Investar Holding Corp (ISTR)

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Note Regarding Forward-Looking Statements

When included in this Quarterly Report on Form 10-Q, or in other documents that Investar Holding Corporation files with the SEC or in statements made by or on behalf of the Company, words like “may,” “should,” “could,” “predict,” “potential,” “believe,” “think,” “will likely result,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “projection,” “would,” “outlook” and similar expressions or the negative version of those words are intended to identify forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve a variety of risks and uncertainties that could cause actual results to differ materially from those described therein. The Company’s forward-looking statements are based on assumptions and estimates that management believes to be reasonable in light of the information available at the time such statements are made. However, many of the matters addressed by these statements are inherently uncertain and could be affected by many factors beyond management’s control. A number of important factors could cause actual results to differ materially from those indicated by the forward-looking statements. These factors include, but are not limited to, the following, any one or more of which could materially affect the outcome of future events:

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These factors should not be construed as exhaustive. Additional information on these and other risk factors can be found in Part I. Item 1A. “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” in the Company’s Annual Report and in Part II. Item 1A. “Risk Factors” of this report.

Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on any forward-looking statement as a prediction of future events. We expressly disclaim any obligation or undertaking to update our forward-looking statements, and we do not intend to release publicly any updates or changes in our expectations concerning the forward-looking statements or any changes in events, conditions or circumstances upon which any forward-looking statement may be based, except as required by law.

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Company Overview

This section presents management’s perspective on the consolidated financial condition and results of operations of the Company and its wholly-owned subsidiary, the Bank. The following discussion and analysis should be read in conjunction with our unaudited consolidated financial statements and related notes thereto included herein, and the audited consolidated financial statements for the year ended December 31, 2025, including the notes thereto, and the related MD&A in the Annual Report. All cross-references to the “Notes” in this Form 10-Q refer to the Notes to Consolidated Financial Statements contained in Part I. Item 1. Financial Statements unless otherwise noted.

The Bank commenced operations in 2006, and we completed our initial public offering in July 2014. On July 1, 2019, the Bank changed from a Louisiana state bank charter to a national bank charter, and its name changed to Investar Bank, National Association. Through the Bank, we provide full banking services, excluding trust services, tailored primarily to meet the needs of individuals, professionals, and small to medium-sized businesses. Our primary areas of operation are south Louisiana, including Baton Rouge, New Orleans, Lafayette, Lake Charles, and their surrounding areas; Texas, including Houston and its surrounding area, and, as of January 1, 2026, north Dallas and Wichita Falls and their surrounding areas; and Alabama, including York and Oxford and their surrounding areas. At March 31, 2026, we operated 36 full service branches comprised of 20 full service branches in Louisiana, ten full service branches in Texas, and six full service branches in Alabama.

Our strategy focuses on consistent, quality earnings through the optimization of our balance sheet. Our strategy includes originating and renewing high quality, primarily variable-rate, loans and allowing higher risk credit relationships to run off. We have kept duration short on our liabilities to provide flexibility to secure lower cost funding that was accretive to our net interest margin. Our strategy also includes growth through acquisitions, including whole-bank acquisitions, strategic branch acquisitions and asset acquisitions. We have completed eight whole-bank acquisitions since 2011 and regularly review acquisition opportunities. Our most recent whole bank acquisition was completed in January 2026. For additional information, see “Acquisition of WFB” below.

Our principal business is lending to and accepting deposits from individuals and small to medium-sized businesses in our areas of operation. As a financial holding company operating through one reportable segment, we generate our income principally from interest on loans and, to a lesser extent, our securities investments, as well as from fees charged in connection with our various loan and deposit services. Our principal expenses are interest expense on interest-bearing customer deposits and borrowings, salaries and employee benefits, occupancy costs, data processing and other operating expenses. We measure our performance through our net interest margin, return on average assets, and return on average equity, among other metrics, while seeking to maintain appropriate regulatory leverage and risk-based capital ratios.

Acquis

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

This section presents management’s perspective on the financial condition and results of operations of Investar Holding Corporation and its wholly-owned subsidiary, Investar Bank, National Association. The following discussion and analysis should be read in conjunction with the Company’s consolidated financial statements and related notes and other supplemental information included herein. Certain risks, uncertainties and other factors, including those set forth under Cautionary Note Regarding Forward-Looking Statements at the beginning of this document, Item 1A. Risk Factors in Part I, and elsewhere in this Annual Report on Form 10-K, may cause actual results to differ materially from those projected results discussed in the forward-looking statements appearing in this discussion and analysis.

Discussion in this Annual Report on Form 10-K includes results of operations and financial condition for 2025 and 2024 and year-over-year comparisons between 2025 and 2024. For discussion on results of operations and financial condition pertaining to 2024 and 2023 and year-over-year comparisons between 2024 and 2023, please refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 12, 2025.

Overview

The Bank commenced operations in 2006 and we completed our initial public offering in July 2014. On July 1, 2019, the Bank changed from a Louisiana state bank charter to a national bank charter and its name changed to Investar Bank, National Association. Through the Bank, we provide full banking services, excluding trust services, tailored primarily to meet the needs of individuals, professionals, and small to medium-sized businesses. Our primary areas of operation are south Louisiana (approximately 77% of our total deposits as of December 31, 2025), including Baton Rouge, New Orleans, Lafayette, Lake Charles, and their surrounding areas; Texas, including Houston and its surrounding area, and, as of January 1, 2026, north Dallas and Wichita Falls and their surrounding areas; and Alabama, including York and Oxford and their surrounding areas. As of March 16, 2026, we operated 36 full-service branches comprised of 20 full-service branches in Louisiana, ten full-service branches in Texas, and six full-service branches in Alabama.

Our strategy focuses on consistent, quality earnings through the optimization of our balance sheet. Our strategy includes originating and renewing high quality, primarily variable-rate, loans and allowing higher risk credit relationships to run off. We have kept duration short on our liabilities to provide flexibility to secure lower cost funding that was accretive to our net interest margin. Our strategy also includes growth through acquisitions, including whole-bank acquisitions, strategic branch acquisitions and asset acquisitions. We have completed eight whole-bank acquisitions since 2011 and regularly review acquisition opportunities. Our most recent whole bank acquisition was completed in January 2026. For additional information, see Item 1. Business – Acquisition Activity – Recent Acquisitions.

Our principal business is lending to and accepting deposits from individuals and small to medium-sized businesses in our areas of operation. As a financial holding company operating through one reportable segment, we generate our income principally from interest on loans and, to a lesser extent, our securities investments, as well as from fees charged in connection with our various loan and deposit services. Our principal expenses are interest expense on interest-bearing customer deposits and borrowings, salaries and employee benefits, occupancy costs, data processing and other operating expenses. We measure our performance through our net interest margin, return on average assets, and return on average common equity, among other metrics, while seeking to maintain appropriate regulatory leverage and risk-based capital ratios.

Acquisition of WFB

On July 1, 2025, we announced that we had entered into the Agreement and Plan of Merger by and between Investar and WFB, headquartered in Wichita Falls, Texas, which provided for the merger of WFB with and into Investar, with Investar as the surviving corporation, followed by the merger of FNB, WFB’s wholly-owned subsidiary, with and into the Bank, with the Bank as the surviving bank. The Company completed its acquisition of WFB and FNB on January 1, 2026. All of the issued and outstanding shares of WFB common stock were converted into aggregate merger consideration consisting of $7.2 million in cash and 3,955,272 shares of Company common stock for an aggregate transaction value of $112.9 million. This value is based on the Company’s closing stock price on December 31, 2025 of $26.72 per common share. At December 31, 2025, WFB had $1.2 billion in total assets, $1.0 billion in net loans and $1.0 billion in total deposits.

Private Placement of Series A Preferred Stock

In connection with the WFB transaction, on July 1, 2025, we completed a private placement of 32,500 shares of our newly designated Series A Preferred Stock with selected institutional and other accredited investors at a price of $1,000 per share, for aggregate gross proceeds of $32.5 million. The net proceeds were $30.4 million, after deducting placement agent fees and other offering-related expenses. Investar utilized the net proceeds from the offering to support the acquisition of WFB and for general corporate purposes, including organic growth and other potential acquisitions. For additional information, see Note 13. Stockholders’ Equity.

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For certain GAAP performance measures, see “Certain Performance Indicators: GAAP Financial Measures” below. We also monitor changes in our tangible equity, tangible assets, and tangible book value per common share, shown in the section “Certain Performance Indicators: Non-GAAP Financial Measures” below.

Certain Performance Indicators: GAAP Financial Measures

Certain Performance Indicators: Non-GAAP Financial Measures

Our accounting and reporting policies conform to accounting principles generally accepted in the United States, or GAAP, and the prevailing practices in the banking industry. However, we also evaluate our performance based on certain additional non-GAAP metrics, including tangible book value, tangible assets, tangible book value per common share, and tangible common equity to tangible assets. These measures are not financial measures recognized under GAAP and, therefore, are considered non-GAAP financial measures.

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Our management, banking regulators, financial analysts and investors use these non-GAAP financial measures to compare the capital adequacy of banking organizations with significant amounts of preferred stock and/or goodwill or other intangible assets, which typically stem from the use of the purchase accounting method of accounting for mergers and acquisitions. Tangible equity, tangible assets, tangible book value per common share or related measures should not be considered in isolation or as a substitute for total stockholders’ equity, total assets, book value per common share or any other measure calculated in accordance with GAAP. Moreover, the manner in which we calculate tangible equity, tangible assets, tangible book value per common share and any other related measures may differ from that of other companies reporting measures with similar names. The following table reconciles, as of the dates set forth below, stockholders’ equity (on a GAAP basis) to tangible equity and total assets (on a GAAP basis) to tangible assets and calculates our tangible book value per common share (dollars in thousands).

Certain Events That Affect Year-over-Year Comparability

Changing Inflation and Interest Rates.
During 2024, beginning in September 2024, the Federal Reserve reduced the federal funds target rate three times by 100 basis points on a cumulative basis to 4.25% to 4.50%. During 2025, beginning in September 2025, the Federal Reserve reduced the federal funds target rate three times by 75 basis points on a cumulative basis to 3.50% to 3.75%. Accordingly, the prevailing federal funds target rate for the year ended
December 31, 2025 was lower than for the year ended
December 31, 2024.

Disruptions in the Banking Industry. Between March 10, 2023 and March 12, 2023, state banking supervisors closed Silicon Valley Bank and Signature Bank and named the FDIC as receiver. At the time of closure, they were among the 30 largest U.S. banks. While the reasons for their failure are complex and have not been fully investigated, reports indicate that, among other things, both banks had grown in asset size in recent periods at a faster rate than their peers, had large proportions of uninsured deposits (approximately 87.5% and 89.7% of total deposits, respectively) and high unrealized losses on investment securities. Silicon Valley Bank’s business strategy focused on serving the technology and venture capital sectors, and Signature Bank had significant exposure to deposits from the digital asset industry. Prior to their closure, both banks experienced sudden and rapid deposit withdrawals. These events caused bank deposit customers, particularly those with uninsured deposits, to become concerned regarding the safety of their deposits, and in some cases caused customers to withdraw deposits. In response to the disruptions, among other things, the Federal Reserve announced a new BTFP to provide eligible banks with loans of up to one-year maturity backed by collateral pledged at par value. On April 24, 2023, San Francisco-based First Republic Bank, also among the 30 largest U.S. banks, reported a large deposit outflow and substantially reduced net income. First Republic Bank also had a large proportion of uninsured deposits (67% as of December 31, 2022). On May 1, 2023, regulators seized First Republic Bank and sold all of its deposits and most of its assets to JPMorgan Chase Bank.

In response to the disruptions and related publicity, we formed an internal task force that included members of our ALCO. The task force met frequently to review our liquidity position and liquidity sources, and oversaw the Bank’s process to qualify for the BTFP. In addition, we took steps to inform our customers about our financial position, liquidity and insured deposit products. During the second quarter of 2023, we utilized the BTFP and reduced FHLB advances. The Bank utilized this source of funding due to its lower rate, the ability to prepay the obligations without penalty, and as a means to lock in funding. During the fourth quarter of 2023 and again in the first quarter of 2024, the Bank refinanced its BTFP borrowings with new borrowings under the program due to more favorable rates. The Federal Reserve ceased making new loans under the BTFP on March 11, 2024. During the third quarter of 2024, we began paying down borrowings under the BTFP and repaid all of the remaining borrowings under the BTFP in the fourth quarter of 2024. As of
December 31, 2025, estimated uninsured deposits represented approximately 34% of our total deposits. For additional information, see “
Discussion and Analysis of Financial Condition –
Deposits,” “
Borrowings,” and “
Liquidity and Capital Resources” and
Part I. Item 1A. Risk Factors.

Hurricane Ida. On August 29, 2021, Hurricane Ida hit the Louisiana coast as a category 4 hurricane. Though Hurricane Ida did not cause significant physical damage to our branch locations, the storm devastated some of our market areas. The Company set up programs to help employees and customers experiencing financial difficulty as a result of the hurricane, including a deferral program. Additionally, the Company recorded an impairment charge of $21.6 million in the third quarter of 2021 related to a lending relationship with related borrowers (collectively, the “Borrower”) consisting of multiple loans secured by various types of collateral, including real estate, inventory, and equipment. As a result of Hurricane Ida’s impact on the Borrower’s business operations, some of the collateral securing the loan relationship, including real estate, inventory, and equipment, experienced a significant reduction in value.

As of December 31, 2025, we have recorded total recoveries on the relationship of approximately $7.9 million on a cumulative basis. During 2025, we recorded a $3.3 million recovery of loans previously charged off as a result of a property insurance settlement related to a loan relationship that became impaired in the third quarter of 2021 as a result of Hurricane Ida, and we also recorded related noninterest expense of $0.2 million. During 2024, we recorded a gain on sale of other real estate owned of $0.7 million and noninterest income of $1.1 million from a legal settlement related to this loan relationship.

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Branch Activity. In January 2024, we closed one branch in Alabama. In October 2024, we converted an existing loan and deposit production office in our Texas market to a full-service branch location.

Subordinated Debt Repurchases and Redemptions. During the first quarter of 2024, we repurchased $1.0 million in principal amount of our 2032 Notes. During the second quarter of 2024, we repurchased $5.0 million in principal amount of our 2029 Notes and $2.0 million in principal amount of our 2032 Notes. During the fourth quarter of 2024, we redeemed all of the remaining $20.0 million in principal amount of the 2029 Notes. As of December 31, 2025 and December 31, 2024, our outstanding subordinated debt consisted of $17.0 million in principal amount of our 2032 Notes.

Legal Settlement. During the third quarter of 2024, we recorded noninterest income of $1.1 million from a legal settlement related to a lending relationship that became impaired in the third quarter of 2021 as a result of Hurricane Ida.

BOLI Restructuring. During the first quarter of 2024, we surrendered approximately $8.4 million of BOLI and reinvested the proceeds in higher yielding policies.

BOLI Death Benefit Proceeds. During the fourth quarter of 2024, we received BOLI death benefit proceeds totaling $5.5 million, and recorded a related $3.1 million in nontaxable noninterest income from BOLI.

Acquisition of WFB. During 2025, we recorded acquisition expense of $1.0 million related to the acquisition of WFB completed on January 1, 2026.

Private Placement of Series A Preferred Stock. During the third quarter of 2025, we completed a private placement of 32,500 shares of our newly designated Series A Preferred Stock with selected institutional and other accredited investors at a price of $1,000 per share, for aggregate gross proceeds of $32.5 million. The net proceeds were $30.4 million, after deducting placement agent fees and other offering-related expenses.

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Overview of Financial Condition and Results of Operations

Total assets were $2.8 billion at December 31, 2025, an increase of $0.1 million, or 4.0%, compared to total assets of $2.7 billion at December 31, 2024. Net income available to common shareholders for the year ended December 31, 2025 totaled $21.8 million, or $2.13 per diluted common share, compared to $20.3 million, or $2.04 per diluted common share, for the year ended December 31, 2024. This represents a $1.6 million, or a 7.9%, increase in net income available to common shareholders. At December 31, 2025, the Company and the Bank each were in compliance with all regulatory capital requirements, and the Bank was considered “well-capitalized” under prompt corrective action regulations.

Key components of the Company’s performance during the year ended December 31, 2025 are summarized below.

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Discussion and Analysis of Financial Condition

Loans

General. Loans, constitute our most significant asset, comprising 77% and 78% of our total assets at December 31, 2025 and 2024, respectively. Loans increased $50.9 million, or 2.4%, to $2.18 billion at December 31, 2025 from $2.13 billion at December 31, 2024. The increase in loans was primarily the result of organic growth. We emphasize the origination of high margin loans that promote long-term profitability and proactively exiting credit relationships that do not fit this strategy. Our variable-rate loans as a percentage of total loans increased to 38% at December 31, 2025 compared to 32% at December 31, 2024.

The table below sets forth the balance of loans outstanding by loan type as of the dates presented, and the percentage of each loan type to total loans (dollars in thousands).

At December 31, 2025, the Company’s total business lending portfolio, which consists of loans secured by owner-occupied commercial real estate properties and commercial and industrial loans, was $1.06 billion, an increase of $79.2 million, or 8.1%, compared to the business lending portfolio of $976.2 million at December 31, 2024. The increase in the business lending portfolio was primarily driven by organic growth and higher utilization of credit lines, particularly on commercial and industrial relationships.

Nonowner-occupied commercial real estate loans totaled $452.1 million at December 31, 2025, a decrease of $43.1 million, or 8.7% compared to $495.3 million at December 31, 2024. The decrease in nonowner-occupied loans was primarily due to loan amortization and payoffs that aligned with our continued strategy to optimize and de-risk the mix of the portfolio.

During the third quarter of 2023, we exited the consumer mortgage loan origination business to transition into shorter duration, higher risk-adjusted return asset classes, in an effort to focus more on our core business and optimize profitability. The consumer mortgage portfolio was approximately $224.5 million at December 31, 2025, a decrease of $18.0 million, or 7.4%, compared to $242.5 million at December 31, 2024, substantially all of which is included in the 1-4 family category. The remaining loans in the category consisted primarily of second mortgages, home equity loans, home equity lines of credit, and business purpose loans secured by 1-4 family residential real estate.

Loan Concentrations. Loan concentrations are considered to exist when there are amounts loaned to multiple borrowers engaged in similar activities that would cause them to be similarly impacted by economic or other conditions. At December 31, 2025 and December 31, 2024, we had no concentrations of loans exceeding 10% of total loans other than loans in the categories listed in the table above.

The table below sets forth the balance of owner-occupied commercial real estate loans by industry based on NAICS code and nonowner-occupied loans by property type as of the dates presented (dollars in thousands).

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The following table reflects contractual loan maturities of loans in our loan portfolio and the amount of such loans with fixed and variable interest rates in each maturity range as of December 31, 2025.

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Investment Securities

We purchase investment securities primarily to provide a source for meeting liquidity needs, with return on investment as a secondary consideration. We also use investment securities as collateral for certain deposits and other types of borrowings. Investment securities represented 15% of our total assets and totaled $418.8 million at December 31, 2025, an increase of $45.0 million, or 12.0%, from $373.8 million at December 31, 2024. The increase in investment securities was driven primarily by a $38.4 million increase in residential mortgage-backed securities and a $5.9 million increase in obligations of state and political subdivisions. Due in large part to higher interest rates and market volatility, net unrealized losses in our AFS investment securities portfolio totaled $45.4 million at December 31, 2025 and $61.4 million at December 31, 2024.

The table below shows the carrying value of our investment securities portfolio by investment type and the percentage that such investment type comprises of our entire portfolio as of the dates indicated (dollars in thousands).

The investment portfolio consists of AFS and HTM securities. We do not hold any investments classified as trading. We classify debt securities as HTM if management has the positive intent and ability to hold the securities to maturity. HTM securities are stated at amortized cost. Securities not classified as HTM are classified as AFS and are stated at fair value. At December 31, 2025, AFS securities comprised 88% of our total investment portfolio.

Due to the nature of the investments, current market prices, and the current interest rate environment, we determined that the declines in the fair values of the AFS and HTM securities portfolio were not attributable to credit losses. Accordingly, no ACL was recorded related to our investment securities. The carrying values of our AFS securities are adjusted for unrealized gains or losses not attributable to credit losses as valuation allowances, and any gains or losses are reported on an after-tax basis as a component of other comprehensive income (loss). For additional information regarding accounting for our investment securities, see Note 1. Summary of Significant Accounting Policies – Allowance for Credit Losses.

During the year ended December 31, 2025, we purchased $8.3 million of HTM securities classified as obligations of state and political subdivisions, compared to $27.0 million during the year ended December 31, 2024. During the year ended December 31, 2025, we purchased $75.0 million of AFS investment securities, compared to $27.6 million during the year ended December 31, 2024. Proceeds from maturities, prepayments and calls of AFS securities were $52.2 million in 2025 compared to $35.6 million in 2024, and we had no sales of AFS investment securities in 2025 compared to $18.0 million in 2024. Proceeds from maturities, prepayments and calls of HTM securities were $2.8 million in 2025 compared to $4.8 million in 2024.

Mortgage-backed securities represented 80% and 55% of the AFS securities we purchased in 2025 and 2024, respectively. U.S. Treasury and U.S. government agencies and corporations securities represented 10% and 23% of the AFS securities we purchased in 2025 and 2024, respectively. Of the remaining AFS securities purchased in 2025 and 2024, 1% and 13%, respectively, were obligations of state and political subdivisions and 9% for each period were corporate bonds. We only purchase corporate bonds that are investment grade securities issued by seasoned corporations.

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The table below sets forth the stated maturities and weighted average yields of our investment debt securities based on the amortized cost of our investment portfolio as of December 31, 2025 (dollars in thousands).

The maturity of mortgage-backed securities reflects scheduled repayments based upon the contractual maturities of the securities. Weighted average yields on tax-exempt securities are calculated based on amortized cost on a fully tax equivalent basis assuming a federal tax rate of 21%, when applicable.

Premises and Equipment

Bank premises and equipment decreased $1.2 million, or 2.9%, to $39.5 million at December 31, 2025 from $40.7 million at December 31, 2024. The decrease was primarily attributable to depreciation.

Deferred Tax Asset

At December 31, 2025, the net deferred tax asset was $14.1 million, compared to $17.1 million at December 31, 2024. The decrease in the deferred tax asset was primarily driven by a decrease in the net unrealized losses of the Bank’s AFS securities portfolio.

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Deposits

The following table sets forth the composition of our deposits and the percentage of each deposit type to total deposits at December 31, 2025 and 2024 (dollars in thousands).

Total deposits were $2.35 billion at December 31, 2025, an increase of $4.3 million, or 0.2%, from total deposits of $2.35 billion at December 31, 2024. The increase in noninterest-bearing demand deposits, interest-bearing demand deposits and money market deposits was primarily due to organic growth. We increased rates on our interest-bearing demand deposits during 2025 compared to 2024 to attract and retain lower cost deposits relative to higher-cost short-term borrowings. The decrease in time deposits was primarily due to maturities of higher cost time deposits as a result of our strategy to keep duration short and lower rates. Brokered time deposits decreased to $204.1 million at December 31, 2025 from $245.5 million at December 31, 2024. We utilize brokered time deposits, entirely in denominations of less than $250,000, to secure fixed cost funding and reduce short-term borrowings. At December 31, 2025, the balance of brokered time deposits remained below 10% of total assets, and the remaining weighted average duration was approximately five months with a weighted average rate of 4.03%.

The Company had de minimis brokered demand deposits at December 31, 2025 compared to $47.3 million at December 31, 2024. We utilize brokered demand deposits when pricing is more favorable than other short-term borrowings.

Estimated uninsured deposits were $793.2 million, or approximately 34% of total deposits, at December 31, 2025, compared to $737.6 million, or approximately 31% of total deposits, at December 31, 2024. The estimates are based on the same methodologies and assumptions used for our regulatory reporting requirements. The insured deposit data for 2025 and 2024 does not reflect an evaluation of all of the account ownership category distinctions that would determine the availability of deposit insurance to individual accounts based on FDIC regulations.

The following table shows scheduled maturities of time deposits in excess of the FDIC insurance limit of $250,000 at December 31, 2025 and 2024 (dollars in thousands).

Borrowings

At December 31, 2025, total borrowings included securities sold under agreements to repurchase, advances from the FHLB, subordinated debt issued in 2022, and junior subordinated debentures assumed through acquisitions.

We had $11.2 million of securities sold under agreements to repurchase at December 31, 2025 compared to $8.4 million at December 31, 2024.

Our advances from the FHLB were $116.0 million at December 31, 2025, an increase of $48.8 million from FHLB advances of $67.2 million at December 31, 2024. FHLB advances are used to fund loan and investment activity that is not funded by deposits or other borrowings. Based on original maturities, at December 31, 2025, $36.0 million were short-term and $80.0 million of FHLB advances were long-term, compared to $7.2 million short-term and $60.0 million long-term FHLB advances at December 31, 2024. We utilized federal funds purchased during the years ended December 31, 2025 and 2024, although none were outstanding at the year-ends. FHLB advances are used to fund new loan and investment activity that is not funded by deposits or other borrowings.

At December 31, 2025 and December 31, 2024, we had $17.0 million in principal amount of our 2032 Notes outstanding. The carrying value of this subordinated debt was $16.7 million at December 31, 2025 and December 31, 2024. Junior subordinated debt of $8.8 million and $8.7 million at December 31, 2025 and 2024, respectively, represents the junior subordinated debentures that we assumed in connection with our acquisitions of Cheaha Financial Group Inc. in 2021, BOJ Bancshares, Inc. in 2017, and First Community Bank in 2013.

On March 12, 2023, the Federal Reserve established the BTFP. The BTFP was a one-year program which provided additional liquidity through borrowings for a term of up to one year secured by the pledging of certain qualifying securities and other assets valued at par. Beginning in the second quarter of 2023, we utilized the BTFP to secure fixed rate funding for a one-year term and reduce short-term FHLB advances, which are priced daily. We utilized this source of funding due to its lower rate and the ability to prepay the obligations without penalty. The rates on the borrowings under the BTFP were fixed for one year from the day each borrowing was made. During the fourth quarter of 2023 and again in the first quarter of 2024, we refinanced all of our borrowings under the BTFP with new loans under the BTFP with a one-year term due to more favorable rates. During the third quarter of 2024, we began paying down borrowings under the BTFP and repaid all of the remaining borrowings under the BTFP in the fourth quarter of 2024. At December 31, 2025 and 2024, we had no outstanding borrowings under the BTFP. The BTFP ceased making new loans as scheduled on March 11, 2024.

Typically, the main source of our short-term borrowings are advances from the FHLB; however, during the year ended December 31, 2024, our primary source of short-term borrowings were borrowings under the BTFP due to more favorable rates. The rate charged for advances from the FHLB is directly tied to the Federal Reserve’s federal funds target rate. As of December 31, 2025, the federal funds target rate was 3.50% to 3.75%.

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The average balances and cost of short-term borrowings for the years ended December 31, 2025, 2024 and 2023 are summarized in the table below (dollars in thousands).

The following table sets forth certain information regarding securities sold under agreements to repurchase for the years ended December 31, 2025, 2024 and 2023 (dollars in thousands).

2032 Notes. At December 31, 2025 and 2024, we had $17.0 million in principal amount of our 2032 Notes outstanding. On April 6, 2022, we entered into a Subordinated Note Purchase Agreement with certain institutional accredited investors and qualified institutional buyers (the “Purchasers”) under which we issued $20.0 million in aggregate principal amount of our 2032 Notes to the Purchasers at a price equal to 100% of the aggregate principal amount of the 2032 Notes. The 2032 Notes were issued under an indenture, dated April 6, 2022 (the “Indenture”), by and among the Company and UMB Bank, National Association, as trustee.

The 2032 Notes have a stated maturity date of April 15, 2032 and bear interest at a fixed rate of 5.125% per year from and including April 6, 2022 to but excluding April 15, 2027 or earlier redemption date. From April 15, 2027 to but excluding the stated maturity date or earlier redemption date, the 2032 Notes will bear interest at a floating rate equal to the then current three-month term SOFR, plus 277 basis points. As provided in the 2032 Notes, the interest rate on the 2032 Notes during the applicable floating rate period may be determined based on a rate other than three-month term SOFR. The 2032 Notes may be redeemed, in whole or in part, on or after April 15, 2027 or, in whole but not in part, under certain other limited circumstances set forth in the Indenture. Any redemption we made would be at a redemption price equal to 100% of the principal balance being redeemed, together with any accrued and unpaid interest to the date of redemption.

Principal and interest on the 2032 Notes are subject to acceleration only in limited circumstances in the case of certain bankruptcy and insolvency-related events. The 2032 Notes are the unsecured, subordinated obligations of the Company and rank junior in right of payment to our current and future senior indebtedness and to our obligations to our general creditors. The 2032 Notes are intended to qualify as Tier 2 capital for regulatory purposes.

We used the majority of the net proceeds from the 2032 Notes to redeem our 2027 Notes in June 2022, and utilized the remaining proceeds for share repurchases and for general corporate purposes.

During the year ended December 31, 2024, we repurchased $3.0 million in principal amount of the 2032 Notes.

2029 Notes. At December 31, 2025 and 2024, none of our 2029 Notes were outstanding. On November 12, 2019, the Company issued $25.0 million in aggregate principal amount of its 2029 Notes at 100% of their face amount in a private placement to certain institutional and other accredited investors. The 2029 Notes had a maturity date of December 30, 2029. From and including the date of issuance to, but excluding December 30, 2024, the 2029 Notes bore interest at an initial fixed rate of 5.125% per annum, payable semi-annually in arrears. From and including December 30, 2024 and thereafter, the 2029 Notes were to bear interest at a floating rate equal to the then-current three-month LIBOR as calculated on each applicable date of determination, or an alternative rate determined in accordance with the terms of the 2029 Notes if the three-month LIBOR could not be determined, plus 3.490%, payable quarterly in arrears.

The Company could redeem the 2029 Notes, in whole or in part, on or after December 30, 2024 or, in whole but not in part, under certain limited circumstances set forth in the 2029 Notes. Any redemption by the Company would be at a redemption price equal to 100% of the principal balance being redeemed, together with any accrued and unpaid interest to the date of redemption.

Principal and interest on the 2029 Notes were not subject to acceleration, except upon certain bankruptcy-related events. The 2029 Notes were unsecured, subordinated obligations of the Company and ranked junior in right of payment to the Company’s current and future senior indebtedness and to the Company’s obligations to its general creditors. The 2029 Notes were obligations of the Company only and were not obligations of, and were not guaranteed by, any of the Company’s subsidiaries. The 2029 Notes were intended to qualify as Tier 2 capital for regulatory capital purposes.

During the second quarter of 2024, we repurchased $5.0 million in principal amount of our 2029 Notes. On December 30, 2024, we redeemed the remaining $20.0 million in principal amount in full accordance with their terms at a redemption price equal to 100% of the outstanding principal balance plus accrued and unpaid interest up to but excluding the December 30, 2024 redemption date.

Stockholders’ Equity

Stockholders’ equity was $301.1 million at December 31, 2025, an increase of $59.8 million, or 24.8%, compared to December 31, 2024. The increase in stockholders’ equity was primarily attributable to the issuance of the Series A Preferred Stock, discussed above, net income for fiscal year 2025, a decrease in accumulated other comprehensive loss due to an increase in the fair value of the Bank’s AFS securities portfolio, partially offset by $4.3 million in dividends declared on common stock, $2.3 million for share repurchases, and $1.1 million in dividends declared on the Series A Preferred Stock.

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Results of Operations

Performance Summary

Net Interest Income and Net Interest Margin

Net interest income, our principal source of earnings, is the difference between the interest income generated by earning assets and the total interest cost of the deposits and borrowings obtained to fund those assets. Factors affecting the level of net interest income include the volume of earning assets and interest-bearing liabilities, yields earned on loans and investments and rates paid on deposits and other borrowings, the level of nonperforming loans, the amount of noninterest-bearing liabilities supporting earning assets, and the interest rate environment. Net interest margin is the ratio of net interest income to average interest-earning assets.

The primary factors affecting net interest margin are changes in interest rates, competition, and the shape of the interest rate yield curve. The Federal Reserve Board sets various benchmark rates, including the federal funds target rate, and thereby influences the general market rates of interest, including the deposit and loan rates offered by financial institutions. During 2024, beginning in September, the Federal Reserve reduced the federal funds target rate three times by 100 basis points on a cumulative basis to 4.25% to 4.50% where it remained until September 2025. During 2025, beginning in September, the Federal Reserve reduced the federal funds target rate three times by 75 basis points on a cumulative basis to 3.50% to 3.75%, where it remained as of March 16, 2026. Accordingly, the prevailing federal funds target rate during year ended December 31, 2025 was lower than during the year ended December 31, 2024. For additional discussion, see Certain Events That Affect Year-over-Year Comparability – Changing Inflation and Interest Rates.

2025 vs. 2024. Net interest income increased 15.8% to $80.8 million for the year ended December 31, 2025 from $69.8 million for the same period in 2024. Net interest margin was 3.07% for the year ended December 31, 2025, an increase of 44 basis points from 2.63% for the year ended December 31, 2024. The increase in net interest income resulted primarily from a lower average balance of short-term borrowings and a lower average balance of, and a decrease in the rates paid on, time deposits, partially offset by a lower average balance of loans and an increase in the average balance of, and rates paid on, interest-bearing demand deposits. Average short-term borrowings decreased $149.8 million, as we repaid our borrowings under the BTFP, which along with lower rates paid, resulted in a $7.4 million decrease in interest expense compared to the year ended December 31, 2024. Average time deposits decreased $34.4 million, which along with lower rates paid, resulted in a $6.0 million decrease in interest expense compared to the year ended December 31, 2024. Average loans decreased $36.6 million in accordance with our strategy to optimize the balance sheet, which, partially offset by higher loan yields, resulted in a $1.8 million decrease in interest income compared to the year ended December 31, 2024. Average interest-bearing demand deposits increased $126.8 million, which, combined with an increase in rates, resulted in a $4.2 million increase in interest expense compared to the year ended December 31, 2024. Average brokered time deposits were $237.3 million during the year ended December 31, 2025 compared to $249.7 million during the year ended December 31, 2024, which along with lower rates paid resulted in a $1.9 million decrease in interest expense compared to the year ended December 31, 2024. Average noninterest-bearing deposits increased $15.5 million during the year ended December 31, 2025 compared to the same period in 2024. Rates paid on interest-bearing liabilities decreased primarily as a result of the overall decrease in prevailing interest rates and our strategy to optimize the balance sheet. Our yield on interest-earning assets increased due to an increase in yield on loans and the investment securities portfolio.

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Interest income was $144.0 million for the year ended December 31, 2025 compared to $143.9 million for the same period in 2024. Loan interest income made up substantially all of our interest income for the years ended December 31, 2025 and 2024, although interest on investment securities contributed 10.2% of interest income for the year ended December 31, 2025 compared to 8.5% for the year ended December 31, 2024. Interest on our commercial real estate loans, commercial and industrial loans, and 1-4 family residential real estate loans constituted the three largest components of our loan interest income for the years ended December 31, 2025 and 2024 at 85% of total interest income on loans. The overall yield on interest-earning assets increased four basis points to 5.47% for the year ended December 31, 2025 compared to 5.43% for the same period in 2024. The loan portfolio yielded 5.96% for the year ended December 31, 2025 compared to 5.94% for the year ended December 31, 2024. The increase in yield on our loan portfolio was driven primarily by higher yields on commercial real estate loans and multifamily loans. In addition, the yield on the investment portfolio was 3.23% for the year ended December 31, 2025 compared to 2.86% for the year ended December 31, 2024.

Interest expense was $63.2 million for the year ended December 31, 2025, a decrease of $10.9 million compared to interest expense of $74.1 million for the year ended December 31, 2024. A decrease in interest expense of $6.0 million resulted from a decrease in the volume of interest-bearing liabilities, primarily short-term borrowings and time deposits partially offset by an increase in volume of interest-bearing demand deposits and long-term debt. A decrease in interest expense of $4.9 million resulted from the decrease in the cost of interest-bearing liabilities, primarily time deposits and brokered time deposits, partially offset by an increase in the cost of interest-bearing demand deposits. Average interest-bearing liabilities decreased by $56.0 million for the year ended December 31, 2025 compared to the year ended December 31, 2024, as average short-term borrowings decreased by $149.8 million while average interest-bearing deposits increased by $126.8 million. For the year ended December 31, 2025, the cost of interest-bearing deposits decreased 34 basis points to 3.04% primarily due to lower prevailing market interest rates. As previously discussed, the federal funds target rate decreased during 2025 to 3.50% to 3.75%, which affects the rate the Company pays for deposits, immediately available overnight funds, and long-term borrowings. We increased rates on our interest-bearing demand deposits during the year ended December 31, 2025 compared to the to the year ended December 31, 2024 to attract and retain lower cost deposits relative to higher cost short-term borrowings. The cost of short-term borrowings decreased 139 basis points to 3.19% primarily due to our payoff of our borrowings under the BTFP during the year ended December 31, 2024. For the year ended December 31, 2025, the cost of interest-bearing liabilities decreased 44 basis points to 3.11% compared to the same period in 2024.

Average Balances and Yields. The following table sets forth average balance sheet data, including all major categories of interest-earning assets and interest-bearing liabilities, together with the interest earned or paid and the average yield or rate paid on each such category as of and for the years ended December 31, 2025, 2024 and 2023. Averages presented below are daily averages (dollars in thousands).

Nonaccrual loans were included in the computation of average loan balances but carry a zero yield. The yields include the effect of loan fees of $2.0 million, $1.7 million and $2.0 million for the years ended December 31, 2025, 2024 and 2023, respectively, and discounts and premiums that are amortized or accreted to interest income or expense.

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Volume/Rate Analysis. The following tables set forth a summary of the changes in interest earned and interest paid resulting from changes in volume and rates for the year ended December 31, 2025 compared to the year ended December 31, 2024 and the year ended December 31, 2024 compared to the year ended December 31, 2023 (dollars in thousands).

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Noninterest Income

We expect to continue to develop new products that generate noninterest income, and enhance our existing products, in order to diversify our revenue sources. The following table illustrates the primary components of noninterest income for the year ended December 31, 2025 compared to the year ended December 31, 2024 (dollars in thousands).

2025 vs. 2024. Total noninterest income decreased $4.7 million, or 33.4%, to $9.5 million for the year ended December 31, 2025 compared to $14.2 million for the year ended December 31, 2024. The decrease was mainly attributable to nonrecurring items occurring during the year ended December 31, 2024. We recorded $3.1 million in income from BOLI for the receipt of death benefit proceeds during the year ended December 31, 2024. There was also $1.1 million of income from legal settlement recorded for the year ended December 31, 2024 related to a lending relationship that became impaired in the third quarter of 2021 as a result of Hurricane Ida. During the first quarter of 2024, we recorded a $0.4 million gain on sale or disposition of fixed assets as a result of the closure of one branch in the Alabama market.

Service charges on deposit accounts include maintenance fees on accounts, account enhancement charges for additional deposit account features, per item charges, overdraft fees, and treasury management charges. Service charges on deposit accounts increased 0.5% to $3.3 million for the year ended December 31, 2025 compared to $3.2 million for the same period in 2024.

There was a de minimis gain on call or sale of investment securities for the year ended December 31, 2025 compared to a $0.8 million loss for the year ended December 31, 2024. We sold no securities during the year ended December 31, 2025 compared to $18.0 million during the year ended December 31, 2024.

There was a de minimis gain on sale of other real estate owned for the year ended December 31, 2025 compared to a $0.7 million gain for the year ended December 31, 2024. We sold approximately $3.1 million of other real estate owned during the year ended December 31, 2025 compared to $2.1 million of sales during the year ended December 31, 2024.

Interchange fees, which are fees earned on the usage of the Bank’s credit and debit cards, decreased $41,000, or 2.5%, to $1.6 million for year ended December 31, 2025 from $1.6 million for the year ended December 31, 2024. The decrease in interchange fees can primarily be attributed to the decrease in the volume of debit and credit card transactions.

Income from BOLI decreased $2.9 million to $2.0 million for the year ended December 31, 2025 from $4.9 million for the year ended December 31, 2024. During the year ended December 31, 2024, we received BOLI death benefit proceeds totaling $5.5 million and recorded $3.1 million in nontaxable income from BOLI. During the year ended December 31, 2025, we purchased $7.5 million in BOLI policies, which resulted in increased interest earning on our BOLI policies.

Other operating income includes, among other things, credit card, ATM and wire fees, derivative fee income, changes in the net asset value of other investments and lease income. The $0.2 million decrease in other operating income for the year ended December 31, 2025 compared to the year ended December 31, 2024 was primarily attributable to a $0.6 million decrease in the change in net asset value of other investments and a $0.2 million decrease in derivative fee income, partially offset by a $0.3 million increase in distributions from other investments and $0.3 million of insurance proceeds received in the second quarter of 2025 for damages to a property recorded in other real estate owned.

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Noninterest Expense

Noninterest expense includes salaries and employee benefits and other costs associated with the conduct of our operations. Our goal is to manage our costs within the framework of our operating strategy of generating consistent, quality earnings.

The following table illustrates the primary components of noninterest expense for the year ended December 31, 2025 compared to the year ended December 31, 2024 (dollars in thousands).

2025 vs. 2024. Total noninterest expense was $65.7 million for the year ended December 31, 2025, an increase of $2.7 million, or 4.3%, from $63.0 million for the year ended December 31, 2024. This increase was primarily driven by increases in salaries and employee benefits and acquisition expense, partially offset by decreases in depreciation and amortization and other operating expenses.

Salaries and employee benefits increased $1.6 million, or 4.2%, to $40.2 million for the year ended December 31, 2025, compared to $38.6 million for the year ended December 31, 2024. The increase in salaries and employee benefits was primarily due to investment in people with an emphasis on our Texas markets to remix and strengthen our balance sheet and an increase in health insurance claims, partially offset by a decrease in deferred compensation expense. As of December 31, 2025, we had 319 full-time and eight part-time employees, compared to 327 full-time and eight part-time employees as of December 31, 2024.

Depreciation and amortization decreased $0.3 million, or 9.8%, to $2.8 million for the year ended December 31, 2025, compared to $3.1 million for the year ended December 31, 2024. The decrease in depreciation and amortization was primarily driven by the closure of one branch during the first quarter of 2024.

Data processing decreased $0.2 million, or 4.3%, to $3.5 million for the year ended December 31, 2025 from $3.6 million for the same period in 2024. We did not complete any acquisitions, which typically drive higher data processing expenses, during the years ended December 31, 2025 and 2024. We regularly review existing contracts with the goal of negotiating favorable terms to offset the increased variable cost components of our data processing costs, such as new accounts and increased transaction volume.

Occupancy expense increased $0.1 million, or 3.5%, to $2.7 million for the year ended December 31, 2025 from $2.6 million for the year ended December 31, 2024. This increase was primarily attributable to utilities and insurances expense.

Acquisition expense increased to $1.0 million for the year ended December 31, 2025 compared to none for the year ended December 31, 2024. This increase was attributable to the acquisition of WFB completed on January 1, 2026.

Other operating expenses include security, business development, FDIC and OCC assessments, bank shares and property taxes, collection and repossession, charitable contributions, repair and maintenance costs, personnel training and development, filing fees, and other costs related to the operation of our business. Other operating expenses decreased $0.2 million, or 1.5%, to $13.1 million for the year ended December 31, 2025 from $13.3 million for the year ended December 31, 2024. The decrease in other operating expenses was primarily due to decreases in collection and repossession expenses and FDIC assessments, partially offset by increases in write-down of other real estate owned and bank shares taxes.

Income Tax Expense

Income tax expense for the years ended December 31, 2025 and 2024, was $5.0 million and $4.2 million, respectively. The effective tax rates for the years ended December 31, 2025 and 2024 were 17.9% and 17.0%, respectively. During the first quarter of 2024, we surrendered approximately $8.4 million of BOLI contracts and reinvested the proceeds in higher yielding policies, which resulted in $0.3 million of income tax expense. The restructuring had an expected earn-back period of just over one year. During the fourth quarter of 2024, we received BOLI death benefit proceeds totaling $5.5 million and recorded $3.1 million in nontaxable income from BOLI.

For the year ended December 31, 2025, the effective tax rate differs from the statutory rate of 21% primarily due to tax-exempt interest income earned on certain loans and investment securities and income from BOLI. For the year ended December 31, 2024, the effective tax rate differs from the statutory rate of 21% primarily due to tax-exempt interest income earned on certain loans and investment securities and income from BOLI, partially offset by the surrender of BOLI contracts.

On July 4, 2025, the OBBBA, which contains a broad range of tax reform provisions affecting businesses, was signed into law. The OBBBA did not have a significant impact on 2025 income tax expense.

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Risk Management

The primary risks associated with our operations are credit, interest rate and liquidity risk. Higher inflation also presents risks. Credit, inflation and interest rate risk are discussed below, while liquidity risk is discussed in this section under the heading Liquidity and Capital Resources below.

Credit Risk and the Allowance for Credit Losses

General. The risk of loss should a borrower default on a loan is inherent in any lending activity. Our portfolio and related credit risk are monitored and managed on an ongoing basis by our risk management department, the Board’s loan committee and the full Board. We utilize a ten-point risk-rating system, which assigns a risk grade to each borrower based on a number of quantitative and qualitative factors associated with a loan transaction. The risk grade categorizes the loan into one of five risk categories, based on information about the ability of borrowers to service the debt. The information includes, among other factors, current financial information about the borrower, historical payment experience, credit documentation, public information and current economic trends. These categories assist management in monitoring our credit quality. The risk categories, which are consistent with the definitions used in guidance promulgated by federal banking regulators are Pass (grades 1-6), Special Mention (grade 7), Substandard (grade 8), Doubtful (grade 9) and Loss (grade 10). For additional information, see Note 3. Loans and Allowance for Credit Losses – Credit Quality Indicators.

At December 31, 2025 and December 31, 2024, there were no loans classified as Loss or Doubtful, $38.1 million and $32.7 million, respectively, of loans classified as Substandard, and $9.7 million and $7.8 million, respectively, of loans classified as Special Mention. Of our aggregate $47.8 million and $40.5 million Substandard and Special Mention loans at December 31, 2025 and December 31, 2024, respectively, $1.7 million and $2.0 million, respectively, were acquired and marked to fair value at the time of their acquisition. The increase in loans classified as Substandard was primarily due to two relationships in which $9.7 million of commercial real estate loans were downgraded and are still accruing.

An independent loan review is conducted annually, whether internally or externally, on at least 40% of commercial loans utilizing a risk-based approach designed to maximize the effectiveness of the review. Internal loan review is independent of the loan underwriting and approval process. In addition, credit analysts periodically review certain commercial loans to identify negative financial trends related to any one borrower, any related groups of borrowers or an industry. All loans not categorized as pass are put on an internal watch list, with quarterly reports to the Board. In addition, a written status report is maintained by our special assets division for all commercial loans categorized as Substandard or worse. We use this information in connection with our collection efforts.

If our collection efforts are unsuccessful, collateral securing loans may be repossessed and sold or, for loans secured by real estate, foreclosure proceedings initiated. The collateral is sold at public auction for fair market value (based upon recent appraisals), with fees associated with the foreclosure being deducted from the sales price. The purchase price is applied to the outstanding loan balance. If the loan balance is greater than the sales proceeds, the deficient balance is charged off.

Allowance for Credit Losses. We account for the ACL in accordance with FASB ASC Topic 326, “Financial Instruments – Credit Losses” (“ASC 326”), which uses the CECL accounting methodology. The CECL methodology requires that lifetime expected credit losses be recorded at the time the financial asset is originated or acquired and be adjusted each period through a provision for credit losses for changes in the expected lifetime credit losses. The ACL was $26.3 million at December 31, 2025, a decrease compared to $26.7 million at December 31, 2024. We maintain a separate ACL on unfunded loan commitments, which is included in “Accrued taxes and other liabilities” in the accompanying consolidated balance sheets. The ACL is generally increased by the provision for credit losses and decreased by charge-offs, net of recoveries.

For the years ended December 31, 2025 and 2024, the reversal of credit losses was $3.4 million and $3.5 million, respectively. The reversal of credit losses for the year ended December 31, 2025 was primarily due to a $3.3 million recovery during the first quarter of 2025 of loans previously charged off as a result of a property insurance settlement related to one loan relationship that became impaired in the third quarter of 2021 as a result of Hurricane Ida. The reversal of credit losses for the year ended December 31, 2024 was primarily driven by a decrease in total loans, aging of existing loans, an improvement in the economic forecast and, to a lesser extent, the completion of our annual CECL allowance model recalibration, which resulted in lower historical loss rates.

We complete our annual model recalibration process in the first quarter of each year. Our annual review includes peer group analysis, updates to our probability of default and loss-given default models, including prepayment and curtailment assumptions, and qualitative factor scorecard ranges, as needed. The changes resulting from the model recalibration reduced the ACL by approximately $0.5 million during each of the years ended December 31, 2025 and 2024.

Refer to Note 1. Summary of Significant Accounting Policies – Allowance for Credit Losses for further discussion of our ACL accounting policy. Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Estimates” for further discussion.

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The following table presents the allocation of the ACL by loan category as of the dates indicated (dollars in thousands).