River Financial Corp.

03/10/2026 | Press release | Distributed by Public on 03/10/2026 12:51

Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

Interest Sensitivity and Market Risk

Interest Sensitivity

We monitor and manage the pricing and maturity of our assets and liabilities in order to diminish the potential adverse impact that changes in interest rates could have on net interest income. The principal monitoring technique we employ is simulation analysis and this technique is augmented by "gap" analysis.

In simulation analysis, we review each individual asset and liability category and their projected behavior in various different interest rate environments. These projected behaviors are based upon management's past experiences and upon current competitive environments, including the various environments in the different markets in which we compete. Using this projected behavior and differing rate scenarios as inputs, the simulation analysis generates as output projections of net interest income. We also periodically verify the validity of this approach by comparing actual results with those that were projected in previous models.

Another technique used in interest rate management, but to a lesser degree than simulation analysis, is the measurement of the interest sensitivity "gap," which is the positive or negative dollar difference between assets and liabilities that are subject to interest rate repricing within a given period of time. Interest rate sensitivity can be managed by repricing assets and liabilities, selling securities available for sale or trading securities, replacing an asset or liability at maturity, or by adjusting the interest rate during the life of an asset or liability.

We evaluate interest rate sensitivity risk and then formulate guidelines regarding asset generation and repricing and sources and prices of off-balance sheet commitments in order to decrease interest sensitivity risk. We use computer simulations to measure the net income effect of various interest rate scenarios. The modeling reflects interest rate changes and the related impact on net income over specified periods of time.

The following table illustrates our interest rate sensitivity at December 31, 2025, assuming that the relevant assets and liabilities are collected and paid, respectively, based upon historical experience rather than their stated maturities.

INTEREST SENSITIVITY ANALYSIS

0-1 Mos

1-3 Mos

3-12 Mos

1-2 Yrs

2-3 Yrs

>3 Yrs

Total

Interest earning assets

Loans

$

648,008

$

149,022

$

484,270

$

414,328

$

308,671

$

709,217

$

2,713,516

Securities

62,095

12,275

77,220

59,211

56,457

478,575

745,833

Certificates of deposit in banks

-

-

2,500

-

250

218

2,968

Interest bearing deposits in banks

89,295

-

-

-

-

-

89,295

Federal funds sold

10,000

-

-

-

-

-

10,000

Total interest earning assets

$

809,398

$

161,297

$

563,990

$

473,539

$

365,378

$

1,188,010

$

3,561,612

Interest bearing liabilities

Interest bearing transaction accounts

$

189,960

$

14,470

$

65,112

$

86,815

$

86,815

$

387,240

$

830,412

Savings and money market accounts

183,641

16,300

73,353

97,804

97,804

560,871

1,029,773

Time deposits

84,453

240,413

430,966

39,425

3,506

1,560

800,323

Securities sold under agreements to repurchase

-

-

-

-

-

-

-

Federal Home Loan Bank Advances

-

-

-

-

40,000

60,000

100,000

Subordinated debt, net of loan costs

-

-

-

-

-

39,633

39,633

Total interest bearing liabilities

$

458,054

$

271,183

$

569,431

$

224,044

$

228,125

$

1,049,304

$

2,800,141

Interest sensitive gap

Period gap

$

351,344

$

(109,886

)

$

(5,441

)

$

249,495

$

137,253

$

138,706

$

761,471

Cumulative gap

$

351,344

$

241,458

$

236,017

$

485,512

$

622,765

$

761,471

Cumulative gap - Rate Sensitive Assets/ Rate

Sensitive Liabilities

9.9

%

6.8

%

6.6

%

13.6

%

17.5

%

21.4

%

We generally benefit from increasing market rates of interest when we have an asset-sensitive gap (a positive number) and generally benefit from decreasing market interest rates when we are liability-sensitive (a negative number). As shown in the table above, we are asset-sensitive on a cumulative basis through three years. The interest sensitivity analysis presents only a static view of the timing and repricing opportunities, without taking into consideration that changes in interest rates do not affect all assets and liabilities equally. For example, rates paid on a substantial portion of core deposits may change contractually within a relatively short time frame, but those are viewed by management as significantly less interest-sensitive than market- based rates such as those paid on non-core deposits. For this and other reasons, management relies more upon the simulation analysis (as noted above) in managing interest rate risk. Net interest income may be impacted by other significant factors in a given interest rate environment, including changes in the volume and mix of earning assets and interest-bearing liabilities.

Market Risk

Our earnings are dependent, to a large degree, on our net interest income, which is the difference between interest income earned on all earning assets, primarily loans and securities, and interest paid on all interest bearing-liabilities, primarily deposits. Market risk is the risk of loss from adverse changes in market prices and interest rates. Our market risk arises primarily from inherent interest rate risk in our lending, investing, and deposit gathering activities. We seek to reduce our exposure to market risk through actively monitoring and managing interest rate risk. Management relies upon static "gap" analysis to determine the degree of mismatch in the maturity and repricing distribution of interest-earning assets and interest-bearing liabilities which quantifies, to a large extent, the degree of market risk inherent in our balance sheet. Gap analysis is further augmented by simulation analysis to evaluate the impact of varying levels of prevailing interest rates and the sensitivity of specific earning assets and interest-bearing liabilities to changes in those prevailing rates. Simulation analysis consists of evaluating the impact on net interest income given changes from 400 basis points below the current prevailing rates to 400 basis points above the current prevailing rates. Management makes certain assumptions as to the effect that varying levels of interest rates have on certain earning assets and interest bearing-liabilities, which assumptions consider both historical experience and consensus estimates of outside sources.

The following table illustrates the results of our simulation analysis to determine the extent to which market risk would affect net interest margin for the next 12 months if prevailing interest rates increased or decreased by the specified amounts from current rates. As noted above, this model uses estimates and assumptions in asset and liability account rate reactions to changes in prevailing interest rates. However, to isolate the market risk inherent in the balance sheet, the model assumes that no growth in the balance sheet occurs during the projection period. This model also assumes an immediate and parallel shift in interest rates, which would result in no change in the shape or slope of the interest rate yield curve. Because of the inherent use of these estimates and assumptions in the simulation model to derive this market risk information, the actual results of the future impact of market risk on our net interest margin may (and most likely will) differ from that found in the table.

MARKET RISK

Impact on net interest income

As of
December 31, 2025

As of
December 31, 2024

Change in prevailing rates:

+ 400 basis points

(8.32)%

(12.99)%

+ 300 basis points

(5.75)%

(9.20)%

+ 200 basis points

(3.35)%

(5.35)%

+ 100 basis points

(0.98)%

(1.62)%

+ 0 basis points

-

-

- 100 basis points

(2.49)%

(2.13)%

- 200 basis points

(2.87)%

(3.85)%

- 300 basis points

(2.59)%

(4.96)%

- 400 basis points

(1.89)%

(5.16)%

River Financial Corp. published this content on March 10, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on March 10, 2026 at 18:51 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]