QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2026
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
COMMISSION FILE NUMBER 000-22062
UWHARRIE CAPITAL CORP
(Exact name of registrant as specified in its charter)
North Carolina
56-1814206
(State or Other Jurisdiction of
Incorporation or Organization)
(I.R.S. Employer
Identification No.)
132 NORTH FIRST STREET
ALBEMARLE, north carolina
28001
(Address of Principal Executive Offices)
(Zip Code)
Registrant’s telephone number, including area code: (704) 983-6181
N/A
(Former name, former address and former fiscal year, if changed since last report)
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. ☒ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☐
Accelerated filer
☐
Non-accelerated filer
☒
Smaller reporting company
☒
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date:7,143,379 shares of common stock outstanding as of May 4, 2026.
Securities available for sale, at fair value (amortized cost $390,536 and $379,272 respectively)
366,836
357,740
Securities held to maturity, at amortized cost (fair value $19,997 and $20,208 respectively)
21,962
21,992
Less allowance for credit losses on securities held to maturity
(45
)
(45
)
Net securities held to maturity
21,917
21,947
Equity securities, at fair value
324
303
Loans held for sale
11,322
9,019
Loans held for investment
685,959
689,562
Less allowance for credit losses on loans
(6,399
)
(6,420
)
Net loans held for investment
679,560
683,142
Premises and equipment, net
15,617
14,710
Interest receivable
4,578
4,428
Prepaid expenses
1,430
1,255
Restricted stock
1,825
1,779
Bank-owned life insurance
8,114
8,081
Deferred income tax
7,311
6,840
Loan servicing assets
3,593
3,702
Mortgage banking derivatives
1,240
883
Other assets
9,358
9,187
Total assets
$
1,249,214
$
1,196,345
LIABILITIES
Deposits:
Demand noninterest-bearing
$
299,137
$
269,566
Interest checking and money market accounts
428,956
421,381
Savings deposits
114,101
105,038
Time deposits, $250,000 and over
133,564
135,474
Other time deposits
155,645
149,322
Total deposits
1,131,403
1,080,781
Short-term borrowed funds
166
25
Long-term debt
29,067
29,048
Mortgage banking derivatives
—
58
Other liabilities
11,918
10,876
Total liabilities
1,172,554
1,120,788
Off balance sheet items, commitments and contingencies (Note 9)
SHAREHOLDERS’ EQUITY
Common stock, $1.25 par value: 20,000,000 shares authorized; shares issued and outstanding 7,149,685 and 7,175,297 at March 31, 2026 and December 31, 2025, respectively
8,937
8,969
Additional paid-in capital
13,250
13,492
Undivided profits
62,072
58,996
Accumulated other comprehensive loss
(18,254
)
(16,555
)
Total Uwharrie Capital Corp shareholders’ equity
66,005
64,902
Noncontrolling interest
10,655
10,655
Total shareholders’ equity
76,660
75,557
Total liabilities and shareholders’ equity
$
1,249,214
$
1,196,345
(*) Derived from audited consolidated financial statements
See accompanying notes
2
Uwharrie Capital Corp and Subsidiaries
Consolidated Statements of Income (Unaudited)
Three Months Ended March 31,
2026
2025
(in thousands, except share and per share data)
Interest Income
Loans, including fees
$
10,614
$
10,225
Investment securities:
Investment securities, taxable
2,791
2,777
Investment securities, non-taxable
445
305
Equity securities
5
5
Interest-earning deposits with banks and federal funds sold
728
490
Total interest income
14,583
13,802
Interest Expense
Interest checking and money market accounts
1,725
1,560
Savings deposits
261
134
Time deposits, $250,000 and over
1,204
1,343
Other time deposits
1,304
1,318
Short-term borrowed funds
1
12
Long-term debt
324
331
Total interest expense
4,819
4,698
Net interest income
9,764
9,104
Provision for (recovery of) credit losses on:
Loans
(82
)
288
Securities held to maturity
—
—
Unfunded loan commitments
20
(7
)
Total provision for (recovery of) credit losses
(62
)
281
Net interest income after provision for (recovery of) credit losses
9,826
8,823
Noninterest Income
Service charges on deposit accounts
289
259
Other service fees and commissions
1,054
981
Interchange and card transaction fees, net
242
249
Gain on sale of securities
186
—
Realized/unrealized gain (loss) on equity securities
21
(23
)
Income from mortgage banking
1,181
1,051
Supplemental executive retirement plan loss
(194
)
(249
)
Other income
180
113
Total noninterest income
2,959
2,381
Noninterest Expense
Salaries and employee benefits
5,882
5,420
Net occupancy expense
497
464
Equipment expense
199
204
Data processing costs
225
213
Loan costs
66
89
Professional fees and services
213
270
Marketing and donations
395
359
Electronic banking expense
138
111
Software amortization and maintenance
410
364
FDIC insurance
141
129
Supplemental executive retirement plan loss
(194
)
(249
)
Other noninterest expense
723
554
Total noninterest expense
8,695
7,928
Income before income taxes
4,090
3,276
Income taxes
875
723
Net income
$
3,215
$
2,553
Consolidated net income
$
3,215
$
2,553
Less: net income attributable to noncontrolling interest
(139
)
(139
)
Net income attributable to common shareholders
3,076
2,414
Net income per common share
Basic
$
0.43
$
0.33
Diluted
$
0.43
$
0.33
Weighted average common shares outstanding
Basic
7,167,728
7,288,141
Diluted
7,167,728
7,288,141
See accompanying notes
3
Uwharrie Capital Corp and Subsidiaries
Consolidated Statements of Comprehensive Income (Unaudited)
Three Months Ended March 31,
2026
2025
(dollars in thousands)
Net income
$
3,215
$
2,553
Other comprehensive income (loss):
Unrealized gain (loss) on available for sale securities
(1,982
)
3,101
Related tax effect
429
(702
)
Reclassification of gain recognized in net income
(186
)
—
Related tax effect
40
—
Total other comprehensive income (loss)
(1,699
)
2,399
Comprehensive income
1,516
4,952
Less: Comprehensive income attributable to noncontrolling interest
(139
)
(139
)
Comprehensive income attributable to Uwharrie Capital Corp
$
1,377
$
4,813
See accompanying notes
4
Uwharrie Capital Corp and Subsidiaries
Consolidated Statement of Changes in Shareholders’ Equity (Unaudited)
Number of Common Shares Issued
Common Stock
Additional Paid-in Capital
Undivided Profits
Accumulated Other Comprehensive Income (Loss)
Noncontrolling Interest
Total
(dollars in thousands, except share data)
Balance, December 31, 2024
7,077,941
$
8,847
$
12,553
$
50,351
$
(24,727
)
$
10,655
$
57,679
Net Income
—
—
—
2,414
—
139
2,553
Repurchase of common stock
(16,164
)
(20
)
(126
)
—
—
—
(146
)
Other comprehensive income
—
—
—
—
2,399
—
2,399
Record preferred stock dividend series B (noncontrolling interest)
—
—
—
—
—
(103
)
(103
)
Record preferred stock dividend series C (noncontrolling interest)
—
—
—
—
—
(36
)
(36
)
Balance, March 31, 2025
7,061,777
$
8,827
$
12,427
$
52,765
$
(22,328
)
$
10,655
$
62,346
Balance, December 31, 2025
7,175,297
$
8,969
$
13,492
$
58,996
$
(16,555
)
$
10,655
$
75,557
Net Income
—
—
—
3,076
—
139
3,215
Repurchase of common stock
(25,612
)
(32
)
(242
)
—
—
—
(274
)
Other comprehensive loss
—
—
—
—
(1,699
)
—
(1,699
)
Record preferred stock dividend series B (noncontrolling interest)
—
—
—
—
—
(103
)
(103
)
Record preferred stock dividend series C (noncontrolling interest)
—
—
—
—
—
(36
)
(36
)
Balance, March 31, 2026
7,149,685
$
8,937
$
13,250
$
62,072
$
(18,254
)
$
10,655
$
76,660
See accompanying notes
5
Uwharrie Capital Corp and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended March 31,
2026
2025
(dollars in thousands)
Cash flows from operating activities
Net income
$
3,215
$
2,553
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
270
270
Right of use asset amortization
101
98
Provision for (recovery of) credit losses
(62
)
281
Gain on sale of securities available for sale
(186
)
—
Gain on sale of mortgage loans
(407
)
(370
)
Gain on sale of OREO
—
(78
)
Realized/unrealized (gain) loss on equity securities
(21
)
23
Net amortization of premium on investment securities available for sale
399
465
Net amortization of premium on investment securities held to maturity
30
29
Amortization of loan servicing assets
310
289
Originations and purchases of mortgage loans for sale
(36,089
)
(29,039
)
Proceeds from sales of mortgage loans for sale
34,193
29,424
Mortgage banking derivatives
(414
)
(296
)
Loan servicing assets
(201
)
(220
)
Accrued interest receivable
(150
)
(342
)
Prepaid assets
(175
)
(142
)
Cash surrender value of life insurance
(33
)
(34
)
Miscellaneous other assets
(155
)
(552
)
Accrued interest payable
39
7
Miscellaneous other liabilities
983
705
Net cash provided by operating activities
1,647
3,071
Cash flows from investing activities
Proceeds from sales of investment securities available for sale
29,817
—
Proceeds from maturities, calls and paydowns of securities available for sale
8,361
10,285
Purchase of investment securities available for sale
(49,655
)
(18,529
)
Purchase of investments in other assets
(19
)
—
Purchases of restricted stock
(46
)
(39
)
Net decrease in loans
3,664
1,322
Purchase of premises and equipment
(1,259
)
(78
)
Proceeds from sale of OREO
—
78
Net cash used by investing activities
(9,137
)
(6,961
)
Cash flows from financing activities
Net increase in deposit accounts
50,622
29,055
Net increase in federal funds purchased and other short-term borrowings
141
53
Repurchase of common stock, net
(274
)
(146
)
Dividends paid on preferred stock (noncontrolling interest)
(139
)
(139
)
Net cash provided by financing activities
50,350
28,823
Increase in cash and cash equivalents
42,860
24,933
Cash and cash equivalents, beginning of period
73,329
52,267
Cash and cash equivalents, end of period
$
116,189
$
77,200
Supplemental disclosures of cash flow information
Interest paid
$
4,761
$
4,672
Income taxes paid
—
—
Supplemental schedule of non-cash activities
Net change in fair value of securities available for sale, net of tax
$
(1,699
)
$
2,399
Loans transferred to foreclosed real estate
—
106
See accompanying notes
6
UWHARRIE CAPITAL CORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
Note 1 – Basis of Presentation
The financial statements and accompanying notes are presented on a consolidated basis including Uwharrie Capital Corp (the “Company”) and its subsidiaries, Uwharrie Bank (the “Bank”), Uwharrie Investment Advisors, Inc. (“UIA”), and Uwharrie Mortgage, Inc. The Bank consolidates its subsidiaries, The Strategic Alliance Corporation (“TSAC”), BOS Agency, Inc. (“BOS Agency”) and Gateway Mortgage, Inc., each of which is wholly owned by the Bank.
The information contained in the consolidated financial statements is unaudited. In the opinion of management, the consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America (“GAAP”) and material adjustments necessary for a fair presentation of results of interim periods, all of which are of a normal recurring nature, have been made. The results of operations for the interim periods are not necessarily indicative of the results that may be expected for an entire year. Management is not aware of additional economic events, outside influences or changes in concentrations of business that would require additional clarification or disclosure in the consolidated financial statements.
The organization and business of the Company, accounting policies followed by the Company and other information are contained in the notes to consolidated financial statements filed as part of the Company’s 2025 Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission on March 5, 2026. This Quarterly Report should be read in conjunction with such Annual Report.
Use of Estimates
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 and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for credit losses.
Accounting Changes and Reclassifications
The Company’s significant accounting policies followed in the preparation of the unaudited consolidated financial statements are disclosed in Note 1 of the audited financial statements for the year ended December 31, 2025 and are contained 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.
Note 2 – Comprehensive Income (Loss)
The Company reports as comprehensive income (loss) all changes in shareholders’ equity during the year from sources other than shareholders. Other comprehensive income (loss) refers to all components (revenues, expenses, gains, and losses) of comprehensive income (loss) that are excluded from net income. The Company’s only component of other comprehensive income (loss) is unrealized gains and losses, net of income tax, on investment securities available for sale.
The following table presents the changes in accumulated other comprehensive loss for the three months ended March 31, 2026 and 2025:
For the Three Months Ended March 31,
2026
2025
(dollars in thousands)
Beginning balance
$
(16,555
)
$
(24,727
)
Other comprehensive income (loss) before reclassifications, net of $429 and ($702) tax effect, respectively
(1,553
)
2,399
Amounts reclassified from accumulated other comprehensive income (loss), net of $40 and $0 tax effect, respectively
(146
)
—
Net current-period other comprehensive income (loss)
(1,699
)
2,399
Ending balance
$
(18,254
)
$
(22,328
)
7
Note 3 – Noncontrolling Interest
In 2013, the Company’s subsidiary bank issued a total of $10.7 million of Fixed Rate Noncumulative Perpetual Preferred Stock, Series B and Series C. The preferred stock qualifies as Tier 1 capital at the Bank and pays dividends at an annual rate of 5.30%. The preferred stock has no voting rights. This capital is presented as noncontrolling interest in the consolidated balance sheets. Dividends declared on this preferred stock are presented as earnings allocated to the noncontrolling interest in the consolidated statements of income.
Note 4 – Per Share Data
Basic and diluted net income per common share is computed based on the weighted average number of shares outstanding during each period after retroactively adjusting for stock dividends. Diluted net income per common share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the net income of the Company. The Company had no stock options outstanding at March 31, 2026 or December 31, 2025. The weighted average number of shares outstanding and earnings per share for the 2025 periods have been adjusted for the 3% stock dividend declared on October 28, 2025.
Basic and diluted net income per common share have been computed based upon net income available to common shareholders as presented in the accompanying consolidated statements of income divided by the weighted average number of common shares outstanding or assumed to be outstanding.
Note 5 – Investment and Equity Securities
Carrying amounts and fair values of securities available for sale and held to maturity are summarized below:
March 31, 2026
Amortized Cost
Gross Unrealized Gains
Gross Unrealized Losses
Fair Value
(dollars in thousands)
Securities available for sale:
U.S. Treasury
$
25,695
$
—
$
1,817
$
23,878
U.S. government agencies
52,151
127
666
51,612
GSE - Mortgage-backed securities and CMOs
178,275
350
8,516
170,109
Asset-backed securities
20,056
236
52
20,240
State and political subdivisions
110,359
136
13,423
97,072
Corporate bonds
4,000
—
75
3,925
Total securities available for sale
$
390,536
$
849
$
24,549
$
366,836
March 31, 2026
Amortized Cost
Gross Unrealized Gains
Gross Unrealized Losses
Fair Value
Allowance for Credit Losses
Net Carrying Amount
(dollars in thousands)
Securities held to maturity:
State and political subdivisions
$
11,662
$
—
$
1,344
$
10,318
$
—
$
11,662
Corporate bonds
10,300
—
621
9,679
45
10,255
Total securities held to maturity
$
21,962
$
—
$
1,965
$
19,997
$
45
$
21,917
December 31, 2025
Amortized Cost
Gross Unrealized Gains
Gross Unrealized Losses
Fair Value
(dollars in thousands)
Securities available for sale:
U.S. Treasury
$
25,753
$
—
$
1,756
$
23,997
U.S. government agencies
45,862
95
729
45,228
GSE - Mortgage-backed securities and CMOs
182,088
839
8,173
174,754
Asset-backed securities
20,726
271
32
20,965
State and political subdivisions
100,843
221
12,178
88,886
Corporate bonds
4,000
—
90
3,910
Total securities available for sale
$
379,272
$
1,426
$
22,958
$
357,740
8
December 31, 2025
Amortized Cost
Gross Unrealized Gains
Gross Unrealized Losses
Fair Value
Allowance for Credit Losses
Net Carrying Amount
(dollars in thousands)
Securities held to maturity:
State and political subdivisions
$
11,692
$
—
$
1,133
$
10,559
$
—
$
11,692
Corporate bonds
10,300
—
651
9,649
45
10,255
Total securities held to maturity
$
21,992
$
—
$
1,784
$
20,208
$
45
$
21,947
The Company owned Federal Reserve Bank ("FRB") stock reported at cost of $959,000 at March 31, 2026 and December 31, 2025. The Company owned Federal Home Loan Bank ("FHLB") stock reported at cost of $866,000 and $819,000 at March 31, 2026 and December 31, 2025, respectively. The investments in FRB stock and FHLB stock are required investments related to the Company’s membership in, and borrowings with, these banks and are classified as restricted stock on the consolidated balance sheet. These investments are carried at cost since there is no ready market and redemption has historically been made at par value. The Company estimated that the fair value approximated cost and that these investments were not impaired at March 31, 2026.
There is no allowance for credit losses on available for sale securities. The following table shows a rollforward of the allowance for credit losses on held to maturity securities for the three months ended March 31, 2026.
State and political subdivisions
Corporate bonds
Total
(dollars in thousands)
Balance, December 31, 2025
$
—
$
45
$
45
Provision for (recovery of) credit losses
—
—
—
Charge-offs of securities
—
—
—
Recoveries
—
—
—
Balance, March 31, 2026
$
—
$
45
$
45
On a quarterly basis, the Company monitors the credit quality of the debt securities held to maturity through the use of credit ratings. For unrated securities, primarily corporate bonds consisting of subordinated debt of bank holding companies, individual financial reports are reviewed quarterly. Capital, profitability, liquidity and other ratios are reviewed to assist in determining credit quality.
The following table summarizes the credit ratings of debt securities held to maturity, presented at amortized cost, by major security type at March 31, 2026.
March 31, 2026
State and political subdivisions
Corporate bonds
Total
(dollars in thousands)
Aaa
$
—
$
—
$
—
Aa1/Aa2/Aa3
11,060
—
11,060
A1/A2
—
—
—
BBB
—
—
—
Not rated
602
10,300
10,902
Total
$
11,662
$
10,300
$
21,962
At March 31, 2026, the Company had no securities held to maturity that were past due 30 days or more as to principal or interest payments. The Company had no securities held to maturity classified as nonaccrual for the three months ended March 31, 2026.
9
Results from sales of securities available for sale during the three-month periods ended March 31, 2026 and 2025, respectively, were as follows:
Three Months Ended March 31,
2026
2025
(dollars in thousands)
Gross proceeds from sales
$
29,817
$
—
Realized gains from sales
$
289
$
—
Realized losses from sales
103
—
Net realized gains (losses)
$
186
$
—
At March 31, 2026 and December 31, 2025, securities available for sale with a carrying amount of $179.9 million and $167.4 million, respectively, were pledged as collateral on public deposits and for other purposes as required or permitted by law.
The following tables show the gross unrealized losses and estimated fair value of available for sale securities, for which an allowance has not been recorded, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at March 31, 2026 and December 31, 2025.
Less than 12 Months
12 Months or More
Total
March 31, 2026
Number of Securities
Fair Value
Unrealized Losses
Number of Securities
Fair Value
Unrealized Losses
Fair Value
Unrealized Losses
(dollars in thousands)
Securities available for sale:
U.S. Treasury
—
$
—
$
—
5
$
23,878
$
1,817
$
23,878
$
1,817
U.S. government agencies
8
11,214
58
27
17,545
608
28,759
666
GSE-Mortgage-backed securities and CMOs
16
40,479
565
53
78,163
7,951
118,642
8,516
Asset-backed securities
3
3,362
14
3
2,579
38
5,941
52
State and political subdivisions
9
17,437
579
57
70,330
12,844
87,767
13,423
Corporate bonds
—
—
—
2
3,925
75
3,925
75
Total securities available for sale
36
$
72,492
$
1,216
147
$
196,420
$
23,333
$
268,912
$
24,549
Less than 12 Months
12 Months or More
Total
December 31, 2025
Number of Securities
Fair Value
Unrealized Losses
Number of Securities
Fair Value
Unrealized Losses
Fair Value
Unrealized Losses
(dollars in thousands)
Securities available for sale
U.S. Treasury
—
$
—
$
—
5
$
23,997
$
1,756
$
23,997
$
1,756
U.S. government agencies
11
13,378
56
28
18,932
673
32,310
729
GSE-Mortgage-backed securities and CMOs
11
23,048
177
61
94,444
7,996
117,492
8,173
Asset-backed securities
1
466
2
4
4,316
30
4,782
32
State and political subdivisions
4
5,376
113
57
72,704
12,065
78,080
12,178
Corporate bonds
—
—
—
2
3,910
90
3,910
90
Total securities available for sale
27
$
42,268
$
348
157
$
218,303
$
22,610
$
260,571
$
22,958
Declines in the fair value of the available for sale investment portfolio are believed by management to be temporary in nature. When evaluating an investment for credit loss, management considers, among other things, the length of time and extent to which the fair value has been in a loss position; the financial condition of the issuer through the review of credit ratings and, if necessary, corporate financial statements; adverse conditions specifically related to the security such as past due principal or interest; underlying assets that collateralize the debt security; other economic conditions and demographics; and the intent and ability of the Company to hold the investment until the loss position is recovered. Any unrealized losses were largely due to increases in market interest rates over the yields available at the time of purchase. The fair value is expected to recover as the bonds approach their maturity date or market yields for such investments decline. Management does not believe any of the securities are impaired due to reasons of credit quality. At March 31, 2026, the Company did not intend to sell, and believed it was not likely to be required to sell, the available for sale securities that were in a loss position prior to full recovery.
10
The following tables show contractual maturities of the investment portfolio as of March 31, 2026:
March 31, 2026
Amortized Cost
Estimated Fair Value
Book Yield
(dollars in thousands)
Securities available for sale:
Due within twelve months
2,424
2,388
1.37
%
Due after one but within five years
57,428
54,194
1.76
%
Due after five but within ten years
62,590
57,841
2.77
%
Due after ten years
268,094
252,413
3.75
%
$
390,536
$
366,836
3.28
%
March 31, 2026
Amortized Cost
Estimated Fair Value
Book Yield
(dollars in thousands)
Securities held to maturity:
Due after one but within five years
5,300
5,104
7.82
%
Due after five but within ten years
7,588
7,060
3.35
%
Due after ten years
9,074
7,833
3.38
%
$
21,962
$
19,997
4.44
%
The portion of unrealized gains and losses for the three months ended March 31, 2026 and 2025 related to equity securities still held at the reporting date is calculated as follows:
Three Months Ended March 31,
2026
2025
(dollars in thousands)
Gross proceeds from sales
$
—
$
—
Net gains (losses) recognized during the period on equity securities
$
21
$
(23
)
Less: Net gains (losses) recognized from equity securities sold during the period
—
—
Unrealized gains (losses) recognized during the period on equity securities still held at the reporting date
$
21
$
(23
)
Note 6 – Loans Held for Investment
The composition of net loans held for investment by class as of March 31, 2026 and December 31, 2025 was as follows:
March 31, 2026
December 31, 2025
(dollars in thousands)
Commercial
Commercial
$
109,508
$
110,088
Real estate - commercial
253,780
255,850
Other real estate construction loans
60,033
57,247
Other loans
4,632
4,683
Noncommercial
Real estate 1-4 family construction
20,640
19,453
Real estate - residential
154,359
158,556
Home equity
73,151
73,262
Consumer loans
9,013
9,611
685,116
688,750
Less:
Allowance for credit losses
(6,399
)
(6,420
)
Deferred loan costs, net
843
812
Loans held for investment, net
$
679,560
$
683,142
11
Note 7 – Allowance for Credit Losses on Loans
The following tables summarize the activity related to the allowance for credit losses on loans for the three months ended March 31, 2026 and 2025.
Commercial Loans
Noncommercial Loans
Commercial
Real estate commercial
Other real estate construction
Other loans
Real estate 1-4 family construction
Real estate residential
Home equity
Consumer
Total
(dollars in thousands)
Balance, December 31, 2025
$
1,479
$
2,420
$
487
$
15
$
83
$
1,155
$
687
$
94
$
6,420
Provision for (recovery of) credit losses
(95
)
(15
)
6
(1
)
4
(41
)
10
50
(82
)
Charge-offs
(10
)
—
—
—
—
—
—
(24
)
(34
)
Recoveries
75
—
—
—
—
1
3
16
95
Net (charge-offs) recoveries
65
—
—
—
—
1
3
(8
)
61
Balance, March 31, 2026
$
1,449
$
2,405
$
493
$
14
$
87
$
1,115
$
700
$
136
$
6,399
Commercial Loans
Noncommercial Loans
Commercial
Real estate commercial
Other real estate construction
Other loans
Real estate 1-4 family construction
Real estate residential
Home equity
Consumer
Total
(dollars in thousands)
Balance, December 31, 2024
$
1,528
$
2,266
$
412
$
18
$
56
$
781
$
588
$
175
$
5,824
Provision for (recovery of) credit losses
154
58
(72
)
2
1
27
64
54
288
Charge-offs
(16
)
—
—
—
—
—
—
(72
)
(88
)
Recoveries
33
—
—
—
—
1
—
7
41
Net (charge-offs) recoveries
17
—
—
—
—
1
—
(65
)
(47
)
Balance, March 31, 2025
$
1,699
$
2,324
$
340
$
20
$
57
$
809
$
652
$
164
$
6,065
Past due loan information is used by management when assessing the adequacy of the allowance for credit losses. The following tables summarize the past due information of the loan portfolio by class as of the dates indicated:
March 31, 2026
Loans 30-89 Days Past Due
Nonaccrual Loans
Total Past Due Loans
Current Loans
Total Loans
Accruing Loans 90 Days or More Past Due
(dollars in thousands)
Commercial
$
—
$
—
$
—
$
109,508
$
109,508
$
—
Real estate - commercial
—
—
—
253,869
253,869
—
Other real estate construction
—
—
—
60,033
60,033
—
Real estate 1-4 family construction
—
—
—
20,640
20,640
—
Real estate - residential
1,555
170
1,725
153,388
155,113
—
Home equity
44
196
240
72,911
73,151
—
Consumer loans
11
50
61
8,952
9,013
—
Other loans
—
—
—
4,632
4,632
—
Total
$
1,610
$
416
$
2,026
$
683,933
$
685,959
$
—
December 31, 2025
Loans 30-89 Days Past Due
Nonaccrual Loans
Total Past Due Loans
Current Loans
Total Loans
Accruing Loans 90 Days or More Past Due
(dollars in thousands)
Commercial
$
22
$
—
$
22
$
110,066
$
110,088
$
—
Real estate - commercial
—
—
—
255,944
255,944
—
Other real estate construction
—
—
—
57,247
57,247
—
Real estate 1-4 family construction
—
—
—
19,453
19,453
—
Real estate - residential
561
179
740
158,534
159,274
—
Home equity
104
199
303
72,959
73,262
—
Consumer loan
13
—
13
9,598
9,611
—
Other loans
—
—
—
4,683
4,683
—
Total
$
700
$
378
$
1,078
$
688,484
$
689,562
$
—
The carrying value of foreclosed properties held as other real estate was $0 at March 31, 2026 and December 31, 2025. The Company had $100,000 and $0 of residential real estate in process of foreclosure at March 31, 2026 and December 31, 2025, respectively.
12
Once a loan becomes 90 days past due, the loan is automatically transferred to a nonaccrual status. The exception to this policy is credit card loans that remain in accruing status 90 days or more until they are paid current or charged off. The composition of nonaccrual loans by class as of March 31, 2026 and December 31, 2025 was as follows:
March 31, 2026
Three Months Ended
Nonaccrual Loans
Nonaccrual Loans
Total Nonaccrual
March 31, 2026
with No Allowance
with an Allowance
Loans
Interest Income
(dollars in thousands)
Commercial
$
—
$
—
$
—
$
—
Real estate - commercial
—
—
—
—
Other real estate construction
—
—
—
—
Real estate 1-4 family construction
—
—
—
—
Real estate - residential
—
170
170
5
Home equity
—
196
196
4
Consumer loans
—
50
50
—
Other loans
—
—
—
—
$
—
$
416
$
416
$
9
December 31, 2025
Three Months Ended
Nonaccrual Loans
Nonaccrual Loans
Total Nonaccrual
March 31, 2025
with No Allowance
with an Allowance
Loans
Interest Income
(dollars in thousands)
Commercial
$
—
$
—
$
—
$
—
Real estate - commercial
—
—
—
—
Other real estate construction
—
—
—
—
Real estate 1-4 family construction
—
—
—
—
Real estate - residential
—
179
179
3
Home equity
—
199
199
—
Consumer loans
—
—
—
—
Other loans
—
—
—
—
$
—
$
378
$
378
$
3
Loans that are in nonaccrual status or 90 days or more past due and still accruing are considered to be nonperforming. At both March 31, 2026 and December 31, 2025, there were no loans 90 days or more past due and still accruing. The following tables show the breakdown between performing and nonperforming loans by class at March 31, 2026 and December 31, 2025:
March 31, 2026
Performing
Nonperforming
Total
(dollars in thousands)
Commercial
$
109,508
$
—
$
109,508
Real estate - commercial
253,869
—
253,869
Other real estate construction
60,033
—
60,033
Real estate 1-4 family construction
20,640
—
20,640
Real estate - residential
154,943
170
155,113
Home equity
72,955
196
73,151
Consumer loans
8,963
50
9,013
Other loans
4,632
—
4,632
Total
$
685,543
$
416
$
685,959
December 31, 2025
Performing
Nonperforming
Total
(dollars in thousands)
Commercial
$
110,088
$
—
$
110,088
Real estate - commercial
255,944
—
255,944
Other real estate construction
57,247
—
57,247
Real estate 1-4 family construction
19,453
—
19,453
Real estate - residential
159,095
179
159,274
Home equity
73,063
199
73,262
Consumer loans
9,611
—
9,611
Other loans
4,683
—
4,683
Total
$
689,184
$
378
$
689,562
13
Loans that do not share the same risk characteristics as loans in the collectively assessed population will be individually assessed. Individually assessed loans determined to be collateral dependent are evaluated based on the fair value of the underlying collateral, as repayment is expected to be derived through the operation or sale of the collateral. When management determines that foreclosure is probable and the borrower is experiencing financial difficulty, the expected credit losses are measured using the fair value of collateral at the reporting date, adjusted for selling costs as appropriate. Loans that are not deemed collateral dependent are assigned a probability of default based on default history. If the loan has defaulted, it will be assigned a 100% probability of default; otherwise, it will be assigned a probability of default based on the Company’s historical experience, which is higher than the forecasted probability of default applied in the collectively assessed portfolio.
The following table details the amortized cost of individually assessed collateral dependent loans and any related allowance at March 31, 2026 and December 31, 2025.
March 31, 2026
December 31, 2025
Amortized Cost
Allowance for Credit Losses
Amortized Cost
Allowance for Credit Losses
(dollars in thousands)
Commercial
$
—
$
—
$
—
$
—
Real estate - commercial
—
—
—
—
Other real estate construction
—
—
—
—
Real estate 1-4 family construction
—
—
—
—
Real estate - residential
—
—
—
—
Home equity
—
—
—
—
Consumer loans
50
41
—
—
Other loans
—
—
—
—
Total
$
50
$
41
$
—
$
—
Management uses a risk-grading program to facilitate the evaluation of probable inherent loan losses and to measure the adequacy of the allowance for credit losses on loans. In this program, risk grades are initially assigned by the loan officers and reviewed and monitored by the lenders and credit administration. The program has nine risk grades summarized in six categories as follows:
Pass: Loans that are pass grade credits include loans that are fundamentally sound, with risk factors that are reasonable and acceptable. They generally conform to policy with only minor exceptions; any major exceptions are clearly mitigated by other economic factors.
Watch: Loans that are acceptable but show signs of weakness in either adequate sources of repayment or collateral but have demonstrated mitigating factors that minimize the risk of delinquency or loss. These loans may deserve management’s attention.
Special Mention: Loans that exhibit potential weakness that deserves management’s close attention. Credits within this category exhibit risk that is increasing beyond the point where the loan would have been originally approved.
Substandard: Loans that are considered substandard are loans that are inadequately protected by the current sound net worth and paying capacity of the obligor or the value of the collateral pledged. All nonaccrual loans are graded as substandard.
Doubtful: Loans that are considered to be doubtful have all weaknesses inherent in loans classified substandard, plus the added characteristic that the weaknesses make the collection or liquidation in full on the basis of current existing facts, conditions and values highly questionable and improbable.
Loss: Loans that are considered to be a loss are considered to be uncollectible and of such little value that their continuance as bankable assets is not warranted.
14
The following table presents the Company’s recorded investment in loans by credit quality indicators by year of origination as of March 31, 2026:
March 31, 2026
Term Loans by Year of Origination
2026
2025
2024
2023
2022
Prior
Revolving
Total
(dollars in thousands)
Commercial
Pass
$
4,138
$
39,886
$
18,227
$
9,283
$
9,401
$
13,193
$
14,509
$
108,637
Watch
180
—
—
2
—
619
70
871
Special Mention
—
—
—
—
—
—
—
—
Substandard
—
—
—
—
—
—
—
—
Total commercial
4,318
39,886
18,227
9,285
9,401
13,812
14,579
109,508
Real estate - commercial
Pass
3,099
35,161
38,329
40,888
43,094
85,760
2,689
249,020
Watch
—
—
—
—
—
142
89
231
Special Mention
—
—
—
4,267
—
22
—
4,289
Substandard
—
—
—
—
—
329
—
329
Total real estate - commercial
3,099
35,161
38,329
45,155
43,094
86,253
2,778
253,869
Other real estate construction
Pass
9,374
21,072
13,155
2,435
3,663
6,286
1,408
57,393
Watch
—
2,640
—
—
—
—
—
2,640
Special Mention
—
—
—
—
—
—
—
—
Substandard
—
—
—
—
—
—
—
—
Total other real estate construction
9,374
23,712
13,155
2,435
3,663
6,286
—
1,408
60,033
Real estate 1-4 family construction
Pass
2,188
14,459
3,993
—
—
—
—
20,640
Watch
—
—
—
—
—
—
—
—
Special Mention
—
—
—
—
—
—
—
—
Substandard
—
—
—
—
—
—
—
—
Total real estate 1-4 family construction
2,188
14,459
3,993
—
—
—
—
20,640
Real estate - residential
Pass
3,960
29,999
21,119
29,237
27,489
39,752
2,227
153,783
Watch
—
—
—
—
—
702
—
702
Special Mention
—
—
—
99
—
136
—
235
Substandard
—
—
—
—
—
393
—
393
Total real estate - residential
3,960
29,999
21,119
29,336
27,489
40,983
2,227
155,113
Home equity
Pass
1
52
69
632
342
2,367
69,328
72,791
Watch
—
—
—
—
15
74
—
89
Special Mention
—
—
—
75
—
—
—
75
Substandard
—
—
—
—
96
100
—
196
Total home equity
1
52
69
707
453
2,541
69,328
73,151
Consumer loans
Pass
1,128
1,903
1,496
683
393
322
3,038
8,963
Watch
—
—
—
—
—
—
—
—
Special Mention
—
—
—
—
—
—
—
—
Substandard
—
—
50
—
—
—
—
50
Total consumer loans
1,128
1,903
1,546
683
393
322
3,038
9,013
Other loans
Pass
—
66
563
—
1,598
2,405
—
4,632
Watch
—
—
—
—
—
—
—
—
Special Mention
—
—
—
—
—
—
—
—
Substandard
—
—
—
—
—
—
—
—
Total other loans
—
66
563
—
1,598
2,405
—
4,632
Total Pass
23,888
142,598
96,951
83,158
85,980
150,085
93,199
675,859
Total Watch
180
2,640
—
2
15
1,537
159
4,533
Total Special Mention
—
—
—
4,441
—
158
—
4,599
Total Substandard
—
—
50
—
96
822
—
968
Total loans
$
24,068
$
145,238
$
97,001
$
87,601
$
86,091
$
152,602
$
93,358
$
685,959
During the three months ended March 31, 2026, twenty-one loans totaling $439,000 were converted from revolving to term loans.
15
The following table presents the Company’s recorded investment in loans by credit quality indicators by year of origination as of December 31, 2025:
December 31, 2025
Term Loans by Year of Origination
2025
2024
2023
2022
2021
Prior
Revolving
Total
(dollars in thousands)
Commercial
Pass
$
41,614
$
18,998
$
10,134
$
9,822
$
4,665
$
9,300
$
14,673
$
109,206
Watch
40
—
3
—
640
39
160
882
Special Mention
—
—
—
—
—
—
—
—
Substandard
—
—
—
—
—
—
—
—
Total commercial
41,654
18,998
10,137
9,822
5,305
9,339
14,833
110,088
Real estate - commercial
Pass
33,690
44,721
38,979
43,708
35,143
52,174
2,666
251,081
Watch
—
—
—
—
—
148
85
233
Special Mention
—
—
4,267
—
—
24
—
4,291
Substandard
—
—
—
—
—
339
—
339
Total real estate - commercial
33,690
44,721
43,246
43,708
35,143
52,685
2,751
255,944
Other real estate construction
Pass
20,951
14,474
8,480
3,754
1,778
4,633
1,330
55,400
Watch
1,847
—
—
—
—
—
—
1,847
Special Mention
—
—
—
—
—
—
—
—
Substandard
—
—
—
—
—
—
—
—
Total other real estate construction
22,798
14,474
8,480
3,754
1,778
4,633
1,330
57,247
Real estate 1-4 family construction
Pass
12,819
6,634
—
—
—
—
—
19,453
Watch
—
—
—
—
—
—
—
—
Special Mention
—
—
—
—
—
—
—
—
Substandard
—
—
—
—
—
—
—
—
Total real estate 1-4 family construction
12,819
6,634
—
—
—
—
—
19,453
Real estate - residential
Pass
30,041
24,409
31,429
29,022
19,789
20,706
2,268
157,664
Watch
322
—
—
—
200
446
—
968
Special Mention
—
—
99
—
117
22
—
238
Substandard
—
—
—
—
—
404
—
404
Total real estate - residential
30,363
24,409
31,528
29,022
20,106
21,578
2,268
159,274
Home equity
Pass
52
43
610
332
254
2,100
69,507
72,898
Watch
—
—
—
15
—
75
—
90
Special Mention
—
—
75
—
—
—
—
75
Substandard
—
—
—
96
103
—
—
199
Total home equity
52
43
685
443
357
2,175
69,507
73,262
Consumer loans
Pass
3,014
1,800
865
456
62
278
3,086
9,561
Watch
—
50
—
—
—
—
—
50
Special Mention
—
—
—
—
—
—
—
—
Substandard
—
—
—
—
—
—
—
—
Total consumer loans
3,014
1,850
865
456
62
278
3,086
9,611
Other loans
Pass
66
567
—
1,597
1,071
1,382
—
4,683
Watch
—
—
—
—
—
—
—
—
Special Mention
—
—
—
—
—
—
—
—
Substandard
—
—
—
—
—
—
—
—
Total other loans
66
567
—
1,597
1,071
1,382
—
4,683
Total Pass
142,247
111,646
90,497
88,691
62,762
90,573
93,530
679,946
Total Watch
2,209
50
3
15
840
708
245
4,070
Total Special Mention
—
—
4,441
—
117
46
—
4,604
Total Substandard
—
—
—
96
103
743
—
942
Total loans
$
144,456
$
111,696
$
94,941
$
88,802
$
63,822
$
92,070
$
93,775
$
689,562
During the year ended December 31, 2025 ninety-nine loans totaling $10.4 million were converted from revolving to term loans.
16
The following tables present gross charge-offs by origination date as of March 31, 2026 and December 31, 2025:
March 31, 2026
Gross Loan Charge-offs by Year of Origination
2026
2025
2024
2023
2022
Prior
Revolving
Total
(dollars in thousands)
Commercial
Commercial
$
—
$
10
$
—
$
—
$
—
$
—
$
—
$
10
Real estate - commercial
—
—
—
—
—
—
—
—
Other real estate construction
—
—
—
—
—
—
—
—
Other loans
—
—
—
—
—
—
—
—
Noncommercial
Real estate 1-4 family construction
—
—
—
—
—
—
—
—
Real estate - residential
—
—
—
—
—
—
—
—
Home equity
—
—
—
—
—
—
—
—
Consumer loans
—
3
13
4
—
1
3
24
Total charge-offs
$
—
$
13
$
13
$
4
$
—
$
1
$
3
$
34
December 31, 2025
Gross Loan Charge-offs by Year of Origination
2025
2024
2023
2022
2021
Prior
Revolving
Total
(dollars in thousands)
Commercial
Commercial
$
—
$
9
$
—
$
16
$
88
$
—
$
10
$
123
Real estate - commercial
—
—
—
—
—
—
—
—
Other real estate construction
—
—
—
—
—
—
—
—
Other loans
—
—
—
—
—
—
—
—
Noncommercial
Real estate 1-4 family construction
—
—
—
—
—
—
—
—
Real estate - residential
—
—
—
—
—
—
—
—
Home equity
—
—
—
—
89
—
89
Consumer loans
—
33
7
2
—
2
86
130
Total charge-offs
$
—
$
42
$
7
$
18
$
88
$
91
$
96
$
342
Modifications to Borrowers Experiencing Financial Difficulty
The allowance for credit losses incorporates an estimate of lifetime expected credit losses and is recorded on each asset upon asset origination or acquisition. The starting point for the estimate of the allowance for credit losses is historical loss information, which includes losses from modifications of receivables to borrowers experiencing financial difficulty. The Company uses a probability of default/loss given default model to determine the allowance for credit losses. 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 due to the measurement methodologies used to estimate the allowance, a change to the allowance for credit losses is generally not recorded upon modification. The Company rarely modifies loans by providing principal forgiveness. When principal forgiveness is provided, the amortized cost basis of the asset is written off against the allowance for credit losses. The amount of the principal forgiveness is deemed to be uncollectible; therefore, that portion of the loan is written off, resulting in a reduction of the amortized cost basis and a corresponding adjustment to the allowance for credit losses. In some cases, the Company will modify a loan by providing multiple types of concessions. Typically one type of concession is granted initially. If the borrower continues to experience financial difficulty, another concession may be granted. Types of concessions include term extensions beyond customary terms, capitalization of accrued interest, interest rate reductions to below current market rates, payment deferrals or principal forgiveness.
There were no loans modified for borrowers experiencing financial difficulty during the three months ended March 31, 2026 or during the twelve months ended December 31, 2025. As such, the Company did not have any loans made to borrowers experiencing financial difficulty that were modified during the three months ended March 31, 2026 or during the twelve months ended December 31, 2025 that subsequently defaulted. A default on a modified loan is defined as being past due 90 days or being out of compliance with the modification agreement. The Company closely monitors the performance of the loans that are modified for borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts.
17
Note 8 - Leases
Operating leases in which we are the lessee are recorded as operating lease right of use (“ROU”) assets and operating lease liabilities, included in premises and equipment and other liabilities, respectively, on our consolidated balance sheets. Operating lease ROU assets represent our right to use an underlying asset during the lease term and operating lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and operating lease liabilities are recognized at lease commencement based on the present value of the remaining lease payments using a discount rate that represents our incremental collateralized borrowing rate at the lease commencement date. ROU assets are further adjusted for any lease incentives. Operating lease expense, which is composed of amortization of the ROU asset and the implicit interest accreted on the operating lease liability, is recognized on a straight-line basis over the lease term and is recorded in the net occupancy expense in the consolidated statements of income.We do not currently have any finance leases in which we are the lessee.
Our leases relate to four office locations, three of which are branch locations, with remaining terms of one to four years. Certain lease arrangements contain extension options which range from five to ten years at the then fair market rental rates. As these extension options are not generally considered reasonably certain of exercise, they are not included in the lease term. As of March 31, 2026, operating lease ROU assets were $612,000 and the operating lease liability was $658,000, compared to operating lease ROU assets of $1.0 million and an operating lease liability of $1.1 million at March 31, 2025. Lease costs associated with all leases was $106,000 for the three months ended March 31, 2026 and 2025.
The table below summarizes other information related to our operating leases for the three months ended March 31, 2026 and 2025:
Three Months Ended March 31,
2026
2025
(in thousands except percent and period data)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases
$
115
$
112
Right-of-use assets obtained in exchange for new operating lease liabilities
—
—
Weighted-average remaining lease term - operating leases, in years
2.0
2.8
Weighted-average discount rate - operating leases
2.85
%
2.67
%
The table below summarizes the maturity of remaining lease liabilities at March 31, 2026:
March 31, 2026
(dollars in thousands)
2026
$
302
2027
260
2028
98
2029
20
2030
-
Thereafter
-
Total lease payments
680
Less: Interest
(22
)
Present value of lease liabilities
$
658
Note 9 - Commitments and Contingencies
The Company’s subsidiary bank is party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, lines of credit and standby letters of credit. These instruments involve elements of credit risk in excess of amounts recognized in the accompanying financial statements.
The Bank’s risk of loss with unfunded loans and lines of credit or standby letters of credit is represented by the contractual amount of these instruments. The Bank uses the same credit policies in making commitments under such instruments as it does for on-balance sheet instruments. The amount of collateral obtained, if any, is based on management’s credit evaluation of the borrower. Collateral held varies, but may include accounts receivable, inventory, real estate and time deposits with financial institutions. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Credit card commitments are unsecured.
18
At March 31, 2026 and December 31, 2025, outstanding financial instruments whose contract amounts represent credit risk were approximately:
March 31, 2026
December 31, 2025
(dollars in thousands)
Commitments to extend credit
$
210,225
$
195,681
Credit card commitments
26,599
26,453
Standby letters of credit
7,950
8,020
Total commitments
$
244,774
$
230,154
The Company maintains an allowance for off-balance sheet credit exposures such as unfunded balances for existing lines of credit, commitments to extend future credit, as well as both standby and commercial letters of credit when there is a contractual obligation to extend credit and when this extension of credit is not unconditionally cancelable. The allowance for off-balance sheet credit exposures is adjusted as a provision for credit loss expense. The estimate includes consideration of the likelihood that funding will occur, which is based on a historical funding study derived from internal information, and an estimate of expected credit losses on commitments expected to be funded over its estimated life, which are the same loss rates that are used in computing the allowance for credit losses on loans. The allowance for credit losses for unfunded loan commitments of $180,000 and $160,000 at March 31, 2026 and December 31, 2025, respectively, is separately classified on the balance sheet within Other Liabilities.
The following table presents the balance and activity in the allowance for credit losses for unfunded loan commitments for the three months ended March 31, 2026.
Total Allowance for Credit Losses - Unfunded Loan Commitments
(dollars in thousands)
Balance, December 31, 2025
$
160
Provision for credit losses
20
Balance, March 31, 2026
$
180
Note 10 – Fair Value Disclosures
Accounting Standards Codification (“ASC”) 820 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. ASC 820 does not require any new fair value measurements but clarifies and standardizes some divergent practices that have emerged since prior guidance was issued. ASC 820 creates a three-level hierarchy under which individual fair value estimates are to be ranked based on the relative reliability of the inputs used in the valuation.
ASC 820 defines fair value as the price that would be received to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities, the Company considers the principal or most advantageous market in which those assets or liabilities are sold and considers assumptions that market participants would use when pricing those assets or liabilities. Fair values determined using Level 1 inputs rely on active and observable markets to price identical assets or liabilities. In situations where identical assets and liabilities are not traded in active markets, fair values may be determined based on Level 2 inputs, which exist when observable data exists for similar assets and liabilities. Fair values for assets and liabilities for which identical or similar assets and liabilities are not actively traded in observable markets are based on Level 3 inputs, which are considered to be unobservable.
Among the Company’s assets and liabilities, investment securities available for sale and mortgage banking derivatives are reported at their fair values on a recurring basis. Certain other assets are adjusted to their fair value on a nonrecurring basis, including other real estate owned, individually evaluated loans, loans held for sale, which are carried at the lower of cost or market, and loan servicing rights, where fair value is determined using similar assets with similar characteristics, when available, or based upon discounted cash flows using market-based assumptions. Deposits, short-term borrowings and long-term obligations are not reported at fair value.
Prices for U.S. Treasury and marketable equity securities are readily available in the active markets in which those securities are traded, and the resulting fair values are shown in the Level 1 input column. Prices for government agency securities, mortgage-backed securities, asset-backed securities, state, county and municipal securities and corporate bonds are obtained for similar securities, and the resulting fair values are shown in the Level 2 input column. Prices for all other non-marketable investments are determined based on various assumptions that are not observable. The fair values for these investment securities are shown in the Level 3 input column. Non-marketable investment securities, which are carried at their purchase price, include those that may only be redeemed by the issuer. The changes in securities between Level 1 and Level 2 were related to the purchase and sale of several securities and not the transfer of securities.
19
Mortgage banking derivatives, which are composed of interest rate lock commitments ("IRLCs"), mortgage forward sales commitments and to-be-announced mortgage-backed securities trades ("TBAs"), are recorded at fair value on a recurring basis. Fair value of the IRLCs is based on projected pull-through rates and anticipated margins based on changes in market interest rates. The Company considers these to be Level 3 valuations. The fair value of mortgage forward sales commitments and TBAs is based on the gain or loss that would occur if the Company were to pair-off the transaction at the measurement date and is considered to be a Level 2 input.
The Company does not record loans at fair value on a recurring basis. The Company measures expected credit losses on loans held at amortized cost using the current expected credit loss model. Loans that do not share common risk characteristics with other loans are evaluated on an individual basis. For individually evaluated loans, expected credit losses are measured using one or more methods, which may include non-discounted cash flow analyses or the fair value of collateral. For collateral dependent loans, expected credit losses are measured based on the fair value of the collateral, less estimated costs to sell when foreclosure is probable. In certain circumstances, the fair value of collateral may exceed the amortized cost basis of the loan. If the fair value of collateral equals or exceeds the amortized cost basis of a collateral dependent loan, the measured expected credit loss is zero and no allowance is recorded for that loan. The Company generally determines the fair value of collateral using appraised values, which involve significant management judgment and are classified as Level 3 valuations within the fair value hierarchy.
Foreclosed assets are adjusted to fair value upon transfer of the loans to other real estate owned. Real estate acquired in settlement of loans is recorded initially at the estimated fair value of the property less estimated selling costs at the date of foreclosure. The initial recorded value may be subsequently reduced by additional allowances, which are charged to earnings if the estimated fair value of the property less estimated selling costs declines below the initial recorded value. Fair value is based upon independent market prices, appraised values of the collateral or management’s estimation of the value of the collateral. The Company typically bases the fair value of the collateral on appraised values, which the Company considers Level 3 valuations.
Loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated fair value in the aggregate, based on secondary market prices. Net unrealized losses, if any, are recognized through a valuation allowance by charges to income. These loans are recorded in Level 2.
The following tables provide fair value information for assets and liabilities measured at fair value on a recurring basis as of March 31, 2026 and December 31, 2025:
March 31, 2026
(dollars in thousands)
Total
Level 1
Level 2
Level 3
Securities available for sale:
U.S. Treasury
$
23,878
$
23,878
$
—
$
—
U.S. government agencies
51,612
—
51,612
—
GSE - Mortgage-backed securities and CMOs
170,109
—
170,109
—
Asset-backed securities
20,240
—
20,240
—
State and political subdivisions
97,072
—
97,072
—
Corporate bonds
3,925
—
3,925
—
Equity securities
324
324
—
—
Mortgage banking derivatives
1,240
—
228
1,012
Total assets at fair value on a recurring basis
$
368,400
$
24,202
$
343,186
$
1,012
Mortgage banking derivatives
$
—
$
—
$
—
$
—
Total liabilities at fair value on a recurring basis
$
—
$
—
$
—
$
—
20
December 31, 2025
(dollars in thousands)
Total
Level 1
Level 2
Level 3
Securities available for sale:
U.S. Treasury
$
23,997
$
23,997
$
—
$
—
U.S. government agencies
45,228
—
45,228
—
GSE - Mortgage-backed securities and CMOs
174,754
—
174,754
—
Asset-backed securities
20,965
—
20,965
—
State and political subdivisions
88,886
—
88,886
—
Corporate bonds
3,910
—
3,910
—
Equity securities
303
303
—
—
Mortgage banking derivatives
883
—
38
845
Total assets at fair value on a recurring basis
$
358,926
$
24,300
$
333,781
$
845
Mortgage banking derivatives
$
58
$
—
$
58
$
—
Total liabilities at fair value on a recurring basis
$
58
$
—
$
58
$
—
The following table provides a rollforward for recurring Level 3 fair value measurements:
The fair value of mortgage IRLCs at March 31, 2026 was calculated based on a notional amount of $47.1 million. Significant unobservable inputs are used to determine the fair value of these derivatives. At March 31, 2026, such inputs included anticipated margins to be earned based on market movement from the original lock date and a weighted average projected pull-through rate of 90.5% determined by loan product, loan stage, and loan purpose. The fair value of mortgage IRLCs at December 31, 2025 was calculated based on a notional amount of $25.3 million. Significant unobservable inputs were the same as those used for the three months ended March 31, 2026 and assumed a weighted average projected pull-through rate of 88.5% at December 31, 2025. Changes in interest rates and other assumptions could significantly change these estimated values.
The Company may be required, from time to time, to measure certain assets at fair value on a nonrecurring basis in accordance with GAAP. These include assets, such as other real estate owned and individually evaluated loans deemed to be collateral dependent, that are measured at the lower of cost or market value that were recognized at fair value less cost to sell at the end of the period. Assets measured at fair value on a nonrecurring basis are included in the table below as of March 31, 2026. There were no assets for which a nonrecurring fair value adjustment was required as of December 31, 2025.
March 31, 2026
(dollars in thousands)
Total
Level 1
Level 2
Level 3
Individually evaluated loans
$
9
$
—
$
—
$
9
Total assets at fair value on a nonrecurring basis
$
9
$
—
$
—
$
9
The following table provides quantitative information about Level 3 fair value measurements:
March 31, 2026
Valuation Technique
Unobservable Input
General Range
Nonrecurring measurements:
Individually evaluated loans
Discounted appraisals
Collateral discounts and estimated costs to sell
10 - 25%
21
Note 11 – Fair Values of Financial Instruments
ASC 825, “Disclosures about Fair Value of Financial Instruments,” requires disclosure of the fair value of financial assets and financial liabilities, including those that are not measured and reported at fair value on a recurring basis or nonrecurring basis.
The fair value estimates presented at March 31, 2026 and December 31, 2025, are based on relevant market information and information about the financial instruments. Fair value estimates are intended to represent the price an asset could be sold at or the price at which a liability could be settled. However, given there is no active market or observable market transactions for many of the Company’s financial instruments, the Company has made estimates of many of these fair values which are subjective in nature, involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimated values. The estimated fair values disclosed in the following table do not represent market values of all assets and liabilities of the Company and should not be interpreted to represent the underlying value of the Company.
The following tables reflect a comparison of carrying amounts and the estimated fair value of the financial instruments as of March 31, 2026 and December 31, 2025:
March 31, 2026
Carrying Value
Estimated Fair Value
Level 1
Level 2
Level 3
(dollars in thousands)
FINANCIAL ASSETS
Cash and cash equivalents
$
116,189
$
116,189
$
116,189
$
—
$
—
Securities available for sale
366,836
366,836
23,878
342,958
—
Securities held to maturity, net
21,917
19,997
—
10,318
9,679
Equity securities
324
324
324
—
—
Loans held for investment, net
679,560
658,154
—
—
658,154
Loans held for sale
11,322
11,322
—
11,322
—
Restricted stock
1,825
1,825
—
1,825
—
Loan servicing assets
3,593
7,251
—
7,251
—
Mortgage banking derivatives
1,240
1,240
—
228
1,012
Accrued interest receivable
4,578
4,578
—
—
4,578
FINANCIAL LIABILITIES
Deposits
$
1,131,403
1,130,969
—
1,130,969
—
Short-term borrowings
166
166
—
166
—
Long-term borrowings
29,067
27,705
—
—
27,705
Accrued interest payable
492
492
—
—
492
December 31, 2025
Carrying Value
Estimated Fair Value
Level 1
Level 2
Level 3
(dollars in thousands)
FINANCIAL ASSETS
Cash and cash equivalents
$
73,329
$
73,329
$
73,329
$
—
$
—
Securities available for sale
357,740
357,740
23,997
333,743
—
Securities held to maturity, net
21,947
20,208
—
10,559
9,649
Equity securities
303
303
303
—
—
Loans held for investment, net
683,142
666,337
—
—
666,337
Loans held for sale
9,019
9,019
—
9,019
—
Restricted stock
1,779
1,779
—
1,779
—
Loan servicing assets
3,702
7,413
—
7,413
—
Mortgage banking derivatives
883
883
—
38
845
Accrued interest receivable
4,428
4,428
—
—
4,428
FINANCIAL LIABILITIES
Deposits
$
1,080,781
$
1,080,610
$
—
$
1,080,610
$
—
Short-term borrowings
25
25
—
25
—
Long-term borrowings
29,048
27,369
—
—
27,369
Mortgage banking derivatives
58
58
—
58
—
Accrued interest payable
453
453
—
—
453
22
At March 31, 2026, the Company’s subsidiary bank had outstanding standby letters of credit and commitments to extend credit. These off-balance sheet financial instruments are generally exercisable at the market rate prevailing at the date the underlying transaction will be completed; therefore, the fair value is the fee the Bank is expected to receive. This amount is deemed immaterial by management. See Note 9 ("Commitments and Contingencies") to the Company’s Notes to Consolidated Financial Statements for more information regarding commitments and contingent liabilities.
Note 12 – Mortgage Banking Derivatives
The Company enters into IRLCs to originate loans whereby the interest rate on the loan is determined prior to funding. IRLCs on mortgage loans that will be held for resale are considered to be derivatives and must be accounted for at fair value on the balance sheet. Accordingly, such commitments are recorded at fair value in the mortgage banking derivatives asset or liability with changes in fair value recorded in income from mortgage banking within the consolidated statement of income. Fair value is based on anticipated margins determined by market movement from the original lock date and projected pull-through rates on a loan-by-loan basis based on loan product, loan stage, and loan purpose.
During the term of the IRLC, the Company is exposed to the risk that the interest rate will change from the rate quoted to the borrower. In an effort to mitigate interest rate risk, the Company also enters into mortgage forward sales commitments on a mandatory basis for future delivery of residential mortgage loans after an interest rate lock is committed to the borrower. Mandatory commitments require that the loan must be delivered to the investor or a pair-off fee be paid. These forward commitments are recorded at fair value in the mortgage banking derivatives asset or liability, and changes in fair value are recorded to income from mortgage banking within the consolidated statement of income. The fair value of the forward commitments is based on the gain or loss that would occur if the Company were to pair-off the transaction at the measurement date.
The Company also enters into purchase and sale agreements of TBAs. A TBA trade is a contract to buy or sell mortgage-backed securities on a specific date while the underlying mortgages are not announced until just prior to settlement. These TBA trades provide an economic hedge against the effect of changes in interest rates resulting from IRLCs. TBAs are accounted for as derivatives when either of the following conditions exist: (i) when settlement of the TBA trade is not expected to occur at the next regular settlement date (which is typically the next month) or (ii) a mechanism exists to settle the contract on a net basis. As a result, these instruments are recorded at fair value in the mortgage banking derivatives asset or liability with changes in fair value recorded in income from mortgage banking within the consolidated statement of income. The fair value of the TBA trades is based on the gain or loss that would occur if the Company were to pair-off the trade at the measurement date.
The following table reflects the notional amount and fair value of mortgage banking derivatives included in the balance sheet at fair value as of March 31, 2026 and December 31, 2025.
Notional Amount
Fair Value
(dollars in thousands)
Balance at March 31, 2026
Included in mortgage banking derivative assets:
Interest rate lock commitments
$
47,105
$
1,012
Forward sales commitments
2,511
54
To-be-announced mortgage-backed securities trades
34,500
174
Balance at December 31, 2025
Included in mortgage banking derivative assets:
Interest rate lock commitments
$
25,267
$
845
Forward sales commitments
3,452
38
Included in mortgage banking derivatives liability:
To-be-announced mortgage-backed securities trades
22,250
58
23
Note 13 – Recent Accounting Pronouncements and Other Changes
In November 2024, the FASB issued ASU 2024-03 “Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses” requiring public business entities to disclose, in the notes to financial statements, specified information about certain costs and expenses at each interim and annual reporting period. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted, and the amendments should be applied prospectively. The Company is currently evaluating the impact of this ASU but does not expect it to have a material effect on its consolidated financial statements.
From time to time the FASB issues exposure drafts of proposed statements of financial accounting standards. Such exposure drafts are subject to comment from the public, to revisions by the FASB and to final issuance by the FASB as statements of financial accounting standards. Management considers the effect of the proposed statements on the consolidated financial statements of the Company and monitors the status of changes to and proposed effective dates of exposure drafts.
Note 14 - Segment Reporting
The chief operating decision maker (“CODM”) of the Company is a group of individuals, also referred to as the Executive Management Team, consisting of the Chief Executive Officer, Chief Financial Officer, Chief Operations Officer and Chief Risk Officer. The Executive Management Team is responsible for allocating resources and assessing the performance of the Company.
Segments are defined as components of an enterprise for which discrete financial information is available and evaluated regularly by the CODM. The Executive Management Team has identified three operating segments within the Company, each with a manager that reports directly to the CODM. The Company’s business operating segments are determined based on the nature of the products or services provided and reflect the manner in which financial information is currently evaluated by the Executive Management Team. The three operating segments of the Company are as follows:
Banking Operations - This segment provides financial products and services to consumer and commercial customers in the form of deposit products, loan products and cash management services through branches, online banking, mobile banking and telephone banking. This segment is also responsible for the management of the investment portfolio. Significant components of noninterest income for this segment are service charges on deposits and interchange fees on card transactions. Significant noninterest expense is salaries and employee benefits.
Mortgage Banking - This segment reflects Uwharrie Bank Mortgage, a division of the Bank that specializes in originating and
servicing one-to-four family residential mortgage loans which are primarily sold on the secondary market. Loans sold to Fannie Mae or Freddie Mac are sold with servicing rights retained. Significant noninterest income for this segment is gain or loss on the sale of loans. Significant noninterest expense is salaries and employee benefits.
Wealth Management - This segment reflects investment advisory, broker-dealer and insurance services of UIA, TSAC and BOS
Agency, respectively. Significant noninterest income for this segment is service fees and commissions. Significant noninterest expense is salaries and employee benefits.
While the CODM monitors each segment’s pre-tax, pre-provision profit or loss, the primary measure for allocating resources to the operating segments during the annual budgeting process is Net Income. This measure is also used to assess the performance of each segment, with a focus on net interest income, noninterest income, and noninterest expense. The CODM conducts monthly income review meetings, where budget-to-actual variances for Net Income and pre-tax, pre-provision profit or loss and its components are analyzed. The Company provides a broad range of financial services as described above and aims to provide one place for its customers to satisfy all of their financial services needs. As such, many customers are shared under the “Uwharrie” umbrella as are certain costs to conduct business. Management regularly reviews the different revenue streams, but is aware that shared resources and costs of key corporate functions may not be fully allocated among the operating segments. The Executive Management Team believes it is appropriate to aggregate the three operating segments into one reportable segment. A review of quantitative thresholds was performed, and the CODM has determined that the Company’s operations are not considered to constitute more than one reportable segment. Non-segment operations are classified as Other below and include assets and activity of the parent holding company. Management will continue to evaluate the operating segments for separate reporting as facts and circumstances change.
24
Banking, Mortgage and Wealth Management
Other
Consolidated
(dollars in thousands)
For the Three Months Ended March 31, 2026
Interest income
$
14,578
$
5
$
14,583
Interest expense
4,494
325
4,819
Net interest income
10,084
(320
)
9,764
Noninterest income
2,837
122
2,959
Noninterest expense
8,559
136
8,695
Pre-tax, pre-provision income
4,362
(334
)
4,028
Provision for (recovery of) credit losses
(62
)
—
(62
)
Provision for income taxes
944
(69
)
875
Net income (loss)
$
3,480
$
(265
)
$
3,215
Total assets as of March 31, 2026
$
1,246,470
$
2,744
$
1,249,214
For the Three Months Ended March 31, 2025
Interest income
$
13,797
$
5
$
13,802
Interest expense
4,354
344
4,698
Net interest income
9,443
(339
)
9,104
Noninterest income
2,370
11
2,381
Noninterest expense
7,798
130
7,928
Pre-tax, pre-provision income
4,015
(458
)
3,557
Provision for (recovery of) credit losses
281
—
281
Provision for income taxes
815
(92
)
723
Net income (loss)
$
2,919
$
(366
)
$
2,553
Total assets as of December 31, 2025
$
1,192,527
$
3,818
$
1,196,345
25
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Caution Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q may contain certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements generally relate to estimates with respect to the financial condition, results of operations and business of the Company that are subject to various factors that could cause actual results to differ materially from these estimates. These factors include, but are not limited to: increases in our past due loans and provision for credit losses that may result from local and/or broader economic effects, including constraints on the availability of credit that may impact our borrowers; declines in general economic conditions, including increased stress in the financial markets; changes in interest rates, deposit flows, loan demand, real estate values, and competition; changes in accounting principles, policies, or guidelines; changes in legislation or regulation; and other economic, competitive, governmental, regulatory, and technological factors affecting the Company’s operations, pricing, products and services. Any use of “we” or “our” in the following discussion refers to the Company on a consolidated basis.
Comparison of Financial Condition at March 31, 2026 and December 31, 2025.
During the three months ended March 31, 2026, the Company’s total assets increased by $52.9 million, from $1.20 billion to $1.25 billion. Cash and cash equivalents increased by $42.9 million during the three months ended March 31, 2026, from $73.3 million to $116.2 million. The increase in cash and cash equivalents is the result of growth in deposits.
Investment securities consist of securities available for sale and securities held to maturity. For the three-month period ended March 31, 2026, investment securities increased by $9.1 million from $379.7 million at December 31, 2025 to $388.8 million at March 31, 2026. At March 31, 2026, the Company had net unrealized losses on securities available for sale of $23.7 million, compared to net unrealized losses of $21.5 million at December 31, 2025, a deterioration of $2.2 million. The allowance for credit losses on securities held to maturity was $45,000 at March 31, 2026 and December 31, 2025. The amortized cost basis of securities held to maturity totaled $22.0 million at March 31, 2026 and December 31, 2025, respectively.
The unrealized gain on equity securities increased by $21,000 during the first three months of the year, resulting in a fair value of $324,000 at March 31, 2026, compared to $303,000 at December 31, 2025.
Loans held for sale increased by $2.3 million from December 31, 2025 to $11.3 million at March 31, 2026. Loans held for investment decreased from $689.6 million at December 31, 2025 to $686.0 million at March 31, 2026, a decrease of $3.6 million. The Company experienced a net decrease in all loan sectors with the exception of commercial construction loans and residential construction loans.
The allowance for credit losses on loans was $6.4 million at March 31, 2026, which represented 0.93% of total loans held for investment, at March 31, 2026 and December 31, 2025. Additional discussion regarding the allowance is included in the Asset Quality section below.
Other changes in the Company’s consolidated assets are primarily related to deferred tax assets, which increased by $471,000 from $6.8 million at December 31, 2025 to $7.3 million at March 31, 2026 as a result of the decline in fair value of the available for sale securities portfolio. Premises and equipment increased by $907,000 from $14.7 million as of December 31, 2025 to $15.6 million at March 31, 2026 related to construction expenses for a new branch in Mount Pleasant, North Carolina, which will replace the currently leased branch location. Mortgage banking derivatives increased by $357,000 during the first three months of 2026, primarily related to a $232,000 increase in the value of TBAs. The value of IRLCs appreciated $167,000 during the three-month period ended March 31, 2026 as the notional amount of the mortgage pipeline increased $21.8 million.
Customer deposits, our primary funding source, experienced a $50.6 million increase during the three-month period ended March 31, 2026, increasing from $1.08 billion to $1.13 billion. The overall increase in deposits is attributable to organic deposit growth. Demand noninterest-bearing checking accounts increased $29.6 million and interest checking and money market accounts increased $7.6 million during the three-month period ended March 31, 2026. Savings deposits increased $9.1 million and time deposits increased $4.4 million during the three months ended March 31, 2026.
Total short-term borrowings increased by $141,000 for the three-month period ended March 31, 2026. At March 31, 2026, the Company had $29.1 million in long-term debt outstanding, which consists solely of its junior subordinated debt securities, net of unamortized debt issuance costs. During the third quarter of 2019, the Company issued $10.0 million in subordinated debt securities with a final maturity date of September 30, 2029 that became redeemable by the Company on September 30, 2024. This junior subordinated debt pays interest quarterly at an annual fixed rate of 5.25%. During the third quarter of 2021, the Company issued $12.0 million and $8.0 million of 10-year and 15-year fixed-to-floating rate subordinated debt securities, respectively. The 10-year subordinated notes mature on September 3, 2031, though they are redeemable at the Company’s option on or after September 3, 2026, and initially pay interest quarterly at an annual rate of 3.5%. From and including September 3, 2026 to but excluding September 3,
26
2031, or up to any early redemption date, the interest rate on the 10-year subordinated notes will reset quarterly to an annual rate equal to the then-current three-month secured overnight financing rate (“SOFR”), plus 283 basis points payable quarterly in arrears. The 15-year subordinated notes mature on September 3, 2036, though they are redeemable at the Company’s option on or after September 3, 2031, and initially pay interest quarterly at an annual rate of 4.0%. From and including September 3, 2031 to but excluding September 3, 2036, or up to any early redemption date, the interest rate on the 15-year subordinated notes will reset quarterly to an annual rate equal to the then-current three-month SOFR plus 292 basis points payable quarterly in arrears. The subordinated debt has been structured to qualify as and is included in the calculation of the Company’s Tier 2 capital. Once the remaining term to maturity drops under five years, the Company must impose a twenty percent annual reduction of the amount of the proceeds from the sale of these securities that are eligible to be counted as Tier 2 capital. Of the subordinated debt that remains outstanding at March 31, 2026, $25.4 million qualifies as Tier 2 capital. The Company also has a $3.0 million line of credit of which $3.0 million was available to use at March 31, 2026.
Other changes in the Company’s liabilities are related to an increase of $1.0 million in other liabilities from December 31, 2025 to March 31, 2026 resulting primarily from accrual of reserves for payables due throughout 2026.
At March 31, 2026, total shareholders’ equity was $76.7 million, an increase of $1.1 million from December 31, 2025. Net income for the three-month period ended March 31, 2026 was $3.2 million, which positively contributed to shareholders’ equity. During the three months ended March 31, 2026, the Company repurchased 25,612 shares of common stock at a total cost of $274,000, and the Company paid $139,000 in dividends attributable to noncontrolling interest. See Note 3 ("Noncontrolling Interest") to the Company’s Notes to Consolidated Financial Statements for additional discussion of the noncontrolling interest.
Results of Operations for the Three Months Ended March 31, 2026 and 2025.
Net Income and Net Income Available to Common Shareholders
Uwharrie Capital Corp reported net income of $3.2 million for the three months ended March 31, 2026, compared to $2.6 million for the three months ended March 31, 2025. Net income available to common shareholders was $3.1 million, or $0.43 per common share, for the three months ended March 31, 2026, compared to $2.4 million, or $0.33 per common share, for the three months ended March 31, 2025. Net income available to common shareholders is net income less dividends on the aforementioned noncontrolling interest.
Net Interest Income
Net interest income for the three months ended March 31, 2026 was $9.8 million, a $660,000 increase from the $9.1 million reported for the comparative period in 2025. During the first three months of 2026, the average yield on our interest-earning assets decreased by 5 basis points to 5.07% from the same period in 2025, and the average rate we paid for our interest-bearing liabilities decreased 9 basis points to 2.27%. These changes resulted in an interest rate spread of 2.81% as of March 31, 2026, compared to 2.77% as of March 31, 2025. The Company’s net interest margin was 3.42% and 3.39% for the comparable periods in 2026 and 2025, respectively.
The following table presents average balance sheet and a net interest income analysis for the three months ended March 31, 2026 and 2025, respectively:
Average Balance
Income/Expenses
Rate/Yield
2026
2025
2026
2025
2026
2025
(dollars in thousands)
Interest-earning assets:
Taxable securities
$
309,591
$
303,789
$
2,791
$
2,777
3.66
%
3.67
%
Non-taxable securities (1)
74,644
57,475
445
305
3.08
%
2.76
%
Short-term investments
96,461
57,265
728
490
3.06
%
3.43
%
Equity securities
303
334
5
5
6.69
%
6.00
%
Taxable loans
680,145
654,174
10,470
10,094
6.24
%
6.19
%
Non-taxable loans (1)
16,816
16,309
144
131
4.42
%
4.18
%
Total interest-earning assets
1,177,960
1,089,346
14,583
13,802
5.07
%
5.12
%
Interest-bearing liabilities:
Interest-bearing deposits
833,028
768,284
4,494
4,355
2.19
%
2.27
%
Short-term borrowed funds
67
1,421
1
12
6.05
%
3.39
%
Long-term debt
29,059
29,168
324
331
4.52
%
4.55
%
Total interest-bearing liabilities
862,154
798,873
4,819
4,698
2.27
%
2.36
%
Net interest spread
$
315,806
$
290,473
$
9,764
$
9,104
2.81
%
2.77
%
Net interest margin (1) (% of earning assets)
3.42
%
3.39
%
(1)
Yields related to securities and loans exempt from income taxes are stated on a fully tax-equivalent basis, assuming a 21% effective tax rate.
27
Provision for (Recovery of) Credit Losses
The Company recorded a $62,000 recovery of credit losses for the three months ended March 31, 2026, compared to a provision of $281,000 for the same period in 2025. There were net loan recoveries of $61,000 for the three months ended March 31, 2026, as compared to net loan charge-offs of $47,000 during the same period of 2025. Refer to the Asset Quality section below for further information.
Noninterest Income
The Company places significant emphasis on diversification of revenue sources rather than relying solely upon interest income. Total noninterest income increased by $578,000 for the three-month period ended March 31, 2026, as compared to the same period in 2025. The gain on sale of securities increased $186,000 related to the sale of available for sale securities during the first quarter of 2026. Income from mortgage banking increased $130,000 quarter-over-quarter, driven by increased mortgage loan production.
Interchange fees, or “swipe” fees, are charges that merchants pay to us and other card-issuing banks for processing electronic payment transactions. Interchange and card transaction fees consist of income from check card usage, point-of-sale income from PIN-based debit card transactions, ATM service fees, and credit card usage. A comparison of gross interchange and card transaction fees, net of associated network costs for the reported periods is presented in the table below:
Three Months Ended March 31,
2026
2025
(dollars in thousands)
Income from debit card transactions
$
603
$
567
Income from credit card transactions
173
172
Gross interchange and transaction fee income
776
739
Network costs - debit card
(333
)
(296
)
Network costs - credit card
(201
)
(194
)
Total
$
242
$
249
Noninterest Expense
Noninterest expense for the three months ended March 31, 2026 increased by $767,000 compared to the same period in 2025. Salaries and benefits, the largest component of noninterest expense, increased by $462,000 due to wage and benefit increases and increased commissions related to higher mortgage production during the first quarter of 2026.
Total other noninterest expense increased by $169,000 for the three months ended March 31, 2026, compared to the same period in 2025. The table below reflects the composition of other noninterest expense for the referenced periods.
Three Months Ended March 31,
2026
2025
(dollars in thousands)
Office supplies and printing
$
27
$
28
Franchise and other taxes
30
34
Employee education
42
30
Shareholder relations expense
54
47
Telephone and data lines
48
51
Postage
64
63
Director fees and expense
78
82
Dues and subscriptions
125
101
Armored transport service
37
34
Other
218
84
Total
$
723
$
554
Income Tax Expense
The Company had income tax expense of $875,000 for the three months ended March 31, 2026 at an effective tax rate of 21.4% compared to income tax expense of $723,000 with an effective tax rate of 22.1% in the comparable 2025 period. The decrease in the effective tax rate is related to an increase in tax exempt income during the first quarter of 2026. Income taxes computed at the statutory rate are primarily affected by the state income tax expense offset by the eligible amount of interest earned on state and municipal securities, tax-free municipal loans and income earned on bank-owned life insurance.
28
Asset Quality
The Company’s allowance for credit losses on loans is established through charges to earnings in the form of a provision for credit losses. The allowance is increased by provisions charged to operations and recoveries of amounts previously charged off and is reduced by recovery of provisions and loans charged off. Management continuously evaluates the adequacy of the allowance for credit losses. In evaluating the adequacy of the allowance, management considers the following: the growth, composition and industry diversification of the portfolio; historical loan loss experience; current delinquency levels; adverse situations that may affect a borrower’s ability to repay; estimated value of any underlying collateral; prevailing economic conditions; and other relevant factors.
The allowance for credit losses on loans represents management’s estimate of lifetime credit losses inherent in loans as of the balance sheet date. The allowance for credit losses is estimated by management using relevant available information, from both internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. The Company’s credit administration function, through a review process, periodically validates the accuracy of the initial risk grade assessment. In addition, as a given loan’s credit quality improves or deteriorates, the credit administration department has the responsibility to change the borrower’s risk grade accordingly.
The Company individually reviews loans that do not share the same risk characteristics as loans in the collectively assessed population. Individually assessed loans determined to be collateral dependent are evaluated based on the fair value of the underlying collateral, as repayment is expected to be derived through the operation or sale of the collateral. When management determines that foreclosure is probable and the borrower is experiencing financial difficulty, the expected credit losses are measured using the fair value of collateral at the reporting date, adjusted for selling costs as appropriate. Loans that are not deemed collateral dependent are assigned a probability of default based on default history. If the loan has defaulted, it will be assigned a 100% probability of default; otherwise, it will be assigned a probability of default based on the Company’s historical experience, which is higher than the forecasted probability of default applied in the collectively assessed portfolio. This evaluation is inherently subjective, as it requires material estimates, including internal and external appraisal services. In addition, regulatory agencies, as an integral part of their examination process, periodically review the allowance for credit losses on loans and may require additions for estimated losses based upon judgments different from those of management.
The Company measures expected credit losses for loans on a pooled basis when similar risk characteristics exist. The Company evaluates credit risk in the Consumer segment based upon consumer credit scores and collateral and the Commercial segment based upon loan risk grade and collateral. The allowance for credit losses for each segment is calculated using a non-discounted cash flow methodology. Management uses a risk-grading program designed to evaluate the credit risk in the loan portfolio. In this program, risk grades are initially assigned by loan officers and then reviewed and monitored by credit administration. This process includes the maintenance of an internally classified loan list that is designed to help management assess the overall quality of the loan portfolio and the adequacy of the allowance for credit losses on loans. In establishing the appropriate classification for specific assets, management considers, among other factors, the estimated value of the underlying collateral, the borrower’s ability to repay, the borrower’s payment history, and the current delinquent status.
Additionally, the allowance for credit losses calculation includes subjective adjustments for qualitative risk factors that are likely to cause estimated credit losses to differ from historical experience. These qualitative adjustments may increase or reduce reserve levels and include adjustments for lending management experience and risk tolerance, loan review and audit results, asset quality and portfolio trends, loan portfolio growth, industry concentrations, trends in underlying collateral, external factors and economic conditions not already captured.
At March 31, 2026, the level of our individually evaluated loans was $5.2 million, and the allowance for credit losses related to individually evaluated loans was $308,000. The allowance, expressed as a percentage of gross loans held for investment, was 0.93% at December 31, 2025 and March 31, 2026. The ratio of nonaccrual loans to total loans increased from 0.05% at December 31, 2025 to 0.06% at March 31, 2026, and was related to the $38,000 increase in nonaccrual loans. One loan totaling $50,000 was converted to nonaccrual during the first three months of 2026, offset by paydowns of $12,000.
The Company did not hold any other real estate owned at March 31, 2026 and December 31, 2025.
As of March 31, 2026, management believed the level of the allowance for credit losses on loans was appropriate in light of the risk inherent in the loan portfolio. While management believes that it uses the best information available to establish the allowance for credit losses on loans, future adjustments may be necessary and results of operations could be adversely affected if circumstances differ from the assumptions used in making the determinations. Furthermore, while management believes it has established the allowance in conformity with GAAP, there can be no assurance that banking regulators, in reviewing the Company’s loan portfolio, will not require an adjustment to the allowance for credit losses on loans. In addition, because future events affecting borrowers and collateral cannot be predicted with certainty, there can be no assurance that the existing allowance is adequate or that increases will
29
not be necessary, should the quality of any loans deteriorate because of the factors discussed herein. Any material increase in the allowance for credit losses on loans may adversely affect the Company’s financial condition, results of operations and the value of its securities.
The following table shows the comparison of nonperforming assets at March 31, 2026 and December 31, 2025:
March 31, 2026
December 31, 2025
(dollars in thousands)
Nonperforming assets:
Accruing loans past due 90 days or more
$
—
$
—
Nonaccrual loans
416
378
Other real estate owned
—
—
Total nonperforming assets
$
416
$
378
Allowance for credit losses on loans
$
6,399
$
6,420
Nonaccrual loans to total loans
0.06
%
0.05
%
Allowance for credit losses on loans to total loans
0.93
%
0.93
%
Allowance for credit losses on loans to nonaccrual loans
1538.22
%
1698.41
%
Liquidity and Capital Resources
The objective of the Company’s liquidity management policy is to ensure the availability of sufficient cash flows to meet all financial commitments and to capitalize on any opportunities for expansion. Liquidity management addresses the ability to meet deposit withdrawals on demand or at contractual maturity, to repay borrowings as they mature and to fund new loans and investments as opportunities arise.
The Company’s primary sources of internally generated funds are principal and interest payments on loans, cash flows generated from operations and cash flows generated by investments. Growth in deposits is typically the primary source of funds for loan growth. Estimated uninsured deposits, including deposits collateralized by pledged assets, represented 41.9% and 40.5% of total deposits at March 31, 2026 and December 31, 2025, respectively. The Company and its subsidiary bank have multiple funding sources, in addition to deposits, that can be used to increase liquidity and provide additional financial flexibility. At March 31, 2026, these sources were the subsidiary bank’s established federal funds lines with correspondent banks aggregating $38.0 million, with available credit of $38.0 million; an established borrowing relationship with the FHLB, with available credit of $183.6 million; and access to borrowings from the FRB discount window, with available credit of $28.6 million. The Company also has a $3.0 million line of credit with TIB The Independent BankersBank, N.A. The line is held by the holding company and is secured with 100% of the outstanding common shares of the Company’s subsidiary bank. As of March 31, 2026, $3.0 million remained available for use on the line of credit.
The following table summarizes the Company’s interest-earning cash and cash equivalents as of the periods indicated.
March 31, 2026
December 31, 2025
(dollars in thousands)
Interest-earning cash and cash equivalents
$
105,646
$
59,289
Interest-earning cash and cash equivalents as a percent of:
Total loans held for investment
15.4
%
8.6
%
Total earning assets
8.9
%
5.2
%
Total deposits
9.3
%
5.5
%
Banks and bank holding companies, as regulated institutions, must meet required levels of capital. The Federal Reserve, the primary federal regulator of the Company and its subsidiary bank, has adopted minimum capital regulations or guidelines that categorize components and the level of risk associated with various types of assets.
The Company continues to maintain capital ratios that support its asset growth. The federal bank regulatory agencies have implemented regulatory capital rules known as “Basel III.” The Basel III rules require a common equity Tier 1 capital to risk-weighted assets minimum ratio of 4.50%, a minimum ratio of Tier 1 capital to risk-weighted assets of 6.00%, a minimum ratio of total capital to risk-weighted assets of 8.00%, and a minimum Tier 1 leverage ratio of 4.00%. There is also a capital conservation buffer that requires banks to hold common equity Tier 1 capital in excess of minimum risk-based capital ratios by at least 2.5% to avoid limits on capital distributions and certain discretionary bonus payments to executive officers and similar employees. The Company’s accumulated other comprehensive income or loss, resulting from unrealized gains and losses, net of income tax, on investment securities available for sale, is excluded from regulatory capital. As of March 31, 2026, the Company’s subsidiary bank continued to exceed minimum capital standards and remained well-capitalized under the applicable rules.
30
The Company’s subsidiary bank has a net total of $10.7 million in outstanding Fixed Rate Noncumulative Perpetual Preferred Stock. The preferred stock qualifies as Tier 1 capital at the Bank and pays dividends at an annual rate of 5.30%. The net total of $10.7 million is presented as noncontrolling interest at the Company level and qualifies as Tier 1 capital at the Company. At March 31, 2026, the Company had $29.1 million, net of unamortized debt issuance costs of $135,000, in subordinated debt outstanding, of which $25.4 million qualifies as Tier 2 capital at the Company level. The Company has made all interest and dividend payments in a timely manner.
Off-Balance Sheet Arrangements
Off-balance sheet arrangements include transactions, agreements or other contractual arrangements to which an unconsolidated entity of the Company is a party and pursuant to which the Company has obligations, including an obligation to provide guarantees on behalf of an unconsolidated entity, or retains an interest in assets transferred to an unconsolidated entity. We currently have no off-balance sheet arrangements of this kind.
Derivative financial instruments include futures contracts, forward contracts, interest rate swaps, options contracts, and other financial instruments with similar characteristics. We have not engaged in significant derivative activities through March 31, 2026, with the exception of mortgage banking derivatives. See Note 12 ("Mortgage Banking Derivatives") to the Company’s Notes to Consolidated Financial Statements for additional discussion of mortgage banking derivatives.
Contractual Obligations
The timing and amount of our contractual obligations has not changed materially since our 2025 Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission on March 5, 2026.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Disclosure under this item is not required for smaller reporting companies.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
At the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s principal executive officer and principal financial officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Securities Exchange Act (“Exchange Act”) Rule 13a-15.
Based upon that evaluation, the principal executive officer and principal financial officer concluded that in their opinion, the Company’s disclosure controls and procedures were effective (1) to provide reasonable assurance that information required to be disclosed by the Company in the reports filed or submitted by it under the Exchange Act was recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (2) to provide reasonable assurance that information required to be disclosed by the Company in such reports is accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate to allow for timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
Management of the Company has evaluated, with the participation of the Company’s principal executive officer and principal financial officer, changes in the Company’s internal controls over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) during the first quarter of 2026. In connection with such evaluation, the Company has determined that there were no changes in the Company’s internal control over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. The Company reviews its disclosure controls and procedures, which may include its internal control over financial reporting, on an ongoing basis, and may from time to time make changes aimed at enhancing their effectiveness and ensuring that the Company’s systems evolve with its business.
31
Part II. OTHER INFORMATION
Item 1. Legal Proceedings.
Neither the Company nor its subsidiaries, nor any of their properties are subject to any material legal proceedings. From time to time, the Company’s subsidiary bank is engaged in ordinary routine litigation incidental to its business.
Item 1A. Risk Factors.
Disclosure under this item is not required for smaller reporting companies.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
The following table sets forth information with respect to shares of common stock repurchased by the Company during the three months ended March 31, 2026.
(a) Total Number of Shares Purchased
(b) Average Price Paid per Share
(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Program(1)
(d) Maximum Dollar Value (in thousands) of Shares that May Yet Be Purchased Under the Plans
January 1, 2026 through January 31, 2026
—
$
—
—
$
—
February 1, 2026 through February 28, 2026
15,043
$
10.74
—
$
—
March 1, 2026 through March 31, 2026
10,569
$
10.60
—
$
—
Total
25,612
$
10.68
—
$
—
(1)
Trades of the Company’s common stock are quoted on the OTCQX Market from time to time. The Company also has in place a Stock Repurchase Plan that provides liquidity to its shareholders in the event a willing buyer is not available to purchase shares that are offered for sale. The Company is under no obligation to purchase shares offered; however, it will accommodate such offers as its Stock Repurchase Plan allows.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
32
Item 6. Exhibits.
Set forth below is the exhibit index for this quarterly report:
Interactive data files providing financial information from the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2026, in inline XBRL (eXtensible Business Reporting Language) (filed herewith)
104
Cover page interactive data file (formatted in inline XBRL and contained in Exhibit 101)
33
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.