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

Our policy generally has been to originate CRE loans primarily in the states in which the Bank operates. At December 31, 2024,2025, CRE loans, including owner occupied, investor, and real estate construction loans, totaled $293.3$293.2 million or 35.6%,257.1%, of our total loanregulatory portfolio.capital. As a result of our growth in this portfolio over the past several years and planned future growth, these loans require more ongoing evaluation and monitoring and we are implementing enhanced risk management policies, procedures and controls. CRE loans generally involve a greater degree of credit risk than residential mortgage loans because they typically have larger balances and are more affected by adverse conditions in the economy. Because payments on loans secured by CRE often depend upon the successful operation and management of the properties and the businesses which operate from within them, repayment of such loans may be affected by factors outside the borrower’s control, such as adverse conditions in the real estate market or the economy or changes in government regulation. In recent years, CRE markets have been experiencing substantial growth, and increased competitive pressures have contributed significantly to historically low capitalization rates and rising property values. However, CRE markets have been facing downward pressure since 2022 due in large part to increasing interest rates and declining property values. Accordingly, the federal banking agencies have expressed concerns about weaknesses in the current CRE market and have applied increased regulatory scrutiny to institutions with CRE loan portfolios that are fast growing or large relative to the institutions' total capital. To address supervisory expectations with respect to financial institutions' handling of CRE borrowers who are experiencing financial difficulty, in June of 2023, the federal banking agencies, including the OCC, issued an interagency policy statement addressing prudent CRE loan accommodations and workouts. Our failure to adequately implement enhanced risk management policies, procedures and controls could adversely affect our ability to increase this portfolio going forward and could result in an increased rate of delinquencies in, and increased losses from, this portfolio. At December 31, 2024,2025, the Company had no$0.4 million of CRE loans on nonaccrual status.

Our business and operations, which primarily consist of banking activities, including lending money to customers in the form of loans and borrowing money from customers in the form of deposits, are sensitive to general business and economic conditions in the United States generally, and in our local markets in particular. If economic conditions in the United States or any of our local markets weaken, our growth and profitability from our operations could be constrained. The current economic environment is characterized by high inflation levels and relatively high interest rates, despite recent FRB reductions in rates. These conditions impact our ability to attract deposits and to generate attractive earnings through our loan and investment portfolios. All of these factors can individually or in the aggregate be detrimental to our business, and the interplay between these factors can be complex and unpredictable. Unfavorable market conditions can result in a deterioration in the credit quality of our borrowers and the demand for our products and services, an increase in the number of delinquencies, defaults and charge-offs, additional provisions for loan losses, a decline in the value of our collateral, and an overall material adverse effect on the quality of our loan portfolio. Additionally, national financial markets may be adversely affected by sustained high levels of inflation, the current or anticipated impact of military conflict, including the current conflicts in the Middle East and Ukraine, terrorism, and other geopolitical events.

We encounter strong competition in making loans,loans and acquiring deposits and attracting customers for investment services.deposits. We compete with commercial banks, online banks, credit unions, finance companies, mutual funds, insurance companies, investment banking companies, brokerage firms and other financial intermediaries operating in our markets and elsewhere in various segments of the financial services market. Many of these competitors, some of which are affiliated with large bank holding companies, have substantially greater resources and lending limits than we do. In addition, many of our non-bank competitors are not subject to the same extensive federal regulations that govern bank holding companies and federally insured banks, and, as a result, may be able to offer certain products and services at a lower cost than we are able to offer, which could adversely affect our business.

Beginning in early 2022, in response to growing signs of inflation, the FRB increased interest rates rapidly, causing the federal funds rate to reach a 22-year high. Although the FRB reduced its benchmark rates ina the latter parttotal of 2024,six times in 2024 and 2025, the inflationary outlook in the United States is currently uncertain. Rapid changes in interest rates make it difficult for the Bank to balance its loan and deposit portfolios, which may adversely affect our results of operations by, for example, reducing asset yields or spreads, creating operating and system issues, or having other adverse impacts on our business. Persistent inflation could lead to higher interest rates, which could, in turn, increase the borrowing costs of our customers, making it more difficult for them to repay their loans or other obligations. High interest rates could also push down asset prices and weaken economic activity. For a more detailed discussion of these risks and our management strategies for these risks, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Our net interest margin depends on many factors that are partly or completely out of our control, including competition, federal economic monetary and fiscal policies and general economic conditions. Despite the implementation of strategies to manage interest rate risks, changes in interest rates may have a material adverse impact on our profitability.

Federal budget deficit concerns and the potential for political conflict over legislation to fund U.S. government operations and raise the U.S. government’s debt limit may increase the possibility of a default by the U.S. government on its debt obligations, related credit-rating downgrades, or an economic recession in the United States. On January 21, 2025, the U.S. Treasury began taking extraordinary measures to prevent a default on U.S. government debt, which measures are expected to continue until such time as the U.S. Congress increases the debt ceiling. However, it is unclear how long such extraordinary measures will forestall a default in the event of extended Congressional negotiations or inaction. Many of our investment securities are issued by the U.S. government and government agencies and sponsored entities. As a result of uncertain domestic political conditions, including potential future federal government shutdowns, the possibility of the federal government defaulting on its obligations for a period of time due to debt ceiling limitations or other unresolved political issues, investments in financial instruments issued or guaranteed by the federal government pose liquidity risks. In connection with prior political disputes over U.S. fiscal and budgetary issues leading to the U.S. government shutdown in 2011, S&P lowered its long-term sovereign credit rating on the U.S. from AAA to AA+. In 2023, Congress narrowly averted two separate government shutdowns by passing continuing resolutions. In part due to repeated debt-limit political standoffs and last-minute resolutions, in 2023 a rating agency downgraded the U.S. long-term foreign-currency issuer default rating to AA+ from AAA. A further downgrade, or a downgrade by other rating agencies, as well as sovereign debt issues facing the governments of other countries, could have a material adverse impact on financial markets and economic conditions in the U.S. and worldwide and, therefore, materially adversely affect our business, financial condition and results of operations.

DisagreementRecent overU.S. government shutdowns have negatively impacted U.S. economic growth, and the federalsuspension budget has previously caused the U.S. federalof government todata shut down for periods of time. On December 21, 2024, President Biden signed a bipartisan continuing resolution to extend federal spendingcollection and avertpublication aleft government shutdown through March 14, 2025. Accordingly,policymakers without a final agreement regarding the federal budget in place prioraccess to the expirationlatest ofdata on employment, inflation, and economic growth, increasing the continuing resolution, or another continuing resolution, it is still possiblerisk that a partialwrong shutdowndecision ofwill thebe U.S. government may occur.made. An extended period of shutdown of portions of the U.S. federal government could negatively impact the financial performance of certain customers and could negatively impact customers’ future access to certain loan and guaranty programs. Continued adverse political and economic conditions could have a material adverse effect on our business, financial condition and results of operations. During any protracted federal government shutdown, we may not be able to close certain loans and we may not be able to recognize non-interest income on the sale of loans. In addition, we believe that some borrowers may decide not to proceed to close on their loans, which would result in a permanent loss of the related non-interest income. A federal government shutdown could also result in reduced income for government employees or employees of companies that engage in business with the federal government, which could result in greater loan delinquencies, increased in our non-performing, criticized, and classified assets, and a decline in demand for our products and services.

The CRA, the Equal Credit Opportunity Act, the Fair Housing Act, and other fair lending laws and regulations (collectively, “fair lending laws”) impose community investment and nondiscriminatory lending requirements on financial institutions. The CFPB, the Department of Justice and other federal and state agencies are responsible for enforcing these federal laws and regulations and comparable state provisions. Various federal banking agencies have recently completed significant changes to their respective CRA regulations. Federal, state or local consumer lending laws may restrict our ability to originate certain mortgage loans or increase our risk of liability with respect to such loans. A successful regulatory challenge to an institution's performance under the fair lending laws could result in a wide variety of sanctions, including damages and civil money penalties, injunctive relief, restrictions on mergers and acquisitions, restrictions on expansion and restrictions on entering new business lines. Private parties may also have the ability to challenge an institution's performance under fair lending laws in private class action litigation. Such actions could have a material adverse effect on our business, financial condition and results of operations.

Bancshares’ liquidity is subject to various regulatory restrictions applicable to its subsidiaries.subsidiary.

There are various regulatory restrictions on the ability of Bancshares’ subsidiariessubsidiary to pay dividends or to make other payments to Bancshares. In addition, Bancshares’ right to participate in any distribution of assets of any of its subsidiariessubsidiary upon a subsidiary’s liquidation or otherwise will be subject to the prior claims of creditors of that subsidiary, except to the extent that any of Bancshares’ claims as a creditor of such subsidiary may be recognized.

Political and social attention to the issue of climate change has increased in recent years. Federal and state legislatures and regulatory agencies have continued to proposeproposed and advanceadvanced numerous legislative and regulatory initiatives seeking to mitigate the effects of climate change. TheIn the future, new regulations or guidance may be issued, or other regulatory or supervisory actions may be taken, in this area by the federal banking agencies or other regulatory agencies, includingor thenew OCC,statutory haverequirements emphasizedmay thatbe climate-related risks are faced by banking organizations of all types and sizes and are in the process of enhancing supervisory expectations regarding banks’ risk management practices. In December 2021, the OCC published proposed principles for climate risk management by banking organizations with more than $100 billion in assets. The OCC also has appointed its first ever Climate Change Risk Officer and established an internal climate risk implementation committee in order to assist with these initiatives and to support the agency’s efforts to enhance its supervision of climate change risk management. Similar and even more expansive initiatives are expected, including potentially increasing supervisory expectations with respect to banks’ risk management practices, accounting for the effects of climate change in stress testing scenarios and systemic risk assessments, revising expectations for credit portfolio concentrations based on climate-related factors and encouraging investment by banks in climate-related initiatives and lending to communities disproportionately impacted by the effects of climate change. In March 2024, the SEC adopted final rules for "The Enhancement and Standardization of Climate-Related Disclosures for Investors,” which would have required issuers to provide climate-related disclosures. In April 2024, the SEC stayed the effectiveness of the final rules pending the outcome of certain legal challenges.adopted. To the extent that these initiatives lead to the promulgation of new regulations or supervisory guidance applicable to the Company or the Bank, we would likely experience increased compliance costs and other compliance-related risks. The lack of empirical data surrounding the credit and other financial risks posed by climate change render it impossible to predict how specifically climate change may impact the Company’s financial condition and results of operations.

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. Previously, the Bank operated two additional wholly-owned subsidiaries, Acceptance Loan Company ("ALC") and FUSB Reinsurance, Inc., both of which were legally dissolved in 2023, and all remaining assets and liabilities of these entities were transferred to the Bank prior to December 31, 2023.

Other intangible assets consist of core deposit intangible assets arising from acquisitions. Core deposit intangible assets have definite useful lives and are amortized on an accelerated basis over their estimated useful lives. The Company’s core deposit intangibles have estimated useful lives of seven years. Intangible assets are evaluated for impairment whenever events or circumstances exist that indicate that the carrying amount should be reevaluated. AsDuring 2025, the balance of December 31, 2024, there was no indication of impairment associated with the Company's other intangible assets.assets was amortized to zero.

Net interest income decreasedincreased by $1.2$1.3 million, or 3.2%,3.6%, comparing the year ended December 31, 20242025 to the year ended December 31, 2023.2024. The decreaseincrease was primarily attributable to increasedgrowth interest expense during 2024, asin average ratesinterest-earning onassets, interestboth bearingloans liabilitiesand increasedinvestment atsecurities, awhich faster pacemore than offset the impact of lower average yields on interest earning assets. Net interest margin totaled 3.59% in 2024, compared to 3.87% in 2023. The decrease in net interest margin, comparing 2024 to 2023, was driven by an increase in total funding costs of 63 basis points, partially offset by an increase in yield on interest earninginterest-earning assets ofduring 31the basis points. The rate-based decrease in net interest income was partially offset by increased volume in interest earning assets.year. Average loans during the year ended December 31, 20242025 increased to $818.5$856.0 million, compared to $795.4$818.5 million during the year ended December 31, 2023.2024.

The provision for credit losses was $0.6$4.0 million for the year ended December 31, 2024,2025, compared to $0.3$0.6 million during the year ended December 31, 2023.2024. The increase in the provision for credit losses in 2025 compared to 2024 resulted primarily from credit-related activity associated with specific commercial loan growthrelationships, including charge-off activity occurring during the year,second asand wellthird asquarters anof increase2025. In addition, significant growth in the indirect consumer loan portfolio, together with elevated charge-offs within that portfolio, contributed to higher provision expense during the year. Net charge-offs on loans totaled $3.5 million, or 0.41% of average loans, for 2025, and $1.1 million, or 0.14%, for 2024. As of December 31, 2025, the Company's allowance for credit losses ("ACL")was on individually evaluated loans. The Company’s net charge-offs as a percentage of average loans totaled 0.14% during both the years ended December 31, 2024 and 2023. As of December 31, 2024, the Company’s allowance for credit losses on loans as a percentage1.25% of total loans was 1.24%,loans, compared to 1.28%1.24% as of December 31, 2023.2024.

LoansLoan Growth

Total loans increased by $1.2$30.0 million, or 0.2%,3.6%, as of December 31, 2024,2025, compared to December 31, 2023.2024. Loan volume increases during 20242025 were driven primarilyby bysubstantial growth in multi-familythe consumer indirect category, and non-farm,to non-residentiala portfolios,lesser extent, the multi-family residential and C&I categories. This growth was partially offset by decreases in construction,non-residential commercial real estate, construction and industrial, 1-4 family residential and consumer categories.

Nonperforming assets, including loans in non-accrual status and OREO, totaled $1.6 million as of December 31, 2025, compared to $5.5 million as of December 31, 2024, compared to $3.0 million as of December 31, 2023. The increase in nonperforming assets during 2024 resulted primarily from one loan that was foreclosed and moved into OREO and another loan that moved into non-accrual status during 2024. As a percentage of total assets, nonperforming assets totaleddecreased to 0.14% as of December 31, 2025, compared to 0.50% as of December 31, 2024,2024. For the year ended December 31, 2025, annualized net charge-offs as a percentage of average loans totaled 0.41%, compared to 0.28%0.14% asfor ofthe year ended December 31,31 2023.2024.

Deposits totaled $1,028.0 million as of December 31, 2025, compared to $972.6 million as of December 31, 2024, compared to $950.2 million as of December 31, 2023.2024. The growth in 20242025 included an increase of $20.0 million in interest-bearing deposits and an increase in certificates of deposit of $16.9 million, partially offset by a decrease of $8.9$54.3 million in money market and savings deposits.deposits Theand depositan growthincrease in 2024brokered wasdeposits of $65.6 million, partially offset by a decreasedecreases of $10.3$21.9 million in wholesaleinterest-bearing demand deposits, $40.5 million in certificates of deposit and $2.1 million in non-interest bearing deposits. The shift to money market and savings deposits is consistent with deposit holders seeking to maximize interest earnings on their accounts, while also maintaining liquidity. The majority of the brokered deposits.deposits acquired by the Company during the year were obtained in conjunction with interest rate derivative instruments that are intended to support the Company’s overall interest rate hedging strategy. As of December 31, 2024,2025, core deposits, which exclude time deposits of $250 thousand or more and all brokered deposits, totaled $837.7$838.3 million, or 86.1%81.6% of total deposits, compared to $819.5$837.7 million, or 86.2%86.1% of total deposits, as of December 31, 2023.2024.

As of December 31, 2024,2025, the Company held cash, federal funds sold and securities purchased under reverse repurchase agreements totaling $52.9$78.4 million, or 4.8%6.8% of total assets, compared to $59.8$52.9 million, or 5.6%4.8% of total assets, as of December 31, 2023.2024. Investment securities, including both the available-for-sale and held-to-maturity portfolios, totaled $168.5 million as of December 31, 2025, compared to $168.6 million as of December 31, 2024, compared to $136.7 million as of December 31, 2023. During the year ended December 31, 2024, the Company invested $58.0 million in taxable U.S. agency-sponsored bonds, resulting in improved yields in the investment portfolio.2024. As of December 31, 2024,2025, the expected average life of securities in the investment portfolio was 3.63.7 years,years compared to 3.93.6 years as of December 31, 2023.2024. During the years ended December 31, 2025 and 2024, the Company purchased $43.6 million and $58.0 million, respectively, of investment securities at market rates in existence 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.

As of December 31, 2024,2025, shareholders’ equity totaled $105.6 million, or 9.15% of total assets, compared to $98.6 million, or 8.96% of total assets, compared to $90.6 million, or 8.44% of total assets, as of December 31, 2023.2024. The increase in shareholders’ equity during the year ended December 31, 20242025 resulted primarily from earnings, net of dividends paid,paid which was partially offset byand repurchases of shares of the Company's common stock. In addition, shareholders' equity was positively impacted during 2024the period 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.securities, and purchases of investment securities at higher yields.

(2) Loan fees are included in the interest amounts presented. Loan fees totaled $0.7 million andfor $0.6 million forboth the years ended December 31, 20242025 and December 31, 2023, respectively.2024.

The elevated market interest rate environment has been characterized by declining short-term market interest rates and increased volatility, which has had, and continues to have, a significant impact on the Company and the banking industry in general. The decreaseChanges in net interest income and net interest margin during 20242025 compared to 20232024 waswere primarily driven by movements in short-term market interest rates and the accelerated repricingtiming of interest-bearingasset liabilitiesand throughliability therepricing. firstFollowing threereductions quarters of 2024. From September 2024 through December 2024,in the federal funds rate wasin reducedboth bylate 100 basis points2024 and late 2025, the Company experienced downward repricing of variable-rate interest-earning assets, while reductions in the cost of interest-bearing liabilities decreased; however, similar reductions occurred onmore certaingradually. marketAs interesta ratesresult, that are used to price the Company’s variable rate loans. Amid these interest rate reductions, the Company’s interest earninginterest-earning assets generally repriced downward more quickly than its interest-bearing liabilities during the fourth quarterportions of both 2025 and 2024. Competition for both loans and deposits remains intense and is expectedcontinues to continue to putplace pressure on net interest margin. ShouldFuture changes in market interest ratesrates, continuewhether to increaseincreases or decreasedecreases, atcould significantadversely levels,affect the Company’s net interest income couldand benet negativelyinterest impacted.margin.

The Company’s non-interest income increasedremained byrelatively $0.2consistent at $3.6 million comparing 20242025 to 2023,2024. dueDecreases primarilyin toservice charges and ATM fee income were partially offset by increases in lease income, bank-owned life insurance, and other miscellaneous revenue sources. TheManagement majoritycontinues ofto theevaluate Company’sopportunities sourcesto ofadd non-interest revenue streams; however, significant variation in non-interest income are relatively stable and areis not expected to change significantly in the near term.

During the year ended December 31, 2024,2025, the Company purchased $58.0$43.6 million in taxable U.S. agency-sponsored securities that are included in the available-for-sale portfolio. The purchased securities partially offset $28.5$50.0 million in proceeds received by the Company associated with maturitiesmaturities, calls and prepayments in the portfolio. InThese purchases, combined with the highermaturity, interestcalls rateand environment,paydown theof investment securities purchasedat lower rates, have servedled to increasecontinued theimprovement Company’sin yield on taxablethe investment securities.portfolio. For the year ended December 31, 2024,2025, the yield on taxable investment securities totaled 3.04%,3.59%, compared to 2.24%3.02% for the year ended December 31, 2023.2024.

As of December 31, 20242025 and December 31, 2023,2024, the composition of the non-farm,non-residential non-residentialcommercial real estate loan portfolio was as follows:

The table below summarizes changes in the allowance for credit losses ("ACL") on loans and leases for each of the most recent five years as of December 31, 2024.2025. For years ended December 31, 2022 and prior, information presented is as determined in accordance with Accounting Standards Codification ("ASC") 310, Receivables, prior to the adoption of ASC 326, Financial Instruments - Credit losses:

Unfunded lending commitments are off-balance sheet arrangements that represent unconditional commitments of the Company to lend to a borrower that are unfunded as of the balance sheet date. These may include unfunded loan commitments, standby letters of credit, and financial guarantees. ASC 326 guidance requires that an estimate of expected credit loss be measured on commitments in which an entity is exposed to credit risk via a present contractual obligation to extend credit unless the obligation is unconditionally cancellable by the issuer. For 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 both December 31, 20242025 and 2023,2024, the Company’s allowance for credit losses on unfunded commitments, which is recorded in other liabilities in the Company’s consolidated balance sheets, totaled $0.4 million and $0.6 million, respectively. No allowance for credit losses on unfunded commitments was recorded by the Company in the years prior to 2023.million.

Deposits totaled $1,028.0 million as of December 31, 2025, compared to $972.6 million as of December 31, 2024, compared to $950.2 million as of December 31, 2023.2024. The growth in 20242025 included an increase of $20.0 million in interest-bearing deposits and an increase in certificates of deposit of $16.9 million, partially offset by a decrease of $8.9$54.3 million in money market and savings deposits and an increase in brokered deposits of $65.6 million, partially offset by decreases of $21.9 million in interest-bearing demand deposits, $40.5 million in certificates of deposit and $2.1 million in non-interest bearing deposits. The shift to interest-bearingmoney market and savings deposits is consistent with deposit holders seeking to maximize interest earnings on their accountsaccounts, amidwhile also maintaining liquidity. The majority of the elevatedbrokered deposits acquired by the Company during the year were obtained in conjunction with interest rate environment.derivative Theinstruments depositthat growthare inintended 2024to wassupport alsothe partiallyCompany’s offsetoverall byinterest arate decreasehedging of $10.3 million in wholesale brokered deposits.strategy. As of December 31, 2024,2025, core deposits, which exclude time deposits of $250 thousand or more and all brokered deposits, totaled $837.7$838.3 million, or 86.1%81.6% of total deposits, compared to $819.5$837.7 million, or 86.2%86.1% of total deposits, as of December 31, 2023.2024.

Other interest-bearing liabilities consist of federal funds purchased, securities sold under agreements to repurchase, FHLB advances and subordinated debt that are used by the Company as alternative sources of funds. As of both December 31, 20242025 and 2023,2024, these liabilities represented 2.5%1.2% and 2.5%, respectively, of interest-bearing liabilities. The table below summarizes short- and long-term liabilities and related interest rate data as of and for the years ended December 31, 20242025 and 2023.2024.

As of December 31, 2024,2025, shareholders’ equity totaled $105.6 million, or 9.1% of total assets, compared to $98.6 million, or 9.0% of total assets, compared to $90.6 million, or 8.4% of total assets, as of December 31, 2023.2024. The increase in shareholders’ equity during the year ended December 31, 20242025 resulted primarily from earnings, net of dividends paid,paid partially offset byand repurchases of shares of the Company's common stock. In addition, shareholders' equity was positively impacted during 2024the period 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.securities combined with purchases of investment securities at higher yields.

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. In response to heightened liquidity concerns in the banking industry, during 2023 management undertook measures designed to enhance the Company’s liquidity position. These procedures included holding higher levels of on-balance sheet cash, as well as enhancing the availability of off-balance sheet borrowing capacity. As part of these efforts, during the third quarter of 2023, the Company completed the establishment of additional borrowing capacity through the FRB's discount window, primarily via the pledging of the majority of the Company’s indirect loan portfolio as collateral. Including the pledging of these eligible investment securities and loans, along with selected securities, the Company had $165.1$210.9 million and $161.7$165.1 million in borrowing capacity as of December 31, 20242025 and December 31, 2023,2024, respectively.

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 that have not been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) 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. Management believes that these non-GAAP measures are beneficial to the reader as they enhance the overall understanding of the Company’s liquidity position and can be used as a supplement to GAAP-based measures of liquidity, but they should not be considered in isolation or as a substitute for the most directly comparable or other financial measures calculated in accordance with GAAP.

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-maturityheld-to-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,sheets, less reductions for securities already pledged and discounts expected to be taken by the lender to determine collateral value.

Refer to the section captioned “Regulatory Capital” included in Note 14, “Shareholders’ Equity,” in the Notes to the consolidated financial statements for an illustration of the Bank’s actual regulatory capital amounts and ratios under regulatory capital standards in effect as of December 31, 2024 andboth December 31, 2023.2025 and 2024. Additionally, refer to the section captioned “Dividend Restrictions” included in Note 14 for a discussion regarding restrictions that could materially influence the Bank’s, and therefore Bancshares’, ability to pay dividends.

Three forwardTwo interest rate swapcap contracts designated as faircash valueflow hedges that were intended to mitigate riskthe associatedCompany’s withexposure risingto increases in short-term interest rates byon convertingan aaggregate portfolionotional amount of $80.0 million in short-term fixed rate loans to a variable rate.liabilities.

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 1516 full-service banking offices located in Birmingham, Butler, Calera, Centreville, Daphne, 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 153152 full-time equivalent employees (as of MarchJune 31,30, 2026), to ensure customer satisfaction and convenience.

The emphasis of this discussion is a comparison of assets, liabilities and shareholders’ equity as of MarchJune 31,30, 2026 to December 31, 2025, while comparing income and expense for the threesix months ended MarchJune 31,30, 2026 and 2025. 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.

During the threesix months ended MarchJune 31,30, 2026, the banking industry continued to operate in an environment characterized by elevated economic uncertainty, influenced by moderating, but still resilient, U.S. economic growth, inflation levels remaining above the Federal Reserve’s long-term objective, and agenerally stable labor market thatconditions. hasU.S. showneconomic signsactivity continued to expand during the first half of gradual2026. softening.According Whileto the U.S. Bureau of Economic Analysis’ advance estimate released on July 30, 2026, real gross domestic product (“"GDP”") growthincreased moderatedat froman levelsannual experiencedrate of 1.5% during the middlesecond quarter of 2025, economic activity remained positive entering 2026, supportedcompared with 2.1% during the first quarter of 2026. This modest second-quarter growth reflected increases in consumer spending, investments and exports that were partially offset by consumerdecreased spendinggovernment and business investment, though at a slower pace.spending.

Uncertainty remainsalso remained elevated with respect to U.S. fiscal and trade policy, including the ongoingcurrent and potential impactseffects of tariffs implemented or announced by the Trump administration and the possibility of additional policy changes. Tariffs, higher energy costs, and other supply-related pressures may affect inflation, consumer demand, business investment, and global supply chains. Geopolitical risks, including the ongoing conflict involving Iran as well asIran, continued unrest elsewhere in the Middle EastEast, and the ongoing war in Ukraine, persistalso and contributecontributed to broader global economic uncertainty. These factors may continue to impactaffect business sentiment, commodity and energy markets, supply chains, financial markets, and overall economic activity.

In the Company’s local markets, competitive pressures for both loans and deposits have remained elevated during the firstsix quartermonths ofended June 30, 2026. Competition for deposits continues to constrain the Company’s ability to significantly reduce funding costs despite the decline in market interest rates relative to peak levels in 2025. Commercial lending activity has remained measured as business customers continuecontinued to evaluateassess the potential impacteffects of elevated borrowing costs, interest rate movements, geopolitical developments, trade policy, and broader economic uncertainty on their operations.operations and investment decisions. Consumer spending trends have remained mixed on a macroeconomic basis; however, the Company has continued to experience growth in consumer indirect lending, primarily within higher credit qualityhigher-credit-quality segments.

The competitive environment, combinedtogether with elevated funding costs and ongoing economic, geopolitical, trade, and policy uncertainty, continues to present achallenges challenging operating environment forto maintaining and improving the Company’s net interest margin. Management continues to closely monitor these conditions and believes the Company remains well positioned to respond to a range of economic outcomes;outcomes. however,However, adverse changes in economic conditions, credit quality, loan demand, competitive dynamics, deposit pricing, geopolitical developments, trade or fiscal policy, or interest rate movements could negatively impactaffect the Company’s financial condition and results of operations.

The Company earned net income of $1.9$1.8 million, or $0.33$0.31 per diluted common share, during the three months ended MarchJune 31,30, 2026, compared to $1.8$0.2 million, or $0.29$0.03 per diluted common share, for the three months ended MarchJune 31,30, 2025. ComparingFor the twosix periods,months ended June 30, 2026, net income totaled $3.7 million, or $0.64 per diluted share, compared to $1.9 million, or $0.32 per diluted share, for the six months ended June 30, 2025. The increase in net income comparing both the three months and six months ended June 30, 2026 to the corresponding periods of 2025 resulted primarily from increased interest income associated with growth in earning assets, as well as from a decrease in the Company’s provision for credit losses on loans and leases.leases, and to a lesser extent, realized gains on the sale of investment securities recorded during the 2026 periods. These increases in net income were partially offset by increases in non-interest expense comparing the six months ended June 30, 2026 to the six months ended June 30, 2025.

Summarized condensed consolidated statements of operations are included below for the three and six months ended MarchJune 31,30, 2026 and 2025.

The discussion that follows summarizes the most significant activity that drove changes in the Company’s operating results during the threesix months ended MarchJune 31,30, 2026, as compared to the threesix months ended MarchJune 31,30, 2025.

Net interest income increased by $0.3 million, or 3.6%,1.9%, comparing the threesix months ended MarchJune 31,30, 2026 to the threesix months ended MarchJune 31,30, 2025. The increase resulted from growth in average interest-earning asset balances comparing the two periods. Average interest-earning assets increased by $86.3$48.2 million, or 8.4%,4.6%, comparing the threesix months ended MarchJune 31,30, 2026 to the corresponding period of 2025. Earning asset growth was reflected in total loans, investment securities, federal funds sold and interest-bearing deposits with other financial institutions. The increase in interest income was partially offset by both volume and rate-relatedvolume-related increases in interest expense associated with interest-bearing liabilities. While the increase in earning assets was 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. Net interest margin was 3.37%3.46% for the threesix months ended MarchJune 31,30, 2026, compared to 3.53%3.56% for the threesix months ended MarchJune 31,30, 2025.

For the threesix months ended MarchJune 31,30, 2026, the Company recorded a provision for credit losses of $0.3$1.2 million, compared to $0.5$3.2 million for the threesix months ended MarchJune 31,30, 2025. The decreasedecreased in provisioningprovision comparing the twofirst periodshalf wasof 2026 to the corresponding period of 2025 resulted primarily from provisioning for specifically identified commercial loans in 2025. The credit issues associated with aadditional reductionprovisioning on these loans were resolved later in loan2025, growthand accordingly, the same level of provisioning was not repeated during the firstsix quartermonths ofended 2026June compared30, to the first quarter of 2025, including the impact of the Company’s reserve for unfunded lending commitments.2026. As of bothJune March30, 31, 2026 and December 31, 2025,2026, the Company’s allowance for credit losses ("ACL") on loans and leases as a percentage of total loans was 1.25%.1.26%, compared to 1.25% as of December 31, 2025.

Non-interest expense increasedtotaled to $7.3$15.0 million for the threesix months ended MarchJune 31,30, 2026, compared to $6.9$14.4 million for the threesix months ended MarchJune 31,30, 2025. The increaseincreased comparing the 2026 period to the 2025 periodexpense resulted primarily from inflationary increases in a number ofvarious expense categories, primarilyas feeswell foras professionalincreased services,occupancy occupancy,expenses andassociated salarieswith andexpansion benefitsof expense.the Company’s banking center footprint.

As of MarchJune 31,30, 2026, the Company’s assets totaled $1,165.2$1,147.6 million, compared to $1,154.8 million as of December 31, 2025, ana increasedecrease of 0.9%.0.6%.

Total loans decreasedincreased by $9.3$7.6 million, or 1.1%,0.9%, as of MarchJune 31,30, 2026, compared to December 31, 2025,2025. asLoan growth in the multi-family residential real estateconstruction and consumer indirect categories was partially offset by decreases primarily in theother construction,categories, non-residentialmost commercial real estate and commercial and industrial (“C&I”) categories. The decrease in construction is consistent with the ebb and flow of projects in the Company's service territories. Construction loans are generally short-to-medium term loans that are expected to pay off or transfer to another loan category upon project completion. The decreasenotably in non-residential commercial real estate. The decrease in commercial real estate wasloans relatedresulted toprimarily completedfrom constructionthe payoff of real estate projects that moved into a permanent category, but were subsequentlyanticipated refinanced intoin the permanentnormal market.course of the project life cycle. The growth in the construction category was consistent with economic growth in the Company’s service territories, while the growth in the indirect category accelerated in the latter part of the first quarter of 2026,was consistent with typical seasonal trends. The indirect lending platform focuses on consumer lending at 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 three months ended March 31, 2026funded was 797,785 while the weighted average credit score for the entire portfolio was 783. While total loans decreased during the first quarteras of 2026,June average30, loan balances remained higher comparing the three months ended March 31, 2026 to the three months ended March 31, 2025, increasing by $26.7 million, or 3.2%.2026.

Nonperforming assets, including loans in non-accrual status andstatus, other real estate owned, and repossessed assets, totaled $1.8$1.9 million as of MarchJune 31,30, 2026, an increase from $1.6 million as of December 31, 2025. As a percentage of total assets, nonperforming assets increased to 0.16%0.17% as of MarchJune 31,30, 2026, compared to 0.14% as of December 31, 2025. Net charge-offs as a percentage of average loans totaled 0.23%0.27% during the threesix months ended MarchJune 31,30, 2026, compared to 0.13%0.47% during the threesix months ended MarchJune 31,30, 2025. The increasedecrease in net charge-offs comparing the twosix periodsmonths ended June 30, 2026, to the six months ended June 30, 2025 was due primarily to anthe increasepartial charge off in charge-offsthe associatedsix withmonths ended June 30, 2025 of one individually evaluated commercial loan totaling $1.2 million that was not repeated in the indirectsix consumermonths portfolio.ended June 30, 2026.

Total deposits increaseddecreased by $10.9$30.0 million, or 1.1%,2.9%, during the threesix months ended MarchJune 31,30, 2026,2026. dueIncluded primarilyin tothis decrease were $20.1 million in wholesale brokered time deposits that matured and were not replaced. The remaining decrease was comprised of reductions of $19.2 million in retail time deposits and $4.0 million in non-interest-bearing demand deposits, partially offset by an increase in interest-bearing demand deposits of $28.4$13.3 million,million. partially offset by a $4.7 millionThe decrease in noninterest-bearingwholesale depositsdeposits, andas awell $12.8as millionother decrease ininterest-bearing time deposits.deposits, assisted management’s efforts to reduce overall deposit costs, while maintaining an appropriate level of core funding. Core deposits, which exclude time deposits of $250 thousand or more and all wholesale brokered deposits, totaled $853.8$835.2 million, or 82.2%83.7% of total deposits, as of MarchJune 31,30, 2026, compared to $838.3 million, or 81.6% of total deposits, as of December 31, 2025. The average rate on deposits totaled 2.08% during the six months ended June 30, 2026, compared to 2.07% during the six months ended June 30, 2025. While deposit costs increased slightly comparing the two six-month periods, the more recent trend in 2026 was favorable. Deposit costs decreased to 1.98% during the three months ended June 30, 2026, compared to 2.18% during the three months ended March 31, 2026, comparedand to 2.07%2.08% during the three months ended MarchJune 31,30, 2025. In the current environment, significant competitive pressure remains to acquire and maintain deposit balances.

As of MarchJune 31,30, 2026, the Company held cash, federal funds sold and securities purchased under reverse repurchase agreements totaling $85.4$63.8 million, or 7.3%5.6% of total assets, compared to $78.4 million, or 6.8% of total assets, as of December 31, 2025. Investment securities, including both the available-for-sale and held-to-maturity portfolios, totaled $181.5$166.0 million as of MarchJune 31,30, 2026, compared to $168.5 million as of December 31, 2025. During the threesix months ended MarchJune 31,30, 2026, the Company purchased $20.5$25.4 million of investment securities at market rates in existence at the time of purchase. In addition, the Company sold investment securities with a principal balance totaling $7.1 million and recorded a gain on sale totaling $0.5 million during the six months ended June 30, 2026. These purchases,purchases and sales, combined with the maturity and paydown of investment securities at lower rates, have led to continued improvement in yield on the portfolio. The average yield on investment securities, including both available-for-sale and held to maturity securities, totaled 3.89%3.92% duringfor the threesix months ended MarchJune 31,30, 2026, compared to 3.44%3.45% duringfor the threesix months ended MarchJune 31,30, 2025. As of MarchJune 31,30, 2026, the expected average life of securities in the investment portfolio was 3.83.6 yearsyears, compared to 3.7 years as of December 31, 2025.

As of MarchJune 31,30, 2026, shareholders’ equity totaled $104.6$104.3 million, or 9.0%9.09% of total assets, compared to $105.6 million, or 9.1%9.15% of total assets, as of December 31, 2025. While earnings, net of dividends paid, increased shareholders’ equity during the threesix months ended MarchJune 31,30, 2026, the increase was fully offset by share repurchases, combined with an increase in the Company’s accumulated other comprehensive loss resulting from the increasing interest rate environment and the sale of investment securities in gain positions during the period.

During both the threesix months ended MarchJune 31,30, 2026 and 2025, the Company declared cash dividends totaling $0.07$0.14 per share on its common stock.

During the threesix months ended MarchJune 31,30, 2026, the Company completed the repurchase of 146,500237,500 shares of its common stock at a weighted average price of $15.03$15.33 per share. The repurchases were completed under the Company’s previously announced share repurchase program, which was most recently expanded during the fourth quarter of 2025. As of MarchJune 31,30, 2026, 1,638,3131,547,313 shares remained available for repurchase under the program.

During the threesix months ended MarchJune 31,30, 2026, 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 MarchJune 31,30, 2026, the Bank’s common equity Tier 1 capital and Tier 1 risk-based capital ratios were each 10.85%. Its total capital ratio was 11.99%,12.02%, and its Tier 1 leverage ratio was 8.85%.9.16%.

As of MarchJune 31,30, 2026, 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.

The following tables show the average balances of each principal category of assets, liabilities and shareholders’ equity for the three and six months ended MarchJune 31,30, 2026 and 2025. 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.

Interest income increased by $0.9$0.7 million, comparing the threesix months ended MarchJune 31,30, 2026 to the threesix months ended MarchJune 31,30, 2025. The increase in interest income resulted from a $1.0$1.1 million increase attributable to growth in average interest-earning assets, partially offset by a $0.1$0.4 million decrease attributable to lower average yields on interest-earning assets. With the exception of investment securities, yields in all earning asset categories declined comparing the threesix months ended MarchJune 31,30, 2026 to the threesix months ended MarchJune 31,30, 20252025, as short-term interest rates generally declined comparing the two periods.

Interest expense increased by $0.6$0.4 million, comparing the threesix months ended MarchJune 31,30, 2026 to the threesix months ended MarchJune 31,30, 2025. The increase resulted primarily from increasesan increase in bothvolume theassociated averagewith balancemoney market accounts, and to a lesser extent, increased rates paidon onboth money market and time deposits. These increases were partially offset by reductions in both average balances of time deposits and borrowings, as well as rates associated with demand deposits, time deposits and borrowings.

The Company’s net interest income and net interest margin during the threesix months ended MarchJune 31,30, 2026 continued to be impacted by variability in the interest rate environment. Notably, between September and December 2025, the federal funds rate was reduced by 75 basis points, and generally, the Company’s interest-earning assets have repriced downward more quickly than interest-bearing liabilities, reducing the Company’s net interest margin to 3.37%3.46% during the threesix months ended MarchJune 3130, 2026, compared to 3.53%3.56% during the threesix months ended MarchJune 31,30, 2025. 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.

For the threesix months ended MarchJune 31,30, 2026, the Company recorded a provision for credit losses of $0.3$1.2 million, compared to $0.5$3.2 million for the threesix months ended MarchJune 31,30, 2025. The decreasedecreased in provisioningprovision comparing the twofirst periodssix wasmonths of 2026 to the corresponding period of 2025 resulted primarily from provisioning for specifically identified commercial loans in 2025. The credit issues associated with aadditional reductionprovisioning on these loans were resolved later in loan2025 growthand, accordingly, the same level of provisioning was not repeated during the firstsix quartermonths ofended 2026June compared30, to the first quarter of 2025, including the impact of the Company’s reserve for unfunded lending commitments.2026. Net charge-offs totaled $0.5$1.1 million and $0.3$2.0 million for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively.

As of bothJune March30, 31, 2026 and December 31, 2025,2026, the Company’s ACL as a percentage of total loans and leases was 1.25%.1.26%, compared to 1.25% as of December 31, 2025. Comparing June 30, 2026 to December 31, 2025, the ACL was increased by changes in economic forecasting associated with the Company’s credit forecasting model, including the expected impact of higher inflation and a higher Federal funds rate. 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.

The Company’s non-interestNon-interest income remainedincreased relativelyto consistent, totaling $0.8$2.2 million for the threesix months ended MarchJune 31,30, 2026, compared to $0.9$1.7 million for the threesix months ended MarchJune 31,30, 2025.2025, primarily due to gains on the sale of investment securities totaling $0.5 million during the 2026 period. Management continues to evaluate opportunities to add non-interest revenue streams and grow existing streams; however, with the exception of sales of investment securities which cannot be predicted with certainty, significant variation in non-interest income is not expected in the near term.

Non-interest expense totaled $7.3$15.0 million during the threesix months ended MarchJune 31,30, 2026, compared to $6.9$14.4 million during the threesix months ended MarchJune 31,30, 2025. The increased expense resulted primarily from an increase comparingin occupancy expenses associated with expansion of the 2026Company’s periodbanking tocenter thefootprint, 2025as periodwell resultedas frominflationary increases in avarious number ofother expense categories, primarily fees for professional services, occupancy, and salaries and benefits expense.categories.

The provision for income taxes was $0.5$1.0 million and $0.6 million for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively. The Company’s effective tax rate was 20.9%21.3% and 23.8%,22.6%, respectively, for the same periods.

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 3.83.6 years and 3.7 years as of MarchJune 31,30, 2026 and December 31, 2025, 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 MarchJune 31,30, 2026, available-for-sale securities totaled $181.1$165.6 million, or 99.8% of the total investment portfolio, compared to $168.1 million, or 99.7% of the total investment portfolio, as of December 31, 2025. 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 MarchJune 31,30, 2026, held-to-maturity securities totaled $0.4 million, or 0.2% of the total investment portfolio, compared to $0.5 million, or 0.3% of the total investment portfolio, as of December 31, 2025. 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 $2.1$2.9 million as of MarchJune 31,30, 2026, compared to $1.0 million as of December 31, 2025. The increase in unrealized losses in the portfolio resulted from changes in the interest rate environment, in particular, increases in market rates, particularly in the mid- to long-term part of the Treasury curve between December 31, 2025 and MarchJune 31,30, 2026.2026, as well as the sale of two residential mortgage-backed securities during the period. Management elected to sell these securities in an effort to realize gains, while providing cash flows that assisted in the reduction of wholesale brokered deposits. Net unrealized losses within the available-for-sale portfolio were recognized, net of tax, in accumulated other comprehensive loss.

As of MarchJune 31,30, 2026, 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.

The Company’s total loan portfolio decreasedincreased by $9.3$7.6 million, or 1.1%,0.9%, as of MarchJune 31,30, 2026, compared to December 31, 2025. 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 MarchJune 31,30, 2026:

As of MarchJune 31,30, 2026 and December 31, 2025, the composition of the non-residential commercial real estate loan portfolio was as follows:

As of MarchJune 31,30, 2026 and December 31, 2025, the composition of the construction, land development, and other land loans loan portfolio was as follows:

The following table classifies the Company's fixed and variable rate loans as of MarchJune 31,30, 2026 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:

The tables below summarize changes in the ACL on loans and leases for each of the most recent five quarters as of MarchJune 31,30, 2026:

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 MarchJune 31,30, 2026, the Company’s reserve for unfunded commitments, which is recorded in other liabilities in the Company’s consolidated balance sheets, totaled $0.3 million, compared to $0.4 million as of December 31, 2025.

Nonperforming assets at the end of the five most recent quarters as of MarchJune 31,30, 2026 were as follows:

Total deposits increaseddecreased toby $1,038.8$30.0 million, or 2.9%, during the six months ended June 30, 2026. Included in this decrease were $20.1 million asin wholesale brokered time deposits that matured and were not replaced. The remaining decrease was comprised of Marchreductions 31,of 2026, from $1,028.0$19.2 million asin ofretail Decembertime 31,deposits 2025,and an$4.0 increasemillion ofin 1.1%.non-interest-bearing Thedemand increasedeposits, waspartially dueoffset primarily toby an increase in interest-bearing demand deposits of $28.4$13.3 million,million. partially offset by a $4.7 millionThe decrease in noninterest-bearingwholesale depositsdeposits, andas awell $12.8as millionother decrease ininterest-bearing time deposits.deposits, assisted management’s efforts to reduce overall deposit costs, while maintaining an appropriate level of core funding. Core deposits, which exclude time deposits of $250 thousand or more and all wholesale brokered deposits, provide a relatively stable funding source that supports earning assets. Core deposits totaled $853.8$835.2 million, or 82.2%83.7% of total deposits, as of MarchJune 31,30, 2026, compared to $838.3 million, or 81.6% of total deposits, as of December 31, 2025.

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 MarchJune 31,30, 2026, other interest-bearing liabilities totaled 3.5%4.1% of total interest-bearing liabilities, compared to 2.5%1.2% as of December 31, 2025.

As of MarchJune 31,30, 2026, shareholders’ equity totaled $104.6$104.3 million, or 9.0%9.09% of total assets, compared to $105.6 million, or 9.1%9.15% of total assets, as of December 31, 2025. While earnings, net of dividends paid, increased shareholders’ equity during the threesix months ended MarchJune 31,30, 2026, the increase was fully offset by share repurchases, combined with an increase in the Company’s accumulated other comprehensive loss resulting from the increasing interest rate environment and the sale of investment securities in gain positions during the period. During both the threesix months ended MarchJune 31,30, 2026 and 2025, the Company declared cash dividends totaling $0.07$0.14 per share on its common stock.

In addition, during the threesix months ended MarchJune 31,30, 2026, the Company completed the repurchase of 146,500237,500 shares of its common stock at a weighted average price of $15.03$15.33 per share. The repurchases were completed under the Company’s previously announced share repurchase program. As of MarchJune 31,30, 2026, 1,638,3131,547,313 shares remained available for repurchase under the program. During the three months ended March 31, 2025, the Company repurchased 40,000 shares of its common stock at a weighted average price of $13.38 per share.

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 $277.6$133.2 million as of MarchJune 31,30, 2026 and $274.7 million as of December 31, 2025. Investment securities forecasted to mature or reprice in one year or less were estimated to be $28.5$22.6 million and $27.5 million as of MarchJune 31,30, 2026 and December 31, 2025, 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 3.83.6 years and 3.7 years as of MarchJune 31,30, 2026 and December 31, 2025, 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.