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

Our financial performance generally, and in particular the ability of borrowers to pay interest on and repay principal of outstanding loans and the value of collateral securing those loans, as well as demand for loans and other products and services we offer, is highly dependent upon the business environment in the primary markets where we operate and in the U.S. as a whole. This business environment has been significantly impacted in recent periods by changing inflation and monetary policy. For example, high inflation in 2021 through 2023 resulted in the Federal Reserve raising target interest rates, on a cumulative basis, by 525 basis points between March 2022 and July 2023, causing increases in the costs of credit, capital and deposits, limitations on the availability of credit and capital, and decreasing the market value of our investment securities portfolio. In response to generally declining inflation during 2023 and 2024, the Federal Reserve decreased target interest rates from September to December 2024, on a cumulative basis, by 100 basis points. The Federal Reserve issued another series of rate cuts from September to December 2025, decreasing target interest rates by 75 basis points on a cumulative basis. New appointments to the Federal Reserve’s Board of Governors or increased political pressures on the Federal Reserve could result in changes to monetary policy and interest rates. Our business may also be adversely affected by declines in economic growth, business activity, investor or business confidence; declines in real estate values; unemployment; rising domestic political tensions, such as uncertainty caused by the transition to a new Presidential administration in 2025tensions; risks of government shutdowns; natural disasters; the emergence or worsening of widespread public health challenges or pandemics such as the COVID-19 pandemic; or a combination of these or other economic, political and business factors.

In addition, new or rising geopolitical tensions including those resulting from the wars and violence in Ukraine and Israel and surrounding areas, along with other instances of violence, acts of terrorism and political unrest, can result in disruptions in or volatility in the economy and in financial and commodity markets in the U.S. and globally, disruptions in international trade patterns, and slow growth or declines in economic sectors of the global and U.S. economies. Changes in U.S. trade policies may also adversely impact our business and operations. For example, changes in tariffs imposed or threatened to be imposed by the new Presidentialcurrent administration may cause inflation,inflation and other economic volatility, which can adversely affect our business as discussed elsewhere in this report.

The majority of our assets and liabilities are monetary in nature and, as a result, we are subject to significant risk from changes in interest rates. Changes in interest rates may affect our net interest income as well as the valuation of our assets and liabilities. We cannot predict with certainty changes in interest rates, which are affected by many factors beyond our control, including inflation, recession, unemployment, money supply, competition for loans and deposits, domestic and international events, changes in the U.S. and other financial markets, and the policies of the Federal Reserve. Inflation increased rapidly during 2021 through June 2022. After June 2022, the rate of inflation generally declined; however, it began increasing in the later part of 2024 and has remained higher than the Federal Reserve’s target rate of inflation of two percent. The inflationary outlook in the U.S. remains uncertain. The Federal Reserve raised the federal funds target rate multiple times from March 2022 through July 2023, by 525 basis points on a cumulative basis. Between September 2024 and December 2024, the Federal Reserve lowered the federal funds target rate by 100 basis points on a cumulative basis. The Federal Reserve conducted another series of rate cuts between September 2025 through December 2025, lowering the federal funds target rate by 75 basis points on a cumulative basis.

High interest rates in 2023 and 2024 caused interest expense on deposits to increase significantly in 2023 and 2024, putting pressure on our net interest margin. Our cost of interest-bearing deposits rose to 3.38% in 2024 from 2.49% in 20232023. andWhile 0.42%the cost of deposits has decreased slightly to 3.04% in 2022.2025, it still remains elevated.

We may experience additional pressure on our net interest margin during 20252026 if our cost of funds increases faster than the yield on our interest-earning assets.assets decreases faster than the cost of funds. Additionally, due in large part to higher interest rates and market volatility during 20232024 and 2024,2025, gross unrealized losses in our AFS investment securities portfolio totaled $46.4 million at December 31, 2025 and $61.7 million at December 31, 2024 and $57.7 million at December 31, 2023.2024. These losses may continue or worsen during 2025,2026, and we may experience realized losses in our portfolio.

Although our asset-liability management strategy is designed to control and mitigate exposure to the risks related to changes in the general level of market interest rates, we may not be able to accurately predict the likelihood, nature and magnitude of those changes or how and to what extent they may affect our business. We also may not be able to adequately prepare for or compensate for the consequences of such changes. Significant increasesfluctuations in interest rates, as occurred infrom 2022 andthrough 2023,2025, makes our business and our balance sheet more challenging to manage. Any failure to predict and prepare for changes in interest rates or adjust for the consequences of these changes may adversely affect our earnings and capital levels. For additional information, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Risk Management – Interest Rate Risk.

Liquidity is essential to our business. Liquidity risk is the potential that we will be unable to meet our obligations as they come due because of an inability to liquidate assets or obtain adequate funding. The primary source of the Bank’s funds are customer deposits, loan repayments and investment securities maturities or sales, while borrowings are a secondary source of liquidity. We also use brokered deposits from time to time and our use of brokered deposits increased over the last two years.time. Brokered deposits tend to be more sensitive to changes in interest rates than other types of deposits and therefore can be a more expensive and uncertain source of funds. The Bank’s liquidity could be adversely impacted if rates offered by the Bank were less than those offered by other institutions seeking brokered deposits, or if such depositors were to perceive a decline in the Bank’s safety or soundness. Additionally, we must maintain our well-capitalized status in order to accept brokered deposits without prior regulatory approval. Our access to deposits and other funding sources in adequate amounts and on acceptable terms is affected by a number of factors, including rates paid by competitors, returns available to customers on alternative investments, customer confidence in the safety of uninsured deposits and general economic conditions. Any decline in available funding could adversely impact our ability to originate loans, invest in securities, meet our expenses, pay dividends to our shareholders, or to fulfill obligations such as repaying our borrowings or meeting deposit withdrawal demands, any of which could have a material adverse impact on our business, financial condition, results of operations and long-term growth prospects.

The highly-publicized failures of Silicon Valley Bank, Signature Bank and First Republic Bank during the first half of 2023 caused significant disruptions in the banking industry. These industry developments negatively impacted overall customer confidence in the safety of their deposits, particularly uninsured deposits, at some regional banks. As a result, some customers moved deposits to, or maintained deposits with, larger financial institutions or moved funds to investment alternatives outside the banking industry. The rapid failures of these large banks highlighted risks associated with advancesAdvances in technology that increase the speed at which information, concerns and rumors can spread through traditional and new media andcan increase the speed at which deposits can be moved from bank to bank or outside the banking system, heightening liquidity concerns of traditional banks. Regulators and the largest U.S. banks tookhave taken steps designed to increase liquidity at regional banks and strengthen depositor confidence in the broader banking industry, including the Bank Term Funding Program discussed elsewhere in this report and measures to protect uninsured deposits from loss; however, there are no guarantees that such steps would be implemented in the future if a similar disruption in the industry were to occur. For more information on the Company’s deposits and liquidity position, see Part I. Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations under the headings “Certain Events That Affect Period-over-PeriodYear-over-Year Comparability,” “Discussion and Analysis of Financial Condition – Deposits” and “Liquidity and Capital Resources.” Concerns about liquidity in the banking industry and the safety of uninsured deposits that may result from similar events in the future may materially adversely impact our liquidity, cost of funds, loan funding capacity, net interest margin, capital and results of operations.

As noted above, inflation increased rapidly during 2021 and continued rising through June 2022. After June 2022, the rate of inflation generally declined; however, it began increasing in the later part of 2024 andthrough January 2025. The rate of inflation subsequently declined through April 2025, followed by a cumulative increase through year-end 2025. It has remained at elevated levels compared to the Federal Reserve’s target rate of inflation of two percent. Inflation increases our borrowers’ costs of living and costs of doing business, which may make it more difficult for them to repay their loans, increasing our credit risk. Inflation also increases many of our operating costs, including the costs of goods and services we purchase and the costs of salaries and benefits. We believe that higher rates resulting from inflation and related factors led to constrained loan demand duringin 2023 and 2024.2024, and to a lesser extent in 2025. When the rate of inflation accelerates, there is an erosion of consumer and customer purchasing power. Accordingly, if the rate of inflation accelerates in the future, this could impact our business by reducing our tolerance for extending credit, and our customer’s desire to obtain credit, or causing us to incur additional provisions for credit losses resulting from a possible increased default rate. Inflation and related higher rates have led and may continue to lead to lower loan re-financings. In addition, inflation led to the Federal Reserve raising interest rates during 2022 and 2023, as discussed above.

Our allowance for credit losses may prove to be insufficient to absorb losses inherent in our loan portfolio, and we may be required to further increase our provision for credit losses. This risk may be heightened by our adoption of the Current Expected Credit Loss accounting standard effective January 1, 2023. If our actual credit losses exceed our allowance for credit losses, our net income will decrease.

Our long-term business strategy includes both organic growth and the continuation of our multi-state growth plans, and our financial condition and results of operations could be negatively affected if we fail to grow or fail to manage our growth effectively.

InOur additionstrategy tofocused organicon growth,consistent, wequality have grown our business through de novo branching andearnings through the acquisitionoptimization of otherour financialbalance institutionssheet andmay branchnot locations.be Wesuccessful havein completed seven whole-bank acquisitions since 2011 and regularly review acquisition opportunities. We have also expandedincreasing our operations outside our historical south Louisiana base and into Texas and Alabama.profitability. Over the long-term, we intend to pursue a multi-state growth strategy for our business primarily through attractive acquisition opportunities as well as continue to pursue organic growth throughout our franchise. We have grown our business through de novo branching and through the acquisition of other financial institutions and branch locations, and we have expanded our operations outside our historical south Louisiana base and into Texas and Alabama. Our long-term growth prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies when expanding their franchise, including the following:

In recent periods, we have focused on enhancing our online banking platform and plan to continue to introduce new technologies, with the goal of delivering products and services more efficiently with fewer branches and people. We closed fourtwo branches during our last three fiscal years. TwoOne of the branches had been acquired, and the closures involved anticipated synergies that resulted in significant cost savings. In 2022, we sold five former branch locations and three tracts of land that were being held for future branch locations. In 2023, we completed the sale of certain assets, deposits and other liabilities associated with two of our Texas branches in order to focus more on our core markets. Of the Bank’s entire branch network, these two locations were geographically the most distant from our Louisiana headquarters. We also ceased operation of 14 ATMs in 2023. In January 2024 we closed a branch in our Alabama market. We could incur material losses in the future due to the closure or consolidation of branches or sale of land held for future branch locations.

Our business is concentrated in southern Louisiana, southeast Texas, and Alabama, and an economic downturn affecting these areas may magnify the adverse effects and consequences to us.

We currently conduct our operations primarily in southern Louisiana, and more specifically, in the Baton Rouge, New Orleans, Lafayette and Lake Charles metropolitan areas, in the greater Houston, Texas area, and in Alabama. As of December 31, 2024,2025, our primary markets were south Louisiana (approximately 78%77% of our total deposits of $2.3$2.4 billion), southeast Texas (approximately 6% of our total deposits) and Alabama (approximately 16%17% of our total deposits). At December 31, 2024,2025, approximately 59%,64%, 6%,13%, and 4% of the secured loans in our total loan portfolio were secured by properties and other collateral located in Louisiana, Texas and Alabama, respectively.

This geographic concentration imposes a greater risk to us than to our competitors in the area who maintain significant operations outside of our selected markets. Accordingly, any regional or local economic downturn, or natural or man-made disaster, that affects southern Louisiana, southeast Texas, Alabama, or existing or prospective property or borrowers in such areas may affect us and our profitability more significantly and more adversely than our more geographically diversified competitors.

Certain industry-specific economic factors may also adversely affect us. For example, the energy sector, which is historically cyclical, has experienced significant volatility in oil and gas prices. While we consider our direct exposure to the energy sector not to be significant, comprising approximately 2.1%4.7% of total loans at December 31, 2024,2025, continued oil price volatility could have further negative impacts on general economic conditions, particularly in our south Louisiana and southeast Texas markets, which could have a material adverse effect on our business, financial condition, and results of operations.

Commercial and industrial loans primarily consist of working capital lines of credit and equipment loans, typically secured by accounts receivable or inventory, or the relevant equipment. Repayment of these loans generally comes from the generation of cash flow as the result of the borrower’s business operations. Commercial lending generally involves different risks from those associated with commercial real estate lending or construction lending. Although commercial loans may be collateralized by business assets (including real estate, if available as collateral), the repayment of these types of loans depends primarily on the creditworthiness and projected cash flow of the borrower (and any guarantors). Thus, the general business conditions of the local economy and the borrower’s ability to sell its products and services, thereby generating sufficient operating revenue to repay us under the agreed upon terms and conditions, are the chief considerations when assessing the risk of a commercial and industrial loan. The liquidation of collateral, if any, is considered a secondary source of repayment because equipment and other business assets may, among other things, bedeteriorate, become obsolete or be of limited resale value. Additionally, as of December 31, 20242025, 56%62% of our commercial and industrial loans were variable rate loans; rising interest rates increase interest payments due on such loans and may increase the risk of default by the borrower, whereas declining interest rates will decrease the interest we earn on the loans.

We have been increasing the proportion of commercial and industrial loans in our loan portfolio. Our commercial and industrial loans represented 20.7%,24.6%, 24.6%24.8% and 24.8%27.4% of total loans as of December 31, 2022,2023, 20232024 and 2024,2025, respectively. The increase from year-end 2022 to year-end 2023 was caused primarily by our purchase of commercial and industrial revolving lines of credit which, at the time of the loan purchase agreement, had an unpaid principal balance of approximately $163 million and total commitments of approximately $238 million, as described in more detail elsewhere in this report. The acquired loans areLoans to consumer finance lending companies.companies accounted for approximately 8% of our total loans at December 31, 2025. The repayment of consumer finance loans depends primarily on the creditworthiness and projected cash flow of the borrower (and any guarantors). Thus, the primary risks associated with these types of loans are the general business conditions of the local economy, and the ability to generate sufficient operating revenue to repay us under the agreed upon terms and conditions. Loans to consumer finance lending companies accounted for approximately 8% of our total loans at December 31, 2024.

Deposits have historically been a low cost and stable source of funding. We compete with banks and other financial institutions for deposits. Funding costs could increase if the Company loses deposits and replaces them with more expensive sources of funding, if customers shift their deposits into higher cost products, or if the Company needs to raise its interest rates to avoid losing deposits. Higher funding costs reduce the Company’s net interest margin, net interest income and net income. As interest rates began to rise significantly during 2022, competition for deposits increased, and the Bank raised rates it offered on deposits to remain competitive in its markets. During 2023, interest rates continued to rise, and they remained high in 2024.2024 and 2025. Customers continued to shift into interest-bearing deposit products, and we utilizedcontinued moreto utilize brokered time deposits. These factors contributed to an increase in our total cost of deposits by 207 basis points from 2022 to 2023 and 89 basis points from 2023 to 2024. Our cost of deposits decreased by 34 basis points to 3.04% in 2025, but remained elevated. Disruptions in the banking industry during the first half of 2023 discussed elsewhere in this report highlighted the speed at which deposits can be moved from bank to bank or outside the banking system, heightening liquidity concerns of traditional banks. Any further increases in interest rates, sustained high interest rates or any new events producing concerns among customers about the safety of uninsured deposits could further increase our cost of deposits or cause us to lose deposits, which would increase our costs of funds and reduce net income.

Our success depends significantly on the continued service and skills of our executive management team. The implementation of our business strategies also depends significantly on our ability to retain employees with experience and business relationships within their respective market areas, as well as on our ability to attract, motivate and retain highly qualified senior and middle management. Competition for employees is intense. Competition for talent is intense. We could have difficulty replacing key employees with personnel with the combination of skills and attributes required to execute our business strategies and who have ties to the communities within our market areas. The loss of any of our key personnel could therefore have a material adverse effect on our business, financial condition, results of operations and ability to successfully execute our business strategy.

Our business is concentrated in southern Louisiana, in southeast Texas, and in Alabama. Our selected markets are susceptible to major hurricanes, floods, tropical storms, tornadoes and other natural disasters and adverse weather, the nature and severity of which can be difficult to predict. These natural disasters can disrupt our operations, cause widespread property damage, and severely depress the local economies in which we operate. For example, the historic flooding of Baton Rouge and surrounding areas in August 2016 had significant impacts in several markets in which we conduct business. Hurricane Harvey caused significant damage and flooding in Texas when it made landfall in August 2017. Hurricane Ida, which made landfall as a category 4 hurricane in Louisiana in August 2021, caused significant damage in the southern part of the state and also disrupted operations for certain of our customers. We recognized a material impairment related to a lending relationship with a group of related borrowers (the “Borrower”), collateralized by commercial real estate, inventory, and equipment. As a result of Hurricane Ida, the Borrower’s business operations were disrupted, and due to this impact on the Borrower’s operations, certain of the collateral supporting the loan relationship experienced a significant reduction in value. Hurricane Francine made landfall in Louisiana in September 2024 as a Category 2 hurricane. The severity and impact of future severe weather events are difficult to predict and may be exacerbated by global climate change. The 2010 Deepwater Horizon oil spill in the Gulf of Mexico illustrated that man-made disasters can also adversely affect economic activity in the markets in which we operate. Any economic decline as a result of a natural disaster, adverse weather, oil spill or other man-made disaster can reduce the demand for loans and our other products and services.

Our industry is undergoing rapid technological changes with frequent introductions of new technology-driven products and services, including those using AI. Our ability to compete successfully to some extent depends on whether we can implement new technologies to provide products and services to our customers more efficiently while avoiding significant operational challenges that increase our costs or delay full implementation, especially relative to our peers, many of which have greater resources to devote to technological improvements. The development and use of new technologies presentspresent a number of risks and challenges to our business. For example, we must have or develop in-house capabilities to implement, manage and use the new technologies, or outsource the implementation, management and use of the new technologies to third parties, and develop appropriate internal controls and third-party oversight. In particular, the business, legal and regulatory environment relating to AI is uncertain and rapidly evolving, and could require changes in our approach to AI technology and increase our compliance costs and the risk of non-compliance. The use of AI may also increase our exposure to cyberattacks or other security risks, as discussed further below.

In addition to the liquidity that we require to conduct our day-to-day operations, the Company, on a consolidated basis, and the Bank, on a stand-alone basis, must meet regulatory requirements. Also, we may need capital to finance our long-term growth, including through acquisitions. For example, in 2019, we sold $25.0 million of subordinated notes structured to qualify as Tier 2 capital, and $30.0 million of common stock, in part to fund acquisitions. In 2025, we issued $32.5 million of our Series A Preferred Stock to support the acquisition of WFB and for general corporate purposes, including organic growth and other potential acquisitions. If the Bank’s regulators deemed its capital levels to be too low for safety and soundness reasons or if the Bank were to be designated as “undercapitalized” or in a lower capitalization category than “undercapitalized,” it could be required to raise additional capital. For additional information, see Item 1. Business -– Regulatory Capital Requirements -– Prompt Corrective Action Regulations.

Our ability to raise additional capital depends on conditions in the capital markets, economic conditions and a number of other factors, including investor perceptions regarding the banking industry, market conditions and governmental activities, and on our financial condition and performance. Rising interest rates increased our costs of long-term debt in 2022, 2023, and 2024. Further increases in interest rates would increase the costs of our variable rate borrowings. There can be no assurances that we will be able to raise additional capital if needed or on terms acceptable to us. If we fail to maintain capital to meet regulatory requirements, our business, financial condition, results of operations and long-term growth prospects could be materially and adversely affected.

We face substantial competition in all areas of our operations from a variety of different competitors, many of which are larger and have substantially greater resources than we have, including higher total assets and capitalization, a more extensive and established branch network, greater access to capital markets and a broader offering of financial services. Such competitors primarily include national, regional and community banks within the various markets in which we operate. Because of their scale, many of these competitors can be more aggressive than we can on loan and deposit pricing. We also face competition from many other types of financial institutions, including savings and loans, credit unions, finance companies, brokerage firms, insurance companies, factoring companies and other financial intermediaries. Many of these entities have fewer regulatory constraints and may have lower cost structures than we do. There has been an increasing trend of credit unions acquiring banks. Credit unions are tax-exempt entitiesentities, which provides an advantage when pricing loans and deposits. The acquisition of banks by credit unions may increase competition for customers and acquisitions.

We are exposed to many types of operational risks, including, particularly as a financial institution, fraud risks and human error. Our fraud risks include fraud committed by external parties against the Companyus or our customers, fraud committed internally by our associates and fraud committed by customers. Certain fraud risks, including identity theft and account takeover, may increase as a result of customers’ accounts or personally identifiable information being obtained through breaches of retailers’ or other third parties’ networks. Fraud attacks against us and other companies in the financial services industry, and against our customers when engaged in financial transactions, have increased in recent years and have become more sophisticated, including through the use of AI, and more difficult to detect. There has been a significant increase in check fraud in which checks are stolen in the mail and fraudulently deposited into the criminal’s account. We expect that detecting and preventing fraud, and remediating losses caused by fraud, will continue to require ongoing and potentially increased attention and investment. There are inherent limitations to our risk management strategies, as there may exist, or develop in the future, risks that we have not appropriately anticipated, monitored or identified. If our risk management framework proves ineffective, we could suffer unexpected losses, we may have to expend resources detecting and correcting the failure in our systems and we may be subject to potential claims from third parties and government agencies. We may also suffer severe reputational damage. Any of these consequences could materially and adversely affect our business, financial condition or results of operations.

We determine impairment by comparing the implied fair value of the reporting unit goodwill with the carrying amount of that goodwill. If the carrying amount of the reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. Any such adjustments are reflected in our results of operations in the periods in which they become known. As of December 31, 2024,2025, our goodwill totaled $40.1 million.million, and we expect to record additional goodwill in connection with our acquisition of WFB. While we have not recorded any such impairment charges since we initially recorded the goodwill, there can be no assurance that our future evaluations of goodwill will not result in findings of impairment and related write-downs, which may have a material adverse effect on our financial condition and results of operations.

We are subject to extensive regulation and supervision under federal and state banking laws and regulations that govern almost all aspects of our operations, including, among other things, our lending practices, deposit-taking practices, capital structure, investment practices, dividend policy, operations and growth. The level of regulatory scrutiny that we are subject to may fluctuate over time, based on numerous factors, including as a result of changes in the political administrations. These laws and regulations, and the supervisory framework that oversees the administration of these laws and regulations, are primarily intended to protect consumers, depositors, the Deposit Insurance Fund and the banking system as a whole, and not shareholders and counterparties. Furthermore, new proposals for legislation continue to be introduced in the U.S. Congress that could further substantially increase regulation of the financial services industry, and impose restrictions on our operations and our ability to conduct business consistent with historical practices, which could have a material adverse effect on our business, financial condition, results of operations and growth prospects. Our efforts to comply with new laws, regulations and standards typically result in increased expenses and a diversion of managementmanagement’s time and attention. The information under the heading “Supervision and Regulation” in Item 1. Business,Business provides more information regarding the regulatory environment in which we and the Bank operate.

The ECOA, the Fair Housing Act and other fair lending laws and regulations impose nondiscriminatory lending requirements on financial institutions. The Department of Justice and other federal agencies enforce these laws and regulations, but private parties may also have the ability to challenge an institution’s performance under fair lending laws in private class action litigation. If an institution’s performance under the fair lending laws and regulations is found to be deficient, the institution could be subject to damages and civil money penalties, injunctive relief, restrictions on mergers and acquisitions activity,acquisitions, restrictions on expansion, and restrictions on entering new business lines, among other sanctions. In addition, the OCC’s assessment of our compliance with the CRA is taken into account when evaluating any application we submit for, among other things, approval of the acquisition or establishment of a branch or other deposit facility, an office relocation, a merger with or the acquisition of another financial institution. Our failure to satisfy our CRA obligations could, at a minimum, result in the denial of such applications and limit our growth.

The Bank Secrecy Act, the USA PATRIOT Act of 2001, and other laws and regulations require financial institutions, among other duties, to institute and maintain an effective anti-money laundering program and file suspicious activity and currency transaction reports as appropriate. The federal Financial Crimes Enforcement Network is authorized to impose significant civil money penalties for violations of those requirements and has recently engaged in coordinated enforcement efforts with the individual federal banking regulators, as well as the U.S. Department of Justice, Drug Enforcement Administration and Internal Revenue Service. We are also subject to increased scrutiny of compliance with the rules enforced by the Office of Foreign Assets Control. If our policies, procedures and systems are deemed deficient, we would be subject to liability, including fines and regulatory actions, which may include restrictions on our ability to pay dividends and the necessity to obtain regulatory approvals to proceed with certain aspects of our business plan, including our acquisitiongrowth plans. Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have serious reputational consequences for us. Any of these results could materially and adversely affect our business, financial condition, results of operations and growth prospects.

Fintech developments, such as stablecoins, bitcoin or other types of cryptocurrency and the development of alternative payment systems such as Venmo and PayPal, have the potential to disrupt the financial industry and change the way banks do business. Our success depends on our ability to adapt to the pace of the rapidly changing technological environment, which is crucial to retention and acquisition of customers. On July 31, 2018,Under the OCCcurrent announced it would grant limited-purpose national bank charters to fintech companies that offer bank products and services. The federal charter would allow fintech companies to operate nationwide under a single set of national standards, without needing to seek state-by-state licenses or joining with brick-and-mortar banks, which could have the effect of allowing fintech companies to more easily compete with us for financial products and services in the communities we serve. At present, the future of the OCC limited-purpose fintech charter is unclear. To date,administration, the OCC has notgenerally been more open and supportive of charter applications in the digital assets space. For example, in December 2025, the OCC approved anyfive suchnational charterstrust bank charter applications for applicants that will primarily engage in fiduciary activities related to digital assets, and eachcertain applicationrelated forcustodial aactivities. Several of the charter hasrecipients been met with a lawsuit challenging the OCC’s authorityplan to issue suchstablecoins. charters.Additional fintech-related charter applications are pending.

Shares of our common stock eligible for future sale, including those that may be issued in any private or public offering of our common stock, as consideration in acquisition transactions, or as incentives under incentive plans, could adversely affect market prices for our common stock. As of December 31, 2024,2025, we had 9,828,4139,798,948 shares outstanding and 260,602226,602 shares subject to options granted under our incentive plan. Our Series A Preferred Stock is also convertible into our common stock. Because our outstanding shares of common stock either were issued in an offering registered under the Securities Act or have been held for more than one year, such shares are freely tradable, except for shares held by our affiliates (approximately 6%7% of shares outstanding as of December 31, 20242025) and 323,820337,735 shares that represent unvested restricted shares under our incentive plan. Shares issued under our incentive plan will be available for sale into the public market, except for shares held by our affiliates. Shares held by our affiliates may be resold subject to the restrictions in Rule 144 of the Securities Act. In the future, we may issue additional shares of common stock to raise capital for growth or as consideration in acquisition transactions or for other purposes, and such shares may be registered under the Securities Act and freely tradable or may be issued in a private placement and registered for resale under the Securities Act.

Our issuanceSeries ofA preferredPreferred stockStock could adversely affect our liquidity, financial condition and holders of our common stock and discourage a takeover.stock.

Our shareholders authorized our Board to issue up to 5,000,000 shares of “blank check” preferred stock without any further action on the part of our shareholders. The Board also has the power, without shareholder approval, to set the terms of any series of preferred stock that may be issued, including voting rights, dividend rights, preferences over our common stock with respect to dividends or in the event of a dissolution, liquidation or winding up and other terms. InAs of the eventdate thatof wethis issuereport, preferred32,500 stockshares inof theour futurenewly thatdesignated hasSeries preferenceA Preferred Stock are outstanding. Holders of our Series A Preferred Stock have certain rights and preferences over our common stockstock, withincluding respectbut tonot limited to, payment of dividendsdividends, orpayment upon our liquidation, dissolution or winding up, orand ifsuch weshares issueare preferredconvertible stockinto with voting rights that dilute the voting powershares of our common stock,stock upon the rightsoccurrence of certain events, subject to the terms and conditions of such Series A Preferred Stock. See Note 13. Stockholders’ Equity and “—Our Series A Preferred Stock could adversely affect our liquidity, financial condition and holders of our common stock” orabove thefor marketadditional priceinformation ofregarding our commonSeries stockA couldPreferred be adversely affected. In addition, the ability of our Board to issue shares of preferred stock without any action on the part of our shareholders may impede a takeover of us and prevent a transaction perceived to be favorable to our shareholders.Stock.

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

During 2023, we pivoted our near-termOur strategy from primarily a growth strategy to primarily a focusfocuses on consistent, quality earnings through the optimization of our balance sheet. Our strategy includes a focus on originating and renewing high quality, primarily variable-rate, loans and allowing higher risk credit relationships to run off. We have kept duration short on our liabilities to provide flexibility to secure lower cost funding that was accretive to our net interest margin. Our near-term strategy includes continuing to consider acquisitions on an opportunistic basis. Our long-term strategyalso includes organic growth through high quality loans and growth through acquisitions, including whole-bank acquisitions, strategic branch acquisitions and asset acquisitions. We have completed seveneight whole-bank acquisitions since 2011 and regularly review acquisition opportunities. Our most recent whole bank acquisition was completed in AprilJanuary 2021.2026. WeFor openedadditional ainformation, loansee andItem deposit1. productionBusiness office– inAcquisition ourActivity Texas– marketRecent in the first quarter of 2024 and converted it to a full-service branch location in the fourth quarter of 2024. Additionally, in the third quarter of 2023, we converted an existing loan and deposit production office in Tuscaloosa, Alabama to a cashless branch designed to provide a digital banking experience. During the third and fourth quarters of 2023, we purchased commercial and industrial revolving lines of credit with an unpaid principal balance of $162.7 million in two tranches.Acquisitions.

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

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

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

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

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

Hurricane Ida. On August 29, 2021, Hurricane Ida hit the Louisiana coast as a category 4 hurricane. Though Hurricane Ida did not cause significant physical damage to our branch locations, the storm devastated some of our market areas. The Company set up programs to help employees and customers experiencing financial difficulty as a result of the hurricane, including a deferral program. Additionally, the Company recorded an impairment charge of $21.6 million in the third quarter of 2021 related to a lending relationship with related borrowers (collectively, the “Borrower”) consisting of multiple loans secured by various types of collateral, including real estate, inventory, and equipment. As a result of Hurricane Ida’s impact on the Borrower’s business operations, some of the collateral securing the loan relationship, including real estate, inventory, and equipment, experienced a significant reduction in value. Since the third quarter of 2021, as of December 31, 2024, we have recorded net recoveries related to this loan relationship of $2.5 million, substantially all of which were in 2023. Additionally, during 2024, we recorded a gain on sale of other real estate owned of $0.7 million and noninterest income of $1.1 million from a legal settlement related to this loan relationship.

Subordinated Debt IssuanceRepurchases and Redemptions. InDuring Aprilthe 2022,first quarter of 2024, we completedrepurchased a private placement of $20.0$1.0 million in aggregate principal amount of our 2032 Notes. InDuring Junethe 2022,second quarter of 2024, we usedrepurchased the majority of the proceeds to redeem $18.6$5.0 million in principal amount of our 20272029 Notes. We utilized the remaining proceeds for share repurchasesNotes and for$2.0 generalmillion corporatein purposes.principal amount of our 2032 Notes. During the fourth quarter of 2024, we redeemed all of the remaining $20.0 million in principal amount of the 2029 Notes. As of December 31, 2025 and December 31, 2024, our outstanding subordinated debt consisted of $17.0 million in principal amount of our 2032 Notes.

The Bank commenced operations in 2006, and we completed our initial public offering in July 2014. On July 1, 2019, the Bank changed from a Louisiana state bank charter to a national bank charter, and its name changed to Investar Bank, National Association. Through the Bank, we provide full banking services, excluding trust services, tailored primarily to meet the needs of individuals, professionals, and small to medium-sized businesses. Our primary areas of operation are south Louisiana, including Baton Rouge, New Orleans, Lafayette, Lake Charles, and their surrounding areas; Texas, including Houston and its surrounding area, and, as of January 1, 2026, north Dallas and Wichita Falls and their surrounding areas; and Alabama, including York and Oxford and their surrounding areas. At MarchJune 31,30, 2026, we operated 36 full service branches comprised of 20 full service branches in Louisiana, ten full service branches in Texas, and six full service branches in Alabama.

Changing Inflation and Interest Rates. During 2025, beginning in September 2025, the Federal Reserve reduced the federal funds target rate three times by 75 basis points on a cumulative basis to 3.50% to 3.75%. Accordingly, the prevailing federal funds target rate for the three and six months ended MarchJune 31,30, 2026 was lower than for the three and six months ended MarchJune 31,30, 2025.

Total assets increased $1.04$1.03 billion, or 36.8%,36.3%, to $3.88$3.86 billion at MarchJune 31,30, 2026, compared to $2.83 billion at December 31, 2025. The acquisition of WFB increased total assets by $1.15 billion on January 1, 2026. For the three months ended MarchJune 31,30, 2026, net income available to common shareholders was $11.5$8.9 million, or $0.77$0.61 per diluted common share, compared to net income available to common shareholders of $6.3$4.5 million, or $0.63$0.46 per diluted common share, for the three months ended MarchJune 31,30, 2025. For the six months ended June 30, 2026, net income available to common shareholders was $20.4 million, or $1.38 per diluted common share, compared to net income available to common shareholders of $10.8 million, or $1.09 per diluted common share, for the six months ended June 30, 2025. At MarchJune 31,30, 2026, the Company and Bank each were in compliance with all regulatory capital requirements, and the Bank was considered “well-capitalized” under the FDIC’s prompt corrective action regulations.

Key components of our performance for the three and six months ended MarchJune 31,30, 2026 are summarized below.

General. Loans constitute our most significant asset, comprising 79.2% and 76.8% of our total assets at MarchJune 31,30, 2026 and December 31, 2025, respectively. Total loans increased $891.8$883.9 million, or 41.0%,40.6%, to $3.07$3.06 billion at MarchJune 31,30, 2026, compared to $2.18 billion at December 31, 2025. The increase in loans was primarily the result of the acquisition of WFB, which increased total loans $961.9 million on January 1, 2026. We are emphasizing the origination of high margin loans that promote long-term profitability and proactively exiting credit relationships that do not fit this strategy. Our variable-rate loans as a percentage of total loans increased to 49%50% at MarchJune 31,30, 2026 compared to 38% at December 31, 2025. Included in variable-rate loans as of MarchJune 31,30, 2026 are adjustable-rate mortgage loans we acquired in connection with our acquisition of WFB.

At MarchJune 31,30, 2026, the Company’s business lending portfolio, which consists of loans secured by owner-occupied commercial real estate properties and commercial and industrial loans, was $1.17$1.21 billion, an increase of $112.3$156.1 million, or 10.6%,14.8%, compared to $1.06 billion at December 31, 2025. The increase in the business lending portfolio was primarily driven by the acquisition of WFB,WFB and increased commercial and industrial loan production, partially offset by loan amortization.

Construction and development loans totaled $318.9$261.8 million at MarchJune 31,30, 2026, an increase of $170.9$113.8 million, or 115.5%,76.9%, compared to $148.0 million at December 31, 2025. The increase in construction and development loans was primarily due to the acquisition of WFB.WFB, partially offset by planned run off of loans acquired from WFB, consisting of consumer mortgage and nonowner-occupied construction loans, and conversions to permanent loans upon completion of construction.

1-4 Family loans totaled $920.5$907.4 million at MarchJune 31,30, 2026, an increase of $544.2$531.1 million, or 144.7%,141.2%, compared to $376.2 million at December 31, 2025. The increase in 1-4 family loans was primarily due to the acquisition of WFB. Substantially all of the 1-4 family loans acquired from WFB were consumer mortgage loans with an adjustable rate.

The consumer mortgage portfolio was approximately $879.8$849.0 million and $224.5 million at MarchJune 31,30, 2026 and December 31, 2025, respectively. The increase was due to the acquisition of WFB. Our consumer mortgage portfolio is included in the 1-4 family and construction and development categories. At MarchJune 31,30, 2026, the remaining loans in the construction and development category consisted primarily of commercial properties, and the remaining loans in the 1-4 family category consisted primarily of second mortgages, home equity loans, home equity lines of credit, and business purpose loans secured by 1-4 family residential real estate.

Nonowner-occupied loans totaled $504.8$512.5 million at MarchJune 31,30, 2026, an increase of $52.6$60.3 million, or 11.6%,13.3%, compared to $452.1 million at December 31, 2025. The increase in nonowner-occupied loans was primarily due to the acquisition of WFB, organic growth and conversions of construction and development loans to nonowner-occupied loans upon completion of construction, partially offset by loan amortization and payoffs that aligned with our continued strategy to optimize and de-risk the mix of the portfolio.amortization.

Loan Concentrations. Loan concentrations are considered to exist when there are amounts loaned to multiple borrowers engaged in similar activities that would cause them to be similarly impacted by economic or other conditions. At MarchJune 31,30, 2026 and December 31, 2025, we had no concentrations of loans exceeding 10% of total loans other than loans in the categories listed in the table above.

The following table reflects contractual loan maturities of loans in our loan portfolio and the amount of such loans with fixed and variable interest rates in each maturity range at MarchJune 31,30, 2026 (dollars in thousands). Adjustable-rate mortgage loans that we acquired in connection with our acquisition of WFB are reflected in the “Loans with variable rates” portion of the table; however, the rate of these loans is generally fixed for an initial period depending on the loan terms.

We purchase investment securities primarily to provide a source for meeting liquidity needs, with return on investment a secondary consideration. We also use investment securities as collateral for certain deposits and other types of borrowings. Investment securities represented 12%11.9% of our total assets and totaled $460.6$458.5 million at MarchJune 31,30, 2026, an increase of $41.8$39.7 million, or 10.0%,9.5%, from $418.8 million at December 31, 2025. The increase in investment securities at MarchJune 31,30, 2026 compared to December 31, 2025 was driven primarily by a $17.7$16.7 million increase in obligations of the U.S. Treasury and U.S. government agencies and corporations, a $13.7$14.4 million increase in residential mortgage-backed securities and a $9.3$9.0 million increase in commercial mortgage-backed securities. Due in large part to higher interest rates and market volatility, net unrealized losses in our AFS investment securities portfolio totaled $47.2$48.0 million at MarchJune 31,30, 2026, compared to $45.4 million at December 31, 2025. For additional information, see Note 4. Investment Securities.

The investment portfolio consists of AFS and HTM securities. We do not hold any investments classified as trading. We classify debt securities as HTM if management has the positive intent and ability to hold the securities to maturity. HTM debt securities are stated at amortized cost. Securities not classified as HTM are classified as AFS and are stated at fair value. The carrying values of our AFS securities are adjusted for unrealized gains or losses not attributable to credit losses as valuation allowances, and any gains or losses are reported on an after-tax basis as a component of other comprehensive (loss) income. As of MarchJune 31,30, 2026, AFS securities comprised 90% of our total investment securities.

The table below sets forth the stated maturities and weighted average yields of our investment debt securities based on the amortized cost of our investment portfolio at MarchJune 31,30, 2026 (dollars in thousands).

The following table sets forth the composition of our deposits and the percentage of each deposit type to total deposits at MarchJune 31,30, 2026 and December 31, 2025 (dollars in thousands).

Total deposits were $3.23$3.21 billion at MarchJune 31,30, 2026, an increase of $882.6$863.6 million, or 37.6%,36.7%, compared to $2.35 billion at December 31, 2025. The increase in deposits was primarily the result of the acquisition of WFB, which increased total deposits $1.02 billion on January 1, 2026, consisting of $187.9 million and $835.5 million of noninterest-bearing deposits and interest-bearing deposits, respectively.

The increase in noninterest-bearing demand deposits, interest-bearing demand deposits, and money market deposits at MarchJune 31,30, 2026 compared to December 31, 2025 was primarily the result of the acquisition of WFB and organic growth. The increase in time deposits at MarchJune 31,30, 2026 compared to December 31, 2025 was primarily the result of the acquisition of WFB, partially offset by the run-off of higher yielding time deposits. Brokered time deposits decreased to $101.2$62.9 million at MarchJune 31,30, 2026 from $204.1 million at December 31, 2025. We utilize brokered time deposits, entirely in denominations of less than $250,000, to secure fixed cost funding and reduce short-term borrowings. At MarchJune 31,30, 2026, the balance of brokered time deposits remained below 10% of total assets, and the remaining weighted average duration was approximately fivefour months with a weighted average rate of 3.94%.3.78%.

At MarchJune 31,30, 2026, our estimated uninsured deposits were $1.16$1.10 billion, or approximately 36%34% of total deposits, compared to $793.2 million, or approximately 34% of our total deposits at December 31, 2025. The estimates are based on the same methodologies and assumptions used for our regulatory reporting requirements. The insured deposit data does not reflect an evaluation of all of the account ownership category distinctions that would determine the availability of deposit insurance to individual accounts based on FDIC regulations.

The following table shows scheduled maturities of time deposits in excess of the FDIC insurance limit of $250,000 at MarchJune 31,30, 2026 and December 31, 2025 (dollars in thousands).

At MarchJune 31,30, 2026, total borrowings included securities sold under agreements to repurchase, FHLB advances, subordinated debt issued in 2022, and junior subordinated debentures assumed through acquisitions.

We had $18.4$18.6 million of securities sold under agreements to repurchase at MarchJune 31,30, 2026 and $11.2 million at December 31, 2025.

Our advances from the FHLB were $136.0 million at MarchJune 31,30, 2026, an increase of $20.0 million compared to FHLB advances of $116.0 million at December 31, 2025. Based on original maturities, at MarchJune 31,30, 2026, $36.0 million were short-term and $100.0 million were long-term FHLB advances, compared to $36.0 million short-term and $80.0 million long-term FHLB advances at December 31, 2025. FHLB advances are used to fund new loan and investment activity that is not funded by deposits or other borrowings.

The main source of our short-term borrowings are advances from the FHLB. The rate charged for advances from the FHLB is directly tied to the Federal Reserve’s federal funds target rate. As of MarchJune 31,30, 2026, the federal funds target rate was 3.50% to 3.75%.

The average balances and cost of short-term borrowings for the three and six months ended MarchJune 31,30, 2026 and 2025 are summarized in the table below (dollars in thousands).

The following table sets forth certain information regarding securities sold under agreements to repurchase for the three and six months ended MarchJune 31,30, 2026 and 2025 (dollars in thousands).

The carrying value of the subordinated debt, which consists entirely of our 2032 Notes, was $16.8 million and $16.7 million at MarchJune 31,30, 2026 and December 31, 2025.2025, respectively. The $23.0 million and $8.8 million in junior subordinated debt at MarchJune 31,30, 2026 and December 31, 2025, respectively, represented the junior subordinated debentures that we assumed through acquisitions. The increase in junior subordinated debt was due to the acquisition of WFB and consisted of $9.2 million of unsecured debt obligations due to trusts and a $5.0 million loan, which matures in October 2029, related to our Southlake corporate office. On January 1, 2026, we assumed WFB’s obligations on an unsecured basis with respect to a $10.0 million note to TIB, N.A. We repaid the note in full in January 2026.

Stockholders’ equity was $414.6$420.1 million at MarchJune 31,30, 2026, an increase of $113.6$119.1 million compared to December 31, 2025. The increase was primarily attributable to the acquisition of WFB, $12.0$21.5 million of net income for the threesix months ended MarchJune 31,30, 2026, partially offset by $1.5$3.2 million in dividends declared on common stock, $2.3 million for share repurchases, a $1.4$2.1 million increase in accumulated other comprehensive loss due to a decrease in the fair value of the Bank’s AFS securities portfolio, $1.5 million in dividends declared on common stock, and $0.5$1.1 million in dividends declared on the Series A Preferred Stock.

The primary factors affecting net interest margin are changes in interest rates, competition, and the shape of the interest rate yield curve. The Federal Reserve Board sets various benchmark rates, including the federal funds target rate, and thereby influences the general market rates of interest, including the deposit and loan rates offered by financial institutions. During 2025, beginning in September, the Federal Reserve reduced the federal funds target rate three times by 75 basis points on a cumulative basis to 3.50% to 3.75%, where it remained as of MayAugust 8,6, 2026. Accordingly, the prevailing federal funds target rate during the three and six months ended MarchJune 31,30, 2026 was lower than during the three and six months ended MarchJune 31,30, 2025. For additional discussion, see Certain Events That Affect Period-over-Period Comparability – Changing Inflation and Interest Rates.

Three months ended MarchJune 31,30, 2026 vs. three months ended MarchJune 31,30, 2025. Net interest income increased 78.0%70.3% to $32.7$33.4 million for the three months ended MarchJune 31,30, 2026 compared to $18.3$19.6 million for the same period in 2025. The increase was primarily due to a higher average balance of, and an increase in the yield on, the loan portfolio, partially offset by an increase in the average balance of interest-bearing demand deposits and time deposits. Average loans increased by $987.0$945.4 million for the three months ended MarchJune 31,30, 2026 primarily due to the acquisition of WFB, which, in addition to higher loan yields, resulted in a $17.4$16.6 million increase in interest income on loans compared to the same period in 2025. Average brokered time deposits were $152.3$73.5 million for the three months ended MarchJune 31,30, 2026 compared to $252.3$255.4 million during the three months ended MarchJune 31,30, 2025, which along with lower rates paid, resulted in a $1.5$2.3 million decrease in interest expense compared tofor the three months ended MarchJune 31,30, 2026 compared to the same period in 2025. Average interest-bearing demand deposits increased by $517.9$526.2 million, which, combined with an increase in rates, resulted in a $3.6$3.3 million increase in interest expense in the firstsecond quarter of 2026 compared to the same period in 2025. A higher average balance of time deposits partially offset by a decrease in rates paid on time deposits resulted in a $2.1$2.0 million increase in interest expense compared to the same period in 2025. Average noninterest-bearing deposits increased by $203.6$178.7 million. Our yield on interest-earning assets increased primarily due to an increase in the average balance of, and the yield on, the loan portfolio. Rates paid on interest-bearing liabilities decreased primarily as a result of the overall decrease in prevailing interest rates.

Interest income was $53.2 million for the three months ended MarchJune 31,30, 2026, compared to $34.4$35.4 million for the same period in 2025. Loan interest income made up substantially all of our interest income for the three months ended MarchJune 31,30, 2026 and 2025, although interest on investment securities contributed 7.7%8.5% of interest income during the firstsecond quarter of 2026 compared to 9.7%10.3% during the firstsecond quarter of 2025. The overall yield on interest-earning assets was 5.86%5.83% and 5.39%5.45% for the three months ended MarchJune 31,30, 2026 and 2025, respectively. The loan portfolio yielded 6.28% and 5.88%5.94% for the three months ended MarchJune 31,30, 2026 and 2025, respectively, while the yield on the investment portfolio was 3.44%3.52% for the three months ended MarchJune 31,30, 2026 compared to 3.10%3.22% for the three months ended MarchJune 31,30, 2025. The overall yield on interest-earning assets increased 4738 basis points for the quarter ended MarchJune 31,30, 2026 compared to the quarter ended MarchJune 31,30, 2025 and was primarily driven by a 4034 basis point increase in the yield on the loan portfolio and a 3430 basis point increase in the yield on the investment securities portfolio.

Interest expense was $20.5$19.8 million for the three months ended MarchJune 31,30, 2026, an increase of $4.5$4.0 million compared to interest expense of $16.1$15.7 million for the three months ended MarchJune 31,30, 2025. An increase in interest expense of $5.3$4.9 million resulted from an increase in the volume of interest-bearing liabilities, primarily interest-bearing demand deposits and time deposits. A decrease of $0.8 million resulted from the decrease in the cost of interest-bearing liabilities, primarily time deposits and brokered time deposits. Average interest-bearing liabilities increased by $812.8$789.9 million for the three months ended MarchJune 31,30, 2026 compared to the same period in 2025, while average interest-bearing deposits increased by $774.9$682.3 million, primarily due to an increase in average interest-bearing demand deposits and average time deposits. We increased rates on our interest-bearing demand deposits during the firstsecond quarter of 2026 compared to the firstsecond quarter of 2025 to attract and retain lower cost deposits relative to higher cost short-term borrowings and brokered time deposits, and the interest-bearing demand deposits acquired from WFB had a higher rate than legacy interest-bearing demand deposits. Average time deposits increased due to the acquisition of WFB; however, we reduced rates on our time deposits during the firstsecond quarter of 2026 compared to the firstsecond quarter of 2025 due to lower prevailing market interest rates. The cost of interest-bearing deposits decreased 3034 basis points to 2.85%2.72% for the three months ended MarchJune 31,30, 2026 compared to 3.15%3.06% for the three months ended MarchJune 31,30, 2025 primarily as a result of a lower average balance of, and a decrease in rates paid on, brokered time deposits and a decrease in rates paid on time deposits, partially offset by a higher average balance of time deposits and a higher average balance of, and an increase in the rates paid on, interest-bearing demand deposits. The cost of interest-bearing liabilities decreased 2831 basis points to 2.94%2.82% for the three months ended MarchJune 31,30, 2026 compared to 3.22%3.13% for the same period in 2025.

Net interest margin was 3.59%3.67% for the three months ended MarchJune 31,30, 2026, an increase of 7264 basis points from 2.87%3.03% for the three months ended MarchJune 31,30, 2025. The increase in net interest margin was primarily driven by a 4738 basis point increase in the yield on interest-earning assets and a 2831 basis point decrease in the cost of interest-bearing liabilities.

Average Balances and Yields. The following table sets forth average balance sheet data, including all major categories of interest-earning assets and interest-bearing liabilities, together with the interest earned or paid and the average yield or rate paid on each such category for the three months ended MarchJune 31,30, 2026 and 2025. Averages presented in the table below are daily averages (dollars in thousands).

The following table illustrates the primary components of noninterest income for the three and six months ended MarchJune 31,30, 2026, compared to the three and six months ended MarchJune 31,30, 2025 (dollars in thousands).

Three months ended MarchJune 31,30, 2026 vs. three months ended MarchJune 31,30, 2025. Total noninterest income increased $1.0$0.5 million, or 48.2%,18.0%, to $3.0$3.1 million for the three months ended MarchJune 31,30, 2026 compared to $2.0$2.6 million for the three months ended MarchJune 31,30, 2025. The increase in noninterest income was primarily attributable to a $0.2 million increase in interchange fees, a $0.2 million increase in income from BOLI, a $0.2$0.1 million increase in interchange fees, a $0.1 million increase in service charges on deposit accounts, a $0.2$0.1 million increase in change in fair value of equity securities, and a $0.3 million increase in other operating income, partially offset by a $0.1 million increasedecrease in lossother operating income. The increases were primarily related to the acquisition of WFB on saleJanuary of1, other real estate owned.2026. The increasedecrease in other operating income was primarily attributable to $0.3 million of income from insurance proceeds received for damages to a property recorded in other real estate owned in the second quarter of 2025, partially offset by a $0.1 million increase in distributions from other investments and a $0.1 million increase in wealth management income.

The following table illustrates the primary components of noninterest expense for the three and six months ended MarchJune 31,30, 2026, compared to the three and six months ended MarchJune 31,30, 2025 (dollars in thousands).

Three months ended MarchJune 31,30, 2026 vs. three months ended MarchJune 31,30, 2025. Total noninterest expense was $22.8$24.7 million for the three months ended MarchJune 31,30, 2026, an increase of $6.6$8.0 million, or 40.7%,47.7%, compared to the same period in 2025. The increase was primarily driven by a $3.3$3.2 million increase in salaries and employee benefits, a $1.6$2.4 million increase in acquisition expense, a $0.6 million increase in depreciation and amortization, a $0.5 million increase in professional fees, a $0.3 million increase in occupancy, a $0.3 million increase in data processing and a $0.2$0.7 million increase in other operating expense. The increases were primarily related to the acquisition of WFB on January 1, 2026. The increase in other operating expense was primarily attributable to a $0.4 million increase in branch services, a $0.2 million increase in FDIC assessments.assessments, a $0.2 million increase in software expense and a $0.1 million increase in telecommunications expense, partially offset by a $0.2 million decrease in other real estate expense and a $0.1 million decrease in bank shares taxes.

Income tax expense for the three months ended MarchJune 31,30, 2026 and 2025 was $2.9$2.1 million and $1.4$0.9 million, respectively. The effective tax rate for the three months ended MarchJune 31,30, 2026 and 2025 was 19.4%18.4% and 18.4%,17.2%, respectively. Income tax expense for the six months ended June 30, 2026 and 2025 was $5.0 million and $2.4 million, respectively. The effective tax rate for the six months ended June 30, 2026 and 2025 was 18.9% and 17.9%, respectively.

For the three months and six months ended MarchJune 31,30, 2026 and 2025, the effective tax rate differed from the statutory tax rate of 21% primarily due to tax-exempt interest income earned on certain loans and investment securities and income from BOLI.

At MarchJune 31,30, 2026 and December 31, 2025, there were no loans classified as Loss, while there were $24,000$23,000 and no loans, respectively, classified as Doubtful, $43.0$51.1 million and $38.1 million, respectively, of loans classified as Substandard, and $9.2 million and $9.7 million, respectively, of loans classified as Special Mention.

Allowance for Credit Losses. We account for the ACL in accordance with ASC 326, which uses the CECL accounting methodology. The CECL methodology requires that lifetime expected credit losses be recorded at the time the financial asset is originated or acquired and be adjusted each period through a provision for credit losses for changes in the expected lifetime credit losses. The ACL was $36.0$36.3 million and $26.3 million at MarchJune 31,30, 2026 and December 31, 2025, respectively. On January 1, 2026, we recorded an $11.7 million ACL due to the acquisition of WFB.

The reversalprovision offor credit losses for the three months ended MarchJune 31,30, 2026 was primarily due to adjustments to qualitative factors, partially offset by a decrease in total loans. The reversal of credit losses for the six months ended June 30, 2026 was primarily due to a decrease in total loans during the quarter,period, changes in the economic forecast and the completion of our CECL allowance model recalibration. The reversalprovision offor credit losses for the three months ended MarchJune 31,30, 2025 was primarily due to netchanges recoveriesin onthe economic forecast and loan mix. The reversal of credit losses for the six months ended June 30, 2025 was primarily due to a $3.3 million recovery during the first quarter of 2025 of loans previously charged off as a result of a property insurance settlement related to one loan relationship that became impaired in the third quarter of 2021 as a result of Hurricane Ida.

Periodically, we complete a CECL allowance model recalibration. This process, which was completed in the first quarter of 2026, includes peer group analysis, updates to our probability of default and loss-given default models, including prepayment and curtailment assumptions, and qualitative factor scorecard ranges, as needed. The changes resulting from the model recalibration reduced the ACL by approximately $3.0 million and $0.5 million during the threesix months ended MarchJune 31,30, 2026 and 2025, respectively.

The ACL to total loans decreased to 1.17%1.18% at MarchJune 31,30, 2026 compared to 1.25%1.26% at MarchJune 31,30, 2025, and the ACL to nonaccrual loans ratio decreased to 177.0%196.4% at MarchJune 31,30, 2026 compared to 473.3%357.2% at MarchJune 31,30, 2025. The decrease in the ACL to total loans compared to MarchJune 31,30, 2025 was primarily due to the completion of our CECL allowance model recalibration and changes in the economic forecast. The decrease in ACL to nonaccrual loans compared to MarchJune 31,30, 2025 was primarily due to an increase in nonaccrual loans. Nonaccrual loans were $20.3$18.5 million, or 0.66%0.60% of total loans, at MarchJune 31,30, 2026, an increase of $14.7$11.0 million compared to $5.6$7.5 million, or 0.27%0.35% of total loans, at MarchJune 31,30, 2025. The increase in nonaccrual loans was primarily attributable to the downgrade of one primarily owner-occupied commercial real estate relationship totaling $6.6 million, one construction and development relationship totaling $1.6 million and nonperforming loans acquired from WFB totaling $3.2$1.2 million.

Charge-offs reflect the realization of losses in the portfolio that were recognized previously through the provision for credit losses on loans. Net charge-offs include recoveries of amounts previously charged off. For the three months ended MarchJune 31,30, 2026, net charge-offs were $0.3$0.1 million, or less than 0.01%, of the average loan balance for the period. For the six months ended June 30, 2026, net charge-offs were $0.4 million, or 0.01%, of the average loan balance for the period. Net charge-offs duringFor the three months ended MarchJune 31,30, 20262025, net recoveries were primarily$13,000, attributableor toless commercialthan and0.01%, industrialof loans.the Netaverage recoveriesloan balance for the threeperiod. For the six months ended MarchJune 31,30, 20252025, net recoveries were $3.4 million, or 0.16%, of the average loan balance for the period. Net recoveries during the threesix months ended MarchJune 31,30, 2025 were primarily the result of a property insurance settlement related to a loan relationship that became impaired in the third quarter of 2021 as a result of Hurricane Ida.

Management believes the ACL at MarchJune 31,30, 2026 is sufficient to provide adequate protection against losses in our portfolio. However, there can be no assurance that this allowance will prove to be adequate over time to cover ultimate losses in connection with our loans. This ACL may prove to be inadequate due to many factors, including those set forth in Part I. Item 1A. “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” in the Company’s Annual Report. These factors could cause deterioration in credit quality that could lead us to increase our ACL in future periods. Our results of operations and financial condition could be materially adversely affected to the extent that the ACL is insufficient to cover such changes or events.

Nonperforming Assets. Nonperforming assets consist of nonperforming loans and other real estate owned. Nonperforming loans are those on which the accrual of interest has stopped or loans which are contractually 90 days past due and accruing. Loans are ordinarily placed on nonaccrual when a loan is specifically determined to be impaired or when principal and interest is delinquent for 90 days or more. Additionally, management may elect to continue the accrual when the estimated net available value of collateral is sufficient to cover the principal balance and accrued interest. It is our policy to discontinue the accrual of interest income on any loan for which we have reasonable doubt as to the payment of interest or principal. A loan may be returned to accrual status when all the principal and interest amounts contractually due are brought current and future principal and interest amounts contractually due are reasonably assured, which is typically evidenced by a sustained period of repayment performance by the borrower. Nonperforming loans were $20.4$19.4 million, or 0.66%0.63% of total loans, at MarchJune 31,30, 2026, an increase of $11.1$10.1 million compared to $9.3 million, or 0.43% of total loans, at December 31, 2025. The increase in nonperforming loans compared to December 31, 2025 was primarily attributable to the downgrade of one primarily owner-occupied commercial real estate relationship totaling $6.6 million, one construction and development relationship totaling $1.6 million and nonperforming loans acquired from WFB totaling $3.2$1.2 million.

Loan Modifications to Borrowers Experiencing Financial Difficulty. Occasionally, we modify loans to borrowers in financial distress by providing certain concessions, such as principal forgiveness, an interest rate reduction, an other-than-insignificant payment delay, or a term extension, excluding covenant waivers and modification of contingent acceleration clauses, or a combination of such concessions. When principal forgiveness is provided, the amount of forgiveness is charged-off against the ACL. Upon the Company’s determination that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or portion of the loan) is written off. During the threesix months ended MarchJune 31,30, 2026 and 2025, we did not provide any modifications under these circumstances to borrowers experiencing financial difficulty.