CBNK 10-K & 10-Q changes, risk factors and insider trading

Our performance could be negatively impacted to the extent there is deterioration in business,business and/or economic conditions, including persistent inflation, supply chain issues or labor shortages, which have direct or indirect impacts on us, our customers and/or our counterparties. All of these factors can individually or in the aggregate be detrimental to our business, and the interplay between these factors can be complex and unpredictable. Adverse economic conditions could have a materialmaterial, adverse effect on our business, and/or the the financial condition of our customers and our results of operations.

Such high-profile bank failures also highlighted the speed at which deposits can be moved in the digital economy, as well as the speed and reach of media attention, including social media, and its ability to disseminate concerns or rumors, in each case potentially exacerbating liquidity concerns. In addition, the banking operating environment and public trading prices of banking institutions can be highly correlated, in particular during times of stress, which could materially and adversely impact the trading pricesprice of our common stock and potentially our results of operations.

Additionally, negative news about us or the banking industry in general could negatively impact market and/or customer perceptions of the Company, which could lead to a loss of depositor confidence and an increase in deposit withdrawals, particularly among those with uninsured deposits. Furthermore, the failure of other financial institutions may cause deposit outflows as customers spread deposits among several different banks so as to maximize their amount of FDIC insurance, move deposits to banks deemed “too big to fail” or remove deposits from the banking system entirely. As of December 31, 2024,2025, approximately 57.1% of our deposits were insured and protected and 42.9%40.9% of our deposits were uninsured and unprotected.59.1% of our deposits were insured. We rely on these deposits for liquidity. A failure to maintain adequate liquidity could have a materialmaterial, adverse effect on our business, financial condition and results of operations.

Our success depends upon the general economic conditions in the areas in which we operate, which we cannot predict with any degree of certainty. The presidential administration and certain governmental agencies have announced and begun to implement plans to reduce government spending and the size of the federal government workforce. The Washington, D.C. metropolitan area is characterized by a significant number of businesses that are federal government contractors or subcontractors, or which depend on such businesses for a significant portion of their revenues. In addition, federal government employees make up a significant proportion of the population of the Washington, D.C. metropolitan area. Reductions in the federal workforce through layoffs and buyouts, furloughs of government employees or government contractors as well as cancelling government contracts and other impacts from declining government spending, lapses in appropriations, or changes in fiscal appropriations could have adverse impacts on other businesses in the Company’s market and the general economy of the greater Washington, D.C. metropolitan area. Such a downturn in the local economy generally could make it more difficult for our borrowers to repay their loans and may lead to loan losses that would not be offset by operations in other markets; it may also reduce the ability of our depositors to make or maintain deposits with us. For these reasons, any regional or local economic downturn that affects the Washington, D.C. and Baltimore metropolitan areas, or existing or prospective borrowers or depositors in the Washington, D.C. and Baltimore metropolitan areas could have a materialmaterial, adverse effect on our business, financial condition and results of operations.

Our customers and businesses in the Washington, D.C. metropolitan area may be adversely impacted as a result of the government shutdown and changes in government spending or government shutdown.spending.

In addition, a significant portion of our loan portfolio is secured by real estate, including construction and land development loans, all of which are in greater demand when interest rates are low and economic conditions are good. Accordingly, a decline in local economic conditions would likely have an adverse impact on our financial condition and results of operations, and the impact on us would likely be greater than the impact felt by larger financial institutions whose loan portfolios are more geographically diverse. We cannot guarantee that any risk management practices that we implement to address our geographic and loan concentrations will be effective in preventing losses relating to our loan portfolio.

Our Allowance for Credit Losses (“ACL”) may prove to be insufficient to absorb life-time losses in our loan portfolio, which may adversely affect our business, financial condition and results of operations.

Additional credit losses will likely occur in the future and may occur at a rate greater than we have previously experienced. We may be required to take additional provisions for credit losses in the future to further supplement our ACL, either due to management’s decision to do so or requirements by our banking regulators. In addition, bank regulatory agencies will periodically review our ACL and the value attributed to nonaccrual loans or to real estate acquired through foreclosure. Such regulatory agencies may require us to recognize future charge-offs. These adjustments could have ana material, adverse effect on our business, financial condition and results of operations.

These loans typically involve repayment that depends upon income generated, or expected to be generated, by the property securing the loan in amounts sufficient to cover operating expenses and debt service. Unexpected deterioration in the credit quality of our commercial real estate loan portfolio could require us to increase our ACL, which would reduce our profitability and could have a materialmaterial, adverse effect on our business, financial condition and results of operations.

Construction loans also involve risks because loan funds are secured by a project under construction and the project is of uncertain value prior to its completion. It can be difficult to accurately evaluate the total funds required to complete a project, and construction lending often involves the disbursement of substantial funds with repayment dependent, in part, on the success of the ultimate project rather than the ability of a borrower or guarantor to repay the loan. If we are forced to foreclose on a project prior to completion, we may be unable to recover the entire unpaid portion of the loan. In addition, we may be required to fund additional amounts to complete a project and,and incur taxes, maintenance and compliance costs for a foreclosed propertyproperty, and we may have to hold the property for an indeterminate period of time, any of which could materially and adversely affect our business, financial condition and results of operations.

In considering whether to make a loan secured by real property, we generally require an appraisal of the property. However, an appraisal is only an estimate of the value of the property at the time the appraisal is made and, inasmuch as real estate values may change significantly in value in relatively short periods of time (especially in periods of heightened economic uncertainty), this estimate may not accurately describe the net value of the real property collateral after the loan is made. As a result, we may not be able to recover the full amount of any remaining indebtedness when we foreclose on and sell the relevant property. In addition, we rely on appraisals and other valuation techniques to establish the value of our other real estate owned (“OREO”) and personal property that we acquire through foreclosure proceedings and to determine certain loan impairments. If any of these valuations are inaccurate, our combined and consolidated financial statements may not reflect the correct value of our OREO, and our allowance for credit losses may not reflect accurate loan impairments. This could have a material, adverse effect on our business, financial condition and/or results of operations.

Since we originate loans secured by real estate, we may have to foreclose on the collateral property to protect our investment and may thereafter own and operate such property, in which case we would be exposed to the risks inherent in the ownership of real estate. Our inability to manage the amount of costs or the risks associated with the ownership of real estate, or write-downs in the value of OREO, could have a materialmaterial, adverse effect on our business, financial condition and results of operations.

Additionally, consumer protection initiatives or changes in state or federal law may substantially increase the time and expense associated with the foreclosure process or prevent us from foreclosing at all. If new state or federal laws or regulations are ultimately enacted that significantly raise the cost of foreclosure or impose outright barriers, such could have a materially adverse effect on our business, financial condition and results of operation.

Liquidity is essential to our business. We rely on our ability to generate deposits and effectively manage the repayment and maturity schedules of our loans and investment securities, respectively, to ensure that we have adequate liquidity to fund our operations. An inability to raise funds through deposits, borrowings, sales of our investment securities, sales of loans or other sources could materially and adversely impact our ability to originate loans, invest in securities, meet our expenses or fulfill obligations such as repaying our borrowings or meeting deposit withdrawal demands, any of which could, in turn, have a materialmaterial, adverse effect on our business, financial condition and results of operations.

Withdrawals of deposits by any one of our largest depositors could force us to rely more heavily on borrowings and other sources of funding for our business, adversely affecting our net interest margin and results of operations. We may also be forced, as a result of any withdrawal of deposits, to rely more heavily on other, potentially more expensive and less stable funding sources. Consequently, the occurrence of any of these events could have a materialmaterial, adverse effect on our business, financial condition and results of operations.

Our OpenSky™ Division provides secured, partially secured, and unsecured credit cards on a nationwide basis to under-banked populations and those looking to rebuild their credit scores. Although some OpenSky™ credit cards are fully or partially secured, losses may occur as a result of fraud, or when the account exceeds its established limit or if a cardholder ceases to maintain the account in good standing. Fraud, such as identity fraud, payment fraud and funding fraud (where, for example, an individual funds a card using information from someone they know well, such as a relative or roommate) can result in substantial losses. In the case of an OpenSky™ account that is funded through fraud on the part of an applicant, we are required by applicable laws to refund the amount of the original deposit, and we charge off balances which were subsequently charged on the card. Account balances in excess of established credit limits happen as a result of certain VISA membership policies that allow cardholders to incur certain charges even if they exceed their card limits, which include, but are not limited to, rental car charges, gas station charges and hotel deposits. If an OpenSky™ cardholder exceeds his or her credit limit as a result of purchases in one of these categories, we may incur losses for amounts in excess of the collateral deposited if the borrower fails to repay such excess amounts. Customers can also exceed their credit limit by making intra-period payments to replenish their available lines. If the payments are made via the Automated Clearing House (“ACH”) and were fraudulent, we could incur the cost of the payment. Losses to our credit card portfolio also arise when cardholders cease to maintain the account in good standing with timely payments. For example, in the event a secured card becomes more than 90 days past due, or an unsecured card becomes more than 150 days past due, the credit card balance is recovered against any corresponding deposit account and athe account becomes eligible for charge-off. A charge-off is recorded for any related fees, accrued interest or other charges in excess of the deposit account balance.balance no later than 120 days for secured and 180 days for unsecured. We have invested in technology and systems designed to detect fraudulent behavior and somewhat mitigate losses but such investments may not be adequate, and our systems may not adequately monitor or mitigate potential losses arising from these risks.

This creates a potential credit risk for us with respect to the guaranteed portion of SBA or USDA loans to the extent that we originated the loan in a manner that was not in compliance with applicable standard operating procedures. Additionally, technical defaults could lead to potential liability for Windsor™ if it assisted in the origination or servicing of the loan on behalf of another bank. Such technical defaults and associated losses could materially adversely affect our business. Furthermore, increased instances of technical defaults, particularly where Windsor Advantage™ acted as a lender service provider, could result in reputational damage to us.

A material part of our business consists of originating and servicing government guaranteed loans, in particular those guaranteed by the SBA and the USDA. Our government guaranteed lending program is substantially dependent on the continued support of the U.S. federal government. Under established and long-standing SBA and USDA programs, the federal government guarantees a portion of the loans originated by us or by clients we service through Windsor Advantage.Advantage™.

Any changes to the laws, regulations, procedures, or funding levels governing the SBA or USDA programs could impair our ability, as well as the ability of our clients through Windsor Advantage,Advantage™, to originate, process, and sell these loans in the secondary market. Such changes could have a materialmaterial, adverse impact on our business, including through a reduction in sales income and decreased revenue within Windsor Advantage.Advantage™.

Additionally, a substantialA portion of our governmentlending guaranteed loan programactivities is tied to the financing of renewable energy projects, including, but not limited toto, commercial solar farms. A significant portion of the committed equity in some of these projects is derived from investment tax credits and other forms of financial incentives provided through federal programs, legislative measures, and governmental support.

If the new administration implements or advocates for reductionsReductions in renewable energy and related incentives, government guaranteed lending opportunities could be materially and adversely affected. Further, any expiration, phase-down, or reductionmodification of key tax incentives or other federal programs,benefits, or delays in reauthorization or expansion of theserelated programs,programs could materially and adversely impact the volume of government guaranteed lending opportunities within our USDA business and the renewable energy sectorlending moreopportunities. broadly.In addition uncertainty regarding future federal policy may delay project development, financing decisions or capital commitments.

As a result, anyAccordingly, adverse changes in the regulatory framework or governmental support for renewable energy projects could have a materialmaterially and adverseadversely impact onaffect our financial performance, particularly in the renewable energy lending space, where government incentives are a critical element of project viability.performance.

Interest rate increases often result in larger payment requirements for our borrowers, which increases the potential for default and could result in a decrease in the demand for loans. At the same time, the marketability of the property securing a loan may be adversely affected by any reduced demand resulting from a higher interest rate environment. In a declining interest rate environment, there may be an increase in prepayments on loans as borrowers refinance their loans at lower rates. In addition, in a low interest rate environment, loan customers often pursue long-term fixed rate credits, which could adversely affect our earnings and net interest margin if rates later increase. Changes in interest rates also can affect the value of loans, securities and other assets. An increase in interest rates that adversely affects the ability of borrowers to pay the principal or interest on loans may lead to an increase in nonperforming assets and a reduction of income recognized, which could have a materialmaterial, adverse effect on our results of operations and cash flows. Further, when we place a loan on nonaccrual status, we reverse any accrued but unpaid interest receivable, which decreases interest income. At the same time, we continue to incur costs to fund the loan, which is reflected as interest expense, without any interest income to offset the associated funding expense. Thus, an increase in the amount of nonperforming assets would have a materialmaterial, adverse impact on net interest income.

We invest a portion of our total assets in investment securities with the primary objectives of providing a source of liquidity, providing an appropriate return on funds invested and managing interest rate risk. Factors beyond our control can significantly and adversely influence the fair value of securities in our portfolio. Because of changing economic and market conditions affecting interest rates, the financial condition of issuers of the securities and the performance of the underlying collateral, we may recognize realized and/or unrealized losses in future periods, which could have a materialmaterial, adverse effect on our business, financial condition and results of operations. Net unrealized losses related to available-for-sale investment securities are reflected in Accumulated Other Comprehensive Loss in our Consolidated Balance Sheets and reduce the level of our tangible common equity. Such unrealized losses do not affect our regulatory capital ratios.

We operate in the highly competitive financial services industry and face significant competition for customers from financial institutions located both within and beyond our principal markets. We compete with commercial banks, savings banks, credit unions, nonbanknon-bank financial services companies and other financial institutions operating within or near the areas we serve. In addition, many of our non-bank competitors are not subject to the same extensive regulations that govern our activities and may have greater flexibility in competing for business. Our inability to compete successfully in the markets in which we operate could have a materialmaterial, adverse effect on our business, financial condition or results of operations.

Our computer systems and network infrastructure could be vulnerable to hardware and cybersecurity issues. Any damage or failure that causes an interruption in our operations could have a materialmaterial, adverse effect on our financial condition and results of operations.

Our operations are also dependent upon our ability to protect our computer systems and network infrastructure, including our digital, mobile and internet banking activities, against damage from physical break-ins, cybersecurity breaches and other disruptive problems. Such computer break-ins and other disruptions would jeopardize the security of information stored in and transmitted through our computer systems and network infrastructure, which may result in significant liability, damage our reputation and inhibit the use of our internet banking services by current and potential customers. A breach of our security that results in unauthorized access to our data could expose us to a disruption or challenges relating to our daily operations, as well as to data loss, litigation, damages, fines and penalties, significant increases in compliance costs and reputational damage, any of which could have a materialmaterial, adverse effect on our business, financial condition and results of operations. In addition, we may need to take our systems off-line if they become infected with malware or a computer virus or as a result of another form of cyber-attack. In the event that backup systems are utilized, they may not process data as quickly as our primary systems and some data might not have been saved to backup systems, potentially resulting in a temporary or permanent loss of such data. In addition, our ability to implement backup systems and other safeguards with respect to third-party systems is more limited than with respect to our own systems. We frequently update our systems to support our operations and growth and to remain compliant with applicable laws, rules and regulations. These updates entail significant costs and create risks associated with implementing new systems and integrating them with existing ones, including business interruptions. Implementation and testing of controls related to our computer systems, security monitoring, and retaining and training personnel required to operate our systems also entail significant costs.

We, our customers, regulators, and other third parties, including other financial services institutions and companies engaged in data processing, have been subject to, and are likely to continue to be the target of, cyber-attacks. These cyber-attacks include computer viruses, malicious or destructive code, phishing attacks, denial of service or information, ransomware, improper access by employees or vendors, attacks on personal email of employees, ransom demands to not exploit security vulnerabilities in our systems or the systems of third parties, and other security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of confidential, proprietary and other information of ours, our employees, our customers, or of third parties, and damage to our systems that could otherwise materially disrupt our or our customers’ or other third parties’ network access or business operations. As cyber-threats continue to evolve, we may be required to expend significant additional resources to modify or enhance our protective measures or to investigate and remediate any information security vulnerabilities or incidents. Despite efforts to ensure the integrity of our systems and implement controls, processes, policies and other protective measures, we may not be able to anticipate all security breaches, nor may we be able to implement sufficient preventive measures against such security breaches, which may expose us to material losses and other materialmaterial, adverse consequences.

Cyber-attacks or other security breaches, whether directed at us or third parties, may result in a material loss or have other materialmaterial, adverse consequences. Furthermore, the public perception that a cyber-attack on our systems has been successful, whether or not this perception is correct, may damage our reputation with customers and third parties with whom we do business. Hacking of personal information and identity theft risks, in particular, could cause serious reputational harm. A successful penetration or circumvention of system security could cause us serious negative consequences, including a loss of customers and business opportunities, costs associated with maintaining business relationships after an attack or breach, significant business disruption to our operations and business, misappropriation, exposure or destruction of our confidential information, intellectual property, funds and/or those of our customers; or damage to our or our customers’ and/or third parties’ computers or systems, and could result in a violation of applicable privacy and other laws, litigation exposure, regulatory fines, penalties or intervention, loss of confidence in our security measures, reputational damage, reimbursement or other compensatory costs, and additional compliance costs, and could materially and adversely impact our results of operations, liquidity and financial condition. In addition, we may not have adequate insurance coverage to compensate for losses from a cybersecurity event.

Banking is highly regulated under federal and state law. As such,Accordingly, we are subject to extensive regulation, supervision and legal requirements that govern almost all aspects of our operations. Compliance with applicable laws and regulations can be difficultcomplex and costly, and changes to laws and regulations, including potential changes in federal policy and at regulatory agenciespriorities asassociated awith result of changestransitions in U.S. Presidential administrations that have different regulatory agendas than their predecessors, oftenfrequently impose additional operating costs. WeRecent administrations have pursued regulatory agendas that differ in approach and emphasis, and we expect the Trump administration will seek to implement a regulatory reform agenda that is significantly different than that of the Biden administration. We expect there will be changes in rulemaking, supervision, examination,examination and enforcement priorities of the federal banking agencies.agencies will continue to evolve. Such changes may affect the manner in which we conduct our business, the products and services we offer, and the costs associated with compliance. Our failure to comply with theseapplicable laws and regulations, even ifwhere thesuch failure followsreflects good faith efforts or reflects a differencedifferences in interpretation, could subject us to restrictions on our business activities, enforcement actionsactions, andfines, fines andor other penalties, any of which could adversely affect our results of operations, regulatory capital levelslevels, and the price of our securities. Further,In anyaddition, new or amended laws, rules andor regulations could makeincrease compliance morecosts, difficultlimit orbusiness expensiveopportunities, or otherwise materially and adversely affect our business, financial conditioncondition, and results of operations.

The federal bank regulatory agencies have indicated their view that banks with high concentrations of loans secured by commercial real estate are subject to increased risk and should implement robust risk management policies and maintain higher capital than regulatory minimums to maintain an appropriate cushion against loss that is commensurate with the perceived risk. Federal bank regulatory guidelines identify institutions potentially exposed to commercial real estate concentration risk as those that have (i) experienced rapid growth in commercial real estate lending, (ii) notable exposure to a specific type of commercial real estate, (iii) total reported loans for construction, land development and other land loans representing 100% or more of the institution’s capital, or (iv) total non-owner-occupied commercial real estate (including construction) loans representing 300% or more of the institution’s capital if the outstanding balance of the institution’s non-owner-occupied commercial real estate (including construction) loan portfolio has increased 50% or more during the prior 36 months. At December 31, 2024,2025, the Bank’s construction to total capital ratio was 99%100% and the Bank’s non-owner-occupied commercial real estate (including construction) loans to total capital ratio was 298%.302%, which exceeded the 300% regulatory guideline threshold set forth in clause (iv) above. As a result, we are deemed to have a concentration in commercial real estate lending under applicable regulatory guidelines. Additionally, at December 31, 2025, the Company’s construction to total capital ratio was 88.1% and the Company’s non-owner-occupied commercial real estate (including construction) loans to total capital ratio was 270.8%. Because a significant portion of our loan portfolio depends on commercial real estate, a change in the regulatory capital requirements applicable to us or a decline in our regulatory capital could limit our ability to leverage our capital as a result of these policies, which could have a materialmaterial, adverse effect on our business, financial condition and results of operations.

Severe weather, earthquakes, other natural disasters, pandemics, climate change, acts of war or terrorism and other adverse external events could have a significant impact on the Company’s ability to conduct business. Such events could affect the stability of itsour deposit base, impair the ability of our borrowers to repay outstanding loans, impair the value of collateral securing loans, cause significant property damage, result in loss of revenue, cause us to incur additional expenses or disrupt the Company’s operations. Climate change has the potential to increase the frequency and severity of severe weather events in the future. Although management has established disaster recovery policies and procedures, the occurrence of any such events could have a materialmaterial, adverse effect on our business, financial condition, results of operations or profitability.

GAAP requires us to record the assets and liabilities of an acquired business to their fair values at the time of the acquisition. With larger transactions, such as our recent merger with IFH, fair value and other estimates can take up to one year to finalize. These estimates, and their revisions, can have a substantial effect on the presentation of our financial condition and operating results after the transaction closes. In addition, the excess of the purchase price over the fair value of the assets acquired, net of liabilities assumed, is recorded as goodwill. If the estimates that we have used at any financial statement date are significantly revised in the future, there could be a negative impact to our goodwill or other acquisition-related intangibles and our results of operations for the period in which the revisions are made.

GAAP requires that goodwill be tested for impairment at the unit level on at least an annual basis or more frequently upon the occurrence of a triggering event. An impairment loss is to be recognized if the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit. A significant decline in our expected future cash flows, a continued period of economic disruption, changes to financial markets, slower growth rates, or other external factors, all of which can be highly unpredictable, may impact fair value calculations and require us to recognize an impairment loss in the future. While goodwill is excluded from regulatory capital, such an impairment may have a materialmaterial, adverse effect on our financial condition and results of our operations.

The success of our recent merger with IFH or any future acquisition we may consummate will depend on, among other things, our ability to realize anticipated revenue enhancements and efficiencies and to combine our business with the business of the target institution in a manner that does not materially disrupt the existing customer relationships of either institution, or result in decreased revenues resulting from any loss of customers, and that permits growth opportunities to occur. If we are not able to successfully achieve these objectives, the anticipated benefits of the subject acquisition may not be realized fully or at all or may take longer to realize than expected.

It is possible that the integration process associated with any pending or future acquisition could result in the loss of key employees, the disruption of ongoing businesses or inconsistencies in standards, controls, procedures and policies that adversely affect our ability to maintain relationships with clients, customers, depositors and employees or to achieve the anticipated benefits of the acquisitions.acquisition. Integration efforts could also divert management attention and resources. These integration matters could have ana material and adverse effect on the combined Company.

Our common stock ranks junior to all of our existing and future indebtedness and other non-equity claims with respect to assets available to satisfy claims against us, including claims in the event of our liquidation. As of December 31, 2024,2025, we had outstanding approximately $10.0 million in aggregate principal amount of subordinated notes and $2.1 million in aggregate principal amount of junior subordinated debentures.debentures and we had no aggregate principal amount of subordinated notes outstanding. We may incur additional indebtedness in the future to increase our capital resources or if our total capital ratio or the total capital ratio of the Bank falls below the required minimums. Furthermore, our common stock is subordinate to any series of preferred stock we may issue in the future.

In addition, certain provisions of Maryland law may delay, discourage or prevent an attempted acquisition or change in control. Furthermore, banking laws impose notice, approval,approval and ongoing regulatory requirements on any shareholder or other party that seeks to acquire direct or indirect “control” of an FDIC-insured depository institution or its holding company. These laws include the BHC Act and the Change in Bank Control Act (“CBCA”). These laws could delay or prevent an acquisition.

This documentreport contains non-GAAP financial measures denoted throughout our MD&A by reference to “non-GAAP.” We believe these non-GAAP financial measures provide useful information to investors because they are used by management to evaluate our operating performance and to make day-to-day operating decisions. In addition, we believe our non-GAAP results in any given reporting period reflect our on-going financial performance in that period and, accordingly, are useful to consider in addition to our GAAP financial results. We further believe the presentation of non-GAAP results increases comparability of period-to-period results.

Net income of $31.0$57.2 million for the year ended December 31, 20242025 decreasedincreased $4.9$26.2 million, or 13.7%84.6% when compared to the prior year.year, augmented in part by the acquisition of IFH and strong organic growth. Net income of $40.1 million as adjusted for the year ended December 31, 2025 of $56.3 million excludes the impact of $3.5 million after-tax impact from issuing a call of brokered time deposits acquired from the IFH transaction (“Call of Brokered Time Deposits”) and $2.6 million after-tax merger-related expenses. Net income as adjusted for the year ended December 31, 2024 included $3.3 million of after-tax merger-related expenses, $3.2 million after-tax impact from the Initial IFH ACL Provision on non-PCDnon-purchased loanscredit deteriorated loans, and a $2.6 million of non-recurring equity and debt investment write-down that was nondeductible for tax purposes (non-GAAP) for the year ended December 31, 2024. There were no adjustments made to net income for the year ended December 31, 2023.. Net interest income of $154.7$196.0 million increased $13.2$41.2 million from the prior year primarily duedriven toby increasedorganic averagegrowth balancesand the acquisition of $325.7 million in portfolio loans, partially offset by higher funding costs primarily resulting from the additional average deposit volume funding the loan growth. Interest income included $0.7 million and interest expense included $1.4 million from net purchase accounting amortization resulting from the IFH acquisition.IFH. For more information on the computation of non-GAAP financial measures, see “Non-GAAP Financial Measures and Reconciliations.”

For the year ended December 31, 2024,2025, the provision for credit losses was $17.7$15.0 million, ana increasedecrease of $8.1$2.8 million from the prior year. The varianceprovision for credit losses for the year-ended December 31, 2024 included the Initialinitial IFH non-PCD ACL Provisionprovision of $4.2 millionmillion. andExcluding $4.5this, the provision for credit losses increased $1.2 million fromwhich organicwas commercialprimarily portfoliodue loanto growth,increased partiallyprovision offsetexpense byfor aOpenSky™ $0.6due millionto reductiongrowth fromin the OpenSkyTMunsecured credit card portfolio. Net charge-offs for the year ended December 31, 20242025 were $9.0$12.4 million, or 0.42%0.45% of average portfolio loans, compared to $8.5$9.0 million, or 0.47%0.42% of average portfolio loans, for the same period in 2023.2024. The $9.0$12.4 million in net charge-offs during the year ended December 31, 20242025 waswere comprisedcomprised, primarilyin part, of OpenSky™ credit card portfolio net charge-offs, with $3.6$5.4 million related to unsecured cards and $1.6 million related to secured and partially secured cardscards. whileFurther, $3.4 million wasof net charge-offs were related to unsecuredcommercial cards.and industrial loans, $1.9 million were related to owner-occupied commercial real estate loans, and $0.3 million were related to construction loans.

For the year ended December 31, 2024,2025, noninterest income of $31.4$49.2 million increased $6.4$17.8 million, or 25.8%,56.6%, from the same period in 2023.2024. This increase was primarily driven by contributionsreporting results from the IFH acquisition,acquisition includingfor a full year in 2025 compared to only three months in 2024. Activity from IFH included increased government loan servicing revenue (Windsor™) of $4.0$11.5 million, increased government lending revenue (gain on sale) of $2.3$1.9 millionmillion, andoffset revenueby fromdecreased loan servicing rights of $1.0$0.5 million,million. offsetThe bynoninterest income also increased $2.6 million as a result of 2024 including non-recurring equity and debt write-down of $2.6 million related to an IFH investment. Other income increased $0.9 million primarily related to a previous investment in an SBIC, while credit card fees declined $1.3 million.

For the year ended December 31, 2024,2025, noninterest expense of $126.2$155.1 million increased $15.5$28.9 million, or 14.0%,22.9%, from the same period in 2023,2024, largely due to the IFH acquisition. The increase was primarily driven by a $7.3$16.1 million, or 14.9%,28.8%, increase in salaries and employee benefits, a $3.9$3.1 million increase in merger-related expenses, a $2.6 million, or 45.3%, increase in occupancy and equipmentequipment, primarilya related$3.1 tomillion increasedincrease contractin expenseprofessional from the IFH acquisition,fees, and a $2.0$2.1 million, or 7.8%,7.6%, increase in data processing expense, partially offset by a $1.4 million, or 15.4%, decrease in professional fees due to a reduction in third party consulting fees.expense.

Total assets at December 31, 20242025 were $3.2$3.6 billion, an increase of $980.7$399.3 million, or 44.1%,12.5%, from the balance at December 31, 2023.2024. Net portfolio loans, which exclude mortgage loans held for sale, totaled $3.0 billion at December 31, 2025, an increase of $329.3 million, or 12.5%, compared to $2.6 billion at December 31, 2024, an increase of $726.9 million, or 38.2%, compared to $1.9 billion at December 31, 2023.2024. Total liabilities at December 31, 20242025 were $2.9$3.2 billion, an increase of $880.5$352.7 million, or 44.7%,12.4%, from the balance at December 31, 2023.2024. Total liability growth was primarily due to a $865.9$331.3 million increase in deposits and a $28.0 million increase in FHLB advances, partially offset by a decrease in other borrowed funds of $15.0$10.0 million when comparing December 31, 20242025 to December 31, 2023.2024. Stockholders’ equity increased to $355.1$401.8 million as of December 31, 2024,2025, compared to $254.9$355.1 million at December 31, 2023.2024, or 13.1%.

Deposits were $2.8$3.1 billion at December 31, 2024,2025, an increase of $865.9$331.3 million,million or 45.7%,12.0%, from the balance at December 31, 2023.2024. Average deposits of $2.2$2.9 billion for the year ended December 31, 20242025 increased $304.4$711.6 million, or 16.3%,32.8%, as compared to the prior year. Average noninterest-bearing deposit balances increased $20.3$136.4 million to $675.4$811.8 million, orand 31.1%represented 28.2% of total average deposits for the year ended December 31, 2024,2025, as compared to $655.0$675.4 million, orwhich 35.1%represented 31.1% of total average deposits for the prior year.

The Bank’s OpenSky™ Division, including shared service and corporate allocations contributed $17.3$14.6 million of income before taxes for the year ended December 31, 2024,2025, a decrease of $1.8$2.7 million for the segment from the prior year. The $2.7 million decrease was primarily attributable to $1.5 million of increased provision for credit losses, $0.8 million of decreased interest income, and $1.3 million of increased data processing expense related to investments in OpenSky™ initiatives and other investments in technology, partially offset by $1.4 million of increased fee revenue from higher credit card fees. Average OpenSky™ loan balances, net of reserves and deferred fees of $115.6$125.8 million for the year ended December 31, 20242025 increased $1.1$10.2 million, or 1.0%,8.9%, as compared to the prior year. OpenSky™ loan balances, net of reserves, of $142.4 million at December 31, 2025 increased by $14.6 million, or 11.5%, compared to $127.8 million at December 31, 2024 increased by $4.4 million, or 3.6%, compared to $123.3 million at December 31, 2023.2024. Corresponding non-interest bearing deposit balances of $166.4$163.2 million at December 31, 20242025 decreased $7.5$3.2 million, or 4.3%, compared to $173.9$166.4 million at December 31, 2023.2024. Gross unsecured loan balances of $61.4 million at December 31, 2025 increased $18.9 million, or 44.7%, compared to $42.4 million at December 31, 2024 increased $11.6 million, or 37.7%, compared to $30.8 million at December 31, 2023.2024. For the year ended December 31, 2024,2025, noninterest income of $16.1$17.4 million decreasedincreased $1.2$1.3 million due primarily to ahigher declinecredit-card inrelated credit card fees as compared to the prior year.fees.

The Bank’s Capital Bank Home Loans division including shared service and corporate allocations contributed a net loss before taxes of $2.5$2.6 million for the year ended December 31, 20242025 as compared to a net loss before taxes of $3.0$2.5 million in the prior year. The Bank’s Capital Bank Home Loans division saw an increase in mortgage originations during the year ended December 31, 20242025 when compared to the prior year. AnThe elevatedlower interest rate environment dampenedincreased home loan sales and home loan refinances. Gain on sale margins were downup from 2.76%2.59% for the twelve monthsyear ended December 31, 20232024 to 2.59%2.70% for the twelve monthsyear ended December 31, 2024.2025.

The Bank’s Windsor Advantage™ division, including shared service and corporate allocations, contributed net income before taxes of $5.1 million for the year ended December 31, 2025 compared to $1.9 million for the year ended December 31, 20242024. followingThe increase was primarily driven by reporting results from the IFH acquisition offor IFHa onfull Octoberyear 1,in 2025 compared to only three months in 2024. Gross government loan servicing revenue (Windsor™) totaled $4.6$19.6 million, includingas $0.6compared to $4.5 million offor the year ended December 31, 2024. Gross government loan servicing revenue included Capital Bank related servicing fees,fees duringof $4.1 million and $0.5 million in 2025 and 2024, respectively. When the fourthgross quartergovernment loan servicing revenue from 2024 is annualized to $18.1 million this represents an increase of $1.5 million, or 8.2%. from 2024. Windsor's™ total servicing portfolio was $3.1 billion at December 31, 2025, compared to $2.5 billion at December 31, 2024.

We account for business combinations under ASC 805, Business Combinations using the acquisition method of accounting and record the identifiable assets acquired, liabilities assumed and consideration paid at fair value at the acquisition date. The excess of consideration paid over the fair value of the net assets acquired is recorded as goodwill. The fair values are preliminary estimates subject to adjustments during the measurement period, which does not exceed one year after acquisition. As of December 31, 2025, the measurement period for the acquisition has closed and the acquisition accounting is finalized. The application of business combination principles, including the determination of the fair value of net assets acquired, requires the use of significant estimates and assumptions under ASC 820, Fair Value Measurement. See Note 2 - Business Combination in the “Notes to the Consolidated Financial Statements” to the Consolidated Financial Statements. Determining estimated fair value requires a significant amount of judgment and estimates. If our assumptions change, or errors are determined in its calculations, the fair value could materially change resulting in an adjustment to our goodwill or identifiable net assets acquired, including identified intangible assets. As of December 31, 2024,2025, the Company believes that the fair value of the assets acquired, liabilities assumed and consideration paid at fair value at the acquisition date was appropriately determined in accordance with GAAP.

Net income for the year ended December 31, 20242025 was $31.0$57.2 million compared to net income of $35.9$31.0 million for the same period in 2023,2024, a 13.7%84.6% decrease.increase, augmented in part by the IFH acquisition. During the year, the Bank issued a call of brokered time deposits acquired from the IFH transaction (“Call of Brokered Time Deposits”), resulting in the accelerated accretion of $4.6 million, or $3.5 million after-tax income. The Bank also incurred $2.6 million of after-tax related merger expenses. Net income was $40.1 millionincome, as adjusted (non-GAAP) to exclude the after-tax impact of $3.3$3.5 million after-tax merger-related expenses, $3.2 million after-tax impact fromfor the InitialCall IFHof ACLBrokered ProvisionTime on non-PCD loansDeposits and a $2.6 million non-recurringof equityafter-tax andrelated debtmerger investment write-down thatexpenses, was nondeductible$56.3 for tax purposes (non-GAAP),million for the year ended December 31, 2024.2025. Net interest income increased $13.2$41.2 million, or 9.3%,26.7%, to $154.7$196.0 million when comparing the year ended December 31, 20242025 to the year ended December 31, 2023,2024, primarily due to increasedthe average balances of $325.7 million in portfolio loans,loans increasing by $623.1 million, partially offset by higher funding costs primarily resulting from the additional average deposit volume funding loan growth. For more information on the computation of non-GAAP financial measures, see “Non-GAAP Financial Measures and Reconciliations.”

The provision for credit losses for the year ended December 31, 20242025 was $17.7$15.0 million, ana increasedecrease of $8.1$2.8 million, or 84.4%,15.5%, from the provision for credit losses for the year ended December 31, 2023.2024. The variancedecrease includedwas driven by $4.2 million of lower provisions in the commercial loan portfolio, primarily driven by 2024 including the initial IFH ACL provision of $4.2 million on non-PCD loans and $4.5 million from organic commercial portfolio loan growth,million, partially offset by $0.6$1.5 million fromof additional OpenSky™ creditprovisions cardduring portfolio.the year. Net charge-offs for the year ended December 31, 20242025 were $9.0$12.4 million, or 0.42%0.45% of average portfolio loans, compared to $8.5$9.0 million, or 0.47%0.42% of average loans for the same period in 2023.2024. Net charge-offs were comprised, in part, of net charge-offs related to OpenSky™ credit card portfolio loansloans, specifically $5.4 million of $3.6net charge-offs were related to unsecured cards and $1.6 million were related to secured and partially secured whilecards. During the year, there were $2.0 million of recoveries resulting from the sale of charged-off OpenSky™ credit card receivables. Further, $3.4 million wasof net charge-offs were related to unsecuredcommercial cards.and industrial loans and $1.9 million were related to owner-occupied commercial real estate loans. The $3.4 million of net charge-offs for commercial and industrial loans were primarily attributable to unguaranteed portions of SBA loans. One purchased credit deteriorated (“PCD”) loan represented $1.5 million of the $1.9 million net charge-offs for owner-occupied commercial real estate loans. A specific reserve of $2.8 million was originally recorded for the loan, which was then sold to a third party allowing for $1.3 million of the reserve to be released and the remaining $1.5 million to be charged off.

For the year ended December 31, 2024,2025, noninterest income was $31.4$49.2 million, an increase of $6.4$17.8 million, or 25.8%,56.6%, from $25.0$31.4 million in the prior year periodperiod, primarily driven by contributions from the IFH acquisition. GovernmentActivity from IFH included increased government loan servicing revenue (Windsor™) totaledof $4.0$11.5 million, increased government lending revenue totaledof $2.3$1.9 millionmillion, andoffset by decreased loan servicing rights totaledof $1.0$0.5 million,million. offsetNoninterest byincome awas also higher due to 2024 including the non-recurring equity and debt write-down of $2.6 million related to an IFH investment. MortgageCredit card fees of $17.4 million increased $1.4 million, primarily from other credit-card related fees associated with the unsecured product, while mortgage banking revenue of $7.1$7.5 million increased $2.3$0.3 million,million primarily due to an increase inas home loan sales whileremained credit card fees of $16.0 million declined $1.3 million from lower interchange and other fee income recognizedstable compared to the prior year.

Noninterest expense was $155.1 million for the year ended December 31, 2025, as compared to $126.2 million for the year ended December 31, 2024, as compared to $110.8 million for the year ended December 31, 2023, an increase of $15.5$28.9 million, or 14.0%22.9% largely due to the IFH acquisition. The change includes increases in salaries and employee benefits expenses of $7.3$16.1 million, or 14.9%,28.8%, merger-relatedoccupancy expensesand equipment of $3.9$3.1 million, advertisingprofessional expensesfees of $0.2$3.1 million, other operating expenses of $0.8$2.3 million andmillion, data processing expense of $2.0$2.1 million, loan processing of $1.6 million and regulatory assessment expenses of $1.4 million, partially offset by decreases in professionalmerger-related feesexpenses of $1.4$0.6 million, operational and other card fraud related losses of $0.2 million and otheradvertising operational lossesexpenses of $0.9$0.1 million.

(2)For the years ended December 31, 20242025 and 2023,2024, portfoliocollectively, loansCommercial yieldBank excludingLoan credit card loansYield was 7.03%6.99% and 6.65%,7.03%, respectively.

(3)For the years ended December 31, 20242025 and 2023,2024, creditcollectively, cardCommercial loansBank accountedNet forInterest 222Margin was 4.38% and 264 basis points of the reported net interest margin,3.93%, respectively.

The net interest margin decreased 3812 basis points to 6.22%6.10% for the year ended December 31, 20242025 from the same period in 2023.2024, Netprimarily driven by the commercial loans acquired from IFH, for a full year in 2025 compared to only one quarter in 2024, and strong organic growth in the Commercial Bank loan portfolio which further diluted the impact from OpenSky™. Commercial Bank net interest margin,margin excludingincreased creditto card loans, was 4.00% and 3.96%, respectively,4.38% for yearsthe year ended December 31, 20242025, andwhich 2023.included 15 basis points from the Call of Brokered Time Deposits, compared to 3.93% for the same period in 2024. For more information on the computation of non-GAAP financial measures, see “Non-GAAP Financial Measures and Reconciliations.”

For the year ended December 31, 2024,2025, average interest earning assets increased $342.4$727.9 million, or 16.0%,29.3%, to $2.5$3.2 billion as compared to the same period in 2023,2024, and the average yield on interest earning assets increaseddecreased 346 basis points. Compared to the same period in the prior year, average interest-bearing liabilities increased $288.5$548.7 million, or 22.7%,35.2%, while the average cost of interest-bearing liabilities increaseddecreased 4768 basis points to 3.76%3.08% from 3.29%.3.76%.

When comparing the years ended December 31, 20242025 to 2023,2024, the largest positive impact to total interest income was the growth in interest earning assets, strengthened in part by the IFH acquisition. Growth (change due to volume) in the loan portfolio, excluding credit cards, contributed $22.8$42.8 million and growth in credit card loans contributed $4.9 million to the increase in interest income,income. whileGrowth elevatedin the loan and credit card portfolios were both partially offset by decreased interest rates on portfolio loans contributed $6.5 million for the year ended December 31, 20242025 compared to the prior year. On a standalone basis, interest income attributable to the creditinterest-bearing carddeposits portfoliocontributed declined by $1.3$3.6 million year over year primarily due to athe reductionincrease in yield.interest income. The variance in interest expense year over year was primarily impacted by growth in interest-bearing liabilities, augmented in part by the IFH acquisition. Growth in interest bearing liabilities contributed $12.3$17.6 million to increased interest expense, including $9.5$9.3 million from growth in time deposits,deposits and $8.9 million from growth in money market accounts, partially offsettingoffset theby increaserate insavings totalof interest$6.7 income.million for time deposits and $4.4 million for money market accounts.

For the year ended December 31, 2024,2025, the provision for credit losses was $17.7$15.0 million, ana increasedecrease of $8.1$2.8 million from the recorded provision for credit losses of $9.6$17.7 million for the year ended December 31, 2023.2024. The variancedecrease includedwas driven by $4.2 million of lower provisions in the Initialcommercial loan portfolio, primarily driven by the initial IFH ACL provision on non-PCD loans of $4.2 million andrecognized $4.5in million from organic commercial portfolio loan growth,2024, partially offset by a $0.6$1.5 million reductionof fromadditional OpenSky™ provisions during the OpenSkyTM credit card portfolio.year. Net charge-offs for the year ended December 31, 20242025 were $12.4 million, or 0.45% of average portfolio loans, compared to $9.0 million, or 0.42% of average portfolio loans, compared to $8.5 million, or 0.47% of average portfolio loans,loans for the same period in 2023.2024. The $9.0$12.4 million in net charge-offs during the year ended December 31, 20242025 was comprised primarily of credit card portfolio net charge-offs, with $3.6$1.6 million related to secured and partially secured cards while $3.4$5.4 million was related to unsecured cards. During the year, there was $2.0 million of recoveries resulting from the sale of charged off OpenSky™ credit card receivables included within net charge-offs. The sale of charged off OpenSky™ credit card receivables reduced the reserve required for OpenSky™, resulting in a $1.3 million reduction to the provision. Further, $3.4 million of net charge-offs were related to commercial and industrial loans and $1.9 million were related to owner-occupied commercial real estate loans. The $3.4 million of net charge-offs for commercial and industrial loans were primarily attributable to unguaranteed portions of SBA loans. One PCD loan represented $1.5 million of the $1.9 million net charge-offs for owner-occupied commercial real estate loans. A specific reserve of $2.8 million was originally recorded for the loan, which was then sold to a third party resulting in the release of $1.3 million from the reserve, with the remaining $1.5 million to be charged off.

The ACL as a percent of portfolio loans was 1.85% at December 31, 20242025 as compared to 1.50% atand December 31, 2023. While the legacy Capital Bank portfolio credit metrics are relatively consistent with prior year, the increase in the ACL provision year-over-year is attributable to the IFH acquisition, most notably a few PCD loans that required elevated ACL coverage and are not consistent with the current product offering and stronger underwriting at IFH at the time of the acquisition.2024. The maintenance of a high-quality loan portfolio, with an adequate allowance for expected credit losses, will continue to be a primary objective for the Company. See additional discussion regarding the Company’s ACL and reserve for unfunded commitments credit exposures at December 31, 20242025 in “Financial Condition - Allowance for Credit Losses.”

A primary source of recurring noninterest income are credit card fees, such as interchange fees and statement fees, mortgage banking revenue and Windsor Advantage™ fee income in connection with its servicing, processing and packaging of SBA and USDA loans for its financial institution clients.clients, and mortgage banking revenue. Noninterest income does not include (i) loan origination fees to the extent they exceed the direct loan origination costs, which are generally recognized over the life of the related loan as an adjustment to yield using the interest method or (ii) annual, renewal and late fees related to our credit card portfolio, which are generally recognized over the twelve month life of the related loan as an adjustment to yield using the interest method.

Mortgage banking revenue of $7.1$7.5 million,million for the year ended December 31, 2024,2025, increased $2.3$0.3 million due to an increase inas home loan sales asremained stable compared to the prior year. For the year ended December 31, 2024,2025, credit card fees of $16.0$17.4 million declinedincreased $1.3$1.4 million primarily as a result of lowercredit-card interchangerelated andfees otherassociated fee income recognized compared towith the priorunsecured year.product.

The Bank’s Capital Bank Home Loans division experienced an increase of 48.7%11.7% in mortgage originations during the year ended December 31, 20242025 when compared to the same period in the prior year. Origination volumes increased $98.0$35.0 million, to $299.1$334.1 million, for the year ended December 31, 2024,2025, when compared to $201.1$299.1 million for the same period in the prior year. Gain on sale margins were downup from 2.76% for the twelve months ended December 31, 2023 to 2.59% for the year ended December 31, 2024.2024 to 2.70% for the year ended December 31, 2025.

Mortgage loans sold are subject to repurchase in circumstances where documentation is deficient or the underlying loan becomes delinquent or pays off within a specified period following loan funding and sale. The Bank has established a reserve under generally accepted accounting principles for possible repurchases. The reserve was $2.3 million at December 31, 20242025 and $1.0$2.3 million at December 31, 2023.2024. The Bank did not repurchase any loans during the year ended December 31, 2025. The Bank repurchased one loan totaling $296 thousand during the year ended December 31, 2024. The Bank repurchased one loan totaling $597 thousand during the year ended December 31, 2023. The Bank does not originate “sub-prime” mortgage loans and has no exposure to this market segment.

For the year ended December 31, 2024,2025, noninterest expense of $126.2$155.1 million increased $15.5$28.9 million, or 14.0%,22.9%, from the same period in 2023,2024, primarily from the IFH acquisition. The increase was primarily driven by a $7.3$16.1 million, or 14.9%,28.8%, increase in salaries and employee benefits due largely to the acquisition of IFH.IFH Merger-relatedand expensesheadcount weregrowth. $3.9Professional million.fees increased $3.1 million, or 39.7%, most of which is comprised of professional fees associated with investments in shared service areas. Occupancy and equipment expense increased $2.6$3.1 million, or 45.3%,38.2%, primarily related to increased contract expense from the IFH acquisition of $0.5 million and software depreciation of $0.4 million. Otherother operating expenses increased $0.8$2.3 millionmillion, includingor an28.0%, increase in insurance related expenses and other miscellaneous expenses. Datadata processing expense increased $2.0$2.1 million, or 7.8%,7.6%, outsideand serviceloan providersprocessing expensefees increased $1.6 million or 64.0%. Regulatory assessment expenses increased $1.4 million, primarily in consequence of the acquisition of IFH. Merger-related expenses of $3.4 million decreased $0.1$0.6 million, or 2.8%14.5%, andfrom professionalthe feessame decreased $1.4 million, or 15.4%,period due to athe reductionacquisition inaccounting thirdbeing partyfinalized consultingon fees.September 30, 2025.

Income tax expense was $17.8 million for 2025 compared to $10.9 million for 2024 compared to $10.4 million for 2023.2024. Our effective tax rates for those periods were 26.0%23.7% and 22.4%,26.0%, respectively. The elevated tax rate in 2024 resulted from the non-deductibility of a non-recurring equity and debt investment write down,down inassociated with a legacy IFH investment, along with certain merger-related expenses. In December of 20242024, the Company became aware of certain financial conditions in a legacy IFH investment which indicated the need to evaluate the investment for impairment. Based upon the Company’s financial evaluation of athat legacy IFH investmentinvestment, it was determined that the value of the Company’s investment in a legacy IFH investment was impaired and a write-down of the investment value was required. The Company does not hold any additional equity securities,securities; thereforetherefore, the Company does not expect any future deferred tax benefits associated with thesuch impairment.investment.

Total assets at December 31, 20242025 increased $980.7$399.3 million from the balance at December 31, 2023. On October 1, 2024, in connection with the IFH acquisition, the Company acquired total assets of $559.4 million, net of purchase accounting adjustments, including gross loans of $373.5 million, loans held for sale of $41.7 million and goodwill and intangible assets of $37.2 million while liabilities assumed totaled $475.9 million including total deposits of $459.0 million.2024. Net portfolio loans, which exclude mortgage loans held for sale, totaled $2.6$3.0 billion as of December 31, 2024,2025, an increase of $726.9$329.3 million, or 38.2%,12.52%, from $1.9$2.6 billion at December 31, 2023.2024. Deposits totaled $3.1 billion at December 31, 2025, an increase of $331.3 million from $2.8 billion at December 31, 2024.

The following tables summarize the contractual maturities, without consideration of call features or pre-refunding dates,dates and weighted-average yieldsyields, of investment securities at December 31, 20242025 and the amortized cost and carrying value of those securities as of the indicated dates. The weighted average yields were calculated by multiplying the amortized cost of each individual security by its yield, dividing that figure by the portfolio total, and then summing the value of these results to arrive at the weighted average yield.results. Yields on tax-exempt investments are not calculated on a fully tax equivalent basis.

As described in “Note 3 - Investment Securities” in the “Notes to the Consolidated Financial Statements” at December 31, 2024,2025, management determined the Company does not have the intent to sell, nor is it more likely than not that it will be required to sell, available-for-sale debt securities in an unrealized loss position at December 31, 20242025 before it is able to recover the amortized cost basis. Further, management reviewed the Company’s holdings as of December 31, 20242025 and concluded that there were no credit-related declines in fair value. Additional information related to the types of securities held at December 31, 2024,2025, other than securities issued or guaranteed by U.S. Government entities or agencies, is as follows:

Corporate Securities – There have been no payment defaults on any of the Company’s holdings of corporate debt securities. There are 5three securities all of which are subordinated debt of other financial institutions with face amounts ranging from $0.5 million to $2 million.

Municipal Securities – All of the Company’s holdings of municipal bonds were investment grade and there have been no payment defaults. Summary ratings information at December 31, 2024,2025, based on the amortized cost basis and reflecting the lowest enhanced or underlying rating by Moody’s, Standard & PoorsPoor’s or Fitch, is as follows: AAA – 82%76% of the portfolio; AA+ – 8%; AA – 10%.24%.

Asset-backed Securities – There wereare 3three investment grade asset-backed securities, and there have been no payment defaults on these securities.

Commercial Real Estate Loans. Commercial real estate loans are originated on owner-occupied and non-owner-occupied properties. These loans may be adversely affected by conditions in the real estate markets or in the general economy. Business equity lines of credit totaling $3.8 million as of December 31, 2025 and $3.1 million as of December 31, 2024 and $14.1 million as of December 31, 2023,2024, are included in the commercial real estate loan category. Business equity lines of credit are commercial purpose lines of credit primarily secured by the business owners residential properties. Lender finance loans totaling $41.4 million as of December 31, 2025 and $28.6 million as of December 31, 2024 are also included in the commercial real estate loan category. Lender finance loans are loans to companies used to purchase finance receivables or extend finance receivables to the underlying obligors and are secured primarily by the finance receivables held by our borrowers. The primary sources of repayment are the operating incomes of the borrowers and the collection of the finance receivables securing the loans. Commercial loans that are secured by owner-occupied commercial real estate and primarily collateralized by operating cash flows are included in the commercial real estate loan category. Commercial real estate loan terms are generally extended for 10 years or less and amortize generally over 25 years or less. The interest rates on commercial real estate loans generally have initial fixed rate terms that adjust typically at five years. Origination fees are routinely charged for services. Personal guarantees from the principal owners of the business are generally required, supported by a review of the principal owners’ personal financial statements and global debt service obligations. The properties securing the portfolio are diverse in type. This diversity may help reduce the exposure to adverse economic events that affect any single industry.

Construction Loans. Construction loans are offered primarily within the Company’s Washington, D.C. and Baltimore, Maryland metropolitan operating areas to builders, primarily for the construction of single-family homes and condominium and townhouse conversions or renovations and, to a lesser extent, to individuals. Construction loans typically have terms of 12 to 18 months. The Company frequently transitions the end purchaser to permanent financing or re-underwriting and sale into the secondary market through Capital Bank Home Loans. According to underwriting standards, the ratio of loan principal to collateral value, as established by an independent appraisal, cannot exceed 75% for investor-owned and 80% for owner-occupied properties, although exceptions are sometimes made. The Company performs a stress test of the construction loan portfolio at least once a year, and underlying real estate conditions are monitored as well as trends in sales outcomes versus underwriting valuations as part of ongoing risk management efforts. The borrowers’ progress in construction buildout is monitored against the original underwriting guidelines for construction milestones and completion timelines.

Commercial and Industrial. In addition to other loan products, general commercial loans, including commercial lines of credit, working capital loans, term loans, equipment financing, letters of credit, government guaranteed loans and solar energy related loans and other loan products, are offered, primarily in target markets, and underwritten based on each borrower’s ability to service debt from income. These loans are primarily made based on the identified cash flows of the borrower and secondarily, on the underlying collateral provided by the borrower. Most commercial business loans are secured by a lien on general business assets including, among other things, available real estate, accounts receivable, promissory notes, inventory and/or equipment. Personal guaranties from the borrower or other principal are generally obtained.

Purchased Credit Deterioration. Acquired loans, including those acquired in a business combination, are evaluated to determine if they have experienced more-than-insignificant deterioration in credit quality since origination. When the condition exists, these loans are referred to as purchased credit deteriorated, or PCD. An allowance is recognized for a PCD loan by adding it to the purchase price or fair value in a business combination. There is no provision for credit losses recognized upon acquisition of a PCD loan since the initial allowance is established through purchase accounting. PCD loans are grouped with organically created loans in their applicable loan category. After initial recognition, the accounting for a PCD loan follows the credit loss model that applies to the loan category. Purchased financial loans that do not have a more-than-significant deterioration in credit quality since origination are accounted for in a manner consistent with originated loans. An allowance for credit losses is recorded with a corresponding charge to provision for credit losses. Subsequent to the acquisition date, the methods utilized to estimate the required ACL for these loans is similar to the method used for organically originated loans.

Loans are generally charged-off in part or in full when management determines the loan to be uncollectible. Factors for charge-off that may be considered include: repayments deemed to be extended out beyond reasonable time frames, customer bankruptcy and lack of assets, and/or collateral deficiencies. ConsumerSecured consumer credit card balances are movedeligible intofor the charge off queuecharge-off after they become more than 90 days past due. Unsecured consumer credit card balances are eligible for charge-off after they become more than 150 days past due and are charged off not later than 120180 days after they become past due. Otherwise, loans that are past due for 180 days or more are charged off unless the loan is well-secured and in the process of collection.

Management is intent on maintaining a strong credit review function and risk rating process. The Company has an experienced credit administration function, which provides independent analysis of credit requests and the management of problem credits. The credit department has developed and implemented analytical procedures for evaluating credit requests, has refinedadministers the Company’s risk rating system, and continually endeavors to adapt and enhance the monitoring of the loan portfolio. The loan portfolio analysis process is intended to contribute to the identification of weaknesses before they become more severe.

At December 31, 2024,2025, the recorded investment in individually assessed loans was $52.8 million, requiring a specific reserve of $9.9 million, whereas at December 31, 2024 the recorded investment in individually assessed loans was $34.9 million, requiring a specific reserve of $9.3 million. AtThe December$52.8 31,million 2023, the recorded investment inof individually assessed loans wasat $16.0December 31, 2025 included two loan relationships totaling $15.9 million, requiringwith a specificcombined reserve of $0.4$7.2 million.million as of December 31, 2025. The $34.9 million of individually assessed loans at December 31, 2024 included a single multi-unit residential real estate loan secured by four properties with a balance of $7.6 million at December 31, 2024.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended as a review of significant factors affecting the Company’s financial condition and results of operations for the periods indicated. This discussion and analysis should be read in conjunction with the accompanying unaudited consolidated financial statements and the related notes and the Company’s Annual Report on Form 10-K for the year ended December 31, 2025. The results for the three and six months ended MarchJune 31,30, 2026 are not necessarily indicative of the results expected for the year ending December 31, 2026.

•geopolitical conditions, including acts or threats of terrorism, actions taken by the U.S. or other governments in response to acts or threats of terrorism and/or military conflicts, including the ongoing wars in Israel, Iran and Ukraine, which could impact business and economic conditions in the U.S. and abroad;

•changes in Small Business Administration (“SBA”) and U.S. Department of Agriculture (“USDA”) U.S. government guaranteed lending rules, regulations, loan and lease products and funding limits, as well as changes in SBA or USDA standard operating procedures, all of which could impact our ability to originate these types of loans within Capital Bank, N.A. and/or the servicing, processing and packaging by Windsor Advantage™ of such loans on behalf of others;

As of MarchJune 31,30, 2026, the Company and the Bank were in compliance with all applicable regulatory capital requirements to which it was subject, and the Bank was classified as “well capitalized” for purposes of the prompt corrective action regulations. As we deploy our capital and continue to grow our operations, our regulatory capital levels may decrease depending on our level of earnings. However, we intend to monitor and control our growth relative to our earnings in order to remain in compliance with all regulatory capital standards applicable to us.

Net income for the three months ended MarchJune 31,30, 2026 was $12.0$14.3 million, compared to net income of $13.9$13.1 million for the same period in 2025, aan 13.7%8.5% decrease.increase. There were no non-GAAP adjustments to net income of $12.0$14.3 million for three months ended MarchJune 31,30, 2026, a $3.0$44 millionthousand decreaseincrease from net income, as adjusted (non-GAAP) of $14.9$14.2 million for the three months ended MarchJune 31,30, 2025. For more information on the computation of non-GAAP financial measures, see “Non-GAAP Financial Measures and Reconciliations.”

Net interest income increased by $3.4$3.3 million, or 7.3%,6.9%, to $49.4$50.9 million when comparing the three months ended MarchJune 31,30, 2026 to the three months ended MarchJune 31,30, 2025, primarily driven by increased interest income of $4.6$3.8 million from the Commercial Bank due to strongorganic balanceloan sheetgrowth, and $1.5 million from OpenSky™ due to growth from the unsecured loan product offset by $0.9$2.1 million of increased interest expense. The $2.1 million increased interest expense was driven by $1.0 million from higher balances and a shift in deposit mix, $0.8 million of lower purchasePAA, accountingand accretion$0.3 (“PAA”).million of higher borrowing costs.

The provision for credit losses for the three months ended MarchJune 31,30, 2026 was $3.0$3.6 million, ana increasedecrease of $0.8$0.5 million from the same period in 2025. Net charge-offs for the three months ended MarchJune 31,30, 2026 were $3.0$3.8 million, or 0.40%0.50% on an annualized basis of average portfolio loans, compared to $2.4$5.1 million, or 0.38%0.75% on an annualized basis of average portfolio loans for the same period in 2025. Net charge-offs during the quarter included $3.1 million from OpenSky™ loans slightly offset by a net recovery of $0.1 million from Commercial Bank loans. OpenSky™ net charge-offs totaled $3.1 million including $2.3 million related to unsecured credit cards and $0.8 million related to secured and partially secured credit cards.

For the three months ended MarchJune 31,30, 2026, noninterest income of $13.4$14.4 million increased $0.8$1.3 million, or 6.6%,9.6%, from the same period in 2025, primarilydriven due toby a $0.8$1.7 million increase from government loan servicing and packaging revenue.revenue Creditand card fees of $4.7$0.9 million forfrom theloan threeservicing monthsrights, ended March 31, 2026 increased $1.0 million compared to the same period in the prior year primarily due to growth in unsecured product. For the three months ended March 31, 2026, mortgage banking revenue of $1.6 million decreased $0.3 million primarily due toand a $0.2 million increase in mortgage banking revenue, offset by a $1.9 million decrease in gaingovernment onlending sale.revenue.

Noninterest expense was $43.7$43.2 million for the three months ended MarchJune 31,30, 2026, an increase of $5.6$3.6 million from the same period in 2025. The change was primarily driven by increases in professional fees of $2.9$1.7 million, salaries and employee benefits expenses of $2.3 million, data processing expense of $0.7$1.6 million, occupancy and equipment expenses of $0.7$0.9 million, and loan processing expenses of $0.6$0.5 million, and advertising expenses of $0.4 million, offset by decreases in merger-related expenses of $1.3$1.4 million and operating losses of $0.2 million.

The table below presents the average balances and weighted average rates of the major categories of the Company’s assets, liabilities and stockholders’ equity for the three and six months ended MarchJune 31,30, 2026 and 2025. Weighted average yields are derived by dividing annualized income by the average balance of the related assets, and weighted average rates are derived by dividing annualized expense by the average balance of the related liabilities, for the periods shown. Average outstanding balances are derived by utilizing average daily balances for the time periods shown. The weighted average yields and rates include amortization of fees, costs, premiums and discounts, which are considered adjustments to yield/rates. Weighted average yields on tax-exempt securities are not calculated on a fully taxable equivalent basis.

(3)For the three months ended MarchJune 31,30, 2026 and 2025, collectively, Core Loan Yield was 6.93%6.77% and 7.14%, respectively. See “Non-GAAP Financial Measures and Reconciliations” for a reconciliation of non-GAAP measures.

(4)For the three months ended MarchJune 31,30, 2026 and 2025, collectively, Core Net Interest Margin was 4.15%4.04% and 4.36%,4.42%, respectively. See “Non-GAAP Financial Measures and Reconciliations” for a reconciliation of non-GAAP measures.

The net interest margin decreased 3440 basis points to 5.71%5.64% for the three months ended MarchJune 31,30, 2026 from the same period in 2025. Core net interest margin (non-GAAP) decreased to 4.15%4.04% for the three months ended MarchJune 31,30, 2026, compared to 4.36%4.42% for the same period in 2025. For more information on the computation of non-GAAP financial measures, see “Non-GAAP Financial Measures and Reconciliations.”

For the three months ended MarchJune 31,30, 2026, average interest earning assets increased $421.2$456.5 million, or 13.6%,14.4%, to $3.5$3.6 billion as compared to the same period in 2025, but the average yield on interest earning assets decreased to 7.86%,7.75%, a 3844 basis point decrease from 8.24%8.19% for the comparable 2025 periodperiod. The 44 basis point decrease was primarily due to changes in the rate environment, particularly impacting OpenSky™ products. Compared to the same period in the prior year, average interest-bearing liabilities increased $341.9$383.2 million, or 16.9%,18.5%, and the average cost of interest-bearing liabilities decreased to 3.19%,3.11%, a 17 basis point decrease from 3.36%,3.28%, primarily as a result of a shift in the product mix of the portfolio as well as changes in the rate environment.

When comparing the three months ended MarchJune 31,30, 2026 to the three months ended MarchJune 31,30, 2025, the largest positive impact to total interest income was the growth in interest earning assets,assets fromdue to organic growth. Growth (change due to volume) in theThe loan portfolio, excluding credit card loans,loans contributed $6.1$2.8 million toof the $5.4 million increase in interest income.income, with growth (due to change in volume) accounting for a $5.2 million increase in interest income, offset by a $2.4 million decrease as a result of the rate environment. Growth in both secured and unsecured product drove an additional $1.8 million increase in volume for credit card loans. The $1.9$2.1 million increase in interest expense year over year was primarily driven by a $0.9$0.8 million lower benefit from net PAA, $0.7$1.0 million from a shift in deposit mix and $0.3 million of higher borrowing costs.

The ACL as a percent of portfolio loans was 1.81%1.76% at MarchJune 31,30, 2026, as compared to 1.85% at December 31, 2025. The maintenance of a high-quality loan portfolio, with an adequate allowance for expected credit losses, will continue to be a primary objective for the Company. See additional discussion regarding the Company’s ACL and reserve for unfunded commitments credit exposures at MarchJune 31,30, 2026 in “Financial Condition - Allowance for Credit Losses.”

Our primary source of recurring noninterest income are credit card fees, such as interchange fees and statement fees, government guaranteed lending revenue (gain on sale), mortgage banking revenue and Windsor Advantage™ fee revenue in connection with its servicing, processing and packaging of SBA and USDA loans for its financial institution clients, and mortgage banking revenue. Noninterest income does not include (i) loan origination fees to the extent they exceed the direct loan origination costs, which are generally recognized over the life of the related loan as an adjustment to yield using the interest method or (ii) annual, renewal and late fees related to our credit card portfolio, which are generally deferred and recognized over the twelvecorresponding monthtwelve-month lifecardholder ofservice the related loanperiod as an adjustment to yield using the interest method.

For the three months ended MarchJune 31,30, 2026, noninterest income of $13.4$14.4 million increased $0.8$1.3 million, or 6.6%,9.6%, from the same period in 2025. The increase was primarily driven by $1.0 million of increased credit card fees and $0.8$1.7 million of increased government loan servicing and packaging revenue (Windsor Advantage™), $0.9 million of increased loan servicing rights, and $0.2 million of increased mortgage banking revenue, offset by a $0.6$1.9 million decrease in othergovernment income.lending revenue.

Credit card fees of $4.7$4.4 million for the three months ended MarchJune 31,30, 2026 increased $1.0$0.1 million as compared to the three months ended MarchJune 31,30, 2025, primarily as a result of credit-cardgrowth related fees associated within the unsecured product.

Originations of loans held for sale within the Bank’s CBHL division increased $7.1$26.6 million to $72.9$106.9 million in the firstsecond quarter of 2026 when compared to $65.8$80.3 million in the firstsecond quarter of 2025. The gain on sale margin decreasedincreased to 2.85%2.71% for the three months ended MarchJune 31,30, 2026 from 3.07%2.68% for the three months ended MarchJune 31,30, 2025.

Mortgage banking revenue of $1.6$2.0 million decreasedincreased $0.3$0.2 million from the three months ended MarchJune 31,30, 2025, primarily driven by the decreasedincreased gain on sale of $0.2$0.8 million.million, offset by a $0.4 million increase in commissions.

Mortgage loans and USDA/SBA loans sold are subject to repurchase in circumstances where documentation is deficient or the underlying loan becomes delinquent or pays off within a specified period following loan funding and sale. The Bank has established a reserve under GAAP for possible repurchases. The reserve was $2.4$1.5 million at MarchJune 31,30, 2026 and $2.3 million at December 31, 2025, respectively. The Bank did not repurchase any loans during the threesix months ended MarchJune 31,30, 2026 or 2025. The Bank does not originate “sub-prime” mortgage loans and has no exposure to this market segment.

Noninterest expense was $43.7$43.2 million for the three months ended MarchJune 31,30, 2026, as compared to $38.1$39.6 million for the three months ended MarchJune 31,30, 2025, an increase of $5.6$3.6 million. The change included increases of $2.9$1.7 million in professional fees associated with strategic investments in shared service areas and card partnerships for OpenSky™, $2.3$1.6 million of increases in salaries and employee benefits expenses due to headcount growth, $0.7 million in data processing costs related to investments in data infrastructure for OpenSky™ and core processing for the Commercial Bank, $0.7$0.9 million in occupancy and equipment due to an increase in software contracts and the acceleration of depreciation of capitalized assets related to OpenSky™ technology, $0.6$0.5 million in loan processing costs from loan expenses associated with our government guaranteed lending portfolio, and $0.2$0.4 million in other operatingadvertising expenses. The increased spending was slightly offset by decreases of $1.3$1.4 million in merger-related expenses, $0.3 million in advertising,expenses and $0.2 million in operational and other card fraud related losses.

Income tax expense was $3.9$4.2 million and $4.4$8.1 million for the three and six months ended June 30, 2026, respectively, compared to $4.0 million and $8.3 million for the same periods, respectively, in 2025. Our effective tax rate decreased from 23.2% for the three months ended MarchJune 31,30, 20262025 andto 2025, respectively. Our effective tax rate increased from 23.9%22.8% for the three months ended MarchJune 31,30, 20252026 following an updated estimate related to 24.3%the deferred tax liability associated with fixed assets acquired in the IFH acquisition. Our effective tax rate was unchanged at 23.5% for the threesix months ended MarchJune 31,30, 2026 duecompared to anthe increasesame period in nondeductible stock-based compensation expense and nondeductible compensation expense.2025. Additional information regarding the Company’s income taxes are discussed in detail in Note 13 “Income Taxes” in the “Notes to the Consolidated Financial Statements” contained in Part II. Item 8 “Financial Statements and Supplementary Data” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.

Total assets at MarchJune 31,30, 2026 increased $202.3$283.7 million from the balance at December 31, 2025. Net portfolio loans, which exclude mortgage loans held for sale, totaled $3.0$3.1 billion as of MarchJune 31,30, 2026, an increase of $67.0$126.5 million, or 2.3%,4.3%, from $3.0 billion at December 31, 2025. Mortgage loans held for sale decreased $12.1$3.5 million, or 46.8%,13.4%, when comparing the period end balances at MarchJune 31,30, 2026 toand December 31, 2025.

The following tables summarize the contractual maturities, without consideration of call features or pre-refunding dates, and weighted-average yields of investment securities at MarchJune 31,30, 2026 and the amortized cost and carrying value of those securities as of the indicated dates. The weighted average yields were calculated by multiplying the amortized cost of each individual security by its yield, dividing that figure by the portfolio total, and then summing the value of these results to arrive at the weighted average yield. Yields on tax-exempt investments are not calculated on a fully tax equivalent basis.

As described in Note 2 - ''Investment Securities'' in the “Notes to Unaudited Consolidated Financial Statements,” at MarchJune 31,30, 2026, management determined the Company does not have the intent to sell, nor is it more likely than not that it will be required to sell, available-for-sale debt securities in an unrealized loss position at MarchJune 31,30, 2026 before it is able to recover the amortized cost basis. Further, management reviewed the Company’s holdings as of MarchJune 31,30, 2026 and concluded there were no credit-related declines in fair value. Additional information related to the types of securities held at MarchJune 31,30, 2026, other than securities issued or guaranteed by U.S. Government entities or agencies, is as follows:

Corporate Securities – There have been no payment defaults on any of the Company’s holdings of corporate debt securities. There are threetwo securities alleach of which areis subordinated debt of other financial institutions with face amounts ranging from $0.5 million to $2$1 million.

Municipal Securities – All of the Company’s holdings of municipal bonds were investment grade and there have been no payment defaults. Summary ratings information at MarchJune 31,30, 2026, based on the amortized cost basis and reflecting the lowest enhanced or underlying rating by Moody’s, Standard & Poors or Fitch, is as follows: AAA – 76% of the portfolio; AA+ – 24%.

As such, it is deemed the above listed securities are not in an unrealized loss position due to credit-related issues and no further analysis is warranted as of MarchJune 31,30, 2026.

Our primary source of income is derived from interest earned on loans. Our portfolio loans consist of loans secured by real estate as well as commercial business loans, credit card loans and, to a limited extent, other consumer loans. Our loan customers primarily consist of small- to medium-sized businesses, professionals, real estate investors, small residential builders and individuals. Our owner-occupied commercial real estate loans, residential construction loans and commercial business and investmentindustrial loans provide us with higher risk-adjusted returns, shorter maturities and more sensitivity to interest rate fluctuations, and are complemented by our relatively lower risk residential real estate loans to individuals. Our credit card portfolio supplements our traditional lending products with enhanced yields. Our traditional commercial real estate and commercial and industrial lending are principally directed to our market area consisting of the Washington, D.C. and Baltimore, Maryland metropolitan areas.

Commercial Real Estate Loans. Commercial real estate loans are originated on owner-occupied and non-owner-occupied properties. These loans may be adversely affected by conditions in the real estate markets or in the general economy. Business equity lines of credit totaling $4.2$4.9 million as of MarchJune 31,30, 2026 and $3.8 million as of December 31, 2025, are included in the commercial real estate loan category. Business equity lines of credit are commercial purpose lines of credit primarily secured by the business ownersowners’ residential properties. Lender finance loans totaling $43.8$50.0 million as of MarchJune 31,30, 2026 and $41.4 million as of December 31, 2025, are also included in the commercial real estate loan category. Lender finance loans are loans to companies used to purchase finance receivables or extend finance receivables to the underlying obligors and are secured primarily by the finance receivables held by our borrowers. The primary sources of repayment are the operating incomes of the borrowers and the collection of the finance receivables securing the loans. Commercial loans that are secured by owner-occupied commercial real estate and primarily collateralized by operating cash flows are included in the commercial real estate loan category. Commercial real estate loan terms are generally extended for 10 years or less and amortize generally over 25 years or less. The interest rates on commercial real estate loans generally have initial fixed rate terms that adjust typically at five years. Origination fees are routinely charged for services. Personal guarantees from the principal owners of the business are generally required, supported by a review of the principal owners’ personal financial statements and global debt service obligations. The properties securing the portfolio are diverse in type. This diversity may help reduce the exposure to adverse economic events that affect any single industry.

Construction Loans. Construction loans are offered primarily within the Company’s Washington, D.C. and Baltimore, Maryland metropolitan operating areas to builders, primarily for the construction of single-family homes and condominium and townhouse conversions or renovations and, to a lesser extent, to individuals. Construction loans typically have terms of 12 to 18 months. The Company sometimes transitions the end purchaser to permanent financing or re-underwriting and sale into the secondary market through its CBHL division. According to underwriting standards, the ratio of loan principal to collateral value, as established by an independent appraisal, cannot exceed 75% for investor-owned and 80% for owner-occupied properties, although exceptions are sometimes made. The CompanyCompany, as part of its ongoing risk management efforts, performs a stress test of the construction loan portfolio at least once a year, and underlying real estate conditions are monitored as well as trends in sales outcomes versus underwriting valuations as part of ongoing risk management efforts.valuations. The borrowers’ progress in construction buildout is monitored against the original underwriting guidelines for construction milestones and completion timelines.

Credit Cards. Through the OpenSky™ credit card division, the Company offers secured, partially secured, and unsecured credit cards on a nationwide basis to under-banked populations and those looking to rebuild their credit scores through a fully digital and mobile platform. The secured lines of credit are secured by a noninterest-bearing demand account at the Bank in an amount equal to the full credit limit of the credit card. For the partially secured lines of credit, the Bank offers certain customers an unsecured line in excess of their secured line of credit by using a proprietary scoring model, which considers credit score and repayment history (typically a minimum of six months of on-time payments, but ultimately determined on a case-by-case basis). Partially secured and unsecured credit cards are only extended to existing secured card customers who have demonstrated sound credit behaviors. Approximately $90.0$96.0 million and $97.3 million in secured and partially secured credit card balances were protected by savings deposits held by the Company as of MarchJune 31,30, 2026 and December 31, 2025, respectively. Unsecured balances were $46.6$51.2 million and $47.1 million, respectively, at the same dates.

(2)Other non-owner-occupied commercial real estate loans include a land loan of $13.6 million, special purpose loans of $8.6$14.7 million, multi-family loans of $8.5 million, skilled nursing loans of $8.4 million, a land loan of $7.3 million, and other loans of $8.2 million.

At MarchJune 31,30, 2026, the recorded investment in individually assessed loans was $52.0$56.7 million, requiring a specific reserve of $10.0$8.3 million. At December 31, 2025, the recorded investment in individually assessed loans was $52.8 million, requiring a specific reserve of $9.9 million. At March 31, 2026, nonperforming assets were $55.4 million, an increase of $1.0 million from December 31, 2025.

The past due loans balance increased $15.0$26.9 million, from $93.5 million or 3.2% of gross loans as of December 31, 2025 to $108.5$120.4 million or 3.6%3.9% of gross loans as of MarchJune 31,30, 2026. The increase was primarily driven by $9.7$16.7 million of increases in C&I loans and $12.6 million of increases in construction loans. Within C&I loans, one relationship across two loans contributed $21.2 million of the past due loans. The two loans were modified in July 2026, and $3.0payments millionreceived inunder commercialthe realmodification estatebrought loans.the Duringloans management’sto quarterlycurrent reviewstatus itas of the date of this report. Excluding this customer, the past due C&I loans balance as of June 30, 2026, decreased $4.5 million. It was noted thatin the $9.7previous millionquarter increasethat a single relationship for 3 construction real estate loans wasaccounted drivenfor by$9.7 3million loansof fromthe aincrease single relationship that arein 30-59 days past due.due One commercial real estate loan accountedloans, for $1.5which millionconstruction ofhas thestalled. $3.0The millionloans increaseare in both total andnow 90+ days past due loans and isforeclosure attributablesales toare aexpected well-known borrower withon the propertyunderlying pendingproperties. sale.A Further,specific althoughreserve of $0.8 million has been recorded on one of the past due balance for C&I loans decreased $0.8 million, there was a $3.4 million increase in loans 90+ days past due. The increase in loans past due 90 days or more was driven by a single commercial loan relationship with a balance of approximately $3.8 million, of which 80% is guaranteed by the USDA.loans. Management believes the credit remains appropriately monitored and reflected within the allowance for credit losses.

At MarchJune 31,30, 2026, the ACL coverage ratio was 1.81%,1.76%, down 49 bps from December 31, 2025 and flatup 3 bps compared to MarchJune 31,30, 2025.

Total charge-offs for the three months ended March 31, 2026 and 2025 were primarily comprised of credit card charge-offs resulting from the aging of the portfolio and continued growth in the partially secured and unsecured card portfolio. The following tables present a summary of the net charge-offs (recovery) of loans as a percentage of average loans for the periods indicated:

As the loan portfolio and ACL review processes continue to evolve, there may be changes to elements of the allowance and this may influence the overall level of the allowance maintained. Historically, the Bank has maintained a high-quality loan portfolio with relatively low levels of net charge-offs and low delinquency rates. The maintenance of a high-quality portfolio will continue to be a priority.

(1)LoanAllowance for reserve amount for each loan category shown as a percentage of allowance for credit losses for total portfolio loans.

Total liabilities at MarchJune 31,30, 2026 increased $195.2$263.3 million from December 31, 2025, due to growth in the deposit portfolio of $198.8$277.9 million.

Deposits are a major source of funding for the Company. We offer a variety of deposit products including noninterest-bearing demand, interest-bearing demand, savings, money market and time accounts, all of which we actively market at competitive pricing. We generate deposits from our customers on a relationship basis and through the efforts of our commercial relationship managers. Our credit card customers are a significant source of low cost deposits. As of MarchJune 31,30, 2026 and December 31, 2025, our credit card customers accounted for $165.5$166.2 million and $163.2 million, or 19.0%18.5% and 19.1%, respectively, of our total noninterest-bearing deposit balances.

The Company had $303.1$231.0 million in brokered deposits at MarchJune 31,30, 2026 compared to $376.7 million at December 31, 2025.

Deposits securing our OpenSky™ card lines of credit and deposits from title companies represent the largest product concentrations in the deposit portfolio. As of MarchJune 31,30, 2026, these product concentrations represented 5% and 11%13% of deposits, respectively. As of December 31, 2025, these deposits represented 5% and 10% of deposits, respectively.

Deposit costs decreasedincreased 1310 basis points during the threesix months ended MarchJune 31,30, 2026, as compared to the year ended December 31, 2025, primarily driven by a shift in the product mix of the portfolio and changes in the rate environment.environment and shift in product mix, primarily growth from customer money market deposits with offsetting activity across other deposit products.

Noninterest-bearing deposits represented 26.5%26.6% of total deposits at MarchJune 31,30, 2026 compared to 27.57% at December 31, 2025. Insured and protected deposits (including deposits that are indirectly protected under the product terms) were approximately $2.3$2.2 billion as of MarchJune 31,30, 2026, representing 69.4%66.6% of the Company’s deposit portfolio. The insured and protected amounts are estimates based on the methodologies and assumptions used for the Bank’s regulatory reporting requirements.