What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-03-17 compared with 2025-03-12 · 161 added, 192 removed, 486 unchanged (42% of the section changed)

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Unless the context indicates otherwise, references in this management’s discussion and analysis to “we”, “our”, and “us,” refer to Bank7 Corp.

and its consolidated subsidiaries.

and its consolidated

subsidiaries.

All references to “the Bank” refer to Bank7, our wholly owned subsidiary.

We are Bank7 Corp., a bank holding company headquartered in Oklahoma City, Oklahoma.

Through our wholly-owned subsidiary, Bank7, we operate twelve full-service branches in Oklahoma, the Dallas/Fort

Worth, Texas metropolitan area and Kansas.

Through our wholly-owned subsidiary, Bank7, we operate twelve full-service branches in Oklahoma, the

Dallas/Fort Worth, Texas metropolitan area and Kansas.

We are focused on serving business owners and entrepreneurs by delivering fast, consistent and well-designed loan and deposit products to meet their financing needs.

We intend to grow organically by

selectively opening additional branches in our target markets and we will also pursue strategic acquisitions.

We intend to grow

organically by selectively opening additional branches in our target markets and we will also pursue strategic acquisitions.

As a bank holding company, we generate most of our revenue from interest income on loans and from short-term investments.

The primary source of funding for our loans and short-term investments are

deposits held by our subsidiary, Bank7.

The primary source of funding for our loans and short-term investments

are deposits held by our subsidiary, Bank7.

We measure our performance by our return on average assets, return on average equity, earnings per share, capital ratios, and efficiency ratio, which is calculated by dividing noninterest expense by the

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As of December 31, 2025, we had total assets of $1.96 billion, total loans of $1.61 billion, total deposits of $1.70 billion and total shareholders’ equity of $251.0 million.

economy experienced widespread volatility throughout 2020 and 2021 as a result of the COVID-19 pandemic and government responses to the pandemic.

condition declined rapidly and significantly following the initial widespread U.S.

outbreak in March and April of 2020.

Federal stimulus was quickly passed in the form of the CARES Act and the economy rebounded significantly in the second half of

In an emergency measure aimed at dampening the economic impact of COVID-19, the Federal Reserve lowered the target for the federal funds rate to a range of between zero to 0.25% effective on March 16, 2020 where it remained through the end

This action by the Federal Reserve followed a prior reduction of the targeted federal funds rates to a range of 1.0% to 1.25% effective March 4, 2020.

As the pandemic eased through 2021 and inflation increased, the Federal Reserve

aggressively raised the federal funds target rate to 4.25-4.50% by the end of 2022 and to 5.25%-5.50% by the end of 2023.

In 2024, the Federal Reserve began to adjust monetary policy, ultimately lowering the federal funds rate three times,

ending the year with a target range of 4.25% to 4.5%.

These monetary policy actions, along with the impact of the elevated interest rate environment experienced earlier in 2024, influenced our net interest income and credit quality throughout the

The Federal Reserve aggressively raised the federal funds target rate throughout 2022 and 2023 to combat elevated inflation, reaching a peak range of 5.25% to 5.50% by December 31, 2023.

In 2024, the Federal Reserve

began to adjust monetary policy, ultimately lowering the federal funds rate three times to end that year with a target range of 4.25% to 4.50%.

This easing cycle continued into 2025, with the Federal Reserve implementing three additional

25-basis-point reductions in the second half of the year.

As of December 31, 2025, the federal funds target range stood at 3.50% to 3.75%.

These monetary policy actions, along with the impact of the transition from a peak-rate environment,

compressed our net interest margin while generally supporting stable credit quality throughout 2025.

2025 Overview

We reported total loans of $1.61 billion as of December 31, 2025, an increase of $209.0 million, or 15.0%, from December 31, 2024.

Total deposits were $1.52 billion as of December 31, 2024, a decrease

of $75.9 million, or 4.8%, from December 31, 2023.

Pre-tax net income was $60.4 million, an increase of $23.1 million, or 62.1%, for the year ended December 31, 2024 as compared to pre-tax net income of $37.2 million for the same period in 2023.

Total deposits were $1.70 billion as of December 31, 2025, an

increase of $185.4 million, or 12.2%, from December 31, 2024.

Income before taxes was $56.8 million, a decrease of $3.6 million, or 6.0%, for the year ended December 31, 2025 as compared to income before taxes of $60.4 million for the same period in 2024.

Pre-tax return on average assets and return on average equity was 3.12% and 24.39%, respectively, for the year ended December 31, 2025, as compared to 3.50% and 31.41%, respectively, for the same

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Tax-adjusted return on average assets and return on average equity was 2.37% and 18.51%, respectively, for the year ended December 31, 2025, as compared to 2.65% and 23.78%, respectively, for the same period in 2024.

efficiency ratio for the year ended December 31, 2024 was 37.90% as compared to 36.07% for the same period in 2023.

The provision for credit losses for the year ended December 31, 2024 decreased $21.1 million, or 100%, from $21.1 million compared to the same period in 2023.

provision expense for the year ended December 31, 2023 was related to loan growth in the first quarter of 2023, the impact of updated economic assumptions, and we had a single loan customer that filed for bankruptcy, and as a result, we recorded

a charge-off of $16.5 million, increased nonaccrual loans by $18.4 million, and recorded an additional specific reserve to the allowance for credit losses and provision for loan losses of $2.0 million.

See Note (6) of the financial statements

for further disclosure and discussion.

Our efficiency

ratio for the year ended December 31, 2025 was 40.24% as compared to 37.90% for the same period in 2024.

The provision for credit losses for the year ended December 31, 2025, was $700,000, an increase of 100% compared to a $0 provision for the year ended December 31, 2024.

This provision was

primarily attributable to the 15% year-over-year loan growth realized during the period, as total loans increased by $209.0 million to $1.61 billion at December 31, 2025.

The 2025 provisioning reflects management’s ongoing assessment of the

allowance for credit losses required to support the expanded loan portfolio and incorporates updated economic assumptions relevant to the current environment.

We continue to monitor credit metrics and economic indicators to ensure the allowance for

credit losses remains at an appropriate level to address potential credit risks within the portfolio.

See Note 5 of the financial statements for further disclosure and discussion.

Results of Operations

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The following table presents, for the periods indicated, information about:

(i) weighted average balances, the total dollar amount of interest income from interest-earning assets, and the resultant average yields;

average balances, the total dollar amount of interest expense on interest-bearing liabilities, and the resultant average rates;

(i) weighted average balances, the total dollar amount of interest income from interest-earning assets, and the

resultant average yields;

(ii) average balances, the total dollar amount of interest expense on interest-bearing liabilities, and the resultant average rates;

(iii) net interest income;

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For the year ended December 31, 2025 compared to the year ended December 31, 2024:

Total interest income on loans decreased $1.9 million, or 1.6%, to $117.5 million, due to decreased loan yields as discussed below;

Yields on our interest-earning assets totaled 7.24%, a decrease of 55 basis points which was attributable to lower loan yields of 64 basis points, a decrease in yield on short term investments of 83 basis

points, and a decrease in yield on taxable debt securities of 47 basis points;

Net interest margin for the years ended 2025 and 2024 was 4.94% and 5.11%, respectively.

For the year ended December 31, 2024 compared to the year ended December 31, 2023:

Total interest income on loans increased $9.6 million, or 8.7%, to $119.4 million, which was attributable to a $76.0 million increase in the average balance of loans to $1.39 billion during the year ended

2024 as compared with the average balance of loans of $1.32 billion for the year ended 2023, and increased loan yields as discussed below;

Yields on our interest-earning assets totaled 7.79%, an increase of 48 basis points which was attributable to higher loan rates of 21 basis points, an increase in yield on short term investments of 13 basis

Yields on our interest-earning assets totaled 7.79%, an increase of 48 basis points which was attributable to higher loan yields of 21 basis points, an increase in yield on short term investments of 13 basis

points, and an increase in yield on taxable debt securities of 96 basis points;

Net interest margin for the years ended 2024 and 2023 was 5.11% and 4.97%, respectively.

We experienced strong asset growth for the year ended December 31, 2023 compared to the year ended December 31, 2022:

Total interest income on loans increased $35.4 million, or 47.6%, to $109.8 million, which was attributable to a $172.2 million increase in the average balance of loans to $1.32 billion during the year

ended 2023 as compared with the average balance of $1.14 billion for the year ended 2022, and increased loan yields as discussed below;

Yields on our interest-earning assets totaled 7.31%, an increase of 185 basis points which was attributable to higher loan rates of 184 basis points, an increase in yield on short term investments of 362

basis points, and an increase in yield on taxable debt securities of 25 basis points;

Net interest margin for the years ended 2023 and 2022 was 4.97% and 4.82%, respectively.

The FED influences the general market rates of interest, including the deposit and loan rates offered by many financial institutions.

Our loan portfolio is significantly affected by changes in the

prime interest rate.

The Federal Reserve (“FED”) influences the general market rates of interest, including the deposit and loan rates offered by many financial institutions.

Our loan portfolio is significantly

affected by changes in the prime interest rate.

For the three-year period between January 1, 2023 and December 31, 2025, the prime rate fluctuated between a high of 8.50%, and a low of 6.75%.

Interest income on short-term investments increased $740,000, or 8.6%, to $9.3 million for year ended December 31, 2024 compared to 2023, due to an increase in the average balances of $9.7 million,

or 5.6% and a yield increase of 13 basis points.

Interest income on short-term investments increased $6.9 million, or 412.9%, to $8.6 million for year ended December 31, 2023 compared to 2022, due to an increase in the average balances of $45.0

Interest income on short-term investments increased $594,000, or 6.4%, to $9.9 million for year ended December 31, 2025 compared to 2024, due to an increase in the average balances of $50.9

million, or 27.6% and a yield decrease of 83 basis points.

Interest income on short-term investments increased $740,000, or 8.6%, to $9.3 million for year ended December 31, 2024 compared to 2023, due to an increase in the average balances of $9.7

million, or 5.6% and a yield increase of 13 basis points.

Interest expense on interest-bearing deposits totaled $45.3 million for the year ended December 31, 2024, compared to $39.0 million for 2023, an increase of $6.3 million, or 16.3%.

The increase was

related to the cost of interest-bearing deposits increasing to 3.98% for the year ended December 31, 2024 from 3.60% for the year ended December 31, 2023.

Interest expense on interest-bearing deposits totaled $40.9 million for the year ended December 31, 2025, compared to $45.3 million for 2024, a decrease of $4.5 million, or 9.8%.

The decrease was

related to the cost of interest-bearing deposits decreasing to 3.25% for the year ended December 31, 2025 from 3.98% for the year ended December 31, 2024.

Interest expense on interest-bearing deposits totaled $45.3 million for the year ended

December 31, 2024, compared to $39.0 million for 2023, an increase of $6.3 million, or 16.3%.

The increase was related to the cost of interest-bearing deposits increasing to 3.60% for the year ended December 31, 2023 from 1.05% for the year

ended December 31, 2022.

The increase was related to the cost of interest-bearing deposits increasing to 3.98% for the year ended December 31, 2024 from 3.60% for the year ended

December 31, 2023.

Net interest margin for the years ended December 31, 2025, 2024 and 2023 was 4.94%, 5.11% and 4.97%, respectively.

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Increase (Decrease) in net interest income

(1) Variances attributable to both volume and rate are allocated on a consistent basis between rate and volume based on the absolute value of the variances

in each category.

Variances attributable to both volume and rate are allocated on a consistent basis between rate and volume based on the absolute value of the variances in each category.

Weighted Average Yield of Debt Securities

The following table summarizes the maturity distribution schedule with corresponding weighted average taxable equivalent yields of the debt securities portfolio at December 31, 2025.

The following table presents

securities at their expected maturities, which may differ from contractual maturities.

The Company manages its debt securities portfolio for liquidity, as a tool to execute its asset/liability management strategy, and for pledging requirements

for public funds:

following table presents securities at their expected maturities, which may differ from contractual maturities.

The Company manages its debt securities portfolio for liquidity, as a tool to execute its asset/liability management strategy, and for

pledging requirements for public funds:

As of December 31, 2025

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For the year ended December 31, 2025 compared to the year ended December 31, 2024:

The provision for credit losses decreased from $21.1 million to $0;

The provision for credit losses increased from $0 to $700,000, reflecting routine adjustments within our allowance for credit losses estimation methodology;

The allowance as a percentage of loans decreased by 7 basis points to 1.21%.

Decreases are related to the single loan customer discussed in the 2024 Overview.

For the year ended December 31, 2024 compared to the year ended December 31, 2023:

The provision for credit losses increased from $4.5 million to $21.1 million;

The allowance as a percentage of loans increased by 29 basis points to 1.44%.

Increases are related to the single loan customer discussed in the 2024 Overview.

The provision for credit losses decreased from $21.1 million to $0;

The allowance as a percentage of loans decreased by 16 basis points to 1.28%.

The decrease in the provision was primarily due to the impact of a single loan customer that filed for bankruptcy in 2023, resulting in a $16.5 million charge-off recorded during that period.

We file a consolidated income tax return and recognize deferred taxes based upon the future tax consequences of temporary differences between the carrying amounts and tax basis of assets and

The process of determining the accruals for income taxes involves the exercise of considerable judgment regarding tax rates, laws, and the implementation of tax planning strategies.

For the years ended December 31, 2025, 2024, and 2023, all of our income before income taxes was generated from domestic operations.

We do not currently have exposure to foreign tax

jurisdictions;

as such, our jurisdictional tax mix remains concentrated within the United States and specific state jurisdictions, primarily Oklahoma.

Our provision for income taxes was $13.7 million for the year ended December 31, 2025, compared to $14.7 million for 2024.

This resulted in an effective tax rate of 24.13% in 2025, compared to

24.28% in 2024.

The effective tax rate differs from the U.S.

federal statutory rate of 21% primarily due to the effect of state income taxes (net of federal benefit) and nondeductible expenses.

The year-over-year rate change was primarily driven by

the impact of Oklahoma state taxes and certain nondeductible reconciling items.

Cash taxes paid during 2025 totaled $13.7 million, compared to $15.1 million in 2024, reflecting our domestic jurisdictional profile and the timing of estimated tax

Noninterest Income

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For the year ended December 31, 2025 compared to the year ended December 31, 2024:

Other noninterest income was $9.9 million compared to $8.1 million, an increase of $1.9 million, or 23.1%.

The increase was primarily attributable to income related to the operation of oil and gas assets

Other noninterest income was $6.2 million compared to $9.9 million, a decrease of $3.7 million, or 37.0%.

The decrease was primarily attributable to income related to the operation of oil and gas assets

acquired during the fourth quarter of 2023, see Note 2 of the financial statements.

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For the year ended December 31, 2024 compared to the year ended December 31, 2023:

Other expense was $7.7 million compared to $2.6 million, an increase of $5.2 million, or 200%.

The increase was primarily attributable to expenses related to the operation of oil and gas assets acquired

during the fourth quarter of 2023, see Note 2 of the financial statements.

Salaries and employee benefits expense was $20.8 million compared to $17.4 million, an increase of $3.4 million, or 19.6%.

The increase was primarily attributable to overall increases in compensation due to

the performance of the Company and to remain competitive.

Financial Condition

The following discussion of our financial condition compares December 31, 2025, 2024, and 2023.

Total assets decreased $31.9 million, or 1.8%, to $1.74 billion as of December 31, 2024, as compared to $1.77 billion as of December 31, 2023 and $1.58 billion as of December 31, 2022.

Total assets increased $223.8 million, or 12.9%, to $1.96 billion as of December 31, 2025, as compared to $1.74 billion as of December 31, 2024 and $1.77 billion as of December 31, 2023.

Loan Portfolio

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Commercial real estate - other

Total commerical real estate

Total commercial real estate

Commercial & industrial

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Other considerations include volumes and trends of delinquencies,

nonaccrual loans, levels of bankruptcies, criticized and classified loan trends, expected losses on real estate secured loans, new credit products and policies, economic conditions, concentrations of credit risk and the experience and abilities

of our lending personnel.

In addition to the segment evaluations, impaired loans with a balance of $250,000 or more are individually evaluated based on facts and circumstances of the loan to determine if a specific allowance amount may be

Specific allowances may also be established for loans whose outstanding balances are below the $250,000 threshold when it is determined that the risk associated with the loan differs significantly from the risk factor amounts

established for its loan segment.

our lending personnel.

In addition to the segment evaluations, substandard loans with a balance of $250,000 or more are individually evaluated based on facts and circumstances of the loan to determine if a specific allowance amount may be

for its loan segment.

The allowance was $19.4 million at December 31, 2025, $17.9 million at December 31, 2024 and $19.7 million at December 31, 2023.

See the 2024 Overview for the

discussion of the decrease in allowance in 2024.

See the 2025 Overview for further discussion regarding

management’s ongoing assessment of the adequacy of the allowance.

The following table provides an analysis of the activity in our allowance for the periods indicated:

For the Year Ended

As of December 31,

(Dollars in thousands)

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Net recoveries (charge-offs) to average loans

While the entire allowance is available to absorb losses from any and all loans, the following table represents management’s allocation of the allowance by loan category, and the percentage

of allowance in each category, for the periods indicated:

While the entire allowance is available to absorb losses from any and all loans, the following table represents management’s allocation of the allowance by loan category, and the percentage of

allowance in each category, for the periods indicated:

As of December 31,

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Commercial & industrial

Nonperforming Assets

Nonaccrual Loans and Nonperforming Assets

Loans are considered delinquent when principal or interest payments are past due 30 days or more.

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subsequently recognized only to the extent that cash is received and the loan’s principal balance is deemed collectible.

Loans are restored to accrual status when loans become well-secured and management believes full collectability of

principal and interest is probable.

Loans are restored to accrual status when loans become well-secured and management believes full collectability of principal

and interest is probable.

Loans are evaluated for expected credit losses over their contractual term, reflecting management’s current estimate.

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borrowers experiencing financial difficulty are considered to have elevated credit risk and are carefully considered within our current expected credit loss methodology.

Income from loans placed on nonaccrual status continues to be recognized

to the extent cash is received and when the collectability of the loan’s principal balance is reasonably assured.

Depending on a particular loan’s risk characteristics, we estimate expected credit losses using methods such as present value of

expected future cash flows discounted at the loan’s effective interest rate, observable market prices for similar assets if available, or the fair value of collateral less estimated costs to sell for collateral-dependent loans.

considered collateral-dependent when the expected source of repayment is primarily the liquidation of the collateral.

Fair value, where utilized, is determined by independent appraisals, typically on an annual basis.

Between appraisal periods,

the estimated fair value may be adjusted based on specific events, such as identified deterioration of collateral quality through our credit risk monitoring, or discussions with the borrower indicating the appraised value may no longer reflect

current market conditions.

Depending on a particular loan’s risk characteristics, we estimate expected

credit losses using methods such as present value of expected future cash flows discounted at the loan’s effective interest rate, observable market prices for similar assets if available, or the fair value of collateral less estimated costs to sell

for collateral-dependent loans.

A loan is considered collateral-dependent when the expected source of repayment is primarily the liquidation of the collateral.

Fair value, where utilized, is determined by independent appraisals, typically on an

annual basis.

Between appraisal periods, the estimated fair value may be adjusted based on specific events, such as identified deterioration of collateral quality through our credit risk monitoring, or discussions with the borrower indicating the

appraised value may no longer reflect current market conditions.

The estimated credit losses are recognized as an allowance for credit losses, which is a valuation account.

Changes in the allowance for credit losses, whether increases or decreases, are recorded in current period

earnings as provision for credit losses.

Changes in the allowance for credit losses, whether increases or decreases,

are recorded in current period earnings as provision for credit losses.

Real estate we acquire as a result of foreclosure or by deed-in-lieu of foreclosure is classified as other real estate owned, or OREO, until sold, and is initially recorded at fair value less

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Nonperforming assets consist of nonperforming loans plus OREO.

Loans accounted for

on a nonaccrual basis were $7.2 million as of December 31, 2024, $18.9 million as of December 31, 2023 and $8.0 million as of December 31, 2022.

OREO was $321,000, $0, and $0 as of December 31, 2024, December 31, 2023, and December 31, 2022,

respectively.

Loans accounted for on a nonaccrual basis

were $6.5 million as of December 31, 2025, $7.2 million as of December 31, 2024, and $18.9 million as of December 31, 2023.

OREO was $461,000, $321,000, and $0 as of December 31, 2025, December 31, 2024, and December 31, 2023, respectively.

The following table presents information regarding nonperforming assets as of the dates indicated:

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Ratio of nonperforming assets to total assets

(1) Included in the nonaccrual loans balance are $0 and $10.12 million of loans modified to borrowers experiencing financial difficulty as of December 31,

2024 and December 31, 2023, respectively.

See Note 6 of the financial statements.

(1) There are no loans modified to borrowers experiencing financial difficulty included in nonaccrual loans as of December 31, 2025 and December 31, 2024, respectively.

(2) Excludes OREO of $461,000, $321,000, and $0 as of December 31, 2025, 2024, and 2023, respectively, as the balances are not considered material for separate disclosure.

The following tables present an aging analysis of loans as of the dates indicated.

As of December 31, 2025

Total past due

(Dollars in thousands)

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Construction & development

1-4 family commerical

1-4 family commercial

Commercial real estate - other

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In addition to the past due and nonaccrual criteria, the Company also evaluates loans according to its internal risk grading system.

Loans are segregated between pass, watch, special mention,

and substandard categories.

Loans are segregated between pass, watch, special mention, and

substandard categories.

The definitions of those categories are as follows:

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These loans have observable weaknesses or evidence imprudent handling or structural issues.

The weaknesses require close attention, and

the remediation of those weaknesses is necessary.

The weaknesses require close attention, and the

remediation of those weaknesses is necessary.

No risk of probable loss exists.

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Substandard loans totaled $7.9 million as of December 31, 2025, a decrease of $7.3 million compared to December 31, 2024.

Substandard loans totaled $31.1 million as of December 31, 2023, an

increase of $10.1 million compared to December 31, 2022.

The total net decrease in substandard loans in 2024 as compared to 2023, is comprised of a net decrease in commercial and industrial substandard loans primarily related to a decrease in

one relationship comprised of three notes totaling $18.4 million with a $2.0 million specific reserve, and a net increase in commercial real estate primarily related to two relationships comprised of one note totaling $3.0 million with a $0.2

million specific reserve, and one note totaling $1.45 million with no specific reserve.

Substandard loans totaled $15.2 million as of December 31, 2024, a decrease

of $15.9 million compared to December 31, 2023.

The total net decrease in substandard loans in 2025 as compared to 2024, is comprised of a net decrease in commercial and industrial substandard loans primarily related to one note totaling $3.9

million with no specific reserve, and a net decrease in commercial real estate primarily related to one note totaling $3.0 million with a $0.2 million specific reserve.

Outstanding loan balances categorized by internal risk grades as of the periods indicated are summarized as follows:

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Commercial & industrial

We gather deposits primarily through our twelve branch locations and online though our website.

We gather deposits primarily through our twelve branch locations and online through our website.

We offer a variety of deposit products including demand deposit accounts and interest-bearing

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Some of our interest-bearing deposits were obtained through brokered transactions.

We participate in the CDARS program, where customer funds are placed into multiple certificates of deposit, each in an

amount under the standard FDIC insurance maximum of $250,000, and placed at a network of banks across the United States.

We also participate in the One-Way Buy Insured Cash Sweep service and similar services, which provide for one-way buy

transactions among banks for the purpose of purchasing cost-effective floating-rate funding without collateralization or stock purchase requirements.

As of December 31, 2024, 2023, and 2022 brokered deposits were $336.7 million, $273.5 million, and $249.9 million, respectively.

We participate in the CDARS program, where customer funds are placed into multiple certificates of deposit, each in an amount

under the standard FDIC insurance maximum of $250,000, and placed at a network of banks across the United States.

We also participate in the One-Way Buy Insured Cash Sweep service and similar services, which provide for one-way buy transactions

among banks for the purpose of purchasing cost-effective floating-rate funding without collateralization or stock purchase requirements.

Of our interest-bearing deposits, some were obtained through brokered transactions.

As of December 31, 2025, 2024, and 2023, brokered deposits were $205.6 million, $225.5 million, and $50.1 million,

respectively.

To manage liquidity and provide insurance for customer funds, the Company participates in reciprocal deposit programs, such as CDARS and ICS.

At December 31, 2025, reciprocal deposits totaled $576.5 million.

Uninsured deposits are defined as the portion of deposit accounts in U.S.

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classified as deposits and are not subject to any federal or state deposit insurance regimes.

Total uninsured deposits were $354.2 million and $448.7 million at December 31, 2024 and December 31, 2023, respectively, as calculated per regulatory

This was approximately 23.4% and 28.2% of deposits at December 31, 2024 and December 31, 2023, respectively.

Total uninsured deposits were $391.7 million and $354.2 million as of December 31, 2025 and December 31, 2024, respectively, as calculated per

regulatory guidance.

This was approximately 23.2% and 23.4% of deposits as of December 31, 2025 and December 31, 2024, respectively.

Total deposits as of December 31, 2025, 2024, and 2023 were $1.70 billion, $1.52 billion and $1.59 billion, respectively.

The following table sets forth deposit balances by certain categories as

of the dates indicated and the percentage of each deposit category to total deposits.

As of December 31,

The following table sets forth deposit balances by certain categories as of

the dates indicated and the percentage of each deposit category to total deposits.

For the Year Ended December 31,

Percentage of

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As of December 31, 2025, we had no unsecured fed funds lines with correspondent depository institutions with no amounts advanced.

In addition, based on the values of loans pledged as collateral,

we had borrowing availability with the FHLB of $190.9 million as of December 31, 2024 and $159.2 million as of December 31, 2023, and we had access to approximately $336.1 million in liquidity with the Federal Reserve Bank as of December 31,

2024 and $0 as of December 31, 2023.

In addition, based on the values of loans pledged as collateral, we

had borrowing availability with the FHLB of $213.8 million as of December 31, 2025 and $190.9 million as of December 31, 2024, and we had access to approximately $288.6 million in liquidity with the Federal Reserve Bank as of December 31, 2025

and $336.1 million as of December 31, 2024.

Capital Requirements

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information, see “Supervision and Regulation – Regulatory Capital Requirements” and “Supervision and Regulation – Prompt Corrective Action Framework.”

In the wake of the global financial crisis of 2008 and 2009, the role of capital has become fundamentally more important, as banking regulators have concluded that the amount and quality of

capital held by banking organizations was insufficient to absorb losses during periods of severely distressed economic conditions.

In the wake of the global financial crisis of 2008 and 2009, the role of capital has become fundamentally more important, as banking regulators have concluded that the amount and quality of capital

held by banking organizations was insufficient to absorb losses during periods of severely distressed economic conditions.

The Dodd-Frank Act and banking regulations promulgated by the U.S.

federal banking regulators to implement Basel

III have established strengthened capital standards for banks and bank holding companies and require more capital to be held in the form of common stock.

In addition, the Basel III regulations implement a concept known as the “capital

conservation buffer.” In general, banks, bank holding companies with more than $3.0 billion in assets and bank holding companies with publicly-traded equity are required to hold a buffer of CET1 capital equal to 2.5% of risk-weighted assets

over each minimum capital ratio in order to avoid being subject to limits on capital distributions (e.g., dividends, stock buybacks, etc.) and certain discretionary bonus payments to executive officers.

federal banking regulators to implement Basel III have

established strengthened capital standards for banks and bank holding companies and require more capital to be held in the form of common stock.

In addition, the Basel III regulations implement a concept known as the “capital conservation

buffer.” In general, banks, bank holding companies with more than $3.0 billion in assets and bank holding companies with publicly-traded equity are required to hold a buffer of CET1 capital equal to 2.5% of risk-weighted assets over each minimum

capital ratio in order to avoid being subject to limits on capital distributions (e.g., dividends, stock buybacks, etc.) and certain discretionary bonus payments to executive officers.

As of December 31, 2025, the FDIC categorized the Bank as “well-capitalized” under the prompt corrective action framework.

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management believes would change this classification.

The table below also summarizes the capital requirements applicable to the Bank in order to be considered “well-capitalized” from a regulatory perspective, as well as the Bank’s capital ratios as

of December 31, 2024, 2023, and 2022.

December 31, 2025, 2024, and 2023.

The Bank exceeded all regulatory capital requirements under Basel III and the Bank was considered to be “well-capitalized” as of the dates reflected in the tables below.

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We are a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of our customers.

These financial instruments include commitments

to extend credit and standby letters of credit.

These financial instruments include commitments to

extend credit and standby letters of credit.

Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheet.

The contractual or notional amounts

of those instruments reflect the extent of involvement we have in particular classes of financial instruments.

The contractual or notional amounts of

those instruments reflect the extent of involvement we have in particular classes of financial instruments.

To control this credit risk, the Company uses the same underwriting standards as it uses for loans recorded on the balance sheet.

Loan commitments are agreements to lend to a customer, as long as there is no violation of any condition established in the contract.

Standby letters of credit are conditional commitments issued

by the Bank to guarantee the performance of the customer to a third party.

Standby letters of credit are conditional commitments issued by

the Bank to guarantee the performance of the customer to a third party.

They are intended to be disbursed, subject to certain conditions, upon request of the borrower.

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based on information available as of the date of the financial statements and, as this information changes, actual results could differ from the estimates, assumptions and judgments reflected in the financial statement.

In particular,

management has identified several accounting policies that, due to the estimates, assumptions and judgments inherent in those policies, are critical in understanding our financial statements.

In particular, management

has identified several accounting policies that, due to the estimates, assumptions and judgments inherent in those policies, are critical in understanding our financial statements.

The following is a discussion of the critical accounting policies and significant estimates that we believe require us to make the most complex or subjective decisions or assessments.

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The allowance is based on management’s estimate of probable losses inherent in the loan portfolio.

In the opinion of management, the allowance is adequate to absorb estimated losses in the

portfolio as of each balance sheet date.

While management uses available information to analyze losses on loans, future additions to the allowance may be necessary based on changes in economic conditions and changes in the composition of the

loan portfolio.

In the opinion of management, the allowance is adequate to absorb estimated losses in the portfolio

as of each balance sheet date.

In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Bank’s allowance.

In analyzing the adequacy of the allowance, a comprehensive loan grading system to determine

risk potential in loans is utilized together with the results of internal credit reviews.

In analyzing the adequacy of the allowance, a comprehensive loan grading system to determine risk

potential in loans is utilized together with the results of internal credit reviews.

To estimate the allowance for credit losses, the loan portfolio is segmented based on shared risk characteristics, primarily by loan type.

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concentrations of credit risk, and the experience and abilities of our lending personnel in the current environment.

In addition to these segment-level estimations, loans with larger balances or unique risk profiles may be further analyzed

based on specific facts and circumstances to refine the overall expected credit loss estimate.

In addition to these segment-level estimations, loans with larger balances or unique risk profiles may be further analyzed based

on specific facts and circumstances to refine the overall expected credit loss estimate.

This individual analysis helps ensure the allowance for credit losses appropriately reflects the expected losses inherent in the portfolio.

Adjustments to the segment-level or portfolio-level expected credit loss estimates may be necessary when specific loan characteristics warrant a different loss expectation than indicated by the segment risk factors.

Goodwill and Intangibles

Intangible assets totaled $878,000 and goodwill, net of accumulated amortization totaled $8.5 million for the year ended December 31, 2024, compared to intangible assets of $1.0 million and goodwill, net of

accumulated amortization of $8.5 million for the year ended December 31, 2023.

Goodwill resulting from a business combination represents the excess of the fair value of the consideration transferred over the fair value of the net assets acquired and liabilities assumed as of the acquisition

Goodwill is tested annually for impairment or more frequently if other impairment indicators are present.

If the implied fair value of goodwill is lower than its carrying amount, a goodwill impairment is indicated and goodwill is written

down to its implied fair value.

Subsequent increases in goodwill value are not recognized in the accompanying consolidated financial statements.

Other intangible assets consist of core deposit intangible assets and are amortized on a straight-line basis based on an estimated useful life of 10 years.

Such assets are periodically evaluated as to the

recoverability of their carrying values.

The Company files a consolidated income tax return.

Deferred taxes are recognized under the balance sheet method based upon the future tax consequences of temporary differences between the

carrying amounts and tax basis of assets and liabilities, using the tax rates expected to apply to taxable income in the periods when the related temporary differences are expected to be realized.

The amount of accrued current and deferred income taxes is based on estimates of taxes due or receivable from taxing authorities either currently or in the future.

Changes in these accruals are

reported as tax expense, and involve estimates of the various components included in determining taxable income, tax credits, other taxes and temporary differences.

Changes periodically occur in the estimates due to changes in tax rates, tax

laws and regulations and implementation of new tax planning strategies.

The process of determining the accruals for income taxes necessarily involves the exercise of considerable judgment and consideration of numerous subjective factors.

Management performs an analysis of the Company’s tax positions annually and believes it is more likely than not that all of its tax positions will be utilized in future years.

Fair Value of Financial Instruments

ASC Topic 820, Fair Value Measurement, defines fair value as the price that would be received to sell a financial asset or paid to transfer a financial liability in an orderly transaction between

market participants at the measurement date.

The degree of management judgment involved in determining the fair value of assets and liabilities is dependent upon the availability of quoted market prices or observable market parameters.

financial instruments that trade actively and have quoted market prices or observable market parameters, there is minimal subjectivity involved in measuring fair value.

When observable market prices and parameters are not available, management

judgment is necessary to estimate fair value.

In addition, changes in market conditions may reduce the availability of quoted prices or the observable date.

Debt securities that are being held for indefinite periods of time and are not intended to sell, are classified as available for sale and are stated at estimated fair value.

Unrealized gains or

losses on debt securities available for sale are reported as a component of stockholders’ equity and comprehensive income, net of income tax.

The Company reviews its portfolio of debt securities in an unrealized loss position at least quarterly.

The Company first assesses whether it intends to sell, or it is more-likely-than-not that it

will be required to sell, the securities before recovery of the amortized cost basis.

If either of these criteria is met, the securities amortized cost basis is written down to fair value as a current period expense.

If either of the above

criteria is not met, the Company evaluates whether the decline in fair value is the result of credit losses or other factors.

In making this assessment, the Company considers, among other things, the period of time the security has been in an

unrealized loss position, and performance of any underlying collateral and adverse conditions specifically related to the security.

The estimates of fair values of debt securities and other financial instruments are based on a variety of factors.

In some cases, fair values represent quoted market prices for identical or

comparable instruments.

In other cases, fair values have been estimated based on assumptions concerning the amount and timing of estimated future cash flows and assumed discount rates reflecting varying degrees of risk.

Accordingly, the fair

values may not represent actual values of the financial instruments that could have been realized as of year-end or that will be realized in the future.

Adjustments to

the segment-level or portfolio-level expected credit loss estimates may be necessary when specific loan characteristics warrant a different loss expectation than indicated by the segment risk factors.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis