Fifth District Bancorp, Inc.

Previous wording

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

Current wording

Allowance for Credit Losses. Allowance for credit losses represents management’s estimate of lifetime credit losses in loans as of the balance sheet date using relevant available information, from both internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

Total Assets. Total assets were $527.3 million at December 31, 2024, an increase of $46.5 million, or 9.7%, compared to $480.8 million at December 31, 2023. This increase is primarily due to $18.6 million increase in cash and cash equivalents, $25.1 million increase in investment securities available-for-sale, and $2.3 million increase in loans receivable, net.

Current wording

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

Previous wording

Investment Securities Available-For-Sale. Investment securities available-for-sale increased $25.1 million, or 36.9%, to $93.0 million at December 31, 2024 from $67.9 million at December 31, 2023. Securities purchased totaled $54.4 million, securities sold totaled $18.7 million, and calls, maturities, and repayments totaled $9.4 million.

Current wording

Investment Securities Available-For-Sale. Investment securities available-for-sale increased $6.1 million, or 6.5%, to $99.1 million at December 31, 2025 from $93.0 million at December 31, 2024. Securities purchased totaled $18.3 million, and calls, maturities, and repayments totaled $15.9 million. Adding to the increase was a fair market value adjustment of $3.8 million

Previous wording

Loans Receivable, Net. Loans receivable, net, increased by $2.3 million, or 0.6%, to $367.3 million at December 31, 2024 from $365.0 million at December 31, 2023. Loan originations were $38.9 million and loan repayments totaled $37.7 million. Commercial and industrial loans increased by $2.0 million, primarily from the purchase of the guaranteed portion of government loans, and Bankers Healthcare loans. 1-4 single family mortgages decreased by $4.4 million, home equity loans decreased by $598,000, construction loans increased by $1.5 million, and we reversed $1.1 million from our allowance for credit losses.

Current wording

Loans Receivable, Net. Loans receivable, net, increased by $9.1 million, or 2.5%, to $376.4 million at December 31, 2025 from $367.3 million at December 31, 2024. Loan originations were $58.5 million and loan repayments totaled $49.4 million. Commercial loans increased by $10.4 million, primarily from the origination of commercial real estate loans, and commercial and industrial loans, 1-4 single family mortgages decreased by $6.9 million, home equity loans increased by $2.1 million, and construction and land loans increased by $3.0 million.

Previous wording

Deposits. Deposits decreased by $1.5 million, or 0.4%, to $391.5 million at December 31, 2024, from $390.0 million at December 31, 2023. Certificates of deposit increased $10.7 million, or 4.7%, to $238.8 million at December 31, 2024, from $228.1 million at December 31, 2023. The majority of the increase in certificates of deposit was driven by new customer activity and migration from lower yielding money markets and savings accounts. NOW accounts increased $3.1 million, or 6.1%, to $53.9 million at December 31, 2024, from $50.8 million at December 31, 2023. MMDA accounts decreased $3.7 million, or 14.0%, to $22.7 million at December 31, 2024, from $26.4 million at December 31, 2023. Savings Accounts decreased $8.6 million, or 10.1%, to $76.0 million at December 31, 2024, from $84.6 million at December 31, 2023.

Current wording

Deposits. Deposits increased by $1.7 million, or 0.4%, to $393.2 million at December 31, 2025, from $391.5 million at December 31, 2024. Certificates of deposit increased $925,000, or 0.4%, to $239.7 million at December 31, 2025, from $238.8 million at December 31, 2024. The majority of the increase in certificates of deposit was driven by new customer activity and migration from lower yielding money markets and savings accounts. NOW accounts increased $2.4 million, or 4.4%, to $56.3 million at December 31, 2025, from $53.9 million at December 31, 2024. MMDA accounts decreased $2.0 million, or 8.8%, to $20.7 million at December 31, 2025, from $22.7 million at December 31, 2024. Savings Accounts increased $399,000, or 0.5%, to $76.4 million at December 31, 2025, from $76.0 million at December 31, 2024.

Previous wording

Total Stockholders’ Equity. Total stockholders’ equity increased by $48.0 million, or 61.7%, to $125.8 million at December 31, 2024, from $77.8 million at December 31, 2023. The increase primarily resulted from the sale of stock in the initial public offering that totaled $53.2 million, offset by the unearned ESOP shares of $4.2 million, the accumulated other comprehensive loss (as a result of market value adjustment of investment securities available-for-sale due to the rise in market interest rates during the period) declining $62,000 and retained earnings decreasing $1.1 million due to the net loss for the period ended December 31, 2024.

Current wording

Total Stockholders’ Equity. Total stockholders’ equity increased by $4.0 million, or 3.2%, to $129.8 million at December 31, 2025, from $125.8 million at December 31, 2024. The increase resulted primarily from the accumulated other comprehensive loss (as a result of market value adjustment of investment securities available-for-sale due to the rise in market interest rates during the period) declining $2.5 million and retained earnings increasing $3.2 million due to the net income for the year offset by the $2.0 million decrease in additional paid-in capital as we deploy excess capital to repurchase shares of our common stock.

Previous wording

General. Net income (loss) for the year ended December 31, 2024, was ($1.1) million, a decrease of $1.9 million, or 235.3%, compared to $797,000 for the year ended December 31, 2023. The net loss was primarily from an increase in non-interest expense of $2.3 million resulting from a $1.3 million charitable contribution to fund the Fifth District Community Foundation Inc., which was established in connection with the initial public offering, and increase in interest expense of $2.9 million, a decrease in non-interest income of $962,000, partially offset by an increase in interest income of $2.9 million, and a $507,000 decrease in provision for income taxes.

Current wording

General. Net income (loss) for the year ended December 31, 2025, was $4.1 million, an increase of $5.2 million, or 479.2%, compared to ($1.1) million for the year ended December 31, 2024. The increase in net income was primarily from an increase in interest income of $2.8 million, an increase in non-interest income of $4.4 million mainly due to a gain on bank owned life insurance proceeds, partially offset by a decrease in recovery of credit losses on loans of $1.2 million, a $370,000 increase in non-interest expense, and a $455,000 decrease in the (benefit) for income taxes.

Previous wording

Interest Income. Interest and dividend income increased by $2.9 million, or 17.4%, to $19.3 million for the year ended December 31, 2024, compared to $16.4 million for the year ended December 31, 2023. The increase is attributed to a $1.1 million, or 8.0%, increase in interest on loans, a $845,000, or 139.7%, increase in interest on other interest-earning assets and $889,000, or 52.8%, increase in interest on investment securities available-for-sale.

Current wording

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

Previous wording

During the year ended December 31, 2024, average loans receivable, net, increased by $2.6 million, or 0.7%, from year ended December 31, 2023. The average yield on loans increased to 4.16% for the year ended December 31, 2024, from 3.88% for the year ended December 31, 2023, due to the rising market interest rate environment.

Current wording

During the year ended December 31, 2025, average loans receivable, net, increased by $9.9 million, or 2.7%, from year ended December 31, 2024. The average yield on loans increased to 4.47% for the year ended December 31, 2025, from 4.16% for the year ended December 31, 2024, due to the making higher yielding loans such as commercial loans.

Previous wording

The average balance of investment securities available-for-sale increased $9.8 million, or 14.8%, to $76.1 million for the year ended December 31, 2024, from $66.2 million for the year ended December 31, 2023. The average yield on available-for-sale investment securities increased to 3.38% for the year ended December 31, 2024, from 2.54% for the year ended December 31, 2023. The increase in the average yield on available-for-sale investment securities was primarily due to the rising market interest rate environment as well as selling $18.7 million in securities available-for-sale, for a loss of $1.1 million, and redeploying the funds into higher yielding securities.

Current wording

The average balance of investment securities available-for-sale increased $22.8 million, or 30.0%, to $98.9 million for the year ended December 31, 2025, from $76.1 million for the year ended December 31, 2024. The average yield on available-for-sale investment securities increased to 4.13% for the year ended December 31, 2025, from 3.38% for the year ended December 31, 2024. The increase in the average yield on available-for-sale investment securities was primarily due to reinvesting in higher yielding securities.

Previous wording

Interest income on cash and cash equivalents, comprised primarily of overnight deposits, increased by $840,000, or 145.3%, for the year ended December 31, 2024, due to an increase in the average yield to 5.02% for the year ended December 31, 2024, from 3.99% for the year ended December 31, 2023. The increase in interest income was mainly due to the increase in the balance of cash and cash equivalents arising from the cash received for the purchase of stock in the IPO. The increase in average yield was due to the rise in market interest rates.

Current wording

Interest income on cash and cash equivalents, comprised primarily of overnight deposits, decreased by $317,000, or 22.4%, for the year ended December 31, 2025, primarily due to a decrease in the average balance of cash and cash equivalents by $303,000 to $27.9 million for the year ended December 31, 2025, from $28.2 million for the year ended December 31, 2024. The average yield decreased to 3.94% for year ended December 31, 2025, from 5.02% for the year ended December 31, 2024. The decrease in average yield was due to the decrease in market interest rates.

Previous wording

Interest Expense*.* Total interest expense increased $2.9 million or 44.9%, to $9.2 million for the year ended December 31, 2024, compared $6.4 million for the year ended December 31, 2023. The increase was primarily due to the increase in the average cost of deposits to 2.40% for the year ended December 31, 2024, from 1.61% for the year ended December 31, 2023, reflecting the rising market interest rate environment. The average balance of interest-bearing deposits increased by $5.5 million, or 1.4%, to $383.6 million for the year ended December 31, 2024, from $389.1 million for the year ended December 31, 2023.

Current wording

Interest Expense*.* Total interest expense decreased $11,000 or 0.1%, to $9.2 million for the year ended December 31, 2025, compared to $9.2 million for the year ended December 31, 2024. The decrease was primarily due to the decrease in the average cost of deposits to 2.33% for the year ended December 31, 2025, from 2.40% for the year ended December 31, 2024, reflecting the decreasing market interest rate environment. The average balance of interest-bearing deposits increased by $10.8 million, or 2.8%, to $394.5 million for the year ended December 31, 2025, from $383.6 million for the year ended December 31, 2024.

Previous wording

Net Interest Income*.* Net interest income increased $7,000, or 0.06%, to $10.1 million for the year ended December 31, 2024, compared to $10.0 million for the year ended December 31, 2023. The interest rate spread decreased to 1.68% for the year ended December 31, 2024 from 2.05% for the year ended December 31, 2023, while average net interest-earning assets increased $33.5 million period-to-period. The net interest margin decreased to 2.13% for the year ended December 31, 2024, from 2.25% for the year ended December 31, 2023. The average yield on interest-earning assets increased from 3.68% for the year ended December 31, 2023, to 4.08% for the year ended December 31, 2024. The average rate paid on interest-bearing liabilities increased from 1.63% for the year ended December 31, 2023, to 2.40% for the year ended December 31, 2024, primarily due to an increase in the average rate paid on certificates of deposit from 2.60% in 2023 to 3.82% in 2024. The increase in the average rate paid on certificates of deposit contributed to migration from lower yielding savings accounts and money market accounts, to higher yielding certificates of deposit. The average balance of certificates of deposit increased from $229.8 million as of December 31, 2023, to $235.9 million as December 31, 2024, while over the same period the average balance of savings accounts decreased from $84.3 million to $80.7 million, and the average balance of money market accounts decreased from $26.3 million to $23.6 million.

Current wording

Net Interest Income*.* Net interest income increased $2.8 million, or 27.8%, to $12.8 million for the year ended December 31, 2025, compared to $10.1 million for the year ended December 31, 2024. The interest rate spread increased to 2.04% for the year ended December 31, 2025 from 1.68% for the year ended December 31, 2024, while average net interest-earning assets increased $21.7 million period-to-period. The net interest margin increased to 2.55% for the year ended December 31, 2025, from 2.13% for the year ended December 31, 2024. The average yield on interest-earning assets increased from 4.08% for the year ended December 31, 2024, to 4.37% for the year ended December 31, 2025. The average rate paid on interest-bearing liabilities decreased from 2.40% for the year ended December 31, 2024, to 2.33% for the year ended December 31, 2025, primarily due to a decrease in the average rate paid on certificates of deposit from 3.82% in 2024 to 3.72% in 2025. The decrease in the average rate paid on certificates of deposit was attributed to decreasing market interest rates. The average balance of certificates of deposit increased from $235.9 million as of December 31, 2024, to $242.2 million as December 31, 2025, while over the same period the average balance of savings accounts decreased from $80.7 million to $77.2 million, and the average balance of money market accounts decreased from $23.6 million to $21.2 million.

Previous wording

Provision for Credit Losses*.*The provision for credit losses was a net benefit of $1.2 million in 2024 and a net benefit of $325,000 in 2023. The allowance for credit losses on loans represented 0.46% of total loans at December 31, 2024, and 0.76% of total loans at December 31, 2023. The increase in net benefit is based on our evaluation of the adequacy of the allowance for credit losses throughout the reporting period.

Current wording

Provision (Recovery) for Credit Losses*.*The provision for credit losses on loans was $-0- for the year ended December 31, 2025, compared to ($1.1 million) for the year ended December 31, 2024. The allowance for credit losses on loans represented 0.45% of total loans at December 31, 2025, and 0.46% of total loans at December 31, 2024. The recovery of credit losses is based on our evaluation of the adequacy of the allowance for credit losses throughout the reporting period.

Previous wording

The recovery of credit losses on unfunded commitments was $110,000 for the year ended December 31, 2024 compared to a $125,000 provision on unfunded commitments for the year ended December 31, 2023. The recovery of credit losses on unfunded commitments is based on an evaluation of the historical usage rate.

Current wording

The provision of credit losses on unfunded commitments was $10,000 for the year ended December 31, 2025 compared to a ($110,000) on unfunded commitments for the year ended December 31, 2024. The increase in the provision was primarily due to an increase on the unfunded balance of construction loans in process. The recovery of credit losses on unfunded commitments is based on an evaluation of the historical usage rate.

Previous wording

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

Current wording

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

Previous wording

Noninterest Expense.*.*Noninterest expense increased $2.3 million, or 22.2%, to $12.7 million for the year ended December 31, 2024, compared to $10.4 million for the year ended December 31, 2023. The increase was primarily due to an increase in salaries and employee benefits of $761,000, or 12.8%, an increase in occupancy and equipment expense of $159,000, or 9.6%, an increase in professional and legal fees of $46,000, or 31.1%, an increase in data processing expense of $111,000, or 10.4%, an increase in audit and examination fees of $158,000, or 108.2%, and an increase in charitable contributions of $1.2 million, or 2,879.1% from establishing the Fifth District Community Foundation Inc., partially offset by a $99,000, or 26.3% decrease in directors fees, and a $127,000, or 49.2% decrease in advertising

Current wording

Noninterest Expense.* *Noninterest expense increased $370,000, or 2.9%, to $13.1 million for the year ended December 31, 2025, compared to $12.7 million for the year ended December 31, 2024. The increase was primarily due to an increase in salaries and employee benefits of $958,000 or 14.3%, an increase in occupancy and equipment expense of $210,000, or 11.5%, an increase in professional and legal fees of $136,000, or 70.1%, an increase in data processing expense of $125,000, or 10.6%, an increase in audit and examination fees of $28,000, or 9.2%, partially offset by a $37,000, or 13.4% decrease in directors fees, a $1.3 million, or 99.7%, decrease in charitable contributions from establishing the Fifth District Community Foundation Inc. in 2024, and a $26,000, or 19.8% decrease in advertising. The increase in salaries and employee benefits is mainly from a death benefit paid to the intended beneficiaries of the late President and Chief Executive Officer from the proceeds of the bank owned life insurance.

Previous wording

Provision (benefit) for Income Taxes. The provision (benefit) for income taxes decreased by $507,000, or 347.0%, to ($358,000) for the year ended December 31, 2024, compared to $149,000 for the year ended December 31, 2023. The decrease was due to a $2.4 million, or 251.8%, decrease in pretax income. The effective tax rate was 21% for both years.

Current wording

Provision (benefit) for Income Taxes. The provision (benefit) for income taxes increased by $455,000, or 127.1%, to $97,000 for the year ended December 31, 2025, compared to ($358,000) for the year ended December 31, 2024. The increase was due to a $5.6 million, or 391.4%, increase in pretax income. The effective tax rate was 21% for both years.

Previous wording

The table above indicates that at December 31, 2024, we would experience 28.02% decrease in EVE in the event of an instantaneous parallel 200 basis point increase in market interest rates and a 22.70% increase in EVE in the event of an instantaneous 200 basis point decrease in interest rates.

Current wording

The table above indicates that at December 31, 2025, we would experience 25.90% decrease in EVE in the event of an instantaneous parallel 200 basis point increase in market interest rates and a 16.09% increase in EVE in the event of an instantaneous 200 basis point decrease in interest rates.

Previous wording

The table above indicates that at December 31, 2024, we would have experienced a 13.56% decrease in net interest income in the event of an instantaneous parallel 200 basis point increase in market interest rates and a 2.18% increase in net interest income in the event of an instantaneous 200 basis point decrease in market interest rates.

Current wording

The table above indicates that at December 31, 2025, we would have experienced a 16.57% decrease in net interest income in the event of an instantaneous parallel 200 basis point increase in market interest rates and a 5.59% increase in net interest income in the event of an instantaneous 200 basis point decrease in market interest rates.

Previous wording

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

Current wording

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

Previous wording

While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions, and competition. Our

Current wording

While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions, and competition. Our most liquid assets are cash and short-term investments. The levels of these assets depend on our operating, financing, lending, and investing activities during any given period.

Previous wording

Our cash flows are comprised of three primary classifications: cash flows from operating activities, cash flows from investing activities, and cash flows from financing activities. For the year ended December 31, 2024, cash flows from operating, investing, and financing activities resulted in a net increase in cash and cash equivalents of $18.6 million. Net cash provided by operating activities amounted to $(1.1) million, primarily due to a $1.1 million loss on sale of investment securities offset by $1.2 million recovery of credit losses. Net cash used in investing activities amounted to $27.5 million, primarily due to purchases of securities totaling $54.4 million offset by proceeds from sales or maturities of securities totaling $28.1 million. Net cash provided by financing activities amounted to $47.1 million, primarily due to the payback of $4.0 million in Federal Home Loan Bank Advances, and the net proceeds from the issuance of common stock totaling $448.7 million. For the year ended December 31, 2023, cash flows from operating, investing, and financing activities resulted in a net decrease in cash and cash equivalents of $730,000. Net cash provided by operating activities amounted to $796,000, primarily due to net income of $797,000. Net cash used in investing activities amounted to $6.6 million, primarily due to an increase in loans receivable, net, of $14.7 million, partially offset by proceeds from sales or maturities of available-for-sale investment securities of $10.7 million. Net cash provided by financing activities amounted to $5.1 million, primarily due to Federal Home Loan Bank advances of $4.0 million and a net increase in deposits of $1.1 million.

Current wording

Our cash flows are comprised of three primary classifications: cash flows from operating activities, cash flows from investing activities, and cash flows from financing activities. For additional information, see the Consolidated Statements of Cash Flows.

Previous wording

Fifth District Bancorp is a separate legal entity from Fifth District and must provide for its own liquidity to pay its operating expenses and other financial obligations. Fifth District Bancorp’s primary source of income is dividends received from Fifth District. The amount of dividends that Fifth District may declare and pay to Fifth District Bancorp is governed by applicable bank regulations. At December 31, 2024, Fifth District Bancorp (on an unconsolidated basis) had liquid assets of $21.8 million.

Current wording

Fifth District Bancorp is a separate legal entity from Fifth District and must provide for its own liquidity to pay its operating expenses and other financial obligations. Fifth District Bancorp’s primary source of income is dividends received from Fifth District. The amount of dividends that Fifth District may declare and pay to Fifth District Bancorp is governed by applicable bank regulations. At December 31, 2025, Fifth District Bancorp (on an unconsolidated basis) had liquid assets of $19.2 million.

Previous wording

Off-Balance Sheet Arrangements. At December 31, 2024, we had $34.6 million of outstanding commitments to originate loans, which primarily consists of HELOC’s totaling $13.4 million, construction loans totaling $8.4 million, and Board approved loans totaling $11.5 million. At December 31, 2024, certificates of deposit that are scheduled to mature on or before December 31, 2025 totaled $214.2 million. Management expects that a substantial portion of the maturing certificates of deposit will be renewed. However, if a substantial portion of these deposits is not retained, we may raise interest rates on deposits to attract new accounts or utilize Federal Home Loan Bank of Dallas advances, which may result in higher levels of interest expense.

Current wording

Off-Balance Sheet Arrangements. At December 31, 2025, we had $35.9 million of outstanding commitments to originate loans, which primarily consists of HELOC’s totaling $17.4 million, construction loans totaling $14.2 million, and Board approved loans totaling $3.1 million. At December 31, 2025, certificates of deposit that are scheduled to mature on or before December 31, 2026 totaled $224.1 million. Management expects that a substantial portion of the maturing certificates of deposit will be renewed. However, if a substantial portion of these deposits is not retained, we may raise interest rates on deposits to attract new accounts or utilize Federal Home Loan Bank of Dallas advances, which may result in higher levels of interest expense.

Previous wording

The consolidated financial statements and related data presented in this annual report have been prepared according to GAAP which require the measurement of financial position and operating results in terms of historical dollars without considering changes in the relative purchasing power of money over time due to inflation. The primary impact of inflation on our operations is reflected in increased operating costs. Unlike most industrial companies, virtually all of the assets and liabilities of a financial institution are monetary in nature. As a result, interest rates,

Current wording

The consolidated financial statements and related data presented in this annual report have been prepared according to GAAP which require the measurement of financial position and operating results in terms of historical dollars without considering changes in the relative purchasing power of money over time due to inflation. The primary impact of inflation on our operations is reflected in increased operating costs. Unlike most industrial companies, virtually all of the assets and liabilities of a financial institution are monetary in nature. As a result, interest rates, generally, have a more significant impact on a financial institution’s performance than does inflation. Interest rates do not necessarily move in the same direction or to the same extent as the prices of goods and services.