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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2025

☐	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from _______________ to _______________

Commission File No. 000-56602

PFS Bancorp, Inc.

(Exact Name of Registrant as Specified in Its Charter)



Maryland	92-2956265
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification Number)

1730 Fourth Street, Peru, Illinois	61354
(Address of Principal Executive Offices)	(Zip Code)

(815) 223-4300

(Registrant’s Telephone Number, Including Area Code)

N/A

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading symbol(s)		Name of each exchange on which registered

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such requirements for the past 90 days. YES ☒ NO ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). YES ☒ NO ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b 2 of the Exchange Act:

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒
	Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES ☐ NO ☒

1,603,945 shares of the registrant’s common stock, par value $0.01 per share, were outstanding as of November 6, 2025.

Table of Contents

PFS Bancorp, Inc.

Form 10-Q

Index


		Page
	Part I. – Financial Information	2

Item 1.	Financial Statements	2

	Consolidated Balance Sheets as of September 30, 2025 (unaudited) and December 31, 2024	2

	Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2025 and 2024 (unaudited)	3

	Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2025 and 2024 (unaudited)	4

	Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended September 30, 2025 and 2024 (unaudited)	5

	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2025 and 2024 (unaudited)	7

	Notes to Consolidated Financial Statements (unaudited)	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	42

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	53

Item 4.	Controls and Procedures	53

	Part II. – Other Information	54

Item 1.	Legal Proceedings	54

Item 1A.	Risk Factors	54

Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities	54

Item 3.	Defaults upon Senior Securities	54

Item 4.	Mine Safety Disclosures	54

Item 5.	Other Information	54

Item 6.	Exhibits	55

	Signature Page	56

Table of Contents

Part I. – Financial Information

Item 1.

Financial Statements

PFS Bancorp, Inc.

Consolidated Balance Sheets

September 30, 2025 (Unaudited) and December 31, 2024

(Dollars In thousands, except per share amounts)


	September 30,		December 31,
	2025		2024
Assets
Cash and cash equivalents — cash and due from bank	$	9,143	$	16,256
Available-for-sale debt securities (net of credit losses of $0 at September 30, 2025 and December 31, 2024, respectively, amortized cost of $71,065 and $71,289 at September 30, 2025 and December 31, 2024, respectively)		68,681		66,658
Held-to-maturity debt securities (net of allowance for credit losses of $0 as of September 30, 2025 and December 31, 2024)		6,394		8,168
Equity securities		436		325
Loans, net of allowance for credit losses of $847 and $700 at September 30, 2025 and December 31, 2024		108,953		96,274
Premises and equipment, net of accumulated depreciation of $2,909 and $2,811 at September 30, 2025 and December 31, 2024		2,020		2,101
Federal Home Loan Bank stock		354		347
Interest receivable		755		733
Cash surrender value of bank-owned life insurance		4,059		3,979
Deferred income taxes		1,256		1,857
Mortgage servicing rights		254		254
Other		615		685

Total assets	$	202,920	$	197,637

Liabilities and Equity Capital

Liabilities
Deposits
Demand	$	11,739	$	17,952
Savings, NOW and money market		77,415		73,082
Time		73,906		68,553

Total deposits		163,060		159,587
Deferred compensation		669		645
Income tax payable		322		173
Interest payable and other liabilities		580		557

Total liabilities		164,631		160,962

Stockholders' Equity
Preferred Stock, $0.01 par value, 1,000,000 shares authorized, none issued		—		—
Common Stock, $0.01 par value, 14,000,000 shares authorized, 1,725,000 issued, 1,569,332 and 1,679,307 outstanding at September 30, 2025 and December 31, 2024		17		17
Additional Paid in Capital		15,660		15,603
Unallocated common stock of ESOP		(1,229)		(1,270)
Treasury stock - 155,668 shares at September 30, 2025 and 45,693 shares at December 31, 2024		(1,695)		(463)
Deferred compensation liability		400		400
Retained earnings		26,840		25,701
Accumulated other comprehensive (loss)		(1,704)		(3,313)

Total stockholders' equity		38,289		36,675

Total liabilities and stockholders' equity	$	202,920	$	197,637

See Notes to Consolidated Financial Statements

Table of Contents

PFS Bancorp, Inc.

Consolidated Statements of Income

For the Three and Nine Months Ended September 30, 2025 (Unaudited) and 2024 (Unaudited)

(Dollars In Thousands, except per share amounts)


	Three Months Ended		Three Months Ended		Nine Months Ended		Nine Months Ended
	September 30, 2025		September 30, 2024		September 30, 2025		September 30, 2024
Interest and Dividend Income
Loans, including fees	$	1,501	$	1,209	$	4,235	$	3,414
Debt securities
Taxable		444		408		1,307		1,155
Tax-exempt		133		137		401		414
Dividends		4		5		15		17
Other		176		258		679		895

Total interest and dividend income		2,258		2,017		6,637		5,895

Interest Expense
Deposits		829		776		2,455		2,173

Net Interest Income		1,429		1,241		4,182		3,722

Provision for Credit Losses		40		113		153		146

Net Interest Income After Provision for Credit Losses		1,389		1,128		4,029		3,576

Noninterest Income
Commission income		8		8		19		23
Customer service fees		117		112		334		326
Net realized gain on loan sales		2		2		5		5
Loan servicing fees		14		16		44		50
Other		116		30		206		133

Total noninterest income		257		168		608		537

Noninterest Expense
Salaries and employee benefits		639		594		1,756		1,711
Occupancy		72		70		234		210
Depreciation		32		37		98		118
Data processing		104		114		356		432
Professional fees		125		86		324		291
Marketing		38		37		122		120
Printing and office supplies		15		19		56		50
Deposit insurance premiums		55		54		135		129
Other		32		25		102		97

Total noninterest expense		1,112		1,036		3,183		3,158

Income Before Income Taxes		534		260		1,454		955

Provision for Income Taxes		118		18		315		163

Net Income	$	416	$	242	$	1,139	$	792

Earnings per share-basic and diluted	$	0.28	$	0.15	$	0.74	$	0.50
Weighted-average shares outstanding-basic and diluted		1,509,672		1,595,970		1,546,594		1,594,590

See Notes to Consolidated Financial Statements

Table of Contents

PFS Bancorp, Inc.

Consolidated Statements of Comprehensive Income (Loss)

For the Three and Nine Months Ended September 30, 2025 (Unaudited) and 2024 (Unaudited)

(In Thousands)


	Three Months Ended		Three Months Ended		Nine Months Ended		Nine Months Ended
	September 30, 2025		September 30, 2024		September 30, 2025		September 30, 2024
Net Income	$	416	$	242	$	1,139	$	792

Other Comprehensive Income
Unrealized gains (losses) on available-for-sale debt securities, net of taxes of $178 and $595 for the three months ended September 30, 2025 and 2024, respectively, and $569 and $548 for the nine months ended September 30, 2025 and 2024, respectively.		621		1,492		1,609		1,374

Other comprehensive income		621		1,492		1,609		1,374

Comprehensive Income	$	1,037	$	1,734	$	2,748	$	2,166

See Notes to Consolidated Financial Statements

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PFS Bancorp, Inc.

Consolidated Statements of Stockholders’ Equity

For the Three and Nine Months Ended September 30, 2025 (Unaudited) and 2024 (Unaudited)

(In Thousands)


									Accumulated
					Unallocated				Other							Total
	Common		Additional		Common Stock		Retained		Comprehensive		Treasury		Deferred Comp			Stockholders'
	Stock		Paid-in Capital		of ESOP		Earnings		Income (loss)		Stock		Liability		Equity
Balance, June 30, 2024	$	17	$	15,603	$	(1,298)	$	25,346	$	(3,292)	$	(400)		400	$	36,376

Net income		—		—		—		242		—		—		—		242
ESOP shares committed to be released (1,380 shares)				(1)		15		—		—		—		—		14
Other comprehensive income		—		—		—		—		1,492		—		—		1,492
Balance, September 30, 2024	$	17	$	15,602	$	(1,283)	$	25,588	$	(1,800)	$	(400)	$	400	$	38,124

Balance, June 30, 2025	$	17	$	15,605	$	(1,244)	$	26,424	$	(2,325)		(1,111)		400	$	37,766

Net income		—		—		—		416		—		—		—		416
ESOP shares committed to be released (1,380 shares)		—		2		15		—		—		—		—		17
Stock-based compensation expense		—		53												53
Purchased 47,700 shares of treasury stock		—		—		—		—		—		(584)		—		(584)
Other comprehensive income		—		—		—		—		621		—		—		621

Balance, September 30, 2025	$	17	$	15,660	$	(1,229)	$	26,840	$	(1,704)	$	(1,695)	$	400	$	38,289

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									Accumulated
					Unallocated				Other								Total
	Common		Additional		Common Stock		Retained		Comprehensive		Treasury			Deferred Comp			Stockholders'
	Stock		Paid-in Capital		of ESOP		Earnings		Income (loss)		Stock			Liability		Equity
Balance, December 31, 2023	$	17	$	15,605	$	(1,325)	$	24,796	$	(3,174)	$	(400)		$	400	$	35,919

Net income		—		—		—		792		—		—			—		792
ESOP shares committed to be released (4,140 shares)				(3)		42		—		—		—	—	—	—		39
Other comprehensive income		—		—		—		—		1,374		—			—		1,374
Balance, September 30, 2024	$	17	$	15,602	$	(1,283)	$	25,588	$	(1,800)	$	(400)		$	400	$	38,124

Balance, December 31, 2024	$	17	$	15,603	$	(1,270)	$	25,701	$	(3,313)	$	(463)		$	400	$	36,675

Net income		—		—		—		1,139		—		—			—		1,139
ESOP shares committed to be released (4,140 shares)		—		4		41		—		—		—			—		45
Stock-based compensation expense		—		53													53
Purchased 109,975 shares of treasury stock		—		—		—		—		—		(1,232)			—		(1,232)
Other comprehensive income		—		—		—		—		1,609		—			—		1,609

Balance, September 30, 2025	$	17	$	15,660	$	(1,229)	$	26,840	$	(1,704)	$	(1,695)		$	400	$	38,289

See Notes to Consolidated Financial Statements

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PFS Bancorp, Inc.

Consolidated Statements of Cash Flows
Nine Months Ended September 30, 2025 (Unaudited) and 2024 (Unaudited)
(In Thousands)


	2025		2024
Operating Activities
Net income	$	1,139	$	792
Items not requiring (providing) cash:
Depreciation		98		118
Provision for credit losses		153		146
Amortization of premiums and discounts on debt securities		16		145
Deferred income taxes		(37)		(71)
Change in fair value of equity securities		(111)		(38)
Net realized (gain) loss on loan sales		(5)		(5)
Loss on disposal of premises and equipment		—		4
Earnings on cash surrender value of life insurance		(80)		(75)
Stock Incentive Plan expense		53
ESOP compensation expense		45		39
Changes in:
Interest receivable		(22)		(47)
Other assets		70		122
Interest payable and other liabilities		193		252
Net cash provided by operating activities		1,512		1,382

Investing Activities
Purchases of available-for-sale debt securities		(7,089)		(10,819)
Proceeds from maturities of available-for-sale debt securities		7,302		5,418
Proceeds from maturities of held-to-maturity debt securities		1,769		515
Net change in loans		(12,824)		(4,543)
Purchase of premises and equipment		(17)		(151)
Purchase of FHLB Stock		(7)		—
Net cash used in investing activities		(10,866)		(9,580)

Financing Activities
Net increase (decrease) in demand deposits, money market,
NOW and savings accounts		(1,880)		(3,448)
Net increase in certificates of deposit		5,353		5,894
Purchase of treasury stock		(1,232)		—
Net cash provided by financing activities		2,241		2,446
Increase (Decrease) in Cash and Cash Equivalents		(7,113)		(5,752)
Cash and Cash Equivalents, Beginning of Year		16,256		20,202
Cash and Cash Equivalents, End of Year	$	9,143	$	14,450
Supplemental Cash Flows Information
Interest paid	$	2,460	$	2,170
Income taxes paid	$	155	$	254

See Notes to Consolidated Financial Statements

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Notes to Consolidated Financial Statements (Unaudited)

(Dollars in thousands)

Note 1: Nature of Operations and Summary of Significant Accounting Policies

Nature of Operations

PFS Bancorp, Inc, a Maryland corporation (the “Company”), is the savings and loan holding company for Peru Federal Savings Bank (“Bank”). Upon completion of the Bank’s mutual-to-stock conversion, which occurred on October 17, 2023, the Company became 100% owner of the Bank. 100% of the common stock of PFS Bancorp, Inc is held by the public. The cost of conversion and the issuing of common stock totaling $1.6 million were deferred and deducted from the sales proceeds of the offering.

The Bank is a federal chartered stock savings bank. The Bank is primarily engaged in providing a full range of banking and financial services to individual and corporate customers in northern Illinois, primarily LaSalle County, from its two facilities located in Peru, Illinois. The Bank is subject to competition from other financial institutions. The Bank is subject to the regulation of the Office of the Comptroller of the Currency (“OCC”) and undergoes periodic examinations by the OCC. The Bank has a wholly owned subsidiary, PFSB Financial Services Inc., which is inactive.

Jumpstart Our Business Startups Act

The Jumpstart Our Business Act (the JOBS Act), which was signed into law on April 5, 2012, made numerous changes to the federal securities laws to facilitate access to capital markets. Under the JOBS Act, a company with total annual gross revenues of less than $1.235 billion (adjusted for inflation) during the most recently completed fiscal year qualifies as an “emerging growth company”. The Company qualifies as an “emerging growth company” and expects to continue to qualify as an “emerging growth company” until December 31, 2028.

As an “emerging growth company” the Company has elected to use the extended transition period to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. Accordingly, the Company’s consolidated financial statements may not be comparable to the financial statements of companies that comply with such new or revised accounting standards.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for credit losses, mortgage servicing rights, and fair values of financial instruments.

In the opinion of Company management, the accompanying unaudited consolidated financial statements at September 30, 2025 and for the periods ended September 30, 2025 and September 30, 2024 include all adjustments, consisting of only normal recurring entries, necessary for a fair presentation of the consolidated balance sheet at September 30, 2025 and the consolidated statements of income for the interim periods ended September 30, 2025 and 2024. The consolidated statement of income for the interim period ended September 30, 2025 is not necessarily indicative of the results of operations for the full year. This information should be read in conjunction with the Company’s audited consolidated financial statements for the years ended December 31, 2024 and 2023 contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.

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Notes to Consolidated Financial Statements (Unaudited)

(Dollars in thousands)

Cash Equivalents

The Company considers all liquid investments with original maturities of three months or less to be cash equivalents. At September 30, 2025 and December 31, 2024, cash equivalents consisted of due from bank accounts.

At September 30, 2025 and December 31, 2024, the Company’s cash accounts exceeded federally insured limits by $1,598 and $4,270, respectively.

Debt Securities

Certain debt securities that management has the positive intent and ability to hold to maturity are classified as “held to maturity” and recorded at amortized cost. Securities not classified as held to maturity are classified as “available for sale” and recorded at fair value, with unrealized gains and losses excluded from earnings and reported in other comprehensive income (loss). Purchase premiums and discounts are recognized in interest income using the interest method over the terms of the securities. Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method.

For available-for-sale debt securities in an unrealized loss position, the Company first assesses whether it intends to sell, or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. For debt securities available-for-sale that do not meet the aforementioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and the allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income.

Changes in the allowance for credit losses are recorded as credit loss expense (or reversal). Losses are charged against the allowance when management believes the uncollectibility of an available-for-sale security is confirmed or when either of the criteria regarding intent or requirement to sell is met.

Accrued interest receivable on available-for-sale debt securities totaled $348 and $378 at September 30, 2025 and December 31, 2024 respectively and is excluded from the estimate of credit losses.

The Company uses the current expected credit loss (“CECL”) model to estimate the allowance for credit losses on securities held to maturity. The CECL model considers historical loss rates and other qualitative adjustments, as well as a forward-looking component that considers reasonable and supportable forecasts over the expected life of each security.

Management believes the Company will collect all amounts owed on securities held to maturity issued by the U.S. government or a U.S. government-sponsored agency since these securities are either explicitly or implicitly guaranteed by the U.S. government, and have a long history of no credit losses. Management evaluates all other securities held to maturity using a probability of default method. The probability of default method estimates the probability a security with a certain credit rating will default during its remaining contractual term (probability of default) and how much loss is expected to be incurred if a security defaults (loss given default rate). The Company obtains information from third parties (e.g., Moody’s) to estimate the probability of default for each credit rating based on the remaining term of the security and the loss given default rate.

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Notes to Consolidated Financial Statements (Unaudited)

(Dollars in thousands)

Accrued interest receivable on held-to-maturity debt securities totaled $18 and $31 at September 30, 2025 and December 31, 2024 respectively and is excluded from the estimate of credit losses.

Equity Securities

The Company measures equity securities at fair value with changes in fair value recognized in net income. Gains and losses on the sale of equity securities are recorded on the trade date and are determined using the specific identification method.

Loans Held for Sale

Mortgage loans originated and intended for sale in the secondary market are carried at the lower of cost or fair value in the aggregate. Net unrealized losses, if any, are recognized through a valuation allowance by charges to noninterest income. Gains and losses on loan sales are recorded on the consolidated statements of income.

Loans

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoffs are reported at their outstanding principal balances adjusted for unearned income, charge-offs, the allowance for credit losses, and for loans amortized at cost, interest income is accrued based on the unpaid principal balance. Loan origination fees, net of direct origination costs are deferred over the life of the loan.

The accrual of interest on mortgage and commercial loans is discontinued at the time the loan is 90 days past due unless the credit is well-secured and in process of collection. Past due status is based on contractual terms of the loan. In all cases, loans are placed on nonaccrual or charged off at an earlier date if collection of principal or interest is considered doubtful.

All interest accrued but not collected for loans that are placed on nonaccrual or charged off are reversed against interest income. The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual status. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

The Company maintains lending policies and procedures designed to focus lending efforts on the type, location, and duration of loans most appropriate for its business model and markets. The Company’s principal lending activity is the origination of residential and commercial real estate loans, commercial loans, and consumer loans. The primary lending market is in LaSalle County, Illinois. Generally, loans are collateralized by assets of the borrower and guaranteed by the principals of the borrowing entity.

The Board of Directors reviews and approves the Company’s lending policy on an annual basis. Quarterly, the Board Loan Committee reviews the allowance for credit losses and reports related to loan production, loan quality, concentrations of credit, loan delinquencies and non-performing and potential problem loans.

Allowance for Credit Losses on Loans and Unfunded Commitments

The allowance for credit losses on loans and unfunded commitments (“allowance”) represents management’s estimate of the reserve necessary to adequately account for probable losses that could ultimately be realized from current loan exposures. In determining the adequacy of the allowance, management relies predominately on a disciplined credit review and approval process. The review process is directed by overall lending policy and is intended to identify, at the earliest possible stage, borrowers who might be facing financial difficulty.

The allowance for credit losses is established as losses are estimated to have occurred through a provision for credit losses charged to income. Credit losses are charged against the allowance when management believes the uncollectability of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

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Notes to Consolidated Financial Statements (Unaudited)

(Dollars in thousands)

The allowance for credit losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

The allowance consists of allocated and general components. The allocated component relates to loans that are individually evaluated. For those loans that are individually evaluated, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the individually evaluated loan is lower than the carrying value of that loan. The general component covers non-classified loans and is based on historical charge-off experience and expected loss given default derived from the Company’s internal risk rating process. Other adjustments may be made to the allowance for pools of loans after an assessment of internal or external influences on credit quality that are not fully reflected in the historical loss or risk rating data.

The Company uses the CECL model to estimate the allowance for credit losses on loans. The CECL model considers historical loss rates and other qualitative adjustments, as well as forward-looking component that considers reasonable and supportable forecasts over the expected life of each loan. To develop the allowance for credit losses on loans estimate under the CECL model, the Company segments the loan portfolio into loan pools based on loan type and similar credit risk elements, performs an individual evaluation of certain collateral dependent and other credit-deteriorated loans, calculates the historical loss rates for the segmented loan pools, applies the loss rates over the calculated life of the collectively evaluated loan pools; adjusts for forecasted macro-level economic conditions and other anticipated changes in credit quality; and determines qualitative adjustments based on factors and conditions unique to the Company’s loan portfolio.

Under the CECL model, loans that do not share similar risk characteristics with the loans in their respective pools are individually evaluated for expected credit losses and are excluded from the collectively evaluated loan credit loss estimates. Management evaluates nonaccrual loans, and other loans with evidence of credit deterioration. For loans individually evaluated, a specific reserve is estimated based on either the fair value of collateral or the discounted value of expected future cash flows.

Management evaluates all collectively evaluated loan pools using the weighted average remaining life (“remaining life”) methodology. The remining life methodology applies calculated quarterly net loss rates to collectively evaluated loan pools on a periodic basis based on the estimated remining life of each pool. The estimated losses under the remaining life methodology are then adjusted for qualitative factors deemed appropriate by management.

The estimated remining life of each pool is determined using quarterly, pool-based attrition measurements using the Company’s loan-level historical data. The Company’s historical call report data is utilized for historical loss rate calculations, and the lookback period for each collectively evaluated loan pool is determined by management based upon the estimated remaining life of the pool. Forecasted historical loss rates are calculated using the Company’s historical data based on the lookback, forecast, and reversion period inputs by management. Management elected to utilize a 2-year forecast period, with immediate reversion to historical losses after the forecast period.

The quantitative analysis described above is supplemented with other qualitative factors based on the risks presented for each collectively evaluated loan pool. These qualitative factors include: past due loan trends; collateral value trends, changes to lending policies, quality of loan review, expertise of management, regulatory environment, micro and macro-economic conditions, and effects of changes in credit concentrations.

Unfunded commitments are evaluated using the same pool methodology and assumptions as the allowance for credit losses on collectively evaluated loans, adjusted for estimated funding rates based on historical rates. A reserve is maintained for these unfunded commitments to absorb estimated probable credit losses over noncancelable loan commitments. The allowance for losses on unfunded commitments is included in other liabilities on the consolidated balance sheet.

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Notes to Consolidated Financial Statements (Unaudited)

(Dollars in thousands)

The Company may modify loans to borrowers experiencing financial difficulty and grant concessions that could include principal loan forgiveness, maturity date extension, interest rate, interest-only period, and payment deferral.

The Company excludes accrued interest receivable from the amortized cost basis of loans when estimating credit losses and when presenting required disclosures in the consolidated financial statements. Accrued interest on loans totaling $389 and $324 at September 30, 2025 and December 31, 2024, respectively, was excluded from the amortized cost basis of loans. Accrued interest is written off at the same time as when a loan is moved to non-accrual status.

Risk characteristics applicable to each segment of the loan portfolio are described as follows.

Residential 1-4 Family Real Estate: The residential 1-4 family real estate are generally secured by owner-occupied 1-4 family residences. Repayment of these loans is primarily dependent on the personal income and credit rating of the borrowers. Credit risk in these loans can be impacted by economic conditions within the Company’s market areas that might impact either property values or a borrower’s personal income. Risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a large number of borrowers.

Commercial Real Estate: Commercial real estate loans typically involve larger principal amounts, and repayment of these loans is generally dependent on the successful operations of the property securing the loan or the business conducted on the property securing the loan. These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Credit risk in these loans may be impacted by the creditworthiness of a borrower, property values and the local economies in the Company’s market areas.

Construction and Land Development Real Estate: Construction and land development real estate loans are usually based upon estimates of costs and estimated value of the completed project and include independent appraisal reviews and a financial analysis of the developers and property owners. Sources of repayment of these loans may include permanent loans, sales of developed property or an interim loan commitment from the Company until permanent financing is obtained. These loans are considered to be higher risk than other real estate loans due to their ultimate repayment being sensitive to interest rate changes, general economic conditions, and the availability of long-term financing. Credit risk in these loans may be impacted by the creditworthiness of a borrower, property values and the local economies in the Company’s market areas.

Commercial: The commercial portfolio includes loans to commercial customers for use in financing working capital needs, equipment purchases and expansions. The loans in this category are repaid primarily from the cash flow of a borrower’s principal business operation. Credit risk in these loans is driven by creditworthiness of a borrower and the economic conditions that impact the cash flow stability from business operations.

Consumer: The consumer loan portfolio consists of various term and line of credit loans such as automobile loans and loans for other personal purposes. Repayment for these types of loans will come from a borrower’s income sources that are typically independent of the loan purpose. Credit risk is driven by consumer economic factors (such as unemployment and general economic conditions in the Company’s market area) and the creditworthiness of a borrower.

Premises and Equipment

Land is carried at cost. Depreciable assets are stated at cost less accumulated depreciation. Depreciation is charged to expense using the straight-line method over the estimated useful lives of the assets.

The estimated useful lives for each major depreciable classification of premises and equipment are as follows:

Buildings and improvements		5-50 years
Equipment		3-7 years

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Notes to Consolidated Financial Statements (Unaudited)

(Dollars in thousands)

Federal Home Loan Bank Stock

Federal Home Loan Bank stock is a required investment for institutions that are members of the Federal Home Loan Bank system. The required investment in the common stock is based on a predetermined formula, carried at cost and evaluated for impairment.

Bank-owned Life Insurance

The Company has purchased life insurance policies on certain key executives. Bank-owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement.

Mortgage Servicing Rights

Mortgage servicing assets are recognized separately when rights are acquired through purchase or through sale of financial assets. Under the servicing assets and liabilities accounting guidance (ASC 860-50), servicing rights resulting from the sale or securitization of loans originated by the Company are initially measured at fair value at the date of transfer. The Company has elected to initially and subsequently measure the mortgage servicing rights for consumer mortgage loans using the fair value method. Under the fair value method, the servicing rights are carried in the balance sheet at fair value and the changes in fair value are reported in earnings in the period in which the changes occur.

Fair value is based on market prices for comparable mortgage servicing contracts, when available, or alternatively, is based on a valuation model that calculates the present value of estimated future net servicing income. The valuation model incorporates assumptions that market participants would use in estimating future net servicing income, such as the cost to service, the discount rate, the custodial earnings rate, an inflation rate, ancillary income, prepayment speeds and default rates and losses. These variables change from quarter to quarter as market conditions and projected interest rates change and may have an adverse impact on the value of the mortgage servicing right and may result in a reduction to noninterest income.

Servicing fee income is recorded for fees earned for servicing loans. The fees are based on a contractual percentage of the outstanding principal or a fixed amount per loan and are recorded as income when earned in loan servicing fees in non-interest income.

Transfers of Financial Assets

Transfers of financial assets are accounted for as sales when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company—put presumptively beyond the reach of the transferor and its creditors, even in bankruptcy or other receivership, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity or the ability to unilaterally cause the holder to return specific assets.

Income Taxes

The Company accounts for income taxes in accordance with income tax accounting guidance (ASC 740, Income Taxes). The income tax accounting guidance results in two components of income tax expense: current and deferred. Current income tax expense reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to the taxable income or excess of deductions over revenues. The Company determines deferred income taxes using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax bases of assets and liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur.

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Notes to Consolidated Financial Statements (Unaudited)

(Dollars in thousands)

Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized.

Tax positions are recognized if it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination. The term more likely than not means a likelihood of more than 50 percent; the terms examined and upon examination also include resolution of the related appeals or litigation processes, if any. A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position has met the more-likely-than-not recognition threshold considers the facts, circumstances, and information available at the reporting date and is subject to the management’s judgment. With a few exceptions, the Company is no longer subject to U.S. federal and state income tax examinations by tax authorities for years before 2019.

The Company recognizes interest and penalties on income taxes as a component of income tax expense.

The Company files consolidated income tax returns with its subsidiary.

Comprehensive Income (Loss)

Comprehensive income (loss) consists of net income and other comprehensive income (loss), net of applicable income taxes. Other comprehensive income (loss) includes unrealized appreciation (depreciation) on available-for-sale securities and reclassification adjustment for realized losses included in net income.

Revenue Recognition

The majority of the Company’s revenues come from interest income and other sources, including loans and securities, which are outside the scope of Financial Accounting Standards Board Accounting Standards Update 2014-09, Revenues from Contracts with Customers (Topic 606). The Company’s services that fall within the scope of Topic 606 are presented within noninterest income in the accompanying consolidated statements of income and are recognized as revenue as the Company satisfies its obligation to the customer.

A description of the Company’s revenue streams accounted for under Topic 606 is as follows:

Customer Service Fees. The Company generates revenues through fees charged to depositors related to deposit account maintenance fees, overdrafts, interchange income, wire transfers and additional miscellaneous services provided at the request of the depositor. For deposit-related services, revenue is recognized when performance obligations are satisfied, which is, generally, at a point in time.

Commission Income. Brokerage commissions and fees primarily relate to investment advisory and brokerage activities as well as the sale of other non-deposit investment products to customers of the Company. The Company’s performance obligation for investment advisory services is generally satisfied, and related revenue recognized, over the period in which the services are provided. Fees earned for brokerage activities, such as facilitating securities transactions, are generally recognized at the time of transaction execution. Commissions or fees earned on the sale of other non-deposit investment products are primarily recognized on a monthly basis based on the executed sales dates. Payment for these services is generally received shortly after month end.

Gains/Losses on Sales of Foreclosed Assets. The Company records a gain or loss from the sale of foreclosed assets when control of the property transfers to the buyer, which generally occurs at the time of an executed deed. When the Company finances the sale of foreclosed assets to the buyer, the Company assesses whether the buyer is committed to perform their obligations under the contract and whether collectability of the transaction price is probable. Once these criteria are met, the

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Notes to Consolidated Financial Statements (Unaudited)

(Dollars in thousands)

foreclosed asset is derecognized and the gain or loss on sale is recorded upon the transfer of control of the property to the buyer. In determining the gain or loss on the sale, the Company adjusts the transaction price and related gain (loss) on sale if a significant financing component is present.

Rate Lock Commitments

The Company enters into commitments to originate loans whereby the interest rate on the loan is determined prior to funding (rate lock commitment). Rate lock commitments on mortgage loans that are intended to be sold are considered to be derivatives. Rate lock commitments are recorded only to the extent of fees received since recording the estimated fair value of these commitments would not have a significant impact on the consolidated financial statements.

Off-Balance-Sheet Instruments

In the ordinary course of business, the Company has entered into off-balance-sheet financial instruments, including commitments to extend credit, unfunded commitments under lines of credit, and standby letters of credit. Such financial instruments are recorded in the consolidated financial statements when they become payable.

Legal Contingencies

Various legal claims arise from time to time in the normal course of business. In the opinion of management, any liability resulting from such proceedings would not have a material impact on the consolidated financial statements of the Company.

Advertising

Advertising costs are expensed as incurred.

Stock-based Compensation

Stock-based payments to employees, including grants of restricted stock or stock options, are valued at fair value of the award on the date of grant and expensed on a straight-line basis as compensation expense over the applicable vesting period. A Black-Scholes model is utilized to estimate the fair value of stock options and the quoted market price of the Company’s stock at the date of grant is used to estimate the fair value of restricted stock awards.

Earnings per Common Share

Basic earnings per common share are calculated by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per common share includes the dilutive effect of outstanding common stock awards unless the impact is anti-dilutive, by application of the treasury stock method.

Note 2:  Restriction on Cash and Due From Banks

Effective March 12, 2021, the Federal Reserve’s board of directors approved the final rule reducing the required reserve requirement ratios to zero percent, effectively eliminating the requirement to maintain reserve balances in cash or on deposit with the Federal Reserve Bank. This reduction in the required reserves does not have a defined timeframe and may be revised by the Federal Reserve’s board in the future.

Table of Contents

Notes to Consolidated Financial Statements (Unaudited)

(Dollars in thousands)

Note 3:  Debt Securities

The amortized cost and approximate fair values, together with gross unrealized gains and losses, of debt securities are as follows:


			Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses		Fair Value
Available-for-sale Debt Securities:
September 30, 2025:
U.S. Government and federal agencies	$	7,156	$	108		(50)	$	7,214
Mortgage-backed:
Government sponsored enterprises (GSEs) - residential		44,267		363		(2,189)		42,441
State and political subdivisions		19,642		47		(663)		19,026

	$	71,065	$	518	$	(2,902)	$	68,681


			Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses		Fair Value
Available-for-sale Debt Securities:
December 31, 2024:
U.S. Government and federal agencies	$	8,154	$	—	$	(187)	$	7,967
Mortgage-backed:
Government sponsored enterprises (GSEs) - residential		42,344		71		(3,557)		38,858
State and political subdivisions		20,791		50		(1,008)		19,833

	$	71,289	$	121	$	(4,752)	$	66,658


			Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses		Fair Value
Held-to-maturity Debt Securities:
September 30, 2025
U.S. Government and Federal agencies	$	764	$	—	$	(113)	$	651
Certificates of Deposit		5,630		108		—		5,738

	$	6,394	$	108	$	(113)	$	6,389

Held-to-maturity Debt Securities:
December 31, 2024
U.S. Government and Federal agencies	$	815	$	—	$	(140)	$	675
Certificates of Deposit		7,353		113		(1)		7,465

	$	8,168	$	113	$	(141)	$	8,140

Table of Contents

Notes to Consolidated Financial Statements (Unaudited)

(Dollars in thousands)

The amortized cost and fair value of available-for-sale securities and held-to-maturity debt securities at September 30, 2025, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.


	Available-for-sale				Held-to-maturity
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
Within one year	$	1,413	$	1,408	$	2,334	$	2,347
One to five years		7,317		7,231		3,296		3,390
Five to ten years		12,143		11,871		—		—
After ten years		5,925		5,730		764		652
		26,798		26,240		6,394		6,389
Mortgage-backed securities		44,267		42,441		—		—

Totals	$	71,065	$	68,681	$	6,394	$	6,389

The carrying value of securities pledged as collateral, to secure public deposits and for other purposes, was $13,195 at September 30, 2025 and $13,446 at December 31, 2024.

There were no sales of securities for the three and nine months ended September 30, 2025 and 2024.

A portion of available-for-sale investments in debt securities are reported in the consolidated financial statements at an amount less than their historical cost.

The following table shows the Company’s investments’ gross unrealized losses and fair value of the Company’s investments with unrealized losses, aggregated by investment class and length of time that individual securities have been in a continuous unrealized loss position at September 30, 2025 and December 31, 2024:


	September 30, 2025
	Less than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
Available-for-sale Debt Securities:
U.S. Government and federal agencies	$	—	$	—	$	2,270	$	(50)	$	2,270	$	(50)
State and political subdivisions		3,916		(62)		10,420		(601)		14,336		(663)
Mortgage backed securities - GSE  residential		3,032		(37)		23,186		(2,152)		26,218		(2,189)
Total AFS securities	$	6,948	$	(99)	$	35,876	$	(2,803)	$	42,824	$	(2,902)


	December 31, 2024
	Less than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
Available-for-sale Debt Securities:
U.S. Government and federal agencies	$	4,690	$	(71)	$	3,277	$	(116)	$	7,967	$	(187)
State and political subdivisions		5,947		(89)		10,829		(919)		16,776		(1,008)
Mortgage backed securities - GSE residential		9,750		(217)		24,506		(3,340)		34,256		(3,557)
Total AFS securities	$	20,387	$	(377)	$	38,612	$	(4,375)	$	58,999	$	(4,752)

Table of Contents

Notes to Consolidated Financial Statements (Unaudited)

(Dollars in thousands)

Total fair value of these investments at September 30, 2025 and December 31, 2024, was $42,824 and $58,999. The following table shows the total available-for-sale securities and aggregate depreciation by security type:


	Number of
	securities in a	Aggregate
	loss position	depreciation
September 30, 2025

U.S. Government and Federal agencies	4	(2.15)	%
Mortgage-backed:
Government sponsored enterprises (GSEs) - residential	164	(7.70)	%
State and political subdivisions	38	(4.42)	%

Total Portfolio	206	(6.35)	%

December 31, 2024

U.S. Government and Federal agencies	13	(2.30)	%
Mortgage-backed:
Government sponsored enterprises (GSEs) - residential	184	(9.40)	%
State and political subdivisions	46	(5.67)	%

Total Portfolio	243	(7.45)	%

These unrealized losses relate principally to the changes in market interest rates and are not due to changes in the financial condition of the issuer, the quality of the underlying assets, or applicable credit enhancements. In analyzing whether and allowance for credit losses on debt securities is required, management considers whether the securities are issued by a government body or agency, whether a rating agency has downgraded the securities, industry analysts’ reports, the financial condition and performance of the issuer, and the quality of any underlying assets or credit enhancements. Since management has the ability to hold debt securities for the foreseeable future, no allowance for credit losses related to debt securities has been recorded at September 30, 2025 and December 31, 2024.

Management has evaluated the Company’s held-to-maturities securities unrealized losses and has concluded that no anticipated credit losses are expected and therefore no reserve for losses related to held-to-maturity securities has been included in the Company’s allowance for credit losses.

Note 4: Equity Securities

Equity securities comprised the following as of September 30, 2025 and December 31, 2024 and are included in the consolidated balance sheets:


	September 30,		December 31,
	2025		2024
Community Development Corp. Stock	$	62	$	62
FHLMC Preferred Stock		374		263
Total	$	436	$	325

Table of Contents

Notes to Consolidated Financial Statements (Unaudited)

(Dollars in thousands)

Community Development Corp. (CDC) Stock is presented on the balance sheets at fair value. The FHLMC Preferred Stock is presented on the balance sheet at fair value. The table below details changes in the carrying amount of the CDC stock and FHLMC Preferred Stock for the nine months ended September 30, 2025 and year ended December 31, 2024.


	September 30,		December 31,
	2025		2024
Net gains and losses recognized during the period on equity securities	$	111	$	210
Less: Net gains and losses recognized during the period on equity securities sold during the period		—		—
Unrealized gains and losses recognized during the period on equity securities still held at the reporting date	$	111	$	210

Note 5: Loans and Allowance for Credit Losses

Classes of loans at September 30, 2025 and December 31, 2024 include:


	September 30,		December 31,
	2025		2024
Mortgage loans on real estate:
Residential 1-4 family	$	68,393	$	65,721
Commercial		29,411		21,412
Construction and land development		1,699		1,637
Total mortgage loans on real estate		99,503		88,770
Commercial loans		5,998		4,656
Consumer		4,194		3,479
		109,695		96,905
Plus:
Deferred Loan Costs		105		69
Less:
Allowance for credit losses		847		700
Net loans	$	108,953	$	96,274

The Company participates in the U.S. Department of Agriculture’s Rural Development Section 502 Guaranteed Loan Program. This program assists approved lenders in providing low- and moderate-income households the opportunity to own adequate, modest, decent, safe and sanitary dwellings as their primary residence in eligible rural areas. Eligible applicants may, purchase, build, rehabilitate, or relocate a dwelling in an eligible rural area with 100% financing. The program provides a 90% loan note guarantee to approved lenders in order to reduce the risk of extending 100% loans to eligible rural homebuyers. As of September 30, 2025 and December 31, 2024, the company held $2,587 and $2,572 respectively, of USDA Guaranteed loans in the Residential 1-4 Family portfolio of loans.

Table of Contents

Notes to Consolidated Financial Statements (Unaudited)

(Dollars in thousands)

The following tables present the balance in the allowance for credit losses based on portfolio segment for the periods presented:


	Three Months Ended
	September 30, 2025
	Mortgage Loans on Real Estate
					Construction
	Residential				and Land
	1-4 Family		Commercial		Development		Commercial
Allowance for credit losses:
Balance, beginning of period	$	268	$	426	$	10	$	88
Provision charged to expense		12		22		3		(11)
Losses charged off		—		—		—		—
Recoveries		—		—		—		—
Balance, end of period	$	280	$	448	$	13	$	77

Allowance for credit losses for unfunded loan commitments
Balance, beginning of period	$	3	$	5	$	6	$	3
Provision charged to expense		—		3		(1)		1
Losses charged off		—		—		—		—
Recoveries		—		—		—		—
Balance, end of period	$	3	$	8	$	5	$	4


	Three Months Ended
	September 30, 2025 (Continued)
	Consumer		Total
Allowance for credit losses:
Balance, beginning of period	$	21	$	813
Provision charged to expense		11		37
Losses charged off		(3)		(3)
Recoveries		—		—
Balance, end of year	$	29	$	847

Allowance for credit losses for unfunded loan commitments
Balance, beginning of year	$	—	$	17
Provision charged to expense		—		3
Losses charged off		—		—
Recoveries		—		—
Balance, end of year	$	—	$	20

Table of Contents

Notes to Consolidated Financial Statements (Unaudited)

(Dollars in thousands)


	Three Months Ended
	September 30, 2024
	Mortgage Loans on Real Estate
					Construction
	Residential				and Land
	1-4 Family		Commercial		Development		Commercial
Allowance for credit losses:
Balance, beginning of period	$	258	$	347	$	8	$	62
Provision charged to expense		9		158		(3)		(47)
Losses charged off		—		—		—		(1)
Recoveries		—		—		—		49
Balance, end of year	$	267	$	505	$	5	$	63

Allowance for credit losses for unfunded loan commitments
Balance, beginning of year	$	4	$	8	$	11	$	3
Provision charged to expense		(1)		(1)		(6)		—
Losses charged off		—		—		—		—
Recoveries		—		—		—		—
Balance, end of year	$	3	$	7	$	5	$	3


	Three Months Ended
	September 30, 2024 (Continued)
	Consumer		Total
Allowance for credit losses:
Balance, beginning of period	$	18	$	693
Provision charged to expense		4		121
Losses charged off		(3)		(4)
Recoveries		—		49
Balance, end of year	$	19	$	859

Allowance for credit losses for unfunded loan commitments
Balance, beginning of year	$	—	$	26
Provision charged to expense		—		(8)
Losses charged off		—		—
Recoveries		—		—
Balance, end of year	$	—	$	18

Table of Contents

Notes to Consolidated Financial Statements (Unaudited)

(Dollars in thousands)


	Nine Months Ended
	September 30, 2025
	Mortgage Loans on Real Estate
					Construction
	Residential				and Land
	1-4 Family		Commercial		Development		Commercial
Allowance for credit losses:
Balance, beginning of year	$	271	$	339	$	13	$	60
Provision charged to expense		9		109		—		17
Losses charged off		—		—		—		—
Recoveries		—		—		—

PFS Bancorp, Inc. 10-Q