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Company News

Glen Burnie Bancorp

11/14/2025 | Press release | Distributed by Public on 11/14/2025 13:42

Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This report, including information included or incorporated by reference in this report, contains statements which constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements may relate to, among other matters, the financial condition, results of operations, plans, objectives, future performance, and business of our company. Forward-looking statements are based on many assumptions and estimates and are not guarantees of future performance. Our actual results may differ materially from those anticipated in any forward-looking statements, as they will depend on many factors about which we are unsure, including many factors which are beyond our control. The words "may," "approximately," "is likely," "would," "could," "should," "will," "expect," "anticipate," "predict," "project," "potential," "continue," "assume," "believe," "intend," "plan," "forecast," "goal," and "estimate," as well as similar expressions, are meant to identify such forward-looking statements. Potential risks and uncertainties that could cause our actual results to differ materially from those anticipated in our forward-looking statements include, without limitation, those described under the heading "Risk Factors" in our Annual Report on in Form 10-K, for the year ended December 31, 2004 as filed with the U.S. Securities and Exchange Commission (the "SEC") on April 28, 2025, and the following:

•	credit losses as a result of, among other potential factors, declining real estate values, increasing interest rates, increasing unemployment, or changes in customer payment behavior or other factors;

•	the amount of our loan portfolio collateralized by real estate and weaknesses in the real estate market;

•	restrictions or conditions imposed by our regulators on our operations;

•	the adequacy of the level of our allowance for credit losses and the amount of credit loss provisions required in future periods;

•	examinations by our regulatory authorities, including the possibility that the regulatory authorities may, among other things, require us to increase our allowance for credit losses, write-down assets, or take other actions;

•	risks associated with actual or potential information gatherings, investigations or legal proceedings by customers, regulatory agencies or others;

- 27 -

•	reduced earnings due to higher credit impairment charges resulting from additional decline in the value of our securities portfolio, specifically as a result of increasing default rates, and loss severities on the underlying real estate collateral;

•	increases in competitive pressure in the banking and financial services industries;

•

changes in the interest rate environment, which are affected by many factors beyond our control, including inflation, recession, unemployment, money supply, domestic and international events and changes in the United States and other financial markets, and that could reduce anticipated or actual margins; temporarily reduce the market value of our available-for-sale investment securities and temporarily reduce accumulated other comprehensive income or increase accumulated other comprehensive loss, which temporarily could reduce stockholders' equity;

•	enterprise risk management may not be effective in mitigating risk and reducing the potential for losses;

•	changes in political conditions or the legislative or regulatory environment, including governmental initiatives affecting the financial services industry, including as a result of the presidential administration and congressional elections;

•	general economic conditions resulting in, among other things, a deterioration in credit quality;

•

changes occurring in business conditions and inflation, including the impact of inflation on us, including a decrease in demand for new mortgage loan and commercial real estate loan originations and refinancings, an increase in competition for deposits, and an increase in non-interest expense, which may have an adverse impact on our financial performance;

•	changes in access to funding or increased regulatory requirements with regard to funding, which could impair our liquidity;

•	FDIC assessment which has increased, and may continue to increase, our cost of doing business;

•

cybersecurity risk related to our dependence on internal computer systems and the technology of outside service providers, as well as the potential impacts of third-party security breaches, which subject us to potential business disruptions or financial losses resulting from deliberate attacks or unintentional events;

•	changes in deposit flows, which may be negatively affected by a number of factors, including rates paid by competitors, general interest rate levels, regulatory capital requirements, and returns available to customers on alternative investments;

•	changes in technology, including the increasing use of artificial intelligence;

•	our current and future products, services, applications and functionality and plans to promote them;

•	changes in monetary and tax policies, including potential changes in tax laws and regulations;

•	changes in accounting standards, policies, estimates and practices as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission and the Public Company Accounting Oversight Board;

•	our assumptions and estimates used in applying critical accounting policies, which may prove unreliable, inaccurate or not predictive of actual results;

•	the rate of delinquencies and amounts of loans charged-off;

•	the rate of loan growth in recent years and the lack of seasoning of a portion of our loan portfolio;

•	our ability to maintain appropriate levels of capital, including levels of capital required under the capital rules implementing Basel III;

•	our ability to successfully execute our business strategy;

•	our ability to attract and retain key personnel;

•	our ability to retain our existing customers, including our deposit relationships;

•	our use of brokered deposits may be an unstable and/or an expensive deposit source to fund earning asset growth;

•	our ability to obtain brokered deposits as an additional funding source could be limited;

•	adverse changes in asset quality and resulting credit risk-related losses and expenses;

•

the potential effects of events beyond our control that may have a destabilizing effect on financial markets and the economy, such as epidemics and pandemics, war or terrorist activities, such as the war in Ukraine, the Middle East conflict, and the conflict between China and Taiwan, disruptions in our customers' supply chains, disruptions in transportation, essential utility outages or trade disputes and related tariffs, and disruptions caused by widespread cybersecurity incidents;

•	the impact of an extended government shutdown upon employment and delinquency in our local markets;

- 28 -

•

the ability to generate sufficient taxable income before tax loss carryforwards expire under application of current tax laws, and in addition, certain deferred tax assets are limited for regulatory capital purposes under banking regulations, and any disallowance could negatively affect our capital ratios;

•	disruptions due to flooding, severe weather or other natural disasters; and

•	other risks and uncertainties described under "Risk Factors" below.

Because of these and other risks and uncertainties, our actual future results may be materially different from the results indicated by any forward-looking statements. In addition, our past results of operations do not necessarily indicate our future results. Therefore, we caution you not to place undue reliance on our forward-looking information and statements.

All forward-looking statements in this report are based on information available to us as of the date of this report. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we cannot guarantee that these expectations will be achieved. We undertake no obligation to publicly update or otherwise revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by applicable law.

OVERVIEW

The following discussion describes our results of operations for the three and nine months ended September 30, 2025, as compared to the three and nine months ended September 30, 2024 and analyzes our financial condition as of September 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.

In addition to earning interest on our loans and investments, we earn income through fees and other expenses we charge to our customers. We describe the various components of this non-interest income, as well as our non-interest expense, in the following discussion.

The following discussion and analysis identifies significant factors that have affected our financial position and operating results during the periods included in the accompanying financial statements. We encourage you to read this discussion and analysis in conjunction with the financial statements and the related notes and the other statistical information also included in this report.

Unless the context requires otherwise, references to the "Company," "we," "us," "our," or similar references mean Glen Burnie Bancorp. References to the "Bank" mean Bank of Glen Burnie.

RECENT INDUSTRY EVENTS

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. In September 2024 the Federal

- 29 -

Reserve Bank 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 has announced ending balance sheet reduction, which may contribute to some funding and market volatility. 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.

Recent Tax Legislation. On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was signed into law. The OBBBA extends or makes permanent a number of provisions originally enacted in the 2017 Tax Cuts and Jobs Act and introduces new items affecting both individuals and businesses. Topic 740, Income Taxes, of the FASB Accounting Standards Codification requires the effects of newly enacted tax law to be recognized in the period of enactment. We are continuing to evaluate OBBBA's impact on our deferred tax assets and liabilities, effective tax rate, and tax-related processes (e.g., payroll reporting for qualifying wage items). Based on preliminary analysis, we do not currently expect the OBBBA to have a material impact on our 2025 estimated annual effective tax rate or on our consolidated financial statements, but our evaluation is ongoing.

FDIC Assessment Changes. In 2025, the FDIC proposed and, in some cases, implemented changes to the assessment base and methodology for deposit insurance premiums. These changes are intended to ensure the continued strength of the Deposit Insurance Fund and to reflect evolving risk profiles in the banking industry. While our FDIC assessment expense declined modestly during the period, we are closely monitoring ongoing regulatory developments and proposals that could impact the calculation or level of future assessments. Any material changes to the FDIC assessment framework could affect our cost of funds and overall operating expenses.

Community Reinvestment Act (CRA) Developments. Federal banking regulators have proposed rescinding the 2023 CRA modernization rule and reinstating the prior 1995 framework, with certain technical updates. If finalized, this rollback could affect how we assess and report our CRA activities and obligations in our markets. We are actively monitoring the rulemaking process and will evaluate and implement any required changes to our CRA compliance program to ensure continued alignment with regulatory expectations.

COMPARISON OF RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2025, TO THE THREE MONTHS ENDED SEPTEMBER 30, 2024

Net Income

Glen Burnie Bancorp, a Maryland corporation (the "Company"), through its subsidiary, The Bank of Glen Burnie, a Maryland banking corporation (the "Bank"), operates a commercial bank with six offices in Anne Arundel County Maryland. The Company reported net income attributable to common stockholders for the three-month period ended September 30, 2025, of $125,000, or $0.04 per basic and diluted share compared to net income of $129,000, or $0.04 per basic and diluted share for the three-month period September 30, 2024. When compared to the third quarter of 2024, there were a number of offsetting differences that resulted in a net decrease of $4,000.

●

Net interest income increased in the third quarter of 2025 by $10,000 while provision for credit loss expense improved by $61,000.

●

Non-interest income increased by $217,000 which was primarily due to mortgage fees, in the amount of $192,000, from the recently acquired VAWM, and increases in service charges and other fees and commissions of $25,000.

●

Total non-interest expenses increased by $280,000, of which $139,000 were attributable to increased salary and employee benefits from VAWM and $72,000 from new hires and commissions, $211,000 from increased legal, accounting, and professional fees, offset by $78,000 of reduced costs in occupancy and equipment expense and the net reduction in all other expenses of $63,000.

- 30 -

●

During the three-month period ended September 30, 2025, the Company recorded an income tax benefit of $38,000 compared to a tax benefit of $50,000 for the same period in 2024. The higher rate of tax benefits are caused by the high amount of tax-exempt income in proportion to our pre-tax book income.

Net Interest Income

Net interest income is our primary source of revenue. Net interest income is the difference between income earned on assets and interest paid on deposits and borrowings used to support such assets. Net interest income is determined by the rates earned on our interest-earning assets and the rates paid on our interest-bearing liabilities, the relative amounts of interest-earning assets and interest-bearing liabilities, and the degree of mismatch and the maturity and repricing characteristics of our interest-earning assets and interest-bearing liabilities.

Net interest income increased $10,000, or 0.4%, to $2.8 million for the three months ended September 30, 2025, from $2.8 million for the three months ended September 30, 2024. Our net interest margin, on a taxable equivalent basis, was 3.24% for the three months ended September 30, 2025, compared to 3.14% for the three months ended September 30, 2024. Average earning assets were $354.9 million for the three months ended September 30, 2025, and $366.2 million in the same period of 2024.

●

The $10,000 increase in net interest income was due to $22,000 less in total interest income offset by $32,000 less in the total cost of funds between the two periods.

●

Total average interest-bearing deposits and investments were down by $24.2 million with $240,000 less in interest income and 25 basis points less in yield between the two periods. Federal funds rates were down 100 basis points in the third quarter of 2025 when compared to the third quarter of 2024. Total average investments were down by $14.8 million as the Company strategically began to allow the securities portfolio to decrease while growing loans in the marketplace. The Company does not intend to sell or buy any securities in the near future.

●

Total average loans increased $12.9 million with $218,000 more in interest income and 4 basis points more in yield between the two periods.

●

Total average interest-bearing deposits increased $17.1 million with $314,000 more in interest expense and 46 basis points more in yield between the two periods. This increase was offset by the total average borrowed funds which decreased $24.7 million with $346,000 less in interest expense and 77 basis points less in yield between the two periods. Total average non-interest-bearing deposits were slightly down by $2.1 million. The total average cost of funds were down by $32,000 while there was no change in the average cost of funds yield of 1.32%.

●

The increase in earning asset yield of 10 basis points between the two periods was due to a change in the mix of our earning assets from cash and securities to loans, and the improvement in the total liabilities mix and lower interest expense. In the third quarter of 2024, loans represented 56% of our average earning assets; in the third quarter of 205, loans represented 61% of our average earning assets.

- 31 -

The following tables set forth, for the periods indicated, information regarding the average balances of interest-earning assets and interest-bearing liabilities, the amount of interest income and interest expense and the resulting yields on average interest-earning assets and rates paid on average interest-bearing liabilities.



	Three Months Ended September 30,
	2025						2024
	Average				Yield/		Average				Yield/
(dollars in thousands)	Balance		Interest		Cost		Balance		Interest		Cost
ASSETS:
Interest-earning assets:
Interest-bearing deposits w/ banks & fed funds	$	10,207	$	84	3.26	%	$	19,696	$	231	4.67	%
Investment securities available for sale		127,918		719	2.23			142,972		814	2.28
Restricted equity securities		502		8	6.33			246		6	9.15
Total interest-bearing deposits/investments		138,627		811	2.32			162,914		1,051	2.57

Loans Secured by Real Estate
Construction and land		4,754		109	9.13			6,939		163	9.35
Farmland		309		4	5.04			318		4	5.06
Single-family residential		103,504		1,328	5.09			100,401		1,360	5.42
Multi-family		4,921		61	4.88			5,091		62	4.89
Commercial		49,485		888	7.12			46,061		669	5.78
Total loans secured by real estate		162,973		2,390	5.82			158,810		2,258	5.66
Commercial and Industrial
Commercial and industrial		23,306		296	5.04			15,373		247	6.39
SBA guaranty		5,461		106	7.72			5,740		122	8.43
Total commercial and industrial loans		28,767		402	5.55			21,113		369	6.95
Consumer Loans
Consumer credit cards		23		1	0.54			-		-	-
Consumer		2,720		7	1.07			3,308		4	0.49
Automobile		21,780		326	5.95			20,085		277	5.52
Total consumer loans		24,523		334	5.40			23,393		281	4.78
Total loans		216,263		3,126	5.73			203,316		2,908	5.69
Total interest-earning assets		354,890		3,937	4.40			366,230		3,959	4.30

Cash		2,118						2,199
Allowance for credit losses		(2,576)						(2,714)
Market valuation		(24,572)						(24,887)
Other assets		23,791						23,299
Total non-earning assets		(1,239)						(2,103)
Total assets	$	353,651					$	364,127

LIABILITIES AND STOCKHOLDER'S EQUITY:
Interest-bearing deposits:
Interest-bearing checking and savings	$	92,102	$	23	0.10	%	$	105,246	$	25	0.09	%
Money market		99,226		906	3.62			67,708		635	3.73
Certificates of deposit		25,969		115	1.76			27,270		70	1.10
Total interest-bearing deposits		217,297		1,044	1.91			200,224		730	1.45

Borrowed Funds:
FHLB advances		5,286		62	4.64			-		-	-
Bank Term Funding Program								30,000		408	5.41
Federal Funds Purchased		-		-	-			1		-	-
Total borrowed funds		5,286		62	4.64			30,001		408	5.41
Total interest-bearing liabilities		222,583		1,106	1.97			230,225		1,138	1.97

Non-interest-bearing deposits		109,609						111,795
Total cost of funds		332,192		1,106	1.32			342,020		1,138	1.32

Other liabilities and accrued expenses		2,007						2,548
Total liabilities		334,199						344,568

Stockholder's equity		19,452						19,559
Total liabilities and equity	$	353,651					$	364,127
Net interest income			$	2,831					$	2,821
Net interest income - FTE			$	2,899						2,890
Yield on earning assets					4.40	%					4.30	%
Cost of interest-bearing liabilities					1.97	%					1.97	%
Net interest spread					2.43	%					2.33	%
Net interest margin					3.17	%					3.06	%
Net interest margin - FTE (1)					3.24	%					3.14

(1) Based on a 21% marginal tax rate.

- 32 -

Provision and Allowance for Credit Losses

The total allowance for credit losses (ACL) is composed of two parts: the ACL for loans and the ACL for unfunded commitments. 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. For the third quarter of 2025, the provision for credit loss allowance was $44,000 comprised of $74,000 provision for ACL for loans and $30,000 release of ACL for unfunded commitments. This compared to a provision for credit loss allowance of $105,000 for the third quarter of 2024 comprised of $78,000 provision of ACL for loans and $27,000 provision of ACL for unfunded commitments.

Non-interest Income and Non-interest Expense

Non-interest income during the three-month period ended September 30, 2025, was $571,000, a $217,000 increase from $354,000 during the same period in 2024. The increase was primarily related to mortgage commissions from VAWM in the amount of $192,000 and increased other fees and commissions of $24,000, and a slight increase in service charges of $1,000.

Non-interest expense increased $280,000 during the three months ended September 30, 2025 to $3.3 million compared to $3.0 million during the third quarter of 2024 primarily due to the following:

●

Salary and employee benefits increased $212,000 in the third quarter of 2025 when compared to the third quarter of 2024 primarily due to VAWM salaries and benefits of $139,000 and other increases due to new hires and increased commissions.

●

Occupancy and equipment expenses decreased $78,000 in the third quarter of 2025 from the third quarter of 2024 primarily due to the closing of two leased offices: Linthicum in January 2025 and Severna Park in May 2025.

●

Legal, accounting, and other professional fees increased $211,000 between the two periods due to additional costs related to the acquisition of VAWM and interim finance and accounting help.

●

Data processing and item process services decreased $44,000 between the two periods, along with reductions in telephone costs of $21,000, and other expenses of $23,000. These were offset by slight increases in FDIC insurance costs, advertising, and loan collection costs totaling $24,000 above the third quarter of 2024.

Comprehensive Income (Loss)

In accordance with regulatory requirements, the Company reports comprehensive income (loss) in its financial statements. Comprehensive income (loss) consists of the Company's net income (loss), adjusted for unrealized gains and losses on the Bank's portfolio of investment securities. For the third quarter of 2025, the comprehensive income, net of tax, totaled $1.8 million compared to comprehensive income in the amount of $3.8 million for the same period in 2024. The $2.2 million decrease in comprehensive income was due to a $2.2 million net of tax decrease in unrealized losses on securities for the quarter ended September 30, 2025, compared to the amount of after-tax unrealized losses on securities for the comparable prior year period, and to the decrease of $4,000 in reported net income for the third quarter of 2025 over the third quarter of 2024.

COMPARISON OF RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2025, TO THE NINE MONTHS ENDED SEPTEMBER 30,2024

Net Income

Our net income attributable to common stockholders for the nine-month period ended September 30, 2025, of $66,000, or $0.02 per basic and diluted share, compared to a net loss of $72,000, or $(0.02) per basic and diluted share

- 33 -

for the nine-month period ended September 30, 2024. The decrease in net loss between the two periods is primarily due to the factors noted below.

●

Net interest income decreased in 2025 by $48,000 while provision for credit losses expense improved by $1.4 million.

●

Non-interest income increased by $171,000 due to increased mortgage commissions from VAWM of $192,000 offset by decreases in services charges and other fees and commissions.

●

Total non-interest expenses increased by $1.1 million, of which $846,000 were attributable to increased salary and employee benefits, $371,000 in legal, accounting and other professional fees, and $92,000 in other expenses, offset by decreases from all other non-interest expense categories of $169,000, primarily lower occupancy costs from office closings.

●

During the nine-month period ended September 30, 2025, the Company recorded an income tax benefit of $230,000 compared to a benefit of $470,000 for the same period in 2024, due to the mix of tax-exempt income in proportion to our pre-tax book loss.

Net Interest Income

Net interest income decreased $48,000, or 0.6%, to $8.1 million for the nine months ended September 30, 2025, from $8.2 million for the nine months ended September 30, 2024. Our net interest margin, on a taxable equivalent basis, was 3.12% for the nine months ended September 30, 2025, compared to 3.06% for the nine months ended September 30, 2024. Average earning assets were $356.8 million for the nine months ended September 30, 2025, and $366.4 million in the same period of 2024.

●

The $48,000 decrease in net interest income was due to $186,000 more in total interest income offset by $234,000 more in the total cost of funds between the two periods.

●

Total average interest-bearing deposits and investments were down by $31.3 million with $910,000 less in interest income and 25 basis points less in yield between the two periods. Federal funds rates were down 100 basis points in the third quarter of 2025 when compared to the third quarter of 2024. Total average investments were down by $20.9 million as the Company strategically began to allow the securities portfolio decrease while growing loans in the marketplace. The Company does not intend to sell nor buy any securities in the near future.

●

Total average loans increased $21.7 million with $1.1 million more in interest income and 14 basis points more in yield between the two periods.

●

Total average interest-bearing deposits increased $17.8 million with $1.1 million more in interest expense and 60 basis points more in yield between the two periods. This increase was offset by the total average borrowed funds which decreased $19.1 million with $877,000 less in interest expense, and 93 basis points less in yield between the two periods. Total average non-interest-bearing deposits were down by $7.4 million. The total cost of funds increased by $234,000 and an overall yield increase of 13 basis points between the two periods.

●

The increase in earning asset yield of 19 basis points between the two periods was due to a change in the mix of our earning assets from cash and securities to loans. In the nine-month period ended September 30, 2024, loans

- 34 -

represented 51% of our average earning assets where in the nine-month period ended September 30, 2025, loans represented 59% of our average earning assets.

The following tables set forth, for the periods indicated, information regarding the average balances of interest-earning assets and interest-bearing liabilities, the amount of interest income and interest expense, and the resulting yields on average interest-earning assets and rates paid on average interest-bearing liabilities.

- 35 -


	Nine Months Ended September 30,
	2025						2024
	Average				Yield/		Average				Yield/
(dollars in thousands)	Balance		Interest		Cost		Balance		Interest		Cost
ASSETS:
Interest-earning assets:
Interest-bearing deposits w/ banks & fed funds	$	15,138	$	457	4.04	%	$	25,555	$	979	5.11	%
Investment securities available for sale		130,355		2,196	2.25			151,760		2,605	2.29
Restricted equity securities		936		46	6.56			437		25	7.74
Total interest-bearing deposits/investments		146,429		2,699	2.46			177,752		3,609	2.71

Loans Secured by Real Estate
Construction and land		5,199		407	10.47			5,858		329	7.51
Farmland		312		12	5.04			321		12	5.60
Single-family residential		102,916		3,792	4.93			92,429		3,490	5.30
Multi-family		4,961		181	4.88			5,113		187	4.87
Commercial		48,336		2,331	6.45			42,329		1,902	6.00
Total loans secured by real estate		161,724		6,723	5.56			146,050		5,920	5.41
Commercial and Industrial
Commercial and industrial		19,826		827	5.57			13,889		614	5.91
SBA guaranty		5,539		317	7.65			5,799		365	8.40
Total commercial and industrial loans		25,365		1,144	5.57			19,688		979	6.64
Consumer Loans
Consumer, credit cards		8		-	0.54			-		-	-
Consumer		2,652		21	1.05			2,810		19	0.91
Automobile		20,611		856	5.55			20,077		730	4.85
Total consumer loans		23,271		877	5.04			22,887		749	4.37
Total loans		210,360		8,744	5.56			188,625		7,648	5.42
Total interest-earning assets		356,789		11,443	4.29			366,377		11,257	4.10

Cash		1,894						2,137
Allowance for credit losses		(2,691)						(2,371)
Market valuation		(24,760)						(26,590)
Other assets		22,575						23,471
Total non-earning assets		(2,982)						(3,353)
Total assets	$	353,807					$	363,024

LIABILITIES AND STOCKHOLDER'S EQUITY:
Interest-bearing deposits:
Interest-bearing checking and savings	$	96,086	$	65	0.09	%	$	112,143	$	73	0.09	%
Money market		91,055		2,460	3.61			52,951		1,434	3.62
Certificates of deposit		25,638		301	1.57			29,889		209	0.93
Total interest-bearing deposits		212,779		2,826	1.78			194,983		1,716	1.18

Borrowed Funds:
FHLB advances		14,441		486	4.50			3,889		160	5.42
Bank Term Funding Program		-		-	-			29,630		1,203	5.50
Federal Funds Purchased		1		-	-			1		-	-
Total borrowed funds		14,442		486	4.50			33,520		1,363	5.43
Total interest-bearing liabilities		227,221		3,312	1.95			228,503		3,079	1.80

Non-interest-bearing deposits		106,082						113,451
Total cost of funds		333,303		3,313	1.33			341,954		3,079	1.20

Other liabilities and accrued expenses		1,054						2,387
Total liabilities		334,357						344,341

Stockholder's equity		19,450						18,684
Total liabilities and equity	$	353,807					$	363,025
Net interest income			$	8,130					$	8,178
Net interest income - FTE			$	8,333					$	8,386
Yield on earning assets					4.29	%					4.10	%
Cost of interest-bearing liabilities					1.95	%					1.80	%
Net interest spread					2.34	%					2.30	%
Net interest margin					3.05	%					2.98	%
Net interest margin - FTE (1)					3.12	%					3.06	%

(1) Based on a 21% marginal tax rate.

- 36 -

Provision and Allowance for Credit Losses

The total allowance for credit losses (ACL) is composed of two parts: The ACL for loans and the ACL for unfunded commitments. 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. For the nine months ended September 30, 2025, the release for credit loss allowance was $498,000 comprised of $128,000 release of ACL for loans and $369,000 release of ACL for unfunded commitments. This compared to a provision for credit loss allowance of $897,000 for the nine months ended September 30,2024 comprised of $773,000 provision for ACL for loans and $124,000 provision for ACL for unfunded commitments.

Non-interest Income and Non-interest Expense

Non-interest income increased $171,000 during the nine-month period ended September 30, 2025, to $996,000 from $825,000 during the same period in 2024. The $171,000 increase was primarily related to $192,000 in mortgage commissions from VAWM, offset by lower service charges of $7,000 and lower other fees and commissions of $14,000.

Non-interest expense increased $1.1 million during the nine-months ended September 30, 2025, to $9.8 million compared to $8.6 million for the nine-month period ended September 30, 2024, primarily due to the following:

●

Salary and employee benefits increased $846,000 for the first nine months of 2025 compared to the first nine months of 2024 primarily due to new compensation from VAWM, new hires/replacements, and non-recurring additional costs related to early retirement programs, offset by reductions in employee expense due to lower headcount.

●

Occupancy and equipment expenses decreased $183,000 in the nine months of 2025 from the first nine months of 2024 primarily due to the closing of two leased offices, one in January 2025 and one in May 2025.

●

Legal, accounting, other professional fees increased $371,000 between the two periods due to additional costs related to internal audit and to professional fees associated with the launch of our new credit card program, costs and fees associated with the acquisition of VAWM, and interim finance and accounting help, offset by reductions in data processing and item processing services of $55,000 in the first nine months of 2025 when compared to the same period in 2024.

●

All other expenses increased $161,000 in the third quarter of 2025 when compared to the same quarter of 2024 due to growth, increased loan collection costs, advertising, and inflationary impacts.

Comprehensive Income (Loss)

In accordance with regulatory requirements, the Company reports comprehensive income (loss) in its financial statements. Comprehensive income (loss) consists of the Company's net income (loss), adjusted for unrealized gains and losses on the Bank's portfolio of investment securities. For the first nine months of 2025, the comprehensive income, net of tax, totaled $2.9 million compared to comprehensive income in the amount of $2.6 million for the same period in 2024. The $285,000 improvement between the two periods was due to a $147,000 net of tax increase in unrealized losses on securities for the first nine months of 2025, compared to the amount of after-tax unrealized losses on securities for the comparable prior year period, and to the increase of $138,000 in reported net income for the first nine months of 2025 over the same period in 2024.

FINANCIAL CONDITION

Total assets were $351.8 million on September 30, 2025, a decrease of $7.2 million from December 31, 2024. Cash and cash equivalents decreased by $12.2 million or 50%, during the first nine months of 2025. The Bank's loan portfolio increased by $10.1 million or 4.9%, and investment securities available for sale declined by $5.2 million or 4.8% over the same period. The Company's allowance for credit losses was $2.57 million as of September 30, 2025,

- 37 -

compared to $2.84 million at December 31, 2024, a decrease of $271,000, or 9.5%. Total deposits increased $19.9 million, or 6.4%, during the first nine months of 2025 and short-term borrowings decreased by $30.0 million as the Company paid off all borrowings by September 30, 2025. Stockholder's equity was $20.7 million on September 30, 2025, a $2.91 million or 16.3% increase, as compared to $17.8 million on December 31, 2024. The increase was primarily due to unrealized losses, net of taxes, on securities available for sale amounting to $16.2 million on September 30, 2025, compared to $19.0 million at December 31, 2024.

Return on average assets for the three-and nine-month periods ended September 30, 2025, was 0.14% and 0.02% compared to 0.14% and -0.03% for the three- and nine-month periods ended September 30, 2024. Return on average equity for the three- and nine-month periods ended September 30, 2025, was 2.64% and -0.47% compared to -2.75% and -0.52% for the three- and nine-month periods ended September 30, 2024.

The book value per share of Bancorp's common stock was $7.10 on September 30, 2025, as compared to $6.14 per share on December 31, 2024. The increase was the result of lower unrealized losses on the Company's available for sale securities of $16.2 million at September 30, 2025, compared to $19.0 million at December 31, 2024.

As of September 30, 2025, the Bank remained above all "well-capitalized" regulatory requirement levels. The Company has strong liquidity and capital positions that provide ample capacity for future growth. The Bank's total regulatory capital to risk weighted assets was 15.96% on September 30, 2025, as compared to 16.40% on December 31, 2024. The Bank's tier 1 risk-based capital ratio was 14.82% on September 30, 2025, compared to 15.15% on December 31, 2024. The Bank's leverage ratio was 9.67% on September 30, 2025, compared to 9.97% on December 31, 2024.

Loans are placed on nonaccrual status when they are past due 90 days as to either principal or interest or when, in the opinion of management, the collection of all interest and/or principal is in doubt. Placing a loan on nonaccrual status means that we no longer accrue interest or amortize deferred fees or costs on such loans and reverse any interest previously accrued but not collected. Management may grant a waiver from nonaccrual status for a 90 day past due loan that is both well secured and in the process of collection. A loan remains on nonaccrual status until the loan is current as to payment of both principal and interest and the borrower has demonstrated the ability to make payments in accordance with the terms of the loan and remain current.

A loan is considered to be impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement. Impaired loans are measured based on the fair value of the collateral for collateral dependent loans and at the present value of expected future cash flows using the loans' effective interest rates for loans that are not collateral dependent.

At September 30, 2025, impaired loans totaled $2.5 million, net of specific reserves. Included in the impaired loans total was $1.2 million in loans classified as nonaccrual loans. At September 30, 2025, impaired loans included restructured loans to borrowers with financial difficulty totaling $23,000. Borrowers under all other restructured loans are paying in accordance with the terms of the modified loan agreement and have been placed on accrual status after a period of performance with the restructured terms.

The following table presents details of our nonperforming loans and nonperforming assets, as these asset quality metrics are evaluated by management, at the dates indicated:


	September 30,			December 31,
(dollars in thousands)	2025			2024
Nonaccrual loans	$	1,201		$
Restructured loans to borrowers with financial difficulty, excluding those in nonaccrual loans		-			-
Accruing loans past due 90+ days		-			-

Total nonperforming loans		1,201

Total nonperforming assets	$	1,201		$

Nonperforming assets to total assets		0.34	%		0.10	%

- 38 -

Deposits on September 30, 2025, and December 31, 2024, were as follows:


	September 30, 2025				December 31, 2024				2025 vs 2024
(dollars in thousands)	Amount		% of Total		Amount		% of Total		$ Change		% Change
Noninterest-bearing deposits	$	107,368	32.5	%	$	100,747	32.6	%	$	6,621	6.57	%

Interest-bearing deposits:
Checking		29,199	8.9	%		25,487	8.2	%		3,712	14.56	%
Savings		67,826	20.6	%		75,444	24.4	%		(7,618)	(10.10)	%
Money market		98,581	30.0	%		81,513	26.4	%		17,068	20.94	%
Total interest-bearing checking, savings and money market deposits		195,606	59.5	%		182,444	59.0	%		13,162	7.21	%

Time deposits of $250,000 or less		25,252	7.7	%		24,865	8.0	%		387	1.56	%
Time deposits of more than $250,000		843	0.3	%		1,133	0.4	%		(290)	(25.60)	%
Total time deposits		26,095	8.0	%		25,998	8.4	%		97	0.37	%

Total interest-bearing deposits		221,701	67.5	%		208,442	67.4	%		13,259	6.36	%

Total Deposits	$	329,069	100.0	%	$	309,189	100.0	%	$	19,880	6.43	%

Lease Commitments.For leases where the Bank is the lessee, operating leases are included in premises and equipment, net, and accrued expenses and other liabilities on the Consolidated Balance Sheet. The Bank currently does not have any finance leases.

Operating lease Right-of-Use ("ROU") assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. ROU assets also include any initial direct costs incurred and any lease payments made at or before the lease commencement date, less lease incentives received. The Company uses its incremental borrowing rate based on the information available at the commencement date in determining the lease liabilities as the Company's leases generally do not provide an implicit rate. Lease terms may include options to extend or to terminate when the Company is reasonably certain that the option will be exercised.

Future minimum payments of the Bank's operating leases as of September 30, 2025 are as follows:


Year ending December 31,	Amount
	(dollars in thousands)
2025	$	63
2026		174
2027		17
2028		11
2029		11
Thereafter		5
Total	$	281

Pension and Profit-Sharing Plans. The Bank has a defined contribution retirement plan qualifying under Section 401(k) of the Internal Revenue Code that is funded through a profit-sharing agreement and voluntary employee contributions. The plan provides for discretionary employer matching contributions to be determined annually by the Board of Directors. The plan covers substantially all employees.

For the nine months ended September 30, 2025, the Bank accrued $382,000 for its projected 401(k) match contribution as well as other profit-sharing benefits.

- 39 -

MARKET RISK AND INTEREST RATE SENSITIVITY

Our primary market risk is interest rate fluctuation. Interest rate risk results primarily from the traditional banking activities in which the Bank engages, such as gathering deposits and extending loans. Many factors, including economic and financial conditions, movements in interest rates and consumer preferences affect the difference between the interest earned on our assets and the interest paid on liabilities. Our interest rate risk represents the level of exposure we have to fluctuations in interest rates and is primarily measured as the change in earnings and the theoretical market value of equity that results from changes in interest rates. The Asset Liability Committee ("ALCO") oversees our management of interest rate risk. The objective of the management of interest rate risk is to maximize stockholder value, enhance profitability and increase capital, serve customer and community needs, and protect the Company from any adverse material financial consequences associated with changes in interest rate risk.

Interest rate risk is that risk to earnings or capital arising from movement of interest rates. It arises from differences between the timing of rate changes and the timing of cash flows (repricing risk); from changing rate relationships across yield curves that affect bank activities (basis risk); from changing rate relationships across the spectrum of maturities (yield curve risk); and from interest rate related options embedded in certain bank products (option risk). Changes in interest rates may also affect a bank's underlying economic value. The value of a bank's assets, liabilities, and interest-rate related, off-balance sheet contracts are affected by a change in rates because they represent the value of future cash flows, and in some cases the cash flows themselves, are changed.

We believe that accepting some level of interest rate risk is necessary in order to achieve realistic profit goals. Management and the Board of Directors have chosen an interest rate risk profile that is consistent with our strategic business plan.

The Company's Board of Directors has established a comprehensive interest rate risk management policy, which is administered by our ALCO. The policy establishes limits on risk, which are quantitative measures of the percentage change in net interest income (a measure of net interest income at risk) and the fair value of equity capital (a measure of economic value of equity or "EVE" at risk) resulting from a hypothetical change in U.S. Treasury interest rates. We measure the potential adverse impacts that changing interest rates may have on our short-term earnings, long-term value, and liquidity by employing simulation analysis through the use of computer modeling. The simulation model captures optionality factors such as call features and interest rate caps and floors embedded in investment and loan portfolio contracts. As with any method of gauging interest rate risk, there are certain shortcomings inherent in the interest rate modeling methodology we employ. When interest rates change, actual movements in different categories of interest-earning assets and interest-bearing liabilities, loan prepayments, and withdrawals of time and other deposits, may deviate significantly from assumptions used in the model. Finally, the methodology does not measure or reflect the impact that higher rates may have on adjustable-rate loan customers' ability to service their debts, or the impact of rate changes on demand for loan and deposit products.

We prepare a current base case and alternative simulations at least once a quarter and report the analysis to the ALCO and Board of Directors. In addition, more frequent forecasts are produced when the direction or degree of change in interest rates are particularly uncertain to evaluate the impact of balance sheet strategies or when other business conditions so dictate.

The statement of condition is subject to quarterly testing for alternative interest rate shock possibilities to indicate the inherent interest rate risk. Average interest rates are shocked by +/- 100, 200, 300, and 400 basis points ("bp"), although we may elect not to use particular scenarios that we determine are impractical in the current rate environment. It is our goal to structure the balance sheet so that net interest-earnings at risk over a 12-month period and the economic value of equity at risk do not exceed policy guidelines at the various interest rate shock levels.

At September 30, 2025, the simulation analysis indicated that the Bank is in a modest asset sensitive position in falling rate scenarios but is liability sensitive in the rising rate shock scenarios. Management strives to optimize the level of higher costing fixed rate funding instruments, while seeking to increase assets that are more fluid in their repricing. An asset sensitive position, theoretically, is favorable in a rising rate environment since more assets than liabilities will re-price in a given time frame as interest rates rise. Similarly, a liability sensitive position, theoretically, is favorable in a

- 40 -

declining interest rate environment since more liabilities than assets will re-price in a given time frame as interest rates decline. Management works to maintain a consistent spread between yields on assets and costs of deposits and borrowings, regardless of the direction of interest rates.

The foregoing analysis assumes that the Company's assets and liabilities move with rates at their earliest repricing opportunities based on final maturity, while considering optionality such as call features, where applicable. Certificates of deposit and IRA accounts are presumed to be repriced at maturity. NOW and savings accounts are assumed to be repriced within three months although it is the Company's experience that such accounts may be less sensitive to changes in market rates.


	Static Balance Sheet/Immediate Change in Rates
Estimated Changes in Net Interest Income	`-200 bp		`-100 bp		`+100 bp		`+200 bp
Policy Limit	(15)	%	(10)	%	(10)	%	(15)	%
September 30, 2025	(1)	%	(2)	%	(1)	%	(5)	%
September 30, 2024	(5)	%	(3)	%	2	%	1	%

As shown above, measures of net interest income at risk were slightly more favorable in down-rate scenarios and less favorable in up-rate scenarios on September 30, 2025 than on September 30, 2024 over a 12-month modeling period. These measures remained within prescribed policy limits in the up and down interest rate scenarios.

The following table sets forth the Company's interest-rate sensitivity at September 30, 2025.


							Over 1
				Over 3 to			Through			Over
	0-3 Months			12 Months			5 Years			5 Years			Total

	(dollars in thousands)
Assets:
Repricing asset balances	$	73,776		$	27,336		$	122,681		$	128,001		$	351,794

Liabilities and Stockholders' Equity
Repricing liability and equity balances	$	62,339		$	27,167		$	77,075		$	185,213		$	351,794

GAP	$	11,437		$	169		$	45,606		$	(57,212)
Cumulative GAP	$	11,437		$	11,606		$	57,212		$	-
Cumulative GAP as a % of total assets		3.25	%		3.30	%		16.26	%		0.00	%

The measures of equity value at risk indicate the ongoing economic value of the Company by considering the effects of changes in interest rates on all of the Company's cash flows, and by discounting the cash flows to estimate the present value of assets and liabilities. The difference between these discounted values of the assets and liabilities is the economic value of equity, which, in theory, approximates the fair value of the Company's net assets.


	Static Balance Sheet/Immediate Change in Rates
Estimated Changes in Economic Value of Equity (EVE)	`-200 bp		`-100 bp		`+100 bp		`+200 bp
Policy Limit	(20)	%	(10)	%	(10)	%	(20)	%
September 30, 2025	10	%	5	%	(7)	%	(16)	%
September 30, 2024	6	%	3	%	(3)	%	(10)	%

- 41 -

In an increasing interest rate environment, the Company's interest income increases at a slightly lower rate compared with changes in its total interest expense, thereby resulting in a slightly liability sensitive profile. In a declining interest rate environment, the decreases in the Company's interest income will be greater than decreases in its interest expense, thereby resulting in lower net interest income. Overall, net interest income exhibits limited changes in rates down scenarios. In a rising interest rate environment, the Company is positioned to generate less economic value of equity as the duration of the assets is longer than the duration of the liabilities, with liabilities repricing more quickly than our assets. Conversely, the Company's economic value of equity increases in most falling interest rate environments as the longer duration of the assets benefits the Company in falling rate scenarios. Thus, the economic value of equity increases. Overall, economic value of equity exhibits acceptable changes in rates down scenarios within policy guidelines.

LIQUIDITY AND CAPITAL RESOURCES

The Company currently owns the Bank and a residential mortgage banking and brokerage company and does not currently have any material funding commitments. The Company's principal sources of liquidity are cash on hand and dividends received from the Bank. The Bank is subject to various regulatory restrictions on the payment of dividends and currently must receive prior approval to pay dividends to the Company due to a limit on current and two prior years' retained earnings.

The Bank's principal sources of funds for investments and operations are net income, deposits from its primary market area, principal and interest payments on loans, interest received on investment securities and proceeds from maturing investment securities. Its principal funding commitments are for the origination or purchase of loans, deposit withdrawals, and the payment of maturing deposits. Deposits are considered a primary source of funds supporting the Bank's lending and investment activities.

The Bank's most liquid assets are cash and cash equivalents, which are cash on hand, amounts due from financial institutions, federal funds sold, certificates of deposit with other financial institutions that have an original maturity of three months or less and money market mutual funds. The levels of such assets are dependent on the Bank's operating, financing, and investment activities at any given time. The variations in levels of cash and cash equivalents are influenced by deposit flows and anticipated future deposit flows. The Bank's cash and cash equivalents (cash due from banks, interest-bearing deposits in other financial institutions, and federal funds sold), as of September 30, 2025, totaled $12.2 million, a decrease of $12.2 million, or 50.0% from $24.5 million at December 31, 2024.

As of September 30, 2025, the Bank was permitted to draw on an $87.7 million line of credit from the FHLB of Atlanta. There were no short-term borrowings outstanding under the line on September 30, 2025 as compared to $30 million of borrowings on the line at December 31, 2024. Borrowings under the line are secured by a floating lien on the Bank's residential mortgage loans and investment securities.As of September 30, 2025, and December 31, 2024, the Bank had $0 in outstanding short-term borrowings from the Federal Reserve Bank ("FRB") discount window. Borrowings under the line are secured by qualifying collateral.

In addition, the Bank has two unsecured federal funds lines of credit in the amount of $9.0 million and $8.0 million, respectively, of which $0 was outstanding as of September 30, 2025.

The Company's stockholders' equity increased $2.9 million, or 16.3% during the nine-month period ended September 30, 2025. The increase in equity was primarily due to a $2.8 million decrease in the after-tax net unrealized holding loss on securities available for sale, the $66,000 net income in the nine-month period, and $17,000 of stock- based compensation expense during the nine-month period ended September 30, 2025.

- 42 -

The Federal Reserve Board and the FDIC have established guidelines with respect to the maintenance of appropriate levels of capital by bank holding companies and state non-member banks, respectively. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on our financial condition. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Bank's capital amounts, and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

The Bank is subject to the Basel III Capital Rules. The Basel III Capital Rules define the components of capital and address other issues affecting the numerator in banking institutions' regulatory capital ratios. The Basel III Capital Rules also address risk weights and other issues affecting the denominator in banking institutions' regulatory capital ratios and replace the existing risk-weighting approach with a more risk-sensitive approach. The Basel III Capital Rules also implements the requirements of Section 939A of the Dodd-Frank Act to remove references to credit ratings from the federal banking agencies' rules.

Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company's financial statements. The Bank must meet specific capital guidelines that involve quantitative measures of its assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting principles. The Bank's capital amounts, and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

The rules include a common equity Tier 1 capital to risk-weighted assets minimum ratio of 4.5%, a minimum ratio of Tier 1 capital to risk-weighted assets from 4.0% to 6.0%, require a minimum ratio of Total Capital to risk-weighted assets of 8.0%, and require a minimum Tier 1 leverage ratio of 4.0%. The rules establish a capital conservation buffer above the regulatory minimum capital requirements. Since 2019, this capital conservation buffer is 2.5%. The capital conservation buffer is designed to absorb losses during periods of economic stress and as detailed above, effectively increases the minimum required risk-weighted capital ratios. The rules also implemented strict eligibility criteria for regulatory capital instruments.

The rules also revised the definition and calculation of Tier 1 capital, Total Capital, and risk-weighted assets. The Common Equity Tier 1, Tier 1 and Total Capital ratios are calculated by dividing the respective capital amounts by risk-weighted assets. Risk-weighted assets are calculated based on regulatory requirements and include total assets, with certain exclusions, allocated by risk weight category, and certain off-balance-sheet items, among other things. The leverage ratio is calculated by dividing Tier 1 capital by adjusted quarterly average total assets, which exclude goodwill and other intangible assets, among other things.

The regulations impose several sets of capital adequacy requirements: minimum leverage rules, which require bank holding companies and banks to maintain a specified minimum ratio of capital to total assets, and risk-based capital rules, which require the maintenance of specified minimum ratios of capital to "risk-weighted" assets. In addition, there are requirements to maintain a capital conservation buffer which raised the minimum required common equity Tier 1 capital ratio to 7.00%, the Tier 1 capital ratio to 8.50% and the total capital ratio to 10.50%. At September 30, 2025, the Bank was in full compliance with these guidelines with a Tier 1 leverage ratio of 9.67%, a Tier 1 risk-based capital ratio of 14.82%, a common equity Tier 1 risk-based capital ratio of 14.82%, and a total risk-based capital ratio of 15.96%.

- 43 -

The Company's capital amounts and ratios at September 30, 2025 and December 31, 2024 were as follows:


									To Be Well Capitalized
					To Be Considered				Under Prompt Corrective
	Actual				Adequately Capitalized				Action Provisions
September 30, 2025	Amount		Ratio		Amount		Ratio		Amount		Ratio

	(dollars in thousands)
Common equity tier 1	$	36,204	14.82	%	$	10,995	4.50	%	$	15,882	6.50	%
Total capital	$	38,987	15.96	%	$	19,547	8.00	%	$	24,434	10.00	%
Tier 1 capital	$	36,204	14.82	%	$	14,660	6.00	%	$	19,547	8.00	%
Tier 1 leverage	$	36,204	9.67	%	$	14,981	4.00	%	$	18,726	5.00	%


									To Be Well Capitalized
					To Be Considered				Under Prompt Corrective
	Actual				Adequately Capitalized				Action Provisions
December 31, 2024	Amount		Ratio		Amount		Ratio		Amount		Ratio

	(dollars in thousands)
Common equity tier 1	$	36,481	15.15	%	$	10,837	4.50	%	$	15,653	6.50	%
Total capital	$	39,496	16.40	%	$	19,265	8.00	%	$	24,082	10.00	%
Tier 1 capital	$	36,481	15.15	%	$	14,449	6.00	%	$	19,265	8.00	%
Tier 1 leverage	$	36,481	9.97	%	$	14,640	4.00	%	$	18,300	5.00	%

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The Company's accounting policies are fully described in its Annual Report on Form 10-K for the fiscal year ended December 31, 2024 and are essential to understanding Management's Discussion and Analysis of Financial Condition and Results of Operations. As discussed there, the preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying notes. Since future events and their effects cannot be determined with absolute certainty, the determination of estimates requires the exercise of judgment. Management has used the best information available to make the estimations necessary to value the related assets and liabilities based on historical experience and on various assumptions which are believed to be reasonable under the circumstances. Actual results could differ from those estimates, and such differences may be material to the financial statements. The Company reevaluates these variables as facts and circumstances change. Historically, actual results have not differed significantly from the Company's estimates. The following is a summary of the more judgmental accounting estimates and principles involved in the preparation of the Company's financial statements, including the identification of the variables most important in the estimation process:

Allowance for Credit Losses.The allowance for credit losses ("ACL") consists of the allowance for credit losses and the reserve for unfunded commitments. In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses ("ASC 326"). The ASC, as amended, is intended to provide financial statement users with more decision useful information about the expected credit losses on financial instruments that are not accounted for at fair value through net income.

As a result of our adoption of ASC 326, our methodology for estimating the ACL changed significantly from December 31, 2020. The standard replaced the "incurred loss" approach with an "expected loss" approach known as current expected credit loss ("CECL"). The CECL methodology requires an estimate of the credit losses expected over the life of an exposure (or pool of exposures) and it removes the incurred loss methodology's threshold that delayed the recognition of a credit loss until it was "probable" a loss event was deemed to be "incurred."

The estimate of expected credit losses under the CECL methodology is based on relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amounts. Historical loss experience is generally the starting point for estimating expected credit losses. We then

- 44 -

consider whether the historical loss experience should be adjusted for asset-specific risk characteristics or current conditions at the reporting date that did not exist over the period from which historical experience was based. Finally, we consider forecasts about future economic conditions or changes in collateral values that are reasonable and supportable.

Management's determination of the amount of the ACL is a critical accounting estimate as it requires significant reliance on the credit risk we ascribe to individual borrowers, the use of estimates and significant judgment as to the amount and timing of expected future cash flows on criticized loans, significant reliance on historical loss rates on homogenous portfolios, consideration of our quantitative and qualitative evaluation of past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amounts.

Going forward, the impact of utilizing the CECL methodology to calculate the ACL will be significantly influenced by the composition, characteristics, and quality of our loan portfolio, as well as the prevailing economic conditions and forecasts utilized. Material changes to these and other relevant factors may result in greater volatility to the allowance for credit losses, and therefore, greater volatility in our reported earnings. For further information regarding the Bank's allowance for credit losses, see "Allowance for Credit Losses," above.

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