PEOPLES BANCORP OF NORTH CAROLINA INC 10-Q

Item 1. Financial Statements PEOPLES BANCORP OF NORTH CAROLINA, INC. Consolidated Balance Sheets March 31, 2026 and December 31, 2025 (Dollars in thousands) March 31, December 31, Assets 2026 2025 (Unaudited) (Audited) Cash and due from banks $ 31,870 27,721 Interest-bearing deposits 29,386 30,384 Cash and cash equivalents 61,256 58,105 Investment securities available for sale 370,139 377,363 Other investments 2,604 2,595 Total securities 372,743 379,958 Mortgage loans held for sale 1,662 1,136 Loans 1,243,250 1,204,388 Less allowance for credit losses ( 10,458 ) ( 10,126 ) Net loans 1,232,792 1,194,262 Premises and equipment, net 14,133 14,162 Cash surrender value of life insurance 17,967 17,837 Right of use lease asset 3,302 3,477 Accrued interest receivable and other assets 30,623 33,211 Total assets $ 1,734,478 1,702,148 Liabilities and Shareholders' Equity Deposits: Noninterest-bearing demand $ 407,979 394,563 Interest-bearing demand, MMDA & savings 806,589 760,883 Time, $250,000 and over 143,219 160,389 Other time 182,770 193,390 Total deposits 1,540,557 1,509,225 Junior subordinated debentures 15,464 15,464 Lease liability 3,441 3,615 Accrued interest payable and other liabilities 16,899 16,726 Total liabilities 1,576,361 1,545,030 Commitments and Contingencies Shareholders' equity: Preferred stock, no par value; authorized 5,000,000 shares; no shares issued and outstanding - - Common stock, no par value; authorized 20,000,000 shares; issued and outstanding 5,461,490 shares at March 31, 2026 and 5,459,441 shares at December 31, 2025 48,782 48,708 Common stock held by deferred compensation trust, at cost; 151,721 shares at March 31, 2026 and 150,288 shares at December 31, 2025 ( 1,564 ) ( 1,510 ) Deferred compensation 1,564 1,510 Retained earnings 137,968 135,645 Accumulated other comprehensive loss ( 28,633 ) ( 27,235 ) Total shareholders' equity 158,117 157,118 Total liabilities and shareholders' equity $ 1,734,478 1,702,148 See accompanying Notes to Consolidated Financial Statements. 4 Table of Contents PEOPLES BANCORP OF NORTH CAROLINA, INC. Consolidated Statements of Earnings Three Months Ended March 31, 2026 and 2025 (Dollars in thousands, except per share amounts) 2026 2025 (Unaudited) (Unaudited) Interest income: Interest and fees on loans $ 17,473 16,016 Interest on due from banks 241 350 Interest on investment securities: U.S. Government sponsored enterprises 1,921 2,261 State and political subdivisions 694 694 Other 547 649 Total interest income 20,876 19,970 Interest expense: Interest-bearing demand, MMDA & savings deposits 2,887 2,652 Time deposits 2,669 3,133 Junior subordinated debentures 217 241 Total interest expense 5,773 6,026 Net interest income 15,103 13,944 Provision for credit losses 560 268 Net interest income after provision for credit losses 14,543 13,676 Non-interest income: Service charges 1,401 1,412 Other service charges and fees 178 186 Loss on sale of securities, net - ( 4 ) Mortgage banking income 135 27 Insurance and brokerage commissions 269 237 Appraisal management fee income 2,620 3,042 Miscellaneous 1,867 1,629 Total non-interest income 6,470 6,529 Non-interest expense: Salaries and employee benefits 7,246 6,788 Occupancy 2,307 2,028 Professional fees 680 507 Advertising 259 253 Debit card expense 426 236 FDIC insurance 194 189 Appraisal management fee expense 2,095 2,419 Other 2,158 2,153 Total non-interest expense 15,365 14,573 Earnings before income taxes 5,648 5,632 Income tax expense 1,250 1,287 Net earnings $ 4,398 4,345 Basic net earnings per share $ 0.83 0.82 Diluted net earnings per share $ 0.80 0.79 Cash dividends declared per share $ 0.38 0.36 See accompanying Notes to Consolidated Financial Statements. 5 Table of Contents PEOPLES BANCORP OF NORTH CAROLINA, INC. Consolidated Statements of Comprehensive Income Three Months Ended March 31, 2026 and 2025 (Dollars in thousands) 2026 2025 (Unaudited) (Unaudited) Net earnings $ 4,398 4,345 Other comprehensive income : Unrealized holding gains (losses) on securities available for sale ( 1,716 ) 7,270 Reclassification adjustment for losses on securities available for sale included in net earnings - 4 Total other comprehensive income (loss), before income taxes ( 1,716 ) 7,274 Income tax benefit related to other comprehensive income : Unrealized holding gains (losses) on securities available for sale 388 ( 1,656 ) Reclassification adjustment for losses on sales of securities available for sale included in net earnings - ( 1 ) Reduction in state tax adjustment ( 70 ) ( 99 ) Total income tax expense related to other comprehensive income (loss) 318 ( 1,756 ) Total other comprehensive income, net of tax ( 1,398 ) 5,518 Total comprehensive income $ 3,000 9,863 See accompanying Notes to Consolidated Financial Statements. 6 Table of Contents PEOPLES BANCORP OF NORTH CAROLINA, INC. Consolidated Statements of Changes in Shareholders' Equity Three Months Ended March 31, 2026 and 2025 (Dollars in thousands) Common Stock Held By Accumulated Deferred Other Common Stock Retained Deferred Compensation Comprehensive Shares Amount Earnings Compensation Trust Income (Loss) Total (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) Balance, December 31, 2025 5,459,441 $ 48,708 135,645 1,510 ( 1,510 ) ( 27,235 ) 157,118 Restricted stock units exercised 2,049 74 - - - - 74 Cash dividends declared on common stock ($0.38 per share) - - ( 2,075 ) - - - ( 2,075 ) Equity incentive plan, net - - - 54 ( 54 ) - - Net earnings - - 4,398 - - - 4,398 Other comprehensive loss - - - - - ( 1,398 ) ( 1,398 ) Balance, March 31, 2026 5,461,490 $ 48,782 137,968 1,564 ( 1,564 ) ( 28,633 ) 158,117 Balance, December 31, 2024 5,457,646 $ 48,658 121,062 1,757 ( 1,757 ) ( 39,157 ) 130,563 Restricted stock units exercised 1,795 50 - - - - 50 Cash dividends declared on common stock ($0.36 per share) - - ( 1,968 ) - - - ( 1,968 ) Equity incentive plan, net - - - 85 ( 85 ) - - Net earnings - - 4,345 - - - 4,345 Other comprehensive income - - - - - 5,518 5,518 Balance, March 31, 2025 5,459,441 $ 48,708 123,439 1,842 ( 1,842 ) ( 33,639 ) 138,508 See accompanying Notes to Consolidated Financial Statements. 7 Table of Contents PEOPLES BANCORP OF NORTH CAROLINA, INC. Consolidated Statements of Cash Flows Three Months Ended March 31, 2026 and 2025 (Dollars in thousands) 2026 2025 (Unaudited) (Unaudited) Cash flows from operating activities: Net earnings $ 4,398 4,345 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation, amortization and accretion 653 678 Provision for credit losses 560 268 Deferred income taxes 71 786 Gain on sale of held for mortgage loans ( 110 ) ( 32 ) Loss on sale of investment securities net - 4 Write-down of premises and equipment - 31 Gain on sale of other real estate - ( 17 ) Restricted stock expense ( 59 ) ( 27 ) Proceeds from sales of mortgage loans held for sale 6,242 1,564 Origination of mortgage loans held for sale ( 6,658 ) ( 709 ) Cash surrender value of life insurance ( 130 ) ( 121 ) Change in: Right of use lease asset 175 182 Other assets 174 ( 1,295 ) Lease liability ( 174 ) ( 178 ) Other liabilities ( 114 ) 445 Net cash provided by operating activities 5,028 5,924 Cash flows from investing activities: Proceeds from calls and maturities of investment securities available for sale - 12,733 Proceeds from sales of investment securities available for sale - 3,000 Proceeds from paydowns of investment securities available for sale 5,321 4,959 Proceeds from paydowns of other investment securities 35 123 Proceeds from DOT settlement receivable 3,009 - Purchase of FHLB stock ( 35 ) ( 11 ) Net change in loans ( 39,090 ) ( 13,892 ) Purchases of premises and equipment ( 448 ) ( 763 ) Proceeds from sale of other real estate and repossessions - 261 Net cash provided (used) by investing activities ( 31,208 ) 6,410 Cash flows from financing activities: Net change in deposits 31,332 32,838 Restricted stock units exercised 74 50 Cash dividends paid on common stock ( 2,075 ) ( 1,968 ) Net cash provided by financing activities 29,331 30,920 Net change in cash and cash equivalents 3,151 43,254 Cash and cash equivalents at beginning of period 58,105 59,266 Cash and cash equivalents at end of period $ 61,256 102,520 8 Table of Contents PEOPLES BANCORP OF NORTH CAROLINA, INC. Consolidated Statements of Cash Flows, continued Three Months Ended March 31, 2026 and 2025 (Dollars in thousands) 2026 2025 (Unaudited) (Unaudited) Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 5,865 6,025 Income taxes $ - 352 Noncash investing and financing activities: Change in unrealized loss on investment securities available for sale, net $ ( 1,398 ) 5,518 See accompanying Notes to Consolidated Financial Statements. 9 Table of Contents PEOPLES BANCORP OF NORTH CAROLINA, INC. Notes to Consolidated Financial Statements ( Unaudited ) (1) Summary of Significant Accounting Policies The Consolidated Financial Statements include the financial statements of Peoples Bancorp of North Carolina, Inc. (the “Company”) and its wholly owned subsidiary, Peoples Bank (the “Bank”), along with the Bank’s wholly owned subsidiaries, Peoples Investment Services, Inc. (“PIS”), Real Estate Advisory Services, Inc. (“REAS”), Community Bank Real Estate Solutions, LLC (“CBRES”) and PB Real Estate Holdings, LLC. All significant intercompany balances and transactions have been eliminated in consolidation. In June 2006, the Company formed a wholly owned Delaware statutory trust, PEBK Capital Trust II (“PEBK Trust II”), to facilitate the issuance of $20.6 million of trust preferred securities . PEBK Trust II is not included in the Consolidated Financial Statements. The Consolidated Financial Statements in this report (other than the Consolidated Balance Sheet at December 31, 2025) are unaudited. In the opinion of management, all adjustments necessary for a fair presentation of the financial position and results of operations for the periods presented have been included. Management has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these Consolidated Financial Statements in conformity with generally accepted accounting principles in the United States (“GAAP”). Actual results could differ from those estimates. Operating segments are components of an enterprise about which separate financial information is available that is evaluated regularly by management in deciding how to allocate resources and in assessing performance. Management has determined that the Company has two significant operating segment: Banking Operations and CBRES, as discussed more fully in Note 9. In determining the appropriateness of segment definition, the Company considers the criteria of Accounting Standards Codification (“ASC”) 280, Segment Reporting. The Company’s accounting policies are fundamental to understanding management’s discussion and analysis of results of operations and financial condition. 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 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 March 31, 2026, which may impact the Company’s financial statements. ASU Description Effective Date Effect on Financial Statements or Other Significant Matters ASU 2024-03—Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40) The ASU requires disaggregated disclosure of income statement expenses for public business entities (PBEs). 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 or financial position. The adoption of this guidance is expected to have an immaterial impact on disclosures. ASU 2025-01, Income Statement—Reporting Comprehensive Income— Expense Disaggregation Disclosures (Subtopic 220- 40) The ASU clarifies that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. 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 or financial position. The adoption of this guidance is expected to have an immaterial impact on disclosures. Other accounting standards that have been issued or proposed by FASB or other standards-setting bodies are not expected to have a material impact on the Company’s results of operations, financial position or disclosures. 10 Table of Contents (2) Comprehensive Income The Company reports as comprehensive income all changes in shareholders’ equity during the year from sources other than shareholders. Other comprehensive income refers to all components (revenues, expenses, gains, and losses) of comprehensive income that are excluded from net income. 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 months ended March 31, 2026 and 2025: For the three months ended (dollars in thousands) March 31, 2026 March 31, 2025 Beginning balance $ ( 27,235 ) $ ( 39,157 ) Other comprehensive gain (loss) before reclassifications, net ( 1,328 ) 5,614 Amounts reclassified from accumulated other comprehensive loss, net - 3 Reduction in state tax rate adjustment, net ( 70 ) ( 99 ) Net current period other comprehensive gain (loss) ( 1,398 ) 5,518 Ending balance $ ( 28,633 ) $ ( 33,639 ) (3) Net Earnings Per Share Net earnings per share is based on the weighted average number of shares outstanding during the period while the effects of potential shares outstanding during the period are included in diluted earnings per share. The average market price during the applicable period is used to compute equivalent shares. 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 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 $ 4,398 5,310,478 $ 0.83 Effect of dilutive securities: Restricted stock units - unvested 8,770 Shares held in deferred comp plan by deferred compensation trust 151,005 Diluted earnings per share $ 4,398 5,470,253 $ 0.80 For the three months ended March 31, 2025 Net Earnings (Dollars in thousands) Weighted Average Number of Shares Per Share Amount Basic earnings per share $ 4,345 5,299,155 $ 0.82 Effect of dilutive securities: Restricted stock units - unvested 10,354 Shares held in deferred comp plan by deferred compensation trust 160,130 Diluted earnings per share $ 4,345 5,469,639 $ 0.79 11 Table of Contents (4) Investment Securities Investment securities available for sale at March 31, 2026 and December 31, 2025 are as follows: (Dollars in thousands) March 31, 2026 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value U.S. Treasuries $ 7,989 - 383 7,606 U.S. Government sponsored enterprises 5,134 - 332 4,802 GSE - Mortgage-backed securities 223,911 122 16,279 207,754 Private label mortgage-backed securities 40,791 54 716 40,129 State and political subdivisions 129,298 - 19,450 109,848 Total $ 407,123 176 37,160 370,139 (Dollars in thousands) December 31, 2025 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value U.S. Treasuries $ 7,987 - 378 7,609 U.S. Government sponsored enterprises 5,545 - 343 5,202 GSE - Mortgage-backed securities 227,161 202 15,447 211,916 Private label mortgage-backed securities 42,575 153 666 42,062 State and political subdivisions 129,363 - 18,789 110,574 Total $ 412,631 355 35,623 377,363 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) March 31, 2026 Less than 12 Months 12 Months or More Total Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses U.S. Treasuries $ - - 7,606 383 7,606 383 U.S. government sponsored enterprises - - 4,802 332 4,802 332 GSE -Mortgage-backed securities 18,251 334 183,499 15,945 201,750 16,279 Private label mortgage-backed securities 17,399 73 15,489 643 32,888 716 State and political subdivisions 1,773 241 108,075 19,209 109,848 19,450 Total $ 37,423 648 319,471 36,512 356,894 37,160 (Dollars in thousands) December 31, 2025 December 31, 2025 12 Months or More Total Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses U.S. Treasuries $ - - 7,609 378 7,609 378 U.S. government sponsored enterprises - - 5,202 343 5,202 343 GSE -Mortgage-backed securities 12,247 183 188,092 15,264 200,339 15,447 Private label mortgage-backed securities 14,156 28 15,858 638 30,014 666 State and political subdivisions - - 110,573 18,789 110,573 18,789 Total $ 26,403 211 327,334 35,412 353,737 35,623 12 Table of Contents 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 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 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, 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 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. March 31, 2026 (Dollars in thousands) Amortized Cost Fair Value Due within one year $ 4,889 4,910 Due from one to five years 35,640 33,466 Due from five to ten years 73,773 62,461 Due after ten years 68,910 61,548 Mortgage-backed securities 223,911 207,754 Total $ 407,123 370,139 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. (5) Loans Major classifications of loans at March 31, 2026 and December 31, 2025 are summarized as follows: (Dollars in thousands) March 31, 2026 December 31, 2025 Real estate loans: Construction and land development $ 127,448 124,089 Single-family residential 416,208 403,992 Commercial 538,546 525,099 Multifamily and farmland 73,361 73,361 Total real estate loans 1,155,563 1,126,541 Loans not secured by real estate: Commercial 64,183 63,035 Farm 273 318 Consumer 15,160 6,260 All other 8,071 8,234 Total loans 1,243,250 1,204,388 Less allowance for credit losses ( 10,458 ) ( 10,126 ) Total net loans $ 1,232,792 1,194,262 13 Table of Contents 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. 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, Rowan and Forsyth counties of North Carolina. 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. Risk characteristics of the major components of the Bank’s loan portfolio are discussed below: · Construction and land development loans – The risk of loss is largely dependent on the initial estimate of whether the property’s value at completion equals or exceeds the cost of property construction and the availability of take-out financing. During the construction phase, a number of factors can result in delays or cost overruns. If the estimate is inaccurate or if actual construction costs exceed estimates, the value of the property securing the loan may be insufficient to ensure full repayment when completed through a permanent loan, sale of the property, or by seizure of collateral. · Single-family residential loans – Declining home sales volumes, decreased real estate values and higher than normal levels of unemployment could contribute to losses on these loans. · Commercial real estate loans – Repayment is dependent on income being generated in amounts sufficient to cover operating expenses and debt service. These loans also involve greater risk because they are generally not fully amortizing over the loan period, but rather have a balloon payment due at maturity. A borrower’s ability to make a balloon payment typically will depend on being able to either refinance the loan or timely sell the underlying property. · Commercial loans – Repayment is generally dependent upon the successful operation of the borrower’s business. In addition, the collateral securing the loans may depreciate over time, be difficult to appraise, be illiquid, or fluctuate in value based on the success of the business. · Multifamily and farmland loans – Decreased real estate values and higher than normal levels of unemployment could contribute to losses on these loans. Loans are considered past due if the required principal and interest payments have not been received within 30 days of the date such payments were due. Loans are placed on non-accrual status when, in management’s opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory provisions. Generally, a loan is placed on non-accrual status when it is over 90 days past due and there is reasonable doubt that all principal will be collected. When interest accrual is discontinued, all unpaid accrued interest is reversed. Interest income is subsequently recognized only to the extent cash payments are received in excess of principal due. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. 14 Table of Contents 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 Total Loans Accruing Loans 90 or More Days Past Due Real estate loans: Construction and land development $ 213 54 267 127,181 127,448 - Single-family residential 4,313 3,552 7,865 408,343 416,208 - Commercial - 1,112 1,112 537,434 538,546 - Multifamily and farmland - - - 73,361 73,361 - Total real estate loans 4,526 4,718 9,244 1,146,319 1,155,563 - Loans not secured by real estate: Commercial 7 123 130 64,053 64,183 - Farm - - - 273 273 - Consumer 81 5 86 15,074 15,160 - All other - - - 8,071 8,071 - Total loans $ 4,614 4,846 9,460 1,233,790 1,243,250 - December 31, 2025 (Dollars in thousands) Loans 30-89 Days Past Due Nonaccrual Loans Total Past Due Loans Total Current Loans Total Loans Accruing Loans 90 or More Days Past Due Real estate loans: Construction and land development $ 202 58 260 123,829 124,089 - Single-family residential 4,635 3,642 8,277 395,715 403,992 - Commercial 299 476 775 524,324 525,099 - Multifamily and farmland - - - 73,361 73,361 - Total real estate loans 5,136 4,176 9,312 1,117,229 1,126,541 - Loans not secured by real estate: Commercial - - - 63,035 63,035 - Farm - - - 318 318 - Consumer 26 - 26 6,234 6,260 - All other - - - 8,234 8,234 - Total loans $ 5,162 4,176 9,338 1,195,050 1,204,388 - 15 Table of Contents The following table presents non-accrual loans as of March 31, 2026 and December 31, 2025: March 31, 2026 Nonaccrual Loans Nonaccrual Loans Total With No With Nonaccrual (Dollars in thousands) Allowance Allowance Loans Real estate loans: Construction and land development $ - 54 54 Single-family residential - 3,552 3,552 Commercial 393 719 1,112 Multifamily and farmland - - - Total real estate loans 393 4,325 4,718 Loans not secured by real estate: Commercial - 123 123 Consumer - 5 5 Total $ 393 4,453 4,846 December 31, 2025 Nonaccrual Loans Nonaccrual Loans Total With No With Nonaccrual (Dollars in thousands) Allowance Allowance Loans Real estate loans: Construction and land development $ - 58 58 Single-family residential - 3,642 3,642 Commercial - 476 476 Multifamily and farmland - - - Total real estate loans - 4,176 4,176 Loans not secured by real estate: Commercial - - - Consumer - - - Total $ - 4,176 4,176 16 Table of Contents 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 $ 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. Collateral dependent loans require an analysis of the collateral. The fair value of the collateral is discounted by estimated liquidation costs. If the discounted fair value of the collateral is greater than the amortized loan balance, no allowance is required. 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 March 31, 2026 and December 31, 2025. March 31, 2026 December 31, 2025 Allowance for Allowance for (Dollars in thousands) Amortized Cost Credit Losses Amortized Cost Credit Losses Real estate loans: Construction and land development $ 54 1 58 1 Single-family residential 3,552 30 3,642 31 Commercial 1,112 47 476 55 Multifamily and farmland - - - - Total real estate loans 4,718 78 4,176 87 Loans not secured by real estate: Commercial 124 1 - - Consumer - - - - Total $ 4,842 79 4,176 87 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) Residential Property Developed Land Commercial Property Business Assets Financial Assets Not Considered Collateral Dependent Total Real estate loans: Construction and land development $ 54 - - - - 54 Single-family residential 3,552 - - - - 3,552 Commercial - - 1,112 - - 1,112 Multifamily and farmland - - - - - - Total real estate loans 3,606 - 1,112 - - 4,718 Loans not secured by real estate: Commercial - - - 124 - 124 Consumer - - - - 4 4 Total $ 3,606 - 1,112 124 4 4,846 Collateral Value $ 12,837 - 1,162 148 17 Table of Contents December 31, 2025 (Dollars in thousands) Residential Property Developed Land Commercial Property Business Assets Financial Assets Not Considered Collateral Dependent Total Real estate loans: Construction and land development $ 58 - - - - 58 Single-family residential 3,642 - - - - 3,642 Commercial - - 476 - - 476 Multifamily and farmland - - - - - - Total real estate loans 3,700 - 476 - - 4,176 Loans not secured by real estate: Commercial - - - - - - Consumer - - - - - - Total $ 3,700 - 476 - - 4,176 Collateral Value $ 13,276 - 487 - The allowance for credit losses incorporates an estimate of lifetime expected credit losses and is recorded on each asset upon origination or acquisition. The starting point for the estimate of the allowance for credit losses is historical loss information, which includes losses from modifications of receivables to borrowers experiencing financial difficulty. An assessment of whether a borrower is experiencing financial difficulty is made on the date of a modification. A change to the allowance for credit losses is evaluated based on the nature of the modification. Occasionally, the Bank modifies loans by providing principal forgiveness on certain loans. When principal forgiveness is provided, the amortized cost basis of the asset is written off against the allowance for credit losses. The amount of the principal forgiveness is deemed to be uncollectible; therefore, that portion of the loan is written off, resulting in a reduction of the amortized cost basis and a corresponding adjustment to the allowance for credit losses. In some cases, the Bank may 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. 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. Upon loan origination, the Bank’s originating loan officer evaluates the quality of the loan and assigns one of eight risk grades. The loan officer monitors the loan’s performance and credit quality and makes changes to the credit grade as conditions warrant. 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 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. The Bank Board reviews, on a monthly basis, an analysis of the Bank’s reserves relative to the range of reserves estimated by the Bank’s Credit Administration. 18 Table of Contents As an additional measure, the Bank engages an independent third party to review the underwriting, documentation and risk grading analyses. This independent third party reviews and evaluates loan relationships greater than or equal to $1.5 million as well as a periodic sample of commercial relationships with exposures below $1.5 million, excluding loans in default, and loans in process of litigation or liquidation. The third party’s evaluation and report is shared with management and the Bank Board. Management considers certain commercial loans with weak credit risk grades to be individually impaired and measures such impairment based upon available cash flows and the value of the collateral. Allowance or reserve levels are estimated for all other graded loans in the portfolio based on their assigned credit risk grade, type of loan and other matters related to credit risk. Management uses the information developed from the procedures described above in evaluating and grading the loan portfolio. This continual grading process is used to monitor the credit quality of the loan portfolio and to assist management in estimating the allowance. 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 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) Real Estate Loans Construction and Land Development Single-Family Residential Commercial Multifamily and Farmland Commercial Farm Consumer and All Other Total Three months ended March 31, 2026 Allowance for credit losses: Beginning balance $ 3,302 3,497 2,475 234 453 1 164 10,126 Charge-offs - - - - ( 2 ) - ( 161 ) ( 163 ) Recoveries - 1 - - 45 - 49 95 Provision (recovery) for loan losses (1) 70 88 42 1 ( 34 ) - 233 400 Ending balance $ 3,372 3,586 2,517 235 462 1 285 10,458 Allowance for credit loss-loans $ 3,372 3,586 2,517 235 462 1 285 10,458 Allowance for credit losses on unfunded loan commitments 1,496 5 10 - 47 - 5 1,563 Total allowance for credit losses $ 4,868 3,591 2,527 235 509 1 290 12,021 (1) Excludes 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. (Dollars in thousands) Real Estate Loans Construction and Land Development Single-Family Residential Commercial Multifamily and Farmland Commercial Farm Consumer and All Other Total Three months ended March 31, 2025 Allowance for credit losses: Beginning balance $ 3,385 3,386 2,322 246 446 1 209 9,995 Charge-offs - ( 5 ) - - - - ( 107 ) ( 112 ) Recoveries - 5 - - 5 - 71 81 Provision (recovery) for loan losses (1) 78 ( 24 ) 15 ( 4 ) ( 12 ) - 30 83 Ending balance $ 3,463 3,362 2,337 242 439 1 203 10,047 Allowance for credit loss-loans $ 3,463 3,362 2,337 242 439 1 203 10,047 Allowance for credit losses on unfunded loan commitments 1,274 3 7 1 - - 1 1,286 Total allowance for credit losses $ 4,737 3,365 2,344 243 439 1 204 11,333 (1) Excludes 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. 19 Table of Contents The Bank utilizes several credit quality indicators to manage credit risk in an ongoing manner. The Bank uses an internal risk grade system that categorizes loans into pass, watch or substandard categories. The Bank uses the following credit quality indicators: · Pass – Includes loans ranging from excellent quality with a minimal amount of credit risk to loans with higher risk and servicing needs but still are considered to be acceptable. The higher risk loans in this category are not problem credits presently, but may be in the future if the borrower is unable to change its present course. · Watch – These loans are currently performing satisfactorily, but there has been some recent past due history on repayment and there are potential weaknesses that may, if not corrected, weaken the asset or inadequately protect the Bank’s 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 the collateral pledged (if there is any). There is a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. There is a distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. · Doubtful – Loans classified Doubtful have all the weaknesses inherent in loans classified 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. · Loss – Loans classified Loss are considered uncollectable and of such little value that their continuance as bankable assets is not warranted. 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. 20 Table of Contents 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 Revolving Loans (Dollars in thousands) 2026 2025 2024 2023 2022 Prior Revolving Loans Converted to Term Loans Total Loans March 31, 2026 Real Estate Loans Construction and land development Pass $ 11,652 45,852 14,254 21,640 17,512 11,477 - 4,957 127,344 Watch - - - - - - - - - Substandard - - - 54 - 50 - - 104 Total Construction and land development $ 11,652 45,852 14,254 21,694 17,512 11,527 - 4,957 127,448 Single family Pass $ 16,076 36,880 23,279 29,966 66,334 110,670 126,929 - 410,134 Watch - - - - 597 1,297 - - 1,894 Substandard - - 108 189 210 3,383 290 - 4,180 Total single family $ 16,076 36,880 23,387 30,155 67,141 115,350 127,219 - 416,208 Commercial Pass $ 24,226 81,335 66,122 41,925 133,726 185,479 3,570 - 536,383 Watch - - - - - 1,051 - - 1,051 Substandard - 393 - 115 421 183 - - 1,112 Total commercial $ 24,226 81,728 66,122 42,040 134,147 186,713 3,570 - 538,546 Multifamily and farmland Pass $ 1,441 13,123 1,245 7,048 17,390 32,672 405 - 73,324 Watch - - - - - 37 - - 37 Substandard - - - - - - - - - Total multifamily and farmland $ 1,441 13,123 1,245 7,048 17,390 32,709 405 - 73,361 Total real estate loans $ 53,395 177,583 105,008 100,937 236,190 346,299 131,194 4,957 1,155,563 Loans not secured by real estate Commercial Pass $ 2,954 12,551 6,758 9,690 2,883 10,941 18,204 - 63,981 Watch - - - - - 79 - - 79 Substandard - - - - 123 - - - 123 Total Commercial $ 2,954 12,551 6,758 9,690 3,006 11,020 18,204 - 64,183 Farm Pass $ - 85 36 149 - 3 - - 273 Watch - - - - - - - - - Substandard - - - - - - - - - Total farm $ - 85 36 149 - 3 - - 273 Consumer Pass $ 9,760 1,702 689 509 286 114 2,079 - 15,139 Watch - - - - 16 - - - 16 Substandard - 5 - - - - - - 5 Total consumer $ 9,760 1,707 689 509 302 114 2,079 - 15,160 All other Pass $ 801 79 - 43 5,315 1,758 75 - 8,071 Watch - - - - - - - - - Substandard - - - - - - - - - Total all other $ 801 79 - 43 5,315 1,758 75 - 8,071 Total loans not secured by real estate $ 13,515 14,422 7,483 10,391 8,623 12,895 20,358 - 87,687 Total loans $ 66,910 192,005 112,491 111,328 244,813 359,194 151,552 4,957 1,243,250 21 Table of Contents 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 Revolving Loans Revolving Converted to Total (Dollars in thousands) 2026 2025 2024 2023 2022 Prior Loans Term Loans Loans Real estate loans: Construction and land development $ - - - - - - - - - Single-family residential - - - - - - - - - Commercial - - - - - - - - - Multifamily and farmland - - - - - - - - - Total real estate loans - - - - - - - - - Loans not secured by real estate: Commercial - - - - - 2 - - 2 Consumer - 5 - - - 156 - - 161 All other - - - - - - - - - Total gross charge-offs $ - 5 - - - 158 - - 163 22 Table of Contents The following table presents by credit quality indicator, loan class and year of origination, the amortized cost of the Bank’s loans as of December 31, 2025. Term Loans by Origination Year Revolving Loans Revolving Converted to Total (Dollars in thousands) 2025 2024 2023 2022 2021 Prior Loans Term Loans Loans December 31, 2025 Real Estate Loans Construction and land development Pass $ 41,682 23,371 22,111 19,201 4,426 7,331 - 5,421 123,543 Watch - - - - 436 - - - 436 Substandard - - 58 - - 52 - - 110 Total Construction and land development $ 41,682 23,371 22,169 19,201 4,862 7,383 - 5,421 124,089 Single family Pass $ 36,508 23,334 32,831 67,865 40,429 74,262 122,541 - 397,770 Watch - - - 600 - 1,280 - - 1,880 Substandard 97 108 195 - 91 3,096 755 - 4,342 Total single family $ 36,605 23,442 33,026 68,465 40,520 78,638 123,296 - 403,992 Commercial Pass $ 85,400 60,520 43,489 135,504 64,216 130,607 3,818 - 523,554 Watch - - - - - 1,070 - - 1,070 Substandard - - - 430 45 - - - 475 Total commercial $ 85,400 60,520 43,489 135,934 64,261 131,677 3,818 - 525,099 Multifamily and farmland Pass $ 12,250 1,250 7,910 18,603 19,874 13,336 100 - 73,323 Watch - - - - - 38 - - 38 Substandard - - - - - - - - - Total multifamily and farmland $ 12,250 1,250 7,910 18,603 19,874 13,374 100 - 73,361 Total real estate loans $ 175,937 108,583 106,594 242,203 129,517 231,072 127,214 5,421 1,126,541 Loans not secured by real estate Commercial Pass $ 13,435 7,125 10,925 3,391 1,675 9,477 16,799 - 62,827 Watch - - - 125 14 69 - - 208 Substandard - - - - - - - - - Total Commercial $ 13,435 7,125 10,925 3,516 1,689 9,546 16,799 - 63,035 Farm Pass $ 91 39 154 4 - - 30 - 318 Watch - - - - - - - - - Substandard - - - - - - - - - Total farm $ 91 39 154 4 - - 30 - 318 Consumer Pass $ 2,085 866 612 333 77 73 2,197 - 6,243 Watch - - - 17 - - - - 17 Substandard - - - - - - - - - Total consumer $ 2,085 866 612 350 77 73 2,197 - 6,260 All other Pass $ 550 - 45 5,315 - 2,248 76 - 8,234 Watch - - - - - - - - - Substandard - - - - - - - - - Total all other $ 550 - 45 5,315 - 2,248 76 - 8,234 Total loans not secured by real estate $ 16,161 8,030 11,736 9,185 1,766 11,867 19,102 - 77,847 Total loans $ 192,098 116,613 118,330 251,388 131,283 242,939 146,316 5,421 1,204,388 23 Table of Contents The following table presents by credit quality indicator, loan class and year of origination, gross loan charge-offs during the year ended December 31, 2025. December 31, 2025 Gross Loan Charge-offs by Origination Year Revolving Loans (Dollars in thousands) Revolving Converted to Total 2025 2024 2023 2022 2021 Prior Loans Term Loans Loans Real estate loans: Construction and land development $ - - 31 - - - - - 31 Single-family residential - - - - - - 5 - 5 Commercial - - - - - - - - - Multifamily and farmland - - - - - - - - - Total real estate loans - - 31 - - - 5 - 36 Loans not secured by real estate: Commercial 100 - 27 39 9 112 - - 287 Consumer 16 6 2 4 - 501 - - 529 All other - - - - - - - - - Total gross charge-offs $ 116 6 60 43 9 613 5 - 852 (6) Leases 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. The Bank maintains operating leases on land and buildings for some of the Bank’s branch facilities and loan production offices. Most leases include one option to renew, with renewal terms extending up to 15 years. 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. The following table presents lease cost and other lease information as of March 31, 2026 and 2025. (Dollars in thousands) March 31, 2026 March 31, 2025 Operating lease cost $ 203 $ 192 Other information: Cash paid for amounts included in the measurement of lease liabilities 200 206 Operating cash flows from operating leases - - Right-of-use assets obtained in exchange for new lease liabilities - operating leases - - Weighted-average remaining lease term - operating leases 7.24 7.80 Weighted-average discount rate - operating leases 2.98 % 2.82 % The following table presents lease maturities as of March 31, 2026. (Dollars in thousands) Maturity Analysis of Operating Lease Liabilities: March 31, 2026 2026 $ 550 2027 657 2028 515 2029 422 2030 424 Thereafter 1,270 Total 3,838 Less: Imputed Interest ( 397 ) Operating Lease Liability $ 3,441 24 Table of Contents (7) Commitments and Contingencies The Bank is party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. Those instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the balance sheet. The contract amounts of those instruments reflect the extent of involvement the Bank has in particular classes of financial instruments. The exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. The Bank uses the same credit policies in making commitments to extend credit and standby letters of credit as it does for on-balance-sheet instruments. In most cases, the Bank requires collateral or other security to support financial instruments with credit risk. (Dollars in thousands) Contractual Amount 3/31/26 12/31/25 Financial instruments whose contract amount represent credit risk: Commitments to extend credit $ 372,299 366,461 Standby letters of credit $ 1,639 1,576 Commitments to extend credit are conditional agreements to lend to a customer. Commitments generally have fixed expiration dates and because they may expire without being drawn upon, the total commitment amount of $ 373.9 million does not necessarily represent future cash requirements. Standby letters of credit are conditional commitments issued by the Bank to pay a third party on behalf of a customer. Those letters of credit are primarily issued to businesses in the Bank’s delineated market area. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The Bank holds real estate, equipment, automobiles and customer deposits as collateral supporting those commitments for which collateral is deemed necessary. The Company maintains an allowance for off-balance sheet credit exposures such as unfunded balances for existing lines of credit, commitments to extend future credit, when this extension of credit is not unconditionally cancelable. The allowance for off-balance sheet credit exposures is adjusted as a provision for credit loss expense. 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 $ 1.6 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) March 31, 2026 March 31, 2025 Beginning Balance $ 1,403 $ 1,101 Provision for (recovery of) credit losses 160 185 Ending balance $ 1,563 $ 1,286 (8) Fair Value The Company is required to disclose fair value information about financial instruments, whether or not recognized at fair value on the face of the balance sheet, for which it is practicable to estimate that value. The assumptions used in the estimation of the fair value of the Company’s financial instruments are detailed below. Where quoted prices are not available, fair values are based on estimates using discounted cash flows and other valuation techniques. The use of discounted cash flows can be significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. The following disclosures should not be considered a surrogate of the liquidation value of the Company, but rather a good faith estimate of the increase or decrease in the value of financial instruments held by the Company since purchase, origination, or issuance. The Company groups assets and liabilities 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. These levels are: · Level 1 – Valuation is based upon quoted prices for identical instruments traded in active markets. · Level 2 – Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market. · Level 3 – Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques. 25 Table of Contents Investment Securities Available for Sale Fair values of investment securities available for sale are determined by obtaining quoted prices on nationally recognized securities exchanges when available. If quoted prices are not available, fair value is determined using matrix pricing, which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities. Fair values for investment securities with quoted market prices are reported in the Level 1 fair value category. Fair value measurements obtained from independent pricing services are reported in the Level 2 fair value category. All other fair value measurements are reported in the Level 3 fair value category. Mortgage Loans Held for Sale Mortgage loans held for sale are carried at lower of aggregate cost or market value. The cost of mortgage loans held for sale approximates the market value. Mortgage loans held for sale are reported in the Level 2 fair value category. Management determined that the valuation technique used at current period end and prior period end are more appropriately classified as Level 2 and has updated in the current period and prior period year end classifications to Level 2. Loans The fair value of loans, excluding previously presented individually evaluated loans measured at fair value on a non-recurring basis, is estimated using discounted cash flow analyses. The discount rates used to determine fair value use interest rate spreads that reflect factors such as liquidity, credit, and nonperformance risk of the loans. Loans are reported in the Level 3 fair value category, as the pricing of loans is more subjective than the pricing of other financial instruments. Mutual Funds Mutual funds held in the deferred compensation trust are carried at fair value. Mutual funds held in the deferred compensation trust are included in other assets on the balance sheet and reported in the Level 1 fair value category. FHLB Borrowings The fair value of FHLB borrowings is estimated based upon discounted future cash flows using a discount rate comparable to the current market rate for such borrowings. FHLB borrowings are reported in the Level 2 fair value category. Management determined that the valuation technique used at current period end and prior period end are more appropriately classified as Level 2 and has updated in the current period and prior period year end classifications to Level 2. Commitments to Extend Credit and Standby Letters of Credit Commitments to extend credit and standby letters of credit are generally short-term in duration and made at variable interest rates. Therefore, both the carrying value and estimated fair value associated with these instruments are immaterial. Limitations 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 many judgments. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. Fair value estimates are based on existing on and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Significant assets and liabilities that are not considered financial instruments include deferred income taxes and premises and equipment. 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. 26 Table of Contents 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) March 31, 2026 Fair Value Measurements Level 1 Valuation Level 2 Valuation Level 3 Valuation Available for sale securities: U.S. Treasuries $ 7,606 - 7,606 - U.S. Government sponsored enterprises 4,802 - 4,802 - GSE - Mortgage-backed securities 207,754 - 207,754 - Private label mortgage-backed securities 40,129 - 40,129 - State and political subdivisions 109,848 - 109,848 - Total available for sale securities $ 370,139 - 370,139 - Mutual funds held in deferred compensation trust $ 2,952 2,952 - - (Dollars in thousands) December 31, 2025 Fair Value Measurements Level 1 Valuation Level 2 Valuation Level 3 Valuation Available for sale securities: U.S. Treasuries $ 7,609 - 7,609 - U.S. Government sponsored enterprises 5,202 - 5,202 - GSE - Mortgage-backed securities 211,916 - 211,916 - Private label mortgage-backed securities 42,062 - 42,062 - State and political subdivisions 110,574 - 110,574 - Total available for sale securities $ 377,363 - 377,363 - Mutual funds held in deferred compensation trust $ 2,855 2,855 - - 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; however, in many cases, it also requires significant input based on management’s knowledge of, and judgment about, current market conditions, specific issues relating to the collateral and other matters. As a result, all fair value measurements for individually evaluated loans and other real estate are considered Level 3. (Dollars in thousands) Fair Value March 31, 2026 Fair Value December 31, 2025 Valuation Technique Significant Unobservable Inputs General Range of Significant Unobservable Input Values Individually evaluated loans $ 375 $ 375 Appraised value Discounts to reflect current market conditions and ultimate collectability 0 - 50 % 27 Table of Contents 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 March 31, 2026 Carrying Amount Level 1 Level 2 Level 3 Total Assets: Cash and cash equivalents $ 61,256 61,256 - - 61,256 Investment securities available for sale 370,139 - 370,139 - 370,139 Other investments 2,604 - - 2,604 2,604 Mortgage loans held for sale 1,662 - 1,662 - 1,662 Loans, net 1,232,792 - - 1,236,259 1,236,259 Mutual funds held in deferred compensation trust 2,952 2,952 - - 2,952 Liabilities: Deposits $ 1,540,557 - 1,542,743 - 1,542,743 Junior subordinated debentures 15,464 - 15,464 - 15,464 (Dollars in thousands) Fair Value Measurements at December 31, 2025 Carrying Amount Level 1 Level 2 Level 3 Total Assets: Cash and cash equivalents $ 58,105 58,105 - - 58,105 Investment securities available for sale 377,363 - 377,363 - 377,363 Other investments 2,595 - - 2,595 2,595 Mortgage loans held for sale 1,136 - 1,136 - 1,136 Loans, net 1,194,262 - - 1,197,371 1,197,371 Mutual funds held in deferred compensation trust 2,855 2,855 - - 2,855 Liabilities: Deposits $ 1,509,225 - 1,511,596 - 1,511,596 Junior subordinated debentures 15,464 - 15,464 - 15,464 (9) Reportable Segments The Company has two reportable segments as described below: Banking Operations – This segment reflects the consolidated Bank, excluding CBRES. The primary source of revenue for this segment is net interest income. CBRES – A Bank subsidiary that provides appraisal management services to community banks. The primary source of revenue for this segment is appraisal management fee income. The Bank’s executive management team, which is comprised of the Bank’s Chief Executive Officer, Chief Financial Officer and executive vice presidents, is the chief operating decision maker for the Company. The Bank’s executive management team reviews actual net income versus budgeted net income on a quarterly basis to assess segment performance. The following table presents financial information for the reportable segments. Financial results by operating segment, including significant expense categories provided to the chief operating decision maker, are detailed below. Certain prior period amounts have been reclassified to conform to the current presentation. The information provided under the caption “Other” represents the parent company, which is not considered to be a reportable segment, is included to reconcile the results of the operating segments to the consolidated financial statements prepared in conformity with GAAP. 28 Table of Contents (Dollars in thousands) Banking Operations CBRES Other Consolidated As of and for the three months ended March 31, 2026 Interest income $ 20,869 - 7 20,876 Interest expense 5,556 - 217 5,773 Net interest income 15,313 - ( 210 ) 15,103 Provision for credit losses 560 - - 560 Noninterest income 3,850 - - 3,850 Appraisal management fee income - 2,620 - 2,620 Salaries and employee benefits 6,931 226 89 7,246 Occupancy 2,306 1 - 2,307 Appraisal management fee expense - 2,095 - 2,095 Noninterest expense 3,496 153 68 3,717 Income tax expense (benefit) 1,293 34 ( 77 ) 1,250 Net income (loss) $ 4,577 111 ( 290 ) 4,398 Total assets $ 1,728,216 5,351 911 1,734,478 As of and for the three months ended March 31, 2025 Interest income $ 19,963 - 7 19,970 Interest expense 5,785 - 241 6,026 Net interest income 14,178 - ( 234 ) 13,944 Provision for credit losses 268 - - 268 Noninterest income 3,487 - - 3,487 Appraisal management fee income - 3,042 - 3,042 Salaries and employee benefits 6,466 220 102 6,788 Occupancy 2,018 10 - 2,028 Appraisal management fee expense - 2,419 - 2,419 Noninterest expense 3,083 188 67 3,338 Income tax expense (benefit) 1,325 47 ( 85 ) 1,287 Net income (loss) $ 4,505 158 ( 318 ) 4,345 Total assets $ 1,687,711 4,545 729 1,692,985 29 Table of Contents