FDSB 10-K & 10-Q changes, risk factors and insider trading

We consider the accounting policyAllowance for theCredit allowanceLosses. for credit losses to be our critical accounting policy. Effective January 1, 2023, we adopted CECL. Under the CECL methodology, the allowanceAllowance for credit losses represents management’s estimate of lifetime credit losses in loans as of the balance sheet date using relevant available information, from both internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts.

Deferred Taxes. Deferred income tax assets and liabilities are computed using the asset and liability method, which recognizes a liability or asset representing the tax effects, based on current tax law, of future deductible or taxable amounts attributable to events recognized in the financial statements. A valuation allowance may be established to the extent necessary to reduce the deferred tax asset to a level at which it is “more likely than not” that the tax asset or benefit will be realized. Realization of tax benefits depends on having sufficient taxable income, available tax loss carrybacks or credits, the reversal of taxable temporary differences and/or tax planning strategies within the reversal period, and that current tax law allows for the realization of recorded tax benefits.

Fair Value Measurements. Certain assets and liabilities are measured at fair value on a recurring basis, including securities and derivative instruments. Assets and liabilities carried at fair value inherently include subjectivity and may require the use of significant assumptions, adjustments and judgment including, among others, discount rates, rates of return on assets, cash flows, default rates, loss rates, terminal values and liquidation values. A significant change in assumptions may result in a significant change in fair value, which in turn, may result in a higher degree of financial statement volatility and could result in significant impact on our results of operations, financial condition or disclosures of fair value information.

Total Assets. Total assets were $534.4 million at December 31, 2025, an increase of $7.1 million, or 1.3%, compared to $527.3 million at December 31, 2024, an increase of $46.5 million, or 9.7%, compared to $480.8 million at December 31, 2023.2024. This increase is primarily due to $18.6 million increase in cash and cash equivalents, $25.1$6.1 million increase in investment securities available-for-sale, and $2.3$9.1 million increase in loans receivable, net.net offset by a $4.1 million decrease in cash and cash equivalents, and a $3.0 million decrease in bank owned life insurance.

Cash and Cash Equivalents. Cash and cash equivalents increaseddecreased by $18.6$4.1 million, or 96.4%,10.7%, to $33.9 million at December 31, 2025 from $37.9 million at December 31, 2024 from $19.3 million at December 31, 2023.2024. This increasedecrease resultedis primarily fromdue to the cashpurchase receivedof investments available for subscriptionssale toand purchasethe sharesorigination of theloans, Company’sprimarily commoncommercial stockreal inestate its initial public offering. The net proceeds of the public offering are reflected in stockholders’ equity at December 31, 2024.loans.

Deposits. Deposits decreasedincreased by $1.5$1.7 million, or 0.4%, to $393.2 million at December 31, 2025, from $391.5 million at December 31, 2024,2024. fromCertificates $390.0of deposit increased $925,000, or 0.4%, to $239.7 million at December 31, 2023.2025, Certificates of deposit increased $10.7 million, or 4.7%, tofrom $238.8 million at December 31, 2024, from $228.1 million at December 31, 2023.2024. The majority of the increase in certificates of deposit was driven by new customer activity and migration from lower yielding money markets and savings accounts. NOW accounts increased $3.1$2.4 million, or 6.1%,4.4%, to $56.3 million at December 31, 2025, from $53.9 million at December 31, 2024,2024. fromMMDA $50.8accounts decreased $2.0 million, or 8.8%, to $20.7 million at December 31, 2023.2025, MMDA accounts decreased $3.7 million, or 14.0%, tofrom $22.7 million at December 31, 2024,2024. fromSavings $26.4Accounts increased $399,000, or 0.5%, to $76.4 million at December 31, 2023.2025, Savings Accounts decreased $8.6 million, or 10.1%, tofrom $76.0 million at December 31, 2024, from $84.6 million at December 31, 2023.2024.

Total Stockholders’ Equity. Total stockholders’ equity increased by $48.0$4.0 million, or 61.7%,3.2%, to $129.8 million at December 31, 2025, from $125.8 million at December 31, 2024, from $77.8 million at December 31, 2023.2024. The increase resulted primarily resulted from the sale of stock in the initial public offering that totaled $53.2 million, offset by the unearned ESOP shares of $4.2 million, the accumulated other comprehensive loss (as a result of market value adjustment of investment securities available-for-sale due to the rise in market interest rates during the period) declining $62,000$2.5 million and retained earnings decreasingincreasing $1.1$3.2 million due to the net lossincome for the periodyear endedoffset Decemberby 31,the 2024.$2.0 million decrease in additional paid-in capital as we deploy excess capital to repurchase shares of our common stock.

Interest Income. Interest and dividend income increased by $2.9$2.8 million, or 17.4%,14.4%, to $22.1 million for the year ended December 31, 2025, compared to $19.3 million for the year ended December 31, 2024, compared to $16.4 million for the year ended December 31, 2023.2024. The increase is attributed to a $1.1$1.6 million, or 8.0%,10.4%, increase in interest on loans, a $845,000,$1.5 million, or 139.7%, increase in interest on other interest-earning assets and $889,000, or 52.8%,58.6%, increase in interest on investment securities available-for-sale.available-for-sale, offset by a $316,000, or 2.2%, decrease in other interest-earning assets.

During the year ended December 31, 2024,2025, average loans receivable, net, increased by $2.6$9.9 million, or 0.7%,2.7%, from year ended December 31, 2023.2024. The average yield on loans increased to 4.47% for the year ended December 31, 2025, from 4.16% for the year ended December 31, 2024, from 3.88% for the year ended December 31, 2023, due to the risingmaking markethigher interestyielding rateloans environment.such as commercial loans.

The average balance of investment securities available-for-sale increased $9.8$22.8 million, or 14.8%,30.0%, to $98.9 million for the year ended December 31, 2025, from $76.1 million for the year ended December 31, 2024, from $66.2 million for the year ended December 31, 2023.2024. The average yield on available-for-sale investment securities increased to 4.13% for the year ended December 31, 2025, from 3.38% for the year ended December 31, 2024, from 2.54% for the year ended December 31, 2023.2024. The increase in the average yield on available-for-sale investment securities was primarily due to the rising market interest rate environment as well as selling $18.7 millionreinvesting in securities available-for-sale, for a loss of $1.1 million, and redeploying the funds into higher yielding securities.

Interest income on cash and cash equivalents, comprised primarily of overnight deposits, increaseddecreased by $840,000,$317,000, or 145.3%,22.4%, for the year ended December 31, 2024,2025, primarily due to ana increasedecrease in the average balance of cash and cash equivalents by $303,000 to $27.9 million for the year ended December 31, 2025, from $28.2 million for the year ended December 31, 2024. The average yield decreased to 3.94% for year ended December 31, 2025, from 5.02% for the year ended December 31, 2024, from 3.99% for the year ended December 31, 2023.2024. The increase in interest income was mainly due to the increase in the balance of cash and cash equivalents arising from the cash received for the purchase of stock in the IPO. The increasedecrease in average yield was due to the risedecrease in market interest rates.

Interest Expense. Total interest expense increaseddecreased $2.9 million$11,000 or 44.9%,0.1%, to $9.2 million for the year ended December 31, 2024,2025, compared $6.4to $9.2 million for the year ended December 31, 2023.2024. The increasedecrease was primarily due to the increasedecrease in the average cost of deposits to 2.33% for the year ended December 31, 2025, from 2.40% for the year ended December 31, 2024, from 1.61% for the year ended December 31, 2023, reflecting the risingdecreasing market interest rate environment. The average balance of interest-bearing deposits increased by $5.5$10.8 million, or 1.4%,2.8%, to $394.5 million for the year ended December 31, 2025, from $383.6 million for the year ended December 31, 2024, from $389.1 million for the year ended December 31, 2023.2024.

Net Interest Income. Net interest income increased $7,000,$2.8 million, or 0.06%,27.8%, to $12.8 million for the year ended December 31, 2025, compared to $10.1 million for the year ended December 31, 2024,2024. comparedThe interest rate spread increased to $10.0 million2.04% for the year ended December 31, 2023.2025 The interest rate spread decreased tofrom 1.68% for the year ended December 31, 20242024, fromwhile 2.05%average net interest-earning assets increased $21.7 million period-to-period. The net interest margin increased to 2.55% for the year ended December 31, 2023, while average net interest-earning assets increased $33.5 million period-to-period. The net interest margin decreased to 2.13% for the year ended December 31, 2024,2025, from 2.25% for the year ended December 31, 2023. The average yield on interest-earning assets increased from 3.68% for the year ended December 31, 2023, to 4.08%2.13% for the year ended December 31, 2024. The average rate paidyield on interest-bearinginterest-earning liabilitiesassets increased from 1.63%4.08% for the year ended December 31, 2023,2024, to 4.37% for the year ended December 31, 2025. The average rate paid on interest-bearing liabilities decreased from 2.40% for the year ended December 31, 2024, to 2.33% for the year ended December 31, 2025, primarily due to ana increasedecrease in the average rate paid on certificates of deposit from 2.60% in 2023 to 3.82% in 2024.2024 to 3.72% in 2025. The increasedecrease in the average rate paid on certificates of deposit contributedwas attributed to migration from lower yielding savings accounts and moneydecreasing market accounts,interest to higher yielding certificates of deposit.rates. The average balance of certificates of deposit increased from $229.8$235.9 million as of December 31, 2023,2024, to $235.9$242.2 million as December 31, 2024,2025, while over the same period the average balance of savings accounts decreased from $84.3$80.7 million to $80.7$77.2 million, and the average balance of money market accounts decreased from $26.3$23.6 million to $23.6$21.2 million.

Provision (Recovery) for Credit Losses. The provision for credit losses on loans was a$-0- netfor benefitthe ofyear $1.2ended December 31, 2025, compared to ($1.1 million) infor 2024the andyear aended netDecember benefit31, of $325,000 in 2023.2024. The allowance for credit losses on loans represented 0.45% of total loans at December 31, 2025, and 0.46% of total loans at December 31, 2024,2024. andThe 0.76%recovery of totalcredit loans at December 31, 2023. The increase in net benefitlosses is based on our evaluation of the adequacy of the allowance for credit losses throughout the reporting period.

The recoveryprovision of credit losses on unfunded commitments was $110,000$10,000 for the year ended December 31, 20242025 compared to a $125,000 provision($110,000) on unfunded commitments for the year ended December 31, 2023.2024. The increase in the provision was primarily due to an increase on the unfunded balance of construction loans in process. The recovery of credit losses on unfunded commitments is based on an evaluation of the historical usage rate.

Total non-performing loans were $544,000 at December 31, 2025, and $1.1 million December 31, 2024. Classified loans totaled $1.3 million at December 31, 2024,2025, andcompared December 31, 2023. Classified loans totaledto $1.1 million at December 31, 2024, compared to $153,000 at December 31, 2023, and total past due greater than 30 days were $5.4$4.9 million and $5.3$5.4 million at those respective dates. As a percentage of nonperforming loans, the allowance for credit losses on loans was 312.3% at December 31, 2025, 158.0% at December 31, 2024, 254.0% at December 31, 2023.2024.

Noninterest Expense..Expense. Noninterest expense increased $2.3 million,$370,000, or 22.2%,2.9%, to $13.1 million for the year ended December 31, 2025, compared to $12.7 million for the year ended December 31, 2024, compared to $10.4 million for the year ended December 31, 2023.2024. The increase was primarily due to an increase in salaries and employee benefits of $761,000,$958,000 or 12.8%,14.3%, an increase in occupancy and equipment expense of $159,000,$210,000, or 9.6%,11.5%, an increase in professional and legal fees of $46,000,$136,000, or 31.1%,70.1%, an increase in data processing expense of $111,000,$125,000, or 10.4%,10.6%, an increase in audit and examination fees of $158,000,$28,000, or 108.2%,9.2%, andpartially anoffset increaseby a $37,000, or 13.4% decrease in directors fees, a $1.3 million, or 99.7%, decrease in charitable contributions of $1.2 million, or 2,879.1% from establishing the Fifth District Community Foundation Inc.,Inc. partiallyin offset2024, byand a $99,000,$26,000, or 26.3%19.8% decrease in directorsadvertising. fees,The increase in salaries and employee benefits is mainly from a $127,000,death orbenefit 49.2% decrease in advertising Provision (benefit) for Income Taxes. The provision (benefit) for income taxes decreased by $507,000, or 347.0%,paid to ($358,000)the forintended beneficiaries of the yearlate endedPresident Decemberand 31,Chief 2024,Executive comparedOfficer to $149,000 forfrom the yearproceeds endedof Decemberthe 31,bank 2023.owned Thelife decrease was due to a $2.4 million, or 251.8%, decrease in pretax income. The effective tax rate was 21% for both years.insurance.

Liquidity describes our ability to meet the financial obligations that arise in the ordinary course of business. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. Our primary sources of funds are deposits, principal and interest payments on loans and securities, and proceeds from maturities of securities. We also have the ability to borrow from the Federal Home Loan Bank of Dallas and from two correspondent banks and, until March 11, 2024, had the ability to obtain advances under the Federal Reserve Board’s Bank Term Funding Program. Under the terms of the Bank Term Funding Program, advances cannot be obtained after March 11, 2024. At December 31, 2024,2025, we had $-0- of outstanding advances under the Bank Term Funding Program. At December 31, 2024,2025, we had $-0- ofno outstanding advances from the Federal Home Loan Bank of Dallas.

Comparison of Financial Condition at MarchJune 31,30, 2026 and December 31, 2025

Total Assets. Total assets were $535.7$532.1 million at MarchJune 31,30, 2026, ana increasedecrease of $1.3$2.3 million, or 0.2%,0.4%, compared to $534.4 million at December 31, 2025. This increasedecrease is primarily due to a $12.0 million increase in loans receivable, net, offset by a $10.5$14.7 million decrease in cash and cash equivalents.equivalents, a $4.9 million decrease in investment securities available-for-sale, offset by a $17.0 million increase in loans receivable, net.

Cash and Cash Equivalents. Cash and cash equivalents decreased by $10.6$14.7 million, or 31.3%,43.4%, to $23.3$19.2 million at MarchJune 31,30, 2026 from $33.9 million at December 31, 2025. This decrease is primarily due to the purchase of investments available for sale and the origination of loans, primarily construction and commercial loans.

Investment Securities Available-for-Sale. Investment securities available-for-sale decreased $263,000,$4.9 million, or 0.3%,4.9%, to $98.8$94.2 million at MarchJune 31,30, 2026 from $99.1 million at December 31, 2025. Securities purchased totaled $3.9 million during the threesix months ended MarchJune 31,30, 2026, and calls, maturities, and repayments totaled $3.9$8.4 million. Adding to the decrease was a fair market value downward adjustment of $214,000.$391,000.

Loans Receivable, Net. Loans receivable, net, increased by $12.0$17.0 million, or 3.2%,4.5%, to $388.4$393.4 million at MarchJune 31,30, 2026 from $376.4 million at December 31, 2025. During the threesix months ended MarchJune 31,30, 2026, loan originations were $22.9$37.2 million and loan repayments totaled $10.9$20.2 million. During the threesix months ended MarchJune 31,30, 2026, commercial loans increased by $5.8$8.2 million, primarily from the origination of commercial real estate loans, and commercial and industrial loans, 1-4 single family mortgages decreased by $2.6 million, home equity loans decreasedincreased by $82,000,$403,000, consumer loans increased by $2.9$2.8 million, and construction and land loans increased by $5.9$10.1 million, and 1-4 single family mortgages decreased by $4.4 million.

Deposits. Deposits increaseddecreased by $2.1$1.6 million, or 0.5%,0.4%, to $395.2$391.6 million at MarchJune 31,30, 2026, from $393.2 million at December 31, 2025. Certificates of deposit decreased $2.4$1.7 million, or 1.0%,0.7%, to $237.4$238.1 million at MarchJune 31,30, 2026, from $239.7 million at December 31, 2025. NOWDemand deposit accounts increased $2.0$1.6 million, or 3.5%,2.9%, to $58.3$57.9 million at MarchJune 31,30, 2026, from $56.3 million at December 31, 2025. MMDA accounts decreased $335,000,$1.1 million, or 1.6%,5.1%, to $20.4$19.7 million at MarchJune 31,30, 2026, from $20.7 million at December 31, 2025. Savings Accountsaccounts increaseddecreased $2.8 million,$463,000, or 3.7%,0.6%, to $79.2$76.0 million at MarchJune 31,30, 2026, from $76.4 million at December 31, 2025.

Total Stockholders’ Equity. Total stockholders’ equity decreased by $445,000,$753,000, or 0.3%,0.6%, to $129.3$129.0 million at MarchJune 31,30, 2026, from $129.8 million at December 31, 2025. The decrease resulted primarily from the accumulated other comprehensive loss (as a result of a downward market value adjustment of investment securities available-for-sale due to the rise in market interest rates during the period) increasing $160,000$293,000 and additional paid-in-capital decreasing $431,000$765,000 due to the repurchase of 59,69153,690 shares of common stock.

Comparison of Operating Results for the Three Months Ended MarchJune 31,30, 2026 and 2025

General. Net income for the three months ended MarchJune 31,30, 2026, was $387,000,$384,000, ana increasedecrease of $309,000,$2.7 million, or 396.2%,87.7%, compared to $78,000$3.1 million for the three months ended MarchJune 31,30, 2025. The increasedecrease in net income was primarily from a $443,000$3.5 million decrease in non-interest income mainly due to a gain on insurance proceeds (in relation to the payout of bank owned life insurance) paid out in 2025, a $192,000 increase in provision for income taxes, partially offset by a $316,000 increase in interest and dividend income, a $169,000 decrease in interest expense,expense offsetof by$252,000, and a $33,000$362,000 decrease in non-interest income, a $188,000 increase in non-interest expense and a $82,000 increase in income tax expense.

Interest and Dividend Income. Interest and dividend income increased by $443,000,$316,000, or 8.5%,5.8%, to $5.7$5.8 million for the three months ended MarchJune 31,30, 2026, compared to $5.2$5.5 million for the three months ended MarchJune 31,30, 2025. The increase is attributed to a $417,000,$414,000, or 10.4%,9.9%, increase in interest on loans, and a $139,000,$8,000, or 15.4%,0.8%, increase in interest on investment securities available-for-sale,available-for-sale offset by a $113,000,$106,000, or 38.6%,41.3%, decrease in interest on other interest-earning assets.

During the three months ended MarchJune 31,30, 2026, average loans receivable, net, increased by $13.2$10.9 million, or 3.6%,2.9%, from the three months ended MarchJune 31,30, 2025. The average yield on loans increased to 4.69%4.81% for the three months ended MarchJune 31,30, 2026, from 4.40%4.50% for the three months ended MarchJune 31,30, 2025, mainly due to the higher yielding loans that were originated during the period.

The average balance of investment securities available-for-sale increaseddecreased $3.6$2.5 million, or 3.8%,2.5%, to $98.2$96.4 million for the three months ended MarchJune 31,30, 2026, from $94.6$98.9 million for the three months ended MarchJune 31,30, 2025. The average yield on available-for-sale investment securities increased to 4.29%4.32% for the three months ended MarchJune 31,30, 2026, from 3.86%4.18% for the three months ended MarchJune 31,30, 2025. The increase in the average yield on available-for-sale investment securities was primarily due to reinvesting in higher yielding securities.bonds.

Interest income on cash and cash equivalents, comprised primarily of overnight deposits, decreased by $112,000,$98,000, or 39.2%,40.2%, for the three months ended MarchJune 31,30, 2026, primarily due to an decrease in the average yield to 3.11%3.20% for the three months ended MarchJune 31,30, 2026, from 4.03%4.09% for the three months ended MarchJune 31,30, 2025. The decrease in average yield was due to the decline in market interest rates as well as the decrease in the average balance in cash and cash equivalents.rates. The average balance of cash and cash equivalents decreased by $6.2$5.7 million to $22.7 million from the three months ended March 31, 2026, from $28.8$18.5 million for the three months ended MarchJune 31,30, 2025.2026, Thefrom decrease$24.2 inmillion for the averagethree balancemonths wasended mainlyJune due30, to using cash to fund loan originations.2025.

Interest Expense. Total interest expense decreased $169,000$252,000 or 7.4%,10.8%, to $2.1 million for the three months ended MarchJune 31,30, 2026, from $2.3 million for the three months ended MarchJune 31,30, 2025. The average balance of interest-bearing deposits increaseddecreased by $2.1$2.9 million, or 0.5%,0.7%, to $391.8$394.1 million for the three months ended MarchJune 31,30, 2026, from $389.7$397.0 million for the three months ended MarchJune 31,30, 2025.

Net Interest Income. Net interest income increased $612,000,$568,000, or 20.8%,18.0%, to $3.5$3.7 million for the three months ended MarchJune 31,30, 2026, compared to $2.9$3.1 million for the three months ended MarchJune 31,30, 2025. The increase reflects the increase in the interest rate spread to 2.36%2.51% for the three months ended MarchJune 31,30, 2026, from 1.91%2.04% for the three months ended MarchJune 31,30, 2025, while average net interest-earning assets increased $8.6$5.7 million period-to-period. The net interest margin increased to 2.85%2.98% for the three months ended MarchJune 31,30, 2026, from 2.41%2.54% for the three months ended MarchJune 31,30, 2025. The average yield on interest-earning assets increased from 4.27%4.42% for the three months ended MarchJune 31,30, 2025, to 4.37%4.65% for the three months ended MarchJune 31,30, 2026. The average rate paid on interest-bearing liabilities decreased from 2.36%2.38% for the three months ended MarchJune 31,30, 2025, to 2.18%2.14% for the three months ended MarchJune 31,30, 2026. The average rate on certificates of deposits decreased from 3.79%3.80% for the three months ended MarchJune 31,30, 2025, to 3.49%3.45% for the three months ended MarchJune 31,30, 2026. The decrease in the average rate paid on certificates of deposit primarily resulted from a decrease in market interest rates. The average balance of certificates of deposit increaseddecreased from $238.2$243.6 million as of MarchJune 31,30, 2025, to $238.6$239.1 million as Marchof 31,June 30, 2026, while over the same period the average balance of savings accounts increaseddecreased from $77.0$77.8 million to $77.3 million, the average balance of NOW accounts increased from $52.8 million to $55.0$77.0 million, and the average balance of money market accounts decreased from $21.7$21.1 million to $20.8$20.0 million.

Provision for Credit Losses. The provision for credit losses on loans was $-0- for the three months ended MarchJune 31,30, 2026 and 2025. The allowance for credit losses on loans represented 0.43% of total loans at MarchJune 31,30, 2026 and 0.44%0.45% of total loans at MarchJune 31,30, 2025.

Total non-performing loans were $63,000$343,000 at MarchJune 31,30, 2026, compared to $758,000$1.3 million at MarchJune 31,30, 2025. ThereWe werehad $63,000$343,000 inof loans over 90 days delinquent at MarchJune 31,30, 2026, compared to $145,000$1.3 million at MarchJune 31,30, 2025. Classified loans totaled $1.2$1.1 million at MarchJune 31,30, 2026, compared to $758,000$915,000 at MarchJune 31,30, 2025. As a percentage of nonperforming loans, the allowance for credit losses on loans was 2,696.8%495.3% at MarchJune 31,30, 2026, and 224.1%130.7% at MarchJune 31,30, 2025.

Noninterest Income. Noninterest income totaled $229,000$239,000 for the three months ended MarchJune 31,30, 2026, a decrease of $33,000,$3.5 million, or 12.6%,93.6%, from $262,000$3.7 million for the three months ended MarchJune 31,30, 2025. The majority of the decrease was due to a $20,000 decrease in incomegain on bank owned life insurance for the three months ended March 31, 2026 as well as no gain on real estate recordedproceeds for the three months ended MarchJune 31, 2026 compared to $13,000 for the three months ended March 31,30, 2025.

Noninterest Expense. Noninterest expense increaseddecreased $188,000,$362,000, or 6.10%,9.5%, to $3.3$3.5 million for the three months ended MarchJune 31,30, 2026, compared to $3.1$3.8 million for the three months ended MarchJune 31,30, 2025. The increasedecrease was primarily due to ana increase of $90,000, or 4.9%,decrease in salaries and employee benefits,benefits of $471,000 or 18.6%, partially offset by an increase of $24,000, or 5.0%, in occupancy and equipment expense,expense of $19,000, or 4.0%, an increase of $43,000, or 71.7%, in professional and legal expense,fees of $6,000, or 7.9%, an increase of $25,000, or 7.9%, in data processing expense,expense of $36,000, or 11.3%, an increase advertising of $19,000,$22,000, or 100%,88.0%, and an increase in advertisingother expense,expenses partiallyof offset by a $7,000,$30,000, or 9.6%,15.6%. The decrease in directorssalaries fees,and employee benefits is mainly from a $6,000,death orbenefit 7.1%,paid decreaseout in audit2025 to the intended beneficiaries of the late President and examinationChief fees,Executive andOfficer afrom $5,000,the orproceeds 2.6%,of decreasethe inbank otherowned expenses.life insurance.

Provision (Benefit) for Income Taxes. The provision (benefit) for income taxes increased by $82,000,$192,000, or 390.5%,211.0%, to $103,000$101,000 for the three months ended MarchJune 31,30, 2026, compared to $21,000($91,000) for the three months ended MarchJune 31,30, 2025. PretaxWhile pretax income increaseddecreased by $391,000,$2.6 million, or 394.9%, to $490,00084.0%, for the three months ended MarchJune 31,30, 2026, compared$3.5 tomillion $99,000of the pretax income for the three months ended MarchJune 31,30, 2025.2025, was from the non-taxable proceeds of the bank owned life insurance. The effective tax rate was 21% for both periods.

Liquidity describes our ability to meet the financial obligations that arise in the ordinary course of business. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. Our primary sources of funds are deposits, principal and interest payments on loans and securities, and proceeds from maturities of securities. We also have the ability to borrow from the Federal Home Loan Bank of Dallas and from two correspondent banks. At MarchJune 31,30, 2026, we had no outstanding advances from the Federal Home Loan Bank of Dallas. At MarchJune 31,30, 2026, we had no outstanding balances under the correspondent bank credit facilities.

Based on collateral pledged, consisting of all shares of FHLB stock owned and the blanket pledge of approximately $233.0$218.5 million of its qualifying mortgage loans as of MarchJune 31,30, 2026, the Bank was eligible to borrow up to an additional $187.0$187.4 million as of MarchJune 31,30, 2026.

The Bank has an unsecured federal funds line of credit with FNBB that expires on June 30, 2026.2027. The Bank is eligible to borrow up to $27.2 million. There was no amount outstanding on this line of credit as of MarchJune 31,30, 2026 and December 31, 2025.

The Bank is eligible to borrow from TIB’s Federal Funds Purchase Line Program, which provides overnight liquidity through pledge of certain qualifying securities. The Bank is eligible to borrow up to $15.0 million and repayment is due the next day. There was no amount outstanding on this line of credit as of MarchJune 31,30, 2026 and December 31, 2025.

Fifth District Bancorp, Inc. is a separate legal entity from Fifth District Savings Bank and must provide for its own liquidity to pay its operating expenses and other financial obligations. Its primary source of income is dividends received from the Bank. The amount of dividends that the Bank may declare and pay to the Company is governed by applicable bank regulations. At MarchJune 31,30, 2026, the Company (on an unconsolidated basis) had liquid assets of $18.2$17.3 million.

At MarchJune 31,30, 2026, the Bank was categorized as well-capitalized under applicable bank regulatory capital guidelines. Management is not aware of any conditions or events since the most recent notification that would change its category.

At MarchJune 31,30, 2026, we had $34.7$44.9 million of outstanding commitments to originate loans, which primarily consists of $16.2$17.2 million of remaining funds to be disbursed on construction loans in process and $18.4$18.7 million of unused balances of home equity lines of credit. At March 31, 2026, certificates of deposit that are scheduled to mature on or before March 31, 2027 totaled $222.6 million. Management expects that a substantial portion of the maturing certificates of deposit will be renewed. However, if a substantial portion of these deposits is not retained, we may raise interest rates on deposits to attract new accounts or utilize Federal Home Loan Bank of Dallas advances, which may result in higher levels of interest expense.

The following table sets forth, as of MarchJune 31,30, 2026, the calculation of the estimated changes in our EVE that would result from the designated immediate changes in the United States Treasury yield curve. All estimated changes presented in the table are within the policy limits established by the Company’s board of directors.

The table above indicates that at MarchJune 31,30, 2026, we would have experienced a 24.19%24.02% decrease in EVE in the event of an instantaneous parallel 200 basis point increase in market interest rates and a 15.25%15.82% increase in EVE in the event of an instantaneous 200 basis point decrease in market interest rates.

Change in Net Interest Income. The following table sets forth, as of MarchJune 31,30, 2026, the calculation of the estimated changes in our net interest income that would result from the designated immediate changes in the United States Treasury yield curve. All estimated changes presented in the table are within the policy limits established by the Company’s board of directors.

The table above indicates that as of MarchJune 31,30, 2026, we would have experienced a 17.67%16.96% decrease in net interest income in the event of an instantaneous parallel 200 basis point increase in market interest rates and a 7.96%8.59% increase in net interest income in the event of an instantaneous 200 basis point decrease in market interest rates.