First US Bancshares nine-month profit rises to $5.66M
Nine-month earnings and diluted EPS were higher than in 2025, while operating cash flow was lower.
Sentiment and the balance of points
Rhea-AI Sentiment reads the wording of the document, how positive or negative its language is on a 1 to 5 scale. The balance of points shown with the takes weighs what the document actually discloses, so the two can disagree, for example when a trial that missed its main goal is described in upbeat language.
First US Bancshares, Inc. (FUSB) reported nine-month 2026 net income of $5.658 million, compared with $3.863 million in 2025; third-quarter net income was $1.960 million versus $1.936 million. Nine-month diluted earnings per share were $1.00, compared with $0.64. Nine-month net interest income was $28.565 million versus $28.035 million, while provision for credit losses was $1.779 million versus $3.811 million.
At September 30, 2026, total assets were $1.164835 billion, deposits were $1.015067 billion and loans held for investment were $845.043 million; at December 31, 2025, assets were $1.154785 billion and deposits were $1.027962 billion. The allowance for credit losses on loans and leases was $10.995 million. Nine-month operating cash flow was $8.678 million, versus $9.867 million in 2025, and period-end cash and cash equivalents were $61.580 million. The company repurchased 627,500 common shares during the nine months. Available-for-sale securities had $8.027 million in gross unrealized losses at September 30; the company attributed the losses to prevailing interest rates rather than issuer creditworthiness and said no allowance for credit losses was necessary on those securities.
How this balance works
Rhea-AI gives every point it takes from this document a weight. Minor counts 1, Moderate 3 and Major 9, so one Major point outweighs several Minor ones. The bar adds up the weights on each side, and when neither side holds more than 65% of the total the balance reads Mixed.
It reads the document as published, with the same rules for every company, and it does not look at what the market expected or at how the stock traded, so a point can be objectively good on a day the stock falls.
Rhea-AI Sentiment measures something else, the tone of the wording.
Positive
- Moderate pointNine-month net income: $5.658 million, versus $3.863 million in 2025.
Negative
- Moderate pointNine-month operating cash flow: $8.678 million, versus $9.867 million in 2025.
Filing Explained
At September 30, 2026, cash and deposits were below December 31, 2025 levels, while short-term borrowings stood at 30,000 thousand dollars.
This unaudited First US Bancshares 10-Q reports results through
The equity statement also records 62,513 shares added through stock-based compensation plans, so the ending share count reflects both repurchases and plan activity.
At September 30, cash and cash equivalents were
Key Figures
Key Terms
allowance for credit losses financial
available-for-sale financial
held-to-maturity financial
cash flow hedge derivatives financial
FAQ
AI-generated questions and answers. How Rhea-AI works. Not financial advice.
How much did FUSB earn in the third quarter of 2026?
How many shares did FUSB repurchase in the first nine months of 2026?
AI-generated analysis. How Rhea-AI works. Not financial advice.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
For the quarterly period ended
OR
For the transition period from _____________ to _____________
Commission File Number:
First US Bancshares, Inc.
(Exact Name of Registrant as Specified in Its Charter)
(State or Other Jurisdiction of Incorporation or Organization) |
(IRS Employer Identification No.) |
(Address of Principal Executive Offices) |
(Zip Code) |
(
(Registrant’s Telephone Number, Including Area Code)
N/A
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
☐ |
|
Accelerated filer |
☐ |
☒ |
|
Smaller reporting company |
||
Emerging growth company |
|
|
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class |
Outstanding at November 3, 2026 |
Common Stock, $0.01 par value |
FIRST US BANCSHARES, INC. AND SUBSIDIARY
|
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PAGE |
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PART I. FINANCIAL INFORMATION |
|
4 |
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ITEM 1. FINANCIAL STATEMENTS |
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4 |
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Interim Condensed Consolidated Balance Sheets at September 30, 2026 (Unaudited) and December 31, 2025 |
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4 |
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Interim Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2026 and 2025 (Unaudited) |
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5 |
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Interim Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2026 and 2025 (Unaudited) |
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6 |
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Interim Condensed Consolidated Statements of Changes in Shareholders’ Equity for the Three and Nine Months Ended September 30, 2026 and 2025 (Unaudited) |
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7 |
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Interim Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2026 and 2025 (Unaudited) |
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9 |
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Notes to Interim Condensed Consolidated Financial Statements (Unaudited) |
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10 |
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
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42 |
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
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60 |
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ITEM 4. CONTROLS AND PROCEDURES |
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61 |
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PART II. OTHER INFORMATION |
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62 |
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ITEM 1. LEGAL PROCEEDINGS |
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62 |
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ITEM 1A. RISK FACTORS |
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62 |
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
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62 |
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ITEM 5. OTHER INFORMATION |
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62 |
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ITEM 6. EXHIBITS |
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63 |
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Signature Page |
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64 |
2
FORWARD-LOOKING STATEMENTS
Statements contained in this Quarterly Report on Form 10-Q that are not historical facts are forward-looking statements (as defined in the Private Securities Litigation Reform Act of 1995). In addition, First US Bancshares, Inc. (“Bancshares” and, together with its subsidiary, the “Company”), through its senior management, from time to time makes forward-looking statements concerning its expected future operations, performance and other developments. The words “estimate,” “project,” “intend,” “anticipate,” “expect,” “believe,” “continues” and similar expressions are indicative of forward-looking statements. Such forward-looking statements are necessarily estimates reflecting the Company’s best judgment based on current information and involve a number of risks and uncertainties. Certain factors that could affect the accuracy of such forward-looking statements and cause actual results to differ materially from those projected in such forward-looking statements are identified in the Company’s filings with the Securities and Exchange Commission (the “SEC”), and forward-looking statements contained herein or in other public statements of the Company or its senior management should be considered in light of those factors. Such factors may include adverse developments in the financial services industry; loan losses may be greater than anticipated; our ability to ensure that sufficient cash flow and liquid assets are available to satisfy current and future financial obligations; the increased lending risks associated with commercial real estate lending; potential weakness in the residential real estate market; liquidity risks; the impact of national and local market conditions on the Company’s business and operations; the rate of growth (or lack thereof) in the economy generally and in the Company’s service areas; the effects of significant changes to the structure and operations of the federal government; strong competition in the banking industry; the impact of changes in interest rates and monetary policy on the Company’s performance and financial condition; the effects of fiscal challenges facing the U.S. government or any potential government shutdown; effects of changes in the policies of monetary authorities and other government action; the impact of technological changes in the banking and financial service industries and potential information system failures; cybersecurity and data privacy threats; the risks and challenges presented by the development and use of artificial intelligence (“AI”); risks of dependence on outside third parties for the processing and handling of our records and data; the costs of complying with extensive governmental regulation; the risk that internal controls and procedures might fail or be circumvented; the impact of changing accounting standards and tax laws on the Company’s financial results; the potential impact of climate change and related legislative and regulatory initiatives; the possibility that acquisitions may not produce anticipated results and result in unforeseen integration difficulties; the volatility of our stock price and our dependence on the soundness of other financial institutions; and other risk factors described from time to time in the Company’s public filings, including, but not limited to, the Company’s most recent Annual Report on Form 10-K. Relative to the Company’s dividend policy, the payment of cash dividends is subject to the discretion of the Board of Directors and will be determined in light of then-current conditions, including the Company’s earnings, leverage, operations, financial conditions, capital requirements and other factors deemed relevant by the Board of Directors. In the future, the Board of Directors may change the Company’s dividend policy, including the frequency or amount of any dividend, in light of then-existing conditions.
3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FIRST US BANCSHARES, INC. AND SUBSIDIARY
INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands, Except Share and Per Share Data)
|
|
September 30, |
|
|
December 31, |
|
||
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|
2026 |
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|
2025 |
|
||
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|
(Unaudited) |
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||
ASSETS |
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|||||||
Cash and due from banks |
|
$ |
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$ |
|
||
Interest-bearing deposits in banks |
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Total cash and cash equivalents |
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Federal funds sold and securities purchased under reverse repurchase agreements |
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Investment securities available-for-sale, at fair value (amortized cost $ |
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||
Investment securities held-to-maturity, at amortized cost, net of allowance for credit |
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Federal Home Loan Bank stock, at cost |
|
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Loans and leases held for investment |
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|
||
Less: allowance for credit losses on loans and leases |
|
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||
Net loans and leases held for investment |
|
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||
Premises and equipment, net of accumulated depreciation |
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||
Cash surrender value of bank-owned life insurance |
|
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Accrued interest receivable |
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Goodwill and core deposit intangible, net |
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||
Other real estate owned |
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Other assets |
|
|
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|
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||
Total assets |
|
$ |
|
|
$ |
|
||
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|||||||
Deposits: |
|
|
|
|
|
|
||
Non-interest-bearing |
|
$ |
|
|
$ |
|
||
Interest-bearing |
|
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||
Total deposits |
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||
Accrued interest expense |
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||
Other liabilities |
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||
Short-term borrowings |
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|
|
— |
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Long-term borrowings |
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||
Total liabilities |
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||
Shareholders’ equity: |
|
|
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|
||
Common stock, par value $ |
|
|
|
|
|
|
||
Additional paid-in capital |
|
|
|
|
|
|
||
Accumulated other comprehensive loss, net of tax |
|
|
( |
) |
|
|
( |
) |
Retained earnings |
|
|
|
|
|
|
||
Less treasury stock: |
|
|
( |
) |
|
|
( |
) |
Total shareholders’ equity |
|
|
|
|
|
|
||
Total liabilities and shareholders’ equity |
|
$ |
|
|
$ |
|
||
The accompanying notes are an integral part of these Interim Condensed Consolidated Financial Statements.
4
FIRST US BANCSHARES, INC. AND SUBSIDIARY
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Per Share Data)
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
|
|
(Unaudited) |
|
|
(Unaudited) |
|
||||||||||
Interest income: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest and fees on loans |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Interest on investment securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest on deposits in banks |
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|
|
|
|
|
|
||||
Other |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total interest income |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense: |
|
|
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|
|
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|
|
|
||||
Interest on deposits |
|
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|
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|
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|
|
|
|
||||
Interest on borrowings |
|
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|
|
|
|
|
||||
Total interest expense |
|
|
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|
|
|
|
|
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|
|
|
||||
Net interest income |
|
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|
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|
||||
Provision for credit losses |
|
|
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|
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|
||||
Net interest income after provision for credit losses |
|
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|
|
|
|
|
|
|
|
||||
Non-interest income: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net gain on sales and prepayments of investment securities |
|
|
|
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|
|
|
|
|
|
|
||||
Service and other charges on deposit accounts |
|
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|
|
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|
||||
Lease income |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other income, net |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total non-interest income |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Non-interest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Salaries and employee benefits |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net occupancy and equipment |
|
|
|
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|
|
|
|
|
|
|
|
||||
Computer services |
|
|
|
|
|
|
|
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|
||||
Insurance expense and assessments |
|
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|
|
|
|
|
|
|
||||
Fees for professional services |
|
|
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|
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|
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|
|
|
||||
Other expense |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total non-interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income before income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Provision for income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Basic net income per share |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Diluted net income per share |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Dividends per share |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The accompanying notes are an integral part of these Interim Condensed Consolidated Financial Statements.
5
FIRST US BANCSHARES, INC. AND SUBSIDIARY
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Dollars in Thousands)
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
|
|
(Unaudited) |
|
|
(Unaudited) |
|
||||||||||
Net income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Unrealized holding (losses) gains on securities available-for-sale |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Reclassification adjustment for net gains on securities available-for-sale realized in net income, net of tax expense of $ |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Unrealized holding gains (losses) arising during the period on |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Reclassification adjustments on cash flow hedge derivatives realized in net income, net of tax benefit of $ |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Other comprehensive (loss) income |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Total comprehensive (loss) income |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||
The accompanying notes are an integral part of these Interim Condensed Consolidated Financial Statements.
6
FIRST US BANCSHARES, INC. AND SUBSIDIARY
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Dollars in Thousands, Except Share and Per Share Data)
For the three months ended September 30, 2026 and 2025 (Unaudited)
|
|
Common |
|
|
Common |
|
|
Additional |
|
|
Accumulated |
|
|
Retained |
|
|
Treasury |
|
|
Total |
|
|||||||
Balance, June 30, 2025 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||||
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Net change in fair value of |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Net change in fair value of |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Dividends declared: $ |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Reissuance of treasury stock as |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Impact of common stock share |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
|
|||
Balance, September 30, 2025 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Balance, June 30, 2026 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||||
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Net change in fair value of |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Net change in fair value of |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Dividends declared: $ |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Impact of stock-based |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
|
|||
Impact of common stock share |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Balance, September 30, 2026 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||||
The accompanying notes are an integral part of these Interim Condensed Consolidated Financial Statements.
7
For the nine months ended September 30, 2026 and 2025 (Unaudited)
|
|
Common |
|
|
Common |
|
|
Additional |
|
|
Accumulated |
|
|
Retained |
|
|
Treasury |
|
|
Total |
|
|||||||
Balance, December 31, 2024 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||||
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Net change in fair value of |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Net change in fair value of |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Dividends declared: $ |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Reissuance of treasury stock as |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Impact of stock-based |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
|
||||
Impact of common stock share |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Balance, September 30, 2025 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Balance, December 31, 2025 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||||
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Net change in fair value of |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Net change in fair value of |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Dividends declared: $ |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Impact of stock-based |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
|
||||
Impact of common stock share |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Balance, September 30, 2026 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||||
The accompanying notes are an integral part of these Interim Condensed Consolidated Financial Statements.
8
FIRST US BANCSHARES, INC. AND SUBSIDIARY
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
|
|
Nine Months Ended |
|
|||||
|
|
September 30, |
|
|||||
|
|
2026 |
|
|
2025 |
|
||
|
|
(Unaudited) |
|
|||||
Cash flows from operating activities: |
|
|
|
|
|
|
||
Net income |
|
$ |
|
|
$ |
|
||
Adjustments to reconcile net income to cash provided by operating activities: |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
|
||
Provision for credit losses |
|
|
|
|
|
|
||
Deferred income tax expense |
|
|
|
|
|
|
||
Reclassification of unrealized gains on terminated derivative contracts |
|
|
( |
) |
|
|
( |
) |
Stock-based compensation expense |
|
|
|
|
|
|
||
Net accretion of securities |
|
|
( |
) |
|
|
( |
) |
Amortization of intangible assets |
|
|
|
|
|
|
||
Net gain on sales and prepayments of investment securities |
|
|
( |
) |
|
|
( |
) |
Net loss on premises and equipment, other real estate, and repossessions |
|
|
|
|
|
|
||
Changes in assets and liabilities: |
|
|
|
|
|
|
||
Increase in cash surrender value of bank owned life insurance |
|
|
( |
) |
|
|
( |
) |
Decrease (increase) in accrued interest receivable |
|
|
|
|
|
( |
) |
|
Decrease in other assets |
|
|
|
|
|
|
||
(Decrease) increase in accrued interest expense |
|
|
( |
) |
|
|
|
|
Increase (decrease) in other liabilities |
|
|
|
|
|
( |
) |
|
Net cash provided by operating activities |
|
|
|
|
|
|
||
Cash flows from investing activities: |
|
|
|
|
|
|
||
Net decrease in federal funds sold and securities purchased under reverse repurchase agreements |
|
|
|
|
|
|
||
Purchases of investment securities, available-for-sale |
|
|
( |
) |
|
|
( |
) |
Proceeds from the sale of investment securities, available-for-sale |
|
|
|
|
|
|
||
Proceeds from maturities and prepayments of investment securities, available-for-sale |
|
|
|
|
|
|
||
Proceeds from maturities and prepayments of investment securities, held-to-maturity |
|
|
|
|
|
|
||
Net increase in Federal Home Loan Bank stock |
|
|
( |
) |
|
|
( |
) |
Net decrease (increase) in loans and leases held for investment |
|
|
|
|
|
( |
) |
|
Proceeds from the sale of premises and equipment, other real estate and repossessions |
|
|
|
|
|
|
||
Purchases of premises and equipment |
|
|
( |
) |
|
|
( |
) |
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
Cash flows from financing activities: |
|
|
|
|
|
|
||
Net (decrease) increase in deposits |
|
|
( |
) |
|
|
|
|
Net increase in short-term borrowings |
|
|
|
|
|
|
||
Net increase in cash collateral from derivative counterparties |
|
|
|
|
|
|
||
Net share-based compensation transactions |
|
|
( |
) |
|
|
( |
) |
Repurchases of common stock |
|
|
( |
) |
|
|
( |
) |
Dividends paid |
|
|
( |
) |
|
|
( |
) |
Net cash provided by financing activities |
|
|
|
|
|
|
||
Net increase (decrease) in cash and cash equivalents |
|
|
( |
) |
|
|
|
|
Cash and cash equivalents, beginning of period |
|
|
|
|
|
|
||
Cash and cash equivalents, end of period |
|
$ |
|
|
$ |
|
||
Supplemental disclosures: |
|
|
|
|
|
|
||
Cash paid for: |
|
|
|
|
|
|
||
Interest |
|
$ |
|
|
$ |
|
||
Income taxes |
|
|
|
|
|
|
||
Non-cash transactions: |
|
|
|
|
|
|
||
Assets acquired in settlement of loans |
|
|
|
|
|
|
||
Reissuance of treasury stock as compensation |
|
|
|
|
|
|
||
The accompanying notes are an integral part of these Interim Condensed Consolidated Financial Statements.
9
FIRST US BANCSHARES, INC. AND SUBSIDIARY
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
First US Bancshares, Inc., a Delaware corporation (“Bancshares” and, together with its subsidiary, the “Company”), is a bank holding company formed in 1983 registered under the Bank Holding Company Act of 1956, as amended (the “BHCA”). Bancshares operates one wholly owned banking subsidiary, First US Bank, an Alabama banking corporation (the “Bank”). Bancshares and the Bank are headquartered in Birmingham, Alabama.
The Bank conducts a general commercial banking business and offers banking services such as demand, savings, individual retirement account and time deposits, personal and commercial loans, safe deposit box services and remote deposit capture. The Bank operates and serves its customers through 16 full-service banking offices located in Birmingham, Butler, Calera, Centreville, Daphne, Gilbertown, Grove Hill, Harpersville, Jackson, Thomasville, Tuscaloosa and Woodstock, Alabama; Knoxville and Powell, Tennessee; and Rose Hill, Virginia; as well as a loan production office in Mobile, Alabama. The Bank provides a wide range of commercial banking services to small- and medium-sized businesses, property managers, business executives, professionals and other individuals. The Bank also performs indirect lending through third-party retailers and currently conducts this lending in
The unaudited interim condensed consolidated financial statements, in the opinion of management, reflect all adjustments necessary for a fair presentation of the Company’s consolidated financial position, results of operations and cash flows for the periods presented. Such adjustments are of a normal, recurring nature. The results of operations for any interim period are not necessarily indicative of results expected for the fiscal year ending December 31, 2026. While certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”), management believes that the disclosures herein are adequate to make the information presented not misleading. These unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K as of and for the year ended December 31, 2025 (the "Company's 2025 Form 10-K").
Reclassification
Certain amounts in the prior period consolidated financial statements and the notes to the prior period consolidated financial statements have been reclassified to conform to the 2026 presentation. These reclassifications had no effect on the Company’s results of operations, financial position or net cash flow.
Summary of Significant Accounting Policies
Certain significant accounting policies followed by the Company are set forth in Note 2, “Summary of Significant Accounting Policies,” of the Notes to Consolidated Financial Statements in the Company’s 2025 Form 10-K.
Net Income Per Share
Basic net income per share is computed by dividing net income by the weighted average number of shares of common stock outstanding ("basic shares"). Included in basic shares are stock equivalent shares that have been accrued as of the balance sheet date as deferred compensation for members of Bancshares’ Board of Directors under the Non-Employee Directors' Deferred Compensation Plan (as defined below and discussed further in Note 9). Diluted net income per share is computed by dividing net income by the weighted average number of shares of common stock outstanding, adjusted for the effect of potentially dilutive stock awards outstanding during the period ("dilutive shares"). The dilutive shares consist of unexercised nonqualified stock options granted to employees and members of Bancshares’ Board of Directors pursuant to the Company's Incentive Plan (as defined below and discussed further in Note 10).
10
The following table reflects the weighted average shares used to calculate basic and diluted net income per share for the periods presented.
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Weighted average shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average director stock equivalent shares |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic shares |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Dilutive shares |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Diluted shares |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
|
|
(Dollars in Thousands, Except Per Share Data) |
|
|||||||||||||
Net income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Basic net income per share |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Diluted net income per share |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Comprehensive Income
Comprehensive income consists of net income, as well as unrealized holding gains and losses that arise during the period associated with the Company’s available-for-sale securities portfolio and the effective portion of cash flow hedge derivatives. In the calculation of comprehensive income, reclassification adjustments are made for gains or losses realized in the statement of operations associated with the sale of available-for-sale securities or settlement of derivative contracts.
Accounting Standards Recently Adopted
The following table provides a description of accounting standards recently adopted as of September 30, 2026.
Standard |
Description |
|
Required Date of Adoption |
Effect on Financial Statements or other significant matters |
ASU 2025-09, Derivatives and Hedging (Topic 815): Hedge Accounting Improvements |
This ASU amends certain hedge accounting guidance to improve operability and better align hedge accounting with an entity’s risk management activities. The amendments include revisions to the similar risk assessment for cash flow hedges, which may allow entities to broaden the scope of forecasted transactions designated in a hedge relationship, and clarify certain documentation and application requirements. |
|
Quarterly financial statements as of and for the quarter ending March 31, 2026. Annual financial statements as of and for the year ending December 31, 2026. Early adoption is permitted. |
The adoption of this guidance did not have a material impact. |
|
|
|
|
|
ASU 2025-08, Financial Instruments-Credit Losses (Topic 326): Purchased Loans |
This ASU expands the use of the gross‑up method to certain acquired non‑purchase credit deteriorated ("PCD") loans classified as purchased seasoned loans. The amendment eliminates Day 1 credit loss expense for these loans by requiring recognition of an initial allowance with a corresponding gross‑up of amortized cost. It also clarifies the criteria for identifying purchased seasoned loans, including special treatment for loans acquired in a business combination. Guidance for PCD assets remains unchanged, and the amendments narrow subsequent measurement differences between purchased seasoned loans and PCD assets. The ASU is applied prospectively. |
|
Quarterly financial statements as of and for the quarter ending March 31, 2027. Annual financial statements as of and for the year ending December 31, 2027. Early adoption is permitted. |
The adoption of this guidance did not have a material impact. |
11
Accounting Standards Not Yet Adopted
The following table provides a description of recent accounting standards that have not yet been adopted as of September 30, 2026.
Standard |
Description |
Required Date of Adoption |
Effect on Financial Statements or other significant matters |
ASU 2024-03, Income Statement Expense Disaggregation Disclosures (Subtopic 220-40) Disaggregation of Income Statement Expenses |
This ASU will change the disclosures about a public business entity's expenses and address requests from investors for more detailed information about the types of expenses (for example: employee compensation, depreciation, and amortization) in expense captions. |
Annual financial statements as of and |
The adoption of this guidance is not likely to have a material impact. Management will continue to evaluate through date of adoption. |
Details of investment securities available-for-sale and held-to-maturity as of September 30, 2026 and December 31, 2025 were as follows:
|
|
Available-for-Sale |
|
|||||||||||||
|
|
September 30, 2026 |
|
|||||||||||||
|
|
|
|
|
Gross |
|
|
Gross |
|
|
Estimated |
|
||||
|
|
Amortized |
|
|
Unrealized |
|
|
Unrealized |
|
|
Fair |
|
||||
|
|
Cost |
|
|
Gains |
|
|
Losses |
|
|
Value |
|
||||
|
|
(Dollars in Thousands) |
|
|||||||||||||
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Residential |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Commercial |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Obligations of U.S. government-sponsored agencies |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Obligations of states and political subdivisions |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Corporate notes |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
U.S. Treasury securities |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
||
Total |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
|
|
Held-to-Maturity |
|
|||||||||||||
|
|
September 30, 2026 |
|
|||||||||||||
|
|
|
|
|
Gross |
|
|
Gross |
|
|
Estimated |
|
||||
|
|
Amortized |
|
|
Unrealized |
|
|
Unrealized |
|
|
Fair |
|
||||
|
|
Cost |
|
|
Gains |
|
|
Losses |
|
|
Value |
|
||||
|
|
(Dollars in Thousands) |
|
|||||||||||||
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Commercial |
|
$ |
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
|
||
Obligations of U.S. government-sponsored agencies |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
||
Total |
|
$ |
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
|
||
|
|
Available-for-Sale |
|
|||||||||||||
|
|
December 31, 2025 |
|
|||||||||||||
|
|
|
|
|
Gross |
|
|
Gross |
|
|
Estimated |
|
||||
|
|
Amortized |
|
|
Unrealized |
|
|
Unrealized |
|
|
Fair |
|
||||
|
|
Cost |
|
|
Gains |
|
|
Losses |
|
|
Value |
|
||||
|
|
(Dollars in Thousands) |
|
|||||||||||||
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Residential |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Commercial |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Obligations of U.S. government-sponsored agencies |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Obligations of states and political subdivisions |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Corporate notes |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
U.S. Treasury securities |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
||
Total |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
12
|
|
Held-to-Maturity |
|
|||||||||||||
|
|
December 31, 2025 |
|
|||||||||||||
|
|
Amortized |
|
|
Gross |
|
|
Gross |
|
|
Estimated |
|
||||
|
|
(Dollars in Thousands) |
|
|||||||||||||
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Commercial |
|
$ |
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
|
||
Obligations of U.S. government-sponsored agencies |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
||
Total |
|
$ |
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
|
||
The scheduled maturities of investment securities available-for-sale and held-to-maturity as of September 30, 2026 are presented in the following table:
|
|
Available-for-Sale |
|
|
Held-to-Maturity |
|
||||||||||
|
|
Amortized |
|
|
Estimated |
|
|
Amortized |
|
|
Estimated |
|
||||
|
|
(Dollars in Thousands) |
|
|||||||||||||
Maturing within one year |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
||
Maturing after one to five years |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Maturing after five to ten years |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Maturing after ten years |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
For purposes of the maturity table, mortgage-backed securities, which are not due at a single maturity date, have been allocated over maturity groupings based on the weighted-average contractual maturities of underlying collateral. The mortgage-backed securities generally mature earlier than their weighted-average contractual maturities because of principal prepayments.
The following tables reflect fair value and gross unrealized losses, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, as of September 30, 2026 and December 31, 2025.
|
|
Available-for-Sale |
|
|||||||||||||
|
|
September 30, 2026 |
|
|||||||||||||
|
|
Less than 12 Months |
|
|
12 Months or More |
|
||||||||||
|
|
Fair |
|
|
Unrealized |
|
|
Fair |
|
|
Unrealized |
|
||||
|
|
(Dollars in Thousands) |
|
|||||||||||||
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Residential |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
Commercial |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Obligations of U.S. government-sponsored agencies |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Obligations of states and political subdivisions |
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
Corporate notes |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
( |
) |
|
U.S. Treasury securities |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Total |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
13
|
|
Held-to-Maturity |
|
|||||||||||||
|
|
September 30, 2026 |
|
|||||||||||||
|
|
Less than 12 Months |
|
|
12 Months or More |
|
||||||||||
|
|
Fair |
|
|
Unrealized |
|
|
Fair |
|
|
Unrealized |
|
||||
|
|
(Dollars in Thousands) |
|
|||||||||||||
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Commercial |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
( |
) |
|
Obligations of U.S. government-sponsored agencies |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
( |
) |
|
Total |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
( |
) |
|
|
|
Available-for-Sale |
|
|||||||||||||
|
|
December 31, 2025 |
|
|||||||||||||
|
|
Less than 12 Months |
|
|
12 Months or More |
|
||||||||||
|
|
Fair |
|
|
Unrealized |
|
|
Fair |
|
|
Unrealized |
|
||||
|
|
(Dollars in Thousands) |
|
|||||||||||||
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Residential |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
Commercial |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
Obligations of U.S. government-sponsored agencies |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
Obligations of states and political subdivisions |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
( |
) |
|
Corporate notes |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
( |
) |
|
U.S. Treasury securities |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
( |
) |
|
Total |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
|
|
Held-to-Maturity |
|
|||||||||||||
|
|
December 31, 2025 |
|
|||||||||||||
|
|
Less than 12 Months |
|
|
12 Months or More |
|
||||||||||
|
|
Fair |
|
|
Unrealized |
|
|
Fair |
|
|
Unrealized |
|
||||
|
|
(Dollars in Thousands) |
|
|||||||||||||
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Commercial |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
( |
) |
|
Obligations of U.S. government-sponsored agencies |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
( |
) |
|
Total |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
( |
) |
|
Available-for-Sale Credit Considerations
For any securities classified as available-for-sale that are in an unrealized loss position as of the balance sheet date, the Company assesses whether or not it intends to sell the security, or more-likely-than-not will be required to sell the security, before recovery of its amortized cost basis which would require a write-down to fair value through net income.
As of September 30, 2026,
Held-to-Maturity Credit Considerations
Each quarter, management evaluates the held-to-maturity investment portfolio on a collective basis by major security type to determine
14
whether an ACL is needed. Qualitative factors are used in the Company’s credit loss assessments, including current and forecasted economic conditions, the characteristics of the debt issuer, and the historic ability of the issuer to make contractual principal and interest payments. Specifically, with regard to mortgage-backed securities or obligations of U.S. government sponsored agencies thereof, it is expected that the securities will not be settled at prices less than the amortized cost bases of the securities as such securities are either backed by the full faith and credit of the U.S. government or the agency. With regard to obligations of states and political subdivisions, management considers issuer bond ratings, historical loss rates for given bond ratings, and whether the issuers continue to make timely principal and interest payments under contractual terms of the securities. Based on these evaluations,
Pledged Securities
Investment securities with a carrying value of $
Portfolio Segments
The Company has divided the loan portfolio into the following portfolio segments based on risk characteristics:
Construction, land development and other land loans – Commercial construction, land and land development loans include loans for the development of residential housing projects, loans for the development of commercial and industrial use property, loans for the purchase and improvement of raw land and loans primarily for agricultural production that are secured by farmland. These loans are secured in whole or in part by the underlying real estate collateral and are generally guaranteed by the principals of the borrowing entity.
Secured by 1-4 family residential properties – These loans include conventional mortgage loans on one-to-four family residential properties. These properties may serve as the borrower’s primary residence, vacation home or investment property. Also included in this portfolio are home equity loans and lines of credit. This type of lending, which is secured by a first or second mortgage on the borrower’s residence, allows customers to borrow against the equity in their home.
Secured by multi-family residential properties – This portfolio segment includes mortgage loans secured by apartment buildings.
Secured by non-residential commercial real estate – This portfolio segment includes real estate loans secured by commercial and industrial properties, office or mixed-use facilities, strip shopping centers or other commercial property. These loans are generally guaranteed by the principals of the borrowing entity.
Commercial and industrial loans and leases – This portfolio segment includes loans and leases to commercial customers for use in the normal course of business. These credits may be loans, lines of credit and leases to financially strong borrowers, secured by inventories, equipment or receivables, and are generally guaranteed by the principals of the borrowing entity.
Direct consumer – This portfolio segment includes a variety of secured and unsecured personal loans, including automobile loans, loans for household and personal purposes and all other direct consumer installment loans.
Indirect consumer – This portfolio segment includes loans secured by collateral purchased by consumers at retail stores with whom the Company has an established relationship to provide financing for the retail products sold if applicable underwriting standards are met. The collateral securing these loans primarily includes boats, recreational vehicles/campers, horse trailers and cargo trailers.
15
As of September 30, 2026 and December 31, 2025, the composition of loans held for investment ("LHFI") by portfolio segment was as follows:
|
September 30, 2026 |
|
December 31, 2025 |
|
||
Real estate loans: |
|
|
|
|
||
Construction, land development and other land loans |
$ |
|
$ |
|
||
Secured by 1-4 family residential properties |
|
|
|
|
||
Secured by multi-family residential properties |
|
|
|
|
||
Secured by non-residential commercial real estate |
|
|
|
|
||
Commercial and industrial loans and leases ("C&I") (1) |
|
|
|
|
||
Consumer loans: |
|
|
|
|
||
Direct |
|
|
|
|
||
Indirect |
|
|
|
|
||
Total loans |
|
|
|
|
||
Less: Allowance for credit losses on loans and leases |
|
|
|
|
||
Net loans (2) |
$ |
|
$ |
|
||
Accrued interest receivable is not included in the amortized cost basis of the Company's LHFI. As of both September 30, 2026 and December 31, 2025, accrued interest receivable for LHFI totaled $
The Company makes commercial, real estate and installment loans to its customers. Although the Company has a diversified loan portfolio,
Loans with a carrying value of $
Related Party Loans
In the ordinary course of business, the Bank makes loans to certain officers and directors of the Company, including companies with which they are associated. These loans are made on the same terms as those prevailing for comparable transactions with unrelated parties. Management believes that such loans do not represent more than a normal risk of collectability, nor do they present other unfavorable features. The aggregate balances of such related party loans and commitments were $
Allowance for Credit Losses
Allowance for Credit Losses on Loans and Leases
The Company records the ACL on loans and leases as a contra-asset valuation account that is deducted from the amortized cost basis of loans and leases held for investment. Loans are charged off against the ACL when management believes that the uncollectibility of a loan balance is confirmed. Recoveries of previously charged off loans are also recorded to the ACL when collected. As of each quarter-end date, the Company evaluates the appropriateness of the ACL on loans and leases and adjusts the ACL through the provision for (recovery of) credit losses.
Determining the appropriateness of the ACL on loans and leases is complex and requires judgment by management about the effects of matters that are inherently uncertain. The level of the ACL is influenced by loan and lease volumes and mix, historical credit loss experience, estimated remaining life of portfolio segments, asset quality characteristics, delinquency status, and other conditions including reasonable and supportable forecasts of economic conditions and qualitative adjustment factors based on management’s understanding of various attributes that could impact life-of-loan losses as of the balance sheet date. The methodology to estimate losses includes two basic components: (1) an asset-specific component for individual loans that do not share similar risk characteristics with other loans, and (2) a pooled component for estimated expected credit losses for loans that share similar risk characteristics.
16
Loans that do not share risk characteristics with other loans are evaluated on an individual basis. The process for determining whether a loan should be evaluated on an individual basis begins with a determination of credit rating. All loans graded by management as substandard or worse with a total commitment of $
For estimating the component of the ACL that shares similar risk characteristics, loans are segregated into pooled loan categories that share risk characteristics. Loans are designated into pooled categories based on product types, business lines, collateral, and other risk characteristics. For all pooled loan categories, the Company uses a loss-rate methodology to calculate estimated life-of-loan and lease credit losses. This methodology focuses on historical credit loss rates applied over the estimated weighted average remaining life of each loan pool, adjusted by qualitative factors, to estimate life-of-loan losses for each pool. The qualitative factors utilized include, among others, reasonable and supportable forecasts of economic data, including inflation, unemployment levels, and interest rates.
Allowance for Credit Losses on Unfunded Lending Commitments
The Company records an ACL on unfunded lending commitments in which the Company is exposed to credit risk via a present contractual obligation to extend credit unless the obligation is unconditionally cancellable by the Company. Unconditional lending commitments generally include unfunded term loan agreements, home equity lines of credit, lines of credit, and demand deposit account overdraft protection.
As of each quarter-end date, the Company estimates expected credit losses on unfunded lending commitments over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit unless that obligation is unconditionally cancellable by the Company. The ACL on unfunded lending commitments is recorded in other liabilities, and adjustments to the ACL are recorded through the provision for (recovery of) credit losses.
Summary of Allowances for Credit Losses
The following tables present changes in the ACL on loans and leases, as well as unfunded lending commitments, during the nine months ended September 30, 2026 and 2025:
|
|
As of and for the Nine Months Ended September 30, 2026 |
|
|||||||||||||||||||||||||||||
|
|
Construction, |
|
|
Real Estate |
|
|
Real |
|
|
Non- |
|
|
Commercial and |
|
|
Direct |
|
|
Indirect |
|
|
Total |
|
||||||||
|
|
(Dollars in Thousands) |
|
|||||||||||||||||||||||||||||
Allowance for credit losses on loans and leases: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Beginning balance |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
Charge-offs |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Recoveries |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Provision for (recovery of) credit losses on loans and leases |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
||
Allowance for credit losses on loans and leases |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Allowance for credit losses on unfunded lending commitments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Beginning balance |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||||||
Provision for (recovery of) credit losses on unfunded lending commitments |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
||
Allowance for credit losses on unfunded lending commitments |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||||||
17
|
|
As of and for the Nine Months Ended September 30, 2025 |
|
|||||||||||||||||||||||||||||
|
|
Construction, |
|
|
Real Estate |
|
|
Real |
|
|
Non- |
|
|
Commercial and |
|
|
Direct |
|
|
Indirect |
|
|
Total |
|
||||||||
|
|
(Dollars in Thousands) |
|
|||||||||||||||||||||||||||||
Allowance for credit losses on loans and leases: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Beginning balance |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
Charge-offs |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Recoveries |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Provision for (recovery of) credit losses on loans and leases |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||||
Allowance for credit losses on loans and leases |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Allowance for credit losses on unfunded lending commitments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Beginning balance |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||||||
Provision for (recovery of) credit losses on unfunded lending commitments |
|
|
|
|
|
— |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|||
Allowance for credit losses on unfunded lending commitments |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||||||
18
Credit Quality Indicators
The Company utilizes a credit grading system that provides a uniform framework for establishing and monitoring credit risk in the loan portfolio. Under this system, construction, land, multi-family real estate, other commercial real estate, and commercial and industrial loans are graded based on pre-determined risk metrics and categorized into one of nine risk grades. These risk grades can be summarized into categories described as pass, special mention, substandard, doubtful and loss, as described in further detail below.
Because residential real estate and consumer loans are more uniform in nature, each loan is categorized into one of two risk grades, depending on whether the loan is considered to be performing or nonperforming. Performing loans are loans that are paying principal and interest in accordance with a contractual agreement. Nonperforming loans are loans that have demonstrated characteristics that indicate a probability of loss.
19
The tables below illustrate the carrying amount of loans and leases by credit quality indicator and year of origination as of September 30, 2026, as well as gross charge-offs for the nine months ended September 30, 2026.
|
|
|
|
September 30, 2026 |
|
|||||||||||||||||||||||||
|
|
|
|
Loans at Amortized Cost Basis by Origination Year |
|
|
|
|
||||||||||||||||||||||
|
|
|
|
2026 |
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|
2022 |
|
|
Prior |
|
|
Total |
|
|||||||
|
|
|
|
(Dollars in Thousands) |
|
|||||||||||||||||||||||||
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Construction, land development and other land loans |
|
Pass |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
||||||
|
|
Special Mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
Substandard |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
$ |
|
||
|
|
Doubtful |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
Loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
Subtotal |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
Current period gross charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Secured by multi-family residential properties |
|
Pass |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
|
|
Special Mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
Substandard |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
Doubtful |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
Loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
Subtotal |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
Current period gross charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Secured by non-residential commercial real estate |
|
Pass |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
|
|
Special Mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
|
|
Substandard |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
Doubtful |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
Loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
Subtotal |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
Current period gross charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Commercial and industrial loans and leases |
|
Pass |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
|
|
Special Mention |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
|
|
Substandard |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|||
|
|
Doubtful |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
Loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
Subtotal |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
Current period gross charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Total commercial |
|
Pass |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
|
|
Special Mention |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|||
|
|
Substandard |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
Doubtful |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
Loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
Current period gross charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
||
20
|
|
|
|
September 30, 2026 |
|
|||||||||||||||||||||||||
|
|
|
|
Loans at Amortized Cost Basis by Origination Year |
|
|
|
|
||||||||||||||||||||||
|
|
|
|
2026 |
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|
2022 |
|
|
Prior |
|
|
Total |
|
|||||||
|
|
|
|
(Dollars in Thousands) |
|
|||||||||||||||||||||||||
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Secured by 1-4 family residential properties |
|
Performing |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
|
|
Non-performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
|
|
Subtotal |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
Current period gross charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Direct |
|
Performing |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
|
|
Non-performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
Subtotal |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
Current period gross charge-offs |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Indirect |
|
Performing |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
|
|
Non-performing |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
Subtotal |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
Current period gross charge-offs |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Total consumer |
|
Performing |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
|
|
Non-performing |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
Current period gross charge-offs |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
21
The tables below illustrate the carrying amount of loans and leases by credit quality indicator and year of origination as of December 31, 2025, as well as gross charge-offs for the year ended December 31, 2025.
|
|
|
|
December 31, 2025 |
|
|||||||||||||||||||||||||
|
|
|
|
Loans at Amortized Cost Basis by Origination Year |
|
|
|
|
||||||||||||||||||||||
|
|
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|
2022 |
|
|
2021 |
|
|
Prior |
|
|
Total |
|
|||||||
|
|
|
|
(Dollars in Thousands) |
|
|||||||||||||||||||||||||
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Construction, land development and other land loans |
|
Pass |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
|
|
Special Mention |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
|
|
Substandard |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
|
|
Doubtful |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
Loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
Subtotal |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
Current period gross charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Secured by multi-family residential properties |
|
Pass |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
|
|
Special Mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
Substandard |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
Doubtful |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
Loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
Subtotal |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
Current period gross charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Secured by non-residential commercial real estate |
|
Pass |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
|
|
Special Mention |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
||||
|
|
Substandard |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|||
|
|
Doubtful |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
Loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
Subtotal |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
Current period gross charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Commercial and industrial loans |
|
Pass |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
|
|
Special Mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
|
|
Substandard |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
|
|
Doubtful |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
Loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
Subtotal |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
Current period gross charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Total commercial |
|
Pass |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
|
|
Special Mention |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
Substandard |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
|
|
Doubtful |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
Loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
Current period gross charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
22
|
|
|
|
December 31, 2025 |
|
|||||||||||||||||||||||||
|
|
|
|
Loans at Amortized Cost Basis by Origination Year |
|
|
|
|
||||||||||||||||||||||
|
|
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|
2022 |
|
|
2021 |
|
|
Prior |
|
|
Total |
|
|||||||
|
|
|
|
(Dollars in Thousands) |
|
|||||||||||||||||||||||||
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Secured by 1-4 family residential properties |
|
Performing |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
|
|
Non-performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
|
|
Subtotal |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
Current period gross charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Direct consumer |
|
Performing |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
|
|
Non-performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
Subtotal |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
Current period gross charge-offs |
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Indirect consumer |
|
Performing |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
|
|
Non-performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
Subtotal |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
Current period gross charge-offs |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Total consumer: |
|
Performing |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
|
|
Non-performing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
Current period gross charge-offs |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
The following table provides an aging analysis of past due loans by class as of September 30, 2026:
|
|
As of September 30, 2026 |
|
|||||||||||||||||||||||||
|
|
30-59 |
|
|
60-89 |
|
|
90 |
|
|
Total |
|
|
Current |
|
|
Total |
|
|
Recorded |
|
|||||||
|
|
(Dollars in Thousands) |
|
|||||||||||||||||||||||||
Loans secured by real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Construction, land development |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
||
Secured by 1-4 family residential |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|||||
Secured by multi-family residential |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
||
Secured by non-residential commercial real estate |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
||||
Commercial and industrial loans |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
||||
Consumer loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Direct |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
||||
Indirect |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
||||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
||||||
As a percentage of total loans |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|||||||
23
The following table provides an aging analysis of past due loans by class as of December 31, 2025:
|
|
As of December 31, 2025 |
|
|||||||||||||||||||||||||
|
|
30-59 |
|
|
60-89 |
|
|
90 |
|
|
Total |
|
|
Current |
|
|
Total |
|
|
Recorded |
|
|||||||
|
|
(Dollars in Thousands) |
|
|||||||||||||||||||||||||
Loans secured by real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Construction, land development |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
||
Secured by 1-4 family residential |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|||||
Secured by multi-family residential |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
||
Secured by non-residential commercial real estate |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
||||
Commercial and industrial loans |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
||||
Consumer loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Direct |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
||||
Indirect |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
||||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
||||||
As a percentage of total loans |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|||||||
The tables below present the amortized cost of loans on nonaccrual status and loans past due 90 days or more and still accruing interest as of September 30, 2026 and December 31, 2025. Also presented is the balance of loans on nonaccrual status at September 30, 2026 and December 31, 2025 for which there was no related ACL recorded.
|
|
Loans on Non-Accrual Status |
|
|||||||
|
|
September 30, 2026 |
|
|||||||
|
|
(Dollars in Thousands) |
|
|||||||
|
|
Total nonaccrual |
|
Nonaccrual loans with no allowance for credit losses |
|
Loans past due 90 days or more and still accruing |
|
|||
Loans secured by real estate: |
|
|
|
|
|
|
|
|||
Construction, land development and other land loans |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
Secured by 1-4 family residential properties |
|
|
|
|
|
|
— |
|
||
Secured by multi-family residential properties |
|
|
— |
|
|
— |
|
|
— |
|
Secured by non-residential commercial real estate |
|
|
|
|
— |
|
|
— |
|
|
Commercial and industrial loans |
|
|
|
|
— |
|
|
— |
|
|
Consumer loans: |
|
|
|
|
|
|
— |
|
||
Direct |
|
|
— |
|
|
— |
|
|
— |
|
Indirect |
|
|
|
|
— |
|
|
— |
|
|
Total loans |
|
$ |
|
$ |
|
$ |
— |
|
||
24
|
|
Loans on Non-Accrual Status |
|
|||||||
|
|
December 31, 2025 |
|
|||||||
|
|
(Dollars in Thousands) |
|
|||||||
|
|
Total nonaccrual |
|
Nonaccrual loans with no allowance for credit losses |
|
Loans past due 90 days or more and still accruing |
|
|||
Loans secured by real estate: |
|
|
|
|
|
|
|
|||
Construction, land development and other land loans |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
Secured by 1-4 family residential properties |
|
|
|
|
|
|
— |
|
||
Secured by multi-family residential properties |
|
|
— |
|
|
— |
|
|
— |
|
Secured by non-residential commercial real estate |
|
|
|
|
— |
|
|
— |
|
|
Commercial and industrial loans |
|
|
— |
|
|
— |
|
|
— |
|
Consumer loans: |
|
|
|
|
|
|
|
|||
Direct |
|
|
|
|
— |
|
|
— |
|
|
Indirect |
|
|
|
|
— |
|
|
— |
|
|
Total loans |
|
$ |
|
$ |
|
$ |
— |
|
||
The following tables present the amortized cost basis of collateral dependent loans as of September 30, 2026 and December 31, 2025, which loans are individually evaluated to determine credit losses:
|
|
September 30, 2026 |
|
|||||||||
|
|
Real Estate |
|
|
Other |
|
|
Total |
|
|||
|
|
(Dollars in Thousands) |
|
|||||||||
Loans secured by real estate |
|
|
|
|
|
|
|
|
|
|||
Construction, land development and other land loans |
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
Secured by 1-4 family residential properties |
|
|
|
|
|
— |
|
|
|
|
||
Secured by multi-family residential properties |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Secured by non-residential commercial real estate |
|
|
|
|
|
— |
|
|
|
|
||
Commercial and industrial |
|
|
— |
|
|
|
|
|
|
|
||
Direct consumer |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total loans individually evaluated |
|
$ |
|
|
$ |
|
|
$ |
|
|||
|
|
December 31, 2025 |
|
|||||||||
|
|
Real Estate |
|
|
Other |
|
|
Total |
|
|||
|
|
(Dollars in Thousands) |
|
|||||||||
Loans secured by real estate |
|
|
|
|
|
|
|
|
|
|||
Construction, land development and other land loans |
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
Secured by 1-4 family residential properties |
|
|
|
|
|
— |
|
|
|
|
||
Secured by multi-family residential properties |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Secured by non-residential commercial real estate |
|
|
|
|
|
— |
|
|
|
|
||
Commercial and industrial |
|
|
— |
|
|
|
|
|
|
|
||
Direct consumer |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total loans individually evaluated |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Loan Modifications Made to Borrowers Experiencing Financial Difficulty
From time to time, the Company may modify the terms of loan agreements with borrowers that are experiencing financial difficulties. Modification of the terms of such loans typically include one or a combination of the following: a reduction of the stated interest rate of the loan; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; or a permanent reduction of the recorded investment in the loan.
During the nine months ended September 30, 2026 and the year ended December 31, 2025, the Company did not modify any loans to borrowers experiencing financial difficulty, and there were no payment defaults on loans that were modified in the previous twelve months.
25
Other Real Estate Owned
Other real estate and certain other assets acquired in foreclosure are reported at the net realizable value of the property, less estimated costs to sell.
|
|
September 30, 2026 |
|
|
September 30, 2025 |
|
||
|
|
(Dollars in Thousands) |
|
|||||
Beginning balance |
|
$ |
|
|
$ |
|
||
Additions (1) |
|
|
|
|
|
|
||
Sales proceeds |
|
|
|
|
|
( |
) |
|
Gross gains |
|
|
|
|
|
|
||
Gross losses |
|
|
|
|
|
|
||
Net gains |
|
|
|
|
|
|
||
Impairment |
|
|
( |
) |
|
|
( |
) |
Ending balance |
|
$ |
|
|
$ |
|
||
Valuation adjustments are recorded in other non-interest expense and are primarily post-foreclosure write-downs that are a result of continued declining property values based on updated appraisals or other indications of value, such as offers to purchase. Net realizable value less estimated costs to sell of foreclosed residential real estate held by the Company was
Repossessed Assets
The Company also acquires assets through the repossession of the underlying collateral of loans in default. As of both September 30, 2026 and 2025, total repossessed assets were $
Goodwill totaled $
The Company’s other intangible assets had a net carrying amount of
Short-Term Borrowings
Short-term borrowings consist of federal funds purchased, securities sold under repurchase agreements, and short-term FHLB advances with original maturities of one year or less.
26
Long-Term Borrowings
FHLB Advances
The Company may use FHLB advances with original maturities of more than one year as an alternative to funding sources with similar maturities, such as certificates of deposit or other deposit programs. These advances generally offer more attractive rates than other mid-term financing options. They are also flexible, allowing the Company to quickly obtain the necessary maturities and rates that best suit its overall asset/liability strategy. FHLB advances with an original maturity of more than one year are classified as long-term. As of both September 30, 2026 and December 31, 2025, the Company did
Subordinated Debt
On October 1, 2021, the Company completed a private placement of $
|
|
September 30, |
|
|
September 30, |
|
||
|
|
2026 |
|
|
2025 |
|
||
|
|
(Dollars in Thousands) |
|
|||||
Balance at period-end |
|
$ |
|
|
$ |
|
||
Average balance during the period |
|
$ |
|
|
$ |
|
||
Maximum month-end balance during the period |
|
$ |
|
|
$ |
|
||
Average rate paid during the period, including amortization of debt issuance costs |
|
|
% |
|
|
% |
||
Weighted average remaining maturity (in years) |
|
|
|
|
|
|
||
Available Credit
As an additional funding source, the Company has available unused lines of credit with correspondent banks, the FRB and the FHLB. Certain of these funding sources are subject to underlying collateral.
Available Unused Lines of Credit |
|
Collateral Requirements |
|
September 30, 2026 |
|
December 31, 2025 |
Correspondent banks |
|
|
$ |
|
$ |
|
FHLB advances (1) |
|
|
$ |
|
$ |
|
FRB (2) |
|
|
$ |
|
$ |
27
The provision for income taxes was $
The Company had a net deferred tax asset of $
Supplemental Retirement Benefits
The Company has entered into supplemental retirement compensation benefits agreements with certain non-employee directors and former executive officers. These agreements are structured as nonqualified retirement plans for federal income tax purposes. The Company’s obligation under these agreements is accrued as deferred compensation in accordance with the terms of the individual contracts over the required service period to the date the employee is eligible to receive benefits. The Company’s deferred compensation obligation under these agreements totaled $
Non-Employee Directors' Deferred Compensation Plan
Non-employee directors may elect to defer payment of all or any portion of their director fees under Bancshares’ Non-Employee Directors’ Deferred Compensation Plan (the “Deferral Plan”). The Deferral Plan permits non-employee directors to invest their directors’ fees and to receive the adjusted value of the deferred amounts in cash and/or shares of Bancshares’ common stock, as applicable. Neither Bancshares nor the Bank makes any contribution to participants’ accounts under the Deferral Plan. As of September 30, 2026 and December 31, 2025, a total of
In 2013, Bancshares’ shareholders authorized the Company to provide share-based compensation awards to eligible employees, directors and consultants of the Company and its affiliates pursuant to the 2013 Incentive Plan. Available award types included stock options, stock appreciation rights, restricted stock and restricted stock units, and performance share awards. The 2013 Incentive Plan, as amended in 2019, expired in March 2023. In April 2023, Bancshares’ shareholders approved the 2023 Incentive Plan, which authorizes the Compensation Committee of the Board of Directors to grant substantially the same types of share-based awards to eligible employees, directors and consultants. Collectively, the 2013 Incentive Plan and the 2023 Incentive Plan are herein referred to as the Company’s “Incentive Plan.” In accordance with the Incentive Plan, shares of common stock available for issuance pursuant to the grants may consist, in whole or in part, of authorized and unissued shares, treasury shares or shares reacquired by the Company in any manner. Since the origination of the Incentive Plan, through September 30, 2026, only stock options and restricted stock have been granted. Stock-based compensation expense related to stock awards totaled $
28
Stock Options
Stock options have been granted with an exercise price equal to the market price of the Company’s common stock on the date of the grant and have vesting periods ranging from one to
The following table summarizes the Company’s stock option activity for the periods presented.
|
|
Nine Months Ended |
|
|||||||||||||
|
|
September 30, 2026 |
|
|
September 30, 2025 |
|
||||||||||
|
|
Number of |
|
|
Weighted-Average |
|
|
Number of |
|
|
Weighted-Average |
|
||||
Options: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Outstanding, beginning of period |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Exercised |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Expired |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Forfeited |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Options outstanding, end of period |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Options exercisable, end of period |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
The aggregate intrinsic value of stock options outstanding (calculated as the amount by which the market value of underlying stock exceeds the exercise price of the option) was $
Restricted Stock
During the nine months ended September 30, 2026 and 2025,
The following table summarizes the Company's restricted stock award activity for the periods presented.
|
|
Nine Months Ended |
|
|||||||||||||
|
|
September 30, 2026 |
|
|
September 30, 2025 |
|
||||||||||
|
|
Number of |
|
|
Weighted-Average Grant-Date |
|
|
Number of |
|
|
Weighted-Average Grant-Date |
|
||||
Restricted stock awards: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Unvested shares, beginning of period |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Released from restriction |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Forfeited |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Unvested shares, end of period |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
The Company is involved in a number of operating leases, primarily for branch locations. Branch leases have remaining lease terms ranging from
29
The following table provides a summary of the components of lease income and expense, as well as the reporting location in the interim condensed consolidated statements of operations, for the three and nine months ended September 30, 2026 and 2025:
|
|
Location in the Condensed |
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
Consolidated Statements |
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
||||
|
|
|
|
(Dollars in Thousands) |
|
|
(Dollars in Thousands) |
|
||||||||||
Operating lease income (1) |
|
Lease income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Operating lease expense (2) |
|
Net occupancy and equipment |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The following table provides supplemental lease information for operating leases on the interim condensed consolidated balance sheets as of September 30, 2026 and December 31, 2025:
|
|
Location in |
|
|
|
|
|
|
||
|
|
Consolidated |
|
September 30, |
|
|
December 31, |
|
||
|
|
|
|
(Dollars in |
|
|||||
Operating lease right-of-use assets |
|
Other assets |
|
$ |
|
|
$ |
|
||
Operating lease liabilities |
|
Other liabilities |
|
$ |
|
|
$ |
|
||
Weighted-average remaining lease term (in years) |
|
|
|
|
|
|
|
|
||
Weighted-average discount rate |
|
|
|
|
% |
|
|
% |
||
The following table provides supplemental lease information for the interim condensed consolidated statements of cash flows for the nine months ended September 30, 2026 and 2025:
|
|
Nine Months Ended |
|
|||||
|
|
September 30, |
|
|
September 30, |
|
||
|
|
(Dollars in Thousands) |
|
|||||
Cash paid for amounts included in the measurement of |
|
|
|
|
|
|
||
Operating cash flows from operating leases |
|
$ |
|
|
$ |
|
||
The following table is a schedule of remaining future minimum lease payments for operating leases that had an initial or remaining non-cancellable lease term in excess of one year as of September 30, 2026:
|
|
Minimum |
|
|
|
|
(Dollars in Thousands) |
|
|
2026 |
|
$ |
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
2029 |
|
|
|
|
2030 |
|
|
|
|
2031 and thereafter |
|
|
|
|
Total future minimum lease payments |
|
$ |
|
|
Less: Imputed interest |
|
|
|
|
Total operating lease liabilities |
|
$ |
|
|
The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company manages its exposures to business and operational risks through management of its core business activities. The Company manages economic risks,
30
including interest rate, liquidity, and credit risk, primarily by managing the amounts, sources, and duration of assets and liabilities. The Company uses interest rate derivative instruments to minimize unplanned fluctuations in earnings and cash flows caused by interest rate volatility. The Company’s interest rate risk management strategy generally involves modifying the repricing characteristics of certain assets and liabilities to mitigate negative impacts on net interest margin and/or cash flow. Interest rate derivative instruments utilized by the Company generally include interest rate swap contracts or option contracts, such as caps and floors. The fair values of derivative instruments are carried in the Company’s consolidated balance sheets as assets and/or liabilities. The Company does not use derivatives for speculative purposes and generally enters into transactions that have a qualifying hedge relationship. When hedge accounting is used, derivatives are classified as either cash flow hedges or fair value hedges. The Company may also enter into derivative contracts that are not designated as hedges in order to mitigate economic risks or risks associated with volatility in connection with customer derivative transactions. The Company’s existing credit derivatives are associated with loan participation arrangements and are not used by the Company to manage interest rate risk in the Company’s assets or liabilities.
Like other financial instruments, derivatives contain an element of credit risk. This risk is measured as the expected replacement value of the contracts. Management enters into bilateral collateral and master netting agreements that provide for the net settlement of all contracts with the same counterparty. Additionally, management monitors counterparty credit risk exposure on each contract to determine appropriate limits on the Company's total credit exposure across all product types.
Cash Flow Hedges
During the fourth quarter of 2025, the Company purchased
In March 2025, the Company purchased an interest rate floor contract with the objective of protecting the Company against variability in expected future cash flows attributed to changes in the designated interest rate (1 Month CME Term SOFR) on the notional amount of $
Derivative Contracts Not Receiving Hedge Accounting Treatment
Customer-Related Interest Rate Swaps – The Company enters into interest rate swap contracts with certain loan customers. As of September 30, 2026, the aggregate notional amount of these contracts was $
Credit Derivatives - During 2024, the Company entered into
Previously Terminated Hedges
During the fourth quarter of 2025, the Company voluntarily terminated
During the first quarter of 2025, the Company voluntarily terminated
31
effectively converting a pool of fixed rate indirect consumer loans to a variable rate throughout the hedge durations in accordance with the portfolio layer method. The termination of the fair value hedges resulted in a nominal settlement with the counterparty.
During the first quarter of 2023, the Company voluntarily terminated
Presentation
The table below reflects the notional amount and fair value of active derivative instruments included on the Company’s consolidated balance sheets on a net basis as of September 30, 2026 and December 31, 2025.
|
|
As of September 30, 2026 |
|
|
As of December 31, 2025 |
|
||||||||||
|
|
|
|
|
Estimated |
|
|
|
|
|
Estimated |
|
||||
|
|
|
|
|
Fair Value |
|
|
|
|
|
Fair Value |
|
||||
|
|
Notional |
|
|
Gain (Loss) (1) |
|
|
Notional |
|
|
Gain (Loss) (1) |
|
||||
|
|
(Dollars in Thousands) |
|
|||||||||||||
Derivatives designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash flow hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest rate floors |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Interest rate caps |
|
$ |
|
|
|
|
|
$ |
|
|
|
|
||||
Total cash flow hedges |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Total derivatives designated as hedging instruments, net |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Derivatives not designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest rate floors |
|
|
— |
|
|
|
— |
|
|
$ |
|
|
|
— |
|
|
Credit risk participation agreements |
|
$ |
|
|
|
( |
) |
|
$ |
|
|
|
( |
) |
||
Customer-related interest rate swaps |
|
$ |
|
|
|
|
|
$ |
|
|
|
|
||||
Customer-related interest rate swaps |
|
$ |
|
|
|
( |
) |
|
$ |
|
|
|
( |
) |
||
Total derivatives not designated as hedging instruments, net |
|
|
|
|
$ |
( |
) |
|
|
|
|
$ |
( |
) |
||
The following table presents the net effects of derivative instruments on the Company’s interim condensed consolidated statements of operations for the three and nine months ended September 30, 2026 and 2025.
Location in the Condensed |
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||||
Consolidated Statements |
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
||||||
|
|
|
|
(Dollars in Thousands) |
|
|
(Dollars in Thousands) |
|
||||||||||
Interest income |
|
Interest and fees on loans |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Interest expense |
|
Interest on deposits |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Non-interest income |
|
Other non-interest income |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
Non-interest expense |
|
Other non-interest expense |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
Net increase to income before income taxes |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
32
Other Operating Income
Other operating income for the three and nine months ended September 30, 2026 and 2025 consisted of the following:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
||||
|
|
(Dollars in Thousands) |
|
|||||||||||||
Bank-owned life insurance |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
ATM fee income |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other income |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Other Operating Expense
Other operating expense for the three and nine months ended September 30, 2026 and 2025 consisted of the following:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
||||
|
|
(Dollars in Thousands) |
|
|||||||||||||
Postage, stationery and supplies |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Telephone/data communication |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Collection and recoveries |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Directors fees |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Software amortization |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other real estate/foreclosure expense, net |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other expense |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Credit
The Bank’s exposure to credit loss in the event of nonperformance by the other party for commitments to make loans and standby letters of credit is represented by the contractual amount of those instruments. The Bank uses the same credit policies in making these commitments as it does for on-balance sheet instruments.
In the normal course of business, there are outstanding commitments and contingent liabilities, such as commitments to extend credit, letters of credit and others, that are not included in the consolidated financial statements. The financial instruments involve, to varying degrees, elements of credit and interest rate risk in excess of amounts recognized in the financial statements.
|
|
September 30, |
|
|
December 31, |
|
||
|
|
(Dollars in Thousands) |
|
|||||
Standby letters of credit |
|
$ |
|
|
$ |
|
||
Standby performance letters of credit |
|
$ |
|
|
$ |
|
||
Commitments to extend credit |
|
$ |
|
|
$ |
|
||
Standby letters of credit and standby performance letters of credit are contingent commitments issued by the Bank generally to guarantee the performance of a customer to a third party. The Bank has recourse against the customer for any amount that it is required to pay to a third party under a standby letter of credit or standby performance letter of credit. Revenues are recognized over the lives of the standby letters of credit and standby performance letters of credit. As of September 30, 2026 and December 31, 2025, the potential amounts of future payments that the Bank could be required to make under its standby letters of credit and standby performance letters of credit, which represent the Bank’s total credit risk in these categories, are included in the table above.
33
A commitment to extend credit is an agreement to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank upon the extension of credit, is based on management’s credit evaluation of the counterparty. Collateral held varies but may include accounts receivable, inventory, property, plant and equipment and income-producing commercial properties.
At each quarter end date, the Company calculates an allowance for unfunded lending commitments, including those described in the table above. The Company's allowance for unfunded commitments totaled $
Self-Insurance
The Company is self-insured for a significant portion of employee health benefits. However, the Company maintains stop-loss coverage with third-party insurers to limit the Company’s individual claim and total exposure related to self-insurance. The Company estimates a liability for the ultimate costs to settle known claims, as well as claims incurred but not yet reported, as of the balance sheet date. The Company’s recorded estimated liability for self-insurance is based on the insurance companies' incurred loss estimates and management’s judgment, including assumptions and evaluation of factors related to the frequency and severity of claims, the Company’s claims development history and the Company’s claims settlement practices. The assessment of loss contingencies and self-insurance reserves is a highly subjective process that requires judgments about future events. Contingencies are reviewed at least quarterly to determine the adequacy of self-insurance accruals. Self-insurance accruals totaled $
Litigation
The Company is party to certain ordinary course litigation, and intends to vigorously defend itself in all such litigation. In the opinion of the Company, based on review and consultation with legal counsel, the outcome of such ordinary course litigation should not have a material adverse effect on the Company’s consolidated financial statements or results of operations.
34
The Company follows a uniform framework for estimating and classifying the fair value of financial instruments. The assumptions used in the estimation of the fair value of the Company’s financial instruments are detailed below. The following disclosures should not be considered a representation of the liquidation value of the Company, but rather represent a good-faith estimate of the increase or decrease in value of financial instruments held by the Company since purchase, origination or issuance.
Fair Value Hierarchy
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between willing market participants at the measurement date. In determining fair value, the Company uses various methods, including market, income and cost approaches. Based on these approaches, the Company often utilizes certain assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and/or the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market-corroborated or generally unobservable inputs. The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Based on the observability of the inputs used in the valuation techniques, the Company is required to provide the following information according to the fair value hierarchy. The fair value hierarchy ranks the quality and reliability of the information used to determine fair value. Assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:
The Company rarely transfers assets and liabilities measured at fair value between Level 1 and Level 2 measurements. Trading account assets and securities available-for-sale may be periodically transferred to or from Level 3 valuation based on management’s conclusion regarding the best method of pricing for an individual security. Such transfers are accounted for as if they occurred at the beginning of a reporting period. There were
Fair Value Measurements on a Recurring Basis
Securities Available-for-Sale
Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. Level 1 securities include U.S. Treasury securities. Level 2 securities include government sponsored agency securities, mortgage-backed agency securities, obligations of states and political subdivisions and certain corporate, asset-backed and other securities. Level 2 fair values are obtained from quoted prices of securities with similar characteristics. In certain cases, where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy.
Derivative Agreements
Derivative agreements include those used by the Company to mitigate risk associated with changes in interest rates, as well as credit derivatives associated with risk participation agreements in certain loans. The fair value of these agreements is based on information obtained from third-party financial institutions. This information is periodically evaluated by the Company and, as necessary, corroborated against other third-party valuations. The Company classifies these derivative assets within Level 2 of the valuation hierarchy.
35
The following table presents assets and liabilities measured at net fair value on a recurring basis as of September 30, 2026 and December 31, 2025.
|
|
Fair Value Measurements as of September 30, 2026 Using |
|
|||||||||||||
|
|
Totals At |
|
|
Quoted |
|
|
Significant |
|
|
Significant |
|
||||
|
|
(Dollars in Thousands) |
|
|||||||||||||
Investment securities, available-for-sale |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Residential |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
||
Commercial |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Obligations of U.S. government-sponsored agencies |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Obligations of states and political subdivisions |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Corporate notes |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
U.S. Treasury securities |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
||
Derivative contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other assets - interest rate caps |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Other assets - interest rate floors |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Other assets - customer-related interest rate swaps |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Other liabilities - customer-related interest rate swaps |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Other liabilities - credit risk participation agreements |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
|
|
Fair Value Measurements as of December 31, 2025 Using |
|
|||||||||||||
|
|
Totals At |
|
|
Quoted |
|
|
Significant |
|
|
Significant |
|
||||
|
|
(Dollars in Thousands) |
|
|||||||||||||
Investment securities, available-for-sale |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Residential |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
||
Commercial |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Obligations of U.S. government-sponsored agencies |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Obligations of states and political subdivisions |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Corporate notes |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
U.S. Treasury securities |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
||
Derivative contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other assets - interest rate caps |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Other assets - interest rate floors |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Other assets - customer-related interest rate swaps |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Other liabilities - customer-related interest rate swaps |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Other liabilities - credit risk participation agreements |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Fair Value Measurements on a Non-recurring Basis
Collateral Dependent Loans
Loans are considered collateral dependent when, based on current information and events, it is probable that the Company will be unable to collect all principal and interest payments due under the contractual terms of the loan agreement. These loans are evaluated separately in accordance with the Company’s policies for calculating the ACL on loans and leases. The fair value of collateral dependent loans with specific
36
allocations of the ACL on loans and leases is typically based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by independent appraisers to adjust for differences between the comparable sales and income data available. Appraised values are discounted by management for estimated costs to sell and may be discounted further based on management’s knowledge of the collateral, changes in market conditions since the most recent appraisal and/or management’s knowledge of the borrower and the borrower’s business. Such adjustments are usually significant and typically result in Level 3 classification of the inputs for determining fair value. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge of the borrower’s business, resulting in a Level 3 fair value classification. Collateral dependent loans are evaluated on a quarterly basis and adjusted accordingly.
OREO and Other Assets Held-for-Sale
OREO and other assets held-for-sale consist of collateral obtained through foreclosure or repossession and are recorded at net realizable value, less estimated cost to sell. Estimates of fair value are generally based on third-party appraisals of the collateral and are classified within Level 3 of the fair value hierarchy. The appraisals are sometimes discounted based on management’s knowledge of the collateral and/or changes in market conditions from the date of the most recent appraisal. Such discounts are typically significant unobservable inputs for determining fair value.
As of September 30, 2026 and December 31, 2025, included within OREO were certain assets that were formerly included as premises and equipment but have been removed from service, and as of the balance sheet date, were designated as assets to be disposed of by sale. These include assets associated with branches of the Company that have been closed. When an asset is designated as held-for-sale, the Company ceases depreciation of the asset, and the asset is recorded at the lower of its carrying amount or fair value less estimated cost to sell. Estimates of fair value are generally based on third-party appraisals of the property and are classified within Level 3 of the fair value hierarchy. The appraisals are sometimes discounted based on management’s knowledge of the property and/or changes in market conditions from the date of the most recent appraisal. Such discounts are typically unobservable inputs for determining fair value.
The following table presents the balances of collateral dependent loans and OREO and other assets held-for-sale measured at fair value on a non-recurring basis as of September 30, 2026 and December 31, 2025:
|
|
Fair Value Measurements as of September 30, 2026 Using |
|
|||||||||||||
|
|
Totals At |
|
|
Quoted |
|
|
Significant |
|
|
Significant |
|
||||
|
|
(Dollars in Thousands) |
|
|||||||||||||
Collateral dependent loans |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
OREO and other assets held-for-sale |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
|
|
Fair Value Measurements as of December 31, 2025 Using |
|
|||||||||||||
|
|
Totals At |
|
|
Quoted |
|
|
Significant |
|
|
Significant |
|
||||
|
|
(Dollars in Thousands) |
|
|||||||||||||
Collateral dependent loans |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
OREO and other assets held-for-sale |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
37
Non-recurring Fair Value Measurements Using Significant Unobservable Inputs
The following tables present information regarding assets and liabilities measured at fair value using significant unobservable inputs (Level 3) as of September 30, 2026 and December 31, 2025. The tables include the valuation techniques and the significant unobservable inputs utilized. The range of each unobservable input and the weighted average within the range utilized as of September 30, 2026 and December 31, 2025 are both included.
|
|
Level 3 Significant Unobservable Input Assumptions |
||||||||||
|
|
Fair Value |
|
|
Valuation Technique |
|
Unobservable Input |
|
Quantitative Range |
|||
|
|
(Dollars in Thousands) |
|
|
|
|
|
|
|
|
|
|
Non-recurring fair value measurements: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateral dependent loans |
|
$ |
|
|
Multiple data points, |
|
Appraisal comparability |
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
OREO and other assets held-for-sale |
|
$ |
|
|
Discount to appraised |
|
Appraisal comparability |
|
|
|||
|
|
Level 3 Significant Unobservable Input Assumptions |
||||||||||
|
|
Fair Value |
|
|
Valuation Technique |
|
Unobservable Input |
|
Quantitative Range |
|||
|
|
(Dollars in Thousands) |
|
|
|
|
|
|
|
|
|
|
Non-recurring fair value measurements: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateral dependent loans |
|
$ |
|
|
Multiple data points, |
|
Appraisal comparability |
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
OREO and other assets held-for-sale |
|
$ |
|
|
Discount to appraised |
|
Appraisal comparability adjustment (discount) |
|
|
|||
Collateral Dependent Loans
Collateral dependent loans are valued based on multiple data points indicating the fair value for each loan. The primary data point is the appraisal value of the underlying collateral, to which a discount is applied. Management establishes this discount or comparability adjustment
38
based on recent sales of similar property types. As liquidity in the market increases or decreases, the comparability adjustment and the resulting asset valuation are impacted.
OREO
OREO under a binding contract for sale is valued based on contract price. If no sales contract is pending for a specific property, management establishes a comparability adjustment to the appraised value based on historical activity, considering proceeds for properties sold versus the corresponding appraised value. Increases or decreases in realization for properties sold impact the comparability adjustment for similar assets remaining on the consolidated balance sheet.
Other Assets Held-for-Sale
Assets designated as held-for-sale that are under a binding contract are valued based on the contract price. If no sales contract is pending for a specific property, management establishes a comparability adjustment to the appraised value based on historical activity, considering proceeds for properties sold versus the corresponding appraised value. Increases or decreases in realization for properties sold impact the comparability adjustment for similar assets remaining on the consolidated balance sheet.
Fair Value of Financial Instruments
The following methods and assumptions were used by the Company in estimating the fair value of its financial instruments:
Cash and cash equivalents: The carrying amount of cash and cash equivalents approximates fair value.
Federal funds sold and securities purchased under reverse repurchase agreements: Federal funds sold and securities purchased under reverse repurchase agreements all contain maturities of
Federal Home Loan Bank stock: Based on the redemption provision of the FHLB, the stock has no quoted market value and is carried at cost.
Investment securities: Fair values of investment securities are based on quoted market prices where available. If quoted market prices are not available, estimated fair values are based on market prices of comparable instruments.
Derivative instruments: The fair value of derivative instruments is based on information obtained from a third-party financial institution. This information is periodically evaluated by the Company and, as necessary, corroborated against other third-party information.
Accrued interest receivable and payable: The carrying amount of accrued interest approximates fair value.
Loans, net: The fair value of loans is estimated on an exit price basis incorporating contractual cash flow, prepayment discount spreads, credit loss and liquidity premiums.
Demand and savings deposits: The fair values of demand deposits are equal to the carrying value of such deposits. Demand deposits include non-interest-bearing demand deposits, savings accounts, NOW accounts and money market demand accounts.
Time deposits: The fair values of relatively short-term time deposits are equal to their carrying values. Discounted cash flows are used to value long-term time deposits. The discount rate used is based on interest rates currently offered by the Company on comparable deposits as to amount and term.
Short-term borrowings: These borrowings may consist of federal funds purchased, securities sold under agreements to repurchase and the floating rate borrowings from the FHLB account. Due to the short-term nature of these borrowings, fair values approximate carrying values.
Long-term debt: The fair value of this debt is estimated using discounted cash flows based on the Company’s current incremental borrowing rate for similar types of borrowing arrangements as of the determination date.
Off-balance sheet instruments: The carrying amount of commitments to extend credit and standby letters of credit approximates fair value. The carrying amount of the off-balance sheet financial instruments is based on fees currently charged to enter into such agreements.
39
The estimated net fair value and related carrying or notional amounts, as well as the level within the fair value hierarchy, of the Company’s financial instruments as of September 30, 2026 and December 31, 2025 were as follows:
|
|
September 30, 2026 |
|
|||||||||||||||||
|
|
Carrying |
|
|
Estimated |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|||||
|
|
(Dollars in Thousands) |
|
|||||||||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|||
Investment securities available-for-sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
||||
Investment securities held-to-maturity |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|||
Federal funds sold and securities purchased under reverse repurchase agreements |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|||
Federal Home Loan Bank stock |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|||
Loans, net of allowance for credit losses |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|||
Other assets - interest rate caps |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|||
Other assets - interest rate floors |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|||
Other assets - customer-related interest rate swaps |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Deposits |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|||
Short-term borrowings |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|||
Long-term borrowings |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|||
Other liabilities - customer-related interest rate swaps |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|||
Other liabilities - credit risk participation agreements |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|||
|
|
December 31, 2025 |
|
|||||||||||||||||
|
|
Carrying |
|
|
Estimated |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|||||
|
|
(Dollars in Thousands) |
|
|||||||||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|||
Investment securities available-for-sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
||||
Investment securities held-to-maturity |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|||
Federal funds sold |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|||
Federal Home Loan Bank stock |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|||
Loans, net of allowance for credit losses |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|||
Other assets - interest rate caps |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|||
Other assets - interest rate floors |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|||
Other assets - customer-related interest rate swaps |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Deposits |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|||
Long-term borrowings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
||||
Other liabilities - customer-related interest rate swaps |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|||
Other liabilities - credit risk participation agreements |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|||
Bancshares is a bank holding company. Bancshares operates one banking subsidiary, the Bank. The Bank reporting unit is the only reportable segment of the Company. The Bank conducts a general commercial banking business and offers banking services such as demand, savings, individual retirement account and time deposits, personal and commercial loans, safe deposit box services and remote deposit capture. The Bank provides a wide range of commercial banking services to small- and medium-sized businesses, property managers, business executives, professionals and other individuals. The Bank also performs indirect lending through third-party retailers and currently conducts this lending in
40
The Company's chief operating decision makers (the "CODM") consist of a group of executive officers of Bancshares and the Bank that includes the chief executive officer, chief financial officer, chief operations and technology officer, chief risk officer, chief commercial lending officer, chief retail banking officer, and chief consumer lending officer.
The accounting policies of the Bank segment are the same as those described in the summary of significant accounting policies. The CODM assesses performance for the Bank segment and decides how to allocate resources based on segment net income that also is reported on the consolidated statement of operations as consolidated net income. The measure of segment assets is reported on the consolidated balance sheet as total consolidated assets.
The table below provides information related to the Company's Bank operating segment for the three and nine months ended September 30, 2026 and 2025:
|
|
Bank Segment |
|
|||||||||||||
|
|
For the three months ended September 30, |
|
|
For the nine months ended September 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
|
|
(Dollars in Thousands) |
|
|
(Dollars in Thousands) |
|
||||||||||
Income: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Non-interest income |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total income |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Provision for credit losses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Salaries and employee benefits |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net occupancy and equipment |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Computer services |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Insurance expense and assessments |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fees for professional services |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Postage, stationery and supplies |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Telephone/data communication |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Collection and recoveries |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Directors fees |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Software amortization |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other real estate/foreclosure expense, net |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other segment items (1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Provision for income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total expense |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Segment net income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
(1)
41
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
DESCRIPTION OF THE BUSINESS
First US Bancshares, Inc., a Delaware corporation (“Bancshares” and, together with its subsidiary, the “Company”), is a bank holding company formed in 1983 registered under the Bank Holding Company Act of 1956, as amended (the “BHCA”). Bancshares operates one wholly owned banking subsidiary, First US Bank, an Alabama banking corporation (the “Bank”). Bancshares and the Bank are headquartered in Birmingham, Alabama.
The Bank conducts a general commercial banking business and offers banking services such as demand, savings, individual retirement account and time deposits, personal and commercial loans, safe deposit box services and remote deposit capture. The Bank operates and serves its customers through 16 full-service banking offices located in Birmingham, Butler, Calera, Centreville, Daphne, Gilbertown, Grove Hill, Harpersville, Jackson, Thomasville, Tuscaloosa and Woodstock, Alabama; Knoxville and Powell, Tennessee; and Rose Hill, Virginia; as well as a loan production office in Mobile, Alabama. The Bank provides a wide range of commercial banking services to small- and medium-sized businesses, property managers, business executives, professionals and other individuals. The Bank also performs indirect lending through third-party retailers and currently conducts this lending in 17 states, including Alabama, Arkansas, Florida, Georgia, Indiana, Iowa, Kansas, Kentucky, Mississippi, Missouri, Nebraska, North Carolina, Oklahoma, South Carolina, Tennessee, Texas and Virginia. The Bank is the Company’s only reportable operating segment upon which management makes decisions regarding how to allocate resources and assess performance.
Delivery of the best possible financial services to customers remains an overall operational focus of the Company. The Company recognizes that attention to detail and responsiveness to customers’ desires are critical to customer satisfaction. The Company continues to upgrade technology, both in its financial services and in the training of its 152 full-time equivalent employees (as of September 30, 2026), to ensure customer satisfaction and convenience.
The preparation of the Company’s consolidated financial statements requires management to make subjective judgments associated with critical accounting estimates. These estimates are necessary to comply with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and general banking practices. A description of the Company's critical accounting estimates, which significantly affect the determination of the Company’s consolidated financial position, results of operations and cash flows, is set forth in Part II, Item 7 - Critical Accounting Estimates in the Company's 2025 Form 10-K.
The emphasis of this discussion is a comparison of assets, liabilities and shareholders’ equity as of September 30, 2026 to December 31, 2025, while comparing income and expense for the nine months ended September 30, 2026 and 2025. All yields and ratios presented and discussed herein are recorded and presented on the accrual basis and not on the tax-equivalent basis, unless otherwise indicated.
This information should be read in conjunction with the Company’s unaudited interim condensed consolidated financial statements and related notes appearing elsewhere in this report and Management’s Discussion and Analysis of Financial Condition and Results of Operations appearing in the Company's 2025 Form 10-K. As used in the following discussion, the words “we,” “us,” “our” and the “Company” refer to Bancshares and its consolidated subsidiaries, unless the context indicates otherwise.
RECENT MARKET CONDITIONS
During the nine months ended September 30, 2026, the banking industry continued to operate in an environment characterized by elevated economic uncertainty, persistent inflationary pressures, rising market interest rates and generally stable unemployment levels. U.S. economic activity continued to expand. According to the U.S. Bureau of Economic Analysis’ advance estimate released on October 29, 2026, real gross domestic product (“GDP”) increased at an annual rate of 3.4% during the third quarter of 2026, compared with revised growth of 2.2% and 2.5% during the second and first quarters of 2026, respectively. Third quarter growth reflected increases in investments, and consumer and government spending, partially offset by a decrease in exports. This is in comparison to second-quarter growth that reflected increases in consumer spending, investment and exports, partially offset by increased imports. Labor market conditions remained relatively stable, although hiring was subdued, with the unemployment rate at 4.2% in September 2026.
Inflation remained elevated, with heightened energy costs contributing to renewed price pressures. The Consumer Price Index increased 3.7% during the twelve months ended September 30, 2026, compared with 3.4% during the twelve months ended August 31, 2026. Excluding food and energy, consumer prices increased 2.6% over the twelve months ended September 30, 2026. At its September 2026 meeting, the Federal Open Market Committee (the “FOMC”) increased the target range for the federal funds rate by 25 basis points from 3.75% to 4.00%. The FOMC cited continued economic expansion and elevated inflation in explaining its decision. The timing, magnitude and direction of future monetary policy actions remain uncertain.
Market interest rates, including U.S. Treasury yields, generally increased during the nine months ended September 30, 2026. The yield on the 10-year U.S. Treasury increased from approximately 4.18% at December 31, 2025 and 4.44% at June 30, 2026 to approximately 5.29% at September 30, 2026. Higher market rates may provide opportunities to improve yields on newly originated loans and investments, but may also
42
increase funding costs, constrain borrowing demand and adversely affect the fair values of fixed-rate assets. The effects on the Company depend, in part, on the timing and extent of asset and liability repricing and changes in the composition of its balance sheet.
Uncertainty also remained elevated with respect to U.S. fiscal and trade policy, including the effects of elevated national debt, tariffs, and the potential for additional policy changes. Reports from businesses across Federal Reserve Districts continued to identify energy, transportation, insurance and tariff-related costs as sources of pressure on operating margins and customer pricing. Consumer spending remained uneven, with greater resilience among higher-income households and continued price sensitivity among other consumers. Geopolitical developments, including disruptions associated with conflicts in the Middle East and Europe, continued to create uncertainty regarding energy supplies, global commerce and economic activity. These conditions may affect business investment, consumer demand and the ability of borrowers to absorb higher costs.
In the Company’s local markets, competitive pressures for both loans and deposits remained elevated during the third quarter of 2026. Commercial lending activity remained measured as business customers assessed borrowing costs and broader economic and policy uncertainty. Expected project payoffs, particularly in multi-family residential and construction lending, contributed to a decline in total loans during the third quarter of 2026. These decreases were partially offset by continued growth in the Company’s indirect consumer portfolio.
The Company’s indirect lending platform continued to focus on borrowers at the higher end of the credit spectrum, with collateral primarily consisting of boats, recreational vehicles, campers, horse trailers and cargo trailers. Indirect consumer loans increased by $35.8 million, or 9.4%, during the nine months ended September 30, 2026, compared to December 31, 2025. The portfolio carried a weighted-average credit score at the time of funding of 785 as of September 30, 2026. Although this credit profile supports the Company’s underwriting strategy, demand for discretionary purchases and borrowers’ repayment capacity remain sensitive to employment conditions, household financial pressures and changes in the broader economy.
The Company’s net interest margin improved to 3.66% during the third quarter of 2026, compared with 3.56% during the second quarter, reflecting higher yields on loans and investment securities while average deposit costs remained relatively stable. Nevertheless, deposit competition, changes in market interest rates and differences in the timing of asset and liability repricing continue to present challenges to sustaining margin improvement. Management continues to monitor economic conditions, credit performance, collateral values and funding needs, while emphasizing disciplined pricing, underwriting and liquidity management. Adverse changes in economic conditions, credit quality, loan demand, competitive dynamics, deposit pricing, geopolitical developments, trade or fiscal policy, or interest rates could negatively affect the Company’s financial condition and results of operations.
EXECUTIVE OVERVIEW
The Company earned net income of $2.0 million, or $0.36 per diluted share, during the three months ended September 30, 2026, compared to $1.9 million, or $0.32 per diluted share, for the three months ended September 30, 2025. For the nine months ended September 30, 2026, net income totaled $5.7 million, or $1.00 per diluted share, compared to $3.9 million, or $0.64 per diluted share, for the nine months ended September 30, 2025. Net income for the three months ended September 30, 2026 remained relatively stable compared to the corresponding period of 2025, with higher net interest income and non-interest income largely offset by higher non-interest expense. The increase in net income for the nine months ended September 30, 2026 compared to the corresponding period of 2025 resulted primarily from a decrease in the provision for credit losses, along with higher net interest income and non-interest income, partially offset by higher non-interest expense.
43
Summarized condensed consolidated statements of operations are included below for the three and nine months ended September 30, 2026 and 2025.
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
|
|
(Dollars in Thousands, Except Per Share Data) |
|
|||||||||||||
Interest income |
|
$ |
15,107 |
|
|
$ |
15,281 |
|
|
$ |
44,704 |
|
|
$ |
44,153 |
|
Interest expense |
|
|
5,257 |
|
|
|
5,619 |
|
|
|
16,139 |
|
|
|
16,118 |
|
Net interest income |
|
|
9,850 |
|
|
|
9,662 |
|
|
|
28,565 |
|
|
|
28,035 |
|
Provision for credit losses |
|
|
586 |
|
|
|
566 |
|
|
|
1,779 |
|
|
|
3,811 |
|
Net interest income after provision for credit losses |
|
|
9,264 |
|
|
|
9,096 |
|
|
|
26,786 |
|
|
|
24,224 |
|
Non-interest income |
|
|
967 |
|
|
|
860 |
|
|
|
3,125 |
|
|
|
2,584 |
|
Non-interest expense |
|
|
7,713 |
|
|
|
7,437 |
|
|
|
22,697 |
|
|
|
21,799 |
|
Income before income taxes |
|
|
2,518 |
|
|
|
2,519 |
|
|
|
7,214 |
|
|
|
5,009 |
|
Provision for income taxes |
|
|
558 |
|
|
|
583 |
|
|
|
1,556 |
|
|
|
1,146 |
|
Net income |
|
$ |
1,960 |
|
|
$ |
1,936 |
|
|
$ |
5,658 |
|
|
$ |
3,863 |
|
Basic net income per share |
|
$ |
0.36 |
|
|
$ |
0.33 |
|
|
$ |
1.01 |
|
|
$ |
0.66 |
|
Diluted net income per share |
|
$ |
0.36 |
|
|
$ |
0.32 |
|
|
$ |
1.00 |
|
|
$ |
0.64 |
|
Dividends per share |
|
$ |
0.07 |
|
|
$ |
0.07 |
|
|
$ |
0.21 |
|
|
$ |
0.21 |
|
The discussion that follows summarizes the most significant activity that drove changes in the Company’s operating results during the nine months ended September 30, 2026, as compared to the nine months ended September 30, 2025.
Net Interest Income and Margin
Net interest income increased by $0.5 million, or 1.9%, comparing the nine months ended September 30, 2026 to the nine months ended September 30, 2025. The increase resulted primarily from growth in average interest-earning assets, which increased by $33.0 million, or 3.1%, comparing the two periods. Earning asset growth was primarily attributable to higher average balances of investment securities and interest-bearing deposits with other financial institutions. The increase in interest income was partially offset by a modest increase in interest expense, as the effect of higher average interest-bearing deposit balances was largely offset by lower average deposit rates and reduced borrowing costs. While earning asset growth supported the increase in net interest income, net interest margin decreased as the average yield on interest-earning assets declined from 5.63% to 5.52%, while the average cost of total funding liabilities declined from 2.15% to 2.09%. Net interest margin was 3.53% for the nine months ended September 30, 2026, compared to 3.57% for the nine months ended September 30, 2025.
Provision for Credit Losses
For the nine months ended September 30, 2026, the Company recorded a provision for credit losses of $1.8 million, compared to $3.8 million for the nine months ended September 30, 2025. The year-over-year decrease resulted primarily from provisioning for specifically identified commercial loans in 2025. The credit issues associated with the additional provisioning on these loans were resolved by the end of 2025 and, accordingly, the same level of provisioning was not repeated during the nine months ended September 30, 2026. The Company’s ACL on loans and leases totaled $11.0 million, or 1.30% of total loans, as of September 30, 2026, compared to $10.7 million, or 1.25%, as of December 31, 2025. The increase in the ACL as a percentage of total loans during the nine-months ended September 30, 2026 reflected changes in loan portfolio composition, including more prominent growth in indirect consumer loans, which require higher credit allowances than other loan categories, as well as updated economic forecast data released during the third quarter of 2026. While management believes that the ACL is adequate to absorb credit losses within the Company’s loan portfolio, inherent uncertainty exists regarding the ultimate impact of geopolitical and economic matters, including prospective inflation, unemployment levels, tariffs and consumer affordability.
Non-interest Income
Non-interest income totaled $3.1 million for the nine months ended September 30, 2026, compared to $2.6 million for the nine months ended September 30, 2025. The increase resulted primarily from $0.5 million in gains on sale of investment securities during the nine months ended September 30, 2026 that did not occur during the corresponding period of 2025.
Non-interest Expense
Non-interest expense totaled $22.7 million for the nine months ended September 30, 2026, compared to $21.8 million for the corresponding period of 2025, reflecting an increase of $0.9 million, or 4.1%. The increase resulted primarily from cost-of-living increases associated with
44
salaries and employee benefits, increases in occupancy expense associated with expansion of the Company’s banking center footprint, as well as inflationary increases in various other expense categories.
Total Assets
As of September 30, 2026, the Company’s assets totaled $1,164.8 million, compared to $1,154.8 million as of December 31, 2025, an increase of 0.9%.
Loans
Total loans decreased by $8.0 million, or 0.9%, as of September 30, 2026, compared to December 31, 2025. The decrease reflected substantial payoffs of real estate loans, including construction, multi-family and commercial real estate, partially offset by growth in indirect consumer loans. The commercial lending team remains strategically focused on building and maintaining commercial lending relationships that are expected to support future loan growth. Average total loans for the nine months ended September 30, 2026 were $854.3 million, an increase of $2.7 million, or 0.3%, compared to the corresponding period of 2025.
The Company’s indirect lending platform focuses on borrowers at the higher end of the credit spectrum, as reflected in the portfolio’s weighted average credit score at the time of funding of 785 as of September 30, 2026. Indirect consumer loans increased by $35.8 million, or 9.4%, during the nine months ended September 30, 2026, compared to December 31, 2025. Collateral primarily consists of boats, recreational vehicles, campers, horse trailers and cargo trailers.
The average yield on total loans was 5.94% for the nine months ended September 30, 2026, compared to 6.07% for the corresponding period of 2025.
Asset Quality
Nonperforming assets, including loans in non-accrual status, other real estate owned, and repossessed assets, totaled $1.7 million as of September 30, 2026, compared to $1.6 million as of December 31, 2025. As a percentage of total assets, nonperforming assets represented 0.14% of total assets as of both September 30, 2026 and December 31, 2025. For the nine months ended September 30, 2026, annualized net charge-offs as a percentage of average loans were 0.25%, compared to 0.52% for the corresponding period of 2025. The year-over-year improvement reflected, in part, the absence of a $2.2 million charge-off recorded for an individually evaluated commercial loan in 2025.
Deposits
Total deposits were $1.015 billion as of September 30, 2026, reflecting a decrease of $12.9 million, or 1.3%, compared to December 31, 2025. The decrease reflected a $21.9 million reduction in wholesale brokered deposits, partially offset by an increase of $9.0 million, or 1.0%, in all other deposits. The reduction in wholesale brokered deposits supported management’s efforts to reduce overall deposit costs while maintaining an appropriate level of core funding. Non-interest-bearing deposits increased by $8.5 million to $162.3 million, or 16.0% of total deposits, as of September 30, 2026, compared to $153.8 million, or 15.0% of total deposits, as of December 31, 2025. Core deposits, which exclude time deposits of $250 thousand or more and all wholesale brokered deposits, totaled $844.6 million, or 83.2% of total deposits, as of September 30, 2026, compared to $838.3 million, or 81.6% of total deposits, as of December 31, 2025. The average rate on total deposits decreased to 2.05% for the nine months ended September 30, 2026, compared to 2.10% for the corresponding period of 2025.
In the current environment, significant competitive pressure remains to acquire and maintain deposit balances. The Company remains focused on efforts to grow deposits while maintaining pricing discipline. Part of this strategy includes growth in deposit gathering banking centers. Consistent with these efforts, in May 2026, the Company opened a new banking center office in Daphne, Alabama to the public. This location represents the Bank’s initial deposit gathering facility in the Daphne/Mobile area. In addition, in April 2026, the Company purchased an office in Orange Beach, Alabama, which is expected to serve as a banking center following the completion of renovations. The location is expected to open to the public in 2027.
45
Cash and Investment Securities
As of September 30, 2026, the Company held cash, federal funds sold and securities purchased under reverse repurchase agreements totaling $66.4 million, or 5.7% of total assets, compared to $78.4 million, or 6.8% of total assets, as of December 31, 2025. Investment securities, including both the available-for-sale and held-to-maturity portfolios, totaled $194.7 million as of September 30, 2026, compared to $168.5 million as of December 31, 2025. During the nine months ended September 30, 2026, the Company purchased $71.4 million in investment securities. These purchases, combined with the maturity and paydown of investment securities at lower rates, have led to continued improvement in yield on the portfolio. For the nine months ended September 30, 2026, the average yield on investment securities was 4.00%, compared to 3.52% for the corresponding period of 2025. As of September 30, 2026, the expected average life of securities in the investment portfolio was 4.0 years, compared to 3.7 years as of December 31, 2025.
Shareholders’ Equity
As of September 30, 2026, shareholders’ equity totaled $96.6 million, or 8.29% of total assets, compared to $105.6 million, or 9.15% of total assets, as of December 31, 2025. While earnings, net of dividends paid, increased shareholders’ equity during the nine months ended September 30, 2026, the increase was fully offset by share repurchases during the period, combined with an increase in the Company’s accumulated other comprehensive loss resulting from increases in market interest rates comparing September 30, 2026 to December 31, 2025.
Cash Dividends
During both the nine months ended September 30, 2026 and 2025, the Company declared cash dividends totaling $0.21 per share on its common stock.
Share Repurchases
During the nine months ended September 30, 2026, the Company completed the repurchase of 627,500 shares of its common stock at a weighted average price of $16.02 per share. The repurchases were completed under the Company’s previously announced share repurchase program, which was most recently expanded during the fourth quarter of 2025. As of September 30, 2026, 1,157,313 shares remained available for repurchase under the program.
Regulatory Capital
During the nine months ended September 30, 2026, the Bank continued to maintain capital ratios at higher levels than required to be considered a “well-capitalized” institution under applicable banking regulations. As of September 30, 2026, the Bank’s common equity Tier 1 capital and Tier 1 risk-based capital ratios were each 11.00%. Its total capital ratio was 12.20%, and its Tier 1 leverage ratio was 9.16%.
Liquidity
As of September 30, 2026, the Company continued to maintain funding capacity sufficient to provide adequate liquidity for loan growth, capital expenditures and ongoing operations. The Company benefits from a strong core deposit base, a liquid investment securities portfolio and access to funding from a variety of sources, including federal funds lines with other banking institutions, FHLB advances, the FRB's discount window, and brokered deposits.
RESULTS OF OPERATIONS
Net Interest Income
Net interest income is calculated as the difference between interest and fee income generated from earning assets and the interest expense paid on deposits and borrowed funds. Fluctuations in interest rates, as well as volume and mix changes in earning assets and interest-bearing liabilities, can materially impact net interest income. The Company’s earning assets consist of loans, investment securities, Federal Home Loan Bank stock, federal funds sold by the Bank, securities purchased under reverse repurchase agreements and interest-bearing deposits in banks. Interest-bearing liabilities consist of interest-bearing demand deposits and savings and time deposits, as well as short- and long-term borrowings.
46
The following tables show the average balances of each principal category of assets, liabilities and shareholders’ equity for the three and nine months ended September 30, 2026 and 2025. Additionally, the tables provide an analysis of interest revenue or expense associated with each category, along with the accompanying yield or rate percentage. Net interest margin is calculated for each period presented as net interest income divided by average total interest-earning assets.
|
|
Three Months Ended |
|
|
Three Months Ended |
|
||||||||||||||||||
|
|
September 30, 2026 |
|
|
September 30, 2025 |
|
||||||||||||||||||
|
|
Average |
|
|
Interest |
|
|
Annualized |
|
|
Average |
|
|
Interest |
|
|
Annualized |
|
||||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Loans (1) |
|
$ |
857,791 |
|
|
$ |
12,936 |
|
|
|
5.98 |
% |
|
$ |
871,926 |
|
|
$ |
13,413 |
|
|
|
6.10 |
% |
Investment securities |
|
|
171,365 |
|
|
|
1,801 |
|
|
|
4.17 |
% |
|
|
151,303 |
|
|
|
1,391 |
|
|
|
3.65 |
% |
Federal Home Loan Bank stock |
|
|
1,639 |
|
|
|
25 |
|
|
|
6.05 |
% |
|
|
1,328 |
|
|
|
21 |
|
|
|
6.27 |
% |
Federal funds sold and securities purchased under reverse repurchase agreements |
|
|
4,850 |
|
|
|
46 |
|
|
|
3.76 |
% |
|
|
4,850 |
|
|
|
54 |
|
|
|
4.42 |
% |
Interest-bearing deposits in banks |
|
|
32,905 |
|
|
|
299 |
|
|
|
3.61 |
% |
|
|
36,087 |
|
|
|
402 |
|
|
|
4.42 |
% |
Total interest-earning assets |
|
|
1,068,550 |
|
|
|
15,107 |
|
|
|
5.61 |
% |
|
|
1,065,494 |
|
|
|
15,281 |
|
|
|
5.69 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Noninterest-earning assets |
|
|
66,032 |
|
|
|
|
|
|
|
|
|
64,765 |
|
|
|
|
|
|
|
||||
Total assets |
|
$ |
1,134,582 |
|
|
|
|
|
|
|
|
$ |
1,130,259 |
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Interest-bearing deposits: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Demand deposits |
|
$ |
200,758 |
|
|
$ |
339 |
|
|
|
0.67 |
% |
|
$ |
195,955 |
|
|
$ |
386 |
|
|
|
0.78 |
% |
Money market/savings deposits |
|
|
319,224 |
|
|
|
1,940 |
|
|
|
2.41 |
% |
|
|
300,736 |
|
|
|
2,068 |
|
|
|
2.73 |
% |
Time deposits |
|
|
320,871 |
|
|
|
2,690 |
|
|
|
3.33 |
% |
|
|
345,916 |
|
|
|
2,914 |
|
|
|
3.34 |
% |
Total interest-bearing deposits |
|
|
840,853 |
|
|
|
4,969 |
|
|
|
2.34 |
% |
|
|
842,607 |
|
|
|
5,368 |
|
|
|
2.53 |
% |
Noninterest-bearing demand deposits |
|
|
152,062 |
|
|
|
— |
|
|
|
— |
|
|
|
152,474 |
|
|
|
— |
|
|
|
— |
|
Total deposits |
|
|
992,915 |
|
|
|
4,969 |
|
|
|
1.99 |
% |
|
|
995,081 |
|
|
|
5,368 |
|
|
|
2.14 |
% |
Borrowings |
|
|
28,665 |
|
|
|
288 |
|
|
|
3.99 |
% |
|
|
22,472 |
|
|
|
251 |
|
|
|
4.43 |
% |
Total funding liabilities |
|
|
1,021,580 |
|
|
|
5,257 |
|
|
|
2.04 |
% |
|
|
1,017,553 |
|
|
|
5,619 |
|
|
|
2.19 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other noninterest-bearing liabilities |
|
|
10,624 |
|
|
|
|
|
|
|
|
|
9,969 |
|
|
|
|
|
|
|
||||
Shareholders’ equity |
|
|
102,378 |
|
|
|
|
|
|
|
|
|
102,737 |
|
|
|
|
|
|
|
||||
Total liabilities and shareholders' equity |
|
$ |
1,134,582 |
|
|
|
|
|
|
|
|
$ |
1,130,259 |
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net interest income (2) |
|
|
|
|
$ |
9,850 |
|
|
|
|
|
|
|
|
$ |
9,662 |
|
|
|
|
||||
Net interest margin |
|
|
|
|
|
|
|
|
3.66 |
% |
|
|
|
|
|
|
|
|
3.60 |
% |
||||
(1) |
For the purpose of these computations, non-accruing loans are included in the average loan amounts outstanding. These loans averaged $1.3 million and $1.6 million for the three months ended September 30, 2026 and 2025, respectively.
|
(2) |
Loan fees are included in interest amounts presented. Loan fees totaled $0.1 million for both the three months ended September 30, 2026 and 2025. |
47
|
|
Nine Months Ended |
|
|
Nine Months Ended |
|
||||||||||||||||||
|
|
September 30, 2026 |
|
|
September 30, 2025 |
|
||||||||||||||||||
|
|
Average |
|
|
Interest |
|
|
Annualized |
|
|
Average |
|
|
Interest |
|
|
Annualized |
|
||||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Loans (1) |
|
$ |
854,295 |
|
|
$ |
37,981 |
|
|
|
5.94 |
% |
|
$ |
851,561 |
|
|
$ |
38,643 |
|
|
|
6.07 |
% |
Investment securities |
|
|
173,877 |
|
|
|
5,207 |
|
|
|
4.00 |
% |
|
|
157,319 |
|
|
|
4,138 |
|
|
|
3.52 |
% |
Federal Home Loan Bank stock |
|
|
1,291 |
|
|
|
59 |
|
|
|
6.11 |
% |
|
|
1,330 |
|
|
|
71 |
|
|
|
7.14 |
% |
Federal funds sold and securities purchased under reverse repurchase agreements |
|
|
8,978 |
|
|
|
260 |
|
|
|
3.87 |
% |
|
|
4,850 |
|
|
|
160 |
|
|
|
4.41 |
% |
Interest-bearing deposits in banks |
|
|
43,976 |
|
|
|
1,197 |
|
|
|
3.64 |
% |
|
|
34,375 |
|
|
|
1,141 |
|
|
|
4.44 |
% |
Total interest-earning assets |
|
|
1,082,417 |
|
|
|
44,704 |
|
|
|
5.52 |
% |
|
|
1,049,435 |
|
|
|
44,153 |
|
|
|
5.63 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Noninterest-earning assets |
|
|
64,917 |
|
|
|
|
|
|
|
|
|
64,034 |
|
|
|
|
|
|
|
||||
Total assets |
|
$ |
1,147,334 |
|
|
|
|
|
|
|
|
$ |
1,113,469 |
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Interest-bearing deposits: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Demand deposits |
|
$ |
206,156 |
|
|
|
1,088 |
|
|
|
0.71 |
% |
|
$ |
203,880 |
|
|
$ |
1,317 |
|
|
|
0.86 |
% |
Money market/savings deposits |
|
|
325,630 |
|
|
|
6,063 |
|
|
|
2.49 |
% |
|
|
277,149 |
|
|
|
5,355 |
|
|
|
2.58 |
% |
Time deposits |
|
|
328,436 |
|
|
|
8,344 |
|
|
|
3.40 |
% |
|
|
344,310 |
|
|
|
8,690 |
|
|
|
3.37 |
% |
Total interest-bearing deposits |
|
|
860,222 |
|
|
|
15,495 |
|
|
|
2.41 |
% |
|
|
825,339 |
|
|
|
15,362 |
|
|
|
2.49 |
% |
Noninterest-bearing demand deposits |
|
|
151,052 |
|
|
|
— |
|
|
|
— |
|
|
|
154,390 |
|
|
|
— |
|
|
|
— |
|
Total deposits |
|
|
1,011,274 |
|
|
|
15,495 |
|
|
|
2.05 |
% |
|
|
979,729 |
|
|
|
15,362 |
|
|
|
2.10 |
% |
Borrowings |
|
|
21,365 |
|
|
|
644 |
|
|
|
4.03 |
% |
|
|
22,944 |
|
|
|
756 |
|
|
|
4.41 |
% |
Total funding liabilities |
|
|
1,032,639 |
|
|
|
16,139 |
|
|
|
2.09 |
% |
|
|
1,002,673 |
|
|
|
16,118 |
|
|
|
2.15 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other noninterest-bearing liabilities |
|
|
10,471 |
|
|
|
|
|
|
|
|
|
9,521 |
|
|
|
|
|
|
|
||||
Shareholders’ equity |
|
|
104,224 |
|
|
|
|
|
|
|
|
|
101,275 |
|
|
|
|
|
|
|
||||
Total liabilities and shareholders' equity |
|
$ |
1,147,334 |
|
|
|
|
|
|
|
|
$ |
1,113,469 |
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net interest income (2) |
|
|
|
|
$ |
28,565 |
|
|
|
|
|
|
|
|
$ |
28,035 |
|
|
|
|
||||
Net interest margin |
|
|
|
|
|
|
|
|
3.53 |
% |
|
|
|
|
|
|
|
|
3.57 |
% |
||||
(1) |
For the purpose of these computations, non-accruing loans are included in the average loan amounts outstanding. These loans averaged $1.4 million and $2.9 million for the nine months ended September 30, 2026 and 2025, respectively.
|
(2) |
Loan fees are included in interest amounts presented. Loan fees totaled $0.5 million for both the nine months ended September 30, 2026 and 2025. |
48
The following tables summarize the impact of variances in volume and rate of interest-earning assets and interest-bearing liabilities on components of net interest income.
|
|
Three Months Ended September 30, 2026 |
|
Nine Months Ended September 30, 2026 |
||||||||
|
|
Compared to |
|
Compared to |
||||||||
|
|
Three Months Ended September 30, 2025 |
|
Nine Months Ended September 30, 2025 |
||||||||
|
|
Increase (Decrease) |
|
Increase (Decrease) |
||||||||
|
|
Due to Change In: |
|
Due to Change In: |
||||||||
|
|
Volume |
|
Average |
|
Net |
|
Volume |
|
Average |
|
Net |
|
|
(Dollars in Thousands) |
||||||||||
Interest earned on: |
|
|
|
|
|
|
|
|
|
|
|
|
Total loans |
|
$(218) |
|
$(259) |
|
$(477) |
|
$124 |
|
$(786) |
|
$(662) |
Investment securities |
|
184 |
|
226 |
|
410 |
|
436 |
|
633 |
|
1,069 |
Federal Home Loan Bank stock |
|
5 |
|
(1) |
|
4 |
|
(2) |
|
(10) |
|
(12) |
Federal funds sold and securities purchased under reverse repurchase agreements |
|
— |
|
(8) |
|
(8) |
|
136 |
|
(36) |
|
100 |
Interest-bearing deposits in banks |
|
(35) |
|
(68) |
|
(103) |
|
319 |
|
(263) |
|
56 |
Total interest-earning assets |
|
(64) |
|
(110) |
|
(174) |
|
1,012 |
|
(461) |
|
551 |
Interest expense on: |
|
|
|
|
|
|
|
|
|
|
|
|
Demand deposits |
|
9 |
|
(56) |
|
(47) |
|
15 |
|
(244) |
|
(229) |
Money market/savings deposits |
|
127 |
|
(255) |
|
(128) |
|
937 |
|
(229) |
|
708 |
Time deposits |
|
(211) |
|
(13) |
|
(224) |
|
(401) |
|
55 |
|
(346) |
Borrowings |
|
69 |
|
(32) |
|
37 |
|
(52) |
|
(60) |
|
(112) |
Total interest-bearing liabilities |
|
(5) |
|
(357) |
|
(362) |
|
499 |
|
(478) |
|
21 |
Increase (decrease) in net interest income |
|
$(59) |
|
$247 |
|
$188 |
|
$514 |
|
$16 |
|
$530 |
Interest income increased by $551 thousand during the nine months ended September 30, 2026 compared to the corresponding period of 2025. The increase resulted from a $1.0 million increase attributable to growth in average interest-earning assets, partially offset by a $461 thousand decrease attributable to changes in average yields. With the exception of investment securities, average yields declined in each earning asset category compared to the corresponding period of 2025.
Interest expense increased by $21 thousand during the nine months ended September 30, 2026 compared to the corresponding period of 2025. Changes in average balances increased interest expense by $499 thousand, primarily reflecting higher average balances of money market and savings deposits, partially offset by lower average balances of time deposits and borrowings. Changes in average rates reduced interest expense by $478 thousand, reflecting lower rates on demand deposits, money market and savings deposits, and borrowings, partially offset by higher rates on time deposits.
The Company’s net interest income increased by $530 thousand during the nine months ended September 30, 2026 compared to the corresponding period of 2025, with $514 thousand attributable to changes in average balances and $16 thousand attributable to changes in average yields and rates. Net interest margin decreased to 3.53% during the nine months ended September 30, 2026, compared to 3.57% during the corresponding period of 2025, reflecting lower loan yields that were partially offset by higher investment securities yields and lower deposit costs. Management continues to pursue opportunities to improve net interest margin; however, significant changes in market interest rates, particularly over a short period of time, could adversely affect the Company’s net interest income and net interest margin.
49
Provision for Credit Losses
For the nine months ended September 30, 2026, the provision for credit losses totaled $1.8 million, compared to $3.8 million for the corresponding period of 2025. The decreased provision comparing the first nine months of 2026 to the corresponding period of 2025 resulted primarily from provisioning for specifically identified commercial loans in 2025. The credit issues associated with the additional provisioning on these loans were resolved later in 2025 and, accordingly, the same level of provisioning was not repeated during the nine months ended September 30, 2026. Net charge-offs totaled $1.6 million and $3.3 million for the nine months ended September 30, 2026 and 2025, respectively.
As of September 30, 2026, the Company’s ACL as a percentage of total loans and leases was 1.30%, compared to 1.25% as of December 31, 2025. Comparing September 30, 2026 to December 31, 2025, the increase in the ACL reflected changes in loan portfolio composition, including more prominent growth in indirect consumer loans, which require higher credit allowances than other loan categories, as well as changes in economic forecasting associated with the Company’s credit forecasting model, including the expected impact of higher inflation and a higher Federal funds rate. While we believe that the methodologies and calculations that have been used in the determination of the ACL are adequate, the determination of the appropriateness of the ACL is complex and requires judgment by management about the effects of matters that are inherently uncertain. Factors beyond our control, such as changes in economic forecasts related to the national economy, changes in consumer behavior, or economic deterioration in service areas in which the Company operates, may negatively and materially affect asset quality and the adequacy of the ACL, as well as the resulting provision for credit losses.
Non-Interest Income
Non-interest income represents fees and income derived from sources other than interest-earning assets. The following table presents the major components of non-interest income for the periods indicated:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||||||||||||||||||
|
|
2026 |
|
|
2025 |
|
|
$ Change |
|
|
% Change |
|
|
2026 |
|
|
2025 |
|
|
$ Change |
|
|
% Change |
|
||||||||
|
|
(Dollars in Thousands) |
|
|
|
|
|
(Dollars in Thousands) |
|
|
|
|
||||||||||||||||||||
Service charges and other fees on deposit accounts |
|
$ |
321 |
|
|
$ |
289 |
|
|
$ |
32 |
|
|
|
11.1 |
% |
|
$ |
881 |
|
|
$ |
855 |
|
|
$ |
26 |
|
|
|
3.0 |
% |
Bank-owned life insurance |
|
|
144 |
|
|
|
141 |
|
|
|
3 |
|
|
|
2.1 |
% |
|
|
427 |
|
|
|
416 |
|
|
|
11 |
|
|
|
2.6 |
% |
Net gain on sales and prepayments of investment securities |
|
|
5 |
|
|
|
11 |
|
|
|
(6 |
) |
|
NM |
|
|
|
463 |
|
|
|
13 |
|
|
|
450 |
|
|
NM |
|
||
Lease income |
|
|
271 |
|
|
|
262 |
|
|
|
9 |
|
|
|
3.4 |
% |
|
|
812 |
|
|
|
815 |
|
|
|
(3 |
) |
|
|
(0.4 |
)% |
ATM fee income |
|
|
79 |
|
|
|
89 |
|
|
|
(10 |
) |
|
|
(11.2 |
)% |
|
|
229 |
|
|
|
271 |
|
|
|
(42 |
) |
|
|
(15.5 |
)% |
Other income |
|
|
147 |
|
|
|
68 |
|
|
|
79 |
|
|
|
116.2 |
% |
|
|
313 |
|
|
|
214 |
|
|
|
99 |
|
|
|
46.3 |
% |
Total non-interest income |
|
$ |
967 |
|
|
$ |
860 |
|
|
$ |
107 |
|
|
|
12.4 |
% |
|
$ |
3,125 |
|
|
$ |
2,584 |
|
|
$ |
541 |
|
|
|
20.9 |
% |
NM: Not meaningful
Non-interest income increased to $3.1 million for the nine months ended September 30, 2026, compared to $2.6 million for the nine months ended September 30, 2025, primarily due to gains on the sale of investment securities totaling $0.5 million during the 2026 period. Management continues to evaluate opportunities to add non-interest revenue streams and grow existing streams; however, with the exception of sales of investment securities which cannot be predicted with certainty, significant variation in non-interest income is not expected in the near term.
50
Non-Interest Expense
Non-interest expense represents expenses incurred from sources other than interest-bearing liabilities. The following table presents the major components of non-interest expense for the periods indicated:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||||||||||||||||||
|
|
2026 |
|
|
2025 |
|
|
$ Change |
|
|
% Change |
|
|
2026 |
|
|
2025 |
|
|
$ Change |
|
|
% Change |
|
||||||||
|
|
(Dollars in Thousands) |
|
|
|
|
|
(Dollars in Thousands) |
|
|
|
|
||||||||||||||||||||
Salaries and employee benefits |
|
$ |
4,065 |
|
|
$ |
3,759 |
|
|
$ |
306 |
|
|
|
8.1 |
% |
|
$ |
11,777 |
|
|
$ |
11,440 |
|
|
$ |
337 |
|
|
|
2.9 |
% |
Net occupancy and equipment |
|
|
949 |
|
|
|
987 |
|
|
|
(38 |
) |
|
|
(3.9 |
)% |
|
|
2,936 |
|
|
|
2,799 |
|
|
|
137 |
|
|
|
4.9 |
% |
Computer services |
|
|
467 |
|
|
|
431 |
|
|
|
36 |
|
|
|
8.4 |
% |
|
|
1,261 |
|
|
|
1,264 |
|
|
|
(3 |
) |
|
|
(0.2 |
)% |
Insurance expense and assessments |
|
|
350 |
|
|
|
348 |
|
|
|
2 |
|
|
|
0.6 |
% |
|
|
1,173 |
|
|
|
1,098 |
|
|
|
75 |
|
|
|
6.8 |
% |
Fees for professional services |
|
|
311 |
|
|
|
363 |
|
|
|
(52 |
) |
|
|
(14.3 |
)% |
|
|
949 |
|
|
|
1,048 |
|
|
|
(99 |
) |
|
|
(9.4 |
)% |
Postage, stationery and supplies |
|
|
163 |
|
|
|
132 |
|
|
|
31 |
|
|
|
23.5 |
% |
|
|
439 |
|
|
|
421 |
|
|
|
18 |
|
|
|
4.3 |
% |
Telephone/data communications |
|
|
245 |
|
|
|
191 |
|
|
|
54 |
|
|
|
28.3 |
% |
|
|
706 |
|
|
|
576 |
|
|
|
130 |
|
|
|
22.6 |
% |
Collection and recoveries |
|
|
86 |
|
|
|
69 |
|
|
|
17 |
|
|
|
24.6 |
% |
|
|
264 |
|
|
|
235 |
|
|
|
29 |
|
|
|
12.3 |
% |
Directors fees |
|
|
126 |
|
|
|
103 |
|
|
|
23 |
|
|
|
22.3 |
% |
|
|
372 |
|
|
|
297 |
|
|
|
75 |
|
|
|
25.3 |
% |
Software amortization |
|
|
122 |
|
|
|
115 |
|
|
|
7 |
|
|
|
6.1 |
% |
|
|
424 |
|
|
|
330 |
|
|
|
94 |
|
|
|
28.5 |
% |
Other real estate/foreclosure expense, net |
|
|
41 |
|
|
|
153 |
|
|
|
(112 |
) |
|
|
(73.2 |
)% |
|
|
136 |
|
|
|
197 |
|
|
|
(61 |
) |
|
|
(31.0 |
)% |
Other expense |
|
|
788 |
|
|
|
786 |
|
|
|
2 |
|
|
|
0.3 |
% |
|
|
2,260 |
|
|
|
2,094 |
|
|
|
166 |
|
|
|
7.9 |
% |
Total non-interest expense |
|
$ |
7,713 |
|
|
$ |
7,437 |
|
|
$ |
276 |
|
|
|
3.7 |
% |
|
$ |
22,697 |
|
|
$ |
21,799 |
|
|
$ |
898 |
|
|
|
4.1 |
% |
Non-interest expense totaled $22.7 million for the nine months ended September 30, 2026, compared to $21.8 million for the corresponding period of 2025, reflecting an increase of $0.9 million, or 4.1%. The increase resulted primarily from cost-of-living increases associated with salaries and employee benefits, increases in occupancy expense associated with expansion of the Company’s banking center footprint, as well as inflationary increases in various other expense categories. While management is focused on efforts to streamline business processes and improve the Company’s efficiency levels, the current inflationary environment is expected to put continued upward pressure on non-interest expense.
Provision for Income Taxes
The provision for income taxes was $1.6 million and $1.1 million for the nine months ended September 30, 2026 and 2025, respectively. The Company’s effective tax rate was 21.6% and 22.9%, respectively, for the same periods.
The effective tax rate is impacted by recurring items, such as changes in tax-exempt interest income earned from bank-qualified municipal bonds and loans and the cash surrender value of bank-owned life insurance. Management makes decisions about whether to invest in tax-exempt instruments on a case-by-case basis after considering a number of factors, including investment return, credit quality and the consistency of such investments with the Company’s overall strategy. The Company’s effective tax rate is expected to fluctuate commensurate with the level of these investments as compared to total pre-tax income.
BALANCE SHEET ANALYSIS
Investment Securities
The investment securities portfolio is used by management to provide liquidity, to generate interest income and for use as collateral for public deposits and wholesale funding. Risk and return can be adjusted by altering the duration, composition and/or balance of the portfolio. The expected average life of securities in the investment portfolio was 4.0 years and 3.7 years as of September 30, 2026 and December 31, 2025, respectively.
Available-for-sale securities are recorded at estimated fair value, with unrealized gains or losses recognized, net of taxes, in accumulated other comprehensive loss, a separate component of shareholders’ equity. As of September 30, 2026, available-for-sale securities totaled $194.4 million, or 99.8% of the total investment portfolio, compared to $168.1 million, or 99.7% of the total investment portfolio, as of December 31, 2025. Available-for-sale securities consisted of residential and commercial mortgage-backed securities, U.S. Treasury securities, corporate bonds, obligations of U.S. government-sponsored agencies, and obligations of state and political subdivisions.
Held-to-maturity securities are recorded at amortized cost and represent securities that the Company both intends and has the ability to hold to maturity. As of September 30, 2026, held-to-maturity securities totaled $0.4 million, or 0.2% of the total investment portfolio, compared to $0.5 million, or 0.3% of the total investment portfolio, as of December 31, 2025. Held-to-maturity securities consisted of commercial mortgage-backed securities, obligations of U.S. government-sponsored agencies, and obligations of state and political subdivisions.
51
Net unrealized losses in the available-for-sale portfolio totaled $8.0 million, or 3.94% of the portfolio’s amortized cost, as of September 30, 2026, compared to $1.0 million, or 0.57% of amortized cost, as of December 31, 2025. The increase in net unrealized losses reflected changes in the interest rate environment, particularly increases in market rates in the mid- to long-term portion of the Treasury yield curve.
The Company purchased $46.4 million of securities classified as available-for-sale during the third quarter of 2026. These purchases increased the amount of securities exposed to subsequent changes in market interest rates. The newly acquired securities had net unrealized losses as of September 30, 2026, contributing to the increase in the portfolio’s overall net unrealized losses. Accordingly, the increase in dollar losses should also be considered in the context of a larger portfolio: available-for-sale securities at amortized cost increased by $33.3 million, or 19.7%, to $202.3 million as of September 30, 2026, compared to $169.0 million as of December 31, 2025. Net unrealized losses within the available-for-sale portfolio were reported, net of tax, in accumulated other comprehensive loss.
As of September 30, 2026, the Company evaluated both the available-for-sale and held-to-maturity portfolios for credit losses and concluded that no credit losses were included in either portfolio and that the unrealized losses in both portfolios resulted from the prevailing interest rate environment.
Loans and Leases
The Company’s total loan portfolio decreased by $8.0 million, or 0.9%, as of September 30, 2026, compared to December 31, 2025. The decrease reflected substantial payoffs of real estate loans, including construction, multi-family and commercial real estate, partially offset by growth in indirect consumer loans. The commercial lending team remains strategically focused on building and maintaining commercial lending relationships that are expected to support future loan growth. Average total loans for the nine months ended September 30, 2026 were $854.3 million, an increase of $2.7 million, or 0.3%, compared to the corresponding period of 2025.
The Company’s indirect lending platform focuses on borrowers at the higher end of the credit spectrum, as reflected in the portfolio’s weighted average credit score at the time of funding of 785 as of September 30, 2026. Indirect consumer loans increased by $35.8 million, or 9.4%, during the nine months ended September 30, 2026, compared to December 31, 2025. Collateral primarily consists of boats, recreational vehicles, campers, horse trailers and cargo trailers.
The average yield on total loans was 5.94% for the nine months ended September 30, 2026, compared to 6.07% for the corresponding period of 2025.
The tables below summarize loan balances by portfolio category, as well as the ACL, as of the end of each of the most recent five quarters as of September 30, 2026:
|
|
Quarter Ended |
|
|||||||||||||||||
|
|
2026 |
|
|
2025 |
|
||||||||||||||
|
|
September |
|
|
June |
|
|
March |
|
|
December |
|
|
September |
|
|||||
|
|
(Dollars in Thousands) |
|
|||||||||||||||||
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Construction, land development and other land loans |
|
$ |
35,778 |
|
|
$ |
41,062 |
|
|
$ |
27,236 |
|
|
$ |
32,618 |
|
|
$ |
38,560 |
|
Secured by 1-4 family residential properties |
|
|
63,282 |
|
|
|
63,093 |
|
|
|
65,460 |
|
|
|
66,996 |
|
|
|
67,620 |
|
Secured by multi-family residential properties |
|
|
98,613 |
|
|
|
119,362 |
|
|
|
124,826 |
|
|
|
117,769 |
|
|
|
112,763 |
|
Secured by non-residential commercial real estate |
|
|
181,878 |
|
|
|
181,480 |
|
|
|
189,408 |
|
|
|
200,699 |
|
|
|
211,400 |
|
Commercial and industrial loans |
|
|
43,528 |
|
|
|
46,834 |
|
|
|
46,665 |
|
|
|
48,360 |
|
|
|
46,562 |
|
Consumer loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Direct |
|
|
4,441 |
|
|
|
4,379 |
|
|
|
4,362 |
|
|
|
4,844 |
|
|
|
4,999 |
|
Indirect |
|
|
417,523 |
|
|
|
404,425 |
|
|
|
385,740 |
|
|
|
381,732 |
|
|
|
385,616 |
|
Total loans |
|
|
845,043 |
|
|
|
860,635 |
|
|
|
843,697 |
|
|
|
853,018 |
|
|
|
867,520 |
|
Allowance for credit losses on loans and leases |
|
|
10,995 |
|
|
|
10,882 |
|
|
|
10,536 |
|
|
|
10,704 |
|
|
|
10,700 |
|
Net loans |
|
$ |
834,048 |
|
|
$ |
849,753 |
|
|
$ |
833,161 |
|
|
$ |
842,314 |
|
|
$ |
856,820 |
|
52
As of September 30, 2026 and December 31, 2025, the composition of the non-residential commercial real estate loan portfolio was as follows:
|
September 30, 2026 |
|
|
December 31, 2025 |
|
||||||||||||||
|
Owner Occupied |
|
Non-Owner Occupied |
|
Total |
|
|
Owner Occupied |
|
Non-Owner Occupied |
|
Total |
|
||||||
|
(Dollars in Thousands) |
|
|||||||||||||||||
Office (1) |
$ |
6,161 |
|
$ |
33,397 |
|
$ |
39,558 |
|
|
$ |
7,141 |
|
$ |
33,170 |
|
$ |
40,311 |
|
Retail single credit tenant |
|
588 |
|
|
37,625 |
|
|
38,213 |
|
|
|
603 |
|
|
39,028 |
|
|
39,631 |
|
Industrial |
|
4,567 |
|
|
41,926 |
|
|
46,493 |
|
|
|
5,194 |
|
|
42,522 |
|
|
47,716 |
|
Storage |
|
686 |
|
|
4,959 |
|
|
5,645 |
|
|
|
727 |
|
|
15,645 |
|
|
16,372 |
|
Retail services |
|
10,753 |
|
|
— |
|
|
10,753 |
|
|
|
14,381 |
|
|
— |
|
|
14,381 |
|
Retail with anchor |
|
2,518 |
|
|
6,323 |
|
|
8,841 |
|
|
|
2,619 |
|
|
3,486 |
|
|
6,105 |
|
Senior housing / Assisted living |
|
17,967 |
|
|
— |
|
|
17,967 |
|
|
|
17,965 |
|
|
— |
|
|
17,965 |
|
Other |
|
8,847 |
|
|
5,561 |
|
|
14,408 |
|
|
|
10,222 |
|
|
7,996 |
|
|
18,218 |
|
Total loans |
$ |
52,087 |
|
$ |
129,791 |
|
$ |
181,878 |
|
|
$ |
58,852 |
|
$ |
141,847 |
|
$ |
200,699 |
|
(1) Non-owner occupied office consisted of 15 loans with an average loan size of $2.2 million as of September 30, 2026. As of December 31, 2025, non-owner occupied office consisted of 16 loans with an average loan size of $2.1 million. For both dates presented, the properties were located in Tuscaloosa, AL, Birmingham, AL, and Chattanooga, TN. |
As of September 30, 2026 and December 31, 2025, the composition of the construction, land development, and other land loans portfolio was as follows:
|
September 30, 2026 |
|
|
December 31, 2025 |
|
||||||||||||||
|
Owner Occupied |
|
Non-Owner Occupied |
|
Total |
|
|
Owner Occupied |
|
Non-Owner Occupied |
|
Total |
|
||||||
|
(Dollars in Thousands) |
|
|||||||||||||||||
Apartments |
$ |
— |
|
$ |
30,561 |
|
$ |
30,561 |
|
|
$ |
— |
|
$ |
22,722 |
|
$ |
22,722 |
|
Farmland |
|
2,252 |
|
|
— |
|
|
2,252 |
|
|
|
2,322 |
|
|
— |
|
|
2,322 |
|
Retail |
|
— |
|
|
— |
|
|
— |
|
|
|
— |
|
|
7,445 |
|
|
7,445 |
|
Other |
|
— |
|
|
2,965 |
|
|
2,965 |
|
|
|
— |
|
|
129 |
|
|
129 |
|
Total loans |
$ |
2,252 |
|
$ |
33,526 |
|
$ |
35,778 |
|
|
$ |
2,322 |
|
$ |
30,296 |
|
$ |
32,618 |
|
53
The following table classifies the Company's fixed and variable rate loans as of September 30, 2026 according to contractual maturities of: (1) one year or less, (2) after one year through five years, (3) after five years through fifteen years, and (4) after fifteen years:
|
|
September 30, 2026 |
|
|||||||||||||||||
|
|
One Year or Less |
|
|
After One Year Through Five Years |
|
|
After Five Years Through Fifteen Years |
|
|
After Fifteen Years |
|
|
Total |
|
|||||
|
|
(Dollars in Thousands) |
|
|
|
|
||||||||||||||
Total loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Construction, land development and other land loans |
|
$ |
42 |
|
|
$ |
35,736 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
35,778 |
|
Secured by 1-4 family residential properties |
|
|
3,706 |
|
|
|
13,639 |
|
|
|
23,594 |
|
|
|
22,343 |
|
|
|
63,282 |
|
Secured by multi-family residential properties |
|
|
75,260 |
|
|
|
21,983 |
|
|
|
440 |
|
|
|
930 |
|
|
|
98,613 |
|
Secured by non-residential commercial real estate |
|
|
67,670 |
|
|
|
81,144 |
|
|
|
33,064 |
|
|
|
— |
|
|
|
181,878 |
|
Commercial and industrial loans |
|
|
8,962 |
|
|
|
31,838 |
|
|
|
2,728 |
|
|
|
— |
|
|
|
43,528 |
|
Consumer loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Direct |
|
|
1,541 |
|
|
|
2,847 |
|
|
|
53 |
|
|
|
— |
|
|
|
4,441 |
|
Indirect (1) |
|
|
33,034 |
|
|
|
16,655 |
|
|
|
367,834 |
|
|
|
— |
|
|
|
417,523 |
|
Total loans |
|
$ |
190,215 |
|
|
$ |
203,842 |
|
|
$ |
427,713 |
|
|
$ |
23,273 |
|
|
$ |
845,043 |
|
Loans with fixed interest rates: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Construction, land development and other land loans |
|
$ |
42 |
|
|
$ |
2,312 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
2,354 |
|
Secured by 1-4 family residential properties |
|
|
1,962 |
|
|
|
3,715 |
|
|
|
3,776 |
|
|
|
11,017 |
|
|
|
20,470 |
|
Secured by multi-family residential properties |
|
|
22,627 |
|
|
|
8,800 |
|
|
|
440 |
|
|
|
930 |
|
|
|
32,797 |
|
Secured by non-residential commercial real estate |
|
|
26,296 |
|
|
|
68,929 |
|
|
|
15,153 |
|
|
|
— |
|
|
|
110,378 |
|
Commercial and industrial loans |
|
|
5,218 |
|
|
|
14,877 |
|
|
|
2,728 |
|
|
|
— |
|
|
|
22,823 |
|
Consumer loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Direct |
|
|
1,541 |
|
|
|
2,847 |
|
|
|
53 |
|
|
|
— |
|
|
|
4,441 |
|
Indirect |
|
|
33,034 |
|
|
|
16,655 |
|
|
|
367,834 |
|
|
|
— |
|
|
|
417,523 |
|
Total loans with fixed interest rates |
|
$ |
90,720 |
|
|
$ |
118,135 |
|
|
$ |
389,984 |
|
|
$ |
11,947 |
|
|
$ |
610,786 |
|
Loans with variable interest rates: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Construction, land development and other land loans |
|
$ |
— |
|
|
$ |
33,424 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
33,424 |
|
Secured by 1-4 family residential properties |
|
|
1,744 |
|
|
|
9,924 |
|
|
|
19,818 |
|
|
|
11,326 |
|
|
|
42,812 |
|
Secured by multi-family residential properties |
|
|
52,633 |
|
|
|
13,183 |
|
|
|
— |
|
|
|
— |
|
|
|
65,816 |
|
Secured by non-residential commercial real estate |
|
|
41,374 |
|
|
|
12,215 |
|
|
|
17,911 |
|
|
|
— |
|
|
|
71,500 |
|
Commercial and industrial loans |
|
|
3,744 |
|
|
|
16,961 |
|
|
|
— |
|
|
|
— |
|
|
|
20,705 |
|
Consumer loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Direct |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Indirect |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total loans with variable interest rates |
|
$ |
99,495 |
|
|
$ |
85,707 |
|
|
$ |
37,729 |
|
|
$ |
11,326 |
|
|
$ |
234,257 |
|
(1) While the Indirect portfolio has contractual maturities of up to 15 years, the weighted average term to payoff has trended at less than 5 years. |
54
Allowance for Credit Losses on Loans and Leases
The tables below summarize changes in the ACL on loans and leases for each of the most recent five quarters as of September 30, 2026:
|
|
Quarter Ended |
|
|||||||||||||||||
|
|
2026 |
|
|
2025 |
|
||||||||||||||
|
|
September |
|
|
June |
|
|
March |
|
|
December |
|
|
September |
|
|||||
|
|
(Dollars in Thousands) |
|
|||||||||||||||||
Balance at beginning of period |
|
$ |
10,882 |
|
|
$ |
10,536 |
|
|
$ |
10,704 |
|
|
$ |
10,700 |
|
|
$ |
11,388 |
|
Charge-offs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Construction, land development and other land loans |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Secured by 1-4 family residential properties |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Secured by multi-family residential properties |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Secured by non-residential commercial real estate |
|
|
— |
|
|
|
— |
|
|
|
(48 |
) |
|
|
— |
|
|
|
— |
|
Commercial and industrial loans |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,024 |
) |
Consumer loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Direct |
|
|
— |
|
|
|
(2 |
) |
|
|
(1 |
) |
|
|
(4 |
) |
|
|
— |
|
Indirect |
|
|
(548 |
) |
|
|
(745 |
) |
|
|
(590 |
) |
|
|
(464 |
) |
|
|
(411 |
) |
Total charge-offs |
|
|
(548 |
) |
|
|
(747 |
) |
|
|
(639 |
) |
|
|
(468 |
) |
|
|
(1,435 |
) |
Recoveries: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Construction, land development and other land loans |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Secured by 1-4 family residential properties |
|
|
4 |
|
|
|
5 |
|
|
|
5 |
|
|
|
9 |
|
|
|
10 |
|
Secured by multi-family residential properties |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Secured by non-residential commercial real estate |
|
|
— |
|
|
|
12 |
|
|
|
— |
|
|
|
49 |
|
|
|
— |
|
Commercial and industrial loans |
|
|
— |
|
|
|
4 |
|
|
|
10 |
|
|
|
149 |
|
|
|
— |
|
Consumer loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Direct |
|
|
22 |
|
|
|
30 |
|
|
|
32 |
|
|
|
42 |
|
|
|
42 |
|
Indirect |
|
|
50 |
|
|
|
57 |
|
|
|
99 |
|
|
|
36 |
|
|
|
45 |
|
Total recoveries |
|
|
76 |
|
|
|
108 |
|
|
|
146 |
|
|
|
285 |
|
|
|
97 |
|
Net charge-offs |
|
|
(472 |
) |
|
|
(639 |
) |
|
|
(493 |
) |
|
|
(183 |
) |
|
|
(1,338 |
) |
Provision for credit losses on loans and leases |
|
|
585 |
|
|
|
985 |
|
|
|
325 |
|
|
|
187 |
|
|
|
650 |
|
Ending balance |
|
$ |
10,995 |
|
|
$ |
10,882 |
|
|
$ |
10,536 |
|
|
$ |
10,704 |
|
|
$ |
10,700 |
|
Ending balance as a percentage of loans |
|
|
1.30 |
% |
|
|
1.26 |
% |
|
|
1.25 |
% |
|
|
1.25 |
% |
|
|
1.23 |
% |
Net charge-offs as a percentage of average loans |
|
|
0.22 |
% |
|
|
0.30 |
% |
|
|
0.23 |
% |
|
|
0.08 |
% |
|
|
0.61 |
% |
Allowance for Credit Losses on Unfunded Lending Commitments
The Company records an ACL on unfunded lending commitments in which the Company is exposed to credit risk via a present contractual obligation to extend credit unless the obligation is unconditionally cancellable. Unconditional lending commitments generally include unfunded term loan agreements, home equity lines of credit, lines of credit, and demand deposit account overdraft protection. As of September 30, 2026, the Company’s reserve for unfunded commitments, which is recorded in other liabilities in the Company’s consolidated balance sheets, totaled $0.3 million, compared to $0.4 million as of December 31, 2025.
55
Nonperforming Assets
Nonperforming assets at the end of the five most recent quarters as of September 30, 2026 were as follows:
|
|
Quarter Ended |
|
|||||||||||||||||
|
|
2026 |
|
|
2025 |
|
||||||||||||||
|
|
September |
|
|
June |
|
|
March |
|
|
December |
|
|
September |
|
|||||
|
|
(Dollars in Thousands) |
|
|||||||||||||||||
Non-accrual loans |
|
$ |
1,296 |
|
|
$ |
1,294 |
|
|
$ |
1,629 |
|
|
$ |
1,373 |
|
|
$ |
1,066 |
|
Other real estate owned and other assets held-for-sale |
|
|
380 |
|
|
|
636 |
|
|
|
215 |
|
|
|
256 |
|
|
|
1,158 |
|
Total |
|
$ |
1,676 |
|
|
$ |
1,930 |
|
|
$ |
1,844 |
|
|
$ |
1,629 |
|
|
$ |
2,224 |
|
Nonperforming assets as a percentage of total loans and other real estate |
|
|
0.20 |
% |
|
|
0.22 |
% |
|
|
0.22 |
% |
|
|
0.19 |
% |
|
|
0.26 |
% |
Nonperforming assets as a percentage of total assets |
|
|
0.14 |
% |
|
|
0.17 |
% |
|
|
0.16 |
% |
|
|
0.14 |
% |
|
|
0.19 |
% |
Non-accrual loans as a percentage of total loans |
|
|
0.15 |
% |
|
|
0.15 |
% |
|
|
0.19 |
% |
|
|
0.16 |
% |
|
|
0.12 |
% |
ACL as a percentage of non-accrual loans |
|
|
848.38 |
% |
|
|
840.96 |
% |
|
|
646.78 |
% |
|
|
779.61 |
% |
|
|
1003.75 |
% |
Allocation of Allowance for Credit Losses on Loans and Leases
While no portion of the ACL is in any way restricted to any individual loan or group of loans and the entire allowance is available to absorb losses from any and all loans, the following table shows an allocation of the ACL for the periods indicated:
|
|
As of and for the Nine Months Ended |
|
|
As of and for the Year Ended |
|
||||||||||||||||||
|
|
September 30, 2026 |
|
|
December 31, 2025 |
|
||||||||||||||||||
|
|
Allowance Allocation |
|
|
Allowance as Percentage of Total Loans |
|
|
Net Charge-offs as a Percentage of Average Loans |
|
|
Allowance Allocation |
|
|
Allowance as Percentage of Total Loans |
|
|
Net Charge-offs as a Percentage of Average Loans |
|
||||||
|
|
(Dollars in Thousands) |
|
|||||||||||||||||||||
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Construction, land development and other land loans |
|
$ |
188 |
|
|
|
0.53 |
% |
|
|
— |
|
|
$ |
222 |
|
|
|
0.68 |
% |
|
|
— |
|
Secured by 1-4 family residential properties |
|
|
336 |
|
|
|
0.53 |
% |
|
|
-0.03 |
% |
|
|
371 |
|
|
|
0.55 |
% |
|
|
-0.04 |
% |
Secured by multi-family residential properties |
|
|
524 |
|
|
|
0.53 |
% |
|
|
— |
|
|
|
666 |
|
|
|
0.57 |
% |
|
|
— |
|
Secured by non-residential commercial real estate |
|
|
1,239 |
|
|
|
0.68 |
% |
|
|
0.03 |
% |
|
|
1,420 |
|
|
|
0.71 |
% |
|
|
-0.02 |
% |
Commercial and industrial loans |
|
|
338 |
|
|
|
0.78 |
% |
|
|
-0.04 |
% |
|
|
399 |
|
|
|
0.83 |
% |
|
|
4.55 |
% |
Consumer loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Direct |
|
|
22 |
|
|
|
0.50 |
% |
|
|
-2.42 |
% |
|
|
50 |
|
|
|
1.03 |
% |
|
|
-3.78 |
% |
Indirect |
|
|
8,348 |
|
|
|
2.00 |
% |
|
|
0.56 |
% |
|
|
7,576 |
|
|
|
1.98 |
% |
|
|
0.50 |
% |
Total |
|
$ |
10,995 |
|
|
|
1.30 |
% |
|
|
0.25 |
% |
|
$ |
10,704 |
|
|
|
1.25 |
% |
|
|
0.41 |
% |
Net charge-offs as a percentage of average loans in the three prior full years were as follows: 0.14% (2024), 0.14% (2023), 0.16% (2022).
Deposits
Total deposits decreased by $12.9 million, or 1.3%, during the nine months ended September 30, 2026, to $1.015 billion. This decrease reflected a $21.9 million reduction in wholesale brokered deposits, partially offset by a $9.0 million, or 1.0%, increase in all other deposits. The reduction in wholesale brokered deposits assisted management’s efforts to reduce overall deposit costs while maintaining an appropriate level of core funding.
Non-interest-bearing demand deposits totaled $162.3 million, or 16.0% of total deposits, as of September 30, 2026, compared to $153.8 million, or 15.0% of total deposits, as of December 31, 2025. Core deposits, which exclude time deposits of $250 thousand or more and all wholesale brokered deposits, totaled $844.6 million, or 83.2% of total deposits, as of September 30, 2026, compared to $838.3 million, or 81.6% of total deposits, as of December 31, 2025.
56
For the nine months ended September 30, 2026, the average rate on total deposits was 2.05%, compared to 2.10% for the corresponding period of 2025.
Core deposits have historically been the Company’s primary source of funding and have enabled the Company to successfully meet both short-term and long-term liquidity needs. Management anticipates that core deposits will continue to be the Company’s primary source of funding in the future. Management will continue to monitor deposit levels closely to help ensure an adequate level of funding for the Company’s activities. However, various economic and competitive factors could affect this funding source in the future, including increased competition from other financial institutions in deposit gathering, national and local economic conditions and interest rate policies adopted by the FRB and other central banks.
The following tables present details on the composition of the Company's deposits for the periods indicated:
|
|
As of and for the Nine Months Ended |
|
|||||||||||||
|
|
September 30, 2026 |
|
|||||||||||||
|
|
Number of Accounts |
|
|
Average Balance Per Account |
|
|
Dollars |
|
|
Percentage of Total Deposits |
|
||||
|
|
|
|
|
(Dollars in Thousands) |
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Non-interest-bearing demand deposits |
|
|
8,858 |
|
|
$ |
18 |
|
|
$ |
162,270 |
|
|
|
16.0 |
% |
Interest-bearing demand deposits |
|
|
5,948 |
|
|
|
33 |
|
|
|
199,230 |
|
|
|
19.6 |
% |
Money market and savings |
|
|
8,237 |
|
|
|
38 |
|
|
|
317,027 |
|
|
|
31.2 |
% |
Certificates of deposits >$250 thousand |
|
|
113 |
|
|
|
481 |
|
|
|
54,404 |
|
|
|
5.4 |
% |
Certificates of deposits $100-$250 thousand |
|
|
532 |
|
|
|
144 |
|
|
|
76,724 |
|
|
|
7.6 |
% |
Certificates of deposits <$100 thousand |
|
|
3,635 |
|
|
|
25 |
|
|
|
89,371 |
|
|
|
8.8 |
% |
Total (excluding brokered certificates of deposit) |
|
|
27,323 |
|
|
$ |
33 |
|
|
|
899,026 |
|
|
|
88.6 |
% |
Brokered deposits |
|
|
|
|
|
|
|
|
116,041 |
|
|
|
11.4 |
% |
||
Total |
|
|
|
|
|
|
|
$ |
1,015,067 |
|
|
|
100.0 |
% |
||
|
|
As of and for the Year Ended |
|
|||||||||||||
|
|
December 31, 2025 |
|
|||||||||||||
|
|
Number of Accounts |
|
|
Average Balance Per Account |
|
|
Dollars |
|
|
Percentage of Total Deposits |
|
||||
|
|
|
|
|
(Dollars in Thousands) |
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Non-interest-bearing demand deposits |
|
|
8,822 |
|
|
$ |
17 |
|
|
$ |
153,809 |
|
|
|
15.0 |
% |
Interest-bearing demand deposits |
|
|
6,124 |
|
|
|
34 |
|
|
|
206,985 |
|
|
|
20.1 |
% |
Money market and savings |
|
|
8,332 |
|
|
|
37 |
|
|
|
307,007 |
|
|
|
29.9 |
% |
Certificates of deposits >$250 thousand |
|
|
110 |
|
|
|
470 |
|
|
|
51,699 |
|
|
|
5.0 |
% |
Certificates of deposits $100-$250 thousand |
|
|
537 |
|
|
|
142 |
|
|
|
76,475 |
|
|
|
7.4 |
% |
Certificates of deposits <$100 thousand |
|
|
3,900 |
|
|
|
24 |
|
|
|
94,043 |
|
|
|
9.2 |
% |
Total (excluding brokered certificates of deposit) |
|
|
27,825 |
|
|
$ |
32 |
|
|
|
890,018 |
|
|
|
86.6 |
% |
Brokered deposits |
|
|
|
|
|
|
|
|
137,944 |
|
|
|
13.4 |
% |
||
Total |
|
|
|
|
|
|
|
$ |
1,027,962 |
|
|
|
100.0 |
% |
||
Other Interest-Bearing Liabilities
Other interest-bearing liabilities that are used by the Company as an alternative source of funds consist of federal funds purchased, securities sold under agreements to repurchase, FHLB advances, and subordinated debt. As of September 30, 2026, other interest-bearing liabilities totaled 4.6% of total interest-bearing liabilities, compared to 1.2% as of December 31, 2025.
Shareholders’ Equity
As of September 30, 2026, shareholders’ equity totaled $96.6 million, or 8.29% of total assets, compared to $105.6 million, or 9.15% of total assets, as of December 31, 2025. While earnings, net of dividends paid, increased shareholders’ equity during the nine months ended September 30, 2026, the increase was fully offset by share repurchases during the period, combined with an increase in the Company’s
57
accumulated other comprehensive loss resulting from increases in market interest rates comparing September 30, 2026 to December 31, 2025. During both the nine months ended September 30, 2026 and 2025, the Company declared cash dividends totaling $0.21 per share on its common stock. In addition, during the nine months ended September 30, 2026, the Company completed the repurchase of 627,500 shares of its common stock at a weighted average price of $16.02 per share. The repurchases were completed under the Company’s previously announced share repurchase program. As of September 30, 2026, 1,157,313 shares remained available for repurchase under the program.
LIQUIDITY AND CAPITAL RESOURCES
The asset portion of the balance sheet provides liquidity primarily from the following sources: (1) excess cash and interest-bearing deposits in banks, (2) federal funds sold and securities purchased under reverse repurchase agreements, (3) principal payments and maturities of loans and (4) principal payments and maturities from the investment portfolio. Loans maturing or repricing in one year or less amounted to $157.1 million as of September 30, 2026 and $274.7 million as of December 31, 2025. Investment securities forecasted to mature or reprice in one year or less were estimated to be $22.5 million and $27.5 million as of September 30, 2026 and December 31, 2025, respectively.
Although some securities in the investment portfolio have final maturities exceeding 10 years, a substantial percentage of the portfolio provides monthly principal and interest payments and consists of securities that are readily marketable and easily convertible into cash on short notice. The investment securities portfolio had an estimated average life of 4.0 years and 3.7 years as of September 30, 2026 and December 31, 2025, respectively. However, management does not rely solely upon the investment portfolio to generate cash flows to fund loans, capital expenditures, dividends, debt repayment and other cash requirements. These activities are also funded by cash flows from loan payments, as well as increases in deposits and short-term borrowings.
The liability portion of the balance sheet provides liquidity through interest-bearing and non-interest-bearing deposit accounts, which represent the Company’s primary sources of funds. In addition, federal funds purchased, FHLB advances, securities sold under agreements to repurchase and short-term and long-term borrowings are additional sources of available liquidity. Liquidity management involves the continual monitoring of the sources and uses of funds to maintain an acceptable cash position. Long-term liquidity management focuses on considerations related to the total balance sheet structure. The Bank manages the pricing of its deposits to maintain a desired deposit balance.
The Company had outstanding borrowings under FHLB advances of $25.0 million as of September 30, 2026, while as of December 31, 2025, the Company had no balances outstanding under FHLB advances. The Company's use of FHLB advances varies depending on fluctuations in deposits and other funding sources, as well as their use in interest rate hedging strategies. The Company had up to $299.3 million and $324.1 million in remaining unused credit from the FHLB (subject to available collateral, which may include eligible investment securities and loans) as of September 30, 2026 and December 31, 2025, respectively.
The Company also has access to the FRB’s discount window. The discount window allows borrowing on pledged collateral that includes eligible investment securities and loans. The Company maintains pledges of its consumer indirect loan portfolio and selected investment securities with the FRB as collateral to provide immediate access to funding through the discount window. As of September 30, 2026, the Company had $5.0 million in outstanding federal funds purchased from the FRB's discount window, while there were no outstanding federal funds purchased from the discount window as of December 31, 2025. As of September 30, 2026 and December 31, 2025 the Company had $221.4 million and $210.9 million, respectively, in secured unused borrowing capacity with the FRB’s discount window.
In addition to collateralized funding sources through the FHLB and FRB, the Company had $48.0 million in unused established unsecured lines of credit with banks as of both September 30, 2026 and December 31, 2025.
On October 1, 2021, the Company completed a private placement of $11.0 million in aggregate principal amount of fixed-to-floating rate subordinated notes that will mature on October 1, 2031. Net of unamortized debt issuance costs, the subordinated notes were recorded as long-term borrowings totaling $11.0 million and $10.9 million as of September 30, 2026 and December 31, 2025, respectively.
58
The table below provides information on the Company’s on-balance sheet liquidity, as well as readily available off-balance sheet sources of liquidity, as of both September 30, 2026 and December 31, 2025.
|
September 30, |
|
|
December 31, |
|
||
|
(Dollars in Thousands) |
|
|||||
|
(Unaudited) |
|
|
(Unaudited) |
|
||
Liquidity from cash, federal funds sold and securities purchased under reverse repurchase agreements: |
|
|
|
|
|
||
Cash and cash equivalents |
$ |
61,580 |
|
|
$ |
73,547 |
|
Federal funds sold and securities purchased under reverse repurchase agreements |
|
4,850 |
|
|
|
4,850 |
|
Total liquidity from cash, federal funds sold and securities purchased under reverse repurchase agreements |
|
66,430 |
|
|
|
78,397 |
|
Liquidity from pledgable investment securities: |
|
|
|
|
|
||
Investment securities available-for-sale, at fair value |
|
194,352 |
|
|
|
168,075 |
|
Investment securities held-to-maturity, at amortized cost |
|
353 |
|
|
|
465 |
|
Less: securities pledged |
|
(79,671 |
) |
|
|
(58,497 |
) |
Less: estimated collateral value discounts |
|
(10,778 |
) |
|
|
(10,671 |
) |
Liquidity from pledgable investment securities |
|
104,256 |
|
|
|
99,372 |
|
Liquidity from unused lendable collateral (loans) at FHLB |
|
23,866 |
|
|
|
30,504 |
|
Liquidity from unused lendable collateral (loans and securities) at FRB |
|
221,361 |
|
|
|
210,921 |
|
Unsecured lines of credit with banks |
|
48,000 |
|
|
|
48,000 |
|
Total readily available liquidity |
$ |
463,913 |
|
|
$ |
467,194 |
|
The table above calculates readily available liquidity by combining cash and cash equivalents, federal funds sold, securities purchased under reverse repurchase agreements and unencumbered investment security values on the Company’s consolidated balance sheet with off-balance sheet liquidity that is readily available through unused collateral pledged to the FHLB and FRB, as well as unsecured lines of credit with other banks. Liquidity from pledgable investment securities and total readily available liquidity are non-GAAP measures used by management and regulators to analyze a portion of the Company's liquidity. Management uses these measures to evaluate the Company's liquidity position.
Pledgable investment securities are considered by management as a readily available source of liquidity since the Company has the ability to pledge the securities with the FHLB or FRB to obtain immediate funding. Both available-for-sale and held-for-maturity securities may be pledged at fair value with the FHLB and through the FRB discount window. The amounts shown as liquidity from pledgable investment securities represent total investment securities as recorded on the consolidated balance sheet, less reductions for securities already pledged and discounts expected to be taken by the lender to determine collateral value. The unused lendable collateral value at the FHLB presented in the table above represents only the amount immediately available to the Company from loans already pledged by the Company to the FHLB as of each consolidated balance sheet date presented.
The Company’s readily available liquidity position decreased to $463.9 million as of September 30, 2026, compared to $467.2 million as of December 31, 2025, due to a number of factors, including a reduction in cash and cash equivalents commensurate with efforts to improve balance sheet efficiency, combined with increased usage of secured short-term borrowings as of September 30, 2026. While readily available liquidity decreased comparing September 30, 2026 to December 31, 2025, the Company maintained ample access to liquidity relative to estimated uninsured deposits. Excluding wholesale brokered deposits, as of September 30, 2026, the Company had approximately 27 thousand deposit accounts with an average balance of approximately $32.9 thousand per account. Estimated uninsured deposits (calculated as deposit amounts per deposit holder in excess of $250 thousand, the maximum amount of federal deposit insurance, and excluding deposits secured by pledged assets) totaled $190.0 million, or 18.7% of total deposits, as of September 30, 2026. As of December 31, 2025, estimated uninsured deposits totaled $218.0 million, or 21.2% of total deposits. Management believes the Company’s on-balance sheet and other readily available liquidity sources as presented in the table above provide strong indicators of the Company’s ability to fund obligations in a stressed liquidity environment, particularly when considered relative to the Company’s uninsured deposit levels. Furthermore, in addition to the liquidity sources noted in the table above, the Company has access to additional sources of liquidity that generally could be obtained over a period of time. For example, the Company has access to unsecured brokered deposits through the wholesale funding markets.
Management believes that the Company has adequate sources of liquidity to cover its contractual obligations and commitments over the next twelve months.
59
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The primary purpose of managing interest rate risk is to invest capital effectively and preserve the value created by the Company’s core banking business. This is accomplished through the development and implementation of lending, funding, pricing and hedging strategies designed to maximize net interest income performance under varying interest rate environments, subject to liquidity and interest rate risk guidelines. Effective interest rate sensitivity management ensures that both assets and liabilities respond to changes in interest rates within an acceptable timeframe, thereby minimizing the effect of such interest rate movements on short- and long-term net interest margin and net interest income.
Financial simulation models are the primary tools used by the Asset/Liability Committee of the Bank’s board of directors to measure interest rate exposure. Using a wide range of scenarios, management is provided with extensive information on the potential impact on net interest income caused by changes in interest rates. In these simulations, assumptions are made about the direction and volatility of interest rates, the slope of the yield curve and the changing composition of the Company’s balance sheet resulting from both strategic plans and customer behavior. Simulation models also incorporate management’s assumptions regarding such factors as loan and deposit growth, pricing, prepayment speeds and spreads between interest rates paid on deposits and charged on loans. Because of limitations inherent in any approach used to measure interest rate risk, simulation results are not intended as a forecast of the actual effect of a change in market interest rates on our results but rather as a means to better plan and execute appropriate asset-liability management strategies and manage our interest rate risk.
Assessing Short-Term Interest Rate Risk – Net Interest Margin Simulation
On a quarterly basis, management simulates how changes in short- and long-term interest rates will impact future profitability, as reflected by changes in the Bank’s net interest margin and net interest income. The tables below depict how, as of September 30, 2026, pre-tax net interest margin and net interest income are forecasted to change over timeframes of one year and two years under the six listed interest rate scenarios. The interest rate scenarios contemplate immediate and parallel shifts in short- and long-term interest rates.
Average Change in Net Interest Margin from Level Interest Rate Forecast (basis points, pre-tax):
|
|
1 Year |
|
|
2 Years |
|
||
+1% |
|
|
8 |
|
|
|
11 |
|
+2% |
|
|
16 |
|
|
|
22 |
|
+3% |
|
|
21 |
|
|
|
27 |
|
-1% |
|
|
(6 |
) |
|
|
(8 |
) |
-2% |
|
|
(6 |
) |
|
|
(11 |
) |
-3% |
|
|
(5 |
) |
|
|
(15 |
) |
Cumulative Change in Net Interest Income from Level Interest Rate Forecast (dollars in thousands, pre-tax):
|
|
1 Year |
|
|
2 Years |
|
||
+1% |
|
$ |
977 |
|
|
$ |
2,628 |
|
+2% |
|
|
1,880 |
|
|
|
5,049 |
|
+3% |
|
|
2,422 |
|
|
|
6,325 |
|
-1% |
|
|
(681 |
) |
|
|
(1,984 |
) |
-2% |
|
|
(648 |
) |
|
|
(2,652 |
) |
-3% |
|
|
(588 |
) |
|
|
(3,470 |
) |
60
ITEM 4. CONTROLS AND PROCEDURES
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
Bancshares maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in Bancshares’ reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to Bancshares’ management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.
Bancshares’ management carried out an evaluation, under the supervision and with the participation of its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of Bancshares’ disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act) as of September 30, 2026, pursuant to the evaluation of these controls and procedures required by Rule 13a-15 of the Exchange Act. Based on that evaluation, Bancshares’ management concluded, as of September 30, 2026, that Bancshares’ disclosure controls and procedures were effective at the reasonable assurance level to ensure that the information required to be disclosed in Bancshares’ periodic filings with the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
Changes in Internal Control Over Financial Reporting
There were no changes in Bancshares’ internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the quarter ended September 30, 2026 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
61
ITEM 1. LEGAL PROCEEDINGS
The Company is a party to certain ordinary course litigation, and the Company intends to vigorously defend itself in all such litigation. In the opinion of the Company, based on review and consultation with legal counsel, the outcome of such ordinary course litigation should not have a material adverse effect on the Company’s consolidated financial statements or results of operations.
ITEM 1A. RISK FACTORS
A list of factors that could materially affect the Company’s business, financial condition and/or operating results is included in Part I, Item 1A, “Risk Factors” in the Company's 2025 Form 10-K. There have been no material changes to such risk factors. Additional risks and uncertainties not currently known to the Company or that the Company currently deems to be immaterial also may materially adversely affect the Company’s business, financial condition and/or operating results.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following table sets forth purchases made by or on behalf of Bancshares or any “affiliated purchaser,” as defined in Rule 10b-18(a)(3) of the Exchange Act, of shares of Bancshares’ common stock during the third quarter of 2026:
Issuer Purchases of Equity Securities
Period |
|
Total Number |
|
|
Average |
|
|
Total Number |
|
|
Maximum Number |
|
||||
July 1 – July 31 |
|
|
20,430 |
|
|
$ |
16.55 |
|
|
|
20,000 |
|
|
|
1,527,313 |
|
August 1 – August 31 |
|
|
320,020 |
|
|
$ |
16.42 |
|
|
|
320,000 |
|
|
|
1,207,313 |
|
September 1 – September 30 |
|
|
50,010 |
|
|
$ |
16.49 |
|
|
|
50,000 |
|
|
|
1,157,313 |
|
Total |
|
|
390,460 |
|
|
$ |
16.44 |
|
|
|
390,000 |
|
|
|
1,157,313 |
|
ITEM 5. OTHER INFORMATION
(a) None.
(b) None.
(c) During the period covered by this report, none of the Company’s directors or executive officers
62
ITEM 6. EXHIBITS
Exhibit No. |
|
Description |
|
|
|
3.1 |
|
Certificate of Incorporation of United Security Bancshares, Inc. (incorporated by reference to Exhibit 3(i) to the Quarterly Report on Form 10-Q (File No. 000-14549), filed on November 12, 1999). |
|
|
|
3.1A |
|
Certificate of Amendment to the Certificate of Incorporation of United Security Bancshares, Inc., effective as of October 11, 2016 (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K (File No. 000-14549), filed on October 11, 2016). |
|
|
|
3.2 |
|
Amended and Restated Bylaws of First US Bancshares, Inc., effective as of January 29, 2025 (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K (File No. 000-14549), filed on January 30, 2025). |
|
|
|
31.1*
|
|
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended. |
|
|
|
31.2* |
|
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended. |
|
|
|
32* |
|
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
|
101 |
|
The following financial statements from the Quarterly Report on Form 10-Q for the quarter ended September 30, 2026, formatted in Inline XBRL: (i) Interim Condensed Consolidated Balance Sheets, (ii) Interim Condensed Consolidated Statements of Comprehensive Income, (iii) Interim Condensed Consolidated Statements of Operations, (iv) Interim Condensed Consolidated Statements of Changes in Shareholders' Equity, (v) Interim Condensed Consolidated Statements of Cash Flows, and (vi) Notes to the Interim Condensed Consolidated Financial Statements, tagged as blocks of text and including detailed tags. |
|
|
|
104 |
|
The cover page from the Quarterly Report on Form 10-Q for the quarter ended September 30, 2026, formatted in Inline XBRL. |
________________
*Filed herewith
63
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
FIRST US BANCSHARES, INC.
DATE: November 5, 2026
By: |
|
/s/ Thomas S. Elley |
|
|
Thomas S. Elley |
|
|
Its Senior Executive Vice President, Treasurer, Assistant Secretary and Chief Financial Officer |
|
|
(Duly Authorized Officer and Principal Financial Officer) |
64