What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-05-12 compared with 2025-11-10 · 72 added, 155 removed, 186 unchanged (55% of the section changed)

60 unchanged sentences

Assets and liabilities that are measured at fair value using quoted prices in active markets (Level 1) do not require significant judgment while the valuation of assets and liabilities when quoted market prices are not available (Levels 2 and 3) may require significant judgment to assess whether observable or unobservable inputs for those assets and liabilities provide reasonable determination of fair value.

Comparison of Financial Condition at September 30, 2025 and December 31, 2024

Comparison of Financial Condition at March 31, 2026 and December 31, 2025

Total Assets.

Total assets were $539.5 million at September 30, 2025, an increase of $12.2 million, or 2.3%, compared to $527.3 million at December 31, 2024.

This increase is primarily due to a $7.7 million increase in investment securities available-for-sale, a $12.0 million increase in loans receivable, net, offset by a $3.5 million decrease in cash and cash equivalents and a $3.1 million decrease in bank owned life insurance.

Total assets were $535.7 million at March 31, 2026, an increase of $1.3 million, or 0.2%, compared to $534.4 million at December 31, 2025.

This increase is primarily due to a $12.0 million increase in loans receivable, net, offset by a $10.5 million decrease in cash and cash equivalents.

Cash and Cash Equivalents.

Cash and cash equivalents decreased by $3.5 million, or 9.3%, to $34.4 million at September 30, 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 construction loans.

Cash and cash equivalents decreased by $10.6 million, or 31.3%, to $23.3 million at March 31, 2026 from $33.9 million at December 31, 2025.

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

Investment Securities Available-for-Sale.

Investment securities available-for-sale increased $7.7 million, or 8.3%, to $100.7 million at September 30, 2025 from $93.0 million at December 31, 2024.

Securities purchased totaled $15.4 million during the nine months ended September 30, 2025, and calls, maturities, and repayments totaled $10.9 million.

Adding to the increase was a fair market value adjustment of $3.2 million.

Investment securities available-for-sale decreased $263,000, or 0.3%, to $98.8 million at March 31, 2026 from $99.1 million at December 31, 2025.

Securities purchased totaled $3.9 million during the three months ended March 31, 2026, and calls, maturities, and repayments totaled $3.9 million.

Adding to the decrease was a fair market value adjustment of $214,000.

Loans Receivable, Net.

Loans receivable, net, increased by $12.0 million, or 3.3%, to $379.3 million at September 30, 2025 from $367.3 million at December 31, 2024.

During the nine months ended September 30, 2025, loan originations were $45.1 million and loan repayments totaled $33.1 million.

During the nine months ended September 30, 2025, commercial loans increased by $3.1 million, primarily from the origination of commercial real estate loans, and commercial and industrial loans, 1-4 single family mortgages increased by $1.9 million, home equity loans increased by $2.4 million, consumer loans increased by $365,000, and construction and land loans increased by $4.1 million.

Deposits increased by $4.7 million, or 1.2%, to $396.2 million at September 30, 2025, from $391.5 million at December 31, 2024.

Certificates of deposit increased $5.3 million, or 2.2%, to $244.1 million at September 30,

Loans receivable, net, increased by $12.0 million, or 3.2%, to $388.4 million at March 31, 2026 from $376.4 million at December 31, 2025.

During the three months ended March 31, 2026, loan originations were $22.9 million and loan repayments totaled $10.9 million.

During the three months ended March 31, 2026, commercial loans increased by $5.8 million, primarily from the origination of commercial real estate loans, and commercial and industrial loans, 1-4 single family mortgages decreased by $2.6 million, home equity loans decreased by $82,000, consumer loans increased by $2.9 million, and construction and land loans increased by $5.9 million.

Deposits increased by $2.1 million, or 0.5%, to $395.2 million at March 31, 2026, from $393.2 million at December 31, 2025.

Certificates of deposit decreased $2.4 million, or 1.0%, to $237.4 million at March 31, 2026, from $239.7 million at December 31, 2025.

NOW accounts increased $2.0 million, or 3.5%, to $58.3 million at March 31,

2026, from $56.3 million at December 31, 2025.

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

NOW accounts increased $1.0 million, or 1.9%, to $55.0 million at September 30, 2025, from $53.9 million at December 31, 2024.

MMDA accounts decreased $2.1 million, or 9.3%, to $20.6 million at September 30, 2025, from $22.7 million at December 31, 2024.

Savings Accounts increased $449,000, or 0.6%, to $76.5 million at September 30, 2025, from $76.0 million at December 31, 2024.

MMDA accounts decreased $335,000, or 1.6%, to $20.4 million at March 31, 2026, from $20.7 million at December 31, 2025.

Savings Accounts increased $2.8 million, or 3.7%, to $79.2 million at March 31, 2026, from $76.4 million at December 31, 2025.

Total Stockholders’ Equity.

Total stockholders’ equity increased by $5.5 million, or 4.4%, to $131.3 million at September 30, 2025, from $125.8 million at 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 $2.3 million and retained earnings increasing $3.4 million due to the net income for the nine months ended September 30, 2025.

Total stockholders’ equity decreased by $445,000, or 0.3%, to $129.3 million at March 31, 2026, from $129.8 million at December 31, 2025.

The decrease 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) increasing $160,000 and additional paid-in-capital decreasing $431,000 due to the repurchase of 59,691 shares of common stock.

Average Balances and Yields .

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Net deferred loan fees/costs are immaterial.

For the Three Months Ended September 30,

Yield/Rate (4)

For the Three Months Ended March 31,

(Dollars in thousands)

Interest-earning assets:

26 unchanged sentences

(4) Average yield/rate is an annualized amount.

Comparison of Operating Results for the Three Months Ended September 30, 2025 and 2024

Net income (loss) for the three months ended September 30, 2025, was $343,000, an increase of $1.1 million, or 143.5%, compared to ($788,000) for the three months ended September 30, 2024.

The increase in net income was primarily from a $500,000 increase in interest and dividend income, a decrease in non-interest expense of $1.1 million, partially offset by an increase interest expense of $38,000, and decrease in recovery of credit losses on loans of $110,000, a decrease in non-interest income of $24,000, and an increase in income tax expense of $301,000.

Comparison of Operating Results for the Three Months Ended March 31, 2026 and 2025

Net income for the three months ended March 31, 2026, was $387,000, an increase of $309,000, or 396.2%, compared to $78,000 for the three months ended March 31, 2025.

The increase in net income was primarily from a $443,000 increase in interest and dividend income, a $169,000 decrease in interest expense, offset by a $33,000 decrease in non-interest income, a $188,000 increase in non-interest expense and a $82,000 increase in income tax expense.

Interest and Dividend Income.

Interest and dividend income increased by $500,000, or 9.6%, to $5.7 million for the three months ended September 30, 2025, compared to $5.2 million for the three months ended September 30, 2024.

The increase is attributed to a $441,000, or 11.4%, increase in interest on loans, a $334,000, or 43.3%, increase in interest on investment securities available-for-sale offset by a $275,000, or 49.3%, decrease in interest on other interest-earning assets.

During the three months ended September 30, 2025, average loans receivable, net, increased by $11.8 million, or 3.2%, from the three months ended September 30, 2024.

The average yield on loans increased to 4.49% for the three months ended September 30, 2025, from 4.16% for the three months ended September 30, 2024, mainly due to the higher yielding loans that were originated during the period.

The average balance of investment securities available-for-sale increased $18.4 million, or 22.3%, to $101.1 million for the three months ended September 30, 2025, from $82.6 million for the three months ended September 30, 2024.

The average yield on available-for-sale investment securities increased to 4.34% for the three months ended September 30, 2025, from 3.71% for the three months ended September 30, 2024.

Interest and dividend income increased by $443,000, or 8.5%, to $5.7 million for the three months ended March 31, 2026, compared to $5.2 million for the three months ended March 31, 2025.

The increase is attributed to a $417,000, or 10.4%, increase in interest on loans, and a $139,000, or 15.4%, increase in interest on investment securities available-for-sale, offset by a $113,000, or 38.6%, decrease in interest on other interest-earning assets.

During the three months ended March 31, 2026, average loans receivable, net, increased by $13.2 million, or 3.6%, from the three months ended March 31, 2025.

The average yield on loans increased to 4.69% for the three months ended March 31, 2026, from 4.40% for the three months ended March 31, 2025, mainly due to the higher yielding loans that were originated during the period.

The average balance of investment securities available-for-sale increased $3.6 million, or 3.8%, to $98.2 million for the three months ended March 31, 2026, from $94.6 million for the three months ended March 31, 2025.

The average yield on available-for-sale investment securities increased to 4.29% for the three months ended March 31, 2026, from 3.86% for the three months ended March 31, 2025.

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 $279,000, or 50.9%, for the three months ended September 30, 2025, primarily due to an decrease in the average yield to 4.01% for the three months ended September 30, 2025, from 5.37% for the three months ended September 30, 2024.

Interest income on cash and cash equivalents, comprised primarily of overnight deposits, decreased by $112,000, or 39.2%, for the three months ended March 31, 2026, primarily due to an decrease in the average yield to 3.11% for the three months ended March 31, 2026, from 4.03% for the three months ended March 31, 2025.

The decrease in average yield was due to the decline in market interest rates as well as the decrease in the average balance in cash and cash equivalents.

The average balance of cash and cash equivalents decreased by $13.8 to $26.6 million from the three months ended September 30, 2025, from $40.5 million for the three months ended September 30, 2024.

The decrease in the average balance was mainly due to using cash to purchase available-for-sale investments.

The average balance of cash and cash equivalents decreased by $6.2 million to $22.7 million from the three months ended March 31, 2026, from $28.8 million for the three months ended March 31, 2025.

The decrease in the average balance was mainly due to using cash to fund loan originations.

Interest Expense .

Total interest expense increased $38,000 or 1.6%, to $2.3 million for the three months ended September 30, 2025, from $2.3 million for the three months ended September 30, 2024.

The average balance of interest-bearing deposits decreased by $7.5 million, or 1.8%, to $396.1 million for the three months ended September 30, 2025, from $403.5 million for the three months ended September 30, 2024.

Total interest expense decreased $169,000 or 7.4%, to $2.1 million for the three months ended March 31, 2026, from $2.3 million for the three months ended March 31, 2025.

The average balance of interest-bearing deposits increased by $2.1 million, or 0.5%, to $391.8 million for the three months ended March 31, 2026, from $389.7 million for the three months ended March 31, 2025.

Net Interest Income .

Net interest income increased $462,000, or 16.0%, to $3.3 million for the three months ended September 30, 2025, compared to $2.9 million for the three months ended September 30, 2024.

The increase reflects the increase in the interest rate spread to 2.09% for the three months ended September 30, 2025, from 1.91% for the three months ended September 30, 2024, while average net interest-earning assets increased $23.8 million period-to-period.

The net interest margin increased to 2.61% for the three months ended September 30, 2025, from 2.32% for the three months ended September 30, 2024.

The average yield on interest-earning assets increased from 4.18% for the three months ended September 30, 2024, to 4.44% for the three months ended September 30, 2025.

The average rate paid on interest-bearing liabilities increased from 2.27% for the three months ended September 30, 2024, to 2.35% for the three months ended September 30, 2025.

The average rate on certificates of deposits decreased from 3.81% for the three months ended September 30, 2024, to 3.74% for the three months ended September 30, 2025.

Net interest income increased $612,000, or 20.8%, to $3.5 million for the three months ended March 31, 2026, compared to $2.9 million for the three months ended March 31, 2025.

The increase reflects the increase in the interest rate spread to 2.36% for the three months ended March 31, 2026, from 1.91% for the three months ended March 31, 2025, while average net interest-earning assets increased $8.6 million period-to-period.

The net interest margin increased to 2.85% for the three months ended March 31, 2026, from 2.41% for the three months ended March 31, 2025.

The average yield on interest-earning assets increased from 4.27% for the three months ended March 31, 2025, to 4.37% for the three months ended March 31, 2026.

The average rate paid on interest-bearing liabilities decreased from 2.36% for the three months ended March 31, 2025, to 2.18% for the three months ended March 31, 2026.

The average rate on certificates of deposits decreased from 3.79% for the three months ended March 31, 2025, to 3.49% for the three months ended March 31, 2026.

The decrease in the average rate paid on certificates of deposit primarily resulted from a decrease in market interest rates.

The average balance of certificates of deposit increased from $235.2 million as of September 30, 2024, to $244.3 million as September 30, 2025, while over the same period the average balance of savings accounts decreased from $79.8 million to $77.2 million, and the average balance of money market accounts decreased from $22.2 million to $20.9 million.

Provision (Recovery) for Credit Losses .

The provision for credit losses on loans was $-0- for the three months ended September 30, 2025, compared to ($110,000) for the three months ended September 30, 2024.

The allowance for credit losses on loans represented 0.45% of total loans at September 30, 2025 and 0.46% of total loans at September 30, 2024.

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

Total non-performing loans were $198,000 at September 30, 2025, compared to $647,000 at September 30, 2024.

We had $199,000 of loans over 90 days delinquent at September 30, 2025, compared to $647,000 at September 30, 2024.

Classified loans totaled $1.3 million at September 30, 2025, compared to $647,000 at September 30, 2024.

As a percentage of nonperforming loans, the allowance for credit losses on loans was 858.1% at September 30, 2025, and 262.6% at September 30, 2024.

The average balance of certificates of deposit increased from $238.2 million as of March 31, 2025, to $238.6 million as March 31, 2026, over the same period the average balance of savings accounts increased from $77.0 million to $77.3 million, the average balance of NOW accounts increased from $52.8 million to $55.0 million, and the average balance of money market accounts decreased from $21.7 million to $20.8 million.

Provision for Credit Losses .

The provision for credit losses on loans was $-0- for the three months ended March 31, 2026 and 2025.

The allowance for credit losses on loans represented 0.43% of total loans at March 31, 2026 and 0.44% of total loans at March 31, 2025.

Total non-performing loans were $63,000 at March 31, 2026, compared to $758,000 at March 31, 2025.

There were $63,000 in loans over 90 days delinquent at March 31, 2026, compared to $145,000 at March 31, 2025.

Classified loans totaled $1.2 million at March 31, 2026, compared to $758,000 at March 31, 2025.

As a percentage of nonperforming loans, the allowance for credit losses on loans was 2,696.8% at March 31, 2026, and 224.1% at March 31, 2025.

Noninterest Income .

Noninterest income totaled $228,000 for the three months ended September 30, 2025, a decrease of $24,000, or 9.5%, from $252,000 for the three months ended September 30, 2024.

The majority of the decrease was due to a $21,000 decrease in income on bank owned life insurance for the three months ended September 30, 2025.

Noninterest Expense .

Noninterest expense decreased $1.1 million, or 26.0%, to $3.1 million for the three months ended September 30, 2025, compared to $4.2 million for the three months ended September 30, 2024.

The decrease was primarily due to a decrease in charitable contributions of $1.3 million ($1.2 million was to fund the Fifth District Savings Foundation), or 99.4%, a decrease in audit and examination expense of $19,000, or 18.5%, a decrease in director fees of $9,000, or 12.3%, a decrease in advertising expense of $4,000, or 13.3%, partially offset by a $43,000, or 15.1%, increase data processing, a $59,000, or 107.3% increase in professional and legal fees, and a $66,000, or 44.3% increase in other expenses.

Provision (Benefit) for Income Taxes .

The provision (benefit) for income taxes increased by $301,000, or 143.3%, to $91,000 for the three months ended September 30, 2025, compared to ($210,000) for the three months ended September 30, 2024.

Pretax income increased by $1.4 million, or 143.5%, to $434,000 for the three months ended

September 30, 2025, compared to $($998,000) for the three months ended September 30, 2024.

The effective tax rate was 21% for both periods.

For the Nine Months Ended September 30,

(Dollars in thousands)

Interest-earning assets:

Cash and cash equivalents

Investment securities available-for-sale

Loans receivable, net

Restricted stock

Total interest-earning assets

Noninterest-earning assets

Interest-bearing liabilities:

Savings accounts

Money market accounts

Certificates of deposit

Total interest-bearing deposits

Federal Home Loan Bank advances

Total interest-bearing liabilities

Noninterest-bearing demand deposits

Other noninterest-bearing liabilities

Total liabilities

Total stockholders' equity

Total liabilities and stockholders' equity

Net interest income

Net interest rate spread (1)

Net interest-earning assets (2)

Net interest margin (3)

Average interest-earning assets to interest-bearing liabilities

(1) Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate of interest-bearing liabilities.

(2) Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.

(3) Net interest margin represents net interest income divided by average total interest-earning assets.

(4) Average yield/rate is an annualized amount.

Comparison of Operating Results for the Nine Months Ended September 30, 2025 and 2024

Net income (loss) for the nine months ended September 30, 2025, was $3.5 million an increase of $4.8 million or 386.7%, compared to ($1.2) million for the nine months ended September 30, 2024.

The net income was primarily from an increase in interest income of $2.2 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 $1.1 million, a $318,000 increase in non-interest expense, and a $350,000 decrease in the (benefit) for income taxes.

Interest and Dividend Income.

Interest and dividend income increased by $2.2 million, or 15.9%, to $16.4 million for the nine months ended September 30, 2025, compared to $14.1 million for the nine months ended September 30, 2024.

The increase is attributed to a $1.1 million, or 10.1%, increase in interest on loans, a $1.4 million, or 80.6%, increase in interest on investment securities available-for-sale, partially offset by a $252,000, or 23.2%, decrease in interest on other interest-earning-assets.

During the nine months ended September 30, 2025, average loans receivable, net, increased by $9.7 million, or 2.6%, from the nine months ended September 30, 2024.

The average yield on loans increased to 4.45% for the nine months

ended September 30, 2025, from 4.13% for the nine months ended September 30, 2024, mainly due to higher yielding loans originated during the period.

The average balance of investment securities available-for-sale increased $27.0 million, or 37.9%, to $98.2 million for the nine months ended September 30, 2025, from $71.2 million for the nine months ended September 30, 2024.

The average yield on available-for-sale investment securities increased to 4.12% for the nine months ended September 30, 2025, from 3.13% for the nine months ended September 30, 2024.

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 $254,000, or 23.94%, for the nine months ended September 30, 2025, primarily due to a decrease in the average balance of cash and cash equivalents by $626,000 to $26.6 million for the nine months ended September 30, 2025, from $27.2 million for the nine months ended September 30, 2024.

The average yield decreased to 4.06% for the nine months ended September 30, 2025, from 5.20% for the nine months ended September 30, 2024.

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

Interest Expense .

Total interest expense increased $24,000 or 0.3%, to $7.0 million for the nine months ended September 30, 2025, from $6.9 million for the nine months ended September 30, 2024.

The increase was due to a $28,000, or 0.4%, increase in interest on deposits, offset by a $4,000 decrease in interest expense on Federal Home Loan Bank advances as there were no advances taken in the nine months ended September 30, 2025..

The average balance of interest-bearing deposits increased by $4.3 million, or 1.1%, to $394.3 million for the nine months ended September 30, 2025, from $390.0 million for the nine months ended September 30, 2024.

Net Interest Income .

Net interest income increased $2.2 million, or 30.8%, to $9.4 million for the nine months ended September 30, 2025, compared to $7.2 million for the nine months ended September 30, 2024.

The increase reflects the increase in the interest rate spread to 2.00% for the nine months ended September 30, 2025, from 1.67% for the nine months ended September 30, 2024, while average net interest-earning assets increased $31.9 million period-to-period.

The net interest margin increased to 2.51% for the nine months ended September 30, 2025, from 2.06% for the nine months ended September 30, 2024.

The average yield on interest-earning assets increased from 4.04% for the nine months ended September 30, 2024, to 4.36% for the nine months ended September 30, 2025.

The average rate paid on interest-bearing liabilities decreased from 2.37% for the nine months ended September 30, 2024, to 2.36% for the nine months ended September 30, 2025.

There was no average balance of Federal Home Loan Bank advances for the nine months ended September 30, 2025, compared to an average balance of $113,000 for the nine months ended September 30, 2024.

The average balance of certificates of deposit increased from $236.3 million for the nine months ended September 30, 2024, to $242.1 million for the nine months ended September 30, 2025.

Over the same period, the average balance of savings accounts decreased from $81.9 million to $77.4 million, and the average balance of money market accounts decreased from $23.9 million to $21.2 million.

Provision (Recovery) for Credit Losses .

The provision for credit losses on loans was $-0- for the nine months ended September 30, 2025, compared to ($1.1 million) for the nine months ended September 30, 2024.

The allowance for credit losses on loans represented 0.45% of total loans at September 30, 2025 and 0.46% of total loans at September 30, 2024.

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

Total non-performing loans were $198,000 at September 30, 2025, compared to $647,000 at September 30, 2024.

We had $199,000 of loans over 90 days delinquent at September 30, 2025, compared to $647,000 at September 30, 2024.

Classified loans totaled $1.3 million at September 30, 2025, compared to $647,000 at September 30, 2024.

As a percentage of nonperforming loans, the allowance for credit losses on loans was 858.1% at September 30, 2025, and 262.6% at September 30, 2024.

Noninterest Income (loss) .

Noninterest income (loss) totaled $4.2 million for the nine months ended September 30, 2025, an increase of $4.4 million, or 1922.1%, from ($231,000) for the nine months ended September 30, 2024.

A $1.1 million realized loss on the sale of investment securities available-for-sale was recorded during the nine months ended September 30, 2024, compared to no such realized losses recorded during the nine months ended September 30, 2025.

$3.5 million gain on bank owned life insurance proceeds was recorded during the nine months ended September 30, 2025, while no such gain was recorded during the nine months ended September 30, 2024.

A $141,000 gain on sale of premises and equipment was recorded during the nine months ended September 30, 2024, while no such gain was record during the nine months ended September 30, 2025.

Noninterest income totaled $229,000 for the three months ended March 31, 2026, a decrease of $33,000, or 12.6%, from $262,000 for the three months ended March 31, 2025.

The majority of the decrease was due to a $20,000 decrease in income on bank owned life insurance for the three months ended March 31, 2026 as well as no gain on real estate recorded for the three months ended March 31, 2026 compared to $13,000 for the three months ended March 31, 2025.

Noninterest Expense .

Noninterest expense increased $318,000, or 3.3%, to $10.1 million for the nine months ended September 30, 2025, compared to $9.8 million for the nine months ended September 30, 2024.

The increase was primarily due to an increase in salaries and employee benefits of $1.2 million, or 24.2%, an increase in occupancy and equipment expense of $62,000, or 4.6%, an increase in professional and legal fees of $119,000, or 90.8%, an increase in data processing expense of $74,000, or 8.3%, an increase in audit and examination fees of $23,000, or 10.0%, and an increase in other expenses of $156,000, or 35.9%, partially offset by a $37,000, or 34.6%, decrease in advertising, and a $18,000, or 8.3% decrease in directors fees.

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 (benefit) for income taxes decreased by $350,000, or 106.4%, to $21,000 for the nine months ended September 30, 2025, compared to ($329,000) for the nine months ended September 30, 2024.

While pretax income increased by $5.1 million, or 327.8%, for the nine months ended September 30, 2025, $3.5 million of the pretax income was from the non-taxable proceeds of the bank owned life insurance.

Noninterest expense increased $188,000, or 6.10%, to $3.3 million for the three months ended March 31, 2026, compared to $3.1 million for the three months ended March 31, 2025.

The increase was primarily due to an increase of $90,000, or 4.9%, in salaries and employee benefits, an increase of $24,000, or 5.0%, in occupancy and equipment expense, an increase of $43,000, or 71.7%, in professional and legal expense, an increase of $25,000, or 7.9%, in data processing expense, an increase of $19,000, or 100%, in advertising expense, partially offset by a $7,000, or 9.6%, decrease in directors fees, a $6,000, or 7.1%, decrease in audit and examination fees, and a $5,000, or 2.6%, decrease in other expenses.

Provision for Income Taxes .

The provision for income taxes increased by $82,000, or 390.5%, to $103,000 for the three months ended March 31, 2026, compared to $21,000 for the three months ended March 31, 2025.

Pretax income increased by $391,000, or 394.9%, to $490,000 for the three months ended March 31, 2026, compared to $99,000 for the three months ended March 31, 2025.

The effective tax rate was 21% for both periods.

4 unchanged sentences

We also have the ability to borrow from the Federal Home Loan Bank of Dallas and from two correspondent banks.

At September 30, 2025, we had no outstanding advances from the Federal Home Loan Bank of Dallas.

At September 30, 2025, we had no outstanding balances under the correspondent bank credit facilities.

Time deposits that meet or exceed the Federal Deposit Insurance Corporation (FDIC) insurance limit of $250,000 at September 30, 2025 and December 31, 2024 were $50.0 million and $48.3 million, respectively.

Based on collateral pledged, consisting of all shares of FHLB stock owned and the blanket pledge of approximately $234.8 million of its qualifying mortgage loans as of September 30, 2025, the Bank was eligible to borrow up to an additional $188.8 million as of September 30, 2025.

The Bank has an unsecured federal funds line of credit with FNBB that expires on September 30, 2026.

At March 31, 2026, we had no outstanding advances from the Federal Home Loan Bank of Dallas.

At March 31, 2026, we had no outstanding balances under the correspondent bank credit facilities.

Time deposits that meet or exceed the Federal Deposit Insurance Corporation (FDIC) insurance limit of $250,000 at March 31, 2026 and December 31, 2025 were $50.0 million and $50.2 million, respectively.

Based on collateral pledged, consisting of all shares of FHLB stock owned and the blanket pledge of approximately $233.0 million of its qualifying mortgage loans as of March 31, 2026, the Bank was eligible to borrow up to an additional $187.0 million as of March 31, 2026.

The Bank has an unsecured federal funds line of credit with FNBB that expires on June 30, 2026.

The Bank is eligible to borrow up to $27.2 million.

There was no amount outstanding on this line of credit as of September 30, 2025 and December 31, 2024.

There was no amount outstanding on this line of credit as of March 31, 2026 and December 31, 2025.

The Bank is eligible to borrow from TIB’s Federal Funds Purchase Line Program, which provides overnight liquidity through pledge of certain qualifying securities.

The Bank is eligible to borrow up to $15.0 million and repayment is due the next day.

There was no amount outstanding on this line of credit as of September 30, 2025 and December 31, 2024.

There was no amount outstanding on this line of credit as of March 31, 2026 and December 31, 2025.

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.

8 unchanged sentences

The amount of dividends that the Bank may declare and pay to the Company is governed by applicable bank regulations.

At September 30, 2025, the Company (on an unconsolidated basis) had liquid assets of $21.2 million.

At March 31, 2026, the Company (on an unconsolidated basis) had liquid assets of $18.2 million.

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

2 unchanged sentences

Based on our deposit retention experience and current pricing strategy, we anticipate that a significant portion of maturing time deposits will be retained.

At September 30, 2025, the Bank was categorized as well-capitalized under applicable bank regulatory capital guidelines.

At March 31, 2026, the Bank was categorized as well-capitalized under applicable bank regulatory capital guidelines.

Management is not aware of any conditions or events since the most recent notification that would change its category.

Off-Balance Sheet Arrangements

At September 30, 2025, we had $26.8 million of outstanding commitments to originate loans, which primarily consists of $9.2 million of remaining funds to be disbursed on construction loans in process and $16.2 million of unused balances of home equity lines of credit.

At September 30, 2025, certificates of deposit that are scheduled to mature on or before September 30, 2026 totaled $225.0 million.

At March 31, 2026, we had $34.7 million of outstanding commitments to originate loans, which primarily consists of $16.2 million of remaining funds to be disbursed on construction loans in process and $18.4 million of unused balances of home equity lines of credit.

At March 31, 2026, certificates of deposit that are scheduled to mature on or before March 31, 2027 totaled $222.6 million.

Management expects that a substantial portion of the maturing certificates of deposit will be renewed.

19 unchanged sentences

The model estimates the economic value of each type of asset, liability and off-balance sheet contract under the assumptions that the United States Treasury yield curve increases instantaneously by 100, 200, 300 and 400 basis point increments or decreases instantaneously by 100, 200, 300 and 400 basis point increments, with changes in interest rates representing immediate and permanent, parallel shifts in the yield curve.

The following table sets forth, as of September 30, 2025, the calculation of the estimated changes in our EVE that would result from the designated immediate changes in the United States Treasury yield curve.

The following table sets forth, as of March 31, 2026, the calculation of the estimated changes in our EVE that would result from the designated immediate changes in the United States Treasury yield curve.

All estimated changes presented in the table are within the policy limits established by the Company’s board of directors.

At September 30, 2025

At March 31, 2026

EVE as a Percentage of Present Value

10 unchanged sentences

(4) EVE Ratio represents EVE divided by the present value of assets.

The table above indicates that at September 30, 2025, we would have experienced a 27.91% decrease in EVE in the event of an instantaneous parallel 200 basis point increase in market interest rates and a 17.43% increase in EVE in the event of an instantaneous 200 basis point decrease in market interest rates.

The table above indicates that at March 31, 2026, we would have experienced a 24.19% decrease in EVE in the event of an instantaneous parallel 200 basis point increase in market interest rates and a 15.25% increase in EVE in the event of an instantaneous 200 basis point decrease in market interest rates.

Change in Net Interest Income.

The following table sets forth, as of September 30, 2025, the calculation of the estimated changes in our net interest income that would result from the designated immediate changes in the United States Treasury yield curve.

The following table sets forth, as of March 31, 2026, the calculation of the estimated changes in our net interest income that would result from the designated immediate changes in the United States Treasury yield curve.

All estimated changes presented in the table are within the policy limits established by the Company’s board of directors.

At September 30, 2025

At March 31, 2026

Change in Interest Rates

4 unchanged sentences

(1) Assumes an immediate uniform change in interest rates at all maturities.

The table above indicates that as of September 30, 2025, we would have experienced a 17.63% decrease in net interest income in the event of an instantaneous parallel 200 basis point increase in market interest rates and a 4.94% increase in net interest income in the event of an instantaneous 200 basis point decrease in market interest rates.

The table above indicates that as of March 31, 2026, we would have experienced a 17.67% decrease in net interest income in the event of an instantaneous parallel 200 basis point increase in market interest rates and a 7.96% increase in net interest income in the event of an instantaneous 200 basis point decrease in market interest rates.

Certain shortcomings are inherent in the methodologies used in the above interest rate risk measurement.

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