ServisFirst Bancshares Inc

(1) Derived from audited financial statements.

SERVISFIRST BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024

(Unaudited)

NOTE1 - GENERAL

The accompanying consolidated financial statements in this report have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission, including Regulation S-X and the instructions for Form10-Q, and havenot been audited. These consolidated financial statements donot include all of the information and footnotes required by U.S. generally accepted accounting principles (“U.S. GAAP”) for complete financial statements. In the opinion of management, all adjustments necessary to present fairly the consolidated financial position and the consolidated results of operations for the interim periods have been made. All such adjustments are of a normal nature. The consolidated results of operations arenot necessarily indicative of the consolidated results of operations that ServisFirst Bancshares, Inc. (the “Company”)* mayachieve for future interim periods or the entire year. For further information, refer to the consolidated financial statements and footnotes included in the Company’s Form10*-K for the year ended* December 31, 2023.*

NOTE2 - CASH AND CASH EQUIVALENTS

Cash on hand, cash items in process of collection, amounts due from banks, and federal funds sold are included in cash and cash equivalents.

NOTE3 - EARNINGS PER COMMON SHARE

Basic earnings per common share are computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per common share include the dilutive effect of additional potential common shares issuable under stock options. The difference in earnings per share under thetwo-class method wasnot significant for thethree month periods ended* March 31, 2024and2023.*

NOTE4 - SECURITIES

The amortized cost and fair value of available-for-sale and held-to-maturity securities at* March 31, 2024and December 31, 2023*are summarized as follows:

8

The amortized cost and fair value of debt securities as of* March 31, 2024and December 31, 2023by contractual maturity are shown below. Actual maturities maydiffer from contractual maturities of mortgage-backed securities since the mortgages underlying the securities maybe called or prepaid with or without penalty. Therefore, these securities arenot* included in the maturity categories along with the other categories of debt securities.

All mortgage-backed securities are with government-sponsored enterprises (GSEs) such as Federal National Mortgage Association, Government National Mortgage Association, Federal Home Loan Bank, and Federal Home Loan Mortgage Corporation.

Restricted equity securities are comprised entirely of restricted investment in Federal Home Loan Bank stock for membership requirements.

The carrying value of investment securities pledged to secure public funds on deposit and for other purposes as required by law was $1.48 billion and $1.49 billion as of* March 31, 2024and December 31, 2023,*respectively.

The following table identifies, as of* March 31, 2024and December 31, 2023,the Company’s investment securities that have been in a continuous unrealized loss position for less than12* months and those that have been in a continuous unrealized loss position for12 or more months.

9

At* March 31, 2024and2023,* no allowance for credit losses (“ACL”) has been recognized on available-for-sale debt securities in an unrealized loss position as the Company doesnot believe any of the debt securities are credit impaired. This is based on the Company’s analysis of the risk characteristics, including credit ratings, and other qualitative factors related to available-for-sale debt securities. The issuers of these debt securities continue to make timely principal and interest payments under the contractual terms of the securities. The Company doesnot intend to sell these debt securities and it is more likely thannot that the Company willnot be required to sell the debt securities before recovery of their amortized cost, which* maybe at maturity. The unrealized losses are due to increases in market interest rates over the yields available at the time the debt securities were purchased. Management measures expected credit losses on held-to-maturity securities on a collective basis by major security type with each type sharing similar risk characteristics and considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. With regard to U.S. Treasury and residential mortgage-backed securities issued by the U.S. government, or agencies thereof, it is expected that the securities willnot* be settled at prices less than the amortized cost bases of the securities as such securities are backed by the full faith and credit of and/or guaranteed by the U.S. government. Accordingly, no allowance for credit losses has been recorded for these securities. With regard to securities issued by States and political subdivisions and other held-to-maturity securities, management considers (i) issuer bond ratings, (ii) historical loss rates for given bond ratings, (iii) whether issuers continue to make timely principal and interest payments under the contractual terms of the securities, and (iv) internal forecasts. Historical loss rates associated with securities having similar grades as those in our portfolio have generallynot been significant. Furthermore, as of* March 31, 2024and2023,* there wereno past due principal or interest payments associated with these securities. Based upon (i) the issuer’s strong bond ratings and (ii) azero historical loss rate, no allowance for credit losses has been recorded for held-to-maturity State and Municipal Securities as such amount isnot material at* March 31, 2024and2023.* All debt securities in an unrealized loss position as of* March 31, 2024continue to perform as scheduled and the Company doesnot* believe there is a possible credit loss or that an allowance for credit loss on these debt securities is necessary.

NOTE5 – LOANS

The loan portfolio is classified based on the underlying collateral utilized to secure each loan for financial reporting purposes. This classification is consistent with the Quarterly Report of Condition and Income filed by ServisFirst Bank with the Federal Deposit Insurance Corporation (FDIC).

10

Commercial, financial and agricultural - Includes loans to business enterprises issued for commercial, industrial, agricultural production and/or other professional purposes. These loans are generally secured by equipment, inventory, and accounts receivable of the borrower and repayment is primarily dependent on business cash flows.

Real estate–* construction*– Includes loans secured by real estate to finance land development or the construction of industrial, commercial or residential buildings. Repayment is dependent upon the completion and eventual sale, refinance or operation of the related real estate project.

Owner-occupied commercial real estate mortgage– Includes loans secured by nonfarm nonresidential properties for which the primary source of repayment is the cash flow from the ongoing operations conducted by the party that owns the property.

1-4 family real estate mortgage– Includes loans secured by residential properties, including home equity lines of credit. Repayment is primarily dependent on the personal cash flow of the borrower.

Other real estate mortgage– Includes loans secured by nonowner-occupied properties, including office buildings, industrial buildings, warehouses, retail buildings, multifamily residential properties and farmland. Repayment is primarily dependent on income generated from the underlying collateral.

Consumer– Includes loans to individualsnot secured by real estate. Repayment is dependent upon the personal cash flow of the borrower.

The following table details the Company’s loans at* March 31, 2024and December 31, 2023:*

The credit quality of the loan portfolio is summarizedno less frequently than quarterly using categories similar to the standard asset classification system used by the federal banking agencies. The following table presents credit quality indicators for the credit loss portfolio segments and classes. These categories are utilized to develop the associated allowance for credit losses using historical losses adjusted for current economic conditions defined as follows:

11

The table below presents loan balances classified by credit quality indicator, loan type and based on year of origination as of* March 31, 2024:*

12

Loans by credit quality indicator, loan type and based on year of origination as of* December 31, 2023*were as follows:

13

Loans by performance status as of* March 31, 2024and December 31, 2023*were as follows:

Loans by past due status as of* March 31, 2024and December 31, 2023*were as follows:

14

Under the current expected credit losses (“CECL”) methodology, the ACL is measured on a collective basis for pools of loans with similar risk characteristics. For loans that donot share similar risk characteristics with the collectively evaluated pools, evaluations are performed on an individual basis. For all loan segments collectively evaluated, losses are predicted over a period of time determined to be reasonable and supportable, and at the end of the reasonable and supportable forecast period losses are reverted to long-term historical averages. The estimated loan losses for all loan segments are adjusted for changes in qualitative factorsnot inherently considered in the quantitative analyses.

The Company uses the discounted cash flow (“DCF”) method to estimate ACL for all loan pools except for commercial revolving lines of credit and credit cards. For all loan pools utilizing the DCF method, the Company utilizes and forecasts national unemployment rate as a loss driver. The Company also utilizes and forecasts GDP growth as asecond loss driver for its agricultural and consumer loan pools. Consistent forecasts of the loss drivers are used across the loan segments. At* March 31, 2024and December 31, 2023,the Company utilized a reasonable and supportable forecast period oftwelve* months followed by asix-month straight-line reversion to long term averages. The Company leveraged economic projections from reputable and independent sources to inform its loss driver forecasts. The Company expects national unemployment to rise and national GDP growth rate to decline compared to the* December 31, 2023*forecast.

The Company uses a loss-rate method to estimate expected credit losses for its commercial revolving lines of credit and credit card pools. The commercial revolving lines of credit pool incorporates a probability of default (“PD”) and loss given default (“LGD”) modeling approach. This approach involves estimating the pool average life and then using historical correlations of default and loss experience over time to calculate the lifetime PD and LGD. Thesetwo inputs are then applied to the outstanding pool balance. The credit card pool incorporates a remaining life modeling approach, which utilizes an attrition-based method to estimate the remaining life of the pool. A quarterly average loss rate is then calculated using the Company’s historical loss data. The model reduces the pool balance quarterly on a straight-line basis over the estimated life of the pool. The quarterly loss rate is multiplied by the outstanding balance at each period-end resulting in an estimated loss for each quarter. The sum of estimated loss for all quarters is the total calculated reserve for the pool. Management has also applied the loss-rate method to commercial and industrial (“C&I”) lines of credit and to credit cards due to their generally short-term nature. An expected loss ratio is applied based on internal and peer historical losses.

Each loan pool is adjusted for qualitative factorsnot inherently considered in the quantitative analyses. The qualitative adjustments either increase or decrease the quantitative model estimation. The Company considers factors that are relevant within the qualitative framework, which include the following: lending policy, changes in nature and volume of loans, staff experience, changes in volume and trends of problem loans, concentration risk, trends in underlying collateral values, external factors, quality of loan review system and other economic conditions.

Inherent risks in the loan portfolio will differ based on type of loan. Specific risk characteristics by loan portfolio segment are listed below:

Commercial and industrial loans include risks associated with borrower’s cash flow, debt service coverage and management’s expertise. These loans are subject to the risk that the Company* mayhave difficulty converting collateral to a liquid asset if necessary, as well as risks associated with degree of specialization, mobility and general collectability in a default situation. These commercial loans may*be subject to many different types of risks, including fraud, bankruptcy, economic downturn, deteriorated or non-existent collateral, and changes in interest rates.

Real estate construction loansinclude risks associated with the borrower’s credit-worthiness, contractor’s qualifications, borrower and contractor performance, and the overall risk and complexity of the proposed project. Construction lending is also subject to risks associated with sub-market dynamics, including population, employment trends and household income. During times of economic stress, this type of loan has typically had a greater degree of risk than other loan types.* *

Real estate mortgage loansconsist of loans secured by commercial and residential real estate. Commercial real estate lending is dependent upon successful management, marketing and expense supervision necessary to maintain the property. Repayment of these loans* may*be adversely affected by conditions in the real estate market or the general economy. Also, commercial real estate loans typically involve relatively large loan balances to a single borrower. Residential real estate lending risks are generally less significant than those of other loans. Real estate lending risks include fluctuations in the value of real estate, bankruptcies, economic downturns and customer financial problems.

15

Consumer loans carry a moderate degree of risk compared to other loans. They are generally more risky than traditional residential real estate loans but less risky than commercial loans. Risk of default is usually determined by the well-being of the local economies. During times of economic stress, there is usually some level of job loss both nationally and locally, which directly affects the ability of the consumer to repay debt.

The following table presents changes in the ACL, segregated by loan type, for thethree months ended* March 31, 2024and March 31, 2023.*

We maintain an ACL on unfunded commercial lending commitments and letters of credit to provide for the risk of loss inherent in these arrangements. The ACL is computed using a methodology similar to that used to determine the ACL for loans, modified to take into account the probability of a drawdown on the commitment. The ACL on unfunded loan commitments is classified as a liability account on the Consolidated Balance Sheets within other liabilities, while the corresponding provision for these credit losses is recorded as a component of other expense. The ACL on unfunded commitments was $742,000 at* March 31, 2024and $575,000 at December 31, 2023.The provision expense for unfunded commitments for thethree* months ended* March 31, 2024and2023* was $167,000 andzero, respectively.

Loans thatno longer share similar risk characteristics with collectively evaluated pools are estimated on an individual basis. A loan is considered collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. The following table summarizes collateral-dependent gross loans held for investment by collateral type as follows:

16

The table below details the amortized cost basis at the end of the reporting period for loans made to borrowers experiencing financial difficulty that were modified during thethree months ended* March**31,* 2024 and2023:

The following table summarizes the financial impacts of loan modifications made to borrowers experiencing financial difficulty during thethree months ended* March 31, 2024and2023:*

17

No loans modified on or after* March 31, 2023,were past due greater than30* days or on non-accrual as of* March 31, 2024.*

As of* March 31, 2024,the Company didnot* have any loans made to borrowers experiencing financial difficulty that were modified during thefirst quarter of2024 that subsequently defaulted. For purposes of this disclosure, default is defined as90 days past due and still accruing or placement on nonaccrual status.

NOTE6 – LEASES

The Company leases space under non-cancelable operating leases for several of its banking offices and certain office equipment. The leases have remaining terms up to 15 years. At* March 31, 2024,the Company had lease right-of-use assets and lease liabilities totaling $25.3 million and $26.3 million, respectively, compared to $26.5 million and $27.4 million, respectively at December 31, 2023,*which are reflected in other assets and other liabilities, respectively, in the Company’s Consolidated Balance Sheets.

Maturities of operating lease liabilities are as follows:

As of* March 31, 2024,*the weighted average remaining term of operating leases was 8.2 years and the weighted average discount rate used in the measurement of operating lease liabilities was 3.68%.

Operating cash flows related to leases were $1.4 million and $1.2 million for thethree months ended* March 31, 2024and2023,* respectively.

Lease costs during thethree months ended* March 31, 2024and2023* were as follows (in thousands):

NOTE7 - EMPLOYEE AND DIRECTOR BENEFITS

Stock Incentive Plan

At* March 31, 2024,the Company had a stock incentive plan as described below. The compensation cost that has been charged to earnings for the plan was approximately $958,000 and $808,000 for thethree* months ended* March 31, 2024and2023,* respectively.

The Company’s2009 Amended and Restated Stock Incentive Plan authorizes the grant of up to 5,550,000 shares and allows for the issuance of Stock Appreciation Rights, Restricted Stock, Stock Options, Non-stock Share Equivalents, Performance Shares or Performance Units. The plan allows for the grant of incentive stock options and non-qualified stock options, and option awards are granted with an exercise price equal to the fair market value of the Company’s common stock at the date of grant. The maximum term of the options granted under the plan isten years.

The Company estimates the fair value of each stock option award using a Black-Scholes-Merton valuation model. Expected volatilities are based on the Company’s trading price history. The expected term for options granted is based on the short-cut method and represents the period of time that options granted are expected to be outstanding. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

There wereno grants of stock options duringfirst quarters of2024 and2023.

The following table summarizes stock option activity during thethree months ended* March 31, 2024and2023:*

As of* March 31, 2024,*there was $35,000 of total unrecognized compensation cost related to non-vested stock options. The cost is expected to be recognized on the straight-line method over the nextsix months.

Restricted Stock and Performance Shares

The Company periodically grants restricted stock awards that vest upon time-based service conditions. Dividend payments are made during the vesting period. The value of restricted stock is determined to be the current value of the Company’s stock, and this total value will be recognized as compensation expense over the vesting period. As of* March 31, 2024,*there was $5.3 million of total unrecognized compensation cost related to non-vested time-based restricted stock. The cost is expected to be recognized evenly over the remaining 1.8 years of the restricted stock’s vesting period.

The Company periodically grants performance shares that give plan participants the opportunity to earn between 0% and 150% of the number of performance shares granted based on achieving certain performance metrics. The number of performance shares earned is determined by reference to the Company’s total shareholder return relative to a peer group of other publicly traded banks and bank holding companies during the performance period. The performance period is generally three years beginning on* January 1st of the year of the grant. The fair value of performance shares is determined using a Monte Carlo simulation model on the grant date. As of March 31, 2024,there was $1.2 million of total unrecognized compensation cost related to non-vested performance shares. As of March 31, 2024,*non-vested performance shares had a weighted average remaining time to vest of 2.1 years.

19

NOTE8 - DERIVATIVES

The Company periodically enters into derivative contracts to manage exposures to movements in interest rates. The Company purchased an interest rate cap in* Mayof2020* to limit exposures to increases in interest rates. The interest rate cap wasnot designated as a hedging instrument but rather as a stand-alone derivative. The interest rate cap had an original term of 3 three years, a notional amount of $300 million and was tied to theone-month LIBOR rate with a strike rate of 0.50%. The fair value of the interest rate cap was carried on the Consolidated Balance Sheets in other assets and the change in fair value was recognized in noninterest income each quarter. The interest rate cap had a fair value of $1.2 million and remaining term ofone month at* March 31, 2023,and expired on May 4, 2023.*

The Company has entered into forward loan sale commitments with secondary market investors to deliver loans on a “best efforts delivery” basis, which donot meet the definition of a derivative instrument. When a rate is committed to a borrower, it is based on the best price that day and locked with the investor for the customer for a30-day period. In the event the loan isnot delivered to the investor, the Company hasno risk or exposure with the investor. The interest rate lock commitments related to loans that are originated for later sale are classified as derivatives. The fair values of the Company’s agreements with investors and rate lock commitments to customers as of* March 31, 2024and December 31, 2023werenot* material.

NOTE9 – RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS

In* March 2023,the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”)2023-02, Investments-Equity Method and Joint Ventures (Topic323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method.*These amendments allow entities to elect to account for qualifying tax equity investments using the proportional amortization method, regardless of the program giving rise to the related income tax credits. The ASU responds to stakeholder feedback that the proportional amortization method provides investors and other allocators of capital with a better understanding of the returns from investments that are made primarily for the purpose of receiving income tax credits and other income tax benefits.

The amendments in this update permit reporting entities to elect to account for certain tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method if certain conditions are met. Under the proportional amortization method, an entity amortizes the initial cost of the investment in proportion to the income tax benefits in the income statement as a component of income tax expense (benefit). To qualify for the proportional amortization method, all of the following conditions must be met: (i) It is probable that the income tax credits allocated to the tax equity investor will be available; (ii) The tax equity investor doesnot have the ability to exercise significant influence over the operating and financial policies of the underlying project; (iii) Substantially all of the projected benefits are from income tax credits and other income tax benefits. Projected benefits included income tax credits, other income tax benefits, and other non-income tax -related benefits. The projected benefits are determined on a discounted basis, using a discount rate that is consistent with the cash flow assumptions used by the tax equity investor in making its decision to invest in the project; (iv) The tax equity investor's projected yield based solely on the cash flows from the income tax credits and other income tax benefits is positive; and (v) The tax equity investor is a limited liability investor in the limited liability entity for both legal and tax purposes, and the tax equity investor's liability is limited to its capital investment. An accounting policy election is allowed to apply the proportional amortization method on a tax-credit-program-by-tax-credit-program basis rather than electing to apply the proportional amortization method at the reporting entity level or to individual investments. The amendments in this update require specific disclosures that must be applied to all investments that generate income tax credits and other income tax benefits from a tax credit program for which the entity has elected to apply the proportional amortization method. The amendments require that a reporting entity disclose certain information in annual and interim reporting periods that enable investors to understand the following information about its investments that generate income tax credits and other income tax benefits from a tax credit program including: (i) The nature of its tax equity investments; and (ii) The effect of its tax equity investments and related income tax credits and other income tax benefits on its financial position and results of operations.

This ASU is effective for fiscal years beginning after* December 15, 2023,including interim periods within those fiscal years. The Company has determined that its equity investments in New Markets Tax Credits and Historic Tax Credits qualify for the proportional amortization method and has made the election to apply the proportional amortization method for these types of tax credits. The Company adopted the standard as of January 1, 2024using the modified retrospective method of adoption, and the adoption of this guidance didnot* have a material impact on the consolidated financial statements.

NOTE10 – RECENT ACCOUNTING PRONOUNCEMENTS

In* December 2023,the FASB issued ASUNo.* 2023-09,* Income Taxes (Topic740): Improvements to Income Tax Disclosures*. ASU2023-09 requires enhanced income tax disclosures primarily related to the rate reconciliation and income taxes paid information to provide more transparency by requiring (i) consistent categories and greater disaggregation of information in the rate reconciliation table and (ii) income taxes paid, net of refunds, to be disaggregated by jurisdiction based on an established threshold. The amendments in this standard will be effective for the Company on* January 1, 2025.*The Company is currently evaluating the impact the amendments will have the consolidated financial statements and related disclosures.

20

In* November 2023,the FASB issued ASU2023*-07, Segment Reporting—Improvements to Reportable Segment Disclosures. This amendment is intended to improve disclosures about a public entity’s reportable segments and addresses requests from investors and other decision makers for additional, more detailed information about a reportable segment’s expenses. The amendment applies to all public entities that are required to report segment information in accordance with Topic280. All public entities will be required to report segment information in accordance with the new guidance starting in annual periods beginning after* December 15, 2023,and interim periods within fiscal years beginning after December 31, 2024.Early adoption is permitted. The amendments are to be applied retrospectively to all periods presented and segment expense categories should be based on the categories identified at adoption. The Company doesnot* currently expect adoption of the amendment to have a material impact on its consolidated financial statements.

NOTE11 - FAIR VALUE MEASUREMENT

Measurement of fair value under U.S. GAAP establishes a hierarchy that prioritizes observable and unobservable inputs used to measure fair value, as of the measurement date, intothree broad levels, which are described below:

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible and also considers counterparty credit risk in its assessment of fair value.

Debt Securities.Where quoted prices are available in an active market, securities are classified within Level1 of the hierarchy. Level1 securities include highly liquid government securities such as U.S. Treasuries and exchange-traded equity securities. For securities traded in secondary markets for which quoted market prices arenot available, the Company generally relies on pricing services provided by independent vendors. Such independent pricing services are to advise the Company on the carrying value of the securities available for sale portfolio. As part of the Company’s procedures, the price provided from the service is evaluated for reasonableness given market changes. When a questionable price exists, the Company investigates further to determine if the price is valid. If needed, other market participants* maybe utilized to determine the correct fair value. The Company has also reviewed and confirmed its determinations in discussions with the pricing service regarding their methods of price discovery. Securities measured with these techniques are classified within Level2* of the hierarchy and often involve using quoted market prices for similar securities, pricing models or discounted cash flow calculations using inputs observable in the market where available. Examples include U.S. government agency securities, mortgage-backed securities, obligations of states and political subdivisions, and certain corporate, asset-backed and other securities. In cases where Level1 or Level2 inputs arenot available, as in the case of certain corporate securities, these securities are classified in Level3 of the hierarchy.

Derivative instruments. The fair values of derivatives are determined based on a valuation pricing model using readily available observable market parameters such as interest rate curves, adjusted for counterparty credit risk. These measurements are classified as level2 within the valuation hierarchy.

Loans Individually Evaluated.Loans individually evaluated are measured and reported at fair value when full payment under the loan terms isnot probable. Loans individually evaluated are carried at the present value of expected future cash flows using the loan’s existing rate in a discounted cash flow calculation, or the fair value of the collateral if the loan is collateral-dependent. Expected cash flows are based on internal inputs reflecting expected default rates on contractual cash flows. This method of estimating fair value doesnot incorporate the exit-price concept of fair value described in ASC820-10 and would generally result in a higher value than the exit-price approach. For loans measured using the estimated fair value of collateral less costs to sell, fair value is generally determined based on appraisals performed by certified and licensed appraisers using inputs such as absorption rates, capitalization rates and market comparables, adjusted for estimated costs to sell. Management modifies the appraised values, if needed, to take into account recent developments in the market or other factors, such as changes in absorption rates or market conditions from the time of valuation, and anticipated sales values considering management’s plans for disposition. Such modifications to the appraised values could result in lower valuations of such collateral. Estimated costs to sell are based on current amounts of disposal costs for similar assets. These measurements are classified as Level3 within the valuation hierarchy. Loans individually evaluated are subject to nonrecurring fair value adjustment upon initial recognition or subsequent individually evaluation. A portion of the ACL is allocated to loans individually evaluated if the value of such loans is deemed to be less than the unpaid balance. The range of fair value adjustments and weighted average adjustment as of* March 31, 2024was 0% to 68% and 24%, respectively. The range of fair value adjustments and weighted average adjustment as of December 31, 2023was 0% to 66% and 25% respectively. Loans individually evaluated are reviewed and evaluated on at least a quarterly basis for additional impairment and adjusted accordingly based on the same factors identified above. The amount recognized to write-down individually evaluated loans that are measured at fair value on a nonrecurring basis was $1.1 million during thethree* months ended* March 31, 2024,and $2.3 million during thethree* months ended* March 31, 2023.*

21

Other Real Estate Owned. Other real estate assets (“OREO”) acquired through, or in lieu of, foreclosure are held for sale and are initially recorded at the lower of cost or fair value, less selling costs. Any write-downs to fair value at the time of transfer to OREO are charged to the ACL subsequent to foreclosure. Values are derived from appraisals of underlying collateral and discounted cash flow analysis. Appraisals are performed by certified and licensed appraisers. Subsequent to foreclosure, valuations are updated periodically and assets are marked to current fair value,not to exceed the new cost basis. In the determination of fair value subsequent to foreclosure, management also considers other factors or recent developments, such as changes in absorption rates and market conditions from the time of valuation, and anticipated sales values considering management’s plans for disposition, which could result in adjustment to lower the property value estimates indicated in the appraisals. The range of fair value adjustments and weighted average adjustment as of* March 31, 2024was 25% to 100% and 49.7%, respectively. The range of fair value adjustments and weighted average adjustment as of December 31, 2023was 25% to 100% and 38.3%, respectively. These measurements are classified as Level3* within the valuation hierarchy. Net losses on the sale and write-downs of OREO of$95,000 during thethree months ended* March 31, 2024,compared tono losses during thethree* months ended* March 31, 2023.These charges were for write-downs in the value of OREO subsequent to foreclosure and losses on the disposal of OREO. OREO is classified within Level3* of the hierarchy.

There werefour residential real estate loans with an aggregate balance of $450,000 foreclosed and classified as OREO as of* March 31, 2024and compared tothree* residential real estate loan foreclosures for $360,000 as of* December 31, 2023.*

Three residential real estate loans for $547,000 were in the process of foreclosure as of* March 31, 2024.There werethree* residential real estate loans for $292,000 that were in the process of being foreclosed as of* December 31, 2023.*

The following table presents the Company’s financial assets carried at fair value on a recurring basis as of* March 31, 2024and December 31, 2023.There wereno liabilities measured at fair value on a recurring basis as of March 31, 2024and December 31, 2023.*

22

The following table presents the Company’s financial assets carried at fair value on a nonrecurring basis as of* March 31, 2024and December 31, 2023.There wereno liabilities measured at fair value on a nonrecurring basis as of March 31, 2024and December 31, 2023.*

There wereno liabilities measured at fair value on a non-recurring basis as of* March 31, 2024and December 31, 2023.*

In the case of the debt securities portfolio, the Company monitors the portfolio to ascertain when transfers between levels have been affected. For thethree months ended* March 31, 2024,there weretwo* transfers out of Level3 into Level2.

The table below includes a roll forward of the balance sheet amounts for the period ended* March 31, 2024and March 31, 2023 (including the change in fair value) for financial instruments classified by the Company within Level3* of the valuation hierarchy measured at fair value on a recurring basis including changes in fair value due in part to observable factors that are part of the valuation methodology:

The fair value of a financial instrument is the current amount that would be exchanged in a sale between willing parties, other than in a forced liquidation. Fair value is best determined based upon quoted market prices. However, in many instances, there areno quoted market prices for the Company’s various financial instruments. In cases where quoted market prices arenot available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates* maynot* be realized in an immediate settlement of the instrument. Current U.S. GAAP excludes certain financial instruments and all nonfinancial instruments from its fair value disclosure requirements. Accordingly, the aggregate fair value amounts presented* maynot* necessarily represent the underlying fair value of the Company.

23

The estimated fair values of the Company’s financial instrumentsnot measured at fair value on a recurring or non-recurring basis as of* March 31, 2024and December 31, 2023*were as follows:

ITEM 2. MANAGEMENT’**S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS