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

Net interest income was $10.9 million for the year ended December 31, 2024, and $12.1 million for the year ended December 31, 2023, and $11.9 million for the year ended December 31, 2022.2023. Total interest income increased from $12.7 million in 2022 to $13.3 million in 2023,2023 to $15.2 million in 2024, a 4.92%14.1% increase. Interest expense for 20232024 totaled $1.2$4.3 million, a 40.91%255.3% increase from $0.9$1.2 million in 2022.2023. Net loss for 2024 was $0.1 million, and net income for 2023 was $1.4 million, and for 2022 was $1.7 million.

General. For the year ended December 31, 2023,2024, the Company reported consolidated net loss of $0.1 million ($ (0.04) per basic and diluted loss per share) compared to consolidated net income of $1.4 million ($0.50 per basic and diluted earnings per share) compared to consolidated net income of $1.7 million ($0.61 per basic and diluted earnings per share) for the year ended December 31, 2022.2023. The $316,000$1.5 million decrease in the 20232024 consolidated net income as compared to 20222023 was primarily due to a $208,000$1.2 million decrease in net interest income, a $748,000 increase in the provision of credit loss allowance, a $206,000 decrease in gain on swap contract termination and a $304,000$253,000 increase in salarynoninterest and employee benefits expenseexpenses, that were partially offset by a $276,000 increase in net interest income and a $168,000$597,000 reduction in income tax expense for 2023.2024.

Annualized return on average assets was (0.03)% at December 31, 2024 compared to 0.40% at December 31, 2023 compared to 0.41% at December 31, 2022.2023. Annualized return on average equity was 8.35%(0.58)% and 7.26%8.35% at December 31, 20232024 and 2022,2023, respectively. The dividend payout ratio was -750% for December 31, 2024 and 80% for December 31, 2023 and 65% for December 31, 2022.2023. The equity to asset ratio was 5.49%5.0% and 4.21%5.5% at December 31, 20232024 and 2022,2023, respectively.

Consolidated net interest income for the year ended December 31, 20232024 was $12.1$10.9 million and $11.9$12.1 million for the year ended December 31, 2022.2023. Total interest income increased from $12.7 million in 2022 to $13.3 million in 2023,2023 to $15.2 million in 2024, a $625,000,$1.9 million, or 4.92%14.1% increase, primarily due to a $744,000$1.9 increase in interest and dividends on securities and a $122,000million increase in interest and fees on loans that were partially offset byand a $241,000$704,000 decreaseincrease in interest on deposits with banks and federal funds sold.sold that were partially offset by a $768,000 decrease in interest and dividends on securities.

Total interest expense increased from $0.9 million in 2022 to $1.2 million in 2023,2023 to $4.3 million in 2024, a $349,000$3.1 million, or 40.91%255.3% increase, primarily due to a $341,000$1.1 million increase in interest on short-term borrowings and a $42,000$2.0 million increase in interest on deposits that were partially offset by a $34,000 decrease in long-term borrowings.deposits. Net interest margin for the year ended December 31, 20232024 was 3.31%2.98% compared to 2.81%3.31% for the year ended December 31, 2022.2023.

During the year ended December 31, 2023,2024, the Company recognized a credit loss provision - loans of $0.1$0.8 million, compared to a release of $0.1 million for the year ended December 31, 2022.2023. The increase was primarily driven by a change$61,000 increase in net charge offs, a $28.2 million increase in the reservable balance of the loan portfolio mixand combineda with0.16% higherincrease in the current expected credit loss rates.percentage. The allowance for credit losses - loans was $2.2$2.8 million, or 1.22%1.4% of total loans at December 31, 2023,2024, compared to $2.2 million, or 1.16%1.2% of total loans at December 31, 2022.2023. At December 31, 2023,2024, the allowance for credit losses - loans equaled 409.5%788.6% of nonaccrual loans and loans past due loansby 90+ days compared to 434.0%409.5% at December 31, 2022.2023. During the year ended December 31, 2023,2024, the Company recorded net charge offs of $0.1$0.2 million compared to net charge offs of $0.2$0.1 million during the year ended December 31, 2022.2023.

Noninterest Income. Noninterest income includes service charges on deposit accounts, other fees and commissions, net gains/losses on investment securities sold,and income on life insurance policies and gain on unwind of derivative contracts.policies. Noninterest income decreasedincreased from $1.4 million in 2022 to $1.1 million in 2023,2023 to $1.2 million in 2024, a $254,000,$57,000, or 18.76%5.2% decrease.increase. The decreaseincrease was primarily due to a $0.2$52,000 million gain on unwind of derivative swap contracts that was recognized in 2022 and a $54,000 declineincrease in other fees and commissions earned in 20232024 compared to 2022.2023.

Income Taxes. During the year ended December 31, 2023,2024, the Company recorded an income tax expensebenefit of $72,000,$525,000, compared to $240,000an expense of $72,000 for the year ended December 31, 2022,2023, a $168,000$597,000 or 70.16%829.2% decrease.decrease in expense. This decrease was primarily due to $484,000,$2.1 million, or 24.41%142.5% lower income before taxes in 2024 compared to 2023.

Total assets decreasedincreased by $29.6$7.1 million, or 7.77%2.0% to $359.0 million at December 31, 2024, compared to $351.8 million at December 31, 2023, compared to $381.4 million at December 31, 2022.2023. The decreaseincrease was primarily a result of decreasesincreases in interest-bearing deposits in other financial institutions,institutions inand the loan portfolioportfolio, andoffset by declines in the investment securities available for sale portfolio.

Cash and cash equivalents at December 31, 20232024 were $15.2$24.5 million compared to $30.1$15.2 million at December 31, 2022.2023. Loans, net at December 31, 20232024 were $174.2$202.4 million compared to $184.3$174.2 million at December 31, 2022,2023, a decrease of $10.1$28.2 million or 5.50%.16.2%. At year-end 2023,2024, investment securities had decreased $4.7$31.5 million, or 3.27%22.6% to $139.4$107.9 million compared to year end 2022.2023. At December 31, 2023,2024, total deposits were $300.1$309.2 million compared to $362.9$300.1 million at the end of 2022,2023, a 17.32%3.0% decreaseincrease during the period. Total borrowings were $30.0 million at December 31, 20232024 comparedunchanged to $0 atfrom December 31, 2022.2023.

Cash and cash equivalents decreasedincreased by $14.9$9.2 million primarily due to a $62.9$9.1 million increase in deposit balances and a $30.6 million decrease in depositinvestment balancessecurities that was partially offset by a $30.0$28.9 million increase in borrowings and a $10.1 million decrease in loans net of deferred fees and costs and a $4.7 million decrease in investment securities.costs.

The investment portfolio consists primarily of U.S. Agency mortgage-backed securities, U.S. Government agency securities, and municipal obligations and U.S. Treasury securities.obligations. The income from state and municipal obligations may be taxable or tax-exempt from federal and state income tax. State and municipal obligations from the State of Maryland are exempt from federal and state income taxes. We use the investment portfolio as a source of both liquidity and earnings. Management continuously evaluates investment options that will produce income without assuming significant credit or interest rate risk and looks for opportunities to use liquidity from maturing investments to reduce our use of high-cost time deposits and borrowed funds.

During 2023,2024, the Company’s investment securities portfolio totaled $139.4$107.9 million, a $4.7$31.5 million, or 3.27%22.58% decrease from $144.1$139.4 million at December 31, 2022.2023. This decrease was primarily driven by $18.5$30.5 million of paydowns and redemptions of investment securities, offset by $9.7 million of purchases of available for sale securities and a $4.0$0.9 million decreaseincrease in the unrealized loss on available for sale securities during 2023.2024.

At December 31, 2023,2024, the Company had municipal securities from seveneight single issuers that, individually, were more than 10% of stockholders’ equity, which totaled $28.6$30.4 million.

The Company’s net loan receivables decreasedincreased by $10.1$28.2 million to $202.4 million at December 31, 2024 from $174.2 million at December 31, 2023 from $184.3 million at December 31, 2022 primarily due to $35.3$67.4 million in new originations outpacing $39.2 million in pay downs outpacing $25.2 million in new originations.downs. This change in the composition of the loan portfolio resulted primarily from a $15.2$4.2 million increase in construction and land loans, a $12.1 million increase in single-family loans, a $9.5 million increase in commercial real estate loans, and a $5.9 million increase in commercial and industrial loans, offset by a $3.2 million decrease in automobile loans and a $3.7 million decrease in commercial real estate loans.

The Bank experienced a $29,000$167,000 or 5.8%31.7% increasedecrease in the total nonperforming loans in 2023.2024. The following table presents details of our nonperforming loans and nonperforming assets, as these asset quality metrics are evaluated by management, for the years indicated:

Nonperforming assets, which consist of nonaccrual loans, loans to borrowers experiencing financial difficulty, accruing loans past due 90 days or more, and real estate acquired through foreclosure, remaineddecreased essentiallyto unchanged$0.4 million at December 31, 2024 from $0.5 million at December 31, 2023 and December 31, 2022.2023. Nonperforming assets represented 0.15%0.10% of total assets at December 31, 2023,2024, compared to 0.13%0.15% at December 31, 2022.2023. Management has worked diligently to identify borrowers that may be facing difficulties in order to restructure terms where appropriate, secure additional collateral or pursue foreclosure and other secondary sources of repayment.

Credit risk is the risk of loss arising from the inability of a borrower to meet his or her obligations and entails both general risks, which are inherent in the process of lending, and risks specific to individual borrowers. Credit risk is mitigated through portfolio diversification, which limits exposure to any single customer, industry, or collateral type. Residential mortgage and home equity loans and lines generally have the lowest credit loss experience. Loans secured by personal property, such as autoautomobile loans, generally experience medium credit losses. Unsecured loan products, such as personal revolving credit, have the highest credit loss experience and for that reason, the Bank has chosen not to engage in a significant amount of this type of lending. Credit risk in commercial lending can vary significantly, as losses as a percentage of outstanding loans can shift widely during economic cycles and are particularly sensitive to changing economic conditions. Generally, improving economic conditions result in improved operating results on the part of commercial customers, enhancing their ability to meet their particular debt service requirements. Improvements, if any, in operating cash flows can be offset by the impact of rising interest rates that may occur during improved economic times. Inconsistent economic conditions may have an adverse effect on the operating results of commercial customers, reducing their ability to meet debt service obligations.

Total deposits were $300.1$309.2 million at December 31, 2023,2024, aan decreaseincrease of $62.9$9.1 million, or 17.3%,3.0%, when compared to the $362.9$300.1 million recorded at December 31, 2022.2023. Within the deposit base, noninterest-bearing deposit balances decreased $26.3$16.2 million, or 18.4%,13.8%, interest-bearing checking account balances decreased $11.5$3.1 million, or 28.7%,10.8%, interest-bearing savings account balances decreased by $20.0$17.7 million, or 17.7%,19.0%, money market balances increased $11.0$54.7 million, or 69.9%,203.7%, and time deposit balances decreased by $16.1$8.6 million, or 31.7%,24.9%, when compared to the amounts at December 31, 2022.2023.

The Bank uses borrowings from the Federal Home Loan Bank (“FHLB”) of Atlanta, of which it is a member, to supplement funding from deposits. The Bank’s total credit availability is $88.8$92.1 million at December 31, 20232024 and it may draw $29.4$52.3 million which is secured by a floating lien on the Bank’s residential first mortgage loans.loans and pledged securities.

As of December 31, 2023,2024, the Bank was permitted to draw on a line of credit from the Federal Reserve BankBank’s underdiscount the Bank Term Funding Program (“BTFP”).window. Credit is available up to the total value of investment securities pledged as collateral. Borrowings under the line are secured by investment securities of $13.2$45.4 million at December 31, 20232024 and thethere were no outstanding loan balance is $10.0 million.balances.

Stockholders’ equity increaseddecreased to $17.8 million at December 31, 2024, compared to $19.3 million at December 31, 2023, compared to $16.1 million at December 31, 2022.2023. The $3.3$1.5 million, or 20.37%,7.8%, increasedecrease for the year ended December 31, 2023,2024, resulted primarily from a $2.9$622,000 million decreaseincrease in net unrealized losses on the available for sale bond portfolio, $1.4a million$112,000 net loss and $865,000 in netdividends incomepaid andthat $120,000were partially offset by $91,000 stock issuances under the dividend reinvestment program that were partially offset by $1.1 million in dividends paid.program. The book value of the Company’s common stock was $6.14 at December 31, 2024 and $6.70 at December 31, 2023 and $5.60 at December 31, 2022.2023.

Our liquidity is derived primarily from our deposit base, scheduled amortization and prepayments of loans and investment securities, funds provided by operations and capital. Additionally, liquidity is provided through our portfolios of cash and interest-bearing deposits in other banks, federal funds sold and securities available for sale. While scheduled principal repayments on loans are a relatively predictable source of funds, deposit flows and loan prepayments are greatly influenced by market interest rates, economic conditions, and rates offered by the Bank’s competitors.

The Bank also has external sources of funds through the FHLB, and Federal Reserve Discount Window and newly formed Bank Term Funding Program which can be drawn upon when required. The Bank has a line of credit totaling approximately $88.8$92.1 million with the FHLB of which $68.8$62.1 million was available to be drawn on December 31, 2023,2024, subject to qualifying loans and securities pledged as collateral. The lines of credit with the Federal Reserve are limited to the amount of qualifying collateral pledged.pledged which totaled $33.4 million at December 31, 2024.

To further aid in managing liquidity, the Bank’s Board of Directors has approved and formed an Asset/Liability Management Committee (“ALCO”) and Investment Committee to review and discuss recommendations for the use of available cash and to maintain an investment portfolio. By limiting the maturity of securities and maintaining a conservative investment posture, management can rely on the investment portfolio to help meet any short-term funding needs.

Loan commitments, lines of credit, and letters of credit are made on the same terms, including collateral, as outstanding loans. As of December 31, 2023,2024, the Bank has accrued $473,000$584,000 as a reserve for credit losses on unfunded commitments, aan decreaseincrease of $4,000$111,000 from the $477,000$473,000 accrued as of December 31, 2022.2023. Unfunded commitments related to these financial instruments with off balance sheet risk, are included in “other liabilities”. The additional provision amount is included in ‘other expense’.

Our primary market risk is interest rate fluctuation. Interest rate risk results primarily from the traditional banking activities in which the Bank engages, such as gathering deposits and extending loans. Many factors, including economic and financial conditions, movements in interest rates and consumer preferences affect the difference between the interest earned on our assets and the interest paid on liabilities. Our interest rate risk represents the level of exposure we have to fluctuations in interest rates and is primarily measured as the change in earnings and the theoretical market value of equity that results from changes in interest rates. The InvestmentAsset Liability Committee (“ALCO”) oversees our management of interest rate risk. The objective of the management of interest rate risk is to maximize stockholder value, enhance profitability and increase capital, serve customer and community needs, and protect usthe Company from any adverse material financial consequences associated with changes in interest rate risk.

Interest rate risk is that risk to earnings or capital arising from movement of interest rates. It arises from differences between the timing of rate changes and the timing of cash flows (repricing risk); from changing rate relationships across yield curves that affect bank activities (basis risk); from changing rate relationships across the spectrum of maturities (yield curve risk); and from interest rate related options embedded in certain bank products (option risk). Changes in interest rates may also affect a bank’s underlying economic value. The value of a bank’s assets, liabilities, and interest-rate related, off-balance sheet contracts isare affected by a change in rates because they represent the present value of future cash flows, and in some cases the cash flows themselves, is changed.

We believe that accepting some level of interest rate risk is necessary in order to achieve realistic profit goals. Management and the Board of Directors have chosen an interest rate risk profile that is consistent with our strategic business plan.

The Company’s Board of Directors has established a comprehensive interest rate risk management policy, which is administered by theour Investment Committee.ALCO. The policy establishes limits on risk, which are quantitative measures of the percentage change in net interest income (a measure of net interest income at risk) and the fair value of equity capital (a measure of economic value of equity or “EVE” at risk) resulting from a hypothetical change in U.S. Treasury interest rates. We measure the potential adverse impacts that changing interest rates may have on our short-term earnings, long-term value, and liquidity by employing simulation analysis through the use of computer modeling. The simulation model captures optionality factors such as call features and interest rate caps and floors embedded in investment and loan portfolio contracts. As with any method of gauging interest rate risk, there are certain shortcomings inherent in the interest rate modeling methodology we employ. When interest rates change, actual movements in different categories of interest-earning assets and interest-bearing liabilities, loan prepayments, and withdrawals of time and other deposits, may deviate significantly from assumptions used in the model. Finally, the methodology does not measure or reflect the impact that higher rates may have on adjustable-rate loan customers’ ability to service their debts, or the impact of rate changes on demand for loan and deposit products.

We prepare a current base case and up to eight alternative simulations at least once a quarter and report the analysis to the ALCO and Board of Directors. In addition, more frequent forecasts may beare produced when the direction or degree of change in interest rates are particularly uncertain to evaluate the impact of balance sheet strategies or when other business conditions or strategy analysis so dictate.

The statement of condition is subject to quarterly testing for up to eight alternative interest rate shock possibilities to indicate the inherent interest rate risk. Average interest rates are shocked by +/ - 100, 200, 300, and 400 basis points (“bp”), although we may elect not to use particular scenarios that we determine are impractical in the current rate environment. It is our goal to structure the balance sheet so that net interest-earnings at risk over a twelve-month12-month period and the economic value of equity at risk do not exceed policy guidelines at the various interest rate shock levels.

At December 31, 2023,2024, wethe werenet interest income simulation analysis indicated that the Bank is in an asset sensitive position.position Managementin continuouslyall strives to reduce higher costing fixedfalling rate fundingscenarios instruments,and while increasing assets that are more fluidis in theira repricing.liability sensitive position in all rising rate scenarios. Overall, falling rate scenarios indicate a fairly balanced profile. An asset sensitive position, theoretically, is favorable in a rising rate environment since more assets than liabilities will repricere-price in a given time frame as interest rates rise. Similarly, a liability sensitive position, theoretically, is favorable in a declining interest rate environment since more liabilities than assets will repricere-price in a given time frame as interest rates decline. Management works to maintain a consistent spread between yields on assets and costs of deposits and borrowings, regardless of the direction of interest rates.

As shown above, over a 12-month modeling period, measures of net interest income at risk in the down scenarios were more favorable while net interest at risk in the up scenarios were slightly less favorable atin up-rate scenarios but more favorable in down-rate scenarios on December 31, 2024 than on December 31, 2023 thanover ata December12-month 31,modeling 2022.period. AllThese measures remained within prescribed policy limits.limits in the up and down interest rate scenarios.

Our consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP) and follow general practices within the industries in which we operate. All intercompany transactions are eliminated in consolidation and certain reclassifications are made when necessarynecessary, in order to conform the previous year’s financial statements to the current year’s presentation. ApplicationThe preparation of thesefinancial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates orand judgmentsassumptions about future events that affect the amounts reported in the financial statements and accompanying notes. TheseSince future events and their effects cannot be determined with absolute certainty, the determination of estimates orrequires judgmentsthe reflectexercise management’sof viewjudgment. Management has used the best information available to make the estimations necessary to value the related assets and liabilities based on historical experience and on various assumptions which are believed to be reasonable under the circumstances. Actual results could differ from those estimates, and such differences may be material to the financial statements. The Company reevaluates these variables as facts and circumstances change. Historically, actual results have not differed significantly from the Company’s estimates. The following is a summary of the more judgmental accounting estimates and principles involved in the preparation of the Company’s financial statements, including the identification of the most appropriateimportant mannervariables in whichthe toestimation record and report our overall financial performance. Because these estimates or judgments are based on current circumstances, they may change over time or prove to be inaccurate based on actual experience. As such, changes in these estimates, judgments, and/or assumptions may have a significant impact on our financial statements. All accounting policies are important, and all policies described in Part II, Item 8, Financial Statements and Supplementary Data, Note 1, should be reviewed for a greater understanding of how our financial performance is recorded and reported.process:

Other significant accounting policies are presented in Note 1 to the consolidated financial statements that appear elsewhere in this Annual Report on Form 10K.10-K. We have not substantively changed any aspect of our overall approach in the application of the foregoing policies.policy.

This report, including information included or incorporated by reference in this report, contains statements which constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements may relate to, among other matters, the financial condition, results of operations, plans, objectives, future performance, and business of our company. Forward-looking statements are based on many assumptions and estimates and are not guarantees of future performance. Our actual results may differ materially from those anticipated in any forward-looking statements, as they will depend on many factors about which we are unsure, including many factors which are beyond our control. The words “may,” “approximately,” “is likely,” “would,” “could,” “should,” “will,” “expect,” “anticipate,” “predict,” “project,” “potential,” “continue,” “assume,” “believe,” “intend,” “plan,” “forecast,” “goal,” and “estimate,” as well as similar expressions, are meant to identify such forward-looking statements. Potential risks and uncertainties that could cause our actual results to differ materially from those anticipated in our forward-looking statements include, without limitation, those described under the heading “Risk Factors” in our Annual Report on in Form 10-K, for the year ended December 31, 2004 as filed with the U.S. Securities and Exchange Commission (the “SEC”) on April 28, 2025, and the following:

The following discussion describes our results of operations for the three and sixnine months ended JuneSeptember 30, 2025, as compared to the three and sixnine months ended JuneSeptember 30, 2024 and analyzes our financial condition as of JuneSeptember 30, 2025 as compared to December 31, 2024. Like most community banks, we derive most of our income from interest we receive on our loans and investments. Our primary sources of funds for making these loans and investments are our deposits and borrowings, on which we pay interest. Consequently, one of the key measures of our success is our amount of net interest income, or the difference between the income on our interest-earning assets, such as loans and investments, and the expense on our interest-bearing liabilities, such as deposits and borrowings. Another key measure is the spread between the yield we earn on our interest-earning assets and the rate we pay on our interest-bearing liabilities. There are risks inherent in all loans, so we maintain an allowance for credit losses to absorb our estimate of expected credit losses on existing loans that may become uncollectible. We establish and maintain this allowance by recording a provision for or release of credit losses against our earnings. In the following section, we have included a detailed discussion of this process.

Effect of Governmental Monetary Policies. Our earnings are affected by domestic economic conditions and the monetary and fiscal policies of the United States government and its agencies. The Federal Reserve’s monetary policies have had, and are likely to continue to have, an important impact on the operating results of commercial banks through its power to implement national monetary policy in order, among other things, to curb inflation or combat a recession. The monetary policies of the Federal Reserve have major effects upon the levels of bank loans, investments, deposits and borrowings through its open market operations in United States government securities and through its regulation of the discount rate on borrowings of member banks and the reserve requirements against member banks’ deposits. It is not possible to predict the nature or impact of future changes in monetary and fiscal policies. TheIn targetSeptember rate2024 rangethe ofFederal federalReserve fundsBank wasbegan 5.25%lowering -interest 5.50%rates fromin July 26, 2023,response to Septembereasing 17,inflation 2024.and Onslowing Septembergrowth. 18,While 2024,lower therates FOMCcan reducedsupport theloan targetdemand, rangethey ofmay federalalso fundscompress bynet 0.50%interest margins. The Federal Reserve has announced ending balance sheet reduction, which may contribute to 4.75%some -funding 5.00%.and Theremarket were two additional 25 basis point cuts to the target rate range of federal funds during the fourth quarter of 2024, lowering the target rate range to 4.25% - 4.50% at June 30, 2025, compared to 5.25% - 5.50% at June 30, 2024.volatility. Changes in market interest rates can have a significant impact on the level of income and expense recorded on a large portion of our interest-earning assets and interest-bearing liabilities, and on the market value of all interest-earning assets, other than those possessing a short term to maturity. Furthermore, changes in market interest rates can have a significant impact on the level of mortgage originations and related mortgage banking income.

COMPARISON OF RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNESEPTEMBER 30, 2025, TO THE THREE MONTHS ENDED JUNESEPTEMBER 30, 2024

Glen Burnie Bancorp, a Maryland corporation (the “Company”), through its subsidiary, The Bank of Glen Burnie, a Maryland banking corporation (the “Bank”), operates a commercial bank with six offices in Anne Arundel County Maryland. The Company reported a net lossincome attributable to common stockholders for the three-month period ended JuneSeptember 30, 2025, of -$212,000,$125,000, or $(0.07)$0.04 per basic and diluted share compared to a net lossincome of $204,000,$129,000, or $(0.07)$0.04 per basic and diluted share for the three-month period JuneSeptember 30, 2024. When compared to the secondthird quarter of 2024, there were a number of offsetting differences that resulted in a net loss increasedecrease of $8,000.$4,000.

Net interest income decreasedincreased $50,000,$10,000, or 1.8%,0.4%, to $2.7$2.8 million for the three months ended JuneSeptember 30, 2025, from $2.8 million for the three months ended JuneSeptember 30, 2024. Our net interest margin, on a taxable equivalent basis, was 3.13%3.24% for the three months ended JuneSeptember 30, 2025, compared to 3.10%3.14% for the three months ended JuneSeptember 30, 2024. Average earning assets were $359.3$354.9 million for the three months ended JuneSeptember 30, 2025, and $370.9$366.2 million in the same period of 2024.

The total allowance for credit losses (ACL) is composed of two parts: the ACL for loans and the ACL for unfunded commitments. The ACL for loans is further composed of the allowance for individually assessed loans, the allowance for collectively assessed expected losses, the allowance for collectively assessed qualitative adjustments, and the allowance for collectively assessed additional allowance. For the secondthird quarter of 2025, the provision for credit loss allowance was $79,000$44,000 comprised of $57,000$74,000 releaseprovision offor ACL for loans and $136,000$30,000 provisionrelease of ACL for unfunded commitments. This compared to a provision for credit loss allowance of $600,000$105,000 for the secondthird quarter of 2024 comprised of $526,000$78,000 provision of ACL for loans and $74,000$27,000 provision of ACL for unfunded commitments.

Non-interest income during the three-month period ended JuneSeptember 30, 20252025, was $220,000,$571,000, a $21,000$217,000 decreaseincrease from $241,000$354,000 during the same period in 2024. The decreaseincrease was primarily related to mortgage commissions from VAWM in the amount of $192,000 and increased other fees and commissions whichof decreased$24,000, $20,000and largelya dueslight toincrease lowerin levelsservice charges of ATM usage and interchange fees.$1,000.

Non-interest expense increased $432,000$280,000 during the three months ended JuneSeptember 30, 2025 to $3.3 million compared to $2.8$3.0 million during the secondthird quarter of 2024 primarily due to the following:

In accordance with regulatory requirements, the Company reports comprehensive income (loss) in its financial statements. Comprehensive income (loss) consists of the Company’s net income (loss), adjusted for unrealized gains and losses on the Bank’s portfolio of investment securities. For the secondthird quarter of 2025, the comprehensive loss,income, net of tax, totaled $248,000$1.8 million compared to a comprehensive lossincome in the amount of $400,000$3.8 million for the same period in 2024. The $152,000$2.2 million decrease in comprehensive lossincome was due to a $160,000$2.2 million net of tax decrease in unrealized losses on securities for the quarter ended JuneSeptember 30, 2025, compared to the amount of after-tax unrealized losses on securities for the comparable prior year period, and to the increasedecrease of $8,000$4,000 in reported net lossincome for the secondthird quarter of 2025 over the secondthird quarter of 2024.

COMPARISON OF RESULTS OF OPERATIONS FOR THE SIXNINE MONTHS ENDED JUNESEPTEMBER 30, 2025, TO THE SIXNINE MONTHS ENDED JUNESEPTEMBER 30,2024

Our net lossincome attributable to common stockholders for the six-monthnine-month period ended JuneSeptember 30, 2025, of $59,000,$66,000, or $0.02 per basic and diluted share, compared to a net loss of $72,000, or $(0.02) per basic and diluted share compared to a net loss of $201,000, or $(0.07) per basic and diluted share for the six-monthnine-month period ended JuneSeptember 30, 2024. The decrease in net loss between the two periods is primarily due to the factors noted below.

Net interest income decreased $58,000,$48,000, or 1.1%,0.6%, to $5.3$8.1 million for the sixnine months ended JuneSeptember 30, 2025, from $5.4$8.2 million for the sixnine months ended JuneSeptember 30, 2024. Our net interest margin, on a taxable equivalent basis, was 3.06%3.12% for the sixnine months ended JuneSeptember 30, 2025, compared to 3.02%3.06% for the sixnine months ended JuneSeptember 30, 2024. Average earning assets were $357.7$356.8 million for the sixnine months ended JuneSeptember 30, 2025, and $366.5$366.4 million in the same period of 2024.

The following tables set forth, for the periods indicated, information regarding the average balances of interest-earning assets and interest-bearing liabilities, the amount of interest income and interest expenseexpense, and the resulting yields on average interest-earning assets and rates paid on average interest-bearing liabilities.

The total allowance for credit losses (ACL) is composed of two parts: The ACL for loans and the ACL for unfunded commitments. The ACL for loans is further composed of the allowance for individually assessed loans, the allowance for collectively assessed expected losses, the allowance for collectively assessed qualitative adjustments, and the allowance for collectively assessed additional allowance. For the sixnine months ended JuneSeptember 30, 2025, the release for credit loss allowance was $541,000$498,000 comprised of $203,000$128,000 release of ACL for loans and $338,000$369,000 release of ACL for unfunded commitments. This compared to a provision for credit loss allowance of $792,000$897,000 for the sixnine months ended JuneSeptember 30,2024 comprised of $694,000$773,000 provision offor ACL for loans and $97,000$124,000 provision offor ACL for unfunded commitments.

Non-interest income decreasedincreased $46,000$171,000 during the six-monthnine-month period ended JuneSeptember 30, 2025, to $425,000$996,000 from $471,000$825,000 during the same period in 2024. The $46,000$171,000 decreaseincrease was primarily related to $192,000 in mortgage commissions from VAWM, offset by lower service charges of $7,000 and lower other fees and commissions which decreased $38,000 largely due to lower levels of ATM and usage and interchange fees plus a reduction of services charges on deposit accounts of $8,000.$14,000.

Non-interest expense increased $858,000$1.1 million during the six-monthsnine-months ended JuneSeptember 30, 2025, to $6.5$9.8 million compared to $5.7$8.6 million for the six-monthnine-month period ended JuneSeptember 30, 2024, primarily due to the following:

In accordance with regulatory requirements, the Company reports comprehensive income (loss) in its financial statements. Comprehensive income (loss) consists of the Company’s net income (loss), adjusted for unrealized gains and losses on the Bank’s portfolio of investment securities. For the first sixnine months of 2025, the comprehensive income, net of tax, totaled $1.1$2.9 million compared to a comprehensive lossincome in the amount of $1.3$2.6 million for the same period in 2024. The $2.5 million$285,000 improvement between the two periods was due to a $2.3 million$147,000 net of tax increase in unrealized incomelosses on securities for the first sixnine months of 2025, compared to the amount of after-tax unrealized losses on securities for the comparable prior year periodperiod, and to the decreaseincrease of $142,000$138,000 in reported net lossincome for the first sixnine months of 2025 over the same period in 2024.

Total assets were $351.0$351.8 million on JuneSeptember 30, 2025, a decrease of $8.2$7.2 million from December 31, 2024. Cash and cash equivalents decreased by $11.8$12.2 million or 48.2%,50%, during the first sixnine months of 2025. The Bank’s loan portfolio increased by $8.1$10.1 million or 4.0%,4.9%, and investment securities available for sale declined by $3.4$5.2 million or 3.1%4.8% over the same period. The Company’s allowance for credit losses was $2.59$2.57 million as of JuneSeptember 30, 2025, compared to $2.84 million at December 31, 2024, a decrease of $252,000$271,000, or 8.9%.9.5%. Total deposits increased $8.1$19.9 million, or 2.6%,6.4%, during the first sixnine months of 2025 and short-term borrowings decreased by $17.0 million to $13.0 million on June 30, 2025, from $30.0 million atas yearthe endCompany 2024.paid off all borrowings by September 30, 2025. Stockholder’s equity was $18.9$20.7 million on JuneSeptember 30, 2025, a $1.1$2.91 million or 6.2%16.3% increase, as compared to $17.8 million on December 31, 2024. The increase was primarily due to unrealized losses, net of taxes, on securities available for sale amounting to $17.8$16.2 million on JuneSeptember 30, 2025, compared to $19.0 million at December 31, 2024.

Return on average assets for the three-and six-monthnine-month periods ended JuneSeptember 30, 2025, was -0.24%0.14% and -0.03%0.02% compared to -0.22%0.14% and -0.11%-0.03% for the three- and six-monthnine-month periods ended JuneSeptember 30, 2024. Return on average equity for the three- and six-monthnine-month periods ended JuneSeptember 30, 2025, was -4.30%2.64% and -0.61%-0.47% compared to -4.72%and-2.75% -2.22%and -0.52% for the three- and six-monthnine-month periods ended JuneSeptember 30, 2024.

The book value per share of Bancorp’s common stock was $6.53$7.10 on JuneSeptember 30, 2025, as compared to $6.14 per share on December 31, 2024. The increase was the result of lower unrealized losses on the Company’s available for sale securities of $17.8$16.2 million at JuneSeptember 30, 20252025, compared to $19.0 million at December 31, 2024.

As of JuneSeptember 30, 2025, the Bank remained above all “well-capitalized” regulatory requirement levels. The Company has strong liquidity and capital positions that provide ample capacity for future growth. The Bank’s total regulatory capital to risk weighted assets was 16.1%15.96% on JuneSeptember 30, 2025, as compared to 16.4%16.40% on December 31, 2024. The Bank’s tier 1 risk-based capital ratio was 14.9%14.82% aton JuneSeptember 30, 2025, compared to 15.2%15.15% aton December 31, 2024. The Bank’s leverage ratio was 9.67% on September 30, 2025, compared to 9.97% on December 31, 2024.

At JuneSeptember 30, 2025, impaired loans totaled $2.4$2.5 million, net of specific reserves. Included in the impaired loans total was $1.1$1.2 million in loans classified as nonaccrual loans. At JuneSeptember 30, 2025, impaired loans included restructured loans to borrowers with financial difficulty totaling $24,000.$23,000. Borrowers under all other restructured loans are paying in accordance with the terms of the modified loan agreement and have been placed on accrual status after a period of performance with the restructured terms.

Deposits on JuneSeptember 30, 2025, and December 31, 2024, were as follows:

Future minimum payments of the Bank’s operating leases as of JuneSeptember 30, 2025 are as follows:

Pension and Profit SharingProfit-Sharing Plans. The Bank has a defined contribution retirement plan qualifying under Section 401(k) of the Internal Revenue Code that is funded through a profit sharingprofit-sharing agreement and voluntary employee contributions. The plan provides for discretionary employer matching contributions to be determined annually by the Board of Directors. The plan covers substantially all employees.

For the sixnine months ended JuneSeptember 30, 2025, the Bank accrued $257,000$382,000 for its projected 401(k) match contribution as well as other profit sharingprofit-sharing benefits.

The statement of condition is subject to quarterly testing for alternative interest rate shock possibilities to indicate the inherent interest rate risk. Average interest rates are shocked by +/ - 100, 200, 300, and 400 basis points (“bp”), although we may elect not to use particular scenarios that we determine are impractical in the current rate environment. It is our goal to structure the balance sheet so that net interest-earnings at risk over a 12-month period and the economic value of equity at risk do not exceed policy guidelines at the various interest rate shock levels.

At JuneSeptember 30, 2025, the simulation analysis indicated that the Bank is in a modest asset sensitive position in falling rate scenarios but is liability sensitive in the rising rate shock scenarios. Management strives to optimize the level of higher costing fixed rate funding instruments, while seeking to increase assets that are more fluid in their repricing. An asset sensitive position, theoretically, is favorable in a rising rate environment since more assets than liabilities will re-price in a given time frame as interest rates rise. Similarly, a liability sensitive position, theoretically, is favorable in a declining interest rate environment since more liabilities than assets will re-price in a given time frame as interest rates decline. Management works to maintain a consistent spread between yields on assets and costs of deposits and borrowings, regardless of the direction of interest rates.

As shown above, measures of net interest income at risk were slightly more favorable in down-rate scenarios and less favorable in up-rate scenarios on JuneSeptember 30, 2025 than on JuneSeptember 30, 2024 over a 12-month modeling period. These measures remained within prescribed policy limits in the up and down interest rate scenarios.

The following table sets forth the Company’s interest-rate sensitivity at JuneSeptember 30, 2025.

The Company currently has no business other than that ofowns the Bank and a residential mortgage banking and brokerage company and does not currently have any material funding commitments. The Company’s principal sources of liquidity are cash on hand and dividends received from the Bank. The Bank is subject to various regulatory restrictions on the payment of dividends.dividends and currently must receive prior approval to pay dividends to the Company due to a limit on current and two prior years’ retained earnings.

The Bank’s principal sources of funds for investments and operations are net income, deposits from its primary market area, principal and interest payments on loans, interest received on investment securities and proceeds from maturing investment securities. Its principal funding commitments are for the origination or purchase of loansloans, deposit withdrawals, and the payment of maturing deposits. Deposits are considered a primary source of funds supporting the Bank’s lending and investment activities.

The Bank’s most liquid assets are cash and cash equivalents, which are cash on hand, amounts due from financial institutions, federal funds sold, certificates of deposit with other financial institutions that have an original maturity of three months or less and money market mutual funds. The levels of such assets are dependent on the Bank’s operating, financing, and investment activities at any given time. The variations in levels of cash and cash equivalents are influenced by deposit flows and anticipated future deposit flows. The Bank’s cash and cash equivalents (cash due from banks, interest-bearing deposits in other financial institutions, and federal funds sold), as of JuneSeptember 30, 2025, totaled $12.7$12.2 million, a decrease of $11.8$12.2 million, or 48.2%50.0% from $24.5 million at December 31, 2024.

As of JuneSeptember 30, 2025, the Bank was permitted to draw on an $89.5$87.7 million line of credit from the FHLB of Atlanta. Short-termThere were no short-term borrowings outstanding under the line totaledon $13.0 million and $30.0 million at JuneSeptember 30, 2025 andas compared to $30 million of borrowings on the line at December 31, 2024, respectively.2024. Borrowings under the line are secured by a floating lien on the Bank’s residential mortgage loans and investment securities. As of JuneSeptember 30, 20252025, and December 31, 2024, the Bank had $0 in outstanding short-term borrowings from the Federal Reserve Bank (“FRB”) discount window. Borrowings under the line are secured by qualifying collateral.

In addition, the Bank has two unsecured federal funds lines of credit in the amount of $9.0 million and $8.0 million, respectively, of which $0 was outstanding as of JuneSeptember 30, 2025.

The Company’s stockholders’ equity increased $1.1$2.9 million, or 6.3%16.3% during the six-monthnine-month period ended JuneSeptember 30, 2025. The increase in equity was primarily due to a $1.2$2.8 million decrease in the after-tax net unrealized holding loss on securities available for sale andsale, the $212,000$66,000 net lossincome in the nine-month period, and $17,000 of stock- based compensation expense during the nine-month period ended JuneSeptember 30, 2025.

The regulations impose several sets of capital adequacy requirements: minimum leverage rules, which require bank holding companies and banks to maintain a specified minimum ratio of capital to total assets, and risk-based capital rules, which require the maintenance of specified minimum ratios of capital to “risk-weighted” assets. In addition, there are requirements to maintain a capital conservation buffer which raised the minimum required common equity Tier 1 capital ratio to 7.00%, the Tier 1 capital ratio to 8.50% and the total capital ratio to 10.50%. At JuneSeptember 30, 2025, the Bank was in full compliance with these guidelines with a Tier 1 leverage ratio of 9.59%,9.67%, a Tier 1 risk-based capital ratio of 14.91%,14.82%, a common equity Tier 1 risk-based capital ratio of 14.91%,14.82%, and a total risk-based capital ratio of 16.06%.15.96%.

The Company’s capital amounts and ratios at JuneSeptember 30, 2025 and December 31, 2024 were as follows: