What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2026-05-07 compared with 2025-11-04 · 120 added, 323 removed, 598 unchanged (43% of the section changed)

2 unchanged sentences

Consolidated Balance Sheets

September 30, 2025 and December 31, 2024

March 31, 2026 and December 31, 2025

(Dollars in thousands)

September 30,

Cash and due from banks

8 unchanged sentences

Cash surrender value of life insurance

Other real estate

Right of use lease asset

3 unchanged sentences

Interest-bearing demand, MMDA & savings

Time, over $250,000

Time, $250,000 and over

Total deposits

10 unchanged sentences

authorized 20,000,000 shares;

issued and outstanding 5,459,441 shares at September 30, 2025 and 5,457,646 shares at December 31, 2024

issued and outstanding 5,461,490 shares at March 31, 2026 and 5,459,441 shares at December 31, 2025

Common stock held by deferred compensation trust, at cost;

150,423 shares at September 30, 2025 and 158,580 shares at December 31, 2024

151,721 shares at March 31, 2026 and 150,288 shares at December 31, 2025

Deferred compensation

6 unchanged sentences

Consolidated Statements of Earnings

Three and Nine Months Ended September 30, 2025 and 2024

Three Months Ended March 31, 2026 and 2025

(Dollars in thousands, except per share amounts)

Three months ended

Nine months ended

September 30,

Interest income:

6 unchanged sentences

Interest expense:

NOW, MMDA & savings deposits

Interest-bearing demand, MMDA & savings deposits

Time deposits

2 unchanged sentences

Net interest income

Provision for (recovery of) credit losses

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

Provision for credit losses

Net interest income after provision for credit losses

Non-interest income:

13 unchanged sentences

Appraisal management fee expense

Miscellaneous

Total non-interest expense

7 unchanged sentences

Consolidated Statements of Comprehensive Income

Three and Nine Months Ended September 30, 2025 and 2024

Three Months Ended March 31, 2026 and 2025

(Dollars in thousands)

Three months ended

Nine months ended

September 30,

Other comprehensive income :

Unrealized holding gains on securities available for sale

Reclassification adjustment for (gains) losses on securities available for sale included in net earnings

Total other comprehensive income, before income taxes

Income tax expense related to other comprehensive income:

Unrealized holding gains on securities available for sale

Reclassification adjustment for (gains) losses on on securities available for sale included in net earnings

Total income tax expense related to other comprehensive income

Unrealized holding gains (losses) on securities available for sale

Reclassification adjustment for losses on securities available for sale included in net earnings

Total other comprehensive income (loss), before income taxes

Income tax benefit related to other comprehensive income :

Unrealized holding gains (losses) on securities available for sale

Reclassification adjustment for losses on sales of securities available for sale included in net earnings

Reduction in state tax adjustment

Total income tax expense related to other comprehensive income (loss)

Total other comprehensive income, net of tax

3 unchanged sentences

Consolidated Statements of Changes in Shareholders' Equity

Three and Nine Months Ended September 30, 2025 and 2024

Three Months Ended March 31, 2026 and 2025

(Dollars in thousands)

Comprehensive

Income (Loss)

Balance, December 31, 2025

Restricted stock units vested

Cash dividends declared on common stock

Restricted stock units exercised

Cash dividends declared on common stock ($0.38 per share)

Equity incentive plan, net

State tax rate reduction

Other comprehensive income

Other comprehensive loss

Balance, March 31, 2026

Cash dividends declared on common stock

Equity incentive plan, net

Other comprehensive income

Balance, June 30, 2025

Cash dividends declared on common stock

Equity incentive plan, net

Other comprehensive income

Balance, September 30, 2025

Balance, December 31, 2024

Common stock repurchase

Cash dividends declared on common stock

Restricted stock units exercised

Cash dividends declared on common stock ($0.36 per share)

Equity incentive plan, net

1 unchanged sentence

Balance, March 31, 2025

Cash dividends declared on common stock

Restricted stock units vested

Equity incentive plan, net

Other comprehensive loss

Balance, June 30, 2024

Cash dividends declared on common stock

Equity incentive plan, net

Change in accumulated other comprehensive income, net of tax

Balance, September 30, 2024

See accompanying Notes to Consolidated Financial Statements.

1 unchanged sentence

Consolidated Statements of Cash Flows

Nine Months Ended September 30, 2025 and 2024

Three Months Ended March 31, 2026 and 2025

(Dollars in thousands)

Cash flows from operating activities:

Adjustments to reconcile net earnings to

net cash provided by operating activities:

Adjustments to reconcile net earnings to net cash provided by operating activities:

Depreciation, amortization and accretion

Provision for (recovery of) credit losses

Provision for credit losses

Deferred income taxes

Gain on sale of held for mortgage loans

(Gain)/loss on sale of investment securities net

Loss on sale of investment securities net

Write-down of premises and equipment

9 unchanged sentences

Cash flows from investing activities:

Purchases of investment securities available for sale

Proceeds from calls and maturities of investment securities available for sale

2 unchanged sentences

Proceeds from paydowns of other investment securities

Proceeds from DOT settlement receivable

Purchase of FHLB stock

1 unchanged sentence

Purchases of premises and equipment

Proceeds from bank owned life insurance

Proceeds from sale of other real estate and repossessions

Net cash used by investing activities

Net cash provided (used) by investing activities

Cash flows from financing activities:

Net change in deposits

Net change in securities sold under agreement to repurchase

Restricted stock units vested

Common stock repurchased

Restricted stock units exercised

Cash dividends paid on common stock

5 unchanged sentences

Consolidated Statements of Cash Flows, continued

Nine Months Ended September 30, 2025 and 2024

Three Months Ended March 31, 2026 and 2025

(Dollars in thousands)

3 unchanged sentences

Change in unrealized loss on investment securities available for sale, net

Initial recognition of lease right-of-use asset and lease liability

See accompanying Notes to Consolidated Financial Statements.

19 unchanged sentences

Many of the Company’s accounting policies require significant judgment regarding valuation of assets and liabilities and/or significant interpretation of the specific accounting guidance.

A description of the Company’s significant accounting policies can be found in Note 1 of the Notes to Consolidated Financial Statements in the Company’s 2024 Annual Report to Shareholders which is Appendix A to the Proxy Statement for the 2025 Annual Meeting of Shareholders.

A description of the Company’s significant accounting policies can be found in Note 1 of the Notes to Consolidated Financial Statements in the Company’s 2025 Annual Report to Shareholders, attached as Appendix A to the Proxy Statement for the 2026 Annual Meeting of Shareholders.

There have been no significant changes to the application of significant accounting policies since December 31, 2025.

Recent Accounting Pronouncements

The following table provides a summary of Accounting Standards Updates (“ASU’s”) issued by the Financial Accounting Standards Board (“FASB”) that the Company has not adopted as of September 30, 2025, which may impact the Company’s financial statements.

The following table provides a summary of Accounting Standards Updates (“ASU’s”) issued by the Financial Accounting Standards Board (“FASB”) that the Company has not adopted as of March 31, 2026, which may impact the Company’s financial statements.

Effective Date

Effect on Financial Statements or Other Significant Matters

ASU 2023-09 Income Taxes (Topic 740)

The ASU provides amendments to improve the transparency

of income tax disclosures.

Annual reporting periods after December 15, 2024.

The adoption of this guidance is not expected to have a material impact on the Company’s results of operations, financial position.

The adoption of this guidance is expected to have an immaterial impact on disclosures.

ASU 2024-03—Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40)

1 unchanged sentence

Annual reporting periods after December 15, 2026.

The adoption of this guidance is not expected to have a material impact on the Company’s results of operations, financial position.

The adoption of this guidance is not expected to have a material impact on the Company’s results of operations or financial position.

The adoption of this guidance is expected to have an immaterial impact on disclosures.

2 unchanged sentences

Annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027.

The adoption of this guidance is not expected to have a material impact on the Company’s results of operations, financial position.

The adoption of this guidance is not expected to have a material impact on the Company’s results of operations or financial position.

The adoption of this guidance is expected to have an immaterial impact on disclosures.

4 unchanged sentences

The Company’s only component of other comprehensive income is unrealized gains and losses, net of income tax, on investment securities available for sale.

The following table presents the changes in accumulated other comprehensive loss for the three and nine months ended September 30, 2025 and 2024:

The following table presents the changes in accumulated other comprehensive loss for the three months ended March 31, 2026 and 2025:

For the three months ended

For the nine months ended

(dollars in thousands)

September 30, 2025

September 30, 2024

September 30, 2025

September 30, 2024

March 31, 2026

March 31, 2025

Beginning balance

Other comprehensive income before reclassifications, net

Amounts reclassified from accumulated other comprehensive gains (loss), net

Other comprehensive gain (loss) before reclassifications, net

Amounts reclassified from accumulated other comprehensive loss, net

Reduction in state tax rate adjustment, net

Net current period other comprehensive income

Net current period other comprehensive gain (loss)

Ending balance

3 unchanged sentences

Shares held in the deferred compensation plan by the deferred compensation trust are excluded for purposes of calculating the weighted average number of shares outstanding and basic earnings per share in accordance with ASC 260-10-45-40 and ASC 260-10-45-45 through ASC 260-26010-45-46.

The reconciliation of the amounts used in the computation of both basic earnings per share and diluted earnings per share for the three and nine months ended September 30, 2025 and 2024 is as follows:

For the three months ended September 30, 2025

Net Earnings (Dollars in thousands)

Weighted Average Number of Shares

Per Share Amount

Basic earnings per share

Effect of dilutive securities:

Restricted stock units - unvested

Shares held in deferred comp plan

by deferred compensation trust

Diluted earnings per share

For the nine months ended September 30, 2025

Net Earnings (Dollars in thousands)

Weighted Average Number of Shares

Per Share Amount

Basic earnings per share

Effect of dilutive securities:

Restricted stock units - unvested

Shares held in deferred comp plan

by deferred compensation trust

Diluted earnings per share

For the three months ended September 30, 2024

The reconciliation of the amounts used in the computation of both basic earnings per share and diluted earnings per share for the three months ended March 31, 2026 and 2025 is as follows:

For the three months ended March 31, 2026

Net Earnings (Dollars in thousands)

Weighted Average Number of Shares

Per Share Amount

Basic earnings per share

1 unchanged sentence

Restricted stock units - unvested

Shares held in deferred comp plan

by deferred compensation trust

Shares held in deferred comp plan by deferred compensation trust

Diluted earnings per share

For the nine months ended September 30, 2024

Net Earnings (Dollars in thousands)

Weighted Average Number of Shares

Per Share Amount

For the three months ended March 31, 2025

Basic earnings per share

1 unchanged sentence

Restricted stock units - unvested

Shares held in deferred comp plan

by deferred compensation trust

Shares held in deferred comp plan by deferred compensation trust

Diluted earnings per share

(4) Investment Securities

Investment securities available for sale at September 30, 2025 and December 31, 2024 are as follows:

Investment securities available for sale at March 31, 2026 and December 31, 2025 are as follows:

(Dollars in thousands)

September 30, 2025

Amortized Cost

Gross Unrealized Gains

Gross Unrealized Losses

March 31, 2026

Government sponsored enterprises

4 unchanged sentences

December 31, 2025

Amortized Cost

Gross Unrealized Gains

Gross Unrealized Losses

Government sponsored enterprises

2 unchanged sentences

State and political subdivisions

The current fair value and associated unrealized losses on investments in securities with unrealized losses at September 30, 2025 and December 31, 2024 are summarized in the tables below, with the length of time the individual securities have been in a continuous loss position.

The current fair value and associated unrealized losses on investments in securities with unrealized losses at March 31, 2026 and December 31, 2025 are summarized in the tables below, with the length of time the individual securities have been in a continuous loss position.

(Dollars in thousands)

September 30, 2025

March 31, 2026

Less than 12 Months

12 Months or More

Unrealized Losses

government sponsored enterprises

4 unchanged sentences

December 31, 2025

Less than 12 Months

December 31, 2025

12 Months or More

Unrealized Losses

government sponsored enterprises

2 unchanged sentences

State and political subdivisions

At September 30, 2025, unrealized losses in the investment securities portfolio relating to debt securities totaled $ 38.4 million.

At March 31, 2026, unrealized losses in the investment securities portfolio relating to debt securities totaled $ 37.2 million.

The unrealized losses on these debt securities arose due to changing interest rates and are considered to be temporary.

From the September 30, 2025 table above, both of the U.S.

Treasury securities, all 108 of the securities issued by state and political subdivisions contained unrealized losses, all six of the securities issued by U.S.

From the March 31, 2026 table above, both of the U.S.

Treasury securities, all 110 of the securities issued by state and political subdivisions, all six of the securities issued by U.S.

Government sponsored enterprises (“GSE”), 111 of the 116 GSE mortgage-backed securities, and 13 of the 17 private label mortgage-backed securities contained unrealized losses.

The Company did not have any reserves on securities at September 30, 2025, as no credit related losses were identified in the Company’s September 30, 2025 analysis.

The Company did not have any reserves on securities at March 31, 2026, as no credit related losses were identified in the Company’s March 31, 2026 analysis.

At December 31, 2025, unrealized losses in the investment securities portfolio relating to debt securities totaled $ 35.6 million.

The unrealized losses on these debt securities arose due to changing interest rates and are considered to be temporary.

From the December 31, 2024 table above, both of the U.S.

Treasury securities, all 108 of the securities issued by state and political subdivisions contained unrealized losses, all seven of the securities issued by GSEs, 114 of the 119 GSE mortgage-backed securities, and 11 of the 16 private label mortgage-backed securities contained unrealized losses.

From the December 31, 2025 tables above, both of the U.S.

Treasury securities, all 108 of the securities issued by state and political subdivisions, all six of the securities issued by GSEs, 110 of the 116 GSE mortgage-backed securities, and 11 of the 17 private label mortgage-backed securities contained unrealized losses.

The Company did not have any reserves on securities at December 31, 2025, as no credit related losses were identified in the Company’s December 31, 2025 analysis.

The amortized cost and estimated fair value of investment securities available for sale, other than GSE mortgage-backed securities, at September 30, 2025, are shown below by contractual maturity.

The amortized cost and estimated fair value of investment securities available for sale, other than GSE mortgage-backed securities, at March 31, 2026, are shown below by contractual maturity.

Expected maturities of mortgage-backed securities will differ from contractual maturities because borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

September 30, 2025

March 31, 2026

(Dollars in thousands)

Amortized Cost

Due within one year

3 unchanged sentences

Mortgage-backed securities

No securities available for sale were sold during the three months ended September 30, 2025.

During the nine months ended September 30, 2025, proceeds from sales of securities available for sale were $ 12.7 million and resulted in gross losses of $ 47,000 and gross gains of $ 43,000 .

During the three and nine months ended September 30, 2024, proceeds from sales of securities available for sale were $ 11.7 million and resulted in gross gains of $ 33,000 and gross losses of $ 28,000 .

Securities with a fair value of approximately $ 36.4 million and $ 40.0 million at September 30, 2025 and December 31, 2024, respectively, were pledged to secure public deposits and for other purposes as required by law.

Major classifications of loans at September 30, 2025 and December 31, 2024 are summarized as follows:

No securities available for sale were sold during the three months ended March 31, 2026.

During the three months ended March 31, 2025, proceeds from sales of securities available for sale were $ 12.7 million and resulted in gross losses of $ 47,000 and gross gains of $ 43,000 .

Securities with a fair value of approximately $ 22.5 million and $ 40.7 million at March 31, 2026 and December 31, 2025, respectively, were pledged to secure public deposits and for other purposes as required by law.

Major classifications of loans at March 31, 2026 and December 31, 2025 are summarized as follows:

(Dollars in thousands)

September 30, 2025

December 31, 2024

Real estate loans:

6 unchanged sentences

Total net loans

The Bank makes loans and extensions of credit primarily within the Catawba Valley region of North Carolina, which encompasses Catawba, Alexander, Iredell and Lincoln counties and also in Mecklenburg, Wake, Rowan and Forsyth counties of North Carolina.

The above table includes deferred costs, net of deferred fees, totaling $ 405,000 and $ 569,000 at March 31, 2026 and March 31, 2025, respectively.

Although the Bank has a diversified loan portfolio, a substantial portion of the loan portfolio is collateralized by improved and unimproved real estate, the value of which is dependent upon the real estate market.

16 unchanged sentences

Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

The following tables present an age analysis of past due loans, by loan type, as of September 30, 2025 and December 31, 2024:

September 30, 2025

The following tables present an age analysis of past due loans, by loan type, as of March 31, 2026 and December 31, 2025:

March 31, 2026

(Dollars in thousands)

Loans 30-89 Days Past Due

Nonaccrual Loans

Total Past Due Loans

Total Current Loans

Accruing Loans 90 or More Days Past Due

Total Current

Real estate loans:

6 unchanged sentences

(Dollars in thousands)

Loans 30-89 Days Past Due

Nonaccrual Loans

Total Past Due Loans

Total Current Loans

Accruing Loans 90 or More Days Past Due

Total Current

Real estate loans:

4 unchanged sentences

Loans not secured by real estate:

The following table presents non-accrual loans as of September 30, 2025 and December 31, 2024:

September 30, 2025

Nonaccrual Loans

The following table presents non-accrual loans as of March 31, 2026 and December 31, 2025:

March 31, 2026

(Dollars in thousands)

6 unchanged sentences

December 31, 2025

Nonaccrual Loans

(Dollars in thousands)

5 unchanged sentences

Loans not secured by real estate:

No interest income was recognized on non-accrual loans for the nine months ended September 30, 2025 and 2024.

No interest income was recognized on non-accrual loans for the three months ended March 31, 2026 and 2025.

A loan may be individually evaluated for determining the allowance for credit losses when it is determined that it does not share similar risk characteristics with other assets.

Non-accrual loans with an outstanding balance of $ 250,000 or greater are individually evaluated and totaled $ 1.5 million and $ 1.6 million at September 30, 2025 and December 31, 2024, respectively.

Non-accrual loans evaluated collectively as a pool totaled $ 3.6 million and $ 2.8 million at September 30, 2025 and December 31, 2024, respectively.

Non-accrual loans with an outstanding balance of $ 250,000 or greater are individually evaluated and totaled $ 814,000 and $ 430,000 at March 31, 2026 and December 31, 2025, respectively.

Non-accrual loans evaluated collectively as a pool totaled $ 4.0 million and $ 3.7 million at March 31, 2026 and December 31, 2025, respectively.

Collateral dependent loans are loans for which the repayment is expected to be provided substantially through the operation or sale of the collateral and the borrower is experiencing financial difficulty.

3 unchanged sentences

Otherwise the difference between the balance and the collateral is charged off if deemed uncollectible.

The following table details the amortized cost of collateral dependent loans and any related allowance at September 30, 2025 and December 31, 2024.

September 30, 2025

The following table details the amortized cost of collateral dependent loans and any related allowance at March 31, 2026 and December 31, 2025.

March 31, 2026

December 31, 2025

2 unchanged sentences

(Dollars in thousands)

Amortized Cost

Credit Losses

Amortized Cost

Credit Losses

Real estate loans:

4 unchanged sentences

Loans not secured by real estate:

The following tables provide a breakdown of collateral dependent loans by collateral type and collateral coverage at September 30, 2025 and 2024.

These tables also show non-accrual loans not considered to be collateral dependent at September 30, 2025 and December 31, 2024.

September 30, 2025

Financial Assets

The following tables provide a breakdown of collateral dependent loans by collateral type and collateral coverage at March 31, 2026 and December 31, 2025.

These tables also show non-accrual loans not considered to be collateral dependent at March 31, 2026 and December 31, 2025.

March 31, 2026

(Dollars in thousands)

Financial Assets

Not Considered

8 unchanged sentences

December 31, 2025

Financial Assets

(Dollars in thousands)

Financial Assets

Not Considered

18 unchanged sentences

If the borrower continues to experience financial difficulty, another concession, such as principal forgiveness, may be granted.

No loans to borrowers experiencing financial difficulty were modified during the three months ended September 30, 2025.

The following table shows the amortized cost basis at September 30, 2024 of the loans to borrowers experiencing financial difficulty that were modified during the three months ended September 30, 2024, disaggregated by loan class and type of concession granted.

(Dollars in thousands)

Amortized Cost Basis at September 30, 2024

% of Loan Class

Modification Type

Financial Effect

Single-family residential

Interest rate reduction

HELOC converted to amortizing term loan

No loans to borrowers experiencing financial difficulty were modified during the nine months ended September 30, 2025.

The following table shows the amortized cost basis at September 30, 2024 of the loans to borrowers experiencing financial difficulty that were modified during the nine months ended September 30, 2024, disaggregated by loan class and type of concession granted.

(Dollars in thousands)

Amortized Cost Basis at September 30, 2024

% of Loan Class

Modification Type

Financial Effect

Single-family residential

Interest rate reduction and term extension

Adjustable rate loan converted to fixed rate loan and HELOC converted to amortizing term loan

Commercial not secured by real estate

Term extension

Line of credit converted to amortizing term loan

The Bank closely monitors the performance of those loans that are modified because borrowers are experiencing financial difficulty so as to understand the effectiveness of its modification efforts.

The following tables show the performance of loans that were modified in the nine months ended September 30, 2024.

September 30, 2024

(Dollars in thousands)

Payment Status (Amortized Cost Basis)

30 - 89 Days Past Due

90 + Days Past Due

Single-family residential

Commercial not secured by real estate

No loans to borrowers experiencing financial difficulty were modified during the three months ended March 31, 2026 and 2025.

Management uses several measures to assess and monitor the credit risks in the loan portfolio, including a loan grading system that begins upon loan origination and continues until the loan is collected or collectability becomes doubtful.

2 unchanged sentences

When originated or renewed, all loans over a certain dollar amount receive in-depth reviews and risk assessments by the Bank’s Credit Administration.

Before making any changes in these risk grades, management considers assessments as determined by an independent third-party credit review firm (as described below), regulatory examiners and the Bank’s Credit Administration.

Before making any changes in these risk grades, management considers assessments as determined by the third-party credit review firm (as described below), regulatory examiners and the Bank’s Credit Administration.

Any issues regarding the risk assessments are addressed by the Bank’s senior credit administrators and factored into management’s decision to originate or renew the loan.

8 unchanged sentences

The provision for credit losses charged or credited to earnings is based upon management’s judgment of the amount necessary to maintain the allowance at a level appropriate to absorb probable incurred losses in the loan portfolio at the balance sheet date.

The amount of the allowance, and any provision, is dependent upon many factors, including growth and changes in the composition of the loan portfolio, net charge-offs, delinquencies, management’s assessment of loan portfolio quality, the value of collateral, and other macro-economic factors and trends.

An evaluation of these factors is performed quarterly by management through an analysis of the appropriateness of the allowance.

The following tables present changes in the allowance for credit losses for the three and nine months ended September 30, 2025 and 2024.

The amount each quarter is dependent upon many factors, including growth and changes in the composition of the loan portfolio, net charge-offs, delinquencies, management’s assessment of loan portfolio quality, the value of collateral, and other macro-economic factors and trends.

The evaluation of these factors is performed quarterly by management through an analysis of the appropriateness of the allowance.

The following tables present changes in the allowance for credit losses for the three months ended March 31, 2026 and 2025.

(Dollars in thousands)

4 unchanged sentences

Consumer and All Other

Three months ended September 30, 2025

Allowance for credit losses:

Beginning balance

Provision (recovery) for

loan losses (1)

Ending balance

Allowance for credit loss-loans

Allowance for credit losses

loan commitments

Total allowance for credit losses

Nine months ended September 30, 2025

Three months ended March 31, 2026

Allowance for credit losses:

Beginning balance

Provision (recovery) for

loan losses (1)

Provision (recovery) for loan losses (1)

Ending balance

Allowance for credit loss-loans

Allowance for credit losses

loan commitments

Allowance for credit losses on unfunded loan commitments

Total allowance for credit losses

7 unchanged sentences

Consumer and All Other

Three months ended September 30, 2024

Allowance for credit losses:

Beginning balance

Provision (recovery) for

loan losses (1)

Ending balance

Allowance for credit loss-loans

Allowance for credit losses -

loan commitments

Total allowance for credit losses

Nine months ended September 30, 2024

Three months ended March 31, 2025

Allowance for credit losses:

Beginning balance

Provision (recovery) for

loan losses (1)

Provision (recovery) for loan losses (1)

Ending balance

Allowance for credit loss-loans

Allowance for credit losses -

loan commitments

Allowance for credit losses on unfunded loan commitments

Total allowance for credit losses

(1) Excludes provision for credit losses related to unfunded commitments.

Note 7,"Commitments and Contingencies" in the consolidated financial statements provides more detail concerning the provision for credit losses related to unfunded commitments.

Note 7,"Commitments and Contingencies" in the condensed consolidated financial statements provides more detail concerning the provision for credit losses related to unfunded commitments.

The Bank utilizes several credit quality indicators to manage credit risk in an ongoing manner.

10 unchanged sentences

This classification does not mean that the asset has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off this worthless loan even though partial recovery may be affected in the future.

The following table presents by credit quality indicator, loan class and year of origination, the amortized cost of the Bank’s loans as of September 30, 2025.

The following table presents by credit quality indicator, loan class and year of origination, the amortized cost of the Bank’s loans as of March 31, 2026.

Term Loans by Origination Year

(Dollars in thousands)

September 30, 2025

March 31, 2026

Real Estate Loans

7 unchanged sentences

Total real estate loans

Loans not secured by real estate Commercial

Loans not secured by real estate

Total Commercial

2 unchanged sentences

Total loans not secured by real estate

The following table presents by credit quality indicator, loan class and year of origination, gross loan charge-offs for the nine months ended September 30, 2025.

September 30, 2025

The following table presents by credit quality indicator, loan class and year of origination, gross loan charge-offs during the three months ended March 31, 2026.

March 31, 2026

Gross Loan Charge-offs by Origination Year

38 unchanged sentences

Total gross charge-offs

As of September 30, 2025, the Bank had operating right of use assets of $ 3.7 million and operating lease liabilities of $ 3.8 million.

As of March 31, 2026, the Bank had operating right of use assets of $ 3.3 million and operating lease liabilities of $ 3.4 million.

As of December 31, 2025, the Bank had operating right of use assets of $ 3.5 million and operating lease liabilities of $ 3.6 million.

1 unchanged sentence

Most leases include one option to renew, with renewal terms extending up to 15 years.

The exercise of renewal options is based on the judgment of management as to whether or not the renewal option is reasonably certain to be exercised.

The decision on whether to include lease extension/renewal periods in lease accounting calculations is based on the judgment of management as to whether or not a lease extension/renewal option is reasonably certain to be exercised.

Factors in determining whether an option is reasonably certain of exercise include, but are not limited to, the value of leasehold improvements, the value of renewal rates compared to market rates, and the presence of factors that would cause a significant economic penalty to the Bank if the option is not exercised.

Leases with a term of 12 months or less are not recorded on the balance sheet and instead are recognized in lease expense on a straight-line basis over the lease term.

The following table presents lease cost and other lease information as of September 30, 2025 and 2024.

The following table presents lease cost and other lease information as of March 31, 2026 and 2025.

(Dollars in thousands)

September 30, 2025

September 30, 2024

Operating lease cost

5 unchanged sentences

Weighted-average discount rate - operating leases

The following table presents lease maturities as of September 30, 2025.

The following table presents lease maturities as of March 31, 2026.

(Dollars in thousands)

Maturity Analysis of Operating Lease Liabilities:

September 30, 2025

Imputed Interest

22 unchanged sentences

The estimate includes consideration of the likelihood that funding will occur, which is based on a historical funding activity and an estimate of expected credit losses on commitments expected to be funded over its estimated life, which are the same loss rates that are used in computing the allowance for credit losses on loans.

The allowance for credit losses for unfunded loan commitments of $ 1.2 million and $ 1.1 million at September 30, 2025 and December 31, 2024, respectively, is separately classified on the balance sheet within Other Liabilities.

The following table presents the balance and activity in the allowance for credit losses for unfunded loan commitments for the three and nine months ended September 30, 2025 and 2024.

The allowance for credit losses for unfunded loan commitments of $ 1.6 million and $ 1.4 million at March 31, 2026 and December 31, 2025, respectively, is separately classified on the balance sheet within Other Liabilities.

The following table presents the balance and activity in the allowance for credit losses for unfunded loan commitments for the three months ended March 31, 2026 and 2025.

(Dollars in thousands)

For three months ended

For nine months ended

September 30, 2025

September 30, 2024

September 30, 2025

September 30, 2024

Beginning Balance

1 unchanged sentence

Ending balance

In 2023, the North Carolina Department of Transportation (“NCDOT”) acquired the Bank’s Mooresville branch office, situated on NC Highway 150 in Mooresville, NC through an eminent domain acquisition for the widening of NC Highway 150.

During the second quarter of 2023, the Bank received a $ 1.5 million payment from the NCDOT for this property, which was recorded as an offset to the net book value of the asset, resulting in a $ 191,000 gain during the second quarter of 2023.

Subsequently, the Bank spent considerable time and effort seeking additional monetary compensation for this property to more closely reflect the fair value of the property.

A September 2025 bench ruling in the Bank’s favor requires that the NCDOT pay the Bank a total of $5.1 million for this property, including the $1.5 million payment the Bank received in 2023 .

The formal written order for this ruling had not been received by the Bank as of September 30, 2025.

The Bank recorded $ 553,000 in legal expenses associated with the legal proceedings and a corresponding other payable for these fees as of September 30, 2025.

The Bank expects to realize an additional $ 3.6 million gain on the involuntarily disposal of this property upon receiving the formal written order from the court.

(8) Fair Value

42 unchanged sentences

In addition, the tax ramifications related to the realization of unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates.

The tables below present all financial instruments measured at fair value on a recurring basis by level within the fair value hierarchy, as of September 30, 2025 and December 31, 2024.

The tables below present all financial instruments measured at fair value on a recurring basis by level within the fair value hierarchy, as of March 31, 2026 and December 31, 2025.

(Dollars in thousands)

September 30, 2025

March 31, 2026

Fair Value Measurements

Level 1 Valuation

Level 2 Valuation

Level 3 Valuation

Available for sale securities:

Government sponsored enterprises

2 unchanged sentences

State and political subdivisions

Total available for sale securities

Mutual funds held in deferred compensation trust

1 unchanged sentence

December 31, 2025

Fair Value Measurements

Level 1 Valuation

Level 2 Valuation

Level 3 Valuation

Available for sale securities:

Government sponsored enterprises

2 unchanged sentences

State and political subdivisions

Total available for sale securities

Mutual funds held in deferred compensation trust

The fair value measurements for individually evaluated loans and other real estate on a non-recurring basis at September 30, 2025 and December 31, 2024 are presented below.

The fair value measurements for individually evaluated loans and other real estate on a non-recurring basis at March 31, 2026 and December 31, 2025 are presented below.

The fair value measurement process uses certified appraisals and other market-based information;

2 unchanged sentences

(Dollars in thousands)

Fair Value September 30, 2025

December 31, 2024

Valuation Technique

Significant Unobservable Inputs

General Range of Significant Unobservable Input Values

Unobservable Inputs

Individually evaluated loans

1 unchanged sentence

Discounts to reflect current market conditions and ultimate collectability

Other real estate

Appraised value

Discounts to reflect current market conditions and estimated costs to sell

The carrying amount and estimated fair value of financial instruments at September 30, 2025 and December 31, 2024 are as follows:

The carrying amount and estimated fair value of financial instruments at March 31, 2026 and December 31, 2025 are as follows:

(Dollars in thousands)

Fair Value Measurements at September 30, 2025

Fair Value Measurements at March 31, 2026

Carrying Amount

13 unchanged sentences

Mortgage loans held for sale

Mutual funds held in deferred compensation trust

Mutual funds held in deferred

compensation trust

Junior subordinated debentures

12 unchanged sentences

(Dollars in thousands)

As of and for the three months ended September 30, 2025

Interest income

Interest expense

Net interest income

Provision for (recovery of) credit losses

Noninterest income

Appraisal management fee income

Salaries and employee benefits

Appraisal management fee expense

Noninterest expense

Income tax expense (benefit)

Net income (loss)

As of and for the three months ended September 30, 2024

Interest income

Interest expense

Net interest income

Provision for (recovery of) credit losses

Noninterest income

Appraisal management fee income

Salaries and employee benefits

Appraisal management fee expense

Noninterest expense

Income tax expense (benefit)

Net income (loss)

As of and for the nine months ended September, 2025

As of and for the three months ended March 31, 2026

Interest income

9 unchanged sentences

Net income (loss)

As of and for the nine months ended September, 2024

As of and for the three months ended March 31, 2025

Interest income

1 unchanged sentence

Net interest income

Provision for (recovery of) credit losses

Provision for credit losses

Noninterest income

6 unchanged sentences

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

What changed 10-Q

Item 1. Financial Statements