PEOPLES BANCORP OF NORTH CAROLINA INC

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 _

000-27205

(Commission File No.)

PEOPLES BANCORP OF NORTH CAROLINA, INC.
(Exact name of registrant as specified in its charter)

North Carolina	56-2132396
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)
518 West C Street , Newton , North Carolina	28658
(Address of principal executive offices)	(Zip Code)

( 828 ) 464-5620

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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

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

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

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

Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. 5,459,441 shares of common stock, outstanding at July 31, 2025.

INDEX

PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements	PAGE(S) — 4
	Consolidated Balance Sheets at June 30, 2025 (Unaudited) and December 31, 2024 (Audited)	4
	Consolidated Statements of Earnings for the three and six months ended June 30, 2025 and 2024 (Unaudited)	5
	Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2025 and 2024 (Unaudited)	6
	Consolidated Statements of Changes in Shareholders' Equity for the three and six months ended June 30, 2025 and 2024 (Unaudited)	7
	Consolidated Statements of Cash Flows for the six months ended June 30, 2025 and 2024 (Unaudited)	8-9
	Notes to Consolidated Financial Statements (Unaudited)	10-27
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	40
Item 4.	Controls and Procedures	40

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	41
Item 1A.	Risk Factors	41
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41
Item 3.	Defaults upon Senior Securities	41
Item 5.	Other Information	41
Item 6.	Exhibits	42
Signatures		43
Certifications

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FORWARD-LOOKING STATEMENTS

Statements made in this Quarterly Report on Form 10-Q, other than those concerning historical information, should be considered forward-looking statements pursuant to the safe harbor provisions of the Securities Exchange Act of 1934 and the Private Securities Litigation Act of 1995. These forward-looking statements involve risks and uncertainties and are based on the beliefs and assumptions of management and on the information available to management at the time that this Quarterly Report on Form 10-Q was prepared. These statements can be identified by the use of words like “expect,” “anticipate,” “estimate,” and “believe,” variations of these words and other similar expressions. Readers should not place undue reliance on forward-looking statements as a number of important factors could cause actual results to differ materially from those in the forward-looking statements. Factors that could cause actual results to differ include, but are not limited to, (1) competition in the markets served by the registrant and its subsidiaries, (2) changes in the interest rate environment, (3) general national, regional or local economic conditions may be less favorable than expected, resulting in, among other things, a deterioration in credit quality and the possible impairment of collectibility of loans, (4) legislative or regulatory changes, including changes in accounting standards, (5) significant changes in the federal and state legal and regulatory environments and tax laws, (6) the impact of changes in monetary and fiscal policies, laws, rules and regulations and (7) other risks and factors identified in other filings with the Securities and Exchange Commission, including but not limited to, those described in the registrant’s Annual Report on Form 10-K for the year ended December 31, 2024.

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

PEOPLES BANCORP OF NORTH CAROLINA, INC.
Consolidated Balance Sheets
June 30, 2025 and December 31, 2024
(Dollars in thousands)
	June 30,	December 31,
	2025	2024
	(Unaudited)	(Audited)
Assets
Cash and due from banks	$ 33,017		30,919
Interest-bearing deposits	68,983		28,347
Cash and cash equivalents	102,000		59,266
Investment securities available for sale	371,614		388,003
Other investments	2,648		2,728
Total securities	374,262		390,731
Mortgage loans held for sale	1,541		1,367
Loans	1,157,975		1,138,404
Less allowance for credit losses	( 9,792	)	( 9,995	)
Net loans	1,148,183		1,128,409
Premises and equipment, net	14,644		14,847
Cash surrender value of life insurance	17,587		17,675
Other real estate	-		369
Right of use lease asset	3,713		4,013
Accrued interest receivable and other assets	31,915		35,285
Total assets	$ 1,693,845		1,651,962
Liabilities and Shareholders' Equity
Deposits:
Noninterest-bearing demand	$ 406,556		402,254
Interest-bearing demand, MMDA & savings	754,125		741,363
Time, over $250,000	150,580		145,939
Other time	202,558		195,175
Total deposits	1,513,819		1,484,731
Junior subordinated debentures	15,464		15,464
Lease liability	3,844		4,136
Accrued interest payable and other liabilities	16,713		17,068
Total liabilities	1,549,840		1,521,399
Commitments and Contingencies
Shareholders' equity:
Preferred stock, no par value; authorized
5,000,000 shares; no shares issued and outstanding	-		-
Common stock, no par value; authorized
20,000,000 shares; issued and outstanding 5,459,441 shares
at June 30, 2025 and 5,457,646 shares at December 31, 2024	48,708		48,658
Common stock held by deferred compensation trust, at cost; 150,463
shares at June 30, 2025 and 158,580 shares at December 31, 2024	( 1,527	)	( 1,757	)
Deferred compensation	1,527		1,757
Retained earnings	127,506		121,062
Accumulated other comprehensive loss	( 32,209	)	( 39,157	)
Total shareholders' equity	144,005		130,563
Total liabilities and shareholders' equity	$ 1,693,845		1,651,962

See accompanying Notes to Consolidated Financial Statements.

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PEOPLES BANCORP OF NORTH CAROLINA, INC.
Consolidated Statements of Earnings
Three and Six Months Ended June 30, 2025 and 2024
(Dollars in thousands, except per share amounts)
	Three months ended			Six months ended
	June 30,			June 30,
	2025	2024		2025		2024
	(Unaudited)	(Unaudited)		(Unaudited)		(Unaudited)
Interest income:
Interest and fees on loans	$ 16,648		15,571		32,664		30,709
Interest on due from banks	706		725		1,056		1,632
Interest on investment securities:
U.S. Government sponsored enterprises	2,087		2,551		4,348		5,142
State and political subdivisions	694		695		1,388		1,390
Other	585		528		1,234		1,007
Total interest income	20,720		20,070		40,690		39,880
Interest expense:
NOW, MMDA & savings deposits	2,729		2,438		5,381		4,498
Time deposits	3,152		3,628		6,285		7,309
Junior subordinated debentures	242		283		483		567
Other	-		305		-		786
Total interest expense	6,123		6,654		12,149		13,160
Net interest income	14,597		13,416		28,541		26,720
Provision for (recovery of) credit losses	( 213	)	( 468	)	55		( 377	)
Net interest income after provision for (recovery of) credit losses	14,810		13,884		28,486		27,097
Non-interest income:
Service charges	1,372		1,346		2,784		2,686
Other service charges and fees	156		180		342		364
Loss on sale of securities, net	-		-		( 4	)	-
Mortgage banking income	41		74		68		125
Insurance and brokerage commissions	258		219		495		465
Appraisal management fee income	3,973		3,181		7,015		5,595
Miscellaneous	1,893		2,521		3,522		4,324
Total non-interest income	7,693		7,521		14,222		13,559
Non-interest expense:
Salaries and employee benefits	7,168		6,827		13,956		13,807
Occupancy	2,058		2,105		4,086		4,216
Professional fees	559		635		1,066		1,027
Advertising	245		95		498		377
Debit card expense	227		425		463		737
FDIC Insurance	193		192		382		383
Appraisal management fee expense	3,156		2,523		5,575		4,427
Miscellaneous	2,234		2,329		4,387		4,673
Total non-interest expense	15,840		15,131		30,413		29,647
Earnings before income taxes	6,663		6,274		12,295		11,009
Income tax expense	1,503		1,386		2,790		2,173
Net earnings	$ 5,160		4,888		9,505		8,836
Basic net earnings per share	$ 0.97		0.93		1.79		1.67
Diluted net earnings per share	$ 0.95		0.89		1.74		1.61
Cash dividends declared per share	$ 0.20		0.19		0.56		0.54

See accompanying Notes to Consolidated Financial Statements.

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PEOPLES BANCORP OF NORTH CAROLINA, INC.
Consolidated Statements of Comprehensive Income
Three and Six Months Ended June 30, 2025 and 2024
(Dollars in thousands)
	Three months ended		Six months ended
	June 30,		June 30,
	2025	2024	2025	2024
	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)
Net earnings	$ 5,160	4,888		9,505	8,836
Other comprehensive income (loss):
Unrealized holding gains (losses) on securities
available for sale	1,852	( 882	)	9,023	( 811	)
Reclassification adjustment for losses on
securities available for sale
included in net earnings	-	-		4	-
Total other comprehensive income (loss),
before income taxes	1,852	( 882	)	9,027	( 811	)
Income tax expense (benefit) related to other
comprehensive income:
Unrealized holding gains (losses) on securities
available for sale	422	( 203	)	2,078	( 187	)
Reclassification adjustment for losses on
on securities available for sale
included in net earnings	-	-		1	-
Total income tax expense (benefit) related to
other comprehensive income	422	( 203	)	2,079	( 187	)
Total other comprehensive income (loss),
net of tax	1,430	( 679	)	6,948	( 624	)
Total comprehensive income	$ 6,590	4,209		16,453	8,212

See accompanying Notes to Consolidated Financial Statements.

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PEOPLES BANCORP OF NORTH CAROLINA, INC.
Consolidated Statements of Changes in Shareholders' Equity
Three and Six Months Ended June 30, 2025 and 2024
(Dollars in thousands)
								Common Stock Held By		Accumulated
								Deferred		Other
Common Stock				Retained		Deferred		Compensation		Comprehensive
Shares		Amount		Earnings		Compensation		Trust		(Loss)		Total
(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Balance, December 31, 2024	5,457,646	$	48,658		121,062		1,757		( 1,757	)	( 39,157	)	130,563
Restricted stock units vested	1,795		50		-		-		-		-		50
Cash dividends declared on
common stock	-		-		( 1,968	)	-		-		-		( 1,968	)
Equity incentive plan, net	-		-		-		85		( 85	)	-		-
Net earnings	-		-		4,345		-		-		-		4,345
State tax rate reduction	-		-		-		-		-		( 99	)	( 99	)
Other comprehensive income	-		-		-		-		-		5,617		5,617
Balance, March 31, 2025	5,459,441	$	48,708		123,439		1,842		( 1,842	)	( 33,639	)	138,508
Cash dividends declared on
common stock	-		-		( 1,093	)	-		-		-		( 1,093	)
Equity incentive plan, net	-		-		-		( 315	)	315		-		-
Net earnings	-		-		5,160		-		-		-		5,160
Other comprehensive income	-		-		-		-		-		1,430		1,430
Balance, June 30, 2025	5,459,441	$	48,708		127,506		1,527		( 1,527	)	( 32,209	)	144,005
Balance, December 31, 2023	5,534,499	$	50,625		109,756		1,910		( 1,910	)	( 39,365	)	121,016
Common stock repurchase	( 78,500	)	( 1,998	)	-		-		-		-		( 1,998	)
Cash dividends declared on
common stock	-		-		( 1,929	)	-		-		-		( 1,929	)
Equity incentive plan, net	-		-		-		33		( 33	)	-		-
Net earnings	-		-		3,948		-		-		-		3,948
Other comprehensive income	-		-		-		-		-		55		55
Balance, March 31, 2024	5,455,999	$	48,627		111,775		1,943		( 1,943	)	( 39,310	)	121,092
Cash dividends declared on
common stock	-		-		( 1,040	)	-		-		-		( 1,040	)
Restricted stock units issued	1,647		51										51
Equity incentive plan, net	-		-		-		37		( 37	)	-		-
Net earnings	-		-		4,888		-		-		-		4,888
Other comprehensive loss	-		-		-		-		-		( 679	)	( 679	)
Balance, June 30, 2024	5,457,646	$	48,678		115,623		1,980		( 1,980	)	( 39,989	)	124,312

See accompanying Notes to Consolidated Financial Statements.

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PEOPLES BANCORP OF NORTH CAROLINA, INC.
Consolidated Statements of Cash Flows
Six Months Ended June 30, 2025 and 2024
(Dollars in thousands)
	2025	2024
	(Unaudited)	(Unaudited)
Cash flows from operating activities:
Net earnings	$ 9,505		8,836
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation, amortization and accretion	1,383		1,429
Provision for (recovery of) credit losses	55		( 377	)
Deferred income taxes	823		( 218	)
Gain on sale of held for mortgage loans	( 73	)	( 105	)
Loss on sale of investment securities net	4		-
Write-down of premises and equipment	31		-
Gain on sale of other real estate	( 13	)	-
Restricted stock expense	26		92
Proceeds from sales of mortgage loans held for sale	3,160		7,078
Origination of mortgage loans held for sale	( 3,261	)	( 7,575	)
Cash surrender value of life insurance	( 242	)	( 231	)
Change in:
Right of use lease asset	300		357
Other assets	369		961
Lease liability	( 292	)	( 345	)
Other liabilities	( 381	)	425
Net cash provided by operating activities	11,394		10,327
Cash flows from investing activities:
Purchases of investment securities available for sale	-		( 13,729	)
Proceeds from calls and maturities of investment securities
available for sale	3,000		3,000
Proceeds from sales of investment securities available for sale	12,733		-
Proceeds from paydowns of investment securities available for sale	9,365		8,160
Proceeds from paydowns of other investment securities	158		128
Purchase of FHLB stock	( 11	)	( 10	)
Net change in loans	( 19,829	)	( 18,254	)
Purchases of premises and equipment	( 865	)	( 215	)
Proceeds from bank owned life insurance	330		-
Proceeds from sale of other real estate and repossessions	382		-
Net cash provided (used) by investing activities	5,263		( 20,920	)
Cash flows from financing activities:
Net change in deposits	29,088		83,911
Net change in securities sold under agreement to repurchase	-		( 67,891	)
Restricted stock units vested	50		-
Common stock repurchased	-		( 1,998	)
Cash dividends paid on common stock	( 3,061	)	( 2,969	)
Net cash provided by financing activities	26,077		11,053
Net change in cash and cash equivalents	42,734		460
Cash and cash equivalents at beginning of period	59,266		82,375
Cash and cash equivalents at end of period	$ 102,000		82,835

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PEOPLES BANCORP OF NORTH CAROLINA, INC.
Consolidated Statements of Cash Flows, continued
Six Months Ended June 30, 2025 and 2024
(Dollars in thousands)
	2025	2024
	(Unaudited)	(Unaudited)
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$ 12,197	14,607
Income taxes	$ 2,125	1,837
Noncash investing and financing activities:
Change in unrealized loss on investment securities
available for sale, net	$ 6,948	( 624	)
Initial recognition of lease right-of-use asset and lease liability	$ 64	-

See accompanying Notes to Consolidated Financial Statements.

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PEOPLES BANCORP OF NORTH CAROLINA, INC.

Notes to Consolidated Financial Statements ( Unaudited )

(1) Summary of Significant Accounting Policies

The Consolidated Financial Statements include the financial statements of Peoples Bancorp of North Carolina, Inc. (the “Company”) and its wholly owned subsidiary, Peoples Bank (the “Bank”), along with the Bank’s wholly owned subsidiaries, Peoples Investment Services, Inc. (“PIS”), Real Estate Advisory Services, Inc. (“REAS”), Community Bank Real Estate Solutions, LLC (“CBRES”) and PB Real Estate Holdings, LLC. All significant intercompany balances and transactions have been eliminated in consolidation.

In June 2006, the Company formed a wholly owned Delaware statutory trust, PEBK Capital Trust II (“PEBK Trust II”), to facilitate the issuance of $ 20.6 million of trust preferred securities. PEBK Trust II is not included in the Consolidated Financial Statements.

The Consolidated Financial Statements in this report (other than the Consolidated Balance Sheet at December 31, 2024) are unaudited. In the opinion of management, all adjustments necessary for a fair presentation of the financial position and results of operations for the periods presented have been included. Management has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these Consolidated Financial Statements in conformity with generally accepted accounting principles in the United States (“GAAP”). Actual results could differ from those estimates.

Operating segments are components of an enterprise about which separate financial information is available that is evaluated regularly by management in deciding how to allocate resources and in assessing performance. Management has determined that the Company has two significant operating segment: Banking Operations and CBRES, as discussed more fully in Note 9. In determining the appropriateness of segment definition, the Company considers the criteria of Accounting Standards Codification (“ASC”) 280, Segment Reporting.

The Company’s accounting policies are fundamental to understanding management’s discussion and analysis of results of operations and financial condition. Many of the Company’s accounting policies require significant judgment regarding valuation of assets and liabilities and/or significant interpretation of the specific accounting guidance. A description of the Company’s significant accounting policies can be found in Note 1 of the Notes to Consolidated Financial Statements in the Company’s 2024 Annual Report to Shareholders which is Appendix A to the Proxy Statement for the 2025 Annual Meeting of Shareholders. There have been no significant changes to the application of significant accounting policies since December 31, 2024.

Recent Accounting Pronouncements

The following table provides a summary of Accounting Standards Updates (“ASU’s”) issued by the Financial Accounting Standards Board (“FASB”) that the Company has not adopted as of June 30, 2025, which may impact the Company’s financial statements.

ASU	Description	Effective Date	Effect on Financial Statements or Other Significant Matters
ASU 2024-03—Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40)	The ASU requires disaggregated disclosure of income statement expenses for public business entities (PBEs).	Annual reporting periods after December 15, 2026.	The adoption of this guidance is not expected to have a material impact on the Company’s results of operations, financial position. The adoption of this guidance is expected to have an immaterial impact on disclosures.
ASU 2025-01, Income Statement—Reporting Comprehensive Income— Expense Disaggregation Disclosures (Subtopic 220- 40)	The ASU clarifies that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027.	Annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027.	The adoption of this guidance is not expected to have a material impact on the Company’s results of operations, financial position. The adoption of this guidance is expected to have an immaterial impact on disclosures.

Other accounting standards that have been issued or proposed by FASB or other standards-setting bodies are not expected to have a material impact on the Company’s results of operations, financial position or disclosures.

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(2) Comprehensive Income

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

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

(dollars in thousands)	For the three months ended — June 30, 2025		June 30, 2024		For the six months ended — June 30, 2025		June 30, 2024
Beginning balance	$ ( 33,639	)	$ ( 39,310	)	$ ( 39,157	)	$ ( 39,365	)
Other comprehensive income (loss) before reclassifications, net	1,430		( 679	)	7,044		( 624	)
Amounts reclassified from accumulated other comprehensive loss, net	-		-		3		-
Reduction in state tax rate adjustment, net	-		-		( 99	)	-
Net current period other comprehensive income (loss)	1,430		( 679	)	6,948		( 624	)
Ending balance	$ ( 32,209	)	$ ( 39,989	)	$ ( 32,209	)	$ ( 39,989	)

(3) Net Earnings Per Share

Net earnings per share is based on the weighted average number of shares outstanding during the period while the effects of potential shares outstanding during the period are included in diluted earnings per share. The average market price during the applicable period is used to compute equivalent shares.

Shares held in the deferred compensation plan by the deferred compensation trust are excluded for purposes of calculating the weighted average number of shares outstanding and basic earnings per share in accordance with ASC 260-10-45-40 and ASC 260-10-45-45 through ASC 260-26010-45-46. The reconciliation of the amounts used in the computation of both basic earnings per share and diluted earnings per share for the three and six months ended June 30, 2025 and 2024 is as follows:

For the three months ended June 30, 2025	Net Earnings (Dollars in thousands)	Weighted Average Number of Shares	Per Share Amount
Basic earnings per share	$ 5,160	5,303,370	$ 0.97
Effect of dilutive securities:
Restricted stock units - unvested		10,771
Shares held in deferred comp plan
by deferred compensation trust		156,071
Diluted earnings per share	$ 5,160	5,470,212	$ 0.95

For the six months ended June 30, 2025	Net Earnings (Dollars in thousands)	Weighted Average Number of Shares	Per Share Amount
Basic earnings per share	$ 9,505	5,300,841	$ 1.79
Effect of dilutive securities:
Restricted stock units - unvested		10,563
Shares held in deferred comp plan
by deferred compensation trust		154,522
Diluted earnings per share	$ 9,505	5,465,926	$ 1.74

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For the three months ended June 30, 2024	Net Earnings (Dollars in thousands)	Weighted Average Number of Shares	Per Share Amount
Basic earnings per share	$ 4,888	5,290,856	$ 0.93
Effect of dilutive securities:
Restricted stock units - unvested		19,886
Shares held in deferred comp plan
by deferred compensation trust		165,608
Diluted earnings per share	$ 4,888	5,476,350	$ 0.89

For the six months ended June 30, 2024	Net Earnings (Dollars in thousands)	Weighted Average Number of Shares	Per Share Amount
Basic earnings per share	$ 8,836	5,304,763	$ 1.67
Effect of dilutive securities:
Restricted stock units - unvested		19,015
Shares held in deferred comp plan
by deferred compensation trust		164,975
Diluted earnings per share	$ 8,836	5,488,753	$ 1.61

(4) Investment Securities

Investment securities available for sale at June 30, 2025 and December 31, 2024 are as follows:

(Dollars in thousands)
	June 30, 2025
	Amortized Cost	Gross Unrealized Gains	Gross Unrealized Losses	Fair Value
U.S. Treasuries	$ 7,984	-	504	7,480
U.S. Government sponsored enterprises	5,972	-	420	5,552
GSE - Mortgage-backed securities	228,692	149	18,368	210,473
Private label mortgage-backed securities	41,145	66	905	40,306
State and political subdivisions	129,530	-	21,727	107,803
Total	$ 413,323	215	41,924	371,614

(Dollars in thousands)
	December 31, 2024
	Amortized Cost	Gross Unrealized Gains	Gross Unrealized Losses	Fair Value
U.S. Treasuries	$ 7,981	-	724	7,257
U.S. Government sponsored enterprises	9,243	-	511	8,732
GSE - Mortgage-backed securities	248,837	162	23,207	225,792
Private label mortgage-backed securities	43,118	74	1,425	41,767
State and political subdivisions	129,659	-	25,204	104,455
Total	$ 438,838	236	51,071	388,003

The current fair value and associated unrealized losses on investments in securities with unrealized losses at June 30, 2025 and December 31, 2024 are summarized in the tables below, with the length of time the individual securities have been in a continuous loss position.

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(Dollars in thousands)
	June 30, 2025
	Less than 12 Months		12 Months or More		Total
	Fair Value	Unrealized Losses	Fair Value	Unrealized Losses	Fair Value	Unrealized Losses
U.S. Treasuries	$ -	-	7,480	504	7,480	504
U.S. government sponsored enterprises	-	-	5,552	420	5,552	420
GSE -Mortgage-backed securities	15,707	308	190,059	18,060	205,766	18,368
Private label mortgage-backed securities	11,756	30	25,251	875	37,007	905
State and political subdivisions	-	-	107,803	21,727	107,803	21,727
Total	$ 27,463	338	336,145	41,586	363,608	41,924

(Dollars in thousands)
	December 31, 2024
	Less than 12 Months		12 Months or More		Total
	Fair Value	Unrealized Losses	Fair Value	Unrealized Losses	Fair Value	Unrealized Losses
U.S. Treasuries	$ -	-	7,257	724	7,257	724
U.S. government sponsored enterprises	-	-	8,732	511	8,732	511
GSE -Mortgage-backed securities	20,458	669	197,497	22,538	217,955	23,207
Private label mortgage-backed securities	4,010	9	21,727	1,416	25,737	1,425
State and political subdivisions	-	-	104,455	25,204	104,455	25,204
Total	$ 24,468	678	339,668	50,393	364,136	51,071

At June 30, 2025, unrealized losses in the investment securities portfolio relating to debt securities totaled $ 41.9 million. The unrealized losses on these debt securities arose due to changing interest rates and are considered to be temporary. From the June 30, 2025 table above, both of the U.S. Treasury securities, all 108 of the securities issued by state and political subdivisions contained unrealized losses, all six of the securities issued by U.S. Government sponsored enterprises (“GSE”), 110 of the 115 GSE mortgage-backed securities, and 14 of the 17 private label mortgage-backed securities contained unrealized losses. The Company did not have any reserves on securities at June 30, 2025, as no credit related losses were identified in the Company’s June 30, 2025 analysis. At December 31, 2024, unrealized losses in the investment securities portfolio relating to debt securities totaled $ 51.1 million. The unrealized losses on these debt securities arose due to changing interest rates and are considered to be temporary. From the December 31, 2024 table above, both of the U.S. Treasury securities, all 108 of the securities issued by state and political subdivisions contained unrealized losses, all seven of the securities issued by GSEs, 114 of the 119 GSE mortgage-backed securities, and 11 of the 16 private label mortgage-backed securities contained unrealized losses. The Company did not have any reserves on securities at December 31, 2024, as no credit related losses were identified in the Company’s December 31, 2024 analysis.

The amortized cost and estimated fair value of investment securities available for sale, other than GSE mortgage-backed securities, at June 30, 2025, are shown below by contractual maturity. Expected maturities of mortgage-backed securities will differ from contractual maturities because borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

June 30, 2025
(Dollars in thousands)
	Amortized Cost	Fair Value
Due within one year	$ 4,987	4,980
Due from one to five years	38,012	35,112
Due from five to ten years	73,590	61,134
Due after ten years	68,042	59,915
Mortgage-backed securities	228,692	210,473
Total	$ 413,323	371,614

No securities available for sale were sold during the three and six months ended June 30, 2024. During the six months ended June 30, 2025, proceeds from sales of securities available for sale were $ 12.7 million and resulted in gross losses of $ 47,000 and gross gains of $ 43,000 .

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Securities with a fair value of approximately $ 36.6 million and $ 40.0 million at June 30, 2025 and December 31, 2024, respectively, were pledged to secure public deposits and for other purposes as required by law.

(5) Loans

Major classifications of loans at June 30, 2025 and December 31, 2024 are summarized as follows:

(Dollars in thousands)	June 30, 2025	December 31, 2024
Real estate loans:
Construction and land development	$ 122,087		122,328
Single-family residential	397,717		384,509
Commercial	491,602		471,444
Multifamily and farmland	71,092		69,671
Total real estate loans	1,082,498		1,047,952
Loans not secured by real estate:
Commercial	57,835		63,837
Farm	467		401
Consumer	6,126		6,475
All other	11,049		19,739
Total loans	1,157,975		1,138,404
Less allowance for credit losses	( 9,792	)	( 9,995	)
Total net loans	$ 1,148,183		1,128,409

The Bank makes loans and extensions of credit primarily within the Catawba Valley region of North Carolina, which encompasses Catawba, Alexander, Iredell and Lincoln counties and also in Mecklenburg, Wake, Rowan and Forsyth counties of North Carolina. Although the Bank has a diversified loan portfolio, a substantial portion of the loan portfolio is collateralized by improved and unimproved real estate, the value of which is dependent upon the real estate market. Risk characteristics of the major components of the Bank’s loan portfolio are discussed below:

·	Construction and land development loans – The risk of loss is largely dependent on the initial estimate of whether the property’s value at completion equals or exceeds the cost of property construction and the availability of take-out financing. During the construction phase, a number of factors can result in delays or cost overruns. If the estimate is inaccurate or if actual construction costs exceed estimates, the value of the property securing the loan may be insufficient to ensure full repayment when completed through a permanent loan, sale of the property, or by seizure of collateral.
·	Single-family residential loans – Declining home sales volumes, decreased real estate values and higher than normal levels of unemployment could contribute to losses on these loans.
·	Commercial real estate loans – Repayment is dependent on income being generated in amounts sufficient to cover operating expenses and debt service. These loans also involve greater risk because they are generally not fully amortizing over the loan period, but rather have a balloon payment due at maturity. A borrower’s ability to make a balloon payment typically will depend on being able to either refinance the loan or timely sell the underlying property.
·	Commercial loans – Repayment is generally dependent upon the successful operation of the borrower’s business. In addition, the collateral securing the loans may depreciate over time, be difficult to appraise, be illiquid, or fluctuate in value based on the success of the business.
·	Multifamily and farmland loans – Decreased real estate values and higher than normal levels of unemployment could contribute to losses on these loans.

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Loans are considered past due if the required principal and interest payments have not been received within 30 days of the date such payments were due. Loans are placed on non-accrual status when, in management’s opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory provisions. Generally, a loan is placed on non-accrual status when it is over 90 days past due and there is reasonable doubt that all principal will be collected. When interest accrual is discontinued, all unpaid accrued interest is reversed. Interest income is subsequently recognized only to the extent cash payments are received in excess of principal due. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

The following tables present an age analysis of past due loans, by loan type, as of June 30, 2025 and December 31, 2024:

June 30, 2025
(Dollars in thousands)
	Loans 30-89 Days Past Due	Nonaccrual Loans	Total Past Due Loans	Total Current Loans	Total Loans	Accruing Loans 90 or More Days Past Due
Real estate loans:
Construction and land development	$ 241	33	274	121,813	122,087	-
Single-family residential	1,138	4,164	5,302	392,415	397,717	-
Commercial	-	409	409	491,193	491,602	-
Multifamily and farmland	-	-	-	71,092	71,092	-
Total real estate loans	1,379	4,606	5,985	1,076,513	1,082,498	-
Loans not secured by real estate:
Commercial	272	209	481	57,354	57,835	-
Farm	-	-	-	467	467	-
Consumer	15	7	22	6,104	6,126	-
All other	-	-	-	11,049	11,049	-
Total loans	$ 1,666	4,822	6,488	1,151,487	1,157,975	-

December 31, 2024
(Dollars in thousands)
	Loans 30-89 Days Past Due	Nonaccrual Loans	Total Past Due Loans	Total Current Loans	Total Loans	Accruing Loans 90 or More Days Past Due
Real estate loans:
Construction and land development	$ 131	37	168	122,160	122,328	-
Single-family residential	5,434	3,720	9,154	375,355	384,509	-
Commercial	87	426	513	470,931	471,444	-
Multifamily and farmland	-	-	-	69,671	69,671	-
Total real estate loans	5,652	4,183	9,835	1,038,117	1,047,952	-
Loans not secured by real estate:
Commercial	360	248	608	63,229	63,837	-
Farm	-	-	-	401	401	-
Consumer	33	9	42	6,433	6,475	-
All other	-	-	-	19,739	19,739	-
Total loans	$ 6,045	4,440	10,485	1,127,919	1,138,404	-

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The following table presents non-accrual loans as of June 30, 2025 and December 31, 2024:

	June 30, 2025 — Nonaccrual Loans	Nonaccrual Loans	Total
	With No	With	Nonaccrual
(Dollars in thousands)	Allowance	Allowance	Loans
Real estate loans:
Construction and land development	$ -	33	33
Single-family residential	1,320	2,845	4,165
Commercial	409	-	409
Multifamily and farmland	-	-	-
Total real estate loans	1,729	2,878	4,607
Loans not secured by real estate:
Commercial	186	22	208
Consumer	-	7	7
Total	$ 1,915	2,907	4,822

	December 31, 2024 — Nonaccrual Loans	Nonaccrual Loans	Total
	With No	With	Nonaccrual
(Dollars in thousands)	Allowance	Allowance	Loans
Real estate loans:
Construction and land development	$ 37	-	37
Single-family residential	3,720	-	3,720
Commercial	426	-	426
Multifamily and farmland	-	-	-
Total real estate loans	4,183	-	4,183
Loans not secured by real estate:
Commercial	248	-	248
Consumer	9	-	9
Total	$ 4,440	-	4,440

No interest income was recognized on non-accrual loans for the six months ended June 30, 2025 and 2024.

A loan may be individually evaluated for determining the allowance for credit losses when it is determined that it does not share similar risk characteristics with other assets. Non-accrual loans with an outstanding balance of $ 250,000 or greater are individually evaluated and totaled $ 1.9 million and $ 1.6 million at June 30, 2025 and December 31, 2024, respectively. Non-accrual loans evaluated collectively as a pool totaled $ 2.9 million and $ 2.8 million at June 30, 2025 and December 31, 2024, respectively. Collateral dependent loans are loans for which the repayment is expected to be provided substantially through the operation or sale of the collateral and the borrower is experiencing financial difficulty. Collateral dependent loans require an analysis of the collateral. The fair value of the collateral is discounted by estimated liquidation costs. If the discounted fair value of the collateral is greater than the amortized loan balance, no allowance is required. Otherwise the difference between the balance and the collateral is charged off if deemed uncollectible.

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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	Allowance for	December 31, 2024	Allowance for
(Dollars in thousands)	Amortized Cost	Credit Losses	Amortized Cost	Credit Losses
Real estate loans:
Construction and land development	$ 33	1	37	-
Single-family residential	4,164	25	3,720	-
Commercial	409	-	426	-
Multifamily and farmland	-	-	-	-
Total real estate loans	4,606	26	4,183	-
Loans not secured by real estate:
Commercial	209	-	248	-
Consumer	-	-	-	-
Total	$ 4,815	26	4,431	-

The following tables provide a breakdown of collateral dependent loans by collateral type and collateral coverage at June 30, 2025 and 2024. These tables also show non-accrual loans not considered to be collateral dependent at June 30, 2025 and December 31, 2024.

	June 30, 2025
					Financial Assets
(Dollars in thousands)					Not Considered
	Residential Property	Developed Land	Commercial Property	Business Assets	Collateral Dependent	Total
Real estate loans:
Construction and land development	$ -	33	-	-	-	33
Single-family residential	4,164	-	-	-	-	4,164
Commercial	-	-	409	-	-	409
Multifamily and farmland	-	-	-	-	-	-
Total real estate loans	4,164	33	409	-	-	4,606
Loans not secured by real estate:
Commercial	-	-	-	209	-	209
Consumer	-	-	-	-	7	7
Total	$ 4,164	33	409	209	7	4,822
Collateral Value	$ 12,220	88	832	215

	December 31, 2024
					Financial Assets
(Dollars in thousands)					Not Considered
	Residential Property	Developed Land	Commercial Property	Business Assets	Collateral Dependent	Total
Real estate loans:
Construction and land development	$ -	37	-	-	-	37
Single-family residential	3,720	-	-	-	-	3,720
Commercial	-	-	426	-	-	426
Multifamily and farmland	-	-	-	-	-	-
Total real estate loans	3,720	37	426	-	-	4,183
Loans not secured by real estate:
Commercial	-	-	-	248	-	248
Consumer	-	-	-	-	9	9
Total	$ 3,720	37	426	248	9	4,440
Collateral Value	$ 9,648	88	944	272

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

A change to the allowance for credit losses is evaluated based on the nature of the modification. Occasionally, the Bank modifies loans by providing principal forgiveness on certain loans. When principal forgiveness is provided, the amortized cost basis of the asset is written off against the allowance for credit losses. The amount of the principal forgiveness is deemed to be uncollectible; therefore, that portion of the loan is written off, resulting in a reduction of the amortized cost basis and a corresponding adjustment to the allowance for credit losses.

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In some cases, the Bank may modify a certain loan by providing multiple types of concessions. Typically, one type of concession, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another concession, such as principal forgiveness, may be granted.

No loans to borrowers experiencing financial difficulty were modified during the three months ended June 30, 2025. The following table shows the amortized cost basis at June 30, 2024 of the loans to borrowers experiencing financial difficulty that were modified during the three months ended June 30, 2024, disaggregated by loan class and type of concession granted.

(Dollars in thousands)	Amortized Cost Basis at June 30, 2024	% of Loan Class	Modification Type	Financial Effect
Loan class:
Single-family residential	$ 201	0.05 %	Interest rate reduction	Adjustable rate loan converted to fixed rate loan
Total	$ 201

No loans to borrowers experiencing financial difficulty were modified during the six months ended June 30, 2025. The following table shows the amortized cost basis at June 30, 2024 of the loans to borrowers experiencing financial difficulty that were modified during the six months ended June 30, 2024, disaggregated by loan class and type of concession granted.

(Dollars in thousands)	Amortized Cost Basis at June 30, 2024	% of Loan Class	Modification Type	Financial Effect
Loan class:
Single-family residential	$ 201	0.05 %	Interest rate reduction	Adjustable rate loan converted to fixed rate loan
Commercial not secured by real estate	73	0.11 %	Term extension	Line of credit converted to amortizing term loan
Total	$ 274

The Bank closely monitors the performance of those loans that are modified because borrowers are experiencing financial difficulty so as to understand the effectiveness of its modification efforts. The following tables show the performance of loans that were modified in the six months ended June 30, 2024.

June 30, 2024
(Dollars in thousands)
	Payment Status (Amortized Cost Basis)
	Current	30 - 89 Days Past Due	90 + Days Past Due
Loan type:
Single-family residential	$ 201
Commercial not secured by real estate	73	-	-
Total	$ 274	-	-

Management uses several measures to assess and monitor the credit risks in the loan portfolio, including a loan grading system that begins upon loan origination and continues until the loan is collected or collectability becomes doubtful. Upon loan origination, the Bank’s originating loan officer evaluates the quality of the loan and assigns one of eight risk grades. The loan officer monitors the loan’s performance and credit quality and makes changes to the credit grade as conditions warrant. When originated or renewed, all loans over a certain dollar amount receive in-depth reviews and risk assessments by the Bank’s Credit Administration. Before making any changes in these risk grades, management considers assessments as determined by an independent third-party credit review firm (as described below), regulatory examiners and the Bank’s Credit Administration. Any issues regarding the risk assessments are addressed by the Bank’s senior credit administrators and factored into management’s decision to originate or renew the loan. The Bank Board reviews, on a monthly basis, an analysis of the Bank’s reserves relative to the range of reserves estimated by the Bank’s Credit Administration.

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As an additional measure, the Bank engages an independent third party to review the underwriting, documentation and risk grading analyses. This independent third party reviews and evaluates loan relationships greater than or equal to $1.5 million as well as a periodic sample of commercial relationships with exposures below $1.5 million, excluding loans in default and loans in process of litigation or liquidation . The third party’s evaluation and report is shared with management and the Bank Board.

Management considers certain commercial loans with weak credit risk grades to be individually impaired and measures such impairment based upon available cash flows and the value of the collateral. Allowance or reserve levels are estimated for all other graded loans in the portfolio based on their assigned credit risk grade, type of loan and other matters related to credit risk.

Management uses the information developed from the procedures described above in evaluating and grading the loan portfolio. This continual grading process is used to monitor the credit quality of the loan portfolio and to assist management in estimating the allowance. The provision for credit losses charged or credited to earnings is based upon management’s judgment of the amount necessary to maintain the allowance at a level appropriate to absorb probable incurred losses in the loan portfolio at the balance sheet date. The amount of the allowance, and any provision, is dependent upon many factors, including growth and changes in the composition of the loan portfolio, net charge-offs, delinquencies, management’s assessment of loan portfolio quality, the value of collateral, and other macro-economic factors and trends. An evaluation of these factors is performed quarterly by management through an analysis of the appropriateness of the allowance.

The following tables present changes in the allowance for credit losses for the three and six months ended June 30, 2025 and 2024.

(Dollars in thousands)
	Real Estate Loans
	Construction and Land Development	Single-Family Residential		Commercial		Multifamily and Farmland		Commercial		Farm	Consumer and All Other		Total
Three months ended June 30, 2025
Allowance for credit losses:
Beginning balance	$ 3,463		3,362		2,337		242		439		1	203		10,047
Charge-offs	-		-		-		-		( 37	)	-	( 135	)	( 172	)
Recoveries	-		39		-		-		25		-	38		102
Provision (recovery) for
loan losses (1)	( 187	)	15		( 53	)	( 11	)	( 21	)	-	72		( 185	)
Ending balance	$ 3,276		3,416		2,284		231		406		1	178		9,792
Allowance for credit loss-loans	$ 3,276		3,416		2,284		231		406		1	178		9,792
Allowance for credit losses
loan commitments	1,257		-		-		-		-		-	1		1,258
Total allowance for credit losses	$ 4,533		3,416		2,284		231		406		1	179		11,050
Six months ended June 30, 2025
Allowance for credit losses:
Beginning balance	$ 3,385		3,386		2,322		246		446		1	209		9,995
Charge-offs	-		( 5	)	-		-		( 37	)	-	( 242	)	( 284	)
Recoveries	-		44		-		-		30		-	109		183
Provision (recovery) for
loan losses (1)	( 109	)	( 9	)	( 38	)	( 15	)	( 33	)	-	102		( 102	)
Ending balance	$ 3,276		3,416		2,284		231		406		1	178		9,792
Allowance for credit loss-loans	$ 3,276		3,416		2,284		231		406		1	178		9,792
Allowance for credit losses
loan commitments	1,257		-		-		-		-		-	1		1,258
Total allowance for credit losses	$ 4,533		3,416		2,284		231		406		1	179		11,050

(1) Excludes provision for credit losses related to unfunded commitments. Note 7, "Commitments and Contingencies" in the condensed consolidated financial statements provides more detail concerning the provision for credit losses related to unfunded commitments.

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(Dollars in thousands)
	Real Estate Loans
	Construction and Land Development	Single-Family Residential		Commercial		Multifamily and Farmland		Commercial		Farm		Consumer and All Other		Total
Three months ended June 30, 2024
Allowance for credit losses:
Beginning balance	$ 3,680		3,597		2,345		313		672		2		238		10,847
Charge-offs	-		( 126	)	-		-		( 301	)	-		( 145	)	( 572	)
Recoveries	-		15		1		-		34		-		26		76
Provision (recovery) for
loan losses (1)	( 362	)	( 2	)	28		( 42	)	( 37	)	( 1	)	81		( 335	)
Ending balance	$ 3,318		3,484		2,374		271		368		1		200		10,016
Allowance for credit loss-loans	$ 3,318		3,484		2,374		271		368		1		200		10,016
Allowance for credit losses
loan commitments	1,541		1		1		-		19		-		3		1,565
Total allowance for credit losses	$ 4,859		3,485		2,375		271		387		1		203		11,581
Six months ended June 30, 2024
Allowance for credit losses:
Beginning balance	$ 3,913		3,484		2,317		268		812		2		245		11,041
Charge-offs	-		( 126	)	-		-		( 747	)	-		( 355	)	( 1,228	)
Recoveries	-		71		203		-		39		-		62		375
Provision (recovery) for
loan losses (1)	( 595	)	55		( 146	)	3		264		( 1	)	248		( 172	)
Ending balance	$ 3,318		3,484		2,374		271		368		1		200		10,016
Allowance for credit loss-loans	$ 3,318		3,484		2,374		271		368		1		200		10,016
Allowance for credit losses
loan commitments	1,541		1		1		-		19		-		3		1,565
Total allowance for credit losses	$ 4,859		3,485		2,375		271		387		1		203		11,581

The Bank utilizes several credit quality indicators to manage credit risk in an ongoing manner. The Bank uses an internal risk grade system that categorizes loans into pass, watch or substandard categories.

The Bank uses the following credit quality indicators:

·	Pass – Includes loans ranging from excellent quality with a minimal amount of credit risk to loans with higher risk and servicing needs but still are considered to be acceptable. The higher risk loans in this category are not problem credits presently, but may be in the future if the borrower is unable to change its present course.
·	Watch – These loans are currently performing satisfactorily, but there has been some recent past due history on repayment and there are potential weaknesses that may, if not corrected, weaken the asset or inadequately protect the Bank’s position at some future date.
·	Substandard – A Substandard loan is inadequately protected by the current sound net worth and paying capacity of the obligor or the collateral pledged (if there is any). There is a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. There is a distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.
·	Doubtful – Loans classified Doubtful have all the weaknesses inherent in loans classified Substandard, plus the added characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions, and values highly questionable and improbable.
·	Loss – Loans classified Loss are considered uncollectable and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off this worthless loan even though partial recovery may be affected in the future.

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The following table presents by credit quality indicator, loan class and year of origination, the amortized cost of the Bank’s loans as of June 30, 2025.

	Term Loans by Origination Year							Revolving
								Loans
(dollars in thousands)							Revolving	Converted to	Total
	2025	2024	2023	2022	2021	Prior	Loans	Term Loans	Loans
June 30, 2025
Real Estate Loans Construction and land development
Pass	$ 23,478	37,209	23,583	19,656	4,811	7,969	-	4,884	121,590
Watch	-	-	-	-	439	-	-	-	439
Substandard	-	-	-	-	-	58	-	-	58
Total Construction and land development	$ 23,478	37,209	23,583	19,656	5,250	8,027	-	4,884	122,087
Single family
Pass	$ 17,019	26,540	37,468	71,857	42,161	80,599	115,316	-	390,960
Watch	-	-	-	-	-	1,862	-	-	1,862
Substandard	-	-	30	1,320	94	3,136	315	-	4,895
Total single family	$ 17,019	26,540	37,498	73,177	42,255	85,597	115,631	-	397,717
Commercial
Pass	$ 31,215	59,529	45,484	138,457	68,157	142,594	2,698	-	488,134
Watch	-	-	-	449	-	2,218	-	-	2,667
Substandard	-	-	-	-	-	801	-	-	801
Total commercial	$ 31,215	59,529	45,484	138,906	68,157	145,613	2,698	-	491,602
Multifamily and farmland
Pass	$ 6,696	984	8,145	20,293	20,253	14,681	-	-	71,052
Watch	-	-	-	-	-	40	-	-	40
Substandard	-	-	-	-	-	-	-	-	-
Total multifamily and farmland	$ 6,696	984	8,145	20,293	20,253	14,721	-	-	71,092
Total real estate loans	$ 78,408	124,262	114,710	252,032	135,915	253,958	118,329	4,884	1,082,498
Loans not secured by real estate Commercial
Pass	$ 4,816	7,687	11,562	4,068	2,319	10,612	16,250	-	57,314
Watch	-	-	-	136	16	160	-	-	312
Substandard	-	-	22	187	-	-	-	-	209
Total Commercial	$ 4,816	7,687	11,584	4,391	2,335	10,772	16,250	-	57,835
Farm
Pass	$ 105	46	162	6	-	-	148	-	467
Watch	-	-	-	-	-	-	-	-	-
Substandard	-	-	-	-	-	-	-	-	-
Total farm	$ 105	46	162	6	-	-	148	-	467
Consumer
Pass	$ 1,033	1,169	846	493	123	115	2,321	-	6,100
Watch	-	-	-	19	-	-	-	-	19
Substandard	-	-	-	-	-	7	-	-	7
Total consumer	$ 1,033	1,169	846	512	123	122	2,321	-	6,126
All other
Pass	$ 1,144	455	48	6,147	326	2,851	78	-	11,049
Watch	-	-	-	-	-	-	-	-	-
Substandard	-	-	-	-	-	-	-	-	-
Total all other	$ 1,144	455	48	6,147	326	2,851	78	-	11,049
Total loans not secured by real estate	$ 7,098	9,357	12,640	11,056	2,784	13,745	18,797	-	75,477
Total loans	$ 85,506	133,619	127,350	263,088	138,699	267,703	137,126	4,884	1,157,975

The following table presents by credit quality indicator, loan class and year of origination, gross loan charge-offs for the six months ended June 30, 2025.

June 30, 2025	Gross Loan Charge-offs by Origination Year							Revolving
								Loans
(dollars in thousands)							Revolving	Converted to	Total
	2025	2024	2023	2022	2021	Prior	Loans	Term Loans	Loans
Real estate loans:
Construction and land development	$ -	-	-	-	-	-	-	-	-
Single-family residential	-	-	-	-	-	-	5	-	5
Commercial	-	-	-	-	-	-	-	-	-
Multifamily and farmland	-	-	-	-	-	-	-	-	-
Total real estate loans	-	-	-	-	-	-	5	-	5
Loans not secured by real estate:
Commercial	-	-	-	37	-	-	-	-	37
Consumer	-	6	-	-	-	236	-	-	242
All other	-	-	-	-	-	-	-	-	-
Total gross charge-offs	$ -	6	-	37	-	236	5	-	284

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The following table presents by credit quality indicator, loan class and year of origination, the amortized cost of the Bank’s loans as of December 31, 2024.

	Term Loans by Origination Year							Revolving
								Loans
(dollars in thousands)							Revolving	Converted to	Total
	2024	2023	2022	2021	2020	Prior	Loans	Term Loans	Loans
December 31, 2024
Real Estate Loans Construction and land development
Pass	$ 41,171	29,503	34,495	6,836	5,792	4,020	-	-	121,817
Watch	-	-	-	443	-	-	-	-	443
Substandard	-	-	-	-	-	68	-	-	68
Total Construction and land development	$ 41,171	29,503	34,495	7,279	5,792	4,088	-	-	122,328
Single family
Pass	$ 22,169	35,865	73,663	43,900	22,363	66,074	113,067	-	377,101
Watch	-	-	-	-	-	1,469	993	-	2,462
Substandard	-	31	1,000	-	124	3,467	324	-	4,946
Total single family	$ 22,169	35,896	74,663	43,900	22,487	71,010	114,384	-	384,509
Commercial
Pass	$ 56,411	46,589	135,881	71,066	58,223	97,122	2,296	-	467,588
Watch	-	-	-	-	87	2,943	-	-	3,030
Substandard	-	-	-	-	400	426	-	-	826
Total commercial	$ 56,411	46,589	135,881	71,066	58,710	100,491	2,296	-	471,444
Multifamily and farmland
Pass	$ 998	8,455	20,786	20,638	6,055	12,186	443	-	69,561
Watch	-	-	-	-	-	43	-	-	43
Substandard	-	-	-	-	-	67	-	-	67
Total multifamily and farmland	$ 998	8,455	20,786	20,638	6,055	12,296	443	-	69,671
Total real estate loans	$ 120,749	120,443	265,825	142,883	93,044	187,885	117,123	-	1,047,952
Loans not secured by real estate
Commercial
Pass	$ 9,153	11,335	6,045	3,107	1,707	11,864	20,032	-	63,243
Watch	-	-	136	19	23	167	1	-	346
Substandard	-	25	223	-	-	-	-	-	248
Total Commercial	$ 9,153	11,360	6,404	3,126	1,730	12,031	20,033	-	63,837
Farm
Pass	$ 53	195	17	50	-	-	86	-	401
Watch	-	-	-	-	-	-	-	-	-
Substandard	-	-	-	-	-	-	-	-	-
Total farm	$ 53	195	17	50	-	-	86	-	401
Consumer
Pass	$ 1,777	1,232	666	176	99	64	2,397	-	6,411
Watch	-	-	53	-	-	-	-	-	53
Substandard	-	-	-	-	-	8	3	-	11
Total consumer	$ 1,777	1,232	719	176	99	72	2,400	-	6,475
All other
Pass	$ 972	-	10,002	376	217	2,878	5,164	-	19,609
Watch	-	-	-	-	-	130	-	-	130
Substandard	-	-	-	-	-	-	-	-	-
Total all other	$ 972	-	10,002	376	217	3,008	5,164	-	19,739
Total loans not secured by real estate	$ 11,955	12,787	17,142	3,728	2,046	15,111	27,683	-	90,452
Total loans	$ 132,704	133,230	282,967	146,611	95,090	202,996	144,806	-	1,138,404

The following table presents by credit quality indicator, loan class and year of origination, gross loan charge-offs during the year ended December 31, 2024.

December 31, 2024	Gross Loan Charge-offs by Origination Year							Revolving
								Loans
(dollars in thousands)							Revolving	Converted to	Total
	2024	2023	2022	2021	2020	Prior	Loans	Term Loans	Loans
Real estate loans:
Construction and land development	$ -	-	-	-	-	-	-	-	-
Single-family residential	-	-	126	-	-	5	-	-	131
Commercial	-	-	-	-	-	-	-	-	-
Multifamily and farmland	-	-	-	-	-	-	-	-	-
Total real estate loans	-	-	126	-	-	5	-	-	131
Loans not secured by real estate:
Commercial	-	447	397	74	179	37	-	-	1,134
Consumer	5	37	9	-	1	557	-	-	609
All other	-	-	-	-	-	107	-	-	107
Total gross charge-offs	$ 5	484	532	74	180	706	-	-	1,981

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(6) Leases

As of June 30, 2025, the Bank had operating right of use assets of $ 3.7 million and operating lease liabilities of $ 3.8 million. As of December 31, 2024, the Bank had operating right of use assets of $ 4.0 million and operating lease liabilities of $ 4.1 million. The Bank maintains operating leases on land and buildings for some of the Bank’s branch facilities and loan production offices. Most leases include one option to renew, with renewal terms extending up to 15 years. The exercise of renewal options is based on the judgment of management as to whether or not the renewal option is reasonably certain to be exercised. Factors in determining whether an option is reasonably certain of exercise include, but are not limited to, the value of leasehold improvements, the value of renewal rates compared to market rates, and the presence of factors that would cause a significant economic penalty to the Bank if the option is not exercised. Leases with a term of 12 months or less are not recorded on the balance sheet and instead are recognized in lease expense on a straight-line basis over the lease term.

The following table presents lease cost and other lease information as of June 30, 2025 and 2024.

(Dollars in thousands)	June 30, 2025	June 30, 2024
Operating lease cost	$ 390	$ 420
Other information:
Cash paid for amounts included in the measurement of lease liabilities	384	408
Operating cash flows from operating leases	-	-
Right-of-use assets obtained in exchange for new lease liabilities - operating leases	64	-
Weighted-average remaining lease term - operating leases	7.62	8.16
Weighted-average discount rate - operating leases	2.86 %	2.76 %

The following table presents lease maturities as of June 30, 2025.

(Dollars in thousands) — Maturity Analysis of Operating Lease Liabilities:	June 30, 2025
2025	$ 378
2026	673
2027	634
2028	515
2029	423
Thereafter	1,694
Total	4,317
Less: Imputed Interest	( 473	)
Operating Lease Liability	$ 3,844

(7) Commitments and Contingencies

The Bank is party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. Those instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the balance sheet. The contract amounts of those instruments reflect the extent of involvement the Bank has in particular classes of financial instruments.

The exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. The Bank uses the same credit policies in making commitments to extend credit and standby letters of credit as it does for on-balance-sheet instruments.

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In most cases, the Bank requires collateral or other security to support financial instruments with credit risk.

(Dollars in thousands)
	Contractual Amount
	6/30/25	12/31/24
Financial instruments whose contract amount represent credit risk:
Commitments to extend credit	$ 350,028	$ 348,876
Standby letters of credit	$ 1,607	$ 1,675

Commitments to extend credit are conditional agreements to lend to a customer. Commitments generally have fixed expiration dates and because they may expire without being drawn upon, the total commitment amount of $ 351.6 million does not necessarily represent future cash requirements.

Standby letters of credit are conditional commitments issued by the Bank to pay a third party on behalf of a customer. Those letters of credit are primarily issued to businesses in the Bank’s delineated market area. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The Bank holds real estate, equipment, automobiles and customer deposits as collateral supporting those commitments for which collateral is deemed necessary.

The Company maintains an allowance for off-balance sheet credit exposures such as unfunded balances for existing lines of credit, commitments to extend future credit, when this extension of credit is not unconditionally cancelable. The allowance for off-balance sheet credit exposures is adjusted as a provision for credit loss expense. The estimate includes consideration of the likelihood that funding will occur, which is based on a historical funding activity and an estimate of expected credit losses on commitments expected to be funded over its estimated life, which are the same loss rates that are used in computing the allowance for credit losses on loans. The allowance for credit losses for unfunded loan commitments of $ 1.3 million and $ 1.1 million 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 three and six months ended June 30, 2025 and 2024.

(dollars in thousands)	For three months ended — June 30, 2025	June 30, 2024		June 30, 2025		June 30, 2024
Beginning Balance	$ 1,286	$	1,698	$	1,101	$ 1,770
Provision for (recovery of) credit losses	( 28	)	( 133	)	157	( 205	)
Ending balance	$ 1,258	$	1,565	$	1,258	$ 1,565

(8) Fair Value

The Company is required to disclose fair value information about financial instruments, whether or not recognized at fair value on the face of the balance sheet, for which it is practicable to estimate that value. The assumptions used in the estimation of the fair value of the Company’s financial instruments are detailed below. Where quoted prices are not available, fair values are based on estimates using discounted cash flows and other valuation techniques. The use of discounted cash flows can be significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. The following disclosures should not be considered a surrogate of the liquidation value of the Company, but rather a good faith estimate of the increase or decrease in the value of financial instruments held by the Company since purchase, origination, or issuance.

The Company groups assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:

·	Level 1 – Valuation is based upon quoted prices for identical instruments traded in active markets.
·	Level 2 – Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.
·	Level 3 – Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.

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Investment Securities Available for Sale

Fair values of investment securities available for sale are determined by obtaining quoted prices on nationally recognized securities exchanges when available. If quoted prices are not available, fair value is determined using matrix pricing, which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities. Fair values for investment securities with quoted market prices are reported in the Level 1 fair value category. Fair value measurements obtained from independent pricing services are reported in the Level 2 fair value category. All other fair value measurements are reported in the Level 3 fair value category.

Mortgage Loans Held for Sale

Mortgage loans held for sale are carried at lower of aggregate cost or market value. The cost of mortgage loans held for sale approximates the market value. Mortgage loans held for sale are reported in the Level 2 fair value category. Management determined that the valuation technique used at current period end and prior period end are more appropriately classified as Level 2 and has updated in the current period and prior period year end classifications to Level 2.

Loans

The fair value of loans, excluding previously presented individually evaluated loans measured at fair value on a non-recurring basis, is estimated using discounted cash flow analyses. The discount rates used to determine fair value use interest rate spreads that reflect factors such as liquidity, credit, and nonperformance risk of the loans. Loans are reported in the Level 3 fair value category, as the pricing of loans is more subjective than the pricing of other financial instruments.

Mutual Funds

Mutual funds held in the deferred compensation trust are carried at fair value. Mutual funds held in the deferred compensation trust are included in other assets on the balance sheet and reported in the Level 1 fair value category.

FHLB Borrowings

The fair value of FHLB borrowings is estimated based upon discounted future cash flows using a discount rate comparable to the current market rate for such borrowings. FHLB borrowings are reported in the Level 2 fair value category. Management determined that the valuation technique used at current period end and prior period end are more appropriately classified as Level 2 and has updated in the current period and prior period year end classifications to Level 2.

Commitments to Extend Credit and Standby Letters of Credit

Commitments to extend credit and standby letters of credit are generally short-term in duration and made at variable interest rates. Therefore, both the carrying value and estimated fair value associated with these instruments are immaterial.

Limitations

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on many judgments. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

Fair value estimates are based on existing on and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Significant assets and liabilities that are not considered financial instruments include deferred income taxes and premises and equipment. In addition, the tax ramifications related to the realization of unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates.

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The tables below present all financial instruments measured at fair value on a recurring basis by level within the fair value hierarchy, as of June 30, 2025 and December 31, 2024.

(Dollars in thousands)
	June 30, 2025
	Fair Value Measurements	Level 1 Valuation	Level 2 Valuation	Level 3 Valuation
U.S. Treasuries	$ 7,480	-	7,480	-
U.S. Government sponsored enterprises	5,552	-	5,552	-
GSE - Mortgage-backed securities	210,473	-	210,473	-
Private label mortgage-backed securities	40,306	-	40,306	-
State and political subdivisions	107,803	-	107,803	-
Mutual funds held in deferred compensation trust	2,760	2,760	-	-

(Dollars in thousands)
	December 31, 2024
	Fair Value Measurements	Level 1 Valuation	Level 2 Valuation	Level 3 Valuation
U.S. Treasuries	$ 7,257	-	7,257	-
U.S. Government sponsored enterprises	8,732	-	8,732	-
GSE - Mortgage-backed securities	225,792	-	225,792	-
Private label mortgage-backed securities	41,767	-	41,767	-
State and political subdivisions	104,455	-	104,455	-
Mutual funds held in deferred compensation trust	2,726	2,726	-	-

The fair value measurements for individually evaluated loans and other real estate on a non-recurring basis at June 30, 2025 and December 31, 2024 are presented below. The fair value measurement process uses certified appraisals and other market-based information; however, in many cases, it also requires significant input based on management’s knowledge of, and judgment about, current market conditions, specific issues relating to the collateral and other matters. As a result, all fair value measurements for individually evaluated loans and other real estate are considered Level 3.

(Dollars in thousands)	Fair Value June 30, 2025	Fair Value December 31, 2024	Valuation Technique	Significant Unobservable Inputs	General Range of Significant Unobservable Input Values
Individually evaluated loans	$ 1,915	$ 1,646	Appraised value	Discounts to reflect current market conditions and ultimate collectability	0 - 58%
Other real estate	$ -	$ 369	Appraised value	Discounts to reflect current market conditions and estimated costs to sell	0 - 25%

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The carrying amount and estimated fair value of financial instruments at June 30, 2025 and December 31, 2024 are as follows:

(Dollars in thousands)
		Fair Value Measurements at June 30, 2025
	Carrying Amount	Level 1	Level 2	Level 3	Total
Assets:
Cash and cash equivalents	$ 102,000	102,000	-	-	102,000
Investment securities available for sale	371,614	-	371,614	-	371,614
Other investments	2,648	-	-	2,648	2,648
Mortgage loans held for sale	1,541	-	1,541	-	1,541
Loans, net	1,148,183	-	-	1,148,442	1,148,442
Mutual funds held in deferred compensation trust	2,760	2,760	-	-	2,760
Liabilities:
Deposits	$ 1,513,819	-	1,516,160	-	1,516,160
Junior subordinated debentures	15,464	-	15,464	-	15,464

(Dollars in thousands)
		Fair Value Measurements at December 31, 2024
	Carrying Amount	Level 1	Level 2	Level 3	Total
Assets:
Cash and cash equivalents	$ 59,266	59,266	-	-	59,266
Investment securities available for sale	388,003	-	388,003	-	388,003
Other investments	2,728	-	-	2,728	2,728
Mortgage loans held for sale	1,367	-	1,367	-	1,367
Loans, net	1,128,409	-	-	1,123,864	1,123,864
Mutual funds held in deferred compensation trust	2,726	2,726	-	-	2,726
Liabilities:
Deposits	$ 1,484,731	-	1,487,475	-	1,487,475
Junior subordinated debentures	15,464	-	15,464	-	15,464

(9) Reportable Segments

The Company has two reportable segments as described below:

Banking Operations – This segment reflects the consolidated Bank, excluding CBRES. The primary source of revenue for this segment is net interest income.

CBRES – A Bank subsidiary that provides appraisal management services to community banks. The primary source of revenue for this segment is appraisal management fee income.

The Bank’s executive management team, which is comprised of the Bank’s Chief Executive Officer, Chief Financial Officer and executive vice presidents, is the chief operating decision maker for the Company. The Bank’s executive management team reviews actual net income versus budgeted net income on a quarterly basis to assess segment performance.

The following table presents financial information for the reportable segments. Financial results by operating segment, including significant expense categories provided to the chief operating decision maker, are detailed below. Certain prior period amounts have been reclassified to conform to the current presentation. The information provided under the caption “Other” represents the parent company, which is not considered to be a reportable segment, is included to reconcile the results of the operating segments to the consolidated financial statements prepared in conformity with GAAP.

(Dollars in thousands)
	Banking
	Operations	CBRES	Other		Consolidated
As of and for the three months ended June 30, 2025
Interest income	$ 20,712		-	8		20,720
Interest expense	5,881		-	242		6,123
Net interest income	14,831		-	( 234	)	14,597
Provision for (recovery of) credit losses	( 213	)	-	-		( 213	)
Noninterest income	3,720		-	-		3,720
Appraisal management fee income	-		3,973	-		3,973
Salaries and employee benefits	6,895		180	93		7,168
Occupancy	2,057		1	-		2,058
Appraisal management fee expense	-		3,156	-		3,156
Noninterest expense	3,138		227	93		3,458
Income tax expense (benefit)	1,497		94	( 88	)	1,503
Net income (loss)	$ 5,177		315	( 332	)	5,160
Total assets	$ 1,688,255		4,888	702		1,693,845
As of and for the three months ended June 30, 2024
Interest income	$ 20,062		-	8		20,070
Interest expense	6,371		-	283		6,654
Net interest income	13,691		-	( 275	)	13,416
Provision for (recovery of) credit losses	( 468	)	-	-		( 468	)
Noninterest income	4,340		-	-		4,340
Appraisal management fee income	-		3,181	-		3,181
Salaries and employee benefits	6,548		178	101		6,827
Occupancy	2,098		7	-		2,105
Appraisal management fee expense	-		2,523	-		2,523
Noninterest expense	3,374		214	88		3,676
Income tax expense (benefit)	1,423		60	( 97	)	1,386
Net income (loss)	$ 5,056		199	( 367	)	4,888
Total assets	$ 1,650,872		4,035	491		1,655,398
As of and for the six months ended June, 2025
Interest income	$ 40,675		-	15		40,690
Interest expense	11,666		-	483		12,149
Net interest income	29,009		-	( 468	)	28,541
Provision for credit losses	55		-	-		55
Noninterest income	7,207		-	-		7,207
Appraisal management fee income	-		7,015	-		7,015
Salaries and employee benefits	13,361		400	195		13,956
Occupancy	4,075		11	-		4,086
Appraisal management fee expense	-		5,575	-		5,575
Noninterest expense	6,221		415	160		6,796
Income tax expense (benefit)	2,822		141	( 173	)	2,790
Net income (loss)	$ 9,682		473	( 650	)	9,505
Total assets	$ 1,688,255		4,888	702		1,693,845
As of and for the six months ended June, 2024
Interest income	$ 39,863		-	17		39,880
Interest expense	12,593		-	567		13,160
Net interest income	27,270		-	( 550	)	26,720
Provision for (recovery of) credit losses	( 377	)	-	-		( 377	)
Noninterest income	7,964		-	-		7,964
Appraisal management fee income	-		5,595	-		5,595
Salaries and employee benefits	13,231		374	202		13,807
Occupancy	4,208		8	-		4,216
Appraisal management fee expense	-		4,427	-		4,427
Noninterest expense	6,687		361	149		7,197
Income tax expense (benefit)	2,264		98	( 189	)	2,173
Net income (loss)	$ 9,221		327	( 712	)	8,836
Total assets	$ 1,650,872		4,035	491		1,655,398

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

The following is a discussion of the financial position and results of operations of the Company and should be read in conjunction with the information set forth under Item 1A Risk Factors in the Company’s Annual Report of Form 10-K and the Company’s Consolidated Financial Statements and Notes thereto on pages A-20 through A-63 of the Company’s 2024 Annual Report to Shareholders which is Appendix A to the Proxy Statement for the 2025 Annual Meeting of Shareholders.

Introduction

Management’s discussion and analysis of earnings and related data are presented to assist in understanding the consolidated financial condition and results of operations of the Company. The Company is the parent company of the Bank and a registered bank holding company operating under the supervision of the Board of Governors of the Federal Reserve System (the “Federal Reserve”). The Bank is a North Carolina-chartered bank, with offices in Catawba, Lincoln, Alexander, Mecklenburg, Iredell, Wake, Rowan and Forsyth counties, operating under the banking laws of North Carolina and the rules and regulations of the Federal Deposit Insurance Corporation (the “FDIC”).

Overview

Our business consists principally of attracting deposits from the general public and investing these funds in commercial loans, real estate mortgage loans, real estate construction loans and consumer loans. Our profitability depends primarily on our net interest income, which is the difference between the income we receive on our loan and investment securities portfolios and our cost of funds, which consists of interest paid on deposits and borrowed funds. Net interest income also is affected by the relative amounts of our interest-earning assets and interest-bearing liabilities. When interest-earning assets approximate or exceed interest-bearing liabilities, a positive interest rate spread will generate net interest income. Our profitability is also affected by the level of other income and operating expenses. Other income consists primarily of miscellaneous fees related to our loans and deposits, mortgage banking income and commissions from sales of annuities and mutual funds. Operating expenses consist of compensation and benefits, occupancy related expenses, federal deposit and other insurance premiums, data processing, advertising and other expenses.

Our operations are influenced significantly by local economic conditions and by policies of financial institution regulatory authorities. The earnings on our assets are influenced by the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Federal Reserve, inflation, interest rates, market and monetary fluctuations. Lending activities are affected by the demand for commercial and other types of loans, which in turn is affected by the interest rates at which such financing may be offered. Our cost of funds is influenced by interest rates on competing investments and by rates offered on similar investments by competing financial institutions in our market area, as well as general market interest rates. These factors can cause fluctuations in our net interest income and other income. In addition, local economic conditions can impact the credit risk of our loan portfolio, in that (1) local employers may be required to eliminate employment positions of individual borrowers, and (2) small businesses and commercial borrowers may experience a downturn in their operating performance and become unable to make timely payments on their loans. Management evaluates these factors in estimating the allowance for credit losses (“ACL”, “allowance for credit losses”, or “allowance”) and changes in these economic factors could result in increases or decreases to the provision for loan losses.

The Federal Reserve Federal Open Market Committee (“FOMC”) increased the target federal funds rate 500 basis points between March 2022 and July 2023 to address the supply-chain disruption and rising inflation that had developed in the markets prior to the increases in the target rate. In 2024, the FOMC reduced the target federal funds rate to a range of 4.25% to 4.50% at June 30, 2025. Subsequently, economic conditions have stabilized such that businesses in our market area are growing and investing again. The uncertainty expressed in the local, national and international markets through the primary economic indicators of activity are now sufficiently stable to allow for reasonable economic growth in our markets.

Although we are unable to control the external factors that influence our business, by maintaining high levels of balance sheet liquidity, managing our interest rate exposures and by actively monitoring asset quality, we seek to minimize the potentially adverse risks of unforeseen and unfavorable economic trends. Because the assets and liabilities of a bank are primarily monetary in nature (payable in fixed, determinable amounts), the performance of a bank is affected more by changes in interest rates than by inflation. Interest rates generally increase as the rate of inflation increases, but the magnitude of the change in rates may not be the same. The effect of inflation on banks is normally not as significant as its influence on those businesses that have large investments in plants and inventories. During periods of high inflation there are normally corresponding increases in the money supply, and banks will normally experience above average growth in assets, loans, and deposits. Also, general increases in the price of goods and services can be expected to result in increased operating expenses.

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Our business emphasis has been and continues to be to operate as a well-capitalized, profitable and independent community-oriented financial institution dedicated to providing quality customer service. We are committed to meeting the financial needs of the communities in which we operate. We expect growth to be achieved in our local markets and through expansion opportunities in contiguous or nearby markets. While we would be willing to consider growth by acquisition in certain circumstances, we do not consider the acquisition of another company to be necessary for our continued ability to provide a reasonable return to our shareholders. We believe that we can be more effective in serving our customers than many of our non-local competitors because of our ability to quickly and effectively provide senior management responses to customer needs and inquiries. Our ability to provide these services is enhanced by the stability and experience of our Bank officers and managers.

Summary of Critical Accounting Policies

The Company’s accounting policies are fundamental to understanding management’s discussion and analysis of results of operations and financial condition. Many of the Company’s accounting policies require significant judgment regarding valuation of assets and liabilities and/or significant interpretation of specific accounting guidance. A complete description of the Company’s significant accounting policies can be found in Note 1 of the Notes to Consolidated Financial Statements in the Company’s 2024 Annual Report to Shareholders which is Appendix A to the Proxy Statement for the 2025 Annual Meeting of Shareholders. There have been no significant changes to the application of significant accounting policies since December 31, 2024.

Results of Operations

Summary. Net earnings were $5.2 million or $0.97 per share and $0.95 per diluted share for the three months ended June 30, 2025, as compared to $4.9 million or $0.93 per share and $0.89 per diluted share for the prior year period. The increase in second quarter net earnings is primarily attributable to increases in net interest income and non-interest income, which were partially offset by an increase in the provision for credit losses and an increase in non-interest expense, compared to the prior year period, as discussed below.

Net earnings were $9.5 million or $1.79 per share and $1.74 per diluted share for the six months ended June 30, 2025, as compared to $8.8 million or $1.67 per share and $1.61 per diluted share for the prior year period. The increase in year to date net earnings is primarily attributable to increases in net interest income and non-interest income, which were partially offset by an increase in the provision for credit losses and an increase in non-interest expense, compared to the prior year period, as discussed below.

The annualized return on average assets was 1.15% for the six months ended June 30, 2025, compared to 1.08% for the same period one year ago, and annualized return on average shareholders’ equity was 14.06% for the six months ended June 30, 2025, compared to 14.69% for the same period one year ago.

Net Interest Income. Net interest income, the major component of the Company’s net income, is the amount by which interest and fees generated by interest-earning assets exceed the total cost of funds used to carry them. Net interest income is affected by changes in the volume and mix of interest-earning assets and interest-bearing liabilities, as well as changes in the yields earned and rates paid. Net interest margin is calculated by dividing tax-equivalent net interest income by average interest-earning assets, and represents the Company’s net yield on its interest-earning assets.

Net interest income was $14.6 million for the three months ended June 30, 2025, compared to $13.4 million for the three months ended June 30, 2024. The increase in net interest income is due to a $650,000 increase in interest income and a $531,000 decrease in interest expense. The increase in interest income is primarily due to a $1.1 million increase in interest income and fees on loans, which was partially offset by a $19,000 decrease in interest income on balances due from banks and a $408,000 decrease in interest income on investment securities. The increase in interest income and fees on loans is primarily due to an increase in total loans. The decrease in interest income on balances due from banks is primarily due to rate decreases implemented by the FOMC from September 2024 through December 2024. The decrease in interest income on investment securities is primarily due to a reduction in balances outstanding. The decrease in interest expense is primarily due to a decrease in rates paid on interest-bearing liabilities. Net interest income after the provision for credit losses was $14.8 million for the three months ended June 30, 2025, compared to $13.9 million for the three months ended June 30, 2024. The provision for credit losses for the three months ended June 30, 2025 was a recovery of $213,000, compared to a recovery of $468,000 for the three months ended June 30, 2024. The decrease in the recovery for credit losses is primarily attributable to a smaller reduction in reserves on construction loans during the three months ended June 30, 2025, as compared to the reduction in reserves on construction loans during the three months ended June 30, 2024. The reduction in reserves on construction loans during the three months ended June 30, 2024 was primarily due to a decrease in construction loan balances outstanding and unfunded construction loan balances during the second quarter of 2024.

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Interest income was $20.7 million for the three months ended June 30, 2025, compared to $20.1 million for the three months ended June 30, 2024. The increase in interest income is primarily due to a $1.1 million increase in interest income and fees on loans, which was partially offset by a $19,000 decrease in interest income on balances due from banks and a $408,000 decrease in interest income on investment securities. The increase in interest income and fees on loans is primarily due to an increase in total loans. The decrease in interest income on balances due from banks is primarily due to rate decreases implemented by the FOMC from September 2024 through December 2024. The decrease in interest income on investment securities is primarily due to a reduction in balances outstanding. During the three months ended June 30, 2025, average loans were $1.16 billion, an increase of $47.5 million from average loans of $1.11 billion for the three months ended June 30, 2024. During the three months ended June 30, 2025, average investment securities available for sale were $415.9 million, a decrease of $29.2 million from average investment securities available for sale of $445.1 million for the three months ended June 30, 2024. The average yield on loans for the three months ended June 30, 2025 and 2024 was 5.78% and 5.65%, respectively. The average yield on investment securities available for sale was 3.21% and 3.36% for the three months ended June 30, 2025 and 2024, respectively. The average yield on earning assets was 5.07% and 5.01% for the three months ended June 30, 2025 and 2024, respectively.

Interest expense was $6.1 million for the three months ended June 30, 2025, compared to $6.7 million for the three months ended June 30, 2024. The decrease in interest expense is primarily due to a decrease in rates paid on interest-bearing liabilities. During the three months ended June 30, 2025, average interest-bearing non-maturity deposits were $750.3 million, an increase of $65.5 million from average interest-bearing non-maturity deposits of $684.8 million for the three months ended June 30, 2024. During the three months ended June 30, 2025, average certificates of deposit were $353.3 million, an increase of $3.8 million from average certificates of deposit of $349.5 million for the three months ended June 30, 2024. The average rate paid on interest-bearing checking and savings accounts was 1.46% and 1.43% for the three months ended June 30, 2025 and 2024, respectively. The average rate paid on certificates of deposit was 3.58% for the three months ended June 30, 2025, compared to 4.17% for the same period one year ago. The average rate paid on interest-bearing liabilities was 2.19% for the three months ended June 30, 2025, compared to 2.46% for the same period one year ago.

The following table sets forth for each category of interest-earning assets and interest-bearing liabilities, the average amounts outstanding, the interest incurred on such amounts and the average rate earned or incurred for the three months ended June 30, 2025 and 2024. The table also sets forth the average rate earned on total interest-earning assets, the average rate paid on total interest-bearing liabilities, and the net yield on total average interest-earning assets for the same periods. Yield information does not give effect to changes in fair value of available for sale investment securities that are reflected as a component of shareholders’ equity. Yields and interest income on tax-exempt investments for the three months ended June 30, 2025 and 2024 have been adjusted to a tax equivalent basis using an effective tax rate of 22.78% for securities that are both federal and state tax exempt and an effective tax rate of 20.53% for federal tax-exempt securities. Non-accrual loans and the interest income that was recorded on non-accrual loans, if any, are included in the yield calculations for loans in all periods reported. The Company believes the presentation of net interest income on a tax-equivalent basis provides comparability of net interest income from both taxable and tax-exempt sources and facilitates comparability within the industry. Although the Company believes these non-GAAP financial measures enhance investors’ understanding of its business and performance, these non-GAAP financial measures should not be considered an alternative to GAAP. The reconciliations of these non-GAAP financial measures to their most directly comparable GAAP financial measures are presented below.

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	Three months ended			Three months ended
	June 30, 2025			June 30, 2024
(Dollars in thousands)	Average Balance	Interest	Yield / Rate	Average Balance	Interest	Yield / Rate
Interest-earning assets:
Loans receivable	$ 1,156,140	$ 16,648	5.78 %	$ 1,108,684	$ 15,571	5.65 %
Investments - taxable	283,382	2,652	3.75 %	308,105	3,031	3.96 %
Investments - nontaxable*	135,660	720	2.13 %	140,252	749	2.15 %
Due from banks	64,293	706	4.40 %	53,770	725	5.42 %
Total interest-earning assets	1,639,475	20,726	5.07 %	1,610,811	20,076	5.01 %
Non-interest earning assets:
Cash and due from banks	28,773			29,695
Allowance for credit losses	(10,065	)		(10,795	)
Other assets	22,671			20,297
Total assets	$ 1,680,854			$ 1,650,008
Interest-bearing liabilities:
Interest-bearing demand, MMDA & savings deposits	$ 750,322	$ 2,729	1.46 %	$ 684,782	$ 2,438	1.43 %
Time deposits	353,303	3,152	3.58 %	349,514	3,628	4.17 %
Junior subordinated debentures	15,464	242	6.28 %	15,464	283	7.36 %
Other	-	-	-	39,431	305	3.11 %
Total interest-bearing liabilities	1,119,089	6,123	2.19 %	1,089,191	6,654	2.46 %
Non-interest bearing liabilities and shareholders' equity:
Demand deposits	409,894			427,299
Other liabilities	14,648			14,075
Shareholders' equity	137,223			119,443
Total liabilities and shareholders' equity	$ 1,680,854			$ 1,650,008
Net interest spread		$ 14,603	2.88 %		$ 13,422	2.55 %
Net yield on interest-earning assets			3.57 %			3.35 %
Taxable equivalent adjustment
Investment securities		$ 6			$ 6
Net interest income		$ 14,597			$ 13,416

*Includes U.S. Government agency securities that are non-taxable for state income tax purposes of $6.1 million in 2025 and $10.4 million in 2024. Tax rates of 2.25% and 2.50% were used to calculate the tax equivalent yields on these securities in 2025 and 2024, respectively.

Year to date net interest income was $28.5 million for the six months ended June 30, 2025, compared to $26.7 million for the six months ended June 30, 2024. The increase in net interest income is due to a $810,000 increase in interest income and a $1.0 million decrease in interest expense. The increase in interest income is primarily due to a $2.0 million increase in interest income and fees on loans, which was partially offset by a $576,000 decrease in interest income on balances due from banks and a $569,000 decrease in interest income on investment securities. The increase in interest income and fees on loans is primarily due to an increase in total loans. The decrease in interest income on balances due from banks is due to a reduction in balances outstanding and rate decreases implemented by the FOMC from September 2024 through December 2024. The decrease in interest income on investment securities is primarily due to a reduction in balances outstanding. The decrease in interest expense is primarily due to a decrease in rates paid on interest-bearing liabilities. Net interest income after the provision for credit losses was $28.5 million for the six months ended June 30, 2025, compared to $27.1 million for the six months ended June 30, 2024. The provision for credit losses for the six months ended June 30, 2025 was an expense of $55,000, compared to a recovery of $377,000 for the six months ended June 30, 2024. The increase in the provision for credit losses is primarily attributable to a reduction in reserves on construction loans during the six months ended June 30, 2024, which was primarily due to a decrease in construction loan balances outstanding, combined with an increase in provision expense for unfunded construction loans during the six months ended June 30, 2025 resulting from an increase in unfunded commitments on construction loans.

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Interest income was $40.7 million for the six months ended June 30, 2025, compared to $39.9 million for the six months ended June 30, 2024. The increase in net interest income is due to a $810,000 increase in interest income and a $1.0 million decrease in interest expense. The increase in interest income is primarily due to a $2.0 million increase in interest income and fees on loans, which was partially offset by a $576,000 decrease in interest income on balances due from banks and a $569,000 decrease in interest income on investment securities. The increase in interest income and fees on loans is primarily due to an increase in total loans. The decrease in interest income on balances due from banks is due to a reduction in balances outstanding and rate decreases implemented by the FOMC from September 2024 through December 2024. The decrease in interest income on investment securities is primarily due to a reduction in balances outstanding. During the six months ended June 30, 2025, average loans were $1.15 billion, an increase of $48.6 million from average loans of $1.10 billion for the six months ended June 30, 2024. During the six months ended June 30, 2025, average investment securities available for sale were $424.5 million, a decrease of $19.8 million from average investment securities available for sale of $444.3 million for the six months ended June 30, 2024. The average yield on loans for the six months ended June 30, 2025 and 2024 was 5.73% and 5.61%, respectively. The average yield on investment securities available for sale was 3.23% and 3.36% for the six months ended June 30, 2025 and 2024, respectively. The average yield on earning assets was 5.05% and 4.99% for the six months ended June 30, 2025 and 2024, respectively.

Interest expense was $12.1 million for the six months ended June 30, 2025, compared to $13.2 million for the six months ended June 30, 2024. The decrease in interest expense is primarily due to a decrease in rates paid on interest-bearing liabilities. During the six months ended June 30, 2025, average interest-bearing non-maturity deposits were $748.6 million, an increase of $82.1 million from average interest-bearing non-maturity deposits of $666.5 million for the six months ended June 30, 2024. During the six months ended June 30, 2025, average certificates of deposit were $347.3 million, a decrease of $3.6 million from average certificates of deposit of $350.9 million for the six months ended June 30, 2024. The average rate paid on interest-bearing checking and savings accounts was 1.45% and 1.36% for the six months ended June 30, 2025 and 2024, respectively. The average rate paid on certificates of deposit was 3.65% for the six months ended June 30, 2025, compared to 4.19% for the same period one year ago. The average rate paid on interest-bearing liabilities was 2.20% for the six months ended June 30, 2025, compared to 2.43% for the same period one year ago.

The following table sets forth for each category of interest-earning assets and interest-bearing liabilities, the average amounts outstanding, the interest incurred on such amounts and the average rate earned or incurred for the six months ended June 30, 2025 and 2024. The table also sets forth the average rate earned on total interest-earning assets, the average rate paid on total interest-bearing liabilities, and the net yield on total average interest-earning assets for the same periods. Yield information does not give effect to changes in fair value of available for sale investment securities that are reflected as a component of shareholders’ equity. Yields and interest income on tax-exempt investments for the six months ended June 30, 2025 and 2024 have been adjusted to a tax equivalent basis using an effective tax rate of 22.78% for securities that are both federal and state tax exempt and an effective tax rate of 20.53% for federal tax-exempt securities. Non-accrual loans and the interest income that was recorded on non-accrual loans, if any, are included in the yield calculations for loans in all periods reported. The Company believes the presentation of net interest income on a tax-equivalent basis provides comparability of net interest income from both taxable and tax-exempt sources and facilitates comparability within the industry. Although the Company believes these non-GAAP financial measures enhance investors’ understanding of its business and performance, these non-GAAP financial measures should not be considered an alternative to GAAP. The reconciliations of these non-GAAP financial measures to their most directly comparable GAAP financial measures are presented below.

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	Six months ended			Six months ended
	June 30, 2025			June 30, 2024
(Dollars in thousands)	Average Balance	Interest	Yield / Rate	Average Balance	Interest	Yield / Rate
Interest-earning assets:
Loans receivable	$ 1,149,274	32,664	5.73 %	$ 1,100,671	30,709	5.61 %
Investments - taxable	294,651	5,516	3.78 %	311,064	6,040	3.90 %
Investments - nontaxable*	132,997	1,466	2.22 %	136,517	1,512	2.23 %
Due from banks	48,702	1,056	4.37 %	60,144	1,632	5.46 %
Total interest-earning assets	1,625,624	40,702	5.05 %	1,608,396	39,893	4.99 %
Non-interest earning assets:
Cash and due from banks	29,139			30,870
Allowance for credit losses	(10,026	)		(10,929	)
Other assets	21,440			20,568
Total assets	$ 1,666,177			$ 1,648,905
Interest-bearing liabilities:
Interest-bearing demand, MMDA & savings deposits	$ 748,650	5,381	1.45 %	$ 666,544	4,498	1.36 %
Time deposits	347,333	6,285	3.65 %	350,881	7,309	4.19 %
Junior subordinated debentures	15,464	483	6.30 %	15,464	567	7.37 %
Other	-	-	-	56,063	786	2.82 %
Total interest-bearing liabilities	1,111,447	12,149	2.20 %	1,088,952	13,160	2.43 %
Non-interest bearing liabilities and shareholders' equity:
Demand deposits	406,250			427,524
Other liabilities	10,396			11,502
Shareholders' equity	136,373			120,927
Total liabilities and shareholders' equity	$ 1,664,466			$ 1,648,905
Net interest spread		$ 28,553	2.85 %		$ 26,733	2.56 %
Net yield on interest-earning assets			3.54 %			3.34 %
Taxable equivalent adjustment
Investment securities		$ 12			$ 13
Net interest income		$ 28,541			$ 26,720

*Includes U.S. Government agency securities that are non-taxable for state income tax purposes of $7.3 million in 2025 and $10.6 million in 2024. Tax rates of 2.25% and 2.50% were used to calculate the tax equivalent yields on these securities in 2025 and 2024, respectively.

Changes in interest income and interest expense can result from variances in both volume and rates. The following table describes the impact on the Company’s tax equivalent net interest income resulting from changes in average balances and average rates for the periods indicated. The changes in net interest income due to both volume and rate changes have been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amounts of the changes in each.

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(Dollars in thousands)	Three months ended June 30, 2025 compared to three months ended June 30, 2024 — Changes in average volume	Changes in average rates		Total Increase (Decrease)		Changes in average volume		Changes in average rates		Total Increase (Decrease)
Interest income:
Loans: Net of unearned income	$ 675		402		1,077		1,369		586		1,955
Investments - taxable	(237	)	(142	)	(379	)	(313	)	(211	)	(524	)
Investments - nontaxable	(24	)	(5	)	(29	)	(39	)	(7	)	(46	)
Due from banks	129		(148	)	(19	)	(279	)	(297	)	(576	)
Total interest income	543		107		650		738		71		809
Interest expense:
Interest-bearing demand,
MMDA & savings deposits	236		55		291		572		311		883
Time deposits	37		(513	)	(476	)	(69	)	(955	)	(1,024	)
Junior subordinated debentures	-		(41	)	(41	)	-		(84	)	(84	)
Other	(153	)	(152	)	(305	)	(393	)	(393	)	(786	)
Total interest expense	120		(651	)	(531	)	110		(1,121	)	(1,011	)
Net interest income	$ 423		758		1,181		628		1,192		1,820

Provision for Credit Losses. The provision for credit losses for the three months ended June 30, 2025 was a recovery of $213,000, compared to a recovery of $468,000 for the three months ended June 30, 2024. The decrease in the recovery for credit losses is primarily attributable to a smaller reduction in reserves on construction loans during the three months ended June 30, 2025, as compared to the reduction in reserves on construction loans during the three months ended June 30, 2024. The reduction in reserves on construction loans during the three months ended June 30, 2024 was primarily due to a decrease in construction loan balances outstanding and unfunded construction loan balances during the second quarter of 2024.

The provision for credit losses for the six months ended June 30, 2025 was an expense of $55,000, compared to a recovery of $377,000 for the six months ended June 30, 2024. The increase in the provision for credit losses is primarily attributable to a reduction in reserves on construction loans during the six months ended June 30, 2024, which was primarily due to a decrease in construction loan balances outstanding, combined with an increase in provision expense for unfunded construction loans during the six months ended June 30, 2025 resulting from an increase in unfunded commitments on construction loans.

Non-Interest Income. Non-interest income was $7.7 million for the three months ended June 30, 2025, compared to $7.5 million for the three months ended June 30, 2024. The increase in non-interest income is primarily attributable to a $792,000 increase in appraisal management fee income due to an increase in appraisal volume, which was partially offset by a $628,000 decrease in miscellaneous non-interest income primarily due to a decrease in income on small business investment company (SBIC) investments.

Non-interest income was $14.2 million for the six months ended June 30, 2025, compared to $13.6 million for the six months ended June 30, 2024. The increase in non-interest income is primarily attributable to a $1.4 million increase in appraisal management fee income due to an increase in appraisal volume, which was partially offset by a $802,000 decrease in miscellaneous non-interest income primarily due to a decrease in income on small business investment company (SBIC) investments.

Non-Interest Expense. Non-interest expense was $15.8 million for the three months ended June 30, 2025, compared to $15.1 million for the three months ended June 30, 2024. The increase in non-interest expense is primarily attributable to a $633,000 increase in appraisal management fee expense due to an increase in appraisal volume, a $341,000 increase in salaries and employee benefits expense primarily due to an increase in salary and insurance expense, and a $150,000 increase in advertising expense, which were partially offset by a $198,000 decrease in debit card expense, a $95,000 decrease in miscellaneous non-interest expense, a $76,000 decrease in professional fees, and a $47,000 decrease in occupancy expense.

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Non-interest expense was $30.4 million for the six months ended June 30, 2025, compared to $29.6 million for the six months ended June 30, 2024. The increase in non-interest expense is primarily attributable to a $1.1 million increase in appraisal management fee expense due to an increase in appraisal volume, a $149,000 increase in salaries and employee benefits expense primarily due to an increase in salary expense, and a $121,000 increase in advertising expense, which were partially offset by a $286,000 decrease in miscellaneous non-interest expense primarily due to a decrease in deferred compensation expense, a $274,000 decrease in debit card expense, and a $130,000 decrease in occupancy expense primarily due to a decrease in equipment maintenance expense.

Income Taxes. Income tax expense was $1.5 million for the three months ended June 30, 2025, compared to $1.4 million for the three months ended June 30, 2024. The effective tax rate was 22.56% for the three months ended June 30, 2025, compared to 22.09% for the three months ended June 30, 2024. Income tax expense was $2.8 million for the six months ended June 30, 2025, compared to $2.2 million for the six months ended June 30, 2024. The effective tax rate was 22.69% for the six months ended June 30, 2025, compared to 19.74% for the six months ended June 30, 2024. The increase in the effective tax rate is primarily due to a $322,000 interest receivable booked during the six months ended June 30, 2024 on a deposit for taxes paid prior to a settlement with the North Carolina Department of Revenue (“NCDOR”) to withdraw the disallowance of certain tax credits previously purchased by the Bank.

Analysis of Financial Condition

Investment Securities. Available for sale securities were $371.6 million as of June 30, 2025, compared to $388.0 million as of December 31, 2024. Average investment securities available for sale for the six months ended June 30, 2025 were $424.5 million, compared to $442.1 million for the year ended December 31, 2024.

Loans. Total loans were $1.16 billion as of June 30, 2025, compared to $1.14 billion at December 31, 2024. Average loans represented 71% and 69% of average earning assets for the six months ended June 30, 2025 and the year ended December 31, 2024, respectively.

The Bank had $1.5 million and $1.4 million in mortgage loans held for sale as of June 30, 2025 and December 31, 2024, respectively.

Although the Bank has a diversified loan portfolio, a substantial portion of the loan portfolio is collateralized by real estate, which is dependent upon the real estate market. Real estate mortgage loans include both commercial and residential mortgage loans. At June 30, 2025, the Bank had $128.8 million in residential mortgage loans, $116.4 million in home equity loans and $712.1 million in commercial mortgage loans, which include $562.7 million secured by commercial property and $149.4 million secured by residential property. All residential mortgage loans are originated as fully amortizing loans, with no negative amortization. The Bank also had construction and land development loans totaling $122.1 million at June 30, 2025.

Allowance for Credit Losses (ACL). The allowance for credit losses reflects management’s assessment and estimate of the risks associated with extending credit and its evaluation of the quality of the loan portfolio. The Bank periodically analyzes the loan portfolio in an effort to review asset quality and to establish an allowance that management believes will be adequate in light of anticipated risks and loan losses. In assessing the adequacy of the allowance, size, quality and risk of loans in the portfolio are reviewed.

The allowance for credit losses on loans is a valuation account that is deducted from the loans' amortized cost basis to present the net amount expected to be collected on the loans. Loans are charged off against the allowance when management believes the uncollectibility of a loan balance is confirmed. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off. Accrued interest receivable is excluded from the estimate of credit losses. The allowance for credit losses represents management’s estimate of lifetime credit losses inherent in loans as of June 30, 2025. The allowance for credit losses is estimated by management using relevant available information, from both internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. The Company measures expected credit losses for loans on a pooled basis when similar risk characteristics exist. The Company calculates the allowance for credit losses using a Weighted Average Remaining Maturity (“WARM”) methodology.

Additionally, the allowance for credit losses calculation includes subjective adjustments for qualitative risk factors that are likely to cause estimated credit losses to differ from historical experience. These qualitative adjustments may increase or decrease reserve levels and include adjustments for: local, state and national economic outlook; levels and trends of delinquencies; trends in volume, mix and size of loans; seasoning of the loan portfolio; experience of staff; concentrations of credit; and interest rate risk.

The portion of the ACL balance attributable to qualitative factors was $5.1 million and $5.2 million at June 30, 2025 and December 31, 2024, respectively. The risk factors are weighted as follows: Local, State and National Economic Outlook – 30%, Concentrations of Credit – 5%, Interest Rate Risk – 5%, Trends in Terms of Volume, Mix and Size of Loans – 15%, Seasoning of the Loan Portfolio – 10%, Experience of Staff – 10%, and Levels and Trends of Delinquencies – 25%. No changes to the risk status of any of the risk factors was made during the six months ended June 30, 2025.

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Loans that do not share risk characteristics are evaluated on an individual basis. When management determines that foreclosure is probable and the borrower is experiencing financial difficulty, the expected credit losses are based on the fair value of collateral at the reporting date adjusted for selling costs as appropriate.

Financial instruments include off-balance sheet credit instruments, such as commitments to make loans and commercial letters of credit issued to meet customer financing needs. The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for off-balance sheet loan commitments represents the contractual amount of those instruments. Such financial instruments are recorded when they are funded.

The Company records an allowance for credit losses on off-balance sheet credit exposures, unless the commitments to extend credit are unconditionally cancelable. The allowance for credit losses on off-balance sheet credit exposures is estimated by loan segment at each balance sheet date under the current expected credit loss model using the same methodologies as portfolio loans, taking into consideration the likelihood that funding will occur as well as any third-party guarantees. The allowance for unfunded commitments is included in other liabilities on the Company’s consolidated balance sheets.

The allowance for credit losses on loans was $9.8 million or 0.85% of total loans at June 30, 2025, compared to $10.0 million or 0.88% of total loans at December 31, 2024. The allowance for credit losses on loans decreased $203,000 primarily due to a $90,000 decrease in the allowance on construction loans from December 31, 2024 to June 30, 2025 and the removal of the $60,000 Hurricane Helene reserve included in the allowance for credit losses at December 31, 2024.

The allowance for credit losses on unfunded commitments was $1.3 million at June 30, 2025, compared to $1.1 million at December 31, 2024. The increase in the allowance for credit losses on unfunded commitments was primarily due to a $161,000 increase in the allowance for unfunded construction loans resulting from a $2.8 million increase in unfunded commitments on construction loans during the six months ended June 30, 2025.

Management uses several measures to assess and monitor the credit risks in the loan portfolio, including a loan grading system that begins upon loan origination and continues until the loan is collected or collectability becomes doubtful. Upon loan origination, the Bank’s originating loan officer evaluates the quality of the loan and assigns one of eight risk grades. The loan officer monitors the loan’s performance and credit quality and makes changes to the credit grade as conditions warrant. When originated or renewed, all loans over a certain dollar amount receive in-depth reviews and risk assessments by the Bank’s Credit Administration. Before making any changes in these risk grades, management considers assessments as determined by the third-party credit review firm (as described below), regulatory examiners and the Bank’s Credit Administration. Any issues regarding the risk assessments are addressed by the Bank’s senior credit administrators and factored into management’s decision to originate or renew the loan. The board of directors of the Bank (the “Bank Board”) reviews, on a monthly basis, an analysis of the Bank’s reserves relative to the range of reserves estimated by the Bank’s Credit Administration.

As an additional measure, the Bank engages an independent third party to review the underwriting, documentation and risk grading analyses. This independent third party reviews and evaluates loan relationships greater than or equal to $1.5 million as well as a periodic sample of commercial relationships with exposures below $1.5 million, excluding loans in default, and loans in process of litigation or liquidation. The third party’s evaluation and report is shared with management and the Bank Board.

Since the adoption of Current Expected Credit Loss (“CECL”) methodology on January 1, 2023, the allowance for credit losses represents management’s estimate of credit losses for the remaining estimated life of the Bank’s financial assets, including loan receivables and some off-balance sheet credit exposures. Estimating the amount of the allowance for credit losses requires significant judgment and the use of estimates related to historical experience, current conditions, reasonable and supportable forecasts, and the value of collateral on collateral-dependent loans. The loan portfolio also represents the largest asset type on our consolidated balance sheet. Credit losses are charged against the allowance, while recoveries of amounts previously charged off are credited to the allowance. A provision for credit losses is charged to operations based on management’s periodic evaluation of the factors previously mentioned, as well as other pertinent factors.

There are many factors affecting the allowance for credit losses; some are quantitative while others require qualitative judgment. Although management believes its process for determining the allowance adequately considers all the potential factors that could potentially result in credit losses, the process includes subjective elements and is susceptible to significant change. To the extent actual outcomes differ from management estimates, additional provision for credit losses could be required that could adversely affect our earnings or financial position in future periods.

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Various regulatory agencies, as an integral part of their examination process, periodically review the Bank’s allowance. Such agencies may require adjustments to the allowance based on their judgments of information available to them at the time of their examinations. Management believes it has established the allowance for credit losses pursuant to CECL, and has taken into account the views of its regulators and the current economic environment. Management considers the allowance adequate to cover the estimated losses inherent in the Bank’s loan portfolio as of the date of the financial statements. Although management uses the best information available to make evaluations, significant future additions to the allowance may be necessary based on changes in economic and other conditions, thus adversely affecting the operating results of the Company.

Non-performing Assets. Non-performing assets were $4.8 million or 0.28% of total assets at June 30, 2025, compared to $4.8 million or 0.29% of total assets at December 31, 2024. Non-performing assets include $4.2 million in residential mortgage loans, $442,000 in commercial mortgage loans and $216,000 in other loans at June 30, 2025, compared to $3.7 million in residential mortgage loans, $463,000 in commercial mortgage loans, $257,000 in other loans, and $369,000 in other real estate owned at December 31, 2024. The Bank had no repossessed assets as of June 30, 2025 and 2024.

Deposits. Deposits were $1.51 billion as of June 30, 2025, compared to $1.48 billion as of December 31, 2024. Core deposits, a non-GAAP measure, which include noninterest-bearing demand deposits, NOW, MMDA, savings and non-brokered certificates of deposit of denominations of $250,000 or less, were $1.36 billion at June 30, 2025, compared to $1.34 billion at December 31, 2024. Management believes it is useful to calculate and present core deposits because of the positive impact this low cost funding source provides to the Bank’s overall cost of funds and profitability. Certificates of deposit in amounts of more than $250,000 totaled $150.6 million at June 30, 2025, compared to $145.9 million December 31, 2024.

Estimated uninsured deposits totaled $348.6 million, or 23.03% of total deposits, at June 30, 2025, compared to $396.5 million, or 26.71% of total deposits, at December 31, 2024. Uninsured amounts are estimated based on the portion of account balances in excess of FDIC insurance limits. The Bank did not have any significant deposit concentrations at June 30, 2025.

Borrowed Funds. There were no borrowed funds outstanding at June 30, 2025 and December 31, 2024.

Junior Subordinated Debentures (related to Trust Preferred Securities). Junior subordinated debentures were $15.5 million at June 30, 2025 and December 31, 2024.

Asset Liability and Interest Rate Risk Management. The objective of the Company’s Asset Liability and Interest Rate Risk strategies is to identify and manage the sensitivity of net interest income to changing interest rates and to minimize the interest rate risk between interest-earning assets and interest-bearing liabilities at various maturities. This is done in conjunction with the need to maintain adequate liquidity and the overall goal of maximizing net interest income.

The Company manages its exposure to fluctuations in interest rates through policies established by the Asset/Liability Committee (“ALCO”) of the Bank. The ALCO meets quarterly and has the responsibility for approving asset/liability management policies, formulating and implementing strategies to improve balance sheet positioning and/or earnings and reviewing the interest rate sensitivity of the Company. ALCO seeks to minimize interest rate risk between interest-earning assets and interest-bearing liabilities by attempting to minimize wide fluctuations in net interest income due to interest rate movements. The ability to control these fluctuations has a direct impact on the profitability of the Company. Management monitors this activity on a regular basis through analysis of its portfolios to determine the difference between rate sensitive assets and rate sensitive liabilities.

The Company’s rate sensitive assets are those earning interest at variable rates and those with contractual maturities within one year. Rate sensitive assets therefore include both loans and available for sale securities. Rate sensitive liabilities include interest-bearing checking accounts, money market deposit accounts, savings accounts, time deposits and borrowed funds. Average rate sensitive assets for the six months ended June 30, 2025 totaled $1.63 billion, exceeding average rate sensitive liabilities of $1.11 billion by $514.2 million.

Included in the rate sensitive assets are $174.8 million in variable rate loans indexed to prime rate subject to immediate repricing upon changes by the FOMC. Certain variable rate loans are structured to establish floors on interest rates charged to protect against downward movements in the prime rate. At June 30, 2025, the Company had $121.6 million in loans with interest rate floors. No floors were in effect on loans with floors on interest rates charged at June 30, 2025.

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Liquidity. The objectives of the Company’s liquidity policy are to provide for the availability of adequate funds to meet the needs of loan demand, deposit withdrawals, maturing liabilities and to satisfy regulatory requirements. Both deposit and loan customer cash needs can fluctuate significantly depending upon business cycles, economic conditions and yields and returns available from alternative investment opportunities. In addition, the Company’s liquidity is affected by off-balance sheet commitments to lend in the form of unfunded commitments to extend credit and standby letters of credit. As of June 30, 2025, such unfunded commitments to extend credit were $350.0 million, while commitments in the form of standby letters of credit totaled $1.6 million. As of December 31, 2024, such unfunded commitments to extend credit were $348.9 million, while commitments in the form of standby letters of credit totaled $1.7 million.

The Bank uses several sources to meet its liquidity requirements. The primary source is core deposits, which includes demand deposits, savings accounts and non-brokered certificates of deposit of denominations less than $250,000. The Bank considers these to be a stable portion of the Bank’s liability mix and the result of on-going consumer and commercial banking relationships. As of June 30, 2025, the Bank’s core deposits, a non-GAAP measure, totaled $1.36 billion, or 90% of total deposits. As of December 31, 2024, the Bank’s core deposits totaled $1.34 billion, or 90% of total deposits.

The other sources of funding for the Company are through large denomination certificates of deposit, including brokered deposits, federal funds purchased, securities under agreement to repurchase and FHLB borrowings. The Bank is also able to borrow from the Federal Reserve Bank (“FRB”) on a short-term basis. The Bank’s policies include the ability to access wholesale funding up to 40% of total assets. The Bank’s wholesale funding includes FHLB borrowings, FRB borrowings, brokered deposits and internet certificates of deposit. The Bank did not have any wholesale funding at June 30, 2025 and December 31, 2024.

The Bank has a line of credit with the FHLB equal to 20% of the Bank’s total assets. There were no FHLB borrowings outstanding at June 30, 2025 and December 31, 2024. At June 30, 2025, the carrying value of loans pledged as collateral to the FHLB totaled $228.8 million compared to $232.9 million at December 31, 2024. The remaining availability under the line of credit with the FHLB was $138.9 million at June 30, 2025 compared to $131.9 million at December 31, 2024. The Bank had no borrowings from the FRB at June 30, 2025 or December 31, 2024. FRB borrowings are collateralized by a blanket assignment on all qualifying loans that the Bank owns which are not pledged to the FHLB. At June 30, 2025, the carrying value of loans pledged as collateral to the FRB totaled $651.7 million compared to $637.9 million at December 31, 2024. Availability under the line of credit with the FRB was $540.0 million at June 30, 2025 compared to $511.9 million at December 31, 2024.

The Bank also had the ability to borrow up to $110.5 million for the purchase of overnight federal funds from five correspondent financial institutions as of June 30, 2025.

The liquidity ratio for the Bank, which is defined as net cash, interest-bearing deposits, federal funds sold and certain investment securities, as a percentage of net deposits and short-term liabilities was 29.56% at June 30, 2025 and 28.16% at December 31, 2024. The minimum required liquidity ratio as defined in the Bank’s Asset/Liability and Interest Rate Risk Management Policy was 10% at June 30, 2025 and December 31, 2024.

Contractual Obligations and Off-Balance Sheet Arrangements. The Company’s contractual obligations include junior subordinated debentures, as well as certain payments under current lease agreements. Other commitments include commitments to extend credit.

Capital Resources. Shareholders’ equity was $144.0 million, or 8.50% of total assets, at June 30, 2025, compared to $130.6 million, or 7.90% of total assets, at December 31, 2024. The increase in shareholders’ equity is primarily due to a decrease in the unrealized loss on investment securities available for sale due to rate changes between December 31, 2024 and June 30, 2025.

Annualized return on average equity for the six months ended June 30, 2025 was 14.06%, compared to 14.69% for the six months ended June 30, 2024. Total cash dividends paid on common stock were $3.1 million for the six months ended June 30, 2025, compared to $3.0 million for the six months ended June 30, 2024.

In June of 2024, the Board of Directors authorized a stock repurchase program, whereby up to $2.0 million may be allocated to repurchase the Company’s common stock. Any purchases under the Company’s stock repurchase program may be made periodically as permitted by securities laws and other legal requirements in the open market or in privately-negotiated transactions. The timing and amount of any repurchase of shares will be determined by the Company’s management, based on its evaluation of market conditions and other factors. The stock repurchase program may be suspended at any time or from time-to-time without prior notice. The Company had not repurchased any shares of its common stock under this stock repurchase program through February 28, 2025, when the program expired.

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In March of 2025, the Board of Directors authorized a stock repurchase program, whereby up to $3.0 million may be allocated to repurchase the Company’s common stock. Any purchases under the Company’s stock repurchase program may be made periodically as permitted by securities laws and other legal requirements in the open market or in privately-negotiated transactions. The timing and amount of any repurchase of shares will be determined by the Company’s management, based on its evaluation of market conditions and other factors. The stock repurchase program may be suspended at any time or from time-to-time without prior notice. The Company had not repurchased any shares of its common stock under this stock repurchase program as of June 30, 2025.

In 2013, the FRB approved its final rule on the Basel III capital standards, which implement changes to the regulatory capital framework for banking organizations. The Basel III capital standards, which became effective January 1, 2015, include new risk-based capital and leverage ratios, which were phased in from 2015 to 2019. The new minimum capital level requirements applicable to the Company and the Bank under the final rules are as follows: (i) a new common equity Tier 1 capital ratio of 4.5%; (ii) a Tier 1 capital ratio of 6% (increased from 4%); (iii) a total risk based capital ratio of 8% (unchanged from previous rules); and (iv) a Tier 1 leverage ratio of 4% (unchanged from previous rules). An additional capital conservation buffer was added to the minimum requirements for capital adequacy purposes beginning on January 1, 2016 and was phased in through 2019 (increasing by 0.625% on January 1, 2016 and each subsequent January 1, until it reached 2.5% on January 1, 2019). This resulted in the following minimum ratios beginning in 2019: (i) a common equity Tier 1 capital ratio of 7.0%, (ii) a Tier 1 capital ratio of 8.5%, and (iii) a total capital ratio of 10.5%. Under the final rules, institutions would be subject to limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses if its capital level falls below the buffer amount. These limitations establish a maximum percentage of eligible retained earnings that could be utilized for such actions.

Under the regulatory capital guidelines, financial institutions are currently required to maintain a total risk-based capital ratio of 8.0% or greater, with a Tier 1 risk-based capital ratio of 6.0% or greater and a common equity Tier 1 capital ratio of 4.5% or greater, as required by the Basel III capital standards referenced above. Tier 1 capital is generally defined as shareholders’ equity and trust preferred securities less all intangible assets and goodwill. Tier 1 capital includes $15.0 million in trust preferred securities at June 30, 2025 and December 31, 2024. The Company’s Tier 1 capital ratio was 14.92% and 14.47% at June 30, 2025 and December 31, 2024, respectively. Total risk-based capital is defined as Tier 1 capital plus supplementary capital. Supplementary capital, or Tier 2 capital, consists of the Company’s allowance for credit losses, not exceeding 1.25% of the Company’s risk-weighted assets. Total risk-based capital ratio is therefore defined as the ratio of total capital (Tier 1 capital and Tier 2 capital) to risk-weighted assets. The Company’s total risk-based capital ratio was 15.78% and 15.34% at June 30, 2025 and December 31, 2024, respectively. The Company’s common equity Tier 1 capital consists of common stock and retained earnings. The Company’s common equity Tier 1 capital ratio was 13.75% and 13.29% at June 30, 2025 and December 31, 2024, respectively. Financial institutions are also required to maintain a leverage ratio of Tier 1 capital to total average assets of 4.0% or greater. The Company’s Tier 1 leverage capital ratio was 11.14% and 10.88% at June 30, 2025 and December 31, 2024, respectively.

The Bank’s Tier 1 risk-based capital ratio was 14.79% and 14.35% at June 30, 2025 and December 31, 2024, respectively. The total risk-based capital ratio for the Bank was 15.65% and 15.22% at June 30, 2025 and December 31, 2024, respectively. The Bank’s common equity Tier 1 capital ratio was 14.79% and 14.35% at June 30, 2025 and December 31, 2024, respectively. The Bank’s Tier 1 leverage capital ratio was 10.95% and 10.71% at June 30, 2025 and December 31, 2024, respectively.

A bank is considered to be “well capitalized” if it has a total risk-based capital ratio of 10.0% or greater, a Tier 1 risk-based capital ratio of 8.0% or greater, a common equity Tier 1 capital ratio of 6.5% or greater and a leverage ratio of 5.0% or greater. Based upon these guidelines, the Bank was considered to be “well capitalized” at June 30, 2025.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable

Item 4. Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, which are our controls and other procedures that are designed to ensure that information required to be disclosed in our periodic reports with the SEC is recorded, processed, summarized and reported within the required time periods. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed is communicated to our management to allow timely decisions regarding required disclosure. Based on the evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are effective in allowing timely decisions regarding disclosure to be made about material information required to be included in our periodic reports with the SEC. In addition, no change in our internal control over financial reporting has occurred during, or subsequent to, the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

In the opinion of management, the Company is not involved in any material pending legal proceedings other than routine proceedings occurring in the ordinary course of business.

Item 1A. Risk Factors

Not applicable

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

ISSUER PURCHASES OF EQUITY SECURITIES — Period	Total Number of Shares Purchased (1)	Average Price Paid per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)	Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (3)
April 1 - 30, 2025	-	$ -	-	$ 3,000,000
May 1 - 31, 2025	103	$ 28.29	-	$ 3,000,000
June 1 - 30, 2025	-	$ -	-	$ 3,000,000
Total	103	$ 28.29	-

(1) The Company purchased 103 shares on the open market in the three months ended June 30, 2025 for its deferred compensation plan. All purchases were funded by participant contributions to the plan.

(2) Reflects shares purchased under the Company's publicly announced stock repurchase program.

(3) Reflects dollar value of balance available for repurchase at end of period under the Company's stock repurchase program, which was authorized in March 2025 and expires February 28, 2026.

Item 3. Defaults Upon Senior Securities

Not applicable

Item 4. Mine Safety Disclosures

Not applicable

Item 5. Other Information

Trading Arrangements of Section 16 Reporting Persons.

During the quarter ended June 30, 2025, no person who is required to file reports pursuant to Section 16(a) of the Securities and Exchange Act of 1934, as amended, with respect to holdings of, and transactions in, the Company’s common shares (i.e. directors and certain officers of the Company) maintained, adopted, modified or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1(c) arrangement”, as those terms are defined in Section 229.408 of the regulations of the SEC.

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Item 6. Exhibits

Exhibit (3)(i)(a)	Articles of Incorporation of the Registrant, incorporated by reference to Exhibit (3)(i) to the Form 8-A filed with the Securities and Exchange Commission on September 2, 1999
Exhibit (3)(i)(b)	Articles of Amendment dated December 19, 2008, regarding the Series A Preferred Stock, incorporated by reference to Exhibit (3)(1) to the Form 8-K filed with the Securities and Exchange Commission on December 29, 2008
Exhibit (3)(i)(c)	Articles of Amendment dated February 26, 2010, incorporated by reference to Exhibit (3)(2) to the Form 10-K filed with the Securities and Exchange Commission on March 25, 2010
Exhibit (3)(i)(d)	Articles of Amendment dated February 25, 2022, incorporated by reference to Exhibit (3)(i)(d) to the Form 10-K filed with the Securities and Exchange Commission on March 18, 2022
Exhibit (3)(ii)	Third Amended and Restated Bylaws of the Registrant, incorporated by reference to Exhibit (3)(iii) to the Form 8-K filed with the Securities and Exchange Commission on January 17, 2025
Exhibit (4)(I)	Specimen Stock Certificate, incorporated by reference to Exhibit (4) to the Form 8-A filed with the Securities and Exchange Commission on September 2, 1999
Exhibit (31)(a)	Certification of principal executive officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002
Exhibit (31)(b)	Certification of principal financial officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002
Exhibit (32)	Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit (101)	The following materials from the Company’s 10-Q Report for the quarterly period ended June 30, 2025, formatted in eXtensible Business Reporting Language (“XBRL”): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Earnings, (iii) the Condensed Consolidated Statements of Comprehensive Income (iv) the Condensed Consolidated Statements of Changes in Shareholders’ Equity, (v) the Condensed Consolidated Statements of Cash Flows, and (vi) the Notes to the Condensed Consolidated Financial Statements.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Peoples Bancorp of North Carolina, Inc.
August 5, 2025	/s/ William D. Cable, Sr.
Date	William D. Cable, Sr. President and Chief Executive Officer (Principal Executive Officer)

August 5, 2025	/s/ Jeffrey N. Hooper
Date	Jeffrey N. Hooper Executive Vice President and Chief Financial Officer (Principal Financial and Principal Accounting Officer)

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