UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 2026
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
For the transition period from __________ to __________
000-27205
(Commission File No.)
PEOPLES BANCORP OF NORTH CAROLINA, INC.
(Exact name of registrant as specified in its charter)
North Carolina
56-2132396
(State or other jurisdiction of
incorporation or organization)
(IRS Employer
Identification No.)
518 West C Street, Newton, North Carolina
28658
(Address of principal executive offices)
(Zip Code)
(828) 464-5620
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: 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 (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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) ☐
Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2 of the Exchange Act).
Yes ☐ No ☒
Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. 5,461,490 shares of common stock, outstanding at April 30, 2026.
INDEX
PART I. FINANCIAL INFORMATION
PAGE(S)
Item 1.
Financial Statements
4
Consolidated Balance Sheets at March 31, 2026 (Unaudited) and December 31, 2025 (Audited)
Consolidated Statements of Earnings for the three months ended March 31, 2026 and 2025 (Unaudited)
5
Consolidated Statements of Comprehensive Income for the three months ended March 31, 2026 and 2025 (Unaudited)
6
Consolidated Statements of Changes in Shareholders' Equity for the three months ended March 31, 2026 and 2025 (Unaudited)
7
Consolidated Statements of Cash Flows for the three months ended March 31, 2026 and 2025 (Unaudited)
8-9
Notes to Consolidated Financial Statements (Unaudited)
10-29
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
30-36
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
37
Item 4.
Controls and Procedures
PART II. OTHER INFORMATION
Legal Proceedings
38
Item 1A.
Risk Factors
Unregistered Sales of Equity Securities and Use of Proceeds
Defaults upon Senior Securities
Item 5.
Other Information
Item 6.
Exhibits
39
Signatures
40
Certifications
FORWARD-LOOKING STATEMENTS
Statements made in this Quarterly Report on Form 10-Q, other than those concerning historical information, should be considered forward-looking statements pursuant to the safe harbor provisions of the Securities Exchange Act of 1934 and the Private Securities Litigation Act of 1995. These forward-looking statements involve risks and uncertainties and are based on the beliefs and assumptions of management and on the information available to management at the time that this Quarterly Report on Form 10-Q was prepared. These statements can be identified by the use of words like “expect,” “anticipate,” “estimate,” and “believe,” variations of these words and other similar expressions. Readers should not place undue reliance on forward-looking statements as a number of important factors could cause actual results to differ materially from those in the forward-looking statements. Factors that could cause actual results to differ include, but are not limited to, (1) competition in the markets served by the registrant and its subsidiaries, (2) changes in the interest rate environment, (3) general national, regional or local economic conditions may be less favorable than expected, resulting in, among other things, a deterioration in credit quality and the possible impairment of collectibility of loans, (4) legislative or regulatory changes, including changes in accounting standards, (5) significant changes in the federal and state legal and regulatory environments and tax laws, (6) the impact of changes in monetary and fiscal policies, laws, rules and regulations and (7) other risks and factors identified in other filings with the Securities and Exchange Commission, including but not limited to, those described in the registrant’s Annual Report on Form 10-K for the year ended December 31, 2025.
Item 1. Financial Statements
Consolidated Balance Sheets
March 31, 2026 and December 31, 2025
(Dollars in thousands)
March 31,
December 31,
Assets
2026
2025
(Unaudited)
(Audited)
Cash and due from banks
Interest-bearing deposits
Cash and cash equivalents
Investment securities available for sale
Other investments
Total securities
Mortgage loans held for sale
Loans
Less allowance for credit losses
Net loans
Premises and equipment, net
Cash surrender value of life insurance
Right of use lease asset
Accrued interest receivable and other assets
Total assets
Liabilities and Shareholders' Equity
Deposits:
Noninterest-bearing demand
Interest-bearing demand, MMDA & savings
Time, $250,000 and over
Other time
Total deposits
Junior subordinated debentures
Lease liability
Accrued interest payable and other liabilities
Total liabilities
Commitments and Contingencies
Shareholders' equity:
Preferred stock, no par value; authorized 5,000,000 shares; no shares issued and outstanding
Common stock, no par value; authorized 20,000,000 shares; issued and outstanding 5,461,490 shares at March 31, 2026 and 5,459,441 shares at December 31, 2025
Common stock held by deferred compensation trust, at cost; 151,721shares at March 31, 2026 and 150,288 shares at December 31, 2025
Deferred compensation
Retained earnings
Accumulated other comprehensive loss
Total shareholders' equity
Total liabilities and shareholders' equity
See accompanying Notes to Consolidated Financial Statements.
Consolidated Statements of Earnings
Three Months Ended March 31, 2026 and 2025
(Dollars in thousands, except per share amounts)
Interest income:
Interest and fees on loans
Interest on due from banks
Interest on investment securities:
U.S. Government sponsored enterprises
State and political subdivisions
Other
Total interest income
Interest expense:
Interest-bearing demand, MMDA & savings deposits
Time deposits
Total interest expense
Net interest income
Provision for credit losses
Net interest income after provision for credit losses
Non-interest income:
Service charges
Other service charges and fees
Loss on sale of securities, net
Mortgage banking income
Insurance and brokerage commissions
Appraisal management fee income
Miscellaneous
Total non-interest income
Non-interest expense:
Salaries and employee benefits
Occupancy
Professional fees
Advertising
Debit card expense
FDIC insurance
Appraisal management fee expense
Total non-interest expense
Earnings before income taxes
Income tax expense
Net earnings
Basic net earnings per share
Diluted net earnings per share
Cash dividends declared per share
Consolidated Statements of Comprehensive Income
Other comprehensive income :
Unrealized holding gains (losses) on securities available for sale
Reclassification adjustment for losses on securities available for sale included in net earnings
Total other comprehensive income (loss), before income taxes
Income tax benefit related to other comprehensive income :
Reclassification adjustment for losses on sales of securities available for sale included in net earnings
Reduction in state tax adjustment
Total income tax expense related to other comprehensive income (loss)
Total other comprehensive income, net of tax
Total comprehensive income
Consolidated Statements of Changes in Shareholders' Equity
Common Stock
Held By
Accumulated
Deferred
Retained
Compensation
Comprehensive
Shares
Amount
Earnings
Trust
Income (Loss)
Total
Balance, December 31, 2025
Restricted stock units exercised
Cash dividends declared on common stock ($0.38 per share)
Equity incentive plan, net
Other comprehensive loss
Balance, March 31, 2026
Balance, December 31, 2024
Cash dividends declared on common stock ($0.36 per share)
Other comprehensive income
Balance, March 31, 2025
Consolidated Statements of Cash Flows
Cash flows from operating activities:
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation, amortization and accretion
Deferred income taxes
Gain on sale of held for mortgage loans
Loss on sale of investment securities net
Write-down of premises and equipment
Gain on sale of other real estate
Restricted stock expense
Proceeds from sales of mortgage loans held for sale
Origination of mortgage loans held for sale
Change in:
Other assets
Other liabilities
Net cash provided by operating activities
Cash flows from investing activities:
Proceeds from calls and maturities of investment securities available for sale
Proceeds from sales of investment securities available for sale
Proceeds from paydowns of investment securities available for sale
Proceeds from paydowns of other investment securities
Proceeds from DOT settlement receivable
Purchase of FHLB stock
Net change in loans
Purchases of premises and equipment
Proceeds from sale of other real estate and repossessions
Net cash provided (used) by investing activities
Cash flows from financing activities:
Net change in deposits
Cash dividends paid on common stock
Net cash provided by financing activities
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Consolidated Statements of Cash Flows, continued
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest
Income taxes
Noncash investing and financing activities:
Change in unrealized loss on investment securities available for sale, net
(1) Summary of Significant Accounting Policies
The Consolidated Financial Statements include the financial statements of Peoples Bancorp of North Carolina, Inc. (the “Company”) and its wholly owned subsidiary, Peoples Bank (the “Bank”), along with the Bank’s wholly owned subsidiaries, Peoples Investment Services, Inc. (“PIS”), Real Estate Advisory Services, Inc. (“REAS”), Community Bank Real Estate Solutions, LLC (“CBRES”) and PB Real Estate Holdings, LLC. All significant intercompany balances and transactions have been eliminated in consolidation.
In June 2006, the Company formed a wholly owned Delaware statutory trust, PEBK Capital Trust II (“PEBK Trust II”), to facilitate the issuance of $20.6 million of trust preferred securities. PEBK Trust II is not included in the Consolidated Financial Statements.
The Consolidated Financial Statements in this report (other than the Consolidated Balance Sheet at December 31, 2025) are unaudited. In the opinion of management, all adjustments necessary for a fair presentation of the financial position and results of operations for the periods presented have been included. Management has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these Consolidated Financial Statements in conformity with generally accepted accounting principles in the United States (“GAAP”). Actual results could differ from those estimates.
Operating segments are components of an enterprise about which separate financial information is available that is evaluated regularly by management in deciding how to allocate resources and in assessing performance. Management has determined that the Company has two significant operating segment: Banking Operations and CBRES, as discussed more fully in Note 9. In determining the appropriateness of segment definition, the Company considers the criteria of Accounting Standards Codification (“ASC”) 280, Segment Reporting.
The Company’s accounting policies are fundamental to understanding management’s discussion and analysis of results of operations and financial condition. Many of the Company’s accounting policies require significant judgment regarding valuation of assets and liabilities and/or significant interpretation of the specific accounting guidance. A description of the Company’s significant accounting policies can be found in Note 1 of the Notes to Consolidated Financial Statements in the Company’s 2025 Annual Report to Shareholders, attached as Appendix A to the Proxy Statement for the 2026 Annual Meeting of Shareholders. There have been no significant changes to the application of significant accounting policies since December 31, 2025.
Recent Accounting Pronouncements
The following table provides a summary of Accounting Standards Updates (“ASU’s”) issued by the Financial Accounting Standards Board (“FASB”) that the Company has not adopted as of March 31, 2026, which may impact the Company’s financial statements.
ASU
Description
Effective Date
Effect on Financial Statements or Other Significant Matters
ASU 2024-03—Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40)
The ASU requires disaggregated disclosure of income statement expenses for public business entities (PBEs).
Annual reporting periods after December 15, 2026.
The adoption of this guidance is not expected to have a material impact on the Company’s results of operations or financial position. The adoption of this guidance is expected to have an immaterial impact on disclosures.
ASU 2025-01, Income Statement—Reporting Comprehensive Income— Expense Disaggregation Disclosures (Subtopic 220- 40)
The ASU clarifies that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027.
Annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027.
Other accounting standards that have been issued or proposed by FASB or other standards-setting bodies are not expected to have a material impact on the Company’s results of operations, financial position or disclosures.
(2) Comprehensive Income
The Company reports as comprehensive income all changes in shareholders’ equity during the year from sources other than shareholders. Other comprehensive income refers to all components (revenues, expenses, gains, and losses) of comprehensive income that are excluded from net income. The Company’s only component of other comprehensive income is unrealized gains and losses, net of income tax, on investment securities available for sale.
The following table presents the changes in accumulated other comprehensive loss for the three months ended March 31, 2026 and 2025:
For the three months ended
(dollars in thousands)
March 31, 2026
March 31, 2025
Beginning balance
Other comprehensive gain (loss) before reclassifications, net
Amounts reclassified from accumulated other comprehensive loss, net
Reduction in state tax rate adjustment, net
Net current period other comprehensive gain (loss)
Ending balance
(3) Net Earnings Per Share
Net earnings per share is based on the weighted average number of shares outstanding during the period while the effects of potential shares outstanding during the period are included in diluted earnings per share. The average market price during the applicable period is used to compute equivalent shares.
Shares held in the deferred compensation plan by the deferred compensation trust are excluded for purposes of calculating the weighted average number of shares outstanding and basic earnings per share in accordance with ASC 260-10-45-40 and ASC 260-10-45-45 through ASC 260-26010-45-46. The reconciliation of the amounts used in the computation of both basic earnings per share and diluted earnings per share for the three months ended March 31, 2026 and 2025 is as follows:
For the three months ended March 31, 2026
Net Earnings (Dollars in thousands)
Weighted
Average
Number of
Per Share
Basic earnings per share
Effect of dilutive securities:
Restricted stock units - unvested
Shares held in deferred comp plan by deferred compensation trust
Diluted earnings per share
For the three months ended March 31, 2025
Net Earnings
(Dollars in
thousands)
(4) Investment Securities
Investment securities available for sale at March 31, 2026 and December 31, 2025 are as follows:
Amortized
Cost
Gross
Unrealized
Gains
Losses
Fair
Value
U.S. Treasuries
GSE - Mortgage-backed securities
Private label mortgage-backed securities
December 31, 2025
The current fair value and associated unrealized losses on investments in securities with unrealized losses at March 31, 2026 and December 31, 2025 are summarized in the tables below, with the length of time the individual securities have been in a continuous loss position.
Less than 12 Months
12 Months or More
U.S. government sponsored enterprises
GSE -Mortgage-backed securities
At March 31, 2026, unrealized losses in the investment securities portfolio relating to debt securities totaled $37.2 million. The unrealized losses on these debt securities arose due to changing interest rates and are considered to be temporary. From the March 31, 2026 table above, both of the U.S. Treasury securities, all 110 of the securities issued by state and political subdivisions, all six of the securities issued by U.S. Government sponsored enterprises (“GSE”), 111 of the 116 GSE mortgage-backed securities, and 13 of the 17 private label mortgage-backed securities contained unrealized losses. The Company did not have any reserves on securities at March 31, 2026, as no credit related losses were identified in the Company’s March 31, 2026 analysis. At December 31, 2025, unrealized losses in the investment securities portfolio relating to debt securities totaled $35.6 million. The unrealized losses on these debt securities arose due to changing interest rates and are considered to be temporary. From the December 31, 2025 tables above, both of the U.S. Treasury securities, all 108 of the securities issued by state and political subdivisions, all six of the securities issued by GSEs, 110 of the 116 GSE mortgage-backed securities, and 11 of the 17 private label mortgage-backed securities contained unrealized losses. The Company did not have any reserves on securities at December 31, 2025, as no credit related losses were identified in the Company’s December 31, 2025 analysis.
The amortized cost and estimated fair value of investment securities available for sale, other than GSE mortgage-backed securities, at March 31, 2026, are shown below by contractual maturity. Expected maturities of mortgage-backed securities will differ from contractual maturities because borrowers have the right to call or prepay obligations with or without call or prepayment penalties.
Due within one year
Due from one to five years
Due from five to ten years
Due after ten years
Mortgage-backed securities
No securities available for sale were sold during the three months ended March 31, 2026. During the three months ended March 31, 2025, proceeds from sales of securities available for sale were $12.7 million and resulted in gross losses of $47,000 and gross gains of $43,000.
Securities with a fair value of approximately $22.5 million and $40.7 million at March 31, 2026 and December 31, 2025, respectively, were pledged to secure public deposits and for other purposes as required by law.
(5) Loans
Major classifications of loans at March 31, 2026 and December 31, 2025 are summarized as follows:
Real estate loans:
Construction and land development
Single-family residential
Commercial
Multifamily and farmland
Total real estate loans
Loans not secured by real estate:
Farm
Consumer
All other
Total loans
Total net loans
The above table includes deferred costs, net of deferred fees, totaling $405,000 and $569,000 at March 31, 2026 and March 31, 2025, respectively.
The Bank makes loans and extensions of credit primarily within the Catawba Valley region of North Carolina, which encompasses Catawba, Alexander, Iredell and Lincoln counties and also in Mecklenburg, Rowan and Forsyth counties of North Carolina. Although the Bank has a diversified loan portfolio, a substantial portion of the loan portfolio is collateralized by improved and unimproved real estate, the value of which is dependent upon the real estate market. Risk characteristics of the major components of the Bank’s loan portfolio are discussed below:
·
Construction and land development loans – The risk of loss is largely dependent on the initial estimate of whether the property’s value at completion equals or exceeds the cost of property construction and the availability of take-out financing. During the construction phase, a number of factors can result in delays or cost overruns. If the estimate is inaccurate or if actual construction costs exceed estimates, the value of the property securing the loan may be insufficient to ensure full repayment when completed through a permanent loan, sale of the property, or by seizure of collateral.
Single-family residential loans – Declining home sales volumes, decreased real estate values and higher than normal levels of unemployment could contribute to losses on these loans.
Commercial real estate loans – Repayment is dependent on income being generated in amounts sufficient to cover operating expenses and debt service. These loans also involve greater risk because they are generally not fully amortizing over the loan period, but rather have a balloon payment due at maturity. A borrower’s ability to make a balloon payment typically will depend on being able to either refinance the loan or timely sell the underlying property.
Commercial loans – Repayment is generally dependent upon the successful operation of the borrower’s business. In addition, the collateral securing the loans may depreciate over time, be difficult to appraise, be illiquid, or fluctuate in value based on the success of the business.
Multifamily and farmland loans – Decreased real estate values and higher than normal levels of unemployment could contribute to losses on these loans.
Loans are considered past due if the required principal and interest payments have not been received within 30 days of the date such payments were due. Loans are placed on non-accrual status when, in management’s opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory provisions. Generally, a loan is placed on non-accrual status when it is over 90 days past due and there is reasonable doubt that all principal will be collected. When interest accrual is discontinued, all unpaid accrued interest is reversed. Interest income is subsequently recognized only to the extent cash payments are received in excess of principal due. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.
The following tables present an age analysis of past due loans, by loan type, as of March 31, 2026 and December 31, 2025:
30-89
Days Past
Due
Nonaccrual
Total Past
Due Loans
Total Current
Total Loans
Accruing
Loans 90 or
More Days
Past Due
The following table presents non-accrual loans as of March 31, 2026 and December 31, 2025:
With No
With
Allowance
No interest income was recognized on non-accrual loans for the three months ended March 31, 2026 and 2025.
A loan may be individually evaluated for determining the allowance for credit losses when it is determined that it does not share similar risk characteristics with other assets. Non-accrual loans with an outstanding balance of $250,000 or greater are individually evaluated and totaled $814,000 and $430,000 at March 31, 2026 and December 31, 2025, respectively. Non-accrual loans evaluated collectively as a pool totaled $4.0 million and $3.7 million at March 31, 2026 and December 31, 2025, respectively. Collateral dependent loans are loans for which the repayment is expected to be provided substantially through the operation or sale of the collateral and the borrower is experiencing financial difficulty. Collateral dependent loans require an analysis of the collateral. The fair value of the collateral is discounted by estimated liquidation costs. If the discounted fair value of the collateral is greater than the amortized loan balance, no allowance is required. Otherwise the difference between the balance and the collateral is charged off if deemed uncollectible.
The following table details the amortized cost of collateral dependent loans and any related allowance at March 31, 2026 and December 31, 2025.
Allowance for
Credit
The following tables provide a breakdown of collateral dependent loans by collateral type and collateral coverage at March 31, 2026 and December 31, 2025. These tables also show non-accrual loans not considered to be collateral dependent at March 31, 2026 and December 31, 2025.
Residential
Property
Developed
Land
Business
Financial Assets
Not Considered
Collateral Dependent
Collateral Value
The allowance for credit losses incorporates an estimate of lifetime expected credit losses and is recorded on each asset upon origination or acquisition. The starting point for the estimate of the allowance for credit losses is historical loss information, which includes losses from modifications of receivables to borrowers experiencing financial difficulty. An assessment of whether a borrower is experiencing financial difficulty is made on the date of a modification.
A change to the allowance for credit losses is evaluated based on the nature of the modification. Occasionally, the Bank modifies loans by providing principal forgiveness on certain loans. When principal forgiveness is provided, the amortized cost basis of the asset is written off against the allowance for credit losses. The amount of the principal forgiveness is deemed to be uncollectible; therefore, that portion of the loan is written off, resulting in a reduction of the amortized cost basis and a corresponding adjustment to the allowance for credit losses.
In some cases, the Bank may modify a certain loan by providing multiple types of concessions. Typically, one type of concession, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another concession, such as principal forgiveness, may be granted.
No loans to borrowers experiencing financial difficulty were modified during the three months ended March 31, 2026 and 2025.
Management uses several measures to assess and monitor the credit risks in the loan portfolio, including a loan grading system that begins upon loan origination and continues until the loan is collected or collectability becomes doubtful. Upon loan origination, the Bank’s originating loan officer evaluates the quality of the loan and assigns one of eight risk grades. The loan officer monitors the loan’s performance and credit quality and makes changes to the credit grade as conditions warrant. When originated or renewed, all loans over a certain dollar amount receive in-depth reviews and risk assessments by the Bank’s Credit Administration. Before making any changes in these risk grades, management considers assessments as determined by the third-party credit review firm (as described below), regulatory examiners and the Bank’s Credit Administration. Any issues regarding the risk assessments are addressed by the Bank’s senior credit administrators and factored into management’s decision to originate or renew the loan. The Bank Board reviews, on a monthly basis, an analysis of the Bank’s reserves relative to the range of reserves estimated by the Bank’s Credit Administration.
As an additional measure, the Bank engages an independent third party to review the underwriting, documentation and risk grading analyses. This independent third party reviews and evaluates loan relationships greater than or equal to $1.5 million as well as a periodic sample of commercial relationships with exposures below $1.5 million, excluding loans in default, and loans in process of litigation or liquidation. The third party’s evaluation and report is shared with management and the Bank Board.
Management considers certain commercial loans with weak credit risk grades to be individually impaired and measures such impairment based upon available cash flows and the value of the collateral. Allowance or reserve levels are estimated for all other graded loans in the portfolio based on their assigned credit risk grade, type of loan and other matters related to credit risk.
Management uses the information developed from the procedures described above in evaluating and grading the loan portfolio. This continual grading process is used to monitor the credit quality of the loan portfolio and to assist management in estimating the allowance. The provision for credit losses charged or credited to earnings is based upon management’s judgment of the amount necessary to maintain the allowance at a level appropriate to absorb probable incurred losses in the loan portfolio at the balance sheet date. The amount each quarter is dependent upon many factors, including growth and changes in the composition of the loan portfolio, net charge-offs, delinquencies, management’s assessment of loan portfolio quality, the value of collateral, and other macro-economic factors and trends. The evaluation of these factors is performed quarterly by management through an analysis of the appropriateness of the allowance.
The following tables present changes in the allowance for credit losses for the three months ended March 31, 2026 and 2025.
Real Estate Loans
Construction and Land Development
Single-Family Residential
Multifamily and Farmland
Consumer and All Other
Three months ended March 31, 2026
Allowance for credit losses:
Charge-offs
Recoveries
Provision (recovery) for loan losses (1)
Allowance for credit loss-loans
Allowance for credit losses on unfunded loan commitments
Total allowance for credit losses
(1) Excludes provision for credit losses related to unfunded commitments. Note 7,"Commitments and Contingencies" in the condensed consolidated financial statements provides more detail concerning the provision for credit losses related to unfunded commitments.
Three months ended March 31, 2025
The Bank utilizes several credit quality indicators to manage credit risk in an ongoing manner. The Bank uses an internal risk grade system that categorizes loans into pass, watch or substandard categories.
The Bank uses the following credit quality indicators:
Pass – Includes loans ranging from excellent quality with a minimal amount of credit risk to loans with higher risk and servicing needs but still are considered to be acceptable. The higher risk loans in this category are not problem credits presently, but may be in the future if the borrower is unable to change its present course.
Watch – These loans are currently performing satisfactorily, but there has been some recent past due history on repayment and there are potential weaknesses that may, if not corrected, weaken the asset or inadequately protect the Bank’s position at some future date.
Substandard – A Substandard loan is inadequately protected by the current sound net worth and paying capacity of the obligor or the collateral pledged (if there is any). There is a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. There is a distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.
Doubtful – Loans classified Doubtful have all the weaknesses inherent in loans classified Substandard, plus the added characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions, and values highly questionable and improbable.
Loss – Loans classified Loss are considered uncollectable and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off this worthless loan even though partial recovery may be affected in the future.
The following table presents by credit quality indicator, loan class and year of origination, the amortized cost of the Bank’s loans as of March 31, 2026.
Term Loans by Origination Year
Revolving
2024
2023
2022
Prior
Converted to
Term Loans
Pass
Watch
Substandard
Total Construction and land development
Single family
Total single family
Total commercial
Total multifamily and farmland
Loans not secured by real estate
Total Commercial
Total farm
Total consumer
Total all other
Total loans not secured by real estate
The following table presents by credit quality indicator, loan class and year of origination, gross loan charge-offs during the three months ended March 31, 2026.
Gross Loan Charge-offs by Origination Year
Total gross charge-offs
The following table presents by credit quality indicator, loan class and year of origination, the amortized cost of the Bank’s loans as of December 31, 2025.
2021
Construction and land
development
Total Construction and
land development
Total multifamily and
farmland
Total loans not secured
by real estate
The following table presents by credit quality indicator, loan class and year of origination, gross loan charge-offs during the year ended December 31, 2025.
(6) Leases
As of March 31, 2026, the Bank had operating right of use assets of $3.3 million and operating lease liabilities of $3.4 million. As of December 31, 2025, the Bank had operating right of use assets of $3.5 million and operating lease liabilities of $3.6 million. The Bank maintains operating leases on land and buildings for some of the Bank’s branch facilities and loan production offices. Most leases include one option to renew, with renewal terms extending up to 15 years. The decision on whether to include lease extension/renewal periods in lease accounting calculations is based on the judgment of management as to whether or not a lease extension/renewal option is reasonably certain to be exercised. Factors in determining whether an option is reasonably certain of exercise include, but are not limited to, the value of leasehold improvements, the value of renewal rates compared to market rates, and the presence of factors that would cause a significant economic penalty to the Bank if the option is not exercised.
The following table presents lease cost and other lease information as of March 31, 2026 and 2025.
Operating lease cost
Other information:
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases
Right-of-use assets obtained in exchange for new lease liabilities - operating leases
Weighted-average remaining lease term - operating leases
Weighted-average discount rate - operating leases
The following table presents lease maturities as of March 31, 2026.
Maturity Analysis of Operating Lease Liabilities:
2027
2028
2029
2030
Thereafter
Less: Imputed Interest
Operating Lease Liability
(7) Commitments and Contingencies
The Bank is party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. Those instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the balance sheet. The contract amounts of those instruments reflect the extent of involvement the Bank has in particular classes of financial instruments.
The exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. The Bank uses the same credit policies in making commitments to extend credit and standby letters of credit as it does for on-balance-sheet instruments.
In most cases, the Bank requires collateral or other security to support financial instruments with credit risk.
Contractual Amount
3/31/26
12/31/25
Financial instruments whose contract amount represent credit risk:
Commitments to extend credit
Standby letters of credit
Commitments to extend credit are conditional agreements to lend to a customer. Commitments generally have fixed expiration dates and because they may expire without being drawn upon, the total commitment amount of $373.9 million does not necessarily represent future cash requirements.
Standby letters of credit are conditional commitments issued by the Bank to pay a third party on behalf of a customer. Those letters of credit are primarily issued to businesses in the Bank’s delineated market area. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The Bank holds real estate, equipment, automobiles and customer deposits as collateral supporting those commitments for which collateral is deemed necessary.
The Company maintains an allowance for off-balance sheet credit exposures such as unfunded balances for existing lines of credit, commitments to extend future credit, when this extension of credit is not unconditionally cancelable. The allowance for off-balance sheet credit exposures is adjusted as a provision for credit loss expense. The estimate includes consideration of the likelihood that funding will occur, which is based on a historical funding activity and an estimate of expected credit losses on commitments expected to be funded over its estimated life, which are the same loss rates that are used in computing the allowance for credit losses on loans. The allowance for credit losses for unfunded loan commitments of $1.6 million and $1.4 million at March 31, 2026 and December 31, 2025, respectively, is separately classified on the balance sheet within Other Liabilities.
The following table presents the balance and activity in the allowance for credit losses for unfunded loan commitments for the three months ended March 31, 2026 and 2025.
Beginning Balance
Provision for (recovery of) credit losses
(8) Fair Value
The Company is required to disclose fair value information about financial instruments, whether or not recognized at fair value on the face of the balance sheet, for which it is practicable to estimate that value. The assumptions used in the estimation of the fair value of the Company’s financial instruments are detailed below. Where quoted prices are not available, fair values are based on estimates using discounted cash flows and other valuation techniques. The use of discounted cash flows can be significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. The following disclosures should not be considered a surrogate of the liquidation value of the Company, but rather a good faith estimate of the increase or decrease in the value of financial instruments held by the Company since purchase, origination, or issuance.
The Company groups assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:
Level 1 – Valuation is based upon quoted prices for identical instruments traded in active markets.
Level 2 – Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.
Level 3 – Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.
Investment Securities Available for Sale
Fair values of investment securities available for sale are determined by obtaining quoted prices on nationally recognized securities exchanges when available. If quoted prices are not available, fair value is determined using matrix pricing, which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities. Fair values for investment securities with quoted market prices are reported in the Level 1 fair value category. Fair value measurements obtained from independent pricing services are reported in the Level 2 fair value category. All other fair value measurements are reported in the Level 3 fair value category.
Mortgage Loans Held for Sale
Mortgage loans held for sale are carried at lower of aggregate cost or market value. The cost of mortgage loans held for sale approximates the market value. Mortgage loans held for sale are reported in the Level 2 fair value category. Management determined that the valuation technique used at current period end and prior period end are more appropriately classified as Level 2 and has updated in the current period and prior period year end classifications to Level 2.
The fair value of loans, excluding previously presented individually evaluated loans measured at fair value on a non-recurring basis, is estimated using discounted cash flow analyses. The discount rates used to determine fair value use interest rate spreads that reflect factors such as liquidity, credit, and nonperformance risk of the loans. Loans are reported in the Level 3 fair value category, as the pricing of loans is more subjective than the pricing of other financial instruments.
Mutual Funds
Mutual funds held in the deferred compensation trust are carried at fair value. Mutual funds held in the deferred compensation trust are included in other assets on the balance sheet and reported in the Level 1 fair value category.
FHLB Borrowings
The fair value of FHLB borrowings is estimated based upon discounted future cash flows using a discount rate comparable to the current market rate for such borrowings. FHLB borrowings are reported in the Level 2 fair value category. Management determined that the valuation technique used at current period end and prior period end are more appropriately classified as Level 2 and has updated in the current period and prior period year end classifications to Level 2.
Commitments to Extend Credit and Standby Letters of Credit
Commitments to extend credit and standby letters of credit are generally short-term in duration and made at variable interest rates. Therefore, both the carrying value and estimated fair value associated with these instruments are immaterial.
Limitations
Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on many judgments. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
Fair value estimates are based on existing on and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Significant assets and liabilities that are not considered financial instruments include deferred income taxes and premises and equipment. In addition, the tax ramifications related to the realization of unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates.
The tables below present all financial instruments measured at fair value on a recurring basis by level within the fair value hierarchy, as of March 31, 2026 and December 31, 2025.
Fair Value Measurements
Level 1
Valuation
Level 2
Level 3
Available for sale securities:
Total available for sale securities
Mutual funds held in deferred compensation trust
Fair Value
Measurements
The fair value measurements for individually evaluated loans and other real estate on a non-recurring basis at March 31, 2026 and December 31, 2025 are presented below. The fair value measurement process uses certified appraisals and other market-based information; however, in many cases, it also requires significant input based on management’s knowledge of, and judgment about, current market conditions, specific issues relating to the collateral and other matters. As a result, all fair value measurements for individually evaluated loans and other real estate are considered Level 3.
Valuation Technique
Significant
Unobservable Inputs
General
Range of
Unobservable
Input Values
Individually evaluated loans
Appraised value
Discounts to reflect current market conditions and ultimate collectability
0 - 50%
The carrying amount and estimated fair value of financial instruments at March 31, 2026 and December 31, 2025 are as follows:
Fair Value Measurements at March 31, 2026
Carrying Amount
Assets:
Loans, net
Mutual funds held in deferred
compensation trust
Liabilities:
Deposits
Fair Value Measurements at December 31, 2025
(9) Reportable Segments
The Company has two reportable segments as described below:
Banking Operations – This segment reflects the consolidated Bank, excluding CBRES. The primary source of revenue for this segment is net interest income.
CBRES – A Bank subsidiary that provides appraisal management services to community banks. The primary source of revenue for this segment is appraisal management fee income.
The Bank’s executive management team, which is comprised of the Bank’s Chief Executive Officer, Chief Financial Officer and executive vice presidents, is the chief operating decision maker for the Company. The Bank’s executive management team reviews actual net income versus budgeted net income on a quarterly basis to assess segment performance.
The following table presents financial information for the reportable segments. Financial results by operating segment, including significant expense categories provided to the chief operating decision maker, are detailed below. Certain prior period amounts have been reclassified to conform to the current presentation. The information provided under the caption “Other” represents the parent company, which is not considered to be a reportable segment, is included to reconcile the results of the operating segments to the consolidated financial statements prepared in conformity with GAAP.
Banking
Operations
CBRES
Consolidated
As of and for the three months ended March 31, 2026
Interest income
Interest expense
Noninterest income
Noninterest expense
Income tax expense (benefit)
Net income (loss)
As of and for the three months ended March 31, 2025
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following is a discussion of the financial position and results of operations of the Company and should be read in conjunction with the information set forth under Item 1A Risk Factors in the Company’s Annual Report of Form 10-K and the Company’s Consolidated Financial Statements and Notes thereto on pages A-20 through A-62 of the Company’s 2025 Annual Report to Shareholders which is Appendix A to the Proxy Statement for the 2026 Annual Meeting of Shareholders.
Introduction
Management’s discussion and analysis of earnings and related data are presented to assist in understanding the consolidated financial condition and results of operations of the Company. The Company is the parent company of the Bank and a registered bank holding company operating under the supervision of the Board of Governors of the Federal Reserve System (the “Federal Reserve”). The Bank is a North Carolina-chartered bank, with offices in Catawba, Lincoln, Alexander, Mecklenburg, Iredell, Rowan and Forsyth counties, operating under the banking laws of North Carolina and the rules and regulations of the Federal Deposit Insurance Corporation (the “FDIC”).
Overview
Our business consists principally of attracting deposits from the general public and investing these funds in commercial loans, real estate mortgage loans, real estate construction loans and consumer loans. Our profitability depends primarily on our net interest income, which is the difference between the income we receive on our loan and investment securities portfolios and our cost of funds, which consists of interest paid on deposits and borrowed funds. Net interest income also is affected by the relative amounts of our interest-earning assets and interest-bearing liabilities. When interest-earning assets approximate or exceed interest-bearing liabilities, a positive interest rate spread will generate net interest income. Our profitability is also affected by the level of other income and operating expenses. Other income consists primarily of miscellaneous fees related to our loans and deposits, mortgage banking income and commissions from sales of annuities and mutual funds. Operating expenses consist of compensation and benefits, occupancy related expenses, federal deposit and other insurance premiums, data processing, advertising and other expenses.
Our operations are influenced significantly by local economic conditions and by policies of financial institution regulatory authorities. The earnings on our assets are influenced by the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Federal Reserve, inflation, interest rates, market and monetary fluctuations. Lending activities are affected by the demand for commercial and other types of loans, which in turn is affected by the interest rates at which such financing may be offered. Our cost of funds is influenced by interest rates on competing investments and by rates offered on similar investments by competing financial institutions in our market area, as well as general market interest rates. These factors can cause fluctuations in our net interest income and other income. In addition, local economic conditions can impact the credit risk of our loan portfolio, in that (1) local employers may be required to eliminate employment positions of individual borrowers, and (2) small businesses and commercial borrowers may experience a downturn in their operating performance and become unable to make timely payments on their loans. Management evaluates these factors in estimating the allowance for credit losses (“ACL”, “allowance for credit losses”, or “allowance”) and changes in these economic factors could result in increases or decreases to the provision for loan losses.
The Federal Reserve Federal Open Market Committee (“FOMC”) increased the target federal funds rate 500 basis points between March 2022 and July 2023 to address the supply-chain disruption and rising inflation that had developed in the markets. The target federal funds rate was lowered 175 basis points between September 2024 and December 2025 to a range of 3.50% to 3.75% at March 31, 2026. We believe that economic conditions in our market area continue to be relatively stable and as a result businesses in our market area continue to grow and invest. Our experience is that the uncertainty expressed in the national and international markets through the primary economic indicators of activity are not as pronounced in our local market, and as a result we expect continued moderate economic growth in our market area.
Although we are unable to control the external factors that influence our business, by maintaining high levels of balance sheet liquidity, managing our interest rate exposures and by actively monitoring asset quality, we seek to minimize the potentially adverse risks of unforeseen and unfavorable economic trends. Because the assets and liabilities of a bank are primarily monetary in nature (payable in fixed, determinable amounts), the performance of a bank is affected more by changes in interest rates than by inflation. Interest rates generally increase as the rate of inflation increases, but the magnitude of the change in rates may not be the same. The effect of inflation on banks is normally not as significant as its influence on those businesses that have large investments in plants and inventories. During periods of high inflation there are normally corresponding increases in the money supply, and banks will normally experience above average growth in assets, loans, and deposits. Also, general increases in the price of goods and services can be expected to result in increased operating expenses.
Our business emphasis has been and continues to be to operate as a well-capitalized, profitable and independent community-oriented financial institution dedicated to providing quality customer service. We are committed to meeting the financial needs of the communities in which we operate. We expect growth to be achieved in our local markets and through expansion opportunities in contiguous or nearby markets. While we would be willing to consider growth by acquisition in certain circumstances, we do not consider the acquisition of another company to be necessary for our continued ability to provide a reasonable return to our shareholders. We believe that we can be more effective in serving our customers than many of our non-local competitors because of our ability to quickly and effectively provide senior management responses to customer needs and inquiries. Our ability to provide these services is enhanced by the stability and experience of our Bank officers and managers.
Summary of Critical Accounting Policies
The Company’s accounting policies are fundamental to understanding management’s discussion and analysis of results of operations and financial condition. Many of the Company’s accounting policies require significant judgment regarding valuation of assets and liabilities and/or significant interpretation of specific accounting guidance. A complete description of the Company’s significant accounting policies can be found in Note 1 of the Notes to Consolidated Financial Statements in the Company’s 2025 Annual Report to Shareholders which is Appendix A to the Proxy Statement for the 2026 Annual Meeting of Shareholders. There have been no significant changes to the application of significant accounting policies since December 31, 2025.
Results of Operations
Summary. Net earnings were $4.4 million or $0.83 per share and $0.80 per diluted share for the three months ended March 31, 2026, compared to $4.3 million or $0.82 per share and $0.79 per diluted share for the prior year period. The increase in first quarter net earnings is primarily attributable to an increase in net interest income, which was partially offset by an increase in the provision for credit losses and an increase in non-interest expense, compared to the prior year period, as discussed below.
The annualized return on average assets was 1.04% for the three months ended March 31, 2026, compared to 1.07% for the same period one year ago, and annualized return on average shareholders’ equity was 11.45% for the three months ended March 31, 2026, compared to 13.52% for the same period one year ago.
Net Interest Income. Net interest income, the major component of the Company’s net income, is the amount by which interest and fees generated by interest-earning assets exceed the total cost of funds used to carry them. Net interest income is affected by changes in the volume and mix of interest-earning assets and interest-bearing liabilities, as well as changes in the yields earned and rates paid. Net interest margin is calculated by dividing tax-equivalent net interest income by average interest-earning assets, and represents the Company’s net yield on its interest-earning assets.
Net interest income was $15.1 million for the three months ended March 31, 2026, compared to $13.9 million for the three months ended March 31, 2025. The increase in net interest income is due to a $906,000 increase in interest income and a $253,000 decrease in interest expense. Net interest income after the provision for credit losses was $14.5 million for the three months ended March 31, 2026, compared to $13.7 million for the three months ended March 31, 2025. The provision for credit losses for the three months ended March 31, 2026 was $560,000, compared to $268,000 for the three months ended March 31, 2025. The increase in the provision for credit losses is primarily attributable to a $38.9 million increase in total loans from December 31, 2025 to March 31, 2026, compared to a $13.7 million increase in total loans from December 31, 2024 to March 31, 2025.
Interest income was $20.9 million for the three months ended March 31, 2026, compared to $20.0 million for the three months ended March 31, 2025. The increase in interest income is primarily due to a $1.5 million increase in interest income and fees on loans, which was partially offset by a $109,000 decrease in interest income on balances due from banks and a $442,000 decrease in interest income on investment securities. The increase in interest income and fees on loans is primarily due to an increase in total loans. The decrease in interest income on balances due from banks is due to a decrease in average balances outstanding and rate decreases implemented by the FOMC. The decrease in interest income on investment securities is due to a reduction in average investment securities and decreases in yields on variable rate securities. During the three months ended March 31, 2026, average loans were $1.22 billion, an increase of $80.2 million from average loans of $1.14 billion for the three months ended March 31, 2025. During the three months ended March 31, 2026, average investment securities were $413.4 million, a decrease of $22.9 million from average investment securities of $436.3 million for the three months ended March 31, 2025. The average yield on loans for the three months ended March 31, 2026 and 2025 was 5.80% and 5.69%, respectively. The average yield on investment securities available for sale was 3.05% and 3.25% for the three months ended March 31, 2026 and 2025, respectively. The average yield on earning assets was 5.09% and 5.03% for the three months ended March 31, 2026 and 2025, respectively.
Interest expense was $5.8 million for the three months ended March 31, 2026, compared to $6.0 million for the three months ended March 31, 2025. The decrease in interest expense is primarily due to a decrease in rates paid on interest-bearing liabilities resulting from rate decreases implemented by the FOMC. During the three months ended March 31, 2026, average interest-bearing non-maturity deposits were $782.2 million, an increase of $35.3 million from average interest-bearing non-maturity deposits of $746.9 million for the three months ended March 31, 2025. During the three months ended March 31, 2026, average certificates of deposit were $340.0 million, a decrease of $1.3 million from average certificates of deposit of $341.3 million for the three months ended March 31, 2025. The average rate paid on interest-bearing checking and savings accounts was 1.50% and 1.44% for the three months ended March 31, 2026 and 2025, respectively. The average rate paid on certificates of deposit was 3.18% for the three months ended March 31, 2026, compared to 3.72% for the same period one year ago. The average rate paid on interest-bearing liabilities was 2.06% for the three months ended March 31, 2026, compared to 2.21% for the same period one year ago.
The following table sets forth for each category of interest-earning assets and interest-bearing liabilities, the average amounts outstanding, the interest incurred on such amounts and the average rate earned or incurred for the three months ended March 31, 2026 and 2025. The table also sets forth the average rate earned on total interest-earning assets, the average rate paid on total interest-bearing liabilities, and the net yield on total average interest-earning assets for the same periods. Yield information does not give effect to changes in fair value of available for sale investment securities that are reflected as a component of shareholders’ equity. Yields and interest income on tax-exempt investments for the three months ended March 31, 2026 have been adjusted to present this information on a tax equivalent basis using an effective tax rate of 22.58% for securities that are both federal and state tax exempt and an effective tax rate of 20.58% for federal tax-exempt securities. Yields and interest income on tax-exempt investments for the three months ended March 31, 2025 have been adjusted to present this information on a tax equivalent basis using an effective tax rate of 22.78% for securities that are both federal and state tax exempt and an effective tax rate of 20.53% for federal tax-exempt securities. Non-accrual loans and the interest income that was recorded on non-accrual loans, if any, are included in the yield calculations for loans in all periods reported. The Company believes the presentation of net interest income on a tax-equivalent basis provides comparability of net interest income from both taxable and tax-exempt sources and facilitates comparability within the industry. Although the Company believes these non-GAAP financial measures enhance investors’ understanding of its business and performance, these non-GAAP financial measures should not be considered an alternative to GAAP. The reconciliations of these non-GAAP financial measures to their most directly comparable GAAP financial measures are presented below.
Three months ended
Average Balance
Yield / Rate
Interest-earning assets:
Loans receivable
Investments - taxable
Investments - nontaxable*
Due from banks
Total interest-earning assets
Non-interest earning assets:
Allowance for credit losses
Interest-bearing liabilities:
Total interest-bearing liabilities
Non-interest bearing liabilities and shareholders' equity:
Demand deposits
Shareholders' equity
Net interest spread
Net yield on interest-earning assets
Taxable equivalent adjustment
Investment securities
*Includes U.S. Government agency securities that are non-taxable for state income tax purposes of $5.4 million in 2026 and $8.6 million in 2025. Tax rates of 2.00% and 2.25% were used to calculate the tax equivalent yields on these securities in 2026 and 2025, respectively.
Changes in interest income and interest expense can result from variances in both volume and rates. The following table describes the impact on the Company’s tax equivalent net interest income resulting from changes in average balances and average rates for the periods indicated. The changes in net interest income due to both volume and rate changes have been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amounts of the changes in each.
Three months ended March 31, 2026 compared to three months ended March 31, 2025
Three months ended March 31, 2025 compared to three months ended March 31, 2024
Changes in average volume
Changes in average rates
Total Increase (Decrease)
Loans: Net of unearned income
Investments - nontaxable
Interest-bearing demand,
MMDA & savings deposits
Provision for Credit Losses.The provision for credit losses for the three months ended March 31, 2026 was $560,000, compared to $268,000 for the three months ended March 31, 2025. The increase in the provision for credit losses is primarily attributable to a $38.9 million increase in total loans from December 31, 2025 to March 31, 2026, compared to a $13.7 million increase in total loans from December 31, 2024 to March 31, 2025.
Non-Interest Income. Non-interest income was $6.5 million for the three months ended March 31, 2026 and 2025. A $422,000 decrease in appraisal management fee income due to a decrease in appraisal volume was partially offset by a $108,000 increase in mortgage banking income due to an increase in secondary mortgage market activity, a $238,000 increase in miscellaneous non-interest income primarily due to an increase in income on Small Business Investment Company (SBIC) investments and a $32,000 increase in insurance and brokerage commissions.
Non-Interest Expense. Non-interest expense was $15.4 million for the three months ended March 31, 2026, compared to $14.6 million for the three months ended March 31, 2025. The increase in non-interest expense is primarily attributable to a $458,000 increase in salaries and employee benefits expense primarily due to increases in health insurance and restricted stock expenses, a $279,000 increase in occupancy expense primarily due to an increase in furniture and equipment maintenance/service contract expenses, a $173,000 increase in professional fees primarily due to an increase in consulting expense, and a $190,000 increase in debit card expense. The increases in non-interest expense were partially offset by a $324,000 decrease in appraisal management fee expense due to a decrease in appraisal volume.
Income Taxes.Income tax expense was $1.3 million for the three months ended March 31, 2026 and 2025. The effective tax rate was 22.13% for the three months ended March 31, 2026, compared to 22.85% for the three months ended March 31, 2025. The decrease in the effective tax rate is primarily due to the North Carolina corporate income tax rate decreasing from 2.25% to 2.00% effective January 1, 2026 and the revaluation of the deferred tax asset due to further upcoming reductions in the North Carolina corporate income tax rate.
Analysis of Financial Condition
Investment Securities.Available for sale securities were $370.1 million as of March 31, 2026, compared to $377.4 million as of December 31, 2025. Average investment securities for the three months ended March 31, 2026 were $413.4 million, compared to $421.6 million for the year ended December 31, 2025.
Loans.Total loans were $1.24 billion as of March 31, 2026, compared to $1.20 billion at December 31, 2025. Average loans represented 74% and 70% of average earning assets for the three months ended March 31, 2026 and the year ended December 31, 2025, respectively.
The Bank had $1.7 million and $1.1 million in mortgage loans held for sale as of March 31, 2026 and December 31, 2025, respectively.
Although the Bank has a diversified loan portfolio, a substantial portion of the loan portfolio is collateralized by real estate, which is dependent upon the real estate market. Real estate mortgage loans include both commercial and residential mortgage loans. At March 31, 2026, the Bank had $139.7 million in residential mortgage loans, $128.0 million in home equity loans and $758.6 million in commercial mortgage loans, which include $610.8 million secured by commercial property and $147.8 million secured by residential property. All residential mortgage loans are originated as fully amortizing loans, with no negative amortization. The Bank also had construction and land development loans totaling $127.4 million at March 31, 2026.
Allowance for Credit Losses (ACL).The allowance for credit losses reflects management’s assessment and estimate of the risks associated with extending credit and its evaluation of the quality of the loan portfolio. The Bank periodically analyzes the loan portfolio in an effort to review asset quality and to establish an allowance that management believes will be adequate in light of anticipated risks and loan losses. In assessing the adequacy of the allowance, size, quality and risk of loans in the portfolio are reviewed.
The allowance for credit losses on loans is a valuation account that is deducted from the loans' amortized cost basis to present the net amount expected to be collected on the loans. Loans are charged off against the allowance when management believes the uncollectibility of a loan balance is confirmed. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off. Accrued interest receivable is excluded from the estimate of credit losses. The allowance for credit losses represents management’s estimate of lifetime credit losses inherent in loans as of March 31, 2026. 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 measures expected credit losses for loans on a pooled basis when similar risk characteristics exist. The Company calculates the allowance for credit losses using a Weighted Average Remaining Maturity (“WARM”) methodology.
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 decrease reserve levels and include adjustments for: local, state and national economic outlook; levels and trends of delinquencies; trends in volume, mix and size of loans; seasoning of the loan portfolio; experience of staff; concentrations of credit; and interest rate risk.
The portion of the ACL balance attributable to qualitative factors was $5.5 million and $5.3 million at March 31, 2026 and December 31, 2025, respectively. The risk factors are weighted as follows: Local, State and National Economic Outlook – 30%, Concentrations of Credit – 5%, Interest Rate Risk – 5%, Trends in Terms of Volume, Mix and Size of Loans – 15%, Seasoning of the Loan Portfolio – 10%, Experience of Staff – 10%, and Levels and Trends of Delinquencies – 25%. No changes to the risk status of any of the risk factors was made during the three months ended March 31, 2026.
Loans that do not share risk characteristics are evaluated on an individual basis. 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.
Financial instruments include off-balance sheet credit instruments, such as commitments to make loans and commercial letters of credit issued to meet customer financing needs. The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for off-balance sheet loan commitments represents the contractual amount of those instruments. Such financial instruments are recorded when they are funded.
The Company records an allowance for credit losses on off-balance sheet credit exposures, unless the commitments to extend credit are unconditionally cancelable. The allowance for credit losses on off-balance sheet credit exposures is estimated by loan segment at each balance sheet date under the current expected credit loss model using the same methodologies as portfolio loans, taking into consideration the likelihood that funding will occur as well as any third-party guarantees. The allowance for unfunded commitments is included in other liabilities on the Company’s consolidated balance sheets.
The allowance for credit losses on loans was $10.5 million or 0.84% of total loans at March 31, 2026, compared to $10.1 million or 0.84% of total loans at December 31, 2025. The allowance for credit losses on loans increased $332,000 primarily due to a $38.9 million increase in total loans from December 31, 2025 to March 31, 2026.
The allowance for credit losses on unfunded commitments was $1.6 million at March 31, 2026, compared to $1.4 million at December 31, 2025. The increase in the allowance for credit losses on unfunded commitments was due to a $5.7 million increase in unfunded loan commitments from December 31, 2025 to March 31, 2026.
Management uses several measures to assess and monitor the credit risks in the loan portfolio, including a loan grading system that begins upon loan origination and continues until the loan is collected or collectability becomes doubtful. Upon loan origination, the Bank’s originating loan officer evaluates the quality of the loan and assigns one of eight risk grades. The loan officer monitors the loan’s performance and credit quality and makes changes to the credit grade as conditions warrant. When originated or renewed, all loans over a certain dollar amount receive in-depth reviews and risk assessments by the Bank’s Credit Administration. Before making any changes in these risk grades, management considers assessments as determined by the third-party credit review firm (as described below), regulatory examiners and the Bank’s Credit Administration. Any issues regarding the risk assessments are addressed by the Bank’s senior credit administrators and factored into management’s decision to originate or renew the loan. The board of directors of the Bank (the “Bank Board”) reviews, on a monthly basis, an analysis of the Bank’s reserves relative to the range of reserves estimated by the Bank’s Credit Administration.
The allowance for credit losses represents management’s estimate of credit losses for the remaining estimated life of the Bank’s financial assets, including loan receivables and some off-balance sheet credit exposures. Estimating the amount of the allowance for credit losses requires significant judgment and the use of estimates related to historical experience, current conditions, reasonable and supportable forecasts, and the value of collateral on collateral-dependent loans. The loan portfolio also represents the largest asset type on our consolidated balance sheet. Credit losses are charged against the allowance, while recoveries of amounts previously charged off are credited to the allowance. A provision for credit losses is charged to operations based on management’s periodic evaluation of the factors previously mentioned, as well as other pertinent factors.
There are many factors affecting the allowance for credit losses; some are quantitative while others require qualitative judgment. Although management believes its process for determining the allowance adequately considers all the potential factors that could potentially result in credit losses, the process includes subjective elements and is susceptible to significant change. To the extent actual outcomes differ from management estimates, additional provision for credit losses could be required that could adversely affect our earnings or financial position in future periods.
Various regulatory agencies, as an integral part of their examination process, periodically review the Bank’s allowance. Such agencies may require adjustments to the allowance based on their judgments of information available to them at the time of their examinations. Management believes it has established the allowance for credit losses pursuant to Current Expected Credit Loss (“CECL”), and has considered the views of its regulators and the current economic environment. Management considers the allowance adequate to cover the estimated losses inherent in the Bank’s loan portfolio as of the date of the financial statements. Although management uses the best information available to make evaluations, significant future additions to the allowance may be necessary based on changes in economic and other conditions, thus adversely affecting the operating results of the Company.
Non-performing Assets. Non-performing assets were $4.8 million or 0.28% of total assets at March 31, 2026, compared to $4.2 million or 0.25% of total assets at December 31, 2025. Non-performing assets comprise $3.6 million in residential mortgage loans and $1.2 million in commercial mortgage loans at March 31, 2026, compared to $3.6 million in residential mortgage loans and $533,000 in commercial mortgage loans at December 31, 2025. The Bank had no other real estate owned or repossessed assets as of March 31, 2026 and December 31, 2025.
Deposits. Deposits were $1.54 billion as of March 31, 2026, compared to $1.51 billion as of December 31, 2025. Core deposits, a non-GAAP measure, which include noninterest-bearing demand deposits, NOW, MMDA, savings and non-brokered certificates of deposit of denominations of less than $250,000, were $1.40 billion at March 31, 2026, compared to $1.35 billion at December 31, 2025. Management believes it is useful to calculate and present core deposits because of the positive impact this low cost funding source provides to the Bank’s overall cost of funds and profitability. Certificates of deposit in amounts of $250,000 or more totaled $143.7 million at March 31, 2026, compared to $160.4 million December 31, 2025.
Estimated uninsured deposits totaled $347.4 million, or 22.55% of total deposits, at March 31, 2026, compared to $358.5 million, or 23.75% of total deposits, at December 31, 2025. Uninsured amounts are estimated based on the portion of account balances in excess of FDIC insurance limits. The Bank did not have any significant deposit concentrations at March 31, 2026.
Borrowed Funds. There were no borrowed funds, other than junior subordinated debt debentures, outstanding at March 31, 2026 and December 31, 2025.
Junior Subordinated Debentures (related to Trust Preferred Securities).Junior subordinated debentures were $15.5 million at March 31, 2026 and December 31, 2025.
Asset Liability and Interest Rate Risk Management. The objective of the Company’s Asset Liability and Interest Rate Risk strategies is to identify and manage the sensitivity of net interest income to changing interest rates and to minimize the interest rate risk between interest-earning assets and interest-bearing liabilities at various maturities. This is done in conjunction with the need to maintain adequate liquidity and the overall goal of maximizing net interest income.
The Company manages its exposure to fluctuations in interest rates through policies established by the Asset/Liability Committee (“ALCO”) of the Bank. The ALCO meets quarterly and has the responsibility for approving asset/liability management policies, formulating and implementing strategies to improve balance sheet positioning and/or earnings and reviewing the interest rate sensitivity of the Company. ALCO seeks to minimize interest rate risk between interest-earning assets and interest-bearing liabilities by attempting to minimize wide fluctuations in net interest income due to interest rate movements. The ability to control these fluctuations has a direct impact on the profitability of the Company. Management monitors this activity on a regular basis through analysis of its portfolios to determine the difference between rate sensitive assets and rate sensitive liabilities.
The Company’s rate sensitive assets are those earning interest at variable rates and those with contractual maturities within one year. Rate sensitive assets therefore include both loans and available for sale securities. Rate sensitive liabilities include interest-bearing checking accounts, money market deposit accounts, savings accounts, time deposits and borrowed funds. Average rate sensitive assets for the three months ended March 31, 2026 totaled $1.66 billion, exceeding average rate sensitive liabilities of $1.14 billion by $525.5 million.
Included in the rate sensitive assets are $184.9 million in variable rate loans indexed to prime rate subject to immediate repricing upon changes by the FOMC. Certain variable rate loans are structured to establish floors on interest rates charged to protect against downward movements in the prime rate. At March 31, 2026, the Company had $130.2 million in loans with interest rate floors. Floors were in effect on four loans, totaling $9,000, at March 31, 2026.
Liquidity. The objectives of the Company’s liquidity policy are to provide for the availability of adequate funds to meet the needs of loan demand, deposit withdrawals, maturing liabilities and to satisfy regulatory requirements. Both deposit and loan customer cash needs can fluctuate significantly depending upon business cycles, economic conditions and yields and returns available from alternative investment opportunities. In addition, the Company’s liquidity is affected by off-balance sheet commitments to lend in the form of unfunded commitments to extend credit and standby letters of credit. As of March 31, 2026, such unfunded commitments to extend credit were $372.3 million, while commitments in the form of standby letters of credit totaled $1.6 million. As of December 31, 2025, such unfunded commitments to extend credit were $366.5 million, while commitments in the form of standby letters of credit totaled $1.6 million.
The Bank uses several sources to meet its liquidity requirements. The primary source is core deposits, which includes demand deposits, savings accounts and non-brokered certificates of deposit of denominations less than $250,000. The Bank considers these to be a stable portion of the Bank’s liability mix and the result of on-going consumer and commercial banking relationships. As of March 31, 2026, the Bank’s core deposits, a non-GAAP measure, totaled $1.40 billion, or 90.70% of total deposits. As of December 31, 2025, the Bank’s core deposits totaled $1.35 billion, or 89.44% of total deposits.
The other sources of funding for the Company are through large denomination certificates of deposit, including brokered deposits, federal funds purchased, securities under agreement to repurchase and FHLB borrowings. The Bank is also able to borrow from the Federal Reserve Bank (“FRB”) on a short-term basis. The Bank’s policies include the ability to access wholesale funding up to 40% of total assets. The Bank’s wholesale funding includes FHLB borrowings, FRB borrowings, brokered deposits and internet certificates of deposit. The Bank did not have any wholesale funding at March 31, 2026 and December 31, 2025.
The Bank has a line of credit with the FHLB equal to 20% of the Bank’s total assets. There were no FHLB borrowings outstanding at March 31, 2026 and December 31, 2025. At March 31, 2026, the carrying value of loans pledged as collateral to the FHLB totaled $253.6 million compared to $247.8 million at December 31, 2025. The remaining availability under the line of credit with the FHLB was $150.6 million at March 31, 2026 compared to $148.5 million at December 31, 2025. The Bank had no borrowings from the FRB at March 31, 2026 or December 31, 2025. FRB borrowings are collateralized by a blanket assignment on all qualifying loans that the Bank owns which are not pledged to the FHLB. At March 31, 2026, the carrying value of loans pledged as collateral to the FRB totaled $720.1 million compared to $689.9 million at December 31, 2025. Availability under the line of credit with the FRB was $603.7 million at March 31, 2026 compared to $583.8 million at December 31, 2025.
The Bank also had the ability to borrow up to $110.5 million for the purchase of overnight federal funds from five correspondent financial institutions as of March 31, 2026.
The liquidity ratio for the Bank, which is defined as net cash, interest-bearing deposits, federal funds sold and certain investment securities, as a percentage of net deposits and short-term liabilities was 26.91% at March 31, 2026 and 26.86% at December 31, 2025. The minimum required liquidity ratio as defined in the Bank’s Asset/Liability and Interest Rate Risk Management Policy was 10% at March 31, 2026 and December 31, 2025.
Contractual Obligations and Off-Balance Sheet Arrangements. The Company’s contractual obligations include junior subordinated debentures, as well as certain payments under current lease agreements. Other commitments include commitments to extend credit.
Capital Resources. Shareholders’ equity was $158.1 million, or 9.12% of total assets, at March 31, 2026, compared to $157.1 million, or 9.23% of total assets, at December 31, 2025.
Annualized return on average equity for the three months ended March 31, 2026 was 11.45%, compared to 13.52% for the three months ended March 31, 2025. Total cash dividends paid on common stock were $2.1 million for the three months ended March 31, 2026, compared to $2.0 million for the three months ended March 31, 2025.
In March 2025, the Board of Directors authorized a stock repurchase program, whereby up to $3.0 million was allocated to repurchase the Company’s common stock. The Company had not repurchased any shares of its common stock under this stock repurchase program through February 28, 2026, when the program expired.
In 2013, the FRB approved its final rule on the Basel III capital standards, which implemented changes to the regulatory capital framework for banking organizations. This resulted in the following minimum ratios beginning in 2019: (i) a common equity Tier 1 capital ratio of 7.0%, (ii) a Tier 1 capital ratio of 8.5%, and (iii) a total capital ratio of 10.5%. Under the final rule, institutions are subject to limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses if their capital levels fall below the minimum ratios. These limitations establish a maximum percentage of eligible retained earnings that could be utilized for such actions.
Under the regulatory capital guidelines, financial institutions are currently required to maintain a total risk-based capital ratio of 8.0% or greater, with a Tier 1 risk-based capital ratio of 6.0% or greater and a common equity Tier 1 capital ratio of 4.5% or greater. Tier 1 capital is generally defined as shareholders’ equity and trust preferred securities less all intangible assets and goodwill. Tier 1 capital includes $15.0 million in trust preferred securities at March 31, 2026 and December 31, 2025. The Company’s Tier 1 capital ratio was 14.75% and 14.96% at March 31, 2026 and December 31, 2025, respectively. Total risk-based capital is defined as Tier 1 capital plus supplementary capital. Supplementary capital, or Tier 2 capital, consists of the Company’s allowance for credit losses, not exceeding 1.25% of the Company’s risk-weighted assets. Total risk-based capital ratio is therefore defined as the ratio of total capital (Tier 1 capital and Tier 2 capital) to risk-weighted assets. The Company’s total risk-based capital ratio was 15.63% and 15.82% at March 31, 2026 and December 31, 2025, respectively. The Company’s common equity Tier 1 capital consists of common stock and retained earnings. The Company’s common equity Tier 1 capital ratio was 13.65% and 13.83% at March 31, 2026 and December 31, 2025, respectively. Financial institutions are also required to maintain a leverage ratio of Tier 1 capital to total average assets of 4.0% or greater. The Company’s Tier 1 leverage capital ratio was 11.60% and 11.33% at March 31, 2026 and December 31, 2025, respectively.
The Bank’s Tier 1 risk-based capital ratio was 14.62% and 14.83% at March 31, 2026 and December 31, 2025, respectively. The total risk-based capital ratio for the Bank was 15.50% and 15.70% at March 31, 2026 and December 31, 2025, respectively. The Bank’s common equity Tier 1 capital ratio was 14.62% and 14.83% at March 31, 2026 and December 31, 2025, respectively. The Bank’s Tier 1 leverage capital ratio was 11.39% and 11.13% at March 31, 2026 and December 31, 2025, respectively.
A bank is considered to be “well capitalized” if it has a total risk-based capital ratio of 10.0% or greater, a Tier 1 risk-based capital ratio of 8.0% or greater, a common equity Tier 1 capital ratio of 6.5% or greater and a leverage ratio of 5.0% or greater. Based upon these guidelines, the Bank was considered to be “well capitalized” at March 31, 2026.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable
Item 4. Controls and Procedures
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, which are our controls and other procedures that are designed to ensure that information required to be disclosed in our periodic reports with the SEC is recorded, processed, summarized and reported within the required time periods. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed is communicated to our management to allow timely decisions regarding required disclosure. Based on the evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are effective in allowing timely decisions regarding disclosure to be made about material information required to be included in our periodic reports with the SEC. In addition, no change in our internal control over financial reporting has occurred during, or subsequent to, the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Item 1. Legal Proceedings
In the opinion of management, the Company is not involved in any material pending legal proceedings other than routine proceedings occurring in the ordinary course of business.
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
ISSUER PURCHASES OF EQUITY SECURITIES
Period
Total Number of Shares Purchased (1)
Average Price Paid per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)
Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (3)
January 1 - 31, 2026
February 1 - 28, 2026
March 1 - 31, 2026
(1) The Company purchased 1,433 shares on the open market in the three months ended March 31, 2026 for its deferred compensation plan. All purchases were funded by participant contributions to the plan.
(2) Reflects shares purchased under the Company's publicly announced stock repurchase program, which expired on February 28, 2026.
(3) Reflects dollar value of balance available for repurchase at end of period under the Company's stock repurchase program, which expired on February 28, 2026.
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Trading Arrangements of Section 16 Reporting Persons.
During the quarter ended March 31, 2026, no person who is required to file reports pursuant to Section 16(a) of the Securities and Exchange Act of 1934, as amended, with respect to holdings of, and transactions in, the Company’s common shares (i.e. directors and certain officers of the Company) maintained, adopted, modified or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1(c) arrangement”, as those terms are defined in Section 229.408 of the regulations of the SEC.
Item 6. Exhibits
Exhibit (3)(i)(a)
Articles of Incorporation of the Registrant, incorporated by reference to Exhibit (3)(i) to the Form 8-A filed with the Securities and Exchange Commission on September 2, 1999
Exhibit (3)(i)(b)
Articles of Amendment dated December 19, 2008, regarding the Series A Preferred Stock, incorporated by reference to Exhibit (3)(1) to the Form 8-K filed with the Securities and Exchange Commission on December 29, 2008
Exhibit (3)(i)(c)
Articles of Amendment dated February 26, 2010, incorporated by reference to Exhibit (3)(2) to the Form 10-K filed with the Securities and Exchange Commission on March 25, 2010
Exhibit (3)(i)(d)
Articles of Amendment dated February 25, 2022, incorporated by reference to Exhibit (3)(i)(d) to the Form 10-K filed with the Securities and Exchange Commission on March 18, 2022
Exhibit (3)(ii)
Third Amended and Restated Bylaws of the Registrant, incorporated by reference to Exhibit (3)(iii) to the Form 8-K filed with the Securities and Exchange Commission on January 17, 2025
Exhibit (4)(i)
Specimen Stock Certificate, incorporated by reference to Exhibit (4) to the Form 8-A filed with the Securities and Exchange Commission on September 2, 1999
Exhibit (31)(a)
Certification of principal executive officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002
Exhibit (31)(b)
Certification of principal financial officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002
Exhibit (32)
Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit (101)
The following materials from the Company’s 10-Q Report for the quarterly period ended March 31, 2026, formatted in eXtensible Business Reporting Language (“XBRL”): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Earnings, (iii) the Condensed Consolidated Statements of Comprehensive Income (iv) the Condensed Consolidated Statements of Changes in Shareholders’ Equity, (v) the Condensed Consolidated Statements of Cash Flows, and (vi) the Notes to the Condensed Consolidated Financial Statements.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Peoples Bancorp of North Carolina, Inc.
May 7, 2026
/s/ William D. Cable, Sr.
Date
William D. Cable, Sr.
President and Chief Executive Officer
(Principal Executive Officer)
/s/ Jeffrey N. Hooper
Jeffrey N. Hooper
Executive Vice President and Chief Financial Officer
(Principal Financial and Principal Accounting Officer)