NWPP 10-Q
New Peoples Bankshares Inc (NWPP)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
|
(Address of principal executive offices) |
(Zip Code) |
| (Registrant’s telephone number, including area code) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| None |
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.
| ☑ | 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).
| ☑ | 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 ☐ | |
| 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 |
The number of shares outstanding of the registrant’s common stock was as of May 11, 2026.
NEW PEOPLES BANKSHARES, INC.
INDEX
| Part I | Financial Information | |
| Item 1 | Financial Statements |
NEW PEOPLES BANKSHARES, INC.
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2026 AND DECEMBER 31, 2025
(IN THOUSANDS EXCEPT PER SHARE AND SHARE DATA)
(UNAUDITED)
| March 31, | December 31, | |||||||
| 2026 | 2025 | |||||||
| ASSETS | ||||||||
| Cash and due from banks | $ | $ | ||||||
| Interest-bearing deposits with banks | ||||||||
| Federal funds sold | ||||||||
| Total cash and cash equivalents | ||||||||
| Investment securities available-for-sale, at fair value | ||||||||
| Restricted stock, at cost | ||||||||
| Loans receivable | ||||||||
| Allowance for credit losses | ( | ) | ( | ) | ||||
| Net loans | ||||||||
| Bank premises and equipment, net | ||||||||
| Other real estate owned | ||||||||
| Accrued interest receivable | ||||||||
| Deferred taxes, net | ||||||||
| Right-of-use assets – operating leases | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES | ||||||||
| Deposits: | ||||||||
| Noninterest bearing | $ | $ | ||||||
| Interest-bearing | ||||||||
| Total deposits | ||||||||
| Borrowed funds | ||||||||
| Lease liabilities – operating leases | ||||||||
| Accrued interest payable | ||||||||
| Accrued expenses and other liabilities | ||||||||
| Total liabilities | ||||||||
| SHAREHOLDERS’ EQUITY | ||||||||
| Common stock - $ par value; shares authorized; and shares issued and outstanding at March 31, 2026 and December 31, 2025, respectively | ||||||||
| Additional paid-in-capital | ||||||||
| Retained earnings | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Total shareholders’ equity | ||||||||
| Total liabilities and shareholders’ equity | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
3
NEW PEOPLES BANKSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2026 AND 2025
(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
| For the Three Months Ended | ||||||||
| March 31, | ||||||||
| INTEREST AND DIVIDEND INCOME | 2026 | 2025 | ||||||
| Loans including fees | $ | $ | ||||||
| Federal funds sold | ||||||||
| Interest-earning deposits with banks | ||||||||
| Investments | ||||||||
| Dividends on equity securities (restricted) | ||||||||
| Total interest and dividend income | ||||||||
| INTEREST EXPENSE | ||||||||
| Deposits | ||||||||
| Borrowed funds | ||||||||
| Total interest expense | ||||||||
| NET INTEREST INCOME | ||||||||
| PROVISION FOR CREDIT LOSSES | ||||||||
| NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES | ||||||||
| NONINTEREST INCOME | ||||||||
| Service charges and fees | ||||||||
| Card processing and interchange | ||||||||
| Financial services fees | ||||||||
| Other noninterest income | ||||||||
| Total noninterest income | ||||||||
| NONINTEREST EXPENSES | ||||||||
| Salaries and employee benefits | ||||||||
| Occupancy and equipment expense | ||||||||
| Data processing and telecommunications | ||||||||
| Other operating expenses | ||||||||
| Total noninterest expenses | ||||||||
| INCOME BEFORE INCOME TAXES | ||||||||
| INCOME TAX EXPENSE | ||||||||
| NET INCOME | $ | $ | ||||||
| Earnings per share | ||||||||
| Basic and diluted | $ | $ | ||||||
| Average Weighted Shares of Common Stock | ||||||||
| Basic and diluted | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
4
NEW PEOPLES BANKSHARES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2026 AND 2025
(IN THOUSANDS)
(UNAUDITED)
| For the Three Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| NET INCOME | $ | $ | ||||||
| Other comprehensive income (loss): | ||||||||
| Investment securities activity | ||||||||
| Unrealized gains (losses) arising during the period | ( | ) | ||||||
| Related tax (expense) benefit | ( | ) | ||||||
| TOTAL OTHER COMPREHENSIVE INCOME (LOSS) | ( | ) | ||||||
| TOTAL COMPREHENSIVE INCOME | $ | $ | ||||||
The accompanying notes are an integral
part of these consolidated financial statements.
5
NEW PEOPLES BANKSHARES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2026 AND 2025
(IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
| Shares of Common Stock | Common Stock | Additional Paid-in- Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Total Shareholders’ Equity | |||||||||||||||||||
| Balance, December 31, 2024 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Net income | — | |||||||||||||||||||||||
| Other comprehensive income, net of tax | — | |||||||||||||||||||||||
| Cash dividend declared ($0.08 per share) | — | ( | ) | ( | ) | |||||||||||||||||||
| Repurchase of common stock | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Balance, March 31, 2025 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Balance, December 31, 2025 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Net income | — | |||||||||||||||||||||||
| Other comprehensive loss, net of tax | — | ( | ) | ( | ) | |||||||||||||||||||
| Cash dividend declared ($0.09 per share) | — | ( | ) | ( | ) | |||||||||||||||||||
| Repurchase of common stock | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Balance, March 31, 2026 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
The accompanying notes are an integral
part of these consolidated financial statements.
6
NEW PEOPLES BANKSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2026 AND 2025
(IN THOUSANDS)
(UNAUDITED)
| 2026 | 2025 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net income | $ | $ | ||||||
| Adjustments to reconcile net income to net cash
provided by operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Provision for credit losses | ||||||||
| Gain on sale of mortgage loans | ( | ) | ||||||
| Gain on sale or disposal of premises and equipment | ( | ) | ||||||
| Loans originated for sale | ( | ) | ( | ) | ||||
| Proceeds from sales of loans originated for sale | ||||||||
| Net amortization/accretion of bond premiums/discounts | ||||||||
| Deferred tax benefit | ( | ) | ( | ) | ||||
| Net change in: | ||||||||
| Accrued interest receivable | ( | ) | ( | ) | ||||
| Other assets | ( | ) | ||||||
| Accrued interest payable | ( | ) | ( | ) | ||||
| Accrued expenses and other liabilities | ||||||||
| Net cash provided by operating activities | ||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Net increase in loans | ( | ) | ( | ) | ||||
| Purchase of securities available-for-sale | ( | ) | ( | ) | ||||
| Proceeds from repayments and maturities of securities available-for-sale | ||||||||
| Net purchase of equity securities (restricted) | ( | ) | ( | ) | ||||
| Payments for the purchase of premises and equipment | ( | ) | ( | ) | ||||
| Proceeds from sale of premises and equipment | ||||||||
| Proceeds from sale of other real estate owned | ||||||||
| Proceeds from bank owned life insurance benefit | ||||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Repayment of long-term debt | ( | ) | ||||||
| Net change in noninterest bearing deposits | ||||||||
| Net change in interest-bearing deposits | ||||||||
| Dividends paid | ( | ) | ( | ) | ||||
| Repurchase of common stock | ( | ) | ( | ) | ||||
| Net cash provided by financing activities | ||||||||
| Net increase in cash and cash equivalents | ||||||||
| Cash and cash equivalents, beginning of the period | ||||||||
| Cash and cash equivalents, end of the period | $ | $ | ||||||
| Supplemental disclosure of cash paid during the period for: | ||||||||
| Interest | $ | $ | ||||||
| Taxes | ||||||||
| Supplemental disclosure of non-cash transactions: | ||||||||
| Change in unrealized losses on securities available-for-sale | ( | ) | ||||||
| Transfer of loans to other real estate owned | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
7
NEW PEOPLES BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 NATURE OF OPERATIONS
Nature of Operations – New Peoples Bankshares, Inc. (New Peoples or the Company) is a financial holding company whose principal activity is the ownership and management of a community bank, New Peoples Bank, Inc. (the Bank). New Peoples and the Bank are organized and incorporated under the laws of the Commonwealth of Virginia. As a state-chartered member bank, the Bank is subject to regulation by the Virginia Bureau of Financial Institutions, the Federal Deposit Insurance Corporation and the Board of Governors of the Federal Reserve System (the Federal Reserve). The Bank provides general banking services to individuals, small and medium size businesses and the professional community of southwest Virginia, southern West Virginia, western North Carolina and northeastern Tennessee. These services include commercial and consumer loans along with traditional deposit products such as checking and savings accounts.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These consolidated financial statements conform to U. S. generally accepted accounting principles (GAAP) and to general industry practices. In the opinion of management, the accompanying consolidated financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the Company’s financial position as of March 31, 2026 and December 31, 2025, and the results of operations for the three-month periods ended March 31, 2026 and 2025. The Notes included herein should be read in conjunction with the notes to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025. The results of operations for interim periods are not necessarily indicative of the results of operations that may be expected for a full year or any future period.
The consolidated financial statements include New Peoples, the Bank, NPB Insurance Services, Inc., and NPB Web Services, Inc. (hereinafter, collectively referred to as the Company, we, us or our). All significant intercompany balances and transactions have been eliminated. In accordance with Accounting Standards Codification (ASC) 942, Financial Services – Depository and Lending, NPB Capital Trust I and 2 are not included in the consolidated financial statements.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The determination of the adequacy of the allowance for credit losses is based on estimates that are particularly susceptible to significant changes in the economic environment and market conditions.
Certain reclassifications have been made to prior period amounts to conform to current period presentation. None of these reclassifications are considered material and have no impact on net income or shareholders’ equity.
The Company’s significant accounting policies followed in the preparation of the unaudited consolidated financial statements are disclosed in the Company’s Annual report on Form 10-K. There have been no significant changes to the application of significant accounting policies since December 31, 2025.
Basic earnings per share computations are based on the weighted average number of shares outstanding during each period. Diluted earnings per share reflect the additional common shares that would have been outstanding if dilutive potential common shares had been issued. For the three-month periods ended March 31, 2026 and 2025, there were no potential common shares. Basic and diluted net income per common share calculations follow:
| (Dollars in thousands, except per share data) | For the three months ended March 31, | |||||||
| 2026 | 2025 | |||||||
| Net income | $ | $ | ||||||
| Weighted average shares outstanding | ||||||||
| Weighted average dilutive shares outstanding | ||||||||
| Basic and diluted earnings per share | $ | $ | ||||||
8
NOTE 4 CAPITAL
Capital Requirements and Ratios
Banks and bank holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action.
To qualify as a "Small Bank Holding Company" under federal regulations, a bank must have consolidated assets of $3.0 billion or less. The primary benefit of being deemed a "Small Bank Holding Company" is the exemption from the requirement to maintain consolidated regulatory capital ratios; instead, regulatory capital ratios only apply at the subsidiary bank level.
The final rules implementing Basel Committee on Banking Supervision’s capital guidelines for U.S. banks (BASEL III rules) became fully phased in on January 1, 2019. Under the BASEL III rules, the Bank must hold a capital conservation buffer above the adequately capitalized risk-based capital ratios. The capital conservation buffer required is 2.50%. At March 31, 2026, the Bank had a capital conservation buffer of 8.38%. Amounts recorded to accumulated other comprehensive income (loss) are not included in computing regulatory capital. Management believes as of March 31, 2026, the Bank met all capital adequacy requirements to which it was subject.
Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. At March 31, 2026, the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the institution's category.
The Bank’s actual capital amounts and ratios are presented in the following table as of March 31, 2026 and December 31, 2025, respectively.
| Actual | Minimum Capital Requirement | Minimum to Be Well Capitalized Under Prompt Corrective Action Provisions | ||||||||||||||||||||||
| (Dollars in thousands) | Amount | Ratio | Amount | Ratio | Amount | Ratio | ||||||||||||||||||
| March 31, 2026: | ||||||||||||||||||||||||
| Total capital to risk weighted assets | $ | % | $ | % | $ | % | ||||||||||||||||||
| Tier 1 capital to risk weighted assets | % | % | % | |||||||||||||||||||||
| Tier 1 capital to average assets | % | % | % | |||||||||||||||||||||
| Common equity Tier 1 capital to risk weighted assets | % | % | % | |||||||||||||||||||||
December 31, 2025: | ||||||||||||||||||||||||
| Total capital to risk weighted assets | $ | % | $ | % | % | |||||||||||||||||||
| Tier 1 capital to risk weighted assets | % | % | % | |||||||||||||||||||||
| Tier 1 capital to average assets | % | % | % | |||||||||||||||||||||
| Common equity Tier 1 capital to risk weighted assets | % | % | % | |||||||||||||||||||||
9
NOTE 5 INVESTMENT SECURITIES
The amortized cost and estimated fair value of available-for-sale (“AFS”) securities as of March 31, 2026 and December 31, 2025 are as follows:
| Gross | Gross | Estimated | ||||||||||||||
| Amortized | Unrealized | Unrealized | Fair | |||||||||||||
| (Dollars in thousands) | Cost | Gains | Losses | Value | ||||||||||||
| March 31, 2026 | ||||||||||||||||
| U.S. Treasuries | $ | $ | $ | $ | ||||||||||||
| U.S. Government agencies | ||||||||||||||||
| Municipal securities | ||||||||||||||||
| Corporate bonds | ||||||||||||||||
| Mortgage-backed securities | ||||||||||||||||
| Collateralized mortgage obligations guaranteed | ||||||||||||||||
| Total securities available-for-sale | $ | $ | $ | $ | ||||||||||||
| December 31, 2025 | ||||||||||||||||
| U.S. Treasuries | $ | $ | $ | $ | ||||||||||||
| U.S. Government agencies | ||||||||||||||||
| Municipal securities | ||||||||||||||||
| Corporate bonds | ||||||||||||||||
| Mortgage-backed securities | ||||||||||||||||
| Collateralized mortgage obligations guaranteed | ||||||||||||||||
| Total securities available-for-sale | $ | $ | $ | $ | ||||||||||||
The following table details unrealized losses and related fair values in the AFS portfolio. This information is aggregated by the length of time that individual securities have been in a continuous unrealized loss position as of March 31, 2026 and December 31, 2025.
| Less than 12 Months | 12 Months or More | Total | ||||||||||||||||||||||
| (Dollars in thousands) | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | ||||||||||||||||||
| March 31, 2026 | ||||||||||||||||||||||||
| U.S. Treasuries | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| U.S. Government agencies | ||||||||||||||||||||||||
| Municipal securities | ||||||||||||||||||||||||
| Corporate bonds | ||||||||||||||||||||||||
| Mortgage-backed securities | ||||||||||||||||||||||||
| Collateralized mortgage obligations guaranteed | ||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| December 31, 2025 | ||||||||||||||||||||||||
| U.S. Treasuries | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| U.S. Government agencies | ||||||||||||||||||||||||
| Municipal securities | ||||||||||||||||||||||||
| Corporate bonds | ||||||||||||||||||||||||
| Mortgage-backed securities | ||||||||||||||||||||||||
| Collateralized mortgage obligations guaranteed | ||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
As of March 31, 2026, the available-for-sale portfolio included 172 investments for which the fair market value was less than amortized cost. As of December 31, 2025, the available-for-sale portfolio included 165 investments for which the fair market value was less than amortized cost. Management believes that all unrealized losses have resulted from temporary changes in the interest rates and current market conditions and are not a result of credit deterioration. Management does not plan to sell, and it is not likely that the Bank will be required to sell any of the securities referenced in the table above before recovery of their amortized cost. None of the individual securities are past due as to principal or interest payments and a number of these securities have explicit or implicit payment guarantees. The remaining securities have credit ratings at or above that necessary to be considered “bank qualified.”
10
Investment securities with a carrying
value of $
There were no sales of available-for-sale investment securities during the three months ended March 31, 2026 and 2025.
The amortized cost and fair value of investment securities as of March 31, 2026, by contractual maturity, are shown in the following schedule. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
| Weighted | ||||||||||||
| (Dollars in thousands) | Amortized | Fair | Average | |||||||||
| Securities Available-for-Sale | Cost | Value | Yield | |||||||||
| Due in one year or less | $ | $ | % | |||||||||
| Due after one year through five years | % | |||||||||||
| Due after five years through ten years | % | |||||||||||
| Due after ten years | % | |||||||||||
| Total | $ | $ | % | |||||||||
The Bank, as a member bank of the Federal
Reserve Bank of Richmond (“Federal Reserve Bank”) and the Federal Home Loan Bank of Atlanta (FHLB), is required to
hold stock in each. The Bank also owns stock in CBB Financial Corp., which is a correspondent of the Bank. These equity securities
are restricted from trading and are recorded at a cost of $
NOTE 6 LOANS
Loans receivable outstanding as of March 31, 2026, and December 31, 2025, are summarized as follows:
| (Dollars in thousands) | March 31, 2026 | December 31, 2025 | ||||||
| Real estate secured: | ||||||||
| Commercial | $ | $ | ||||||
| Construction and land development | ||||||||
| Residential 1-4 family | ||||||||
| Multifamily | ||||||||
| Farmland | ||||||||
| Total real estate loans | ||||||||
| Commercial | ||||||||
| Agriculture | ||||||||
| Consumer installment and all other loans | ||||||||
| Total loans | $ | $ | ||||||
Also included in total loans above are
deferred loan fees of $
11
Loans receivable on nonaccrual status as of March 31, 2026, and December 31, 2025, are summarized as follows:
| March 31, 2026 | December 31, 2025 | |||||||||||||||||||||||||||
| With No Allowance | With an Allowance | Total | With No Allowance | With an Allowance | Total | |||||||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||||||
| Real estate secured: | ||||||||||||||||||||||||||||
| Commercial | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||
| Construction and land development | ||||||||||||||||||||||||||||
| Farmland | ||||||||||||||||||||||||||||
| Residential 1-4 family | ||||||||||||||||||||||||||||
| Total real estate loans | ||||||||||||||||||||||||||||
| Commercial | ||||||||||||||||||||||||||||
| Agriculture | ||||||||||||||||||||||||||||
| Consumer installment loans and all other loans | ||||||||||||||||||||||||||||
| Total loans receivable on nonaccrual status | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||
Total interest income not recognized on
nonaccrual loans for the three months ended March 31, 2026 and March 31, 2025, was $
The Company evaluates loans that do not share risk characteristics on an individual basis utilizing the collateral or discounted cash flow methods. The following table presents the unpaid principal balance of collateral dependent loans, which are individually evaluated to determine expected credit losses, and the related ACL allocated to those loans as March 31, 2026 and December 31, 2025:
| March 31, 2026 | December 31, 2025 | |||||||||||||||
| Unpaid
Principal Balance | Related
Allowance | Unpaid
Principal Balance | Related
Allowance | |||||||||||||
| (Dollars in thousands) | ||||||||||||||||
| Real estate secured: | ||||||||||||||||
| Commercial | $ | $ | — | $ | $ | |||||||||||
| Residential 1-4 family | ||||||||||||||||
| Total real estate loans | ||||||||||||||||
| Agriculture | ||||||||||||||||
| Consumer installment loans and other loans | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
12
The following table is an age analysis of past due loans receivable as of March 31, 2026, segregated by class:
March 31, 2026 (Dollars in thousands) | Loans 30-59 Days Past Due | Loans 60-89 Days Past Due | Loans 90 or More Days Past Due | Total Past Due Loans | Current Loans | Total Loans | ||||||||||||||||||
| Real estate secured: | ||||||||||||||||||||||||
| Commercial | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Construction and land development | — | — | ||||||||||||||||||||||
| Residential 1-4 family | ||||||||||||||||||||||||
| Multifamily | — | — | — | — | ||||||||||||||||||||
| Farmland | — | — | ||||||||||||||||||||||
| Total real estate loans | ||||||||||||||||||||||||
| Commercial | ||||||||||||||||||||||||
| Agriculture | — | |||||||||||||||||||||||
| Consumer installment and all other loans | ||||||||||||||||||||||||
| Total loans | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
The following table is an age analysis of past due loans receivable as of December 31, 2025, segregated by class:
December 31, 2025 (Dollars in thousands) | Loans 30-59 Days Past Due | Loans 60-89 Days Past Due | Loans 90 or More Days Past Due | Total Past Due Loans | Current Loans | Total Loans | ||||||||||||||||||
| Real estate secured: | ||||||||||||||||||||||||
| Commercial | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Construction and land development | — | — | — | — | ||||||||||||||||||||
| Residential 1-4 family | ||||||||||||||||||||||||
| Multifamily | — | — | — | — | ||||||||||||||||||||
| Farmland | — | — | — | — | ||||||||||||||||||||
| Total real estate loans | ||||||||||||||||||||||||
| Commercial | — | |||||||||||||||||||||||
| Agriculture | — | |||||||||||||||||||||||
| Consumer installment and all other loans | ||||||||||||||||||||||||
| Total loans | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
The Company categorizes loans receivable into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans receivable as to credit risk. The Company uses the following definitions for risk ratings:
Pass - Loans in this category are considered to have a low likelihood of loss based on relevant information analyzed about the ability of the borrowers to service their debt and other factors.
Special Mention - Loans in this category are currently protected but are potentially weak, including adverse trends in borrower’s operations, credit quality or financial strength. Those loans constitute an undue and unwarranted credit risk but not to the point of justifying a substandard classification. The credit risk may be relatively minor yet constitute an unwarranted risk in light of the circumstances. Special mention loans have potential weaknesses which may, if not checked or corrected, weaken the loan or inadequately protect the Company’s credit position at some future date.
Substandard - A substandard loan is inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified as substandard must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt; they are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.
Doubtful - Loans classified doubtful have all the weaknesses inherent in loans classified as substandard, plus the added characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions, and values highly questionable and improbable.
13
The following table presents the credit risk grade of loans by origination year as of March 31, 2026:
| As of March 31, 2026 | ||||||||||||||||||||||||||||||||
| (Dollars in thousands) | 2026 | 2025 | 2024 | 2023 | 2022 | Prior | Revolving | Total | ||||||||||||||||||||||||
| Commercial Real Estate | ||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Substandard | — | — | — | — | — | — | ||||||||||||||||||||||||||
| Total commercial real estate | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Current period gross charge-offs | — | — | — | — | — | $ | ( | ) | — | $ | ( | ) | ||||||||||||||||||||
| Construction and Land Development | ||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Substandard | — | — | — | — | — | — | ||||||||||||||||||||||||||
| Total construction and land development | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Current period gross charge-offs | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
| Residential 1-4 Family | ||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Special Mention | — | — | — | — | — | — | ||||||||||||||||||||||||||
| Substandard | — | — | ||||||||||||||||||||||||||||||
| Total residential 1-4 family | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Current period gross charge-offs | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
| Multifamily | ||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Total Multifamily | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Current period gross charge-offs | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
| Farmland | ||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Special Mention | — | — | — | — | — | — | ||||||||||||||||||||||||||
| Substandard | — | — | — | — | — | — | ||||||||||||||||||||||||||
| Total farmland | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Current period gross charge-offs | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
| Commercial | ||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Special Mention | — | — | — | — | — | — | ||||||||||||||||||||||||||
| Substandard | — | — | ||||||||||||||||||||||||||||||
| Total commercial | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Current period gross charge-offs | — | $ | ( | ) | — | — | — | — | — | $ | ( | ) | ||||||||||||||||||||
| Agriculture | ||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Special Mention | — | — | — | — | — | — | ||||||||||||||||||||||||||
| Substandard | — | — | — | — | ||||||||||||||||||||||||||||
| Total agriculture | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Current period gross charge-offs | — | — | $ | ( | ) | — | — | — | — | $ | ( | ) | ||||||||||||||||||||
| Consumer Installment Loans | ||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Substandard | — | — | — | |||||||||||||||||||||||||||||
| Total consumer installment loans | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Current period gross charge-offs | — | $ | ( | ) | $ | ( | ) | $ | ( | ) | — | $ | ( | ) | — | $ | ( | ) | ||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Total current period gross charge-offs | — | $ | ( | ) | $ | ( | ) | $ | ( | ) | — | $ | ( | ) | — | $ | ( | ) | ||||||||||||||
14
The following table presents the credit risk grade of loans by origination year as of December 31, 2025:
| As of December 31, 2025 | ||||||||||||||||||||||||||||||||
| (Dollars in thousands) | 2025 | 2024 | 2023 | 2022 | 2021 | Prior | Revolving | Total | ||||||||||||||||||||||||
| Commercial real estate | ||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Substandard | — | — | — | — | — | — | ||||||||||||||||||||||||||
| Total commercial real estate | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Current period gross charge-offs | $ | — | $ | — | $ | — | $ | ( | ) | $ | — | $ | — | $ | — | $ | ( | ) | ||||||||||||||
| Construction and land development | ||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Substandard | — | — | — | — | — | — | ||||||||||||||||||||||||||
| Total construction and land development | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Current period gross charge-offs | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||
| Residential 1-4 family | ||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| SpecialMention | — | — | — | — | — | — | ||||||||||||||||||||||||||
| Substandard | — | — | ||||||||||||||||||||||||||||||
| Total residential 1-4 family | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Current period gross charge-offs | $ | — | $ | — | $ | ( | ) | $ | — | $ | — | $ | ( | ) | $ | — | $ | ( | ) | |||||||||||||
| Multifamily | ||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | — | $ | |||||||||||||||||||||||
| Total multifamily | $ | $ | $ | $ | $ | $ | $ | — | $ | |||||||||||||||||||||||
| Current period gross charge-offs | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||
| Farmland | ||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | — | $ | |||||||||||||||||||||||
| SpecialMention | — | — | — | — | — | — | ||||||||||||||||||||||||||
| Substandard | — | — | — | — | — | — | ||||||||||||||||||||||||||
| Total farmland | $ | $ | $ | $ | $ | $ | $ | — | $ | |||||||||||||||||||||||
| Current period gross charge-offs | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||
| Commercial | ||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| SpecialMention | — | — | — | — | — | — | ||||||||||||||||||||||||||
| Substandard | — | — | — | — | — | — | ||||||||||||||||||||||||||
| Total commercial | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Current period gross charge-offs | $ | — | $ | ( | ) | $ | — | $ | — | $ | ( | ) | $ | ( | ) | $ | — | $ | ( | ) | ||||||||||||
| Agriculture | ||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| SpecialMention | — | — | — | — | — | — | ||||||||||||||||||||||||||
| Substandard | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
| Doubtful | — | — | — | — | — | |||||||||||||||||||||||||||
| Total agriculture | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Current period gross charge-offs | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | ( | ) | $ | ( | ) | ||||||||||||||
| Consumer and all other | ||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Substandard | — | — | ||||||||||||||||||||||||||||||
| Total consumer and all other | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Current period gross charge-offs | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | — | $ | ( | ) | |||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Total current period gross charge-offs | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||
15
NOTE 7 ALLOWANCE FOR CREDIT LOSSES FOR LOANS (“ACLL”)
In determining the amount of our allowance for credit losses, we rely on an analysis of our loan portfolio, our experience and our evaluation of general economic conditions. If our assumptions prove to be incorrect, our current allowance may not be sufficient to cover future loan losses and we may experience significant increases to our provision.
The following table presents a disaggregated analysis of activity in the allowance for credit losses for loans as of March 31, 2026 and December 31, 2025:
| Real estate secured | ||||||||||||||||||||||||||||
| Construction | Consumer | |||||||||||||||||||||||||||
| and Land | Residential | and All | ||||||||||||||||||||||||||
| (Dollars are in thousands) | Commercial | Development | 1-4 family | Multifamily | Farmland | Commercial | Agriculture | Other | Total | |||||||||||||||||||
| Three months ended March 31, 2026 | ||||||||||||||||||||||||||||
| Beginning balance | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||
| Charge-offs | ( | ) | — | — | — | — | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Recoveries | — | — | — | — | ||||||||||||||||||||||||
| Provision for credit losses | ( | ) | ( | ) | ||||||||||||||||||||||||
| Ending balance | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||
| Real estate secured | ||||||||||||||||||||||||||||
| Construction | Consumer | |||||||||||||||||||||||||||
| and Land | Residential | and All | ||||||||||||||||||||||||||
| (Dollars are in thousands) | Commercial | Development | 1-4 family | Multifamily | Farmland | Commercial | Agriculture | Other | Total | |||||||||||||||||||
| Year ended December 31, 2025 | ||||||||||||||||||||||||||||
| Beginning balance | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||
| Charge-offs | ( | ) | — | ( | ) | — | — | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||
| Recoveries | — | — | ||||||||||||||||||||||||||
| Provision for credit losses | ( | ) | ( | ) | ||||||||||||||||||||||||
| Ending balance | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||
Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.
NOTE 8 MODIFICATIONS MADE TO BORROWERS EXPERIENCING FINANCIAL DIFFICULTY
An assessment of whether a borrower is experiencing financial difficulty is made on the date of a modification. Because the effect of most modifications made to borrowers experiencing financial difficulty is already included in the allowance for credit losses because of the measurement methodologies used to estimate the allowance, a change to the allowance for credit losses is generally not recorded upon modification. Occasionally, the Company modifies loans by providing principal forgiveness on certain of its real estate loans. When principal forgiveness is provided, the amount of the principal forgiveness is deemed to be uncollectible; therefore, that portion of the loan is written off, against the allowance for credit losses, resulting in a reduction of the amortized cost basis and a corresponding adjustment to the allowance for credit losses.
In some cases, the Company will modify a certain loan by providing multiple types of concessions. Typically, one type of concession, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another concession, such as principal forgiveness, may be granted.
On
February 15, 2025, severe flash flooding occurred in Tazewell and Buchanan, Counties Virgina. On September 27, 2024, Hurricane Helene
passed through western North Carolina, southwest Virginia and northeast Tennessee, causing flood and wind damage in its path. To assist
borrowers impacted by these natural disasters, we offered short-term payment deferrals of 3 to 6 months. As of March 31, 2026, 43 loans
totaling $
16
NOTE 9 CREDIT ALLOWANCE FOR UNFUNDED COMMITMENTS
The Company maintains a separate allowance for credit losses on off-balance-sheet credit exposures, including unfunded loan commitments, which is included in other liabilities on the consolidated balance sheet. The allowance for credit losses for off-balance-sheet credit exposures is adjusted through a provision for credit losses in the income statement. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over their estimated lives, utilizing the same models and approaches for the Company’s other loan portfolio segments described above, as these unfunded commitments share similar risk characteristics as its loan portfolio segments. The Company has identified the unfunded portion of certain lines of credit as unconditionally cancellable credit exposures, meaning the Company can cancel the unfunded commitment at any time, and those commitments are excluded from the credit loss estimate.
As
of March 31, 2026 and December 31, 2025, the liability for credit losses on off-balance-sheet credit exposures included in other liabilities
was $
NOTE 10 OTHER REAL ESTATE OWNED
The following table summarizes the activity in other real estate owned for the three months ended March 31, 2026, and the year ended December 31, 2025:
| (Dollars in thousands) | March
31, 2026 | December 31,
2025 | ||||||
| Balance, beginning of period | $ | $ | ||||||
| Additions | ||||||||
| Proceeds from sales | ( | ) | ||||||
| Net gains from sales | ||||||||
| Balance, end of period | $ | $ | ||||||
As of March 31, 2026 one loan secured by residential real estate, totaling $95,000 was in the process of foreclosure.
NOTE 11 FAIR VALUES
The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. In accordance with the Fair Value Measurements and Disclosures topic of Financial Accounting Standards Board (the FASB) ASC, the fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market and in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument.
The fair value guidance provides a consistent definition of fair value, which focuses on exit price in the principal or most advantageous market and in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. If there has been a significant decrease in the volume and level of activity for the asset or liability, a change in valuation technique or the use of multiple valuation techniques may be appropriate. In such instances, determining the price at which willing market participants would transact at the measurement date under current market conditions depends on the facts and circumstances and requires the use of significant judgment. The fair value is a reasonable point within the range that is most representative of fair value under current market conditions.
In accordance with this guidance, the Company groups its financial assets and financial liabilities generally measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.
17
Level 1: Quoted prices are available in active markets for identical assets or liabilities as of the reported date.
Level 2: Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reported date. The nature of these assets and liabilities include items for which quoted prices are available but traded less frequently, and items that are valued using other financial instruments, the parameters of which can be directly observed.
Level 3: Assets and liabilities that have little to no pricing observability as of the reported date. These items do not have two-way markets and are measured using management’s best estimate of fair value, where the inputs into the determination of fair value require significant management judgment or estimation.
A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy are as follows:
Investment Securities Available-for-sale - Investment securities AFS are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices. The Company’s AFS securities, totaling $96.9 million and $96.4 million as of March 31, 2026 and December 31, 2025, respectively, are the only assets whose fair values are measured on a recurring basis using Level 2 inputs from an independent pricing service.
Collateral Dependent Loans with an ACL - In accordance with ASC 326, we may determine that an individual loan exhibits unique risk characteristics which differentiate it from other loans within our loan pools. In such cases, the loans are evaluated for expected credit losses on an individual basis and excluded from the collective evaluation. Specific allocations of the allowance for credit losses are determined by analyzing the borrower’s ability to repay amounts owed, collateral deficiencies, the relative risk grade of the loan and economic conditions affecting the borrower’s industry, among other things. A loan is considered to be collateral dependent when, based upon management’s assessment, the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. In such cases, expected credit losses are based on the fair value of the collateral at the measurement date, adjusted for estimated selling costs if satisfaction of the loan depends on the sale of the collateral. We reevaluate the fair value of collateral supporting collateral dependent loans on a quarterly basis. The fair value of real estate collateral supporting collateral dependent loans is evaluated by appraisal services using a methodology that is consistent with the Uniform Standards of Professional Appraisal Practice.
Other Real Estate Owned –Other real estate owned is adjusted to fair value upon transfer of the loans, or former bank premises, to other real estate owned. These assets are carried at the lower of their carrying value or fair value. Fair value is based upon observable market prices, when available, reduced by estimated disposition costs, which the Company considers to be nonrecurring Level 2 inputs. When observable market prices are not available, management determines the fair value of the foreclosed asset using independent third-party appraisals, evaluated to determine whether or not the property is further impaired below the appraised value, and adjusts for estimated costs of disposition. The Company records foreclosed assets as nonrecurring Level 3.
18
Assets and liabilities measured at fair value are as follows as of March 31, 2026 and December 31, 2025:
| March
31, 2026 (Dollars in thousands) | Quoted
market price in active markets (Level 1) | Significant
other observable inputs (Level 2) | Significant unobservable inputs (Level 3) | |||||||||
| (On a recurring basis) Available-for-sale investments | ||||||||||||
| U.S. Treasuries | $ | — | $ | $ | — | |||||||
| U.S. Government agencies | — | — | ||||||||||
| Municipal securities | — | — | ||||||||||
| Corporate bonds | — | — | ||||||||||
| Mortgage-backed securities | — | — | ||||||||||
| Collateralized mortgage obligations -guaranteed | — | — | ||||||||||
| (On a
non-recurring basis) Other real estate owned | — | — | ||||||||||
| Total | $ | — | $ | $ | ||||||||
| December
31, 2025 (Dollars in thousands) | Quoted
market price in active markets (Level 1) | Significant
other observable inputs (Level 2) | Significant unobservable inputs (Level 3) | |||||||||
| (On a recurring basis) Available-for-sale investments | ||||||||||||
| U.S. Treasuries | $ | — | $ | — | ||||||||
| U.S. Government agencies | — | $ | — | |||||||||
| Municipal securities | — | — | ||||||||||
| Corporate bonds | — | — | ||||||||||
| Mortgage-backed securities | — | — | ||||||||||
| Collateralized mortgage obligations - guaranteed | — | — | ||||||||||
| (On a non-recurring basis) Other real estate owned | — | — | ||||||||||
| Collateral dependent loans with ACL: | — | — | ||||||||||
| Agriculture | — | — | ||||||||||
| Commercial Real Estate | — | — | ||||||||||
| Total | $ | — | $ | $ | ||||||||
Not
included in the tables above as of March 31, 2026 and December 31, 2025 is a residential 1-4 family mortgage loan totaling approximately
$
19
For Level 3 assets measured at fair value on a recurring or non-recurring basis as of March 31, 2026 and December 31, 2025, the significant unobservable inputs used in the fair value measurements were as follows:
| (Dollars in thousands) | Fair
Value at March 31, 2026 |
Fair
Value at December 31, 2025 |
Valuation Technique |
Significant Unobservable Inputs |
General
Range of Significant Unobservable Input Values | |||||
Collateral dependent loans with ACL:
|
||||||||||
| Agriculture | $ | — | $ | |||||||
| Commercial Real Estate | — | |||||||||
| Consumer and all other | — | — | ||||||||
| Other Real Estate Owned | $ | $ |
Fair Value of Financial Instruments
Fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practical to estimate the value is based upon the characteristics of the instruments and relevant market information. Financial instruments include cash, evidence of ownership in an entity, or contracts that convey or impose on an entity that contractual right or obligation to either receive or deliver cash for another financial instrument.
The following summary presents the methodologies and assumptions used to estimate the fair value of the Company’s financial instruments presented below. The information used to determine fair value is highly subjective and judgmental in nature and, therefore, the results may not be precise. Subjective factors include, among other things, estimates of cash flows, risk characteristics, credit quality, and interest rates, all of which are subject to change. Since the fair value is estimated as of the balance sheet date, the amounts that will actually be realized or paid upon settlement or maturity on these various instruments could be significantly different.
20
The carrying amount and fair value of the Company’s financial instruments that are not required to be measured or reported at fair value on a recurring basis as of March 31, 2026, and December 31, 2025, are as follows:
| Fair Value Measurements | ||||||||||||||||||||
| (Dollars in thousands) | Carrying Amount | Fair
Value | Quoted market price in active markets (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs (Level 3) | |||||||||||||||
| March 31, 2026 | ||||||||||||||||||||
| Financial instruments – assets | ||||||||||||||||||||
| Net loans | $ | $ | $ | — | $ | — | $ | |||||||||||||
| Financial instruments – liabilities | ||||||||||||||||||||
| Time deposits | — | — | ||||||||||||||||||
| Borrowed funds | — | — | ||||||||||||||||||
| December 31, 2025 | ||||||||||||||||||||
| Financial instruments – assets | ||||||||||||||||||||
| Net loans | $ | $ | $ | — | $ | — | $ | |||||||||||||
| Financial instruments – liabilities | ||||||||||||||||||||
| Time deposits | — | — | ||||||||||||||||||
| Borrowed funds | — | — | ||||||||||||||||||
Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions can significantly affect the estimates.
Estimated fair values have been determined by the Company using historical data, as generally provided in the Company’s regulatory reports, and an estimation methodology suitable for each category of financial instruments. The Company’s fair value estimates, methods and assumptions are set forth below for the Company’s other financial instruments.
The carrying values of cash and due from banks, federal funds sold, deposits with no stated maturities, and accrued interest approximates fair value and are excluded from the table above.
The methods utilized to measure the fair value of financial instruments represent an approximation of exit price; however, an actual exit price may differ.
NOTE 12 LEASING ACTIVITIES
As
of March 31, 2026, the Bank leases four branch offices, one administrative office, one loan production office and sublets a lot adjacent
to another branch office. The lease agreements have maturity dates ranging from 2028 to December 2041. It is assumed that there are currently
no circumstances in which the leases would be terminated prior to expiration. The weighted average remaining life of the lease terms
as of March 31, 2026 was
The
discount rate used in determining the lease liability for each individual lease was the FHLB fixed advance rate which corresponded to
the lease term for each transaction. This methodology is expected to be used for any other subsequent lease agreements. The weighted
average discount rate for the leases as of March 31, 2026 was
For
the three months ended March 31, 2026 and 2025, operating lease expenses were $
21
The Company’s other operating leases were evaluated and determined to be immaterial to the financial statements. As of March 31, 2026, future minimum rental commitments under the non-cancellable operating leases discussed above are as follows (dollars are in thousands):
| 2026 | $ | ||||
| 2027 | |||||
| 2028 | |||||
| 2029 | |||||
| 2030 | |||||
| Thereafter | |||||
| Total lease payments | |||||
| Less: imputed interest | ( | ) | |||
| Total | $ | ||||
NOTE 13 BORROWED FUNDS
Borrowed
funds totaled $
NOTE 14 REVENUE FROM CONTRACTS WITH CUSTOMERS
All our revenue from contracts with customers as defined in ASC 606 is recognized within noninterest income. Refer to Note 25 in our Annual Report on Form 10-K for the year ended December 31, 2025 for a description of how each revenue stream is accounted for under ASC 606. The following table presents noninterest income by revenue stream for the three months ended March 31, 2026 and 2025:
| For the three months ended | ||||||||
| March 31, | ||||||||
| (Dollars in thousands) | 2026 | 2025 | ||||||
| Service charges and fees | $ | $ | ||||||
| Card processing and interchange income | ||||||||
| Financial services fees | ||||||||
| Other noninterest income | ||||||||
| Total noninterest income | $ | $ | ||||||
NOTE 15 NONINTEREST EXPENSES
Other operating expenses, included as part of noninterest expenses, consisted of the following for the periods presented:
| For
the three months ended March 31, | ||||||||
| (Dollars in thousands) | 2026 | 2025 | ||||||
| Other operating expenses | $ | $ | ||||||
| ATM network expense | ||||||||
| Legal, accounting, and professional fees | ||||||||
| FDIC insurance premiums | ||||||||
| Loan related expenses | ||||||||
| Advertising | ||||||||
| Consulting fees | ||||||||
| Printing and supplies | ||||||||
| Other real estate owned expenses, net | ||||||||
| Total other operating expenses | $ | $ | ||||||
22
NOTE 16 RECENT ACCOUNTING DEVELOPMENTS
The following is a summary of recent authoritative announcements:
In November 2024, the Financial Accounting Standards Board (FASB) issued ASU 2024-03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses.” ASU 2024-03 requires public companies to disclose, in the notes to the financial statements, specific information about certain costs and expenses at each interim and annual reporting period. This includes disclosing amounts related to employee compensation, depreciation, and intangible asset amortization. In addition, public companies will need to provide qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively. The FASB subsequently issued ASU 2025-01, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date”, which amends the effective date of ASU 2024-03 to clarify that all public business entities are required to adopt the guidance in ASU 2024-03 in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption of ASU 2024-03 is permitted. Implementation of ASU 2024-03 may be applied prospectively or retrospectively. The Company does not expect the adoption of ASU 2024-03 to have a material impact on its consolidated financial statements.
Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.
23
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Caution About Forward-Looking Statements
We make forward-looking statements in this quarterly report on Form 10-Q that are subject to risks and uncertainties. These forward-looking statements include statements regarding expectations, intentions, projections and beliefs concerning our profitability, liquidity, and allowance for credit losses, interest rate sensitivity, market risk, growth strategy, and financial and other goals. The words “believes,” “expects,” “may,” “will,” “should,” “projects,” “contemplates,” “anticipates,” “forecasts,” “intends,” or other similar words or terms are intended to identify forward looking statements. The forward-looking information is based on various factors and was derived using numerous assumptions. Important factors that may cause actual results to differ from projections include:
| ● | the success or failure of our efforts to implement our business plan; |
| ● | any required increase in our regulatory capital ratios; |
| ● | satisfying other regulatory requirements that may arise from examinations, changes in the law and other similar factors; |
| ● | deterioration of asset quality; |
| ● | changes in the level of our nonperforming assets and charge-offs; |
| ● | fluctuations of real estate values in our markets; |
| ● | our ability to attract and retain talent; |
| ● | demographical changes in our markets which negatively impact the local economy; |
| ● | the uncertain outcome of current or future legislation or regulations or policies of state and federal regulators; |
| ● | the successful management of interest rate risk; |
| ● | the successful management of liquidity; |
| ● | changes in general economic and business conditions in our market area and the United States in general; |
| ● | credit risks inherent in making loans such as changes in a borrower’s ability to repay and our management of such risks; |
| ● | competition with other banks and financial institutions, and companies outside of the banking industry, including online lenders and those companies that have substantially greater access to capital and other resources; |
| ● | customer acceptance of new products and services we have offered or may offer; |
| ● | deposit flows and competition for deposits; |
| ● | the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Federal Reserve, inflation, interest rate, market and monetary fluctuations; |
| ● | the occurrence of significant natural disasters, including severe weather conditions, floods, health related issues and other catastrophic events; |
| ● | geopolitical conditions, including trade restrictions and tariffs, and acts or threats of terrorism, international hostilities, military conflicts or actions taken by the U.S. or other governments in response thereto, which could impact business and economic conditions in the U.S. and abroad; |
| ● | the continued effective operation of our information technology systems and third-party service providers, including the stabilization and ongoing performance of our core processing platform following the system conversion completed during the fourth quarter of 2025; |
| ● | the effects of cyber incidents or other failures, disruptions, or breaches of our operational or security systems, or those of our third-party vendors or other service providers, including as a result of cyber threats or attacks; |
| ● | our ability to successfully manage cybersecurity, including generative artificial intelligence risks; |
| ● | our ability to assist in managing third party fraud against customer accounts including but not limited to check, credit and debit card, and electronic funds transfer fraud; |
| ● | our reliance on third-party vendors and correspondent banks; |
| ● | changes in generally accepted accounting principles; |
| ● | changes in governmental regulations, tax rates and similar matters; and, |
| ● | other risks, which may be described, from time to time, in our filings with the SEC. |
24
Because of these uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements. In addition, our past results of operations do not necessarily indicate our future results. We expressly disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
Critical Accounting Policies
For discussion of our significant accounting policies, see our Annual Report on Form 10-K for the year ended December 31, 2025, and Note 2 Summary of Significant Accounting Policies, in Item 1 of this Form 10-Q. Certain critical accounting policies affect the more significant judgments and estimates used in the preparation of our financial statements. Our most critical accounting policies relate to our allowance for credit losses.
The allowance for credit losses reflects the estimated losses resulting from the inability of our customers to make required payments. If the financial condition of our borrowers were to deteriorate, resulting in an impairment of their ability to make payments, our estimates would be updated, and additional provisions could be required. For further discussion of the estimates used in determining the allowance for credit losses, we refer you to the section on “Asset Quality” in this discussion.
Overview and Highlights
Net income for the three months ended March 31, 2026 was $3.1 million, an increase of $1.2 million, or 60.48%, from the same period in 2025. Net interest income increased 15.86%, or $1.2 million, from $7.6 million for the quarter ended March 31, 2025 to $8.8 million for the quarter ended March 31, 2026. The loan portfolio was the primary driver of both increases as the yield rose 25 basis points (”bps”) while the average balance increased $57.8 million compared to the first quarter of 2025.
The balance sheet grew to $939.6 million in total assets as of March 31, 2026, from $909.7 million as of December 31, 2025. Gross loans increased $13.7 million to $723.3 million as of March 31, 2026. Additionally, interest-bearing deposits with banks increased $13.1 million to $76.2 million as of March 31, 2026. During the first three months of 2026 total deposits increased $29.4 million or 3.68% to $827.7 million.
A dividend of $0.09 per share was paid to shareholders during the first quarter of 2026, a 12.5% increase over the dividend paid in 2025.
During the first quarter of 2026, we extended a previously announced stock repurchase program, to continue through March 31, 2027. Since the inception of the program through March 31, 2026, the Company has repurchased 366,569 shares at an average price of $2.57 per share.
Comparison of the Three Months ended March 31, 2026 and 2025
Quarter-to-date highlights include:
| ● | Returns on average assets and equity of 1.34% and 14.69% for the first quarter of 2026, compared to 0.90% and 10.78% for the first quarter of 2025, respectively; |
| ● | Net interest margin was 3.99% for the first quarter of 2026 compared to 3.69% for the first quarter of 2025; |
| ● | Net interest income was $8.8 million for the first quarter of 2026, an increase of $1.2 million, or 15.86%, compared to the first quarter of 2025; |
| ● | Noninterest income was $2.6 million, an increase of $217,000, or 8.99%, during the first quarter of 2026 compared to the first quarter of 2025; and |
| ● | Noninterest expense was $7.2 million, a decrease of $39,000, or 0.54%, for the first quarter of 2026 compared to the first quarter of 2025. |
During the first quarter of 2026, interest income increased $1.2 million to $12.6 million due to the combination of an increase of 18 bps in the yield on earning assets to 5.69% and a $61.5 million increase in the average balance of earning assets when compared to the first quarter of 2025. The loan portfolio was the primary driver of both increases as the yield rose 25 bps to 6.35% while the average balance increased $57.8 million compared to the first quarter of 2025. Also contributing to the improvement in net interest income was lower funding costs. While the average balance of interest-bearing liabilities increased $44.2 million, the costs decreased 18 bps to 2.55%, and total interest expense only increased by $39,000 to $3.8 million during the first quarter of 2026 as compared to the first quarter of 2025. The reduction in the cost of interest-bearing liabilities is primarily due to maturing time deposits repricing in a lower interest-rate environment and declines in both the cost and balance of borrowed funds. The decrease in the average balance of borrowed funds was due to a $3 million principal payment on a borrowing from the Federal Home Loan Bank of Atlanta during the fourth quarter of 2025 combined with principal payments made on a trust preferred security in January 2025. In addition, the variable rate paid on the trust preferred securities decreased as overnight and short-term borrowing rates declined during the last half of 2025. The net interest margin improved 30 bps to 3.99% for the quarter ending March 31, 2026, compared to 3.69% for the same period in 2025, due to the increase in the yield on earning assets and the decline in the cost of funds. The net interest spread, which is the difference between the yield on interest-earning assets and the costs of interest-bearing liabilities, widened by 36 bps to 3.14% for the first quarter of 2026 from 2.78% for the comparable period of 2025.
25
The following table shows the rates paid on earning assets and interest-bearing liabilities for the periods indicated:
Net Interest Margin Analysis
Average Balances, Income and Expense, and Yields and Rates
Three Months Ended March 31,
| 2026 | 2025 | |||||||||||||||||||||||
| Average | Income/ | Yields/ | Average | Income/ | Yields/ | |||||||||||||||||||
| (Dollars are in thousands) | Balance | Expense | Rates | Balance | Expense | Rates | ||||||||||||||||||
| ASSETS | ||||||||||||||||||||||||
| Loans (1) (2) | $ | 716,807 | 11,215 | 6.35 | % | $ | 659,022 | $ | 9,912 | 6.10 | % | |||||||||||||
| Federal funds sold | 491 | 4 | 3.58 | % | 139 | 2 | 4.40 | % | ||||||||||||||||
| Interest bearing deposits in other banks | 71,064 | 638 | 3.64 | % | 64,406 | 692 | 4.36 | % | ||||||||||||||||
| Securities (2) | 108,027 | 740 | 2.74 | % | 111,306 | 745 | 2.68 | % | ||||||||||||||||
| Total earning assets | 896,389 | 12,597 | 5.69 | % | 834,873 | 11,351 | 5.51 | % | ||||||||||||||||
| Less: Allowance for credit losses | (8,175 | ) | (7,788 | ) | ||||||||||||||||||||
| Non-earning assets | 37,278 | 37,411 | ||||||||||||||||||||||
| Total assets | $ | 925,492 | $ | 864,496 | ||||||||||||||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||||||||||
| Interest-bearing demand deposits | $ | 74,258 | 112 | 0.61 | % | $ | 72,394 | $ | 137 | 0.77 | % | |||||||||||||
| Savings and money market deposits | 216,113 | 941 | 1.77 | % | 186,941 | 779 | 1.69 | % | ||||||||||||||||
| Time deposits | 290,916 | 2,481 | 3.46 | % | 274,564 | 2,533 | 3.74 | % | ||||||||||||||||
| Total interest-bearing deposits | 581,287 | 3,534 | 2.47 | % | 533,899 | 3,449 | 2.62 | % | ||||||||||||||||
| Other borrowings | 7,000 | 61 | 3.51 | % | 10,000 | 88 | 3.51 | % | ||||||||||||||||
| Trust preferred securities | 11,986 | 185 | 6.18 | % | 12,186 | 204 | 6.69 | % | ||||||||||||||||
| Total borrowed funds | 18,986 | 246 | 5.19 | % | 22,186 | 292 | 5.26 | % | ||||||||||||||||
| Total interest-bearing liabilities | 600,273 | 3,780 | 2.55 | % | 556,085 | 3,741 | 2.73 | % | ||||||||||||||||
| Non-interest-bearing deposits | 230,875 | 227,045 | ||||||||||||||||||||||
| Other liabilities | 9,803 | 9,580 | ||||||||||||||||||||||
| Total liabilities | 840,951 | 792,710 | ||||||||||||||||||||||
| Shareholders’ equity | 84,541 | 71,786 | ||||||||||||||||||||||
| Total liabilities and shareholders’ equity | $ | 925,492 | $ | 864,496 | ||||||||||||||||||||
| Net interest income | $ | 8,817 | $ | 7,610 | ||||||||||||||||||||
| Net interest margin | 3.99 | % | 3.69 | % | ||||||||||||||||||||
| Net interest spread | 3.14 | % | 2.78 | % | ||||||||||||||||||||
| (1) | Nonaccrual loans and loans held for sale have been included in average loan balances. |
| (2) | Tax exempt income is not significant and has been treated as fully taxable. |
26
Net interest income is affected by changes in both average interest rates and average volumes (balances) of interest-earning assets and interest-bearing liabilities. The following table sets forth the amounts of the total changes in interest income and interest expense which can be attributed to rates and volume for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025.
| Volume and Rate Analysis | ||||||||||||
| Increase (decrease) | ||||||||||||
| Three Months Ended March 31, 2026 | ||||||||||||
| (Dollars in thousands) | Volume Effect | Rate Effect | Change
in Interest Income/ Expense | |||||||||
| Interest income: | ||||||||||||
| Loans | $ | 888 | $ | 415 | $ | 1,303 | ||||||
| Federal funds sold | 2 | — | 2 | |||||||||
| Interest bearing deposits in other banks | 67 | (121 | ) | (54 | ) | |||||||
| Taxable investment securities | (22 | ) | 17 | (5 | ) | |||||||
| Total earning assets | 935 | 311 | 1,246 | |||||||||
| Interest expense: | ||||||||||||
| Interest-bearing demand deposits | 4 | (29 | ) | (25 | ) | |||||||
| Savings and money market deposits | 124 | 38 | 162 | |||||||||
| Time deposits | 145 | (197 | ) | (52 | ) | |||||||
| Other borrowings | (27 | ) | — | (27 | ) | |||||||
| Trust preferred securities | (3 | ) | (16 | ) | (19 | ) | ||||||
| Total interest-bearing liabilities | 243 | (204 | ) | 39 | ||||||||
| Change in net interest income | $ | 692 | $ | 515 | $ | 1,207 | ||||||
The provision for credit losses charged to the income statement for the quarter ended March 31, 2026 was $240,000 compared to $259,000 for the three months ended March 31, 2025. The provision expense for the first quarter of 2026 is mainly attributable to growth in the loan portfolio and a modest adjustment to certain qualitative factors in the calculation of the allowance for loan losses to reflect geopolitical uncertainty related to the conflict in the Middle East. The provision for credit losses during the first quarter of 2025 is attributable to loan growth and the impact of valuation allowances for two specifically assessed borrower relationships. A recovery of credit losses on unfunded commitments of $11,000 was recognized for the first quarter of 2026 due to a $2.1 million reduction in commitments on construction loans. The provision for credit losses on unfunded commitments for the first quarter of 2025 was $92,000, reflecting an $11.6 million, or 31.84%, increase in unfunded commitments on construction loans.
For a discussion of the factors affecting the allowance for credit losses, including provision expense, refer to Note 7, Allowance for Credit Losses for Loans, in Item 1 of this Form 10-Q.
Noninterest income, totaling $2.6 million for the first quarter of 2026, increased $217,000 compared to the quarter ended March 31, 2025. The improvement was driven by a $101,000 increase in income from financial and investment services and a $121,000 increase in income from card processing.
Noninterest expense was $7.2 million for the quarter ended March 31, 2026, which was a $39,000 decrease compared to the first quarter of 2025. Occupancy costs decreased $93,000 due to costs incurred in “refreshing” a branch office in the first quarter of 2025 and a decrease in costs for snow and ice removal to keep our branch locations open and safe during the winter storms in 2026 compared to 2025. Other categories experiencing reductions include professional and consulting fees, card processing costs, and the expense for the debit card rewards program which was discontinued in the fourth quarter of 2025. The reductions in expenses were partially offset by an $85,000 increase in salaries and benefits attributable to annual merit increases and an uptick in losses due to fraudulent activity.
The efficiency ratio, which is defined as noninterest expense divided by the sum of net interest income plus noninterest income, decreased to 63.17% during the first quarter of 2026 from 72.55% for the first quarter of 2025. We continue to assess our operational procedures and structure to improve efficiencies and contain costs.
Income tax expense for the first quarter of 2026 totaled $912,000, an increase of $328,000, or 56.16%, from $584,000 recorded during the same period in 2025. The effective tax rate for the three months ended March 31, 2026, was 22.95%, compared to 23.43% for the same period in 2025.
27
Balance Sheet
Total assets as of March 31, 2026, were $939.6 million, an increase of $29.9 million, or 3.28%, from $909.7 million as of December 31, 2025. Gross loans of $723.3 million as of March 31, 2026 reflected an increase of $13.7 million, or 1.93%, from $709.6 million as of December 31, 2025. Liquid assets in the form of cash and cash equivalents increased $15.7 million, or 20.31%, during the first quarter of 2026 mainly due to the seasonal increase in deposits. Investment securities increased $427,000 during the first quarter of 2026 due to purchases of $4.2 million offset by maturities, calls, payments and amortization of $2.9 million and an $808,000 increase in the unrealized loss on securities available-for-sale.
Deposits totaled $827.7 million as of March 31, 2026, compared to $798.3 million as of December 31, 2025. The increase of $29.4 million, or 3.68%, was due to continued efforts to attract money market account relationships combined with seasonal and cyclical funds inflows. As a result, money market and savings accounts increased $14.8 million, and noninterest-bearing demand and interest-bearing demand deposits combined for an increase of $18.9 million during the first quarter of 2026. Over this same period, time deposits decreased $5.0 million largely due to the maturity of a public funds deposit with no other deposit relationship, for which the Bank did not aggressively bid.
As of March 31, 2026 and December 31, 2025, borrowed funds totaled $19.0 million.
Capital
During the quarter ended March 31, 2026, total shareholders’ equity increased $262,000 to $83.1 million due to net income of $3.1 million which was offset by dividends paid to shareholders of $2.1 million, the repurchase of common stock totaling $41,000, and an increase in the unrealized loss on securities available for sale, net of the tax effects, of $639,000. Consequently, book value per share increased to $3.53 as of March 31, 2026 compared to $3.52 as of December 31, 2025. The Bank remains well-capitalized per regulatory guidance.
As previously announced, the Board of Directors extended the repurchase of up to 500,000 shares of the Company’s common stock through March 31, 2027. During the first quarter of 2026, the Company repurchased 11,496 shares at an average price of $3.55 per share. Since the commencement of the repurchase plan in 2022, 366,569 shares have been repurchased at an average price of $2.57 per share.
Asset Quality
The allowance for credit losses on loans was $8.1 million, or 1.12% as a percentage of total loans, as of March 31, 2026, and $8.1 million, or 1.14%, as of December 31, 2025. The decrease in the allowance as a percentage of loans was primarily attributable to charging off the year-end specific reserves on two borrower relationships during the first quarter of 2026. One of these relationships had two pieces of collateral – the residential property was foreclosed and reclassified into other real estate owned during the quarter, and the commercial property was sold at auction and the sales proceeds were received subsequent to March 31, 2026. The charge-off on the other relationship was largely driven by the amount of time that it had been in its classified status. The $9,000 increase in the allowance for credit losses on loans was attributable to provision expense associated with a larger loan portfolio and a modest adjustment to a qualitative factor for geopolitical uncertainty related to the conflict in the Middle East partially offset by the charge-off of the specific reserves discussed above.
The allowance for credit losses on unfunded commitments was $460,000 as of March 31, 2026, as compared to $471,000 as of December 31, 2025. The decrease in the allowance for credit losses on unfunded commitments was due to a decrease in loan commitments, specifically residential and commercial real estate construction loan commitments.
Annualized net charge-offs as a percentage of average loans were 0.14% during the first 3 months of 2026 compared to 0.05% during the fourth quarter of 2025 and 0.01% during the first quarter of 2025. The increase was due to the charge-off of the specific reserves discussed above.
Nonperforming assets, which include nonaccrual loans, accruing loans past due 90 days or more, and other real estate owned, totaled $3.3 million as of March 31, 2026, a decrease of $537,000, or 13.94%, since year-end 2025. Nonaccrual loans decreased $467,000 during the first three months of 2026 primarily due to the charge-off of the specific reserves on individually evaluated loans and a loan that was removed from nonaccrual status based on performance. Nonperforming assets as a percentage of total assets were 0.35% as of March 31, 2026 and 0.42% as of December 31, 2025.
28
Other real estate owned increased to $184,000 as of March 31, 2026 from $89,000 at December 31, 2025 due to the foreclosure on the residential property discussed above. Expenses associated with other real estate owned, including gains and losses on sales, were $3,000 and $1,000 for the three months ended March 31, 2026 and 2025, respectively.
For detailed information on nonaccrual loans and other real estate owned as of March 31, 2026 and December 31, 2025, refer to Note 6 Loans and Note 10 Other Real Estate Owned in Item 1 of this Form 10-Q.
Loans rated substandard or below totaled $3.7 million as of March 31, 2026, an increase of $1.1 million from $2.6 million as of December 31, 2025. Total past due loans decreased to $6.1 million as of March 31, 2026 from $7.2 million as of December 31, 2025.
The allowance for credit losses is maintained at a level that management deems appropriate to absorb any potential future losses and known impairments within the loan portfolio, whether or not the losses are actually ever realized. Through our quarterly assessment, we continue to adjust the CECL model to best reflect the risks in the portfolio. However, future provisions may be deemed necessary. During the first three months of 2026, we maintained the adjustments to our qualitative factors initiated in 2024 and carried forward into 2025, to consider risk factors associated with commercial real estate and residential mortgage loans. In addition, we made a slight adjustment of 3 bps to consider the geopolitical uncertainty in the Middle East. Those changes, along with growth in the loan portfolio and the assessment of the historical and specific risks associated with the loan portfolio, resulted in a recovery of credit losses for credit losses of $240,000, which included a $251,000 provision for the loan portfolio; and a $11,000 negative provision for unfunded commitments due to a decrease in unfunded commitments, particularly construction loans. The following table summarizes components of the allowance for credit losses and related loans as of March 31, 2026 and December 31, 2025:
| Selected Credit Ratios | ||||||||
| March 31, | December 31, | |||||||
| (Dollars in thousands) | 2026 | 2025 | ||||||
| Allowance for credit losses - loans | $ | 8,116 | $ | 8,107 | ||||
| Total loans | 723,305 | 709,587 | ||||||
| Allowance for credit losses to total loans | 1.12 | % | 1.14 | % | ||||
| Nonaccrual loans | $ | 3,131 | $ | 3,598 | ||||
| Nonaccrual loans to total loans | 0.43 | % | 0.51 | % | ||||
| Ratio of allowance for credit losses loans to nonaccrual loans | 2.59 | X | 2.25 | X | ||||
| Charge-offs net of recoveries | $ | 242 | $ | 316 | ||||
| Average loans | $ | 716,807 | $ | 689,104 | ||||
| Net charge-offs to average loans1 | 0.14 | % | 0.05 | % | ||||
1 - Annualized
Deferred Tax Asset and Income Taxes
Due to timing differences between the book and tax treatments of several income and expense items, a net deferred tax asset, excluding the deferred tax asset on the unrealized loss on securities available-for-sale of $2.3 million and $2.1 million, existed as of March 31, 2026 and December 31, 2025, respectively. Our income tax expense was computed at the federal corporate income tax rate of 21% of taxable income and a blended state tax rate of 1.95%. We have no significant nontaxable income or non-deductible expenses.
Capital Resources
The Company meets the eligibility criteria to be classified as a small bank holding company in accordance with the Federal Reserve’s Small Bank Holding Company Policy Statement issued in February 2015 and is therefore not obligated to report consolidated regulatory capital. The Bank continues to be subject to various capital requirements administered by banking agencies.
The Bank’s capital ratios along with the minimum regulatory thresholds to be considered well-capitalized are presented in Note 4 in Item 1 of this Form 10-Q.
29
As of March 31, 2026, the Bank remains well capitalized under the regulatory framework for prompt corrective action. The ratios mentioned above for the Bank comply with the Federal Reserve rules to align with the Basel III Capital requirements.
Book value per common share was $3.53 and $3.52 as of March 31, 2026 and December 31, 2025, respectively. The increase in book value was due to net income of $3.1 million which was offset by dividends paid to shareholders of $2.1 million, the repurchase of common stock totaling $41,000, and an increase in the unrealized loss on securities available for sale, net of the tax effects, of $639,000.
Other key performance indicators are as follows:
Three months ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Return on average assets1 | 1.34 | % | 0.90 | % | ||||
| Return on average shareholders’ equity1 | 14.69 | % | 10.78 | % | ||||
| Average equity to average assets | 9.13 | % | 8.30 | % | ||||
1 - Annualized
Under current economic conditions, we believe it is prudent to continue to retain capital sufficient to support planned asset growth while being able to absorb potential losses that may occur if asset quality deteriorates, and based upon projections, we believe our current capital levels will be sufficient.
During the first quarter of 2026, the Company paid a cash dividend of $0.09 per common share to our shareholders. Future payments of cash dividends will depend on a number of factors including but not limited to maintaining positive retained earnings, compliance with regulatory rules governing the payment of dividends, strategic plans, and sufficient capital at the Bank to allow payment of dividends to the Company.
On April 28, 2022 the board of directors of the Company authorized the repurchase of up to 500,000 shares of the Company’s outstanding common stock. As previously reported, this plan was extended by the Board of Directors through March 31, 2027. The actual means and timing of any purchases, number of shares and prices or range of prices will be determined by the Company in its discretion and will depend on a number of factors, including the market price of the Company’s common stock, general market and economic conditions, and applicable legal and regulatory requirements. As of March 31, 2026, the Company has repurchased 366,569 shares at an average price of $2.57 per share since inception of the plan. During the quarter ended March 31, 2026, the Company repurchased 11,496 shares at an average price of $3.55 per share. There is no assurance that the Company will purchase any additional shares under this program.
Liquidity
We closely monitor our liquidity and our liquid assets in the form of cash, due from banks, federal funds sold and unpledged available-for-sale investments. Collectively, those balances were $158.0 million as of March 31, 2026, up from $141.0 million as of December 31, 2025. The increase is primarily due to deposit growth exceeding funding needs for loan growth. A surplus of short-term assets is maintained at levels management deems adequate to meet potential liquidity needs
As of March 31, 2026, all of our investments are classified as available-for-sale, providing an additional source of liquidity in the amount of $65.1 million, which is net of the $31.8 million of securities pledged as collateral. Generally, the investment portfolio serves as a source of liquidity while yielding a higher return at the purchase date when compared to other short-term investment options, such as federal funds sold and overnight deposits with the Federal Reserve Bank of Richmond (the FRB). Due to the unrealized loss on securities available-for-sale, the sale of investments, other than shorter-term investments with minimal unrealized losses or more recently purchased investments, would not be a main source of liquidity at this time due to the immediate impact on regulatory capital; however, the majority of the portfolio is considered high credit quality investments and would be available to pledge against borrowed funds. Total investment securities increased $427,000 during the first quarter of 2026 from $96.4 million as of December 31, 2025 to $96.9 million as of March 31, 2026. The Bank also has additional borrowing capacity on lines for which investments and certain loans are currently pledged.
Our loan to deposit ratio was 87.39% and 88.89% as of March 31, 2026 and December 31, 2025, respectively.
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Available third-party sources of liquidity as of March 31, 2026 include the following: a line of credit with the FHLB, access to brokered certificates of deposit markets and the discount window at the Federal Reserve Bank. We also have the ability to borrow $30.0 million in unsecured federal funds through credit facilities extended by correspondent banks.
We have used our line of credit with the FHLB to issue letters of credit totaling $14.0 million to the Treasury Board of Virginia for collateral on public funds. No draws on these letters of credit have been issued. The letters of credit are considered to be draws on our FHLB line of credit. In May 2023, we borrowed $10.0 million from the FHLB, through a fixed rate 5-year advance, to support loan fundings and other general liquidity needs and prepaid $3 million of the outstanding balance in the fourth quarter of 2025; and, in June 2025, we borrowed an additional $5.0 million which was repaid in July 2025. An additional $252.0 million was available as of March 31, 2026 on the $273.0 million line of credit. Full use of the FHLB borrowing capacity would require the Company to pledge additional assets.
As of March 31, 2026 we held brokered time deposits of $8.0 million, unchanged from December 31, 2025. Internet accounts are limited to customers located in our primary market area and the surrounding geographical area. The average balance of and the rate paid on deposits is shown in the net interest margin analysis tables. Total reciprocal Certificate of Deposit Registry Services (“CDARS”) time deposits were $7.7 million and $7.0 million as of March 31, 2026 and December 31, 2025, respectively. Aside from the availability of CDARS time deposits, we also offer a similar deposit product for transaction account customers through Intrafi Cash Service (“ICS”). As of March 31, 2026 approximately $16.3 million were placed in this product as compared to $16.1 million at December 31, 2025. Both the CDARS and ICS offerings assist us in maintaining deposit relationships, while assuring the depositors’ funds retain federal deposit insurance coverage.
Additional liquidity is available through the Federal Reserve Bank discount window for overnight funding needs. We may collateralize this line with investment securities and loans at our discretion; however, while we do not anticipate using this as a primary funding source, securities with an estimated market value of $24.9 million were pledged as of March 31, 2026.
Time deposits of $250,000 or more were approximately 6.35% of total deposits at March 31, 2026 and 7.15% of total deposits at December 31, 2025.
In January 2025, we made a voluntary principal payment of $3.0 million on an outstanding trust preferred security. We may consider making future principal payments based on our available liquidity and considering other funding opportunities that may be available.
With the on-balance sheet liquidity and other external sources of funding, we believe the Bank has adequate liquidity and capital resources to meet our requirements and needs for the foreseeable future. However, liquidity can be further affected by a number of factors such as counterparty willingness or ability to extend credit, regulatory actions and customer preferences, some of which are beyond our control. Given continued economic uncertainty, the level of market interest rates, and potential impacts from proposed or enacted tariffs and other trade restrictions, along with ongoing geopolitical conflicts than can contribute to energy price volatility and broader financial market volatility, we continue monitoring our liquidity position, specifically cash on hand, and readily-available contingent funding sources, in order to meet customer demands. Additionally, our contingency funding plan is reviewed quarterly with our Asset Liability Committee.
Off Balance Sheet Items and Contractual Obligations
There have been no material changes during the three months ended March 31, 2026, to the off-balance sheet items and the contractual obligations disclosed in our 2025 Form 10-K.
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
Not Applicable.
| Item 4. | Controls and Procedures |
We have carried out an evaluation, under the supervision and with the participation of our management, including our President and Chief Executive Officer (our CEO) and our Executive Vice President and Chief Financial Officer (our CFO), of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) as of the end of the period covered by this report. Based upon that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were operating effectively in providing reasonable assurance that (a) the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and (b) such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.
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Changes in Internal Control Over Financial Reporting
There were no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the quarter ended March 31, 2026, that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.
Part II Other Information
| Item 1. | Legal Proceedings |
In the course of operations, we may become a party to legal proceedings in the normal course of business. At March 31, 2026, we do not anticipate that the aggregate ultimate liability arising out of litigation pending or threatened against the Company or any of its subsidiaries or to which the property of the Company or any of its subsidiaries is subject, in the opinion of management, will materially impact the financial condition or liquidity of the Company.
| Item 1A. | Risk Factors |
Not Applicable.
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
| (a) | Sales of Unregistered Securities – None |
| (b) | Use of Proceeds – Not Applicable |
| (c) | Issuer Purchases of Securities |
Stock Repurchase Program
The Company has an approved one-year stock repurchase program that authorizes the repurchase of up to 500,000 of the Company’s common shares that was extended through March 31, 2027. Repurchases may be made through open market purchases or in privately negotiated transactions. Shares repurchased will be returned to the status of authorized and unissued shares of common stock. The actual means and timing of any purchases, number of shares and prices or range of prices will be determined by the Company.
Shares of the Company’s common stock were repurchased during the three months ended March 31, 2026, as detailed below. Under the terms of the stock repurchase program, the Company has the remaining authority to repurchase up to 133,431 shares of common stock.
| Period Beginning on First Day of Month Ended | Total
Number of Shares Purchased | Average
Price Paid Per Share | Total
Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number of Shares That May Yet Be Purchased Under Plans or Programs |
|||||||||||||||
| January 31, 2026 | 572 | $ | 3.37 | 572 | 144,355 | ||||||||||||||
| February 28, 2026 | 3,910 | $ | 3.56 | 3,910 | 140,445 | ||||||||||||||
| March 31, 2026 | 7,014 | $ | 3.56 | 7,014 | 133,431 | ||||||||||||||
| Total | 11,496 | $ | 3.55 | 11,496 | |||||||||||||||
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| Item 3. | Defaults Upon Senior Securities |
None.
| Item 4. | Mine Safety Disclosures |
Not Applicable.
| Item 5. | Other Information |
Trading
Arrangements – During the three months ended March 31, 2026, none of our directors or officers (as defined in Rule 16a-1(f) of
the Exchange Act)
| Item 6. | Exhibits |
The following exhibits are filed as part of this report or are incorporated by reference:
* Denotes management contract
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SIGNATURES
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.
| NEW PEOPLES BANKSHARES, INC. | ||
| (Registrant) | ||
| By: | /s/ JAMES W. KISER | |
| James W. Kiser | ||
| President and Chief Executive Officer | ||
| Date: | May 13, 2026 | |
| By: | /s/ CHRISTOPHER G. SPEAKS | |
| Christopher G. Speaks | ||
| Executive Vice President and Chief Financial Officer | ||
| Date: | May 13, 2026 |
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