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Financial Services

C&F Financial Corporation

11/05/2026 | Press release | Distributed by Public on 11/05/2026 11:17

Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion supplements and provides information about the major components of the results of operations, financial condition, liquidity and capital resources of the Corporation. This discussion and analysis should be read in conjunction with the accompanying consolidated financial statements. In addition to current and historical information, the following discussion and analysis contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to our future business, financial condition or results of operations. For a description of certain factors that may have a significant impact on our future business, financial condition or results of operations, see "Cautionary Statement About Forward-Looking Statements" at the end of this discussion and analysis.

OVERVIEW

Our primary financial goals are to maximize the Corporation's earnings and to deploy capital in profitable growth initiatives that will enhance long-term shareholder value. We track three primary financial performance measures in order to assess the level of success in achieving these goals: (1) return on average assets (ROA), (2) return on average equity (ROE), and (3) growth in earnings. In addition to these financial performance measures, we track the performance of the Corporation's three business segments: community banking, mortgage banking, and consumer finance. We balance these financial measures with acceptable levels of interest rate risk, while satisfying liquidity and capital requirements and monitoring asset quality. We also actively manage our capital through growth, dividends and share repurchases, while considering the need to maintain a strong capital position. The following table presents selected financial performance highlights for the periods indicated:

TABLE 1: Financial Performance Highlights


(Dollars in thousands, except for per share data)	Three Months Ended September 30,						Nine Months Ended September 30,
	2026			2025			2026			2025
Net Income (Loss):
Community Banking	$	8,914		$	7,378		$	24,197		$	19,939
Mortgage Banking		266			641			2,236			2,057
Consumer Finance		303			231			760			996
Other		(1,226)			(1,137)			(3,516)			(2,717)
Consolidated net income	$	8,257		$	7,113		$	23,677		$	20,275

Adjusted net income¹	$	8,257		$	7,113		$	22,934		$	20,275

Earnings per share - basic and diluted	$	2.55		$	2.18		$	7.26		$	6.22
Adjusted earnings per share - basic and diluted¹	$	2.55		$	2.18		$	7.03		$	6.22

Annualized ROA		1.18	%		1.06	%		1.13	%		1.02	%
Annualized adjusted ROA¹		1.18	%		1.06	%		1.09	%		1.02	%
Annualized ROE		11.86	%		11.60	%		11.60	%		11.36	%
Annualized adjusted ROE¹		11.86	%		11.60	%		11.24	%		11.36	%
Annualized return on average tangible common equity (ROTCE)¹		13.18	%		13.07	%		12.86	%		12.84	%
Annualized adjusted ROTCE¹		13.18	%		13.07	%		12.45	%		12.84	%

¹	Refer to "Use of Certain Non-GAAP Financial Measures," below, for information about these non-GAAP financial measures, including a quantitative reconciliation to the most directly comparable financial measures calculated in accordance with GAAP.

Consolidated net income increased $1.1 million for the third quarter of 2026 compared to the same period in 2025 due primarily to higher net income at the community banking segment, partially offset by lower net income at the mortgage banking segment. Consolidated net income increased $3.4 million for the first nine months of 2026 compared to the same period in 2025 due primarily to higher net income at the community banking segment, partially offset by lower net income

at the standalone Corporation, included in "Other" in the table above. A discussion of the performance of our business segments is included under the heading "Business Segments" in the "Results of Operations" section of this discussion and analysis.

Included in net income for the first nine months of 2026 were the effects of the sale of an equity interest in Bearing Insurance Group, LLC (the Bearing equity interest), resulting in an after-tax gain of $6.4 million, and a strategic restructuring of a portion of the Corporation's securities portfolio (the Portfolio Restructuring), which resulted in an after-tax loss of $5.6 million. No such effects impacted the Corporation's financial results for the three months ended September 30, 2026 or the three and nine months ended September 30, 2025. Excluding the effects of these items, adjusted net income was $22.9 million, or $7.03 per share, for the first nine months of 2026 compared to $20.3 million, or $6.22 per share, for the first nine months of 2025.

The Corporation uses non-GAAP measures of financial performance, including adjusted net income, adjusted earnings per share, annualized adjusted ROA, annualized adjusted ROE, annualized ROTCE, annualized adjusted ROTCE, annualized adjusted ROA, net tangible income attributable to the Corporation, ROTCE, tangible book value per share, and the following fully-taxable equivalent (FTE) measures: interest and fees on loans-FTE, interest and dividends on securities-FTE, total interest income-FTE, net interest income-FTE and net interest margin-FTE, to provide meaningful information about operating performance by excluding the effects of certain items that management does not expect to have an ongoing impact on consolidated net income. Each of the non-GAAP measures listed in the prior sentence, for the nine months ended September 30, 2026, excludes the effects of the sale of the Bearing equity interest and the Portfolio Restructuring. For further information regarding non-GAAP measures, including the impact of the above items on each year, refer to "Use of Certain Non-GAAP Financial Measures" and the accompanying disclosure below within this Item 2.

Key factors affecting comparison for the third quarter and first nine months of 2026 are as follows.

●

Community banking segment loans grew $102.8 million, or 8.6 percent annualized, compared to December 31, 2025;

●

Consumer finance segment loans decreased $12.8 million, or 3.7 percent annualized, compared to December 31, 2025;

●

Deposits increased $10.4 million, or 1.0 percent annualized, compared to December 31, 2025;

●

Consolidated annualized net interest margin was 4.53 percent for the third quarter of 2026 compared to 4.24 percent for the third quarter of 2025 and 4.41 percent for the second quarter of 2026;

●

The consumer finance segment experienced net charge-offs at an annualized rate of 2.63 percent and 2.61 percent of average total loans for the third quarter and first nine months of 2026, respectively, compared to 2.68 percent and 2.51 percent for the same periods of 2025 and 2.21 percent for the second quarter of 2026;

●

Mortgage banking segment loan originations increased $5.7 million, or 3.4 percent, to $172.8 million and increased $91.8 million, or 18.6 percent, to $586.1 million for the third quarter and first nine months of 2026 compared to the same periods of 2025;

●

During the first nine months of 2026, the community banking segment sold its Bearing equity interest, resulting in a pre-tax gain of $8.3 million. Following the sale, the community banking segment executed the Portfolio Restructuring, resulting in a pre-tax loss of $7.1 million. The community banking segment sold securities with a book value of $72.6 million and purchased approximately $67.8 million of securities; and

●

The Corporation expanded into the Lynchburg, Virginia market with the hiring of an experienced lender in the third quarter of 2026.

Capital Management and Dividends

Under regulatory capital standards, the Corporation's tier 1 risk-based capital and total risk-based capital ratios at September 30, 2026 were 12.7 percent and 15.7 percent, respectively, compared to 12.2 percent and 15.2 percent, respectively, at December 31, 2025. At September 30, 2026, the book value per share of the Corporation's common stock was $82.66 and tangible book value per share, which is a non-GAAP financial measure, was $74.66, compared to $80.64 and $72.60, respectively, at December 31, 2025.

Total consolidated equity increased $7.0 million to $269.3 million at September 30, 2026 compared to $262.3 million at December 31, 2025 due primarily to net income, partially offset by higher unrealized losses in the market value of securities available for sale, which are recognized as a component of other comprehensive income, and by dividends paid on the Corporation's common stock. The Corporation's securities available for sale are fixed income debt securities and their net unrealized loss position is a result of increased market interest rates since they were purchased. The Corporation expects to recover its investments in debt securities through scheduled payments of principal and interest. Unrealized losses are not expected to affect the earnings or regulatory capital of the Corporation or C&F Bank. The accumulated other comprehensive loss related to the Corporation's securities available for sale, net of deferred income taxes, increased to $23.2 million at September 30, 2026 compared to $10.2 million at December 31, 2025 due primarily to an increase in debt security market interest rates.

The Corporation's Board of Directors declared a quarterly cash dividend of 48 cents per share during the third quarter of 2026, which was paid on October 1, 2026. This dividend represents a payout ratio of 18.8 percent of earnings per share for the third quarter of 2026. The Corporation continually reviews the amount of cash dividends per share and the resulting dividend payout ratio in light of changes in economic conditions, current and future capital levels and requirements and expected future earnings. In making its decision on the payment of dividends on the Corporation's common stock, the Corporation's Board of Directors considers operating results, financial condition, capital adequacy, regulatory requirements, shareholder returns, growth expectations and other factors.

The Corporation has a share repurchase program, effective January 1, 2026 through December 31, 2026, that was authorized by the Board of Directors to repurchase up to $5.0 million of the Corporation's common stock (the 2026 Repurchase Program). During the third quarter and first nine months of 2026, the Corporation repurchased 3 and 8,377 shares, or less than $1,000 and $622,000, respectively, of its common stock under the 2026 Repurchase Program.

CRITICAL ACCOUNTING ESTIMATES

The preparation of financial statements requires us to make estimates and assumptions. Those accounting policies with the greatest uncertainty and that require management's most difficult, subjective or complex judgments affecting the application of these policies, and the greatest likelihood that materially different amounts would be reported under different conditions, or using different assumptions, are described below.

Allowance for Credit Losses: We establish the allowance for credit losses through charges to earnings in the form of a provision for credit losses. Loan losses are charged against the allowance for credit losses for the difference between the carrying value of the loan and the estimated net realizable value or fair value of the collateral, if collateral dependent, when management believes that the collectability of the principal is unlikely. Subsequent recoveries, if any, are credited to the allowance. The allowance represents management's current estimate of expected credit losses over the contractual term of loans held for investment, and is recorded at an amount that, in management's judgment, reduces the recorded investment in loans to the net amount expected to be collected.

Management's judgment in determining the level of the allowance is based on evaluations of historical loan losses, current conditions and reasonable and supportable forecasts relevant to the collectability of loans. The measurement of the allowance for credit losses on commercial and consumer loans is based in part on the twelve-month forecast of the national unemployment rate, which we believe to be indicative of risk factors related to the collectability of commercial and consumer loans. Forecasts of the national unemployment rate are derived from the Federal Open Market Committee of the Federal Reserve Board. For periods beyond those for which reasonable and supportable forecasts are available, projections are based on a reversion of the national unemployment rate from the last forecast to a historical average level over the following six months. In addition, management's estimate of expected credit losses is based on the remaining life of loans held for investment, which is affected in part by changes in expected prepayment behavior and in the nature and volume of the loan portfolio. Management also assesses the risk of credit losses arising from external factors, such as changes in general market, economic and business conditions and the value of underlying collateral, to make qualitative adjustments in determining the recorded balance of the allowance for credit losses. This evaluation is inherently subjective because it requires estimates that are susceptible to significant revision as more information becomes available. These factors outside of the Corporation's control are difficult to predict and can have significant impacts on the level of allowance that is

required, which can be different than the level recorded based on the then-existing loan portfolio, unemployment rate forecast and other external factors that were used in the qualitative adjustments at that time.

In evaluating the level of the allowance, we consider a range of possible assumptions and outcomes related to the various factors identified above. The level of the allowance is particularly sensitive to changes in the actual and forecasted national unemployment rate during the twelve-month forecast period and changes in current conditions or reasonably expected future conditions affecting the collectability of loans. Given the relationship between external variables used in the forecast and the qualitative adjustments made based on the assessment of available information relevant to assessing collectability that is not captured in the forecast, it is difficult to estimate the impact of a change in any one individual variable on the allowance for credit losses. The impact of a change in an assumption or input may be amplified by or partially offset by the impact of a change in another assumption or input.

For further information concerning accounting policies, refer to Item 8. "Financial Statements and Supplementary Data," under the heading "Note 1: Summary of Significant Accounting Policies" in the Corporation's Annual Report on Form 10-K for the year ended December 31, 2025.

RESULTS OF OPERATIONS

NET INTEREST INCOME

The following table shows the average balance sheets, the amounts of interest earned on earning assets, with related yields, and interest expense on interest-bearing liabilities, with related rates, for the three and nine months ended September 30, 2026 and 2025. Interest on tax-exempt loans and securities is presented on a taxable-equivalent basis (which converts the income on loans and investments for which no income taxes are paid to the equivalent yield as if income taxes were paid) using the federal corporate income tax rate of 21 percent that was applicable for all periods presented. Average balances of securities available for sale are included at amortized cost. Loans include loans held for sale. Loans placed on a nonaccrual status are included in the balances and are included in the computation of yields, but had no material effect for all periods presented.

TABLE 2: Average Balances, Income and Expense, Yields and Rates


		Three Months Ended September 30,
		2026								2025
		Average			Income/			Yield/		Average			Income/			Yield/
(Dollars in thousands)		Balance			Expense			Rate		Balance			Expense			Rate
Assets
Loans:
Community banking segment		$	1,671,177		$	24,018		5.70	%	$	1,538,149		$	21,706		5.60	%
Mortgage banking segment			37,526			615		6.50			37,596			625		6.60
Consumer finance segment			453,770			12,107		10.59			463,761			12,404		10.61
Total loans			2,162,473			36,740		6.74			2,039,506			34,735		6.76
Securities - available for sale:
Taxable			349,838			3,442		3.94			338,354			2,391		2.82
Tax-exempt			126,802			1,480		4.67			122,605			1,256		4.10
Total securities - available for sale			476,640			4,922		4.13			460,959			3,647		3.16
Interest-bearing deposits in other banks			38,104			272		2.83			74,629			719		3.83
Total earning assets			2,677,217			41,934		6.22			2,575,094			39,101		6.03
Allowance for credit losses			(40,283)								(40,389)
Total non-earning assets			167,386								156,558
Total assets		$	2,804,320							$	2,691,263

Liabilities and Equity
Interest-bearing deposits:
Interest-bearing demand deposits		$	333,619			538		0.64	%	$	312,095			448		0.57	%
Savings and money market deposit accounts			553,500			1,722		1.23			545,055			1,778		1.29
Time deposits			923,258			7,617		3.27			865,439			7,725		3.54
Total interest-bearing deposits			1,810,377			9,877		2.16			1,722,589			9,951		2.29
Borrowings:
FHLB advances			29,293			322		4.30			40,000			450		4.40
Subordinated notes			65,516			1,139		6.93			65,480			1,112		6.77
Other borrowings			8,501			64		2.99			19,832			96		1.92
Total borrowings			103,310			1,525		5.86			125,312			1,658		5.30
Total interest-bearing liabilities			1,913,687			11,402		2.36			1,847,901			11,609		2.50
Noninterest-bearing demand deposits			566,391								555,090
Other liabilities			45,802								43,054
Total liabilities			2,525,880								2,446,045
Equity			278,440								245,218
Total liabilities and equity		$	2,804,320							$	2,691,263
Net interest income					$	30,532							$	27,492
Interest rate spread								3.86	%							3.53	%
Interest expense to average earning assets								1.69	%							1.79	%
Net interest margin (FTE)								4.53	%							4.24	%


		Nine Months Ended September 30,
		2026								2025
		Average			Income/			Yield/		Average			Income/			Yield/
(Dollars in thousands)		Balance			Expense			Rate		Balance			Expense			Rate
Assets
Loans:
Community banking segment		$	1,635,395		$	68,856		5.63	%	$	1,501,919		$	62,562		5.57	%
Mortgage banking segment			43,376			1,974		6.08			34,898			1,696		6.50
Consumer finance segment			459,213			36,410		10.60			464,487			36,671		10.56
Total loans			2,137,984			107,240		6.71			2,001,304			100,929		6.74
Securities - available for sale:
Taxable			347,044			9,190		3.53			339,938			6,909		2.71
Tax-exempt			128,645			4,291		4.45			120,653			3,614		3.99
Total securities - available for sale			475,689			13,481		3.78			460,591			10,523		3.05
Interest-bearing deposits in other banks			59,536			1,394		3.13			59,633			1,634		3.66
Total earning assets			2,673,209			122,115		6.11			2,521,528			113,086		5.99
Allowance for credit losses			(40,351)								(40,759)
Total non-earning assets			166,741								156,147
Total assets		$	2,799,599							$	2,636,916

Liabilities and Equity
Interest-bearing deposits:
Interest-bearing demand deposits		$	341,931		$	1,710		0.67	%	$	319,039		$	1,524		0.64	%
Savings and money market deposit accounts			552,664			5,053		1.22			519,113			4,513		1.16
Time deposits			917,638			22,729		3.31			839,431			23,236		3.70
Total interest-bearing deposits			1,812,233			29,492		2.18			1,677,583			29,273		2.33
Borrowings:
FHLB advances			32,784			1,079		4.34			40,044			1,337		4.40
Subordinated notes			65,507			3,351		6.83			54,038			2,465		6.09
Other borrowings			8,039			178		2.96			29,326			411		1.87
Total borrowings			106,330			4,608		5.77			123,408			4,213		4.55
Total interest-bearing liabilities			1,918,563			34,100		2.37			1,800,991			33,486		2.49
Noninterest-bearing demand deposits			564,371								556,305
Other liabilities			44,666								41,622
Total liabilities			2,527,600								2,398,918
Equity			271,999								237,998
Total liabilities and equity		$	2,799,599							$	2,636,916
Net interest income					$	88,015							$	79,600
Interest rate spread								3.74	%							3.50	%
Interest expense to average earning assets								1.70	%							1.78	%
Net interest margin (FTE)								4.41	%							4.21	%

Interest income and expense are affected by fluctuations in interest rates, by changes in the volume of earning assets and interest-bearing liabilities, and by the interaction of rate and volume factors. The following table shows the direct causes of the period-to-period changes in the components of net interest income on a taxable-equivalent basis. The Corporation calculates the rate and volume variances using a formula prescribed by the SEC. Rate/volume variances, the third element in the calculation, are not shown separately in the table, but are allocated to the rate and volume variances in proportion to the absolute dollar amounts of each.

TABLE 3: Rate-Volume Recap


		Three Months Ended September 30, 2026 from 2025
		Increase (Decrease)						Total
		Due to						Increase
(Dollars in thousands)		Rate			Volume			(Decrease)
Interest income:
Loans:
Community banking segment		$	396		$	1,916		$	2,312
Mortgage banking segment			(9)			(1)			(10)
Consumer finance segment			(24)			(273)			(297)
Securities - available for sale:
Taxable			968			83			1,051
Tax-exempt			180			44			224
Interest-bearing deposits in other banks			(155)			(292)			(447)
Total interest income			1,356			1,477			2,833
Interest expense:
Interest-bearing deposits:
Interest-bearing demand deposits			58			32			90
Savings and money market deposit accounts			(83)			27			(56)
Time deposits			(608)			500			(108)
Borrowings:
FHLB advances			(10)			(118)			(128)
Subordinated notes			26			1			27
Other borrowings			38			(70)			(32)
Total interest expense			(579)			372			(207)
Change in net interest income		$	1,935		$	1,105		$	3,040


		Nine Months Ended September 30, 2026 from 2025
		Increase (Decrease)						Total
		Due to						Increase
(Dollars in thousands)		Rate			Volume			(Decrease)
Interest income:
Loans:
Community banking segment		$	680		$	5,614		$	6,294
Mortgage banking segment			(115)			393			278
Consumer finance segment			143			(404)			(261)
Securities - available for sale:
Taxable			2,134			147			2,281
Tax-exempt			430			247			677
Interest-bearing deposits in other banks			(237)			(3)			(240)
Total interest income			3,035			5,994			9,029
Interest expense:
Interest-bearing deposits:
Interest-bearing demand deposits			74			112			186
Savings and money market deposit accounts			240			300			540
Time deposits			(2,567)			2,060			(507)
Borrowings:
FHLB advances			(18)			(240)			(258)
Subordinated notes			323			563			886
Other borrowings			162			(395)			(233)
Total interest expense			(1,786)			2,400			614
Change in net interest income		$	4,821		$	3,594		$	8,415

Net interest income, on a taxable-equivalent basis, for the third quarter and first nine months of 2026 increased to $30.5 million and $88.0 million, respectively, compared to $27.5 million and $79.6 million for the same periods in 2025 due primarily to higher average balances of interest-earning assets and higher net interest margin. Annualized net interest margin increased 29 basis points to 4.53 percent for the third quarter of 2026 compared to the same period of 2025 and increased 20 basis points to 4.41 percent for the first nine months of 2026 compared to the same period of 2025 due primarily to higher average interest rates on securities and lower average interest rates on deposits, partially offset by higher average cost of borrowings. The Federal Reserve Bank (FRB) target federal funds interest rate was at an upper limit of 4.50 percent at December 31, 2024 until the Federal Open Market Committee began decreasing it in September 2025, decreasing it to 3.75 percent by December 31, 2025, where it remained until it was increased to 4.00 percent in September

2026. The yield on interest-earning assets increased by 19 basis points and 12 basis points for the third quarter and first nine months of 2026, respectively, compared to the same periods in 2025. The cost of interest-bearing liabilities decreased by 14 basis points and 12 basis points for the third quarter and first nine months of 2026, respectively, compared to the same periods in 2025. Average earning assets increased $102.1 million and $151.7 million for the third quarter and first nine months of 2026, respectively, compared to the same periods in 2025. Average interest-bearing liabilities increased $65.8 million and $117.6 million for the third quarter and first nine months of 2026, respectively, compared to the same periods in 2025. Average noninterest-bearing demand deposits increased $11.3 million and $8.1 million for the third quarter and first nine months of 2026, respectively, compared to the same periods in 2025.

Average loans, which includes both loans held for investment and loans held for sale, increased $123.0 million to $2.16 billion for the third quarter of 2026 and increased $136.7 million to $2.14 billion for the first nine months of 2026 compared to the same periods in 2025. Average loans at the community banking segment increased $133.0 million, or 8.6 percent, for the third quarter of 2026 and increased $133.5 million, or 8.9 percent, for the first nine months of 2026 compared to the same periods in 2025 due primarily to growth in the commercial real estate and land acquisition and development segments of the loan portfolio, partially offset by a decrease in construction loans. Average loans at the consumer finance segment decreased $10.0 million, or 2.2 percent, for the third quarter of 2026 and decreased $5.3 million, or 1.1 percent, for the first nine months of 2026 compared to the same periods in 2025 due primarily to a decrease in marine and recreational vehicle (RV) loans as the third party administrator of that program significantly decreased sales of those loans to outside parties during 2025, which led to the consumer finance segment ending future purchases under the program during the third quarter of 2025. The marine and RV portfolio is expected to run off over time, subject to normal repayment activity and credit performance. Average loans at the mortgage banking segment, which consist of loans held for sale, decreased $70,000, or less than one percent, for the third quarter of 2026 and increased $8.5 million, or 24.3 percent, for the first nine months of 2026 compared to the same periods in 2025.

Average loan yields decreased 2 basis points to 6.74 percent for the third quarter of 2026 and decreased 3 basis points to 6.71 percent for the first nine months of 2026 compared to the same periods in 2025 due primarily to a mix shift in the portfolio with growth in loans at the community banking segment, which has lower yields than loans at the consumer finance segment, partially offset by an increase in loan yields at the community banking segment. The community banking segment average loan yield increased 10 basis points to 5.70 percent for the third quarter of 2026 and increased 6 basis points to 5.63 percent for the first nine months of 2026 compared to the same periods in 2025 due primarily to an increase in market interest rates and renewals of fixed rate loans originated during periods of lower interest rates. The consumer finance segment average loan yield decreased 2 basis points to 10.59 percent for the third quarter of 2026 compared to the same period of 2025 due primarily to lower yields on automobile loans, partially offset by a mix shift in the loan portfolio with the termination of the marine and RV loans program. The consumer finance segment average loan yield increased 4 basis points to 10.60 percent for the first nine months of 2026 compared to the same period in 2025 due primarily to a mix shift in the loan portfolio with the termination of the marine and RV loans program and the portfolio composition in general shifting towards originations within the past three years, when interest rates have generally been higher, as balances on loans originated prior to that in periods of lower interest rates decline. The mortgage banking segment average loan yield decreased 10 basis points to 6.50 percent for the third quarter of 2026 and decreased 42 basis points to 6.08 percent for the first nine months of 2026 compared to the same periods in 2025 due to fluctuations in mortgage market interest rates.

Average securities available for sale increased $15.7 million to $476.6 million for the third quarter of 2026 and increased $15.1 million to $475.7 million for the first nine months of 2026 compared to the same periods in 2025. The average yield on the securities portfolio, on a taxable-equivalent basis, increased 97 basis points to 4.13 percent for the third quarter of 2026 and increased 73 basis points to 3.78 percent for the first nine months of 2026 compared to the same periods in 2025 due primarily to the Portfolio Restructuring during the second quarter of 2026. In the Portfolio Restructuring, the community banking segment sold $72.6 million in book value of securities with a weighted average yield of 1.40% and representing approximately 14.7% of the entire securities portfolio and purchased approximately $67.8 million of securities with a weighted average yield of 4.70%.

Average interest-bearing deposits in other banks, consisting primarily of excess cash reserves maintained at the FRB, decreased $36.5 million to $38.1 million for the third quarter of 2026 and decreased $97,000 to $59.5 million for the first nine months of 2026 compared to the same periods in 2025. The average yield on interest-bearing deposits in other banks decreased 100 basis points for the third quarter of 2026 and decreased 53 basis points for the first nine months of 2026

compared to the same periods of 2025 due primarily to the decreases in the federal funds interest rate beginning in September 2025.

Average savings and money market and interest-bearing demand deposits combined increased $30.0 million to $887.1 million for the third quarter of 2026 and increased $56.4 million to $894.6 million for the first nine months of 2026 compared to the same periods in 2025. Average noninterest-bearing demand deposits increased $11.3 million to $566.4 million for the third quarter of 2026 and increased $8.1 million to $564.4 million for the first nine months of 2026 compared to the same periods in 2025. Average time deposits increased $57.8 million to $923.3 million for the third quarter of 2026 and increased $78.2 million to $917.6 million for the first nine months of 2026 compared to the same periods in 2025. The average cost of interest-bearing deposits decreased 13 basis points to 2.16 percent for the third quarter of 2026 and decreased 15 basis points to 2.18 percent for the first nine months of 2026 compared to the same periods in 2025 due primarily to decreases in interest rates paid on time deposits. A portion of the increases in average deposits was due to the wind-down of the repurchase agreement program with certain commercial deposit customers during the third quarter of 2025. The average balance of these repurchase agreements was $11.9 million and $21.3 million for the third quarter and first nine months of 2025, respectively.

Average borrowings decreased $22.0 million to $103.3 million for the third quarter of 2026 compared to the same period in 2025 due primarily to the wind-down of the repurchase agreement program and a decrease in average balances of FHLB advances. Average borrowings decreased $17.1 million to $106.3 million for the first nine months of 2026 compared to the same period in 2025 due primarily to the wind-down of the repurchase agreement program and a decrease in average balances of FHLB advances, partially offset by higher average balances of subordinated notes. The average cost of borrowings increased 56 basis points to 5.86 percent for the third quarter of 2026 and increased 122 basis points to 5.77 percent for the first nine months of 2026 compared to the same periods in 2025 due primarily to a shift in the mix of borrowings and higher rates paid on subordinated notes. The Corporation issued new subordinated notes with an aggregate principal amount of $40.0 million in the second quarter of 2025, which initially bear interest at a fixed rate of 7.50%, and concurrently repurchased its previously issued subordinated notes with aggregate principal amount of $20.0 million, which were to transition from a fixed rate of 4.875% to a floating rate at the then current three-month SOFR plus 475.5 basis points during the third quarter of 2025.

The Corporation gives no assurance as to the timing or extent of changes in market interest rates or the impact of those changes or any other factor on the Corporation's ability to compete for loans and deposits or on its funding costs, liquidity, and net interest margin. The Corporation believes that if market interest rates were to continue to rise, net interest margin could be positively affected in the short term as the Corporation generally expects its assets to reprice upward more quickly than its deposits and borrowings, in each case as of the date of this report. The Corporation believes renewals of fixed rate loans originated during periods of lower interest rates and purchases of securities available for sale with higher interest rates would contribute to increased yields on interest-earning assets. While recent increases in market interest rates and increased competition for deposits may result in higher funding costs, the Corporation believes the impact on cost of interest-bearing deposits would occur over time as the majority of the Corporation's time deposits have repriced within the past year. Additionally, if market interest rates were to remain elevated or increase further, other aspects of the Corporation's business, such as mortgage loan demand, may also be adversely affected. If market interest rates were to decline, net interest margin could be adversely affected in the short term as the Corporation generally expects its assets to reprice downward more quickly than its deposits and borrowings, although mortgage loan demand may be positively affected. The interest rate environment has grown increasingly uncertain during the first nine months of 2026. The ultimate impact on the Corporation's net interest margin of changes in market interest rates and other market factors, including monetary policy actions taken by the Federal Reserve, will also depend on other factors, some of which may be outside of the Corporation's control, including the Corporation's ability to grow loans at the community banking and consumer finance segments, the Corporation's ability to compete for deposits, the Corporation's use of borrowings to fund its operations, economic conditions nationally and within the Corporations' markets, other factors discussed in this report, including the risks discussed under "Cautionary Statement About Forward-Looking Statements," and the risks discussed in more detail in Item 1A. "Risk Factors" of Part I of the Corporation's Annual Report on Form 10-K for the year ended December 31, 2025 and other reports filed with the SEC.

Noninterest Income

TABLE 4: Noninterest Income


		Three Months Ended September 30,					Nine Months Ended September 30,
(Dollars in thousands)		2026			2025		2026			2025
Gains on sales of loans		$	1,365		$	1,896	$	6,346		$	6,201
Interchange income			1,652			1,610		4,902			4,706
Service charges on deposit accounts			1,123			1,049		3,204			3,061
Investment income from other equity interests			80			197		8,784			531
Net losses on sales, maturities and calls of available for sale securities			-			-		(7,129)			-
Mortgage banking fee income			757			735		2,592			2,193
Wealth management services income, net			917			795		2,572			2,283
Mortgage lender services income			907			768		2,696			2,066
Other service charges and fees			502			520		1,523			1,569
Unrealized gain on investments held in rabbi trust			184			860		1,510			2,283
Other income, net			549			414		1,362			1,372
Total noninterest income		$	8,036		$	8,844	$	28,362		$	26,265

Total noninterest income decreased $808,000, or 9.1 percent, for the third quarter of 2026 compared to the same period in 2025 due primarily to fluctuations in unrealized gains and losses on investments held in the rabbi trust and lower gains on sales of loans.

Total noninterest income increased $2.1 million, or 8.0 percent, for the first nine months of 2026 compared to the same period in 2025 due primarily to higher investment income from other equity interests related to the sale of the Bearing equity interest, higher mortgage lender services income and higher mortgage banking fee income, partially offset by net losses on the Portfolio Restructuring and fluctuations in unrealized gains and losses on investments held in the rabbi trust.

The Corporation uses a rabbi trust to fund liabilities under its nonqualified deferred compensation plan. Unrealized gains and losses on investments held in the Corporation's rabbi trust are offset by changes in deferred compensation liabilities, which are recorded in salaries and employee benefits expense.

Noninterest Expense

TABLE 5: Noninterest Expense


		Three Months Ended September 30,					Nine Months Ended September 30,
(Dollars in thousands)		2026			2025		2026			2025
Salaries and employee benefits:
Compensation, payroll taxes and employee benefits		$	14,574		$	13,560	$	44,106		$	40,466
Increase in nonqualified deferred compensation plan liabilities			184			860		1,510			2,283
Total salaries and employee benefits			14,758			14,420		45,616			42,749

Occupancy expense			2,416			2,245		7,033			6,537
Data processing			3,421			3,026		9,999			8,881
Professional fees			785			901		2,645			2,823
Insurance expense			481			399		1,351			1,306
Marketing and advertising expenses			604			660		1,790			1,738
Loan processing and collection expenses			847			831		2,638			2,259
Other expenses:
Licenses and taxes expense			391			284		1,170			884
Telecommunication expenses			315			313		884			1,011
Postage and courier expenses			293			264		875			812
Travel and educational expenses			363			312		1,044			883
Other components of net periodic pension cost			(193)			(150)		(579)			(451)
Provision for indemnifications			(35)			(75)		(95)			(135)
All other noninterest expenses			835			860		2,572			2,682
Total other noninterest expenses			1,969			1,808		5,871			5,686
Total noninterest expense		$	25,281		$	24,290	$	76,943		$	71,979

Total noninterest expenses increased $1.0 million, or 4.1 percent, in the third quarter of 2026 and increased $5.0 million, or 6.9 percent, for the first nine months of 2026 compared to the same periods in 2025 due primarily to higher salaries and employee benefits due to the addition of seasoned lending teams with the expansion into the Roanoke and Lynchburg, Virginia markets in the third quarters of 2025 and 2026, respectively, annual compensation adjustments, increased employee incentive accruals associated with improved financial performance and higher commissions from increased volume of mortgage loan production, as well as higher data processing and occupancy expense, partially offset by fluctuations in deferred compensation liabilities.

Changes in deferred compensation plan liabilities are offset by unrealized gains and losses on investments held in the Corporation's rabbi trust, which are recorded in noninterest income.

Income Taxes

The Corporation's consolidated effective income tax rate was 18.9 percent for the third quarter of 2026 compared to 19.4 percent for the same period in 2025 due primarily to a higher share of income at the community banking segment, which is not subject to state income taxes. The Corporation's consolidated effective income tax rate was 19.4 percent for the first nine months of 2026 compared to 18.8 percent for the same period in 2025 due primarily to the tax impact of the sale of the Bearing equity interest in the second quarter of 2026.

Business Segments

The Corporation operates in a decentralized manner in three business segments: community banking, mortgage banking and consumer finance. An overview of the financial results for each of the Corporation's business segments is presented below.

Community Banking: The community banking segment comprises C&F Bank, C&F Wealth Management, C&F Insurance and CVB Title. The following table presents the community banking segment operating results for the periods indicated.

TABLE 6: Community Banking Segment Operating Results


		Three Months Ended September 30,						Nine Months Ended September 30,
(Dollars in thousands)		2026			2025			2026			2025
Interest income		$	28,648		$	25,610		$	82,035		$	73,372
Interest expense			10,264			10,498			30,750			31,022
Net interest income before allocation			18,384			15,112			51,285			42,350
Net interest allocation¹			5,806			6,080			17,524			17,944
Net interest income			24,190			21,192			68,809			60,294
Provision for credit losses			-			(100)			450			(300)
Net interest income after provision for credit losses			24,190			21,292			68,359			60,594
Noninterest income:
Interchange income			1,652			1,610			4,902			4,706
Service charges on deposit accounts			1,143			1,061			3,261			3,107
Wealth management services income, net			917			795			2,572			2,283
Other service charges and fees			501			520			1,522			1,567
Investment income from other equity interests			80			197			8,784			531
Net losses on sales, maturities and calls of available for sale securities			-			-			(7,129)			-
Other income, net			389			247			844			844
Total noninterest income			4,682			4,430			14,756			13,038
Noninterest expense:
Salaries and employee benefits			10,417			9,503			31,019			28,203
Occupancy expense			2,006			1,878			5,872			5,377
Data processing			2,669			2,365			7,752			7,007
Professional fees			520			642			1,825			2,046
Insurance expense			408			350			1,179			1,111
Marketing and advertising expenses			450			496			1,361			1,295
Loan processing and collection expenses			74			46			188			114
Other expenses			1,341			1,310			3,955			3,944
Total noninterest expenses			17,885			16,590			53,151			49,097
Income before income taxes			10,987			9,132			29,964			24,535
Income tax expense			2,073			1,754			5,767			4,596
Net income		$	8,914		$	7,378		$	24,197		$	19,939

1	Interest expense is allocated to the mortgage banking and consumer finance segments through borrowings from the community banking segment.

The community banking segment reported net income of $8.9 million and $24.2 million for the third quarter and first nine months of 2026, respectively, compared to $7.4 million and $19.9 million for the same periods in 2025 due primarily to:

●

higher interest income resulting from higher average balances of loans and securities and higher average interest rates on loans and securities, due primarily to an increase in market interest rates and the Portfolio Restructuring; and

●

a pre-tax gain of $8.3 million on the sale of the Bearing equity interest in the first nine months of 2026, reported in investment income from other equity interests;

partially offset by:

●

higher salaries and employee benefits due primarily to the addition of seasoned lending teams with the expansion into the Roanoke and Lynchburg, Virginia markets in the third quarters of 2025 and 2026, respectively, annual compensation adjustments, and increased employee incentive accruals associated with improved financial performance;

●

the Portfolio Restructuring, which resulted in a pre-tax loss of $7.1 million for the first nine months of 2026, reported in net loss on sales of available for sale securities;

●

higher provision for credit losses for the first nine months of 2026 as compared to the same period of 2025 due primarily to the reversal of a specific reserve in the second quarter of 2025 upon the resolution of a nonperforming commercial real estate loan; and

●

higher data processing expenses associated with investments in information technology infrastructure projects.

Adjusted net income for the community banking segment, which excludes the effects of the sale of the Bearing equity interest and the Portfolio Restructuring, was $23.5 million for the first nine months of 2026, compared to $19.9 million for the same period in 2025. Adjusted net income for the community banking segment increased $3.5 million for the first nine months of 2026, compared to the same period in 2025 due primarily to the other items discussed above.

Net interest income for the community banking segment increased by $3.0 million to $24.2 million for the third quarter of 2026 and increased $8.5 million to $68.8 million for the first nine months of 2026 compared to the same periods in 2025 due primarily to an increase in net interest margin and higher average balances of earning assets. Average interest-earning asset yields at the community banking segment were higher for the third quarter and first nine months of 2026 compared to the same periods in 2025 due primarily to higher average interest rates on securities available for sale and loans and a mix shift in interest-earning assets to loans, which have higher yields than securities available for sale or interest-bearing deposits in other banks. In the Portfolio Restructuring, the community banking segment sold $72.6 million in book value of securities with a weighted average yield of 1.40% and representing approximately 14.7% of the entire securities portfolio, and purchased approximately $67.8 million of securities with a weighted average yield of 4.70%. Average loan yields increased for the third quarter and first nine months of 2026 at the community banking segment due primarily to higher average market interest rates. The average cost of interest-bearing liabilities was lower for the third quarter and first nine months of 2026 compared to the same periods in 2025 due primarily to a decrease in interest rates paid on time deposits. Interest income allocated to the community banking segment includes interest income on loans to the consumer finance and mortgage banking segments. Intercompany loan balances, interest income, and interest expense related to these transactions are eliminated to reach consolidated totals.

The community banking segment recorded no provision for credit losses in the third quarter of 2026 compared to a net reversal of $100,000 in the third quarter of 2025. For the first nine months of 2026, the community banking segment recorded $450,000 of provision for credit losses compared to a net reversal of $300,000 for the first nine months of 2025. Management believes that the level of the allowance for credit losses is adequate to reflect the net amount expected to be collected.

Noninterest income increased for the third quarter and first nine months of 2026 compared to the same periods in 2025 due primarily to higher wealth management services income and for the first nine months of 2026, higher investment income from other equity interests from the sale of the Bearing equity interest partially offset by net losses on sales of available for sale securities from the Portfolio Restructuring. Noninterest expenses increased for the third quarter and first nine months of 2026 compared to the same periods in 2025 due primarily to higher salaries and employee benefits, occupancy expense and data processing expenses.

Mortgage Banking: The following table presents the mortgage banking operating results for the periods indicated.

TABLE 7: Mortgage Banking Segment Operating Results


		Three Months Ended September 30,						Nine Months Ended September 30,
(Dollars in thousands)		2026			2025			2026			2025
Interest income		$	616		$	625		$	1,974		$	1,696
Interest expense			-			-			-			-
Net interest income before allocation			616			625			1,974			1,696
Net interest allocation¹			(242)			(287)			(890)			(733)
Net interest income			374			338			1,084			963
Provision for credit losses			-			-			-			-
Net interest income after provision for credit losses			374			338			1,084			963
Noninterest income:
Gains on sales of loans			1,606			2,074			6,990			6,632
Mortgage banking fee income			771			774			2,665			2,299
Mortgage lender services fee income			907			768			2,696			2,073
Other income			4			4			33			10
Total noninterest income			3,288			3,620			12,384			11,014
Noninterest expense:
Salaries and employee benefits			1,878			1,899			6,245			5,662
Occupancy expense			270			222			716			725
Data processing			391			324			1,197			908
Professional fees			64			83			142			176
Insurance expense			42			15			78			82
Marketing and advertising expenses			148			152			400			417
Loan processing and collection expenses			368			335			1,227			892
Provision for indemnifications			(35)			(75)			(95)			(135)
Other expenses			165			144			550			502
Total noninterest expenses			3,291			3,099			10,460			9,229
Income before income taxes			371			859			3,008			2,748
Income tax expense			105			218			772			691
Net income		$	266		$	641		$	2,236		$	2,057

1	Interest expense is allocated to the mortgage banking segment through borrowings from the community banking segment.

The mortgage banking segment reported net income of $266,000 for the third quarter of 2026 compared to $641,000 for the same period in 2025 due primarily to:

●

lower gains on sales of loans due primarily to lower margins;

partially offset by:

●

higher mortgage lender services fee income.

The mortgage banking segment reported net income of $2.2 million for the first nine months of 2026 compared to $2.1 million for the same period of 2025 due primarily to:

●

higher gains on sales of loans and higher mortgage banking fee income due to higher volume of mortgage loan originations; and

●

higher mortgage lender services fee income;

partially offset by:

●

higher variable expenses tied to mortgage loan origination volume such as commissions and bonuses, reported in salaries and employee benefits, and loan processing expenses, reported in loan processing and collection expenses.

The following table presents mortgage loan originations and mortgage loans sold for the periods indicated.

TABLE 8: Mortgage Loan Originations


		Three Months Ended September 30,						Nine Months Ended September 30,
(Dollars in thousands)		2026			2025			2026			2025
Mortgage loan originations:
Purchases		$	158,242		$	148,245		$	510,023		$	447,107
Refinancings			14,519			18,773			76,074			47,184
Total mortgage loan originations¹		$	172,761		$	167,018		$	586,097		$	494,291

Lock-adjusted originations²		$	157,585		$	172,245		$	599,357		$	514,565

Total mortgage loan originations does not include mortgage lender services.

Lock-adjusted originations includes the effect of changes in the volume of mortgage loan applications in process that have not closed, net of an estimated volume not expected to close.

Mortgage banking segment loan originations increased 3.4 percent and 18.6 percent for the third quarter and first nine months of 2026, respectively, compared to the same periods in 2025 as the mortgage interest rate environment was generally more favorable during the first nine months of 2026 compared to the first nine months of 2025. With interest rates rising in the third quarter of 2026, refinancings decreased during the quarter by 22.7 percent compared to the third quarter of 2025. Gains on sales of loans, while driven in part by mortgage loan originations, also includes the effects of changes in locked loan commitments, which reflect the volume of mortgage loan applications that are in process and have not closed. Lock-adjusted originations for the mortgage banking segment decreased 8.5 percent and increased 16.5 percent for the third quarter and first nine months of 2026, respectively, compared to the same periods in 2025. Locked loan commitments were $57.7 million at September 30, 2026 compared to $44.6 million and $62.3 million at December 31, 2025 and September 30, 2025, respectively. Mortgage banking segment originations include originations of loans sold to the community banking segment, at prices similar to those paid by third-party investors. All interest expense at the mortgage banking segment is from variable rate borrowings from the community banking segment. Intercompany loan balances, interest income, interest expense, intercompany gains, losses, and other income and expenses related to these transactions are eliminated to reach consolidated totals.

Through the Lender Solutions division of the mortgage banking segment, mortgage lender services fee income is derived from providing mortgage origination functions to third-party mortgage lenders for a fee. Mortgage lender services fee income increased to $907,000 and $2.7 million for the third quarter and first nine months of 2026, respectively, compared to $768,000 and $2.1 million for the same periods in 2025 due primarily to an increase in the number of third-party mortgage lenders serviced and increased mortgage loan volume in the industry.

During the third quarter and first nine months of 2026, the mortgage banking segment recorded net reversals of provision for indemnification losses of $35,000 and $95,000, respectively, compared to net reversals of provision for indemnification losses of $75,000 and $135,000 for the same periods in 2025. Management believes that the indemnification reserve is sufficient to absorb losses related to loans that have been sold in the secondary market.

Consumer Finance: The following table presents the consumer finance operating results for the periods indicated.

TABLE 9: Consumer Finance Segment Operating Results


		Three Months Ended September 30,						Nine Months Ended September 30,
(Dollars in thousands)		2026			2025			2026			2025
Interest income		$	12,107		$	12,404		$	36,411		$	36,671
Interest expense			-			-			-			-
Net interest income before allocation			12,107			12,404			36,411			36,671
Net interest allocation¹			(5,564)			(5,793)			(16,634)			(17,211)
Net interest income			6,543			6,611			19,777			19,460
Provision for credit losses			2,750			3,000			8,550			8,300
Net interest income after provision for credit losses			3,793			3,611			11,227			11,160
Noninterest income			146			149			449			475
Noninterest expense:
Salaries and employee benefits			2,021			1,934			6,067			5,929
Occupancy expense			140			145			445			435
Data processing			351			327			1,021			938
Professional fees			128			168			479			394
Insurance expense			31			34			94			113
Marketing and advertising expenses			6			12			29			26
Loan processing and collection expenses			405			450			1,223			1,253
Other expenses			437			369			1,262			1,169
Total noninterest expenses			3,519			3,439			10,620			10,257
Income before income taxes			420			321			1,056			1,378
Income tax expense			117			90			296			382
Net income		$	303		$	231		$	760		$	996

1	Interest expense is allocated to the consumer finance segment through borrowings from the community banking segment.

The consumer finance segment reported net income of $303,000 for the third quarter of 2026 compared to net income of $231,000 for the same period in 2025 due primarily to:

●

lower provision for credit losses due primarily to a decrease in the balance of loans; and

●

lower interest expense allocation on borrowings from the community banking segment as a result of lower average balance of borrowings and lower average interest rates;

partially offset by:

●

lower interest income resulting from lower average balances of loans and lower loan yields.

The consumer finance segment reported net income of $760,000 for the first nine months of 2026 compared to $996,000 for the same period of 2025 due primarily to:

●

higher provision for credit losses due primarily to higher net charge-offs;

partially offset by:

●

lower interest expense allocation on borrowings from the community banking segment as a result of lower average interest rates and lower average balance of borrowings.

Average loans decreased $10.0 million, or 2.2 percent, for the third quarter of 2026 and decreased $5.3 million, or 1.1 percent, for the first nine months of 2026 compared to the same periods in 2025 due primarily to a decrease in marine and RV loans as the third party administrator of that program significantly decreased sales of those loans to outside parties during 2025, which led to the consumer finance segment ending future purchases under the program during the third

quarter of 2025. The marine and recreational vehicle portfolio is expected to run off over time, subject to normal repayment activity and credit performance. All interest expense at the consumer finance segment is from fixed and variable rate borrowings from the community banking segment. Intercompany loan balances, interest income, and interest expense related to these transactions are eliminated to reach consolidated totals.

The consumer finance segment at times offers payment deferrals to borrowers as a portfolio management technique to achieve higher ultimate cash collections on select loan accounts. Average amounts of payment deferrals of automobile loans on a monthly basis, which are not included in delinquent loans, were 2.05 percent and 1.59 percent of average automobile loans outstanding during the third quarter and first nine months of 2026, respectively, compared to 1.88 percent and 1.79 percent during the same periods of 2025, and 1.40 percent during the second quarter of 2026.

The consumer finance segment recorded $2.8 million and $8.6 million in provision for credit losses for the third quarter and first nine months of 2026, respectively, compared to $3.0 million and $8.3 million for the same periods in 2025. Net charge-offs as a percentage of total loans increased for the first nine months of 2026 compared to the same period in 2025 due primarily to a mix shift in the portfolio as balances of marine and recreational vehicle loans, which historically have had lower charge-off rates than the automobile portfolio, continued to decrease and increased charge-offs within the automobile portfolio. If loan performance deteriorates, resulting in further elevated delinquencies or net charge-offs, the provision for credit losses may increase in future periods.

ASSET QUALITY

Allowance and Provision for Credit Losses

The Corporation conducts an analysis of the collectability of the loan portfolio on a regular basis and uses this analysis to assess the sufficiency of the allowance for credit losses on loans and to determine the necessary provision for credit losses. The Corporation segments the loan portfolio into three loan portfolios based on common risk characteristics.

Commercial and consumer loans are assigned loan classification ratings based on their credit quality and risk of loss. These loan ratings are reviewed on a quarterly basis and updated as new information becomes available. The characteristics of these loan ratings are as follows:

●

Pass rated loans are to persons or business entities with an acceptable financial condition, appropriate collateral margins, appropriate cash flow to service the existing loan, and an appropriate leverage ratio. The borrower has paid all obligations as agreed and it is expected that this type of payment history will continue. When necessary, acceptable personal guarantors support the loan.

●

Special mention loans have a specific, identified weakness in the borrower's operations and in the borrower's ability to generate positive cash flow on a sustained basis. The borrower's recent payment history may be characterized by late payments. The Corporation's risk exposure is mitigated by collateral supporting the loan. The collateral is considered to be well-margined, well maintained, accessible and readily marketable.

●

Substandard loans are considered to have specific and well-defined weaknesses that jeopardize the viability of the Corporation's credit extension. The payment history for the loan has been inconsistent and the expected or projected primary repayment source may be inadequate to service the loan. The estimated net liquidation value of the collateral pledged and/or ability of the personal guarantor(s) to pay the loan may not adequately protect the Corporation. There is a distinct possibility that the Corporation will sustain some loss if the deficiencies associated with the loan are not corrected in the near term.

●

Substandard nonaccrual loans have the same characteristics as substandard loans; however, they have a nonaccrual classification because it is probable that the Corporation will not be able to collect all amounts due.

●

Doubtful rated loans have all the weaknesses inherent in a loan that is classified substandard but with 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. The possibility of loss is extremely high.

●

Loss rated loans are not considered collectible under normal circumstances and there is no realistic expectation for any future payment on the loan. Loss rated loans are fully charged off.

The Corporation monitors the consumer finance loan portfolio by past due status and by credit rating at the time of origination, which the Corporation believes serves as a relevant indicator of aggregate credit quality and risk of loan defaults in the portfolio based upon the use of Fair Isaac Corporation (FICO) Scores over time for loan approval decisions and through experience analyzing loss patterns. The characteristics of these credit ratings and our thresholds are as follows:

●

Very Good (>739) and Good (670-739) credit rated borrowers are near or above the average FICO Score of consumers. Borrowers generally have limited to no prior credit difficulties or have shown extensive creditworthiness over a recent period of time.

●

Fairly Good (625-669) and Fair (580-624) credit rated borrowers are approaching or slightly below the average FICO Score of consumers but typically have a credit profile acceptable to most lenders. Borrowers may have experienced minor credit difficulties or have a relatively limited credit history.

●

Marginal (<580) credit rated borrowers are well below the average FICO Score of consumers. Borrowers may have limited access to traditional financing due to having experienced prior credit difficulties or have a limited credit history. The risk of future charge-offs is higher.

The allowance for credit losses represents an amount that, in our judgment, reduces the recorded investment in loans to the net amount expected to be collected. The provision for credit losses increases the allowance, and loans charged off, net of recoveries, reduce the allowance. The following tables present the Corporation's credit loss experience for the periods indicated.

TABLE 10: Allowance for Credit Losses

Consumer

(Dollars in thousands)

Commercial

Consumer¹

Finance

Total

For the three months ended September 30, 2026:

Balance at June 30, 2026

13,420

4,192

22,063

39,675

Provision charged to operations

(129)

229

2,750

2,850

Loans charged off

(133)

(4,310)

(4,443)

Recoveries of loans previously charged off

200

1,328

1,556

Balance at September 30, 2026

13,491

4,316

21,831

39,638

Average loans²

1,252,094

419,083

453,770

2,124,947

Ratio of annualized net (recoveries) charge-offs to average loans

(0.06)

0.10

2.63

0.54


							Consumer
(Dollars in thousands)	Commercial			Consumer¹			Finance			Total
For the three months ended September 30, 2025:
Balance at June 30, 2025	$	13,026		$	4,167		$	22,385		$	39,578
Provision charged to operations		(38)			38			3,000			3,000
Loans charged off		(15)			(51)			(4,266)			(4,332)
Recoveries of loans previously charged off		13			30			1,157			1,200
Balance at September 30, 2025	$	12,986		$	4,184		$	22,276		$	39,446

Average loans²	$	1,148,245		$	389,904		$	463,761		$	2,001,910
Ratio of annualized net charge-offs to average loans		0.00	%		0.02	%		2.68	%		0.63	%

1Consumer loans includes provision, charge-offs and recoveries related to demand deposit overdrafts.

2Average loans does not include loans held for sale at the mortgage banking segment.

Consumer

(Dollars in thousands)

Commercial

Consumer¹

Finance

Total

For the nine months ended September 30, 2026:

Balance at December 31, 2025

13,239

4,179

22,259

39,677

Provision charged to operations

118

282

8,550

8,950

Loans charged off

(101)

(234)

(12,803)

(13,138)

Recoveries of loans previously charged off

235

3,825

4,149

Balance at September 30, 2026

13,491

4,316

21,831

39,638

Average loans²

1,226,369

409,026

459,213

2,094,608

Ratio of annualized net (recoveries) charge-offs to average loans

(0.01)

0.05

2.61

0.57


							Consumer
(Dollars in thousands)	Commercial			Consumer¹			Finance			Total
For the nine months ended September 30, 2025:
Balance at December 31, 2024	$	13,347		$	4,032		$	22,708		$	40,087
Provision charged to operations		(362)			212			8,300			8,150
Loans charged off		(35)			(167)			(11,985)			(12,187)
Recoveries of loans previously charged off		36			107			3,253			3,396
Balance at September 30, 2025	$	12,986		$	4,184		$	22,276		$	39,446

Average loans²	$	1,117,673		$	384,246		$	464,487		$	1,966,406
Ratio of net annualized charge-offs to average loans		0.00	%		0.02	%		2.51	%		0.60	%

1Consumer loans includes provision, charge-offs and recoveries related to demand deposit overdrafts.

2Average loans does not include loans held for sale at the mortgage banking segment.

For further information regarding the adequacy of our allowance for credit losses, refer to "Table 16: Nonperforming Assets" and the accompanying disclosure below.

The allocation of the allowance for credit losses and the ratio of corresponding outstanding loan balances to total loans are as follows as of the dates indicated.

TABLE 11: Allocation of Allowance for Credit Losses


		September 30,				December 31,
(Dollars in thousands)		2026				2025
Allocation of allowance for credit losses:
Commercial		$	13,491			$	13,239
Consumer			4,316				4,179
Consumer Finance			21,831				22,259
Total allowance for credit losses		$	39,638			$	39,677
Ratio of loans to total period-end loans:
Commercial			59	%			57	%
Consumer			20				20
Consumer Finance			21				23
			100	%			100	%

Loans are required to be measured at amortized cost and to be presented at the net amount expected to be collected. Credit losses on available for sale debt securities are accounted for as an allowance for credit losses, which is a valuation account that is deducted from the amortized cost basis of the financial asset to present the net carrying value and the amount expected to be collected on the financial asset. The Corporation concluded that a credit loss did not exist in its securities portfolio at September 30, 2026, and no allowance for credit losses has been recognized. Off balance sheet credit exposures, including loan commitments, are not recorded on balance sheet, but expected credit losses arising from off balance sheet credit exposures are recorded as a reserve for unfunded commitments and reported in Other Liabilities. The following table presents the Corporation's reserve for unfunded commitments for the periods indicated.

TABLE 12: Reserve for Unfunded Commitments


		Three Months Ended September 30,					Nine Months Ended September 30,
(Dollars in thousands)		2026		2025			2026		2025
Balance at the beginning of period		$	1,750	$	1,750		$	1,600	$	1,800
Provision charged to operations			(100)		(100)			50		(150)
Total		$	1,650	$	1,650		$	1,650	$	1,650

The allowance for credit losses on loans and available for sale debt securities and the reserve for unfunded commitments are established through a provision for credit losses charged against earnings. The following table presents a breakdown of the provision for credit losses for the periods indicated.

TABLE 13: Provision for Credit Losses


		Three Months Ended September 30,					Nine Months Ended September 30,
(Dollars in thousands)		2026			2025		2026			2025
Provision for credit losses:
Provision for loans		$	2,850		$	3,000	$	8,950		$	8,150
Provision for unfunded commitments			(100)			(100)		50			(150)
Total		$	2,750		$	2,900	$	9,000		$	8,000

TABLE 14: Credit Quality Indicators

Loans by credit quality indicators as of September 30, 2026 were as follows:


					Special						Substandard
(Dollars in thousands)		Pass			Mention			Substandard			Nonaccrual			Total¹
Commercial real estate		$	938,794		$	7,882		$	-		$	-		$	946,676
Commercial business			127,114			106			-			-			127,220
Construction - commercial real estate			34,562			-			-			-			34,562
Land acquisition and development			82,473			7,794			-			-			90,267
Builder lines			33,353			-			-			-			33,353
Construction - consumer real estate			31,654			-			-			-			31,654
Residential mortgage			333,630			657			58			1,095			335,440
Equity lines			84,245			24			-			-			84,269
Other consumer			9,645			6			-			6			9,657
		$	1,675,470		$	16,469		$	58		$	1,101		$	1,693,098

(Dollars in thousands)

Very Good

Good

Fairly Good

Fair

Marginal

Total

Consumer finance - automobiles

53,313

118,845

133,648

79,517

17,265

402,588

Consumer finance - marine and recreational vehicles

32,091

16,453

338

48,882

85,404

135,298

133,986

79,517

17,265

451,470

1At September 30, 2026, the Corporation did not have any loans classified as Doubtful or Loss.

Loans by credit quality indicators as of December 31, 2025 were as follows:


					Special						Substandard
(Dollars in thousands)		Pass			Mention			Substandard			Nonaccrual			Total¹
Commercial real estate		$	835,360		$	72		$	-		$	-		$	835,432
Commercial business			115,710			-			-			-			115,710
Construction - commercial real estate			99,604			-			-			-			99,604
Land acquisition and development			66,248			-			-			-			66,248
Builder lines			37,938			-			-			-			37,938
Construction - consumer real estate			29,288			-			-			-			29,288
Residential mortgage			317,686			655			60			1,135			319,536
Equity lines			76,359			101			-			-			76,460
Other consumer			10,085			-			-			-			10,085
		$	1,588,278		$	828		$	60		$	1,135		$	1,590,301



(Dollars in thousands)	Very Good		Good		Fairly Good		Fair		Marginal		Total
Consumer finance - automobiles	$	49,347	$	114,539	$	135,569	$	86,336	$	20,521	$	406,312
Consumer finance - marine and recreational vehicles		38,531		19,023		409		-		-		57,963
	$	87,878	$	133,562	$	135,978	$	86,336	$	20,521	$	464,275

1	At December 31, 2025, the Corporation did not have any loans classified as Doubtful or Loss.

The increase in loans classified as Special Mention at the community banking segment as of September 30, 2026 compared to December 31, 2025 was due primarily to one commercial relationship that was downgraded during the third quarter of 2026.

Table 15 summarizes the Corporation's credit ratios on a consolidated basis and Table 16 summarizes nonperforming assets by principal business segment as of September 30, 2026 and December 31, 2025. The mortgage banking segment did not have any nonperforming assets as of September 30, 2026 or December 31, 2025.

TABLE 15: Consolidated Credit Ratios


		September 30,			December 31,
(Dollars in thousands)		2026			2025
Total loans¹		$	2,144,568		$	2,054,576
Nonaccrual loans		$	2,020		$	2,157
Allowance for credit losses (ACL)		$	39,638		$	39,677
Nonaccrual loans to total loans			0.09	%		0.10	%
ACL to total loans			1.85	%		1.93	%
ACL to nonaccrual loans			1,962.28	%		1,839.45	%

1Total loans does not include loans held for sale at the mortgage banking segment.

TABLE 16: Nonperforming Assets

Community Banking Segment


		September 30,			December 31,
(Dollars in thousands)		2026			2025
Total loans		$	1,693,098		$	1,590,301
Nonaccrual loans		$	1,101		$	1,135
ACL		$	17,807		$	17,418
Nonaccrual loans to total loans			0.07	%		0.07	%
ACL to total loans			1.05	%		1.10	%
ACL to nonaccrual loans			1,617.35	%		1,534.63	%
Annualized year-to-date net charge-offs to average total loans			0.00	%		0.01	%

Consumer Finance Segment


		September 30,			December 31,
(Dollars in thousands)		2026			2025
Total loans		$	451,470		$	464,275
Nonaccrual loans		$	919		$	1,022
Repossessed assets		$	782		$	937
ACL		$	21,831		$	22,259
Nonaccrual loans to total loans			0.20	%		0.22	%
ACL to total loans			4.84	%		4.79	%
ACL to nonaccrual loans			2,375.52	%		2,177.98	%
Annualized year-to-date net charge-offs to average total loans			2.61	%		2.59	%

The community banking segment's nonaccrual loans were $1.1 million at both September 30, 2026 and December 31, 2025. The community banking segment recorded no provision for credit losses in the third quarter of 2026 compared to a net reversal of $100,000 in the third quarter of 2025. For the first nine months of 2026, the community banking segment recorded $450,000 of provision for credit losses compared to a net reversal of $300,000 for the first nine months of 2025 due primarily to the reversal of a specific reserve in the second quarter of 2025 upon the resolution of a nonperforming commercial real estate loan. At September 30, 2026, the allowance for credit losses increased to $17.8 million compared to $17.4 million at December 31, 2025. The allowance for credit losses as a percentage of total loans decreased to 1.05 percent at September 30, 2026 from 1.10 percent at December 31, 2025 due primarily to changes in the forecast of key credit loss model assumptions, primarily the forecast of the national unemployment rate derived from the Federal Open Market Committee of the Federal Reserve Board. Management believes that the level of the allowance for credit losses is adequate to reflect the net amount expected to be collected.

Nonaccrual loans at the consumer finance segment were $919,000 at September 30, 2026 compared to $1.0 million at December 31, 2025. Nonaccrual consumer finance loans remain low relative to the allowance for credit losses and the total consumer finance loan portfolio because the consumer finance segment generally initiates repossession of loan collateral once a loan becomes more than 60 days delinquent. Repossessed vehicles of the consumer finance segment are classified as other assets and consist only of vehicles the Corporation has the legal right to sell. Prior to the reclassification from loans to repossessed vehicles, the difference between the carrying amount of each loan and the fair value of each vehicle (i.e., the deficiency) is charged against the allowance for credit losses. At September 30, 2026, repossessed vehicles available for sale totaled $782,000 compared to $937,000 at December 31, 2025.

The consumer finance segment experienced net charge-offs at an annualized rate of 2.61 percent of average total loans for the first nine months of 2026 compared to 2.51 percent for the same period of 2025. The allowance for credit losses was $21.8 million, or 4.84 percent of total loans, at September 30, 2026 compared to $22.3 million, or 4.79 percent of total loans, at December 31, 2025. The increases in the net charge-off rate and the allowance for credit losses as a percentage of total loans are due primarily to a mix shift in the portfolio as balances of marine and recreational vehicle loans, which historically have had lower charge-off rates than the automobile portfolio, continued to decrease and increased charge-offs

within the automobile portfolio. At September 30, 2026, total delinquent loans as a percentage of total loans was 3.39 percent compared to 4.38 percent at December 31, 2025 and 4.00 percent at September 30, 2025.

The consumer finance segment is an indirect lender that provides automobile financing through lending programs that are designed to serve customers in both the "prime" and "non-prime" markets, including those who may have limited access to traditional automobile financing due to having experienced prior credit difficulties. The preferred automobile is a later model, low mileage used vehicle because the value of new vehicles typically depreciates rapidly. In addition to automobile financing, marine and RV loan contracts were also previously purchased on an indirect basis through a referral program administered by a third party. The marine and RV loan contracts were for "prime" loans averaging less than $50,000 made to individuals with higher credit scores. The third party administrator of that program significantly decreased sales of those loans to outside parties during 2025, which led to the consumer finance segment ending future purchases during the third quarter of 2025. The marine and RV portfolio is expected to run off over time, subject to normal repayment activity and credit performance.

The consumer finance segment's borrowers have included those considered "non-prime" and, therefore, the anticipated rates of delinquencies, defaults, repossessions and losses on the consumer finance loans may be higher than those experienced in the general automobile finance industry and could be more dramatically affected by changes in general economic conditions. Changes in economic conditions may also affect consumer demand for used automobiles and values of automobiles securing outstanding loans, due to changes in demand or changes in levels of inventory of used automobiles, which may directly affect the amount of a loss incurred by the consumer finance segment in the event of default. While we manage the higher risk inherent in loans made to "non-prime" borrowers through the underwriting criteria, portfolio management and collection methods employed by the consumer finance segment, we cannot guarantee that these criteria or methods will afford adequate protection against these risks. With the consumer finance segment's scorecard model for purchasing loan contracts, the credit-worthiness of borrowers at origination has improved for automobile loans purchased; however, we cannot provide any assurances regarding the level of the consumer finance segment's net charge-off ratio in future periods. However, we believe that the current allowance for credit losses is adequate to reflect the net amount expected to be collected on existing consumer finance segment loans that may become uncollectible. If factors influencing the consumer finance segment result in higher net charge-off ratios in future periods, the consumer finance segment may need to increase the level of its allowance for credit losses through additional provisions for credit losses, which could negatively affect future earnings of the consumer finance segment.

FINANCIAL CONDITION

At September 30, 2026, the Corporation had total assets of $2.8 billion, an increase of $42.7 million since December 31, 2025. The increase was attributable primarily to growth in loans held for investment funded by growth in deposits, borrowings and earnings. The significant components of the Corporation's Consolidated Balance Sheets are discussed below.

Loan Portfolio

Tables 17, 18 and 19 present information pertaining to the composition of loans held for investment, the composition of commercial real estate and construction commercial real estate loans, and the maturity/repricing of certain loans held for investment, respectively.

TABLE 17: Summary of Loans Held for Investment


		September 30, 2026					December 31, 2025
(Dollars in thousands)		Amount		Percent			Amount			Percent
Commercial real estate		$	946,676	44	%		$	835,432		41	%
Commercial business			127,220	6				115,710		5
Construction - commercial real estate			34,562	2				99,604		5
Land acquisition and development			90,267	4				66,248		3
Builder lines			33,353	2				37,938		2
Construction - consumer real estate			31,654	1				29,288		1
Residential mortgage			335,440	15				319,536		16
Equity lines			84,269	4				76,460		3
Other consumer			9,657	1				10,085		1
Consumer finance - automobiles			402,588	19				406,312		20
Consumer finance - marine and recreational vehicles			48,882	2				57,963		3
Subtotal			2,144,568	100	%			2,054,576		100	%
Less allowance for credit losses			(39,638)					(39,677)
Loans, net		$	2,104,930				$	2,014,899

During the first nine months of 2026, loans held for investment increased $90.0 million to $2.10 billion at September 30, 2026 due primarily to growth in commercial real estate and land acquisition and development loans, partially offset by a decrease in construction loans at the community banking segment.

TABLE 18: Commercial Real Estate and Construction Commercial Real Estate Loans


	September 30, 2026
(Dollars in thousands)	Amount		% of Commercial Real Estate and Construction Commercial Real Estate Loans			% of Total
Multifamily	$	184,041		18.8	%		8.6	%
Retail		160,007		16.3			7.5
Office		136,328		13.9			6.4
1-4 family investment properties		111,552		11.4			5.2
Hotels		101,061		10.3			4.7
Industrial/warehouse		92,438		9.4			4.3
Mini-storage		73,218		7.5			3.4
Medical office		50,677		5.2			2.4
Other		71,916		7.2			3.3
	$	981,238		100	%		45.8	%


	December 31, 2025
(Dollars in thousands)	Amount		% of Commercial Real Estate and Construction Commercial Real Estate Loans			% of Total
Multifamily	$	177,215		19.0	%		8.6	%
Retail		162,677		17.4			7.9
Office		123,274		13.2			6.0
1-4 family investment properties		99,526		10.6			4.8
Hotels		100,858		10.8			4.9
Industrial/warehouse		85,479		9.1			4.2
Mini-storage		66,983		7.2			3.3
Medical office		43,447		4.6			2.1
Other		75,577		8.1			3.7
	$	935,036		100	%		45.5	%

TABLE 19: Maturity/Repricing Schedule of Loans Held for Investment

September 30, 2026

(Dollars in thousands)

Commercial

Consumer

Consumer Finance

Total

Variable Rate:

Within 1 year

357,938

85,067

443,005

1 to 5 years

102,640

845

103,485

5 to 15 years

7,562

2,333

9,895

After 15 years

Fixed Rate:

Within 1 year

117,571

11,687

5,042

134,300

1 to 5 years

490,263

120,052

205,365

815,680

5 to 15 years

174,459

164,952

241,063

580,474

After 15 years

13,299

44,430

57,729

1,263,732

429,366

451,470

2,144,568

Securities

The investment portfolio plays a primary role in the management of the Corporation's interest rate sensitivity. In addition, the portfolio serves as a source of liquidity and is used as needed to meet collateral requirements. The investment portfolio consists of securities available for sale, which may be sold in response to changes in market interest rates, changes in prepayment risk, increases in loan demand, general liquidity needs and other similar factors. These securities are carried at estimated fair value. At September 30, 2026 and December 31, 2025, all debt securities in the Corporation's investment portfolio were classified as available for sale.

The following table sets forth the composition of the Corporation's securities available for sale in dollar amounts at fair value and as a percentage of the Corporation's total securities available for sale at the dates indicated.

TABLE 20: Securities Available for Sale


		September 30, 2026					December 31, 2025
(Dollars in thousands)		Amount			Percent		Amount			Percent
U.S. Treasury securities		$	4,964		1	%	$	4,887		1	%
U.S. government agencies and corporations			21,988		5			55,710		12
Mortgage-backed securities			244,501		54			205,832		45
Obligations of states and political subdivisions			148,867		33			157,091		34
Corporate and other debt securities			33,737		7			34,591		8
Total available for sale securities at fair value		$	454,057		100	%	$	458,111		100	%

During the first nine months of 2026, securities available for sale decreased $4.1 million to $454.1 million at September 30, 2026. Net unrealized losses in the market value of securities available for sale increased to $29.4 million at September 30, 2026 compared to $12.9 million at December 31, 2025, due primarily to an increase in debt security market interest rates.

For more information about the Corporation's securities available for sale, including information about securities in an unrealized loss position at September 30, 2026 and December 31, 2025, see Part I, Item 1, "Financial Statements" under the heading "Note 2: Securities" in this Quarterly Report on Form 10-Q.

The following table presents additional information pertaining to the composition of the securities portfolio at amortized cost, by the earlier of contractual maturity or expected maturity. Expected maturities will differ from contractual maturities because borrowers may have the right to prepay obligations with or without call or prepayment penalties. The total effective duration of the investment portfolio was 4.4 years as of September 30, 2026.

TABLE 21: Maturity of Securities



		September 30, 2026
					Weighted
		Amortized			Average
(Dollars in thousands)		Cost			Yield ¹
U.S. Treasury securities:
Maturing within 1 year		$	4,998		1.38	%
Total U.S. Treasury securities			4,998		1.38
U.S. government agencies and corporations:
Maturing within 1 year			2,520		1.80
Maturing after 1 year, but within 5 years			19,007		1.56
Maturing after 5 years, but within 10 years			2,075		3.98
Maturing after 10 years			111		2.35
Total U.S. government agencies and corporations			23,713		1.80
Mortgage-backed securities:
Maturing within 1 year			35,656		3.61
Maturing after 1 year, but within 5 years			106,816		3.77
Maturing after 5 years, but within 10 years			71,682		4.22
Maturing after 10 years			46,225		4.83
Total mortgage-backed securities			260,379		4.06
States and municipals:¹
Maturing within 1 year			16,478		4.14
Maturing after 1 year, but within 5 years			28,357		3.29
Maturing after 5 years, but within 10 years			33,597		4.24
Maturing after 10 years			81,050		4.88
Total states and municipals			159,482		4.39
Corporate and other debt securities:
Maturing within 1 year			8,935		3.53
Maturing after 1 year, but within 5 years			9,250		6.87
Maturing after 5 years, but within 10 years			16,709		7.02
Total corporate and other debt securities			34,894		6.09
Total securities:
Maturing within 1 year			68,587		3.50
Maturing after 1 year, but within 5 years			163,430		3.61
Maturing after 5 years, but within 10 years			124,063		4.60
Maturing after 10 years			127,386		4.86
Total securities		$	483,466		4.18

1.	Yields on tax-exempt securities have been computed on a taxable-equivalent basis using the federal corporate income tax rate of 21 percent. The weighted average yield is calculated based on the relative amortized costs of the securities.

Deposits

The Corporation's predominant source of funds is depository accounts, which are comprised of demand deposits, savings and money market accounts and time deposits. The Corporation's deposits are principally provided by individuals and businesses located within the communities served.

During the first nine months of 2026, deposits increased $10.4 million to $2.36 billion at September 30, 2026 due primarily to increases in time deposits and noninterest-bearing demand deposits, partially offset by a decrease in savings, money market and interest-bearing demand deposits. The increase in deposits was due in part to higher average balances within deposit accounts and the opening of new deposit accounts. Municipal deposits decreased $42.8 million to $119.6 million at September 30, 2026 due primarily to seasonal factors caused by the timing of tax collections.

The Corporation had $17.9 million and $25.0 million in brokered time deposits outstanding at September 30, 2026 and December 31, 2025, respectively. The Corporation may continue to use brokered deposits on a limited basis as a means of maintaining and diversifying liquidity and funding sources.

Borrowings

During the first nine months of 2026, borrowings increased $24.8 million to $138.1 million at September 30, 2026 due primarily to an increase in FHLB advances during the first nine months of 2026 that were used to help fund loan growth.

Liquidity

The objective of the Corporation's liquidity management is to ensure the continuous availability of funds to satisfy the credit needs of our customers and the demands of our depositors, creditors and investors. Stable core deposits and a strong capital position are the components of a solid foundation for the Corporation's liquidity position. Additional sources of liquidity available to the Corporation include cash flows from operations, loan payments and payoffs, deposit growth, maturities, calls and sales of securities, the issuance of brokered certificates of deposit and the capacity to borrow additional funds. Depending on the Corporation's liquidity levels, conditions in the capital markets and other factors, the Corporation may from time to time consider the issuance of debt, equity or other securities, the proceeds of which could provide additional liquidity for our operations.

Liquid assets, which include cash and due from banks, interest-bearing deposits at other banks and unpledged securities available for sale, totaled $389.4 million at September 30, 2026 compared to $406.4 million at December 31, 2025. The Corporation's funding sources at September 30, 2026 are presented in Table 22. The Corporation's capacity was $706.7 million and $714.8 million at September 30, 2026 and December 31, 2025, respectively, and the Corporation's amount available decreased $33.1 million from December 31, 2025 due primarily to an increase in FHLB advances during the first nine months of 2026.

TABLE 22: Funding Sources


	September 30, 2026
(Dollars in thousands)	Capacity			Outstanding			Available
Unsecured federal funds agreements	$	75,000		$	-		$	75,000
Borrowings from FHLB		288,819			65,000			223,819
Borrowings from FRB		342,876			-			342,876
Total	$	706,695		$	65,000		$	641,695


	December 31, 2025
(Dollars in thousands)	Capacity			Outstanding			Available
Unsecured federal funds agreements	$	75,000		$	-		$	75,000
Borrowings from FHLB		276,703			40,000			236,703
Borrowings from FRB		363,100			-			363,100
Total	$	714,803		$	40,000		$	674,803

We have no reason to believe these arrangements will not be renewed at maturity. Additional loans and securities are available that can be pledged as collateral for future borrowings from the FHLB and FRB above the current lendable collateral value. Our ability to maintain sufficient liquidity may be affected by numerous factors, including economic conditions nationally and in our markets. Depending on our liquidity levels, our capital position, conditions in the capital markets, our business operations and initiatives, and other factors, we may from time to time consider the issuance of debt, equity or other securities or other possible capital market transactions, the proceeds of which could provide additional liquidity for our operations.

Uninsured deposits represent an estimate of amounts above the Federal Deposit Insurance Corporation (FDIC) insurance coverage limit of $250,000. As of September 30, 2026, the Corporation's uninsured deposits were approximately $720.4 million, or 30.6 percent of total deposits, compared to $710.4 million, or 30.3 percent of total deposits as of December 31, 2025. Excluding intercompany cash holdings and municipal deposits which are secured with pledged securities, amounts uninsured were approximately $587.2 million, or 24.9 percent of total deposits as of September 30, 2026, compared to $527.8 million, or 22.5 percent of total deposits as of December 31, 2025. The Corporation's liquid assets and borrowing

availability as of September 30, 2026 totaled $1.03 billion, exceeding uninsured deposits, excluding intercompany cash holdings and secured municipal deposits, by $443.9 million.

The Corporation's internal policy limits brokered deposits to 20 percent of total deposits, representing approximately $566.6 million of net availability for additional brokered deposits as of September 30, 2026.

In the ordinary course of business, the Corporation has entered into contractual obligations and has made other commitments to make future payments. For further information concerning the Corporation's expected timing of such payments, refer to "Item 8. Financial Statements and Supplementary Data," under the headings "Note 9: Leases," "Note 11: Borrowings," and "Note 18: Commitments and Contingent Liabilities" in the Corporation's Annual Report on Form 10-K for the year ended December 31, 2025.

As a result of the Corporation's management of liquid assets and the ability to generate liquidity through liability funding, management believes that the Corporation maintains overall liquidity sufficient to satisfy its operational requirements and contractual obligations.

Capital Resources

The assessment of capital adequacy depends on such factors as asset quality, liquidity, earnings performance, and changing competitive conditions and economic forces. We regularly review the adequacy of the Corporation's and the Bank's capital. We maintain a structure that will assure an adequate level of capital to support anticipated asset growth and to absorb potential losses. While we will continue to look for opportunities to invest capital in profitable growth, share repurchases are another tool that facilitates improving shareholder return, as measured by ROE and earnings per share.

The disclosure below presents the Corporation's and the Bank's actual capital amounts and ratios under currently applicable regulatory capital standards. Under the small bank holding company policy statement of the Federal Reserve Board, which applies to certain bank holding companies with consolidated total assets of less than $3 billion, the Corporation was not subject to regulatory capital requirements at September 30, 2026. The following tables reflect the Corporation's consolidated capital as determined under regulations that apply to bank holding companies that are not small bank holding companies and minimum capital requirements that would apply to the Corporation if it were not a small bank holding company. Although the minimum regulatory capital requirements are not applicable to the Corporation, the Corporation calculates these ratios for its own planning and monitoring purposes. Total risk-weighted assets at September 30, 2026 for the Corporation were $2.33 billion and for the Bank were $2.30 billion. Total risk-weighted assets at December 31, 2025 for the Corporation were $2.26 billion and for the Bank were $2.23 billion. As of September 30, 2026, the Bank met all capital adequacy requirements to which it is subject.

TABLE 23: Regulatory Capital

September 30, 2026

Minimum Capital

Well Capitalized

Actual

Requirements

(Dollars in thousands)

 Amount

Ratio

Amount

Ratio

Amount

Ratio

The Corporation

Total risk-based capital ratio

363,253

15.7

185,097

8.0

N/A

Tier 1 risk-based capital ratio

294,179

12.7

138,822

6.0

N/A

Common Equity Tier 1 capital ratio

269,179

11.6

104,117

4.5

N/A

Tier 1 leverage ratio

294,179

10.5

111,798

4.0

N/A

The Bank

Total risk-based capital ratio

343,162

15.0

182,793

8.0

228,491

10.0

Tier 1 risk-based capital ratio

314,443

13.8

137,095

6.0

182,793

8.0

Common Equity Tier 1 capital ratio

314,443

13.8

102,821

4.5

148,519

6.5

Tier 1 leverage ratio

314,443

11.3

110,875

4.0

138,593

5.0


	December 31, 2025
					Minimum Capital				Well Capitalized
	Actual				Requirements				Requirements
(Dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio
The Corporation
Total risk-based capital ratio	$	342,856	15.2	%	$	180,649	8.0	%	$	N/A	N/A	%
Tier 1 risk-based capital ratio		274,469	12.2			135,487	6.0			N/A	N/A
Common Equity Tier 1 capital ratio		249,469	11.0			101,615	4.5			N/A	N/A
Tier 1 leverage ratio		274,469	10.0			110,060	4.0			N/A	N/A

The Bank
Total risk-based capital ratio	$	330,859	14.8	%	$	178,421	8.0	%	$	223,026	10.0	%
Tier 1 risk-based capital ratio		302,815	13.6			133,816	6.0			178,421	8.0
Common Equity Tier 1 capital ratio		302,815	13.6			100,362	4.5			144,967	6.5
Tier 1 leverage ratio		302,815	11.1			109,173	4.0			136,466	5.0

The regulatory risk-based capital amounts presented above include: (1) common equity tier 1 capital (CET1) which consists principally of common stock (including surplus) and retained earnings with adjustments for goodwill and intangible assets; (2) additional Tier 1 capital which consists principally of the Corporation's "grandfathered" trust preferred securities of $25.0 million; and (3) Tier 2 capital which consists of a limited amount of the allowance for credit losses and $40.0 million of outstanding subordinated notes of the Corporation. Total Risk-Based Capital is comprised of CET1, additional Tier 1 capital and Tier 2 capital. The Total Risk-Based Capital ratio, Tier 1 Risk-Based Capital ratio and Common Equity Tier 1 Capital ratio are calculated as a percentage of risk-weighted assets. The Tier 1 Leverage ratio is calculated as a percentage of average tangible assets. In addition, the Corporation has made the one-time irrevocable election to continue treating accumulated other comprehensive income (AOCI) under regulatory standards that were in place prior to the Basel III Final Rule in order to eliminate volatility of regulatory capital that can result from fluctuations in AOCI and the inclusion of AOCI in regulatory capital, as would otherwise be required under the Basel III Capital Rule. As a result of this election, changes in AOCI, including unrealized losses on securities available for sale, do not affect regulatory capital amounts shown in the table above for the Corporation or the Bank. For additional information about the Basel III Final Rules, see "Item 1. Business" under the heading "Regulation and Supervision" and "Item 8. Financial Statements and Supplementary Data," under the heading "Note 17: Regulatory Requirements and Restrictions" in the Corporation's Annual Report on Form 10-K for the year ended December 31, 2025.

In addition to the regulatory risk-based capital requirements, the Bank must maintain a capital conservation buffer of 2.5 percent of risk-weighted assets as required by the Basel III Final Rule. Including the capital conservation buffer, the minimum ratios are a common equity Tier 1 risk-based capital ratio of 7.0 percent, a Tier 1 risk-based capital ratio of 8.5 percent, and a total risk-based capital ratio of 10.5 percent. The Corporation and the Bank exceeded these ratios at September 30, 2026 and December 31, 2025.

The Corporation's capital resources are impacted by its share repurchase programs. The Board of Directors authorized a program, effective January 1, 2026 through December 31, 2026, to repurchase up to $5.0 million of the Corporation's common stock (the 2026 Repurchase Program). Repurchases under the 2026 Repurchase Program may be made through privately negotiated transactions or open market transactions, including pursuant to a trading plan in accordance with Rule 10b5-1 and/or Rule 10b-18 under the Securities Exchange Act of 1934, as amended (Exchange Act) and shares repurchased will be returned to the status of authorized and unissued shares of common stock. The timing, number and purchase price of shares repurchased under the program will be determined by management in its discretion and will depend on a number of factors, including the market price of the shares, general market and economic conditions, applicable legal requirements and other conditions, and there is no assurance that the Corporation will purchase any additional shares under the 2026 Repurchase Program. During the nine months ended September 30, 2026, the Corporation repurchased 8,377 shares, or $622,000, of its common stock under the 2026 Repurchase Program. As of September 30, 2026, there was $4.38 million remaining available for repurchases of the Corporation's common stock under the 2026 Repurchase Program.

USE OF CERTAIN NON-GAAP FINANCIAL MEASURES

The accounting and reporting policies of the Corporation conform to GAAP in the United States and prevailing practices in the banking industry. However, certain non-GAAP measures are used by management to supplement the evaluation of the Corporation's performance. These include adjusted net income for the Corporation and for the community banking segment, adjusted earnings per share, annualized adjusted ROE, annualized ROTCE, annualized adjusted ROTCE, annualized adjusted ROA, net tangible income attributable to the Corporation, ROTCE, tangible book value per share, and the following fully-taxable equivalent (FTE) measures: interest and fees on loans-FTE, interest and dividends on securities-FTE, total interest income-FTE, net interest income-FTE and net interest margin-FTE. Interest on tax-exempt loans and securities is presented on a taxable-equivalent basis (which converts the income on loans and investments for which no income taxes are paid to the equivalent yield as if income taxes were paid) using the federal corporate income tax rate of 21 percent that was applicable for all periods presented.

Management believes that the use of these non-GAAP measures provides meaningful information about operating performance by enhancing comparability with other financial periods, other financial institutions, and between different sources of interest income. The non-GAAP measures used by management enhance comparability by excluding the effects of balances of intangible assets, including goodwill, that vary significantly between institutions, and tax benefits that are not consistent across different opportunities for investment. These non-GAAP financial measures should not be considered an alternative to, or more important than, GAAP-basis financial statements, and other bank holding companies may define or calculate these or similar measures differently. A reconciliation of the non-GAAP financial measures used by the Corporation to evaluate and measure the Corporation's performance to the most directly comparable GAAP financial measures is presented below.

TABLE 24: Non-GAAP Table


	Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in thousands, except per share amounts)	2026		2025		2026		2025
Reconciliation of Certain Non-GAAP Financial Measures
Adjusted Net Income and Adjusted Earnings Per Share
Net income, as reported	$	8,257	$	7,113	$	23,677	$	20,275
Gain on sale of other equity interest¹		-		-		(6,375)		-
Loss on securities portfolio restructuring²		-		-		5,632		-
Adjusted net income	$	8,257	$	7,113	$	22,934	$	20,275

Weighted average shares - basic and diluted		3,251,418		3,238,057		3,250,699		3,237,256

Earnings per share - basic and diluted, as reported	$	2.55	$	2.18	$	7.26	$	6.22
Gain on sale of other equity interest¹		-		-		(1.96)		-
Loss on securities portfolio restructuring²		-		-		1.73		-
Adjusted earnings per share - basic and diluted	$	2.55	$	2.18	$	7.03	$	6.22

Adjusted Net Income, Community Banking Segment
Net income, community banking segment, as reported	$	8,914	$	7,378	$	24,197	$	19,939
Gain on sale of other equity interest¹		-		-		(6,375)		-
Loss on securities portfolio restructuring²		-		-		5,632		-
Adjusted net income, community banking segment	$	8,914	$	7,378	$	23,454	$	19,939

1	Sale of other equity interest is net of related income tax expense of $1.9 million for the nine months ended September 30, 2026.

2	Securities portfolio restructuring is net of related income tax benefit of $1.5 million for the nine months ended September 30, 2026.


	Three Months Ended September 30,						Nine Months Ended September 30,
(Dollars in thousands, except per share amounts)	2026			2025			2026			2025
Adjusted ROE
Average total equity, as reported	$	278,440		$	245,218		$	271,999		$	237,998

Annualized ROE, as reported		11.86	%		11.60	%		11.60	%		11.36	%
Annualized Adjusted ROE		11.86	%		11.60	%		11.24	%		11.36	%

Adjusted ROA
Average total assets, as reported	$	2,804,320		$	2,691,263		$	2,799,599		$	2,636,916

Annualized ROA, as reported		1.18	%		1.06	%		1.13	%		1.02	%
Annualized Adjusted ROA		1.18	%		1.06	%		1.09	%		1.02	%

Return on Average Tangible Common Equity
Average total equity, as reported	$	278,440		$	245,218		$	271,999		$	237,998
Average goodwill		(25,191)			(25,191)			(25,191)			(25,191)
Average other intangible assets		(843)			(985)			(869)			(1,049)
Average noncontrolling interest		(471)			(538)			(623)			(702)
Average tangible common equity	$	251,935		$	218,504		$	245,316		$	211,056

Net income	$	8,257		$	7,113		$	23,677		$	20,275
Amortization of intangibles		25			63			75			188
Net loss (income) attributable to noncontrolling interest		18			(38)			(92)			(141)
Net tangible income attributable to C&F Financial Corporation	$	8,300		$	7,138		$	23,660		$	20,322

Adjusted net income	$	8,257		$	7,113		$	22,934		$	20,275
Amortization of intangibles		25			63			75			188
Net loss (income) attributable to noncontrolling interest		18			(38)			(92)			(141)
Adjusted net tangible income attributable to C&F Financial Corporation	$	8,300		$	7,138		$	22,917		$	20,322

Annualized ROE, as reported		11.86	%		11.60	%		11.60	%		11.36	%
Annualized return on average tangible common equity		13.18	%		13.07	%		12.86	%		12.84	%
Annualized adjusted return on average tangible common equity		13.18	%		13.07	%		12.45	%		12.84	%


(Dollars in thousands)	Three Months Ended September 30,						Nine Months Ended September 30,
Fully Taxable Equivalent Net Interest Income¹	2026			2025			2026			2025
Interest and fees on loans	$	36,693		$	34,683		$	107,098		$	100,781
FTE adjustment		47			52			142			148
FTE interest and fees on loans	$	36,740		$	34,735		$	107,240		$	100,929

Interest and dividends on securities	$	4,611		$	3,381		$	12,581		$	9,763
FTE adjustment		311			266			900			760
FTE interest and dividends on securities	$	4,922		$	3,647		$	13,481		$	10,523

Total interest income	$	41,576		$	38,783		$	121,073		$	112,178
FTE adjustment		358			318			1,042			908
FTE interest income	$	41,934		$	39,101		$	122,115		$	113,086

Net interest income	$	30,174		$	27,174		$	86,973		$	78,692
FTE adjustment		358			318			1,042			908
FTE net interest income	$	30,532		$	27,492		$	88,015		$	79,600

Net interest margin		4.47	%		4.19	%		4.35	%		4.17	%
FTE adjustment		0.06	%		0.05	%		0.06	%		0.04	%
FTE net interest margin		4.53	%		4.24	%		4.41	%		4.21	%

1	Assuming a tax rate of 21%.


	September 30,		December 31,
(Dollars in thousands, except per share amounts)	2026		2025
Tangible Book Value Per Share
Equity attributable to C&F Financial Corporation	$	268,753	$	261,753
Less goodwill		(25,191)		(25,191)
Less other intangible assets		(834)		(909)
Tangible equity attributable to C&F Financial Corporation	$	242,728	$	235,653

Shares outstanding		3,251,123		3,245,972

Book value per share	$	82.66	$	80.64
Tangible book value per share	$	74.66	$	72.60

CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS

This report contains statements concerning the Corporation's expectations, plans, objectives or beliefs regarding future financial performance and other statements that are not historical facts, which may constitute "forward-looking statements" as defined by federal securities laws. Forward-looking statements generally can be identified by the use of words such as "believe," "expect," "anticipate," "estimate," "plan," "may," "might," "will," "intend," "target," "should," "could," or similar expressions, are not statements of historical fact, and are based on management's beliefs, assumptions and expectations regarding future events or performance as of the date of this report, taking into account all information currently available to management. These statements may include, but are not limited to: statements regarding expected future operations and financial performance; expected trends in yields on loans; expected future recovery of investments in debt securities; future dividend payments and share repurchases; deposit trends; charge-offs and delinquencies; changes in cost of funds and net interest margin and items affecting net interest margin; strategic business initiatives, including our expansion into Lynchburg, Virginia, and the anticipated effects thereof; expected impact of unrealized losses on earnings and regulatory capital of the Corporation or the Bank; expected renewal of unsecured federal funds agreements; mortgage loan originations; expectations regarding the Bank's regulatory risk-based capital requirement levels; competition; our loan portfolio; our digital services; the adoption of artificial intelligence; improving operational efficiencies; retention of qualified loan officers and expectations regarding new mortgage loan originations; expectations regarding the runoff of the marine and recreational vehicle portfolio; technology initiatives; our diversified business strategy; asset quality; credit quality; adequacy of allowances for credit losses and the level of future charge-offs; market interest rates and housing inventory and resulting effects on mortgage loan origination volume; sources of liquidity; adequacy of the reserve for indemnification losses related to loans sold in the secondary market; capital levels; the effect of future market and industry trends and conditions; the effects of future interest rate levels and fluctuations; cybersecurity risks; and inflation. These forward-looking statements are subject to significant risks and uncertainties due to factors that could have a material adverse effect on the operations and future prospects of the Corporation including, but not limited to, changes in:

●

interest rates, such as volatility in short-term interest rates or yields on U.S. Treasury bonds, fluctuations in interest rates following actions by the Federal Reserve and increases or volatility in mortgage interest rates

●general business conditions, as well as conditions within the financial markets

●general economic conditions, including unemployment levels, inflation rates, supply chain disruptions, slowdowns in economic growth and government shutdowns

●general market conditions, including disruptions due to pandemics or significant health hazards, severe weather conditions, natural disasters, terrorist activities, financial crises, political crises, changes in trade policy and the implementation of tariffs, geopolitical tensions, war and other military conflicts (including the conflict in the Middle East and potential associated impacts on interest rates and energy prices) or other major events, or the prospect of these events

●average loan yields and securities yields and average costs of interest-bearing deposits and borrowings

●financial services industry conditions, including bank failures or rumors of such failures, the soundness of other financial institutions or concerns involving liquidity, along with actions taken by governmental agencies to address such conditions, and the effects on financial institutions, including us, on, among other things, the ability to attract or retain depositors and to borrow or raise capital

●labor market conditions, including attracting, hiring, training, motivating and retaining qualified employees

●the legislative and regulatory climate, regulatory initiatives with respect to financial institutions, products and services, the Consumer Financial Protection Bureau (the CFPB) and the regulatory and enforcement activities of the CFPB

●monetary and fiscal policies of the U.S. Government, including policies of the FDIC, U.S. Department of the Treasury and the Board of Governors of the Federal Reserve System (the Federal Reserve Board), and the effect of these policies on interest rates and business in our markets

●demand for financial services in the Corporation's market areas

●the value of securities held in the Corporation's investment portfolios

●the quality or composition of the loan portfolios and the value of the collateral securing those loans

●the inventory level, demand and fluctuations in the pricing of used automobiles, including sales prices of repossessed vehicles

●the level of automobile loan delinquencies or defaults and our ability to repossess automobiles securing delinquent automobile finance installment contracts

●the level of net charge-offs on loans and the adequacy of our allowance for credit losses

●the level of indemnification losses related to mortgage loans sold

●demand for loan products

●deposit flows

●the possibility that the expected financial impacts of the Portfolio Restructuring may differ from current expectations, as well as business, economic, tax and other factors affecting the Portfolio Restructuring

●the strength of the Corporation's counterparties

●the availability of lines of credit from the FHLB and other counterparties

●competition from both banks and non-banks, including competition in the automobile finance market

●services provided by, or the level of the Corporation's reliance upon, third parties for key services

●the commercial and residential real estate markets, including changes in property values

●the demand for residential mortgages and conditions in the secondary residential mortgage loan markets

●the Corporation's technology initiatives and other strategic initiatives

●the Corporation's branch expansion, relocation and consolidation plans

●cyber threats, attacks or events, including emerging issues related to the development and use of artificial intelligence that could give rise to legal or regulatory action or increase cybersecurity threats

●C&F Bank's product offerings

●accounting principles, policies and guidelines, and elections made by the Corporation thereunder

These risks and uncertainties, and the risks discussed in more detail in Item 1A. "Risk Factors" of Part I of the Corporation's Annual Report on Form 10-K for the year ended December 31, 2025 and other reports filed with the SEC should be considered in evaluating the forward-looking statements contained herein.

Readers should not place undue reliance on any forward-looking statement. There can be no assurance that actual results will not differ materially from historical results or those expressed in or implied by such forward-looking statements, or that the beliefs, assumptions and expectations underlying such forward-looking statements will be proven to be accurate. Forward-looking statements are made as of the date of this report and we undertake no obligation to update or revise any forward-looking statement to reflect events or circumstances arising after the date on which the statement was made, except as otherwise required by law.

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