What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-05-13 compared with 2025-11-14 · 336 added, 478 removed, 61 unchanged (93% of the section changed)

Discussion and Analysis of Financial Condition and Results of Operations

Caution About Forward-Looking Statements

We make forward-looking

statements in this quarterly report on Form 10-Q that are subject to risks and uncertainties.

These forward-looking statements include

statements regarding expectations, intentions, projections and beliefs concerning our profitability, liquidity, and allowance for credit

losses, interest rate sensitivity, market risk, growth strategy, and financial and other goals.

The words “believes,” “expects,”

“may,” “will,” “should,” “projects,” “contemplates,” “anticipates,”

“forecasts,” “intends,” or other similar words or terms are intended to identify forward looking statements.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

About Forward-Looking Statements

make forward-looking statements in this quarterly report on Form 10-Q that are subject to risks and uncertainties.

These forward-looking

statements include statements regarding expectations, intentions, projections and beliefs concerning our profitability, liquidity, and

allowance for credit losses, interest rate sensitivity, market risk, growth strategy, and financial and other goals.

The words “believes,”

“expects,” “may,” “will,” “should,” “projects,” “contemplates,”

“anticipates,” “forecasts,” “intends,” or other similar words or terms are intended to identify forward

looking statements.

The forward-looking information is based on various factors and was derived using numerous assumptions.

Important factors that may cause

actual results to differ from projections include:

or failure of our efforts to implement our business plan;

increase in our regulatory capital ratios;

other regulatory requirements that may arise from examinations, changes in the law and other similar factors;

factors that may cause actual results to differ from projections include:

success or failure of our efforts to implement our business plan;

required increase in our regulatory capital ratios;

other regulatory requirements that may arise from examinations, changes in the law and other

similar factors;

● deterioration

of asset quality;

the level of our nonperforming assets and charge-offs;

in the level of our nonperforming assets and charge-offs;

● fluctuations

of real estate values in our markets;

to attract and retain talent;

ability to attract and retain talent;

● demographical

changes in our markets which negatively impact the local economy;

the uncertain

outcome of current or future legislation or regulations or policies of state and federal regulators;

the successful

management of interest rate risk;

the successful

management of liquidity;

general economic and business conditions in our market area and the United States in general;

inherent in making loans such as changes in a borrower’s ability to repay and our management of such risks;

with other banks and financial institutions, and companies outside of the banking industry, including online lenders and those companies

that have substantially greater access to capital and other resources;

demand, development

and acceptance of new products and services we have offered or may offer;

deposit flows

and competition for deposits;

of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Federal Reserve, inflation,

interest rate, market and monetary fluctuations;

the occurrence

of significant natural disasters, including severe weather conditions, floods, health related issues and other catastrophic events;

conditions, including trade restrictions and tariffs, and acts or threats of terrorism, international hostilities, or actions taken by

or other governments in response to trade restrictions and tariffs, and acts or threats of terrorism and/or military conflicts,

which could impact business and economic conditions in the U.S.

utilized by us, including the successful core operating system conversion in 2025;

the effects of cyber incidents or other failures, disruptions or breaches of

our operational or security systems, or those of our third-party vendors or other service providers, including as a result of cyber threats

to assist in managing third party fraud against customer accounts including but not limited to check, credit and debit card, and electronic

funds transfer fraud;

on third-party vendors and correspondent banks;

generally accepted accounting principles;

governmental regulations, tax rates and similar matters;

which may be described, from time to time, in our filings with the SEC.

Because of these

uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements.

uncertain outcome of current or future legislation or regulations or policies of state and

federal regulators;

successful management of interest rate risk;

successful management of liquidity;

in general economic and business conditions in our market area and the United States in general;

risks inherent in making loans such as changes in a borrower’s ability to repay and

our management of such risks;

● competition

with other banks and financial institutions, and companies outside of the banking industry,

including online lenders and those companies that have substantially greater access to capital

and other resources;

acceptance of new products and services we have offered or may offer;

flows and competition for deposits;

effects of, and changes in, trade, monetary and fiscal policies and laws, including interest

rate policies of the Federal Reserve, inflation, interest rate, market and monetary fluctuations;

occurrence of significant natural disasters, including severe weather conditions, floods,

health related issues and other catastrophic events;

● geopolitical

conditions, including trade restrictions and tariffs, and acts or threats of terrorism, international

hostilities, military conflicts or actions taken by the U.S.

or other governments in response

thereto, which could impact business and economic conditions in the U.S.

continued effective operation of our information technology systems and third-party service

providers, including the stabilization and ongoing performance of our core processing platform

following the system conversion completed during the fourth quarter of 2025;

effects of cyber incidents or other failures, disruptions, or breaches of our operational

or security systems, or those of our third-party vendors or other service providers, including

as a result of cyber threats or attacks;

ability to successfully manage cybersecurity, including generative artificial intelligence

ability to assist in managing third party fraud against customer accounts including but not

limited to check, credit and debit card, and electronic funds transfer fraud;

reliance on third-party vendors and correspondent banks;

in generally accepted accounting principles;

in governmental regulations, tax rates and similar matters;

risks, which may be described, from time to time, in our filings with the SEC.

of these uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements.

In addition, our past results of operations do not necessarily indicate our future results.

1 unchanged sentence

or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Critical Accounting

For discussion of

our significant accounting policies, see our Annual Report on Form 10-K for the year ended December 31, 2024, and Note 2 Summary of Significant

Accounting Policies, in Item 1 of this Form 10-Q.

Certain critical accounting policies affect the more significant judgments and estimates

used in the preparation of our financial statements.

Our most critical accounting policies relate to our allowance for credit losses.

The allowance for

credit losses reflects the estimated losses resulting from the inability of our customers to make required payments.

If the financial

condition of our borrowers were to deteriorate, resulting in an impairment of their ability to make payments, our estimates would be

updated, and additional provisions could be required.

For further discussion of the estimates used in determining the allowance for credit

losses, we refer you to the section on “Asset Quality” in this discussion.

Overview and Highlights

Quarter-to-date highlights

income for the three months ended September 30, 2025 was $2.8 million, or $0.12 per share,

an increase of $650,000, or 30.83%, from the $2.1 million or $0.09 per share reported for

the same period in 2024.

on average assets and equity of 1.21% and 14.28% for the third quarter of 2025 compared to

0.97% and 12.35% for the third quarter of 2024, respectively;

interest margin was 3.93% for the third quarter of 2025 compared to 3.43% for the third quarter

interest income was $8.6 million for the third quarter of 2025, an increase of $1.5 million

or 20.28%, compared to the third quarter of 2024;

Accounting Policies

discussion of our significant accounting policies, see our Annual Report on Form 10-K for the year ended December 31, 2025, and Note

2 Summary of Significant Accounting Policies, in Item 1 of this Form 10-Q.

Certain critical accounting policies affect the more significant

judgments and estimates used in the preparation of our financial statements.

Our most critical accounting policies relate to our allowance

for credit losses.

allowance for credit losses reflects the estimated losses resulting from the inability of our customers to make required payments.

the financial condition of our borrowers were to deteriorate, resulting in an impairment of their ability to make payments, our estimates

would be updated, and additional provisions could be required.

For further discussion of the estimates used in determining the allowance

for credit losses, we refer you to the section on “Asset Quality” in this discussion.

and Highlights

income for the three months ended March 31, 2026 was $3.1 million, an increase of $1.2 million, or 60.48%, from the same period in 2025.

Net interest income increased 15.86%, or $1.2 million, from $7.6 million for the quarter ended March 31, 2025 to $8.8 million for the

quarter ended March 31, 2026.

The loan portfolio was the primary driver of both increases as the yield rose 25 basis points (”bps”)

while the average balance increased $57.8 million compared to the first quarter of 2025.

balance sheet grew to $939.6 million in total assets as of March 31, 2026, from $909.7 million as of December 31, 2025.

Gross loans increased

$13.7 million to $723.3 million as of March 31, 2026.

Additionally, interest-bearing deposits with banks increased $13.1 million to $76.2

million as of March 31, 2026.

During the first three months of 2026 total deposits increased $29.4 million or 3.68% to $827.7 million.

dividend of $0.09 per share was paid to shareholders during the first quarter of 2026, a 12.5% increase over the dividend paid in 2025.

the first quarter of 2026, we extended a previously announced stock repurchase program, to continue through March 31, 2027.

inception of the program through March 31, 2026, the Company has repurchased 366,569 shares at an average price of $2.57 per share.

of the Three Months ended March 31, 2026 and 2025

Quarter-to-date

highlights include:

on average assets and equity of 1.34% and 14.69% for the first quarter of 2026, compared

to 0.90% and 10.78% for the first quarter of 2025, respectively;

interest margin was 3.99% for the first quarter of 2026 compared to 3.69% for the first quarter

interest income was $8.8 million for the first quarter of 2026, an increase of $1.2 million,

or 15.86%, compared to the first quarter of 2025;

● Noninterest

income was $2.5 million, an increase of $73,000, or 3.01%, during the third quarter of 2025

compared to the third quarter of 2024;

income was $2.6 million, an increase of $217,000, or 8.99%, during the first quarter of 2026

compared to the first quarter of 2025;

● Noninterest

expense was $7.4 million, an increase of $548,000, or 8.02%, for the third quarter of 2025

compared to the third quarter of 2024.

Comparison of

the Three Months ended September 30, 2025, and 2024

Net interest income

for the quarter ended September 30, 2025 was $8.6 million, an increase of $1.5 million, or 20.28%, when compared to the third quarter

Interest income increased $1.1 million to $12.6 million due to the combination of an increase of 22 basis points (“bps”)

in the yield on earning assets to 5.73% and a $39.4 million increase in the average balance of earning assets when compared to 2024.

The loan portfolio was the primary driver of both increases as the yield rose 26 bps to 6.31% while the average balance increased $66.1

million compared to the quarter ending September 30, 2024.

Also contributing to the improvement in net interest income was the $394,000

decrease in interest expense to $4.0 million during the third quarter of 2025 as compared to $4.4 million in 2024.

The reduction in interest

expense is due to a number of factors including a 31 bp decrease in the cost of interest-bearing deposits to 2.59% due to maturing time

deposits and money market accounts repricing in a lower interest-rate environment and declines

in both the cost and average balance of borrowed funds.

The decline in the average balance of borrowed funds was due to the decrease

in the average balance related to a $10 million borrowing from the Federal Reserve Bank under the Bank Term Funding Program that was

repaid in October 2024 combined with $4.2 million in principal payments made on trust preferred securities in October 2024 and January

In addition, the variable rate paid on the trust preferred securities decreased as overnight and short-term borrowing rates declined

during the last half of 2024.

As a result, the cost of total interest-bearing liabilities decreased 40 bps to 2.69% during the third

quarter of 2025 as compared to the third quarter of 2024.

The net interest margin increased 50 bps to 3.93% for the quarter ending September

30, 2025 as compared to 3.43% for the same period in 2024 due to the increase in the yield on earning assets and the decline in the cost

The following table

shows the rates paid on earning assets and interest-bearing liabilities for the periods indicated:

Net Interest Margin

Average Balances,

Income and Expense, and Yields and Rates

Three Months Ended

September 30,

expense was $7.2 million, a decrease of $39,000, or 0.54%, for the first quarter of 2026

compared to the first quarter of 2025.

the first quarter of 2026, interest income increased $1.2 million to $12.6 million due to the combination of an increase of 18 bps in

the yield on earning assets to 5.69% and a $61.5 million increase in the average balance of earning assets when compared to the first

quarter of 2025.

The loan portfolio was the primary driver of both increases as the yield rose 25 bps to 6.35% while the average balance

increased $57.8 million compared to the first quarter of 2025.

Also contributing to the improvement in net interest income was lower

funding costs.

While the average balance of interest-bearing liabilities increased $44.2 million, the costs decreased 18 bps to 2.55%,

and total interest expense only increased by $39,000 to $3.8 million during the first quarter of 2026 as compared to the first quarter

The reduction in the cost of interest-bearing liabilities is primarily due to maturing time deposits repricing in a lower interest-rate

environment and declines in both the cost and balance of borrowed funds.

The decrease in the average balance of borrowed funds was due

to a $3 million principal payment on a borrowing from the Federal Home Loan Bank of Atlanta during the fourth quarter of 2025 combined

with principal payments made on a trust preferred security in January 2025.

In addition, the variable rate paid on the trust preferred

securities decreased as overnight and short-term borrowing rates declined during the last half of 2025.

The net interest margin improved

30 bps to 3.99% for the quarter ending March 31, 2026, compared to 3.69% for the same period in 2025, due to the increase in the yield

on earning assets and the decline in the cost of funds.

The net interest spread, which is the difference between the yield on interest-earning

assets and the costs of interest-bearing liabilities, widened by 36 bps to 3.14% for the first quarter of 2026 from 2.78% for the comparable

period of 2025.

following table shows the rates paid on earning assets and interest-bearing liabilities for the periods indicated:

Interest Margin Analysis

Balances, Income and Expense, and Yields and Rates

Months Ended March 31 ,

are in thousands)

bearing deposits in other banks

securities (2)

earning assets

Allowance for credit losses

AND SHAREHOLDERS’ EQUITY

for credit losses

LIABILITIES AND SHAREHOLDERS’

Interest-bearing

11 unchanged sentences

interest spread

Nonaccrual loans and loans held for sale have been included in average loan balances.

Tax exempt income is not significant and has been treated as fully taxable.

Net interest income

is affected by changes in both average interest rates and average volumes (balances) of interest-earning assets and interest-bearing

(1) Nonaccrual

loans and loans held for sale have been included in average loan balances.

exempt income is not significant and has been treated as fully taxable.

interest income is affected by changes in both average interest rates and average volumes (balances) of interest-earning assets and interest-bearing

The following table sets forth the amounts of the total changes in interest income and interest expense which can be attributed

to rates and volume for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024.

(Dollars in thousands)

Volume Effect

Change in Interest Income/ Expense

to rates and volume for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025.

and Rate Analysis

Months Ended March 31, 2026

in thousands)

Interest income:

Federal funds sold

Interest bearing deposits in other banks

Investment securities

Total earning assets

Interest expense:

Interest-bearing demand deposits

Savings and money market deposits

Time deposits

Other borrowings

Trust preferred securities

Total interest-bearing liabilities

Change in net interest income

The provision for

credit losses charged to the income statement for the quarter ended September 30, 2025, was $189,000 compared to $49,000 for the three

months ended September 30, 2024.

The third quarter 2025 provision reflects the impact of the loan growth while the provision recorded

in 2024 was impacted by the resolution of a loan relationship that had resulted in a $262,000 specific allowance allocation during the

second quarter of 2024.

The provision for credit losses on unfunded commitments was $0 for the third quarter of 2025 due to a slight

reduction in commitments on construction loans offset by a small increase in the expected loss rate.

For a discussion of the factors

affecting the allowance for credit losses, including provision expense, refer to Note 7, Allowance for Credit Losses for Loans, in Item

1 of this Form 10-Q.

Noninterest income

totaling $2.5 million for the quarter ended September 30, 2025 increased $73,000 compared to the quarter ended September 30, 2024.

increases in earnings from service charges, card processing, financial services revenue, and other miscellaneous income totaling $8,000,

$21,000, $31,000, and $35,000, respectively, were partially offset by the $20,000 decrease in income from bank-owned life insurance policies

which were either surrendered or paid out due to death in the fourth quarter of 2024.

Noninterest expense

was $7.4 million for the quarter ended September 30, 2025 compared to $6.8 million for the quarter ended September 30, 2024.

increase primarily resulted from increases in salaries and benefits of $209,000, other expenses related to the core conversion of $104,000,

data processing costs of $38,000, ATM network expenses of $42,000, and loan-related expenses of $104,000.

The increase in salaries and

benefits is attributable to normal recurring salary adjustments, increases in incentive accruals based on the Company’s year-to-date

performance and production, higher health insurance expenses, staffing costs for the Wytheville loan production office, and overtime

associated with the core conversion.

Other expenses related to the core conversion include professional and ancillary costs for other

applications and systems impacted by the conversion as well as internal and external travel costs associated with testing and data validation.

The increase in loan-related expenses is due to expenses associated with a home equity loan promotion during the second and third quarters

Subsequent to quarter-end,

there has been, and will be, additional costs associated with the core system conversion including additional costs related to overtime,

meals and other expenses related to the installation, testing and training on the new system and the other ancillary systems impacted

by the core conversion.

The efficiency ratio,

which is defined as noninterest expense divided by the sum of net interest income plus noninterest income, decreased to 66.24% during

the third quarter of 2025 from 71.10% for the third quarter of 2024.

We continue to assess our operational procedures and structure to

improve efficiencies and contain costs.

Income tax expense

for the third quarter of 2025 totaled $812,000, an increase of $191,000, or 30.76%, from $621,000 recorded during the same period in

This increase was in line with the increase in pre-tax income which increased $841,000 or 30.82% for the comparative three months

ended September 30, 2025 and 2024.

The effective tax rate for the three months ended September 30, 2025 was 22.75%,compared to 22.76%

for the same period in 2024.

While the signing

of the One Big Beautiful Bill Act on July 4, 2025, made many of the provisions of the 2017 Tax Cut and Jobs Act permanent, including

the 21% corporate tax rate, and the reinstatement of bonus depreciation, it also put in place modifications to reduce or limit certain

fringe benefits and charitable contribution deductions and modified information reporting rules by requiring increased compliance processes

by businesses.

Pending the release of final regulations later in 2025, a full assessment of the impact of this legislation on the Company

cannot yet be determined.

Comparison of

the Nine Months ended September 30, 2025 and 2024

Year-to-date highlights

income for the nine months ended September 30, 2025 was $7.2 million, or $0.30 per share,

an increase of $1.6 million, or 29.04%, from the $5.6 million or $0.24 per share reported

for the same period in 2024.

on average assets and equity of 1.09% and 13.03% for the first nine months of 2025, compared

to 0.87% and 11.36% for the first nine months of 2024, respectively;

For the nine months

ended September 30, 2025, net interest income totaled $24.5 million, an increase of $3.4 million, or 16.03%, as compared to the nine

months ended September 30, 2024.

The net interest margin increased 39 bps to 3.83% as compared to 3.44% for the same period in 2024.

Net interest income improved due to increased average earning assets, which increased $34.7 million, or 4.23%, to $854.5 million.

addition, the yield on earning assets improved 22 bps to 5.62% during the nine months ended September 30, 2025 compared to the same period

Interest expense for the nine months ended September 30, 2025 totaled $11.5 million, a decrease of $634,000, or 5.24%, from

the same period in 2024.

The decrease in interest expense is due primarily to the lower costs of interest-bearing deposits and borrowed

funds as discussed above.

The following table

shows the rates paid on earning assets and interest-bearing liabilities for the periods indicated:

Net Interest Margin

Average Balances,

Income and Expense, and Yields and Rates

Nine Months Ended

September 30,

are in thousands)

bearing deposits in other banks

securities (2)

investment securities

earning assets

Allowance for credit losses

AND SHAREHOLDERS’ EQUITY

Interest expense:

Interest-bearing

1 unchanged sentence

and money market deposits

interest-bearing deposits

preferred securities

borrowed funds

interest-bearing liabilities

Non-interest-bearing

Shareholders’

liabilities and shareholders’ equity

interest income

interest margin

interest spread

Nonaccrual loans and loans held for sale have been included in average loan balances.

Tax exempt income is not significant and has been treated as fully taxable.

Net interest income

is affected by changes in both average interest rates and average volumes (balances) of interest-earning assets and interest-bearing

The following table sets forth the amounts of the total changes in interest income and interest expense which can be attributed

to rates and volume for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024.

(Dollars in thousands)

Volume Effect

Change in Interest Income/ Expense

Interest income:

Federal funds sold

Interest bearing deposits in other banks

Investment securities

Total earning assets

Interest expense:

Interest-bearing demand deposits

Savings and money market deposits

Time deposits

Other borrowings

Trust preferred securities

Total interest-bearing liabilities

Change in net interest income

For the nine months

ended September 30, 2025, the provision for credit losses totaled $602,000 as compared to $478,000 recorded for the same period in 2024.

For the nine months

ended September 30, 2025, noninterest income increased $69,000 to $7.3 million compared to the same period in 2024, mainly due to a branded

card incentive payment of $141,000 in 2025 which was partially offset by a $98,000 decrease in service charges.

For the nine months

ended September 30, 2025, noninterest expense totaled $21.9 million, an increase of $1.2 million, or 5.90%, over the same period in 2024.

The components of the year-over-year increase are largely similar to those discussed for the current quarter.

Additional items include

$47,000 in costs incurred in “refreshing” a branch office and $42,000 in costs incurred for snow and ice removal to keep

our branch locations open and safe during the winter storms in the first quarter of 2025.

Balance Sheet

Total assets as of

September 30, 2025 were $910.7 million, an increase of $55.8 million, or 8.73% annualized, from $854.9 million as of December 31, 2024.

Gross loans of $707.3 million as of September 30, 2025 reflected an increase of $49.7 million, or 10.11% annualized, from $657.5 million

in net interest income

provision for credit losses charged to the income statement for the quarter ended March 31, 2026 was $240,000 compared to $259,000 for

the three months ended March 31, 2025.

The provision expense for the first quarter of 2026 is mainly attributable to growth in the loan

portfolio and a modest adjustment to certain qualitative factors in the calculation of the allowance for loan losses to reflect geopolitical

uncertainty related to the conflict in the Middle East.

The provision for credit losses during the first quarter of 2025 is attributable

to loan growth and the impact of valuation allowances for two specifically assessed borrower relationships.

A recovery of credit losses

on unfunded commitments of $11,000 was recognized for the first quarter of 2026 due to a $2.1 million reduction in commitments on construction

The provision for credit losses on unfunded commitments for the first quarter of 2025 was $92,000, reflecting an $11.6 million,

or 31.84%, increase in unfunded commitments on construction loans.

a discussion of the factors affecting the allowance for credit losses, including provision expense, refer to Note 7, Allowance for Credit

Losses for Loans, in Item 1 of this Form 10-Q.

income, totaling $2.6 million for the first quarter of 2026, increased $217,000 compared to the quarter ended March 31, 2025.

The improvement

was driven by a $101,000 increase in income from financial and investment services and a $121,000 increase in income from card processing.

expense was $7.2 million for the quarter ended March 31, 2026, which was a $39,000 decrease compared to the first quarter of 2025.

costs decreased $93,000 due to costs incurred in “refreshing” a branch office in the first quarter of 2025 and a decrease

in costs for snow and ice removal to keep our branch locations open and safe during the winter storms in 2026 compared to 2025.

categories experiencing reductions include professional and consulting fees, card processing costs, and the expense for the debit card

rewards program which was discontinued in the fourth quarter of 2025.

The reductions in expenses were partially offset by an $85,000

increase in salaries and benefits attributable to annual merit increases and an uptick in losses due to fraudulent activity.

efficiency ratio, which is defined as noninterest expense divided by the sum of net interest income plus noninterest income, decreased

to 63.17% during the first quarter of 2026 from 72.55% for the first quarter of 2025.

We continue to assess our operational procedures

and structure to improve efficiencies and contain costs.

tax expense for the first quarter of 2026 totaled $912,000, an increase of $328,000, or 56.16%, from $584,000 recorded during the same

period in 2025.

The effective tax rate for the three months ended March 31, 2026, was 22.95%, compared to 23.43% for the same period

assets as of March 31, 2026, were $939.6 million, an increase of $29.9 million, or 3.28%, from $909.7 million as of December 31, 2025.

Gross loans of $723.3 million as of March 31, 2026 reflected an increase of $13.7 million, or 1.93%, from $709.6 million as of December

Liquid assets in the form of cash and cash equivalents increased $15.7 million, or 20.31%, during the first quarter of 2026

mainly due to the seasonal increase in deposits.

Investment securities increased $427,000 during the first quarter of 2026 due to purchases

of $4.2 million offset by maturities, calls, payments and amortization of $2.9 million and an $808,000 increase in the unrealized loss

on securities available-for-sale.

totaled $827.7 million as of March 31, 2026, compared to $798.3 million as of December 31, 2025.

The increase of $29.4 million, or 3.68%,

was due to continued efforts to attract money market account relationships combined with seasonal and cyclical funds inflows.

money market and savings accounts increased $14.8 million, and noninterest-bearing demand and interest-bearing demand deposits combined

for an increase of $18.9 million during the first quarter of 2026.

Over this same period, time deposits decreased $5.0 million largely

due to the maturity of a public funds deposit with no other deposit relationship, for which the Bank did not aggressively bid.

of March 31, 2026 and December 31, 2025, borrowed funds totaled $19.0 million.

the quarter ended March 31, 2026, total shareholders’ equity increased $262,000 to $83.1 million due to net income of $3.1 million

which was offset by dividends paid to shareholders of $2.1 million, the repurchase of common stock totaling $41,000, and an increase

in the unrealized loss on securities available for sale, net of the tax effects, of $639,000.

Consequently, book value per share increased

to $3.53 as of March 31, 2026 compared to $3.52 as of December 31, 2025.

The Bank remains well-capitalized per regulatory guidance.

previously announced, the Board of Directors extended the repurchase of up to 500,000 shares of the Company’s common stock through

March 31, 2027.

During the first quarter of 2026, the Company repurchased 11,496 shares at an average price of $3.55 per share.

the commencement of the repurchase plan in 2022, 366,569 shares have been repurchased at an average price of $2.57 per share.

allowance for credit losses on loans was $8.1 million, or 1.12% as a percentage of total loans, as of March 31, 2026, and $8.1 million,

or 1.14%, as of December 31, 2025.

The decrease in the allowance as a percentage of loans was primarily attributable to charging off

the year-end specific reserves on two borrower relationships during the first quarter of 2026.

One of these relationships had two pieces

of collateral – the residential property was foreclosed and reclassified into other real estate owned during the quarter, and the

commercial property was sold at auction and the sales proceeds were received subsequent to March 31, 2026.

The charge-off on the other

relationship was largely driven by the amount of time that it had been in its classified status.

The $9,000 increase in the allowance

for credit losses on loans was attributable to provision expense associated with a larger loan portfolio and a modest adjustment to a

qualitative factor for geopolitical uncertainty related to the conflict in the Middle East partially offset by the charge-off of the

specific reserves discussed above.

allowance for credit losses on unfunded commitments was $460,000 as of March 31, 2026, as compared to $471,000 as of December 31, 2025.

The decrease in the allowance for credit losses on unfunded commitments was due to a decrease in loan commitments, specifically residential

and commercial real estate construction loan commitments.

net charge-offs as a percentage of average loans were 0.14% during the first 3 months of 2026 compared to 0.05% during the fourth quarter

of 2025 and 0.01% during the first quarter of 2025.

The increase was due to the charge-off of the specific reserves discussed above.

Nonperforming

assets, which include nonaccrual loans, accruing loans past due 90 days or more, and other real estate owned, totaled $3.3 million as

of March 31, 2026, a decrease of $537,000, or 13.94%, since year-end 2025.

Nonaccrual loans decreased $467,000 during the first three

months of 2026 primarily due to the charge-off of the specific reserves on individually evaluated loans and a loan that was removed from

nonaccrual status based on performance.

Nonperforming assets as a percentage of total assets were 0.35% as of March 31, 2026 and 0.42%

as of December 31, 2025.

Liquid assets in the form of cash and cash equivalents increased $13.0 million, or 25.77% annualized, during

the first nine months of 2025.

Investment securities increased $169,000 during the first nine months of 2025 due to purchases of $5.3

million and a decrease in the unrealized loss on available-for-sale securities of $4.6 million which more than offset maturities, calls,

payments and amortization of $9.7 million.

There have been no sales of loans or investments during 2025 other than normal sales of mortgage

loans originated for sale.

Commercial and residential

real estate loans, the two largest categories of loans, increased $9.1 million and $16.7 million, respectively, from December 31, 2024

to September 30, 2025.

Multi-family real estate loans increased $12.5 million.

Consumer loans increased $3.5 million, which included

the purchase of $2.8 million of individual loans during the nine months ended September 30, 2025.

Farmland and Agriculture loans increased

$7.6 million and $847,000, respectively, during the first nine months of 2025.

Deposits totaled

$799.4 million as of September 30, 2025 compared to $750.0 million as of December 31, 2024.

The increase of $49.4 million, or 8.81% annualized,

was due to efforts to attract and retain time deposits and money market account relationships, including replacing a large, high-rate

account with lower-cost brokered time deposits, combined with cyclical funds inflows.

As a result of these efforts and seasonality, total

time deposits increased $23.7 million, money market

accounts increased $23.7 million, and noninterest bearing deposits increased $3.9 million during the first nine months of 2025.

the second quarter of 2025, $15.0 million of brokered time deposits were issued with maturities ranging from two months to two years.

$10.0 million of these brokered time deposits matured in August and were not replaced.

These deposits supplement liquidity, support loan

closings and advances and bolster on-balance-sheet liquidity.

As of September 30,

2025, borrowed funds totaled $22.0 million, a decrease of $3.0 million from December 31, 2024.

During the first quarter of 2025, a $3.0

million principal reduction was paid toward outstanding trust preferred securities.

This repayment improved net interest income and the

net interest margin during the current reporting periods and should positively impact future periods.

On June 30, 2025, we took a short-term

Federal Home Loan Bank advance of $5.0 million to bolster liquidity based on anticipated loan closings or advances.

This advance was

repaid in July.

During the nine months

ended September 30, 2025, total shareholders’ equity increased $8.8 million to $79.5 million due to net income of $7.2 million

and a decrease in the net unrealized loss on available-for-sale securities of $3.7 million.

These increases to capital were offset by

dividends paid to shareholders of $1.9 million and the repurchase of common stock totaling $180,000.

Consequently, book value per share

increased to $3.37 as of September 30, 2025 compared to $2.99 as of December 31, 2024.

The Bank remains well capitalized per regulatory

As previously announced,

the Board of Directors extended the repurchase of up to 500,000 shares of the Company’s common stock through March 31, 2026.

the first nine months of 2025, the Company repurchased 59,531 shares at an average price of $3.02 per share.

Since the commencement of

the repurchase plan in 2022, 344,893 shares have been repurchased at an average price of $2.52 per share.

Asset Quality

The allowance for

credit losses was $8.0 million, or 1.13% as a percentage of total loans, as of September 30, 2025 and $7.7 million, or 1.17%, as of December

The allowance for credit losses on unfunded commitments was $496,000 as of September 30, 2025 as compared to $404,000 as of

December 31, 2024.

The increase in the allowance for credit losses on unfunded commitments was due to an increase in loan commitments,

specifically residential and commercial real estate construction loan commitments.

Annualized net charge-offs

(recoveries) as a percentage of average loans were 0.04% during the first nine months of 2025 compared to 0.01% during the same period

of 2024 and 0.10% during the third quarter of 2025.

The higher charge-off rate during the third quarter was related to a partial charge-off

of $138,000 on a loan that had been specifically provided for in 2024.

Nonperforming assets,

which include nonaccrual loans, accruing loans past due 90 days or more, and other real estate owned, totaled $3.2 million as of September

30, 2025, a decrease of $164,000, or 4.88%, since year-end 2024.

Nonaccrual loans decreased $321,000 during the first nine months of

2025 primarily due to the resolution of several large credits and a partial charge-off exceeding the impact of a single loan relationship

totaling $802,000 placed in nonaccrual status in 2025.

Nonperforming assets as a percentage of total assets were 0.35% as of September

30, 2025 and 0.39% as of December 31, 2024.

Other real estate

owned increased $2,000 to $89,000 as of September 30, 2025 compared to December 31, 2024, due to the sale of a property during the first

quarter of 2025 and the foreclosure on one property during the third quarter of 2025.

Expenses associated with other real estate owned,

including gains and losses on sales, were $6,000 for the three months ended September 30, 2025 compared to net recoveries of $3,000 during

the three months ended September 30, 2024 due to gains on sales of foreclosed properties of $0 and $10,000 during the respective three-month

periods in 2025 and 2024.

For detailed information

on nonaccrual loans and other real estate owned as of September 30, 2025 and December 31, 2024, refer to Note 6 Loans and Note 10 Other

Real Estate Owned in Item 1 of this Form 10-Q.

Loans rated substandard

or below totaled $5.2 million as of September 30, 2025, an increase of $1.2 million from $4.0 million as of December 31, 2024 due to

two loan relationships totaling $2.9 million that were downgraded during the first nine months of 2025.

The Company is working with one

of these borrowers to bring the classified portion of the loan totaling $2.2 million into compliance with applicable loan covenants and

does not anticipate any loss will result from this loan.

Total past due loans decreased to $4.6 million as of September 30, 2025 from

$6.2 million as of December 31, 2024.

The allowance for

credit losses is maintained at a level that management deems appropriate to absorb any potential future losses and known impairments

within the loan portfolio, whether or not the losses are actually ever realized.

Through our quarterly assessment, we continue to adjust

the CECL model to best reflect the risks in the portfolio.

real estate owned increased to $184,000 as of March 31, 2026 from $89,000 at December 31, 2025 due to the foreclosure on the residential

property discussed above.

Expenses associated with other real estate owned, including gains and losses on sales, were $3,000 and $1,000

for the three months ended March 31, 2026 and 2025, respectively.

detailed information on nonaccrual loans and other real estate owned as of March 31, 2026 and December 31, 2025, refer to Note 6 Loans

and Note 10 Other Real Estate Owned in Item 1 of this Form 10-Q.

rated substandard or below totaled $3.7 million as of March 31, 2026, an increase of $1.1 million from $2.6 million as of December 31,

Total past due loans decreased to $6.1 million as of March 31, 2026 from $7.2 million as of December 31, 2025.

allowance for credit losses is maintained at a level that management deems appropriate to absorb any potential future losses and known

impairments within the loan portfolio, whether or not the losses are actually ever realized.

Through our quarterly assessment, we continue

to adjust the CECL model to best reflect the risks in the portfolio.

However, future provisions may be deemed necessary.

During the first nine

months of 2025, we maintained the adjustments to our qualitative factors initiated in 2024 to consider risk factors associated with commercial

real estate and residential mortgage loans;

however, we removed the qualitative factor related to Hurricane Helene which occurred in

September 2024.

Those changes, along with recoveries of loans previously charged off and the assessment of the historical and specific

risks associated with the loan portfolio, resulted in a provision for credit losses of $602,000, of which $510,000 was a provision for

the loan portfolio and $92,000 was a provision for unfunded commitments.

The following table summarizes components of the allowance for

credit losses and related loans as of September 30, 2025 and December 31, 2024:

During the first

three months of 2026, we maintained the adjustments to our qualitative factors initiated in 2024 and carried forward into 2025, to consider

risk factors associated with commercial real estate and residential mortgage loans.

In addition, we made a slight adjustment of 3 bps

to consider the geopolitical uncertainty in the Middle East.

Those changes, along with growth in the loan portfolio and the assessment

of the historical and specific risks associated with the loan portfolio, resulted in a recovery of credit losses for credit losses of

$240,000, which included a $251,000 provision for the loan portfolio;

and a $11,000 negative provision for unfunded commitments due to

a decrease in unfunded commitments, particularly construction loans.

The following table summarizes components of the allowance for credit

losses and related loans as of March 31, 2026 and December 31, 2025:

Credit Ratios

in thousands)

for credit losses - loans

Allowance for

credit losses - loans

for credit losses to total loans

1 unchanged sentence

of allowance for credit losses loans to nonaccrual loans

net of recoveries

Charge-offs net of recoveries

Average loans

charge-offs to average loans1

Deferred Tax Asset

and Income Taxes

Due to timing differences

between the book and tax treatments of several income and expense items, a net deferred tax asset of $1.6 million is recorded as of September

30, 2025 and December 31, 2024, excluding the deferred tax asset on the unrealized loss on securities available-for-sale of $2.2 million

and $3.2 million, as of September 30, 2025 and December 31, 2024, respectively.

Our income tax expense was computed at the federal corporate

income tax rate of 21% of taxable income and a blended state tax rate of 2.4%.

We have no significant nontaxable income or nondeductible

Capital Resources

The Company meets

the eligibility criteria to be classified as a small bank holding company in accordance with the Federal Reserve’s Small Bank Holding

Company Policy Statement issued in February 2015 and is therefore not obligated to report consolidated regulatory capital.

The Bank continues

to be subject to various capital requirements administered by banking agencies.

capital ratios along with the minimum regulatory thresholds to be considered well-capitalized are presented in Note 4 in Item 1 of this

As of September 30,

2025, the Bank remains well capitalized under the regulatory framework for prompt corrective action.

The ratios mentioned above for the

Bank comply with the Federal Reserve rules to align with the Basel III Capital requirements.

Book value per common

share was $3.37 and $2.99 as of September 30, 2025 and December 31, 2024, respectively.

The increase in book value was due largely to

net earnings for the year of $7.2 million combined with a decrease in the unrealized loss on available for sale investment securities,

net of the tax effects, for the year of $3.7 million, which more than offset the dividend payment of $0.08 per share and the repurchase

of common shares of $180,000 during the first nine months of 2025.

Other key performance

indicators are as follows:

Three months ended

September 30,

Nine months ended

September 30,

Tax Asset and Income Taxes

to timing differences between the book and tax treatments of several income and expense items, a net deferred tax asset, excluding the

deferred tax asset on the unrealized loss on securities available-for-sale of $2.3 million and $2.1 million, existed as of March 31,

2026 and December 31, 2025, respectively.

Our income tax expense was computed at the federal corporate income tax rate of 21% of taxable

income and a blended state tax rate of 1.95%.

We have no significant nontaxable income or non-deductible expenses.

Company meets the eligibility criteria to be classified as a small bank holding company in accordance with the Federal Reserve’s

Small Bank Holding Company Policy Statement issued in February 2015 and is therefore not obligated to report consolidated regulatory

The Bank continues to be subject to various capital requirements administered by banking agencies.

Bank’s capital ratios along with the minimum regulatory thresholds to be considered well-capitalized are presented in Note 4 in

Item 1 of this Form 10-Q.

of March 31, 2026, the Bank remains well capitalized under the regulatory framework for prompt corrective action.

The ratios mentioned

above for the Bank comply with the Federal Reserve rules to align with the Basel III Capital requirements.

value per common share was $3.53 and $3.52 as of March 31, 2026 and December 31, 2025, respectively.

The increase in book value was due

to net income of $3.1 million which was offset by dividends paid to shareholders of $2.1 million, the repurchase of common stock totaling

$41,000, and an increase in the unrealized loss on securities available for sale, net of the tax effects, of $639,000.

key performance indicators are as follows:

Return on average assets1

Return on average shareholders’ equity 1

Return on average shareholders’

Average equity to average assets

Under current economic

conditions, we believe it is prudent to continue to retain capital sufficient to support planned asset growth while being able to absorb

potential losses that may occur if asset quality deteriorates, and based upon projections, we believe our current capital levels will

be sufficient.

During the first

quarter of 2025, the Company paid a cash dividend of $0.08 per common share to our shareholders.

Future payments of cash dividends will

depend on a number of factors including but not limited to maintaining positive retained earnings, compliance with regulatory rules governing

the payment of dividends, strategic plans, and sufficient capital at the Bank to allow payment of dividends to the Company.

On April 28, 2022,

the board of directors of the Company authorized the repurchase of up to 500,000 shares of the Company’s outstanding common stock.

current economic conditions, we believe it is prudent to continue to retain capital sufficient to support planned asset growth while

being able to absorb potential losses that may occur if asset quality deteriorates, and based upon projections, we believe our current

capital levels will be sufficient.

the first quarter of 2026, the Company paid a cash dividend of $0.09 per common share to our shareholders.

Future payments of cash dividends

will depend on a number of factors including but not limited to maintaining positive retained earnings, compliance with regulatory rules

governing the payment of dividends, strategic plans, and sufficient capital at the Bank to allow payment of dividends to the Company.

April 28, 2022 the board of directors of the Company authorized the repurchase of up to 500,000 shares of the Company’s outstanding

common stock.

As previously reported, this plan was extended by the Board of Directors through March 31, 2027.

The actual means and timing of any purchases,

number of shares and prices or range of prices will be determined by the Company in its discretion and will depend on a number of factors,

including the market price of the Company’s common stock, general market and economic conditions, and applicable legal and regulatory

requirements.

As of September 30, 2025, the Company has repurchased 344,893 shares at an average price of $2.52 per share since inception

During the quarter ended September 30, 2025, the Company repurchased 23,685 shares at an average price of $3.07 per share.

The actual means and timing

of any purchases, number of shares and prices or range of prices will be determined by the Company in its discretion and will depend

on a number of factors, including the market price of the Company’s common stock, general market and economic conditions, and applicable

legal and regulatory requirements.

As of March 31, 2026, the Company has repurchased 366,569 shares at an average price of $2.57 per

share since inception of the plan.

During the quarter ended March 31, 2026, the Company repurchased 11,496 shares at an average price

of $3.55 per share.

There is no assurance that the Company will purchase any additional shares under this program.

We closely monitor

our liquidity and our liquid assets in the form of cash, due from banks, federal funds sold and unpledged available-for-sale investments.

Collectively, those balances were $141.1 million as of September 30, 2025, up from $128.5 million as of December 31, 2024.

is primarily due to deposit growth, including brokered certificates of deposit.

A surplus of short-term assets is maintained at levels

management deems adequate to meet potential liquidity needs

As of September 30,

2025, all of our investments are classified as available-for-sale, providing an additional source of liquidity in the amount of $35.8

million, which is net of the $60.4 million of securities pledged as collateral.

Generally, the investment portfolio serves as a source

of liquidity while yielding a higher return at the purchase date when compared to other short-term investment options such as federal

funds sold and overnight deposits with the Federal Reserve Bank of Richmond (the FRB).

Due to the unrealized loss on securities available-for-sale,

the sale of investments, other than shorter-term investments with minimal unrealized losses or more recently purchased investments, would

not be a main source of liquidity at this time due to the immediate impact on regulatory capital;

however, the majority of the portfolio

is considered high credit quality investments and would be available to pledge against borrowed funds.

Total investment securities increased

$169,000, or 0.24% annualized, during the first nine months of 2025 from $96.0 million as of December 31, 2024, to $96.2 million as of

September 30, 2025.

closely monitor our liquidity and our liquid assets in the form of cash, due from banks, federal funds sold and unpledged available-for-sale

Collectively, those balances were $158.0 million as of March 31, 2026, up from $141.0 million as of December 31, 2025.

increase is primarily due to deposit growth exceeding funding needs for loan growth.

A surplus of short-term assets is maintained at

levels management deems adequate to meet potential liquidity needs

of March 31, 2026, all of our investments are classified as available-for-sale, providing an additional source of liquidity in the amount

of $65.1 million, which is net of the $31.8 million of securities pledged as collateral.

Generally, the investment portfolio serves as

a source of liquidity while yielding a higher return at the purchase date when compared to other short-term investment options, such

as federal funds sold and overnight deposits with the Federal Reserve Bank of Richmond (the FRB).

Due to the unrealized loss on securities

available-for-sale, the sale of investments, other than shorter-term investments with minimal unrealized losses or more recently purchased

investments, would not be a main source of liquidity at this time due to the immediate impact on regulatory capital;

however, the majority

of the portfolio is considered high credit quality investments and would be available to pledge against borrowed funds.

Total investment

securities increased $427,000 during the first quarter of 2026 from $96.4 million as of December 31, 2025 to $96.9 million as of March

The Bank also has additional borrowing capacity on lines for which investments and certain loans are currently pledged.

Our loan to deposit

ratio was 88.48% and 87.67% as of September 30, 2025 and December 31, 2024, respectively.

Available third-party

sources of liquidity as of September 30, 2025 include the following:

loan to deposit ratio was 87.39% and 88.89% as of March 31, 2026 and December 31, 2025, respectively.

third-party sources of liquidity as of March 31, 2026 include the following:

a line of credit with the FHLB, access to brokered certificates

2 unchanged sentences

federal funds through credit facilities extended by correspondent banks.

We have used our

line of credit with the FHLB to issue letters of credit totaling $14.0 million to the Treasury Board of Virginia for collateral on public

have used our line of credit with the FHLB to issue letters of credit totaling $14.0 million to the Treasury Board of Virginia for collateral

on public funds.

No draws on these letters of credit have been issued.

The letters of credit are considered to be draws on our FHLB line of credit.

In May 2023, we borrowed $10.0 million from the FHLB, through a fixed rate 5-year advance, to support loan fundings and other general

liquidity needs;

and, in June 2025, we borrowed an additional

$5.0 million which was repaid in July 2025.

An additional $199.3 million was available as of September 30, 2025 on the $223.3 million

line of credit.

The letters of credit are considered to be draws on our FHLB line

In May 2023, we borrowed $10.0 million from the FHLB, through a fixed rate 5-year advance, to support loan fundings and other

general liquidity needs and prepaid $3 million of the outstanding balance in the fourth quarter of 2025;

and, in June 2025, we borrowed

an additional $5.0 million which was repaid in July 2025.

An additional $252.0 million was available as of March 31, 2026 on the $273.0

million line of credit.

Full use of the FHLB borrowing capacity would require the Company to pledge additional assets.

As of September 30,

2025, we held brokered time deposits of $8.0 million, an increase of $5.0 million from December 31, 2024.

These added brokered deposits

supplemented liquidity and supported loan closings and advances and bolstered on-balance-sheet liquidity.

Internet accounts are limited

to customers located in our primary market area and the surrounding geographical area.

of March 31, 2026 we held brokered time deposits of $8.0 million, unchanged from December 31, 2025.

Internet accounts are limited to

customers located in our primary market area and the surrounding geographical area.

The average balance of and the rate paid on deposits

1 unchanged sentence

Total reciprocal Certificate of Deposit Registry Services (“CDARS”)

time deposits were $7.9 million and $7.0 million as of September 30, 2025 and December 31, 2024, respectively.

time deposits were $7.7 million and $7.0 million as of March 31, 2026 and December 31, 2025, respectively.

Aside from the availability

of CDARS time deposits, we also offer a similar deposit product for transaction account customers through Intrafi Cash Service (“ICS”).

As of September 30, 2025, approximately $17.1 million were placed in this product as compared to $23.7 million at December 31, 2024.

Both the CDARS and ICS offerings assist us in maintaining deposit relationships, while assuring the depositors’ funds retain federal

As of March 31, 2026 approximately $16.3 million were placed in this product as compared to $16.1 million at December 31, 2025.

the CDARS and ICS offerings assist us in maintaining deposit relationships, while assuring the depositors’ funds retain federal

deposit insurance coverage.

Additional liquidity

is available through the Federal Reserve Bank discount window for overnight funding needs.

We may collateralize this line with investment

securities and loans at our discretion;

however, while we do not anticipate using this as a primary funding source, securities with an

estimated market value of $28.5 million were pledged as of September 30, 2025.

Time deposits of

$250,000 or more were approximately 6.55% of total deposits at September 30, 2025 and 6.84% of total deposits at December 31, 2024.

In January 2025,

we made a voluntary principal payment of $3.0 million on an outstanding trust preferred security.

We may consider making future principal

payments based on our available liquidity and considering other funding opportunities that may be available.

With the on-balance

sheet liquidity and other external sources of funding, we believe the Bank has adequate liquidity and capital resources to meet our requirements

and needs for the foreseeable future.

However, liquidity can be further affected by a number of factors such as counterparty willingness

or ability to extend credit, regulatory actions and customer preferences, some of which are beyond our control.

With the current economic

uncertainty resulting from inflation, the impact of proposed tariffs and the wars in Ukraine and Gaza, we continue monitoring our liquidity

position, specifically cash on hand in order to meet customer demands.

Additionally, our contingency funding plan is reviewed quarterly

with our Asset Liability Committee.

Off Balance Sheet Items and Contractual

There have been no

material changes during the nine months ended September 30, 2025 to the off-balance sheet items and the contractual obligations disclosed

in our 2024 Form 10-K.

and Qualitative Disclosures About Market Risk

Not Applicable.

liquidity is available through the Federal Reserve Bank discount window for overnight funding needs.

We may collateralize this line with

investment securities and loans at our discretion;

however, while we do not anticipate using this as a primary funding source, securities

with an estimated market value of $24.9 million were pledged as of March 31, 2026.

deposits of $250,000 or more were approximately 6.35% of total deposits at March 31, 2026 and 7.15% of total deposits at December 31,

January 2025, we made a voluntary principal payment of $3.0 million on an outstanding trust preferred security.

We may consider making

future principal payments based on our available liquidity and considering other funding opportunities that may be available.

the on-balance sheet liquidity and other external sources of funding, we believe the Bank has adequate liquidity and capital resources

to meet our requirements and needs for the foreseeable future.

However, liquidity can be further affected by a number of factors such

as counterparty willingness or ability to extend credit, regulatory actions and customer preferences, some of which are beyond our control.

Given continued economic uncertainty, the level of market interest rates, and potential impacts from proposed or enacted tariffs and

other trade restrictions, along with ongoing geopolitical conflicts than can contribute to energy price volatility and broader financial

market volatility, we continue monitoring our liquidity position, specifically cash on hand, and readily-available contingent funding

sources, in order to meet customer demands.

Additionally, our contingency funding plan is reviewed quarterly with our Asset Liability

Balance Sheet Items and Contractual Obligations

have been no material changes during the three months ended March 31, 2026, to the off-balance sheet items and the contractual obligations

disclosed in our 2025 Form 10-K.

Quantitative and

Qualitative Disclosures About Market Risk

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis