FIRST US BANCSHARES, INC.

Previous wording

Delivery of the best possible financial services to customers remains an overall operational focus of the Company. The Company recognizes that attention to detail and responsiveness to customers’ desires are critical to customer satisfaction. The Company continues to upgrade technology, both in its financial services and in the training of its 148 full-time equivalent employees (as of June 30, 2025), to ensure customer satisfaction and convenience.

Current wording

Delivery of the best possible financial services to customers remains an overall operational focus of the Company. The Company recognizes that attention to detail and responsiveness to customers’ desires are critical to customer satisfaction. The Company continues to upgrade technology, both in its financial services and in the training of its 151 full-time equivalent employees (as of September 30, 2025), to ensure customer satisfaction and convenience.

Previous wording

The emphasis of this discussion is a comparison of assets, liabilities and shareholders’ equity as of June 30, 2025 to December 31, 2024, while comparing income and expense for the six months ended June 30, 2025 and 2024. All yields and ratios presented and discussed herein are recorded and presented on the accrual basis and not on the tax-equivalent basis, unless otherwise indicated.

Current wording

The emphasis of this discussion is a comparison of assets, liabilities and shareholders’ equity as of September 30, 2025 to December 31, 2024, while comparing income and expense for the nine months ended September 30, 2025 and 2024. All yields and ratios presented and discussed herein are recorded and presented on the accrual basis and not on the tax-equivalent basis, unless otherwise indicated.

Previous wording

Economic volatility continued through the six months ended June 30, 2025 due to a number of factors, including reductions in U.S. gross domestic product (“GDP”) during the first quarter of 2025, modest increases in the inflation rate as the second quarter came to a close, and ongoing uncertainty around the ultimate impact of trade tariffs introduced by the Trump administration in April 2025. In addition, geopolitical uncertainty continued with a number of ongoing military conflicts on the global front. The U.S. inflation rate, as measured by the consumer price index, accelerated to 2.7% in June 2025, the highest level since February 2025, and remains elevated above the Federal Reserve Bank’s (“FRB”) longer run target of 2%. The U.S. unemployment rate edged down to 4.1% in June 2025. The unemployment rate has held within a narrow 4.0% - 4.2% range since May 2024. First quarter 2025 GDP reflected annualized contraction of 0.5%, a decline from previous estimates. The weaker GDP figure was largely driven by significant declines in consumer spending and an increase in imports as businesses and consumers stockpiled goods ahead of expected price increases following tariff announcements. Preliminary estimates indicated that second quarter 2025 GDP grew by an annualized rate of 3.0%. The expansion in second quarter primarily reflected a substantial reduction in imports, largely offsetting the surge of import growth in the first quarter. Throughout the first six months of 2025, the Open Market Committee of the FRB did not change the federal funds rate, keeping the rate at a level of 4.25% to 4.50%. Minutes from the Committee’s June 2025 meetings indicated a shift toward higher expectations for interest rates through 2026, and implied two 25 basis point rate cuts in 2025 and two additional in 2026. Although volatile at times, treasury rates generally trended lower during the six-month period, indicating sentiment of further rate reductions to come later in 2025 and 2026. The combination of the continued heightened inflation level, stable employment levels, and volatile GDP provides a difficult environment in which to predict future movement in the federal funds rate and treasury rates.

Current wording

Economic volatility persisted during the nine months ended September 30, 2025 due to a number of factors, including continued growth in U.S. gross domestic product (“GDP”), as well as rising inflation and unemployment levels, during the third quarter of 2025. As of September 30, 2025, uncertainty continued related to the ultimate impact of trade tariffs introduced by the Trump administration, ongoing geopolitical unrest, and more recently, the Congressional shutdown of “nonessential” portions of the U.S. government. Estimates of second quarter 2025 U.S. GDP were revised upward to 3.8%, rebounding from a 0.5% contraction in the first quarter of 2025. An October 2025 estimate by the Federal Reserve Bank of Atlanta put third quarter 2025 GDP at 3.9%. The U.S. inflation rate, as measured by the consumer price index, rose to 3.0% in September 2025, the highest level since January 2025, but slightly below consensus forecasts. The U.S. unemployment rate increased to 4.3% in August 2025, and while unemployment for September 2025 was not released in accordance with the typical time-frame due to the government shutdown, consensus expectations are that September unemployment will hold steady with the August number. Through most of the nine months ended September 30, 2025, the Open Market Committee of the FRB did not change the federal funds rate; however, in both September and October 2025, the federal funds rate was reduced by 25 basis points. Although volatile at times, Treasury rates trended lower during the first nine months of 2025, indicating continued sentiment for further rate reductions in the coming year. The combination of continued GDP growth, inflation levels above the FRB’s 2% target, and rising unemployment levels provides a difficult environment in which to predict future movement in interest rates.

Previous wording

The impacts of new trade and other economic policies in the U.S., including tariffs and the One Big Beautiful Bill Act, along with the threat to implement additional tariffs, have created economic uncertainty which will continue to evolve and impact our business in future periods. There is a risk that these policy changes could have a negative impact on certain of our customers, causing increased difficulty in repaying their loans or other obligations which could result in a higher level of credit losses in our loan portfolios with a corresponding impact on our results of operations. In the Company’s local markets, competition for deposits has remained at elevated levels causing difficulty in lowering funding costs amid a declining interest rate environment. Uncertainty has continued with respect to commercial lending as business firms assess the potential impact of trade tariffs and the interest rate environment on their activities. However, while consumer spending has generally slowed on a macro-basis, the Company has experienced significant growth in consumer indirect lending at the higher end of the credit spectrum during the first six months of 2025. Management continues to monitor ongoing developments related to economic conditions, the federal funds rate and market interest rates. The competitive environment, combined with ongoing economic uncertainty, provides a challenging environment in which to maintain and increase the Company’s net interest margin. Should economic conditions worsen, the Company is exposed to increased credit risk from both commercial and consumer borrowers. Furthermore, should market interest rates or the federal funds rate increase or decrease at significant levels, particularly over a short period of time, the Company’s net interest margin and net interest income could be negatively impacted.

Current wording

Additionally, the impacts of new trade and other economic policies in the U.S., including tariffs and the One Big Beautiful Bill Act, along with the threat to implement additional tariffs, have created economic uncertainty which will continue to evolve and impact our business in future periods. There is a risk that these policy changes could have a negative impact on certain of our customers, causing increased difficulty in repaying their loans or other obligations which could result in a higher level of credit losses in our loan portfolios with a corresponding impact on our results of operations. In the Company’s local markets, competition for deposits has remained at elevated levels causing difficulty in lowering funding costs amid a declining interest rate environment. Uncertainty has continued with respect to commercial lending as business firms assess the potential impact of trade tariffs and the interest rate environment on their activities. However, while consumer spending has generally slowed on a macro-basis, the Company has experienced significant growth in consumer indirect lending at the higher end of the credit spectrum during the first nine months of 2025. The competitive environment, combined with ongoing economic uncertainty, provides a challenging environment in which to maintain and increase the Company’s net interest margin. Should economic conditions worsen, the Company is exposed to increased credit risk from both commercial and consumer borrowers. Furthermore, should market interest rates or the federal funds rate increase or decrease at significant levels, particularly over a short period of time, the Company’s net interest margin and net interest income could be negatively impacted.

Previous wording

The Company earned net income of $0.2 million, or $0.03 per diluted common share, during the three months ended June 30, 2025, compared to $2.1 million, or $0.34 per diluted common share, for the three months ended June 30, 2024. For the six months ended June 30, 2025, net income totaled $1.9 million, or $0.32 per diluted share, compared to $4.2 million, or $0.68 per diluted share for the six months ended June 30, 2024. The decrease in net income during both the three months and the six months ended June 30, 2025, compared to the previous periods, resulted primarily from an increase in the Company’s provision for credit losses on loans and leases.

Current wording

The Company earned net income of $1.9 million, or $0.32 per diluted common share, during the three months ended September 30, 2025, compared to $2.2 million, or $0.36 per diluted common share, for the three months ended September 30, 2024. For the nine months ended September 30, 2025, net income totaled $3.9 million, or $0.64 per diluted share, compared to $6.5 million, or $1.04 per diluted share for the nine months ended September 30, 2024. The decrease in net income during both the three months and the nine months ended September 30, 2025, compared to the previous periods, resulted primarily from increases in the Company’s provision for credit losses on loans and leases and non-interest expense, partially offset by increases in net interest income.

Previous wording

Summarized condensed consolidated statements of operations are included below for the three and six months ended June 30, 2025 and 2024.

Current wording

Summarized condensed consolidated statements of operations are included below for the three and nine months ended September 30, 2025 and 2024.

Previous wording

The discussion that follows summarizes the most significant activity that drove changes in the Company’s operating results during the six months ended June 30, 2025, as compared to the six months ended June 30, 2024.

Current wording

The discussion that follows summarizes the most significant activity that drove changes in the Company’s operating results during the nine months ended September 30, 2025, as compared to the nine months ended September 30, 2024.

Previous wording

Net interest income increased by $0.2 million, or 0.9%, comparing the six months ended June 30, 2025 to the six months ended June 30, 2024. Net interest margin was 3.56% for the six months ended June 30, 2025, compared to 3.67% for the six months ended June 30, 2024. The increase in net interest income comparing the two six-month periods resulted from a combination of increased average interest-earning-asset balances and decreased average rates on deposits. While net interest income increased modestly, net interest margin decreased due to the significance increase in average interest-earning assets over the period, combined with a declining interest rate environment. Average interest-earnings assets increased by $42.9 million comparing the six months ended June 30, 2025 to the six months ended June 30, 2024, driven by growth in consumer indirect loans and, to a lesser extent, investment securities.

Current wording

Net interest income increased by $0.6 million, or 2.3%, comparing the nine months ended September 30, 2025 to the nine months ended September 30, 2024. The increase resulted from a combination of increased average interest-earning asset balances and decreased average rates on deposits. Average interest-earning assets increased by $45.3 million during the first nine months of 2025, driven by growth in consumer indirect loans and, to a lesser extent, investment securities. While decreases in deposit costs were favorable to the Company’s net interest income, net interest margin decreased as the average yield on interest-earnings assets declined at a faster pace than the average rate on interest-bearing liabilities amid the declining interest rate environment. Net interest margin was 3.57% for the nine months ended September 30, 2025, compared to 3.65% for the nine months ended September 30, 2024.

Previous wording

Non-interest income remained relatively consistent, totaling $1.7 million for both the six months ended June 30, 2025 and 2024.

Current wording

Non-interest income remained relatively consistent, totaling $2.6 million for both the nine months ended September 30, 2025 and 2024.

Previous wording

As of June 30, 2025, the Company’s assets totaled $1,143.4 million, compared to $1,101.1 million as of December 31, 2024, an increase of 3.8%.

Current wording

As of September 30, 2025, the Company’s assets totaled $1,147.2 million, compared to $1,101.1 million as of December 31, 2024, an increase of 4.2%.

Previous wording

Total loans increased by $48.4 million, or 5.9%, as of June 30, 2025, compared to December 31, 2024. The increase was driven primarily by growth of $66.4 million in consumer indirect loans during the six months ended June 30, 2025. The indirect lending platform focuses on recreational and equipment consumer lending on the higher end of the credit spectrum. Collateral financed in the indirect portfolio primarily includes boats, recreational vehicles/campers, horse trailers and cargo trailers. The weighted average credit score of new indirect loans financed during the six months ended June 30, 2025 was 798, while the weighted average credit score for the entire portfolio was 781. In addition to the indirect portfolio, the Company also grew its multi-family residential real estate lending category during the six months ended June 30, 2025 by $17.8 million. Loan growth during the six months ended June 30, 2025 was partially offset by reductions of $35.8 million in other lending categories, primarily construction and non-residential commercial real estate. For the six months ended June 30, 2025, average loan balances increased by $20.4 million, or 2.5%, compared to the six months ended June 30, 2024.

Current wording

Total loans increased by $44.5 million, or 5.4%, as of September 30, 2025, compared to December 31, 2024. The increase was driven primarily by growth of $75.9 million in consumer indirect loans during the nine months ended September 30, 2025. The indirect lending platform focuses on consumer lending on the higher end of the credit spectrum. Collateral financed in the indirect portfolio primarily includes boats, recreational vehicles/campers, horse trailers and cargo trailers. The weighted average credit score of new indirect loans financed during the nine months ended September 30, 2025 was 798, while the weighted average credit score for the entire portfolio was 782. In addition to the indirect portfolio, the Company also grew its multi-family residential real estate and commercial and industrial lending categories during the nine months ended September 30, 2025 by $11.7 million and $2.3 million, respectively. Loan growth during the nine months ended September 30, 2025 was partially offset by net reductions of $45.4 million in other lending categories, primarily construction and non-residential commercial real estate. For the nine months ended September 30, 2025, average loan balances increased by $30.6 million, or 3.7%, compared to the nine months ended September 30, 2024.

Previous wording

Nonperforming assets, including loans in non-accrual status and other real estate owned, totaled $3.7 million as of June 30, 2025, compared to $5.5 million as of December 31, 2024. As a percentage of total assets, nonperforming assets totaled 0.33% as of June 30, 2025, compared to 0.50% as of December 31, 2024. For the six months ended June 30, 2025, net charge-offs as a percentage of average loans totaled 0.47%, compared to 0.10% for the six months ended June 30, 2024. The increase in net charge-offs during the six months ended June 30, 2025 was due to a partial charge-off of one individually evaluated commercial loan of $1.2 million, as well as an increase in charge-offs associated with the indirect portfolio. For the six months ended June 30, 2025, net charge-offs associated with the indirect portfolio totaled $0.9 million, or 0.55% of average loans, compared to $0.5 million, or 0.33% of average loans, for the six months ended June 30, 2024.

Current wording

Nonperforming assets, including loans in non-accrual status and other real estate owned, totaled $2.2 million as of September 30, 2025, compared to $5.5 million as of December 31, 2024. As a percentage of total assets, nonperforming assets totaled 0.19% as of September 30, 2025, compared to 0.50% as of December 31, 2024. For the nine months ended September 30, 2025, annualized net charge-offs as a percentage of average loans totaled 0.52% compared to 0.10% for the nine months ended September 30, 2024. Net charge-offs over the nine months ended September 30, 2025 totaled $3.3 million, of which $2.2 million was associated with individually evaluated commercial loans and $1.3 million was associated with the consumer indirect portfolio, partially offset by $0.2 million in net recoveries in other portfolios.

Previous wording

Total deposits increased by $14.3 million, or 1.5%, during the six months ended June 30, 2025, due primarily to increases in interest-bearing demand deposit accounts, as well as the addition of brokered certificates of deposit obtained to assist in the management of deposit costs. Core deposits, which exclude time deposits of $250 thousand or more and all wholesale brokered deposits, totaled $816.1 million, or 82.7% of total deposits, as of June 30, 2025, compared to $837.7 million, or 86.1% of total deposits, as of December 31, 2024.

Current wording

Total deposits increased by $29.9 million, or 3.1%, during the nine months ended September 30, 2025, due primarily to increases in interest-bearing demand deposit accounts, as well as the addition of brokered certificates of deposit obtained to assist in the management of deposit costs. Core deposits, which exclude time deposits of $250 thousand or more and all wholesale brokered deposits, totaled $838.4 million, or 83.6% of total deposits, as of September 30, 2025, compared to $837.7 million, or 86.1% of total deposits, as of December 31, 2024.

Previous wording

As of June 30, 2025, the Company had $35.0 million in short-term borrowings outstanding, compared to $10.0 million outstanding as of December 31, 2024. The short-term borrowings were held as part of the Company’s efforts to maintain on-balance sheet liquidity levels while repricing deposits at lower rates. As of both June 30, 2025 and December 31, 2024, all outstanding short-term borrowings had remaining maturities of less than 30 days. The amount outstanding as of June 30, 2025 included $20.0 million borrowed from the Federal Home Loan Bank of Atlanta (“FHLB”) and $15.0 million borrowed from the Federal Reserve Bank’s (“FRB”) discount window. As of December 31, 2024, all short-term borrowings outstanding were borrowed exclusively from the FHLB.

Current wording

As of September 30, 2025, the Company had $20.0 million in short-term borrowings outstanding compared to $10.0 million outstanding as of December 31, 2024. The short-term borrowings were held as part of the Company’s efforts to maintain on-balance sheet liquidity levels while repricing deposits at lower rates. As of both September 30, 2025 and December 31, 2024, all outstanding short-term borrowings had remaining maturities of less than 30 days. The amount outstanding as of September 30, 2025 included $10.0 million borrowed from the Federal Home Loan Bank of Atlanta (“FHLB”) and $10.0 million borrowed from the Federal Reserve Bank’s (“FRB”) discount window. As of December 31, 2024, all short-term borrowings outstanding were borrowed exclusively from the FHLB.

Previous wording

As of June 30, 2025, the Company held cash, federal funds sold and securities purchased under reverse repurchase agreements totaling $58.8 million, or 5.1% of total assets, compared to $52.9 million, or 4.8% of total assets, as of December 31, 2024. Investment securities, including both the available-for-sale and held-to-maturity portfolios, totaled $157.1 million as of June 30, 2025, compared to $168.6 million as of December 31, 2024. As of June 30, 2025, the expected average life of securities in the investment portfolio was 3.7 years, compared to 3.6 years as of December 31, 2024.

Current wording

As of September 30, 2025, the Company held cash, federal funds sold and securities purchased under reverse repurchase agreements totaling $59.5 million, or 5.2% of total assets, compared to $52.9 million, or 4.8% of total assets, as of December 31, 2024. Investment securities, including both the available-for-sale and held-to-maturity portfolios, totaled $164.5 million as of September 30, 2025 compared to $168.6 million as of December 31, 2024. As of September 30, 2025, the expected average life of securities in the investment portfolio was 4.2 years compared to 3.6 years as of December 31, 2024. During the nine months ended September 30, 2025 and 2024, the Company purchased $34.0 million and $27.5 million, respectively, of investment securities at market rates at the time of purchase. These purchases, combined with the maturity and paydown of investment securities at lower rates have led to continued improvement in yield on the portfolio. The yield on the investment securities, including both available-for-sale and held to maturity securities, totaled 3.52% for the nine months ended September 30, 2025, compared to 2.93% for the nine months ended September 30, 2024.

Previous wording

Shareholders’ equity increased by $3.3 million, or 3.3%, as of June 30, 2025, compared to December 31, 2024. The increase in shareholders’ equity during the six months ended June 30, 2025 resulted primarily from earnings, net of dividends paid and repurchases of shares of the Company's common stock. In addition, shareholders' equity was positively impacted during the six months ended June 30, 2025 by reductions in the Company's accumulated other comprehensive loss resulting from changes in market interest rates, as well as the maturity of lower yielding investment securities.

Current wording

Shareholders’ equity increased by $5.6 million, or 5.7%, as of September 30, 2025, compared to December 31, 2024. The increase in shareholders’ equity during the nine months ended September 30, 2025 resulted primarily from earnings, net of dividends paid and repurchases of shares of the Company's common stock. In addition, shareholders' equity was positively impacted during the nine months ended September 30, 2025 by reductions in the Company's accumulated other comprehensive loss resulting from changes in market interest rates, as well as the maturity of lower yielding investment securities.

Previous wording

During the six months ended June 30, 2025, the Company declared cash dividends totaling $0.14 per share on its common stock, compared to cash dividends totaling $0.10 per share on its common stock during the six months ended June 30, 2024.

Current wording

During the nine months ended September 30, 2025, the Company declared cash dividends totaling $0.21 per share on its common stock, compared to cash dividends totaling $0.15 per share on its common stock during the nine months ended September 30, 2024.

Previous wording

During the six months ended June 30, 2025, the Company completed the repurchase of 40,000 shares of its common stock at a weighted average price of $13.38 per share. The repurchases were completed under the Company’s previously announced share repurchase program. As of June 30, 2025, 872,813 shares remained available for repurchase under the program.

Current wording

During the nine months ended September 30, 2025, the Company completed the repurchase of 40,000 shares of its common stock at a weighted average price of $13.38 per share. The repurchases were completed under the Company’s previously announced share repurchase program. As of September 30, 2025, 872,813 shares remained available for repurchase under the program.

Previous wording

During the six months ended June 30, 2025, the Bank continued to maintain capital ratios at higher levels than required to be considered a “well-capitalized” institution under applicable banking regulations. As of June 30, 2025, the Bank’s common equity Tier 1 capital and Tier 1 risk-based capital ratios were each 10.70%. Its total capital ratio was 11.93%, and its Tier 1 leverage ratio was 9.23%.

Current wording

During the nine months ended September 30, 2025, the Bank continued to maintain capital ratios at higher levels than required to be considered a “well-capitalized” institution under applicable banking regulations. As of September 30, 2025, the Bank’s common equity Tier 1 capital and Tier 1 risk-based capital ratios were each 10.77%. Its total capital ratio was 11.92%, and its Tier 1 leverage ratio was 9.19%.

Previous wording

During the six months ended June 30, 2025, the Company continued its renovation of a banking center office in Daphne, Alabama that was purchased from another financial institution. This location is expected to serve as the Bank’s initial deposit gathering facility in the Daphne/Mobile area. It is currently anticipated that the location will open to the public during the first half of 2026. In addition, during the six months ended June 30, 2025, the Company purchased land in Mobile, Alabama. The Company intends to develop the land into an office complex that will house the Company’s indirect lending operation, as well as provide an additional banking center in the area.

Current wording

During the nine months ended September 30, 2025, the Company continued its renovation of a banking center office in Daphne, Alabama that was purchased from another financial institution. This location is expected to serve as the Bank’s initial deposit gathering facility in the Daphne/Mobile area. It is currently anticipated that the location will open to the public during the first half of 2026. In addition, in October 2025, the Company opened a new automated banking facility in Mountain Brook, Alabama.

Previous wording

The following tables show the average balances of each principal category of assets, liabilities and shareholders’ equity for the three and six months ended June 30, 2025 and 2024. Additionally, the tables provide an analysis of interest revenue or expense associated with each category, along with the accompanying yield or rate percentage. Net interest margin is calculated for each period presented as net interest income divided by average total interest-earning assets.

Current wording

The following tables show the average balances of each principal category of assets, liabilities and shareholders’ equity for the three and nine months ended September 30, 2025 and 2024. Additionally, the tables provide an analysis of interest revenue or expense associated with each category, along with the accompanying yield or rate percentage. Net interest margin is calculated for each period presented as net interest income divided by average total interest-earning assets.

Previous wording

Interest income increased by $49 thousand, comparing the six months ended June 30, 2025 to the six months ended June 30, 2024. While increased average earning-asset balances contributed $1.0 million in interest income growth, this growth was mostly offset by reductions in average yield. Amid a declining interest rate environment, average yields decreased in all interest-earning categories, except investment securities which provided the majority of interest income growth comparing the two six-month periods.

Current wording

Interest income increased by $0.3 million, comparing the nine months ended September 30, 2025 to the nine months ended September 30, 2024. While increased average interest-earning asset balances contributed $1.8 million in interest income growth, this growth was offset by reductions in average yield. Amid a declining interest rate environment, average yields decreased in all interest-earning categories, except investment securities which provided the majority of interest income growth comparing the two nine-month periods.

Previous wording

Interest expense decreased by $0.1 million, comparing the six months ended June 30, 2025 to the six months ended June 30, 2024. While a decrease in average rates paid on deposits contributed $0.5 million to the decrease in interest expense, these savings were partially offset by the impact of growth in average deposits and borrowings which increased interest expense by $0.4 million comparing the two six-month periods.

Current wording

Interest expense decreased by $0.3 million, comparing the nine months ended September 30, 2025 to the nine months ended September 30, 2024. While a decrease in average rates paid on deposits contributed $1.1 million to the decrease in interest expense, these savings were partially offset by the impact of growth in average deposits and borrowings which increased interest expense by $0.8 million comparing the two nine-month periods.

Previous wording

The Company’s net interest income and net interest margin during the six months ended June 30, 2025 continued to be impacted by changes in the interest rate environment that began during the latter months of 2024. Notably, between September and December 2024, the federal funds rate was reduced by 100 basis points, and generally, the Company’s earning assets repriced more quickly than interest-bearing liabilities during the latter part of 2024, reducing the Company’s net interest margin to 3.41% during the three months ended December 31 2024. During the six months ended June 30, 2025, management continued efforts to both maximize earning asset growth and reduce interest expense, resulting in an improvement in net interest margin by 12 basis points, comparing the first quarter of 2025 to the fourth quarter of 2024, and an additional six basis points, comparing the second quarter of 2025 to the first quarter of 2025. While net interest margin improved for two consecutive quarters, it remained below the levels recorded during the earlier periods of 2024. For the six months ended June 30, 2025, net interest margin was 3.56%, compared to 3.67% for the six months ended June 30, 2024. While management is continuing efforts to improve net interest margin, the results of these efforts cannot be fully predicted. Should market interest rates increase or decrease at significant levels, particularly over a short period of time, the Company’s net interest margin and net interest income could be negatively impacted.

Current wording

The Company’s net interest income and net interest margin during the nine months ended September 30, 2025 continued to be impacted by changes in the interest rate environment that began during the latter months of 2024. Notably, between September and December 2024, the federal funds rate was reduced by 100 basis points, and generally, the Company’s interest-earning assets repriced more quickly than interest-bearing liabilities during the latter part of 2024, reducing the Company’s net interest margin to 3.41% during the three months ended December 31 2024. During the nine months ended September 30, 2025, management continued efforts to both maximize earning asset growth and reduce interest expense, resulting in an improvement in net interest margin by 19 basis points, comparing the third quarter of 2025 to the fourth quarter of 2024. While net interest margin improved for three consecutive quarters, it remained below the levels recorded during the earlier periods of 2024. For the nine months ended September 30, 2025, net interest margin was 3.57%, compared to 3.65% for the nine months ended September 30, 2024. In September 2025, the federal funds rate was reduced by 25 basis points, marking the first reduction in the rate since December 2024. In October 2025, the federal funds rate was reduced by an additional 25 basis points. While management is continuing efforts to improve net interest margin, the results of these efforts cannot be fully predicted. Should market interest rates increase or decrease at significant levels, particularly over a short period of time, the Company’s net interest margin and net interest income could be negatively impacted.

Previous wording

For the six months ended June 30, 2025, the Company recorded a provision for credit losses of $3.2 million. No provision for credit losses was recorded for the six months ended June 30, 2024. Of the total provision recorded during the 2025 period, $2.3 million was associated with the consumer indirect loan portfolio, while $0.9 million was associated with specific reserves added for two individually evaluated commercial loans. The increased provision associated with the consumer indirect portfolio was attributable to both significant growth in the portfolio during the six months ended June 30, 2025, as well as an increase in net charge-offs. As of June 30, 2025, the Company’s allowance for credit losses ("ACL") on loans and leases as a percentage of total loans was 1.31%, compared to 1.24% as of December 31, 2024.

Current wording

For the nine months ended September 30, 2025, the Company recorded a provision for credit losses of $3.8 million, compared to $0.2 million for the nine months ended September 30, 2024. Of the total provision in the 2025 period, $2.8 million was associated with the consumer indirect loan portfolio, $1.1 million with the C&I portfolio, $0.1 million with the non-residential CRE portfolio and $0.1 million with the multi-family real estate category. These provisions were partially offset by a $0.3 million net reduction of credit losses in other loan categories. The increased provision associated with the consumer indirect portfolio was attributable to significant growth in the portfolio during the nine months ended September 30, 2025, as well as an increase in net charge-offs, particularly in the second quarter of 2025. The provisions recorded for C&I and CRE were primarily the result of credit allowances on two individually evaluated loans.

Previous wording

Net charge-offs totaled $2.0 million and $0.4 million for the six months ended June 30, 2025 and 2024, respectively. Of the net charge-offs recorded during the six months ended June 30, 2025, $1.2 million was associated with one individually evaluated commercial loan and $0.9 million was associated with the consumer indirect loan portfolio. These net charge-offs were partially offset by $0.1 million in net recoveries associated with the consumer direct portfolio. The $1.2 million charge-off on the individually evaluated commercial loan had been fully reserved during 2024. Of the net charge-offs recorded during the six months ended June 30, 2024, $0.5 million was associated with the consumer indirect portfolio, partially offset by $0.1 million in net recoveries in the consumer direct portfolio.

Current wording

Net charge-offs totaled $3.3 million and $0.6 million for the nine months ended September 30, 2025 and 2024, respectively. Of the net charge-offs recorded during the nine months ended September 30, 2025, $2.2 million was associated with one individually evaluated commercial loan and $1.3 million was associated with the consumer indirect loan portfolio. The individually evaluated commercial loan had been partially reserved during 2024. These amounts were partially offset by $0.2 million in net recoveries associated with other loan categories. Of the net charge-offs recorded during the nine months ended September 30, 2024, $0.8 million was associated with the consumer indirect portfolio, partially offset by $0.2 million in net recoveries in the consumer direct portfolio.

Previous wording

As of June 30, 2025, the Company’s ACL as a percentage of total loans and leases was 1.31%, compared to 1.24% as of December 31, 2024. While we believe that the methodologies and calculations that have been used in the determination of the ACL are adequate, the determination of the appropriateness of the ACL is complex and requires judgment by management about the effects of matters that are inherently uncertain. Factors beyond our control, such as changes in economic forecasts related to the national economy, changes in consumer behavior, or economic deterioration in service areas in which the Company operates, may negatively and materially affect asset quality and the adequacy of the ACL, as well as the resulting provision for credit losses.

Current wording

As of September 30, 2025, the Company’s ACL as a percentage of total loans and leases was 1.23%, compared to 1.24% as of December 31, 2024. While we believe that the methodologies and calculations that have been used in the determination of the ACL are adequate, the determination of the appropriateness of the ACL is complex and requires judgment by management about the effects of matters that are inherently uncertain. Factors beyond our control, such as changes in economic forecasts related to the national economy, changes in consumer behavior, or economic deterioration in service areas in which the Company operates, may negatively and materially affect asset quality and the adequacy of the ACL, as well as the resulting provision for credit losses.

Previous wording

The Company’s non-interest income remained relatively consistent, totaling $1.7 million for both the six months ended June 30, 2025 and 2024. Management continues to evaluate opportunities to add non-interest revenue streams and grow existing streams; however, significant variation in non-interest income is not expected in the near term.

Current wording

The Company’s non-interest income remained relatively consistent, totaling $2.6 million for both the nine months ended September 30, 2025 and 2024. Management continues to evaluate opportunities to add non-interest revenue streams and grow existing streams; however, significant variation in non-interest income is not expected in the near term.

Previous wording

The provision for income taxes was $0.6 million and $1.3 million for the six months ended June 30, 2025 and 2024, respectively. The Company’s effective tax rate was 22.6% and 23.0%, respectively, for the same periods.

Current wording

The provision for income taxes was $1.1 million and $2.0 million for the nine months ended September 30, 2025 and 2024, respectively. The Company’s effective tax rate was 22.9% and 23.5%, respectively, for the same periods.

Previous wording

The investment securities portfolio is used by management to provide liquidity, to generate interest income and for use as collateral for public deposits and wholesale funding. Risk and return can be adjusted by altering the duration, composition and/or balance of the portfolio. The expected average life of securities in the investment portfolio was 3.7 years and 3.6 years as of June 30, 2025 and December 31, 2024, respectively.

Current wording

The investment securities portfolio is used by management to provide liquidity, to generate interest income and for use as collateral for public deposits and wholesale funding. Risk and return can be adjusted by altering the duration, composition and/or balance of the portfolio. The expected average life of securities in the investment portfolio was 4.2 years and 3.6 years as of September 30, 2025 and December 31, 2024, respectively.

Previous wording

Available-for-sale securities are recorded at estimated fair value, with unrealized gains or losses recognized, net of taxes, in accumulated other comprehensive loss, a separate component of shareholders’ equity. As of June 30, 2025, available-for-sale securities totaled $156.6 million, or 99.6% of the total investment portfolio, compared to $167.9 million, or 99.6% of the total investment portfolio, as of December 31, 2024.

Current wording

Available-for-sale securities are recorded at estimated fair value, with unrealized gains or losses recognized, net of taxes, in accumulated other comprehensive loss, a separate component of shareholders’ equity. As of September 30, 2025, available-for-sale securities totaled $164.0 million, or 99.7% of the total investment portfolio, compared to $167.9 million, or 99.6% of the total investment portfolio, as of December 31,

Previous wording

Held-to-maturity securities are recorded at amortized cost and represent securities that the Company both intends and has the ability to hold to maturity. As of June 30, 2025, held-to-maturity securities totaled $0.6 million, or 0.4% of the total investment portfolio, compared to $0.7 million, or 0.4% of the total investment portfolio, as of December 31, 2024. Held-to-maturity securities consisted of commercial mortgage-backed securities, obligations of U.S. government-sponsored agencies, and obligations of state and political subdivisions.

Current wording

Held-to-maturity securities are recorded at amortized cost and represent securities that the Company both intends and has the ability to hold to maturity. As of September 30, 2025, held-to-maturity securities totaled $0.5 million, or 0.3% of the total investment portfolio, compared to $0.7 million, or 0.4% of the total investment portfolio, as of December 31, 2024. Held-to-maturity securities consisted of commercial mortgage-backed securities, obligations of U.S. government-sponsored agencies, and obligations of state and political subdivisions.

Previous wording

Net unrealized losses in the available-for-sale portfolio totaled $3.0 million as of June 30, 2025, compared to $6.7 million as of December 31, 2024. Net unrealized losses within the available-for-sale portfolio were recognized, net of tax, in accumulated other comprehensive loss.

Current wording

Net unrealized losses in the available-for-sale portfolio totaled $2.0 million as of September 30, 2025, compared to $6.7 million as of December 31, 2024. Net unrealized losses within the available-for-sale portfolio were recognized, net of tax, in accumulated other comprehensive loss.

Previous wording

The Company’s total loan portfolio increased by $48.4 million, or 5.9%, as of June 30, 2025, compared to December 31, 2024. The tables below summarize loan balances by portfolio category, as well as the ACL, as of the end of each of the most recent five quarters as of June 30, 2025:

Current wording

The Company’s total loan portfolio increased by $44.5 million, or 5.4%, as of September 30, 2025, compared to December 31, 2024. The tables below summarize loan balances by portfolio category, as well as the ACL, as of the end of each of the most recent five quarters as of September 30, 2025:

Previous wording

As of June 30, 2025 and December 31, 2024, the Company’s reserve for unfunded commitments, which is recorded in other liabilities in the Company’s consolidated balance sheets, totaled $0.5 million and $0.4 million, respectively.

Current wording

As of both September 30, 2025 and December 31, 2024, the Company’s reserve for unfunded commitments, which is recorded in other liabilities in the Company’s consolidated balance sheets, totaled $0.4 million.

Previous wording

Total deposits increased to $986.8 million as of June 30, 2025, from $972.6 million as of December 31, 2024, an increase of 1.5%. The increase was due primarily to increases in interest-bearing money market accounts, as well as the addition of brokered certificates of deposit obtained to assist in the management of deposit costs over specific terms. Core deposits, which exclude time deposits of $250 thousand or more and all brokered deposits, provide a relatively stable funding source that supports earning assets. Core deposits totaled $816.1 million, or 82.7% of total deposits, as of June 30, 2025, compared to $837.7 million, or 86.1% of total deposits, as of December 31, 2024.

Current wording

Total deposits increased to $1,002.5 million as of September 30, 2025, from $972.6 million as of December 31, 2024, an increase of 3.1%. The increase was due primarily to increases in interest-bearing money market accounts, as well as the addition of brokered certificates of deposit obtained to assist in the management of deposit costs over specific terms. Core deposits, which exclude time deposits of $250 thousand or more and all brokered deposits, provide a relatively stable funding source that supports earning assets. Core deposits totaled $838.4 million, or 83.6% of total deposits, as of September 30, 2025, compared to $837.7 million, or 86.1% of total deposits, as of December 31, 2024.

Previous wording

Other interest-bearing liabilities that are used by the Company as an alternative source of funds consist of federal funds purchased, securities sold under agreements to repurchase, FHLB advances, and subordinated debt. As of June 30, 2025, other interest-bearing liabilities totaled 5.2% of total interest-bearing liabilities, compared to 2.5% as of December 31, 2024.

Current wording

Other interest-bearing liabilities that are used by the Company as an alternative source of funds consist of federal funds purchased, securities sold under agreements to repurchase, FHLB advances, and subordinated debt. As of September 30, 2025, other interest-bearing liabilities totaled 3.5% of total interest-bearing liabilities, compared to 2.5% as of December 31, 2024.

Previous wording

As of June 30, 2025, shareholders’ equity totaled $101.9 million, or 8.9% of total assets, compared to $98.6 million, or 9.0% of total assets, as of December 31, 2024. The increase in shareholders’ equity during the six months ended June 30, 2025 resulted primarily from earnings, net of dividends paid and repurchases of shares of the Company's common stock. In addition, shareholders' equity was positively impacted during the six months ended June 30, 2025 by reductions in the Company's accumulated other comprehensive loss resulting from changes in market interest rates, as well as the maturity of lower yielding investment securities.

Current wording

As of September 30, 2025, shareholders’ equity totaled $104.2 million, or 9.1% of total assets, compared to $98.6 million, or 9.0% of total assets, as of December 31, 2024. The increase in shareholders’ equity during the nine months ended September 30, 2025 resulted primarily from earnings, net of dividends paid and repurchases of shares of the Company's common stock. In addition, shareholders' equity was positively impacted during the nine months ended September 30, 2025 by reductions in the Company's accumulated other comprehensive loss resulting from changes in market interest rates, as well as the maturity of lower yielding investment securities.

Previous wording

During the six months ended June 30, 2025, the Company declared cash dividends totaling $0.14 per share on its common stock, compared to cash dividends totaling $0.10 per share on its common stock during the six months ended June 30, 2024.

Current wording

During the nine months ended September 30, 2025, the Company declared cash dividends totaling $0.21 per share on its common stock, compared to cash dividends totaling $0.15 per share on its common stock during the nine months ended September 30, 2024.

Previous wording

In addition, during the six months ended June 30, 2025, the Company completed the repurchase of 40,000 shares of its common stock at a weighted average price of $13.38 per share. The repurchases were completed under the Company’s previously announced share repurchase program. As of June 30, 2025, 872,813 shares remained available for repurchase under the program. During the six months ended June 30, 2024, the Company repurchased 77,000 shares of its common stock at a weighted average price of $10.60 per share.

Current wording

In addition, during the nine months ended September 30, 2025, the Company completed the repurchase of 40,000 shares of its common stock at a weighted average price of $13.38 per share. The repurchases were completed under the Company’s previously announced share repurchase program. As of September 30, 2025, 872,813 shares remained available for repurchase under the program. During the nine months ended September 30, 2024, the Company repurchased 106,500 shares of its common stock at a weighted average price of $10.67 per share.