NEW PEOPLES BANKSHARES INC 10-Q

Item 1 Financial Statements NEW PEOPLES BANKSHARES, INC. CONSOLIDATED BALANCE SHEETS JUNE 30, 2026 AND DECEMBER 31, 2025 (IN THOUSANDS EXCEPT PER SHARE AND SHARE DATA) (UNAUDITED) June 30, December 31, 2026 2025 ASSETS Cash and due from banks $ 17,403 $ 13,849 Interest-bearing deposits with banks 66,060 63,109 Federal funds sold 850 252 Total cash and cash equivalents 84,313 77,210 Investment securities available-for-sale, at fair value 98,610 96,433 Restricted stock, at cost 2,636 2,598 Loans held for sale 1,334 — Loans receivable 732,260 709,587 Allowance for credit losses ( 8,215 ) ( 8,107 ) Net loans 724,045 701,480 Bank premises and equipment, net 15,961 16,400 Other real estate owned 225 89 Accrued interest receivable 3,751 3,451 Deferred taxes, net 4,110 3,895 Right-of-use assets – operating leases 2,759 2,998 Other assets 4,406 5,146 Total assets $ 942,150 $ 909,700 LIABILITIES Deposits: Noninterest bearing $ 242,549 $ 220,829 Interest-bearing 584,930 577,437 Total deposits 827,479 798,266 Borrowed funds 18,986 18,986 Lease liabilities – operating leases 2,759 2,998 Accrued interest payable 1,336 1,507 Accrued expenses and other liabilities 5,245 5,088 Total liabilities 855,805 826,845 SHAREHOLDERS’ EQUITY Common stock - $ 2.00 par value; 50,000,000 shares authorized; 23,539,312 and 23,567,013 shares issued and outstanding at June 30, 2026 and December 31, 2025, respectively 47,079 47,134 Additional paid-in-capital 14,335 14,378 Retained earnings 33,603 29,210 Accumulated other comprehensive loss ( 8,672 ) ( 7,867 ) Total shareholders’ equity 86,345 82,855 Total liabilities and shareholders’ equity $ 942,150 $ 909,700 The accompanying notes are an integral part of these consolidated financial statements. 3 NEW PEOPLES BANKSHARES, INC. CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2026 AND 2025 (IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA) (UNAUDITED) For the Three Months Ended June 30, For the Six Months Ended June 30, INTEREST AND DIVIDEND INCOME 2026 2025 2026 2025 Loans including fees $ 11,710 $ 10,540 $ 22,925 $ 20,452 Federal funds sold 4 3 8 5 Interest-earning deposits with banks 687 663 1,325 1,355 Investments 751 711 1,449 1,413 Dividends on equity securities (restricted) 36 41 78 84 Total interest and dividend income 13,188 11,958 25,785 23,309 INTEREST EXPENSE Deposits 3,544 3,450 7,078 6,899 Borrowed funds 249 294 495 586 Total interest expense 3,793 3,744 7,573 7,485 NET INTEREST INCOME 9,395 8,214 18,212 15,824 PROVISION FOR CREDIT LOSSES 63 154 303 413 NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 9,332 8,060 17,909 15,411 NONINTEREST INCOME Service charges and fees 889 899 1,726 1,776 Card processing and interchange 1,088 988 2,074 1,853 Financial services fees 329 356 748 674 Other noninterest income 214 193 602 546 Total noninterest income 2,520 2,436 5,150 4,849 NONINTEREST EXPENSES Salaries and employee benefits 3,885 3,652 7,769 7,450 Occupancy and equipment expense 873 874 1,764 1,858 Data processing and telecommunications 607 665 1,246 1,299 Other operating expenses 2,016 2,022 3,835 3,878 Total noninterest expenses 7,381 7,213 14,614 14,485 INCOME BEFORE INCOME TAXES 4,471 3,283 8,445 5,775 INCOME TAX EXPENSE 1,020 751 1,932 1,335 NET INCOME $ 3,451 $ 2,532 $ 6,513 $ 4,440 Earnings per share Basic and diluted $ 0.15 $ 0.11 $ 0.28 $ 0.19 Average Weighted Shares of Common Stock Basic and diluted 23,549,269 23,607,372 23,556,113 23,616,941 The accompanying notes are an integral part of these consolidated financial statements. 4 NEW PEOPLES BANKSHARES, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2026 AND 2025 (IN THOUSANDS) (UNAUDITED) For the Three Months Ended June 30, For the Six Months Ended June 30, 2026 2025 2026 2025 NET INCOME $ 3,451 $ 2,532 $ 6,513 $ 4,440 Other comprehensive income (loss): Investment securities activity Unrealized gains (losses) arising during the period ( 212 ) ( 280 ) ( 1,020 ) 2,099 Related tax (expense) benefit 46 58 215 ( 441 ) TOTAL OTHER COMPREHENSIVE INCOME (LOSS) ( 166 ) ( 222 ) ( 805 ) 1,658 TOTAL COMPREHENSIVE INCOME $ 3,285 $ 2,310 $ 5,708 $ 6,098 The accompanying notes are an integral part of these consolidated financial statements. 5 NEW PEOPLES BANKSHARES, INC. CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2026 AND 2025 (IN THOUSANDS INCLUDING SHARE DATA) (UNAUDITED) Shares of Common Stock Common Stock Additional Paid-in- Capital Retained Earnings Accumulated Other Comprehensive Loss Total Shareholders’ Equity Three Months Ended June 30, Balance, March 31, 2026 23,556 $ 47,111 $ 14,360 $ 30,152 $ ( 8,506 ) $ 83,117 Net income — — — 3,451 — 3,451 Other comprehensive loss, net of tax — — — — ( 166 ) ( 166 ) Repurchase of common stock ( 17 ) ( 32 ) ( 25 ) — — ( 57 ) Balance, June 30, 2026 23,539 $ 47,079 $ 14,335 $ 33,603 $ ( 8,672 ) $ 86,345 Balance, March 31, 2025 23,614 $ 47,228 $ 14,428 $ 21,020 $ ( 10,104 ) $ 72,572 Net income — — — 2,532 — 2,532 Other comprehensive loss, net of tax — — — — ( 222 ) ( 222 ) Repurchase of common stock ( 13 ) ( 26 ) ( 12 ) — — ( 38 ) Balance, June 30, 2025 23,601 $ 47,202 $ 14,416 $ 23,552 $ ( 10,326 ) $ 74,844 Six Months Ended June 30, Balance, December 31, 2025 23,567 $ 47,134 $ 14,378 $ 29,210 $ ( 7,867 ) $ 82,855 Net income — — — 6,513 — 6,513 Other comprehensive loss, net of tax — — — — ( 805 ) ( 805 ) Cash dividend declared ($0.09 per share) — — — ( 2,120 ) — ( 2,120 ) Repurchase of common stock ( 28 ) ( 55 ) ( 43 ) — — ( 98 ) Balance, June 30, 2026 23,539 $ 47,079 $ 14,335 $ 33,603 $ ( 8,672 ) $ 86,345 Balance, December 31, 2024 23,637 $ 47,273 $ 14,451 $ 21,001 $ ( 11,984 ) $ 70,741 Net income — — — 4,440 — 4,440 Other comprehensive income, net of tax — — — — 1,658 1,658 Cash dividend declared ($0.08 per share) — — — ( 1,889 ) — ( 1,889 ) Repurchase of common stock ( 36 ) ( 71 ) ( 35 ) — — ( 106 ) Balance, June 30, 2025 23,601 $ 47,202 $ 14,416 $ 23,552 $ ( 10,326 ) $ 74,844 The accompanying notes are an integral part of these consolidated financial statements. 6 NEW PEOPLES BANKSHARES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2026 AND 2025 (IN THOUSANDS) (UNAUDITED) 2026 2025 CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 6,513 $ 4,440 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 621 745 Provision for credit losses 303 413 Gain on sale of mortgage loans — ( 9 ) Gain on sale or disposal of premises and equipment ( 9 ) ( 2 ) Gain on sale of other real estate owned ( 37 ) ( 6 ) Loans originated for sale ( 112 ) ( 380 ) Proceeds from sales of loans originated for sale 112 389 Net amortization/accretion of bond premiums/discounts 34 37 Deferred tax benefit ( 2 ) — Net change in: Accrued interest receivable ( 300 ) ( 123 ) Other assets 683 ( 542 ) Accrued interest payable ( 171 ) ( 15 ) Accrued expenses and other liabilities 173 ( 102 ) Net cash provided by operating activities 7,808 4,845 CASH FLOWS FROM INVESTING ACTIVITIES Net increase in loans ( 24,386 ) ( 38,350 ) Purchase of securities available-for-sale ( 9,908 ) ( 4,770 ) Proceeds from repayments and maturities of securities available-for-sale 6,677 6,067 Net purchase of equity securities (restricted) ( 38 ) ( 258 ) Payments for the purchase of premises and equipment and software ( 123 ) ( 444 ) Proceeds from sale of premises and equipment 9 2 Proceeds from sale of other real estate owned 69 50 Proceeds from bank owned life insurance benefit — 5,417 Net cash used in investing activities ( 27,700 ) ( 32,286 ) CASH FLOWS FROM FINANCING ACTIVITIES Increase in short-term borrowings — 5,000 Repayment of long-term debt — ( 3,000 ) Net change in noninterest bearing deposits 21,720 8,629 Net change in interest-bearing deposits 7,493 23,298 Dividends paid ( 2,120 ) ( 1,889 ) Repurchase of common stock ( 98 ) ( 106 ) Net cash provided by financing activities 26,995 31,932 Net increase in cash and cash equivalents 7,103 4,491 Cash and cash equivalents, beginning of the period 77,210 67,668 Cash and cash equivalents, end of the period $ 84,313 $ 72,159 Supplemental disclosure of cash paid during the period for: Interest $ 7,744 $ 7,500 Taxes 1,931 880 Supplemental disclosure of non-cash transactions: Transfer of loans to other real estate owned 168 14 Change in unrealized losses on securities available-for-sale ( 1,020 ) 2,099 Transfer of loans receivable to loans held for sale 1,334 — The accompanying notes are an integral part of these consolidated financial statements. 7 NEW PEOPLES BANKSHARES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 NATURE OF OPERATIONS Nature of Operations – New Peoples Bankshares, Inc. (New Peoples or the Company) is a financial holding company whose principal activity is the ownership and management of a community bank, New Peoples Bank, Inc. (the Bank). New Peoples and the Bank are organized and incorporated under the laws of the Commonwealth of Virginia. As a state-chartered member bank, the Bank is subject to regulation by the Virginia Bureau of Financial Institutions, the Federal Deposit Insurance Corporation and the Board of Governors of the Federal Reserve System (the Federal Reserve). The Bank provides general banking services to individuals, small and medium-size businesses and the professional community of southwest Virginia, southern West Virginia, western North Carolina and northeastern Tennessee. These services include commercial and consumer loans along with traditional deposit products such as checking and savings accounts. NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES These consolidated financial statements conform to U. S. generally accepted accounting principles (GAAP) and to general industry practices. In the opinion of management, the accompanying consolidated financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the Company’s financial position as of June 30, 2026 and December 31, 2025, and the results of operations for the three- and six-month periods ended June 30, 2026 and 2025. The Notes included herein should be read in conjunction with the notes to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025. The results of operations for interim periods are not necessarily indicative of the results of operations that may be expected for a full year or any future period. The consolidated financial statements include New Peoples, the Bank, NPB Insurance Services, Inc., and NPB Web Services, Inc. (hereinafter, collectively referred to as the Company, we, us or our). All significant intercompany balances and transactions have been eliminated. In accordance with Accounting Standards Codification (ASC) 942, Financial Services – Depository and Lending, NPB Capital Trust I and 2 are not included in the consolidated financial statements. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The determination of the adequacy of the allowance for credit losses is based on estimates that are particularly susceptible to significant changes in the economic environment and market conditions. Certain reclassifications have been made to prior period amounts to conform to current period presentation. None of these reclassifications are considered material and have no impact on net income or shareholders’ equity. The Company’s significant accounting policies followed in the preparation of the unaudited consolidated financial statements are disclosed in the Company’s Annual report on Form 10-K. There have been no significant changes to the application of significant accounting policies since December 31, 2025, except for the following: Loans held for sale – Loans that management has decided to sell are transferred from loans held for investment to loans held for sale. Loans held for sale are carried at the lower of amortized cost or fair value, determined on an individual or aggregate basis, as applicable. Any amount by which amortized cost exceeds fair value at the date of transfer, and subsequent changes in the valuation allowance, are recognized in earnings. Loans classified as held for sale are not subject to the Company’s allowance for credit losses methodology applicable to loans held for investment. NOTE 3 EARNINGS PER SHARE Basic earnings per share computations are based on the weighted average number of shares outstanding during each period. Diluted earnings per share reflect the additional common shares that would have been outstanding if dilutive potential common shares had been issued. For the three- and six-month periods ended June 30, 2026 and 2025, there were no potential common shares. Basic and diluted net income per common share calculations follow: 8 Schedule of basic and diluted net loss per common share calculations (Dollars in thousands, except per share data) For the three months ended June 30, For the six months ended June 30, 2026 2025 2026 2025 Net income $ 3,451 $ 2,532 $ 6,513 $ 4,440 Weighted average shares outstanding 23,549,269 23,607,372 23,556,113 23,616,941 Weighted average dilutive shares outstanding 23,549,269 23,607,372 23,556,113 23,616,941 Basic and diluted earnings per share $ 0.15 $ 0.11 $ 0.28 $ 0.19 NOTE 4 CAPITAL Capital Requirements and Ratios Banks and bank holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action. To qualify as a “Small Bank Holding Company” under federal regulations, a bank must have consolidated assets of $3.0 billion or less. The primary benefit of being deemed a “Small Bank Holding Company” is the exemption from the requirement to maintain consolidated regulatory capital ratios; instead, regulatory capital ratios only apply at the subsidiary bank level. The final rules implementing Basel Committee on Banking Supervision’s capital guidelines for U.S. banks (BASEL III rules) became fully phased in on January 1, 2019. Under the BASEL III rules, the Bank must hold a capital conservation buffer above the adequately capitalized risk-based capital ratios. The capital conservation buffer required is 2.50%. At June 30, 2026, the Bank had a capital conservation buffer of 8.73%. Amounts recorded to accumulated other comprehensive income (loss) are not included in computing regulatory capital. Management believes as of June 30, 2026, the Bank met all capital adequacy requirements to which it was subject. Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. At June 30, 2026, the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the institution’s category. 9 The Bank’s actual capital amounts and ratios are presented in the following table as of June 30, 2026 and December 31, 2025, respectively. Schedule of bank’s actual capital amounts and ratios presented Actual Minimum Capital Requirement Minimum to Be Well Capitalized Under Prompt Corrective Action Provisions (Dollars in thousands) Amount Ratio Amount Ratio Amount Ratio June 30, 2026: Total capital to risk weighted assets $ 115,070 16.73 % $ 55,017 8.00 % $ 68,772 10.00 % Tier 1 capital to risk weighted assets 106,473 15.48 % 41,263 6.00 % 55,017 8.00 % Tier 1 capital to average assets 106,473 11.17 % 38,144 4.00 % 47,681 5.00 % Common equity Tier 1 capital to risk weighted assets 106,473 15.48 % 30,947 4.50 % 44,701 6.50 % December 31, 2025: Total capital to risk weighted assets $ 110,354 16.51 % $ 53,467 8.00 % $ 66,834 10.00 % Tier 1 capital to risk weighted assets 101,997 15.26 % 40,100 6.00 % 53,467 8.00 % Tier 1 capital to average assets 101,997 10.93 % 37,344 4.00 % 46,680 5.00 % Common equity Tier 1 capital to risk weighted assets 101,997 15.26 % 30,075 4.50 % 43,442 6.50 % NOTE 5 INVESTMENT SECURITIES The amortized cost and estimated fair value of available-for-sale (“AFS”) securities as of June 30, 2026 and December 31, 2025 are as follows: Schedule of securities amortized cost and estimated fair value Gross Gross Estimated Amortized Unrealized Unrealized Fair (Dollars in thousands) Cost Gains Losses Value June 30, 2026 U.S. Treasuries $ 6,077 $ — $ 150 $ 5,927 U.S. Government agencies 9,322 30 408 8,944 Municipal securities 24,193 2 4,505 19,690 Corporate bonds 2,500 2 123 2,379 Mortgage-backed securities 51,043 21 5,093 45,971 Collateralized mortgage obligations guaranteed 16,454 9 764 15,699 Total securities available-for-sale $ 109,589 $ 64 $ 11,043 $ 98,610 December 31, 2025 U.S. Treasuries $ 5,597 $ 16 $ 153 $ 5,460 U.S. Government agencies 9,482 49 372 9,159 Municipal securities 24,217 4 4,224 19,997 Corporate bonds 2,500 6 127 2,379 Mortgage-backed securities 50,742 134 4,797 46,079 Collateralized mortgage obligations guaranteed 13,854 70 565 13,359 Total securities available-for-sale $ 106,392 $ 279 $ 10,238 $ 96,433 10 The following table details unrealized losses and related fair values in the AFS portfolio. This information is aggregated by the length of time that individual securities have been in a continuous unrealized loss position as of June 30, 2026 and December 31, 2025. Schedule of fair value and gross unrealized losses on investment securities Less than 12 Months 12 Months or More Total (Dollars in thousands) Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses June 30, 2026 U.S. Treasuries $ 2,979 $ 20 $ 1,611 $ 130 $ 4,590 $ 150 U.S. Government agencies 2,100 18 5,358 390 7,458 408 Municipal securities 556 21 18,122 4,484 18,678 4,505 Corporate bonds — — 1,877 123 1,877 123 Mortgage-backed securities 8,082 124 32,270 4,969 40,352 5,093 Collateralized mortgage obligations guaranteed 9,774 119 3,299 645 13,073 764 Total $ 23,491 $ 302 $ 62,537 $ 10,741 $ 86,028 $ 11,043 December 31, 2025 U.S. Treasuries $ — $ — $ 4,444 $ 153 $ 4,444 $ 153 U.S. Government agencies 814 1 4,469 371 5,283 372 Municipal securities 946 110 18,036 4,114 18,982 4,224 Corporate bonds — — 1,873 127 1,873 127 Mortgage-backed securities 744 5 37,156 4,792 37,900 4,797 Collateralized mortgage obligations guaranteed 3,076 5 3,699 560 6,775 565 Total $ 5,580 $ 121 $ 69,677 $ 10,117 $ 75,257 $ 10,238 As of June 30, 2026, the available-for-sale portfolio included 211 investments for which the fair market value was less than amortized cost. As of December 31, 2025, the available-for-sale portfolio included 165 investments for which the fair market value was less than amortized cost. Management believes that all unrealized losses have resulted from temporary changes in the interest rates and current market conditions and are not a result of credit deterioration. Management does not plan to sell, and it is not likely that the Bank will be required to sell any of the securities referenced in the table above before recovery of their amortized cost. None of the individual securities are past due as to principal or interest payments and a number of these securities have explicit or implicit payment guarantees. The remaining securities have credit ratings at or above that necessary to be considered “bank qualified.” Investment securities with a carrying value of $ 29.8 million and $ 32.5 million as of June 30, 2026 and December 31, 2025, respectively, were pledged as collateral to secure public deposits and for other purposes required or permitted by law. There were no sales of available-for-sale investment securities during the three or six months ended June 30, 2026 and 2025. The amortized cost and fair value of investment securities as of June 30, 2026, by contractual maturity, are shown in the following schedule. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Schedule of amortized cost and fair value of investment securities contractual maturity Weighted (Dollars in thousands) Amortized Fair Average Securities Available-for-Sale Cost Value Yield Due in one year or less $ 3,435 $ 3,397 1.75 % Due after one year through five years 12,630 12,220 3.21 % Due after five years through ten years 32,935 30,697 2.90 % Due after ten years 60,589 52,296 2.73 % Total $ 109,589 $ 98,610 2.88 % The Bank, as a member bank of the Federal Reserve Bank of Richmond (“Federal Reserve Bank”) and the Federal Home Loan Bank of Atlanta (FHLB), is required to hold stock in each. The Bank also owns stock in CBB Financial Corp., which is a correspondent of the Bank. These equity securities are restricted from trading and are recorded at a cost of $ 2.6 million as of June 30, 2026 and December 31, 2025. The stock has no quoted market value and no ready market exists. When evaluating these securities for impairment, their value is determined based on the ultimate recoverability of the par value rather than by recognizing temporary declines in value. Equity securities are viewed as long-term investments and management believes the Company has the ability and the intent to hold these securities until their value is recovered. 11 NOTE 6 LOANS Loans receivable outstanding as of June 30, 2026, and December 31, 2025, are summarized as follows: Schedule of loans receivable outstanding (Dollars in thousands) June 30, 2026 December 31, 2025 Real estate secured: Commercial $ 253,872 $ 255,707 Construction and land development 53,645 42,826 Residential 1-4 family 254,109 252,624 Multifamily 51,044 45,964 Farmland 25,478 23,385 Total real estate loans 638,148 620,506 Commercial 58,699 53,175 Agriculture 4,566 4,384 Consumer installment and all other loans 30,847 31,522 Total loans $ 732,260 $ 709,587 Also included in total loans above are deferred loan fees of $ 2.3 million and $ 2.2 million as of June 30, 2026 and December 31, 2025, respectively. Deferred loan costs were $ 2.1 million as of June 30, 2026 and December 31, 2025. Income from net deferred fees and costs is recognized over the lives of the respective loans as a yield adjustment. If loans repay prior to scheduled maturities, any unamortized fees or costs are recognized at that time. During the second quarter of 2026, the Company transferred its $1.3 million credit card portfolio from loans held for investment to loans held for sale based on management’s decision to sell the portfolio. The loans were transferred at the lower of amortized cost or fair value, determined on an aggregate basis which resulted in no fair value writedown at the date of transfer. The sale of the portfolio is not expected to be finalized until 2027. Loans receivable on nonaccrual status as of June 30, 2026, and December 31, 2025, are summarized as follows: Schedule of loans receivable nonaccrual status June 30, 2026 December 31, 2025 With No Allowance With an Allowance Total With No Allowance With an Allowance Total (Dollars in thousands) Real estate secured: Commercial $ — $ — $ — $ — $ 415 $ 415 Construction and land development — 19 19 — 23 23 Residential 1-4 family 703 1,752 2,455 960 1,323 2,283 Farmland — 14 14 — 16 16 Total real estate loans 703 1,785 2,488 960 1,777 2,737 Commercial — 23 23 — 25 25 Agriculture 105 512 617 446 305 751 Consumer installment loans and other loans — 185 185 — 85 85 Total loans receivable on nonaccrual status $ 808 $ 2,505 $ 3,313 $ 1,406 $ 2,192 $ 3,598 12 The Company evaluates loans that do not share risk characteristics on an individual basis utilizing the collateral or discounted cash flow methods. The following table presents the unpaid principal balance of individually evaluated loans, by measurement method, and the related ACL allocated to those loans as of June 30, 2026 and December 31, 2025: Schedule of summary of impaired loans June 30, 2026 December 31, 2025 Unpaid Principal Balance Related Allowance Unpaid Principal Balance Related Allowance (Dollars in thousands) Collateral Dependent Loans Real estate secured: Commercial $ — $ — $ 408 $ 108 Residential 1-4 family 1,147 13 998 39 Total real estate loans 1,147 13 1,406 147 Agriculture 181 37 752 54 Total collateral dependent $ 1,328 $ 50 $ 2,158 $ 201 Discounted Cash Flow Method Agriculture $ 437 $ 91 $ — $ — Total DCF method $ 437 $ 91 $ — $ — Total individually evaluated $ 1,765 $ 141 $ 2,158 $ 201 During the second quarter of 2026, the Company began individually evaluating one agriculture loan relationship using the discounted cash flow method rather than the fair value of collateral. The borrower has ceased making payments and has filed for bankruptcy protection, and repayment is expected to occur through payments under the borrower’s bankruptcy plan over an extended period rather than through the operation or sale of collateral. Expected credit losses on this loan were measured as the difference between the loan’s amortized cost basis and the present value of estimated future cash flows, discounted at the loan’s effective interest rate. As of June 30, 2026, the loan had an unpaid principal balance of approximately $437,000, net of a $50,000 charge-off recorded during the prior year, and a related specific allowance for credit losses of approximately $91,000. The following table is an age analysis of past due loans receivable as of June 30, 2026, segregated by class: Schedule of analysis of past due loans receivable June 30, 2026 (Dollars in thousands) Loans 30-59 Days Past Due Loans 60-89 Days Past Due Loans 90 or More Days Past Due Total Past Due Loans Current Loans Total Loans Real estate secured: Commercial $ 55 $ — $ — $ 55 $ 253,817 $ 253,872 Construction and land development 169 — — 169 53,476 53,645 Residential 1-4 family 1,323 1,231 831 3,385 250,724 254,109 Multifamily — — — — 51,044 51,044 Farmland — — — — 25,478 25,478 Total real estate loans 1,547 1,231 831 3,609 634,539 638,148 Commercial 130 124 3 257 58,442 58,699 Agriculture — — 618 618 3,948 4,566 Consumer installment and all other loans 235 58 26 319 30,528 30,847 Total loans $ 1,912 $ 1,413 $ 1,478 $ 4,803 $ 727,457 $ 732,260 13 The following table is an age analysis of past due loans receivable as of December 31, 2025, segregated by class: December 31, 2025 (Dollars in thousands) Loans 30-59 Days Past Due Loans 60-89 Days Past Due Loans 90 or More Days Past Due Total Past Due Loans Current Loans Total Loans Real estate secured: Commercial $ 468 $ — $ 423 $ 891 $ 254,816 $ 255,707 Construction and land development — — — — 42,826 42,826 Residential 1-4 family 2,140 1,631 828 4,599 248,025 252,624 Multifamily — — — — 45,964 45,964 Farmland — — — — 23,385 23,385 Total real estate loans 2,608 1,631 1,251 5,490 615,016 620,506 Commercial 203 26 — 229 52,946 53,175 Agriculture 110 — 802 912 3,472 4,384 Consumer installment and all other loans 272 26 307 605 30,917 31,522 Total loans $ 3,193 $ 1,683 $ 2,360 $ 7,236 $ 702,351 $ 709,587 The Company categorizes loans receivable into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans receivable as to credit risk. The Company uses the following definitions for risk ratings: Pass - Loans in this category are considered to have a low likelihood of loss based on relevant information analyzed about the ability of the borrowers to service their debt and other factors. Special Mention - Loans in this category are currently protected but are potentially weak, including adverse trends in borrower’s operations, credit quality or financial strength. Those loans constitute an undue and unwarranted credit risk but not to the point of justifying a substandard classification. The credit risk may be relatively minor yet constitute an unwarranted risk in light of the circumstances. Special mention loans have potential weaknesses which may, if not checked or corrected, weaken the loan or inadequately protect the Company’s credit position at some future date. Substandard - A substandard loan is inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified as substandard must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt; they are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. Doubtful - Loans classified doubtful have all the weaknesses inherent in loans classified as substandard, plus the added characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions, and values highly questionable and improbable. 14 The following table presents the credit risk grade of loans by origination year as of June 30, 2026: Schedule of credit risk grade of loans As of June 30, 2026 (Dollars in thousands) 2026 2025 2024 2023 2022 Prior Revolving Total Commercial real estate Pass $ 13,266 $ 28,783 $ 21,670 $ 39,345 $ 41,729 $ 97,900 $ 11,179 $ 253,872 Total commercial real estate $ 13,266 $ 28,783 $ 21,670 $ 39,345 $ 41,729 $ 97,900 $ 11,179 $ 253,872 Current period gross charge-offs $ — $ — $ — $ — $ — $ ( 103 ) $ — $ ( 103 ) Construction and land development Pass $ 9,244 $ 16,507 $ 22,808 $ 478 $ 2,042 $ 2,091 $ 456 $ 53,626 Substandard — — 19 — — — — 19 Total construction and land development $ 9,244 $ 16,507 $ 22,827 $ 478 $ 2,042 $ 2,091 $ 456 $ 53,645 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — Residential 1-4 family Pass $ 14,432 $ 33,904 $ 17,556 $ 20,466 $ 21,749 $ 102,692 $ 40,566 $ 251,365 Special Mention — — — — — 458 — 458 Substandard 442 — — 71 241 1,368 164 2,286 Total residential 1-4 family $ 14,874 $ 33,904 $ 17,556 $ 20,537 $ 21,990 $ 104,518 $ 40,730 $ 254,109 Current period gross charge-offs $ — $ — $ ( 29 ) $ — $ — $ — $ — $ ( 29 ) Multifamily Pass $ 7,266 $ 18,078 $ 383 $ 2,121 $ 8,856 $ 13,348 $ 992 $ 51,044 Total multifamily $ 7,266 $ 18,078 $ 383 $ 2,121 $ 8,856 $ 13,348 $ 992 $ 51,044 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — Farmland Pass $ 1,165 $ 6,949 $ 2,404 $ 1,102 $ 1,751 $ 7,541 $ 4,443 $ 25,355 Special Mention — — — — — 109 — 109 Substandard — — — — — 14 — 14 Total farmland $ 1,165 $ 6,949 $ 2,404 $ 1,102 $ 1,751 $ 7,664 $ 4,443 $ 25,478 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — Commercial Pass $ 15,037 $ 11,264 $ 8,161 $ 5,445 $ 1,483 $ 3,357 $ 13,880 $ 58,627 Special Mention — — — — — 2 — 2 Substandard — 12 — 19 — 20 19 70 Total commercial $ 15,037 $ 11,276 $ 8,161 $ 5,464 $ 1,483 $ 3,379 $ 13,899 $ 58,699 Current period gross charge-offs $ — $ ( 51 ) $ ( 3 ) $ — $ — $ ( 19 ) $ ( 16 ) $ ( 89 ) Agriculture Pass $ 336 $ 501 $ 526 $ 90 $ 155 $ 47 $ 2,189 $ 3,844 Special Mention — — — 27 — — — 27 Substandard — 436 181 — — 78 — 695 Doubtful — — — — — — — — Total agriculture $ 336 $ 937 $ 707 $ 117 $ 155 $ 125 $ 2,189 $ 4,566 Current period gross charge-offs $ — $ — $ ( 117 ) $ — $ — $ — $ — $ ( 117 ) Consumer and all other Pass $ 7,294 $ 12,181 $ 6,014 $ 2,446 $ 817 $ 1,601 $ 332 $ 30,685 Substandard — 98 27 37 — — — 162 Total consumer and all other $ 7,294 $ 12,279 $ 6,041 $ 2,483 $ 817 $ 1,601 $ 332 $ 30,847 Current period gross charge-offs $ — $ ( 20 ) $ ( 34 ) $ ( 10 ) $ — $ ( 97 ) $ ( 11 ) $ ( 172 ) Total $ 68,482 $ 128,713 $ 79,749 $ 71,647 $ 78,823 $ 230,626 $ 74,220 $ 732,260 Total current period gross charge-offs $ — $ ( 71 ) $ ( 183 ) $ ( 10 ) $ — $ ( 219 ) $ ( 27 ) $ ( 510 ) 15 The following table presents the credit risk grade of loans by origination year as of December 31, 2025: As of December 31, 2025 (Dollars in thousands) 2025 2024 2023 2022 2021 Prior Revolving Total Commercial real estate Pass $ 33,892 $ 22,565 $ 43,005 $ 44,828 $ 42,021 $ 69,031 $ 358 $ 255,700 Substandard — — — — — 7 — 7 Total commercial real estate $ 33,892 $ 22,565 $ 43,005 $ 44,828 $ 42,021 $ 69,038 $ 358 $ 255,707 Current period gross charge-offs $ — $ — $ — $ ( 1 ) $ — $ — $ — $ ( 1 ) Construction and land development Pass $ 12,676 $ 21,666 $ 2,448 $ 2,113 $ 2,122 $ 1,778 $ 0 $ 42,803 Substandard — 23 — — — — — 23 Total construction and land development $ 12,676 $ 21,689 $ 2,448 $ 2,113 $ 2,122 $ 1,778 $ 0 $ 42,826 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — Residential 1-4 family Pass $ 35,441 $ 18,703 $ 24,178 $ 24,318 $ 35,543 $ 76,674 $ 34,842 $ 249,699 Special Mention — — — — — 476 — 476 Substandard — 104 197 50 — 2,020 78 2,449 Total residential 1-4 family $ 35,441 $ 18,807 $ 24,375 $ 24,368 $ 35,543 $ 79,170 $ 34,920 $ 252,624 Current period gross charge-offs $ — $ — $ ( 138 ) $ — $ — $ ( 1 ) $ — $ ( 139 ) Multifamily Pass $ 17,668 $ 1,464 $ 3,197 $ 9,874 $ 6,444 $ 7,317 $ — $ 45,964 Total multifamily $ 17,668 $ 1,464 $ 3,197 $ 9,874 $ 6,444 $ 7,317 $ — $ 45,964 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — Farmland Pass $ 9,005 $ 2,610 $ 1,142 $ 1,830 $ 2,641 $ 6,020 $ — $ 23,248 Special Mention — — — — — 121 — 121 Substandard — — — — — 16 — 16 Total farmland $ 9,005 $ 2,610 $ 1,142 $ 1,830 $ 2,641 $ 6,157 $ — $ 23,385 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — Commercial Pass $ 14,653 $ 10,852 $ 8,745 $ 2,628 $ 1,284 $ 3,106 $ 11,880 $ 53,148 Special Mention — — — — — 2 — 2 Substandard — — — — — — 25 25 Total commercial $ 14,653 $ 10,852 $ 8,745 $ 2,628 $ 1,284 $ 3,108 $ 11,905 $ 53,175 Current period gross charge-offs $ — $ ( 59 ) $ — $ — $ ( 23 ) $ ( 15 ) $ — $ ( 97 ) Agriculture Pass $ 1,437 $ 683 $ 162 $ 176 $ 104 $ 98 $ 942 $ 3,602 Special Mention — — — — — — 31 31 Substandard — — — — — — — — Doubtful — 305 — — — — 446 751 Total agriculture $ 1,437 $ 988 $ 162 $ 176 $ 104 $ 98 $ 1,419 $ 4,384 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ ( 50 ) $ ( 50 ) Consumer and all other Pass $ 16,111 $ 7,607 $ 3,599 $ 1,311 $ 845 $ 1,617 $ 372 $ 31,462 Substandard 18 30 10 2 — 0 — 60 Total consumer and all other $ 16,129 $ 7,637 $ 3,609 $ 1,313 $ 845 $ 1,617 $ 372 $ 31,522 Current period gross charge-offs $ ( 14 ) $ ( 47 ) $ ( 25 ) $ ( 5 ) $ ( 5 ) $ ( 280 ) $ — $ ( 376 ) Total $ 140,901 $ 86,612 $ 86,683 $ 87,130 $ 91,004 $ 168,283 $ 48,974 $ 709,587 Total current period gross charge-offs $ ( 14 ) $ ( 106 ) $ ( 163 ) $ ( 6 ) $ ( 28 ) $ ( 296 ) $ ( 50 ) $ ( 663 ) 16 NOTE 7 ALLOWANCE FOR CREDIT LOSSES FOR LOANS (“ACLL”) In determining the amount of our allowance for credit losses, we rely on an analysis of our loan portfolio, our experience and our evaluation of general economic conditions. If our assumptions prove to be incorrect, our current allowance may not be sufficient to cover future loan losses and we may experience significant increases to our provision. The following table presents a disaggregated analysis of activity in the allowance for credit losses for loans as of June 30, 2026 and June 30, 2025: Schedule of allowance for credit losses for loans Real estate secured (Dollars are in thousands) Commercial RE Construction and Land Development Residential 1-4 family Multifamily Farmland Commercial Agriculture Consumer and All Other Total Three months ended June 30, 2026 Beginning balance $ 2,772 $ 488 $ 2,834 $ 588 $ 179 $ 646 $ 37 $ 572 $ 8,116 Charge-offs — — ( 29 ) — — ( 51 ) — ( 92 ) ( 172 ) Recoveries 92 — 60 3 — 6 — 42 203 Provision for credit losses ( 182 ) 19 48 ( 16 ) 8 51 125 15 68 Ending balance $ 2,682 $ 507 $ 2,913 $ 575 $ 187 $ 652 $ 162 $ 537 $ 8,215 Real estate secured (Dollars are in thousands) Commercial RE Construction and Land Development Residential 1-4 family Multifamily Farmland Commercial Agriculture Consumer and All Other Total Three months ended June 30, 2025 Beginning balance $ 2,592 $ 316 $ 2,909 $ 372 $ 155 $ 771 $ 114 $ 603 $ 7,832 Charge-offs — — — — — — ( 50 ) ( 55 ) ( 105 ) Recoveries — 11 12 3 — 1 — 39 66 Provision for credit losses ( 31 ) 33 77 57 27 ( 35 ) ( 2 ) 29 155 Ending balance $ 2,561 $ 360 $ 2,998 $ 432 $ 182 $ 737 $ 62 $ 616 $ 7,948 Real estate secured (Dollars are in thousands) Commercial RE Construction and Land Development Residential 1-4 family Multifamily Farmland Commercial Agriculture Consumer and All Other Total Six months ended June 30, 2026 Beginning balance $ 2,856 $ 411 $ 2,799 $ 559 $ 166 $ 602 $ 82 $ 632 $ 8,107 Charge-offs ( 103 ) — ( 29 ) — — ( 89 ) ( 117 ) ( 172 ) ( 510 ) Recoveries 92 — 96 6 9 6 — 90 299 Provision for credit losses ( 163 ) 96 47 10 12 133 197 ( 13 ) 319 Ending balance $ 2,682 $ 507 $ 2,913 $ 575 $ 187 $ 652 $ 162 $ 537 $ 8,215 Real estate secured (Dollars are in thousands) Commercial RE Construction and Land Development Residential 1-4 family Multifamily Farmland Commercial Agriculture Consumer and All Other Total Six months ended June 30, 2025 Beginning balance $ 2,565 $ 322 $ 2,923 $ 382 $ 149 $ 751 $ 36 $ 556 $ 7,684 Charge-offs — — — — — ( 18 ) ( 50 ) ( 115 ) ( 183 ) Recoveries — 26 22 6 3 2 — 66 125 Provision for credit losses ( 4 ) 12 53 44 30 2 76 109 322 Ending balance $ 2,561 $ 360 $ 2,998 $ 432 $ 182 $ 737 $ 62 $ 616 $ 7,948 Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories. NOTE 8 MODIFICATIONS MADE TO BORROWERS EXPERIENCING FINANCIAL DIFFICULTY An assessment of whether a borrower is experiencing financial difficulty is made on the date of a modification. Because the effect of most modifications made to borrowers experiencing financial difficulty is already included in the allowance for credit losses because of the measurement methodologies used to estimate the allowance, a change to the allowance for credit losses is generally not recorded upon modification. Occasionally, the Company modifies loans by providing principal forgiveness on certain of its real estate loans. When principal forgiveness is provided, the amount of the principal forgiveness is deemed to be uncollectible; therefore, that portion of the loan is written off against the allowance for credit losses, resulting in a reduction of the amortized cost basis and a corresponding adjustment to the allowance for credit losses. 17 In some cases, the Company will modify a certain loan by providing multiple types of concessions. Typically, one type of concession, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another concession, such as principal forgiveness, may be granted. On February 15, 2025, severe flash flooding occurred in Tazewell and Buchanan, Counties in Virginia. On September 27, 2024, Hurricane Helene passed through western North Carolina, southwest Virginia and northeast Tennessee, causing flood and wind damage in its path. To assist borrowers impacted by these natural disasters, we offered short-term payment deferrals of 3 to 6 months. As of June 30, 2026, the deferral periods have ended, and 42 loans totaling $ 6.3 million that participated in the deferral program have commenced regular payments. As of December 31, 2025, 48 loans totaling $ 6.6 million were participating in the deferral program. One of these loans, a residential mortgage loan totaling $ 178,000 , received an additional 3-month deferral, due to the extent of damage to the property. The loan was settled in 2026. There were no loans modified to borrowers experiencing financial difficulties in the three and six-months ended June 30, 2026. NOTE 9 CREDIT ALLOWANCE FOR UNFUNDED COMMITMENTS The Company maintains a separate allowance for credit losses on off-balance-sheet credit exposures, including unfunded loan commitments, which is included in other liabilities on the consolidated balance sheet. The allowance for credit losses for off-balance-sheet credit exposures is adjusted through a provision for credit losses in the income statement. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over their estimated lives, utilizing the same models and approaches for the Company’s other loan portfolio segments described above, as these unfunded commitments share similar risk characteristics as its loan portfolio segments. The Company has identified the unfunded portion of certain lines of credit as unconditionally cancellable credit exposures, meaning the Company can cancel the unfunded commitment at any time, and those commitments are excluded from the credit loss estimate. As of June 30, 2026 and December 31, 2025, the liability for credit losses on off-balance-sheet credit exposures included in other liabilities was $ 455,000 and $ 471,000 , respectively. During the three and six months ended June 30, 2026, a recovery of losses on unfunded commitments of $ 5,000 and $ 16,000 , respectively, was included in the Provision for Credit Losses. During the three and six months ended June 30, 2025, a provision for losses on unfunded commitments of $ 0 and $ 92,000 , respectively, was included in the Provision for Credit Losses. NOTE 10 OTHER REAL ESTATE OWNED The following table summarizes the activity in other real estate owned for the six months ended June 30, 2026, and the year ended December 31, 2025: Schedule of activity in other real estate owned (Dollars in thousands) June 30, 2026 December 31, 2025 Balance, beginning of period $ 89 $ 87 Additions 168 46 Proceeds from sales ( 69 ) ( 50 ) Net gains from sales 37 6 Balance, end of period $ 225 $ 89 As of June 30, 2026 three loans secured by residential real estate, totaling $286,000 were in the process of foreclosure. NOTE 11 FAIR VALUES The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. In accordance with the Fair Value Measurements and Disclosures topic of Financial Accounting Standards Board (the FASB) ASC, the fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market and in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. 18 The fair value guidance provides a consistent definition of fair value, which focuses on exit price in the principal or most advantageous market and in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. If there has been a significant decrease in the volume and level of activity for the asset or liability, a change in valuation technique or the use of multiple valuation techniques may be appropriate. In such instances, determining the price at which willing market participants would transact at the measurement date under current market conditions depends on the facts and circumstances and requires the use of significant judgment. The fair value is a reasonable point within the range that is most representative of fair value under current market conditions. In accordance with this guidance, the Company groups its financial assets and financial liabilities generally measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. Level 1: Quoted prices are available in active markets for identical assets or liabilities as of the reported date. Level 2: Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reported date. The nature of these assets and liabilities include items for which quoted prices are available but traded less frequently, and items that are valued using other financial instruments, the parameters of which can be directly observed. Level 3: Assets and liabilities that have little to no pricing observability as of the reported date. These items do not have two-way markets and are measured using management’s best estimate of fair value, where the inputs into the determination of fair value require significant management judgment or estimation. A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy are as follows: Investment Securities Available-for-sale - Investment securities AFS are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices. The Company’s AFS securities, totaling $98.6 million and $96.4 million as of June 30, 2026 and December 31, 2025, respectively, are the only assets whose fair values are measured on a recurring basis using Level 2 inputs from an independent pricing service. Collateral Dependent Loans with an ACL - In accordance with ASC 326, we may determine that an individual loan exhibits unique risk characteristics which differentiate it from other loans within our loan pools. In such cases, the loans are evaluated for expected credit losses on an individual basis and excluded from the collective evaluation. Specific allocations of the allowance for credit losses are determined by analyzing the borrower’s ability to repay amounts owed, collateral deficiencies, the relative risk grade of the loan and economic conditions affecting the borrower’s industry, among other things. A loan is considered to be collateral dependent when, based upon management’s assessment, the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. In such cases, expected credit losses are based on the fair value of the collateral at the measurement date, adjusted for estimated selling costs if satisfaction of the loan depends on the sale of the collateral. We reevaluate the fair value of collateral supporting collateral dependent loans on a quarterly basis. The fair value of real estate collateral supporting collateral dependent loans is evaluated by appraisal services using a methodology that is consistent with the Uniform Standards of Professional Appraisal Practice. Other Real Estate Owned –Other real estate owned is adjusted to fair value upon transfer of the loans, or former bank premises, to other real estate owned. These assets are carried at the lower of their carrying value or fair value. Fair value is based upon observable market prices, when available, reduced by estimated disposition costs, which the Company considers to be nonrecurring Level 2 inputs. When observable market prices are not available, management determines the fair value of the foreclosed asset using independent third-party appraisals, evaluated to determine whether or not the property is further impaired below the appraised value, and adjusts for estimated costs of disposition. The Company records foreclosed assets as nonrecurring Level 3. 19 Assets and liabilities measured at fair value are as follows as of June 30, 2026 and December 31, 2025: Schedule of summary of assets and liabilities measured at fair value June 30, 2026 (Dollars in thousands) Quoted market price in active markets (Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3) (On a recurring basis) Available-for-sale investments U.S. Treasuries $ — $ 5,927 $ — U.S. Government agencies — 8,944 — Corporate bonds — 2,379 — Municipal securities — 19,690 — Mortgage-backed securities — 45,971 — Collateralized mortgage obligations – guaranteed — 15,699 — (On a non-recurring basis) Other real estate owned — — 225 Collateral dependent loans with ACL: Agriculture — — 40 Residential 1-4 Family — — 429 Total $ — $ 98,610 $ 694 December 31, 2025 (Dollars in thousands) Quoted market price in active markets (Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3) (On a recurring basis) Available-for-sale investments U.S. Treasuries $ — $ 5,460 $ — U.S. Government agencies — 9,159 — Corporate bonds — 2,379 — Municipal securities — 19,997 — Mortgage-backed securities — 46,079 — Collateralized mortgage obligations – guaranteed — 13,359 — (On a non-recurring basis) Other real estate owned — — 89 Collateral dependent loans with ACL: Agriculture — — 251 Commercial real estate — — 300 Total $ — $ 96,433 $ 640 Not included in the tables above as December 31, 2025 is a residential 1-4 family mortgage loan totaling $ 39,000 that had a specific allowance for credit loss allocation of 100% and was settled during the first six months of 2026. 20 For Level 3 assets measured at fair value on a recurring or non-recurring basis as of June 30, 2026 and December 31, 2025, the significant unobservable inputs used in the fair value measurements were as follows: Schedule of significant unobservable inputs In level 3 assets (Dollars in thousands) Fair Value at June 30, 2026 Fair Value at December 31, 2025 Valuation Technique Significant Unobservable Inputs General Range of Significant Unobservable Input Values Collateral dependent loans with ACL: Commercial real estate $ — $ 300 Appraised Value Discounts to reflect current market conditions, ultimate collectability, and estimated costs to sell 0 – 18 % Residential 1-4 Family $ 429 $ — Appraised Value Discounts to reflect current market conditions, ultimate collectability, and estimated costs to sell 0 – 18 % Agriculture $ 40 $ 251 Appraised Value/Other estimates from Independent Sources Discounts to reflect current market conditions, ultimate collectability, and estimated costs to sell 0 – 18 % Other Real Estate Owned $ 225 $ 89 Appraised Value/Comparable Sales/Other Estimates from Independent Sources Discounts to reflect current market conditions and estimated costs to sell 0 – 18 % Fair Value of Financial Instruments Fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practical to estimate the value is based upon the characteristics of the instruments and relevant market information. Financial instruments include cash, evidence of ownership in an entity, or contracts that convey or impose on an entity that contractual right or obligation to either receive or deliver cash for another financial instrument. The following summary presents the methodologies and assumptions used to estimate the fair value of the Company’s financial instruments presented below. The information used to determine fair value is highly subjective and judgmental in nature and, therefore, the results may not be precise. Subjective factors include, among other things, estimates of cash flows, risk characteristics, credit quality, and interest rates, all of which are subject to change. Since the fair value is estimated as of the balance sheet date, the amounts that will actually be realized or paid upon settlement or maturity on these various instruments could be significantly different. 21 The carrying amount and fair value of the Company’s financial instruments that are not required to be measured or reported at fair value on a recurring basis as of June 30, 2026, and December 31, 2025, are as follows: Schedule of estimated fair value of financial instruments Fair Value Measurements (Dollars in thousands) Carrying Amount Fair Value Quoted market price in active markets (Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3) June 30, 2026 Financial instruments – assets Net loans $ 724,045 $ 721,922 $ — $ — $ 721,922 Loans held for sale 1,334 1,367 — — 1,367 Financial instruments – liabilities Time deposits 287,978 287,544 — 287,544 — Borrowed funds 18,986 17,927 — 17,927 — December 31, 2025 Financial instruments – assets Net loans $ 701,480 $ 697,105 $ — $ — $ 697,105 Financial instruments – liabilities Time deposits 294,216 294,244 — 294,244 — Borrowed funds 18,986 17,132 — 17,132 — Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions can significantly affect the estimates. Estimated fair values have been determined by the Company using historical data, as generally provided in the Company’s regulatory reports, and an estimation methodology suitable for each category of financial instruments. The Company’s fair value estimates, methods and assumptions are set forth below for the Company’s other financial instruments. The carrying values of cash and due from banks, federal funds sold, deposits with no stated maturities, and accrued interest approximates fair value and are excluded from the table above. NOTE 12 LEASING ACTIVITIES As of June 30, 2026, the Bank leases four branch offices, one administrative office, one loan production office and sublets a lot adjacent to another branch office. The lease agreements have maturity dates ranging from 2028 to December 2041. It is assumed that there are currently no circumstances in which the leases would be terminated prior to expiration. The weighted average remaining life of the lease terms as of June 30, 2026 was 5.85 years. The discount rate used in determining the lease liability for each individual lease was the FHLB fixed advance rate which corresponded to the lease term for each transaction. This methodology is expected to be used for any other subsequent lease agreements. The weighted average discount rate for the leases as of June 30, 2026 was 3.34 %. For the three and six months ended June 30, 2026 and 2025, operating lease expenses were $ 148,000 and $ 295,000 ; and $ 145,000 and $ 288,000 , respectively. 22 The Company’s other operating leases were evaluated and determined to be immaterial to the financial statements. As of June 30, 2026, future minimum rental commitments under the non-cancellable operating leases discussed above are as follows (dollars are in thousands): Schedule of future minimum rental commitments under the non-cancellable operating leases 2026 $ 288 2027 599 2028 603 2029 492 2030 492 Thereafter 712 Total lease payments 3,186 Less: imputed interest ( 427 ) Total $ 2,759 NOTE 13 BORROWED FUNDS Borrowed funds totaled $ 18,986 and $ 18,986 as of June 30, 2026 and December 31, 2025, respectively. For additional information on borrowed funds, refer to Note 19 in Item 8 of Form 10-K for the year ended December 31, 2025. NOTE 14 REVENUE FROM CONTRACTS WITH CUSTOMERS All our revenue from contracts with customers as defined in ASC 606 is recognized within noninterest income. Refer to Note 25 in our Annual Report on Form 10-K for the year ended December 31, 2025 for a description of how each revenue stream is accounted for under ASC 606. The following table presents noninterest income by revenue stream for the three and six months ended June 30, 2026 and 2025: Schedule of revenue from contracts with customers For the three months ended For the six months ended June 30, June 30, (Dollars in thousands) 2026 2025 2026 2025 Service charges and fees $ 889 $ 899 $ 1,726 $ 1,776 Card processing and interchange income 1,088 988 2,074 1,853 Financial services fees 329 356 748 674 Other noninterest income 214 193 602 546 Total noninterest income $ 2,520 $ 2,436 $ 5,150 $ 4,849 NOTE 15 NONINTEREST EXPENSES Other operating expenses, included as part of noninterest expenses, consisted of the following for the periods presented: Schedule of noninterest expenses For the three months ended June 30, For the six months ended June 30, (Dollars in thousands) 2026 2025 2026 2025 Other operating expenses $ 990 $ 934 $ 1,903 $ 1,813 ATM network expense 403 417 780 845 Legal, accounting, and professional fees 254 234 468 471 Loan related expenses 51 175 127 254 FDIC insurance premiums 105 99 208 197 Advertising 113 89 176 156 Consulting fees 102 41 141 83 Printing and supplies 30 36 61 61 Other real estate owned expenses, net ( 32 ) ( 3 ) ( 29 ) ( 2 ) Total other operating expenses $ 2,016 $ 2,022 $ 3,835 $ 3,878 23 NOTE 16 RECENT ACCOUNTING DEVELOPMENTS The following is a summary of recent authoritative announcements: In November 2024, the Financial Accounting Standards Board (FASB) issued ASU 2024-03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses.” ASU 2024-03 requires public companies to disclose, in the notes to the financial statements, specific information about certain costs and expenses at each interim and annual reporting period. This includes disclosing amounts related to employee compensation, depreciation, and intangible asset amortization. In addition, public companies will need to provide qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively. The FASB subsequently issued ASU 2025-01, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date”, which amends the effective date of ASU 2024-03 to clarify that all public business entities are required to adopt the guidance in ASU 2024-03 in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption of ASU 2024-03 is permitted. Implementation of ASU 2024-03 may be applied prospectively or retrospectively. The Company does not expect the adoption of ASU 2024-03 to have a material impact on its consolidated financial statements. Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on the Company’s financial position, results of operations or cash flows. 24