What changed in this filing

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Item 1. Financial Statements

2025-05-06 compared with 2024-11-05 · 239 added, 293 removed, 522 unchanged (50% of the section changed)

2 unchanged sentences

Consolidated Balance Sheets

September 30, 2024 and December 31, 2023

March 31, 2025 and December 31, 2024

(Dollars in thousands)

9 unchanged sentences

Cash surrender value of life insurance

Other real estate

Right of use lease asset

5 unchanged sentences

Total deposits

Securities sold under agreements to repurchase

Junior subordinated debentures

5 unchanged sentences

Preferred stock, no par value;

authorized 5,000,000 shares;

5,000,000 shares;

no shares issued and outstanding

Common stock, no par value;

authorized 20,000,000 shares;

issued and outstanding 5,457,646 shares at September 30, 2024 and 5,534,499 shares at December 31, 2023

20,000,000 shares;

issued and outstanding 5,459,441 shares

at March 31, 2025 and 5,457,646 shares at December 31, 2024

Common stock held by deferred compensation trust, at cost;

shares at September 30, 2024 and 163,702 shares at December 31, 2023

shares at March 31, 2025 and 158,580 shares at December 31, 2024

Deferred compensation

6 unchanged sentences

Consolidated Statements of Earnings

Three and Nine Months Ended September 30, 2024 and 2023

Three Months Ended March 31, 2025 and 2024

(Dollars in thousands, except per share amounts)

Three months ended

Nine months ended

September 30,

Interest income:

6 unchanged sentences

Interest expense:

NOW, MMDA & savings deposits

Interest-bearing demand, MMDA & savings deposits

Time deposits

2 unchanged sentences

Net interest income

Provision for (recovery of) credit losses

Net interest income after provision for loan losses

Provision for credit losses

Net interest income after provision for credit losses

Non-interest income:

1 unchanged sentence

Other service charges and fees

Gain (loss) on sale of securities, net

Loss on sale of securities, net

Mortgage banking income

9 unchanged sentences

Appraisal management fee expense

Miscellaneous

Total non-interest expense

6 unchanged sentences

PEOPLES BANCORP OF NORTH CAROLINA, INC.

Consolidated Statements of Comprehensive Income (Loss)

Three and Nine Months Ended September 30, 2024 and 2023

Consolidated Statements of Comprehensive Income

Three Months Ended March 31, 2025 and 2024

(Dollars in thousands)

Three months ended

Nine months ended

September 30,

Other comprehensive income (loss):

Unrealized holding gains (losses) on securities available for sale

Reclassification adjustment for (gains) losses on securities available for sale included in net earnings

Total other comprehensive income (loss), before income taxes

Income tax expense (benefit) related to other comprehensive income:

Unrealized holding gains (losses) on securities available for sale

Reclassification adjustment for (gains) losses on securities available for sale included in net earnings

Total income tax expense (benefit) related to other comprehensive income

Total other comprehensive income (loss), net of tax

Total comprehensive income (loss)

Other comprehensive income :

Unrealized holding gains on securities available for sale

Reclassification adjustment for losses on securities available for sale included in net earnings

Total other comprehensive income , before income taxes

Income tax benefit related to other comprehensive income :

Unrealized holding gains on securities available for sale

Reclassification adjustment for losses on sales of securities available for sale included in net earnings

Total income tax expense related to other comprehensive income

Total other comprehensive income, net of tax

Total comprehensive income

See accompanying Notes to Consolidated Financial Statements.

1 unchanged sentence

Consolidated Statements of Changes in Shareholders' Equity

Three and Nine Months Ended September 30, 2024 and 2023

Three Months Ended March 31, 2025 and 2024

(Dollars in thousands)

1 unchanged sentence

Balance, December 31, 2024

Common stock repurchase

Restricted stock units vested

Cash dividends declared on common stock

Equity incentive plan, net

Change in accumulated other comprehensive income , net of tax

State tax rate reduction

Other comprehensive income

Balance, March 31, 2025

Cash dividends declared on common stock

Restricted stock units issued

Equity incentive plan, net

Change in accumulated other comprehensive loss, net of tax

Balance, June 30, 2024

Cash dividends declared on common stock

Equity incentive plan, net

Change in accumulated other comprehensive income, net of tax

Balance, September 30, 2024

Balance, December 31, 2023

Adoption of new accounting standard, net of tax

Cash dividends declared on common stock

Restricted stock units issued

Equity incentive plan, net

Change in accumulated other comprehensive income, net of tax

Balance, March 31, 2023

Common stock repurchase

1 unchanged sentence

Equity incentive plan, net

Change in accumulated other comprehensive loss, net of tax

Balance, June 30, 2023

Common stock repurchase

Cash dividends declared on common stock

Equity incentive plan, net

Change in accumulated other comprehensive loss, net of tax

Balance, September 30, 2023

Other comprehensive income

Balance, March 31, 2024

See accompanying Notes to Consolidated Financial Statements.

1 unchanged sentence

Consolidated Statements of Cash Flows

Nine Months Ended September 30, 2024 and 2023

Three Months Ended March 31, 2025 and 2024

(Dollars in thousands)

2 unchanged sentences

Depreciation, amortization and accretion

Provision for (recovery of) credit losses

Provision for credit losses

Deferred income taxes

Gain on sale of held for sale mortgage loans

(Gain) loss on sale of investment securities net

Gain on sale of held for mortgage loans

Loss on sale of investment securities net

Write-down of premises and equipment

Gain on sale of premises and equipment

Gain on sale of other real estate

Restricted stock expense

8 unchanged sentences

Purchases of investment securities available for sale

Proceeds from sales, calls and maturities of investment securities available for sale

Proceeds from calls and maturities of investment securities available for sale

Proceeds from sales of investment securities available for sale

Proceeds from paydowns of investment securities available for sale

3 unchanged sentences

Purchases of premises and equipment

Proceeds from sale of premises and equipment

Proceeds from sale of other real estate and repossessions

Net cash provided (used) by investing activities

2 unchanged sentences

Net change in securities sold under agreement to repurchase

Proceeds from Fed Funds purchased

Repayments of Fed Funds purchased

Restricted stock units vested

Common stock repurchased

Cash dividends paid on common stock

Net cash provided (used) by financing activities

Net cash provided by financing activities

Net change in cash and cash equivalents

3 unchanged sentences

Consolidated Statements of Cash Flows, continued

Nine Months Ended September 30, 2024 and 2023

Three Months Ended March 31, 2025 and 2024

(Dollars in thousands)

3 unchanged sentences

Change in unrealized loss on investment securities available for sale, net

Restricted stock units issued

Initial recognition of lease right-of-use asset and lease liability

Allowance for credit losses recorded upon adoption of ASU 326, net of tax

See accompanying Notes to Consolidated Financial Statements.

21 unchanged sentences

There have been no significant changes to the application of significant accounting policies since December 31, 2024.

Recent Accounting Pronouncements

The following table provides a summary of Accounting Standards Updates (“ASU’s”) issued by the Financial Accounting Standards Board (“FASB”) that the Company has not adopted as of September 30, 2024, which may impact the Company’s financial statements.

Effective Date

Effect on Financial Statements or Other Significant Matters

ASU 2023-07 Segment Reporting (Topic 280)

The ASU provides amendments to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses

Annual periods after 12/15/23 and interim periods after 12/15/24

ASU 2024-03—Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40)

The ASU requires disaggregated disclosure of income statement expenses for public business entities (PBEs).

Annual reporting periods after 12/15/26

The adoption of this guidance is not expected to have a material impact on the Company’s results of operations, financial position.

The adoption of this guidance is expected to have an immaterial impact on disclosures.

ASU 2023-09 Income Taxes (Topic 740)

The ASU provides amendments to improve the transparency of income tax disclosures.

January 1, 2025

ASU 2025-01, Income Statement—Reporting Comprehensive Income— Expense Disaggregation Disclosures (Subtopic 220- 40)

The ASU clarifies that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027.

Annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027.

The adoption of this guidance is not expected to have a material impact on the Company’s results of operations, financial position.

The adoption of this guidance is expected to have an immaterial impact on disclosures.

ASU 2024-01 Compensation—Stock Compensation (Topic 718)

The ASU adds an illustrative example (with four fact patterns) on how an entity would apply Accounting Standards Codification (ASC) 718 scope guidance.

January 1, 2025

The adoption of this guidance is not expected to have a material impact on the Company’s results of operations, financial position or disclosures.

ASU 2024-02 Codification Improvements Amendments to Remove References to Concepts Statements

The ASU removes references to various Concepts Statements.

In most instances, the references are extraneous and not required to understand or apply the guidance.

In other instances, the references are a substitute for actual wording from a Concepts Statement.

In most cases, the ASU is not intended to result in significant accounting changes for most entities.

January 1, 2025

The adoption of this guidance is not expected to have a material impact on the Company’s results of operations, financial position or disclosures.

Other accounting standards that have been issued or proposed by FASB or other standards-setting bodies are not expected to have a material impact on the Company’s results of operations, financial position or disclosures.

6 unchanged sentences

The Company’s only component of other comprehensive income is unrealized gains and losses, net of income tax, on investment securities available for sale.

The following table presents the changes in accumulated other comprehensive loss for the three and nine months ended September 30, 2024 and 2023:

The following table presents the changes in accumulated other comprehensive loss for the three months ended March 31, 2025 and 2024:

For the three months ended

For the nine months ended

(dollars in thousands)

September 30,

March 31, 2025

March 31, 2024

Beginning balance

Other comprehensive loss before reclassifications, net

Amounts reclassified from accumulated other comprehensive (gain) loss, net

Net current period other comprehensive gain (loss)

Amounts reclassified from accumulated other comprehensive loss, net

Reduction in state tax rate adjustment, net

Net current period other comprehensive loss

Ending balance

3 unchanged sentences

Shares held in the deferred compensation plan by the deferred compensation trust are excluded for purposes of calculating the weighted average number of shares outstanding and basic earnings per share in accordance with ASC 260-10-45-40 and ASC 260-10-45-45 through ASC 260-26010-45-46.

The reconciliation of the amounts used in the computation of both basic earnings per share and diluted earnings per share for the three and nine months ended September 30, 2024 and 2023 is as follows:

For the three months ended September 30, 2024

Net Earnings (Dollars in thousands)

Weighted Average Number of Shares

Basic earnings per share

Effect of dilutive securities:

Restricted stock units - unvested

Shares held in deferred comp plan by deferred compensation trust

Diluted earnings per share

For the nine months ended September 30, 2024

Net Earnings (Dollars in thousands)

Weighted Average Number of Shares

Basic earnings per share

Effect of dilutive securities:

Restricted stock units - unvested

Shares held in deferred comp plan by deferred compensation trust

Diluted earnings per share

For the three months ended September 30, 2023

Net Earnings (Dollars in thousands)

Weighted Average Number of Shares

The reconciliation of the amounts used in the computation of both basic earnings per share and diluted earnings per share for the three months ended March 31, 2025 and 2024 is as follows:

For the three months ended March 31, 2025

Basic earnings per share

3 unchanged sentences

Diluted earnings per share

For the nine months ended September 30, 2023

Net Earnings (Dollars in thousands)

Weighted Average Number of Shares

For the three months ended March 31, 2024

Basic earnings per share

4 unchanged sentences

(4) Investment Securities

Investment securities available for sale at September 30, 2024 and December 31, 2023 are as follows:

Investment securities available for sale at March 31, 2025 and December 31, 2024 are as follows:

(Dollars in thousands)

September 30, 2024

March 31, 2025

Government sponsored enterprises

4 unchanged sentences

December 31, 2024

Amortized Cost

Government sponsored enterprises

2 unchanged sentences

State and political subdivisions

The current fair value and associated unrealized losses on investments in securities with unrealized losses at September 30, 2024 and December 31, 2023 are summarized in the tables below, with the length of time the individual securities have been in a continuous loss position.

The current fair value and associated unrealized losses on investments in securities with unrealized losses at March 31, 2025 and December 31, 2024 are summarized in the tables below, with the length of time the individual securities have been in a continuous loss position.

(Dollars in thousands)

September 30, 2024

March 31, 2025

Less than 12 Months

12 unchanged sentences

State and political subdivisions

At September 30, 2024, unrealized losses in the investment securities portfolio relating to debt securities totaled $ 40.6 million.

At March 31, 2025, unrealized losses in the investment securities portfolio relating to debt securities totaled $ 43.8 million.

The unrealized losses on these debt securities arose due to changing interest rates and are considered to be temporary.

From the September 30, 2024 tables above, both of the U.S.

Treasury securities, all 108 of the securities issued by state and political subdivisions contained unrealized losses, all seven of the securities issued by U.S.

From the March 31, 2025 table above, both of the U.S.

Treasury securities, all 108 of the securities issued by state and political subdivisions contained unrealized losses, all six of the securities issued by U.S.

Government sponsored enterprises (“GSE”), 110 of the 115 GSE mortgage-backed securities, and 13 of the 17 private label mortgage-backed securities contained unrealized losses.

The Company did not have any reserves on available for sale securities at September 30, 2024, as no credit related losses were identified in the Company’s September 30, 2024 Current Expected Credit Loss (“CECL”) analysis.

The Company did not have any reserves on securities at March 31, 2025, as no credit related losses were identified in the Company’s March 31, 2025 analysis.

At December 31, 2024, unrealized losses in the investment securities portfolio relating to debt securities totaled $ 51.1 million.

The unrealized losses on these debt securities arose due to changing interest rates and are considered to be temporary.

From the December 31, 2023 tables above, all three of the U.S.

Treasury securities, all 108 of the securities issued by state and political subdivisions contained unrealized losses, all seven of the securities issued by GSE, 114 of the 121 GSE mortgage-backed securities, and 12 of the 14 private label mortgage backed securities contained unrealized losses.

The Company did not have an allowance for credit losses on available for sale securities at December 31, 2023, as no credit related losses were identified in the Company’s December 31, 2023 CECL analysis.

The amortized cost and estimated fair value of investment securities available for sale at September 30, 2024, presented by contractual maturity, are shown below.

Expected maturities of mortgage-backed securities will differ from contractual maturities because borrowers have the right to prepay obligations with or without prepayment penalties.

September 30, 2024

From the December 31, 2024 table above, both of the U.S.

Treasury securities, all 108 of the securities issued by state and political subdivisions contained unrealized losses, all seven of the securities issued by GSEs, 114 of the 119 GSE mortgage-backed securities, and 11 of the 16 private label mortgage-backed securities contained unrealized losses.

The Company did not have any reserves on securities at December 31, 2024, as no credit related losses were identified in the Company’s December 31, 2024 analysis.

The amortized cost and estimated fair value of investment securities available for sale, other than GSE mortgage-backed securities, at March 31, 2025, are shown below by contractual maturity.

Expected maturities of mortgage-backed securities will differ from contractual maturities because borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

March 31, 2025

(Dollars in thousands)

4 unchanged sentences

Mortgage-backed securities

During the three and nine months ended September 30, 2024, proceeds from sales of securities available for sale were $ 11.7 million and resulted in gross gains of $ 33,000 and gross losses of $ 28,000 .

No securities available for sale were sold during the three months ended September 30, 2023.

During the nine months ended September 30, 2023, proceeds from sales of securities available for sale were $ 51.0 million and resulted in gross losses of $ 2.7 million and gross gains of $ 177,000 .

Securities with a fair value of approximately $ 50.6 million and $ 132.0 million at September 30, 2024 and December 31, 2023, respectively, were pledged to secure public deposits and for other purposes as required by law.

Major classifications of loans at September 30, 2024 and December 31, 2023 are summarized as follows:

During the three months ended March 31, 2025, proceeds from sales of securities available for sale were $ 12.7 million and resulted in gross losses of $ 47,000 and gross gains of $ 43,000 .

No securities available for sale were sold during the three months ended March 31, 2024.

Securities with a fair value of approximately $ 36.7 million and $ 40.0 million at March 31, 2025 and December 31, 2024, respectively, were pledged to secure public deposits and for other purposes as required by law.

Major classifications of loans at March 31, 2025 and December 31, 2024 are summarized as follows:

(Dollars in thousands)

September 30,

March 31, 2025

December 31, 2024

Real estate loans:

25 unchanged sentences

Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

The following tables present an age analysis of past due loans, by loan type, as of September 30, 2024 and December 31, 2023:

September 30, 2024

The following tables present an age analysis of past due loans, by loan type, as of March 31, 2025 and December 31, 2024:

March 31, 2025

(Dollars in thousands)

Loans 30-89 Days Past Due

Loans 30-89 Days

Nonaccrual Loans

Total Past Due Loans

Total Current Loans

Past Due Loans

Accruing Loans 90 or More Days Past Due

7 unchanged sentences

(Dollars in thousands)

Loans 30-89 Days Past Due

Nonaccrual Loans

Total Past Due Loans

Total Current Loans

Loans 30-89 Days

Past Due Loans

Accruing Loans 90 or More Days Past Due

5 unchanged sentences

Loans not secured by real estate:

The following table presents non-accrual loans as of September 30, 2024 and December 31, 2023:

September 30, 2024

The following table presents non-accrual loans as of March 31, 2025 and December 31, 2024:

March 31, 2025

Nonaccrual Loans

(Dollars in thousands)

6 unchanged sentences

December 31, 2024

Nonaccrual Loans

(Dollars in thousands)

5 unchanged sentences

Loans not secured by real estate:

No interest income was recognized on non-accrual loans for the nine months ended September 30, 2024 and 2023.

No interest income was recognized on non-accrual loans for the three months ended March 31, 2025 and 2024.

A loan may be individually evaluated for determining the allowance for credit losses when it is determined that it does not share similar risk characteristics with other assets.

Non-accrual loans with an outstanding balance of $ 250,000 or greater are individually evaluated and totaled $ 2.0 million and $ 1.6 million at March 31, 2025 and December 31, 2024, respectively.

Non-accrual loans evaluated collectively as a pool totaled $ 3.0 million and $ 2.8 million at March 31, 2025 and December 31, 2024, respectively.

Collateral dependent loans are loans for which the repayment is expected to be provided substantially through the operation or sale of the collateral and the borrower is experiencing financial difficulty.

Collateral dependent loans require an analysis of the collateral.

The fair value of the collateral is discounted by estimated liquidation costs.

If the discounted fair value of the collateral is greater than the amortized loan balance, no allowance is required.

Otherwise the difference between the balance and the collateral is charged off if deemed uncollectible.

The following table details the amortized cost of collateral dependent loans and any related allowance at March 31, 2025 and December 31, 2024.

March 31, 2025

December 31, 2024

Allowance for

(Dollars in thousands)

Real estate loans:

Construction and land development

Single-family residential

Multifamily and farmland

Total real estate loans

Loans not secured by real estate:

The following tables provide a breakdown of collateral dependent loans by collateral type and collateral coverage at March 31, 2025 and 2024.

These tables also show non-accrual loans not considered to be collateral dependent at March 31, 2025 and December 31, 2024.

March 31, 2025

Financial Assets

Not Considered

(Dollars in thousands)

Collateral Dependent

Real estate loans:

Construction and land development

Single-family residential

Multifamily and farmland

Total real estate loans

Loans not secured by real estate:

Collateral Value

December 31, 2024

Financial Assets

Not Considered

(Dollars in thousands)

Collateral Dependent

Real estate loans:

Construction and land development

Single-family residential

Multifamily and farmland

Total real estate loans

Loans not secured by real estate:

Collateral Value

The allowance for credit losses incorporates an estimate of lifetime expected credit losses and is recorded on each asset upon origination or acquisition.

9 unchanged sentences

If the borrower continues to experience financial difficulty, another concession, such as principal forgiveness, may be granted.

The following tables show the amortized cost basis at September 30, 2024 and 2023 of the loans to borrowers experiencing financial difficulty that were modified during the nine months ended September 30, 2024 and 2023, disaggregated by loan class and type of concession granted.

One $30,000 loan to a borrower experiencing financial difficulty was modified during the three months ended September 30, 2024.

No loans to borrowers experiencing financial difficulty were modified during the three months ended September 30, 2023.

Modifications during the three months ended September 30, 2024 and 2023 are not presented in tables due to immateriality.

No loans to borrowers experiencing financial difficulty were modified during the three months ended March 31, 2025.

The following table shows the amortized cost basis at March 31, 2024 of the loans to borrowers experiencing financial difficulty that were modified during the three months ended March 31, 2024, disaggregated by loan class and type of concession granted.

(Dollars in thousands)

Amortized Cost Basis at

September 30,

Amortized Cost Basis

at March 31, 2024

% of Loan Class

1 unchanged sentence

Financial Effect

Single-family residential

Interest rate reduction and term extension

Adjustable rate loan converted to fixed rate loan and HELOC converted to amortizing term loan

Commercial not secured by real estate

1 unchanged sentence

Line of credit converted to amortizing term loan .

(Dollars in thousands)

Amortized Cost Basis at

September 30,

% of Loan Class

Modification Type

Financial Effect

Single-family residential

Term extension

Forbearance agreement on matured home equity line of credit (HELOC) that was modified to 180 month term.

Commercial real estate

Term extension

Extended existing amortization from 148 months to 173 months to keep existing payment the same with the current market rate.

No loans modified in the nine months ended September 30, 2024 and 2023 that were made to borrowers experiencing financial difficulty had been written off at September 30, 2024 and 2023.

The Bank closely monitors the performance of those loans that are modified because borrowers are experiencing financial difficulty so as to understand the effectiveness of its modification efforts.

The following tables show the performance of loans that have been modified in the nine months ended September 30, 2024 and 2023.

September 30, 2024

(Dollars in thousands)

Payment Status (Amortized Cost Basis)

Single-family residential

Commercial not secured by real estate

September 30, 2023

The following tables show the performance of loans that were modified in the three months ended March 31, 2024.

March 31, 2024

(Dollars in thousands)

Payment Status (Amortized Cost Basis)

Single-family residential

90 + Days Past

Commercial real estate

The following tables present changes in the allowance for credit losses for the three and nine months ended September 30, 2024 and 2023.

Management uses several measures to assess and monitor the credit risks in the loan portfolio, including a loan grading system that begins upon loan origination and continues until the loan is collected or collectability becomes doubtful.

Upon loan origination, the Bank’s originating loan officer evaluates the quality of the loan and assigns one of eight risk grades.

The loan officer monitors the loan’s performance and credit quality and makes changes to the credit grade as conditions warrant.

When originated or renewed, all loans over a certain dollar amount receive in-depth reviews and risk assessments by the Bank’s Credit Administration.

Before making any changes in these risk grades, management considers assessments as determined by an independent third-party credit review firm (as described below), regulatory examiners and the Bank’s Credit Administration.

Any issues regarding the risk assessments are addressed by the Bank’s senior credit administrators and factored into management’s decision to originate or renew the loan.

The Bank Board reviews, on a monthly basis, an analysis of the Bank’s reserves relative to the range of reserves estimated by the Bank’s Credit Administration.

As an additional measure, the Bank engages an independent third party to review the underwriting, documentation and risk grading analyses.

This independent third party reviews and evaluates loan relationships greater than or equal to $1.5 million as well as a periodic sample of commercial relationships with exposures below $1.5 million, excluding loans in default and loans in process of litigation or liquidation .

The third party’s evaluation and report is shared with management and the Bank Board.

Management considers certain commercial loans with weak credit risk grades to be individually impaired and measures such impairment based upon available cash flows and the value of the collateral.

Allowance or reserve levels are estimated for all other graded loans in the portfolio based on their assigned credit risk grade, type of loan and other matters related to credit risk.

Management uses the information developed from the procedures described above in evaluating and grading the loan portfolio.

This continual grading process is used to monitor the credit quality of the loan portfolio and to assist management in estimating the allowance.

The provision for credit losses charged or credited to earnings is based upon management’s judgment of the amount necessary to maintain the allowance at a level appropriate to absorb probable incurred losses in the loan portfolio at the balance sheet date.

The amount of the allowance, and any provision, is dependent upon many factors, including growth and changes in the composition of the loan portfolio, net charge-offs, delinquencies, management’s assessment of loan portfolio quality, the value of collateral, and other macro-economic factors and trends.

An evaluation of these factors is performed quarterly by management through an analysis of the appropriateness of the allowance.

The following tables present changes in the allowance for credit losses for the three months ended March 31, 2025 and 2024.

(Dollars in thousands)

4 unchanged sentences

Consumer and All Other

Three months ended September 30, 2024

Three months ended March 31, 2025

Allowance for credit losses:

Beginning balance

Provision (recovery) for loan losses (1)

Provision (recovery) for

loan losses (1)

Ending balance

Allowance for credit loss-loans

Allowance for credit losses - loan commitments

Total allowance for credit losses

Nine months ended September 30, 2024

Allowance for credit losses

Beginning balance

Provision (recovery) for loan losses (1)

Ending balance

Allowance for credit loss-loans

Allowance for credit losses - loan commitments

loan commitments

Total allowance for credit losses

(1) Excludes provision for credit losses related to unfunded commitments.

Note 8,"Commitments and Contingencies" in the consolidated financial statements provides more detail concerning the provision for credit losses related to unfunded commitments.

Note 7,"Commitments and Contingencies" in the condensed consolidated financial statements provides more detail concerning the provision for credit losses related to unfunded commitments.

(Dollars in thousands)

4 unchanged sentences

Consumer and All Other

Three months ended September 30, 2023

Three months ended March 31, 2024

Allowance for credit losses:

Beginning balance

Provision (recovery) for loan losses (1)

Provision (recovery) for

loan losses (1)

Ending balance

Allowance for credit loss-loans

Allowance for credit losses - loan commitments

Total allowance for credit losses

Nine months ended September 30, 2023

Allowance for credit losses

Beginning balance

Adjustment for CECL

implementation (1)

Provision (recovery) for loan losses (1)

Ending balance

Allowance for credit loss-loans

Allowance for credit losses - loan commitments

loan commitments

Total allowance for credit losses

(1) Excludes adjustment for CECL implemenation and provision for credit losses related to unfunded commitments.

Note 8,"Commitments and Contingencies" in the consolidated financial statements provides more detail concerning the implementation adjustment and provision for credit losses related to unfunded commitments.

There were no collateral dependent loans individually evaluated at September 30, 2024 and December 31, 2023.

(1) Excludes provision for credit losses related to unfunded commitments.

Note 7,"Commitments and Contingencies" in the condensed consolidated financial statements provides more detail concerning the provision for credit losses related to unfunded commitments.

The Bank utilizes several credit quality indicators to manage credit risk in an ongoing manner.

10 unchanged sentences

This classification does not mean that the asset has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off this worthless loan even though partial recovery may be affected in the future.

The following table presents by credit quality indicator, loan class and year of origination, the amortized cost of the Bank’s loans as of September 30, 2024.

The following table presents by credit quality indicator, loan class and year of origination, the amortized cost of the Bank’s loans as of March 31, 2025.

Term Loans by Origination Year

(dollars in thousands)

September 30, 2024

March 31, 2025

Real Estate Loans

Construction and land development

Total Construction and land development

Construction and land

Total Construction and

land development

Single family

2 unchanged sentences

Multifamily and farmland

Total multifamily and farmland

Total multifamily and

Total real estate loans

3 unchanged sentences

Total all other

Total loans not secured by real estate

The following table presents by credit quality indicator, loan class and year of origination, gross loan charge-offs during the nine months ended September 30, 2024.

Total loans not secured

by real estate

The following table presents by credit quality indicator, loan class and year of origination, gross loan charge-offs for the three months ended March 31, 2025.

March 31, 2025

Gross Loan Charge-offs by Origination Year

12 unchanged sentences

Real Estate Loans

Construction and land development

Total Construction and land development

Construction and land

Total Construction and

land development

Single family

2 unchanged sentences

Multifamily and farmland

Total multifamily and farmland

Total multifamily and

Total real estate loans

3 unchanged sentences

Total all other

Total loans not secured by real estate

Total loans not secured

by real estate

The following table presents by credit quality indicator, loan class and year of origination, gross loan charge-offs during the year ended December 31, 2024.

December 31, 2024

Gross Loan Charge-offs by Origination Year

7 unchanged sentences

Total gross charge-offs

As of September 30, 2024, the Bank had operating right of use assets of $ 4.2 million and operating lease liabilities of $ 4.3 million.

As of March 31, 2025, the Bank had operating right of use assets of $ 3.8 million and operating lease liabilities of $ 4.0 million.

As of December 31, 2024, the Bank had operating right of use assets of $ 4.0 million and operating lease liabilities of $ 4.1 million.

The Bank maintains operating leases on land and buildings for some of the Bank’s branch facilities and loan production offices.

3 unchanged sentences

Leases with a term of 12 months or less are not recorded on the balance sheet and instead are recognized in lease expense on a straight-line basis over the lease term.

The following table presents lease cost and other lease information as of September 30, 2024 and 2023.

The following table presents lease cost and other lease information as of March 31, 2025 and 2024.

(Dollars in thousands)

September 30,

March 31, 2025

March 31, 2024

Operating lease cost

5 unchanged sentences

Weighted-average discount rate - operating leases

The following table presents lease maturities as of September 30, 2024.

The following table presents lease maturities as of March 31, 2025.

(Dollars in thousands)

Maturity Analysis of Operating Lease Liabilities:

September 30,

March 31, 2025

Imputed Interest

Operating Lease Liability

Securities Sold Under Agreements to Repurchase (“repurchase agreements”)

The Bank utilizes repurchase agreements to facilitate the needs of our customers and provide additional funding to our balance sheet.

Repurchase agreements are transactions whereby we offer to sell to a counterparty an undivided interest in an eligible security at an agreed upon purchase price, and which obligates the Bank to repurchase the security on an agreed upon date at an agreed upon repurchase price plus interest at an agreed upon rate.

Securities sold under repurchase agreements are recorded at the amount of cash received in connection with the transaction and are reflected in the accompanying consolidated balance sheet.

Repurchase agreements are subject to terms and conditions of the master repurchase agreements between the Bank and the customer and are accounted for as secured borrowings.

At September 30, 2024 and December 31, 2023, repurchase agreements totaled $ 8.4 million and $ 86.7 million, respectively.

These borrowings were collateralized with government-sponsored enterprise securities with a market value of $ 17.2 million and $ 89.8 million at September 30, 2024 and December 31, 2023, respectively.

We monitor collateral levels on a continuous basis and maintain records of each transaction specifically describing the applicable security and the counterparty’s fractional interest in that security, and we segregate the security from its general assets in accordance with regulations governing custodial holdings of securities.

The primary risk with repurchase agreements is market risk associated with the securities securing the transactions, as we may be required to provide additional collateral based on fair value changes of the underlying securities.

(7) Commitments and Contingencies

8 unchanged sentences

Contractual Amount

Financial instruments with credit risk:

Financial instruments whose contract amount represent credit risk:

Commitments to extend credit

9 unchanged sentences

The estimate includes consideration of the likelihood that funding will occur, which is based on a historical funding activity and an estimate of expected credit losses on commitments expected to be funded over its estimated life, which are the same loss rates that are used in computing the allowance for credit losses on loans.

The allowance for credit losses for unfunded loan commitments of $ 1.2 million and $ 2.1 million at September 30, 2024 and 2023, respectively, is separately classified on the balance sheet within Other Liabilities.

The following table presents the balance and activity in the allowance for credit losses for unfunded loan commitments for the three and nine months ended September 30, 2024 and 2023.

The allowance for credit losses for unfunded loan commitments of $ 1.3 million and $ 1.1 million at March 31, 2025 and December 31, 2024, respectively, is separately classified on the balance sheet within Other Liabilities.

The following table presents the balance and activity in the allowance for credit losses for unfunded loan commitments for the three months ended March 31, 2025 and 2024.

(dollars in thousands)

For three months ended

For nine months ended

September 30,

March 31, 2025

March 31, 2024

Beginning Balance

Cummulative effect of change in accounting principle

Recovery of credit losses

Provision for (recovery of) credit losses

Ending balance

(8) Fair Value

The Company is required to disclose fair value information about financial instruments, whether or not recognized at fair value on the face of the balance sheet, for which it is practicable to estimate that value.

24 unchanged sentences

Loans are reported in the Level 3 fair value category, as the pricing of loans is more subjective than the pricing of other financial instruments.

For mutual funds held in the deferred compensation trust, the carrying value is a reasonable estimate of fair value.

Mutual funds held in the deferred compensation trust are carried at fair value.

Mutual funds held in the deferred compensation trust are included in other assets on the balance sheet and reported in the Level 1 fair value category.

14 unchanged sentences

In addition, the tax ramifications related to the realization of unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates.

The tables below present all financial instruments measured at fair value on a recurring basis by level within the fair value hierarchy, as of September 30, 2024 and December 31, 2023.

The tables below present all financial instruments measured at fair value on a recurring basis by level within the fair value hierarchy, as of March 31, 2025 and December 31, 2024.

(Dollars in thousands)

September 30, 2024

Level 1 Valuation

Level 2 Valuation

Level 3 Valuation

March 31, 2025

Fair Value Measurements

Government sponsored enterprises

2 unchanged sentences

State and political subdivisions

Mutual funds held in deferred compensation trust

(Dollars in thousands)

December 31, 2024

Level 1 Valuation

Level 2 Valuation

Level 3 Valuation

Fair Value Measurements

Government sponsored enterprises

2 unchanged sentences

State and political subdivisions

The fair value measurements for individually evaluated loans on a non-recurring basis at September 30, 2024 and December 31, 2023 are presented below.

Mutual funds held in deferred compensation trust

The fair value measurements for individually evaluated loans and other real estate on a non-recurring basis at March 31, 2025 and December 31, 2024 are presented below.

The fair value measurement process uses certified appraisals and other market-based information;

1 unchanged sentence

As a result, all fair value measurements for individually evaluated loans and other real estate are considered Level 3.

There were no individually evaluated loans at September 30, 2024 and December 31, 2023

The carrying amount and estimated fair value of financial instruments at September 30, 2024 and December 31, 2023 are as follows:

(Dollars in thousands)

Fair Value Measurements at September 30, 2024

Carrying Amount

March 31, 2025

December 31, 2024

General Range

of Significant

Individually evaluated loans

Appraised value

Discounts to reflect current market conditions and ultimate collectability

Other real estate

Appraised value

Discounts to reflect current market conditions and estimated costs to sell

The carrying amount and estimated fair value of financial instruments at March 31, 2025 and December 31, 2024 are as follows:

(Dollars in thousands)

Fair Value Measurements at March 31, 2025

Cash and cash equivalents

2 unchanged sentences

Mortgage loans held for sale

Mutual funds held in deferred compensation trust

Securities sold under agreements to repurchase

Mutual funds held in deferred

compensation trust

Junior subordinated debentures

1 unchanged sentence

Fair Value Measurements at December 31, 2024

Carrying Amount

Cash and cash equivalents

2 unchanged sentences

Mortgage loans held for sale

Mutual funds held in deferred compensation trust

Securities sold under agreements to repurchase

Mutual funds held in deferred

compensation trust

Junior subordinated debentures

5 unchanged sentences

The primary source of revenue for this segment is appraisal management fee income.

The Bank’s executive management team, which is comprised of the Bank’s Chief Executive Officer, Chief Financial Officer and executive vice presidents, is the chief operating decision maker for the Company.

The Bank’s executive management team reviews actual net income versus budgeted net income on a quarterly basis to assess segment performance.

The following table presents financial information for the reportable segments.

The information provided under the caption “Other” represents financial information for the Company, which is not considered to be a reportable segment, and is included to reconcile the results of the reportable segments to the Consolidated Financial Statements prepared in conformity with GAAP.

Financial results by operating segment, including significant expense categories provided to the chief operating decision maker, are detailed below.

Certain prior period amounts have been reclassified to conform to the current presentation.

The information provided under the caption “Other” represents the parent company, which is not considered to be a reportable segment, is included to reconcile the results of the operating segments to the consolidated financial statements prepared in conformity with GAAP.

(Dollars in thousands)

As of and for the three months ended September 30, 2024

As of and for the three months ended March 31, 2025

Interest income

1 unchanged sentence

Net interest income

Provision for (recovery of) credit losses

Provision for credit losses

Noninterest income

Appraisal management fee income

Noninterest expense

Salaries and employee benefits

Appraisal management fee expense

Income tax expense (benefit)

Net income (loss)

As of and for the three months ended September 30, 2023

Interest income

Interest expense

Net interest income

Provision for (recovery of) credit losses

Noninterest income

Appraisal management fee income

Noninterest expense

Appraisal management fee expense

Income tax expense (benefit)

Net income (loss)

As of and for the nine months ended September 30, 2024

As of and for the three months ended March 31, 2024

Interest income

1 unchanged sentence

Net interest income

Provision for (recovery of) credit losses

Provision for credit losses

Noninterest income

Appraisal management fee income

Noninterest expense

Salaries and employee benefits

Appraisal management fee expense

Income tax expense (benefit)

Net income (loss)

As of and for the nine months ended September 30, 2023

Interest income

Interest expense

Net interest income

Provision for (recovery of) credit losses

Noninterest income

Appraisal management fee income

Noninterest expense

Appraisal management fee expense

Income tax expense (benefit)

1 unchanged sentence

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 1. Financial Statements