[10-Q] SOUTHERN FIRST BANCSHARES INC Quarterly Earnings Report

Rhea-AI Filing Summary

Southern First Bancshares (SFST) reported stronger Q3 results. Net income rose to $8.662 million from $4.382 million a year ago, and diluted EPS improved to $1.07 from $0.54. Net interest income increased to $27.529 million versus $20.591 million, reflecting higher loan yields and lower interest expense. The provision for credit losses was $0.850 million. Noninterest income was $3.600 million and noninterest expenses were $18.946 million.

Total assets grew to $4.359 billion from $4.088 billion at year-end. Loans reached $3.789 billion (up from $3.632 billion), while deposits increased to $3.676 billion (from $3.436 billion). Cash and equivalents rose to $282.903 million. The allowance for credit losses stood at $41.799 million. Accumulated other comprehensive loss narrowed to $8.426 million, aided by unrealized gains on securities. As context, 8,189,177 common shares were outstanding as of October 27, 2025.

Positive

• Q3 net income $8.662M vs. $4.382M YoY; diluted EPS $1.07 vs. $0.54
• Net interest income $27.529M, up year over year, with lower interest expense
• Deposits $3.676B and loans $3.789B grew from year-end, supporting revenue

Negative

• None.

Insights

Banking analyst

Q3 profitability improved on wider net interest income.

Southern First delivered higher Q3 earnings as net interest income reached $27.529M, up year over year, while interest expense declined versus prior-year levels. The quarter included a modest provision of $0.850M, indicating stable credit costs in the period.

Balance sheet growth was broad-based: loans increased to $3.789B and deposits to $3.676B. Liquidity improved with cash and equivalents at $282.903M. Accumulated other comprehensive loss narrowed to $8.426M on securities gains, supporting tangible capital.

Key dependencies include funding mix and asset yields as rates evolve. Actual impact will hinge on loan growth pace and credit performance. The year-to-date net income of $20.509M provides a stronger earnings base heading into Q4 2025.

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2025
OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from                      to
Commission file number 000-27719

Southern First Bancshares, Inc.

(Exact name of registrant as specified in its charter)

South Carolina		58-2459561
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
6 Verdae Boulevard
Greenville, S.C.		29607
(Address of principal executive offices)		(Zip Code)

864-679-9000
(Registrant’s telephone number, including area code)

Not Applicable
(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
Common Stock	SFST	The Nasdaq Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the 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.  Yes ☒ No ☐

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). Yes ☒ No ☐

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 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	☒
Non-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: 8,189,177 shares of common stock, par value $0.01 per share, were issued and outstanding as of October 27, 2025.

Table of Contents 

SOUTHERN FIRST BANCSHARES, INC. AND SUBSIDIARY
September 30, 2025 Form 10-Q

INDEX

		Page
PART I – CONSOLIDATED FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements
	Consolidated Balance Sheets	3
	Consolidated Statements of Income	4
	Consolidated Statements of Comprehensive Income	5
	Consolidated Statements of Shareholders’ Equity	6
	Consolidated Statements of Cash Flows	7
	Notes to Unaudited Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	45
Item 4.	Controls and Procedures	46
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	46
Item 1A.	Risk Factors	46
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	47
Item 3.	Defaults upon Senior Securities	47
Item 4.	Mine Safety Disclosures	47
Item 5.	Other Information	47
Item 6.	Exhibits	47

2 

Table of Contents 

PART I. CONSOLIDATED FINANCIAL INFORMATION

Item 1. CONSOLIDATED FINANCIAL STATEMENTS

SOUTHERN FIRST BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS

		September 30,				December 31,
(dollars in thousands, except share data)		2025				2024
		(Unaudited)				(Audited)
ASSETS
Cash and cash equivalents:
Cash and due from banks		$	24,600				22,553
Federal funds sold			178,534				128,452
Interest-bearing deposits with banks			79,769				11,858
Total cash and cash equivalents			282,903				162,863
Investment securities:
Investment securities available for sale			131,040				132,127
Other investments			20,066				19,490
Total investment securities			151,106				151,617
Mortgage loans held for sale			6,906				4,565
Loans			3,789,021				3,631,767
Less allowance for credit losses			(41,799	)			(39,914	)
Loans, net			3,747,222				3,591,853
Bank owned life insurance			55,324				54,070
Property and equipment, net			84,586				88,794
Deferred income taxes, net			12,657				13,467
Other assets			17,885				20,364
Total assets		$	4,358,589				4,087,593
LIABILITIES
Deposits		$	3,676,417				3,435,765
FHLB advances and related debt			240,000				240,000
Subordinated debentures			24,903				24,903
Other liabilities			60,921				56,481
Total liabilities			4,002,241				3,757,149
SHAREHOLDERS’ EQUITY
Preferred stock, par value $.01 per share, 10,000,000 shares authorized			-				-
Common stock, par value $.01 per share, 20,000,000 shares authorized, 8,189,177 shares issued and outstanding at September 30, 2025; 20,000,000 shares authorized, 8,164,872 shares issued and outstanding at December 31, 2024.			82				82
Nonvested restricted stock			(1,929	)			(3,884	)
Additional paid-in capital			125,035				124,641
Accumulated other comprehensive loss			(8,426	)			(11,472	)
Retained earnings			241,586				221,077
Total shareholders’ equity			356,348				330,444
Total liabilities and shareholders’ equity		$	4,358,589				4,087,593

See notes to consolidated financial statements that are an integral part of these consolidated statements.

3 

Table of Contents 

SOUTHERN FIRST BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

		For the three months								For the nine months
		ended September 30,								ended September 30,
(dollars in thousands, except share data)		2025				2024				2025				2024
Interest income
Loans		$	50,999				47,550				147,077				139,700
Investment securities			1,342				1,412				4,102				4,308
Federal funds sold and interest-bearing deposits with banks			2,645				2,209				5,773				6,072
Total interest income			54,986				51,171				156,952				150,080
Interest expense
Deposits			24,703				27,725				72,572				82,873
Borrowings			2,754				2,855				8,172				8,443
Total interest expense			27,457				30,580				80,744				91,316
Net interest income			27,529				20,591				76,208				58,764
Provision for credit losses			850				-				2,300				325
Net interest income after provision for credit losses			26,679				20,591				73,908				58,439
Noninterest income
Mortgage banking income			1,600				1,449				4,593				4,536
Service fees on deposit accounts			625				455				1,731				1,265
ATM and debit card income			601				599				1,739				1,730
Income from bank owned life insurance			439				401				1,254				1,162
Other income			335				271				729				669
Total noninterest income			3,600				3,175				10,046				9,362
Noninterest expenses
Compensation and benefits			11,299				10,789				34,277				32,936
Occupancy			2,447				2,595				7,517				7,704
Outside service and data processing			2,158				1,930				6,383				5,738
Insurance			961				1,025				2,881				2,945
Professional fees			605				548				1,723				1,748
Marketing			412				319				1,183				1,077
Other			1,064				833				3,153				2,634
Total noninterest expenses			18,946				18,039				57,117				54,782
Income before income tax expense			11,333				5,727				26,837				13,019
Income tax expense			2,671				1,345				6,328				3,116
Net income		$	8,662				4,382				20,509				9,903
Earnings per common share
Basic		$	1.08				0.54				2.55				1.22
Diluted			1.07				0.54				2.54				1.22
Weighted average common shares outstanding
Basic			8,030,944				8,064,283				8,048,426				8,100,003
Diluted			8,080,459				8,089,176				8,080,678				8,123,846

See notes to consolidated financial statements that are an integral part of these consolidated statements.

4 

Table of Contents 

SOUTHERN FIRST BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)

		For the three months ended September 30,								For the nine months ended September 30,
(dollars in thousands)		2025				2024				2025				2024
Net income		$	8,662				4,382				20,509				9,903
Other comprehensive income:
Unrealized gain on securities available for sale:
Unrealized holding gain arising during the period, pretax			1,498				3,548				3,855				2,884
Tax expense			(315	)			(745	)			(809	)			(605	)
Other comprehensive income			1,183				2,803				3,046				2,279
Comprehensive income		$	9,845				7,185				23,555				12,182

See notes to consolidated financial statements that are an integral part of these consolidated statements.

5 

Table of Contents 

SOUTHERN FIRST BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Unaudited)

		For the three months ended September 30,
Accumulated other comprehensive income (loss)		Common stock								Preferred stock								Nonvested restricted				Additional paid-in				Accumulated other comprehensive				Retained
(dollars in thousands, except share data)		Shares				Amount				Shares				Amount				stock				capital				income (loss)				earnings				Total
June 30, 2024			8,155,097			$	82				-			$	-			$	(4,710	)		$	124,174			$	(11,866	)		$	211,068			$	318,748
Net incomeAdditional paid-in capital			-				-				-				-				-				-				-				4,382				4,382
Proceeds from exercise of stock options			1,000				-				-				-				-				23				-				-				23
Compensation expense related to restricted stock, net of tax			-				-				-				-				491				-				-				-				491
Compensation expense related to stock options, net of taxPreferred stock			-				-				-				-				-				91				-				-				91
Other comprehensive income			-				-				-				-				-				-				2,803				-				2,803
September 30, 2024			8,156,097			$	82				-			$	-			$	(4,219	)		$	124,288			$	(9,063	)		$	215,450			$	326,538
June 30, 2025			8,180,715			$	82				-			$	-			$	(2,774	)		$	124,839			$	(9,609	)		$	232,924			$	345,462
Net incomeNonvested restricted stock			-				-				-				-				-				-				-				8,662				8,662
Proceeds from exercise of stock options			17,750				-				-				-				-				581				-				-				581
Restricted shares withheld for taxes			(2,094	)			-				-				-				-				(79	)			-				-				(79	)
Restricted stock awards (forfeitures)			(7,194	)			-				-				-				306				(306	)			-				-				-
Share based compensation expense, net of forfeituresRetained earnings			-				-				-				-				539				-				-				-				539
Other comprehensive incomeCommon stock			-				-				-				-				-				-				1,183				-				1,183
September 30, 2025			8,189,177			$	82				-			$	-			$	(1,929	)		$	125,035			$	(8,426	)		$	241,586			$	356,348
		For the nine months ended September 30,
		Common stock								Preferred stock								Nonvested restricted				Additional paid-in				Accumulated other comprehensive				Retained
(dollars in thousands, except share data)		Shares				Amount				Shares				Amount				stock				capital				income (loss)				earnings				Total
December 31, 2023			8,088,186			$	81				-				-			$	(3,596	)		$	121,777			$	(11,342	)		$	205,547			$	312,467
Net income			-				-				-				-				-				-				-				9,903				9,903
Proceeds from exercise of stock options			12,000				-				-				-				-				190				-				-				190
Issuance of restricted stock, net of forfeitures			55,911				1				-				-				(2,035	)			2,034				-				-				-
Compensation expense related to restricted stock, net of tax			-				-				-				-				1,412				-				-				-				1,412
Compensation expense related to stock options, net of tax			-				-				-				-				-				287				-				-				287
Other comprehensive income			-				-				-				-				-				-				2,279				-				2,279
September 30, 2024			8,156,097			$	82				-			$	-			$	(4,219	)		$	124,288			$	(9,063	)		$	215,450			$	326,538
December 31, 2024			8,164,872			$	82				-			$	-			$	(3,884	)		$	124,641			$	(11,472	)		$	221,077			$	330,444
Net income			-				-				-				-				-				-				-				20,509				20,509
Proceeds from exercise of stock options			43,250				-				-				-				-				1,097				-				-				1,097
Restricted shares withheld for taxes			(11,751	)			-				-				-				-				(429	)			-				-				(429	)
Restricted stock awards (forfeitures)			(7,194	)			-				-				-				307				(307	)			-				-				-
Share based compensation expense, net of forfeitures			-				-				-				-				1,648				33				-				-				1,681
Other comprehensive income			-				-				-				-				-				-				3,046				-				3,046
September 30, 2025			8,189,177			$	82				-			$	-			$	(1,929	)		$	125,035			$	(8,426	)		$	241,586			$	356,348

See notes to consolidated financial statements that are an integral part of these consolidated statements.

6 

Table of Contents 

SOUTHERN FIRST BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

		For the nine months ended September 30,
(dollars in thousands)		2025				2024
Operating activities
Net income		$	20,509			$	9,903
Adjustments to reconcile net income to cash provided by operating activities:
Provision for credit losses			2,300				325
Depreciation and other amortization			3,319				3,623
Accretion and amortization of securities discounts and premium, net			336				437
Net change in operating leases			69				114
Stock-based compensation expense			1,681				1,699
Gain on sale of loans held for sale			(4,552	)			(4,354	)
Loans originated and held for sale			(154,847	)			(148,745	)
Proceeds from sale of loans held for sale			157,058				151,691
Increase in cash surrender value of bank owned life insurance			(1,254	)			(1,162	)
Decrease in other assets			2,755				426
Increase in other liabilities			5,169				13,408
Net cash provided by operating activities			32,543				27,365
Investing activities
Increase (decrease) in cash realized from:
Increase in loans, net			(157,544	)			(18,195	)
Purchase of property and equipment			(309	)			(567	)
Purchase of investment securities:
Available for sale			(3,220	)			(20,513	)
Other investments			(576	)			(4,301	)
Payments and maturities, calls and repayments of investment securities:
Available for sale			7,826				23,065
Other investments			-				4,600
Net cash used for investing activities			(153,823	)			(15,911	)
Financing activities
Increase (decrease) in cash realized from:
Increase in deposits, net			240,652				139,261
Decrease in Federal Home Loan Bank advances and other borrowings, net			-				(35,000	)
Decrease in subordinated debentures			-				(11,500	)
Proceeds from the exercise of stock options			1,097				190
Restricted shares withheld for taxes			(429	)			-
Net cash provided by financing activities			241,320				92,951
Net increase in cash and cash equivalents			120,040				104,405
Cash and cash equivalents at beginning of the period			162,863				156,170
Cash and cash equivalents at end of the period		$	282,903			$	260,575
Supplemental information
Cash paid for
Interest		$	79,536			$	87,129
Income taxes			7,255				2,235
Schedule of non-cash transactions
Unrealized gain on securities, net of income taxes			3,046				2,279
Foreclosure of other real estate			275				-

See notes to consolidated financial statements that are an integral part of these consolidated statements.

7 

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SOUTHERN FIRST BANCSHARES, INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – Summary of Significant Accounting Policies

Nature of Business

Southern First Bancshares, Inc. (the “Company”) is a South Carolina corporation that owns all of the capital stock of Southern First Bank (the “Bank”) and all of the stock of Greenville First Statutory Trusts I and II (collectively, the “Trusts”). The Trusts are special purpose non-consolidated entities organized for the sole purpose of issuing trust preferred securities. The Bank’s primary federal regulator is the Federal Deposit Insurance Corporation (the “FDIC”). The Bank is also regulated and examined by the South Carolina Board of Financial Institutions. The Bank is primarily engaged in the business of accepting demand deposits and savings deposits insured by the FDIC, and providing commercial, consumer and mortgage loans to the general public.

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine month periods ended September 30, 2025 are not necessarily indicative of the results that may be expected for the year ending December 31, 2025. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 as filed with the U.S. Securities and Exchange Commission (“SEC”) on March 3, 2025. The consolidated financial statements include the accounts of the Company and the Bank. In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810, “Consolidation,” the financial statements related to the Trusts have not been consolidated.

Risk and Uncertainties

In the normal course of its business, the Company encounters two significant types of risks: economic and regulatory. There are three main components of economic risk: interest rate risk, credit risk and market risk. The Company is subject to interest rate risk to the degree that its interest-bearing liabilities mature or reprice at different speeds, or on different bases, than its interest-earning assets. Credit risk is the risk of default within the Company’s loan portfolio that results from borrowers’ inability or unwillingness to make contractually required payments. Market risk reflects changes in the value of collateral underlying loans receivable and the valuation of real estate held by the Company. There were several notable bank failures in 2023, driven primarily by liquidity challenges as depositors rapidly withdrew funds. These failures were exacerbated by the impact of rising interest rates, which left affected banks unable to sell long-term investment securities without incurring significant losses. In response, regulators took steps to stabilize the banking system, including ensuring that losses to the Deposit Insurance Fund used to support uninsured depositors would be recovered through a special assessment on banks, as mandated by law. While the banking disruptions seen in 2023 have largely stabilized, the financial environment remains uncertain, shaped by ongoing inflationary pressures, and persistent concerns around commercial real estate values and refinancing risks. In late 2024, the Federal Reserve began lowering interest rates in response to easing inflation and slowing growth. While lower rates can support loan demand, they may also compress net interest margins. The Federal Reserve is also continuing balance sheet reduction, contributing to some funding and market volatility. The long-term impact of these developments on the economy, financial institutions, and regulatory frameworks remains uncertain.

The Company is subject to the regulations of various governmental agencies. These regulations can and do change significantly from period to period. The Company also undergoes periodic examinations by the regulatory agencies, which may subject the Company to changes with respect to the valuation of assets, the amount of required credit loss allowance and operating restrictions resulting from the regulators’ judgments based on information available to them at the time of their examinations.

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The Bank makes loans to individuals and businesses in the Upstate, Midlands, and Lowcountry regions of South Carolina as well as the Triangle, Triad and Charlotte regions of North Carolina and Atlanta, Georgia for various personal and commercial purposes. The Bank’s loan portfolio has a concentration of real estate loans. As of September 30, 2025 and December 31, 2024, real estate loans represented 83.0% and 83.5%, respectively, of total loans. However, borrowers’ ability to repay their loans is not dependent upon any specific economic sector.

As of September 30, 2025, the Company’s and the Bank’s capital ratios were in excess of all regulatory requirements. While management believes that we have sufficient capital to withstand an extended economic recession, our reported and regulatory capital ratios could be adversely impacted by future credit losses.

The Company maintains access to multiple sources of liquidity, including a $15.0 million holding company line of credit with another bank which could be used to support capital ratios at the subsidiary bank. As of September 30, 2025, the $15.0 million line was unused.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amount of income and expenses during the reporting periods. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for credit losses, real estate acquired in the settlement of loans, fair value of financial instruments, and valuation of deferred tax assets.

During the first quarter of 2025, the Company refined its methodology for estimating the allowance for credit losses (“ACL”) on loans by transitioning from a lifetime probability of default and loss given default model to a discounted cash flow (“DCF”) approach. The Company transitioned to the DCF method as it allows for a better estimation of credit losses through customization among the various inputs by loan segmentation. The DCF model uses regression techniques that relate one or more economic factors to the default rate of various portfolios to build reasonable and supportable forecasts to estimate future losses. The Company determined that the national gross domestic product and unemployment rate were the two economic factors which had the greatest correlation to historical performance for use in the forecasted portion of the model. In addition, the transition to the DCF model allowed the Company to reduce its reliance on qualitative factors and to analyze them on a more granular level, such as by segment. The refinement represents a change in accounting estimate under ASC Topic 250, Accounting Changes and Error Corrections, with prospective application beginning in the period of change. This change in accounting estimate did not have a material effect on the Company’s financial statements.

Reclassifications

Certain amounts, previously reported, have been reclassified to state all periods on a comparable basis and had no effect on shareholders’ equity or net income.

Subsequent Events

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

Newly Issued, But Not Yet Effective Accounting Standards

In November 2024, the FASB amended the Income Statement – Reporting Comprehensive Income topic in the Accounting Standards Codification to require public companies to disclose, in interim and annual reporting periods, additional information about certain expenses in the notes to the financial statements. The amendments are effective for annual periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company will apply the amendments retrospectively to all prior periods presented in the financial statements. The Company does not expect these amendments to have a material effect on its financial statements.

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NOTE 2 – Investment Securities

The amortized costs and fair value of investment securities are as follows:

Schedule of amortized costs and fair value of investment securities
		September 30, 2025
		Amortized				Gross Unrealized								Fair
(dollars in thousands) Corporate bonds [Member]		Cost				Gains				Losses				Value
Available for sale Asset-backed securities [Member]
Corporate bonds US treasuries [Member]		$	2,102				-				143				1,959
US treasuries			1,000				-				56				944
US government agencies US government agencies [Member]			16,361				20				1,216				15,165
State and political subdivisions State and political subdivisions [Member]			22,199				-				2,298				19,901
Asset-backed securities Mortgage-backed securities [Member]			33,842				67				135				33,774
Mortgage-backed securities			66,202				14				6,919				59,297
Total investment securities available for sale		$	141,706				101				10,767				131,040

		December 31, 2024
		Amortized				Gross Unrealized								Fair
		Cost				Gains				Losses				Value
Available for sale
Corporate bonds		$	2,121				-				194				1,927
US treasuries			999				-				91				908
US government agencies			17,540				1				1,746				15,795
State and political subdivisions			22,387				-				3,065				19,322
Asset-backed securities			36,613				36				111				36,538
Mortgage-backed securities			66,988				19				9,370				57,637
Total investment securities available for sale		$	146,648				56				14,577				132,127

Contractual maturities and yields on the Company’s investment securities at September 30, 2025 and December 31, 2024 are shown in the following table. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

Schedule of maturities and yields on the company’s investment securities
																										September 30, 2025
		Less than one year								One to five years								Five to ten years								Over ten years								Total
(dollars in thousands)		Amount				Yield				Amount				Yield				Amount				Yield				Amount				Yield				Amount				Yield
Available for sale
Corporate bonds		$	-				-			$	1,959				2.03	%		$	-				-			$	-				-			$	1,959				2.03	%
US treasuries			-				-				944				1.27	%			-				-				-				-				944				1.27	%
US government agencies			-				-				7,348				1.25	%			7,817				4.64	%			-				-				15,165				2.99	%
State and political subdivisions			469				2.13	%			3,020				1.64	%			5,244				2.15	%			11,168				2.18	%			19,901				2.09	%
Asset-backed securities			-				-				-				-				3,463				5.21	%			30,311				5.52	%			33,774				5.49	%
Mortgage-backed securities			-				-				6,633				1.27	%			9,557				2.76	%			43,107				2.61	%			59,297				2.48	%
Total investment securities		$	469				2.13	%		$	19,904				1.39	%		$	26,081				3.52	%		$	84,586				3.60	%		$	131,040				3.24	%

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																										December 31, 2024
		Less than one year								One to five years								Five to ten years								Over ten years								Total
(dollars in thousands)		Amount				Yield				Amount				Yield				Amount				Yield				Amount				Yield				Amount				Yield
Available for sale
Corporate bonds		$	-				-			$	1,927				2.02	%		$	-				-			$	-				-			$	1,927				2.02	%
US treasuries			-				-				908				1.27	%			-				-				-				-				908				1.27	%
US government agencies			-				-				5,021				1.10	%			10,774				4.51	%			-				-				15,795				3.43	%
State and political subdivisions			461				2.13	%			1,726				1.61	%			5,049				2.10	%			12,086				2.13	%			19,322				2.08	%
Asset-backed securities			-				-				23				6.14	%			3,420				5.25	%			33,095				5.87	%			36,538				5.81	%
Mortgage-backed securities			-				-				6,549				1.28	%			7,548				3.00	%			43,540				2.45	%			57,637				2.39	%
Total investment securities		$	461				2.13	%		$	16,154				1.35	%		$	26,791				3.73	%		$	88,721				3.68	%		$	132,127				3.40	%

The tables below summarize gross unrealized losses on investment securities and the fair market value of the related securities at September 30, 2025 and December 31, 2024, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position.

Schedule of gross unrealized losses on investment securities and fair market value of related securities
																										September 30, 2025
Total investment securities [Member]		Less than 12 months												12 months or longer												Total
(dollars in thousands)		#				Fair value				Unrealized losses				#				Fair value				Unrealized losses				#				Fair value				Unrealized losses
Available for sale
Corporate bonds			-			$	-			$	-				1			$	1,959			$	143				1			$	1,959			$	143
US treasuries			-				-				-				1				944				56				1				944				56
US government agencies			-				-				-				9				10,801				1,216				9				10,801				1,216
State and political subdivisions			2				953				95				31				18,948				2,203				33				19,901				2,298
Asset-backed securities			3				7,877				74				5				8,328				61				8				16,205				135
Mortgage-backed securities			4				6,147				49				65				52,369				6,870				69				58,516				6,919
Total investment securities			9			$	14,977			$	218				112			$	93,349			$	10,549				121			$	108,326			$	10,767

																														December 31, 2024
		Less than 12 months												12 months or longer												Total
(dollars in thousands)		#				Fair value				Unrealized losses				#				Fair value				Unrealized losses				#				Fair value				Unrealized losses
Available for sale
Corporate bonds			-			$	-			$	-				1			$	1,927			$	194				1			$	1,927			$	194
US treasuries			-				-				-				1				908				91				1				908				91
US government agencies			1				2,694				1				9				10,269				1,745				10				12,963				1,746
State and political subdivisions			3				1,436				153				30				17,886				2,912				33				19,322				3,065
Asset-backed securities			6				15,828				83				5				5,344				28				11				21,172				111
Mortgage-backed securities			6				8,226				409				61				45,360				8,961				67				53,586				9,370
Total investment securities			16			$	28,184			$	646				107			$	81,694			$	13,931				123			$	109,878			$	14,577

At September 30, 2025, the Company had 121 individual investments that were in an unrealized loss position. The unrealized losses were primarily attributable to changes in interest rates, rather than deterioration in credit quality. The individual securities are each investment grade securities. The Company considers factors such as the financial condition of the issuer including credit ratings and specific events affecting the operations of the issuer, volatility of the security, underlying assets that collateralize the debt security, and other industry and macroeconomic conditions. The Company does not intend to sell these securities, and it is more likely than not that the Company will not be required to sell these securities before recovery of the amortized cost. The issuers of these securities continue to make timely principal and interest payments under the contractual terms of the securities. As such, there is no allowance for credit losses on available for sale securities recognized as of September 30, 2025.

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Other investments are comprised of the following and are recorded at cost which approximates fair value.

Schedule of other investments
(dollars in thousands)		September 30, 2025				December 31, 2024
Federal Home Loan Bank stock		$	14,540				14,516
Other nonmarketable investments			5,123				4,571
Investment in Trust Preferred subsidiaries			403				403
Total other investments		$	20,066				19,490

As of September 30, 2025 and December 31, 2024, there was no ACL for the Company’s securities AFS portfolio. Any credit loss that has not been recorded through an ACL is recognized in accumulated other comprehensive income (loss). All of the FHLB stock is used to collateralize advances with the FHLB.

At September 30, 2025, there were no securities pledged as collateral for repurchase agreements from brokers.

NOTE 3 – Mortgage Loans Held for Sale

Mortgage loans originated and intended for sale in the secondary market are reported as loans held for sale and carried at fair value under the fair value option with changes in fair value recognized in current period earnings. At the date of funding of the mortgage loan held for sale, the funded amount of the loan, the related derivative asset or liability of the associated interest rate lock commitment, less direct loan costs becomes the initial recorded investment in the loan held for sale. Such amount approximates the fair value of the loan. At September 30, 2025, mortgage loans held for sale totaled $6.9 million compared to $4.6 million at December 31, 2024.

NOTE 4 – Loans and Allowance for Credit Losses

The following table summarizes the composition of our loan portfolio. Total gross loans are recorded net of deferred loan fees and costs, which totaled $5.7 million as of September 30, 2025 and $6.2 million as of December 31, 2024.

Schedule of composition of our loan portfolio
		September 30, 2025								December 31, 2024
(dollars in thousands)Commercial [Member]		Amount				%  of Total				Amount				%  of Total
Commercial
Owner occupied REOwner occupied RE [Member]		$	705,383				18.6	%		$	651,597				17.9	%
Non-owner occupied RE			943,304				24.9	%			924,367				25.5	%
ConstructionConstruction [Member]			71,928				1.9	%			103,204				2.8	%
Business			604,411				16.0	%			556,117				15.3	%
Total commercial loans			2,325,026				61.4	%			2,235,285				61.5	%
ConsumerConsumer [Member]
Real estateReal estate [Member]			1,159,693				30.6	%			1,128,629				31.1	%
Home equityHome equity [Member]			239,996				6.3	%			204,897				5.6	%
ConstructionNon-owner occupied RE [Member]			25,842				0.7	%			20,874				0.6	%
OtherOther [Member]			38,464				1.0	%			42,082				1.2	%
Total consumer loans			1,463,995				38.6	%			1,396,482				38.5	%
Total gross loans, net of deferred fees			3,789,021				100.0	%			3,631,767				100.0	%
Less—allowance for credit losses			(41,799	)							(39,914	)
Total loans, net		$	3,747,222							$	3,591,853

Maturities and Sensitivity of Loans to Changes in Interest Rates

The information in the following tables summarize the loan maturity distribution by type and related interest rate characteristics based on the contractual maturities of individual loans, including loans which may be subject to renewal at their contractual maturity. Renewal of such loans is subject to review and credit approval, as well as modification of terms upon maturity. Actual repayments of loans may differ from the maturities reflected below, because borrowers have the right to prepay obligations with or without prepayment penalties.

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Schedule of loan maturity distribution by type and related interest rate
						September 30, 2025
(dollars in thousands)		One year or less				After one but within five years				After five but within fifteen years				After fifteen years				Total
Commercial
Owner occupied RE		$	39,707				265,726				374,989				24,961				705,383
Non-owner occupied RE			145,791				578,899				200,798				17,816				943,304
Construction			22,802				34,011				15,115				-				71,928
Business			149,210				325,022				126,524				3,655				604,411
Total commercial loans			357,510				1,203,658				717,426				46,432				2,325,026
Consumer
Real estate			28,929				114,413				222,671				793,680				1,159,693
Home equity			5,516				37,676				192,731				4,073				239,996
Construction			18,043				568				7,231				-				25,842
Other			5,648				30,673				1,397				746				38,464
Total consumer loans			58,136				183,330				424,030				798,499				1,463,995
Total gross loans, net of deferred fees		$	415,646				1,386,988				1,141,456				844,931				3,789,021

										December 31, 2024
(dollars in thousands)		One year or less				After one but within five years				After five but within fifteen years				After fifteen years				Total
Commercial
Owner occupied RE		$	21,235				220,648				369,748				39,966				651,597
Non-owner occupied RE			129,269				547,864				227,987				19,247				924,367
Construction			6,479				77,636				19,089				-				103,204
Business			129,978				277,830				144,056				4,253				556,117
Total commercial loans			286,961				1,123,978				760,880				63,466				2,235,285
Consumer
Real estate			20,982				82,896				281,091				743,660				1,128,629
Home equity			3,454				36,722				160,380				4,341				204,897
Construction			5,849				2,133				10,427				2,465				20,874
Other			7,660				30,633				3,040				749				42,082
Total consumer loans			37,945				152,384				454,938				751,215				1,396,482
Total gross loans, net of deferred fees		$	324,906				1,276,362				1,215,818				814,681				3,631,767

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The following table summarizes the loans due after one year by category.

Schedule of loans due after one year by category
		September 30, 2025								December 31, 2024
		Interest Rate												Interest Rate
(dollars in thousands)		Fixed				Floating or Adjustable				Fixed				Floating or Adjustable
Commercial
Owner occupied RE		$	616,874				48,802			$	599,179				31,183
Non-owner occupied RE			694,257				103,256				701,297				93,801
Construction			23,200				25,926				63,019				33,706
Business			284,688				170,513				281,316				144,823
Total commercial loans			1,619,019				348,497				1,644,811				303,513
Consumer
Real estate			979,075				151,689				1,023,593				84,054
Home equity			8,889				225,591				9,899				191,544
Construction			7,799				-				15,025				-
Other			6,653				26,163				8,038				26,384
Total consumer loans			1,002,416				403,443				1,056,555				301,982
Total gross loans, net of deferred fees		$	2,621,435				751,940			$	2,701,366				605,495

Credit Quality Indicators

The Company tracks credit quality based on its internal risk ratings. Upon origination, a loan is assigned an initial risk grade, which is generally based on several factors such as the borrower’s credit score, the loan-to-value ratio, the debt-to-income ratio, etc. After loans are initially graded, they are monitored regularly for credit quality based on many factors, such as payment history, the borrower’s financial status, and changes in collateral value. Loans can be downgraded or upgraded depending on management’s evaluation of these factors. Internal risk-grading policies are consistent throughout each loan type.

A description of the general characteristics of the risk grades is as follows:

· Pass— A pass loan ranges from minimal to average credit risk; however, still has acceptable credit risk.

· Watch—A watch loan exhibits above average credit risk due to minor weaknesses and warrants closer scrutiny by management.

· Special mention—A special mention loan has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or the institution’s credit position at some future date.

· Substandard—A substandard loan is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified must have a well-defined weakness, or weaknesses, which may jeopardize the liquidation of the debt. A substandard loan is characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.

· Doubtful—A doubtful loan has all of the weaknesses inherent in one classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of the currently existing facts, conditions and values, highly questionable and improbable.

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The following table presents loan balances classified by credit quality indicators by year of origination as of September 30, 2025.

Schedule of classified by credit quality indicators by year of origination
																										September 30, 2025
(dollars in thousands)		2025				2024				2023				2022				2021				Prior				Revolving				Revolving Converted to Term				Total
Commercial
Owner occupied RE
Pass		$	59,743				63,053				40,074				190,168				122,283				197,552				85				-				672,958
Watch			4,016				440				5,848				5,801				2,277				10,325				-				-				28,707
Special Mention			-				-				-				-				-				3,456				-				-				3,456
Substandard			-				-				-				262				-				-				-				-				262
Total Owner occupied RE			63,759				63,493				45,922				196,231				124,560				211,333				85				-				705,383
Non-owner occupied RE
Pass			60,224				61,653				64,117				302,806				149,628				257,611				471				467				896,977
Watch			-				618				2,228				5,970				10,666				9,723				-				-				29,205
Special Mention			-				146				-				-				191				7,627				-				-				7,964
Substandard			-				-				-				2,247				-				6,911				-				-				9,158
Total Non-owner occupied RE			60,224				62,417				66,345				311,023				160,485				281,872				471				467				943,304
Construction
Pass			14,053				20,451				12,004				22,011				58				-				-				-				68,577
Watch			-				-				-				1,170				2,181				-				-				-				3,351
Total Construction			14,053				20,451				12,004				23,181				2,239				-				-				-				71,928
Business
Pass			85,947				46,287				47,430				107,471				30,003				55,049				204,217				474				576,878
Watch			704				778				1,220				3,177				2,264				4,194				10,971				387				23,695
Special Mention			77				655				635				630				-				589				160				386				3,132
Substandard			165				-				-				-				-				74				467				-				706
Total Business			86,893				47,720				49,285				111,278				32,267				59,906				215,815				1,247				604,411
Current period gross write-offs			-				-				-				-				-				(78	)			(63	)			-				(141	)
Total Commercial loans			224,929				194,081				173,556				641,713				319,551				553,111				216,371				1,714				2,325,026
Consumer
Real estate
Pass			117,871				64,687				130,511				258,945				250,683				283,170				-				-				1,105,867
Watch			1,200				665				4,539				6,379				8,474				9,577				-				-				30,834
Special Mention			149				817				1,720				5,174				2,621				7,564				-				-				18,045
Substandard			-				641				844				986				720				1,756				-				-				4,947
Total Real estate			119,220				66,810				137,614				271,484				262,498				302,067				-				-				1,159,693
Home equity
Pass			-				-				-				-				-				-				223,850				-				223,850
Watch			-				-				-				-				-				-				8,880				-				8,880
Special Mention			-				-				-				-				-				-				5,757				-				5,757
Substandard			-				-				-				-				-				-				1,509				-				1,509
Total Home equity			-				-				-				-				-				-				239,996				-				239,996
Construction
Pass			15,623				4,507				-				3,089				-				-				648				-				23,867
Watch			-				-				1,975				-				-				-				-				-				1,975
Total Construction			15,623				4,507				1,975				3,089				-				-				648				-				25,842
Other
Pass			1,586				658				614				1,121				394				1,775				31,018				-				37,166
Watch			25				156				38				29				327				115				131				-				821
Special Mention			14				29				5				318				51				41				19				-				477
Total Other			1,625				843				657				1,468				772				1,931				31,168				-				38,464
Current period gross write-offs			(30	)			-				-				-				(21	)			-				(9	)			-				(60	)
Total Consumer loans			136,468				72,160				140,246				276,041				263,270				303,998				271,812				-				1,463,995
Total loans		$	361,397				266,241				313,802				917,754				582,821				857,109				488,183				1,714				3,789,021
Total Current period gross write-offs			(30	)			-				-				-				(21	)			(78	)			(72	)			-				(201	)

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The following table presents loan balances classified by credit quality indicators by year of origination as of December 31, 2024.

																										December 31, 2024
(dollars in thousands)		2024				2023				2022				2021				2020				Prior				Revolving				Revolving Converted to Term				Total
Commercial
Owner occupied RE
Pass		$	51,338				47,997				186,361				122,306				66,561				145,743				160				238				620,704
Watch			480				1,180				3,638				1,962				8,828				11,012				-				-				27,100
Special Mention			-				-				162				-				-				2,840				-				-				3,002
Substandard			-				-				-				-				-				791				-				-				791
Total Owner occupied RE			51,818				49,177				190,161				124,268				75,389				160,386				160				238				651,597
Non-owner occupied RE
Pass			50,685				70,517				321,726				145,658				95,994				183,723				360				220				868,883
Watch			-				954				6,081				10,238				4,705				8,435				-				-				30,413
Special Mention			-				-				-				7,579				-				8,882				-				-				16,461
Substandard			-				-				969				-				-				7,641				-				-				8,610
Total Non-owner occupied RE			50,685				71,471				328,776				163,475				100,699				208,681				360				220				924,367
Current period gross write-offs			-				-				-				-				-				(1,029	)			-				-				(1,029	)
Construction
Pass			24,076				26,501				34,067				15,000				-				-				-				-				99,644
Watch			-				2,420				1,140				-				-				-				-				-				3,560
Total Construction			24,076				28,921				35,207				15,000				-				-				-				-				103,204
Business
Pass			54,814				41,743				129,450				38,312				15,716				51,566				196,246				803				528,650
Watch			-				132				5,353				2,174				1,423				5,243				8,776				389				23,490
Special Mention			660				95				805				-				65				533				-				206				2,364
Substandard			28				-				-				-				385				630				570				-				1,613
Total Business			55,502				41,970				135,608				40,486				17,589				57,972				205,592				1,398				556,117
Current period gross write-offs			-				-				-				(143	)			(347	)			(18	)			(72	)			-				(580	)
Total Commercial loans			182,081				191,539				689,752				343,229				193,677				427,039				206,112				1,856				2,235,285
Consumer
Real estate
Pass			78,287				144,487				277,854				263,079				160,007				153,584				-				-				1,077,298
Watch			671				2,409				6,961				8,573				4,147				4,632				-				-				27,393
Special Mention			817				1,536				5,987				2,664				2,804				5,181				-				-				18,989
Substandard			212				508				967				746				821				1,695				-				-				4,949
Total Real estate			79,987				148,940				291,769				275,062				167,779				165,092				-				-				1,128,629
Home equity
Pass			-				-				-				-				-				-				188,451				-				188,451
Watch			-				-				-				-				-				-				9,114				-				9,114
Special Mention			-				-				-				-				-				-				6,173				-				6,173
Substandard			-				-				-				-				-				-				1,159				-				1,159
Total Home equity			-				-				-				-				-				-				204,897				-				204,897
Current period gross write-offs			-				-				-				-				-				-				(45	)			-				(45	)
Construction
Pass			7,700				3,636				9,222				316				-				-				-				-				20,874
Total Construction			7,700				3,636				9,222				316				-				-				-				-				20,874
Other
Pass			2,732				836				1,521				1,593				1,229				2,609				29,660				-				40,180
Watch			167				61				12				366				-				129				595				-				1,330
Special Mention			36				35				325				66				-				65				45				-				572
Total Other			2,935				932				1,858				2,025				1,229				2,803				30,300				-				42,082
Current period gross write-offs			-				-				-				-				-				(38	)			(42	)			-				(80	)
Total Consumer loans			90,622				153,508				302,849				277,403				169,008				167,895				235,197				-				1,396,482
Total loans		$	272,703				345,047				992,601				620,632				362,685				594,934				441,309				1,856				3,631,767
Total Current period gross write-offs			-				-				-				(143	)			(347	)			(1,085	)			(159	)			-				(1,734	)

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The following tables present loan balances by age and payment status.

Schedule of loan balances by age and payment status
		September 30, 2025
(dollars in thousands)		Accruing 30-59 days past due				Accruing 60-89 days past due				Accruing 90 days or more past due				Nonaccrual loans				Accruing current				Total
Commercial
Owner occupied RE		$	1,974				-				-				262				703,147				705,383
Non-owner occupied RE			491				-				-				6,911				935,902				943,304
Construction			-				-				-				-				71,928				71,928
Business			914				-				-				195				603,302				604,411
Consumer
Real estate			2,078				685				-				3,394				1,153,536				1,159,693
Home equity			703				-				-				705				238,588				239,996
Construction			-				-				-				-				25,842				25,842
Other			51				-				-				-				38,413				38,464
Total loans		$	6,211				685				-				11,467				3,770,658				3,789,021

		December 31, 2024
(dollars in thousands)		Accruing 30-59 days past due				Accruing 60-89 days past due				Accruing 90 days or more past due				Nonaccrual loans				Accruing current				Total
Commercial
Owner occupied RE		$	292				-				-				-				651,305				651,597
Non-owner occupied RE			-				-				-				7,641				916,726				924,367
Construction			-				-				-				-				103,204				103,204
Business			1,319				-				-				1,016				553,782				556,117
Consumer
Real estate			3,839				938				-				1,908				1,121,944				1,128,629
Home equity			41				-				-				312				204,544				204,897
Construction			-				-				-				-				20,874				20,874
Other			-				-				-				-				42,082				42,082
Total loans		$	5,491				938				-				10,877				3,614,461				3,631,767

As of September 30, 2025 and December 31, 2024, accruing loans 30 days or more past due represented 0.18% of the Company’s total loan portfolio. Commercial loans accruing 30 days or more past due were 0.09% and 0.05% of the Company’s total loan portfolio as of September 30, 2025 and December 31, 2024, respectively. Consumer loans accruing 30 days or more past due were 0.09% and 0.13% of total loans as of September 30, 2025 and December 31, 2024, respectively.

The table below summarizes nonaccrual loans by major categories for the periods presented.

Schedule of nonaccrual loans by major categories
		September 30, 2025																December 31, 2024
		Nonaccrual				Nonaccrual								Nonaccrual				Nonaccrual
		loans				loans				Total				loans				loans				Total
		with no				with an				nonaccrual				with no				with an				nonaccrual
(dollars in thousands)		allowance				allowance				loans				allowance				allowance				loans
Commercial
Owner occupied RE		$	262				-				262			$	-				-				-
Non-owner occupied RE			5,122				1,789				6,911				5,844				1,797				7,641
Business			-				195				195				-				1,016				1,016
Total commercial			5,384				1,984				7,368				5,844				2,813				8,657
Consumer
Real estate			2,412				982				3,394				1,526				382				1,908
Home equity			705				-				705				312				-				312
Total consumer			3,117				982				4,099				1,838				382				2,220
Total nonaccrual loans		$	8,501				2,966				11,467			$	7,682				3,195				10,877

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The Company did not recognize interest income on nonaccrual loans for the three months ended September 30, 2025 and September 30, 2024. The accrued interest reversed during the three months ended September 30, 2025 and September 30, 2024 was not material. Foregone interest income on the nonaccrual loans for the three month period ended September 30, 2025 was $28,000, while foregone interest income on the nonaccrual loans for the three month period ended September 30, 2024 was $111,000.

The Company did not recognize interest income on nonaccrual loans for the nine months ended September 30, 2025 and September 30, 2024. Accrued interest of $63,000 was reversed during the nine months ended September 30, 2025 and $94,000 was reversed during the nine months ended September 30, 2024. Foregone interest income on the nonaccrual loans for the nine month period ended September 30, 2025 was $229,000, while foregone interest income on the nonaccrual loans for the nine month period ended September 30, 2024 was $134,000.

The table below summarizes information regarding nonperforming assets.

Schedule of nonperforming assets
(dollars in thousands)		September 30, 2025				December 31, 2024
Nonaccrual loans		$	11,467				10,877
Other real estate owned			275				-
Total nonperforming assets		$	11,742				10,877
Nonperforming assets as a percentage of:
Total assets			0.27	%			0.27	%
Gross loans			0.31	%			0.30	%
Total loans over 90 days past due		$	1,480				2,641
Loans over 90 days past due and still accruing			-				-

Modifications to Borrowers Experiencing Financial Difficulty

The allowance for credit losses incorporates an estimate of lifetime expected credit losses and is recorded on each asset upon origination or acquisition. The starting point for the estimate of the allowance for credit losses is historical loss information, which includes losses from modifications of receivables to borrowers experiencing financial difficulty. The Company uses a discounted cash flow model to determine the allowance for credit losses. An assessment of whether a borrower is experiencing financial difficulty is made on the date of a modification.

Because the effect of most modifications made to borrowers experiencing financial difficulty is already included in the allowance for credit losses due to the measurement methodologies used to estimate the allowance, a change to the allowance for credit losses is generally not recorded upon modification. Loan modifications to borrowers experiencing financial difficulty were not material for the three and nine months ended September 30, 2025 and September 30, 2024.

Allowance for Credit Losses

The Company maintains an allowance for credit losses to provide for expected credit losses. Losses are charged against the allowance when management believes that the principal is uncollectable. Subsequent recoveries, if any, are credited to the allowance. Allocations of the allowance are made for specific loans and for pools of similar types of loans, although the entire allowance is available for any loan that, in management’s judgment, should be charged against the allowance. A provision for credit losses is taken based on management’s ongoing evaluation of the appropriate allowance balance.

A formal evaluation of the adequacy of the ACL is conducted quarterly. This assessment includes procedures to estimate the allowance and test the adequacy and appropriateness of the resulting balance. The level of the allowance is based upon management's evaluation of historical default and loss experience, current and projected economic conditions, asset quality trends, known and inherent risks in the portfolio, adverse situations that may affect the borrowers' ability to repay a loan, the estimated value of any underlying collateral, composition of the loan portfolio, industry and peer bank loan quality indications and other pertinent factors, including regulatory recommendations. Management believes the level of the ACL is adequate to absorb all expected future losses inherent in the loan portfolio at the balance sheet date. The allowance is increased through provision for credit losses and decreased by charge-offs, net of recoveries of amounts previously charged-off.

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On January 1, 2025, the Company transitioned to the DCF modeling approach to estimate the ACL on loans as it allows for a better estimation of credit losses through customization among the various inputs by loan segmentation. The DCF methodology is applied on a segment-by-segment basis at the loan level with a one-year reasonable and supportable forecast period, followed by a one-year reversion to the long-term average. The Company considers economic forecasts of national gross domestic product (“GDP”) and unemployment rates as reported by Fannie Mae to inform the model for loss estimation. Historical loss rates used in the quantitative model were derived using both the Bank's and peer bank data obtained from publicly-available sources (i.e., federal call reports) encompassing an economic cycle. The peer group utilized by the Bank is comprised of financial institutions of relatively similar size (i.e., $1-$15 billion of total assets) and in similar markets. In addition, the DCF methodology considers the weighted average life of the portfolio, impacting the reaction time and the exposure to potential loss based on changes in the interest rate environment. Management also considers qualitative adjustments when estimating loan losses to take into account the model's quantitative limitations. Qualitative adjustments to quantitative loss factors, either negative or positive, may include changes in lending policies; international, national, regional, and local conditions; volume and terms of loans; experience and depth of management; volume and severity of past due loans; effects of changes in lending policy; concentrations of credit; and loan review results. The Company enhanced its qualitative factor framework to better address risks that are not reflected in the quantitative loss factors.

Prior to January 1, 2025, the Company used a lifetime probability of default and loss given default modeling approach to estimate the allowance for credit losses on loans. This method used historical correlations between default experience and the age of loans to forecast defaults and losses, assuming that a loan in a pool shares similar risk characteristics such as loan product type, risk rating and loan age, and demonstrates similar default characteristics as other loans in that pool, as the loan progresses through its lifecycle. The Company calculated lifetime probability of default and loss given default rates based on historical loss experience, which is used to calculate expected losses based on the pool’s loss rate and the age of loans in the pool. The Company used its own internal data to measure historical credit loss experience within the pools with similar risk characteristics over an economic cycle. The probability of default and loss given default method also includes assumptions of observed migration over the lifetime of the underlying loan data. Loans that do not share risk characteristics were evaluated for expected credit losses on an individual basis and excluded from the collective evaluation.

During the quarter ended September 30, 2025, the risk weightings associated with certain qualitative factors were revised based on new information reflecting the current economic and market environment. The result of these changes was immaterial as it relates to the allowance for credit loss balance. 

The following tables summarize the activity related to the allowance for credit losses for the three and nine months ended September 30, 2025 and September 30, 2024.

Schedule of activity related to the allowance for credit losses
														Three months September 30, 2025
		Commercial																																Consumer
(dollars in thousands)		Owner occupied RE				Non- owner occupied RE				Construction				Business				Real Estate				Home Equity				Construction				Other				Total
Balance, beginning of period		$	4,003				7,417				462				11,293				15,533				1,649				455				473				41,285
Provision for credit losses for loans			(469	)			(751	)			140				769				451				115				177				68				500
Loan charge-offs			-				-				-				-				-				-				-				(55	)			(55	)
Loan recoveries			-				-				-				30				36				3				-				-				69
Net loan recoveries (charge-offs)			-				-				-				30				36				3				-				(55	)			14
Balance, end of period		$	3,534				6,666				602				12,092				16,020				1,767				632				486				41,799
Net recoveries to average loans (annualized)																																			0.00	%
Allowance for credit losses to gross loans																																			1.10	%
Allowance for credit losses to nonperforming loans																																			364.50	%

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														Three months ended September 30, 2024
		Commercial																																Consumer
(dollars in thousands)		Owner occupied RE				Non- owner occupied RE				Construction				Business				Real Estate				Home Equity				Construction				Other				Total
Balance, beginning of period		$	5,467				10,562				1,331				7,236				12,397				2,479				278				407				40,157
Provision for credit losses for loans			-				-				-				-				-				-				-				-				-
Loan charge-offs			-				-				-				(72	)			-				(45	)			-				(1	)			(118	)
Loan recoveries			-				-				-				73				-				4				-				50				127
Net loan recoveries (charge-offs)			-				-				-				1				-				(41	)			-				49				9
Balance, end of period		$	5,467				10,562				1,331				7,237				12,397				2,438				278				456				40,166
Net recoveries to average loans (annualized)																																			0.00	%
Allowance for credit losses to gross loans																																			1.11	%
Allowance for credit losses to nonperforming loans																																			346.78	%

														Nine months ended September 30, 2025
		Commercial																Consumer
(dollars in thousands)		Owner occupied RE				Non- owner occupied RE				Construction				Business				Real Estate				Home Equity				Construction				Other				Total
Balance, beginning of period		$	5,482				10,219				940				7,745				12,359				2,655				115				399				39,914
Provision for credit losses			(1,948	)			(3,553	)			(338	)			4,384				3,625				(899	)			517				112				1,900
Loan charge-offs			-				-				-				(141	)			-				-				-				(60	)			(201	)
Loan recoveries			-				-				-				104				36				11				-				35				186
Net loan recoveries (charge-offs)			-				-				-				(37	)			36				11				-				(25	)			(15	)
Balance, end of period		$	3,534				6,666				602				12,092				16,020				1,767				632				486				41,799
Net charge-offs to average loans (annualized)																																			0.00	%
Allowance for credit losses to gross loans																																			1.10	%
Allowance for credit losses to nonperforming loans																																			364.50	%

														Nine months ended September 30, 2024
		Commercial																Consumer
(dollars in thousands)		Owner occupied RE				Non- owner occupied RE				Construction				Business				Real Estate				Home Equity				Construction				Other				Total
Balance, beginning of period		$	6,118				11,167				1,594				7,385				10,647				2,600				677				494				40,682
Provision for credit losses			(651	)			424				(263	)			190				1,750				(244	)			(399	)			(57	)			750
Loan charge-offs			-				(1,029	)			-				(437	)			-				(45	)			-				(80	)			(1,591	)
Loan recoveries			-				-				-				99				-				127				-				99				325
Net loan recoveries (charge-offs)			-				(1,029	)			-				(338	)			-				82				-				19				(1,266	)
Balance, end of period		$	5,467				10,562				1,331				7,237				12,397				2,438				278				456				40,166
Net charge-offs to average loans (annualized)																																			0.05	%
Allowance for credit losses to gross loans																																			1.11	%
Allowance for credit losses to nonperforming loans																																			346.78	%

There was a provision for credit losses of $500,000 for the three months ended September 30, 2025 and no provision for credit losses for the three months ended September 30, 2024. In addition, the provision for credit losses was $1.9 million and $750,000 for the nine months ended September 30, 2025 and September 30, 2024, respectively.0

Collateral dependent loans are loans for which the repayment is expected to be provided substantially through the operation or sale of the collateral and the borrower is experiencing financial difficulty. The Company reviews individually evaluated loans for designation as collateral dependent loans, as well as other loans that management of the Company designates as having higher risk. These loans do not share common risk characteristics and are not included within the collectively evaluated loans for determining the allowance for credit losses.

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Under CECL, for collateral dependent loans, the Company has adopted the practical expedient to measure the allowance for credit losses based on the fair value of collateral. The allowance for credit losses is calculated on an individual loan basis based on the shortfall between the fair value of the loan's collateral, which is adjusted for liquidation costs/discounts, and amortized cost. If the fair value of the collateral exceeds the amortized cost, no allowance is required.

The following tables present an analysis of collateral-dependent loans of the Company as of September 30, 2025 and December 31, 2024.

Schedule of analysis of collateral-dependent loans
										September 30, 2025
		Real				Business
(dollars in thousands)		estate				assets				Other				Total
Commercial
Owner occupied RE		$	262				-				-				262
Non-owner occupied RE			6,911												6,911
Business			171				24				-				195
Total commercial			7,344				24				-				7,368
Consumer
Real estate			3,394				-				-				3,394
Home equity			705				-				-				705
Total consumer			4,099				-				-				4,099
Total		$	11,443				24				-				11,467

										December 31, 2024
		Real				Business
(dollars in thousands)		estate				assets				Other				Total
Commercial
Non-owner occupied RE		$	7,641				-				-				7,641
Business			460				556				-				1,016
Total commercial			8,101				556				-				8,657
Consumer
Real estate			1,908				-				-				1,908
Home equity			312				-				-				312
Total consumer			2,220				-				-				2,220
Total		$	10,321				556				-				10,877

Allowance for Credit Losses - Unfunded Loan Commitments

The allowance for credit losses for unfunded loan commitments was $1.9 million and $1.5 million at September 30, 2025 and December 31, 2024, respectively, and is separately classified on the balance sheet within other liabilities. The following table presents the balance and activity in the ACL for unfunded loan commitments for the three and nine months ended September 30, 2025 and September 30, 2024.

Schedule of allowance for credit losses for unfunded loan commitments
		Three months ended				Three months ended
(dollars in thousands)		September 30, 2025				September 30, 2024
Balance, beginning of period		$	1,506				1,406
Provision for credit losses			350				-
Balance, end of period		$	1,856				1,406
Unfunded Loan Commitments		$	836,396				699,888
Reserve for Unfunded Commitments			0.22	%			0.20	%

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		Nine months ended				Nine months ended
(dollars in thousands)		September 30, 2025				September 30, 2024
Balance, beginning of period		$	1,456				1,831
Provision for (reversal of) credit losses			400				(425	)
Balance, end of period		$	1,856				1,406
Unfunded Loan Commitments		$	836,396				699,888
Reserve for Unfunded Commitments			0.22	%			0.20	%

NOTE 5 – Derivative Financial Instruments

The Company utilizes derivative financial instruments primarily to manage its exposure to changes in interest rates. All derivative financial instruments are recognized as either assets or liabilities and measured at fair value.

The Company enters into commitments to originate residential mortgage loans held for sale, at specified interest rates and within a specified period of time, with clients who have applied for a loan and meet certain credit and underwriting criteria (interest rate lock commitments). These interest rate lock commitments (“IRLCs”) meet the definition of a derivative financial instrument and are reflected in the balance sheet at fair value with changes in fair value recognized in current period earnings. Unrealized gains and losses on the IRLCs are recorded as derivative assets and derivative liabilities, respectively, and are measured based on the value of the underlying mortgage loan, quoted mortgage-backed securities (“MBS”) prices and an estimate of the probability that the mortgage loan will fund within the terms of the interest rate lock commitment, net of estimated commission expenses.

The Company manages the interest rate and price risk associated with its outstanding IRLCs and mortgage loans held for sale by entering into derivative instruments such as forward sales of MBS. These derivatives are free- standing derivatives and are not designated as instruments for hedge accounting. Management expects these derivatives will experience changes in fair value opposite to changes in fair value of the IRLCs and mortgage loans held for sale, thereby reducing earnings volatility. The Company takes into account various factors and strategies in determining the portion of the mortgage pipeline (IRLCs and mortgage loans held for sale) it wants to economically hedge. The gain or loss resulting from the change in the fair value of the derivative is recognized in the Company’s statement of income during the period of change.

The Company entered into a pay-fixed portfolio layer method (“PLM”) fair value swap, designated as a hedging instrument, with a total notional amount of $200.0 million in the second quarter of 2023. The hedging instrument matures on May 25, 2028. The Company entered into a second pay-fixed PLM fair value swap, designated as a hedging instrument, with a total notional amount of $100.0 million in the third quarter of 2024. The hedging instrument matures on August 27, 2027. Under the PLM method, the hedged item is designated as a hedged layer of a closed portfolio of financial loans that is anticipated to remain outstanding for the designated hedged period. Adjustments are made to record the swap at fair value on the consolidated balance sheets, with changes in fair value recognized in interest income. The carrying value of the fair value swap on the consolidated balance sheets will also be adjusted through interest income, based on changes in fair value attributable to changes in the hedged risk.

The following table represents the carrying value of the PLM hedged asset and liability and the cumulative fair value hedging adjustment included in the carrying value of the hedged asset as of September 30, 2025 and December 31, 2024.

Schedule of carrying value of the PLM hedged asset and liability and the cumulative fair value hedging adjustment
		September 30, 2025								December 31, 2024
(dollars in thousands)		Carrying Amount				Hedge Basis Adjustment				Carrying Amount				Hedge Basis Adjustment
Fixed Rate Asset/Liability1		$	301,844				1,844				296,361				(3,638	)

¹ These amounts included the amortized cost basis of closed portfolios of fixed rate loans used to designate hedging relationships in which the hedged item is the stated amount of the assets in the closed portfolio anticipated to be outstanding for the designated hedged period. As of September 30, 2025, the amortized cost basis of the closed portfolio used in this hedging relationship was $620.6 million, the cumulative basis adjustment associated with this hedging relationship was $1.8 million, and the amount of the designated hedged item was $300.0 million.

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The following table summarizes the Company’s outstanding financial derivative instruments at September 30, 2025 and December 31, 2024.

Schedule of outstanding financial derivative instruments
						September 30, 2025
								Fair Value
(dollars in thousands)		Notional				Balance Sheet Location		Asset/(Liability)
Derivatives designated as hedging instruments:
Fair value swapFair value swap [Member]		$	300,000			Other liabilities		$	(1,664	)
Derivatives not designated as hedging instruments:
Mortgage loan interest rate lock commitmentsMortgage loan interest rate lock commitments [Member]			26,446			Other assets			366
MBS forward sales commitmentsMBS forward sales commitments [Member]			17,000			Other liabilities			(8	)
Total derivative financial instrumentsTotal derivative financial instruments [Member]		$	343,446					$	(1,306	)

						December 31, 2024
								Fair Value
(dollars in thousands)		Notional				Balance Sheet Location		Asset/(Liability)
Derivatives designated as hedging instruments:
Fair value swap		$	300,000			Other assets		$	3,698
Derivatives not designated as hedging instruments:
Mortgage loan interest rate lock commitments			15,841			Other assets			188
MBS forward sales commitments			10,500			Other assets			40
Total derivative financial instruments		$	326,341					$	3,926

Accrued interest receivable related to the interest rate swap as of September 30, 2025 totaled $193,000 and is excluded from the fair value presented in the table above.

The Company assesses the effectiveness of the fair value swap hedge with a regression analysis that compares the changes in forward curves to determine the value. The effective portion of changes in fair value of derivatives designated as fair value hedges is recorded through interest income. The Company does not offset derivative assets and derivative liabilities for financial statement presentation purposes.

The following table summarizes the effect of the fair value hedging relationship recognized in the consolidated statements of income for the three and nine months ended September 30, 2025 and September 30, 2024.

Schedule of summarize the effect of fair value hedging relationship recognized in the consolidated statements of income
		Three months ended September 30,								Nine months ended September 30,
(dollars in thousands)		2025				2024				2025				2024
Gain on fair value hedging relationship:
Hedged asset/(liability)		$	272				7,151				5,482				2,671
Fair value derivative designated as hedging instrument			(207	)			(7,050	)			(5,362	)			(2,581	)
Total gain recognized in interest income on loans		$	65				101				120				90

NOTE 6 – Fair Value Accounting

FASB ASC 820, “Fair Value Measurement and Disclosures,” defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. FASB ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

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Level 1 – Quoted market price in active markets

Quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities include certain debt and equity securities that are traded in an active exchange market.

Level 2 – Significant other observable inputs

Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 2 assets and liabilities include fixed income securities and mortgage-backed securities that are held in the Company’s available-for-sale portfolio and valued by a third-party pricing service, as well as certain individually evaluated loans.

Level 3 – Significant unobservable inputs

Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.  These methodologies may result in a significant portion of the fair value being derived from unobservable data.  

The methods of determining the fair value of assets and liabilities presented in this note are consistent with our methodologies disclosed in Note 12 of the Company’s 2024 Annual Report on Form 10-K. See Note 5 for how the derivative asset fair value is determined. The Company’s loan portfolio is initially fair valued using a segmented approach, using the eight categories of loans as disclosed in Note 4 – Loans and Allowance for Credit Losses. Loans are considered a Level 3 classification.

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

The tables below present the recorded amount of assets and liabilities measured at fair value on a recurring basis as of September 30, 2025 and December 31, 2024.

Schedule of assets and liabilities measured at fair value on a recurring basis
										September 30, 2025
(dollars in thousands)		Level 1				Level 2				Level 3				Total
Assets
Securities available for saleLevel 1 [Member]
Corporate bonds		$	-				1,959				-				1,959
US treasuriesLevel 2 [Member]			-				944				-				944
US government agencies			-				15,165				-				15,165
State and political subdivisionsLevel 3 [Member]			-				19,901				-				19,901
Asset-backed securities			-				33,774				-				33,774
Mortgage-backed securities			-				59,297				-				59,297
Mortgage loans held for sale			-				6,906				-				6,906
Mortgage loan interest rate lock commitments			-				366				-				366
Total assets measured at fair value on a recurring basis		$	-				138,312				-				138,312
Liabilities
MBS forward sales commitments		$	-				8				-				8
Derivative liability			-				1,664				-				1,664
Total liabilities measured at fair value on a recurring basis		$	-				1,672				-				1,672

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		December 31, 2024
(dollars in thousands)		Level 1				Level 2				Level 3				Total
Assets
Securities available for sale:
Corporate bonds		$	-				1,927				-				1,927
US treasuries			-				908				-				908
US government agencies			-				15,795				-				15,795
State and political subdivisions			-				19,322				-				19,322
Asset-backed securities			-				36,538				-				36,538
Mortgage-backed securities			-				57,637				-				57,637
Mortgage loans held for sale			-				4,565				-				4,565
Mortgage loan interest rate lock commitments			-				188				-				188
Derivative asset			-				3,698				-				3,698
MBS forward sales commitments			-				40				-				40
Total assets measured at fair value on a recurring basis		$	-				140,618				-				140,618

The Company had no liabilities recorded at fair value on a recurring basis as of December 31, 2024.

Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis

The tables below present the recorded amount of assets and liabilities measured at fair value on a nonrecurring basis as of September 30, 2025 and December 31, 2024.

Schedule of assets and liabilities measured at fair value on a nonrecurring basis
										As of September 30, 2025
(dollars in thousands)		Level 1				Level 2				Level 3				Total
Assets
Individually evaluated loans		$	-				10,512				1,063				11,575
Other real estate owned			-				275				-				275
Total assets measured at fair value on a nonrecurring basis		$	-				10,787				1,063				11,850

										As of December 31, 2024
(dollars in thousands)		Level 1				Level 2				Level 3				Total
Assets
Individually evaluated loans		$	-				9,139				1,127				10,266
Total assets measured at fair value on a nonrecurring basis		$	-				9,139				1,127				10,266

The Company had no liabilities carried at fair value or measured at fair value on a nonrecurring basis as of September 30, 2025 and December 31, 2024.

For Level 3 assets and liabilities measured at fair value on a recurring or nonrecurring basis as of September 30, 2025 and December 31, 2024, the significant unobservable inputs used in the fair value measurements were as follows:

Schedule of unobservable inputs used in the fair value measurements
	Valuation Technique	Significant Unobservable Inputs	Range of Inputs
Individually evaluated loans	Appraised Value/ Discounted Cash Flows	Discounts to appraisals or cash flows for estimated holding and/or selling costs or age of appraisal	0-25%

Fair Value of Financial Instruments

Financial instruments require disclosure of fair value information, whether or not recognized in the consolidated balance sheets, when it is practical to estimate the fair value. A financial instrument is defined as cash, evidence of an ownership interest in an entity or a contractual obligation which requires the exchange of cash. Certain items

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are specifically excluded from the disclosure requirements, including the Company’s common stock, premises and equipment and other assets and liabilities.

The estimated fair values of the Company’s financial instruments at September 30, 2025 and December 31, 2024 are as follows:

Schedule of estimated fair values of the company’s financial instruments
										September 30, 2025
(dollars in thousands)		Carrying Amount				Fair Value				Level 1				Level 2				Level 3
Financial Assets:
Other investments, at cost		$	20,066				20,066				-				-				20,066
Loans1			3,734,452				3,517,817				-				-				3,517,817
Financial Liabilities:
Deposits			3,676,417				3,444,304				-				3,444,304				-
Subordinated debentures			24,903				27,030				-				27,030				-

										December 31, 2024
(dollars in thousands)		Carrying Amount				Fair Value				Level 1				Level 2				Level 3
Financial Assets:
Other investments, at cost		$	19,490				19,490				-				-				19,490
Loans1			3,579,640				3,319,602				-				-				3,319,602
Financial Liabilities:
Deposits			3,435,765				3,158,893				-				3,158,893				-
Subordinated debentures			24,903				27,539				-				27,539				-

¹ Carrying amount is net of the allowance for credit losses and individually evaluated loans.

NOTE 7 – Leases

The Company had operating right-of-use (“ROU”) assets, included in property and equipment, of $19.4 million and $20.6 million as of September 30, 2025 and December 31, 2024, respectively.  The Company had lease liabilities, included in other liabilities, of $22.1 million and $23.2 million as of September 30, 2025 and December 31, 2024, respectively. We maintain operating leases on land and buildings for various office spaces. The lease agreements have maturity dates ranging from September 2027 to February 2032, some of which include options for multiple five-year extensions. The weighted average remaining life of the lease term for these leases was 4.55 years and 4.95 years as September 30, 2025 and December, 31, 2024, respectively. The ROU asset and lease liability are recognized at lease commencement by calculating the present value of lease payments over the lease term.  The ROU assets also include any initial direct costs incurred and lease payments made at or before commencement date and are reduced by any lease incentives.

The discount rate used in determining the lease liability for each individual lease was the FHLB fixed advance rate which corresponded with the remaining lease term at implementation of the accounting standard and as of the lease commencement date for leases subsequently entered into. The weighted average discount rate for leases was 2.27% and 2.28% as of September 30, 2025 and December 31, 2024, respectively.

The total operating lease costs were $613,000 and $604,000 for the three months ended September 30, 2025 and 2024, respectively, and $1.8 million for the nine months ended September 30, 2025 and 2024, respectively.

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Operating lease payments due as of September 30, 2025 were as follows:

Schedule of operating lease payments
		Operating
(dollars in thousands)		Leases
2025		$	544
2026			2,210
2027			2,267
2028			2,015
2029			1,501
Thereafter			18,686
Total undiscounted lease payments			27,223
Discount effect of cash flows			5,125
Total lease liability		$	22,098

NOTE 8 – Earnings Per Common Share

The following schedule reconciles the numerators and denominators of the basic and diluted earnings per share computations for the three and nine month periods ended September 30, 2025 and 2024. Dilutive common shares arise from the potentially dilutive effect of the Company’s stock options and unvested restricted stock that were outstanding at September 30, 2025. The assumed conversion of stock options can create a difference between basic and dilutive net income per common share. At September 30, 2025 and 2024, there were 45,662 and 263,387 options, respectively, that were not considered in computing diluted earnings per common share because they were anti-dilutive.

Schedule of earnings per common share
		Three months ended September 30,								Nine months ended September 30,
(dollars in thousands, except share data)		2025				2024				2025				2024
Numerator:
Net income available to common shareholders		$	8,662				4,382				20,509				9,903
Denominator:
Weighted-average common shares outstanding – basic			8,030,944				8,064,283				8,048,426				8,100,003
Common stock equivalents			49,515				24,893				32,252				23,843
Weighted-average common shares outstanding – diluted			8,080,459				8,089,176				8,080,678				8,123,846
Earnings per common share:
Basic		$	1.08				0.54				2.55				1.22
Diluted			1.07				0.54				2.54				1.22

Item 2. MANAGEMENT’S DISCUSSION AND Analysis of Financial Condition and Results of Operations.

The following discussion reviews our results of operations for the three and nine month periods ended September 30, 2025 as compared to the three and nine month periods ended September 30, 2024 and assesses our financial condition as of September 30, 2025 as compared to December 31, 2024. You should read the following discussion and analysis in conjunction with the accompanying consolidated financial statements and the related notes and the consolidated financial statements and the related notes for the year ended December 31, 2024 included in our Annual Report on Form 10-K for that period. Results for the three and nine month periods ended September 30, 2025 are not necessarily indicative of the results for the year ending December 31, 2025 or any future period.

Unless the context requires otherwise, references to the “Company,” “we,” “us,” “our,” or similar references mean Southern First Bancshares, Inc. and its consolidated subsidiary. References to the “Bank” refer to Southern First Bank.

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Cautionary Warning Regarding forward-looking statements

This report contains statements which constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). Forward-looking statements may relate to our financial condition, results of operations, plans, objectives, or future performance. These statements are based on many assumptions and estimates and are not guarantees of future performance. Our actual results may differ materially from those anticipated in any forward-looking statements, as they will depend on many factors about which we are unsure, including many factors which are beyond our control. The words “may,” “would,” “could,” “should,” “will,” “seek to,” “strive,” “focus,” “expect,” “anticipate,” “predict,” “project,” “potential,” “believe,” “continue,” “assume,” “intend,” “plan,” and “estimate,” as well as similar expressions, are meant to identify such forward-looking statements. Potential risks and uncertainties that could cause our actual results to differ from those anticipated in any forward-looking statements include, but are not limited to:

· Restrictions or conditions imposed by our regulators on our operations;

· Increases in competitive pressure in the banking and financial services industries;

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

· Changes in deposit flows, which may be negatively affected by a number of factors, including rates paid by competitors, general interest rate levels, regulatory capital requirements, returns available to clients on alternative investments and general economic or industry conditions;

· Credit losses as a result of declining real estate values, increasing interest rates, increasing unemployment, changes in payment behavior or other factors;

· Credit losses due to loan concentration;

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

· Our ability to successfully execute our business strategy;

· Our ability to attract and retain key personnel;

· The success and costs of our expansion into the Charlotte, North Carolina, Greensboro, North Carolina and Atlanta, Georgia markets and into potential new markets;

· Risks with respect to future mergers or acquisitions, including our ability to successfully expand and integrate the businesses and operations that we acquire and realize the anticipated benefits of the mergers or acquisitions;

· Changes in the interest rate environment which could reduce anticipated or actual margins, including due to the Federal Reserve lowering interest rates to incent economic growth;

· Changes in political conditions or the legislative or regulatory environment, including new governmental initiatives affecting the financial services industry;

· Changes in economic conditions resulting in, among other things, a deterioration in credit quality;

· Changes occurring in business conditions and inflation;

· Increased cybersecurity risk, including potential business disruptions or financial losses;

· Changes in technology;

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

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

· Changes in U.S. monetary policy, the level and volatility of interest rates, the capital markets and other market conditions that may affect, among other things, our liquidity and the value of our assets and liabilities;

· Any increase in FDIC assessments which will increase our cost of doing business;

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· Risks associated with complex and changing regulatory environments, including, among others, with respect to data privacy, artificial intelligence (“AI”), information security, climate change or other environmental, social and governance matters, and labor matters, relating to our operations;

· The rate of delinquencies and amounts of loans charged-off;

· Our ability to maintain appropriate levels of capital and to comply with our capital ratio requirements;

· Adverse changes in asset quality and resulting credit risk-related losses and expenses;

· Changes in accounting standards, rules and interpretations and the related impact on our financial statements;

· Risks associated with actual or potential litigation or investigations by customers, regulatory agencies or others;

· Adverse effects of failures by our vendors to provide agreed upon services in the manner and at the cost agreed;

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

· Other risks and uncertainties detailed in Part I, Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2024, in Part II, Item 1A, “Risk Factors” of our Quarterly Reports on Form 10-Q, and in our other filings with the SEC.

If any of these risks or uncertainties materialize, or if any of the assumptions underlying such forward-looking statements proves to be incorrect, our results could differ materially from those expressed in, implied or projected by, such forward-looking statements. We urge investors to consider all of these factors carefully in evaluating the forward-looking statements contained in this Quarterly Report on Form 10-Q. We make these forward-looking statements as of the date of this document and we do not intend, and assume no obligation, to update the forward-looking statements or to update the reasons why actual results could differ from those expressed in, or implied or projected by, the forward-looking statements, except as required by law.

OVERVIEW

Our business model continues to be client-focused, utilizing relationship teams to provide our clients with a specific banker contact and support team responsible for all of their banking needs. The purpose of this structure is to provide a consistent and superior level of professional service, and we believe it provides us with a distinct competitive advantage. We consider exceptional client service to be a critical part of our culture, which we refer to as "ClientFIRST."

At September 30, 2025, we had total assets of $4.36 billion, a 6.6% increase from total assets of $4.09 billion at December 31, 2024. The largest component of our total assets is loans which were $3.79 billion and $3.63 billion at September 30, 2025 and December 31, 2024, respectively. Our liabilities and shareholders’ equity at September 30, 2025 totaled $4.00 billion and $356.3 million, respectively, compared to liabilities of $3.76 billion and shareholders’ equity of $330.4 million at December 31, 2024. The principal component of our liabilities is deposits which were $3.68 billion and $3.44 billion at September 30, 2025 and December 31, 2024, respectively.

Like most community banks, we derive the majority of our income from interest received on our loans and investments. Our primary source of funds for making these loans and investments is our deposits, on which we pay interest. Consequently, one of the key measures of our success is our amount of net interest income, or the difference between the income on our interest-earning assets, such as loans and investments, and the expense on our interest-bearing liabilities, such as deposits and borrowings. Another key measure is the spread between the yield we earn on these interest-earning assets and the rate we pay on our interest-bearing liabilities, which is called our net interest spread. In addition to earning interest on our loans and investments, we earn income through fees and other charges to our clients.

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Our net income to common shareholders was $8.7 million and $4.4 million for the three months ended September 30, 2025 and 2024, respectively. Diluted earnings per share (“EPS”) was $1.07 for the third quarter of 2025 as compared to $0.54 for the same period in 2024. The increase in net income was primarily driven by an increase in net interest income.

Our net income to common shareholders was $20.5 million and $9.9 million for the nine months ended September 30, 2025 and 2024, respectively. Diluted earnings per share (“EPS”) was $2.54 for the nine months ended September 30, 2025 as compared to $1.22 for the same period in 2024. The increase in net income was primarily driven by an increase in net interest income.

results of operations

Net Interest Income and Margin

Our level of net interest income is determined by the level of earning assets and the management of our net interest margin. Our net interest income was $27.5 million for the third quarter of 2025, a 33.7% increase over net interest income of $20.6 million for the third quarter of 2024, driven primarily by a $3.8 million increase in interest income on our interest-earning assets combined with a $3.1 million decrease in interest expense on our interest-bearing liabilities. In addition, our net interest margin, on a tax-equivalent (TE) basis, was 2.62% for the third quarter of 2025 compared to 2.08% for the same period in 2024.

We have included a number of tables to assist in our description of various measures of our financial performance. For example, the “Average Balances, Income and Expenses, Yields and Rates” table reflects the average balance of each category of our assets and liabilities as well as the yield we earned or the rate we paid with respect to each category during the three and nine month periods ended September 30, 2025 and 2024. A review of this table shows that our loans typically provide higher interest yields than do other types of interest-earning assets, which is why we direct a substantial percentage of our earning assets into our loan portfolio. Similarly, the “Rate/Volume Analysis” tables demonstrate the effect of changing interest rates and changing volume of assets and liabilities on our financial condition during the periods shown. We also track the sensitivity of our various categories of assets and liabilities to changes in interest rates, and we have included tables to illustrate our interest rate sensitivity with respect to interest-earning accounts and interest-bearing accounts.

The following tables entitled “Average Balances, Income and Expenses, Yield and Rates” set forth information related to our average balance sheets, average yields on assets, and average costs of liabilities. We derived these yields by dividing income or expense by the average balance of the corresponding assets or liabilities. We derived average balances from the daily balances throughout the periods indicated. During the same periods, we had no securities purchased with agreements to resell. All investments owned have an original maturity of over one year. Nonaccrual loans are included in the following tables. Loan yields have been reduced to reflect the negative impact on our earnings of loans on nonaccrual status. The net of capitalized loan costs and fees are amortized into interest income on loans.

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Average Balances, Income and Expenses, Yields and Rates

		For the Three Months Ended September 30,
		2025												2024
(dollars in thousands)		Average Balance				Income/ Expense				Yield/ Rate(1)				Average Balance				Income/ Expense				Yield/ Rate(1)
Interest-earning assets
Federal funds sold and interest-bearing deposits with banks		$	238,552			$	2,645				4.40	%		$	158,222			$	2,209				5.55	%
Investment securities, taxable			141,143				1,307				3.67	%			137,087				1,370				3.98	%
Investment securities, nontaxable(2)			7,811				45				2.31	%			8,047				55				2.70	%
Loans(3)			3,783,885				50,999				5.35	%			3,629,050				47,550				5.21	%
Total interest-earning assets			4,171,391				54,996				5.23	%			3,932,406				51,184				5.18	%
Noninterest-earning assets			150,552												158,550
Total assets		$	4,321,943											$	4,090,956
Interest-bearing liabilities
NOW accounts		$	329,301				746				0.90	%		$	314,669				835				1.06	%
Savings & money market			1,599,710				13,509				3.35	%			1,523,834				15,287				3.99	%
Time deposits			984,078				10,448				4.21	%			909,192				11,603				5.08	%
Total interest-bearing deposits			2,913,089				24,703				3.36	%			2,747,695				27,725				4.01	%
FHLB advances and other borrowings			240,087				2,296				3.79	%			240,065				2,297				3.81	%
Subordinated debentures			24,903				458				7.30	%			36,261				558				6.12	%
Total interest-bearing liabilities			3,178,079				27,457				3.43	%			3,024,021				30,580				4.02	%
Noninterest-bearing liabilities			792,575												744,025
Shareholders’ equity			351,289												322,910
Total liabilities and shareholders’ equity		$	4,321,943											$	4,090,956
Net interest spread											1.80	%											1.16	%
Net interest income (tax equivalent) / margin						$	27,539				2.62	%						$	20,604				2.08	%
Less:  tax-equivalent adjustment(2)							10												13
Net interest income						$	27,529											$	20,591

(1) Annualized for the three month period.

(2) The tax-equivalent adjustment to net interest income adjusts the yield for assets earning tax-exempt income to a comparable yield on a taxable basis.

(3) Includes mortgage loans held for sale.

Our net interest margin (TE) increased by 54 basis points to 2.62% during the third quarter of 2025, compared to the third quarter of 2024, primarily due to a decrease in the cost of our interest-bearing liabilities resulting from the 125 basis point decrease in the Fed Funds rate during the last twelve months. Our average interest-bearing liabilities grew by $154.1 million during the third quarter of 2025 from the prior year, while the rate on these liabilities decreased 59 basis points to 3.43%. Our average interest-earning assets grew by $239.0 million during the third quarter of 2025 from the prior year, while the average yield on these assets increased by five basis points to 5.23%.

The increase in average interest-bearing liabilities for the third quarter of 2025 related primarily to an increase of $165.4 million in our average interest-bearing deposits, partially offset by a $11.4 million decrease in subordinated debentures. The primary driver of the decrease in interest expense was a 65 basis point decrease in the cost of our interest-bearing deposits.

The increase in average interest-earning assets for the third quarter of 2025 related primarily to an increase of $154.8 million in our average loan balances from the prior year. The five basis point increase in yield on our interest-earning assets was driven by a 14 basis point increase in loan yield, offset by a 115 basis point decrease in yield on federal funds sold and interest-bearing deposits with banks, as a result of the decrease in the Fed Funds rate.

Our net interest spread was 1.80% for the third quarter of 2025 compared to 1.16% for the same period in 2024. The net interest spread is the difference between the yield we earn on our interest-earning assets and the rate we pay on our interest-bearing liabilities. The five basis point increase in yield on our interest-earning assets, combined with the 59 basis point decrease in the rate on our interest-bearing liabilities, resulted in a 64 basis point increase in our net interest spread for the 2025 period. We seek to fund increased loan volumes by growing our core deposits,

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but, subject to internal policy limits on the amount of wholesale funding we may maintain, will utilize wholesale funding to fund shortfalls, if any, or provide additional liquidity. To the extent that our dependence on wholesale funding sources increases, our net interest margin would likely be negatively impacted as we may not be able to reduce the rates we pay on these deposits as quickly as we can on core deposits as rates have and may continue to decline. We continue to deploy various asset liability management strategies to manage our risk to interest rate fluctuations.

Average Balances, Income and Expenses, Yields and Rates

		For the Nine Months Ended September 30,
		2025												2024
(dollars in thousands)		Average Balance				Income/ Expense				Yield/ Rate(1)				Average Balance				Income/ Expense				Yield/ Rate(1)
Interest-earning assets
Federal funds sold and interest-bearing deposits with banks		$	175,635			$	5,773				4.39	%		$	146,452			$	6,072				5.54	%
Investment securities, taxable			142,237				3,976				3.74	%			131,828				4,183				4.24	%
Investment securities, nontaxable(2)			7,792				164				2.81	%			12,188				162				1.78	%
Loans(3)			3,727,690				147,077				5.28	%			3,632,527				139,700				5.14	%
Total interest-earning assets			4,053,354				156,990				5.18	%			3,922,995				150,117				5.11	%
Noninterest-earning assets			153,861												159,663
Total assets		$	4,207,215											$	4,082,658
Interest-bearing liabilities
NOW accounts		$	322,689				2,096				0.87	%		$	304,479				2,117				0.93	%
Savings & money market			1,562,519				39,658				3.39	%			1,585,224				47,930				4.04	%
Time deposits			952,610				30,818				4.33	%			870,078				32,826				5.04	%
Total interest-bearing deposits			2,837,818				72,572				3.42	%			2,759,781				82,873				4.01	%
FHLB advances and other borrowings			240,029				6,810				3.79	%			240,460				6,772				3.76	%
Subordinated debentures			24,903				1,362				7.31	%			36,318				1,671				6.15	%
Total interest-bearing liabilities			3,102,750				80,744				3.48	%			3,036,559				91,316				4.02	%
Noninterest-bearing liabilities			761,540												727,977
Shareholders’ equity			342,925												318,122
Total liabilities and shareholders’ equity		$	4,207,215											$	4,082,658
Net interest spread											1.70	%											1.09	%
Net interest income (tax equivalent) / margin						$	76,246				2.51	%						$	58,801				2.00	%
Less:  tax-equivalent adjustment(2)							38												37
Net interest income						$	76,208											$	58,764

(1) Annualized for the nine month period.

(2) The tax-equivalent adjustment to net interest income adjusts the yield for assets earning tax-exempt income to a comparable yield on a taxable basis.

(3) Includes mortgage loans held for sale.

During the first nine months of 2025, our net interest margin (TE) increased by 51 basis points to 2.51%, compared to 2.00% for the first nine months of 2024, primarily due to a decrease in the cost of our interest-bearing liabilities. Our average interest-bearing liabilities grew by only $66.2 million from the prior year, while the rate of these liabilities decreased by 54 basis points to 3.48%. In addition, our average interest-earning assets grew by $130.4 million, while the average yield increased by seven basis points to 5.18%.

The increase in average interest-bearing liabilities for the first nine months of 2025 was driven by an increase in interest-bearing deposits of $78.0 million, partially offset by a $11.4 million decrease in subordinated debentures. The primary driver of our decrease in interest expense was a 59 basis point decrease in the cost of our interest-bearing deposits.

The increase in average interest-earning assets for the first nine months of 2025 related primarily to a $95.2 million increase in our average loan balances. The increase in yield on our interest-earning assets was driven by a 14 basis point increase on our loan yield, partially offset by a 115 basis point decrease in the yield on Federal Funds sold and interest-bearing deposits with banks.

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Our net interest spread was 1.70% for the first nine months of 2025 compared to 1.09% for the same period in 2024. The net interest spread is the difference between the yield we earn on our interest-earning assets and the rate we pay on our interest-bearing liabilities. The seven basis point increase in yield on our interest-earning assets, combined with the 54 basis point decrease in the rate on our interest-bearing liabilities, resulted in a 61 basis point increase in our net interest spread for 2025.

Rate/Volume Analysis

Net interest income can be analyzed in terms of the impact of changing interest rates and changing volume. The following tables set forth the effect which the varying levels of interest-earning assets and interest-bearing liabilities and the applicable rates have had on changes in net interest income for the periods presented.

		Three Months Ended
		September 30, 2025 vs. 2024																September 30, 2024 vs. 2023
		Increase (Decrease) Due to																Increase (Decrease) Due to
(dollars in thousands)		Volume				Rate				Rate/ Volume				Total				Volume				Rate				Rate/ Volume				Total
Interest income
Loans		$	2,114				1,280				55				3,449			$	1,047				2,891				70				4,008
Investment securities			35				(102	)			(3	)			(70	)			(103	)			48				(3	)			(58	)
Federal funds sold and interest-bearing deposits with banks			1,140				(467	)			(237	)			436				(315	)			102				(13	)			(226	)
Total interest income			3,289				711				(185	)			3,815				629				3,041				54				3,724
Interest expense
Deposits			1,719				(4,459	)			(282	)			(3,022	)			295				2,273				27				2,595
FHLB advances and other borrowings			-				(1	)			-				(1	)			(220	)			112				(10	)			(118	)
Subordinated debentures			(173	)			106				(33	)			(100	)			-				1				-				1
Total interest expense			1,546				(4,354	)			(315	)			(3,123	)			75				2,386				17				2,478
Net interest income		$	1,743				5,065				130				6,938			$	554				655				37				1,246

Net interest income, the largest component of our income, was $27.5 million for the third quarter of 2025 and $20.6 million for the third quarter of 2024, a $6.9 million, or 33.7%, increase year over year. The increase during 2025 was driven by a $3.8 million increase in interest income primarily due to an increase in average loan balances and higher yields on our loan portfolio, as well as a $3.1 million decrease in interest expense primarily due to lower rates on our interest-bearing deposits.

		Nine Months Ended
		September 30, 2025 vs. 2024																September 30, 2024 vs. 2023
		Increase (Decrease) Due to																Increase (Decrease) Due to
(dollars in thousands)		Volume				Rate				Rate/ Volume				Total				Volume				Rate				Rate/ Volume				Total
Interest income
Loans		$	91				7,100				186				7,377			$	6,121				11,617				582				18,320
Investment securities			(5	)			(193	)			(8	)			(206	)			573				786				161				1,520
Federal funds sold and interest-bearing deposits with banks			(33	)			(222	)			(44	)			(299	)			1,262				398				117				1,777
Total interest income			53				6,685				134				6,872				7,956				12,801				860				21,617
Interest expense
Deposits			(212	)			(9,766	)			(323	)			(10,301	)			1,981				16,151				496				18,628
FHLB advances and other borrowings			-				38				-				38				2,857				(47	)			(34	)			2,776
Subordinated debentures			68				(550	)			173				(309	)			3				41				-				44
Total interest expense			(144	)			(10,278	)			(150	)			(10,572	)			4,841				16,145				462				21,448
Net interest income		$	197				16,963				284				17,444			$	3,115				(3,344	)			398				169

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Net interest income for the first nine months of 2025 was $76.2 million compared to $58.8 million for 2024, a $17.4 million, or 29.7%, increase. The increase in net interest income during 2025 was driven by a $10.6 million decrease in interest expense, related primarily to lower rates on our interest-bearing deposits, as well as an increase in the yield on our loan portfolio.

Provision for Credit Losses 

The provision for credit losses, which includes a provision for losses on unfunded commitments, is a charge to earnings to maintain the allowance for credit losses and reserve for unfunded commitments at levels consistent with management’s assessment of expected losses in the loan portfolio at the balance sheet date. We review the adequacy of the allowance for credit losses on a quarterly basis. Please see the discussion included in Note 4 – Loans and Allowance for Credit Losses for a description of the factors we consider in determining the amount of the provision we expense each period to maintain this allowance. Based on the transition to the DCF methodology for calculating the ACL, management analyzed the risk level associated with factors such as the global, national and local economy, which includes the potential impact of tariffs, changes in the experience and depth of management, as well as changes in the risk ratings and volume and severity of past due loans in the consideration of the qualitative portion of the ACL. During the quarter ended September 30, 2025, the risk weightings associated with certain qualitative factors were revised based on new information reflecting the current economic and market environment. The result of these changes was immaterial as it relates to the allowance for credit loss balance.

We recorded a provision for credit losses of $850,000 during the third quarter of 2025, compared to no provision for credit losses in the third quarter of 2024. The $850,000 provision in 2025, which included a $500,000 provision for credit losses and a $350,000 reserve for unfunded commitments was driven primarily by changes in qualitative factors related to an increase in past due loans and risk migration among our commercial business and non-owner occupied loans. No provision was recorded in the third quarter of 2024 due to low charge-offs and insignificant loan growth.

We recorded a provision expense of $2.3 million and $325,000 for the nine months ended September 30, 2025 and September 30, 2024, respectively. The $2.3 million provision expense for the first nine months of 2025 included $1.9 provision for credit losses and a $400,000 reserve for unfunded commitments. The increase in provision expense was primarily due to loan growth and changes in qualitative factors related to delinquency status, risk migration and collateral values on commercial real estate during the first nine months of the year. The $325,000 provision expense for the first nine months of 2024 included a $750,000 provision for credit losses and a $425,000 reversal for unfunded commitments.

Noninterest Income

The following table sets forth information related to our noninterest income.

		Three months ended September 30,								Nine months ended September 30,
(dollars in thousands)		2025				2024				2025				2024
Mortgage banking income		$	1,600				1,449				4,593				4,536
Service fees on deposit accounts			625				455				1,731				1,265
ATM and debit card income			601				599				1,739				1,730
Income from bank owned life insurance			439				401				1,254				1,162
Other income			335				271				729				669
Total noninterest income		$	3,600				3,175				10,046				9,362

Noninterest income was $3.6 million for the third quarter of 2025, a $425,000, or 13.4%, increase from noninterest income of $3.2 million for the third quarter of 2024. Mortgage banking income continues to be the largest component of our noninterest income at $1.6 million for the third quarter of 2025, an increase of $151,000, or 10.4%, over the prior year. Service fees on deposit accounts increased $170,000, or 37.4%, over the prior year, driven by fee income on our commercial credit cards and additional wire fee income.

Noninterest income was $10.0 million for the first nine months of 2025, a $684,000, or 7.3%, increase from noninterest income of $9.4 million for the first nine months of 2024. Service fees on deposit account increased by $466,000, or 36.8% over the prior year and income from bank owned life insurance increased by $92,000, or 7.9%, from the first nine months of 2024.

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Noninterest expenses

The following table sets forth information related to our noninterest expenses.

		Three months ended September 30,								Nine months ended September 30,
(dollars in thousands)		2025				2024				2025				2024
Compensation and benefits		$	11,299				10,789				34,277				32,936
Occupancy			2,447				2,595				7,517				7,704
Outside service and data processing costs			2,158				1,930				6,383				5,738
Insurance			961				1,025				2,881				2,945
Professional fees			605				548				1,723				1,748
Marketing			412				319				1,183				1,077
Other			1,064				833				3,153				2,634
Total noninterest expense		$	18,946				18,039				57,117				54,782

Noninterest expense was $18.9 million for the third quarter of 2025, a $907,000, or 5.0%, increase from noninterest expense of $18.0 million for the third quarter of 2024. The increase in noninterest expense was driven primarily by the following:

· Compensation and benefits expense increased $510,000, or 4.7%, relating primarily to an increase in salaries, commissions, and other employee benefits expenses.

· Outside service and data processing costs increased $228,000, or 11.8%, relating primarily to increases in software licensing and maintenance costs, electronic banking, and other services we provide to our clients.

· Other noninterest expenses increased $231,000, or 27.7%, relating primarily to an increase in employee travel expenses and other employee related expenses.

Partially offsetting the above increases was a decrease in occupancy of $148,000, or 5.7% due to lower depreciation expense as several larger items were fully depreciated during the third quarter of 2025.

Noninterest expense was $57.1 million for the first nine months of 2025, a $2.3 million, or 4.3%, increase from noninterest expense of $54.8 million for the first nine months of 2024. The increase in noninterest expense was driven primarily by the following:

· Compensation and benefits expense increased $1.3 million, or 4.1%, relating primarily to annual salary increases, commissions, and other employee benefit expenses.

· Outside service and data processing costs increased $645,000, or 11.2%, relating primarily to increases in software licensing and maintenance costs, ATM card related expenses, and other business electronic banking services we provide to our clients.

· Other noninterest expenses increased $519,000, or 19.7%, relating primarily to an increase in fraud losses, employee travel and other employee expenses.

Partially offsetting these increases, occupancy decreased $187,000, or 2.4%, relating primarily to a decrease in depreciation expense as several larger items became fully depreciated.

Our efficiency ratio was 66.2% for the third quarter of 2025, compared to 75.9% for the third quarter of 2024. The efficiency ratio represents the percentage of one dollar of expense required to be incurred to earn a full dollar of revenue and is computed by dividing noninterest expense by the sum of net interest income and noninterest income. The improvement during the 2025 period was driven primarily by the increase in net interest income.

We incurred income tax expense of $2.7 million and $1.3 million for the three months ended September 30, 2025 and 2024, respectively, and $6.3 million and $3.1 million for the nine months ended September 30, 2025 and 2024. Our effective tax rate was 23.6% and 23.9% for the nine months ended September 30, 2025 and 2024, respectively.

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The decrease in the effective tax rate was driven by the effect of equity compensation transactions in comparison to our income before income tax expense.

Balance Sheet Review

Investment Securities

At September 30, 2025, the $151.1 million in our investment securities portfolio represented approximately 3.5% of our total assets. Our available for sale investment portfolio included corporate bonds, US treasuries, US government agency securities, state and political subdivisions, asset-backed securities and mortgage-backed securities with a fair value of $131.0 million and an amortized cost of $141.7 million, resulting in an unrealized loss of $10.7 million. At December 31, 2024, the $151.6 million in our investment securities portfolio represented approximately 3.7% of our total assets, including investment securities with a fair value of $132.1 million and an amortized cost of $146.6 million for an unrealized loss of $14.5 million. In addition, other investments, which include FHLB Stock and other nonmarketable investments, increased $576,000 from December 31, 2024 to $20.1 million at September 30, 2025.

Loans

Since loans typically provide higher interest yields than other types of interest earning assets, a substantial percentage of our earning assets are invested in our loan portfolio. Average loans, excluding mortgage loans held for sale, for the nine months ended September 30, 2025 and 2024 were $3.72 billion and $3.62 billion, respectively. Before the allowance for credit losses, total loans outstanding at September 30, 2025 and December 31, 2024 were $3.79 billion and $3.63 billion, respectively.

The principal component of our loan portfolio is loans secured by real estate mortgages. As of September 30, 2025, our loan portfolio included $3.14 billion, or 83.0%, of real estate loans, compared to $3.03 billion, or 83.5%, at December 31, 2024. Most of our real estate loans are secured by residential or commercial property. We obtain a security interest in real estate, in addition to any other available collateral, in order to increase the likelihood of the ultimate repayment of the loan. Generally, we limit the loan-to-value ratio on loans to coincide with the appropriate regulatory guidelines. We attempt to maintain a relatively diversified loan portfolio to help reduce the risk inherent in concentration in certain types of collateral and business types. Home equity lines of credit totaled $240.0 million as of September 30, 2025, of which approximately 48% were in a first lien position, while the remaining balance was second liens. At December 31, 2024, our home equity lines of credit totaled $204.9 million, of which approximately 46% were in first lien positions, while the remaining balance was in second liens. The average home equity loan had a balance of approximately $105,000 and a loan to value of 73% as of September 30, 2025, compared to an average loan balance of $92,000 and a loan to value of approximately 74% as of December 31, 2024. Further, 0.59% and 0.12% of our total home equity lines of credit were over 30 days past due as of September 30, 2025 and December 31, 2024, respectively.

Following is a summary of our loan composition at September 30, 2025 and December 31, 2024. During the first nine months of 2025, our loan portfolio increased by $157.3 million, or 4.33% annualized, primarily driven by a $71.1 million increase in consumer loans secured by real estate and a $53.8 million increase in commercial owner occupied loans. In addition, commercial business loans increased by $48.3 million during the first nine months of 2025. Our consumer real estate portfolio grew by $31.1 million and includes high quality 1-4 family consumer real estate loans. Our average consumer real estate loan currently has a principal balance of $472,000, a term of 24 years, and an average rate of 4.54% as of September 30, 2025, compared to a principal balance of $468,000, a term of 23 years, and an average rate of 4.36% as of December 31, 2024.

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		September 30, 2025								December 31, 2024
(dollars in thousands)		Amount				%  of Total				Amount				%  of Total
Commercial
Owner occupied RE		$	705,383				18.6	%		$	651,597				17.9	%
Non-owner occupied RE			943,304				24.9	%			924,367				25.5	%
Construction			71,928				1.9	%			103,204				2.8	%
Business			604,411				16.0	%			556,117				15.3	%
Total commercial loans			2,325,026				61.4	%			2,235,285				61.5	%
Consumer
Real estate			1,159,693				30.6	%			1,128,629				31.1	%
Home equity			239,996				6.3	%			204,897				5.6	%
Construction			25,842				0.7	%			20,874				0.6	%
Other			38,464				1.0	%			42,082				1.2	%
Total consumer loans			1,463,995				38.6	%			1,396,482				38.5	%
Total gross loans, net of deferred fees			3,789,021				100.0	%			3,631,767				100.0	%
Less—allowance for credit losses			(41,799	)							(39,914	)
Total loans, net		$	3,747,222							$	3,591,853

We have included the table below to provide additional clarity on our commercial real estate exposure. We have not identified any geographic concentrations within these collateral types. Our level of non-owner occupied commercial real estate loans represents 237.4% of the Bank’s total risk-based capital at September 30, 2025. The table below presents the majority of our commercial real estate exposure by collateral type which are included in the commercial business, construction, and non-owner occupied segments.

						September 30, 2025
(dollars in thousands)		Outstanding				% of Loan Portfolio				Average Loan Size				Weighted Average LTV
Collateral
Office		$	219,658				5.80	%		$	1,377				54	%
Retail			189,982				5.01	%			1,631				51	%
Hotel			143,152				3.78	%			7,803				49	%
Multifamily			99,834				2.63	%			2,500				43	%

						December 31, 2024
(dollars in thousands)		Outstanding				% of Loan Portfolio				Average Loan Size				Weighted Average LTV
Collateral
Office		$	214,048				5.89	%		$	1,364				57	%
Retail			170,601				4.70	%			1,543				52	%
Hotel			125,557				3.46	%			7,250				48	%
Multifamily			96,735				2.66	%			2,385				45	%

Nonperforming assets

Nonperforming assets include real estate acquired through foreclosure or deed taken in lieu of foreclosure and loans on nonaccrual status. Generally, a loan is placed on nonaccrual status when it becomes 90 days past due as to principal or interest, or when we believe, after considering economic and business conditions and collection efforts, that the borrower’s financial condition is such that collection of the contractual principal or interest on the loan is doubtful. A payment of interest on a loan that is classified as nonaccrual is recognized as a reduction in principal when received. Our policy with respect to nonperforming loans requires the borrower to make a minimum of six consecutive payments in accordance with the loan terms and to show capacity to continue performing into

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the future before that loan can be placed back on accrual status. As of September 30, 2025 and December 31, 2024 we had no loans that were 90 days past due and still accruing.

Following is a summary of our nonperforming assets.

(dollars in thousands)		September 30, 2025				December 31, 2024
Commercial		$	7,368				8,657
Consumer			4,099				2,220
Total nonaccrual loans			11,467				10,877
Other real estate owned			275				-
Total nonperforming assets		$	11,742				10,877

At September 30, 2025, nonperforming assets were $11.7 million, or 0.27% of total assets and 0.31% of gross loans. Comparatively, nonperforming assets were $10.9 million, or 0.27% of total assets and 0.30% of gross loans at December 31, 2024. The amount of foregone interest income on nonaccrual loans in the third quarter of 2025 and 2024 was $28,000 and $111,000, respectively.

At September 30, 2025 and December 31, 2024, the allowance for credit losses represented 364.50% and 366.94% of the total amount of nonperforming loans, respectively. A significant portion of the nonperforming loans at September 30, 2025 were secured by real estate. We have evaluated the underlying collateral on these loans and believe that the collateral on these loans is sufficient to minimize future losses.

As a general practice, most of our commercial loans and a portion of our consumer loans are originated with relatively short maturities of less than ten years. As a result, when a loan reaches its maturity, we frequently renew the loan and thus extend its maturity using similar credit standards as those used when the loan was first originated. Due to these loan practices, we may, at times, renew loans which are classified as nonaccrual after evaluating the loan’s collateral value and financial strength of its guarantors. Nonaccrual loans are renewed at terms generally consistent with the ultimate source of repayment and rarely at reduced rates. In these cases, we will generally seek additional credit enhancements, such as additional collateral or additional guarantees to further protect the loan. When a loan is no longer performing in accordance with its stated terms, we will typically seek performance under the guarantee.

In addition, at September 30, 2025, 83.0% of our loans were collateralized by real estate and 99.8% of our individually evaluated loans were secured by real estate. We utilize third party appraisers to determine the fair value of collateral dependent loans. Our current loan and appraisal policies require us to obtain updated appraisals on an annual basis, either through a new external appraisal or an appraisal evaluation. Individually evaluated loans are reviewed on a quarterly basis to determine the level of credit loss. As of September 30, 2025, we did not have any individually evaluated real estate loans carried at a value in excess of the appraised value. We typically charge-off a portion or create a specific reserve for individually evaluated loans when we do not expect repayment to occur as agreed upon under the original terms of the loan agreement.

At September 30, 2025, individually evaluated loans totaled $12.8 million, for which $4.3 million of these loans had a reserve of approximately $1.2 million allocated in the allowance for credit losses. Comparatively, individually evaluated loans totaled $12.2 million at December 31, 2024 for which $4.5 million of these loans had a reserve of approximately $1.9 million allocated in the allowance for credit losses.

Allowance for Credit Losses

The allowance for credit losses was $41.8 million, representing 1.10% of outstanding loans and providing coverage of 364.50% of nonperforming loans at September 30, 2025 compared to $39.9 million, or 1.10% of outstanding loans and 366.94% of nonperforming loans at December 31, 2024. At September 30, 2024, the ACL was $40.2 million, or 1.11% of outstanding loans and 346.78% of nonperforming loans.

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During the first quarter of 2025, the Company refined its methodology for estimating the allowance for credit losses on loans by transitioning from a lifetime probability of default and loss given default model (“lifetime PD/LGD”) to a discounted cash flow (“DCF”) approach. The Company transitioned to the DCF method as it allows for a better estimation of credit losses through customization among the various inputs by loan segmentation. The DCF model uses regression techniques that relate one or more economic factors to the default rate of various portfolios to build reasonable and supportable forecasts to estimate future losses. The Company determined that the national gross domestic product and unemployment rate were the two economic factors which had the greatest correlation to historical performance to use in the forecasted portion of the model. In addition, the transition to the DCF model allowed the Company to reduce its reliance on qualitative factors and to analyze them on a more granular level, such as by segment. The refinement represents a change in accounting estimate under ASC Topic 250, Accounting Changes and Error Corrections, with prospective application beginning in the period of change. This change in accounting estimate did not have a material effect on the Company’s financial statements.

Under the DCF methodology, the expected loss rates are evaluated at an individual loan level, incorporating a forecast for certain economic conditions, prepayment assumptions, weighted average life of loan and peer loss experience into the credit loss calculation. In addition, the model no longer considers risk rating as a key factor in the calculation of expected credit losses. This factor drove the decrease in expected loss under the DCF model for the commercial non-owner occupied category as loans with a risk rating less than “pass” were assigned a higher expected loss rate under the lifetime PD/LGD model. In addition, loan categories such as commercial business and consumer real estate loans were highly impacted by the incorporation of prepayment rates and a regression analysis under the DCF method. Higher prepayment rates shortened the recovery period for expected losses, resulting in an increased expected loss rate while the regression analysis, which includes a forecasted gross national product (“GDP”) and unemployment rate, increased the probability of default for both of these loan categories and consequently resulted in a higher expected loss rate. Finally, the incorporation of the weighted average life of loan into the calculation was a key driver of the change in the overall allocation between our commercial portfolio and our consumer portfolio as the weighted average life of our consumer loans is generally longer than that of our commercial loans, thus driving the changes in the expected loss rate to correlate to the expected life of the loan. As a result, the allocation of the ACL shifted among loan categories, reducing the ACL allotted to the commercial portfolio and increasing the ACL allotted to the consumer portfolio.

The following table summarizes the allocation of the allowance for credit losses among the various loan categories.

		September 30, 2025								December 31, 2024
(dollars in thousands)			Amount				%(1)				Amount				%(1)
Commercial
Owner occupied RE		$	3,534				18.6	%		$	5,482				17.9	%
Non-owner occupied RE			6,666				24.9	%			10,219				25.5	%
Construction			602				1.9	%			940				2.8	%
Business			12,092				16.0	%			7,745				15.3	%
Total commercial			22,894				61.4	%			24,386				61.5	%
Consumer
Real estate			16,020				30.6	%			12,359				31.1	%
Home equity			1,767				6.3	%			2,655				5.6	%
Construction			632				0.7	%			115				0.6	%
Other			486				1.0	%			399				1.2	%
Total consumer			18,905				38.6	%			15,528				38.5	%
Total allowance for credit losses		$	41,799				100.0	%		$	39,914				100.0	%

(1) Percentage of loans in each category to total loans

Deposits and Other Interest-Bearing Liabilities

Our primary source of funds for loans and investments is our deposits and advances from the FHLB. In the past, we have chosen to obtain a portion of our certificates of deposits from areas outside of our market in order to obtain longer term deposits than are readily available in our local market. Our internal guidelines regarding the use of brokered CDs limit our brokered CDs to 30% of total deposits, which allows us to take advantage of the attractive terms that wholesale funding can offer while mitigating the related inherent risk.

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Our retail deposits represented $3.11 billion, or 84.6% of total deposits, while our wholesale deposits represented $568.0 million, or 15.4%, of total deposits at September 30, 2025. At December 31, 2024, retail deposits represented $2.89 billion, or 84.0%, of our total deposits and wholesale deposits were $550.3 million, representing 16.0% of our total deposits. Our loan-to-deposit ratio was 103% at September 30, 2025 and 106% at December 31, 2024.

The following is a detail of our deposit accounts:

		September 30,				December 31,
(dollars in thousands)		2025				2024
Non-interest bearing		$	736,518				683,081
Interest bearing:
NOW accounts			343,615				314,588
Money market accounts			1,572,738				1,438,530
Savings			29,381				31,976
Time deposits			994,165				967,590
Total deposits		$	3,676,417				3,435,765

Our primary focus is on increasing core deposits, which exclude out-of-market deposits and time deposits of $250,000 or more, in order to provide a relatively stable funding source for our loan portfolio and other earning assets. In addition, at September 30, 2025 and December 31, 2024, we estimate that we have approximately $1.4 billion and $1.3 billion, or 38.1% and 37.1% of total deposits, respectively, in uninsured deposits, including related interest accrued and unpaid. Since it is not reasonably practicable to provide a precise measure of uninsured deposits, the amounts above are estimates and are based on the same methodologies and assumptions used by the FDIC for the Bank’s regulatory reporting requirements.

The following table shows the average balance amounts and the average rates paid on deposits.

		Nine months ended September 30,
		2025								2024
(dollars in thousands)		Amount				Rate				Amount				Rate
Noninterest-bearing demand deposits		$	705,114				0.00	%		$	669,911				0.00	%
Interest-bearing demand deposits			322,689				0.87	%			304,479				0.93	%
Money market accounts			1,530,981				3.46	%			1,555,198				4.10	%
Savings accounts			31,538				0.33	%			30,026				0.23	%
Time deposits less than $250,000			189,564				3.80	%			213,748				4.66	%
Time deposits greater than $250,000			763,046				4.46	%			656,330				5.14	%
Total deposits		$	3,542,932				2.74	%		$	3,429,692				3.22	%

During the first nine months of 2025, our average transaction account balances increased by $30.7 million, or 1.2%, from the prior year, while our average time deposit balances increased by $82.5 million, or 9.5%.

All of our time deposits are certificates of deposits. The maturity distribution of our time deposits $250,000 or more at September 30, 2025 was as follows:

(dollars in thousands)		September 30, 2025
Three months or less		$	204,579
Over three through six months			128,852
Over six through twelve months			277,678
Over twelve months			180,703
Total time deposits		$	791,812

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Time deposits that meet or exceed the FDIC insurance limit of $250,000 at September 30, 2025 and December 31, 2024 were $791.8 million and $774.0 million, respectively. We have a relationship with IntraFi Promontory Network, allowing us to provide deposit customers with access to aggregate FDIC insurance in amounts exceeding $250,000. This gives us the ability, as and when needed, to attract and retain large deposits from insurance conscious customers. With IntraFi, we have the option to keep deposits on balance sheet or sell them to other members of the network.

At September 30, 2025 and December 31, 2024, we had $240.0 million of convertible fixed rate FHLB advances with a weighted average rate of 3.74%. At September 30, 2025, the $240.0 million was secured with approximately $1.37 billion of mortgage loans and $14.5 million of stock in the FHLB. At December 31, 2024, the $240.0 million was secured with approximately $1.29 billion of mortgage loans and $14.5 million of stock in the FHLB.

Listed below is a summary of the terms and maturities of the advances outstanding at September 30, 2025 and December 31, 2024.

(dollars in thousands)		September 30, 2025								December 31, 2024
Maturity		Amount				Rate				Amount				Rate
April 28, 2028		$	40,000				3.51	%		$	40,000				3.51	%
June 28, 2028			40,000				3.54	%			40,000				3.54	%
July 10, 2028			40,000				3.87	%			40,000				3.87	%
July 10, 2028			40,000				3.96	%			40,000				3.96	%
May 15, 2029			35,000				3.90	%			35,000				3.90	%
July 10, 2029			45,000				3.69	%			45,000				3.69	%
Total FHLB Advances		$	240,000				3.74	%		$	240,000				3.74	%

Liquidity and Capital Resources

Liquidity is our ability to fund operations, to meet depositor withdrawals, to provide for customers’ credit needs, and to meet maturing obligations and existing commitments. Our liquidity principally depends on our cash flows from operating activities, investment in and maturity of assets, changes in balances of deposits and borrowings, and our ability to borrow funds. The several large bank failures across the United States in the first five months of 2023 exemplify the potential serious results of the unexpected inability of insured depository institutions to obtain needed liquidity to satisfy deposit withdrawal requests, including how quickly such requests can accelerate once uninsured depositors lose confidence in an institution’s ability to satisfy its obligations to depositors. We seek to ensure our funding needs are met by maintaining a level of liquidity through asset and liability management. Liquidity management involves monitoring our sources and uses of funds in order to meet our day-to-day cash flow requirements while maximizing profits. Liquidity management is made more complicated because different balance sheet components are subject to varying degrees of management control. For example, the timing of maturities of our investment portfolio is fairly predictable and subject to a high degree of control at the time investment decisions are made. However, net deposit inflows and outflows are far less predictable and are not subject to the same degree of control.

At September 30, 2025 and December 31, 2024, our cash and cash equivalents totaled $282.9 million and $162.9 million, respectively, or 6.5% and 4.0% of total assets, respectively. Our investment securities at September 30, 2025 and December 31, 2024 amounted to $151.1 million and $151.6 million, respectively, or 3.5% and 3.7% of total assets, respectively. Investment securities traditionally provide a secondary source of liquidity since they can be converted into cash in a timely manner.

Our ability to maintain and expand our deposit base and borrowing capabilities serves as our primary source of liquidity. We plan to meet our future cash needs through the liquidation of temporary investments, the generation of deposits, loan payoffs, and from additional borrowings. In addition, we will receive cash upon the maturity and sale of loans and the maturity of investment securities. We maintain six federal funds purchased lines of credit with correspondent banks totaling $128.5 million for which there were no borrowings against the lines of credit at September 30, 2025. We also had $189.8 million pledged and available with the Federal Reserve Discount Window

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at September 30, 2025. Comparatively, at December 31, 2024, we had $210.8 million pledged and available with the Federal Reserve Discount Window.

We are also a member of the FHLB, from which applications for borrowings can be made. The FHLB requires that securities, qualifying mortgage loans, and stock of the FHLB owned by the Bank be pledged to secure any advances from the FHLB. The unused borrowing capacity currently available from the FHLB at September 30, 2025 was $828.9 million, based primarily on the Bank’s qualifying mortgages available to secure any future borrowings. However, we are able to pledge additional securities to the FHLB in order to increase our available borrowing capacity. In addition, at September 30, 2025 and December 31, 2024 we had $224.0 million and $205.4 million, respectively, of letters of credit outstanding with the FHLB to secure client deposits.

We have a relationship with IntraFi Promontory Network, allowing us to provide deposit customers with access to aggregate FDIC insurance in amounts exceeding $250,000. This gives us the ability, as and when needed, to attract and retain large deposits from insurance conscious customers. With IntraFi, we have the option to keep deposits on balance sheet or sell them to other members of the network. Additionally, subject to certain limits, the Bank can use IntraFi to purchase cost-effective funding without collateralization and in lieu of generating funds through traditional brokered CDs or the FHLB. In this manner, IntraFi can provide us with another funding option. Thus, it serves as a deposit-gathering tool and an additional liquidity management tool. Under the Economic Growth, Regulatory Relief, and Consumer Protection Act, a well capitalized bank with a CAMELS rating of 1 or 2 may hold reciprocal deposits up to the lesser of 20% of its total liabilities or $5 billion without those deposits being treated as brokered deposits.

We also have a line of credit with another financial institution for $15.0 million, which was unused at September 30, 2025. The line of credit was renewed on February 28, 2025 at an interest rate of the U.S. Prime Rate plus 0.25% and matures on March 5, 2026.

On September 30, 2024, in conjunction with the semi-annual interest payment, we redeemed $11.5 million of our outstanding subordinated debt. Beginning September 30, 2024, the interest rate on our remaining $11.5 million of outstanding subordinated debt reset to an interest rate per annum equal to the Three-Month Term SOFR plus 340.8 basis points (7.65% at September 30, 2025), payable quarterly in arrears.

We believe that our existing stable base of core deposits, federal funds purchased lines of credit with correspondent banks, availability with the Federal Reserve Discount Window, and borrowings from the FHLB will enable us to successfully meet our long-term liquidity needs. However, as short-term liquidity needs arise, we have the ability to sell a portion of our investment securities portfolio to meet those needs.

Total shareholders’ equity was $356.3 million at September 30, 2025 and $330.4 million at December 31, 2024. The $25.9 million increase from December 31, 2024 is primarily related to net income of $20.5 million during the first nine months of 2025, stock option exercises and equity compensation expenses of $2.3 million, and a $3.0 million increase in other comprehensive income related to our available for sale securities.

The following table shows the return on average assets (net income divided by average total assets), return on average equity (net income divided by average equity), equity to assets ratio (average equity divided by average assets), and tangible common equity ratio (total equity less preferred stock divided by total assets) annualized for the nine months ended September 30, 2025 and the year ended December 31, 2024. Since our inception, we have not paid cash dividends.

		September 30, 2025				December 31, 2024
Return on average assets			0.65	%			0.38	%
Return on average equity			8.00	%			4.84	%
Return on average common equity			8.00	%			4.84	%
Average equity to average assets ratio			8.15	%			7.83	%
Tangible common equity to assets ratio			8.18	%			8.08	%

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Under the capital adequacy guidelines, regulatory capital is classified into two tiers. These guidelines require an institution to maintain a certain level of Tier 1 and Tier 2 capital to risk-weighted assets. Tier 1 capital consists of common shareholders’ equity, excluding the unrealized gain or loss on securities available for sale, minus certain intangible assets. In determining the amount of risk-weighted assets, all assets, including certain off-balance sheet assets, are multiplied by a risk-weight factor of 0% to 100% based on the risks believed to be inherent in the type of asset. Tier 2 capital consists of Tier 1 capital plus the general reserve for credit losses, subject to certain limitations. We are also required to maintain capital at a minimum level based on total average assets, which is known as the Tier 1 leverage ratio.

Regulatory capital rules, which we refer to as Basel III, impose minimum capital requirements for bank holding companies and banks. The Basel III rules apply to all national and state banks and savings associations regardless of size and bank holding companies and savings and loan holding companies other than “small bank holding companies,” generally holding companies with consolidated assets of less than $3 billion. In order to avoid restrictions on capital distributions or discretionary bonus payments to executives, a covered banking organization must maintain a “capital conservation buffer” on top of our minimum risk-based capital requirements. This buffer must consist solely of common equity Tier 1, but the buffer applies to all three measurements (common equity Tier 1, Tier 1 capital and total capital). The capital conservation buffer consists of an additional amount of CET1 equal to 2.5% of risk-weighted assets.

To be considered “well capitalized” for purposes of certain rules and prompt corrective action requirements, the Bank must maintain a minimum total risk-based capital ratio of at least 10%, a total Tier 1 capital ratio of at least 8%, a common equity Tier 1 capital ratio of at least 6.5%, and a leverage ratio of at least 5%. As of September 30, 2025 our capital ratios exceed these ratios and we remain “well capitalized.”

The following table summarizes the capital amounts and ratios of the Bank and the regulatory minimum requirements.

										September 30, 2025
		Actual								For capital adequacy purposes minimum plus the capital conservation buffer								To be well capitalized under prompt corrective action provisions minimum
(dollars in thousands)		Amount				Ratio				Amount				Ratio				Amount				Ratio
Total Capital (to risk weighted assets)		$	426,464				12.72	%		$	268,285				8.00	%		$	335,356				10.00	%
Tier 1 Capital (to risk weighted assets)			384,665				11.47	%			201,214				6.00	%			268,285				8.00	%
Common Equity Tier 1 Capital (to risk weighted assets)			384,665				11.47	%			150,910				4.50	%			217,981				6.50	%
Tier 1 Capital (to average assets)			384,665				8.88	%			173,328				4.00	%			216,660				5.00	%

										December 31, 2024
		Actual								For capital adequacy purposes minimum plus the capital conservation buffer								To be well capitalized under prompt corrective action provisions minimum
(dollars in thousands)		Amount				Ratio				Amount				Ratio				Amount				Ratio
Total Capital (to risk weighted assets)		$	402,629				12.66	%		$	254,412				8.00	%		$	318,015				10.00	%
Tier 1 Capital (to risk weighted assets)			362,875				11.41	%			190,809				6.00	%			254,412				8.00	%
Common Equity Tier 1 Capital (to risk weighted assets)			362,875				11.41	%			143,107				4.50	%			206,709				6.50	%
Tier 1 Capital (to average assets)			362,875				8.75	%			165,941				4.00	%			207,426				5.00	%

The following table summarizes the capital amounts and ratios of the Company and the minimum regulatory requirements.

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										September 30, 2025
		Actual								For capital adequacy purposes minimum plus the capital conservation buffer (1)									To be well capitalized under prompt corrective action provisions minimum
(dollars in thousands)		Amount				Ratio				Amount				Ratio					Amount				Ratio
Total Capital (to risk weighted assets)		$	428,773				12.79	%		$	268,285				8.00	%			N/A				N/A
Tier 1 Capital (to risk weighted assets)			377.774				11.26	%			201,213				6.00	%			N/A				N/A
Common Equity Tier 1 Capital (to risk weighted assets)			364,774				10.88	%			150,910				4.50	%			N/A				N/A
Tier 1 Capital (to average assets)			377,774				8.72	%			173,344				4.00	%			N/A				N/A

										December 31, 2024
		Actual								For capital adequacy purposes minimum plus the capital conservation buffer									To be well capitalized under prompt corrective action provisions minimum(1)
(dollars in thousands)		Amount				Ratio				Amount				Ratio					Amount				Ratio
Total Capital (to risk weighted assets)		$	403,867				12.70	%			254,392				8.00	%			N/A				N/A
Tier 1 Capital (to risk weighted assets)			354,916				11.16	%			190,794				6.00	%			N/A				N/A
Common Equity Tier 1 Capital (to risk weighted assets)			341,916				10.75	%			143,096				4.50	%			N/A				N/A
Tier 1 Capital (to average assets)			354,916				8.55	%			165,963				4.00	%			N/A				N/A

(1) The prompt corrective action provisions are only applicable at the Bank level. The Bank exceeded the general minimum regulatory requirements to be considered “well capitalized.”

The ability of the Company to pay cash dividends to shareholders is dependent upon receiving cash in the form of dividends from the Bank. The dividends that may be paid by the Bank to the Company are subject to legal limitations and regulatory capital requirements. Since our inception, we have not paid cash dividends to shareholders.

Effect of Inflation and Changing Prices

The effect of relative purchasing power over time due to inflation has not been taken into account in our consolidated financial statements. Rather, our financial statements have been prepared on a historical cost basis in accordance with generally accepted accounting principles.

Unlike most industrial companies, our assets and liabilities are primarily monetary in nature. Therefore, the effect of changes in interest rates will have a more significant impact on our performance than will the effect of changing prices and inflation in general. In addition, interest rates may generally increase as the rate of inflation increases, although not necessarily in the same magnitude. As discussed previously, we seek to manage the relationships between interest sensitive assets and liabilities in order to protect against wide rate fluctuations, including those resulting from inflation.

Off-Balance Sheet Risk

Commitments to extend credit are agreements to lend money to a client as long as the client has not violated any material condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require the payment of a fee. At September 30, 2025 unfunded commitments to extend credit were $836.4 million, of which $99.9 million were at fixed rates and $736.5 million were at variable rates. At December 31, 2024, unfunded commitments to extend credit were $719.1 million, of which approximately $57.5 million were at fixed rates and $661.6 million were at variable rates. A significant portion of the unfunded commitments related to commercial business loans and consumer home equity lines of credit. We evaluate each client’s credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by us upon extension of credit, is based on our credit evaluation of the borrower. The type of collateral varies but may include accounts receivable, inventory, property, plant and equipment, and commercial and residential real estate. As of September 30, 2025 and December 31, 2024, the reserve for unfunded commitments was $1.9 million or 0.22% and 0.20%, respectively, of total unfunded commitments.

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At September 30, 2025 and December 31, 2024, there were commitments under letters of credit for $20.4 million and $16.2 million, respectively. The credit risk and collateral involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. Since most of the letters of credit are expected to expire without being drawn upon, they do not necessarily represent future cash requirements.

Except as disclosed in this report, we are not involved in off-balance sheet contractual relationships, unconsolidated related entities that have off-balance sheet arrangements or transactions that could result in liquidity needs or other commitments that significantly impact earnings.

Critical Accounting Estimates

We have adopted various accounting policies that govern the application of accounting principles generally accepted in the United States and with general practices within the banking industry in the preparation of our financial statements.

Certain accounting policies inherently involve a greater reliance on the use of estimates, assumptions and judgments and, as such, have a greater possibility of producing results that could be materially different than originally reported, which could have a material impact on the carrying values of our assets and liabilities and our results of operations. Of the significant accounting policies used in the preparation of our consolidated financial statements, we have identified certain items as critical accounting policies based on the associated estimates, assumptions, judgments and complexity. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2024, for a description our significant accounting policies that use critical accounting estimates.

Accounting, Reporting, and Regulatory Matters

See Note 1 – Summary of Significant Accounting Policies in the accompanying notes to consolidated financial statements included elsewhere in this report for details of recently issued accounting pronouncements and their expected impact on our consolidated financial statements.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption.

On October 24, 2023, the federal banking agencies released a final rule significantly revising the framework that the agencies use to evaluate banks’ records of meeting the credit needs of their entire communities under the Community Reinvestment Act (CRA). On July 16, 2025, the agencies issued a notice of proposed rulemaking to rescind the October 2023 final rule and restore the 1995 CRA framework that existed previously, which has remained in effect due to a preliminary injunction that stayed implementation of the October 2023 rule. Southern First received a “satisfactory” rating in its most recent CRA performance evaluation, which was conducted using the CRA framework which existed prior to the October 2023 final rule.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Market risk is the risk of loss from adverse changes in market prices and rates, which principally arises from interest rate risk inherent in our lending, investing, deposit gathering, and borrowing activities. Other types of market risks, such as foreign currency exchange rate risk and commodity price risk, do not generally arise in the normal course of our business.

We actively monitor and manage our interest rate risk exposure to seek to control the mix and maturities of our assets and liabilities utilizing a process we call asset/liability management. The essential purposes of asset/liability management are to seek to ensure adequate liquidity and to maintain an appropriate balance between interest sensitive assets and liabilities in order to minimize potentially adverse impacts on earnings from changes in market interest rates. Our asset/liability management committee (“ALCO”) monitors and considers methods of managing exposure to interest rate risk by repricing assets or liabilities, selling securities available for sale, replacing an asset or liability at maturity, by adjusting the interest rate during the life of an asset or liability, or by the use of derivatives

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such as interest rate swaps and other hedging instruments. Managing the amount of assets and liabilities repricing in the same time interval helps to hedge the risk and minimize the impact on net interest income of rising or falling interest rates. We have both an internal ALCO consisting of senior management that meets no less than quarterly and a board risk committee that meets quarterly, and both committees are responsible for maintaining the level of interest rate sensitivity of our interest sensitive assets and liabilities within board-approved limits.

As of September 30, 2025, the following table summarizes the forecasted impact on net interest income using a base case scenario given upward and downward movements in interest rates of 100, 200, and 300 basis points based on forecasted assumptions of prepayment speeds, nominal interest rates and loan and deposit repricing rates. Estimates are based on current economic conditions, historical interest rate cycles and other factors deemed to be relevant. However, underlying assumptions may be impacted in future periods which were not known to management at the time of the issuance of the Consolidated Financial Statements. Therefore, management’s assumptions may or may not prove valid. No assurance can be given that changing economic conditions and other relevant factors impacting our net interest income will not cause actual occurrences to differ from underlying assumptions. In addition, this analysis does not consider any strategic changes to our balance sheet which management may consider as a result of changes in market conditions.

Interest rate scenario		Change in net interest income from base
Up 300 basis points			(6.96	)%
Up 200 basis points			(3.84	)%
Up 100 basis points			(1.51	)%
Base			-
Down 100 basis points			(0.07	)%
Down 200 basis points			1.36	%
Down 300 basis points			3.02	%

Item 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

Management, including our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this report. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports we file and submit under the Exchange Act is (i) recorded, processed, summarized and reported as and when required and (ii) accumulated and communicated to our management, including our Chief Executive Officer and the Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting 

There has been no change in the Company’s internal control over financial reporting during the three months ended September 30, 2025, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS.

We are a party to claims and lawsuits arising in the course of normal business activities. Management is not aware of any material pending legal proceedings against the Company which, if determined adversely, would have a material adverse impact on the company’s financial position, results of operations or cash flows.

Item 1A. RISK FACTORS.

Investing in shares of our common stock involves certain risks, including those identified and described in Item 1A. of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, as well as cautionary statements contained in this Quarterly Report on Form 10-Q, including those under the caption “Cautionary Warning Regarding

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Forward-Looking Statements” set forth in Part I, Item 2 of this Form 10-Q, risks and matters described elsewhere in this Form 10-Q, and in our other filings with the SEC.

There have been no material changes to the risk factors previously disclosed in the Company’s (i) Annual Report on Form 10-K for fiscal year ended December 31, 2024.

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

(a) Sales of Unregistered Securities - None

(b) Use of Proceeds – Not applicable

(c) Issuer Purchases of Securities

The following table reflects share repurchase activity during the third quarter of 2025:

(d) Maximum

(c) Total

Number (or

Number of

Approximate

Shares (or

Dollar Value) of

Units)

Shares (or

(a) Total

Purchased as

Units) that May

Number of

Part of Publicly

Yet Be

Shares (or

(b) Average

Announced

Purchased

Units)

Price Paid per

Plans or

Under the Plans

Period

Purchased

Share (or Unit)

Programs

or Programs

July 1, 2025 – September 30, 2025

-

-

-

$

5,000,000

Total

-

-

-

$

5,000,000

*On June 17, 2025, the Company announced a share repurchase plan allowing us to repurchase up to $5.0 million of shares of our common stock (the “Repurchase Plan”). As of September 30, 2025, we have not repurchased any of the shares authorized for repurchase under the Repurchase Plan. The Company is not obligated to purchase any such shares under the Repurchase Plan, and the Repurchase Plan may be discontinued, suspended or restarted at any time; however, repurchases under the Repurchase Plan after May 22, 2026 would require additional approval of our Board of Directors and the Federal Reserve.

Item 3. DEFAULTS UPON SENIOR SECURITIES.

None.

Item 4. MINE SAFETY DISCLOSURES.

Not applicable.

Item 5. OTHER INFORMATION.

Trading Plans

During the nine months ended September 30, 2025, no director or “officer” of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408 of Regulation S-K of the Securities Act of 1933.

Item 6. EXHIBITS.

The exhibits required to be filed as part of this Quarterly Report on Form 10-Q are listed in the Index to Exhibits attached hereto and are incorporated herein by reference.

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Table of Contents 

INDEX TO EXHIBITS

Exhibit Number	Description
31.1	Rule 13a-14(a) Certification of the Principal Executive Officer.
31.2	Rule 13a-14(a) Certification of the Principal Financial Officer.
32	Section 1350 Certifications.
101	The following materials from the Quarterly Report on Form 10-Q of Southern First Bancshares, Inc. for the quarter ended September 30, 2025, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statement of Changes in Shareholders’ Equity, (v) Consolidated Statements of Cash Flows and (vi) Notes to Unaudited Consolidated Financial Statements.
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)
______	________________________________________________

48 

Table of Contents 

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.

		SOUTHERN FIRST BANCSHARES, INC.
		Registrant
Date: October 31, 2025		/s/ R. Arthur Seaver, Jr.
		R. Arthur Seaver, Jr.
		Chief Executive Officer (Principal Executive Officer)
Date: October 31, 2025		/s/ Christian J. Zych
		Christian J. Zych
		Chief Financial Officer (Principal Financial Officer)

49 

FAQ

How did SFST perform in Q3 2025?

Net income was $8.662 million and diluted EPS was $1.07, up from $4.382 million and $0.54 a year ago.

What was SFST's net interest income in Q3 2025?

Net interest income was $27.529 million, compared with $20.591 million in the prior-year quarter.

How did SFST's balance sheet change by September 30, 2025?

Assets were $4.359 billion, loans $3.789 billion, and deposits $3.676 billion.

What were credit costs and reserves in Q3 2025?

Provision for credit losses was $0.850 million; the allowance for credit losses was $41.799 million.

How did liquidity and capital-related metrics trend?

Cash and equivalents increased to $282.903 million, and accumulated other comprehensive loss narrowed to $8.426 million.

How many SFST shares were outstanding recently?

There were 8,189,177 common shares outstanding as of October 27, 2025.