BANK OF THE JAMES FINANCIAL GROUP INC

Previous wording

This report contains statements that constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. Statements made in this document and in any documents that are incorporated by reference which are not purely historical are forward-looking statements, including any statements regarding descriptions of management’s plans, objectives, or goals for future operations, products or services, and forecasts of its revenues, earnings, or other measures of performance. Forward-looking statements are based on current management expectations and, by their nature, are subject to risks and uncertainties. These statements generally may be identified by the use of words such as “believe,” “expect,” “anticipate,” “plan,” “estimate,” “should,” “will,” “intend,” or similar expressions. Shareholders should note that many factors, some of which are discussed elsewhere in this document, could affect the future financial results of Financial and could cause those results to differ materially from those expressed in forward-looking statements contained in this document. These factors, many of which are beyond Financial’s control, include, but are not necessarily limited to the following:

Current wording

This report contains statements that constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. Statements made in this document and in any documents incorporated by reference that are not purely historical are forward-looking statements, including statements regarding management’s plans, objectives, or goals for future operations, products or services, and forecasts of revenues, earnings, or other performance measures. Forward-looking statements are based on current management expectations and, by their nature, are subject to risks and uncertainties. These statements generally may be identified by words such as “believe,” “expect,” “anticipate,” “plan,” “estimate,” “should,” “will,” “intend,” or similar expressions. Shareholders should note that many factors, some of which are discussed elsewhere in this document, could affect the future financial results of Financial and could cause those results to differ materially from those expressed in forward-looking statements. These factors, many of which are beyond Financial’s control, include, but are not limited to, the following:

Previous wording

potential exposure to fraud, negligence, computer theft and cyber-crime and cyber-threats, and the Company’s ability to maintain the security of its data processing and information technology systems;

Current wording

Problems with technology utilized by us, including potential exposure to fraud, negligence, computer theft, cyber-crime, cyber-threats, and the Company’s ability to maintain the security of its data processing and information technology systems.

Previous wording

operating, legal and regulatory risks, including the effects of legislative or regulatory developments affecting thefinancial industry generally or Financial specifically;

Current wording

Operating, legal, and regulatory risks, including the effects of legislative or regulatory developments affecting the financial industry generally or Financial specifically, such as government legislation and policies (including the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act and its related regulations), which change from time to time and over which we have no control, and increased competition from other providers of financial services due to such regulations.

Previous wording

economic, market, political and competitive forces affecting Financial’s banking and other businesses;

Current wording

Economic, market, political, and competitive forces affecting Financial's banking and other businesses, including changes in interest rates, monetary policy, and general economic conditions, which may impact net interest income, credit quality, loan demand, or overall conditions in our market area.

Previous wording

the potential impact of tariffs, trade restrictions, or changes in U.S. trade policy on businesses in our market area and our business and agricultural borrowers, which could indirectly affect credit quality, loan demand, or overall economic conditions in its market area; and

Current wording

Geopolitical risks, including economic and political tensions with China, the ongoing war between Russia and Ukraine and potential expansion of combatants, sanctions on Russia, and the potential impact of tariffs, trade restrictions, or changes in U.S. trade policy on businesses in our market area and our business and agricultural borrowers, all of which may have a destabilizing effect on financial markets and economic activity and could indirectly affect credit quality, loan demand, or overall economic conditions in our market area.

Previous wording

other risks anduncertainties set forth in this Annual Report on Form 10-K and, from time to time, in our other filings with the Securities and Exchanges Commission (“SEC”).

Current wording

Other risks and uncertainties set forth in this Quarterly l Report on Form 10-Q and, from time to time, in our other filings with the Securities and Exchange Commission (“SEC”).

Previous wording

Other risks, uncertainties, and factors could cause our actual results to differ materially from those projected in any forward-looking statements we make.

Current wording

Other risks, uncertainties, and factors could cause our actual results to differ materially from those projected in any forward-looking statements we make. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.

Previous wording

These factors should be considered when evaluating the forward-looking statements, and you should not place undue reliance on such statements. Financial specifically disclaims any obligation to update factors or to publicly announce the results of revisions to any of the forward-looking statements or comments included herein to reflect future events or developments. This discussion and analysis should be read in conjunction with the description of our “Risk Factors” in Item 1A of the most recently filed Form 10-K.

Current wording

These factors should be considered when evaluating the forward-looking statements, and you should not place undue reliance on such statements. This discussion and analysis should be read in conjunction with the description of our “Risk Factors” in Item 1A of the most recently filed Form 10-K.

Previous wording

Bank of the James Financial Group, Inc.’s (“Financial” or the “Company”)financial statements are prepared in accordance with accounting principles generally accepted in the United States (GAAP). Thefinancial information contained within our statements is, to a significant extent, based on measures of thefinancial effects of transactions and events that have already occurred. A variety of factors could affect the ultimate value that is obtained either when earning income, recognizing an expense, recovering an asset or relieving a liability. In addition, GAAP itself may change from one previously acceptable method to another method. Although the economics of our transactions would be the same, the timing of events that would impact our transactions could change.

Current wording

Bank of the James Financial Group, Inc.’s (“Financial” or the “Company”)financial statements are prepared in accordance with accounting principles generally accepted in the United States (GAAP). As a community bank primarily serving central Virginia, thefinancial information contained within our statements is, to a significant extent, based on measures of thefinancial effects of transactions and events that have already occurred, such as lending activities tied to local real estate markets and small business operations. A variety of factors—particularly regional economic conditions, fluctuations in interest rates, and changes in real estate values in our market area—could affect the ultimate value obtained when earning income, recognizing an expense, recovering an asset, or relieving a liability. In addition, GAAP itself may evolve from one previously acceptable method to another, potentially altering the timing of how these events impact our transactions, even if the underlying economics remain unchanged.

Previous wording

The ACLL is management’s estimate of the probable losses expected in our loan portfolio and held-to-maturity securities portfolio. With the exception of loans related to agriculture, the Company uses a discounted cash flow model to estimate its current expected credit losses in our loan portfolio. Actual losses could differ significantly from the historical factors that we use in estimating risk. For information on the Company’s policies on the ACLL, please refer to Note 2 – “Allowance for Credit Losses - Loans” in the Company’s Form 10-K for the year ended December 31, 2024. See “Management Discussion and Analysis Results of Operations – Allowance and Provision for Credit losses” below for further discussion of the allowance for credit losses.

Current wording

The Allowance for Credit Losses on Loans (“ACLL”) is management’s estimate of the current expected credit losses in our loan portfolio and held-to-maturity securities portfolio. With the exception of loans related to agriculture, the Company uses a discounted cash flow model to estimate its current expected credit losses in our loan portfolioand held-to-maturity securities portfolio. Actual losses could differ significantly from the historical factors that we use in estimating risk. For information on the Company’s policies on the ACLL, please refer to Note 2 – “Allowance for Credit Losses - Loans” in the Company’s Form 10-K for the year ended December 31, 2024. See “Management’s Discussion and Analysis Results of Operations – Allowance and Provision for Credit losses”below for further discussion of the allowance for credit losses.

Previous wording

The Bank is a Virginia banking corporation headquartered in Lynchburg, Virginia. The Bank was incorporated under the laws of the Commonwealth of Virginia as a state-chartered bank in 1998 and began banking operations in July 1999. The Bank was organized to engage in general retail and commercial banking business. The Bank is a community-oriented financial institution that provides varied banking services to individuals, small and medium-sized businesses, and professional concerns. Historically, our primary market area has been the Central Virginia, Region 2000 area, which encompasses the seven jurisdictions of the Town of Altavista, Amherst County, Appomattox County, the Town of Bedford, Bedford County, Campbell County, and the City of Lynchburg. Recently, the Bank has begun to expand to other areas in Virginia, specifically Roanoke, Charlottesville, Harrisonburg, Blacksburg, Lexington and Rustburg. The Bank strives to provide its customers with products comparable to statewide regional banks located in its market area, while maintaining the prompt response time and level of service of a community bank. Management believes this operating strategy has particular appeal in the Bank’s market areas.

Current wording

The Bank is a Virginia banking corporation headquartered in Lynchburg, Virginia. The Bank was incorporated under the laws of the Commonwealth of Virginia as a state-chartered bank in 1998 and began banking operations in July 1999. The Bank was organized to engage in general retail and commercial banking business. The Bank is a community-oriented financial institution that provides varied banking services to individuals, small and medium-sized businesses, and professional concerns. Historically, our primary market area has been the Central Virginia, Region 2000 area, which encompasses the seven jurisdictions of the Town of Altavista, Amherst County, Appomattox County, the Town of Bedford, Bedford County, Campbell County, and the City of Lynchburg. The Bank has expanded to other areas in Virginia, specifically Roanoke, Charlottesville, Harrisonburg, Blacksburg, Lexington, Rustburg, Buchanan, and Nellysford. The Bank strives to provide its customers with products comparable to statewide regional banks located in its market areas, while maintaining the prompt response time and level of service of a community bank. Management believes this operating strategy has particular appeal in the Bank’s market areas.

Previous wording

We conduct our investment advisory business through PWW, which Financial acquired on December 31, 2021. PWW is a Lynchburg, Virginia-based investment advisory firm that has approximately $843 million in assets under management and advisement as of March 31, 2025. PWW generates revenue primarily through investment advisory fees.

Current wording

We conduct our investment advisory business through PWW, which Financial acquired on December 31, 2021. PWW is a Lynchburg, Virginia-based investment advisory firm that has approximately $929,957,000 in assets under management and advisement as of June 30, 2025. PWW generates revenue primarily through investment advisory fees.

Previous wording

(ii) interest expense on interest-bearing liabilities, consisting principally of deposits and other borrowings. The Bank’s net income is also affected by its provision for credit losses, as well as the level of itsnoninterest income (including gains on sales of loans held for sale, service charges, and investment advisory fees) and its noninterest expenses (including salaries and employee benefits, occupancy expense, data processing expenses, Federal Deposit Insurance Corporation premiums, expenses in complying with regulatory requirements, miscellaneous other expenses, franchise taxes, and income taxes).

Current wording

Our operating results depend primarily upon the Bank’s net interest income, which is determined by the difference between (i) interest and dividend income on earning assets—consisting primarily of loans, investment securities, and other investments—and (ii) interest expense on interest-bearing liabilities, consisting principally of deposits and other borrowings. The Bank’s net income is also affected by its provision for credit losses, as well as the level of itsnoninterest income (including gains on sales of loans held for sale, service charges, and investment advisory fees) and its noninterest expenses (including salaries and employee benefits, occupancy expense, data processing expenses, Federal Deposit Insurance Corporation premiums, expenses in complying with regulatory requirements, miscellaneous other expenses, franchise taxes, and income taxes).

Previous wording

Subject to regulatory approval, the Bank may open additional branches during the next two fiscal years. Although numerous factors could influence the Bank’s expansion plans, the following discussion provides a general overview of the additional branch locations that the Bank currently is considering, including the following propertiy that we own and are holding for expansion:

Current wording

Subject to regulatory approval, the Bank may open additional branches during the next two fiscal years. Although numerous factors could influence the Bank’s expansion plans, the following discussion provides a general overview of the additional branch locations that the Bank currently is considering, including the following property that we own and are holding for expansion:

Previous wording

Although the Bank cannot predict the financial impact of each new branch with certainty, management generally anticipates that each new branch will become profitable within 12 to 18 months of operation.

Current wording

Although the Bank cannot predict thefinancial impact of each new branch with certainty, management generally anticipates that each new branch will become profitable within 12 to 18 months of operation.

Previous wording

The following discussion represents management’s discussion and analysis of thefinancial condition of Financial as of March 31, 2025 and December 31, 2024 and the results of operations of Financial for the three-month periods ended March 31, 2025 and 2024. This discussion should be read in conjunction with thefinancial statements included elsewhere herein.Allfinancial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.

Current wording

The following discussion represents management’s discussion and analysis of thefinancial condition of Financial as of June 30, 2025 and December 31, 2024 and the results of operations of Financial for the three and six-month periods ended June 30, 2025 and 2024. This discussion should be read in conjunction with thefinancial statements included elsewhere herein. Allfinancial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.

Previous wording

Total assets were $1,011,726,000 on March 31, 2025 compared with $979,244,000 at December 31, 2024, an increase of 3.32%. The increase in total assets was primarily due to increases in cash, Fed funds sold, securities available-for-sale, loans, net of the allowance for credit losses, loans held for sale, and, to a lesser extent, the cash value of bank-owned life insurance.

Current wording

Total assets were $1,004,242,000 on June 30, 2025 compared with $979,244,000 at December 31, 2024, an increase of 2.56%. The increase in total assets was primarily due to growth in federal funds sold, securities available-for-sale, loans (net of the allowance for credit losses), and loans held for sale.

Previous wording

Total loans, excluding loans held for sale, increased to $649,409,000 on March 31, 2025 from $643,596,000 on December 31, 2024. The increase was primarily due to increases in commercial real estate and consumer loans, and was offset in part by a decrease in commercial, and to a lesser extent, residential loans. These decrease were due to payoffs and normal amortization of loans. Loans, excluding loans held for sale and net of deferred fees and costs and including the allowance for credit losses, increased to $642,388,000 on March 31, 2025 from $636,552,000 on December 31, 2024, an increase of 0.92%. The following summarizes the position of the Bank’s loan portfolio as of the dates indicated by dollar amount and percentages (dollar amounts in thousands):

Current wording

Total loans, excluding loans held for sale, increased to $655,397,000 on June 30, 2025 from $643,596,000 on December 31, 2024. Loans, excluding loans held for sale and net of deferred fees and costs and including the allowance for credit losses, increased to $649,089,000 as of June 30, 2025 from $636,552,000 on December 31, 2024, an increase of 1.97%. This increase was primarily due to higher balances in commercial loans (up $4,092,000), commercial real estate (up $6,936,000), and consumer loan categories (up $2,307,000), partially offset by decreases in residential loan portfolios (down $1,534,000).

Previous wording

As a community bank, the Bank is committed to growing assets through quality loan growth by providing credit to small and mid-size businesses and individuals within the markets it serves. Based on the loan portfolio as of March 31, 2025, the non-owner occupied commercial real estate loans and the construction and land development loans were approximately 228% and 19% (based on interagency commercial real estate guidelines) of total risk-based capital, respectively.

Current wording

Subsegments of the loan portfolio are set forth in Note 8 of ourfinancial statements. As a community bank, the Bank is committed to growing assets through quality loan growth by providing credit to small and mid-size businesses and individuals within the markets it serves. Based on the loan portfolio as of June 30, 2025, non-owner occupied commercial real estate loans and construction and land development loans were approximately $212,825,000, or 32.5 % of total loans.

Previous wording

We have expertise and a long history of originating and managing commercial real estate loans. Our strong credit underwriting process 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 concentration level in commercial real estate loans within our loan portfolio monthly.

Current wording

We have expertise and a long history of originating and managing commercial real estate loans. Our strong credit underwriting process 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 tomonitor concentration levels in our commercial real estate loans monthly.

Previous wording

The Bank closely monitors concentrations within its commercial real estate loan portfolio. As of March 31, 2025, non-owner occupied commercial real estate loans totaled$156,852,000, or 24.07% of total loans. This amount was calculated by purpose code and it is consistent with the Call Report that the Bank files with the Federal Deposit Insurance Corporation. The Bank has minimal exposure to loans secured by large office buildings or shopping centers, which comprise less than 5% of the non-owner occupied commercial real estate portfolio. The majority of the Bank’s non-owner occupied commercial loans are secured by smaller, multi-tenant properties diversified across various industries and geographies within our market areas.

Current wording

The Bank closely monitors concentrations within its commercial real estate loan portfolio. As of June 30, 2025, non-owner occupied commercial real estate loans totaled $202,147,000, or approximately 31% of total loans. This amount was calculated by purpose code and is consistent with the Call Report that the Bank files with the FDIC. The Bank has minimal exposure to loans secured by large office buildings or shopping centers (less than 5% of the non-owner occupied CRE portfolio). The majority of our non-owner occupied commercial loans are secured by smaller, multi-tenant properties diversified across various industries and geographies within our market areas.

Previous wording

We have a thorough loan origination process. For all CRE loans secured by real estate collateral, we require an appraisal or valuation at the time we originate the loan. We generally do not approve loans that have a loan-to-value ratio exceeding 80%. We perform an individual property cash flow analysis and, if appropriate, a global cash flow analysis at origination and generally require a debt service coverage ratio of at least 1.2x.

Current wording

We have a thorough loan origination process. For all CRE loans secured by real estate collateral, we require an appraisal or valuation at the time of origination. We generally do not approve loans with a loan-to-value ratio exceeding 80%. An individual property cash flow analysis is performed, and, if appropriate, a global cash flow analysis is also conducted. We generally require a debt service coverage ratio of at least 1.2x.

Previous wording

Regular monitoring of local market conditions and property sector trends;

Current wording

Regularly monitoring local market conditions and property sector trends;

Previous wording

Total nonperforming assets, which consist of nonaccrual loans, loans past due 90 days or more and still accruing, and OREO, were $1,798,000 on March 31, 2025 compared with$1,640,000 on December 31, 2024. Because we had no OREO on either March 31, 2025 or December 31, 2024, the nonperforming assets consist entirely of nonperforming loans.

Current wording

Total nonperforming assets, which consist of nonaccrual loans, loans past due 90 days or more and still accruing were $1,846,000 at June 30, 2025, compared with $1,640,000 at December 31, 2024. As discussed under “Results of Operations—

Previous wording

As discussed in more detail below under “Results of Operations—Allowance and Provision for Credit Losses,” management has provided for any anticipated losses on these loans in the allowance for credit losses. Loan payments received on nonaccrual loans are first applied to principal. When a loan is placed on nonaccrual status there are several negative implications. First, all interest accrued but unpaid at the time of the classification is reversed and deducted from the interest income totals for the Bank. Second, accruals of interest are discontinued until it becomes certain that both principal and interest can be repaid. Third, there may be actual losses that necessitate additional provisions for credit losses charged against earnings.

Current wording

Allowance and Provision for Credit Losses,” management has provided for any anticipated losses on these loans in the allowance for credit losses.

Previous wording

OREO represents real property acquired by the Bank for debts previously contracted, including through foreclosure or deeds in lieu of foreclosure. We had no OREO on March 31, 2025 or December 31, 2024. The Bank neither acquired nor disposed of any OREO during the three months ended March 31, 2025. As a result, the OREO balance remained $0 as of March 31, 2025.

Current wording

OREO represents real property acquired by the Bank for debts previously contracted, including through foreclosure or deeds in lieu of foreclosure. We had no OREO at either June 30, 2025, or December 31, 2024. The Bank neither acquired nor disposed of any OREO during the quarter ended June 30, 2025; the OREO balance remained zero.

Previous wording

Cash and cash equivalents increased to$94,966,000 on March 31, 2025 from$73,309,000 on December 31, 2024. Cash and cash equivalents consist of cash due from correspondents, cash in vault, and overnight investments (including Federal funds sold). Deposit inflows allowed management to deploy excess liquidity into overnight Fed funds. Cash and cash equivalents are subject to routine fluctuations in deposits, including fluctuations in transactional accounts and professional settlement accounts.

Current wording

Cash and cash equivalents increased to $77,907,000 at June 30, 2025, from $73,309,000 at December 31, 2024. Cash and cash equivalents consist of cash due from correspondents, cash in vault, and overnight investments (including federal funds sold). Deposit inflows allowed management to deploy excess liquidity into overnight Fed funds. Cash and cash equivalents are subject to routine fluctuations in deposits, including transactional accounts and professional settlement accounts.

Previous wording

Securities held-to-maturity were essentially flat, decreasing slightly to$3,602,000 on March 31, 2025 from$3,606,000 on December 31, 2024. This decrease is a result of normal net amortization of premiums within the held-to-maturity portfolio.

Current wording

Securities held-to-maturity were essentially flat, decreasing slightly to $3,598,000 at June 30, 2025, from $3,606,000 at December 31, 2024, due to normal net amortization of premiums.

Previous wording

Securities available-for-sale, which are carried on the balance sheet at fair market value, increased by $4,864,000 to$192,780,000 on March 31, 2025 from$187,916,000 on December 31, 2024. During the three months ended March 31, 2025, the Bank purchased $16,482,000 in available-for-sale securities. During the same period the Bank sold no available-for-sale securities and received $10,000,000 in proceeds from calls, maturities, and paydowns of securities available-for-sale. As of March 31, 2025, we have an unrealized tax-effected loss of$19,819,000 (or$25,248,000 prior to the tax benefit). Financial does not expect to realize the losses as it has the intent and ability to hold the securities until their recovery, which may be at maturity.

Current wording

Securities available-for-sale, carried at fair market value, increased by $8,669,000 to $196,585,000 at June 30, 2025, from $187,916,000 at December 31, 2024. During the quarter ended June 30, 2025, the Bank purchased $6,280,000 of available-for-sale securities and received $12,000,000 in proceeds from calls, maturities, and paydowns. As of June 30, 2025, we had an unrealized tax-effected loss of $23,737,000 (or $18,753,000 after tax benefit). We do not expect to realize these losses, as we have both the intent and ability to hold the securities until recovery or maturity.

Previous wording

At March 31, 2025, Financial, on a consolidated basis, had liquid assets of$287,746,000 in the form of cash, interest-bearing and noninterest-bearing deposits with banks, federal funds sold and available-for-sale investments. The Bank has pledged (market values):

Current wording

Liquid assets, on a consolidated basis, were $274,492,000 on June 30, 2025 in the form of cash, interest-bearing and noninterest-bearing deposits with banks, federal funds sold and available-for-sale investments. The Bank has pledged (market values):

Previous wording

approximately $38,000,000 of our available-for-sale securities as collateral with correspondent banks, including the FHLBA, for collateralized lines of credit;

Current wording

approximately $37,000,000 of our available-for-sale securities as collateral with correspondent banks, including the FHLBA, for collateralized lines of credit;

Previous wording

approximately $46,000,000 of our available-for-sale securities as security for public deposits; and

Current wording

approximately $49,000,000 of our available-for-sale securities as security for public deposits; and

Previous wording

approximately $28,000,000 of our available-for-sale securities as collateral for advances at the Federal Reserve Bank’s discount window.

Current wording

approximately $26,000,000 of our available-for-sale securities as collateral for advances at the Federal Reserve Bank’s discount window.

Previous wording

Further, if additional liquidity is needed, the Bank has the ability to purchase up to $53,000,000 of Fed funds through the Bank’s correspondent relationships and borrow from the FHLBA by pledging additional investments within the Bank’s portfolio as collateral. In addition to the above, the Bank has borrowing capacity with the FHLBA of approximately $20,000,000 related to loans it has pledged to the FHLBA.

Current wording

If additional liquidity is needed, the Bank can purchase up to $53,000,000 of Fed funds through correspondent relationships and borrow from the FHLBA by pledging additional investments. In addition, the Bank has borrowing capacity with the FHLBA of approximately $20,000,000 related to pledged loans. As of June 30, 2025, the Bank had no borrowings from any of these sources. Management believes that liquid assets were adequate at June 30, 2025 and anticipates additional liquidity from deposit growth and loan repayments.

Previous wording

Management believes that liquid assets were adequate at March 31, 2025. Management anticipates that additional liquidity will be provided by the growth in deposit accounts and loan repayments from customers.

Current wording

As of June 30, 2025, the Bank had no borrowings from any of these sources. Management believes that liquid assets were adequate at June 30, 2025. Management anticipates that additional liquidity will be provided by the growth in deposit accounts and loan repayments from customers.

Previous wording

While we have not experienced any unusual pressure on our deposit balances or our liquidity position, management continues to closely monitor our sources and uses of funds to meet our cash flow requirements while attempting to maximize profits. The Company’s total uninsured deposits, which are the amount of deposits, subject to aggregation rules, that exceed the FDIC insurance limit (currently $250,000), were approximately$241,832,000, or 26.53% of our total deposits, at March 31, 2025. These amounts were estimated based on the same methodologies and assumptions used for regulatory reporting purposes.

Current wording

While we have not experienced unusual pressure on deposit balances or liquidity, management continues to closely monitor sources and uses of funds to meet cash flow requirements while seeking to maximize profits. The Company’s total uninsured deposits—amounts, subject to aggregation rules, that exceed the FDIC insurance limit of $250,000—were approximately $282,000,000, or 31% of total deposits, at June 30, 2025. These were estimated using the same methodologies and assumptions as regulatory reporting.

Previous wording

At March 31, 2025, the Bank had a leverage ratio of approximately 9.12%, a Tier 1 risk-based capital ratio and a CET1 ratio of approximately 11.84%, and a total risk-based capital ratio of approximately 12.75%. As of March 31, 2025 and December 31, 2024, the Bank’s regulatory capital levels exceeded those established for well-capitalized institutions. The following table sets forth the minimum capital requirements and the Bank’s capital position as of March 31, 2025 and December 31, 2024:

Current wording

At June 30, 2025, the Bank had a leverage ratio of 8.85%, a Tier 1 risk-based capital ratio and a Common Equity Tier 1 (CET1) ratio of 11.38%, and a total risk-based capital ratio of 12.19%. As of both June 30, 2025 and December 31, 2024, the Bank’s regulatory capital levels exceeded those established for well-capitalized institutions. The Tier 1 risk-based capital ratio decreased from December 31, 2024, primarily because the Bank made a dividend payment to Financial of $5,000,000 in June 2025, which Financial applied towards the retirement of approximately $10,050,000 in debt at maturity. This decrease was mitigated by net income of $3,546,000 for the six months ended June 30, 2025.

Previous wording

The above tables set forth the capital position and analysis for the Bank only. Because total assets on a consolidated basis are less than $3,000,000,000, Financial is not subject to the consolidated capital requirements imposed by the Bank Holding Company Act. Consequently, Financial does not calculate its financial ratios on a consolidated basis. If calculated, the capital ratios for the Company on a consolidated basis at March 31, 2025 would be lower than those of the Bank because a portion of proceeds from the sale of notes previously issued by the holding company were contributed to the Bank as equity.

Current wording

Act. Consequently, Financial does not calculate its financial ratios on a consolidated basis. If calculated, the capital ratios for the Company on a consolidated basis at June 30, 2025 would be lower than those of the Bank, because a portion of the proceeds from the sale of notes previously issued by the holding company were contributed to the Bank as equity.

Previous wording

In July 2013, the Federal Reserve Board approved a final rule establishing a regulatory capital framework for smaller, less complex financial institutions. The rule was fully implemented on January 1, 2019 and implemented a capital conservation buffer of 2.5%. As a result, the Bank is required to have a minimum ratio of Tier 1 capital to average total assets of 4.00% (exclusive of the capital conservation buffer), a minimum ratio of common equity Tier 1 capital to risk-weighted assets of 7.0% (inclusive of the capital conservation buffer), and a Tier 1 risk-based capital ratio of 8.5% (inclusive of the capital conservation buffer). Failure to maintain the capital conservation buffer will limit the ability of the Bank and Financial to pay dividends, repurchase shares or pay discretionary bonuses. The rule also raised the minimum ratio of Tier 1 capital to risk-weighted assets from 4% to 6% and includes a minimum leverage ratio of 4% for all banking organizations.

Current wording

In July 2013, the Federal Reserve Board approved a final rule establishing a regulatory capital framework for smaller, less complex financial institutions. The rule was fully implemented on January 1, 2019, and established a capital conservation buffer of 2.5%. As a result, the Bank is required to maintain a minimum ratio of Tier 1 capital to average total assets of 4.00% (exclusive of the capital conservation buffer), a minimum ratio of common equity Tier 1 capital to risk-weighted assets of 7.0% (inclusive of the capital conservation buffer), and a Tier 1 risk-based capital ratio of 8.5% (inclusive of the capital conservation buffer). Failure to maintain the capital conservation buffer will limit the ability of the Bank and Financial to pay dividends, repurchase shares, or pay discretionary bonuses. The rule also raised the minimum ratio of Tier 1 capital to risk-weighted assets from 4% to 6% and includes a minimum leverage ratio of 4% for all banking organizations.

Previous wording

Comparison of the Three Months Ended March 31, 2025 and 2024

Current wording

Comparison of the Three and Six Months Ended June 30, 2025 and 2024