of $136.9 million resulted in a reduction in borrowings. The yield on loans increased 0.62% to 5.61% during
the twelve months ended December 31, 2024 from 4.99% during the same period in 2023 due to market interest rates and the Pay-Fixed
Swap Agreement. Average securities for the twelve months ended December 31, 2024 declined $50.0 million, or 9.2%, to $491.0 million
from $541.1 million during the same period in 2023. Other short-term investments increased $68.0 million to $110.9 million during
the twelve months ended December 31, 2024 from $42.9 million during the same period in 2023 due to the additional cash on hand
as deposit growth outpaced loan growth. The yield on our securities portfolio increased to 3.90% for the twelve months ended December
31, 2024 from 3.36% for the same period in 2023. The yield on our other short-term investments declined to 4.95% for the twelve
months ended December 31, 2024 from 5.11% for the same period in 2023 due to the Federal Open Market Committee (FOMC) decreasing
the target range of federal funds during the twelve months of 2024 a total of 1.00% to a target federal funds rate range of 4.25%
– 4.50% at December 31, 2023 from a target federal funds rate range of 5.25% – 5.50% at December 31, 2024.

 The yield on
earning assets for the twelve months ended December 31, 2024 and 2023 were 5.00% and 4.45%, respectively.

 The cost of interest-bearing
liabilities was 2.88% during the twelve months ended December 31, 2024 compared to 2.06% during the same period in 2023. The cost
of deposits, including demand deposits, was 1.96% during the twelve months ended December 31, 2024 compared to 1.16% during the
same period in 2023. The cost of funds, including demand deposits, was 2.15% during the twelve months ended December 31, 2024
compared to 1.48% during the same period in 2023. We continue to focus on growing our pure deposits plus customer cash management
repurchase agreements (demand deposits, interest-bearing transaction accounts, savings deposits, money market accounts, IRAs,
and customer cash management repurchase agreements) as these accounts tend to be low-cost deposits and assist us in controlling
our overall cost of funds. During the twelve months ended December 31, 2024, these pure deposits plus customer cash management
repurchase agreements averaged 83.1% of total deposits plus customer cash management repurchase agreements as compared to 89.9%
during the same period of 2023.

 Year Ended December 31, 2023 and
2022

 Net interest
income increased $949,000, or 2.0%, to $48.9 million for the twelve months ended December 31, 2023 from $47.9 million for the
twelve months ended December 31, 2022. Our net interest margin declined by 11 basis points to 3.00% during the twelve months ended
December 31, 2023 from 3.11% during the twelve months ended December 31, 2022. Our net interest margin, on a taxable equivalent
basis, was 3.01% for the twelve months ended December 31, 2023 compared to 3.14% for the twelve months ended December 31, 2022.
Average earning assets increased $90.7 million, or 5.9%, to $1.6 billion for the twelve months ended December 31, 2023 compared
to $1.5 billion in the same period of 2022.

 The increase in net interest income was primarily due to
a higher level of average earning assets partially offset by lower net interest margin.

 The increase in average earning assets was due to increases
in total loans partially offset by declines in securities and other short-term investments.

 Market interest rates increased in 2023, driving an increase
in funding costs. Earning asset yield growth, which included the benefit of the Pay-Fixed Swap Agreement, was more than offset
by the rising price of funding, leading to the net interest margin compression.

 o
 Investment securities represented 33.2% of average total
earning assets for the twelve month ended December 31, 2023 compared to 37.0% during the same period in 2022.

 o
 Short-term investments represented 2.6% of average total
earning assets for the twelve months ended December 31, 2023 compared to 3.3% during the same period in 2022.

 o
 Loans represented 64.2% of average total earning assets
for the twelve months ended December 31, 2023 compared to 59.7% during the same period in 2022.

 o
 During 2022 and 2023, market interest rates increased significantly
due to an increase in inflation. The target range of federal funds was 5.25% - 5.50% at December 31, 2023 compared
to 4.25% - 4.50% at December 31, 2022.

 o
 The interest rate swap under the Pay-Fixed Swap Agreement
positively impacted interest on loans by $1.6 million during the twelve months ended December 31, 2023. Loan yields
and net interest margin both benefited during the twelve months ended December 31, 2023 with an increase of 16 basis points and
10 basis points, respectively.

 Average loans
increased $127.7 million, or 13.9%, to $1.0 billion for the twelve months ended December 31, 2023 from $920.4 million for the
same period in 2022. Average loans represented 64.2% of average earning assets during the twelve months ended December 31, 2023
compared to 59.7% of average earning assets during the same period in 2022. Our loan (including loans held-for-sale) to deposit
ratio on average during 2023 was 73.2%, as compared to 64.9% during 2022. These increases were due to our growth in loans (including
loans held for sale) of $127.7 million exceeding our deposit growth of $13.3 million. The loan to deposit ratio (including loans
held-for-sale) increased to 75.3% at December 31, 2023 as compared to 70.9% at December 31, 2022. Our growth in loans of $155.8
million from December 31, 2022 to December 31, 2023 exceeded our growth in deposits of $125.6 million during the same period.

 The growth in
our average deposits and securities sold under agreements to repurchase compared to the growth in our average loans resulted in
an increase in borrowings. The yield on loans increased 73 basis points to 4.99% during the twelve months ended December 31, 2023
from 4.26% during the same period in 2022 due to market interest rates and the Pay-Fixed Swap Agreement. Average securities for
the twelve months ended December 31, 2023 declined $29.5 million, or 5.2%, to $541.1 million from $570.6 million during the same
period in 2022. Other short-term investments declined $7.5 million to $42.9 million during the twelve months ended December 31,
2023 from $50.5 million during the same period in 2022 due to the deployment of lower yielding other short-term investments into
higher yielding loans. The yield on our securities portfolio increased to 3.36% for the twelve months ended December 31, 2023
from 1.97% for the same period in 2022. The yield on our other short-term investments increased to 5.11% for the twelve months
ended December 31, 2023 from 1.25% for the same period in 2022 due to the Federal Open Market Committee (FOMC) increasing the
target range of federal funds during the twelve months of 2023 a total of 100 basis points and a total of 425 basis points during
the twelve months of 2022. The target range of federal funds was 5.25% - 5.50% at December 31, 2023 compared to compared
to 4.25% - 4.50% at December 31, 2022.

 The yield on
earning assets for the twelve months ended December 31, 2023 and 2022 were 4.45% and 3.32%, respectively.

 The cost of interest-bearing
liabilities was 2.06% during the twelve months ended December 31, 2023 compared to 30 basis points during the same period in 2022.
The cost of deposits, including demand deposits, was 1.16% during the twelve months ended December 31, 2023 compared to 13 basis
points during the same period in 2022. The cost of funds, including demand deposits, was 1.48% during the twelve months ended
December 31, 2023 compared to 21 basis points during the same period in 2022. We continue to focus on growing our pure deposits
plus customer cash management repurchase agreements (demand deposits, interest-bearing transaction accounts, savings deposits,
money market accounts, IRAs, and customer cash management repurchase agreements) as these accounts tend to be low-cost deposits
and assist us in controlling our overall cost of funds. During the twelve months ended December 31, 2023, these pure deposits
plus customer cash management repurchase agreements averaged 89.9% of total deposits plus customer cash management repurchase
agreements as compared to 92.2% during the same period of 2022.

 Average Balances,
Income Expenses and Rates. The following table depicts, for the periods indicated, certain information related to our average
balance sheet and our average yields on assets and average costs of liabilities. Such yields are derived by dividing income or
expense by the average balance of the corresponding assets or liabilities. Average balances have been derived from daily averages.

 2024

 2023

 2022

 Balance

 Income/
 Expense

 Yield/
 Rate

 Balance

 Income/
 Expense

 Yield/
 Rate

 Balance

 Income/
 Expense

 Yield/
 Rate

 Earning assets

 Loans (1)

 $
 1,185,024

 $
 66,431

 5.61
 %

 $
 1,048,118

 $
 52,317

 4.99
 %

 $
 920,379

 $
 39,234

 4.26
 %

 Non-Taxable Securities

 48,761

 1,420

 2.91
 %

 50,726

 1,471

 2.90
 %

 52,501

 1,525

 2.90
 %

 Taxable Securities

 442,278

 16,084

 3.64
 %

 490,352

 16,715

 3.41
 %

 518,051

 9,725

 1.88
 %

 Int Bearing Deposits in Other Banks

 110,844

 5,484

 4.95
 %

 42,859

 2,191

 5.11
 %

 50,435

 1.26
 %

 Fed Funds Sold

 4.76
 %

 5.36
 %

 —

 0.00
 %

 Total earning assets

 $
 1,786,970

 $
 89,422

 5.00
 %

 $
 1,632,111

 $
 72,697

 4.45
 %

 $
 1,541,381

 $
 51,117

 3.32
 %

 Cash and due from banks

 24,126

 25,278

 27,034

 Premises and equipment

 30,313

 31,145

 32,274

 Goodwill and other intangible assets

 15,161

 15,319

 15,476

 Other assets

 53,948

 54,840

 48,031

 Allowance for credit losses-investments

 (27
)

 (39
)

 —

 Allowance for credit losses-loans

 (12,736
)

 (11,677
)

 (11,250
)

 Total assets

 $
 1,897,755

 $
 1,746,977

 $
 1,652,946

 Interest-bearing liabilities

 Interest-bearing transaction accounts

 $
 311,101

 $
 3,451

 1.11
 %

 $
 307,415

 $
 1,760

 0.57
 %

 $
 336,115

 $

 0.08
 %

 Money market accounts

 417,178

 13,824

 3.31
 %

 361,994

 9,721

 2.69
 %

 308,473

 0.31
 %

 Savings deposits

 112,473

 0.38
 %

 133,010

 0.23
 %

 157,626

 0.06
 %

 309,509

 13,468

 4.35
 %

 178,339

 4,775

 2.68
 %

 146,112

 0.36
 %

 Fed Funds Purchased

 8.33
 %

 1,100

 4.73
 %

 1,496

 3.54
 %

 Securities Sold Under Agreements to Repurchase

 77,158

 2,183

 2.83
 %

 74,586

 1,658

 2.22
 %

 74,805

 0.30
 %

 FHLB Advances

 54,822

 2,808

 5.12
 %

 86,614

 4,345

 5.02
 %

 9,457

 3.91
 %

 Other Long-Term Debt

 1,217

 8.13
 %

 1,187

 7.93
 %

 4.51
 %

 Total interest-bearing liabilities

 $
 1,297,217

 $
 37,382

 2.88
 %

 $
 1,158,022

 $
 23,805

 2.06
 %

 $
 1,049,048

 $
 3,174

 0.30
 %

 Demand deposits

 443,571

 450,177

 469,292

 Allowance for credit losses-unfunded commitments

 —

 Other liabilities

 19,295

 14,837

 12,725

 Shareholders' equity

 $
 137,171

 $
 123,477

 $
 121,881

 Total liabilities and shareholders' equity

 $
 1,897,755

 $
 1,746,977

 $
 1,652,946

 Cost of deposits, including demand deposits

 1.96
 %

 1.16
 %

 0.13
 %

 Cost of funds, including demand deposits

 2.15
 %

 1.48
 %

 0.21
 %

 Net interest spread

 2.12
 %

 2.39
 %

 3.01
 %

 Net interest income/margin

 $
 52,040

 2.91
 %

 $
 48,892

 3.00
 %

 $
 47,943

 3.11
 %

 Net interest margin (tax equivalent) (2)

 $
 52,198

 2.92
 %

 $
 49,176

 3.01
 %

 $
 48,455

 3.14
 %

 (1)

 All
 loans and deposits are domestic. Average loan balances include non-accrual loans and loans held for sale.

 (2)

 Based on a 21.0% marginal
 tax rate.

table presents the dollar amount of changes in interest income and interest expense attributable to changes in volume and the
amount attributable to changes in rate. The combined effect related to volume and rate which cannot be separately identified,
has been allocated proportionately, to the change due to volume and the change due to rate.

 2024 versus 2023
 Increase (decrease) due to

 2023 versus 2022
 Increase (decrease) due to

 Volume

 Rate

 Net

 Volume

 Rate

 Net

 Earning assets

 Loans

 $
 7,267

 $
 6,847

 $
 14,114

 $
 5,862

 $
 7,221

 $
 13,083

 Investment securities-taxable

 (57
)

 (51
)

 (51
)

 (3
)

 (54
)

 Investment securities- nontaxable

 (1,704
)

 1,073

 (631
)

 (490
)

 7,480

 6,990

 Interest bearing deposits in other banks

 3,366

 (73
)

 3,293

 (80
)

 1,638

 1,558

 Fed Funds sold

 —

 —

 —

 —

 Total earning assets

 8,872

 7,853

 16,725

 5,241

 16,339

 21,580

 Interest-bearing liabilities

 Interest-bearing transaction accounts

 1,670

 1,691

 (21
)

 1,508

 1,487

 Money market accounts

 1,619

 2,484

 4,103

 8,587

 8,778

 Savings deposits

 (53
)

 (13
)

 4,699

 3,994

 8,693

 4,102

 4,244

 Fed funds purchased

 (74
)

 (51
)

 (5
)

 (1
)

 Securities sold under agreements to repurchase

 (1
)

 1,432

 1,431

 FHLB Advances

 (1,627
)

 (1,537
)

 3,842

 3,975

 Other long-term debt

 —

 —

 Total interest-bearing liabilities

 4,644

 8,933

 13,577

 4,144

 16,487

 20,631

 4,228

 (1,080
)

 $
 3,148

 $

 Market Risk and Interest
Rate Sensitivity

 Market risk reflects
the risk of economic loss resulting from adverse changes in market prices and interest rates. The risk of loss can be measured
in either diminished current market values or reduced current and potential net income. Our primary market risk is interest rate
risk. We have established an Asset/Liability Committee of the board of directors (the "ALCO"), which has members from
our board of directors and management to monitor and manage interest rate risk. Our ALCO

 monitors our compliance with regulatory
 guidance in the formulation and implementation of our interest rate risk program;

 reviews the results of our interest rate
 risk modeling quarterly to assess whether we have appropriately measured our interest rate risk, mitigated our exposures appropriately
 and confirmed that any residual risk is acceptable;

 monitors and manages the pricing and maturity
 of our assets and liabilities in order to diminish the potential adverse impact that changes in interest rates could have
 on our net interest income; and

 has established policies, policy guidelines,
 and strategies with respect to interest rate risk exposure and liquidity.

 Further, our ALCO and board of directors
explicitly review our ALCO policies at least annually and review our ALCO assumptions and policy limits quarterly.

 We employ a monitoring
technique to measure our interest sensitivity "gap," which is the positive or negative dollar difference between assets
and liabilities that are subject to interest rate repricing within a given period of time. Simulation modeling is performed to
assess the impact varying interest rates and balance sheet mix assumptions will have on net interest income. We model the impact
on net interest income for several different changes in the yield curve. We model the impact on net interest income in an increasing
and decreasing rate environment of 100, 200, 300, and 400 basis points. We also periodically stress certain assumptions such as
loan prepayment rates, average lives, interest rate betas, and deposit migration to evaluate our overall sensitivity to changes
in interest rates. Policies have been established in an effort to maintain the maximum anticipated negative impact of these modeled
changes in net interest income at no more than 10%, 15%, 20%, and 20%, respectively, in a 100, 200, 300, and 400 basis point change
in interest rates over the first 12-month period subsequent to interest rate changes. Interest rate sensitivity can be managed
by repricing assets or liabilities, selling securities available-for-sale, replacing an asset or liability at maturity, by adjusting
the interest rate during the life of an asset or liability, or by the use of derivatives such as interest rate swaps and other
hedging instruments. Managing the amount of assets and liabilities repricing in the same time interval helps to hedge the risk
and minimize the impact on net interest income of rising or falling interest rates. Neither the "gap" analysis or
asset/liability modeling are precise indicators of our interest sensitivity position due to the many factors that affect net interest
income including, the timing, magnitude, and frequency of interest rate changes as well as changes in the volume and mix of earning
assets and interest-bearing liabilities.

table illustrates our interest rate sensitivity at December 31, 2024.

 Interest Sensitivity Analysis

 Within
 One
 Year

 One to
 Three
 Years

 Three to
 Five
 Years

 Over
 Five
 Years

 Total

 Earning assets

 Interest bearing deposits

 $
 123,455

 $
 —

 $
 —

 $
 —

 $
 123,455

 Loans (1)

 325,156

 378,381

 356,469

 160,536

 Loans Held for Sale

 9,662

 —

 —

 —

 9,662

 Total Securities (2)

 56,952

 83,653

 147,434

 203,635

 491,674

 Total earning assets

 513,782

 462,034

 503,903

 363,171

 1,845,333

 Interest bearing liabilities

 Interest bearing deposits

 Interest checking accounts

 20,788

 41,576

 41,574

 234,574

 338,512

 Money market accounts

 26,539

 53,076

 53,077

 299,391

 432,083

 Savings deposits

 6,998

 14,000

 13,999

 78,931

 318,172

 8,453

 2,024

 328,661

 Total interest-bearing deposits

 372,497

 117,105

 110,674

 612,908

 1,213,184

 Borrowings

 118,074

 —

 —

 —

 118,074

 Total interest-bearing liabilities

 490,571

 117,105

 110,674

 612,908

 1,331,258

 Period gap

 $
 24,654

 $
 344,929

 $
 393,229

 $
 (248,737
)

 $
 514,075

 Cumulative gap

 $
 24,654

 $
 369,583

 $
 762,812

 $
 514,075

 $
 514,075

 Ratio of cumulative gap to total earning assets

 4.79
 %

 37.82
 %

 51.50
 %

 27.86
 %

 27.86
 %

 (1)

 Loans
 classified as non-accrual as of December 31, 2024 are not included in the balances.

 (2)

 Securities based on amortized cost.

 Based on the
many factors and assumptions used in simulating the effect of changes in interest rates, the following table estimates the hypothetical
percentage change in net interest income at December 31, 2024 and at December 31, 2023 over the subsequent 12 months. We were
liability sensitive at December 31, 2024 and primarily liability sensitive at December 31, 2023. In 2023, we increased our non-maturity
deposit interest rate betas in increasing rate environments, which increased our liability sensitivity at December 31, 2023. This
was partially offset by the previously mentioned $150.0 million Pay-Fixed Swap Agreement that we entered into effective May 5,
2023. Furthermore, we reduced the average live on our non-maturity deposits at June 30, 2024. As a result, our modeling, at December
31, 2024, reflects a decrease in net interest income in a rising interest rate environment during the first 12-month period subsequent
to interest rate changes. The negative impact of rising rates on net interest income is slightly less liability sensitive during
the second 12-month period subsequent to interest rate changes. In a declining interest rate environment, the model reflects increases
in net interest income in all of the scenarios during the first 12-month period subsequent to interest rate changes. The positive
impact in the down 100, down 200, and down 300 basis point scenarios of declining rates changes to a slightly less positive impact
on net interest income during the second 12-month period subsequent to interest rate changes. In the down 400 basis point scenario,
the model reflects a slight decrease. The increase and decrease of 100, 200, 300, and 400 basis points, respectively, reflected
in the table below assume a simultaneous and parallel change in interest rates along the entire yield curve.

 Net Interest
Income Sensitivity

 Change
 in short-term interest rates

 Hypothetical
 percentage change in
 net interest income

 31,
 2024

 31,
 2023

 +400bp

 -13.27

 %

 -12.24

 %

 +300bp

 -9.20

 %

 -8.92

 %

 +200bp

 -5.23

 %

 -5.62

 %

 +100bp

 -2.18

 %

 -2.47

 %

 Flat

 —

 —

 -100bp

 +2.12

 %

 +0.94

 %

 -200bp

 +3.77

 %

 +1.18

 %

 -300bp

 +3.04

 %

 -1.11

 %

 -400bp

 +0.76

 %

 -1.50

 %

 During the second
12-month period after 100 basis point, 200 basis point, 300 basis point, and 400 basis point simultaneous and parallel increases
in interest rates along the entire yield curve, our net interest income is projected to decline 2.04%, 4.96%, 8.75%, and 12.70%,
respectively, at December 31, 2024, and decline 1.94%, 4.67%, 7.63%, and 10.68%, respectively, at December 31, 2023. During the
second 12-month period after 100 basis point, 200 basis point, 300 basis point, and 400 basis point simultaneous and parallel
reduction in interest rates along the entire yield curve, our net interest income is projected to increase 1.80%, 2.91%, and 1.46%
and decline 1.75%, respectively, at December 31, 2024, and to increase 0.51% and decline 0.03%, 3.19%, and 4.41%, respectively,
at December 31, 2023.

 We perform a
valuation analysis projecting future cash flows from assets and liabilities to determine the Present Value of Equity ("PVE")
over a range of changes in market interest rates. The sensitivity of PVE to changes in interest rates is a measure of the sensitivity
of earnings over a longer time horizon. Policies have been established in an effort to maintain the maximum anticipated negative
impact of these modeled changes in PVE at no more than 15%, 20%, 25%, and 25%, respectively, in a 100, 200, 300, and 400 basis
point change in market interest rates. Based on PVE, we were primarily asset sensitive at December 31, 2024 and asset sensitive
at December 31, 2023. However, in the up 300 and 400 basis point scenarios, present value of equity declines 1.47% and 3.72%,
respectively, at December 31, 2024.

 Present Value
of Equity Sensitivity

 Change
 in present value of equity

 Hypothetical
 percentage change in
 PVE

 31,
 2024

 31,
 2023

 +400bp

 -3.72

 %

 +1.49

 %

 +300bp

 -1.47

 %

 +0.44

 %

 +200bp

 +0.23

 %

 +1.54

 %

 +100bp

 +0.92

 %

 +1.59

 %

 Flat

 —

 —

 -100bp

 -2.31

 %

 -3.91

 %

 -200bp

 -6.80

 %

 -10.63

 %

 -300bp

 -14.97

 %

 -23.39

 %

 -400bp

 -27.07

 %

 -47.74

 %

 Provision and Allowance for Credit

 Year Ended December 31, 2024 and
2023

 On January
1, 2023, we adopted CECL, which resulted in a day one reduction of $14 thousand to the allowance for credit losses on loans
offset by increases of $398 thousand to the allowance for credit losses on unfunded commitments and $43.5 thousand to the
allowance for credit losses on held-to-maturity investments. Furthermore, deferred tax assets increased $90 thousand and retained
earnings declined $337 thousand. During the twelve months ended December 31, 2024, the allowance for credit losses on loans increased
$868 thousand to $13.1 million, the allowance for credit losses on unfunded commitments declined $117 thousand to $480 thousand,
and the allowance for credit loss on held-to-maturity investments declined $7 thousand to $23 thousand. Compared to the day one
CECL results, the allowance for credit losses on loans increased $945 thousand to $12.3 million at December 31, 2023 from $11.3
million at January 1, 2023; the allowance for credit losses on unfunded commitments increased $199 thousand to $597 thousand as
of December 31, 2023 from $398 thousand as of January 1, 2023; and the allowance for credit losses on held-to-maturity investments
declined $14 thousand to $30 thousand at December 31, 2023 from $43.5 thousand at January 1, 2023. At December 31, 2024, the combined
allowance for credit losses for loans, unfunded commitments, and investments was $13.6 million compared to $12.9 million at December
31, 2023 and $11.8 million at January 1, 2023.

for credit losses on loans as a percentage of total loans held-for-investment was 1.08% at December 31, 2024, 1.08% at December
31, 2023 and 1.15% at January 1, 2023.

 The total ACL
is composed of three parts: the ACL for loans, the ACL for unfunded commitments, and the ACL for HTM investments. The ACL for
loans is further composed of the allowance for individually assessed loans, the allowance for collectively assessed expected losses,
the allowance for collectively assessed qualitative adjustments, and the allowance for collectively assessed additional allowance.
The allowance for collectively assessed qualitative adjustments is calculated using a set of qualitative factors, which at December
31, 2024 and 2023 included the following factors:

 Qualitative Factors

 (in basis points)

 2024

 2023

 Changes in lending policies and procedures

 Changes in staff, markets, and products

 Change in total of 30-89 days past due and other loans especially mentioned

 Changes in the loan review system

 Change in collateral value for non-collateral dependent loans

 Changes in concentration of credits

 Changes in the legal or regulatory requirements and competition

 Data limitations

 Model imprecision

 Reasonable and supportable forecast alternative scenarios

 Total Basis Points

 We have a significant
portion of our loan portfolio with real estate as the underlying collateral. As of December 31, 2024 and December 31, 2023,
approximately 91.4% and 91.7%, respectively, of the loan portfolio had real estate collateral. When loans, whether commercial
or personal, are granted, they are based on the borrower's ability to generate repayment cash flows from income sources
sufficient to service the debt. Real estate is generally taken to reinforce the likelihood of the ultimate repayment and as a
secondary source of repayment. We work closely with all our borrowers that experience cash flow or other economic problems, and
we believe that we have the appropriate processes in place to monitor and identify problem credits. There can be no assurance
that charge-offs of loans in future periods will not exceed the allowance for credit losses as estimated at any point in time
or that provisions for credit losses will not be significant to a particular accounting period. The allowance is also subject
to examination and testing for adequacy by regulatory agencies, which may consider such factors as the methodology used to determine
adequacy and the size of the allowance relative to that of peer institutions. Such regulatory agencies could require us to adjust
our allowance based on information available to them at the time of their examination.

 The non-performing asset
ratio was 0.04% of total assets with the nominal level of $810 thousand in non-performing assets at December 31, 2024 compared to 0.05%
and $864 thousand at December 31, 2023. Non-accrual loans increase to $219 thousand at December 31, 2024 from $27 thousand at December
31, 2023. We had $48 thousand in accruing loans past due 90 days or more at December 31, 2024 compared to $215 thousand at December 31,
2023. Loans past due 30 days or more represented 0.05% of the loan portfolio at December 31, 2024 compared to 0.06% at December 31, 2023. The
ratio of classified loans plus OREO and repossessed assets declined to 1.06% of total bank regulatory risk-based capital at December
31, 2024 from 1.25% at December 31, 2023. During the twelve months ended December 31, 2024, we experienced net loan recoveries of $6
thousand (charge-offs of $97 thousand less recoveries of $103 thousand) and net overdraft charge-offs of $71 thousand (charge-offs of
$87 thousand less recoveries of $16 thousand). In comparison, we experienced net loan recoveries of $55 thousand and net overdraft
charge-offs of $49 thousand during the twelve months ended December 31, 2023.

 There were five
loans totaling $267 thousand (0.02% of total loans) included on non-performing status (non-accrual loans and loans past due 90
days and still accruing) at December 31, 2024. Two of these loans were on non-accrual status. The largest loan of the two is $217
thousand and is secured by a first lien mortgage. The balance of the remaining loan on non-accrual status is $2 thousand and it
is secured by a second lien mortgage. We had two loans totaling $215 thousand that were accruing loans past due 90 days or more
at December 31, 2023. At December 31, 2024 and December 31, 2023, we considered loan relationships exceeding $500 thousand and
on non-accrual status as individually assessed loans for the allowance for credit losses. At December 31, 2024 and December 31,
2023, we had no individually assessed loans. The specific allowance for individually assessed loans is based on the fair value
of collateral method or present value of expected cash flows method. For collateral dependent loans, the fair value of collateral
method is used and the fair value is determined by an independent appraisal less estimated selling costs. There were no specific
allowances for credit losses on our individually assessed loans at December 31, 2024 and December 31, 2023. At December 31, 2024,
we had $554 thousand in loans that were delinquent 30 days to 89 days representing 0.05% of total loans compared to $498 thousand
or 0.04% of total loans at December 31, 2023.

 Year Ended December 31, 2023 and
2022

 On January
1, 2023, we adopted CECL, which resulted in a day one reduction of $14 thousand to the allowance for credit losses on loans
offset by increases of $398 thousand to the allowance for credit losses on unfunded commitments and $43.5 thousand to the
allowance for credit losses on held-to-maturity investments. Furthermore, deferred tax assets increased $90 thousand and retained
earnings declined $337 thousand. Refer to the "Application of New Accounting Guidance Adopted in 2023" section in
Note 2 for more information about our CECL adoption and methodology. Compared to the day one CECL results, the allowance for credit
losses on loans increased $945 thousand to $12.3 million at December 31, 2023 from $11.3 million at January 1, 2023; the allowance
for credit losses on unfunded commitments increased $199 thousand to $597 thousand as of December 31, 2023 from $398 thousand
as of January 1, 2023; and the allowance for credit losses on held-to-maturity investments declined $14 thousand to $30 thousand
at December 31, 2023 from $43.5 thousand at January 1, 2023. As of December 31, 2023, the combined allowance for credit losses
for loans, unfunded commitments, and investments was $12.9 million compared to $11.8 million at January 1,
2023 and $11.3 million at December 31, 2022.

for credit losses on loans as a percentage of total loans held-for-investment was 1.08% at December 31, 2023, 1.15% at January
1, 2023, and 1.16% at December 31, 2022.

 The total ACL
is composed of three parts: the ACL for loans, the ACL for unfunded commitments, and the ACL for HTM investments. The ACL for
loans is further composed of the allowance for individually assessed loans, the allowance for collectively assessed expected losses,
the allowance for collectively assessed qualitative adjustments, and the allowance for collectively assessed additional allowance.
The allowance for collectively assessed qualitative adjustments is calculated using a set of qualitative factors, which at December
31, 2023 included the following factors:

 Qualitative Factors

 (in basis points)

 2023

 Changes in lending policies and procedures

 Changes in staff, markets, and products

 Change in total of 30-89 days past due and other loans especially mentioned

 Changes in the loan review system

 Change in collateral value for non-collateral dependent loans

 Changes in concentration of credits

 Changes in the legal or regulatory requirements and competition

 Data limitations

 Model imprecision

 Reasonable and supportable forecast alternative scenarios

 Total Basis Points

 Refer to the
"Application of New Accounting Guidance Adopted in 2023" section in Note 2 for more information about our CECL adoption
and methodology.

 We have a significant
portion of our loan portfolio with real estate as the underlying collateral. As of December 31, 2023 and December 31, 2022,
approximately 91.7% and 91.2%, respectively, of the loan portfolio had real estate collateral. When loans, whether commercial
or personal, are granted, they are based on the borrower's ability to generate repayment cash flows from income sources
sufficient to service the debt. Real estate is generally taken to reinforce the likelihood of the ultimate repayment and as a
secondary source of repayment. We work closely with all our borrowers that experience cash flow or other economic problems, and
we believe that we have the appropriate processes in place to monitor and identify problem credits. There can be no assurance
that charge-offs of loans in future periods will not exceed the allowance for credit losses as estimated at any point in time
or that provisions for credit losses will not be significant to a particular accounting period. The allowance is also subject
to examination and testing for adequacy by regulatory agencies, which may consider such factors as the methodology used to determine
adequacy and the size of the allowance relative to that of peer institutions. Such regulatory agencies could require us to adjust
our allowance based on information available to them at the time of their examination.

 The non-performing
asset ratio was 0.05% of total assets with the nominal level of $864 thousand in non-performing assets at December 31, 2023 compared
to 0.35% and $5.8 million at December 31, 2022. Non-accrual loans declined to $27 thousand at December 31, 2023 from $4.9 million
at December 31, 2022. The declines in both non-performing assets and non-accrual loans from December 31, 2022 to December 31,
2023 were due to non-accrual loan payoffs and paydowns primarily due to the successful resolution of two customer relationships
with three non-accrual loans totaling $716 thousand, which were paid-off during the first quarter of 2023; and due to one large
loan relationship totaling $3.9 million, which was resolved during the second quarter of 2023. The resolution of the $3.9 million
loan relationship during the second quarter of 2023 occurred through the foreclosure process followed by the timely sale of the
real estate at a gain of $105 thousand. We had $215 thousand in accruing loans past due 90 days or more at December 31, 2023 compared
to $2 thousand at December 31, 2022. Loans past due 30 days or more represented 0.06% of the loan portfolio at December 31, 2023
compared to 0.06% at December 31, 2022. The ratio of classified loans plus OREO and repossessed assets declined to 1.25%
of total bank regulatory risk-based capital at December 31, 2023 from 4.47% at December 31, 2022. During the twelve months ended
December 31, 2023, we experienced net loan recoveries of $55 thousand (charge-offs of $24 thousand less recoveries of $79 thousand)
and net overdraft charge-offs of $49 thousand (charge-offs of $63 thousand and recoveries of $14 thousand). In comparison, we
experienced net loan recoveries of $361 thousand and net overdraft charge-offs of $52 thousand during the twelve months ended
December 31, 2022.

 There were four
loans totaling $242 thousand (0.02% of total loans) included on non-performing status (non-accrual loans and loans past due 90
days and still accruing) at December 31, 2023. Two of these loans were on non-accrual status. The largest loan of the two is $24
thousand and is secured by a truck. The balance of the remaining loan on non-accrual status is $3 thousand and it is secured by
a second mortgage lien. Furthermore, we had $88 thousand in accruing trouble debt restructurings, or TDRs, at December 31, 2022.
We had two loans totaling $215 thousand that were accruing loans past due 90 days or more at December 31, 2023. At December 31,
2023, we considered loan relationships exceeding $500 thousand and on non-accrual status as individually assessed loans for the
allowance for credit losses. At December 31, 2023, we had no individually assessed loans. At December 31, 2022, we considered
a loan impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due,
including both principal and interest, according to the contractual terms of the loan agreement. Non-accrual loans and accruing
TDRs were considered impaired. At December 31, 2022, we had 11 impaired loans totaling $5.0 million. The specific allowance for
individually assessed loans is based on the fair value of collateral method or present value of expected cash flows method. For
collateral dependent loans, the fair value of collateral method is used and the fair value is determined by an independent appraisal
less estimated selling costs. There was no specific allowance for credit losses on our individually assessed loans at December
31, 2023 and December 31, 2022. At December 31, 2023, we had $498 thousand in loans that were delinquent 30 days to 89 days representing
0.04% of total loans compared to $564 thousand or 0.06% of total loans at December 31, 2022.

 Year Ended December 31, 2022

 We accounted
for our allowance for loan losses under the incurred loss model during 2022 and 2021. At December 31, 2022, the allowance for
credit losses was $11.3 million, or 1.16% of total loans (excluding loans held-for-sale), compared to $11.2 million, or 1.29%
of total loans (excluding loans held-for-sale) at December 31, 2021. Excluding PPP loans and loans held-for-sale, the allowance
for credit losses was 1.16% of total loans at December 31, 2022 compared to 1.30% of total loans at December 31, 2021. The decline
in the allowance for credit losses as a percentage of total loans compared to December 31, 2021 is primarily related to a reduction
in the loss emergence period assumption in our COVID-19 qualitative factor, which was added to our allowance for credit losses
methodology during 2020 and is discussed below. The loss emergence assumption on our COVID-19 qualitative factor was reduced to
zero months at December 31, 2022 from 21 months at December 31, 2021. This reduction was partially offset by loan growth of $117.2
million; $309 thousand in net recoveries; an increase in our economic conditions qualitative factor by six basis points due to
higher inflation, supply chain bottlenecks, labor shortages in certain industries, and the war in Ukraine; an increase in our
change in staff qualitative factor by one basis point due to the addition of a new team and new market in York County, South Carolina
in March 2022; and an increase in our change in total of past due, rated, and non-accrual loans qualitative factor by two basis
points due to a $4.1 million loan being moved to non-accrual status in June 2022. This loan has a loan-to-value of 76.3% based
on an appraisal received in May 2022.

 During 2020,
we added a qualitative factor for the COVID-19 pandemic to our allowance for credit losses methodology. This qualitative factor
was based on the dollar amount of our deferrals and a one-year loss emergence period based on the highest period of annual historical
loss rate since the Bank's inception. As the pandemic worsened, we added our exposure to certain industry segments most
impacted by the COVID-19 pandemic (hotels, restaurants, assisted living, and retail) to the COVID-19 qualitative factor and we
extended the loss emergence period to two years based on the highest two periods of annual historical loss rates since the Bank's
inception. The loss emergence period assumption in the COVID-19 qualitative factor was reduced to zero months at December 31,
2022 from 21 months at December 31, 2021. At December 31, 2022 and December 31, 2021, the COVID-19 qualitative factor represented
zero dollars and $1.9 million, respectively, of our allowance for credit losses.

 Loans that we
acquired in our acquisition of Cornerstone Bancorp, otherwise referred to herein as Cornerstone, in 2017 as well as in our acquisition
of Savannah River Financial Corp., otherwise referred to herein as Savannah River, in 2014 are accounted for under FASB ASC 310-30.
These acquired loans were initially measured at fair value, which includes estimated future credit losses expected to be incurred
over the life of the loans. The credit component on loans related to cash flows not expected to be collected is not subsequently
accreted (non-accretable difference) into interest income. Any remaining portion representing the excess of a loan's or
pool's cash flows expected to be collected over the fair value is accreted (accretable difference) into interest income.
At December 31, 2022, the remaining credit component on loans attributable to acquired loans in the Cornerstone and Savannah River
transactions was $81 thousand.

 Our provision
for credit losses was a credit of $152 thousand for the twelve months ended December 31, 2022 compared to an expense of $335 thousand
during the same period in 2021. The reduction in provision for credit losses is primarily related to a decrease in our COVID-19
qualitative factor in our allowance for credit losses methodology and net recoveries during the twelve months of 2022, partially
offset by increases in our economic conditions, change in staff, and changes in past due, rated, and non-accrual loan qualitative
factors and loan growth as discussed above.

for credit losses represents an amount that we believe will be adequate to absorb probable losses on existing loans that may become
uncollectible. Our judgment as to the adequacy of the allowance for credit losses is based on assumptions about future events,
which we believe to be reasonable, but which may or may not prove to be accurate. Our determination of the allowance for credit
losses is based on evaluations of the collectability of loans, including consideration of factors such as the balance of impaired
loans, the quality, mix, and size of our overall loan portfolio, the knowledge and depth of lending personnel, economic conditions
(local and national) that may affect the borrower's ability to repay, the amount and quality of collateral securing the
loans, our historical credit loss experience, and a review of specific problem loans. We also consider qualitative factors such
as changes in the lending policies and procedures, changes in the local or national economies, changes in volume or type of credits,
changes in volume/severity of problem loans, quality of loan review and board of director oversight, and concentrations of credit.
We charge recognized losses to the allowance and add subsequent recoveries back to the allowance for credit losses. There can
be no assurance that charge-offs of loans in future periods will not exceed the allowance for credit losses as estimated at any
point in time or that provisions for credit losses will not be significant to a particular accounting period.

 We perform an
analysis quarterly to assess the risk within the loan portfolio. The portfolio is segregated into similar risk components for
which historical loss ratios are calculated and adjusted for identified changes in current portfolio characteristics. Historical
loss ratios are calculated by product type and by regulatory credit risk classification (See Note 4 to the Consolidated Financial
Statements). The annualized weighted average loss ratios over the last 36 months for loans classified as substandard, special
mention and pass have been approximately 0.00%, 0.07% and 0.00%, respectively. The allowance consists of an allocated and unallocated
allowance. The allocated portion is determined by types and ratings of loans within the portfolio. The unallocated portion of
the allowance is established for losses that exist in the remainder of the portfolio and compensates for uncertainty in estimating
the credit losses. The allocated portion of the allowance is based on historical loss experience as well as certain qualitative
factors as explained above. The qualitative factors have been established based on certain assumptions made as a result of the
current economic conditions and are adjusted as conditions change to be directionally consistent with these changes. The unallocated
portion of the allowance is composed of factors based on management's evaluation of various conditions that are not directly
measured in the estimation of probable losses through the experience formula or specific allowances. The overall risk as measured
in our three-year lookback, both quantitatively and qualitatively, does not encompass a full economic cycle. Net charge-offs in
the 2009 to 2011 period averaged 63 basis points annualized in our loan portfolio. Over the most recent three-year period, our
net charge-offs have experienced a modest net recovery. We currently believe the unallocated portion of our allowance represents
potential risk associated throughout a full economic cycle.

 We have a significant
portion of our loan portfolio with real estate as the underlying collateral. At December 31, 2022 and December 31, 2021,
approximately 90.8% and 90.9%, respectively, of the loan portfolio had real estate collateral. When loans, whether commercial
or personal, are granted, they are based on the borrower's ability to generate repayment cash flows from income sources
sufficient to service the debt. Real estate is generally taken to reinforce the likelihood of the ultimate repayment and as a
secondary source of repayment. We work closely with all our borrowers that experience cash flow or other economic problems, and
we believe that we have the appropriate processes in place to monitor and identify problem credits. There can be no assurance
that charge-offs of loans in future periods will not exceed the allowance for credit losses as estimated at any point in time
or that provisions for credit losses will not be significant to a particular accounting period. The allowance is also subject
to examination and testing for adequacy by regulatory agencies, which may consider such factors as the methodology used to determine
adequacy and the size of the allowance relative to that of peer institutions. Such regulatory agencies could require us to adjust
our allowance based on information available to them at the time of their examination.

 The non-performing
asset ratio was 0.35% of total assets with the nominal level of $5.8 million in non-performing assets at December 31, 2022 compared
to 0.09% and $1.4 million at December 31, 2021. Non-accrual loans increased to $4.9 million at December 31, 2022 from $250 thousand
at December 31, 2021. The increases in both non-performing assets and non-accrual loans from December 31, 2021 to December 31,
2022 were due to one $4.1 million loan that was moved to non-accrual status in June 2022. This loan had a loan-to-value of 76.3%
at the time it was moved to non-accrual based on an appraisal received in May 2022. The balance of this loan is $4.0 million at
December 31, 2022. Furthermore, we had one customer relationship with two loans totaling $508 thousand, which was placed on non-accrual
during September 2022. This relationship had a loan-to-value of 42.5% at the time it was moved to non-accrual. The balance of
this relationship increased to $550 thousand at December 31, 2022 due to a loan advance to pay real estate taxes. We had $2 thousand
in accruing loans past due 90 days or more at December 31, 2022 compared to zero at December 31, 2021. Loans past due 30 days
or more represented 0.06% of the loan portfolio at December 31, 2022 compared to 0.03% at December 31, 2021. The ratio of
classified loans plus OREO and repossessed assets declined to 4.47% of total bank regulatory risk-based capital at December 31,
2022 from 6.27% at December 31, 2021. During the twelve months ended December 31, 2022, we experienced net loan recoveries of
$361 thousand and net overdraft charge-offs of $52 thousand.

 There were 12
loans totaling $4.9 million (0.50% of total loans) included on non-performing status (non-accrual loans and loans past due 90
days and still accruing) at December 31, 2022. Ten of these loans totaling $4.9 million were on non-accrual status. The largest
loan included on non-accrual status is in the amount of $4.0 million and is secured by a first mortgage lien and had a loan-to-value
of 76.3% at the time it was moved to non-accrual based on an appraisal received in May 2022. The average balance of the remaining
nine loans on non-accrual status is approximately $104 thousand with a range between $1 and $406 thousand. Five of these loans
are secured by first mortgage liens, three loans are secured by second mortgage liens, and one is secured by equipment. Furthermore,
we had $88 thousand in accruing trouble debt restructurings, or TDRs, at December 31, 2022 compared to $1.4 million at December
31, 2021. This reduction was due to the payoff of one loan. We had two loans totaling $2 thousand that were accruing loans past
due 90 days or more at December 31, 2022. We consider a loan impaired when, based on current information and events, it is probable
that we will be unable to collect all amounts due, including both principal and interest, according to the contractual terms of
the loan agreement. Nonaccrual loans and accruing TDRs are considered impaired. At December 31, 2022, we had 11 impaired loans
totaling $5.0 million compared to ten impaired loans totaling $1.7 million at December 31, 2021. These loans were measured for
impairment under the fair value of collateral method or present value of expected cash flows method. For collateral dependent
loans, the fair value of collateral method is used and the fair value is determined by an independent appraisal less estimated
selling costs. There was no specific allowance for loan and lease losses on our impaired loans at December 31, 2022 and December
31, 2021. At December 31, 2022, we had ten loans totaling $565 thousand that were delinquent 30 days to 89 days representing 0.06%
of total loans compared to $235 thousand or 0.03% of total loans at December 31, 2021.

table summarizes the activity related to our allowance for credit losses.

 2024

 2023

 2022

 Average loans outstanding (excluding loans held-for-sale)

 $
 1,180,482

 $
 1,044,983

 $
 914,569

 Loans outstanding at period end (excluding loans held-for-sale)

 $
 1,230,204

 $

 $

 Total nonaccrual loans

 $

 $

 $
 4,895

 Loans past due 90 days and still accruing

 $

 $

 $

 Beginning balance of allowance

 $

 $

 $
 11,179

 CECL Day 1 Adjustment

 —

 (14
)

 Loans charged-off:

 1-4 family residential mortgage

 —

 —

 —

 Real Estate - Construction

 —

 —

 —

 Real Estate Mortgage - Residential

 —

 —

 —

 Real Estate Mortgage - Commercial

 —

 —

 Consumer - Home equity

 —

 —

 —

 Consumer - Other

 Overdrafts

 —

 —

 —

 Total loans charged-off

 Recoveries:

 1-4 family residential mortgage

 —

 —

 —

 Real Estate - Construction

 Real Estate Mortgage - Residential

 —

 Real Estate Mortgage - Commercial

 Consumer - Home equity

 Consumer - Other

 Total recoveries

 Net loans recovered (charged off)

 (65
)

 (152
)

 Balance at period end

 $

 $

 $

 Net charge-offs (recoveries) to average loans and loans held-for-sale

 0.01
 %

 0.00
 %

 (0.03
)%

 Allowance as percent of total loans

 1.08
 %

 1.08
 %

 1.16
 %

 Non-performing loans as % of total loans

 0.04
 %

 0.02
 %

 0.50
 %

 Allowance as % of non-performing loans

 4,919.48
 %

 5,069.01
 %

 194.41
 %

 Nonaccrual loans as % of total loans

 0.02
 %

 0.00
 %

 0.50
 %

 Allowance as % of nonaccrual loans

 5,997.72
 %

 45,433.33
 %

 231.58
 %

table details net charge-offs to average loans outstanding by loan category for the years ended December 31:

 2024

 2023

 2022

 $

 $

 $
 (17
)

 $
 82,478

 $
 76,315

 $
 71,999

 0.03
 %

 0.02
 %

 (0.02
)%

 $
 (2
)

 $
 (2
)

 $
 (5
)

 $
 140,065

 $
 99,502

 $
 91,258

 0.00
 %

 0.00
 %

 (0.01
)%

 $
 (18
)

 $
 (9
)

 $
 —

 Average loans for the year (1)

 $
 110,345

 $
 76,604

 $
 49,278

 Net charge-offs (recoveries)/average loans (1)

 (0.02
)%

 (0.01
)%

 0.00
 %

 $
 (11
)

 $
 (37
)

 $
 (326
)

 $
 794,728

 $
 747,202

 $
 662,044

 0.00
 %

 0.00
 %

 (0.05
)%

 Home Equity

 $
 (9
)

 $
 (22
)

 $
 (12
)

 $
 36,767

 $
 30,884

 $
 27,479

 (0.02
)%

 (0.07
)%

 (0.04
)%

 Other

 $

 $

 $

 $
 16,099

 $
 14,476

 $
 12,511

 0.48
 %

 0.34
 %

 0.41
 %

 Total:

 $

 $
 (6
)

 $
 (309
)

 Average loans for the year (1)

 $
 1,180,482

 $
 1,044,983

 $
 914,569

 Net charge-offs (recoveries)/average loans (1)

 0.01
 %

 0.00
 %

 (0.03
)%

 (1)

 Average loans exclude loans held for sale

31, 2022, loans acquired in the Cornerstone transaction are excluded from our evaluation of the adequacy of the allowance as they
were measured at fair value at acquisition. The assumptions used in this evaluation included a credit component and an interest
rate component. These loans amounted to approximately $5.5 million at 2022.

 Accrual of interest
is discontinued on loans when we believe, after considering economic and business conditions and collection efforts that a borrower's
financial condition is such that the collection of interest is doubtful. A delinquent loan is generally placed in nonaccrual status
when it becomes 90 days or more past due. At the time a loan is placed in nonaccrual status, all interest, which has been accrued
on the loan but remains unpaid, is reversed and deducted from earnings as a reduction of reported interest income. No additional
interest is accrued on the loan balance until the collection of both principal and interest becomes reasonably certain.

table shows the allocation of the allowance for credit losses on loans:

 Allocation of the Allowance for
Credit Losses on Loans

 2024

 2023

 2022

 % of
 loans in
 category

 % of
 loans in
 category

 % of
 loans in
 category

 $

 7.6
 %

 $

 7.6
 %

 $

 7.9
 %

 Real Estate Construction

 1,675

 12.8
 %

 1,337

 10.9
 %

 0.7
 %

 Real Estate Mortgage:

 7,974

 60.6
 %

 8,146

 66.4
 %

 8,569

 80.1
 %

 Residential

 1,639

 12.5
 %

 1,122

 9.2
 %

 6.8
 %

 Consumer - Home Equity

 4.3
 %

 3.8
 %

 2.9
 %

 Consumer - Other

 2.2
 %

 2.1
 %

 1.6
 %

 Unallocated

 —

 N/A

 —

 N/A

 N/A

 Total

 $

 100.0
 %

 $

 100.0
 %

 $

 100.0
 %

 Non-interest Income and
Expense

Income. A source of noninterest income is service charges on deposit accounts. We also originate and sell residential loans
on a servicing released basis in the secondary market. These loans are originated in our name. The loans have locked in price
commitments to be purchased by investors at the time of closing. Therefore, these loans present very little market risk for us.
We typically deliver to, and receive funding from, the investor within 30 days. Other sources of noninterest income are derived
from investment advisory fees and commissions on non-deposit investment products, ATM/debit card fees, commissions on check sales,
safe deposit box rent, wire transfer, official check fees, rental income, and bank owned life insurance income.

income during the twelve months ended December 31, 2024 increased to $14.0 million from $10.4 million during the same period in
2023. The $3.6 million increase in non-interest income is primarily related to a reduction in loss on sale of securities of $1.2
million, increases in mortgage banking income of $962 thousand, investment advisory fees and non-deposit commissions of $1.7 million,
and an increase in gains on insurance proceeds of $73 thousand partially offset by a decease in gain on sale of other assets of
$146 thousand and a loss on early extinguishment of debt of $229 thousand.

 During
the third quarter of 2023, we sold $39.9 million of book value U.S. Treasuries in our available-for-sale investment securities
portfolio. While this sale created a one-time pre-tax loss of $1.2 million, it provided additional liquidity which was used to
pay down borrowings and fund loan growth. The weighted average book yield of the securities sold was 1.75% and the projected earn
back period is 1.6 years. There was no such similar sale during 2024.

 Mortgage banking
income increased $962 thousand to $2.4 million during the twelve months ended December 31, 2024 from $1.4 million during the same
period in 2023. Secondary mortgage production during the twelve months ended December 31, 2024 was $79.3 million compared to $49.7
million during the same period in 2023 while the gain on sale margin increased to 2.96% during the twelve months ended December
31, 2024 from 2.83% during the same period in 2023.

 During 2022,
we began to market an adjustable rate mortgage (ARM) product to provide borrowers with an alternative to fixed-rate mortgages
and to help offset anticipated mortgage production challenges. Currently, we are offering 5/6, 7/6, and 10/6 ARM loans that are
originated for our loans held-for-investment portfolio. Furthermore, in 2022, we added a new construction residential real estate
team and product. Total mortgage production during the twelve months ended December 31, 2024 was $165.6 million, $79.3 million
of the production was originated to be sold in the secondary market, $40.9 million of the loan production was originated as ARM
loans for our loans held-for-investment portfolio, and $45.4 million of the loan production was commitments for new construction
residential real estate loans. As these ARM and new construction residential real estate loans are being held on our balance sheet
as loans held-for-investment, the result is additive to loan growth and interest income but results in less gain on sale fee income,
which is reported in noninterest income as mortgage banking income.

 Investment advisory
fees increased $1.7 million to $6.2 million during the twelve months ended December 31, 2024 from $4.5 million during the same
period in 2023. Total assets under management were $926.0 million at December 31, 2024 compared to $755.4 million at December
31, 2023. Our net new assets were $37.5 million during the twelve months ended December 31, 2024. Furthermore, our investment
performance for the twelve months ended December 31, 2024 was 17.6% compared to 23.3% for the S&P 500.

 Gain (loss) on
sale of other assets declined $146 thousand to a gain of $5 thousand during the twelve months ended December 31, 2024 from $151
thousand during the same period in 2023 due to an income tax recovery in 2024 on a previously sold other real estate owned property
and due to a sale of other real estate owned during the twelve months ended December 31, 2023.

 The $229 thousand
loss on early extinguishment of debt during the twelve months ended December 31, 2024 resulted from our decision to use available
cash to reduce FHLB advances to zero, including the pre-payment of $35.0 million in FHLB advances during the fourth quarter of
2024. We believe this reduction in these borrowings positioned us for improvements in net interest income and margin in the future.

income during the twelve months ended December 31, 2023 declined to $10.4 million from $11.6 million during the same period in
2022. The $1.1 million decline in non-interest income is primarily related to decreases in non-recurring non-interest income of
$866 thousand, and mortgage banking income of $494 thousand partially offset by increases in investment advisory fees and non-deposit
commissions of $32 thousand and other non-interest income of $177 thousand.

 During
the third quarter of 2023, we sold $39.9 million of book value U.S. Treasuries in our available-for-sale investment securities
portfolio, which created a one-time pre-tax loss of $1.2 million. The weighted average book yield of the securities sold was 1.75%
and the projected earn back period is 1.6 years.

 Mortgage banking
income declined $494 thousand to $1.4 million during the twelve months ended December 31, 2023 from $1.9 million during the same
period in 2022. Secondary mortgage production during the twelve months ended December 31, 2023 was $49.7 million compared to $65.8
million during the same period in 2022 while the gain on sale margin declined to 2.83% during the twelve months ended December
31, 2023 from 2.85% during the same period in 2022. The reduction in mortgage production was primarily due to a higher interest
rate environment and low levels of home inventories.

 Total mortgage
production during the twelve months ended December 31, 2023 was $135.7 million, $49.7 million of the production was originated
to be sold in the secondary market, $32.5 million of the loan production was originated as ARM loans for our loans held-for-investment
portfolio, and $53.5 million of the loan production was commitments for new construction residential real estate loans. As these
ARM and new construction residential real estate loans are being held on our balance sheet as loans held-for-investment, the result
is additive to loan growth and interest income but results in less gain on sale fee income, which is reported in noninterest income
as mortgage banking income.

 Investment advisory
fees increased $32 thousand to $4.5 million during the twelve months ended December 31, 2023 from $4.5 million during the same
period in 2022. Total assets under management were $755.4 million at December 31, 2023 compared to $558.8 million at December
31, 2022. Our net new assets were $39.2 million during the twelve months ended December 31, 2023. Furthermore, our investment
performance for the twelve months ended December 31, 2023 was 28.2% compared to 24.2% for the S&P 500.

 The $977 thousand
in non-recurring contra non-interest income during the twelve months ended December 31, 2023 includes the previously mentioned
loss on sale of securities of $1.2 million, gains on sale of other real estate owned of $151 thousand, a bank owned life insurance
claim of $93 thousand, and gains on insurance proceeds of $28 thousand. We recorded $111 thousand in other non-recurring
contra income related to a loss on sale of other real estate owned of $45 thousand, due to the sale of one other real estate owned
property, and a loss on sale of other assets of $73 thousand, due to the sale of one bank owned premise, partially offset by gains
on insurance proceeds of $7 thousand during the twelve months ended December 31, 2022.

income, other increased $177 thousand during the twelve months ended December 31, 2023 compared to the same period in 2022 primarily
due to increases in ATM debit card income of $65 thousand and rental income of $48 thousand.

table sets forth for the periods indicated the primary components of noninterest income:

 2024

 2023

 2022

 Deposit service charges

 Mortgage banking income

 2,368

 1,406

 1,900

 Investment advisory fees and non-deposit commissions

 6,181

 4,511

 4,479

 Loss on sale of securities

 —

 (1,249
)

 —

 Gain (loss) on sale of other real estate owned

 —

 (45
)

 Loss on sale of other assets

 (5
)

 —

 (73
)

 Other non-recurring income

 ATM debit card income

 2,758

 2,771

 2,706

 Recurring income on bank owned life insurance

 Rental income

 Other service fees including safe deposit box fees

 Wire transfer fees

 Other

 Total

 $

 $

 $
 11,569

Expense. In the very competitive financial services industry, we recognize the need to place a great deal of emphasis on expense
management and continually evaluate and monitor growth in discretionary expense categories in order to control future increases.

expense during the twelve months ended December 31, 2024 increased $4.3 million to $47.5 million from $43.1 million during the
same period in 2023. The increase is primarily due to increases in salaries and employee benefits of $3.4 million, increases in
marketing and public relations expense of $15 thousand, increases in FDIC Insurance assessments of $273 thousand, increases in
other real estate expense, net, of $215 thousand, and increases in other non-interest expense of $597 thousand, partially offset
by a decline in occupancy expense of $63 thousand and equipment expense of $115 thousand.

 Salary and benefit expense increased $3.4
 million to $29.3 million during the twelve months ended December 31, 2024 from $25.9 million during the same period in 2023.
 This increase is primarily a result of normal salary adjustments and an increase of approximately $834 thousand in additional
 annual incentive compensation. We had 260 full-time employees, ten part-time employees, and eight seasonal/on-call employees
 at December 31, 2024 compared to 268 full-time employees, 14 part-time employees, and five seasonal/on-call employees at December
 31, 2023.

 Occupancy expense declined $63 thousand
 to $3.1 million during the twelve months ended December 31, 2024 compared to $3.2 million during the same period in 2023 primarily
 due to lower building and yard maintenance costs and lease expense partially offset by higher janitorial services.

 Equipment expense
 declined $115 thousand to $1.5 million during the twelve months ended December 31, 2024 compared to $1.6 million during the
 same period in 2023 primarily due to lower equipment depreciation, equipment maintenance and repairs, and auto expense.

 Marketing and public
 relations increased $15 thousand to $1.5 million during the twelve months ended December 31, 2024 from $1.5 million during
 the same period in 2023 primarily due to timing of planned media production and campaigns.

 FDIC assessments
 increased $273 thousand to $1.2 million during the twelve months ended December 31, 2024 compared to $904 thousand during
 the same period in 2023 due to an increase in our FDIC assessment rate and our assets.

 Other
 real estate expenses increased $215 thousand to $103 thousand during the twelve months ended December 31, 2024 from $112 thousand
 in contra expenses or credits during the twelve months ended December 31, 2023. This was primarily due to a return to normal
 activity during the twelve months ended December 31, 2024 compared to a significant reversal in accruals for real estate taxes
 on a non-accrual loan, which were either paid by the borrower or recovered as a result of the sale of the real estate.

 Other expense increased $597 thousand to
 $10.7 million during the twelve months ended December 31, 2024 compared to $10.1 million during the same period in 2023, which
 included

 o

 Core banking and electronic processing
 and services increased $224 thousand or 8.9% primarily due to an increase in the cost of our core service provider, FIS as
 a result of higher customer activity and enhanced technology.

 o

 ATM/debit card processing increased $206
 thousand or 19.2% as EFT processing expense increased during the period.

 o

 Software subscriptions and services increased
 $252 thousand or 25.0% due to new subscriptions and higher renewal rates.

 o

 Debit card and fraud losses declined $223
 thousand, or 52.8%, due to a decline in fraud losses. Debit card and fraud losses rose during 2023 due to an extraordinary
 spike in mail check fraud losses during the third quarter of 2023. We responded to this spike with countermeasures including
 deploying additional resources, and conducting a formal customer education marketing campaign called "THINK TWICE,"
 which requests customers who have been a victim of fraud to enhance their check authorization processes and upgrade to our
 current fraud detection system.

 o

 Telephone expense increased $32 thousand
 or 6.6% due to a change in our telecommunications vendor, which resulted in paying two vendors for a period of time and due
 to a $29 thousand write-off the remainder of a contract related to the closing of our downtown Augusta, Georgia banking office.

 o

 Loan processing and closing costs declined
 $95 thousand or 28.7% primarily due to lower average new loan sizes in 2024 and fees paid for a home equity campaign in 2023.

 o

 Legal and professional fees increased $163
 thousand, or 15.6%, primarily due to an increase in auditing costs and higher legal expense.

expense during the twelve months ended December 31, 2023 increased to $43.1 million from $41.3 million during the same period
in 2022. The $1.9 million increase in non-interest expense is primarily due to increases in salaries and benefits of $507 thousand,
occupancy expense of $155 thousand, equipment expense of $223 thousand, marketing and public relations of $237 thousand, FDIC
assessment of $223 thousand, and other expense of $753 thousand partially offset by lower other real estate expense of $420 thousand.

 Salary and benefit expense increased $507 thousand to $25.9
million during the twelve months ended December 31, 2023 from $25.4 million during the same period in 2022. This increase is primarily
a result of normal salary adjustments, the addition of six employees in our York County, South Carolina office in 2022, the addition
of new mortgage lenders during the third quarter of 2022, and increased compensation levels for banking office employees implemented
at the beginning of the third quarter of 2022, partially offset by lower mortgage banking commissions and annual incentive compensation.
We had 268 full-time employees, 14 part-time employees, and five seasonal/on-call employees at December 31, 2023 compared to 254
full-time employees, seven part-time employees, and eight seasonal/on-call employees at December 31, 2022.

 Occupancy expense increased $155 thousand to $3.2 million
during the twelve months ended December 31, 2023 compared to $3.0 million during the same period in 2022 primarily related to
the opening of our York County, South Carolina office in 2022, the expansion of our Southlake operations and support location
in Lexington, South Carolina, and higher maintenance expense partially offset by lower janitorial expense.

 Equipment expense increased $223 thousand to $1.6 million
during the twelve months ended December 31, 2023 compared to $1.3 million during the same period in 2022 primarily due to higher
equipment maintenance and repair, equipment depreciation, and auto expense.

 Marketing and public relations increased $237 thousand
to $1.5 million during the twelve months ended December 31, 2023 from $1.3 million during the same period in 2022 primarily due
to media production and campaigns.

 FDIC assessments increased $436 thousand to $904 thousand
during the twelve months ended December 31, 2023 compared to $468 thousand during the same period in 2022 due to an increase in
our FDIC assessment rate.

 Other real estate expenses declined $420 thousand to $112
thousand in contra expenses or credits during the twelve months ended December 31, 2023 compared to $308 thousand in expenses
during the same period in 2022 primarily due to a reversal in accruals for real estate taxes on a non-accrual loan, which were
either paid by the borrower or recovered as a result of the sale of the real estate.

 Other expense increased $753 thousand to $10.1 million
during the twelve months ended December 31, 2023 compared to $9.4 million during the same period in 2022, which included

 o
 Computer service expense, which includes core banking and
electronic processing and services, ATM/debit card processing, software subscriptions and services and wire processing fees, increased
$344 thousand primarily due to higher customer activity and enhanced technology solutions.

 o
 Debit card and fraud losses increased $137 thousand due
to an extraordinary spike in mail check fraud losses during the third quarter of 2023.

 o
 Telephone expense increased $131 thousand primarily due
to a change in our telecommunications vendor, which resulted in paying two vendors for a period of time.

 o
 Director fees increased $113 thousand primarily due to
an increase in director compensation, which includes an increase in director stock awards.

 o
 Loan processing and closing costs increased $65 thousand
due to an increase in loans.

 o
 Correspondent services increased $51 thousand.

 o
 Legal and professional fees declined $135 thousand primarily
due to lower legal expense.

 o
 Investment advisory services declined $80 thousand.

table sets forth for the periods indicated the primary components of noninterest expense:

 2024

 2023

 2022

 Salaries and employee benefits

 $
 29,263

 $
 25,864

 $
 25,357

 Occupancy

 3,094

 3,157

 3,002

 Equipment

 1,451

 1,566

 1,343

 Marketing and public relations

 1,511

 1,496

 1,259

 FDIC Insurance assessments

 1,177

 Other real estate expense (income)

 (112
)

 Amortization of intangibles

 Core banking and electronic processing and services

 2,736

 2,512

 2,469

 ATM/debit card processing

 1,280

 1,074

 Software subscriptions and services

 1,260

 1,008

 Supplies

 Telephone

 Courier

 Correspondent services

 Insurance

 Debit card and Fraud losses

 Investment advisory services

 Loan processing and closing costs

 Director fees

 Legal and Professional fees

 1,205

 1,042

 1,177

 Shareholder expense

 Other

 $
 47,465

 $
 43,144

 $
 41,253

 *

 Core banking and electronic processing
 and services includes core processing, bill payment, online banking, remote deposit capture, wire processing services and
 postage costs for mailing customer notices and statements.

 Income Tax Expense

 Our income tax
expense for the years ended December 31, 2024, 2023, and 2022 were $3.8 million, $3.2 million, and $3.8 million, respectively.
See Note 14 "Income Taxes" to the Consolidated Financial Statements for additional information. We recognize deferred
tax assets for future deductible amounts resulting from differences in the financial statement and tax bases of assets and liabilities
and operating loss carry forwards. The deferred tax assets are established based on the amounts expected to be paid/recovered
at existing tax rates. A valuation allowance is established to reduce the deferred tax asset to the level that it is more likely
than not that the tax benefit will be realized. Our effective tax rates were 21.5%, 21.3%, and 20.6%, for the twelve month periods
ended December 31, 2024, 2023, and 2022, respectively. The effective tax rates were affected by a $149 thousand non-recurring
reduction to income tax during the twelve months ended December 31, 2024, by a $122 thousand non-recurring reduction to income
tax expense during the twelve months ended December 31, 2023, and by a $153 thousand non-recurring reduction to income taxes during
the twelve months ended December 31, 2022. Furthermore, we purchased $500 thousand of South Carolina State Tax Credits for $432.5
thousand in November 2024, which created a $67.5 thousand non-recurring benefit to income taxes in November 2024. As a result
of our current level of tax-exempt securities in our investment portfolio and our BOLI holdings, assuming the current corporate
rate remains unchanged, our effective tax rate is expected to be approximately 22.25% to 22.75%.

 Financial Position

 Assets increased
$130.3 million, or 7.1%, to $2.0 billion at December 31, 2024 from $1.8 billion at December 31, 2023. The $130.3 million increase
in assets was primarily due to loans (excluding loans held-for-sale), which increased $86.5 million, or 7.6%, to $1.2 billion
at December 31, 2024 from $1.1 billion at December 31, 2023.

 Earning Assets

 Loans and loans held-for-sale

 Loans held-for-sale
increased to $9.7 million at December 31, 2024 from $4.4 million at December 31, 2023. Loans (excluding loans held-for-sale) increased
$86.5 million, or 7.6%, to $1.2 billion at December 31, 2024 from $1.1 billion at December 31, 2023. Total loan production, excluding
mortgage secondary market and new construction residential real estate, was $179.3 million during the twelve months ended December
31, 2024 compared to $198.8 million during the same period in 2023. Advances from unfunded commercial construction loans available
for draws were $94.5 million during the twelve months ended December 31, 2024. Total mortgage production during the twelve months
ended December 31, 2024 was $165.6 million, $79.3 million of the production was originated to be sold in the secondary market,
$40.9 million of the loan production was originated as ARM loans for our loans held-for-investment portfolio, and $45.4 million
of the loan production was commitments for new construction residential real estate loans. Total mortgage production during the
twelve months ended December 31, 2023 was $135.7 million, $49.7 million of the production was originated to be sold in the secondary
market, $32.5 million of the loan production was originated as ARM loans for our loans held-for-investment portfolio, and $53.5
million of the loan production was commitments for new construction residential real estate loans. As these ARM and new construction
residential real estate loans are being held on our balance sheet as loans held-for-investment, the result is additive to loan
growth and interest income but results in less gain on sale fee income, which is reported in noninterest income as mortgage banking
income. The increase in mortgage production was primarily due to higher secondary market and ARM production partially offset by
lower construction residential real estate loan production. Payoffs and paydowns increased to $113.2 million during the twelve
months ended December 31, 2024 compared to $87.0 million during the same period in 2023. However, they were still the second lowest
level of payoffs and paydowns in the past six years. The loan-to-deposit ratio (including loans held-for-sale) at December 31,
2024 and December 31, 2023 was 73.4% and 75.3%, respectively. The loan-to-deposit ratio (excluding loans held-for-sale) at December
31, 2024 and December 31, 2023 was 72.8% and 75.1%, respectively.

 One of our goals
as a community bank has been, and continues to be, to grow our assets through quality loan growth by providing credit to small
and mid-size businesses and individuals within the markets we serve. We remain committed to meeting the credit needs of our local
markets. Based on the Bank's loan portfolio as of December 31, 2024, its non-owner occupied commercial real estate loans
and its construction and land development loans were approximately 305% and 82% of total risk-based capital, respectively. Furthermore,
our three-year growth in non-owner occupied commercial real estate loans was 46% from December 31, 2021 to December 31, 2024.
We have expertise and a long history in originating and managing commercial real estate loans. We have a strong credit underwriting
process, which includes management and board oversight. We perform rigorous monitoring, stress testing, and reporting of these
portfolios at the management and board levels, and we continue to monitor the level of the concentration in commercial real estate
loans within the Bank's loan portfolio monthly.

 Loans typically
provide higher yields than the other types of earning assets. During 2024 and 2023, loans accounted for 66.3% and 64.2% of average
earning assets, respectively. The loan portfolio (including held-for-sale) averaged $1.2 billion in 2024 as compared to $1.0 billion
in 2023. Quality loan portfolio growth continued to be a strategic focus of ours in 2024. However, with the higher loan yields,
there are inherent credit and liquidity risks, which we attempt to control and counterbalance. One of our goals as a community
bank continues to be to grow our assets through quality loan growth by providing credit to small and mid-size businesses, as well
as individuals within the markets we serve. We remain committed to meeting the credit needs of our local markets, but adverse
national and local economic conditions, as well as deterioration of our asset quality, could significantly impact our ability
to grow our loan portfolio. Significant increases in regulatory capital expectations beyond the traditional "well capitalized"
ratios and significantly increased regulatory burdens could impede our ability to leverage our balance sheet and expand the loan
portfolio.

table shows the composition of the loan portfolio by category:

 2024

 2023

 2022

 Commercial, financial & agricultural

 $

 $
 78,134

 $
 72,409

 91,223

 Mortgage—residential

 94,796

 65,759

 Mortgage—commercial

 791,947

 709,218

 28,723

 Other

 16,165

 13,525

 Total gross loans

 $

 $

 $

 Allowance for credit losses

 (13,135
)

 (12,267
)

 (11,336
)

 Total net loans

 $
 1,207,407

 $
 1,121,752

 $
 969,521

 In the
context of this discussion, a real estate mortgage loan is defined as any loan, other than loans for construction purposes, secured
by real estate, regardless of the purpose of the loan. We follow the common practice of financial institutions in our market area
of obtaining a security interest in real estate whenever possible, in addition to any other available collateral. This collateral
is taken to reinforce the likelihood of the ultimate repayment of the loan and tends to increase the magnitude of the real estate
loan components. Generally, we limit the loan-to-value ratio to 80%. The principal components of our loan portfolio at December
31, 2024 and 2023 were commercial mortgage loans in the amount of $796.4 million and $791.9 million, respectively, representing
65.3% and 69.8% of the portfolio, respectively, excluding loans held for sale. Significant portions of these commercial mortgage
loans are made to finance owner-occupied real estate. We continue to maintain a conservative philosophy regarding our underwriting
guidelines, and believe we will reduce the risk elements of the loan portfolio through strategies that diversify the lending mix.

 The repayment
of loans in the loan portfolio as they mature is a source of liquidity. The following table sets forth the loans maturing within
specified intervals at December 31, 2024.

 Loan Maturity Schedule
and Sensitivity to Changes in Interest Rates

 One Year
 or Less

 Over One Year
 Through Five
 Years

 Over Five Years
 Through Fifteen
 years

 Over Fifteen
 Years

 Total

 Commercial, financial and agricultural

 $
 15,195

 $
 47,871

 $
 23,550

 $
 —

 $

 Construction (1)

 42,211

 84,395

 25,549

 —

 3,305

 14,687

 3,191

 103,568

 83,816

 533,674

 177,650

 1,271

 2,726

 6,693

 32,885

 —

 Other

 3,248

 14,118

 Total

 $
 150,501

 $
 701,438

 $
 263,394

 $
 105,209

 $

 (1)

 Included in construction
 loans are construction-to-permanent loans that will move to their permanent loan category upon completion of the construction
 phase.

 Loans
maturing after one year with:

 Variable Rate

 $
 161,867

 Fixed Rate

 908,174

 $
 1,070,041

presented in the above table is based on the contractual maturities of the individual loans, including loans which may be subject
to renewal at their contractual maturity. Renewal of such loans is subject to review and credit approval, as well as modification
of terms upon their maturity.

Securities

 Our investment
securities portfolio is a significant component of our total earning assets. Investment securities declined $14.5 million to $491.7
million, net of allowance for credit losses on investments of $23 thousand, at December 31, 2024 from $506.2 million, net of allowance
for credit losses on investments of $30 thousand, at December 31, 2023. The $14.5 million decline was primarily related to normal
principal cash flows primarily offset by the purchase of $17.7 million in investment securities. Our investment securities portfolio
averaged $491.0 million in 2024, as compared to $541.1 million in 2023, which represents 27.5% and 33.2% of the average earning
assets for the years ended December 31, 2024 and 2023, respectively.

 On June 1, 2022,
we reclassified $224.5 million in investments to held-to-maturity (HTM) from available-for-sale (AFS). These securities were transferred
at fair value at the time of the transfer, which became the new cost basis for the securities held to maturity. The pretax unrealized
net holding loss on the available-for-sale securities on the date of transfer totaled approximately $16.7 million, and continued
to be reported as a component of accumulated other comprehensive loss. This net unrealized loss is being amortized to interest
income over the remaining life of the securities as a yield adjustment. There were no gains or losses recognized as a result of
this transfer. The remaining pretax unrealized net holding loss on these investments was $12.3 million ($9.7 million net of tax)
at December 31, 2024. The remaining pretax unrealized net holding loss on these investments was $14.0 million ($11.1 million net
of tax) at December 31, 2023. Our HTM investments totaled $209.4 million and represented approximately 42% of our total investments
at December 31, 2024. Our AFS investments totaled $279.6 million or approximately 57% of our total investments at December 31,
2024. Our investments at cost totaled $2.7 million or approximately 1% of our total investments at December 31, 2024. The
unrealized losses on our investment securities are related to an increase in market interest rates, which has a temporary negative
impact on the fair value of our investment securities portfolio and on accumulated other comprehensive income (loss), which is
included in shareholders' equity.

31, 2024, the estimated weighted average life of our total investment portfolio was 5.67 years, the modified duration was 4.4,
the effective duration was 3.5, and the weighted average tax equivalent book yield was 3.68%. At December 31, 2023, the estimated
weighted average life of our total investment portfolio was 6.19 years, the modified duration was 4.7, the effective duration
was 3.8, and the weighted average tax equivalent book yield was 3.84%.

 We held
no debt securities rated below investment grade at December 31, 2024 and December 31, 2023.

table shows the Available-for Sale investment portfolio composition.

 2024

 2023

 2022

 Securities available-for-sale at fair value:

 US Treasury Securities

 $

 $

 $
 55,982

 Government sponsored enterprises

 2,110

 2,129

 2,074

 Small Business Administration pools

 12,079

 15,721

 21,088

 244,204

 238,159

 244,599

 Corporate and Other Securities

 7,949

 7,871

 8,118

 Total

 $

 $

 $
 331,861

table shows the Held-to-Maturity investment portfolio composition.

 2024

 2023

 2022

 Securities held-to-maturity at fair value:

 $
 96,918

 $
 104,250

 $
 113,116

 State and local government

 99,122

 101,268

 100,497

 Total

 $

 $
 205,518

 $
 213,613

 We hold other
investments carried at cost totaling $2.7 million and $6.8 million at December 31, 2024 and 2023, respectively. Other investments,
at cost, include Federal Home Loan Bank ("FHLB") stock in the amount of $1.3 million, corporate stock in the amount
of $1.0 million, and a venture capital fund in the amount of $399.2 thousand at December 31, 2024. We held FHLB stock in the amount
of $5.4 million, corporate stock in the amount of $1.0 million, and a venture capital fund in the amount of $354.2 thousand at
December 31, 2023. These are equity securities without readily determinable fair values. Investment in the FHLB of Atlanta is
a condition of borrowing from the FHLB Atlanta. FHLB stock is carried at cost and periodically evaluated for impairment based
on an assessment of the ultimate recovery of par value. Both cash and stock dividends are reported as interest income. Dividends
received on other investments, at cost are reported as interest income.

Securities Maturity Distribution and Yields

table shows, at amortized cost, the expected maturities and weighted average yield, which is calculated using amortized cost as
the weight and tax-equivalent book yield, of securities held at December 31, 2024:

 (In

 Within
 One Year

 After
 One But
 Within Five Years

 After
 Five But
 Within Ten Years

 After
 Ten Years

 Available-for-sale:

 Yield

 Yield

 Yield

 Yield

 US
 Treasury Securities

 $
 —

 —
 %

 $

 0.74
 %

 $
 14,825

 1.24
 %

 $
 —

 —

 Government
 sponsored enterprises

 —

 —

 $
 —

 —

 2,500

 2.00
 %

 —

 —

 Small
 Business Administration pools

 $

 2.82
 %

 2,061

 5.97
 %

 5,163

 4.55
 %

 4,969

 5.65
 %

 5.39
 %

 9,997

 4.22
 %

 3,928

 3.54
 %

 245,852

 5.78
 %

 and other securities

 —

 —

 1,990

 7.14
 %

 6,753

 3.76
 %

 —

 Total
 investment securities available-for-sale

 $

 4.11
 %

 $
 15,045

 4.61
 %

 $
 33,169

 2.60
 %

 $
 250,833

 5.77
 %

 Within One Year

 After One But
 Within Five Years

 After Five But
 Within Ten Years

 After Ten Years

 Held-to-Maturity:

 Yield

 Yield

 Yield

 Yield

 $
 6,284

 2.83
 %

 $
 32,761

 3.26
 %

 $
 16,231

 3.41
 %

 $
 50,285

 4.04
 %

 State and local government

 1,000

 2.42

 23,941

 3.50
 %

 42,054

 3.38
 %

 36,880

 3.33
 %

 Total investment securities held-to-maturity

 $
 7,284

 2.78
 %

 $
 56,702

 3.36
 %

 $
 58,285

 3.39
 %

 $
 87,165

 3.74
 %

 Short-Term Investments

 Short-term investments,
which consist of federal funds sold, securities purchased under agreements to resell and interest bearing deposits, averaged $110.9
million in 2024, as compared to $42.9 million in 2023. The increase in short-term investments in 2024 is primarily due to deposit
growth exceeding loan growth, which resulted in additional cash on hand for short-term investments. We maintain the majority of
our short-term overnight investments in our account at the Federal Reserve rather than in federal funds at various correspondent
banks due to the lower regulatory capital risk weighting. These funds are an immediate source of liquidity and are generally invested
in an earning capacity on an overnight basis. Other short-term investments, including funds on deposit at the Federal Reserve,
increased $56.7 million to $123.5 million at December 31, 2024 from $66.8 million at December 31, 2023 due to the previously mentioned
deposit growth. This additional liquidity will be used to fund loan growth.

 Deposits and Other Interest-Bearing

 Deposits.
 Deposits increased $164.9 million, or 10.9%, to $1.7 billion at December 31, 2024 compared to $1.5 billion at December 31,
2023. Our pure deposits, which are defined as total deposits less certificates of deposits, increased $146.3 million, or 11.9%,
to $1.4 billion at December 31, 2024 from $1.2 billion at December 31, 2023. We continue to focus on growing our pure deposits
as a percentage of total deposits in order to better manage our overall cost of funds.

 To secure a cost-effective
stable funding source, during the third quarter of 2023, we issued $48.2 million in brokered certificates of deposit ranging in
terms from six months to three years, with the three year term callable after six months. We had $10.4 million and $48.1 million
dollars in brokered deposits at December 31, 2024 and December 31, 2023, respectively.

 Total uninsured
deposits were $542.9 million and $436.6 million at December 31, 2024 and December 31, 2023, respectively. Included in uninsured
deposits at December 31, 2024 and December 31, 2023 were $105.8 million and $82.8 million of deposits of states or political subdivisions
in the U.S., which are secured or collateralized, respectively. Total uninsured deposits, excluding these deposits that are secured
or collateralized, totaled $437.1 million, or 26.1%, of total deposits at December 31, 2024 and $353.8 million, or 23.4%, of total
deposits at December 31, 2023.

 The average balance
of all customer deposit accounts at December 31, 2024 was $24,434. The average balance for consumer accounts was $13,106 and the
average balance for non-consumer accounts was $53,162.

table sets forth the average deposits by category:

 2024

 2023

 2022

 Annual

 Interest
Rate

 Annual

 Interest
Rate

 Annual

 Interest
Rate

 Demand deposit accounts

 $
 443,571

 —
 %

 $
 450,177

 —
 %

 $
 478,649

 —
 %

 Interest bearing checking accounts

 311,101

 1.11
 %

 307,415

 0.57
 %

 334,724

 0.16
 %

 Money market accounts

 417,178

 3.31
 %

 361,994

 2.69
 %

 304,784

 0.73
 %

 Savings accounts

 112,473

 0.38
 %

 133,010

 0.23
 %

 162,876

 0.09
 %

 309,509

 4.35
 %

 178,339

 2.68
 %

 135,882

 0.42
 %

 $
 1,593,832

 1.96
 %

 $
 1,430,935

 1.16
 %

 $
 1,416,915

 0.25
 %

 The uninsured
amount of time deposits at December 31, 2024 and 2023 were $40.8 million and $17.1 million, respectively.

 A stable
base of deposits is expected to continue to be the primary source of funding to meet both our short-term and long-term liquidity
needs in the future. The maturity distribution of time deposits is shown in the following table.

 Maturities
of Certificates of Deposit and Other Time Deposit of $250,000 or More

31, 2024, time deposits in excess of the FDIC insurance limit were as follows:

 Within Three
 Months

 After Three
 Through
 Six Months

 After Six
 Through
 Twelve Months

 After
 Twelve
 Months

 Total

 Time deposits of $250,000 or more

 $
 14,930

 $
 15,930

 $
 9,156

 $

 $
 40,768

 Borrowed funds.
 Borrowed funds consist of fed funds purchased, securities sold under agreements to repurchase, FHLB advances and long-term
debt. Our long-term debt is a result of issuing $15.0 million in trust preferred securities. Short-term borrowings in the form
of securities sold under agreements to repurchase averaged $77.2 million, $74.6 million, and $74.8 million during 2024, 2023,
and 2022, respectively. The average rates paid during these periods were 2.83%, 2.22%, and 0.30%, respectively. The balances of
securities sold under agreements to repurchase were $103.1 million and $62.9 million at December 31, 2024 and December 31, 2023,
respectively. The repurchase agreements all mature within one to four days and are generally originated with customers that have
other relationships with us and tend to provide a stable and predictable source of funding. Federal funds purchased averaged $12
thousand, $1.1 million, and $1.5 million during 2024, 2023, and 2022, respectively. The average rates paid during these periods
were 4.99%, 4.73%, and 3.54%, respectively. The balances of federal funds purchased were zero at December 31, 2024 and December
31, 2023. As a member of the FHLB, the Bank has access to advances from the FHLB for various terms and amounts. FHLB advances
averaged $54.8 million, $86.6 million, and $9.5 million during 2024, 2023, and 2022, respectively. The average rates paid during
these periods were 5.12%, 5.02%, and 3.91%, respectively. During the twelve months ended December 31, 2024, FHLB advances were
reduced from $90.0 million at December 31, 2023 to zero at December 31, 2024, including the prepayment of $35.0 million of FHLB
advances resulting in a loss on early extinguishment of debt of $229 thousand. The balances of FHLB advances were zero and $90.0
million at December 31, 2024 and December 31, 2023, respectively.

 The $90.0 million
in FHLB advances at December 31, 2023 had maturity dates between March 13, 2024, and November 3, 2026 with interest rates between
4.81% and 5.26%.

 We issued
$15.5 million in trust preferred securities on September 16, 2004. During the fourth quarter of 2015, we redeemed $500 thousand
of these securities. Until the cessation of LIBOR on June 30, 2023, the securities accrued and paid distributions quarterly at
a rate of three month LIBOR plus 257 basis points, thereafter, such distributions to be paid quarterly transitioned to an adjusted
Secured Overnight Financing Rate (SOFR) index in accordance with the Federal Reserve's final rule implementing the Adjustable
Interest Rate Act, which is three-month CME Term SOFR plus 257 basis points plus a tenor spread adjustment of 0.26161%. The remaining
debt may be redeemed in full anytime with notice and matures on September 16, 2034. Trust preferred securities averaged $15.0
million during 2024, 2023, and 2022. The average rates paid during these periods were 8.13%, 7.93%, and 4.51%, respectively. The
balances of trust preferred securities were $15.0 million as of December 31, 2024 and December 31, 2023.

31, 2024, there were no FHLB advances. At December 31, 2023, the FHLB advance maturities were as follows:

 Within Three
 Months

 After Three
 Through
 Six Months

 After Six
 Through
 Twelve Months

 After
 Twelve
 Months

 Total

 FHLB Advances

 $
 30,000

 $
 10,000

 $
 50,000

 $
 —

 $

 The $90 million
in FHLB advances at December 31, 2023 had maturity dates between March 13, 2024 and December 9, 2023 with interest rates between
4.83% and 5.25%.

Adequacy and Dividend Policy

Adequacy

 Total shareholders'
equity increased $13.4 million, or 10.3%, to $144.5 million at December 31, 2024 from $131.1 million at December 31, 2023. Shareholders'
equity increased to 7.4% of total assets at December 31, 2024 from 7.2% of total assets at December 31, 2023 due to total asset
growth of $130.3 million, or 7.1%, compared to total shareholders' equity growth of $13.4 million, or 10.3%. The growth
in assets was due to increases of $86.5 million in loans held-for-investment, $56.7 million in interest-bearing bank balances
and $5.2 million in loans held-for-sale partially offset by a decline of $14.5 million in investment securities. The $13.4 million
increase in shareholders' equity was due to a $9.6 million increase in retention of earnings resulting from $14.0 million
in net income less $4.4 million in dividends; a $753 thousand increase due to employee and director stock awards; a $410 thousand
increase due to our dividend reinvestment plan (DRIP); and a $2.7 million improvement in accumulated other comprehensive loss.
The increase in accumulated other comprehensive loss was due to a decline in market interest rates, which affects the fair value
of our investment securities portfolio and accumulated other comprehensive (loss) income, which is included in shareholders'
equity.

 On April 20,
2022, we announced that our board of directors approved the repurchase of up to 375,000 shares of our common stock (the "2022
Repurchase Plan"), which represented approximately 5% of our 7,606,172 shares outstanding as of December 31, 2023. No repurchases
were made under the 2022 Repurchase Plan prior to its expiration at the market close on December 31, 2023.

 On
May 14, 2024, we announced that our board of directors approved a plan to utilize up to $7.1 million of capital to repurchase
shares of our common stock (the "2024 Repurchase Plan"), which represented approximately 5.3% of our shareholders'
equity at the time of the announcement. No repurchases have been made under the 2024 Repurchase Plan. The Repurchase Plan expires
at the market close on May 13, 2025.

 During each quarter
in 2023, we paid an $0.14 per share dividend on our common stock. During the first and second quarter of 2024, we paid an $0.14
per share dividend on our common stock. During the third and fourth quarters of 2024, we paid an $0.15 per share dividend on our
common stock. On January 22, 2025, we announced a $0.15 per share dividend payable on February 18, 2025 to shareholders of record
of our common stock on February 4, 2025.

we have a dividend reinvestment plan that allows existing shareholders the option of reinvesting cash dividends as well as making
optional purchases of up to $5,000 in the purchase of common stock per quarter.

table shows the return on average assets (net income divided by average total assets), return on average equity (net income divided
by average equity), and equity to assets ratio for the three years ended December 31.

 2024

 2023

 2022

 Return on average assets

 0.74
 %

 0.68
 %

 0.88
 %

 Return on average common equity

 10.17
 %

 9.59
 %

 11.99
 %

 Equity to assets ratio

 7.38
 %

 7.17
 %

 7.08
 %

 Dividend Payout Ratio

 31.69
 %

 35.76
 %

 26.78
 %

 While the Company
is currently a small bank holding company and so generally is not subject to Basel III capital requirements, our Bank remains
subject to such capital requirements. See "Supervision and Regulation—Basel Capital Standards" for additional
information on Basel III and the Dodd-Frank Act.

 The Bank
exceeded the regulatory capital ratios at December 31, 2024 and 2023, as set forth in the following table:

 Required

 %

 Actual

 %

 Excess

 %

 The Bank (1)(2):

 Risk Based Capital

 Tier 1

 $
 76,653

 6.0
 %

 $

 12.9
 %

 $
 87,744

 6.9
 %

 Total Capital

 102,204

 8.0
 %

 178,034

 13.9
 %

 75,830

 5.9
 %

 CET1

 57,490

 4.5
 %

 12.9
 %

 106,907

 8.4
 %

 Tier 1 Leverage

 78,274

 4.0
 %

 8.4
 %

 86,123

 4.4
 %

 Risk Based Capital

 Tier 1

 $
 73,696

 6.0
 %

 $

 12.5
 %

 $
 80,163

 6.5
 %

 Total Capital

 98,261

 8.0
 %

 166,752

 13.6
 %

 68,491

 5.6
 %

 CET1

 55,272

 4.5
 %

 12.5
 %

 98,587

 8.0
 %

 Tier 1 Leverage

 72,830

 4.0
 %

 8.5
 %

 81,029

 4.5
 %

 (1)

 As a small bank holding company, the Company
 is generally not subject to Basel III capital requirements unless otherwise advised by the Federal Reserve.

 (2)

 Required Amounts and Required Ratios do
 not include the capital conservation buffer of 2.5%.

 Dividend
Policy

 Since we are
a bank holding company, our ability to declare and pay dividends is dependent on certain federal and state regulatory considerations,
including the guidelines of the Federal Reserve. The Federal Reserve has issued a policy statement regarding the payment of dividends
by bank holding companies. In general, the Federal Reserve's policies provide that dividends should be paid only out of
current earnings and only if the prospective rate of earnings retention by the bank holding company appears consistent with the
organization's capital needs, asset quality and overall financial condition. The Federal Reserve's policies also require
that a bank holding company serve as a source of financial strength to its subsidiary banks by standing ready to use available
resources to provide adequate capital funds to those banks during periods of financial stress or adversity and by maintaining
the financial flexibility and capital-raising capacity to obtain additional resources for assisting its subsidiary banks where
necessary. In addition, under the prompt corrective action regulations, the ability of a bank holding company to pay dividends
may be restricted if a subsidiary bank becomes undercapitalized. These regulatory policies could affect our ability to pay dividends
or otherwise engage in capital distributions.

 Because the Company
is a legal entity separate and distinct from the Bank and does not conduct stand-alone operations, the Company's ability
to pay dividends depends on the ability of the Bank to pay dividends to the Company, which is also subject to regulatory restrictions.
As a South Carolina-chartered bank, the Bank is subject to limitations on the amount of dividends that it is permitted to pay.
Unless otherwise instructed by the S.C. Board, the Bank is generally permitted under South Carolina state banking regulations
to pay cash dividends of up to 100% of net income in any calendar year without obtaining the prior approval of the S.C. Board.
In addition, the Bank must maintain a capital conservation buffer, above its regulatory minimum capital requirements, consisting
entirely of Common Equity Tier 1 capital, in order to avoid restrictions with respect to its payment of dividends to First Community
Corporation. The FDIC also has the authority under federal law to enjoin a bank from engaging in what in its opinion constitutes
an unsafe or unsound practice in conducting its business, including the payment of a dividend under certain circumstances.

 Liquidity Management

 Liquidity management
involves monitoring sources and uses of funds in order to meet our day-to-day cash flow requirements while maximizing profits.
Liquidity represents our ability to convert assets into cash or cash equivalents without significant loss and to raise additional
funds by increasing liabilities. Liquidity management is made more complicated because different balance sheet components are
subject to varying degrees of management control. For example, the timing of maturities of the investment portfolio is very predictable
and subject to a high degree of control at the time investment decisions are made. However, net deposit inflows and outflows are
far less predictable and are not subject to nearly the same degree of control. Asset liquidity is provided by cash and assets
which are readily marketable, or which can be pledged or will mature in the near future. Liability liquidity is provided by access
to core funding sources, principally the ability to generate customer deposits in our market area. In addition, liability liquidity
is provided through the ability to borrow against approved lines of credit (federal funds purchased) from correspondent banks,
to borrow on a secured basis through the Federal Reserve Discount Window, and to borrow on a secured basis through securities
sold under agreements to repurchase. Furthermore, the Bank is a member of the FHLB and has the ability to obtain advances for
various periods of time. These advances are secured by eligible securities pledged by the Bank or assignment of eligible loans
within the Bank's portfolio.

 To secure
a cost-effective stable funding source, during the third quarter of 2023, we issued $48.2 million in brokered certificates of
deposit ranging in terms from six months to three years, with the three year term callable after six months. Brokered certificates
of deposit totaled $10.4 million and $48.1 million in brokered deposits as of December 31, 2024 and December 31, 2023, respectively.
The $10.4 million in brokered deposits had a maturity date of July 31, 2025 with an interest rate of 4.70%. We believe that we
have ample liquidity to meet the needs of our customers through our low cost deposits, our ability to issue brokered deposits,
our ability to borrow against approved lines of credit (federal funds purchased) from correspondent banks, our ability to borrow
on a secured basis through the Federal Reserve Discount Window, and our ability to obtain advances secured by certain securities
and loans from the FHLB.

 We generally
maintain adequate liquidity and adequate capital, which along with continued retained earnings, we believe will be sufficient
to fund the operations of the Bank for at least the next 12 months. Furthermore, we believe that we will have access to adequate
liquidity and capital to support the long-term operations of the Bank.

 Total shareholders'
equity increased $13.4 million, or 10.3%, to $144.5 million at December 31, 2024 from $131.1 million at December 31, 2023. Shareholders'
equity increased to 7.4% of total assets at December 31, 2024 from 7.2% of total assets at December 31, 2023 due to total asset
growth of $130.3 million, or 7.1%, compared to total shareholders' equity growth of $13.4 million, or 10.3%. The growth
in assets was due to increases of $86.5 million in loans held-for-investment, $56.7 million in interest-bearing bank balances
and $5.2 million in loans held-for-sale partially offset by a decline of $14.5 million in investment securities. The $13.4 million
increase in shareholders' equity was due to a $9.6 million increase in retention of earnings resulting from $14.0 million
in net income less $4.4 million in dividends; a $753 thousand increase due to employee and director stock awards; a $410 thousand
increase due to our dividend reinvestment plan (DRIP); and a $2.7 million improvement in accumulated other comprehensive loss.
The increase in accumulated other comprehensive loss was due to a decline in market interest rates, which affects the fair value
of our investment securities portfolio and accumulated other comprehensive (loss) income, which is included in shareholders'
equity.

 On June 1, 2022,
we reclassified $224.5 million in investments to held-to-maturity (HTM) from available-for-sale (AFS). These securities were transferred
at fair value at the time of the transfer, which became the new cost basis for the securities held to maturity. The pretax unrealized
net holding loss on the available-for-sale securities on the date of transfer totaled approximately $16.7 million, and continued
to be reported as a component of accumulated other comprehensive loss. This net unrealized loss is being amortized to interest
income over the remaining life of the securities as a yield adjustment. There were no gains or losses recognized as a result of
this transfer. The remaining pretax unrealized net holding loss on these investments was $12.3 million ($9.7 million net of tax)
at December 31, 2024. The remaining pretax unrealized net holding loss on these investments was $14.0 million ($11.1 million net
of tax) at December 31, 2023. Our HTM investments totaled $209.4 million and represented approximately 42% of our total investments
at December 31, 2024. Our AFS investments totaled $279.6 million or approximately 57% of our total investments at December 31,
2024. Our investments at cost totaled $2.7 million or approximately 1% of our total investments at December 31, 2024. The
unrealized losses on our investment securities are related to an increase in market interest rates, which has a temporary negative
impact on the fair value of our investment securities portfolio and on accumulated other comprehensive income (loss), which is
included in shareholders' equity.

 The Bank maintains
federal funds purchased lines in the total amount of $77.5 million with three financial institutions and $10.0 million through
the Federal Reserve Discount Window. We utilized none of our federal funds purchased lines at December 31, 2024 or 2023. The FHLB
of Atlanta has approved a line of credit of up to 25.00% of the Bank's total assets, which, when utilized, is collateralized
by a pledge against specific investment securities and/or eligible loans. We had zero and $90.0 million in FHLB advances at December
31, 2024 and 2023, respectively. The FHLB advances at December 31, 2023 had maturity dates between March 13, 2024 and November
3, 2026 with interest rates between 4.81% and 5.26%. At December 31, 2024, we have remaining credit availability under this facility
in excess of $485.6 million, subject to collateral requirements. Combined, we have total remaining credit availability, subject
to collateral requirements, in excess of $573.1 million as compared to uninsured deposits excluding deposits of states or political
subdivisions in the U.S., which are secured or collateralized, of $437.1 million as previously noted.

 Through the operations
of our Bank, we have made contractual commitments to extend credit in the ordinary course of our business activities. These commitments
are legally binding agreements to lend money to our customers at predetermined interest rates for a specified period of time.
At December 31, 2024, we had issued commitments to extend unused credit of $180.2 million, including $63.6 million in unused home
equity lines of credit, through various types of lending arrangements. At December 31, 2023, we had issued commitments to extend
unused credit of $214.2 million, including $53.1 million in unused home equity lines of credit, through various types of lending
arrangements. We evaluate each customer's credit worthiness on a case-by-case basis. The amount of collateral obtained,
if deemed necessary by us upon extension of credit, is based on our credit evaluation of the borrower. Collateral varies but may
include accounts receivable, inventory, property, plant and equipment, commercial and residential real estate. We manage the credit
risk on these commitments by subjecting them to normal underwriting and risk management processes.

 We regularly
review our liquidity position and have implemented internal policies establishing guidelines for sources of asset-based liquidity
and evaluate and monitor the total amount of purchased funds used to support the balance sheet and funding from noncore sources.

 Off-Balance Sheet Arrangements

 In the
normal course of operations, we engage in a variety of financial transactions that, in accordance with GAAP, are not recorded
in the financial statements, or are recorded in amounts that differ from the notional amounts. These transactions involve, to
varying degrees, elements of credit, interest rate, and liquidity risk. Such transactions are used by the company for general
corporate purposes or for customer needs. Corporate purpose transactions are used to help manage credit, interest rate, and liquidity
risk or to optimize capital. Customer transactions are used to manage customers' requests for funding. Please refer to Note
15 of our financial statements for a discussion of our off-balance sheet arrangements.

 Impact of Inflation

 Unlike
most industrial companies, the assets and liabilities of financial institutions such as the Company and the Bank are primarily
monetary in nature. Therefore, interest rates have a more significant effect on our performance than do the effects of changes
in the general rate of inflation and change in prices. In addition, interest rates do not necessarily move in the same direction
or in the same magnitude as the prices of goods and services. However, we are not immune from changes occurring in inflation,
which risks include a decrease in demand for new mortgage loan and commercial real estate loan originations and refinancings,
an increase in competition for deposits, and an increase in non-interest expenses, which may have an adverse impact on our financial
performance. As discussed previously, we continually seek to manage the relationships between interest sensitive assets and liabilities
in order to protect against wide interest rate fluctuations, including those resulting from inflation.

 Item 7A. Quantitative and
Qualitative Disclosures About Market Risk

 Not Applicable

 Item 8. Financial Statements
and Supplementary Data.

 Additional information
required under this Item 8 may be found under the accompanying Financial Statements and Notes to Financial Statements under Note
25.

 MANAGEMENT'S
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

 Our management
is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial
reporting is defined in Rule 13a-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under
the supervision of, our principal executive and principal financial officers and effected by our board of directors, management
and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with U.S. generally accepted accounting principles and includes those policies
and procedures that:

 Pertain to the maintenance of records that
 in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

 Provide reasonable assurance that transactions
 are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting
 principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management
 and directors; and

 Provide reasonable assurance regarding
 prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect
 on the financial statements.

 Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of
any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes
in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 Our management
assessed the effectiveness of our internal controls over financial reporting as of December 31, 2024. In making this assessment,
our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO")
in Internal Control—Integrated Framework issued in 2013.

 Based
on that assessment, we believe that, as of December 31, 2024, our internal control over financial reporting is effective based
on those criteria.

 /s/

 /s/
 D. Shawn Jordan

 Chief Executive
 Officer and President

 Executive Vice President
 and Chief Financial Officer

 Report of
Independent Registered Public Accounting Firm

 To the Shareholders and the Board
of Directors of First Community Corporation:

 Opinion on
the Financial Statements

 We have audited the accompanying consolidated balance sheets of First Community and its subsidiary (the Company) as of December 31, 2024
and 2023, the related consolidated statements of income, other comprehensive income (loss), changes in shareholders' equity and
cash flows for each of the three years in the period ended December 31, 2024, and the related notes to the consolidated financial statements
(collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial
position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years
the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

 Basis for
Opinion

 These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the
Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting
Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company
is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits,
we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion
on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

 Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error
or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide
a reasonable basis for our opinion.

 Critical
Audit Matters

 The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were
communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to
the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit
matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical
audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

 Allowance
for Credit Losses

 As described in Note 4 to the Company's financial statements, the Company has a loan portfolio, net of deferred fees of approximately
$1.2 billion and related allowance for credit losses of approximately $13.1 million as of December 31, 2024. Expected credit losses are
measured on a collective basis using a non-discounted cash flow methodology with probability of default ("PD") and loss given
default ("LGD") for all call report code cohorts. Loans not sharing similar risk characteristics are evaluated on an individual
basis. Due to the minimal amount of default activity and limited charge-off history, the Company has elected to use index PDs and LGDs
comprised of rates derived from other community banks in place of the Company's historical PDs and LGDs. The Company utilizes reasonable
and supportable forecasts of future economic conditions when estimating the allowance for credit losses on loans. The calculation includes
a 12-month PD forecast based on the peer index regression model comparing peer defaults to the national unemployment rate. Additionally,
the allowance for credit losses calculation includes subjective adjustments for qualitative risk factors that are likely to cause estimated
credit losses to differ from historical experience.

 We identified the Company's estimate of the allowance for credit losses as a critical audit matter. The principal considerations
for our determination of the allowance for credit losses as a critical audit matter related to the high degree of subjectivity in the
Company's judgments in determining the qualitative factors, model assumptions, forecasts and forecasting periods. Auditing these
complex judgments and assumptions by the Company involves especially challenging auditor judgment due to the nature and extent of audit
evidence and effort required to address these matters, including the extent of specialized skill or knowledge needed.

 The primary procedures we performed to address this critical audit matter included the following:

 We evaluated the appropriateness of the methodology applied.

 We evaluated the relevance and the reasonableness of assumptions related to evaluation of the loan portfolio, current and forecasted economic
conditions, and other risk factors used in development of the qualitative factors.

 We tested the completeness and accuracy of the significant inputs into the model including the underlying data used to develop the qualitative
factors and forecasts.

 We validated the mathematical accuracy of the calculation.

 We evaluated the reasonableness of assumptions and data used by the Company in developing the qualitative factors by comparing these data
points to internally developed and third-party sources, as well as other audit evidence gathered.

 Analytical procedures were performed to evaluate the directional consistency of changes that occurred in the allowance for credit losses.

 /s/ Elliott Davis, LLC

 Firm ID: 149

 We have served as the Company's
auditor since 2006.

 Charleston, South Carolina

 FIRST COMMUNITY
CORPORATION

Balance Sheets

 (Dollars in thousands, except par values)

 2024

 2023

 ASSETS

 Cash and due from banks

 $
 26,373

 $
 27,908

 Interest-bearing bank balances

 123,455

 66,787

 Investment securities available-for-sale

 Investment securities held-to-maturity, fair value of $ 196,040 and $ 205,518 at December 31, 2024 and December 31, 2023, respectively, net of allowance for credit losses-investments

 209,413

 217,170

 Other investments, at cost

 2,679

 6,800

 Loans held-for-sale

 9,662

 4,433

 Loans held-for-investment

 Less, allowance for credit losses

 Net loans held-for-investment

 1,207,407

 1,121,752

 Property and equipment - net

 29,975

 30,589

 Lease right-of-use asset

 2,477

 3,248

 Bank owned life insurance

 30,973

 30,174

 Other real estate owned

 Intangible assets

 Goodwill

 Other assets

 20,399

 20,738

 Total assets

 $
 1,958,021

 $
 1,827,688

 LIABILITIES

 Deposits:

 Non-interest bearing

 $

 $

 Interest bearing

 1,213,184

 1,078,668

 1,675,901

 1,511,001

 Securities sold under agreements to repurchase

 103,110

 62,863

 Federal Home Loan Bank advances

 —

 Junior subordinated debt

 Lease liability

 2,646

 3,426

 Other liabilities

 16,906

 14,375

 Total liabilities

 1,813,527

 1,696,629

 Commitments and Contingencies (Note 15)

 SHAREHOLDERS' EQUITY

 Preferred stock, par value $ 1.00 per share; 10,000,000 shares authorized; none issued and outstanding

 —

 —

 Common stock, par value $ 1.00 per share; 20,000,000 shares authorized; issued and outstanding 7,644,424 at December 31, 2024 and 7,606,172 at December 31, 2023

 7,644

 7,606

 Nonvested restricted stock and stock units

 2,639

 2,181

 Additional paid in capital

 93,834

 93,167

 Retained earnings

 65,836

 56,296

 Accumulated other comprehensive loss

 ( 25,459
)

 ( 28,191
)

 Total shareholders' equity

 Total liabilities and shareholders' equity

 $
 1,958,021

 $
 1,827,688

 See Notes to
Consolidated Financial Statements

 FIRST
COMMUNITY CORPORATION

Statements of Income

 Year Ended December 31,

 (Dollars in thousands except per share amounts)

 2024

 2023

 2022

 Interest income:

 Loans, including fees

 $
 66,431

 $
 52,317

 $
 39,234

 Investment securities - taxable

 16,084

 16,715

 9,725

 Investment securities - non taxable

 1,420

 1,471

 1,525

 Other short term investments and CDs

 5,487

 2,194

 Total interest income

 89,422

 72,697

 51,117

 Interest expense:

 Deposits

 31,173

 16,563

 1,849

 Securities sold under agreement to repurchase

 2,183

 1,658

 Other borrowed money

 4,026

 5,584

 1,098

 Total interest expense

 37,382

 23,805

 3,174

 52,040

 48,892

 47,943

 1,129

 ( 152
)

 Net interest income after provision for (release of) credit losses

 51,231

 47,763

 48,095

 Non-interest income:

 Deposit service charges

 Mortgage banking income

 2,368

 1,406

 1,900

 Investment advisory fees and non-deposit commissions

 6,181

 4,511

 4,479

 Loss on sale of securities

 —

 ( 1,249
)

 —

 Gain (loss) on sale of other real estate owned

 —

 ( 45
)

 Loss on sale of other assets

 ( 5
)

 —

 ( 73
)

 Other non-recurring income

 Other

 4,403

 4,518

 4,341

 Total non-interest income

 11,569

 Non-interest expense:

 Salaries and employee benefits

 29,263

 25,864

 25,357

 Occupancy

 3,094

 3,157

 3,002

 Equipment

 1,451

 1,566

 1,343

 Marketing and public relations

 1,511

 1,496

 1,259

 FDIC Insurance assessments

 1,177

 Other real estate expense (income)

 ( 112
)

 Amortization of intangibles

 Other

 10,708

 10,111

 9,358

 Total non-interest expense

 47,465

 43,144

 41,253

 Net income before tax

 17,770

 15,040

 18,411

 Income tax expense

 3,815

 3,197

 3,798

 $

 $

 $

 Basic earnings per common share

 $
 1.83

 $
 1.56

 $
 1.94

 Diluted earnings per common share

 $
 1.81

 $
 1.55

 $
 1.92

 See Notes to
Consolidated Financial Statements

 FIRST
COMMUNITY CORPORATION

Statements of Comprehensive Income (Loss)

 2024

 2023

 2022

 $

 $

 $

 Other comprehensive income (loss):

 Unrealized gain (loss) during the period on available for
 sale securities, net of tax (expense) benefit of $ ( 215),
 $ ( 501),
 and $ 6,190,
 respectively

 1,370

 1,884

 ( 23,285
)

 Reclassification adjustment for loss included in net income, net of tax benefit of $ 0, $ 262, and $ 0, respectively

 —

 —

 Unrealized loss during the period on available-for-sale securities transferred to held-to-maturity, net of tax benefit of $ 0, $ 0, and $ 3,509, respectively

 —

 —

 ( 13,198
)

 Reclassification adjustment for amortization
 of unrealized losses on securities transferred from available-for-sale to held-to-maturity, net of tax expense of $ 362,
 $ 352,
 and $ 218
 respectively

 1,362

 1,324

 Other comprehensive income (loss)

 2,732

 4,195

 ( 35,665
)

 Comprehensive income (loss)

 $
 16,687

 $
 16,038

 $
 ( 21,052
)

 See Notes to
Consolidated Financial Statements

 FIRST
COMMUNITY CORPORATION

Statements of Changes in Shareholders' Equity

 Common Stock

 Nonvested

 Accumulated

 (Dollars and shares in thousands)

 Number
 Shares
 Issued

 Common
 Stock

 Additional
 Paid-in

 Restricted
 Stock and
 Stock Units

 Retained
 Earnings

 Other
 Comprehensive
 Income (Loss)

 Total

 Balance, December 31, 2021

 7,549

 $
 7,549

 $
 92,139

 $
 ( 294
)

 $
 38,325

 $
 3,279

 $
 140,998

 —

 —

 —

 —

 —

 Other comprehensive loss net of tax benefit of $ 9,481

 —

 —

 —

 —

 —

 ( 35,665
)

 ( 35,665
)

 Issuance of restricted stock

 ( 199
)

 —

 —

 —

 Issuance of common stock-deffered compensation

 —

 —

 —

 Grant of restricted stock units

 —

 —

 —

 1,447

 —

 —

 1,447

 Amortization of compensation on restricted stock

 —

 —

 —

 —

 —

 Shares forfeited

 ( 2
)

 ( 2
)

 ( 40
)

 —

 —

 —

 ( 42
)

 Dividends: Common ($ 0.52 per share)

 —

 —

 —

 —

 ( 3,913
)

 —

 ( 3,913
)

 Dividend reinvestment plan

 —

 —

 —

 Balance, December 31, 2022

 7,578

 $
 7,578

 $
 92,683

 $
 1,461

 $
 49,025

 $
 ( 32,386
)

 $
 118,361

 —

 —

 —

 —

 —

 Adoption of ASU 2016-13 net of tax benefit of $90

 —

 —

 —

 —

 ( 337
)

 —

 ( 337
)

 Other comprehensive income net of tax expense of $ 1,115

 —

 —

 —

 —

 —

 4,195

 4,195

 Issuance of restricted stock

 ( 154
)

 —

 —

 —

 Issuance of common stock-deferred compensation

 ( 69
)

 —

 —

 ( 28
)

 Grant of restricted stock units

 —

 —

 —

 —

 —

 Amortization of compensation on restricted stock

 —

 —

 —

 —

 —

 Shares forfeited

 ( 6
)

 ( 6
)

 ( 115
)

 —

 —

 —

 ( 121
)

 Dividends: Common ($ 0.56 per share)

 —

 —

 —

 —

 ( 4,235
)

 —

 ( 4,235
)

 Dividend reinvestment plan

 —

 —

 —

 Balance, December 31, 2023

 7,606

 $
 7,606

 $
 93,167

 $
 2,181

 $
 56,296

 $
 ( 28,191
)

 $

 —

 —

 —

 —

 —

 Other comprehensive income net of tax expense of $ 1,090

 —

 —

 —

 —

 —

 2,732

 2,732

 Issuance of restricted stock

 ( 245
)

 —

 —

 —

 Issuance of common stock-deferred compensation

 ( 273
)

 —

 —

 ( 104
)

 Grant of restricted stock units

 —

 —

 —

 —

 —

 Amortization of compensation on restricted stock

 —

 —

 —

 —

 —

 Shares forfeited

 ( 7
)

 ( 7
)

 ( 112
)

 —

 —

 —

 ( 119
)

 Dividends: Common ($ 0.58 per share)

 —

 —

 —

 —

 ( 4,415
)

 —

 ( 4,415
)

 Dividend reinvestment plan

 —

 —

 —

 Balance, December 31, 2024

 7,644

 $
 7,644

 $
 93,834

 $
 2,639

 $
 65,836

 $
 ( 25,459
)

 $

 See Notes to
Consolidated Financial Statements

 FIRST
COMMUNITY CORPORATION

Statements of Cash Flows

 Year Ended December 31,

 (Amounts in thousands)

 2024

 2023

 2022

 Cash flows from operating activities:

 $

 $

 $

 Adjustments to reconcile net income to net cash provided in operating activities

 Depreciation

 1,706

 1,760

 1,663

 Net premium amortization AFS

 ( 3,136
)

 ( 2,507
)

 1,869

 Net premium amortization HTM

 ( 626
)

 ( 575
)

 ( 264
)

 1,129

 ( 152
)

 Write-downs of other real estate owned

 (Gain) loss on sale of other real estate owned

 —

 ( 151
)

 Originations of HFS loans

 ( 79,376
)

 ( 50,253
)

 ( 64,495
)

 Sales of HFS loans

 76,497

 49,004

 71,717

 Gain on sale of HFS loans

 ( 2,350
)

 ( 1,405
)

 ( 1,881
)

 Amortization of intangibles

 Loss on sale of securities

 —

 1,249

 —

 Loss on fair value of equity investments

 ( 20
)

 ( 19
)

 ( 2
)

 Accretion on acquired loans

 —

 ( 81
)

 ( 49
)

 Loss on sale of other assets

 —

 (Increase) decrease in other assets

 1,302

 ( 1,628
)

 ( 1,696
)

 Increase in other liabilities

 1,868

 3,658

 Net cash provided in operating activities

 10,871

 12,226

 22,125

 Cash flows from investing activities:

 Proceeds from sale of securities available-for-sale

 —

 38,662

 —

 Purchase of investment securities available-for-sale

 ( 17,733
)

 ( 6,025
)

 ( 105,943
)

 Purchase of investment securities held-to-maturity

 —

 —

 ( 11,270
)

 (Purchase) sale of other investment securities

 1,766

 ( 2,589
)

 ( 2,406
)

 Maturity/call of investment securities available-for-sale

 27,628

 21,891

 61,958

 Maturity/call of investment securities held-to-maturity

 8,391

 12,074

 11,745

 Increase in loans

 ( 86,588
)

 ( 153,029
)

 ( 116,797
)

 Proceeds from sale of other real estate owned

 —

 Proceeds from sale of property and equipment

 —

 —

 Purchase of property and equipment

 ( 1,097
)

 ( 1,071
)

 ( 1,223
)

 Net disposal of property and equipment

 —

 —

 Net cash used in investing activities

 ( 67,633
)

 ( 89,668
)

 ( 162,779
)

 Cash flows from financing activities:

 Increase in deposit accounts

 164,900

 125,619

 24,091

 Increase (decrease) in Fed Funds Borrowed

 —

 ( 22,000
)

 22,000

 Advances from the Federal Home Loan Bank

 —

 289,000

 118,000

 Repayment of advances from the Federal Home Loan Bank

 ( 90,000
)

 ( 249,000
)

 ( 68,000
)

 Increase (decrease) in securities sold under agreements to repurchase

 40,247

 ( 5,880
)

 14,527

 Shares retired

 ( 119
)

 ( 121
)

 ( 42
)

 Restricted stock units granted

 1,447

 Change in non-vested restricted stock

 Dividend reinvestment plan

 Proceeds from (cost of) issuance of common stock-deferred compensation

 ( 104
)

 ( 28
)

 Dividends paid on common stock

 ( 4,415
)

 ( 4,235
)

 ( 3,913
)

 Net cash provided in financing activities

 111,895

 134,736

 109,033

 Net increase (decrease) in cash and cash equivalents

 55,133

 57,294

 ( 31,621
)

 Cash and cash equivalents at beginning of year

 94,695

 37,401

 69,022

 Cash and cash equivalents at end of year

 $
 149,828

 $
 94,695

 $
 37,401

 Supplemental disclosure:

 Cash paid during the period for: interest

 $
 33,235

 $
 20,750

 $
 3,058

 Income Taxes

 $
 3,761

 $
 3,574

 $
 3,893

 Non-cash investing and financing activities:

 Unrealized gain (loss) on securities available-for-sale, net of tax

 $
 1,370

 $
 2,871

 $
 ( 23,285
)

 Transfer of investment securities available-for-sale to held-to-maturity

 —

 —

 245,619

 Adoption of ASU 2016-3 (CECL transition)

 $
 —

 $

 $
 —

 Transfer of loans to other real estate owned

 $
 —

 $

 $
 —

 Recognition of operating lease right of use asset

 $
 —

 $

 $
 —

 Recognition of operating lease liability

 $
 —

 $

 $
 —

 Termination of operating lease right of use asset

 $

 $
 —

 $
 —

 Termination of operating lease liability

 $

 $
 —

 $
 —

 See Notes
to Consolidated Financial Statements

 FIRST COMMUNITY
CORPORATION

 Notes
to Consolidated Financial Statements

 Note 1— ORGANIZATION
AND BASIS OF PRESENTATION

 The consolidated
financial statements include the accounts of First Community Corporation (the "Company") and its wholly owned subsidiary,
First Community Bank (the "Bank"). The Company owns all of the common stock of FCC Capital Trust I. All material intercompany
transactions are eliminated in consolidation. The Company was organized on November 2, 1994, as a South Carolina corporation,
and was formed to become a bank holding company. The Bank opened for business on August 17, 1995. FCC Capital Trust I is an unconsolidated
special purpose subsidiary organized for the sole purpose of issuing trust preferred securities.

 Note
2— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 Use of Estimates

 The financial
statements are prepared in accordance with accounting principles generally accepted in the United States of America. These principles
require management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.

 Material
estimates that are particularly susceptible to significant change relate to the determination of the allowance for credit losses.
The estimation process includes management's judgment as to future losses on existing loans based on an internal review
of the loan portfolio, including an analysis of the borrower's current financial position, the consideration of current
and anticipated economic conditions and the effect on specific borrowers. In determining the collectability of loans management
also considers the fair value of underlying collateral. Various regulatory agencies, as an integral part of their examination
process, review the Company's allowance for credit losses. Such agencies may require the Company to recognize additions
to the allowance based on their judgments about information available to them at the time of their examination. Because of these
factors it is possible that the allowance for credit losses could change materially.

 Cash and Cash Equivalents

 Cash and
cash equivalents consist of cash on hand, due from banks, interest-bearing bank balances, federal funds sold and securities purchased
under agreements to resell. Generally federal funds are sold for a one-day period and securities purchased under agreements to
resell mature in less than 90 days.

 Investment Securities

securities are classified as either held-to-maturity, available-for-sale or trading securities. In determining such classification,
securities that the Company has the positive intent and ability to hold to maturity are classified as held-to maturity and are
carried at amortized cost. Securities classified as available-for-sale are carried at estimated fair values with unrealized gains
and losses included in shareholders' equity on an after-tax basis. Trading securities are carried at estimated fair value
with unrealized gains and losses included in non-interest income (See Note 3).

 Gains
and losses on the sale of available-for-sale securities and trading securities are determined using the specific identification
method. Declines in the fair value of individual held-to-maturity and available-for-sale securities below their cost that are
judged to due to credit impairment are written down to fair value and charged to income in the Consolidated Statement of Income.

 Premiums are
recognized in interest income using the effective interest method over the period to the earliest call date. Discounts are
recognized in interest income using the effective interest method to maturity.

 Other Investments, At Cost

 Equity
Securities without readily determinable fair values include Federal Home Loan Bank ("FHLB") of Atlanta capital stock and
various other non-marketable equity investments. Investment in the FHLB of Atlanta is a condition of borrowing from the FHLB
Atlanta. FHLB stock is carried at cost and periodically evaluated for impairment based on an assessment of the ultimate recovery of
par value. Both cash and stock dividends are reported as interest income. At December 31, 2024 and 2023, the Company's
investment in FHLB stock was $ 1.3 million
and $ 5.5
million, respectively. Dividends received on other investments, at cost are reported as interest income.

 Note

on Held-to-Maturity Securities

 Management
measures expected credit losses on held-to-maturity debt securities on a collective basis by major security type. Accrued interest
receivable on held-to-maturity debt securities totaled $1.3 million at December 31, 2024 and 2023 and was excluded from the estimate
of credit losses. The held-to-maturity portfolio consists of mortgage-backed and municipal securities. Securities are generally
rated BBB- or higher. Securities are analyzed individually to establish a CECL reserve.

 The estimate
of expected credit losses is primarily based on the ratings assigned to the securities by debt rating agencies and the average
of the annual historical loss rates associated with those ratings. The Company then multiplies those loss rates, as adjusted for
any modifications to reflect current conditions and reasonable and supportable forecasts as considered necessary, by the remaining
lives of each individual security to arrive at a lifetime expected loss amount. Management classifies the held-to-maturity portfolio
into the following major security types: mortgage-backed securities or state and local governments.

 All the mortgage-backed
securities ("MBS") held by the Company are issued by government-sponsored corporations. These securities are either
explicitly or implicitly guaranteed by the U.S. government, are highly rated by major rating agencies and have a long history
of no credit losses. As a result, no allowance for credit losses was recorded on held-to-maturity MBS at the adoption of CECL
or at December 31, 2024 and December 31, 2023. The state and local governments securities held by the Company are highly rated
by major rating agencies.

on Available-for-Sale Securities

 For available-for-sale
securities, management evaluates all investments in an unrealized loss position on a quarterly basis, or more frequently when
economic or market conditions warrant such evaluation. If the Company has the intent to sell the security or it is more likely
than not that the Company will be required to sell the security, the security is written down to fair value and the entire loss
is recorded in earnings.

 If either
of the above criteria is not met, the Company evaluates whether the decline in fair value is the result of credit losses or other
factors. In making the assessment, the Company may consider various factors including the extent to which fair value is less than
amortized cost, performance on any underlying collateral, downgrades in the ratings of the security by a rating agency, the failure
of the issuer to make scheduled interest or principal payments and adverse conditions specifically related to the security. If
the assessment indicates that a credit loss exists, the present value of cash flows expected to be collected are compared to the
amortized cost basis of the security and any excess is recorded as an allowance for credit loss, limited by the amount that the
fair value is less than the amortized cost basis. Any amount of unrealized loss that has not been recorded through an allowance
for credit loss is recognized in other comprehensive income.

 Changes
in the allowance for credit loss are recorded as provision for (or reversal of) credit loss expense. Losses are charged against
the allowance for credit loss when management believes an available-for-sale security is confirmed to be uncollectible or when
either of the criteria regarding intent or requirement to sell is met. At December 31, 2024 and 2023, there was no allowance for
credit loss related to the available-for-sale securities portfolio.

 Accrued interest receivable on available-for-sale
securities totaled $840,000 and $870,000 at December 31, 2024 and 2023, respectively, and was excluded from the estimate of credit
losses.

 Loans

 Loans
that management has the intent and ability to hold for the foreseeable future, until maturity, or payoff are reported at amortized
cost. Amortized cost is the principal balance outstanding, net of purchase premiums and discounts and deferred fees and costs.
Accrued interest receivable related to loans totaled $4.1 million and $3.6 million at December 31, 2024 and 2023, respectively,
and was reported in other assets on the consolidated balance sheets. Interest income is accrued on the unpaid principal balance.
Loan origination fees, net of certain direct origination costs, are deferred and recognized in interest income using methods that
approximate a level yield without anticipating prepayments.

 Note

 The accrual
of interest is generally discontinued when a loan becomes 90 days past due and is not well collateralized and in the process of
collection, or when management believes, after considering economic and business conditions and collection efforts, that the principal
or interest will not be collectible in the normal course of business. Past due status is based on contractual terms of the loan.
A loan is considered to be past due when a scheduled payment has not been received 30 days after the contractual due date.

 All accrued
interest is reversed against interest income when a loan is placed on non-accrual status. Interest received on such loans is accounted
for using the cost-recovery method, until qualifying for return to accrual. Under the cost-recovery method, interest income is
not recognized until the loan balance is reduced to zero. Loans are returned to accrual status when all the principal and interest
amounts contractually due are brought current, there is a sustained period of repayment performance, and future payments are reasonably
assured.

elected not to measure an allowance for credit losses for accrued interest receivable and instead elected to reverse interest
income on loans or securities that are placed on non-accrual status, which is generally when the instrument is 90 days past due,
or earlier if the Company believes the collection of interest is doubtful. The Company has concluded that this policy results
in the timely reversal of uncollectible interest.

- Loans

 The accrual
of interest on individually evaluated loans is discontinued when, in management's opinion, the borrower may be unable to
meet payments as they become due, generally when a loan becomes 90 days past due. When interest accrual is discontinued, all unpaid
accrued interest is reversed. Interest income is subsequently recognized only to the extent cash payments are received first to
principal and then to interest income.

for credit losses is a valuation account that is deducted from the loans' amortized cost basis to present the net amount
expected to be collected on the loans. Loans are charged off against the allowance when management believes the uncollectibility
of a loan balance is confirmed. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected
to be charged-off. Accrued interest receivable is excluded from the estimate of credit losses.

for credit losses represents management's estimate of lifetime credit losses inherent in loans as of the balance sheet date.
The allowance for credit losses is estimated by management using relevant available information, from both internal and external
sources, relating to past events, current conditions, and reasonable and supportable forecasts. The Company measures expected
credit losses for loans on a pooled basis when similar risk characteristics exist. Generally, collectively assessed loans are
grouped by call report code and then by risk grade grouping. Risk grade is grouped within each call report code by pass, watch,
special mention, substandard, and doubtful. Other loan types are separated into their own cohorts due to specific risk characteristics
for that pool of loans.

 The Company has
elected a non-discounted cash flow methodology with probability of default ("PD") and loss given default ("LGD")
for all call report code cohorts ("cohorts"), as this is believed to be the most accurate model available. The PD
calculation looks at the historical loan portfolio at particular points in time (each month during the lookback period) to determine
the probability that loans in a certain cohort will default over the next 12-month period. A default is defined as a loan that
has moved to past due 90 days and greater, non-accrual status, or experienced a charge-off during the period. Currently, the Company's
historical data is insufficient due to a minimal amount of default activity or zero defaults, therefore, management uses index
PDs comprised of rates derived from the PD experience of other community banks in place of the Company's historical PDs.

 The LGD
calculation looks at actual losses (net charge-offs) experienced over the entire lookback period for each cohort of loans. The
aggregate loss amount is divided by the exposure at default to determine an LGD rate. All defaults (non-accrual, charge-off, or
greater than 90 days past due) occurring during the lookback period are included in the denominator, whether a loss occurred or
not and exposure at default is determined by the loan balance immediately preceding the default event (i.e., non-accrual or charge-off).
Due to very limited charge-off history, management uses index LGDs comprised of rates derived from the LGD experience of other
community banks in place of the Company's historical LGDs.

utilizes reasonable and supportable forecasts of future economic conditions when estimating the allowance for credit losses on
loans. The calculation includes a 12-month PD forecast based on the peer index regression model comparing peer defaults to the
national unemployment rate. After the forecast period, PD rates revert on a straight-line basis back to long-term historical average
rates over a 12-month period.

recognizes that all significant factors that affect the collectability of the loan portfolio must be considered to determine the
estimated credit losses as of the evaluation date. Furthermore, the methodology, in and of itself and even when selectively adjusted
by comparison to market and peer data, does not provide a sufficient basis to determine the estimated credit losses. The Company
adjusts the modeled historical losses by qualitative adjustments to incorporate all significant risks to form a sufficient basis
to estimate the credit losses. These qualitative adjustments may increase or reduce reserve levels and include adjustments for
lending management experience, loan review and audit results, asset quality and portfolio trends, loan portfolio growth and concentrations,
trends in underlying collateral, as well as external factors and economic conditions not already captured.

 Note

for credit losses is measured on a collective basis for pools of loans with similar risk characteristics. The Bank has identified
the following pools:

 Loans Secured by Non-Owner Occupied Commercial
 Real Estate – These loans are to businesses for structures that will be leased to other commercial entities. Cash flows
 to pay these loans is dependent on lease payments to the business owners.

 Loans Secured by Owner Occupied Commercial
 Real Estate – These loans are to businesses who are housed in the building that serves as collateral. Cash flows to
 pay these loans is dependent on cash generated by the business.

 Commercial and Industrial Loans –
 These loans are to businesses for purposes other than commercial real estate, such as equipment. The loans are typically secured
 by the equipment purchased, and cash flows to pay these loans is dependent on cash generated by the business.

 Loans Secured by Residential Real Estate
 – These loans are to businesses and individuals for real estate with houses or apartment complexes on it. Cash flows
 to pay these loans is dependent on household income, and the collateral rises and falls in value in alignment with the residential
 property market.

 Loans Secured by Farmland – These
 loans are secured by agricultural property.

 Loans to States and Municipalities –
 These loans are to governments, and are backed by tax revenues.

 Loans Secured by Construction and Development
 – These loans are for new construction and work on the underlying land.

 Other Consumer Loans – These loans
 are made to consumers and are secured by collateral other than residential real estate, e.g., automobiles.

 Loans
that do not share risk characteristics are evaluated on an individual basis. Generally, this population includes loan relationships
exceeding $500,000 and on non-accrual status, however they can also include any loan that does not share risk characteristics
with its respective pool. When management determines that foreclosure is probable and the borrower is experiencing financial difficulty,
the expected credit losses are based on the fair value of collateral at the reporting date unadjusted for selling costs as appropriate.
When the expected source of repayment is from a source other than the underlying collateral, impairment will generally be measured
based upon the present value of expected proceeds discounted at the contractual interest rate.

on Unfunded Commitments

instruments include off-balance sheet credit instruments, such as commitments to make loans and commercial letters of credit issued
to meet customer financing needs. The Company's exposure to credit loss in the event of nonperformance by the other party
to the financial instrument for off-balance sheet loan commitments is represented by the contractual amount of those instruments.
Such financial instruments are recorded when they are funded.

records an allowance for credit losses on off-balance sheet credit exposures, unless the commitments to extend credit are unconditionally
cancelable, through a charge to provision for unfunded commitments in the Company's income statements. The allowance for
credit losses on off-balance sheet credit exposures is estimated by loan cohort at each balance sheet date under the current expected
credit loss model using the same methodologies as portfolio loans, taking into consideration the likelihood that funding will
occur as well as any third-party guarantees. The allowance for credit losses - unfunded commitments is included in other liabilities
on the Company's consolidated balance sheets.

 Mortgage Loans Held for
Sale

 The Company originates
fixed rate residential loans on a servicing released basis in the secondary market. Loans closed but not yet settled with an investor,
are carried in the Company's loans held for sale portfolio. These loans are primarily fixed rate residential loans that
have been originated in the Company's name and have closed. Virtually all these loans have commitments to be purchased by
investors at a locked in price with the investors on the same day that the loan was locked in with the Company's customers.
Therefore, these loans present very little market risk for the Company.

usually delivers to, and receives funding from, the investor within 30 days. Commitments to sell these loans to the investor are
considered derivative contracts and are sold to investors on a "best efforts" basis. The Company is not obligated
to deliver a loan or pay a penalty if a loan is not delivered to the investor. As a result of the short-term nature of these derivative
contracts, the fair value of the mortgage loans held for sale in most cases is the same as the value of the loan amount at its
origination. These loans are classified as Level 2.

 Note

 Property and Equipment

 Property
and equipment are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the
asset's estimated useful life. Estimated lives range up to 39 years for buildings and up to 10 years for furniture, fixtures,
and equipment.

 Goodwill and Other Intangible

 Goodwill
represents the cost in excess of fair value of net assets acquired (including identifiable intangibles) in purchase transactions.
Other intangible assets represent premiums paid for acquisitions of core deposits (core deposit intangibles). Core deposit intangibles
are being amortized on a straight-line basis over seven years. Goodwill and identifiable intangible assets are reviewed for impairment
annually or whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Qualitative
factors are assessed to first determine if it is more likely than not (more than 50%) that the carrying value of goodwill is less
than fair value. During the years ended December 31, 2024 and 2023, qualitative factors indicated it was more likely than not
that the carrying value of goodwill was less than fair value, thus there were no indicators of impairment and no quantitative
testing was performed.

 Other Real Estate Owned

 Other real estate
owned includes real estate acquired through foreclosure. Other real estate owned is carried at the lower of cost (principal balance
at date of foreclosure) or fair value minus estimated cost to sell. Any write-downs at the date of foreclosure are charged to
the allowance for credit losses. Expenses to maintain such assets, subsequent changes in the valuation allowance, and gains or
losses on disposal are included in other expenses.

 Derivatives

 The
Company utilizes derivative instruments to manage risks such as interest rate risk or market risk. Our Derivatives Policy prohibits
using derivatives for speculative purposes.

 Accounting
for derivatives differs significantly depending on whether a derivative is designated as an accounting hedge, which is a transaction
intended to reduce a risk associated with a specific asset or liability or future expected cash flow at the time it is purchased.
In order to qualify as an accounting hedge, a derivative must be designated as such at inception by management and meet certain
criteria. Management must also continue to evaluate whether the instrument effectively reduces the risk associated with that item.
To determine if a derivative instrument continues to be an effective hedge, the Company must make assumptions and judgments about
the continued effectiveness of the hedging strategies and the nature and timing of forecasted transactions. If the Company's
hedging strategy was to become ineffective, hedge accounting would no longer apply and the reported results of operations or financial
condition could be materially affected.

 Note 2—SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued)

 Comprehensive Income (loss)

reports comprehensive income (loss) in accordance with Accounting Standards Codification ("ASC") 220, "Comprehensive
Income." ASC 220 requires that all items that are required to be reported under accounting standards as comprehensive income
(loss) be reported in a financial statement that is displayed with the same prominence as other financial statements. The disclosures
requirements have been included in the Company's consolidated statements of comprehensive income.

 Mortgage Origination Fees

origination fees relate to activities comprised of accepting residential mortgage applications, qualifying borrowers to standards
established by investors and selling the mortgage loans to the investors under pre-existing commitments. The related fees received
by the Company for these services are recognized at the time the loan is closed.

 Advertising Expense

 Marketing and
public relations costs are generally expensed as incurred. External costs incurred in producing media advertising are expensed
the first time the advertising takes place. External costs relating to direct mailing costs are expensed in the period in which
the direct mailings are sent. Marketing and public relations expense totaled $ 1.5 million, $ 1.5 million and $ 1.3 million for the
years ended December 31, 2024, 2023, and 2022, respectively.

 Income Taxes

 A deferred
income tax liability or asset is recognized for the estimated future effects attributable to differences in the tax bases of assets
or liabilities and their reported amounts in the financial statements as well as operating loss and tax credit carry forwards.
The deferred tax asset or liability is measured using the enacted tax rate expected to apply to taxable income in the period in
which the deferred tax asset or liability is expected to be realized. There are no uncertain tax positions at December 31, 2024
or 2023.

 Stock Based Compensation
Cost

accounts for stock-based compensation under the fair value provisions of the accounting literature. Compensation expense is recognized
in salaries and employee benefits.

 The fair
value of each options grant is estimated on the date of grant using the Black-Scholes option pricing model. No options were granted
in 2024, 2023 or 2022.

 Earnings Per Common Share

 Basic earnings
per common share ("EPS") excludes dilution and is computed by dividing income available to common shareholders by
the weighted-average number of common shares outstanding for the period. Diluted EPS is computed by dividing net income available
to common shareholders by the weighted average number of shares of common stock and common stock equivalents. Common stock equivalents
consist of restricted stock and restricted stock units and are computed using the treasury stock method.

 Business Combinations and
Method of Accounting for Loans Acquired

 The Company accounts
for its acquisitions under FASB ASC Topic 805, " Business Combinations," which requires the use of the acquisition
method of accounting. All identifiable assets acquired, including loans, are recorded at fair value. Loans acquired are recorded
at fair value in accordance with the fair value methodology prescribed in FASB ASC Topic 820, " Fair Value Measurements
and Disclosures."

 Note 2—SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued)

 Segment Information

 ASC Topic 280-10,
" Segment Reporting," requires selected segment information of operating segments based on a management approach.
The Company's four reportable segments represent the distinct product lines the Company offers and are viewed separately
for strategic planning by management. Below is a listing of the segments along with their markets and services.

 Commercial and retail banking: The Company's
 primary business is to provide deposit and lending products and services to its commercial and retail customers.

 Mortgage Banking: This segment provides
 mortgage origination services for loans that will be sold to investors in the secondary market and consumer mortgage loans
 that will be held-for-investment.

 Investment advisory and non-deposit: This
 segment provides investment advisory services and non-deposit products.

 Corporate: This segment includes the parent
 company financial information, including interest on parent company debt and dividend income received from First Community
 Bank (the "Bank").

 Application of New Accounting
Guidance Adopted in 2024 and 2023

 In November
2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This amendment
is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment
expenses. The amendments require disclosure of incremental segment information on an annual and interim basis for all public entities.
For public business entities, the amendments are effective for fiscal years beginning after December 15, 2023, and interim periods
with fiscal years beginning after December 15, 2024. The Company adopted this amendment effective January 1, 2024.

 On January
1, 2023, the Company adopted ASU 2016-13 Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses
on Financial Instruments, which replaced the incurred loss methodology that delayed recognition until it is probable a loss has
been incurred with an expected loss methodology that is referred to as the current expected credit loss ("CECL") methodology.
The measurement of expected losses under the CECL methodology is applicable to financial assets measured at amortized cost, including
loan receivables and held-to-maturity debt securities. It also applies to off-balance sheet credit exposures not accounted for
as insurance (loan commitments, standby letters of credit, financial guarantees, and other similar instruments) and net investments
in leases recognized by a lessor in accordance with Topic 842 on leases. Additionally, ASC 326 made changes to the accounting
for available-for-sale debt securities. One such change is to require credit losses to be presented as an allowance rather than
a write-down on available-for-sale debt securities management does not intend to sell or believes that it is more likely than
not they will be required to sell.

adopted ASC 326 and all related subsequent amendments thereto effective January 1, 2023 using the modified retrospective approach
for all financial assets measured at amortized cost and off-balance sheet credit exposures. The transition adjustment of the adoption
of CECL included a decrease in the allowance for credit losses on loans of $14,300, which is presented as a reduction to net loans
outstanding, and an increase in the allowance for credit losses on unfunded loan commitments of $397,900, which is recorded within
Other Liabilities. The Company recorded an allowance for credit losses for held to maturity securities of $43,500, which is presented
as a reduction to held to maturity securities outstanding. The Company recorded a net decrease to retained earnings of $337,400
as of January 1, 2023 for the cumulative effect of adopting CECL, which reflects the transition adjustments noted above, net of
the applicable deferred tax assets recorded. Results for reporting periods beginning after January 1, 2023 are presented under
CECL while prior period amounts continue to be reported in accordance with previously applicable accounting standards ("Incurred
Loss").

 The Company adopted
ASC 326 using the prospective transition approach for debt securities for which other-than-temporary impairment had been recognized
prior to January 1, 2023. As of December 31, 2022, the Company did not have any other-than-temporarily impaired available-for-sale
investment securities. Therefore, upon adoption of ASC 326, the Company determined that an allowance for credit losses on available-for-sale
securities was not deemed material.

 Note

table illustrates the impact on the allowance for credit losses ("ACL") from the adoption of ASC 326:

 Schedule of impact on the allowance for credit losses from the adoption of ASC 326

 January 1, 2023
 As Reported
 Under ASC 326

 2022 Pre-ASC
 326 Adoption

 Impact of ASC
 326 Adoption

 Assets:

 Held to maturity securities, at amortized cost

 $
 106,929

 $
 106,929

 $
 —

 Allowance for credit losses on held to maturity securities:

 State and local governments

 —

 Allowance for credit losses on held-to-maturity securities

 $

 $
 —

 $

 Loans, at amortized cost

 $

 $

 $
 —

 Allowance for credit losses on loans:

 1,042

 Real Estate Construction

 1,150

 1,075

 Real Estate Mortgage Residential

 Real Estate Mortgage Commercial

 7,686

 8,569

 ( 883
)

 Consumer Home Equity

 Consumer Other

 Unallocated

 —

 ( 636
)

 Allowance for credit losses on loans

 $
 11,322

 $

 $
 ( 14
)

 Liabilities:

 Allowance for credit losses for unfunded commitments

 $

 $
 —

 $

 Recently Issued Accounting Standards

 In March 2020,
the FASB issued guidance to provide temporary optional guidance to ease the potential burden in accounting for reference rate
reform. The guidance provides optional expedients and exceptions for applying generally accepted accounting principles to contract
modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected
to be discontinued. The ASU is intended to help stakeholders during the global market-wide reference rate transition period. In
December 2022, the FASB issued amendments to extend the period of time preparers can use the reference rate reform relief guidance
under ASC Topic 848 from December 31, 2023 to December 31, 2024, to address the fact that all London Interbank Offered Rate (LIBOR)
tenors were not discontinued as of December 31, 2022, and some tenors were published until June 2023. The amendments are effective
immediately for all entities and applied prospectively. The Company does not expect these amendments to have a material effect
on its financial statements.

 In December
2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This amendment is intended
to enhance the transparency and decision usefulness of income tax disclosures by requiring public business entities to disclose
additional information in specified categories with respect to the reconciliation of the effective tax rate to the statutory rate
for federal, state, and foreign income taxes. It also requires greater detail about individual reconciling items in the rate reconciliation
to the extent the impact of those items exceeds a specified threshold. For public business entities, the amendments are effective
for annual periods beginning after December 15, 2024. Early adoption is permitted.

 Other accounting
standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material
impact on the Company's financial position, results of operations or cash flows.

 Note 2—SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued)

 General Risk and Uncertainties

 In the
normal course of business, the Company encounters two significant types of risks: economic and regulatory. There are three main
components of economic risk: interest rate risk, credit risk and market risk. The Company is subject to interest rate risk to
the degree that its interest-bearing liabilities mature or reprice at different speeds, or on a different basis, than its interest-earning
assets. Credit risk is the risk of default on the Company's loan and investment portfolios that results from borrowers'
or issuer's inability or unwillingness to make contractually required payments. Market risk reflects changes in the value
of collateral underlying loans and investments and the valuation of real estate held by the Company.

is subject to regulations of various governmental agencies (regulatory risk). These regulations can and do change significantly
from period to period. The Company also undergoes periodic examinations by the regulatory agencies, which may subject it to further
changes with respect to asset valuations, amounts of required credit loss allowances and operating restrictions from regulators'
judgments based on information available to them at the time of their examination.

 Reclassifications

 Certain captions
and amounts in the 2022 consolidated financial statements were reclassified to conform to the 2024 and 2023 presentation.

 Note 3— INVESTMENT
SECURITIES

 The amortized cost and estimated
fair values of investment securities are summarized below:

 Schedule of Amortized Cost and Estimated Fair Values of Investment Securities Available-For-Sale

 AVAILABLE-FOR-SALE:

 Cost

 Gross

 Gains

 Gross

 Fair
 Value

 US
 Treasury securities

 $

 15,822

 $

 —

 $

 ( 2,582

)

 $

 Government
 Sponsored Enterprises

 2,500

 —

 ( 390

)

 2,110

 260,023

 ( 15,859

)

 244,204

 Small
 Business Administration pools

 12,437

 ( 373

)

 12,079

 and other securities

 8,755

 —

 ( 806

)

 7,949

 Total

 $

 299,537

 $

 $

 ( 20,010

)

 $

 Cost

 Gross

 Gains

 Gross

 Fair
 Value

 31, 2023

 US Treasury securities

 $

 20,791

 $

 —

 $

 ( 2,445

)

 $

 Government Sponsored Enterprises

 2,500

 —

 ( 371

)

 2,129

 255,757

 ( 17,613

)

 238,159

 Small Business Administration pools

 16,108

 ( 411

)

 15,721

 Corporate and other

 8,759

 —

 ( 888

)

 7,871

 Total

 $

 303,915

 $

 $

 ( 21,728

)

 $

 Note
3—INVESTMENT SECURITIES (Continued)

 HELD-TO-MATURITY:

 Schedule of Amortized Cost and Estimated Fair Values of
Investment Securities Held-To-Maturity

 Cost

 Net of Allowance

 for Credit

 Gross

 Gains

 Gross

 Fair
 Value

 31, 2024

 $

 105,563

 $

 —

 $

 ( 8,645

)

 $

 96,918

 State
 and local government

 103,850

 —

 ( 4,728

)

 99,122

 Total

 $

 209,413

 $

 —

 $

 ( 13,373

)

 $

 Cost

 Net of Allowance

 for Credit

 Gross

 Gains

 Gross

 Fair
 Value

 31, 2023

 $

 112,740

 —

 $

 ( 8,490

)

 $

 104,250

 State
 and local government

 104,430

 ( 3,445

)

 101,268

 Total

 $

 217,170

 $

 $

 ( 11,935

)

 $

 205,518

 On June 1, 2022,
the Company reclassified $224.5 million in investments to held-to-maturity (HTM) from available-for-sale (AFS). These securities
were transferred at fair value at the time of the transfer, which became the new cost basis for the securities held to maturity.
The pretax unrealized net holding loss on the available for sale securities on the date of transfer totaled approximately $16.7
million, and continued to be reported as a component of accumulated other comprehensive loss. This net unrealized loss is being
amortized to interest income over the remaining life of the securities as a yield adjustment. There were no gains or losses recognized
as a result of this transfer. The remaining pretax unrealized net holding loss on these investments was $12.3 million ($9.7 million
net of tax) at December 31, 2024, $14.0 million ($11.1 million net of tax) at December 31, 2023 and $15.7 million ($12.4 million
net of tax) at December 31, 2022.

ended December 31, 2023, the Company sold $39.9 million of book value US Treasury securities from the available-for-sale investment
securities portfolio. This sale created a one-time pre-tax loss of $1.2 million and provided additional liquidity to pay down
borrowings and fund loan growth. During the years ended December 31, 2024 and 2022, the Company sold no investment securities.
The tax benefit applicable to the net realized loss was approximately $0 and $262, and $0 for 2024 and 2023 respectively.

tables show gross unrealized losses and fair values, aggregated by investment category and length of time that individual securities
have been in a continuous loss position, at December 31, 2024 and December 31, 2023.

 Note 3—INVESTMENT SECURITIES

 Schedule of gross unrealized losses
and fair values, aggregated by investment category and length of time that individual securities have been in a continuous loss
position.

 Less
 than 12 months

 months or more

 Total

 Fair

 Fair

 Fair

 Available-for-sale
 securities:

 Value

 Loss

 Value

 Loss

 Value

 Loss

 US
 Treasury Securities

 $

 —

 $

 —

 $

 $

 2,582

 $

 $

 2,582

 Government
 Sponsored Enterprise

 —

 —

 2,110

 2,110

 14,310

 216,452

 15,709

 230,762

 15,859

 Small
 Business Administration pools

 1,279

 8,554

 9,833

 and other securities

 1,488

 6,449

 7,937

 Total

 $

 17,077

 $

 $

 246,805

 $

 19,595

 $

 263,882

 $

 20,010

 Less
 than 12 months

 months or more

 Total

 Fair

 Fair

 Fair

 Available-for-sale
 securities:

 Value

 Loss

 Value

 Loss

 Value

 Loss

 US
 Treasury Securities

 $

 —

 $

 —

 $

 $

 2,445

 $

 $

 2,445

 Government
 Sponsored Enterprise

 —

 —

 2,129

 2,129

 8,164

 223,844

 17,190

 232,008

 17,613

 Small
 Business Administration pools

 4,253

 7,638

 11,891

 and other securities

 1,880

 4,236

 6,116

 Total

 $

 14,297

 $

 $

 256,193

 $

 21,145

 $

 270,490

 $

 21,728

 Less
 than 12 months

 months or more

 Total

 Fair

 Fair

 Fair

 Held-to-maturity
 securities:

 Value

 Loss

 Value

 Loss

 Value

 Loss

 —

 —

 96,918

 8,645

 96,918

 8,645

 State
 and local government

 21,376

 76,104

 4,292

 97,480

 4,728

 Total

 $

 21,376

 $

 $

 173,022

 $

 12,937

 $

 194,398

 $

 13,373

 Less
 than 12 months

 months or more

 Total

 Fair

 Fair

 Fair

 Held-to-maturity
 securities:

 Value

 Loss

 Value

 Loss

 Value

 Loss

 —

 —

 104,250

 8,490

 104,250

 8,490

 State
 and local government

 6,278

 78,597

 3,420

 84,875

 3,445

 Total

 $

 6,278

 $

 $

 182,847

 $

 11,910

 $

 189,125

 $

 11,935

 Note
3—INVESTMENT SECURITIES (Continued)
 The amortized
cost and fair value of investment securities at December 31, 2024, by expected maturity, follow. Expected maturities differ from
contractual maturities because borrowers may have the right to call or prepay the obligations with or without prepayment penalties.
Mortgage-backed securities are included in the year corresponding with the remaining expected life.

 Schedule of Amortized
Cost and Fair Value of Investment Securities

 AVAILABLE-FOR-SALE:

 Available-for-sale

 Cost

 Fair
 Value

 Due in one year or less

 $

 $

 Due after one year through five years

 15,045

 14,634

 Due after five years through ten years

 33,167

 29,179

 Due after ten years

 250,835

 235,282

 $
 299,537

 $

 HELD-TO-MATURITY:

 Held-to-maturity

 Cost

 Fair
 Value

 Due in one year or less

 $
 7,284

 $
 7,234

 Due after one year through five years

 56,701

 54,511

 Due after five years through ten years

 58,285

 55,222

 Due after ten years

 87,166

 79,096

 Allowance for Credit Losses on Held-to-Maturity Securities

 ( 23
)

 (23
)

 $
 209,413

 $

 Securities with
an amortized cost of $3 88.5 million and fair value of $ 363.8 million at December 31, 2024 were pledged to secure FHLB advances,
public deposits, and securities sold under agreements to repurchase. Securities with an amortized cost of $ 160.8 million and fair
value of $ 150.6 million at December 31, 2023 were pledged to secure FHLB advances, public deposits, and securities sold under
agreements to repurchase.

 Allowance for Credit
Losses on Held-to-Maturity Securities

 Expected
credit losses on held-to-maturity debt securities are evaluated by major security type. The held-to-maturity portfolio consists
of mortgage-backed and municipal securities. Securities are generally rated BBB- or higher. Municipal securities are analyzed
individually to establish a CECL reserve.

 All mortgage-backed
securities ("MBS") held by the Company are issued by government-sponsored corporations. These securities are either
explicitly or implicitly guaranteed by the U.S. government, are highly rated by major rating agencies and have a long history
of no credit losses. As a result, no allowance for credit losses was recorded on held-to-maturity MBS at the adoption of CECL
at December 31, 2023 or December 31, 2024.

 The following table shows
a roll forward of the allowance for credit losses on held to maturity securities for the years ended December 31, 2024 and 2023.

 Schedule of allowance for credit losses on held to maturity securities

 State and

 local

 government

 Allowance for Credit Losses on Held-to-Maturity Securities:

 Beginning balance, December 31, 2022

 $
 —

 Adjustment for adoption of ASU 2016-13

 ( 43
)

 Release of credit losses

 Ending balance, December 31, 2023

 $
 ( 30
)

 Note
3—INVESTMENT SECURITIES (Continued)

 State and

 local

 government

 Allowance for Credit Losses on Held-to-Maturity Securities:

 Beginning balance, December 31, 2023

 $
 ( 30
)

 Release of credit losses

 Ending balance, December 31, 2024

 $
 ( 23
)

 For the years ended December 31,
2024 and 2023, the Company had no securities held-to-maturity that were past due 30 days or more as to principal or interest payments.
The Company had no securities held-to-maturity classified as non-accrual at December 31, 2024 or 2023.

 Allowance for Credit
Losses on Available-for-Sale Securities

 For available-for-sale
securities, management evaluates all investments in an unrealized loss position on a quarterly basis, or more frequently when
economic or market conditions warrant such evaluation. If the Company has the intent to sell the security or it is more likely
than not that the Company will be required to sell the security, the security is written down to fair value and the entire loss
is recorded in earnings.

 Changes in the
allowance for credit loss are recorded as provision for (or reversal of) credit loss expense. Losses are charged against the allowance
for credit loss when management believes an available-for-sale security is confirmed to be uncollectible or when either of the
criteria regarding intent or requirement to sell is met. At December 31, 2024 and December 31, 2023, there were no allowance for
credit loss related to the available-for-sale securities portfolio.

 Note 4— LOANS

table summarizes the composition of our loan portfolio. Total loans are recorded net of deferred loan fees and costs, which totaled
$ 2.1 million and $ 2.2 million as of December 31, 2024 and December 31, 2023, respectively.

 Schedule of Loan Portfolio

 2024

 2023

 $

 $
 78,134

 94,796

 791,947

 Other

 16,165

 Total

 $

 $

 Commercial category includes $ 82.0
thousand and $ 151.0 thousand in PPP loans, net of deferred fees and costs, as of December 31, 2024 and December 31, 2023, respectively.

 Activity in the allowance for credit
losses – loans was as follows:

 Schedule of Allowance for Credit Losses

 Years ended December 31,

 2024

 2023

 2022

 Balance at the beginning of year

 $

 $

 $
 11,179

 Adjustment for adoption of ASU 2016-13

 —

 ( 14
)

 —

 ( 152
)

 Charged off loans

 ( 184
)

 ( 87
)

 ( 68
)

 Recoveries

 Balance at end of year

 $

 $

 $

 Note 4—LOANS (Continued)

 The detailed
activity in the allowance for credit losses on loans by portfolio segment as of and for the years ended December 31, 2024, December
31, 2023, and December 31, 2022 follows:

 ($ in thousands)

 Residential

 Home
 Equity

 Other

 Total
 Loans

 Balance at December 31, 2023

 $

 $
 1,337

 $
 1,122

 $
 8,146

 $

 $

 $

 Charge-offs

 ( 87
)

 —

 —

 ( 2
)

 ( 95
)

 ( 184
)

 Recoveries

 Provision for credit losses

 ( 181
)

 Balance at December 31, 2024

 $

 $
 1,675

 $
 1,639

 $
 7,974

 $

 $

 $

 ($ in thousands)

 Residential

 Home
 Equity

 Other

 Unallocated

 Total
 Loans

 Balance at December 31, 2022

 $

 $

 $

 $
 8,569

 $

 $

 $

 $

 Adjustment to allowance for adoption of ASU 2016-13

 1,075

 ( 883
)

 ( 636
)

 ( 14
)

 Charge-offs

 ( 20
)

 —

 —

 —

 —

 ( 67
)

 —

 ( 87
)

 Recoveries

 —

 Provision for credit losses

 ( 92
)

 ( 30
)

 —

 Balance at December 31, 2023

 $

 $
 1,337

 $
 1,122

 $
 8,146

 $

 $

 —

 $

 Real estate

 Real estate
 Residential

 Real estate

 Home
 equity

 Other

 Unallocated

 Total

 2022

 Allowance for credit losses:

 Beginning balance

 $

 $

 $

 $
 8,570

 $

 $

 $

 $
 11,179

 Charge-offs

 —

 —

 —

 —

 ( 1
)

 ( 67
)

 —

 ( 68
)

 Recoveries

 —

 —

 Provisions

 ( 21
)

 ( 38
)

 ( 326
)

 ( 31
)

 ( 152
)

 Ending balance

 $

 $

 $

 $
 8,569

 $

 $

 $

 $

table presents an allocation of the allowance for credit losses at the end of each of the past three years. The allocation is
calculated on an approximate basis and is not necessarily indicative of future losses or allocations. The entire amount is available
to absorb losses occurring in any category of loans.

 Note
4—LOANS (Continued)

 The
following tables show the amortized cost basis for loan modifications for borrowers experiencing financial difficulty during the
12 months ended December 31, 2024 and 2023 that had a payment default, segregated by loan category and describes the financial effect
of the modification made for a borrower experiencing financial difficulty.

 Schedule of Amortized
Cost of Loans, by Loan Category, Modified for Borrowers with Financial Difficulty

 31, 2024

 cost basis

 %
 of Total Loan Type

 effect

 Real
 Estate Mortgage Residential

 $

 0.28

 %

 Deferred monthly payments that
 are added to the end of the original loan term

 Real
 Estate Mortgage Residential

 0.17

 %

 Deferred interest payments added to principal
 balance, re-amortized loan

 Total
 Loans

 $

 0.46

 %

 The following table depicts the performance
of loans that have been modified for borrowers experiencing financial difficulty in the last 12 months.

 30-89 Days

 Greater than 90
 Days

 Real Estate Mortgage Residential

 $

 $
 —

 $
 —

 Total Loans

 $

 $
 —

 $
 —

table shows the amortized cost basis at December 31, 2023 of the loans modified for borrowers experiencing financial difficulty
during the 12 month period ended December 31, 2023 that had a payment default segregated by loan category and describes the financial
effect of the modification made for a borrower experiencing financial difficulty.

 31, 2023

 cost basis

 %
 of Total Loan Type

 effect

 Real
 Estate Mortgage Residential

 0.21

 %

 Deferred two monthly payments
 that are added to the end of the original loan term.

 Total
 Loans

 $

 0.21

 %

 The following table depicts the performance
of loans that have been modified prior to December 31, 2023.

 30-89 Days

 Greater than 90
 Days

 Real Estate Mortgage Residential

 $
 —

 $

 $
 —

 Total Loans

 $
 —

 $

 $
 —

categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such
as: current financial information, historical payment experience, credit documentation, public information, and current economic
trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis
is performed on a monthly basis. The Company uses the following definitions for risk ratings:

 Special Mention.
Loans classified as special mention have a potential weakness that deserves management's close attention. If left uncorrected,
these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution's credit
position at some future date. Special mention assets are not adversely classified and do not expose an institution to sufficient
risk to warrant adverse classification.

 Substandard. Loans
classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral
pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They
are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

 Doubtful. Loans
classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that
the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly
questionable and improbable.

 Loans not meeting the criteria
above that are analyzed individually as part of the above described process are considered to be "Pass" rated loans.

 Note
4—LOANS (Continued)

 The following table presents the
Company's recorded investment in loans by credit quality indicators by year of origination as of December 31, 2024:

 Schedule of loan category and loan by risk categories

 Term Loans by year of Origination

 ($ in thousands)

 2020

 2021

 2022

 2023

 2024

 Prior

 Revolving

 Revolving
 Converted
 to Term

 Total

 Pass

 $

 $
 20,288

 $
 7,084

 $
 8,336

 $
 21,808

 $
 8,100

 $
 20,359

 $

 $

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 Total commercial

 20,288

 7,084

 8,336

 21,808

 8,100

 20,359

 —

 —

 —

 —

 —

 Real estate construction

 Pass

 —

 2,295

 44,290

 44,022

 27,213

 6,231

 28,104

 —

 Total real estate construction

 —

 2,295

 44,290

 44,022

 27,213

 6,231

 28,104

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 Real estate mortgage-residential

 Pass

 9,240

 5,191

 32,422

 28,983

 14,492

 8,012

 24,775

 123,987

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 Total real estate mortgage-residential

 9,261

 5,191

 32,780

 28,983

 14,492

 8,397

 24,775

 —

 —

 —

 —

 —

 —

 —

 —

 —

 Real estate mortgage-commercial

 Pass

 79,977

 118,415

 190,140

 115,525

 76,754

 196,793

 17,949

 796,135

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 Total real estate mortgage-commercial

 79,977

 118,415

 190,140

 115,525

 76,754

 197,069

 17,949

 —

 —

 —

 —

 —

 —

 —

 Consumer - home equity

 Pass

 —

 —

 —

 —

 —

 —

 41,081

 —

 41,081

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 1,063

 —

 1,063

 Total consumer - home equity

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 Consumer - other

 Pass

 1,128

 4,359

 1,225

 10,696

 —

 18,288

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 Total consumer - other

 1,142

 4,362

 1,225

 10,696

 —

 Current period gross

 write-offs

 —

 —

 —

 —

 —

 —

 Note
4—LOANS (Continued)

 The following table presents the
Company's recorded investment in loans by credit quality indicators by year of origination as of December 31, 2023:

 Term Loans by year of Origination

 ($ in thousands)

 2019

 2020

 2021

 2022

 2023

 Prior

 Revolving

 Revolving
 Converted
 to Term

 Total

 Pass

 $
 1,149

 $
 1,375

 $
 23,226

 $
 9,018

 $
 12,950

 $
 9,230

 $
 21,033

 $

 $
 78,030

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 Total commercial

 1,149

 1,375

 23,304

 9,018

 12,950

 9,256

 21,033

 78,134

 —

 —

 —

 —

 —

 —

 —

 Real estate construction

 Pass

 6,864

 —

 5,074

 39,514

 47,992

 —

 18,781

 —

 Total real estate construction

 6,864

 —

 5,074

 39,514

 47,992

 —

 18,781

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 Real estate mortgage-residential

 Pass

 1,894

 10,548

 6,219

 28,843

 28,517

 8,420

 8,962

 94,380

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 Total real estate mortgage-residential

 1,894

 10,573

 6,219

 28,843

 28,517

 8,811

 8,962

 94,796

 —

 —

 —

 —

 —

 —

 —

 —

 —

 Real estate mortgage-commercial

 Pass

 47,962

 95,120

 136,892

 201,380

 106,125

 189,983

 14,038

 791,829

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 Total real estate mortgage-commercial

 47,962

 95,120

 136,892

 201,380

 106,125

 190,101

 14,038

 791,947

 —

 —

 —

 —

 —

 —

 —

 —

 —

 Consumer - home equity

 Pass

 —

 —

 —

 —

 —

 —

 33,621

 —

 33,621

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 1,064

 —

 1,064

 Total consumer - home equity

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 Consumer - other

 Pass

 1,164

 2,043

 10,982

 —

 16,149

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 Total consumer - other

 1,164

 2,059

 10,982

 —

 16,165

 —

 —

 —

 —

 —

 —

 —

31, 2024 and December 31, 2023, no loans were classified as doubtful.

 Note 4—LOANS (Continued)

tables are by loan category and present loans past due and on non-accrual status as of December 31, 2024 and December 31, 2023:

 Schedule of Loan Category and Aging Analysis of Loans

 30-59
 Days

 60-89
 Days

 Greater than
 90 Days and
 Accruing

 Nonaccrual

 Total Past
 Due

 Total
 Loans

 $

 $
 —

 $
 —

 $
 —

 $

 $
 86,555

 $

 —

 —

 —

 —

 —

 —

 —

 124,520

 —

 —

 —

 796,324

 —

 41,866

 Other

 —

 —

 18,301

 Total

 $

 $

 $

 $

 $

 $
 1,219,721

 $

 30-59
 Days

 60-89
 Days

 Greater than
 90 Days and
 Accruing

 Nonaccrual

 Total Past
 Due

 Total
 Loans

 $

 $

 $
 —

 $

 $

 $
 78,084

 $
 78,134

 —

 —

 —

 —

 —

 —

 94,323

 94,796

 —

 —

 791,756

 791,947

 —

 —

 —

 34,749

 Other

 —

 —

 16,142

 16,165

 Total

 $

 $

 $

 $

 $

 $
 1,133,279

 $

table is a summary of the Company's non-accrual loans by major categories for the periods indicated.

 Schedule of Nonaccrual Loans

Loans with

 No Allowance

Loans with

an Allowance

 Total

 Loans

Loans with

 No Allowance

 Loans with

 an Allowance

 Total

 Loans

 $
 —

 $
 —

 $
 —

 $
 —

 $

 $

 Real Estate:

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 —

 Mortgage-Residential

 —

 —

 —

 —

 Mortgage-Commercial

 —

 —

 —

 —

 —

 —

 Consumer Home Equity

 —

 —

 Consumer Other

 —

 —

 —

 —

 —

 —

 Total

 $
 —

 $

 $

 $
 —

 $

 $

 There were no
collateral dependent loans that were individually evaluated for years ended December 31, 2024 and December 31, 2023.

 Note
4—LOANS (Continued)

 Related party
loans are made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable
transactions with unrelated persons and generally do not involve more than the normal risk of collectability. The following table
presents related party loan transactions for the years ended December 31, 2024 and December 31, 2023.

 Schedule of Related Party Loans

 For the years ended

 2024

 2023

 Balance, beginning of year

 $
 1,058

 $
 2,189

 New Loans

 —

 —

 Less loan repayments

 1,131

 Balance, end of year

 $

 $
 1,058

 Unfunded Commitments

maintains an allowance for off-balance sheet credit exposures such as unfunded balances for existing lines of credit, commitments
to extend future credit, as well as both standby and commercial letters of credit when there is a contractual obligation to extend
credit and when this extension of credit is not unconditionally cancellable (i.e., commitment cannot be cancelled at any time).
The allowance for off-balance sheet credit exposures is adjusted as a provision for credit loss expense. The estimate includes
consideration of the likelihood that funding will occur, which is based on a historical funding study derived from internal information,
and an estimate of expected credit losses on commitments expected to be funded over its estimated life, which are the same loss
rates that are used in computing the allowance for credit losses on loans. The allowance for credit losses for unfunded loan commitments
of $480,000 and $597,000 at December 31, 2024 and December 31, 2023 is separately classified on the balance sheet within Other
Liabilities.

table presents the balance and activity in the allowance for credit losses for unfunded loan commitments for the year ended December
31, 2024.

 Total Allowance
 for Credit
 Losses -
 Unfunded
 Commitments

 Balance, December 31, 2023

 $

 Release of unfunded commitments

 ( 117
)

 Balance, December 31, 2024

 $

table presents the balance and activity in the allowance for credit losses for unfunded loan commitments for the year ended December
31, 2023.

 Total Allowance
 for Credit
 Losses -
 Unfunded
 Commitments

 Balance, December 31, 2022

 $
 —

 Adjustment to allowance for unfunded commitments for adoption of ASU 2016-13

 Provision for unfunded commitments

 Balance, December 31, 2023

 $

 Note 5— FAIR VALUE
MEASUREMENT

adopted FASB ASC Fair Value Measurement Topic 820, which defines fair value, establishes a framework for measuring fair value,
and expands disclosures about fair value measurements. ASC 820 defines fair value as the exchange price that would be received
for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability
in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy
which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair
value. The standard describes three levels of inputs that may be used to measure fair value:

 Level l

 Quoted prices in active markets for identical
 assets or liabilities.

 Level 2

 Observable inputs other than Level 1 prices
 such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that
 are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

 Level 3

 Unobservable inputs that are supported
 by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and
 liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies,
 or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment
 or estimation.

 FASB ASC 825-10-50
"Disclosure about Fair Value of Financial Instruments", requires the Company to disclose estimated fair values for
its financial instruments. Fair value estimates, methods, and assumptions are set forth below.

 Cash and short
term investments—The carrying amount of these financial instruments (cash and due from banks, interest-bearing bank balances,
federal funds sold and securities purchased under agreements to resell) approximates fair value. All mature within 90 days and
do not present unanticipated credit concerns and are classified as Level 1.

Securities—Measurement is on a recurring basis based upon quoted market prices, if available. If quoted market prices are
not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the
present value of future cash flows, adjusted for prepayment assumptions, projected credit losses, and liquidity. Level 1 securities
include those traded on an active exchange, such as the New York Stock Exchange, or by dealers or brokers in active over-the-counter
markets. Level 2 securities include mortgage-backed securities issued both by government sponsored enterprises and private label
mortgage-backed securities. Generally, these fair values are priced from established pricing models. Level 3 securities include
corporate debt obligations and asset–backed securities that are less liquid or for which there is an inactive market.

 Derivative
Financial Instruments - Derivative instruments (pay fixed swaps) used to hedge interest rate risk related to the mortgage portfolio
are reported at fair value utilizing Level 2 inputs. The fair values of the hedged item and the interest rate swap are based on
derivative market data as of the valuation date.

 Other
investments, at cost—The carrying value of other investments, such as FHLB stock, approximates fair value based on redemption
provisions.

 Loans
Held for Sale—The Company originates fixed rate residential loans on a servicing released basis in the secondary market.
Loans closed but not yet settled with an investor, are carried in the Company's loans held for sale portfolio. These loans
are fixed rate residential loans that have been originated in the Company's name and have closed. Virtually all of these
loans have commitments to be purchased by investors at a locked in price with the investors on the same day that the loan was
locked in with the Company's customers. Therefore, these loans present very little market risk for the Company and are classified
as Level 2. The carrying amount of these loans approximates fair value.

 Loans—
The valuation of loans receivable is estimated using the exit price notion which incorporates factors, such as enhanced credit
risk, illiquidity risk and market factors that sometimes exist in exit prices in dislocated markets. This credit risk assumption
is intended to approximate the fair value that a market participant would realize in a hypothetical orderly transaction. The Company's
loan portfolio is initially fair valued using a segmented approach. The Company divides its loan portfolio into the following
categories: variable rate loans, fixed rate loans and all other loans. The results are then adjusted to account for credit risk
as described above.

 Other
Real Estate Owned ("OREO")—OREO is carried at the lower of carrying value or fair value on a non-recurring basis.
Fair value is based upon independent appraisals or management's estimation of the collateral and is considered a Level 3
measurement.

 Note 5—FAIR VALUE MEASUREMENT

 Accrued
Interest Receivable—The fair value approximates the carrying value and is classified as Level 1.

 Deposits—The
fair value of demand deposits, savings accounts, and money market accounts is the amount payable on demand at the reporting date.
The fair value of fixed-maturity certificates of deposits is estimated by discounting the future cash flows using rates currently
offered for deposits of similar remaining maturities. Deposits are classified as Level 2.

 Federal
Home Loan Bank Advances—Fair value is estimated based on discounted cash flows using current market rates for borrowings
with similar terms and are classified as Level 2.

 Short
Term Borrowings—The carrying value of short term borrowings (securities sold under agreements to repurchase and demand notes
to the Treasury) approximates fair value. These are classified as Level 2.

 Junior
Subordinated Debentures—The fair values of junior subordinated debentures are estimated by using discounted cash flow analyses
based on incremental borrowing rates for similar types of instruments. These are classified as Level 2.

 Accrued
Interest Payable—The fair value approximates the carrying value and is classified as Level 1.

 Commitments to
Extend Credit—The fair value of these commitments is immaterial because their underlying interest rates approximate market.

 The carrying
amount and estimated fair value by classification Level of the Company's financial instruments as of December 31, 2024 and
December 31, 2023 are as follows:

 Schedule of Fair Value, by Balance Sheet Grouping

 Carrying

 Fair Value

 Total

 Level 1

 Level 2

 Level 3

 Financial Assets:

 Cash and short term investments

 $
 149,828

 $
 149,828

 $
 149,828

 $
 —

 $
 —

 Available-for-sale securities

 —

 —

 Held-to-maturity securities

 209,413

 —

 —

 Other investments, at cost

 2,679

 2,679

 —

 —

 2,679

 9,662

 9,662

 —

 9,662

 —

 Derivative financial instruments

 Net loans receivable

 1,207,407

 1,160,013

 —

 —

 1,160,013

 Accrued interest

 6,084

 6,084

 6,084

 —

 —

 Financial liabilities:

 Non-interest bearing demand

 $

 $

 $
 —

 $

 $
 —

 Interest bearing demand deposits and money market accounts

 770,595

 770,595

 —

 770,595

 —

 Savings

 —

 —

 328,661

 321,258

 —

 321,258

 —

 1,675,901

 1,668,498

 —

 1,668,498

 —

 Short term borrowings

 103,110

 103,110

 —

 103,110

 —

 Junior subordinated debentures

 13,042

 —

 13,042

 —

 Accrued interest payable

 4,666

 4,666

 4,666

 —

 —

 Note 5—FAIR VALUE MEASUREMENT

 Carrying

 Fair Value

 Total

 Level 1

 Level 2

 Level 3

 Financial Assets:

 Cash and short term investments

 $
 94,695

 $
 94,965

 $
 94,695

 $
 —

 $
 —

 Available-for-sale securities

 —

 —

 Held-to-maturity securities

 217,170

 205,518

 —

 205,518

 —

 Other investments, at cost

 6,800

 6,800

 —

 —

 6,800

 4,433

 4,433

 —

 4,433

 —

 Derivative financial instruments

 1,069

 1,069

 1,069

 Net loans receivable

 1,121,752

 1,088,053

 —

 —

 1,088,053

 Accrued interest

 5,869

 5,869

 5,869

 —

 —

 Financial liabilities:

 Non-interest bearing demand

 $

 $

 $
 —

 $

 $
 —

 Interest bearing demand deposits and money market accounts

 707,434

 707,434

 —

 707,434

 —

 Savings

 118,623

 118,623

 —

 118,623

 —

 252,611

 252,137

 —

 252,137

 —

 1,511,001

 1,510,527

 —

 1,510,527

 —

 Federal Home Loan Bank Advances

 —

 —

 Short term borrowings

 62,863

 62,863

 —

 62,863

 —

 Junior subordinated debentures

 13,123

 —

 13,123

 —

 Accrued interest payable

 3,575

 3,575

 3,575

 —

 —

table summarizes quantitative disclosures about the fair value for each category of assets carried at fair value as of December
31, 2024 and December 31, 2023 that are measured on a recurring basis. There were no liabilities carried at fair value as of December
31, 2024 or December 31, 2023 that are measured on a recurring basis.

of Fair Value, Assets Measured on Recurring Basis

 AVAILABLE-FOR-SALE:

 Dollars in thousands)

 2024

 (Level 1)

 (Level 2)

 (Level 3)

 Available- for-sale securities

 US Treasury Securities

 $

 $
 —

 $

 $
 —

 Government Sponsored Enterprises

 2,110

 —

 2,110

 —

 244,204

 —

 244,204

 —

 Small Business Administration pools

 12,079

 —

 12,079

 —

 Corporate and other securities

 7,949

 —

 7,949

 —

 Total Available-for-sale securities

 —

 —

 9,662

 —

 9,662

 —

 Derivative financial instruments

 —

 —

 Total

 $
 290,140

 $
 —

 $
 290,140

 $
 —

 2023

 (Level 1)

 (Level 2)

 (Level 3)

 Available- for-sale securities

 US Treasury Securities

 $

 $
 —

 $

 $
 —

 Government Sponsored Enterprises

 2,129

 —

 2,129

 —

 238,159

 —

 238,159

 —

 Small Business Administration pools

 15,721

 —

 15,721

 —

 Corporate and other securities

 7,871

 —

 7,871

 —

 Total Available-for-sale securities

 —

 —

 4,433

 —

 4,433

 —

 Derivative financial instruments

 1,069

 —

 1,069

 —

 Total

 $
 287,728

 $
 —

 $
 287,728

 $
 —

 Note
5—FAIR VALUE MEASUREMENT (Continued)

tables summarize quantitative disclosures about the fair value for each category of assets carried at fair value as of December
31, 2024 and December 31, 2023 that are measured on a non-recurring basis. There were no liabilities carried at fair value and
measured on a non-recurring basis at December 31, 2024 and 2023.

of Fair Value, Assets Measured on Non-Recurring Basis

 2024

 (Level 1)

 (Level 2)

 (Level 3)

 Other real estate owned:

 —

 —

 —

 —

 Total other real estate owned

 —

 —

 Total

 $

 $
 —

 $
 —

 $

 2023

 (Level 1)

 (Level 2)

 (Level 3)

 Other real estate owned:

 —

 —

 —

 —

 Total other real estate owned

 —

 —

 Total

 $

 $
 —

 $
 —

 $

 The Company has
a large percentage of loans with real estate serving as collateral. Loans which are deemed to be impaired are primarily valued
on a nonrecurring basis at the fair value of the underlying real estate collateral. Such fair values are obtained using independent
appraisals, which the Company considers to be Level 3 inputs. Third party appraisals are generally obtained when a loan is identified
as being impaired or at the time it is transferred to OREO. This internal process would consist of evaluating the underlying collateral
to independently obtained comparable properties. With respect to less complex or smaller credits, an internal evaluation may be
performed. Generally, the independent and internal evaluations are updated annually. Factors considered in determining the fair
value include geographic sales trends, the value of comparable surrounding properties as well as the condition of the property.

 For Level 3 assets
and liabilities measured at fair value on a non-recurring basis as of December 31, 2024 and December 31, 2023, the significant
unobservable inputs used in the fair value measurements were as follows:

of Fair Value Measurement Inputs and Valuation Techniques

 (Dollars
 in thousands)

 Fair
 Value as

 of December 31,

 2024

 Valuation
 Technique

 Significant

 Observable

 Inputs

 Significant

 Unobservable

 Inputs

 OREO

 $

 Appraisal
 Value/Comparison

 Sales/Other estimates

 Appraisals
 and or sales of comparable properties

 Appraisals
 discounted 6 % to 16 % for sales commissions and other holding cost

 (Dollars
 in thousands)

 Fair
 Value as

 of December 31,

 2023

 Valuation
 Technique

 Significant

 Observable

 Inputs

 Significant

 Unobservable

 Inputs

 OREO

 $

 Appraisal
 Value/Comparison

 Sales/Other estimates

 Appraisals
 and or sales of comparable properties

 Appraisals
 discounted 6 % to 16 % for sales commissions and other holding cost

 Note 6— PROPERTY AND EQUIPMENT

 Property and
equipment consisted of the following:

 Schedule of Property and Equipment

 2024

 2023

 Land

 $
 9,804

 $
 9,804

 Premises

 28,768

 28,708

 Equipment

 8,681

 8,203

 Property and equipment in progress

 Property and equipment, gross

 47,371

 46,729

 Accumulated depreciation

 17,396

 16,140

 Property and Equipment Net

 $
 29,975

 $
 30,589

 Depreciation
expense included in operating expenses for the years ended December 31, 2024, 2023 and 2022 amounted to $ 1.7 million, $ 1.8 million,
and $ 1.6 million, respectively.

31, 2024 and December 31, 2023 there were no premises held-for-sale. There was no gain or loss on premises held for sale during
the years ended December 31, 2024 and December 31, 2023. There was a loss on sale of property and equipment of $ 5,000 during the
year ended December 31, 2024. There was no gain or loss on sale of property and equipment during the year ended December 31, 2023.

ended December 31, 2022, the Company sold a warehouse that had been previously used for storage. Loss on premises held-for-sale
was $ 73 thousand for the year ended December 31, 2022. Loss on sale of property and equipment was $ 45 thousand during the year
ended December 31, 2022.

 Note 7— GOODWILL,
CORE DEPOSIT INTANGIBLE

 Intangible assets
(excluding goodwill) consisted of the following:

of Intangible Assets excluding Goodwill

 2024

 2023

 2022

 Core deposit premiums, gross carrying amount

 $
 3,358

 $
 3,358

 $
 3,358

 Other intangibles

 Gross carrying amount

 3,896

 3,896

 3,896

 Accumulated amortization

 ( 3,450
)

 ( 3,292
)

 ( 3,135
)

 Net

 $

 $

 $

 Based
on the core deposit and other intangibles as of December 31, 2024, the following table presents the aggregate amortization expense
for each of the succeeding years ending December 31:

of Aggregate Amortization Expenses

 2025

 $

 2026

 2027

 Total

 $

 Amortization
of the intangibles amounted to $158 thousand, $158 thousand, and $158 thousand for the years ended December 31, 2024, 2023 and
2022, respectively. Goodwill represents the excess of the purchase price over the sum of the estimated fair values of the tangible
and identifiable intangible assets acquired less the estimated fair value of the liabilities assumed. Goodwill has an indefinite
useful life and is evaluated for impairment annually or more frequently if events and circumstances indicate that the asset might
be impaired. An impairment loss is recognized to the extent that the carrying amount exceeds the asset's fair value. Qualitative
factors are assessed to first determine if it is more likely than not (more than 50%) that the carrying value of goodwill is less
than fair value. During the year ended December 31, 2024, qualitative factors indicated it was more likely than not that the carrying
value of goodwill was less than fair value, there were no indicators of impairment at December 31, 2024 and no quantitative testing
was performed. Goodwill was evaluated for impairment as of December 31, 2024.

 Note
7—GOODWILL, CORE DEPOSIT INTANGIBLE (Continued)
carrying amount of goodwill at December 31, 2024, December 31, 2023, and changes to the goodwill are summarized as follows:

of Goodwill

 2024

 2023

 Balance—beginning of year

 $

 $

 Acquired Goodwill

 —

 —

 Impairment

 —

 —

 Balance, end of year

 $

 $

 Note 8— OTHER REAL
ESTATE OWNED

summarizes the activity in the other real estate owned for the years ended December 31, 2024 and 2023.

 Schedule of Other Real Estate Owned

 2024

 2023

 Balance—beginning of year

 $

 $

 Additions—foreclosures

 —

 —

 Write-downs

 ( 79
)

 ( 44
)

 Sales

 —

 ( 268
)

 Balance, end of year

 $

 $

 Note 9— DEPOSITS

total deposits are comprised of the following at the dates indicated:

 Schedule of Deposits

 2024

 2023

 Non-interest bearing deposits

 $

 $

 Interest bearing demand deposits and money market accounts

 770,595

 707,434

 Savings

 118,623

 328,661

 252,611

 $
 1,675,901

 $
 1,511,001

above include $10.4 million and $48.1 million in brokered deposits as of December 31, 2024 and December 31, 2023, respectively.

 At December 31, 2024,
the scheduled maturities of time deposits are as follows:

 Schedule of Scheduled Maturities of Time Deposits

 2025

 $
 318,184

 2026

 4,818

 2027

 3,632

 2028

 1,345

 2029 and after

 Total

 $
 328,661

that meet or exceed the FDIC insurance limit of $250 thousand at December 31, 2024 and December 31, 2023 were $ 89.0 million and
$ 51.1 million, respectively.

 Deposits
from directors and executive officers and their related interests at December 31, 2024 and 2023 amounted to approximately $ 17.6
million and $ 18.0 million, respectively.

 The amount of
overdrafts classified as loans at December 31, 2024 and 2023 were $ 57 thousand and $ 75 thousand, respectively.

 Note 10— SECURITIES
SOLD UNDER AGREEMENTS TO REPURCHASE AND OTHER BORROWED MONEY

 Securities
sold under agreements to repurchase generally mature within one day to four days from the transaction date. The weighted average
interest rate at December 31, 2024 and 2023 was 2.55 % and 2.83 %, respectively. The maximum month-end balance during 2024 and 2023
was $ 107.1 million and $ 91.8 million, respectively. The average outstanding balance during the years ended December 31, 2024 and
2023 amounted to $ 77.2 million and $ 74.6 million, respectively, with an average rate paid of 2.83 % and 2.22 %, respectively. Securities
sold under agreements to repurchase are collateralized by securities with fair market values exceeding the total balance of the
agreement.

 At December 31,
2024 and 2023, the Company had unused short-term lines of credit totaling $ 87.5 million and $ 95.0 million respectively.

 Note 11— ADVANCES FROM FEDERAL
HOME LOAN BANK

 As collateral
for its advances, the Company has pledged in the form of blanket liens, eligible loans, in the amount of $28.9 million at December
31, 2024. Securities have been pledged as collateral for advances in the amount of $53.5 million as of December 31, 2024. As collateral
for its advances, the Company has pledged in the form of blanket liens, eligible loans, in the amount of $ 31.7 million at December
31, 2023. Securities have been pledged as collateral for advances in the amount of $150.6 million as of December 31, 2023. Advances
are subject to prepayment penalties. The average advances during 2024 and 2023 were $ 54.8 million and $ 86.6 million, respectively.
The average interest rate for 2024 and 2023 was 5.12 % and 5.02 %, respectively. The maximum outstanding amount at any month end
was $ 90.0 million and $ 125.0 million for 2023 and 2023, respectively.

ended December 31, 2024, there were $35 million in advances that were prepaid. The loss realized on early extinguishment of these
advances was $229 thousand. During the year ended December 31, 2023, there were no advances that were prepaid. Accordingly, no
losses were realized on early extinguishment.

 Note 12— JUNIOR SUBORDINATED
DEBT

 On September
16, 2004, FCC Capital Trust I ("Trust I"), a wholly owned unconsolidated subsidiary of the Company, issued and sold
floating rate securities having an aggregate liquidation amount of $ 15.0 million. Until
the cessation of LIBOR on June 30, 2023, the securities accrued and paid distributions quarterly at a rate of three month LIBOR
plus 257 basis points, thereafter, such distributions to be paid quarterly transitioned to an adjusted Secured Overnight Financing
Rate (SOFR) index in accordance with the Federal Reserve's final rule implementing the Adjustable Interest Rate Act. The
distributions are cumulative and payable in arrears. The Company has the right, subject to events of default, to defer payments
of interest on the Trust I securities for a period not to exceed 20 consecutive quarters, provided no extension can extend beyond
the maturity date of September 16, 2034. The Trust I securities are mandatorily redeemable upon maturity at September 16, 2034.
If the Trust I securities are redeemed on or after September 16, 2009, the redemption price will be 100 % of the principal amount
plus accrued and unpaid interest. The Trust I security were eligible to be redeemed in whole but not in part, at any time prior
to September 16, 2009 following an occurrence of a tax event, a capital treatment event or an investment company event. Currently,
these securities qualify under risk-based capital guidelines as Tier 1 capital, subject to certain limitations. The Company has
no current intention to exercise its right to defer payments of interest on the Trust I securities. In 2015, the Company redeemed
$500 thousand of this Trust I security. This resulted in a gain of $130 thousand received in 2015.

 Note 13— LEASES

 The Company has
operating leases on three of its facilities at December 31, 2024 and four of its facilities at December 31, 2023. The reduction
in leases is due to the July 31, 2024 termination of the lease for the downtown Augusta, Georgia location, which was closed June
27, 2024. The termination of the lease resulted in a reduction in right-of-use assets of $476,000, a reduction of lease liabilities
of $510,000, and a reduction of lease expense of $34,000.

 Note 13—LEASES (Continued)

 The remaining
three leases have maturities ranging from May 2027 to December 2038 some of which include extensions of multiple five-year terms.
The right-of-use asset was $2.5 million and $3.2 million at December 31, 2024 and December 31, 2023, respectively. The lease liability
was $2.6 million and $3.4 million at December 31, 2024 and December 31, 2023, respectively. During the twelve-month period ended
December 31, 2024, the Company made cash payments in the amount of $ 432.9 thousand for operating leases and the lease liability
was reduced by $ 780.0 thousand. The lease expense recognized during the twelve-month periods ended December 31, 2024, December
31, 2023, and December 31, 2022 amounted to $ 423.9 thousand, $ 448.5 thousand, and $ 354.8 thousand, respectively. The weighted
average remaining lease term as of December 31, 2024, is 11.21 years and the weighted average discount rate used is 4.21 %. The
following table shows future undiscounted lease payments for operating leases with initial terms of one year or more as of December
31, 2024.

 Schedule of Future
Undiscounted Operating Lease Payments

 2025

 $

 2026

 2027

 2028

 2029

 Thereafter

 1,767

 Total undiscounted lease payments

 $
 3,374

 Less effect of discounting

 ( 728
)

 Present value of estimated lease payments (lease liability)

 $
 2,646

 Note 14— INCOME TAXES

 Income tax expense
for the years ended December 31, 2024, 2023 and 2022 consists of the following:

 Schedule of Income
Tax Expenses

 Year ended December 31

 2024

 2023

 2022

 Federal

 $
 3,576

 $
 2,937

 $
 3,429

 State

 Total Current

 3,795

 3,564

 4,164

 Deferred

 Federal

 ( 327
)

 ( 323
)

 State

 ( 51
)

 ( 40
)

 ( 43
)

 Total Deferred

 ( 367
)

 ( 366
)

 Income tax expense

 $
 3,815

 $
 3,197

 $
 3,798

 Reconciliation
from expected federal tax expense to effective income tax expense for the periods indicated are as follows:

 Schedule of Effective Income Tax Rate Reconciliation

 Year ended December 31

 2024

 2023

 2022

 Expected federal income tax expense

 $
 3,732

 $
 3,159

 $
 3,866

 State income tax net of federal benefit

 Tax exempt interest

 ( 195
)

 ( 275
)

 ( 404
)

 Increase in cash surrender value life insurance

 ( 168
)

 ( 176
)

 ( 151
)

 Valuation allowance

 Life Insurance Proceeds

 —

 ( 19
)

 —

 Excess tax benefit of stock compensation

 —

 ( 5
)

 Tax credits

 —

 —

 Other

 ( 49
)

 ( 82
)

 Total

 $
 3,815

 $
 3,197

 $
 3,798

 Note 14—INCOME TAXES
is a summary of the tax effects of temporary differences that give rise to significant portions of the deferred tax assets and
deferred tax liabilities:

of Deferred Tax Assets and Liabilities

 2024

 2023

 Assets:

 Allowance for credit losses

 $
 2,813

 $
 2,646

 Unfunded Commitments

 Excess tax basis of deductible intangible assets

 Net operating loss carry forward

 Unrealized losses on available-for-sale securities

 4,191

 4,406

 Unrealized losses on held-to-maturity securities

 2,577

 2,939

 Compensation expense deferred for tax purposes

 1,528

 1,448

 Deferred loss on other-than-temporary-impairment charges

 FASB 91 - Origination Income & Costs

 Other Real Estate Owned

 Other

 Total deferred tax asset

 13,025

 13,391

 Valuation reserve

 ( 1,073
)

 ( 1,009
)

 Total deferred tax asset net of valuation reserve

 11,952

 12,382

 Liabilities:

 Tax depreciation in excess of book depreciation

 Excess financial reporting basis of assets acquired

 Total deferred tax liabilities

 1,531

 1,364

 Net deferred tax asset recognized

 $

 $
 11,018

 The Company has
approximately $ 25.2 million and $ 23.6 million in state net operating losses at December 31, 2024 and 2023, respectively. A valuation
allowance is established to fully offset the deferred tax asset related to these net operating losses of the holding company.
The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in
which the temporary differences become deductible. Management considers the scheduled reversal of deferred income tax liabilities,
projected future taxable income and tax planning strategies in making this assessment. Additional amounts of these deferred tax
assets considered to be realizable could be reduced in the near term if estimates of future taxable income during the carry forward
period are reduced. The net deferred asset is included in other assets on the consolidated balance sheets.

 A portion of
the change in the net deferred tax asset relates to unrealized gains/losses on securities available-for-sale and held-to-maturity. The
tax expense related to the change of $577 thousand has been recorded directly to accumulated other comprehensive income
within shareholders' equity. The balance in the change in net deferred tax asset results from the current period deferred tax expense
of $20 thousand. At December 31, 2024 and 2023, the Company had no federal net operating loss carryforward.

 Tax returns
for 2021 and subsequent years are subject to examination by taxing authorities.

31, 2024, the Company had no material unrecognized tax benefits or accrued interest and penalties. It is the Company's policy
to account for interest and penalties accrued relative to unrecognized tax benefits as a component of income tax expense.

 Note 15— COMMITMENTS,
CONCENTRATIONS OF CREDIT RISK AND CONTINGENCIES

 The Bank
is party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of
its customers. These financial instruments include commitments to extend credit. These instruments involve, to varying degrees,
elements of credit risk in excess of the amount recognized in the consolidated balance sheets.

 The Bank's
exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend
credit is represented by the contractual amount of these instruments. The Bank uses the same credit policies in making commitments
as for on-balance sheet instruments. At December 31, 2024 and 2023, the Bank had commitments to extend credit including lines
of credit of $ 180.2 million and $ 214.2 million, respectively.

 Commitments to
extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since commitments
may expire without being drawn upon, the total commitments do not necessarily represent future cash requirements. The Bank evaluates
each customer's creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the
Bank upon extension of credit, is based on management's credit evaluation of the party. Collateral held varies but may include
inventory, property and equipment, residential real estate and income producing commercial properties.

 The primary market
areas served by the Bank include the following regions and their component counties: the Midlands Region of South Carolina to
include Lexington, Richland, Newberry, and Kershaw Counties; the Central Savannah River Region to include Aiken County, South
Carolina and Richmond and Columbia Counties in Georgia; the Upstate Region to include Greenville, Anderson, and Pickens Counties
in South Carolina. In 2022, the Company opened a branch in Rock Hill, South Carolina which is located in York County and referred
to as the Piedmont Region. Management closely monitors its credit concentrations and attempts to diversify the portfolio within
its primary market area. The Company considers concentrations of credit risk to exist when pursuant to regulatory guidelines,
the amounts loaned to multiple borrowers engaged in similar business activities represent 25 % or more of the Bank's risk
based capital, or approximately $ 44.4 million.

 Based on this criteria,
the Bank had five
 such concentrations at December 31, 2024, including $ 335
million to lessors of non-residential property, $ 141
million to lessors of residential properties, $ 83
million to private households, $ 62
million to other activities related to real estate and $ 52
million to hotels. As reflected above, lessors of non-residential properties and lessors of
residential buildings equate to approximately 188% and 79% of total regulatory capital, respectively. The risk in these portfolios is
diversified over a large number of loans, approximately 502
 for lessors of non-residential properties and 392
 loans for lessors of residential buildings. Commercial real estate loans and commercial construction
loans represent $ 921
million, or 75 %,
of the portfolio. Of these, approximately $ 284
 million, or 31 %,
of the total commercial real estate loans are owner occupied, which can tend to reduce the risk associated with these credits. Although
the Bank's loan portfolio, as well as existing commitments, reflects the diversity of its market areas, a substantial portion of
its debtor's ability to honor their contracts is dependent upon the economic stability of these areas.

 The nature of
the business of the Company and Bank may at times result in a certain amount of litigation. The Bank is involved in certain litigation
that is considered incidental to the normal conduct of business. Management believes that the liabilities, if any, resulting from
the proceedings will not have a material adverse effect on the consolidated financial position, consolidated results of operations
or consolidated cash flows of the Company.

 Note 16— REVENUE RECOGNITION

 In accordance
with Topic 606, revenues are recognized when control of promised goods or services is transferred to customers in an amount that
reflects the consideration the Company expects to be entitled to in exchange for those goods or services. To determine revenue
recognition for arrangements that an entity determines are within the scope of Topic 606, the Company performs the following five
steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine
the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue
when (or as) the Company satisfies a performance obligation.

 The Company only
applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to
in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to
be within the scope of Topic 606, the Company assesses the goods or services that are promised within each contract and identifies
those that contain performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes
as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance
obligation is satisfied.

 Note 16—REVENUE RECOGNITION

 Deposit Service
Charges: The Bank earns fees from its deposit customers for account maintenance, transaction-based and overdraft services.
Account maintenance fees consist primarily of account fees and analyzed account fees charged on deposit accounts on a monthly
basis. The performance obligation is satisfied and the fees are recognized on a monthly basis as the service period is completed.
Transaction-based fees on deposits accounts are charged to deposit customers for specific services provided to the customer, such
as non-sufficient funds fees, overdraft fees, and wire fees. The performance obligation is completed as the transaction occurs
and the fees are recognized at the time each specific service is provided to the customer.

 Check Card
Fee Income: Check card fee income represents fees earned when a debit card issued by the Bank is used. The Bank earns interchange
fees from debit cardholder transactions through the Mastercard payment network. Interchange fees from cardholder transactions
represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing
services provided to the cardholder. The performance obligation is satisfied and the fees are earned when the cost of the transaction
is charged to the card. Certain expenses directly associated with the debit card are recorded on a net basis with the fee income.
This income is recognized within "Other" below.

 Gains/Losses
on OREO Sales: Gains/losses on the sale of OREO are included in non-interest income and are generally recognized when the
performance obligation is complete. This is typically at delivery of control over the property to the buyer at the time of each
real estate closing.

of Revenue Recognition

 Non-Interest Income

 2024

 2023

 Deposit service charges

 $

 $

 Mortgage banking income (1)

 2,368

 1,406

 Investment advisory fees and non-deposit commissions (1)

 6,181

 4,511

 Loss on sale of securities (1)

 —

 ( 1,249
)

 Gain on sale of other real estate owned

 —

 Loss on sale of other assets

 ( 5
)

 —

 Non-recurring income

 Other (2)

 4,403

 4,518

 Total non-interest income

 $

 $

 (1)

 Not within the scope
 of ASC 606

 (2)

 Includes Check Card
 Fee income discussed above. No other items are both material and within the scope of ASC 606.

 Note 17— OTHER INCOME
AND OTHER EXPENSE

 A summary of
the components of other non-interest income is as follows:

of Components of Other Non-Interest Income

 2024

 2023

 2022

 ATM debit card income

 $
 2,758

 $
 2,771

 $
 2,706

 Recurring income on bank owned life insurance

 Rental income

 Other fees including safe deposit box fees

 Wire transfer fees

 Other

 Total

 $
 4,403

 $
 4,518

 $
 4,341

 Note 17—OTHER INCOME
AND OTHER EXPENSE (Continued)
 A summary of
the components of other non-interest expense is as follows:

of Components of Other Non-Interest Expenses

 2024

 2023

 2022

 Core banking/electronic processing and services

 $
 2,736

 $
 2,512

 $
 2,469

 ATM/debit card processing

 1,280

 1,074

 Software subscriptions and services

 1,260

 1,008

 Supplies

 Telephone

 Courier

 Correspondent services

 Insurance

 Debit card and Fraud losses

 Investment advisory and non-deposit expense

 Loan processing and closing costs

 Director fees

 Legal and Professional fees

 1,205

 1,042

 1,177

 Shareholder expense

 Other

 Total

 $
 10,708

 $
 10,111

 $
 9,358

 Note 18— STOCK OPTIONS,
RESTRICTED STOCK, RESTRICTED STOCK UNITS, AND DEFERRED COMPENSATION

 The table
below shows the components of "nonvested restricted stock and stock units" as of the years ended December 31, 2024
and 2023.

 Schedule of
nonvested restricted stock and stock units

 Nonvested restricted stock and stock units

 2024

 2023

 Non-employee director deferred compensation stock plan deferred stock units

 $
 1,600

 $
 1,439

 Time-based restricted stock units - officer

 Performance-based restricted stock units - officer

 Restricted stock – officer and director

 ( 3
)

 ( 14
)

 Total nonvested restricted stock and stock units

 $
 2,639

 $
 2,181

 Non-Employee Director Deferred
Compensation Plan

 Under the Company's Non-Employee
Director Deferred Compensation Plan, as amended and restated effective as of January 1, 2021, a director may elect to defer all
or any part of annual retainer and monthly meeting fees payable with respect to service on the board of directors or a committee
of the board. Units of common stock are credited to the director's account as of the last day of such calendar quarter during
which the compensation is earned and are included in dilutive securities in the table above. The non-employee director's
account balance is distributed by issuance of common stock within 30 days following such director's separation from service
from the board of directors.

 Note 18—STOCK OPTIONS,
RESTRICTED STOCK, RESTRICTED STOCK UNITS, AND DEFERRED COMPENSATION (Continued)
 The table below
shows the following information related to First Community Corporation's Non-Employee Director Deferred Compensation Plan:
accumulated share units and accrued amounts as of the years ended December 31, 2024, 2023 and 2022; and the related director compensation
expense for the twelve months ended 2024, 2023, and 2022.

 Schedule of Non-Employee
Director Deferred Compensation

 Twelve Months ended December 31,

 2024

 2023

 2022

 Non-employee director deferred compensation plan accumulated share units

 111,166

 103,133

 93,488

 Accrued amounts (dollars in thousands) 1

 $
 1,600

 $
 1,439

 $
 1,260

 Related director compensation expense (dollars in thousands)

 $

 $

 $

 First Community Corporation
2021 Omnibus Equity Incentive Plan

 In 2021, the
Company and its shareholders adopted an omnibus equity incentive plan whereby 225,000 shares were reserved for issuance by the
Company to help the company attract, retain and motivate directors, officers, employees, consultants and advisors of the Company
and its subsidiaries (the "2021 Plan"). The 2021 Plan replaced the 2011 Plan. All awards granted during 2024, 2023,
and 2022 were granted under the First Community Corporation 2021 Omnibus Equity Incentive Plan.

 The table below
shows stock awards granted during the twelve months ended December 31, 2024, 2023, and 2022.

 (In shares/units)

 Twelve Months ended December 31,

 2024

 2023

 2022

 Time-based restricted stock units - officer

 15,095

 12,562

 11,738

 Performance-based restricted stock units – officer

 20,126

 16,749

 11,738

 Restricted stock – officer

 2,201

 Restricted stock – director

 13,464

 7,590

 7,359

 20,126
 units represent the target payout with a maximum payout of 40,253 units.

 16,749
 units represent the target payout with a maximum payout of 33,500 units.

 11,738
 units represent the target payout with a maximum payout of 17,608 units.

 The table below
shows the fair value of stock awards granted during the periods.

 Schedule of Fair Value of Stock Awards Granted

 Twelve months ended December 31,

 2024

 2023

 2022

 Time-based restricted stock units - officer

 $

 $

 $

 Performance-based restricted stock units – officer

 Restricted stock – officer

 Restricted stock – director

 $

 $

 $

 $362
 thousand represents the target payout with a maximum payout of $723 thousand.

 $340
 thousand represents the target payout with a maximum payout of $680 thousand.

 $246
 thousand represents the target payout with a maximum payout of $369 thousand.

 Note 18—STOCK OPTIONS, RESTRICTED
STOCK, RESTRICTED STOCK UNITS, AND DEFERRED COMPENSATION (Continued)

 The table below shows the compensation
expense related to stock awards granted during the twelve months ended December 31 2024, 2023 and 2022.

 Schedule of Compensation
Expense Related to Stock Awards Granted

 Compensation expense related to stock awards

 2024

 2023

 2022

 Time-based restricted stock units – officer 1

 $

 $

 $

 Performance-based restricted stock units – officer 2

 Restricted stock – officer 3

 Restricted stock – director 4

 $

 $

 $

 Expense in 2024 was
 related to stock awards granted under the First Community Corporation 2021 Omnibus Equity Incentive Plan. Expense in 2023
 consists of $159.8 thousand related stock awards granted under the First Community Corporation 2021 Omnibus Equity Incentive
 Plan and $3.2 thousand related stock awards granted under the First Community Corporation 2011 Stock Incentive Plan. Expense
 in 2022 consists of $75.1 thousand related stock awards granted under the First Community Corporation 2021 Omnibus Equity
 Incentive Plan and $19.1 thousand related stock awards granted under the First Community Corporation 2011 Stock Incentive
 Plan.

 Expense in 2024 consists
 of $300.7 thousand related stock awards granted under the First Community Corporation 2021 Omnibus Equity Incentive Plan and
 $13 thousand related stock awards granted under the First Community Corporation 2011 Stock Incentive Plan. Expense in 2023
 consists of $186.0 thousand related stock awards granted under the First Community Corporation 2021 Omnibus Equity Incentive
 Plan and $78.0 thousand related stock awards granted under the First Community Corporation 2011 Stock Incentive Plan. Expense
 in 2022 consists of $75.1 thousand related stock awards granted under the First Community Corporation 2021 Omnibus Equity
 Incentive Plan and $78.0 thousand related stock awards granted under the First Community Corporation 2011 Stock Incentive
 Plan.

 Expense in 2024 consists
 of $3.4 thousand related stock awards granted under the First Community Corporation 2021 Omnibus Equity Incentive Plan and
 $2.5 thousand related stock awards granted under the First Community Corporation 2011 Stock Incentive Plan. Expense in 2023
 consists of $17.2 thousand related stock awards granted under the First Community Corporation 2021 Omnibus Equity Incentive
 Plan and $102.8 thousand related stock awards granted under the First Community Corporation 2011 Stock Incentive Plan. Expense
 in 2022 consists of $23.8 thousand related stock awards granted under the First Community Corporation 2021 Omnibus Equity
 Incentive Plan and $182.1 thousand related stock awards granted under the First Community Corporation 2011 Stock Incentive
 Plan.

 Expense in 2024,
 2023, and 2022 was related to stock awards granted under the Community Corporation 2021 Omnibus Equity Incentive Plan.

 The table below
shows the First Community Corporation 2021 Omnibus Equity Incentive Plan ("2021 Incentive Plan") initial reserve at
May 19, 2021; stock awards granted under the 2021 Incentive Plan from its inception through December 31, 2024; and the remaining
reserve under such plan at December 31, 2024.

 Note 18—STOCK OPTIONS, RESTRICTED
STOCK, RESTRICTED STOCK UNITS, AND DEFERRED COMPENSATION (Continued)

of Stock Awards Granted Under 2021 Incentive Plan

 (In shares / units)

 First Community Corporation 2021 Omnibus Equity Incentive Plan

 2024

 Initial reserve – May 19, 2021

 225,000

 Shares / units granted

 Time-based restricted stock units - officer

 ( 39,395
)

 Performance-based restricted stock units – officer 1

 ( 48,613
)

 Restricted stock – officer

 ( 2,666
)

 Restricted stock – director

 ( 28,413
)

 Remaining reserve – December 31, 2024

 105,913

 Performance-based restricted stock units
 are initially granted and expensed at target levels; however, they are reserved at maximum levels. The maximum level for 2024
 was 91,361.

 Note 19— EMPLOYEE
BENEFIT PLANS

 The
Company maintains a 401(k) plan, which covers substantially all employees. Participants may contribute up to the maximum allowed
by the regulations. During the years ended December 31, 2024, 2023 and 2022, the plan expense amounted to $ 698 thousand, $ 659
thousand, and $ 608 thousand, respectively. The Company matches 100 % of the employee's contribution up to 3 % and 50 % of the
employee's contribution on the next 2 % of the employee's contribution.

 The
Company acquired various single premium life insurance policies from DutchFork Bancshares that are used to indirectly fund fringe
benefits to certain employees and officers. A salary continuation plan was established payable for two key individuals upon attainment
of age 63. The plan provides for monthly benefits of $ 2,500 each for seventeen years for two individuals.

 The Company acquires
various life insurance policies to fund fringe benefits to certain key employees. The cash surrender value at December 31, 2024
and 2023 of all bank owned life insurance was $ 31.0 million and $ 30.2 million, respectively. Expenses accrued for the anticipated
benefits under the salary continuation plans for the year ended December 31, 2024, 2023 and 2022 amounted to $417 thousand, $482
thousand, and $492 thousand, respectively.

 Note 20— EARNINGS
PER COMMON SHARE

reconciles the numerator and denominator of the basic and diluted earnings per common share computation:

of Earning Per Common Share

 (Amounts in thousands)

 2024

 2023

 2022

 Numerator (Included in basic and diluted earnings per share)

 $

 $

 $

 Denominator

 Weighted average common shares outstanding for:

 Basic earnings per common share

 7,617

 7,568

 7,529

 Dilutive securities:

 Deferred compensation

 Diluted common shares outstanding

 7,702

 7,647

 7,608

 Basic earnings per common share

 $
 1.83

 $
 1.56

 $
 1.94

 Diluted earnings per common share

 $
 1.81

 $
 1.55

 $
 1.92

 The average market price used in calculating assumed number of shares

 $
 19.79

 $
 18.70

 $
 19.52

 Note 21— SHAREHOLDERS'
EQUITY, CAPITAL REQUIREMENTS AND DIVIDEND RESTRICTIONS

and Bank are subject to various federal and state regulatory requirements, including regulatory capital requirements. Failure
to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions that, if undertaken,
could have a direct material effect on the Company's financial statements. Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, the Company and Bank must meet specific guidelines that involve quantitative measures
of the Company's assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices.
The Company and Bank capital amounts and classification are also subject to qualitative judgments by the regulators about components,
risk weighting, and other factors. The Bank is required to maintain minimum Tier 1 capital, Common Equity Tier I (CET1) capital,
total risked based capital and Tier 1 leverage ratios of 6%, 4.5%, 8% and 4%, respectively.

 Note
21—SHAREHOLDERS' EQUITY, CAPITAL REQUIREMENTS AND DIVIDEND RESTRICTIONS (Continued)

 Regulatory
capital rules adopted in July 2013 and fully phased in as of January 1, 2019, which we refer to as Basel III, impose minimum capital
requirements for bank holding companies and banks. The Basel III rules apply to all national and state banks and savings associations
regardless of size and bank holding companies and savings and loan holding companies other than "small bank holding companies,"
generally holding companies with consolidated assets of less than $3 billion (such as the Company). In order to avoid restrictions
on capital distributions or discretionary bonus payments to executives, a covered banking organization must maintain a "capital
conservation buffer" on top of our minimum risk-based capital requirements. This buffer must consist solely of common equity
Tier 1, but the buffer applies to all three measurements (common equity Tier 1, Tier 1 capital and total capital). The capital
conservation buffer consists of an additional amount of CET1 equal to 2.5% of risk-weighted assets.

 Based on the
foregoing, as a small bank holding company, we are generally not subject to the capital requirements unless otherwise advised
by the Federal Reserve; however, our Bank remains subject to the capital requirements.

 The Bank exceeded the minimum regulatory
capital ratios at December 31, 2024 and 2023, as set forth in the following table:

 Schedule of actual
capital amounts and ratios as well as minimum amounts for each regulatory defined category for the bank and the company

 Minimum
 Required

 %

 Actual

 %

 Excess

 %

 The Bank (1)(2):

 Risk Based Capital

 Tier 1

 $
 76,653

 6.0
 %

 $

 12.9
 %

 $
 87,744

 6.9
 %

 Total Capital

 $
 102,204

 8.0
 %

 $
 178,034

 13.9
 %

 $
 75,830

 5.9
 %

 CET1

 $
 57,490

 4.5
 %

 $

 12.9
 %

 $
 106,907

 8.4
 %

 Tier 1 Leverage

 $
 78,274

 4.0
 %

 $

 8.4
 %

 $
 86,123

 4.4
 %

 Risk Based Capital

 Tier 1

 $
 73,696

 6.0
 %

 $

 12.5
 %

 $
 80,163

 6.5
 %

 Total Capital

 $
 98,261

 8.0
 %

 $
 166,752

 13.6
 %

 $
 68,491

 5.6
 %

 CET1

 $
 55,272

 4.5
 %

 $

 12.5
 %

 $
 98,587

 8.0
 %

 Tier 1 Leverage

 $
 72,830

 4.0
 %

 $

 8.5
 %

 $
 81,029

 4.5
 %

 (1)

 As a small bank holding company, the Company
 is generally not subject to the capital requirements unless otherwise advised by the Federal Reserve.

 (2)

 Ratios do not include the capital conservation
 buffer of 2.5%.

 The Federal
Reserve has issued a policy statement regarding the payment of dividends by bank holding companies. In general, the Federal Reserve's
policies provide that dividends should be paid only out of current earnings and only if the prospective rate of earnings retention
by the bank holding company appears consistent with the organization's capital needs asset quality and overall financial
condition. The Federal Reserve's policies also require that a bank holding company serve as a source of financial strength
to its subsidiary banks by standing ready to use available resources to provide adequate capital funds to those banks during periods
of financial stress or adversity and by maintaining the financial flexibility and capital-raising capacity to obtain additional
resources for assisting its subsidiary banks where necessary. In addition, under the prompt corrective action regulations, the
ability of a bank holding company to pay dividends may be restricted if a subsidiary bank becomes undercapitalized. These regulatory
policies could affect the ability of the Company to pay dividends or otherwise engage in capital distributions.

principal source of cash flow, including cash flow to pay dividends to its shareholders, is dividends it receives from the Bank.
Statutory and regulatory limitations apply to the Bank's payment of dividends to the Company. As a South Carolina chartered
bank, the Bank is subject to limitations on the amount of dividends that it is permitted to pay. Unless otherwise instructed by
the S.C. Board, the Bank is generally permitted under South Carolina State banking regulations to pay cash dividends of up to
100% of net income in any calendar year without obtaining the prior approval of the S.C. Board. The FDIC also has the authority
under federal law to enjoin a bank from engaging in what in its opinion constitutes an unsafe or unsound practice in conducting
its business, including the payment of a dividend under certain circumstances.

 If the Bank is
not permitted to pay cash dividends to the Company, it is unlikely that we would be able to pay cash dividends on our common stock.
Moreover, holders of the Company's common stock are entitled to receive dividends only when, and if declared by the board
of directors. Although the Company has historically paid cash dividends on its common stock, the Company is not required to do
so, and the board of directors could reduce or eliminate our common stock dividend in the future.

 Note 22— PARENT COMPANY
FINANCIAL INFORMATION

 The balance
sheets, statements of operations and cash flows for First Community Corporation (Parent Only) follow:

 Condensed Balance Sheets

 At December 31,

 2024

 2023

 Assets:

 Cash on deposit

 $
 4,061

 $
 3,590

 Investment in bank subsidiary

 153,894

 140,746

 Other

 1,759

 1,941

 Total assets

 $
 159,714

 $
 146,277

 Liabilities:

 Junior subordinated debentures

 $

 $

 Other

 Total liabilities

 15,220

 15,218

 Shareholders' equity

 Total liabilities and shareholders' equity

 $
 159,714

 $
 146,277

 Condensed Statements of Operations

 2024

 2023

 2022

 Income:

 Interest and dividend income

 $

 $

 $

 Equity in undistributed earnings of subsidiary

 10,416

 8,495

 11,431

 Dividend income from bank subsidiary

 5,627

 5,357

 4,463

 Total income

 16,081

 13,889

 15,915

 Expenses:

 1,217

 1,187

 Other

 1,484

 1,419

 Total expense

 2,701

 2,606

 1,649

 Income before taxes

 13,380

 11,283

 14,266

 Income tax benefit

 ( 575
)

 ( 560
)

 ( 347
)

 $

 $

 $

 Note
22—PARENT COMPANY FINANCIAL INFORMATION (Continued)
 Condensed Statements of Cash Flows

 2024

 2023

 2022

 Cash flows from operating activities:

 $

 $

 $

 Adjustments to reconcile net income to net cash provided by operating activities

 Equity in undistributed earnings of subsidiary

 ( 10,416
)

 ( 8,495
)

 ( 11,431
)

 Other-net

 ( 545
)

 Net cash provided by operating activities

 3,768

 2,803

 3,414

 Cash flows from investing activities:

 Purchase of investments at cost

 ( 45
)

 ( 80
)

 ( 188
)

 Net cash used in investing activities

 ( 45
)

 ( 80
)

 ( 188
)

 Cash flows from financing activities:

 Dividends paid: common stock

 ( 4,415
)

 ( 4,235
)

 ( 3,913
)

 (Cost of) Proceeds from issuance of common stock

 ( 104
)

 ( 28
)

 Dividend Reinvestment Plan

 Change in non-vested restricted stock

 Restricted stock units granted

 1,447

 Restricted shares surrendered

 ( 119
)

 ( 121
)

 ( 42
)

 Deferred compensation shares

 —

 —

 ( 1,106
)

 Net cash used in financing activities

 ( 3,252
)

 ( 3,003
)

 ( 2,691
)

 Increase (decrease) in cash and cash equivalents

 ( 280
)

 Cash and cash equivalents at beginning of year

 3,590

 3,870

 3,335

 Cash and cash equivalents at end of year

 $
 4,061

 $
 3,590

 $
 3,870

 Note 23— DERIVATIVES

 The Company utilizes
interest rate swap agreements as part of its asset liability management strategy to help manage its interest rate risk position.
The notional amount of the interest rate swaps does not represent amounts exchanged by the parties. The amount exchanged is determined
by reference to the notional amount and the other terms of the individual interest rate swap agreements.

table presents the gross notional amounts and estimated fair value of derivative instruments employed by the Company as of December
31, 2024 and 2023:

of Gross Notional Amount and Estimated Fair Value of Derivative Instruments

 2024

 Notional

 Fair Value

 Fair Value Hedges:

 Interest rate contracts

 Pay fixed, receive variable – loans

 $
 150,000

 $

 $
 —

 Total derivatives

 $
 150,000

 $

 $
 —

 2023

 Notional

 Fair Value

 Fair Value Hedges:

 Interest rate contracts

 Pay fixed, receive variable – loans

 $
 150,000

 $
 1,069

 $
 —

 Total derivatives

 $
 150,000

 $
 1,069

 $
 —

 Note 23—DERIVATIVES

 The above derivative
is under a master netting arrangement. However, as of December 31, 2024 and 2023, there were no other outstanding derivative contracts.
The net fair value of the hedged item and derivative item is recorded in other assets in the statement of financial condition.
The following represents the carrying value of hedged items in fair value hedging relationships:

of carrying value of Hedged
items in Fair Value Hedging Relationships

 Hedge Asset

 Hedge Basis Adjustment

 Basis

 Designated

 Discounted

 2024

 Fair Value Hedges:

 Interest rate contracts

 Commercial real estate loans

 $

 $
 —

 $
 —

 Total

 $

 $
 —

 $
 —

 2023

 Fair Value Hedges:

 Interest rate contracts

 Commercial real estate loans

 $

 $
 —

 $
 —

 Total

 $

 $
 —

 $
 —

ended December 31, 2024, income on interest settlements totaled $ 2.4 million. Changes in the fair value of the hedged item of
$907 thousand was mostly offset by changes in the fair value of the swap derivative of $896 thousand. The residual was a result
of hedge ineffectiveness and recorded in other income on the consolidated statement of operations. No portion of the change in
fair value of derivatives designated as hedges has been excluded from effectiveness testing. No hedges were terminated during
the year ended December 31, 2024.

ended December 31, 2023, income on interest settlements totaled $ 1.6 million. Changes in the fair value of the hedged item of
$1.1 million was offset by changes in the fair value of the swap derivative of $1.1 million. The residual was a result of hedge
ineffectiveness and recorded in other income on the consolidated statement of operations. No portion of the change in fair value
of derivatives designated as hedges has been excluded from effectiveness testing. No hedges were terminated during the year ended
December 31, 2023.

 Note 24— REPORTABLE
SEGMENTS

reportable segments represent the distinct product lines the Company offers and are viewed separately for strategic planning by
the Bank President and CEO, who is the Chief Operating Decision Maker. (CODM). The CODM regularly reviews the performance of the
Company's four reportable segments, which are detailed below:

 Commercial and retail banking: The Company's
 primary business is to provide deposit and lending products and services to its commercial and retail customers.

 Mortgage Banking: This segment provides
 mortgage origination services for loans that will be sold to investors in the secondary market and consumer mortgage loans
 that will be held-for-investment. In the second quarter of 2022, management made the decision to include consumer mortgage
 held-for-investment loans in this segment. Prior to the second quarter of 2022, consumer mortgage loans held-for-investment
 were included in the Commercial and Retail Banking segment. Non-interest income for loans held-for-sale and loans held-for-investment
 is included in Mortgage Banking income and other income, respectively, on the income statement. The Mortgage Banking financial
 information presented below includes consumer mortgage loans held-for-investment for all periods presented. Beginning in 2022,
 a provision for credit loss, a cost of funds and other operating costs have been allocated to this segment.

 Investment advisory and non-deposit: This
 segment provides investment advisory services and non-deposit products.

 Corporate: This segment includes the parent
 company financial information, including interest on parent company debt and dividend income received from First Community
 Bank (the "Bank").

 To monitor the performance of the four reportable segments, the CODM reviews monthly reports for the product lines. These monthly reports
include various volume metrics, as well as revenue versus budget, salaries versus budget, and net income. He uses the data reviewed to
determine how to allocate future resources.

tables present selected financial information for the Company's reportable business segments for the years ended December
31, 2024, December 31, 2023 and December 31, 2022.

 Schedule of Company's Reportable Segment

 Year ended December 31, 2024

 and Retail

 advisory and
 non-deposit

 Eliminations

 Dividend and Interest Income

 $
 82,274

 $
 7,111

 $
 —

 $
 5,664

 $
 ( 5,627
)

 $
 89,422

 33,543

 2,622

 —

 1,217

 —

 37,382

 $
 48,731

 $
 4,489

 $
 —

 $
 4,447

 $
 ( 5,627
)

 $
 52,040

 Provision for credit losses

 —

 —

 —

 Noninterest income

 5,455

 2,368

 6,181

 —

 —

 Salaries and employee benefits

 22,321

 2,975

 3,373

 —

 29,263

 Other noninterest expense

 15,896

 —

 18,202

 Total Noninterest expense

 $
 38,217

 $
 3,732

 $
 4,032

 $
 1,484

 $
 —

 $
 47,465

 Net income (loss) before taxes

 $
 15,618

 $
 2,667

 $
 2,149

 $
 2,963

 $
 ( 5,627
)

 $
 17,770

 Income tax expense (benefit)

 4,390

 —

 —

 ( 575
)

 —

 3,815

 Net income (loss)

 $
 11,228

 $
 2,667

 $
 2,149

 $
 3,538

 $
 ( 5,627
)

 $

 Note 24—REPORTABLE
SEGMENTS (Continued)

 Year ended December 31, 2023

 and Retail

 advisory and
 non-deposit

 Eliminations

 Dividend and Interest Income

 $
 68,874

 $
 3,787

 $
 —

 $
 5,393

 $
 ( 5,357
)

 $
 72,697

 21,478

 1,140

 —

 1,187

 —

 23,805

 $
 47,396

 $
 2,647

 $
 —

 $
 4,206

 $
 ( 5,357
)

 $
 48,892

 Provision for credit losses

 —

 —

 —

 1,129

 Noninterest income

 4,496

 1,414

 4,511

 —

 —

 Salaries and employee benefits

 19,864

 2,867

 2,537

 —

 25,864

 Other noninterest expense

 15,272

 —

 17,280

 Total Noninterest expense

 $
 35,136

 $
 3,477

 $
 3,112

 $
 1,419

 $
 —

 $
 43,144

 Net income before taxes

 $
 16,079

 $

 $
 1,399

 $
 2,787

 $
 ( 5,357
)

 $
 15,040

 Income tax expense (benefit)

 3,757

 —

 —

 ( 560
)

 —

 3,197

 $
 12,322

 $

 $
 1,399

 $
 3,347

 $
 ( 5,357
)

 $

 Year ended December 31, 2022

 and Retail

 advisory and
 non-deposit

 Eliminations

 Dividend and Interest Income

 $
 49,238

 $
 1,858

 $
 —

 $
 4,484

 $
 ( 4,463
)

 $
 51,117

 2,403

 —

 —

 3,174

 $
 46,835

 $
 1,762

 $
 —

 $
 3,809

 $
 ( 4,463
)

 $
 47,943

 ( 392
)

 —

 —

 —

 ( 152
)

 Noninterest income

 5,184

 1,906

 4,479

 —

 —

 11,569

 Salary and benefits

 19,552

 2,983

 2,364

 —

 25,357

 Other non-interest expense

 14,077

 —

 15,896

 Total noninterest expense

 $
 33,629

 $
 3,689

 $
 2,961

 $

 $
 —

 $
 41,253

 Net income before taxes

 $
 18,782

 $
 ( 261
)

 $
 1,518

 $
 2,835

 $
 ( 4,463
)

 $
 18,411

 Income tax expense (benefit)

 4,145

 —

 —

 ( 347
)

 —

 3,798

 $

 $
 ( 261
)

 $
 1,518

 $
 3,182

 $
 ( 4,463
)

 $

 and Retail

 advisory and
 non-deposit

 Eliminations

 Total Assets as of

 $
 1,812,215

 $
 144,616

 $

 $
 185,173

 $
 ( 183,989
)

 $
 1,958,021

 Total Assets as of

 $
 1,727,245

 $
 99,310

 $

 $
 174,468

 $
 ( 173,340
)

 $
 1,827,688

 Note 25— SUBSEQUENT EVENTS

 Subsequent events
are events or transactions that occur after the balance sheet date but before financial statements are issued. Recognized subsequent
events are events or transactions that provide additional evidence about conditions that existed at the date of the balance sheet,
including the estimates inherent in the process of preparing financial statements. Non-recognized subsequent events are events
that provide evidence about conditions that did not exist at the date of the balance sheet but arose after that date.

 Management
has reviewed events occurring through the date the financial statements were available to be issued and no subsequent events occurred
requiring accrual or disclosure.

 Item 9. Changes in and Disagreements
with Accountants on Accounting and Financial Disclosure.

 None.

 Item 9A. Controls and Procedures.

 Our management,
with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design
and operation of our disclosure controls and procedures as of December 31, 2024, in accordance with Rule 13a-15 of the Exchange
Act. We applied our judgment in the process of reviewing these controls and procedures, which, by their nature, can provide only
reasonable assurance regarding our control objectives. Based upon that evaluation, our Chief Executive Officer and the Chief Financial
Officer concluded that our disclosure controls and procedures as of December 31, 2024, were effective to provide reasonable assurance
regarding our control objectives.

 Management's Report
on Internal Controls over Financial Reporting

 Management
is responsible for establishing and maintaining an effective system of internal control over financial reporting (as such term
is defined in Rules 13A-15(f) and 15d-15(f) under the Exchange Act). The Company's system of internal control over financial
reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles. There are inherent limitations
in the effectiveness of any system of internal control over financial reporting, including the possibility of human error and
circumvention or overriding of controls. Accordingly, even an effective system of internal control over financial reporting can
provide only reasonable assurance with respect to financial statement preparation. Projections of any evaluation of effectiveness
to future periods are subject to the risks that controls may become inadequate because of changes in conditions or that the degree
of compliance with the policies or procedures may deteriorate.

 Management
has assessed the Company's internal control over financial reporting as of December 31, 2024. This assessment was based
on criteria for effective internal control over financial reporting described in Internal Control - Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management
believes that, as of December 31, 2024, the Company maintained effective internal control over financial reporting based on those
criteria.

 Changes in Internal Controls

 There
were no changes in our internal controls over financial reporting that occurred during our most recent fiscal quarter that materially
affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

 Item 9B. Other Information.

 Trading
Plans

 During
the three months ended December 31, 2024, no director or "officer" of the Company adopted or terminated a "Rule
10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement," as each term is defined in Item 408(a)
of Regulation S-K.

 Item 9C. Disclosure Regarding
Foreign Jurisdictions that Prevent Inspections.

 Not applicable.

 PART
III

 Item 10. Directors, Executive
Officers and Corporate Governance.

required to be disclosed by this item will be disclosed in our definitive proxy statement to be filed no later than 120 days after
December 31, 2024 in connection with our 2025 annual meeting of shareholders. The information required by Item 10 is hereby incorporated
by reference from our proxy statement for our 2025 annual meeting of shareholders to be held on May 21, 2025.

 We have
adopted a Code of Ethics that applies to our directors, executive officers (including our principal executive officer and principal
financial officer) and employees in accordance with the Sarbanes-Oxley Corporate Responsibility Act of 2002. The Code of Ethics
is available on our web site at www.firstcommunitysc.com. We will disclose any future amendments to, or waivers from, provisions
of these ethics policies and standards on our website as promptly as practicable, as and to the extent required under NASDAQ Stock
Market listing standards and applicable SEC rules.

 Item 11. Executive Compensation.

required to be disclosed by this item will be disclosed in our definitive proxy statement to be filed no later than 120 days after
December 31, 2024 in connection with our 2025 annual meeting of shareholders. The information required by Item 11 is hereby incorporated
by reference from our proxy statement for our 2025 annual meeting of shareholders to be held on May 21, 2025.

 Item 12. Security Ownership
of Certain Beneficial Owners and Management and Related Shareholder Matters.

 There
are no outstanding options as of December 31, 2024.

 The additional
information required to be disclosed by this item will be disclosed in our definitive proxy statement to be filed no later than
120 days after December 31, 2024 in connection with our 2025 annual meeting of shareholders. The information required by this
Item 12 is set forth under "Security Ownership of Certain Beneficial Owners and Management" and hereby incorporated
by reference from our proxy statement for our 2024 annual meeting of shareholders to be held on May 21, 2025.

 Item 13. Certain Relationships
and Related Transactions, and Director Independence.

required to be disclosed by this item will be disclosed in our definitive proxy statement to be filed no later than 120 days after
December 31, 2024 in connection with our 2025 annual meeting of shareholders. The information required by Item 13 is hereby incorporated
by reference from our proxy statement for our 2025 annual meeting of shareholders to be held on May 21, 2025.

 Item 14. Principal Accountant
Fees and Services.

required to be disclosed by this item will be disclosed in our definitive proxy statement to be filed no later than 120 days after
December 31, 2024, in connection with our 2025 annual meeting of shareholders. The information required by Item 14 is hereby incorporated
by reference from our proxy statement for our 2025 annual meeting of shareholders to be held on May 21, 2025.

 PART
IV

 Item 15. Exhibits, Financial
Statement Schedules.

 (a)(1) Financial Statements

consolidated financial statements are located in Item 8 of this report.

 Report of Independent
 Registered Public Accounting Firm

 Consolidated Balance
 Sheets as of December 31, 2024 and 2023

 Consolidated Statements
 of Income for the years ended December 31, 2024, 2023 and 2022

 Consolidated Statements
 of Comprehensive Income (Loss) for the years ended December 31, 2024, 2023 and 2022

 Consolidated Statements
 of Changes in Shareholders' Equity for the years ended December 31, 2024, 2023 and 2022

 Consolidated Statements
 of Cash Flows for the years ended December 31, 2024, 2023 and 2022

 Notes to the Consolidated Financial Statements

 (a)(2) Financial Statement
Schedules

 These
schedules have been omitted because they are not required, are not applicable or have been included in our consolidated financial
statements.

 (a)(3) Exhibits

exhibits are required to be filed with this Report on Form 10-K by Item 601 of Regulation S-K.

 Exhibit

 Exhibit No.

 of Exhibit

 2.1

 Agreement and Plan of Merger, dated as of April 11, 2017, by and between First Community Corporation and Cornerstone Bancorp (incorporated by reference to Exhibit 2.1 to the Company's Form 8-K filed with the SEC on April 12, 2017).

 3.1

 Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the Company's Form 8-K filed with the SEC on June 27, 2011).

 3.2

 Articles of Amendment (incorporated by reference to Exhibit 3.1 to the Company's Form 8-K filed with the SEC on May 23, 2019).

 3.3

 Amended and Restated Bylaws dated May 21, 2019 (incorporated by reference to Exhibit 3.1 to the Company's Form 8-K filed with the SEC on May 22, 2019).

 4.1

 Description of the Company's Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934 (incorporated by reference to Exhibit 4.1 of the Company's Form 10-K for the period ended December 31, 2019).

 10.1

 Dividend Reinvestment Plan dated July 7,
 2003 (incorporated by reference to Form S-3/D filed with the SEC on July 14, 2003, File No. 333-107009, April 20, 2011, File No. 333-173612, and January 31, 2019, File No. 333-229442).**

 10.2

 Form of Salary Continuation Agreement dated August 2, 2006 (incorporated by reference to Exhibit 10.1 to the Company's Form 8-K filed with the SEC on August 3, 2006).**

 10.3

 Form of Deferred Compensation Agreement (incorporated by reference to Exhibit 10.2 to the Company's Form 8-K filed with the SEC on October 4, 2006).

 10.4

 First Community Corporation Non-Employee Director Deferred Compensation Plan, as amended and restated effective as of January 1, 2021 (incorporated by reference to Exhibit 10.1 to the Company's Form 10-Q for the period ended June 30, 2021).

 10.5

 Employment Agreement by and between Michael C. Crapps and First Community Corporation dated December 8, 2015 (incorporated by reference to Exhibit 10.7 of the Company's Form 10-K for the period ended December 31, 2015).**

 10.6

 Employment Agreement by and between Joseph G. Sawyer and First Community Corporation dated December 8, 2015 (incorporated by reference to Exhibit 10.8 of the Company's Form 10-K for the period ended December 31, 2015).**

 10.7

 Employment Agreement by and between Robin D. Brown and First Community Corporation dated December 8, 2015 (incorporated by reference to Exhibit 10.10 of the Company's Form 10-K for the period ended December 31, 2015).**

 10.8

 Amended and Restated Employment Agreement by and between J. Ted Nissen and First Community Corporation effective July 1, 2024 (incorporated by reference to Exhibit 10.1 of the Company's Form 8-K filed with the SEC on July 1, 2024).**

 10.9

 Employment Agreement by and between Tanya A. Butts and First Community Corporation dated April 22, 2019 (incorporated by reference to Exhibit 10.12 of the Company's Form 10-K for the period ended December 31, 2019).**

 10.10

 Employment Agreement by and between Donald Shawn Jordan and First Community Corporation dated November 12, 2019 (incorporated by reference to Exhibit 10.13 of the Company's Form 10-K for the period ended December 31, 2019).**

 10.11

 First Community Corporation 2011 Stock Incentive Plan and Form of Stock Option Agreement and Form of Restricted Stock Agreement (incorporated by reference to Appendix A to the Company's Proxy Statement filed with April 7, 2011).**

 10.12

 Amendment No. 1 to the First Community Corporation 2011 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company's Form 8-K filed with the SEC on April 22, 2016).**

 10.13

 Form of Restricted Stock Unit Agreement (incorporated by reference to Exhibit 10.2 to the Company's Form 8-K filed with the SEC on April 22, 2016).**

 10.14

 First Community Corporation Annual Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company's Form 8-K filed with the SEC on December 16, 2019).**

 10.15

 First Community Corporation 2021 Omnibus Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company's Form S-8 (File No. 333-257550) filed with the SEC on June 30, 2021)**

 10.16

 Form of Time-based Restricted Stock Unit Agreement under the First Community Corporation 2021 Omnibus Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company's Form 8-K filed with the SEC on February 16, 2022)**

 10.17

 Form of Performance-based Restricted Stock Unit Agreement under the First Community Corporation 2021 Omnibus Equity Incentive Plan (incorporated by reference to Exhibit 10.2 to the Company's Form 8-K filed with the SEC on February 16, 2022)**

 Exhibit No.

 of Exhibit

 10.18

 Form of Restricted Stock Agreement for Directors under the First Community Corporation 2021 Omnibus Equity Incentive Plan (incorporated by reference to Exhibit 10.3 to the Company's Form 8-K filed with the SEC on February 16, 2022)**

 10.19

 Form of Restricted Stock Agreement for Employees under the First Community Corporation 2021 Omnibus Equity Incentive Plan (incorporated by reference to Exhibit 10.4 to the Company's Form 8-K filed with the SEC on February 16, 2022)**

 10.20

 Employment Agreement by and between Vaughan R. Dozier, Jr. and First Community Corporation dated January 1, 2024

 10.21

 Employment Agreement by and between Joseph A.(Drew) Painter. and First Community Corporation dated January 1, 2024

 10.22

 Form of Time-based Restricted Stock Unit Agreement under the First Community Corporation 2021 Omnibus Equity Incentive Plan*,**

 10.23

 Form of Performance-based Restricted Stock Unit Agreement under the First Community Corporation 2021 Omnibus Equity Incentive Plan*,**

 10.24

 Form of Restricted Stock Agreement for Directors under the First Community Corporation 2021 Omnibus Equity Incentive Plan*,**

 10.25

 Form of Restricted Stock Agreement for Employees under the First Community Corporation 2021 Omnibus Equity Incentive Plan*,**

 10.26

 Employment Agreement by and between Sarah T. Donley and First Community Corporation dated January 1, 2025*,**

 19.1

 First Community Corporation Insider Trading
 Policy*

 21.1

 Subsidiaries of the Company.*

 23.1

 Consent of Independent Registered Public Accounting Firm—Elliott Davis, LLC.*

 24.1

 Power of Attorney (contained on the signature page hereto).*

 31.1

 Rule 13a-14(a) Certification of the Chief Executive Officer.*

 31.2

 Rule 13a-14(a) Certification of the Chief Financial Officer.*

 Section 1350 Certifications.*

 97#

 First Community Corporation Clawback Policy, effective September 19, 2023.

 The following materials from the Company's
 (i) the Consolidated Balance Sheets as December 31, 2024 and December 31, 2023; (ii) Consolidated Statements of Income for
 the years ended December 31, 2024, 2023 and 2022; (iii) Consolidated Statements of Comprehensive Income (Loss) for the years
 ended December 31, 2024, 2023 and 2022; (iv) Consolidated Statements of Changes in Shareholders' Equity for the years
 ended December 31, 2024, 2023 and 2022; (v) Consolidated Statements of Cash Flows for the years ended December 31, 2024, 2023
 and 2022; and (vi) Notes to the Consolidated Financial Statements.*

 Cover Page Interactive Data File (embedded

 The Exhibits listed above will be
furnished to any security holder free of charge upon written request to the Corporate Secretary, First Community Corporation,
5455 Sunset Blvd., Lexington, South Carolina 29072.

 *

 Filed herewith.

 **

 Management contract
 or compensatory plan or arrangement required to be filed as an Exhibit to this Annual Report on Form

 10-K.

 (b)

 See listing of Exhibits above for an indication
 of exhibits filed herewith.

 (c)

 Not applicable.

 SIGNATURES

 Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.

 Date: March 14, 2025

 FIRST COMMUNITY CORPORATION

 By:

 /s/

 President and Chief
 Executive Officer

 (Principal Executive
 Officer)

 KNOW ALL
MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Michael C. Crapps, his true and
lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead,
in any and all capacities, to sign any and all amendments to this report, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange Commission, granting unto attorney-in-fact and agent
full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises,
as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that attorney-in-fact
and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

 Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.

 Signature

 Title

 Date

 /s/
 Thomas C. Brown

 Thomas C. Brown

 /s/
 Chimin J. Chao

 Director and Chairman of the Board

 Chimin J. Chao

 /s/

 Director, President, & Chief Executive
 Officer

 (Principal Executive Officer)

 /s/
 W. James Kitchens, Jr.

 Director and Vice Chairman of the Board

 W. James Kitchens,
 Jr.

 /s/
 Ray E. Jones

 Ray E. Jones

 /s/
 Jan H. Hollar

 Jan H. Hollar

 /s/
 Mickey Layden

 Mickey Layden

 /s/
 J. Ted Nissen

 Director, Executive Vice President, & Chief Banking Officer

 J. Ted Nissen

 /s/
 E. Leland Reynolds

 E. Leland Reynolds

 /s/
 Alexander Snipe, Jr.

 Alexander Snipe, Jr.

 /s/
 Jane Sosebee

 Jane Sosebee

 /s/
 Roderick M. Todd, Jr.

 Roderick M. Todd, Jr.

 /s/
 D. Shawn Jordan

 Chief Financial Officer

 D. Shawn Jordan

 (Principal Financial and Accounting Officer)