10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 333-205986

RIVER FINANCIAL CORPORATION

(Exact Name of Registrant as Specified in its Charter)


ALABAMA		46-1422125
( State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
2611 Legends Drive Prattville, Alabama		36066
(Address of principal executive offices)		(Zip Code)

(334) 290-1012

“Registrant’s telephone number, including area code”

Securities registered pursuant to Section 12(b) of the Act: None


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
None	None	None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 1, 2024, the registrant had 7,661,275 shares of common stock, $1.00 par value per share, outstanding.


Auditor Firm Id:	669	Auditor Name:	Mauldin & Jenkins, LLC	Auditor Location:	Birmingham, Alabama, USA

Table of Contents


		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	5
	Consolidated Statements of Financial Condition	5
	Consolidated Statements of Income	6
	Consolidated Statements of Comprehensive Income	7
	Consolidated Statements of Changes in Stockholders’ Equity	8
	Consolidated Statements of Cash Flows	10
	Notes to Unaudited Consolidated Financial Statements	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	60
Item 4.	Controls and Procedures	60
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	61
Item 1A.	Risk Factors	61
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	61
Item 3.	Defaults Upon Senior Securities	61
Item 4.	Mine Safety Disclosures	61
Item 5.	Other Information	61
Item 6.	Exhibits	62
Signatures		63

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements that reflect our current views with respect to, among other things, future events and financial performance, which involve substantial risks and uncertainties. Certain statements made in this Quarterly Report on Form 10-Q are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934 (the "Exchange Act"). Forward-looking statements are not historical facts and include any statement that, without limitation, may predict, forecast, indicate or imply future results, performance or achievements instead of historical or current facts and may contain words like “anticipates,” “approximately,” “believes,” “budget,” “can,” “could,” “continues,” “contemplates,” “estimates,” “expects,” “forecast,” “intends,” “may,” “might,” “objective,” “outlook,” “predicts,” “probably,” “plans,” “potential,” “project,” “seeks,” “shall,” “should,” “target,” “will,” or the negative of these terms and other words, phrases, or expressions with similar meaning.

Any forward-looking statements contained in this Quarterly Report on Form 10-Q are based upon our historical performance and on our current plans, estimates and expectations in light of information currently available to us. The inclusion of forward-looking information should not be regarded as a representation by us that the future plans, estimates or expectations will be achieved. Such forward-looking statements are subject to various risks and uncertainties and assumptions relating to our operations, financial results, financial condition, business, prospects, growth strategy and liquidity. Forward-looking statements involve risks and uncertainties which may cause actual results to differ materially from those projected in the forward-looking statements, and the Company cannot give assurances that such statements will prove to be correct. Except as required by law, we undertake no obligation to update any forward-looking statement, whether as a result of new information or otherwise. Given these uncertainties, the reader should not place undue reliance on forward-looking statements as a prediction of actual results. Factors that could cause actual results to differ materially from those projected or estimated by us include those that are discussed herein as well as in our Annual Report on Form 10-K for the year ended December 31, 2023, under “Part I, Item 1A. – Risk Factors,” as well as other unknown risks and uncertainties. Factors that might cause such differences include, but are not limited to:

Acquisition related factors:

•

The businesses of any bank acquired by us may not be integrated successfully or the integration may be more difficult, time-consuming or costly than expected;

•

The expected growth opportunities or costs savings from such transactions may not be fully realized or may take longer to realize than expected;

•

Revenues following such transactions may be lower than expected as a result of losses of customers or other reasons;

•

Deposit attrition, operating costs, customer loss and business disruption following such transactions, including difficulties in maintaining relationships with employees, may be greater than expected;

•

Governmental approvals of such transactions may not be obtained on the proposed terms or expected timeframe;

•

Reputational risks and the reaction of the companies’ customers may be adverse to such transactions;

•

Diversion of management time on merger related issues may have negative effcts on day-to-day operations.

Factors affecting our Bank generally:

•

Changes in asset quality and credit risk of our Bank;

•

Inflation;

•

Customer acceptance of our products and services;

•

Customer borrowing, repayment, investment and deposit practices;

•

The negative impact on profitability imposed on us by a compressed net interest margin on loans and other extensions of credit that affects our ability to lend profitably and to price loans effectively in the face of competitive pressures;

•

Our liquidity requirements could be adversely affected by changes in our assets and liabilities;

•

Our ability to attract, develop and retain qualified banking professionals;

•

Failure to attract or retain stable deposits at reasonable cost that is competitive with the larger international, national, and regional financial service providers with which we compete;

•

Significant reliance on loans secured by real estate and the associated vulnerability to downturns in the local real estate market, natural disasters and other variables impacting the value of real estate;

•

The introduction, withdrawal, success and timing of business initiatives;

•

The impact, extent, and timing of technological changes;

•

A weakening of the economies in which we conduct operations may adversely affect our operating results;

•

The U.S. legal and regulatory framework, changes in such framework, or official or informal mandates directed by state and federal regulators in reports of examination or other mandates could adversely affect our operating results;

•

The interest rate environment may compress margins and adversely affect net interest income and negatively affect the market value of state, county and municipal securities held for investment;

•

Competition from other financial services companies in our markets could adversely affect operations; and

•

Interruption in our business and the businesses of our customers caused by a downturn in the economy and possible weather-related conditions such as tornadoes or hurricanes or further outbreaks of COVID.

You should also consider carefully the risk factors referred to in Item 1A of Part II of this Form 10-Q, which address additional factors that could cause our actual results to differ from those set forth in the forward-looking statements and could materially and adversely affect our business, operating results and financial condition. The risks discussed in this report are factors that, individually or in the aggregate, management believes could cause our actual results to differ materially from expected and historical results. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider such disclosures to be a complete discussion of all potential risks or uncertainties. Factors not here or there listed may develop or, if currently extant, we may not have yet recognized them.

The forward-looking statements speak only as of the date on which they are made, and, except to the extent required by federal securities laws, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

PART I – FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements (Unaudited)

RIVER FINANCIAL CORPORATION

Consolidated Statements of Financial Condition

(in thousands except share data)


	September 30, 2024			December 31, 2023
	Unaudited			Audited
Assets
Cash and due from banks	$	41,159		$	32,572
Interest-bearing deposits in banks		91,942			7,975
Federal funds sold		14,000			32,000
Cash and cash equivalents		147,101			72,547

Certificates of deposit in banks		4,218			4,218
Securities held-to-maturity, at amortized cost (fair value of $103,286 and $103,174, respectively)		123,288			126,793
Securities available-for-sale, at fair value (amortized cost of $692,958 and $703,915, respectively)		632,553			621,091
Loans held for sale		9,863			4,595
Loans, net of deferred fees and discounts		2,423,683			2,240,006
Less allowance for credit losses		(31,077	)		(28,991	)
Net loans		2,392,606			2,211,015
Premises and equipment, net		44,791			45,216
Accrued interest receivable		14,621			14,091
Bank owned life insurance		49,370			47,001
Foreclosed assets		44			92
Deferred income taxes, net		25,418			29,901
Core deposit intangible		1,051			1,445
Goodwill		27,817			27,817
Restricted equity securities		10,038			13,433
Other assets		13,695			15,995
Total assets	$	3,496,474		$	3,235,250
Liabilities and Shareholders' Equity
Noninterest-bearing deposits	$	638,122		$	628,415
Interest-bearing deposits		2,400,700			2,102,240
Total deposits		3,038,822			2,730,655
Securities sold under agreements to repurchase		13,935			16,731
Federal Home Loan Bank advances		150,000			230,000
Subordinated debentures, net of loan costs		39,545			39,492
Accrued interest payable and other liabilities		15,514			15,551
Total liabilities		3,257,816			3,032,429
Common stock related to 401(k) Employee Stock Ownership Plan		5,374			4,483
Stockholders' Equity
Preferred stock ($0.01 par value; 1,000,000 shares authorized; no shares issued or outstanding)		-			-
Common stock ($1 par value; 15,000,000 shares authorized; 7,678,561 and 7,670,318 shares issued; 7,664,200 and 7,655,860 shares outstanding at September 30, 2024 and December 31, 2023, respectively)		7,679			7,670
Additional paid-in capital		137,202			137,017
Retained earnings		142,606			124,333
Accumulated other comprehensive loss		(47,025	)		(64,003	)
Unvested restricted stock		(1,340	)		(1,700	)
Treasury stock at cost (14,361 and 14,458 shares, respectively)		(464	)		(496	)
Common stock related to 401(k) Employee Stock Ownership Plan		(5,374	)		(4,483	)
Total stockholders' equity		233,284			198,338
Total equity		238,658			202,821
Total liabilities and stockholders' equity	$	3,496,474		$	3,235,250

The accompanying notes are an integral part of these financial statements.

RIVER FINANCIAL CORPORATION

Unaudited Consolidated Statements of Income

(in thousands except per share data)


	For the Three Months Ended:				For the Nine Months Ended:
	September 30,				September 30,
	2024		2023		2024			2023
Interest income:
Loans, including fees	$	38,216	$	29,895	$	107,701		$	80,379
Taxable securities		3,672		3,498		10,529			10,767
Nontaxable securities		352		357		1,048			1,198
Federal funds sold		180		793		956			1,390
Other interest income		1,177		172		3,987			1,028
Total interest income		43,597		34,715		124,221			94,762
Interest expense:
Deposits		17,583		12,238		48,548			29,900
Short-term borrowings		118		173		379			403
Federal Home Loan Bank advances		1,502		1,658		5,908			4,576
Subordinated debentures		418		418		1,253			1,251
Note payable		-		185		-			520
Total interest expense		19,621		14,672		56,088			36,650
Net interest income		23,976		20,043		68,133			58,112
Provision for credit losses		1,326		1,311		3,961			3,933
Net interest income after provision for credit losses		22,650		18,732		64,172			54,179
Noninterest income:
Service charges and fees		2,115		1,946		6,172			5,569
Investment brokerage revenue		209		134		573			435
Mortgage operations		1,221		1,234		3,301			2,814
Bank owned life insurance income		395		328		1,091			957
Net gain (loss) on sales of investment securities		73		-		(1,359	)		5
Community Development Financial Institution income		-		-		-			3,718
Other noninterest income		527		288		1,571			1,675
Total noninterest income		4,540		3,930		11,349			15,173
Noninterest expense:
Salaries and employee benefits		9,533		9,035		28,205			27,064
Occupancy expenses		1,017		934		2,963			2,764
Equipment rentals, depreciation, and maintenance		572		530		1,617			1,507
Telephone and communications		106		129		372			409
Advertising and business development		269		390		712			1,011
Data processing		1,093		779		3,121			2,729
Foreclosed assets, net		156		38		257			73
Federal deposit insurance and other regulatory assessments		747		698		2,176			1,992
Legal and other professional services		261		301		875			1,302
Other operating expenses		1,956		2,233		6,218			6,557
Total noninterest expense		15,710		15,067		46,516			45,408
Income before income taxes		11,480		7,595		29,005			23,944
Provision for income taxes		2,827		1,713		6,899			5,320
Net income	$	8,653	$	5,882	$	22,106		$	18,624

Basic net earnings per common share	$	1.13	$	0.86	$	2.88		$	2.76
Diluted net earnings per common share	$	1.12	$	0.84	$	2.86		$	2.73
Dividends per common share	$	-	$	-	$	0.50		$	0.48

The accompanying notes are an integral part of these financial statements.

RIVER FINANCIAL CORPORATION

Unaudited Consolidated Statements of Comprehensive Income (Loss)

(in thousands)


	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2024			2023			2024			2023
Net income	$	8,653		$	5,882		$	22,106		$	18,624
Other comprehensive income (loss), net of tax:
Investment securities available-for-sale:
Net unrealized gains (losses)		22,407			(16,738	)		21,565			(17,907	)
Income tax effect		(5,626	)		4,203			(5,415	)		4,496
Reclassification adjustments for (gains) losses realized in net income		(73	)		-			1,359			(5	)
Income tax effect		18			-			(341	)		1
Reclassification adjustment for accretion of unrealized holding loss included in accumulated other comprehensive loss from the transfer of securities from available-for-sale to held-to-maturity		(87	)		(95	)		(254	)		(278	)
Income tax effect		22			24			64			70
Other comprehensive income (loss), net of tax		16,661			(12,606	)		16,978			(13,623	)
Comprehensive income (loss)	$	25,314		$	(6,724	)	$	39,084		$	5,001

The accompanying notes are an integral part of these financial statements.

RIVER FINANCIAL CORPORATION

Unaudited Consolidated Statements of Changes in Stockholders' Equity

(in thousands except share and per share data)


For the Nine Months Ended
	Common Stock			Additional Paid In Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Unvested Restricted Stock			Treasury Stock			Common Stock Related to ESOP			Total Stockholders' Equity



Balance at December 31, 2023	$	7,670		$	137,017		$	124,333		$	(64,003	)	$	(1,700	)	$	(496	)	$	(4,483	)	$	198,338
Net income		-			-			22,106			-			-			-			-			22,106
Other comprehensive , net of tax		-			-			-			16,978			-			-			-			16,978
Exercise of stock options (9,293 shares)		10			207			-			-			-			-			-			217
Purchase of treasury stock (39,866 shares)		-			-			-			-			-			(1,321	)		-			(1,321	)
Restricted stock forfeitures (1,050 shares)		(1	)		(32	)		-			-			33			-			-			-
Sale of treasury shares (39,963 shares)		-			(56	)		-			-			-			1,353			-			1,297
Dividends declared ($0.50 per share)		-			-			(3,833	)		-			-			-			-			(3,833	)
Stock-based compensation expense		-			66			-			-			327			-			-			393
Change for ESOP related shares		-			-			-			-			-			-			(891	)		(891	)
Balance at September 30, 2024	$	7,679		$	137,202		$	142,606		$	(47,025	)	$	(1,340	)	$	(464	)	$	(5,374	)	$	233,284


Balance at December 31, 2022	$	6,666	$	104,294		$	100,826		$	(71,564	)	$	(1,730	)	$	(306	)	$	(4,160	)	$	134,026
Adoption of ASC topic 326							(24	)														(24	)
Net income		-		-			18,624			-			-			-			-			18,624
Other comprehensive loss, net of tax		-		-			-			(13,623	)		-			-			-			(13,623	)
Exercise of stock options (23,625 shares)		24		319			-			-			-			-			-			343
Purchase of treasury stock (16,109 shares)		-		-			-			-			-			(605	)		-			(605	)
Restricted stock grants, net of forfeiture (11,600 shares)		11		380			-			-			(391	)		-			-			-
Sale of treasury shares (24,738 shares)		-		(51	)		-			-			-			891			-			840
Issuance of common stock (968,904 shares)		969		31,974			-			-						-			-			32,943
Dividends declared ($0.48 per share)		-		-			(3,208	)		-			-			-			-			(3,208	)
Stock-based compensation expense		-		67			-			-			306			-			-			373
Change for ESOP related shares		-		-			-			-			-			-			(569	)		(569	)
Balance at September 30, 2023	$	7,670	$	136,983		$	116,218		$	(85,187	)	$	(1,815	)	$	(20	)	$	(4,729	)	$	169,120


For the Three Months Ended
	Common Stock		Additional Paid In Capital			Retained Earnings		Accumulated Other Comprehensive Loss			Unvested Restricted Stock			Treasury Stock			Common Stock Related to ESOP			Total Stockholders' Equity



Balance at June 30, 2024	$	7,676	$	137,185		$	133,953	$	(63,686	)	$	(1,453	)	$	(1,238	)	$	(4,242	)	$	208,195
Net income		-		-			8,653		-			-			-			-			8,653
Other comprehensive income, net of tax		-		-			-		16,661			-			-			-			16,661
Exercise of stock options (2,387 shares)		3		53			-		-			-			-			-			56
Purchase of treasury stock (13,063 shares)		-		-			-		-			-			(418	)		-			(418	)
Sale of treasury shares (35,098 shares)		-		(60	)		-		-			-			1,192			-			1,132
Stock-based compensation expense		-		24			-		-			113			-			-			137
Change for ESOP related shares		-		-			-		-			-			-			(1,132	)		(1,132	)
Balance at September 30, 2024	$	7,679	$	137,202		$	142,606	$	(47,025	)	$	(1,340	)	$	(464	)	$	(5,374	)	$	233,284


Balance at June 30, 2023	$	6,690	$	104,688		$	110,336	$	(72,581	)	$	(1,594	)	$	(729	)	$	(4,048	)	$	142,762
Adoption of ASC topic 326		-		-			-		-			-			-			-			-
Net income		-		-			5,882		-			-			-			-			5,882
Other comprehensive loss, net of tax		-		-			-		(12,606	)		-			-			-			(12,606	)
Exercise of stock options (725 shares)		1		15			-		-			-			-			-			16
Purchase of treasury stock (955 shares)				-			-		-			-			(34	)		-			(34	)
Restricted stock grants, net of forfeiture (10,000 shares)		10		328			-		-			(338	)		-			-			-
Sale of treasury shares (19,989 shares)		-		(63	)		-		-			-			743			-			680
Issuance of common stock ( 968,904 shares)		969		31,974			-		-			-			-			-			32,943
Stock-based compensation expense		-		41			-		-			117			-			-			158
Change for ESOP related shares		-		-			-		-			-			-			(681	)		(681	)
Balance at September 30, 2023	$	7,670	$	136,983		$	116,218	$	(85,187	)	$	(1,815	)	$	(20	)	$	(4,729	)	$	169,120

The accompanying notes are an integral part of these financial statements.

RIVER FINANCIAL CORPORATION

Unaudited Consolidated Statements of Cash Flows

(in thousands)


	For the Nine Months
	Ended September 30,
	2024			2023
Cash Flows From Operating Activities:
Net Income	$	22,106		$	18,624
Adjustments to reconcile net income to net cash from operating activities:
Provision for credit losses		3,961			3,933
Provision for losses on foreclosed assets		60			91
Amortization of securities		1,890			2,210
Accretion of securities		(351	)		(358	)
Realized net loss (gain) on sales of securities available-for-sale		1,359			(5	)
Accretion of discount on acquired loans		(7	)		(7	)
Accretion of deferred loan fees / costs		(3,634	)		(3,115	)
Amortization of core deposit intangible asset		394			522
Amortization of debt issuance costs		53			55
Stock-based compensation expense		393			373
Bank owned life insurance income		(1,091	)		(957	)
Depreciation and amortization of premises and equipment		2,421			2,056
Loss (gain) on sales of foreclosed assets		36			(51	)
Deferred income tax benefit		(1,210	)		(1,394	)
(Increase) decrease in operating assets and (decrease) increase in operating liabilities:
Loans held-for-sale		(5,268	)		(3,510	)
Accrued interest receivable		(530	)		(1,931	)
Other assets		2,300			(5,753	)
Accrued interest payable and other liabilities		(37	)		751
Net cash from operating activities		22,845			11,534
Cash Flows (Used For) Investing Activities:
Maturity of certificate of deposit		-			722
Activity in securities available-for-sale:
Sales of securities available-for-sale		81,705			15,252
Maturities, payments, calls of securities available-for-sale		32,556			32,704
Purchases of securities available-for-sale		(106,052	)		(4,861	)
Activity in securities held-to-maturity:
Maturities, payments, calls of securities held-to-maturity		3,609			3,772
Loan principal originations, net		(182,865	)		(317,130	)
Proceeds from sale of foreclosed assets		906			497
Purchases of premises and equipment		(1,998	)		(7,603	)
Redemption (purchase) of restricted equity securities, net		3,395			(4,111	)
Purchase of bank owned life insurance		(1,278	)		-
Net cash used for investing activities		(170,022	)		(280,758	)
Cash Flows From Financing Activities:
Net increase in deposits		308,167			262,551
Net (decrease) increase in securities sold under agreements to repurchase		(2,796	)		11,634
Proceeds from Federal Home Loan Bank advances		50,000			250,000
Repayment of Federal Home Loan Bank advances		(130,000	)		(190,000	)
Proceeds from issuance of line of credit		-			12,000
Repayment of line of credit		-			(12,000	)
Proceeds from Federal Reserve Bank discount window borrowings		-			26,500
Repayment of Federal Reserve Bank discount window borrowings		-			(51,500	)
Proceeds from issuance of common stock		-			32,943
Proceeds from exercise of common stock options		217			343
Purchase of treasury stock		(1,321	)		(605	)
Sale of treasury stock		1,297			840
Cash dividends		(3,833	)		(3,208	)
Net cash from financing activities		221,731			339,498
Net Change In Cash And Cash Equivalents		74,554			70,274
Cash and Cash Equivalents At Beginning Of Period		72,547			74,826
Cash and Cash Equivalents At End Of Period	$	147,101		$	145,100

Supplemental Disclosures Of Cash Flows Information:
Cash Payments For:
Interest paid to depositors	$	48,225		$	29,471
Interest paid on borrowings	$	7,543		$	6,872
Income taxes	$	4,770		$	5,680
Non-cash investing and financing activities:
Transfer of loans to foreclosed assets	$	954		$	444
Restricted stock (forfeiture) grant	$	(33	)	$	391

The accompanying notes are an integral part of these financial statements.

River Financial Corporation

Notes to Unaudited Consolidated Financial Statements

(amounts in thousands, except share and per share data)

Note 1 – Basis of Presentation

General

The unaudited consolidated financial statements include the accounts of River Financial Corporation (“River” or the “Company”) and its wholly owned subsidiary, River Bank & Trust (“Bank”). The Bank provides a full range of commercial and consumer banking services primarily in the Montgomery, Alabama metropolitan area, Autauga, Baldwin, Chilton, Coffee, Elmore, Etowah, Houston, Jefferson, Lee, Madison, Mobile, Morgan and Tallapoosa counties and surrounding counties in Alabama. The Bank is regulated by the Federal Deposit Insurance Corporation (FDIC) and undergoes periodic examinations by this regulatory agency and the Alabama Banking Department. The Company is regulated by the Federal Reserve Bank (FRB) and is also subject to periodic examinations.

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly River Financial Corporation’s consolidated statements of financial condition, statements of income, statements of comprehensive income, statements of changes in stockholders’ equity and statements of cash flows for the periods presented, and all such adjustments are of a normal recurring nature. All material intercompany accounts and transactions have been eliminated in consolidation. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the entire year.

These interim consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission and, therefore, certain information and note disclosures normally presented in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) have been omitted or abbreviated. These financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes as of December 31, 2023, which are contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

Preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying disclosures. These estimates are based on management’s best knowledge of current events and actions the Company may undertake in the future. Estimates are used in accounting for, among other items, the allowance for credit losses, foreclosed asset valuations, useful lives for depreciation and amortization, fair value of financial instruments, deferred taxes, and contingencies. Estimates that are particularly susceptible to significant change for the Company include the determination of the allowance for credit losses, investment securities impairment, and assessment of deferred tax assets and liabilities, and therefore are critical accounting policies. Management does not anticipate any material changes to estimates in the near term. Factors that may cause sensitivity to the aforementioned estimates include but are not limited to: external market factors such as market interest rates and employment rates, changes to operating policies and procedures, economic conditions in our markets, and changes in applicable banking regulations. Actual results may ultimately differ from estimates, although management does not generally believe such differences would materially affect the consolidated financial statements in any individual reporting period presented.

Significant Accounting Policies

Allowance for credit losses and provision for credit losses

The allowance for credit losses represents management’s estimate of lifetime credit losses inherent in loans as of the balance sheet date. The allowance for credit losses is estimated by management using relevant available information, from both internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. The Bank measures expected credit losses for loans on a pooled basis when similar risk characteristics exist. Generally, collectively assessed loans are grouped by call report code and then risk grade grouping. Risk grade is grouped within each call report code by pass, watch, special mention, substandard, and doubtful. Other loan types are separated into their own cohorts due to specific risk characteristics for that pool of loans.

The Bank has elected a non-discounted cash flow methodology with a probability of default (PD) and loss-given default (LGD) for all cohorts. The PD calculation looks at the historical loan portfolio at particular points in time (each month during the lookback period) to determine the probability that loans in a certain cohort will default over the next 12-month period. A default is defined as a loan that has moved to past due 90 days and greater, nonaccrual status, or experienced a charge-off during the period. Currently, the Bank’s historical data is insufficient due to a minimal amount of default activity or zero defaults, therefore management uses index PDs comprised of rates derived from the PD experience of other community banks in place of the Bank’s historical PDs.

The LGD calculation looks at actual losses (net charge-offs) experienced over the entire lookback period for each cohort of loans. The aggregate loss amount is divided by the exposure at default to determine an LGD rate. All defaults (non-accrual, charge-off, or

greater than 90 days past due) occurring during the lookback period are included in the denominator, whether a loss occurred or not and exposure at default is determined by the loan balance immediately preceding the default event (i.e. nonaccrual or charge-off). Due to the very limited charge-off history, management uses index LGDs comprised of rates derived from the LGD experience of other community banks in place of the Bank’s historical LGDs.

The Bank utilizes reasonable and supportable forecasts of future economic conditions when estimating the allowance for credit losses on loans. The calculation includes a 12-month PD forecast based on the peer index regression model comparing peer defaults to the national unemployment rate. After the forecast period, PD rates revert on a straight-line basis back to long-term historical average rates over 12 months.

The Bank recognizes that all significant factors that affect the collectability of the loan portfolio must be considered to determine the estimated credit losses as of the evaluation date. Furthermore, the methodology, in and of itself and even when selectively adjusted by comparison to market and peer data, does not provide a sufficient basis to determine the estimated credit losses. The Bank adjusts the modeled historical losses by a qualitative adjustment to incorporate all significant risks to form a sufficient basis to estimate the credit losses. These qualitative adjustments may increase or reduce reserve levels and include adjustments for lending management experience, loan review and audit results, asset quality and portfolio trends, loan portfolio growth, and concentrations, trends in underlying collateral, as well as external factors and economic conditions not already captured.

Loans that do not share risk characteristics are evaluated on an individual basis. Generally, this population includes loans on non-accrual status, however, they can also include any loan that does not share risk characteristics with its respective pool. When management determines that foreclosure is probable and the borrower is experiencing financial difficulty, the expected credit losses are based on the fair value of the collateral at the reporting date unadjusted for selling costs as appropriate. When the expected source of repayment is from a source other than the underlying collateral, impairment will generally be measured based on the present value of expected proceeds discounted at the contractual interest rate.

The loss allocations for individually assessed and collectively assessed loans are totaled to determine the total required allowance for credit losses. This total is compared to the current allowance on the Bank’s books and adjustments made accordingly by a charge or credit to the provision for credit losses.

Investment Securities Impairment

Effective January 1, 2023, the Company estimates and recognizes an allowance for credit losses for held-to-maturity (HTM) debt securities pursuant to ASU No. 2016-13. The Company has a zero loss expectation for its HTM securities portfolio, except for U.S. State and Municipal securities, and therefore it is not required to estimate an allowance for credit losses related to these securities. For HTM securities that do not have a zero loss expectation, the allowance for credit losses is based on the security’s amortized cost, excluding interest receivable, and represents the portion of the amortized cost that the Company does not expect to collect over the life of the security. The allowance for credit losses is determined using average industry credit ratings and historical loss experience, and is initially recognized upon acquisition of the securities, and subsequently remeasured on a recurring basis. The Company evaluates available for sale (AFS) debt securities that experienced a decline in fair value below amortized cost for credit impairment. In performing an assessment of whether any decline in fair value is due to a credit loss, the Company considers the extent to which the fair value is less than the amortized cost, changes in credit ratings, any adverse economic conditions, as well as all relevant information at the individual security level, such as credit deterioration of the issuer, explicit or implicit guarantees by the federal government or collateral underlying the security. If it is determined that the decline in fair value was due to credit losses, an allowance for credit losses is recorded, limited to the amount the fair value is less than the amortized cost basis. The non-credit related decrease in the fair value, such as a decline due to changes in market interest rates, is recorded in other comprehensive income (loss), net of tax. The Company recognizes a credit impairment if the Company has the intent to sell the security, or it is more likely than not that the Bank will be required to sell the security before recovery of its amortized cost. Prior to the adoption of ASU No. 2016-13 Management evaluated AFS and HTM debt securities for other-than-temporary-impairment on at least a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation.

Note 2 – Reclassifications

Certain prior period amounts have been reclassified to conform to the presentation used in 2024. These reclassifications had no material effect on the operations, financial condition or cash flows of the Company.

Note 3 – Earnings Per Share

Basic earnings per common share are computed by dividing net income by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per common share are computed by dividing net income by the effect of the issuance of potential common shares that are dilutive and by the sum of the weighted-average number of shares of common stock outstanding. All shares owned by the Company’s 401(k) Employee Stock Ownership Plan (ESOP) are included in the earnings per share calculations.

The reconciliation of the components of the basic and diluted earnings per share is as follows (amounts in thousands):


	For the Three Months		For the Nine Months
	Ended September 30,		Ended September 30,
	2024	2023	2024	2023
Net earnings available to common shareholders	$8,653	$5,882	$22,106	$18,624
Weighted average common shares outstanding	7,669,628	6,870,594	7,663,890	6,738,010
Dilutive effect of stock options	69,528	94,709	71,510	94,413
Diluted common shares	7,739,156	6,965,303	7,735,400	6,832,423
Basic earnings per common share	$1.13	$0.86	$2.88	$2.76
Diluted earnings per common share	$1.12	$0.84	$2.86	$2.73

Note 4 – Investment Securities

The following tables summarize the amortized cost and fair value of securities available-for-sale and securities held-to-maturity and the corresponding amounts of unrealized gains and losses recognized in accumulated other comprehensive loss at September 30, 2024 and December 31, 2023 (amounts in thousands):


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
September 30, 2024:
Securities available-for-sale:
Residential mortgage-backed	$	429,298	$	555	$	(42,893	)	$	386,960
U.S. treasury securities		115,636		-		(6,104	)		109,532
U.S. govt. sponsored enterprises		57,222		-		(3,133	)		54,089
State, county, and municipal		74,078		65		(7,345	)		66,798
Corporate debt obligations		16,724		32		(1,582	)		15,174
Total available-for-sale	$	692,958	$	652	$	(61,057	)	$	632,553


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
September 30, 2024:
Securities held-to-maturity:
Residential mortgage-backed	$	60,487	$	-	$	(10,185	)	$	50,302
State, county, and municipal		62,801		-		(9,817	)		52,984
Total held-to-maturity	$	123,288	$	-	$	(20,002	)	$	103,286


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
December 31, 2023:
Securities available-for-sale:
Residential mortgage-backed	$	413,179	$	102	$	(55,981	)	$	357,300
U.S. treasury securities		130,713		-		(10,661	)		120,052
U.S. govt. sponsored enterprises		68,751		-		(5,185	)		63,566
State, county, and municipal		73,514		4		(8,857	)		64,661
Corporate debt obligations		17,758		5		(2,251	)		15,512
Total available-for-sale	$	703,915	$	111	$	(82,935	)	$	621,091

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
December 31, 2023:
Securities held-to-maturity:
Residential mortgage-backed	$	63,953	$	-	$	(12,022	)	$	51,931
State, county, and municipal		62,840		-		(11,597	)		51,243
Total held-to-maturity	$	126,793	$	-	$	(23,619	)	$	103,174

The unrecognized losses on held-to-maturity investment securities presented in the table above do not include unrecognized losses on securities that were transferred from available-for-sale to held-to-maturity totaling $2.37 million at September 30, 2024 and $2.62 million at December 31, 2023. These unrecognized losses that were transferred in 2022 are included as a separate component of stockholders' equity and are being amortized over the remaining term of the securities.

The Company has a zero loss expectation for its HTM securities portfolio, except for U.S. State and Municipal securities, and therefore it is not required to estimate an allowance for credit losses related to these securities. For HTM securities that do not have a zero loss expectation, the allowance for credit losses is based on the security’s amortized cost, excluding interest receivable, and represents the portion of the amortized cost that the Company does not expect to collect over the life of the security. The allowance for credit losses is determined using average industry credit ratings and historical loss experience, and is initially recognized upon acquisition of the securities, and subsequently remeasured on a recurring basis. The Company evaluates available for sale (AFS) debt securities that experienced a decline in fair value below amortized cost for credit impairment. In performing an assessment of whether any decline in fair value is due to a credit loss, the Company considers the extent to which the fair value is less than the amortized cost, changes in credit ratings, any adverse economic conditions, as well as all relevant information at the individual security level, such as credit deterioration of the issuer, explicit or implicit guarantees by the federal government or collateral underlying the security. If it is determined that the decline in fair value was due to credit losses, an allowance for credit losses is recorded, limited to the amount the fair value is less than the amortized cost basis. The non-credit related decrease in the fair value, such as a decline due to changes in market interest rates, is recorded in other comprehensive income (loss), net of tax. The Company recognizes a credit impairment if the Company has the intent to sell the security, or it is more likely than not that the Bank will be required to sell the security before recovery of its amortized cost.

The following tables summarize securities with unrealized and unrecognized losses as of September 30, 2024 and December 31, 2023 aggregated by major security type and length of time in a continuous unrealized or unrecognized loss position (amounts in thousands):


	Less Than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
September 30, 2024:
Securities available-for-sale:
Residential mortgage-backed	$	17,525	$	59	$	330,458	$	42,834	$	347,983	$	42,893
U.S. treasury securities		-		-		109,532		6,104		109,532		6,104
U.S. govt. sponsored enterprises		-		-		54,089		3,133		54,089		3,133
State, county & municipal		-		-		60,553		7,345		60,553		7,345
Corporate debt obligations		455		4		12,727		1,578		13,182		1,582
Total available-for-sale	$	17,980	$	63	$	567,359	$	60,994	$	585,339	$	61,057

Securities held-to-maturity:
Residential mortgage-backed	$	-	$	-	$	50,302	$	10,185	$	50,302	$	10,185
State, county & municipal		-		-		47,639		9,817		47,639		9,817
Total held-to-maturity	$	-	$	-	$	97,941	$	20,002	$	97,941	$	20,002

December 31, 2023:
Securities available-for-sale:
Residential mortgage-backed	$	2,028	$	2	$	352,807	$	55,979	$	354,835	$	55,981
U.S. treasury securities		-		-		120,053		10,661		120,053		10,661
U.S. govt. sponsored enterprises		1,689		7		61,877		5,178		63,566		5,185
State, county & municipal		-		-		63,657		8,857		63,657		8,857
Corporate debt obligations		926		29		13,131		2,222		14,057		2,251
Total available-for-sale	$	4,643	$	38	$	611,525	$	82,897	$	616,168	$	82,935

Securities held-to-maturity:
Residential mortgage-backed	$	-	$	-	$	51,931	$	12,022	$	51,931	$	12,022
State, county & municipal		-		-		45,898		11,597		45,898		11,597
Total held-to-maturity	$	-	$	-	$	97,829	$	23,619	$	97,829	$	23,619

The Company owned a total of 313 securities with unrealized losses of $81.1 million at September 30, 2024. The unrealized losses were primarily attributable to changes in interest rates, rather than deterioration in credit quality. The individual securities are each investment grade securities. The Company considers factors such as the financial condition of the issuer including credit ratings and specific events affecting the operations of the issuer, volatility of the security, underlying assets that collateralize the debt security, and other industry and macroeconomic conditions. The Company does not intend to sell these securities, and it is more likely than not that the Company will not be required to sell these securities before recovery of the amortized cost. The issuers of these securities continue to make timely principal and interest payments under the contractual terms of the securities. As such, there is no allowance for credit losses on available for sale or held to maturity securities recognized as of September 30, 2024 and December 31, 2023. Accrued interest receivable is not included in available-for-sale security balances and is presented in accrued interest receivable on the consolidated statement of financial condition. Interest receivable on securities was approximately $2.8 million and $2.1 million as of September 30, 2024 and December 31, 2023, respectively, and was excluded from the estimate of credit losses.

As of September 30, 2024 and December 31, 2023, securities with a carrying value of approximately $287.8 million and $268.2 million, respectively, were pledged to secure public deposits as required by law. At September 30, 2024 and December 31, 2023, the carrying value of securities pledged to secure repurchase agreements was approximately $22.8 million and $26.9 million, respectively.

During the nine months ended September 30, 2024, the Company sold investment securities for proceeds of $81.7 million and realized losses of $1.4 million. The net loss consisted of gross gains of $289.0 thousand and gross losses of $1.6 million. During the nine months ended September 30, 2023, the Company sold investment securities for proceeds of $15.3 million and realized gains of $5.0 thousand. The net gain consisted of gross gains of $150.0 thousand and gross losses of $145.0 thousand.

The amortized cost and estimated fair value of debt securities at September 30, 2024 and December 31, 2023, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities for residential mortgage backed securities because borrowers have the right to call or prepay obligations with or without call or prepayment penalties. These securities are therefore not presented by maturity classification.


	September 30, 2024				December 31, 2023
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(In Thousands)				(In Thousands)
Securities available-for-sale
Less than 1 year	$	-	$	-	$	2,500	$	2,424
1 to 5 years		158,782		150,323		163,927		150,501
5 to 10 years		37,321		34,152		51,970		46,415
After 10 years		67,557		61,118		72,339		64,451
		263,660		245,593		290,736		263,791
Residential mortgage-backed securities		429,298		386,960		413,179		357,300
Total available-for-sale	$	692,958	$	632,553	$	703,915	$	621,091


	September 30, 2024				December 31, 2023
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(In Thousands)				(In Thousands)
Securities held-to-maturity
5 to 10 years	$	25,835	$	22,334	$	19,706	$	16,192
After 10 years		36,966		30,650		43,134		35,051
		62,801		52,984		62,840		51,243
Residential mortgage-backed securities		60,487		50,302		63,953		51,931
Total held-to-maturity	$	123,288	$	103,286	$	126,793	$	103,174

Note 5 – Loans, Allowance for Credit Losses and Credit Quality

Major classifications of loans at September 30, 2024 and December 31, 2023 are summarized as follows (amounts in thousands):


	September 30, 2024						December 31, 2023
	Amount			% of Total			Amount			% of Total
Residential real estate:
Closed-end 1-4 family - first lien	$	841,742			35.2	%	$	771,144			34.9	%
Closed-end 1-4 family - junior lien		14,254			0.6	%		11,814			0.5	%
Multi-family		29,661			1.2	%		26,739			1.2	%
Total residential real estate		885,657			37.0	%		809,697			36.6	%
Commercial real estate:
Nonfarm nonresidential		630,947			26.4	%		557,202			25.2	%
Farmland		71,671			3.0	%		58,532			2.6	%
Total commercial real estate		702,618			29.4	%		615,734			27.8	%
Construction and land development:
Residential		103,974			4.3	%		100,974			4.6	%
Other		163,011			6.8	%		195,724			8.9	%
Total construction and land development		266,985			11.1	%		296,698			13.5	%
Home equity lines of credit		117,722			4.9	%		95,544			4.3	%
Commercial loans:
Other commercial loans		288,455			12.2	%		273,639			12.4	%
Agricultural		79,434			3.3	%		66,510			3.0	%
State, county, and municipal loans		34,666			1.4	%		34,819			1.6	%
Total commercial loans		402,555			16.9	%		374,968			17.0	%
Consumer loans		56,602			2.4	%		55,587			2.5	%
Total gross loans		2,432,139			101.7	%		2,248,228			101.7	%
Allowance for credit losses		(31,077	)		-1.3	%		(28,991	)		-1.3	%
Net discounts		(16	)		0.0	%		(129	)		0.0	%
Net deferred loan fees		(8,440	)		-0.4	%		(8,093	)		-0.4	%
Net loans	$	2,392,606			100.0	%	$	2,211,015			100.0	%

The Bank grants loans and extensions of credit to individuals and a variety of businesses and corporations located in its general trade area. Although the Bank has a diversified loan portfolio, a substantial portion of the loan portfolio is collateralized by improved and unimproved real estate and is dependent upon the real estate market. Relevant risk characteristics for these portfolio segments generally include debt service coverage, loan-to-value ratios and financial performance on non-consumer loans and credit scores, debt-to-income, collateral type and loan-to-value ratios for consumer loans.

The loan portfolio has been disaggregated into segments and then further disaggregated into classes for certain disclosures. A portfolio segment is defined as the level at which an entity develops and documents a systematic method for determining its allowance for credit losses. There are three primary loan portfolio segments that include real estate, commercial, and consumer. A class is generally determined based on the initial measurement attribute, risk characteristic of the loan, and the Company’s method for monitoring and assessing credit risk. Classes within the real estate portfolio segment include residential real estate, commercial real estate, construction and land development and home equity lines of credit. The portfolio segments of non-real estate commercial loans and consumer loans have not been further segregated by class.

Under the current expected credit losses (CECL) methodology, the allowance for credit losses is measured on a collective basis for pools of loans with similar risk characteristics. For loans that do not share similar risk characteristics with the collectively evaluated pools, evaluations are performed on an individual basis. For all loan segments collectively evaluated, losses are predicted over a period of time determined to be reasonable and supportable, and at the end of the reasonable and supportable forecast period losses are reverted to long-term historical averages. The estimated loan losses for all loan segments are adjusted for changes in qualitative factors not inherently considered in the quantitative analyses.

The following tables present the balance in the allowance for credit losses by portfolio segment. It also includes the balance in the allowance for credit losses and the recorded investment in loans by portfolio segment and based on evaluation method for the periods indicated below (amounts in thousands).


	Real Estate Mortgage Loans
			Construction	Home equity
			and land	lines
Allowance for Credit Losses	Residential	Commercial	development	of credit	Commercial	Consumer	Total
Balance - December 31, 2023	$7,233	$10,530	$4,646	$1,078	$4,906	$598	$28,991
Provision for credit losses	(464)	595	(1,114)	688	4,238	18	3,961
Loan charge-offs	(35)	(498)	(29)	(50)	(1,213)	(126)	(1,951)
Loan recoveries	2	8	-	-	53	13	76
Balance - September 30, 2024	$6,736	$10,635	$3,503	$1,716	$7,984	$503	$31,077

Balance - June 30, 2024	$7,258	$11,084	$3,892	$1,152	$6,922	$608	$30,916
Provision for credit losses	(489)	(202)	(379)	564	1,915	(83)	1,326
Loan charge-offs	(35)	(250)	(10)	-	(867)	(25)	(1,187)
Loan recoveries	2	3	-	-	14	3	22
Balance - September 30, 2024	$6,736	$10,635	$3,503	$1,716	$7,984	$503	$31,077

Individually evaluated	$10	$233	$-	$-	$2,002	$45	$2,290
Collectively evaluated	6,726	10,402	3,503	1,716	5,982	458	28,787
Total	$6,736	$10,635	$3,503	$1,716	$7,984	$503	$31,077

Loans:
Individually evaluated	$4,176	$5,792	$124	$145	$2,298	$45	$12,580
Collectively evaluated	881,481	696,826	266,861	117,577	400,257	56,557	2,419,559
Total	$885,657	$702,618	$266,985	$117,722	$402,555	$56,602	$2,432,139


	Real Estate Mortgage Loans
			Construction	Home equity
			and land	lines
Allowance for Credit Losses	Residential	Commercial	development	of credit	Commercial	Consumer	Total
Balance - December 31, 2022 prior to adoption of ASC 326	$5,088	$10,057	$3,377	$562	$4,778	$448	$24,310
Impact of adopting ASC 326	-	-	-	-	73	7	80
Provision for credit losses	1,397	1,048	539	328	412	209	3,933
Loan charge-offs	-	-	(196)	-	(510)	(98)	(804)
Loan recoveries	-	81	-	-	205	27	313
Balance - September 30, 2023	$6,485	$11,186	$3,720	$890	$4,958	$593	$27,832

Balance - June 30, 2023	$5,859	$11,011	$3,611	$801	$5,035	$572	$26,889
Impact of adopting ASC 326	-	-	-	-	-	-	-
Provision for credit losses	626	172	109	89	252	63	1,311
Loan charge-offs	-	-	-	-	(348)	(58)	(406)
Loan recoveries	-	3	-	-	19	16	38
Balance - September 30, 2023	$6,485	$11,186	$3,720	$890	$4,958	$593	$27,832

Ending balance:
Individually evaluated	$14	$322	$-	$-	$26	$37	$399
Collectively evaluated	6,471	10,864	3,720	890	4,932	556	27,433
Total	$6,485	$11,186	$3,720	$890	$4,958	$593	$27,832

Loans:
Individually evaluated	$1,403	$3,712	$-	$527	$26	$37	$5,705
Collectively evaluated	756,723	604,069	275,747	83,878	347,242	56,992	2,124,651
Total	$758,126	$607,781	$275,747	$84,405	$347,268	$57,029	$2,130,356

The Company's unfunded lending commitments are unconditionally cancellable and therefore no allowance for credit losses has been recorded. In the event that collection of principal becomes uncertain, the Company has policies in place to reverse accrued interest in a timely manner. Therefore, the Company has made a policy election to exclude accrued interest from the measurement of the allowance for credit losses. Accrued interest on loans of $11.8 million and $11.3 million at September 30, 2024 and December 31, 2023, respectively, was included in accrued interest receivable and was excluded from the estimate of credit losses.

The following table presents collateral dependent loans by class of loans as of September 30, 2024 (amounts in thousands). Collateral dependent loans are loans for which the repayment is expected to be provided substantially through the operation or sale of the collateral and the borrower is experiencing financial difficulty. The Company reviews individually evaluated loans for designation as collateral dependent loans, as well as other loans that management of the Company designates as having higher risk. These loans do not share common risk characteristics and are not included within the collectively evaluated loans for determining the allowance for credit losses. The Company considers all individually evaluated loans to be collateral dependent.


Nonaccruing Collateral Dependent Loans	Unpaid Principal Balance		Recorded Investment		Loans With No Allowance		Loans With Allowance		Allowance for Credit Losses
Mortgage loans on real estate:
Residential real estate	$	2,426	$	2,419	$	2,419	$	-	$	-
Commercial real estate		5,801		5,551		4,272		1,279		233
Construction and land development		124		124		124		-		-
Total mortgage loans on real estate		8,351		8,094		6,815		1,279		233
Home equity lines of credit		125		125		125		-		-
Commercial loans		2,274		2,274		-		2,274		1,978
Consumer loans		21		21		-		21		21
Total Loans	$	10,771	$	10,514	$	6,940	$	3,574	$	2,232


Accruing Collateral Dependent Loans	Unpaid Principal Balance		Recorded Investment		Loans With No Allowance		Loans With Allowance		Allowance for Credit Losses
Mortgage loans on real estate:
Residential real estate	$	1,757	$	1,757	$	1,594	$	163	$	10
Commercial real estate		241		241		241		-		-
Construction and land development		-		-		-		-		-
Total mortgage loans on real estate		1,998		1,998		1,835		163		10
Home equity lines of credit		20		20		20		-		-
Commercial loans		24		24		-		24		24
Consumer loans		24		24		-		24		24
Total Loans	$	2,066	$	2,066	$	1,855	$	211	$	58


Total Collateral Dependent Loans	Unpaid Principal Balance		Recorded Investment		Loans With No Allowance		Loans With Allowance		Allowance for Credit Losses
Mortgage loans on real estate:
Residential real estate	$	4,183	$	4,176	$	4,013	$	163	$	10
Commercial real estate		6,042		5,792		4,513		1,279		233
Construction and land development		124		124		124		-		-
Total mortgage loans on real estate		10,349		10,092		8,650		1,442		243
Home equity lines of credit		145		145		145		-		-
Commercial loans		2,298		2,298		-		2,298		2,002
Consumer loans		45		45		-		45		45
Total Loans	$	12,837	$	12,580	$	8,795	$	3,785	$	2,290

The following table presents collateral dependent loans by class of loans as of December 31, 2023 (amounts in thousands).


Nonaccruing Collateral Dependent Loans	Unpaid Principal Balance		Recorded Investment		Loans With No Allowance		Loans With Allowance		Allowance for Credit Losses
Mortgage loans on real estate:
Residential real estate	$	1,229	$	1,229	$	1,229	$	-	$	-
Commercial real estate		2,769		2,769		1,423		1,346		300
Construction and land development		364		364		364		-		-
Total mortgage loans on real estate		4,362		4,362		3,016		1,346		300
Home equity lines of credit		202		202		202		-		-
Commercial loans		-		-		-		-		-
Consumer loans		5		5		-		5		5
Total Loans	$	4,569	$	4,569	$	3,218	$	1,351	$	305


Accruing Collateral Dependent Loans	Unpaid Principal Balance		Recorded Investment		Loans With No Allowance		Loans With Allowance		Allowance for Credit Losses
Mortgage loans on real estate:
Residential real estate	$	1,099	$	1,099	$	934	$	165	$	12
Commercial real estate		9		9		9		-		-
Construction and land development		-		-		-		-		-
Total mortgage loans on real estate		1,108		1,108		943		165		12
Home equity lines of credit		-		-		-		-		-
Commercial loans		26		26		-		26		26
Consumer loans		35		35		-		35		35
Total Loans	$	1,169	$	1,169	$	943	$	226	$	73


Total Collateral Dependent Loans	Unpaid Principal Balance		Recorded Investment		Loans With No Allowance		Loans With Allowance		Allowance for Credit Losses
Mortgage loans on real estate:
Residential real estate	$	2,328	$	2,328	$	2,163	$	165	$	12
Commercial real estate		2,778		2,778		1,432		1,346		300
Construction and land development		364		364		364		-		-
Total mortgage loans on real estate		5,470		5,470		3,959		1,511		312
Home equity lines of credit		202		202		202		-		-
Commercial loans		26		26		-		26		26
Consumer loans		40		40		-		40		40
Total Loans	$	5,738	$	5,738	$	4,161	$	1,577	$	378

The following tables present the performance status of loans as of September 30, 2024 and December 31, 2023, by class of loans (amounts in thousands).


As of September 30, 2024	Performing		Nonperforming		Total
Mortgage loans on real estate:
Residential real estate	$	882,711	$	2,946	$	885,657
Commercial real estate		697,009		5,609		702,618
Construction and land development		266,818		167		266,985
Total mortgage loans on real estate		1,846,538		8,722		1,855,260
Home equity lines of credit		117,509		213		117,722
Commercial loans		400,128		2,427		402,555
Consumer loans		56,502		100		56,602
Total Loans	$	2,420,677	$	11,462	$	2,432,139


As of December 31, 2023	Performing		Nonperforming		Total
Mortgage loans on real estate:
Residential real estate	$	807,682	$	2,015	$	809,697
Commercial real estate		612,965		2,769		615,734
Construction and land development		296,187		511		296,698
Total mortgage loans on real estate		1,716,834		5,295		1,722,129
Home equity lines of credit		95,115		429		95,544
Commercial loans		374,968		-		374,968
Consumer loans		55,444		143		55,587
Total Loans	$	2,242,361	$	5,867	$	2,248,228

The following tables present the aging of loans and non-accrual loans as of September 30, 2024 and December 31, 2023, by class of loans (amounts in thousands).


	Accruing Loans
As of September 30, 2024	Current		30-89 Days Past Due		90+ Days Past Due		Nonaccrual Loans		Total Loans		Nonaccrual With No ACL
Mortgage loans on real estate:
Residential real estate	$	878,974	$	3,737	$	-	$	2,946	$	885,657	$	2,946
Commercial real estate		696,725		284		-		5,609		702,618		4,330
Construction and land development		265,712		1,106		-		167		266,985		167
Total mortgage loans on real estate		1,841,411		5,127		-		8,722		1,855,260		7,443
Home equity lines of credit		117,258		251		-		213		117,722		213
Commercial loans		399,867		261		24		2,403		402,555		130
Consumer loans		55,975		527		-		100		56,602		79
Total Loans	$	2,414,511	$	6,166	$	24	$	11,438	$	2,432,139	$	7,865


	Accruing Loans
As of December 31, 2023	Current		30-89 Days Past Due		90+ Days Past Due		Nonaccrual Loans		Total Loans		Nonaccrual With No ACL
Mortgage loans on real estate:
Residential real estate	$	805,262	$	2,420	$	288	$	1,727	$	809,697	$	1,727
Commercial real estate		612,901		64		-		2,769		615,734		1,423
Construction and land development		296,030		157		-		511		296,698		511
Total mortgage loans on real estate		1,714,193		2,641		288		5,007		1,722,129		3,661
Home equity lines of credit		95,003		112		-		429		95,544		429
Commercial loans		374,699		269		-		-		374,968		-
Consumer loans		55,061		383		-		143		55,587		137
Total Loans	$	2,238,956	$	3,405	$	288	$	5,579	$	2,248,228	$	4,227

The Bank categorizes loans in risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Bank analyzes loans individually by classifying the loans as to credit risk. This analysis is performed on a continuous basis. The Bank uses the following definitions for its risk ratings:

Special Mention - Weakness exists that could cause future impairment, including the deterioration of financial ratios, past due status and questionable management capabilities. Collateral values generally afford adequate coverage but may not be immediately marketable.

Substandard - Specific and well-defined weaknesses exist that may include poor liquidity and deterioration of financial ratios. The loan may be past due and related deposit accounts experiencing overdrafts. Immediate corrective action is necessary.

Doubtful - Specific weaknesses characterized as Substandard that are severe enough to make collection in full unlikely. There is no reliable secondary source of full repayment. Loans classified as doubtful will be placed on non-accrual, analyzed and fully or partially charged-off based on review of collateral and other relevant factors.

Loans not meeting the criteria above that are evaluated individually as part of the above described process are considered to be Pass rated loans.

The following table presents loan balances classified by credit quality indicator, loan type and based on year of origination as of September 30, 2024 (amounts in thousands).


	2024		2023		2022		2021		2020		Prior		Revolving Loans		Total
Residential real estate
Pass	$	94,663	$	236,365	$	338,154	$	109,551	$	60,437	$	31,653	$	5,461	$	876,284
Special Mention		512		1,332		2,204		279		10		119		-		4,456
Substandard		363		754		1,874		79		397		1,450		-		4,917
Doubtful		-		-		-		-		-		-		-		-
Total residential real estate	$	95,538	$	238,451	$	342,232	$	109,909	$	60,844	$	33,222	$	5,461	$	885,657
Current-period gross charge-offs	$	-	$	15	$	20	$	-	$	-	$	-	$	-	$	35
Commercial real estate
Pass	$	54,621	$	118,893	$	210,978	$	90,936	$	91,259	$	101,743	$	20,376	$	688,806
Special Mention		1,091		-		659		385		1,346		4,221		168		7,870
Substandard		110		324		-		3,322		240		1,937		9		5,942
Doubtful		-		-		-		-		-		-		-		-
Total commercial real estate	$	55,822	$	119,217	$	211,637	$	94,643	$	92,845	$	107,901	$	20,553	$	702,618
Current-period gross charge-offs	$	-	$	-			$	250	$	-	$	248	$	-	$	498
Construction and land development
Pass	$	91,300	$	96,128	$	49,468	$	10,821	$	3,426	$	5,571	$	9,566	$	266,280
Special Mention		-		209		296		-		-		30		-		535
Substandard		3		-		164		-		3		-		-		170
Doubtful		-		-		-		-		-		-		-		-
Total construction and land development	$	91,303	$	96,337	$	49,928	$	10,821	$	3,429	$	5,601	$	9,566	$	266,985
Current-period gross charge-offs	$	-	$	10	$	19	$	-	$	-	$	-	$	-	$	29
Home equity lines of credit
Pass	$	231	$	491	$	450	$	-	$	582	$	-	$	115,130	$	116,884
Special Mention		-		-		-		-		-		-		565		565
Substandard		-		-		-		-		-		-		273		273
Doubtful		-		-		-		-		-		-		-		-
Total home equity lines of credit	$	231	$	491	$	450	$	-	$	582	$	-	$	115,968	$	117,722
Current-period gross charge-offs	$	-	$	-	$	-	$	50	$	-	$	-	$	-	$	50
Commercial loans
Pass	$	70,896	$	79,742	$	56,050	$	24,019	$	12,991	$	13,579	$	134,469	$	391,746
Special Mention		-		53		3,180		72		45		3,942		1,085		8,377
Substandard		49		425		26		38		24		-		1,870		2,432
Doubtful		-		-		-		-		-		-		-		-
Total commercial loans	$	70,945	$	80,220	$	59,256	$	24,129	$	13,060	$	17,521	$	137,424	$	402,555
Current-period gross charge-offs	$	-	$	684	$	203	$	-	$	104	$	222	$	-	$	1,213
Consumer loans
Pass	$	15,049	$	15,359	$	10,594	$	5,890	$	2,683	$	2,787	$	3,674	$	56,036
Special Mention		39		27		48		103		80		-		23		320
Substandard		3		25		66		21		75		48		8		246
Doubtful		-		-		-		-		-		-		-		-
Total consumer loans	$	15,091	$	15,411	$	10,708	$	6,014	$	2,838	$	2,835	$	3,705	$	56,602
Current-period gross charge-offs	$	23	$	75	$	21	$	3	$	4	$	-	$	-	$	126
Total Loans
Pass	$	326,760	$	546,978	$	665,694	$	241,217	$	171,378	$	155,333	$	288,676	$	2,396,036
Special Mention		1,642		1,621		6,387		839		1,481		8,312		1,841		22,123
Substandard		528		1,528		2,130		3,460		739		3,435		2,160		13,980
Doubtful		-		-		-		-		-		-		-		-
Total loans	$	328,930	$	550,127	$	674,211	$	245,516	$	173,598	$	167,080	$	292,677	$	2,432,139
Current-period gross charge-offs	$	23	$	784	$	263	$	303	$	108	$	470	$	-	$	1,951

The following table presents loan balances classified by credit quality indicator, loan type and based on year of origination as of December 31, 2023 (amounts in thousands).


	2023		2022		2021		2020		2019		Prior		Revolving Loans		Total
Residential real estate
Pass	$	209,016	$	354,153	$	120,802	$	68,229	$	16,903	$	25,380	$	7,420	$	801,903
Special Mention		1,742		2,013		590		157		27		176		-		4,705
Substandard		36		1,240		151		258		719		685		-		3,089
Doubtful		-		-		-		-		-		-		-		-
Total residential real estate	$	210,794	$	357,406	$	121,543	$	68,644	$	17,649	$	26,241	$	7,420	$	809,697
Commercial real estate
Pass	$	81,239	$	196,437	$	99,072	$	96,775	$	51,677	$	64,851	$	14,977	$	605,028
Special Mention		419		978		383		881		-		5,122		-		7,783
Substandard		49		-		-		46		50		2,769		9		2,923
Doubtful		-		-		-		-		-		-		-		-
Total commercial real estate	$	81,707	$	197,415	$	99,455	$	97,702	$	51,727	$	72,742	$	14,986	$	615,734
Construction and land development
Pass	$	148,804	$	93,987	$	20,752	$	4,678	$	2,421	$	4,591	$	20,139	$	295,372
Special Mention		211		472		14		-		22		12		-		731
Substandard		-		411		84		-		-		100		-		595
Doubtful		-		-		-		-		-		-		-		-
Total construction and land development	$	149,015	$	94,870	$	20,850	$	4,678	$	2,443	$	4,703	$	20,139	$	296,698
Current-period gross charge-offs	$	-	$	-	$	196	$	-	$	-	$	-	$	-	$	196
Home equity lines of credit
Pass	$	750	$	450	$	-	$	852	$	-	$	-	$	92,823	$	94,875
Special Mention		-		-		-		-		-		-		200		200
Substandard		-		-		-		-		-		20		449		469
Doubtful		-		-		-		-		-		-		-		-
Total home equity lines of credit	$	750	$	450	$	-	$	852	$	-	$	20	$	93,472	$	95,544
Commercial loans
Pass	$	94,966	$	73,381	$	30,912	$	16,257	$	6,505	$	10,700	$	134,488	$	367,209
Special Mention		175		142		49		294		26		4,057		2,990		7,733
Substandard		-		-		-		26		-		-		-		26
Doubtful		-		-		-		-		-		-		-		-
Total commercial loans	$	95,141	$	73,523	$	30,961	$	16,577	$	6,531	$	14,757	$	137,478	$	374,968
Current-period gross charge-offs	$	288	$	46	$	1	$	-	$	23	$	338	$	-	$	696
Consumer loans
Pass	$	21,479	$	14,017	$	8,188	$	3,949	$	1,950	$	2,567	$	2,933	$	55,083
Special Mention		77		107		36		16		3		-		27		266
Substandard		65		46		26		56		-		34		11		238
Doubtful		-		-		-		-		-		-		-		-
Total consumer loans	$	21,621	$	14,170	$	8,250	$	4,021	$	1,953	$	2,601	$	2,971	$	55,587
Current-period gross charge-offs	$	-	$	120	$	-	$	15	$	-	$	-	$	-	$	135
Total Loans
Pass	$	556,254	$	732,425	$	279,726	$	190,740	$	79,456	$	108,089	$	272,780	$	2,219,470
Special Mention		2,624		3,712		1,072		1,348		78		9,367		3,217		21,418
Substandard		150		1,697		261		386		769		3,608		469		7,340
Doubtful		-		-		-		-		-		-		-		-
Total loans	$	559,028	$	737,834	$	281,059	$	192,474	$	80,303	$	121,064	$	276,466	$	2,248,228
Current-period gross charge-offs	$	288	$	166	$	197	$	15	$	23	$	338	$	-	$	1,027

Note 6 – Fair Value Measurements and Disclosures

The Company utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Securities available-for-sale are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record at fair value other assets on a nonrecurring basis, such as individually evaluated loans, foreclosed assets, and repossessed assets. These nonrecurring fair value adjustments typically involve application of the lower of cost or market accounting or write-downs of individual assets.

Fair Value Hierarchy

The Company groups assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:

Level 1 – Valuation is based upon quoted prices for identical instruments traded in active markets.

Level 2 – Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

Level 3 – Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.

The following is a description of valuation methodologies used for assets and liabilities recorded or disclosed at fair value:

Cash and cash equivalents – For disclosure purposes, for cash, due from banks, interest-bearing deposits and federal funds sold, the carrying amount is a reasonable estimate of fair value.

Certificates of deposit in banks – For disclosure purposes, the carrying amount of certificates of deposit is a reasonable estimate of fair value.

Investment Securities – Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange and securities that are traded by dealers or brokers in active over-the-counter market funds. Level 2 securities include mortgage-backed securities issued by government sponsored enterprises and municipal bonds. Securities classified as Level 3 include asset-backed securities in less liquid markets.

Mortgage loans held for sale – Loans held for sale are carried at the lower of cost or fair value, which is evaluated on a loan-level basis. The fair value of loans held for sale is determined using quoted prices for similar assets, adjusted for specific attributes of that loan or other observable market data, such as outstanding commitments from third party investors.

Loans – The fair value estimation process for the loan portfolio uses an exit price concept and reflects discounts the Company believes are consistent with discounts in the marketplace. Fair values are estimated for portfolios of loans with similar characteristics. The fair value of loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for similar maturities. The fair value analysis also includes other assumptions to estimate fair value, intended to approximate those a market participant would use in an orderly transaction, with adjustments for discount rates, interest rates, liquidity, and credit spreads, as appropriate.

Accrued interest receivable – For disclosure purposes, the fair value of the accrued interest on investments and loans is the carrying value.

Bank owned life insurance – For disclosure purposes, the fair value of the cash surrender value of bank owned life insurance policies is equivalent to the carrying value.

Foreclosed assets – Other real estate properties and miscellaneous repossessed assets are adjusted to fair value upon transfer of the loans to foreclosed assets. Subsequently, foreclosed assets are carried at the lower of carrying value or fair value less selling costs. Fair value is based upon independent market prices, appraised values of the collateral or management’s estimation of the value of the collateral. When the fair value of the collateral is based on an observable market price, the Company records the foreclosed asset as nonrecurring Level 2. When the fair value is based on an appraised value or management’s estimate of value, the Company records the foreclosed asset as nonrecurring Level 3.

Restricted equity securities – It is not practical to determine the fair value of restricted equity securities due to restrictions placed on transferability.

Deposits – For disclosure purposes, the fair value for demand deposits, savings accounts, and certain money market deposits is the amount payable on demand at the reporting date. Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered for deposits of similar remaining maturities.

Securities sold under agreements to repurchase – For disclosure purposes, the carrying amounts of securities sold under agreements to repurchase approximate their fair values.

Federal Home Loan Bank advances – For disclosure purposes, the fair value of Federal Home Loan Bank advances is estimated using discounted cash flow analyses using interest rates offered for borrowings with similar maturities.

Subordinated debentures – For disclosure purposes, the fair value is estimated using a discounted cash flow calculation that applies interest rates currently being offered for similar subordinated debenture offerings.

Accrued interest payable – For disclosure purposes, the fair value of the accrued interest payable on deposits is the carrying value.

Commitments to extend credit and standby letters of credit – Because commitments to extend credit and standby letters of credit are generally short-term and made using variable rates, the carrying value and estimated fair value associated with these instruments are immaterial.

Assets and liabilities measured at fair value on a recurring basis – The only assets and liabilities measured at fair value on a recurring basis are our securities available-for-sale. Information related to the Company’s assets and liabilities measured at fair value on a recurring basis at September 30, 2024 and December 31, 2023 is as follows: (amounts in thousands)


	Fair Value Measurements At Reporting Date Using:
September 30, 2024	Fair Value		Quoted Prices In Active Markets For Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Securities available-for-sale:
Residential mortgage -backed	$	386,960	$	-	$	386,960	$	-
U.S. treasury securities		109,532		-		109,532		-
U.S. government sponsored enterprises		54,089		-		54,089		-
State, county, and municipal		66,798		-		66,798		-
Corporate debt obligations		15,174		-		15,174		-
Totals	$	632,553	$	-	$	632,553	$	-


	Fair Value Measurements At Reporting Date Using:
December 31, 2023	Fair Value		Quoted Prices In Active Markets For Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Securities available-for-sale:
Residential mortgage -backed	$	357,300	$	-	$	357,300	$	-
U.S. treasury securities		120,052		-		120,052		-
U.S. government sponsored enterprises		63,566		-		63,566		-
State, county, and municipal		64,661		-		64,661		-
Corporate debt obligations		15,512		-		15,512		-
Totals	$	621,091	$	-	$	621,091	$	-

The Company's policy is to recognize transfers in and transfers out of levels 1, 2, and 3 as of the end of a reporting period. There were no transfers between levels from December 31, 2023 to September 30, 2024 (amounts in thousands):


	Significant Unobservable Inputs (Level 3)
	September 30, 2024		December 31, 2023
Fair value, beginning of period	$	-	$	5,621
Transfers into Level 3		-		-
Transfers out of Level 3		-		(5,621	)
Changes in unrealized gains/losses included in other comprehensive income for assets and liabilities still held at period-end		-		-
Fair value, end of period	$	-	$	-

Assets measured at fair value on a nonrecurring basis – The Company may be required, from time to time, to measure certain assets at fair value on a nonrecurring basis in accordance with U.S. GAAP. These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period. Assets measured at fair value on a nonrecurring basis are included in the table below as of September 30, 2024 and December 31, 2023 (amounts in thousands):


	Fair Value Measurements At Reporting Date Using:
September 30, 2024	Fair Value		Quoted Prices In Active Markets For Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Individually evaluated loans	$	10,290	$	-	$	-	$	10,290
Foreclosed assets		44		-		-		44
Totals	$	10,334	$	-	$	-	$	10,334


December 31, 2023	Fair Value		Quoted Prices In Active Markets For Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Individually evaluated loans	$	5,360	$	-	$	-	$	5,360
Foreclosed assets		92		-		-		92
Totals	$	5,452	$	-	$	-	$	5,452

The Company has estimated the fair values of these assets using Level 3 inputs, specifically the appraised value of the collateral. Individually evaluated loan balances represent those collateral dependent loans where management has estimated the credit loss by comparing the loan’s carrying value against the expected realizable fair value of the collateral dependent loan for the amount of the credit loss. For Level 3 assets measured at fair value on a non-recurring basis as of September 30, 2024 and December 31, 2023 for the valuation technique, we used appraisals. For the significant unobservable input, we used appraisal discounts, and weighted average input of 15-20% was used for the period ended September 30, 2024 and December 31, 2023.

The estimated fair values, and related carrying or notional amounts, of the Company’s financial instruments as of September 30, 2024 and December 31, 2023 are as follows (amounts in thousands):


			Estimated Fair Value
September 30, 2024	Carrying Amount		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	147,101	$	147,101	$	-	$	-
Certificates of deposit in banks		4,218		-		4,218		-
Securities held-to-maturity		123,288		-		103,286		-
Securities available-for-sale		632,553		-		632,553		-
Loans held-for-sale		9,863		-		9,863		-
Loans receivable, net		2,392,606		-		2,392,923		10,290
Accrued interest receivable		14,621		-		14,621		-
Bank owned life insurance		49,370		-		49,370		-
Restricted equity securities		10,038		-		-		10,038
Financial liabilities:
Deposits		3,038,822		-		2,888,785		-
Securities sold under agreements to repurchase		13,935		-		13,935		-
Federal Home Loan Bank advances		150,000		-		148,845		-
Subordinated debentures		39,545		-		30,836		-
Accrued interest payable		2,058		-		2,058		-


			Estimated Fair Value
December 31, 2023	Carrying Amount		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	72,547	$	72,547	$	-	$	-
Certificates of deposit in banks		4,218		-		4,218		-
Securities held-to-maturity		126,793		-		103,174		-
Securities available-for-sale		621,091		-		621,091		-
Loans held-for-sale		4,595		-		4,595		-
Loans receivable, net		2,211,015		-		2,180,082		5,360
Accrued interest receivable		14,091		-		14,091		-
Bank owned life insurance		47,001		-		47,001		-
Restricted equity securities		13,433		-		-		13,433
Financial liabilities:
Deposits		2,730,655		-		2,574,801		-
Securities sold under agreements to repurchase		16,731		-		16,731		-
Federal Home Loan Bank advances		230,000		-		229,430		-
Subordinated debentures		39,492		-		30,944		-
Accrued interest payable		2,178		-		2,178		-

The estimated fair values of the standby letters of credit and loan commitments on which the committed interest rate is less than the current market rate are insignificant as of September 30, 2024 and December 31, 2023.

The Company assumes interest rate risk (the risk that general interest rate levels will change) as a result of its normal operations. As a result, the fair values of the Company’s financial instruments will change when interest rate levels change and that change may be either favorable or unfavorable to the Company. Management attempts to match maturities of assets and liabilities to the extent believed necessary to minimize interest rate risk. However, borrowers with fixed-rate obligations are less likely to prepay in a rising rate environment and more likely to prepay in a falling rate environment. Conversely, depositors who are receiving fixed-rates are more likely to withdraw funds before maturity in a rising rate environment and less likely to do so in a falling-rate environment. Management monitors rates and maturities of assets and liabilities, and attempts to minimize interest rate risk by adjusting terms of new loans and deposits and by investing in securities with terms that mitigate the Company’s overall interest rate risk.

Note 7 – Recently Adopted Accounting Pronouncements

On January 1, 2024, the Company adopted ASU 2023-02, Investments-Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method. These amendments allowed entities to elect to account for qualifying tax equity investments using the proportional amortization method, regardless of the program giving rise to the related income tax credits. The ASU responded to stakeholder feedback that the proportional amortization method provided investors and other allocators of capital with a better understanding of the returns from investments that were made primarily for the purpose of receiving income tax credits and other income tax benefits. ASU 2023-02 was effective for public entities for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Adoption of ASU 2023-02 did not have a material impact on the Company’s consolidated financial statements.

Note 8 – Recently Issued Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. ASU 2023-07 expands disclosure requirements for significant segment expenses under Topic 280. The amendments require public entities to disclose significant expense categories for each reportable segment, other segment items, the title and position of the chief operating decision-maker, and interim disclosures of certain segment-related information previously required only on an annual basis. The amendments clarify that entities reporting single segments must disclose both the new and existing segment disclosures under Topic 280, and a public entity is permitted to disclose multiple measures of segment profit or loss if certain criteria are met. The amendments in this update are effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 31, 2024. ASU 2023-07 must be applied on a retrospective basis. Early adoption is permitted. This standard is not expected to have a material impact on the Company’s consolidated results of operations or financial position.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 expands income tax disclosure requirements. The amendments require annual disclosure of certain information relating to the rate reconciliation, income taxes paid by jurisdiction, income (loss) from continuing operations before income tax expense (benefit) disaggregated between domestic and foreign, income tax expense (benefit) from continuing operations disaggregated by federal (national), state, and foreign. The amendments also eliminate certain requirements relating to unrecognized tax benefits and certain deferred tax disclosure relating to subsidiaries and corporate joint ventures. The amendments in this update are effective for years beginning after December 15, 2024. ASU 2023-09 should be applied on a prospective basis, but retrospective application is permitted. Early adoption is permitted. This standard is not expected to have a material impact on the Company’s consolidated results of operations or financial position.

Note 9 – Defined Contribution Plan

The Company provides a 401(k) employee stock ownership plan (ESOP), which covers substantially all of the Company’s employees who are eligible, as to age and length of service. A participant may elect to make contributions up to $23.0 thousand and $22.5 thousand of the participant’s annual compensation in 2024 and 2023, respectively. The Company makes contributions up to 3% of each participant’s annual compensation and the Company matches 50% of the next 2% contributed by the employee. Contributions to the plan by the Company were approximately $726 thousand and $655 thousand for the nine months ended September 30, 2024 and 2023, respectively. Outstanding shares of the Company’s common stock allocated to participants at September 30, 2024 and December 31, 2023 totaled 192,699 shares and 166,664 shares, respectively, and there were no unallocated shares. These shares are treated as outstanding for purposes of calculating earnings per share and dividends on these shares are included in the Consolidated Statements of Stockholders’ Equity.

The Company’s ESOP includes a put option for shares of the Company’s common stock distributed from the ESOP. Shares are distributed from the ESOP primarily to separate vested participants and certain eligible participants who elect to diversify their account balances. Since the Company’s common stock is not currently traded on an established securities market, if the owners of distributed shares desire to sell their shares, the Company is required to purchase the shares at fair value during two put option periods following the distribution of the shares from the ESOP. The first put option period is within sixty days following the distribution of the shares from the ESOP. The second put option period begins on the first day of the fifth month of the plan year for a sixty day period. The fair value of distributed shares subject to the put option totaled $0 as of September 30, 2024 and December 31, 2023. The cost of the ESOP shares totaled $5.37 million and $4.48 million as of September 30, 2024 and December 31, 2023, respectively. Due to the Company’s obligation under the put option, the distributed shares and ESOP shares are classified as temporary equity in the mezzanine section of the consolidated statements of financial condition and totaled $5.37 million and $4.48 million as of September 30, 2024 and December 31, 2023, respectively. The fair value of the ESOP shares totaled $6.89 million and $6.17 million as of September 30, 2024 and December 31, 2023, respectively.

Note 10 – Loans Held for Sale

The Company has entered into agreements with secondary market investors to deliver loans on a “best efforts delivery” basis. When a rate is committed to a borrower, it is based on the best price that day and locked with the investor for the customer for a thirty day period. In the event the loan is not delivered to the investor, the Company has no risk or exposure with the investor. The fair values of the Company’s agreements with investors and rate lock commitments to customers as of September 30, 2024 and December 31, 2023, respectively, were not material.

Note 11 – Leases

Operating lease assets represent the Company’s right to use an underlying asset during the lease term and operating lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at lease commencement based on the present value of the remaining lease payments using a discount rate that represents the Company’s incremental borrowing rate at the lease commencement date. Operating lease cost, which is comprised of amortization of the operating lease asset and the implicit interest accreted on the operating lease liability, is recognized on a straight-line basis over the lease term, and is recorded in occupancy expenses in the consolidated statements of income.The Company leases certain full-service branch offices, land, and equipment. Leases with an initial term of twelve months or less are not recorded on the balance sheet. Most leases include one or more options to renew and the exercise of the lease renewal options are at the Company’s sole discretion. The Company includes lease extension and termination options in the lease term if, after considering relevant economic factors, it is reasonably certain the Company will exercise the option.

The following table represents the consolidated statements of financial condition classification of the Company’s ROU assets and lease liabilities. The Company elected not to include short-term leases (i.e., leases with initial terms of twelve months or less), or equipment leases (deemed immaterial) on the consolidated statements of financial condition.


Lease Right-of-Use Assets	Classification on Consolidated Statement of Condition	September 30, 2024		December 31, 2023
Operating lease right-of-use assets	Other Assets	$	2,821	$	3,243

Lease Liabilities	Classification on Consolidated Statement of Condition	September 30, 2024		December 31, 2023
Operating lease liabilities	Accrued interest payable and other liabilities	$	2,970	$	3,407


	September 30, 2024			December 31, 2023
Weighted-average remaining lease term for operating leases	8.44 Years			8.50 Years
Weighted-average discount rate for operating leases		6.00	%		6.00	%

Future minimum payments for operating leases with initial or remaining terms of one year or more as of September 30, 2024 are as follows:


	Operating Leases
October 1, 2024 - September 30, 2025	$	703
October 1, 2025 - September 30, 2026		531
October 1, 2026 - September 30, 2027		421
October 1, 2027 - September 30, 2028		385
October 1, 2028 - September 30, 2029		252
Afterward		1,590
Total future minimum lease payments		3,882
Amounts representing interest		(912	)
Present value of net future minimum lease payments	$	2,970

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read together with our condensed consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q, as well as our audited consolidated financial statements and related notes thereto for the year ended December 31, 2023, which are contained in the Annual Report on Form 10-K for the year ended December 31, 2023. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions that could cause actual results to differ materially from our expectations. Factors that could cause such differences are discussed in our 2023 Annual Report on Form 10-K under “Part I, Item 1A - Risk Factors.” We assume no obligation to update any of these forward-looking statements.

The following discussion pertains to our historical results on a consolidated basis. However, because we conduct all of our material business operations through our subsidiaries, the discussion and analysis relates to activities primarily conducted at the subsidiary level.

All dollar amounts in the tables in this section are in thousands of dollars, except per share data, yields, percentages and rates or when specifically identified. As used in this Item, the words “we,” “us,” “our,” the “Company,” “RFC,” “River” and similar terms refer to River Financial Corporation and its consolidated affiliate, unless the context indicates otherwise.

Our Business

We are a bank holding company headquartered in Prattville, Alabama. We engage in the business of banking through our wholly-owned banking subsidiary, River Bank & Trust, which we may refer to as the “Bank” or “River Bank.” Through the Bank, we provide a broad array of financial services to businesses, business owners, professionals, and consumers. As of September 30, 2024, we operated twenty-three full-service banking offices in Alabama in the cities of Montgomery, Prattville, Millbrook, Wetumpka, Auburn, Opelika, Gadsden, Alexander City, Daphne, Clanton, Dothan, Enterprise, Mobile, Decatur, Huntsville, Saraland, and Birmingham, Alabama. We also have one loan production office in Florence, Alabama.

Segments

While our chief decision makers monitor the revenue streams of the various banking products and services, 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. Because the overall banking operations comprise substantially all of the consolidated operations, no separate segment disclosures are presented in the accompanying consolidated financial statements.

Overview of Third Quarter 2024 Results

Net income was $8.7 million in the quarter ended September 30, 2024, compared with $5.9 million in the quarter ended September 30, 2023. Several significant measures from the 2024 third quarter include:

•

Net interest margin (taxable equivalent) of 2.90%, compared with 2.66% for the third quarter of 2023.

•

Net interest income increase of $4.0 million for the quarter ended September 30, 2024, representing a 19.62% rate of increase over the quarter ended September 30, 2023.

•

Annualized return on average earning assets for the quarter ended September 30, 2024 of 1.05% compared with 0.78% for the quarter ended September 30, 2023.

•

Annualized return on average equity for the quarter ended September 30, 2024 of 15.67% compared with 15.10% for the quarter ended September 30, 2023.

•

Loan increase of $73.3 million during the quarter ended September 30, 2024, representing a 12.47% annualized growth rate.

•

Securities increase of $34.9 million during the quarter ended September 30, 2024, representing a 19.36% annualized increase for the quarter.

•

Deposit increase of $96.1 million during the quarter ended September 30, 2024, representing a 13.07% annualized growth rate.

•

Stockholders’ equity increase of $25.1 million during the quarter ended September 30, 2024, representing a 48.20% annualized increase.

•

Book value per share of $31.14 at September 30, 2024, compared with $26.49 per share at December 31, 2023.

•

Tangible book value per share of $27.37 at September 30, 2024, compared with $22.67 at December 31, 2023.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared based on the application of certain accounting policies, the most significant of which are described in the notes to the financial statements for the year ended December 31, 2023, which are contained in our Annual Report filed on Form 10-K. Certain of these policies require numerous estimates and strategic or economic assumptions that may prove inaccurate or subject to variation and may significantly affect our reported results and financial position for the current period or future periods. The use of estimates, assumptions, and judgment is necessary when financial assets and liabilities are required to be recorded at or adjusted to reflect fair value. Assets carried at fair value inherently result in more financial statement volatility. Fair values and information used to record valuation adjustments for certain assets and liabilities are based on quoted market prices or are provided by other independent third-party sources, when available. When such information is not available, management estimates valuation adjustments. Changes in underlying factors, assumptions or estimates in any of these areas could have a material impact on our future financial condition and results of operations.

The following briefly describes the more complex policies involving a significant amount of judgments about valuation and the application of complex accounting standards and interpretations.

Allowance for Credit Losses

The allowance for credit losses has been determined in accordance with GAAP. The Company is responsible for the timely and periodic determination of the amount of the allowance for credit losses. Management believes that the allowance for credit losses is adequate to cover expected credit losses over the life of the loan portfolio. Although management evaluates available information to determine the adequacy of the allowance for credit losses, the level of allowance is an estimate which is subject to significant judgment and short-term change. Because of uncertainties associated with local and national economic forecasts, the operating and regulatory environment, collateral values and future cash flows from the loan portfolio, it is possible that a material change could occur in the allowance for credit losses in the near term. The evaluation of the adequacy of loan collateral is often based upon estimates and appraisals. Because of changing economic conditions, the valuations determined from such estimates and appraisals may also change.

Accordingly, the Company may ultimately incur losses that vary from management’s current estimates. Adjustments to the allowance for credit losses will be reported in the period in which such adjustments become known and can be reasonably estimated. All loan losses are charged to the allowance for credit losses when the loss actually occurs or when the collectability of the principal is unlikely. Recoveries are credited to the allowance at the time of recovery. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Company’s allowance for credit losses. As a result of such examinations, the Company may need to recognize additions to the allowance for credit losses based on the regulators’ judgments.

In estimating the allowance for credit losses, the Company relies on models and economic forecasts developed by external parties as the primary driver of the allowance for credit losses. These models and forecasts are based on nationwide sets of data. Economic forecasts can change significantly over an economic cycle and have a significant level of uncertainty associated with them. The performance of the models is dependent on the variables used in the models being reasonable proxies for the loan portfolio’s performance. However, these variables may not capture all sources of risk within the portfolio. As a result, the Company reviews the results and makes qualitative adjustments to the models to capture limitations of the models as necessary. Such qualitative factors may include adjustments to better capture the imprecision associated with the economic forecasts, and the ability of the models to capture emerging risks within the portfolio that may not be represented in the data. These judgments are evaluated through the Company’s review process and revised on a quarterly basis to account for changes in facts and circumstances. It is difficult to estimate how potential changes in any one of the quantitative inputs or qualitative factors might affect the overall allowance for credit losses, and the Company’s current assessments may not reflect the potential future impact of changes to those inputs or factors.

Investment Securities Impairment

Comparison of the Results of Operations for the three and nine months ended September 30, 2024 and 2023

The following is a narrative discussion and analysis of significant changes in our results of operations for the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023.

Net Income

During the three months ended September 30, 2024, our net income was $8.7 million, compared to $5.9 million for the three months ended September 30, 2023, an increase of $2.8 million, or 47.11%. The primary reason for the increase in net income for the third quarter of 2024 as compared to the third quarter of 2023 was an increase in net interest income coupled with an increase in noninterest income. During the three months ended September 30, 2024, net interest income was $24.0 million compared to $20.0 million for the three months ended September 30, 2023, an increase of $4.0 million, or 19.62%. This increase is a result of higher yields on new and repricing loans. Total noninterest income for the third quarter of 2024 was $4.5 million compared to $3.9 million for the quarter ended September 30, 2023. This increase in noninterest income was primarily the result of loan related fee income. Total noninterest expense in the third quarter of 2024 increased $643.0 thousand, or 4.27%, from the third quarter of 2023. The most significant noninterest expense continues to be salaries and employee benefits which increased approximately $498.0 thousand.

During the nine months ended September 30, 2024, our net income was $22.1 million, compared to $18.6 million for the nine months ended September 30, 2023, an increase of $3.5 million, or 18.70%. The primary reason for the increase in net income for the third quarter of 2024 as compared to the third quarter of 2023 was an increase in net interest income offset by a decrease in noninterest income. During the nine months ended September 30, 2024, net interest income was $68.1 million compared to $58.1 million for the nine months ended September 30, 2023, an increase of $10.0 million, or 17.24%. This increase is a result of higher yields on new and repricing loans. Total noninterest income for the first nine months of 2024 was $11.3 million compared to $15.2 million in the first nine months of 2023. This decrease in noninterest income was primarily the result of a $3.7 million Community Development Financial Institution award recognized in 2023. Noninterest income for the first nine months of 2024 was also reduced by a $1.4 million net loss on sales of investment securities. Total noninterest expense in the third quarter of 2024 increased $1.1 million, or 2.44%, from the third quarter of 2023. The most significant increase was an increase of $1.1 million in salaries and employee benefits.

Net Interest Income and Net Interest Margin Analysis

The largest component of our net income is net interest income – the difference between the income earned on interest earning assets and the interest paid on deposits and borrowed funds used to support assets. Net interest income divided by average interest earning assets represents our net interest margin. The major factors that affect net interest income and net interest margin are changes in volumes, the yield on interest earning assets and the cost of interest bearing liabilities. Our net interest margin can also be affected by economic conditions, the competitive environment, loan demand, and deposit flow. Management’s ability to respond to changes in these factors by using effective asset-liability management techniques is critical to maintaining the stability of the net interest margin and the primary source of earnings. This is discussed in greater detail under the heading “Interest Sensitivity and Market Risk”.

Comparison of net interest income for the three months ended September 30, 2024 and 2023

The following table shows, for the three months ended September 30, 2024 and 2023, the average balances of each principal category of our earning assets and interest bearing liabilities and the average taxable equivalent yields on assets and average costs of liabilities. These yields and costs are calculated by dividing the income or expense by the average daily balance of the associated assets or liabilities (amounts in thousands).


	Three Months Ended September 30, 2024								Three Months Ended September 30, 2023
			Interest								Interest
	Average		Income/			Average			Average		Income/			Average
	Balance		Expense			Yield/Rate			Balance		Expense			Yield/Rate
Interest earning assets
Loans	$	2,389,722	$	38,223			6.35	%	$	2,084,083	$	29,884			5.69	%
Mortgage loans held for sale		6,291		86			5.40	%		10,124		102			4.01	%
Investment securities:
Taxable securities		744,814		3,672			1.95	%		784,550		3,498			1.77	%
Tax-exempt securities		64,806		473			2.90	%		67,744		480			2.81	%
Interest bearing balances in other banks		85,820		1,177			5.44	%		14,180		172			4.82	%
Federal funds sold		13,102		180			5.44	%		57,358		793			5.48	%
Total interest earning assets	$	3,304,555	$	43,811			5.26	%	$	3,018,039	$	34,929			4.59	%

Interest bearing liabilities
Interest bearing transaction accounts	$	700,018	$	2,983			1.69	%	$	670,072	$	2,519			1.49	%
Savings and money market accounts		982,656		7,250			2.93	%		869,058		5,123			2.34	%
Time deposits		666,044		7,350			4.38	%		517,990		4,596			3.52	%
Short-term borrowings		13,852		118			3.38	%		20,378		173			3.60	%
Federal Home Loan Bank advances		150,000		1,502			3.97	%		155,000		1,658			4.21	%
Subordinated debentures		40,000		418			4.14	%		40,000		418			4.14	%
Line of credit		-		-			0.00	%		8,609		185			8.52	%
Total interest bearing liabilities	$	2,552,570	$	19,621			3.05	%	$	2,281,107	$	14,672			2.55	%
Noninterest-bearing funding of earning assets		751,985		-			0.00	%		736,932		-			0.00	%
Total cost of funding earning assets	$	3,304,555	$	19,621			2.36	%	$	3,018,039	$	14,672			1.93	%
Net interest rate spread							2.21	%							2.04	%
Net interest income/margin (taxable equivalent)			$	24,190			2.90	%			$	20,257			2.66	%
Tax equivalent adjustment				(214	)							(214	)
Net interest income/margin			$	23,976			2.88	%			$	20,043			2.63	%

The following table reflects, for the three months ended September 30, 2024 and 2023, the changes in our net interest income due to variances in the volume of interest earning assets and interest bearing liabilities and variances in the associated rates earned or paid on these assets and liabilities (amounts in thousands).


	Three Months Ended September 30, 2024 vs.
	Three Months Ended September 30, 2023
				Variance
				due to
	Volume			Yield/Rate			Total
Interest earning assets
Loans	$	4,364		$	3,975		$	8,339
Mortgage loans held for sale		(38	)		22			(16	)
Investment securities:
Taxable securities		(164	)		338			174
Tax-exempt securities		(22	)		15			(7	)
Interest bearing balances in other banks		871			134			1,005
Federal funds sold		(612	)		(1	)		(613	)
Total interest earning assets	$	4,399		$	4,483		$	8,882


Interest bearing liabilities
Interest bearing transaction accounts	$	112		$	352		$	464
Savings and money market accounts		670			1,457			2,127
Time deposits		1,316			1,438			2,754
Short-term borrowings		(47	)		(8	)		(55	)
Federal Home Loan Bank advances		(64	)		(92	)		(156	)
Subordinated debentures		-			-			-
Line of credit		(185	)		-			(185	)
Total interest bearing liabilities	$	1,802		$	3,147		$	4,949

Net interest income
Net interest income (taxable equivalent)	$	2,597		$	1,336		$	3,933
Taxable equivalent adjustment		12			(12	)		-
Net interest income	$	2,609		$	1,324		$	3,933

Total interest income for the three months ended September 30, 2024 was $43.6 million and total interest expense was $19.6 million, resulting in net interest income of $24.0 million for the period. For the same period of 2023, total interest income was $34.7 million and total interest expense was $14.7 million, resulting in net interest income of $20.0 million for the period. This represents a 19.62% increase in net interest income when comparing the same period from 2024 and 2023. When comparing the variances related to interest income for the three months ended September 30, 2024 and 2023, the increase was primarily attributed to increases in average volumes in loans and loan yields. The volume related increase in interest income for the three months ended September 30, 2024 was accompanied by an increase in the yield on loans and investment securities as well as interest bearing balances in other banks. When comparing variances related to interest expense for the three months ended September 30, 2024 and 2023, the increase primarily resulted from an increase in deposit and borrowing rates in 2024 along with an increase in deposits.

Comparison of net interest income for the nine months ended September 30, 2024 and 2023

The following table shows, for the nine months ended September 30, 2024 and 2023, the average balances of each principal category of our earning assets and interest bearing liabilities and the average taxable equivalent yields on assets and average costs of liabilities. These yields and costs are calculated by dividing the income or expense by the average daily balance of the associated assets or liabilities (amounts in thousands).


	Nine Months Ended September 30, 2024								Nine Months Ended September 30, 2023
			Interest								Interest
	Average		Income/			Average			Average		Income/			Average
	Balance		Expense			Yield/Rate			Balance		Expense			Yield/Rate
Interest earning assets
Loans	$	2,315,031	$	107,772			6.20	%	$	1,969,975	$	80,417			5.46	%
Mortgage loans held for sale		5,617		227			5.38	%		8,775		241			3.67	%
Investment securities:
Taxable securities		741,233		10,529			1.89	%		797,421		10,767			1.81	%
Tax-exempt securities		64,982		1,399			2.87	%		73,044		1,595			2.92	%
Interest bearing balances in other banks		97,142		3,987			5.47	%		29,886		1,028			4.60	%
Federal funds sold		23,274		956			5.47	%		35,044		1,390			5.30	%
Total interest earning assets	$	3,247,279	$	124,870			5.05	%	$	2,914,145	$	95,438			4.39	%

Interest bearing liabilities
Interest bearing transaction accounts	$	688,013	$	8,641			1.67	%	$	643,614	$	5,753			1.20	%
Savings and money market accounts		947,622		20,215			2.84	%		846,563		12,337			1.95	%
Time deposits		615,458		19,692			4.26	%		495,356		11,810			3.19	%
Securities sold under repurchase agreements		14,651		379			3.45	%		17,393		403			3.10	%
Federal Home Loan Bank advances		189,033		5,908			4.16	%		129,590		4,576			4.72	%
Subordinated debentures		40,000		1,253			4.17	%		40,000		1,251			4.18	%
Line of credit		-		-			0.00	%		8,377		520			8.30	%
Total interest bearing liabilities	$	2,494,777	$	56,088			2.99	%	$	2,180,893	$	36,650			2.25	%
Noninterest-bearing funding of earning assets		752,502		-			0.00	%		733,252		-			0.00	%
Total cost of funding earning assets	$	3,247,279	$	56,088			2.30	%	$	2,914,145	$	36,650			1.68	%
Net interest rate spread							2.06	%							2.14	%
Net interest income/margin (taxable equivalent)			$	68,782			2.82	%			$	58,788			2.70	%
Tax equivalent adjustment				(649	)							(676	)
Net interest income/margin			$	68,133			2.79	%			$	58,112			2.67	%

The following table reflects, for the nine months ended September 30, 2024 and 2023, the changes in our net interest income due to variances in the volume of interest earning assets and interest bearing liabilities and variances in the associated rates earned or paid on these assets and liabilities (amounts in thousands).


	Nine Months Ended September 30, 2024 vs.
	Nine Months Ended September 30, 2023
				Variance
				due to
	Volume			Yield/Rate			Total
Interest earning assets
Loans	$	14,316		$	13,039		$	27,355
Mortgage loans held for sale		(87	)		73			(14	)
Investment securities:
Taxable securities		(689	)		451			(238	)
Tax-exempt securities		(171	)		(25	)		(196	)
Interest bearing balances in other banks		2,316			643			2,959
Federal funds sold		(464	)		30			(434	)
Total interest earning assets	$	15,221		$	14,211		$	29,432


Interest bearing liabilities
Interest bearing transaction accounts	$	406		$	2,482		$	2,888
Savings and money market accounts		1,501			6,377			7,878
Time deposits		2,915			4,967			7,882
Short-term debt		(45	)		21			(24	)
Federal Home Loan Bank advances		2,109			(777	)		1,332
Subordinated debentures		5			(3	)		2
Line of credit		(529	)		9			(520	)
Total interest bearing liabilities	$	6,362		$	13,076		$	19,438

Net interest income
Net interest income (taxable equivalent)	$	8,859		$	1,135		$	9,994
Taxable equivalent adjustment		60			(33	)		27
Net interest income	$	8,919		$	1,102		$	10,021

Total interest income for the nine months ended September 30, 2024 was $124.2 million and total interest expense was $56.1 million, resulting in net interest income of $68.1 million for the period. For the same period of 2023, total interest income was $94.8 million and total interest expense was $36.7 million, resulting in net interest income of $58.1 million for the period. This represents a 17.24% increase in net interest income when comparing the same period from 2024 and 2023. When comparing the variances related to interest income for the nine months ended September 30, 2024 and 2023, the increase was primarily attributed to increases in average volumes in loans and loan yields. The volume related increase in interest income for the nine months ended September 30, 2024 was accompanied by an increase in the yield on loans and taxable investment securities as well as interest bearing balances in other banks. When comparing variances related to interest expense for the nine months ended September 30, 2024 and 2023, the increase primarily resulted from an increase in deposit and borrowing rates in 2024 along with an increase in deposits.

Provision for Credit Losses

On January 1, 2023, we adopted ASC 326, which introduces the current expected credit losses (CECL) methodology and requires us to estimate all expected credit losses over the remaining life of our loans. Accordingly, the provision for credit losses represents a charge to earnings necessary to establish an allowance for credit losses that, in management's evaluation, is adequate to provide coverage for all expected credit losses. As a result of evaluating the allowance for credit losses at September 30, 2024, management recorded a provision for credit losses of $1.33 million in the third quarter of 2024 compared to $1.31 million in the third quarter of 2023. For the nine months ended September 30, 2024 and 2023, management recorded a provision for credit losses of $4.0 million and $3.9 million, respectively. The minimally increased provision for credit losses allocated was primarily due to continued strength in the performance of our loan portfolio despite some indications of a slowdown in the economy. In management’s evaluation, our allowance for credit losses reflects an amount we believe appropriate, based on our allowance assessment methodology, to adequately cover all expected future losses as of the date the allowance is determined.

Noninterest Income

In addition to net interest income, we generate various types of noninterest income from our operations. Our banking operations generate revenue from service charges and fees mainly on deposit accounts. Our mortgage division generates revenue from originating and selling mortgage loans. Our investment brokerage division generates revenue through a revenue-sharing relationship with a registered broker-dealer. We also own life insurance policies on several key employees and record income on the increase in the cash surrender value of these policies.

The following table sets forth the principal components of noninterest income for the periods indicated (amounts in thousands).


	For the Three Months				For the Nine Months
	Ended September 30,				Ended September 30,
	2024		2023		2024			2023
Service charges and fees	$	2,115	$	1,946	$	6,172		$	5,569
Investment brokerage revenue		209		134		573			435
Mortgage operations		1,221		1,234		3,301			2,814
Bank owned life insurance income		395		328		1,091			957
Net gain (loss) on sales of investment securities		73		-		(1,359	)		5
Community Development Financial Institution income		-		-		-			3,718
Other noninterest income		527		288		1,571			1,675
Total noninterest income	$	4,540	$	3,930	$	11,349		$	15,173

Noninterest income for the three months ended September 30, 2024 was $4.5 million compared to $3.9 million for the same period in 2023. The most significant increase in noninterest income was due to a $123 thousand increase in loan related fee income.

Noninterest income for the nine months ended September 30, 2024 was $11.3 million compared to $15.2 million for the same period in 2023. The most significant decreases in noninterest income was due to a $3.7 million Community Development Financial Institution award for the same period in 2023 as well as an approximate $1.4 million loss on sales of investment securities in 2024 while the most significant increase was a $487 thousand increase in mortgage operations revenue.

Noninterest Expense

Noninterest expenses consist primarily of salaries and employee benefits, building occupancy and equipment expenses, advertising and promotion expenses, data processing expenses, legal and professional services and miscellaneous other operating expenses.

The following table sets forth the principal components of noninterest expense for the periods indicated (amounts in thousands).


	For the Three Months				For the Nine Months
	Ended September 30,				Ended September 30,
	2024		2023		2024		2023
Salaries and employee benefits	$	9,533	$	9,035	$	28,205	$	27,064
Occupancy expenses		1,017		934		2,963		2,764
Equipment rentals, depreciation, and maintenance		572		530		1,617		1,507
Telephone and communications		106		129		372		409
Advertising and business development		269		390		712		1,011
Data processing		1,093		779		3,121		2,729
Foreclosed assets, net		156		38		257		73
Federal deposit insurance and other regulatory assessments		747		698		2,176		1,992
Legal and other professional services		261		301		875		1,302
Other operating expense		1,956		2,233		6,218		6,557
Total noninterest expense	$	15,710	$	15,067	$	46,516	$	45,408

Noninterest expense for the three months ended September 30, 2024 totaled $15.7 million compared with $15.1 million for the same period of 2023. The overall increase was primarily a result of salaries and employee benefits. Salaries and employee benefits increased $498.0 thousand, or 5.51%, to $9.53 million in the third quarter of 2024 from $9.04 million in the third quarter of 2023. The number of full-time equivalent employees decreased from approximately 342 at September 30, 2023 to approximately 340 at September 30, 2024 for an decrease of approximately 0.58%.

Noninterest expense for the nine months ended September 30, 2024 totaled $46.5 million compared with $45.4 million for the same period of 2023. The overall increase was primarily a result of increases in salaries and employee benefits. Salaries and employee benefits increased $1.1 million, or 4.22%, to $28.2 million in the first nine months of 2024 from $27.1 million in the first nine months of 2023.

Provision for Income Taxes

We recognized income tax expense of $2.8 million for the three months ended September 30, 2024, compared to $1.7 million for the three months ended September 30, 2023. The effective tax rate for the three months ended September 30, 2024 was 24.6% compared to 22.6% for the same period in 2023. The effective tax rate is affected by levels of items of income that are not subject to federal and/or state taxation and by levels of items of expense that are not deductible for federal and/or state income tax purposes.

We recognized income tax expense of $6.9 million for the nine months ended September 30, 2024, compared to $5.3 million for the nine months ended September 30, 2023. The effective tax rate for the nine months ended September 30, 2024 was 23.8% compared to 22.2% for the same period in 2023. The effective tax rate is affected by levels of items of income that are not subject to federal and/or state taxation and by levels of items of expense that are not deductible for federal and/or state income tax purposes.

Comparison of Financial Condition at September 30, 2024 and December 31, 2023

Overview

Our total assets increased $261.2 million, or 8.07%, from December 31, 2023 to September 30, 2024. Loans, net of deferred fees and discounts, increased $183.7 million, or 8.20%, from December 31, 2023 to September 30, 2024. Securities available-for-sale increased by $11.5 million, or 1.85%, and securities held-to-maturity decreased by $3.5 million, or 2.76%, from December 31, 2023 to September 30, 2024, respectively. Cash and cash equivalents increased $74.6 million, or 102.77% from December 31, 2023 to September 30, 2024. Total deposits increased $308.2 million, or 11.29%, from December 31, 2023 to September 30, 2024 which funded a majority of our loan growth. Total stockholders’ equity increased $35.0 million, or 17.62% from December 31, 2023 to September 30, 2024.

Investment Securities

We use our securities portfolio primarily to enhance our overall yield on interest-earning assets and as a source of liquidity, as a tool to manage our balance sheet sensitivity and regulatory capital ratios, and as a base upon which to pledge assets for public deposits. When our liquidity position exceeds current needs and our expected loan demand, other investments are considered as a secondary earnings alternative. As investments mature, they are used to meet current cash needs, or they are reinvested to maintain our desired liquidity position. We have designated the majority of our securities as available-for-sale to provide flexibility, in case an immediate need for liquidity arises, and we believe that the composition of the portfolio offers needed flexibility in managing our liquidity position and interest rate sensitivity without adversely impacting our regulatory capital levels. In certain cases, we have designated securities as held-to-maturity to protect capital from changes in the value of the securities portfolio. Securities available-for-sale are reported at fair value with unrealized gains or losses reported as a separate component of other comprehensive income (loss), net of related deferred taxes while securities held-to-maturity are reported at amortized cost. Purchase premiums and discounts are recognized in income using the interest method over the terms of the securities.

During the nine months ended September 30, 2024, we purchased investment securities totaling $106.1 million and sold investment securities with proceeds received of $81.7 million including net realized losses of $1.4 million.

The following tables summarize the amortized cost, gross unrealized gains, gross unrealized losses, and fair value of debt securities at September 30, 2024 and December 31, 2023 (amounts in thousands).


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
September 30, 2024:
Securities available-for-sale:
Residential mortgage-backed	$	429,298	$	555	$	(42,893	)	$	386,960
U.S. treasury securities		115,636		-		(6,104	)		109,532
U.S. govt. sponsored enterprises		57,222		-		(3,133	)		54,089
State, county, and municipal		74,078		65		(7,345	)		66,798
Corporate debt obligations		16,724		32		(1,582	)		15,174
Total available-for-sale	$	692,958	$	652	$	(61,057	)	$	632,553


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
September 30, 2024:
Securities held-to-maturity:
Residential mortgage-backed	$	60,487	$	-	$	(10,185	)	$	50,302
State, county, and municipal		62,801		-		(9,817	)		52,984
Total held-to-maturity	$	123,288	$	-	$	(20,002	)	$	103,286


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
December 31, 2023:
Securities available-for-sale:
Residential mortgage-backed	$	413,179	$	102	$	(55,981	)	$	357,300
U.S. treasury securities		130,713		-		(10,661	)		120,052
U.S. govt. sponsored enterprises		68,751		-		(5,185	)		63,566
State, county, and municipal		73,514		4		(8,857	)		64,661
Corporate debt obligations		17,758		5		(2,251	)		15,512
Total available-for-sale	$	703,915	$	111	$	(82,935	)	$	621,091

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
December 31, 2023:
Securities held-to-maturity:
Residential mortgage-backed	$	63,953	$	-	$	(12,022	)	$	51,931
State, county, and municipal		62,840		-		(11,597	)		51,243
Total held-to-maturity	$	126,793	$	-	$	(23,619	)	$	103,174

Loans

Loans are the largest category of interest earning assets and typically provide higher yields than other types of interest earning assets. Associated with the higher loan yields are the inherent credit and liquidity risks which management attempts to control and counterbalance. Total loans averaged $2.39 billion during the three months ended September 30, 2024, or 72.3% of average interest earning assets, as compared to $2.08 billion, or 69.1% of average interest earning assets, for the three months ended September 30, 2023. At September 30, 2024, total loans, net of deferred loan fees and discounts, were $2.42 billion, compared to $2.24 billion at December 31, 2023, an increase of $183.7 million, or 8.20%.

The organic, or non-acquired, growth in our loan portfolio is attributable both to our ability to attract new customers and to our ability to benefit from the overall growth in our markets. We seek to build relationships with new customers, maintain and even improve our relationships with existing customers, and encourage our bankers to be involved in their communities. We expect our bankers to recognize business development efforts and to maintain healthy relationships with clients, and our philosophy is to be responsive to customer needs by providing decisions in a timely manner. In addition to our business development efforts, many of the markets that we serve have shown signs of economic recovery over the last few years.

The following table provides a summary of the loan portfolio as of September 30, 2024, and December 31, 2023.


	September 30, 2024						December 31, 2023
	Amount			% of Total			Amount			% of Total
Residential real estate:
Closed-end 1-4 family - first lien	$	841,742			35.2	%	$	771,144			34.9	%
Closed-end 1-4 family - junior lien		14,254			0.6	%		11,814			0.5	%
Multi-family		29,661			1.2	%		26,739			1.2	%
Total residential real estate		885,657			37.0	%		809,697			36.6	%
Commercial real estate:
Nonfarm nonresidential		630,947			26.4	%		557,202			25.2	%
Farmland		71,671			3.0	%		58,532			2.6	%
Total commercial real estate		702,618			29.4	%		615,734			27.8	%
Construction and land development:
Residential		103,974			4.3	%		100,974			4.6	%
Other		163,011			6.8	%		195,724			8.9	%
Total construction and land development		266,985			11.1	%		296,698			13.5	%
Home equity lines of credit		117,722			4.9	%		95,544			4.3	%
Commercial loans:
Other commercial loans		288,455			12.2	%		273,639			12.4	%
Agricultural		79,434			3.3	%		66,510			3.0	%
State, county, and municipal loans		34,666			1.4	%		34,819			1.6	%
Total commercial loans		402,555			16.9	%		374,968			17.0	%
Consumer loans		56,602			2.4	%		55,587			2.5	%
Total gross loans		2,432,139			101.7	%		2,248,228			101.7	%
Allowance for credit losses		(31,077	)		-1.3	%		(28,991	)		-1.3	%
Net discounts		(16	)		0.0	%		(129	)		0.0	%
Net deferred loan fees		(8,440	)		-0.4	%		(8,093	)		-0.4	%
Net loans	$	2,392,606			100.0	%	$	2,211,015			100.0	%

In this context, a “real estate loan” is defined as any loan, secured by real estate, regardless of the purpose of the loan. It is common practice for financial institutions in our market areas, and for our Bank, to obtain a security interest or lien in real estate whenever possible, in addition to any other available collateral. This collateral is taken to reinforce the likelihood of the ultimate repayment of the loan and tends to increase the magnitude of the real estate loan portfolio component. In general, we prefer real estate collateral to many other potential collateral sources, such as accounts receivable, inventory and equipment.

Real estate loans are the largest component of our loan portfolio and include residential real estate loans, commercial real estate loans, and construction and land development loans. At September 30, 2024, this category totaled $1.86 billion, or 76.28% of total gross loans, compared to $1.72 billion, or 76.60%, at December 31, 2023. Real estate loans increased $133.1 million, or 7.73%, during the period December 31, 2023 to September 30, 2024. Commercial loans increased $27.6 million, or 7.36% during the same period. Our management team and lending officers have a great deal of experience and expertise in real estate lending and commercial lending.

The federal regulatory agencies issued two “guidance” documents that have a significant impact on real estate related lending and, thus, on the operations of the Bank. One part of the guidance could require lenders to restrict lending secured primarily by certain categories of commercial real estate to a level of 300% of their capital or to raise additional capital. This factor, combined with the current economic environment, could affect the Bank’s lending strategy away from, or to limit its expansion of, commercial real estate lending, which has been a material part of River Financial Corporation’s lending strategy. This could also have a negative impact on our lending and profitability. Management actively monitors the composition of the Bank’s loan portfolio, focusing on concentrations of credit, and the results of that monitoring activity are periodically reported to the Board of Directors.

The other guidance relates to the structuring of certain types of mortgages that allow negative amortization of consumer mortgage loans. Although the Bank does not engage at present in lending using these types of instruments, the guidance could have the effect of making the Bank less competitive in consumer mortgage lending if the local market is driving the demand for such an offering.

The repayment of loans is a source of additional liquidity for us. The following table sets forth our variable rate and fixed rate loans maturing within specific intervals at September 30, 2024.

LOAN MATURITY AND SENSITIVITY TO CHANGES IN INTEREST RATES


			Over one		Over five
	One year		year through		years through		Over fifteen
Variable Rate Loans:	or less		five years		fifteen years		years		Total
Residential real estate:
Closed-end 1-4 family - first lien	$	5,988	$	3,501	$	5,998	$	475,598	$	491,085
Closed-end 1-4 family - junior lien		964		359		-		258		1,581
Multi-family		-		10,697		-		-		10,697
Total residential real estate		6,952		14,557		5,998		475,856		503,363
Commercial real estate:
Nonfarm nonresidential		12,293		15,395		2,334		49		30,071
Farmland		2,564		1,692		-		248		4,504
Total commercial real estate		14,857		17,087		2,334		297		34,575
Construction and land development:
Residential		20,534		3,893		259		35,929		60,615
Other		16,173		17,444		-		10,258		43,875
Total construction and land development		36,707		21,337		259		46,187		104,490
Home equity lines of credit		8,476		4,091		83,683		-		96,250
Commercial loans:
Other commercial loans		77,140		24,938		10,975		-		113,053
Agricultural		53,604		1,443		-		-		55,047
State, county, and municipal loans		90		-		-		-		90
Total commercial loans		130,834		26,381		10,975		-		168,190
Consumer loans		2,466		1,026		49		-		3,541
Total gross variable rate loans	$	200,292	$	84,479	$	103,298	$	522,340	$	910,409


			Over one		Over five
	One year		year through		years through		Over fifteen
Fixed Rate Loans:	or less		five years		fifteen years		years		Total
Residential real estate:
Closed-end 1-4 family - first lien	$	31,068	$	155,607	$	60,288	$	103,694	$	350,657
Closed-end 1-4 family - junior lien		985		9,836		1,551		301		12,673
Multi-family		239		14,718		3,058		949		18,964
Total residential real estate		32,292		180,161		64,897		104,944		382,294
Commercial real estate:
Nonfarm nonresidential		45,797		298,999		249,860		6,220		600,876
Farmland		10,866		38,211		18,024		66		67,167
Total commercial real estate		56,663		337,210		267,884		6,286		668,043
Construction and land development:
Residential		37,029		5,928		402		-		43,359
Other		40,081		62,938		16,042		75		119,136
Total construction and land development		77,110		68,866		16,444		75		162,495
Home equity lines of credit		3,561		2,055		15,856		-		21,472
Commercial loans:
Other commercial loans		22,226		113,941		39,235		-		175,402
Agricultural		6,822		17,244		321		-		24,387
State, county, and municipal loans		647		9,217		24,712		-		34,576
Total commercial loans		29,695		140,402		64,268		-		234,365
Consumer loans		7,064		29,015		16,851		131		53,061
Total fixed rate gross loans	$	206,385	$	757,709	$	446,200	$	111,436	$	1,521,730

			Over one		Over five
	One year		year through		years through		Over fifteen
Total Loans:	or less		five years		fifteen years		years		Total
Residential real estate:
Closed-end 1-4 family - first lien	$	37,056	$	159,108	$	66,286	$	579,292	$	841,742
Closed-end 1-4 family - junior lien		1,949		10,195		1,551		559		14,254
Multi-family		239		25,415		3,058		949		29,661
Total residential real estate		39,244		194,718		70,895		580,800		885,657
Commercial real estate:
Nonfarm nonresidential		58,090		314,394		252,194		6,269		630,947
Farmland		13,430		39,903		18,024		314		71,671
Total commercial real estate		71,520		354,297		270,218		6,583		702,618
Construction and land development:
Residential		57,563		9,821		661		35,929		103,974
Other		56,254		80,382		16,042		10,333		163,011
Total construction and land development		113,817		90,203		16,703		46,262		266,985
Home equity lines of credit		12,037		6,146		99,539		-		117,722
Commercial loans:
Other commercial loans		99,366		138,879		50,210		-		288,455
Agricultural		60,426		18,687		321		-		79,434
State, county, and municipal loans		737		9,217		24,712		-		34,666
Total commercial loans		160,529		166,783		75,243		-		402,555
Consumer loans		9,530		30,041		16,900		131		56,602
Total gross loans	$	406,677	$	842,188	$	549,498	$	633,776	$	2,432,139

The information presented in the table above is based upon the contractual maturities of the individual loans, which may be subject to renewal at their contractual maturity. Renewal of such loans is subject to review and credit approval, as well as modification of terms at their maturity. Consequently, we believe that this treatment presents fairly the maturity structure of the loan portfolio.

Allowance for Credit Losses, Provision for Credit Losses and Asset Quality

Allowance for credit losses and provision for credit losses

The allowance for credit losses represents management’s estimate of expected inherent credit losses in the loan portfolio. Management determines the allowance based on an ongoing evaluation of risk as it correlates to potential losses within the portfolio. Increases to the allowance for credit losses are made by charges to the provision for credit losses. Loans deemed to be uncollectible are charged against the allowance. Recoveries of previously charged-off amounts are credited to the allowance for credit losses.

Management believes the data it uses in determining the allowance for credit losses is sufficient to estimate potential losses in the loan portfolio; however, actual results could differ from management’s estimate.

The following table presents a summary of changes in the allowance for credit losses for the periods indicated (amounts in thousands).


	As of and for the						As of and for the
	Three Months Ended:						Nine Months Ended:
	September 30,			September 30,			September 30,			September 30,
	2024			2023			2024			2023
Allowance for credit losses at beginning of period	$	30,916		$	26,809		$	28,991		$	24,310
Impact of adopting ASC 326		-			80		$	-		$	80
Charge-offs:
Mortgage loans on real estate:
Residential real estate		35			-			35			-
Commercial real estate		250			-			498			-
Construction and land development		10			-			29			196
Total mortgage loans on real estate		295			-			562			196
Home equity lines of credit		-			-			50			-
Commercial		867			348			1,213			510
Consumer		25			58			126			98
Total		1,187			406			1,951			804

Recoveries:
Mortgage loans on real estate:
Residential real estate		2			-			2			-
Commercial real estate		3			3			8			81
Construction and land development		-			-			-			-
Total mortgage loans on real estate		5			3			10			81
Home equity lines of credit		-			-			-			-
Commercial		14			19			53			205
Consumer		3			16			13			27
Total		22			38			76			313

Net charge-offs (recoveries)		1,165			368			1,875			491
Provision for credit losses		1,326			1,311			3,961			3,933
Allowance for credit losses at end of period	$	31,077		$	27,832		$	31,077		$	27,832

Total loans outstanding, net of deferred loan fees		2,423,683			2,122,443			2,423,683			2,122,443
Average loans outstanding, net of deferred loan fees		2,389,722			2,084,083			2,315,031			1,969,975
Allowance for credit losses to period end loans		1.28	%		1.31	%		1.28	%		1.31	%
Net charge-offs to average loans (annualized)		0.20	%		0.07	%		0.11	%		0.03	%

Allocation of the Allowance for Credit Losses

While no portion of the allowance for credits losses is in any way restricted to any individual loan or group of loans and the entire allowance is available to absorb losses from any and all loans, the following table represents management’s allocation of the allowance for credit losses to specific loan categories as of the dates indicated (amounts in thousands).


	September 30, 2024					December 31, 2023
			Percent of					Percent of
	Amount		Total			Amount		Total
Mortgage loans on real estate:
Residential real estate	$	6,736		21.7	%	$	7,233		25.0	%
Commercial real estate		10,635		34.2	%		10,530		36.3	%
Construction and land development		3,503		11.3	%		4,646		16.0	%
Total mortgage loans on real estate		20,874		67.2	%		22,409		77.3	%
Home equity lines of credit		1,716		5.5	%		1,078		3.7	%
Commercial		7,984		25.7	%		4,906		16.9	%
Consumer		503		1.6	%		598		2.1	%
Total	$	31,077		100.0	%	$	28,991		100.0	%

Nonperforming Assets

The following table presents our nonperforming assets as of the dates indicated (amounts in thousands):


	September 30,						December 31,
	2024			2023			2023
Nonaccrual loans	$	11,438		$	4,770		$	5,579
Accruing loans past due 90 days or more		24			-			288
Total nonperforming loans		11,462			4,770			5,867
Foreclosed assets		44			516			92
Total nonperforming assets	$	11,506		$	5,286		$	5,959

Allowance for credit losses to period end loans		1.28	%		1.31	%		1.29	%
Allowance for credit losses to period end nonperforming loans		271.13	%		583.48	%		494.14	%
Net charge-offs (recoveries) to average loans (annualized)		0.11	%		0.03	%		0.03	%
Nonperforming assets to period end loans and foreclosed property		0.47	%		0.25	%		0.27	%
Nonperforming loans to period end loans		0.47	%		0.22	%		0.26	%
Nonperforming assets to total assets		0.33	%		0.17	%		0.18	%
Period end loans		2,423,683			2,122,443			2,240,006
Period end total assets		3,496,474			3,179,036			3,235,250
Allowance for credit losses		31,077			27,832			28,991
Average loans for the period		2,315,031			1,969,975			2,043,466
Net charge-offs (recoveries) for the period		1,875			491			643
Period end loans plus foreclosed property		2,423,727			2,122,959			2,240,098

Accrual of interest is discontinued on a loan when management believes, after considering economic and business conditions and collection efforts, that the borrower’s financial condition is such that the collection of interest is doubtful. In addition to consideration of these factors, loans that are past due 90 days or more are generally placed on nonaccrual status. When a loan is placed on nonaccrual status, all accrued interest on the loan is reversed and deducted from earnings as a reduction of reported interest income. No additional interest is accrued on the loan balance until collection of both principal and interest becomes reasonably certain. Payments received while a loan is on nonaccrual status will generally be applied to the outstanding principal balance. When a problem loan is finally resolved, there may ultimately be an actual write-down or charge-off of the principal balance of the loan that would necessitate additional charges to the allowance for credit losses. The nonperforming loans classification is made up of all loans 90 days or most past due and loans on nonaccrual status.

Deposits

Deposits, which include noninterest bearing demand deposits, interest bearing demand deposits, money market accounts, savings accounts, and time deposits, are the principal source of funds for the Bank. We offer a variety of products designed to attract and retain customers, with primary focus on building and expanding client relationships. Management continues to focus on establishing a comprehensive relationship with consumer and business borrowers, seeking deposits as well as lending relationships.

The following table details the composition of our deposit portfolio as of September 30, 2024, and December 31, 2023.


	September 30, 2024					December 31, 2023
			Percent of					Percent of
	Amount		Total			Amount		Total
Demand deposits, non-interest bearing	$	638,122		21.0	%	$	628,415		23.0	%
Demand deposits, interest bearing		714,146		23.5	%		693,421		25.4	%
Money market accounts		877,491		28.9	%		761,164		27.9	%
Savings deposits		112,766		3.7	%		112,563		4.1	%
Time certificates of $250 thousand or more		383,352		12.6	%		272,008		10.0	%
Other time certificates		312,945		10.3	%		263,084		9.6	%
Totals	$	3,038,822		100.0	%	$	2,730,655		100.0	%

Total deposits were $3.04 billion at September 30, 2024, an increase of $308.2 million from December 31, 2023 with the increase resulting mainly in the balances of interest bearing demand deposits, money market accounts, and time deposit accounts. Some of our demand deposit accounts are seasonal and have expected balance fluctuations. The seasonality of these demand deposits is related to property tax collections and to agricultural production.

The following table presents the Bank’s time certificates of deposits by various maturities as of September 30, 2024 (amounts in thousands).


	All Time Deposits		Time Deposits $250 or more		Time Deposits less than $250
Three months or less	$	218,492	$	89,242	$	129,250
Greater than three months through six months		268,082		178,947		89,135
Greater than six months through one year		169,411		96,702		72,709
Greater than one year through three years		35,425		17,007		18,418
Greater than three years		4,887		1,454		3,433
Total	$	696,297	$	383,352	$	312,945

Other Funding Sources

We supplement our deposit funding with wholesale funding when needed for balance sheet planning and management or when the terms are attractive and will not disrupt our offering rates in our markets. A source we have used for wholesale funding is the Federal Home Loan Bank of Atlanta (FHLB). The line of credit with the FHLB is secured by pledges of various loans in our loan portfolio. At September 30, 2024, the FHLB line of credit available was $253.9 million and at December 31, 2023 it was $210.3 million. As of September 30, 2024 and December 31, 2023, we had $150 million and $230 million Federal Home Loan Bank advances outstanding, respectively. We also have lines of credit for federal funds borrowings with other banks that totaled $100.0 million and $88.5 million at September 30, 2024 and December 31, 2023, respectively. Furthermore, we have pledged certain loans to the Federal Reserve Bank (FRB) to secure a line of credit. At September 30, 2024, the FRB line of credit available was $409.4 million and at December 31, 2023, the FRB line of credit available was $157.6 million. Another source that we have used for wholesale funding is the Federal Reserve Bank discount window. At both September 30, 2024 and December 31, 2023, we had no borrowings outstanding with the Federal Reserve Bank discount window.

On August 9, 2021, the Company entered into a line of credit agreement with ServisFirst Bank for $10 million. The line of credit agreement was amended on March 17, 2023 to increase the line to $20 million. The line of credit is to be used for general capital needs and investments. The line, when drawn, will require quarterly payments of interest only. The line of credit was amended on March 15, 2024 and extended the maturity date 24 months to March 15, 2026. Additionally, the amendment dated March 15, 2024 increased the interest rate float at Wall Street Journal Prime with a floor of 4.50% up from 3.25%. The line of credit is secured by 51% of the Bank's stock.

On March 9, 2021, River Financial Corporation (“the Company”) entered into a Subordinated Note Purchase Agreement (the “Purchase Agreement”) with the purchasers signatory thereto providing for a private placement of $40 million in aggregate principal amount of 4.00% fixed-to-floating rate Subordinated Notes due March 15, 2031 (the “Notes”). The Notes were issued by the Company to the purchasers at a price equal to 100% of their face amount. Interest on the Notes will accrue from March 9, 2021, and the Company will pay interest semi-annually on March 15th and September 15th of each year, beginning on September 15, 2021, until the Notes mature. The Notes will bear interest at a fixed rate of 4.00% per year, from and including March 9, 2021 to, but excluding, March 15, 2026. From and including March 15, 2026, but excluding the maturity date or early redemption date, the interest rate will reset quarterly at a variable rate equal to the then current three-month term SOFR plus 342 basis points. The Notes may not be prepaid by the Company prior to March 15, 2026. From and after March 15, 2026, the Company may prepay all or, from time to time, any part of the Notes at 100% of the principal amount (plus accrued interest) without penalty, subject to any requirement under Federal Reserve Board regulations to obtain prior approval from the Board of Governors of the Federal Reserve System before making any prepayment. The Notes may also be prepaid by the Company at any time after the occurrence of an event that would preclude the Notes from being included in the Tier 2 Capital of the Company. The Purchase Agreement contains customary representations and warranties, events of default, and affirmative and negative covenants, including the requirement that, subject to certain limitations, the Company restructure any portion of the Notes that ceases to be deemed Tier 2 Capital. The Company used approximately $19.7 million of the net proceeds from the issuance of the Notes to pay off its note with CenterState Bank dated October 31, 2018, including interest accrued on such notes, and the remaining proceeds for general corporate purposes, including providing capital to support the organic growth of its bank subsidiary, River Bank.

On December 15, 2023, the Bank entered into an irrevocable standby letter of credit agreement with the FHLB for $75 million issued in favor of the Alabama State Treasurer, SAFE Program. The letter of credit agreement was amended on June 24, 2024 to increase the amount to $200 million. The letter of credit agreement was amended on September 13, 2024 to decrease the amount to $175 million. The Bank is charged 0.09% on the amount of the irrevocable standby letter of credit. The letter of credit shall remain in effect until terminated by either the Bank or the Institution upon written notice to the other party.

Liquidity

Market and public confidence in our financial strength and financial institutions in general will largely determine our access to appropriate levels of liquidity. This confidence is significantly dependent on our ability to maintain sound asset quality and appropriate levels of capital reserves.

Liquidity is defined as the ability to meet anticipated customer demands for funds under credit commitments and deposit withdrawals at a reasonable cost and on a timely basis. We measure our liquidity position by giving consideration to both on- and off-balance sheet sources of and demands for funds on a daily, weekly and monthly basis.

Liquidity risk involves the risk of being unable to fund assets with the appropriate duration and rate-based liabilities, as well as the risk of not being able to meet unexpected cash needs. Liquidity planning and management are necessary to ensure the ability to fund operations cost-effectively and to meet current and future potential obligations such as loan commitments and unexpected deposit outflows. In this process, we focus on assets and liabilities and on the manner in which they combine to provide adequate liquidity to meet our needs.

Funds are available from a number of basic banking activity sources, including the core deposit base, the repayment and maturity of loans, and investment cash flows. Other funding sources include federal funds borrowings, brokered certificates of deposit and borrowings from the FHLB and FRB.

Cash and cash equivalents at September 30, 2024 and December 31, 2023, were $147.1 million and $72.6 million, respectively. Based on recorded cash and cash equivalents, management believes River Financial Corporation’s liquidity resources were sufficient at September 30, 2024 to fund loans and meet other cash needs as necessary.

Off-Balance Sheet Arrangements

The Company is party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financial needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. Such instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized by the balance sheet. The contract amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments.

The exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments. In most cases, the Company requires collateral or other security to support financial instruments with credit risk.

Financial instruments whose contract amount represents credit risk at September 30, 2024 and December 31, 2023 were as follows (amounts in thousands):


	September 30, 2024		December 31, 2023
Commitments to extend credit	$	449,635	$	477,476
Stand-by and performance letters of credit		9,136		8,025
Total	$	458,771	$	485,501

Contractual Obligations

While our liquidity monitoring and management considers both present and future demands for and sources of liquidity, the following table of contractual commitments focuses only on future obligations as of September 30, 2024 (amounts in thousands).


			Due after 1		Due after 3
	Due in 1		through		through		Due after
	year or less		3 years		5 years		5 years		Total
Deposits without a stated maturity	$	2,342,525	$	-	$	-	$	-	$	2,342,525
Certificates of deposit of less than $250		291,094		18,418		3,403		30		312,945
Certificates of deposit of $250 or more		364,891		17,007		1,454		-		383,352
Securities sold under agreements to repurchase		13,935		-		-		-		13,935
Federal Home Loan Bank advances		-		50,000		40,000		60,000		150,000
Subordinated debt, net of loan costs		-		-		-		39,545		39,545
Operating leases		703		952		637		1,590		3,882
Total contractual obligations	$	3,013,148	$	86,377	$	45,494	$	101,165	$	3,246,184

Capital Position and Dividends

At September 30, 2024 and December 31, 2023, total stockholders’ equity was $233.3 million and $198.3 million, respectively. The increase of approximately $35.0 million resulted mainly from the net change in retained earnings and accumulated other comprehensive loss for the nine months ended September 30, 2024. Retained earnings for the first nine months of 2024 increased $18.3 million while accumulated other comprehensive loss also decreased $17.0 million. The ratio of stockholders’ equity to total assets was 6.67% and 6.13% at September 30, 2024 and December 31, 2023, respectively.

River Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Certain items such as goodwill and other intangible assets are deducted from total capital in arriving at the various regulatory capital measures such as Common Equity Tier 1 capital, Tier 1 capital, and total risk-based capital. 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 River Financial Corporation’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, River Bank must meet specific capital guidelines that involve quantitative measures of the bank’s assets, liabilities, and certain off-balance-sheet items as calculated under regulatory regulations and guidelines. River Bank’s capital amounts and classifications are also subject to qualitative judgments by regulators about components, risk weightings, and other factors.

River Bank is eligible to utilize the community bank leverage ratio (CBLR) framework. The Bank has evaluated this option and has elected not to utilize the CBLR framework at this time, but may do so in the future.

Quantitative measures, established by regulation to ensure capital adequacy, require River Financial Corporation and River Bank to maintain minimum amounts and ratios (set forth in the table below) of total risk based capital, Common Equity Tier 1 capital, and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined in the regulations), and of Tier 1 capital (as defined in the regulations) to average assets (as defined in the regulations).

Management believes, as of September 30, 2024, that the Company and Bank meet all capital adequacy requirements to which they are subject. The following table presents the Company's and Bank’s capital amounts and ratios as of September 30, 2024 with the required minimum levels for capital adequacy purposes including the capital conservation buffer under Basel III and minimum levels to be well capitalized (as defined) under the regulatory prompt corrective action regulations.


As of September 30, 2024:
									To Be Well Capitalized
						Required For Capital			Under Prompt Corrective
	Actual					Adequacy Purposes			Action Regulations (1)
	Amount		Ratio			Amount		Ratio	Amount		Ratio
River Financial Corporation:
Total Capital (To Risk-Weighted Assets)	$	327,994		13.263	%	$	259,665	>= 10.500%	N/A		N/A
Common Equity Tier 1 Capital (To Risk-Weighted Assets)		257,081		10.396	%		173,102	>= 7.000%	N/A		N/A
Tier 1 Capital (To Risk-Weighted Assets)		257,081		10.396	%		210,195	>= 8.500%	N/A		N/A
Tier 1 Capital (To Average Assets)		257,081		7.451	%		138,016	>= 4.000%	N/A		N/A

River Bank:
Total Capital (To Risk-Weighted Assets)	$	325,466		13.161	%	$	259,655	>= 10.500%	$	247,290	>= 10.00%
Common Equity Tier 1 Capital (To Risk-Weighted Assets)		294,553		11.911	%		173,104	>= 7.000%		160,739	>= 6.50%
Tier 1 Capital (To Risk-Weighted Assets)		294,553		11.911	%		210,197	>= 8.500%		197,833	>= 8.00%
Tier 1 Capital (To Average Assets)		294,553		8.537	%		138,016	>= 4.000%		172,520	>= 5.00%
(1) the prompt corrective action provisions are applicable at the Bank level only.

Management believes, as of December 31, 2023, that the Bank met all capital adequacy requirements to which it was subject at the time. The following table presents the Company's and Bank’s capital amounts and ratios as of December 31, 2023 with the required minimum levels for capital adequacy purposes and minimum levels to be well capitalized (as defined) under the prompt corrective action regulations.


As of December 31, 2023:
									To Be Well Capitalized
						Required For Capital			Under Prompt Corrective
	Actual					Adequacy Purposes			Action Regulations (1)
	Amount		Ratio			Amount		Ratio	Amount		Ratio
River Financial Corporation:
Total Capital (To Risk-Weighted Assets)	$	306,917		12.948	%	$	248,890	>= 10.500%	N/A		N/A
Common Equity Tier 1 Capital (To Risk-Weighted Assets)		237,927		10.037	%		165,935	>= 7.000%	N/A		N/A
Tier 1 Capital (To Risk-Weighted Assets)		237,927		10.037	%		201,492	>= 8.500%	N/A		N/A
Tier 1 Capital (To Average Assets)		237,927		7.505	%		126,810	>= 4.000%	N/A		N/A

River Bank:
Total Capital (To Risk-Weighted Assets)	$	303,279		12.794	%	$	248,892	>= 10.500%	$	237,040	>= 10.00%
Common Equity Tier 1 Capital (To Risk-Weighted Assets)		274,289		11.571	%		165,928	>= 7.000%		154,076	>= 6.50%
Tier 1 Capital (To Risk-Weighted Assets)		274,289		11.571	%		201,484	>= 8.500%		189,632	>= 8.00%
Tier 1 Capital (To Average Assets)		274,289		8.652	%		126,807	>= 4.000%		158,508	>= 5.00%
(1) the prompt corrective action provisions are applicable at the Bank level only.

River Financial Corporation’s principal source of funds for dividend payments and debt service is dividends received from River Bank. There are statutory limitations on the payment of dividends by River Bank to River Financial Corporation. As of September 30, 2024, the maximum amount the Bank could dividend to River Financial Corporation without prior regulatory authority approval was approximately $61.9 million. In addition to dividend restrictions, federal statutes prohibit unsecured loans from banks to bank holding companies.

During the nine months ending September 30, 2024 there were 9,000 incentive stock options issued with a weighted average exercise price of $32.33 per share. During the same period, there were 9,293 incentive stock options exercised at a weighted average exercise price of $23.35 per share. During the same period, there were 1,200 incentive stock options forfeited at a weighted average exercise price of $31.99. A total of 336,244 incentive stock options were outstanding as of September 30, 2024 with a weighted average exercise price of $25.50 per share and a weighted average remaining life of 4.47 years.

During the nine months ending September 30, 2024 there were no restricted stock grants issued. During the same time period, there were 14,450 stock grants that vested with a weighted average exercise price of $31.83. During the same time period, there were 1,050 stock grants forfeited with a weighted average exercise price of $31.20. A total of 50,233 restricted stock grants remained nonvested as of September 30, 2024 with a weighted average exercise price of $32.02 per share and a weighted average remaining life of 2.26 years.

Interest Sensitivity and Market Risk

Management monitors and manages the pricing and maturity of our assets and liabilities in order to diminish the potential adverse impact that changes in interest rates could have on net interest income. The principal monitoring technique employed by the Bank is simulation analysis.

In simulation analysis, we review each asset and liability category and its projected behavior in various different interest rate environments. These projected behaviors are based on management’s past experience and on current competitive environments, including the various environments in the different markets in which we compete. Using projected behavior and differing rate scenarios as inputs, the simulation analysis generates projections of net interest income. We also periodically verify the validity of this approach by comparing actual results with those that were projected in previous models.

Another technique used in interest rate management, but to a lesser degree than simulation analysis, is the measurement of the interest sensitivity “gap”, which is the positive or negative dollar difference between assets and liabilities that are subject to interest rate repricing within a given period of time. Interest rate sensitivity can be managed by repricing assets and liabilities, selling securities available for sale, replacing an asset or liability at maturity or by adjusting the interest rate during the life of an asset or liability.

We evaluate interest rate sensitivity risk and then formulate guidelines regarding asset generation and repricing, and sources and prices of off-balance sheet commitments in order to maintain interest sensitivity risk at levels deemed prudent by management. We use computer simulations to measure the net income effect of various rate scenarios. The modeling reflects interest rate changes and the related impact on net income over specified periods of time.

The following table illustrates our interest rate sensitivity at September 30, 2024, assuming the relevant assets and liabilities are collected and paid, respectively, based upon historical experience rather than their stated maturities (amounts in thousands).


	0-1 Mos			1-3 Mos			3-12 Mos			1-2 Yrs			2-3 Yrs			>3 Yrs			Total
Interest earning assets
Loans	$	469,914		$	104,924		$	405,991		$	360,523		$	271,683		$	810,648		$	2,423,683
Securities		22,105			13,320			45,988			123,205			96,705			454,518			755,841
Certificates of deposit in banks		-			-			-			1,250			2,500			468			4,218
Cash balances in banks		91,942			-			-			-			-			-			91,942
Federal funds sold		14,000			-			-			-			-			-			14,000
Total interest earning assets	$	597,961		$	118,244		$	451,979		$	484,978		$	370,888		$	1,265,634		$	3,289,684

Interest bearing liabilities
Interest bearing transaction accounts	$	85,978		$	14,866		$	66,894		$	89,191		$	89,191		$	368,026		$	714,146
Savings and money market accounts		178,901			16,428			73,923			98,564			98,564			523,877			990,257
Time deposits		82,258			134,790			438,080			31,778			4,503			4,888			696,297
Securities sold under agreements to repurchase		13,935			-			-			-			-			-			13,935
Federal Home Loan Bank advances		-			-			-			25,000			25,000			100,000			150,000
Subordinated debentures, net of loan costs		-			-			-			-			-			39,545			39,545
Total interest bearing liabilities	$	361,072		$	166,084		$	578,897		$	244,533		$	217,258		$	1,036,336		$	2,604,180

Interest sensitive gap
Period gap	$	236,889		$	(47,840	)	$	(126,918	)	$	240,445		$	153,630		$	229,298		$	685,504
Cumulative gap	$	236,889		$	189,049		$	62,131		$	302,576		$	456,206		$	685,504
Cumulative gap - Rate Sensitive Assets/ Rate Sensitive Liabilities		7.2	%		5.7	%		1.9	%		9.2	%		13.9	%		20.8	%

The Bank generally benefits from increasing market interest rates when it has an asset-sensitive gap (a positive number) and generally benefits from decreasing market interest rates when it is liability sensitive (a negative number). As shown in the table above, the Bank is asset sensitive on a cumulative basis throughout the one to two year time frame. The interest sensitivity analysis presents only a static view of the timing and repricing opportunities, without taking into consideration that changes in interest rates do not affect all assets and liabilities equally. For example, rates paid on a substantial portion of core deposits may change contractually within a relatively short time frame, but those are viewed by management as significantly less interest sensitive than market-based rates such as those paid on non-core deposits. For this and other reasons, management relies more upon the simulations analysis (as noted above) in managing interest rate risk. Net interest income may be impacted by other significant factors in a given interest rate environment, including changes in volume and mix of interest earning assets and interest bearing liabilities.

The Bank’s earnings are dependent, to a large degree, on its net interest income, which is the difference between interest income earned on all interest earning assets, primarily loans and securities, and interest paid on all interest bearing liabilities, primarily deposits. Market risk is the risk of loss from adverse changes in market prices and interest rates. Our market risk arises primarily from inherent interest rate risk in our lending, investing and deposit gathering activities. We seek to reduce our exposure to market risk through actively monitoring and managing interest rate risk. Management relies on simulations analysis to evaluate the impact of varying levels of prevailing interest rates and the sensitivity of specific earning assets and interest bearing liabilities to changes in those prevailing rates. Simulation analysis consists of evaluating the impact on net interest income given changes from 400 basis points below the current prevailing rates to 400 basis points above current prevailing interest rates. Management makes certain assumptions as to the effect varying levels of interest rates have on certain interest earning assets and interest bearing liabilities, which assumptions consider both historical experience and consensus estimates of outside sources.

The following table illustrates the results of our simulation analysis to determine the extent to which market risk would affect net interest income for the next twelve months if prevailing interest rates increased or decreased by the specified amounts from current rates. As noted above, this model uses estimates and assumptions in asset and liability account rate reactions to changes in prevailing interest rates. However, to isolate the market risk inherent in the balance sheet, the model assumes that no growth in the balance sheet occurs during the projection period. This model also assumes an immediate and parallel shift in interest rates, which would result in no change in the shape or slope of the interest rate yield curve. Because of the inherent use of the estimates and assumptions in the simulation model to derive this market risk information, the actual results of the future impact of market risk on our net interest income may differ from that found in the table. Given the current level of prevailing interest rates, management believes prevailing market rates falling 300 basis points and 400 basis points are not reasonable assumptions. All other simulated prevailing interest rates changes modeled indicate a level of sensitivity of the Bank’s net interest income to those changes that is acceptable to management and within established Bank policy limits as of both dates shown.


	Impact on net interest income
	As of			As of
	September 30, 2024			December 31, 2023
Change in prevailing rates:
+ 400 basis points		(14.37	)%		(13.84	)%
+ 300 basis points		(9.43	)%		(10.27	)%
+ 200 basis points		(4.48	)%		(6.87	)%
+ 100 basis points		0.32	%		(3.35	)%
+ 0 basis points		-			-
- 100 basis points		(2.13	)%		3.02	%
- 200 basis points		(2.37	)%		5.59	%
- 300 basis points		(2.54	)%		8.11	%
- 400 basis points		(1.19	)%		12.40	%

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

This item is not applicable to smaller reporting companies.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company has carried out an evaluation under the supervision and with participation of management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even the effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of September 30, 2024, the Company’s disclosure controls and procedures are effective in ensuring that material information relating to the Company required to be disclosed in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the requisite time periods and is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding disclosure.

Changes in Internal Control over Financial Reporting

There has been no change in the Company’s internal control over financial reporting during the nine months ended September 30, 2024 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time the Company is a party to legal proceedings. At the present time the Company is not part of any proceeding which the Company deems to be material except as described in the Company's Annual Report on Form 10-K for the year ended December 31, 2023 at Item 1., "Supervision and Regulation - USA Patriot Act."

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A, “Risk Factors,” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 that could materially affect the Company’s business, financial condition or future results. The risks described in the Company’s Annual Report on Form 10-K are not the only risks facing the Company. Additional risks and uncertainties not currently known to the Company or that the Company currently deems to be immaterial also may materially adversely affect the Company’s business, financial condition and/or operating results in the future.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

In July 2024, the company sold 35,098 shares of its common stock for a cash total of approximately $1.1 million to its employee stock ownership plan. The Company relied upon exemptions from registration under SEC Rule 701 and Rule 147A.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

Not applicable.

Item 6. Exhibits.


Exhibit Number		Description

3.1		Certificate of Incorporation of River Financial Corporation included as Exhibit 3.1 in the River Financial Corporation Form 8-K filed May 18, 2023 and incorporated herein by reference.

3.2		Bylaws of River Financial Corporation included as Exhibit 3.2 in the River Financial Corporation 8-K filed May 18, 2023 and incorporated herein by reference.

4.1		Article IV and Article V of the Certificates of Incorporation filed at Exhibit 3.1 to the Registrants’ Form 8-K filed May 18, 2023, and Article II and Article VI of the Bylaws included as Exhibit 3.2 of the Registrants’ Form 8-K filed May 18, 2023, and incorporated herein by reference.

10.2		River Financial Change in Control Agreement for Jimmy Stubbs filed as Exhibit 10.2 to the Registrant’s Registration Statement on Form S-4, registration no. 333-205986 filed on July 31, 2015 and incorporated herein by reference.

10.4		River Financial Change in Control Agreement for Joel K. Winslett filed as Exhibit 10.4 to the Registrant’s Registration Statement on Form S-4, registration no. 333-205986 filed on July 31, 2015 and incorporated herein by reference.

10.5		River Financial Change in Control Agreement for Ray Smith filed as Exhibit 10.5 to the Registrant’s Registration Statement on Form S-4, registration no. 333-205986 filed on July 31, 2015 and incorporated herein by reference.

10.6		River Financial Change in Control Agreement for Boles Pegues filed as Exhibit 10.6 to the Registrant’s Registration Statement on Form S-4, registration no. 333-205986 filed on July 31, 2015 and incorporated herein by reference.

10.7		River Financial Employment Term Sheet for Ray Smith filed as Exhibit 10.7 to the Registrant’s Registration Statement on Form S-4, registration no. 333-205986 filed on July 31, 2015 and incorporated herein by reference.

10.8		River Financial Employment Term Sheet for Boles Pegues filed as Exhibit 10.8 to the Registrant’s Registration Statement on Form S-4, registration no. 333-205986 filed on July 31, 2015 and incorporated herein by reference.

10.10		River Financial 2015 Incentive Stock Compensation Plan filed as Annex E to the Registrant’s Registration Statement on Form S-4, registration no. 333-205986 filed on July 31, 2015 and incorporated herein by reference.

10.12		Form of Subordinated Note Purchase Agreement, dated March 9, 2021, between River Financial Corporation and certain accredited investors, included as Exhibit 10.1 in the River Financial Corporation Form 8-K, filed on March 10, 2021 and incorporated herein by reference.

10.13		Loan and Security Agreement, dated August 9, 2021, between River Financial Corporation and ServisFirst Bank, included as Exhibit 10.13 in the River Financial Corporation Form 10-K, filed on March 15, 2022 and incorporated herein by reference.

31.1**		Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as amended.

31.2**		Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as amended.

32 **		Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350.


101.INS		Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.

101.SCH		Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Document

104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

* Schedules omitted. Registrant agrees to furnish a copy of any omitted schedule to the SEC upon request.

** Filed herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	RIVER FINANCIAL CORPORATION

Date: November 12, 2024	By:	/s/ James M. Stubbs
		James M. Stubbs
		Chief Executive Officer (principal executive officer)

Date: November 12, 2024	By:	/s/ Jason B. Davis
		Jason B. Davis
		Chief Financial Officer