What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-11-04 compared with 2025-08-07 · 201 added, 195 removed, 650 unchanged (38% of the section changed)

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• geopolitical tensions, including current or anticipated impact of military conflicts;

• the impact of a prolonged U.S.

government shutdown on our business and our customers;

• higher lending risks associated with our commercial and agricultural banking activities;

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The forward-looking statements made herein are only made as of the date of this filing and the Company undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances occurring after the date of this report.

The following discussion sets forth management’s discussion and analysis of our consolidated financial condition as of June 30, 2025, and our consolidated results of operations for the six months ended June 30, 2025, compared to the same period in the prior fiscal year ended June 30, 2024.

The following discussion sets forth management’s discussion and analysis of our consolidated financial condition as of September 30, 2025, and our consolidated results of operations for the nine months ended September 30, 2025, compared to the same period in the prior fiscal year ended September 30, 2024.

This discussion should be read in conjunction with the interim consolidated financial statements and the condensed notes thereto included with this report and with Management’s Discussion and Analysis of Financial Condition and Results of Operations and the financial statements and notes related thereto included in our 2024 10-K.

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PERFORMANCE SUMMARY

The following is a summary of some of the significant factors that affected our operating results for the three and six months ended June 30, 2025, and June 30, 2024.

Compared to the second quarter of 2024, the second quarter of 2025 net interest income increased $1.7 million.

The second quarter 2025, increase from the same period in 2024, was largely due to:

(1) $0.7 million of interest income recognized on the payoff of nonaccrual loans;

The following is a summary of some of the significant factors that affected our operating results for the three and nine months ended September 30, 2025, and September 30, 2024.

Compared to the third quarter of 2024, the third quarter of 2025 net interest income increased $1.9 million.

The third quarter 2025 increase from the same period in 2024 was largely due to:

(1) $1.3 million in lower liability expense due to 50 basis point lower cost of funds;

(2) $0.4 million of interest income recognized on the payoff of nonaccrual loans and loans with purchase credit discounts;

(3) $0.4 million of accretion on the aforementioned payoffs;

and (3) improvements in the net interest margin.

Improving net interest margins were partially offset by the impact of a smaller loan portfolio and $0.2 million recognized in curing technical defaults on performing loans in the second quarter of 2024.

The total provision for credit losses for the second quarter ended June 30, 2025, was $1.350 million compared to a negative provision for credit losses of $1.525 million for the quarter ended June 30, 2024.

The second quarter of 2025 provision was largely due to:

(1) the impact of three 30-89 days delinquent commercial relationships resulting in a $0.7 million provision;

(2) the impact of modestly worsening macro-economic assumptions used by our third party provider of $0.3 million;

and (3) provisions on new loans with longer contractual life outpacing previously established provisions on prepaying and maturing loans of $0.15 million and an increase in off-balance sheet commitments for new construction loan originations of $0.2 million.

The total benefit, i.e., negative provision, for credit losses for the second quarter ended June 30, 2024, of $1.525 million was due to decreases in ACL related to:

(1) loan portfolio decreases and credit quality improvements of $0.6 million;

(2) improvements in the Moody’s economic scenario per our third-party provider of $0.6 million;

and (4) with higher asset yields offsetting a 4% decrease in interest-earning assets.

The total provision for credit losses for the third quarter ended September 30, 2025, was $0.650 million compared to a negative provision for credit losses of $0.400 million for the quarter ended September 30, 2024.

The third quarter of 2025 provision was largely due to:

(1) the impact of changes in credit quality, i.e.

changes in reserve on impaired loans, and the impact of delinquent loans at June 30, 2025, becoming current at September 30, 2025;

(2) net shrinkage of the loan portfolio of $0.1 million;

(3) $51 thousand of net recoveries;

(4) a decrease in off-balance sheet commitments for new construction loan originations of $0.1 million.

The total benefit, i.e., negative provision, for credit losses for the third quarter ended September 30, 2024, of $0.400 million, was due to decreases in the ACL related to on-balance sheet ACL of $0.1 million;

and reductions in off-balance sheet reserves to fund commitments of $0.3 million.

Non-interest income increased $0.9 million in the second quarter of 2025, compared to the second quarter of 2024, primarily due to $0.8 million higher gain on equity securities and higher gain on sales of loans of $0.5 million, partially offset by the Bank Owned Life Insurance death benefit of $0.2 million recognized in the second quarter of 2024.

Non-interest expense increased $0.5 million in the second quarter of 2025 from $10.3 million in the second quarter of 2024.

The increase was primarily due to an increase in compensation expense due to annual employee pay raises, effective late first quarter of 2025, higher incentive accruals and higher medical costs.

Provision for income taxes decreased to $0.8 million in the second quarter of 2025, from $1.0 million in the second quarter of 2024, primarily due to a decrease in pre-tax income and a lower effective tax rate.

The decrease in the effective tax rate is primarily due to the positive impact of higher permanent tax deductions in 2025.

For the six months ended June 30, 2025, net interest income increased $1.4 million from the same period in 2024.

The second quarter 2025 changes discussed above were the primary drivers, along with the $0.4 million of interest income on payoffs of nonaccrual loans recognized in the first quarter of 2025, and a smaller loan portfolio throughout the 2025 six-month period being partially offset by an improving net interest margin in 2025.

The total provision for credit losses for the six months ended June 30, 2025, was $1.100 million compared to a negative provision for credit losses of $2.325 million for the six months ended June 30, 2024.

The primary reasons for the change in the provision were:

(1) the impact of the on-balance sheet loan portfolio ACL changes, including credit quality changes of $1.7

(2) the impact of an improving economic scenario in 2024 compared to a modestly worsening scenario in 2025, equivalent to an increase of approximately $0.9 million;

and 3) off-balance sheet ACL changes of $0.8 million.

Non-interest income increased $0.3 million for the six-month period ended June 30, 2025, compared to the same period in 2024, primarily due to $0.6 million higher gain on equity securities offset by the Bank Owned Life Insurance death benefit of $0.2 million recognized in the second quarter of 2024.

Non-interest expense increased $0.1 million in the six-month period ended June 30, 2025, compared to the same period in 2024, primarily due to higher second quarter compensation expense partially offset by the establishment in the first quarter 2024 of the SBA recourse reserve of $0.4 million.

Provision for income taxes decreased to $0.6 million in the six months ended June 30, 2025, compared to the same period in 2024, due to a decrease in pre-tax income and a lower effective tax rate.

The decrease in the effective tax rate is primarily due to the positive impact of higher permanent tax deductions in 2025.

When comparing year-over-year results, changes in net interest income, provision for credit losses, non-interest income and non-interest expense are primarily due to the items discussed above.

Non-interest income increased $0.1 million in the third quarter of 2025, compared to the third quarter of 2024, primarily due to higher gains on sale of loans.

Non-interest expense increased $0.7 million in the third quarter of 2025 from $10.4 million in the third quarter of 2024.

The increase was primarily due to an increase in compensation expense due to annual employee pay raises, higher incentive accruals, and higher medical costs.

Provision for income taxes decreased to $0.85 million in the third quarter of 2025, from $0.9 million in the third quarter of 2024, primarily due to a lower effective tax rate.

The decrease in the effective tax rate was primarily due to the positive impact of higher permanent tax deductions in 2025.

For the nine months ended September 30, 2025, net interest income increased $3.4 million from the same period in 2024.

The increase in net interest income was largely due to:

(1) lower liability interest costs of 33 basis points;

(2) income from the payoff of nonaccrual loans and loans with purchase credit discounts, which increased $0.8 million;

partially offset by the impact of a 4% decrease in interest-earnings assets.

The total provision for credit losses for the nine months ended September 30, 2025, was $1.750 million compared to a negative provision for credit losses of $2.725 million for the nine months ended September 30, 2024.

The 2025 provision for ACL was primarily due to the impact of higher reserves on impaired loans and the impact of higher delinquencies.

For the nine months ended 2024, the total provision for ACL was a negative provision of $2.725 million.

The decrease was primarily due to:

(1) the $0.9 million impact of loan portfolio decreases and credit quality improvements;

(2) $0.6 million due to improvements in the Moody’s economic scenario assumptions utilized by our third party provider;

(3) reduction in off-balance sheet ACL to fund loan commitments of $0.9 million;

(4) a decrease in the allowance for credit losses of $0.5 million, largely in the first quarter;

and (5) net recoveries.

Non-interest income increased $0.4 million for the nine-month period ended September 30, 2025, compared to the same period in 2024, primarily due to:

(1) $0.6 million higher gain on equity securities, and (2) higher gain on sale of loans of $0.4 million, partially offset by the (3) Bank Owned Life Insurance death benefit of $0.2 million recognized in the second quarter of 2024, and (4) lower service charges on deposit accounts, loan fees and service charges due to lower customer activity.

Non-interest expense increased $0.8 million in the nine-month period ended September 30, 2025, compared to the same period in 2024, primarily due to higher compensation expense for the reason discussed above, partially offset by the establishment in the first quarter 2024 of the SBA recourse reserve of $0.4 million.

Provision for income taxes decreased to $2.4 million in the nine months ended September 30, 2025, compared to the same period in 2024, due to a decrease in pre-tax income and a lower effective tax rate.

The decrease in the effective tax rate was primarily due to the positive impact of higher permanent tax deductions in 2025.

When comparing year-over-year results, changes in net interest income, provision for credit losses, non-interest income, non-interest expense, and provision for income taxes are primarily due to the items discussed above.

See the remainder of this section for a more thorough discussion.

We reported net income of $3.3 million and $6.5 million, or $0.33 and $0.65 per diluted share for the three and six months ended June 30, 2025, compared to net income of $3.7 million and $7.8 million, or $0.35 and $0.75 per diluted share for the three and six months ended June 30, 2024, respectively.

We reported net income of $3.7 million and $10.1 million, or $0.37 and $1.02 per diluted share for the three and nine months ended September 30, 2025, compared to net income of $3.3 million and $11.0 million, or $0.32 and $1.07 per diluted share for the three and nine months ended September 30, 2024, respectively.

CRITICAL ACCOUNTING ESTIMATES

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For loans that are not collateral dependent, the allowance for credit losses is based on the present value of expected future cash flows discounted at the loan’s original effective interest rate through the repayment period;

and (2) a collective allowance for loans not specifically identified in (1) above.

The allowance for these loans is estimated by pooling loans with a similar risk profile and calculating a collective loss rate using the pool’s risk drivers, historical loss experience, and reasonable and

supportable future economic forecasts to project lifetime losses.

and (2) a collective allowance

for loans not specifically identified in (1) above.

This collectively estimated loss is adjusted for qualitative factors.

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Net interest margin currently exceeds interest rate spread because non-interest-bearing sources of funds (“net free funds”), principally demand deposits and stockholders’ equity, also support interest earning assets.

The narrative below discusses net interest income, and net interest margin for the three-month and six-month periods ended June 30, 2025, and June 30, 2024, respectively.

Net interest income was $13.3 million for the three months ended June 30, 2025, compared to $11.6 million for the three months ended June 30, 2024.

Interest income for the three months ended June 30, 2025, increased from the same period one year ago due to:

(1) $0.7 million of income realized on the payoff of nonaccrual loans;

(2) $0.4 million increase in accretion due to aforementioned payoffs in the second quarter of 2025;

(3) growth in the net interest margin due to the positive impact of lower liability costs of 33 basis points;

and (4) improving asset yields, partially offset by:

(1) the impact of lower balances of loans and investment securities;

and (2) one-time income of $0.2 million recognized from curing technical defaults on performing loans in the second quarter of 2024.

Lower short-term interest rates of 100 basis points, due to lower Federal Open Market Committee reductions, favorably impacted liability costs, new loan originations and repricing along with the items we discussed above more than offset the impact of lower short-term interest rate on variable rate loans.

The net interest margin for the three-month period ended June 30, 2025, increased to 3.27%, compared to 2.72%, for the three-month period ended June 30, 2024.

The narrative below discusses net interest income, and net interest margin for the three-month and nine-month periods ended September 30, 2025, and September 30, 2024, respectively.

Net interest income was $13.2 million for the three months ended September 30, 2025, compared to $11.3 million for the three months ended September 30, 2024.

Compared to the third quarter of 2024, the third quarter of 2025 net interest income increased $1.9 million.

The third quarter 2025 increase from the same period in 2024, was largely due to:

(1) $1.3 million in lower liability interest expense due to 50 basis point lower cost of funds;

(2) $0.4 million of interest income recognized on the payoff of nonaccrual loans and loans with purchase credit discounts;

(3) $0.4 million of accretion on the aforementioned payoffs;

and (4) with higher asset yields offsetting a 4% decrease in interest-earning assets.

The net interest margin for the three-month period ended September 30, 2025, increased to 3.20%, compared to 2.63%, for the three-month period ended September 30, 2024.

The higher net interest margin was due to:

(1) a decrease in liability costs of 48 basis points;

(2) the net favorable impacts of the $0.7 million of nonaccrual loan repayments in the second quarter;

and (3) the $0.4 million decrease in liability costs, partially offset by the $0.2 million of one-time income recognized from curing technical defaults on performing loans in the second quarter of 2024, or 21 basis points, and higher asset yields of 10 basis points.

Net interest income was $24.9 million for the six-month period ended June 30, 2025, compared to $23.5 million for the six months ended June 30, 2024.

The second quarter 2025 changes discussed above were the primary drivers, with the $0.4 million of interest income on nonaccrual loan repayments recognized in the first quarter and a smaller loan portfolio throughout the six-month period being partially offset by an improving net interest margin.

The net interest margin for the six-month period ended June 30, 2025, increased to 3.06%, compared to 2.75%, for the six-month period ended June 30, 2024.

(2) the net favorable impacts of the $0.4 million of payoffs of nonaccrual loans and loans with purchase credit discounts or 10 basis points;

and (3) a net increase of 4 basis points in asset yields in addition to those discussed above.

Net interest income was $38.1 million for the nine-month period ended September 30, 2025, compared to $34.8 million for the nine months ended September 30, 2024.

For the nine months ended September 30, 2025, net interest income increased $3.3 million from the same period in 2024.

The increase in net interest income was largely due to:

(1) lower liability costs of 33 basis points;

(2) income from the payoff of nonaccrual loans and loans with purchase credit discounts, increased $0.8 million;

partially offset by the impact of a 4% decrease in interest-earnings assets.

The net interest margin for the nine-month period ended September 30, 2025, increased to 3.11%, compared to 2.71%, for the nine-month period ended September 30, 2024.

The higher net interest margin was primarily due to:

(1) a decrease in liability costs of 33 basis points;

(2) the net favorable impact of the $0.7 million nonaccrual loan payoffs in the second quarter;

and (3) the $0.4 million decrease in liability costs, partially offset by the $0.2 million of one-time income recognized from curing technical defaults on performing loans in the second quarter of 2024, and $0.4 million of interest income recognized on non-accrual loan payoffs in the first quarter of 2024, or 9 basis points.

and (2) the net favorable impact of the $0.74 million payoffs of nonaccrual loans and loans with purchase credit discounts, net of income recognized on loans modified.

Average Balances, Net Interest Income, Yields Earned and Rates Paid.

The following net interest income analysis table presents interest income from average interest earning assets, expressed in dollars and yields, and interest expense on average interest-bearing liabilities, expressed in dollars and rates on a tax equivalent basis.

Shown below is the weighted average tax equivalent yield on interest earning assets, rates paid on interest-bearing liabilities and the resultant spread at or during the three and six-month periods ended June 30, 2025, and June 30, 2024.

Shown below is the weighted average tax equivalent yield on interest earning assets, rates paid on interest-bearing liabilities and the resultant spread at or during the three and nine-month periods ended September 30, 2025, and September 30, 2024.

Non-accruing loans have been included in the table as loans carrying a zero yield.

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(Dollar amounts in thousands)

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

Three months ended June 30, 2025

Three months ended June 30, 2024

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

Three months ended September 30, 2025

Three months ended September 30, 2024

Balance Interest

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(Dollar amounts in thousands)

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

Six months ended June 30, 2025 Six months ended June 30, 2024

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

Nine months ended September 30, 2025 Nine months ended September 30, 2024

Balance Interest

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(Dollar amounts in thousands)

Three months ended June 30, 2025, compared to the three months ended June 30, 2024.

Three months ended September 30, 2025, compared to the three months ended September 30, 2024.

Increase (decrease) due to

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(Dollar amounts in thousands)

Six months ended June 30, 2025, compared to the six months ended June 30, 2024.

Nine months ended September 30, 2025, compared to the nine months ended September 30, 2024.

Increase (decrease) due to

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Net interest income $ (1,443) $ 4,796 $ 3,353

The table below shows the principal balance and current contractual rate of fixed rate certificates of deposit as of June 30, 2025.

The table also shows the principal balance and current contractual rate of fixed rate loans and securities as of June 30, 2025, that mature or reprice.

The table below shows the principal balance and current contractual rate of fixed rate certificates of deposit as of September 30, 2025.

The table also shows the principal balance and current contractual rate of fixed rate loans and securities as of September 30, 2025, that mature or reprice.

Portfolio Contractual Repricing:

(in millions, except yields)

Q3 2025 Q4 2025 Q1 2026 Q2 2026 Q3 2026 Q4 2026 FY 2027

Q4 2025 Q1 2026 Q2 2026 Q3 2026 Q4 2026 FY 2027

Maturing Certificate Accounts:

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Lifetime losses on these loans are estimated based on the loans’ individual characteristics.

The second quarter of 2025 provision expense was largely due to:

(1) the impact of three 30-89 day delinquent commercial relationships resulting in a $0.7 million provision;

(2) the impact of modestly worsening macro-economic assumptions used by our third party provider of $0.3 million;

(3) provisions on new loans with longer contractual life outpacing previously established provisions on prepaying and maturing loans of $0.15 million;

and (4) an increase in off-balance sheet commitments from new construction loan originations of $0.2 million.

The total benefit, i.e., negative provision, for credit losses for the second quarter ended June 30, 2024, was $1.525 million due to decreases in ACL as follows:

(1) loan portfolio decreases and credit quality improvements of $0.6 million;

(2) macro-economic improvements utilized by our third-party provider of $0.6 million;

The third quarter of 2025 provision was largely due to:

(1) the impact of changes in credit quality, i.e.

changes in reserve on impaired loans, and the impact of delinquent loans at June 30, 2025, becoming delinquent at September 30, 2025;

(2) net shrinkage of the loan portfolio of $0.1 million;

(3) $51 thousand of net recoveries;

(4) a decrease in off-balance sheet commitments for new construction loan originations of $0.1 million.

The total benefit, i.e., negative provision, for credit losses for the third quarter ended September 30, 2024, of $0.400 million was due to decreases in ACL related to on-balance sheet ACL of $0.1 million;

and reductions in off-balance sheet reserves to fund commitments of $0.3 million.

The total provision for credit losses for the six months ended June 30, 2025, was $1.100 million compared to a negative provision for credit losses of $2.325 million for the quarter ended June 30, 2024.

The primary reasons for the change in the provision were:

(1) the impact of the on-balance sheet loan portfolio ACL changes, including credit quality changes of $1.7 million;

(2) the impact of an improving macro-economic scenario in 2024 compared to a modestly worsening scenario in 2025, equivalent to an increase of approximately $0.9 million;

and (3) off-balance sheet ACL changes of $0.8 million.

The 2025 provision for ACL was primarily due to the impact of higher reserves on impaired loans and the impact of higher delinquencies.

For the nine months ended 2024, the total provision for ACL was a negative provision of $2.725 million.

The decrease was primarily due to:

(1) the $0.9 million impact of loan portfolio decreases and credit quality improvements;

(2) $0.6 million due to improvements in the Moody’s economic scenario assumptions utilized by our third party provider;

(3) reduction in off-balance sheet ACL to fund loan commitments of $0.9 million;

(4) a decrease in the allowance for credit losses of $0.5 million, largely in the first quarter;

and (5) net recoveries.

Continued stable economic conditions in our markets, as evidenced by unemployment rates below the national average in our two largest population centers, have resulted in positive overall economic trends for businesses.

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Note that in discussing ACL allocations, the entire ACL balance is available for any loan that, in management’s judgment, should be charged off.

Management believes that the provision recorded for the current year’s three and six month periods is adequate in view of the present condition of our loan portfolio and the sufficiency of collateral supporting our non-performing loans.

Management believes that the provision recorded for the current year’s three- and nine-month periods is adequate in view of the present condition of our loan portfolio and the sufficiency of collateral supporting our non-performing loans.

We continually monitor non-performing loan relationships and will adjust our provision, as necessary, if changing facts and circumstances require a change in the ACL.

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Non-interest Income .

The following table reflects the various components of non-interest income for the three and six-month periods ended June 30, 2025 and 2024, respectively.

Three months ended June 30, Six months ended June 30,

The following table reflects the various components of non-interest income for the three and nine-month periods ended September 30, 2025 and 2024, respectively.

Three months ended September 30, Nine months ended September 30,

2025 2024 % Change 2025 2024 % Change

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N/M means not meaningful

Service charges on deposit accounts decreased $58 thousand from the second quarter of 2024, compared to the second quarter of 2025, and decreased $106 thousand for the six months ended June 30, 2025, compared to the same period in 2024, primarily due to lower customer activity.

Gain on sale of loans increased in the three-month period ended June 30, 2025, compared to the three-month period ended June 30, 2024, primarily due to higher gains on SBA loan sales.

For the six-month periods ending June 30, 2025, and 2024, loan sale gains increased due to higher residential gains on sale.

Loan fees and services charges were lower for the three and six-month periods ended June 30, 2025, compared to the same periods in 2024, due to lower customer activity.

The increase in net gains on equity securities between the three-month period ended June 30, 2025, and the three-month period ended June 30, 2024, was primarily due to the impact of mark-to-market losses on equity securities as the second quarter of 2024 had an unrealized loss on the exchange of a debt security for an equity security.

For the six-month period ended June 30, 2025, compared to the same period in 2024, the change was due to second quarter 2024 losses, partially offset by gains recognized in the first quarter of 2024 due to increased valuations of equity securities.

Service charges on deposit accounts decreased $64 thousand from the third quarter of 2024, compared to the third quarter of 2025, and decreased $170 thousand for the nine months ended September 30, 2025, compared to the same period in 2024, primarily due to lower customer activity.

Gain on sale of loans increased in the three-month period ended September 30, 2025, compared to the three-month period ended September 30, 2024.

Higher gains on SBA loan sales account for approximately 2/3 of the increase, with the remainder of the increase also impacted by higher gains on sale of residential loans.

For the nine-month periods ending September 30, 2025, and 2024, loan sale gains increased approximately 60% due to higher SBA loan sales and 40% higher residential gains on sale

Loan fees and services charges were lower in the nine-month period ended September 30, 2025, compared to the same periods in 2024, due to lower customer activity.

Net gains (losses) on equity securities increased for the nine-month period ended September 30, 2025, compared to the same period in 2024.

The change was due to second quarter 2024 losses, partially offset by gains recognized in the first quarter of 2024, due to increased valuations of equity securities.

The decrease in other income for the three- and nine-month periods ending September 30, 2025, compared to the same periods in 2024, is due to changes in annual debit card incentives in 2025, due to lower customer spending.

Non-interest Expense.

The following table reflects the various components of non-interest expense for the three and six-month periods ended June 30, 2025 and 2024, respectively.

Three months ended June 30, Six months ended June 30,

The following table reflects the various components of non-interest expense for the three and nine-month periods ended September 30, 2025 and 2024, respectively.

Three months ended September 30, Nine months ended September 30,

2025 2024 % Change 2025 2024 % Change

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N/M means not meaningful

Compensation expense for the three-month period ended June 30, 2025, increased from the same period in 2024, due to annual employee pay raises, effective late first quarter of 2025, higher incentive accruals and higher medical costs.

The increase for the six-month period ending June 30, 2025, was largely due to the increases in the second quarter period.

Data processing expense for the three and six-months ended June 30, 2025, increased from the same 2024 periods, largely due to inflationary pressures and the impact of new software implementation costs to aid in future efficiency efforts.

Professional fees for the three months ended June 30, 2025, increased from the same period in 2024, largely due to higher legal and audit expenses.

The decrease in other non-interest expense for the three months ended June 30, 2025, compared to the same period in 2024, is largely due to the branch closure costs in the second quarter of 2024.

For the six months ended June 30, 2025, compared to the same period in 2024, the decrease is primarily due to the establishment of an SBA valuation reserve of $0.4 million in the first quarter of 2024 and the branch closure costs in the second quarter of 2024.

Compensation expense for the three-month period ended September 30, 2025, increased from the same period in 2024, due to annual employee pay raises, effective late first quarter of 2025, higher incentive accruals, and higher medical costs.

The increase for the nine-month period ending September 30, 2025, was largely due to the same reason as in the third quarter period.

Data processing expense for the three and nine-months ended September 30, 2025, increased from the same 2024 periods, largely due to inflationary pressures and the impact of new software implementation costs to aid in future efficiency efforts.

Amortization of intangibles decreased for both the three and nine-month periods ending September 30, 2025, from the same 2024 periods, as an intangible was fully amortized in the third quarter of 2025.

The decrease in other non-interest expense for the nine-months ended September 30, 2025, compared to the same period in 2024, is largely due to $0.2 million in branch closure costs in the second quarter of 2024 and the establishment of an SBA valuation reserve of $0.4 million in the first quarter of 2024, partially offset by additional SBA costs in 2025 of $0.1 million.

Income Taxes.

Provision for income taxes decreased to $0.8 million in the second quarter of 2025, from $1.0 million in the second quarter of 2024.

For the six months ended June 30, 2025, income tax expense decreased $0.5 million to $1.6 million, compared to the same period in 2024.

Provision for income taxes decreased to $0.85 million in the third quarter of 2025, from $0.9 million in the third quarter of 2024.

For the nine months ended September 30, 2025, income tax expense decreased $0.6 million to $2.4 million, compared to the same period in 2024.

The decrease in both periods is primarily due to lower pre-tax income and to a lesser extent, a lower effective tax rate, due to the positive impact of higher permanent tax deductions in 2025 .

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Cash and Cash Equivalents.

Cash and cash equivalents increased $17.3 million to $67.5 million at June 30, 2025, compared to $50.2 million at December 31, 2024.

Cash and cash equivalents increased $32.2 million to $82.4 million at September 30, 2025, compared to $50.2 million at December 31, 2024.

This increase was primarily due to the net proceeds from loan shrinkage increasing on-balance sheet liquidity and growing interest-bearing cash.

2 unchanged sentences

Our investment portfolio is comprised of securities available-for-sale and securities held-to-maturity.

Securities available-for-sale decreased $8.1 million during the six months ended June 30, 2025, to $134.8 million from $142.9 million at December 31, 2024.

There were principal repayments of $6.3 million, and a net decrease in the corporate debt portfolio due to calls of $3.2 million and maturities of $2.5 million, partially offset by purchases of $1.9 million.

These net decreases were partially offset by a decrease in the unrealized loss of $2.0 million.

Securities held-to-maturity decreased $2.5 million to $83.0 million during the six-month period ended June 30, 2025, from $85.5 million at December 31, 2024, due to principal repayments.

Securities available-for-sale decreased $5.3 million during the nine months ended September 30, 2025, to $137.6 million from $142.9 million at December 31, 2024.

There were principal repayments of $8.9 million, and a net decrease in the corporate debt portfolio due to calls of $5.0 million and maturities of $2.5 million.

These reductions were partially offset by purchases of $7.0 million of corporate debt and a decrease in the unrealized loss of $4.2 million.

Securities held-to-maturity decreased $4.0 million to $81.5 million during the nine-month period ended September 30, 2025, from $85.5 million at December 31, 2024, due to principal repayments.

The amortized cost and market values of our available-for-sale securities by asset categories as of the dates indicated below were as follows:

Available-for-sale securities Amortized

June 30, 2025

September 30, 2025

government agency obligations $ 11,502 $ 11,432

11 unchanged sentences

Held-to-maturity securities Amortized

June 30, 2025

September 30, 2025

Obligations of states and political subdivisions $ 400 $ 385

6 unchanged sentences

The composition of our available-for-sale portfolios by credit rating as of the dates indicated below was as follows:

June 30, 2025 December 31, 2024

September 30, 2025 December 31, 2024

Available-for-sale securities Amortized

7 unchanged sentences

The composition of our held-to-maturity portfolio by credit rating as of the dates indicated was as follows:

June 30, 2025 December 31, 2024

September 30, 2025 December 31, 2024

Held-to-maturity securities Amortized

3 unchanged sentences

Total $ 81,526 $ 64,879 $ 85,504 $ 65,622

At June 30, 2025, the Bank has pledged certain of its mortgage-backed securities with a carrying value of $33.2 million as collateral to secure a line of credit with the Federal Reserve Bank.

As of June 30, 2025, there were no borrowings outstanding on this Federal Reserve Bank line of credit.

As of June 30, 2025, the Bank has pledged certain of its U.S.

At September 30, 2025, the Bank has pledged certain of its mortgage-backed securities with a carrying value of $32.6 million as collateral to secure a line of credit with the Federal Reserve Bank.

As of September 30, 2025, there were no borrowings outstanding on this Federal Reserve Bank line of credit.

As of September 30, 2025, the Bank has pledged certain of its U.S.

Government Agency securities with a carrying value of $0.2 million and mortgage-backed securities with a carrying value of $1.9 million as collateral against specific municipal deposits.

As of June 30, 2025, the Bank also has mortgage-backed securities with a carrying value of $0.4 million pledged as collateral to the Federal Home Loan Bank of Des Moines.

As of September 30, 2025, the Bank also has mortgage-backed securities with a carrying value of $0.4 million pledged as collateral to the Federal Home Loan Bank of Des Moines.

At December 31, 2024, the Bank has pledged certain of its mortgage-backed securities with a carrying value of $34.0 million as collateral to secure a line of credit with the Federal Reserve Bank.

3 unchanged sentences

As of December 31, 2024, the Bank also has mortgage-backed securities with a carrying value of $0.5 million pledged as collateral to the Federal Home Loan Bank of Des Moines.

Total loans outstanding, net of deferred loan fees and costs and unamortized discount on acquired loans, decreased by $0.02 billion, to $1.35 billion as of June 30, 2025, from $1.37 billion at December 31, 2024.

The following table reflects the composition, of our loan portfolio at June 30, 2025, and December 31, 2024:

June 30, 2025 December 31, 2024

Total loans outstanding, net of deferred loan fees and costs and unamortized discount on acquired loans, decreased by $0.05 billion, to $1.32 billion as of September 30, 2025, from $1.37 billion at December 31, 2024.

The following table reflects the composition, of our loan portfolio at September 30, 2025, and December 31, 2024:

September 30, 2025 December 31, 2024

Amount Percent Amount Percent

26 unchanged sentences

The level of owner-occupied property versus non-owner-occupied property are tracked and monitored on a regular basis.

The following table lists the portfolio characteristics of our major commercial real estate loan portfolio at June 30, 2025:

The following table lists the portfolio characteristics of our major commercial real estate loan portfolio at September 30, 2025:

Non-Owner Occupied CRE Owner- Occupied CRE Multi-family CRE Construction and Development CRE

12 unchanged sentences

Other 29 % 6 % 11 % 33 %

The following table further disaggregates the composition of our commercial real estate loan portfolio by selected industry components at June 30, 2025:

The following table further disaggregates the composition of our commercial real estate loan portfolio by selected industry components at September 30, 2025:

Campground Hotel Restaurant Office

3 unchanged sentences

Approximate Weighted Average LTV 48 % 54 % 49 % 63 %

Weighted Average Seasoning in Months 40 43 43 48

Weighted Average Seasoning in Months 41 N/A N/A 51

Trailing 12 Month Net Charge-Offs 0.00 % 0.00 % 0.00 % 0.00 %

48 unchanged sentences

The entire ACL balance is available for any loan that, in management’s judgment, should be charged off.

The determination of the ACL requires significant judgement to estimate credit losses.

The determination of the ACL requires significant judgment to estimate credit losses.

The ACL is measured collectively on a pooled basis when similar risk characteristics exist, and on an individual basis when management determines that the loan does not share similar risk characteristics with other loans.

27 unchanged sentences

(in thousands, except ratios)

June 30, 2025 and Three Months Ended March 31, 2025 and Three Months Ended December 31, 2024 and Three Months Ended

September 30, 2025 and Three Months Ended June 30, 2025 and Three Months Ended December 31, 2024 and Three Months Ended

Allowance for Credit Losses (“ACL”)

20 unchanged sentences

Commercial/Agricultural Real Estate C&I/Agricultural operating Residential Mortgage Consumer Installment Total

Three months ended June 30, 2025

Three months ended September 30, 2025

Allowance for Credit Losses - Loans:

5 unchanged sentences

Commercial/Agricultural Real Estate C&I/Agricultural operating Residential Mortgage Consumer Installment Total

Six months ended June 30, 2025

Nine months ended September 30, 2025

Allowance for Credit Losses - Loans:

15 unchanged sentences

(in thousands, except ratios)

September 30,

2025 December 31,

2 unchanged sentences

ACL - Loans to loans, end of period 1.68 % 1.50 %

In addition to the ACL - Loans, the Company has established an ACL - Unfunded Commitments of $0.63 million at June 30, 2025, and $0.33 million at December 31, 2024, classified in other liabilities on the consolidated balance sheets.

In addition to the ACL - Loans, the Company has established an ACL - Unfunded Commitments of $0.49 million at September 30, 2025, and $0.33 million at December 31, 2024, classified in other liabilities on the consolidated balance sheets.

Allowance for Credit Losses - Unfunded Commitments:

(in thousands)

June 30, 2025 and Three Months Ended June 30, 2024 and Three Months Ended June 30, 2025 and Six Months Ended June 30, 2024 and Six Months Ended

September 30, 2025 and Three Months Ended September 30, 2024 and Three Months Ended September 30, 2025 and Nine Months Ended September 30, 2024 and Nine Months Ended

ACL - Unfunded commitments - beginning of period $ 627 $ 712 $ 334 $ 1,250

12 unchanged sentences

The following table identifies the various components of nonperforming assets and other balance sheet information as of the dates indicated below and changes in the ACL for the periods then ended:

June 30, 2025 and Six Months Then Ended (1) December 31, 2024 and Twelve Months Then Ended (1)

September 30, 2025 and Nine Months Then Ended (1) December 31, 2024 and Twelve Months Then Ended (1)

Nonperforming assets:

2 unchanged sentences

Agricultural real estate 220 6,222

Multi-family real estate 8,970 —

Construction and land development — 103

39 unchanged sentences

Quarter Ended

September 30,

2025 June 30,

2025 March 31,

1 unchanged sentence

2024 September 30,

2024 June 30,

Balance, beginning of period $ 11,609 $ 13,091 $ 13,168 $ 15,042 $ 8,352

5 unchanged sentences

Balance, end of period $ 15,614 $ 11,609 $ 13,091 $ 13,168 $ 15,042

Nonperforming assets were $13.0 million at June 30, 2025, compared to $14.3 million at December 31, 2024.

This net decrease was largely due to:

(1) a payoff of an agricultural relationship in the second quarter of 2025;

(2) other payments received modestly larger than the sum of new additions;

and (3) the increase of $0.4 million in residential loans delinquent more than 89 days not on nonaccrual status.

Nonperforming assets were $16.7 million at September 30, 2025, compared to $14.3 million at December 31, 2024.

This net increase was largely due to a $9 million multi-family loan moved to nonaccrual in the third quarter due to slower than expected leasing activity, partially offset by decreases largely due to:

(1) a payoff of an agricultural relationship in the second quarter of 2025 and (2) a payoff of a $5.2 million forestry services agricultural loans in the third quarter of 2025.

Refer to the “Allowance for Credit Losses - Loans” and “Nonperforming Loans, Potential Problem Loans and Foreclosed Properties” sections above for more information related to nonperforming loans.

Below is a summary of loan modifications made to borrowers experiencing financial difficulty during the three months ended June 30, 2025:

Term Extension

Loan Class Amortized Cost Basis at

June 30, 2025 % of Total Class of Financing Receivables

Commercial real estate $ 164 0.02 %

Other-Than-Insignificant Payment Delay

Loan Class Amortized Cost Basis at

June 30, 2025 % of Total Class of Financing Receivables

Commercial real estate $ 4,263 0.62 %

Agricultural Real Estate $ 200 0.29 %

There were no Loan Modifications made to Borrowers Experiencing Financial Difficulty during the three months ended September 30, 2025.

The table below shows a summary of criticized loans, split by special mention and substandard loans for the past five quarters.

The increase in criticized loans from June 30, 2024, was primarily due to:

(1) one forestry services credit that moved from special mention to substandard in the third quarter of 2024;

and (2) an increase in special mention commercial loans due to a new special mention C&I relationship in the first quarter of 2025 that showed weaker cash flow than expected, and one new $9 million multi-family loan that is experiencing slower leasing activity than expected.

The increase in special mention loans in 2025 was primarily due to an increase in special mention commercial loans in the first quarter of 2025 largely due to a C&I relationship in the first quarter of 2025 that showed weaker cash flow than expected, and in the second quarter of 2025, one new $9 million multi-family loan that is experiencing slower leasing activity than expected.

In the third quarter, the $9 million special mention loan moved to substandard and nonaccrual, which was partially offset by the payoff of a $5.2 million substandard loan that was on nonaccrual.

(in thousands)

(Loan balance at unpaid principal balance) June 30,

(Loan balance at unpaid principal balance) September 30,

2025 June 30,

2025 March 31,

1 unchanged sentence

2024 September 30,

2024 June 30,

Special mention loan balances $ 12,920 $ 23,201 $ 14,990 $ 8,480 $ 11,047

10 unchanged sentences

Although management believes that the assumptions used to evaluate the MSRs for impairment are reasonable, future adjustment may be necessary if future economic conditions differ substantially from the economic assumptions used to determine the value of MSRs.

The fair market value of the Company’s MSR asset was $5.1 million at June 30, 2025, compared to $5.4 million at June 30, 2024.

The unpaid balances of one-to-four family residential real estate loans serviced for others as of June 30, 2025, and December 31, 2024, were $475.2 million and $479.6 million, respectively.

The fair market value of the Company’s MSR asset as a percentage of its servicing portfolio at June 30, 2025, and December 31, 2024, was 1.07% and 1.09%, respectively.

Total deposits decreased $9.7 million during the six months ended June 30, 2025, to $1.48 billion.

The fair market value of the Company’s MSR asset was $4.8 million at September 30, 2025, compared to $5.0 million at September 30, 2024.

The unpaid balances of one-to-four family residential real estate loans serviced for others as of September 30, 2025, and December 31, 2024, were $475.9 million and $479.6 million, respectively.

The fair market value of the Company’s MSR asset as a percentage of its servicing portfolio at September 30, 2025, and December 31, 2024, was 1.01% and 1.09%, respectively.

Total deposits decreased $7.6 million during the nine months ended September 30, 2025, to $1.48 billion.

The decrease is largely due to the reduction in brokered deposits.

Public deposits are seasonal and the seasonal decrease for the nine months ended September 30, 2025, was largely offset by growth in commercial and consumer deposits.

Deposits by type for five quarters are detailed below:

September 30,

2025 June 30,

2025 March 31,

1 unchanged sentence

2024 September 30,

2024 June 30,

Consumer deposits $ 855,226 $ 856,467 $ 861,746 $ 852,083 $ 844,808

3 unchanged sentences

Total deposits $ 1,480,554 $ 1,478,416 $ 1,523,654 $ 1,488,148 $ 1,520,667

At June 30, 2025, the deposit portfolio composition was 58% consumer, 27% commercial, 13% public, and 2% wholesale deposits compared to 57% consumer, 28% commercial, 13% public and 2% brokered deposits at December 31, 2024.

2025 March 31,

2025 December 31, 2024 September 30, 2024 June 30,

At September 30, 2025, the deposit portfolio composition was 58% consumer, 28% commercial, 12% public, and 2% wholesale deposits compared to 57% consumer, 28% commercial, 13% public and 2% brokered deposits at December 31, 2024.

September 30,

2025 June 30,

2025 March 31, 2025 December 31, 2024 September 30,

Non-interest bearing demand deposits $ 262,535 $ 260,248 $ 253,343 $ 252,656 $ 256,840

4 unchanged sentences

Total deposits $ 1,480,554 $ 1,478,416 $ 1,523,654 $ 1,488,148 $ 1,520,667

Uninsured and uncollateralized deposits were $263.2 million, or 18% of total deposits, at June 30, 2025, and $265.4 million, or 18% of total deposits, at December 31, 2024.

Uninsured deposits alone at June 30, 2025, were $419.6 million, or 28% of total deposits, and $428.0 million, or 29% of total deposits at December 31, 2024.

On-balance sheet liquidity collateralized new borrowing capacity and uncommitted federal funds borrowing availability was $730 million, or 277% of uninsured and uncollateralized deposits at June 30, 2025.

Uninsured and uncollateralized deposits were $277.7 million, or 19% of total deposits, at September 30, 2025, and $265.4 million, or 18% of total deposits, at December 31, 2024.

Uninsured deposits alone at September 30, 2025, were $421.5 million, or 28% of total deposits, and $428.0 million, or 29% of total deposits at December 31, 2024.

On-balance sheet liquidity, collateralized new borrowing capacity, and uncommitted federal funds borrowing availability was $741 million, or 267% of uninsured and uncollateralized deposits at September 30, 2025.

At December 31, 2024, on-balance sheet liquidity, collateralized borrowing and uncommitted federal funds availability totaled $724.8 million, or 273% of uninsured and uncollateralized deposits.

Federal Home Loan Bank (FHLB) advances and Other Borrowings.

A summary of Federal Home Loan Bank (FHLB) advances and other borrowings at June 30, 2025, and December 31, 2024, is as follows:

June 30, 2025 December 31, 2024

A summary of Federal Home Loan Bank (FHLB) advances and other borrowings at September 30, 2025, and December 31, 2024, is as follows:

September 30, 2025 December 31, 2024

Stated Maturity Amount Range of Stated Rates Stated Maturity Amount Range of Stated Rates

8 unchanged sentences

Totals $ 46,762 $ 66,606

(1) The FHLB advance shown is a fixed rate advance, requires interest-only monthly payments, and is collateralized by a blanket lien on pre-qualifying first mortgages, home equity lines, multi-family loans and certain other loans which had a pledged balance of $1,027.3 million and $1,075.0 million at June 30, 2025 and December 31, 2024, respectively.

At June 30, 2025, the Bank’s available and unused portion under the FHLB borrowing arrangement was approximately $424.4 million compared to $424.7 million as of December 31, 2024.

(2) Maximum month-end borrowed amounts outstanding under this borrowing agreement were $5.0 million and $81.0 million, during the six months ended June 30, 2025 and the twelve months ended December 31, 2024, respectively.

(3) There were no FHLB borrowings outstanding as of June 30, 2025.

(1) FHLB advances require interest-only monthly payments and are collateralized by a blanket lien on pre-qualifying first mortgages, home equity lines, multi-family loans and certain other loans which had a pledged balance of $1,028.7 million and $1,075.0 million at September 30, 2025 and December 31, 2024, respectively.

At September 30, 2025, the Bank’s available and unused portion under the FHLB borrowing arrangement was approximately $414.4 million compared to $424.7 million as of December 31, 2024.

(2) Maximum month-end borrowed amounts outstanding under this borrowing agreement were $5.0 million and $81.0 million, during the nine months ended September 30, 2025 and the twelve months ended December 31, 2024, respectively.

(3) There were no FHLB borrowings outstanding as of September 30, 2025.

The weighted-average interest rate on FHLB borrowings, with maturities less than twelve months, outstanding as of December 31, 2024, was 1.45%.

(4) Senior notes, entered into by the Company in June 2019 consist of the following:

(a) A term note, which was subsequently refinanced in March 2022, modified in February of 2023, and refinanced in May 2024, requiring quarterly interest-only payments through January 2029, and quarterly principal and interest payments thereafter.

(a) A term note, which was subsequently refinanced in March 2022, modified in February of 2023, requiring quarterly interest-only payments through January 2029, and quarterly principal and interest payments thereafter.

Interest is variable, based on US Prime rate minus 75 basis points with a floor rate of 3.00%.

1 unchanged sentence

(5) Subordinated notes resulted from the following:

(a) The Company’s Subordinated Note Purchase Agreement entered into with certain purchasers in August 2020, which bears a fixed interest rate of 6.00% for five years.

The note is callable by the Bank when, and anytime after, the floating rate is initially set.

On July 7, 2025, the Board of Directors approved the redemption of the entire $15 million balance of the 6% subordinated debentures due September 1, 2030, which were scheduled to reprice on September 1, 2025, to SOFR plus 591 basis points.

The redemption will occur on September 1, 2025.

(a) The Company’s Subordinated Note Purchase Agreement entered into with certain purchasers in August 2020, which bore a fixed interest rate of 6.00% for five years.

On July 7, 2025, the Board of Directors approved the redemption of the entire $15,000 balance of the 6% subordinated debentures due September 1, 2030, which were scheduled to reprice on September 1, 2025, to SOFR plus 0.0591 basis points.

The redemption occurred on September 1, 2025.

(b) The Company’s Subordinated Note Purchase Agreement entered into with certain purchasers in March 2022, which bears a fixed interest rate of 4.75% for five years.

2 unchanged sentences

Interest-only payments are due semi-annually each year during the fixed interest period and quarterly during the floating interest period.

FHLB advances decreased to $0.0 million as of June 30, 2025, compared to $5.0 million as of December 31, 2024.

FHLB advances decreased to $0 as of September 30, 2025, compared to $5.0 million as of December 31, 2024.

The Bank has an irrevocable Standby Letter of Credit Master Reimbursement Agreement with the Federal Home Loan Bank.

This irrevocable standby letter of credit (“LOC”) is supported by loan collateral as an alternative to directly pledging investment securities on behalf of a municipal customer as collateral for their interest-bearing deposit balances.

The Bank’s current unused borrowing capacity, supported by loan collateral as of June 30, 2025, is approximately $424.4 million.

At June 30, 2025, and December 31, 2024, the Bank had the ability to borrow $24.7 million and $24.9 million from the Federal Reserve Bank of Minneapolis.

The ability to borrow is based on mortgage-backed securities pledged with a carrying value of $33.2 million and $34.0 million as of June 30, 2025, and December 31, 2024, respectively.

There were no related Federal Reserve borrowings outstanding as of June 30, 2025, or December 31, 2024.

The Bank’s current unused borrowing capacity, supported by loan collateral as of September 30, 2025, is approximately $414.4 million.

At September 30, 2025, and December 31, 2024, the Bank had the ability to borrow $24.8 million and $24.9 million from the Federal Reserve Bank of Minneapolis.

The ability to borrow is based on mortgage-backed securities pledged with a carrying value of $32.6 million and $34.0 million as of September 30, 2025, and December 31, 2024, respectively.

There were no related Federal Reserve borrowings outstanding as of September 30, 2025, or December 31, 2024.

The Bank maintains two unsecured federal funds purchased lines of credit with banking partners which total $70 million.

These lines bear interest at the lender banks announced daily federal funds rate, mature daily, and are revocable at the discretion of the lending institution.

There were no borrowings outstanding on these lines of credit as of June 30, 2025, or December 31, 2024.

There were no borrowings outstanding on these lines of credit as of September 30, 2025, or December 31, 2024.

Additionally, we have a $5.0 million revolving line of credit which is available as needed for general liquidity purposes.

1 unchanged sentence

Stockholders’ Equity.

Stockholders’ equity was $183.5 million at June 30, 2025, compared to $179.1 million at December 31, 2024.

Stockholders’ equity was $186.8 million at September 30, 2025, compared to $179.1 million at December 31, 2024.

The increase in stockholders’ equity was attributable to:

(1) net income of $6.5 million for the six-month period ended June 30, 2025;

and (2) a decrease from December 31, 2024, in net unrealized losses from the AFS securities portfolio reflected in accumulated other comprehensive income of $1,536.

These increases were partially offset by the annual cash dividend paid in February to common stockholders of $0.36 per share, or $3.6 million.

The Company repurchased no shares of common stock in the quarter ended June 30, 2025.

As of June 30, 2025, approximately 238 thousand shares remained available for repurchase under the July 2024 share repurchase authorization, with this authorization expiring in July 2025.

On July 24, 2025, the Board of Directors authorized a new stock repurchase program of 5% of the outstanding shares on that date, or 499,000 shares, in open market or private transactions.

(1) net income of $10.1 million for the nine-month period ended September 30, 2025;

and (2) a decrease from December 31, 2024, in net unrealized losses from the AFS securities portfolio reflected in accumulated other comprehensive income of $3.2 million.

These increases were partially offset by the annual cash dividend paid in February to common stockholders of $0.36 per share, or $3.6 million and repurchases of common stock of $2.0 million.

The Company repurchased approximately 136 thousand shares of common stock in the quarter ended September 30, 2025.

As of September 30, 2025, approximately 363 thousand shares remain available for repurchase under the July 2025 5% share repurchase authorization.

The timing and amount of any share repurchases under the new authorization will be determined by management based on market conditions and other considerations.

4 unchanged sentences

A key metric we monitor is our liquidity ratio, calculated as cash and unpledged securities portfolio divided by total assets.

At June 30, 2025, our on-balance sheet liquidity ratio increased by 0.42% to 12.17% from the December 31, 2024, level.

At September 30, 2025, our on-balance sheet liquidity ratio increased by 1.69% to 13.44% from the December 31, 2024, level.

There are no material customers or industry deposit concentrations.

Deposits decreased during January 2025, as commercial customers decreased their cash balances to support the needs of their businesses.

At June 30, 2025, the deposit portfolio composition was 58% consumer, 27% commercial, 13% public, and 2% brokered deposits compared to 57% consumer, 28% commercial, 13% public and 2% brokered deposits at December 31, 2024.

Uninsured and uncollateralized deposits were $263.2 million, or 18% of total deposits, at June 30, 2025, and $265.4 million, or 18% of total deposits, at December 31, 2024.

Uninsured deposits alone, i.e., excluding fully secured government deposits, at June 30, 2025, were $419.6 million, or 28% of total deposits, and $428.0 million, or 29% of total deposits at December 31, 2024.

At September 30, 2025, the deposit portfolio composition was 58% consumer, 28% commercial, 12% public, and 2% brokered deposits compared to 57% consumer, 28% commercial, 13% public and 2% brokered deposits at December 31, 2024 .

Uninsured and uncollateralized deposits were $277.7 million, or 19% of total deposits, at September 30, 2025, and $265.4 million, or 18% of total deposits, at December 31, 2024.

Uninsured deposits alone, i.e., excluding fully secured government deposits, at September 30, 2025, were $421.5 million, or 28% of total deposits, and $428.0 million, or 29% of total deposits at December 31, 2024.

On-balance sheet liquidity collateralized new borrowing capacity and uncommitted federal funds borrowing availability was $741 million, or 267% of uninsured and uncollateralized deposits at September 30, 2025.

At December 31, 2024, on-balance sheet liquidity, collateralized borrowing and uncommitted federal funds availability totaled $724.8 million, or 273% of uninsured and uncollateralized deposits.

4 unchanged sentences

The redemption will occur on September 1, 2025.

The redemption occurred on September 1, 2025.

We maintain access to additional sources of funds including FHLB borrowings and lines of credit with the Federal Reserve Bank, and our correspondent banks.

1 unchanged sentence

Our borrowing arrangement with the FHLB calls for pledging certain qualified real estate, commercial and industrial loans, and borrowing up to 75% of the value of those loans, not to exceed 35% of the Bank’s total assets.

Currently, we have approximately $424.4 million available to borrow under this arrangement, supported by loan collateral as of June 30, 2025.

Currently, we have approximately $414.4 million available to borrow under this arrangement, supported by loan collateral as of September 30, 2025.

We also had borrowing capacity of $24.8 million at the Federal Reserve Bank.

1 unchanged sentence

In addition, we have a $5.0 million revolving line of credit which is available as needed for general liquidity purposes.

While the Bank does not have formal brokered certificate lines of credit with counter parties at June 30, 2025, we believe that the Bank could access this market, which provides an additional potential source of liquidity, as evidenced by access to this market during the past four quarters.

While the Bank does not have formal brokered certificate lines of credit with counter parties at September 30, 2025, we believe that the Bank could access this market, which provides an additional potential source of liquidity, as evidenced by access to this market during the past four quarters.

See Note 7, “Federal Home Loan Bank and Other Borrowings” of “Notes to Consolidated Financial Statements” which are included in Part I, Item 1, “Financial Statements and Supplementary Data” of this Form 10-Q, for further detail.

5 unchanged sentences

These instruments include unused commitments for lines of credit, overdraft protection lines of credit and home equity lines of credit, as well as commitments to extend credit.

As of June 30, 2025, the Company had approximately $166.5 million in unused loan commitments, compared to approximately $137.0 million in unused commitments as of December 31, 2024.

In addition, there are $2.0 million of commitments for contributions of capital to an SBIC and an investment company at June 30, 2025.

As of September 30, 2025, the Company had approximately $191.5 million in unused loan commitments, compared to approximately $137.0 million in unused commitments as of December 31, 2024.

In addition, there are $3.5 million of commitments for contributions of capital to an SBIC and an investment company at September 30, 2025.

These commitments totaled $2.9 million at December 31, 2024.

Capital Resources.

As of June 30, 2025, and December 31, 2024, the amounts and ratios for our capital levels are noted below for the Bank and the Company.

As of September 30, 2025, and December 31, 2024, the amounts and ratios for our capital levels are noted below for the Bank and the Company.

Below are the amounts and ratios for our capital levels as of the dates noted below for the Bank:

4 unchanged sentences

Amount Ratio Amount Ratio Amount Ratio

As of June 30, 2025 (Unaudited)

As of September 30, 2025 (Unaudited)

Total capital (to risk weighted assets) $ 227,075 15.9 % $ 114,476 > = 8.0 % $ 143,095 > = 10.0 %

7 unchanged sentences

Tier 1 leverage ratio (to adjusted total assets) 207,749 11.9 % 69,787 > = 4.0 % 87,234 > = 5.0 %

At June 30, 2025, and December 31, 2024, the Bank was categorized as “Well Capitalized” under Prompt Corrective Action Provisions, as determined by the OCC, our primary regulator.

At September 30, 2025, and December 31, 2024, the Bank was categorized as “Well Capitalized” under Prompt Corrective Action Provisions, as determined by the OCC, our primary regulator.

Below are the amounts and ratios for our capital levels as of the dates noted below for the Company:

1 unchanged sentence

Amount Ratio Amount Ratio

As of June 30, 2025 (Unaudited)

As of September 30, 2025 (Unaudited)

Total capital (to risk weighted assets) $ 222,117 15.5 % $ 114,654 > = 8.0 %

8 unchanged sentences

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