NEW PEOPLES BANKSHARES INC 10-Q

Item 2. Management’s 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. 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: ● the success or failure of our efforts to implement our business plan; ● any required increase in our regulatory capital ratios; ● satisfying other regulatory requirements that may arise from examinations, changes in the law and other similar factors; ● deterioration of asset quality; ● changes in the level of our nonperforming assets and charge-offs; ● fluctuations of real estate values in our markets; ● our 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; ● changes in general economic and business conditions in our market area and the United States in general; ● credit 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; ● customer acceptance of new products and services we have offered or may offer; ● deposit flows and competition for deposits; ● the 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; ● the 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. and abroad; ● the 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; ● 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 or attacks; ● our ability to successfully manage cybersecurity, including generative artificial intelligence risks; ● our 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; ● our reliance on third-party vendors and correspondent banks; ● changes in generally accepted accounting principles; ● changes in governmental regulations, tax rates and similar matters; and, ● other risks, which may be described, from time to time, in our filings with the SEC. 24 Because 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. We expressly disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Critical Accounting Policies For 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. 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 Net 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. The 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. A 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. During the first quarter of 2026, we extended a previously announced stock repurchase program, to continue through March 31, 2027. Since the inception of the program through March 31, 2026, the Company has repurchased 366,569 shares at an average price of $2.57 per share. Comparison of the Three Months ended March 31, 2026 and 2025 Quarter-to-date highlights include: ● Returns 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; ● Net interest margin was 3.99% for the first quarter of 2026 compared to 3.69% for the first quarter of 2025; ● Net 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 $2.6 million, an increase of $217,000, or 8.99%, during the first quarter of 2026 compared to the first quarter of 2025; and ● Noninterest 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. During 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 of 2025. 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. 25 The following table shows the rates paid on earning assets and interest-bearing liabilities for the periods indicated: Net Interest Margin Analysis Average Balances, Income and Expense, and Yields and Rates Three Months Ended March 31 , 2026 2025 Average Income/ Yields/ Average Income/ Yields/ (Dollars are in thousands) Balance Expense Rates Balance Expense Rates ASSETS Loans (1) (2) $ 716,807 11,215 6.35 % $ 659,022 $ 9,912 6.10 % Federal funds sold 491 4 3.58 % 139 2 4.40 % Interest bearing deposits in other banks 71,064 638 3.64 % 64,406 692 4.36 % Securities (2) 108,027 740 2.74 % 111,306 745 2.68 % Total earning assets 896,389 12,597 5.69 % 834,873 11,351 5.51 % Less: Allowance for credit losses (8,175 ) (7,788 ) Non-earning assets 37,278 37,411 Total assets $ 925,492 $ 864,496 LIABILITIES AND SHAREHOLDERS’ EQUITY Interest-bearing demand deposits $ 74,258 112 0.61 % $ 72,394 $ 137 0.77 % Savings and money market deposits 216,113 941 1.77 % 186,941 779 1.69 % Time deposits 290,916 2,481 3.46 % 274,564 2,533 3.74 % Total interest-bearing deposits 581,287 3,534 2.47 % 533,899 3,449 2.62 % Other borrowings 7,000 61 3.51 % 10,000 88 3.51 % Trust preferred securities 11,986 185 6.18 % 12,186 204 6.69 % Total borrowed funds 18,986 246 5.19 % 22,186 292 5.26 % Total interest-bearing liabilities 600,273 3,780 2.55 % 556,085 3,741 2.73 % Non-interest-bearing deposits 230,875 227,045 Other liabilities 9,803 9,580 Total liabilities 840,951 792,710 Shareholders’ equity 84,541 71,786 Total liabilities and shareholders’ equity $ 925,492 $ 864,496 Net interest income $ 8,817 $ 7,610 Net interest margin 3.99 % 3.69 % Net interest spread 3.14 % 2.78 % (1) Nonaccrual loans and loans held for sale have been included in average loan balances. (2) Tax exempt income is not significant and has been treated as fully taxable. 26 Net interest income is affected by changes in both average interest rates and average volumes (balances) of interest-earning assets and interest-bearing liabilities. 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 March 31, 2026, as compared to the three months ended March 31, 2025. Volume and Rate Analysis Increase (decrease) Three Months Ended March 31, 2026 (Dollars in thousands) Volume Effect Rate Effect Change in Interest Income/ Expense Interest income: Loans $ 888 $ 415 $ 1,303 Federal funds sold 2 — 2 Interest bearing deposits in other banks 67 (121 ) (54 ) Taxable investment securities (22 ) 17 (5 ) Total earning assets 935 311 1,246 Interest expense: Interest-bearing demand deposits 4 (29 ) (25 ) Savings and money market deposits 124 38 162 Time deposits 145 (197 ) (52 ) Other borrowings (27 ) — (27 ) Trust preferred securities (3 ) (16 ) (19 ) Total interest-bearing liabilities 243 (204 ) 39 Change in net interest income $ 692 $ 515 $ 1,207 The 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 loans. 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. 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 $2.6 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. Noninterest 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. Occupancy 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. Other 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. The 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. Income 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 in 2025. 27 Balance Sheet Total 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 31, 2025. 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. Deposits 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. As a result, 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. As of March 31, 2026 and December 31, 2025, borrowed funds totaled $19.0 million. Capital During 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. 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, 2027. During the first quarter of 2026, the Company repurchased 11,496 shares at an average price of $3.55 per share. Since the commencement of the repurchase plan in 2022, 366,569 shares have been repurchased at an average price of $2.57 per share. Asset Quality The 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. The 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. Annualized 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. 28 Other 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. For 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. Loans 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, 2025. Total past due loans decreased to $6.1 million as of March 31, 2026 from $7.2 million as of December 31, 2025. 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. However, future provisions may be deemed necessary. 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: Selected Credit Ratios March 31, December 31, (Dollars in thousands) 2026 2025 Allowance for credit losses - loans $ 8,116 $ 8,107 Total loans 723,305 709,587 Allowance for credit losses to total loans 1.12 % 1.14 % Nonaccrual loans $ 3,131 $ 3,598 Nonaccrual loans to total loans 0.43 % 0.51 % Ratio of allowance for credit losses loans to nonaccrual loans 2.59 X 2.25 X Charge-offs net of recoveries $ 242 $ 316 Average loans $ 716,807 $ 689,104 Net charge-offs to average loans1 0.14 % 0.05 % 1 - Annualized 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, 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. 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. The 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. 29 As 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. Book 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. Other key performance indicators are as follows: Three months ended March 31, 2026 2025 Return on average assets1 1.34 % 0.90 % Return on average shareholders’ equity1 14.69 % 10.78 % Average equity to average assets 9.13 % 8.30 % 1 - Annualized 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 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. 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. 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 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. Liquidity 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 $158.0 million as of March 31, 2026, up from $141.0 million as of December 31, 2025. The 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 As 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 31, 2026. The Bank also has additional borrowing capacity on lines for which investments and certain loans are currently pledged. Our loan to deposit ratio was 87.39% and 88.89% as of March 31, 2026 and December 31, 2025, respectively. 30 Available third-party sources of liquidity as of March 31, 2026 include the following: a line of credit with the FHLB, access to brokered certificates of deposit markets and the discount window at the Federal Reserve Bank. We also have the ability to borrow $30.0 million in unsecured 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 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 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 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 is shown in the net interest margin analysis tables. Total reciprocal Certificate of Deposit Registry Services (“CDARS”) 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 March 31, 2026 approximately $16.3 million were placed in this product as compared to $16.1 million at December 31, 2025. Both 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 $24.9 million were pledged as of March 31, 2026. Time 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, 2025. 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. 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 Committee. Off Balance Sheet Items and Contractual Obligations There 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. Item 3. Quantitative and Qualitative Disclosures About Market Risk Not Applicable.