Virginia National Bankshares Corp 10-Q

10-Q ` ` UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2026 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to ___________ Commission File Number: 001-40305 VIRGINIA NATIONAL BANKSHARES CORP ORATION (Exact Name of Registrant as Specified in its Charter) Virginia 46-2331578 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 404 People Place Charlottesville , Virginia 22911 (Address of principal executive offices ) (Zip Code) Registrant’s telephone number, including area code: ( 434 ) 817-8621 Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock VABK The Nasdaq Capital Market Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Smaller reporting company ☒ Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ As of August 11, 2026, the registrant had 5,425,282 shares of common stock, $2.50 par value per share, outstanding. VIRGINIA NATIONAL BANKSHARES CORPORATION FORM 10-Q TABLE OF CONTENTS Part I. Financial Information Item 1 Financial Statements Page 4 Consolidated Balance Sheets (unaudited) Page 4 Consolidated Statements of Income (unaudited) Page 5 Consolidated Statements of Comprehensive Income (unaudited) Page 6 Consolidated Statements of Changes in Shareholders’ Equity (unaudited) Page 7 Consolidated Statements of Cash Flows (unaudited) Page 8 Notes to Consolidated Financial Statements (unaudited) Page 9 Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations Page 28 Application of Critical Accounting Policies and Estimates Page 29 Financial Condition Page 29 Results of Operations Page 35 Item 3 Quantitative and Qualitative Disclosures About Market Risk Page 42 Item 4 Controls and Procedures Page 42 Part II. Other Information Item 1 Legal Proceedings Page 42 Item 1A Risk Factors Page 42 Item 2 Unregistered Sales of Equity Securities and Use of Proceeds Page 43 Item 3 Defaults Upon Senior Securities Page 43 Item 4 Mine Safety Disclosures Page 43 Item 5 Other Information Page 43 Item 6 Exhibits Page 43 Signatures Page 44 2 Glossary of Acronyms and Defined Terms 2014 Plan - 2014 Stock Incentive Plan 2022 Plan - 2022 Stock Incentive Plan ACL - Allowance for credit losses Acquired Loans - Loans acquired from Fauquier AFS - Available for sale ASC - Accounting Standards Codification ASC 820 - ASC 820, Fair Value Measurements and Disclosures ASU - Accounting Standards Update the Bank - Virginia National Bank BOLI - Bank-owned life insurance bps - Basis points CBLR - Community Bank Leverage Ratio CDARS™ - Certificates of Deposit Account Registry Service CECL - Current expected credit losses CET1 - Common equity tier 1 CFPB - Consumer Financial Protection Bureau CME - Chicago Mercantile Exchange CMO - Collateralized mortgage obligation the Company - Virginia National Bankshares Corporation and its subsidiary CRA - Community Reinvestment Act of 1977 CRE - Commercial real estate Dodd-Frank Act - Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 Effective Date - April 1, 2021 EPS - Earnings per common share Exchange Act - Securities Exchange Act of 1934, as amended Fauquier - Fauquier Bankshares, Inc. and its subsidiaries FASB - Financial Accounting Standards Board FBS - Fauquier Bank Services, Inc Federal Reserve - Board of Governors of the Federal Reserve System Federal Reserve Act - Federal Reserve Act of 1913, as amended Federal Reserve Bank or FRB - Federal Reserve Bank of Richmond FHLB - Federal Home Loan Bank of Atlanta FOMC - Federal Open Market Committee Form 10-K - Annual Report on Form 10-K for the year ended December 31, 2025 FTE - Fully taxable equivalent GAAP or U.S. GAAP - Accounting principles generally accepted in the United States ICS® - Insured Cash Sweep® MBS - Mortgage-Backed Securities Merger - Mergers of Fauquier Bankshares, Inc. and The Fauquier Bank with and into the Company and the Bank, respectively Nasdaq - The Nasdaq Stock Market, LLC NPA - Nonperforming assets OCC - Office of the Comptroller of the Currency PCA - Prompt Corrective Action PCD - Purchased loan with credit deterioration ROAA - Return on Average Assets ROAE - Return on Average Equity Reorganization - Reorganization Agreement and Plan of Share Exchange dated March 6, 2013 between the Bank and the Company SBA - Small Business Administration SCC - Virginia State Corporation Commission SEC - U.S. Securities and Exchange Commission Securities Act - Securities Act of 1933, as amended SOFR - Secured Overnight Financing Rate 3 PART I. FINANCI AL INFORMATION ITEM 1. FINAN CIAL STATEMENTS VIRGINIA NATIONAL BANKSHARES CORPORATION CONSOLIDATED B ALANCE SHEETS (Dollars in thousands, except per share data) June 30, 2026 December 31, 2025 * ASSETS Unaudited Cash and due from banks $ 35,705 $ 5,798 Interest-bearing deposits in other banks 9,694 10,552 Federal funds sold 31,948 54,264 Securities: Available for sale, at fair value 234,770 247,992 Restricted securities, at cost 6,195 6,172 Total securities 240,965 254,164 Loans, net of deferred fees and costs 1,233,980 1,237,577 Allowance for credit losses ( 8,124 ) ( 8,270 ) Loans, net $ 1,225,856 $ 1,229,307 Premises and equipment, net 11,575 11,687 Bank owned life insurance 41,953 41,302 Goodwill 7,768 7,768 Core deposit intangible, net 2,199 2,682 Right-of-use asset, net 5,551 6,297 Deferred tax asset, net 12,179 12,079 Accrued interest receivable and other assets 12,803 13,842 Total assets $ 1,638,196 $ 1,649,742 LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Demand deposits: Noninterest bearing $ 367,348 $ 362,322 Interest bearing 279,179 308,295 Money market and savings deposit accounts 481,847 469,815 Certificates of deposit and other time deposits 280,822 291,299 Total deposits 1,409,196 1,431,731 Borrowings 20,000 20,000 Junior subordinated debt, net 3,578 3,554 Lease liability 5,474 6,192 Accrued interest payable and other liabilities 5,263 4,104 Total liabilities 1,443,511 1,465,581 Commitments and contingent liabilities Shareholders' equity: Preferred stock, $ 2.50 par value - - Common stock, $ 2.50 par value 13,416 13,327 Capital surplus 107,781 107,337 Retained earnings 104,531 94,165 Accumulated other comprehensive loss ( 31,043 ) ( 30,668 ) Total shareholders' equity 194,685 184,161 Total liabilities and shareholders' equity $ 1,638,196 $ 1,649,742 Common shares outstanding 5,424,431 5,393,140 Common shares authorized 10,000,000 10,000,000 Preferred shares outstanding - - Preferred shares authorized 2,000,000 2,000,000 * Derived from audited Consolidated Financial Statements See Notes to Consolidated Financial Statements 4 VIRGINIA NATIONAL BANKSHARES CORPORATION CONSOLIDATED STAT EMENTS OF INCOME (Dollars in thousands, except per share data) (Unaudited) For the three months ended For the six months ended June 30, 2026 June 30, 2025 June 30, 2026 June 30, 2025 Interest and dividend income: Loans, including fees $ 17,688 $ 17,330 $ 34,521 $ 34,363 Federal funds sold 288 64 782 248 Other interest-bearing deposits 47 45 82 87 Investment securities: Taxable 1,066 1,265 2,169 2,574 Tax exempt 326 323 648 646 Dividends 83 109 173 224 Total interest and dividend income 19,498 19,136 38,375 38,142 Interest expense: Demand deposits 67 67 137 136 Money market and savings deposits 2,940 2,927 5,993 5,930 Certificates and other time deposits 2,478 2,670 5,063 5,724 Borrowings 194 582 386 1,091 Federal funds purchased - 18 - 25 Junior subordinated debt 71 76 141 146 Total interest expense 5,750 6,340 11,720 13,052 Net interest income 13,748 12,796 26,655 25,090 Provision for (recovery of) credit losses 231 3 ( 105 ) ( 157 ) Net interest income after provision for (recovery of) credit losses 13,517 12,793 26,760 25,247 Noninterest income: Wealth management fees 214 206 434 435 Deposit account fees 359 293 725 600 Debit/credit card and ATM fees 245 355 496 725 Bank owned life insurance income 332 307 651 600 Gains on sale of assets, net - - 5 278 Gain on sale of limited partnership investment 4,662 - 4,662 - Other 220 150 548 433 Total noninterest income 6,032 1,311 7,521 3,071 Noninterest expense: Salaries and employee benefits 4,027 3,863 8,026 7,799 Net occupancy 720 889 1,499 1,905 Equipment 212 202 398 388 Bank franchise tax 468 489 936 828 Computer software 214 266 428 522 Data processing 609 732 1,159 1,467 FDIC deposit insurance assessment 187 145 362 290 Marketing, advertising and promotion 254 179 521 433 Professional fees 333 331 681 587 Core deposit intangible amortization 236 284 483 579 Other 1,009 1,301 1,975 2,707 Total noninterest expense 8,269 8,681 16,468 17,505 Income before income taxes 11,280 5,423 17,813 10,813 Provision for income taxes 2,272 1,185 3,545 2,086 Net income $ 9,008 $ 4,238 $ 14,268 $ 8,727 Net income per common share, basic $ 1.66 $ 0.79 $ 2.63 $ 1.62 Net income per common share, diluted $ 1.65 $ 0.78 $ 2.62 $ 1.61 Weighted average common shares outstanding, basic 5,423,642 5,391,979 5,416,631 5,385,461 Weighted average common shares outstanding, diluted 5,455,403 5,417,900 5,449,309 5,410,430 See Notes to Consolidated Financial Statements 5 VIRGINIA NATIONAL BANKSHARES CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Dollars in thousands) (Unaudited) For the three months ended For the six months ended June 30, 2026 June 30, 2025 June 30, 2026 June 30, 2025 Net income $ 9,008 $ 4,238 $ 14,268 $ 8,727 Other comprehensive income (loss), net of tax: Securities available for sale 901 1,447 ( 375 ) 4,968 Total comprehensive income $ 9,909 $ 5,685 $ 13,893 $ 13,695 See Notes to Consolidated Financial Statements 6 VIRGINIA NATIONAL BANKSHARES CORPORATION CONSOLIDATED STATEMENTS OF CH ANGES IN SHAREHOLDERS' EQUITY FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2026 AND 2025 (Dollars in thousands, except per share data) (Unaudited) Common Stock Capital Surplus Retained Earnings Accumulated Other Comprehensive Loss Total Balance, December 31, 2024 $ 13,263 $ 106,394 $ 82,507 $ ( 41,862 ) $ 160,302 Stock option expense - 34 - - 34 Restricted stock grant expense - 214 - - 214 Vested stock grants 33 ( 33 ) - - - Cash dividends declared ($ 0.33 per share) - - ( 1,779 ) - ( 1,779 ) Net income - - 4,489 - 4,489 Other comprehensive income - - - 3,521 3,521 Balance, March 31, 2025 $ 13,296 $ 106,609 $ 85,217 $ ( 38,341 ) $ 166,781 Stock option expense - 35 - - 35 Restricted stock grant expense - 212 - - 212 Vested stock grants 22 ( 22 ) - - - Cash dividends declared ($ 0.36 per share) - - ( 1,941 ) - ( 1,941 ) Net income - - 4,238 - 4,238 Other comprehensive income - - - 1,447 1,447 Balance, June 30, 2025 $ 13,318 $ 106,834 $ 87,514 $ ( 36,894 ) $ 170,772 Balance, December 31, 2025 $ 13,327 $ 107,337 $ 94,165 $ ( 30,668 ) $ 184,161 Shares surrendered in connection with stock option exercise ( 42 ) ( 630 ) - - ( 672 ) Stock options exercised 63 609 - - 672 Stock option expense - 4 - - 4 Restricted stock grant expense - 298 - - 298 Vested stock grants 45 ( 45 ) - - - Cash dividends declared ($ 0.36 per share) - - ( 1,949 ) - ( 1,949 ) Net income - - 5,259 - 5,259 Other comprehensive loss - - - ( 1,276 ) ( 1,276 ) Balance, March 31, 2026 $ 13,393 $ 107,573 $ 97,475 $ ( 31,944 ) $ 186,497 Shares surrendered in connection with stock option exercise ( 27 ) ( 552 ) - - ( 579 ) Stock options exercised 32 547 - - 579 Stock option expense - 23 - - 23 Restricted stock grant expense - 208 - - 208 Vested stock grants 18 ( 18 ) - - - Cash dividends declared ($ 0.36 per share) - - ( 1,952 ) - ( 1,952 ) Net income - - 9,008 - 9,008 Other comprehensive income - - - 901 901 Balance, June 30, 2026 $ 13,416 $ 107,781 $ 104,531 $ ( 31,043 ) $ 194,685 See Notes to Consolidated Financial Statements 7 VIRGINIA NATIONAL BANKSHARES CORPORATION CONSOLIDATED STATEM ENTS OF CASH FLOWS (Dollars in thousands) (Unaudited) For the six months ended June 30, 2026 June 30, 2025 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 14,268 $ 8,727 Adjustments to reconcile net income to net cash provided by operating activities: Recovery of credit losses ( 105 ) ( 157 ) Net accretion of certain acquisition-related adjustments ( 819 ) ( 1,038 ) Amortization of intangible assets 483 579 Net amortization of securities 374 398 Net gains on sale of assets ( 5 ) ( 278 ) Net gain on sale of other assets ( 81 ) - Gain on sale of limited partnership investment ( 4,662 ) - Earnings on bank owned life insurance ( 651 ) ( 600 ) Depreciation and other amortization 1,097 1,553 Stock option expense 27 69 Restricted stock expense 506 426 Net change in: Accrued interest receivable and other assets ( 124 ) ( 527 ) Accrued interest payable and other liabilities 440 ( 322 ) Net cash provided by operating activities 10,748 8,830 CASH FLOWS FROM INVESTING ACTIVITIES: Net increase in restricted investments ( 23 ) ( 1,927 ) Proceeds from maturities, calls, sales and principal payments of available for sale securities 11,873 14,519 Proceeds from sale of limited partnership investment 6,325 - Proceeds from sale of other asset 81 - Net change in loans 4,399 ( 5,328 ) Proceeds from sale of premises and equipment 64 3,047 Purchase of bank premises and equipment ( 298 ) ( 285 ) Net cash provided by investing activities 22,421 10,026 CASH FLOWS FROM FINANCING ACTIVITIES: Net change in demand deposits, money market and savings accounts ( 12,058 ) ( 7,476 ) Net change in certificates of deposit and other time deposits ( 10,477 ) ( 27,005 ) Net change in Federal funds purchased - ( 236 ) Net change in other borrowings - 41,000 Cash dividends paid ( 3,901 ) ( 3,720 ) Net cash (used in) provided by financing activities ( 26,436 ) 2,563 NET INCREASE IN CASH AND CASH EQUIVALENTS $ 6,733 $ 21,419 CASH AND CASH EQUIVALENTS: Beginning of period $ 70,614 $ 17,103 End of period $ 77,347 $ 38,522 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash payments for: Interest $ 11,816 $ 13,503 Taxes 2,440 2,090 SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES Unrealized (losses) gains on available for sale securities $ ( 475 ) $ 6,289 Initial right-of-use assets obtained in exchange for new operating lease liabilities - 2,338 See Notes to Consolidated Financial Statements 8 VIRGINIA NATIONAL BANKSHARES CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) June 30, 2026 Note 1. Summary of Significant Accounting Policies Principles of Consolidation: The unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information. Accordingly, the unaudited consolidated financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring items) considered necessary for a fair presentation have been included. The statements should be read in conjunction with the Notes to Consolidated Financial Statements included in the Company’s Form 10-K for the year ended December 31, 2025 . Nature of Operations: The accompanying unaudited consolidated financial statements include the accounts of the Company, and its subsidiary Virginia National Bank. The Bank offers a full range of banking and related financial services to meet the needs of individuals, businesses and charitable organizations, including the fiduciary services of VNB Trust and Estate Services, a division of the Bank. All significant intercompany balances and transactions have been eliminated in consolidation. Basis of Presentation: The preparation of financial statements in conformity with GAAP and the reporting guidelines prescribed by regulatory authorities requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for credit losses. Operating results for the three and six months ended June 30, 2026, are not necessarily indicative of the results that may be expected for the year ending December 31, 2026. The Company's significant accounting policies followed in the preparation of unaudited consolidated financial statements are disclosed in Note 1 of the audited financial statements and notes for the year ended December 31, 2025, and are contained in the Company's 2025 Annual Report on Form 10-K. There have been no significant changes to the application of significant accounting policies since December 31, 2025 . Reclassifications: If needed, certain previously reported amounts have been reclassified to conform to current period presentation. The results of reclassifications are not considered material to shareholders' equity and net income. Note 2. Recent Significant Accounting Pronouncements In November 2024, the Financial Accounting Standards Board (FASB) issued ASU 2024-03, “Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses.” ASU 2024-03 requires public companies to disclose, in the notes to the financial statements, specified information about certain costs and expenses at each interim and annual reporting period. This includes disclosing amounts related to employee compensation, depreciation, and intangible asset amortization. In addition, public companies will need to provide a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively. The FASB subsequently issued ASU 2025-01, “Income Statement—Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date”, which amends the effective date of ASU 2024-03 to clarify that all public business entities are required to adopt the guidance in ASU 2024-03 in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption of ASU 2024-03 is permitted. The Company does not expect the adoption of ASU 2024-03 to have a material impact on its consolidated financial statements. In December 2025, the Financial Accounting Standards Board issued ASU 2025-12, “Codification Improvements.” The amendments in this ASU update the FASB Accounting Standards Codification for a broad range of Topics arising from technical corrections, unintended application of the Codification, clarifications, and other minor improvements. The amendments in this ASU are effective for annual periods beginning after December 15, 2026, and interim periods within those annual periods. Early adoption is permitted in both interim and annual periods in which financial statements have not yet been issued or made available for issuance. If an entity adopts the amendments in this ASU in an interim period, it must adopt them as of the beginning of the annual period that includes that interim period. An entity may elect to early adopt the amendments on an issue-by-issue basis. The Company does not expect the adoption of ASU 2025-12 to have a material impact on its consolidated financial statements. 9 Note 3. Securities The amortized cost and fair values of available for sale securities as of June 30, 2026, and December 31, 2025, were as follows (dollars in thousands): June 30, 2026 Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value U.S. Government agencies $ 34,496 $ - $ ( 3,639 ) $ 30,857 Mortgage-backed/CMOs 132,428 2 ( 18,698 ) 113,732 Corporate bonds 5,906 52 - 5,958 Municipal bonds 101,235 1 ( 17,013 ) 84,223 Total $ 274,065 $ 55 $ ( 39,350 ) $ 234,770 December 31, 2025 Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value U.S. Government agencies $ 34,707 $ - $ ( 3,444 ) $ 31,263 Mortgage-backed/CMOs 141,731 11 ( 18,237 ) 123,505 Corporate bonds 7,868 32 ( 1 ) 7,899 Municipal bonds 102,506 19 ( 17,200 ) 85,325 Total $ 286,812 $ 62 $ ( 38,882 ) $ 247,992 As of June 30, 2026, there were $ 226.4 million or 255 issues of individual securities, held in an unrealized loss position. These securities have an unrealized loss of $ 39.4 million and consist of 113 mortgage-backed/collateralized mortgage obligations, 123 municipal bonds and 19 agency bonds. Accrued interest receivable on AFS securities was $ 1.3 million as of June 30, 2026, and December 31, 2025. The Company has elected to exclude accrued interest receivable from the amortized cost basis. The following tables summarize all securities with unrealized losses, segregated by length of time in a continuous unrealized loss position, for which no allowance for credit losses was recorded, at June 30, 2026 and December 31, 2025 (dollars in thousands): Less than 12 Months 12 Months or More Total June 30, 2026 Fair Unrealized Fair Unrealized Fair Unrealized Value Losses Value Losses Value Losses U.S. Government agencies $ - $ - $ 30,827 $ ( 3,639 ) $ 30,827 $ ( 3,639 ) Mortgage-backed/CMOs 3,441 ( 75 ) 109,397 ( 18,623 ) 112,838 ( 18,698 ) Municipal bonds 5,001 ( 27 ) 77,711 ( 16,986 ) 82,712 ( 17,013 ) Total $ 8,442 $ ( 102 ) $ 217,935 $ ( 39,248 ) $ 226,377 $ ( 39,350 ) Less than 12 Months 12 Months or More Total December 31, 2025 Fair Unrealized Fair Unrealized Fair Unrealized Value Losses Value Losses Value Losses U.S. Government agencies $ - $ - $ 31,220 $ ( 3,444 ) $ 31,220 $ ( 3,444 ) Mortgage-backed/CMOs - - 122,085 ( 18,237 ) 122,085 ( 18,237 ) Corporate bonds - - 1,996 ( 1 ) 1,996 ( 1 ) Municipal bonds - - 81,422 ( 17,200 ) 81,422 ( 17,200 ) Total $ - $ - $ 236,723 $ ( 38,882 ) $ 236,723 $ ( 38,882 ) The Company’s securities portfolio is primarily made up of fixed-rate instruments, the prices of which move inversely with interest rates. Any unrealized losses are considered by management to be driven by increases in market interest rates over the yields available at the time the underlying securities were purchased. The fair value is expected to recover as the instruments approach their maturity date or repricing date or if market yields for such investments decline. At the end of any accounting period, the portfolio may have both unrealized gains and losses. 10 Impairment of debt securities occurs when the fair value of a security is less than its amortized cost. For debt securities AFS, impairment is recognized in its entirety in net income if either, (i) we intend to sell the security; or, (ii) it is more-likely-than-not that we will be required to sell the security before recovery of its amortized cost basis. If, however, the Company does not intend to sell the security and it is not more-likely-than-not that the Company will be required to sell the security before recovery, the Company evaluates unrealized losses to determine whether a decline in fair value below amortized cost basis is a result of a credit loss, which occurs when the amortized cost basis of the security exceeds the present value of the cash flows expected to be collected from the security, or other factors such as changes in market interest rates. If a credit loss exists, an ACL is recorded that reflects the amount of impairment related to credit losses, limited by the amount by which the security’s amortized cost basis exceeds its fair value. Changes in the ACL are recorded in net income in the period of change and are included in the provision for credit losses. Changes in the fair value of debt securities AFS not resulting from credit losses are recorded in other comprehensive income (loss). The Company regularly reviews unrealized losses in its investments in securities and cash flows expected to be collected from impaired securities based on criteria including the extent to which market value is below amortized cost, the financial health of and specific prospects for the issuer, the Company’s intention with regard to holding the security to maturity and the likelihood that the Company would be required to sell the security before recovery. Management does not believe any of the securities in an unrealized loss position are impaired due to credit quality. In addition, issuers have continued to make timely payments of principal and interest. Accordingly, as of June 30, 2026, management believes the impairments detailed in the table above are temporary, and no credit loss has been realized in the Company’s consolidated statements of income. Additionally, management has the intent and ability to hold any security with an unrealized loss until maturity or until such time as the value of the security has recovered from its unrealized loss position. Securities pledged as collateral to secure public deposits and to facilitate borrowing from the FRB had carrying values of $ 23.2 million and $ 23.3 mi llion at June 30, 2026 and December 31, 2025, respectively. There were no sales of AFS securities during the six months ended June 30, 2026 and 2025. Restricted securities are securities with limited marketability and consist of stock in the FRB, the Federal Home Loan Bank of Atlanta, CBB Financial Corporation (the holding company for Community Bankers' Bank) and an investment in an SBA loan fund. These restricted securities, totaling $ 6.2 million as of June 30, 2026 and December 31, 2025, are carried at cost. The Company did not consider its investment in restricted stock to be impaired at June 30, 2026 or December 31, 2025 and no impairment has been recognized. The amortized cost and fair value of AFS debt securities at June 30, 2026 are presented below based upon contractual maturities, by major investment categories (dollars in thousands). Expected maturities may differ from contractual maturities because issuers have the right to call or prepay obligations. Amortized Cost Fair Value U.S. Government agencies One year or less $ 649 $ 630 After one year to five years 25,467 23,155 After five years to ten years 8,380 7,072 $ 34,496 $ 30,857 Mortgage-backed/CMOs One year or less $ 1,496 $ 1,482 After one year to five years 1,529 1,458 After five years to ten years 12,629 11,504 Ten years or more 116,774 99,288 $ 132,428 $ 113,732 Corporate bonds After one year to five years $ 5,906 $ 5,958 $ 5,906 $ 5,958 Municipal bonds One year or less $ 805 $ 802 After one year to five years 9,316 9,049 After five years to ten years 24,974 22,873 Ten years or more 66,140 51,499 $ 101,235 $ 84,223 Total AFS Debt Securities $ 274,065 $ 234,770 11 Note 4. Loans The composition of the loan portfolio by major loan classifications at June 30, 2026 and December 31, 2025, stated at their face amount, net of deferred fees and costs and discounts, including fair value marks, ap pears below (dollars in thousands). The Company has elected to exclude accrued interest receivable, totaling $ 4.7 million and $ 4.8 million as of June 30, 2026 and December 31, 2025, respectively, from the amortized cost basis of loans. June 30, December 31, 2026 2025 Commercial loans $ 258,975 $ 265,393 Real estate construction and land 33,111 35,000 1-4 family residential mortgages 300,768 297,589 Commercial mortgages 616,641 613,443 Consumer loans 24,485 26,152 Total loans 1,233,980 1,237,577 Less: Allowance for credit losses ( 8,124 ) ( 8,270 ) Net loans $ 1,225,856 $ 1,229,307 The balances in the table above include unamortized premiums and net deferred loan costs and fees. As of June 30, 2026 and December 31, 2025, unamortized premiums from purchases of loans (excluding loans acquired during the Merger) were $ 10.9 million , and $ 11.6 million , respectively, due primarily to purchases of government-guaranteed loans. Net deferred loan fees net of costs totaled $ 2.9 million as of June 30, 2026 and December 31, 2025. Consumer loans include $ 62 thousand and $ 82 thousand of demand deposit overdrafts as of June 30, 2026 and December 31, 2025, respectively. Loans acquired in business combinations are recorded in the consolidated balance sheets at fair value at the acquisition date under the acquisition method of accounting. The fair value mark as of the Effective Date w as $ 23.1 million. The table above includes a remaining net fair value mark of $ 3.9 millio n and $ 4.8 million as of June 30, 2026 and December 31, 2025, respectively, on the Acquired Loans. The following table shows the aging of the Company's loan portfolio, by class, at June 30, 2026 (dollars in thousands): 30-59 Days 60-89 Days 90 Days or More Past Due and Still Accruing Nonaccrual Loans Current Loans Total Loans Commercial loans $ 4,784 $ 3,236 $ 3,626 $ - $ 247,329 $ 258,975 Real estate construction and land - - - - 33,111 33,111 1-4 family residential mortgages 579 - - 2,099 298,090 300,768 Commercial mortgages 239 452 - - 615,950 616,641 Consumer loans 82 70 66 - 24,267 24,485 Total Loans $ 5,684 $ 3,758 $ 3,692 $ 2,099 $ 1,218,747 $ 1,233,980 The following table shows the aging of the Company's loan portfolio, by class, at December 31, 2025 (dollars in thousands): 12 30-59 Days 60-89 Days 90 Days or More Past Due and Still Accruing Nonaccrual Loans Current Loans Total Loans Commercial loans $ 3,103 $ 2,882 $ 6,565 $ - $ 252,843 $ 265,393 Real estate construction and land - - - - 35,000 35,000 1-4 family residential mortgages 256 221 391 2,198 294,523 297,589 Commercial mortgages 113 - - - 613,330 613,443 Consumer loans 162 73 86 - 25,831 26,152 Total Loans $ 3,634 $ 3,176 $ 7,042 $ 2,198 $ 1,221,527 $ 1,237,577 The following tables show the Company's amortized cost basis of loans on nonaccrual status as of June 30, 2026 and December 31, 2025 (dollars in thousands) . All nonaccrual loans are evaluated for an ACL on an individual basis. As of June 30, 2026 and December 31, 2025, no nonaccrual loans required an ACL. June 30, 2026 Nonaccrual Loans with No Allowance Nonaccrual Loans with an Allowance Total Nonaccrual Loans Commercial loans $ - $ - $ - Real estate construction and land - - - 1-4 family residential mortgages 2,099 - 2,099 Commercial mortgages - - - Consumer loans - - - Total Nonaccrual Loans $ 2,099 $ - $ 2,099 December 31, 2025 Nonaccrual Loans with No Allowance Nonaccrual Loans with an Allowance Total Nonaccrual Loans Commercial loans $ - $ - $ - Real estate construction and land - - - 1-4 family residential mortgages 2,198 - 2,198 Commercial mortgages - - - Consumer loans - - - Total Nonaccrual Loans $ 2,198 $ - $ 2,198 Troubled loan modifications From time to time, the Company modifies loans to borrowers who are experiencing financial difficulties by providing term extensions, interest rate reductions or other-than-insignificant payment delays. As the effect of most modifications is already included in the ACL due to the measurement methodologies used in its estimate, the ACL is typically not adjusted upon modification. For the three months ended June 30, 2026 and 2025, and the six months ended June 30, 2026 and 2025 there were no loans that were modified to borrowers who were experiencing financial difficulty. The Company closely monitors the performance of all modified loans to understand the effectiveness of its modification efforts. Upon determination, if applicable, that all or a portion of a modified loan is uncollectible, that amount is charged against the ACL. During the three months ended June 30, 2026 and 2025, and the six months ended June 30, 2026 and 2025 , no loans which had been previously modified were considered by management to be in default of the terms of their modification. There were no loans secured by 1-4 family properties in foreclosure as of June 30, 2026 or December 31, 2025 . Note 5. Allowance for Credit Losses The ACL on the loan portfolio is a material estimate for the Company. The Company estimates an ACL on its loan portfolio on a quarterly basis and uses this analysis to assess the sufficiency of the ACL on loans and to determine the necessary provision for credit losses. The portfolio is segmented into categories based on common risk factors. 13 The following table shows the ACL activity by loan portfolio for the six months ended June 30, 2026 (dollars in thousands): Commercial Loans Real Estate Construction and Land 1-4 Family Residential Mortgages Commercial Mortgages Consumer Loans Total Allowance for Credit Losses: Balance as of December 31, 2025 $ 481 $ 930 $ 2,482 $ 3,840 $ 537 $ 8,270 Charge-offs - - - - ( 93 ) ( 93 ) Recoveries 8 - - 1 76 85 Recovery of credit losses ( 57 ) ( 193 ) ( 135 ) 120 ( 16 ) ( 281 ) Balance as of March 31, 2026 $ 432 $ 737 $ 2,347 $ 3,961 $ 504 $ 7,981 Charge-offs ( 8 ) - - ( 1 ) ( 65 ) ( 74 ) Recoveries - - - - 80 80 Provision for (recovery of) credit losses 15 231 42 ( 95 ) ( 56 ) 137 Balance as of June 30, 2026 $ 439 $ 968 $ 2,389 $ 3,865 $ 463 $ 8,124 The following table shows the ACL activity by loan portfolio for the year ended December 31, 2025 (dollars in thousands): Commercial Loans Real Estate Construction and Land 1-4 Family Residential Mortgages Commercial Mortgages Consumer Loans Total Allowance for Credit Losses: Balance as of December 31, 2024 $ 760 $ 737 $ 2,551 $ 3,533 $ 874 $ 8,455 Charge-offs ( 6 ) - - - ( 64 ) ( 70 ) Recoveries 4 - 1 1 42 48 Recovery of credit losses ( 66 ) ( 12 ) ( 36 ) 39 ( 30 ) ( 105 ) Balance as of March 31, 2025 $ 692 $ 725 $ 2,516 $ 3,573 $ 822 $ 8,328 Charge-offs ( 9 ) - - - ( 102 ) ( 111 ) Recoveries 5 - - 1 34 40 Provision for (recovery of) credit losses 155 ( 269 ) ( 101 ) 297 8 90 Balance as of June 30, 2025 $ 843 $ 456 $ 2,415 $ 3,871 $ 762 $ 8,347 The following table presents a breakdown of the provision for (recovery o f) credit losses for the periods indicated (dollars in thousands): Three Months Ended Six Months Ended June 30, 2026 June 30, 2025 June 30, 2026 June 30, 2025 Provision for (recovery of) credit losses: Provision for (recovery of) loan losses $ 137 $ 90 $ ( 144 ) $ ( 15 ) Provision for (recovery of) unfunded commitments 94 ( 87 ) 39 ( 142 ) Total $ 231 $ 3 $ ( 105 ) $ ( 157 ) As of June 30, 2026 and December 31, 2025 , the Company had $ 2.1 million and $ 2.2 million respectively, of collateral dependent loans secured by 1-4 family residential mortgages, individually evaluated for expected losses. There was no ACL allocation for the loans for either period. Credit Quality Indicators The Company utilizes the following credit quality indicators: Pass - Loans with the following risk ratings are pooled by class and considered together as “Pass”: Excellent – minimal risk loans secured by cash or fully guaranteed by a U.S. government agency Good – low risk loans secured by marketable collateral within margin Satisfactory – modest risk loans where the borrower has strong and liquid financial statements and more than adequate cash flow Average – average risk loans where the borrower has reasonable debt service capacity Marginal – acceptable risk loans where the borrower has acceptable financial statements but is leveraged 14 Watch - These loans have an acceptable risk but require more attention than normal servicing. Special Mention - These potential problem loans are currently protected but are potentially weak. Substandard - These problem loans are inadequately protected by the sound worth and paying capacity of the borrower and/or the value of any collateral pledged. If such loans are not accruing interest, they would be evaluated on an individual basis. Doubtful - Loans with this rating have significant deterioration in the sound worth and paying capacity of the borrower and/or the value of any collateral pledged, making collection or liquidation of the loan in full highly questionable. These loans would be considered impaired and evaluated on an individual basis. 15 The following table prese nts the Company's recorded investment in loans by credit quality indicators by year of origination as of June 30, 2026 (dollars in thousands). Current period gross write-off amounts represent write-offs for the six months ended June 30, 2026. June 30, 2026 Term Loans Amortized Cost Basis by Origination Year 2026 2025 2024 2023 2022 Prior Revolving Loans Loans Converted to Term Total Commercial loans Pass $ 20,780 $ 45,508 $ 77,164 $ 71,696 $ 9,496 $ 22,104 $ 11,387 $ 100 $ 258,235 Watch - - - - 10 - - - 10 Special Mention - 51 - - - - - - 51 Substandard - - 130 - 472 77 - - 679 Total commercial $ 20,780 $ 45,559 $ 77,294 $ 71,696 $ 9,978 $ 22,181 $ 11,387 $ 100 $ 258,975 Current period gross write-off $ - $ - $ - $ - $ - $ - $ - $ - $ - . Real estate construction and land Pass $ 4,306 $ 9,732 $ 6,973 $ 1,925 $ 352 $ 2,422 $ 1,035 $ - $ 26,745 Watch - - - - - - - - - Special Mention - - - - - 151 - - 151 Substandard - - - - 6,215 - - - 6,215 Total real estate construction and land $ 4,306 $ 9,732 $ 6,973 $ 1,925 $ 6,567 $ 2,573 $ 1,035 $ - $ 33,111 Current period gross write-off $ - $ - $ - $ - $ - $ - $ - $ - $ - . 1-4 family residential mortgages Pass $ 19,574 $ 12,706 $ 20,052 $ 16,233 $ 11,167 $ 186,509 $ 15,973 $ 96 $ 282,310 Watch - 282 1,174 2,888 150 3,362 590 - 8,446 Special Mention 296 18 194 950 333 4,499 43 - 6,333 Substandard - - 102 - 56 3,521 - - 3,679 Total 1-4 family residential mortgage $ 19,870 $ 13,006 $ 21,522 $ 20,071 $ 11,706 $ 197,891 $ 16,606 $ 96 $ 300,768 Current period gross write-off $ - $ - $ - $ - $ - $ - $ - $ - $ - . Commercial mortgages Pass $ 40,238 $ 57,120 $ 89,791 $ 81,705 $ 37,210 $ 249,226 $ 1,113 $ - $ 556,403 Watch - - - 16,138 - 3,746 - - 19,884 Special Mention - 80 12,450 14,025 - 12,862 - - 39,417 Substandard - - - - - 937 - - 937 Total commercial mortgages $ 40,238 $ 57,200 $ 102,241 $ 111,868 $ 37,210 $ 266,771 $ 1,113 $ - $ 616,641 Current period gross write-off $ - $ - $ - $ - $ - $ - $ - $ - $ - Consumer Pass $ 83 $ 543 $ 175 $ 1,067 $ 30 $ 12,143 $ 10,423 $ - $ 24,464 Watch - - - - - 4 - - 4 Special Mention - - - - - 16 - - 16 Substandard - - - 1 - - - - 1 Total consumer $ 83 $ 543 $ 175 $ 1,068 $ 30 $ 12,163 $ 10,423 $ - $ 24,485 Current period gross write-off $ - $ - $ - $ - $ - $ 158 $ - $ - $ 158 16 The following table presents the Company's recorded investment in loans by credit quality indicators by year of origination as of December 31, 2025 (dollars in thousands). Current period gross write-off amounts represent write-offs for the year ended December 31, 2025. December 31, 2025 Term Loans Amortized Cost Basis by Origination Year 2025 2024 2023 2022 2021 Prior Revolving Loans Loans Converted to Term Total Commercial loans Pass $ 49,895 $ 86,243 $ 79,833 $ 9,847 $ 1,392 $ 24,201 $ 13,136 $ - $ 264,547 Watch - - - 15 - - - - 15 Special Mention 56 - - - - - - 69 125 Substandard - 77 - 524 - 104 1 - 706 Total commercial $ 49,951 $ 86,320 $ 79,833 $ 10,386 $ 1,392 $ 24,305 $ 13,137 $ 69 $ 265,393 Current period gross write-off $ - $ - $ 1 $ - $ - $ 94 $ 5 $ - $ 100 Real estate construction and land Pass $ 8,570 $ 6,978 $ 8,984 $ 365 $ 1,823 $ 1,163 $ 104 $ - $ 27,987 Watch - - - - 153 - - - 153 Special Mention - - - - - 186 - - 186 Substandard - - - 6,215 - 459 - - 6,674 Total real estate construction and land $ 8,570 $ 6,978 $ 8,984 $ 6,580 $ 1,976 $ 1,808 $ 104 $ - $ 35,000 Current period gross write-off $ - $ - $ - $ - $ - $ - $ - $ - $ - 1-4 family residential mortgages Pass $ 11,278 $ 22,275 $ 17,500 $ 10,275 $ 45,608 $ 150,553 $ 15,217 $ 294 $ 273,000 Watch 284 1,502 3,737 1,503 2,145 1,545 967 129 11,812 Special Mention 19 196 961 878 1,167 5,021 193 - 8,435 Substandard - 206 - 266 162 3,207 391 110 4,342 Total 1-4 family residential mortgage $ 11,581 $ 24,179 $ 22,198 $ 12,922 $ 49,082 $ 160,326 $ 16,768 $ 533 $ 297,589 Current period gross write-off $ - $ - $ - $ - $ - $ - $ - $ - $ - Commercial mortgages Pass $ 57,470 $ 105,944 $ 110,311 $ 37,753 $ 38,914 $ 236,444 $ 571 $ - $ 587,407 Watch - - 987 - - 8,145 - - 9,132 Special Mention - 77 1,741 - 1,357 12,600 - - 15,775 Substandard 95 794 - - 240 - - 1,129 Total commercial mortgages $ 57,565 $ 106,815 $ 113,039 $ 37,753 $ 40,271 $ 257,429 $ 571 $ - $ 613,443 Current period gross write-off $ - $ - $ - $ - $ - $ - $ - $ - $ - Consumer Pass $ 619 $ 559 $ 1,076 $ 36 $ 145 $ 13,341 $ 10,140 $ - $ 25,916 Watch - - - - 8 58 1 - 67 Special Mention - - - - 15 64 - - 79 Substandard - - - - 86 4 - 90 Total consumer $ 619 $ 559 $ 1,076 $ 36 $ 168 $ 13,549 $ 10,145 $ - $ 26,152 Current period gross write-off $ - $ - $ - $ - $ 9 $ 343 $ 1 $ - $ 353 17 Note 6. Goodwill and Other Intangible Assets The carrying amount of goodwill was $ 7.8 million at June 30, 2026 and December 31, 2025. The Company had $ 2.2 million and $ 2.7 million of other intangible assets as of June 30, 2026 and December 31, 2025 , respectively, recognized in connection with the core deposits acquired from the Merger. The following table summarizes the gross carrying amounts and accumulated amortization of other intangible assets (dollars in thousands): June 30, 2026 December 31, 2025 Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization Amortized intangible assets: Core deposit intangible $ 9,660 $ ( 7,461 ) $ 9,660 $ ( 6,978 ) Amortization expense was $ 236 thousand and $ 284 thousand for the three months ended June 30, 2026 and 2025, respectively, and $ 483 thousand and $ 579 thousand for the six months ended June 30, 2026 and 2025, respectively. Estimated future amortization expense as of June 30, 2026 is as follows (dollars in thousands): Core Deposit Intangible For the six months ending December 31, 2026 $ 435 For the year ending December 31, 2027 726 For the year ending December 31, 2028 535 For the year ending December 31, 2029 343 For the year ending December 31, 2030 152 Thereafter 8 Total $ 2,199 Note 7. Net Income Per Share The table below shows the weighted average number of shares used in computing net income per common share and the effect of the weighted average number of shares of potential dilutive common stock for the three and six months ended June 30, 2026 and 2025. Diluted net income per share is computed based on the weighted average number of shares of common stock equivalents outstanding, to the extent dilutive. The Company’s common stock equivalents relate to outstanding common stock options. The recipients of unvested restricted shares have full voting and dividend rights, and as such, unvested restricted stock is included in the calculation of basic and diluted net income per share (dollars in thousands except per share data). Three Months Ended June 30, 2026 June 30, 2025 Net Income Weighted Average Shares Per Share Amount Net Income Weighted Average Shares Per Share Amount Basic net income per share $ 9,008 5,423,642 $ 1.66 $ 4,238 5,391,979 $ 0.79 Effect of dilutive stock options - 31,761 ( 0.01 ) - 25,921 ( 0.01 ) Diluted net income per share $ 9,008 5,455,403 $ 1.65 $ 4,238 5,417,900 $ 0.78 Six Months Ended June 30, 2026 June 30, 2025 Net Income Weighted Average Shares Per Share Amount Net Income Weighted Average Shares Per Share Amount Basic net income per share $ 14,268 5,416,631 $ 2.63 $ 8,727 5,385,461 $ 1.62 Effect of dilutive stock options - 32,678 ( 0.01 ) - 24,969 ( 0.01 ) Diluted net income per share $ 14,268 5,449,309 $ 2.62 $ 8,727 5,410,430 $ 1.61 For the three and six months ended June 30, 2026, there w ere 53,520 and 56,120 opt ion shares, respectively, considered anti-dilutive and excluded from this calculation. For the three and six months ended June 30, 2025 , there were 101,864 and 119,464 option shares, respectively, considered anti-dilutive and excluded from this calculation. 18 Note 8. Stock Incentive Plans The 2022 Plan permits the Company to grant both incentive and nonqualified stock options, as well as restricted stock, unrestricted stock and other stock based awards. No new grants can be issued under the previous 2014 Plan as that plan has expired. Outstanding stock options expire ten years from the grant date. Both plans had outstanding options and restricted stock at June 30, 2026. Restricted stock and stock options from both plans vest by the fourth or fifth anniversary of the date of the grant. For the 2022 Plan, the option price for any stock options cannot be less than the fair value of the Company’s stock on the grant date. In addition, 95 % of the common stock authorized for issuance must have a vesting or exercise schedule of at least one year. For the 2014 Plan, the option price of incentive stock options could not be less than the fair value of the stock at the time an option was granted and nonqualified stock options could have been granted at prices established by the Board of Directors, including prices less than the fair value on the date of grant. The Company accounts for all of its stock incentive plans under recognition and measurement accounting principles which require that the compensation cost relating to stock-based payment transactions be recognized in the financial statements. Stock-based compensation arrangements include stock options and restricted stock. All stock-based payments to employees are required to be valued at a fair value on the date of grant and expensed based on that fair value over the applicable vesting period. Stock Options Changes in the stock options outstanding related to the Plans are summarized below (dollars in thousands except per share data): June 30, 2026 Number of Options Weighted Average Exercise Price Aggregate Intrinsic Value Outstanding at January 1, 2026 226,294 $ 33.17 $ - Issued - - - Exercised ( 37,997 ) 30.10 - Forfeited ( 12,937 ) 34.35 - Expired - - - Outstanding at June 30, 2026 175,360 $ 33.75 $ 1,864 Options exercisable at June 30, 2026 137,020 $ 33.98 $ 1,425 For the three months ended June 30, 2026 and 2025, the Company recognized $ 23 thousand and $ 35 thousand , respectively, in compensation expense for stock options. For the six months ended June 30, 2026, and 2025, the Company recognized $ 27 thousand and $ 69 thousand , respectively, in compensation expense for stock options. As of June 30, 2026, there wa s $ 226 thousand in unr e cognized compensation expense remaining to be recognized in future reporting periods through 2030 . The fair value of any stock option grant is estimated at the grant date using the Black-Scholes pricing model. There were no stock options granted during the three months ended June 30, 2026 compared to 2,600 shares issued during the same time period for 2025. There were no stock options granted during the first six months of 2026 compared to 8,200 shares issued during the six months ended June 30, 2025. Summary information pertaining to options outstanding at June 30, 2026 is shown below. Options Outstanding Options Exercisable Exercise Price Number of Options Outstanding Weighted- Average Remaining Contractual Life Weighted- Average Exercise Price Number of Options Exercisable Weighted- Average Exercise Price $ 23.75 to $ 30.00 71,040 5.3 Years $ 26.02 57,180 $ 25.58 $ 30.01 to $ 40.00 61,800 5.9 Years 36.54 37,320 37.03 $ 40.01 to $ 42.62 42,520 1.9 Years 42.62 42,520 42.62 Total 175,360 4.7 Years $ 33.75 137,020 $ 33.98 19 Stock Grants Restricted stock grants – Under the 2022 Plan, during the three months ended June 30, 2026 and 2025 , no shares of restricted stock were issued; however, for the six months ended June 30, 2026 and 2025, 20,900 and 21,068 restricted shares, respectively, were granted to employees and non-employee directors. The shares vest over a four-year period. For the three months ended June 30, 2026 and 2025, $ 208 thousand and $ 212 thousand , respectively, was expensed as a result of restricted stock grants. For the six months ended June 30, 2026 and 2025, $ 506 thousand and $ 426 thousand , respectively, was expensed as a result of restricted stock grants. As of June 30, 2026 , there was $ 1.8 million in unrecognized compensation expense for all restricted stock grants remaining to be recognized in future reporting periods through 2030 . Changes in the restricted stock grants outstanding during the six months ended June 30, 2026 are summarized below (dollars in thousands except per share data): June 30, 2026 Number of Shares Weighted Average Grant Date Fair Value Per Share Aggregate Intrinsic Value Nonvested as of January 1, 2026 62,468 $ 33.30 $ 2,772 Issued 20,900 40.85 928 Vested ( 24,974 ) ( 33.33 ) ( 1,108 ) Forfeited ( 220 ) ( 35.91 ) ( 10 ) Nonvested at June 30, 2026 58,174 $ 35.99 $ 2,582 Note 9. Fair Value Measurements Determination of Fair Value The Company follows ASC 820, “Fair Value Measurements and Disclosures,” to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. This codification clarifies that the fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. The fair value guidance provides a consistent definition of fair value, which focuses on exit price in the principal or most advantageous market for the asset or liability in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. If there has been a significant decrease in the volume and level of activity for the asset or liability, a change in valuation technique or the use of multiple valuation techniques may be appropriate. In such instances, determining the price at which willing market participants would transact at the measurement date under current market conditions depends on the facts and circumstances and requires the use of significant judgment. The fair value is a reasonable point within the range that is most representative of fair value under current market conditions. Fair Value Hierarchy In accordance with this guidance, the Company groups its financial assets and financial liabilities generally measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value: Level 1 – Valuation is based on quoted prices in active markets for identical assets and liabilities. Level 2 – Valuation is based on observable inputs including quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets and liabilities in less active markets, and model-based valuation techniques for which significant assumptions can be derived primarily from or corroborated by observable data in the market. Level 3 – Valuation is based on model-based techniques that use one or more significant inputs or assumptions that are unobservable in the market. 20 The following describes the valuation techniques used by the Company to measure certain financial assets and liabilities recorded at fair value on a recurring basis in the consolidated financial statements: Securities available for sale Securities AFS are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted market prices, when available (Level 1). If quoted market prices are not available, fair values are measured utilizing independent valuation techniques of identical or similar securities for which significant assumptions are derived primarily from or corroborated by observable market data. Third party vendors compile prices from various sources and may determine the fair value of identical or similar securities by using pricing models that consider observable market data (Level 2). Assets and Liabilities Measured at Fair Value on a Recurring Basis The following tables present the balances measured at fair value on a recurring basis at the dates indicated (dollars in thousands): Fair Value Measurements at June 30, 2026 Using: Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs Description Balance (Level 1) (Level 2) (Level 3) Assets: U.S. Government agencies $ 30,857 $ - $ 30,857 $ - Mortgage-backed/CMOs 113,732 - 113,732 - Corporate bonds 5,958 - 5,958 - Municipal bonds 84,223 - 84,223 - Total securities AFS $ 234,770 $ - $ 234,770 $ - Fair Value Measurements at December 31, 2025 Using: Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs Description Balance (Level 1) (Level 2) (Level 3) Assets: U.S. Government agencies $ 31,263 $ - $ 31,263 $ - Mortgage-backed/CMOs 123,505 - 123,505 - Corporate bonds 7,899 - 7,899 - Municipal bonds 85,325 - 85,325 - Total securities AFS $ 247,992 $ - $ 247,992 $ - Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis Certain financial assets are measured at fair value on a nonrecurring basis in accordance with GAAP. Adjustments to the fair value of these assets usually result from the application of lower-of-cost-or-market accounting or write downs of individual assets. There were no assets measured at fair value on a nonrecurring basis as of June 30, 2026 and December 31, 2025. Fair Value of Financial Instruments ASC 825, “Financial Instruments,” requires disclosures about fair value of financial instruments for interim periods and excludes certain financial instruments and all non-financial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company. The Company uses the exit price notion in calculating the fair values of financial instruments not measured at fair value on a recurring basis. The carrying values and estimated fair values of the Company's financial instruments at the dates indicated are as follows (dollars in thousands): 21 Fair Value Measurements at June 30, 2026 Using: Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs Carrying value Level 1 Level 2 Level 3 Fair Value Assets Cash and cash equivalent $ 77,347 $ 77,347 $ - $ - $ 77,347 Available for sale securities 234,770 - 234,770 - 234,770 Restricted securities 6,195 - 6,195 - 6,195 Loans, net 1,225,856 - - 1,200,251 1,200,251 Bank owned life insurance 41,953 - 41,953 - 41,953 Accrued interest receivable 5,870 - 1,313 4,557 5,870 Liabilities Demand deposits and interest-bearing transaction and money market accounts $ 1,128,374 $ - $ 1,128,374 $ - $ 1,128,374 Certificates of deposit 280,822 - 280,494 - 280,494 Borrowings 20,000 - 20,111 - 20,111 Junior subordinated debt, net 3,578 - 3,578 - 3,578 Accrued interest payable 1,457 - 1,457 - 1,457 Fair Value Measurements at December 31, 2025 Using: Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs Carrying value Level 1 Level 2 Level 3 Fair Value Assets Cash and cash equivalent $ 70,614 $ 70,614 $ - $ - $ 70,614 Available for sale securities 247,992 - 247,992 - 247,992 Restricted securities 6,172 - 6,172 - 6,172 Loans, net 1,229,307 - - 1,202,216 1,202,216 Bank owned life insurance 41,302 - 41,302 - 41,302 Accrued interest receivable 6,213 - 1,371 4,842 6,213 Liabilities Demand deposits and interest-bearing transaction and money market accounts $ 1,140,432 $ - $ 1,140,432 $ - $ 1,140,432 Certificates of deposit 291,299 - 291,499 - 291,499 Borrowings 20,000 - 19,954 - 19,954 Junior subordinated debt, net 3,554 - 3,554 - 3,554 Accrued interest payable 1,431 - 1,431 - 1,431 The Company assumes interest rate risk (the risk that general interest rate levels will change) as a result of its normal operations. Consequently, the fair values of the Company’s financial instruments will fluctuate when interest rate levels change, and that change may be either favorable or unfavorable to the Company. Management attempts to match maturities of assets and liabilities to the extent believed necessary to minimize interest rate risk; however, borrowers with fixed rate obligations are less likely to prepay in a rising rate environment and more likely to prepay in a falling rate environment. Conversely, depositors who are receiving fixed rates are more likely to withdraw funds before maturity in a rising rate environment and less likely to do so in a falling rate environment. Management monitors rates and maturities of assets and liabilities and attempts to minimize interest rate risk by adjusting terms of new loans and deposits and by investing in securities with terms that mitigate the Company’s overall interest rate risk. 22 Note 10. Accumulated Other Comprehensive Loss The following table presents the changes in each component of accumulated other comprehensive loss during the three months ended June 30, 2026 and 2025 (dollars in thousands). AFS Securities Accumulated other comprehensive loss at March 31, 2026 $ ( 31,944 ) Other comprehensive income arising during the period 1,141 Related income tax effects ( 240 ) 901 Accumulated other comprehensive loss at June 30, 2026 $ ( 31,043 ) AFS Securities Accumulated other comprehensive loss at March 31, 2025 $ ( 38,341 ) Other comprehensive income arising during the period 1,832 Related income tax effects ( 385 ) 1,447 Accumulated other comprehensive loss at June 30, 2025 $ ( 36,894 ) The following table presents the changes in each component of accumulated other comprehensive loss during the six months ended June 30, 2026 and 2025 (dollars in thousands). AFS Securities Accumulated other comprehensive loss at December 31, 2025 $ ( 30,668 ) Other comprehensive loss arising during the period ( 475 ) Related income tax effects 100 ( 375 ) Accumulated other comprehensive loss at June 30, 2026 $ ( 31,043 ) AFS Securities Accumulated other comprehensive loss at December 31, 2024 $ ( 41,862 ) Other comprehensive income arising during the period 6,289 Related income tax effects ( 1,321 ) 4,968 Accumulated other comprehensive loss at June 30, 2025 $ ( 36,894 ) Note 11. Segment Reporting For the financial periods noted in this report, the Company has two reportable segments. Each reportable segment is a strategic business unit that offers different products and services. They are managed separately, because each segment appeals to different markets and, accordingly, require different technology and marketing strategies. The accounting policies of the segments are the same as those described in the summary of significant accounting policies provided earlier in this report. Asset information is not disclosed because all are held at the bank level. The two reportable segments are: • Bank - The commercial banking segment involves making loans and generating deposits from individuals, businesses and charitable organizations. Loan fee income, service charges from deposit accounts, and other noninterest related fees, such as fees for debit cards and ATM usage and fees for treasury management services, generate additional income for the Bank segment. • VNB Trust & Estate Services - VNB Trust & Estate Services offers corporate trustee services, trust and estate administration, IRA administration and custody services. Revenue for this segment is generated from administration, service and custody fees, as well as management fees that are derived from Assets Under 23 Management. Investment management services currently are offered through in-house and third-party managers. Segment information for the three and six months ended June 30, 2026 and 2025 is shown in the following tables (dollars in thousands). Three months ended June 30, 2026 Bank VNB Trust & Estate Services Consolidated Net interest income $ 13,748 $ - $ 13,748 Provision for credit losses 231 - 231 Net interest income after provision for credit losses $ 13,517 $ - $ 13,517 Noninterest income: Wealth management fees $ - $ 214 $ 214 Deposit account fees 359 - 359 Debit/credit card and ATM fees 245 - 245 Bank owned life insurance income 332 - 332 Gain on sale of limited partnership investment 4,662 - 4,662 Other 220 - 220 Total noninterest income $ 5,818 $ 214 $ 6,032 Noninterest expense: Salaries and employee benefits $ 3,840 $ 187 $ 4,027 Net occupancy 693 27 720 Equipment 212 - 212 Bank franchise tax 468 - 468 Computer software 214 - 214 Data processing 609 - 609 FDIC deposit insurance assessment 187 - 187 Marketing, advertising and promotion 254 - 254 Professional fees 333 - 333 Core deposit intangible amortization 236 - 236 Other 954 55 1,009 Total noninterest expense $ 8,000 $ 269 $ 8,269 Income before income taxes $ 11,335 $ ( 55 ) $ 11,280 Provision for (benefit of) income taxes 2,283 ( 11 ) 2,272 Net income (loss) $ 9,052 $ ( 44 ) $ 9,008 24 Six months ended June 30, 2026 Bank VNB Trust & Estate Services Consolidated Net interest income $ 26,655 $ - $ 26,655 Recovery of credit losses ( 105 ) - ( 105 ) Net interest income after recovery of credit losses $ 26,760 $ - $ 26,760 Noninterest income: Wealth management fees $ - $ 434 $ 434 Deposit account fees 725 - 725 Debit/credit card and ATM fees 496 - 496 Bank owned life insurance income 651 - 651 Gains on sale of assets, net 5 - 5 Gain on sale of limited partnership investment 4,662 - 4,662 Other 548 - 548 Total noninterest income $ 7,087 $ 434 $ 7,521 Noninterest expense: Salaries and employee benefits $ 7,649 $ 377 $ 8,026 Net occupancy 1,447 52 1,499 Equipment 398 - 398 Bank franchise tax 936 - 936 Computer software 428 - 428 Data processing 1,159 - 1,159 FDIC deposit insurance assessment 362 - 362 Marketing, advertising and promotion 521 - 521 Professional fees 681 - 681 Core deposit intangible amortization 483 - 483 Other 1,828 147 1,975 Total noninterest expense $ 15,892 $ 576 $ 16,468 Income before income taxes $ 17,955 $ ( 142 ) $ 17,813 Provision for (benefit of) income taxes 3,574 ( 29 ) 3,545 Net income (loss) $ 14,381 $ ( 113 ) $ 14,268 25 Three months ended June 30, 2025 Bank VNB Trust & Estate Services Consolidated Net interest income $ 12,796 $ - $ 12,796 Provision for credit losses 3 - 3 Net interest income after provision for credit losses $ 12,793 $ - $ 12,793 Noninterest income: Wealth management fees $ - $ 206 $ 206 Deposit account fees 293 - 293 Debit/credit card and ATM fees 355 - 355 Bank owned life insurance income 307 - 307 Other 150 - 150 Total noninterest income $ 1,105 $ 206 $ 1,311 Noninterest expense: Salaries and employee benefits $ 3,612 $ 251 $ 3,863 Net occupancy 856 33 889 Equipment 198 4 202 Bank franchise tax 489 - 489 Computer software 266 - 266 Data processing 693 39 732 FDIC deposit insurance assessment 145 - 145 Marketing, advertising and promotion 179 - 179 Professional fees 297 34 331 Core deposit intangible amortization 284 - 284 Other 1,293 8 1,301 Total noninterest expense $ 8,312 $ 369 $ 8,681 Income before income taxes $ 5,586 $ ( 163 ) $ 5,423 Provision for (benefit of) income taxes 1,219 ( 34 ) 1,185 Net income (loss) $ 4,367 $ ( 129 ) $ 4,238 26 Six months ended June 30, 2025 Bank VNB Trust & Estate Services Consolidated Net interest income $ 25,090 $ - $ 25,090 Recovery of credit losses ( 157 ) - ( 157 ) Net interest income after recovery of credit losses $ 25,247 $ - $ 25,247 Noninterest income: Wealth management fees $ - $ 435 $ 435 Deposit account fees 600 - 600 Debit/credit card and ATM fees 725 - 725 Bank owned life insurance income 600 - 600 Gains on sale of assets, net 278 - 278 Other 433 - 433 Total noninterest income $ 2,636 $ 435 $ 3,071 Noninterest expense: Salaries and employee benefits $ 7,309 $ 490 $ 7,799 Net occupancy 1,840 65 1,905 Equipment 381 7 388 Bank franchise tax 828 - 828 Computer software 522 - 522 Data processing 1,388 79 1,467 FDIC deposit insurance assessment 290 - 290 Marketing, advertising and promotion 433 - 433 Professional fees 517 70 587 Core deposit intangible amortization 579 - 579 Other 2,693 14 2,707 Total noninterest expense $ 16,780 $ 725 $ 17,505 Income before income taxes $ 11,103 $ ( 290 ) $ 10,813 Provision for (benefit of) income taxes 2,146 ( 60 ) 2,086 Net income (loss) $ 8,957 $ ( 230 ) $ 8,727 Note 12. Subsequent Event In July 2026, the Company entered into an amendment to the ground lease for the Pantops headquarters property. The amendment, which is effective beginning on November 1, 2026, extends the term of the lease from five years to 20 years. The extension increases both the right-of-use asset and the lease liability by $ 5.2 million. This change reflects the present value of additional lease payments over the new term. 27 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the unaudited consolidated financial statements, and notes thereto, of Virginia National Bankshares Corporation included in this report and the audited consolidated financial statements, and notes thereto, of the Company included in the Company’s Form 10-K for the year ended December 31, 2025. Operating results for the three and six months ended June 30, 2026 are not necessarily indicative of the results for the year ending December 31, 2026 or any future period. FORWARD-LOOKING STATEMENTS AND FACTORS THAT COULD AFFECT FUTURE RESULTS Certain statements in this report may be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including but not limited to, statements concerning future results of operations or financial position, borrowing capacity and future liquidity, future investment results, future credit exposure, future loan losses, plans and objectives for future operations, changes in laws and regulations applicable to the Company and its subsidiaries, adequacy of funding sources, actuarial expected benefit payments, valuation of foreclosed assets, regulatory requirements, economic environment and other statements contained herein regarding matters that are not historical facts. Such statements are often characterized by use of qualified words such as “expect,” “believe,” “estimate,” “project,” “anticipate,” “intend,” “will,” “should,” or words of similar meaning or their derivatives, or other statements concerning the opinions or judgment of the Company and its management about future events. These statements are not historical facts but instead are subject to numerous assumptions, risks and uncertainties, and represent only management’s belief regarding future events, many of which, by their nature, are inherently uncertain and outside management’s control. Although the Company believes that management’s expectations with respect to forward-looking statements are based upon reasonable assumptions within the bounds of its existing knowledge of the Company’s business and operations, there can be no assurance that actual future results, performance, or achievements of, or trends affecting, the Company will not differ materially from any projected future results, performance, achievements or trends expressed in or implied by such forward-looking statements. Any forward-looking statements made by the Company speak only as of the date on which such statements are made, and the Company does not undertake to update any forward-looking statements to reflect changes or events that may occur after the date of this report. The Company’s actual results and financial position may differ materially from the anticipated results and financial condition indicated in or implied by these forward-looking statements. Factors that could cause the Company's actual results to differ materially from those in the forward-looking statements include, but are not limited to, the following: inflation, interest rates, market and monetary fluctuations; liquidity and capital requirements; market disruptions including trade restrictions, tariffs, pandemics or significant health hazards, severe weather conditions, natural disasters, terrorist activities, financial crises, political crises, war and other military conflicts or other major events, the governmental and societal responses thereto, or the prospect of these events; changes, particularly declines, in general economic and market conditions in the local economies in which the Company operates, including the effects of declines in real estate values; the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Federal Reserve; the impact of changes in laws, regulations and guidance related to financial services, including, but not limited to, taxes, banking, securities and insurance; changes in accounting principles, standards, policies and guidelines; the financial condition of the Company’s borrowers; the Company's ability to attract, hire, train and retain qualified employees; an increase in unemployment levels; competitive pressures on loan and deposit pricing and demand; fluctuation in asset quality; assumptions that underlie the Company’s ACL; the value of securities held in the Company's investment portfolio; performance of assets under management; cybersecurity threats or attacks and the development and maintenance of reliable electronic systems; changes in technology and their impact on the marketing of new products and services and the acceptance of these products and services by new and existing customers; the willingness of customers to substitute competitors’ products and services for the Company’s products and services; the risks and uncertainties described from time-to-time in the Company’s press releases and filings with the SEC; and the Company’s performance in managing the risks involved in any of the foregoing. Additional risk factors and uncertainties are described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 and in other reports filed from time to time by the Company with the Securities and Exchange Commission. All risk factors and uncertainties described herein and therein should be considered in evaluating any forward-looking statements. The forward-looking statements are expressly qualified by this cautionary statement, and undue reliance should not be placed on such forward-looking statements. 28 OVERVIEW Our primary financial goal is to maximize the Company’s earnings to increase long-term shareholder value. We monitor four key financial performance measures to determine our success in realizing this goal: 1) return on average assets, 2) return on average equity, 3) net income per share, and 4) tangible book value per share (a non-GAAP financial measure). • ROAA for the three months ended June 30, 2026 of 2.24% increased 119 bps when compared to the three months ended June 30, 2025 of 1.05%. ROAA for the six months ended June 30, 2026 was 1.77% compared to 1.08% realized in the same period in the prior year. Both periods of 2026 reflect higher non-interest income due to a gain from the sale of a limited investment partnership interest in Bearing Insurance Group, LLC ("Bearing"). • ROAE for the three months ended June 30, 2026 was 18.81% compared to 10.05% in the same period in the prior year. ROAE for the six months ended June 30, 2026 was 15.14% compared to 10.54% realized in the same period in the prior year. • Net income per diluted share was $1.65 for the three months ended June 30, 2026, compared to $0.78 for the same period in the prior year. Net income per diluted share was $2.62 for the six months ended June 30, 2026 compared to $1.61 for the same period in the prior year. • Tangible book value per share (non-GAAP) increased to $34.05 as of June 30, 2026, compared to $29.63 as of June 30, 2025. The increase reflects the impact of the Company's earnings performance that the Company posts as well as the gain from the Bearing transaction in the second quarter of 2026. Refer to the Results of Operations, Non-GAAP Presentation section, later in this Management’s Discussion and Analysis for more discussion on financial performance measures determined other than in accordance with GAAP. APPLICATION OF CRITICAL ACCO UNTING POLICIES AND ESTIMATES The accounting and reporting policies followed by the Company conform, in all material respects, to GAAP and to general practices within the financial services industry. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. While the Company bases estimates on historical experience, current information and other factors deemed to be relevant, actual results could differ from those estimates. The Company considers accounting estimates to be critical to reported financial results if (i) the accounting estimate requires management to make assumptions about matters that are highly uncertain, and (ii) different estimates that management reasonably could have used for the accounting estimate in the current period, or changes in the accounting estimate that are reasonably likely to occur from period to period, could have a material impact on the Company’s consolidated financial statements. The Company’s accounting policies are fundamental to understanding management’s discussion and analysis of financial condition and results of operations. For additional information regarding critical accounting policies, refer to the Application of Critical Accounting Policies and Critical Accounting Estimates section under Item 8 in the Company’s 2025 Form 10-K, there have been no changes since that time. FINANCIAL CONDITION Total assets The total assets of the Company as of June 30, 2026 were $1.6 billion. This is a $11.5 million, or 0.7%, decrease from total assets reported at December 31, 2025. Securities The Company’s investment securities portfolio as of June 30, 2026 totaled $241.0 million, a decrease of $13.2 million compared with the $254.2 million reported at December 31, 2025. The decrease from year-end was the result of maturities and normal cash flow from paydowns. Paydowns within the securities portfolio provide additional liquidity allowing the Company to take advantage of investment opportunities that complement its growth and earnings strategies. At June 30, 2026 and December 31, 2025, the investment securities holdings represented 14.7% and 15.4% of the Company’s total assets, respectively. The Company’s investment securities portfolio included restricted securities totaling $6.2 million as of June 30, 2026 and December 31, 2025. These securities represent stock in the FRB, the FHLB, CBB Financial Corporation (the holding company for Community Bankers' Bank), and an investment in an SBA loan fund. The level of FRB and FHLB stock that the Company is required to hold is determined in accordance with membership guidelines provided by the Federal Reserve and the FHLB, respectively. Stock ownership in CBB Financial Corporation provides the Company with several benefits that are not available to non-shareholder correspondent banks. None of these restricted securities are traded on the open market and can only be redeemed by the respective issuer. 29 At June 30, 2026, the unrestricted securities portfolio totaled $234.8 million. The following table summarizes the Company's AFS securities by type as of June 30, 2026, and December 31, 2025 (dollars in thousands): June 30, 2026 December 31, 2025 % of % of Balance Total Balance Total U.S. Government agencies $ 30,857 13.1 % $ 31,263 12.6 % Mortgage-backed/CMOs 113,732 48.5 % 123,505 49.8 % Corporate bonds 5,958 2.5 % 7,899 3.2 % Municipal bonds 84,223 35.9 % 85,325 34.4 % Total AFS securities $ 234,770 100.0 % $ 247,992 100.0 % The unrestricted securities are held primarily for earnings, liquidity, and asset/liability management purposes and are reviewed quarterly for possible impairments indicating credit losses. During this review, management analyzes the length of time the fair value has been below cost, the expectation for each security’s performance, the creditworthiness of the issuer, and the Company’s intent and ability to hold the security to recovery or maturity. These factors are analyzed for each individual security. Loan portfolio A management objective is to grow loan balances while maintaining the asset quality of the loan portfolio. The Company seeks to achieve this objective by maintaining rigorous underwriting standards coupled with regular evaluation of the creditworthiness of, and the designation of lending limits for, each borrowing relationship. The portfolio strategies include seeking industry, loan size, and loan type diversification to minimize credit exposure and originating loans in markets with which the Company is familiar. The Company's geographical trade area includes localities in Virginia, Maryland, the District of Columbia and West Virginia. Total loans were $1.2 billion as of June 30, 2026 and December 31, 2025. Loans as a percentage of total assets at June 30, 2026 were 75.3%, compared to 75.0% as of December 31, 2025. The following table summarizes the Company's loan portfolio by type of loan as of June 30, 2026 and December 31, 2025 (dollars in thousands): June 30, 2026 December 31, 2025 Balance % of Total Balance % of Total Commercial loans $ 258,975 21.0 % $ 265,393 21.4 % Real estate mortgage: Construction and land 33,111 2.7 % 35,000 2.8 % 1-4 family residential mortgages 300,768 24.3 % 297,589 24.1 % Commercial mortgages 616,641 50.0 % 613,443 49.6 % Total real estate mortgage $ 950,520 77.0 % $ 946,032 76.5 % Consumer loans 24,485 2.0 % 26,152 2.1 % Total loans $ 1,233,980 100.0 % $ 1,237,577 100.0 % Despite strong loan originations in the first half of 2026, loan balances declined $3.6 million from December 31, 2025 to June 30, 2026. During the first half of 2026, the Company funded $85 million in loans, which was comprised of $64 million in organic loan production and $21 million of purchased government guaranteed loans. Payoffs and normal amortization offset the loans funded during the first half of 2026. 30 The following table details the Company's levels of non-owner occupied commercial real estate as of June 30, 2026, along with the average loan size and percentage of risk ratings for each category (dollars in thousands): Loan Type Balance # of Loans % of Total CRE Average Loan Size Special Mention Sub- standard Nonaccrual Hotels $ 46,695 8 14.14 % $ 5,837 0.00 % 0.00 % 0.00 % Office Building 74,946 85 22.70 % $ 882 3.56 % 0.00 % 0.00 % Warehouses/Industrial 65,109 31 19.72 % $ 2,100 0.78 % 0.00 % 0.00 % Retail 124,201 70 37.61 % $ 1,774 13.96 % 0.57 % 0.00 % Day Cares / Schools 10,740 7 3.25 % $ 1,534 0.00 % 0.00 % 0.00 % All Other Commercial Buildings 8,518 10 2.58 % $ 852 0.00 % 0.00 % 0.00 % Total Non-Owner Occupied CRE $ 330,209 The following table details the Company's levels of non-owner occupied commercial real estate as of December 31, 2025, along with the average loan size and percentage of risk ratings for each category (dollars in thousands): Loan Type Balance # of Loans % of Total CRE Average Loan Size Special Mention Sub- standard Nonaccrual Hotels $ 42,870 8 12.85 % $ 5,359 0.00 % 0.00 % 0.00 % Office Building 77,908 81 23.35 % $ 962 0.00 % 0.00 % 0.00 % Warehouses/Industrial 63,622 29 19.07 % $ 2,194 0.87 % 0.00 % 0.00 % Retail 128,548 65 38.52 % $ 1,978 3.04 % 0.00 % 0.00 % Day Cares / Schools 11,655 9 3.49 % $ 1,295 0.00 % 0.00 % 0.00 % All Other Commercial Buildings 9,091 11 2.72 % $ 826 0.00 % 0.00 % 0.00 % Total Non-Owner Occupied CRE $ 333,694 Loan quality The Company continues to experience extremely low levels of NPAs, as a result of strict underwriting standards and practices. However, the economic environment in the Company's lending footprint could be impacted, which could increase NPAs in future periods. Nonaccruals - Nonaccrual loans, comprised of fourteen loans to twelve borrowers, totaled $2.1 million at June 30, 2026, compared to $2.2 million reported at December 31, 2025. Past Due Loans - The Company had loans in its portfolio totaling $3.7 million, and $7.0 million as of June 30, 2026, and December 31, 2025, respectively, that were 90 or more days past due and still accruing interest as the Company deemed them to be collectible. The past due balance as of June 30, 2026 is comprised of four loans totaling $3.6 million which are 100% government-guaranteed, and six student loans totaling $66 thousand. Troubled Loan Modifications - No loans were modified during the three and six months ended June 30, 2026 or 2025. Management identifies potential problem loans through its periodic loan review process and considers potential problem loans as those loans classified as special mention, substandard, or doubtful. 31 Allowance for Credit Losses The relationship of the ACL to total loans and nonaccrual loans appears below (dollars in thousands): June 30, 2026 December 31, 2025 Total loans $ 1,233,980 $ 1,237,577 Nonaccrual loans $ 2,099 $ 2,198 Allowance for credit losses $ 8,124 $ 8,270 Nonaccrual loans to total loans 0.17 % 0.18 % ACL to total loans 0.66 % 0.67 % ACL to nonaccrual loans 387.04 % 376.25 % The ACL on loans as a percentage of loans was 0.66% as of June 30, 2026 and 0.67% as of December 31, 2025, and the fair value mark that was allocated to the acquired loans was $3.9 million as of June 30, 2026 and $4.7 million as of December 31, 2025. Recoveries of credit losses on loans totaling $144 thousand and $15 thousand were recorded in the six months ended June 30, 2026 and 2025, respectively. The following is a summary of the changes (dollars in thousands): 2026 2025 Allowance for credit losses, December 31 of prior year $ 8,270 $ 8,455 Charge-offs (158 ) (181 ) Recoveries 156 88 Recovery of credit losses (144 ) (15 ) Allowance for credit losses, June 30 $ 8,124 $ 8,347 For additional insight into management’s approach and methodology in estimating the ACL, please refer to the earlier discussion of “Allowance for Credit Losses” in Note 5 of the Notes to Consolidated Financial Statements. Management has elected to perform an individual evaluation on all loans in nonaccrual status. As of June 30, 2026 and 2025, after reviewing each loan no specific reserve was deemed necessary. The $144 thousand provision release from December 31, 2025 to June 30, 2026 was the result of a combination of events. The improved economic forecast in the first quarter of 2026 drove improvement in factors and thus overall lower reserves. During the first quarter, a significant number of construction loans converted to permanent financing into pools with lower reserve rates. Even though second quarter origination activity was brisk, it did not overtake the releases warranted due to the balance decrease. These changes led to the reduction in the ACL on loans as a percentage of loans of 1 bps from 0.67% at December 31, 2025 to 0.66% at June 30, 2026. The provision for unfunded commitments increased by $36 thousand from December 31, 2025 to June 30, 2026 due to a second quarter increase in unfunded commitments. The balance in government-guaranteed loans, which do not require an ACL, decreased $2.3 million from December 31, 2025 to June 30, 2026, from $227.5 million to $225.2 million. Management reviews the ACL on a quarterly basis to ensure it is adequate based upon the calculated probable losses inherent in the portfolio. Management believes the ACL was adequately provided for as of June 30, 2026 and acknowledges that the ACL may increase throughout the year as loan growth and economic conditions may change in the foreseeable future. 32 Premises and equipment The Company’s premises and equipment, net of depreciation, totaled $11.6 million and $11.7 million as of June 30, 2026 and December 31, 2025, respectively. Depreciation expense is computed by the straight-line method based on the estimated useful lives of assets. Expenditures for repairs and maintenance are charged to expense as incurred. The costs of major renewals and betterments are capitalized and depreciated over their estimated useful lives. Upon disposition, assets and related accumulated depreciation are removed from the books, and any resulting gain or loss is charged to income. As of June 30, 2026, the Company occupied thirteen banking facilities throughout Albemarle, Fauquier and Prince William counties and the cities of Charlottesville, Richmond, Manassas and Winchester, Virginia. The Company operates a drive-through location, at 301 East Water Street, Charlottesville, Virginia, which is included in the thirteen. The five-story office building at 404 People Place, Charlottesville, Virginia, located in Albemarle County, also serves as the Company’s corporate headquarters and operations center. VNB Trust & Estate Services is located at 103 Third Street, SE, Charlottesville, Virginia. Both the Arlington Boulevard facility in Charlottesville and the People Place facility in Albemarle County also contain office space that is currently under lease to tenants. Leases As of June 30, 2026, the Company has recorded $5.6 million of right-of-use assets and $5.5 million of lease liabilities. As of December 31, 2025, $6.3 million of right-of-use assets and $6.2 million of lease liabilities were included on the balance sheet. Right-of-use assets are assets that represent the Company’s right to use, or control the use of, a specified asset for the lease term, offset by the lease liability, which is the Company’s obligation to make lease payments arising from a lease, measured on a discounted basis. During the second quarter of 2025, the Company extended the ground lease associated with the Pantops headquarters for an additional five-year period. In July 2026, the Company further extended the term of such ground lease. The amended lease has a 20-year term which will begin on November 1, 2026. The extension increases both the right-of-use asset and the lease liability by $5.2 million. This change reflects the present value of additional lease payments over the new term. Deposits Deposit accounts represent the Company’s primary source of funds and are comprised of demand deposits, interest-bearing checking, money market, and savings accounts as well as time deposits. These deposits have been provided predominantly by individuals, businesses and charitable organizations in the Commonwealth of Virginia. Total deposits as of June 30, 2026 were $1.4 billion, a decrease of $22.5 million, or 1.6%, compared to December 31, 2025 (dollars in thousands). June 30, 2026 December 31, 2025 % of % of Balance Total Balance Total No cost and low cost deposits: Noninterest demand deposits $ 367,348 26.1 % $ 362,322 25.3 % Interest checking accounts 279,179 19.8 % 308,295 21.5 % Money market and savings deposit accounts 481,847 34.2 % 469,815 32.9 % Total noninterest and low cost deposit accounts $ 1,128,374 80.1 % $ 1,140,432 79.7 % Time deposit accounts: Certificates of deposit 270,733 19.2 % 285,472 19.9 % CDARS deposits 10,089 0.7 % 5,827 0.4 % Total certificates of deposit and other time deposits $ 280,822 19.9 % $ 291,299 20.3 % Total deposit account balances $ 1,409,196 100.0 % $ 1,431,731 100.0 % Noninterest-bearing demand deposits on June 30, 2026 were $367.3 million, representing 26.1% of total deposits. Interest-bearing transaction, money market, and savings accounts totaled $761.0 million, and represented 54.0% of total deposits at June 30, 2026. Collectively, noninterest-bearing and interest-bearing transaction, money market and savings 33 accounts represented 80.1% of total deposit accounts at June 30, 2026. These account types are an excellent source of low-cost funding for the Company. The Company also offers insured cash sweep deposit products. ICS ® deposit balances of $51.3 million and $145.1 million are included in the interest checking accounts and in the money market and savings deposit accounts balances, respectively, in the table above, as of June 30, 2026. As of December 31, 2025, ICS ® deposit balances of $60.8 million and $139.6 million are included in the interest checking accounts and in the money market and savings deposit account balances, respectively. All ICS ® accounts consist of reciprocal balances for the Company’s customers. The Company currently holds no brokered or specialty certificates of deposit. The remaining 19.9% of total deposits consisted of certificates of deposit and other time deposit accounts totaling $280.8 million at June 30, 2026, decreasing from $291.3 million as of December 31, 2025. Included in these deposit totals are CDARS TM , whereby depositors can obtain FDIC deposit insurance on account balances of up to $50 million. CDARS TM deposits totaled $10.1 million as of June 30, 2026 and $5.8 million as of December 31, 2025, all of which were reciprocal balances for the Company’s customers. As of June 30, 2026 and December 31, 2025, the estimated amounts of uninsured deposits were $333.6 million, or 23.7% of total deposits and $392.0 million, or 27.4% of total deposits, respectively. Borrowings Borrowings, consisting primarily of FHLB advances, are additional sources of funds for the Company. The level of these borrowings is determined by various factors, including customer demand and the Company's ability to earn a favorable spread on the funds obtained. As of June 30, 2026, based on the FHLB’s evaluation, the Company has an available credit position of $494.0 million, for which access can be negotiated based on multiple factors. The Company currently has a collateral dependent line of credit with the FHLB for $133.5 million, secured by commercial mortgages, with borrowings of $20.0 million as of June 30, 2026 and December 31, 2025. Additional borrowing arrangements maintained by the Company include formal unsecured federal funds lines with five major regional correspondent banks for a total of $120.0 million and a secured line with the Federal Reserve discount window in the amount of $3.3 million, based on the market value of the collateral. Junior Subordinated Debt In 2006, a subsidiary of Fauquier, Fauquier Statutory Trust II, privately issued $4.0 million face amount of the trust’s Floating Rate Capital Securities in a pooled capital securities offering. Simultaneously, the trust used the proceeds of that sale to purchase $4.0 million principal amount of Fauquier’s Floating Rate Junior Subordinated Deferrable Interest Debentures due 2036. As of June 30, 2026 and December 31, 2025, total capital securities were $3.6 million, as adjusted to fair value as of the date of the Merger. The rate is a spread adjustment of 0.03% plus a margin of 1.70% above the three-month CME Term SOFR. The Trust II issuance of capital securities and the respective subordinated debentures are callable at any time. The subordinated debentures are an unsecured obligation of the Company and are junior in right of payment to all present and future senior indebtedness of the Company. The capital securities are guaranteed by the Company on a subordinated basis. Shareholders' equity and regulatory capital ratios The following table displays the changes in shareholders' equity for the Company from December 31, 2025 to June 30, 2026 (dollars in thousands): Equity, December 31, 2025 $ 184,161 Net income 14,268 Other comprehensive loss (375 ) Cash dividends declared (3,902 ) Equity increase due to expensing of stock options 27 Equity increase due to expensing of restricted stock 506 Equity, June 30, 2026 $ 194,685 The Basel III capital rules require banks and bank holding companies to comply with the following minimum capital ratios: (i) a ratio of common equity Tier 1 capital to risk-weighted assets of at least 4.5%, plus a 2.5% “capital conservation buffer” (effectively resulting in a minimum ratio of common equity Tier 1 to risk-weighted assets of at least 7%); (ii) a ratio of Tier 1 capital to risk-weighted assets of at least 6.0%, plus the 2.5% capital conservation buffer (effectively resulting 34 in a minimum Tier 1 capital ratio of 8.5%); (iii) a ratio of total capital to risk-weighted assets of at least 8.0%, plus the 2.5% capital conservation buffer (effectively resulting in a minimum total capital ratio of 10.5%); and (iv) a leverage ratio of 4%, calculated as the ratio of Tier 1 capital to balance sheet exposures plus certain off-balance sheet exposures (computed as the average for each quarter of the month-end ratios for the quarter). The Company’s Tier 1, common equity Tier 1, total capital to risk-weighted assets, and leverage ratios were 20.77%, 20.77%, 21.59%, and 13.38% respectively, as of June 30, 2026, thus exceeding the minimum requirements. The Bank’s Tier 1, common equity Tier 1, total capital to risk-weighted assets, and leverage ratios were 20.52%, 20.52%, 21.35%, and 13.21%, respectively, as of June 30, 2026, also exceeding the minimum requirements. As of June 30, 2026, the Bank exceeded all of the following minimum capital ratios in order to be considered “well capitalized” under the PCA regulations, as revised: (i) a common equity Tier 1 capital ratio of at least 6.5%; (ii) a Tier 1 capital to risk-weighted assets ratio of at least 8.0%; (iii) a total capital to risk-weighted assets ratio of at least 10.0%; and (iv) a leverage ratio of at least 5.0%. RESULTS OF OPERATIONS Industry events and economic environment Management of the Company continually monitors the impact of various global and national events on the Company's results of operations and financial condition, including inflation and economic recessionary conditions, changes in interest rates, the political environment, geopolitical conflicts, competition, liquidity matters, changes in legislative or regulatory requirements and changes in government policy, such as the imposition of tariffs and potential trade barriers. The timing and impact of inflation, fluctuations in and volatility of interest rates, and the competitive landscape of loans and deposits on our business and results of operations will depend on future developments, which are uncertain and unpredictable. In 2025, the Federal Reserve reduced rates three times with each rate reduction being 25 bps, and the final reduction occurred in December. There were no rate changes in the first half of 2026. While growth is solid, inflation remains above the 2% goal due to supply and energy shocks. At the July 29, 2026 FOMC meeting, where the rates remained unchanged again, the new Federal Reserve Chair Kevin Warsh avoided future guidance on forward rate paths, and focused instead on new task forces to review policy frameworks. Management will continue to deploy solid asset liability management strategies to manage our risk related to interest rate fluctuations and monitor balance sheet trends, deposit flows, and liquidity needs to enable us to meet the needs of our customers and maintain financial flexibility. 35 Non-GAAP presentations The accounting and reporting policies of the Company conform to GAAP and prevailing practices in the banking industry. However, certain non-GAAP measures are used by management to supplement the evaluation of the Company’s performance. These include tangible book value per share, tangible equity and the following fully-taxable equivalent measures: net interest income-FTE, efficiency ratio-FTE and net interest margin-FTE. Interest on tax-exempt loans and securities is presented on a taxable-equivalent basis (which converts the income on loans and investments for which no income taxes are paid to the equivalent yield as if income taxes were paid) using the federal corporate income tax rate of 21 percent that was applicable for all periods presented. Management believes that the use of these non-GAAP measures provides meaningful information about operating performance by enhancing comparability with other financial periods, other financial institutions, and between different sources of interest income. The non-GAAP measures used by management enhance comparability by excluding the effects of (1) balances of intangible assets, including goodwill, that vary significantly between institutions, and (2) tax benefits that are not consistent across different opportunities for investment. These non-GAAP financial measures should not be considered an alternative to, or more important than, GAAP-basis financial statements, and other banks and bank holding companies may define or calculate these or similar measures differently. Net income is discussed in Management’s Discussion and Analysis on a GAAP basis unless noted as “non-GAAP.” A reconcilement of the non-GAAP financial measures used by the Company to evaluate and measure the Company's performance to the most directly comparable GAAP financial measures is presented below (dollars in thousands, except per share data): As of or for the Three Months Ended For the Six Months Ended June 30, 2026 June 30, 2025 June 30, 2026 June 30, 2025 Fully tax-equivalent measures Net interest income (GAAP) $ 13,748 $ 12,796 $ 26,655 $ 25,090 Fully tax-equivalent adjustment 87 85 172 172 Net interest income (FTE) (non-GAAP) $ 13,835 $ 12,881 $ 26,827 $ 25,262 Efficiency ratio (GAAP) 41.8 % 61.5 % 48.2 % 62.2 % Fully tax-equivalent adjustment -0.2 % -0.3 % -0.3 % -0.4 % Efficiency ratio (FTE) (non-GAAP) 41.6 % 61.2 % 47.9 % 61.8 % Net interest margin (GAAP) 3.63 % 3.37 % 3.50 % 3.32 % Fully tax-equivalent adjustment 0.02 % 0.02 % 0.02 % 0.02 % Net interest margin (FTE) (non-GAAP) 3.65 % 3.40 % 3.52 % 3.34 % Other financial measures Book value per share (GAAP) $ 35.89 $ 31.67 Impact of intangible assets (1.84 ) (2.04 ) Tangible book value per share (non-GAAP) $ 34.05 $ 29.63 Total equity (GAAP) $ 194,685 $ 170,772 Impact of intangible assets (9,967 ) (10,981 ) Tangible equity (non-GAAP) $ 184,718 $ 159,791 Net income Net income for the three months ended June 30, 2026 was $9.0 million, a $4.8 million increase compared to $4.2 million reported for the three months ended June 30, 2025. Net income per diluted share was $1.65 for the three months ended June 30, 2026 compared to $0.78 per diluted share for the same period in the prior year. 36 Net income for the six months ended June 30, 2026 was $14.3 million, compared to $8.7 million for the six months ended June 30, 2025. Net income per diluted share was $2.62 for the six months ended June 30, 2026, compared to $1.61 for the six months ended June 30, 2025. The increase in net income in 2026 is primarily the result of the increase in noninterest income, continued decreases in the cost of funds and increases in earning asset yields despite some contraction in loan balances, along with decreases in noninterest expense, particularly in net occupancy, data processing and other expenses. The gain from the sale of the Bearing limited partnership investment augmented noninterest income. Net interest income Net interest margin (FTE) is the ratio of net interest income (FTE) to average earning assets for the period. The level of interest rates, together with the volume and mix of earning assets and interest-bearing liabilities, impact net interest income (FTE) and net interest margin (FTE). Quarterly overview - Net interest income (FTE) for the three months ended June 30, 2026 was $13.8 million, a $954 thousand increase compared to net interest income (FTE) of $12.9 million for the three months ended June 30, 2025. The net interest margin (FTE) of 3.65% for the three months ended June 30, 2026 was 25 bps higher than the 3.40% realized during the three months ended June 30, 2025. Interest expense decreased by $590 thousand, positively impacting net interest income (FTE) and net interest margin (FTE), compared to the same period in the prior year. Overall, the cost of interest-bearing deposits decreased 11 bps period over period, from 2.23% to 2.12%. A $3.3 million decrease in average balances of time deposit products contributed to the reduced interest expense during the three months ended June 30, 2026 compared to 2025. Average loan balances of $1.2 billion for the three months ended June 30, 2025 were flat compared to average loan balances for the three months ended June 30, 2026. Earning assets were negatively impacted by the decrease in the average balances of securities, decreasing from $266.9 million in the three months ended June 30, 2025 to $243.9 million in the three months ended June 30, 2026; however, an increase of $25.9 million in Federal funds sold during the same periods helped to offset the decreased securities balances. The primary contributor to the margin improvement was decreased funding costs with a $590 thousand expense reduction due to the control of interest rates paid and decreased borrowings. Year-to-date overview - Net interest income (FTE) for the six months ended June 30, 2026 was $26.8 million, a $1.6 million increase compared to net interest income (FTE) for the six months ended June 30, 2025. The net interest margin (FTE) of 3.52% was 18 bps higher than the 3.34% realized during the six months ended June 30, 2025. Interest expense decreased by $1.3 million, positively impacting net interest income (FTE) and net interest margin (FTE), compared to the same period in the prior year. Overall, the cost of interest-bearing deposits decreased 15 bps period over period, from 230 bps to 215 bps. A $9.0 million decrease in average balances of time deposit products contributed to a lower interest expense in 2026. Average loan balances of $1.2 billion for the six months ended June 30, 2026 were flat compared to average loan balances for the six months ended June 30, 2025. Earning assets were negatively impacted by the decrease in the average balances of securities, decreasing from $269.2 million in the six months ended June 30, 2025 to $248.8 million in the six months ended June 30, 2026. There was an increase in Federal funds sold of $31.8 million which helped offset the decrease in securities. Refer to the Reconcilement of Non-GAAP Measures table within the Non-GAAP presentations section for a reconcilement of GAAP net interest margin to non-GAAP net interest margin (FTE). 37 The following tables detail the average balance sheet, including an analysis of net interest income (FTE) for earning assets and interest-bearing liabilities. These tables also include rate/volume analyses for these same periods (dollars in thousands). Consolidated Average Balance Sheet and Analysis of Net Interest Income For the Three Months Ended June 30, 2026 June 30, 2025 Change in Interest Income/ Expense Average Interest Average Average Interest Average Change Due to 4 : Total Balance Income/ Yield/ Balance Income/ Yield/ Volume Rate Increase/ Expense Cost 5 Expense Cost 5 (Decrease) ASSETS Interest Earning Assets: Securities: Taxable Securities $179,586 $1,149 2.56% $201,507 $1,374 2.73% $(144) $(81) $(225) Tax Exempt Securities 1 64,347 413 2.57% 65,347 408 2.50% (6) 11 5 Total Securities 1 243,933 1,562 2.56% 266,854 1,782 2.67% (150) (70) (220) Loans, net of deferred fees and costs 1,235,696 17,688 5.74% 1,240,563 17,330 5.60% (68) 426 358 Federal funds sold 31,554 288 3.66% 5,698 64 4.51% 238 (14) 224 Other interest-bearing deposits 9,147 47 2.06% 8,230 45 2.19% 5 (3) 2 Total Earning Assets 1,520,330 19,585 5.17% 1,521,345 19,221 5.07% 25 339 364 Less: Allowance for Credit Losses (7,996) (8,338) Total Non-Earning Assets 97,395 102,550 Total Assets $1,609,729 $1,615,557 LIABILITIES AND SHAREHOLDERS' EQUITY Interest Bearing Liabilities: Interest Bearing Deposits: Interest Checking $265,742 $67 0.10% $268,728 $67 0.10% $(1) $1 - Money Market and Savings Deposits 489,059 2,940 2.41% 464,058 2,927 2.53% 154 (141) 13 Time Deposits 283,277 2,478 3.51% 286,555 2,670 3.74% (30) (162) (192) Total Interest-Bearing Deposits 1,038,078 5,485 2.12% 1,019,341 5,664 2.23% 123 (302) (179) Federal funds purchased - - 0.00% 1,472 18 4.90% (18) - (18) Borrowings 20,000 194 3.89% 49,275 582 4.74% (298) (90) (388) Junior subordinated debt 3,570 71 7.98% 3,523 76 8.65% 1 (6) (5) Total Interest-Bearing Liabilities 1,061,648 5,750 2.17% 1,073,611 6,340 2.37% (192) (398) (590) Noninterest-Bearing Liabilities: Demand deposits 344,699 364,033 Other liabilities 11,299 8,790 Total Liabilities 1,417,646 1,446,434 Shareholders' Equity 192,083 169,123 Total Liabilities & Shareholders' Equity $1,609,729 $1,615,557 Net Interest Income (FTE) $13,835 $12,881 $217 $737 $954 Interest Rate Spread 2 3.00% 2.70% Cost of Funds 1.64% 1.77% Interest Expense as a Percentage of Average Earning Assets 1.52% 1.67% Net Interest Margin (FTE) 3 3.65% 3.40% (1) Tax-exempt income for investment securities has been adjusted to a fully tax-equivalent basis (FTE), using a Federal income tax rate of 21%. Refer to the Reconcilement of Non-GAAP Measures table within the Non-GAAP Presentations earlier in this section. (2) Interest spread is the average yield earned on earning assets less the average rate paid on interest-bearing liabilities. (3) Net interest margin (FTE) is net interest income expressed as a percentage of average earning assets (a non-GAAP financial measure). (4) The impact on the net interest income (FTE) resulting from changes in average balances and average rates is shown for the period indicated. The change in interest due to both volume and rate has been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amounts of the change in each. (5) Ratio is computed on an annualized basis. 38 Consolidated Average Balance Sheet and Analysis of Net Interest Income For the Six Months Ended June 30, 2026 June 30, 2025 Change in Interest Income/ Expense Average Interest Average Average Interest Average Change Due to 4 : Total Balance Income/ Yield/ Balance Income/ Yield/ Volume Rate Increase/ Expense Cost 5 Expense Cost 5 (Decrease) ASSETS Interest Earning Assets: Securities: Taxable Securities $ 184,352 $ 2,342 2.54 % $ 203,584 $ 2,798 2.75 % $ (253 ) $ (203 ) $ (456 ) Tax Exempt Securities 1 64,411 820 2.55 % 65,572 818 2.49 % (15 ) 17 2 Total Securities 1 248,763 3,162 2.54 % 269,156 3,616 2.69 % (268 ) (186 ) (454 ) Loans, net of deferred fees and costs 1,234,592 34,521 5.64 % 1,237,061 34,363 5.60 % (69 ) 227 158 Federal funds sold 43,046 782 3.66 % 11,256 248 4.44 % 585 (51 ) 534 Other interest-bearing deposits 8,696 82 1.90 % 8,041 87 2.18 % 7 (12 ) (5 ) Total Earning Assets 1,535,097 38,547 5.06 % 1,525,514 38,314 5.06 % 255 (22 ) 233 Less: Allowance for Credit Losses (8,135 ) (8,416 ) Total Non-Earning Assets 98,624 105,321 Total Assets $ 1,625,586 $ 1,622,419 LIABILITIES AND SHAREHOLDERS' EQUITY Interest Bearing Liabilities: Interest Bearing Deposits: Interest Checking $ 275,134 $ 137 0.10 % $ 271,736 $ 136 0.10 % $ 2 $ (1 ) $ 1 Money Market and Savings Deposits 488,403 5,993 2.47 % 464,231 5,930 2.58 % 302 (239 ) 63 Time Deposits 287,339 5,063 3.55 % 296,388 5,724 3.89 % (171 ) (490 ) (661 ) Total Interest-Bearing Deposits 1,050,876 11,193 2.15 % 1,032,355 11,790 2.30 % 133 (730 ) (597 ) Federal funds purchased - - 0.00 % 1,017 25 4.96 % (12 ) (13 ) (25 ) Borrowings 20,000 386 3.89 % 46,038 1,091 4.78 % (531 ) (174 ) (705 ) Junior subordinated debt 3,564 141 7.98 % 3,517 146 8.37 % 2 (7 ) (5 ) Total Interest-Bearing Liabilities 1,074,440 11,720 2.20 % 1,082,927 13,052 2.43 % (408 ) (924 ) (1,332 ) Non-Interest-Bearing Liabilities: Demand deposits 349,925 363,198 Other liabilities 11,125 9,328 Total Liabilities 1,435,490 1,455,453 Shareholders' Equity 190,096 166,966 Total Liabilities & Shareholders' Equity $ 1,625,586 $ 1,622,419 Net Interest Income (FTE) $ 26,827 $ 25,262 $ 663 $ 902 $ 1,565 Interest Rate Spread 2 2.86 % 2.63 % Cost of Funds 1.66 % 1.82 % Interest Expense as a Percentage of Average Earning Assets 1.54 % 1.73 % Net Interest Margin (FTE) 3 3.52 % 3.34 % (1) Tax-exempt income for investment securities has been adjusted to a fully tax-equivalent basis (FTE), using a Federal income tax rate of 21%. Refer to the Reconcilement of Non-GAAP Measures table within the Non-GAAP Presentations earlier in this section. (2) Interest spread is the average yield earned on earning assets less the average rate paid on interest-bearing liabilities. (3) Net interest margin (FTE) is net interest income expressed as a percentage of average earning assets (a non-GAAP financial measure). (4) The impact on the net interest income (FTE) resulting from changes in average balances and average rates is shown for the period indicated. The change in interest due to both volume and rate has been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amounts of the change in each. (5) Ratio is computed on an annualized basis. 39 Provision for credit losses A provision for credit losses of $231 thousand was recognized during the three months ended June 30, 2026 compared to $3 thousand recognized during the three months ended June 30, 2025. For the six months ended June 30, 2026 and 2025 there were recoveries of $105 thousand and $157 thousand, respectively. The provision recognized in the three months ended June 30, 2026 was due to construction and multifamily project loans originated which drove increases in the ACL as those pools require higher reserves. The fluctuation of loan balances with a net reduction of outstanding balances from December 31, 2025 to June 30, 2026 contributed to the release. In addition, the migration of loans that were refinanced into pools requiring lower reserves contributed to the release. Further discussion of management’s assessment of the ACL is provided earlier in the report and in Note 5 – Allowance for Credit Losses, found in the Notes to the Consolidated Financial Statements. In management’s opinion, the ACL was adequately provided for at June 30, 2026. The ACL calculation, provision for credit losses, asset quality and collateral values may be significantly impacted by deterioration in economic conditions. Should economic conditions worsen, we could experience increases in our required ACL and record additional provision for credit loss exposure. Noninterest income The components of noninterest income are shown below (dollars in thousands): For the Three Months Ended Variance June 30, 2026 June 30, 2025 $ % Noninterest income: Wealth management fees $ 214 $ 206 $ 8 3.9 % Deposit account fees 359 293 66 22.5 % Debit/credit card and ATM fees 245 355 (110 ) -31.0 % Bank owned life insurance income 332 307 25 8.1 % Gain on sale of limited partnership investment 1 4,662 - 4,662 N/A Other 220 150 70 46.7 % Total noninterest income $ 6,032 $ 1,311 $ 4,721 360.1 % (1) Percentage change is not reported when the baseline (prior period) is zero, as the percentage change is mathematically undefined. Noninterest income for the three months ended June 30, 2026 of $6.0 million was $4.7 million or 360.1% more than the amount recorded for the three months ended June 30, 2025, due primarily to the gain on the sale of limited partnership investment. The sale of the Company's interest in the investment in Bearing Insurance Group, LLC, a full service insurance agency owned by multiple banks throughout Virginia, was completed on May 1, 2026. For the Six Months Ended Variance June 30, 2026 June 30, 2025 $ % Noninterest income: Wealth management fees $ 434 $ 435 $ (1 ) -0.2 % Deposit account fees 725 600 125 20.8 % Debit/credit card and ATM fees 496 725 (229 ) -31.6 % Bank owned life insurance income 651 600 51 8.5 % Gains on sale of assets, net 5 278 (273 ) -98.2 % Gain on sale of limited partnership investment 1 4,662 - 4,662 N/A Other 548 433 115 26.6 % Total noninterest income $ 7,521 $ 3,071 $ 4,450 144.9 % (1) Percentage change is not reported when the baseline (prior period) is zero, as the percentage change is mathematically undefined. Noninterest income for the six months ended June 30, 2026 of $7.5 million was $4.5 million or 144.9% more than the amount recorded for the six months ended June 30, 2025, due primarily to the gain on sale of the limited partnership investment, as discussed above. 40 Noninterest expense The components of noninterest expense are shown below (dollars in thousands): For the Three Months Ended Variance June 30, 2026 June 30, 2025 $ % Noninterest expense: Salaries and employee benefits $ 4,027 $ 3,863 $ 164 4.2 % Net occupancy 720 889 (169 ) -19.0 % Equipment 212 202 10 5.0 % Bank franchise tax 468 489 (21 ) -4.3 % Computer software 214 266 (52 ) -19.5 % Data processing 609 732 (123 ) -16.8 % FDIC deposit insurance assessment 187 145 42 29.0 % Marketing, advertising and promotion 254 179 75 41.9 % Professional fees 333 331 2 0.6 % Core deposit intangible amortization 236 284 (48 ) -16.9 % Other 1,009 1,301 (292 ) -22.4 % Total noninterest expense $ 8,269 $ 8,681 $ (412 ) -4.7 % Noninterest expense for the quarter ended June 30, 2026 of $8.3 million was $412 thousand or 4.7% less than the quarter ended June 30, 2025. This decrease is primarily due to lower data processing costs resulting from the contract renewal negotiations which occurred in the fourth quarter of 2025, reduction of depreciation expenses on fully-depreciated assets and a reduction in other expenses (which includes legal fees) incurred in the most recent quarter compared to the same quarter of 2025. The components of noninterest expense for the six months ended June 30, 2026 and 2025 are shown below (dollars in thousands): For the Six Months Ended Variance June 30, 2026 June 30, 2025 $ % Noninterest expense: Salaries and employee benefits $ 8,026 $ 7,799 $ 227 2.9 % Net occupancy 1,499 1,905 (406 ) -21.3 % Equipment 398 388 10 2.6 % Bank franchise tax 936 828 108 13.0 % Computer software 428 522 (94 ) -18.0 % Data processing 1,159 1,467 (308 ) -21.0 % FDIC deposit insurance assessment 362 290 72 24.8 % Marketing, advertising and promotion 521 433 88 20.3 % Professional fees 681 587 94 16.0 % Core deposit intangible amortization 483 579 (96 ) -16.6 % Other 1,975 2,707 (732 ) -27.0 % Total noninterest expense $ 16,468 $ 17,505 $ (1,037 ) -5.9 % Noninterest expense for the six months ended June 30, 2026 of $16.5 million was $1.0 million or 5.9% less than the six months ended June 30, 2025. This decrease is primarily due to the same factors discussed above. Efficiency Ratio The efficiency ratio (FTE) was 41.6% for the three months ended June 30, 2026 compared to 61.2% for the same quarter of 2025, primarily due to a one time gain on sale of limited partner investment. The efficiency ratio (FTE) of 47.9% for the six months ended June 30, 2026 improved from 61.8% realized in the six months ended June 30, 2025, as all the components of the ratio improved for both the quarter to date and year to date periods of 2026 compared to 2025. Refer to the Reconcilement of Non-GAAP Measures table within the Non-GAAP presentations section for a reconcilement of GAAP to Non-GAAP efficiency ratio. 41 Provision for Income Taxes For the three months ended June 30, 2026 and 2025, the Company provided $2.3 million and $1.2 million for Federal income taxes, respectively, resulting in effective income tax rates of 20.1% and 21.9%, respectively. For the six months ended June 30, 2026 and 2025, the Company provided $3.5 million and $2.1 million for Federal income taxes, respectively, resulting in effective tax rates of 19.9% and 19.3%, respectively. For each period, the effective income tax rate differed from the U.S. statutory rate of 21% due to the changes in pretax earnings, low-income housing tax credits and the levels of permanent tax differences. OTHER SIGNIFICANT EVENTS None ITEM 3. QUANTITATIVE AND QUALITAT IVE DISCLOSURES ABOUT MARKET RISK Not required ITEM 4. CONTROLS AND PROCEDURES The Company maintains “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Exchange Act, that are designed to ensure that information required to be disclosed in reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating its disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Based on their evaluation as of the end of the period covered by this quarterly report on Form 10-Q, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the disclosure controls and procedures were effective at the reasonable assurance level. There were no changes in the Company’s internal control over financial reporting that occurred during the three months ended June 30, 2026 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. PART II. OTHE R INFORMATION ITEM 1. LEGAL PROCEEDINGS. In the ordinary course of its operations, the Company and/or its subsidiaries are parties to various legal proceedings from time to time. Based on the information presently available, and after consultation with legal counsel, management believes that the ultimate outcome of such proceedings, in the aggregate, will not have a material adverse effect on the business or financial condition of the Company and its subsidiary. ITEM 1A. RI SK FACTORS. During the quarter ended June 30, 2026, there have been no material changes from the risk factors described in the Company’s Form 10-K for the year ended December 31, 2025. The risks described may not be the only risks facing us. Additional risks and uncertainties not currently known to us or that are currently considered not to be material also may materially adversely affect our business, financial condition and/or operating results. 42 ITEM 2. UNREGISTERED SALES OF EQUI TY SECURITIES AND USE OF PROCEEDS. (a) Sales of Unregistered Securities - None (b) Use of Proceeds - Not Applicable (c) Issuer Purchases of Securities - None ITEM 3. DEFAULTS UPO N SENIOR SECURITIES. None ITEM 4. MINE SAF ETY DISCLOSURES. Not applicable ITEM 5. OTHER INFORMATION. (a) Required 8-K disclosures. None (b) Changes in procedures for director nominations by security holders. None (c) Rule 10b5-1 Trading arrangements During the three months ended June 30, 2026 none of our directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted , modified or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408 of Regulation S-K of the Securities Exchange Act of 1934). ITEM 6. E XHIBITS. Exhibit Number Description of Exhibit 31.1 302 Certification of Principal Executive Officer 31.2 302 Certification of Principal Financial Officer 32.1 906 Certification 101 The following financial statements from the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2026, formatted in Inline eXtensible Business Reporting Language, pursuant to Rule 405 of Regulation S-T (1): (i) Consolidated Balance Sheets (unaudited), (ii) Consolidated Statements of Income (unaudited), (iii) Consolidated Statements of Comprehensive Income (unaudited), (iv) Consolidated Statements of Changes in Shareholders' Equity (unaudited), (v) Consolidated Statements of Cash Flows (unaudited), and (vi) Notes to Consolidated Financial Statements (unaudited), tagged as blocks of text and including detailed tags 104 The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2026, formatted in Inline eXtensible Business Reporting Language (included with Exhibit 101) 43 SIGNAT URES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. VIRGINIA NATIONAL BANKSHARES CORPORATION (Registrant) /s/ Glenn W. Rust Glenn W. Rust President and Chief Executive Officer (principal executive officer) Date: August 13, 2026 /s/ Cathy W. Liles Cathy W. Liles Executive Vice President and Chief Financial Officer (principal financial and accounting officer) Date: August 13, 2026 44