MetroCity Bankshares, Inc. (MCBS)

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

The purpose of this discussion and analysis is to focus on significant changes in the financial condition of MetroCity Bancshares, Inc. and our wholly owned subsidiary, Metro City 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 in our Annual Report on 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 Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). 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,” “outlook,” “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 those factors discussed elsewhere in this quarterly report and the following:

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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.

Overview

We are MetroCity Bankshares, Inc., a bank holding company headquartered in the Atlanta, Georgia metropolitan area. We operate through our wholly-owned banking subsidiary, Metro City Bank, a Georgia state-chartered commercial bank that was founded in 2006. We currently operate 29 full-service branch locations in multi-ethnic communities in Alabama, California, Florida, Georgia, New York, New Jersey, Texas and Virginia. We are focused on delivering full-service banking services in diverse multi-ethnic markets, including Asian-American communities in growing metropolitan markets in the Eastern U.S. and Texas

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Prior to December 2014, the Bank operated without a holding company structure. In December 2014, the Bank formed MetroCity Bankshares, Inc. as its holding company, and on, December 31, 2014, MetroCity Bankshares, Inc. acquired all of the outstanding common stock of Metro City Bank in connection with the holding company formation transaction.

We are a bank holding company and we conduct all of our material business operations through the Bank. Accordingly, the discussion and analysis herein relates primarily to activities primarily conducted at the Bank level.

Acquisition of First IC Corporation and First IC Bank

After the close of business on December 1, 2025, the Company completed the acquisition of First IC Corporation. (“First IC”). For each share of First IC common stock, First IC stockholders had the right to receive 0.3729 shares of the Company's common stock and $12.00 in cash, with cash paid in lieu of fractional shares. Total consideration was approximately $202.3 million and consisted of $90.5 million of equity (3,384,066 shares) in the form of the Company’s common stock, plus $111.9 million in cash, including cash paid for stock option cancellations and fractional shares. As of December 31, 2025, First IC had approximately $1.13 billion in total assets, $1.01 billion in total loans and $878.4 million in deposits.

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.

Reserve for Credit Losses

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

The reserve for credit losses consists of the allowance for credit losses (“ACL”) and the allowance for unfunded commitments. We estimate the reserve for credit losses using the Current Expected Credit Losses (“CECL”) model, which is based on an expected loss methodology. The estimate of expected credit losses under the CECL approach is based on relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amounts. Historical loss experience is generally the starting point for estimating expected credit losses. We then consider whether the historical loss experience should be adjusted for loan-specific risk characteristics or current conditions at the reporting date that did not exist over the period from which historical experience was used. Finally, we consider forecasts about future economic conditions that are reasonable and supportable. The allowance for unfunded commitments represents the expected credit losses on off-balance sheet commitments such as unfunded commitments to extend credit. This allowance 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.

Management’s evaluation of the appropriateness of the reserve for credit losses is often the most critical of accounting estimates for a financial institution. Our determination of the amount of the reserve for credit losses is a critical accounting

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estimate as it requires the use of estimates and significant judgment as to the amount and timing of expected future cash flows, reliance on historical loss rates on homogenous portfolios, consideration of our quantitative and qualitative evaluation of economic factors, and the reliance on our reasonable and supportable forecasts. The reserve for credit losses attributable to each portfolio segment also includes an amount for inherent risks not reflected in the historical analyses. Relevant factors include, but are not limited to, concentrations of credit risk (geographic, large borrower, and industry), changes in underwriting standards, changes in collateral values, experience and depth of lending staff, trends in delinquencies, and the volume and terms of loans.

See Note 1 and Note 4 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 reserve and allowance for credit losses.

Business Combinations

In accordance with applicable accounting guidance, the Company recognizes assets acquired and liabilities assumed at their respective fair values as of the date of acquisition, with the related transaction costs expensed in the period incurred. The Company may use third party valuation specialists to assist in the determination of fair value of certain assets and liabilities at the acquisition date, including loans, core deposit intangibles and time deposits. While the Company uses its best estimates and assumptions to accurately value assets acquired and liabilities assumed on the acquisition date, the estimates are inherently uncertain. The allowance for credit losses on purchased seasoned loans (PSLs) and purchased credit deteriorated (PCD) loans are recognized within business combination accounting.

See Note 1 and Note 2 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 Company’s accounting policies for estimating credit losses on acquired loans and details regarding our acquisition of First IC.

Goodwill and Core Deposit Intangible

The Company has increased its market share through the acquisition of entire financial institutions accounted for under the acquisition method of accounting. For all acquisitions, the Company is required to record assets acquired and liabilities assumed at their fair value, which is an estimate determined by the use of internal or other valuation techniques, which may include the use of third-party specialists. Goodwill is evaluated for impairment at least annually, or more often if warranted, using a combined qualitative and quantitative impairment approach. The initial qualitative approach assesses whether the existence of events or circumstances led to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events and circumstances, the Company determines it is more likely than not that the fair value is less than carrying value, a quantitative impairment test is performed to compare carrying value to the fair value of the reporting unit. If the carrying amount of the reporting unit exceeds its fair value, an impairment loss will be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. The Company’s goodwill relates to acquisitions that are fully integrated into the retail banking operations, which management does not consider to be at risk of failing step one in the near future.

The Company’s core deposit intangibles arise from the acquisition of deposits and represent the fair value of the expected cost savings from a stable, low-cost funding source compared to alternative market funding. Core deposit intangible assets are amortized on a straight-line method over their estimated useful life of 10 years.

Results of Operations

Net Income

Year ended December 31, 2025 compared to year ended December 31, 2024

We recorded net income of $68.5 million for the year ended December 31, 2025 compared to $64.5 million for the year ended December 31, 2024, an increase of $4.0 million, or 6.2%. The increase was due to an increase in net interest income of $12.3 million, an increase in noninterest income of $2.1 million and a decrease in provision for credit losses of

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$834,000, offset by an increase in noninterest expense of $9.9 million and an increase in income tax expense of $1.4 million.

Basic and diluted earnings per common share for the year ended December 31, 2025 was $2.66 and $2.64, respectively, compared to $2.55 and $2.52 for the basic and diluted earnings per common share for the year ended December 31, 2024.

Year ended December 31, 2024 compared to year ended December 31, 2023

We recorded net income of $64.5 million for the year ended December 31, 2024 compared to $51.6 million for the year ended December 31, 2023, an increase of $12.9 million, or 25.0%. The increase was due to an increase in net interest income of $16.7 million and an increase in noninterest income of $4.9 million, offset by an increase in noninterest expense of $5.7 million, an increase in income tax expense of $2.5 million and an increase in provision for credit losses of $531,000.

Basic and diluted earnings per common share for the year ended December 31, 2024 was $2.55 and $2.52, respectively, compared to $2.05 and $2.02 for the basic and diluted earnings per common share for the year ended December 31, 2023.

Financial Performance Ratios

The following table sets forth our return on average assets, return on average equity, dividend payout ratio and average shareholders’ equity to average assets ratio for the periods indicated:

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Non-GAAP Financial Measures

This document contains financial information determined by methods other than in accordance with GAAP. The measures entitled adjusted return on average shareholder’s equity, adjusted efficiency ratio and tangible book value per share are not measures recognized under GAAP and therefore are considered non-GAAP financial measures. The most comparable GAAP measures are return on average shareholder’s equity, efficiency ratio and book value per share, respectively. Adjusted return on average shareholder’s equity excludes average accumulated other comprehensive income and merger-related expenses. Adjusted efficiency ratio excludes merger-related expenses. Tangible book value per share excludes goodwill and core deposit intangibles.

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Management uses these non-GAAP financial measures in its analysis of the Company's performance and believes these presentations provide useful supplemental information, and a clearer understanding of the Company's performance, and if not provided would be requested by the investor community. The Company believes the non-GAAP measures enhance investors' understanding of the Company's business and performance. These measures are also useful in understanding performance trends and facilitate comparisons with the performance of other financial institutions. The limitations associated with operating measures are the risk that persons might disagree as to the appropriateness of items comprising these measures and that different companies might calculate these measures differently.

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These disclosures should not be considered an alternative to GAAP. The computations of adjusted return on average shareholder’s equity, adjusted efficiency ratio and tangible book value per share and the reconciliation of these measures to return on average shareholder’s equity, efficiency ratio and book value per share are set forth in the table below.

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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.

Year ended December 31, 2025 compared to year ended December 31, 2024

Net interest income for the year ended December 31, 2025 was $130.4 million compared to $118.1 million for the year ended December 31, 2024, an increase of $12.3 million, or 10.4%. Interest income totaled $220.8 million for the year ended December 31, 2025, an increase of $7.9 million, or 3.7%, from the year ended December 31, 2024, primarily due to a $119.1 million increase in average loans coupled with a four basis points increase in the yield on average loans. Average earning assets increased by $148.9 million, due to increases of $119.1 million in average loans, $22.4 million in average fed funds sold and interest-bearing cash accounts and $7.5 million in average investment securities. The increase

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in average loans included increases of $127.7 million in average commercial real estate loans, $11.9 million in average construction and development loans and $5.9 million in average commercial and industrial loans, offset by a decrease of $26.5 million in average residential real estate loans.

Interest expense for the year ended December 31, 2025 decreased $4.4 million, or 4.6%, to $90.4 million compared to interest expense of $94.8 million for the year ended December 31, 2024. This decrease was primarily attributable to decreases of 66 basis points and 18 basis points in time deposits and money market costs, respectively. These decreases to deposit interest expense were offset by a 20 basis points increase to the yield on interest-bearing demand deposits coupled with a $47.3 million increase in average interest-bearing demand deposits. Average borrowings outstanding for the year ended December 31, 2025 increased by $57.9 million with an increase in rate of 10 basis points compared to the year ended December 31, 2024.

The Company has interest rate derivative agreements totaling $825.0 million that are designated as cash flow hedges of our deposit accounts indexed to the Federal Funds Effective rate. The weighted average pay rate for these interest rate derivatives is 2.62%. During the year ended December 31, 2025, we recorded a credit to interest expense of $15.1 million from the benefit received on these interest rate derivatives compared to a credit to interest expense of $22.1 million recorded during the year ended December 31, 2024. Based on the Federal Funds Effective rate as of December 31, 2025 (3.64%), the Company would estimate to record a credit to interest expense of $5.9 million during 2026 from the benefit received on these interest rate derivatives. See Note 11 of our consolidated financial statements as of December 31, 2025, included elsewhere in this Annual Report on Form 10-K, for additional information on these interest rate derivatives.

The net interest margin for the year ended December 31, 2025 was 3.72% compared to 3.51% for the year ended December 31, 2024, an increase of 21 basis points. The cost of interest-bearing liabilities decreased by 31 basis points to 3.41% from 3.72% for the previous year while the yield on interest-earning assets decreased by four basis points to 6.29% from 6.33%, for the previous year. Average earning assets increased by $148.9 million, primarily due to an increase of $119.1 million in average loans and an increase of $29.8 million in average total investments. Average interest-bearing liabilities increased by $99.9 million as average interest-bearing deposits increased by $42.0 million and average borrowings increased by $57.9 million.

Year ended December 31, 2024 compared to year ended December 31, 2023

Net interest income for the year ended December 31, 2024 was $118.1 million compared to $101.5 million for the year ended December 31, 2023, an increase of $16.7 million, or 16.4%. Interest income totaled $212.9 million for the year ended December 31, 2024, an increase of $20.1 million, or 10.4%, from the year ended December 31, 2023, primarily due to a 41 basis points increase in the yield on average loans coupled with a $99.8 million increase in average loans. Average earning assets increased by $117.5 million, due to increases of $99.8 million in average loans and $18.7 million in average fed funds sold and interest-bearing cash accounts, offset by a decrease of $957,000 in average investment securities. The increase in average loans included increases of $78.8 million in average commercial real estate loans, $21.8 million in average residential real estate loans and $13.9 million in average commercial and industrial loans, offset by a decrease of $14.8 million in average construction and development loans.

Interest expense for the year ended December 31, 2024 increased $3.4 million, or 3.7%, to $94.8 million compared to interest expense of $91.3 million for the year ended December 31, 2023. This increase is primarily attributable to a $91.0 million increase in average time deposit balances coupled with an 84 basis points increase in time deposit costs, as well as a 101 basis points increase to interest-bearing demand deposit costs. These increases to deposit interest expense were offset by a 141 basis points decrease to the yield on average money market accounts from the benefit received on the Company’s interest rate derivatives (see further discussion in next paragraph). Average borrowings outstanding for the year ended December 31, 2024 increased by $12.8 million with an increase in rate of 98 basis points compared to the year ended December 31, 2023.

The Company currently has interest rate derivative agreements totaling $850.0 million that are designated as cash flow hedges of our deposit accounts indexed to the Federal Funds Effective rate. The weighted average pay rate for these interest rate derivatives is 2.29%. During the year ended December 31, 2024, we recorded a credit to interest expense of

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$22.1 million from the benefit received on these interest rate derivatives compared to a credit to interest expense of $5.4 million recorded during the year ended December 31, 2023.

The net interest margin for the year ended December 31, 2024 was 3.51% compared to 3.13% for the year ended December 31, 2023, an increase of 38 basis points. The yield on interest-earning assets increased by 39 basis points to 6.33% from 5.94%, while the cost of interest-bearing liabilities decreased by one basis point to 3.72% from 3.73% for the previous year. Average earning assets increased by $117.5 million, primarily due to an increase of $99.8 million in average loans and an increase of $17.7 million in average total investments. Average interest-bearing liabilities increased by $102.1 million as average interest-bearing deposits increased by $89.3 million and average borrowings increased by $12.8 million.

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Average Balances, Interest and Yields

The following tables present, for the years ended December 31, 2025, 2024 and 2023, 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.

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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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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” and most recently ASU No. 2025-08, “Purchased Loans” significantly changed the methodology of how we measure credit losses (see Note 1 to the Consolidated Financial Statements for more information). We maintain the allowance for credit losses 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 allowance for credit losses is determined through detailed quarterly analyses of our loan portfolio. The allowance for credit losses is based on our loss experience, changes in the economic environment, 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” elsewhere in this document for further analysis of our provision for credit losses.

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Year ended December 31, 2025 compared to year ended December 31, 2024

We recorded a credit to the provision for credit losses of $318,000 during the year ended December 31, 2025 compared to provision expense of $516,000 recorded during the year ended December 31, 2024. The credit provision recorded during the year ended December 31, 2025 was primarily due to the decrease in the general reserves allocated to our residential real estate and commercial and industrial legacy loan portfolios due to lower loan balances, as well as the decrease in reserves allocated to individually analyzed legacy loans, offset by an increase in the general reserves allocated to our commercial real estate legacy loans due to higher balances. Our allowance for credit losses as a percentage of gross loans for the periods ended December 31, 2025 and 2024 was 0.68% and 0.59%, respectively. Our allowance for credit losses as a percent of gross loans is relatively lower than our peers due to our high percentage of residential mortgage loans, which tend to have lower allowance for credit loss ratios compared to other commercial or consumer loans due to their low LTVs.

Year ended December 31, 2024 compared to year ended December 31, 2023

We recorded a provision for credit losses of $516,000 during the year ended December 31, 2024 compared to a credit provision of $15,000 recorded during the year ended December 31, 2023. The provision expense recorded during the year ended December 31, 2024 was primarily due to the increase in reserves allocated to individually analyzed loans, as well as an increase in the general reserves allocated to our commercial real estate and commercial and industrial loan portfolios due to higher loan balances. Our allowance for credit losses as a percentage of gross loans for the periods ended December 31, 2024 and 2023 was 0.59% and 0.57%, respectively. Our allowance for credit losses as a percent of gross loans is relatively lower than our peers due to our high percentage of residential mortgage loans, which tend to have lower allowance for credit loss ratios compared to other commercial or consumer loans due to their low LTVs.

Noninterest Income

Noninterest income is an important component of our total revenues. An important portion of our noninterest  income is associated with SBA and residential mortgage lending activity, consisting of gains on the sale of loans sold in the secondary market and servicing income from loans sold with servicing rights retained. Other sources of noninterest  income include service charges on deposit accounts and other service charges, commissions and fees.

The following table sets forth the major components of our noninterest income for the years ended December 31, 2025, 2024 and 2023:

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Year ended December 31, 2025 compared to year ended December 31, 2024

Service charges on deposit accounts were $2.3 million for the year ended December 31, 2025 compared to $2.1 million for the year ended December 31, 2024, an increase of $255,000, or 12.3%. The increase was primarily attributable to increased overdraft fees and analysis charges.

Other service charges, commissions and fees increased $492,000, or 7.2%, to $7.3 million for the year ended December 31, 2025 compared to $6.8 million for the year ended December 31, 2024. The increase is mainly attributable to higher underwriting, processing and origination fees earned from our origination of residential mortgage loans as

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mortgage volume increased during the year ended December 31, 2025 compared to the year ended December 31, 2024. Mortgage loan originations totaled $464.6 million during the year ended December 31, 2025 compared to $413.7 million during the year ended December 31, 2024.

Total gain on sale of loans was $6.3 million for the year ended December 31, 2025 compared to $4.9 million for the year ended December 31, 2024, an increase of $1.4 million, or 29.1%.

Gain on sale of residential loans totaled $4.0 million for the year ended December 31, 2025 as we sold $310.2 million in residential mortgage loans during the period with an average premium of 1.35% compared to the sale of $187.5 million in residential mortgage loans with an average premium of 1.05% during the year ended December 31, 2024.

Gain on sale of SBA loans totaled $2.3 million for the year ended December 31, 2025 compared to $2.9 million for the year ended December 31, 2024. We sold $60.5 million in SBA loans during the year ended December 31, 2025 with average premiums of 6.08% compared to the sale of $72.2 million in SBA loans with an average premium of 6.57% in the year ended December 31, 2024.

Mortgage loan servicing income was $2.4 million for both the year ended December 31, 2025 and 2024. Included in mortgage loan servicing income for the year ended December 31, 2025 was $2.2 million in mortgage servicing fees compared to $2.3 million for 2024, and capitalized mortgage servicing assets of $812,000 for the year ended December 31, 2025 compared to $1.2 million for 2024. These amounts were offset by mortgage loan servicing asset amortization of $581,000 for the year ended December 31, 2025 compared to $1.1 million for the year ended December 31, 2024. During the year ended December 31, 2025, we recorded a fair value impairment recovery of $20,000 on our mortgage servicing assets compared to a fair value impairment of $20,000 on our mortgage servicing assets recorded during 2024. Our total residential mortgage loan servicing portfolio was $702.6 million at December 31, 2025 compared to $527.0 million at December 31, 2024. The increase in the residential mortgage servicing portfolio is due to the sale of $310.2 million of residential mortgage loans during the year. There were no residential mortgage loans serviced for others acquired from First IC.

SBA servicing income was $3.6 million for the year ended December 31, 2025 compared to $4.2 million for the year ended December 31, 2024, a decrease of $685,000, or 16.1%. Our total SBA and USDA loan servicing portfolio was $685.5 million as of December 31, 2025 compared to $479.7 million as of December 31, 2024. The increase in our SBA and USDA loan servicing portfolio is attributable to the SBA loans acquired from First IC. SBA servicing fees totaled $4.1 million for the year ended December 31, 2025 compared to $4.2 million for the year ended December 31, 2024. Our SBA servicing rights are carried at fair value and inputs used to calculate fair value change from period to period. During the year ended December 31, 2025, we recorded a $521,000 fair value loss on our SBA servicing rights compared to a $29,000 fair value gain on our SBA servicing rights during the year ended December 31, 2024.

Other noninterest income was $3.3 million for the year ended December 31, 2025 compared to $2.6 million for the year ended December 31, 2024, an increase of $673,000, or 26.0%. The largest component of other noninterest income is the income on bank owned life insurance, which totaled $2.5 million and $2.3 million, respectively, for the years ended December 31, 2025 and 2024. Also included in other noninterest income are fair value gains/losses on our equity securities, which totaled $346,000 (gain) and $35,000 (loss), respectively, for the years ended December 31, 2025 and 2024.

Year ended December 31, 2024 compared to year ended December 31, 2023

Service charges on deposit accounts were $2.1 million for the year ended December 31, 2024 compared to $1.9 million for the year ended December 31, 2023, an increase of $155,000, or 8.1%. The increase was primarily attributable to increased overdraft fees and wire transfer fees.

Other service charges, commissions and fees increased $1.2 million, or 21.1%, to $6.9 million for the year ended December 31, 2024 compared to $5.7 million for the year ended December 31, 2023. The increase is mainly attributable to higher underwriting, processing and origination fees earned from our origination of residential mortgage loans as mortgage volume increased during the year ended December 31, 2024 compared to the year ended December 31, 2023.

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Mortgage loan originations totaled $413.7 million during the year ended December 31, 2024 compared to $337.0 million during the year ended December 31, 2023.

Total gain on sale of loans was $4.9 million for the year ended December 31, 2024 compared to $3.3 million for the year ended December 31, 2023, an increase of $1.6 million, or 47.3%.

Gain on sale of residential loans totaled $1.9 million for the year ended December 31, 2024  as we sold $187.5 million in residential mortgage loans during the period with an average premium of 1.05%. We recorded no gain on sale of residential mortgage loans during the year ended December 31, 2023 as no residential mortgage loans were sold during the period.

Gain on sale of SBA loans totaled $2.9 million for the year ended December 31, 2024 compared to $3.3 million for the year ended December 31, 2023. We sold $72.2 million in SBA loans during the year ended December 31, 2024 with average premiums of 6.57% compared to the sale of $72.9 million in SBA loans with an average premium of 6.09% in the year ended December 31, 2023.

Mortgage loan servicing income was $2.4 million for the year ended December 31, 2024 compared to mortgage loan servicing expense of $193,000 for the year ended December 31, 2023, an increase of $2.6 million year over year. The change in mortgage loan servicing income was primarily due to the decrease in mortgage servicing amortization and an increase in capitalized mortgage servicing assets, partially offset by the decrease in mortgage servicing fees. Included in mortgage loan servicing income for the year ended December 31, 2024 was $2.3 million in mortgage servicing fees compared to $2.5 million for 2023, and capitalized mortgage servicing assets of $1.2 million for the year ended December 31, 2024 compared to $0 for 2023. These amounts were offset by mortgage loan servicing asset amortization of $1.1 million for the year ended December 31, 2024 compared to $2.7 million for the year ended December 31, 2023. During the year ended December 31, 2024, we recorded a fair value impairment of $20,000 on our mortgage servicing assets compared to no fair value impairment recorded during 2023. Our total residential mortgage loan servicing portfolio was $527.0 million at December 31, 2024 compared to $443.1 million at December 31, 2023.

SBA servicing income was $4.2 million for the year ended December 31, 2024 compared to $4.8 million for the year ended December 31, 2023, a decrease of $553,000, or 11.5%. Our total SBA and USDA loan servicing portfolio was $479.7 million as of December 31, 2024 compared to $508.0 million as of December 31, 2023. SBA servicing fees totaled $4.2 million for the year ended December 31, 2024 compared to $4.6 million for the year ended December 31, 2023. Our SBA servicing rights are carried at fair value and inputs used to calculate fair value change from period to period. During the year ended December 31, 2024, we recorded a $29,000 fair value gain on our SBA servicing rights compared to a $201,000 fair value gain on our SBA servicing rights during the year ended December 31, 2023.

Other noninterest income was $2.6 million for the year ended December 31, 2024 compared to $2.7 million for the year ended December 31, 2023, a decrease of $135,000, or 5.0%. The largest component of other noninterest income is the income on bank owned life insurance, which totaled $2.3 million and $1.8 million, respectively, for the years ended December 31, 2024 and 2023. Also included in other noninterest income are fair value gains/losses on our equity securities, which totaled $35,000 (loss) and $35,000 (gain), respectively, for the years ended December 31, 2024 and 2023.

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Noninterest Expense

The following table sets forth the major components of our noninterest expense for the years ended December 31, 2025, 2024 and 2023:

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Year ended December 31, 2025 compared to year ended December 31, 2024

Salaries and employee benefits expense for the year ended December 31, 2025 was $36.7 million compared to $33.2 million for the year ended December 31, 2024, an increase of $3.5 million, or 10.4%. This increase was primarily attributable to higher employee salaries partially due annual salary adjustments and the addition of the First IC employees,  higher commissions paid from higher loan volume, and increased employee insurance costs and stock based compensation. The average number of full-time equivalent employees was 252 for the year ended December 31, 2025 compared to 240 for the year ended December 31, 2024.

Occupancy expense for the year ended December 31, 2025 was $5.8 million compared to $5.5 million for the year ended December 31, 2024, an increase of $264,000, or 4.8%. This increase was primarily due to higher expenses related to depreciation, rent, and maintenance and repairs.

Data processing 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 $241,000, or 18.6%. The increase was partially attributable to the First IC acquisition.

Advertising expense for the year ended December 31, 2025 was $657,000 compared to $634,000 for the year ended December 31, 2024, a slight increase of $23,000, or 3.6%. The increase was consistent with the continued growth of our loans and deposits.

Merger-related expenses for the year ended December 31, 2025 were $4.7 million compared to $0 during the year ended December 31, 2024 as no business combinations occurred during 2024. Included in the $4.7 million of merger-related expenses are professional and legal fees, severance payments, systems termination costs and other integration costs.

Other expenses for the year ended December 31, 2025 were $13.9 million compared to $12.7 million for the year ended December 31, 2024, an increase of $1.2 million, or 9.1%. The increase was primarily due to higher expenses related to security, loans and professional services, partially offset by lower other real estate owned expenses. Included in other expenses were directors’ fees of $761,000 and $645,000 for the years ended December 31, 2025 and 2024, respectively.

Year ended December 31, 2024 compared to year ended December 31, 2023

Salaries and employee benefits expense for the year ended December 31, 2024 was $33.2 million compared to $29.3 million for the year ended December 31, 2023, an increase of $3.9 million, or 13.3%. This increase was primarily attributable to higher employee salaries and benefits due to the increase in the overall number of employees necessary to support our continued growth and annual salary adjustments, higher commissions from higher loan volume, and increased employee insurance costs and stock based compensation. The average number of full-time equivalent employees was 240 for the year ended December 31, 2024 compared to 220 for the year ended December 31, 2023.

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Occupancy expense for the year ended December 31, 2024 was $5.5 million compared to $4.9 million for the year ended December 31, 2023, an increase of $631,000, or 12.9%. This increase was primarily due to higher expenses related to depreciation, rent, and maintenance and repairs.

Data processing expense for the year ended December 31, 2024 was $1.3 million compared to $1.2 million for the year ended December 31, 2023, an increase of $64,000, or 5.2%. The increase was consistent with the continued growth of our loans and deposits.

Advertising expense for the year ended December 31, 2024 was $634,000 compared to $614,000 for the year ended December 31, 2023, a slight increase of $20,000, or 3.3%. The increase was consistent with the continued growth of our loans and deposits.

Other expenses for the year ended December 31, 2024 were $12.7 million compared to $11.7 million for the year ended December 31, 2023, an increase of $1.0 million, or 8.9%. The increase was primarily due to higher expenses related to security, audit and accounting services, business taxes, other real estate owned and FDIC insurance premiums. Included in other expenses were directors’ fees of $645,000 and $617,000 for the years ended December 31, 2024 and 2023, respectively.

Income Tax Expense

Income tax expense for the years ended December 31, 2025, 2024 and 2023 was $24.2 million, $22.8 million and $20.4 million, respectively. The Company’s effective tax rates for the years ended December 31, 2025, 2024 and 2023 were 26.1%, 26.1% and 28.3%, respectively. The decrease in the effective tax rate during 2024 compared to 2023 was partially due to a tax provision to tax return adjustment recorded for our 2023 state tax returns filed during the third and fourth quarter of 2024.

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We had a net deferred tax asset of $6.0 million at December 31, 2025, a net deferred tax asset of $158,000 at December 31, 2024 and net deferred tax liability of $2.3 million at December 31, 2023.

Financial Condition

Total assets increased $1.17 billion, or 32.7%, to $4.77 billion at December 31, 2025 as compared to $3.59 billion at December 31, 2024. This increase was mainly due to the $1.19 billion of assets acquired from First IC as of December 31, 2025, including goodwill and core deposit intangibles. Exlcuding these acquired assets, legacy total assets were $3.57 billion at December 31, 2025, a decrease of $21.2 million, 0.6% compared to December 31, 2024. The $21.1 million decrease in total assets at December 31, 2025 compared to December 31, 2024 was primarily due to decreases in loans held for investment of $99.6 million and interest rate derivatives of $15.4 million, partially offset by increases in cash and due from banks of $64.5 million, other assets of $13.4 million, loans held for sale of $5.9 million, equity securities of $8.4 million, bank owned life insurance of $2.5 million and Federal Home Loan Bank stock of $2.4 million

Our investment securities portfolio made up only 1.38% of our total assets at December 31, 2025 compared to 0.77% at December 31, 2024. The increase in our securities portfolio during 2025 was due to the securities acquired from First IC.

Loans

Our loans represent the largest portion  of our earning assets, substantially greater than the securities portfolio or any other asset category, and the quality and diversification of the loan portfolio is an important consideration when reviewing our financial condition.

Our gross loans held for investment increased $912.5 million, or 28.8%, to $4.08 billion as of December 31, 2025 compared to $3.17 billion as of December 31, 2024, primarily due to the $1.01 billion of loans acquired from First IC as of December 31, 2025. Excluding acquired loans, our legacy loans held for investment decreased by $96.5 million, or 3.0%, compared to 2024. The decline in our legacy loan portfolio during the year ended December 31, 2025 was made up

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of an increase of $18.9 million, or 87.7%, in construction and development loans, an increase of $79.6 million, or 10.4%, in commercial real estate loans, a decrease of $4.6 million, or 5.9%, in commercial and industrial loans, a decrease of $190.3 million, or 8.3%, in residential real estate loans and an increase of $10,000, or 3.8%, in consumer and other loans. There were no loans classified as held for sale as of December 31, 2025 or 2024. Loans classified as held for sale totaled $22.3 million as of December 31, 2023.

The following table presents the ending balance of each major category in our loan portfolio held for investment as of the dates indicated.

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

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Our loan portfolio is concentrated in commercial real estate and residential mortgage loans with the remaining balance in construction and development, commercial and industrial, and consumer loans. 97.6% of our gross loans held for investment were secured by real property as of December 31, 2025, compared to 97.5% as of December 31, 2024 and 97.9% as of December 31, 2023.

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We have established concentration limits in the loan portfolio for commercial real estate loans, commercial and industrial loans, and unsecured lending, among others. 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. For more information, see “Item 1 – Business – Lending Activities.”

The principal categories of our loan portfolios  are discussed below:

Construction and development loans. Our construction and development loans are comprised of commercial construction and land acquisition and development construction. Interest reserves are generally established on real estate construction loans. These loans typically carry a fixed interest rate and have maturities of less than 18 months. Our LTV policy limits are 65% for construction and development loans. Additionally, we impose limits on the total dollar amount of this category of our portfolio. The risks inherent in construction lending may affect adversely our results of operations. Such risks include, among other things, the possibility that contractors may fail to complete, or complete on a timely basis, construction of the relevant properties; substantial cost overruns in excess of original estimates and financing; market deterioration during construction; and lack of permanent take-out financing. Loans secured by such properties also involve additional risk because they have no operating history. Advances on construction loans are made relative to the overall percentage of completion on the project in an effort to remain adequately secured. Such properties may not be sold or leased so as to generate the cash flow anticipated by the borrower.

As of December 31, 2025, our construction and development loans comprised $41.8 million, or 1.0%, of total loans held for investment, compared to $21.6 million, or 0.7%, of total loans held for investment as of December 31, 2024. This compares to $23.3 million, or 0.7%, of total loans held for investment as of December 31, 2023.

Commercial real estate loans. Commercial real estate loans include owner-occupied and non-owner occupied commercial real estate. We require our commercial real estate loans to be secured by what we believe to be well-managed property with adequate margins and we generally obtain  a personal guarantee from responsible parties. We originate both fixed-rate and adjustable-rate loans with terms up to 25 years.

As of December 31, 2025, our loans secured by commercial real estate were $1.56 billion, or 38.3%, of total loans held for investment compared to $762.0 million, or 24.1%, as of December 31, 2024. This increase was mainly due to the $719.1 million of commercial real estate loans acquired from First IC coupled with organic growth of $79.6 million of newly originated and renewed legacy commercial real estate loans. Commercial real estate loans were $711.2 million, or 22.6%, of our portfolio as of December 31, 2023. Our non-owner occupied commercial real estate loans has historically made up a small percentage of our overall commercial real estate loan portfolio. Non-owner occupied commercial real estate loans were 8.0%, and 7.6%, as a percentage of commercial real estate loans for the years ending December 31, 2024 and 2023, respectively. During 2025, our non-owner occupied commercial real estate increased to 49.3% as a percentage of commercial real estate loans as of December 31, 2025. This increase was partially due to the reclassification of our legacy hotel loan portfolio from owner occupied to non-owner occupied coupled with the $347.4 million of non-owner occupied commercial real estate acquired from First IC. Of the $769.6 million of non-owner occupied commercial real estate loans as of December 31, 2025, $600.3 million, or 78.0% were hotel loans, which carried a weighted average LTV of 55.6%. At December 31, 2025, approximately 50.7% of our commercial real estate loans were owner-occupied compared to 92.0% at December 31, 2024.

We originate both fixed and adjustable rate loans. Adjustable rate loans are based on the prime rate, SOFR or constant  maturity treasury (“CMT”). At December 31, 2025 and 2024, approximately 21.6% and 12.0% of the commercial real estate portfolio consisted of fixed-rate loans, respectively. Our policy maximum LTV is 85% for commercial real estate loans. However, our weighted average LTV is well below this policy maximum. Newly originated and renewed non-SBA commercial real estate loans for the years ending December 31, 2025 and 2024 carried a weighted average LTV of 51.8% and 53.5%, respectively.

Commercial and industrial loans. We provide a mix of variable and fixed rate commercial and industrial loans. The loans are typically made to small and medium-sized businesses for working capital needs, business expansions and for

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trade financing. We extend commercial business loans on an unsecured and secured basis for working capital, accounts receivable and inventory financing, machinery and equipment purchases, and other business purposes. Generally, short-term loans have maturities ranging from six months to one year, and “term loans” have maturities ranging from five to ten years. Loans are generally intended to finance current transactions and typically provide for periodic principal payments, with interest payable monthly. Term loans generally provide for floating interest rates, with monthly payments of both principal and interest.

As of December 31, 2025, our commercial and industrial loans comprised $96.4 million, or 2.4%, of total loans held for investment, compared to $78.2 million, or 2.5% of total loans held for investment as of December 31, 2024. This increase was mainly due the $22.8 million of commercial and industrial loans acquired from First IC. This compares to $65.9 million, or 2.1%, of total loans held for investment as of December 31, 2023.

A large portion of both our commercial real estate and commercial and industrial loans are SBA loans. We are designated an SBA Preferred Lender under the SBA Preferred Lender Program. We offer mostly SBA 7(a) variable-rate loans. We have historically sold the guaranteed portion (typically 75%) of the SBA loans that we originate. Our SBA loans are typically made to small-sized retail, hotel/motel, service and distribution businesses for working capital needs or business expansions. SBA loans have maturities up to 25 years. Typically, non-real estate secured loans mature in less than 10 years. Collateral  may also include inventory, accounts receivable and equipment, and may include personal guarantees. Our unguaranteed SBA loans collateralized by real estate are monitored by collateral type and included in our CRE Concentration Guidance. As of December 31, 2025, our SBA and USDA portfolio totaled $482.2 million, compared to $277.0 million as of December 31, 2024. This increase was primarily attributed to $208.7 million of SBA loans acquired from First IC. We originated and sold $100.1 million and $60.5 million of SBA loans during the year ended December 31, 2025 compared to originations and sales of $90.8 million and $72.2 million for the year ended December 31, 2024. We originated and sold $88.1 million and $72.9 million of SBA loans during the year ended December 31, 2023.

From our total SBA and USDA loan portfolio of $482.2 million at December 31, 2025, $439.8 million is secured by real estate and $42.4 million is unsecured or secured by business assets, which we classify as commercial and industrial loans.

Residential real estate loans. We originate mainly non-conforming single-family residential mortgage loans through  our branch network, without the use of any third party originator. During 2025, our primary loan products were a three-year, five-year or ten-year hybrid adjustable rate mortgage which reprice after three, five or ten years to the one-year CMT plus certain spreads, as well as 15-year and 30-year fixed rate products. We originate the residential mortgage loans to hold for investment and also sell on the secondary market when premiums are elevated or for liquidity purposes.

As of December 31, 2025, our residential real estate loans comprised $2.38 billion, or 58.3%, of total loans held for investment, compared to $2.30 billion, or 72.7%, of total loans held for investment as of December 31, 2024. This compares to $2.35 billion, or 74.6%, of total loans held for investment as of December 31, 2023. Included in the $2.38 billion total loans held for investment balance as of December 31, 2025 were $265.4 million of residential real estate loans acquired from First IC. The increase in 2025 was due to $265.4 million of residential real estate loans acquired from First IC, offset by the significant amount of residential real estate loans sold to investors during the year. During the years ended December 31, 2025 and 2024, we originated $465.6 million and $413.7 million and sold $310.2 million and $187.5, respectively, in residential mortgage loans. During the year ended December 31, 2023, we originated $337.0 million and sold $0 in residential mortgage loans.

Consumer and other loans. These loans represent a small portion of our overall portfolio and primarily consists of overdrafts and consumer lines of credit. Consumer loans carry a greater amount of risk and collections are dependent on the borrower’s continuing financial stability and thus are more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy. Furthermore, the application of various federal and state laws may limit the amount which can be recovered on such loans.

As of December 31, 2025, our consumer and other loans totaled $627,000 compared to $260,000 as of December 31, 2024. This compares to $319,000 as of December 31, 2023.

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Nonperforming Assets

Loans are considered delinquent when principal or interest payments are past due 30 days or more. Delinquent loans may remain on accrual status between 30 days and 90 days past due. Loans on which the accrual of interest has been discontinued are designated as nonaccrual loans. Typically, the accrual of interest on loans is discontinued when principal and interest payments are past due 90 days or more or when, in the opinion of management, there is a reasonable doubt as to collectability in the normal course of business. When loans are placed on nonaccrual status, all interest previously accrued but not collected is reversed against current period interest income. All payments received while a loan is on nonaccrual status are applied against the principal balance of the loan. The Company does not recognize interest income while loans are on nonaccrual status. Loans are restored to accrual status when loans become well-secured and management believes full collectability of principal and interest is probable.

Real estate acquired as a result of foreclosure or by deed-in-lieu of foreclosure is classified as foreclosed real estate until sold, and is carried at the balance of the loan at the time of foreclosure or at estimated fair value less estimated costs to sell, whichever is less.

Nonperforming loans include nonaccrual loans and loans 90 days or more past due and still accruing. Nonperforming assets consist of nonperforming loans plus foreclosed real estate.

Nonperforming loans were $25.2 million at December 31, 2025 compared to $18.0 million at December 31, 2024 and $14.7 million at December 31, 2023. The increase from December 31, 2024 to December 31, 2025 was attributable to increase of $11.5 million in nonaccrual commercial real estate loans and $775,000 in nonaccrual commercial and industrial loans, offset by a $5.0 million decrease in nonaccrual residential real estate loans. Included in the increase from December 31, 2024 to December 31, 2025 were nonaccrual commercial real estate, commercial and industrial and residential real estate loans of $6.5 million, $183,000 and $468,000, respectively, acquired from First IC. The increase from December 31, 2023 to December 31, 2024 was attributable to a $2.3 million increase in both nonaccrual commercial real estate loans and nonaccrual residential real estate loans, offset by a $760,000 decrease in commercial and industrial loans and a $548,000 decrease in nonaccrual construction and development loans. We did not recognize any interest income on nonaccrual loans during the years ended December 31, 2025, 2024 and 2023.

The following table sets forth the allocation of our nonperforming assets among our different asset categories as of the dates indicated. Nonperforming loans include nonaccrual loans and loans past due 90 days or more and still accruing interest. At December 31, 2025, included in nonaccrual loans were $14.8 million of commercial real estate loans, $1.3 million in commercial and industrial loans and $9.1 million in residential real estate loans. Nonaccrual loans at December 31, 2024 consisted of $3.3 million of commercial real estate loans, $526,000 in commercial and industrial loans and $14.2 million in residential real estate loans.

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Allowance for credit losses

The allowance for credit losses was $27.8 million at December 31, 2025 compared to $18.7 million at December 31, 2024, an increase of $9.1 million, or 48.5%. The allowance for credit losses was $18.1 million as of December 31, 2023.

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The increase from December 31, 2024 to December 31, 2025 was due to the $9.9 million in initial allowance reserves recorded on the acquired First IC loan portfolio, including $7.9 million and $2.0 million attributable to purchased seasoned loans and PCD loans, respectively, as well as additional reserves allocated to our construction and development, commercial real estate and commercial and industrial loan portfolios.These increases were offset by a decrease in the reserves allocated to our residential real estate loan portfolio. The increase from December 31, 2023 to December 31, 2024 was primarily due to the increase in reserves allocated to individually analyzed loans, partially offset by $130,000 in charge-offs recorded during the year ended December 31, 2024. The CECL approach requires an estimate of the credit losses expected over the life of an exposure (or pool of exposures). It removes the incurred loss approach’s threshold that delayed the recognition of a credit loss until it was probable a loss event was incurred.

We maintain a reserve for credit losses that consist of two components, the allowance for credit losses (ACL) on funded loans and the ACL for unfunded commitments, The allowance for credit losses provides for the risk of credit losses expected in our loan portfolio and is based on loss estimates derived from a comprehensive quarterly evaluation.  The evaluation reflects analyses of individual borrowers coupled with analysis of historical loss experience in various loan pools that have been grouped based on similar risk characteristics, supplemented as necessary by credit judgment that considers observable trends, conditions, reasonable and supportable forecasts, and other relevant environmental and economic factors.  The level of the allowance for credit losses is adjusted by recording an expense or credit through the provision for credit losses.  The level of the allowance for unfunded commitments is adjusted by recording an expense or credit in other noninterest expense. The allowance for unfunded commitments was created upon adoption of CECL on January 1, 2023 and had a balance of $287,000 and  $165,000 as of December 31, 2025 and 2024, respectively.

Loans that do not share risk characteristics are evaluated on an individual basis. For collateral dependent loans where the Company has determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and the Company expects repayment of the loan to be provided substantially through the operation or sale of the collateral, the ACL is measured based on the difference between the fair value of the collateral and the amortized cost basis of the loan as of the measurement date. When repayment is expected to be from the operation of the collateral, expected credit losses are calculated as the amount by which the amortized cost basis of the loan exceeds the present value of expected cash flows from the operation of the collateral. When repayment is expected to be from the sale of the collateral, expected credit losses are calculated as the amount by which the amortized costs basis of the loan exceeds the fair value of the underlying collateral less estimated cost to sell. The ACL may be zero if the fair value of the collateral at the measurement date exceeds the amortized cost basis of the loan.

The impact of utilizing the CECL approach to calculate the allowance for credit losses will be significantly influenced by the composition, characteristics and quality of our loan portfolio, as well as the prevailing economic conditions and forecasts utilized. Material changes to these and other relevant factors may result in greater volatility to the provision for credit losses, and therefore, greater volatility to our reported earnings. See Note 1 and Note 4 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 on the allowance for credit losses and the allowance for unfunded commitments.

The FDIC and GA DBF also review the allowance for credit losses as an integral part of their examination process. Based on information currently available, management believes that our allowance for credit losses is adequate. However, the loan portfolio can be adversely affected if economic conditions and 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 credit 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.

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Analysis of the Allowance for Credit Losses. The following table provides an analysis of the allowance for credit losses, provision for loan losses and net charge-offs for the periods presented below:

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Management believes the allowance for credit losses is adequate to provide for losses inherent in the loan portfolio as of December 31, 2025.

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The following table presents a summary of the allocation of the allowance for credit losses by loan portfolio segment for the periods indicated:

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Investment Securities

Our securities portfolio is the third largest component of our interest earning assets. The portfolio serves the following purposes: (i) to optimize the Bank’s income consistent with the investment portfolio’s liquidity and risk objectives; (ii) to balance market and credit risks of other assets and the Bank’s liability structure; (iii) to profitably deploy funds which are not needed to fulfill loan demand, deposit redemptions or other liquidity purposes; (iv) to provide collateral which the Bank is required to pledge against public funds; and (v) to provide investments for Community Reinvestment Act (CRA) purposes.

We classify our debt securities as either available-for-sale or held-to-maturity at the time of purchase. Accounting  guidance requires available-for-sale securities to be marked to fair value with an offset to accumulated other comprehensive income (loss), a component of shareholders’ equity. Monthly adjustments are made to reflect changes in the fair value of our available-for-sale securities.

All of the debt securities in our investment portfolio were classified as available-for-sale as of December 31, 2025. All available-for-sale securities are carried at fair value. Securities available-for-sale consist primarily of U.S. government-sponsored agency securities, home mortgage-backed securities and state and municipal bonds. No issuer of the available-for-sale securities comprised more than ten percent of our shareholders’ equity as of December 31, 2025, 2024 or 2023.

The following table presents the amortized cost and fair value of our available-for-sale securities portfolio as of the dates presented.

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Certain securities have fair values less than amortized cost and, therefore, contain unrealized losses. The Company does not believe that the securities available for sale that were in an unrealized loss position as of December 31, 2025 represent a credit loss impairment.  As of December 31, 2025, there have been no payment defaults nor do we currently expect any future payment defaults. Furthermore, the Company does not intend to sell these securities, and it is not more likely than not that the Company will be required to sell the investment securities before recovery of their amortized cost basis, which may be at maturity.

The following table sets forth certain information regarding contractual maturities and the weighted average tax-equivalent yields of our investment securities available for sale as of the dates presented. Expected maturities may differ from contractual maturities if borrowers  have the right to call or prepay obligations with or without call or prepayment penalties.

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We have not used interest rate swaps or other derivative instruments to hedge fixed rate loans or securities to otherwise mitigate our interest rate risk.

Equity Securities

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As of December 31, 2025 and 2024, the Company had equity securities with carrying values totaling $18.6 million and $10.3 million, respectively. The equity securities consist of our investment in a mutual fund that invests in high quality fixed income bonds, mainly government agency securities whose proceeds are designed to positively impact community development throughout the United States. The mutual fund focuses exclusively on providing affordable housing to low- and moderate-income borrowers and renters, including those in Majority Minority Census Tracts.

During the years ended December 31, 2025, 2024 and 2023, we recognized an unrealized gain of $346,000, an unrealized loss of $35,000 and an unrealized gain of $35,000, respectively, in net income on our equity securities.

Deposits

Deposits represent the Bank’s primary source of funds, and we gather deposits primarily through our branch locations, as well as the use of wholesale and brokered deposits. We offer a variety of deposit products including demand deposit accounts, interest-bearing products, money market and savings accounts and certificate of deposits. We put continued

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effort into gathering noninterest-bearing demand deposits accounts through marketing to our existing and new loan customers, customer referrals, and expansion into new markets.

Total deposits increased $909.2 million, or 33.2%, to $3.65 billion at December 31, 2025 compared to $2.74 billion at December 31, 2024. The increase in deposit balances was primarily driven by $878.4 million in deposit balances acquired from First IC as of December 31, 2025. As of December 31, 2025, 21.4% of total deposits were comprised of noninterest-bearing demand accounts and 78.6% of interest-bearing deposit accounts compared to 19.6% and 80.4% as of December 31, 2024, respectively. Total deposits increased $5.9 million, or 0.2%, to $2.74 billion at December 31, 2024 compared to $2.73 billion at December 31, 2023. Our noninterest-bearing demand accounts were 18.7% of total deposits and our interest-bearing deposits accounted for the remaining 81.3% of our deposits as of December 31, 2023.

As of December 31, 2025 and 2024, the Company had estimated uninsured deposits of $1.09 billion and $666.4 million, respectively. These estimates were derived using the same methodologies and assumptions used for the Bank's regulatory reporting. Uninsured deposits were 29.6% of total deposits at December 31, 2025 compared to 24.1% at December 31, 2024. The increase in uninsured deposit balances was driven by the deposits acquired from First IC. As of December 31, 2025, we had $1.23 billion of available borrowing capacity at the Federal Home Loan Bank ($577.9 million), Federal Reserve Discount Window ($600.4 million) and various other financial institutions (fed fund lines totaling $52.5 million).

We had brokered deposits of $747.8 million, or 20.5% of total deposits, at December 31, 2025 compared to $721.8 million, or 26.4% of total deposits, at December 31, 2024 and $766.3 million, or 28.1% of total deposits, at December 31, 2023. We use brokered deposits, 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 deposits 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 deposits are less costly than issuing internet certificates of deposit or borrowing from the Federal Home Loan Bank, or to help fund our loan demand when necessary.

We use interest rate swap and cap agreements to hedge our deposit accounts that are indexed to the Federal Funds Effective rate. These swap agreements are designated as cash flow hedges. As of December 31, 2025, the total amount of deposits tied to the Federal Funds Effective rate was $1.07 billion. See Note 11 of our consolidated financial statements as of December 31, 2025, included elsewhere in this Annual Report on Form 10-K, for additional information.

The following table summarizes our average deposit balances and weighted average rates for the years ended December 31, 2025, 2024 and 2023:

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The following table sets forth the scheduled maturities of time deposits of $250,000 or greater as of December 31, 2025:

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Borrowed Funds

Other than deposits, the Company utilizes FHLB advances as a supplementary funding source to finance our operations. The advances from the FHLB are collateralized by our residential real estate loans. At December 31, 2025 and December 31, 2024, we had available borrowing capacity from the FHLB of $577.9 million and $692.6 million, respectively. At December 31, 2025 and 2024, we had $510.0 million and $375.0 million, respectively, of outstanding advances from the FHLB.

The following table provides information related to our FHLB Advances for the periods indicated:

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In addition  to our advances with the FHLB, we maintain federal funds agreements with our correspondent banks. Our available borrowings under these agreements were $52.5 and $47.5 million at December 31, 2025 and 2024, respectively. We did not have any advances outstanding under these agreements for any of the periods presented. We also have access to the Federal Reserve’s discount window in the amount of $600.4 million and $551.6 million at December 31, 2025 and 2024, respectively. No discount window borrowings were outstanding as of December 31, 2025 and  2024. We also maintain relationships in the capital markets with brokers to issue certificates of deposit and money market accounts.

Liquidity

Liquidity refers to the measure of our ability to meet the cash flow requirements of depositors and borrowers, while at the same time meeting our operating, 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 to meet the return on investment objectives of our shareholders.

Our liquidity position is supported by management of 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/brokered deposits and additional borrowings from correspondent banks, FHLB  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 increases in customer

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deposits. Other alternative 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 $52.5 million and $47.5 million, respectively, of unsecured federal funds lines with no amounts advanced. In addition, the Company had Federal Reserve Discount Window funds available of approximately $600.4 million and $551.6 million at December 31, 2025 and 2024, respectively. The FRB discount window line is collateralized by a pool of construction and development, commercial real estate and commercial and industrial loans with carrying balances totaling $765.7 million as of December 31, 2025, as well as all of the Company’s municipal and mortgage backed securities. There were no outstanding borrowings on this line as of December 31, 2025 and 2024.

At December 31, 2025 and 2024, we had $510.0 million and $375.0 million, respectively, of outstanding advances from the FHLB. Based on the values of residential mortgage loans pledged as collateral, we had $577.9 million and $692.6 million of additional borrowing availability with the FHLB as of December 31, 2025 and 2024, respectively. We also maintain relationships in the capital markets with brokers to issue certificates of deposit and money market accounts.

Capital Requirements

The Company and the Bank are required under federal law to maintain certain minimum capital levels based on ratios of capital to total assets and capital to risk-weighted assets. The required capital ratios are minimums, and the federal banking agencies may determine that a banking organization, based on its size, complexity or risk profile, must maintain  a higher level of capital in order to operate in a safe and sound manner. Risks such as concentration of credit risks and the risk arising from non-traditional activities, as well as the institution’s exposure to a decline in the economic value of its capital due to changes in interest rates, and an institution’s ability to manage those risks are important factors that are to be taken into account by the federal banking agencies in assessing an institution’s overall capital adequacy. For more information, see “Item 1. Business – Regulation and Supervision – Regulation of the Company – Capital Requirements.”

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The table below summarizes the capital requirements applicable to the Company and the Bank in order to be considered “well-capitalized” from a regulatory perspective, as well as the Company’s and the Bank’s capital ratios as of December 31, 2025 and 2024. The Bank exceeded all regulatory capital requirements and was considered to be “well-capitalized” as of December 31, 2025 and 2024. As of December 31, 2025, the FDIC categorized the Bank as well-capitalized under the prompt corrective action framework. There have been no conditions or events since December 31, 2025 that management believes would change this classification. While the Company believes that it has sufficient capital to withstand an extended economic recession, its reported and regulatory capital ratios could be adversely impacted in future periods.

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Contractual Obligations

The Company has entered into various contractual obligations in the normal course of business, certain of which require future payments that could impact our liquidity and capital resources. These include payments related to operating lease obligations (see Note 6 in Item 8.), time deposits with stated maturity dates (See Note 9 in Item 8.) and FHLB advances (see Note 10 in item 8.). 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.

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Off-Balance Sheet Arrangements

We are a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of our customers. These financial instruments include commitments to extend credit and standby letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount  recognized in our consolidated balance sheet. The contractual or notional amounts of those instruments reflect the extent of involvement we have in particular classes of financial instruments.

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. Since many of the commitments are expected to expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. We evaluate each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if we deem collateral is necessary upon extension of credit, is based on management’s credit evaluation  of the counterparty.

Standby letters of credit are conditional commitments issued by us to guarantee the performance of a customer to a third party. They are intended to be disbursed, subject to certain condition, upon request of the borrower.

The following table presents outstanding financial commitments whose contractual amount represents credit risks as of the dates indicated:

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