First Community Bankshares Inc

The Company, the Bank and its customers are exposed to an increasing risk of fraud, including cyber fraud, identity theft, account takeover, and other fraudulent activities. The sophistication and frequency of these schemes continue to grow, driven by advances in technology and the proliferation of digital banking channels. Fraudulent activity can result in financial losses for us or our customers, increased operational costs, and potential legal exposure. Although the Company has enhanced security measures, including authentication protocols, transaction monitoring, and fraud detection systems, these controls may not be sufficient to prevent all fraudulent activity. Criminals continuously adapt their methods to circumvent existing safeguards, and emerging technologies such as artificial intelligence may further enhance their ability to perpetrate fraud.

We may face new operational, compliance, reputational and legal risks due to the development and use of artificial intelligence.

The Company, the Bank and many of its third-party services providers currently use and may increasingly develop or incorporate artificial intelligence ("AI") technology in our operations, processes, products, or services. The development and use of AI present a number of opportunities for the Company, as we as risks that are difficult to predict and may evolve rapidly. AI could significantly disrupt the business models, investment strategies, operational processes, and markets in which we operate and subject us to increased competition, which could have a material adverse effect on our business, financial condition and results of operations. Some of our competitors may be more successful than us in the development and implementation of new technologies, including services and platforms based on AI, to address investor demands or improve operations. If we are unable to adequately advance our capabilities in these areas or do so at a slower pace than others in our industry, we may be at a disadvantage. The use of AI may also include the input of sensitive personal information, trade secrets, and other protected data by both us and third parties and could result in the exposure of such information.

Regulatory expectations, supervisory guidance and legal standards related to AI and emerging technologies are evolving and may vary across jurisdictions. New or changing laws, regulations or supervisory interpretations could require us to modify or limit its use of AI technologies, increase compliance and governance costs, or subject the Company to additional examination, reporting, or liability risks. In addition, public perception of AI use, including concerns regarding transparency, fairness, data usage and accountability, could results in reputational harm if our use of such technologies is perceived negatively.