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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☑

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2026

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to

Commission File Number: 333-209052

SKYLINE BANKSHARES, INC.

(Exact Name of Registrant as Specified in Its Charter)

Virginia		47-5486027
(State or Other Jurisdiction of Incorporation)		(I.R.S. Employer Identification Number)

212 East Main Street
Floyd, Virginia		24091
(Address of Principal Executive Offices)		(Zip Code)

(540) 745-4191

(Registrant’s Telephone Number, Including Area Code)

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

Title of each class

Trading

Symbol(s)

Name of each exchange

on which registered

None

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

Indicate by checkmark whether the Registrant has submitted electronically any Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405) of this chapter during the preceding 12 months or for such shorter period that the Registrant was required to submit such files. Yes ☑ No ☐

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

Large accelerated filer ☐	Accelerated filer ☐

Non-accelerated filer ☑	Smaller reporting company ☑

	Emerging growth company ☐

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

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

The registrant had 5,672,204 shares of Common Stock, no par value per share, outstanding as of May 14, 2026.

PART I	FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Balance Sheets—March 31, 2026 (Unaudited) and December 31, 2025 (Audited)	3

	Unaudited Consolidated Statements of Income—Three Months Ended March 31, 2026 and March 31, 2025	4

	Unaudited Consolidated Statements of Comprehensive Income—Three Months Ended March 31, 2026 and March 31, 2025	5

	Unaudited Consolidated Statements of Changes in Stockholders’ Equity—Three Months Ended March 31, 2026 and March 31, 2025	6

	Unaudited Consolidated Statements of Cash Flows—Three Months Ended March 31, 2026 and March 31, 2025	7

	Notes to Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	33

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	41

Item 4.	Controls and Procedures	42

PART II	OTHER INFORMATION

Item 1.	Legal Proceedings	43

Item 1A.	Risk Factors	43

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	43

Item 3.	Defaults Upon Senior Securities	43

Item 4.	Mine Safety Disclosures	43

Item 5.	Other Information	43

Item 6.	Exhibits	43

Signatures		44

Part I. Financial Information

Item 1. Financial Statements

Skyline Bankshares, Inc. and Subsidiary

Consolidated Balance Sheets

March 31, 2026 and December 31, 2025

	March 31,			December 31,
(dollars in thousands)	2026			2025
	(Unaudited)			(Audited)
Assets

Cash and due from banks	$	19,699		$	19,724
Interest-bearing deposits with banks		137			3,125
Federal funds sold		-			343
Total cash and cash equivalents		19,836			23,192
Investment securities available for sale		106,142			114,096
Restricted equity securities		3,812			3,474
Loans		1,086,279			1,058,198
Allowance for credit losses		(8,914	)		(8,666	)
Net loans		1,077,365			1,049,532
Cash value of life insurance		27,058			27,169
Properties and equipment, net		40,503			40,760
Accrued interest receivable		4,515			4,541
Core deposit intangible		2,874			3,043
Goodwill		7,900			7,900
Deferred tax assets, net		3,784			3,696
Other assets		16,140			15,900
	$	1,309,929		$	1,293,303

Liabilities and Stockholders’ Equity

*Liabilities*
Deposits
Noninterest-bearing	$	381,952		$	371,001
Interest-bearing		802,535			807,164
Total deposits		1,184,487			1,178,165

Borrowings		6,000			-
Fed funds purchased		623			-
Accrued interest payable		521			531
Other liabilities		8,155			6,943
		1,199,786			1,185,639

Commitments and contingencies (Note 9)

*Stockholders’ Equity*
Preferred stock, no par value; 5,000,000 shares authorized, none issued		-			-
Common stock, no par value; 25,000,000 shares authorized, 5,672,204 and 5,666,204 issued and outstanding at March 31, 2026 and December 31, 2025, respectively		-			-
Surplus		34,043			33,984
Retained earnings		89,517			86,617
Accumulated other comprehensive loss		(13,417	)		(12,937	)
		110,143			107,664
	$	1,309,929		$	1,293,303

See Notes to Consolidated Financial Statements

Skyline Bankshares, Inc. and Subsidiary

Consolidated Statements of Income

For the Three Months ended March 31, 2026 and 2025

	Three Months Ended
	March 31,
(dollars in thousands except share amounts)	2026		2025
	(Unaudited)		(Unaudited)
Interest income
Loans and fees on loans	$	16,229	$	14,721
Interest-bearing deposits in banks		23		47
Federal funds sold		1		2
Interest on taxable securities		555		633
Interest on nontaxable securities		49		49
Dividends		60		32
		16,917		15,484
Interest expense
Deposits		3,321		3,335
Interest on borrowings		82		426
		3,403		3,761
Net interest income		13,514		11,723

*Provision for credit losses*		279		178
Net interest income after provision for credit losses		13,235		11,545

Noninterest income
Service charges on deposit accounts		650		584
Other service charges and fees		995		916
Mortgage origination fees		112		35
Increase in cash value of life insurance		179		174
Life insurance income		-		60
Other income		51		17
		1,987		1,786
Noninterest expenses
Salaries and employee benefits		4,834		4,500
Occupancy and equipment		1,547		1,479
Data processing expense		896		848
FDIC Assessments		249		246
Advertising		264		244
Bank franchise tax		150		132
Director fees		114		93
Professional fees		224		302
Telephone expense		115		124
Core deposit intangible amortization		169		212
Other expense		808		683
		9,370		8,863
Net income before income taxes		5,852		4,468

*Income tax expense*		1,251		895
Net income	$	4,601	$	3,573

*Net income per share*	$	0.82	$	0.64
*Weighted average shares outstanding*		5,617,204		5,584,704
*Dividends declared per share*	$	0.30	$	0.25

See Notes to Consolidated Financial Statements

Skyline Bankshares, Inc. and Subsidiary

Consolidated Statements of Comprehensive Income

For the Three Months ended March 31, 2026 and 2025

	Three Months Ended
	March 31,
(dollars in thousands)	2026			2025
	(Unaudited)			(Unaudited)

Net income	$	4,601		$	3,573

Other comprehensive (loss) income

Unrealized (losses) gains on investment securities available for sale:
Unrealized (losses) gains arising during the period		(608	)		2,587
Tax related to unrealized losses (gains)		128			(543	)

Total other comprehensive (loss) income		(480	)		2,044
Total comprehensive income	$	4,121		$	5,617

See Notes to Consolidated Financial Statements

Skyline Bankshares, Inc. and Subsidiary

Consolidated Statements of Changes in Stockholders’ Equity

For the Three Months ended March 31, 2026 and 2025 (unaudited)

(dollars in thousands except share amounts)
										Accumulated
										Other
	Common Stock						Retained			Comprehensive
	Shares		Amount		Surplus		Earnings			Loss			Total

*Balance, December 31, 2024*		5,651,704	$	-	$	33,507	$	73,714		$	(18,553	)	$	88,668

Net income		-		-		-		3,573			-			3,573
Other comprehensive income		-		-		-		-			2,044			2,044
Dividends paid ($0.25 per share)		-		-		-		(1,413	)		-			(1,413	)
Share-based compensation		-		-		49		-			-			49

*Balance, March 31, 2025*		5,651,704	$	-	$	33,556	$	75,874		$	(16,509	)	$	92,921


*Balance, December 31, 2025*		5,666,204	$	-	$	33,984	$	86,617		$	(12,937	)	$	107,664

Net income		-		-		-		4,601			-			4,601
Other comprehensive loss		-		-		-		-			(480	)		(480	)
Dividends paid ($0.30 per share)		-		-		-		(1,701	)		-			(1,701	)
Stock awards issued		6,000		-		-		-			-			-
Share-based compensation		-		-		59		-			-			59

*Balance, March 31, 2026*		5,672,204	$	-	$	34,043	$	89,517		$	(13,417	)	$	110,143

See Notes to Consolidated Financial Statements

Skyline Bankshares, Inc. and Subsidiary

Consolidated Statements of Cash Flows

For the Three Months ended March 31, 2026 and 2025

	Three Months Ended
	March 31,
(dollars in thousands)	2026			2025
	(Unaudited)			(Unaudited)
Cash flows from operating activities
Net income	$	4,601		$	3,573
Adjustments to reconcile net income to net cash provided by operations:
Depreciation		536			508
Amortization of core deposit intangible		169			212
Accretion of loan discount and deposit premium, net		(197	)		(312	)
Provision for credit losses		279			178
Deferred income taxes		40			(10	)
Accretion of discount on securities, net of amortization of premiums		14			11
Deferred compensation		41			29
Share-based compensation		59			49
Life insurance income		-			(60	)
Changes in assets and liabilities:
Cash value of life insurance		(179	)		(174	)
Accrued interest receivable		26			4
Other assets		(240	)		1,265
Accrued interest payable		(10	)		(251	)
Other liabilities		1,171			(105	)
Net cash provided by operating activities		6,310			4,917

Cash flows from investing activities
Activity in available for sale securities:
Maturities/calls/paydowns		7,332			2,380
Purchases of restricted equity securities		(338	)		(959	)
Net increase in loans		(27,909	)		(15,560	)
Proceeds from life insurance contracts		290			328
Purchases of property and equipment		(279	)		(1,187	)
Net cash used in investing activities		(20,904	)		(14,998	)

Cash flows from financing activities
Net increase in deposits		6,316			22,155
Proceeds from FHLB advances		17,000			107,500
Repayments on FHLB advances		(11,000	)		(93,000	)
Net change in fed funds purchased		623			(4,228	)
Advances on short-term line of credit		-			2,500
Payment on short-term line of credit		-			(5,000	)
Dividends paid		(1,701	)		(1,413	)
Net cash provided by financing activities		11,238			28,514
Net (decrease) increase in cash and cash equivalents		(3,356	)		18,433

*Cash and cash equivalents, beginning*		23,192			19,451
*Cash and cash equivalents, ending*	$	19,836		$	37,884

See Notes to Consolidated Financial Statements

Skyline Bankshares, Inc. and Subsidiary

Consolidated Statements of Cash Flows, continued

For the Three Months ended March 31, 2026 and 2025

	Three Months Ended
	March 31,
(dollars in thousands)	2026			2025
	(Unaudited)			(Unaudited)
*Supplemental disclosure of cash flow information*
Interest paid	$	3,413		$	4,012
Taxes paid	$	-		$	-

*Supplemental disclosure of noncash investing activities*
Effect on equity of change in net unrealized (loss) gain on available for sale securities	$	(480	)	$	2,044

See Notes to Consolidated Financial Statements

Skyline Bankshares, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

Note 1. Organization and Summary of Significant Accounting Policies

Organization

Skyline Bankshares, Inc. (the “Company”) is a bank holding company headquartered in Floyd, Virginia. The Company offers a wide range of retail and commercial banking services through its wholly-owned bank subsidiary, Skyline National Bank (the “Bank”). On January 1, 2023, the Company changed its name from Parkway Acquisition Corp. to Skyline Bankshares, Inc. to align its brand across the entire organization.

The Company was incorporated as a Virginia corporation on November 2, 2015. The Company was formed as a business combination shell company for the purpose of completing a business combination transaction between Grayson Bankshares, Inc. (“Grayson”) and Cardinal Bankshares Corporation (“Cardinal”) in which Grayson and Cardinal merged with and into the Company, with the Company as the surviving corporation (the “Cardinal merger”), on July 1, 2016. Upon completion of the Cardinal merger, the Bank of Floyd (“Floyd”), a wholly-owned subsidiary of Cardinal, was merged with and into the Bank (formerly Grayson National Bank), a wholly-owned subsidiary of Grayson. Effective March 13, 2017, the Bank changed its name to Skyline National Bank.

On July 1, 2018, the Company acquired Great State Bank (“Great State”), based in Wilkesboro, North Carolina, through the merger of Great State with and into the Bank, with the Bank as the surviving bank. On September 1, 2024, the Company acquired Johnson County Bank (“JCB”), based in Mountain City, Tennessee, through the merger of JCB with and into the Bank, with the Bank as the surviving bank. The purpose of this acquisition was to facilitate the Bank’s entry into Eastern Tennessee.

The Bank was organized under the laws of the United States in 1900 and now serves the Virginia counties of Grayson, Floyd, Carroll, Wythe, Pulaski, Montgomery, Roanoke, Patrick and Washington, the North Carolina counties of Alleghany, Ashe, Burke, Caldwell, Catawba, Cleveland, Davie, Iredell, Watauga, Wilkes, and Yadkin, and the Tennessee county of Johnson, and the surrounding areas, through twenty-eight full-service banking offices and two loan production offices. As a Federal Deposit Insurance Corporation (“FDIC”) insured national banking association, the Bank is subject to regulation by the Comptroller of the Currency and the FDIC. The Company is regulated by the Board of Governors of the Federal Reserve System (the “Federal Reserve”).

The consolidated financial statements as of March 31, 2026 and for the three-month periods ended March 31, 2026 and 2025 included herein have been prepared by the Company without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the information furnished in the interim consolidated financial statements reflects all adjustments necessary to present fairly the Company’s consolidated financial position, results of operations, changes in stockholders’ equity and cash flows for such interim periods. Management believes that all interim period adjustments are of a normal recurring nature. These consolidated financial statements should be read in conjunction with the Company’s audited financial statements and the notes thereto as of December 31, 2025, included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025. The results of operations for the three months ended March 31, 2026 are not necessarily indicative of the results to be expected for the full year.

Critical Accounting Policies

Management believes the policies with respect to the methodology for the determination of the allowance for credit losses, and asset impairment judgments, such as the recoverability of intangible assets and credit losses on investment securities, involve a higher degree of complexity and require management to make difficult and subjective judgments that often require assumptions or estimates about highly uncertain matters. Changes in these judgments, assumptions or estimates could cause reported results to differ materially. These critical policies and their application are periodically reviewed with the Audit Committee and the Board of Directors.

Reclassification

No reclassifications have been made to the prior years’ financial statements to place them on a comparable basis with the current presentation.

Skyline Bankshares, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

Note 1. Organization and Summary of Significant Accounting Policies, continued

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for credit losses and the valuation of real estate acquired in connection with foreclosures or in satisfaction of loans. In connection with the determination of the allowances for credit and foreclosed real estate losses, management obtains independent appraisals for significant properties.

Substantially all of the Bank’s loan portfolio consists of loans in its market area. Accordingly, the ultimate collectability of a substantial portion of the Bank’s loan portfolio and the recovery of a substantial portion of the carrying amount of foreclosed real estate are susceptible to changes in local market conditions. The regional economy is diverse, but influenced to an extent by the manufacturing and agricultural segments.

While management uses available information to recognize loan and foreclosed real estate losses, future additions to the allowances may be necessary based on changes in local economic conditions. In addition, regulatory agencies, as a part of their routine examination process, periodically review the Bank’s allowances for credit and foreclosed real estate losses. Such agencies may require the Bank to recognize additions to the allowances based on their judgments about information available to them at the time of their examinations. Because of these factors, it is reasonably possible that the allowances for credit and foreclosed real estate losses may change materially in the near term.

The Company seeks strategies that minimize the tax effect of implementing their business strategies. As such, judgments are made regarding the ultimate consequence of long-term tax planning strategies, including the likelihood of future recognition of deferred tax benefits. The Company’s tax returns are subject to examination by both Federal and State authorities. Such examinations may result in the assessment of additional taxes, interest and penalties. As a result, the ultimate outcome, and the corresponding financial statement impact, can be difficult to predict with accuracy.

Accounting for pension benefits, costs and related liabilities are developed using actuarial valuations. These valuations include key assumptions determined by management, including the discount rate and expected long-term rate of return on plan assets. Material changes in pension costs may occur in the future due to changes in these assumptions.

Segment Reporting

The Company adopted Accounting Standards Update (“ASU”) 2023-07 “Segment Reporting (Topic 280) - Improvement to Reportable Segment Disclosures” on January 1, 2024. The Company has determined that its banking subsidiary meets the aggregation criteria of Accounting Standards Codification (“ASC”) 280, Segment Reporting, as its current operating model is structured whereby its banking subsidiary serves a similar base of retail and commercial clients utilizing a company-wide offering of similar products and services managed through similar processes and platforms that are collectively reviewed by the Company’s Chief Executive Officer, who has been identified as the chief operating decision maker (“CODM”).

The CODM regularly assesses performance of the aggregated single operating and reporting segment and decides how to allocate resources based on net income calculated on the same basis as is net income reported in the Company’s consolidated statements of income and other comprehensive income. The measure of segment assets is reported on the balance sheet as total consolidated assets. The CODM is also regularly provided with expense information at a level consistent with that disclosed in the Company’s consolidated statements of income and other comprehensive income.

Skyline Bankshares, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

Note 1. Organization and Summary of Significant Accounting Policies, continued

Recent Accounting Pronouncements

The following accounting standards may affect the future financial reporting by the Company:

In November 2024, the FASB issued Accounting Standards Update 2024-03 (“ASU 2024-03”) which amended the Income Statement—Reporting Comprehensive Income topic in the Accounting Standards Codification to require public companies to disclose, in interim and annual reporting periods, additional information about certain expenses in the notes to financial statements. The amendments are effective for annual periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company will apply the amendments prospectively to financial statements issued for reporting periods after the effective date. The Company does not expect these amendments to have a material effect on its financial statements.

In January 2025, the FASB amended the effective date of ASU 2024-03 to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. The Company does not expect these amendments to have a material effect on its financial statements.

In November 2025, the FASB amended the Financial Instruments—Credit Losses topic in the Accounting Standards Codification to expand the population of acquired financial assets subject to the gross-up approach. The amendments are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods. Early adoption is permitted in both interim and annual reporting periods in which financial statements have not yet been issued or made available for issuance. The Company does not expect these amendments to have a material effect on its financial statements.

In November 2025, the FASB amended the Derivatives and Hedging topic in the Accounting Standards Codification to clarify certain aspects of the guidance on hedge accounting and to address several incremental hedge accounting issues arising from the global reference rate reform initiative. The amendments are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods. Early adoption is permitted on any date on or after the issuance of this ASU. Upon adoption of the amendments, entities are permitted to modify certain critical terms of certain existing hedging relationships without dedesignating the hedge. The Company does not expect these amendments to have a material effect on its financial statements.

In December 2025, the FASB amended the Interim Reporting topic in the Accounting Standards Codification to clarify current interim reporting requirements. The amendments are effective for interim reporting periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company will apply the amendments prospectively. The Company does not expect these amendments to have a material effect on its financial statements.

In December 2025, the FASB issued amendments to the Codification to make incremental improvements to generally accepted accounting principles. The amendments are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods. Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance. The Company will apply the amendments prospectively to all transactions recognized on or after the date that the Company first applies the amendments. The Company does not expect these amendments to have a material effect on its financial statements.

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

Skyline Bankshares, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

Note 2. Investment Securities

Investment securities have been classified in the consolidated balance sheets according to management’s intent. The amortized cost of securities and their approximate fair values at March 31, 2026 and December 31, 2025 is summarized in the following table. There was no allowance for credit losses on available for sale securities as of March 31, 2026 and December 31, 2025.

(dollars in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
March 31, 2026
*Available for sale:*
U.S. Government agencies	$	20,483	$	-	$	(2,635	)	$	17,848
Mortgage-backed securities		55,694		-		(6,506	)		49,188
State and municipal securities		45,913		8		(6,815	)		39,106
	$	122,090	$	8	$	(15,956	)	$	106,142
December 31, 2025
*Available for sale:*
U.S. Government agencies	$	25,457	$	-	$	(2,444	)	$	23,013
Mortgage-backed securities		58,040		-		(6,379	)		51,661
State and municipal securities		45,939		7		(6,524	)		39,422
	$	129,436	$	7	$	(15,347	)	$	114,096

Restricted equity securities totaled $3.8 million at March 31, 2026 and $3.5 million at December 31, 2025. Restricted equity securities consist of investments in stock of the Federal Home Loan Bank of Atlanta (“FHLB”), CBB Financial Corp., Pacific Coast Bankers Bank, and the Federal Reserve Bank of Richmond, all of which are carried at cost. All of these entities are upstream correspondents of the Bank. The FHLB requires financial institutions to make equity investments in the FHLB in order to borrow money. The Federal Reserve requires banks to purchase stock as a condition for membership in the Federal Reserve System. The Bank’s stock in CBB Financial Corp. and Pacific Coast Bankers Bank is restricted only in the fact that the stock may only be repurchased by the respective banks.

The following tables details unrealized losses and related fair values in the Company’s available for sale investment securities portfolios for which an allowance for credit losses has not been recorded as of March 31, 2026 and December 31, 2025. This information is aggregated by the length of time that individual securities have been in a continuous unrealized loss position as of March 31, 2026 and December 31, 2025.

	Less Than 12 Months					12 Months or More					Total
(dollars in thousands)	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
March 31, 2026
*Available for sale:*
U.S. Government agencies	$	-	$	-		$	17,848	$	(2,635	)	$	17,848	$	(2,635	)
Mortgage-backed securities		-		-			49,188		(6,506	)		49,188		(6,506	)
State and municipal securities		653		(17	)		37,435		(6,798	)		38,088		(6,815	)
Total securities available for sale	$	653	$	(17	)	$	104,471	$	(15,939	)	$	105,124	$	(15,956	)

December 31, 2025
*Available for sale:*
U.S. Government agencies	$	-	$	-		$	23,013	$	(2,444	)		23,013	$	(2,444	)
Mortgage-backed securities		-		-			51,661		(6,379	)		51,661		(6,379	)
State and municipal securities		-		-			38,405		(6,524	)		38,405		(6,524	)
Total securities available for sale	$	-	$	-		$	113,079	$	(15,347	)	$	113,079	$	(15,347	)

Skyline Bankshares, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

Note 2. Investment Securities, continued

At March 31, 2026, 75 investment securities with unrealized losses had depreciated 13.18 percent from their total amortized cost basis. Management evaluates all available for sale investments in an unrealized loss position on a quarterly basis, and more frequently when economic or market conditions warrant such evaluation. If the Company has the intent to sell the security or it is more likely than not that the Company will be required to sell the security, the security is written down to fair value and the entire loss is recorded in earnings.

If either of the above criteria is not met, the Company evaluates whether the decline in fair value is the result of credit losses or other factors. In making the assessment, the Company may consider various factors including the extent to which fair value is less than amortized cost, performance on any underlying collateral, downgrades in the ratings of the security by a rating agency, the failure of the issuer to make scheduled interest or principal payments and adverse conditions specifically related to the security. If the assessment indicates that a credit loss exists, the present value of cash flows expected to be collected are compared to the amortized cost basis of the security and any excess is recorded as an allowance for credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any amount of unrealized loss that has not been recorded through an allowance for credit loss is recognized in other comprehensive income.

Changes in the allowance for credit loss are recorded as provision for (or reversal of) credit loss expense. Losses are charged against the allowance for credit loss when management believes an available for sale security is confirmed to be uncollectible or when either of the criteria regarding intent or requirement to sell is met. At March 31, 2026 and December 31, 2025, there was no allowance for credit losses related to the available for sale portfolio.

There were no sales of investment securities available for sale for the three-month periods ended March 31, 2026 and 2025, respectively. Gains and losses on the sale of investment securities are recorded on the trade date and are determined using the specific identification method.

There were no securities transferred between the available for sale and held to maturity portfolios or other sales of held to maturity securities during the periods presented. In the future management may elect to classify securities as held to maturity based upon such considerations as the nature of the security, the Bank’s ability to hold the security until maturity, and general economic conditions. The scheduled maturities of securities available for sale at March 31, 2026, were as follows:

(dollars in thousands)	Amortized Cost		Fair Value

Due in one year or less	$	135	$	133
Due after one year through five years		18,511		17,108
Due after five years through ten years		66,774		58,953
Due after ten years		36,670		29,948
	$	122,090	$	106,142

Maturities of mortgage-backed securities are based on contractual amounts. Actual maturity will vary as loans underlying the securities are prepaid.

Investment securities with amortized cost of approximately $54.6 million and $55.3 million at March 31, 2026 and December 31, 2025, respectively, were pledged as collateral on public deposits and for other purposes as required or permitted by law.

Skyline Bankshares, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

Note 3. Loans Receivable

The major components of loans in the consolidated balance sheets at March 31, 2026 and December 31, 2025 are as follows:

(dollars in thousands)	2026			2025

Real Estate Secured:
Construction & development	$	68,284		$	64,851
Farmland		27,662			23,203
Residential		606,512			596,318
Commercial mortgage		314,366			302,696
Non-Real Estate Secured:
Commercial & agricultural		56,258			56,997
Consumer & other		13,197			14,133
Total loans		1,086,279			1,058,198
Allowance for credit losses		(8,914	)		(8,666	)
Loans, net of allowance for credit losses	$	1,077,365		$	1,049,532

Included in total loans above are deferred loan fees of $1.8 million and $1.8 million at March 31, 2026 and December 31, 2025, respectively. Included in total loans above are deferred loan costs of $6.2 million and $6.0 million, at March 31, 2026 and December 31, 2025, respectively. Income from net deferred fees and costs is recognized over the lives of the respective loans as a yield adjustment. If loans repay prior to scheduled maturities any unamortized fee or cost is recognized at that time.

The Company elected to exclude accrued interest receivable from the amortized cost basis of loans. Accrued interest receivable related to loans totaled $4.1 million at March 31, 2026 and $4.0 million at December 31, 2025 and was reported in accrued interest receivable on the consolidated balance sheets.

As of March 31, 2026 and December 31, 2025, substantially all of the Bank’s residential 1-4 family loans were pledged as collateral for borrowing lines at the FHLB.

As of March 31, 2026, the Bank had $808 thousand in residential real estate loans in the process of foreclosure. As of December 31, 2025, the Bank had no residential real estate loans in the process of foreclosure.

Skyline Bankshares, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

Note 4. Allowance for Credit Losses

Allowance for Credit Losses - Loans

The change in the allowance for credit losses for the three months ended March 31, 2026, was due to the increase in loan volume during the first three months of 2026 and changes in the Company’s forecast variables during the period ended March 31, 2026.

The change in the allowance for credit losses for the three months ended March 31, 2025, was due to the increase in loan volume and changes in the Company’s forecast variables during the period ended March 31, 2025.

The following table summarizes the activity related to the allowance for credit losses for the three-month periods ended March 31, 2026 and 2025 under the CECL methodology.

(dollars in thousands)	Construction & Development		Farmland		Residential		Commercial Mortgage		Commercial & Agricultural			Consumer & Other			Total

For the Three Months Ended March 31, 2026

Balance, December 31, 2025	$	924	$	182	$	4,677	$	2,192	$	530		$	161		$	8,666
Charge-offs		-		-		-		-		(11	)		(34	)		(45	)
Recoveries		-		-		-		2		2			10			14
Provision for (recovery of provision)		44		42		104		99		(23	)		13			279
Balance, March 31, 2026	$	968	$	224	$	4,781	$	2,293	$	498		$	150		$	8,914

(dollars in thousands)	Construction & Development			Farmland			Residential		Commercial Mortgage		Commercial & Agricultural		Consumer & Other			Total

For the Three Months Ended March 31, 2025

Balance, December 31, 2024	$	1,012		$	174		$	4,070	$	1,941	$	504	$	326		$	8,027
Charge-offs		-			-			-		-		-		(40	)		(40	)
Recoveries		-			-			-		1		3		8			12
Provision for (recovery of provision)		(7	)		(8	)		152		26		12		(14	)		161
Balance, March 31, 2025	$	1,005		$	166		$	4,222	$	1,968	$	519	$	280		$	8,160

Skyline Bankshares, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

Note 4. Allowance for Credit Losses, continued

Credit Quality Indicators

Management closely monitors the quality of the loan portfolio and has established a loan review process designed to help grade the quality of the Bank’s loan portfolio. The Bank’s loan ratings coincide with the “Substandard,” “Doubtful” and “Loss” classifications used by federal regulators in their examination of financial institutions. Generally, an asset is considered “Substandard” if it is inadequately protected by the current net worth and paying capacity of the obligors and/or the collateral pledged. “Substandard” assets include those characterized by the distinct possibility that the insured financial institution will sustain some loss if the deficiencies are not corrected. Assets classified as “Doubtful” have all the weaknesses inherent in assets classified “Substandard” with the added characteristic that the weaknesses present make collection or liquidation in full, on the basis of currently existing facts, highly questionable and improbable. Assets classified as "Loss” are those considered uncollectible, and of such little value that its continuance on the books is not warranted. As of March 31, 2026 and December 31, 2025, respectively, the Bank had no loans graded “Doubtful” or “Loss” included in the balance of total loans outstanding.

Assets that do not currently expose the insured financial institutions to sufficient risk to warrant classification in one of the aforementioned categories but otherwise possess weaknesses are designated “Special Mention.” Management also maintains a listing of loans designated “Watch”. These loans represent borrowers with declining earnings, strained cash flow, increasing leverage and/or weakening market fundamentals that indicate above average risk. Loans that are currently performing and are of high quality are given a loan rating of “Pass”.

Loans are graded at origination and will be considered for potential downgrades as the borrower experiences financial difficulties. Loan officers meet periodically to discuss their past due credits and loan downgrades could occur at that time. Commercial relationships of over $1.0 million are reviewed on an annual basis, and that review could result in downgrades or in some cases, upgrades. In addition, the Company engages a third-party loan review each quarter. The results of these loan reviews could result in upgrades or downgrades.

The following table presents the Company’s recorded investment in loans by credit quality indicators as of March 31, 2026 and December 31, 2025:

	Loan Grades
(dollars in thousands)	Pass		Watch		Special Mention		Substandard		Total
March 31, 2026
Real Estate Secured:
Construction & development	$	67,646	$	567	$	-	$	71	$	68,284
Farmland		25,892		-		1,142		628		27,662
Residential		593,294		1,032		5,210		6,976		606,512
Commercial mortgage		307,279		4,578		1,442		1,067		314,366
Non-Real Estate Secured:
Commercial & agricultural		55,399		665		9		185		56,258
Consumer & other		13,129		-		5		63		13,197
Total	$	1,062,639	$	6,842	$	7,808	$	8,990	$	1,086,279

December 31, 2025
Real Estate Secured:
Construction & development	$	64,486	$	365	$	-	$	-	$	64,851
Farmland		21,419		-		1,154		630		23,203
Residential		584,031		358		5,065		6,864		596,318
Commercial mortgage		295,722		4,430		1,584		960		302,696
Non-Real Estate Secured:
Commercial & agricultural		56,112		668		17		200		56,997
Consumer & other		14,069		21		-		43		14,133
Total	$	1,035,839	$	5,842	$	7,820	$	8,697	$	1,058,198

Skyline Bankshares, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

Note 4. Allowance for Credit Losses, continued

Credit Quality Indicators, continued

The following table presents the Company’s recorded investment in loans by credit quality indicators by year of origination as of March 31, 2026:

	Term Loans by Year of Origination														Revolving Loans Converted
(dollars in thousands)	2026		2025		2024		2023		2022		Prior		Revolving		To Term		Total

Construction & development
Pass	$	3,684	$	33,102	$	9,811	$	3,696	$	2,711	$	11,295	$	3,347	$	-	$	67,646
Watch		-		-		202		365		-		-		-		-		567
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		71		-		-		-		71
Total construction & development	$	3,684	$	33,102	$	10,013	$	4,061	$	2,782	$	11,295	$	3,347	$	-	$	68,284

Current period gross write-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Farmland
Pass	$	1,730	$	4,508	$	2,202	$	2,321	$	1,630	$	8,351	$	5,150	$	-	$	25,892
Watch		-		-		-		-		-		-		-		-		-
Special Mention		-		-		-		-		-		925		124		93		1,142
Substandard		-		-		-		-		-		628		-		-		628
Total farmland	$	1,730	$	4,508	$	2,202	$	2,321	$	1,630	$	9,904	$	5,274	$	93	$	27,662

Current period gross write-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Residential
Pass	$	24,214	$	95,168	$	58,847	$	56,837	$	95,252	$	160,139	$	102,634	$	203	$	593,294
Watch		-		99		-		311		179		443		-		-		1,032
Special Mention		-		-		591		126		1,043		3,127		323		-		5,210
Substandard		-		-		1,007		913		2,426		641		1,989		-		6,976
Total residential	$	24,214	$	95,267	$	60,445	$	58,187	$	98,900	$	164,350	$	104,946	$	203	$	606,512

Current period gross write-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Commercial mortgage
Pass	$	15,026	$	37,228	$	30,007	$	39,815	$	48,335	$	122,938	$	13,930	$	-	$	307,279
Watch		-		-		-		-		1,947		2,631		-		-		4,578
Special Mention		-		-		-		-		-		1,442		-		-		1,442
Substandard		-		-		87		-		-		980		-		-		1,067
Total commercial mortgage	$	15,026	$	37,228	$	30,094	$	39,815	$	50,282	$	127,991	$	13,930	$	-	$	314,366

Current period gross write-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Commercial & agricultural
Pass	$	6,168	$	15,540	$	8,650	$	4,952	$	3,409	$	3,334	$	13,346	$	-	$	55,399
Watch		-		-		-		69		-		-		596		-		665
Special Mention		-		-		-		-		-		9		-		-		9
Substandard		-		-		39		-		-		146		-		-		185
Total commercial & agricultural	$	6,168	$	15,540	$	8,689	$	5,021	$	3,409	$	3,489	$	13,942	$	-	$	56,258

Current period gross write-offs	$	-	$	9	$	-	$	2	$	-	$	-	$	-	$	-	$	11

Consumer & other
Pass	$	1,822	$	4,265	$	1,863	$	865	$	1,368	$	2,218	$	728	$	-	$	13,129
Watch		-		-		-		-		-		-		-		-		-
Special Mention		-		5		-		-		-		-		-		-		5
Substandard		-		-		4		21		-		38		-		-		63
Total consumer & other	$	1,822	$	4,270	$	1,867	$	886	$	1,368	$	2,256	$	728	$	-	$	13,197

Current period gross write-offs	$	-	$	12	$	10	$	5	$	4	$	3	$	-	$	-	$	34

Total loans
Pass	$	52,644	$	189,811	$	111,380	$	108,486	$	152,705	$	308,275	$	139,135	$	203	$	1,062,639
Watch		-		99		202		745		2,126		3,074		596		-		6,842
Special Mention		-		5		591		126		1,043		5,503		447		93		7,808
Substandard		-		-		1,137		934		2,497		2,433		1,989		-		8,990
Total loans	$	52,644	$	189,915	$	113,310	$	110,291	$	158,371	$	319,285	$	142,167	$	296	$	1,086,279

Total Current period gross write-offs	$	-	$	21	$	10	$	7	$	4	$	3	$	-	$	-	$	45

Skyline Bankshares, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

Note 4. Allowance for Credit Losses, continued

Credit Quality Indicators, continued

The following table presents the Company’s recorded investment in loans by credit quality indicators by year of origination as of December 31, 2025:

	Term Loans by Year of Origination														Revolving Loans Converted
(dollars in thousands)	2025		2024		2023		2022		2021		Prior		Revolving		To Term		Total

Construction & development
Pass	$	29,637	$	12,038	$	4,406	$	3,158	$	5,110	$	6,716	$	3,326	$	95	$	64,486
Watch		-		-		-		-		-		-		-		365		365
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-		-
Total construction & development	$	29,637	$	12,038	$	4,406	$	3,158	$	5,110	$	6,716	$	3,326	$	460	$	64,851

Current period gross write-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Farmland
Pass	$	4,730	$	2,223	$	2,334	$	1,711	$	447	$	8,145	$	1,829	$	-	$	21,419
Watch		-		-		-		-		-		-		-		-		-
Special Mention		-		-		-		-		772		160		222		-		1,154
Substandard		-		-		-		-		-		630		-		-		630
Total farmland	$	4,730	$	2,223	$	2,334	$	1,711	$	1,219	$	8,935	$	2,051	$	-	$	23,203

Current period gross write-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Residential
Pass	$	97,859	$	62,494	$	59,933	$	97,801	$	50,254	$	117,024	$	98,457	$	209	$	584,031
Watch		99		-		62		-		-		197		-		-		358
Special Mention		-		594		247		1,057		721		2,446		-		-		5,065
Substandard		-		1,008		865		2,427		74		588		1,902		-		6,864
Total residential	$	97,958	$	64,096	$	61,107	$	101,285	$	51,049	$	120,255	$	100,359	$	209	$	596,318

Current period gross write-offs	$	-	$	-	$	-	$	-	$	-	$	1	$	-	$	-	$	1

Commercial mortgage
Pass	$	36,621	$	31,518	$	39,769	$	49,127	$	40,196	$	86,602	$	11,680	$	209	$	295,722
Watch		-		-		-		1,962		-		2,468		-		-		4,430
Special Mention		-		117		-		-		418		1,049		-		-		1,584
Substandard		-		110		-		-		68		782		-		-		960
Total commercial mortgage	$	36,621	$	31,745	$	39,769	$	51,089	$	40,682	$	90,901	$	11,680	$	209	$	302,696

Current period gross write-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Commercial & agricultural
Pass	$	16,796	$	10,418	$	6,083	$	4,037	$	1,983	$	1,802	$	14,538	$	455	$	56,112
Watch		-		-		73		-		-		-		595		-		668
Special Mention		-		-		-		-		4		13		-		-		17
Substandard		-		43		9		-		18		130		-		-		200
Total commercial & agricultural	$	16,796	$	10,461	$	6,165	$	4,037	$	2,005	$	1,945	$	15,133	$	455	$	56,997

Current period gross write-offs	$	-	$	9	$	26	$	-	$	-	$	-	$	-	$	-	$	35

Consumer & other
Pass	$	5,227	$	2,303	$	1,166	$	1,447	$	1,092	$	2,085	$	749	$	-	$	14,069
Watch		-		-		21		-		-		-		-		-		21
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		-		6		-		-		-		37		-		-		43
Total consumer & other	$	5,227	$	2,309	$	1,187	$	1,447	$	1,092	$	2,122	$	749	$	-	$	14,133

Current period gross write-offs	$	43	$	51	$	34	$	10	$	4	$	21	$	-	$	-	$	163

Total loans
Pass	$	190,870	$	120,994	$	113,691	$	157,281	$	99,082	$	222,374	$	130,579	$	968	$	1,035,839
Watch		99		-		156		1,962		-		2,665		595		365		5,842
Special Mention		-		711		247		1,057		1,915		3,668		222		-		7,820
Substandard		-		1,167		874		2,427		160		2,167		1,902		-		8,697
Total loans	$	190,969	$	122,872	$	114,968	$	162,727	$	101,157	$	230,874	$	133,298	$	1,333	$	1,058,198

Total Current period gross write-offs	$	43	$	60	$	60	$	10	$	4	$	22	$	-	$	-	$	199

Skyline Bankshares, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

Note 4. Allowance for Credit Losses, continued

Nonaccrual Loans

The following table is a summary of the Company’s nonaccrual loans by major categories for the periods indicated:

	March 31, 2026
(dollars in thousands)	Nonaccrual Loans with no Allowance		Nonaccrual Loans with an Allowance		Total Nonaccrual Loans

Construction & development	$	-	$	-	$	-
Farmland		-		63		63
Residential		3,817		648		4,465
Commercial mortgage		-		23		23
Commercial & agricultural		-		146		146
Consumer & other		-		57		57
Total	$	3,817	$	937	$	4,754

	December 31, 2025
(dollars in thousands)	Nonaccrual Loans with no Allowance		Nonaccrual Loans with an Allowance		Total Nonaccrual Loans

Construction & development	$	-	$	-	$	-
Farmland		-		63		63
Residential		3,264		1,172		4,436
Commercial mortgage		-		112		112
Commercial & agricultural		-		157		157
Consumer & other		-		42		42
Total	$	3,264	$	1,546	$	4,810

Skyline Bankshares, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

Note 4. Allowance for Credit Losses, continued

Nonaccrual Loans, continued

The following table represents the accrued interest receivables written off on nonaccrual loans by reversing interest income during the three months ended March 31, 2026 and March 31, 2025:

(dollars in thousands)	For the Three Months Ended March 31, 2026		For the Three Months Ended March 31, 2025

Construction & development	$	-	$	-
Farmland		-		-
Residential		4		-
Commercial mortgage		-		-
Commercial & agricultural		-		-
Consumer & other		1		1
Total	$	5	$	1

The following table represents the interest income recognized on loans before they entered nonaccrual status during the three months ended March 31, 2026 and March 31, 2025:

(dollars in thousands)	For the Three Months Ended March 31, 2026		For the Three Months Ended March 31, 2025

Construction & development	$	-	$	-
Farmland		-		-
Residential		1		-
Commercial mortgage		-		-
Commercial & agricultural		-		-
Consumer & other		-		-
Total	$	1	$	-

Skyline Bankshares, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

Note 4. Allowance for Credit Losses, continued

Aging Analysis

The following table presents an aging analysis of past due loans by category as of March 31, 2026:

	Accruing
(dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		90+ Days Past Due		Nonaccrual Loans		Current		Total Loans

March 31, 2026
Real Estate Secured:
Construction & development	$	-	$	-	$	-	$	-	$	68,284	$	68,284
Farmland		-		-		-		63		27,599		27,662
Residential		85		83		-		4,465		601,879		606,512
Commercial mortgage		-		-		-		23		314,343		314,366
Non-Real Estate Secured:
Commercial & agricultural		-		-		-		146		56,112		56,258
Consumer & other		17		12		-		57		13,111		13,197
Total	$	102	$	95	$	-	$	4,754	$	1,081,328	$	1,086,279

The following table presents an aging analysis of past due loans by category as of December 31, 2025:

Accruing

(dollars in thousands)

30-59 Days

Past Due

60-89 Days

Past Due

90+ Days

Past Due

Nonaccrual

Loans

Current

Total

Loans

December 31, 2025

Skyline Bankshares, Inc. 10-Q