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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
September 30,
2025
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:
6,988,394
shares of common stock outstanding as of November 3, 2025.
Securities available for sale, at fair value (amortized cost $
378,890
and $
365,088
respectively)
354,920
332,986
Securities held to maturity, at amortized cost (fair value $
20,016
and $
24,561
respectively)
22,023
26,813
Less allowance for credit losses on securities held to maturity
(
46
)
(
68
)
Net securities held to maturity
21,977
26,745
Equity securities, at fair value
332
334
Loans held for sale
5,083
4,561
Loans held for investment
677,390
666,377
Less allowance for credit losses on loans
(
6,356
)
(
5,824
)
Net loans held for investment
671,034
660,553
Premises and equipment, net
14,171
14,479
Interest receivable
4,700
4,355
Restricted stock
1,779
1,709
Bank-owned life insurance
8,044
7,938
Deferred income tax benefit
7,132
8,983
Loan servicing assets
3,799
3,903
Mortgage banking derivatives
944
795
Other assets
10,893
9,200
Total assets
$
1,215,826
$
1,128,808
LIABILITIES
Deposits:
Demand noninterest-bearing
$
287,219
$
272,355
Interest checking and money market accounts
429,147
395,079
Savings deposits
100,842
92,954
Time deposits, $250,000 and over
137,654
133,335
Other time deposits
149,191
136,513
Total deposits
1,104,053
1,030,236
Short-term borrowed funds
43
1,414
Long-term debt
29,219
29,161
Mortgage banking derivatives
52
—
Other liabilities
11,493
10,318
Total liabilities
1,144,860
1,071,129
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
6,988,394
and
7,077,941
at September 30, 2025 and December 31, 2024, respectively
8,735
8,847
Common stock dividend distributable
262
—
Additional paid-in capital
13,666
12,553
Undivided profits
56,089
50,351
Accumulated other comprehensive loss
(
18,441
)
(
24,727
)
Total Uwharrie Capital Corp shareholders’ equity
60,311
47,024
Noncontrolling interest
10,655
10,655
Total shareholders’ equity
70,966
57,679
Total liabilities and shareholders’ equity
$
1,215,826
$
1,128,808
(*) Derived from audited consolidated financial statements
See accompanying notes
2
Uwharrie Capital Corp and Subsidiaries
Consolidated Statements
of Income (Unaudited)
Three Months Ended September 30,
Nine Months Ended September 30,
2025
2024
2025
2024
(in thousands, except share and per share data)
Interest Income
Loans, including fees
$
10,800
$
9,966
$
31,504
$
28,045
Investment securities:
Investment securities, taxable
2,883
3,066
8,536
8,998
Investment securities, non-taxable
330
307
949
929
Equity securities
5
5
15
15
Interest-earning deposits with banks and federal funds sold
682
780
1,834
2,116
Total interest income
14,700
14,124
42,838
40,103
Interest Expense
Interest checking and money market accounts
1,741
1,763
4,910
4,953
Savings deposits
158
136
430
410
Time deposits, $250,000 and over
1,335
1,431
3,895
3,435
Other time deposits
1,247
1,328
3,871
3,686
Short-term borrowed funds
1
69
24
206
Long-term debt
330
339
985
1,001
Total interest expense
4,812
5,066
14,115
13,691
Net interest income
9,888
9,058
28,723
26,412
Provision for (recovery of) credit losses on:
Loans
192
(
223
)
722
182
Securities held to maturity
(
8
)
—
(
22
)
10
Unfunded loan commitments
(
8
)
(
7
)
11
(
21
)
Total provision for (recovery of) credit losses
176
(
230
)
711
171
Net interest income after provision for (recovery of) credit losses
9,712
9,288
28,012
26,241
Noninterest Income
Service charges on deposit accounts
280
283
802
818
Other service fees and commissions
1,002
991
2,972
2,819
Interchange and card transaction fees, net
252
267
809
877
Loss on sale/call of securities
—
—
—
(
148
)
Realized/unrealized gain (loss) on equity securities
7
31
(
2
)
53
Income from mortgage banking
927
861
3,005
2,301
Supplemental executive retirement plan gain (loss)
293
(
66
)
417
(
112
)
Other income
145
162
368
476
Total noninterest income
2,906
2,529
8,371
7,084
Noninterest Expense
Salaries and employee benefits
5,581
5,152
16,712
15,511
Net occupancy expense
488
454
1,385
1,308
Equipment expense
195
217
606
642
Data processing costs
223
177
664
610
Loan costs
47
58
205
142
Professional fees and services
289
252
826
778
Marketing and donations
375
383
1,093
1,088
Electronic banking expense
137
107
371
320
Software amortization and maintenance
412
344
1,132
1,003
FDIC insurance
137
126
400
375
Supplemental executive retirement plan gain (loss)
293
(
66
)
417
(
112
)
Other noninterest expense
684
616
1,958
1,869
Total noninterest expense
8,861
7,820
25,769
23,534
Income before income taxes
3,757
3,997
10,614
9,791
Income taxes
867
962
2,347
2,160
Net income
$
2,890
$
3,035
$
8,267
$
7,631
Consolidated net income
$
2,890
$
3,035
$
8,267
$
7,631
Less: net income attributable to noncontrolling interest
(
142
)
(
142
)
(
422
)
(
424
)
Net income attributable to common shareholders
2,748
2,893
7,845
7,207
Net income per common share
Basic
$
0.38
$
0.39
$
1.08
$
0.97
Diluted
$
0.38
$
0.39
$
1.08
$
0.97
Weighted average common shares outstanding
Basic
7,216,259
7,376,072
7,254,062
7,436,961
Diluted
7,216,259
7,376,072
7,254,062
7,436,961
See accompanying notes
3
Uw
harrie Capital Corp and Subsidiaries
Consolidated Statements of Comprehensive Income (Unaudited)
Three Months Ended September 30,
Nine Months Ended September 30,
2025
2024
2025
2024
(dollars in thousands)
Net income
$
2,890
$
3,035
$
8,267
$
7,631
Other comprehensive income:
Unrealized gain on available for sale securities
3,962
8,987
8,133
7,445
Related tax effect
(
900
)
(
2,064
)
(
1,847
)
(
1,710
)
Total other comprehensive income
3,062
6,923
6,286
5,735
Comprehensive income
5,952
9,958
14,553
13,366
Less: Comprehensive income attributable to noncontrolling interest
(
142
)
(
142
)
(
422
)
(
424
)
Comprehensive income attributable to Uwharrie Capital Corp
$
5,810
$
9,816
$
14,131
$
12,942
See accompanying notes
4
Uwharrie Capital Corp and Subsidiaries
Consolidated Statements of Changes in
Shareholders’ Equity (Unaudited)
Number of
Common
Shares
Issued
Common
Stock
Common
Stock
Dividend
Distributable
Additional
Paid-in
Capital
Undivided
Profits
Accumulated
Other
Comprehensive
Income (Loss)
Noncontrolling
Interest
Total
(dollars in thousands, except share data)
Balance, June 30, 2024
7,068,577
$
8,836
$
—
$
12,510
$
46,419
$
(
26,288
)
$
10,655
$
52,132
Net Income
—
—
—
—
2,893
—
142
3,035
2
% stock dividend declaration
—
—
174
921
(
1,095
)
—
—
—
Repurchase of common stock
(
104,254
)
(
131
)
—
(
696
)
—
—
—
(
827
)
Other comprehensive loss
—
—
—
—
—
6,923
—
6,923
Record preferred stock dividend series B
(noncontrolling interest)
—
—
—
—
—
—
(
105
)
(
105
)
Record preferred stock dividend series C
(noncontrolling interest)
—
—
—
—
—
—
(
37
)
(
37
)
Balance, September 30, 2024
6,964,323
$
8,705
$
174
$
12,735
$
48,217
$
(
19,365
)
$
10,655
$
61,121
Balance, June 30, 2025
7,013,052
$
8,766
$
—
$
12,038
$
55,448
$
(
21,503
)
$
10,655
$
65,404
Net Income
—
—
—
—
2,748
—
142
2,890
3
% stock dividend declaration
—
—
262
1,845
(
2,107
)
—
—
—
Repurchase of common stock
(
24,658
)
(
31
)
—
(
217
)
—
—
—
(
248
)
Other comprehensive income
—
—
—
—
—
3,062
—
3,062
Record preferred stock dividend series B
(noncontrolling interest)
—
—
—
—
—
—
(
105
)
(
105
)
Record preferred stock dividend series C
(noncontrolling interest)
—
—
—
—
—
—
(
37
)
(
37
)
Balance, September 30, 2025
6,988,394
$
8,735
$
262
$
13,666
$
56,089
$
(
18,441
)
$
10,655
$
70,966
Number of
Common
Shares
Issued
Common
Stock
Common
Stock
Dividend
Distributable
Additional
Paid-in
Capital
Undivided
Profits
Accumulated
Other
Comprehensive
Income (Loss)
Noncontrolling
Interest
Total
(dollars in thousands, except share data)
Balance, December 31, 2023
7,124,438
$
8,905
$
—
$
12,876
$
42,105
$
(
25,100
)
$
10,655
$
49,441
Net Income
—
—
—
—
7,207
—
424
7,631
2
% stock dividend declaration
—
—
174
921
(
1,095
)
—
—
—
Repurchase of common stock
(
160,115
)
(
200
)
—
(
1,062
)
—
—
—
(
1,262
)
Other comprehensive loss
—
—
—
—
—
5,735
—
5,735
Record preferred stock dividend Series B
(noncontrolling interest)
—
—
—
—
—
—
(
313
)
(
313
)
Record preferred stock dividend Series C
(noncontrolling interest)
—
—
—
—
—
—
(
111
)
(
111
)
Balance, September 30, 2024
6,964,323
$
8,705
$
174
$
12,735
$
48,217
$
(
19,365
)
$
10,655
$
61,121
Balance, December 31, 2024
7,077,941
$
8,847
$
—
$
12,553
$
50,351
$
(
24,727
)
$
10,655
$
57,679
Net Income
—
—
—
—
7,845
—
422
8,267
3
% stock dividend declaration
—
—
262
1,845
(
2,107
)
—
—
—
Repurchase of common stock
(
89,547
)
(
112
)
—
(
732
)
—
—
—
(
844
)
Other comprehensive income
—
—
—
—
—
6,286
—
6,286
Record preferred stock dividend Series B
(noncontrolling interest)
—
—
—
—
—
—
(
311
)
(
311
)
Record preferred stock dividend Series C
(noncontrolling interest)
—
—
—
—
—
—
(
111
)
(
111
)
Balance, September 30, 2025
6,988,394
$
8,735
$
262
$
13,666
$
56,089
$
(
18,441
)
$
10,655
$
70,966
See accompanying notes
5
Uwharrie Capital Corp and Subsidiaries
Consolidated Statements of
Cash Flows (Unaudited)
Nine Months Ended September 30,
2025
2024
(dollars in thousands)
Cash flows from operating activities
Net income
$
8,267
$
7,631
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
799
832
Right of use asset amortization
296
289
Provision for credit losses
711
171
Loss on call of securities held to maturity
—
148
Gain on sale of mortgage loans
(
1,447
)
(
589
)
Loss on sale of premises and equipment
—
8
Gain on sale of OREO
(
83
)
—
Realized/unrealized (gain) loss on equity securities
2
(
53
)
Net amortization of premium on investment securities available for sale
1,335
1,303
Net amortization of premium on investment securities held to maturity
90
95
Amortization of loan servicing assets
930
927
Originations and purchases of mortgage loans for sale
(
125,295
)
(
77,728
)
Proceeds from sales of mortgage loans for sale
126,220
78,225
Mortgage banking derivatives
(
97
)
(
581
)
Loan servicing assets
(
826
)
(
622
)
Accrued interest receivable
(
345
)
(
428
)
Prepaid assets
(
2
)
30
Cash surrender value of life insurance
(
106
)
(
108
)
Miscellaneous other assets
(
1,763
)
(
188
)
Deferred income taxes
4
—
Accrued interest payable
(
61
)
58
Miscellaneous other liabilities
1,225
835
Net cash provided by operating activities
9,854
10,255
Cash flows from investing activities
Proceeds from maturities, calls and paydowns of securities available for sale
35,256
47,940
Proceeds from maturities, calls and paydowns of securities held to maturity
4,700
1,514
Purchase of investment securities available for sale
(
50,392
)
(
37,729
)
Purchase of investments in other assets
(
89
)
(
350
)
Proceeds from distributions of investments in other assets
161
224
Net change in restricted stock
(
70
)
(
57
)
Net increase in loans
(
11,309
)
(
55,061
)
Purchase of premises and equipment
(
729
)
(
735
)
Proceeds from sale of premises and equipment
—
31
Proceeds from sale of OREO
189
—
Net cash used by investing activities
(
22,283
)
(
44,223
)
Cash flows from financing activities
Net increase in deposit accounts
73,817
96,098
Net increase (decrease) in federal funds purchased and other short-term borrowings
(
1,371
)
40
Repayment of long term borrowings
—
(
20
)
Repurchase of common stock, net
(
844
)
(
1,262
)
Dividends paid on preferred stock (noncontrolling interest)
(
422
)
(
424
)
Net cash provided by financing activities
71,180
94,432
Increase in cash and cash equivalents
58,751
60,464
Cash and cash equivalents, beginning of period
52,267
63,434
Cash and cash equivalents, end of period
$
111,018
$
123,898
Supplemental disclosures of cash flow information
Interest paid
$
14,118
$
13,570
Income taxes paid
2,707
2,312
Supplemental schedule of non-cash activities
Net change in fair value of securities available for sale, net of tax
$
6,286
$
5,735
Loans transferred to foreclosed real estate
106
—
See accompanying notes
6
UWHARRIE CAPITAL CORP AND SUBSIDIARIES
Notes to Consolidated Financ
ial 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 2024
Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission on March 6, 2025. 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.
The allowance for credit losses calculation utilizes a forecast model for the collectively assessed population. Effective June 30, 2025, after multiple periods of parallel modeling using the national unemployment rate and the NC unemployment rate as indices, compared to the National Unemployment Rate and the 10-Year T-Bill which had previously been utilized for this purpose, a change in estimate was incorporated into the model. The change in estimate incorporated more recent data to enhance and maintain reliable results.
In conjunction with this change, it was also necessary to update the framework we used for establishing qualitative reserves, which has likewise been modified to use new indices and metrics. The change in estimate of the forecast model for the collectively assessed population also increased the maximum potential allowance allocated to the qualitative factors. While t
hese changes altered the overall composition of the allowance model, the overall impact is not material.
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, 2024 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, 2024.
Note 2 – Comprehensive Income (Loss)
The Company reports as comprehensive income all changes in shareholders’ equity during the year from sources other than shareholders. Other comprehensive income refers to all components (revenues, expenses, gains, and losses) of comprehensive income that are excluded from net income. The Company’s only component of other comprehensive income is unrealized gains and losses, net of income tax, on investment securities available for sale.
7
The following table presents the changes in accumulated other comprehensive loss for the
three and nine months ended September 30, 2025 and 2024:
For the Three Months Ended September 30,
For the Nine Months Ended September 30,
2025
2024
2025
2024
(dollars in thousands)
Beginning balance
$
(
21,503
)
$
(
26,288
)
$
(
24,727
)
$
(
25,100
)
Other comprehensive income before reclassifications,
net of ($
900
), ($
2,064
), ($
1,847
) and ($
1,710
) tax effect, respectively
3,062
6,923
6,286
5,735
Amounts reclassified from accumulated other comprehensive loss,
net of $
0
, $
0
, $
0
, and $
0
tax effect, respectively
—
—
—
—
Net current-period other comprehensive income
3,062
6,923
6,286
5,735
Ending balance
$
(
18,441
)
$
(
19,365
)
$
(
18,441
)
$
(
19,365
)
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
On
October 28, 2025
, the Company's Board of Directors declared a
3
% stock dividend payable
December 1, 2025
to shareholders of record on
November 10, 2025
.
All information in the accompanying consolidated financial statements regarding earnings per share and weighted average number of shares outstanding has been computed giving effect to this stock dividend. The weighted average number of shares outstanding and earnings per share for the 2024 periods have also been adjusted for the
2
% stock dividend declared on
October 15, 2024
.
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
September 30, 2025 or December 31, 2024.
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:
September 30, 2025
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
(dollars in thousands)
Securities available for sale:
U.S. Treasury
$
25,813
$
—
$
1,963
$
23,850
U.S. government agencies
49,081
66
867
48,280
GSE - Mortgage-backed securities and CMOs
180,083
694
8,969
171,808
Asset-backed securities
21,340
310
61
21,589
State and political subdivisions
98,573
195
13,240
85,528
Corporate bonds
4,000
—
135
3,865
Total securities available for sale
$
378,890
$
1,265
$
25,235
$
354,920
8
September 30, 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
$
11,723
$
—
$
1,215
$
10,508
$
—
$
11,723
Corporate bonds
10,300
—
792
9,508
46
10,254
Total securities held to maturity
$
22,023
$
—
$
2,007
$
20,016
$
46
$
21,977
December 31, 2024
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
(dollars in thousands)
Securities available for sale:
U.S. Treasury
$
32,961
$
—
$
3,067
$
29,894
U.S. government agencies
42,667
97
1,035
$
41,729
GSE - Mortgage-backed securities and CMOs
165,561
198
12,970
$
152,789
Asset-backed securities
23,215
407
44
$
23,578
State and political subdivisions
94,684
5
15,436
$
79,253
Corporate bonds
6,000
—
257
$
5,743
Total securities available for sale
$
365,088
$
707
$
32,809
$
332,986
December 31, 2024
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
$
11,813
$
—
$
1,078
$
10,735
$
—
$
11,813
Corporate bonds
15,000
—
1,174
13,826
68
14,932
Total securities held to maturity
$
26,813
$
—
$
2,252
$
24,561
$
68
$
26,745
The Company owned Federal Reserve Bank (FRB) stock reported at cost of $
959,000
at
September 30, 2025 and December 31, 2024
. The Company owned Federal Home Loan Bank (FHLB) stock reported at cost of $
819,000
and $
750,000
at
September 30, 2025 and December 31, 2024, 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 September 30, 2025.
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
nine months ended September 30, 2025.
State and political subdivisions
Corporate bonds
Total
(dollars in thousands)
Balance, December 31, 2024
$
—
$
68
$
68
Recovery of credit losses
—
(
22
)
(
22
)
Charge-offs of securities
—
—
—
Recoveries
—
—
—
Balance, September 30, 2025
$
—
$
46
$
46
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.
9
The following table summarizes the credit ratings of debt securities held to maturity, presented at amortized cost, by major security type at
September 30, 2025.
September 30, 2025
State and political subdivisions
Corporate bonds
Total
(dollars in thousands)
Aaa
$
—
$
—
$
—
Aa1/Aa2/Aa3
11,116
—
11,116
A1/A2
—
—
—
BBB
—
—
—
Not rated
607
10,300
10,907
Total
$
11,723
$
10,300
$
22,023
At September 30, 2025
, 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
nine months ended September 30, 2025.
The Company had no sales of securities available for sale during the nine-month periods ended September 30, 2025 and 2024.
At September 30, 2025 and December 31, 2024, securities available for sale with a carrying amount
of $
171.5
million and $
161.5
million,
respectively, were pledged as collateral on public deposits and for other purposes as required or permitted by law.
We believe the unrealized losses on investment securities are a result of a volatile market and fluctuations in market prices due to a rise in interest rates, which will adjust if rates decline. Management does not believe these fluctuations are a reflection of the credit quality of the investments.
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
September 30, 2025 and December 31, 2024.
Less than 12 Months
12 Months or More
Total
September 30, 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
$
23,850
$
1,963
$
23,850
$
1,963
U.S. government agencies
17
19,256
106
27
19,716
761
38,972
867
GSE-Mortgage-backed securities and CMOs
16
32,207
270
57
87,018
8,699
119,225
8,969
Asset-backed securities
—
—
—
4
4,398
61
4,398
61
State and political subdivisions
4
1,972
94
58
73,274
13,146
75,246
13,240
Corporate bonds
—
—
—
2
3,865
135
3,865
135
Total securities available for sale
37
$
53,435
$
470
153
$
212,121
$
24,765
$
265,556
$
25,235
Less than 12 Months
12 Months or More
Total
December 31, 2024
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
—
$
—
$
—
7
$
29,894
$
3,067
$
29,894
$
3,067
U.S. government agencies
9
9,956
134
24
19,995
901
29,951
1,035
GSE-Mortgage-backed securities and CMOs
19
32,580
313
57
97,798
12,657
130,378
12,970
Asset-backed securities
2
2,872
21
3
4,189
23
7,061
44
State and political subdivisions
5
7,773
253
57
70,169
15,183
77,942
15,436
Corporate bonds
—
—
—
3
5,743
257
5,743
257
Total securities available for sale
35
$
53,181
$
721
151
$
227,788
$
32,088
$
280,969
$
32,809
10
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 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 September 30, 2025, 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.
The following tables show contractual maturities of the investment portfolio as of
September 30, 2025:
September 30, 2025
Amortized
Cost
Estimated
Fair Value
Book
Yield
(dollars in thousands)
Securities available for sale:
Due within twelve months
2,675
2,614
1.45
%
Due after one but within five years
64,389
60,681
1.94
%
Due after five but within ten years
56,381
51,850
2.92
%
Due after ten years
255,445
239,775
3.88
%
$
378,890
$
354,920
3.39
%
September 30, 2025
Amortized
Cost
Estimated
Fair Value
Book
Yield
(dollars in thousands)
Securities held to maturity:
Due after one but within five years
3,300
3,252
8.42
%
Due after five but within ten years
9,609
8,769
3.51
%
Due after ten years
9,114
7,995
3.39
%
$
22,023
$
20,016
4.20
%
The portion of unrealized gains and losses for the
three and nine months ended September 30, 2025
and 2024
related to equity securities still held at the reporting date is calculated as follows:
Three Months Ended September 30,
Nine Months Ended September 30,
2025
2024
2025
2024
(dollars in thousands)
Gross proceeds from sales
$
—
$
—
$
—
$
—
Net gains (losses) recognized during the period on equity securities
$
7
$
31
$
(
2
)
$
53
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
$
7
$
31
$
(
2
)
$
53
11
Note 6 – Loans Held for Investment
The composition of net loans held for investment by class as of
September 30, 2025 and December 31, 2024 was as follows:
September 30, 2025
December 31, 2024
(dollars in thousands)
Commercial
Commercial
$
108,142
$
104,872
Real estate - commercial
254,498
245,569
Other real estate construction loans
51,214
50,940
Other loans
4,819
6,408
Noncommercial
Real estate 1-4 family construction
18,031
27,789
Real estate - residential
158,598
150,667
Home equity
71,541
68,287
Consumer loans
9,719
11,020
676,562
665,552
Less:
Allowance for credit losses
(
6,356
)
(
5,824
)
Deferred loan costs net
828
825
Loans held for investment, net
$
671,034
$
660,553
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 and nine months ended September 30, 2025 and 2024.
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, June 30, 2025
$
1,333
$
2,361
$
409
$
15
$
99
$
1,264
$
651
$
99
$
6,231
Provision for (recovery of) credit losses
65
(
24
)
17
1
(
11
)
2
128
14
192
Charge-offs
(
10
)
—
—
—
—
—
(
89
)
(
37
)
(
136
)
Recoveries
43
—
—
—
—
1
2
23
69
Net (charge-offs) recoveries
33
—
—
—
—
1
(
87
)
(
14
)
(
67
)
Balance, September 30, 2025
$
1,431
$
2,337
$
426
$
16
$
88
$
1,267
$
692
$
99
$
6,356
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, June 30, 2024
$
1,454
$
2,208
$
368
$
10
$
42
$
962
$
669
$
195
$
5,908
Provision for (recovery of) credit losses
158
(
21
)
(
3
)
2
1
(
190
)
(
130
)
(
40
)
(
223
)
Charge-offs
(
20
)
—
—
—
—
—
—
(
22
)
(
42
)
Recoveries
62
—
—
—
—
1
—
30
93
Net (charge-offs) recoveries
42
—
—
—
—
1
—
8
51
Balance, September 30, 2024
$
1,654
$
2,187
$
365
$
12
$
43
$
773
$
539
$
163
$
5,736
12
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
(
65
)
71
14
(
2
)
32
484
190
(
2
)
722
Charge-offs
(
123
)
—
—
—
—
—
(
89
)
(
115
)
(
327
)
Recoveries
91
—
—
—
—
2
3
41
137
Net (charge-offs) recoveries
(
32
)
—
—
—
—
2
(
86
)
(
74
)
(
190
)
Balance, September 30, 2025
$
1,431
$
2,337
$
426
$
16
$
88
$
1,267
$
692
$
99
$
6,356
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, 2023
$
1,493
$
2,057
$
389
$
9
$
31
$
796
$
582
$
204
$
5,561
Provision for (recovery of) credit losses
79
130
(
24
)
3
12
(
25
)
(
43
)
50
182
Charge-offs
(
37
)
—
—
—
—
—
(
1
)
(
140
)
(
178
)
Recoveries
119
—
—
—
—
2
1
49
171
Net (charge-offs) recoveries
82
—
—
—
—
2
—
(
91
)
(
7
)
Balance, September 30, 2024
$
1,654
$
2,187
$
365
$
12
$
43
$
773
$
539
$
163
$
5,736
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:
September 30, 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
$
16
$
—
$
16
$
108,125
$
108,141
$
—
Real estate - commercial
—
—
—
254,596
254,596
—
Other real estate construction
—
—
—
51,214
51,214
—
Real estate 1-4 family construction
—
—
—
18,031
18,031
—
Real estate - residential
881
198
1,079
158,250
159,329
—
Home equity
75
205
280
71,261
71,541
—
Consumer loans
1
—
1
9,718
9,719
—
Other loans
—
—
—
4,819
4,819
—
Total
$
973
$
403
$
1,376
$
676,014
$
677,390
$
—
December 31, 2024
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
$
9
$
88
$
97
$
104,773
$
104,870
$
—
Real estate - commercial
43
—
43
245,636
245,679
—
Other real estate construction
—
—
—
50,940
50,940
—
Real estate 1-4 family construction
—
—
—
27,789
27,789
—
Real estate - residential
429
64
493
150,891
151,384
—
Home equity
176
40
216
68,071
68,287
—
Consumer loan
42
—
42
10,978
11,020
—
Other loans
—
—
—
6,408
6,408
—
Total
$
699
$
192
$
891
$
665,486
$
666,377
$
—
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 carrying value of foreclosed properties held as other real estate was $
0
at September 30, 2025 and December 31, 2024. The Company had
no
foreclosed residential real estate and $
136,000
of residential real estate in process of foreclosure at
September 30,
13
2025. At December 31, 2024
, the Company had
no
foreclosed residential real estate and $
93,000
of residential real estate in process of foreclosure.
The composition of nonaccrual loans by class as of
September 30, 2025 and December 31, 2024 was as follows:
Nine Months Ended
September 30, 2025
September 30, 2025
Nonaccrual Loans with No Allowance
Nonaccrual Loans with an Allowance
Total Nonaccrual Loans
Interest Income
(dollars in thousands)
Commercial
$
—
$
—
$
—
$
—
Real estate - commercial
—
—
—
—
Other real estate construction
—
—
—
—
Real estate 1-4 family construction
—
—
—
—
Real estate - residential
—
198
198
12
Home equity
—
205
205
6
Consumer loans
—
—
—
—
Other loans
—
—
—
—
$
—
$
403
$
403
$
18
Nine Months Ended
December 31, 2024
September 30, 2024
Nonaccrual Loans with No Allowance
Nonaccrual Loans with an Allowance
Total Nonaccrual Loans
Interest Income
(dollars in thousands)
Commercial
$
—
$
88
$
88
$
5
Real estate - commercial
—
—
—
—
Other real estate construction
—
—
—
—
Real estate 1-4 family construction
—
—
—
—
Real estate - residential
—
64
64
19
Home equity
—
40
40
2
Consumer loans
—
—
—
—
Other loans
—
—
—
—
$
—
$
192
$
192
$
26
A loan may be individually assessed for determining the allowance for credit losses when it is determined that it does not share similar risk characteristics with other loans. Loans that are on nonaccrual status will be reviewed to determine if they will be individually, rather than collectively, assessed. If the loan is deemed to be collateral dependent and the relationship’s outstanding balance is $
100,000
or greater, it will be individually assessed. Collateral dependent loans are loans for which the repayment is expected to be provided substantially through the operation or sale of the collateral and the borrower is experiencing financial difficulty. Collateral dependent loans require an analysis of the collateral. The fair value of the collateral is discounted by liquidation costs. If the discounted fair value of the collateral is greater than the amortized loan balance, no allowance is required. Otherwise the difference between the balance and the collateral is charged off if deemed uncollectible.
The following table details the amortized cost of collateral dependent loans and any related allowance at
September 30, 2025 and December 31, 2024.
September 30, 2025
December 31, 2024
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
135
18
—
—
Home equity
—
—
—
—
Consumer loans
—
—
—
—
Other loans
—
—
—
—
Total
$
135
$
18
$
—
$
—
14
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.
15
The following table presents the Company’s recorded investment in loans by credit quality indicators by year of origination as of
September 30, 2025:
September 30, 2025
Term Loans by Year of Origination
2025
2024
2023
2022
2021
Prior
Revolving
Total
(dollars in thousands)
Commercial
Pass
$
35,409
$
20,594
$
10,796
$
11,179
$
7,619
$
9,681
$
12,661
$
107,939
Watch
121
36
3
—
—
—
42
202
Special Mention
—
—
—
—
—
—
—
—
Substandard
—
—
—
—
—
—
—
—
Total commercial
35,530
20,630
10,799
11,179
7,619
9,681
12,703
108,141
Real estate - commercial
Pass
26,134
42,804
44,116
44,333
35,940
53,292
1,532
248,151
Watch
—
—
6,017
—
—
55
—
6,072
Special Mention
—
—
—
—
—
26
—
26
Substandard
—
—
—
—
—
347
—
347
Total real estate - commercial
26,134
42,804
50,133
44,333
35,940
53,720
1,532
254,596
Other real estate construction
Pass
8,994
16,781
13,433
3,817
1,823
4,734
1,632
51,214
Watch
—
—
—
—
—
—
—
—
Special Mention
—
—
—
—
—
—
—
—
Substandard
—
—
—
—
—
—
—
—
Total other real estate construction
8,994
16,781
13,433
3,817
1,823
4,734
1,632
51,214
Real estate 1-4 family construction
Pass
8,476
9,555
—
—
—
—
—
18,031
Watch
—
—
—
—
—
—
—
—
Special Mention
—
—
—
—
—
—
—
—
Substandard
—
—
—
—
—
—
—
—
Total real estate 1-4 family construction
8,476
9,555
—
—
—
—
—
18,031
Real estate - residential
Pass
28,203
22,750
32,319
29,996
20,650
21,533
2,123
157,574
Watch
323
—
—
—
201
561
—
1,085
Special Mention
—
—
101
—
118
23
—
242
Substandard
—
—
—
—
—
428
—
428
Total real estate - residential
28,526
22,750
32,420
29,996
20,969
22,545
2,123
159,329
Home equity
Pass
10
44
553
326
173
2,098
68,002
71,206
Watch
—
—
—
15
—
40
—
55
Special Mention
—
—
75
—
—
—
—
75
Substandard
—
—
—
100
105
—
—
205
Total home equity
10
44
628
441
278
2,138
68,002
71,541
Consumer loans
Pass
2,431
2,079
1,088
550
73
315
3,131
9,667
Watch
—
52
—
—
—
—
—
52
Special Mention
—
—
—
—
—
—
—
—
Substandard
—
—
—
—
—
—
—
—
Total consumer loans
2,431
2,131
1,088
550
73
315
3,131
9,719
Other loans
Pass
66
631
—
1,598
1,095
1,429
—
4,819
Watch
—
—
—
—
—
—
—
—
Special Mention
—
—
—
—
—
—
—
—
Substandard
—
—
—
—
—
—
—
—
Total other loans
66
631
—
1,598
1,095
1,429
—
4,819
Total Pass
109,723
115,238
102,305
91,799
67,373
93,082
89,081
668,601
Total Watch
444
88
6,020
15
201
656
42
7,466
Total Special Mention
—
—
176
—
118
49
—
343
Total Substandard
—
—
—
100
105
775
—
980
Total loans
$
110,167
$
115,326
$
108,501
$
91,914
$
67,797
$
94,562
$
89,123
$
677,390
During the nine months ended September 30, 2025
, seventy-five loans totaling $
10.2
million were converted from revolving to term loans.
16
The following table presents the Company’s recorded investment in loans by credit quality indicators by year of origination as of December 31, 2024:
December 31, 2024
Term Loans by Year of Origination
2024
2023
2022
2021
2020
Prior
Revolving
Total
(dollars in thousands)
Commercial
Pass
$
25,634
$
18,992
$
14,319
$
11,948
$
2,292
$
10,270
$
20,964
$
104,419
Watch
48
117
—
—
—
—
182
347
Special Mention
—
—
—
—
—
—
—
—
Substandard
—
15
—
88
—
—
—
103
Total commercial
25,682
19,124
14,319
12,036
2,292
10,270
21,146
104,869
Real estate - commercial
Pass
38,684
55,090
48,600
30,383
20,722
48,127
3,040
244,646
Watch
—
—
—
—
—
63
—
63
Special Mention
—
—
—
561
—
32
—
593
Substandard
—
—
—
—
113
264
—
377
Total real estate - commercial
38,684
55,090
48,600
30,944
20,835
48,486
3,040
245,679
Other real estate construction
Pass
22,447
15,004
4,981
2,287
3,211
2,172
795
50,897
Watch
—
—
—
—
—
44
—
44
Special Mention
—
—
—
—
—
—
—
—
Substandard
—
—
—
—
—
—
—
—
Total other real estate construction
22,447
15,004
4,981
2,287
3,211
2,216
795
50,941
Real estate 1-4 family construction
Pass
19,845
7,944
—
—
—
—
—
27,789
Watch
—
—
—
—
—
—
—
—
Special Mention
—
—
—
—
—
—
—
—
Substandard
—
—
—
—
—
—
—
—
Total real estate 1-4 family construction
19,845
7,944
—
—
—
—
—
27,789
Real estate - residential
Pass
29,936
37,448
34,018
21,613
10,473
14,397
1,829
149,714
Watch
—
—
—
204
365
490
—
1,059
Special Mention
—
104
—
122
—
83
—
309
Substandard
—
—
—
—
—
302
—
302
Total real estate - residential
29,936
37,552
34,018
21,939
10,838
15,272
1,829
151,384
Home equity
Pass
57
255
159
192
402
1,679
65,158
67,902
Watch
—
—
—
—
—
84
140
224
Special Mention
—
—
100
—
—
20
—
120
Substandard
—
—
—
—
—
41
—
41
Total home equity
57
255
259
192
402
1,824
65,298
68,287
Consumer loans
Pass
3,934
1,944
985
170
70
320
3,586
11,009
Watch
11
—
—
—
—
—
—
11
Special Mention
—
—
—
—
—
—
—
—
Substandard
—
—
—
—
—
—
—
—
Total consumer loans
3,945
1,944
985
170
70
320
3,586
11,020
Other loans
Pass
644
—
1,598
2,602
1,211
353
—
6,408
Watch
—
—
—
—
—
—
—
—
Special Mention
—
—
—
—
—
—
—
—
Substandard
—
—
—
—
—
—
—
—
Total other loans
644
—
1,598
2,602
1,211
353
—
6,408
Total Pass
141,181
136,677
104,660
69,195
38,381
77,318
95,372
662,784
Total Watch
59
117
—
204
365
681
322
1,748
Total Special Mention
—
104
100
683
—
135
—
1,022
Total Substandard
—
15
—
88
113
607
—
823
Total loans
$
141,240
$
136,913
$
104,760
$
70,170
$
38,859
$
78,741
$
95,694
$
666,377
17
The following tables present gross charge-offs by origination date as of September 30, 2025 and December 31, 2024:
September 30, 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
4
2
—
2
74
115
Total charge-offs
$
—
$
42
$
4
$
18
$
88
$
91
$
84
$
327
December 31, 2024
Gross Loan Charge-offs by Year of Origination
2024
2023
2022
2021
2020
Prior
Revolving
Total
(dollars in thousands)
Commercial
Commercial
$
—
$
10
$
—
$
137
$
164
$
—
$
10
$
321
Real estate - commercial
—
—
—
—
—
—
—
—
Other real estate construction
—
—
—
—
—
—
—
—
Other loans
—
—
—
—
—
—
—
—
Noncommercial
Real estate 1-4 family construction
—
—
—
—
—
—
—
—
Real estate - residential
—
—
—
—
—
—
—
—
Home equity
—
—
—
—
—
1
—
1
Consumer loans
12
51
7
12
7
4
65
158
Total charge-offs
$
12
$
61
$
7
$
149
$
171
$
5
$
75
$
480
Loans that are in nonaccrual status or 90 days past due and still accruing are considered to be nonperforming. At both September 30, 2025 and December 31, 2024
there were
no
loans 90 days past due and still accruing.
The following tables show the breakdown between performing and nonperforming loans by class at
September 30, 2025 and December 31, 2024:
September 30, 2025
Performing
Non-
Performing
Total
(dollars in thousands)
Commercial
$
108,141
$
—
$
108,141
Real estate - commercial
254,596
—
254,596
Other real estate construction
51,214
—
51,214
Real estate 1-4 family construction
18,031
—
18,031
Real estate - residential
159,131
198
159,329
Home equity
71,336
205
71,541
Consumer loans
9,719
—
9,719
Other loans
4,819
—
4,819
Total
$
676,987
$
403
$
677,390
December 31, 2024
Performing
Non-
Performing
Total
(dollars in thousands)
Commercial
$
104,782
$
88
$
104,870
Real estate - commercial
245,679
—
245,679
Other real estate construction
50,940
—
50,940
Real estate 1-4 family construction
27,789
—
27,789
Real estate - residential
151,320
64
151,384
Home equity
68,247
40
68,287
Consumer loans
11,020
—
11,020
Other loans
6,408
—
6,408
Total
$
666,185
$
192
$
666,377
18
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 nine months ended
September 30, 2025 or during the twelve months ended December 31, 2024
. As such, the Company did
no
t have any loans made to borrowers experiencing financial difficulty that were modified during the nine months ended September 30, 2025 or during the twelve months ended
December 31, 2024
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.
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
September 30, 2025
,
operating lease ROU assets
were $
813,000
and the operating lease liability was $
877,000
, compared to
operating lease ROU assets
of $
1.1
million and an operating lease liability of $
1.2
million at
December 31, 2024. Lease costs associated with all leases was
$
106,000
and $
317,000
f
or the three and nine months ended September 30, 2025, respectively.
The table below summarizes other information related to our operating leases:
Nine Months Ended September 30,
2025
2024
(in thousands except percent and period data)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases
$
340
$
333
Right-of-use assets obtained in exchange for new operating lease liabilities
—
—
Weighted-average remaining lease term - operating leases, in years
2.4
3.3
Weighted-average discount rate - operating leases
2.74
%
2.63
%
19
The table below summarizes the maturity of remaining lease liabilities:
September 30, 2025
(dollars in thousands)
2025
$
115
2026
416
2027
260
2028
97
2029
20
Thereafter
-
Total lease payments
908
Less: Interest
(
31
)
Present value of lease liabilities
$
877
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.
At
September 30, 2025 and December 31, 2024, outstanding financial instruments whose contract amounts represent credit risk were approximately:
September 30, 2025
December 31, 2024
(dollars in thousands)
Commitments to extend credit
$
216,327
$
224,708
Credit card commitments
26,219
26,715
Standby letters of credit
8,000
8,141
Total commitments
$
250,546
$
259,564
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 $
179,000
and $
167,000
at
September 30, 2025 and December 31, 2024, respectively, is separately classified on the balance sheet within Other Liabilities.
The following table presents the balance and activity in the allowance for credit losses for unfunded loan commitments for the nine months ended
September 30, 2025.
Total Allowance for Credit Losses -
Unfunded Loan Commitments
(dollars in thousands)
Balance, December 31, 2024
$
167
Provision for credit losses
12
Balance, September 30, 2025
$
179
20
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 and state, county and municipal securities 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.
Mortgage banking derivatives, which are composed of interest rate lock commitments, or 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. However, certain nonaccrual loans are individually evaluated in connection with determining the allowance for credit losses. If the loan is deemed to be collateral dependent and the relationship’s outstanding balance is $
100,000
or greater, it will be individually evaluated. Collateral dependent loans are loans for which the repayment is expected to be provided substantially through the operation or sale of the collateral and the borrower is experiencing financial difficulty. Collateral dependent loans require an analysis of the collateral. The fair value of the collateral is based on appraised values discounted by liquidation costs which the Company considers Level 3 valuations.
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.
21
The following tables provide fair value information for assets and liabilities measured at fair value on a recurring basis as of
September 30, 2025 and December 31, 2024:
September 30, 2025
(dollars in thousands)
Total
Level 1
Level 2
Level 3
Securities available for sale:
U.S. Treasury
$
23,850
$
23,850
$
—
$
—
U.S. government agencies
48,280
—
48,280
—
GSE - Mortgage-backed securities and CMOs
171,808
—
171,808
—
Asset-backed securities
21,589
—
21,589
—
State and political subdivisions
85,528
—
85,528
—
Corporate bonds
3,865
—
3,865
—
Equity securities
332
332
—
—
Mortgage banking derivatives
944
—
49
895
Total assets at fair value on a recurring basis
$
356,196
$
24,182
$
331,119
$
895
Mortgage banking derivatives
$
52
$
—
$
52
$
—
Total liabilities at fair value on a recurring basis
$
52
$
—
$
52
$
—
December 31, 2024
(dollars in thousands)
Total
Level 1
Level 2
Level 3
Securities available for sale:
U.S. Treasury
$
29,894
$
29,894
$
—
$
—
U.S. government agencies
41,729
—
41,729
—
GSE - Mortgage-backed securities and CMOs
152,789
—
152,789
—
Asset-backed securities
23,578
—
23,578
—
State and political subdivisions
79,253
—
79,253
—
Corporate bonds
5,743
—
5,743
—
Equity securities
334
334
—
—
Mortgage banking derivatives
795
—
204
591
Total assets at fair value on a recurring basis
$
334,115
$
30,228
$
303,296
$
591
Mortgage banking derivatives
$
—
$
—
$
—
$
—
Total liabilities at fair value on a recurring basis
$
—
$
—
$
—
$
—
The following table provides a rollforward for recurring Level 3 fair value measurements:
The fair value of mortgage IRLCs at September 30, 2025
was calculated based on a notional amount of $
31.7
million. Significant unobservable inputs are used to determine the fair value of these derivatives. At
September 30, 2025
, 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
90.2
% determined by loan product, loan stage, and loan purpose. The fair value of mortgage IRLCs at December 31, 2024
was calculated based on a notional amount of $
32.4
million. Significant unobservable inputs were the same as those used for the nine months ended
September 30, 2025
and assumed a weighted average projected pull-through rate of
90.1
% at
December 31, 2024. Changes in interest rates and other assumptions could significantly change these estimated values.
22
The Company may be required, from time to time, to measure certain assets at fair value on a nonrecurring basis in accordance with U.S. generally accepted accounting principles. These include assets, such as other real estate owned and individually evaluated loans, 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
September 30, 2025. There were no assets for which a nonrecurring fair value adjustment was required as of December 31, 2024.
September 30, 2025
(dollars in thousands)
Total
Level 1
Level 2
Level 3
Individually evaluated loans
$
118
$
—
$
—
$
118
Total assets at fair value on a nonrecurring basis
$
118
$
—
$
—
$
118
The following table provides quantitative information about Level 3 fair value measurements:
September 30, 2025
Valuation Technique
Unobservable Input
General
Range
Nonrecurring measurements:
Individually evaluated loans
Discounted appraisals
Collateral discounts and estimated costs to sell
10
-
25
%
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 non-recurring basis.
The fair value estimates presented at September 30, 2025 and December 31, 2024 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
September 30, 2025 and December 31, 2024:
September 30, 2025
Carrying
Value
Estimated
Fair Value
Level 1
Level 2
Level 3
(dollars in thousands)
FINANCIAL ASSETS
Cash and cash equivalents
$
111,018
$
111,018
$
111,018
$
—
$
—
Securities available for sale
354,920
354,920
23,850
331,070
—
Securities held to maturity
21,977
20,016
—
10,508
9,508
Equity securities
332
332
332
—
—
Loans held for investment, net
671,034
648,487
—
—
648,487
Loans held for sale
5,083
5,083
—
5,083
—
Restricted stock
1,779
1,779
1,779
—
—
Loan servicing assets
3,799
7,449
—
7,449
—
Mortgage banking derivatives
944
944
—
49
895
Accrued interest receivable
4,700
4,700
—
—
4,700
FINANCIAL LIABILITIES
Deposits
$
1,104,053
1,103,766
—
1,103,766
—
Short-term borrowings
43
43
—
43
—
Long-term borrowings
29,219
26,723
—
—
26,723
Mortgage banking derivatives
52
52
—
52
—
Accrued interest payable
444
444
—
—
444
23
December 31, 2024
Carrying
Value
Estimated
Fair Value
Level 1
Level 2
Level 3
(dollars in thousands)
FINANCIAL ASSETS
Cash and cash equivalents
$
52,267
$
52,267
$
52,267
$
—
$
—
Securities available for sale
332,986
332,986
29,894
303,092
—
Securities held to maturity
26,745
24,561
—
10,735
13,826
Equity securities
334
334
334
—
—
Loans held for investment, net
660,553
629,111
—
—
629,111
Loans held for sale
4,561
4,561
—
4,561
—
Restricted stock
1,709
1,709
1,709
—
—
Loan servicing assets
3,903
7,323
—
7,323
—
Mortgage banking derivatives
795
795
—
204
591
Accrued interest receivable
4,355
4,355
—
—
4,355
FINANCIAL LIABILITIES
Deposits
$
1,030,236
$
1,029,696
$
—
$
1,029,696
$
—
Short-term borrowings
1,414
1,414
—
1,414
—
Long-term borrowings
29,161
25,725
—
—
25,725
Accrued interest payable
505
505
—
—
505
At September 30, 2025
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.
Note 12
–
Mortgage Banking Derivatives
The Company enters into commitments to originate loans whereby the interest rate on the loan is determined prior to funding, otherwise known as Interest Rate Lock Commitments (IRLCs). 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 to-be-announced mortgage-backed securities trades (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.
24
The following table reflects the notional amount and fair value of mortgage banking derivatives included in the balance sheet at fair value as of
September 30, 2025 and December 31, 2024.
Notional Amount
Fair Value
(dollars in thousands)
Balance at September 30, 2025
Included in mortgage banking derivative assets:
Interest rate lock commitments
$
31,745
$
895
Forward sales commitments
1,778
49
Included in mortgage banking derivative liabilities:
To-be-announced mortgage-backed securities trades
30,000
52
Balance at December 31, 2024
Included in mortgage banking derivative assets:
Interest rate lock commitments
$
32,352
$
591
Forward sales commitments
2,173
44
To-be-announced mortgage-backed securities trades
25,500
160
Note 13 – Recent Accounting Pronouncements and Other Changes
The Inflation Reduction Act of 2022 (“IRA”) created a new nondeductible
1
% excise tax on repurchases of corporate stock by
certain publicly traded corporations or their specified affiliates after December 31, 2022. The tax is imposed on the fair value of the
stock of a covered corporation that is repurchased in a given year, less the fair market value of any stock issued in that year. A
“covered corporation” is any domestic corporation whose stock is traded on an established securities market, such as an OTC market.
The excise tax applies to all of the stock of a covered corporation regardless of whether the corporation has profits or losses. The IRA
contains several exceptions to the excise tax, including, but not limited to, any repurchase of stock: in which the total value of the
repurchased stock in a given year does not exceed $
1,000,000
; that is contributed to an employer-sponsored retirement plan or other
similar stock compensation plan; or that is taxed as a dividend. The impact of the IRA on our consolidated financial statements is
dependent on the extent of stock repurchases.
In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which enhances income tax disclosure requirements. Under the new guidance, entities must disclose additional information in specified categories for federal, state and foreign income taxes with respect to the reconciliation of the effective tax rate to the statutory rate (rate reconciliation). Greater detail is also required about individual reconciling items in the rate reconciliation to the extent the impact of those items exceeds a specified threshold. Additionally, the amendments require that entities must disaggregate income taxes paid, net of refunds received, for federal, state and foreign taxes and further disaggregate for specific jurisdictions to the extent the related amounts exceed a quantitative threshold. The quantitative threshold is equal to 5% or more of the amount determined by multiplying pretax income (loss) from continuing operations by the applicable statutory rate. Public business entities must apply the guidance to annual periods beginning after December 15, 2024. ASU 2023-09 became effective for the Company on January 1, 2025. Entities may apply the amendments prospectively or may elect retrospective application. The Company does not expect the adoption of the ASU to have a material impact on the Company's financial statements.
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.
On July 4, 2025, President Trump signed into law the legislation formally titled “An Act to Provide for Reconciliation Pursuant to Title II of H. Con. Res. 14” and commonly referred to as the One Big Beautiful Bill (“the Act”). The Company is currently evaluating income tax implications of the Act. The Company does not expect the Act to have a material impact on the Company's 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.
25
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.
26
Banking, Mortgage and
Wealth Management
Other
Consolidated
(dollars in thousands)
For the Three Months Ended September 30, 2025
Interest income
$
14,695
$
5
$
14,700
Interest expense
4,481
331
4,812
Net interest income
10,214
(
326
)
9,888
Noninterest income
2,847
59
2,906
Noninterest expense
8,722
139
8,861
Pre-tax, pre-provision income
4,339
(
406
)
3,933
Provision for (recovery of) credit losses
176
—
176
Provision for income taxes
951
(
84
)
867
Net income (loss)
$
3,212
$
(
322
)
$
2,890
For the Nine Months Ended September 30, 2025
Interest income
$
42,823
$
15
$
42,838
Interest expense
13,106
1,009
14,115
Net interest income
29,717
(
994
)
28,723
Noninterest income
8,240
131
8,371
Noninterest expense
25,353
416
25,769
Pre-tax, pre-provision income
12,604
(
1,279
)
11,325
Provision for (recovery of) credit losses
711
—
711
Provision for income taxes
2,607
(
260
)
2,347
Net income (loss)
$
9,286
$
(
1,019
)
$
8,267
Total assets as of September 30, 2025
$
1,211,240
$
4,586
$
1,215,826
For the Three Months Ended September 30, 2024
Interest income
$
14,119
$
5
$
14,124
Interest expense
4,712
354
5,066
Net interest income
9,407
(
349
)
9,058
Noninterest income
2,442
87
2,529
Noninterest expense
7,697
123
7,820
Pre-tax, pre-provision income
4,152
(
385
)
3,767
Provision for (recovery of) credit losses
(
230
)
—
(
230
)
Provision for income taxes
1,038
(
76
)
962
Net income (loss)
$
3,344
$
(
309
)
$
3,035
For the Nine Months Ended September 30, 2024
Interest income
$
40,088
$
15
$
40,103
Interest expense
12,646
1,045
13,691
Net interest income
27,442
(
1,030
)
26,412
Noninterest income
6,911
173
7,084
Noninterest expense
23,151
383
23,534
Pre-tax, pre-provision income
11,202
(
1,240
)
9,962
Provision for (recovery of) credit losses
171
—
171
Provision for income taxes
2,408
(
248
)
2,160
Net income (loss)
$
8,623
$
(
992
)
$
7,631
Total assets as of December 31, 2024
$
1,123,764
$
5,044
$
1,128,808
27
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 the impacts of inflation and 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 September 30, 2025 and December 31, 2024.
During the nine months ended September 30, 2025, the Company’s total assets increased $87.0 million, from $1.13 billion to $1.22 billion.
Cash and cash equivalents increased $58.7 million during the nine months ended September 30, 2025, from $52.3 million to $111.0 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 nine-month period ended September 30, 2025, investment securities increased $17.1 million from $359.8 million at December 31, 2024 to $376.9 million at September 30, 2025. At September 30, 2025, the Company had net unrealized losses on securities available for sale of $24.0 million, compared to net unrealized losses of $32.1 million at December 31, 2024, an improvement of $8.1 million. During the first nine months of 2025, a $22,000 recovery was recorded against the allowance for credit losses on securities held to maturity, bringing the balance to $46,000 at September 30, 2025 compared to $68,000 at December 31, 2024. The amortized cost basis of securities held to maturity totaled $22.0 million and $26.8 million at September 30, 2025 and December 31, 2024, respectively.
At September 30, 2025, equity securities had deteriorated slightly in value from $334,000 at December 31, 2024 to $332,000, making an almost complete recovery from the volatility in the equity market earlier in the year.
Loans held for sale increased $522,000 from December 31, 2024 to $5.1 million at September 30, 2025. Loans held for investment increased from $666.4 million at December 31, 2024 to $677.4 million at September 30, 2025, an increase of $11.0 million. The Company experienced a net decrease in loans categorized as “Real Estate - 1-4 Family Construction,” “Consumer,” and “Commercial - Other.” All other loan sectors experienced a net increase during the nine months ended September 30, 2025.
The allowance for credit losses on loans was $6.4 million at September 30, 2025, which represented 0.94% of total loans held for investment, compared to $5.8 million, or 0.87% of total loans held for investment, at December 31, 2024. 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 decreased $1.9 million from $9.0 million at December 31, 2024 to $7.1 million at September 30, 2025 as a result of the improvement in fair value of the available for sale securities portfolio. Annual Company contributions, supplemented by positive market adjustments, increased the balance of supplemental executive retirement plans (“SERPs”), included in Other Assets, by $640,000 during the nine months ended September 30, 2025. Also included in Other Assets, accounts receivable increased $777,000 during the same period as a result of larger payments receivable on U.S. government agency securities.
Customer deposits, our primary funding source, experienced a $73.8 million increase during the nine-month period ended September 30, 2025, increasing from $1.03 billion to $1.10 billion. The overall increase in deposits is attributable to organic deposit growth. Demand noninterest-bearing checking accounts increased $14.9 million and interest checking and money market accounts increased $34.1 million, primarily from growth in public funds accounts, during the nine-month period ended September 30, 2025. Savings deposits increased $8.0 million and time deposits increased $17.0 million during the nine months ended September 30, 2025.
Total short-term borrowings decreased $1.4 million for the nine-month period ended September 30, 2025 due to the closing of a master note account during the third quarter that carried a balance of at least $1.1 million. At September 30, 2025, the Company had $29.2 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
28
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, 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 September 30, 2025, $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 September 30, 2025.
Other changes in the Company’s liabilities are related to an increase of $1.2 million in other liabilities from December 31, 2024 to September 30, 2025, $955,000 of which is related to the accrual of reserves for payables due throughout 2025. As with SERP assets mentioned above, SERP liabilities increased $640,000 during the same period. These increases were offset by a decrease of $319,000 in lease liability as leases approach expiration.
At September 30, 2025, total shareholders’ equity was $71.0 million, an increase of $13.3 million from December 31, 2024. Net income for the nine-month period ended September 30, 2025 was $8.3 million, which positively contributed to shareholders’ equity. Improvement in the unrealized loss position of the available for sale securities portfolio also contributed to the increase in shareholders’ equity during the same nine-month period. During the nine months ended September 30, 2025, the Company repurchased 89,547 shares of common stock at a total cost of $844,000, and the Company paid $422,000 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 September 30, 2025 and 2024.
Net Income and Net Income Available to Common Shareholders
Uwharrie Capital Corp reported net income of $2.9 million for the three months ended September 30, 2025, compared to $3.0 million for the three months ended September 30, 2024. Net income available to common shareholders was $2.7 million, or $0.38 per common share, for the three months ended September 30, 2025, compared to $2.9 million, or $0.39 per common share, for the three months ended September 30, 2024. 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 September 30, 2025 was $9.9 million, an $830,000 increase from the $9.1 million reported for the comparative period in 2024. During the third quarter of 2025, the average yield on our interest-earning assets increased 1 basis point to 5.19% from the same period in 2024, and the average rate we paid for our interest-bearing liabilities decreased 23 basis points to 2.32%. These changes resulted in an interest rate spread of 2.86% as of September 30, 2025, compared to 2.63% as of September 30, 2024. The Company’s net interest margin was 3.50% and 3.34% for the comparable periods in 2025 and 2024, respectively.
29
The following table presents average balance sheet and a net interest income analysis for the three months ended September 30, 2025 and 2024, respectively:
Average Balance
Income/Expenses
Rate/Yield
2025
2024
2025
2024
2025
2024
(dollars in thousands)
Interest-earning assets:
Taxable securities
$
306,918
$
314,789
$
2,883
$
3,066
3.73
%
3.87
%
Non-taxable securities
(1)
59,796
57,538
330
307
2.81
%
2.66
%
Short-term investments
78,139
76,883
682
780
3.46
%
4.04
%
Equity securities
325
324
5
5
6.10
%
6.14
%
Taxable loans
671,609
627,215
10,650
9,836
6.29
%
6.24
%
Non-taxable loans
(1)
17,202
16,466
150
130
4.44
%
3.93
%
Total interest-earning assets
1,133,989
1,093,215
14,700
14,124
5.19
%
5.18
%
Interest-bearing liabilities:
Interest-bearing deposits
791,955
755,728
4,481
4,659
2.24
%
2.45
%
Short-term borrowed funds
73
5,723
1
70
5.43
%
4.87
%
Long-term debt
29,208
29,429
330
338
4.48
%
4.57
%
Total interest bearing liabilities
821,236
790,880
4,812
5,067
2.32
%
2.55
%
Net interest spread
$
312,753
$
302,335
$
9,888
$
9,057
2.86
%
2.63
%
Net interest margin
(1)
(% of earning assets)
3.50
%
3.34
%
(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.
Provision for (Recovery of) Credit Losses
The provision for credit losses was $176,000 for the three months ended September 30, 2025, compared to a recovery of $230,000 for the same period in 2024. There were net loan charge-offs of $67,000 for the three months ended September 30, 2025, as compared to net loan recoveries of $51,000 during the same period of 2024. 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 $377,000 for the three-month period ended September 30, 2025, as compared to the same period in 2024. Income associated with market adjustments on SERP accounts increased by $359,000 during the three months ended September 30, 2025, compared to the three months ended September 30, 2024.
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 September 30,
2025
2024
(dollars in thousands)
Income from debit card transactions
$
636
$
587
Income from credit card transactions
169
174
Gross interchange and transaction fee income
805
761
Network costs - debit card
342
313
Network costs - credit card
211
181
Total
$
252
$
267
Noninterest Expense
Noninterest expense for the three months ended September 30, 2025 increased by $1.0 million from the same period in 2024. Salaries and benefits, the largest component of noninterest expense, increased $429,000 due to wage and benefit increases during 2025. Expense associated with market adjustments on SERP accounts increased by $359,000 during the three months ended September 30, 2025, compared to the three months ended September 30, 2024.
Total other noninterest expense increased $68,000 for the three months ended September 30, 2025, compared to the same period in 2024. The table below reflects the composition of other noninterest expense for the referenced periods.
30
Three Months Ended September 30,
2025
2024
(dollars in thousands)
Office supplies and printing
$
18
$
19
Franchise and other taxes
42
28
Employee education
34
33
Shareholder relations expense
53
48
Telephone and data lines
39
51
Postage
65
61
Director fees and expense
77
67
Dues and subscriptions
114
90
Armored transport service
35
30
Other
207
189
Total
$
684
$
616
Income Tax Expense
The Company had income tax expense of $867,000 for the three months ended September 30, 2025 at an effective tax rate of 23.1% compared to income tax expense of $962,000 with an effective tax rate of 24.1% in the comparable 2024 period. 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. For the three months ended September 30, 2024, the effective tax rate was higher due to an adjustment for increased interest expense disallowance resulting from compliance with the Tax Equity and Fiscal Responsibility Act of 1982 (“TEFRA”).
Results of Operations for the Nine Months Ended September 30, 2025 and 2024.
Net Income and Net Income Available to Common Shareholders
Uwharrie Capital Corp reported net income of $8.3 million for the nine months ended September 30, 2025, as compared to $7.6 million for the nine months ended September 30, 2024, an increase of $636,000. Net income available to common shareholders was $7.8 million, or $1.08 per common share, for the nine months ended September 30, 2025, compared to $7.2 million, or $0.97 per common share, for the nine months ended September 30, 2024. Net income available to common shareholders is net income less dividends on the aforementioned noncontrolling interest.
Net Interest Income
Net interest income for the nine months ended September 30, 2025 was $28.7 million, a $2.3 million increase from the $26.4 million reported for the comparative period in 2024. During the first nine months of 2025, the average yield on our interest-earning assets increased 9 basis points to 5.20% from the same period in 2024, and the average rate we paid for our interest-bearing liabilities decreased 6 basis points to 2.34%. These changes resulted in a higher interest rate spread of 2.86% as of September 30, 2025, compared to 2.71% as of September 30, 2024. The Company’s net interest margin was 3.50% and 3.38% for the comparable periods in 2025 and 2024, respectively.
31
The following table presents average balance sheet and a net interest income analysis for the nine months ended September 30, 2025 and 2024, respectively:
Average Balance
Income/Expenses
Rate/Yield
2025
2024
2025
2024
2025
2024
(dollars in thousands)
Interest-earning assets:
Taxable securities
$
306,157
$
310,912
$
8,536
$
8,998
3.73
%
3.87
%
Non-taxable securities
(1)
58,681
57,475
949
929
2.78
%
4.08
%
Short-term investments
66,070
63,949
1,834
2,116
3.71
%
4.42
%
Equity securities
323
323
15
15
6.21
%
6.20
%
Taxable loans
664,845
608,021
31,135
27,651
6.26
%
6.07
%
Non-taxable loans
(1)
15,184
17,085
369
394
4.17
%
5.82
%
Total interest-earning assets
1,111,260
1,057,765
42,838
40,103
5.20
%
5.11
%
Interest-bearing liabilities:
Interest-bearing deposits
776,661
728,587
13,106
12,484
2.26
%
2.29
%
Short-term borrowed funds
904
5,694
24
206
3.55
%
4.83
%
Long-term debt
29,189
29,222
985
1,001
4.51
%
4.58
%
Total interest-bearing liabilities
806,754
763,503
14,115
13,691
2.34
%
2.40
%
Net interest spread
$
304,506
$
294,262
$
28,723
$
26,412
2.86
%
2.71
%
Net interest margin
(1)
(% of earning assets)
3.50
%
3.38
%
(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.
Provision for Credit Losses
The provision for credit losses was $711,000 for the nine months ended September 30, 2025, compared to a provision of $171,000 for the same period in 2024. There were net loan charge-offs of $190,000 for the nine months ended September 30, 2025, as compared to net loan charge-offs of $7,000 during the same period of 2024. 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 $1.3 million for the nine-month period ended September 30, 2025, as compared to the same period in 2024. The primary factor contributing to the overall improvement in noninterest income was an increase of $704,000 in income from mortgage banking. This improvement is the result of increased volume in the mortgage loan pipeline. Another driver of the overall increase was a $529,000 increase in income associated with market adjustments on SERP accounts during the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024.
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:
Nine Months Ended September 30,
2025
2024
(dollars in thousands)
Income from debit card transactions
$
1,821
$
1,739
Income from credit card transactions
515
524
Gross interchange and transaction fee income
2,336
2,263
Network costs - debit card
944
882
Network costs - credit card
583
504
Total
$
809
$
877
Noninterest Expense
Noninterest expense for the nine months ended September 30, 2025 increased by $2.2 million from the same period in 2024, to $25.8 million. Salaries and employee benefits contributed $1.2 million to the increase in noninterest expense due to wage increases and more commissions paid on increased production in the mortgage division during the first nine months of 2025. Additionally, expense associated with market adjustments on SERP accounts increased by $529,000 during the nine-month period ended September 30, 2025, compared to the same period in 2024.
32
Total other noninterest expense increased $89,000 for the nine months ended September 30, 2025, compared to the same period in 2024. The table below reflects the composition of other noninterest expense for the referenced periods.
Nine Months Ended September 30,
2025
2024
(dollars in thousands)
Office supplies and printing
$
75
$
56
Franchise and other taxes
132
89
Employee education
95
107
Shareholder relations expense
145
144
Telephone and data lines
133
154
Postage
198
178
Director fees and expense
237
210
Dues and subscriptions
330
265
Armored transport service
106
95
Other
507
571
Total
$
1,958
$
1,869
Income Tax Expense
The Company had income tax expense of $2.3 million for the nine months ended September 30, 2025 at an effective tax rate of 22.1% compared to income tax expense of $2.2 million with an effective tax rate of 22.1% in the comparable 2024 period. 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.
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 when it is determined that it does not share similar risk characteristics with other loans and with total relationship exposure greater than or equal to $100,000 that are determined to be collateral dependent. When management determines that foreclosure is probable and the borrower is experiencing financial difficulty, the expected credit losses are based on the fair value of collateral at the reporting date adjusted for selling costs as appropriate. 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.
33
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 September 30, 2025, the level of our individually assessed loans, which includes all collateral dependent loans in nonaccrual status with total relationship exposure greater than or equal to $100,000, was $136,000. The allowance for credit losses related to individually evaluated loans was $18,000 at September 30, 2025.
The allowance, expressed as a percentage of gross loans held for investment, increased seven basis points from 0.87% at December 31, 2024 to 0.94% at September 30, 2025. During the second quarter of 2025, the Company implemented a change in estimate of the allowance model which altered the allocation of these percentages between the collectively assessed population and qualitative factors. The collectively assessed portion decreased from 0.75% at December 31, 2024 to 0.53% at September 30, 2025, and the qualitative factors portion increased from 0.12% to 0.41% over the same period. The increase in the allowance was driven by an increase in the national unemployment rate forecast used in the commercial regression model. Additionally, while total loans decreased during the third quarter of 2025, newly originated loans had a higher forecasted loss rate due to a longer projected duration than the loans that were fully repaid during the same quarter. The ratio of nonaccrual loans to total loans increased from 0.03% at December 31, 2024 to 0.06% at September 30, 2025, and was related to the $211,000 increase in nonaccrual loans. Four loans totaling $360,000 were converted to nonaccrual during the first nine months of 2025, offset by paydowns of $20,000, two loans totaling $88,000 were charged off, and one loan totaling $40,000 was moved to other real estate owned and subsequently sold.
Other real estate owned was $0 at September 30, 2025 and December 31, 2024.
As of September 30, 2025, 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 generally accepted accounting principles, 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 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 September 30, 2025 and December 31, 2024:
Nonperforming Assets
(dollars in thousands)
September 30, 2025
December 31, 2024
(dollars in thousands)
Nonperforming assets:
Accruing loans past due 90 days or more
$
—
$
—
Nonaccrual loans
403
192
Other real estate owned
—
—
Total nonperforming assets
$
403
$
192
Allowance for credit losses on loans
$
6,356
$
5,824
Nonaccrual loans to total loans
0.06
%
0.03
%
Allowance for credit losses on loans to total loans
0.94
%
0.87
%
Allowance for credit losses on loans to nonaccrual loans
1577.17
%
3033.33
%
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.
34
The Company’s primary sources of internally generated funds are principal and interest payments on loans, cash flows generated from operations and cash flow 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 42.0% and 38.8% of total deposits at September 30, 2025 and December 31, 2024, 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 September 30, 2025, 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 $145.1 million; and access to borrowings from the FRB discount window, with available credit of $26.5 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 September 30, 2025, $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.
September 30, 2025
December 31, 2024
(dollars in thousands)
Interest-earning cash and cash equivalents
100,250
42,554
Interest-earning cash and cash equivalents as a percent of:
Total loans held for investment
14.8
%
6.4
%
Total earning assets
8.6
%
4.0
%
Total deposits
9.1
%
4.1
%
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 September 30, 2025, the Company’s subsidiary bank continued to exceed minimum capital standards and remained well-capitalized under the applicable rules.
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 September 30, 2025, the Company had $29.2 million, net of unamortized debt issuance costs of $173,000, 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 September 30, 2025, 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 2024 Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission on March 6, 2025.
35
Item 3. Quantitative and Qualitat
ive 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 third quarter of 2025. 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.
36
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. Ri
sk Factors.
Disclosure under this item is not required for smaller reporting companies.
Item 2. Unregistered Sales of Equi
ty 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 September 30, 2025.
(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
July 1, 2025 Through July 31, 2025
—
$
—
—
$
—
August 1, 2025 Through August 31, 2025
11,200
$
9.71
—
$
—
September 1, 2025 Through September 30, 2025
13,458
$
10.29
—
$
—
Total
24,658
$
10.03
—
$
—
(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 Upo
n Senior Securities.
None.
Item 4. Mine Safe
ty Disclosures.
Not applicable.
Item 5. Ot
her Information.
None
.
37
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 September 30, 2025, in inline XBRL (eXtensible Business Reporting Language) (filed herewith)
104
Cover page interactive data file (formatted in inline XBRL and contained in Exhibit 101)
38
Signat
ures
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Customers and Suppliers of UWHARRIE CAPITAL CORP
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Bonds of UWHARRIE CAPITAL CORP
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Price
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Insider Ownership of UWHARRIE CAPITAL CORP
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Owner
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Summary Financials of UWHARRIE CAPITAL CORP
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