What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-03-24 compared with 2025-03-26 · 62 added, 62 removed, 289 unchanged (30% of the section changed)

19 unchanged sentences

We are primarily a fixed-rate one- to four-family residential mortgage loan lender for borrowers in our primary market area.

We do not offer adjustable-rate residential mortgage loans.

At December 31, 2025, $325.8 million, or 86.3% of our total loan portfolio, consisted of residential mortgage loans.

6 unchanged sentences

We intend to maintain strong asset quality through what we believe are our conservative underwriting standards and credit monitoring processes.

At December 31, 2024, our nonperforming assets totaled $1.1 million, or 0.2% of total assets.

At December 31, 2025, our nonperforming assets totaled $586,000, or 0.1% of total assets.

● Continue efforts to grow low-cost “core” deposits.

7 unchanged sentences

● Grow organically and through opportunistic branching and/or acquisitions.

We intend to grow our balance sheet organically on a managed basis, and the capital we are raising in the stock offering will enable us to increase our lending and investment capacity.

We intend to grow our balance sheet organically on a managed basis, and the capital we raised in the stock offering has enabled us to increase our lending and investment capacity.

In addition to organic growth, we may also consider expansion opportunities in our market area or in contiguous markets that we believe would enhance both our franchise value and stockholder returns.

These opportunities may include establishing loan production offices, establishing new, or de novo, branch offices, acquiring branch offices and/or acquiring other financial institutions.

These opportunities may include

establishing loan production offices, establishing new, or de novo, branch offices, acquiring branch offices and/or acquiring other financial institutions.

Critical Accounting Policies and Use of Critical Accounting Estimates

8 unchanged sentences

Accordingly, our consolidated financial statements may not be comparable to companies that comply with such new or revised accounting standards.

We consider the accounting policy for the allowance for credit losses to be our critical accounting policy.

Effective January 1, 2023, we adopted CECL.

Under the CECL methodology, the allowance for credit losses represents management’s estimate of lifetime credit losses in loans as of the balance sheet date using relevant available information, from both internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts.

We consider the following accounting policies to be our critical accounting policies:

Allowance for Credit Losses.

Allowance for credit losses represents management’s estimate of lifetime credit losses in loans as of the balance sheet date using relevant available information, from both internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts.

Deferred Taxes.

Deferred income tax assets and liabilities are computed using the asset and liability method, which recognizes a liability or asset representing the tax effects, based on current tax law, of future deductible or taxable amounts attributable to events recognized in the financial statements.

1 unchanged sentence

Realization of tax benefits depends on having sufficient taxable income, available tax loss carrybacks or credits, the reversal of taxable temporary differences and/or tax planning strategies within the reversal period, and that current tax law allows for the realization of recorded tax benefits.

Fair Value Measurements.

Certain assets and liabilities are measured at fair value on a recurring basis, including securities and derivative instruments.

17 unchanged sentences

Federal Home Loan Bank advances

Total equity capital

Total stockholders' equity

For the Years Ended December 31,

4 unchanged sentences

Net interest income

Recovery of credit loan losses

Net interest income after recovery of credit losses

Provision for (Recovery of) credit losses

Net interest income after provision for (recovery of) credit losses

Total non-interest income

Total non-interest expense

Earnings (loss) before income taxes

Income (loss) before income taxes

Provision (benefit) for income taxes

33 unchanged sentences

Total assets were $534.4 million at December 31, 2025, an increase of $7.1 million, or 1.3%, compared to $527.3 million at December 31, 2024.

This increase is primarily due to $18.6 million increase in cash and cash equivalents, $25.1 million increase in investment securities available-for-sale, and $2.3 million increase in loans receivable, net.

This increase is primarily due to $6.1 million increase in investment securities available-for-sale, and $9.1 million increase in loans receivable, net offset by a $4.1 million decrease in cash and cash equivalents, and a $3.0 million decrease in bank owned life insurance.

Cash and Cash Equivalents.

Cash and cash equivalents increased by $18.6 million, or 96.4%, to $37.9 million at December 31, 2024 from $19.3 million at December 31, 2023.

This increase resulted primarily from the cash received for subscriptions to purchase shares of the Company’s common stock in its initial public offering.

The net proceeds of the public offering are reflected in stockholders’ equity at December 31, 2024.

Cash and cash equivalents decreased by $4.1 million, or 10.7%, to $33.9 million at December 31, 2025 from $37.9 million at December 31, 2024.

This decrease is primarily due to the purchase of investments available for sale and the origination of loans, primarily commercial real estate loans.

Investment Securities Available-For-Sale.

Investment securities available-for-sale increased $6.1 million, or 6.5%, to $99.1 million at December 31, 2025 from $93.0 million at December 31, 2024.

Securities purchased totaled $54.4 million, securities sold totaled $18.7 million, and calls, maturities, and repayments totaled $9.4 million.

Securities purchased totaled $18.3 million, and calls, maturities, and repayments totaled $15.9 million.

Adding to the increase was a fair market value adjustment of $3.8 million

Loans Receivable, Net.

1 unchanged sentence

Loan originations were $58.5 million and loan repayments totaled $49.4 million.

Commercial and industrial loans increased by $2.0 million, primarily from the purchase of the guaranteed portion of government loans, and Bankers Healthcare loans.

1-4 single family mortgages decreased by $4.4 million, home equity loans decreased by $598,000, construction loans increased by $1.5 million, and we reversed $1.1 million from our allowance for credit losses.

Deposits decreased by $1.5 million, or 0.4%, to $391.5 million at December 31, 2024, from $390.0 million at December 31, 2023.

Certificates of deposit increased $10.7 million, or 4.7%, to $238.8 million at December 31, 2024, from $228.1 million at December 31, 2023.

Commercial loans increased by $10.4 million, primarily from the origination of commercial real estate loans, and commercial and industrial loans, 1-4 single family mortgages decreased by $6.9 million, home equity loans increased by $2.1 million, and construction and land loans increased by $3.0 million.

Deposits increased by $1.7 million, or 0.4%, to $393.2 million at December 31, 2025, from $391.5 million at December 31, 2024.

Certificates of deposit increased $925,000, or 0.4%, to $239.7 million at December 31, 2025, from $238.8 million at December 31, 2024.

The majority of the increase in certificates of deposit was driven by new customer activity and migration from lower yielding money markets and savings accounts.

1 unchanged sentence

MMDA accounts decreased $2.0 million, or 8.8%, to $20.7 million at December 31, 2025, from $22.7 million at December 31, 2024.

Savings Accounts decreased $8.6 million, or 10.1%, to $76.0 million at December 31, 2024, from $84.6 million at December 31, 2023.

Savings Accounts increased $399,000, or 0.5%, to $76.4 million at December 31, 2025, from $76.0 million at December 31, 2024.

Total Stockholders’ Equity.

Total stockholders’ equity increased by $4.0 million, or 3.2%, to $129.8 million at December 31, 2025, from $125.8 million at December 31, 2024.

The increase primarily resulted from the sale of stock in the initial public offering that totaled $53.2 million, offset by the unearned ESOP shares of $4.2 million, the accumulated other comprehensive loss (as a result of market value adjustment of investment securities available-for-sale due to the rise in market interest rates during the period) declining $62,000 and retained earnings decreasing $1.1 million due to the net loss for the period ended December 31, 2024.

The increase resulted primarily from the accumulated other comprehensive loss (as a result of market value adjustment of investment securities available-for-sale due to the rise in market interest rates during the period) declining $2.5 million and retained earnings increasing $3.2 million due to the net income for the year offset by the $2.0 million decrease in additional paid-in capital as we deploy excess capital to repurchase shares of our common stock.

Average Balances and Yields

5 unchanged sentences

Net deferred loan fees/costs are immaterial.

For the Years Ended December 31,

For the Year Ended December 31,

(Dollars in thousands)

52 unchanged sentences

Comparison of Operating Results for the Years Ended December 31, 2025 and December 31, 2024

Net income (loss) for the year ended December 31, 2024, was ($1.1) million, a decrease of $1.9 million, or 235.3%, compared to $797,000 for the year ended December 31, 2023.

The net loss was primarily from an increase in non-interest expense of $2.3 million resulting from a $1.3 million charitable contribution to fund the Fifth District Community Foundation Inc., which was established in connection with the initial public offering, and increase in interest expense of $2.9 million, a decrease in non-interest income of $962,000, partially offset by an increase in interest income of $2.9 million, and a $507,000 decrease in provision for income taxes.

Net income (loss) for the year ended December 31, 2025, was $4.1 million, an increase of $5.2 million, or 479.2%, compared to ($1.1) million for the year ended December 31, 2024.

The increase in net income was primarily from an increase in interest income of $2.8 million, an increase in non-interest income of $4.4 million mainly due to a gain on bank owned life insurance proceeds, partially offset by a decrease in recovery of credit losses on loans of $1.2 million, a $370,000 increase in non-interest expense, and a $455,000 decrease in the (benefit) for income taxes.

Interest Income.

Interest and dividend income increased by $2.8 million, or 14.4%, to $22.1 million for the year ended December 31, 2025, compared to $19.3 million for the year ended December 31, 2024.

The increase is attributed to a $1.1 million, or 8.0%, increase in interest on loans, a $845,000, or 139.7%, increase in interest on other interest-earning assets and $889,000, or 52.8%, increase in interest on investment securities available-for-sale.

The increase is attributed to a $1.6 million, or 10.4%, increase in interest on loans, a $1.5 million, or 58.6%, increase in interest on investment securities available-for-sale, offset by a $316,000, or 2.2%, decrease in other interest-earning assets.

During the year ended December 31, 2025, average loans receivable, net, increased by $9.9 million, or 2.7%, from year ended December 31, 2024.

The average yield on loans increased to 4.16% for the year ended December 31, 2024, from 3.88% for the year ended December 31, 2023, due to the rising market interest rate environment.

The average yield on loans increased to 4.47% for the year ended December 31, 2025, from 4.16% for the year ended December 31, 2024, due to the making higher yielding loans such as commercial loans.

The average balance of investment securities available-for-sale increased $22.8 million, or 30.0%, to $98.9 million for the year ended December 31, 2025, from $76.1 million for the year ended December 31, 2024.

The average yield on available-for-sale investment securities increased to 4.13% for the year ended December 31, 2025, from 3.38% for the year ended December 31, 2024.

The increase in the average yield on available-for-sale investment securities was primarily due to the rising market interest rate environment as well as selling $18.7 million in securities available-for-sale, for a loss of $1.1 million, and redeploying the funds into higher yielding securities.

Interest income on cash and cash equivalents, comprised primarily of overnight deposits, increased by $840,000, or 145.3%, for the year ended December 31, 2024, due to an increase in the average yield to 5.02% for the year ended December 31, 2024, from 3.99% for the year ended December 31, 2023.

The increase in interest income was mainly due to the increase in the balance of cash and cash equivalents arising from the cash received for the purchase of stock in the IPO.

The increase in average yield was due to the rise in market interest rates.

The increase in the average yield on available-for-sale investment securities was primarily due to reinvesting in higher yielding securities.

Interest income on cash and cash equivalents, comprised primarily of overnight deposits, decreased by $317,000, or 22.4%, for the year ended December 31, 2025, primarily due to a decrease in the average balance of cash and cash equivalents by $303,000 to $27.9 million for the year ended December 31, 2025, from $28.2 million for the year ended December 31, 2024.

The average yield decreased to 3.94% for year ended December 31, 2025, from 5.02% for the year ended December 31, 2024.

The decrease in average yield was due to the decrease in market interest rates.

Interest Expense .

Total interest expense increased $2.9 million or 44.9%, to $9.2 million for the year ended December 31, 2024, compared $6.4 million for the year ended December 31, 2023.

The increase was primarily due to the increase in the average cost of deposits to 2.40% for the year ended December 31, 2024, from 1.61% for the year ended December 31, 2023, reflecting the rising market interest rate environment.

Total interest expense decreased $11,000 or 0.1%, to $9.2 million for the year ended December 31, 2025, compared to $9.2 million for the year ended December 31, 2024.

The decrease was primarily due to the decrease in the average cost of deposits to 2.33% for the year ended December 31, 2025, from 2.40% for the year ended December 31, 2024, reflecting the decreasing market interest rate environment.

The average balance of interest-bearing deposits increased by $10.8 million, or 2.8%, to $394.5 million for the year ended December 31, 2025, from $383.6 million for the year ended December 31, 2024.

Net Interest Income .

Net interest income increased $7,000, or 0.06%, to $10.1 million for the year ended December 31, 2024, compared to $10.0 million for the year ended December 31, 2023.

The interest rate spread decreased to 1.68% for the year ended December 31, 2024 from 2.05% for the year ended December 31, 2023, while average net interest-earning assets increased $33.5 million period-to-period.

The net interest margin decreased to 2.13% for the year ended December 31, 2024, from 2.25% for the year ended December 31, 2023.

Net interest income increased $2.8 million, or 27.8%, to $12.8 million for the year ended December 31, 2025, compared to $10.1 million for the year ended December 31, 2024.

The interest rate spread increased to 2.04% for the year ended December 31, 2025 from 1.68% for the year ended December 31, 2024, while average net interest-earning assets increased $21.7 million period-to-period.

The net interest margin increased to 2.55% for the year ended December 31, 2025, from 2.13% for the year ended December 31, 2024.

The average yield on interest-earning assets increased from 4.08% for the year ended December 31, 2024, to 4.37% for the year ended December 31, 2025.

The average rate paid on interest-bearing liabilities increased from 1.63% for the year ended December 31, 2023, to 2.40% for the year ended December 31, 2024, primarily due to an increase in the average rate paid on certificates of deposit from 2.60% in 2023 to 3.82% in 2024.

The increase in the average rate paid on certificates of deposit contributed to migration from lower yielding savings accounts and money market accounts, to higher yielding certificates of deposit.

The average rate paid on interest-bearing liabilities decreased from 2.40% for the year ended December 31, 2024, to 2.33% for the year ended December 31, 2025, primarily due to a decrease in the average rate paid on certificates of deposit from 3.82% in 2024 to 3.72% in 2025.

The decrease in the average rate paid on certificates of deposit was attributed to decreasing market interest rates.

The average balance of certificates of deposit increased from $235.9 million as of December 31, 2024, to $242.2 million as December 31, 2025, while over the same period the average balance of savings accounts decreased from $80.7 million to $77.2 million, and the average balance of money market accounts decreased from $23.6 million to $21.2 million.

Provision for Credit Losses .

The provision for credit losses was a net benefit of $1.2 million in 2024 and a net benefit of $325,000 in 2023.

Provision (Recovery) for Credit Losses .

The provision for credit losses on loans was $-0- for the year ended December 31, 2025, compared to ($1.1 million) for the year ended December 31, 2024.

The allowance for credit losses on loans represented 0.45% of total loans at December 31, 2025, and 0.46% of total loans at December 31, 2024.

The increase in net benefit is based on our evaluation of the adequacy of the allowance for credit losses throughout the reporting period.

The recovery of credit losses on unfunded commitments was $110,000 for the year ended December 31, 2024 compared to a $125,000 provision on unfunded commitments for the year ended December 31, 2023.

The recovery of credit losses is based on our evaluation of the adequacy of the allowance for credit losses throughout the reporting period.

The provision of credit losses on unfunded commitments was $10,000 for the year ended December 31, 2025 compared to a ($110,000) on unfunded commitments for the year ended December 31, 2024.

The increase in the provision was primarily due to an increase on the unfunded balance of construction loans in process.

The recovery of credit losses on unfunded commitments is based on an evaluation of the historical usage rate.

Total non-performing loans were $1.1 million at December 31, 2024, and December 31, 2023.

Total non-performing loans were $544,000 at December 31, 2025, and $1.1 million December 31, 2024.

Classified loans totaled $1.3 million at December 31, 2025, compared to $1.1 at December 31, 2024, and total past due greater than 30 days were $4.9 million and $5.4 million at those respective dates.

1 unchanged sentence

Noninterest Income.

Non-interest income decreased $962,000, or 98.9% to $11,000 for the year ended December 31, 2024, compared to $973,000 for the year ended December 31, 2023.

The decrease was primarily due to the $1.1 million realized loss on the sale of investment securities available-for-sale and a $8,000, or 2.0% decrease in ATM and check card fees, offset by a $13,000, or 6.4% increase in deposit service charges and fees, a $41,000, or 13.1% increase in the cash surrender value of the bank owned life insurance, and a $141,000 gain on sale of property.

Non-interest income increased $4.4, or 4017.3% to $4.4 million for the year ended December 31, 2025, compared to $11,000 for the year ended December 31, 2024.

A $1.1 million realized loss on the sale of investment securities available-for-sale was recorded for the year ended December 31, 2024, compared to no such realized losses recorded for the year ended December 31, 2025.

A $3.5 million gain on bank owned life insurance proceeds was recorded for the year ended December 31, 2025, while no such gain was recorded for the year ended December 31, 2024.

A $141,000 gain on sale of premises and equipment was recorded for the year ended December 31, 2024, while no such gain was recorded for the year ended December 31, 2025.

A gain on real estate owned of $14,000 was recorded for the year ended December 31, 2025, while no such gain was recorded for the year ended December 31, 2024.

Noninterest Expense.

Noninterest expense increased $2.3 million, or 22.2%, to $12.7 million for the year ended December 31, 2024, compared to $10.4 million for the year ended December 31, 2023.

The increase was primarily due to an increase in salaries and employee benefits of $761,000, or 12.8%, an increase in occupancy and equipment expense of $159,000, or 9.6%, an increase in professional and legal fees of $46,000, or 31.1%, an increase in data processing expense of $111,000, or 10.4%, an increase in audit and examination fees of $158,000, or 108.2%, and an increase in charitable contributions of $1.2 million, or 2,879.1% from establishing the Fifth District Community Foundation Inc., partially offset by a $99,000, or 26.3% decrease in directors fees, and a $127,000, or 49.2% decrease in advertising

Noninterest expense increased $370,000, or 2.9%, to $13.1 million for the year ended December 31, 2025, compared to $12.7 million for the year ended December 31, 2024.

The increase was primarily due to an increase in salaries and employee benefits of $958,000 or 14.3%, an increase in occupancy and equipment expense of $210,000, or 11.5%, an increase in professional and legal fees of $136,000, or 70.1%, an increase in data processing expense of $125,000, or 10.6%, an increase in audit and examination fees of $28,000, or 9.2%, partially offset by a $37,000, or 13.4% decrease in directors fees, a $1.3 million, or 99.7%, decrease in charitable contributions from establishing the Fifth District Community Foundation Inc.

in 2024, and a $26,000, or 19.8% decrease in advertising.

The increase in salaries and employee benefits is mainly from a death benefit paid to the intended beneficiaries of the late President and Chief Executive Officer from the proceeds of the bank owned life insurance.

Provision (benefit) for Income Taxes.

The provision (benefit) for income taxes decreased by $507,000, or 347.0%, to ($358,000) for the year ended December 31, 2024, compared to $149,000 for the year ended December 31, 2023.

The decrease was due to a $2.4 million, or 251.8%, decrease in pretax income.

The provision (benefit) for income taxes increased by $455,000, or 127.1%, to $97,000 for the year ended December 31, 2025, compared to ($358,000) for the year ended December 31, 2024.

The increase was due to a $5.6 million, or 391.4%, increase in pretax income.

The effective tax rate was 21% for both years.

58 unchanged sentences

Under the terms of the Bank Term Funding Program, advances cannot be obtained after March 11, 2024.

At December 31, 2024, we had $-0- of outstanding advances under the Bank Term Funding Program.

At December 31, 2024, we had $-0- of outstanding advances from the Federal Home Loan Bank of Dallas.

At December 31, 2025, we had $-0- of outstanding advances under

the Bank Term Funding Program.

At December 31, 2025, we had no outstanding advances from the Federal Home Loan Bank of Dallas.

While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions, and competition.

most liquid assets are cash and short-term investments.

Our most liquid assets are cash and short-term investments.

The levels of these assets depend on our operating, financing, lending, and investing activities during any given period.

1 unchanged sentence

cash flows from operating activities, cash flows from investing activities, and cash flows from financing activities.

For the year ended December 31, 2024, cash flows from operating, investing, and financing activities resulted in a net increase in cash and cash equivalents of $18.6 million.

Net cash provided by operating activities amounted to $(1.1) million, primarily due to a $1.1 million loss on sale of investment securities offset by $1.2 million recovery of credit losses.

Net cash used in investing activities amounted to $27.5 million, primarily due to purchases of securities totaling $54.4 million offset by proceeds from sales or maturities of securities totaling $28.1 million.

Net cash provided by financing activities amounted to $47.1 million, primarily due to the payback of $4.0 million in Federal Home Loan Bank Advances, and the net proceeds from the issuance of common stock totaling $448.7 million.

For the year ended December 31, 2023, cash flows from operating, investing, and financing activities resulted in a net decrease in cash and cash equivalents of $730,000.

Net cash provided by operating activities amounted to $796,000, primarily due to net income of $797,000.

Net cash used in investing activities amounted to $6.6 million, primarily due to an increase in loans receivable, net, of $14.7 million, partially offset by proceeds from sales or maturities of available-for-sale investment securities of $10.7 million.

Net cash provided by financing activities amounted to $5.1 million, primarily due to Federal Home Loan Bank advances of $4.0 million and a net increase in deposits of $1.1 million.

For additional information, see the Consolidated Statements of Cash Flows.

We believe we maintain a strong liquidity position, and are committed to maintaining it.

20 unchanged sentences

Unlike most industrial companies, virtually all of the assets and liabilities of a financial institution are monetary in nature.

As a result, interest rates,

generally, have a more significant impact on a financial institution’s performance than does inflation.

As a result, interest rates, generally, have a more significant impact on a financial institution’s performance than does inflation.

Interest rates do not necessarily move in the same direction or to the same extent as the prices of goods and services.

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-K

Item 7. Management’s Discussion and Analysis