FS Bancorp, Inc.

Previous wording

At June 30, 2025, the Company's loan portfolio included commercial real estate loans, residential real estate loans, consumer loans, and commercial business loans representing 35.0%, 29.8%, 23.2%, and 12.0% of the portfolio, respectively.

Current wording

At September 30, 2025, the Company's loan portfolio included commercial real estate loans, residential real estate loans, consumer loans, and commercial business loans representing 35.4%, 29.1%, 22.9%, and 12.4% of the portfolio, respectively.

Previous wording

Fixture secured loans to finance window, gutter, siding replacement, solar panels, spas, and other improvement renovations are a large segment of the consumer loan portfolio. These fixture-secured consumer loans are dependent on the Company’s contractor/dealer network of 34 currently active fixture dealerships located throughout Washington, Oregon, California, Idaho, Colorado, Nevada, Arizona, Minnesota, Texas, Utah, Massachusetts, Montana, and New Hampshire. During the three months ended June 30, 2025, the Company originated 1,620 fixture-secured consumer loans with an aggregate total of $37.6 million. Five contractor/dealers accounted for 81.9% of the dollar volume funded in this category. In addition, four states represented nearly three-quarters of the loan originations: Washington, Oregon, California, and Idaho with 37.5%, 17.9%, 12.1%, and 7.1% of total loan volume, respectively.

Current wording

Indirect home improvement loans to finance window, gutter, siding replacement, solar panels, spas, and other improvement renovations are a large segment of the consumer loan portfolio. These indirect home improvement loans are dependent on the Company’s contractor/dealer network of 33 currently active fixture dealerships located throughout Washington, Oregon, California, Idaho, Colorado, Nevada, Arizona, Minnesota, Texas, Utah, Massachusetts, Montana, and New Hampshire. During the three months ended September 30, 2025, the Company originated 1,691 indirect home improvement loans with an aggregate total of $38.4 million. Five contractor/dealers accounted for 75.7% of the dollar volume funded in this category. In addition, four states represented nearly three-quarters of the loan originations: Washington, Oregon, California, and Idaho with 35.9%, 20.0%, 15.6%, and 4.9% of total loan volume, respectively.

Previous wording

The Company originates one-to-four-family residential mortgage loans through referrals from real estate agents, financial planners, builders, and from existing customers. Retail banking customers are also an important source of the Company’s loan originations. The Company originated $193.3 million of one-to-four-family loans (which included loans held for sale, loans held for investment and fixed seconds) in addition to $6.0 million of loans brokered to other institutions through the home lending segment during the three months ended June 30, 2025, of which $127.1 million were sold to investors. Of the loans sold to investors, $40.9 million were sold to the FNMA, FHLMC, FHLB, and/or GNMA with servicing rights retained for the purpose of further developing these customer relationships.

Current wording

The Company originates one-to-four-family residential mortgage loans through referrals from real estate agents, financial planners, builders, and from existing customers. Retail banking customers are also an important source of the Company’s loan originations. The Company originated $166.9 million of one-to-four-family loans (which included loans held for sale, loans held for investment and fixed seconds) in addition to $8.7 million of loans brokered to other institutions through the home lending segment during the three months ended September 30, 2025, of which $156.4 million were sold to investors. Of the loans sold to investors, $53.8 million were sold to the FNMA, FHLMC, FHLB, and/or GNMA with servicing rights retained for the purpose of further developing these customer relationships.

Previous wording

***Assets.***Total assets increased $146.8 million to $3.18 billion at June 30, 2025, from $3.03 billion at December 31, 2024, primarily due to increases of $80.3 million in loans receivable, net, $25.8 million in loans held for sale, $23.1 million in securities held-to-maturity, and $21.5 million in securities available-for-sale, partially offset by a decrease of $4.0 million in FHLB stock funded by a combination of on-balance sheet liquidity and borrowings.

Current wording

***Assets.***Total assets increased $179.6 million to $3.21 billion at September 30, 2025, from $3.03 billion at December 31, 2024, primarily due to increases of $97.7 million in loans receivable, net, $30.5 million in securities available-for-sale, $29.6 million in total cash and cash equivalents, $22.9 million in securities held-to-maturity, and $10.7 million in loans held for sale, partially offset by decreases of $7.6 million in FHLB stock, $4.4 million in other assets, $2.4 million in core deposits intangible, net, and $1.7 million in certificates of deposit at other financial institutions. Asset growth was primarily funded by brokered deposits.

Previous wording

Loans receivable, net increased $80.3 million to $2.58 billion at June 30, 2025, compared to $2.50 billion at December 31, 2024. CRE loans increased $44.8 million at June 30, 2025, compared to December 31, 2024, and reflects increases of $19.9 million in commercial and speculative construction and development loans, $18.0 million in multi-family loans, and $9.9 million in CRE owner occupied loans, partially offset by a decrease of $2.9 million in CRE non-owner occupied loans. Residential real estate loans increased $37.1 million for the same time periods, driven by increases in one-to-four-family loans (excluding loans held for sale) of $22.6 million, home equity of $10.5 million, and residential custom construction of $4.1 million. Total undisbursed construction and development loan commitments increased $30.8 million to $204.9 million at June 30, 2025, as compared to $174.1 million at December 31, 2024. Commercial business loans increased $12.6 million at June 30, 2025, compared to December 31, 2024, due to increases in C&I loans of $7.5 million and $5.0 million in warehouse lending. Consumer loans decreased $13.9 million at June 30, 2025, compared to December 31, 2024, primarily due to decreases of $11.6 million in indirect home improvement loans and $2.2 million in marine loans. Loan growth was concentrated in construction and development, residential real estate, and multi-family loan segments, reflecting sustained demands in those markets, while consumer balances, primarily in indirect home improvement loans declined during the period as the Company continued to manage indirect exposures.

Current wording

Loans receivable, net, increased $97.7 million to $2.60 billion at September 30, 2025, compared to $2.50 billion at December 31, 2024.

Previous wording

Loans held for sale, consisting of one-to-four-family loans, increased $25.8 million to $53.6 million at June 30, 2025, from $27.8 million at December 31, 2024. The Company continues to invest in its home lending operations and strategically manage production capacity in the markets we serve.

Current wording

Loans held for sale, consisting of one-to-four-family loans, increased $10.7 million to $38.6 million at September 30, 2025, from $27.8 million at December 31, 2024. The Company continues to invest in its home lending operations and strategically manage production capacity in the markets we serve.

Previous wording

One-to-four-family loan originations for the six months ended June 30, 2025, included $204.6 million of loans originated for sale, $109.7 million of portfolio loans including first and second liens, and $10.0 million of loans brokered to other institutions.

Current wording

One-to-four-family loan originations for the nine months ended September 30, 2025, included $354.2 million of loans originated for sale, $147.4 million of portfolio loans including first and second liens, and $18.7 million of loans brokered to other institutions.

Previous wording

During the six months ended June 30, 2025, the Company sold $219.0 million of one-to-four-family loans, compared to $258.4 million for the same period one year ago. The decrease in loan sales reflects a more competitive market environment and lower purchase volume, partially offset by higher refinance activity. The Company remains focused on managing loan production capacity and maintaining a pipeline consistent with market demand. Gross margin on home loan sales was 3.14% for both the six months ended June 30, 2025 and 2024. Gross margin is defined as the margin on loans sold without the impact of deferred loan costs.

Current wording

During the nine months ended September 30, 2025, the Company sold $375.4 million of one-to-four-family loans, compared to $426.0 million for the same period one year ago. The decrease in loan sales reflects a more competitive market environment and lower purchase volume, partially offset by higher refinance activity. The Company remains focused on managing loan production capacity and maintaining a pipeline consistent with market demand. Gross margin on home loan sales was 3.14% for the nine months ended September 30, 2025, compared to 3.06% for the nine months ended September 30, 2024. Gross margin is defined as the margin on loans sold without the impact of deferred loan costs.

Previous wording

The ACL on loans totaled $32.2 million, or 1.23% of gross loans receivable (excluding loans held for sale), at June 30, 2025, compared to $31.9 million, or 1.26% at December 31, 2024. The ACL on unfunded loan commitments increased $217,000 to $1.6 million at June 30, 2025, from $1.4 million at December 31, 2024. The most significant qualitative factor change was an increase in qualitative reserves, driven by higher levels of nonaccrual loans and shifts in delinquency trends. Total loans 30 days or more past due were $20.7 million, or 0.79% of total loans, at June 30, 2025, compared to $22.2 million, or 0.88%, at December 31, 2024. Although total past due loans declined slightly, loans 90 days or more past due increased to $14.8 million from $11.1 million, primarily due to the migration of certain construction and development CRE loans into later-stage delinquency. Nonaccrual loans rose to $19.0 million from $13.6 million over the same period. The increase was primarily concentrated in construction and development CRE loans, which increased to $9.1 million from $5.0 million, and in the consumer portfolio, where nonaccrual loans increased to $3.9 million from $2.0 million, led by indirect home improvement loans. Loan growth of 3.2% during the period also contributed to a higher required allowance under CECL. As a result, management increased qualitative reserves to address the higher risk of loss, particularly in the consumer and construction portfolios. The coverage ratio of the ACL on loans to nonperforming loans was 169.4% at June 30, 2025, compared to 234.3%, at December 31, 2024, reflecting the increase in nonaccrual balances discussed above.

Current wording

The ACL on loans totaled $30.1 million, or 1.14%, of gross loans receivable (excluding loans held for sale), at September 30, 2025, compared to $31.9 million, or 1.26%, at December 31, 2024. The ACL on unfunded loan commitments increased $675,000 to $2.1 million at September 30, 2025, from $1.4 million at December 31, 2024, primarily reflecting growth in commercial and speculative construction and development loan commitments. Total loans 30 days or more past due decreased to $18.5 million, or 0.70% of total loans, from $22.2 million, or 0.88%, over the same period, reflecting continued repayment performance in the broader loan portfolio.

Previous wording

Liabilities. Total liabilities increased $145.4 million to $2.88 billion at June 30, 2025, from $2.73 billion at December 31, 2024, primarily due to an increase of $214.0 million in deposits, offset by a decrease of $73.5 million in borrowings. The loan-to-deposit ratio was approximately 101.1% at June 30, 2025, compared to approximately 106.9% at December 31, 2024, reflecting the mix shift toward deposits, particularly brokered CDs, to fund asset growth and reduce wholesale borrowings.

Current wording

Liabilities. Total liabilities increased $174.9 million to $2.91 billion at September 30, 2025, from $2.73 billion at December 31, 2024, primarily due to an increase of $347.1 million in deposits, offset by a decrease of $178.5 million in borrowings. The loan-to-deposit ratio was approximately 99.3% at September 30, 2025, compared to approximately 109.5% at December 31, 2024, reflecting the mix shift toward deposits, particularly brokered CDs, to fund asset growth and reduce wholesale borrowings.

Previous wording

Total deposits increased $214.0 million to $2.55 billion at June 30, 2025, from $2.34 billion at December 31, 2024, reflecting increases in all deposit categories. Transactional accounts (noninterest-bearing checking, interest-bearing checking and escrow accounts) increased $50.6 million to $865.3 million at June 30, 2025, from $814.7 million at December 31, 2024, due to increases of $34.7 million in interest-bearing checking, $15.9 million in noninterest-bearing checking and $17,000 in escrow accounts related to mortgages serviced. Money market and savings accounts increased $14.6 million to $510.4 million at June 30, 2025, from $495.8 million at December 31, 2024.

Current wording

Total deposits increased $347.1 million to $2.69 billion at September 30, 2025, from $2.34 billion at December 31, 2024, reflecting increases in all deposit categories. Transactional accounts (noninterest-bearing checking, interest-bearing checking and escrow accounts) increased $50.7 million to $865.4 million at September 30, 2025, from $814.7 million at December 31, 2024 This increase was due to increases of $23.0 million in interest-bearing checking, $21.0 million in noninterest-bearing checking and $6.7 million in escrow accounts related to mortgages serviced, reflecting higher customer balances and increased activity in mortgage servicing. Money market and savings accounts increased $25.5 million to $521.3 million at September 30, 2025, from $495.8 million at December 31, 2024, due to customer preference for liquidity and slightly higher balances in retail and business savings accounts.

Previous wording

CDs, which include both retail and non-retail CDs, increased $148.8 million to $1.18 billion at June 30, 2025, from $1.03 billion at December 31, 2024. Retail CDs increased $17.2 million to $891.4 million at June 30, 2025, from $874.1 million at December 31, 2024, while non-retail CDs, which include brokered CDs, online CDs and public funds CDs increased $131.5 million to $286.3 million, compared to $154.8 million at December 31, 2024. The increase in non-retail CDs was primarily due to an increase of $137.7 million in brokered CDs. Non-retail CDs represented 24.3% and 15.0% of total CDs at June 30, 2025 and December 31, 2024, respectively. The increase in non-retail CDs aligns with the Company's strategy to manage interest rate risk and liquidity by accessing larger, diversified funding sources at competitive rates, which were only slightly higher than local market rates, and to pay down higher cost borrowings.

Current wording

CDs, which include both retail and non-retail CDs, increased $270.9 million to $1.3 billion at September 30, 2025, from $1.03 billion at December 31, 2024. Retail CDs increased $50.8 million to $924.9 million at September 30, 2025, from $874.1 million at December 31, 2024. Non-retail CDs, which include brokered CDs, online CDs and public funds CDs increased $220.0 million to $374.8 million, compared to $154.8 million at December 31, 2024, was primarily due to an increase of $226.4 million in brokered CDs. Non-retail CDs represented 28.8% and 15.0% of total CDs at September 30, 2025 and December 31, 2024, respectively. The increase in non-retail CDs aligns with the Company's strategy to manage interest rate risk and liquidity by accessing larger and more diversified funding sources at competitive rates that were only slightly higher than local market rates, and to reduce reliance on higher cost borrowings.

Previous wording

The Bank had uninsured deposits of approximately $677.2 million or 26.5% of total deposits, at June 30, 2025, compared to approximately $652.7 million or 27.9% of total deposits at December 31, 2024. The uninsured amounts are estimates based on the methodologies and assumptions used for the Bank’s regulatory reporting requirements.

Current wording

The Bank had uninsured deposits of approximately $694.4 million or 25.8% of total deposits, at September 30, 2025, compared to approximately $652.7 million or 27.9% of total deposits at December 31, 2024. The uninsured amounts are estimates based on the methodologies and assumptions used for the Bank’s regulatory reporting requirements.

Previous wording

Borrowings decreased $73.5 million to $234.3 million at June 30, 2025, from $307.8 million at December 31, 2024. The decreased borrowings reflect the paydown of these higher cost funds utilizing lower cost brokered deposits. At June 30, 2025, borrowings were comprised of $209.3 million of FHLB advances and $25.0 million of FRB borrowings.

Current wording

Borrowings decreased $178.5 million to $129.3 million at September 30, 2025, from $307.8 million at December 31, 2024. The decrease reflects the repayment of higher-cost borrowings using lower-cost brokered deposits, consistent with the Company’s funding and liquidity strategy. At September 30, 2025, borrowings were solely comprised of FHLB advances.

Previous wording

Stockholders’*** Equity.*** Total stockholders’ equity increased $1.4 million to $297.2 million at June 30, 2025, from $295.8 million at December 31, 2024. The increase primarily reflects net income of $15.7 million, partially offset by share repurchases of $9.0 million, cash dividends paid totaling $4.3 million, and $1.0 million in equity award compensation. Additionally, the issuance of common stock under the employee stock purchase plan contributed $650,000, reflecting the issuance of 16,128 shares of Company common stock. Stockholders' equity was also impacted by the increase in accumulated other comprehensive loss, net of tax of $2.7 million, primarily due to decreases in unrealized net gains on fair value and cash flow hedges of $4.2 million, net of tax, reflecting changes in market interest rates during the quarter, partially offset by an improvement in unrealized net losses on securities available-for-sale of $1.5 million, net of tax.

Current wording

Stockholders’*** Equity.*** Total stockholders’ equity increased $4.7 million to $300.5 million at September 30, 2025, from $295.8 million at December 31, 2024. The increase primarily reflects net income of $24.9 million, partially offset by share repurchases of $13.9 million, cash dividends paid totaling $8.2 million, and $1.6 million in equity award compensation. Additionally, the issuance of common stock under the employee stock purchase plan contributed $937,000, reflecting the issuance of 23,456 shares of Company common stock. Stockholders' equity was also impacted by the increase in accumulated other comprehensive loss, net of tax of $213,000, primarily due to decreases in unrealized net gains on fair value and cash flow hedges of $4.6 million, net of tax, reflecting changes in market interest rates during the quarter, partially offset by an improvement in unrealized net losses on securities available-for-sale of $4.4 million, net of tax.

Previous wording

Book value per common share was $39.55 at June 30, 2025, compared to $38.26 at December 31, 2024. The calculation of book value per share at June 30, 2025, was based on 7,515,480 common shares, derived by subtracting the 103,063 unvested restricted stock shares from the 7,618,543 reported common shares outstanding as of that date. Similarly, the book value per share at December 31, 2024, was calculated based on 7,729,951 common shares, after deducting 103,063 unvested restricted stock shares from the 7,833,014 reported common shares outstanding as of that date.

Current wording

Book value per common share was $40.43 at September 30, 2025, compared to $38.26 at December 31, 2024. The calculation of book value per share at September 30, 2025, was based on 7,432,359 common shares, derived by subtracting the 102,971 unvested restricted stock shares from the 7,535,330 reported common shares outstanding as of that date. Similarly, the book value per share at December 31, 2024, was calculated based on 7,729,951 common shares, after deducting 103,063 unvested restricted stock shares from the 7,833,014 reported common shares outstanding as of that date.

Previous wording

***General.***Net income was $7.7 million for the three months ended June 30, 2025, compared to $9.0 million for the three months ended June 30, 2024. The decrease was primarily due to a $1.6 million, or 6.9%, increase in noninterest expense, a $944,000, or 87.7%, increase in provision for loan losses, and a $698,000 decrease in total noninterest income, partially offset by a $1.7 million, or 5.6% increase in net interest income and a $345,000, or 14.5%, reduction in provision for income tax expense.

Current wording

***General.***Net income was $9.2 million for the three months ended September 30, 2025, compared to $10.3 million for the three months ended September 30, 2024. The decrease was primarily due to a $2.8 million, or 673.8%, increase in provision for income tax expense, a $796,000, or 52.6%, increase in provision for loan losses, and a $373,000 decrease in total noninterest income, partially offset by a $2.4 million, or 7.8%, increase in net interest income and a $444,000, or 1.7%, reduction in total noninterest expense.

Previous wording

***Net Interest Income.***Net interest income increased $1.7 million to $32.1 million for the three months ended June 30, 2025, from $30.4 million for the three months ended June 30, 2024, primarily due to an increase in total interest income of $2.8 million, partially offset by an increase in total interest expense of $1.1 million. The $2.8 million increase in total interest income was primarily due to an increase of $2.6 million in interest income on loans receivable, including fees, driven primarily by a 12-basis point increase in the average yield earned on loans receivable as new loans were originated at higher rates and variable-rate loans repriced higher, and a higher average balance of loans outstanding. The $1.1 million increase in total interest expense was primarily the result of higher market interest rates and a shift in deposit mix from transactional accounts to higher cost brokered CDs.

Current wording

***Net Interest Income.***Net interest income increased $2.4 million to $33.7 million for the three months ended September 30, 2025, from $31.2 million for the three months ended September 30, 2024, primarily due to an increase in total interest income of $3.9 million, partially offset by an increase in total interest expense of $1.5 million. The $3.9 million increase in total interest income was primarily due to an increase of $2.9 million in interest income on loans receivable, including fees, driven primarily by an 11-basis point increase in the average yield earned on loans receivable as new loans were originated at higher rates and variable-rate loans repriced higher, and a higher average balance of loans outstanding. The $1.5 million increase in total interest expense was primarily the result of a shift in the funding mix toward brokered CDs, which were used to repay higher-cost borrowings in accordance with the Company's funding and liquidity strategy.

Previous wording

Net interest margin (“NIM”) (annualized) increased one basis point to 4.30% for the three months ended June 30, 2025, from 4.29% for the same period the prior year. The change in NIM reflects the increase in yields earned on interest-earning assets, along with a slight improvement in funding cost.

Current wording

Net interest margin (“NIM”) (annualized) increased two basis point to 4.37% for the three months ended September 30, 2025, from 4.35% for the same period the prior year. The change in NIM reflects the increase in yields earned on interest-earning assets, along with a slight improvement in funding cost.

Previous wording

***Interest Income.***Total interest income for the three months ended June 30, 2025, increased $2.8 million to $48.7 million, from $45.9 million for the three months ended June 30, 2024. The $2.8 million increase in total interest income was primarily due to an increase of $2.6 million in interest income on loans receivable, including fees, primarily as a result of net loan growth and variable rate loans repricing higher.

Current wording

***Interest Income.***Total interest income for the three months ended September 30, 2025, increased $3.9 million to $51.0 million, from $47.0 million for the three months ended September 30, 2024. The $3.9 million increase in total interest income was primarily due to an increase of $2.9 million in interest income on loans receivable, including fees, primarily as a result of net loan growth and variable rate loans repricing higher.

Previous wording

***Interest Expense.***Total interest expense increased $1.1 million to $16.6 million for the three months ended June 30, 2025, from $15.5 million for the comparable quarter in 2024, primarily due to an increase of interest expense on deposits of $1.3 million. The higher deposit costs were a result of an increase in the average balance of deposits, partially offset by a decrease in the average interest paid. The increase in interest expense also reflects a strategic shift in deposit mix, with a higher proportion of CDs and interest-bearing checking accounts that carry higher interest rates in the current market.

Current wording

***Interest Expense.***Total interest expense increased $1.5 million to $17.3 million for the three months ended September 30, 2025, from $15.8 million for the comparable quarter in 2024, primarily due to an increase of interest expense on deposits of $1.4 million. The higher deposit costs were a result of an increase in the average balance of deposits, partially offset by a decrease in the average interest paid. The increase in interest expense also reflects a strategic shift in deposit mix towards a higher proportion of CDs and interest-bearing checking accounts, which generally carry higher interest rates in the current market environment.

Previous wording

The average cost of total interest-bearing deposits increased six basis points to 3.03%, for the three months ended June 30, 2025, compared to 2.97%, for the three months ended June 30, 2024. The average balance of total interest-bearing deposits increased $129.6 million to $1.92 billion for the three months ended June 30, 2025 and 2024, compared to $1.79 billion for the three months ended June 30, 2024. The increase in cost was primarily attributable due to a shift in deposit mix to higher cost certificates of deposits and increases in deposit cost for interest-bearing checking, savings and money markets accounts.

Current wording

The average cost of total interest-bearing deposits decreased six basis points to 3.03%, for the three months ended September 30, 2025, compared to 3.09%, for the three months ended September 30, 2024. The average balance of total interest-bearing deposits increased $210.0 million to $1.95 billion for the three months ended September 30, 2025 and 2024, compared to $1.74 billion for the three months ended September 30, 2024. The decrease in the average cost of deposits primarily reflected lower rates paid on CDs, partially offset by higher rates paid on interest-bearing checking, savings, and money market accounts in the current rate environment. The shift in the deposit mix toward a higher proportion of CDs, which generally bear higher rates than transaction accounts but lower rates than borrowings, also contributed to the change in funding costs.

Previous wording

The average cost of total interest-bearing liabilities decreased two basis points to 3.13% for the three months ended June 30, 2025, from 3.15% for the three months ended June 30, 2024. The average cost of funds, which includes noninterest-bearing checking, increased one basis points to 2.39% for the three months ended June 30, 2025, from 2.38% for the three months ended June 30, 2024.

Current wording

The average cost of total interest-bearing liabilities decreased three basis points to 3.15% for the three months ended September 30, 2025, from 3.18% for the three months ended September 30, 2024. The average cost of funds, which includes noninterest-bearing checking, increased two basis points to 2.41% for the three months ended September 30, 2025, from 2.39% for the three months ended September 30, 2024, primarily reflecting a lower proportion of noninterest-bearing deposits in the overall funding mix.

Previous wording

Provision for Credit Losses. For the three months ended June 30, 2025, the provision for credit losses was $2.0 million, consisting of a $1.7 million provision for credit losses on loans, a $154,000 provision for held-to-maturity securities, and a $151,000 provision for credit losses on unfunded loan commitments, compared to $1.1 million provision for credit losses for the three months ended June 30, 2024, consisting of a $1.0 million provision for credit losses on loans and a $77,000 provision of the ACL on unfunded loan commitments. The provision for credit losses on loans reflects the increase in the loan portfolio, as well as an increase in nonperforming loans and higher net charge-offs.

Current wording

Provision for Credit Losses. For the three months ended September 30, 2025, the provision for credit losses was $2.3 million, consisting of a $1.9 million provision for credit losses on loans and a $457,000 provision for credit losses on unfunded loan commitments, compared to $1.5 million provision for the three months ended September 30, 2024, consisting of a $1.6 million provision for credit losses on loans, partially offset by a $79,000 reversal of the ACL on unfunded loan commitments. The increase in the provision for credit losses on loans primarily reflects growth in the loan portfolio, an increase in nonperforming loans, and higher net charge-offs.

Previous wording

During the three months ended June 30, 2025 and 2024, net loan charge-offs totaled $1.2 million. The predominate changes in net charge-offs were a $718,000 decrease in commercial business loans, offset by a $707,000 increase in indirect home improvement loans. A decline in national and local economic conditions, as a result the effects of inflation, a recession or slowed economic growth, among other economic factors, could result in a material increase in the ACL on loans and may adversely affect the Company’s financial condition and result of operations.

Current wording

Net loan charge-offs totaled $4.0 million for the three months ended September 30, 2025, compared to $1.6 million during the three months ended September 30, 2024. The increase was primarily due to a partial charge-off of $2.3 million on a commercial construction loan. A decline in national and local economic conditions, as a result of the effects of tariffs, inflation, or slowed economic growth, among other factors, could result in a material increase in the ACL on loans and may adversely affect the Company’s financial condition and result of operations.

Previous wording

***Noninterest Income.***Noninterest income decreased $698,000 to $5.2 million for the three months ended June 30, 2025, from $5.9 million for the three months ended June 30, 2024. The decrease primarily reflects a $491,000 decrease in gain on sale of loans, resulting from a decrease of loans available for sale, as well as a $156,000 decrease in service charges and fee income, largely attributable to lower transaction volumes. Additionally, the current quarter recorded no gain on sale of investment securities, compared to a gain of $151,000 in the prior-year period, reflecting no securities sales activity during the current quarter. These declines were partially offset by modest increases in earnings on cash surrender value of bank-owned life insurance and other noninterest income.

Current wording

***Noninterest Income.***Noninterest income decreased $373,000 to $5.6 million for the three months ended September 30, 2025, from $6.0 million for the three months ended September 30, 2024. The decrease primarily reflects a $156,000 decrease in service charges and fee income and a $141,000 decrease in gain on sale of MSRs as there were no MSR sales in the current quarter compared to sales of $8.4 million during the same period last year.

Previous wording

The efficiency ratio, which is calculated by dividing noninterest expense by total net interest income and noninterest income, weakened to 68.89% for the six months ended June 30, 2025, compared to 66.07% for the six months ended June 30, 2024, due to an increase in noninterest expense that outpaced total revenue growth.

Current wording

The efficiency ratio, which is calculated by dividing noninterest expense by total net interest income and noninterest income, improved to 64.63% for the three months ended September 30, 2025, compared to 69.42% for the three months ended September 30, 2024, due to an increase in net interest income and a slight decrease in noninterest expense.

Previous wording

Provision for Income Taxes.* *For the three months ended June 30, 2025, the Company recorded a provision for income taxes of $2.0 million, compared to $2.4 million for the three months ended June 30, 2024. The decrease in the income taxes provision was primarily due to a $1.6 million decrease in pre-tax income during the three months ended June 30, 2025, as compared to the same quarter last year. The effective corporate income tax rates for the three months ended June 30, 2025 and 2024, were 20.8% and 21.0%, respectively.

Current wording

Provision for Income Taxes.* *For the three months ended September 30, 2025, the Company recorded a provision for income taxes of $2.4 million, compared to a $420,000 benefit for income taxes for the three months ended September 30, 2024. The increase in the provision for income taxes was primarily due to the absence of alternative energy tax credits under the Inflation Reduction Act of 2022 for the three months ended September 30, 2025, which were available in the comparable quarter last year. The effective corporate income tax rates for the three months ended September 30, 2025 and 2024, were 20.8% and (4.3)%, respectively.

Previous wording

Comparison of Results of Operations for the Six Months Ended June 30, 2025 and 2024

Current wording

Comparison of Results of Operations for the Nine Months Ended September 30, 2025 and 2024

Previous wording

***Net Interest Income.***Net interest income increased $2.3 million to $63.1 million for the six months ended June 30, 2025, from $60.7 million for the six months ended June 30, 2024, primarily due to an increase in total interest income of $4.7 million, partially offset by an increase in total interest expense of $2.3 million. The $4.7 million increase in total interest income was primarily due to an increase of $4.9 million in interest income on loans receivable, including fees, driven primarily by a 15-basis point increase in the average yield earned on loans receivable as new loans were originated at higher rates and variable-rate loans repriced higher, and a higher average balance of loans outstanding. The $2.3 million increase in total interest expense was primarily the result of higher market interest rates and a shift in deposit mix from transactional accounts to higher cost brokered CDs.

Current wording

***Net Interest Income.***Net interest income increased $4.8 million to $96.8 million for the nine months ended September 30, 2025, from $92.0 million for the nine months ended September 30, 2024, primarily due to an increase in total interest income of $8.6 million, partially offset by an increase in total interest expense of $3.8 million. The increase in total interest income was primarily due to an increase of $7.8 million in interest income on loans receivable, including fees, driven primarily by a 13-basis point increase in the average yield earned on loans receivable as new loans were originated at higher rates and variable-rate loans repriced higher, and a higher average balance of loans outstanding. The $3.8 million increase in total interest expense was primarily the result of a shift in the funding mix toward brokered CDs, which were used to repay higher-cost borrowings in accordance with the Company's funding and liquidity strategy.

Previous wording

Net interest margin (“NIM”) (annualized) increased four basis point to 4.31% for the six months ended June 30, 2025, from 4.27% for the same period the prior year. The change in NIM reflects the increase in yields earned on interest-earning assets, along with higher average capital relative to the prior period.

Current wording

Net interest margin (“NIM”) (annualized) increased three basis point to 4.33% for the nine months ended September 30, 2025, from 4.30% for the same period the prior year. The increase in NIM reflects higher yields on interest-earning assets, partially offset by the higher cost of funding and increased average capital relative to the prior period.

Previous wording

The following table compares average interest-earning asset balances, associated yields, and resulting changes in interest income for the six months ended June 30, 2025 and 2024:

Current wording

The following table compares average interest-earning asset balances, associated yields, and resulting changes in interest income for the nine months ended September 30, 2025 and 2024:

Previous wording

***Interest Expense.***Total interest expense increased $2.3 million to $32.4 million for the six months ended June 30, 2025, compared to $30.1 million for the same period in 2024, primarily due to an increase of interest expense on deposits of $1.4 million. The higher deposit costs were a result of both higher overall average balances and increased rates on deposit accounts. The average cost of total interest-bearing deposits increased 11 basis points to 3.01%, for the six months ended June 30, 2025, compared to 2.90%, for the six months ended June 30, 2024. The average balance of total interest-bearing deposits increased $31.7 million to $1.85 billion for the six months ended June 30, 2025 and 2024, compared to $1.81 billion for the six months ended June 30, 2024.

Current wording

***Interest Expense.***Total interest expense increased $3.8 million to $49.7 million for the nine months ended September 30, 2025, from $45.9 million for the same period in 2024. Interest expense on deposits increased $2.8 million, primarily reflecting higher average balances across deposit categories and higher rates on deposit accounts. The average balance of total interest-bearing deposits increased $91.7 million to $1.88 billion for the nine months ended September 30, 2025, compared to $1.79 billion for the nine months ended September 30, 2024. The average cost of total interest-bearing deposits increased six basis points to 3.02% from 2.96%. Interest expense on borrowings increased by $987,000, primarily due to higher average balances of borrowings. The average cost of borrowings declined slightly, reflecting changes in the mix of FHLB advances and other borrowings.

Previous wording

The average cost of total interest-bearing liabilities increased nine basis points to 3.14% for the six months ended June 30, 2025, compared to 3.05% for the six months ended June 30, 2024. The average cost of funds, which includes noninterest-bearing checking, increased eight basis points to 2.38% for the six months ended June 30, 2025, from 2.30% for the six months ended June 30, 2024.

Current wording

The average cost of total interest-bearing liabilities increased six basis points to 3.15% for the nine months ended September 30, 2025, compared to 3.09% for the nine months ended September 30, 2024. The average cost of funds, which includes noninterest-bearing checking accounts, increased six basis points to 2.39% for the nine months ended September 30, 2025, from 2.33% for the nine months ended September 30, 2024.

Previous wording

The following table details average balances of interest-bearing liabilities, associated rates, and resulting change in interest expense for the six months ended June 30, 2025 and 2024:

Current wording

The following table details average balances of interest-bearing liabilities, associated rates, and resulting change in interest expense for the nine months ended September 30, 2025 and 2024:

Previous wording

Provision for Credit Losses. For the six months ended June 30, 2025, the provision for credit losses was $3.6 million, consisting of a $3.2 million provision for credit losses on loans, a $217,000 provision for credit losses on unfunded loan commitments, and a $175,000 provision for losses on held to maturity investments, compared to $2.5 million provision for credit losses for the six months ended June 30, 2024, consisting of a $2.4 million provision for credit losses on loans and a $54,000 provision for credit losses on unfunded loan commitments. The provision for credit losses on loans reflects the increase in the loan portfolio, as well as an increase in nonperforming loans and higher net charge-offs.

Current wording

Provision for Credit Losses. For the nine months ended September 30, 2025, the provision for credit losses was $5.9 million, consisting of a $5.1 million provision for credit losses on loans, a $675,000 provision for credit losses on unfunded loan commitments, and a $175,000 provision for losses on held to maturity investment securities, compared to $4.0 million provision for the nine months ended September 30, 2024, which was entirely attributable to loans. The increase in the provision for credit losses on loans was primarily due to growth in the loan portfolio, an increase in nonperforming loans, and higher net charge-offs.

Previous wording

During the six months ended June 30, 2025, net loan charge-offs totaled $2.9 million, compared to $2.7 million during the six months ended June 30, 2024. This increase was the result of increased net charge-offs of $1.2 million in indirect home improvement loans, primarily offset by net charge-off decreases of $693,000 in commercial business loans and $271,000 in marine loans. A decline in national and local economic conditions, as a result the effects of tariffs or slowed economic growth, among other economic factors, could result in a material increase in the ACL on loans and may adversely affect the Company’s financial condition and result of operations.

Current wording

Net loan charge-offs totaled $6.9 million, for the nine months ended September 30, 2025, compared to $4.3 million during the nine months ended September 30, 2024. The increase was primarily due to a partial charge-off of $2.3 million on a commercial construction loan as discussed above, and a $1.3 million increase in net charge-offs on indirect home improvement loans, partially offset by decreases of $695,000 and $312,000 in net charge-offs on commercial business loans and marine loans, respectively. A decline in national and local economic conditions, as a result of the effects of tariffs, inflation or slowed economic growth, among other factors, could result in a material increase in the ACL on loans and may adversely affect the Company’s financial condition and result of operations.

Previous wording

***Noninterest Income.***Noninterest income decreased $683,000 to $10.3 million for the six months ended June 30, 2025, compared to $11.0 million for the same period in 2024. The decrease was primarily the result of a $629,000 decrease in gain on sale of loans, reflecting lower sales activity, a $464,000 decrease in service charges and fee income, primarily due to reduced transaction volumes, and a net $368,000 decrease from the absence of gain on sale of MSRs and losses on the sale of investment securities in 2025, compared to an $8.2 million net gain on sale of MSRs partially offset by a $7.8 million loss on sale of investment securities in the first half of 2024. These decreases were partially offset by a $755,000 increase in other noninterest income including a $312,000 gain from sales of nonmarketable equity securities, $195,000 in bank owned life insurance proceeds, and a $101,000 increase in brokered loan fees.

Current wording

***Noninterest Income.***Noninterest income decreased $1.1 million to $15.9 million for the nine months ended September 30, 2025, compared to $16.9 million for the same period in 2024. This decrease was primarily the result of a $713,000 decrease in gain on sale of loans, reflecting lower sales activity, a $619,000 decrease in service charges and fee income, primarily due to reduced transaction volumes, and a net decrease of $520,000 from no activity in gain on sale of MSRs and loss on sale of investment securities in 2025, compared to an $8.4 million net gain on sale of MSRs partially offset by a $7.8 million loss on sale of investment securities in the first half of 2024. These decreases were partially offset by a $757,000 increase in other noninterest income, primarily due to a $358,000 gain from sales of nonmarketable equity securities, $219,000 in bank owned life insurance proceeds, and a $152,000 increase in brokered loan fees.

Previous wording

***Noninterest Expense.***Noninterest expense increased $3.2 million to $50.6 million for the six months ended June 30, 2025, from $47.4 million for the six months ended June 30, 2024. The increase was primarily due to increases of $1.7 million in salaries and benefits due to competitive wage adjustments and higher overall benefit costs, $742,000 in operations, and $531,000 in professional and board fees.

Current wording

***Noninterest Expense.***Noninterest expense increased $2.7 million to $75.9 million for the nine months ended September 30, 2025, from $73.2 million for the nine months ended September 30, 2024. The increase was primarily due to increases of $2.1 million in salaries and benefits due to competitive wage adjustments, $889,000 in operations, primarily due to system upgrades, and $401,000 in professional and board fees, partially offset by a $522,000 decrease in the impairment of MSRs, driven primarily by higher market interest rates, which reduced prepayment risk and increased the estimated value of mortgage servicing rights..

Previous wording

The efficiency ratio, which is calculated by dividing noninterest expense by total net interest income and noninterest income, weakened to 68.40% for the three months ended June 30, 2025, compared to 65.78% for the three months ended June 30, 2024, due to an increase in noninterest expense that outpaced total revenue growth.

Current wording

The efficiency ratio, which is calculated by dividing noninterest expense by total net interest income and noninterest income, weakened to 67.40% for the nine months ended September 30, 2025, compared to 67.21% for the nine months ended September 30, 2024, due to an increase in noninterest expense that outpaced total revenue growth.