What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-11-07 compared with 2025-08-07 · 276 added, 242 removed, 378 unchanged (58% of the section changed)

Management’s Discussion and Analysis of Financial Condition and

Results of Operations

Management’s Discussion and Analysis of Financial Condition

and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included

elsewhere in this Quarterly Report and in our Annual Report on Form 10-K for the year ended December 31, 2024.

Unless the context indicates otherwise, references in this management’s discussion and analysis to “we,” “our,” and “us,” refer to Bank7

Unless the context indicates otherwise, references in this management’s discussion and analysis to “we,” “our,” and “us,” refer

to Bank7 Corp.

and its consolidated subsidiaries.

1 unchanged sentence

We are Bank7 Corp., a bank holding company headquartered in Oklahoma City, Oklahoma.

Through our wholly-owned subsidiary, Bank7, we operate twelve locations in Oklahoma, the Dallas/Fort Worth, Texas metropolitan area

Through our wholly-owned subsidiary, Bank7, we operate twelve locations in Oklahoma, the Dallas/Fort Worth, Texas

metropolitan area and Kansas.

We are focused on serving business owners and entrepreneurs by delivering fast, consistent and well-designed loan and deposit products to meet their financing needs.

We intend to grow organically by selectively opening additional

branches in our target markets and pursuing strategic acquisitions.

We intend to grow organically by selectively

opening additional branches in our target markets and pursuing strategic acquisitions.

As a bank holding company, we generate most of our revenue from interest income on loans and from short-term investments.

The primary source of funding for our

loans and short-term investments are deposits held by our subsidiary, Bank7.

We measure our performance by our return on average equity, earnings per share, capital ratios, efficiency ratio (calculated by dividing noninterest expense by the sum of

net interest income on a tax equivalent basis) and noninterest income.

The primary source of

funding for our loans and short-term investments are deposits held by our subsidiary, Bank7.

We measure our performance by our return on average equity, earnings per share, capital ratios, efficiency ratio (calculated by dividing noninterest

expense by the sum of net interest income on a tax equivalent basis) and noninterest income.

Q3 2025 Overview

We reported total loans of $1.50 billion as of June 30, 2025, an increase of $145.3 million, or 10.7%, from June 30, 2024.

Total deposits were $1.59 billion as of June 30, 2025, an increase of $112.8 million, or

7.6%, as compared to June 30, 2024.

Pre-tax net income was $14.7 million, a decrease of $0.5 million, or 3.6%, for the three months ended June 30, 2025 as compared to pre-tax net income of $15.3 million for the same period in 2024.

Pre-tax net income

was $28.4 million, a decrease of $1.7 million, or 5.7%, for the six months ended June 30, 2025 as compared to pre-tax net income of $30.1 million for the same period in 2024.

Return on average assets and return on average equity was 2.47% and 19.62%, respectively for the three months ended June 30, 2025, as compared to 2.74% and 25.02%, respectively, for the same period in 2024.

average assets and return on average equity was 2.44% and 19.42%, respectively for the six months ended June 30, 2025, as compared to 2.66% and 25.41%, respectively, for the same period in 2024.

Our efficiency ratio for the three months ended June

30, 2025 was 39.95% as compared to 37.72% for the same period in 2024.

Our efficiency ratio for the six months ended June 30, 2025 was 39.44% as compared to 37.63% for the same period in 2024.

We reported total loans of $1.53 billion as of September 30, 2025, an increase of $96.7 million, or 6.7%, from September 30, 2024.

Total deposits were $1.64 billion

as of September 30, 2025, an increase of $112.6 million, or 7.4%, as compared to September 30, 2024.

Pre-tax net income was $14.2 million, a decrease of $1.3 million, or 8.5%, for the three months ended September 30, 2025 as compared to pre-tax net income of $15.5

million for the same period in 2024.

Pre-tax net income was $42.6 million, a decrease of $3.0 million, or 6.6%, for the nine months ended September 30, 2025 as compared to pre-tax net income of $45.6 million

for the same period in 2024.

Return on average assets and return on average equity was 2.33% and 18.11%, respectively for the three months ended September 30, 2025, as compared to 2.73% and 23.67%, respectively, for the same period in

Return on average assets and return on average equity was 2.41% and 18.96%, respectively for the nine months ended September 30, 2025, as compared to 2.68% and 24.79%, respectively, for the same period in 2024.

Our efficiency ratio for

the three months ended September 30, 2025 was 41.12% as compared to 37.87% for the same period in 2024.

Our efficiency ratio for the nine months ended September 30, 2025 was 39.94% as compared to 37.58% for the same period in 2024.

The provision for credit losses for the three months ended September 30, 2025 increased $0.7 million, or 100.0%, as compared to the same period in 2024.

The provision for credit losses for the nine months

ended September 30, 2025 increased $0.7 million, or 100.0%, as compared to the same period in 2024.

The provision expense for the three and nine months ended September 30, 2025 was related to loan growth in the third quarter of 2025.

Results of Operations

7 unchanged sentences

Net Interest Margin

For the Three Months Ended June 30,

For the Three Months Ended September 30,

(Dollars in thousands)

22 unchanged sentences

Net interest margin

Taxable-equivalent yield of 2.68% as of June 30, 2025, applying a 24.5% effective tax rate

Average loan balances include monthly average nonaccrual loans of $5.7 million and $11.8 million as of June 30, 2025 and June 30, 2024, respectively, are included in loans.

For the second quarter of 2025 compared to the second quarter of 2024:

Taxable-equivalent yield of 2.60% as of September 30, 2025, applying a 23.6% effective tax rate.

Average loan balances include monthly average nonaccrual loans of $5.4 million and $7.4 million as of September 30, 2025 and September 30, 2024,

respectively, are included in loans.

For the third quarter of 2025 compared to the third quarter of 2024:

Interest income on total loans totaled $30.9 million, an increase of $123,000 or 0.4%;

Yields on our interest-earning assets totaled 7.25%, a decrease of 62 basis points which was primarily attributable to lower loan yields of 54 basis points, and a decrease in yield on taxable debt securities of 122 basis points;

Yields on our interest-earning assets totaled 7.43%, a decrease of 49 basis points which was primarily attributable to lower loan yields of 50 basis points, and a decrease in yield on short-term investments of 51 basis points;

Net interest margin was 5.07% compared to 5.02%.

Net Interest Margin

For the Six Months Ended June, 30

For the Nine Months Ended September 30,

(Dollars in thousands)

22 unchanged sentences

Net interest margin

Taxable-equivalent yield of 2.69% as of June 30, 2025, applying a 24.6% effective tax rate.

Average loan balances include monthly average nonaccrual loans of $6.2 million and $17.2 million as of June 30, 2025 and June 30, 2024, respectively, are included in loans.

For the first six months of 2025 compared to the same period in 2024:

Taxable-equivalent yield of 2.68% as of September 30, 2025, applying a 24.2% effective tax rate.

Average loan balances include monthly average nonaccrual loans of $5.9 million and $13.9 million as of September 30, 2025 and September 30, 2024,

respectively, are included in loans.

For the first nine months of 2025 compared to the same period in 2024:

Interest income on total loans totaled $87.2 million, a decrease of $2.6 million or 2.9%, due to decreased loan yields as discussed below;

Yields on our interest-earning assets totaled 7.26%, a decrease of 56 basis points which was primarily attributable to lower loan yields of 72 basis points, and a decrease in yield on taxable debt securities of 67 basis points;

Yields on our interest-earning assets totaled 7.32%, a decrease of 53 basis points which was primarily attributable to lower loan yields of 64

basis points, and a decrease in yield on taxable debt securities of 58 basis points;

Net interest margin was 5.00% compared to 5.10%.

Increases and decreases in interest income and interest expense result from changes in average balances, or volume, of interest-earning assets and interest-bearing liabilities, as well as changes in average interest

interest rates.

The following tables set forth the effects of changing rates and volumes on our net interest income during the period shown.

Information is provided with respect to (i) effects on interest income attributable to changes in volume (change in

volume multiplied by prior rate) and (ii) effects on interest income attributable to changes in rate (changes in rate multiplied by prior volume).

Information is provided with respect to (i) effects on interest income attributable to changes in

volume (change in volume multiplied by prior rate) and (ii) effects on interest income attributable to changes in rate (changes in rate multiplied by prior volume).

Analysis of Changes in Interest Income and Expenses

For the Three Months Ended

June 30, 2025 vs 2024

September 30, 2025 vs 2024

Change due to:

11 unchanged sentences

Analysis of Changes in Interest Income and Expenses

For the Six Months Ended

June 30, 2025 vs 2024

For the Nine Months Ended

September 30, 2025 vs 2024

Change due to:

12 unchanged sentences

Our investment portfolio consists entirely of securities classified as available-for-sale.

As a result, the carrying values of our investment securities are adjusted for unrealized gain or loss, and any gain or loss

is reported on an after-tax basis as a component of other comprehensive income in shareholders’ equity.

As a result, the carrying values of our investment securities are adjusted for unrealized gain or loss, and any gain or

loss is reported on an after-tax basis as a component of other comprehensive income in shareholders’ equity.

We evaluate our available-for-sale securities portfolio on a quarterly basis for potential credit-related losses.

We assess potential credit losses by comparing the fair value of a debt security to its amortized cost

We assess potential credit losses by comparing the fair value of a debt security to its

amortized cost basis.

If the fair value of a debt security is greater than the amortized cost basis, no allowance for credit losses is recognized.

If the fair value is less than the amortized cost basis, we review the factors to determine if the impairment is

credit-related or noncredit-related.

For debt securities we intend to sell or are more likely than not required to sell, before the recovery of their amortized cost basis, the difference between fair value and amortized cost is impaired and is

recognized through earnings.

For debt securities we do not intend to sell or are more likely than not required to sell, prior to expected recovery of amortized cost basis, the credit portion of the impairment is recognized through earnings, with a

corresponding entry to an allowance for credit losses, and the noncredit portion is recognized through accumulated other comprehensive income.

The following table summarizes the maturity distribution schedule with corresponding weighted average taxable equivalent yields of the debt securities portfolio at June 30,

If the fair value is less than the amortized cost basis, we review the factors to determine if

the impairment is credit-related or noncredit-related.

For debt securities we intend to sell or are more likely than not required to sell, before the recovery of their amortized cost basis, the difference between fair value and amortized

cost is impaired and is recognized through earnings.

For debt securities we do not intend to sell or are more likely than not required to sell, prior to expected recovery of amortized cost basis, the credit portion of the impairment is

recognized through earnings, with a corresponding entry to an allowance for credit losses, and the noncredit portion is recognized through accumulated other comprehensive income.

The following table summarizes the maturity distribution schedule with corresponding weighted average taxable equivalent yields of the debt securities portfolio at

September 30, 2025.

The following table presents securities at their expected maturities, which may differ from contractual maturities.

The Company manages its debt securities portfolio for liquidity, as a tool to execute its asset/liability management strategy,

and for pledging requirements for public funds:

As of June 30, 2025

Within One Year

The Company manages its debt securities portfolio for liquidity, as a tool to execute its asset/liability

management strategy, and for pledging requirements for public funds:

As of September 30, 2025

After One Year But

Within Five Years

After Five Years But

Within One Year

Within Five Years

Within Ten Years

10 unchanged sentences

Credit risk is inherent in the business of making loans.

We establish an Allowance for credit losses (“Allowance”) through charges to earnings, which are shown in the statements of comprehensive

income as the provision for credit losses.

The provision for credit losses and level of Allowance for each period are dependent upon many factors, including loan growth, net charge-offs, changes in the composition of the loan portfolio,

delinquencies, management’s assessment of the quality of the loan portfolio, and the valuation of problems and the general economic conditions in our market areas.

For the three months ended June 30, 2025 compared to the three months ended June 30, 2024:

There was no provision for credit losses;

The allowance as a percentage of total loans decreased by 9 basis points to 1.22%.

For the six months ended June 30, 2025 compared to the six months ended June 30, 2024:

There was no provision for credit losses;

The allowance as a percentage of total loans decreased by 9 basis points to 1.22%.

We establish an Allowance for credit losses (“Allowance”) through charges to earnings, which are shown in the statements of

comprehensive income as the provision for credit losses.

The provision for credit losses and level of Allowance for each period are dependent upon many factors, including loan growth, net charge-offs, changes in the composition of the loan

portfolio, delinquencies, management’s assessment of the quality of the loan portfolio, and the valuation of problems and the general economic conditions in our market areas.

For the three months ended September 30, 2025 compared to the three months ended September 30, 2024:

The provision for credit losses increased from $0 to $0.7 million;

The allowance as a percentage of total loans increased by 2 basis points to 1.26%.

For the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024:

The provision for credit losses increased from $0 to $0.7 million;

The allowance as a percentage of total loans increased by 2 basis points to 1.26%.

Noninterest Income

1 unchanged sentence

For the Three Months Ended

September 30,

(Dollars in thousands)

1 unchanged sentence

Mortgage lending income

Loss on sales of available-for-sale debt securities

Service charges on deposit accounts

1 unchanged sentence

Total noninterest income

Noninterest income for the three months ended June 30, 2025 was $2.7 million compared to $3.2 million for the same period in 2024, a decrease of $464,000, or 14.7%.

The decrease was primarily attributable to income

related to operations of oil and gas assets, see Note 2 of the financial statements.

For the Six Months Ended

Noninterest income for the three months ended September 30, 2025 was $2.2 m illion compared to $3.7 million for the same

period in 2024, a decrease of $1.5 million, or 39.9%.

The decrease was primarily attributable to a decrease in

income related to operations of oil and gas assets, see Note 2 of the financial statements.

For the Nine Months Ended

September 30,

(Dollars in thousands)

1 unchanged sentence

Mortgage lending income

Loss on sales of available-for-sale debt securities

Service charges on deposit accounts

1 unchanged sentence

Total noninterest income

Noninterest income for the six months ended June 30, 2025 was $4.5 million compared to $5.2 million for the same period in 2024, a decrease of $718,000, or 13.9%.

The decrease was primarily attributable to income

related to operations of oil and gas assets, see Note 2 of the financial statements.

Noninterest income for the nine months ended September 30, 2025 was $6.7 million compared to $8.9 million for the same

period in 2024, a decrease of $2.2 million, or 24.7%.

The decrease was primarily attributable to a decrease in

income related to operations of oil and gas assets, see Note 2 of the financial statements.

Noninterest Expense

1 unchanged sentence

For the Three Months Ended

September 30,

(Dollars in thousands)

9 unchanged sentences

Total noninterest expense

Noninterest expense for the three months ended June 30, 2025 was $9.7 million compared to $9.1 million for the same period in 2024, an increase of $590,000, or 6.5%.

For the Six Months Ended

Noninterest expense for the three months ended September 30, 2025 was $10.4 million compared to $9.4 million for the same period in 2024, an increase of $1.0 million, or 10.1%.

For the Nine Months Ended

September 30,

(Dollars in thousands)

9 unchanged sentences

Total noninterest expense

Noninterest expense for the six months ended June 30, 2025 was $18.6 million compared to $18.3 million for the same period in 2024, an increase of $338,000, or 1.9%.

Noninterest expense for the nine months ended September 30, 2025 was $29.0 million compared to $27.7 million for the same

period in 2024, an increase of $ 1.3 million, or 4.7%.

Financial Condition

The following discussion of our financial condition compares June 30, 2025 and December 31, 2024.

Total assets increased $96.6 million, or 5.6%, to $1.84 billion as of June 30, 2025, compared to $1.74 billion as of December 31, 2024.

The following discussion of our financial condition compares September 30, 2025 and December 31, 2024.

Total assets increased $151.6 million , or 8.7%, to $1.89 billion as of September 30, 2025, compared to $1.74 billion as of December 31, 2024.

Loan Portfolio

The following table presents the balance and associated percentage of each major category in our loan portfolio as of June 30, 2025 and December 31, 2024:

As of June 30,

The following table presents the balance and associated percentage of each major category in our loan portfolio as of September 30, 2025 and December 31, 2024:

As of September 30,

As of December 31,

9 unchanged sentences

Our loans represent the largest portion of our earning assets.

The quality and diversification of the loan portfolio is an important consideration when reviewing our financial

As of June 30, 2025, and December 31, 2024, our gross loans were $1.50 billion and $1.40 billion, respectively.

The quality and diversification of the loan portfolio is an important consideration when reviewing our

financial condition.

As of September 30, 2025, and December 31, 2024, our gross loans were $1.54 billion and $1.40 billion, respectively.

We have established internal concentration limits in the loan portfolio for Commercial Real Estate (CRE) loans, hospitality loans, energy loans, and construction loans, among others.

All loan types are within our

established limits.

We use underwriting guidelines to assess each borrower’s historical cash flow to determine debt service capabilities, and we further stress test the customer’s debt service capability under higher interest rate scenarios as well

as other underlying macro-economic factors.

All loan types are within

our established limits.

scenarios as well as other underlying macro-economic factors.

Financial and performance covenants are used in commercial lending to allow us to react to a borrower’s deteriorating financial condition, should that occur.

The following tables show the contractual maturities of our gross loans as of the periods below:

As of June 30, 2025

Due in One Year or Less

As of September 30, 2025

Due after One Year

Through Five Years

Due after Five Years

Due in One Year or Less

Through Five Years

Through Fifteen Years

7 unchanged sentences

As of December 31, 2024

Due in One Year or Less

Due after One Year

Through Five Years

Due after Five Years

Due in One Year or Less

Through Five Years

Through Fifteen Years

11 unchanged sentences

While management uses available information to analyze losses on loans, future additions to the allowance may be necessary based on changes in economic conditions.

In addition, various regulatory agencies, as an integral part of

their examination process, periodically review the Company’s allowance.

In analyzing the adequacy of the allowance, a comprehensive loan grading system to determine risk potential in loans is utilized together with the results of internal credit

In addition, various regulatory agencies, as an integral

part of their examination process, periodically review the Company’s allowance.

In analyzing the adequacy of the allowance, a comprehensive loan grading system to determine risk potential in loans is utilized together with the results of

internal credit reviews.

To determine the adequacy of the allowance, the loan portfolio is broken into segments based on loan type.

Historical loss experience factors by segment, adjusted for changes in trends and conditions, are used to

determine an indicated allowance for each portfolio segment.

Historical loss experience factors by segment, adjusted for changes in trends and conditions, are used

to determine an indicated allowance for each portfolio segment.

These factors are evaluated and updated based on the composition of the specific loan segment.

Other considerations include volumes and trends of delinquencies, nonaccrual loans, levels

of bankruptcies, criticized and classified loan trends, expected losses on real estate secured loans, new credit products and policies, economic conditions, concentrations of credit risk and the experience and abilities of our lending personnel.

The allowance was $18.2 million at June 30, 2025, compared to $17.9 million at December 31, 2024.

Other considerations include volumes and trends of delinquencies, nonaccrual loans,

levels of bankruptcies, criticized and classified loan trends, expected losses on real estate secured loans, new credit products and policies, economic conditions, concentrations of credit risk and the experience and abilities of our lending

The allowance was $19.4 million at September 30, 2025, compared to $17.9 million at December 31, 2024.

The following table provides an analysis of the activity in our allowance for the periods indicated:

For the Six Months Ended

For the Nine Months Ended

September 30,

(Dollars in thousands)

16 unchanged sentences

category, for the periods indicated:

As of June 30,

As of September 30,

As of December 31,

7 unchanged sentences

Delinquent loans may remain on accrual status between 30 days and 90 days past due.

Loans on which the accrual of

interest has been discontinued are designated as nonaccrual loans.

Typically, the accrual of interest on loans is discontinued when principal or interest payments are past due 90 days or when, in the opinion of management, there is a reasonable

doubt as to collectability of the obligation.

Loans on which the accrual

of interest has been discontinued are designated as nonaccrual loans.

Typically, the accrual of interest on loans is discontinued when principal or interest payments are past due 90 days or when, in the opinion of management, there is a

reasonable doubt as to collectability of the obligation.

When loans are placed on nonaccrual status, all interest previously accrued but not collected is reversed against current period interest income.

Income on a nonaccrual loan is subsequently recognized

only to the extent that cash is received and the loan’s principal balance is deemed collectible.

Loans are restored to accrual status when loans become well-secured and management believes full collectability of principal and interest is probable.

Income on a nonaccrual loan is

subsequently recognized only to the extent that cash is received and the loan’s principal balance is deemed collectible.

Loans are restored to accrual status when loans become well-secured and management believes full collectability of

principal and interest is probable.

Loans are evaluated for expected credit losses over their contractual term, reflecting management’s current estimate.

Loans placed on nonaccrual status and loan modifications

granted to borrowers experiencing financial difficulty are considered to have elevated credit risk and are carefully considered within our current expected credit loss methodology.

Income from loans placed on nonaccrual status continues to be

recognized to the extent cash is received and when the collectability of the loan’s principal balance is reasonably assured.

Depending on a particular loan’s risk characteristics, we estimate expected credit losses using methods such as present

value of expected future cash flows discounted at the loan’s effective interest rate, observable market prices for similar assets if available, or the fair value of collateral less estimated costs to sell for collateral-dependent loans.

considered collateral-dependent when the expected source of repayment is primarily the liquidation of the collateral.

Fair value, where utilized, is determined by independent appraisals, typically on an annual basis.

Between appraisal periods, the

estimated fair value may be adjusted based on specific events, such as identified deterioration of collateral quality through our credit risk monitoring, or discussions with the borrower indicating the appraised value may no longer reflect current

market conditions.

Loans placed on nonaccrual status and loan

modifications granted to borrowers experiencing financial difficulty are considered to have elevated credit risk and are carefully considered within our current expected credit loss methodology.

Income from loans placed on nonaccrual status

continues to be recognized to the extent cash is received and when the collectability of the loan’s principal balance is reasonably assured.

Depending on a particular loan’s risk characteristics, we estimate expected credit losses using

methods such as present value of expected future cash flows discounted at the loan’s effective interest rate, observable market prices for similar assets if available, or the fair value of collateral less estimated costs to sell for

collateral-dependent loans.

A loan is considered collateral-dependent when the expected source of repayment is primarily the liquidation of the collateral.

Fair value, where utilized, is determined by independent appraisals, typically on an

annual basis.

Between appraisal periods, the estimated fair value may be adjusted based on specific events, such as identified deterioration of collateral quality through our credit risk monitoring, or discussions with the borrower indicating

the appraised value may no longer reflect current market conditions.

The estimated credit losses are recognized as an allowance for credit losses, which is a valuation account.

Changes in the allowance for credit losses, whether increases or decreases, are recorded in current period earnings as

provision for credit losses.

Changes in the allowance for credit losses, whether increases or

decreases, are recorded in current period earnings as provision for credit losses.

Real estate we acquire as a result of foreclosure or by deed-in-lieu of foreclosure is classified as other real estate owned, or OREO, until sold, and is initially recorded at fair value less costs to sell when

1 unchanged sentence

The following table presents information regarding nonperforming assets as of the dates indicated.

December 31, 2024

September 30,

(Dollars in thousands)

7 unchanged sentences

Ratio of nonperforming assets to total assets

(1) There are no loans modified to borrowers experiencing financial difficulty included in nonaccrual loans as of June 30, 2025 and December 31, 2024, respectively.

There are no loans modified to borrowers experiencing financial difficulty included in nonaccrual loans as of September 30, 2025 and December 31, 2024, respectively.

The following tables present an aging analysis of loans as of the dates indicated.

As of June 30, 2025

As of September 30, 2025

Total past due

11 unchanged sentences

In addition to the past due and nonaccrual criteria, we also evaluate loans according to our internal risk grading system.

Loans are segregated between pass, watch, special mention, and substandard categories.

definitions of those categories are as follows:

Loans are segregated between pass, watch, special mention, and substandard

The definitions of those categories are as follows:

These loans generally conform to Bank policies, are characterized by policy-conforming advance rates on collateral, and have well-defined repayment sources.

these credits are extended to borrowers and guarantors with a strong balance sheet and either substantial liquidity or a reliable income history.

addition, these credits are extended to borrowers and guarantors with a strong balance sheet and either substantial liquidity or a reliable income history.

These loans are still considered “Pass” credits;

3 unchanged sentences

These loans have observable weaknesses or evidence of imprudent handling or structural issues.

The weaknesses require close attention, and the remediation of

those weaknesses is necessary.

The weaknesses require close attention, and the

remediation of those weaknesses is necessary.

No risk of probable loss exists.

2 unchanged sentences

These loans are not adequately protected by the sound worth and debt service capacity of the borrower, but may be well-secured.

The loans have defined weaknesses

relative to cash flow, collateral, financial condition or other factors that might jeopardize repayment of all of the principal and interest on a timely basis.

There is the possibility that a future loss will occur if weaknesses are not remediated.

The loans have defined

weaknesses relative to cash flow, collateral, financial condition or other factors that might jeopardize repayment of all of the principal and interest on a timely basis.

There is the possibility that a future loss will occur if

weaknesses are not remediated.

Outstanding loan balances categorized by internal risk grades as of the periods indicated are summarized as follows:

As of June 30, 2025

As of September 30, 2025

(Dollars in thousands)

10 unchanged sentences

We gather deposits primarily through our twelve branch locations and online through our website.

We offer a variety of deposit products including demand deposit accounts and interest-bearing products, such as savings

accounts and certificates of deposit.

We put continued effort into gathering noninterest-bearing demand deposit accounts through loan production cross-selling, customer referrals, marketing efforts and various involvement with community networks.

We offer a variety of deposit products including demand deposit accounts and interest-bearing products, such

as savings accounts and certificates of deposit.

We put continued effort into gathering noninterest-bearing demand deposit accounts through loan production cross-selling, customer referrals, marketing efforts and various involvement with

community networks.

Some of our interest-bearing deposits are obtained through brokered transactions.

We participate in the CDARS and ICS programs, where customer funds are placed into multiple deposit accounts, each in an amount under the standard FDIC insurance

maximum of $250,000, and placed at a network of banks across the United States.

Total deposits as of June 30, 2025 and December 31, 2024 were $1.59 billion and $1.52 billion, respectively.

As of June 30, 2025, and December 31, 2024, brokered deposits were $371.5 million and $336.7 million, respectively.

We participate in the CDARS and ICS programs, where customer funds are placed into multiple deposit accounts, each in an amount under

the standard FDIC insurance maximum of $250,000, and placed at a network of banks across the United States.

Total deposits as of September 30, 2025 and December 31, 2024 were $1.64 billion and $1.52 billion , respectively.

As of September 30, 2025, and December 31, 2024, brokered deposits were $387.6 million and $336.7 million , respectively.

Uninsured deposits are defined as the portion of deposit accounts in U.S.

offices that exceed the FDIC insurance limit and amounts in any other uninsured investment or deposit account that are classified as deposits

and are not subject to any federal or state deposit insurance regimes.

Total uninsured deposits were $380.3 million and $354.2 million at June 30, 2025 and December 31, 2024, respectively, as calculated per regulatory guidance.

These amounts were

approximately 24.0% and 23.4% of deposits at June 30, 2025 and December 31, 2024, respectively.

offices that exceed the FDIC insurance limit and amounts in any other uninsured investment or deposit account that are classified as

deposits and are not subject to any federal or state deposit insurance regimes.

Total uninsured deposits were $401.8 million and $354.2 million at

September 30, 2025 and December 31, 2024, respectively, as calculated per regulatory guidance.

These amounts were approximately 24.6% and 23.4% of deposits at September 30, 2025 and December 31,

2024, respectively.

The following table sets forth deposit balances by certain categories as of the dates indicated and the percentage of each deposit category to total deposits.

As of June 30,

As of September 30,

As of December 31,

10 unchanged sentences

The following tables set forth the maturity of time deposits as of the dates indicated below:

As of June 30, 2025 Maturity Within:

As of September 30, 2025 Maturity Within:

(Dollars in thousands)

8 unchanged sentences

Liquidity refers to our ability to meet the cash flow requirements of depositors and borrowers, while at the same time meeting our operating, capital and strategic cash flow needs, all at a reasonable cost.

We continuously monitor our liquidity

position to ensure that assets and liabilities are managed in a manner that will meet all short-term and long-term cash requirements.

We manage our liquidity position to meet the daily cash flow needs of customers, while maintaining an appropriate

balance between assets and liabilities to meet the return on investment objectives of our shareholders.

We continuously monitor our

liquidity position to ensure that assets and liabilities are managed in a manner that will meet all short-term and long-term cash requirements.

We manage our liquidity position to meet the daily cash flow needs of customers, while

maintaining an appropriate balance between assets and liabilities to meet the return on investment objectives of our shareholders.

Our liquidity position is supported by the management of liquid assets and access to alternative sources of funds.

Our liquid assets include cash, interest-bearing deposits in correspondent banks and fed funds sold.

Other available sources of

liquidity include wholesale deposits and borrowings from correspondent banks and FHLB advances.

Other available

sources of liquidity include wholesale deposits and borrowings from correspondent banks and FHLB advances.

Our short-term and long-term liquidity requirements are primarily met through cash flow from operations, redeployment of prepaying and maturing balances in our loan portfolios, and increases in customer deposits.

Other alternative sources of

funds will supplement these primary sources to the extent necessary to meet additional liquidity requirements on either a short-term or long-term basis.

As of June 30, 2025, we had no unsecured fed funds lines with correspondent depository institutions, with no corresponding amounts advanced.

In addition, based on the values of loans pledged as collateral, we had borrowing availability with the

FHLB of $223.5 million as of June 30, 2025 and $190.9 million as of December 31, 2024, and we had access to approximately $296.3 million in liquidity with the Federal Reserve Bank as of June 30, 2025 and $336.1 million as of December 31, 2024.

Other alternative

sources of funds will supplement these primary sources to the extent necessary to meet additional liquidity requirements on either a short-term or long-term basis.

As of September 30, 2025, we had no unsecured fed funds lines with correspondent depository institutions, with no corresponding amounts advanced.

In addition, based on the values of loans pledged as collateral, we had borrowing

availability with the FHLB of $217.6 million as of September 30, 2025 and $190.9 million as of December 31, 2024, and we had access to approximately $298.4 million in liquidity with the Federal Reserve Bank as of September 30, 2025 and $336.1 million as of December 31, 2024.

Capital Requirements

The Bank is subject to various regulatory capital requirements administered by the federal and state banking regulators.

Failure to meet regulatory capital requirements may result in certain mandatory and possible additional discretionary

actions by regulators that, if undertaken, could have a direct material effect on our financial statements.

Under capital adequacy guidelines and the regulatory framework for “prompt corrective action” (described below), We must meet specific

capital guidelines that involve quantitative measures of our assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting policies.

The capital amounts and classifications are subject to qualitative judgments by

the federal banking regulators about components, risk weightings and other factors.

Qualitative measures established by regulation to ensure capital adequacy require us to maintain minimum amounts and ratios of CET1 capital, Tier 1 capital, total

capital to risk-weighted assets, and Tier 1 capital to average consolidated assets, referred to as the “leverage ratio.”

As of June 30, 2025, the Bank was in compliance with all applicable regulatory requirements and categorized as “well-capitalized” under the prompt corrective action frame work.

There have been no

conditions or events since June 30, 2025 that management believes would change this classification.

The table below presents our applicable capital requirements, as well as our capital ratios as of June 30, 2025 and December 31, 2024.

exceeded all regulatory capital requirements and the Bank was considered to be “well-capitalized” as of the dates reflected in the tables below.

Failure to meet regulatory capital requirements may result in certain mandatory and possible additional

discretionary actions by regulators that, if undertaken, could have a direct material effect on our financial statements.

Under capital adequacy guidelines and the regulatory framework for “prompt corrective action” (described below), We

must meet specific capital guidelines that involve quantitative measures of our assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting policies.

The capital amounts and classifications are

subject to qualitative judgments by the federal banking regulators about components, risk weightings and other factors.

Qualitative measures established by regulation to ensure capital adequacy require us to maintain minimum amounts and

ratios of CET1 capital, Tier 1 capital, total capital to risk-weighted assets, and Tier 1 capital to average consolidated assets, referred to as the “leverage ratio.”

As of September 30, 2025, the Bank was in compliance with all applicable regulatory requirements and categorized as “well-capitalized” under the prompt corrective action frame work.

There have been no conditions or events since September 30, 2025 that management believes would change this classification.

The table below presents our applicable capital requirements, as well as our capital ratios as of September 30,

2025 and December 31, 2024.

The Company exceeded all regulatory capital requirements and the Bank was considered to be “well-capitalized” as of the dates reflected in the tables below.

Basel III Capital Rules

Under the Basel III Capital Rules, in order to avoid limitations on capital distributions, including dividend payments and certain discretionary bonus payments to executive officers, a banking

organization must hold a capital conservation buffer composed of CET1 capital above its minimum risk-based capital requirements.

As of June 30, 2025, the Company and the Bank met all capital adequacy requirements under the Basel III Capital Rules.

Under the Basel III Capital Rules, in order to avoid limitations on capital distributions, including dividend payments and certain discretionary bonus payments to executive officers, a

banking organization must hold a capital conservation buffer composed of CET1 capital above its minimum risk-based capital requirements.

As of September 30, 2025, the Company and the Bank met all capital adequacy requirements under the

Basel III Capital Rules.

Conservation Buffer

3 unchanged sentences

(Dollars in thousands)

As of June 30, 2025

As of September 30, 2025

Total capital (to risk-weighted assets)

2 unchanged sentences

Tier 1 capital (to average assets)

Conservation Buffer

With Capital Conservation Buffer

Minimum to be "Well-

8 unchanged sentences

Shareholders’ equity provides a source of permanent funding, allows for future growth and provides a cushion to withstand unforeseen adverse developments.

Total shareholders’ equity increased

$18.7 million as of June 30, 2025 to $231.9 million, compared to $213.2 million as of December 31, 2024.

Total shareholders’ equity increased $28.5 million as of September 30, 2025 to $241.7 million, compared to $213.2 million as of December 31, 2024.

Contractual Obligations

The following tables contain supplemental information regarding our total contractual obligations as of June 30, 2025, and December 31, 2024:

Payments Due as of June 30, 2025

Three to Five

The following tables contain supplemental information regarding our total contractual obligations as of September 30, 2025, and December 31, 2024:

Payments Due as of September 30, 2025

One to Three Years

Three to Five Years

(Dollars in thousands)

4 unchanged sentences

Payments Due as of December 31, 2024

Three to Five

One to Three Years

Three to Five Years

(Dollars in thousands)

4 unchanged sentences

We believe that we will be able to meet our contractual obligations as they come due through the maintenance of adequate cash levels.

We expect to maintain adequate cash levels through profitability, loan repayment

and maturity activity and continued deposit gathering activities.

We expect to maintain adequate cash levels through profitability, loan

repayment and maturity activity and continued deposit gathering activities.

We have in place various borrowing mechanisms for both short-term and long-term liquidity needs.

1 unchanged sentence

We are a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of our customers.

These financial instruments include commitments to extend credit and

standby letters of credit.

These financial instruments include commitments to extend

credit and standby letters of credit.

Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheet.

The contractual or notional amounts of those instruments

reflect the extent of involvement we have in particular classes of financial instruments.

The contractual or notional amounts of

those instruments reflect the extent of involvement we have in particular classes of financial instruments.

To control this credit risk, the Company uses the same underwriting standards as it uses for loans recorded on the balance sheet.

Loan commitments are agreements to lend to a customer, as long as there is no violation of any condition established in the contract.

Standby letters of credit are conditional commitments issued by the Bank to

guarantee the performance of the customer to a third party.

Standby letters of credit are conditional commitments issued by the Bank

to guarantee the performance of the customer to a third party.

They are intended to be disbursed, subject to certain conditions, upon request of the borrower.

The following table summarizes commitments as of the dates presented.

December 31, 2024

September 30,

(Dollars in thousands)

3 unchanged sentences

Our accounting and reporting policies conform to GAAP and conform to general practices within the industry in which we operate.

To prepare financial statements in conformity with GAAP, management makes estimates,

assumptions and judgments based on available information.

To prepare financial statements in conformity with GAAP, management makes

estimates, assumptions and judgments based on available information.

These estimates, assumptions and judgments affect the amounts reported in the financial statements and accompanying notes.

These estimates, assumptions and judgments are based on information

available as of the date of the financial statements and, as this information changes, actual results could differ from the estimates, assumptions and judgments reflected in the financial statement.

In particular, management has identified several

accounting policies that, due to the estimates, assumptions and judgments inherent in those policies, are critical in understanding our financial statements.

These estimates, assumptions and judgments are

based on information available as of the date of the financial statements and, as this information changes, actual results could differ from the estimates, assumptions and judgments reflected in the financial statement.

In particular,

management has identified several accounting policies that, due to the estimates, assumptions and judgments inherent in those policies, are critical in understanding our financial statements.

The following is a discussion of the critical accounting policies and significant estimates that we believe require us to make the most complex or subjective decisions or assessments.

1 unchanged sentence

The allowance is based on management’s estimate of probable losses inherent in the loan portfolio.

In the opinion of management, the allowance is adequate to absorb estimated losses in the portfolio as of each

balance sheet date.

While management uses available information to analyze losses on loans, future additions to the allowance may be necessary based on changes in economic conditions and changes in the composition of the loan portfolio.

addition, various regulatory agencies, as an integral part of their examination process, periodically review the Bank’s allowance.

In analyzing the adequacy of the allowance, a comprehensive loan grading system to determine risk potential in loans

is utilized together with the results of internal credit reviews.

In the opinion of management, the allowance is adequate to absorb estimated losses in the portfolio as of

each balance sheet date.

In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Bank’s allowance.

In analyzing the adequacy of the allowance, a comprehensive loan grading system to determine

risk potential in loans is utilized together with the results of internal credit reviews.

To determine the adequacy of the allowance, the loan portfolio is broken into pools based on loan type and risk characteristics.

Historical loss experience factors by pool, adjusted for changes in trends and

conditions, are used to determine an indicated allowance for each portfolio pool.

Historical loss experience factors by pool, adjusted for changes in trends

and conditions, are used to determine an indicated allowance for each portfolio pool.

These factors are evaluated and updated based on the composition of the specific loan pool.

Other considerations include volumes and trends of delinquencies,

nonaccrual loans, levels of bankruptcies, criticized and classified loan trends, expected losses on real estate secured loans, new credit products and policies, economic conditions, concentrations of credit risk and the experience and abilities of

our lending personnel.

In addition to the pool evaluations, classified loans with a balance of $250,000 or more are individually evaluated based on facts and circumstances of the loan to determine if a specific allowance amount may be necessary.

Specific allowances may also be established for loans whose outstanding balances are below the $250,000 threshold when it is determined that the risk associated with the loan differs significantly from the risk factor amounts established for its

Other considerations include volumes and trends of

delinquencies, nonaccrual loans, levels of bankruptcies, criticized and classified loan trends, expected losses on real estate secured loans, new credit products and policies, economic conditions, concentrations of credit risk and the

experience and abilities of our lending personnel.

In addition to the pool evaluations, classified loans with a balance of $250,000 or more are individually evaluated based on facts and circumstances of the loan to determine if a specific

allowance amount may be necessary.

the risk factor amounts established for its loan pool.

Goodwill and Intangibles

Intangible assets totaled $815,000 and goodwill, net of accumulated amortization, totaled $11.2 million as of June 30, 2025, compared to intangible assets of $878,000 and goodwill of $8.5 million as

of December 31, 2024.

Goodwill resulting from a business combination represents the excess of the fair value of the consideration transferred over the fair value of the net assets acquired and liabilities assumed as of the

acquisition date.

Intangible assets totaled $784,000 and goodwill, net of accumulated amortization, totaled $11.2 million as of September 30, 2025, compared to intangible assets of $878,000 and goodwill

of $8.5 million as of December 31, 2024.

Goodwill resulting from a business combination represents the excess of the fair value of the consideration transferred over the fair value of the net assets acquired and liabilities

assumed as of the acquisition date.

Goodwill is tested annually for impairment or more frequently if other impairment indicators are present.

If the implied fair value of goodwill is lower than its carrying amount, a goodwill impairment is indicated and goodwill is

written down to its implied fair value.

If the implied fair value of goodwill is lower than its carrying amount, a goodwill impairment

is indicated and goodwill is written down to its implied fair value.

Subsequent increases in goodwill value are not recognized in the accompanying consolidated financial statements.

Other intangible assets consist of core deposit intangible assets and are amortized on a straight-line basis based on an estimated useful life of 10 years.

Such assets are periodically evaluated as

to the recoverability of their carrying values.

Such assets are periodically

evaluated as to the recoverability of their carrying values.

We file a consolidated income tax return.

Deferred taxes are recognized under the balance sheet method based upon the future tax consequences of temporary differences between the carrying amounts and tax basis of

assets and liabilities, using the tax rates expected to apply to taxable income in the periods when the related temporary differences are expected to be realized.

Deferred taxes are recognized under the balance sheet method based upon the future tax consequences of temporary differences between the carrying amounts and tax

basis of assets and liabilities, using the tax rates expected to apply to taxable income in the periods when the related temporary differences are expected to be realized.

The amount of accrued current and deferred income taxes is based on estimates of taxes due or receivable from taxing authorities either currently or in the future.

Changes in these accruals are reported as tax

expense, and involve estimates of the various components included in determining taxable income, tax credits, other taxes and temporary differences.

Changes periodically occur in the estimates due to changes in tax rates, tax laws and regulations

and implementation of new tax planning strategies.

Changes in these accruals are reported as

tax expense, and involve estimates of the various components included in determining taxable income, tax credits, other taxes and temporary differences.

Changes periodically occur in the estimates due to changes in tax rates, tax laws and

regulations and implementation of new tax planning strategies.

The process of determining the accruals for income taxes necessarily involves the exercise of considerable judgment and consideration of numerous subjective factors.

Management performs an analysis of our tax positions annually and believes it is more likely than not that all of its tax positions will be utilized in future years.

The Company’s effective tax rate was 24.5% for the second quarter of 2025, which was consistent with the rate of 24.6% for the same period in 2024.

The Company’s effective tax rate was 23.6% for the third quarter of 2025, which was consistent with the rate of 24.2%

for the same period in 2024.

Our effective tax rate differs from the U.S.

federal statutory rate

of 21% primarily due to the effect of state income taxes, tax-exempt income earned on certain loans and investments, and nondeductible expenses.

federal statutory rate of 21% primarily due to the effect of state income taxes, tax-exempt income earned on certain loans and investments, and nondeductible

Fair Value of Financial Instruments

ASC Topic 820, Fair Value Measurement, defines fair value as the price that would be received to sell a financial asset or paid to transfer a financial liability in an orderly transaction between market participants

at the measurement date.

participants at the measurement date.

The degree of management judgment involved in determining the fair value of assets and liabilities is dependent upon the availability of quoted market prices or observable market parameters.

For financial instruments that

trade actively and have quoted market prices or observable market parameters, there is minimal subjectivity involved in measuring fair value.

When observable market prices and parameters are not available, management judgment is necessary to

estimate fair value.

financial instruments that trade actively and have quoted market prices or observable market parameters, there is minimal subjectivity involved in measuring fair value.

When observable market prices and parameters are not available,

management judgment is necessary to estimate fair value.

In addition, changes in market conditions may reduce the availability of quoted prices or the observable date.

Debt securities that are being held for indefinite periods of time and are not intended to sell, are classified as available for sale and are stated at estimated fair value.

Unrealized gains or losses on debt

securities available for sale are reported as a component of stockholders’ equity and comprehensive income, net of income tax.

Debt securities that are being held for indefinite periods of time and

are not intended to sell, are classified as available for sale and are stated at estimated fair value.

Unrealized gains or losses on debt securities available for sale are reported as a component of stockholders’ equity and comprehensive

income, net of income tax.

The Company reviews its portfolio of debt securities in an unrealized loss position at least quarterly.

The Company first assesses whether it intends to sell, or it is more-likely-than-not that it will be required to

sell, the securities before recovery of the amortized cost basis.

The Company first assesses whether it intends to sell, or it is more-likely-than-not that it will be

required to sell, the securities before recovery of the amortized cost basis.

If either of these criteria is met, the securities amortized cost basis is written down to fair value as a current period expense.

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 this assessment, the Company considers, among other things, the period of time the security has been in an unrealized loss position, and

performance of any underlying collateral and adverse conditions specifically related to the security.

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 this assessment, the Company considers, among other things, the period of time the security has been

in an unrealized loss position, and performance of any underlying collateral and adverse conditions specifically related to the security.

The estimates of fair values of debt securities and other financial instruments are based on a variety of factors.

In some cases, fair values represent quoted market prices for identical or comparable instruments.

other cases, fair values have been estimated based on assumptions concerning the amount and timing of estimated future cash flows and assumed discount rates reflecting varying degrees of risk.

Accordingly, the fair values may not represent actual

values of the financial instruments that could have been realized as of year-end or that will be realized in the future.

In some cases, fair values represent quoted market prices for identical or comparable

In other cases, fair values have been estimated based on assumptions concerning the amount and timing of estimated future cash flows and assumed discount rates reflecting varying degrees of risk.

Accordingly, the fair values

may not represent actual values of the financial instruments that could have been realized as of year-end or that will be realized in the future.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis