BANK OF THE JAMES FINANCIAL GROUP INC

ents

Consolidated Balance Sheets

(dollar amounts in thousands, except per share amounts) (2025 unaudited)

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Consolidated Statements of Income

(dollar amounts in thousands, except per share amounts) (unaudited)

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Consolidated Statements of Comprehensive Income

(dollar amounts in thousands) (unaudited)

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Consolidated Statements of Cash Flows

(dollar amounts in thousands) (unaudited)

Consolidated Statements of Changes in Stockholders’ Equity

For the Three and Six Months Ended June 30, 2025 and 2024

(dollars in thousands, except per share amounts) (unaudited)

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Notes to Consolidated Financial Statements

Note 1 – Basis of Presentation

Bank of the James Financial Group, Inc.’s (“Financial” or the “Company”) primary market area consists of the area commonly referred to as Region 2000 which encompasses theseven jurisdictions of the Town of Altavista, Amherst County, Appomattox County, the Town of Bedford, Bedford County, Campbell County, and the City of Lynchburg. Within the last several years, the Company expanded into Charlottesville, Roanoke, Blacksburg, Harrisonburg, Lexington, Rustburg, Wytheville, Buchanan, and Nellysford.

The unaudited consolidated financial statements have been prepared by the Company in accordance with the rules and regulations of the Securities and Exchange Commission. In management’s opinion, the accompanying financial statements, which unless otherwise noted are unaudited, reflect all adjustments, consisting solely of normal recurring accruals, necessary for a fair presentation of thefinancial information as of June 30, 2025 and December 31, 2024, and for the three and six months ended June 30, 2025 and 2024, in conformity with accounting principles generally accepted in the United States of America. Additional information concerning the organization and business of Financial, accounting policies followed, and other related information is contained in Financial’s Annual Report on Form 10-K for the year ended December 31, 2024. These financial statements should be read in conjunction with the audited consolidated financial statements and related footnotes for the year ended December 31, 2024 included in Financial’s Annual Report on Form 10-K. Results for the three and six-month periods ended June 30, 2025 are not necessarily indicative of the results that may be expected for the year ending December 31, 2025.

In connection with the acquisition of PWW, the Company recorded an intangible asset for customer relationships in the amount of $8,406,000. The Company is using straight line amortization over a period of 15 years, resulting in annual amortization of $560,000. As of June 30, 2025 and December 31, 2024, the intangible asset, net of amortization, was $6,445,000 and $6,725,000, respectively.

Note 2 –Significant Accounting Policies and Estimates

The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America which require management to make estimates and assumptions that affect the amounts reported in thefinancial statements and accompanying notes. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant changes in the near term relate to the determination of the allowance for credit losses on loans (“ACLL”) and the valuation of our available-for-sale securities.

Significant Accounting Policies and Estimates

Application of the principles of GAAP and practices within the banking industry requires management to make estimates, assumptions, and judgments that affect the amounts reported in thefinancial statements and accompanying notes. These estimates, assumptions, and judgments are based on information available as of the date of thefinancial statements; accordingly, as this information changes, thefinancial statements may reflect different estimates, assumptions, and judgments. Certain policies inherently rely more extensively on the use of estimates, assumptions, and judgments and as such may have a greater possibility of producing results that could be materially different than originally reported.

The Company’s significant accounting policies followed in the preparation of the unaudited consolidated financial statements are disclosed in Note 2 of the audited financial statements and notes for the year ended December 31, 2024 and are contained in the Company’s 2024 Annual Report on Form 10-K. There have been no significant changes to the application of significant accounting policies since December 31, 2024.

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Note 3 – Earnings Per Common Share (EPS)

The following is a summary of the earnings per share calculation for the three and six months ended June 30, 2025 and 2024 (dollars in thousands except per share data):

There wereno potentially dilutive shares outstanding as of June 30, 2025 and 2024. Consequently, the weighted average shares and weighted average diluted shares were identical.

Note 4 – Debt (Current and Long Term)

Capital Notes

On April 13, 2020, the Company commenced a private placement of unregistered, unsecured subordinated notes (the “2020 Offering”). Between April 13, 2020 and July 8, 2020, the Company issued an aggregate principal amount of $10,050,000 of 3.25% fixed‑rate notes (the “2020 Notes”). Interest was payable quarterly in arrears.

The 2020 Notes matured and were payable in full on June 30, 2025. On the maturity date, the Company repaid the entire $10,050,000 principal plus accrued interest of approximately $82,000 from parent‑company cash. In accordance with Accounting Standards Codification (ASC) 405-20, no gain or loss was recognized on the settlement of the notes at par. The $10,050,000 cash outflow is presented in the financing activities section of the consolidated statement of cash flows.

The balance of the 2020 Notes as of June 30, 2025 and December 31, 2024 is presented net of unamortized issuance costs on the Consolidated Balance Sheet.

Other Long Term Debt

On December 29, 2021, Financial borrowed $11,000,000 from National Bank of Blacksburg (“NBB”) pursuant to a secured promissory note (the “NBB Note”). Prior to the modification discussed below, the NBB Note bore interest at a rate of 4.00% and was being amortized over afifteen-year period, with a balloon payment of approximately $9,375,000 due on December 31, 2024. The note is secured by a first-priority lien on approximately 4.95% of the Bank’s common stock. The balance of the NBB Note is presented on the Consolidated Balance Sheets under “other borrowings” and is net of unamortized issuance costs. A portion of the proceeds was used to purchase 100% of the capital stock of Pettyjohn, Wood & White, Inc. (“PWW”), our wholly-owned investment advisory subsidiary.

On June 30, 2022, NBB agreed to modify the terms of the NBB Note, effective July 1, 2022. Pursuant to the modification, the balloon payment date was extended to December 31, 2026, from December 31, 2024, and the interest rate was lowered to 3.90% from 4.00%. The principal balance on the NBB Note was approximately $8,992,000 at June 30, 2025, and $9,300,000 at December 31, 2024. Absent further modification, the approximate amount of the balloon payment on December 31, 2026 will be $8,104,000.

Note 5 –Fair Value Measurements

Determination of Fair Value

The Company uses fair value measurements to record adjustments to certain assets and liabilities and to determine fair value disclosures. In accordance with the Fair Value Measurements and Disclosures topic of FASB ASC 820, the fair value of a financial instrument is defined as the price that would be received to sell an asset or paid to transfer a liability (an “exit price”) in the principal or most advantageous market, in an orderly transaction between market participants at the measurement date.

Fair value is best determined based on quoted market prices. However, in many instances, quoted market prices are not available for the Company’s various financial instruments. In such cases, fair values are estimated using present value or other valuation techniques. These techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, fair value estimates may not be realized in an immediate settlement of the instrument.

The fair value guidance provides a consistent definition of fair value, emphasizing exit price in the principal or most advantageous market, and in an orderly transaction (not a forced liquidation or distressed sale) between market participants at the measurement date, under current market conditions. If there has been a significant decrease in the volume and level of activity for an asset or liability, a change in valuation technique or the use of multiple valuation techniques may be appropriate. In such instances, determining the price at which willing market participants would transact depends on the facts and circumstances and requires significant judgment. The fair value selected should be a reasonable point within the range most representative of fair value under current market conditions.

Fair Value Hierarchy

In accordance with this guidance, the Company groups itsfinancial assets andfinancial liabilities generally measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.

Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of thefinancial instrument.

Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.

Fair Value on a Recurring Basis

Securities Available-for-Sale

Fair values of securities available-for-sale are based on quoted prices available in an active market. If quoted prices are available, these securities are classified within Level 1 of the valuation hierarchy. Level 1 securities include highly liquid government bonds, mortgage products, and exchange-traded equities. If quoted market prices are not available, then fair values are estimated using pricing models, quoted prices of securities with similar characteristics, or discounted cash flow.

Level 2 securities include U.S. agency securities, mortgage-backed agency securities, obligations of states and political subdivisions, and certain corporate, asset-backed, and other securities. In certain cases where there is limited activity or less transparency around inputs to the valuation, securities are classified within Level 3 of the valuation hierarchy. Currently, all of the Company’s securities are considered Level 2 securities.

Derivatives Assets/Liabilities – Interest Rate Lock Commitments (IRLCs)

The Company recognizes IRLCs at fair value based on the price of the underlying loans obtained from an investor for loans that will be delivered on a best efforts basis while taking into consideration the probability that the rate lock commitments will close. All of the Company’s IRLCs are classified as Level 3.

The below tables summarize the Company’sfinancial assets that were measured at fair value on a recurring basis during the period presented.

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The following table provides additional quantitative information about assets measured at fair value on a recurring basis and for which we utilize Level 3 inputs to determine fair value:

(1) Weighted based on the relative value of the instruments

There wereno transfers offinancial assets between hierarchy levels during the three and six month period ending June 30, 2025.

Fair Value on a Non-recurring Basis

Collateral Dependent Loans with an ACLL

In accordance with ASC 326, the Company may determine that an individual loan exhibits unique risk characteristics which differentiate it from other loans within our loan pools. In such cases, the loans are evaluated for expected credit losses on an individual basis and excluded from the collective evaluation. Specific allocations of the allowance for credit losses are determined by analyzing the borrower’s ability to repay, collateral deficiencies, the relative risk grade of the loan, and economic conditions affecting the borrower’s industry, among other factors.

A loan is considered collateral dependent when, based on management’s assessment, the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. In these cases, expected credit losses are based on the fair value of the collateral at the measurement date, adjusted for estimated selling costs if satisfaction of the loan depends on the sale of the collateral. The Company reevaluates the fair value of collateral supporting collateral dependent loans on a quarterly basis. The fair value of real estate collateral supporting such loans is evaluated by appraisal services using methodologies consistent with the Uniform Standards of Professional Appraisal Practice. Based the review of managment, no nonrecurring fair value adjustments were needed on collateral dependent loans at June 30, 2025 or December 31, 2024.

Loans Held for Sale

Loans held for sale are carried at cost, which approximates estimated fair value. These loans currently consist of one-to-four family residential loans originated for sale in the secondary market. Fair value is based on prices currently offered by secondary markets for similar loans using observable market data, which is not materially different from cost due to the short duration between origination and sale (Level 2). As such, the Company records fair value adjustments on a nonrecurring basis. No nonrecurring fair value adjustments were recorded on loans held for sale at June 30, 2025 or December 31, 2024. Gains and losses on the sale of loans are recorded within “Gain on sales of loans held for sale” on the Consolidated Statements of Income.

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Financial Instruments

FASB ASC 825, Financial Instruments, requires disclosure about fair value offinancial instruments, including those financial assets andfinancial liabilities that are not required to be measured and reported at fair value on a recurring or nonrecurring basis. ASC 825 excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company. The carrying amounts and estimated fair values of the Company’sfinancial instruments are presented in the following tables whether or not recognized on the Consolidated Balance Sheets at fair value.

The estimated fair values, and related carrying or notional amounts, of Financial’sfinancial instruments and their placement in the fair value hierarchy at June 30, 2025, and December 31, 2024, were as follows (in thousands):

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Note 5 – Fair Value Measurements (continued)

(1) Carrying amount is net of unearned income and the ACLL.

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Note 6 – Securities

The following tables summarize the Bank’s holdings for securities held-to-maturity and available-for-sale as of June 30, 2025 and December 31, 2024 (amounts in thousands) are summarized below:

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Note 6 – Securities (continued)

The following tables summarize the fair value of securities available-for-sale as of June 30, 2025 and as of December 31, 2024 and the corresponding amounts of unrealized losses. Management uses the valuation as of month-end in determining when securities are in an unrealized loss position(amounts in thousands):

As of June 30, 2025, the Company owned 120 securities that were in an unrealized loss position. Of these securities,26 were S&P rated AAA,83 were rated AA,4 were rated A,2 were rated BBB, and 5 were non-rated. As of June 30, 2025,56 of these securities were municipal issues,51 were backed directly or indirectly by the U.S. government,11 were issues of publicly traded domestic corporations, and 2 were issues of non-public financial institutions. The Company monitors its municipal and corporate securities by periodically reviewing the issuer’s cash flow and revenue streams, as well as other economic factors that could affect the issuer’s ability to service and/or repay the debt.

The Company has evaluated available-for-sale securities in an unrealized loss position for credit-related impairment at June 30, 2025, and concluded no impairment existed based on a combination of factors, which included: (1) the securities are of high credit quality; (2) unrealized losses are primarily the result of market volatility and increases in market interest rates; (3) the contractual terms of the investments do not permit the issuers to settle the securities at a price less than the par value of each investment; (4) issuers continue to make timely principal and interest payments; and (5) the Company does not intend to sell any of the investments before recovery of its amortized cost basis, nor is it likely that management will be required to sell the securities. As such, there wasno allowance for credit losses on available-for-sale securities at June 30, 2025.

The Company’s held-to-maturity portfolio is covered by the explicit or implied guarantee of the United States government or one of its agencies and is rated investment grade or higher. As a result, the Company did not have an allowance for credit losses on held-to-maturity securities as of June 30, 2025 or December 31, 2024.

Note 6 – Securities (continued)

All held-to-maturity and available-for-sale securities were current, with no securities past due or on nonaccrual as of June 30, 2025 and December 31, 2024. There wereno sales of available-for-sale securities during the three and six months ended June 30, 2025. Sales of available-for-sale securities were $8,754,000 during the three and six months ended June 30, 2024. As of June 30, 2025 and 2024, the Company had approximately (market values):

$49,360,000 and $44,865,000 , respectively, of available-for-sale securities pledged as collateral for public deposits;

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

$26,000,000 and $29,000,000 of our available-for-sale securities as collateral for advances at the Federal Reserve Bank’s discount window.

The amortized costs and fair values of securities at June 30, 2025, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

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Note 7 – Business Segments

Segment Overview

The Company reports three business segments:

1. Community Banking – Provides loans, deposits, and related banking services to retail and commercial customers primarily in Central Virginia. Revenue is primarily from net interest income.

2. Mortgage Banking – Originates residential mortgage loans for sale into the secondary market, typically with servicing released. Revenue consists mainly of gains on loan sales.

3. Investment Advisory – Offers investment advisory andfinancial planning services through Pettyjohn, Wood & White, Inc. Revenue is primarily fee-based, tied to assets under management (AUM).

Segments refer business to one another when appropriate. Robert R. Chapman III, President of Financial, is the Chief Operating Decision Maker (CODM). The CODM evaluates performance and allocates resources based on segment profit (pre-tax income). Supplemental data regularly reviewed by the CODM includes total loans held for investment, total deposits, and assets under management (AUM), as these metrics provide additional insights into segment performance. Segment accounting policies are consistent with those in the consolidated financial statements.

Significant Expense Categories. Consistent with ASU 2023-07, significant segment expenses reviewed regularly by the CODM and included in segment profit measures are separately presented. For the three and six months ended June 30, 2025 and 2024, these significant approximate expenses included:

Community Banking: Salaries and employee benefits ($4.013 million and$7.751 million, in the three and six months ended June 30, 2025; and$3.632 million and$7.151 million, in the three and six months ended June 30, 2024); data processing ($719 thousand and$1.539 million, in 2025; and$748 thousand and$1.499 million, in 2024); professional services ($778 thousand and$2.434 million, in 2025; and$653 thousand and$1.394 million, in 2024); equipment ($631 thousand and$1.277 million, in 2025; and$609 thousand and$1.186 million, in 2024); and occupancy ($502 thousand and$1.037 million, in 2025; and$496 thousand and$954 thousand, in 2024).

Mortgage Banking: Salaries and employee benefits ($903 thousand and$1.525 million, in the three and six months ended June 30, 2025; and$830 thousand and$1.328 million, in the three and six months ended June 30, 2024); credit-related expenses ($220 thousand and$351 thousand, in 2025; and$189 thousand and$305 thousand, in 2024); and occupancy costs ($27 thousand and$59 thousand, in 2025; and$28 thousand and$61 thousand, in 2024).

Investment Advisory: Salaries and employee benefits ($442 thousand and$859 thousand, in the three and six months ended June 30, 2025; and$430 thousand and$858 thousand, in the three and six months ended June 30, 2024); and amortization of intangible assets ($140 thousand and$280 thousand, in both 2025 and 2024).

Expenses not identified as significant are presented within “Other segment items” and include general and administrative costs that support the segments’ operations, including travel, liability and property insurance, and contribution expenses.

Supplemental Segment Data

Supplemental data regularly reviewed by the CODM includes total loans held for investment, total deposits, and assets under management (AUM), as these metrics provide additional insights into segment performance:

Community Banking: Total loans held for investment, net of allowance, were $649.1 million at June 30, 2025, compared to $636.6 million at December 31, 2024, and $636.6 million at June 30, 2024. Deposits totaled $915.4 million at June 30, 2025, $882.4 million at December 31, 2024, and $887.1 million at June 30, 2024.

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Investment Advisory: Assets under management (AUM) were $930.0 million at June 30, 2025, compared to $854.0 million at December 31, 2024, and $802.9 million at June 30, 2024.

Segment financial information, including significant expense categories and supplemental metrics, is presented in the tables below, along with reconciliations to consolidated financial statements for the three and six months ended June 30, 2025 and 2024(dollars in thousands).

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(1) Primarily intercompany service fees and dividends eliminated in consolidation.

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Note 8 – Loans and allowance for credit losses

The Company’s primary portfolio segments align with the methodology applied in estimating the allowance for credit losses and are reflected in the disclosures as of and for the periods ended June 30, 2025 and 2024, as set forth below. Management has determined that the classifications presented below are appropriate for identifying and managing risk within the loan portfolio.

Commercial and Commercial Real Estate

Commercial loans are primarily underwritten based on the identified cash flows of the borrower, and secondarily on the underlying collateral provided. Borrower cash flows may not meet expectations, and the value of collateral securing these loans can fluctuate. Most commercial loans are secured by the assets being financed or other business assets, such as accounts receivable or inventory, and may include personal guarantees. Short-term loans may be made on an unsecured basis. For loans secured by accounts receivable, the availability of funds for repayment may substantially depend on the borrower’s ability to collect amounts due from its customers.

Commercial real estate loans are viewed primarily as cash flow loans, with the collateral serving as a secondary source of repayment. Commercial real estate lending typically involves higher loan principal amounts, with repayment generally dependent on the successful operation of the property or the business conducted on the property. These loans may be more adversely affected by conditions in the real estate markets or the general economy. The properties securing the Company’s commercial real estate portfolio are diverse but are geographically concentrated almost entirely within the Company’s market area. Management monitors and evaluates commercial real estate loans based on collateral, geography, and risk grade criteria. In general, the Company avoids financing single-purpose projects unless other underwriting factors are present to help mitigate risk. Management also tracks the level of owner-occupied versus non-owner-occupied commercial real estate loans.

Consumer and Residential

Consumer and residential segments consist of residential mortgage loans and personal loans. The consumer loan segment includes home equity lines of credit (HELOCs) and other second mortgages. Home equity loans are typically secured by a subordinate interest in 1–4 family residences, while consumer personal loans may be secured by personal assets such as automobiles or recreational vehicles, or may be unsecured, such as small installment loans and certain lines of credit.

For residential mortgage loans secured by 1–4 family, generally owner-occupied residences, the Company typically establishes a maximum loan-to-value ratio. Repayment of these loans is primarily dependent on the personal income of the borrowers, which can be affected by economic conditions in the market area, such as unemployment levels. Repayment can also be impacted by changes in property values. Risk is mitigated by the smaller individual loan amounts and the diversification provided by a large number of borrowers.

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A summary of loans, net of deferred costs of$598,000 and $817,000 as of June 30, 2025 and December 31, 2024, respectively, is as follows (dollars in thousands):

The following table presents the amortized cost basis of collateral dependent loans by loan segment (dollars in thousands):

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The following tables present the activity in the allowance for credit losses for the three and six-month periods ended and the distribution of the allowance by segment as of June 30, 2025, and 2024.

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In the second quarter of 2025, the Company, in collaboration with its third‑party model vendor and as part of ongoing model governance, implemented updates to the quantitative CECL loss models for collectively evaluated loan segments that use discounted cash flow techniques (all segments other than agricultural loans, which uses the weighted-average remaining life method). The updates (i) revised certain maximum loss‑rate parameters and (ii) incorporated additional post‑COVID historical loss data, and (iii) as is customary for each quarter, we refreshed the economic forecasts. Using the prior-period model specification as a sensitivity, management estimates the quarter would have resulted in a provision of approximately $232,000; under the updated specifications, the Company recorded a net recovery of $555,000 on loans.

Credit Quality Indicators

The Bank’s internal risk rating system is in place to grade commercial and commercial real estate loans. Category ratings are reviewed periodically by lenders and the credit review area of the Bank based on the borrower’s individual situation. Additionally, internal and external monitoring and review of credits are conducted on an annual basis.

Below is a summary and definition of the Bank’s risk rating categories:

We segregate commercial and commercial real estate loans into the above categories based on the following criteria and we review the characteristics of each rating at least annually, generally during the first quarter. The characteristics of these ratings are as follows:

“Pass.” These are loans having risk ratings of 1 through 4. Pass loans are to persons or business entities with an acceptable financial condition, appropriate collateral margins, appropriate cash flow to service the existing loan, and an appropriate leverage ratio. The borrower has paid all obligations as agreed and it is expected that this type of payment history will continue. When necessary, acceptable personal guarantors support the loan.

“Monitor.” These are loans having a risk rating of 5. Monitor loans have currently acceptable risk but may have the potential for a specific defined weakness in the borrower’s operations and the borrower’s ability to generate positive cash flow on a sustained basis. The borrower’s recent payment history may currently or in the future be characterized by late payments. The Bank’s risk exposure is mitigated by collateral supporting the loan. The collateral is considered to be well-margined, well maintained, accessible and readily marketable.

“Special Mention.” These are loans having a risk rating of 6. Special Mention loans have weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Bank’s credit position at some future date. Special Mention loans are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification. These loans do warrant more than routine monitoring due to a weakness caused by adverse events.

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“Substandard.” These are loans having a risk rating of 7. Substandard loans are considered to have specific and well-defined weaknesses that jeopardize the viability of the Bank’s credit extension. The payment history for the loan has been inconsistent and the expected or projected primary repayment source may be inadequate to service the loan. The estimated net liquidation value of the collateral pledged and/or ability of the personal guarantor(s) to pay the loan may not adequately protect the Bank. There is a distinct possibility that the Bank will sustain some loss if the deficiencies associated with the loan are not corrected in the near term. Asubstandard loan would not automatically meet our definition of impaired unless the loan is significantly past due and the borrower’s performance andfinancial condition provides evidence that it is probable that the Bank will be unable to collect all amounts due.

“Doubtful.” These are loans having a risk rating of 8. Doubtful rated loans have all the weaknesses inherent in a -

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The table below details the amortized cost of the classes of loans by credit quality indicator and year of origination as of June 30, 2025 (dollars in thousands).

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The table below details the amortized cost of the classes of loans by credit quality indicator and year of origination as of December 31, 2024 (dollars in thousands).

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The following table details the gross charge-offs of loans by year of origination for the six months ended June 30, 2025 and the year ended December 31, 2024(dollars in thousands).

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The following tables present nonaccrual information by class of loans as of June 30, 2025 and December 31, 2024:

Loans on Nonaccrual Status

(dollars in thousands)

Interest income on nonaccrual loans is recognized only when received in cash. The Company didnot record any interest income on nonaccrual loans during the three and six months ended June 30, 2025 or 2024. The Company also reversed all previously accrued but unpaid interest on nonaccrual loans during the three and six months ended June 30, 2025 and 2024.

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The following tables present an aging analysis of the loan portfolio by class and past due as of June 30, 2025 and December 31, 2024 (dollars in thousands):

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Occasionally, the Bank modifies loans for borrowers experiencing financial difficulties by providing principal forgiveness, term extensions, interest rate reductions, or payment deferrals. Because the effect of most modifications is already included in the allowance for credit losses due to the measurement methodologies used in its estimate, the allowance is typically not adjusted upon modification. When principal forgiveness is provided, the amount forgiven is charged against the allowance for credit losses.

There wereno loan modifications for borrowers experiencing financial difficulty during the three and six months ended June 30, 2025 or June 30, 2024. As of June 30, 2025, no previously modified loans had defaulted within the past twelve months.

ACL on Unfunded Commitments

The Company maintains an allowance for off-balance sheet credit exposures, such as unfunded balances for existing lines of credit, commitments to extend future credit, and both standby and commercial letters of credit, when there is a contractual obligation to extend credit and such extension is not unconditionally cancellable by the Company. The allowance for off-balance sheet credit exposures is adjusted through a provision for (or recovery of) credit losses in the Consolidated Statements of Income.

The estimate includes consideration of the likelihood that funding will occur, which is based on a historical funding study derived from internal information, as well as an estimate of expected credit losses on commitments expected to be funded over their estimated life, using the same loss rates that are applied in computing the allowance for loan credit losses. The allowance for credit losses for unfunded loan commitments was $678,000 at June 30, 2025, and is separately classified within Other Liabilities on the Consolidated Balance Sheets.

The following table presents the balance and activity in the ACL for unfunded commitments for the three and six months ended June 30, 2025 and 2024(dollars in thousands):

Other Real Estate Owned

At June 30, 2025 and December 31, 2024, the Company hadno consumer mortgage loans secured by residential real estate for which foreclosure was in process. The Company heldno residential real estate properties in other real estate owned as of June 30, 2025 and December 31, 2024.

Note 9 – Recent accounting pronouncements and other authoritative guidance

In November 2024, the Financial Accounting Standards Board (FASB) issued ASU 2024-03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses.” ASU 2024-03 requires public companies to disclose specific types of expenses included in the expense captions presented on the face of the income statement as well as make certain other disclosures. The effective date was clarified by the FASB’s issuance of ASU 2025-01, which clarified that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted, and the standard may be applied prospectively or retrospectively. The Company does not expect the adoption of ASU 2024-03 to have a material impact on its consolidated financial statements.

Note 10 - Subsequent Events

Subsequent events are events or transactions that occur after the balance sheet date but before the financial statements are issued. Recognized subsequent events are those that provide additional evidence about conditions that existed as of the balance sheet date, including the estimates inherent in the preparation of the financial statements. Non-recognized subsequent events are those that provide evidence about conditions that did not exist at the balance sheet date but arose after that date.

Management has reviewed events occurring through the date the financial statements were available to be issued and has determined that no subsequent events occurred requiring accrual or disclosure, other than those already disclosed in the footnotes to the Company’s unaudited consolidated financial statements as of June 30, 2025.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Resu