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

¨☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

(Former name, former address, and former fiscal year, if changed since last report)

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 x☒ No ¨☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted 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 and post such files).

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or 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.

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 x☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

~~8,088,638~~8,156,109 shares of common stock, par value $0.01 per share, were issued and outstanding as of ~~October 31, 2023.~~

Table of Contents

SOUTHERN FIRST BANCSHARES, INC. AND SUBSIDIARY

~~September 30, 2023~~
March 31, 2024 Form 10-Q

INDEX

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,			March 31,			December 31,
(dollars in thousands, except share data)	2023			2022			2024			2023
	(Unaudited)			(Audited)			(Unaudited)			(Audited)
ASSETS
Cash and cash equivalents:
Cash and due from banks	$	17,395			18,788		$	13,925			28,020
Federal funds sold		127,714			101,277			144,595			119,349
Interest-bearing deposits with banks		7,283			50,809			8,789			8,801
Total cash and cash equivalents		152,392			170,874			167,309			156,170
Investment securities:
Investment securities available for sale		144,035			93,347			125,996			134,702
Other investments		19,600			10,833			18,499			19,939
Total investment securities		163,635			104,180			144,495			154,641
Mortgage loans held for sale		7,117			3,917			11,842			7,194
Loans		3,553,632			3,273,363			3,643,766			3,602,627
Less allowance for credit losses		(41,131	)		(38,639	)		(40,441	)		(40,682	)
Loans, net		3,512,501			3,234,724			3,603,325			3,561,945
Bank owned life insurance		52,140			51,122			52,878			52,501
Property and equipment, net		95,743			99,183			93,007			94,301
Deferred income taxes, net		13,078			12,522			12,321			12,200
Other assets		23,351			15,459			20,527			16,837
Total assets	$	4,019,957			3,691,981		$	4,105,704			4,055,789
LIABILITIES
Deposits	$	3,347,771			3,133,864		$	3,460,681			3,379,564
FHLB advances and related debt		275,000			175,000			240,000			275,000
Subordinated debentures		36,295			36,214			36,349			36,322
Other liabilities		56,993			52,391			53,418			52,436
Total liabilities		3,716,059			3,397,469			3,790,448			3,743,322
SHAREHOLDERS’ EQUITY
Preferred stock, par value $.01 per share, 10,000,000 shares authorized		-			-			-			-
Common stock, par value $.01 per share, 10,000,000 shares authorized, 8,088,638 and 8,011,045 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively		81			80
Common stock, par value $.01 per share, 10,000,000 shares authorized, 8,156,109 and 8,088,186 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively								82			81
Nonvested restricted stock		(4,065	)		(3,306	)		(5,257	)		(3,596	)
Additional paid-in capital		121,757			119,027			124,159			121,777
Accumulated other comprehensive loss		(15,255	)		(13,410	)		(11,797	)		(11,342	)
Retained earnings		201,380			192,121			208,069			205,547
Total shareholders’ equity		303,898			294,512			315,256			312,467
Total liabilities and shareholders’ equity	$	4,019,957			3,691,981		$	4,105,704			4,055,789

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

Table of Contents

SOUTHERN FIRST BANCSHARES, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

For the three months
ended March 31,
(dollars in thousands, except share data) 2024 2023
Interest income
Loans $ 45,605 36,748
Investment securities 1,478 613
Federal funds sold and interest-bearing deposits with banks 1,280 969
Total interest income 48,363 38,330
Interest expense
Deposits 26,932 17,179
Borrowings 2,786 727
Total interest expense 29,718 17,906
Net interest income 18,645 20,424
Provision for (reversal of) credit losses (175 ) 1,825
Net interest income after provision for (reversal of) credit losses 18,820 18,599
Noninterest income
Mortgage banking income 1,164 622
Service fees on deposit accounts 387 325
ATM and debit card income 544 555
Income from bank owned life insurance 377 332
Other income 192 210
Total noninterest income 2,664 2,044
Noninterest expenses
Compensation and benefits 10,857 10,356
Occupancy 2,557 2,457
Outside service and data processing costs 1,846 1,629
Insurance 955 689
Professional fees 618 660
Marketing 369 366
Other 898 947
Total noninterest expenses 18,100 17,104
Income before income tax expense 3,384 3,539
Income tax expense 862 836
Net income $ 2,522 2,703
Earnings per common share
Basic $ 0.31 0.34
Diluted 0.31 0.33
Weighted average common shares outstanding
Basic 8,110,249 8,025,876
Diluted 8,141,921 8,092,270

~~(Unaudited)~~

For the three months For the nine months
ended September 30, ended September 30,
(dollars in thousands, except share data) 2023 2022 2023 2022
Interest income
Loans $ 43,542 29,752 121,380 80,294
Investment securities 1,470 506 2,788 1,428
Federal funds sold and interest-bearing deposits with banks 2,435 676 4,295 915
Total interest income 47,447 30,934 128,463 82,637
Interest expense
Deposits 25,130 5,021 64,245 7,773
Borrowings 2,972 459 5,623 1,362
Total interest expense 28,102 5,480 69,868 9,135
Net interest income 19,345 25,454 58,595 73,502
Provision for credit losses (500 ) 950 2,235 3,830
Net interest income after provision for credit losses 19,845 24,504 56,360 69,672
Noninterest income
Mortgage banking income 1,208 1,230 3,167 3,907
Service fees on deposit accounts 356 318 1,011 949
ATM and debit card income 588 542 1,680 1,604
Income from bank owned life insurance 349 315 1,018 945
Loss on disposal of fixed assets - - - (394 )
Gain on sale of securities - - - 12
Other income 249 275 653 850
Total noninterest income 2,750 2,680 7,529 7,873
Noninterest expenses
Compensation and benefits 10,231 9,843 30,874 29,214
Occupancy 2,562 2,442 7,537 6,439
Outside service and data processing costs 1,744 1,529 5,078 4,591
Insurance 1,243 507 2,829 1,134
Professional fees 504 555 1,914 1,848
Marketing 293 338 994 934
Other 725 832 2,573 2,360
Total noninterest expenses 17,302 16,046 51,799 46,520
Income before income tax expense 5,293 11,138 12,090 31,025
Income tax expense 1,195 2,725 2,831 7,402
Net income $ 4,098 8,413 9,259 23,623
Earnings per common share
Basic $ 0.51 1.06 1.15 2.97
Diluted 0.51 1.04 1.15 2.93
Weighted average common shares outstanding
Basic 8,052,926 7,972,146 8,043,410 7,954,025
Diluted 8,072,408 8,065,087 8,077,830 8,071,988
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 March 31,
(dollars in thousands) 2024 2023
Net income $ 2,522 2,703
Other comprehensive income (loss):
Unrealized gain (loss) on securities available for sale:
Unrealized holding gain (loss) arising during the period, pretax (578 ) 2,070
Tax benefit (expense) 123 (435 )
Other comprehensive income (loss) (455 ) 1,635
Comprehensive income $ 2,067 4,338
~~(Unaudited)~~

For the three months
ended September 30, For the nine months
ended September 30,
(dollars in thousands) 2023 2022 2023 2022
Net income $ 4,098 8,413 9,259 23,623
Other comprehensive loss:
Unrealized loss on securities available for sale:
Unrealized holding loss arising during the period, pretax (3,221 ) (4,894 ) (2,333 ) (16,783 )
Tax expense 676 1,028 488 3,524
Reclassification of realized gain - - - (12 )
Tax benefit - - - 2
Other comprehensive loss (2,545 ) (3,866 ) (1,845 ) (13,269 )
Comprehensive income $ 1,553 4,547 7,414 10,354
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)
~~(Unaudited)~~

For the three months ended September 30,
Common stock Preferred stock Nonvested
restricted Additional
paid-in Accumulated
other
comprehensive Retained For the three months ended March 31,
(dollars in thousands, except share data) Shares Amount Shares Amount stock capital income (loss) earnings Total
June 30, 2022 7,985,644 $ 80 - - $ (3,230 ) $ 117,714 $ (10,143 ) $ 178,216 $ 282,637
Net income Retained earnings - - - - - - - 8,413 8,413
(dollars in thousands, Common stock Preferred stock Nonvested
restricted Additional
paid-in Accumulated
other
comprehensive Retained
except share data) Shares Amount Shares Amount stock capital income (loss) earnings Total
December 31, 2022 8,011,045 $ 80 - $ - $ (3,306 ) $ 119,027 $ (13,410 ) $ 192,121 $ 294,512
Net income - - - - - - - 2,703 2,703
Proceeds from exercise of stock options 3,000 - - - - 87 - - 87 1,000 - - - - 17 - - 17
Issuance of restricted stock 8,700 - - - (405 ) 405 - - -
Issuance of restricted stock Retained earnings 35,930 - - - (1,521 ) 1,521 - - -
Compensation expense related to restricted stock, net of tax - - - - 287 - - - 287 - - - - 365 - - - 365
Compensation expense related to stock options, net of tax - - - - - 227 - - 227
Other comprehensive loss - - - - - - (3,866 ) - (3,866 )
Compensation expense related to stock options, net of tax Common stock - - - - - 118 - - 118
Other comprehensive income - - - - - - 1,635 - 1,635
Additional paid-in capital
September 30, 2022 7,997,344 $ 80 - $ - $ (3,348 ) $ 118,433 $ (14,009 ) $ 186,629 $ 287,785
June 30, 2023 8,058,438 $ 81 - $ - $ (4,051 ) $ 120,912 $ (12,710 ) $ 197,282 $ 301,514
March 31, 2023 Preferred stock 8,047,975 $ 80 - $ - $ (4,462 ) $ 120,683 $ (11,775 ) $ 194,824 $ 299,350
December 31, 2023 8,088,186 $ 81 - $ - $ (3,596 ) $ 121,777 $ (11,342 ) $ 205,547 $ 312,467
Net income - - - - - - - 4,098 4,098 - - - - - - - 2,522 2,522
Proceeds from exercise of stock options 14,250 - - - - 312 - - 312 11,000 - - - - 167 - - 167
Issuance of restricted stock, net of forfeitures 15,950 - - - (388 ) 388 - - - 56,923 1 - - (2,112 ) 2,111 - - -
Compensation expense related to restricted stock, net of tax - - - - 374 - - - 374 - - - - 451 - - - 451
Compensation expense related to stock options, net of tax - - - - - 145 - - 145 - - - - - 104 - - 104
Other comprehensive loss - - - - - - (2,545 ) - (2,545 ) - - - - - - (455 ) - (455 )

September 30, 2023 8,088,638 $ 81 - $ - $ (4,065 ) $ 121,757 $ (15,255 ) $ 201,380 $ 303,898
Accumulated other comprehensive income (loss)
March 31, 2024 8,156,109 $ 82 - $ - $ (5,257 ) $ 124,159 $ (11,797 ) $ 208,069 $ 315,256
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, 2021 Preferred stock 7,925,819 $ 79 - - $ (1,435 ) $ 114,226 $ (740 ) $ 165,771 $ 277,901
Net income Common stock - - - - - - - 23,623 23,623
Proceeds from exercise of stock options 24,750 1 - - - 793 - - 794
Issuance of restricted stock 46,775 - - - (2,710 ) 2,710 - - -
Adoption of ASU 2016-13 - - - - - - - (2,765 ) (2,765 )
Compensation expense related to restricted stock, net of tax - - - - 797 - - - 797
Compensation expense related to stock options, net of tax - - - - - 704 - - 704
Other comprehensive loss - - - - - - (13,269 ) - (13,269 )

September 30, 2022 7,997,344 $ 80 - $ - $ (3,348 ) $ 118,433 $ (14,009 ) $ 186,629 $ 287,785
December 31, 2022 8,011,045 $ 80 - $ - $ (3,306 ) $ 119,027 $ (13,410 ) $ 192,121 $ 294,512
Net income - - - - - - - 9,259 9,259
Proceeds from exercise of stock options 25,250 - - - - 497 - - 497
Issuance of restricted stock 52,343 1 - - (1,824 ) 1,823 - - -
Compensation expense related to restricted stock, net of tax - - - - 1,065 - - - 1,065
Compensation expense related to stock options, net of tax - - - - - 410 - - 410
Other comprehensive loss - - - - - - (1,845 ) - (1,845 )
Accumulated other comprehensive income (loss)
September 30, 2023 8,088,638 $ 81 - $ - $ (4,065 ) $ 121,757 $ (15,255 ) $ 201,380 $ 303,898
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, For the three months ended
March 31,
(dollars in thousands) 2023 2022 2024 2023
Operating activities
Net income $ 9,259 23,623 $ 2,522 2,703
Adjustments to reconcile net income to cash provided by operating activities:
Provision for credit losses 2,235 3,830
Provision for (reversal of) credit losses (175 ) 1,825
Depreciation and other amortization 3,611 2,521 1,214 1,203
Accretion and amortization of securities discounts and premium, net 142 554 131 129
Loss on sale of fixed assets - 394
Gain on sale of securities - (12 )
Net change in operating leases 188 814 39 53
Compensation expense related to stock options and restricted stock grants 1,475 1,501 555 483
Gain on sale of loans held for sale (2,793 ) (2,700 ) (1,014 ) (530 )
Loans originated and held for sale (112,930 ) (191,448 ) (36,524 ) (17,892 )
Proceeds from sale of loans held for sale 112,523 198,461 32,890 15,360
Increase in cash surrender value of bank owned life insurance (1,018 ) (945 ) (377 ) (331 )
Increase in deferred tax asset (66 ) (5,766 )
(Increase) decrease in other assets (7,892 ) 5
Increase in other liabilities 6,059 6,006
Net cash provided by operating activities 10,793 36,838
Increase in other assets (3,690 ) (508 )
Increase (decrease) in other liabilities 1,505 (1,258 )
Net cash (used for) provided by operating activities (2,924 ) 1,237
Investing activities
Increase (decrease) in cash realized from:
Increase in loans, net (280,627 ) (538,816 ) (41,380 ) (144,641 )
Purchase of property and equipment (1,120 ) (13,134 ) (280 ) (180 )
Purchase of investment securities:
Available for sale (58,204 ) (10,094 ) (5,191 ) -
Other investments (49,949 ) (15,235 ) (4,302 ) (18,264 )
Payments and maturities, calls and repayments of investment securities:
Available for sale 5,039 21,517 13,190 1,252
Other investments 41,182 13,806 5,742 19,000
Proceeds from sale of fixed assets - 95
Net cash used for investing activities (343,679 ) (541,861 ) (32,221 ) (142,833 )
Financing activities
Increase in cash realized from:
Increase in deposits, net 213,907 437,626 81,117 292,910
Increase in Federal Home Loan Bank advances and other borrowings, net 100,000 60,000
Decrease in Federal Home Loan Bank advances and other borrowings, net (35,000 ) (50,000 )
Proceeds from the exercise of stock options 497 794 167 17
Net cash provided by financing activities 314,404 498,420 46,284 242,927
Net decrease in cash and cash equivalents (18,482 ) (6,603 )
Net increase in cash and cash equivalents 11,139 101,331
Cash and cash equivalents at beginning of the period 170,874 167,209 156,170 170,874
Cash and cash equivalents at end of the period $ 152,392 160,606 $ 167,309 272,205
Supplemental information
Cash paid for
Interest $ 64,390 9,155 $ 27,617 16,801
Income taxes 586 8,270
Schedule of non-cash transactions
Unrealized gain (loss) on securities, net of income taxes (1,845 ) (13,259 ) (455 ) 1,635
Right-of-use assets obtained in exchange for lease obligations:
Operating leases 147 237
See notes to consolidated financial statements that are an integral part of these consolidated statements.
7
Table of Contents
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~~three-month period ended ~~September 30, 2023~~March 31, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2023.~~2024. 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, ~~2022~~2023 as filed with the U.S. Securities and Exchange Commission (“SEC”) on ~~February 13, 2023.~~March 5, 2024. 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.
Business Segments
The Company, through the Bank, provides a broad range of financial services to individuals and companies in South Carolina, North Carolina, and Georgia. These services include demand, time and savings deposits, lending services and ATM processing and mortgage banking services. While the Company’s management periodically reviews limited production information for these revenue streams, that information is not complete as it does not include a full allocation of revenue, costs and capital from key corporate functions. Management will continue to evaluate these lines of business for separate reporting as facts and circumstances change. Accordingly, the Company’s various banking operations are not considered by management to constitute more than one reportable operating segment.
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 three significant bank failures in the first five months of 2023, primarily due to the failed banks’ lack of liquidity as depositors sought to withdraw their deposits. Due to rising interest rates, the failed banks were unable to sell investment securities held to meet liquidity needs without realizing substantial losses. As a result of the ~~March 2023~~recent bank ~~closures~~failures and in an effort to strengthen public confidence in the banking system and protect depositors, regulators announced that any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law, which has and could continue to increase the cost of our FDIC insurance assessments. ~~Additionally, the Federal Reserve announced the creation of a new Bank Term Funding Program in an effort to minimize the need for banks to sell securities at a loss in times of stress.~~ The ~~continued~~ultimate impact of these bank failures on the economy, financial institutions and their depositors, as well as any governmental regulatory responses or actions resulting from the same, isremains difficult to predict at this time.
8
Table of Contents
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.
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 March 31, 2024 and 2023, real estate loans represented 84.3% and 84.8%, respectively, of total loans. However, borrowers’ ability to repay their loans is not dependent upon any specific economic sector.
As of March 31, 2024, 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 March 31, 2024, 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
8
~~Table of Contents~~
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.
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.
~~Adoption of New Accounting Standard~~
In January 2023, the Company adopted ASU 2022-02, “Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures” (“ASU 2022-02”), which eliminated the accounting guidance for troubled debt restructurings (“TDRs”) while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors when a borrower is experiencing financial difficulty. In addition, for public business entities, the guidance requires disclosure of current-period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of Subtopic 326-20. The Company adopted the guidance using the modified retrospective method. Upon adoption of this guidance, the Company no longer establishes a specific reserve for modifications to borrowers experiencing financial difficulty. Instead, these modifications are included in their respective cohort and a historical loss rate is applied to the current loan balance to arrive at the quantitative baseline portion of the allowance. The difference between the allowance previously determined and the current allowance was not material to the Company’s financial statements.
In January 2023, the Company adopted ASU 2022-01, “Derivatives and Hedging (Topic 815): Fair Value Hedging – Portfolio Layer Method”, which intended to better align hedge accounting with an organization’s risk management strategies. The ASU became applicable to the Company in the second quarter of 2023 when we entered into a fair value hedge using the portfolio layer method.
Newly Issued, But Not Yet Effective Accounting Standards
In December 2022, the FASB issued amendments to defer the sunset date of the Reference Rate Reform Topic of the Accounting Standards Codification from December 31, 2022 to December 31, 2024, because the current relief in Reference Rate Reform Topic may not cover a period of time during which a significant number of modifications may take place. The amendments were effective upon issuance. The Company does not expect these amendments to have a material effect on its financial statements.
In December 2023, the FASB amended the Income Taxes topic in the Accounting Standards Codification to improve the transparency of income tax disclosures. The amendments are effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The Company does not expect these amendments to have a material effect on its financial statements.
9
Table of Contents
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, 2023 March 31, 2024
Amortized Gross Unrealized Fair Amortized Gross Unrealized Fair
(dollars in thousands) Cost Gains Losses Value
(dollars in thousands) Corporate bonds [Member] Cost Gains Losses Value
Available for sale Asset-backed securities [Member]
Corporate bonds $ 2,140 - 253 1,887
US treasuries US treasuries [Member] 999 - 111 888
US government agencies US government agencies [Member] 20,183 - 1,986 18,197
State and political subdivisions State and political subdivisions [Member] 22,579 - 3,042 19,537
Asset-backed securities Mortgage-backed securities [Member] 34,247 33 76 34,204
Mortgage-backed securities 60,782 - 9,499 51,283
Total investment securities available for sale $ 140,930 33 14,967 125,996

December 31, 2023
Amortized Gross Unrealized Fair
Cost Gains Losses Value
Available for sale
Corporate bonds $ 2,153 - 303 1,850 $ 2,147 - 237 1,910
US treasuries 25,737 2 136 25,603 9,495 1 102 9,394
US government agencies 21,225 - 2,501 18,724 20,594 - 1,938 18,656
State and political subdivisions 22,708 - 4,398 18,310 22,642 11 2,912 19,741
Asset-backed securities 29,780 25 164 29,641 33,450 2 216 33,236
Mortgage-backed securities 60,730 - 8,965 51,765
FHLMC 23,379 - 4,639 18,740
FNMA 33,251 - 6,285 26,966
GNMA 5,111 - 910 4,201
Total mortgage-backed securities 61,741 - 11,834 49,907
Total investment securities available for sale $ 163,344 27 19,336 144,035 $ 149,058 14 14,370 134,702
December 31, 2022
Amortized Gross Unrealized Fair
Cost Gains Losses Value
Available for sale ��
Corporate bonds $ 2,172 - 289 1,883
US treasuries US treasuries [Member] 999 - 128 871
US government agencies 13,007 - 2,390 10,617
State and political subdivisions 22,910 - 4,004 18,906
Asset-backed securities 6,435 - 206 6,229
Mortgage-backed securities
FHLMC FHLMC [Member] 24,086 - 3,745 20,341
FNMA FNMA [Member] 35,141 - 5,520 29,621
GNMA GNMA [Member] 5,573 - 694 4,879
Total mortgage-backed securities 64,800 - 9,959 54,841
Total investment securities available for sale $ 110,323 - 16,976 93,347
Contractual maturities and yields on the Company’s investment securities at ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022~~2023 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

March 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 Corporate bonds [Member] $ - - $ - - $ 1,887 2.01 % $ - - $ 1,887 2.01 %
US treasuries - - 888 1.27 % - - - - 888 1.27 %
US government agencies US government agencies [Member] 980 0.45 % 2,380 1.00 % 14,837 4.38 % - - 18,197 3.72 %
State and political subdivisions State and political subdivisions [Member] - - 902 1.94 % 5,744 1.89 % 12,891 2.15 % 19,537 2.07 %
Asset-backed securities Asset-backed securities [Member] - - 211 6.21 % - - 33,993 6.61 % 34,204 6.61 %
Mortgage-backed securities Mortgage-backed securities [Member] - - 6,626 1.29 % 3,419 1.54 % 41,238 2.04 % 51,283 1.91 %
Total investment securities Total investment securities [Member] $ 980 0.45 % $ 11,007 1.37 % $ 25,887 3.28 % $ 88,122 3.82 % $ 125,996 3.47 %

December 31, 2023
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 $ - - $ - - $ 1,910 2.01 % $ - - $ 1,910 2.01 %
US treasuries 8,497 5.42 % 897 1.27 % - - - - 9,394 5.02 %
US government agencies 970 0.45 % 2,385 1.00 % 15,301 4.41 % - - 18,656 3.77 %
State and political subdivisions - - 906 1.94 % 5,769 1.89 % 13,066 2.15 % 19,741 2.06 %
Asset-backed securities - - 296 (6.13 %) - - 32,940 6.63 % 33,236 6.57 %
Mortgage-backed securities - - 4,795 1.15 % 5,400 1.59 % 41,570 2.00 % 51,765 1.87 %
Total investment securities $ 9,467 4.91 % $ 9,279 0.98 % $ 28,380 3.20 % $ 87,576 3.76 % $ 134,702 3.55 %
10
Table of Contents
Schedule of maturities and yields on the company’s investment securities

September 30, 2023
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 Corporate bonds [Member] $ - - $ - - $ 1,850 2.01 % $ - - $ 1,850 2.01 %
US treasuries 24,739 5.39 % 864 1.27 % - - - - 25,603 5.25 %
US government agencies US government agencies [Member] 956 0.45 % 2,293 1.00 % 15,475 4.45 % - - 18,724 3.82 %
State and political subdivisions State and political subdivisions [Member] - - 872 1.94 % 4,919 1.80 % 12,519 2.17 % 18,310 2.06 %
Asset-backed securities Asset-backed securities [Member] - - - - 340 6.24 % 29,301 6.61 % 29,641 6.60 %
Mortgage-backed securities Mortgage-backed securities [Member] - - 4,680 1.16 % 5,140 1.59 % 40,087 1.94 % 49,907 1.83 %
Total investment securities Total investment securities [Member] $ 25,695 5.21 % $ 8,709 1.20 % $ 27,724 3.31 % $ 81,907 3.64 % $ 144,035 3.71 %
December 31, 2022
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 $ - - $ - - $ 1,883 2.00 % $ - - $ 1,883 2.00 %
US treasuries - - - - 871 1.27 % - - 871 1.27 %
US government agencies - - 3,223 0.85 % 7,394 1.55 % - - 10,617 1.34 %
State and political subdivisions - - 460 2.13 % 5,382 1.80 % 13,064 2.16 % 18,906 2.05 %
Asset-backed securities - - - - 554 4.77 % 5,675 5.14 % 6,229 5.10 %
Mortgage-backed securities - - 4,594 1.13 % 3,959 1.60 % 46,288 1.90 % 54,841 1.82 %
Total investment securities $ - - $ 8,277 1.08 % $ 20,043 1.75 % $ 65,027 2.24 % $ 93,347 2.03 %
The tables below summarize gross unrealized losses on investment securities and the fair market value of the related securities at ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, 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, 2023
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 $ 1,850 $ 303 1 $ 1,850 $ 303
US treasuries - - - 1 863 136 1 863 136
US government agencies 2 8,156 60 10 10,568 2,441 12 18,724 2,501
State and political subdivisions 2 734 33 30 17,576 4,365 32 18,310 4,398
Asset-backed 5 15,631 83 7 5,039 81 12 20,670 164
Mortgage-backed securitiesMortgage-backed securities [Member]
FHLMCFHLMC [Member] 2 2,726 189 19 16,014 4,450 21 18,740 4,639
FNMA - - - 37 26,966 6,285 37 26,966 6,285
GNMA - - - 6 4,201 910 6 4,201 910
Total investment securities 11 $ 27,247 $ 365 111 $ 83,077 $ 18,971 122 $ 110,324 $ 19,336
11
~~Table of Contents~~
Schedule of gross unrealized losses on investment securities and fair market value of related securities

December 31, 2022 March 31, 2024
Less than 12 months 12 months or longer Total Less than 12 months 12 months or longer Total
(dollars in thousands) # Fair
value Unrealized
losses # Fair
value Unrealized
losses # Fair
value Unrealized
losses # Fair
value Unrealized
losses # Fair
value Unrealized
losses # Fair
value Unrealized
losses
Available for sale
Corporate bonds - $ - $ - 1 $ 1,883 $ 289 1 $ 1,883 $ 289 - $ - $ - 1 $ 1,887 $ 253 1 $ 1,887 $ 253
US treasuries - - - 1 871 128 1 871 128 - - - 1 888 111 1 888 111
US government agencies - - - 10 10,617 2,390 10 10,617 2,390 2 7,133 39 10 11,064 1,947 12 18,197 1,986
State and political subdivisions 10 5,101 763 22 13,805 3,241 32 18,906 4,004 2 759 4 30 18,778 3,038 32 19,537 3,042
Asset-backed 5 4,291 135 3 1,938 71 8 6,229 206 4 11,343 31 7 4,567 45 11 15,910 76
Mortgage-backed securities 1 1,387 8 64 49,896 9,491 65 51,283 9,499
FHLMC 4 3,712 155 17 16,629 3,590 21 20,341 3,745
FNMA 9 2,208 201 28 27,413 5,319 37 29,621 5,520
GNMA 1 103 7 6 4,776 687 7 4,879 694
Total investment securities 29 $ 15,415 $ 1,261 88 $ 77,932 $ 15,715 117 $ 93,347 $ 16,976 9 $ 20,622 $ 82 113 $ 87,080 $ 14,885 122 $ 107,702 $ 14,967

December 31, 2023
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 $ 1,910 $ 237 1 $ 1,910 $ 237
US treasuries - - - 1 897 102 1 897 102
US government agencies 2 7,533 50 10 11,123 1,888 12 18,656 1,938
State and political subdivisions - - - 30 18,964 2,912 30 18,964 2,912
Asset-backed 8 26,746 145 7 4,866 71 15 31,612 216
Mortgage-backed securities Mortgage-backed securities [Member] 2 2,869 36 62 48,896 8,929 64 51,765 8,965
Total investment securities 12 $ 37,148 $ 231 111 $ 86,656 $ 14,139 123 $ 123,804 $ 14,370

At ~~September 30, 2023~~March 31, 2024, the Company had 122 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, 2023~~.March 31, 2024.
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, 2023 December 31, 2022 March 31, 2024 December 31, 2023
Federal Home Loan Bank stock $ 16,046 9,250 $ 14,633 16,063
Other nonmarketable investments 3,151 1,180 3,463 3,473
Investment in Trust Preferred subsidiaries 403 403 403 403
Total other investments $ 19,600 10,833 $ 18,499 19,939
The Company has evaluated other investments for impairment and determined that the other investments are not impaired as of ~~September 30, 2023~~March 31, 2024 and that ultimate recoverability of the par value of the investments is probable. All of the FHLB stock is used to collateralize advances with the FHLB.
At March 31, 2024, there were no securities pledges as collateral for repurchase agreements from brokers.
11
Table of Contents
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 2023,~~March 31, 2024, mortgage loans held for sale totaled $~~7.1~~11.8 million compared to $~~3.9~~7.2 million at December 31, ~~2022.~~2023.
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 $~~7.1~~6.9 million as of ~~September 30, 2023~~March 31, 2024 and $~~7.3~~7.0 million as of December 31, ~~2022.~~2023.
Schedule of composition of our loan portfolio

March 31, 2024 December 31, 2023
(dollars in thousands)Commercial [Member] Amount %  of Total Amount %  of Total
Commercial
Owner occupied REOwner occupied RE [Member] $ 631,047 17.3 % $ 631,657 17.5 %
Non-owner occupied RENon-owner occupied RE [Member] 944,530 25.9 % 942,529 26.2 %
ConstructionConstruction [Member] 157,464 4.3 % 150,680 4.2 %
BusinessBusiness [Member] 520,073 14.3 % 500,161 13.9 %
Total commercial loansConsumer [Member] 2,253,114 61.8 % 2,225,027 61.8 %
Consumer
Real estateReal estate [Member] 1,101,573 30.2 % 1,082,429 30.0 %
Home equityHome equity [Member] 184,691 5.1 % 183,004 5.1 %
Construction 53,216 1.5 % 63,348 1.7 %
OtherOther [Member] 51,172 1.4 % 48,819 1.4 %
Total consumer loans 1,390,652 38.2 % 1,377,600 38.2 %
Total gross loans, net of deferred fees 3,643,766 100.0 % 3,602,627 100.0 %
Less—allowance for credit losses (40,441 ) (40,682 )
Total loans, net $ 3,603,325 $ 3,561,945
12
~~Table of Contents~~

Schedule of composition of our loan portfolio
September 30, 2023 December 31, 2022
(dollars in thousands) Commercial [Member] Amount %  of Total Amount %  of Total
Commercial
Owner occupied RE Owner occupied RE [Member] $ 637,038 17.9 % $ 612,901 18.7 %
Non-owner occupied RE Non-owner occupied RE [Member] 937,749 26.4 % 862,579 26.3 %
Construction Construction [Member] 119,629 3.4 % 109,726 3.4 %
Business Business [Member] 500,253 14.1 % 468,112 14.3 %
Total commercial loans Consumer [Member] 2,194,669 61.8 % 2,053,318 62.7 %
Consumer
Real estate Real estate [Member] 1,074,679 30.2 % 931,278 28.4 %
Home equity Home equity [Member] 180,856 5.1 % 179,300 5.5 %
Construction Construction [Member] 54,210 1.5 % 80,415 2.5 %
Other Other [Member] 49,218 1.4 % 29,052 0.9 %
Total consumer loans 1,358,963 38.2 % 1,220,045 37.3 %
Total gross loans, net of deferred fees 3,553,632 100.0 % 3,273,363 100.0 %
Less—allowance for credit losses (41,131 ) (38,639 )
Total loans, net $ 3,512,501 $ 3,234,724
Maturities and Sensitivity of Loans to Changes in Interest Rates
The information in the following tables summarizes 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.

Schedule of loan maturity distribution by type and related interest rate September 30, 2023
(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 $ 13,679 177,138 404,693 41,528 637,038
Non-owner occupied RE 66,746 501,700 343,953 25,350 937,749
Construction 23,899 44,452 51,278 - 119,629
Business 106,126 198,150 191,559 4,418 500,253
Total commercial loans 210,450 921,440 991,483 71,296 2,194,669
Consumer
Real estate 8,646 50,898 304,890 710,245 1,074,679
Home equity 1,996 24,720 149,252 4,888 180,856
Construction - 259 31,796 22,155 54,210
Other 12,945 33,082 2,376 815 49,218
Total consumer loans 23,587 108,959 488,314 738,103 1,358,963
Total gross loans, net of deferred fees $ 234,037 1,030,399 1,479,797 809,399 3,553,632
12
Table of Contents
Schedule of loan maturity distribution by type and related interest rate

March 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 $ 15,855 185,107 388,424 41,661 631,047
Non-owner occupied RE 77,445 516,176 326,650 24,259 944,530
Construction 32,425 61,546 63,493 - 157,464
Business 117,557 218,031 180,132 4,353 520,073
Total commercial loans 243,282 980,860 958,699 70,273 2,253,114
Consumer
Real estate 10,230 52,771 310,383 728,189 1,101,573
Home equity 2,878 27,460 149,530 4,823 184,691
Construction 382 901 31,926 20,007 53,216
Other 12,564 34,683 3,103 822 51,172
Total consumer loans 26,054 115,815 494,942 753,841 1,390,652
Total gross loans, net of deferred fees $ 269,336 1,096,675 1,453,641 824,114 3,643,766

December 31, 2023
(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 $ 17,358 177,203 395,130 41,966 631,657
Non-owner occupied RE 68,601 517,622 331,727 24,579 942,529
Construction 26,762 64,432 59,486 - 150,680
Business 114,432 194,416 186,927 4,386 500,161
Total commercial loans 227,153 953,673 973,270 70,931 2,225,027
Consumer
Real estate 10,593 51,956 301,095 718,785 1,082,429
Home equity 2,716 27,578 147,855 4,855 183,004
Construction - 252 39,459 23,637 63,348
Other 11,157 33,592 3,265 805 48,819
Total consumer loans 24,466 113,378 491,674 748,082 1,377,600
Total gross loans, net of deferred fees $ 251,619 1,067,051 1,464,944 819,013 3,602,627

13
Table of Contents

December 31, 2022
(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 $ 10,574 133,017 420,881 48,429 612,901
Non-owner occupied RE 44,570 419,976 371,208 26,825 862,579
Construction 5,509 36,537 61,009 6,671 109,726
Business 96,157 194,489 173,259 4,207 468,112
Total commercial loans 156,810 784,019 1,026,357 86,132 2,053,318
Consumer
Real estate 12,137 38,948 260,005 620,188 931,278
Home equity 1,336 20,933 151,696 5,335 179,300
Construction 665 182 23,788 55,780 80,415
Other 3,926 21,890 2,458 778 29,052
Total consumer loans 18,064 81,953 437,947 682,081 1,220,045
Total gross loans, net of deferred fees $ 174,874 865,972 1,464,304 768,213 3,273,363
The following table summarizes the loans due after one year by category.
Schedule of composition of gross loans by rate type
September 30, 2023 December 31, 2022
Interest Rate Interest Rate
(dollars in thousands) Fixed Floating or
Adjustable Fixed Floating or
Adjustable
CommercialCommercial [Member]
Owner occupied REOwner occupied RE [Member] $ 614,563 8,796 598,513 3,814
Non-owner occupied RENon-owner occupied RE [Member] 787,479 83,524 742,763 75,246
ConstructionConstruction [Member] 65,517 30,213 90,246 13,971
BusinessBusiness [Member] 300,464 93,663 298,866 73,089
Total commercial loans 1,768,023 216,196 1,730,388 166,120
ConsumerConsumer [Member]
Real estateReal estate [Member] 1,066,033 - 919,130 11
Home equityHome equity [Member] 12,403 166,457 14,173 163,791
ConstructionConstruction [Member] 54,210 - 79,750 -
OtherOther [Member] 11,916 24,357 19,113 6,013
Total consumer loans 1,144,562 190,814 1,032,166 169,815
Total gross loans, net of deferred fees $ 2,912,585 407,010 2,762,554 335,935
Schedule of loans due after one year by category

March 31, 2024 December 31, 2023
Interest Rate Interest Rate
(dollars in thousands) Fixed Floating or
Adjustable Fixed Floating or
Adjustable
Commercial
Owner occupied RE $ 600,279 14,913 605,199 9,100
Non-owner occupied RE 746,525 120,560 768,048 105,880
Construction 96,176 28,863 81,326 42,592
Business 293,897 108,619 293,920 91,809
Total commercial loans 1,736,877 272,955 1,748,493 249,381
Consumer
Real estate 1,091,343 - 1,071,836 -
Home equity 11,485 170,328 11,441 168,847
Construction 52,834 - 63,348 -
Other 12,127 26,481 11,525 26,137
Total consumer loans 1,167,789 196,809 1,158,150 194,984
Total gross loans, net of deferred fees $ 2,904,666 469,764 2,906,643 444,365
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.
14
~~Table of Contents~~
·● 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.
1514
Table of Contents
The following table presents loan balances classified by credit quality indicators by year of origination as of ~~September 30, 2023.~~March 31, 2024.
Schedule of breakdown of outstanding loans by risk category
Schedule of classified by credit quality indicators by year of origination

September 30, 2023 March 31, 2024
(dollars in thousands) 2023 2022 2021 2020 2019 Prior Revolving Revolving Converted to Term Total 2024 2023 2022 2021 2020 Prior Revolving Revolving
Converted
to Term Total
Commercial
Owner occupied RE
Pass $ 38,310 178,722 143,057 67,509 62,216 112,528 - 167 602,509 $ 11,770 42,283 180,226 134,787 63,949 164,174 85 - 597,274
Watch - 3,482 464 16,074 3,551 6,821 - - 30,392 - - 3,429 456 15,880 10,101 - - 29,866
Special Mention - 186 - - - 3,074 - - 3,260 - - 177 - - 2,889 - - 3,066
Substandard - - - - - 877 - - 877 - - - - - 841 - - 841
Total Owner occupied RE 38,310 182,390 143,521 83,583 65,767 123,300 - 167 637,038 11,770 42,283 183,832 135,243 79,829 178,005 85 - 631,047

Non-owner occupied RE
Pass 79,567 302,942 169,567 109,566 59,595 173,400 257 - 894,894 12,575 79,336 303,755 169,028 105,833 226,072 303 - 896,902
Watch 772 828 10,221 - 5,393 6,610 - - 23,824 - 1,002 2,596 448 527 15,911 - - 20,484
Special Mention - - 199 - 8,267 878 - - 9,344 - - 967 7,707 - 9,049 - - 17,723
Substandard - - - - 8,073 1,614 - - 9,687 - - - 305 - 9,116 - - 9,421
Total Non-owner occupied RE 80,339 303,770 179,987 109,566 81,328 182,502 257 - 937,749 12,575 80,338 307,318 177,488 106,360 260,148 303 - 944,530

Construction
Pass 13,921 72,528 22,179 9,897 - - - - 118,525 3,563 28,027 86,648 26,741 11,087 - - - 156,066
Watch - 1,104 - - - - - - 1,104 - - 1,398 - - - - - 1,398
Special Mention - - - - - - - - -
Substandard - - - - - - - - -
Total Construction 13,921 73,632 22,179 9,897 - - - - 119,629 3,563 28,027 88,046 26,741 11,087 - - - 157,464

Business
Pass 41,808 136,635 50,098 19,637 18,214 53,775 144,671 1,099 465,937 8,232 52,166 134,401 45,948 18,339 61,981 163,010 - 484,077
Watch 282 14,431 1,955 1,114 913 3,958 6,697 - 29,350 - 120 17,160 1,814 980 4,600 6,942 5 31,621
Special Mention 101 977 77 793 211 234 - 98 2,491 - 231 942 89 500 1,736 101 - 3,599
Substandard - 490 164 - 153 1,199 447 22 2,475 - - - 151 - 625 - - 776
Total Business 42,191 152,533 52,294 21,544 19,491 59,166 151,815 1,219 500,253 8,232 52,517 152,503 48,002 19,819 68,942 170,053 5 520,073
Current period gross write-offs - - - - (346 ) - - - (346 )
Total Commercial loans 174,761 712,325 397,981 224,590 166,586 364,968 152,072 1,386 2,194,669 36,140 203,165 731,699 387,474 217,095 507,095 170,441 5 2,253,114

Consumer
Real estate
Pass 126,174 273,593 283,538 178,459 66,468 108,094 - - 1,036,326 18,718 146,761 281,881 276,118 171,468 168,438 - - 1,063,384
Watch 490 5,684 7,877 3,941 2,058 4,098 - - 24,148 - 488 5,615 7,360 3,883 5,876 - - 23,222
Special Mention - 2,319 1,663 1,301 2,407 2,799 - - 10,489 - 142 2,487 1,905 1,282 5,253 - - 11,069
Substandard - 186 637 820 323 1,750 - - 3,716 - 275 350 631 986 1,656 - - 3,898
Total Real estate 126,664 281,782 293,715 184,521 71,256 116,741 - - 1,074,679 18,718 147,666 290,333 286,014 177,619 181,223 - - 1,101,573

Home equity
Pass - - - - - - 168,399 - 168,399 - - - - - - 173,125 - 173,125
Watch - - - - - - 6,870 - 6,870 - - - - - - 6,103 - 6,103
Special Mention - - - - - - 4,150 - 4,150 - - - - - - 5,007 - 5,007
Substandard - - - - - - 1,437 - 1,437 - - - - - - 456 - 456
Total Home equity - - - - - - 180,856 - 180,856 - - - - - - 184,691 - 184,691

Construction
Pass 9,798 35,606 8,806 - - - - - 54,210 664 13,604 30,974 7,974 - - - - 53,216
Watch - - - - - - - - -
Special Mention - - - - - - - - -
Substandard - - - - - - - - -
Total Construction 9,798 35,606 8,806 - - - - - 54,210 664 13,604 30,974 7,974 - - - - 53,216

Other
Pass 923 2,643 2,578 1,505 846 2,726 36,718 - 47,939 1,979 1,171 2,411 2,174 1,387 3,253 37,657 - 50,032
Watch 44 33 352 4 1 167 94 - 695 - 8 25 345 - 156 51 - 585
Special Mention - 334 - - 27 84 51 - 496 - 32 330 71 - 73 36 - 542
Substandard - - 80 - 1 - 7 - 88 - - - - - - 13 - 13
Total Other 967 3,010 3,010 1,509 875 2,977 36,870 - 49,218 1,979 1,211 2,766 2,590 1,387 3,482 37,757 - 51,172

Current period gross write-offs - - - - - (38 ) (40 ) - (78 )
Total Consumer loans 137,429 320,398 305,531 186,030 72,131 119,718 217,726 - 1,358,963 21,361 162,481 324,073 296,578 179,006 184,705 222,448 - 1,390,652
Total loans $ 312,190 1,032,723 703,512 410,620 238,717 484,686 369,798 1,386 3,553,632 $ 57,501 365,646 1,055,772 684,052 396,101 691,800 392,889 5 3,643,766
Current period gross write-offs - (200 ) - (28 ) - (10 ) (405 ) - (643 )
Total Current period gross write-offs - - - - (346 ) (38 ) (40 ) - (424 )
1615
Table of Contents
The following table presents loan balances classified by credit quality indicators by year of origination as of December 31, ~~2022.~~2023.

December 31, 2022 December 31, 2023
(dollars in thousands) 2022 2021 2020 2019 2018 Prior Revolving Revolving
Converted
to Term Total 2023 2022 2021 2020 2019 Prior Revolving Revolving Converted to Term Total
Commercial
Owner occupied RE
Pass $ 169,083 122,654 85,867 66,299 36,718 93,915 - - 574,536 $ 42,846 180,654 138,549 64,818 59,880 110,502 85 166 597,500
Watch 14,648 479 9,339 3,658 - 6,792 - - 34,916 - 3,460 460 15,997 3,525 6,616 - - 30,058
Special Mention 200 - - - - 2,960 - - 3,160 - 181 - - - 3,057 - - 3,238
Substandard - - - - 289 - - - 289 - - - - - 861 - - 861
Total Owner occupied RE 183,931 123,133 95,206 69,957 37,007 103,667 - - 612,901 42,846 184,295 139,009 80,815 63,405 121,036 85 166 631,657

Non-owner occupied RE
Pass 281,890 169,599 113,264 59,550 79,722 106,967 604 137 811,733 84,617 298,063 162,697 107,364 59,260 163,990 9,249 - 885,240
Watch 1,061 9,491 - 10,683 1,408 11,660 - - 34,303 1,007 3,260 9,914 533 5,545 10,630 - - 30,889
Special Mention - 202 - 6,087 - 930 - - 7,219 - - 7,759 - 8,252 879 - - 16,890
Substandard - 134 - 7,992 327 871 - - 9,324 - - 313 - 8,088 1,109 - - 9,510
Total Non-owner occupied RE 282,951 179,426 113,264 84,312 81,457 120,428 604 137 862,579 85,624 301,323 180,683 107,897 81,145 176,608 9,249 - 942,529
Current period gross write-offs - (200 ) - - - (42 ) - - (242 )

Construction
Pass 48,420 55,129 4,811 247 - - - - 108,607 27,262 86,161 24,399 11,459 - - - - 149,281
Watch 1,119 - - - - - - - 1,119 - 1,399 - - - - - - 1,399
Special Mention - - - - - - - - -
Substandard - - - - - - - - -
Total Construction 49,539 55,129 4,811 247 - - - - 109,726 27,262 87,560 24,399 11,459 - - - - 150,680

Business
Pass 136,489 57,804 29,864 21,808 35,249 28,914 136,337 709 447,174 48,705 134,999 48,557 18,868 17,292 47,708 146,745 1,431 464,305
Watch 3,186 2,058 1,318 1,282 179 3,074 3,783 439 15,319 127 15,867 1,833 1,010 842 3,584 7,570 506 31,339
Special Mention 1,137 260 386 210 - 252 115 642 3,002 241 961 98 857 184 447 150 97 3,035
Substandard 498 - 188 233 315 911 472 - 2,617 - - 155 - 132 1,195 - - 1,482
Total Business 141,310 60,122 31,756 23,533 35,743 33,151 140,707 1,790 468,112 49,073 151,827 50,643 20,735 18,450 52,934 154,465 2,034 500,161
Current period gross write-offs - - - (28 ) - - (15 ) (22 ) (65 )
Total Commercial loans 657,731 417,810 245,037 178,049 154,207 257,246 141,311 1,927 2,053,318 204,805 725,005 394,734 220,906 163,000 350,578 163,799 2,200 2,225,027

Consumer
Real estate
Pass 243,589 269,565 189,075 72,499 39,042 76,172 - - 889,942 144,179 273,585 278,138 176,395 66,087 105,383 - - 1,043,767
Watch 6,196 8,256 3,847 2,278 494 3,671 - - 24,742 490 5,658 8,230 3,917 2,051 3,890 - - 24,236
Special Mention 3,114 1,938 2,644 2,258 955 2,639 - - 13,548 143 2,499 1,657 1,291 2,220 3,360 - - 11,170
Substandard - 648 227 341 408 1,422 - - 3,046 - - 635 817 318 1,486 - - 3,256
Total Real estate 252,899 280,407 195,793 77,376 40,899 83,904 - - 931,278 144,812 281,742 288,660 182,420 70,676 114,119 - - 1,082,429

Home equity
Pass - - - - - - 165,847 - 165,847 - - - - - - 171,003 - 171,003
Watch - - - - - - 7,226 - 7,226 - - - - - - 6,393 - 6,393
Special Mention - - - - - - 4,055 - 4,055 - - - - - - 4,283 - 4,283
Substandard - - - - - - 2,172 - 2,172 - - - - - - 1,325 - 1,325
Total Home equity - - - - - - 179,300 - 179,300 - - - - - - 183,004 - 183,004
Current period gross write-offs - - - - - - (438 ) - (438 )

Construction
Pass 41,138 34,039 4,923 - - - - - 80,100 14,339 39,893 9,116 - - - - - 63,348
Watch - - - - - - - - -
Special Mention - - - 315 - - - - 315
Substandard - - - - - - - - -
Total Construction 41,138 34,039 4,923 315 - - - - 80,415 14,339 39,893 9,116 - - - - - 63,348

Other
Pass 3,894 3,038 1,702 1,534 341 3,015 14,465 - 27,989 1,278 2,551 2,361 1,457 803 2,604 36,549 - 47,603
Watch 46 367 15 5 16 175 93 - 717 9 29 348 - 15 163 58 - 622
Special Mention 94 - - 44 75 23 96 - 332 33 333 - - 23 82 41 - 512
Substandard - - - 5 - - 9 - 14 - - 75 - - - 7 - 82
Total Other 4,034 3,405 1,717 1,588 432 3,213 14,663 - 29,052 1,320 2,913 2,784 1,457 841 2,849 36,655 - 48,819
Current period gross write-offs - - - - - - (16 ) - (16 )
Total Consumer loans 298,071 317,851 202,433 79,279 41,331 87,117 193,963 - 1,220,045 160,471 324,548 300,560 183,877 71,517 116,968 219,659 - 1,377,600
Total loans $ 955,802 735,661 447,470 257,328 195,538 344,363 335,274 1,927 3,273,363 $ 365,276 1,049,553 695,294 404,783 234,517 467,546 383,458 2,200 3,602,627
Current period gross write-offs - (91 ) - (23 ) - (32 ) (339 ) - (485 )
Total Current period gross write-offs - (200 ) - (28 ) - (42 ) (469 ) (22 ) (761 )
1716
Table of Contents
The following tables present loan balances by age and payment status.
Schedule of loan balances by payment status

September 30, 2023 March 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 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 $ - - - - 637,038 637,038 $ - - - - 631,047 631,047
Non-owner occupied RE 440 - - 1,615 935,694 937,749 8,031 27 - 1,410 935,062 944,530
Construction - - - - 119,629 119,629 - - - - 157,464 157,464
Business 347 27 - 404 499,475 500,253 428 18 - 488 519,139 520,073
Consumer
Real estate 1,210 - - 1,228 1,072,241 1,074,679 2,903 - - 1,380 1,097,290 1,101,573
Home equity 226 182 - 1,068 179,380 180,856 231 127 - 367 183,966 184,691
Construction - - - - 54,210 54,210 - - - - 53,216 53,216
Other - - - - 49,218 49,218 - 7 - 1 51,164 51,172
Total loans $ 2,223 209 - 4,315 3,546,885 3,553,632 $ 11,593 179 - 3,646 3,628,348 3,643,766
Total loans over 90 days past due - - - - - 1,572 - - - - - 889

December 31, 2022 December 31, 2023
(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 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 $ - - - - 612,901 612,901 $ 74 - - - 631,583 631,657
Non-owner occupied RE 119 757 - 247 861,456 862,579 8,102 - - 1,423 933,004 942,529
Construction - - - - 109,726 109,726 - - - - 150,680 150,680
Business 24 1 - 182 467,905 468,112 567 - - 319 499,275 500,161
Consumer
Real estate 330 - - 1,099 929,849 931,278 1,750 - - 985 1,079,694 1,082,429
Home equity 50 - - 1,099 178,151 179,300 601 30 - 1,236 181,137 183,004
Construction - - - - 80,415 80,415 - - - - 63,348 63,348
Other 88 - - - 28,964 29,052 25 25 - - 48,769 48,819
Total loans $ 611 758 - 2,627 3,269,367 3,273,363 $ 11,119 55 - 3,963 3,587,490 3,602,627
Total loans over 90 days past due - - - - - 402 - - - - - 1,300
As of ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, loans 30 days or more past due represented ~~0.13%~~0.36% and ~~0.11%~~0.37% of the Company’s total loan portfolio, respectively. Commercial loans 30 days or more past due were ~~0.05%~~0.24% and ~~0.03%~~0.27% of the Company’s total loan portfolio as of ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, respectively. Consumer loans 30 days or more past due were ~~0.08%~~0.11% and ~~0.08%~~0.09% of total loans as of ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, respectively.
1817
Table of Contents
The table below summarizes nonaccrual loans by major categories for the periods presented.
Schedule nonaccrual loans by major categories

Schedule nonaccrual loans by major categories September 30, 2023 December 31, 2022
March 31, 2024 December 31, 2023
Nonaccrual Nonaccrual Nonaccrual Nonaccrual Nonaccrual Nonaccrual Nonaccrual Nonaccrual
loans loans Total loans loans Total loans loans Total loans loans Total
with no with an nonaccrual with no with an nonaccrual with no with an nonaccrual with no with an nonaccrual
(dollars in thousands) allowance allowance loans allowance allowance loans allowance allowance loans allowance allowance loans
Commercial
Owner occupied RE - - - - - - $ - - - $ - - -
Non-owner occupied RE 379 1,236 1,615 114 133 247 646 764 1,410 653 770 1,423
Construction - - - - - - - - - - - -
Business 170 234 404 - 182 182 - 488 488 164 155 319
Total commercial 549 1,470 2,019 114 315 429 646 1,252 1,898 817 925 1,742
Consumer
Real estate 227 1,001 1,228 - 1,099 1,099 625 755 1,380 - 985 985
Home equity 181 887 1,068 194 905 1,099 367 - 367 343 893 1,236
Construction - - - - - - - - - - - -
Other - - - - - - - 1 1 - - -
Total consumer 408 1,888 2,296 194 2,004 2,198 992 756 1,748 343 1,878 2,221
Total nonaccrual loans 957 3,358 4,315 308 2,319 2,627 $ 1,638 2,008 3,646 $ 1,160 2,803 3,963
WeThe Company did not recognize interest income on nonaccrual loans for the three months ended ~~September 30, 2023~~March 31, 2024 and ~~September 30, 2022.~~March 31, 2023. The accrued interest reversed during the three months ended ~~September 30,~~March 31, 2024 and March 31, 2023 ~~and September 30, 2022~~ was not material.
~~We did not recognize~~ Foregone interest income on the nonaccrual loans for the ~~nine months~~three-month period ended ~~September 30,~~March 31, 2024 and March 31, 2023 ~~and September 30, 2022. Accrued interest of $35,000~~was ~~reversed during the nine months ended September 30, 2023 and $~~not material.~~16,000~~0 ~~was reversed during the nine months ended September 30, 2022.~~
The table below summarizes information regarding nonperforming assets.
Schedule of nonperforming assets, including nonaccruing TDRs
Schedule of nonperforming assets

(dollars in thousands) September 30, 2023 December 31, 2022 March 31, 2024 December 31, 2023
Nonaccrual loans $ 4,315 2,627 $ 3,646 3,963
Other real estate owned - - - -
Total nonperforming assets $ 4,315 2,627 $ 3,646 3,963
Nonperforming assets as a percentage of:
Total assets 0.11 % 0.07 % 0.09 % 0.10 %
Gross loans 0.12 % 0.08 % 0.10 % 0.11 %
Total loans over 90 days past due $ 1,572 402 $ 889 1,300
Loans over 90 days past due and still accruing - - - -
Accruing troubled debt restructurings - 4,503
Modifications to Borrowers Experiencing Financial Difficulty
The Company adopted Accounting Standards Update (“ASU”) 2022-02, Financial Instruments - Credit Losses (Topic 326) Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”) effective January 1, 2023. The amendments in ASU 2022-02 eliminated the recognition and measure of troubled debt restructurings and enhanced disclosures for loan 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 probability of default/loss given default 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.
19
~~Table of Contents~~
Because the effect of most modifications made to borrowers experiencing financial difficulty is already included in the allowance for credit losses because of the measurement methodologies used to estimate the allowance, a change to the allowance for credit losses is generally not recorded upon modification.
18
Table of Contents
There were no loans modified to borrowers experiencing financial difficulty during the three months ended March 31, 2024. The following table shows the amortized cost basis of the loans modified to borrowers experiencing financial difficulty during the ~~three and nine~~twelve months ended ~~September 30,~~December 31, 2023, disaggregated by class of loans and type of concession granted and describes the financial effect of the modifications made to borrowers experiencing financial difficulty.
Schedule of amortized cost basis of loans Term Extension
Term Extension
(dollars in thousands) Amortized Cost Basis % of Total Loan Type Financial Effect Amortized Cost Basis % of Total Loan Type Financial Effect
Commercial Business $           329 0.07% Added a 1-year term to both of the loans modified. One loan was granted an extended amortization due to the inability to pay on a 3-year amortization. The other loan was given an interest only period due to the ability to pay only interest to get the loan renewed. $ 309 0.06 % Added a 1-year term to both of the loans modified. One loan was granted an extended amortization due to the inability to pay on a 3-year amortization. The other loan was given an interest only period due to the ability to pay only interest to get the loan renewed.
Neither of the two loans modified had a payment default during the period. The Company closely monitors the performance of the loans that are modified for borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. Both loans are in current payment status since the loan modification occurred in the third quarter of 2023. There have been no commitments to lend additional funds to the borrowers experiencing financial difficulty as of ~~September 30, 2023.~~March 31, 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 credit loss allowance 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~~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’~~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 allowance for credit losses 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.
The Company uses a lifetime probability of default and loss given default modeling approach to estimate the allowance for credit losses on loans. This method uses 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 calculates 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. Management believes that the Company’s historical loss experience provides the best basis for its assessment of expected credit losses to determine the allowance for credit losses. The Company uses 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
20
~~Table of Contents~~
share risk characteristics are evaluated for expected credit losses on an individual basis and excluded from the collective evaluation.
19
Table of Contents
Management also considers further adjustments to historical loss information for current conditions and reasonable and supportable forecasts that differ from the conditions that exist for the period over which historical information is evaluated as well as other changes in qualitative factors not inherently considered in the quantitative analyses. The Company generally utilizes a four-quarter forecast period in evaluating the appropriateness of the reasonable and supportable forecast scenarios which are incorporated through qualitative adjustments. There is immediate reversion to historical loss rates. The qualitative categories and the measurements used to quantify the risks within each of these categories are subjectively selected by management but measured by objective measurements period over period. The data for each measurement may be obtained from internal or external sources. The current period measurements are evaluated and assigned a factor commensurate with the current level of risk relative to past measurements over time. The resulting qualitative adjustments are applied to the relevant collectively evaluated loan pools. These adjustments are based upon quarterly trend assessments in certain economic factors such as labor, inflation, consumer sentiment and real disposable income, as well as associate retention and turnover, portfolio concentrations, and growth characteristics. The qualitative analysis increases or decreases the allowance allocation for each loan pool based on the assessment of factors described above.
The following tables summarize the activity related to the allowance for credit losses for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2024 and March 31, 2023 ~~and September 30, 2022~~ under the CECL methodology.
Schedule of activity related to the allowance for credit losses

Three months ended September 30, 2023
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 $ 5,896 11,584 1,331 8,152 10,395 2,521 684 542 41,105
Provision for credit losses 300 (247 ) (34 ) (148 ) 191 (20 ) (102 ) (40 ) (100 )
Loan charge-offs - (1 ) - (42 ) - - - - (43 )
Loan recoveries - 154 - 13 - 2 - - 169
Net loan recoveries (charge-offs) - 153 - (29 ) - 2 - - 126
Balance, end of period $ 6,196 11,490 1,297 7,975 10,586 2,503 582 502 41,131
Net recoveries to average loans (annualized) (0.01 )%
Allowance for credit losses to gross loans 1.16 %
Allowance for credit losses to nonperforming loans 953.25 %

Three months ended September 30, 2022
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 $ 4,829 10,010 1,060 6,717 7,992 2,442 851 291 34,192
Provision for credit losses 476 (1,595 ) (82 ) 875 782 3 41 25 525
Loan charge-offs - - - - - - - - -
Loan recoveries - 1,540 - 51 - 8 - 1 1,600
Net loan recoveries (charge-offs) - 1,540 - 51 - 8 - 1 1,600
Balance, end of period $ 5,305 9,955 978 7,643 8,774 2,453 892 317 36,317
Net recoveries to average loans (annualized) (0.22 )%
Allowance for credit losses to gross loans 1.20 %
Allowance for credit losses to nonperforming loans 1,388.87 %
21
~~Table of Contents~~

Nine months ended September 30, 2023
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 $ 5,867 10,376 1,292 7,861 9,487 2,551 893 312 38,639
Provision for credit losses 329 1,138 5 120 1,099 278 (311 ) 192 2,850
Loan charge-offs - (209 ) - (43 ) - (389 ) - (2 ) (643 )
Loan recoveries - 185 - 37 - 63 - - 285
Net loan recoveries (charge-offs) - (24 ) - (6 ) - (326 ) - (2 ) (358 )
Balance, end of period $ 6,196 11,490 1,297 7,975 10,586 2,503 582 502 41,131
Net charge-offs to average loans (annualized) 0.01 %
Allowance for credit losses to gross loans 1.16 %
Allowance for credit losses to nonperforming loans 953.25 %
Schedule of activity related to the allowance for credit losses

Nine months ended September 30, 2022 Three months ended March 31, 2024
Commercial Consumer Commercial Consumer
(dollars in thousands) Owner occupied RE Non-
owner occupied RE Construction Business Real Estate Home
Equity Construction Other Total Owner
occupied
RE Non-
owner
occupied
RE Construction Business Real
Estate Home
Equity Construction Other Total
Balance, beginning of period $ 4,700 10,518 625 4,887 7,083 1,697 578 320 30,408 $ 6,118 11,167 1,594 7,385 10,647 2,600 677 494 40,682
Adjustment for CECL (313 ) 333 154 1,057 (294 ) 438 130 (5 ) 1,500
Provision for credit losses 918 (2,436 ) 199 1,558 1,985 575 184 92 3,075 - - - - - - - - -
Loan charge-offs - - - (55 ) - (339 ) - (91 ) (485 ) - - - (346 ) - - - (78 ) (424 )
Loan recoveries - 1,540 - 196 - 82 - 1 1,819 - - - 15 - 119 - 49 183
Net loan recoveries (charge-offs) - 1,540 - 141 - (257 ) - (90 ) 1,334 - - - (331 ) - 119 - (29 ) (241 )
Balance, end of period $ 5,305 9,955 978 7,643 8,774 2,453 892 317 36,317 $ 6,118 11,167 1,594 7,054 10,647 2,719 677 465 40,441
Net recoveries to average loans (annualized) (0.06 )%
Net charge-offs to average loans (annualized) 0.03 %
Allowance for credit losses to gross loans 1.20 % 1.11 %
Allowance for credit losses to nonperforming loans 1,388.87 % 1,109.13 %

Three months ended March 31, 2023
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 $ 5,867 10,376 1,292 7,861 9,487 2,551 893 312 38,639
Provision for credit losses 117 1,038 (182 ) 150 592 53 (83 ) 170 1,855
Loan charge-offs - (160 ) -  (1 ) - - - - (161 )
Loan recoveries - 31 - 12 - 59 - - 102
Net loan recoveries (charge-offs) - (129 ) - 11 - 59 - - (59 )
Balance, end of period $ 5,984 11,285 1,110 8,022 10,079 2,663 810 482 40,435
Net charge-offs to average loans (annualized) 0.01 %
Allowance for credit losses to gross loans 1.18 %
Allowance for credit losses to nonperforming loans 854.33 %

~~The $100,000~~There was no ~~reversal of the~~ provision for credit losses recorded during the first quarter of 2024, compared to a provision of $1.9 million for the ~~three months ended September 30, 2023~~first quarter of 2023. No provision was ~~driven by net recoveries~~recorded during the first quarter of $~~126,000~~ ~~for the quarter combined with lower expected loss rates. The $2.9~~ ~~million provision for credit losses for the nine months ended September 30, 2023 was driven by $280.3~~ ~~million in loan growth for the period. In addition to loan growth, the provision for credit losses was impacted by lower expected loss rates~~2024 due to continued low net charge-offs ~~during the first nine months of 2023, while minor adjustments to an internal qualitative factor increased the qualitative component~~and a continued decline of the expected loss rates in the allowance ~~and related provision expense.~~for credit losses.
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.
2220
Table of Contents
~~The following tables present an analysis of collateral-dependent loans of the Company as of September 30, 2023 and December 31, 2022.~~
Schedule of analysis of collateral-dependent loans of the company
September 30, 2023
Real Business
(dollars in thousands) estate assets Other Total
Commercial
Owner occupied RE $ - - - -
Non-owner occupied RE 908 - - 908
Construction - - - -
Business 244 - - 244
Total commercial 1,152 - - 1,152
Consumer
Real estate 386 - - 386
Home equity 182 - - 182
Construction - - - -
Other - - - -
Total consumer 568 - - 568
Total $ 1,720 - - 1,720
December 31, 2022
Real Business
(dollars in thousands) estate assets Other Total
Commercial
Owner occupied RE $ - - - -
Non-owner occupied RE 114 - - 114
Construction - - - -
Business 30 - - 30
Total commercial 144 - - 144
Consumer
Real estate 207 - - 207
Home equity 194 - - 194
Construction - - - -
Other - - - -
Total consumer 401 - - 401
Total $ 545 - - 545
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~~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 March 31, 2024 and December 31, 2023.
Schedule of analysis of collateral-dependent loans

March 31, 2024
Real Business
(dollars in thousands) estate assets Other Total
Commercial
Owner occupied RE $ - - - -
Non-owner occupied RE 723 - - 723
Construction - - - -
Business - - - -
Total commercial 723 - - 723
Consumer
Real estate 789 - - 789
Home equity 367 - - 367
Construction - - - -
Other - - - -
Total consumer 1,156 - - 1,156
Total $ 1,879 - - 1,879

December 31, 2023
Real Business
(dollars in thousands) estate assets Other Total
Commercial
Owner occupied RE $ - - - -
Non-owner occupied RE 720 - - 720
Construction - - - -
Business 164 - - 164
Total commercial 884 - - 884
Consumer
Real estate 166 - - 166
Home equity 343 - - 343
Construction - - - -
Other - - - -
Total consumer 509 - - 509
Total $ 1,393 - - 1,393
21
Table of Contents
Allowance for Credit Losses - Unfunded Loan Commitments
The allowance for credit losses for unfunded loan commitments was $~~2.2~~1.7 million and $~~2.8~~1.8 million at ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, respectively, and is separately classified on the balance sheet within other liabilities. The following table presents the balance and activity in the allowance for credit losses for unfunded loan commitments for the three ~~and nine~~ months ended ~~September 30, 2023~~March 31, 2024 and ~~September 30, 2022.~~for the twelve months ended December 31, 2023.
Schedule of allowance for credit losses for unfunded loan commitments

Three months ended Twelve months ended
(dollars in thousands) March 31, 2024 December 31, 2023
Balance, beginning of period $ 1,831 2,780
Provision for (reversal of) credit losses (175 ) (949 )
Balance, end of period $ 1,656 1,831
Unfunded Loan Commitments $ 710,669 724,606
Reserve for Unfunded Commitments to Unfunded Loan Commitments 0.23 % 0.25 %
23
~~Table of Contents~~
Schedule of allowance for credit losses for unfunded loan commitments
Three months ended Three months ended
(dollars in thousands) September 30, 2023 September 30, 2022
Balance, beginning of period $ 2,565 2,330
   Adjustment for adoption of CECL - -
Provision for (reversal of) credit losses (400 ) 425
Balance, end of period $ 2,165 2,755
Unfunded Loan Commitments $ 780,581 840,912
Reserve for Unfunded Commitments to Unfunded Loan Commitments 0.28 % 0.33 %
Nine months ended Nine months ended
(dollars in thousands) September 30, 2023 September 30, 2022
Balance, beginning of period $ 2,780 -
   Adjustment for adoption of CECL - 2,000
Provision for (reversal of) credit losses (615 ) 755
Balance, end of period $ 2,165 2,755
Unfunded Loan Commitments $ 780,581 840,912
Reserve for Unfunded Commitments to Unfunded Loan Commitments 0.28 % 0.33 %
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 fair value swap, designated as a hedging instrument, with a total notional amount of $~~200.0~~200.0 million in the second quarter of 2023. The hedging instrument matures on May 25, 2028. The Company is designating the fair value swap under the portfolio layer method (“PLM”). Under this 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 portfolio layer method hedged asset and liability and the cumulative fair value hedging adjustment included in the carrying value of the hedged asset as of ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022.~~2023.
Schedule of carrying value of hedged asset and liability and cumulative fair value hedging adjustment
March 31, 2024 December 31, 2023
(dollars in thousands) Carrying
Amount Hedged Asset Carrying
Amount Hedged Liability
Fixed Rate Asset/Liability¹ $ 203,206 $ 3,206 $ 199,518 $ 482
2422
Table of Contents

Schedule of carrying value of hedged asset and cumulative fair value hedging adjustment September 30, 2023 December 31, 2022
(dollars in thousands) Carrying
Amount Hedged Asset Carrying
Amount Hedged Asset
Fixed Rate Asset¹ $ 206,250 $ 6,250 $ - $ -
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, 2023,~~March 31, 2024, the amortized cost basis of the closed portfolio used in this hedging relationship was $~~729.5~~706.9 million, the cumulative basis adjustment associated with this hedging relationship was $~~6.3~~3.2 million, and the amount of the designated hedged item was $~~200.0~~200.0 million.
The following table summarizes the Company’s outstanding financial derivative instruments at ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022.~~2023.
Schedule of outstanding financial derivative instruments
March 31, 2024
Schedule of outstanding financial derivative instruments September 30, 2023
Fair Value Fair Value
(dollars in thousands) Notional Balance Sheet Location Asset/(Liability) Notional Balance Sheet
Location Asset/(Liability)
Derivatives designated as hedging instruments:
Fair value swapFair value swap [Member] $ 200,000 Other assets $ 6,250 $ 200,000 Other assets $ 3,206

Derivatives not designated as hedging instruments:
Mortgage loan interest rate lock commitmentsMortgage loan interest rate lock commitments [Member] 16,401 Other assets 160 28,986 Other assets 316
MBS forward sales commitmentsMBS forward sales commitments [Member] 10,000 Other assets 38 19,500 Other liabilities (59 )
Total derivative financial instrumentsTotal derivative financial instruments [Member] $ 226,401 $ 6,448 $ 248,486 $ 3,463

December 31, 2023
Fair Value
(dollars in thousands) Notional Balance Sheet
Location Asset/(Liability)
Derivatives designated as hedging instruments:
Fair value swap $ 200,000 Other liabilities $ (482 )

Derivatives not designated as hedging instruments:
Mortgage loan interest rate lock commitments 12,973 Other assets 159
MBS forward sales commitments 10,000 Other liabilities (68 )
Total derivative financial instruments $ 222,973 $ (391 )
December 31, 2022
Fair Value
(dollars in thousands) Notional Balance Sheet Location Asset/(Liability)
Derivatives not designated as hedging instruments:
Mortgage loan interest rate lock commitments $ 6,793 Other assets $ 49
MBS forward sales commitments 5,750 Other assets 27
Total derivative financial instruments $ 12,543 $ 76
Accrued interest receivable related to the interest rate swap as of ~~September 30, 2023~~March 31, 2024 totaled $~~280~~291,000~~,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, 2023~~March 31, 2024 and ~~September 30, 2022.~~March 31, 2023.
Schedule of summarize the effect of fair value hedging relationship recognized in consolidated statement of income
Three months ended
March 31,
Schedule of summarize the effect of fair value hedging relationship recognized in consolidated statement of income Three months ended
September 30, Nine months ended
September 30,
(dollars in thousands) 2023 2022 2023 2022 2024 2023
Gain (loss) on fair value hedging relationship:
Hedged asset $ 3,500 - 6,250 - $ 3,688 -
Fair value derivative designated as hedging instrument (3,501 ) - (6,285 ) - (3,738 ) -
Total gain (loss) recognized in interest income on loans $ (1 ) - (35 ) - $ (50 ) -
25

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:

The methods of determining the fair value of assets and liabilities presented in this note are consistent with our methodologies disclosed in Note 1412 of the Company’s ~~2022~~2023 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.

The tables below present the recorded amount of assets and liabilities measured at fair value on a recurring basis as of ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022.~~2023.

South Carolina		58-2459561
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

6 Verdae Boulevard
Greenville, ~~S.C~~S.C..		29607
(Address of principal executive offices)		(Zip Code)

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	SFST	The Nasdaq Global Market

		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	2927

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	4542

Item 4.	Controls and Procedures	4642

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	4643

Item 1A.	Risk Factors	4643

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4643

Item 3.	Defaults upon Senior Securities	4743

Item 4.	Mine Safety Disclosures	4743

Item 5.	Other Information	4743

Item 6.	Exhibits	4743

	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 ~~impaired~~individually evaluated loans.

Large accelerated filer	¨☐	Accelerated filer	x☒
Non-accelerated filer	¨☐	Smaller Reporting Company	¨☐
		Emerging growth company	¨☐



	For the three months
	ended March 31,
(dollars in thousands, except share data)	2024			2023
Interest income
Loans	$	45,605			36,748
Investment securities		1,478			613
Federal funds sold and interest-bearing deposits with banks		1,280			969
Total interest income		48,363			38,330
Interest expense
Deposits		26,932			17,179
Borrowings		2,786			727
Total interest expense		29,718			17,906
Net interest income		18,645			20,424
Provision for (reversal of) credit losses		(175	)		1,825
Net interest income after provision for (reversal of) credit losses		18,820			18,599
Noninterest income
Mortgage banking income		1,164			622
Service fees on deposit accounts		387			325
ATM and debit card income		544			555
Income from bank owned life insurance		377			332
Other income		192			210
Total noninterest income		2,664			2,044
Noninterest expenses
Compensation and benefits		10,857			10,356
Occupancy		2,557			2,457
Outside service and data processing costs		1,846			1,629
Insurance		955			689
Professional fees		618			660
Marketing		369			366
Other		898			947
Total noninterest expenses		18,100			17,104
Income before income tax expense		3,384			3,539
Income tax expense		862			836
Net income	$	2,522			2,703
Earnings per common share
Basic	$	0.31			0.34
Diluted		0.31			0.33
Weighted average common shares outstanding
Basic		8,110,249			8,025,876
Diluted		8,141,921			8,092,270



	For the three months					For the nine months
	ended September 30,					ended September 30,
(dollars in thousands, except share data)	2023			2022		2023		2022
Interest income
Loans	$	43,542			29,752		121,380		80,294
Investment securities		1,470			506		2,788		1,428
Federal funds sold and interest-bearing deposits with banks		2,435			676		4,295		915
Total interest income		47,447			30,934		128,463		82,637
Interest expense
Deposits		25,130			5,021		64,245		7,773
Borrowings		2,972			459		5,623		1,362
Total interest expense		28,102			5,480		69,868		9,135
Net interest income		19,345			25,454		58,595		73,502
Provision for credit losses		(500	)		950		2,235		3,830
Net interest income after provision for credit losses		19,845			24,504		56,360		69,672
Noninterest income
Mortgage banking income		1,208			1,230		3,167		3,907
Service fees on deposit accounts		356			318		1,011		949
ATM and debit card income		588			542		1,680		1,604
Income from bank owned life insurance		349			315		1,018		945
Loss on disposal of fixed assets		-			-		-		(394	)
Gain on sale of securities		-			-		-		12
Other income		249			275		653		850
Total noninterest income		2,750			2,680		7,529		7,873
Noninterest expenses
Compensation and benefits		10,231			9,843		30,874		29,214
Occupancy		2,562			2,442		7,537		6,439
Outside service and data processing costs		1,744			1,529		5,078		4,591
Insurance		1,243			507		2,829		1,134
Professional fees		504			555		1,914		1,848
Marketing		293			338		994		934
Other		725			832		2,573		2,360
Total noninterest expenses		17,302			16,046		51,799		46,520
Income before income tax expense		5,293			11,138		12,090		31,025
Income tax expense		1,195			2,725		2,831		7,402
Net income	$	4,098			8,413		9,259		23,623
Earnings per common share
Basic	$	0.51			1.06		1.15		2.97
Diluted		0.51			1.04		1.15		2.93
Weighted average common shares outstanding
Basic		8,052,926			7,972,146		8,043,410		7,954,025
Diluted		8,072,408			8,065,087		8,077,830		8,071,988



	For the three months ended March 31,
(dollars in thousands)	2024			2023
Net income	$	2,522			2,703
Other comprehensive income (loss):
Unrealized gain (loss) on securities available for sale:
Unrealized holding gain (loss) arising during the period, pretax		(578	)		2,070
Tax benefit (expense)		123			(435	)
Other comprehensive income (loss)		(455	)		1,635
Comprehensive income	$	2,067			4,338



	For the three months ended September 30,						For the nine months ended September 30,
(dollars in thousands)	2023			2022			2023			2022
Net income	$	4,098			8,413			9,259			23,623
Other comprehensive loss:
Unrealized loss on securities available for sale:
Unrealized holding loss arising during the period, pretax		(3,221	)		(4,894	)		(2,333	)		(16,783	)
Tax expense		676			1,028			488			3,524
Reclassification of realized gain		-			-			-			(12	)
Tax benefit		-			-			-			2
Other comprehensive loss		(2,545	)		(3,866	)		(1,845	)		(13,269	)
Comprehensive income	$	1,553			4,547			7,414			10,354


	For the three months ended September 30,
	Common stock				Preferred stock				Nonvested restricted			Additional paid-in		Accumulated other comprehensive			Retained					For the three months ended March 31,
(dollars in thousands, except share data)	Shares		Amount		Shares		Amount		stock			capital		income (loss)			earnings		Total
June 30, 2022		7,985,644	$	80		-		-	$	(3,230	)	$	117,714	$	(10,143	)	$	178,216	$	282,637
Net income Retained earnings		-		-		-		-		-			-		-			8,413		8,413
(dollars in thousands,																						Common stock				Preferred stock				Nonvested restricted			Additional paid-in		Accumulated other comprehensive			Retained
except share data)																						Shares		Amount		Shares		Amount		stock			capital		income (loss)			earnings		Total
December 31, 2022																							8,011,045	$	80		-	$	-	$	(3,306	)	$	119,027	$	(13,410	)	$	192,121	$	294,512
Net income																							-		-		-		-		-			-		-			2,703		2,703
Proceeds from exercise of stock options		3,000		-		-		-		-			87		-			-		87			1,000		-		-		-		-			17		-			-		17
Issuance of restricted stock		8,700		-		-		-		(405	)		405		-			-		-
Issuance of restricted stock Retained earnings																							35,930		-		-		-		(1,521	)		1,521		-			-		-
Compensation expense related to restricted stock, net of tax		-		-		-		-		287			-		-			-		287			-		-		-		-		365			-		-			-		365
Compensation expense related to stock options, net of tax		-		-		-		-		-			227		-			-		227
Other comprehensive loss		-		-		-		-		-			-		(3,866	)		-		(3,866	)
Compensation expense related to stock options, net of tax Common stock																							-		-		-		-		-			118		-			-		118
Other comprehensive income																							-		-		-		-		-			-		1,635			-		1,635
Additional paid-in capital
September 30, 2022		7,997,344	$	80		-	$	-	$	(3,348	)	$	118,433	$	(14,009	)	$	186,629	$	287,785
June 30, 2023		8,058,438	$	81		-	$	-	$	(4,051	)	$	120,912	$	(12,710	)	$	197,282	$	301,514
March 31, 2023 Preferred stock																							8,047,975	$	80		-	$	-	$	(4,462	)	$	120,683	$	(11,775	)	$	194,824	$	299,350
December 31, 2023																							8,088,186	$	81		-	$	-	$	(3,596	)	$	121,777	$	(11,342	)	$	205,547	$	312,467
Net income		-		-		-		-		-			-		-			4,098		4,098			-		-		-		-		-			-		-			2,522		2,522
Proceeds from exercise of stock options		14,250		-		-		-		-			312		-			-		312			11,000		-		-		-		-			167		-			-		167
Issuance of restricted stock, net of forfeitures		15,950		-		-		-		(388	)		388		-			-		-			56,923		1		-		-		(2,112	)		2,111		-			-		-
Compensation expense related to restricted stock, net of tax		-		-		-		-		374			-		-			-		374			-		-		-		-		451			-		-			-		451
Compensation expense related to stock options, net of tax		-		-		-		-		-			145		-			-		145			-		-		-		-		-			104		-			-		104
Other comprehensive loss		-		-		-		-		-			-		(2,545	)		-		(2,545	)		-		-		-		-		-			-		(455	)		-		(455	)

September 30, 2023		8,088,638	$	81		-	$	-	$	(4,065	)	$	121,757	$	(15,255	)	$	201,380	$	303,898
Accumulated other comprehensive income (loss)
March 31, 2024																							8,156,109	$	82		-	$	-	$	(5,257	)	$	124,159	$	(11,797	)	$	208,069	$	315,256

	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, 2021 Preferred stock		7,925,819	$	79		-		-	$	(1,435	)	$	114,226	$	(740	)	$	165,771		$	277,901
Net income Common stock		-		-		-		-		-			-		-			23,623			23,623
Proceeds from exercise of stock options		24,750		1		-		-		-			793		-			-			794
Issuance of restricted stock		46,775		-		-		-		(2,710	)		2,710		-			-			-
Adoption of ASU 2016-13		-		-		-		-		-			-		-			(2,765	)		(2,765	)
Compensation expense related to restricted stock, net of tax		-		-		-		-		797			-		-			-			797
Compensation expense related to stock options, net of tax		-		-		-		-		-			704		-			-			704
Other comprehensive loss		-		-		-		-		-			-		(13,269	)		-			(13,269	)

September 30, 2022		7,997,344	$	80		-	$	-	$	(3,348	)	$	118,433	$	(14,009	)	$	186,629		$	287,785
December 31, 2022		8,011,045	$	80		-	$	-	$	(3,306	)	$	119,027	$	(13,410	)	$	192,121		$	294,512
Net income		-		-		-		-		-			-		-			9,259			9,259
Proceeds from exercise of stock options		25,250		-		-		-		-			497		-			-			497
Issuance of restricted stock		52,343		1		-		-		(1,824	)		1,823		-			-			-
Compensation expense related to restricted stock, net of tax		-		-		-		-		1,065			-		-			-			1,065
Compensation expense related to stock options, net of tax		-		-		-		-		-			410		-			-			410
Other comprehensive loss		-		-		-		-		-			-		(1,845	)		-			(1,845	)
Accumulated other comprehensive income (loss)
September 30, 2023		8,088,638	$	81		-	$	-	$	(4,065	)	$	121,757	$	(15,255	)	$	201,380		$	303,898



	For the nine months ended September 30,						For the three months ended March 31,
(dollars in thousands)	2023			2022			2024			2023
Operating activities
Net income	$	9,259			23,623		$	2,522			2,703
Adjustments to reconcile net income to cash provided by operating activities:
Provision for credit losses		2,235			3,830
Provision for (reversal of) credit losses								(175	)		1,825
Depreciation and other amortization		3,611			2,521			1,214			1,203
Accretion and amortization of securities discounts and premium, net		142			554			131			129
Loss on sale of fixed assets		-			394
Gain on sale of securities		-			(12	)
Net change in operating leases		188			814			39			53
Compensation expense related to stock options and restricted stock grants		1,475			1,501			555			483
Gain on sale of loans held for sale		(2,793	)		(2,700	)		(1,014	)		(530	)
Loans originated and held for sale		(112,930	)		(191,448	)		(36,524	)		(17,892	)
Proceeds from sale of loans held for sale		112,523			198,461			32,890			15,360
Increase in cash surrender value of bank owned life insurance		(1,018	)		(945	)		(377	)		(331	)
Increase in deferred tax asset		(66	)		(5,766	)
(Increase) decrease in other assets		(7,892	)		5
Increase in other liabilities		6,059			6,006
Net cash provided by operating activities		10,793			36,838
Increase in other assets								(3,690	)		(508	)
Increase (decrease) in other liabilities								1,505			(1,258	)
Net cash (used for) provided by operating activities								(2,924	)		1,237
Investing activities
Increase (decrease) in cash realized from:
Increase in loans, net		(280,627	)		(538,816	)		(41,380	)		(144,641	)
Purchase of property and equipment		(1,120	)		(13,134	)		(280	)		(180	)
Purchase of investment securities:
Available for sale		(58,204	)		(10,094	)		(5,191	)		-
Other investments		(49,949	)		(15,235	)		(4,302	)		(18,264	)
Payments and maturities, calls and repayments of investment securities:
Available for sale		5,039			21,517			13,190			1,252
Other investments		41,182			13,806			5,742			19,000
Proceeds from sale of fixed assets		-			95
Net cash used for investing activities		(343,679	)		(541,861	)		(32,221	)		(142,833	)
Financing activities
Increase in cash realized from:
Increase in deposits, net		213,907			437,626			81,117			292,910
Increase in Federal Home Loan Bank advances and other borrowings, net		100,000			60,000
Decrease in Federal Home Loan Bank advances and other borrowings, net								(35,000	)		(50,000	)
Proceeds from the exercise of stock options		497			794			167			17
Net cash provided by financing activities		314,404			498,420			46,284			242,927
Net decrease in cash and cash equivalents		(18,482	)		(6,603	)
Net increase in cash and cash equivalents								11,139			101,331
Cash and cash equivalents at beginning of the period		170,874			167,209			156,170			170,874
Cash and cash equivalents at end of the period	$	152,392			160,606		$	167,309			272,205
Supplemental information
Cash paid for
Interest	$	64,390			9,155		$	27,617			16,801
Income taxes		586			8,270
Schedule of non-cash transactions
Unrealized gain (loss) on securities, net of income taxes		(1,845	)		(13,259	)		(455	)		1,635
Right-of-use assets obtained in exchange for lease obligations:
Operating leases		147			237

Schedule of amortized costs and fair value of investment securities

	September 30, 2023								March 31, 2024
	Amortized		Gross Unrealized				Fair		Amortized		Gross Unrealized				Fair
(dollars in thousands)	Cost		Gains		Losses		Value
(dollars in thousands) Corporate bonds [Member]									Cost		Gains		Losses		Value
Available for sale Asset-backed securities [Member]
Corporate bonds									$	2,140		-		253		1,887
US treasuries US treasuries [Member]										999		-		111		888
US government agencies US government agencies [Member]										20,183		-		1,986		18,197
State and political subdivisions State and political subdivisions [Member]										22,579		-		3,042		19,537
Asset-backed securities Mortgage-backed securities [Member]										34,247		33		76		34,204
Mortgage-backed securities										60,782		-		9,499		51,283
Total investment securities available for sale									$	140,930		33		14,967		125,996

										December 31, 2023
										Amortized		Gross Unrealized				Fair
										Cost		Gains		Losses		Value
Available for sale
Corporate bonds	$	2,153		-		303		1,850	$	2,147		-		237		1,910
US treasuries		25,737		2		136		25,603		9,495		1		102		9,394
US government agencies		21,225		-		2,501		18,724		20,594		-		1,938		18,656
State and political subdivisions		22,708		-		4,398		18,310		22,642		11		2,912		19,741
Asset-backed securities		29,780		25		164		29,641		33,450		2		216		33,236
Mortgage-backed securities										60,730		-		8,965		51,765
FHLMC		23,379		-		4,639		18,740
FNMA		33,251		-		6,285		26,966
GNMA		5,111		-		910		4,201
Total mortgage-backed securities		61,741		-		11,834		49,907
Total investment securities available for sale	$	163,344		27		19,336		144,035	$	149,058		14		14,370		134,702

Schedule of maturities and yields on the company’s investment securities

	March 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 Corporate bonds [Member]		$	-	-		$	-	-		$	1,887	2.01	%	$	-	-		$	1,887	2.01	%
US treasuries			-	-			888	1.27	%		-	-			-	-			888	1.27	%
US government agencies US government agencies [Member]			980	0.45	%		2,380	1.00	%		14,837	4.38	%		-	-			18,197	3.72	%
State and political subdivisions State and political subdivisions [Member]			-	-			902	1.94	%		5,744	1.89	%		12,891	2.15	%		19,537	2.07	%
Asset-backed securities Asset-backed securities [Member]			-	-			211	6.21	%		-	-			33,993	6.61	%		34,204	6.61	%
Mortgage-backed securities Mortgage-backed securities [Member]			-	-			6,626	1.29	%		3,419	1.54	%		41,238	2.04	%		51,283	1.91	%
Total investment securities Total investment securities [Member]		$	980	0.45	%	$	11,007	1.37	%	$	25,887	3.28	%	$	88,122	3.82	%	$	125,996	3.47	%

			December 31, 2023
			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		$	-	-		$	-	-		$	1,910	2.01	%	$	-	-		$	1,910	2.01	%
US treasuries			8,497	5.42	%		897	1.27	%		-	-			-	-			9,394	5.02	%
US government agencies			970	0.45	%		2,385	1.00	%		15,301	4.41	%		-	-			18,656	3.77	%
State and political subdivisions			-	-			906	1.94	%		5,769	1.89	%		13,066	2.15	%		19,741	2.06	%
Asset-backed securities			-	-			296	(6.13	%)		-	-			32,940	6.63	%		33,236	6.57	%
Mortgage-backed securities			-	-			4,795	1.15	%		5,400	1.59	%		41,570	2.00	%		51,765	1.87	%
Total investment securities		$	9,467	4.91	%	$	9,279	0.98	%	$	28,380	3.20	%	$	87,576	3.76	%	$	134,702	3.55	%

Schedule of gross unrealized losses on investment securities and fair market value of related securities

													September 30, 2023
	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	$	1,850	$	303		1	$	1,850	$	303
US treasuries		-		-		-		1		863		136		1		863		136
US government agencies		2		8,156		60		10		10,568		2,441		12		18,724		2,501
State and political subdivisions		2		734		33		30		17,576		4,365		32		18,310		4,398
Asset-backed		5		15,631		83		7		5,039		81		12		20,670		164
Mortgage-backed securitiesMortgage-backed securities [Member]
FHLMCFHLMC [Member]		2		2,726		189		19		16,014		4,450		21		18,740		4,639
FNMA		-		-		-		37		26,966		6,285		37		26,966		6,285
GNMA		-		-		-		6		4,201		910		6		4,201		910
Total investment securities		11	$	27,247	$	365		111	$	83,077	$	18,971		122	$	110,324	$	19,336

Schedule of other investments

(dollars in thousands)	September 30, 2023		December 31, 2022		March 31, 2024		December 31, 2023
Federal Home Loan Bank stock	$	16,046		9,250	$	14,633		16,063
Other nonmarketable investments		3,151		1,180		3,463		3,473
Investment in Trust Preferred subsidiaries		403		403		403		403
Total other investments	$	19,600		10,833	$	18,499		19,939

Schedule of composition of our loan portfolio

	March 31, 2024						December 31, 2023
(dollars in thousands)Commercial [Member]	Amount			% of Total			Amount			% of Total
Commercial
Owner occupied REOwner occupied RE [Member]	$	631,047			17.3	%	$	631,657			17.5	%
Non-owner occupied RENon-owner occupied RE [Member]		944,530			25.9	%		942,529			26.2	%
ConstructionConstruction [Member]		157,464			4.3	%		150,680			4.2	%
BusinessBusiness [Member]		520,073			14.3	%		500,161			13.9	%
Total commercial loansConsumer [Member]		2,253,114			61.8	%		2,225,027			61.8	%
Consumer
Real estateReal estate [Member]		1,101,573			30.2	%		1,082,429			30.0	%
Home equityHome equity [Member]		184,691			5.1	%		183,004			5.1	%
Construction		53,216			1.5	%		63,348			1.7	%
OtherOther [Member]		51,172			1.4	%		48,819			1.4	%
Total consumer loans		1,390,652			38.2	%		1,377,600			38.2	%
Total gross loans, net of deferred fees		3,643,766			100.0	%		3,602,627			100.0	%
Less—allowance for credit losses		(40,441	)					(40,682	)
Total loans, net	$	3,603,325					$	3,561,945


Schedule of loan maturity distribution by type and related interest rate			September 30, 2023
(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	$	13,679		177,138		404,693		41,528		637,038
Non-owner occupied RE		66,746		501,700		343,953		25,350		937,749
Construction		23,899		44,452		51,278		-		119,629
Business		106,126		198,150		191,559		4,418		500,253
Total commercial loans		210,450		921,440		991,483		71,296		2,194,669
Consumer
Real estate		8,646		50,898		304,890		710,245		1,074,679
Home equity		1,996		24,720		149,252		4,888		180,856
Construction		-		259		31,796		22,155		54,210
Other		12,945		33,082		2,376		815		49,218
Total consumer loans		23,587		108,959		488,314		738,103		1,358,963
Total gross loans, net of deferred fees	$	234,037		1,030,399		1,479,797		809,399		3,553,632

Schedule of composition of gross loans by rate type
	September 30, 2023				December 31, 2022
	Interest Rate						Interest Rate
(dollars in thousands)	Fixed		Floating or Adjustable		Fixed		Floating or Adjustable
CommercialCommercial [Member]
Owner occupied REOwner occupied RE [Member]	$	614,563		8,796		598,513		3,814
Non-owner occupied RENon-owner occupied RE [Member]		787,479		83,524		742,763		75,246
ConstructionConstruction [Member]		65,517		30,213		90,246		13,971
BusinessBusiness [Member]		300,464		93,663		298,866		73,089
Total commercial loans		1,768,023		216,196		1,730,388		166,120
ConsumerConsumer [Member]
Real estateReal estate [Member]		1,066,033		-		919,130		11
Home equityHome equity [Member]		12,403		166,457		14,173		163,791
ConstructionConstruction [Member]		54,210		-		79,750		-
OtherOther [Member]		11,916		24,357		19,113		6,013
Total consumer loans		1,144,562		190,814		1,032,166		169,815
Total gross loans, net of deferred fees	$	2,912,585		407,010		2,762,554		335,935

Schedule of loans due after one year by category

	March 31, 2024			December 31, 2023
	Interest Rate			Interest Rate
(dollars in thousands)		Fixed	Floating or Adjustable		Fixed	Floating or Adjustable
Commercial
Owner occupied RE	$	600,279	14,913		605,199	9,100
Non-owner occupied RE		746,525	120,560		768,048	105,880
Construction		96,176	28,863		81,326	42,592
Business		293,897	108,619		293,920	91,809
Total commercial loans		1,736,877	272,955		1,748,493	249,381
Consumer
Real estate		1,091,343	-		1,071,836	-
Home equity		11,485	170,328		11,441	168,847
Construction		52,834	-		63,348	-
Other		12,127	26,481		11,525	26,137
Total consumer loans		1,167,789	196,809		1,158,150	194,984
Total gross loans, net of deferred fees	$	2,904,666	469,764		2,906,643	444,365


	·●	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.

Schedule of breakdown of outstanding loans by risk category
Schedule of classified by credit quality indicators by year of origination

																September 30, 2023																	March 31, 2024
(dollars in thousands)	2023		2022			2021		2020			2019		Prior			Revolving			Revolving Converted to Term		Total				2024	2023	2022	2021	2020		Prior			Revolving		Revolving Converted to Term	Total
Commercial
Owner occupied RE
Pass	$	38,310		178,722			143,057		67,509			62,216		112,528			-			167		602,509		$	11,770	42,283	180,226	134,787	63,949		164,174			85		-	597,274
Watch		-		3,482			464		16,074			3,551		6,821			-			-		30,392			-	-	3,429	456	15,880		10,101			-		-	29,866
Special Mention		-		186			-		-			-		3,074			-			-		3,260			-	-	177	-	-		2,889			-		-	3,066
Substandard		-		-			-		-			-		877			-			-		877			-	-	-	-	-		841			-		-	841
Total Owner occupied RE		38,310		182,390			143,521		83,583			65,767		123,300			-			167		637,038			11,770	42,283	183,832	135,243	79,829		178,005			85		-	631,047

Non-owner occupied RE
Pass		79,567		302,942			169,567		109,566			59,595		173,400			257			-		894,894			12,575	79,336	303,755	169,028	105,833		226,072			303		-	896,902
Watch		772		828			10,221		-			5,393		6,610			-			-		23,824			-	1,002	2,596	448	527		15,911			-		-	20,484
Special Mention		-		-			199		-			8,267		878			-			-		9,344			-	-	967	7,707	-		9,049			-		-	17,723
Substandard		-		-			-		-			8,073		1,614			-			-		9,687			-	-	-	305	-		9,116			-		-	9,421
Total Non-owner occupied RE		80,339		303,770			179,987		109,566			81,328		182,502			257			-		937,749			12,575	80,338	307,318	177,488	106,360		260,148			303		-	944,530

Construction
Pass		13,921		72,528			22,179		9,897			-		-			-			-		118,525			3,563	28,027	86,648	26,741	11,087		-			-		-	156,066
Watch		-		1,104			-		-			-		-			-			-		1,104			-	-	1,398	-	-		-			-		-	1,398
Special Mention		-		-			-		-			-		-			-			-		-
Substandard		-		-			-		-			-		-			-			-		-
Total Construction		13,921		73,632			22,179		9,897			-		-			-			-		119,629			3,563	28,027	88,046	26,741	11,087		-			-		-	157,464

Business
Pass		41,808		136,635			50,098		19,637			18,214		53,775			144,671			1,099		465,937			8,232	52,166	134,401	45,948	18,339		61,981			163,010		-	484,077
Watch		282		14,431			1,955		1,114			913		3,958			6,697			-		29,350			-	120	17,160	1,814	980		4,600			6,942		5	31,621
Special Mention		101		977			77		793			211		234			-			98		2,491			-	231	942	89	500		1,736			101		-	3,599
Substandard		-		490			164		-			153		1,199			447			22		2,475			-	-	-	151	-		625			-		-	776
Total Business		42,191		152,533			52,294		21,544			19,491		59,166			151,815			1,219		500,253			8,232	52,517	152,503	48,002	19,819		68,942			170,053		5	520,073
Current period gross write-offs																									-	-	-	-	(346	)	-			-		-	(346	)
Total Commercial loans		174,761		712,325			397,981		224,590			166,586		364,968			152,072			1,386		2,194,669			36,140	203,165	731,699	387,474	217,095		507,095			170,441		5	2,253,114

Consumer
Real estate
Pass		126,174		273,593			283,538		178,459			66,468		108,094			-			-		1,036,326			18,718	146,761	281,881	276,118	171,468		168,438			-		-	1,063,384
Watch		490		5,684			7,877		3,941			2,058		4,098			-			-		24,148			-	488	5,615	7,360	3,883		5,876			-		-	23,222
Special Mention		-		2,319			1,663		1,301			2,407		2,799			-			-		10,489			-	142	2,487	1,905	1,282		5,253			-		-	11,069
Substandard		-		186			637		820			323		1,750			-			-		3,716			-	275	350	631	986		1,656			-		-	3,898
Total Real estate		126,664		281,782			293,715		184,521			71,256		116,741			-			-		1,074,679			18,718	147,666	290,333	286,014	177,619		181,223			-		-	1,101,573

Home equity
Pass		-		-			-		-			-		-			168,399			-		168,399			-	-	-	-	-		-			173,125		-	173,125
Watch		-		-			-		-			-		-			6,870			-		6,870			-	-	-	-	-		-			6,103		-	6,103
Special Mention		-		-			-		-			-		-			4,150			-		4,150			-	-	-	-	-		-			5,007		-	5,007
Substandard		-		-			-		-			-		-			1,437			-		1,437			-	-	-	-	-		-			456		-	456
Total Home equity		-		-			-		-			-		-			180,856			-		180,856			-	-	-	-	-		-			184,691		-	184,691

Construction
Pass		9,798		35,606			8,806		-			-		-			-			-		54,210			664	13,604	30,974	7,974	-		-			-		-	53,216
Watch		-		-			-		-			-		-			-			-		-
Special Mention		-		-			-		-			-		-			-			-		-
Substandard		-		-			-		-			-		-			-			-		-
Total Construction		9,798		35,606			8,806		-			-		-			-			-		54,210			664	13,604	30,974	7,974	-		-			-		-	53,216

Other
Pass		923		2,643			2,578		1,505			846		2,726			36,718			-		47,939			1,979	1,171	2,411	2,174	1,387		3,253			37,657		-	50,032
Watch		44		33			352		4			1		167			94			-		695			-	8	25	345	-		156			51		-	585
Special Mention		-		334			-		-			27		84			51			-		496			-	32	330	71	-		73			36		-	542
Substandard		-		-			80		-			1		-			7			-		88			-	-	-	-	-		-			13		-	13
Total Other		967		3,010			3,010		1,509			875		2,977			36,870			-		49,218			1,979	1,211	2,766	2,590	1,387		3,482			37,757		-	51,172

Current period gross write-offs																									-	-	-	-	-		(38	)		(40	)	-	(78	)
Total Consumer loans		137,429		320,398			305,531		186,030			72,131		119,718			217,726			-		1,358,963			21,361	162,481	324,073	296,578	179,006		184,705			222,448		-	1,390,652
Total loans	$	312,190		1,032,723			703,512		410,620			238,717		484,686			369,798			1,386		3,553,632		$	57,501	365,646	1,055,772	684,052	396,101		691,800			392,889		5	3,643,766
Current period gross write-offs		-		(200	)		-		(28	)		-		(10	)		(405	)		-		(643	)
Total Current period gross write-offs																									-	-	-	-	(346	)	(38	)		(40	)	-	(424	)

Schedule of loan balances by payment status

	September 30, 2023												March 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		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	$	-		-		-		-		637,038		637,038	$	-		-		-		-		631,047		631,047
Non-owner occupied RE		440		-		-		1,615		935,694		937,749		8,031		27		-		1,410		935,062		944,530
Construction		-		-		-		-		119,629		119,629		-		-		-		-		157,464		157,464
Business		347		27		-		404		499,475		500,253		428		18		-		488		519,139		520,073
Consumer
Real estate		1,210		-		-		1,228		1,072,241		1,074,679		2,903		-		-		1,380		1,097,290		1,101,573
Home equity		226		182		-		1,068		179,380		180,856		231		127		-		367		183,966		184,691
Construction		-		-		-		-		54,210		54,210		-		-		-		-		53,216		53,216
Other		-		-		-		-		49,218		49,218		-		7		-		1		51,164		51,172
Total loans	$	2,223		209		-		4,315		3,546,885		3,553,632	$	11,593		179		-		3,646		3,628,348		3,643,766
Total loans over 90 days past due		-		-		-		-		-		1,572		-		-		-		-		-		889

	December 31, 2022													December 31, 2023
(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			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	$	-		-		-		-		612,901		612,901	$	74		-		-		-		631,583		631,657
Non-owner occupied RE		119		757		-		247		861,456		862,579		8,102		-		-		1,423		933,004		942,529
Construction		-		-		-		-		109,726		109,726		-		-		-		-		150,680		150,680
Business		24		1		-		182		467,905		468,112		567		-		-		319		499,275		500,161
Consumer
Real estate		330		-		-		1,099		929,849		931,278		1,750		-		-		985		1,079,694		1,082,429
Home equity		50		-		-		1,099		178,151		179,300		601		30		-		1,236		181,137		183,004
Construction		-		-		-		-		80,415		80,415		-		-		-		-		63,348		63,348
Other		88		-		-		-		28,964		29,052		25		25		-		-		48,769		48,819
Total loans	$	611		758		-		2,627		3,269,367		3,273,363	$	11,119		55		-		3,963		3,587,490		3,602,627
Total loans over 90 days past due		-		-		-		-		-		402		-		-		-		-		-		1,300

Schedule nonaccrual loans by major categories

Schedule nonaccrual loans by major categories	September 30, 2023								December 31, 2022
													March 31, 2024								December 31, 2023
	Nonaccrual		Nonaccrual				Nonaccrual		Nonaccrual				Nonaccrual		Nonaccrual				Nonaccrual		Nonaccrual
	loans		loans		Total		loans		loans		Total		loans		loans		Total		loans		loans		Total
	with no		with an		nonaccrual		with no		with an		nonaccrual		with no		with an		nonaccrual		with no		with an		nonaccrual
(dollars in thousands)	allowance		allowance		loans		allowance		allowance		loans			allowance		allowance		loans		allowance		allowance		loans
Commercial
Owner occupied RE		-		-		-		-		-		-	$	-		-		-	$	-		-		-
Non-owner occupied RE		379		1,236		1,615		114		133		247		646		764		1,410		653		770		1,423
Construction		-		-		-		-		-		-		-		-		-		-		-		-
Business		170		234		404		-		182		182		-		488		488		164		155		319
Total commercial		549		1,470		2,019		114		315		429		646		1,252		1,898		817		925		1,742
Consumer
Real estate		227		1,001		1,228		-		1,099		1,099		625		755		1,380		-		985		985
Home equity		181		887		1,068		194		905		1,099		367		-		367		343		893		1,236
Construction		-		-		-		-		-		-		-		-		-		-		-		-
Other		-		-		-		-		-		-		-		1		1		-		-		-
Total consumer		408		1,888		2,296		194		2,004		2,198		992		756		1,748		343		1,878		2,221
Total nonaccrual loans		957		3,358		4,315		308		2,319		2,627	$	1,638		2,008		3,646	$	1,160		2,803		3,963

Schedule of nonperforming assets, including nonaccruing TDRs
Schedule of nonperforming assets

(dollars in thousands)	September 30, 2023			December 31, 2022			March 31, 2024			December 31, 2023
Nonaccrual loans	$	4,315			2,627		$	3,646			3,963
Other real estate owned		-			-			-			-
Total nonperforming assets	$	4,315			2,627		$	3,646			3,963
Nonperforming assets as a percentage of:
Total assets		0.11	%		0.07	%		0.09	%		0.10	%
Gross loans		0.12	%		0.08	%		0.10	%		0.11	%
Total loans over 90 days past due	$	1,572			402		$	889			1,300
Loans over 90 days past due and still accruing		-			-			-			-
Accruing troubled debt restructurings		-			4,503

Schedule of activity related to the allowance for credit losses

									Three months ended September 30, 2023
	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	$	5,896		11,584			1,331			8,152			10,395		2,521			684			542			41,105
Provision for credit losses		300		(247	)		(34	)		(148	)		191		(20	)		(102	)		(40	)		(100	)
Loan charge-offs		-		(1	)		-			(42	)		-		-			-			-			(43	)
Loan recoveries		-		154			-			13			-		2			-			-			169
Net loan recoveries (charge-offs)		-		153			-			(29	)		-		2			-			-			126
Balance, end of period	$	6,196		11,490			1,297			7,975			10,586		2,503			582			502			41,131
Net recoveries to average loans (annualized)																								(0.01	)%
Allowance for credit losses to gross loans																								1.16	%
Allowance for credit losses to nonperforming loans																								953.25	%


									Three months ended September 30, 2022
	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	$	4,829		10,010			1,060			6,717		7,992		2,442		851		291		34,192
Provision for credit losses		476		(1,595	)		(82	)		875		782		3		41		25		525
Loan charge-offs		-		-			-			-		-		-		-		-		-
Loan recoveries		-		1,540			-			51		-		8		-		1		1,600
Net loan recoveries (charge-offs)		-		1,540			-			51		-		8		-		1		1,600
Balance, end of period	$	5,305		9,955			978			7,643		8,774		2,453		892		317		36,317
Net recoveries to average loans (annualized)																				(0.22	)%
Allowance for credit losses to gross loans																				1.20	%
Allowance for credit losses to nonperforming loans																				1,388.87	%



								Nine months ended September 30, 2023
	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	$	5,867		10,376			1,292		7,861			9,487		2,551			893			312			38,639
Provision for credit losses		329		1,138			5		120			1,099		278			(311	)		192			2,850
Loan charge-offs		-		(209	)		-		(43	)		-		(389	)		-			(2	)		(643	)
Loan recoveries		-		185			-		37			-		63			-			-			285
Net loan recoveries (charge-offs)		-		(24	)		-		(6	)		-		(326	)		-			(2	)		(358	)
Balance, end of period	$	6,196		11,490			1,297		7,975			10,586		2,503			582			502			41,131
Net charge-offs to average loans (annualized)																							0.01	%
Allowance for credit losses to gross loans																							1.16	%
Allowance for credit losses to nonperforming loans																							953.25	%

Schedule of activity related to the allowance for credit losses

									Nine months ended September 30, 2022																									Three months ended March 31, 2024
	Commercial											Consumer														Commercial											Consumer
(dollars in thousands)	Owner occupied RE			Non- owner occupied RE			Construction		Business			Real Estate			Home Equity			Construction		Other			Total			Owner occupied RE		Non- owner occupied RE			Construction			Business			Real Estate		Home Equity		Construction			Other			Total
Balance, beginning of period	$	4,700			10,518			625		4,887			7,083			1,697			578		320			30,408		$	6,118		11,167			1,594			7,385			10,647		2,600		677			494		40,682
Adjustment for CECL		(313	)		333			154		1,057			(294	)		438			130		(5	)		1,500
Provision for credit losses		918			(2,436	)		199		1,558			1,985			575			184		92			3,075			-		-			-			-			-		-		-			-		-
Loan charge-offs		-			-			-		(55	)		-			(339	)		-		(91	)		(485	)		-		-			-			(346	)		-		-		-			(78	)	(424	)
Loan recoveries		-			1,540			-		196			-			82			-		1			1,819			-		-			-			15			-		119		-			49		183
Net loan recoveries (charge-offs)		-			1,540			-		141			-			(257	)		-		(90	)		1,334			-		-			-			(331	)		-		119		-			(29	)	(241	)
Balance, end of period	$	5,305			9,955			978		7,643			8,774			2,453			892		317			36,317		$	6,118		11,167			1,594			7,054			10,647		2,719		677			465		40,441
Net recoveries to average loans (annualized)																								(0.06	)%
Net charge-offs to average loans (annualized)																																															0.03	%
Allowance for credit losses to gross loans																								1.20	%																						1.11	%
Allowance for credit losses to nonperforming loans																								1,388.87	%																						1,109.13	%

																																			Three months ended March 31, 2023
																											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																										$	5,867		10,376			1,292			7,861			9,487		2,551		893			312		38,639
Provision for credit losses																											117		1,038			(182	)		150			592		53		(83	)		170		1,855
Loan charge-offs																											-		(160	)		-			(1	)		-		-		-			-		(161	)
Loan recoveries																											-		31			-			12			-		59		-			-		102
Net loan recoveries (charge-offs)																											-		(129	)		-			11			-		59		-			-		(59	)
Balance, end of period																										$	5,984		11,285			1,110			8,022			10,079		2,663		810			482		40,435
Net charge-offs to average loans (annualized)																																															0.01	%
Allowance for credit losses to gross loans																																															1.18	%
Allowance for credit losses to nonperforming loans																																															854.33	%

Schedule of analysis of collateral-dependent loans of the company					September 30, 2023
	Real		Business
(dollars in thousands)	estate		assets		Other		Total
Commercial
Owner occupied RE	$	-		-		-		-
Non-owner occupied RE		908		-		-		908
Construction		-		-		-		-
Business		244		-		-		244
Total commercial		1,152		-		-		1,152
Consumer
Real estate		386		-		-		386
Home equity		182		-		-		182
Construction		-		-		-		-
Other		-		-		-		-
Total consumer		568		-		-		568
Total	$	1,720		-		-		1,720

Schedule of allowance for credit losses for unfunded loan commitments

	Three months ended			Twelve months ended
(dollars in thousands)	March 31, 2024			December 31, 2023
Balance, beginning of period	$	1,831			2,780
Provision for (reversal of) credit losses		(175	)		(949	)
Balance, end of period	$	1,656			1,831
Unfunded Loan Commitments	$	710,669			724,606
Reserve for Unfunded Commitments to Unfunded Loan Commitments		0.23	%		0.25	%