UWHARRIE CAPITAL CORP

Previous wording

During the six months ended June 30, 2026, the Company’s total assets increased by $25.8 million, from $1.20 billion to $1.22 billion. Cash and cash equivalents increased by $18.4 million during the six months ended June 30, 2026, from $73.3 million to $91.7 million. The increase in cash and cash equivalents is the result of growth in deposits.

Current wording

During the nine months ended September 30, 2026, the Company’s total assets increased by $34.8 million, from $1.20 billion to $1.23 billion. Cash and cash equivalents increased by $2.0 million during the nine months ended September 30, 2026, from $73.3 million to $75.3 million.

Previous wording

Investment securities consist of securities available for sale and securities held to maturity. For the six-month period ended June 30, 2026, investment securities increased by $2.0 million from $379.7 million at December 31, 2025 to $381.7 million at June 30, 2026. At June 30, 2026, the Company had net unrealized losses on securities available for sale of $22.3 million, compared to net unrealized losses of $21.5 million at December 31, 2025, a deterioration of $722,000. The allowance for credit losses on securities held to maturity was $44,000 at June 30, 2026 and $45,000 at December 31, 2025. The amortized cost basis of securities held to maturity was $22.0 million at both June 30, 2026 and December 31, 2025.

Current wording

Investment securities consist of securities available for sale and securities held to maturity. For the nine-month period ended September 30, 2026, investment securities increased by $13.9 million from $379.7 million at December 31, 2025 to $393.6 million at September 30, 2026. At September 30, 2026, the Company had net unrealized losses on securities available for sale of $37.4 million, compared to net unrealized losses of $21.5 million at December 31, 2025, a deterioration of $15.9 million. The allowance for credit losses on securities held to maturity was $30,000 at September 30, 2026 and $45,000 at December 31, 2025. The amortized cost basis of securities held to maturity totaled $18.6 million and $22.0 million at September 30, 2026 and December 31, 2025, respectively.

Previous wording

Equity securities increased by $575,000 at June 30, 2026, compared to December 31, 2025, primarily due to the Company’s participation in Visa Inc.’s exchange offer described in Note 5 of the Notes to Consolidated Financial Statements (Unaudited) included in Item 1 of this Report. The Company received Visa Class C common stock with a fair value of approximately $826,000 and subsequently sold 211 shares during the quarter, resulting in a net increase in equity securities at period end. The Company also received 550 shares of Visa Class B-3 common stock in the exchange; however, no carrying value was assigned to the Class B-3 shares, and therefore they are not included in the Company’s equity securities balance at June 30, 2026.

Current wording

Equity securities decreased by $34,000 at September 30, 2026, compared to December 31, 2025, as a result of the decline in value in the equity market. During the nine-month period ended September 30, 2026, the Company participated in Visa Inc.’s exchange offer described in Note 5 of the Notes to Consolidated Financial Statements (Unaudited) included in Item 1 of this Report. The Company received Visa Class C common stock with a fair value of approximately $826,000 and subsequently converted and sold all 633 shares. The Company also received 550 shares of Visa Class B-3 common stock in the exchange; however, no carrying value was assigned to the Class B-3 shares, and therefore they are not included in the Company’s equity securities balance at September 30, 2026.

Previous wording

The allowance for credit losses on loans was $6.0 million at June 30, 2026, which represented 0.86% of total loans held for investment, compared to $6.4 million, or 0.93% of total loans held for investment, at December 31, 2025. Additional discussion regarding the allowance is included in the Asset Quality section below.

Current wording

Loans held for sale decreased by $2.4 million from December 31, 2025 to $6.6 million at September 30, 2026. Loans held for investment increased from $689.6 million at December 31, 2025 to $702.8 million at September 30, 2026, an increase of $13.2 million. The allowance for credit losses on loans was $5.8 million at September 30, 2026, which represented 0.82% of total loans held for investment, compared to $6.4 million, or 0.93% of total loans held for investment, at December 31, 2025. Additional discussion regarding the allowance is included in the Asset Quality section below.

Previous wording

Other changes in the Company’s consolidated assets are primarily related to premises and equipment, which increased by $2.0 million from $14.7 million at December 31, 2025 to $16.7 million at June 30, 2026 related to construction expenses for a new branch in Mount Pleasant, North Carolina, which will replace the currently leased branch location. Other assets increased by $628,000 during the six months ended June 30, 2026, primarily due to a $392,000 increase in supplemental executive retirement plan (“SERP”) account balances, driven by annual Company contributions and favorable market performance. In addition, the Company’s investment in a Small Business Investment Company (“SBIC”) increased by $266,000.

Current wording

Other changes in the Company’s consolidated assets are primarily related to deferred tax assets, which increased by $3.3 million from $6.8 million at December 31, 2025 to $10.2 million at September 30, 2026, as a result of the deterioration in fair value of the available-for-sale securities portfolio. Premises and equipment increased by $2.6 million from $14.7 million at December 31, 2025 to $17.4 million at September 30, 2026 related to construction expenses for a new branch building in Mount Pleasant, North Carolina. Annual Company contributions and favorable market performance increased supplemental executive retirement plans (“SERP”), included in Other Assets, by $1.1 million during the nine months ended September 30, 2026. Also included in Other Assets, the Company’s investment in a Small Business Investment Company (“SBIC”) increased by $233,000.

Previous wording

Customer deposits, our primary funding source, experienced growth of $18.3 million during the six-month period ended June 30, 2026, increasing from $1.08 billion to $1.10 billion. The overall increase in deposits is attributable to organic deposit growth. Demand noninterest-bearing checking accounts increased by $25.7 million while interest checking and money market accounts declined by $8.5 million during the six-month period ended June 30, 2026. Savings deposits increased by $10.3 million and time deposits decreased by $9.3 million during the same period.

Current wording

Customer deposits, our primary funding source, experienced growth of $37.1 million during the nine-month period ended September 30, 2026, increasing from $1.08 billion to $1.12 billion. The overall increase in deposits is attributable to organic deposit growth. Demand noninterest-bearing checking accounts increased by $34.0 million while interest checking and money market accounts increased by $12.9 million during the nine-month period ended September 30, 2026. Savings deposits increased by $3.0 million and time deposits decreased by $12.9 million during the same period.

Previous wording

Total short-term borrowings increased by $203,000 for the six-month period ended June 30, 2026. At June 30, 2026, the Company had $30.1 million in long-term debt outstanding, $29.1 million of which consists of junior subordinated debt securities, net of unamortized debt issuance costs. During the third quarter of 2019, the Company issued $10.0 million in subordinated debt securities with a final maturity date of September 30, 2029 that became redeemable by the Company on September 30, 2024. This junior subordinated debt pays interest quarterly at an annual fixed rate of 5.25%. During the third quarter of 2021, the Company issued $12.0 million and $8.0 million of 10-year and 15-year fixed-to-floating rate subordinated debt securities, respectively. The 10-year subordinated notes mature on September 3, 2031, though they are redeemable at the Company’s option on or after September 3, 2026, and initially pay interest quarterly at an annual rate of 3.5%. From and including September 3, 2026 to but excluding September 3, 2031, or up to any early redemption date, the interest rate on the 10-year subordinated notes will reset quarterly to an annual rate equal to the then-current three-month secured overnight financing rate (“SOFR”), plus 283 basis points payable quarterly in arrears. The 15-year subordinated notes mature on September 3, 2036, though they are redeemable at the Company’s option on or after September 3, 2031, and initially pay interest quarterly at an annual rate of 4.0%. From and including September 3, 2031 to but excluding September 3, 2036, or up to any early redemption date, the interest rate on the 15-year subordinated notes will reset quarterly to an annual rate equal to the then-current three-month SOFR plus 292 basis points payable quarterly in arrears. The subordinated debt has been structured to qualify as and is included in the calculation of the Company’s Tier 2 capital. Once the remaining term to maturity drops under five years, the Company must impose a twenty percent annual reduction of the amount of the proceeds from the sale of these securities that are eligible to be counted as Tier 2 capital. Of the subordinated debt that remains outstanding at June 30, 2026, $25.3 million qualifies as Tier 2 capital. The Company also maintains a $3.0 million line of credit, of which $1.0 million was outstanding at June 30, 2026.

Current wording

Total short-term borrowings increased by $127,000 for the nine-month period ended September 30, 2026. At September 30, 2026, the Company had $31.6 million in long-term debt outstanding, $29.1 million of which consists of junior subordinated debt securities, net of unamortized debt issuance costs. During the third quarter of 2019, the Company issued $10.0 million in subordinated debt securities with a final maturity date of September 30, 2029 that became redeemable by the Company on September 30, 2024. This junior subordinated debt pays interest quarterly at an annual fixed rate of 5.25%. During the third quarter of 2021, the Company issued $12.0 million and $8.0 million of 10-year and 15-year fixed-to-floating rate subordinated debt securities, respectively. The 10-year subordinated notes mature on September 3, 2031 and became redeemable at the Company’s option on September 3, 2026. From and including September 3, 2026 to but excluding September 3, 2031, or up to any early redemption date, the interest rate on the 10-year subordinated notes resets quarterly to an annual rate equal to the then-current three-month secured overnight financing rate (“SOFR”), plus 283 basis points payable quarterly in arrears. At September 30, 2026, the interest rate on the 10-year subordinated notes was 6.67%. The 15-year subordinated notes mature on September 3, 2036, though they are redeemable at the Company’s option on or after September 3, 2031, and initially pay interest quarterly at an annual rate of 4.0%. From and including September 3, 2031 to but excluding September 3, 2036, or up to any early redemption date, the interest rate on the 15-year subordinated notes will reset quarterly to an annual rate equal to the then-current three-month SOFR plus 292 basis points payable quarterly in arrears. The subordinated debt has been structured to qualify as and is included in the calculation of the Company’s Tier 2 capital. Once the remaining term to maturity drops under five years, the Company must impose a twenty percent annual reduction of the amount of the proceeds from the sale of these securities that are eligible to be counted as Tier 2 capital. Of the subordinated debt that remains outstanding at September 30, 2026, $21.1 million qualifies as Tier 2 capital. The Company also maintains a $3.0 million line of credit, of which $2.5 million was outstanding at September 30, 2026.

Previous wording

Other changes in the Company’s liabilities are related to an increase of $760,000 in other liabilities from December 31, 2025 to June 30, 2026 resulting primarily from accrual of reserves for payables due throughout 2026.

Current wording

Other changes in the Company’s liabilities are related to an increase of $1.8 million in other liabilities from December 31, 2025 to September 30, 2026 resulting primarily from accrual of reserves for payables due during the last quarter of 2026. As with SERP assets mentioned above, SERP liabilities increased $1.1 million during the same period.

Previous wording

At June 30, 2026, total shareholders’ equity was $81.1 million, an increase of $5.5 million from December 31, 2025. Net income for the six-month period ended June 30, 2026 was $7.1 million, which positively contributed to shareholders’ equity. During the six months ended June 30, 2026, the Company repurchased 68,263 shares of common stock at a total cost of $765,000, and the Company paid $280,000 in dividends attributable to noncontrolling interest. See Note 3 (“Noncontrolling Interest”) to the Company’s Notes to Consolidated Financial Statements for additional discussion of the noncontrolling interest.

Current wording

At September 30, 2026, total shareholders’ equity was $68.6 million, a decrease of $7.0 million from December 31, 2025. Net income for the nine-month period ended September 30, 2026 was $10.0 million, which positively contributed to shareholders’ equity. During the nine months ended September 30, 2026, the Company repurchased 308,554 shares of common stock at a total cost of $4.2 million, and the Company paid $422,000 in dividends attributable to noncontrolling interest. See Note 3 (“Noncontrolling Interest”) to the Company’s Notes to Consolidated Financial Statements for additional discussion of the noncontrolling interest.

Previous wording

Uwharrie Capital Corp reported net income of $7.1 million for the six months ended June 30, 2026, compared to $5.4 million for the six months ended June 30, 2025. Net income available to common shareholders was $6.8 million, or $0.96 per common share, for the six months ended June 30, 2026, compared to $5.1 million, or $0.70 per common share, for the six months ended June 30, 2025. Net income available to common shareholders is net income less dividends on the aforementioned noncontrolling interest.

Current wording

Uwharrie Capital Corp reported net income of $2.9 million for both three-month periods ended September 30, 2026 and 2025. Net income available to common shareholders was $2.7 million, or $0.37 per common share, for the three months ended September 30, 2026 and 2025. Net income available to common shareholders is net income less dividends on the aforementioned noncontrolling interest.

Previous wording

Net interest income for the three months ended June 30, 2026 was $10.2 million, a $455,000 increase from the $9.7 million reported for the comparative period in 2025. During the second quarter of 2026, the average yield on our interest-earning assets decreased by 10 basis points to 5.12% from the same period in 2025, and the average rate we paid for our interest-bearing liabilities decreased 9 basis points to 2.22%. These changes resulted in an interest rate spread of 2.90% as of June 30, 2026, compared to 2.91% as of June 30, 2025. The Company’s net interest margin was 3.52% and 3.56% for the comparable periods in 2026 and 2025, respectively.

Current wording

Net interest income for the three months ended September 30, 2026 was $10.2 million, a $325,000 increase from the $9.9 million reported for the comparative period in 2025. During the third quarter of 2026, the average yield on our interest-earning assets decreased by 9 basis points to 5.10% from the same period in 2025, and the average rate we paid for our interest-bearing liabilities decreased 7 basis points to 2.25%. These changes resulted in an interest rate spread of 2.86% as of both September 30, 2026 and September 30, 2025. The Company’s net interest margin was 3.48% and 3.50% for the comparable periods in 2026 and 2025, respectively. The following table presents average balance sheet and a net interest income analysis for the three months ended September 30, 2026 and 2025, respectively:

Previous wording

The Company recorded a $424,000 recovery of credit losses for the three months ended June 30, 2026, compared to a provision of $254,000 for the same period in 2025. There were net loan charge-offs of $8,000 for the three months ended June 30, 2026, as compared to net loan charge-offs of $76,000 during the same period of 2025. Refer to the Asset Quality section below for further information.

Current wording

The Company recorded a $287,000 recovery of credit losses for the three months ended September 30, 2026, compared to a provision of $176,000 for the same period in 2025. There were net loan recoveries of $11,000 for the three months ended September 30, 2026, as compared to net loan charge-offs of $67,000 during the same period of 2025. Refer to the Asset Quality section below for further information.

Previous wording

Interchange fees, or “swipe” fees, are charges that merchants pay to us and other card-issuing banks for processing electronic payment transactions. Interchange and card transaction fees consist of income from check card usage, point-of-sale income from PIN-based debit card transactions, ATM service fees, and credit card usage. A comparison of gross interchange and card transaction fees, net of associated network costs for the reported periods is presented in the table below:

Current wording

Interchange fees are charges that merchants pay to us and other card-issuing banks for processing electronic payment transactions. Interchange and card transaction fees consist of income from check card usage, point-of-sale income from PIN-based debit card transactions, ATM service fees, and credit card usage. A comparison of gross interchange and card transaction fees, net of associated network costs for the reported periods is presented in the table below:

Previous wording

Noninterest expense for the three months ended June 30, 2026 increased by $683,000 compared to the same period in 2025. Salaries and benefits, the largest component of noninterest expense, increased by $262,000 due to higher wages and benefit costs during the three months ended June 30, 2026. Marketing and donations expense increased by $307,000 during the same period, primarily due to the timing of several large donations.

Current wording

Noninterest expense for the three months ended September 30, 2026 increased by $1.1 million compared to the same period in 2025. Salaries and benefits, the largest component of noninterest expense, increased by $259,000 due to higher compensation and benefit costs during the three months ended September 30, 2026. Expense associated with market adjustments on SERP accounts increased by $446,000 compared to the three months ended September 30, 2025. Marketing and donations expense increased by $129,000 during the same period, primarily due to higher charitable contributions and other community support efforts.

Previous wording

Total other noninterest expense increased by $23,000 for the three months ended June 30, 2026, compared to the same period in 2025. The table below reflects the composition of other noninterest expense for the referenced periods.

Current wording

Total other noninterest expense increased by $107,000 for the three months ended September 30, 2026, compared to the same period in 2025. The table below reflects the composition of other noninterest expense for the referenced periods.

Previous wording

The Company had income tax expense of $2.0 million for the six months ended June 30, 2026 at an effective tax rate of 21.5% compared to income tax expense of $1.5 million with an effective tax rate of 21.6% in the comparable 2025 period. Income taxes computed at the statutory rate are primarily affected by the state income tax expense offset by the eligible amount of interest earned on state and municipal securities, tax-free municipal loans and income earned on bank-owned life insurance.

Current wording

The Company recorded income tax expense of $788,000 for the three months ended September 30, 2026, reflecting an effective tax rate of 21.6%, compared to income tax expense of $867,000 and an effective tax rate of 23.1% for the same period in 2025. The lower effective tax rate in 2026 was primarily attributable to a catch-up adjustment recorded during the third quarter of 2025 to align year-to-date tax expense with the estimated annual effective tax rate. Income taxes computed at the statutory rate are primarily affected by state income taxes, partially offset by tax-exempt interest earned on state and municipal securities, interest income from tax-free municipal loans, and income earned on bank-owned life insurance.

Previous wording

Results of Operations for the Six Months Ended June 30, 2026 and 2025.

Current wording

Results of Operations for the Nine Months Ended September 30, 2026 and 2025.

Previous wording

Uwharrie Capital Corp reported net income of $3.9 million for the three months ended June 30, 2026, compared to $2.8 million for the three months ended June 30, 2025. Net income available to common shareholders was $3.8 million, or $0.53 per common share, for the three months ended June 30, 2026, compared to $2.7 million, or $0.37 per common share, for the three months ended June 30, 2025. Net income available to common shareholders is net income less dividends on the aforementioned noncontrolling interest.

Current wording

Uwharrie Capital Corp reported net income of $10.0 million for the nine months ended September 30, 2026, compared to $8.3 million for the nine months ended September 30, 2025. Net income available to common shareholders was $9.6 million, or $1.31 per common share, for the nine months ended September 30, 2026, compared to $7.8 million, or $1.05 per common share, for the nine months ended September 30, 2025. Net income available to common shareholders is net income less dividends on the aforementioned noncontrolling interest.

Previous wording

Net interest income for the six months ended June 30, 2026 was $20.0 million, a $1.1 million increase from the $18.8 million reported for the comparative period in 2025. During the first six months of 2026, the average yield on our interest-earning assets decreased by 10 basis points to 5.10% from the same period in 2025, and the average rate we paid for our interest-bearing liabilities decreased 11 basis points to 2.24%. These changes resulted in an interest rate spread of 2.86% as of June 30, 2026, compared to 2.85% as of June 30, 2025. The Company’s net interest margin was 3.47% and 3.49% for the comparable periods in 2026 and 2025, respectively.

Current wording

Net interest income for the nine months ended September 30, 2026 was $30.2 million, a $1.4 million increase from the $28.7 million reported for the comparative period in 2025. During the first nine months of 2026, the average yield on our interest-earning assets decreased by 10 basis points to 5.10% from the same period in 2025, and the average rate we paid for our interest-bearing liabilities decreased 10 basis points to 2.24%. These changes resulted in an interest rate spread of 2.86% as of both September 30, 2026 and September 30, 2025. The Company’s net interest margin was 3.47% and 3.50% for the comparable periods in 2026 and 2025, respectively. The following table presents average balance sheet and a net interest income analysis for the nine months ended September 30, 2026 and 2025, respectively:

Previous wording

The Company recorded a $486,000 recovery of credit losses for the six months ended June 30, 2026, compared to a provision of $535,000 for the same period in 2025. There were net loan recoveries of $53,000 for the six months ended June 30, 2026, as compared to net loan charge-offs of $123,000 during the same period of 2025. Refer to the Asset Quality section below for further information.

Current wording

The Company recorded a $773,000 recovery of credit losses for the nine months ended September 30, 2026, compared to a provision of $711,000 for the same period in 2025. There were net loan recoveries of $64,000 for the nine months ended September 30, 2026, as compared to net loan charge-offs of $190,000 during the same period of 2025. Refer to the Asset Quality section below for further information.

Previous wording

The Company places significant emphasis on diversification of revenue sources rather than relying solely upon interest income. Total noninterest income increased by $1.5 million for the six-month period ended June 30, 2026, as compared to the same period in 2025. The increase in noninterest income was primarily attributable to a gain of $827,000 recognized in connection with Visa Inc.’s exchange offer. During the second quarter of 2026, the Company exchanged its Visa Class B-1 common stock for Class B-3 common stock and Class C common stock. Because the exchanged Class B-1 common stock had no carrying value, the Company recognized the fair value of the Class C common stock received, along with cash received in lieu of fractional shares, as a gain. The Visa Class B-3 common stock received in the exchange represents a continuation of the Company’s restricted ownership interest and, therefore, no carrying value was assigned to the Class B-3 shares received. The Company also sold 211 shares of Visa Class C common stock received in the exchange during the quarter. The Visa-related transactions were nonrecurring in nature and favorably impacted current-period earnings. The remaining Visa Class C common stock is carried at fair value, with subsequent changes in fair value recognized in earnings as part of noninterest income. The gain on sale of securities increased $186,000 related to the sale of available for sale securities during 2026, and growth in assets under management (“AUM”) within the wealth management division resulted in a $193,000 increase in other service fees and commissions.

Current wording

The Company places significant emphasis on diversification of revenue sources rather than relying solely upon interest income. Total noninterest income increased by $1.7 million for the nine-month period ended September 30, 2026, compared to the same period in 2025. The increase in noninterest income was primarily attributable to a gain of $827,000 recognized in connection with Visa Inc.’s exchange offer. During the second quarter of 2026, the Company exchanged its Visa Class B-1 common stock for Class B-3 common stock and Visa Class C common stock. Because the exchanged Class B-1 common stock had no carrying value, the Company recognized a gain equal to the fair value of the Class C common stock received, together with cash received in lieu of fractional shares. The Visa Class B-3 common stock received in the exchange represents a continuation of the Company’s restricted ownership interest and, accordingly, no carrying value was assigned to the Class B-3 shares received. By September 30, 2026, the Company had converted and sold all 633 shares of Visa Class C common stock received in the exchange. These Visa-related transactions were nonrecurring in nature and positively impacted noninterest income and net income during the current period. Growth in AUM within the wealth management division contributed a $313,000 increase in other service fees and commissions during the nine months ended September 30, 2026, compared to the same period in 2025. In addition, income associated with market adjustments on SERP accounts increased by $491,000, while gains on the sale of available-for-sale securities increased by $158,000.

Previous wording

Interchange fees, or “swipe” fees, are charges that merchants pay to us and other card-issuing banks for processing electronic payment transactions. Interchange and card transaction fees consist of income from check card usage, point-of-sale income from PIN-based debit card transactions, ATM service fees, and credit card usage. A comparison of gross interchange and card transaction fees, net of associated network costs for the reported periods is presented in the table below:

Current wording

Interchange fees are charges that merchants pay to us and other card-issuing banks for processing electronic payment transactions. Interchange and card transaction fees consist of income from check card usage, point-of-sale income from PIN-based debit card transactions, ATM service fees, and credit card usage. A comparison of gross interchange and card transaction fees, net of associated network costs for the reported periods is presented in the table below:

Previous wording

Noninterest expense for the six months ended June 30, 2026 increased by $1.5 million compared to the same period in 2025. Salaries and benefits, the largest component of noninterest expense, increased by $724,000 due to higher wages and benefit costs and increased commissions related to higher mortgage production during the first half of 2026. Marketing and donations expense increased by $343,000 during the first half of 2026 compared to the same period in 2025, primarily due to larger donations being made earlier in the year. Management expects overall giving for 2026 to remain consistent with the Company’s customary level of support.

Current wording

Noninterest expense for the nine months ended September 30, 2026 increased by $2.5 million compared to the same period in 2025. Salaries and benefits, the largest component of noninterest expense, increased by $983,000 due to higher compensation and benefit costs during 2026. Marketing and donations expense increased by $472,000 during the first nine months of 2026 compared to the same period in 2025, primarily due to larger donations being made earlier in the year, with contribution levels being adjusted to remain consistent with expected year-end giving. Management anticipates overall giving for 2026 will remain consistent with the Company’s customary level of support. Additionally, expense associated with market adjustments on SERP accounts increased by $491,000 during the nine-month period ended September 30, 2026, compared to the same period in 2025.

Previous wording

Total other noninterest expense increased by $192,000 for the six months ended June 30, 2026, compared to the same period in 2025. The table below reflects the composition of other noninterest expense for the referenced periods.

Current wording

Total other noninterest expense increased by $299,000 for the nine months ended September 30, 2026, compared to the same period in 2025. The table below reflects the composition of other noninterest expense for the referenced periods.

Previous wording

The Company had income tax expense of $1.1 million for the three months ended June 30, 2026 at an effective tax rate of 21.6% compared to income tax expense of $757,000 with an effective tax rate of 21.1% in the comparable 2025 period. The increase in the effective tax rate reflects normal period-to-period fluctuations. Income taxes computed at the statutory rate are primarily affected by the state income tax expense offset by the eligible amount of interest earned on state and municipal securities, tax-free municipal loans and income earned on bank-owned life insurance.

Current wording

The Company recorded income tax expense of $2.7 million for the nine months ended September 30, 2026, reflecting an effective tax rate of 21.5%, compared to income tax expense of $2.3 million and an effective tax rate of 22.1% for the same period in 2025. The decrease in the effective tax rate resulted from normal period-to-period fluctuations in the composition of taxable and tax-advantaged income. Income taxes computed at the statutory rate are primarily affected by state income taxes, partially offset by tax-exempt interest earned on state and municipal securities, interest income from tax-free municipal loans, and income earned on bank-owned life insurance.

Previous wording

At June 30, 2026, the level of our individually evaluated loans was $4.0 million, and the allowance for credit losses related to individually evaluated loans was $552,000. The allowance, expressed as a percentage of gross loans held for investment, was 0.86 % and 0.93% at June 30, 2026 and December 31, 2025, respectively. The ratio of nonaccrual loans to total loans increased from 0.05% at December 31, 2025 to 0.11% at June 30, 2026, and was related to the $393,000 increase in nonaccrual loans. Seven loans totaling $468,000 were converted to nonaccrual during the first six months of 2026, offset by a $50,000 charge-off and paydowns of $25,000.

Current wording

At September 30, 2026, the level of our individually evaluated loans was $4.0 million, and the allowance for credit losses related to individually evaluated loans was $713,000. The allowance, expressed as a percentage of gross loans held for investment, was 0.82% and 0.93% at September 30, 2026 and December 31, 2025, respectively. The ratio of nonaccrual loans to total loans increased from 0.05% at December 31, 2025 to 0.11% at September 30, 2026, and was related to the $362,000 increase in nonaccrual loans. Seven loans totaling $468,000 were converted to nonaccrual during the first nine months of 2026, offset by a $50,000 charge-off and paydowns of $56,000.

Previous wording

The Company’s primary sources of internally generated funds are principal and interest payments on loans, cash flows generated from operations and cash flows generated by investments. Growth in deposits is typically the primary source of funds for loan growth. Estimated uninsured deposits, including deposits collateralized by pledged assets, represented 40.6% and 40.5% of total deposits at June 30, 2026 and December 31, 2025, respectively. The Company and its subsidiary bank have multiple funding sources, in addition to deposits, that can be used to increase liquidity and provide additional financial flexibility. At June 30, 2026, these sources were the subsidiary bank’s established federal funds lines with correspondent banks aggregating $38.0 million, with available credit of $38.0 million; an established borrowing relationship with the FHLB, with available credit of $177.5 million; and access to borrowings from the FRB discount window, with available credit of $35.2 million. The Company also has a $3.0 million line of credit with TIB The Independent BankersBank, N.A. The line is held by the holding company and is secured with 100% of the outstanding common shares of the Company’s subsidiary bank. As of June 30, 2026, $2.0 million remained available for use on the line of credit.

Current wording

The Company’s primary sources of internally generated funds are principal and interest payments on loans, cash flows generated from operations and cash flows generated by investments. Growth in deposits is typically the primary source of funds for loan growth. Estimated uninsured deposits, including deposits collateralized by pledged assets, represented 41.2% and 40.5% of total deposits at September 30, 2026 and December 31, 2025, respectively. The Company and its subsidiary bank have multiple funding sources, in addition to deposits, that can be used to increase liquidity and provide additional financial flexibility. At September 30, 2026, these sources were the subsidiary bank’s established federal funds lines with correspondent banks aggregating $38.0 million, with available credit of $38.0 million; an established borrowing relationship with the FHLB, with available credit of $175.9 million; and access to borrowings from the FRB discount window, with available credit of $33.5 million. The Company also has a $3.0 million line of credit with TIB The Independent BankersBank, N.A. The line is held by the holding company and is secured with 100% of the outstanding common shares of the Company’s subsidiary bank. As of September 30, 2026, $500,000 remained available for use on the line of credit.

Previous wording

The Company’s subsidiary bank has a net total of $10.7 million in outstanding Fixed Rate Noncumulative Perpetual Preferred Stock. The preferred stock qualifies as Tier 1 capital at the Bank and pays dividends at an annual rate of 5.30%. The net total of $10.7 million is presented as noncontrolling interest at the Company level and qualifies as Tier 1 capital at the Company. At June 30, 2026, the Company had $29.1 million, net of unamortized debt issuance costs of $115,000, in subordinated debt outstanding, of which $25.3 million qualifies as Tier 2 capital at the Company level. The Company has made all interest and dividend payments in a timely manner.

Current wording

The Company’s subsidiary bank has a net total of $10.7 million in outstanding Fixed Rate Noncumulative Perpetual Preferred Stock. The preferred stock qualifies as Tier 1 capital at the Bank and pays dividends at an annual rate of 5.30%. The net total of $10.7 million is presented as noncontrolling interest at the Company level and qualifies as Tier 1 capital at the Company. At September 30, 2026, the Company had $29.1 million, net of unamortized debt issuance costs of $96,000, in subordinated debt outstanding, of which $21.1 million qualifies as Tier 2 capital at the Company level. The Company has made all interest and dividend payments in a timely manner.