FIRST COMMUNITY CORP /SC/

Previous wording

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

Current wording

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

Previous wording

Effect of Governmental Monetary Policies. Our earnings are affected by domestic economic conditions and the monetary and fiscal policies of the United States government and its agencies. The Federal Reserve’s monetary policies have had, and are likely to continue to have, an important impact on the operating results of commercial banks through its power to implement national monetary policy in order, among other things, to curb inflation or combat a recession. The monetary policies of the Federal Reserve have major effects upon the levels of bank loans, investments, deposits and borrowings through its open market operations in United States government securities and through its regulation of the discount rate on borrowings of member banks and the reserve requirements against member banks’ deposits. It is not possible to predict the nature or impact of future changes in monetary and fiscal policies. The target rate range of federal funds was 5.25% - 5.50% from July 26, 2023 to September 17, 2024. On September 18, 2024, the FOMC reduced the target range of federal funds by 0.50% to 4.75% - 5.00%. There were two additional 25 basis point cuts to the target rate range of federal funds during the fourth quarter of 2024, lowering the target rate range to 4.25% - 4.50% at March 31, 2025, compared to 5.25% - 5.50% at March 31, 2024. Changes in market interest rates can have a significant impact on the level of income and expense recorded on a large portion of our interest-earning assets and interest-bearing liabilities, and on the market value of all interest-earning assets, other than those possessing a short term to maturity. Furthermore, changes in market interest rates can have a significant impact on the level of mortgage originations and related mortgage banking income.

Current wording

Effect of Governmental Monetary Policies. Our earnings are affected by domestic economic conditions and the monetary and fiscal policies of the United States government and its agencies. The Federal Reserve’s monetary policies have had, and are likely to continue to have, an important impact on the operating results of commercial banks through its power to implement national monetary policy in order, among other things, to curb inflation or combat a recession. The monetary policies of the Federal Reserve have major effects upon the levels of bank loans, investments, deposits and borrowings through its open market operations in United States government securities and through its regulation of the discount rate on borrowings of member banks and the reserve requirements against member banks’ deposits. In September 2024, the Federal Reserve began lowering interest rates in response to easing inflation and slowing growth. While lower rates can support loan demand, they may also compress net interest margins. The Federal Reserve is also continuing balance sheet reduction, contributing to some funding and market volatility. It is not possible to predict the nature or impact of future changes in monetary and fiscal policies. Changes in market interest rates can have a significant impact on the level of income and expense recorded on a large portion of our interest-earning assets and interest-bearing liabilities, and on the market value of all interest-earning assets, other than those possessing a short term to maturity. Furthermore, changes in market interest rates can have a significant impact on the level of mortgage originations and related mortgage banking income.

Previous wording

Comparison of Results of Operations for Three Months Ended March 31, 2025 to the Three Months Ended March 31, 2024

Current wording

Comparison of Results of Operations for the Three Months Ended June 30, 2025 to the Three Months Ended June 30, 2024

Previous wording

Our net income for the three months ended March 31, 2025 increased $1.4 million to $4.0 million, or $0.51 diluted earnings per common share, as compared to $2.6 million, or $0.34 diluted earnings per common share, for the three months ended March 31, 2024. The $1.4 million increase in net income between the two periods is primarily due to a $2.3 million increase in net interest income and a $798,000 increase in total non-interest income, partially offset by a $308,000 increase in provision for credit losses, a $949,000 increase in total non-interest expense and a $454,000 increase in income tax expense.

Current wording

Our net income for the three months ended June 30, 2025 increased $1.9 million to $5.2 million, or $0.67 diluted earnings per common share, as compared to $3.3 million, or $0.42 diluted earnings per common share, for the three months ended June 30, 2024. The $1.9 million increase in net income between the two periods is primarily due to a $2.6 million increase in net interest income, a $691,000 decline in provision for credit losses, and a $564,000 increase in total non-interest income, partially offset by a $1.2 million increase in total non-interest expense and a $724,000 increase in income tax expense.

Previous wording

Net interest income increased $2.3 million, or 19.2%, to $14.4 million for the three months ended March 31, 2025 from $12.1 million for the three months ended March 31, 2024. Our net interest margin improved 34 basis points to 3.12% during the three months ended March 31, 2025 compared to 2.78% during the three months ended March 31, 2024. Our net interest margin, on a taxable equivalent basis, was 3.13% for the three months ended March 31, 2025 compared to 2.79% for the three months ended March 31, 2024. Average earning assets were $1.9 billion for the three months ended March 31, 2025 and $1.7 billion in the same period of 2024.

Current wording

Net interest income increased $2.6 million, or 20.7%, to $15.3 million for the three months ended June 30, 2025 from $12.7 million for the three months ended June 30, 2024. Our net interest margin improved 0.27% to 3.19% during the three months ended June 30, 2025 compared to 2.92% during the three months ended June 30, 2024. Our net interest margin, on a taxable equivalent basis, was 3.21% for the three months ended June 30, 2025 compared to 2.93% for the three months ended June 30, 2024. Average earning assets were $1.9 billion for the three months ended June 30, 2025 and $1.7 billion in the same period of 2024.

Previous wording

Average loans increased $90.0 million, or 7.8%, to $1.2 billion for the three months ended March 31, 2025 from $1.1 billion for the same period in 2024. Our loan (including loans held-for-sale) to deposit ratio on average during the three months ended March 31, 2025 was 74.2%, as compared to 75.5% during same period in 2024. The yield on loans increased 27 basis points to 5.71% during the three months ended March 31, 2025 from 5.44% during the same period in 2024 due to an increase in market interest rates.

Current wording

Average loans increased $84.7 million, or 7.2%, to $1.3 billion for the three months ended June 30, 2025 from $1.2 billion for the same period in 2024. Our loan (including loans held-for-sale) to deposit ratio on average during the three months ended June 30, 2025 was 72.7%, as compared to 75.1% during same period in 2024. The yield on loans increased 0.17% to 5.77% during the three months ended June 30, 2025 from 5.60% during the same period in 2024 due to higher rates on new and renewed loans during the period compared to interest rates on loans maturing during the period.

Previous wording

Average securities for the three months ended March 31, 2025 decreased $7.2 million, or 1.4%, to $492.2 million from $499.4 million during the same period in 2024. Short-term investments and CDs increased $43.3 million to $140.6 million during the three months ended March 31, 2025 from $97.4 million during the same period in 2024. The increase in short-term investments was due to our decision to hold excess liquidity in interest bearing deposits at the Federal Reserve Bank. The yield on our securities portfolio declined to 3.42% for the three months ended March 31, 2025 from 3.66% for the same period in 2024. The yield on our short-term investments declined to 4.29% for the three months ended March 31, 2025 from 4.79%.

Current wording

Average securities for the three months ended June 30, 2025 increased $14.3 million, or 2.9%, to $505.5 million from $491.2 million during the same period in 2024. Short-term investments and CDs increased $75.9 million to $155.9 million during the three months ended June 30, 2025 from $80.0 million during the same period in 2024. The increase in short-term investments was due to our decision to hold excess liquidity in interest bearing deposits at the Federal Reserve Bank. The yield on our securities portfolio declined to 3.43% for the three months ended June 30, 2025 from 3.66% for the same period in 2024. The yield on our short-term investments declined to 4.32% for the three months ended June 30, 2025 from 5.32%.

Previous wording

The yields on earning assets for the three months ended March 31, 2025 and 2024 were 5.00% and 4.90%, respectively.

Current wording

The yields on earning assets for the three months ended June 30, 2025 and 2024 were 5.04% and 5.04%, respectively.

Previous wording

Mortgage banking income increased $334,000 to $759,000 during the three months ended March 31, 2025 from $425,000 during the same period in 2024. Total production in the mortgage line of business in the three months ended March 31, 2025 was $43.9 million, which was comprised of $25.8 million in secondary market loans, $4.0 million in adjustable rate mortgages (ARMs), and $14.1 million in commitments for new construction residential real estate loans. Fee revenue from the mortgage line of business was $759,000 for the three months ended March 31, 2025, which includes $755,000 associated with the secondary market loans with a gain-on-sale margin of 2.93%. This compares to production year-over-year of $36.6 million which was comprised of $13.1 million in secondary market loans, $9.7 million in ARMs, and $13.9 million in commitments for new construction residential real estate loans during the three months ended March 31, 2024. Fee revenue from the mortgage line of business was $425,000, which includes $418,000 associated with the secondary market loans with a gain-on-sale margin of 3.20% during the three months ended March 31, 2024.

Current wording

Mortgage banking income increased $220,000 to $879,000 during the three months ended June 30, 2025 from $659,000 during the same period in 2024. Total production in the mortgage line of business in the three months ended June 30, 2025 was $62.9 million, which was comprised of $31.9 million in secondary market loans, $5.7 million in adjustable rate mortgages (ARMs), and $25.3 million in commitments for new construction residential real estate loans. Fee revenue from the mortgage line of business was $879,000 for the three months ended June 30, 2025, which includes $873,000 associated with the secondary market loans with a gain-on-sale margin of 2.74%. This compares to production year-over-year of $49.0 million which was comprised of $22.7 million in secondary market loans, $14.6 million in ARMs, and $11.7 million in commitments for new construction residential real estate loans during the three months ended June 30, 2024. Fee revenue from the mortgage line of business was $659,000, which includes $655,000 associated with the secondary market loans with a gain-on-sale margin of 2.89% during the three months ended June 30, 2024.

Previous wording

Investment advisory fees rose $448,000 to $1.8 million during the three months ended March 31, 2025 from $1.4 million during the same period in 2024. Total assets under management decreased to $892.8 million at March 31, 2025 compared to $926.0 million at December 31, 2024 and increased compared to $832.9 million at March 31, 2024. The decline between December 31, 2024 and March 31, 2025 was driven by broad declines in the US stock market during the first quarter of 2025. Our net new assets under management were $21.5 million during the three months ended March 31, 2025. Furthermore, our investment performance for the three months ended March 31, 2025 was -5.9% compared to -4.6% for the S&P 500; and our investment performance for the 12-month period ended March 31, 2025 was 2.1% compared to 6.8% for the S&P 500. Our customers’ assets under management are allocated across a range of asset classes, including equities, bonds, and cash.

Current wording

Investment advisory fees rose $243,000 to $1.8 million during the three months ended June 30, 2025 from $1.5 million during the same period in 2024. Total assets under management increased to $1.0 billion at June 30, 2025 compared to $926.0 million at December 31, 2024 and increased compared to $865.6 million at June 30, 2024. Our net new assets under management were $20.7 million during the three months ended June 30, 2025. Furthermore, our investment performance for the three months ended June 30, 2025 was 10.9% compared to 10.6% for the S&P 500. Our customers’ assets under management are allocated across a range of asset classes, including equities, bonds, and cash.

Previous wording

Non-interest expense increased $949,000 during the three months ended March 31, 2025 to $12.8 million compared to $11.8 million during the same period in 2024. The $949,000 increase in non-interest expense is primarily due to increases of $556,000 in salaries and employee benefits, $60,000 in equipment, $22,000 in FDIC insurance assessments, and $376,000 in other non-interest expense, partially offset by decreases of $13,000 in occupancy expense and $52,000 in marketing and public relations expense.

Current wording

Non-interest expense increased $1.2 million during the three months ended June 30, 2025 to $13.1 million compared to $11.8 million during the same period in 2024. The increase in non-interest expense is primarily due to increases of $757,000 in salaries and employee benefits, $73,000 in equipment, and $434,000 in other non-interest expense, partially offset by decreases of $50,000 in marketing and public relations expense and $28,000 in FDIC insurance assessment expense.

Previous wording

We incurred income tax expense of $1.2 million and $730,000 for the three months ended March 31, 2025 and 2024, respectively. Our effective tax rate was 22.85% and 21.94% for the three months ended March 31, 2025 and 2024, respectively.

Current wording

We incurred income tax expense of $1.5 million and $774,000 for the three months ended June 30, 2025 and 2024, respectively. Our effective tax rate was 22.4% and 19.2% for the three months ended June 30, 2025 and 2024, respectively. The increase in the effective tax rate was due to a non-recurring adjustment of $249,000 during the three months ended June 30, 2024.

Previous wording

The cost of interest-bearing liabilities was 2.58% during the three months ended March 31, 2025 compared to 2.88% during the same period in 2024. The cost of deposits, including demand deposits, was 1.85% during the three months ended March 31, 2025 compared to 1.90% during the same period in 2024. The cost of funds, including demand deposits, was 1.94% during the three months ended March 31, 2025 compared to 2.16% during the same period in 2024. We continue to focus on growing our pure deposits (demand deposits, interest-bearing transaction accounts, savings deposits, money market accounts, and IRAs) plus customer cash management repurchase agreements as these accounts tend to be low-cost funding and assist us in controlling our overall cost of funds. Average pure deposits plus customer cash management repurchase agreements increased $143.4 million or 10.6% to $1.5 billion during the three months ended March 31, 2025 from $1.4 billion during the same period in 2024. During the three months ended March 31, 2025, pure deposits plus customer cash management repurchase agreements averaged 83.0% of total deposits plus customer cash management repurchase agreements as compared to 84.0% during the same period of 2024. This reduction is related to a higher rate of growth in our certificates of deposit compared to pure deposits due to the higher interest rate environment. The growth in certificates of deposit is related to customer certificates of deposit partially offset by a reduction in brokered certificates of deposit. As of March 31, 2025, we had $10.4 million in brokered certificates of deposit with an initial terms of 18 months. We had $10.4 million and $60.6 million in brokered certificates of deposit at December 31, 2024 and at March 31, 2024, respectively.

Current wording

The cost of interest-bearing liabilities was 2.57% during the six months ended June 30, 2025 compared to 2.91% during the same period in 2024. The cost of deposits, including demand deposits, was 1.84% during the six months ended June 30, 2025 compared to 1.94% during the same period in 2024. The cost of funds, including demand deposits, was 1.92% during the six months ended June 30, 2025 compared to 2.17% during the same period in 2024. We continue to focus on growing our pure deposits (demand deposits, interest-bearing transaction accounts, savings deposits, money market accounts, and IRAs) plus customer cash management repurchase agreements as these accounts tend to be low-cost funding and assist us in controlling our overall cost of funds. During the six months ended June 30, 2025, pure deposits plus customer cash management repurchase agreements averaged 83.0% of total deposits plus customer cash management repurchase agreements as compared to 83.5% during the same period of 2024. This reduction is related to a higher rate of growth in our certificates of deposit compared to pure deposits due to the higher interest rate environment and strong loan growth. The growth in certificates of deposit is related to customer certificates of deposit. We began issuing brokered certificates of deposit during the third quarter of 2024 to supplement our funding mix. As of June 30, 2025, we had $10.4 million in brokered certificates of deposit with initial terms of 18 months and maturity of July 31, 2025. We had $10.4 million and $42.9 million in brokered certificates of deposit at December 31, 2024 and at June 30, 2024, respectively.

Previous wording

Non-interest income during the three months ended March 31, 2025 increased $798,000 to $4.0 million from $3.2 million during the same period in 2024. The $798,000 increase in non-interest income was primarily related to increases of $334,000 in mortgage banking income, $448,000 in investment advisory fees and non-deposit commissions, and $54,000 in other non-interest income, partially offset by a decrease of $38,000 in deposit service charges.

Current wording

Non-interest income during the six months ended June 30, 2025 increased $1.4 million to $8.2 million from $6.8 million during the same period in 2024. The increase in non-interest income was primarily related to increases in mortgage banking income, investment advisory fees and non-deposit commissions, ATM debit card income, rental income, and gain on sale of other real estate owned, partially offset by declines in deposit service charges.

Previous wording

The total allowance for credit losses (ACL) is composed of three parts: the ACL for loans, the ACL for unfunded commitments, and the ACL for HTM investments. The ACL for loans is further composed of the allowance for individually assessed loans, the allowance for collectively assessed expected losses, the allowance for collectively assessed qualitative adjustments, and the allowance for collectively assessed additional allowance. The allowance for collectively assessed qualitative adjustments is calculated using a set of qualitative factors, which at March 31, 2025 and December 31, 2024 included the following factors:

Current wording

The total allowance for credit losses (ACL) is composed of three parts: the ACL for loans, the ACL for unfunded commitments, and the ACL for HTM investments. The ACL for loans is further composed of the allowance for individually assessed loans, the allowance for collectively assessed expected losses, the allowance for collectively assessed qualitative adjustments, and the allowance for collectively assessed additional allowance. The allowance for collectively assessed qualitative adjustments is calculated using a set of qualitative factors, shown below:

Previous wording

We have a significant portion of our loan portfolio with real estate as the underlying collateral. As of March 31, 2025 and December 31, 2024, approximately 91.2% and 91.4%, respectively, of the loan portfolio had real estate collateral. When loans, whether commercial or personal, are granted, they are based on the borrower’s ability to generate repayment cash flows from income sources sufficient to service the debt. Real estate is generally taken to reinforce the likelihood of the ultimate repayment and as a secondary source of repayment. We work closely with all our borrowers that experience cash flow or other economic problems, and we believe that we have the appropriate processes in place to monitor and identify problem credits. There can be no assurance that charge-offs of loans in future periods will not exceed the allowance for credit losses as estimated at any point in time or that provisions for credit losses will not be significant to a particular accounting period. The allowance for credit losses is also subject to examination and testing for adequacy by regulatory agencies, which may consider such factors as the methodology used to determine adequacy for credit losses and the size of the allowance relative to that of peer institutions. Such regulatory agencies could require us to adjust our allowance for credit losses based on information available to them at the time of their examination.

Current wording

We have a significant portion of our loan portfolio with real estate as the underlying collateral. As of June 30, 2025 and December 31, 2024, approximately 91.3% and 91.4%, respectively, of the loan portfolio had real estate collateral. When loans, whether commercial or personal, are granted, they are based on the borrower’s ability to generate repayment cash flows from income sources sufficient to service the debt. Real estate is generally taken to reinforce the likelihood of the ultimate repayment and as a secondary source of repayment. We work closely with all our borrowers that experience cash flow or other economic problems, and we believe that we have the appropriate processes in place to monitor and identify problem credits. There can be no assurance that charge-offs of loans in future periods will not exceed the allowance for credit losses as estimated at any point in time or that provisions for credit losses will not be significant to a particular accounting period. The allowance for credit losses is also subject to examination and testing for adequacy by regulatory agencies, which may consider such factors as the methodology used to determine adequacy for credit losses and the size of the allowance relative to that of peer institutions. Such regulatory agencies could require us to adjust our allowance for credit losses based on information available to them at the time of their examination.

Previous wording

The non-performing asset ratio was 0.03% of total assets with the nominal level of $658,000 in non-performing assets at March 31, 2025 compared to 0.04% and $810,000 at December 31, 2024. Non-accrual loans decreased to $215,000 at March 31, 2025 from $219,000 at December 31, 2024. We had three accruing loans past due 90 days or more totaling $6,000 at March 31, 2025 compared to $48,000 at December 31, 2024. Loans past due 30 days or more represented 0.14% of the loan portfolio at March 31, 2025 compared to 0.05% at December 31, 2024. The ratio of classified loans plus OREO and repossessed assets declined to 0.98% of total bank regulatory risk-based capital at March 31, 2025 from 1.06% at December 31, 2024. During the three months ended March 31, 2025, we experienced net loan recoveries of $14,000 (charge-offs of $0 less recoveries of $14,000) and net overdraft charge-offs of $3,000 (charge-offs of $9,000 and recoveries of $6,000). In comparison, we experienced net loan recoveries of $1,000 and net overdraft charge-offs of $23,000 during the three months ended March 31, 2024.

Current wording

The non-performing asset ratio was 0.02% of total assets with the nominal level of $469,000 in non-performing assets at June 30, 2025 compared to 0.04% and $810,000 at December 31, 2024. Non-accrual loans decreased to $210,000 at June 30, 2025 from $219,000 at December 31, 2024. We had two accruing loans past due 90 days or more totaling $66,000 at June 30, 2025 compared to $48,000 at December 31, 2024. Loans past due 30 days or more represented 0.02% of the loan portfolio at June 30, 2025 compared to 0.05% at December 31, 2024. The ratio of classified loans plus OREO and repossessed assets declined to 0.82% of total bank regulatory risk-based capital at June 30, 2025 from 1.06% at December 31, 2024.

Previous wording

There were five loans totaling $221,000 (0.02% of total loans) included on non-performing status (non-accrual loans and loans past due 90 days and still accruing) at March 31, 2025. Two of these loans were on non-accrual status. The largest loan of the two is $213,000 and is secured by real estate. The balance of the remaining loan on non-accrual status is $2,000. This loan is secured by a second mortgage lien. We had three loans that were accruing loans past due 90 days or more at March 31, 2025. At both March 31, 2025 and December 31, 2024, we considered loan relationships exceeding $500,000 and on non-accrual status as individually assessed loans for the allowance for credit losses. At both March 31, 2025 and December 31, 2024, we had no individually assessed loans. The specific allowance for individually assessed loans is based on the fair value of collateral method or present value of expected cash flows method. For collateral dependent loans, the fair value of collateral method is used and the fair value is determined by an independent appraisal less estimated selling costs. There was no specific allowance for credit losses on our individually assessed loans at March 31, 2025 and December 31, 2024. At March 31, 2025, we had $1.7 million in loans that were delinquent 30 days to 89 days representing 0.14% of total loans compared to $554,000 or 0.05% of total loans at December 31, 2024.

Current wording

There were four loans totaling $276,000 (0.02% of total loans) included on non-performing status (non-accrual loans and loans past due 90 days and still accruing) at June 30, 2025. Two of these loans were on non-accrual status. The largest loan of the two is $208,000 and is secured by real estate. The balance of the remaining loan on non-accrual status is $1,000. This loan is secured by a second mortgage lien. We had two loans that were accruing loans past due 90 days or more at June 30, 2025. At both June 30, 2025 and December 31, 2024, we considered loan relationships exceeding $500,000 and on non-accrual status as individually assessed loans for the allowance for credit losses. At both June 30, 2025 and December 31, 2024, we had no individually assessed loans. The specific allowance for individually assessed loans is based on the fair value of collateral method or present value of expected cash flows method. For collateral dependent loans, the fair value of collateral method is used and the fair value is determined by an independent appraisal less estimated selling costs. There was no specific allowance for credit losses on our individually assessed loans at June 30, 2025 and December 31, 2024. At June 30, 2025, we had $220,000 in loans that were delinquent 30 days to 89 days representing 0.02% of total loans compared to $554,000 or 0.05% of total loans at December 31, 2024.

Previous wording

Assets increased $81.4 million, or 4.2% (16.8% annualized), to $2.0 billion at March 31, 2025 from $2.0 billion at December 31, 2024. The increase in assets was primarily due to increases in interest-bearing bank balances of $49.8 million, investment securities available-for-sale of $7.4 million and loans held-for-investment of $31.4 million, partially offset by decreases in investment securities held-to-maturity of $3.6 million and loans held-for-sale of $2.6 million.

Current wording

Assets increased $88.2 million, or 4.5% (9.1% annualized), to $2.0 billion at June 30, 2025 from $2.0 billion at December 31, 2024. The increase in assets was primarily due to increases in cash and due from banks of $5.8 million, interest-bearing bank balances of $27.9 million, investment securities available-for-sale of $23.0 million and loans held-for-investment of $39.5 million, partially offset by a decrease in investment securities held-to-maturity of $7.7 million.

Previous wording

Loans held-for-sale decreased to $7.1 million at March 31, 2025 from $9.7 million at December 31, 2024. Loans (excluding loans held-for-sale) increased $31.4 million, or 2.6% (10.4% annualized), to $1.3 billion at March 31, 2025 from $1.2 billion at December 31, 2024. Total loan production, excluding mortgage secondary market and new construction residential real estate, was $57.6 million during the three months ended March 31, 2025 compared to $37.5 million during the same period in 2024. Advances from unfunded commercial construction loans available for draws were $9.0 million during the three months ended March 31, 2025. Payoffs and paydowns totaled $18.6 million during the three months ended March 31, 2025 compared to $26.5 million during the same period in 2024.

Current wording

Loans held-for-sale increased to $10.8 million at June 30, 2025 from $9.7 million at December 31, 2024. Loans (excluding loans held-for-sale) increased $39.5 million, or 3.2% (6.5% annualized), to $1.3 billion at June 30, 2025 from $1.2 billion at December 31, 2024. Total loan production, excluding mortgage secondary market and new construction residential real estate, was $109.5 million during the six months ended June 30, 2025 compared to $94.6 million during the same period in 2024. Advances from unfunded commercial construction loans available for draws were $23.8 million during the six months ended June 30, 2025. Payoffs and paydowns totaled $60.7 million during the six months ended June 30, 2025 compared to $48.3 million during the same period in 2024.

Previous wording

Total mortgage production during the three months ended March 31, 2025 was $43.9 million, $25.8 million of the production was originated to be sold in the secondary market, $4.0 million of the loan production was originated as ARM loans for our loans held-for-investment portfolio, and $14.1 million of the loan production was commitments for new construction residential real estate loans. Total mortgage production during the three months ended March 31, 2024 was $36.6 million, $13.1 million of the production was originated to be sold in the secondary market, $9.7 million of the loan production was originated as ARM loans for our loans held-for-investment portfolio, and $13.9 million of the loan production was commitments for new construction residential real estate loans. As these ARM and new construction residential real estate loans are being held on our balance sheet as loans held-for-investment, the result is additive to loan growth and interest income but results in less gain on sale fee income, which is reported in noninterest income as mortgage banking income. The increase in mortgage production was primarily due to higher secondary market loan production.

Current wording

Total mortgage production during the six months ended June 30, 2025 was $106.7 million, $57.7 million of the production was originated to be sold in the secondary market, $9.6 million of the loan production was originated as ARM loans for our loans held-for-investment portfolio, and $39.4 million of the loan production was commitments for new construction residential real estate loans. Total mortgage production during the six months ended June 30, 2024 was $85.6 million, $35.7 million of the production was originated to be sold in the secondary market, $24.3 million of the loan production was originated as ARM loans for our loans held-for-investment portfolio, and $25.6 million of the loan production was commitments for new construction residential real estate loans. As these ARM and new construction residential real estate loans are being held on our balance sheet as loans held-for-investment, the result is additive to loan growth and interest income but results in less gain on sale fee income, which is reported in noninterest income as mortgage banking income. The increase in mortgage production was primarily due to higher secondary market loan production and increased commitments for new residential real estate construction, partially offset by lower ARM loans for our loans held for investment portfolio.

Previous wording

The loan-to-deposit ratio (including loans held-for-sale) at March 31, 2025 and December 31, 2024 was 73.0% and 73.4%, respectively. The loan-to-deposit ratio (excluding loans held-for-sale) at March 31, 2025 and December 31, 2024 was 72.6% and 72.8%, respectively.

Current wording

The loan-to-deposit ratio (including loans held-for-sale) at June 30, 2025 and December 31, 2024 was 72.5% and 74.5%, respectively. The loan-to-deposit ratio (excluding loans held-for-sale) at June 30, 2025 and December 31, 2024 was 71.8% and 74.1%, respectively.

Previous wording

One of our goals as a community bank has been, and continues to be, to grow our assets through quality loan growth by providing credit to small and mid-size businesses and individuals within the markets we serve. We remain committed to meeting the credit needs of our local markets. Based on our loan portfolio as of March 31, 2025, the non-owner occupied commercial real estate loans and the construction and land development loans were approximately 308% and 80% of total risk-based capital, respectively. Furthermore, our three-year growth in non-owner occupied commercial real estate loans was 51% from March 31, 2022 to March 31, 2025. We have expertise and a long history in originating and managing commercial real estate loans. We have a strong credit underwriting process, which includes management and board oversight. We perform rigorous monitoring, stress testing, and reporting of these portfolios at the management and board levels, and we continue to monitor the level of the concentration in commercial real estate loans within our loan portfolio monthly.

Current wording

One of our goals as a community bank has been, and continues to be, to grow our assets through quality loan growth by providing credit to small and mid-size businesses and individuals within the markets we serve. We remain committed to meeting the credit needs of our local markets. Based on our loan portfolio as of June 30, 2025, the non-owner occupied commercial real estate loans and the construction and land development loans were approximately 306% and 77% of total risk-based capital, respectively. Furthermore, our three-year growth in non-owner occupied commercial real estate loans was 45% from June 30, 2022 to June 30, 2025. We have expertise and a long history in originating and managing commercial real estate loans. We have a strong credit underwriting process, which includes management and board oversight. We perform rigorous monitoring, stress testing, and reporting of these portfolios at the management and board levels, and we continue to monitor the level of the concentration in commercial real estate loans within our loan portfolio monthly.

Previous wording

Investment securities increased $4.0 million to $495.6 million, net of allowance for credit losses on investments of $24,000, at March 31, 2025 from $491.7 million, net of allowance for credit losses on investments of $23,000, at December 31, 2024. The increase was driven by purchases of treasury securities in the available-for-sale portfolio, partially offset by normal principal cash flows.

Current wording

Investment securities increased $15.6 million to $507.3 million, net of allowance for credit losses on investments of $19,000, at June 30, 2025 from $491.7 million, net of allowance for credit losses on investments of $23,000, at December 31, 2024. The increase was driven by purchases of mortgage-backed securities in the available-for-sale portfolio, partially offset by normal principal cash flows.

Previous wording

On June 1, 2022, we reclassified $224.5 million in investments to held-to-maturity (HTM) from available-for-sale (AFS). These securities were transferred at fair value at the time of the transfer, which became the new cost basis for the securities held to maturity. The pretax unrealized net holding loss on the available-for-sale securities on the date of transfer totaled approximately $16.7 million and continued to be reported as a component of accumulated other comprehensive loss. This net unrealized loss is being amortized to interest income over the remaining life of the securities as a yield adjustment. There were no gains or losses recognized as a result of this transfer. The remaining pretax unrealized net holding loss on these investments was $11.9 million ($9.4 million net of tax) at March 31, 2025.

Current wording

On June 1, 2022, we reclassified $224.5 million in investments to held-to-maturity (HTM) from available-for-sale (AFS). These securities were transferred at fair value at the time of the transfer, which became the new cost basis for the securities held to maturity. The pretax unrealized net holding loss on the available-for-sale securities on the date of transfer totaled approximately $16.7 million and continued to be reported as a component of accumulated other comprehensive loss. This net unrealized loss is being amortized to interest income over the remaining life of the securities as a yield adjustment. There were no gains or losses recognized as a result of this transfer. The remaining pretax unrealized net holding loss on these investments was $11.4 million ($9.0 million net of tax) at June 30, 2025.

Previous wording

Our HTM investments totaled $205.8 million and represented approximately 42% of our total investments at March 31, 2025. Our AFS investments totaled $286.9 million or approximately 57% of our total investments at March 31, 2025. Our investments at cost totaled $2.9 million or approximately 1% of our total investments at March 31, 2025. The unrealized losses on our investment securities are related to an increase in market interest rates, which has a temporary negative impact on the fair value of our investment securities portfolio and on accumulated other comprehensive loss, which is included in shareholders’ equity.

Current wording

Our HTM investments totaled $201.7 million and represented approximately 40% of our total investments at June 30, 2025. Our AFS investments totaled $302.6 million or approximately 59% of our total investments at June 30, 2025. Our investments at cost totaled $2.9 million or approximately 1% of our total investments at June 30, 2025. The unrealized losses on our investment securities are related to an increase in market interest rates, which has a temporary negative impact on the fair value of our investment securities portfolio and on accumulated other comprehensive loss, which is included in shareholders’ equity.

Previous wording

At March 31, 2025, the estimated weighted average life of our total investment portfolio was 5.5 years, the modified duration was 4.2, the effective duration was 3.2, and the weighted average tax equivalent book yield was 3.64%.

Current wording

At June 30, 2025, the estimated weighted average life of our total investment portfolio was 5.4 years, the modified duration was 4.2, the effective duration was 3.3, and the weighted average tax equivalent book yield was 3.69%.

Previous wording

Other short-term investments increased $49.8 million to $173.2 million at March 31, 2025 from $123.5 million at December 31, 2024 due to our decision to temporarily hold excess liquidity in interest-bearing bank deposits at the Federal Reserve Bank. This additional liquidity will be used to fund loan growth and/or reduce borrowings and brokered certificates of deposit.

Current wording

Other short-term investments increased $27.9 million to $151.3 million at June 30, 2025 from $123.5 million at December 31, 2024 due to our decision to temporarily hold excess liquidity in interest-bearing bank deposits at the Federal Reserve Bank. This additional liquidity will be used to fund loan growth and/or reduce borrowings and brokered certificates of deposit.

Previous wording

Deposits increased $49.8 million, or 3.0% (12.1% annualized), to $1.7 billion at March 31, 2025 compared to $1.7 billion at December 31, 2024. Our pure deposits, which are defined as total deposits less certificates of deposits, increased $38.6 million, or 2.8% (11.4% annualized), to $1.41 billion at March 31, 2025 from $1.38 billion at December 31, 2024. We continue to focus on growing our pure deposits in order to better manage our overall cost of funds. Certificates of deposits increased $11.2 million to $311.5 million at March 31, 2025 from $300.2 million at December 31, 2024.

Current wording

Deposits increased $78.1 million, or 4.7% (9.4% annualized), to $1.8 billion at June 30, 2025 compared to $1.7 billion at December 31, 2024. Our pure deposits, which are defined as total deposits less certificates of deposits, increased $61.6 million, or 4.5% (9.0% annualized), to $1.44 billion at June 30, 2025 from $1.38 billion at December 31, 2024. We continue to focus on growing our pure deposits in order to better manage our overall cost of funds. Certificates of deposits increased $16.6 million to $316.8 million at June 30, 2025 from $300.2 million at December 31, 2024.

Previous wording

We began issuing brokered certificates of deposit during the third quarter of 2023 to supplement our funding mix. As of March 31, 2025, we had $10.4 million in brokered certificates of deposit. This brokered certificate of deposit had an initial term of 18 months and matures in July 2025. We had $10.4 million and $60.5 million in brokered certificates of deposit at December 31, 2024 and at March 31, 2024, respectively.

Current wording

We began issuing brokered certificates of deposit during the third quarter of 2023 to supplement our funding mix. As of June 30, 2025, we had $10.4 million in brokered certificates of deposit. This brokered certificate of deposit had an initial term of 18 months and matures in July 2025. We had $10.4 million and $42.9 million in brokered certificates of deposit at December 31, 2024 and at June 30, 2024, respectively.

Previous wording

Total uninsured deposits were $575.2 million and $542.9 million at March 31, 2025 and December 31, 2024, respectively. Included in uninsured deposits at March 31, 2025 and December 31, 2024 were $95.5 million and $105.8 million of deposits of states or political subdivisions in the U.S., which are secured or collateralized, respectively. Total uninsured deposits, excluding these deposits that are secured or collateralized, totaled $479.7 million, or 27.8%, of total deposits at March 31, 2025 and $437.1 million, or 26.1%, of total deposits at December 31, 2024. The average balance of all customer deposit accounts at March 31, 2025 was $31,262. The average balance for consumer accounts was $16,416 and the average balance for non-consumer accounts was $67,993.

Current wording

Total uninsured deposits were $570.5 million and $542.9 million at June 30, 2025 and December 31, 2024, respectively. Included in uninsured deposits at June 30, 2025 and December 31, 2024 were $87.9 million and $105.8 million of deposits of states or political subdivisions in the U.S., which are secured or collateralized, respectively. Total uninsured deposits, excluding these deposits that are secured or collateralized, totaled $482.6 million, or 27.5%, of total deposits at June 30, 2025 and $437.1 million, or 26.1%, of total deposits at December 31, 2024. The average balance of all customer deposit accounts at June 30, 2025 was $31,119. The average balance for consumer accounts was $16,138 and the average balance for non-consumer accounts was $70,257.

Previous wording

The uninsured amount of time deposits in the table above at March 31, 2025 and December 31, 2024 was $42.7 million and $40.8 million, respectively.

Current wording

The uninsured amount of time deposits in the table above at June 30, 2025 and December 31, 2024 was $42.4 million and $40.8 million, respectively.

Previous wording

*Borrowed funds.*Borrowed funds consist of federal funds purchased, securities sold under agreements to repurchase, FHLB advances and long-term debt. Our long-term debt is a result of issuing $15.0 million in trust preferred securities. Short-term borrowings in the form of securities sold under agreements to repurchase averaged $130.8 million, $83.9 million, and $87.1 million during the three months ended March 31, 2025, December 31, 2024, and March 31, 2024, respectively. The average rates paid during these periods were 2.52%, 2.71%, and 2.81%, respectively. The balances of securities sold under agreements to repurchase were $129.8 million, $103.1 million, and $81.8 million at March 31, 2025, December 31, 2024, and March 31, 2024, respectively. The repurchase agreements all mature within one to four days and are generally originated with customers that have other relationships with us and tend to provide a stable and predictable source of funding. Federal funds purchased averaged $2,000, zero, and $2,000 during the three months ended March 31, 2025, December 31, 2024, and March 31, 2024, respectively. The average rates paid during these periods were 0.00%, 0.00%, and 0.00%, respectively. Federal funds purchased were zero at March 31, 2025, December 2024, and March 31, 2024. As a member of the FHLB, the Bank has access to advances from the FHLB for various terms and amounts. FHLB advances averaged zero, $30.3 million, and $83.7 million during the three months ended March 31, 2025, December 31, 2024, and March 31, 2024, respectively. The average rates paid during these periods were zero, 5.15%, and 5.09%, respectively. The balances of FHLB advances were zero, zero, and $60.0 million at March 31, 2025, December 31, 2024, and March 31, 2024, respectively.

Current wording

Borrowed funds consist of federal funds purchased, securities sold under agreements to repurchase, FHLB advances and long-term debt. Our long-term debt is a result of issuing $15.0 million in trust preferred securities. Short-term borrowings in the form of securities sold under agreements to repurchase averaged $110.2 million, $83.9 million, and $68.6 million during the three months ended June 30, 2025, December 31, 2024, and June 30, 2024, respectively. The average rates paid during these periods were 2.48%, 2.71%, and 2.91 %, respectively. The balances of securities sold under agreements to repurchase were $103.6 million, $103.1 million, and $59.3 million at June 30, 2025, December 31, 2024, and June 30, 2024, respectively. The repurchase agreements all mature within one to four days and are generally originated with customers that have other relationships with us and tend to provide a stable and predictable source of funding. Federal funds purchased averaged zero, zero, and $6,000 during the three months ended June 30, 2025, December 31, 2024, and June 30, 2024, respectively. The average rates paid during these periods were 0.00%, 0.00%, and 0.00%, respectively. Federal funds purchased were zero at June 30, 2025, December 2024, and June 30, 2024. As a member of the FHLB, the Bank has access to advances from the FHLB for various terms and amounts. FHLB advances averaged zero, $30.3 million, and $55.6 million during the three months ended June 30, 2025, December 31, 2024, and June 30, 2024, respectively. The average rates paid during these periods were zero, 5.15%, and 5.15%, respectively. The balances of FHLB advances were zero, zero, and $50.0 million at June 30, 2025, December 31, 2024, and June 30, 2024, respectively.

Previous wording

We issued $15.5 million in trust preferred securities on September 16, 2004. During the fourth quarter of 2015, we redeemed $500,000 of these securities. Until the cessation of LIBOR on September 30, 2023, the securities accrued and paid distributions quarterly at a rate of three month LIBOR plus 257 basis points, thereafter, such distributions to be paid quarterly transitioned to an adjusted Secured Overnight Financing Rate (SOFR) index in accordance with the Federal Reserve’s final rule implementing the Adjustable Interest Rate Act. The remaining debt may be redeemed in full anytime with notice and matures on September 16, 2034. Trust preferred securities averaged $15.0 million during the three months ended March 31, 2025, December 31, 2024, and March 31, 2024. The average rates during these periods were 7.29%, 7.71%, and 8.28%, respectively. The balances of trust preferred securities were $15.0 million as of March 31, 2025, December 31, 2024, and March 31, 2024.

Current wording

We issued $15.5 million in trust preferred securities on September 16, 2004. During the fourth quarter of 2015, we redeemed $500,000 of these securities. The remaining debt may be redeemed in full anytime with notice and matures on September 16, 2034. The securities accrue and pay distributions quarterly at a rate determined by an adjusted Secured Overnight Financing Rate (SOFR). Trust preferred securities averaged $15.0 million during the three months ended June 30, 2025, December 31, 2024, and June 30, 2024. The average rates during these periods were 7.21%, 7.71%, and 8.28%, respectively. The balances of trust preferred securities were $15.0 million as of June 30, 2025, December 31, 2024, and June 30, 2024.

Previous wording

Total shareholders’ equity increased $5.5 million, or 3.8%, to $150.0 million at March 31, 2025 from $144.5 million at December 31, 2024. Shareholders’ equity was 7.4% of total assets at March 31, 2025 and 7.4% at December 31, 2024. The $5.5 million increase in shareholders’ equity was due to a $2.9 million increase in retention of earnings resulting from $4.0 million in net income less $1.1 million in dividends, a $34,000 increase due to employee and director stock awards, a $96,000 increase due to dividend reinvestment plan (DRIP) purchases, and a $2.5 million improvement in accumulated other comprehensive loss. The improvement in other accumulated other comprehensive loss for the period was due to improvements in the accumulated other comprehensive loss on available-for-sale securities, net of tax expense, of $2.2 million and the reclassification adjustment for amortization of unrealized losses on securities transferred from available-for-sale to held-to-maturity, net of tax expense, of $330,000.

Current wording

Total shareholders’ equity increased $11.0 million, or 7.6%, to $155.5 million at June 30, 2025 from $144.5 million at December 31, 2024. Shareholders’ equity was 7.6% of total assets at June 30, 2025 and 7.4% at December 31, 2024. The $11.0 million increase in shareholders’ equity was due to a $6.9 million increase in retention of earnings resulting from $9.2 million in net income less $2.3 million in dividends, a $331,000 increase due to employee and director stock awards, a $192,000 increase due to dividend reinvestment plan (DRIP) purchases, and a $3.6 million improvement in accumulated other comprehensive loss. The improvement in other accumulated other comprehensive loss for the period was due to improvements in the accumulated other comprehensive loss on available-for-sale securities, net of tax expense, of $3.0 million and the reclassification adjustment for amortization of unrealized losses on securities transferred from available-for-sale to held-to-maturity, net of tax expense, of $662,000, partially offset by unrealized loss on investment hedge of $76,000.

Previous wording

On May 14, 2024, we announced that our Board of Directors approved a plan to utilize up to $7.1 million of capital to repurchase shares of our common stock (the “2024 Repurchase Plan”), which represented approximately 5.3% of total shareholders’ equity at the time of the announcement. No repurchases have been made under the 2024 Repurchase Plan. The 2024 Repurchase Plan expires at the market close on May 13, 2025.

Current wording

On May 9, 2025, we announced that our Board of Directors approved a plan to utilize up to $7.5 million of capital to repurchase shares of our common stock (the “2025 Repurchase Plan”), which represented approximately 5.0% of total shareholders’ equity at the time of the announcement. No repurchases have been made under the 2025 Repurchase Plan. The 2025 Repurchase Plan expires at the market close on May 8, 2026.

Previous wording

Based on the many factors and assumptions used in simulating the effect of changes in interest rates, the following table estimates the hypothetical percentage change in net interest income at March 31, 2025 and at December 31, 2024 over the subsequent 12 months. We were liability sensitive at March 31, 2025 and at December 31, 2024. Previously in 2023, we increased our non-maturity deposit interest rate betas in increasing rate environments, which increased our liability sensitivity. This was partially offset by the previously mentioned $150.0 million Pay-Fixed Swap Agreement that we entered into effective May 5, 2023. Furthermore, we reduced the average life on our non-maturity deposits at June 30, 2024. As a result, our modeling, at March 31, 2025, reflects a decrease in net interest income in a rising interest rate environment during the first 12-month period subsequent to interest rate changes. The negative impact of rising rates on net interest income is slightly more liability sensitive during the second 12- month period subsequent to interest rate changes. In a declining interest rate environment, the model reflects increases in net interest income during both the first 12-month period and the second 12-month period subsequent to interest rate changes. The increase and decrease of 100, 200, 300, and 400 basis points, respectively, reflected in the table below assume a simultaneous and parallel change in interest rates along the entire yield curve.

Current wording

Based on the many factors and assumptions used in simulating the effect of changes in interest rates, the following table estimates the hypothetical percentage change in net interest income at June 30, 2025 and at December 31, 2024 over the subsequent 12 months. We were liability sensitive at June 30, 2025 and at December 31, 2024. In 2023, we increased our non-maturity deposit interest rate betas in increasing rate environments, which increased our liability sensitivity. This was partially offset by the previously mentioned $150.0 million Loan Pay-Fixed Swap Agreement and Investment Pay-Fixed Interest Rate Swap Agreement that we entered into effective May 5, 2023 and April 30, 2025, respectively. Furthermore, we reduced the average life on our non-maturity deposits at June 30, 2024. As a result, our modeling, at June 30, 2025, reflects a decrease in net interest income in a rising interest rate environment during the first 12-month period subsequent to interest rate changes. The negative impact of rising rates on net interest income is slightly less liability sensitive during the second 12-month period subsequent to interest rate changes. In a declining interest rate environment, the model reflects increases in net interest income in all of the scenarios during the first 12-month period subsequent to interest rate changes. The positive impact in the down 100 and down 200 basis point scenarios of declining rates changes to a slightly less positive impact on net interest income during the second 12-month period subsequent to interest rate changes. In the down 300 and down 400 basis point scenarios, the model reflects a slight decrease. The increase and decrease of 100, 200, 300, and 400 basis points, respectively, reflected in the table below assume a simultaneous and parallel change in interest rates along the entire yield curve. As a result, our modeling, at December 31, 2024, reflects a decrease in net interest income in a rising interest rate environment during the first 12-month period subsequent to interest rate changes. The negative impact of rising rates on net interest income is slightly less liability sensitive during the second 12-month period subsequent to interest rate changes. In a declining interest rate environment, the model reflects increases in net interest income in all of the scenarios during the first 12-month period subsequent to interest rate changes. The positive impact in the down 100, down 200, and down 300 basis point scenarios of declining rates changes to a slightly less positive impact on net interest income during the second 12-month period subsequent to interest rate changes. In the down 400 basis points scenario, the model reflects a slight decrease in net interest income. The increase and decrease of 100, 200, 300, and 400 basis points, respectively, reflected in the table below assume a simultaneous and parallel change in interest rates along the entire yield curve.

Previous wording

During the second 12-month period after 100 basis point, 200 basis point, 300 basis point, and 400 basis point simultaneous and parallel increases in interest rates along the entire yield curve, our net interest income is projected to decline 1.98%, 4.83%, 8.79%, and 12.96%, respectively, at March 31, 2025, and 2.04%, 4.96%, 8.75%, and 12.70%, respectively, at December 31, 2024. During the second 12-month period after 100 basis point, 200 basis point, 300 basis point, and 400 basis point simultaneous and parallel reduction in interest rates along the entire yield curve, our net interest income is projected to increase 2.05%, 3.39%, 2.40%, and 0.11%, respectively, at March 31, 2025, and to increase 1.80%, 2.91%, and 1.46%, and decline 1.75%, respectively, at December 31, 2024.

Current wording

During the second 12-month period after 100 basis point, 200 basis point, 300 basis point, and 400 basis point simultaneous and parallel increases in interest rates along the entire yield curve, our net interest income is projected to decline 1.76%, 4.64%, 8.44%, and 12.41%, respectively, at June 30, 2025, and decline 2.04%, 4.96%, 8.75%, and 12.70%, respectively, at December 31, 2024. During the second 12-month period after 100 basis point, 200 basis point, 300 basis point, and 400 basis point simultaneous and parallel reduction in interest rates along the entire yield curve, our net interest income is projected to increase 1.44%, 1.97%, and decline 0.52%, and 3.78%, respectively, at June 30, 2025, and to increase 1.80%, 2.91%, and 1.46%, and decline 1.75%, respectively, at December 31, 2024.

Previous wording

We perform a valuation analysis projecting future cash flows from assets and liabilities to determine the Present Value of Equity (“PVE”) over a range of changes in market interest rates. The sensitivity of PVE to changes in interest rates is a measure of the sensitivity of earnings over a longer time horizon. Policies have been established in an effort to maintain the maximum anticipated negative impact of these modeled changes in PVE at no more than 15%, 20%, 25%, and 25%, respectively, in a 100, 200, 300, and 400 basis point change in market interest rates. Based on PVE, we were primarily asset sensitive at March 31, 2025 and at December 31, 2024. However, our PVE increases slightly in the up 100, up 200, and up 300 basis point scenario and declines 1.49% in the up 400 basis point scenario at March 31, 2025. Our PVE increases slightly in the up 100, up 200 basis point scenarios and in the up 300 and up 400 basis point scenarios, the PVE declines 1.47% and 3.72%, respectively, at December 31, 2024.

Current wording

We perform a valuation analysis projecting future cash flows from assets and liabilities to determine the Present Value of Equity (“PVE”) over a range of changes in market interest rates. The sensitivity of PVE to changes in interest rates is a measure of the sensitivity of earnings over a longer time horizon. Policies have been established in an effort to maintain the maximum anticipated negative impact of these modeled changes in PVE at no more than 15%, 20%, 25%, and 25%, respectively, in a 100, 200, 300, and 400 basis point change in market interest rates. Based on PVE, we were primarily asset sensitive at June 30, 2025 and at December 31, 2024. However, our PVE increases slightly in the up 100 and up 200, and declines in the up 300 and up 400 basis point scenarios at June 30, 2025 and December 31, 2024.

Previous wording

From time to time, we issue brokered certificates of deposit to supplement our funding mix. As of March 31, 2025 and December 31, 2024, we had $10.4 million in brokered certificates of deposit. This brokered certificate of deposit had an initial term of 18 months and matures in July 2025. We believe that we have ample liquidity to meet the needs of our customers through our low-cost deposits, the ability to borrow against approved lines of credit (federal funds purchased) from correspondent banks, the ability to borrow on a secured basis through the Federal Reserve Discount Window, and the ability to obtain advances secured by certain securities and loans from the FHLB.

Current wording

From time to time, we issue brokered certificates of deposit to supplement our funding mix. As of June 30, 2025 and December 31, 2024, we had $10.4 million in brokered certificates of deposit. This brokered certificate of deposit had an initial term of 18 months and matures on July 31, 2025. We believe that we have ample liquidity to meet the needs of our customers through our low-cost deposits, the ability to borrow against approved lines of credit (federal funds purchased) from correspondent banks, the ability to borrow on a secured basis through the Federal Reserve Discount Window, and the ability to obtain advances secured by certain securities and loans from the FHLB.