# Catalyst Bancorp, Inc.: Form 10-Q for the period ended Mar 31, 2024

- Company: [Catalyst Bancorp, Inc.](/companies/clst.md) (CIK 1849867)
- Form: 10-Q
- Filed: 2024-05-15
- Accepted by EDGAR: May 15, 2024, 13:00 ET
- Period: 2024-03-31
- Accession: 0001558370-24-008243
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1849867/000155837024008243/clst-20240331x10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1849867/000155837024008243/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Interest expense | 3 months, 2024-01-01 to 2024-03-31 | $1.0m | us-gaap:InterestExpense |
| Income tax | 3 months, 2024-01-01 to 2024-03-31 | −$1.3m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-01-01 to 2024-03-31 | −$4.7m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-01-01 to 2024-03-31 | −$1.14 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-01-01 to 2024-03-31 | −$1.14 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-01-01 to 2024-03-31 | 4,089,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2024-01-01 to 2024-03-31 | $247.0k | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2024-01-01 to 2024-03-31 | $24.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 3 months, 2024-01-01 to 2024-03-31 | $2.5m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2024-03-31 | $76.0m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Total assets | at 2024-03-31 | $282.0m | us-gaap:Assets |
| Total liabilities | at 2024-03-31 | $200.7m | us-gaap:Liabilities |
| Long-term debt | at 2024-03-31 | $29.4m | us-gaap:LongTermDebt |
| Shareholders' equity | at 2024-03-31 | $81.4m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 44,493 characters.

### General

Management’s Discussion and Analysis of Financial Condition and Results of Operations at March 31, 2024 and for the three months ended March 31, 2024 and 2023 is intended to assist in understanding our financial condition and results of operations. The information contained in this section should be read in conjunction with the unaudited consolidated financial statements of the Company and the notes thereto appearing in Part I, Item 1, of this Quarterly Report on Form 10-Q as well as the business and financial information included in the Company’s Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2023.

### Cautionary Note Regarding Forward-Looking Statements

Certain matters in this Form 10-Q may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not statements of historical fact, are based on certain assumptions and are generally identified by use of words such as “believes,” “expects,” “anticipates,” “estimates,” “forecasts,” “intends,” “plans,” “targets,” “potentially,” “probably,” “projects,” “outlook” or similar expressions or future or conditional verbs such as “may,” “will,” “should,” “would,” and “could.” These forward-looking statements include, but are not limited to:

- statements of our goals, intentions and expectations;
- statements regarding our business plans, prospects, growth and operating strategies;
- statements regarding the quality of our loan and investment portfolios; and
- estimates of our risks and future costs and benefits.

You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date made. These forward-looking statements are based on our current beliefs and expectations and, by their nature, are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change.

Important factors that could cause our actual results to differ materially from the results anticipated or projected, include, but are not limited to, the following:

- general economic conditions, either nationally or in our market areas, that are different than expected;
- conditions relating to infectious disease outbreaks, including the severity and duration of the associated economic slowdown, either nationally or in our market areas, that are worse than expected;
- changes in the level and direction of loan delinquencies and charge-offs and changes in estimates of the adequacy of the allowance for credit losses;
- our ability to access cost-effective funding;
- major catastrophes such as hurricanes, floods or other natural disasters, the related disruption to local, regional and global economic activity and financial markets, and the impact that any of the foregoing may have on us and our customers and other constituencies;
- technological changes that may be more difficult or expensive than expected;
- success or consummation of new business initiatives may be more difficult or expensive than expected;
- the inability of third-party service providers to perform;
- fluctuations in real estate values and both residential and commercial real estate market conditions;
- demand for loans and deposits in our market area;
- our ability to continue to implement our business strategies;
- competition among depository and other financial institutions;
- inflation and changes in the interest rate environment that reduce our margins and yields, reduce the fair value of financial instruments or reduce the origination levels in our lending business, or increase the level of defaults, losses and prepayments on loans;
- adverse changes in the securities markets;
- changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees and capital requirements;
- our ability to manage market risk, credit risk and operational risk in the current economic conditions;
- our ability to enter new markets successfully and capitalize on growth opportunities;
- our ability to successfully integrate any assets, liabilities, customers, systems and management personnel we may acquire into our operations and our ability to realize related revenue synergies and cost savings within expected time frames and any goodwill charges related thereto;
- changes in consumer spending, borrowing and savings habits;
- changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the U. S. Securities and Exchange Commission or the Public Company Accounting Oversight Board;
- our ability to retain key employees; and our compensation expense associated with equity allocated or awarded to our employees.

We undertake no obligation to publicly update or revise any forward-looking statements included in this report or to update the reasons why actual results could differ from those contained in such statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking statements discussed in this report might not occur and you should not put undue reliance on any forward-looking statements.

### Overview

Catalyst Bancorp, Inc. (“Catalyst Bancorp” or the “Company”) is the holding company for Catalyst Bank (the “Bank”), formerly known as St. Landry Homestead Federal Savings Bank. The Company was incorporated by the Bank in February 2021 as part of the conversion of the Bank from the mutual to the stock form of organization (the “Conversion”). The Conversion was completed on October 12, 2021, at which time the Company acquired all of the issued and outstanding shares of common stock of the Bank, which became the wholly-owned subsidiary of Catalyst Bancorp. The Bank officially changed its name to Catalyst Bank in June 2022.

Founded in 1922, the Bank is a community-oriented savings bank serving the banking needs of customers in the Acadiana region of south-central Louisiana. We are headquartered in Opelousas, Louisiana and serve our customers through six full-service branches located in Carencro, Eunice, Lafayette, Opelousas, and Port Barre. Our primary business consists of attracting deposits from the general public and using those funds together with funds we borrow from the Federal Home Loan Bank (“FHLB”) of Dallas, Federal Reserve Bank of Atlanta, and other sources to originate loans to our customers and invest in securities.

Historically, we operated as a traditional thrift relying on long-term, single-family residential mortgage loans secured by properties located primarily in St. Landry Parish and adjoining areas to generate interest income. In 2021, we re-focused our business strategy to a relationship-based community bank model targeting small- to mid-sized businesses and business professionals in our market areas while continuing to serve our traditional customer base. The Conversion and offering were important factors in our efforts to become a more dynamic, profitable and growing institution.

The following is an overview of financial results for the three months ended March 31, 2024:

- Total assets of $282.0 million at March 31, 2024, up $11.1 million or 4.1% from December 31, 2023
- Loans of $143.5 million, or 50.9% of total assets, at March 31, 2024, down $1.4 million or 1.0% from December 31, 2023
- Non-performing assets of $1.7 million at March 31, 2024, down $332,000 or 16.2% from December 31, 2023
- Investment securities of $39.0 million, or 13.8% of total assets, at March 31, 2024, down $45.0 million or 53.6% from December 31, 2023
- Deposits of $169.6 million at March 31, 2024, up $4.0 million or 2.4% from December 31, 2023
- Borrowings of $29.4 million at March 31, 2024, up $10.0 million or 51.8% from December 31, 2023
- Total shareholders’ equity of $81.4 million, or 28.8% of total assets, at March 31, 2024, down $3.3 million or 3.9% from December 31, 2023
- Net interest income of $2.1 million, up $142,000 or 7.2%, and net interest margin of 3.15%, up 5 basis points (“bps”) compared to the first three months of 2023
- Loss on the sales of investment securities of $5.5 million
- Non-interest expense of $2.8 million, up $606,000 or 27.7% compared to the first three months of 2023, primarily due to expenses related to the Company’s upgrade to a new core processing system.
- Net loss of $4.7 million

Our results of operations depend, to a large extent, on net interest income, which is the difference between the income earned on our loan and investment portfolios and interest expense on deposits and borrowings. Our net interest income is largely determined by our net interest spread, which is the difference between the average yield earned on interest-earning assets and the average rate paid on interest-bearing liabilities, and the relative amounts of interest-earning assets and interest-bearing liabilities. Results of operations are also affected by our provisions for credit losses, fee income and other non-interest income and non-interest expense. Non-interest expense principally consists of compensation, office occupancy and equipment expense, data processing, and other expense. Our results of operations are also significantly affected by general economic and competitive conditions, particularly changes in interest rates, government policies and actions of regulatory authorities. Future changes in applicable law, regulations or government policies may materially impact our financial condition and results of operations.

### Critical Accounting Policies and Estimates

Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties and could reflect materially different results under different assumptions and conditions. Methodologies the Company uses when applying critical accounting policies and developing critical estimates are included in its Annual Report on Form 10-K for the year ended December 31, 2023. Our accounting policies for allowance for credit losses, investment securities, and income taxes comprise those that management believes involve the most critical estimates and aid in fully understanding and evaluating our reported financial results.

During the three months ended March 31, 2024, the measurement of the Company’s deferred income tax assets and liabilities was identified as a critical accounting estimate. Deferred income tax assets and liabilities are determined based on the tax effects of the temporary differences between the book and tax bases of the various assets and liabilities and gives current recognition to changes in tax rates and laws. At March 31, 2024, the Company’s net deferred tax asset totaled $1.8 million and is included in other assets on the statement of financial condition. According to Subtopic 740-10 of the Accounting Standards Codification (“ASC 740-10”), the measurement of deferred tax assets is reduced, if necessary, by the amount of any tax benefits that, based on available evidence, are not expected to be realized. At March 31, 2024, the Company has not recorded a valuation allowance for its deferred tax assets. Realizing our deferred tax assets principally depends upon our achieving projected future taxable income. We may change our judgments regarding future profitability due to future market conditions and other factors. We may adjust our deferred tax asset balances if our judgments change, which may impact total income tax expense in future periods.

There were no other material changes from the significant accounting policies or critical accounting estimates previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. In preparing the financial statements, the Company is required to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. The consolidated financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair statement of the Company’s financial condition, results of operations, comprehensive income, changes in equity and cash flows for the interim periods presented. These adjustments are of a normal recurring nature and include appropriate estimated provisions.

### Comparison of Financial Condition at March 31, 2024 and December 31, 2023

***Total Assets.*** Total assets increased $11.1 million, or 4.1%, to $282.0 million at March 31, 2024 from $270.9 million at December 31, 2023. The increase was primarily due to additional borrowings under the Bank Term Funding Program (“BTFP”).

***Loans***. The following table summarizes the changes in the composition of our loan portfolio by type of loan as of the dates indicated.

*(Dollars in thousands)*

| ​ ​ ​ Real estate loans | ​ ​ ​ ​ | ​ ​ ​ ​ March 31, 2024 Amount% ​ ​ | ​ ​ ​ ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ | ​ ​ ​ ​ December 31, 2023 Amount% ​ ​ | ​ ​ ​ ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ Change ​ ​ | ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ ​ ​ |
| --- | --- | ---: | ---: | --- | ---: | ---: | --- | ---: | --- | ---: |
| One- to four-family residential | ​ | $81,686 | 56.9% | ​ | $83,623 | 57.7% | ​ | $(1,937) | ​ | (2.3)% |
| Commercial real estate | ​ | 21,130 | 14.7 ​ | ​ | 21,478 | 14.8 ​ | ​ | (348) | ​ | (1.6) ​ |
| Construction and land | ​ | 19,369 | 13.5 ​ | ​ | 13,857 | 9.6 ​ | ​ | 5,512 | ​ | 39.8 ​ |
| Multi-family residential | ​ | 3,061 | 2.1 ​ | ​ | 3,373 | 2.3 ​ | ​ | (312) | ​ | (9.2) ​ |
| Total real estate loans | ​ | ​ 125,246 | 87.2 ​ | ​ | ​ 122,331 | 84.4 ​ | ​ | ​ 2,915 | ​ | 2.4 ​ |
| **Other loans** | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Commercial and industrial | ​ | ​ 15,711 | 10.9 ​ | ​ | ​ 19,984 | 13.8 ​ | ​ | ​ (4,273) | ​ | (21.4) ​ |
| Consumer | ​ | ​ 2,534 | 1.9 ​ | ​ | ​ 2,605 | 1.8 ​ | ​ | ​ (71) | ​ | (2.7) ​ |
| Total other loans | ​ | ​ 18,245 | 12.8 ​ | ​ | ​ 22,589 | 15.6 ​ | ​ | ​ (4,344) | ​ | (19.2) ​ |
| Total loans | ​ | $143,491 | 100.0% | ​ | $144,920 | 100.0% | ​ | $(1,429) | ​ | (1.0) ​ |

During the three months ended March 31, 2024, strong construction loan growth was offset primarily by net declines in our commercial and industrial and residential loan portfolios. Construction loan growth was largely driven by multi-family residential development and additional fundings on several existing construction loans.

The following table summarizes the composition of our construction and land loan balances and commitments, including the related undisbursed amounts for construction projects in process as of March 31, 2024.

*(Dollars in thousands)*

| ​ Commercial construction and land loans | ​ ​ ​ | ​ ​ Loan Balance ​ ​ | ​ ​ ​ | ​ ​ Undisbursed ​ ​ | ​ ​ ​ | ​ ​ Total Commitment ​ ​ |
| --- | --- | --- | --- | --- | --- | --- |
| Multi-family residential | ​ | $4,782 | ​ | $3,218 | ​ | $8,000 |
| Retail | ​ | ​ 711 | ​ | ​ 4,769 | ​ | ​ 5,480 |
| Health service facilities | ​ | ​ 2,749 | ​ | ​ 2,663 | ​ | ​ 5,412 |
| Hospitality | ​ | ​ 2,716 | ​ | ​ 700 | ​ | ​ 3,416 |
| Residential subdivision development | ​ | ​ 813 | ​ | ​ 9 | ​ | ​ 822 |
| Commercial land | ​ | ​ 297 | ​ | ​ - | ​ | ​ 297 |
| Other commercial construction and development | ​ | ​ 3,790 | ​ | ​ 289 | ​ | ​ 4,079 |
| Total commercial construction and land | ​ | $15,858 | ​ | $11,648 | ​ | $27,506 |
| **Consumer construction and land loans** | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Residential construction | ​ | ​ 2,851 | ​ | ​ 1,241 | ​ | ​ 4,092 |
| Consumer land | ​ | ​ 660 | ​ | ​ - | ​ | ​ 660 |
| Total consumer construction and land | ​ | ​ 3,511 | ​ | ​ 1,241 | ​ | ​ 4,752 |
| Total construction and land | ​ | $19,369 | ​ | $12,889 | ​ | $32,258 |

Based on total commitment and contractual maturity date, the weighted average term to maturity of our construction and land loan portfolio is approximately 11 months as of March 31, 2024.

***Allowance for Credit Losses.*** At March 31, 2024, the allowance for loan losses totaled $2.1 million, or 1.44% of total loans, compared to 1.47% of total loans at December 31, 2023. The allowance for credit losses on unfunded commitments totaled $310,000, up $53,000 from December 31, 2023. The provision for credit losses, inclusive of the provision for unfunded commitments, for the first quarter of 2024 totaled $95,000 and was largely attributable to growth in total construction loan commitments.

The following table presents the changes in the allowance for loan losses and other related data for the periods indicated.

*(Dollars in thousands)*

| ​ ​ Allowance for loan losses: | ​ ​ ​ | ​ ​ ​ Three Months Ended March 31, 2024 ​ ​ ​ | ​ ​ ​ | ​ ​ ​ 2023 ​ ​ ​ | ​ ​ ​ ​ | ​ ​ ​ ​ Year Ended December 31, ​ 2023 ​ ​ ​ |
| --- | --- | --- | --- | --- | --- | --- |
| Balance, beginning of period | ​ | $2,124 | ​ | $1,807 ​ | ​ | $1,807 ​ |
| Impact of adoption of ASC 326 | ​ | ​ - ​ | ​ | ​ 209 ​ | ​ | ​ 209 ​ |
| Provision for loan losses | ​ | 42 | ​ | ​ - ​ | ​ | ​ 87 ​ |
| Net loan recoveries (charge-offs): | ​ | ​ | ​ | ​ ​ | ​ | ​ ​ |
| One- to four-family residential | ​ | (80) | ​ | ​ 56 ​ | ​ | ​ 42 ​ |
| Commercial real estate | ​ | (14) | ​ | ​ - ​ | ​ | ​ - ​ |
| Construction and land | ​ | - | ​ | ​ - ​ | ​ | ​ - ​ |
| Multi-family residential | ​ | - | ​ | ​ - ​ | ​ | ​ - ​ |
| Commercial and industrial | ​ | - | ​ | ​ - ​ | ​ | ​ 1 ​ |
| Consumer | ​ | (4) | ​ | ​ (2) ​ | ​ | ​ (22) ​ |
| Total net recoveries (charge-offs) | ​ | (98) | ​ | ​ 54 ​ | ​ | ​ 21 ​ |
| Balance, end of period | ​ | $2,068 | ​ | $2,070 ​ | ​ | $2,124 ​ |
| **​** | ​ | ​ ​ ​ | ​ | ​ ​ ​ | ​ | ​ ​ ​ |
| **Allowance for credit losses on unfunded lending commitments:** | ​ | ​ ​ ​ | ​ | ​ ​ ​ | ​ | ​ ​ ​ |
| Balance, beginning of period | ​ | $257 | ​ | $- ​ | ​ | $- ​ |
| Impact of adoption of ASC 326 | ​ | ​ - ​ | ​ | ​ 216 ​ | ​ | ​ 216 ​ |
| Provision for credit losses on unfunded lending commitments | ​ | ​ 53 | ​ | ​ - ​ | ​ | ​ 41 ​ |
| Balance, end of period | ​ | $310 ​ | ​ | $216 ​ | ​ | $257 ​ |
| ​ | ​ | ​ ​ ​ | ​ | ​ ​ ​ | ​ | ​ ​ ​ |
| Total allowance for credit losses, end of period | ​ | $2,378 ​ | ​ | $2,286 ​ | ​ | $2,381 ​ |
| Total provision for (reversal of) credit losses | ​ | ​ 95 ​ | ​ | ​ - ​ | ​ | ​ 128 ​ |
| ​ | ​ | ​ ​ ​ | ​ | ​ ​ ​ | ​ | ​ ​ ​ |
| Total loans at end of period | ​ | $143,491 | ​ | $132,690 ​ | ​ | $144,920 ​ |
| Total non-accrual loans at end of period | ​ | 1,453 | ​ | ​ 1,618 ​ | ​ | ​ 1,967 ​ |
| Total non-performing loans at end of period | ​ | 1,482 | ​ | ​ 1,687 ​ | ​ | ​ 1,991 ​ |
| Total average loans | ​ | ​ 144,428 ​ | ​ | ​ 133,781 ​ | ​ | ​ 135,713 ​ |
| ​ | ​ | ​ ​ ​ | ​ | ​ ​ ​ | ​ | ​ ​ ​ |
| **Allowance for loan losses as a percent of:** | ​ | ​ ​ ​ | ​ | ​ ​ ​ | ​ | ​ ​ ​ |
| Total loans | ​ | 1.44% | ​ | ​ 1.56% | ​ | ​ 1.47% |
| Non-accrual loans | ​ | 142.33 ​ | ​ | ​ 127.94 ​ | ​ | ​ 107.98 ​ |
| Non-performing loans | ​ | 139.54 ​ | ​ | ​ 122.70 ​ | ​ | ​ 106.68 ​ |
| ​ | ​ | ​ ​ ​ | ​ | ​ ​ ​ | ​ | ​ ​ ​ |
| **Net annualized recoveries (charge-offs) as a percent of average loans by portfolio:** | ​ | ​ ​ ​ | ​ | ​ ​ ​ | ​ | ​ ​ ​ |
| One- to four-family residential | ​ | ​ (0.39)% | ​ | ​ 0.26% | ​ | ​ 0.05% |
| Commercial real estate | ​ | ​ (0.27) ​ | ​ | ​ - ​ | ​ | ​ - ​ |
| Construction and land | ​ | ​ - ​ | ​ | ​ - ​ | ​ | ​ - ​ |
| Multi-family residential | ​ | ​ - ​ | ​ | ​ - ​ | ​ | ​ - ​ |
| Commercial and industrial | ​ | ​ - ​ | ​ | ​ - ​ | ​ | ​ 0.01 ​ |
| Consumer | ​ | ​ (0.63) ​ | ​ | ​ (0.24) ​ | ​ | ​ (0.71) ​ |
| Total loans | ​ | ​ (0.27) ​ | ​ | ​ 0.16 ​ | ​ | ​ 0.02 ​ |

**Non-performing Assets.** The following table shows the amounts of our non-performing assets, which include non-accruing loans, accruing loans 90 days or more past due and foreclosed assets at the dates indicated.

*(Dollars in thousands)*

| ​ ​ Non-accruing loans | ​ ​ | ​ ​ ​ March 31, 2024 ​ | ​ ​ ​ ​ | ​ ​ ​ December 31, 2023 ​ ​ |
| --- | --- | ---: | --- | ---: |
| One- to four-family residential | ​ | $1,426 ​ | ​ | $1,875 ​ |
| Commercial real estate | ​ | - ​ | ​ | 50 ​ |
| Construction and land | ​ | 27 ​ | ​ | 42 ​ |
| Multi-family residential | ​ | - ​ | ​ | - ​ |
| Commercial and industrial | ​ | - ​ | ​ | - ​ |
| Consumer | ​ | - ​ | ​ | - ​ |
| Total non-accruing loans | ​ | 1,453 ​ | ​ | ​ 1,967 ​ |
| **Accruing loans 90 days or more past due** | ​ | ​ | ​ | ​ |
| One- to four-family residential | ​ | 29 ​ | ​ | 24 ​ |
| Commercial real estate | ​ | - ​ | ​ | - ​ |
| Construction and land | ​ | - ​ | ​ | - ​ |
| Multi-family residential | ​ | - ​ | ​ | - ​ |
| Commercial and industrial | ​ | - ​ | ​ | - ​ |
| Consumer | ​ | - ​ | ​ | - ​ |
| Total accruing loans 90 days or more past due | ​ | ​ 29 | ​ | ​ 24 ​ |
| Total non-performing loans | ​ | ​ 1,482 ​ | ​ | ​ 1,991 ​ |
| Foreclosed assets | ​ | ​ 237 ​ | ​ | ​ 60 ​ |
| Total non-performing assets | ​ | $1,719 ​ | ​ | $2,051 ​ |
| ​ | ​ | ​ ​ ​ | ​ | ​ ​ ​ |
| Total loans | ​ | $143,491 ​ | ​ | $144,920 ​ |
| Total assets | ​ | ​ 282,049 ​ | ​ | ​ 270,932 ​ |
| ​ | ​ | ​ ​ ​ | ​ | ​ ​ ​ |
| Total non-accruing loans as a percentage of total loans | ​ | ​ 1.01% | ​ | 1.36% |
| Total non-performing loans as a percentage of total loans | ​ | ​ 1.03 ​ | ​ | 1.37 ​ |
| Total non-performing loans as a percentage of total assets | ​ | ​ 0.53 ​ | ​ | 0.73 ​ |
| Total non-performing assets as a percentage of total assets | ​ | ​ 0.61 ​ | ​ | 0.76 ​ |

Non-performing loans totaling $275,000 as of December 31, 2023 were paid-off or returned to accrual status during the three months ended March 31, 2024.

***Investment Securities.*** Total investment securities were $39.0 million at March 31, 2024, down $45.0 million, or 53.6%, compared to $84.0 million at December 31, 2023. Net unrealized losses on securities available-for-sale totaled $4.6 million at March 31, 2024, compared to $9.2 million at December 31, 2023. Unrealized losses on available-for-sale securities relate principally to increases in market interest rates for similar securities. Our investment securities portfolio consists primarily of debt obligations issued by the U.S. government and government agencies and government-sponsored mortgage-backed securities.

The Company has not purchased investment securities since the fourth quarter of 2022. During the three months ended March 31, 2024, the Company sold 50 available-for-sale investment securities for a total pre-tax loss of $5.5 million. Proceeds from the sales totaled $42.6 million, inclusive of accrued interest.

The following table presents the amortized cost of our total investment securities portfolio that mature during each of the periods indicated and the weighted average yields for each range of maturities at March 31, 2024.

*(Dollars in thousands)*

| ​ ​ Total investment securities | ​ ​ ​ ​ | ​ ​ ​ Contractual Maturity as of March 31, 2024 One Year or Less ​ ​ ​ | ​ ​ ​ | ​ ​ ​ After One Through Five Years ​ ​ ​ | ​ ​ ​ | ​ ​ ​ After Five Through Ten Years ​ ​ ​ | ​ ​ ​ | ​ ​ ​ Over Ten Years ​ ​ ​ | ​ ​ ​ | ​ ​ ​ Total ​ ​ ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: |
| Mortgage-backed securities | ​ | $- ​ | ​ | $2,041 ​ | ​ | $537 ​ | ​ | $24,098 ​ | ​ | $26,676 ​ |
| U.S. Government and agency obligations | ​ | 1,000 ​ | ​ | 2,000 ​ | ​ | 7,000 ​ | ​ | 4,002 ​ | ​ | 14,002 ​ |
| Municipal obligations | ​ | ​ 700 ​ | ​ | ​ 455 ​ | ​ | ​ 624 ​ | ​ | ​ 1,085 ​ | ​ | ​ 2,864 ​ |
| Total | ​ | $1,700 ​ | ​ | $4,496 ​ | ​ | $8,161 ​ | ​ | $29,185 ​ | ​ | $43,542 ​ |
| ​ | ​ | ​ ​ ​ | ​ | ​ ​ ​ | ​ | ​ ​ ​ | ​ | ​ ​ ​ | ​ | ​ ​ ​ |
| **Weighted average yield** | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ |
| Mortgage-backed securities | ​ | -% | ​ | 4.18% | ​ | 4.52% | ​ | 1.83% | ​ | 2.06% |
| U.S. Government and agency obligations | ​ | 0.92 ​ | ​ | 1.00 ​ | ​ | 1.31 ​ | ​ | 2.37 ​ | ​ | 1.54 ​ |
| Municipal obligations | ​ | 0.80 ​ | ​ | 1.12 ​ | ​ | 4.90 ​ | ​ | 1.41 ​ | ​ | 1.97 ​ |
| Total weighted average yield | ​ | 0.87 ​ | ​ | 2.45 ​ | ​ | 1.79 ​ | ​ | 1.88 ​ | ​ | 1.89 ​ |

Securities are classified according to their contractual maturities without consideration of principal amortization, potential prepayments, or call options. The expected maturities may differ from contractual maturities because of the exercise of call options and potential paydowns. Accordingly, actual maturities may differ from contractual maturities. Weighted average yields are calculated by dividing the estimated annual income divided by the average amortized cost of the applicable securities.

***Deposits.*** The following table presents total deposits by account type for the dates indicated.

*(Dollars in thousands)*

| ​ ​ | ​ ​ | ​ ​ March 31, 2024 Amount% | ​ ​ ​ | ​ ​ | ​ ​ December 31, 2023 Amount% | ​ ​ ​ | ​ ​ ​ | ​ ​ ​ ​ Change | ​ ​ | ​ ​ ​ ​ |
| --- | --- | ---: | ---: | --- | ---: | ---: | --- | ---: | --- | ---: |
| Non-interest-bearing demand deposits | ​ | $28,836 | 17.0% | ​ | $28,183 | 17.0% | ​ | $653 | ​ | 2.3% |
| Interest-bearing demand deposits | ​ | 35,374 | 20.9 ​ | ​ | 36,867 | 22.3 ​ | ​ | (1,493) | ​ | (4.0) ​ |
| Money market | ​ | 14,712 | 8.7 ​ | ​ | 15,126 | 9.1 ​ | ​ | (414) | ​ | (2.7) ​ |
| Savings | ​ | 33,675 | 19.9 ​ | ​ | 31,518 | 19.0 ​ | ​ | 2,157 | ​ | 6.8 ​ |
| Certificates of deposit | ​ | ​ 57,040 | 33.5 ​ | ​ | ​ 53,928 | 32.6 ​ | ​ | ​ 3,112 | ​ | 5.8 ​ |
| Total deposits | ​ | $169,637 | 100.0% | ​ | $165,622 | 100.0% | ​ | $4,015 | ​ | 2.4 ​ |

The ratio of the Company’s total loans to total deposits was 84.6% and 87.5% as of March 31, 2024 and December 31, 2023, respectively.

Total public fund deposits amounted to $22.7 million, or 13% of total deposits, at March 31, 2024, compared to $23.3 million, or 14% of total deposits, at December 31, 2023. At March 31, 2024, approximately 78% of our total public fund deposits consisted of non-interest-bearing and interest-bearing demand deposits from municipalities within our market.

Our total uninsured deposits (that is deposits in excess of the FDIC’s insurance limit), inclusive of public funds, were approximately $41.7 million at March 31, 2024 and $44.6 million at December 31, 2023. Total uninsured non-public funds deposits were approximately $23.9 million and $26.3 million at March 31, 2024 and December 31, 2023, respectively. At March 31, 2024, the full amount of our public fund deposits in excess of the FDIC’s insurance limit were secured by either pledged investment securities of $23.0 million or $34.0 million of a custodial letter of credit granted by the Federal Home Loan Bank of Dallas.

***Borrowings.*** Total borrowings at March 31, 2024 were $29.4 million, up $10.0 million from December 31, 2023. During the three months ended March 31, 2024, the Bank increased its borrowings from the Federal Reserve Bank of Atlanta through the BTFP. At March 31, 2024, the Bank had one $20.0 million BTFP advance outstanding with a contractual interest rate of 4.76% and a maturity date of January 15, 2025.

Other borrowings outstanding consisted of FHLB advances totaling $9.4 million at March 31, 2024 and December 31, 2023. Deferred prepayment penalties on our FHLB advances totaled $577,000 and $622,000 at March 31, 2024 and December 31, 2023, respectively.

***Shareholders’ Equity.*** Shareholders’ equity totaled $81.4 million, or 28.8% of total assets, at March 31, 2024, down $3.3 million, or 3.9%, from $84.7 million, or 31.2% of total assets, at December 31, 2023. During the first three months of 2024, shareholders’ equity decreased by $2.5 million due to the Company’s repurchases of its common stock.

The Company repurchased 202,997 shares of its common stock at an average cost per share of $12.12 during the three months ended March 31, 2024 under its November 2023 Repurchase Plan. At March 31, 2024, the Company had common shares outstanding of 4,558,329 and 25,329 of those shares were available for repurchase under the November 2023 Repurchase Plan. The Company completed the November 2023 Repurchase Plan in April 2024.

On May 2, 2024, The Company announced that its Board of Directors approved the Company’s fourth share repurchase plan (the “May 2024 Repurchase Plan”). Under the May 2024 Repurchase Plan, the Company may purchase up to 227,000 shares, or approximately 5%, of the Company’s outstanding shares of common stock.

**Average Balances, Net Interest Income, and Yields Earned and Rates Paid.** The following tables show for the periods indicated the total dollar amount of interest income from average interest-earning assets and the resulting yields, as well as the interest expense on average interest-bearing liabilities, expressed both in dollars and rates, and the net interest margin. Taxable equivalent (“TE”) yields have been calculated using a marginal tax rate of 21%. All average balances are based on daily balances.

*(Dollars in thousands)*

| ​ ​ ​ Interest-earning assets: | ​ ​ ​ | ​ ​ Three Months Ended March 31, 2024 Average Balance ​ ​ | ​ ​ | ​ ​ Interest ​ ​ | ​ ​ | ​ ​ Average Yield/Rate ​ ​ | ​ ​ ​ ​ | ​ ​ 2023 Average Balance ​ ​ | ​ ​ | ​ ​ Interest ​ ​ | ​ ​ | ​ ​ Average Yield/Rate ​ ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: |
| Loans receivable(1) |  | $144,428 | ​ | $2,214 |  | 6.17% | ​ | $133,781 | ​ | $1,629 |  | 4.94% |
| Investment securities(TE)(2) |  | 76,432 | ​ | 325 |  | 1.72 ​ | ​ | 103,739 | ​ | 427 |  | 1.66 ​ |
| Other interest-earning assets |  | 48,779 | ​ | 616 |  | 5.08 ​ | ​ | 19,820 | ​ | 211 |  | 4.33 ​ |
| Total interest-earning assets(TE) | ​ | 269,639 | ​ | 3,155 |  | 4.71 ​ | ​ | 257,340 | ​ | 2,267 |  | 3.57 ​ |
| Non-interest-earning assets | ​ | 16,792 | ​ | ​ ​ | ​ | ​ ​ | ​ | 14,636 | ​ | ​ ​ | ​ | ​ ​ |
| Total assets | ​ | $286,431 | ​ | ​ ​ | ​ | ​ ​ | ​ | $271,976 | ​ | ​ ​ | ​ | ​ ​ |
| **Interest-bearing liabilities:** |  | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Demand deposits, money market and savings accounts |  | 89,109 | ​ | 317 |  | 1.43 ​ | ​ | 90,972 | ​ | 81 |  | 0.36 ​ |
| Certificates of deposit |  | 57,092 | ​ | 437 |  | 3.08 ​ | ​ | 51,528 | ​ | 152 |  | 1.20 ​ |
| Total interest-bearing deposits |  | 146,201 | ​ | 754 |  | 2.07 ​ | ​ | 142,500 | ​ | 233 |  | 0.66 ​ |
| Borrowings |  | 27,991 | ​ | 293 |  | 4.21 ​ | ​ | 9,216 | ​ | 68 |  | 2.96 ​ |
| Total interest-bearing liabilities | ​ | 174,192 | ​ | 1,047 |  | 2.42 ​ | ​ | 151,716 | ​ | 301 |  | 0.80 ​ |
| Non-interest-bearing liabilities | ​ | 29,844 | ​ | ​ ​ | ​ | ​ ​ | ​ | 32,872 | ​ | ​ ​ | ​ | ​ ​ |
| Total liabilities | ​ | 204,036 | ​ | ​ ​ | ​ | ​ ​ | ​ | 184,588 | ​ | ​ ​ | ​ | ​ ​ |
| **Shareholders' equity** | ​ | 82,395 | ​ | ​ ​ | ​ | ​ ​ | ​ | 87,388 | ​ | ​ ​ | ​ | ​ ​ |
| Total liabilities and shareholders' equity | ​ | $286,431 | ​ | ​ ​ | ​ | ​ ​ | ​ | $271,976 | ​ | ​ ​ | ​ | ​ ​ |
| Net interest-earning assets | ​ | $95,447 | ​ | ​ ​ | ​ | ​ ​ | ​ | $105,624 | ​ | ​ ​ | ​ | ​ ​ |
| Net interest income; average interest rate spread(TE) | ​ | ​ ​ | ​ | $2,108 |  | 2.29% | ​ | ​ ​ | ​ | $1,966 |  | 2.77% |
| Net interest margin(TE)(3) | ​ | ​ ​ | ​ | ​ ​ |  | 3.15 ​ | ​ | ​ ​ | ​ | ​ ​ |  | 3.10 ​ |
| Average interest-earning assets to average interest-bearing liabilities | ​ | ​ ​ | ​ | ​ ​ |  | 154.79 ​ | ​ | ​ ​ | ​ | ​ ​ |  | 169.62 ​ |

(1) Includes non-accrual loans during the respective periods. Calculated net of deferred fees and discounts and loans in process.

(2) Average investment securities does not include unrealized holding gains/ losses on available-for-sale securities.

(3) Equals net interest income divided by average interest-earning assets. Taxable equivalent yields are calculated using a marginal tax rate of 21%.

**Rate/Volume Analysis.** The following tables show the extent to which changes in interest rates and changes in volume of interest-earning assets and interest-bearing liabilities affected our interest income and expense during the periods indicated. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to (1) changes in rate, which is the change in rate multiplied by prior year volume, and (2) changes in volume, which is the change in volume multiplied by prior year rate. The combined effect of changes in both rate and volume has been allocated proportionately to the change due to rate and the change due to volume.

*(Dollars in thousands)*

| ​ ​ ​ ​ Interest income: | ​ ​ ​ ​ | ​ ​ Three Months Ended March 31, 2024 vs 2023 Increase (Decrease) Due to Rate ​ | ​ ​ | ​ ​ Volume ​ | ​ ​ ​ | ​ ​ Total Increase (Decrease) ​ |
| --- | --- | ---: | --- | ---: | --- | ---: |
| Loans receivable | ​ | $448 | ​ | $137 | ​ | $585 |
| Investment securities | ​ | 36 | ​ | (138) | ​ | (102) |
| Other interest-earning assets | ​ | 43 | ​ | 362 | ​ | 405 |
| Total interest income | ​ | 527 | ​ | 361 | ​ | 888 |
| **Interest expense:** | ​ |  | ​ |  | ​ |  |
| Demand deposits, money market and savings accounts | ​ | 237 | ​ | (1) | ​ | 236 |
| Certificates of deposit | ​ | 267 | ​ | 18 | ​ | 285 |
| Total deposits | ​ | 504 | ​ | 17 | ​ | 521 |
| Borrowings | ​ | 110 | ​ | 115 | ​ | 225 |
| Total interest expense | ​ | 614 | ​ | 132 | ​ | 746 |
| Increase (decrease) in net interest income | ​ | $(87) | ​ | $229 | ​ | $142 |

**Comparison of Results of Operations for the Three Months Ended March 31, 2024 and 2023.**

***General.*** For the three months ended March 31, 2024, the Company reported a net loss of $4.7 million, compared to net income of $73,000 for the three months ended March 31, 2023. Net interest income was up $142,000, or 7.2%, for the three months ended March 31, 2024, compared to the same period in 2023. The provision for credit losses totaled $95,000 for the three months ended March 31, 2024, compared to no provision for the same period in 2023. Non-interest income was down $5.5 million for the three months ended March 31, 2024, compared to the same period in 2023, primarily due to losses on the sales of investment securities. Total non-interest expense for the three months ended March 31, 2024 was up $606,000, or 27.7%, from the same period in 2023 primarily due to expenses related to the Company’s upgrade to a new core processing system.

***Interest Income.*** Total interest income increased $888,000, or 39.2%, to $3.2 million for the three months ended March 31, 2024, compared to the same period in 2023. Interest income on loans and other interest-earning assets were up $585,000 and $405,000, respectively. These increases were partially offset by a decrease in interest income on investment securities of $102,000.

The average loan yield was 6.17% for the three months ended March 31, 2024, up from 4.94% for the same period in 2023. Average loans were $144.4 million for the three months ended March 31, 2024, up $10.6 million, or 8.0%, compared to the same period in 2023. At March 31, 2024, approximately 52% of our total loans have adjustable rates and approximately 49% of total loans are scheduled to re-price or mature during the next 12 months.

The decrease in interest income on investment securities was primarily due to the decrease in the average balance of total investment securities due to the sales executed during the three months ended March 31, 2024. The average rate earned on our investment securities portfolio was 1.72% for the three months ended March 31, 2024, up six basis points compared to the same period 2023.

Interest income on other interest-earning assets, consisting primarily of interest-earning cash and deposits at other financial institutions, increased mainly due to the re-investment of proceeds from investment securities sales.

***Interest Expense.*** Total interest expense increased $746,000, or 247.8%, to $1.0 million for the three months ended March 31, 2024, compared to $301,000 for the same period in 2023. Interest expense on deposits was $754,000 during the three months ended March 31, 2024, up $521,000, or 223.6%, compared to the same period in 2023. The average rate paid on interest-bearing deposits was 2.07% during the three months ended March 31, 2024, up 141 basis points compared to the same period in 2023. Interest expense on borrowings increased by $225,000 during the three months ended March 31, 2024 compared to the same period in 2023 due to interest expense on BTFP advances.

***Net Interest Income.*** Net interest income was $2.1 million for the three months ended March 31, 2024, up $142,000, or 7.2%, compared to 2023. Our interest rate spread was 2.29% and 2.77% for the three months ended March 31, 2024 and 2023, respectively. Our net interest margin was 3.15% and 3.10% for the three months ended March 31, 2024 and 2023, respectively. The increase in net interest margin and net interest income over the comparable periods was primarily the result of increased yields on our interest-earning assets, partially offset by the rising cost of interest-bearing liabilities.

***Provision for Credit Losses.*** The total provision for credit losses on loans and unfunded commitments was $95,000 for the three months ended March 31, 2024, compared to no provision for the same period in 2023. In 2024, the provision for credit losses was largely attributable to growth in total construction loan commitments.

***Non-interest Income.*** Non-interest income for the three months ended March 31, 2024 was down $5.5 million compared to $294,000 for the same period in 2023. Non-interest income for 2024 includes the $5.5 million loss on the sales of investment securities discussed previously.

***Non-interest Expense.*** Non-interest expense totaled $2.8 million for the three months ended March 31, 2024, up $606,000, or 27.7%, compared to the three months ended March 31, 2023. During the three months ended March 31, 2024, the Company upgraded to a new core processing system and incurred $560,000 of data conversion and other associated expenses. Most of these costs are included in data processing and communication expense, which was up $567,000 for the three months ended March 31, 2024 compared to the same period in 2023. The Company estimates annual savings of greater than $200,000 due to the upgrade to our new core processing system.

***Income Tax Expense.*** The Company reported an income tax benefit of $1.3 million for the three months ended March 31, 2024 compared to income tax expense of $2,000 for the three months ended March 31, 2023. The change in income taxes over the comparable prior period was largely due the loss on sales of investment securities in 2024.

### Liquidity and Capital Resources

The Company maintains levels of liquid assets deemed adequate by management. We adjust our liquidity levels to fund deposit outflows, repay our borrowings, and to fund loan commitments. We also adjust liquidity, as appropriate, to meet asset and liability management objectives.

Liquidity describes our ability to meet the financial obligations that arise in the ordinary course of business. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. Our primary sources of funds are deposits, principal and interest payments on loans and securities, and proceeds from maturities of securities. We also have the ability to borrow from the FHLB, Federal Reserve Bank of Atlanta, and our primary correspondent bank.

At March 31, 2024, our borrowed funds consisted of a $20 million BTFP advance and FHLB advances with a carrying value of $9.4 million. The table below summarizes our unused and available liquidity sources as of March 31, 2024.

*(Dollars in thousands)*

| ​ | ​ ​ | ​ ​ 3/31/2024 |
| --- | --- | ---: |
| Advances from the Federal Home Loan Bank of Dallas | ​ | $31,786 |
| Line of credit with primary correspondent bank | ​ | ​ 17,800 |
| Unpledged available-for-sale investment securities, at fair value | ​ | ​ 11,663 |
| Total unused and available liquidity | ​ | $61,249 |

The Company also has a $40.0 million custodial letter of credit outstanding from the FHLB as of March 31, 2024, which is included in the calculation of our available capacity with the FHLB. The Company can allocate portions of this letter of credit to collateralize certain deposit balances in excess of the FDIC’s insurance limit as an alternative to pledging investment securities for the same purpose. During the three months ended March 31, 2024, the Company used $34.0 million of this letter of credit to collateralize public fund deposits as we executed the investment securities sales discussed previously.

While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions, and competition. Our most liquid assets are cash and short-term investments. The levels of these assets are dependent on our operating, financing, lending, and investing activities during any given period.

Our cash flows are comprised of three primary classifications: cash flows from operating activities, investing activities, and financing activities. The most significant uses and sources of cash flows during the three months ended March 31, 2024 included: $44.1 million in proceeds from maturities, paydowns, and sales of investment securities, $10.0 million in proceeds from BTFP advances, $4.0 million of inflows from growth in total deposits and $2.5 million in outflows for the repurchase of the Company’s common stock.

We are committed to maintaining a strong liquidity position. We monitor our liquidity position daily and anticipate that we will have sufficient funds to meet our current funding commitments. Based on our deposit retention experience and current pricing strategy, we anticipate that the majority of maturing time deposits will be retained. We also anticipate continued use of our secondary funding sources.

The following table summarizes our outstanding commitments to originate loans and to advance additional amounts pursuant to outstanding letters of credit, lines of credit and undisbursed construction loans at March 31, 2024.

*(Dollars in thousands)*

| ​ ​ | ​ ​ ​ | ​ ​ ​ ​ Total Amounts Committed at March 31, 2024 | ​ ​ ​ | ​ ​ Amount of Commitment Expiration — Per Period To 1 Year | ​ ​ | ​ ​ 1 - 3 Years | ​ ​ | ​ ​ 3 - 5 Years | ​ ​ | ​ ​ After 5 Years |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: |
| Commitments to originate loans | ​ | $3,711 | ​ | $3,711 | ​ | $- | ​ | $- | ​ | $- |
| Undisbursed portion of construction loans in process | ​ | 12,072 | ​ | 9,527 | ​ | 2,545 | ​ | - | ​ | - |
| Unused lines of credit | ​ | 22,884 | ​ | 19,008 | ​ | 2,657 | ​ | - | ​ | 1,219 |
| Unused overdraft privilege amounts | ​ | 1,126 | ​ | - | ​ | - | ​ | - | ​ | 1,126 |
| Letters of credit | ​ | ​ 2 | ​ | ​ 2 | ​ | ​ - | ​ | ​ - | ​ | ​ - |
| Total commitments | ​ | $39,795 | ​ | $32,248 | ​ | $5,202 | ​ | $- | ​ | $2,345 |

The following table summarizes our contractual cash obligations at March 31, 2024.

*(Dollars in thousands)*

| ​ ​ | ​ ​ ​ | ​ ​ ​ ​ Total at March 31, 2024 | ​ ​ ​ | ​ ​ Payments Due By Period To 1 Year | ​ ​ | ​ ​ 1 - 3 Years | ​ ​ | ​ ​ 3 - 5 Years | ​ ​ | ​ ​ After 5 Years |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: |
| Certificates of deposit | ​ | $57,040 | ​ | $50,225 | ​ | $6,145 | ​ | $670 | ​ | $- |
| Borrowings | ​ | 30,000 | ​ | 20,000 | ​ | 3,000 | ​ | 7,000 | ​ | - |
| Total term debt | ​ | $87,040 | ​ | $70,225 | ​ | $9,145 | ​ | $7,670 | ​ | $- |

Management expects that a majority of the maturing certificates of deposit will be retained. However, if a substantial portion of these deposits is not retained, we may utilize borrowings from our secondary funding sources or raise interest rates on deposits to attract new accounts, which may result in higher levels of interest expense.

### Recent Accounting Pronouncements

For a discussion of the impact of recent accounting pronouncements, see Note 2 of the notes to our financial statements.

## Controls and procedures

As filed, 2,174 characters.

An evaluation of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934 (the “Act”)) as of March 31, 2024, was carried out under the supervision and with the participation of our Chief Executive Officer, Chief Financial Officer and several other members of our senior management. Our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures in effect as of March 31, 2024, were effective. In addition, there have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Act) that occurred during the quarter ended March 31, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

We do not expect that our disclosure controls and procedures and internal control over financial reporting will prevent all errors and all fraud. A control procedure, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control procedure are met. Because of the inherent limitations in all control procedures, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls may be circumvented by the individual acts of some persons, by collusion of two or more people, or by override of the control. The design of any control procedure also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control procedure, misstatements due to error or fraud may occur and not be detected.

Filed May 15, 2024.
Source: SEC EDGAR, the filing index for accession 0001558370-24-008243. Last ingested by Listed: Oct 29, 2026, 09:14 ET. No prices; not investment advice.