RED RIVER BANCSHARES INC 10-K

Item 8. Financial Statements and Supplementary Data REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Red River Bancshares, Inc. Opinion on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of Red River Bancshares, Inc. and its subsidiaries (the “Company”) as of December 31, 2024, and December 31, 2023, and the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows for each of the years then ended, and the related notes (collectively referred to as the “financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2024 and 2023, and the consolidated results of their operations and their cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in the Internal Control - Integrated Framework (2013) issued by COSO. Basis for Opinion The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control over Financial Reporting An entity’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. An entity’s internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the entity; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the entity are being made only in accordance with authorizations of management and directors of the entity; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the entity’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. 65 Table of Contents Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the Audit Committee and that: (i) related to accounts or disclosures that are material to the financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Allowance for Credit Losses The Company’s loans held for investment portfolio totaled $2.08 billion as of December 31, 2024, and the allowance for credit losses (“ACL”) on loans held for investment was $21.73 million. The Company’s unfunded loan commitments totaled $521.50 million as of December 31, 2024, and the reserve for unfunded commitments was $642,000. These amounts are included in the ACL and reserve for unfunded commitments. As more fully described in Notes 1 and 3 to the Company’s financial statements, the Company estimates its exposure to expected credit losses as of the balance sheet date, for existing financial instruments held at amortized cost, and off-balance sheet exposures, such as unfunded loan commitments, letters of credit, and other financial guarantees that are not unconditionally cancellable by the Company. The Company measures expected credit losses of financial assets on a collective (pool) basis when the financial assets share similar risk characteristics. We identified the valuation of the ACL as a critical audit matter, as the determination of the ACL requires management to exercise significant judgment and could have a material impact on the Company’s financial statements. Management must consider numerous subjective factors, including determining qualitative factors used to adjust the calculated allowance for credit losses, loan credit risk grading, and identifying loans requiring individual evaluation among others. As disclosed by management, different assumptions and conditions could result in a materially different amount for the estimate of the ACL. As such, there is a high degree of auditor judgment and subjectivity, and significant audit effort was required in performing procedures in auditing the ACL. Addressing the critical audit matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the financial statements. The primary procedures we performed to address this critical audit matter included: • Obtained an understanding of the Company’s process for establishing the ACL, including determination of the qualitative factors and reserve assumptions for loans evaluated on an individual basis, and evaluated the process utilized by management to challenge the model results and determine the best estimate of the ACL as of the balance sheet date; • Evaluated the design and tested the operating effectiveness of controls associated with the ACL process, including: ◦ reliability and accuracy of data used in the model, ◦ management’s review and approval of the selected qualitative factors, ◦ classifications of loans by loan segment, ◦ identification of problems loans, ◦ risk rating grades assigned to loans, ◦ management’s review and approval of the ACL; • Evaluated the appropriateness of the models and methodologies used in quantitative calculations; • Tested the completeness and accuracy of data used in the estimate; • Performed analysis of prepayment speeds used to calculate the weighted average remaining maturity; • Evaluated if qualitative factors were applied based on a comprehensive framework and compared to the adjustments utilized by management to both internal portfolio metrics and external macroeconomic data (as applicable) to support adjustments and evaluate trends in such adjustments; • Verified historical net loss; • Performed loan reviews in order to evaluate the accuracy of loan credit ratings and reasonableness of specific reserves on individually evaluated loans; and • Evaluated the disclosures in the financial statements. /s/ EISNERAMPER LLP We have served as the Company’s auditor since 2023 (Note: Partners of Postlethwaite & Netterville, APAC joined EisnerAmper LLP in 2023. Postlethwaite & Netterville, APAC had served as the Company’s auditor since 1998). Metairie, Louisiana March 14, 2025 66 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Red River Bancshares, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows of Red River Bancshares, Inc. and its subsidiaries (the Company) for the year ended December 31, 2022, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the Company’s consolidated results and cash flows for the year ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion. /s/ Postlethwaite & Netterville, APAC We have served as the Company’s auditor since 1998. Baton Rouge, Louisiana March 16, 2023 67 Table of Contents RED RIVER BANCSHARES, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share amounts) December 31, 2024 2023 ASSETS Cash and due from banks $ 30,558 $ 53,062 Interest-bearing deposits in other banks 238,417 252,364 Total Cash and Cash Equivalents 268,975 305,426 Securities available-for-sale, at fair value (amortized cost of $ 613,393 and $ 632,258 , respectively) 550,148 570,092 Securities held-to-maturity, at amortized cost (fair value of $ 108,990 and $ 119,029 , respectively) 131,796 141,236 Equity securities, at fair value 2,937 2,965 Nonmarketable equity securities 2,328 2,239 Loans held for sale 2,547 1,306 Loans held for investment 2,075,013 1,992,858 Less: Allowance for credit losses ( 21,731 ) ( 21,336 ) Loans held for investment, net 2,053,282 1,971,522 Premises and equipment, net 59,441 57,088 Accrued interest receivable 10,048 9,945 Bank-owned life insurance 30,380 29,529 Intangible assets 1,546 1,546 Right-of-use assets 2,733 3,629 Other assets 33,433 32,287 Total Assets $ 3,149,594 $ 3,128,810 LIABILITIES Noninterest-bearing deposits $ 866,496 $ 916,456 Interest-bearing deposits 1,938,610 1,885,432 Total Deposits 2,805,106 2,801,888 Accrued interest payable 7,583 8,000 Lease liabilities 2,864 3,767 Accrued expenses and other liabilities 14,302 11,304 Total Liabilities 2,829,855 2,824,959 COMMITMENTS AND CONTINGENCIES — — STOCKHOLDERS’ EQUITY Preferred stock, no par value: Authorized - 1,000,000 shares; None Issued and Outstanding — — Common stock, no par value: Authorized - 30,000,000 shares; Issued and Outstanding - 6,777,238 and 7,091,637 shares, respectively 38,655 55,136 Additional paid-in capital 2,777 2,407 Retained earnings 338,554 306,802 Accumulated other comprehensive income (loss) ( 60,247 ) ( 60,494 ) Total Stockholders’ Equity 319,739 303,851 Total Liabilities and Stockholders’ Equity $ 3,149,594 $ 3,128,810 The accompanying notes are an integral part of these consolidated financial statements. 68 Table of Contents RED RIVER BANCSHARES, INC. CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share data) Years Ended December 31, 2024 2023 2022 INTEREST AND DIVIDEND INCOME Interest and fees on loans $ 108,969 $ 93,439 $ 75,827 Interest on securities 17,089 14,291 13,735 Interest on federal funds sold — 886 1,091 Interest on deposits in other banks 11,077 9,797 3,682 Dividends on stock 95 155 40 Total Interest and Dividend Income 137,230 118,568 94,375 INTEREST EXPENSE Interest on deposits 47,936 32,066 7,736 Interest on other borrowed funds — 64 — Total Interest Expense 47,936 32,130 7,736 Net Interest Income 89,294 86,438 86,639 Provision for credit losses 1,200 735 1,750 Net Interest Income After Provision for Credit Losses 88,094 85,703 84,889 NONINTEREST INCOME Service charges on deposit accounts 5,674 5,776 5,565 Debit card income, net 3,836 3,563 3,897 Mortgage loan income 2,490 1,965 3,096 Brokerage income 3,791 3,798 3,549 Loan and deposit income 2,034 2,140 1,723 Bank-owned life insurance income 851 754 713 Gain (Loss) on equity securities ( 28 ) ( 14 ) ( 468 ) Gain (Loss) on sale and call of securities — — ( 59 ) SBIC income 1,453 2,873 563 Other income (loss) 340 259 168 Total Noninterest Income 20,441 21,114 18,747 OPERATING EXPENSES Personnel expenses 38,623 37,241 34,560 Occupancy and equipment expenses 6,691 6,581 6,109 Technology expenses 3,182 2,759 2,763 Advertising 1,374 1,302 1,134 Other business development expenses 2,076 1,987 1,645 Data processing expense 2,331 2,320 2,093 Other taxes 2,407 2,721 2,714 Loan and deposit expenses 895 984 659 Legal and professional expenses 2,657 2,378 1,997 Regulatory assessment expenses 1,654 1,645 1,058 Other operating expenses 4,264 3,955 3,923 Total Operating Expenses 66,154 63,873 58,655 Income Before Income Tax Expense 42,381 42,944 44,981 Income tax expense 8,146 8,065 8,065 Net Income $ 34,235 $ 34,879 $ 36,916 EARNINGS PER SHARE Basic $ 4.96 $ 4.87 $ 5.14 Diluted $ 4.95 $ 4.86 $ 5.13 The accompanying notes are an integral part of these consolidated financial statements. 69 Table of Contents RED RIVER BANCSHARES, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in thousands) Years Ended December 31, 2024 2023 2022 Net income $ 34,235 $ 34,879 $ 36,916 Other comprehensive income (loss): Unrealized net gain (loss) on securities arising during period ( 1,079 ) 11,966 ( 87,342 ) Tax effect 226 ( 2,512 ) 18,342 (Gain) Loss on sale and call of securities included in net income — — 59 Tax effect — — ( 13 ) Change in unrealized net loss on securities transferred to held-to-maturity 1,392 1,542 1,975 Tax effect ( 292 ) ( 324 ) ( 414 ) Total other comprehensive income (loss) 247 10,672 ( 67,393 ) Comprehensive Income (Loss) $ 34,482 $ 45,551 $ ( 30,477 ) The accompanying notes are an integral part of these consolidated financial statements. 70 Table of Contents RED RIVER BANCSHARES, INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (dollars in thousands, except per share amounts) Common Shares Issued Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Stockholders’ Equity Balance as of December 31, 2021 7,180,155 $ 60,233 $ 1,814 $ 239,876 $ ( 3,773 ) $ 298,150 Net income — — — 36,916 — 36,916 Stock incentive plan — — 274 — — 274 Issuance of restricted shares of common stock through stock incentive plan 7,550 — — — — — Issuance of shares of common stock as board compensation 675 35 — — — 35 Repurchase of common stock ( 4,465 ) ( 218 ) — — — ( 218 ) Cash dividend - $ 0.28 per share — — — ( 2,011 ) — ( 2,011 ) Other comprehensive income (loss) — — — — ( 67,393 ) ( 67,393 ) Balance as of December 31, 2022 7,183,915 $ 60,050 $ 2,088 $ 274,781 $ ( 71,166 ) $ 265,753 Net income — — — 34,879 — 34,879 Stock incentive plan — — 319 — — 319 Issuance of restricted shares of common stock through stock incentive plan 9,300 — — — — — Forfeiture of restricted shares of common stock ( 1,940 ) — — — — — Issuance of shares of common stock as board compensation 1,660 85 — — — 85 Repurchase of common stock ( 101,298 ) ( 4,999 ) — — — ( 4,999 ) Cash dividend - $ 0.32 per share — — — ( 2,289 ) — ( 2,289 ) Cumulative effect of change in accounting principle — — — ( 569 ) — ( 569 ) Other comprehensive income (loss) — — — — 10,672 10,672 Balance as of December 31, 2023 7,091,637 $ 55,136 $ 2,407 $ 306,802 $ ( 60,494 ) $ 303,851 Net income — — — 34,235 — 34,235 Stock incentive plan — — 370 — — 370 Issuance of restricted shares of common stock through stock incentive plan 12,450 — — — — — Forfeiture of restricted shares of common stock ( 575 ) — — — — — Issuance of shares of common stock as board compensation 811 41 — — — 41 Repurchase of common stock, including excise tax ( 327,085 ) ( 16,522 ) — — — ( 16,522 ) Cash dividend - $ 0.36 per share — — — ( 2,483 ) — ( 2,483 ) Other comprehensive income (loss) — — — — 247 247 Balance as of December 31, 2024 6,777,238 $ 38,655 $ 2,777 $ 338,554 $ ( 60,247 ) $ 319,739 The accompanying notes are an integral part of these consolidated financial statements. 71 Table of Contents RED RIVER BANCSHARES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Years Ended December 31, 2024 2023 2022 CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 34,235 $ 34,879 $ 36,916 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation 2,525 2,198 2,076 Amortization 694 548 533 Share-based compensation earned 370 319 274 Share-based board compensation earned 62 42 85 (Gain) Loss on other assets owned ( 10 ) 60 60 Net (accretion) amortization on securities AFS 1,223 1,610 2,339 Net (accretion) amortization on securities HTM ( 1,359 ) ( 1,502 ) ( 1,953 ) (Gain) Loss on sale and call of securities — — 59 (Gain) Loss on equity securities 28 14 468 Provision for credit losses 1,200 735 1,750 Deferred income tax (benefit) expense 764 ( 330 ) 313 Net (increase) decrease in loans HFS ( 1,241 ) ( 788 ) 3,772 Net (increase) decrease in accrued interest receivable ( 103 ) ( 1,115 ) ( 2,585 ) Net (increase) decrease in BOLI ( 851 ) ( 754 ) ( 714 ) Net increase (decrease) in accrued interest payable ( 417 ) 6,437 253 Net increase (decrease) in accrued income taxes payable 358 ( 527 ) 374 Other operating activities, net 806 ( 1,715 ) 1,847 Net cash provided by (used in) operating activities 38,284 40,111 45,867 CASH FLOWS FROM INVESTING ACTIVITIES Activity in securities AFS: Sales — — 31,762 Maturities, principal repayments, and calls 146,506 151,110 70,531 Purchases ( 128,864 ) ( 96,439 ) ( 313,514 ) Activity in securities HTM: Maturities, principal repayments, and calls 10,799 11,949 16,580 Sale of equity securities — 7,000 7,399 Purchase of equity securities — — ( 10,000 ) Sale of nonmarketable equity securities — 2,178 — Purchase of nonmarketable equity securities — ( 792 ) ( 28 ) Capital contribution in partnerships ( 861 ) ( 1,819 ) ( 892 ) Return of capital contribution in partnerships 856 — — Net (increase) decrease in loans HFI ( 82,799 ) ( 77,042 ) ( 232,733 ) Proceeds from sales of foreclosed assets 69 15 641 Proceeds from sales of premises and equipment 11 15 — Purchases of premises and equipment ( 4,878 ) ( 4,916 ) ( 8,444 ) Net cash provided by (used in) investing activities ( 59,161 ) ( 8,741 ) ( 438,698 ) CASH FLOWS FROM FINANCING ACTIVITIES Net increase (decrease) in deposits 3,218 2,952 ( 111,412 ) Proceeds from other borrowed funds — 60,000 — Repayments of other borrowed funds — ( 60,000 ) — Repurchase of common stock ( 16,309 ) ( 4,999 ) ( 218 ) Cash dividends ( 2,483 ) ( 2,289 ) ( 2,011 ) Net cash provided by (used in) financing activities ( 15,574 ) ( 4,336 ) ( 113,641 ) Net change in cash and cash equivalents ( 36,451 ) 27,034 ( 506,472 ) Cash and cash equivalents - beginning of year 305,426 278,392 784,864 Cash and cash equivalents - end of year $ 268,975 $ 305,426 $ 278,392 The accompanying notes are an integral part of these consolidated financial statements. 72 Table of Contents RED RIVER BANCSHARES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) (in thousands) Years Ended December 31, 2024 2023 2022 SUPPLEMENTAL DISCLOSURES Cash paid during the period for: Interest $ 48,353 $ 25,693 $ 7,483 Income taxes $ 6,937 $ 8,999 $ 7,351 SUPPLEMENTAL INFORMATION FOR NON-CASH INVESTING AND FINANCING ACTIVITIES Assets acquired in settlement of loans $ 38 $ 146 $ — Transfers of investment securities from AFS to HTM, prior to market value adjustment $ — $ — $ 184,238 The accompanying notes are an integral part of these consolidated financial statements. 73 Table of Contents RED RIVER BANCSHARES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Significant Accounting Policies Nature of Operations The Company is a bank holding company headquartered in Alexandria, Louisiana. The Company’s wholly owned bank subsidiary, Red River Bank, is a Louisiana state-chartered bank that provides a fully integrated suite of banking products and services tailored to the needs of commercial and retail customers. As of December 31, 2024, Red River Bank operated from a network of 28 banking centers throughout Louisiana and one combined LDPO in New Orleans, Louisiana. Banking centers are located in the following Louisiana markets: Central, which includes the Alexandria MSA; Northwest, which includes the Shreveport-Bossier City MSA; Capital, which includes the Baton Rouge MSA; Southwest, which includes the Lake Charles MSA; the Northshore, which includes Covington; Acadiana, which includes the Lafayette MSA; and New Orleans. Basis of Presentation The consolidated financial statements include the accounts of the Company and all other entities in which the Company has controlling interest. All significant intercompany accounts and transactions have been eliminated in consolidation. The accounting and reporting policies of the Company conform to GAAP and the prevailing practices within the banking industry. Operating Segments While the CODM monitors the revenue streams of the various banking products, services, and markets, banking operations are managed and financial performance is evaluated on a company-wide basis. Accordingly, all of the banking operations are considered by management to be aggregated in one reportable operating segment. For additional segment information see “Note 18. Segment Reporting.” Use of Estimates The preparation of financial statements, in conformity with GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities. These estimates also affect the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Acquisition Accounting The Company accounts for its acquisitions under ASC Topic 805, Business Combinations, which requires the use of the acquisition method of accounting. Purchased assets, including loans, and assumed liabilities are recorded at their respective acquisition date fair values. Fair values are subject to refinement for up to one year after the closing date of an acquisition as information relative to closing date fair values becomes available. Cash and Cash Equivalents Cash and cash equivalents consist of cash and due from banks and interest-bearing deposits in other banks. Interest-bearing deposits in other banks consist of money market, certificate of deposit, and checking accounts and are carried at cost. Securities All debt securities of the Company as of December 31, 2024 and 2023, were classified either as AFS or HTM. Securities AFS are held for indefinite periods of time and are carried at estimated fair value with unrealized gains and losses excluded from earnings and reported in other comprehensive income (loss), net of tax. Securities HTM, which the Company has the intent and ability to hold until maturity, are carried at amortized cost. Realized gains and losses on the sale and call of securities are determined using the specific-identification method. Purchased premiums and discounts are recognized in interest income using the interest method over the term of the securities. Equity securities include a CRA mutual fund owned by the Company, which is carried at fair value with any periodic changes in value recorded through the statements of income. Securities AFS The Company is required to measure expected credit losses on securities AFS. Impairment is evaluated when there has been a decline in fair value below the amortized cost basis of a security to determine whether there is a credit loss associated with the decline in fair value. Management evaluates each security by considering the nature of the collateral, potential future changes in collateral values, default rates, delinquency rates, third-party guarantees, credit ratings, volatility of the security’s fair value, and historical loss information for financial assets secured with similar collateral, along with other factors. In analyzing an issuer’s financial condition, management considers whether the securities are issued by 74 Table of Contents the federal government or its agencies, whether downgrades by bond rating agencies have occurred, the results of reviews of the issuer’s financial condition, and the issuer’s anticipated ability to pay the contractual cash flows of the investments. If a decline in the fair value related to creditworthiness or other factors is determined, an ACL is calculated using a discounted cash flow method, whereby management compares the present value of expected cash flows with the amortized cost basis of the security. The credit loss component is recognized through the provision for credit losses in the consolidated statements of income. Accrued interest receivable is excluded from the amortized cost basis in measuring expected credit losses on the investment securities, and no ACL is recorded on accrued interest receivable. The Company’s current securities AFS portfolio consists of U.S. Treasury securities, mortgage-backed securities, U.S. agency securities, and municipal bonds. The Company’s securities AFS, other than the municipal bonds, are considered treasuries, agencies, and instrumentalities of the U.S. government, which have a zero credit loss assumption. These securities have the full faith and credit backing of the U.S. government or one of its agencies. Municipal bonds AFS do not fall under the zero credit loss assumption and are evaluated quarterly using the considerations mentioned above to determine whether there is a credit loss associated with a decline in fair value. Securities HTM The Company is required to measure expected credit losses on securities HTM. Securities HTM are measured on a collective basis by major security type with those sharing similar risk characteristics, and considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. The ACL is a valuation account that is deducted from the amortized cost basis to present the net amount expected to be collected on the securities HTM portfolio. Management monitors the HTM portfolio to determine whether an ACL should be recorded. The Company’s current securities HTM portfolio consists of mortgage-backed securities and U.S. agency securities. The Company’s securities HTM are considered agencies and instrumentalities of the U.S. government that have a zero credit loss assumption. These securities have the full faith and credit backing of the U.S. government or one of its agencies. Nonmarketable Equity Securities Nonmarketable equity securities, which include investments in the FHLB of Dallas and First National Banker’s Bank, are carried at cost. Loans Held for Sale Residential mortgage loans originated and intended for sale are carried at the lower of cost or estimated fair value on an individual basis. These mortgage loans are pre-sold prior to funding. Loans Held for Investment Loans that management has the intent and ability to hold, for the foreseeable future or until maturity or payoff, are reported at amortized cost. Amortized cost is the principal balance outstanding, net of deferred fees and costs. Accrued interest receivable is reported in accrued interest receivable on the consolidated balance sheets and is excluded from the estimate of credit losses. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized in interest income using the level-yield method without anticipating prepayments. Interest income on loans is discontinued, and the loans are placed on nonaccrual status at the time the loan is 90 days past due unless the loan is well-secured and in process of collection. When a loan is placed on nonaccrual status, uncollected accrued interest is reversed, reducing interest income, and future income accrual is discontinued. Subsequent payments, if any, of interest and fees are applied as reductions to the loan’s outstanding principal balance. Once the principal balance of a loan placed on nonaccrual status has been fully recovered, subsequent payments received are recognized as interest income on a cash basis. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. Loans, excluding credit cards, are charged-off to the ACL to the extent management is relatively certain that principal and interest will be uncollectible. Management may elect to partially charge-off a loan to adjust the principal balance to the net realizable value of the collateral that secures the loan. When a partial charge-off is made, the remaining balance of the loan is placed on nonaccrual. Recoveries of amounts previously charged-off, if any, are credited to the ACL until the principal balance of the loan is fully recovered. Any subsequent payments are recognized as income. Credit card loans continue to accrue interest until they are charged-off to the ACL no later than 120 days past due unless the loan is in the process of collection. Past due status is based on the contractual terms of the loan. In all cases, loans are placed on nonaccrual status or charged-off at an earlier date if collection of principal or interest is considered doubtful. Allowance for Credit Losses - Loans Effective January 1, 2023, the ACL is a valuation account that is deducted from the amortized cost basis of loans HFI to present management’s best estimate of the expected credit losses to be recognized over the lifetime of the loans. The amount of the ACL should not be interpreted as an indication that charge-offs in future periods will necessarily occur in those amounts, or at all. Loans are charged-off against the allowance when management is relatively certain that principal 75 Table of Contents and interest will be uncollectible. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off. Subsequent recoveries, if any, are credited to the allowance. Management estimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. This reasonable and supportable forecast period is currently one year and incorporates the Company’s and its peer’s historical losses. After the forecast period, the Company reverts to an average historical loss rate over a two-year period. Historical credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level, or term, as well as for changes in economic conditions, such as changes in unemployment rates, property values, or other relevant factors. These qualitative factors serve to compensate for additional areas of uncertainty inherent in the portfolio that are not reflected in the Company’s historic loss factors. The determination of the amount of allowance involves a high degree of judgment and subjectivity. The ACL is measured on a collective pool basis when similar risk characteristics and risk profiles exist. The Company utilizes cohort loss rate (static pool analysis) and remaining life loss rate methodologies to estimate the quantitative portion of the ACL for loan pools. The cohort loss rate methodology tracks a closed pool of loans over their remaining lives to determine their loss behavior. The remaining life loss rate methodology takes the calculated loss rate and applies that rate to a pool of loans on a periodic basis based on the remaining life expectation of that pool. 76 Table of Contents The portfolio pools are based primarily on regulatory call report codes. These pools and certain of the inherent risks in the Company’s loan portfolio are summarized in the following table. Loan Pool Risk Characteristics Residential construction This category consists of loans to residential developers and to individual clients for construction of single-family homes. Risks inherent in this portfolio pool include fluctuations in the value of real estate, project completion risk, and change in market trends. Commercial construction This category consists of loans to small and medium-sized businesses to construct owner occupied facilities and developers of CRE investment properties. Risks inherent in this portfolio pool include fluctuations in the value of real estate, project completion risk, change in market trends, and the ability to sell the property upon completion. Farmland This category consists of loans secured by real estate that is used or usable for agricultural purposes, including land used for crops, livestock production, grazing/pastureland, and timberland. Risks inherent in this portfolio pool include adverse changes in climate, fluctuations in feed and livestock prices, and changes in property values. Home equity loans and lines This category consists of home equity loans and lines of credit. Risks inherent in this portfolio pool include local unemployment rates, local residential real estate market conditions, and the interest rate environment. Secured closed-liens This category consists of loans secured by primary and secondary liens on residential real estate. Risks inherent in this portfolio pool include local unemployment rates, local residential real estate market conditions, and the interest rate environment. Generally, these loans are for longer terms than home equity loans and lines of credit. Multifamily This category consists of loans secured by apartment or residential buildings with five or more units used to accommodate households on a temporary or permanent basis. Risks inherent in this portfolio pool include local unemployment rates, changes in the local economy, and factors that would impact property values. Owner occupied CRE This category consists of loans to established operating companies and secured by owner occupied offices and industrial real estate properties. Risks inherent in this portfolio pool include fluctuations in the value of real estate, the overall strength of the economy, new job creation trends, environmental contamination, and the quality of the borrower’s management. Non-owner occupied CRE This category consists of loans to developers and other persons or entities and secured by non-owner occupied CRE properties. Risks inherent in this portfolio pool include fluctuations in the value of real estate, the overall strength of the economy, new job creation trends, tenant vacancy rates, environmental contamination, and the quality of the borrower’s management. Commercial and industrial This category consists of secured and unsecured loans to purchase capital equipment, agriculture operating loans, and other business loans for working capital and operating purposes. Secured loans are primarily secured by accounts receivable, inventory, and other business assets. The performance of commercial and industrial loans may be adversely affected by, among other factors, conditions specific to the relevant industry, fluctuations in the value of the collateral, and individual performance factors related to the borrower such as the quality of the borrower’s management. Consumer This category consists of loans to individuals for household, family, and other personal use. Risks inherent in this portfolio pool include the borrower’s financial condition, local unemployment rates, local economic conditions, and the interest rate environment. Tax-exempt This category consists of loans to political subdivisions primarily of the State of Louisiana including parishes, municipalities, utility districts, school districts, and development authorities. These loans undergo the same underwriting as any of the Company’s other loans and are typically paid for by ad valorem taxes or specific revenue sources. Other loans This category consists of loans not included in any other category. Risks inherent in this portfolio pool include local unemployment rates, local economic conditions, and the interest rate environment. 77 Table of Contents Loans that do not share similar risk characteristics are evaluated on an individual basis and excluded from the collective evaluation. For loans evaluated on an individual basis that are collateral dependent, the specific allowance is estimated by calculating the difference between the fair value of the underlying collateral less estimated selling costs and the Bank’s exposure. If the loan is not collateral dependent, the discounted cash flow methodology is used. Either of these determinations are highly subjective and based on information available at the time of valuation. Reserve for Unfunded Commitments Commitments to extend credit are agreements to lend to a customer if all conditions of the commitment have been met. The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The reserve for unfunded commitments is recorded within other liabilities on the consolidated balance sheets, and the related provision is recorded in provision for credit losses on the consolidated statements of income. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life. The loss rates computed for each pool and expected pool-level funding rates are applied to the related unfunded commitment balance to obtain the reserve amount. Allowance for Loan Losses For reporting periods prior to January 1, 2023, the ALL was established for known and inherent losses in the loan portfolio based upon management’s best assessment of the loan portfolio at each balance sheet date. It was maintained at a level estimated to be adequate to absorb potential losses through periodic changes to loan losses. The ALL consisted of specific and general reserves. Specific reserves related to loans classified as impaired. Loans were considered impaired when, based on current information and events, it was probable that the Bank would be unable to collect all amounts due in accordance with the contractual terms of the loan. Impaired loans included TDRs and performing and nonperforming loans. Impaired loans were reviewed individually, and a specific allowance was allocated, if necessary, based on evaluation of either the fair value of the collateral underlying the loan or the present value of future cash flows calculated using the loan’s existing interest rate. General reserves were related to the remainder of the loan portfolio, including overdrawn deposit accounts, and were based on an evaluation of a number of factors, such as current economic conditions, the quality and composition of the loan portfolio, loss history, and other relevant factors. Acquired Loans Acquired loans, for which all contractual cash flows are expected to be received, are accounted for under the accounting guidance found in ASC Topic 310-20, Receivables - Nonrefundable Fees and Other Costs. With the adoption of ASC 326 on January 1, 2023, loans acquired as part of a business combination that have evidence of credit deterioration since their origination date are to be recorded at amortized cost with an associated allowance for the expected credit loss at the date of the acquisition. Prior to January 1, 2023, acquired loans, with evidence of credit deterioration, were accounted for under the accounting guidance found in ASC Topic 310-30, Receivables - Loans and Debt Securities Acquired with Deteriorated Credit Quality. Foreclosed Assets Assets acquired through, or in lieu of, loan foreclosure are HFS and are initially recorded at fair value less estimated cost to sell at the date of foreclosure, establishing a new cost basis. Subsequent to foreclosure, valuations are periodically performed by management, and the assets are carried at the lower of carrying amount or fair value less estimated cost to sell. Foreclosed assets are included in other assets on the consolidated balance sheets. As of December 31, 2024 and 2023, the Company had $ 38,000 and $ 69,000 of foreclosed assets, respectively. Credit Related Financial Information In the ordinary course of business, the Bank has entered into commitments to extend credit and standby letters of credit. Such financial instruments are recorded in the financial statements when they are funded. Premises and Equipment, Net Premises and equipment are stated at cost less accumulated depreciation, which is computed using the straight-line method over the estimated useful lives of the assets, which range from 3 to 40 years. Bank-Owned Life Insurance The Bank has purchased life insurance policies on certain key employees. The Bank is the beneficiary of the BOLI policies, which may be on past or present employees. BOLI policies have death benefits as well as a cash surrender value component, which is carried as an asset on the consolidated balance sheets. 78 Table of Contents Intangible Assets Intangible assets consist of goodwill. Goodwill represents the excess purchase price over the fair value of net assets acquired in business acquisitions. Goodwill is not amortized but rather evaluated for impairment annually. The Company performed its annual impairment test of goodwill for 2024 and 2023 as required by ASC 350, Intangibles - Goodwill and Other. The evaluation indicated no impairment of the Company’s goodwill. Treasury Stock On January 1, 2015, the LBCA became effective. Under provisions of the LBCA, there is no concept of “Treasury Shares.” Rather, shares purchased by the Company constitute authorized but unissued shares. Accordingly, the Company’s consolidated balance sheets reflect the cost of shares purchased by the Company, and any applicable excise taxes, within common stock. Comprehensive Income Comprehensive income consists of net income and other comprehensive income (loss). Other comprehensive income (loss) includes the after tax effect of unrealized net gains and losses on securities AFS and the amortization of the unrealized net loss on securities transferred to HTM. Stock-Based Compensation Plans The Company has adopted stock incentive plans that provide for the granting of stock-based awards to key employees, directors, and consultants. The Company accounts for the stock incentive plans in accordance with applicable accounting guidance. Under the fair value recognition provisions of this guidance, stock-based compensation cost is measured at the grant date based on the fair value of the award and recognized as expense on a straight-line basis over the requisite service period, which is the vesting period. The restricted stock granted under these plans provides common stock to recipients at the grant date. The restrictions vest in twenty percent increments on the first through fifth anniversaries of the grant date. The Company recognizes forfeitures as they occur. The Company has a Director Compensation Program, which allows directors the option of receiving their board attendance fees in Company stock in lieu of cash. Board compensation expense is recorded when board service is rendered. Advertising Cost Advertising costs are expensed as incurred. Income Tax The provision for income tax is based on taxes payable or receivable for the current year and deferred taxes on temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements. Deferred tax assets and liabilities are included in the financial statements at currently enacted income tax rates applicable to the period in which the deferred tax assets and liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. The Company has adopted the provisions of accounting guidance related to accounting for uncertainty in income taxes. This interpretation clarifies that the benefit of a position taken or expected to be taken in a tax return should be recognized in a company’s financial statements when it is more likely than not that the position will be sustained based on technical merits. The Company recognizes interest and penalties on income taxes as a component of income tax expense. The effect on deferred tax assets of a change in tax rate is recognized in income as part of income tax expense for the period that includes the enactment date. Deferred tax assets and liabilities have been measured as of December 31, 2024 and 2023, using the 21.0 % corporate tax rate. For more information, see “Note 8. Income Tax Expense.” Earnings per Common Share Basic EPS is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period, after giving retroactive effect to stock splits. Diluted EPS includes accrued but unissued shares relating to the Director Compensation Program, stock options, and restricted stock determined using the treasury stock method. A reconciliation of the weighted-average shares used in calculating basic EPS and diluted EPS for the reported periods is provided in “Note 17. Earnings Per Common Share.” Revenue Recognition The Company has identified certain recurring revenue streams related to noninterest income, which are within the scope of Topic 606, Revenue from Contracts with Customers . In-scope revenue streams are summarized based on the timing of revenue recognition as follows: • Revenue earned at a point in time - Fee income (including wire transfer, check ordering, and other transactional fees), NSF/OD charges, ATM/Card fee income (including ATM transaction fees and credit and debit card interchange income), and brokerage transaction income. Revenue is recorded as transactions 79 Table of Contents occur or services are provided to customers. The Company is the principal in each of these contracts with the exception of credit and debit card interchange fees, online transaction interchange fees, sweep income, and brokerage services income, in which case the Company is acting as the agent and records revenue net of expenses paid. • Revenue earned over time (generally under a monthly contract) - Debit card agreement, safe deposit box fees, and brokerage agreement income. Revenue is recorded in the period transactions occur or services are rendered to the customer. The Company is the principal in each of these contracts. There are no significant judgments relating to the amount and timing of revenue recognition for revenue streams within the scope of Topic 606, Revenue from Contracts with Customers . Due to the nature of the services the Company provides to its customers, it does not incur costs to obtain contracts, and there are no material incremental costs to fulfill these contracts that should be capitalized. Additionally, there are no material contract assets or receivables as the Company does not typically enter into long-term revenue contracts with customers. Accounting Standards Adopted in 2024 ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The guidance issued in this update requires improvement to the disclosures about a public entity’s reportable segments and more detailed information about a reportable segment’s expenses and other segment items. Although the Company has a single reportable segment, all the disclosures required by this update are required. Under this guidance, public entities are required to disclose segment expenses and other segment items on an annual and interim basis and to provide in interim periods all disclosures about a reportable segment that are currently required annually. The goal of these disclosures is to enable investors to develop more decision-useful financial analyses. This update is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The amendments in this update should be applied retrospectively to all previous periods presented. The adoption of this standard did not have an impact on the Company’s consolidated financial statements. Recent Accounting Pronouncements ASU 2023-09 Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The guidance in this update provides enhanced transparency and decision usefulness of income tax disclosures. The amendment addresses investor requests for income tax information through improvements to income tax disclosures related to the rate reconciliation and income taxes paid information. The guidance requires public business entities to disclose in their rate reconciliation table additional categories of information about federal, state, and foreign income taxes and to provide more details about the reconciling items in some categories if the items meet a quantitative threshold. The guidance also requires all entities to disclose annually income taxes paid (net of refunds received) disaggregated by federal, state, and foreign taxes and to disaggregate the information by jurisdiction based on a quantitative threshold. Investors anticipate theses disclosures will provide an understanding of an entity’s exposures to changes in tax legislation and allow investors to better assess income tax information that affects cash flow forecasts and capital allocation decisions, as well as identify opportunities to increase future cash flows. The standard is effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The amendments should be applied on a prospective basis, but retrospective application is permitted. The Company does not expect the adoption of this standard to have a material impact on the Company’s consolidated financial statements. ASU No. 2024-01, Compensation - Stock Compensation (Topic 718): Scope Application of Profits Interest and Similar Awards. The guidance issued in this update was designed to improve GAAP by adding an illustrative example that clarifies when the scope guidance of Topic 718 should be applied, since diversity in practice exists. This ASU does not change existing guidance. The standard is effective for annual periods beginning after December 15, 2024, and interim periods within those annual periods. Early adoption is permitted. The amendments in this update should be applied retrospectively to all prior periods presented or prospectively. The Company does not expect the adoption of this guidance to have a material impact on the Company’s consolidated financial statements. ASU No. 2024-02, Codification Improvements - Amendments to Remove References to the Concept Statements. The guidance issued in this update amends the codification to remove references to various FASB Concept Statements. The codification will be updated to clarify or correct unintended application of guidance that is not expected to have any significant effect on current accounting practice or cost to most entities. The standard is effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company does not expect the adoption of this guidance to have a material impact on the Company’s consolidated financial statements. ASU No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40). The guidance issued in this update was designed to improve financial reporting by requiring entities to disclose additional information about specific expense categories in the notes to financial statements. This standard is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The amendments in this update should be applied either prospectively to 80 Table of Contents financial statements issued for reporting periods after the effective date of this update or retrospectively to any or all prior periods presented in the financial statements. The Company does not expect the adoption of this guidance to have a material impact on the Company’s consolidated financial statements. Reclassification Certain prior period amounts have been reclassified to conform to the current period presentation. These changes in presentation did not have a material impact on the Company’s financial condition or results of operations. 2. Securities Securities are classified as AFS, HTM, and equity securities. Total securities were $ 684.9 million as of December 31, 2024. Securities AFS and Securities HTM Securities AFS and securities HTM are debt securities. Securities AFS are held for indefinite periods of time and are carried at estimated fair value. As of December 31, 2024, the estimated fair value of securities AFS was $ 550.1 million. The net unrealized loss on securities AFS increased $ 1.0 million for the year ended December 31, 2024, resulting in a net unrealized loss of $ 63.2 million as of December 31, 2024. Securities HTM, which the Company has the intent and ability to hold until maturity, are carried at amortized cost. As of December 31, 2024, the amortized cost of securities HTM was $ 131.8 million. Investment activity for the year ended December 31, 2024, included $ 157.3 million in maturities, principal repayments, and calls, partially offset by $ 128.9 million of securities purchased. There were no sales of securities AFS, and there were no purchases or sales of securities HTM for the same period. 81 Table of Contents The amortized cost and estimated fair value of securities AFS and securities HTM are summarized in the following tables: December 31, 2024 (in thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Securities AFS: Mortgage-backed securities $ 334,123 $ 539 $ ( 27,562 ) $ 307,100 Municipal bonds 203,394 — ( 34,551 ) 168,843 U.S. Treasury securities 10,995 — ( 63 ) 10,932 U.S. agency securities 64,881 18 ( 1,626 ) 63,273 Total Securities AFS $ 613,393 $ 557 $ ( 63,802 ) $ 550,148 Securities HTM: Mortgage-backed securities $ 130,864 $ — $ ( 22,698 ) $ 108,166 U.S. agency securities 932 — ( 108 ) 824 Total Securities HTM $ 131,796 $ — $ ( 22,806 ) $ 108,990 December 31, 2023 (in thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Securities AFS: Mortgage-backed securities $ 288,793 $ 395 $ ( 31,228 ) $ 257,960 Municipal bonds 211,848 13 ( 27,732 ) 184,129 U.S. Treasury securities 92,054 — ( 1,912 ) 90,142 U.S. agency securities 39,563 5 ( 1,707 ) 37,861 Total Securities AFS $ 632,258 $ 413 $ ( 62,579 ) $ 570,092 Securities HTM: Mortgage-backed securities $ 140,314 $ — $ ( 22,098 ) $ 118,216 U.S. agency securities 922 — ( 109 ) 813 Total Securities HTM $ 141,236 $ — $ ( 22,207 ) $ 119,029 82 Table of Contents The amortized cost and estimated fair value of securities AFS and securities HTM as of December 31, 2024, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because issuers have the right to call or repay obligations with or without call or prepayment penalties. December 31, 2024 (in thousands) Amortized Cost Fair Value Securities AFS: Within one year $ 17,974 $ 17,845 After one year but within five years 25,071 24,278 After five years but within ten years 126,667 118,100 After ten years 443,681 389,925 Total Securities AFS $ 613,393 $ 550,148 Securities HTM: Within one year $ — $ — After one year but within five years — — After five years but within ten years 932 824 After ten years 130,864 108,166 Total Securities HTM $ 131,796 $ 108,990 Accounting for Credit Losses – Securities AFS and Securities HTM The Company evaluates securities AFS for impairment when there has been a decline in fair value below the amortized cost basis of a security to determine whether there is a credit loss associated with the decline in fair value on at least a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Due to the zero credit loss assumption and evaluation of the considerations applied to the securities AFS, there was no ACL for securities AFS as of December 31, 2024 and 2023. Also, as part of the Company’s evaluation of its intent and ability to hold investments for a period of time sufficient to allow for any anticipated recovery in the market, the Company considers its investment strategy, cash flow needs, liquidity position, capital adequacy, and interest rate risk position. Management does not intend to sell these securities prior to recovery, and it is more likely than not that the Company will have the ability to hold them, primarily due to adequate liquidity, until each security has recovered its cost basis. Due to the zero credit loss assumption on the securities HTM portfolio, there was no ACL recorded for securities HTM as of December 31, 2024 and 2023. Accrued interest receivable totaled $ 3.0 million as of December 31, 2024 and 2023, for securities AFS and securities HTM and was reported in accrued interest receivable on the consolidated balance sheets. 83 Table of Contents Information pertaining to securities AFS with gross unrealized losses as of December 31, 2024 and 2023, aggregated by investment category and length of time that individual securities have been in a continuous loss position, is described as follows: December 31, 2024 Less than twelve months Twelve months or more (in thousands) Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value Securities AFS: Mortgage-backed securities $ ( 642 ) $ 66,986 $ ( 26,920 ) $ 179,644 Municipal bonds ( 136 ) 2,863 ( 34,415 ) 165,980 U.S. Treasury securities — — ( 63 ) 10,932 U.S. agency securities ( 82 ) 27,329 ( 1,544 ) 19,801 Total Securities AFS $ ( 860 ) $ 97,178 $ ( 62,942 ) $ 376,357 December 31, 2023 Less than twelve months Twelve months or more Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value Securities AFS: Mortgage-backed securities $ ( 35 ) $ 19,383 $ ( 31,193 ) $ 206,518 Municipal bonds ( 83 ) 4,815 ( 27,649 ) 176,098 U.S. Treasury securities — — ( 1,912 ) 90,142 U.S. agency securities ( 82 ) 19,301 ( 1,625 ) 14,475 Total Securities AFS $ ( 200 ) $ 43,499 $ ( 62,379 ) $ 487,233 As of December 31, 2024, the Company held 485 securities AFS that were in unrealized loss positions. The aggregate unrealized loss of these securities AFS as of December 31, 2024, was 10.40 % of the amortized cost basis of securities AFS. The proceeds from sales of debt securities and their gross gain (loss) for the years ended December 31, 2024, 2023, and 2022, are shown below: Years Ended December 31, (in thousands) 2024 2023 2022 Proceeds (1) $ — $ — $ 41,234 Gross gain — — 64 Gross loss — — ( 123 ) (1) The proceeds include the gross gain and loss. Equity Securities Equity securities are an investment in a CRA mutual fund, consisting primarily of bonds. Equity securities are carried at fair value on the consolidated balance sheets with periodic changes in value recorded through the consolidated statements of income. As of December 31, 2024, equity securities had a fair value of $ 2.9 million with a recognized loss of $ 28,000 for the year ended December 31, 2024. As of December 31, 2023, equity securities had a fair value of $ 3.0 million with a recognized loss of $ 14,000 for the year ended December 31, 2023. Pledged Securities Securities with carrying values of approximately $ 226.5 million and $ 230.9 million were used as collateral as of December 31, 2024 and 2023, respectively. 84 Table of Contents 3. Loans and Asset Quality Loans Loans HFI by category and loans HFS are summarized below: December 31, (in thousands) 2024 2023 Real estate: Commercial real estate $ 884,641 $ 851,582 One-to-four family residential 614,551 599,487 Construction and development 155,229 125,238 Commercial and industrial 327,086 315,327 Tax-exempt 64,930 72,913 Consumer 28,576 28,311 Total loans HFI $ 2,075,013 $ 1,992,858 Total loans HFS $ 2,547 $ 1,306 Deferred loan origination fees, net of certain direct costs, were $ 1.7 million and $ 1.4 million as of December 31, 2024 and 2023, respectively. Accrued interest receivable on loans HFI totaled $ 6.9 million and $ 6.8 million as of December 31, 2024 and 2023, respectively, and was reported in accrued interest receivable on the accompanying consolidated balance sheets. Concentrations of Credit Risk The majority of the lending activity occurs within the Bank’s Louisiana markets. The Bank maintains a diversified loan portfolio with a focus on CRE, one-to-four family residential real estate, and commercial and industrial loans. Substantially all of the Bank’s real estate loans are secured by properties located within Louisiana. Allowance for Credit Losses The Company maintains an ACL on all loans that reflects management’s estimate of expected credit losses for the full life of the loan portfolio. The following table summarizes the activity in the ACL by category for the year ended December 31, 2024: (in thousands) Beginning Balance Provision for Credit Losses (1) Charge-offs Recoveries Ending Balance Real estate: Commercial real estate $ 9,118 $ ( 71 ) $ — $ — $ 9,047 One-to-four family residential 7,484 ( 1,041 ) ( 1 ) 10 6,452 Construction and development 1,309 344 — — 1,653 Commercial and industrial 2,553 1,887 ( 380 ) 63 4,123 Tax-exempt 575 ( 472 ) — — 103 Consumer 297 353 ( 422 ) 125 353 Total allowance for credit losses $ 21,336 $ 1,000 $ ( 803 ) $ 198 $ 21,731 (1) The $ 1.2 million provision for credit losses on the consolidated statements of income for the year ended December 31, 2024, includes $ 1.0 million for loans and $ 200,000 for unfunded loan commitments. 85 Table of Contents Effective January 1, 2023, the Company adopted the provisions of ASC 326 using the modified retrospective method. The following table summarizes the activity in the ACL by category for the year ended December 31, 2023: (in thousands) Beginning Balance Impact of ASC 326 Adoption Provision for Credit Losses Charge-offs Recoveries Ending Balance Real estate: Commercial real estate $ 7,720 $ 876 $ 522 $ — $ — $ 9,118 One-to-four family residential 5,682 1,231 584 ( 23 ) 10 7,484 Construction and development 1,654 ( 444 ) 108 ( 9 ) — 1,309 Commercial and industrial 4,350 ( 822 ) ( 947 ) ( 58 ) 30 2,553 Tax-exempt 751 ( 427 ) 251 — — 575 Consumer 471 ( 136 ) 217 ( 383 ) 128 297 Total allowance for credit losses $ 20,628 $ 278 $ 735 $ ( 473 ) $ 168 $ 21,336 Allowance for Loan Losses For reporting periods prior to January 1, 2023, the Company maintained an ALL on loans that represented management’s estimate of probable losses incurred in the portfolio category. The following table summarizes the activity in the ALL by category for the year ended December 31, 2022: (in thousands) Beginning Balance Provision for Loan Losses Charge-offs Recoveries Ending Balance Real estate: Commercial real estate $ 6,749 $ 970 $ — $ 1 $ 7,720 One-to-four family residential 5,375 296 — 11 5,682 Construction and development 1,326 328 ( 18 ) 18 1,654 Commercial and industrial 4,465 ( 162 ) ( 39 ) 86 4,350 Tax-exempt 749 2 — — 751 Consumer 512 316 ( 490 ) 133 471 Total allowance for loan losses $ 19,176 $ 1,750 $ ( 547 ) $ 249 $ 20,628 86 Table of Contents The balance in the ACL and the related recorded investment in loans by category as of December 31, 2024, are as follows: (in thousands) Individually Evaluated Collectively Evaluated Total Allowance for credit losses: Real estate: Commercial real estate $ 32 $ 9,015 $ 9,047 One-to-four family residential 144 6,308 6,452 Construction and development 549 1,104 1,653 Commercial and industrial 116 4,007 4,123 Tax-exempt — 103 103 Consumer 78 275 353 Total allowance for credit losses $ 919 $ 20,812 $ 21,731 Loans: Real estate: Commercial real estate $ 4,173 $ 880,468 $ 884,641 One-to-four family residential 2,822 611,729 614,551 Construction and development 1,158 154,071 155,229 Commercial and industrial 661 326,425 327,086 Tax-exempt — 64,930 64,930 Consumer 91 28,485 28,576 Total loans HFI $ 8,905 $ 2,066,108 $ 2,075,013 The balance in the ACL and the related recorded investment in loans by category as of December 31, 2023, are as follows: (in thousands) Individually Evaluated Collectively Evaluated Total Allowance for credit losses: Real estate: Commercial real estate $ 342 $ 8,776 $ 9,118 One-to-four family residential 57 7,427 7,484 Construction and development — 1,309 1,309 Commercial and industrial 226 2,327 2,553 Tax-exempt — 575 575 Consumer 104 193 297 Total allowance for credit losses $ 729 $ 20,607 $ 21,336 Loans: Real estate: Commercial real estate $ 1,379 $ 850,203 $ 851,582 One-to-four family residential 751 598,736 599,487 Construction and development — 125,238 125,238 Commercial and industrial 972 314,355 315,327 Tax-exempt — 72,913 72,913 Consumer 140 28,171 28,311 Total loans HFI $ 3,242 $ 1,989,616 $ 1,992,858 87 Table of Contents Nonaccrual and Past Due Loans The following table presents nonaccrual loans as of December 31, 2024: (in thousands) Nonaccrual with No ACL Nonaccrual with ACL Total Nonaccrual Real estate: Commercial real estate $ 458 $ 276 $ 734 One-to-four family residential 397 289 686 Construction and development — 920 920 Commercial and industrial 412 142 554 Tax-exempt — — — Consumer — 74 74 Total loans HFI $ 1,267 $ 1,701 $ 2,968 The following table presents nonaccrual loans as of December 31, 2023: (in thousands) Nonaccrual with No ACL Nonaccrual with ACL Total Nonaccrual Real estate: Commercial real estate $ — $ 714 $ 714 One-to-four family residential — 269 269 Construction and development — — — Commercial and industrial 709 135 844 Tax-exempt — — — Consumer — 132 132 Total loans HFI $ 709 $ 1,250 $ 1,959 No material interest income was recognized in the consolidated statements of income on nonaccrual loans for the years ended December 31, 2024, 2023, or 2022. The following table presents the aging analysis of the past due loans and loans 90 days or more past due and still accruing interest by loan category as of December 31, 2024: Past Due (in thousands) 30-59 Days 60-89 Days Past Due 90 Days or More Current Total Loans HFI 90 Days or More Past Due and Accruing Real estate: Commercial real estate $ — $ — $ 704 $ 883,937 $ 884,641 $ — One-to-four family residential 1,762 2,705 899 609,185 614,551 264 Construction and development 32 — 918 154,279 155,229 — Commercial and industrial 4 2 453 326,627 327,086 — Tax-exempt — — — 64,930 64,930 — Consumer 44 15 2 28,515 28,576 2 Total loans HFI $ 1,842 $ 2,722 $ 2,976 $ 2,067,473 $ 2,075,013 $ 266 88 Table of Contents The following table presents the aging analysis of the past due loans and loans 90 days or more past due and still accruing interest by loan category as of December 31, 2023: Past Due (in thousands) 30-59 Days 60-89 Days Past Due 90 Days or More Current Total Loans HFI 90 Days or More Past Due and Accruing Real estate: Commercial real estate $ 36 $ — $ 678 $ 850,868 $ 851,582 $ — One-to-four family residential 392 251 409 598,435 599,487 260 Construction and development — — 265 124,973 125,238 265 Commercial and industrial 132 60 847 314,288 315,327 45 Tax-exempt — — — 72,913 72,913 — Consumer 27 16 46 28,222 28,311 4 Total loans HFI $ 587 $ 327 $ 2,245 $ 1,989,699 $ 1,992,858 $ 574 Impaired Loans For reporting periods prior to January 1, 2023, when ASC 326 was adopted, the Company individually evaluated impaired loans, including TDRs and performing and nonperforming loans. Once a loan was deemed to be impaired, the difference between the loan value and the Bank’s exposure was charged-off or a specific reserve was established. Information pertaining to impaired loans as of and for the year ended December 31, 2022, is as follows: (in thousands) Unpaid Principal Balance Recorded Investment Related Allowance Average Recorded Investment Interest Income Recognized With no related allowance recorded: Real estate: Commercial real estate $ 3,804 $ 3,796 $ — $ 3,194 $ 135 One-to-four family residential 1,458 1,387 — 797 68 Construction and development 9 9 — 104 — Commercial and industrial 51 51 — 58 4 Tax-exempt — — — — — Consumer 26 26 — 9 1 Total with no related allowance 5,348 5,269 — 4,162 208 With allowance recorded: Real estate: Commercial real estate 717 717 15 1,264 33 One-to-four family residential 120 120 16 48 6 Construction and development — — — — — Commercial and industrial 1,360 1,351 172 623 4 Tax-exempt — — — — — Consumer 113 111 111 122 1 Total with related allowance 2,310 2,299 314 2,057 44 Total impaired loans $ 7,658 $ 7,568 $ 314 $ 6,219 $ 252 Loan Modifications Modifications are made to a borrower experiencing financial difficulty, and the modified terms are in the form of principal forgiveness, interest rate reduction, other-than-insignificant payment delay, or a term extension in the current reporting period. For the years ended December 31, 2024 and 2023, modifications were made to certain borrowers by granting term extensions. These term extensions were not significant to the consolidated financial statements. Troubled Debt Restructurings For reporting periods prior to January 1, 2023, when ASC 326 was adopted, the restructuring of a loan was considered a TDR if the borrower was experiencing financial difficulties and the Bank had granted a concession. 89 Table of Contents A summary of loans modified as TDRs that occurred during the year ended December 31, 2022, is as follows: December 31, 2022 Recorded Investment (dollars in thousands) Loan Count Pre Modification Post Modification Real estate: Commercial real estate 1 $ 50 $ 50 One-to-four family residential 5 696 699 Construction and development — — — Commercial and industrial — — — Tax-exempt — — — Consumer 1 104 104 Total 7 $ 850 $ 853 The TDRs described above increased the ALL by $ 101,000 during the year ended December 31, 2022. Additionally, there were no charge-offs of TDRs in 2022, and there were no TDRs that subsequently defaulted in 2022. Credit Quality Indicators Loans are categorized based on the degree of risk inherent in the credit and the ability of the borrower to service the debt. A description of the general characteristics of the Bank’s risk rating grades follows: Pass - These loans are of satisfactory quality and do not require a more severe classification. Special Mention - This category includes loans with potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan. However, the loss potential does not warrant substandard classification. Substandard - Loans in this category have well-defined weaknesses that jeopardize normal repayment of principal and interest. Prompt corrective action is required to reduce exposure and to assure adequate remedial actions are taken by the borrower. If these weaknesses do not improve, loss is possible. Doubtful - Loans in this category have well-defined weaknesses that make full collection improbable. Loss - Loans classified in this category are considered uncollectible and charged-off to the ACL. 90 Table of Contents As of December 31, 2024, the Company had no loans classified as doubtful or loss. The following table summarizes loans by risk rating and year of origination as of December 31, 2024, and gross charge-offs for the year ended December 31, 2024: Year of Origination (in thousands) 2024 2023 2022 2021 2020 Prior Years Revolving Lines Total Real estate: Commercial real estate Pass $ 141,677 $ 107,788 $ 242,693 $ 208,595 $ 68,371 $ 85,212 $ 22,731 $ 877,067 Special Mention 2,883 221 1,475 — — 658 — 5,237 Substandard 725 — 194 684 — 734 — 2,337 Total $ 145,285 $ 108,009 $ 244,362 $ 209,279 $ 68,371 $ 86,604 $ 22,731 $ 884,641 One-to-four family residential Pass $ 92,621 $ 104,575 $ 117,750 $ 111,730 $ 78,869 $ 86,432 $ 19,294 $ 611,271 Special Mention 125 — — 798 — 255 — 1,178 Substandard — 63 369 42 33 785 810 2,102 Total $ 92,746 $ 104,638 $ 118,119 $ 112,570 $ 78,902 $ 87,472 $ 20,104 $ 614,551 Construction and development Pass $ 79,431 $ 51,997 $ 15,031 $ 3,629 $ 672 $ 1,514 $ 1,799 $ 154,073 Special Mention — — — — — — — — Substandard — 918 — — — 238 — 1,156 Total $ 79,431 $ 52,915 $ 15,031 $ 3,629 $ 672 $ 1,752 $ 1,799 $ 155,229 Commercial and industrial Pass $ 85,573 $ 43,242 $ 32,024 $ 38,991 $ 7,619 $ 1,356 $ 115,704 $ 324,509 Special Mention 646 — 1,191 — — — 78 1,915 Substandard 26 2 58 11 2 78 485 662 Total $ 86,245 $ 43,244 $ 33,273 $ 39,002 $ 7,621 $ 1,434 $ 116,267 $ 327,086 Tax-exempt Pass $ 2,510 $ 1,893 $ 14,976 $ 6,626 $ 10,811 $ 28,114 $ — $ 64,930 Special Mention — — — — — — — — Substandard — — — — — — — — Total $ 2,510 $ 1,893 $ 14,976 $ 6,626 $ 10,811 $ 28,114 $ — $ 64,930 Consumer Pass $ 15,638 $ 7,316 $ 3,009 $ 869 $ 335 $ 183 $ 1,135 $ 28,485 Special Mention — — — — — — — — Substandard — 10 — — — 74 7 91 Total $ 15,638 $ 7,326 $ 3,009 $ 869 $ 335 $ 257 $ 1,142 $ 28,576 Total loans HFI $ 421,855 $ 318,025 $ 428,770 $ 371,975 $ 166,712 $ 205,633 $ 162,043 $ 2,075,013 Gross charge-offs $ 13 $ 27 $ 37 $ 1 $ — $ 312 $ 413 $ 803 91 Table of Contents As of December 31, 2023, the Company had no loans classified as doubtful or loss. The following table summarizes loans by risk rating and year of origination as of December 31, 2023, and gross charge-offs for the year ended December 31, 2023: Year of Origination (in thousands) 2023 2022 2021 2020 2019 Prior Years Revolving Lines Total Real estate: Commercial real estate Pass $ 124,134 $ 256,707 $ 239,364 $ 76,754 $ 63,475 $ 61,957 $ 18,467 $ 840,858 Special Mention 73 — 3,186 — 1,031 4,082 — 8,372 Substandard 184 779 675 — — 714 — 2,352 Total $ 124,391 $ 257,486 $ 243,225 $ 76,754 $ 64,506 $ 66,753 $ 18,467 $ 851,582 One-to-four family residential Pass $ 122,004 $ 134,583 $ 129,388 $ 90,190 $ 31,110 $ 74,077 $ 16,472 $ 597,824 Special Mention — — — — — 261 — 261 Substandard — 79 — 37 385 827 74 1,402 Total $ 122,004 $ 134,662 $ 129,388 $ 90,227 $ 31,495 $ 75,165 $ 16,546 $ 599,487 Construction and development Pass $ 54,189 $ 55,515 $ 10,333 $ 1,742 $ 2,158 $ 1,015 $ 286 $ 125,238 Special Mention — — — — — — — — Substandard — — — — — — — — Total $ 54,189 $ 55,515 $ 10,333 $ 1,742 $ 2,158 $ 1,015 $ 286 $ 125,238 Commercial and industrial Pass $ 73,653 $ 49,637 $ 51,012 $ 13,863 $ 7,409 $ 813 $ 107,171 $ 303,558 Special Mention 1,208 937 4,659 — 310 509 3,173 10,796 Substandard 4 — 59 5 54 51 800 973 Total $ 74,865 $ 50,574 $ 55,730 $ 13,868 $ 7,773 $ 1,373 $ 111,144 $ 315,327 Tax-exempt Pass $ 959 $ 15,679 $ 8,174 $ 13,919 $ 4,250 $ 29,932 $ — $ 72,913 Special Mention — — — — — — — — Substandard — — — — — — — — Total $ 959 $ 15,679 $ 8,174 $ 13,919 $ 4,250 $ 29,932 $ — $ 72,913 Consumer Pass $ 16,947 $ 6,385 $ 2,325 $ 858 $ 363 $ 133 $ 1,173 $ 28,184 Special Mention — — — — — — — — Substandard — 29 — — — 90 8 127 Total $ 16,947 $ 6,414 $ 2,325 $ 858 $ 363 $ 223 $ 1,181 $ 28,311 Total loans HFI $ 393,355 $ 520,330 $ 449,175 $ 197,368 $ 110,545 $ 174,461 $ 147,624 $ 1,992,858 Gross charge-offs $ 12 $ 20 $ 1 $ — $ 10 $ 25 $ 405 $ 473 Commitments to Extend Credit Commitments to extend credit are agreements to lend to a customer if all conditions of the commitment have been met. Commitments generally have fixed expiration dates or other termination clauses and may require the payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if it is deemed necessary by the Company upon extension of credit, is based on management’s evaluation of the customer’s ability to repay. Unfunded loan commitments totaled approximately $ 509.6 million and $ 372.0 million as of December 31, 2024 and 2023, respectively. Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements, including 92 Table of Contents commercial paper, bond financing, and similar transactions. Commitments under standby letters of credit totaled approximately $ 11.9 million and $ 15.4 million as of December 31, 2024 and 2023, respectively. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. Effective January 1, 2023, the Company adopted the provision of ASC 326 using the modified retrospective method and established a reserve for unfunded commitments. The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk through a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The reserve for unfunded commitments is recorded within accrued expenses and other liabilities on the consolidated balance sheets, and the related provision is recorded in provision for credit losses on the consolidated statements of income. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life. The loss rates computed for each pool and expected pool-level funding rates are applied to the related unfunded commitment balance to obtain the reserve amount. As of December 31, 2024 and December 31, 2023, the reserve on unfunded commitments was $ 642,000 and $ 442,000 , respectively. The following table summarizes the reserve for unfunded commitments for the periods indicated: As of and for the Years Ended December 31, (in thousands) 2024 2023 Reserve for unfunded commitments at beginning of period $ 442 $ — Provision for credit losses (1,2) 200 — Impact of ASC 326 adoption — 442 Reserve for unfunded commitments at end of period $ 642 $ 442 (1) The $ 1.2 million provision for credit losses on the consolidated statements of income for the year ended December 31, 2024, includes $ 1.0 million for loans and $ 200,000 for unfunded loan commitments. (2) The $ 735,000 provision for credit losses on the consolidated statements of income for the year ended December 31, 2023, is all for loans. 4. Premises and Equipment, Net Components of premises and equipment were as follows: December 31, (in thousands) 2024 2023 Land $ 20,508 $ 20,354 Buildings 44,104 41,763 Leasehold improvements 2,877 2,815 Furniture and equipment 15,356 14,765 Vehicles 395 380 Computer equipment 3,642 3,623 Projects in process 2,347 927 Total premises and equipment 89,229 84,627 Less: Accumulated depreciation ( 29,788 ) ( 27,539 ) Premises and equipment, net $ 59,441 $ 57,088 Depreciation expense amounted to approximately $ 2.5 million, $ 2.2 million, and $ 2.1 million for the years ended December 31, 2024, 2023, and 2022, respectively. 93 Table of Contents 5. Deposits Deposits were $ 2.81 billion as of December 31, 2024, which remained consistent with $ 2.80 billion as of December 31, 2023. In 2024, customer deposit balances were consistent with normal activity. D eposits are summarized below: December 31, (in thousands) 2024 2023 Noninterest-bearing demand deposits $ 866,496 $ 916,456 Interest-bearing deposits: Interest-bearing demand deposits 154,720 138,380 NOW accounts 467,118 468,483 Money market accounts 556,769 541,607 Savings accounts 169,894 173,741 Time deposits less than or equal to $250,000 403,096 392,094 Time deposits greater than $250,000 187,013 171,127 Total interest-bearing deposits 1,938,610 1,885,432 Total deposits $ 2,805,106 $ 2,801,888 As of December 31, 2024, the scheduled maturities of all outstanding time deposits were as follows: Years ending December 31, Amount (in thousands) 2025 $ 541,927 2026 27,430 2027 9,985 2028 4,493 2029 4,464 Thereafter 1,810 $ 590,109 Collateral for Deposits As of December 31, 2024 and 2023, securities and FHLB of Dallas letters of credit with values of approximately $ 287.5 million and $ 287.4 million, respectively, were pledged as collateral to secure public entity deposits. 6. Other Borrowed Funds The Company has established borrowing capacity with the FHLB of Dallas, the Federal Reserve Bank’s Discount Window facility, and other correspondent banks to provide additional sources of operating funds. As of December 31, 2024, total borrowing capacity from these sources was $ 1.18 billion. As of December 31, 2024 and 2023, the Company had no outstanding borrowings under these agreements, and there were no borrowings during these periods. 7. Leases The Company determines if an arrangement is a lease at inception of the contract and assesses the appropriate classification as operating or financing. Operating leases with terms greater than one year are included in right-of-use assets and lease liabilities on the Company’s consolidated balance sheets. Agreements with both lease and non-lease components are accounted for separately, with only the lease component capitalized. Operating right-of-use assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the term using the interest rate implicit in the contract, when available, or the Company’s incremental collateralized borrowing rate with similar terms. As of December 31, 2024, the Company maintained six operating leases on land and buildings for banking center facilities under long-term leases. These operating leases contain renewal options for periods ranging from one to five years that expire at various dates through October 31, 2033, with no residual value guarantees. Future obligations relating to the exercise of renewal options are included in the measurement if, based on the judgment of management, the renewal option is reasonably certain to be exercised. Factors in determining whether an option is reasonably certain of exercise include, but are not limited to, the value of leasehold improvements, the value of the renewal rate compared to market rates, and the presence of factors that would cause a significant economic penalty to the Company if the option is not exercised. Management reasonably plans to exercise all options, and as such, all renewal options are included in the measurement of the right-of-use assets and operating lease liabilities. 94 Table of Contents The Company elects to recognize the lease payments on leases with terms of one year or less in its consolidated statements of income on a straight-line basis over the lease term. For the years ended December 31, 2024, 2023, and 2022, operating lease expenses were $ 581,000 , $ 643,000 , and $ 628,000 , respectively. Operating lease expenses are included as a component of occupancy and equipment expenses within the accompanying consolidated statements of income. Cash paid for amounts included in the measurement of lease liabilities for operating leases totaled $ 571,000 , $ 625,000 , and $ 606,000 for the years ended December 31, 2024, 2023, and 2022, respectively. The table below summarizes other information related to the Company’s operating leases as of December 31, 2024 and 2023: December 31, 2024 2023 Weighted average remaining operating lease term 5.51 years 6.70 years Weighted average operating lease discount rate 3.3 % 3.3 % Future obligations over the primary and renewal option terms of the Company’s long-term operating leases as of December 31, 2024, were as follows: Years Ending December 31, Amount (in thousands) 2025 $ 596 2026 540 2027 483 2028 485 2029 488 Thereafter 625 Total lease payments 3,217 Less: Imputed interest ( 353 ) Present value of lease liabilities $ 2,864 8. Income Tax Expense The components of income tax expense for the years ended December 31, 2024, 2023, and 2022, were as follows: Years Ended December 31, (in thousands) 2024 2023 2022 Current tax expense $ 7,382 $ 8,395 $ 7,752 Deferred tax expense (benefit) 764 ( 330 ) 313 Income tax expense $ 8,146 $ 8,065 $ 8,065 The source and tax effect of items reconciling income tax expense to the amount computed by applying the federal income tax rates in effect to income before income tax expense for the years ended December 31, 2024, 2023, and 2022 are as follows: December 31, 2024 2023 2022 (dollars in thousands) Amount Percent Amount Percent Amount Percent Income before income tax expense $ 42,381 100.0 % $ 42,944 100.0 % $ 44,981 100.0 % U.S. federal income tax expense 8,900 21.0 % 9,018 21.0 % 9,446 21.0 % Nontaxable income ( 897 ) ( 2.1 %) ( 1,073 ) ( 2.5 %) ( 1,338 ) ( 3.0 %) Nondeductible expenses 81 0.2 % 67 0.2 % 50 0.1 % Other 62 0.1 % 53 0.1 % ( 93 ) ( 0.2 %) Income tax expense $ 8,146 19.2 % $ 8,065 18.8 % $ 8,065 17.9 % 95 Table of Contents The Company records deferred income taxes on the tax effect of changes in temporary differences. Deferred tax assets (liabilities) are subject to a valuation allowance unless their realization is more likely than not. The deferred tax assets (liabilities) were comprised of the following as of December 31, 2024 and 2023: December 31, (in thousands) 2024 2023 Depreciation $ ( 3,377 ) $ ( 2,542 ) FHLB of Dallas stock dividends ( 39 ) ( 20 ) Equity security valuation ( 6 ) — Other ( 338 ) — Gross deferred tax liability ( 3,760 ) ( 2,562 ) Allowance for credit losses 4,683 4,541 Allowance for operational losses 55 54 Health insurance self fund 340 221 Deferred compensation 831 708 Unrealized loss on securities 16,015 16,081 Equity security valuation — 35 Advance payments from vendors 302 197 Accrued bonus 512 502 Other — 72 Gross deferred tax asset 22,738 22,411 Net deferred tax asset (liability) $ 18,978 $ 19,849 9. Employee Benefits The Company adopted a contributory retirement plan for employees of the Bank effective March 1, 1999, and amended effective January 1, 2022. Beginning April 1, 2022, employees had the opportunity to invest a portion of their plan funds in the Company’s common stock through a unitized fund. Effective January 1, 2025, the Company’s common stock unitized fund was no longer an investment alternative in the plan. The contributory retirement plan covers all employees who meet the length of service and the number of hours worked requirements and elect to participate. Discretionary employer contributions during the years ended December 31, 2024, 2023, and 2022, totaled approximately $ 816,000 , $ 780,000 , and $ 742,000 , respectively. The Bank has purchased life insurance policies on certain key employees. The Bank is the beneficiary of the BOLI policies, which have cash surrender value and death benefit components. The Bank uses a portion of the income generated from the BOLI policies to fund the expenses for nonqualified, noncontributory supplemental executive retirement agreements with certain employees. The supplemental executive retirement agreements provide post-retirement benefit payments to those employees. The liability related to these agreements was $ 4.1 million and $ 3.4 million as of December 31, 2024 and 2023, respectively, and is recorded in accrued expenses and other liabilities on the consolidated balance sheets. 10. Stock-Based Compensation Plans Equity Incentive Plans On April 17, 2008, the Company adopted its 2008 Plan, which provided for the grant of stock-based awards for key employees and non-employee members of the Company’s board of directors. The 2008 Plan expired on December 31, 2018, and no new awards were granted under this plan after that date. As of December 31, 2020, all granted stock options under the 2008 Plan had been exercised. Effective July 1, 2023, all restricted stock awards had vested or been forfeited and the 2008 Plan was completed. On October 25, 2018, the Company adopted its 2018 Plan, which was approved by the Company’s shareholders in April of 2019. The 2018 Plan provides for the granting of stock-based awards to key employees, directors, and consultants. The Compensation Committee administers the 2018 Plan, makes determinations with respect to participation, and authorizes stock-based awards under the plan. The maximum number of shares of the Company’s common stock available for 96 Table of Contents issuance under the 2018 Plan was 200,000 shares. The status of the Company’s 2018 Plan is presented below: 2018 Plan Number of Shares Awards available for issuance- December 31, 2022 173,550 Awards granted ( 9,300 ) Awards forfeited 1,850 Awards available for issuance - December 31, 2023 166,100 Awards granted ( 12,450 ) Awards forfeited 575 Awards available for issuance - December 31, 2024 154,225 All disclosures for restricted stock shown below relate to outstanding awards under the 2008 and 2018 Plans. Restricted Stock Awards The restricted stock awards issued under the 2008 and 2018 Plans provide common stock to recipients at the grant date. The restrictions vest in twenty percent increments on the first through fifth anniversaries of the grant date. Compensation expense for these grants is recognized ratably over the vesting period of the awards based on the fair value of the stock at the grant date. During 2024, the Compensation Committee granted 12,450 restricted stock awards with a weighted average fair value of $ 49.02 , and 575 restricted stock awards with a weighted average fair value of $ 49.22 were forfeited. For the year ended December 31, 2024, the compensation expense for the vested restricted stock was $ 370,000 . As of December 31, 2024, there was approximately $ 1.1 million of total unrecognized compensation cost related to restricted stock awards. That cost is expected to be recognized over a weighted average period of 4.3 years. During 2023, the Compensation Committee granted 9,300 restricted stock awards with a weighted average fair value of $ 48.11 , and 1,940 restricted stock awards with a weighted average fair value of $ 49.51 were forfeited. For the year ended December 31, 2023, the compensation expense for the vested restricted stock was $ 319,000 . As of December 31, 2023, there was approximately $ 880,000 of total unrecognized compensation cost related to restricted stock awards. That cost was expected to be recognized over a weighted average period of 4.3 years. For the year ended December 31, 2022, the compensation expense for the vested restricted stock was $ 274,000 . The Company funds the restricted stock from authorized, but unissued, shares. The status of the Company’s nonvested restricted stock is presented below: Nonvested Restricted Stock Number of Shares Weighted Average Grant Date Fair Value Nonvested - December 31, 2021 18,135 $ 45.61 Granted 7,550 $ 53.40 Vested ( 5,830 ) $ 43.03 Nonvested - December 31, 2022 19,855 $ 49.33 Granted 9,300 $ 48.11 Vested ( 5,870 ) $ 47.18 Forfeited ( 1,940 ) $ 49.51 Nonvested - December 31, 2023 21,345 $ 49.40 Granted 12,450 $ 49.02 Vested ( 6,460 ) $ 48.90 Forfeited ( 575 ) $ 49.22 Nonvested - December 31, 2024 26,760 $ 49.35 97 Table of Contents Director Compensation Program The Company has a Director Compensation Program. This program allows directors the option of receiving their board attendance fees in Company stock in lieu of cash. Under the program, director fees are earned and expensed in the year board services are rendered, and the related stock is issued the following year. The Director Compensation Program stock earned and the issuance of shares as board compensation for the years ended December 31, 2024, 2023, and 2022 were as follows: Years Ended December 31, (dollars in thousands) 2024 2023 2022 Share-based board compensation earned $ 62 $ 42 $ 85 Issuance of shares of common stock as board compensation: Number of shares issued 811 1,660 675 Equity impact of shares issued $ 41 $ 85 $ 35 11. Self-Insurance The Company is self-insured for group health insurance. The Company’s liability is limited to the aggregate policy deductible of $ 135,000 per individual with a maximum of approximately $ 4.5 million for the group. The Company has reflected its estimated liability for known and incurred but not reported claims in the accompanying financial statements. 12. Off-Balance Sheet Contractual Obligations and Contingencies The Company is a party to financial instruments with off-balance sheet risk in the normal course of business. The contract or notional amounts of these instruments reflect the extent of the Company’s involvement in particular classes of financial instruments. The Company’s exposure is represented by the contractual amount of these commitments. Investment Commitments In 2014, the Company committed to an investment into an SBIC limited partnership. As of December 31, 2024, there was a $ 226,000 outstanding commitment to this partnership. In 2020, the Company committed to an additional investment into an SBIC limited partnership. As of December 31, 2024, there was a $ 1.9 million outstanding commitment to this partnership. In 2021, the Company committed to an investment into a bank technology limited partnership. As of December 31, 2024, there was a $ 402,000 outstanding commitment to this partnership. Construction Commitment The Company has one committed construction agreement to renovate a banking center, and there was approximately $ 12,000 remaining on this commitment as of December 31, 2024. Contingencies The Company and the Bank are involved, from time to time, in various legal matters arising in the ordinary course of business. While the outcome of these claims or litigation cannot be determined at this time, in the opinion of management, neither the Company nor the Bank are involved in such legal proceedings that the resolution is expected to have a material adverse effect on the consolidated results of operations, financial condition, or cash flows. 13. Related Party Transactions In the ordinary course of business, certain officers, directors, and principal shareholders, as well as their immediate family members and their affiliates, maintain a variety of banking relationships with the Company. An analysis of loan activity to these related parties is as follows: Years Ended December 31, (in thousands) 2024 2023 Loan balance - beginning of period $ 30,058 $ 32,648 New loans 7,044 3,773 Changes in relationships, net ( 1,029 ) 690 Repayments ( 7,516 ) ( 7,053 ) Loan balance - end of period $ 28,557 $ 30,058 98 Table of Contents As of December 31, 2024 and 2023, deposits from directors, executive officers, their immediate family members, and their affiliates totaled approximately $ 75.7 million and $ 74.6 million, respectively. 14. Fair Value The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. The fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair Value Disclosure Securities AFS, loans HFS, and equity securities are recorded at fair value on a recurring basis. Additionally, the Company may be required to record at fair value other assets on a nonrecurring basis, such as collateral dependent loans, foreclosed assets, and other certain assets. The nonrecurring fair value adjustments typically involve application of lower of cost or market accounting or write-downs of individual assets. ASC 820, Fair Value Measurements and Disclosures indicates that assets and liabilities are recorded at fair value according to a fair value hierarchy comprised of three levels: • Level 1 pricing represents quotes on the exact financial instrument that is traded in active markets. Quoted prices on actively traded equities, for example, are in this category. • Level 2 pricing is derived from observable data including market spreads, current and projected rates, prepayment data, and credit quality. The valuation may be based on quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. • Level 3 pricing is derived without the use of observable data. In such cases, mark-to-model strategies are typically employed. Often, these types of instruments have no active market, possess unique characteristics, and are thinly traded. The Company used the following methods and significant assumptions to estimate fair value: Securities AFS and Equity Securities: The fair values for securities AFS are determined by quoted market prices, if available (Level 1). For securities where quoted prices are not available, fair values are calculated based on market prices of similar securities (Level 2). For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators (Level 3). Loans HFS: Residential mortgage loans originated and held for sale are carried at the lower of cost or estimated fair value on an individual basis. The fair values of mortgage loans HFS are based on commitments on hand from investors within the secondary market for loans with similar characteristics. As such, the fair value adjustments for mortgage loans HFS are recurring Level 2. Loans HFI: The Company does not record loans HFI at fair value on a recurring basis. Loans for which it was probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are evaluated individually to determine if any credit loss exists. For loans evaluated on an individual basis that are collateral dependent, the fair value is estimated by applying a discount factor to the collateral value then deducting the estimated cost to sell. For loans evaluated on an individual basis that are not collateral dependent, the discounted cash flow method is utilized to determine the fair value. When a loan experiences a credit loss with specific allocated losses determined by the fair value method, the Company considers the collateral dependent loan as nonrecurring Level 3. Foreclosed Assets: Foreclosed assets, consisting of properties obtained through foreclosure or in satisfaction of loans, are reported at fair value, determined on the basis of current appraisals, comparable sales, and other estimates of value obtained principally from independent sources, adjusted for estimated selling costs (Level 2). However, foreclosed assets are considered Level 3 in the fair value hierarchy because management has qualitatively applied a discount due to the size, supply of inventory, and the incremental discounts applied to the appraisals. Management also considers other factors, including changes in absorption rates, length of time the property has been on the market, and anticipated sales values, which have resulted in adjustments to the collateral value estimates indicated in certain appraisals. 99 Table of Contents Fair Value of Assets Measured on a Recurring Basis The table below presents the recorded amount of assets measured at fair value on a recurring basis: (in thousands) Fair Value Level 1 Level 2 Level 3 December 31, 2024 Loans HFS $ 2,547 $ — $ 2,547 $ — Securities AFS: Mortgage-backed securities $ 307,100 $ — $ 307,100 $ — Municipal bonds $ 168,843 $ — $ 168,843 $ — U.S. Treasury securities $ 10,932 $ — $ 10,932 $ — U.S. agency securities $ 63,273 $ — $ 63,273 $ — Equity securities $ 2,937 $ 2,937 $ — $ — December 31, 2023 Loans HFS $ 1,306 $ — $ 1,306 $ — Securities AFS: Mortgage-backed securities $ 257,960 $ — $ 257,960 $ — Municipal bonds $ 184,129 $ — $ 184,129 $ — U.S. Treasury securities $ 90,142 $ — $ 90,142 $ — U.S. agency securities $ 37,861 $ — $ 37,861 $ — Equity securities $ 2,965 $ 2,965 $ — $ — There were no transfers between Level 1, 2, or 3 during the years ended December 31, 2024 or 2023. Fair Value of Assets and Liabilities Measured on a Nonrecurring Basis Financial Assets and Financial Liabilities : Certain financial assets and financial liabilities are measured at fair value on a nonrecurring basis and are subject to fair value adjustments in certain circumstances. Financial assets measured at fair value on a nonrecurring basis include certain individually evaluated collateral dependent loans reported at fair value of the underlying collateral if repayment is expected solely from the collateral. Prior to foreclosure of these loans, fair value of the collateral is estimated using Level 3 inputs based on customized discounting criteria. The table below presents certain collateral dependent loans that were remeasured and reported at fair value through the ACL based upon the fair value of the underlying collateral as of the dates indicated: December 31, (in thousands) 2024 2023 Carrying value of collateral dependent loans before allowance $ 1,672 $ 633 Specific allowance ( 658 ) ( 100 ) Fair value of collateral dependent loans $ 1,014 $ 533 The Company had no financial liabilities measured at fair value on a nonrecurring basis as of December 31, 2024 and 2023. Nonfinancial Assets and Liabilities : Certain nonfinancial assets and nonfinancial liabilities are measured at fair value on a nonrecurring basis. These include certain foreclosed assets, which are remeasured and reported at fair value through a charge-off to the ACL upon initial recognition as a foreclosed asset. Subsequent to their initial recognition, certain foreclosed assets are remeasured at fair value through an adjustment included in other noninterest income. The fair value of foreclosed assets is estimated using Level 3 inputs based on customized discounting criteria less estimated selling costs. 100 Table of Contents The following table presents foreclosed assets that were remeasured and reported at fair value as of the dates indicated: December 31, (in thousands) 2024 2023 Foreclosed assets remeasured at initial recognition: Carrying value of foreclosed assets prior to remeasurement $ 38 $ 69 Charge-offs — — Fair value of foreclosed assets $ 38 $ 69 There were no foreclosed assets that were remeasured subsequent to initial recognition and reported at fair value as of December 31, 2024 and 2023. The Company had no nonfinancial liabilities measured at fair value on a nonrecurring basis as of December 31, 2024 and 2023. The unobservable inputs used for the Level 3 fair value measurements on a nonrecurring basis were as follows: (dollars in thousands) Fair Value Valuation Technique Unobservable Input Discount Ranges Weighted Average Discount December 31, 2024 Collateral dependent loans $ 7,841 Discounted appraisals Collateral discounts and costs to sell 0 % - 100 % 8.90 % Foreclosed assets $ 38 Discounted appraisals Collateral discounts and costs to sell N/A N/A December 31, 2023 Collateral dependent loans $ 1,754 Discounted appraisals Collateral discounts and costs to sell 0 % - 100 % 24.05 % Foreclosed assets $ 69 Discounted appraisals Collateral discounts and costs to sell N/A N/A 101 Table of Contents Fair Value of Financial Instruments The carrying amounts and estimated fair values of financial instruments as of December 31, 2024 and 2023, were as follows: (in thousands) Carrying Amount Fair Value Level 1 Level 2 Level 3 December 31, 2024 Financial assets: Cash and due from banks $ 30,558 $ 30,558 $ 30,558 $ — $ — Interest-bearing deposits in other banks $ 238,417 $ 238,417 $ 238,417 $ — $ — Securities AFS $ 550,148 $ 550,148 $ — $ 550,148 $ — Securities HTM $ 131,796 $ 108,990 $ — $ 108,990 $ — Equity securities $ 2,937 $ 2,937 $ 2,937 $ — $ — Nonmarketable equity securities $ 2,328 $ 2,328 $ — $ 2,328 $ — Loans HFS $ 2,547 $ 2,547 $ — $ 2,547 $ — Loans HFI, net of allowance $ 2,053,282 $ 1,923,754 $ — $ — $ 1,923,754 Accrued interest receivable $ 10,048 $ 10,048 $ — $ — $ 10,048 Financial liabilities: Deposits $ 2,805,106 $ 2,801,310 $ — $ 2,801,310 $ — Accrued interest payable $ 7,583 $ 7,583 $ — $ 7,583 $ — December 31, 2023 Financial assets: Cash and due from banks $ 53,062 $ 53,062 $ 53,062 $ — $ — Interest-bearing deposits in other banks $ 252,364 $ 252,364 $ 252,364 $ — $ — Securities AFS $ 570,092 $ 570,092 $ — $ 570,092 $ — Securities HTM $ 141,236 $ 119,029 $ — $ 119,029 $ — Equity securities $ 2,965 $ 2,965 $ 2,965 $ — $ — Nonmarketable equity securities $ 2,239 $ 2,239 $ — $ 2,239 $ — Loans HFS $ 1,306 $ 1,306 $ — $ 1,306 $ — Loans HFI, net of allowance $ 1,971,522 $ 1,820,573 $ — $ — $ 1,820,573 Accrued interest receivable $ 9,945 $ 9,945 $ — $ — $ 9,945 Financial liabilities: Deposits $ 2,801,888 $ 2,796,303 $ — $ 2,796,303 $ — Accrued interest payable $ 8,000 $ 8,000 $ — $ 8,000 $ — 15. Regulatory Capital Requirements The Company and the Bank are subject to various regulatory capital requirements administered by federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s and the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of its assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Prompt corrective action provisions are not applicable to bank holding companies. Basel III Capital Requirements The Company and the Bank are subject to Basel III capital guidelines. Basel III requires the Company and the Bank to maintain certain minimum ratios to meet capital adequacy requirements. It is management’s belief that, as of December 31, 2024, both the Company and the Bank met all capital adequacy requirements under Basel III. Management expects that the capital ratios for the Company and the Bank under Basel III will continue to exceed capital adequacy requirements. Management believes that, as of December 31, 2024, the Bank is well-capitalized under the regulatory framework for prompt corrective action. 102 Table of Contents Bank holding companies that qualify as “small bank holding companies” under the Policy Statement are exempt from the Federal Reserve’s consolidated capital adequacy ratios at the holding company level and instead are evaluated at the bank level. In May 2018, the Economic Growth Act was enacted. One of the Economic Growth Act’s highlights, with implications for the Company, was the asset threshold under the Policy Statement being increased from $1.0 billion to $3.0 billion, which benefits bank holding companies by, among various other items, allowing for an 18-month safety and soundness examination cycle as opposed to a 12-month examination cycle, changing to scaled biannual regulatory reporting requirements as opposed to quarterly regulatory reporting requirements, and not subjecting bank holding companies to capital adequacy guidelines on a consolidated basis. Effective January 1, 2023, the Company no longer receives any benefits under the Policy Statement and became subject to consolidated capital requirements. As of the June 30, 2024 measurement date, the Company had more than $3.0 billion in assets and remains subject to consolidated capital requirements. Capital amounts and ratios for the Company as of December 31, 2024 and 2023, are presented in the following table (Basel III Minimum includes the capital conservation buffer): Actual Basel III Minimum (dollars in thousands) Amount Ratio Amount Ratio December 31, 2024 Total Risk-Based Capital $ 400,813 18.13 % $ 232,161 10.50 % Tier I Risk-Based Capital $ 378,440 17.12 % $ 187,940 8.50 % Common Equity Tier I Capital $ 378,440 17.12 % $ 154,774 7.00 % Tier I Leverage Capital $ 378,440 11.86 % $ 127,615 4.00 % December 31, 2023 Total Risk-Based Capital $ 384,577 18.28 % $ 220,905 10.50 % Tier I Risk-Based Capital $ 362,799 17.24 % $ 178,828 8.50 % Common Equity Tier I Capital $ 362,799 17.24 % $ 147,270 7.00 % Tier I Leverage Capital $ 362,799 11.56 % $ 125,575 4.00 % Capital amounts and ratios for the Bank as of December 31, 2024 and 2023, are presented in the following table (Basel III Minimum includes the capital conservation buffer): Regulatory Requirements Actual Basel III Minimum Well-Capitalized (1) (dollars in thousands) Amount Ratio Amount Ratio Amount Ratio December 31, 2024 Total Risk-Based Capital $ 393,743 17.81 % $ 232,092 10.50 % $ 221,040 10.00 % Tier I Risk-Based Capital $ 371,370 16.80 % $ 187,884 8.50 % $ 176,832 8.00 % Common Equity Tier I Capital $ 371,370 16.80 % $ 154,728 7.00 % $ 143,676 6.50 % Tier I Leverage Capital $ 371,370 11.64 % $ 127,582 4.00 % $ 159,477 5.00 % December 31, 2023 Total Risk-Based Capital $ 378,582 18.00 % $ 220,850 10.50 % $ 210,333 10.00 % Tier I Risk-Based Capital $ 356,804 16.96 % $ 178,783 8.50 % $ 168,266 8.00 % Common Equity Tier I Capital $ 356,804 16.96 % $ 147,233 7.00 % $ 136,716 6.50 % Tier I Leverage Capital $ 356,804 11.37 % $ 125,538 4.00 % $ 156,923 5.00 % (1) This column refers to the prompt corrective action requirements applicable to banks. Community Bank Leverage Ratio Framework As part of the directive under the Economic Growth Act, in September 2019, the FDIC and other federal bank regulatory agencies approved the CBLR framework. This optional framework became effective January 1, 2020, and is available to the Company and the Bank as an alternative to the Basel III risk-based capital framework. The CBLR framework provides for a simple measure of capital adequacy for certain community banking organizations. Specifically, depository institutions and depository institution holding companies that have less than $10.0 billion in total consolidated assets and meet other qualifying criteria, including a Tier I leverage ratio of greater than 9.00%, are considered qualifying community banking organizations eligible to opt into the CBLR framework and replace the applicable Basel III risk-based capital requirements. 103 Table of Contents As of December 31, 2024, the Company and the Bank qualify for the CBLR framework. Management does not intend to utilize the CBLR framework. 16. Equity Events Cash Dividends As a Louisiana corporation, the Company is subject to certain restrictions on dividends under the Louisiana Business Corporation Act. Generally, a Louisiana corporation may pay dividends to its shareholders unless, after giving effect to the dividend, either: (1) the corporation would not be able to pay its debts as they come due in the usual course of business; or (2) the corporation’s total assets would be less than the sum of its total liabilities and the amount that would be needed, if the corporation were to be dissolved at the time of the payment of the dividend, to satisfy the preferential rights of shareholders whose preferential rights are superior to those receiving the dividend. The Company’s status as a bank holding company also affects its ability to pay dividends in two additional ways. First, since the Company is a holding company with no material business activities of its own, its ability to pay dividends could become dependent upon the ability of the Bank to transfer funds to it in the form of dividends, loans, and advances. The Bank’s ability to pay dividends and make other distributions and payments to the Company is itself subject to various legal, regulatory, and other restrictions, and the present and future dividend policy of the Bank is subject to the discretion of its board of directors. Second, as a bank holding company, the Company’s payment of dividends must comply with the laws, regulations, and policies of the Federal Reserve. The Federal Reserve has issued a supervisory letter on the payment of cash dividends by bank holding companies, which expresses the Federal Reserve’s view that a bank holding company should pay cash dividends only to the extent that: (1) the holding company’s net income for the past four quarters, net of any dividends previously paid during that period, is sufficient to fully fund the dividends; (2) the prospective rate of earnings retention is consistent with the bank holding company’s capital needs, asset quality, and overall financial condition; and (3) the bank holding company will continue to meet, and is not in danger of failing to meet, minimum regulatory capital adequacy ratios. The ability of the Bank to pay dividends on its common stock is restricted by Louisiana Banking Law, the FDIA, and FDIC regulations. In general, the board of directors of a Louisiana state bank may, quarterly, semiannually, or annually, declare or pay dividends on its outstanding capital stock, provided that the bank has surplus at least equal to 50.0% of its capital stock and such surplus will not be reduced below 50.0% following payment of the dividend. Prior approval of the OFI is required for a Louisiana state bank to pay any dividend that would exceed its net profits earned during the current year combined with its retained net profits of the immediately preceding year. In general terms, the FDIA and FDIC regulations restrict the payment of dividends when a bank is undercapitalized, when a bank has failed to pay insurance assessments, or when there are safety and soundness concerns regarding a bank. The Bank and the Company have internal policies regarding dividends. Neither entity would ordinarily pay dividends if following the payment, the entity would not meet minimum capital adequacy plus the CCB requirements. The exception to this policy is in situations where the payment of a dividend from the Bank to the Company is necessary for the Company to be able to meet its obligations, and as long as, after such payment the Bank would still meet minimum capital adequacy requirements. Also, the Company’s internal policy requires that the Company maintain a common stockholders’ equity to total assets ratio of greater than 7.0 % and that trust preferred securities are less than 25.0 % of capital. Taking into consideration the Company’s performance and capital levels, cash dividends were paid in 2024, 2023, and 2022. Stock Repurchases On December 14, 2023, the Company’s board of directors approved the renewal of the 2023 stock repurchase program that was completed in the fourth quarter of 2023 after reaching its purchase limit. The 2024 stock repurchase program authorized the Company to purchase up to $ 5.0 million of its outstanding shares of common stock from January 1, 2024 through December 31, 2024. Repurchases were made from time to time in the open market at prevailing prices and based on market conditions, and in privately negotiated transactions. On March 13, 2024, the company entered into a privately negotiated stock repurchase agreement for the purchase of 200,000 shares of the Company’s common stock for a total purchase price of approximately $ 10.0 million. This repurchase was supplemental to the Company’s 2024 stock repurchase program and did not impact the amount of permitted repurchases thereunder. On August 8, 2024, the Company entered into a privately negotiated stock repurchase agreement for the purchase of 60,000 shares of the Company’s common stock for a total purchase price of approximately $ 3.0 million. This repurchase was supplemental to the Company’s 2024 stock repurchase program. However, in connection with the repurchase, the Company reduced the availability under its 2024 stock repurchase program by $ 3.0 million. On November 5, 2024, the Company entered into a privately negotiated stock repurchase agreement for the purchase of 50,000 shares of the Company’s common stock for a total purchase price of approximately $ 2.5 million. This repurchase was supplemental to the Company’s 2024 stock repurchase program and did not impact the amount of permitted repurchases thereunder. 104 Table of Contents For the year ended December 31, 2024, the Company repurchased 17,085 shares of its common stock on the open market at an aggregate cost of $ 809,000 under the stock repurchase program. The 2024 stock repurchase program expired on December 31, 2024, with $ 1.1 million of remaining availability. Effective January 1, 2023, stock repurchases are subject to a nondeductible excise tax under the Inflation Reduction Act of 2022 equal to 1.0 % of the fair market value of the shares repurchased, subject to certain limitations. In the fourth quarter of 2024, $ 213,000 of stock repurchase excise tax was recorded. This tax relates to the Company’s 2023 and 2024 stock repurchases, which regulations require to be recorded as a reduction to stockholders’ equity. On December 19, 2024, the Company’s board of directors approved the renewal of the 2024 stock repurchase program that expired on December 31, 2024. The renewed program authorizes the Company to purchase up to $ 5.0 million of its outstanding shares of common stock from January 1, 2025 through December 31, 2025. Repurchases may be made from time to time in the open market at prevailing prices and based on market conditions, or in privately negotiated transactions. AOCI - Transfer of Unrealized Gain (Loss) of Securities AFS and HTM During the second quarter of 2022, the Company reclassified $ 166.3 million, net of $ 17.9 million of unrealized loss, from AFS to HTM. The securities were transferred at fair value, which became the cost basis for the securities HTM. At the date of transfer, the net unrealized loss of $ 17.9 million, of which $ 14.2 million, net of tax, was included in AOCI and is being amortized over the remaining life of the securities as a yield adjustment in a manner consistent with the amortization or accretion of the original purchase premium or discount on the associated security. There were no gains or losses recognized as a result of the transfer. As of December 31, 2024, the net unamortized, unrealized loss remaining on the transferred securities included in the consolidated balance sheets totaled $ 13.0 million, of which $ 10.3 million, net of tax, was included in AOCI. 17. Earnings Per Common Share Basic EPS is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period, after giving retroactive effect to stock splits. Diluted EPS includes accrued but unissued shares relating to the Director Compensation Program, stock options, and restricted stock determined using the treasury stock method. The dilutive EPS calculation assumes all outstanding stock options to purchase common stock have been exercised at the beginning of the year, and the pro forma proceeds from the exercised options and restricted stock are used to purchase common stock at the average fair market valuation price. The computations of basic and diluted earnings per common share for the Company were as follows: Years Ended December 31, (in thousands, except share amounts) 2024 2023 2022 Numerator: Net income - basic $ 34,235 $ 34,879 $ 36,916 Net income - diluted $ 34,235 $ 34,879 $ 36,916 Denominator: Weighted average shares outstanding - basic 6,898,286 7,164,314 7,180,975 Plus: Effect of Director Compensation Program 1,139 741 1,655 Plus: Effect of restricted stock 18,635 16,673 14,823 Weighted average shares outstanding - diluted 6,918,060 7,181,728 7,197,453 Earnings per common share: Basic $ 4.96 $ 4.87 $ 5.14 Diluted $ 4.95 $ 4.86 $ 5.13 105 Table of Contents 18. Segment Reporting The Company is engaged primarily in providing a fully integrated suite of banking products and services consistently across all of its markets. The Company has identified the Executive Management Committee of the Bank as the Company’s CODM. The Executive Management Committee of the Bank is comprised of the Chief Executive Officer, Chief Financial Officer, Chief Banking Officer, Chief Operating Officer, Chief Credit Policy Officer, General Counsel, and several division heads that report directly to the Chief Executive Officer. The CODM assesses performance and decides how to allocate resources based on net income as reported in the accompanying consolidated statements of income. While the CODM monitors the revenue streams of the various banking products, services, and markets, banking operations are managed and financial performance is evaluated on a company-wide basis. Accordingly, all of the Company’s banking operations are considered by management to be aggregated in one reportable operating segment. The Company’s banking operations accounting policies are the same as those described in “Note 1. Significant Accounting Policies.” Segment assets are reported in the accompanying consolidated balance sheets in total assets. The CODM uses net income and assets in deciding whether to reinvest profits into banking products, services, and markets or into other Company priorities like dividends, share repurchases, or acquisitions. Actual net income and assets are compared to budgeted metrics to assist in operating and financial decisions and future activities. Financial results for the banking operations segment are presented in the table below: As of and for the Years Ended December 31, (in thousands) 2024 2023 2022 Interest and dividend income $ 137,230 $ 118,568 $ 94,375 Interest expense 47,936 32,130 7,736 Provision for credit losses 1,200 735 1,750 Noninterest income 20,441 21,114 18,747 Depreciation and amortization 3,219 2,746 2,609 Other operating expenses 62,935 61,127 56,046 Income before income tax expense 42,381 42,944 44,981 Income tax expense 8,146 8,065 8,065 Segment net income $ 34,235 $ 34,879 $ 36,916 Adjustments and reconciling items — — — Consolidated net income $ 34,235 $ 34,879 $ 36,916 Total Assets $ 3,149,594 $ 3,128,810 $ 3,082,686 106 Table of Contents 19. Quarterly Results of Operations (Unaudited) The following tables present certain unaudited consolidated quarterly financial information regarding the Company’s results of operations for each of the eight consecutive quarters in the fiscal years of 2024 and 2023. This information is derived from unaudited consolidated financial statements that include, in the Company’s opinion, all adjustments necessary for a fair presentation when read in conjunction with the Company’s consolidated financial statements and notes thereto as of and for the years ended December 31, 2024 and 2023. 2024 (in thousands, except per share data) 4th Quarter 3rd Quarter 2nd Quarter 1st Quarter Interest and dividend income $ 35,630 $ 34,901 $ 33,681 $ 33,018 Interest expense 11,943 12,444 11,894 11,655 Net interest income 23,687 22,457 21,787 21,363 Provision for credit losses 300 300 300 300 Net interest income after provision for credit losses 23,387 22,157 21,487 21,063 Noninterest income 4,995 5,419 5,098 4,928 Operating expenses 16,840 16,752 16,689 15,873 Income tax expense 2,236 2,070 1,909 1,930 Net income $ 9,306 $ 8,754 $ 7,987 $ 8,188 Earnings per share Basic $ 1.37 $ 1.28 $ 1.16 $ 1.16 Diluted $ 1.37 $ 1.27 $ 1.16 $ 1.16 2023 (in thousands, except per share data) 4th Quarter 3rd Quarter 2nd Quarter 1st Quarter Interest and dividend income $ 32,041 $ 30,324 $ 28,471 $ 27,732 Interest expense 10,747 9,599 6,961 4,823 Net interest income 21,294 20,725 21,510 22,909 Provision for credit losses 250 185 300 — Net interest income after provision for credit losses 21,044 20,540 21,210 22,909 Noninterest income 5,187 5,581 6,007 4,340 Operating expenses 16,023 16,230 16,132 15,488 Income tax expense 1,916 1,870 2,117 2,163 Net income $ 8,292 $ 8,021 $ 8,968 $ 9,598 Earnings per share Basic $ 1.16 $ 1.12 $ 1.25 $ 1.34 Diluted $ 1.16 $ 1.12 $ 1.25 $ 1.33 107 Table of Contents 20. Parent Company Financial Statements PARENT COMPANY BALANCE SHEETS (dollars in thousands, except share amounts) December 31, 2024 2023 ASSETS Cash and cash equivalents $ 6,653 $ 5,516 Investment in subsidiary bank 312,669 297,856 Other assets 621 524 Total Assets $ 319,943 $ 303,896 LIABILITIES Accrued expenses and other liabilities $ 204 $ 45 Total Liabilities 204 45 STOCKHOLDERS’ EQUITY Preferred stock, no par value: Authorized - 1,000,000 shares; None Issued and Outstanding — — Common stock, no par value: Authorized - 30,000,000 shares; Issued and Outstanding - 6,777,238 and 7,091,637 shares, respectively 38,655 55,136 Additional paid-in capital 2,777 2,407 Retained earnings 338,554 306,802 Accumulated other comprehensive income (loss) ( 60,247 ) ( 60,494 ) Total Stockholders’ Equity 319,739 303,851 Total Liabilities and Stockholders’ Equity $ 319,943 $ 303,896 108 Table of Contents PARENT COMPANY STATEMENTS OF INCOME (in thousands) Years Ended December 31, 2024 2023 2022 INTEREST AND DIVIDEND INCOME Dividend income from subsidiaries $ 20,500 $ 2,500 $ — Total Interest and Dividend Income 20,500 2,500 — NONINTEREST INCOME Other income 1 2 1 Total Noninterest Income 1 2 1 OPERATING EXPENSES Technology expenses 181 105 52 Legal and professional expenses 869 764 837 Advertising — — 2 Other operating expenses 2 89 32 Total Operating Expenses 1,052 958 923 Income (Loss) Before Income Tax Expense (Benefit) 19,449 1,544 ( 922 ) Income tax expense (benefit) ( 220 ) ( 201 ) ( 194 ) Income (Loss) Before Equity in Undistributed Earnings of Subsidiaries 19,669 1,745 ( 728 ) Equity in undistributed earnings of subsidiaries 14,566 33,134 37,644 Net Income $ 34,235 $ 34,879 $ 36,916 109 Table of Contents PARENT COMPANY STATEMENTS OF CASH FLOWS (in thousands) Years Ended December 31, 2024 2023 2022 CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 34,235 $ 34,879 $ 36,916 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Undistributed earnings of subsidiaries ( 14,566 ) ( 33,134 ) ( 37,644 ) Other operating activities, net 350 424 322 Net cash provided by (used in) operating activities 20,019 2,169 ( 406 ) CASH FLOWS FROM INVESTING ACTIVITIES Capital contribution in partnerships ( 90 ) ( 160 ) ( 175 ) Net cash provided by (used in) investing activities ( 90 ) ( 160 ) ( 175 ) CASH FLOWS FROM FINANCING ACTIVITIES Repurchase of common stock ( 16,309 ) ( 4,999 ) ( 218 ) Cash dividends ( 2,483 ) ( 2,289 ) ( 2,011 ) Net cash provided by (used in) financing activities ( 18,792 ) ( 7,288 ) ( 2,229 ) Net change in cash and cash equivalents 1,137 ( 5,279 ) ( 2,810 ) Cash and cash equivalents - beginning of year 5,516 10,795 13,605 Cash and cash equivalents - end of year $ 6,653 $ 5,516 $ 10,795 110 Table of Contents Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure None.