CoastalSouth Bancshares, Inc. (COSO)

CIK: 0001297107. SIC: 6022 State Commercial Banks. Latest 10-K as of: 2026-03-12.

SIC breadcrumb: Finance, Insurance, And Real Estate > Depository Institutions > SIC 6022 State Commercial Banks

SEC company page: https://www.sec.gov/edgar/browse/?CIK=1297107. Latest filing source: 0001193125-26-104114.

Selected Fundamentals

Financials

Annual standardized facts from SEC companyfacts as of latest extracted filing date 2026-03-12. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001297107.json. Derived margins, ratios, and free cash flow are computed from the extracted annual SEC facts.

Flow metrics use full-year FY periods from 10-K/10-K/A filings; balance-sheet metrics use FY-end instants. Free cash flow = operating cash flow - capital expenditures. Missing metrics are omitted rather than fabricated.

Ratios

ROE and ROA use period-end equity/assets. Liabilities / equity uses total liabilities divided by stockholders' equity. Current ratio uses current assets divided by current liabilities when both are reported.

Financial Charts

Quarterly

Quarterly standardized facts from SEC companyfacts as of latest extracted filing date 2026-05-08. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001297107.json.

Flow metrics use discrete quarter-length periods from 10-Q/10-Q/A filings. Q4 revenue and net income are derived only when annual FY and nine-month YTD facts exist for the same fiscal year; derived Q4 values are labeled. EPS Q4 is not derived.

Quarterly Charts

Macro Cross-References

• CPIAUCSL - Consumer Price Index for All Urban Consumers: All Items in U.S. City Average
• UNRATE - Unemployment Rate
• FEDFUNDS - Federal Funds Effective Rate
• CES0500000003 - Average Hourly Earnings of All Employees, Total Private
• DFEDTARU - Federal Funds Target Range - Upper Limit
• DFEDTARL - Federal Funds Target Range - Lower Limit
• DGS3MO - Market Yield on U.S. Treasury Securities at 3-Month Constant Maturity
• DGS2 - Market Yield on U.S. Treasury Securities at 2-Year Constant Maturity
• DGS10 - Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity
• DGS30 - Market Yield on U.S. Treasury Securities at 30-Year Constant Maturity
• T10Y2Y - 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity
• CPILFESL - Consumer Price Index for All Urban Consumers: All Items Less Food and Energy
• CPIUFDSL - Consumer Price Index for All Urban Consumers: Food
• CPIENGSL - Consumer Price Index for All Urban Consumers: Energy
• CUSR0000SAH1 - Consumer Price Index for All Urban Consumers: Shelter
• PCEPI - Personal Consumption Expenditures: Chain-type Price Index
• PCEPILFE - Personal Consumption Expenditures Excluding Food and Energy: Chain-type Price Index
• PPIACO - Producer Price Index by Commodity: All Commodities
• T10YIE - 10-Year Breakeven Inflation Rate
• U6RATE - Total Unemployed, Plus All Marginally Attached Workers Plus Total Employed Part Time for Economic Reasons
• PAYEMS - All Employees, Total Nonfarm
• CIVPART - Labor Force Participation Rate
• EMRATIO - Employment-Population Ratio
• UNEMPLOY - Unemployed
• CE16OV - Employment Level
• ICSA - Initial Claims
• JTSJOL - Job Openings: Total Nonfarm
• JTSQUR - Quits: Total Nonfarm
• GDPC1 - Real Gross Domestic Product
• A191RL1Q225SBEA - Real Gross Domestic Product: Percent Change from Preceding Period
• INDPRO - Industrial Production: Total Index
• TCU - Capacity Utilization: Total Index
• HOUST - New Privately-Owned Housing Units Started: Total Units
• PERMIT - New Privately-Owned Housing Units Authorized in Permit-Issuing Places: Total Units
• RSAFS - Advance Retail Sales: Retail Trade
• PCE - Personal Consumption Expenditures
• DSPIC96 - Real Disposable Personal Income
• PSAVERT - Personal Saving Rate
• M2SL - M2
• BOPGSTB - U.S. International Trade in Goods and Services: Balance
• MSPUS - Median Sales Price of Houses Sold for the United States
• HSN1F - New One Family Houses Sold: United States
• RHORUSQ156N - Homeownership Rate in the United States
• TTLCONS - Total Construction Spending: Total Construction in the United States
• RRVRUSQ156N - Rental Vacancy Rate in the United States
• TOTALSL - Total Consumer Credit Owned and Securitized
• REVOLSL - Revolving Consumer Credit Owned and Securitized
• DRCCLACBS - Delinquency Rate on Credit Card Loans, All Commercial Banks
• GDP - Gross Domestic Product
• GPDI - Gross Private Domestic Investment
• GCE - Government Consumption Expenditures and Gross Investment
• PCEC - Personal Consumption Expenditures
• NETEXP - Net Exports of Goods and Services
• GFDEBTN - Federal Debt: Total Public Debt
• GFDEGDQ188S - Federal Debt: Total Public Debt as Percent of Gross Domestic Product
• FYFSD - Federal Surplus or Deficit
• FGRECPT - Federal Government Current Receipts
• FGEXPND - Federal Government: Current Expenditures
• MANEMP - All Employees, Manufacturing
• USCONS - All Employees, Construction
• USTRADE - All Employees, Retail Trade
• USFIRE - All Employees, Financial Activities
• USGOVT - All Employees, Government
• AWHAETP - Average Weekly Hours of All Employees, Total Private
• DGORDER - Manufacturers' New Orders: Durable Goods
• NEWORDER - Manufacturers' New Orders: Nondefense Capital Goods Excluding Aircraft
• BUSINV - Total Business Inventories
• EXPGS - Exports of Goods and Services
• IMPGS - Imports of Goods and Services
• IR - Import Price Index (End Use): All Commodities
• PPIFIS - Producer Price Index by Commodity: Final Demand

Latest quarter (10-Q)

Latest 10-Q source: 0001193125-26-214695.

Extracted structurally from real Item 2 body heading to real Item 3/4 boundary. Confidence: high. Filing date: 2026-05-08. Report date: 2026-03-31.

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

The purpose of this discussion and analysis of financial condition and results of operations, also referred to hereafter as this MD&A, is to aid in understanding significant changes in the financial condition of CoastalSouth Bancshares, Inc. and our wholly owned subsidiary, Coastal States Bank, from December 31, 2025 through March 31, 2026 and on our results of operations for the three months ended March 31, 2026 and 2025. This discussion and analysis should be read in conjunction with our audited consolidated financial statements and notes thereto for the year ended December 31, 2025 included on the Company’s 2025 Form 10-K and information presented elsewhere in this Quarterly Report on Form 10‑Q, particularly the unaudited consolidated financial statements and related notes appearing in Item 1.

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10‑Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. These statements are often, but not always, made through the use of words or phrases such as “may,” “might,” “should,” “could,” “predict,” “potential,” “believe,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “strive,” “projection,” “goal,” “target,” “aim,” “would,” “annualized” and “outlook,” or the negative version of those words or other comparable words or phrases of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions, estimates and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements.

A number of important factors could cause our actual results to differ materially from those indicated in these forward-looking statements, including the following:

•
general economic and business conditions in our local markets, including conditions affecting employment levels, interest rates, inflation, supply chains, the threat of recession, volatile equity capital markets, property and casualty insurance costs, collateral values, customer income, creditworthiness and confidence, spending and savings that may affect customer bankruptcies, defaults, charge-offs and deposit activity; and the impact of the foregoing on client behavior, including the velocity and levels of deposit withdrawals and loan repayment, the risk of accelerated deposit outflows driven by digital banking channels, real-time payments, or social media-driven concerns that may materially increase liquidity risk;

•
the occurrence of significant natural disasters, including hurricanes;

•
our ability to successfully execute our business strategy to achieve profitable growth;

•
our ability to implement and adapt to changes in our business strategies;

•
the impact of adverse developments in the banking industry, on client confidence, liquidity, and regulatory responses to these developments (including increases in the cost of our deposit insurance assessments and increased regulatory scrutiny), our ability to effectively manage our liquidity risk and any growth plans, and the availability of capital and funding;

•
our ability to manage growth and to increase operating efficiency;

•
our ability to access cost-effective funding in the future;

•
restrictions or limitations on access to funds from historical and alternative sources of liquidity could adversely affect our overall liquidity, which could restrict our ability to make payments on our obligations and our ability to support asset growth and sustain our operations and the operations of the Bank;

•
our ability to successfully manage our credit risk and the sufficiency of our allowance for credit losses (“ACL”);

•
the adequacy of our reserves (including ACL), including the appropriateness of our methodology for calculating such reserves;

•
factors that may impact the performance of our loan portfolio, including real estate values and liquidity in our primary service market areas, the financial health of our borrowers and the success of various projects that we finance;

•
inflation and changes in the interest rate environment that can reduce our margins or reduce the fair value of the financial instruments due to changes in consumer spending, borrowing and savings habits;

•
our ability to attract and maintain business banking relationships with well-qualified businesses, real estate developers and investors with proven track records in the market areas that we serve;

•
our ability to retain our existing customers and attract and retain new customer relationships;

29

•
our focus on small and mid-sized businesses;

•
our capital requirements as an insured depository institution;

•
concentration of our loan portfolio in real estate loans, changes in the prices, values and sales volumes of commercial and residential real estate;

•
credit and lending risks associated with our construction and development, commercial real estate, commercial and industrial, residential real estate and Small Business Administration ("SBA") loan portfolios;

•
a breach in security of our information systems, including the occurrence of cyber-attack incidents or a deficiencies in cyber security;

•
political instability or civil unrest and/or acts of war or terrorism;

•
changes or new fiscal and monetary policies of the federal government and its agencies;

•
our ability to comply with consumer protection laws, including the CRA and fair lending laws;

•
our ability to comply with various governmental and regulatory requirements, including supervisory actions by federal and state banking agencies;

•
other economic, competitive, governmental, regulatory and operational factors affecting our operations, pricing, products and services described in the Company's 2025 Form 10-K.

•
changes in the quality or composition of our loan or investment portfolios;

•
our hedging strategies to mitigate risks associated with changes in interest rates;

•
our dependence on third-party service providers;

•
inaccuracies or other failures from the use of models, including the failure of assumptions and estimates, as well as differences in, and changes to, economic, market and credit conditions;

•
continued or increasing competition and innovation from other financial institutions, credit unions, and non-bank financial services companies, many of which are subject to different regulations than we are;

•
our ability to attract and retain skilled people;

•
changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the FASB, the SEC or the Public Company Accounting Oversight Board;

•
risks related to potential acquisitions;

•
changes in the scope and cost of FDIC insurance and other coverage;

•
restraints on the ability of the Bank to pay dividends to us, which could limit our liquidity;

•
our ability to maintain adequate internal controls over financial reporting;

•
potential claims, damages, penalties, fines, costs and reputational damage resulting from pending or future litigation, regulatory proceedings and enforcement actions;

•
the makeup of our asset mix and investments;

•
our ability to manage our growth;

•
our ability to increase our operating efficiency;

•
the risk that balance sheet, revenue growth, and loan growth expectations may differ from actual results;

•
a deterioration of the credit rating for U.S. long-term sovereign debt, actions that the U.S. government may take to avoid exceeding the debt ceiling, and uncertainties surrounding the federal budget and economic policy, including the impact of tariffs and trade policies; and

•
other risks and factors identified in the Company’s 2025 Form 10-K that was filed with the SEC under the heading “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this Quarterly Report on Form 10-Q. Because of these risks and other uncertainties, our actual future results, performance or achievement, or industry results, may be materially different from the results indicated by the forward-looking statements in this Quarterly Report on Form 10-Q. In addition, our past results of operations are not necessarily indicative of our future results. These forward-looking statements represent our beliefs, assumptions and estimates only as of the dates on which they were made, as predictions of future events. However, the events and circumstances reflected in the forward-looking statements may not be achieved or occur. For example, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. Any forward-looking statement speaks

30

only as of the date on which it is made, and except as required by applicable law, we do not undertake any obligation to update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.

These statements are inherently uncertain, and we cannot guarantee future results, performance or achievements. For a discussion of these and other risks that may cause actual results to differ from expectations, refer to the section entitled “Risk Factors” and other information contained on the Company’s 2025 Form 10-K and our other periodic filings, including quarterly reports on Form 10-Q and current reports on Form 8-K, that we file from time to time with the SEC.

Overview

CoastalSouth Bancshares, Inc. (the "Company"), a bank holding company headquartered in Atlanta, Georgia. The Company was incorporated under the laws of the Commonwealth of Virginia on May 24, 2004, and converted to a corporation organized under the laws of the State of Georgia on May 12, 2023. We operate through our wholly-owned banking subsidiary, Coastal States Bank (the "Bank" or "CSB"), a South Carolina state-chartered commercial bank. We currently operate 11 retail banking branches in three primary markets, including the Lowcountry of South Carolina, Savannah, Georgia, and metro Atlanta, Georgia. CSB also operates four specialty lines of business, including Senior Housing, Marine Lending, Government Guaranteed Lending, and Mortgage Banker Finance ("MBF"). The deposits of CSB are insured by the FDIC. Coastal States Mortgage, Inc. (“CSM”), a wholly owned subsidiary of CSB, is a mortgage company focused on originating and single-family residential mortgages, some of which are retained in the portfolio. In this report on Form 10-Q, the words “the Company,” “we,” “us,” and “our” refer to CoastalSouth Bancshares, Inc., together with CSB and CSB’s wholly owned subsidiaries, except where the context requires otherwise.

The following discussion a

[Excerpt truncated for page length; source filing is linked above.]

Latest 10-K MD&A

Extracted from Item 7 to the first post-MD&A boundary after HTML sanitization. Confidence: high. Filing date: 2026-03-12. Report date: 2025-12-31.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. This discussion and analysis contains forward-looking statements that involve risk, uncertainties and assumptions. Certain risks, uncertainties and other factors, including but not limited to those set forth under “Cautionary Note Regarding Forward-Looking Statements,” “Risk Factors,” and elsewhere in this Annual Report on Form 10-K, may cause actual results to differ materially from those projected in the forward looking statements. We assume no obligation to update any of these forward-looking statements.

Critical Accounting Policies and Estimates

Our accounting and reporting policies conform to accounting principles generally accepted in the United States of America (“GAAP”) and conform to general practices within the industry in which we operate. To prepare financial statements in conformity with GAAP, management makes estimates, assumptions and judgments based on available information. These estimates, assumptions and judgments affect the amounts reported in the financial statements and accompanying notes. These estimates, assumptions, and judgments are based on information available as of the date of the financial statements and, as this information changes, actual results could differ from the estimates, assumptions and judgments reflected in the financial statement. In particular, management has identified several accounting policies that, due to the estimates, assumptions and judgments inherent in those policies, are critical in understanding our financial statements.

The following is a discussion of the critical accounting policies and significant estimates that require us to make complex and subjective judgments. Additional information about these policies can be found in Note 1 of our consolidated financial statements as of December 31, 2025, included elsewhere in this Annual Report on Form 10-K.

Allowance for Credit Losses

A consequence of lending activities is that we may incur credit losses and the amount of such losses will vary depending upon the risk characteristics of the loan lease portfolio as affected by economic conditions such as rising interest rates and the financial performance of borrowers.

The ACL represents management’s current estimate of credit losses for the remaining estimated life of financial instruments, with particular applicability on our balance sheet to loans held-for-investment and unfunded loan commitments. Estimating the amount of the ACL requires significant judgment and the use of estimates related to historical experience, current conditions, reasonable and supportable forecasts, and the value of collateral on collateral-dependent loans. The loan portfolio also represents the largest asset type on our Consolidated Balance Sheet. Credit losses are charged against the allowance, while recoveries of amounts previously charged off are credited to the allowance. A provision for credit losses is charged to operations based on management’s periodic evaluation of the factors previously mentioned, as well as other pertinent factors.

There are many factors affecting the ACL; some are quantitative, while others require qualitative judgment. Although management believes its process for determining the allowance adequately considers the potential factors that could potentially result in credit losses, the process includes subjective elements and is susceptible to significant change. To the extent actual outcomes are worse than management estimates, additional provision for credit losses could be required that could adversely affect our earnings or financial position in future periods.

See Note 1 and Note 3 of our consolidated financial statements as of December 31, 2025, included elsewhere in this Annual Report on Form 10-K, for additional information on the allowance for credit losses.

Fair Value Measurements

ASC 820 defines fair value as the price that would be received to sell a financial asset or paid to transfer a financial liability in an orderly transaction between market participants at the measurement date. The degree of management judgment involved in determining the fair value of assets and liabilities is dependent upon the availability of quoted market prices or observable market parameters. For financial instruments that trade actively and have quoted market prices or observable market parameters, there is minimal subjectivity involved in measuring fair value. When observable market prices and parameters are not available, management judgment is necessary to estimate fair value.

38

The fair values for AFS securities are generally based upon quoted market prices or observable market prices for similar instruments. Management utilizes a third-party pricing service to assist with determining the fair value of our securities portfolio. The pricing service uses observable inputs when available including benchmark yields, reported trades, broker-dealer quotes, issuer spreads, benchmark securities, bids and offers. These values take into account recent market activity as well as other market observable data such as interest rate, spread and prepayment information.

The Company’s derivative financial instruments, which are interest rate contracts, are valued using a discounted cash flow method that incorporates current market interest rates. We use derivative financial instruments primarily to manage our interest rate risk.

From time to time, we may record assets at fair value on a nonrecurring basis, usually as a result of the write-downs of individual assets due to impairment or to value real estate or property obtained through foreclosure or repossession. In particular, nonaccrual loans may be carried at the fair value of collateral if repayment is expected solely from the collateral. Although management believes its processes for determining the fair value of collateral-dependent loans are appropriate, the processes require management judgment and assumptions and the value of such assets at the time they are revalued or divested may be significantly different from management’s determination of fair value.

In addition, changes in market conditions may reduce the availability of quoted prices or observable date. See Note 17 of our consolidated financial statements as of December 31, 2025, included elsewhere in this Annual Report on Form 10-K, for a complete discussion of fair value of financial assets and liabilities and their related measurement practices.

Results of Operations — Comparison for the Years Ended December 31, 2025 and 2024

Net Income

We recorded net income of $24.9 million for the year ended December 31, 2025 compared to $21.9 million for the year ended December 31, 2024, an increase of $3.0 million, or 13.6%. This increase was due to a combination of factors including, an $8.6 million increase in net interest income; a $3.6 million increase noninterest income, principally due to the previously disclosed $3.5 million nonrecurring loss on sale of AFS securities during 2024; offset by a $5.6 million increase in noninterest expense, a $2.6 million increase in provision for credit losses and a $933 thousand increase in provision for income taxes.

Basic and diluted earnings per common share for the year ended December 31, 2025 was $2.24 and $2.16, respectively, compared to $2.15 and $2.09 for the basic and diluted earnings per common share for the year ended December 31, 2024.

Net Interest Income

The management of interest income and expense is fundamental to our financial performance. Net interest income, the difference between interest income and interest expense, is the largest component of the Company’s total revenue. Management closely monitors both total net interest income and the net interest margin (net interest income divided by average earning assets). We seek to maximize net interest income without exposing the Company to an excessive level of interest rate risk through our asset and liability policies. Interest rate risk is managed by monitoring the pricing, maturity and repricing options of all classes of interest-bearing assets and liabilities.

Net interest income for the year ended December 31, 2025 was $73.9 million compared to $65.3 million for the year ended December 31, 2024, an increase of $8.6 million, or 13.1%. This increase was primarily due to an increase in the average balance of our total interest-earning assets albeit lower yields on interest-earning assets; offset by a decrease in the average rate paid on interest-bearing liabilities. The increase in the average balance of interest-earning assets was primarily due to an increase in average loans outstanding. The yield on total earning assets and interest-bearing liabilities decreased by 16 and 47 basis points, respectively, during the same period.

Interest expense for the year ended December 31, 2025 was $53.8 million compared to $58.3 million for the year ended December 31, 2024. This decrease was primarily attributable to a 47 basis point decrease in the average cost on overall total interest-bearing liabilities, primarily in money market and time deposits accounts due to the interest rates cuts during 2025. Average borrowings outstanding decreased from December 31, 2024 to December 31, 2025 by $63.1 million, or 73.8%, while the yield increased by 119 basis points primarily driven by the $15.0 million redemption of subordinated debt and the recognition of $236 thousand of accelerated debt issuance expense during 2025.

The Company currently has various interest rate swap derivative agreements that are designated as cash flow hedges of our brokered deposits, or other fixed rate advances to mitigate interest rate risk. The Company also has interest rate collar derivative agreements that are designated as hedges of variable rate loans. See Note 19 of our consolidated financial

39

statements as of December 31, 2025, included elsewhere in this Annual Report on Form 10-K, for additional information on these interest rate derivatives.

Net interest margin for the year ended December 31, 2025 and 2024 was 3.51% and 3.29%, respectively. Net interest margin and net interest income are influenced by internal and external factors. Internal factors include balance sheet changes on both volume and mix and pricing decisions, and external factors include changes in market interest rates, competition and the shape of the interest rate yield curve. This increase in our net interest margin is primarily driven by higher growth rate in average total earnings assets in relation to the growth of total interest-earning liabilities, coupled with a lower rate of yield decline for average total earnings assets in relation to the yield decline of total interest-earning liabilities as discussed above.

Average Balances, Interest and Yields

The following tables present, for the years ended December 31, 2025 and 2024, information about: (i) weighted average balances, the total dollar amount of interest income from interest-earning assets and the resultant average yields; (ii) average balances, the total dollar amount of interest expense on interest-bearing liabilities and the resultant average rates; (iii) net interest income; (iv) the interest rate spread; and (v) the net interest margin.

For the Years Ended December 31,

2025

2024

Average

Interest and

Yield /

Average

Interest and

Yield /

(dollars in thousands)

Balance

Fees

Rate

Balance

Fees

Rate

Earning Assets:

Cash and due from banks

$

21,449

$

484

2.26

%

$

20,546

$

534

2.60

%

Federal funds sold

66,287

2,901

4.38

69,490

3,751

5.40

Investment securities

338,498

15,534

4.59

352,681

16,046

4.55

Loans:

Loans held for sale

167,670

13,308

7.94

123,310

10,272

8.33

Gross loans held for investment

1,511,831

95,486

6.32

1,418,022

93,046

6.56

Total earning assets

2,105,735

127,713

6.07

1,984,049

123,649

6.23

Noninterest-earning assets

100,807

103,204

Total assets

$

2,206,542

$

2,087,253

Interest-bearing liabilities:

Demand deposits

$

199,395

$

1,506

0.76

%

$

179,495

$

816

0.45

%

Money market deposits

593,291

18,500

3.12

598,621

22,349

3.73

Savings deposits

35,179

177

0.50

38,074

189

0.50

Time deposits

793,184

32,097

4.05

651,974

30,089

4.62

Total interest-bearing deposits

1,621,049

52,280

3.23

1,468,164

53,443

3.64

Borrowings

22,362

1,543

6.90

85,505

4,884

5.71

Total interest-bearing liabilities

$

1,643,411

$

53,823

3.28

%

$

1,553,669

$

58,327

3.75

%

Noninterest-bearing liabilities:

Noninterest-bearing deposits

$

307,464

$

323,949

Other noninterest-bearing liabilities

28,182

29,007

Total noninterest-bearing liabilities

335,646

352,956

Shareholders' equity

227,485

180,628

Total liabilities and shareholders' equity

$

2,206,542

$

2,087,253

Net interest income

$

73,890

$

65,322

Net interest spread

2.79

%

2.48

%

Net interest margin

3.51

%

3.29

%

Rate/Volume Analysis

Increases and decreases in interest income and interest expense result from changes in average balances (volume) of interest-earning assets and interest-bearing liabilities, as well as changes in average interest rates. The following table sets forth the effects of changing rates and volumes on our net interest income during the period shown. Information is provided with respect to (i) effects on interest income attributable to changes in volume (change in volume multiplied by prior rate) and (ii) effects on interest income attributable to changes in rate (changes in rate multiplied by prior volume). Change applicable to both volumes and rate have been allocated to volume.

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For the Year Ended December 31, 2025 Compared to the Year Ended December 31, 2024

Increase (Decrease) Due to Change in:

(dollars in thousands)

Volume

Yield/Rate

Total Change

Earning Assets:

Cash and due from banks

$

20

$

(70

)

$

(50

)

Federal funds sold

(140

)

$

(710

)

(850

)

Investment securities

(651

)

$

139

(512

)

Loans:

Loans held for sale

3,521

$

(485

)

3,036

Gross loans held for investment

5,925

$

(3,485

)

2,440

Total earning assets

$

8,675

$

(4,611

)

$

4,064

Interest-bearing liabilities:

Demand deposits

$

150

$

540

$

690

Money market deposits

(166

)

$

(3,683

)

(3,849

)

Savings deposits

(15

)

$

3

(12

)

Time deposits

5,714

$

(3,706

)

2,008

Total interest-bearing deposits

$

5,683

$

(6,846

)

$

(1,163

)

Borrowings

(4,357

)

1,016

(3,341

)

Total interest-bearing liabilities

$

1,326

$

(5,830

)

$

(4,504

)

Net interest income

$

7,349

$

1,219

$

8,568

Provision for Credit Losses

The provision for credit losses reflects our internal calculation and judgment of the appropriate amount of the allowance for credit losses. The adoption of ASU No. 2016-13, “Measurement of Credit Losses on Financial Instruments” or “CECL” significantly changed the methodology of how we measure credit losses (see Note 1 to the consolidated financial statements for more information). We maintain the ACL at levels we believe are appropriate to cover our estimate of expected credit losses over the life of loans in the portfolio as of the end of the reporting period. The ACL is determined through detailed quarterly analyses of our loan portfolio. We estimate the ACL on loans based on the underlying loans’ amortized cost basis, which is the amount at which the financing receivable is originated or acquired, adjusted for applicable accretion or amortization of premium, discount, and net deferred fees or costs, collection of cash, and charge-offs. Expected credit losses are reflected in the ACL through a charge to provision for credit losses. The ACL is based on loss rate method, qualitative factors adjustments that are relevant to the institution as of the reporting date, reasonable and supportable forecasts, as well as an ongoing assessment of credit quality and environmental factors not reflective in historical loss rates. Additional qualitative factors that are considered in determining the amount of the allowance for credit losses are concentrations of credit risk (geographic, large borrower, and industry), changes in underwriting standards, changes in collateral value, experience and depth of lending staff, trends in delinquencies, and the volume and terms of loans.

See the section captioned “Allowance for Credit Losses on Loans”, “Allowance for Credit Losses for Unfunded Commitments”, and "Allowance for Credit Losses — Available for Sale Securities" elsewhere in this document for further analysis of our provision for credit losses.

Total allowance for credit losses was $18.7 million at December 31, 2025 compared to $17.1 million at December 31, 2024, an increase of $1.6 million, or 9.5% primarily attributed to loan growth in 2025.

Provision for credit losses for the year ended December 31, 2025 was $3.2 million compared to $553 thousand for the year ended December 31, 2024, an increase of $2.6 million. This increase was primarily attributable to increased loan production and changes in economic factors, offset by decreases in reserves of individually analyzed collateral-dependent loans and other changes in loss rates. The allowance for credit losses as a percentage of gross LHFI at December 31, 2025 and 2024 was 1.16% and 1.21%, respectively.

Noninterest Income

Noninterest income is an important component of our total revenues. A significant portion of our noninterest income is associated with mortgage banking related activities as well as gain on sale of government guaranteed loans. Other sources of noninterest income include service charges on deposit accounts, interchange and card fees, gain on bank-owned life insurance ("BOLI"), and other noninterest income categories.

41

The following table sets forth the major components of our noninterest income for the years ended December 31, 2025 and 2024:

For the Years Ended December 31,

(dollars in thousands)

2025

2024

Increase (decrease)

Noninterest income:

Bank-owned life insurance

$

1,812

$

1,664

$

148

8.9

%

Income from mortgage originations

1,176

1,204

(28

)

(2.3

)

Gain on sale of government guaranteed loans

1,560

1,818

(258

)

(14.2

)

Interchange and card fee income

991

868

123

14.2

Service charges on deposit accounts

890

846

44

5.2

Losses on sale of available-for-sale securities

(10

)

(3,465

)

3,455

(99.7

)

Other noninterest income

1,652

1,579

73

4.6

Total noninterest income

$

8,071

$

4,514

$

3,557

(78.8

)

%

Gain on BOLI increased by $148 thousand to $1.8 million for the year ended December 31, 2025 compared to $1.7 million for the year ended December 31, 2024. This increase was primarily attributable to an overall increase in total cash surrender value.

Mortgage banking related income decreased modestly by $28 thousand to $1.2 million for the year ended December 31, 2025 compared to $1.2 million for the the year ended December 31, 2024. This decrease was primarily due to lower mortgage production which is comprised primarily of activity related to the sale of consumer mortgage loans as well as loan origination fees such as closing charges, document review fees, application fees, other loan origination fees, and loan processing fees.

Gain on sale of government guaranteed loans decreased by $258 thousand to $1.6 million for the year ended December 31, 2025 compared to $1.8 million for the the year ended December 31, 2024. The Company sold less GGL volume at lower premiums during 2025.

Interchange and card fee income increased by $123 thousand to $991 thousand for the year ended December 31, 2025 compared to $868 thousand for the the year ended December 31, 2024. This increase was attributable interchange fees from debit cardholder transactions conducted through a payment network. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are earned on a daily basis.

Service charges on deposit accounts increased by $44 thousand to $890 thousand for the year ended December 31, 2025 compared to $846 thousand for the year ended December 31, 2024. This increase was attributable to an increase in NSF and overdraft fees charged during 2025.

Losses on sale of AFS securities were $10 thousand for the year ended December 31, 2025 compared to $3.5 million for the year ended December 31, 2024. The higher loss during the year ended December 31, 2024 was primarily due to a strategic repositioning of AFS portfolio.

Other noninterest income increased by $73 thousand to $1.7 million for the year ended December 31, 2025 compared to $1.6 million for the year ended December 31, 2024. The largest component of other noninterest income generally consists of SBA loan servicing fees. SBA loan servicing fees increased by $41 thousand during the year ended December 31, 2025 compared to the year ended December 31, 2024.

Noninterest Expense

The following table sets forth the major components of our noninterest expense for the years ended December 31, 2025 and 2024:

For the Years Ended December 31,

(dollars in thousands)

2025

2024

Increase (decrease)

Noninterest expense:

Salaries and employee benefits

$

28,320

$

26,187

$

2,133

8.1

%

Occupancy and equipment

3,316

2,995

321

10.7

Other professional services

2,628

2,046

582

28.4

Software and other technology expense

3,018

2,742

276

10.1

Data processing

2,564

2,213

351

15.9

Regulatory assessment

1,493

1,291

202

15.6

Marketing and advertising

972

859

113

13.2

Other noninterest expense

5,318

3,735

1,583

42.4

Total noninterest expense

$

47,629

$

42,068

$

5,561

13.2

%

42

Salaries and employee benefits expense for the year ended December 31, 2025 was $28.3 million compared to $26.2 million for the year ended December 31, 2024, an increase of $2.1 million, or 8.1%. This increase was attributable to hiring new employees with skills and experience necessary to support our strategic goals and annual salary adjustments and were commensurate with the Company's growth, generally. The average number of full-time equivalent employees was 189 for the year ended December 31, 2025 compared to 180 for the year ended December 31, 2024.

Occupancy and equipment expense for the year ended December 31, 2025 was $3.3 million compared to $3.0 million for the year ended December 31, 2024, an increase of $321 thousand, or 10.7%. This increase was primarily due to property taxes and depreciation and upkeep related to the properties.

Other professional services expense for the year ended December 31, 2025 was $2.6 million compared to $2.0 million for the year ended December 31, 2024, an increase of $582 thousand, or 28.4%. This increase was primarily in recruiting expense, consulting fees and loan workout related expenses.

Software and technology expense for the year ended December 31, 2025 was $3.0 million compared to $2.7 million for the year ended December 31, 2024, an increase of $276 thousand, or 10.1%. This expense was primarily comprised of our information technology services, software licenses and maintenance and were commensurate with Company growth, generally.

Data processing expense for the year ended December 31, 2025 was $2.6 million compared to $2.2 million for the year ended December 31, 2024, an increase of $351 thousand, or 15.9%. Data processing expense was in line with the Company's increased wire and account processing volumes and other processing costs that were commensurate with growth, generally.

FDIC insurance and regulatory assessment expense for the year ended December 31, 2025 was $1.5 million compared to $1.3 million for the year ended December 31, 2024, an increase of $202 thousand, or 15.6%. This increase was primarily attributable to increases in total assets and changes in asset mix and asset growth rates from 2024 to 2025.

Marketing and advertising expense for the year ended December 31, 2025 was $972 thousand compared to $859 thousand for the year ended December 31, 2024, an increase of $113 thousand, or 13.2%. This increase was primarily attributable to higher marketing and advertising costs associated with increased digital advertising, mailings, and sponsorships during 2025. Marketing and advertising expense is included in other noninterest expenses in our Company’s Consolidated Statements of Operations.

Other noninterest expenses, excluding marketing and advertising expense, for the year ended December 31, 2025 were $5.3 million compared to $3.7 million for the year ended December 31, 2024, an increase of $1.6 million, or 42.4%. This increase was across multiple categories but primarily was attributable to a nonrecurring release from the resolution of the SBA contingency reserve in 2024, increases in board of directors fees paid in cash, as no equity award were granted to the Board of Directors in 2025, general and administrative, and other real estate owned ("OREO") writedowns. Included in other noninterest expenses for the year ended December 31, 2025 and 2024 were directors’ fees of approximately $702 thousand and $318 thousand, respectively.

Income Tax Expense

Income tax expense for the years ended December 31, 2025 and 2024 was $6.2 million and $5.3 million, respectively. Effective tax rates were 20.1% and 19.5% for the years ended December 31, 2025 and 2024, respectively. We had a net deferred tax asset of $16.4 million and $18.1 million at December 31, 2025 and 2024, respectively.

Return on Equity and Assets

The Company has and continues to consistently improve profitability due to success in our growth strategies to expand our balance sheet by sourcing and acquiring new customer relationships, and as a result, growing quality loans, as well as a strong deposits base, coupled with a strong net interest margin during the periods indicated in the table below.

The following table sets forth our return on total average assets, return on tangible common equity (non-GAAP) and return on average shareholders’ for the periods indicated:

As of and for the Years Ended December 31,

2025

2024

Return on Average:

Total assets (1)

1.13

%

1.05

%

Tangible common equity (1) (2)

11.19

%

12.49

%

Shareholders' equity (1)

10.94

%

12.13

%

43

(1) Results for the year ended December 31, 2024 were impacted by losses on sale of AFS securities due to portfolio restructuring discussed elsewhere.

(2) This is a Non-GAAP financial measure. See the Non-GAAP reconciliation to most comparable GAAP measures that follows below.

Reconciliation of Return on Average Equity (GAAP-basis) to the Return on Average Tangible Equity as of December 31, 2025 and 2024:

As of and for the Years Ended December 31,

(dollars in thousands)

2025

2024

Net income

$

24,892

$

21,904

Average shareholders' equity

227,485

180,628

Return on average shareholders' equity (1)

10.94

%

12.13

%

Average Tangible Common Equity:

Average shareholders' equity

$

227,485

$

180,628

Less: Average goodwill and intangibles

(6,209

)

(6,372

)

 Adjusted for: Average mortgage servicing rights

1,141

1,133

Average tangible common equity

$

222,417

$

175,389

Return on average tangible common shareholders' equity (1)

11.19

%

12.49

%

(1) Results for the year ended December 31, 2024 were impacted by losses on sale of AFS securities due to portfolio restructuring discussed elsewhere.

Financial Condition

Total Assets

Total assets increased $207.9 million, or 9.9%, to $2.31 billion at December 31, 2025 compared to $2.10 billion at December 31, 2024. The increasing trend in total assets was primarily attributable to increases in gross LHFI, driven by strong demand for our loan products in our markets and the success of our growth initiatives to grow our loans portfolio.

Loans

Our loans represent the largest portion of our earning assets, substantially greater than the securities portfolio or any other asset category.

Average loans, including both LHFI and LHFS, were 79.8% and 77.7% of total average earning assets as of December 31, 2025 and 2024, respectively. Therefore, the quality and diversification of our loan portfolio is an important consideration when reviewing our financial condition. The Company has established systematic procedures for approving and monitoring loans that vary depending on the size and nature of the loan and applies these procedures in a disciplined manner. Total gross loans of $1.79 billion at December 31, 2025 represent an increase of $204.8 million or 12.9% as compared to December 31, 2024.

LHFS are comprised of loans acquired through mortgage warehouse lending activities and origination of mortgage loans. We act as a warehouse lender by purchasing loans originated by third-party mortgage originators and selling these loans to other third-party investors. We also originate mortgage loans with customers through CSM and sell these loans to third-party investors. LHFS at December 31, 2025 were $170.9 million compared to $174.0 million at December 31, 2024.

Gross LHFI increased $207.9 million, or 14.7%, to $1.62 billion as of December 31, 2025 compared to $1.41 billion at December 31, 2024. There was a higher market demand for our commercial and retail loan products during the year ended December 31, 2025 from December 31, 2024 as the Company experienced strong loan demand and has been able to close many deals in the pipeline.

The Company engages in a full complement of lending activities, including CRE loans, construction loans, C&I, and consumer purpose loans. Our loan portfolio has concentrations of over 10% of LHFI in income producing CRE, senior housing, marine vessels loans, and residential mortgages with the remaining balance in other categories within commercial and retail loans categories. The Bank's ratio of commercial real estate loans, excluding owner-occupied loans, to total regulatory capital was 230.0% and 232.0% for December 31, 2025 and 2024, respectively.

44

The following table presents the balance and associated percentage of each major category in our LHFI portfolio at December 31, 2025 and 2024:

As of December 31,

2025

2024

(dollars in thousands)

Amount

% of Total

Amount

% of Total

 Commercial loans

Acquisition, development, and

  construction

$

119,352

7.4

%

$

72,520

5.2

%

Income producing CRE

378,179

23.4

321,558

22.8

Owner-occupied CRE

92,787

5.7

94,573

6.7

Senior housing

259,529

16.0

234,081

16.6

Commercial and industrial

145,380

9.0

141,626

10.0

Total commercial loans

995,227

61.5

%

$

864,358

61.3

%

Retail loans

Marine vessels

$

312,096

19.3

 %

$

263,657

18.6

 %

Residential mortgages

199,991

12.4

174,099

12.4

Cash value life insurance LOC

87,172

5.4

86,844

6.2

Other consumer

22,829

1.4

20,485

1.5

Total retail loans

$

622,088

38.5

 %

$

545,085

38.7

 %

    Gross loans held for investment

$

1,617,315

100.0

 %

$

1,409,443

100.0

 %

    Allowance for credit losses

(18,743

)

(17,118

)

     Total loans held for investment, net

$

1,598,572

$

1,392,325

We have established a policy for managing concentration limits in the loan portfolio for commercial real estate, senior housing, and marine lending, among other loan types. All loan types are within established limits. We use underwriting guidelines to assess the borrowers’ historical cash flow to determine debt service, and we further stress test the debt service under higher interest rate scenarios. Financial and performance covenants are used in commercial lending agreements to allow us to react to a borrower’s deteriorating financial condition, should that occur. We engage in a full complement of lending activities, including CRE loans, construction loans, C&I, and consumer purpose loans.

The following table presents the maturity distribution of our loans as of December 31, 2025. The table shows the distribution of such loans between those loans with predetermined (fixed) interest rates and those with variable (floating) interest rates:

As of December 31, 2025

Due in One Year or Less

Due after One Year Through Five Years

Due after Five Years Through Fifteen Years

Due after Fifteen Years

(dollars in thousands)

Fixed

Rate

Adjustable

Rate

Fixed

Rate

Adjustable

Rate

Fixed

Rate

Adjustable

Rate

Fixed

Rate

Adjustable

Rate

Total

 Commercial loans

Acquisition, development, and

  construction

$

32

$

58,666

$

3,733

$

49,108

$

2,378

$

860

$

-

$

4,575

$

119,352

Income producing CRE

43,850

23,988

142,692

109,008

8,595

30,569

1,129

18,348

378,179

Owner-occupied CRE

6,674

200

40,584

3,548

6,842

12,806

1,233

20,900

92,787

Senior housing

959

100,391

6,479

151,700

-

-

-

-

259,529

Commercial and industrial

10,193

25,032

28,823

22,761

30,150

27,526

19

876

145,380

Total commercial loans

$

61,708

$

208,277

$

222,311

$

336,125

$

47,965

$

71,761

$

2,381

$

44,699

$

995,227

Retail loans

Marine vessels

$

3,305

$

-

$

-

$

-

$

30,228

$

564

$

252,901

$

25,098

$

312,096

Residential mortgages

8,699

630

1,566

3,024

17,000

7,042

92,886

69,144

199,991

Cash value life insurance LOC

-

27,573

-

59,599

-

-

-

-

87,172

Other consumer

507

68

1,421

4

9,477

91

10,903

358

22,829

Total retail loans

$

12,511

$

28,271

$

2,987

$

62,627

$

56,705

$

7,697

$

356,690

$

94,600

$

622,088

   Gross loans held for investment

$

74,219

$

236,548

$

225,298

$

398,752

$

104,670

$

79,458

$

359,071

$

139,299

$

1,617,315

The following is a discussion of the Company's segments and classes of LHFI:

Commercial Loans

As of December 31, 2025, our total commercial loans comprised of $995.2 million, or 61.5%, of loans, compared to $864.4 million or 61.3%, of loans as of December 31, 2024. Our total commercial loans balances have consistently increased due to a steady production and demand.

45

Following below are our principal commercial loans portfolio categories:

Acquisition, Development, and Construction – ADC loans include both loans and credit lines for the purpose of purchasing, carrying, and developing land into residential subdivisions or various types of commercial developments, such as industrial, hospitality, warehouse, retail, office, and multi-family. This category also includes loans and credit lines for construction of residential developments, multi-family buildings, and commercial buildings. The Company generally engages in ADC lending primarily in local markets served by its branches, and through our homebuilder finance and government guaranteed lending lines of business. The Company recognizes that risks are inherent in the financing of commercial real estate development and construction. These risks include location, market conditions and price volatility, change in interest rates, demand for developed land, lots and buildings, desirability of features and styling of completed developments and buildings, competition from other developments and builders, traffic patterns, remote work patterns, governmental jurisdiction, tax structure, availability of utilities, roads, public transportation and schools, availability of permanent financing for homebuyers, zoning, environmental restrictions, lawsuits, economic and business cycle, labor, and reputation of the builder or developer.

Each ADC loan is underwritten to address: (i) the desirability of the project, its market viability and projected absorption period; (ii) the creditworthiness of the borrower and the guarantor as to liquidity, cash flow and assets available to ensure performance of the loan; (iii) equity contribution to the project; (iv) the developer’s experience and success with similar projects; and (v) the value of the collateral. ADC loans are inspected periodically to ensure that the project is on schedule and eligible for requested draws. Inspections may be performed by construction inspectors hired by the Company or by appropriate loan officers and are conducted periodically to monitor the progress of a particular project. These inspections may also include discussions with project managers and engineers. Rising interest rates and the potential for slowing economic conditions could negatively impact borrowers’ and guarantors’ ability to repay their debt which could make more of the Company’s loans collateral-dependent.

The following table presents the balance and associated percentage of each category in our ADC loan portfolio as of December 31, 2025 and 2024:

As of December 31,

2025

2024

(dollars in thousands)

Amount

% of Total

Amount

% of Total

ADC Loans by Type

Residential Builder

$

51,324

43.0

%

$

57,597

79.4

%

Multifamily

20,886

17.5

-

0.0

Office

904

0.8

-

0.0

Retail

666

0.5

-

0.0

Restaurant

-

0.0

1,393

1.9

Hospitality

3,255

2.7

-

0.0

Other

42,317

35.5

13,530

18.7

Total ADC loans

$

119,352

100.0

%

$

72,520

100.0

%

As of December 31, 2025, our ADC loans comprised of $119.4 million, or 7.4%, of loans, compared to $72.5 million, or 5.2%, of loans as of December 31, 2024. Our ADC loans balances have grown since December 31, 2024 due to the continued ADC loans demand in our markets.

Income Producing CRE – Income producing CRE loans include loans to finance income-producing commercial and multifamily properties. Lending in this category is generally limited to properties located in the Company’s market area with only limited exposure to properties located elsewhere but owned by in-market borrowers. Loans in this category include loans for neighborhood retail centers, medical and professional offices, single retail stores, warehouses and apartments leased generally to local businesses and residents. The underwriting of these loans takes into consideration the occupancy, rental rates, and local market demand as well as the financial health of the borrower. The primary risk associated with loans secured with income producing property is the inability of that property to produce adequate cash flow to service the debt. High unemployment, significant increases to interest rates, generally weak economic conditions and/or an oversupply in the market may result in our customers having difficulty achieving adequate occupancy and/or rental rates. Payments on such loans are often dependent on successful operation or management of the properties.

The following table presents the balance and associated percentage of each category in our income producing CRE loan portfolio as of December 31, 2025 and 2024:

46

As of December 31,

2025

2024

(dollars in thousands)

Amount

% of Total

Amount

% of Total

Income Producing CRE by Type

Hospitality

$

146,540

38.8

%

$

114,591

35.6

%

Retail

77,586

20.5

72,051

22.4

Office

28,100

7.4

28,663

8.9

Multifamily

41,682

11.0

31,649

9.8

Industrial

5,442

1.4

14,652

4.6

Restaurant

9,909

2.6

11,406

3.6

Medical

1,644

0.5

1,696

0.5

Other

67,276

17.8

46,850

14.6

Total income producing CRE loans

$

378,179

100.0

%

$

321,558

100.0

%

As of December 31, 2025, our income producing CRE loans comprised of $378.2 million, or 23.4%, of loans, compared to $321.6 million, or 22.8%, of loans as of December 31, 2024. Our income producing CRE loans balances have consistently grown due to a steady demand in our markets coupled with fewer competitors actively pursuing income producing CRE loans.

Owner-Occupied CRE – Owner-occupied CRE loans include loans secured by business facilities to finance business operations, equipment and owner-occupied facilities primarily for small and medium-sized enterprises. These include both lines of credit and term loans which are amortized over the useful life of the assets financed. Personal guarantees, if applicable, are generally required for these loans. The Company recognizes that risk from economic cycles, pandemics, government regulation, supply chain disruptions, product innovations or obsolescence, operational errors, lawsuits, natural disasters, losses due to theft or embezzlement, health or loss of key personnel, or competitive situations may adversely affect the scheduled repayment of business loans.

The following table presents the balance and associated percentage of each category in our owner-occupied CRE loan portfolio as of December 30, 2025 and 2024:

2025

2024

(dollars in thousands)

Amount

% of Total

Amount

% of Total

Owner-occupied CRE by Type

Restaurant

$

22,275

24.0

%

$

23,641

25.0

%

Office

11,903

12.8

13,202

14.0

Medical

6,911

7.5

8,464

9.0

Retail

3,254

3.5

3,136

3.3

Industrial

8,972

9.7

3,628

3.8

Other

39,472

42.5

42,502

44.9

Total owner-occupied CRE loans

$

92,787

100.0

%

$

94,573

100.0

%

As of December 31, 2025, our owner-occupied CRE loans comprised of $92.8 million, or 5.7%, of loans, compared to $94.6 million, or 6.7%, of loans as of December 31, 2024. Our owner-occupied CRE loans balances have remained generally flat from December 31, 2024 as competition remains fierce for this loan type.

Senior Housing – Senior housing loans support senior adults facilities, generally restricted for adults over the age of 55 years old. These types of loans include independent living communities, assisted living and memory care communities, nursing homes or skilled nursing facilities, and continuing care retirement communities. The Company recognizes that risk from high resident turnover, pandemics, government regulation, operator risk, increases in acuity, availability and cost of qualified staffing resources, technology risk, and other risks such as liability, insurance, reimbursement and regulatory changes may impact repayment of these loans. Underwriting focuses primarily on operator quality and business operations rather than income producing CRE property quality metrics.

47

The following table presents the balance and associated percentage of each category in our senior housing loans portfolio at December 31, 2025 and 2024:

As of December 31,

2025

2024

(dollars in thousands)

Amount

% of Total

Amount

% of Total

Senior housing loans by Type

Independent living communities

$

51,032

19.7

%

$

69,869

29.9

%

Assisted living and memory care facilities

205,406

79.1

160,914

68.7

Nursing homes or skilled nursing facilities

3,091

1.2

3,298

1.4

Total senior housing loans

$

259,529

100.0

%

$

234,081

100.0

%

As of December 31, 2025, our Senior housing loans comprised of $259.5 million, or 16.0%, of loans, compared to $234.1 million or 16.6%, of loans as of December 31, 2024. Our Senior housing loans balances have increased from December 31, 2024 as we continue to monitor concentration of the Senior housing loans.

Commercial and Industrial – C&I loans are loans and lines of credit to finance business operations, equipment and other non-real estate collateral primarily for small and medium-sized enterprises. These include both lines of credit and term loans which are amortized over the useful life of the assets financed. Personal and/or corporate guarantees are generally obtained where available and prudent. The Company recognizes that risk from economic cycles, commodity prices, pandemics, government regulation, supply-chain disruptions, product innovations or obsolescence, operational errors, lawsuits, natural disasters, losses due to theft or embezzlement, health or loss of key personnel or competitive situations may adversely affect the scheduled repayment of business loans.

As of December 31, 2025, our C&I loans comprised of $145.4 million, or 9.0%, of loans, compared to $141.6 million or 10.0%, of loans as of December 31, 2024. Our C&I loans balances have increased modestly due to a steady production and demand.

Retail Loans

As of December 31, 2025, our total retail loans comprised of $622.1 million, or 38.5%, of loans, compared to $545.1 million or 38.7%, of loans as of December 31, 2024. Our total retail loans balances have increased due to a steady production of and demand for our retail products.

Following below are our principal retail loans portfolio categories:

Residential Mortgages – Residential mortgages are first or second-lien loans secured by a primary residence or second home. This category includes permanent mortgage financing, construction loans to individual consumers, and home equity lines of credit. The loans are generally secured by properties located within the local market area of the Bank's retail footprint which originates and services the loan. These loans are underwritten in accordance with the Company’s general loan policies and procedures which require, among other things, proper documentation of each borrower’s financial condition, satisfactory credit history, and property value. In addition to loans originated through the Company’s branches, the Company originates and services residential mortgages sold in the secondary market which are underwritten and closed pursuant to investor and agency guidelines. Significant and rapid declines in real estate values can result in residential mortgage loan borrowers having debt levels in excess of the current market value of the collateral.

As of December 31, 2025, our residential mortgage loans comprised of approximately $200.0 million, or 12.4%, of loans, compared to $174.1 million or 12.4%, of loans as of December 31, 2024. Our residential mortgage loans balances have steadily increased due to continued demand for our residential mortgage product.

We originate residential mortgage loans to sell on the secondary market and also to hold for investment. During the year ended December 31, 2025, we originated $93.3 million and sold $46.6 million in home mortgage loans. During the year ended December 31, 2024, we originated approximately $86.0 million and sold $49.5 million in home mortgage loans.

Marine Vessels – Marine vessel loans are a type of consumer loan used to finance the purchase of a boat or another marine craft. Functioning similarly to auto loans and personal loans, these installment loans come with a repayment term, fixed monthly payments and variable-or-fixed interest rates. These loans are underwritten in accordance with the Company’s general loan policies and procedures and are generally secured with title or preferred ships' mortgage on the marine vessel. The Company recognizes that risk from economic cycles, pandemics, government regulation, natural disasters, losses due to theft, or changes to customer's ability to meet the scheduled repayment of marine vessel.

48

As of December 31, 2025, our marine vessels loans comprised of $312.1 million, or 19.3%, of loans, compared to $263.7 million or 18.6%, of loans as of December 31, 2024. Our marine vessels loans balances have increased due to continued demand for our marine vessels loans product.

Cash Value Life Insurance Line of Credit – Cash value life insurance encompasses multiple types of life insurance that contain a cash value account. This cash value component typically earns interest or other investment gains and grows tax deferred. CVLI loans are generally lines of credit secured by cash value life insurance of the debtor and can be originated for personal or business purposes. Upon the delinquency of the loan or lapse of an insurance policy premium payment, the Company pursues liquidation of the policy cash value in order to satisfy the loan.

As of December 31, 2025, our CVLI loans comprised of $87.2 million, or 5.4%, of loans, compared to $86.8 million or 6.2%, of loans as of December 31, 2024. Our CVLI loans balances have remained relatively flat due to higher interest rates environment which have softened demand for the product.

The following table presents the balance and associated percentage of each category in our other consumer loans portfolio at December 31, 2025 and 2024:

As of December 31,

2025

2024

(dollars in thousands)

Amount

% of Total

Amount

% of Total

Other consumer loans by Type

Unsecured student loans

$

8,712

38.2

%

$

11,353

55.4

%

Secured consumer purpose loans

13,921

61.0

8,956

43.7

Unsecured consumer purpose loans

196

0.8

176

0.9

Total other consumer loans

$

22,829

100.0

%

$

20,485

100.0

%

As of December 31, 2025, our other consumer loans comprised of $22.8 million, or 1.4% of loans, compared to $20.5 million, or 1.5% of loans, as of December 31, 2024. Our other consumer loans balances increased $2.3 million or 11.4% since December 31, 2024 due to continued demand for consumer loans.

Internally Assigned Grades on LHFI

The Company utilizes an internal loan classification system for the Commercial portfolio that is updated to perpetually grade loans according to certain credit quality indicators. These credit quality indicators include, but are not limited to, recent credit performance, delinquency, liquidity, cash flows, debt coverage ratios, collateral type and loan-to-value ratio. The Company determines its risk rating classification of the Retail lending portfolio based on nonaccrual and delinquency status in accordance with the Uniform Retail Credit Classification guidance and industry norms. See Note 3 to the consolidated financial statements.

The following tables provides details of the Company’s loan and lease portfolio by segment, class, and internally assigned grade at December 31, 2025 and 2024:

As of December 31, 2025

(dollars in thousands)

Pass

Special mention

Substandard

Total

Commercial loans

Acquisition, development, and construction

$

119,352

$

-

$

-

$

119,352

Income producing CRE

377,711

-

468

378,179

Owner-occupied CRE

82,959

2,739

7,089

92,787

Senior housing

236,816

11,934

10,779

259,529

Commercial and industrial

141,020

212

4,148

145,380

Retail loans (1)

Marine vessels

312,096

-

-

312,096

Residential mortgages

199,601

-

390

199,991

Cash value life insurance LOC

87,172

-

-

87,172

Other consumer

22,829

-

-

22,829

Total

$

1,579,556

$

14,885

$

22,874

$

1,617,315

(1) Retail loans are not risk rated but are classified as performing or nonperforming. Performing loans are presented in the Pass category and nonperforming loans are in the Substandard category.

49

As of December 31, 2024

(dollars in thousands)

Pass

Special mention

Substandard

Total

Commercial loans

Acquisition, development, and construction

$

72,520

$

-

$

-

$

72,520

Income producing CRE

321,146

-

412

321,558

Owner-occupied CRE

87,906

-

6,667

94,573

Senior housing

190,084

25,025

18,972

234,081

Commercial and industrial

136,878

36

4,712

141,626

Retail loans (1)

Marine vessels

263,657

-

-

263,657

Residential mortgages

173,834

-

265

174,099

Cash value life insurance LOC

86,844

-

-

86,844

Other consumer

20,442

-

43

20,485

Total

$

1,353,311

$

25,061

$

31,071

$

1,409,443

(1) Retail loans are not risk rated but are classified as performing or nonperforming. Performing loans are presented in the Pass category and nonperforming loans are in the Substandard category.

Pass rated loans were 97.7% of total LHFI at December 31, 2025 as compared to 96.0% at December 31, 2024. Special mention rated loans were 0.9% of total LHFI at December 31, 2025 as compared to 1.8% at December 31, 2024. Substandard loans were 1.4% of total LHFI at December 31, 2025 as compared to 2.2% at December 31, 2024. For the comparative period, there was considerable improvements in both special mention and substandard loans within the senior housing portfolio due to improved operating metrics that improved the risk profile of certain loans and other loans that paid in full during the period. The Company continues to closely monitor these loans.

Nonperforming Loans

Loans are considered past due or delinquent when the contractual principal or interest due in accordance with the terms of the loan agreement or any portion thereof remains unpaid after the due date of the scheduled payment. Loans are placed on nonaccrual status when it becomes probable that interest is not fully collectable generally when the loan becomes 90 days past due. Once loans are placed on nonaccrual status, previously accrued but unpaid interest is reversed from interest income, and the accrual of interest income is suspended. Future payments received are applied to the principal balance of the loan. If and when borrowers demonstrate the sustained ability to repay such loans in accordance with the loan’s contractual terms, the loan may be returned to accrual status. Loans which become 90 days past due are reviewed for collectability of principal. Principal amounts deemed uncollectible are charged off against the provision for loan credit losses, unless such loans are in the process of modification, collection through repossession, or foreclosure. Certain consumer loans are not placed on nonaccrual but are monitored and charged-off at 120 days past due.

Real estate we acquired as a result of foreclosure or by deed-in-lieu of foreclosure is classified as other real estate owned until sold and is recorded at the lower of cost or fair value, minus estimated costs to sell. Subsequent to foreclosure, losses resulting from the periodic revaluation of the property are charged to loss on OREO, net and a new carrying value is established. Any gains or losses realized at the time of disposal or subsequent write-downs are reflected in the Consolidated Statements of Operations. Expenses to maintain such assets are included in net cost of operation of OREO.

Nonperforming loans include loans 90 days or more past due and still accruing, loans accounted for on a nonaccrual basis and accruing restructured loans. Nonperforming assets consist of nonperforming loans in addition to OREO. Nonperforming loans include nonaccrual loans, loans past due 90 days or more and still accruing interest, and loans modifications to borrowers with financial difficulty. The following table sets forth the allocation of our nonperforming assets among our different asset categories as of December 31, 2025 and 2024:

As of December 31,

(dollars in thousands)

2025

2024

Nonaccrual loans (1)

$

18,306

$

14,957

Past due loans 90 days and still accruing

-

49

Total nonperforming loans

18,306

15,006

Other real estate owned

-

864

Total nonperforming assets

$

18,306

$

15,870

Nonperforming loans to gross LHFI

1.13

%

1.06

%

Nonperforming assets to total assets

0.79

%

0.76

%

Allowance for credit losses to total LHFI

1.16

%

1.21

%

(1) Nonaccrual loans include balances of approximately $4.1 million and $4.8 million that are covered by government guarantees at December 31, 2025 and 2024, respectively.

50

Nonperforming loans were $18.3 million at December 31, 2025 as compared to $15.0 million at December 31, 2024. The increase in nonperforming loans from December 31, 2024 to December 31, 2025 was primarily due to the migration of one relationship within the Senior housing portfolio.

The following table sets forth the major classifications of nonaccrual loans as of December 31, 2025 and 2024:

As of December 31,

(dollars in thousands)

2025

2024

Commercial loans

Income producing CRE

$

-

$

412

Owner-occupied CRE

3,074

3,425

Senior housing

10,779

6,570

Commercial and industrial

4,063

4,285

Retail loans

Residential mortgages

390

265

Total nonaccrual loans

$

18,306

$

14,957

Allowance for Credit Losses on Loans

The ACL for loans is a valuation allowance estimated at each balance sheet date in accordance with GAAP that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans. The ACL represents management's best estimate of credit losses expected over the life of the loan, adjusted for expected contractual payments and the impact of prepayment expectations. ACL is not required for LHFS and is only recorded for LHFI.

The Company estimates the ACL on loans based on the underlying loans’ amortized cost basis, which is the amount at which the financing receivable is originated or acquired, adjusted for applicable accretion or amortization of premium, discount, and net deferred fees or costs, collection of cash, and charge-offs. In the event that collection of principal becomes uncertain, the Company has policies in place to reverse accrued interest in a timely manner. It is the Company's policy to write off uncollectible interest receivable of LHFI when it is considered uncollectible, which is generally when an asset is placed on nonaccrual and exclude it from the ACL.

Expected credit losses are reflected in the ACL through a charge to provision for credit losses. When the Company deems all or a portion of a loan to be uncollectible the appropriate amount is written off and the ACL is reduced by the same amount. Loans are charged off against the ACL when management believes the collection of the principal is unlikely. Subsequent recoveries of previously charged off amounts, if any, are credited to the ACL when received. See Note 1 of our consolidated financial statements as of December 31, 2025, included elsewhere in this Annual Report Form 10-K, for additional information regarding ACL policy.

It is management's policy to maintain the ACL at a level adequate for risks inherent in the loan portfolio. The FRB and SCBFI also review the ACL as an integral part of their examination process. Based on the information currently available, management believes that our ACL is adequate. However, the loan portfolio can be adversely affected if economic conditions or the real estate market in our market areas were to weaken. The effect of such events, although uncertain at this time, could result in an increase in the level of nonperforming loans and increased loan losses, which could adversely affect our future growth and profitability. No assurance of the ultimate level of credit losses can be given with any certainty.

Analysis of the Allowance for Credit Losses on Loans. The following table provides an analysis of the ACL on loans and net charge-offs for the years ended December 31, 2025 and 2024:

As of and for the Years Ended December 31,

(dollars in thousands)

2025

2024

Allowance for credit losses on loans at end of period (1)

$

18,743

$

17,118

Loans balances:

Total loans held for investment, end of period

$

1,617,315

$

1,409,443

Average loans held for investment

$

1,511,831

$

1,418,022

Net charge-offs to average LHFI

0.02

%

0.01

%

Allowance for loan credit losses to total LHFI (1)

1.16

%

1.21

%

Nonaccrual loans as a percentage of end of period loans

1.13

%

1.06

%

Allowance for credit losses on loans to nonaccrual loans

  at end of period (1)

102.39

%

114.45

%

Allowance for credit losses on loans to total nonperforming loans

  at end of period (1)

102.39

%

114.07

%

(1) Excludes allowance for credit losses for unfunded loans commitments.

51

At December 31, 2025, the ACL on loans totaled $18.7 million, or 1.16% of loans, compared to $17.1 million, or 1.21% of loans, at December 31, 2024 an increase of $1.6 million, or 9.5% primarily attributed to increased loan production and changes in economic factors, offset by other changes in loss rates and a decrease in reserves on individually analyzed loans.

For the year ended December 31, 2025, our net charge-off ratio as a percentage of average loans was 0.02%, compared to 0.01% for the year ended December 31, 2024. Originating and maintaining high quality loans is a top priority for the management.

As of December 31, 2025, our ratio of nonperforming assets to total assets was 0.79%, compared to 0.76% as of December 31, 2024. This increase was due to an increase in nonaccrual loans at December 31, 2025.

The following table allocates the allowance for credit losses on loans by loan category for the years ended December 31, 2025 and 2024:

As of December 31,

2025

2024

(dollars in thousands)

Amount

% of Loans in each category to total loans

Amount

% of Loans in each category to total loans

 Commercial loans

Acquisition, development, and

  construction

$

1,623

7.4

%

$

1,188

5.2

%

Income producing CRE

7,027

23.4

5,867

22.8

Owner-occupied CRE

870

5.7

543

6.7

Senior housing

4,051

16.0

4,576

16.6

Commercial and industrial

902

9.0

751

10.0

Total commercial loans

$

14,473

61.5

 %

$

12,925

61.3

 %

Retail loans

Marine vessels

$

1,412

19.3

 %

$

2,015

18.6

 %

Residential mortgages

2,412

12.4

 %

1,688

12.4

 %

Cash value life insurance LOC

82

5.4

88

6.2

Other consumer

364

1.4

402

1.5

Total retail

$

4,270

38.5

 %

$

4,193

38.7

 %

   Total allowance for credit losses

$

18,743

100.0

 %

$

17,118

100.0

 %

Allowance for Credit Losses for Unfunded Commitments

The Company records an ACL for unfunded loan commitments, unless the commitments to extend credit are unconditionally cancelable, through a charge to provision for credit losses in the Company’s Consolidated Statements of Operations. The ACL for unfunded commitment exposures is estimated by loan segment at each balance sheet date under the CECL model using the same methodologies as portfolio loans, taking into consideration the likelihood that funding will occur. The ACL for unfunded commitments is included in Other liabilities on the Company’s Consolidated Balance Sheets.

As of December 31, 2025 and 2024, the ACL for unfunded commitments was $4.0 million compared to $2.7 million, respectively. The increase in the ACL for unfunded commitments was primarily due to production of new loan commitments.

It is management's policy to maintain the allowance for credit losses at a level adequate for risks inherent in the loan portfolio. The FRB and SCBFI also review the allowance for loan credit losses as an integral part of their examination process. Based on information currently available, management believes that our ACL is adequate. However, the loan portfolio can be adversely affected if economic conditions or the real estate market in our market areas were to weaken. The effect of such events, although uncertain at this time, could result in an increase in the level of nonperforming loans and increased loan losses, which could adversely affect our future growth and profitability. No assurance of the ultimate level of credit losses can be given with any certainty.

Net Charge-offs

The following table summarizes net charge-offs to average loans for for or the years ended December 31, 2025 and 2024:

52

As of December 31, 2025

As of December 31, 2024

(dollars in thousands)

Average Loans

Net Charge-offs (Recoveries)

Net Charge-offs to Average Loans

Average Loans

Net Charge-offs (Recoveries)

Net Charge-offs to Average Loans

Commercial loans

Acquisition, development,

  and construction

$

95,304

$

-

0.00%

$

110,569

$

-

0.00%

Income producing CRE

351,976

-

0.00%

260,325

-

0.00%

Owner-occupied CRE

88,869

-

0.00%

97,900

(53

)

-0.05%

Senior housing

235,392

-

0.00%

243,235

-

0.00%

Commercial and industrial

152,268

(13

)

-0.01%

144,395

82

0.06%

Retail loans

Marine vessels

296,493

162

0.05%

275,236

36

0.01%

Residential mortgages

182,995

(35

)

-0.02%

170,354

(15

)

-0.01%

Cash value life insurance LOC

87,222

-

0.00%

94,428

47

0.05%

Other consumer

21,312

221

1.04%

21,580

(1

)

0.00%

$

1,511,831

$

335

0.02%

$

1,418,022

$

96

0.01%

Net charge-offs were $335 thousand and $96 thousand as of December 31, 2025 and 2024, respectively.

Investment Securities

The securities portfolio is the second largest component of our interest-earning assets and is managed to: (i) generate a prudent level of income consistent with our liquidity, credit, and interest rate risk objectives; (ii) support overall balance sheet management by helping manage interest rate and market risk exposures arising from our loan and funding activities; (iii) provide a readily available source of liquidity when funds are not immediately deployed into loans or are needed to meet deposit outflows and other liquidity needs; and (iv) provide eligible collateral for public funds and other secured funding arrangements.

We classify our securities as either available-for-sale or held-to-maturity at the time of purchase. Investment securities not classified as either held-to-maturity or trading are classified as available-for-sale. All of the securities in our investment portfolio were classified as available-for-sale as of December 31, 2025. Investment securities available-for-sale are stated at fair value, with the unrealized gains and losses, net of tax, reported as a separate component of AOCI in the Consolidated Statements of Comprehensive Income. Monthly adjustments are made to reflect changes in the fair value of our available-for-sale securities.

Securities available-for-sale consist primarily of U.S. Treasuries, municipal obligations, mortgage-backed securities, asset-backed securities, and corporate debt securities. No issuer of the available-for-sale securities comprised more than ten percent of our shareholders’ equity as of December 31, 2025 and 2024, except Federal Home Loan Mortgage Corp ("FHLMC"), Federal National Mortgage Association ("FNMA') and Government National Mortgage Association ("Ginnie Mae") within those periods.

The following table summarizes the fair value of the available-for-sale securities portfolio as of December 31, 2025 and 2024:

As of December 31,

2025

2024

(dollars in thousands)

Amortized Cost

Fair

 Value

Unrealized Gain (loss)

Amortized Cost

Fair Value

Unrealized Gain (loss)

U.S. Treasuries

$

5,996

$

5,850

(146

)

$

5,990

$

5,612

$

(378

)

Municipal obligations

64,878

58,642

(6,236

)

61,401

53,071

(8,330

)

Mortgage-backed securities

188,509

180,060

(8,449

)

181,242

166,092

(15,150

)

Asset-backed securities

26,897

27,000

103

46,775

46,940

165

Corporate debt securities

59,079

58,951

(128

)

64,264

63,552

(712

)

Total available for sale securities

$

345,359

$

330,503

$

(14,856

)

$

359,672

$

335,267

$

(24,405

)

Certain securities have fair values less than amortized cost and, therefore, contain unrealized losses. At December 31, 2025, we evaluated securities available-for-sale which had an unrealized loss to determine whether the decline in the fair value below the amortized cost basis (impairment) is due to credit-related factors or noncredit-related factors. Any impairment that is not credit related is recognized in other comprehensive income, net of applicable taxes. Credit-related impairment is recognized as an ACL on the balance sheet, limited to the amount by which the amortized cost basis exceeds the fair value with a charge to earnings. We do not intend to sell these securities and it is not more likely than not that we will be required to sell them before recovery of the amortized cost basis, which may be at maturity.

53

The following table sets forth certain information regarding contractual maturities and the weighted average yields of our investment securities as of December 31, 2025. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Yields were computed using coupon interest, adding discount accretion or subtracting premium amortization, as appropriate, considering the expected life of each security. The weighted average yield for each maturity range was computed using the amortized cost of each security within the applicable maturity range. The yield on non-taxable investments was not adjusted for tax equivalency.

As of December 31, 2025

Due in One

Year or Less

Due after One Year

Through Five Years

Due after Five Years

Through Ten Years

Due after

Ten Years

(dollars in thousands)

Amortized Cost

Weighted Average Yield

Amortized Cost

Weighted Average Yield

Amortized Cost

Weighted Average Yield

Amortized Cost

Weighted Average Yield

U.S. Treasuries

$

4,997

0.98

%

$

999

1.28

%

$

-

-

%

$

-

-

%

Municipal obligations

-

-

8,328

1.89

29,144

2.14

27,406

2.91

Mortgage-backed securities

892

3.12

28,893

2.98

13,138

3.99

145,586

3.50

Asset-backed securities

-

-

-

-

11,268

5.22

15,629

5.53

Corporate debt securities

-

-

16,196

7.34

39,840

6.24

3,043

5.58

Total available for sale securities

$

5,889

1.30

 %

$

54,416

4.08

 %

$

93,390

4.53

 %

$

191,664

3.61

 %

We utilize interest rate swaps agreements for some of our AFS securities as part of our asset-liability management strategy to help mitigate its interest rate risk. As of December 31, 2025 and 2024, the carrying amount of our hedged securities available for sale related to cumulative basis adjustment for the fair value hedges was $23.7 million and $22.6 million, respectively.

Deposits

Deposits represent our Bank’s primary source of funding. We gather deposits primarily through our branch locations and targeting new deposits relationships by our bankers. We offer a variety of deposit products including demand deposits accounts, interest-bearing products, savings accounts, and certificate of deposits. We put continued effort into gathering noninterest demand deposits accounts through marketing to our existing and new loan customers, customer referrals, and expansion into new markets. As the Company wins new loan customers and targets new deposit relationships with competitive rates on interest bearing accounts, our bankers are focused on ensuring that we win the entire relationship, including operating accounts, so that we have an attractive mix of deposits.

Total deposits increased $152.9 million, or 8.3%, to $1.99 billion at December 31, 2025 compared to $1.83 billion at December 31, 2024. As of December 31, 2025, 15.7% of total deposits were comprised of noninterest-bearing demand deposits accounts and 84.3% of interest-bearing deposit accounts compared to 16.5% and 83.5% as of December 31, 2024. These increases are due to a continued result of pursuing and winning new relationships as well as maintaining our existing relationships.

At December 31, 2025, we had total brokered certificates of deposit ("CDs") of $307.0 million, or 15.5% of total deposits, compared to $275.3 million, or 15.0% of total deposits, at December 31, 2024. We use brokered CDs, subject to certain limitations and requirements, as a source of funding to support our asset growth and augment the deposits generated from our branch network, which are our principal source of funding. Our level of brokered CDs varies from time to time depending on competitive interest rate conditions and other factors and tends to increase as a percentage of total deposits when the brokered CDs are less costly than issuing internet CDs or borrowing from the FHLBA.

At December 31, 2025, our uninsured deposits were $719.4 million, or 36.2% of total deposits, compared to $667.4 million, or 36.4% of total deposits, at December 31, 2024.

The following table summarizes our average deposit balances and weighted average rates for the years ended December 31, 2025 and 2024:

As of December 31, 2025

As of December 31, 2024

(dollars in thousands)

Average Balance

Weighted Average Rate(1)

Average Balance

Weighted Average Rate

Noninterest-bearing demand deposits

$

307,464

−

 %

$

323,949

−

 %

Interest-bearing demand deposits

199,395

0.76

179,495

0.45

Money market deposits

593,291

3.12

598,621

3.73

Savings deposits

35,179

0.50

38,074

0.50

Certificates of deposits

793,184

4.05

651,974

4.62

Total interest-bearing deposits

$

1,621,049

3.23

 %

$

1,468,164

3.64

 %

   Total deposits

$

1,928,513

2.71

 %

$

1,792,113

2.98

 %

54

The following table sets forth the maturity of time deposits as of December 31, 2025:

As of December 31, 2025

(dollars in thousands)

Three Months

Three to Six Months

Six to Twelve Months

After Twelve Months

Total

Time deposits ($250,000 or less)

$

251,609

$

189,825

$

113,332

$

64,074

$

618,840

Time deposits (more than $250,000)

65,166

63,041

40,157

-

168,364

   Total time deposits

$

316,775

$

252,866

$

153,489

$

64,074

$

787,204

Commercial Mortgage Government Guaranteed Loan Servicing Rights

As of December 31, 2025 and 2024, we serviced $124.4 million and $120.4 million, respectively, of SBA and United States Department of Agriculture loans for others. The size of this loan servicing portfolio has grown over the last few years as we consistently originated and sold portions of these loans that we originate while retaining loan servicing rights. Activity for commercial mortgage servicing rights was as follows:

For the Years Ended December 31,

(dollars in thousands)

2025

2024

Balance, beginning of period

$

1,237

$

1,125

Additions

412

426

Disposals

-

-

Other changes(1)

(383

)

(314

)

Balance, end of period

$

1,266

$

1,237

(1) Comprised of amortization.

Our government guaranteed loans ("GGL") servicing rights are included in intangible assets on our Consolidated Balance Sheets and are reported net of amortization and impairment, if any.

Other Borrowings

The Company utilizes FHLBA advances as a supplementary funding source to finance our operations. These FHLBA advances are collateralized by securities owned by the Company and held in safekeeping by the FHLBA, FHLBA stock owned by the Company, and certain qualifying loans secured by real estate, including residential mortgage loans, home equity lines of credit and commercial real estate loans.

At December 31, 2025 and 2024, we had a maximum borrowing capacity from the FHLBA of $176.3 million and $162.8 million, respectively. We had $30.0 million and $15.0 million in FHLBA advances outstanding at December 31, 2025 and 2024, respectively.

The Company had no line of credit outstanding as of December 31, 2025, and a $12.0 million line of credit outstanding, net of debt costs, as of December 31, 2024 with a maximum commitment availability of $15.0 million and $24.0 million at December 31, 2025 and 2024, respectively.

The Company had no subordinated debt outstanding as of December 31, 2025, and a $14.7 million as of December 31, 2024 of subordinated debt, net of debt costs outstanding. The Company paid off its outstanding subordinated debt in 2025.

Liquidity

The term liquidity refers to the measure of our ability to meet cash flow requirements of our depositors and borrowers, while at the same time meeting our operational, capital, and strategic cash flow needs, all at a reasonable cost. We continuously monitor our liquidity position to ensure that assets and liabilities are managed in a manner that will meet all short-term and long-term cash requirements. We manage our liquidity position to meet the daily cash flow needs of customers, while maintaining an appropriate balance between assets and liabilities in order to meet the return on investment objectives of our shareholders.

Our liquidity position is supported by management of our liquid assets and access to alternative sources of funds. Our liquid assets include cash, interest-bearing deposits in correspondent banks, federal funds sold, and fair value of unpledged investment securities. Other available sources of liquidity include wholesale deposits, and additional borrowings from correspondent banks, FHLBA advances, and the Federal Reserve discount window.

Our short-term and long-term liquidity requirements are primarily met through cash flow from operations, redeployment of prepaying and maturing balances in our loan and investment portfolios, and new customer deposits. Other alternative

55

sources of funds will supplement these primary sources to the extent necessary to meet additional liquidity requirements on either a short-term or long-term basis.

As part of our liquidity management strategy, we open federal funds lines with our correspondent banks. As of December 31, 2025 and 2024, we had $69.5 million as of the end of each period of unsecured federal funds lines with no amounts advanced.

As of December 31, 2025 and 2024, we had access to the Federal Reserve’s discount window in the amount of $29.8 million and $30.4 million, respectively. There were no borrowings outstanding as of December 31, 2025 and 2024 for the Federal Reserve’s discount window. We had pledged investment securities at December 31, 2025 and 2024 totaling $9.1 million and $8.5 million, respectively, as collateral for federal funds purchased. In addition, we also had pledged investment securities at December 31, 2025 and 2024, totaling $31.6 million and $32.1 million, respectively, as collateral at the Federal Reserve Bank.

At December 31, 2025 and 2024, we had $30.0 million and $15.0 million outstanding advances from the FHLBA, respectively. Based on the values of collateral pledged, we had $144.3 million and $141.8 million as of December 31, 2025 and 2024, respectively, of additional borrowing availability with the FHLBA. We had no pledged investment securities at December 31, 2025 or December 31, 2024 pledged as collateral for the FHLBA advances. We also maintain relationships in the capital markets with brokers to issue certificates of deposit and money market accounts.

Capital Requirements

The Bank is subject to various regulatory capital requirements administered by the Federal Banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary actions by regulators that, if undertaken, could have a direct adverse material effect on the Company's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum ratios. These include a CET1 risk-based capital ratio, a Tier 1 risk-based capital ratio, which includes CET1 and additional Tier 1 capital, and a total risk-based capital ratio, which includes Tier 1 and Tier 2 capital. CET1 is primarily comprised of the sum of common stock instruments and related surplus net of treasury stock plus retained earnings less certain adjustments and deductions, including with respect to goodwill, intangible assets, mortgage servicing assets, and deferred tax assets subject to temporary timing differences. Additional Tier 1 capital is primarily comprised of noncumulative perpetual preferred stock. Tier 2 capital consists of instruments disqualified from Tier 1 capital, including qualifying subordinated debt and a limited amount of loan loss reserves up to a maximum of 1.25% of risk-weighted assets, subject to certain eligibility criteria. The capital rules also define the risk-weights assigned to assets and off-balance sheet items to determine the risk-weighted asset components of the risk-based capital rules, including, for example, certain “high volatility” commercial real estate, past due assets, structured securities, and equity holdings.

The Bank is also required to maintain capital at a minimum level based on total assets, which is known as the Tier 1 leverage ratio. The leverage capital ratio is the ratio of Tier 1 capital to quarterly average assets net of goodwill, certain other intangible assets, and certain required deduction items require the Bank to maintain:

(i) a minimum leverage ratio of Tier 1 capital to average total assets, after certain adjustments, of 4.0%,

(ii) a minimum ratio of Tier 1 capital to risk-weighted assets of 6.0%,

(iii) a minimum ratio of total-capital to risk-weighted assets of 8.0% and,

(iv) a minimum ratio of CET1 to risk-weighted assets of 4.5%.

In addition, the capital rules require a capital conservation buffer of 2.5% above each of the minimum risk-based capital ratio requirements (CET1, Tier 1, and total capital), comprised of CET1, which is designed to absorb losses during periods of economic stress. These buffer requirements must be met for a bank or bank holding company to be able to pay dividends, engage in share buybacks, or make discretionary bonus payments to executive management without restriction. Our capital conservation buffer was $110.5 million and $93.0 million as of December 31, 2025 and 2024, respectively.

56

Prompt Corrective Action — The Federal Banking agencies have broad powers with which to require companies to take prompt corrective action to resolve problems of insured depository institutions that do not meet minimum capital requirements. The law establishes five capital categories for this purpose:

(i) well-capitalized;

(ii) adequately capitalized;

(iii) undercapitalized;

(iv) significantly undercapitalized; and

(v) critically undercapitalized.

To be well-capitalized, the Bank must maintain at least the following capital ratios:

•
6.5% CET1 to risk-weighted assets;

•
8.0% Tier 1 capital to risk-weighted assets;

•
10.0% Total capital to risk-weighted assets; and

•
5.0% Tier 1 leverage ratio.

The table below summarizes the capital requirements applicable to the Bank in order to be considered “well-capitalized” from a regulatory perspective, as well as the Bank’s capital ratios as of December 31, 2025 and 2024. Because the Company is a small bank holding company under the guidelines of the Federal Reserve and is not required to report consolidated capital ratios for regulatory purposes, capital ratios are presented for the Bank only.

The Bank exceeded all regulatory capital requirements and was considered to be “well-capitalized” as of December 31, 2025 and 2024.

There have been no conditions or events since December 31, 2025 that management believes would change this classification.

The following table summarizes the capital amounts and ratios of CSB and the regulatory minimum requirements at December 31, 2025 and 2024:

Ratios at December 31,

Regulatory Capital Ratio Requirements

Regulatory Capital Ratio Requirements including fully phased-in Capital Conservation Buffer

Minimum Requirements for "Well Capitalized" Depository Institution

2025

2024

Coastal States Bank

Total capital (to risk-weighted assets)

13.31

%

12.97

%

8.00

%

10.50

%

10.00

%

Tier 1 capital (to risk-weighted assets)

12.30

%

12.07

%

6.00

%

8.50

%

8.00

%

CET1 capital (to risk-weighted assets)

12.30

%

12.07

%

4.50

%

7.00

%

6.50

%

Tier 1 leverage

11.18

%

10.64

%

4.00

%

4.00

%

5.00

%

Contractual Obligations

The following tables contain supplemental information regarding our total contractual obligations at December 31, 2025 and 2024:

Payments Due at December 31, 2025

(dollars in thousands)

Within One Year

One to Three Years

Three to Five Years

After Five Years

Total

Deposits without a stated maturity

$

1,200,480

$

-

$

-

$

-

$

1,200,480

Time deposits

723,130

63,991

83

-

787,204

Other borrowings (1)

30,000

-

-

-

30,000

Operating lease liabilities

809

1,683

1,433

1,116

5,041

   Total contractual obligations

$

1,954,419

$

65,674

$

1,516

$

1,116

$

2,022,725

(1) $30 million due within one year represents FHLBA advance outstanding.

57

Payments Due at December 31, 2024

(dollars in thousands)

Within One Year

One to Three Years

Three to Five Years

After Five Years

Total

Deposits without a stated maturity

$

1,075,601

$

-

$

-

$

-

$

1,075,601

Time deposits

754,997

3,850

354

-

759,201

Other borrowings (1)

27,000

-

-

15,000

42,000

Operating lease liabilities

987

1,642

1,380

1,302

5,311

   Total contractual obligations

$

1,858,585

$

5,492

$

1,734

$

16,302

$

1,882,113

(1) $27 million due within one year includes a gross revolving commercial line of credit of $12 million and an FHLBA advance of $15 million outstanding; $15 million due after five years represents gross subordinated debt outstanding.

We believe that we will be able to meet our contractual obligations as they come due through the maintenance of adequate cash levels. We expect to maintain adequate cash levels through profitability, loan and securities repayment and maturity activity and continued deposit gathering activities. We have in place various borrowing mechanisms for both short-term and long-term liquidity needs.

Off-Balance Sheet Arrangements

The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments consist of commitments to extend credit and standby letters of credit.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. A commitment involves, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheet. The Company’s exposure to credit loss in the event of nonperformance by the other party to the instrument is represented by the contractual notional amount of the instrument. Since certain commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company uses the same credit policies in making commitments to extend credit as it does for on-balance-sheet instruments.

Letters of credit are conditional commitments issued to guarantee a customer’s performance to a third party and have essentially the same credit risk as other lending facilities. Collateral held for commitments to extend credit and letters of credit varies but may include accounts receivable, inventory, property, plant, equipment and income-producing commercial properties.

The Company also has invested capital in limited partnerships to obtain renewable energy tax credits generated by solar power projects and has committed funding towards these investments in future periods.

See Note 12 of our consolidated financial statements as of December 31, 2025, included elsewhere in this Form 10-K, for more information regarding our off-balance sheet arrangements as of December 31, 2025 and 2024.