What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-08-11 compared with 2025-05-12 · 203 added, 123 removed, 447 unchanged (42% of the section changed)

10 unchanged sentences

Except as required by law, the Company undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events, or changes in its business, results of operations or financial condition over time.

During the quarter ended March 31, 2025, there were no material changes to the Risk Factors disclosed in the Company's 2024 Annual Report on Form 10-K.

During the quarter ended June 30, 2025, there were no material changes to the Risk Factors disclosed in the Company's 2024 Annual Report on Form 10-K.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

6 unchanged sentences

Crucial to the Company’s community banking strategy is growth in its commercial banking services, retail mortgage lending and retail banking services.

Through the branch network of its subsidiary bank, Hawthorn Bank (the "Bank"), the Company, with $1.9 billion in assets at March 31, 2025, provides a broad range of commercial and personal banking services.

Through the branch network of its subsidiary bank, Hawthorn Bank (the "Bank"), the Company, with $1.9 billion in assets at June 30, 2025, provides a broad range of commercial and personal banking services.

The Bank's specialties include commercial banking for small and mid-sized businesses, including equipment, operating, commercial real estate, Small Business Administration ("SBA") loans, and personal banking services including real estate mortgage lending, installment and consumer loans, certificates of deposit, individual retirement and other time deposit accounts, checking accounts, savings accounts, and money market accounts.

21 unchanged sentences

There can be no assurances that actual results will not differ from those estimates.

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(dollars in thousands, except per share data) 2025 2024 2025 2024

9 unchanged sentences

Diluted earnings per share $ 0.88 $ 0.66 $ 1.65 $ 1.29

As of and for the Three Months Ended

As of and for the Three Months Ended As of and for the Six Months Ended

June 30, June 30,

(dollars in thousands, except per share data) 2025 2024 2025 2024

12 unchanged sentences

Total revenue is calculated as net interest income plus non-interest income.

As of and for the Three Months Ended

As of and for the Three Months Ended As of and for the Six Months Ended

June 30, June 30,

(dollars in thousands, except per share data) 2025 2024 2025 2024

8 unchanged sentences

Non-performing assets $ 5,186 $ 8,062

Net loan (recoveries) charge-offs

Net (recoveries) charge-offs to average loans (4)

Net loan charge-offs $ 51 $ 1,977 $ 33 $ 2,046

Net charge-offs to average loans (4)

0.01% 0.53% —% 0.27%

Allowance for credit losses to total loans 1.47% 1.47%

5 unchanged sentences

Results of Operations Highlights:

Consolidated net income of $5.4 million, or $0.77 per diluted share, for the first quarter ended March 31, 2025 increased $0.9 million, or 20.8%, compared to $4.5 million, or $0.63 per diluted share, for the first quarter ended March 31, 2024.

For the first quarter 2025, the return on average assets was 1.20%, the return on average stockholders’ equity was 14.29%, and the efficiency ratio was 66.6%.

Net interest income of $15.3 million for the first quarter ended March 31, 2025 increased $0.5 million compared to $14.7 million for the first quarter ended March 31, 2024.

Net interest margin, on a fully taxable equivalent ("FTE") basis, was 3.67% for the first quarter 2025, an increase from 3.39% for the first quarter 2024.

Consolidated net income was $6.1 million, or $0.88 per diluted share, and $11.5 million, or $1.65 per diluted share, for the three and six months ended June 30, 2025, respectively, compared to $4.6 million, or $0.66 per diluted share, and $9.1 million, or $1.29 per diluted share, for the three and six months ended June 30, 2024.

For the three and six months ended June 30, 2025, the return on average assets was 1.36% and 1.28%, respectively, the return on average stockholders’ equity was 15.85% and 15.08%, respectively, and the efficiency ratio was 62.3% and 64.43%, respectively.

Net interest income was $16.1 million and $31.4 million for the three and six months ended June 30, 2025 compared to $14.2 million and $28.9 million for the three and six months ended June 30, 2024.

Net interest margin, on a fully taxable equivalent ("FTE") basis, was 3.89% and 3.78% for the three and six months ended 2025, compared to 3.33% and 3.36% for the three and six months ended June 30, 2024.

The change to net interest margin on a fully taxable equivalent basis is discussed in greater detail under the Average Balance Sheet Data and Rate and Volume Analysis sections.

Non-interest income was $3.5 million for the three months ended March 31, 2025 compared to $3.0 million for the three months ended March 31, 2024.

Non-interest income was $3.5 million and $7.0 million for the three and six months ended June 30, 2025, respectively, compared to $4.0 million and $7.0 million for the three and six months ended June 30, 2024, respectively.

These changes are discussed in greater detail under the Non-interest Income and Expense section.

Non-interest expense was $12.5 million for the three months ended March 31, 2025 compared to $12.6 million for the three months ended March 31, 2024.

Non-interest expense was $12.3 million and $24.8 million for the three and six months ended June 30, 2025, respectively, compared to $12.0 million and $24.6 million for the three and six months ended June 30, 2024, respectively.

These changes are discussed in greater detail under the Non-interest Income and Expense section.

Balance Sheet Highlights:

Cash and cash equivalents – Cash and cash equivalents increased $51.3 million to $102.3 million as of March 31, 2025 compared to $51.0 million as of December 31, 2024 and increased $58.8 million compared to $43.5 million as of March 31, 2024.

Cash and cash equivalents – Cash and cash equivalents increased $49.3 million to $100.3 million as of June 30, 2025 compared to $51.0 million as of December 31, 2024 and increased $24.5 million compared to $75.8 million as of June 30, 2024.

See the Liquidity Management section for further discussion.

Loans – Loans held for investment increased $4.2 million to $1.47 billion as of March 31, 2025 compared to $1.47 billion as of December 31, 2024 and decreased $48.5 million compared to $1.52 billion as of March 31, 2024.

Asset quality – Non-performing assets totaled $3.1 million, or 0.21% of total loans, at March 31, 2025 compared to $4.2 million, or 0.29% of total loans, at December 31, 2024 and $10.5 million, or 0.69% of total loans, at March 31, 2024.

In the first quarter 2025, the Company had net loan recoveries of $0.02 million, or 0%, of average loans, compared to net loan charge-offs $0.07 million, or 0.02% of average loans, in the prior year quarter.

The allowance for credit losses was $21.8 million, or 1.48%, of loans outstanding at March 31, 2025 compared to $22.0 million, or 1.50%, of loans outstanding at December 31, 2024, and $23.7 million, or 1.56% of loans outstanding at March 31, 2024.

Loans – Loans held for investment decreased $3.3 million to $1.46 billion as of June 30, 2025 compared to $1.47 billion as of December 31, 2024 and decreased $35.6 million compared to $1.50 billion as of June 30, 2024.

Asset quality – Non-performing assets totaled $5.2 million, or 0.35% of total loans, at June 30, 2025 compared to $4.2 million, or 0.29% of total loans, at December 31, 2024 and $8.1 million, or 0.54% of total loans, at June 30, 2024.

In the second quarter 2025, the Company had net loan charge-offs of $0.05 million, or 0.01%, of average loans, compared to net loan charge-offs $1.98 million, or 0.53% of average loans, in the prior year quarter.

The allowance for credit losses was $21.6 million, or 1.47%, of loans outstanding at June 30, 2025 compared to $22.0 million, or 1.50%, of loans outstanding at December 31, 2024, and $22.0 million, or 1.47% of loans outstanding at June 30, 2024.

These changes are discussed in greater detail under the Lending and Credit Management section.

Deposit s – Total deposits increased $10.7 million to $1.54 billion as of March 31, 2025 compared to $1.53 billion as of December 31, 2024, and increased $16.0 million compared to $1.53 billion as of March 31, 2024.

Federal Home Loan Bank ("FHLB") advances and other borrowings – Total FHLB advances and other borrowings increased $42.6 million to $124.1 million as of March 31, 2025, compared to $81.5 million as of December 31, 2024, and increased $15.1 million compared to $109.0 million as of March 31, 2024.

Deposit s – Total deposits decreased $15.2 million to $1.52 billion as of June 30, 2025 compared to $1.53 billion as of December 31, 2024, and decreased $32.3 million compared to $1.55 billion as of June 30, 2024.

Federal Home Loan Bank ("FHLB") advances and other borrowings – Total FHLB advances and other borrowings increased $58.6 million to $140.1 million as of June 30, 2025, compared to $81.5 million as of December 31, 2024, and increased $41.0 million compared to $99.1 million as of June 30, 2024.

Capital – The Company maintains its “well capitalized” regulatory capital position.

At March 31, 2025, capital ratios were as follows:

At June 30, 2025, capital ratios were as follows:

total risk-based capital to risk-weighted assets 15.12%;

5 unchanged sentences

It is affected both by changes in the level of interest rates and changes in the amounts and mix of interest-earning assets and interest-bearing liabilities.

The following table presents average balance sheet data, net interest income, average yields of earning assets, average costs of interest-bearing liabilities, net interest spread and net interest margin on a FTE basis for each of the three month periods ended March 31, 2025 and 2024, respectively.

The following table presents average balance sheet data, net interest income, average yields of earning assets, average costs of interest-bearing liabilities, net interest spread and net interest margin on a FTE basis for each of the three and six month periods ended June 30, 2025 and 2024, respectively.

The average balances used in this table and other statistical data were calculated using average daily balances.

Three Months Ended March 31,

Three Months Ended June 30,

(dollars in thousands) Average Balance Interest Income/ Expense (1) Rate Earned/ Paid (1) Average Balance Interest Income/ Expense (1) Rate Earned/ Paid (1)

40 unchanged sentences

Net interest margin (FTE) 3.89% 3.33%

(1) Interest income and yields are presented on a FTE basis using the federal statutory income tax rate of 21%, net of nondeductible interest expense, for both the three months ended March 31, 2025 and 2024.

Such adjustments totaled $0.24 million and $0.20 million for the three months ended March 31, 2025 and 2024, respectively.

Such adjustments totaled $0.38 million and $0.20 million for the three months ended June 30, 2025 and 2024, respectively.

(2) Non-accruing loans are included in the average amounts outstanding.

Six Months Ended June 30, 2025

(dollars in thousands) Average Balance Interest Income/ Expense(1) Rate Earned/ Paid(1) Average Balance Interest Income/ Expense(1) Rate Earned/ Paid(1)

Commercial $ 203,966 $ 6,672 6.60% $ 221,010 $ 7,257 6.60%

Real estate construction - residential 29,317 1,146 7.88 51,624 1,988 7.74

Real estate construction - commercial 73,268 2,791 7.68 74,953 2,519 6.76

Real estate mortgage - residential 370,800 10,686 5.81 372,085 10,481 5.66

Real estate mortgage - commercial 768,940 21,223 5.57 779,558 20,601 5.31

Installment and other consumer 12,623 401 6.41 18,896 545 5.80

Total loans $ 1,458,914 $ 42,919 5.93% $ 1,518,126 $ 43,391 5.75%

Loans held for sale 130 5 7.76 2,463 66 5.39

Investment securities:

Treasury 4,984 105 4.25 988 26 5.29

government and federal agency obligations 13,228 281 4.28 15,892 362 4.58

Obligations of states and political subdivisions 99,342 1,671 3.39 103,634 1,510 2.93

Mortgage-backed securities 79,345 1,543 3.92 50,539 740 2.94

Other debt securities 25,091 721 5.79 12,289 359 5.87

Total investment securities $ 221,990 $ 4,321 3.93% $ 183,342 $ 2,997 3.29%

Other investment securities 4,422 205 9.35 6,268 287 9.21

Interest bearing deposits in other financial institutions 23,818 539 4.56 44,713 1,263 5.68

Total interest earning assets $ 1,709,274 $ 47,989 5.66% $ 1,754,912 $ 48,004 5.50%

All other assets 121,496 105,457

Allowance for credit losses (22,034) (23,743)

Total assets $ 1,808,736 $ 1,836,626

LIABILITIES AND STOCKHOLDERS' EQUITY

Savings $ 273,648 $ 2,505 1.85% $ 237,525 $ 2,301 1.95%

NOW accounts 197,537 1,407 1.44 201,848 1,407 1.40

Interest checking 141,637 2,667 3.80 131,958 2,986 4.55

Money market 206,561 1,856 1.81 228,299 2,429 2.14

Time deposits 301,580 4,886 3.27 341,323 5,910 3.48

Total interest bearing deposits $ 1,120,963 $ 13,321 2.40% $ 1,140,953 $ 15,033 2.65%

Federal funds purchased and securities sold under agreements to repurchase 51 1 3.95 — — —

Federal Home Loan Bank advances and other borrowings 67,304 903 2.71 107,960 1,680 3.13

Subordinated notes 49,486 1,708 6.96 49,486 1,975 8.03

Total borrowings $ 116,841 $ 2,612 4.51% $ 157,446 $ 3,655 4.67%

Total interest bearing liabilities $ 1,237,804 $ 15,933 2.60% $ 1,298,399 $ 18,688 2.89%

Demand deposits 404,945 390,876

Other liabilities 12,437 11,343

Total liabilities $ 1,655,186 $ 1,700,618

Stockholders' equity 153,550 136,008

Total liabilities and stockholders' equity $ 1,808,736 $ 1,836,626

Net interest income (FTE) $ 32,056 $ 29,316

Net interest spread (FTE) 3.06% 2.61%

Net interest margin (FTE) 3.78% 3.36%

(1) Interest income and yields are presented on a FTE basis using the federal statutory income tax rate of 21%, net of nondeductible interest expense, for both the six months ended June 30, 2025 and 2024.

Such adjustments totaled $0.62 million and $0.40 million for the six months ended June 30, 2025 and 2024, respectively.

(2) Non-accruing loans are included in the average amounts outstanding.

Rate and Volume Analysis

The following table summarizes the changes in net interest income on a FTE basis, by major category of interest earning assets and interest-bearing liabilities, identifying changes related to volumes and rates for the three months ended March 31, 2025 compared to the three months ending ended March 31, 2024, respectively.

The following table summarizes the changes in net interest income on a FTE basis, by major category of interest earning assets and interest-bearing liabilities, identifying changes related to volumes and rates for the three and six months ended June 30, 2025 compared to the three and six months ending ended June 30, 2024, respectively.

The change in interest due to the combined rate/volume variance has been allocated to rate and volume changes in proportion to the absolute dollar amounts of change in each.

Three Months Ended March 31,

Change due to

(dollars in thousands) Total Change Average Volume Average Rate

Three Months Ended June 30, Six Months Ended June 30,

2024 2025 vs.

Change due to Change due to

(dollars in thousands) Total Change Average Volume Average Rate Total Change Average Volume Average Rate

Interest income on a fully taxable equivalent basis:

27 unchanged sentences

$ 2,154 $ (187) $ 2,341 $ 2,740 $ (907) $ 3,647

(1) Interest income and yields are presented on a FTE basis using the federal statutory income tax rate of 21%, net of nondeductible interest expense, for the three months ended March 31, 2025 and 2024, respectively.

Such adjustments totaled $0.24 million for the three months ended March 31, 2025 compared to $0.20 million for the three months ended March 31, 2024.

(1) Interest income and yields are presented on a FTE basis using the federal statutory income tax rate of 21%, net of nondeductible interest expense, for the three and six months ended June 30, 2025 and 2024, respectively.

Such adjustments totaled $0.38 million and $0.62 million for the three and six months ended June 30, 2025, respectively, compared to $0.20 million and $0.40 million for the three and six months ended June 30, 2024, respectively.

(2) Non-accruing loans are included in the average amounts outstanding.

Financial results for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 reflected an increase in net interest income on a FTE basis, of $0.6 million, or 3.9%.

Measured as a percentage of average earning assets, the net interest margin (expressed on a FTE basis) increased to 3.67% for the three months ended March 31, 2025 compared to 3.39% for the three months ended March 31, 2024.

Average interest-earning assets decreased $58.6 million, or 3.3%, to $1.72 billion for the quarter ended March 31, 2025 compared to $1.77 billion for the quarter ended March 31, 2024, and average interest-bearing liabilities decreased $55.2 million, or 4.2%, to $1.26 billion for the quarter ended March 31, 2025 compared to $1.31 billion for the quarter ended March 31, 2024.

Total interest income (expressed on a FTE basis) was $23.7 million for the three months ended March 31, 2025 compared to $24.3 million for the three months ended March 31, 2024.

The Company’s rates earned on interest earning assets were 5.60% for the three months ended March 31, 2025 compared to 5.50% for the three months ended March 31, 2024.

Interest income on loans held for investment was $21.3 million for the three months ended March 31, 2025 compared to $21.8 million for the three months ended March 31, 2024.

Average loans outstanding decreased $59.3 million, or 3.9%, to $1.47 billion for the quarter ended March 31, 2025 compared to $1.52 billion for the quarter ended March 31, 2024.

The average yield on loans increased to 5.89% for the quarter ended March 31, 2025 compared to 5.75% for the quarter ended March 31, 2024.

Financial results for the quarter ended June 30, 2025 compared to the quarter ended June 30, 2024, reflected an increase in net interest income on an FTE basis, of $2.2 million, or 15.0%, and financial results for the six months ended June 30, 2025 compared to the six months ended June 30, 2024 reflected an increase in net interest income on an FTE basis, of $2.7 million, or 9.3%.

Measured as a percentage of average earning assets, the net interest margin (expressed on an FTE basis) increased to 3.89% for the quarter ended June 30, 2025 compared to 3.33% for the quarter ended June 30, 2024, and increased to 3.78% for the six months ended June 30, 2025 compared to 3.36% for the six months ended June 30, 2024.

Average interest-earning assets decreased $32.6 million, or 1.9%, to $1.70 billion for the quarter ended June 30, 2025 compared to $1.74 billion for the quarter ended June 30, 2024, and average interest-bearing liabilities decreased $65.8 million, or 5.1%, to $1.22 billion for the quarter ended June 30, 2025 compared to $1.29 billion for the quarter ended June 30, 2024.

Average interest-earning assets decreased $45.6 million, or 2.6%, to $1.71 billion for the six months ended June 30, 2025 compared to $1.75 billion for the six months ended June 30, 2024, and average interest-bearing liabilities decreased $60.6 million, or 4.7%, to $1.24 billion for the six months ended June 30, 2025 compared to $1.30 billion for the six months ended June 30, 2024.

Total interest income (expressed on an FTE basis) was $24.3 million and $48.0 million for the three and six months ended June 30, 2025, respectively compared to $23.8 million and $48.0 million for the three and six months ended June 30, 2024, respectively.

The Company’s rates earned on interest earning assets were 5.72% and 5.66% for the three and six months ended June 30, 2025, respectively, compared to 5.50% for both the three and six months ended June 30, 2024.

Interest income on loans held for investment was $21.7 million and $42.9 million for the three and six months ended June 30, 2025, respectively, compared to $21.6 million and $43.4 million for the three and six months ended June 30, 2024, respectively.

Average loans outstanding decreased $59.0 million, or 3.9%, to $1.45 billion for the quarter ended June 30, 2025 compared to $1.51 billion for the quarter ended June 30, 2024.

The average yield on loans increased to 5.98% for the quarter ended June 30, 2025 compared to 5.75% for the quarter ended June 30, 2024.

Average loans outstanding decreased $59.2 million, or 3.9%, to $1.46 billion for the six months ended June 30, 2025 compared to $1.52 billion for the six months ended June 30, 2024.

The average yield on loans increased to 5.93% for the six months ended June 30, 2025 compared to 5.75% for the six months ended June 30, 2024.

See the Lending and Credit Management section for further discussion of changes in the composition of the lending portfolio.

Interest income on available-for-sale securities was $2.1 million for the three months ended March 31, 2025 compared to $1.5 million for the three months ended March 31, 2024.

Average securities increased $37.8 million, or 20.5%, to $222.3 million for the quarter ended March 31, 2025 compared to $184.5 million for the quarter ended March 31, 2024.

The average yield on securities increased to 3.76% for the quarter ended March 31, 2025 compared to 3.22% for the quarter ended March 31, 2024.

Interest income on available-for-sale securities was $2.3 million and $4.3 million for the three and six months ended June 30, 2025, respectively, compared to $1.5 million and $3.0 million for the three and six months ended June 30, 2024, respectively.

Average securities increased $39.5 million, or 21.7%, to $221.7 million for the quarter ended June 30, 2025 compared to $182.2 million for the quarter ended June 30, 2024.

The average yield on securities increased to 4.09% for the quarter ended June 30, 2025 compared to 3.35% for the quarter ended June 30, 2024.

Average securities increased $38.6 million, or 21.1%, to $222.0 million for the six months ended June 30, 2025 compared to $183.3 million for the six months ended June 30, 2024.

The average yield on securities increased to 3.93% for the six months ended June 30, 2025 compared to 3.29% for the six months ended June 30, 2024.

See the Liquidity Management section for further discussion.

Total interest expense was $8.2 million for the three months ended March 31, 2025 compared to $9.3 million for the three months ended March 31, 2024.

The Company’s rates paid on interest bearing liabilities were 2.64% for the three months ended March 31, 2025 compared to 2.85% for the three months ended March 31, 2024.

Total interest expense was $7.8 million and $15.9 million for the three and six months ended June 30, 2025, respectively, compared to $9.4 million and $18.7 million for the three and six months ended June 30, 2024, respectively.

The Company’s rates paid on interest bearing liabilities were 2.55% and 2.60% for the three and six months ended June 30, 2025, respectively, compared to 2.94% and 2.89% for the three and six months ended June 30, 2024, respectively.

See the Liquidity Management section for further discussion.

Interest expense on deposits was $6.8 million for the three months ended March 31, 2025 compared to $7.5 million for the three months ended March 31, 2024.

Average interest-bearing deposits decreased $19.6 million, or 1.7%, to $1.13 billion for the quarter ended March 31, 2025 compared to $1.15 billion for the quarter ended March 31, 2024.

The average cost of deposits decreased to 2.44% for the quarter ended March 31, 2025 compared to 2.61% for the quarter ended March 31, 2024.

Interest expense on borrowings was $1.4 million for the three months ended March 31, 2025 compared to $1.8 million for the three months ended March 31, 2024.

Average borrowings decreased $35.5 million, or 22.1%, to $125.0 million for the quarter ended March 31, 2025 compared to $160.6 million for the quarter ended March 31, 2024.

The average cost of borrowings decreased to 4.38% for the quarter ended March 31, 2025 compared to 4.61% for the quarter ended March 31, 2024.

Interest expense on deposits was $6.5 million and $13.3 million for the three and six months ended June 30, 2025, respectively, compared to $7.6 million and $15.0 million for the three and six months ended June 30, 2024, respectively.

Average interest-bearing deposits decreased $20.2 million, or 1.8%, to $1.11 billion for the quarter ended June 30, 2025 compared to $1.13 billion for the quarter ended June 30, 2024.

The average cost of deposits decreased to 2.35% for the quarter ended June 30, 2025 compared to 2.69% for the quarter ended June 30, 2024.

Average interest-bearing deposits decreased $20.0 million, or 1.8%, to $1.12 billion for the six months ended June 30, 2025 compared to $1.14 billion for the six months ended June 30, 2024.

The average cost of deposits decreased to 2.40% for the six months ended June 30, 2025 compared to 2.65% for the six months ended June 30, 2024.

Interest expense on borrowings was $1.3 million and $2.6 million for the three and six months ended June 30, 2025, respectively, compared to $1.8 million and $3.7 million for the three and six months ended June 30, 2024, respectively.

Average borrowings decreased $45.6 million, or 29.5%, to $108.7 million for the quarter ended June 30, 2025 compared to $154.3 million for the quarter ended June 30, 2024.

The average cost of borrowings decreased to 4.65% for the quarter ended June 30, 2025 compared to 4.73% for the quarter ended June 30, 2024.

Average borrowings decreased $40.6 million, or 25.8%, to $116.8 million for the six months ended June 30, 2025 compared to $157.4 million for the six months ended June 30, 2024.

The average cost of borrowings decreased to 4.51% for the six months ended June 30, 2025 compared to 4.67% for the six months ended June 30, 2024.

Non-interest Income

The following table shows the principal components of non-interest income.

Three Months Ended March 31,

(dollars in thousands) 2025 2024 $ Change % Change

Three Months Ended June 30, Six Months Ended June 30,

(dollars in thousands) 2025 2024 $ Change % Change 2025 2024 $ Change % Change

Service charges and other fees $ 940 $ 777 $ 163 21.0 % $ 1,853 $ 1,594 $ 259 16.2 %

3 unchanged sentences

Gain on sales of mortgage loans, net 117 398 (281) (70.6) % 242 675 (433) (64.1) %

Gains on other real estate owned, net 21 34 (13) (38.2) %

(Losses) gains on other real estate owned, net (177) 454 (631) (139.0) % (156) 488 (644) (132.0) %

Other 611 337 274 81.3 % 1,105 739 366 49.5 %

2 unchanged sentences

* Total revenue is calculated as net interest income plus non-interest income.

Total non-interest income increased $0.4 million, or 14.7%, to $3.5 million for the three months ended March 31, 2025 compared to $3.0 million for the three months ended March 31, 2024.

The increase was primarily due to earnings on bank-owned life insurance, offset by a decrease on gains on sales of mortgage loans during the current quarter.

Earnings on bank-owned life insurance increased to $0.5 million for the three months ended March 31, 2025 compared to $0.1 million for the three months ended March 31, 2024.

Total non-interest income decreased $0.5 million, or 11.3%, to $3.5 million for the quarter ended June 30, 2025 compared to $4.0 million for the quarter ended June 30, 2024, and remained unchanged at $7.0 million for the six months ended June 30, 2025 and June 30, 2024.

Compared to the prior year quarter, the decrease was primarily due to lower gains on sales of mortgage loans and lower net gains on sales of other real estate owned, offset by increases in earnings on bank-owned life insurance and an increase in service charges and other fees.

Earnings on bank-owned life insurance was $0.5 million for both quarters ended June 30, 2025 and June 30, 2024, and increased to $1.0 million for the six months ended June 30, 2025 compared to $0.6 million for the six months ended June 30, 2024.

The Company purchased $35.0 million in bank-owned life insurance policies in the first quarter of 2024.

The earnings generated from these polices are primarily derived from the investment returns on the cash value component.

Gain on sales of mortgage loans decreased to $0.1 million for the three months ended March 31, 2025 compared to $0.3 million for the three months ended March 31, 2024.

The Company sold mortgage loans totaling $1.2 million for the three months ended March 31, 2025 compared to $15.1 million for the three months ended March 31, 2024.

Gain on sales of mortgage loans decreased to $0.1 million for the quarter ended June 30, 2025 compared to $0.4 million for the quarter ended June 30, 2024, and decreased to $0.2 million for the six months ended June 30, 2025 compared to $0.7 million for the six months ended June 30, 2024.

The Company sold mortgage loans totaling $1.7 million and $2.9 million for the three and six months ended June 30, 2025, respectively, compared to $21.7 million and $38.0 million for the three and six months ended June 30, 2024, respectively.

Non-interest Expense

The following table shows the principal components of non-interest expense.

Three Months Ended March 31,

(dollars in thousands) 2025 2024 $ Change % Change

Three Months Ended June 30, Six Months Ended June 30,

(dollars in thousands) 2025 2024 $ Change % Change 2025 2024 $ Change % Change

Salaries $ 5,415 $ 5,392 $ 23 0.4% $ 10,780 $ 10,642 $ 138 1.3%

12 unchanged sentences

Total revenue is calculated as net interest income plus non-interest income.

Total non-interest expense decreased $0.1 million, or 0.6%, to $12.5 million for the three months ended March 31, 2025 compared to $12.6 million for the three months ended March 31, 2024.

Occupancy expense increased $0.1 million, or 15.0%, to $0.9 million for the three months ended March 31, 2025 compared to $0.8 million for the three months ended March 31, 2024.

Total non-interest expense increased $0.2 million, or 2.0%, to $12.3 million for the quarter ended June 30, 2025 compared to $12.0 million for the quarter ended June 30, 2024, and increased $0.2 million, or 0.6%, to $24.8 million for the six months ended June 30, 2025 compared to $24.6 million for the six months ended June 30, 2024.

Occupancy expense increased $0.2 million, or 33.8%, to $0.9 million for the quarter ended June 30, 2025 compared to $0.7 million for the quarter ended June 30, 2024, and increased $0.4 million, or 23.8%, to $1.9 million for the six months ended June 30, 2025 compared to $1.5 million for the six months ended June 30, 2024.

The increase primarily resulted from the opening of two new branch locations and one new operations facility.

Legal, examination and professional fees decreased $0.3 million, or 40.1%, to $0.5 million for the three months ended March 31, 2025 compared to $0.8 million for the three months ended March 31, 2024.

Legal, examination and professional fees decreased $0.1 million, or 16.4%, to $0.4 million for the quarter ended June 30, 2025 compared to $0.5 million for the quarter ended June 30, 2024, and decreased $0.4 million, or 31.0%, to $0.9 million for the six months ended June 30, 2025 compared to $1.3 million for the six months ended June 30, 2024.

The decrease was primarily due to the costs from a settlement agreement from terminating a contract related to a digital account opening project in the prior year quarter.

Advertising and promotion decreased $0.1 million, or 39.2%, to $0.2 million for the three months ended March 31, 2025 compared to $0.3 million for the three months ended March 31, 2024.

Advertising and promotion decreased $0.05 million, or 18.8%, to $0.2 million for the quarter ended June 30, 2025 compared to $0.3 million for the quarter ended June 30, 2024, and decreased $0.2 million, or 29.0%, to $0.4 million for the six months ended June 30, 2025 compared to $0.5 million for the six months ended June 30, 2024.

The Company is utilizing internal marketing resources whereas, in the prior year quarter, external resources were used.

Postage, printing and supplies increased $0.1 million, or 76.0%, to $0.3 million for the three months ended March 31, 2025 compared to $0.2 million for the three months ended March 31, 2024.

Postage, printing and supplies increased $0.2 million, or 80.0%, to $0.3 million for the quarter ended June 30, 2025 compared to $0.2 million for the quarter ended June 30, 2024, and increased $0.3 million, or 78.2%, to $0.6 million for the six months ended June 30, 2025 compared to $0.4 million for the six months ended June 30, 2024.

The increase was primarily a result of customer mailings related to an account consolidation project.

Income taxes as a percentage of earnings before income taxes as reported in the consolidated financial statements was 18.4% for the three months ended March 31, 2025 compared to 17.8% for the three months ended March 31, 2024.

The effective tax rate for each of the three months ended March 31, 2025 and 2024 was lower than the U.S.

Income taxes as a percentage of earnings before income taxes as reported in the consolidated financial statements was consistent at 18.3% for both the three and six months ended June 30, 2025, respectively, compared to 18.2% and 18.0% for the three and six months ended June 30, 2024, respectively.

The effective tax rate for each of the three and six months ended June 30, 2025 and 2024 was lower than the U.S.

federal statutory rate of 21% primarily due to tax-free revenues.

1 unchanged sentence

Interest earned on the loan portfolio is a primary source of interest income for the Company.

Net loans represented 76.9% of total assets as of March 31, 2025 compared to 79.1% as of December 31, 2024.

Net loans represented 76.8% of total assets as of June 30, 2025 compared to 79.1% as of December 31, 2024.

Lending activities are conducted pursuant to an established loan policy approved by the Bank's Board of Directors.

3 unchanged sentences

Major classifications within the Company’s held-for-investment loan portfolio as of the dates indicated is as follows:

March 31, 2025 December 31, 2024

June 30, 2025 December 31, 2024

(dollars in thousands) Amount % of Loans Amount % of Loans

13 unchanged sentences

Additionally, CRE loans include 1-4 family property loans as well as land and development loans.

The following table shows the categories of the Company's non-owner occupied CRE loan portfolio at March 31, 2025 and December 31, 2024:

March 31, 2025 December 31, 2024

The following table shows the categories of the Company's non-owner occupied CRE loan portfolio at June 30, 2025 and December 31, 2024:

June 30, 2025 December 31, 2024

(Dollars in thousands) Amount % of Loans Amount % of Loans

8 unchanged sentences

Land Subdivision 10,066 1.7 10,844 1.7

Commercial and Institutional Building Construction 9,538 1.5 9,481 1.5

Residential Building Construction 9,894 1.7 20,413 3.2

Commercial and Institutional Building Construction 6,802 1.2 9,481 1.5

Total Commercial Real Estate - Non Owner Occupied $ 589,205 100.0 % $ 635,381 100.0 %

28 unchanged sentences

Management believes, but there can be no assurance, that these procedures keep management informed of potential problem loans.

At March 31, 2025 and December 31, 2024, the ACL on loans included a qualitative adjustment of approximately $10.9 million and $11.2 million, respectively.

At June 30, 2025 and December 31, 2024, the ACL on loans included a qualitative adjustment of approximately $10.0 million and $11.2 million, respectively.

Non-Performing Assets

The following table summarizes non-performing assets at the dates indicated:

March 31, December 31,

June 30, December 31,

(dollars in thousands) 2025 2024

29 unchanged sentences

(b) Non-performing assets include non-performing loans and other real estate owned and repossessed assets.

Total non-performing assets were $3.1 million, or 0.21% of total loans, at March 31, 2025 compared to $4.2 million, or 0.29% of total loans, at December 31, 2024.

Total non-accrual loans at March 31, 2025 decreased $0.1 million, or 3.7%, to $2.4 million compared to $2.5 million at December 31, 2024.

There were $0.02 million in loans past due 90 days and still accruing interest at March 31, 2025 compared to $0.21 million at December 31, 2024.

Other real estate and repossessed assets were $0.7 million and $1.4 million at March 31, 2025 and December 31, 2024, respectively.

There were no non-accrual loans added to other real estate owned and repossessed assets during the three months ended March 31, 2025 and 2024.

Total non-performing assets were $5.2 million, or 0.35% of total loans, at June 30, 2025 compared to $4.2 million, or 0.29% of total loans, at December 31, 2024.

Total non-accrual loans at June 30, 2025 decreased $0.3 million, or 11.1%, to $2.3 million compared to $2.5 million at December 31, 2024.

There were $0.51 million in loans past due 90 days and still accruing interest at June 30, 2025 compared to $0.21 million at December 31, 2024.

Other real estate and repossessed assets were $2.4 million and $1.4 million at June 30, 2025 and December 31, 2024, respectively.

There were no non-accrual loans added to other real estate owned and repossessed assets during the six months ended June 30, 2025 and 2024.

Provision and Allowance for Credit Losses on Loans and Liability for Unfunded Commitments

1 unchanged sentence

The following table is a summary of the allocation of the allowance for credit losses:

March 31, 2025 December 31, 2024

June 30, 2025 December 31, 2024

(dollars in thousands) Amount % of loans in each category to total loans Amount % of loans in each category to total loans

8 unchanged sentences

Total $ 21,570 100.0 % $ 22,044 100.0 %

The allowance for credit losses was $21.8 million, or 1.48%, of loans outstanding at March 31, 2025 compared to $22.0 million, or 1.50%, of loans outstanding at December 31, 2024.

The ratio of the allowance for credit losses to non-performing loans was 885.01% at March 31, 2025, compared to 802.48% at December 31, 2024.

The allowance for credit losses was $21.6 million, or 1.47%, of loans outstanding at June 30, 2025 compared to $22.0 million, or 1.50%, of loans outstanding at December 31, 2024.

The ratio of the allowance for credit losses to non-performing loans was 781.24% at June 30, 2025, compared to 802.48% at December 31, 2024.

(Release of) Provision for Credit Losses

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(dollars in thousands) 2025 2024 2025 2024

(Release of) provision for credit losses on loans $ (159) $ 282 $ (441) $ 282

Release of provision credit losses for off-balance sheet commitments (58) (230)

Provision for (release of) credit losses for off-balance sheet commitments 108 175 50 (55)

Total (release of) provision for credit losses $ (51) $ 457 $ (391) $ 227

The Company recognized a release of provision for credit losses of $0.3 million for the three months ended March 31, 2025 compared to a $0.2 million release of provision for credit losses for the three months ended March 31, 2024.

The Company recognized a release of provision for credit losses of $0.1 million and $0.4 million for the three and six months ended June 30, 2025, respectively, compared to $0.5 million and $0.2 million of provisions for credit losses for the three and six months ended June 30, 2024, respectively.

The following table summarizes credit loss experience for the periods indicated:

Three Months Ended March 31,

Three Months Ended June 30,

(dollars in thousands) (Net Charge-offs) Recoveries Average Loans Net (Charge-offs) Recoveries / Average Loans (Net Charge-offs) Recoveries Average Loans Net (Charge-offs) Recoveries / Average Loans

10 unchanged sentences

Total $ (51) $ 1,452,591 — % $ (1,977) $ 1,511,609 (0.13) %

Six Months Ended June 30,

(dollars in thousands) (Net Charge-offs) Recoveries Average Loans Net (Charge-offs) Recoveries / Average Loans (Net Charge-offs) Recoveries Average Loans Net (Charge-offs) Recoveries / Average Loans

Commercial, financial, and agricultural $ 68 $ 203,966 0.03 % $ (1,868) $ 221,010 (0.85) %

Real estate construction − residential

— 29,317 — — 51,624 —

Real estate construction − commercial

— 73,268 — — 74,953 —

Real estate mortgage − residential

5 370,800 — (18) 372,085 —

Real estate mortgage − commercial

22 768,940 — (89) 779,558 (0.01)

Installment and other consumer (128) 12,623 (1.01) (71) 18,896 (0.38)

Total $ (33) $ 1,458,914 — % $ (2,046) $ 1,518,126 (0.13) %

Net Loan Recoveries (Charge-Offs)

The Company’s net recoveries were $0.02 million for the three months ended March 31, 2025 compared to $0.07 million net charge-offs for the three months ended March 31, 2024.

The Company’s net charge-offs were $0.05 million and $0.03 million for the three and six months ended June 30, 2025, respectively, compared to $2.0 million net charge-offs for both the three and six months ended June 30, 2024.

Loans Held for Sale

2 unchanged sentences

The loans are primarily sold to Freddie Mac, Fannie Mae, and PennyMac and various other secondary market investors.

At March 31, 2025, the carrying amount of these loans was $0.2 million compared to no loans at December 31, 2024.

There were no loans held for sale at either June 30, 2025 or December 31, 2024.

The Company generally does not retain long-term fixed rate residential mortgage loans in its portfolio.

Fixed rate loans conforming to standards required by the secondary market are offered to qualified borrowers but are not funded until the Company has a non-recourse purchase commitment from the secondary market at a predetermined price.

During the three months ended March 31, 2025, the Company sold approximately $1.2 million of loans to investors compared to $15.1 million for the three months ended March 31, 2024.

During the six months ended June 30, 2025, the Company sold approximately $2.9 million of loans to investors compared to $38.0 million for the six months ended June 30, 2024.

Liquidity and Capital Resources

9 unchanged sentences

The Company’s most liquid assets are comprised of available-for-sale investment securities, not including other debt securities, federal funds sold, and excess reserves held at the Federal Reserve.

(dollars in thousands) March 31, 2025 December 31, 2024

(dollars in thousands) June 30, 2025 December 31, 2024

Other interest-bearing deposits $ 77,383 $ 27,326

3 unchanged sentences

Federal funds sold and resale agreements normally have overnight maturities and are used for general daily liquidity purposes.

The fair value of the available-for-sale investment portfolio was $219.6 million at March 31, 2025 and included an unrealized net loss of $30.4 million.

The fair value of the available-for-sale investment portfolio was $221.7 million at June 30, 2025 and included an unrealized net loss of $29.6 million.

The portfolio includes projected maturities and mortgage-backed securities pay-downs of approximately $2.2 million over the next twelve months, which offer resources to meet either new loan demand or reductions in the Company’s borrowings.

The Company pledges portions of its investment securities portfolio to secure public fund deposits, federal funds purchase lines, securities sold under agreements to repurchase, borrowing capacity at the Federal Reserve Bank, and for other purposes as required or permitted by law.

At March 31, 2025 and December 31, 2024, the Company’s unpledged securities in the available-for-sale portfolio totaled approximately $130.8 million and $136.3 million, respectively.

At June 30, 2025 and December 31, 2024, the Company’s unpledged securities in the available-for-sale portfolio totaled approximately $132.0 million and $136.3 million, respectively.

Total investment securities pledged for these purposes were as follows:

(dollars in thousands) March 31, 2025 December 31, 2024

(dollars in thousands) June 30, 2025 December 31, 2024

Federal Reserve Bank borrowings $ 7,705 $ 7,915

2 unchanged sentences

Liquidity is available from the Company’s base of core customer deposits, defined as demand, interest checking, savings, money market deposit accounts, and time deposits less than $250,000, less all brokered deposits under $250,000.

At March 31, 2025, such deposits totaled $1.4 billion and represented 93.7% of the Company’s total deposits.

At June 30, 2025, such deposits totaled $1.4 billion and represented 94.0% of the Company’s total deposits.

These core deposits are normally less volatile and are often tied to other products of the Company through long lasting relationships.

Core deposits at March 31, 2025 and December 31, 2024 were as follows:

(dollars in thousands) March 31, 2025 December 31, 2024

Core deposits at June 30, 2025 and December 31, 2024 were as follows:

(dollars in thousands) June 30, 2025 December 31, 2024

Non-interest bearing demand $ 419,914 $ 385,022

3 unchanged sentences

Total $ 1,426,818 $ 1,432,786

Estimated uninsured deposits totaled $349.4 million, including $97.5 million of certificates of deposit, at March 31, 2025, compared to $352.0 million, including $100.4 million of certificates of deposit, at December 31, 2024.

The Company's brokered deposits were consistent at $0.01 million at March 31, 2025 and December 31, 2024.

Estimated uninsured deposits totaled $352.9 million, including $91.2 million of certificates of deposit, at June 30, 2025, compared to $352.0 million, including $100.4 million of certificates of deposit, at December 31, 2024.

The Company's brokered deposits were consistent at $0.01 million at June 30, 2025 and December 31, 2024.

Other components of liquidity are the level of borrowings from third-party sources and the availability of future credit.

1 unchanged sentence

Federal funds purchased are overnight borrowings obtained mainly from upstream correspondent banks with which the Company maintains approved credit lines.

As of March 31, 2025, under agreements with these unaffiliated banks, the Bank may borrow up to $35.0 million in federal funds on an unsecured basis and $7.2 million on a secured basis.

There were no federal funds purchased outstanding at March 31, 2025.

The Company may

periodically borrow additional short-term funds from the Federal Reserve Bank through the discount window, although no such borrowings were outstanding at March 31, 2025.

As of June 30, 2025, under agreements with these unaffiliated banks, the Bank may borrow up to $35.0 million in federal funds on an unsecured basis and $7.2 million on a secured basis.

There were no federal funds purchased outstanding at June 30, 2025.

The Company may periodically borrow additional short-term funds from the Federal Reserve Bank through the discount window, although no such borrowings were outstanding at June 30, 2025.

The Bank is a member of the FHLB and has access to credit products of the FHLB.

As of March 31, 2025, the Bank had $124.0 million in outstanding borrowings with the FHLB.

As of June 30, 2025, the Bank had $140.0 million in outstanding borrowings with the FHLB.

In addition, the Company has $49.5 million in outstanding subordinated notes issued to wholly-owned grantor trusts, funded by preferred securities issued by the trusts.

Borrowings outstanding at March 31, 2025 and December 31, 2024 were as follows:

(dollars in thousands) March 31, 2025 December 31, 2024

Borrowings outstanding at June 30, 2025 and December 31, 2024 were as follows:

(dollars in thousands) June 30, 2025 December 31, 2024

Federal Home Loan Bank advances $ 140,000 $ 81,425

7 unchanged sentences

The following table reflects collateral value of assets pledged, borrowings, and letters of credit outstanding, in addition to the estimated future funding capacity available to the Company:

March 31, 2025 December 31, 2024

June 30, 2025 December 31, 2024

(dollars in thousands) FHLB Federal Reserve Bank Federal Funds Purchased Lines Total FHLB Federal Reserve Bank Federal Funds Purchased Lines Total

3 unchanged sentences

Total available $ 209,707 $ 7,221 $ 35,000 $ 251,928 $ 187,253 $ 7,468 $ 35,000 $ 229,721

At March 31, 2025, loans of $733.7 million were pledged to the FHLB as collateral for borrowings and letters of credit.

At March 31, 2025, investments with a market value of $7.7 million were pledged to secure federal funds purchase lines and borrowing capacity at the Federal Reserve Bank.

At June 30, 2025, loans of $723.2 million were pledged to the FHLB as collateral for borrowings and letters of credit.

At June 30, 2025, investments with a market value of $7.7 million were pledged to secure federal funds purchase lines and borrowing capacity at the Federal Reserve Bank.

Based upon the above, management believes the Company has more than adequate liquidity, both on balance sheet and through the additional funding capacity with the FHLB, the Federal Reserve Bank and Federal funds purchased lines to meet future anticipated liquidity needs in both the short and long-term.

Sources and Uses of Funds

Cash and cash equivalents were $102.3 million at March 31, 2025 compared to $51.0 million at December 31, 2024.

The $51.3 million increase resulted from changes in the various cash flows produced by operating, investing, and financing activities of the Company, as shown in the accompanying consolidated statement of cash flows for the three months ended March 31, 2025.

Cash and cash equivalents were $100.3 million at June 30, 2025 compared to $51.0 million at December 31, 2024.

The $49.3 million increase resulted from changes in the various cash flows produced by operating, investing, and financing activities of the Company, as shown in the accompanying consolidated statement of cash flows for the six months ended June 30, 2025.

Cash flow provided by operating activities consists mainly of net income adjusted for certain non-cash items.

Operating activities provided total cash of $5.7 million for the three months ended March 31, 2025.

Investing activities, consisting mainly of purchases, sales and maturities of available-for-sale securities, and changes in the level of the loan portfolio, used total cash of $6.0 million during the three months ended March 31, 2025.

The cash outflow primarily consisted of a $4.1 million net increase in loans held for investment and $6.7 million in purchases of securities, partially offset by $6.0 million proceeds from maturities and calls of available-for-sale securities.

Financing activities provided total cash of $51.5 million during the three months ended March 31, 2025, resulting primarily from a $42.1 million increase in demand deposits and a $42.6 million net increase in FHLB advances, partially offset by a $27.4 million decrease in interest-bearing transaction accounts and $3.9 million decrease in time deposits.

Operating activities provided total cash of $11.5 million for the six months ended June 30, 2025.

Investing activities, consisting mainly of purchases, sales and maturities of available-for-sale securities, and changes in the level of the loan portfolio, used total cash of $0.7 million during the six months ended June 30, 2025.

The cash outflow primarily consisted of a $13.3 million in purchases of securities and a $2.5 million net decrease in FHLB stock, partially offset by $11.4 million proceeds from maturities and calls of available-for-sale securities and a $3.2 million net decrease in loans held for investment.

Financing activities provided total cash of $38.5 million during the six months ended June 30, 2025, resulting primarily from a $34.9 million increase in demand deposits, a $58.6 million net increase in FHLB advances, and an $8.0 million increase in time deposits, partially offset by a $58.1 million decrease in interest-bearing transaction accounts.

In the normal course of business, the Company enters into certain forms of off-balance sheet transactions, including unfunded loan commitments and letters of credit.

1 unchanged sentence

Management considers both on-balance sheet and off-balance sheet transactions in its evaluation of the Company’s liquidity.

The Company had $368.7 million in unused loan commitments and standby letters of credit as of March 31, 2025.

The Company had $388.0 million in unused loan commitments and standby letters of credit as of June 30, 2025.

Although the Company’s current liquidity resources are adequate to fund this commitment level, the nature of these commitments is such that the likelihood of such a funding demand is very low.

1 unchanged sentence

The Company’s ongoing liquidity needs primarily include funding its operating expenses, paying cash dividends to its shareholders and, to a lesser extent, repurchasing its shares of common stock.

The Company paid cash dividends to its shareholders totaling approximately $1.3 million and $1.2 million during the three months ended March 31, 2025 and 2024, respectively.

The Company paid cash dividends to its shareholders totaling approximately $2.7 million and $2.4 million during the six months ended June 30, 2025 and 2024, respectively.

A large portion of the Company’s liquidity is obtained from the Bank in the form of dividends.

The Bank did not declare a dividend to the Company during the three months ended March 31, 2025 and declared a $5.0 million dividend to the Company during the three months ended March 31, 2024.

At March 31, 2025 and December 31, 2024, the Company had cash and cash equivalents totaling $14.4 million and $15.3 million, respectively.

The Bank declared $10.0 million in dividends to the Company during both the six months ended June 30, 2025 and 2024, respectively.

At June 30, 2025 and December 31, 2024, the Company had cash and cash equivalents totaling $21.0 million and $15.3 million, respectively.

Subject to declaration by the Company's Board of Directors, the Company expects to continue paying quarterly cash dividends as a part of its current capital allocation strategy.

Future dividends will be subject to the determination, declaration and discretion of the Company's Board of Directors and compliance with applicable regulatory capital requirements.

On June 5, 2025, the Company announced that its Board of Directors approved a new common stock repurchase program under which the Company may repurchase up to $10.0 million of its common stock, which replaced the Company’s prior common stock repurchase program.

Pursuant to the repurchase program, management is given discretion to determine the number and pricing of the shares to be repurchased, as well as the timing of any such repurchases.

The timing and total amount of stock repurchases will depend on market and other conditions and may be made from time to time in open market purchases or privately negotiated transactions.

The program has no termination date, may be suspended or discontinued at any time and does not obligate the Company to acquire any amount of common stock.

The Company repurchased 79,777 common shares under its repurchase programs during the first six months of 2025 at an average cost of $27.62 per share totaling $2.2 million.

As of June 30, 2025, $9.0 million remained available for share repurchases pursuant to the Company's current repurchase program.

On June 24, 2025, the Company filed a universal shelf registration statement on Form S-3 with the Securities and Exchange Commission, which became effective on July 2, 2025.

The shelf registration statement is intended to provide us

with financial flexibility to raise capital from the offering of up to $150 million of any combination of common stock, preferred stock, debt securities, depositary shares, warrants, purchase contracts, purchase units, subscription rights and units in one or multiple offerings while the shelf registration statement is effective.

Capital Management

8 unchanged sentences

Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios of CET1, Tier 1 and total capital to risk-weighted assets, and of Tier 1 capital to average assets, each as defined in the regulations.

Management believes, as of March 31, 2025, that the Company and the Bank meet all capital adequacy requirements to which they are subject.

Management believes, as of June 30, 2025, that the Company and the Bank meet all capital adequacy requirements to which they are subject.

Financial institutions are categorized as well capitalized or adequately capitalized, based on minimum total risk-based, Tier 1 risk-based, CET1 and Tier 1 leverage ratios.

As shown in the table below, the Company’s capital ratios exceeded the regulatory definition of adequately capitalized as of March 31, 2025 and December 31, 2024.

As shown in the table below, the Company’s capital ratios exceeded the regulatory definition of adequately capitalized as of June 30, 2025 and December 31, 2024.

Based upon the information in its most recently filed call report, the Bank met the capital ratios necessary to be well-capitalized.

1 unchanged sentence

Any such change could reduce one or more capital ratios below well-capitalized status.

addition, a change may result in imposition of additional assessments by the FDIC or could result in regulatory actions that could have a material effect on our condition and results of operations.

In addition, a change may result in imposition of additional assessments by the FDIC or could result in regulatory actions that could have a material effect on our condition and results of operations.

In addition, bank holding companies generally are required to maintain a Tier 1 leverage ratio of at least 4%.

Because the Bank had less than $15.0 billion in total consolidated assets as of December 31, 2009, the Company is allowed to continue its trust preferred securities, all of which were issued prior to May 19, 2010, as Tier 1 capital.

Under the Basel III Capital Rules, at March 31, 2025 and December 31, 2024, the Company met all capital adequacy requirements and had regulatory capital ratios in excess of the levels established for well-capitalized institutions, as shown in the following table as the dates indicated:

Under the Basel III Capital Rules, at June 30, 2025 and December 31, 2024, the Company met all capital adequacy requirements and had regulatory capital ratios in excess of the levels established for well-capitalized institutions, as shown in the following table as the dates indicated:

Actual Minimum Capital Required - Basel III Fully Phased-In Required to be Considered Well- Capitalized

(dollars in thousands) Amount Ratio Amount Ratio Amount Ratio

March 31, 2025

June 30, 2025

Total Capital (to risk-weighted assets):

24 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