What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-11-07 compared with 2025-08-11 · 199 added, 186 removed, 464 unchanged (45% 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 June 30, 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 September 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 June 30, 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 $1.93 billion in assets at September 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.

The Company also provides other financial services through its Wealth Management business, including trust services, estate planning, investment and asset management services and a comprehensive suite of cash management services.

Beginning with the first quarter of 2025, the Company's Wealth Management business is now reported as a separate reporting segment, and the Company now operates two reporting segments, consisting of the Bank and the Wealth Management business.

Beginning with the first quarter of 2025, the Company's Wealth Management business is reported as a separate reporting segment, and the Company operates two reporting segments, consisting of the Bank and the Wealth Management business.

The geographic areas in which the Company provides products and services include the Missouri communities in and surrounding Jefferson City, Columbia, Clinton, Warsaw, Springfield, and the greater Kansas City metropolitan area.

18 unchanged sentences

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

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

As of and for the As of and for the

Three Months Ended September 30, Nine Months Ended September 30,

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

Net interest income $ 16,865 $ 14,327 $ 48,301 $ 43,246

Release of provision for credit losses (51) 457 (391) 227

Provision for (release of) for credit losses 375 500 (16) 726

Non-interest income 3,716 3,783 10,724 10,798

Investment securities losses, net (1) (15) (3) (15)

Investment securities gains (losses), net 105 8 102 (7)

Non-interest expense 12,821 11,994 37,589 36,603

4 unchanged sentences

Diluted earnings per share $ 0.88 $ 0.66 $ 2.53 $ 1.95

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

Market and per share data

Book value per share (1) $ 22.53 $ 19.71

Market price per share $ 29.14 $ 19.80

Cash dividends paid on common stock $ 1,328 $ 1,194 $ 2,656 $ 2,391

Performance Ratios

2 unchanged sentences

Efficiency ratio (1)

Net interest margin 3.89% 3.33% 3.78% 3.36%

62.30 66.23 63.68 67.73

Net interest margin, fully tax-equivalent 3.97 3.36 3.85 3.36

Average stockholders' equity to total assets 8.74 7.80 8.58 7.54

(1) Book value per share is calculated using weighted average shares

Market and per share data

Book value per share (2)

$ 23.76 $ 20.91

Market price per share $ 31.04 $ 25.03

Cash dividends declared on common stock $ 1,384 $ 1,327 $ 4,101 $ 3,850

(1) Efficiency ratio is calculated as non-interest expense as a percentage of revenue.

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 Six Months Ended

June 30, June 30,

(2) Book value per share is calculated using weighted average shares.

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

September 30, September 30,

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

18 unchanged sentences

Results of Operations Highlights:

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.

Consolidated net income was $6.1 million, or $0.88 per diluted share, and $17.6 million, or $2.53 per diluted share, for the three and nine months ended September 30, 2025, respectively, compared to $4.6 million, or $0.66 per diluted share, and $13.7 million, or $1.95 per diluted share, for the three and nine months ended September 30, 2024, respectively.

For the three and nine months ended September 30, 2025, the return on average assets was 1.33% and 1.30%, respectively, the return on average stockholders’ equity was 15.21% and 15.13%, respectively, and the efficiency ratio was 62.30% and 63.68%, respectively.

Net interest income was $16.9 million and $48.3 million for the three and nine months ended September 30, 2025, respectively, compared to $14.3 million and $43.2 million for the three and nine months ended September 30, 2024, respectively.

Net interest margin, on a fully taxable equivalent (“FTE”) basis, was 3.97% and 3.85% for the three and nine months ended September 30, 2025, respectively, compared to 3.36% for both the three and nine months ended September 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 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.

Non-interest income was $3.7 million and $10.7 million for the three and nine months ended September 30, 2025, respectively, compared to $3.8 million and $10.8 million for the three and nine months ended September 30, 2024, respectively.

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

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.

Non-interest expense was $12.8 million and $37.6 million for the three and nine months ended September 30, 2025, respectively, compared to $12.0 million and $36.6 million for the three and nine months ended September 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 $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.

Cash and cash equivalents – Cash and cash equivalents increased $48.9 million to $99.9 million as of September 30, 2025 compared to $51.0 million as of December 31, 2024, and increased $45.7 million compared to $54.2 million as of September 30, 2024.

See the Liquidity Management section for further discussion.

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.

Loans – Loans held for investment increased $47.8 million to $1.51 billion as of September 30, 2025 compared to $1.47 billion as of December 31, 2024, and increased $47.3 million compared to $1.47 billion as of September 30, 2024.

Asset quality – Non-performing assets totaled $7.3 million, or 0.48% of total loans, at September 30, 2025 compared to $4.2 million, or 0.29% of total loans, at December 31, 2024 and $8.5 million, or 0.58% of total loans, at September 30, 2024.

In the third quarter of 2025, the Company had net loan charge-offs of $0.04 million, or 0.01% of average loans, compared to net loan charge-offs $0.6 million, or 0.17% of average loans, in the same prior year quarter.

The allowance for credit losses was $21.9 million, or 1.45% of loans outstanding, at September 30, 2025 compared to $22.0 million, or 1.50% of loans outstanding, at December 31, 2024, and $21.9 million, or 1.50% of loans outstanding at September 30, 2024.

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

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.

Deposit s – Total deposits decreased $7.3 million to $1.53 billion as of September 30, 2025 compared to $1.53 billion as of December 31, 2024, and increased $22.4 million compared to $1.50 billion as of September 30, 2024.

Federal Home Loan Bank (“FHLB”) advances and other borrowings – Total FHLB advances and other borrowings increased $95.6 million to $177.1 million as of September 30, 2025, compared to $81.5 million as of December 31, 2024, and increased $80.6 million compared to $96.5 million as of September 30, 2024.

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

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

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

total risk-based capital to risk-weighted assets 14.90%;

1 unchanged sentence

tier 1 leverage 11.97%;

and common equity to assets 8.35%.

and stockholders’ equity to assets 8.54%.

Average Balance Sheet Data

1 unchanged sentence

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 and six month periods ended June 30, 2025 and 2024, respectively.

The following tables present 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 an FTE basis for each of the three and nine month periods ended September 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 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)

Three Months Ended September 30,

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

Rate Earned/ Paid (1)

Average Balance Interest Income/ Expense (1)

Rate Earned/ Paid (1)

Commercial $ 214,213 $ 3,821 7.08% $ 210,783 $ 3,592 6.78%

39 unchanged sentences

Net interest margin (FTE) 3.97% 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 three months ended June 30, 2025 and 2024.

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)

Nine months ended September 30,

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

Rate Earned/ Paid (1)

Average Balance Interest Income/ Expense (1)

Rate Earned/ Paid (1)

Commercial $ 207,419 $ 10,493 6.76% $ 217,576 $ 10,847 6.66%

39 unchanged sentences

Net interest margin (FTE) 3.85% 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.

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

Such adjustments totaled $0.4 million and $0.2 million for the three months ended September 30, 2025 and 2024, respectively, compared to $1.0 million and $0.6 million for the nine months ended September 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 and six months ended June 30, 2025 compared to the three and six months ending ended June 30, 2024, respectively.

The following table summarizes the changes in net interest income on an FTE basis, by major category of interest earning assets and interest bearing liabilities, identifying changes related to volumes and rates for the three and nine months ended September 30, 2025 compared to the three and nine months ending ended September 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 June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2024 2025 vs.

25 unchanged sentences

FHLB advances and other borrowings (41) (105) 64 (817) (698) (119)

(427) (325) (102) (777) (570) (207)

Subordinated notes (129) — (129) (396) — (396)

Total interest expense (1,354) (71) (1,283) (4,110) (1,005) (3,105)

Net interest income on a FTE basis

$ 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 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.

Net interest income on an FTE basis $ 2,740 $ 158 $ 2,582 $ 5,481 $ (766) $ 6,247

Such adjustments totaled $0.4 million and $1.0 million for the three and nine months ended September 30, 2025, respectively, compared to $0.2 million and $0.6 million for the three and nine months ended September 30, 2024, respectively.

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

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.

Financial results for the quarter ended September 30, 2025 compared to the quarter ended September 30, 2024, reflected an increase in net interest income on an FTE basis of $2.7 million, or 18.9%, and financial results for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 reflected an increase in net interest income on an FTE basis of $5.5 million, or 12.5%.

Measured as a percentage of average earning assets, the net interest margin (expressed on an FTE basis) increased to 3.97% for the quarter ended September 30, 2025 compared to 3.36% for the quarter ended September 30, 2024, and increased to 3.85% for the nine months ended September 30, 2025 compared to 3.36% for the nine months ended September 30, 2024.

Average interest earning assets increased $5.6 million, or 0.3%, to $1.72 billion for the quarter ended September 30, 2025 compared to $1.72 billion for the quarter ended September 30, 2024, and average interest bearing liabilities decreased $37.3 million, or 2.9%, to $1.24 billion for the quarter ended September 30, 2025 compared to $1.27 billion for the quarter ended September 30, 2024.

Average interest earning assets decreased $28.4 million, or 1.6%, to $1.71 billion for the nine months ended September 30, 2025 compared to $1.74 billion for the nine months ended September 30, 2024, and average interest bearing liabilities decreased $52.8 million, or 4.1%, to $1.24 billion for the nine months ended September 30, 2025 compared to $1.29 billion for the nine months ended September 30, 2024.

Total interest income (expressed on an FTE basis) was $25.4 million and $73.4 million for the three and nine months ended September 30, 2025, respectively, compared to $24.0 million and $72.0 million for the three and nine months ended September 30, 2024, respectively.

The Company’s rates earned on interest earning assets were 5.84% and 5.72% for the three and nine months ended September 30, 2025, respectively, compared to 5.56% and 5.52% for the three and nine months ended September 30, 2024, respectively.

Interest income on loans held for investment (expressed on an FTE basis) was $22.8 million and $65.7 million for the three and nine months ended September 30, 2025, respectively, compared to $21.8 million and $65.2 million for the three and nine months ended September 30, 2024, respectively.

Average loans outstanding decreased $7.5 million, or 0.5%, to $1.48 billion for the quarter ended September 30, 2025 compared to $1.49 billion for the quarter ended September 30, 2024.

The average yield on loans increased to 6.12% for the quarter ended September 30, 2025 compared to 5.83% for the quarter ended September 30, 2024.

Average loans outstanding decreased $41.8 million, or 2.8%, to $1.47 billion for the nine months ended September 30, 2025 compared to $1.51 billion for the nine months ended September 30, 2024.

The average yield on loans increased to 6.00% for the nine months ended September 30, 2025 compared to 5.78% for the nine months ended September 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 $2.3 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.

Interest income on available-for-sale securities (expressed on an FTE basis) was $2.2 million and $6.5 million for the three and nine months ended September 30, 2025, respectively, compared to $1.6 million and $4.6 million for the three and nine months ended September 30, 2024, respectively.

Average securities increased $26.5 million, or 13.8%, to $218.7 million for the quarter ended September 30, 2025 compared to $192.3 million for the quarter ended September 30, 2024.

The average yield on securities increased to 4.01% for the quarter ended September 30, 2025 compared to 3.32% for the quarter ended September 30, 2024.

Average securities increased $34.6 million, or 18.5%, to $220.9 million for the nine months ended September 30, 2025 compared to $186.3 million for the nine months ended September 30, 2024.

The average yield on securities increased to 3.95% for the nine months ended September 30, 2025 compared to 3.30% for the nine months ended September 30, 2024.

See the Liquidity Management section for further discussion.

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.

Total interest expense was $8.1 million and $24.1 million for the three and nine months ended September 30, 2025, respectively, compared to $9.5 million and $28.2 million for the three and nine months ended September 30, 2024, respectively.

The Company’s rates paid on interest bearing liabilities were 2.61% and 2.60% for the three and nine months ended September 30, 2025, respectively, compared to 2.96% and 2.92% for the three and nine months ended September 30, 2024, respectively.

See the Liquidity Management section for further discussion.

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.

Interest expense on deposits was $6.6 million and $19.9 million for the three and nine months ended September 30, 2025, respectively, compared to $7.7 million and $22.8 million for the three and nine months ended September 30, 2024, respectively.

Average interest bearing deposits decreased $24.2 million, or 2.2%, to $1.10 billion for the quarter ended September 30, 2025 compared to $1.13 billion for the quarter ended September 30, 2024.

The average cost of deposits decreased to 2.36% for the quarter ended September 30, 2025 compared to 2.74% for the quarter ended September 30, 2024.

Average interest bearing deposits decreased $21.4 million, or 1.9%, to $1.11 billion for the nine months ended September 30, 2025 compared to $1.14 billion for the nine months ended September 30, 2024.

The average cost of deposits decreased to 2.38% for the nine months ended September 30, 2025 compared to 2.68% for the nine months ended September 30, 2024.

Interest expense on borrowings was $1.6 million and $4.2 million for the three and nine months ended September 30, 2025, respectively, compared to $1.7 million and $5.4 million for the three and nine months ended September 30, 2024, respectively.

Average borrowings decreased $13.0 million, or 8.8%, to $135.8 million for the quarter ended September 30, 2025 compared to $148.8 million for the quarter ended September 30, 2024.

The average cost of borrowings decreased to 4.61% for the quarter ended September 30, 2025 compared to 4.67% for the quarter ended September 30, 2024.

Average borrowings decreased $31.3 million, or 20.3%, to $123.2 million for the nine months ended September 30, 2025 compared to $154.5 million for the nine months ended September 30, 2024.

The average cost of borrowings decreased to 4.55% for the nine months ended September 30, 2025 compared to 4.67% for the nine months ended September 30, 2024.

Non-interest Income

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

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

The following table shows the principal components of non-interest income for the three and nine months ended September 30, 2025 and 2024.

Three Months Ended September 30, Nine Months Ended September 30,

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

4 unchanged sentences

Gain on sales of mortgage loans, net 78 111 (33) (29.7) 320 786 (466) (59.3)

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

Gains (losses) on other real estate owned, net — 262 (262) (100.0) (156) 751 (907) (120.8)

Other 546 561 (15) (2.7) 1,651 1,300 351 27.0

1 unchanged sentence

Non-interest income as a % of total revenue (1)

18.1 % 20.9 % 18.2 % 20.0 %

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

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.

Total non-interest income decreased $0.1 million, or 1.8%, to $3.7 million for the quarter ended September 30, 2025 compared to $3.8 million for the quarter ended September 30, 2024, and decreased $0.1 million, or 0.7%, to $10.7 million from $10.8 million for the nine months ended September 30, 2025 and September 30, 2024, respectively.

Compared to the prior year quarter, the decrease was primarily due to lower gains on sales of mortgage loans and lower net gains (losses) on sales of other real estate owned, offset by increases in wealth management revenue and service charges and other fees.

Service charges and other fees increased $0.1 million, or 6.7%, to $0.9 million for the quarter ended September 30, 2025 compared to $0.9 million for the quarter ended September 30, 2024 and increased $0.3 million, or 12.9%, to $2.8 million from $2.5 million for the nine months ended September 30, 2025 and September 30, 2024, respectively.

The increase for both the three and nine months ended September 30, 2025 was primarily attributable to an increase in service charge rates assessed on customer accounts beginning in the third quarter of 2024.

Earnings on bank-owned life insurance was $0.5 million for both quarters ended September 30, 2025 and September 30, 2024, and increased to $1.5 million for the nine months ended September 30, 2025 compared to $1.2 million for the nine months ended September 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 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.

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

Wealth management revenue increased $0.2 million, or 54.3%, to $0.7 million for the quarter ended September 30, 2025 compared to $0.4 million for the quarter ended September 30, 2024.

For the nine months ended September 30, 2025,

wealth management revenue totaled $1.7 million, an increase of $0.4 million, or 33.3%, from $1.3 million for the nine months ended September 30, 2024.

The increases for both the three and nine month periods ended September 30, 2025 were primarily attributable the Company’s identification of a strategic opportunity to add resources and provide a structure for Wealth Management products and services.

Gain on sales of mortgage loans was $0.1 million for both quarters ended September 30, 2025 and September 30, 2024, and decreased to $0.3 million for the nine months ended September 30, 2025 compared to $0.8 million for the nine months ended September 30, 2024.

The Company sold mortgage loans totaling $2.2 million and $5.1 million for the three and nine months ended September 30, 2025, respectively, compared to $7.0 million and $45.0 million for the three and nine months ended September 30, 2024, respectively.

Gains (losses) on other real estate owned were zero for the quarter ended September 30, 2025 compared to gains of $0.3 million for the quarter ended September 30, 2024, and were losses of $0.2 million for the nine months ended September 30, 2025 compared to gains of $0.8 million for the nine months ended September 30, 2024.

The Company sold the remaining parcel related to a foreclosed property in the second quarter of 2024, and the Company recognized a $0.4 million release of the valuation write-down.

Moreover, the Company sold land previously intended for a new branch, resulting in a gain of $0.3 million in the third quarter of 2024.

Non-interest Expense

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

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

The following table shows the principal components of non-interest expense for the three and nine months ended September 30, 2025 and 2024.

Three Months Ended September 30, Nine Months Ended September 30,

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

10 unchanged sentences

Efficiency ratio (1)

62.3 % 66.2 % 63.7 % 67.7 %

Number of full-time equivalent employees 259 268 259 268

1 unchanged sentence

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

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 $0.1 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 $0.05 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 $0.2 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 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.

Total non-interest expense increased $0.8 million, or 6.9%, to $12.8 million for the quarter ended September 30, 2025 compared to $12.0 million for the quarter ended September 30, 2024, and increased $1.0 million, or 2.7%, to $37.6 million for the nine months ended September 30, 2025 compared to $36.6 million for the nine months ended September 30, 2024.

Salaries expense increased $0.6 million, or 12.2%, to $5.7 million for the quarter ended September 30, 2025 compared to $5.1 million for the quarter ended September 30, 2024, and increased $0.8 million, or 4.8%, to $16.5 million for the nine months ended September 30, 2025 compared to $15.8 million for the nine months ended September 30, 2024.

The increases for both the three and nine months ended September 30, 2025 were primarily attributable to overall merit increases and focused recruiting efforts to hire more experienced candidates, which aligns with the Company’s overall strategic plan.

Occupancy expense, net, increased $0.1 million, or 10.4%, to $0.9 million for the quarter ended September 30, 2025 compared to $0.8 million for the quarter ended September 30, 2024, and increased $0.5 million, or 19.0%, to $2.8 million for the nine months ended September 30, 2025 compared to $2.4 million for the nine months ended September 30, 2024.

The increases for both the three and nine months ended September 30, 2025 primarily resulted from the opening of two new branch locations and one new operations facility.

Furniture and equipment expense decreased $0.1 million, or 13.2%, to $0.7 million for the quarter ended September 30, 2025 compared to $0.8 million for the quarter ended September 30, 2024, and decreased $0.1 million, or 5.2%, to $2.1 million for the nine months ended September 30, 2025 compared to $2.3 million for the nine months ended September 30, 2024.

Legal, examination and professional fees increased $0.1 million, or 24.3%, to $0.5 million for the quarter ended September 30, 2025 compared to $0.4 million for the quarter ended September 30, 2024, and decreased $0.3 million, or 18.8%, to $1.4 million for the nine months ended September 30, 2025 compared to $1.7 million for the nine months ended September 30, 2024.

Advertising and promotion increased $0.05 million, or 27.3%, to $0.3 million for the quarter ended September 30, 2025 compared to $0.2 million for the quarter ended September 30, 2024, and decreased $0.1 million, or 12.2%, to $0.6 million for the nine months ended September 30, 2025 compared to $0.7 million for the nine months ended September 30, 2024.

Postage, printing and supplies increased $0.1 million, or 64.7%, to $0.4 million for the quarter ended September 30, 2025 compared to $0.2 million for the quarter ended September 30, 2024, and increased $0.4 million, or 73.4%, to $1.0 million for the nine months ended September 30, 2025 compared to $0.6 million for the nine months ended September 30, 2024.

The increases for both the three and nine months ended September 30, 2025 were primarily the 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 were 18.1% and 18.3% for the three and nine months ended September 30, 2025, respectively, compared to 18.7% and 18.2% for the three and nine months ended September 30, 2024, respectively.

The effective tax rate for each of the three and nine months ended September 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 76.8% of total assets as of June 30, 2025 compared to 79.1% as of December 31, 2024.

Net loans represented 77.2% of total assets as of September 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.

2 unchanged sentences

The executive loan committee meets weekly and is comprised of senior managers of the Bank.

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

June 30, 2025 December 31, 2024

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

September 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 June 30, 2025 and December 31, 2024:

June 30, 2025 December 31, 2024

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

September 30, 2025 December 31, 2024

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

Retail $ 172,122 29.2 % $ 190,915 30.0 %

Multi Family $ 188,299 29.9 % $ 168,629 26.5 %

Retail 170,540 27.1 190,915 30.0

Hotel & Food Service 63,552 10.1 70,816 11.2

36 unchanged sentences

The model used depends on the loan portfolio segment.

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

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.

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

At September 30, 2025 and December 31, 2024, the ACL on loans included a qualitative adjustment of approximately $9.7 million and $11.2 million, respectively.

Non-Performing Assets

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

June 30, December 31,

September 30, December 31,

(dollars in thousands) 2025 2024

8 unchanged sentences

Loans contractually past due 90 days or more and still accruing:

Commercial, financial, and agricultural 500 —

Real estate mortgage − residential 352 207

1 unchanged sentence

Total 855 210

Total non-performing loans (a) 2,761 2,747

Total non-performing loans (1)

Other real estate owned and repossessed assets 2,425 1,446

Total non-performing assets (b)

Total non-performing assets (2)

$ 7,336 $ 4,193

2 unchanged sentences

Allowance for credit losses to loans 1.45 % 1.50 %

1.47 % 1.50 %

Non-accrual loans to total loans 0.27 0.17

Non-performing loans to loans (a) 0.19 % 0.19 %

Non-performing assets to loans (b) 0.35 % 0.29 %

Non-performing assets to assets (b) 0.28 % 0.23 %

Non-performing loans to loans (1)

Non-performing assets to loans (2)

Non-performing assets to assets (2)

Allowance for credit losses to non-accrual loans 540.04 868.90

956.12 % 868.90 %

Allowance for credit losses to non-performing loans 446.02 802.48

781.24 % 802.48 %

(a) Non-performing loans include loans 90 days past due and accruing and non-accrual loans.

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

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.

(1) Non-performing loans include loans 90 days past due and accruing and non-accrual loans.

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

Total non-performing assets were $7.3 million, or 0.48% of total loans, at September 30, 2025 compared to $4.2 million, or 0.29% of total loans, at December 31, 2024.

Total non-accrual loans at September 30, 2025 increased $1.5 million, or 59.9%, to $4.1 million compared to $2.5 million at December 31, 2024.

The increase in non-accrual loans since December 31, 2024 was primarily due to the movement of one commercial relationship to non-accrual status.

There were $0.9 million in loans past due 90 days and still accruing interest at September 30, 2025 compared to $0.2 million at December 31, 2024.

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

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

Allowance for Credit Losses

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

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

Allocation of allowance for credit losses at end of period:

The following table is a summary of the allocation of the allowance for credit losses at the end of the periods shown below:

September 30, 2025 December 31, 2024

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

Commercial, financial, and agricultural $ 2,421 15.0 % $ 1,560 13.8 %

6 unchanged sentences

Total $ 21,904 100.0 % $ 22,044 100.0 %

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 June 30, Six Months Ended June 30,

The allowance for credit losses was $21.9 million, or 1.45% of loans outstanding, at September 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 446.02% at September 30, 2025, compared to 802.48% at December 31, 2024.

Provision for (Release of) Credit Losses

Three Months Ended September 30, Nine Months Ended September 30,

(dollars in thousands) 2025 2024 2025 2024

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

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 $0.1 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 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

Provision for (release of) credit losses on loans $ 375 $ 593 $ (66) $ 875

(Release of) provision for credit losses for off-balance sheet commitments — (93) 50 (149)

Total provision for (release of) credit losses $ 375 $ 500 $ (16) $ 726

The Company recognized provision for credit losses of $0.4 million and a release of provision for credit losses of $0.02 million for the three and nine months ended September 30, 2025, respectively, compared to $0.5 million and $0.7 million of provision for credit losses for the three and nine months ended September 30, 2024, respectively.

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

Three Months Ended September 30,

(dollars in thousands) Net (Charge-offs) Recoveries Average Loans Net (Charge-offs) Recoveries / Average Loans (1)

Net (Charge-offs) Recoveries Average Loans Net (Charge-offs) Recoveries / Average Loans (1)

Commercial, financial, and agricultural $ 25 $ 214,213 0.05 % $ (254) $ 210,783 (0.48) %

9 unchanged sentences

Total $ (41) $ 1,478,139 (0.01) % $ (636) $ 1,485,653 (0.17) %

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

Nine Months Ended September 30,

(dollars in thousands) Net (Charge-offs) Recoveries Average Loans Net (Charge-offs) Recoveries / Average Loans (1)

Net (Charge-offs) Recoveries Average Loans Net (Charge-offs) Recoveries / Average Loans (1)

Commercial, financial, and agricultural $ 93 $ 207,419 0.06 % $ (2,122) $ 217,576 (1.30) %

9 unchanged sentences

Total $ (74) $ 1,465,393 (0.01) % $ (2,682) $ 1,507,223 (0.24) %

Net Loan Recoveries (Charge-Offs)

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.

(1) Annualized ratio of net (charge-offs) recoveries to average loans by loan type.

Net Loan Charge-Offs/Recoveries

The Company’s net charge-offs were $0.04 million and $0.07 million for the three and nine months ended September 30, 2025, respectively, compared to $0.6 million and $2.7 million of net charge-offs for the three and nine months ended September 30, 2024, respectively.

Loans Held for Sale

1 unchanged sentence

Loans held for sale are being carried at the lower of cost or estimated fair value.

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

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

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

There were $1.4 million loans held for sale at September 30, 2025, and no loans held for sale at 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 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.

During the nine months ended September 30, 2025, the Company sold approximately $5.1 million of loans to investors compared to $45.0 million for the nine months ended September 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) June 30, 2025 December 31, 2024

The following table shows the Company’s sources of funds as of September 30, 2025 and December 31, 2024.

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

Other interest bearing deposits $ 82,262 $ 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 $221.7 million at June 30, 2025 and included an unrealized net loss of $29.6 million.

The fair value of the available-for-sale investment portfolio was $216.7 million at September 30, 2025 and included an unrealized net loss of $24.7 million.

The portfolio includes projected maturities and mortgage-backed securities pay-downs of approximately $1.1 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 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) June 30, 2025 December 31, 2024

At September 30, 2025 and December 31, 2024, the Company’s unpledged securities in the available-for-sale portfolio totaled approximately $124.1 million and $136.3 million, respectively.

Total investment securities pledged for these purposes were as follows as of September 30, 2025 and December 31, 2024:

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

Federal Reserve Bank borrowings $ 8,064 $ 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 June 30, 2025, such deposits totaled $1.4 billion and represented 94.0% of the Company’s total deposits.

At September 30, 2025, such deposits totaled $1.44 billion and represented 94.1% 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 June 30, 2025 and December 31, 2024 were as follows:

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

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

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

Non-interest bearing demand $ 424,437 $ 385,022

3 unchanged sentences

Total $ 1,436,000 $ 1,432,786

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.

Estimated uninsured deposits totaled $339.6 million, including $89.9 million of certificates of deposit, at September 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 both September 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 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.

As of September 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 $7.5 million on a secured basis.

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

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

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

As of September 30, 2025, the Bank had $177.0 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 June 30, 2025 and December 31, 2024 were as follows:

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

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

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

Federal Home Loan Bank advances $ 177,000 $ 81,425

6 unchanged sentences

The Federal Reserve Bank also establishes a collateral value of assets pledged to support borrowings from the discount window.

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:

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

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 as of September 30, 2025:

September 30, 2025

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

Advance equivalent $ 406,573 $ 7,525 $ 35,000 $ 449,098

2 unchanged sentences

Total available $ 183,198 $ 7,525 $ 35,000 $ 225,723

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.

At September 30, 2025, loans of $742.0 million were pledged to the FHLB as collateral for borrowings and letters of credit.

At September 30, 2025, investments with a market value of $8.1 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 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 $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 and cash equivalents were $99.9 million at September 30, 2025 compared to $51.0 million at December 31, 2024 and $54.2 million at September 30, 2024.

The $45.7 million increase since September 30, 2024 resulted from changes in the various cash flows produced by operating, investing, and financing activities of the Company, as shown in the accompanying consolidated statements of cash flows for the nine months ended September 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 $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.

Operating activities provided total cash of $11.8 million for the nine months ended September 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 $44.6 million during the nine months ended September 30, 2025.

The cash outflow primarily consisted of $18.8 million in purchases of securities and a $4.2 million net increase in FHLB stock, partially offset by $26.7 million of proceeds from maturities and calls of available-for-sale securities and a $47.9 million net increase in loans held for investment.

Financing activities provided total cash of $81.7 million during the nine months ended September 30, 2025, resulting primarily from a $39.4 million increase in demand deposits, a $34.4 million net decrease in FHLB advances, and an $11.6 million increase in time deposits, partially offset by a $58.3 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.

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

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

The Company had $384.9 million in unused loan commitments and standby letters of credit as of September 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.

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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 $2.7 million and $2.4 million during the six months ended June 30, 2025 and 2024, respectively.

The Company paid cash dividends to its shareholders totaling approximately $4.0 million and $3.7 million during the nine months ended September 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 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.

The Bank declared $16.0 million and $15.0 million in dividends to the Company during the nine months ended September 30, 2025 and 2024, respectively.

At September 30, 2025 and December 31, 2024, the Company had cash and cash equivalents totaling $21.8 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.

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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.

The Company repurchased 90,466 common shares under its repurchase programs during the first nine months of 2025 at an average cost of $27.72 per share totaling $2.5 million.

As of September 30, 2025, $8.7 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.

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

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

Management believes, as of September 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 June 30, 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 both September 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.

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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 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:

Because the Bank had less than $15.0 billion in total consolidated assets as of December 31, 2009, the Company is allowed to continue including 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 both September 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

June 30, 2025

September 30, 2025

Total Capital (to risk-weighted assets):

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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