10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2025

☐ 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: 000-14549

First US Bancshares, Inc.

(Exact Name of Registrant as Specified in Its Charter)

     Delaware

     63-0843362

     (State or Other Jurisdiction of
Incorporation or Organization)

     (IRS Employer
Identification No.)

     3291 U.S. Highway 280
Birmingham, AL

     35243

     (Address of Principal Executive Offices)

     (Zip Code)

(205) 582-1200

(Registrant’s Telephone Number, Including Area Code)

N/A

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	FUSB	The Nasdaq Stock Market LLC

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 ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Class	Outstanding at May 1, 2025
Common Stock, $0.01 par value	5,738,352 shares

FIRST US BANCSHARES, INC. AND SUBSIDIARY


		PAGE

PART I. FINANCIAL INFORMATION		4

ITEM 1. FINANCIAL STATEMENTS		4

Interim Condensed Consolidated Balance Sheets at March 31, 2025 (Unaudited) and December 31, 2024		4

Interim Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2025 and 2024 (Unaudited)		5

Interim Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2025 and 2024 (Unaudited)		6

Interim Condensed Consolidated Statements of Changes in Shareholders’ Equity for the Three Months Ended March 31, 2025 and 2024 (Unaudited)		7

Interim Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2025 and 2024 (Unaudited)		8

Notes to Interim Condensed Consolidated Financial Statements (Unaudited)		9

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		40

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		54

ITEM 4. CONTROLS AND PROCEDURES		55

PART II. OTHER INFORMATION		56

ITEM 1. LEGAL PROCEEDINGS		56

ITEM 1A. RISK FACTORS		56

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		56

ITEM 5. OTHER INFORMATION		56

ITEM 6. EXHIBITS		57

Signature Page		58

FORWARD-LOOKING STATEMENTS

Statements contained in this Quarterly Report on Form 10-Q that are not historical facts are forward-looking statements (as defined in the Private Securities Litigation Reform Act of 1995). In addition, First US Bancshares, Inc. (“Bancshares” and, together with its subsidiaries, the “Company”), through its senior management, from time to time makes forward-looking statements concerning its expected future operations, performance and other developments. The words “estimate,” “project,” “intend,” “anticipate,” “expect,” “believe,” “continues” and similar expressions are indicative of forward-looking statements. Such forward-looking statements are necessarily estimates reflecting the Company’s best judgment based on current information and involve a number of risks and uncertainties. Certain factors that could affect the accuracy of such forward-looking statements and cause actual results to differ materially from those projected in such forward-looking statements are identified in the Company’s filings with the Securities and Exchange Commission (the “SEC”), and forward-looking statements contained herein or in other public statements of the Company or its senior management should be considered in light of those factors. Such factors may include adverse developments in the financial services industry; the effects of any government shutdown; loan losses may be greater than anticipated; our ability to ensure that sufficient cash flow and liquid assets are available to satisfy current and future financial obligations; the increased lending risks associated with commercial real estate lending; potential weakness in the residential real estate market; liquidity risks; the impact of national and local market conditions on the Company’s business and operations; the effects of significant changes to the structure and operations of the federal government; strong competition in the banking industry; the impact of changes in interest rates and monetary policy on the Company’s performance and financial condition; the effects of fiscal challenges facing the U.S. government or any potential government shutdown; the impact of technological changes in the banking and financial service industries and potential information system failures; cybersecurity and data privacy threats; the risks and challenges presented by the development and use of artificial intelligence (“AI”); the costs of complying with extensive governmental regulation; the risk that internal controls and procedures might fail or be circumvented; the impact of changing accounting standards and tax laws on the Company’s financial results; the potential impact of climate change and related legislative and regulatory initiatives; the possibility that acquisitions may not produce anticipated results and result in unforeseen integration difficulties; the volatility of our stock price and our dependence on the soundness of other financial institutions; and other risk factors described from time to time in the Company’s public filings, including, but not limited to, the Company’s most recent Annual Report on Form 10-K. Relative to the Company’s dividend policy, the payment of cash dividends is subject to the discretion of the Board of Directors and will be determined in light of then-current conditions, including the Company’s earnings, leverage, operations, financial conditions, capital requirements and other factors deemed relevant by the Board of Directors. In the future, the Board of Directors may change the Company’s dividend policy, including the frequency or amount of any dividend, in light of then-existing conditions.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

FIRST US BANCSHARES, INC. AND SUBSIDIARY

INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands, Except Share and Per Share Data)


	March 31,			December 31,
	2025			2024
	(Unaudited)
ASSETS
Cash and due from banks	$	10,547		$	10,633
Interest-bearing deposits in banks		45,494			36,583
Total cash and cash equivalents		56,041			47,216
Federal funds sold and securities purchased under reverse repurchase agreements		5,451			5,727
Investment securities available-for-sale, at fair value (amortized cost $165,341 and $174,597; net of allowance for credit losses of $- and $-)		161,314			167,888
Investment securities held-to-maturity, at amortized cost, net of allowance for credit losses of $- and $-, (fair value 2025 - $602, 2024 - $642)		632			682
Federal Home Loan Bank stock, at cost		1,978			1,256
Loans and leases held for investment		848,335			823,039
Less: allowance for credit losses on loans and leases		10,405			10,184
Net loans and leases held for investment		837,930			812,855
Premises and equipment, net of accumulated depreciation		24,558			24,803
Cash surrender value of bank-owned life insurance		17,145			17,056
Accrued interest receivable		3,763			3,588
Goodwill and core deposit intangible, net		7,465			7,484
Other real estate owned		1,328			1,509
Other assets		9,362			11,022
Total assets	$	1,126,967		$	1,101,086
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits:
Non-interest-bearing	$	153,747		$	155,945
Interest-bearing		808,205			816,612
Total deposits		961,952			972,557
Accrued interest expense		1,698			1,751
Other liabilities		6,196			7,282
Short-term borrowings		45,000			10,000
Long-term borrowings		10,890			10,872
Total liabilities		1,025,736			1,002,462
Shareholders’ equity:
Common stock, par value $0.01 per share, 10,000,000 shares authorized; 7,899,625 and 7,840,348 shares issued, respectively; 5,739,286 and 5,696,171 shares outstanding, respectively		79			78
Additional paid-in capital		15,308			15,540
Accumulated other comprehensive loss, net of tax		(2,674	)		(4,344	)
Retained earnings		118,236			116,865
Less treasury stock: 2,160,339 and 2,144,177 shares at cost, respectively		(29,718	)		(29,515	)
Total shareholders’ equity		101,231			98,624
Total liabilities and shareholders’ equity	$	1,126,967		$	1,101,086

The accompanying notes are an integral part of these Interim Condensed Consolidated Financial Statements.

FIRST US BANCSHARES, INC. AND SUBSIDIARY

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in Thousands, Except Per Share Data)


	Three Months Ended
	March 31,
	2025		2024
	(Unaudited)
Interest income:
Interest and fees on loans	$	12,241	$	12,853
Interest on investment securities		1,412		865
Interest on deposits in banks		288		452
Other		77		107
Total interest income		14,018		14,277
Interest expense:
Interest on deposits		4,869		5,099
Interest on borrowings		252		138
Total interest expense		5,121		5,237
Net interest income		8,897		9,040
Provision for credit losses		528		—
Net interest income after provision for credit losses		8,369		9,040
Non-interest income:
Service and other charges on deposit accounts		288		299
Lease income		284		257
Other income, net		303		309
Total non-interest income		875		865
Non-interest expense:
Salaries and employee benefits		3,736		4,088
Net occupancy and equipment		875		894
Computer services		412		443
Insurance expense and assessments		384		391
Fees for professional services		215		341
Other expense		1,296		990
Total non-interest expense		6,918		7,147
Income before income taxes		2,326		2,758
Provision for income taxes		554		651
Net income	$	1,772	$	2,107
Basic net income per share	$	0.30	$	0.36
Diluted net income per share	$	0.29	$	0.34
Dividends per share	$	0.07	$	0.05

The accompanying notes are an integral part of these Interim Condensed Consolidated Financial Statements.

FIRST US BANCSHARES, INC. AND SUBSIDIARY

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in Thousands)


	Three Months Ended
	March 31,
	2025			2024
	(Unaudited)
Net income	$	1,772		$	2,107
Other comprehensive income (loss):
Unrealized holding gains (losses) on securities available-for-sale arising during period, net of tax expense (benefit) of $671 and ($24), respectively		2,011			(73	)
Unrealized holding losses arising during the period on effective cash flow hedge derivatives, net of tax benefit of $103 and $0, respectively		(305	)		—
Reclassification adjustments on cash flow hedge derivatives realized in net income, net of tax benefit of $12 and $39, respectively		(36	)		(117	)
Other comprehensive income (loss)		1,670			(190	)
Total comprehensive income	$	3,442		$	1,917

The accompanying notes are an integral part of these Interim Condensed Consolidated Financial Statements.

FIRST US BANCSHARES, INC. AND SUBSIDIARY

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Dollars in Thousands, Except Share and Per Share Data)

For the three months ended March 31, 2025 and 2024 (Unaudited)


	Common Stock Shares Outstanding			Common Stock		Additional Paid-in Capital			Accumulated Other Comprehensive Loss			Retained Earnings			Treasury Stock, at Cost			Total Shareholders’ Equity
Balance, December 31, 2023		5,735,075		$	75	$	14,972		$	(6,431	)	$	109,959		$	(27,982	)	$	90,593
Net income		—			—		—			—			2,107			—			2,107
Net change in fair value of securities available-for-sale, net of tax		—			—		—			(73	)		—			—			(73	)
Net change in fair value of derivative instruments, net of tax		—			—		—			(117	)		—			—			(117	)
Dividends declared: $0.05 per share		—			—		—			—			(289	)		—			(289	)
Impact of stock-based compensation plans, net		52,366			—		150			—			—			(45	)		105
Balance, March 31, 2024		5,787,441		$	75	$	15,122		$	(6,621	)	$	111,777		$	(28,027	)	$	92,326

Balance, December 31, 2024		5,696,171		$	78	$	15,540		$	(4,344	)	$	116,865		$	(29,515	)	$	98,624
Net income		—			—		—			—			1,772			—			1,772
Net change in fair value of securities available-for-sale, net of tax		—			—		—			2,011			—			—			2,011
Net change in fair value of derivative instruments, net of tax		—			—		—			(341	)		—			—			(341	)
Dividends declared: $0.07 per share		—			—		—			—			(401	)		—			(401	)
Reissuance of treasury stock as compensation		31,550			—		(434	)		—			—			434			—
Impact of stock-based compensation plans, net		51,565			1		202			—			—			(102	)		101
Impact of common stock share repurchases		(40,000	)		—		—			—			—			(535	)		(535	)
Balance, March 31, 2025		5,739,286		$	79	$	15,308		$	(2,674	)	$	118,236		$	(29,718	)	$	101,231

The accompanying notes are an integral part of these Interim Condensed Consolidated Financial Statements.

FIRST US BANCSHARES, INC. AND SUBSIDIARY

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)


	Three Months Ended
	March 31,
	2025			2024
	(Unaudited)
Cash flows from operating activities:
Net income	$	1,772		$	2,107
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		419			391
Provision for credit losses		528			—
Deferred income tax expense		548			395
Reclassification of unrealized gains on terminated derivative contracts		(48	)		(313	)
Stock-based compensation expense		172			157
Net accretion of securities		(154	)		(36	)
Amortization of intangible assets		19			37
Net (gain) loss on premises and equipment and other real estate		(5	)		374
Changes in assets and liabilities:
Increase in cash surrender value of bank owned life insurance		(89	)		(86	)
Increase in accrued interest receivable		(175	)		(172	)
(Increase) decrease in other assets		(73	)		61
Decrease in accrued interest expense		(53	)		(316	)
Decrease in other liabilities		(1,106	)		(1,774	)
Net cash provided by operating activities		1,755			825
Cash flows from investing activities:
Net decrease in federal funds sold and securities purchased under reverse repurchase agreements		276			3,943
Purchases of investment securities, available-for-sale		—			(5,791	)
Proceeds from maturities and prepayments of investment securities, available-for-sale		9,410			15,915
Proceeds from maturities and prepayments of investment securities, held-to-maturity		50			121
Net increase in Federal Home Loan Bank stock		(722	)		(293	)
Net increase in loans and leases held for investment		(25,690	)		(1,820	)
Proceeds from the sale of premises and equipment, other real estate and repossessions		428			294
Purchases of premises and equipment		(70	)		(967	)
Net cash (used in) provided by investing activities		(16,318	)		11,402
Cash flows from financing activities:
Net decrease in deposits		(10,605	)		(6,923	)
Net increase in short-term borrowings		35,000			5,000
Net share-based compensation transactions		(71	)		(52	)
Repurchases of common stock		(535	)		—
Dividends paid		(401	)		(289	)
Net cash provided by (used in) financing activities		23,388			(2,264	)
Net increase in cash and cash equivalents		8,825			9,963
Cash and cash equivalents, beginning of period		47,216			50,279
Cash and cash equivalents, end of period	$	56,041		$	60,242
Supplemental disclosures:
Cash paid for:
Interest	$	5,174		$	5,553
Income taxes		418			765
Non-cash transactions:
Assets acquired in settlement of loans		194			364
Reissuance of treasury stock as compensation		434			—

The accompanying notes are an integral part of these Interim Condensed Consolidated Financial Statements.

FIRST US BANCSHARES, INC. AND SUBSIDIARY

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

GENERAL

First US Bancshares, Inc., a Delaware corporation (“Bancshares” and, together with its subsidiary, the “Company”), is a bank holding company formed in 1983 registered under the Bank Holding Company Act of 1956, as amended (the “BHCA”). Bancshares operates one wholly owned banking subsidiary, First US Bank, an Alabama banking corporation (the “Bank”). Bancshares and the Bank are headquartered in Birmingham, Alabama.

The Bank conducts a general commercial banking business and offers banking services such as demand, savings, individual retirement account and time deposits, personal and commercial loans, safe deposit box services and remote deposit capture. The Bank operates and serves its customers through 15 full-service banking offices located in Birmingham, Butler, Calera, Centreville, Gilbertown, Grove Hill, Harpersville, Jackson, Thomasville, Tuscaloosa and Woodstock, Alabama; Knoxville and Powell, Tennessee; and Rose Hill, Virginia; as well as loan production offices in Mobile, Alabama and the Chattanooga, Tennessee area. The Bank provides a wide range of commercial banking services to small- and medium-sized businesses, property managers, business executives, professionals and other individuals. The Bank also performs indirect lending through third-party retailers and currently conducts this lending in 17 states, including Alabama, Arkansas, Florida, Georgia, Indiana, Iowa, Kansas, Kentucky, Mississippi, Missouri, Nebraska, North Carolina, Oklahoma, South Carolina, Tennessee, Texas and Virginia. The Bank is the Company’s only reportable operating segment upon which management makes decisions regarding how to allocate resources and assess performance.

The unaudited interim condensed consolidated financial statements, in the opinion of management, reflect all adjustments necessary for a fair presentation of the Company’s consolidated financial position, results of operations and cash flows for the periods presented. Such adjustments are of a normal, recurring nature. The results of operations for any interim period are not necessarily indicative of results expected for the fiscal year ending December 31, 2025. While certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”), management believes that the disclosures herein are adequate to make the information presented not misleading. These unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K as of and for the year ended December 31, 2024 (the "Company's 2024 Form 10-K").

BASIS OF PRESENTATION

Reclassification

Certain amounts in the prior period consolidated financial statements and the notes to the prior period consolidated financial statements have been reclassified to conform to the 2025 presentation. These reclassifications had no effect on the Company’s results of operations, financial position or net cash flow.

Summary of Significant Accounting Policies

Certain significant accounting policies followed by the Company are set forth in Note 2, “Summary of Significant Accounting Policies,” of the Notes to Consolidated Financial Statements in the Company’s 2024 Form 10-K.

Net Income Per Share

Basic net income per share is computed by dividing net income by the weighted average number of shares of common stock outstanding ("basic shares"). Included in basic shares are stock equivalent shares that have been accrued as of the balance sheet date as deferred compensation for members of Bancshares’ Board of Directors under the Non-Employee Directors' Deferred Compensation Plan (as defined below and discussed further in Note 9). Diluted net income per share is computed by dividing net income by the weighted average number of shares of common stock outstanding, adjusted for the effect of potentially dilutive stock awards outstanding during the period ("dilutive shares"). The dilutive shares consist of unexercised nonqualified stock option grants issued to employees and members of Bancshares’ Board of Directors pursuant to the Company's Incentive Plan (as defined below and discussed further in Note 10).

The following table reflects the weighted average shares used to calculate basic and diluted net income per share for the periods presented.


	Three Months Ended
	March 31,
	2025		2024
Weighted average shares outstanding		5,716,790		5,760,962
Weighted average director stock equivalent shares		100,668		113,519
Basic shares		5,817,458		5,874,481
Dilutive shares		242,000		402,650
Diluted shares		6,059,458		6,277,131


	Three Months Ended
	March 31,
	2025		2024
	(Dollars in Thousands, Except Per Share Data)
Net income	$	1,772	$	2,107
Basic net income per share	$	0.30	$	0.36
Diluted net income per share	$	0.29	$	0.34

Comprehensive Income

Comprehensive income consists of net income, as well as unrealized holding gains and losses that arise during the period associated with the Company’s available-for-sale securities portfolio and the effective portion of cash flow hedge derivatives. In the calculation of comprehensive income, reclassification adjustments are made for gains or losses realized in the statement of operations associated with the sale of available-for-sale securities or settlement of derivative contracts.

Accounting Standards Not Yet Adopted

The following table provides a description of recent accounting standards that have not yet been adopted as of March 31, 2025.


Standard	Description	Required Date of Adoption	Effect on Financial Statements or other significant matters
ASU 2023-09, Income Taxes (Topic 740) Improvements to Income Tax Disclosures	This ASU improves the transparency of income tax disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. It also includes certain other amendments to improve the effectiveness of income tax disclosures.	Annual financial statements as of and for the year ending December 31, 2025	The adoption of this guidance is not likely to have a material impact. Management will continue to evaluate through date of adoption.

ASU 2024-03, Income Statement Expense Disaggregation Disclosures (Subtopic 220-40) Disaggregation of Income Statement Expenses	This ASU will change the disclosures about a public business entity's expenses and address requests from investors for more detailed information about the types of expenses (for example: employee compensation, depreciation, and amortization) in expense captions	Annual financial statements as of and for the year ending December 31, 2027	The adoption of this guidance is not likely to have a material impact. Management will continue to evaluate through date of adoption.

INVESTMENT SECURITIES

Details of investment securities available-for-sale and held-to-maturity as of March 31, 2025 and December 31, 2024 were as follows:


	Available-for-Sale
	March 31, 2025
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(Dollars in Thousands)
Mortgage-backed securities:
Residential	$	84,064	$	823	$	(1,931	)	$	82,956
Commercial		11,340		73		(159	)		11,254
Obligations of U.S. government-sponsored agencies		10,589		151		(471	)		10,269
Obligations of states and political subdivisions		1,566		—		(17	)		1,549
Corporate notes		17,759		33		(1,303	)		16,489
U.S. Treasury securities		40,023		—		(1,226	)		38,797
Total	$	165,341	$	1,080	$	(5,107	)	$	161,314


	Held-to-Maturity
	March 31, 2025
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(Dollars in Thousands)
Mortgage-backed securities:
Commercial	$	236	$	—	$	(8	)	$	228
Obligations of U.S. government-sponsored agencies		375		—		(21	)	$	354
Obligations of states and political subdivisions		21		—		(1	)	$	20
Total	$	632	$	—	$	(30	)	$	602


	Available-for-Sale
	December 31, 2024
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(Dollars in Thousands)
Mortgage-backed securities:
Residential	$	87,703	$	347	$	(2,768	)	$	85,282
Commercial		12,105		17		(202	)		11,920
Obligations of U.S. government-sponsored agencies		11,436		18		(620	)		10,834
Obligations of states and political subdivisions		1,577		—		(28	)		1,549
Corporate notes		17,757		58		(1,871	)		15,944
U.S. Treasury securities		44,019		—		(1,660	)		42,359
Total	$	174,597	$	440	$	(7,149	)	$	167,888


	Held-to-Maturity
	December 31, 2024
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(Dollars in Thousands)
Mortgage-backed securities:
Commercial	$	264	$	—	$	(10	)	$	254
Obligations of U.S. government-sponsored agencies		384		—		(27	)		357
Obligations of states and political subdivisions		34		—		(3	)		31
Total	$	682	$	—	$	(40	)	$	642

The scheduled maturities of investment securities available-for-sale and held-to-maturity as of March 31, 2025 are presented in the following table:


	Available-for-Sale				Held-to-Maturity
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
	(Dollars in Thousands)
Maturing within one year	$	20,278	$	20,109	$	—	$	—
Maturing after one to five years		26,668		25,527		242		237
Maturing after five to ten years		57,533		54,387		290		271
Maturing after ten years		60,862		61,291		100		94
Total	$	165,341	$	161,314	$	632	$	602

For purposes of the maturity table, mortgage-backed securities, which are not due at a single maturity date, have been allocated over maturity groupings based on the weighted-average contractual maturities of underlying collateral. The mortgage-backed securities generally mature earlier than their weighted-average contractual maturities because of principal prepayments.

The following tables reflect fair value and gross unrealized losses, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, as of March 31, 2025 and December 31, 2024.


	Available-for-Sale
	March 31, 2025
	Less than 12 Months					12 Months or More
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(Dollars in Thousands)
Mortgage-backed securities:
Residential	$	4,681	$	(10	)	$	26,999	$	(1,921	)
Commercial		881		(4	)		4,936		(155	)
Obligations of U.S. government-sponsored agencies		—		—			4,599		(471	)
Obligations of states and political subdivisions		—		—			1,549		(17	)
Corporate notes		—		—			14,456		(1,303	)
U.S. Treasury securities		—		—			38,797		(1,226	)
Total	$	5,562	$	(14	)	$	91,336	$	(5,093	)


	Held-to-Maturity
	March 31, 2025
	Less than 12 Months				12 Months or More
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(Dollars in Thousands)
Mortgage-backed securities:
Commercial	$	—	$	—	$	228	$	(8	)
Obligations of U.S. government-sponsored agencies		—		—		354		(21	)
Obligations of states and political subdivisions		—		—		20		(1	)
Total	$	—	$	—	$	602	$	(30	)


	Available-for-Sale
	December 31, 2024
	Less than 12 Months					12 Months or More
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(Dollars in Thousands)
Mortgage-backed securities:
Residential	$	41,417	$	(424	)	$	28,520	$	(2,344	)
Commercial		3,374		(13	)		5,331		(189	)
Obligations of U.S. government-sponsored agencies		3,823		(1	)		4,457		(619	)
Obligations of states and political subdivisions		—		—			1,549		(28	)
Corporate notes		—		—			13,886		(1,871	)
U.S. Treasury securities		—		—			42,359		(1,660	)
Total	$	48,614	$	(438	)	$	96,102	$	(6,711	)


	Held-to-Maturity
	December 31, 2024
	Less than 12 Months				12 Months or More
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(Dollars in Thousands)
Mortgage-backed securities:
Commercial	$	—	$	—	$	254	$	(10	)
Obligations of U.S. government-sponsored agencies		—		—		357		(27	)
Obligations of states and political subdivisions		—		—		31		(3	)
Total	$	—	$	—	$	642	$	(40	)

Available-for-Sale Considerations

For any securities classified as available-for-sale that are in an unrealized loss position as of the balance sheet date, the Company assesses whether or not it intends to sell the security, or more-likely-than-not will be required to sell the security, before recovery of its amortized cost basis which would require a write-down to fair value through net income.

As of March 31, 2025, 95 available-for-sale debt securities had been in a loss position for more than 12 months, and four available-for-sale debt securities had been in a loss position for less than 12 months. As of December 31, 2024, 97 available-for-sale debt securities had been in a loss position for more than 12 months, and 16 available-for-sale debt securities had been in a loss position for less than 12 months. As of March 31, 2025, the Company had the current intent and ability to retain its investments for a period of time that management believes to be sufficient to allow for any anticipated recovery of fair value. As of March 31, 2025 and December 31, 2024, the losses for all available-for-sale securities were considered to be a direct result of the effect that the prevailing interest rate environment had on the value of debt securities and were not related to the creditworthiness of the issuers. Accordingly, no allowance for credit losses ("ACL") was considered necessary related to available-for-sale securities as of March 31, 2025 or December 31, 2024. Accrued interest receivable is excluded from the estimate of credit losses for available-for-sale securities. As of both March 31, 2025 and December 31, 2024, accrued interest receivable totaled $0.7 million with no related ACL and was reported in the accrued interest line on the accompanying consolidated balance sheets.

Held-to-Maturity Considerations

Each quarter, management evaluates the held-to-maturity investment portfolio on a collective basis by major security type to determine whether an ACL is needed. Qualitative factors are used in the Company’s credit loss assessments, including current and forecasted economic conditions, the characteristics of the debt issuer, and the historic ability of the issuer to make contractual principal and interest payments. Specifically, with regard to mortgage-backed securities or obligations of U.S. government sponsored agencies thereof, it is expected that the securities will not be settled at prices less than the amortized cost bases of the securities as such securities are either backed by the full faith and credit of the U.S. government or the agency. With regard to obligations of states and political subdivisions, management considers issuer bond ratings, historical loss rates for given bond ratings, and whether the issuers continue to make timely principal and interest payments under contractual terms of the securities. Based on these evaluations, no ACL was recorded by the Company for the held-to-maturity investment portfolio as of March 31, 2025 or December 31, 2024. As of March 31, 2025 and December 31, 2024, accrued interest receivable totaled $3.0 thousand and $2.0 thousand, respectively, with no related ACL and was reported in the accrued interest line on the accompanying consolidated balance sheets.

Pledged Securities

Investment securities with a carrying value of $62.6 million and $72.1 million as of March 31, 2025 and December 31, 2024, respectively, were pledged to secure public deposits and for other purposes.

LOANS AND LEASES

Portfolio Segments

The Company has divided the loan portfolio into the following portfolio segments based on risk characteristics:

Construction, land development and other land loans – Commercial construction, land and land development loans include loans for the development of residential housing projects, loans for the development of commercial and industrial use property, loans for the purchase and improvement of raw land and loans primarily for agricultural production that are secured by farmland. These loans are secured in whole or in part by the underlying real estate collateral and are generally guaranteed by the principals of the borrowing entity.

Secured by 1-4 family residential properties – These loans include conventional mortgage loans on one-to-four family residential properties. These properties may serve as the borrower’s primary residence, vacation home or investment property. Also included in this portfolio are home equity loans and lines of credit. This type of lending, which is secured by a first or second mortgage on the borrower’s residence, allows customers to borrow against the equity in their home.

Secured by multi-family residential properties – This portfolio segment includes mortgage loans secured by apartment buildings.

Secured by non-residential commercial real estate – This portfolio segment includes real estate loans secured by commercial and industrial properties, office or mixed-use facilities, strip shopping centers or other commercial property. These loans are generally guaranteed by the principals of the borrowing entity.

Commercial and industrial loans and leases – This portfolio segment includes loans and leases to commercial customers for use in the normal course of business. These credits may be loans, lines of credit and leases to financially strong borrowers, secured by inventories, equipment or receivables, and are generally guaranteed by the principals of the borrowing entity.

Direct consumer – This portfolio segment includes a variety of secured and unsecured personal loans, including automobile loans, loans for household and personal purposes and all other direct consumer installment loans.

Indirect consumer – This portfolio segment includes loans secured by collateral purchased by consumers at retail stores with whom the Company has an established relationship to provide financing for the retail products sold if applicable underwriting standards are met. The collateral securing these loans primarily includes recreational vehicles, campers, boats, horse trailers and cargo trailers.

As of March 31, 2025 and December 31, 2024, the composition of the loan portfolio by portfolio segment was as follows:


	March 31, 2025		December 31, 2024
Real estate loans:
Construction, land development and other land loans	$	58,572	$	65,537
Secured by 1-4 family residential properties		68,523		69,999
Secured by multi-family residential properties		106,374		101,057
Secured by non-residential commercial real estate		214,065		227,751
Commercial and industrial loans and leases (1)		45,166		44,238
Consumer loans:
Direct		4,610		4,774
Indirect		351,025		309,683
Total loans		848,335		823,039
Allowance for credit losses on loans and leases		10,405		10,184
Net loans (2)	$	837,930	$	812,855

(1)

Includes equipment financing leases, which totaled $15.2 million as of March 31, 2025 and $14.2 million as of December 31, 2024.

(2)

Loans are presented net of unearned income and unamortized deferred fees and costs of $0.8 million as of both March 31, 2025 and December 31, 2024. In addition, loans are also presented net of unamortized premiums associated with indirect loans of $13.7 million and $10.6 million as of March 31, 2025 and December 31, 2024, respectively.

Accrued interest receivable is not included in the amortized cost basis of the Company's loans held for investment ("LHFI"). As of March 31, 2025 and December 31, 2024, accrued interest receivable for LHFI totaled $3.0 million and $2.8 million, respectively, with no related ACL and was reported in the accrued interest line on the accompanying consolidated balance sheets.

The Company makes commercial, real estate and installment loans to its customers. Although the Company has a diversified loan portfolio, 52.8% and 56.4% of the portfolio was concentrated in loans secured by real estate as of March 31, 2025 and December 31, 2024, respectively.

Loans with a carrying value of $90.7 million and $92.6 million were pledged as collateral to secure Federal Home Loan Bank (“FHLB”) borrowings as of March 31, 2025 and December 31, 2024, respectively. In addition, loans with a carrying value of $309.7 million and $285.2 million were pledged to secure borrowings with the Federal Reserve Bank ("FRB") as of March 31, 2025 and December 31, 2024, respectively.

Related Party Loans

In the ordinary course of business, the Bank makes loans to certain officers and directors of the Company, including companies with which they are associated. These loans are made on the same terms as those prevailing for comparable transactions with unrelated parties. Management believes that such loans do not represent more than a normal risk of collectability, nor do they present other unfavorable features. The aggregate balances of such related party loans and commitments were $11.4 million as of both March 31, 2025 and December 31, 2024. During the three months ended March 31, 2025, there were no new loans to related parties, and no repayments made by related parties. During the year ended December 31, 2024, there were new loans of $1.4 million to related parties, and repayments made of $1.4 million by related parties.

Allowances for Credit Losses

Allowance for Credit Losses on Loans and Leases

The Company records the ACL on loans and leases as a contra-asset valuation account that is deducted from the amortized cost basis of loans and leases held for investment. Loans are charged off against the ACL when management believes that the uncollectibility of a loan balance is confirmed. Recoveries of previously charged off loans are also recorded to the ACL when collected. As of each quarter-end date, the Company evaluates the appropriateness of the ACL on loans and leases and adjusts the ACL through the provision for (recovery of) credit losses.

Determining the appropriateness of the ACL on loans and leases is complex and requires judgment by management about the effects of matters that are inherently uncertain. The level of the ACL is influenced by loan and lease volumes and mix, historical credit loss experience, estimated remaining life of portfolio segments, asset quality characteristics, delinquency status, and other conditions including reasonable and supportable forecasts of economic conditions and qualitative adjustment factors based on management’s understanding of various attributes that could impact life-of-loan losses as of the balance sheet date. The methodology to estimate losses includes two basic components: (1) an asset-specific component for individual loans that do not share similar risk characteristics with other loans, and (2) a pooled component for estimated expected credit losses for loans that share similar risk characteristics.

Loans that do not share risk characteristics with other loans are evaluated on an individual basis. The process for determining whether a loan should be evaluated on an individual basis begins with a determination of credit rating. All loans graded by management as substandard or worse with a total commitment of $0.5 million or more are evaluated on an individual basis. At management's discretion, other loans may be evaluated, including loans less than $0.5 million, if management determines that the loans exhibit unique risk characteristics. For loans individually evaluated, the ACL is based primarily on the fair value of the underlying collateral, less any estimated costs to sell, as applicable, utilizing independent third-party appraisals, and assessment of borrower guarantees. The fair value is compared to the amortized cost basis of the loan to determine if an ACL should be recognized.

For estimating the component of the ACL that shares similar risk characteristics, loans are segregated into pooled loan categories that share risk characteristics. Loans are designated into pooled categories based on product types, business lines, collateral, and other risk characteristics. For all pooled loan categories, the Company uses a loss-rate methodology to calculate estimated life-of-loan and lease credit losses. This methodology focuses on historical credit loss rates applied over the estimated weighted average remaining life of each loan pool, adjusted by qualitative factors, to estimate life-of-loan losses for each pool. The qualitative factors utilized include, among others, reasonable and supportable forecasts of economic data, including inflation and unemployment levels, as well as interest rates.

Allowance for Credit Losses on Unfunded Lending Commitments

The Company records an ACL on unfunded lending commitments in which the Company is exposed to credit risk via a present contractual obligation to extend credit unless the obligation is unconditionally cancellable by the Company. Unconditional lending commitments generally include unfunded term loan agreements, home equity lines of credit, lines of credit, and demand deposit account overdraft protection.

As of each quarter-end date, the Company estimates expected credit losses on unfunded lending commitments over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit unless that obligation is unconditionally cancellable by the Company. The ACL on unfunded lending commitments is recorded in other liabilities, and adjustments to the ACL are recorded through the provision for (recovery of) credit losses.

Summary of Allowances for Credit Losses

The following tables present changes in the ACL on loans and leases, as well as unfunded lending commitments, during the three months ended March 31, 2025 and 2024:


	As of and for the Three Months Ended March 31, 2025
	Construction, Land Development, and Other			Real Estate 1-4 Family			Real Estate Multi- Family			Non- Residential Commercial Real estate			Commercial and Industrial			Direct Consumer			Indirect Consumer			Total
	(Dollars in Thousands)
Allowance for credit losses on loans and leases:
Beginning balance	$	352		$	406		$	546		$	1,428		$	1,531		$	49		$	5,872		$	10,184
Charge-offs		—			—			—			—			—			—			(422	)		(422	)
Recoveries		—			6			—			—			16			57			74			153
Provision for (recovery of) credit losses on loans and leases		(73	)		(57	)		(17	)		(157	)		(20	)		(59	)		873			490
Allowance for credit losses on loans and leases	$	279		$	355		$	529		$	1,271		$	1,527		$	47		$	6,397		$	10,405


Allowance for credit losses on unfunded lending commitments:
Beginning balance	$	280		$	1		$	43		$	16		$	34		$	2		$	—		$	376
Provision for (recovery of) credit losses on unfunded lending commitments		50			—			(1	)		(9	)		—			(2	)		—			38
Allowance for credit losses on unfunded lending commitments	$	330		$	1		$	42		$	7		$	34		$	—		$	—		$	414


	As of and for the Three Months Ended March 31, 2024
	Construction, Land Development, and Other			Real Estate 1-4 Family			Real Estate Multi- Family			Non- Residential Commercial Real estate			Commercial and Industrial			Direct Consumer			Indirect Consumer			Total
	(Dollars in Thousands)
Allowance for credit losses on loans and leases:
Beginning balance	$	565		$	591		$	415		$	1,425		$	513		$	64		$	6,934		$	10,507
Charge-offs		—			(2	)		—			—			—			(22	)		(366	)		(390	)
Recoveries		—			23			—			—			—			100			84			207
Provision for (recovery of) credit losses on loans and leases		95			(80	)		(15	)		(75	)		(24	)		(74	)		285			112
Allowance for credit losses on loans and leases	$	660		$	532		$	400		$	1,350		$	489		$	68		$	6,937		$	10,436


Allowance for credit losses on unfunded lending commitments:
Beginning balance	$	450		$	1		$	9		$	2		$	102		$	5		$	—		$	569
Provision for (recovery of) credit losses on unfunded lending commitments		(100	)		(1	)		(1	)		4			—			(14	)		—			(112	)
Allowance for credit losses on unfunded lending commitments	$	350		$	—		$	8		$	6		$	102		$	(9	)	$	—		$	457

Credit Quality Indicators

The Company utilizes a credit grading system that provides a uniform framework for establishing and monitoring credit risk in the loan portfolio. Under this system, construction, land, multi-family real estate, other commercial real estate, and commercial and industrial loans are graded based on pre-determined risk metrics and categorized into one of nine risk grades. These risk grades can be summarized into categories described as pass, special mention, substandard, doubtful and loss, as described in further detail below.

•

Pass (Risk Grades 1-5): Loans in this category include obligations in which the probability of default is considered low.

•

Special Mention (Risk Grade 6): Loans in this category exhibit potential credit weaknesses or downward trends deserving management’s close attention. If left uncorrected, these potential weaknesses may result in the deterioration of the repayment prospects for the asset or in the Company’s credit position at some future date. Special mention loans are not adversely classified and do not expose the Company to sufficient risk to warrant adverse classification. Although a special mention asset has a higher probability of default than pass-rated categories, its default is not imminent.

•

Substandard (Risk Grade 7): Loans in this category have defined weaknesses that jeopardize the orderly liquidation of debt. A substandard loan is inadequately protected by the current worth and paying capacity of the obligor or by the collateral pledged, if any. Normal repayment from the borrower is in jeopardy, although no loss of principal is envisioned. There is a distinct possibility that a partial loss of interest and/or principal will occur if the deficiencies are not corrected. Loss potential, while existing in the aggregate amount of substandard assets, does not have to exist in individual assets classified as substandard.

•

Doubtful (Risk Grade 8): Loans classified as doubtful have all of the weaknesses found in substandard loans, with the added characteristic that the weaknesses make collection of debt in full, based on currently existing facts, conditions and values, highly questionable or improbable. Serious problems exist such that partial loss of principal is likely; however, because of certain important, reasonably specific pending factors that may work to strengthen the assets, the loans’ classification as estimated losses is deferred until a more exact status may be determined. Such pending factors may include proposed merger, acquisition or liquidation procedures, capital injection, perfection of liens on additional collateral and refinancing plans. Loans classified as doubtful may include loans to borrowers that have demonstrated a history of failing to live up to agreements.

•

Loss (Risk Grade 9): Loans are classified in this category when borrowers are deemed incapable of repayment of unsecured debt. Loans to such borrowers are considered uncollectable and of such little value that continuance as active assets of the Company is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value, but rather that it is not prudent to defer writing off these assets, even though partial recovery may be realized in the future. The Company did not have any loans classified as Loss (Risk Grade 9) as of March 31, 2025 or December 31, 2024.

Because residential real estate and consumer loans are more uniform in nature, each loan is categorized into one of two risk grades, depending on whether the loan is considered to be performing or nonperforming. Performing loans are loans that are paying principal and interest in accordance with a contractual agreement. Nonperforming loans are loans that have demonstrated characteristics that indicate a probability of loss.

The tables below illustrate the carrying amount of loans and leases by credit quality indicator and year of origination as of March 31, 2025, as well as gross charge-offs for the three months ended March 31, 2025.


		March 31, 2025
		Loans at Amortized Cost Basis by Origination Year
		2025		2024		2023		2022		2021		Prior		Total
		(Dollars in Thousands)
Commercial:

Construction, land development and other land loans	Pass	$	419	$	1,975	$	7,927	$	37,404	$	7,874	$	453	$	56,052
	Special Mention		—		—		—		—		56		—		56
	Substandard		—		—		2,464		—		—		—		2,464
	Doubtful		—		—		—		—		—		—		—
	Loss		—		—		—		—		—		—		—
	Subtotal	$	419	$	1,975	$	10,391	$	37,404	$	7,930	$	453	$	58,572

	Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Secured by multi-family residential properties	Pass	$	550	$	7,942	$	8,598	$	33,497	$	22,698	$	24,592	$	97,877
	Special Mention		—		—		—		8,497		—		—		8,497
	Substandard		—		—		—		—		—		—		—
	Doubtful		—		—		—		—		—		—		—
	Loss		—		—		—		—		—		—		—
	Subtotal	$	550	$	7,942	$	8,598	$	41,994	$	22,698	$	24,592	$	106,374

	Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Secured by non-residential commercial real estate	Pass	$	97	$	25,153	$	24,120	$	22,423	$	36,049	$	101,145	$	208,987
	Special Mention		—		—		546		3,186		—		331		4,063
	Substandard		—		—		—		—		475		540		1,015
	Doubtful		—		—		—		—		—		—		—
	Loss		—		—		—		—		—		—		—
	Subtotal	$	97	$	25,153	$	24,666	$	25,609	$	36,524	$	102,016	$	214,065

	Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Commercial and industrial loans and leases	Pass	$	2,579	$	13,244	$	5,278	$	3,261	$	4,917	$	12,899	$	42,178
	Special Mention		—		—		—		26		51		—		77
	Substandard		—		—		—		—		—		259		259
	Doubtful		—		—		2,652		—		—		—		2,652
	Loss		—		—		—		—		—		—		—
	Subtotal	$	2,579	$	13,244	$	7,930	$	3,287	$	4,968	$	13,158	$	45,166

	Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Total commercial	Pass	$	3,645	$	48,314	$	45,923	$	96,585	$	71,538	$	139,089	$	405,094
	Special Mention		—		—		546		11,709		107		331		12,693
	Substandard		—		—		2,464		—		475		799		3,738
	Doubtful		—		—		2,652		—		—		—		2,652
	Loss		—		—		—		—		—		—		—
		$	3,645	$	48,314	$	51,585	$	108,294	$	72,120	$	140,219	$	424,177

	Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—


		March 31, 2025
		Loans at Amortized Cost Basis by Origination Year
		2025		2024		2023		2022		2021		Prior		Total
		(Dollars in Thousands)
Consumer:

Secured by 1-4 family residential properties	Performing	$	395	$	4,295	$	3,366	$	17,982	$	14,169	$	26,749	$	66,956
	Non-performing		—		—		—		—		—		1,567		1,567
	Subtotal	$	395	$	4,295	$	3,366	$	17,982	$	14,169	$	28,316	$	68,523

	Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Direct	Performing	$	785	$	1,868	$	881	$	348	$	374	$	354	$	4,610
	Non-performing		—		—		—		—		—		—		—
	Subtotal	$	785	$	1,868	$	881	$	348	$	374	$	354	$	4,610

	Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Indirect	Performing	$	54,604	$	54,338	$	68,690	$	71,003	$	52,649	$	49,379	$	350,663
	Non-performing		—		—		202		98		—		62		362
	Subtotal	$	54,604	$	54,338	$	68,892	$	71,101	$	52,649	$	49,441	$	351,025

	Current period gross charge-offs	$	—	$	—	$	59	$	289	$	35	$	39	$	422

Total consumer	Performing	$	55,784	$	60,501	$	72,937	$	89,333	$	67,192	$	76,482	$	422,229
	Non-performing		—		—		202		98		—		1,629		1,929
		$	55,784	$	60,501	$	73,139	$	89,431	$	67,192	$	78,111	$	424,158

	Current period gross charge-offs	$	—	$	—	$	59	$	289	$	35	$	39	$	422

The tables below illustrate the carrying amount of loans and leases by credit quality indicator and year of origination as of December 31, 2024, as well as gross charge-offs for the year ended December 31, 2024.


		December 31, 2024
		Loans at Amortized Cost Basis by Origination Year
		2024		2023		2022		2021		2020		Prior		Total
		(Dollars in Thousands)
Commercial:

Construction, land development and other land loans	Pass	$	852	$	4,626	$	45,087	$	11,931	$	41	$	450	$	62,987
	Special Mention		—		—		—		61		—		—		61
	Substandard		—		2,489		—		—		—		—		2,489
	Doubtful		—		—		—		—		—		—		—
	Loss		—		—		—		—		—		—		—
	Subtotal	$	852	$	7,115	$	45,087	$	11,992	$	41	$	450	$	65,537

	Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Secured by multi-family residential properties	Pass	$	7,941	$	8,218	$	42,077	$	17,557	$	5,592	$	19,672	$	101,057
	Special Mention		—		—		—		—		—		—		—
	Substandard		—		—		—		—		—		—		—
	Doubtful		—		—		—		—		—		—		—
	Loss		—		—		—		—		—		—		—
	Subtotal	$	7,941	$	8,218	$	42,077	$	17,557	$	5,592	$	19,672	$	101,057

	Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Secured by non-residential commercial real estate	Pass	$	25,251	$	24,906	$	34,930	$	36,793	$	54,527	$	49,681	$	226,088
	Special Mention		—		—		316		—		334		—		650
	Substandard		—		—		—		483		147		383		1,013
	Doubtful		—		—		—		—		—		—		—
	Loss		—		—		—		—		—		—		—
	Subtotal	$	25,251	$	24,906	$	35,246	$	37,276	$	55,008	$	50,064	$	227,751

	Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	248	$	248

Commercial and industrial loans	Pass	$	13,458	$	5,562	$	3,499	$	5,189	$	2,888	$	9,963	$	40,559
	Special Mention		—		—		30		60		—		—		90
	Substandard		—		—		—		2		—		303		305
	Doubtful		—		3,284		—		—		—		—		3,284
	Loss		—		—		—		—		—		—		—
	Subtotal	$	13,458	$	8,846	$	3,529	$	5,251	$	2,888	$	10,266	$	44,238

	Current period gross charge-offs	$	—	$	—	$	54	$	—	$	43	$	24	$	121

Total commercial	Pass	$	47,502	$	43,312	$	125,593	$	71,470	$	63,048	$	79,766	$	430,691
	Special Mention		—		—		346		121		334		—		801
	Substandard		—		2,489		—		485		147		686		3,807
	Doubtful		—		3,284		—		—		—		—		3,284
	Loss		—		—		—		—		—		—		—
		$	47,502	$	49,085	$	125,939	$	72,076	$	63,529	$	80,452	$	438,583

	Current period gross charge-offs	$	—	$	—	$	54	$	—	$	43	$	272	$	369


		December 31, 2024
		Loans at Amortized Cost Basis by Origination Year
		2024		2023		2022		2021		2020		Prior		Total
		(Dollars in Thousands)
Consumer:

Secured by 1-4 family residential properties	Performing	$	4,559	$	3,525	$	18,060	$	14,746	$	5,884	$	21,612	$	68,386
	Non-performing		—		—		—		—		—		1,613		1,613
	Subtotal	$	4,559	$	3,525	$	18,060	$	14,746	$	5,884	$	23,225	$	69,999

	Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	2	$	2

Direct consumer	Performing	$	2,397	$	1,077	$	430	$	487	$	283	$	100	$	4,774
	Non-performing		—		—		—		—		—		—		—
	Subtotal	$	2,397	$	1,077	$	430	$	487	$	283	$	100	$	4,774

	Current period gross charge-offs	$	—	$	—	$	1	$	42	$	3	$	16	$	62

Indirect consumer	Performing	$	54,546	$	72,461	$	74,514	$	55,904	$	41,908	$	10,350	$	309,683
	Non-performing		—		—		—		—		—		—		—
	Subtotal	$	54,546	$	72,461	$	74,514	$	55,904	$	41,908	$	10,350	$	309,683

	Current period gross charge-offs	$	21	$	95	$	278	$	531	$	329	$	127	$	1,381

Total consumer:	Performing	$	61,502	$	77,063	$	93,004	$	71,137	$	48,075	$	32,062	$	382,843
	Non-performing		—		—		—		—		—		1,613		1,613
		$	61,502	$	77,063	$	93,004	$	71,137	$	48,075	$	33,675	$	384,456

	Current period gross charge-offs	$	21	$	95	$	279	$	573	$	332	$	145	$	1,445

The following table provides an aging analysis of past due loans by class as of March 31, 2025:


	As of March 31, 2025
	30-59 Days Past Due			60-89 Days Past Due			90 Days Or Greater			Total Past Due			Current			Total Loans			Recorded Investment > 90 Days And Accruing
	(Dollars in Thousands)
Loans secured by real estate:
Construction, land development and other land loans	$	—		$	—		$	—		$	—		$	58,572		$	58,572		$	—
Secured by 1-4 family residential properties		227			—			—			227			68,296			68,523			—
Secured by multi-family residential properties		—			—			—			—			106,374			106,374			—
Secured by non-residential commercial real estate		—			—			22			22			214,043			214,065			—
Commercial and industrial loans		63			—			2,652			2,715			42,451			45,166			—
Consumer loans:											—
Direct		3			1			—			4			4,606			4,610			—
Indirect		594			295			362			1,251			349,774			351,025			—
Total	$	887		$	296		$	3,036		$	4,219		$	844,116		$	848,335		$	—
As a percentage of total loans		0.10	%		0.03	%		0.36	%		0.50	%		99.50	%		100.00	%

The following table provides an aging analysis of past due loans by class as of December 31, 2024:


	As of December 31, 2024
	30-59 Days Past Due			60-89 Days Past Due			90 Days Or Greater			Total Past Due			Current			Total Loans			Recorded Investment > 90 Days And Accruing
	(Dollars in Thousands)
Loans secured by real estate:
Construction, land development and other land loans	$	—		$	—		$	—		$	—		$	65,537		$	65,537		$	—
Secured by 1-4 family residential properties		515			—			—			515			69,484			69,999			—
Secured by multi-family residential properties		—			—			—			—			101,057			101,057			—
Secured by non-residential commercial real estate		—			—			—			—			227,751			227,751			—
Commercial and industrial loans		3,317			—			—			3,317			40,921			44,238			—
Consumer loans:
Direct		15			—			—			15			4,759			4,774			—
Indirect		489			47			—			536			309,147			309,683			—
Total	$	4,336		$	47		$	—		$	4,383		$	818,656		$	823,039		$	—
As a percentage of total loans		0.52	%		0.01	%		0.00	%		0.53	%		99.47	%		100.00	%

The tables below present the amortized cost of loans on nonaccrual status and loans past due 90 days or more and still accruing interest as of March 31, 2025 and December 31, 2024. Also presented is the balance of loans on nonaccrual status at March 31, 2025 and December 31, 2024 for which there was no related ACL recorded.


	Loans on Non-Accrual Status
	March 31, 2025
	(Dollars in Thousands)
	Total nonaccrual loans		Nonaccrual loans with no allowance for credit losses		Loans past due 90 days or more and still accruing
Loans secured by real estate:
Construction, land development and other land loans	$	—	$	—	$	—
Secured by 1-4 family residential properties		632		389		—
Secured by multi-family residential properties		—		—		—
Secured by non-residential commercial real estate		22		—		—
Commercial and industrial loans		2,652		—		—
Consumer loans:						—
Direct		—		—		—
Indirect		362		—		—
Total loans	$	3,668	$	389	$	—


	Loans on Non-Accrual Status
	December 31, 2024
	(Dollars in Thousands)
	Total nonaccrual loans		Nonaccrual loans with no allowance for credit losses		Loans past due 90 days or more and still accruing
Loans secured by real estate:
Construction, land development and other land loans	$	—	$	—	$	—
Secured by 1-4 family residential properties		665		404		—
Secured by multi-family residential properties		—		—		—
Secured by non-residential commercial real estate		—		—		—
Commercial and industrial loans		3,284		—		—
Consumer loans:						—
Direct		—		—		—
Indirect		—		—		—
Total loans	$	3,949	$	404	$	—

The following tables present the amortized cost basis of collateral dependent loans as of March 31, 2025 and December 31, 2024, which loans are individually evaluated to determine credit losses:


	March 31, 2025
	Real Estate		Other		Total
	(Dollars in Thousands)
Loans secured by real estate
Construction, land development and other land loans	$	2,464	$	—	$	2,464
Secured by 1-4 family residential properties		1,367		—		1,367
Secured by multi-family residential properties		—		—		—
Secured by non-residential commercial real estate		371		—		371
Commercial and industrial		—		2,693		2,693
Direct consumer		—		—		—
Total loans individually evaluated	$	4,202	$	2,693	$	6,895


	December 31, 2024
	Real Estate		Other		Total
	(Dollars in Thousands)
Loans secured by real estate
Construction, land development and other land loans	$	2,489	$	—	$	2,489
Secured by 1-4 family residential properties		1,402		—		1,402
Secured by multi-family residential properties		—		—		—
Secured by non-residential commercial real estate		383		—		383
Commercial and industrial		—		3,327		3,327
Direct consumer		—		—		—
Total loans individually evaluated	$	4,274	$	3,327	$	7,601

Loan Modifications Made to Borrowers Experiencing Financial Difficulty

From time to time, the Company may modify the terms of loan agreements with borrowers that are experiencing financial difficulties. Modification of the terms of such loans typically include one or a combination of the following: a reduction of the stated interest rate of the loan; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; or a permanent reduction of the recorded investment in the loan. No modifications in 2025 or 2024 resulted in the permanent reduction of the recorded investment in the loan.

During the three months ended March 31, 2025 and the year ended December 31, 2024, the Company did not modify any loans to borrowers experiencing financial difficulty, and there were no payment defaults on loans that were modified in the previous twelve months.

OTHER REAL ESTATE OWNED AND REPOSSESSED ASSETS

Other Real Estate Owned

Other real estate and certain other assets acquired in foreclosure are reported at the net realizable value of the property, less estimated costs to sell. The following table summarizes foreclosed property activity as of the three months ended March 31, 2025 and 2024:


	March 31, 2025			March 31, 2024
	(Dollars in Thousands)
Beginning balance	$	1,509		$	602
Additions (1)		—			—
Sales proceeds		(186	)		—
Gross gains		35			—
Gross losses		—			—
Net gains		35			—
Impairment		(30	)		(30	)
Ending balance	$	1,328		$	572

(1)

Additions to other real estate owned (“OREO”) may include transfers from loans, transfers from closed branches, and capitalized improvements to existing OREO properties.

Valuation adjustments are recorded in other non-interest expense and are primarily post-foreclosure write-downs that are a result of continued declining property values based on updated appraisals or other indications of value, such as offers to purchase. Net realizable value less estimated costs to sell of foreclosed residential real estate held by the Company was zero as of both March 31, 2025 and 2024. In addition, the Company held zero and $20 thousand in consumer mortgage loans collateralized by residential real estate that were in the process of foreclosure as of March 31, 2025 and 2024, respectively.

Repossessed Assets

The Company also acquires assets through the repossession of the underlying collateral of loans in default. As of both March 31, 2025 and 2024, total repossessed assets were $0.2 million. Repossessed assets are included in other assets in the Company's consolidated balance sheets.

GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill is tested for impairment annually, or more often if circumstances warrant. If, as a result of impairment testing, it is determined that the fair value of goodwill is lower than its carrying amount, goodwill must be written down to its implied fair value. Subsequent increases in goodwill value are not recognized in the consolidated financial statements. Goodwill totaled $7.4 million as of both March 31, 2025 and December 31, 2024. Goodwill impairment was neither indicated nor recorded during the three months ended March 31, 2025 or the year ended December 31, 2024.

Core deposit premiums are amortized over a seven-year period and are periodically evaluated, at least annually, as to the recoverability of their carrying value. No write-downs of core deposit premiums were recorded by the Company during the three months ended March 31, 2025 or the year ended December 31, 2024.

The Company’s goodwill and other intangible assets (carrying basis and accumulated amortization) as of March 31, 2025 and December 31, 2024 were as follows:


	March 31, 2025			December 31, 2024
	(Dollars in Thousands)
Goodwill	$	7,435		$	7,435
Core deposit intangible:
Gross carrying amount		2,048			2,048
Accumulated amortization		(2,018	)		(1,999	)
Core deposit intangible, net		30			49
Total	$	7,465		$	7,484

As of March 31, 2025, the Company’s estimated remaining amortization expense on intangible assets was $30 thousand. The remainder of the amortization expense will occur during 2025.

The net carrying amount of the Company’s core deposit premiums is not considered recoverable if it exceeds the sum of the undiscounted cash flows expected to result from use and eventual disposition. That assessment is based on the carrying amount of the intangible assets subject to amortization at the date on which it is tested for recoverability. Intangible assets subject to amortization are tested by the Company for recoverability whenever events or changes in circumstances indicate that their carrying amount may not be recoverable.

BORROWINGS

Short-Term Borrowings

Short-term borrowings consist of federal funds purchased, securities sold under repurchase agreements, and short-term FHLB advances with original maturities of one year or less.

•

Federal funds purchased, which represent unsecured lines of credit that generally mature within one to 90 days, are available to the Bank through arrangements with correspondent banks and the FRB. As of March 31, 2025 and December 31, 2024, the Bank had $20.0 million and zero, respectively, in outstanding federal funds purchased.

•

Securities sold under repurchase agreements, which are secured borrowings, generally are reflected at the amount of cash received in connection with the transaction. The Bank may be required to provide additional collateral based on the fair value of the underlying securities. The Bank monitors the fair value of the underlying securities on a daily basis. There were no securities sold under repurchase agreements as of both March 31, 2025 and December 31, 2024.

•

Short-term FHLB advances are secured borrowings available to the Bank as an alternative funding source. As of March 31, 2025 and December 31, 2024, the Bank had $25.0 and $10.0 million, respectively, in outstanding FHLB advances with original maturities of less than one year.

Long-Term Borrowings

FHLB Advances

The Company may use FHLB advances with original maturities of more than one year as an alternative to funding sources with similar maturities, such as certificates of deposit or other deposit programs. These advances generally offer more attractive rates than other mid-term financing options. They are also flexible, allowing the Company to quickly obtain the necessary maturities and rates that best suit its overall asset/liability strategy. FHLB advances with an original maturity of more than one year are classified as long-term. As of both March 31, 2025 and December 31, 2024, the Company did not have any long-term FHLB advances outstanding.

Subordinated Debt

On October 1, 2021, the Company completed a private placement of $11.0 million in aggregate principal amount of fixed-to-floating rate subordinated notes that will mature on October 1, 2031 (the “Notes”). The Notes bear interest at a rate of 3.50% per annum for the first five years, after which the interest rate will be reset quarterly to a benchmark interest rate per annum which, subject to certain conditions provided in the Notes, will be equal to the then current three-month term Secured Overnight Financing Rate (“SOFR”) plus 275 basis points. The Company used the net proceeds of the Notes for general corporate purposes, which included repurchasing of the Company’s common stock, and supporting organic growth plans, including the maintenance of the Bank's capital ratios. Net of unamortized debt issuance costs, the Notes were recorded as long-term borrowings totaling $10.9 million as of both March 31, 2025 and December 31, 2024. The table below provides additional information related to the Notes as of and for the three months ended March 31, 2025 and 2024.


	March 31,	March 31,
	2025	2024
	(Dollars in Thousands)
Balance at period-end	$10,890	$10,817
Average balance during the period	$10,884	$10,811
Maximum month-end balance during the period	$10,890	$10,817
Average rate paid during the period, including amortization of debt issuance costs	4.20%	4.20%
Weighted average remaining maturity (in years)	6.50	7.50

Available Credit

As an additional funding source, the Company has available unused lines of credit with correspondent banks, the FRB and the FHLB. Certain of these funding sources are subject to underlying collateral. As of March 31, 2025 and December 31, 2024, the Company’s available unused lines of credit consisted of the following:


Available Unused Lines of Credit	Collateral Requirements	March 31, 2025	December 31, 2024
Correspondent banks	None	$48.0 million	$48.0 million
FHLB advances (1)	Subject to collateral	$285.3 million	$319.9 million
FRB (2)	Subject to collateral	$160.0 million	$165.1 million

(1)

These amounts represent the total remaining credit the Company has from the FHLB, but this credit can only be utilized to the extent that underlying collateral exists. The total lendable collateral value of assets pledged (including loans and investment securities) associated with FHLB advances and letters of credit totaled $54.2 million and $55.4 million as of March 31, 2025 and December 31, 2024, respectively. The Company’s collateral exposure with the FHLB in the form of advances and letters of credit was $45.0 million and $10.0 million as of March 31, 2025 and December 31, 2024, respectively, leaving an excess of collateral of $9.2 million and $45.4 million available to utilize for additional credit as of the respective dates. The Company also has the ability to pledge additional assets to increase the availability of borrowings.

(2)

The Company has access to the FRB's discount window, which allows borrowing on pledged collateral that includes eligible investment securities and loans under 90-day terms. The amounts shown in the table represent the Company's unused borrowing capacity as of the applicable date based on collateral pledged to the FRB's discount window.

INCOME TAXES

The provision for income taxes was $0.6 million and $0.7 million for the three months ended March 31, 2025 and 2024, respectively. The Company’s effective tax rate was 23.8% and 23.6%, respectively, for the same periods. The effective tax rate is impacted by recurring permanent differences, such as those associated with bank-owned life insurance and tax-exempt investment and loan income.

The Company had a net deferred tax asset of $3.0 million and $4.1 million as of March 31, 2025 and December 31, 2024, respectively. The net deferred tax asset, which is included on the interim condensed consolidated balance sheets in other assets, is impacted by changes in the fair value of securities available-for-sale and cash flow hedges, changes in net operating loss carryforwards, changes in the allowance for credit losses, and other book-to-tax temporary differences.

DEFERRED COMPENSATION PLANS

Supplemental Retirement Benefits

The Company has entered into supplemental retirement compensation benefits agreements with certain non-employee directors and former executive officers. These agreements are structured as nonqualified retirement plans for federal income tax purposes. The Company’s obligation under these agreements is accrued as deferred compensation in accordance with the terms of the individual contracts over the required service period to the date the employee is eligible to receive benefits. The Company’s deferred compensation obligation under these agreements totaled $2.6 million and $2.7 million as of March 31, 2025 and December 31, 2024, respectively.

Non-Employee Directors' Deferred Compensation Plan

Non-employee directors may elect to defer payment of all or any portion of their director fees under Bancshares’ Non-Employee Directors’ Deferred Compensation Plan (the “Deferral Plan”). The Deferral Plan permits non-employee directors to invest their directors’ fees and to receive the adjusted value of the deferred amounts in cash and/or shares of Bancshares’ common stock, as applicable. Neither Bancshares nor the Bank makes any contribution to participants’ accounts under the Deferral Plan. As of March 31, 2025 and December 31, 2024, a total of 78,102 and 108,190 shares of Bancshares common stock, respectively, were being held as stock equivalents in connection with the Deferral Plan. All deferred fees and shares of Bancshares common stock are reflected as compensation expense in the period earned. The Company classifies all deferred directors’ fees allocated to be paid in shares as equity as additional paid-in capital. The Company may use issued shares or shares of treasury stock to satisfy these obligations when due.

10.

STOCK AWARDS

In 2013, Bancshares’ shareholders authorized the Company to provide share-based compensation awards to eligible employees, directors and consultants of the Company and its affiliates pursuant to the 2013 Incentive Plan. Available award types included stock options, stock appreciation rights, restricted stock and restricted stock units, and performance share awards. The 2013 Incentive Plan, as amended in 2019, expired in March 2023. In April 2023, Bancshares’ shareholders approved the 2023 Incentive Plan, which authorizes the Compensation Committee of the Board of Directors to grant substantially the same types of share-based awards to eligible employees, directors and

consultants. Collectively, the 2013 Incentive Plan and the 2023 Incentive Plan are herein referred to as the Company’s “Incentive Plan.” In accordance with the Incentive Plan, shares of common stock available for issuance pursuant to the grants may consist, in whole or in part, of authorized and unissued shares, treasury shares or shares reacquired by the Company in any manner. Since the origination of the Incentive Plan, through March 31, 2025, only stock options and restricted stock have been granted. Stock-based compensation expense related to stock awards totaled $0.2 million and $0.1 million for the three months ended March 31, 2025 and 2024, respectively.

Stock Options

Stock option awards have been granted with an exercise price equal to the market price of the Company’s common stock on the date of the grant and have vesting periods ranging from one to three years, with 10-year contractual terms. The Company recognizes the cost of services received in exchange for stock option awards based on the grant date fair value of the award, with compensation expense recognized on a straight-line basis over the award’s vesting period. The fair value of outstanding awards was determined using the Black-Scholes option pricing model. The Company did not grant any stock option awards during the three months ended March 31, 2025 or 2024.

The following table summarizes the Company’s stock option activity for the periods presented.


	Three Months Ended
	March 31, 2025				March 31, 2024
	Number of Shares		Weighted-Average Exercise Price		Number of Shares		Weighted-Average Exercise Price
Options:
Outstanding, beginning of period		268,250	$	10.62		411,900	$	9.77
Granted		—		—		—		—
Exercised		20,750		8.30		8,750		8.09
Expired		5,500		8.23		500		8.00
Forfeited		—		—		—		—
Options outstanding, end of period		242,000	$	10.88		402,650	$	9.81
Options exercisable, end of period		242,000	$	10.88		402,650	$	9.81

The aggregate intrinsic value of stock options outstanding (calculated as the amount by which the market value of underlying stock exceeds the exercise price of the option) was $0.6 million and $0.2 million as of March 31, 2025 and 2024, respectively.

Restricted Stock

During the three months ended March 31, 2025 and 2024, 49,400 shares and 55,300 shares, respectively, of restricted stock were granted. Restricted stock awards granted to employees had a three-year vesting period, while awards granted to non-employee directors had a one-year vesting period. The Company recognizes the cost of services received in exchange for restricted stock awards based on the grant date closing price of the stock, with compensation expense recognized on a straight-line basis over the award’s vesting period.

The following table summarizes the Company's restricted stock award activity for the periods presented.


	Three Months Ended
	March 31, 2025				March 31, 2024
	Number of Shares		Weighted-Average Grant-Date Fair Value		Number of Shares		Weighted-Average Grant-Date Fair Value
Restricted stock awards:
Unvested shares, beginning of period		92,599	$	10.29		86,443	$	10.03
Granted		49,400		13.15		55,300		10.41
Released from restriction		50,075		10.37		45,977		9.94
Forfeited		—		—		—		—
Unvested shares, end of period		91,924	$	11.78		95,766	$	10.30

11.

LEASES

The Company is involved in a number of operating leases, primarily for branch locations. Branch leases have remaining lease terms ranging from one year to nine years, some of which include options to extend the leases for up to five years, and some of which include an option to

terminate the lease within one year. The Company also leases certain office facilities to third parties and classifies these leases as operating leases.

The following table provides a summary of the components of lease income and expense, as well as the reporting location in the interim condensed consolidated statements of operations, for the three months ended March 31, 2025 and 2024:


	Location in the Condensed	Three Months Ended
	Consolidated Statements of Operations	March 31, 2025		March 31, 2024
		(Dollars in Thousands)
Operating lease income (1)	Lease income	$	284	$	257
Operating lease expense (2)	Net occupancy and equipment	$	109	$	156

(1)

Operating lease income includes rental income from owned properties.

(2)

Includes short-term lease costs. For the three months ended March 31, 2025 and 2024, short-term lease costs were nominal in amount.

The following table provides supplemental lease information for operating leases on the interim condensed consolidated balance sheets as of March 31, 2025 and December 31, 2024:


	Location in the Condensed
	Consolidated Balance Sheets	March 31, 2025			December 31, 2024
		(Dollars in Thousands)
Operating lease right-of-use assets	Other assets	$	1,838		$	1,921
Operating lease liabilities	Other liabilities	$	1,892		$	1,972
Weighted-average remaining lease term (in years)			6.00			5.14
Weighted-average discount rate			4.31	%		4.08	%

The following table provides supplemental lease information for the interim condensed consolidated statements of cash flows for the three months ended March 31, 2025 and 2024:


	Three Months Ended
	March 31, 2025		March 31, 2024
	(Dollars in Thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	103	$	98

The following table is a schedule of remaining future minimum lease payments for operating leases that had an initial or remaining non-cancellable lease term in excess of one year as of March 31, 2025:


	Minimum Rental Payments
	(Dollars in Thousands)
2025	$	310
2026		419
2027		308
2028		269
2029		183
2030 and thereafter		746
Total future minimum lease payments	$	2,235
Less: Imputed interest		343
Total operating lease liabilities	$	1,892

12.

DERIVATIVE FINANCIAL INSTRUMENTS

The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company manages its exposures to business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk, primarily by managing the amounts, sources, and duration of assets and liabilities. The Company uses interest rate derivative instruments to minimize unplanned fluctuations in earnings and cash flows caused by interest rate volatility. The Company’s interest rate risk management strategy generally involves modifying the repricing characteristics of certain assets and liabilities to mitigate negative impacts on net interest margin and/or cash flow. Interest rate derivative instruments utilized by the Company generally include interest rate swap contracts or option contracts, such as caps and floors. The Company’s existing credit derivatives are associated with loan participation arrangements, and are not used to manage interest rate risk in the Company’s assets or liabilities. The fair values of derivative instruments are carried in the Company’s consolidated balance sheets as assets and/or liabilities. The Company does not use derivatives for speculative purposes and generally enters into transactions that have a qualifying hedge relationship. When hedge accounting is used, derivatives are classified as either cash flow hedges or fair value hedges. The Company may also enter into derivative contracts that are not designated as hedges in order to mitigate economic risks or risks associated with volatility in connection with customer derivative transactions.

Cash Flow Hedges

In March 2025, the Company purchased an interest rate floor contract with the objective of protecting the Company against variability in expected future cash flows attributed to changes in the designated interest rate (1 Month CME Term SOFR) on the notional amount of $20.0 million based on interest receipts on loans and securities indexed to the designated interest rate. The contract was designated as a derivative instrument in cash flow hedges and is intended to mitigate the Company’s risk of loss associated with downward shifts in the designated interest rate. The contract will provide cash flow to the Company in the event the designated interest rate decreases below 3.05% before the contract’s designated termination date of March 15, 2029. As of March 31, 2025, the hedge relationship for the floor contract was designated effective, and accordingly, changes in the fair value of the contract were included as an adjustment to accumulated other comprehensive income.

In August 2024, the Company entered into two forward starting interest rate swap contracts with the objective of protecting the Company against variability in expected future cash flows attributed to changes in the designated interest rate (USD-SOFR-COMPOUND) on the designated notional of interest-bearing liabilities. Each of the contracts has a $20.0 million notional amount, or $40.0 million in the aggregate. The interest rate swaps were designated as derivative instruments in cash flow hedges. In accordance with the related contracts, the Company pays a fixed interest rate and receives a variable interest rate based on the designated interest rate, on the notional amounts. The swap contracts are scheduled to terminate on September 6, 2027 and March 15, 2028. As of March 31, 2025 and December 31, 2024, the hedge relationships for both swaps were designated effective, and accordingly, changes in the fair value of the contracts were included as an adjustment to accumulated other comprehensive income.

Derivative Contracts Not Receiving Hedge Accounting Treatment

Interest Rate Floor - In March 2024, the Company purchased an interest rate floor contract on the notional amount of $25.0 million. The floor contract protects the Company against variability in expected future cash flows attributed to changes in the designated interest rate (USD-SOFR-OIS-COMPOUND) on the $25.0 million notional amount. The contract was not designated as a hedging instrument, and accordingly, changes in the fair value of the contract are recorded as non-interest income or expense over the term of the contract. The contract is intended to mitigate the Company’s risk of loss associated with downward shifts in the designated interest rate in the event the designated interest rate decreases below 4.0% before the contract’s designated termination date of March 27, 2026.

Credit Derivatives - During 2024, the Company entered into three credit risk participation agreements with lead participant banks with which the Company shares participation loans. The Company is the guarantor under these agreements to provide reimbursement of losses resulting from a third-party default on the underlying swap. For participating in the agreements, the Company received one-time fees which were included in other liabilities. The derivatives are not eligible for hedge accounting treatment. Accordingly, valuation changes are recorded directly to non-interest income or expense.

Terminated Derivative Contracts

In March 2025, the Company voluntarily terminated three interest rate swap contracts, each with notional amounts of $10.0 million, or an aggregate amount of $30.0 million. Each of the swaps had previously been designated as fair value hedges with the objective of effectively converting a pool of fixed rate indirect consumer loans to a variable rate throughout the hedge durations in accordance with the portfolio layer method. The termination of the fair value hedges resulted in a nominal settlement with the counterparty.

As of March 31, 2025 and December 31, 2024, the Company had an unrealized gain of $0.3 million associated with an interest rate swap contract that was terminated in February 2023. Prior to termination, the swap was designated as a cash flow hedge on a notional of $10.0 million in interest payments associated with variable rate interest-bearing liabilities. The unrealized gain is being reclassified as an increase to net interest income over the original term of the contract which had a designated termination date of July 8, 2026.

Presentation

The table below reflects the notional amount and fair value of active derivative instruments included on the Company’s consolidated balance sheets on a net basis as of March 31, 2025 and December 31, 2024.


	As of March 31, 2025					As of December 31, 2024
			Estimated					Estimated
			Fair Value					Fair Value
	Notional Amount		Gain (Loss) (1)			Notional Amount		Gain (Loss) (1)
	(Dollars in Thousands)
Derivatives designated as hedging instruments:
Fair value hedges:
Interest rate swaps related to fixed rate indirect consumer loans	$	—	$	—		$	30,000	$	69
Total fair value hedges			$	—				$	69
Cash flow hedges:
Interest rate swaps related to interest-bearing liabilities	$	40,000	$	217		$	40,000	$	609
Interest rate floors	$	20,000		278		$	—		—
Total cash flow hedges			$	495				$	609
Total derivatives designated as hedging instruments, net			$	495				$	678
Derivatives not designated as hedging instruments:
Interest rate floors	$	25,000	$	15		$	50,000	$	18
Credit risk participation agreements	$	15,198		(71	)	$	15,198		(54	)
Total derivatives not designated as hedging instruments, net			$	(56	)			$	(36	)

(1)

Derivatives in a gain position are recorded as other assets and derivatives in a loss position are recorded as other liabilities in the consolidated balance sheets.

The following table presents the net effects of derivative instruments on the Company’s interim condensed consolidated statements of operations for the three months ended March 31, 2025 and 2024. The effects, which include the reclassification of unrealized gains on terminated swap contracts, are presented as either an increase or decrease to income before income taxes in the relevant caption of the Company’s interim condensed consolidated statements of operations.


Location in the Condensed		Three Months Ended
Consolidated Statements of Operations		March 31, 2025			March 31, 2024
		(Dollars in Thousands)
Interest income	Interest and fees on loans	$	(29	)	$	260
Interest expense	Interest on deposits		97			120
Interest expense	Interest on borrowings		—			36
Non-interest income	Other non-interest income		(17	)		—
Non-interest expense	Other non-interest expense		(4	)		(24	)
	Net increase to income before income taxes	$	47		$	392

13.

OTHER OPERATING INCOME AND EXPENSE

Other Operating Income

Other operating income for the three months ended March 31, 2025 and 2024 consisted of the following:


	Three Months Ended
	March 31, 2025		March 31, 2024
	(Dollars in Thousands)
Bank-owned life insurance	$	137	$	131
ATM fee income		84		85
Other income		82		93
Total	$	303	$	309

Other Operating Expense

Other operating expense for the three months ended March 31, 2025 and 2024 consisted of the following:


	Three Months Ended
	March 31, 2025		March 31, 2024
	(Dollars in Thousands)
Postage, stationery and supplies	$	149	$	178
Telephone/data communication		199		192
Collection and recoveries		70		26
Directors fees		93		96
Software amortization		108		90
Other real estate/foreclosure expense, net		20		31
Other expense		657		377
Total	$	1,296	$	990

14.

GUARANTEES, COMMITMENTS AND CONTINGENCIES

Credit

The Bank’s exposure to credit loss in the event of nonperformance by the other party for commitments to make loans and standby letters of credit is represented by the contractual amount of those instruments. The Bank uses the same credit policies in making these commitments as it does for on-balance sheet instruments.

In the normal course of business, there are outstanding commitments and contingent liabilities, such as commitments to extend credit, letters of credit and others, that are not included in the consolidated financial statements. The financial instruments involve, to varying degrees, elements of credit and interest rate risk in excess of amounts recognized in the financial statements. A summary of these commitments and contingent liabilities is presented below:


	March 31, 2025		December 31, 2024
	(Dollars in Thousands)
Standby letters of credit	$	—	$	—
Standby performance letters of credit	$	896	$	896
Commitments to extend credit	$	133,257	$	120,703

Standby letters of credit and standby performance letters of credit are contingent commitments issued by the Bank generally to guarantee the performance of a customer to a third party. The Bank has recourse against the customer for any amount that it is required to pay to a third party under a standby letter of credit or standby performance letter of credit. Revenues are recognized over the lives of the standby letters of credit and standby performance letters of credit. As of March 31, 2025 and December 31, 2024, the potential amounts of future payments that the Bank could be required to make under its standby letters of credit and standby performance letters of credit, which represent the Bank’s total credit risk in these categories, are included in the table above.

A commitment to extend credit is an agreement to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank upon the extension of credit, is based on management’s credit evaluation of the counterparty. Collateral held varies but may include accounts receivable, inventory, property, plant and equipment and income-producing commercial properties.

At each quarter end date, the Company calculates an allowance for unfunded lending commitments, including those described in the table above. The Company's allowance for unfunded commitments totaled $0.4 million as of both March 31, 2025 and December 31, 2024. Additional discussion related to the calculation of the allowance for unfunded commitments is included in Note 4, "Loans and Leases."

Self-Insurance

The Company is self-insured for a significant portion of employee health benefits. However, the Company maintains stop-loss coverage with third-party insurers to limit the Company’s individual claim and total exposure related to self-insurance. The Company estimates a liability for the ultimate costs to settle known claims, as well as claims incurred but not yet reported, as of the balance sheet date. The Company’s recorded estimated liability for self-insurance is based on the insurance companies' incurred loss estimates and management’s judgment, including assumptions and evaluation of factors related to the frequency and severity of claims, the Company’s claims development history and the Company’s claims settlement practices. The assessment of loss contingencies and self-insurance reserves is a highly subjective process that requires judgments about future events. Contingencies are reviewed at least quarterly to determine the adequacy of self-insurance accruals. Self-insurance accruals totaled $0.2 million as of both March 31, 2025 and December 31, 2024. The ultimate settlement of loss contingencies and self-insurance reserves may differ significantly from amounts accrued in the Company’s consolidated financial statements.

Litigation

The Company is party to certain ordinary course litigation, and intends to vigorously defend itself in all such litigation. In the opinion of the Company, based on review and consultation with legal counsel, the outcome of such ordinary course litigation should not have a material adverse effect on the Company’s consolidated financial statements or results of operations.

15.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company follows a uniform framework for estimating and classifying the fair value of financial instruments. The assumptions used in the estimation of the fair value of the Company’s financial instruments are detailed below. The following disclosures should not be considered a representation of the liquidation value of the Company, but rather represent a good-faith estimate of the increase or decrease in value of financial instruments held by the Company since purchase, origination or issuance.

Fair Value Hierarchy

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between willing market participants at the measurement date. In determining fair value, the Company uses various methods, including market, income and cost approaches. Based on these approaches, the Company often utilizes certain assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and/or the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market-corroborated or generally unobservable inputs. The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Based on the observability of the inputs used in the valuation techniques, the Company is required to provide the following information according to the fair value hierarchy. The fair value hierarchy ranks the quality and reliability of the information used to determine fair value. Assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:

•

Level 1 — Valuations for assets and liabilities traded in active exchange markets, such as the New York Stock Exchange or Nasdaq. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.

•

Level 2 — Valuations for assets and liabilities traded in less active dealer or broker markets. Valuations are obtained from third-party pricing services for identical or similar assets or liabilities.

•

Level 3 — Valuations for assets and liabilities that are derived from other valuation methodologies, including option pricing models, discounted cash flow models and similar techniques, and not based on market exchange, dealer or broker-traded transactions. Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities.

The Company rarely transfers assets and liabilities measured at fair value between Level 1 and Level 2 measurements. Trading account assets and securities available-for-sale may be periodically transferred to or from Level 3 valuation based on management’s conclusion regarding the best method of pricing for an individual security. Such transfers are accounted for as if they occurred at the beginning of a reporting period. There were no such transfers during the three months ended March 31, 2025 or the year ended December 31, 2024.

Fair Value Measurements on a Recurring Basis

Securities Available-for-Sale

Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. Level 1 securities include U.S. Treasury securities. Level 2 securities include government sponsored agency securities, mortgage-backed agency securities, obligations of states and political subdivisions and certain corporate, asset-backed and other securities. Level 2 fair values are obtained from quoted prices of securities with similar characteristics. In certain cases, where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy.

Derivative Agreements

Derivative agreements include those used by the Company to mitigate risk associated with changes in interest rates, as well as credit derivatives associated with risk participation agreements in certain loans. The fair value of these agreements is based on information obtained from third-party financial institutions. This information is periodically evaluated by the Company and, as necessary, corroborated against other third-party valuations. The Company classifies these derivative assets within Level 2 of the valuation hierarchy.

The following table presents assets and liabilities measured at fair value on a recurring basis as of March 31, 2025 and December 31, 2024.


	Fair Value Measurements as of March 31, 2025 Using
	Totals At March 31, 2025		Quoted Prices in Active Markets For Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(Dollars in Thousands)
Investment securities, available-for-sale
Mortgage-backed securities:
Residential	$	82,956	$	—	$	82,956	$	—
Commercial		11,254		—		11,254		—
Obligations of U.S. government-sponsored agencies		10,269		—		10,269		—
Obligations of states and political subdivisions		1,549		—		1,549		—
Corporate notes		16,489		—		16,489		—
U.S. Treasury securities		38,797		38,797		—		—
Derivative contracts:
Other assets - interest rate floors		293		—		293		—
Other assets - interest rate swaps		217		—		217		—
Other liabilities - credit risk participation agreements		71		—		71		—


	Fair Value Measurements as of December 31, 2024 Using
	Totals At December 31, 2024		Quoted Prices in Active Markets For Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(Dollars in Thousands)
Investment securities, available-for-sale
Mortgage-backed securities:
Residential	$	85,282	$	—	$	85,282	$	—
Commercial		11,920		—		11,920		—
Obligations of U.S. government-sponsored agencies		10,834		—		10,834
Obligations of states and political subdivisions		1,549		—		1,549		—
Corporate notes		15,944				15,944		—
U.S. Treasury securities		42,359		42,359		—		—
Derivative contracts:
Other assets - interest rate swaps		678		—		678		—
Other assets - interest rate floors		18		—		18		—
Other liabilities - credit risk participation agreements		54		—		54		—

Fair Value Measurements on a Non-recurring Basis

Collateral Dependent Loans

Loans are considered collateral dependent when, based on current information and events, it is probable that the Company will be unable to collect all principal and interest payments due under the contractual terms of the loan agreement. These loans are evaluated separately in accordance with the Company’s policies for calculating the ACL on loans and leases. The fair value of collateral dependent loans with specific allocations of the ACL on loans and leases is typically based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by independent appraisers to adjust for differences between the comparable sales and income data available. Appraised values are discounted by management for estimated costs to sell and may be discounted further based on management’s knowledge of the collateral, changes in market conditions since the most recent appraisal and/or management’s knowledge of the borrower and the borrower’s business. Such adjustments are usually significant and typically result in Level 3 classification of the inputs for determining fair value. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge of the borrower’s business, resulting in a Level 3 fair value classification. Collateral dependent loans are evaluated on a quarterly basis and adjusted accordingly.

OREO and Other Assets Held-for-Sale

OREO consists of properties obtained through foreclosure or in satisfaction of loans and is recorded at net realizable value, less estimated cost to sell. Estimates of fair value are generally based on third-party appraisals of the property and are classified within Level 3 of the fair value hierarchy. The appraisals are sometimes discounted based on management’s knowledge of the property and/or changes in market conditions from the date of the most recent appraisal. Such discounts are typically significant unobservable inputs for determining fair value.

As of March 31, 2025 and December 31, 2024, included within OREO were certain assets that were formerly included as premises and equipment but have been removed from service, and as of the balance sheet date, were designated as assets to be disposed of by sale. These include assets associated with branches of the Company that have been closed. When an asset is designated as held-for-sale, the Company ceases depreciation of the asset, and the asset is recorded at the lower of its carrying amount or fair value less estimated cost to sell. Estimates of fair value are generally based on third-party appraisals of the property and are classified within Level 3 of the fair value hierarchy. The appraisals are sometimes discounted based on management’s knowledge of the property and/or changes in market conditions from the date of the most recent appraisal. Such discounts are typically unobservable inputs for determining fair value.

The following table presents the balances of collateral dependent loans, OREO and other assets held-for-sale measured at fair value on a non-recurring basis as of March 31, 2025 and December 31, 2024:


	Fair Value Measurements as of March 31, 2025 Using
	Totals At March 31, 2025		Quoted Prices in Active Markets For Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(Dollars in Thousands)
Collateral dependent loans	$	1,393	$	—	$	—	$	1,393
OREO and other assets held-for-sale		1,328		—		—		1,328


	Fair Value Measurements as of December 31, 2024 Using
	Totals At December 31, 2024		Quoted Prices in Active Markets For Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(Dollars in Thousands)
Collateral dependent loans	$	2,026	$	—	$	—	$	2,026
OREO and other assets held-for-sale		1,509		—		—		1,509

Non-recurring Fair Value Measurements Using Significant Unobservable Inputs

The following tables present information regarding assets and liabilities measured at fair value using significant unobservable inputs (Level 3) as of March 31, 2025 and December 31, 2024. The tables include the valuation techniques and the significant unobservable inputs utilized. The range of each unobservable input and the weighted average within the range utilized as of March 31, 2025 and December 31, 2024 are both included. Following the table is a description of the valuation technique and the sensitivity of the technique to changes in the significant unobservable input.

          
         Level 3 Significant Unobservable Input Assumptions

          
         Fair Value 
March 31,
2025

         Valuation Technique

         Unobservable Input

         Quantitative Range
of Unobservable
Inputs
(Weighted Average)

          
         (Dollars in Thousands)

         Non-recurring fair value measurements:

Collateral dependent loans

1,393

Multiple data points,
including discount to
appraised value of
collateral based on
recent market activity

Appraisal comparability
adjustment (discount)

9%-10%

9.5%

OREO and other assets held-for-sale

1,328

Discount to appraised
value of property
based on recent
market activity for
sales of similar
properties

Appraisal comparability
adjustment (discount)

9%-10%

9.5%

          
         Level 3 Significant Unobservable Input Assumptions

          
         Fair Value
December 31, 2024

         Valuation Technique

         Unobservable Input

         Quantitative Range
of Unobservable
Inputs
(Weighted Average)

          
         (Dollars in Thousands)

         Non-recurring fair value measurements:

Collateral dependent loans

2,026

Multiple data points,
including discount to
appraised value of
collateral based on
recent market activity

Appraisal comparability
adjustment (discount)

9%-10%

9.5%

OREO and other assets held-for-sale

1,509

Discount to appraised
value of property
based on recent
market activity for
sales of similar
properties

Appraisal comparability
adjustment (discount)

9%-10%

9.5%

Collateral Dependent Loans

Collateral dependent loans are valued based on multiple data points indicating the fair value for each loan. The primary data point is the appraisal value of the underlying collateral, to which a discount is applied. Management establishes this discount or comparability adjustment based on recent sales of similar property types. As liquidity in the market increases or decreases, the comparability adjustment and the resulting asset valuation are impacted.

OREO

OREO under a binding contract for sale is valued based on contract price. If no sales contract is pending for a specific property, management establishes a comparability adjustment to the appraised value based on historical activity, considering proceeds for properties sold versus the corresponding appraised value. Increases or decreases in realization for properties sold impact the comparability adjustment for similar assets remaining on the balance sheet.

Other Assets Held-for-Sale

Assets designated as held-for-sale that are under a binding contract are valued based on the contract price. If no sales contract is pending for a specific property, management establishes a comparability adjustment to the appraised value based on historical activity, considering proceeds for properties sold versus the corresponding appraised value. Increases or decreases in realization for properties sold impact the comparability adjustment for similar assets remaining on the balance sheet.

Fair Value of Financial Instruments

The following methods and assumptions were used by the Company in estimating the fair value of its financial instruments:

Cash and cash equivalents: The carrying amount of cash and cash equivalents approximates fair value.

Federal funds sold and securities purchased under reverse repurchase agreements: Federal funds sold and securities purchased under reverse repurchase agreements all contain maturities of 30 days or less, and therefore, their carrying amounts approximate fair value.

Federal Home Loan Bank stock: Based on the redemption provision of the FHLB, the stock has no quoted market value and is carried at cost.

Investment securities: Fair values of investment securities are based on quoted market prices where available. If quoted market prices are not available, estimated fair values are based on market prices of comparable instruments.

Derivative instruments: The fair value of derivative instruments is based on information obtained from a third-party financial institution. This information is periodically evaluated by the Company and, as necessary, corroborated against other third-party information.

Accrued interest receivable and payable: The carrying amount of accrued interest approximates fair value.

Loans, net: The fair value of loans is estimated on an exit price basis incorporating contractual cash flow, prepayment discount spreads, credit loss and liquidity premiums.

Demand and savings deposits: The fair values of demand deposits are equal to the carrying value of such deposits. Demand deposits include non-interest-bearing demand deposits, savings accounts, NOW accounts and money market demand accounts.

Time deposits: The fair values of relatively short-term time deposits are equal to their carrying values. Discounted cash flows are used to value long-term time deposits. The discount rate used is based on interest rates currently offered by the Company on comparable deposits as to amount and term.

Short-term borrowings: These borrowings may consist of federal funds purchased, securities sold under agreements to repurchase and the floating rate borrowings from the FHLB account. Due to the short-term nature of these borrowings, fair values approximate carrying values.

Long-term debt: The fair value of this debt is estimated using discounted cash flows based on the Company’s current incremental borrowing rate for similar types of borrowing arrangements as of the determination date.

Off-balance sheet instruments: The carrying amount of commitments to extend credit and standby letters of credit approximates fair value. The carrying amount of the off-balance sheet financial instruments is based on fees currently charged to enter into such agreements.

The estimated fair value and related carrying or notional amounts, as well as the level within the fair value hierarchy, of the Company’s financial instruments as of March 31, 2025 and December 31, 2024 were as follows:


	March 31, 2025
	Carrying Amount		Estimated Fair Value		Level 1		Level 2		Level 3
	(Dollars in Thousands)
Assets:
Cash and cash equivalents	$	56,041	$	56,041	$	56,041	$	—	$	—
Investment securities available-for-sale		161,314		161,314		38,797		122,517		—
Investment securities held-to-maturity		632		602		—		602		—
Federal funds sold and securities purchased under reverse repurchase agreements		5,451		5,451		—		5,451		—
Federal Home Loan Bank stock		1,978		1,978		—		—		1,978
Loans, net of allowance for credit losses		837,930		799,659		—		—		799,659
Other assets - interest rate floors		293		293		—		293		—
Other assets - interest rate swaps		217		217		—		217		—
Liabilities:
Deposits		961,952		896,643		—		896,643		—
Short-term borrowings		45,000		45,000		—		45,000		—
Long-term borrowings		10,890		9,746		—		9,746		—
Other liabilities - credit risk participation agreements		71		71		—		71		—


	December 31, 2024
	Carrying Amount		Estimated Fair Value		Level 1		Level 2		Level 3
	(Dollars in Thousands)
Assets:
Cash and cash equivalents	$	47,216	$	47,216	$	47,216	$	—	$	—
Investment securities available-for-sale		167,888		167,888		42,359		125,529		—
Investment securities held-to-maturity		682		642		—		642		—
Federal funds sold		5,727		5,727		—		5,727		—
Federal Home Loan Bank stock		1,256		1,256		—		—		1,256
Loans, net of allowance for credit losses		812,855		759,870		—		—		759,870
Other assets - interest rate swaps		678		678		—		678		—
Other assets - interest rate floors		18		18		—		18		—
Liabilities:
Deposits		972,557		893,814		—		893,814		—
Short-term borrowings		10,000		10,000		—		10,000		—
Long-term borrowings		10,872		9,590		—		9,590		—
Other liabilities - credit risk participation agreements		54		54		—		54		—

16.

SEGMENT REPORTING

Bancshares is a bank holding company. Bancshares operates one banking subsidiary, the Bank. The Bank reporting unit is the only reportable segment of the Company. The Bank conducts a general commercial banking business and offers banking services such as demand, savings, individual retirement account and time deposits, personal and commercial loans, safe deposit box services and remote deposit capture. The Bank provides a wide range of commercial banking services to small- and medium-sized businesses, property managers, business executives, professionals and other individuals. The Bank also performs indirect lending through third-party retailers and currently conducts this lending in 17 states. Other than this indirect lending program, the Bank derives its revenue primarily in the southeast United States. The Bank does not have any customers that produce revenues of 10% or more.

The Company's chief operating decision makers (the "CODM") consist of a group of senior executive officers of Bancshares and the Bank that includes the chief executive officer, the chief financial officer, the chief retail, operations and technology officer, the chief risk officer, the chief commercial lending officer, and the chief consumer lending officer.

The CODM uses net income to evaluate income generated from segment assets in deciding whether to reinvest profits into the Bank segment or into other parts of the entity, such as for acquisitions or to pay dividends. Net income is used to monitor budget versus actual results. The CODM also uses net income in competitive analysis by benchmarking to the Company’s competitors. The competitive analysis along with the monitoring of budgeted versus actual results are used in assessing performance of the segment and in establishing management’s compensation.

The accounting policies of the Bank segment are the same as those described in the summary of significant accounting policies. The CODM assesses performance for the Bank segment and decides how to allocate resources based on net income that also is reported on the income statement as consolidated net income. The measure of segment assets is reported on the consolidated balance sheet as total consolidated assets.

The table below provides information related to the Company's Bank operating segment for the three months ended March 31, 2025 and 2024:


	Bank Segment
	Three months ended March 31,
	2025		2024
	(Dollars in Thousands)
Income:
Interest income	$	14,018	$	14,277
Non-interest income		875		865
Total income		14,893		15,142
Less:
Interest expense		5,121		5,237
Provision for credit losses		528		—
Salaries and employee benefits		3,736		4,088
Net occupancy and equipment		875		894
Computer services		412		443
Insurance expense and assessments		384		391
Fees for professional services		215		341
Postage, stationery and supplies		149		178
Telephone/data communication		199		192
Collection and recoveries		70		26
Directors fees		93		96
Software amortization		108		90
Other real estate/foreclosure expense, net		20		31
Other expense (1)		657		377
Provision for income taxes		554		651
Total expense		13,121		13,035
Consolidated net income	$	1,772	$	2,107

(1) Other expense includes advertising, travel and business development, and life insurance expense.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

DESCRIPTION OF THE BUSINESS

Delivery of the best possible financial services to customers remains an overall operational focus of the Company. The Company recognizes that attention to detail and responsiveness to customers’ desires are critical to customer satisfaction. The Company continues to upgrade technology, both in its financial services and in the training of its 147 full-time equivalent employees (as of March 31, 2025), to ensure customer satisfaction and convenience.

The preparation of the Company’s consolidated financial statements requires management to make subjective judgments associated with critical accounting estimates. These estimates are necessary to comply with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and general banking practices. A description of the Company's critical accounting estimates, which significantly affect the determination of the Company’s consolidated financial position, results of operations and cash flows, is set forth in Part II, Item 7 - Critical Accounting Estimates in the Company's 2024 Form 10-K.

The emphasis of this discussion is a comparison of assets, liabilities and shareholders’ equity as of March 31, 2025 to December 31, 2024, while comparing income and expense for the three months ended March 31, 2025 and 2024. All yields and ratios presented and discussed herein are recorded and presented on the accrual basis and not on the tax-equivalent basis, unless otherwise indicated.

This information should be read in conjunction with the Company’s unaudited interim condensed consolidated financial statements and related notes appearing elsewhere in this report and Management’s Discussion and Analysis of Financial Condition and Results of Operations appearing in the Company's 2024 Form 10-K. As used in the following discussion, the words “we,” “us,” “our” and the “Company” refer to Bancshares and its consolidated subsidiaries, unless the context indicates otherwise.

RECENT MARKET CONDITIONS

The banking industry continued to be impacted by economic volatility during the three months ended March 31, 2025. The U.S. inflation rate, as measured by the consumer price index, slowed to 2.4% in March 2025, however, it remained elevated above the Federal Reserve Bank’s (“FRB”) longer run target of 2%. The U.S. unemployment rate moved up modestly to 4.2% in March 2025. The Open Market Committee of the FRB did not change the federal funds rate during the period, keeping the rate at a level of 4.25% to 4.50%. Treasury rates generally trended lower during the period, indicating sentiment of further rate reductions to come later in 2025. U.S. gross domestic product (“GDP”) contracted during the first quarter of 2025 for the first time since 2022, decreasing 0.3% on an annualized basis, due primarily to a surge in imports during the quarter. The combination of the continued heightened inflation level with negative GDP provides a difficult environment in which to predict future movement in the federal funds rate. Remarks from the Open Market Committee following its March 2025 meetings remained cautious, noting that uncertainty around its economic outlook had increased and that it would “carefully assess incoming data, the evolving outlook, and the balance of risks” in its consideration of the extent and timing of additional adjustments to the federal funds rate.

In addition, the Company continues to monitor the potential impact of evolving trade policies, including the impact of additional tariffs imposed by the U.S. While no specific tariffs were implemented during the reporting period that materially affected the Company’s operations, the potential for future changes in cross-border trade arrangements and import/export duties contributes to broader economic uncertainty. Should the impact of tariffs lead to higher inflation levels or higher interest rates for a sustained period, the Company’s financial position and result of operations could be negatively impacted.

EXECUTIVE OVERVIEW

The Company earned net income of $1.8 million, or $0.29 per diluted common share, during the three months ended March 31, 2025, compared to $2.1 million, or $0.34 per diluted common share, for the three months ended March 31, 2024.

Summarized condensed consolidated statements of operations are included below for the three months ended March 31, 2025 and 2024.


	Three Months Ended
	March 31,		March 31,
	2025		2024
	(Dollars in Thousands, Except Per Share Data)
Interest income	$	14,018	$	14,277
Interest expense		5,121		5,237
Net interest income		8,897		9,040
Provision for credit losses		528		—
Net interest income after provision for credit losses		8,369		9,040
Non-interest income		875		865
Non-interest expense		6,918		7,147
Income before income taxes		2,326		2,758
Provision for income taxes		554		651
Net income	$	1,772	$	2,107
Basic net income per share	$	0.30	$	0.36
Diluted net income per share	$	0.29	$	0.34
Dividends per share	$	0.07	$	0.05

The discussion that follows summarizes the most significant activity that drove changes in the Company’s operating results during the three months ended March 31, 2025, as compared to the three months ended March 31, 2024.

Net Interest Income and Margin

Net interest income decreased by $0.1 million, or 1.6%, comparing the three months ended March 31, 2025 to the three months ended March 31, 2024. Net interest margin was 3.53% for the three months ended March 31, 2025, compared to 3.65% for the three months ended March 31, 2024. The decrease in net interest income and margin comparing the three months ended March 31, 2025 to the three months ended March 31, 2024 resulted primarily from yield reductions on loans that occurred following the reduction of the federal funds rate during the latter part of 2024. The reduction in interest income was partially offset by an increase in average earning asset volumes, particularly investment securities, as well as reductions in expense on interest-bearing liabilities.

Provision for Credit Losses

For the three months ended March 31, 2025, the Company recorded a provision for credit losses of $0.5 million, compared to the three months ended March 31, 2024, in which no provision for credit losses was recorded. The increase in the provision for credit losses comparing the three months ended March 31, 2025 to the three months ended March 31, 2024 was primarily attributable to loan growth during the quarter. As of March 31, 2025, the Company’s allowance for credit losses ("ACL") on loans and leases as a percentage of total loans was 1.23%, compared to 1.24% as of December 31, 2024.

Non-interest Income

Non-interest income remained relatively consistent, totaling $0.9 million for both the three months ended March 31, 2025 and 2024.

Non-interest Expense

For the three months ended March 31, 2025, non-interest expense totaled $6.9 million, compared to $7.1 million for the three months ended March 31, 2024. The expense reduction comparing the three months ended March 31, 2025 to the three months ended March 31, 2024 resulted primarily from decreases in salaries and benefits and fees for professional services. These reductions were partially offset by an increase in other expense that resulted primarily from a recovery of check fraud expense that occurred during the three months ended March 31, 2024, but was not repeated during the three months ended March 31, 2025.

Total Assets

As of March 31, 2025, the Company’s assets totaled $1,127.0 million, compared to $1,101.1 million as of December 31, 2024, an increase of 2.4%.

Loans

Total loans increased by $25.3 million, or 3.1%, as of March 31, 2025, compared to December 31, 2024. The increase was driven primarily by growth of $41.3 million in consumer indirect loans during the quarter. The indirect lending platform focuses on recreational and equipment consumer lending on the higher end of the credit spectrum. Collateral financed in the indirect portfolio primarily includes boats, recreational vehicles, campers, horse trailers and cargo trailers. The weighted average credit score of new indirect loans financed during the quarter reached 800, while the weighted average credit score for the entire portfolio was 779. In addition to the indirect portfolio, the Company also grew its multi-family residential real estate and commercial and industrial lending categories during the quarter by $5.3 million and $0.9 million, respectively. Loan growth during the quarter was partially offset by reductions of $22.2 million in other lending categories, primarily construction and non-residential commercial real estate. Total loan volume averaged $824.5 million during the three months ended March 31, 2025, compared to $822.0 million during the three months ended March 31, 2024.

Asset Quality

Nonperforming assets, including loans in non-accrual status and other real estate owned, totaled $5.0 million as of March 31, 2025, compared to $5.5 million as of December 31, 2024. As a percentage of total assets, nonperforming assets totaled 0.44% as of March 31, 2025, compared to 0.50% as of December 31, 2024. Net charge-offs as a percentage of average loans totaled 0.13% during the three months ended March 31, 2025, compared to 0.09% during the three months ended March 31, 2024.

Deposits

Total deposits decreased by $10.6 million, or 1.1%, during the three months ended March 31, 2025, due primarily to reductions in interest-bearing demand deposit accounts, and to a lesser extent, reductions in non-interest-bearing demand deposit accounts. These reductions resulted in part from lower deposit pricing implemented by management during the quarter in an effort to improve net interest margin. Core deposits, which exclude time deposits of $250 thousand or more and all wholesale brokered deposits, totaled $813.9 million, or 84.6% of total deposits, as of March 31, 2025, compared to $837.7 million, or 86.1% of total deposits, as of December 31, 2024.

Short-term Borrowings

As of March 31, 2025, the Company had $45.0 million in short-term borrowings outstanding, compared to $10.0 million outstanding as of December 31, 2024. The short-term borrowings were held as part of the Company’s efforts to maintain on-balance sheet liquidity levels while repricing deposits at lower rates. As of both March 31, 2025 and December 31, 2024, all outstanding short-term borrowings had remaining maturities of less than 30 days. The amount outstanding as of March 31, 2025 included $25.0 million borrowed from the Federal Home Loan Bank of Atlanta (“FHLB”) and $20.0 million borrowed from the Federal Reserve Bank’s (“FRB”) discount window. As of December 31, 2024, all short-term borrowings outstanding were borrowed exclusively from the FHLB.

Deployment of Funds

As of March 31, 2025, the Company held cash, federal funds sold and securities purchased under reverse repurchase agreements totaling $61.5 million, or 5.5% of total assets, compared to $52.9 million, or 4.8% of total assets, as of December 31, 2024. Investment securities, including both the available-for-sale and held-to-maturity portfolios, totaled $161.9 million as of March 31, 2025, compared to $168.6 million as of December 31, 2024. As of March 31, 2025, the expected average life of securities in the investment portfolio was 4.0 years, compared to 3.6 years as of December 31, 2024.

Shareholders’ Equity

Shareholders’ equity increased by $2.6 million, or 2.6%, as of March 31, 2025, compared to December 31, 2024. The increase in shareholders’ equity during the three months ended March 31, 2025 resulted primarily from earnings, net of dividends paid and repurchases of shares of the Company's common stock. In addition, shareholders' equity was positively impacted during the quarter by reductions in the Company's accumulated other comprehensive loss resulting from changes in market interest rates, as well as the maturity of lower yielding investment securities.

Cash Dividends

During the three months ended March 31, 2025, the Company declared a cash dividend of $0.07 per share on its common stock, consistent with

the dividend paid in the previous quarter. The Company’s cash dividend was increased during the fourth quarter of 2024, compared to a dividend declared of $0.05 per share in each of the first three quarters of 2024.

Share Repurchases

During the three months ended March 31, 2025, the Company completed the repurchase of 40,000 shares of its common stock at a weighted average price of $13.38 per share. The repurchases were completed under the Company’s previously announced share repurchase program. As of March 31, 2025, 872,813 shares remained available for repurchase under the program.

Regulatory Capital

During the three months ended March 31, 2025, the Bank continued to maintain capital ratios at higher levels than required to be considered a “well-capitalized” institution under applicable banking regulations. As of March 31, 2025, the Bank’s common equity Tier 1 capital and Tier 1 risk-based capital ratios were each 11.08%. Its total capital ratio was 12.23%, and its Tier 1 leverage ratio was 9.55%.

Liquidity

As of March 31, 2025, the Company continued to maintain funding capacity sufficient to provide adequate liquidity for loan growth, capital expenditures and ongoing operations. The Company benefits from a strong core deposit base, a liquid investment securities portfolio and access to funding from a variety of sources, including federal funds lines with other banking institutions, FHLB advances, the FRB's discount window, and brokered deposits.

Banking Center Growth

During the three months ended March 31, 2025, the Company continued its renovation of a banking center office in Daphne, Alabama that was purchased from another financial institution. This location is expected to serve as the Bank’s initial deposit gathering facility in the Daphne/Mobile area. It is currently anticipated that the location will open to the public by the fourth quarter of 2025.

RESULTS OF OPERATIONS

Net Interest Income

Net interest income is calculated as the difference between interest and fee income generated from earning assets and the interest expense paid on deposits and borrowed funds. Fluctuations in interest rates, as well as volume and mix changes in earning assets and interest-bearing liabilities, can materially impact net interest income. The Company’s earning assets consist of loans, investment securities, Federal Home Loan Bank stock, federal funds sold by the Bank, securities purchased under reverse repurchase agreements and interest-bearing deposits in banks. Interest-bearing liabilities consist of interest-bearing demand deposits and savings and time deposits, as well as short- and long-term borrowings.

The following tables show the average balances of each principal category of assets, liabilities and shareholders’ equity for the three months ended March 31, 2025 and 2024. Additionally, the tables provide an analysis of interest revenue or expense associated with each category, along with the accompanying yield or rate percentage. Net interest margin is calculated for each period presented as net interest income divided by average total interest-earning assets.


	Three Months Ended							Three Months Ended
	March 31, 2025							March 31, 2024
	Average Balance		Interest		Annualized Yield/ Rate %			Average Balance		Interest		Annualized Yield/ Rate %
ASSETS
Interest-earning assets:
Loans (1)	$	824,531	$	12,241		6.02	%	$	821,984	$	12,853		6.29	%
Investment securities		166,241		1,412		3.44	%		134,719		865		2.58	%
Federal Home Loan Bank stock		1,341		24		7.26	%		914		18		7.92	%
Federal funds sold and securities purchased under reverse repurchase agreements		4,850		53		4.43	%		6,607		89		5.42	%
Interest-bearing deposits in banks		26,220		288		4.45	%		33,004		452		5.51	%
Total interest-earning assets		1,023,183		14,018		5.56	%		997,228		14,277		5.76	%

Noninterest-earning assets		64,155							67,790
Total assets	$	1,087,338						$	1,065,018

LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing deposits:
Demand deposits	$	212,130	$	493		0.94	%	$	201,261	$	252		0.50	%
Money market/savings deposits		257,046		1,544		2.44	%		260,420		1,884		2.91	%
Time deposits		330,241		2,832		3.48	%		336,822		2,963		3.54	%
Total interest-bearing deposits		799,417		4,869		2.47	%		798,503		5,099		2.57	%
Noninterest-bearing demand deposits		155,294		—		—			149,613		—		—
Total deposits		954,711		4,869		2.07	%		948,116		5,099		2.16	%
Borrowings		23,404		252		4.37	%		14,545		138		3.82	%
Total funding liabilities		978,115		5,121		2.12	%		962,661		5,237		2.19	%

Other noninterest-bearing liabilities		9,489							10,712
Shareholders’ equity		99,734							91,645
Total liabilities and shareholders' equity	$	1,087,338						$	1,065,018

Net interest income (2)			$	8,897						$	9,040
Net interest margin						3.53	%						3.65	%

     (1)

     For the purpose of these computations, non-accruing loans are included in the average loan amounts outstanding. These loans averaged $4.0 million and $2.4 million for the three months ended March 31, 2025 and 2024, respectively.

     (2)

     Loan fees are included in interest amounts presented. Loan fees totaled $0.2 million and $0.1 million for the three months ended March 31, 2025 and 2024, respectively.

The following tables summarize the impact of variances in volume and rate of interest-earning assets and interest-bearing liabilities on components of net interest income.


	Three Months Ended March 31, 2025									Three Months Ended March 31, 2024
	Compared to									Compared to
	Three Months Ended March 31, 2024									Three Months Ended March 31, 2023
	Increase (Decrease)									Increase (Decrease)
	Due to Change In:									Due to Change In:
	Volume			Average Yield/Rate			Net			Volume			Average Yield/Rate			Net
	(Dollars in Thousands)
Interest earned on:
Total loans	$	40		$	(652	)	$	(612	)	$	728		$	1,143		$	1,871
Investment securities		202			345			547			20			162			182
Federal Home Loan Bank stock		8			(2	)		6			(12	)		2			(10	)
Federal funds sold and securities purchased under reverse repurchase agreements		(24	)		(12	)		(36	)		45			15			60
Interest-bearing deposits in banks		(93	)		(71	)		(164	)		145			69			214
Total interest-earning assets		133			(392	)		(259	)		926			1,391			2,317
Interest expense on:
Demand deposits		14			227			241			(22	)		79			57
Money market/savings deposits		(24	)		(316	)		(340	)		190			1,141			1,331
Time deposits		(58	)		(73	)		(131	)		339			1,235			1,574
Borrowings		84			30			114			(237	)		(14	)		(251	)
Total interest-bearing liabilities		16			(132	)		(116	)		270			2,441			2,711
Increase (decrease) in net interest income	$	117		$	(260	)	$	(143	)	$	656		$	(1,050	)	$	(394	)

Interest income decreased by $0.3 million, comparing the three months ended March 31, 2025 to the three months ended March 31, 2024. Of the decrease, $0.4 million was attributable to lower average yields on interest-earning assets, which was partially offset by $0.1 million growth in interest-earning assets comparing the two periods.

The decrease in interest income was offset by a decrease in interest expense of $0.1 million, comparing the three months ended March 31, 2025 to the three months ended March 31, 2024. The decrease was primarily attributable to the reductions in market interest rates.

The Company’s net interest income and net interest margin during the first three months of 2025 continued to be impacted by changes in the interest rate environment that occurred during the latter months of 2024. Notably, between September and December 2024, the federal funds rate was reduced by 100 basis points, and generally, the Company’s earning assets repriced more quickly than interest-bearing liabilities during the latter part of 2024, reducing the Company’s net interest margin to 3.41% during the three months ended December 31 2024. During the first quarter of 2025, management continued efforts to both maximize earning asset growth and reduce interest expense, resulting in an improvement in net interest margin by 12 basis points, comparing the first quarter of 2025 to the fourth quarter of 2024. While net interest margin improved compared to the prior quarter, it remained below the levels recorded during the earlier periods of 2024. For the three months ended March 31, 2025, net interest margin was 3.53%, compared to 3.65% for the three months ended March 31, 2024. While management is continuing efforts to improve net interest margin, the results of these efforts cannot be fully predicted. Should market interest rates increase or decrease at significant levels, particularly over a short period of time, the Company’s net interest margin and net interest income could be negatively impacted.

Provision for Credit Losses

The Company recorded a provision for credit losses of $0.5 million during the three months ended March 31, 2025, compared to the three months ended March 31, 2024, in which no provision for credit losses was recorded. The increase in the provision for credit losses comparing the three months ended March 31, 2025 to the corresponding period of 2024 was due primarily to an increase in loan volume. As of March 31, 2025, the Company’s ACL on loans and leases as a percentage of total loans was 1.23%, compared to 1.24% as of December 31, 2024.

Net charge-offs totaled $0.3 million and $0.2 million for the three months ended March 31, 2025 and 2024, respectively. The ongoing timing of charge-offs, economic developments, and other factors that could impact the provision for credit losses cannot be fully predicted with certainty. Among other things, sustained levels of high inflation or an economic downturn in the Company's operating territories could negatively impact the Company’s borrowers, and could lead to increased provisions for credit losses in the future.

Non-Interest Income

Non-interest income represents fees and income derived from sources other than interest-earning assets. The following table presents the major components of non-interest income for the periods indicated:


	Three Months Ended March 31,
	2025		2024		$ Change			% Change
	(Dollars in Thousands)
Service charges and other fees on deposit accounts	$	288	$	299	$	(11	)		(3.7	)%
Bank-owned life insurance		137		131		6			4.6	%
Lease income		284		257		27			10.5	%
ATM fee income		84		85		(1	)		(1.2	)%
Other income		82		93		(11	)		(11.8	)%
Total non-interest income	$	875	$	865	$	10			1.2	%

The Company’s non-interest income remained relatively consistent, totaling $0.9 million for both the three months ended March 31, 2025 and 2024.

Non-Interest Expense

Non-interest expense represents expenses incurred from sources other than interest-bearing liabilities. The following table presents the major components of non-interest expense for the periods indicated:


	Three Months Ended March 31,
	2025		2024		$ Change			% Change
	(Dollars in Thousands)
Salaries and employee benefits	$	3,736	$	4,088	$	(352	)		(8.6	)%
Net occupancy and equipment		875		894		(19	)		(2.1	)%
Computer services		412		443		(31	)		(7.0	)%
Insurance expense and assessments		384		391		(7	)		(1.8	)%
Fees for professional services		215		341		(126	)		(37.0	)%
Postage, stationery and supplies		149		178		(29	)		(16.3	)%
Telephone/data communications		199		192		7			3.6	%
Collection and recoveries		70		26		44			169.2	%
Directors fees		93		96		(3	)		(3.1	)%
Software amortization		108		90		18			20.0	%
Other real estate/foreclosure expense, net		20		31		(11	)		(35.5	)%
Other expense		657		377		280			74.3	%
Total non-interest expense	$	6,918	$	7,147	$	(229	)		(3.2	)%

Non-interest expense totaled $6.9 million and $7.1 million during the three months ended March 31, 2025 and 2024, respectively. The expense reduction comparing the three months ended March 31, 2025 to the three months ended March 31, 2024 resulted primarily from decreases in salaries and benefits and fees for professional services. These reductions were partially offset by an increase in other expense that resulted primarily from a recovery of check fraud expense that occurred during the three months ended March 31, 2024, but was not repeated during the three months ended March 31, 2025.

Provision for Income Taxes

The effective tax rate is impacted by recurring items, such as changes in tax-exempt interest income earned from bank-qualified municipal bonds and loans and the cash surrender value of bank-owned life insurance. Management makes decisions about whether to invest in tax-exempt instruments on a case-by-case basis after considering a number of factors, including investment return, credit quality and the consistency of such investments with the Company’s overall strategy. The Company’s effective tax rate is expected to fluctuate commensurate with the level of these investments as compared to total pre-tax income.

BALANCE SHEET ANALYSIS

Investment Securities

The investment securities portfolio is used by management to provide liquidity, to generate interest income and for use as collateral for public deposits and wholesale funding. Risk and return can be adjusted by altering the duration, composition and/or balance of the portfolio. The expected average life of securities in the investment portfolio was 4.0 years and 3.6 years as of March 31, 2025 and December 31, 2024, respectively.

Available-for-sale securities are recorded at estimated fair value, with unrealized gains or losses recognized, net of taxes, in accumulated other comprehensive loss, a separate component of shareholders’ equity. As of March 31, 2025, available-for-sale securities totaled $161.3 million, or 99.6% of the total investment portfolio, compared to $167.9 million, or 99.6% of the total investment portfolio, as of December 31, 2024. Available-for-sale securities consisted of residential and commercial mortgage-backed securities, U.S. Treasury securities, corporate bonds, obligations of U.S. government-sponsored agencies, and obligations of state and political subdivisions.

Held-to-maturity securities are recorded at amortized cost and represent securities that the Company both intends and has the ability to hold to maturity. As of March 31, 2025, held-to-maturity securities totaled $0.6 million, or 0.4% of the total investment portfolio, compared to $0.7 million, or 0.4% of the total investment portfolio, as of December 31, 2024. Held-to-maturity securities consisted of commercial mortgage-backed securities, obligations of U.S. government-sponsored agencies, and obligations of state and political subdivisions.

Net unrealized losses in the available-for-sale portfolio totaled $4.0 million as of March 31, 2025, compared to $6.7 million as of December 31, 2024. Net unrealized losses within the available-for-sale portfolio were recognized, net of tax, in accumulated other comprehensive loss.

As of March 31, 2025, the Company evaluated both the available-for-sale and held-to-maturity portfolios for credit losses and concluded that no credit losses were included in either portfolio and that the unrealized losses in both portfolios resulted from the prevailing interest rate environment.

Loans and Leases

The Company’s total loan portfolio increased by $25.3 million, or 3.1%, as of March 31, 2025, compared to December 31, 2024. The tables below summarize loan balances by portfolio category, as well as the ACL, as of the end of each of the most recent five quarters as of March 31, 2025:


	Quarter Ended
	2025		2024
	March 31,		December 31,		September 30,		June 30,		March 31,
	(Dollars in Thousands)
Real estate loans:
Construction, land development and other land loans	$	58,572	$	65,537	$	53,098	$	72,183	$	102,282
Secured by 1-4 family residential properties		68,523		69,999		70,067		70,272		74,361
Secured by multi-family residential properties		106,374		101,057		100,627		97,527		62,145
Secured by non-residential commercial real estate		214,065		227,751		224,611		218,386		212,465
Commercial and industrial loans		45,166		44,238		44,872		46,249		57,112
Consumer loans:
Direct		4,610		4,774		5,018		5,272		5,590
Indirect		351,025		309,683		305,015		309,237		308,986
Total loans		848,335		823,039		803,308		819,126		822,941
Allowance for credit losses on loans and leases		10,405		10,184		10,116		10,227		10,436
Net loans	$	837,930	$	812,855	$	793,192	$	808,899	$	812,505

As of March 31, 2025 and December 31, 2024, the composition of the non-residential commercial real estate loan portfolio was as follows:


	March 31, 2025						December 31, 2024
	Owner Occupied		Non-Owner Occupied		Total		Owner Occupied		Non-Owner Occupied		Total
	(Dollars in Thousands)
Office	$	9,830	$	35,083	$	44,913	$	10,093	$	36,811	$	46,904
Retail single credit tenant		—		40,388		40,388		—		41,357		41,357
Industrial		5,572		45,369		50,941		5,696		45,477		51,173
Storage		767		14,730		15,497		780		14,835		15,615
Retail services		14,862		—		14,862		15,031		—		15,031
Retail with anchor		3,038		4,111		7,149		3,075		13,628		16,703
Nursing homes		17,962		—		17,962		17,961		—		17,961
Other		11,691		10,662		22,353		11,989		11,018		23,007
Total loans	$	63,722	$	150,343	$	214,065	$	64,625	$	163,126	$	227,751

As of March 31, 2025 and December 31, 2024, the composition of the construction, land development, and other land loans loan portfolio was as follows:


	March 31, 2025						December 31, 2024
	Owner Occupied		Non-Owner Occupied		Total		Owner Occupied		Non-Owner Occupied		Total
	(Dollars in Thousands)
Apartments	$	—	$	53,683	$	53,683	$	—	$	61,118	$	61,118
Farmland		3,011		—		3,011		3,057		—		3,057
Other		733		1,145		1,878		440		922		1,362
Total loans	$	3,744	$	54,828	$	58,572	$	3,497	$	62,040	$	65,537

The following table classifies the Company's fixed and variable rate loans as of March 31, 2025 according to contractual maturities of: (1) one year or less, (2) after one year through five years, (3) after five years through fifteen years, and (4) after fifteen years:


	March 31, 2025
	One Year or Less		After One Year Through Five Years		After Five Years Through Fifteen Years		After Fifteen Years		Total
	(Dollars in Thousands)
Total loans:
Real estate loans:
Construction, land development and other land loans	$	18,705	$	39,743	$	124	$	—	$	58,572
Secured by 1-4 family residential properties		1,706		13,841		22,371		30,605		68,523
Secured by multi-family residential properties		41,792		62,665		370		1,547		106,374
Secured by non-residential commercial real estate		34,416		105,558		74,091		—		214,065
Commercial and industrial loans		14,234		23,535		7,397		—		45,166
Consumer loans:
Direct		1,370		3,193		47		—		4,610
Indirect		515		16,724		333,786		—		351,025
Total loans	$	112,738	$	265,259	$	438,186	$	32,152	$	848,335
Loans with fixed interest rates:
Real estate loans:
Construction, land development and other land loans	$	851	$	2,548	$	124	$	—	$	3,523
Secured by 1-4 family residential properties		944		6,127		5,377		14,220		26,668
Secured by multi-family residential properties		—		35,758		370		166		36,294
Secured by non-residential commercial real estate		17,598		57,390		57,600		—		132,588
Commercial and industrial loans		6,616		15,490		7,397		—		29,503
Consumer loans:
Direct		1,356		3,193		47		—		4,596
Indirect		515		16,724		333,786		—		351,025
Total loans with fixed interest rates	$	27,880	$	137,230	$	404,701	$	14,386	$	584,197
Loans with variable interest rates:
Real estate loans:
Construction, land development and other land loans	$	17,854	$	37,195	$	—	$	—	$	55,049
Secured by 1-4 family residential properties		762		7,714		16,994		16,385		41,855
Secured by multi-family residential properties		41,792		26,907		—		1,381		70,080
Secured by non-residential commercial real estate		16,818		48,168		16,491		—		81,477
Commercial and industrial loans		7,618		8,045		—		—		15,663
Consumer loans:
Direct		14		—		—		—		14
Indirect		—		—		—		—		—
Total loans with variable interest rates	$	84,858	$	128,029	$	33,485	$	17,766	$	264,138

Allowance for Credit Losses on Loans and Leases

The tables below summarize changes in the ACL on loans and leases for each of the most recent five quarters as of March 31, 2025:


	Quarter Ended
	2025			2024
	March 31,			December 31,			September 30,			June 30,			March 31,
	(Dollars in Thousands)
Balance at beginning of period	$	10,184		$	10,116		$	10,227		$	10,436		$	10,507
Charge-offs:
Real estate loans:
Construction, land development and other land loans		—			—			—			—			—
Secured by 1-4 family residential properties		—			—			—			—			(2	)
Secured by multi-family residential properties		—			—			—			—			—
Secured by non-residential commercial real estate		—			(248	)		—			—			—
Commercial and industrial loans		—			(8	)		(16	)		(97	)		—
Consumer loans:
Direct		—			(9	)		(25	)		(6	)		(22	)
Indirect		(422	)		(332	)		(370	)		(313	)		(366	)
Total charge-offs		(422	)		(597	)		(411	)		(416	)		(390	)
Recoveries:
Real estate loans:
Construction, land development and other land loans		—			—			—			20			—
Secured by 1-4 family residential properties		6			10			11			12			23
Secured by multi-family residential properties		—			—			—			—			—
Secured by non-residential commercial real estate		—			—			—			—			—
Commercial and industrial loans		16			2			—			—			—
Consumer loans:		—
Direct		57			51			71			78			100
Indirect		74			39			78			97			84
Total recoveries		153			102			160			207			207
Net charge-offs		(269	)		(495	)		(251	)		(209	)		(183	)
Provision for credit losses		490			563			140			—			112
Ending balance	$	10,405		$	10,184		$	10,116		$	10,227		$	10,436
Ending balance as a percentage of loans		1.23	%		1.24	%		1.26	%		1.25	%		1.27	%
Net charge-offs as a percentage of average loans		0.13	%		0.14	%		0.12	%		0.10	%		0.09	%

Allowance for Credit Losses on Unfunded Lending Commitments

The Company records an ACL on unfunded lending commitments in which the Company is exposed to credit risk via a present contractual obligation to extend credit unless the obligation is unconditionally cancellable. Unconditional lending commitments generally include unfunded term loan agreements, home equity lines of credit, lines of credit, and demand deposit account overdraft protection.

As of both March 31, 2025 and December 31, 2024, the Company’s reserve for unfunded commitments, which is recorded in other liabilities in the Company’s consolidated balance sheets, totaled $0.4 million.

Nonperforming Assets

Nonperforming assets at the end of the five most recent quarters as of March 31, 2025 were as follows:


	Quarter Ended
	2025			2024
	March 31,			December 31,			September 30,			June 30,			March 31,
	(Dollars in Thousands)
Non-accrual loans	$	3,668		$	3,949		$	6,051		$	2,337		$	2,393
Other real estate owned		1,328			1,509			538			542			572
Total	$	4,996		$	5,458		$	6,589		$	2,879		$	2,965
Nonperforming assets as a percentage of total loans and other real estate		0.59	%		0.66	%		0.83	%		0.35	%		0.36	%
Nonperforming assets as a percentage of total assets		0.44	%		0.50	%		0.60	%		0.27	%		0.28	%
Non-accrual loans as a percentage of total loans		0.43	%		0.48	%		0.75	%		0.29	%		0.29	%
ACL as a percentage of non-accrual loans		283.67	%		257.89	%		167.18	%		437.61	%		436.11	%

Allocation of Allowance for Credit Losses on Loans and Leases

While no portion of the ACL 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 shows an allocation of the ACL as of March 31, 2025 and December 31, 2024:


	As of and for the Three Months Ended								As of and for the Year Ended
	March 31, 2025								December 31, 2024
	Allowance Allocation		Allowance as Percentage of Total Loans			Net Charge-offs as a Percentage of Average Loans			Allowance Allocation		Allowance as Percentage of Total Loans			Net Charge-offs as a Percentage of Average Loans
	(Dollars in Thousands)
Real estate loans:
Construction, land development and other land loans	$	279		0.48	%		—		$	352		0.54	%		-0.03	%
Secured by 1-4 family residential properties		355		0.52	%		-0.03	%		406		0.58	%		-0.07	%
Secured by multi-family residential properties		529		0.50	%		—			546		0.54	%		—
Secured by non-residential commercial real estate		1,271		0.59	%		—			1,428		0.63	%		0.11	%
Commercial and industrial loans		1,527		3.38	%		-0.13	%		1,531		3.46	%		0.22	%
Consumer loans:
Direct		47		1.02	%		-4.49	%		49		1.03	%		-4.09	%
Indirect		6,397		1.82	%		0.44	%		5,872		1.90	%		0.35	%
Total	$	10,405		1.23	%		0.13	%	$	10,184		1.24	%		0.14	%

Deposits

Total deposits decreased to $962.0 million as of March 31, 2025, from $972.6 million as of December 31, 2024, a decrease of 1.1%. The decrease was due primarily to reductions in interest-bearing demand deposit accounts, and to a lesser extent, reductions in non-interest-bearing demand deposit accounts. These reductions resulted in part from lower deposit pricing implemented by management during the quarter in an effort to improve net interest margin. Core deposits, which exclude time deposits of $250 thousand or more and all brokered deposits, provide a relatively stable funding source that supports earning assets. Core deposits totaled $813.9 million, or 84.6% of total deposits, as of March 31, 2025, compared to $837.7 million, or 86.1% of total deposits, as of December 31, 2024.

Core deposits have historically been the Company’s primary source of funding and have enabled the Company to successfully meet both short-term and long-term liquidity needs. Management anticipates that core deposits will continue to be the Company’s primary source of funding in the future. Management will continue to monitor deposit levels closely to help ensure an adequate level of funding for the Company’s activities. However, various economic and competitive factors could affect this funding source in the future, including increased competition from other financial institutions in deposit gathering, national and local economic conditions and interest rate policies adopted by the FRB and other central banks.

Other Interest-Bearing Liabilities

Other interest-bearing liabilities that are used by the Company as an alternative source of funds consist of federal funds purchased, securities sold under agreements to repurchase, FHLB advances, and subordinated debt. As of March 31, 2025, other interest-bearing liabilities totaled 6.5% of total interest-bearing liabilities, compared to 2.5% as of December 31, 2024.

Shareholders’ Equity

As of March 31, 2025, shareholders’ equity totaled $101.2 million, or 9.0% of total assets, compared to $98.6 million, or 9.0% of total assets, as of December 31, 2024. The increase in shareholders’ equity during the three months ended March 31, 2025 resulted primarily from earnings, net of dividends paid and repurchases of shares of the Company's common stock. In addition, shareholders' equity was positively impacted during the three months ended March 31, 2025 by reductions in the Company's accumulated other comprehensive loss resulting from changes in market interest rates, as well as the maturity of lower yielding investment securities.

During the three months ended March 31, 2025, the Company declared a cash dividend of $0.07 per share on its common stock, consistent with the dividend paid in the previous quarter. The Company’s cash dividend was increased during the fourth quarter of 2024, compared to a dividend declared of $0.05 per share in each of the first three quarters of 2024.

In addition, during the three months ended March 31, 2025, the Company completed the repurchase of 40,000 shares of its common stock at a weighted average price of $13.38 per share. The repurchases were completed under the Company’s previously announced share repurchase program. As of March 31, 2025, 872,813 shares remained available for repurchase under the program. No shares were repurchased by the Company during the three months ended March 31, 2024.

LIQUIDITY AND CAPITAL RESOURCES

The asset portion of the balance sheet provides liquidity primarily from the following sources: (1) excess cash and interest-bearing deposits in banks, (2) federal funds sold and securities purchased under reverse repurchase agreements, (3) principal payments and maturities of loans and (4) principal payments and maturities from the investment portfolio. Loans maturing or repricing in one year or less amounted to $264.4 million as of March 31, 2025 and $279.0 million as of December 31, 2024. Investment securities forecasted to mature or reprice in one year or less were estimated to be $27.6 million and $29.6 million of the investment portfolio as of March 31, 2025 and December 31, 2024, respectively.

Although some securities in the investment portfolio have legal final maturities exceeding 10 years, a substantial percentage of the portfolio provides monthly principal and interest payments and consists of securities that are readily marketable and easily convertible into cash on short notice. The investment securities portfolio had an estimated average life of 4.0 years and 3.6 years as of March 31, 2025 and December 31, 2024, respectively. However, management does not rely solely upon the investment portfolio to generate cash flows to fund loans, capital expenditures, dividends, debt repayment and other cash requirements. These activities are also funded by cash flows from loan payments, as well as increases in deposits and short-term borrowings.

The liability portion of the balance sheet provides liquidity through interest-bearing and non-interest-bearing deposit accounts, which represent the Company’s primary sources of funds. In addition, federal funds purchased, FHLB advances, securities sold under agreements to repurchase and short-term and long-term borrowings are additional sources of available liquidity. Liquidity management involves the continual monitoring of the sources and uses of funds to maintain an acceptable cash position. Long-term liquidity management focuses on considerations related to the total balance sheet structure. The Bank manages the pricing of its deposits to maintain a desired deposit balance.

The Company had $25.0 million and $10.0 million of outstanding borrowings under FHLB advances as of March 31, 2025 and December 31, 2024, respectively. The Company's use of FHLB advances varies depending on fluctuations in deposits and other funding sources, as well as their use in interest rate hedging strategies. The Company had up to $285.3 million and $319.9 million in remaining unused credit from the FHLB (subject to available collateral, which may include eligible investment securities and loans) as of March 31, 2025 and December 31, 2024, respectively.

The Company also has access to the FRB’s discount window. The discount window allows borrowing on pledged collateral that includes eligible investment securities and loans. The Company maintains pledges of its consumer indirect loan portfolio and selected investment securities with the FRB as collateral to provide immediate access to funding through the discount window. As of March 31, 2025 and December 31, 2024 the Company had $160.0 and $165.1 million, respectively, in borrowing capacity with the FRB’s discount window. As of March 31, 2025 and December 31, 2024, the Bank had $20.0 million and zero, respectively, in outstanding federal funds purchased from the FRB's discount window.

In addition to collateralized funding sources through the FHLB and FRB, the Company had $48.0 million in unused established unsecured lines of credit with banks as of both March 31, 2025 and December 31, 2024.

On October 1, 2021, the Company completed a private placement of $11.0 million in aggregate principal amount of fixed-to-floating rate subordinated notes that will mature on October 1, 2031. Net of unamortized debt issuance costs, the subordinated notes were recorded as long-term borrowings totaling $10.9 million as of both March 31, 2025 and December 31, 2024.

The table below provides information on the Company’s on-balance sheet liquidity, as well as readily available off-balance sheet sources of liquidity, as of both March 31, 2025 and December 31, 2024.


	March 31, 2025			December 31, 2024
	(Dollars in Thousands)
	(Unaudited)			(Unaudited)
Liquidity from cash, federal funds sold and securities purchased under reverse repurchase agreements:
Cash and cash equivalents	$	56,041		$	47,216
Federal funds sold and securities purchased under reverse repurchase agreements		5,451			5,727
Total liquidity from cash, federal funds sold and securities purchased under reverse repurchase agreements		61,492			52,943
Liquidity from pledgable investment securities:
Investment securities available-for sale, at fair value		161,314			167,888
Investment securities held-to-maturity, at amortized cost		632			682
Less: securities pledged		(62,563	)		(72,110	)
Less: estimated collateral value discounts		(10,319	)		(10,164	)
Liquidity from pledgable investment securities		89,064			86,296
Liquidity from unused lendable collateral (loans) at FHLB		9,180			45,388
Liquidity from unused lendable collateral (loans and securities) at FRB		160,043			165,061
Unsecured lines of credit with banks		48,000			48,000
Total readily available liquidity	$	367,779		$	397,688

The table above calculates readily available liquidity by combining cash and cash equivalents, federal funds sold, securities purchased under reverse repurchase agreements and unencumbered investment security values on the Company’s consolidated balance sheet with off-balance sheet liquidity that is readily available through unused collateral pledged to the FHLB and FRB, as well as unsecured lines of credit with other banks. Liquidity from pledgable investment securities and total readily available liquidity are non-GAAP measures used by management and regulators to analyze a portion of the Company's liquidity. Management uses these measures to evaluate the Company's liquidity position.

Pledgable investment securities are considered by management as a readily available source of liquidity since the Company has the ability to pledge the securities with the FHLB or FRB to obtain immediate funding. Both available-for-sale and held-for-maturity securities may be pledged at fair value with the FHLB and through the FRB discount window. The amounts shown as liquidity from pledgable investment securities represent total investment securities as recorded on the consolidated balance sheet, less reductions for securities already pledged and discounts expected to be taken by the lender to determine collateral value.

The unused lendable collateral value at the FHLB presented in the table represents only the amount immediately available to the Company from loans already pledged by the Company to the FHLB as of each consolidated balance sheet date presented. As of March 31, 2025 and December 31, 2024, the Company's total remaining credit availability with the FHLB was $285.3 million and $319.9 million, respectively, subject to the pledging of additional collateral which may include eligible investment securities and loans. In addition, the Company has access to additional sources of liquidity that generally could be obtained over a period of time. For example, the Company has access to unsecured brokered deposits through the wholesale funding markets. Management believes the Company’s on-balance sheet and other readily available liquidity provide strong indicators of the Company’s ability to fund obligations in a stressed liquidity environment.

Excluding wholesale brokered deposits, as of March 31, 2025, the Company had approximately 29 thousand deposit accounts with an average balance of approximately $30.0 thousand per account. Estimated uninsured deposits (calculated as deposit amounts per deposit holder in excess of $250 thousand, the maximum amount of federal deposit insurance, and excluding deposits secured by pledged assets) totaled $202.6 million, or 21.1% of total deposits, as of March 31, 2025. As of December 31, 2024, estimated uninsured deposits totaled $216.8 million, or 22.2% of total deposits.

Management believes that the Company has adequate sources of liquidity to cover its contractual obligations and commitments over the next twelve months.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The primary purpose of managing interest rate risk is to invest capital effectively and preserve the value created by the Company’s core banking business. This is accomplished through the development and implementation of lending, funding, pricing and hedging strategies designed to maximize net interest income performance under varying interest rate environments, subject to liquidity and interest rate risk guidelines. Effective interest rate sensitivity management ensures that both assets and liabilities respond to changes in interest rates within an acceptable timeframe, thereby minimizing the effect of such interest rate movements on short- and long-term net interest margin and net interest income.

Financial simulation models are the primary tools used by the Asset/Liability Committee of the Bank’s board of directors to measure interest rate exposure. Using a wide range of scenarios, management is provided with extensive information on the potential impact on net interest income caused by changes in interest rates. In these simulations, assumptions are made about the direction and volatility of interest rates, the slope of the yield curve and the changing composition of the Company’s balance sheet resulting from both strategic plans and customer behavior. Simulation models also incorporate management’s assumptions regarding such factors as loan and deposit growth, pricing, prepayment speeds and spreads between interest rates paid on deposits and charged on loans. Because of limitations inherent in any approach used to measure interest rate risk, simulation results are not intended as a forecast of the actual effect of a change in market interest rates on our results but rather as a means to better plan and execute appropriate asset-liability management strategies and manage our interest rate risk.

Assessing Short-Term Interest Rate Risk – Net Interest Margin Simulation

On a quarterly basis, management simulates how changes in short- and long-term interest rates will impact future profitability, as reflected by changes in the Bank’s net interest margin and net interest income. The tables below depict how, as of March 31, 2025, pre-tax net interest margin and net interest income are forecasted to change over timeframes of one year and two years under the six listed interest rate scenarios. The interest rate scenarios contemplate immediate and parallel shifts in short- and long-term interest rates.

Average Change in Net Interest Margin from Level Interest Rate Forecast (basis points, pre-tax):


	1 Year			2 Years
+1%		1			2
+2%		1			3
+3%		(1	)		2
-1%		(6	)		(8	)
-2%		(12	)		(19	)
-3%		(21	)		(33	)

Cumulative Change in Net Interest Income from Level Interest Rate Forecast (dollars in thousands, pre-tax):


	1 Year			2 Years
+1%	$	112		$	524
+2%		116			712
+3%		(136	)		379
-1%		(702	)		(1,840	)
-2%		(1,343	)		(4,252	)
-3%		(2,345	)		(7,505	)

ITEM 4. CONTROLS AND PROCEDURES

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

Bancshares maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in Bancshares’ reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to Bancshares’ management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

Bancshares’ management carried out an evaluation, under the supervision and with the participation of its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of Bancshares’ disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act) as of March 31, 2025, pursuant to the evaluation of these controls and procedures required by Rule 13a-15 of the Exchange Act. Based on that evaluation, Bancshares’ management concluded, as of March 31, 2025, that Bancshares’ disclosure controls and procedures were effective at the reasonable assurance level to ensure that the information required to be disclosed in Bancshares’ periodic filings with the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

Changes in Internal Control Over Financial Reporting

There were no changes in Bancshares’ internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the quarter ended March 31, 2025 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company is a party to certain ordinary course litigation, and the Company intends to vigorously defend itself in all such litigation. In the opinion of the Company, based on review and consultation with legal counsel, the outcome of such ordinary course litigation should not have a material adverse effect on the Company’s consolidated financial statements or results of operations.

ITEM 1A. RISK FACTORS

A list of factors that could materially affect the Company’s business, financial condition and/or operating results is included in Part I, Item 1A, “Risk Factors” in the Company's 2024 Form 10-K. There have been no material changes to such risk factors. 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.

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

The following table sets forth purchases made by or on behalf of Bancshares or any “affiliated purchaser,” as defined in Rule 10b-18(a)(3) of the Exchange Act, of shares of Bancshares’ common stock during the first quarter of 2025:

Issuer Purchases of Equity Securities


Period	Total Number of Shares Purchased (1)		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Programs (2)		Maximum Number of Shares that May Yet Be Purchased Under the Programs (2)
January 1 – January 31		687	$	12.68		—		912,813
February 1 – February 28		16,547	$	13.10		16,500		896,313
March 1 – March 31		23,545	$	13.58		23,500		872,813
Total		40,779	$	13.37		40,000		872,813

(1)

Includes 779 shares that were purchased in open-market transactions by an independent trustee for Bancshares’ 401(k) Plan during the first quarter of 2025.

(2)

40,000 shares were repurchased during the first quarter of 2025 pursuant to Bancshares’ publicly announced share repurchase program, which was initially approved by the Board of Directors on January 19, 2006 and authorized the repurchase of up to 642,785 shares of common stock. Most recently, in November 2024, the Board approved the repurchase of an additional 600,000 shares under the share repurchase program and the extension of the expiration date of the program to December 31, 2025. As of March 31, 2025, Bancshares was authorized to repurchase up to 872,813 shares of common stock under the share repurchase program.

ITEM 5. OTHER INFORMATION

(a) None.

(b) None.

(c) During the period covered by this report, none of the Company’s directors or executive officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement (each as defined in Item 408 of Regulation S-K under the Securities Exchange Act of 1934, as amended).

ITEM 6. EXHIBITS


Exhibit No.		Description

3.1		Certificate of Incorporation of United Security Bancshares, Inc. (incorporated by reference to Exhibit 3(i) to the Quarterly Report on Form 10-Q (File No. 000-14549), filed on November 12, 1999).

3.1A		Certificate of Amendment to the Certificate of Incorporation of United Security Bancshares, Inc., effective as of October 11, 2016 (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K (File No. 000-14549), filed on October 11, 2016).

3.2		Amended and Restated Bylaws of First US Bancshares, Inc., effective as of January 29, 2025 (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K (File No. 000-14549), filed on January 30, 2025).

10.1		First US Bancshares, Inc. 2025 Cash Incentive Program (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K (File No. 000-14549), filed on February 12, 2025).

10.2*		First US Bancshares, Inc. Non-Employee Director Fee Schedule

31.1*		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.

31.2*		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.

32*		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101		The following financial statements from the Quarterly Report on Form 10-Q for the quarter ended March 31, 2025, formatted in Inline XBRL: (i) Interim Condensed Consolidated Balance Sheets, (ii) Interim Condensed Consolidated Statements of Comprehensive Income, (iii) Interim Condensed Consolidated Statements of Operations, (iv) Interim Condensed Consolidated Statements of Changes in Shareholders' Equity, (v) Interim Condensed Consolidated Statements of Cash Flows, and (vi) Notes to the Interim Condensed Consolidated Financial Statements, tagged as blocks of text and including detailed tags.

104		The cover page from the Quarterly Report on Form 10-Q for the quarter ended March 31, 2025, formatted in Inline XBRL.

________________

*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.

FIRST US BANCSHARES, INC.

DATE: May 8, 2025


By:		/s/ Thomas S. Elley
		Thomas S. Elley
		Its Senior Executive Vice President, Treasurer and Assistant Secretary, Chief Financial Officer and Principal Accounting Officer
		(Duly Authorized Officer and Principal Financial Officer)