10-Q

June 30, 2025

Valuation Technique

Unobservable Input

General
Range

Nonrecurring measurements:

Individually evaluated loans

Discounted appraisals

Collateral discounts and estimated costs to sell

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 June 30, 2025


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

COMMISSION FILE NUMBER 000-22062

UWHARRIE CAPITAL CORP

(Exact name of registrant as specified in its charter)


North Carolina		56-1814206
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

132 NORTH FIRST STREET ALBEMARLE, north carolina		28001
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s telephone number, including area code: (704) 983-6181

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

     Title of each class

     Trading
Symbol(s)

     Name of each exchange on which registered

     None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date: 7,011,513 shares of common stock outstanding as of August 4, 2025.

Table of Contents


		Page No.

Part I.	FINANCIAL INFORMATION	2

Item 1 -	Financial Statements (Unaudited)	2

	Consolidated Balance Sheets as of June 30, 2025 and December 31, 2024	2

	Consolidated Statements of Income for the Three and Six Months Ended June 30, 2025 and 2024	3

	Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2025 and 2024	4

	Consolidated Statements of Changes in Shareholders’ Equity for the Three and Six Months Ended June 30, 2025 and 2024	5

	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2025 and 2024	6

	Notes to Consolidated Financial Statements	7

Item 2 -	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27

Item 3 -	Quantitative and Qualitative Disclosures About Market Risk	35

Item 4 -	Controls and Procedures	35

Part II.	OTHER INFORMATION	36

Item 1 -	Legal Proceedings	36

Item 1A -	Risk Factors	36

Item 2 -	Unregistered Sales of Equity Securities and Use of Proceeds	36

Item 3 -	Defaults Upon Senior Securities	36

Item 4 -	Mine Safety Disclosures	36

Item 5 -	Other Information	36

Item 6 -	Exhibits	37

	Signatures	38

Uwharrie Capital Corp and Subsidiaries

Consolidated Balance Sheets

Part I. Financial Information

Item 1. Financial Statements.


	June 30, 2025 (Unaudited)			December 31, 2024*
	(dollars in thousands)
ASSETS
Cash and due from banks	$	10,676		$	9,713
Interest-earning deposits with banks		62,598			42,554
Cash and cash equivalents		73,274			52,267
Securities available for sale, at fair value (amortized cost $368,917 and $365,088 respectively)		340,985			332,986
Securities held to maturity, at amortized cost (fair value $21,047 and $24,561 respectively)		23,753			26,813
Less allowance for credit losses on securities held to maturity		(54	)		(68	)
Net securities held to maturity		23,699			26,745
Equity securities, at fair value		325			334
Loans held for sale		9,147			4,561
Loans held for investment		677,556			666,377
Less allowance for credit losses on loans		(6,231	)		(5,824	)
Net loans held for investment		671,325			660,553
Premises and equipment, net		14,054			14,479
Interest receivable		4,300			4,355
Restricted stock		1,749			1,709
Bank-owned life insurance		8,008			7,938
Deferred income tax benefit		8,036			8,983
Loan servicing assets		3,828			3,903
Mortgage banking derivatives		1,076			795
Other assets		9,948			9,200
Total assets	$	1,169,754		$	1,128,808

LIABILITIES
Deposits:
Demand noninterest-bearing	$	291,431		$	272,355
Interest checking and money market accounts		394,855			395,079
Savings deposits		102,666			92,954
Time deposits, $250,000 and over		127,984			133,335
Other time deposits		145,428			136,513
Total deposits		1,062,364			1,030,236
Short-term borrowed funds		1,132			1,414
Long-term debt		29,200			29,161
Mortgage banking derivatives		170			—
Other liabilities		11,484			10,318
Total liabilities		1,104,350			1,071,129

Off balance sheet items, commitments and contingencies (Note 9)

SHAREHOLDERS’ EQUITY
Common stock, $1.25 par value: 20,000,000 shares authorized; shares issued and outstanding 7,013,052 and 7,077,941 at June 30, 2025 and December 31, 2024, respectively		8,766			8,847
Additional paid-in capital		12,038			12,553
Undivided profits		55,448			50,351
Accumulated other comprehensive loss		(21,503	)		(24,727	)
Total Uwharrie Capital Corp shareholders’ equity		54,749			47,024
Noncontrolling interest		10,655			10,655
Total shareholders’ equity		65,404			57,679
Total liabilities and shareholders’ equity	$	1,169,754		$	1,128,808

(*) Derived from audited consolidated financial statements

See accompanying notes

Uwharrie Capital Corp and Subsidiaries

Consolidated Statements of Income (Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2025			2024			2025			2024
	(in thousands, except share and per share data)
Interest Income
Loans, including fees	$	10,479		$	9,285		$	20,704		$	18,079
Investment securities:
Investment securities, taxable		2,876			3,011			5,653			5,932
Investment securities, non-taxable		314			310			619			622
Equity Securities		5			5			10			10
Interest-earning deposits with banks and federal funds sold		662			710			1,152			1,336
Total interest income		14,336			13,321			28,138			25,979
Interest Expense
Interest checking and money market accounts		1,609			1,591			3,169			3,190
Savings deposits		138			135			272			274
Time deposits, $250,000 and over		1,217			1,146			2,560			2,004
Other time deposits		1,306			1,225			2,624			2,358
Short-term borrowed funds		11			76			23			137
Long-term debt		324			332			655			662
Total interest expense		4,605			4,505			9,303			8,625
Net interest income		9,731			8,816			18,835			17,354
Provision for (recovery of) credit losses on:
Loans		242			410			530			405
Securities held to maturity		(14	)		—			(14	)		10
Unfunded loan commitments		26			21			19			(14	)
Total provision for credit losses		254			431			535			401
Net interest income after provision for credit losses		9,477			8,385			18,300			16,953
Noninterest Income
Service charges on deposit accounts		263			267			522			535
Other service fees and commissions		989			897			1,970			1,828
Interchange and card transaction fees, net		308			322			557			610
Loss on sale/call of securities		—			—			—			(148	)
Realized/unrealized gain (loss) on equity securities		14			(19	)		(9	)		22
Income from mortgage banking		1,027			606			2,078			1,440
Supplemental executive retirement plan gain (loss)		373			(34	)		124			(46	)
Other income		110			187			223			314
Total noninterest income		3,084			2,226			5,465			4,555
Noninterest Expense
Salaries and employee benefits		5,711			5,145			11,131			10,359
Net occupancy expense		433			429			897			854
Equipment expense		207			218			411			425
Data processing costs		228			203			441			433
Loan costs		69			51			158			84
Professional fees and services		267			262			537			526
Marketing and donations		359			339			718			705
Electronic banking expense		123			113			234			213
Software amortization and maintenance		356			329			720			659
FDIC insurance		134			126			263			249
Supplemental executive retirement plan gain (loss)		373			(34	)		124			(46	)
Other noninterest expense		720			651			1,274			1,253
Total noninterest expense		8,980			7,832			16,908			15,714
Income before income taxes		3,581			2,779			6,857			5,794
Income taxes		757			566			1,480			1,198
Net income	$	2,824		$	2,213		$	5,377		$	4,596
Consolidated net income	$	2,824		$	2,213		$	5,377		$	4,596
Less: net income attributable to noncontrolling interest		(141	)		(141	)		(280	)		(282	)
Net income attributable to common shareholders		2,683			2,072			5,097			4,314
Net income per common share
Basic	$	0.38		$	0.29		$	0.72		$	0.60
Diluted	$	0.38		$	0.29		$	0.72		$	0.60
Weighted average common shares outstanding
Basic		7,047,162			7,235,539			7,061,434			7,250,231
Diluted		7,047,162			7,235,539			7,061,434			7,250,231

See accompanying notes

Uwharrie Capital Corp and Subsidiaries

Consolidated Statements of Comprehensive Income (Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2025			2024			2025			2024
	(dollars in thousands)
Net income	$	2,824		$	2,213		$	5,377		$	4,596
Other comprehensive income (loss):
Unrealized gain (loss) on available for sale securities		1,070			(97	)		4,171			(1,542	)
Related tax effect		(245	)		22			(947	)		354
Total other comprehensive income (loss)		825			(75	)		3,224			(1,188	)
Comprehensive income		3,649			2,138			8,601			3,408
Less: Comprehensive income attributable to noncontrolling interest		(141	)		(141	)		(280	)		(282	)
Comprehensive income attributable to Uwharrie Capital Corp	$	3,508		$	1,997		$	8,321		$	3,126

See accompanying notes

Uwharrie Capital Corp and Subsidiaries

Consolidated Statement of Changes in Shareholders’ Equity (Unaudited)


	Number of Common Shares Issued			Common Stock			Additional Paid-in Capital			Undivided Profits		Accumulated Other Comprehensive Income (Loss)			Noncontrolling Interest			Total
	(dollars in thousands, except share data)
Balance, March 31, 2024		7,103,003		$	8,879		$	12,735		$	44,347	$	(26,213	)	$	10,655		$	50,403
Net Income		—			—			—			2,072		—			141			2,213
Repurchase of common stock		(34,426	)		(43	)		(225	)		—		—			—			(268	)
Other comprehensive loss		—			—			—			—		(75	)		—			(75	)
Record preferred stock dividend series B (noncontrolling interest)		—			—			—			—		—			(104	)		(104	)
Record preferred stock dividend series C (noncontrolling interest)		—			—			—			—		—			(37	)		(37	)
Balance, June 30, 2024		7,068,577		$	8,836		$	12,510		$	46,419	$	(26,288	)	$	10,655		$	52,132

Balance, March 31, 2025		7,061,777		$	8,827		$	12,427		$	52,765	$	(22,328	)	$	10,655		$	62,346
Net Income		—			—			—			2,683		—			141			2,824
Repurchase of common stock		(48,725	)		(61	)		(389	)		—		—			—			(450	)
Other comprehensive income		—			—			—			—		825			—			825
Record preferred stock dividend series B (noncontrolling interest)		—			—			—			—		—			(103	)		(103	)
Record preferred stock dividend series C (noncontrolling interest)		—			—			—			—		—			(38	)		(38	)
Balance, June 30, 2025		7,013,052		$	8,766		$	12,038		$	55,448	$	(21,503	)	$	10,655		$	65,404


	Number of Common Shares Issued			Common Stock			Additional Paid-in Capital			Undivided Profits		Accumulated Other Comprehensive Income (Loss)			Noncontrolling Interest			Total
	(dollars in thousands, except share data)
Balance, December 31, 2023		7,124,438		$	8,905		$	12,876		$	42,105	$	(25,100	)	$	10,655		$	49,441
Net Income		—			—			—			4,314		—			282			4,596
Repurchase of common stock		(55,861	)		(69	)		(366	)		—		—			—			(435	)
Other comprehensive loss		—			—			—			—		(1,188	)		—			(1,188	)
Record preferred stock dividend Series B (noncontrolling interest)		—			—			—			—		—			(208	)		(208	)
Record preferred stock dividend Series C (noncontrolling interest)		—			—			—			—		—			(74	)		(74	)
Balance, June 30, 2024		7,068,577		$	8,836		$	12,510		$	46,419	$	(26,288	)	$	10,655		$	52,132

Balance, December 31, 2024		7,077,941		$	8,847		$	12,553		$	50,351	$	(24,727	)	$	10,655		$	57,679
Net Income		—			—			—			5,097		—			280			5,377
Repurchase of common stock		(64,889	)		(81	)		(515	)		—		—			—			(596	)
Other comprehensive income		—			—			—			—		3,224			—			3,224
Record preferred stock dividend Series B (noncontrolling interest)		—			—			—			—		—			(206	)		(206	)
Record preferred stock dividend Series C (noncontrolling interest)		—			—			—			—		—			(74	)		(74	)
Balance, June 30, 2025		7,013,052		$	8,766		$	12,038		$	55,448	$	(21,503	)	$	10,655		$	65,404

See accompanying notes

Uwharrie Capital Corp and Subsidiaries

Consolidated Statements of Cash Flows (Unaudited)


	Six Months Ended June 30,
	2025			2024
	(dollars in thousands)
Cash flows from operating activities
Net income	$	5,377		$	4,596
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		537			537
Right of use asset amortization		197			192
Provision for for credit losses		535			401
Loss on call of securities held to maturity		—			148
Gain on sale of mortgage loans		(980	)		(526	)
Gain on sale of OREO		(83	)		—
Realized/unrealized (gain) loss on equity securities		9			(22	)
Net amortization of premium on investment securities available for sale		896			886
Net amortization of premium on investment securities held to maturity		60			66
Amortization of loan servicing assets		601			611
Originations and purchases of mortgage loans for sale		(84,680	)		(51,641	)
Proceeds from sales of mortgage loans for sale		81,074			53,251
Mortgage banking derivatives		(111	)		(140	)
Loan servicing assets		(526	)		(413	)
Accrued interest receivable		55			(295	)
Prepaid assets		(70	)		(149	)
Cash surrender value of life insurance		(70	)		(71	)
Miscellaneous other assets		(621	)		(312	)
Accrued interest payable		(37	)		153
Miscellaneous other liabilities		1,184			631
Net cash provided by operating activities		3,347			7,903
Cash flows from investing activities
Proceeds from maturities, calls and paydowns of securities available for sale		23,609			19,225
Proceeds from maturities, calls and paydowns of securities held to maturity		3,000			1,134
Purchase of investment securities available for sale		(28,333	)		(35,703	)
Purchase of investments in other assets		(57	)		(350	)
Proceeds from distributions of investments in other assets		—			97
Net change in restricted stock		(40	)		(37	)
Net increase in loans		(11,408	)		(44,725	)
Purchase of premises and equipment		(270	)		(173	)
Proceeds from sale of OREO		189			—
Net cash used by investing activities		(13,310	)		(60,532	)
Cash flows from financing activities
Net increase in deposit accounts		32,128			42,362
Net increase (decrease) in federal funds purchased and other short-term borrowings		(282	)		5,021
Repurchase of common stock, net		(596	)		(435	)
Dividends paid on preferred stock (noncontrolling interest)		(280	)		(282	)
Net cash provided by financing activities		30,970			46,666
Increase (decrease) in cash and cash equivalents		21,007			(5,963	)
Cash and cash equivalents, beginning of period		52,267			63,434
Cash and cash equivalents, end of period	$	73,274		$	57,471
Supplemental disclosures of cash flow information
Interest paid	$	9,301		$	8,430
Income taxes paid		1,771			1,535
Supplemental schedule of non-cash activities
Net change in fair value of securities available for sale, net of tax	$	3,224		$	(1,188	)
Loans transferred to foreclosed real estate		106			—

See accompanying notes

UWHARRIE CAPITAL CORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Note 1 – Basis of Presentation

The financial statements and accompanying notes are presented on a consolidated basis including Uwharrie Capital Corp (the “Company”) and its subsidiaries, Uwharrie Bank (the “Bank”), Uwharrie Investment Advisors, Inc. (“UIA”), and Uwharrie Mortgage, Inc. The Bank consolidates its subsidiaries, The Strategic Alliance Corporation (“TSAC”), BOS Agency, Inc. (“BOS Agency”) and Gateway Mortgage, Inc., each of which is wholly owned by the Bank.

The information contained in the consolidated financial statements is unaudited. In the opinion of management, the consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America (“GAAP”) and material adjustments necessary for a fair presentation of results of interim periods, all of which are of a normal recurring nature, have been made. The results of operations for the interim periods are not necessarily indicative of the results that may be expected for an entire year. Management is not aware of additional economic events, outside influences or changes in concentrations of business that would require additional clarification or disclosure in the consolidated financial statements.

The organization and business of the Company, accounting policies followed by the Company and other information are contained in the notes to consolidated financial statements filed as part of the Company’s 2024 Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission on March 6, 2025. This Quarterly Report should be read in conjunction with such Annual Report.

Use of Estimates

The preparation of financial statements, in conformity with GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for credit losses.

The allowance for credit losses calculation utilizes a forecast model for the collectively assessed population. Effective June 30, 2025, after multiple periods of parallel modeling using the National Unemployment Rate and the NC Unemployment rate as indices, compared to the National Unemployment Rate and the 10-Year T-Bill which had previously been utilized for this purpose, a change in estimate was incorporated into the model. The change in estimate incorporated more recent data to enhance and maintain reliable results.

In conjunction with this change, it was also necessary to update the framework we use for establishing qualitative reserves, which has likewise been modified to use new indices and metrics. The change in estimate of the forecast model for the collectively assessed population also increased the maximum potential allowance allocated to the qualitative factors. While these changes altered the overall composition of the allowance model, the overall impact is not material.

Accounting Changes and Reclassifications

The Company’s significant accounting policies followed in the preparation of the unaudited consolidated financial statements are disclosed in Note 1 of the audited financial statements for the year ended December 31, 2024 and are contained in the Company’s Annual Report on Form 10-K. There have been no significant changes to the application of significant accounting policies since December 31, 2024.

Note 2 – Comprehensive Income (Loss)

The Company reports as comprehensive income all changes in shareholders’ equity during the year from sources other than shareholders. Other comprehensive income refers to all components (revenues, expenses, gains, and losses) of comprehensive income that are excluded from net income. The Company’s only component of other comprehensive income is unrealized gains and losses, net of income tax, on investment securities available for sale.

The following table presents the changes in accumulated other comprehensive loss for the three and six months ended June 30, 2025 and 2024:


	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2025			2024			2025			2024
	(dollars in thousands)
Beginning balance	$	(22,328	)	$	(26,213	)	$	(24,727	)	$	(25,100	)
Other comprehensive income (loss) before reclassifications, net of ($245), $22, ($947) and $354 tax effect, respectively		825			(75	)		3,224			(1,188	)
Amounts reclassified from accumulated other comprehensive loss, net of $0, $0, $0, and $0 tax effect, respectively		—			—			—			—
Net current-period other comprehensive income (loss)		825			(75	)		3,224			(1,188	)
Ending balance	$	(21,503	)	$	(26,288	)	$	(21,503	)	$	(26,288	)

Note 3 – Noncontrolling Interest

In 2013, the Company’s subsidiary bank issued a total of $10.7 million of Fixed Rate Noncumulative Perpetual Preferred Stock, Series B and Series C. The preferred stock qualifies as Tier 1 capital at the Bank and pays dividends at an annual rate of 5.30%. The preferred stock has no voting rights. This capital is presented as noncontrolling interest in the consolidated balance sheets. Dividends declared on this preferred stock are presented as earnings allocated to the noncontrolling interest in the consolidated statements of income.

Note 4 – Per Share Data

Basic and diluted net income per common share is computed based on the weighted average number of shares outstanding during each period after retroactively adjusting for stock dividends. Diluted net income per common share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the net income of the Company. The Company had no stock options outstanding at June 30, 2025 or December 31, 2024. The number of shares and earnings per share for the 2024 periods have been adjusted for the 2% stock dividend declared on October 15, 2024.

Basic and diluted net income per common share have been computed based upon net income available to common shareholders as presented in the accompanying consolidated statements of income divided by the weighted average number of common shares outstanding or assumed to be outstanding.

Note 5 – Investment and Equity Securities

Carrying amounts and fair values of securities available for sale and held to maturity are summarized below:


June 30, 2025	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(dollars in thousands)
Securities available for sale:
U.S. Treasury	$	25,872	$	—	$	2,167	$	23,705
U.S. government agencies		46,654		139		739		46,054
GSE - Mortgage-backed securities and CMOs		172,709		592		9,931		163,370
Asset-backed securities		21,974		238		137		22,075
State and political subdivisions		95,708		63		15,817		79,954
Corporate bonds		6,000		—		173		5,827
Total securities available for sale	$	368,917	$	1,032	$	28,964	$	340,985


June 30, 2025	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Allowance for Credit Losses		Net Carrying Amount
	(dollars in thousands)
Securities held to maturity:
State and political subdivisions	$	11,753	$	—	$	1,680	$	10,073	$	—	$	11,753
Corporate bonds		12,000		—		1,026		10,974		54		11,946
Total securities held to maturity	$	23,753	$	—	$	2,706	$	21,047	$	54	$	23,699


December 31, 2024	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(dollars in thousands)
Securities available for sale:
U.S. Treasury	$	32,961	$	—	$	3,067	$	29,894
U.S. government agencies		42,667		97		1,035	$	41,729
GSE - Mortgage-backed securities and CMOs		165,561		198		12,970	$	152,789
Asset-backed securities		23,215		407		44	$	23,578
State and political subdivisions		94,684		5		15,436	$	79,253
Corporate bonds		6,000		—		257	$	5,743
Total securities available for sale	$	365,088	$	707	$	32,809	$	332,986


December 31, 2024	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Allowance for Credit Losses		Net Carrying Amount
	(dollars in thousands)
Securities held to maturity:
State and political subdivisions	$	11,813	$	—	$	1,078	$	10,735	$	—	$	11,813
Corporate bonds		15,000		—		1,174		13,826		68		14,932
Total securities held to maturity	$	26,813	$	—	$	2,252	$	24,561	$	68	$	26,745

The Company owned Federal Reserve Bank (FRB) stock reported at cost of $959,000 at June 30, 2025 and December 31, 2024. The Company owned Federal Home Loan Bank (FHLB) stock reported at cost of $789,000 and $750,000 at June 30, 2025 and December 31, 2024, respectively. The investments in FRB stock and FHLB stock are required investments related to the Company’s membership in, and borrowings with, these banks and are classified as restricted stock on the consolidated balance sheet. These investments are carried at cost since there is no ready market and redemption has historically been made at par value. The Company estimated that the fair value approximated cost and that these investments were not impaired at June 30, 2025.

There is no allowance for credit losses on available for sale securities. The following table shows a rollforward of the allowance for credit losses on held to maturity securities for the six months ended June 30, 2025.


	State and political subdivisions		Corporate bonds			Total
	(dollars in thousands)
Balance, December 31, 2024	$	—	$	68		$	68
Recovery of credit losses		—		(14	)		(14	)
Charge-offs of securities		—		—			—
Recoveries		—		—			—
Balance, June 30, 2025	$	—	$	54		$	54

On a quarterly basis, the Company monitors the credit quality of the debt securities held to maturity through the use of credit ratings. For unrated securities, primarily corporate bonds consisting of subordinated debt of bank holding companies, individual financial reports are reviewed quarterly. Capital, profitability, liquidity and other ratios are reviewed to assist in determining credit quality.

The following table summarizes the credit ratings of debt securities held to maturity, presented at amortized cost, by major security type at June 30, 2025.


June 30, 2025	State and political subdivisions		Corporate bonds		Total
	(dollars in thousands)
Aaa	$	—	$	—	$	—
Aa1/Aa2/Aa3		11,144		—		11,144
A1/A2		—		—		—
BBB		—		—		—
Not rated		609		12,000		12,609
Total	$	11,753	$	12,000	$	23,753

At June 30, 2025, the Company had no securities held to maturity that were past due 30 days or more as to principal or interest payments. The Company had no securities held to maturity classified as nonaccrual for the six months ended June 30, 2025.

The Company had no sales of securities available for sale during the six-month periods ended June 30, 2025 and 2024.

At June 30, 2025 and December 31, 2024, securities available for sale with a carrying amount of $151.1 million and $161.5 million, respectively, were pledged as collateral on public deposits and for other purposes as required or permitted by law.

We believe the unrealized losses on investment securities are a result of a volatile market and fluctuations in market prices due to a rise in interest rates, which will adjust if rates decline. Management does not believe these fluctuations are a reflection of the credit quality of the investments.

The following tables show the gross unrealized losses and estimated fair value of available for sale securities, for which an allowance has not been recorded, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at June 30, 2025 and December 31, 2024.


	Less than 12 Months						12 Months or More						Total
June 30, 2025	Number of Securities		Fair Value		Unrealized Losses		Number of Securities		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
			(dollars in thousands)
Securities available for sale:
U.S. Treasury		—	$	—	$	—		5	$	23,705	$	2,167	$	23,705	$	2,167
U.S. government agencies		4		4,240		29		27		20,437		710		24,677		739
GSE-Mortgage-backed securities and CMOs		15		33,637		289		57		88,561		9,642		122,198		9,931
Asset-backed securities		4		4,282		79		4		4,237		58		8,519		137
State and political subdivisions		8		7,604		266		56		68,808		15,551		76,412		15,817
Corporate bonds		—		—		—		3		5,827		173		5,827		173
Total securities available for sale		31	$	49,763	$	663		152	$	211,575	$	28,301	$	261,338	$	28,964


	Less than 12 Months						12 Months or More						Total
December 31, 2024	Number of Securities		Fair Value		Unrealized Losses		Number of Securities		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
			(dollars in thousands)
Securities available for sale
U.S. Treasury		—	$	—	$	—		7	$	29,894	$	3,067	$	29,894	$	3,067
U.S. government agencies		9		9,956		134		24		19,995		901		29,951		1,035
GSE-Mortgage-backed securities and CMOs		19		32,580		313		57		97,798		12,657		130,378		12,970
Asset-backed securities		2		2,872		21		3		4,189		23		7,061		44
State and political subdivisions		5		7,773		253		57		70,169		15,183		77,942		15,436
Corporate bonds		—		—		—		3		5,743		257		5,743		257
Total securities available for sale		35	$	53,181	$	721		151	$	227,788	$	32,088	$	280,969	$	32,809

Declines in the fair value of the available for sale investment portfolio are believed by management to be temporary in nature. When evaluating an investment for credit loss, management considers, among other things, the extent to which the fair value has been in a loss position; the financial condition of the issuer through the review of credit ratings and, if necessary, corporate financial statements; adverse conditions specifically related to the security such as past due principal or interest; underlying assets that collateralize the debt security; other economic conditions and demographics; and the intent and ability of the Company to hold the investment until the loss position is recovered. Any unrealized losses were largely due to increases in market interest rates over the yields available at the time of purchase. The fair value is expected to recover as the bonds approach their maturity date or market yields for such investments decline. Management does not believe any of the securities are impaired due to reasons of credit quality. At June 30, 2025, the Company did not intend to sell and believed it was not likely to be required to sell the available for sale securities that were in a loss position prior to full recovery.

The following tables show contractual maturities of the investment portfolio as of June 30, 2025:


	June 30, 2025
	Amortized Cost		Estimated Fair Value		Book Yield
	(dollars in thousands)
Securities available for sale:
Due within twelve months		2,105		2,104		4.96	%
Due after one but within five years		68,425		64,074		1.93	%
Due after five but within ten years		50,143		45,141		2.62	%
Due after ten years		248,244		229,666		3.79	%
	$	368,917	$	340,985		3.29	%


	June 30, 2025
	Amortized Cost		Estimated Fair Value		Book Yield
	(dollars in thousands)
Securities held to maturity:
Due after one but within five years		3,000		2,951		8.52	%
Due after five but within ten years		11,620		10,516		4.02	%
Due after ten years		9,133		7,580		3.38	%
	$	23,753	$	21,047		4.34	%

The portion of unrealized gains and losses for the three and six months ended June 30, 2025 and 2024 related to equity securities still held at the reporting date is calculated as follows:


	Three Months Ended June 30,					Six Months Ended June 30,
	2025		2024			2025			2024
	(dollars in thousands)
Gross proceeds from sales	$	—	$	—		$	—		$	—

Net gains (losses) recognized during the period on equity securities	$	14	$	(19	)	$	(9	)	$	22
Less: Net gains (losses) recognized from equity securities sold during the period		—		—			—			—
Unrealized gains (losses) recognized during the period on equity securities still held at the reporting date	$	14	$	(19	)	$	(9	)	$	22

Note 6 – Loans Held for Investment

The composition of net loans held for investment by class as of June 30, 2025 and December 31, 2024 was as follows:


	June 30, 2025			December 31, 2024
	(dollars in thousands)
Commercial
Commercial	$	107,449		$	104,872
Real estate - commercial		259,418			245,569
Other real estate construction loans		48,024			50,940
Other loans		4,804			6,408
Noncommercial
Real estate 1-4 family construction		21,245			27,789
Real estate - residential		154,807			150,667
Home equity		71,077			68,287
Consumer loans		9,959			11,020
		676,783			665,552
Less:
Allowance for credit losses		(6,231	)		(5,824	)
Deferred loan costs net		773			825

Loans held for investment, net	$	671,325		$	660,553

Note 7 – Allowance for Credit Losses on Loans

The following tables summarize the activity related to the allowance for credit losses on loans for the three and six months ended June 30, 2025 and 2024.


	Commercial Loans										Noncommercial Loans
	Commercial			Real estate commercial		Other real estate construction		Other loans			Real estate 1-4 family construction		Real estate residential		Home equity			Consumer			Total
	(dollars in thousands)
Balance, March 31, 2025	$	1,699		$	2,324	$	340	$	20		$	57	$	809	$	652		$	164		$	6,065
Provision for (recovery of) credit losses		(284	)		37		69		(5	)		42		455		(2	)		(70	)		242
Charge-offs		(97	)		—		—		—			—		—		—			(6	)		(103	)
Recoveries		15			—		—		—			—		—		1			11			27
Net (charge-offs) recoveries		(82	)		—		—		—			—		—		1			5			(76	)
Balance, June 30, 2025	$	1,333		$	2,361	$	409	$	15		$	99	$	1,264	$	651		$	99		$	6,231


	Commercial Loans										Noncommercial Loans
	Commercial			Real estate commercial		Other real estate construction		Other loans			Real estate 1-4 family construction		Real estate residential		Home equity			Consumer			Total
	(dollars in thousands)
Balance, March 31, 2024	$	1,480		$	2,033	$	323	$	11		$	34	$	855	$	600		$	187		$	5,523
Provision for (recovery of) credit losses		(63	)		175		45		(1	)		8		107		69			70			410
Charge-offs		(17	)		—		—		—			—		—		(1	)		(73	)		(91	)
Recoveries		54			—		—		—			—		—		1			11			66
Net (charge-offs) recoveries		37			—		—		—			—		—		—			(62	)		(25	)
Balance, June 30, 2024	$	1,454		$	2,208	$	368	$	10		$	42	$	962	$	669		$	195		$	5,908


	Commercial Loans											Noncommercial Loans
	Commercial			Real estate commercial		Other real estate construction			Other loans			Real estate 1-4 family construction		Real estate residential		Home equity		Consumer			Total
	(dollars in thousands)
Balance, December 31, 2024	$	1,528		$	2,266	$	412		$	18		$	56	$	781	$	588	$	175		$	5,824
Provision for (recovery of) credit losses		(130	)		95		(3	)		(3	)		43		482		62		(16	)		530
Charge-offs		(113	)		—		—			—			—		—		—		(78	)		(191	)
Recoveries		48			—		—			—			—		1		1		18			68
Net (charge-offs) recoveries		(65	)		—		—			—			—		1		1		(60	)		(123	)
Balance, June 30, 2025	$	1,333		$	2,361	$	409		$	15		$	99	$	1,264	$	651	$	99		$	6,231


	Commercial Loans										Noncommercial Loans
	Commercial			Real estate commercial		Other real estate construction			Other loans		Real estate 1-4 family construction		Real estate residential		Home equity			Consumer			Total
	(dollars in thousands)
Balance, December 31, 2023	$	1,493		$	2,057	$	389		$	9	$	31	$	796	$	582		$	204		$	5,561
Provision for (recovery of) credit losses		(79	)		151		(21	)		1		11		165		87			90			405
Charge-offs		(17	)		—		—			—		—		—		(1	)		(118	)		(136	)
Recoveries		57			—		—			—		—		1		1			19			78
Net (charge-offs) recoveries		40			—		—			—		—		1		—			(99	)		(58	)
Balance, June 30, 2024	$	1,454		$	2,208	$	368		$	10	$	42	$	962	$	669		$	195		$	5,908

Past due loan information is used by management when assessing the adequacy of the allowance for credit losses. The following tables summarize the past due information of the loan portfolio by class as of the dates indicated:


June 30, 2025	Loans 30-89 Days Past Due		Nonaccrual Loans		Total Past Due Loans		Current Loans		Total Loans		Accruing Loans 90 Days or More Past Due
	(dollars in thousands)
Commercial	$	—	$	—	$	—	$	107,448	$	107,448	$	—
Real estate - commercial		—		—		—		259,520		259,520		—
Other real estate construction		—		—		—		48,024		48,024		—
Real estate 1-4 family construction		—		—		—		21,245		21,245		—
Real estate - residential		534		204		738		154,741		155,479		—
Home equity		156		107		263		70,814		71,077		—
Consumer loans		23		—		23		9,936		9,959		—
Other loans		—		—		—		4,804		4,804		—
Total	$	713	$	311	$	1,024	$	676,532	$	677,556	$	—


December 31, 2024	Loans 30-89 Days Past Due		Nonaccrual Loans		Total Past Due Loans		Current Loans		Total Loans		Accruing Loans 90 Days or More Past Due
	(dollars in thousands)
Commercial	$	9	$	88	$	97	$	104,773	$	104,870	$	—
Real estate - commercial		43		—		43		245,636		245,679		—
Other real estate construction		—		—		—		50,940		50,940		—
Real estate 1-4 family construction		—		—		—		27,789		27,789		—
Real estate - residential		429		64		493		150,891		151,384		—
Home equity		176		40		216		68,071		68,287		—
Consumer loan		42		—		42		10,978		11,020		—
Other loans		—		—		—		6,408		6,408		—
Total	$	699	$	192	$	891	$	665,486	$	666,377	$	—

Once a loan becomes 90 days past due, the loan is automatically transferred to a nonaccrual status. The exception to this policy is credit card loans that remain in accruing status 90 days or more until they are paid current or charged off.

The carrying value of foreclosed properties held as other real estate was $0 at June 30, 2025 and December 31, 2024. The Company had no foreclosed residential real estate and no residential real estate in process of foreclosure at June 30, 2025. At December 31, 2024, the Company had no foreclosed residential real estate and $93,000 of residential real estate in process of foreclosure.

The composition of nonaccrual loans by class as of June 30, 2025 and December 31, 2024 was as follows:


							Six Months Ended
	June 30, 2025						June 30, 2025
	Nonaccrual Loans with No Allowance		Nonaccrual Loans with an Allowance		Total Nonaccrual Loans		Interest Income
	(dollars in thousands)
Commercial	$	—	$	—	$	—	$	—
Real estate - commercial		—		—		—		—
Other real estate construction		—		—		—		—
Real estate 1-4 family construction		—		—		—		—
Real estate - residential		—		204		204		9
Home equity		—		107		107		—
Consumer loans		—		—		—		—
Other loans		—		—		—		—
	$	—	$	311	$	311	$	9


							Six Months Ended
	December 31, 2024						June 30, 2024
	Nonaccrual Loans with No Allowance		Nonaccrual Loans with an Allowance		Total Nonaccrual Loans		Interest Income
	(dollars in thousands)
Commercial	$	—	$	88	$	88	$	—
Real estate - commercial		—		—		—		—
Other real estate construction		—		—		—		—
Real estate 1-4 family construction		—		—		—		—
Real estate - residential		—		64		64		17
Home equity		—		40		40		2
Consumer loans		—		—		—		—
Other loans		—		—		—		—
	$	—	$	192	$	192	$	19

A loan may be individually assessed for determining the allowance for credit losses when it is determined that it does not share similar risk characteristics with other loans. Loans that are on nonaccrual status will be reviewed to determine if they will be individually, rather than collectively, assessed. If the loan is deemed to be collateral dependent and the relationship’s outstanding balance is $100,000 or greater, it will be individually assessed. Collateral dependent loans are loans for which the repayment is expected to be provided substantially through the operation or sale of the collateral and the borrower is experiencing financial difficulty. Collateral dependent loans require an analysis of the collateral. The fair value of the collateral is discounted by liquidation costs. If the discounted fair value of the collateral is greater than the amortized loan balance, no allowance is required. Otherwise the difference between the balance and the collateral is charged off if deemed uncollectible.

The following table details the amortized cost of collateral dependent loans and any related allowance at June 30, 2025 and December 31, 2024.


	June 30, 2025				December 31, 2024
	Amortized Cost		Allowance for Credit Losses		Amortized Cost		Allowance for Credit Losses
	(dollars in thousands)
Commercial	$	—	$	—	$	—	$	—
Real estate - commercial		—		—		—		—
Other real estate construction		—		—		—		—
Real estate 1-4 family construction		—		—		—		—
Real estate - residential		135		18		—		—
Home equity		—		—		—		—
Consumer loans		—		—		—		—
Other loans		—		—		—		—
Total	$	135	$	18	$	—	$	—

Management uses a risk-grading program to facilitate the evaluation of probable inherent loan losses and to measure the adequacy of the allowance for credit losses on loans. In this program, risk grades are initially assigned by the loan officers and reviewed and monitored by the lenders and credit administration. The program has nine risk grades summarized in six categories as follows:

Pass: Loans that are pass grade credits include loans that are fundamentally sound, with risk factors that are reasonable and acceptable. They generally conform to policy with only minor exceptions; any major exceptions are clearly mitigated by other economic factors.

Watch: Loans that are acceptable but show signs of weakness in either adequate sources of repayment or collateral but have demonstrated mitigating factors that minimize the risk of delinquency or loss. These loans may deserve management’s attention.

Special Mention: Loans that exhibit potential weakness that deserves management’s close attention. Credits within this category exhibit risk that is increasing beyond the point where the loan would have been originally approved.

Substandard: Loans that are considered substandard are loans that are inadequately protected by the current sound net worth and paying capacity of the obligor or the value of the collateral pledged. All nonaccrual loans are graded as substandard.

Doubtful: Loans that are considered to be doubtful have all weaknesses inherent in loans classified substandard, plus the added characteristic that the weaknesses make the collection or liquidation in full on the basis of current existing facts, conditions and values highly questionable and improbable.

Loss: Loans that are considered to be a loss are considered to be uncollectible and of such little value that their continuance as bankable assets is not warranted.

The following table presents the Company’s recorded investment in loans by credit quality indicators by year of origination as of June 30, 2025:


June 30, 2025	Term Loans by Year of Origination
	2025		2024		2023		2022		2021		Prior		Revolving		Total
	(dollars in thousands)
Commercial
Pass	$	20,865	$	23,389	$	19,271	$	11,321	$	9,293	$	7,987	$	15,238	$	107,364
Watch		5		37		4		—		—		—		38		84
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Total commercial		20,870		23,426		19,275		11,321		9,293		7,987		15,276		107,448

Real estate - commercial
Pass		18,705		44,982		36,084		40,309		32,182		50,242		29,802		252,306
Watch		—		—		6,225		—		—		58		—		6,283
Special Mention		—		—		—		—		544		28		—		572
Substandard		—		—		—		—		—		359		—		359
Total real estate - commercial		18,705		44,982		42,309		40,309		32,726		50,687		29,802		259,520

Other real estate construction
Pass		3,624		18,370		13,379		3,183		1,575		4,354		3,539		48,024
Watch		—		—		—		—		—		—		—		—
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Total other real estate construction		3,624		18,370		13,379		3,183		1,575		4,354		3,539		48,024

Real estate 1-4 family construction
Pass		2,911		4,467		—		—		—		—		13,867		21,245
Watch		—		—		—		—		—		—		—		—
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Total real estate 1-4 family construction		2,911		4,467		—		—		—		—		13,867		21,245

Real estate - residential
Pass		10,952		12,782		18,479		18,969		11,798		13,262		67,294		153,536
Watch		323		—		—		—		202		696		—		1,221
Special Mention		—		—		102		—		119		64		—		285
Substandard		—		—		—		—		—		437		—		437
Total real estate - residential		11,275		12,782		18,581		18,969		12,119		14,459		67,294		155,479

Home equity
Pass		2,797		7,188		4,751		6,307		3,264		9,095		37,258		70,660
Watch		—		—		—		16		—		99		—		115
Special Mention		—		—		75		100		—		20		—		195
Substandard		—		—		—		—		107		—		—		107
Total home equity		2,797		7,188		4,826		6,423		3,371		9,214		37,258		71,077

Consumer loans
Pass		1,093		1,415		682		266		16		406		6,016		9,894
Watch		—		65		—		—		—		—		—		65
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Total consumer loans		1,093		1,480		682		266		16		406		6,016		9,959

Other loans
Pass		—		636		—		1,598		937		1,471		162		4,804
Watch		—		—		—		—		—		—		—		—
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Total other loans		—		636		—		1,598		937		1,471		162		4,804

Total Pass		60,947		113,229		92,646		81,953		59,065		86,817		173,176		667,833
Total Watch		328		102		6,229		16		202		853		38		7,768
Total Special Mention		—		—		177		100		663		112		—		1,052
Total Substandard		—		—		—		—		107		796		—		903
Total loans	$	61,275	$	113,331	$	99,052	$	82,069	$	60,037	$	88,578	$	173,214	$	677,556

During the six months ended June 30, 2025, fifty-one loans totaling $5.5 million were converted from revolving to term loans.

The following table presents the Company’s recorded investment in loans by credit quality indicators by year of origination as of December 31, 2024:


December 31, 2024	Term Loans by Year of Origination
	2024		2023		2022		2021		2020		Prior		Revolving		Total
	(dollars in thousands)
Commercial
Pass	$	25,634	$	18,992	$	14,319	$	11,948	$	2,292	$	10,270	$	20,964	$	104,419
Watch		48		117		—		—		—		—		182		347
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		15		—		88		—		—		—		103
Total commercial		25,682		19,124		14,319		12,036		2,292		10,270		21,146		104,869

Real estate - commercial
Pass		38,684		55,090		48,600		30,383		20,722		48,127		3,040		244,646
Watch		—		—		—		—		—		63		—		63
Special Mention		—		—		—		561		—		32		—		593
Substandard		—		—		—		—		113		264		—		377
Total real estate - commercial		38,684		55,090		48,600		30,944		20,835		48,486		3,040		245,679

Other real estate construction
Pass		22,447		15,004		4,981		2,287		3,211		2,172		795		50,897
Watch		—		—		—		—		—		44		—		44
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Total other real estate construction		22,447		15,004		4,981		2,287		3,211		2,216		795		50,941

Real estate 1-4 family construction
Pass		19,845		7,944		—		—		—		—		—		27,789
Watch		—		—		—		—		—		—		—		—
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Total real estate 1-4 family construction		19,845		7,944		—		—		—		—		—		27,789

Real estate - residential
Pass		29,936		37,448		34,018		21,613		10,473		14,397		1,829		149,714
Watch		—		—		—		204		365		490		—		1,059
Special Mention		—		104		—		122		—		83		—		309
Substandard		—		—		—		—		—		302		—		302
Total real estate - residential		29,936		37,552		34,018		21,939		10,838		15,272		1,829		151,384

Home equity
Pass		57		255		159		192		402		1,679		65,158		67,902
Watch		—		—		—		—		—		84		140		224
Special Mention		—		—		100		—		—		20		—		120
Substandard		—		—		—		—		—		41		—		41
Total home equity		57		255		259		192		402		1,824		65,298		68,287

Consumer loans
Pass		3,934		1,944		985		170		70		320		3,586		11,009
Watch		11		—		—		—		—		—		—		11
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Total consumer loans		3,945		1,944		985		170		70		320		3,586		11,020

Other loans
Pass		644		—		1,598		2,602		1,211		353		—		6,408
Watch		—		—		—		—		—		—		—		—
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Total other loans		644		—		1,598		2,602		1,211		353		—		6,408

Total Pass		141,181		136,677		104,660		69,195		38,381		77,318		95,372		662,784
Total Watch		59		117		—		204		365		681		322		1,748
Total Special Mention		—		104		100		683		—		135		—		1,022
Total Substandard		—		15		—		88		113		607		—		823
Total loans	$	141,240	$	136,913	$	104,760	$	70,170	$	38,859	$	78,741	$	95,694	$	666,377

The following tables present gross charge-offs by origination date as of June 30, 2025 and December 31, 2024:


June 30, 2025	Gross Loan Charge-offs by Year of Origination
	2025		2024		2023		2022		2021		Prior		Revolving		Total
	(dollars in thousands)
Commercial
Commercial	$	—	$	9	$	—	$	16	$	88	$	—	$	—	$	113
Real estate - commercial		—		—		—		—		—		—		—		—
Other real estate construction		—		—		—		—		—		—		—		—
Other loans		—		—		—		—		—		—		—		—
Noncommercial
Real estate 1-4 family construction		—		—		—		—		—		—		—		—
Real estate - residential		—		—		—		—		—		—		—		—
Home equity		—		—		—		—		—		—		—		—
Consumer loans		—		29		5		2		—		2		40		78
Total charge-offs	$	—	$	38	$	5	$	18	$	88	$	2	$	40	$	191


December 31, 2024	Gross Loan Charge-offs by Year of Origination
	2024		2023		2022		2021		2020		Prior		Revolving		Total
	(dollars in thousands)
Commercial
Commercial	$	—	$	10	$	—	$	137	$	164	$	—	$	10	$	321
Real estate - commercial		—		—		—		—		—		—		—		—
Other real estate construction		—		—		—		—		—		—		—		—
Other loans		—		—		—		—		—		—		—		—
Noncommercial
Real estate 1-4 family construction		—		—		—		—		—		—		—		—
Real estate - residential		—		—		—		—		—		—		—		—
Home equity		—		—		—		—		—		1		—		1
Consumer loans		12		51		7		12		7		4		65		158
Total charge-offs	$	12	$	61	$	7	$	149	$	171	$	5	$	75	$	480

Loans that are in nonaccrual status or 90 days past due and still accruing are considered to be nonperforming. At both June 30, 2025 and December 31, 2024 there were no loans 90 days past due and still accruing. The following tables show the breakdown between performing and nonperforming loans by class at June 30, 2025 and December 31, 2024:


June 30, 2025	Performing		Non- Performing		Total
	(dollars in thousands)
Commercial	$	107,448	$	—	$	107,448
Real estate - commercial		259,520		—		259,520
Other real estate construction		48,024		—		48,024
Real estate 1-4 family construction		21,245		—		21,245
Real estate - residential		155,275		204		155,479
Home equity		70,970		107		71,077
Consumer loans		9,959		—		9,959
Other loans		4,804		—		4,804
Total	$	677,245	$	311	$	677,556


December 31, 2024	Performing		Non- Performing		Total
	(dollars in thousands)
Commercial	$	104,782	$	88	$	104,870
Real estate - commercial		245,679		—		245,679
Other real estate construction		50,940		—		50,940
Real estate 1-4 family construction		27,789		—		27,789
Real estate - residential		151,320		64		151,384
Home equity		68,247		40		68,287
Consumer loans		11,020		—		11,020
Other loans		6,408		—		6,408
Total	$	666,185	$	192	$	666,377

Modifications to Borrowers Experiencing Financial Difficulty

The allowance for credit losses incorporates an estimate of lifetime expected credit losses and is recorded on each asset upon asset origination or acquisition. The starting point for the estimate of the allowance for credit losses is historical loss information, which includes losses from modifications of receivables to borrowers experiencing financial difficulty. The Company uses a probability of default/loss given default model to determine the allowance for credit losses. An assessment of whether a borrower is experiencing financial difficulty is made on the date of a modification.

Because the effect of most modifications made to borrowers experiencing financial difficulty is already included in the allowance for credit losses due to the measurement methodologies used to estimate the allowance, a change to the allowance for credit losses is generally not recorded upon modification. The Company rarely modifies loans by providing principal forgiveness. When principal forgiveness is provided, the amortized cost basis of the asset is written off against the allowance for credit losses. The amount of the principal forgiveness is deemed to be uncollectible; therefore, that portion of the loan is written off, resulting in a reduction of the amortized cost basis and a corresponding adjustment to the allowance for credit losses. In some cases, the Company will modify a loan by providing multiple types of concessions. Typically one type of concession is granted initially. If the borrower continues to experience financial difficulty, another concession may be granted. Types of concessions include term extensions beyond customary terms, capitalization of accrued interest, interest rate reductions to below current market rates, payment deferrals or principal forgiveness.

There were no loans modified for borrowers experiencing financial difficulty during the six months ended June 30, 2025 or during the twelve months ended December 31, 2024. As such, the Company did not have any loans made to borrowers experiencing financial difficulty that were modified during the six months ended June 30, 2025 or during the twelve months ended December 31, 2024 that subsequently defaulted. A default on a modified loan is defined as being past due 90 days or being out of compliance with the modification agreement. The Company closely monitors the performance of the loans that are modified for borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts.

Note 8 - Leases

Operating leases in which we are the lessee are recorded as operating lease right of use (“ROU”) assets and operating lease liabilities, included in premises and equipment and other liabilities, respectively, on our consolidated balance sheets. Operating lease ROU assets represent our right to use an underlying asset during the lease term and operating lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and operating lease liabilities are recognized at lease commencement based on the present value of the remaining lease payments using a discount rate that represents our incremental collateralized borrowing rate at the lease commencement date. ROU assets are further adjusted for any lease incentives. Operating lease expense, which is composed of amortization of the ROU asset and the implicit interest accreted on the operating lease liability, is recognized on a straight-line basis over the lease term and is recorded in the net occupancy expense in the consolidated statements of income. We do not currently have any finance leases in which we are the lessee.

Our leases relate to four office locations, three of which are branch locations, with remaining terms of one to four years. Certain lease arrangements contain extension options which range from five to ten years at the then fair market rental rates. As these extension options are not generally considered reasonably certain of exercise, they are not included in the lease term. As of June 30, 2025, operating lease ROU assets were $912,000 and the operating lease liability was $985,000, compared to operating lease ROU assets of $1.1 million and an operating lease liability of $1.2 million at December 31, 2024. Lease costs associated with all leases was $106,000 and $212,000 for the three and six months ended June 30, 2025, respectively.

The table below summarizes other information related to our operating leases:


	Six Months Ended June 30,
	2025			2024
	(in thousands except percent and period data)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	226		$	221
Right-of-use assets obtained in exchange for new operating lease liabilities		—			—
Weighted-average remaining lease term - operating leases, in years		2.6			3.5
Weighted-average discount rate - operating leases		2.70	%		2.61	%

The table below summarizes the maturity of remaining lease liabilities:


	June 30, 2025
	(dollars in thousands)
2025	$	230
2026		416
2027		260
2028		97
2029		20
Thereafter		-
Total lease payments		1,023
Less: Interest		(38	)
Present value of lease liabilities	$	985

Note 9 - Commitments and Contingencies

The Company’s subsidiary bank is party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, lines of credit and standby letters of credit. These instruments involve elements of credit risk in excess of amounts recognized in the accompanying financial statements.

The Bank’s risk of loss with unfunded loans and lines of credit or standby letters of credit is represented by the contractual amount of these instruments. The Bank uses the same credit policies in making commitments under such instruments as it does for on-balance sheet instruments. The amount of collateral obtained, if any, is based on management’s credit evaluation of the borrower. Collateral held varies, but may include accounts receivable, inventory, real estate and time deposits with financial institutions. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Credit card commitments are unsecured.

At June 30, 2025 and December 31, 2024, outstanding financial instruments whose contract amounts represent credit risk were approximately:


	June 30, 2025		December 31, 2024
	(dollars in thousands)
Commitments to extend credit	$	221,847	$	224,708
Credit card commitments		26,344		26,715
Standby letters of credit		8,136		8,141
Total commitments	$	256,327	$	259,564

The Company maintains an allowance for off-balance sheet credit exposures such as unfunded balances for existing lines of credit, commitments to extend future credit, as well as both standby and commercial letters of credit when there is a contractual obligation to extend credit and when this extension of credit is not unconditionally cancelable. The allowance for off-balance sheet credit exposures is adjusted as a provision for credit loss expense. The estimate includes consideration of the likelihood that funding will occur, which is based on a historical funding study derived from internal information, and an estimate of expected credit losses on commitments expected to be funded over its estimated life, which are the same loss rates that are used in computing the allowance for credit losses on loans. The allowance for credit losses for unfunded loan commitments of $186,000 and $167,000 at June 30, 2025 and December 31, 2024, respectively, is separately classified on the balance sheet within Other Liabilities.

The following table presents the balance and activity in the allowance for credit losses for unfunded loan commitments for the six months ended June 30, 2025.


	Total Allowance for Credit Losses - Unfunded Loan Commitments
	(dollars in thousands)
Balance, December 31, 2024	$	167
Provision for credit losses		19
Balance, June 30, 2025	$	186

Note 10 – Fair Value Disclosures

Accounting Standards Codification (“ASC”) 820 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. ASC 820 does not require any new fair value measurements but clarifies and standardizes some divergent practices that have emerged since prior guidance was issued. ASC 820 creates a three-level hierarchy under which individual fair value estimates are to be ranked based on the relative reliability of the inputs used in the valuation.

ASC 820 defines fair value as the price that would be received to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities, the Company considers the principal or most advantageous market in which those assets or liabilities are sold and considers assumptions that market participants would use when pricing those assets or liabilities. Fair values determined using Level 1 inputs rely on active and observable markets to price identical assets or liabilities. In situations where identical assets and liabilities are not traded in active markets, fair values may be determined based on Level 2 inputs, which exist when observable data exists for similar assets and liabilities. Fair values for assets and liabilities for which identical or similar assets and liabilities are not actively traded in observable markets are based on Level 3 inputs, which are considered to be unobservable.

Among the Company’s assets and liabilities, investment securities available for sale and mortgage banking derivatives are reported at their fair values on a recurring basis. Certain other assets are adjusted to their fair value on a nonrecurring basis, including other real estate owned, individually evaluated loans, loans held for sale, which are carried at the lower of cost or market, and loan servicing rights, where fair value is determined using similar assets with similar characteristics, when available, or based upon discounted cash flows using market-based assumptions. Deposits, short-term borrowings and long-term obligations are not reported at fair value.

Prices for U.S. Treasury and marketable equity securities are readily available in the active markets in which those securities are traded, and the resulting fair values are shown in the Level 1 input column. Prices for government agency securities, mortgage-backed securities, asset-backed securities and state, county and municipal securities are obtained for similar securities, and the resulting fair values are shown in the Level 2 input column. Prices for all other non-marketable investments are determined based on various assumptions that are not observable. The fair values for these investment securities are shown in the Level 3 input column. Non-marketable investment securities, which are carried at their purchase price, include those that may only be redeemed by the issuer. The changes in securities between Level 1 and Level 2 were related to the purchase and sale of several securities and not the transfer of securities.

Mortgage banking derivatives, which are composed of interest rate lock commitments, or IRLCs, mortgage forward sales commitments and to-be-announced mortgage-backed securities trades (TBAs), are recorded at fair value on a recurring basis. Fair value of the IRLCs is based on projected pull-through rates and anticipated margins based on changes in market interest rates. The Company considers these to be Level 3 valuations. The fair value of mortgage forward sales commitments and TBAs is based on the gain or loss that would occur if the Company were to pair-off the transaction at the measurement date and is considered to be a Level 2 input.

The Company does not record loans at fair value on a recurring basis. However, certain nonaccrual loans are individually evaluated in connection with determining the allowance for credit losses. If the loan is deemed to be collateral dependent and the relationship’s outstanding balance is $100,000 or greater, it will be individually evaluated. Collateral dependent loans are loans for which the repayment is expected to be provided substantially through the operation or sale of the collateral and the borrower is experiencing financial difficulty. Collateral dependent loans require an analysis of the collateral. The fair value of the collateral is based on appraised values discounted by liquidation costs which the Company considers Level 3 valuations.

Foreclosed assets are adjusted to fair value upon transfer of the loans to other real estate owned. Real estate acquired in settlement of loans is recorded initially at the estimated fair value of the property less estimated selling costs at the date of foreclosure. The initial recorded value may be subsequently reduced by additional allowances, which are charged to earnings if the estimated fair value of the property less estimated selling costs declines below the initial recorded value. Fair value is based upon independent market prices, appraised values of the collateral or management’s estimation of the value of the collateral. The Company typically bases the fair value of the collateral on appraised values, which the Company considers Level 3 valuations.

Loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated fair value in the aggregate, based on secondary market prices. Net unrealized losses, if any, are recognized through a valuation allowance by charges to income. These loans are recorded in Level 2.

The following tables provide fair value information for assets and liabilities measured at fair value on a recurring basis as of June 30, 2025 and December 31, 2024:


	June 30, 2025
	(dollars in thousands)
	Total		Level 1		Level 2		Level 3
Securities available for sale:
U.S. Treasury	$	23,705	$	23,705	$	—	$	—
U.S. government agencies		46,054		—		46,054		—
GSE - Mortgage-backed securities and CMOs		163,370		—		163,370		—
Asset-backed securities		22,075		—		22,075		—
State and political subdivisions		79,954		—		79,954		—
Corporate bonds		5,827		—		5,827		—
Equity securities		325		325		—		—
Mortgage banking derivatives		1,076		—		104		972
Total assets at fair value on a recurring basis	$	342,386	$	24,030	$	317,384	$	972
Mortgage banking derivatives	$	170	$	—	$	170	$	—
Total liabilities at fair value on a recurring basis	$	170	$	—	$	170	$	—


	December 31, 2024
	(dollars in thousands)
	Total		Level 1		Level 2		Level 3
Securities available for sale:
U.S. Treasury	$	29,894	$	29,894	$	—	$	—
U.S. government agencies		41,729		—		41,729		—
GSE - Mortgage-backed securities and CMOs		152,789		—		152,789		—
Asset-backed securities		23,578		—		23,578		—
State and political subdivisions		79,253		—		79,253		—
Corporate bonds		5,743		—		5,743		—
Equity securities		334		334		—		—
Mortgage banking derivatives		795		—		204		591
Total assets at fair value on a recurring basis	$	334,115	$	30,228	$	303,296	$	591
Mortgage banking derivatives	$	—	$	—	$	—	$	—
Total liabilities at fair value on a recurring basis	$	—	$	—	$	—	$	—

The following table provides a rollforward for recurring Level 3 fair value measurements:


	June 30, 2025
	Mortgage banking derivatives: Interest rate lock commitments		Total
	(dollars in thousands)
Balance at December 31, 2024	$	591	$	591
Change in fair value:
Included in income from mortgage banking		381		381
Change in observability of significant inputs:
Included in income from mortgage banking		—		—
Balance at June 30, 2025	$	972	$	972

The fair value of mortgage IRLCs at June 30, 2025 was calculated based on a notional amount of $33.6 million. Significant unobservable inputs are used to determine the fair value of these derivatives. At June 30, 2025, such inputs included anticipated margins to be earned based on market movement from the original lock date and a weighted average projected pull-through rate of 84.7% determined by loan product, loan stage, and loan purpose. The fair value of mortgage IRLCs at December 31, 2024 was calculated based on a notional amount of $32.4 million. Significant unobservable inputs were the same as those used for the six months ended June 30, 2025 and assumed a weighted average projected pull-through rate of 90.1% at December 31, 2024. Changes in interest rates and other assumptions could significantly change these estimated values.

The Company may be required, from time to time, to measure certain assets at fair value on a nonrecurring basis in accordance with U.S. generally accepted accounting principles. These include assets, such as other real estate owned and individually evaluated loans, that are measured at the lower of cost or market value that were recognized at fair value less cost to sell at the end of the period. Assets measured at fair value on a nonrecurring basis are included in the table below as of June 30, 2025. There were no assets for which a nonrecurring fair value adjustment was required as of December 31, 2024.


	June 30, 2025
	(dollars in thousands)
	Total		Level 1		Level 2		Level 3

Individually evaluated loans	$	118	$	—	$	—	$	118
Total assets at fair value on a nonrecurring basis	$	118	$	—	$	—	$	118

The following table provides quantitative information about Level 3 fair value measurements:

Note 11 – Fair Values of Financial Instruments

ASC 825, “Disclosures about Fair Value of Financial Instruments,” requires disclosure of the fair value of financial assets and financial liabilities, including those that are not measured and reported at fair value on a recurring basis or non-recurring basis.

The fair value estimates presented at June 30, 2025 and December 31, 2024 are based on relevant market information and information about the financial instruments. Fair value estimates are intended to represent the price an asset could be sold at or the price at which a liability could be settled. However, given there is no active market or observable market transactions for many of the Company’s financial instruments, the Company has made estimates of many of these fair values which are subjective in nature, involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimated values. The estimated fair values disclosed in the following table do not represent market values of all assets and liabilities of the Company and should not be interpreted to represent the underlying value of the Company.

The following tables reflect a comparison of carrying amounts and the estimated fair value of the financial instruments as of June 30, 2025 and December 31, 2024:


June 30, 2025	Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3
	(dollars in thousands)
FINANCIAL ASSETS
Cash and cash equivalents	$	73,274	$	73,274	$	73,274	$	—	$	—
Securities available for sale		340,985		340,985		23,705		317,280		—
Securities held to maturity		23,699		21,047		—		10,073		10,974
Equity securities		325		325		325		—		—
Loans held for investment, net		671,325		642,928		—		—		642,928
Loans held for sale		9,147		9,147		—		9,147		—
Restricted stock		1,749		1,749		1,749		—		—
Loan servicing assets		3,828		7,447		—		7,447		—
Mortgage banking derivatives		1,076		1,076		—		104		972
Accrued interest receivable		4,300		4,300		—		—		4,300

FINANCIAL LIABILITIES
Deposits	$	1,062,364		1,061,735		—		1,061,735		—
Short-term borrowings		1,132		1,132		—		1,132		—
Long-term borrowings		29,200		26,150		—		—		26,150
Mortgage banking derivatives		170		170		—		170		—
Accrued interest payable		468		468		—		—		468


December 31, 2024	Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3
	(dollars in thousands)
FINANCIAL ASSETS
Cash and cash equivalents	$	52,267	$	52,267	$	52,267	$	—	$	—
Securities available for sale		332,986		332,986		29,894		303,092		—
Securities held to maturity		26,745		24,561		—		10,735		13,826
Equity securities		334		334		334		—		—
Loans held for investment, net		660,553		629,111		—		—		629,111
Loans held for sale		4,561		4,561		—		4,561		—
Restricted stock		1,709		1,709		1,709		—		—
Loan servicing assets		3,903		7,323		—		7,323		—
Mortgage banking derivatives		795		795		—		204		591
Accrued interest receivable		4,355		4,355		—		—		4,355

FINANCIAL LIABILITIES
Deposits	$	1,030,236	$	1,029,696	$	—	$	1,029,696	$	—
Short-term borrowings		1,414		1,414		—		1,414		—
Long-term borrowings		29,161		25,725		—		—		25,725
Accrued interest payable		505		505		—		—		505

At June 30, 2025 the Company’s subsidiary bank had outstanding standby letters of credit and commitments to extend credit. These off-balance sheet financial instruments are generally exercisable at the market rate prevailing at the date the underlying transaction will be completed; therefore, the fair value is the fee the Bank is expected to receive. This amount is deemed immaterial by management. See Note 9 (Commitments and Contingencies) to the Company’s Notes to Consolidated Financial Statements.

Note 12 – Mortgage Banking Derivatives

The Company enters into commitments to originate loans whereby the interest rate on the loan is determined prior to funding, otherwise known as Interest Rate Lock Commitments (IRLCs). IRLCs on mortgage loans that will be held for resale are considered to be derivatives and must be accounted for at fair value on the balance sheet. Accordingly, such commitments are recorded at fair value in the mortgage banking derivatives asset or liability with changes in fair value recorded in income from mortgage banking within the consolidated statement of income. Fair value is based on anticipated margins determined by market movement from the original lock date and projected pull-through rates on a loan-by-loan basis based on loan product, loan stage, and loan purpose.

During the term of the IRLC, the Company is exposed to the risk that the interest rate will change from the rate quoted to the borrower. In an effort to mitigate interest rate risk, the Company also enters into mortgage forward sales commitments on a mandatory basis for future delivery of residential mortgage loans after an interest rate lock is committed to the borrower. Mandatory commitments require that the loan must be delivered to the investor or a pair-off fee be paid. These forward commitments are recorded at fair value in the mortgage banking derivatives asset or liability, and changes in fair value are recorded to income from mortgage banking within the consolidated statement of income. The fair value of the forward commitments is based on the gain or loss that would occur if the Company were to pair-off the transaction at the measurement date.

The Company also enters into purchase and sale agreements of to-be-announced mortgage-backed securities trades (TBAs). A TBA trade is a contract to buy or sell mortgage-backed securities on a specific date while the underlying mortgages are not announced until just prior to settlement. These TBA trades provide an economic hedge against the effect of changes in interest rates resulting from IRLCs. TBAs are accounted for as derivatives when either of the following conditions exist: (i) when settlement of the TBA trade is not expected to occur at the next regular settlement date (which is typically the next month) or (ii) a mechanism exists to settle the contract on a net basis. As a result, these instruments are recorded at fair value in the mortgage banking derivatives asset or liability with changes in fair value recorded in income from mortgage banking within the consolidated statement of income. The fair value of the TBA trades is based on the gain or loss that would occur if the Company were to pair-off the trade at the measurement date.

The following table reflects the notional amount and fair value of mortgage banking derivatives included in the balance sheet at fair value as of June 30, 2025 and December 31, 2024.


	Notional Amount		Fair Value
	(dollars in thousands)
Balance at June 30, 2025
Included in mortgage banking derivative assets:
Interest rate lock commitments	$	33,610	$	972
Forward sales commitments		5,474		104
Included in mortgage banking derivative liabilities:
To-be-announced mortgage-backed securities trades		38,500		170

Balance at December 31, 2024
Included in mortgage banking derivative assets:
Interest rate lock commitments	$	32,352	$	591
Forward sales commitments		2,173		44
To-be-announced mortgage-backed securities trades		25,500		160

Note 13 – Recent Accounting Pronouncements and Other Changes

The Inflation Reduction Act of 2022 (“IRA”) created a new nondeductible 1% excise tax on repurchases of corporate stock by
certain publicly traded corporations or their specified affiliates after December 31, 2022. The tax is imposed on the fair value of the
stock of a covered corporation that is repurchased in a given year, less the fair market value of any stock issued in that year. A
“covered corporation” is any domestic corporation whose stock is traded on an established securities market, such as an OTC market.
The excise tax applies to all of the stock of a covered corporation regardless of whether the corporation has profits or losses. The IRA
contains several exceptions to the excise tax, including, but not limited to, any repurchase of stock: in which the total value of the
repurchased stock in a given year does not exceed $1,000,000; that is contributed to an employer-sponsored retirement plan or other
similar stock compensation plan; or that is taxed as a dividend. The impact of the IRA on our consolidated financial statements is
dependent on the extent of stock repurchases.

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which enhances income tax disclosure requirements. Under the new guidance, entities must disclose additional information in specified categories for federal, state and foreign income taxes with respect to the reconciliation of the effective tax rate to the statutory rate (rate reconciliation). Greater detail is also required about individual reconciling items in the rate reconciliation to the extent the impact of those items exceeds a specified threshold. Additionally, the amendments require that entities must disaggregate income taxes paid, net of refunds received, for federal, state and foreign taxes and further disaggregate for specific jurisdictions to the extent the related amounts exceed a quantitative threshold. The quantitative threshold is equal to 5% or more of the amount determined by multiplying pretax income (loss) from continuing operations by the applicable statutory rate. Public business entities must apply the guidance to annual periods beginning after December 15, 2024. ASU 2023-09 is effective for the Company on January 1, 2025, though early adoption is permitted. Entities may apply the amendments prospectively or may elect retrospective application. The Company does not expect the adoption of the ASU to have a material impact on the Company's financial statements.

In November 2024, the FASB issued ASU 2024-03 “Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses” requiring public business entities to disclose, in the notes to financial statements, specified information about certain costs and expenses at each interim and annual reporting period. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted, and the amendments should be applied prospectively. The Company is currently evaluating the impact of this ASU but does not expect it to have a material effect on its consolidated financial statements.

On July 4, 2025, President Trump signed into law the legislation formally titled “An Act to Provide for Reconciliation Pursuant to Title II of H. Con. Res. 14” and commonly referred to as the One Big Beautiful Bill (“the Act”). The Company is currently evaluating income tax implications of the Act. The Company does not expect the Act to have a material impact on the Company's financial statements.

From time to time the FASB issues exposure drafts of proposed statements of financial accounting standards. Such exposure drafts are subject to comment from the public, to revisions by the FASB and to final issuance by the FASB as statements of financial accounting standards. Management considers the effect of the proposed statements on the consolidated financial statements of the Company and monitors the status of changes to and proposed effective dates of exposure drafts.

Note 14 - Segment Reporting

The chief operating decision maker (“CODM”) of the Company is a group of individuals, also referred to as the Executive Management Team, consisting of the Chief Executive Officer, Chief Financial Officer, Chief Operations Officer and Chief Risk Officer. The Executive Management Team is responsible for allocating resources and assessing the performance of the Company.

Segments are defined as components of an enterprise for which discrete financial information is available and evaluated regularly by the CODM. The Executive Management Team has identified three operating segments within the Company, each with a manager that reports directly to the CODM. The Company’s business operating segments are determined based on the nature of the products or services provided and reflect the manner in which financial information is currently evaluated by the Executive Management Team. The three operating segments of the Company are as follows:

Banking Operations - This segment provides financial products and services to consumer and commercial customers in the form of deposit products, loan products and cash management services through branches, online banking, mobile banking and telephone banking. This segment is also responsible for the management of the investment portfolio. Significant components of noninterest income for this segment are service charges on deposits and interchange fees on card transactions. Significant noninterest expense is salaries and employee benefits.

Mortgage Banking - This segment reflects Uwharrie Bank Mortgage, a division of the Bank that specializes in originating and

servicing one-to-four family residential mortgage loans which are primarily sold on the secondary market. Loans sold to Fannie Mae or Freddie Mac are sold with servicing rights retained. Significant noninterest income for this segment is gain or loss on the sale of loans. Significant noninterest expense is salaries and employee benefits.

Wealth Management - This segment reflects investment advisory, broker-dealer and insurance services of UIA, TSAC and BOS

Agency, respectively. Significant noninterest income for this segment is service fees and commissions. Significant noninterest expense is salaries and employee benefits.

While the CODM monitors each segment’s pre-tax, pre-provision profit or loss, the primary measure for allocating resources to the operating segments during the annual budgeting process is Net Income. This measure is also used to assess the performance of each segment, with a focus on net interest income, noninterest income, and noninterest expense. The CODM conducts monthly income review meetings, where budget-to-actual variances for Net Income and pre-tax, pre-provision profit or loss and its components are analyzed. The Company provides a broad range of financial services as described above and aims to provide one place for its customers to satisfy all of their financial services needs. As such, many customers are shared under the “Uwharrie” umbrella as are certain costs to conduct business. Management regularly reviews the different revenue streams, but is aware that shared resources and costs of key corporate functions may not be fully allocated among the operating segments. The Executive Management Team believes it is appropriate to aggregate the three operating segments into one reportable segment. A review of quantitative thresholds was performed, and the CODM has determined that the Company’s operations are not considered to constitute more than one reportable segment. Non-segment operations are classified as Other below and include assets and activity of the parent holding company. Management will continue to evaluate the operating segments for separate reporting as facts and circumstances change.


	Banking, Mortgage and Wealth Management		Other			Consolidated
	(dollars in thousands)
For the Three Months Ended June 30, 2025
Interest income	$	14,331	$	5		$	14,336
Interest expense		4,270		335			4,605
Net interest income		10,061		(330	)		9,731
Noninterest income		3,023		61			3,084
Noninterest expense		8,834		146			8,980
Pre-tax, pre-provision income		4,250		(415	)		3,835
Provision for (recovery of) credit losses		254		—			254
Provision for income taxes		841		(84	)		757
Net income (loss)	$	3,155	$	(331	)	$	2,824

For the Six Months Ended June 30, 2025
Interest income	$	28,128	$	10		$	28,138
Interest expense		8,625		678			9,303
Net interest income		19,503		(668	)		18,835
Noninterest income		5,393		72			5,465
Noninterest expense		16,631		277			16,908
Pre-tax, pre-provision income		8,265		(873	)		7,392
Provision for (recovery of) credit losses		535		—			535
Provision for income taxes		1,656		(176	)		1,480
Net income (loss)	$	6,074	$	(697	)	$	5,377

Total assets as of June 30, 2025	$	1,166,175	$	3,579		$	1,169,754

For the Three Months Ended June 30, 2024
Interest income	$	13,316	$	5		$	13,321
Interest expense		4,158		347			4,505
Net interest income		9,158		(342	)		8,816
Noninterest income		2,218		8			2,226
Noninterest expense		7,699		133			7,832
Pre-tax, pre-provision income		3,677		(467	)		3,210
Provision for (recovery of) credit losses		431		—			431
Provision for income taxes		660		(94	)		566
Net income (loss)	$	2,586	$	(373	)	$	2,213

For the Six Months Ended June 30, 2024
Interest income	$	25,969	$	10		$	25,979
Interest expense		7,934		691			8,625
Net interest income		18,035		(681	)		17,354
Noninterest income		4,468		87			4,555
Noninterest expense		15,453		261			15,714
Pre-tax, pre-provision income		7,050		(855	)		6,195
Provision for (recovery of) credit losses		401		—			401
Provision for income taxes		1,369		(171	)		1,198
Net income (loss)	$	5,280	$	(684	)	$	4,596

Total assets as of December 31, 2024	$	1,123,764	$	5,044		$	1,128,808

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Caution Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q may contain certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements generally relate to estimates with respect to the financial condition, results of operations and business of the Company that are subject to various factors that could cause actual results to differ materially from these estimates. These factors include, but are not limited to: increases in our past due loans and provision for credit losses that may result from local and/or broader economic effects, including the impacts of inflation and constraints on the availability of credit that may impact our borrowers; declines in general economic conditions, including increased stress in the financial markets; changes in interest rates, deposit flows, loan demand, real estate values, and competition; changes in accounting principles, policies, or guidelines; changes in legislation or regulation; and other economic, competitive, governmental, regulatory, and technological factors affecting the Company’s operations, pricing, products and services. Any use of “we” or “our” in the following discussion refers to the Company on a consolidated basis.

Comparison of Financial Condition at June 30, 2025 and December 31, 2024.

During the six months ended June 30, 2025, the Company’s total assets increased $40.9 million, from $1.13 billion to $1.17 billion.

Cash and cash equivalents increased $21.0 million during the six months ended June 30, 2025, from $52.3 million to $73.3 million. The increase in cash and cash equivalents is the result of growth in deposits.

Investment securities consist of securities available for sale and securities held to maturity. For the six-month period ended June 30, 2025, investment securities increased $4.9 million from $359.8 million at December 31, 2024 to $364.7 million at June 30, 2025. At June 30, 2025, the Company had net unrealized losses on securities available for sale of $27.9 million, compared to net unrealized losses of $32.1 million at December 31, 2024, an improvement of $4.2 million. During the first six months of 2025, a $14,000 recovery was recorded against the allowance for credit losses on securities held to maturity, bringing the balance to $54,000 at June 30, 2025 compared to $68,000 at December 31, 2024. The amortized cost basis of securities held to maturity totaled $23.8 million and $26.8 million at June 30, 2025 and December 31, 2024, respectively.

At June 30, 2025, equity securities deteriorated in value from $334,000 at December 31, 2024 to $325,000 as a result of the decrease in value in the equity market.

Loans held for sale increased $4.6 million from December 31, 2024 to $9.1 million at June 30, 2025. Loans held for investment increased from $666.4 million at December 31, 2024 to $677.6 million at June 30, 2025, an increase of $11.2 million. The Company experienced a net decrease in loans categorized as “Other Real Estate - Construction,” “Real Estate - 1-4 Family Construction,” “Consumer,” and “Commercial - Other.” All other loan sectors experienced a net increase during the quarter ended June 30, 2025.

The allowance for credit losses on loans was $6.2 million at June 30, 2025, which represented 0.92% of total loans held for investment, compared to $5.8 million, or 0.87% of total loans held for investment, at December 31, 2024. Additional discussion regarding the allowance is included in the Asset Quality section below.

Other changes in the Company’s consolidated assets are primarily related to deferred tax assets, which decreased $947,000 from $9.0 million at December 31, 2024 to $8.0 million at June 30, 2025 as a result of the improvement in fair value of the available for sale securities portfolio. Mortgage banking derivatives increased $281,000 during the first six months of 2025, primarily related to an increase in the value of interest rate lock commitments (“IRLCs”). The value of IRLCs appreciated $381,000 during the six-month period ended June 30, 2025 as the notional amount of the mortgage pipeline increased $1.3 million. Annual Company contributions, enhanced by positive market adjustments, increased the balance of supplemental executive retirement plans (“SERP”) by $348,000 during the six months ended June 30, 2025.

Customer deposits, our primary funding source, experienced a $32.1 million increase during the six-month period ended June 30, 2025, increasing from $1.03 billion to $1.06 billion. The overall increase in deposits is attributable to organic deposit growth combined with higher yielding time deposit products. Demand noninterest-bearing checking accounts increased $19.1 million and time deposits increased $3.6 million during the six-month period ended June 30, 2025. Interest checking and money market accounts decreased $224,000 and savings deposits increased $9.7 million during the six months ended June 30, 2025.

Total short-term borrowings decreased $282,000 for the six-month period ended June 30, 2025. At June 30, 2025, the Company had $29.2 million in long-term debt outstanding, which consists solely of its junior subordinated debt securities, net of unamortized debt issuance costs. During the third quarter of 2019, the Company issued $10.0 million in subordinated debt securities with a final 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, 2025, $27.3 million qualifies as Tier 2 capital. The Company also has a $3.0 million line of credit of which $3.0 million was available to use at June 30, 2025.

Other changes in the Company’s liabilities are related to an increase of $1.2 million in other liabilities from December 31, 2024 to June 30, 2025, $529,000 of which is related to the accrual of reserves for payables due throughout 2025. As with SERP assets mentioned above, SERP liabilities increased $348,000. Mortgage banking derivative liabilities increased in the form of to-be-announced mortgage-backed securities (“TBAs”) by $170,000 during the same period.

At June 30, 2025, total shareholders’ equity was $65.4 million, an increase of $7.7 million from December 31, 2024. Net income for the six-month period ended June 30, 2025 was $5.4 million, which positively contributed to shareholders’ equity. Improvement in the unrealized loss position of the available for sale securities portfolio also contributed to the increase in shareholders’ equity during the same six-month period. During the six months ended June 30, 2025, the Company repurchased 64,889 shares of common stock at a total cost of $596,000, 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.

Results of Operations for the Three Months Ended June 30, 2025 and 2024.

Net Income and Net Income Available to Common Shareholders

Uwharrie Capital Corp reported net income of $2.8 million for the three months ended June 30, 2025, compared to $2.2 million for the three months ended June 30, 2024. Net income available to common shareholders was $2.7 million, or $0.38 per common share, for the three months ended June 30, 2025, compared to $2.1 million, or $0.29 per common share, for the three months ended June 30, 2024. Net income available to common shareholders is net income less dividends on the aforementioned noncontrolling interest.

Net Interest Income

Net interest income for the three months ended June 30, 2025 was $9.7 million, a $915,000 increase from the $8.8 million reported for the comparative period in 2024. During the second quarter of 2025, the average yield on our interest-earning assets increased 8 basis points to 5.22% from the same period in 2024, and the average rate we paid for our interest-bearing liabilities decreased 9 basis points to 2.31%. These changes resulted in an interest rate spread of 2.91% as of June 30, 2025, compared to 2.74% as of June 30, 2024. The Company’s net interest margin was 3.56% and 3.42% for the comparable periods in 2025 and 2024, respectively.

The following table presents average balance sheet and a net interest income analysis for the three months ended June 30, 2025 and 2024, respectively:


	Average Balance				Income/Expenses				Rate/Yield
	2025		2024		2025		2024		2025			2024
	(dollars in thousands)
Interest-earning assets:
Taxable securities	$	307,652	$	309,283	$	2,876	$	3,011		3.75	%		3.92	%
Non-taxable securities (1)		58,756		57,908		314		310		2.73	%		2.70	%
Short-term investments		62,577		57,206		662		710		4.24	%		4.99	%
Equity securities		311		343		5		5		6.45	%		5.86	%
Taxable loans		668,533		609,358		10,391		9,151		6.23	%		6.04	%
Non-taxable loans (1)		12,057		17,312		88		134		3.73	%		3.91	%
Total interest-earning assets		1,109,886		1,051,410		14,336		13,321		5.22	%		5.14	%
Interest-bearing liabilities:
Interest-bearing deposits		769,483		720,248		4,270		4,097		2.23	%		2.29	%
Short-term borrowed funds		1,233		6,283		11		76		3.58	%		4.87	%
Long-term debt		29,189		29,127		324		332		4.45	%		4.58	%
Total interest bearing liabilities		799,905		755,658		4,605		4,505		2.31	%		2.40	%
Net interest spread	$	309,981	$	295,752	$	9,731	$	8,816		2.91	%		2.74	%
Net interest margin (1) (% of earning assets)										3.56	%		3.42	%

(1)

Yields related to securities and loans exempt from income taxes are stated on a fully tax-equivalent basis, assuming a 21% effective tax rate.

Provision for Credit Losses

The provision for credit losses was $254,000 for the three months ended June 30, 2025, compared to a provision of $431,000 for the same period in 2024. There were net loan charge-offs of $76,000 for the three months ended June 30, 2025, as compared to net loan charge-offs of $24,000 during the same period of 2024. Refer to the Asset Quality section below for further information.

Noninterest Income

The Company places significant emphasis on diversification of revenue sources rather than relying solely upon interest income. Total noninterest income increased by $858,000 for the three-month period ended June 30, 2025, as compared to the same period in 2024. Income from mortgage banking increased $421,000 quarter-over-quarter, driven by increased loan pipeline volume. Income associated with market adjustments on supplemental executive retirement plans increased by $407,000 during the three months ended June 30, 2025, compared to the three months ended June 30, 2024.

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


	Three Months Ended June 30,
	2025		2024
	(dollars in thousands)
Income from debit card transactions	$	618	$	592
Income from credit card transactions		174		177
Gross interchange and transaction fee income		792		769
Network costs - debit card		306		281
Network costs - credit card		178		166
Total	$	308	$	322

Noninterest Expense

Noninterest expense for the three months ended June 30, 2025 increased by $1.1 million from the same period in 2024. Salaries and benefits, the largest component of noninterest expense, increased $566,000 due to wage increases and more commissions paid on increased production in the mortgage division during 2025. Expense associated with market adjustments on supplemental executive retirement plans increased by $407,000 during the three months ended June 30, 2025, compared to the three months ended June 30, 2024.

Total other noninterest expense increased $69,000 for the three months ended June 30, 2025, compared to the same period in 2024. The table below reflects the composition of other noninterest expense for the referenced periods.


	Three Months Ended June 30,
	2025		2024
	(dollars in thousands)
Office supplies and printing	$	29	$	17
Franchise and other taxes		57		26
Employee education		30		40
Shareholder relations expense		46		48
Telephone and data lines		43		53
Postage		70		57
Director fees and expense		78		65
Dues and subscriptions		114		93
Armored transport service		37		35
Other		216		217
Total	$	720	$	651

Income Tax Expense

The Company had income tax expense of $757,000 for the three months ended June 31, 2025 at an effective tax rate of 21.1% compared to income tax expense of $566,000 with an effective tax rate of 20.4% in the comparable 2024 period. Income taxes computed at the statutory rate are primarily affected by the state income tax expense offset by the eligible amount of interest earned on state and municipal securities, tax-free municipal loans and income earned on bank-owned life insurance. For the three months ended June 30, 2025, the effective tax rate increased due to the increase in interest expense disallowance resulting from compliance
with the Tax Equity and Fiscal Responsibility Act of 1982 (“TEFRA”). The larger disallowance is due to greater projected interest expense for 2025 compared to 2024.

Results of Operations for the Six Months Ended June 30, 2025 and 2024.

Net Income and Net Income Available to Common Shareholders

Uwharrie Capital Corp reported net income of $5.4 million for the six months ended June 30, 2025, as compared to $4.6 million for the six months ended June 30, 2024, an increase of $781,000. Net income available to common shareholders was $5.1 million, or $0.72 per common share, for the six months ended June 30, 2025, compared to $4.3 million, or $0.60 per common share, for the six months ended June 30, 2024. Net income available to common shareholders is net income less dividends on the aforementioned noncontrolling interest.

Net Interest Income

Net interest income for the six months ended June 30, 2025 was $18.8 million, a $1.5 million increase from the $17.4 million reported for the comparative period in 2024. During the first six months of 2025, the average yield on our interest-earning assets increased 13 basis points to 5.20% from the same period in 2024, and the average rate we paid for our interest-bearing liabilities increased 4 basis points to 2.35%. These changes resulted in a higher interest rate spread of 2.85% as of June 30, 2025, compared to 2.76% as of June 30, 2024. The Company’s net interest margin was 3.49% and 3.40% for the comparable periods in 2025 and 2024, respectively.

The following table presents average balance sheet and a net interest income analysis for the six months ended June 30, 2025 and 2024, respectively:


	Average Balance				Income/Expenses				Rate/Yield
	2025		2024		2025		2024		2025			2024
	(dollars in thousands)
Interest-earning assets:
Taxable securities	$	304,914	$	308,501	$	5,653	$	5,932		3.74	%		3.87	%
Non-taxable securities (1)		58,970		57,855		619		622		2.69	%		2.71	%
Short-term investments		59,935		57,411		1,152		1,336		3.88	%		4.68	%
Equity securities		323		322		10		10		6.24	%		6.25	%
Taxable loans		661,407		598,320		20,485		17,815		6.25	%		5.99	%
Non-taxable loans (1)		14,158		17,397		219		264		3.96	%		3.83	%
Total interest-earning assets		1,099,707		1,039,806		28,138		25,979		5.20	%		5.07	%
Interest-bearing liabilities:
Interest-bearing deposits		768,887		714,866		8,625		7,826		2.26	%		2.20	%
Short-term borrowed funds		1,326		5,679		23		137		3.50	%		4.85	%
Long-term debt		29,179		29,118		655		662		4.53	%		4.57	%
Total interest-bearing liabilities		799,392		749,663		9,303		8,625		2.35	%		2.31	%
Net interest spread	$	300,315	$	290,143	$	18,835	$	17,354		2.85	%		2.76	%
Net interest margin (1) (% of earning assets)										3.49	%		3.40	%

(1)

Yields related to securities and loans exempt from income taxes are stated on a fully tax-equivalent basis, assuming a 21% effective tax rate.

Provision for Credit Losses

The provision for credit losses was $535,000 for the six months ended June 30, 2025, compared to a provision of $401,000 for the same period in 2024. There were net loan charge-offs of $123,000 for the six months ended June 30, 2025, as compared to net loan charge-offs of $58,000 during the same period of 2024. Refer to the Asset Quality section below for further information.

Noninterest Income

The Company places significant emphasis on diversification of revenue sources rather than relying solely upon interest income. Total noninterest income increased by $910,000 for the six-month period ended June 30, 2025, as compared to the same period in 2024. The primary factor contributing to the overall improvement in noninterest income was an increase of $638,000 in income from mortgage banking. This improvement is the result of an increased loan pipeline and improved pricing on loans. The 2024 period included a loss of $148,000 on the call of a held to maturity security under early redemption provisions, compared to no losses from sales or calls of securities during the 2025 period. Another factor contributing to the overall increase was a $170,000 increase in income associated with market adjustments on supplemental executive retirement plans during the six months ended June 30, 2025, compared to the six months ended June 30, 2024.


	Six Months Ended June 30,
	2025		2024
	(dollars in thousands)
Income from debit card transactions	$	1,185	$	1,152
Income from credit card transactions		346		350
Gross interchange and transaction fee income		1,531		1,502
Network costs - debit card		602		569
Network costs - credit card		372		323
Total	$	557	$	610

Noninterest Expense

Noninterest expense for the six months ended June 30, 2025 increased by $1.2 million from the same period in 2024, to $16.9 million. Salaries and employee benefits contributed $772,000 to the increase in noninterest expense due to wage increases and more commissions paid on increased production in the mortgage division during the first six months of 2025.

Total other noninterest expense increased $21,000 for the six months ended June 30, 2025, compared to the same period in 2024. The table below reflects the composition of other noninterest expense for the referenced periods.


	Six Months Ended June 30,
	2025		2024
	(dollars in thousands)
Office supplies and printing	$	57	$	37
Franchise and other taxes		90		62
Employee education		61		73
Shareholder relations expense		93		96
Telephone and data lines		94		102
Postage		133		117
Director fees and expense		160		143
Dues and subscriptions		215		175
Armored transport service		70		65
Other		301		383
Total	$	1,274	$	1,253

Income Tax Expense

The Company had income tax expense of $1.5 million for the six months ended June 30, 2025 at an effective tax rate of 21.6% compared to income tax expense of $1.2 million with an effective tax rate of 20.7% in the comparable 2024 period. Income taxes computed at the statutory rate are primarily affected by the state income tax expense offset by the eligible amount of interest earned on state and municipal securities, tax-free municipal loans and income earned on bank-owned life insurance. For the six months ended June 30, 2025, the effective tax rate increased due to the increase in interest expense disallowance resulting from compliance with the Tax Equity and Fiscal Responsibility Act of 1982 (“TEFRA”). The larger disallowance is due to greater projected interest expense for 2025 compared to 2024.

Asset Quality

The Company’s allowance for credit losses on loans is established through charges to earnings in the form of a provision for credit losses. The allowance is increased by provisions charged to operations and recoveries of amounts previously charged off and is reduced by recovery of provisions and loans charged off. Management continuously evaluates the adequacy of the allowance for credit losses. In evaluating the adequacy of the allowance, management considers the following: the growth, composition and industry diversification of the portfolio; historical loan loss experience; current delinquency levels; adverse situations that may affect a borrower’s ability to repay; estimated value of any underlying collateral; prevailing economic conditions; and other relevant factors.

The allowance for credit losses on loans represents management’s estimate of lifetime credit losses inherent in loans as of the balance sheet date. The allowance for credit losses is estimated by management using relevant available information, from both internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. The Company’s credit administration function, through a review process, periodically validates the accuracy of the initial risk grade assessment. In addition, as a given loan’s credit quality improves or deteriorates, the credit administration department has the responsibility to change the borrower’s risk grade accordingly.

The Company individually reviews loans when it is determined that it does not share similar risk characteristics with other loans and with total relationship exposure greater than or equal to $100,000 that are determined to be collateral dependent. When management determines that foreclosure is probable and the borrower is experiencing financial difficulty, the expected credit losses are based on the fair value of collateral at the reporting date adjusted for selling costs as appropriate. This evaluation is inherently subjective, as it requires material estimates, including internal and external appraisal services. In addition, regulatory agencies, as an integral part of their examination process, periodically review the allowance for credit losses on loans and may require additions for estimated losses based upon judgments different from those of management.

The Company measures expected credit losses for loans on a pooled basis when similar risk characteristics exist. The Company
evaluates credit risk in the Consumer segment based upon consumer credit scores and collateral and the Commercial segment based
upon loan risk grade and collateral. The allowance for credit losses for each segment is calculated using a Non-Discounted Cash Flow methodology. Management uses a risk-grading program designed to evaluate the credit risk in the loan portfolio. In this program, risk grades are initially assigned by loan officers and then reviewed and monitored by credit administration. This process includes the maintenance of an internally classified loan list that is designed to help management assess the overall quality of the loan portfolio and the adequacy of the allowance for credit losses on loans. In establishing the appropriate classification for specific assets, management

considers, among other factors, the estimated value of the underlying collateral, the borrower’s ability to repay, the borrower’s payment history, and the current delinquent status.

Additionally, the allowance for credit losses calculation includes subjective adjustments for qualitative risk factors that are likely to cause estimated credit losses to differ from historical experience. These qualitative adjustments may increase or reduce reserve levels and include adjustments for lending management experience and risk tolerance, loan review and audit results, asset quality and portfolio trends, loan portfolio growth, industry concentrations, trends in underlying collateral, external factors and economic conditions not already captured.

At June 30, 2025, the level of our individually assessed loans, which includes all collateral dependent loans in nonaccrual status with total relationship exposure greater than or equal to $100,000, was $136,000. The allowance for credit losses related to individually evaluated loans was $18,000 at June 30, 2025.

The allowance, expressed as a percentage of gross loans held for investment, increased five basis points from 0.87% at December 31, 2024 to 0.92% at June 30, 2025. The change in estimate of the allowance model altered the allocation of these percentages between the collectively assessed population and qualitative factors. The collectively assessed portion decreased from 0.75% at December 31, 2024 to 0.51% at June 30, 2025, and the qualitative factors portion increased from 0.12% to 0.41% over the same period. The increase in the allowance was driven by overall loan growth of $15.8 million, growth in commercial and industrial loans with higher loss given default rates and increases in the National unemployment rate forecasts. The ratio of nonaccrual loans to total loans increased from 0.03% at December 31, 2024 to 0.05% at June 30, 2025, and was related to the $119,000 increase in nonaccrual loans. Three loans totaling $260,000 were converted to nonaccrual during the first half of 2025, offset by paydowns of $13,000, two loans totaling $88,000 that were charged off, and one loan totaling $40,000 that was moved to other real estate owned and subsequently sold.

Other real estate owned was $0 at June 30, 2025 and December 31, 2024.

As of June 30, 2025, management believed the level of the allowance for credit losses on loans was appropriate in light of the risk inherent in the loan portfolio. While management believes that it uses the best information available to establish the allowance for credit losses on loans, future adjustments may be necessary and results of operations could be adversely affected if circumstances differ from the assumptions used in making the determinations. Furthermore, while management believes it has established the allowance in conformity with generally accepted accounting principles, there can be no assurance that banking regulators, in reviewing the Company’s loan portfolio, will not require an adjustment to the allowance for credit losses on loans. In addition, because future events affecting borrowers and collateral cannot be predicted with certainty, there can be no assurance that the existing allowance is adequate or that increases will not be necessary, should the quality of any loans deteriorate because of the factors discussed herein. Any material increase in the allowance for credit losses on loans may adversely affect the Company’s financial condition, results of operations and the value of its securities.

The following table shows the comparison of nonperforming assets at June 30, 2025 and December 31, 2024:

Nonperforming Assets

(dollars in thousands)


	June 30, 2025			December 31, 2024
	(dollars in thousands)
Nonperforming assets:
Accruing loans past due 90 days or more	$	—		$	—
Nonaccrual loans		311			192
Other real estate owned		—			—
Total nonperforming assets	$	311		$	192
Allowance for credit losses on loans	$	6,231		$	5,824
Nonaccrual loans to total loans		0.05	%		0.03	%
Allowance for credit losses on loans to total loans		0.92	%		0.87	%
Allowance for credit losses on loans to nonaccrual loans		2003.54	%		3033.33	%

Liquidity and Capital Resources

The objective of the Company’s liquidity management policy is to ensure the availability of sufficient cash flows to meet all financial commitments and to capitalize on any opportunities for expansion. Liquidity management addresses the ability to meet deposit withdrawals on demand or at contractual maturity, to repay borrowings as they mature and to fund new loans and investments as opportunities arise.

The Company’s primary sources of internally generated funds are principal and interest payments on loans, cash flows generated from operations and cash flow generated by investments. Growth in deposits is typically the primary source of funds for loan growth. Estimated uninsured deposits, including deposits collateralized by pledged assets, represented 39.2% and 38.8% of total deposits at June 30, 2025 and December 31, 2024, respectively. The Company and its subsidiary bank have multiple funding sources, in addition to deposits, that can be used to increase liquidity and provide additional financial flexibility. At June 30, 2025, these sources were the subsidiary bank’s established federal funds lines with correspondent banks aggregating $38.0 million, with available credit of $38.0 million; an established borrowing relationship with the FHLB, with available credit of $174.9 million; and access to borrowings from the FRB discount window, with available credit of $28.1 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, 2025, $3.0 million remained available for use on the line of credit.

The following table summarizes the Company’s interest-earning cash and cash equivalents as of the periods indicated.


	June 30, 2025			December 31, 2024
	(dollars in thousands)
Interest-earning cash and cash equivalents		62,598			42,554
Interest-earning cash and cash equivalents as a percent of:
Total loans held for investment		9.2	%		6.4	%
Total earning assets		5.6	%		4.0	%
Total deposits		5.9	%		4.1	%

Banks and bank holding companies, as regulated institutions, must meet required levels of capital. The Federal Reserve, the primary federal regulator of the Company and its subsidiary bank, has adopted minimum capital regulations or guidelines that categorize components and the level of risk associated with various types of assets.

The Company continues to maintain capital ratios that support its asset growth. The federal bank regulatory agencies have implemented regulatory capital rules known as “Basel III.” The Basel III rules require a common equity Tier 1 capital to risk-weighted assets minimum ratio of 4.50%, a minimum ratio of Tier 1 capital to risk-weighted assets of 6.00%, a minimum ratio of total capital to risk-weighted assets of 8.00%, and a minimum Tier 1 leverage ratio of 4.00%. There is also a capital conservation buffer that requires banks to hold common equity Tier 1 capital in excess of minimum risk-based capital ratios by at least 2.5% to avoid limits on capital distributions and certain discretionary bonus payments to executive officers and similar employees. The Company’s accumulated other comprehensive income or loss, resulting from unrealized gains and losses, net of income tax, on investment securities available for sale, is excluded from regulatory capital. As of June 30, 2025, the Company’s subsidiary bank continued to exceed minimum capital standards and remained well-capitalized under the applicable rules.

The Company’s subsidiary bank has a net total of $10.7 million in outstanding Fixed Rate Noncumulative Perpetual Preferred Stock. The preferred stock qualifies as Tier 1 capital at the Bank and pays dividends at an annual rate of 5.30%. The net total of $10.7 million is presented as noncontrolling interest at the Company level and qualifies as Tier 1 capital at the Company. At June 30, 2025, the Company had $29.2 million, net of unamortized debt issuance costs of $192,000, in subordinated debt outstanding, of which $27.3 million qualifies as Tier 2 capital at the Company level. The Company has made all interest and dividend payments in a timely manner.

Off-Balance Sheet Arrangements

Off-balance sheet arrangements include transactions, agreements or other contractual arrangements to which an unconsolidated entity of the Company is a party and pursuant to which the Company has obligations, including an obligation to provide guarantees on behalf of an unconsolidated entity, or retains an interest in assets transferred to an unconsolidated entity. We currently have no off-balance sheet arrangements of this kind.

Derivative financial instruments include futures contracts, forward contracts, interest rate swaps, options contracts, and other financial instruments with similar characteristics. We have not engaged in significant derivative activities through June 30, 2025, with the exception of mortgage banking derivatives. See Note 12 (Mortgage Banking Derivatives) to the Company’s Notes to Consolidated Financial Statements for additional discussion of mortgage banking derivatives.

Contractual Obligations

The timing and amount of our contractual obligations has not changed materially since our 2024 Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission on March 6, 2025.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Disclosure under this item is not required for smaller reporting companies.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

At the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s principal executive officer and principal financial officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Securities Exchange Act (“Exchange Act”) Rule 13a-15.

Based upon that evaluation, the principal executive officer and principal financial officer concluded that in their opinion, the Company’s disclosure controls and procedures were effective (1) to provide reasonable assurance that information required to be disclosed by the Company in the reports filed or submitted by it under the Exchange Act was recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (2) to provide reasonable assurance that information required to be disclosed by the Company in such reports is accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate to allow for timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

Management of the Company has evaluated, with the participation of the Company’s principal executive officer and principal financial officer, changes in the Company’s internal controls over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) during the second quarter of 2025. In connection with such evaluation, the Company has determined that there were no changes in the Company’s internal control over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. The Company reviews its disclosure controls and procedures, which may include its internal control over financial reporting, on an ongoing basis, and may from time to time make changes aimed at enhancing their effectiveness and ensuring that the Company’s systems evolve with its business.

Part II. OTHER INFORMATION

Item 1. Legal Proceedings.

Neither the Company nor its subsidiaries, nor any of their properties are subject to any material legal proceedings. From time to time, the Company’s subsidiary bank is engaged in ordinary routine litigation incidental to its business.

Item 1A. Risk Factors.

Disclosure under this item is not required for smaller reporting companies.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

The following table sets forth information with respect to shares of common stock repurchased by the Company during the three months ended June 30, 2025.


	(a) Total Number of Shares Purchased		(b) Average Price Paid per Share		(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Program(1)		(d) Maximum Dollar Value (in thousands) of Shares that May Yet Be Purchased Under the Plans
April 1, 2025 Through April 30, 2025		—	$	—		—	$	—
May 1, 2025 Through May 31, 2025		14,978	$	8.79		—	$	—
June 1, 2025 Through June 30, 2025		33,747	$	9.43		—	$	—
Total		48,725	$	9.23		—	$	—

(1)

Trades of the Company’s common stock are quoted on the OTCQX Market from time to time. The Company also has in place a Stock Repurchase Plan that provides liquidity to its shareholders in the event a willing buyer is not available to purchase shares that are offered for sale. The Company is under no obligation to purchase shares offered; however, it will accommodate such offers as its Stock Repurchase Plan allows.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.

Set forth below is the exhibit index for this quarterly report:


Exhibit Number		Description of Exhibit

31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
31.2		Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
32		Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)
101		Interactive data files providing financial information from the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2025, in inline XBRL (eXtensible Business Reporting Language) (filed herewith)
104		Cover page interactive data file (formatted in inline XBRL and contained in Exhibit 101)

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.


		UWHARRIE CAPITAL CORP
		(Registrant)

Date:	August 5, 2025	By:	/s/ Roger L. Dick
		Roger L. Dick
		President and Chief Executive Officer

Date:	August 5, 2025	By:	/s/ Heather H. Almond
		Heather H. Almond
		Principal Financial Officer