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☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
September 30,
2025
OR
☐
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.
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 subsidiary, 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.
3
PART I. FINANCI
AL INFORMATION
ITEM 1. FINANCI
AL STATEMENTS
FIRST US BANCSHARES, INC. AND SUBSIDIARY
INTERIM CONDENSED CONS
OLIDATED BALANCE SHEETS
(Dollars in Thousands, Except Share and Per Share Data)
September 30,
December 31,
2025
2024
(Unaudited)
ASSETS
Cash and due from banks
$
10,692
$
10,633
Interest-bearing deposits in banks
43,998
36,583
Total cash and cash equivalents
54,690
47,216
Federal funds sold and securities purchased under reverse repurchase agreements
4,850
5,727
Investment securities available-for-sale, at fair value (amortized cost $
165,921
and
$
174,597
; net of allowance for credit losses of $- and $-)
163,969
167,888
Investment securities held-to-maturity, at amortized cost, net of allowance for credit
losses of $- and $-, (fair value 2025 - $
504
, 2024 - $
642
)
524
682
Federal Home Loan Bank stock, at cost
1,266
1,256
Loans and leases held for investment
867,520
823,039
Less: allowance for credit losses on loans and leases
10,700
10,184
Net loans and leases held for investment
856,820
812,855
Premises and equipment, net of accumulated depreciation
26,499
24,803
Cash surrender value of bank-owned life insurance
17,289
17,056
Accrued interest receivable
3,926
3,588
Goodwill and core deposit intangible, net
7,435
7,484
Other real estate owned
1,158
1,509
Other assets
8,749
11,022
Total assets
$
1,147,175
$
1,101,086
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits:
Non-interest-bearing
$
155,941
$
155,945
Interest-bearing
846,531
816,612
Total deposits
1,002,472
972,557
Accrued interest expense
2,388
1,751
Other liabilities
7,150
7,282
Short-term borrowings
20,000
10,000
Long-term borrowings
10,927
10,872
Total liabilities
1,042,937
1,002,462
Shareholders’ equity:
Common stock, par value $
0.01
per share,
10,000,000
shares authorized;
7,924,744
and
7,840,348
shares issued, respectively;
5,765,137
and
5,696,171
shares outstanding,
respectively
79
78
Additional paid-in capital
15,725
15,540
Accumulated other comprehensive loss, net of tax
(
1,407
)
(
4,344
)
Retained earnings
119,520
116,865
Less treasury stock:
2,159,607
and
2,144,177
shares at cost, respectively
(
29,679
)
(
29,515
)
Total shareholders’ equity
104,238
98,624
Total liabilities and shareholders’ equity
$
1,147,175
$
1,101,086
The accompanying notes are an integral part of these Interim Condensed Consolidated Financial Statements.
4
FIRST US BANCSHARES, INC. AND SUBSIDIARY
INTERIM CONDENSED CONSOLIDAT
ED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Per Share Data)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2025
2024
2025
2024
(Unaudited)
(Unaudited)
Interest income:
Interest and fees on loans
$
13,413
$
13,206
$
38,643
$
38,989
Interest on investment securities
1,391
1,121
4,138
3,094
Interest on deposits in banks
402
603
1,141
1,478
Other
75
87
231
279
Total interest income
15,281
15,017
44,153
43,840
Interest expense:
Interest on deposits
5,368
5,709
15,362
16,018
Interest on borrowings
251
123
756
421
Total interest expense
5,619
5,832
16,118
16,439
Net interest income
9,662
9,185
28,035
27,401
Provision for credit losses
566
152
3,811
152
Net interest income after provision for credit losses
9,096
9,033
24,224
27,249
Non-interest income:
Service and other charges on deposit accounts
289
312
855
909
Lease income
262
260
815
770
Other income, net
309
329
914
922
Total non-interest income
860
901
2,584
2,601
Non-interest expense:
Salaries and employee benefits
3,759
3,837
11,440
11,815
Net occupancy and equipment
987
958
2,799
2,806
Computer services
431
449
1,264
1,336
Insurance expense and assessments
348
348
1,098
1,153
Fees for professional services
363
299
1,048
1,004
Other expense
1,549
1,099
4,150
3,295
Total non-interest expense
7,437
6,990
21,799
21,409
Income before income taxes
2,519
2,944
5,009
8,441
Provision for income taxes
583
722
1,146
1,985
Net income
$
1,936
$
2,222
$
3,863
$
6,456
Basic net income per share
$
0.33
$
0.38
$
0.66
$
1.10
Diluted net income per share
$
0.32
$
0.36
$
0.64
$
1.04
Dividends per share
$
0.07
$
0.05
$
0.21
$
0.15
The accompanying notes are an integral part of these Interim Condensed Consolidated Financial Statements.
5
FIRST US BANCSHARES, INC. AND SUBSIDIARY
INTERIM CONDENSED CONSOLIDATED ST
ATEMENTS OF COMPREHENSIVE INCOME
(Dollars in Thousands)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2025
2024
2025
2024
(Unaudited)
(Unaudited)
Net income
$
1,936
$
2,222
$
3,863
$
6,456
Other comprehensive income:
Unrealized holding gains on securities available-for-sale
arising during period, net of tax expense of $
258
, $
1,050
, $
1,188
, and $
1,151
, respectively
777
3,150
3,569
3,447
Unrealized holding losses arising during the period on
effective cash flow hedge derivatives, net of tax benefit
of $
27
, $
66
, $
175
and $
66
, respectively
(
82
)
(
198
)
(
522
)
(
198
)
Reclassification adjustments on cash flow hedge derivatives realized in net income, net of tax benefit of $
12
, $
21
, $
36
, and $
99
, respectively
(
37
)
(
63
)
(
110
)
(
297
)
Other comprehensive income
658
2,889
2,937
2,952
Total comprehensive income
$
2,594
$
5,111
$
6,800
$
9,408
The accompanying notes are an integral part of these Interim Condensed Consolidated Financial Statements.
6
FIRST US BANCSHARES, INC. AND SUBSIDIARY
INTERIM CONDENSED CONSOLIDATED STATEME
NTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Dollars in Thousands, Except Share and Per Share Data)
For the three months ended September 30, 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, June 30, 2024
5,744,254
$
78
$
15,200
$
(
6,368
)
$
113,615
$
(
28,689
)
$
93,836
Net income
—
—
—
—
2,222
—
2,222
Net change in fair value of
securities available-for-sale,
net of tax
—
—
—
3,150
—
—
3,150
Net change in fair value of
derivative instruments, net
of tax
—
—
—
(
261
)
—
—
(
261
)
Dividends declared: $
0.05
per
share
—
—
—
—
(
286
)
—
(
286
)
Impact of stock-based
compensation plans, net
634
—
149
—
—
—
149
Impact of common stock share
repurchases
(
29,500
)
—
—
—
—
(
319
)
(
319
)
Balance, September 30, 2024
5,715,388
$
78
$
15,349
$
(
3,479
)
$
115,551
$
(
29,008
)
$
98,491
Balance, June 30, 2025
5,755,064
$
79
$
15,619
$
(
2,065
)
$
117,988
$
(
29,729
)
$
101,892
Net income
—
—
—
—
1,936
—
1,936
Net change in fair value of
securities available-for-sale,
net of tax
—
—
—
777
—
—
777
Net change in fair value of
derivative instruments, net
of tax
—
—
—
(
119
)
—
—
(
119
)
Dividends declared: $
0.07
per
share
—
—
—
—
(
404
)
—
(
404
)
Reissuance of treasury stock as
compensation
5,710
—
(
79
)
—
—
79
—
Impact of stock-based
compensation plans, net
4,363
—
185
—
—
(
29
)
156
Balance, September 30, 2025
5,765,137
$
79
$
15,725
$
(
1,407
)
$
119,520
$
(
29,679
)
$
104,238
The accompanying notes are an integral part of these Interim Condensed Consolidated Financial Statements.
7
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 nine months ended September 30, 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
—
—
—
—
6,456
—
6,456
Net change in fair value of
securities available-for-sale,
net of tax
—
—
—
3,447
—
—
3,447
Net change in fair value of
derivative instruments,
net of tax
—
—
—
(
495
)
—
—
(
495
)
Dividends declared: $
0.15
per
share
—
—
—
—
(
864
)
—
(
864
)
Reissuance of treasury stock as
compensation
11,293
—
(
158
)
—
—
158
—
Impact of stock-based
compensation plans, net
75,520
3
535
—
—
(
48
)
490
Impact of common stock share
repurchases
(
106,500
)
—
—
—
—
(
1,136
)
(
1,136
)
Balance, September 30, 2024
5,715,388
$
78
$
15,349
$
(
3,479
)
$
115,551
$
(
29,008
)
$
98,491
Balance, December 31, 2024
5,696,171
$
78
$
15,540
$
(
4,344
)
$
116,865
$
(
29,515
)
$
98,624
Net income
—
—
—
—
3,863
—
3,863
Net change in fair value of
securities available-for-sale,
net of tax
—
—
—
3,569
—
—
3,569
Net change in fair value of
derivative instruments,
net of tax
—
—
—
(
632
)
—
—
(
632
)
Dividends declared: $
0.21
per
share
—
—
—
—
(
1,208
)
—
(
1,208
)
Reissuance of treasury stock as
compensation
37,260
—
(
513
)
—
—
513
—
Impact of stock-based
compensation plans, net
71,706
1
698
—
—
(
142
)
557
Impact of common stock share
repurchases
(
40,000
)
—
—
—
—
(
535
)
(
535
)
Balance, September 30, 2025
5,765,137
$
79
$
15,725
$
(
1,407
)
$
119,520
$
(
29,679
)
$
104,238
The accompanying notes are an integral part of these Interim Condensed Consolidated Financial Statements.
8
FIRST US BANCSHARES, INC. AND SUBSIDIARY
INTERIM CONDENSED CONSOLIDA
TED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
Nine Months Ended
September 30,
2025
2024
(Unaudited)
Cash flows from operating activities:
Net income
$
3,863
$
6,456
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization
1,261
1,155
Provision for credit losses
3,811
152
Deferred income tax expense
151
636
Reclassification of unrealized gains on terminated derivative contracts
(
146
)
(
814
)
Stock-based compensation expense
566
468
Net accretion of securities
(
494
)
(
165
)
Amortization of intangible assets
49
104
Net loss on premises and equipment and other real estate
142
111
Changes in assets and liabilities:
Increase in cash surrender value of bank owned life insurance
(
233
)
(
264
)
(Increase) decrease in accrued interest receivable
(
338
)
308
Decrease (increase) in other assets
684
(
897
)
Increase in accrued interest expense
637
—
Decrease in other liabilities
(
73
)
(
1,938
)
Net cash provided by operating activities
9,880
5,312
Cash flows from investing activities:
Net decrease (increase) in federal funds sold and securities purchased under reverse repurchase agreements
877
(
6,049
)
Purchases of investment securities, available-for-sale
(
33,954
)
(
27,524
)
Proceeds from maturities and prepayments of investment securities, available-for-sale
43,125
23,576
Proceeds from maturities and prepayments of investment securities, held-to-maturity
157
335
Net (increase) decrease in Federal Home Loan Bank stock
(
10
)
420
Net (increase) decrease in loans and leases held for investment
(
48,735
)
18,112
Proceeds from the sale of premises and equipment, other real estate and repossessions
916
698
Purchases of premises and equipment
(
2,945
)
(
1,830
)
Net cash (used in) provided by investing activities
(
40,569
)
7,738
Cash flows from financing activities:
Net increase in deposits
29,915
30,958
Net increase (decrease) in short-term borrowings
10,000
(
10,000
)
Net share-based compensation transactions
(
9
)
22
Repurchases of common stock
(
535
)
(
1,136
)
Dividends paid
(
1,208
)
(
864
)
Net cash provided by financing activities
38,163
18,980
Net increase in cash and cash equivalents
7,474
32,030
Cash and cash equivalents, beginning of period
47,216
50,279
Cash and cash equivalents, end of period
$
54,690
$
82,309
Supplemental disclosures:
Cash paid for:
Interest
$
15,481
$
16,439
Income taxes
1,158
2,550
Non-cash transactions:
Assets acquired in settlement of loans
1,024
133
Reissuance of treasury stock as compensation
513
158
The accompanying notes are an integral part of these Interim Condensed Consolidated Financial Statements.
9
FIRST US BANCSHARES, INC. AND SUBSIDIARY
NOTES TO INTERIM CONDENSED CONS
OLIDATED FINANCIAL STATEMENTS
(Unaudited)
1.
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").
2.
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 options granted 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).
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
Nine Months Ended
September 30,
September 30,
2025
2024
2025
2024
Weighted average shares outstanding
5,759,822
5,733,480
5,739,415
5,752,991
Weighted average director stock equivalent shares
78,557
105,799
87,310
109,588
Basic shares
5,838,379
5,839,279
5,826,725
5,862,579
Dilutive shares
230,000
317,600
230,000
317,600
Diluted shares
6,068,379
6,156,879
6,056,725
6,180,179
Three Months Ended
Nine Months Ended
September 30,
September 30,
2025
2024
2025
2024
(Dollars in Thousands, Except Per Share Data)
Net income
$
1,936
$
2,222
$
3,863
$
6,456
Basic net income per share
$
0.33
$
0.38
$
0.66
$
1.10
Diluted net income per share
$
0.32
$
0.36
$
0.64
$
1.04
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 September 30, 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.
11
3.
INVESTMENT SECURITIES
Details of investment securities available-for-sale and held-to-maturity as of
September 30, 2025 and December 31, 2024 were as follows:
Available-for-Sale
September 30, 2025
Gross
Gross
Estimated
Amortized
Unrealized
Unrealized
Fair
Cost
Gains
Losses
Value
(Dollars in Thousands)
Mortgage-backed securities:
Residential
$
106,036
$
1,564
$
(
1,728
)
105,872
Commercial
8,245
83
(
86
)
8,242
Obligations of U.S. government-sponsored agencies
12,177
162
(
349
)
11,990
Obligations of states and political subdivisions
1,691
54
(
4
)
1,741
Corporate notes
17,762
88
(
1,017
)
16,833
U.S. Treasury securities
20,010
—
(
719
)
19,291
Total
$
165,921
$
1,951
$
(
3,903
)
$
163,969
Held-to-Maturity
September 30, 2025
Gross
Gross
Estimated
Amortized
Unrealized
Unrealized
Fair
Cost
Gains
Losses
Value
(Dollars in Thousands)
Mortgage-backed securities:
Commercial
$
185
$
—
$
(
5
)
$
180
Obligations of U.S. government-sponsored agencies
335
—
(
15
)
320
Obligations of states and political subdivisions
4
—
—
4
Total
$
524
$
—
$
(
20
)
$
504
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
12
The scheduled maturities of investment securities available-for-sale and held-to-maturity as of
September 30, 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
$
10,455
$
10,238
$
—
$
—
Maturing after one to five years
14,884
14,412
189
187
Maturing after five to ten years
58,452
56,142
251
236
Maturing after ten years
82,130
83,177
84
81
Total
$
165,921
$
163,969
$
524
$
504
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
September 30, 2025 and December 31, 2024.
Available-for-Sale
September 30, 2025
Less than 12 Months
12 Months or More
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
(Dollars in Thousands)
Mortgage-backed securities:
Residential
$
25,109
$
(
263
)
$
23,794
$
(
1,465
)
Commercial
—
—
3,583
(
86
)
Obligations of U.S. government-sponsored agencies
1,995
(
5
)
4,714
(
344
)
Obligations of states and political subdivisions
—
—
297
(
4
)
Corporate notes
—
—
14,745
(
1,017
)
U.S. Treasury securities
—
—
19,291
(
719
)
Total
$
27,104
$
(
268
)
$
66,424
$
(
3,635
)
Held-to-Maturity
September 30, 2025
Less than 12 Months
12 Months or More
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
(Dollars in Thousands)
Mortgage-backed securities:
Commercial
$
—
$
—
$
180
$
(
5
)
Obligations of U.S. government-sponsored agencies
—
—
320
(
15
)
Obligations of states and political subdivisions
—
—
4
—
Total
$
—
$
—
$
504
$
(
20
)
13
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 Credit 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 September 30, 2025
,
86
available-for-sale debt securities had been in a loss position for more than 12 months, and
six
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
September 30, 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 September 30, 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 September 30, 2025 or December 31, 2024. Accrued interest receivable is excluded from the estimate of credit losses for available-for-sale securities. As of both September 30, 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 interim condensed consolidated balance sheets.
Held-to-Maturity Credit 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
September 30, 2025 or December 31, 2024. As of September 30, 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 interim condensed consolidated balance sheets.
14
Pledged Securities
Investment securities with a carrying value of $
59.3
million and $
72.1
million as of September 30, 2025 and December 31, 2024
, respectively, were pledged to secure public deposits and for other purposes.
4.
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 boats, recreational vehicles/campers, horse trailers and cargo trailers.
As of
September 30, 2025 and December 31, 2024, the composition of the loan portfolio by portfolio segment was as follows:
September 30, 2025
December 31, 2024
Real estate loans:
Construction, land development and other land loans
$
38,560
$
65,537
Secured by 1-4 family residential properties
67,620
69,999
Secured by multi-family residential properties
112,763
101,057
Secured by non-residential commercial real estate
211,400
227,751
Commercial and industrial loans and leases ("C&I")
(1)
46,562
44,238
Consumer loans:
Direct
4,999
4,774
Indirect
385,616
309,683
Total loans
867,520
823,039
Less: Allowance for credit losses on loans and leases
10,700
10,184
Net loans
(2)
$
856,820
$
812,855
15
(1)
Includes equipment financing leases, which totaled $
13.4
million as of
September 30, 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 $
0.7
million and $
0.8
million as of September 30, 2025 and December 31, 2024, respectively. Loans are also presented net of unamortized premiums associated with indirect loans of $
15.8
million and $
10.6
million as of September 30, 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 September 30, 2025 and December 31, 2024, accrued interest receivable for LHFI totaled $
3.2
mil
lion 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,
49.6
%
and
56.4
%
of the portfolio was concentrated in loans secured by real estate as of September 30, 2025 and December 31, 2024, respectively.
Loans with a carrying value of $
86.5
million and $
92.6
million were pledged as collateral to secure Federal Home Loan Bank (“FHLB”) borrowings as of September 30, 2025 and December 31, 2024, respectively. In addition, loans with a carrying value of $
363.9
million and $
285.2
million were pledged to secure borrowings with the Federal Reserve Bank ("FRB") as of September 30, 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 $
22.9
million and $
11.4
million as of September 30, 2025 and December 31, 2024, respectively. During the nine months ended September 30, 2025
, there were new loans of $
11.5
million 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.
Allowance 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, unemployment levels, and interest rates.
16
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 nine months ended September 30, 2025 and 2024:
As of and for the Nine Months Ended September 30, 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
—
—
—
—
(
2,215
)
(
5
)
(
1,428
)
(
3,648
)
Recoveries
—
21
—
—
16
149
163
349
Provision for (recovery of) credit losses on loans and leases
(
90
)
(
41
)
97
142
1,072
(
135
)
2,770
3,815
Allowance for credit losses on loans and leases
$
262
$
386
$
643
$
1,570
$
404
$
58
$
7,377
$
10,700
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
6
—
—
(
10
)
—
—
—
(
4
)
Allowance for credit losses on unfunded lending commitments
$
286
$
1
$
43
$
6
$
34
$
2
$
—
$
372
As of and for the Nine Months Ended September 30, 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
)
—
—
(
113
)
(
53
)
(
1,049
)
(
1,217
)
Recoveries
20
46
—
—
—
249
259
574
Provision for (recovery of) credit losses on loans and leases
(
249
)
(
171
)
261
322
342
(
209
)
(
44
)
252
Allowance for credit losses on loans and leases
$
336
$
464
$
676
$
1,747
$
742
$
51
$
6,100
$
10,116
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
(
115
)
(
1
)
50
25
(
59
)
—
—
(
100
)
Allowance for credit losses on unfunded lending commitments
$
335
$
—
$
59
$
27
$
43
$
5
$
—
$
469
17
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 September 30, 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.
18
The tables below illustrate the carrying amount of loans and leases by credit quality indicator and year of origination as of
September 30, 2025, as well as gross charge-offs for the nine months ended September 30, 2025.
September 30, 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
$
1,852
$
8,099
$
14,000
$
7,753
$
6
$
105
$
31,815
Special Mention
—
4,416
—
—
25
—
4,441
Substandard
—
—
2,304
—
—
—
2,304
Doubtful
—
—
—
—
—
—
—
Loss
—
—
—
—
—
—
—
Subtotal
$
1,852
$
12,515
$
16,304
$
7,753
$
31
$
105
$
38,560
Current period gross charge-offs
$
—
$
—
$
—
$
—
$
—
$
—
$
—
Secured by multi-family residential properties
Pass
$
1,025
$
201
$
381
$
65,771
$
13,601
$
23,808
$
104,787
Special Mention
—
—
—
7,976
—
—
7,976
Substandard
—
—
—
—
—
—
—
Doubtful
—
—
—
—
—
—
—
Loss
—
—
—
—
—
—
—
Subtotal
$
1,025
$
201
$
381
$
73,747
$
13,601
$
23,808
$
112,763
Current period gross charge-offs
$
—
$
—
$
—
$
—
$
—
$
—
$
—
Secured by non-residential commercial real estate
Pass
$
11,257
$
25,271
$
16,221
$
21,959
$
35,191
$
96,966
$
206,865
Special Mention
—
—
540
2,849
—
326
3,715
Substandard
—
—
—
—
457
363
820
Doubtful
—
—
—
—
—
—
—
Loss
—
—
—
—
—
—
—
Subtotal
$
11,257
$
25,271
$
16,761
$
24,808
$
35,648
$
97,655
$
211,400
Current period gross charge-offs
$
—
$
—
$
—
$
—
$
—
$
—
$
—
Commercial and industrial loans and leases
Pass
$
11,215
$
14,191
$
4,641
$
2,575
$
3,935
$
9,835
$
46,392
Special Mention
—
—
—
18
45
—
63
Substandard
—
—
—
—
—
107
107
Doubtful
—
—
—
—
—
—
—
Loss
—
—
—
—
—
—
—
Subtotal
$
11,215
$
14,191
$
4,641
$
2,593
$
3,980
$
9,942
$
46,562
Current period gross charge-offs
$
—
$
—
$
2,215
$
—
$
—
$
—
$
2,215
Total commercial
Pass
$
25,349
$
47,762
$
35,243
$
98,058
$
52,733
$
130,714
$
389,859
Special Mention
—
4,416
540
10,843
70
326
16,195
Substandard
—
—
2,304
—
457
470
3,231
Doubtful
—
—
—
—
—
—
—
Loss
—
—
—
—
—
—
—
$
25,349
$
52,178
$
38,087
$
108,901
$
53,260
$
131,510
$
409,285
Current period gross charge-offs
$
—
$
—
$
2,215
$
—
$
—
$
—
$
2,215
19
September 30, 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
$
4,206
$
5,045
$
2,979
$
17,345
$
14,093
$
23,359
$
67,027
Non-performing
—
—
—
—
—
593
593
Subtotal
$
4,206
$
5,045
$
2,979
$
17,345
$
14,093
$
23,952
$
67,620
Current period gross charge-offs
$
—
$
—
$
—
$
—
$
—
$
—
$
—
Direct
Performing
$
2,533
$
1,354
$
557
$
185
$
223
$
143
$
4,995
Non-performing
—
—
—
—
4
—
4
Subtotal
$
2,533
$
1,354
$
557
$
185
$
227
$
143
$
4,999
Current period gross charge-offs
$
—
$
4
$
—
$
—
$
1
$
—
$
5
Indirect
Performing
$
125,127
$
47,928
$
60,530
$
62,932
$
46,774
$
42,219
$
385,510
Non-performing
—
23
—
—
10
73
106
Subtotal
$
125,127
$
47,951
$
60,530
$
62,932
$
46,784
$
42,292
$
385,616
Current period gross charge-offs
$
10
$
95
$
203
$
449
$
277
$
394
$
1,428
Total consumer
Performing
$
131,866
$
54,327
$
64,066
$
80,462
$
61,090
$
65,721
$
457,532
Non-performing
—
23
—
—
14
666
703
$
131,866
$
54,350
$
64,066
$
80,462
$
61,104
$
66,387
$
458,235
Current period gross charge-offs
$
10
$
99
$
203
$
449
$
278
$
394
$
1,433
20
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
21
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
September 30, 2025:
As of September 30, 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
$
—
$
—
$
—
$
—
$
38,560
$
38,560
$
—
Secured by 1-4 family residential
properties
7
5
362
374
67,246
67,620
—
Secured by multi-family residential
properties
—
—
—
—
112,763
112,763
—
Secured by non-residential commercial real estate
—
—
363
363
211,037
211,400
—
Commercial and industrial loans
—
25
—
25
46,537
46,562
—
Consumer loans:
—
Direct
1
—
4
5
4,994
4,999
—
Indirect
614
254
83
951
384,665
385,616
—
Total
$
622
$
284
$
812
$
1,718
$
865,802
$
867,520
$
—
As a percentage of total loans
0.07
%
0.04
%
0.09
%
0.20
%
99.80
%
100.00
%
22
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
September 30, 2025 and December 31, 2024. Also presented is the balance of loans on nonaccrual status at September 30, 2025 and December 31, 2024 for which there was no related ACL recorded.
Loans on Non-Accrual Status
September 30, 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
593
374
—
Secured by multi-family residential properties
—
—
—
Secured by non-residential commercial real estate
363
—
—
Commercial and industrial loans
—
—
—
Consumer loans:
—
Direct
4
—
—
Indirect
106
—
—
Total loans
$
1,066
$
374
$
—
23
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
September 30, 2025 and December 31, 2024, which loans are individually evaluated to determine credit losses:
September 30, 2025
Real Estate
Other
Total
(Dollars in Thousands)
Loans secured by real estate
Construction, land development and other land loans
$
2,304
$
—
$
2,304
Secured by 1-4 family residential properties
391
—
391
Secured by multi-family residential properties
—
—
—
Secured by non-residential commercial real estate
363
—
363
Commercial and industrial
—
39
39
Direct consumer
—
—
—
Total loans individually evaluated
$
3,058
$
39
$
3,097
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 nine months ended September 30, 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.
24
5.
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
nine months ended September 30, 2025 and 2024:
September 30, 2025
September 30, 2024
(Dollars in Thousands)
Beginning balance
$
1,509
$
602
Additions
(1)
—
26
Sales proceeds
(
204
)
—
Gross gains
53
—
Gross losses
—
—
Net gains
53
—
Impairment
(
200
)
(
90
)
Ending balance
$
1,158
$
538
(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 September 30, 2025
and 2024. In addition, the Company did
no
t hold any consumer mortgage loans collateralized by residential real estate that were in the process of foreclosure as of both
September 30, 2025 and 2024.
Repossessed Assets
The Company also acquires assets through the repossession of the underlying collateral of loans in default. As of September 30, 2025
and 2024, total repossessed assets were $
0.5
million and $
49
thousand, respectively. Repossessed assets are included in other assets in the Company's consolidated balance sheets.
6.
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
September 30, 2025 and December 31, 2024. Goodwill impairment was neither indicated nor recorded during the nine months ended September 30, 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
nine months ended September 30, 2025 or the year ended December 31, 2024.
25
The Company’s goodwill and other intangible assets (carrying basis and accumulated amortization) as of
September 30, 2025 and December 31, 2024 were as follows:
September 30, 2025
December 31, 2024
(Dollars in Thousands)
Goodwill
$
7,435
$
7,435
Core deposit intangible:
Gross carrying amount
2,048
2,048
Accumulated amortization
(
2,048
)
(
1,999
)
Core deposit intangible, net
—
49
Total
$
7,435
$
7,484
As of September 30, 2025, the Company had fully amortized the remaining balance of the core deposit intangible.
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.
7.
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
September 30, 2025 and December 31, 2024, the Bank had $
10.0
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
September 30, 2025 and December 31, 2024.
•
Short-term FHLB advances are secured borrowings available to the Bank as an alternative funding source. As of both September 30, 2025 and December 31, 2024, the Bank had $
10.0
million 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 September 30, 2025 and December 31, 2024
, the Company did
no
t 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 September 30, 2025 and December 31, 2024
.
The table below provides additional information related to the Notes as of and for the
nine months ended September 30, 2025 and 2024
.
26
September 30,
September 30,
2025
2024
(Dollars in Thousands)
Balance at period-end
$
10,927
$
10,854
Average balance during the period
$
10,921
$
10,848
Maximum month-end balance during the period
$
10,927
$
10,854
Average rate paid during the period, including amortization of debt issuance costs
4.20
%
4.20
%
Weighted average remaining maturity (in years)
6.00
7.00
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
September 30, 2025 and December 31, 2024, the Company’s available unused lines of credit consisted of the following:
Available Unused Lines of Credit
Collateral Requirements
September 30, 2025
December 31, 2024
Correspondent banks
None
$
48.0
million
$
48.0
million
FHLB advances
(1)
Subject to collateral
$
313.0
million
$
319.9
million
FRB
(2)
Subject to collateral
$
200.9
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 $
50.8
million and $
55.4
million as of September 30, 2025 and December 31, 2024, respectively. The Company’s collateral exposure with the FHLB in the form of advances and letters of credit was $
30.0
million and $
10.0
million as of September 30, 2025 and December 31, 2024, respectively, leaving an excess of collateral of $
20.8
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.
8.
INCOME TAXES
The provision for income taxes was $
1.1
million and $
2.0
million for the
nine months ended September 30, 2025 and 2024, respectively. The Company’s effective tax rate was
22.9
%
and
23.5
%
, 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 $
2.9
million and $
4.1
million as of September 30, 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.
On July 4, 2025, the One Big Beautiful Bill Act (the “OBBBA”) was signed into law. The OBBBA extends or makes permanent a number of provisions originally enacted in the 2017 Tax Cuts and Jobs Act and introduces new items affecting both individuals and businesses. Topic 740, Income Taxes, of the FASB Accounting Standards Codification requires the effects of newly enacted tax law to be recognized in the period of enactment. We do not expect the OBBBA to have a material impact on our 2025 estimated annual effective tax rate or on our consolidated financial statements.
27
9.
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 $
2.5
million and $
2.7
million as of September 30, 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 September 30, 2025 and December 31, 2024, a total of
75,455
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 September 30, 2025, only stock options and restricted stock have been granted. Stock-based compensation expense related to stock awards totaled $
0.5
million and $
0.4
million for the nine months ended September 30, 2025 and 2024, respectively.
Stock Options
Stock options 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
no
t grant any stock options during the
nine months ended September 30, 2025 or 2024.
The following table summarizes the Company’s stock option activity for the periods presented.
Nine Months Ended
September 30, 2025
September 30, 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
31,750
8.30
86,700
8.14
Expired
5,500
8.23
7,600
8.09
Forfeited
1,000
10.01
—
—
Options outstanding, end of period
230,000
11.00
317,600
10.26
Options exercisable, end of period
230,000
11.00
317,600
10.26
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 $
0.4
million and $
0.5
million as of September 30, 2025 and 2024, respectively.
28
Restricted Stock
During the nine months ended September 30, 2025 and 2024,
63,519
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.
Nine Months Ended
September 30, 2025
September 30, 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
63,519
13.06
55,300
10.41
Released from restriction
58,076
10.53
47,644
9.96
Forfeited
2,768
11.77
1,500
10.41
Unvested shares, end of period
95,274
$
11.95
92,599
$
10.29
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 and nine months ended September 30, 2025 and 2024:
Location in the Condensed
Three Months Ended
Nine Months Ended
Consolidated Statements
of Operations
September 30,
2025
September 30,
2024
September 30,
2025
September 30,
2024
(Dollars in Thousands)
(Dollars in Thousands)
Operating lease income
(1)
Lease income
$
262
$
260
$
815
$
770
Operating lease expense
(2)
Net occupancy and equipment
$
109
$
147
$
336
$
460
(1)
Operating lease income includes rental income from owned properties.
(2)
Includes short-term lease costs. For the
three and nine months ended September 30, 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 September 30, 2025 and December 31, 2024:
Location in
the Condensed
Consolidated
Balance Sheets
September 30,
2025
December 31,
2024
(Dollars in
Thousands)
Operating lease right-of-use assets
Other assets
$
1,668
$
1,921
Operating lease liabilities
Other liabilities
$
1,728
$
1,972
Weighted-average remaining lease term (in years)
5.48
5.14
Weighted-average discount rate
4.31
%
4.08
%
29
The following table provides supplemental lease information for the interim condensed consolidated statements of cash flows for the nine months ended September 30, 2025 and 2024:
Nine Months Ended
September 30,
2025
September 30,
2024
(Dollars in Thousands)
Cash paid for amounts included in the measurement of
lease liabilities:
Operating cash flows from operating leases
$
308
$
295
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
September 30, 2025:
Minimum
Rental Payments
(Dollars in Thousands)
2025
$
104
2026
419
2027
308
2028
269
2029
183
2030 and thereafter
746
Total future minimum lease payments
$
2,029
Less: Imputed interest
301
Total operating lease liabilities
$
1,728
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
September 30, 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
September 30, 2025 and December 31, 2024, the hedge
30
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 on the notional amount of $
15.2
million in the aggregate. These agreements are 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 September 30, 2025 and December 31, 2024
, the Company had an unrealized gain of $
0.2
million and $
0.3
million, respectively, 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
September 30, 2025 and December 31, 2024.
As of September 30, 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
$
(
45
)
$
40,000
$
609
Interest rate floors
$
20,000
214
$
—
—
Total cash flow hedges
$
169
$
609
Total derivatives designated as hedging instruments, net
$
169
$
678
Derivatives not designated as hedging instruments:
Interest rate floors
$
25,000
$
1
$
50,000
$
18
Credit risk participation agreements
$
15,198
(
62
)
$
15,198
(
54
)
Total derivatives not designated as hedging instruments, net
$
(
61
)
$
(
36
)
31
(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 and nine months ended September 30, 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
Nine Months Ended
Consolidated Statements
of Operations
September 30,
2025
September 30,
2024
September 30,
2025
September 30,
2024
(Dollars in Thousands)
(Dollars in Thousands)
Interest income
Interest and fees on loans
$
(
18
)
$
209
$
(
66
)
$
729
Interest expense
Interest on deposits
143
93
380
333
Interest expense
Interest on borrowings
—
12
—
84
Non-interest income
Other non-interest income
12
27
(
8
)
27
Non-interest expense
Other non-interest expense
(
5
)
72
(
17
)
10
Net increase to income before income taxes
$
132
$
413
$
289
$
1,183
13.
OTHER OPERATING INCOME AND EXPENSE
Other Operating Income
Other operating income for the
three and nine months ended September 30, 2025 and 2024 consisted of the following:
Three Months Ended
Nine Months Ended
September 30,
2025
September 30,
2024
September 30,
2025
September 30,
2024
(Dollars in Thousands)
Bank-owned life insurance
$
141
$
136
$
416
$
400
ATM fee income
89
90
271
272
Other income
79
103
227
250
Total
$
309
$
329
$
914
$
922
Other Operating Expense
Other operating expense for the
three and nine months ended September 30, 2025 and 2024 consisted of the following:
Three Months Ended
Nine Months Ended
September 30,
2025
September 30,
2024
September 30,
2025
September 30,
2024
(Dollars in Thousands)
Postage, stationery and supplies
$
132
$
106
$
421
$
420
Telephone/data communication
191
197
576
582
Collection and recoveries
69
47
235
107
Directors fees
103
81
297
262
Software amortization
115
62
330
239
Other real estate/foreclosure expense, net
153
31
197
92
Other expense
786
575
2,094
1,593
Total
$
1,549
$
1,099
$
4,150
$
3,295
32
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:
September 30,
2025
December 31,
2024
(Dollars in Thousands)
Standby letters of credit
$
—
$
—
Standby performance letters of credit
$
722
$
896
Commitments to extend credit
$
121,794
$
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 September 30, 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
September 30, 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 September 30, 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.
33
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
nine months ended September 30, 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.
34
The following table presents assets and liabilities measured at net fair value on a recurring basis as of
September 30, 2025 and December 31, 2024.
Fair Value Measurements as of September 30, 2025 Using
Totals At
September 30,
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
$
105,872
$
—
$
105,872
$
—
Commercial
8,242
—
8,242
—
Obligations of U.S. government-sponsored agencies
11,990
—
11,990
—
Obligations of states and political subdivisions
1,741
—
1,741
—
Corporate notes
16,833
—
16,833
—
U.S. Treasury securities
19,291
19,291
—
—
Derivative contracts:
Other assets - interest rate floors
215
—
215
—
Other liabilities - interest rate swaps
45
—
45
—
Other liabilities - credit risk participation agreements
62
—
62
—
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,
35
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 September 30, 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
September 30, 2025 and December 31, 2024:
Fair Value Measurements as of September 30, 2025 Using
Totals At
September 30,
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
$
161
$
—
$
—
$
161
OREO and other assets held-for-sale
1,158
—
—
1,158
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
36
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 September 30, 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 September 30, 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.
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
37
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 consolidated 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 consolidated 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.
38
The estimated net 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
September 30, 2025 and December 31, 2024 were as follows:
September 30, 2025
Carrying
Amount
Estimated
Fair Value
Level 1
Level 2
Level 3
(Dollars in Thousands)
Assets:
Cash and cash equivalents
$
54,690
$
54,690
$
54,690
$
—
$
—
Investment securities available-for-sale
163,969
163,969
19,291
144,678
—
Investment securities held-to-maturity
524
504
—
504
—
Federal funds sold and securities purchased under reverse repurchase agreements
4,850
4,850
—
4,850
—
Federal Home Loan Bank stock
1,266
1,266
—
—
1,266
Loans, net of allowance for credit losses
856,820
817,984
—
—
817,984
Other assets - interest rate floors
215
215
—
215
—
Liabilities:
Deposits
1,002,472
950,583
—
950,583
—
Short-term borrowings
20,000
20,000
—
20,000
—
Long-term borrowings
10,927
10,230
—
10,230
—
Other liabilities - interest rate swaps
45
45
—
45
—
Other liabilities - credit risk participation agreements
62
62
—
62
—
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
.
39
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 segment net income that also is reported on the consolidated statement of operations 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 and nine months ended September 30, 2025 and 2024:
Bank Segment
For the three months ended September 30,
For the nine months ended September 30,
2025
2024
2025
2024
(Dollars in Thousands)
(Dollars in Thousands)
Income:
Interest income
$
15,281
$
15,017
$
44,153
$
43,840
Non-interest income
860
901
2,584
2,601
Total income
16,141
15,918
46,737
46,441
Less:
Interest expense
5,619
5,832
16,118
16,439
Provision for credit losses
566
152
3,811
152
Salaries and employee benefits
3,759
3,837
11,440
11,815
Net occupancy and equipment
987
958
2,799
2,806
Computer services
431
449
1,264
1,336
Insurance expense and assessments
348
348
1,098
1,153
Fees for professional services
363
299
1,048
1,004
Postage, stationery and supplies
132
106
421
420
Telephone/data communication
191
197
576
582
Collection and recoveries
69
47
235
107
Directors fees
103
81
297
262
Software amortization
115
62
330
239
Other real estate/foreclosure expense, net
153
31
197
92
Other segment items
(1)
786
575
2,094
1,593
Provision for income taxes
583
722
1,146
1,985
Total expense
14,205
13,696
42,874
39,985
Segment net income
$
1,936
$
2,222
$
3,863
$
6,456
(1)
Other segment items includes advertising expense, travel and business development expense, and life insurance expense.
40
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
DESCRIPTION OF THE BUSINESS
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.
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 151 full-time equivalent employees (as of September 30, 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 September 30, 2025 to December 31, 2024, while comparing income and expense for the nine months ended September 30, 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.
41
RECENT MARKET CONDITIONS
Economic volatility persisted during the nine months ended September 30, 2025 due to a number of factors, including continued growth in U.S. gross domestic product (“GDP”), as well as rising inflation and unemployment levels, during the third quarter of 2025. As of September 30, 2025, uncertainty continued related to the ultimate impact of trade tariffs introduced by the Trump administration, ongoing geopolitical unrest, and more recently, the Congressional shutdown of “nonessential” portions of the U.S. government. Estimates of second quarter 2025 U.S. GDP were revised upward to 3.8%, rebounding from a 0.5% contraction in the first quarter of 2025. An October 2025 estimate by the Federal Reserve Bank of Atlanta put third quarter 2025 GDP at 3.9%. The U.S. inflation rate, as measured by the consumer price index, rose to 3.0% in September 2025, the highest level since January 2025, but slightly below consensus forecasts. The U.S. unemployment rate increased to 4.3% in August 2025, and while unemployment for September 2025 was not released in accordance with the typical time-frame due to the government shutdown, consensus expectations are that September unemployment will hold steady with the August number. Through most of the nine months ended September 30, 2025, the Open Market Committee of the FRB did not change the federal funds rate; however, in both September and October 2025, the federal funds rate was reduced by 25 basis points. Although volatile at times, Treasury rates trended lower during the first nine months of 2025, indicating continued sentiment for further rate reductions in the coming year. The combination of continued GDP growth, inflation levels above the FRB’s 2% target, and rising unemployment levels provides a difficult environment in which to predict future movement in interest rates.
Additionally, the impacts of new trade and other economic policies in the U.S., including tariffs and the One Big Beautiful Bill Act, along with the threat to implement additional tariffs, have created economic uncertainty which will continue to evolve and impact our business in future periods. There is a risk that these policy changes could have a negative impact on certain of our customers, causing increased difficulty in repaying their loans or other obligations which could result in a higher level of credit losses in our loan portfolios with a corresponding impact on our results of operations. In the Company’s local markets, competition for deposits has remained at elevated levels causing difficulty in lowering funding costs amid a declining interest rate environment. Uncertainty has continued with respect to commercial lending as business firms assess the potential impact of trade tariffs and the interest rate environment on their activities. However, while consumer spending has generally slowed on a macro-basis, the Company has experienced significant growth in consumer indirect lending at the higher end of the credit spectrum during the first nine months of 2025. The competitive environment, combined with ongoing economic uncertainty, provides a challenging environment in which to maintain and increase the Company’s net interest margin. Should economic conditions worsen, the Company is exposed to increased credit risk from both commercial and consumer borrowers. Furthermore, should market interest rates or the federal funds rate 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.
EXECUTIVE OVERVIEW
The Company earned net income of $1.9 million, or $0.32 per diluted common share, during the three months ended September 30, 2025, compared to $2.2 million, or $0.36 per diluted common share, for the three months ended September 30, 2024. For the nine months ended September 30, 2025, net income totaled $3.9 million, or $0.64 per diluted share, compared to $6.5 million, or $1.04 per diluted share for the nine months ended September 30, 2024. The decrease in net income during both the three months and the nine months ended September 30, 2025, compared to the previous periods, resulted primarily from increases in the Company’s provision for credit losses on loans and leases and non-interest expense, partially offset by increases in net interest income.
42
Summarized condensed consolidated statements of operations are included below for the three and nine months ended September 30, 2025 and 2024.
Three Months Ended
Nine Months Ended
September 30,
September 30,
September 30,
September 30,
2025
2024
2025
2024
(Dollars in Thousands, Except Per Share Data)
Interest income
$
15,281
$
15,017
$
44,153
$
43,840
Interest expense
5,619
5,832
16,118
16,439
Net interest income
9,662
9,185
28,035
27,401
Provision for credit losses
566
152
3,811
152
Net interest income after provision for credit losses
9,096
9,033
24,224
27,249
Non-interest income
860
901
2,584
2,601
Non-interest expense
7,437
6,990
21,799
21,409
Income before income taxes
2,519
2,944
5,009
8,441
Provision for income taxes
583
722
1,146
1,985
Net income
$
1,936
$
2,222
$
3,863
$
6,456
Basic net income per share
$
0.33
$
0.38
$
0.66
$
1.10
Diluted net income per share
$
0.32
$
0.36
$
0.64
$
1.04
Dividends per share
$
0.07
$
0.05
$
0.21
$
0.15
The discussion that follows summarizes the most significant activity that drove changes in the Company’s operating results during the nine months ended September 30, 2025, as compared to the nine months ended September 30, 2024.
Net Interest Income and Margin
Net interest income increased by $0.6 million, or 2.3%, comparing the nine months ended September 30, 2025 to the nine months ended September 30, 2024. The increase resulted from a combination of increased average interest-earning asset balances and decreased average rates on deposits. Average interest-earning assets increased by $45.3 million during the first nine months of 2025, driven by growth in consumer indirect loans and, to a lesser extent, investment securities. While decreases in deposit costs were favorable to the Company’s net interest income, net interest margin decreased as the average yield on interest-earnings assets declined at a faster pace than the average rate on interest-bearing liabilities amid the declining interest rate environment. Net interest margin was 3.57% for the nine months ended September 30, 2025, compared to 3.65% for the nine months ended September 30, 2024.
Provision for Credit Losses
For the nine months ended September 30, 2025, the Company recorded a provision for credit losses of $3.8 million, compared to $0.2 million for the nine months ended September 30, 2024. Of the total provision recorded in the 2025 period, $2.8 million was associated with the consumer indirect loan portfolio, $1.1 million with the commercial and industrial portfolio (“C&I”), $0.1 million with the non-residential commercial real estate portfolio (“CRE”) and $0.1 million with the multi-family real estate category. These provisions were partially offset by a net of $0.3 million in reductions of credit losses in other loan categories. The increased provision associated with the consumer indirect portfolio was attributable to significant growth in the portfolio during the nine months ended September 30, 2025, as well as an increase in net charge-offs, particularly in the second quarter of 2025. The provisions recorded for C&I and CRE were primarily the result of credit allowances on two individually evaluated loans. During the third quarter of 2025, charge-offs associated with the indirect portfolio decreased relative to the second quarter and credit issues associated with the two individually evaluated loans were substantially resolved. As of September 30, 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 $2.6 million for both the nine months ended September 30, 2025 and 2024.
Non-interest Expense
Non-interest expense increased to $21.8 million for the nine months ended September 30, 2025, compared to $21.4 million for the nine months ended September 30, 2024, an increase of $0.4 million, or 1.8%. The increase comparing the 2025 period to the 2024 period resulted from increases in a number of expense categories, including collection and other real estate/foreclosure expense, as well as increases related to check fraud recoveries that occurred in 2024, but were not repeated in 2025. The increase in non-interest expense during the nine months ended
43
September 30, 2025 compared to the corresponding period of 2024 was partially offset by a decrease in salaries and benefits, and to a lesser extent, various other expense categories.
Total Assets
As of September 30, 2025, the Company’s assets totaled $1,147.2 million, compared to $1,101.1 million as of December 31, 2024, an increase of 4.2%.
Loans
Total loans increased by $44.5 million, or 5.4%, as of September 30, 2025, compared to December 31, 2024. The increase was driven primarily by growth of $75.9 million in consumer indirect loans during the nine months ended September 30, 2025. The indirect lending platform focuses on 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 nine months ended September 30, 2025 was 798, while the weighted average credit score for the entire portfolio was 782. In addition to the indirect portfolio, the Company also grew its multi-family residential real estate and commercial and industrial lending categories during the nine months ended September 30, 2025 by $11.7 million and $2.3 million, respectively. Loan growth during the nine months ended September 30, 2025 was partially offset by net reductions of $45.4 million in other lending categories, primarily construction and non-residential commercial real estate. For the nine months ended September 30, 2025, average loan balances increased by $30.6 million, or 3.7%, compared to the nine months ended September 30, 2024.
Asset Quality
Nonperforming assets, including loans in non-accrual status and other real estate owned, totaled $2.2 million as of September 30, 2025, compared to $5.5 million as of December 31, 2024. As a percentage of total assets, nonperforming assets totaled 0.19% as of September 30, 2025, compared to 0.50% as of December 31, 2024. For the nine months ended September 30, 2025, annualized net charge-offs as a percentage of average loans totaled 0.52% compared to 0.10% for the nine months ended September 30, 2024. Net charge-offs over the nine months ended September 30, 2025 totaled $3.3 million, of which $2.2 million was associated with individually evaluated commercial loans and $1.3 million was associated with the consumer indirect portfolio, partially offset by $0.2 million in net recoveries in other portfolios.
Deposits
Total deposits increased by $29.9 million, or 3.1%, during the nine months ended September 30, 2025, due primarily to increases in interest-bearing demand deposit accounts, as well as the addition of brokered certificates of deposit obtained to assist in the management of deposit costs. Core deposits, which exclude time deposits of $250 thousand or more and all wholesale brokered deposits, totaled $838.4 million, or 83.6% of total deposits, as of September 30, 2025, compared to $837.7 million, or 86.1% of total deposits, as of December 31, 2024.
Short-term Borrowings
As of September 30, 2025, the Company had $20.0 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 September 30, 2025 and December 31, 2024, all outstanding short-term borrowings had remaining maturities of less than 30 days. The amount outstanding as of September 30, 2025 included $10.0 million borrowed from the Federal Home Loan Bank of Atlanta (“FHLB”) and $10.0 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 September 30, 2025, the Company held cash, federal funds sold and securities purchased under reverse repurchase agreements totaling $59.5 million, or 5.2% 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 $164.5 million as of September 30, 2025 compared to $168.6 million as of December 31, 2024. As of September 30, 2025, the expected average life of securities in the investment portfolio was 4.2 years compared to 3.6 years as of December 31, 2024. During the nine months ended September 30, 2025 and 2024, the Company purchased $34.0 million and $27.5 million, respectively, of investment securities at market rates at the time of purchase. These purchases, combined with the maturity and paydown of investment securities at lower rates have led to continued improvement in yield on the portfolio. The yield on the investment securities, including both available-for-sale and held to maturity securities, totaled 3.52% for the nine months ended September 30, 2025, compared to 2.93% for the nine months ended September 30, 2024.
44
Shareholders’ Equity
Shareholders’ equity increased by $5.6 million, or 5.7%, as of September 30, 2025, compared to December 31, 2024. The increase in shareholders’ equity during the nine months ended September 30, 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 nine months ended September 30, 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.
Cash Dividends
During the nine months ended September 30, 2025, the Company declared cash dividends totaling $0.21 per share on its common stock, compared to cash dividends totaling $0.15 per share on its common stock during the nine months ended September 30, 2024.
Share Repurchases
During the nine months ended September 30, 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 September 30, 2025, 872,813 shares remained available for repurchase under the program.
Regulatory Capital
During the nine months ended September 30, 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 September 30, 2025, the Bank’s common equity Tier 1 capital and Tier 1 risk-based capital ratios were each 10.77%. Its total capital ratio was 11.92%, and its Tier 1 leverage ratio was 9.19%.
Liquidity
As of September 30, 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 nine months ended September 30, 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 during the first half of 2026. In addition, in October 2025, the Company opened a new automated banking facility in Mountain Brook, Alabama.
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 and nine months ended September 30, 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.
45
Three Months Ended
Three Months Ended
September 30, 2025
September 30, 2024
Average
Balance
Interest
Annualized
Yield/
Rate %
Average
Balance
Interest
Annualized
Yield/
Rate %
ASSETS
Interest-earning assets:
Loans
(1)
$
871,926
$
13,413
6.10
%
$
821,444
$
13,206
6.40
%
Investment securities
151,303
1,391
3.65
%
144,821
1,121
3.08
%
Federal Home Loan Bank stock
1,328
21
6.27
%
825
16
7.72
%
Federal funds sold and securities purchased under reverse repurchase agreements
4,850
54
4.42
%
5,285
71
5.34
%
Interest-bearing deposits in banks
36,087
402
4.42
%
43,191
603
5.55
%
Total interest-earning assets
1,065,494
15,281
5.69
%
1,015,566
15,017
5.88
%
Noninterest-earning assets
64,765
64,632
Total assets
$
1,130,259
$
1,080,198
LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing deposits:
Demand deposits
$
195,955
$
386
0.78
%
$
209,322
$
566
1.08
%
Money market/savings deposits
300,736
2,068
2.73
%
244,022
1,650
2.69
%
Time deposits
345,916
2,914
3.34
%
355,819
3,493
3.91
%
Total interest-bearing deposits
842,607
5,368
2.53
%
809,163
5,709
2.81
%
Noninterest-bearing demand deposits
152,474
—
—
153,171
—
—
Total deposits
995,081
5,368
2.14
%
962,334
5,709
2.36
%
Borrowings
22,472
251
4.43
%
11,769
123
4.16
%
Total funding liabilities
1,017,553
5,619
2.19
%
974,103
5,832
2.38
%
Other noninterest-bearing liabilities
9,969
10,095
Shareholders’ equity
102,737
96,000
Total liabilities and shareholders' equity
$
1,130,259
$
1,080,198
Net interest income
(2)
$
9,662
$
9,185
Net interest margin
3.60
%
3.60
%
(
1)
For the purpose of these computations, non-accruing loans are included in the average loan amounts outstanding. These loans averaged $1.6 million and $3.4 million for the three months ended September 30, 2025 and 2024, respectively.
(2)
Loan fees are included in interest amounts presented. Loan fees totaled $0.1 million and $0.2 million for the three months ended September 30, 2025 and 2024, respectively.
46
Nine Months Ended
Nine Months Ended
September 30, 2025
September 30, 2024
Average
Balance
Interest
Annualized
Yield/
Rate %
Average
Balance
Interest
Annualized
Yield/
Rate %
ASSETS
Interest-earning assets:
Loans
(1)
$
851,561
$
38,643
6.07
%
$
821,008
$
38,989
6.34
%
Investment securities
157,319
4,138
3.52
%
140,898
3,094
2.93
%
Federal Home Loan Bank stock
1,330
71
7.14
%
902
53
7.85
%
Federal funds sold and securities purchased under reverse repurchase agreements
4,850
160
4.41
%
5,580
226
5.41
%
Interest-bearing deposits in banks
34,375
1,141
4.44
%
35,748
1,478
5.52
%
Total interest-earning assets
1,049,435
44,153
5.63
%
1,004,136
43,840
5.83
%
Noninterest-earning assets
64,034
66,076
Total assets
$
1,113,469
$
1,070,212
LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing deposits:
Demand deposits
$
203,880
$
1,317
0.86
%
$
204,805
$
1,242
0.81
%
Money market/savings deposits
277,149
5,355
2.58
%
250,528
5,161
2.75
%
Time deposits
344,310
8,690
3.37
%
346,584
9,615
3.71
%
Total interest-bearing deposits
825,339
15,362
2.49
%
801,917
16,018
2.67
%
Noninterest-bearing demand deposits
154,390
—
—
151,317
—
—
Total deposits
979,729
15,362
2.10
%
953,234
16,018
2.24
%
Borrowings
22,944
756
4.41
%
13,710
421
4.10
%
Total funding liabilities
1,002,673
16,118
2.15
%
966,944
16,439
2.27
%
Other noninterest-bearing liabilities
9,521
9,816
Shareholders’ equity
101,275
93,452
Total liabilities and shareholders' equity
$
1,113,469
$
1,070,212
Net interest income
(2)
$
28,035
$
27,401
Net interest margin
3.57
%
3.65
%
(1)
For the purpose of these computations, non-accruing loans are included in the average loan amounts outstanding. These loans averaged $2.9 million and $2.7 million for the nine months ended September 30, 2025 and 2024, respectively.
(2)
Loan fees are included in interest amounts presented. Loan fees totaled $0.5 million for both the nine months ended September 30, 2025 and 2024.
47
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 September 30, 2025
Nine Months Ended September 30, 2025
Compared to
Compared to
Three Months Ended September 30, 2024
Nine Months Ended September 30, 2024
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
$
812
$
(605
)
$
207
$
1,451
$
(1,797
)
$
(346
)
Investment securities
50
220
270
361
683
1,044
Federal Home Loan Bank stock
10
(5
)
5
25
(7
)
18
Federal funds sold and securities purchased under reverse repurchase agreements
(6
)
(11
)
(17
)
(30
)
(36
)
(66
)
Interest-bearing deposits in banks
(99
)
(102
)
(201
)
(57
)
(280
)
(337
)
Total interest-earning assets
767
(503
)
264
1,750
(1,437
)
313
Interest expense on:
Demand deposits
(36
)
(144
)
(180
)
(6
)
81
75
Money market/savings deposits
383
35
418
548
(354
)
194
Time deposits
(97
)
(482
)
(579
)
(63
)
(862
)
(925
)
Borrowings
112
16
128
284
51
335
Total interest-bearing liabilities
362
(575
)
(213
)
763
(1,084
)
(321
)
Increase (decrease) in net interest income
$
405
$
72
$
477
$
987
$
(353
)
$
634
Interest income increased by $0.3 million, comparing the nine months ended September 30, 2025 to the nine months ended September 30, 2024. While increased average interest-earning asset balances contributed $1.8 million in interest income growth, this growth was offset by reductions in average yield. Amid a declining interest rate environment, average yields decreased in all interest-earning categories, except investment securities which provided the majority of interest income growth comparing the two nine-month periods.
Interest expense decreased by $0.3 million, comparing the nine months ended September 30, 2025 to the nine months ended September 30, 2024. While a decrease in average rates paid on deposits contributed $1.1 million to the decrease in interest expense, these savings were partially offset by the impact of growth in average deposits and borrowings which increased interest expense by $0.8 million comparing the two nine-month periods.
The Company’s net interest income and net interest margin during the nine months ended September 30, 2025 continued to be impacted by changes in the interest rate environment that began 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 interest-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 nine months ended September 30, 2025, management continued efforts to both maximize earning asset growth and reduce interest expense, resulting in an improvement in net interest margin by 19 basis points, comparing the third quarter of 2025 to the fourth quarter of 2024. While net interest margin improved for three consecutive quarters, it remained below the levels recorded during the earlier periods of 2024. For the nine months ended September 30, 2025, net interest margin was 3.57%, compared to 3.65% for the nine months ended September 30, 2024. In September 2025, the federal funds rate was reduced by 25 basis points, marking the first reduction in the rate since December 2024. In October 2025, the federal funds rate was reduced by an additional 25 basis points. 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.
48
Provision for Credit Losses
For the nine months ended September 30, 2025, the Company recorded a provision for credit losses of $3.8 million, compared to $0.2 million for the nine months ended September 30, 2024. Of the total provision in the 2025 period, $2.8 million was associated with the consumer indirect loan portfolio, $1.1 million with the C&I portfolio, $0.1 million with the non-residential CRE portfolio and $0.1 million with the multi-family real estate category. These provisions were partially offset by a $0.3 million net reduction of credit losses in other loan categories. The increased provision associated with the consumer indirect portfolio was attributable to significant growth in the portfolio during the nine months ended September 30, 2025, as well as an increase in net charge-offs, particularly in the second quarter of 2025. The provisions recorded for C&I and CRE were primarily the result of credit allowances on two individually evaluated loans.
Net charge-offs totaled $3.3 million and $0.6 million for the nine months ended September 30, 2025 and 2024, respectively. Of the net charge-offs recorded during the nine months ended September 30, 2025, $2.2 million was associated with one individually evaluated commercial loan and $1.3 million was associated with the consumer indirect loan portfolio. The individually evaluated commercial loan had been partially reserved during 2024. These amounts were partially offset by $0.2 million in net recoveries associated with other loan categories. Of the net charge-offs recorded during the nine months ended September 30, 2024, $0.8 million was associated with the consumer indirect portfolio, partially offset by $0.2 million in net recoveries in the consumer direct portfolio.
As of September 30, 2025, the Company’s ACL as a percentage of total loans and leases was 1.23%, compared to 1.24% as of December 31, 2024. While we believe that the methodologies and calculations that have been used in the determination of the ACL are adequate, the determination of the appropriateness of the ACL is complex and requires judgment by management about the effects of matters that are inherently uncertain. Factors beyond our control, such as changes in economic forecasts related to the national economy, changes in consumer behavior, or economic deterioration in service areas in which the Company operates, may negatively and materially affect asset quality and the adequacy of the ACL, as well as the resulting provision for credit losses.
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 September 30,
Nine Months Ended September 30,
2025
2024
$ Change
% Change
2025
2024
$ Change
% Change
(Dollars in Thousands)
(Dollars in Thousands)
Service charges and other fees on deposit accounts
$
289
$
312
$
(23
)
(7.4
)%
$
855
$
909
$
(54
)
(5.9
)%
Bank-owned life insurance
141
136
5
3.7
%
416
400
16
4.0
%
Lease income
262
260
2
0.8
%
815
770
45
5.8
%
ATM fee income
89
90
(1
)
(1.1
)%
271
272
(1
)
(0.4
)%
Other income
79
103
(24
)
(23.3
)%
227
250
(23
)
(9.2
)%
Total non-interest income
$
860
$
901
$
(41
)
(4.6
)%
$
2,584
$
2,601
$
(17
)
(0.7
)%
49
The Company’s non-interest income remained relatively consistent, totaling $2.6 million for both the nine months ended September 30, 2025 and 2024. Management continues to evaluate opportunities to add non-interest revenue streams and grow existing streams; however, significant variation in non-interest income is not expected in the near term.
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 September 30,
Nine Months Ended September 30,
2025
2024
$ Change
% Change
2025
2024
$ Change
% Change
(Dollars in Thousands)
(Dollars in Thousands)
Salaries and employee benefits
$
3,759
$
3,837
$
(78
)
(2.0
)%
$
11,440
$
11,815
$
(375
)
(3.2
)%
Net occupancy and equipment
987
958
29
3.0
%
2,799
2,806
(7
)
(0.2
)%
Computer services
431
449
(18
)
(4.0
)%
1,264
1,336
(72
)
(5.4
)%
Insurance expense and assessments
348
348
—
—
1,098
1,153
(55
)
(4.8
)%
Fees for professional services
363
299
64
21.4
%
1,048
1,004
44
4.4
%
Postage, stationery and supplies
132
106
26
24.5
%
421
420
1
0.2
%
Telephone/data communications
191
197
(6
)
(3.0
)%
576
582
(6
)
(1.0
)%
Collection and recoveries
69
47
22
46.8
%
235
107
128
119.6
%
Directors fees
103
81
22
27.2
%
297
262
35
13.4
%
Software amortization
115
62
53
85.5
%
330
239
91
38.1
%
Other real estate/foreclosure expense, net
153
31
122
393.5
%
197
92
105
114.1
%
Other expense
786
575
211
36.7
%
2,094
1,593
501
31.5
%
Total non-interest expense
$
7,437
$
6,990
$
447
6.4
%
$
21,799
$
21,409
$
390
1.8
%
Non-interest expense totaled $21.8 million and $21.4 million during the nine months ended September 30, 2025 and 2024, respectively. The increase comparing the 2025 period to the 2024 period resulted from an increase in a number of expense categories, including collection and other real estate/foreclosure expense, as well as increases related to check fraud recoveries that occurred in 2024, but were not repeated in 2025. The increase in non-interest expense during the nine months ended September 30, 2025 compared to the corresponding nine month period of 2024 was partially offset by a decrease in salaries and benefits, and to a lesser extent, decreases in various other expense categories.
Provision for Income Taxes
The provision for income taxes was $1.1 million and $2.0 million for the nine months ended September 30, 2025 and 2024, respectively. The Company’s effective tax rate was 22.9% and 23.5%, respectively, for the same periods.
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.
In July 2025, the One Big Beautiful Bill Act (the "OBBBA") was signed into law, which includes a broad range of tax reform provisions affecting businesses, including extending and modifying certain key provisions from the Tax Cuts and Jobs Act of 2017 and expanding certain incentives from the Inflation Reduction Act of 2022 while accelerating the phase-out of others. We do not anticipate a material impact on our income tax expense and taxes payable from the tax provisions of the OBBBA
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 4.2 years and 3.6 years as of September 30, 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 September 30, 2025, available-for-sale securities totaled $164.0 million, or 99.7% of the total investment portfolio, compared to $167.9 million, or 99.6% of the total investment portfolio, as of December 31,
50
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 September 30, 2025, held-to-maturity securities totaled $0.5 million, or 0.3% 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 $2.0 million as of September 30, 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 September 30, 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 $44.5 million, or 5.4%, as of September 30, 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 September 30, 2025:
Quarter Ended
2025
2024
September
30,
June
30,
March
31,
December
31,
September
30,
(Dollars in Thousands)
Real estate loans:
Construction, land development and other land loans
$
38,560
$
48,101
$
58,572
$
65,537
$
53,098
Secured by 1-4 family residential properties
67,620
67,587
68,523
69,999
70,067
Secured by multi-family residential properties
112,763
118,807
106,374
101,057
100,627
Secured by non-residential commercial real estate
211,400
215,035
214,065
227,751
224,611
Commercial and industrial loans
46,562
40,986
45,166
44,238
44,872
Consumer loans:
Direct
4,999
4,836
4,610
4,774
5,018
Indirect
385,616
376,079
351,025
309,683
305,015
Total loans
867,520
871,431
848,335
823,039
803,308
Allowance for credit losses on loans and leases
10,700
11,388
10,405
10,184
10,116
Net loans
$
856,820
$
860,043
$
837,930
$
812,855
$
793,192
As of September 30, 2025 and December 31, 2024, the composition of the non-residential commercial real estate loan portfolio was as follows:
September 30, 2025
December 31, 2024
Owner Occupied
Non-Owner Occupied
Total
Owner Occupied
Non-Owner Occupied
Total
(Dollars in Thousands)
Office
$
7,256
$
34,051
$
41,307
$
10,093
$
36,811
$
46,904
Retail single credit tenant
608
39,488
40,096
—
41,357
41,357
Industrial
5,494
49,449
54,943
5,696
45,477
51,173
Storage
741
15,751
16,492
780
14,835
15,615
Retail services
14,542
—
14,542
15,031
—
15,031
Retail with anchor
2,645
3,534
6,179
3,075
13,628
16,703
Nursing homes
17,964
—
17,964
17,961
—
17,961
Other
11,473
8,404
19,877
11,989
11,018
23,007
Total loans
$
60,723
$
150,677
$
211,400
$
64,625
$
163,126
$
227,751
51
As of September 30, 2025 and December 31, 2024, the composition of the construction, land development, and other land loans loan portfolio was as follows:
September 30, 2025
December 31, 2024
Owner Occupied
Non-Owner Occupied
Total
Owner Occupied
Non-Owner Occupied
Total
(Dollars in Thousands)
Apartments
$
—
$
31,096
$
31,096
$
—
$
61,118
$
61,118
Farmland
2,748
—
2,748
3,057
—
3,057
Other
260
4,456
4,716
440
922
1,362
Total loans
$
3,008
$
35,552
$
38,560
$
3,497
$
62,040
$
65,537
The following table classifies the Company's fixed and variable rate loans as of September 30, 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:
September 30, 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
$
7,787
$
30,773
$
—
$
—
$
38,560
Secured by 1-4 family residential properties
2,323
12,489
24,301
28,507
67,620
Secured by multi-family residential properties
47,268
63,398
447
1,650
112,763
Secured by non-residential commercial real estate
33,457
125,584
52,359
—
211,400
Commercial and industrial loans
9,855
29,430
7,277
—
46,562
Consumer loans:
Direct
1,912
3,071
16
—
4,999
Indirect
3,899
17,384
364,333
—
385,616
Total loans
$
106,501
$
282,129
$
448,733
$
30,157
$
867,520
Loans with fixed interest rates:
Real estate loans:
Construction, land development and other land loans
$
335
$
2,713
$
—
$
—
$
3,048
Secured by 1-4 family residential properties
1,204
5,428
4,287
13,468
24,387
Secured by multi-family residential properties
2,602
32,456
447
554
36,059
Secured by non-residential commercial real estate
17,641
64,702
43,772
—
126,115
Commercial and industrial loans
4,675
14,473
7,080
—
26,228
Consumer loans:
Direct
1,899
3,071
16
—
4,986
Indirect
3,899
17,384
364,333
—
385,616
Total loans with fixed interest rates
$
32,255
$
140,227
$
419,935
$
14,022
$
606,439
Loans with variable interest rates:
Real estate loans:
Construction, land development and other land loans
$
7,452
$
28,060
$
—
$
—
$
35,512
Secured by 1-4 family residential properties
1,119
7,061
20,014
15,039
43,233
Secured by multi-family residential properties
44,666
30,942
—
1,096
76,704
Secured by non-residential commercial real estate
15,816
60,882
8,587
—
85,285
Commercial and industrial loans
5,180
14,957
197
—
20,334
Consumer loans:
Direct
13
—
—
—
13
Indirect
—
—
—
—
—
Total loans with variable interest rates
$
74,246
$
141,902
$
28,798
$
16,135
$
261,081
52
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 September 30, 2025:
Quarter Ended
2025
2024
September
30,
June
30,
March
31,
December
31,
September
30,
(Dollars in Thousands)
Balance at beginning of period
$
11,388
$
10,405
$
10,184
$
10,116
$
10,227
Charge-offs:
Real estate loans:
Construction, land development and other land loans
—
—
—
—
—
Secured by 1-4 family residential properties
—
—
—
—
—
Secured by multi-family residential properties
—
—
—
—
—
Secured by non-residential commercial real estate
—
—
—
(248
)
—
Commercial and industrial loans
(1,024
)
(1,191
)
—
(8
)
(16
)
Consumer loans:
Direct
—
(5
)
—
(9
)
(25
)
Indirect
(411
)
(595
)
(422
)
(332
)
(370
)
Total charge-offs
(1,435
)
(1,791
)
(422
)
(597
)
(411
)
Recoveries:
Real estate loans:
Construction, land development and other land loans
—
—
—
—
—
Secured by 1-4 family residential properties
10
5
6
10
11
Secured by multi-family residential properties
—
—
—
—
—
Secured by non-residential commercial real estate
—
—
—
—
—
Commercial and industrial loans
—
—
16
2
—
Consumer loans:
Direct
42
50
57
51
71
Indirect
45
44
74
39
78
Total recoveries
97
99
153
102
160
Net charge-offs
(1,338
)
(1,692
)
(269
)
(495
)
(251
)
Provision for credit losses on loans and leases
650
2,675
490
563
140
Ending balance
$
10,700
$
11,388
$
10,405
$
10,184
$
10,116
Ending balance as a percentage of loans
1.23
%
1.31
%
1.23
%
1.24
%
1.26
%
Net charge-offs as a percentage of average loans
0.61
%
0.79
%
0.13
%
0.24
%
0.12
%
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 September 30, 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.
53
Nonperforming Assets
Nonperforming assets at the end of the five most recent quarters as of September 30, 2025 were as follows:
Quarter Ended
2025
2024
September
30,
June
30,
March
31,
December
31,
September
30,
(Dollars in Thousands)
Non-accrual loans
$
1,066
$
2,447
$
3,668
$
3,949
$
6,051
Other real estate owned
1,158
1,298
1,328
1,509
538
Total
$
2,224
$
3,745
$
4,996
$
5,458
$
6,589
Nonperforming assets as a percentage of total loans and other real estate
0.26
%
0.43
%
0.59
%
0.66
%
0.83
%
Nonperforming assets as a percentage of total assets
0.19
%
0.33
%
0.44
%
0.50
%
0.60
%
Non-accrual loans as a percentage of total loans
0.12
%
0.28
%
0.43
%
0.48
%
0.75
%
ACL as a percentage of non-accrual loans
1003.75
%
465.39
%
283.67
%
257.89
%
167.18
%
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 for the periods indicated:
As of and for the Nine Months Ended
As of and for the Year Ended
September 30, 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
$
262
0.68
%
—
$
352
0.54
%
-0.03
%
Secured by 1-4 family residential properties
386
0.57
%
-0.04
%
406
0.58
%
-0.07
%
Secured by multi-family residential properties
643
0.57
%
—
546
0.54
%
—
Secured by non-residential commercial real estate
1,570
0.74
%
—
1,428
0.63
%
0.11
%
Commercial and industrial loans
404
0.87
%
6.63
%
1,531
3.46
%
0.22
%
Consumer loans:
Direct
58
1.16
%
-3.97
%
49
1.03
%
-4.09
%
Indirect
7,377
1.91
%
0.50
%
5,872
1.90
%
0.35
%
Total
$
10,700
1.23
%
0.52
%
$
10,184
1.24
%
0.14
%
Deposits
Total deposits increased to $1,002.5 million as of September 30, 2025, from $972.6 million as of December 31, 2024, an increase of 3.1%. The increase was due primarily to increases in interest-bearing money market accounts, as well as the addition of brokered certificates of deposit obtained to assist in the management of deposit costs over specific terms. 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 $838.4 million, or 83.6% of total deposits, as of September 30, 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.
54
The following tables present details on the composition of the Company's deposits for the periods indicated:
As of and for the Nine Months Ended
September 30, 2025
Number of Accounts
Average Balance Per Account
Dollars
Percentage of Total Deposits
(Dollars in Thousands)
Non-interest-bearing demand deposits
8,851
$
18
$
155,941
15.6
%
Interest-bearing demand deposits
6,167
32
198,096
19.8
%
Money market and savings
8,003
38
306,661
30.6
%
Certificates of deposits >$250 thousand
114
459
52,346
5.2
%
Certificates of deposits $100-$250 thousand
574
143
82,052
8.2
%
Certificates of deposits <$100 thousand
3,957
24
95,635
9.5
%
Total (excluding brokered certificates of deposit)
27,666
32
890,731
88.9
%
Brokered deposits
12
9,312
111,741
11.1
%
Total
27,678
$
36
$
1,002,472
100.0
%
As of and for the Year Ended
December 31, 2024
Number of Accounts
Average Balance Per Account
Dollars
Percentage of Total Deposits
(Dollars in Thousands)
Non-interest-bearing demand deposits
9,050
$
17
$
155,945
16.0
%
Interest-bearing demand deposits
6,317
36
228,853
23.6
%
Money market and savings
8,462
30
252,674
26.0
%
Certificates of deposits >$250 thousand
143
437
62,495
6.4
%
Certificates of deposits $100-$250 thousand
674
142
95,374
9.8
%
Certificates of deposits <$100 thousand
4,398
24
104,820
10.8
%
Total (excluding brokered certificates of deposit)
29,044
31
900,161
92.6
%
Brokered deposits
12
6,033
72,396
7.4
%
Total
29,056
$
33
$
972,557
100.0
%
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 September 30, 2025, other interest-bearing liabilities totaled 3.5% of total interest-bearing liabilities, compared to 2.5% as of December 31, 2024.
Shareholders’ Equity
As of September 30, 2025, shareholders’ equity totaled $104.2 million, or 9.1% 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 nine months ended September 30, 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 nine months ended September 30, 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 nine months ended September 30, 2025, the Company declared cash dividends totaling $0.21 per share on its common stock, compared to cash dividends totaling $0.15 per share on its common stock during the nine months ended September 30, 2024.
In addition, during the nine months ended September 30, 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 September 30, 2025, 872,813 shares remained available for repurchase under the program. During the nine months ended September 30, 2024, the Company repurchased 106,500 shares of its common stock at a weighted average price of $10.67 per share.
55
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 $266.2 million as of September 30, 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 $21.7 million and $29.6 million as of September 30, 2025 and December 31, 2024, respectively.
Although some securities in the investment portfolio have 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 4.2 years and 3.6 years as of September 30, 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 $10.0 million of outstanding borrowings under FHLB advances as of both September 30, 2025 and December 31, 2024. 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 $313.0 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 September 30, 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 September 30, 2025 and December 31, 2024 the Company had $200.9 and $165.1 million, respectively, in unused borrowing capacity with the FRB’s discount window. As of September 30, 2025 and December 31, 2024, the Bank had $10.0 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 September 30, 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 September 30, 2025 and December 31, 2024.
56
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 September 30, 2025 and December 31, 2024.
September 30,
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
$
54,690
$
47,216
Federal funds sold and securities purchased under reverse repurchase agreements
4,850
5,727
Total liquidity from cash, federal funds sold and securities purchased under reverse repurchase agreements
59,540
52,943
Liquidity from pledgable investment securities:
Investment securities available-for sale, at fair value
163,969
167,888
Investment securities held-to-maturity, at amortized cost
524
682
Less: securities pledged
(59,255
)
(72,110
)
Less: estimated collateral value discounts
(10,585
)
(10,164
)
Liquidity from pledgable investment securities
94,653
86,296
Liquidity from unused lendable collateral (loans) at FHLB
20,785
45,388
Liquidity from unused lendable collateral (loans and securities) at FRB
200,895
165,061
Unsecured lines of credit with banks
48,000
48,000
Total readily available liquidity
$
423,873
$
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 September 30, 2025 and December 31, 2024, the Company's total remaining credit availability with the FHLB was $313.0 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 September 30, 2025, the Company had approximately 28 thousand deposit accounts with an average balance of approximately $32.2 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 $220.2 million, or 22.0% of total deposits, as of September 30, 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.
57
ITEM 3. QUANTITATIVE AND QUALITATI
VE 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 September 30, 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%
5
5
+2%
8
9
+3%
9
9
-1%
(10
)
(11
)
-2%
(19
)
(21
)
-3%
(29
)
(33
)
Cumulative Change in Net Interest Income from Level Interest Rate Forecast (dollars in thousands, pre-tax):
1 Year
2 Years
+1%
$
532
$
1,238
+2%
930
2,107
+3%
1,009
2,166
-1%
(1,166
)
(2,444
)
-2%
(2,193
)
(4,843
)
-3%
(3,323
)
(7,620
)
58
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 September 30, 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 September 30, 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 September 30, 2025 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
59
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 EQUI
TY 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 third 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)
July 1 – July 31
690
$
13.01
—
872,813
August 1 – August 31
65
$
12.74
—
872,813
September 1 – September 30
64
$
12.83
—
872,813
Total
819
$
12.97
—
872,813
(1)
Includes 819 shares that were purchased in open-market transactions by an independent trustee for Bancshares’ 401(k) Plan during the third quarter of 2025.
(2)
No shares were repurchased during the third 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 September 30, 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).
The following financial statements from the Quarterly Report on Form 10-Q for the quarter ended September 30, 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 September 30, 2025, formatted in Inline XBRL.
________________
*Filed herewith
61
SIGNAT
URES
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: November 6, 2025
By:
/s/ Thomas S. Elley
Thomas S. Elley
Its Senior Executive Vice President, Treasurer, Assistant Secretary and Chief Financial Officer
(Duly Authorized Officer and Principal Financial Officer)
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