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Item 7. Management’s Discussion and Analysis

2026-03-31 compared with 2025-03-31 · 296 added, 305 removed, 160 unchanged (79% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion is intended to provide a reader of our financial statements with a narrative from the perspective of our management on our financial condition, results of operations,

liquidity and other factors that have affected our reported results of operations and financial condition or may affect our future results or financial condition.

The following discussion should be read in conjunction with the Consolidated

Financial Statements and related Notes included in Item 8 “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.

Total assets decreased by $71.7 million to $1.3 billion at December 31, 2024, compared to $1.4 billion at December 31, 2023, reflecting decreases in securities available-for-sale of $113.1

million, primarily due to maturities and paydowns, and cash and cash equivalents of $43.8 million, primarily due to repayments of borrowings.

These decreases were partially offset by growth in net loans of $88.4 million during the year ended

December 31, 2024.

Total liabilities decreased by $75.0 million to $1.0 billion at December 31, 2024 from $1.1 billion at December 31, 2023.

The decrease in total liabilities during 2024 resulted primarily from

decreases in borrowings of $100.0 million from the Bank Fund Term Program, as well as decreases of $14.0 million in notes payable, $13.8 million in FHLB advances and $6.9 million in securities sold under agreements to repurchase, offset by a

net $62.8 million increase in total deposits.

We recorded net income attributable to Broadway of $1.9 million for the year ended December 31, 2024 or $0.04 per share compared to net income of $4.5 million or $0.52 per share

for the year ended December 31, 2023.

Net income attributable to common stockholders was $359 thousand for the year ended December 31, 2024 after deducting preferred dividends of $1.6 million, compared to net income attributable to common

stockholders of $4.5 million for the year ended December 31, 2023.

Diluted earnings per common share was $0.04 for the year ended December 31, 2024 compared to $0.51 of earnings per diluted common share for the year ended December 31,

Diluted earnings per share for the year ended December 31, 2024 reflects preferred dividends of $0.18 per diluted common share.

The decrease in net income attributable to the Company during the year ended December 31, 2024, compared to the year ended December 31, 2023, primarily resulted from a decrease in

non-interest income of $3.8 million, related to grant income received from the Equitable Recovery Program administered by the U.S.

Treasury’s Community Development Financial Institutions (“CDFI”) Fund in

2023, and an increase in non-interest expense of $2.5 million, partially offset by an increase in net interest income after provision for credit losses of $2.6 million, and a decrease in tax expense of $1.2 million.

The following table summarizes the return on average assets, the return on average equity and the average equity to average assets ratios for the periods indicated:

The following discussion is intended to provide a reader of our financial statements with a narrative from the perspective of our management on our financial

condition, results of operations, liquidity and other factors that have affected our reported results of operations and financial condition or may affect our future results or financial condition.

The following discussion should be read in

conjunction with the Consolidated Financial Statements and related Notes included in Item 8 “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.

Total assets increased by $10.7 million to $1.3 billion at December 31, 2025, compared to $1.3 billion at December 31, 2024, reflecting an increase in

securities available-for-sale of $53.0 million, primarily due to purchases, an increase in bank owned life insurance of $20.3 million, due to purchases, and an increase in loans held for investment, net of $16.6 million, primarily due to loan

These increases were partially offset by a decrease in cash and cash equivalents of $50.9 million, primarily due to repayments of borrowings, a $25.9 million goodwill impairment charge recorded in the third quarter of 2025, and a

decrease in FHLB stock of $5.2 million.

Total liabilities increased by $32.9 million to $1.1 billion at December 31, 2025 from $1.0 billion at December 31, 2024.

The increase in total liabilities

during 2025 resulted primarily from an increase in deposits of $172.2 million and a $14.2 million increase in securities sold under agreements to repurchase, partially offset by a $154.9 million decrease in borrowings.

For the year ended December 31, 2025, the Company reported consolidated net loss attributable to common stockholders of $27.8 million after

preferred dividends of $3.0 million and goodwill impairment of $25.9 million, compared to net income attributable to common stockholders of $362 thousand for the year ended December 31, 2024 after preferred dividends of $1.6 million.

diluted common share was ($3.23) for the year ended December 31, 2025, compared to $0.04 of earnings per diluted common share for the year ended December 31, 2024.

Consolidated net income before preferred dividends and goodwill impairment was

$1.1 million, or $0.12 per diluted share, for the year ended December 31, 2025, compared to consolidated net income of $1.9 million, or $0.22 per diluted share, for the year ended December 31, 2024.

Diluted loss per common share for the year

ended December 31, 2025 reflects preferred dividends of ($0.35) per diluted common share and goodwill impairment of ($3.01) per diluted common share.

“Net income before preferred dividends and goodwill impairment” and “Earnings per common share –

diluted before preferred dividends and goodwill impairment” are considered to be non-GAAP measures.

See “Use of Non-GAAP Financial Measures” section of this Form 10-K for a reconciliation of these amounts to the associated GAAP financial measure.

The $28.2 million decrease in consolidated net income attributable to common stockholders during the year ended December 31, 2025, compared to the year ended

December 31, 2024, primarily resulted from the goodwill impairment of $25.9 million and an increase in preferred dividends of $1.4 million.

The following table summarizes the return on average assets, the return on average equity and the average equity to average assets ratios for the periods

For the Years Ended December 31,

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Our most significant source of income is net interest income, which is the difference between our interest income and our interest expense.

Generally, interest income is generated from our loans

and investments (interest earning assets) and interest expense is incurred from deposits and borrowings (interest-bearing liabilities).

Typically, our results of operations are also affected by our provision for credit losses, non-interest

income generated from service charges and fees on loan and deposit accounts, non-interest expenses, and income taxes.

interest income is generated from our loans and investments (interest earning assets) and interest expense is incurred from deposits and borrowings (interest-bearing liabilities).

Typically, our results of operations are also affected by our

provision for credit losses, non-interest income generated from service charges and fees on loan and deposit accounts, non-interest expenses, and income taxes.

Net Interest Income

For the year ended December 31, 2024, net interest income before provision for credit losses increased by $2.3 million, or 7.8%, to $31.8 million, compared to $29.5 million for the year ended

December 31, 2023.

The increase resulted from higher interest income of $15.0 million, partially offset by an increase in interest expense of $12.7 million.

For the year ended December 31, 2025, net interest income before provision for credit losses increased by $1.4 million, or 4.3%, to $33.1 million, compared

to $31.8 million for the year ended December 31, 2024.

The increase resulted from lower interest expense of $4.0 million, partially offset by a decrease in interest income of $2.7 million.

Interest income and fees on loans receivable increased by $2.5 million during the year ended December 31, 2025, compared to the year ended December 31, 2024.

This increase was primarily due to

a $138.8 million increase in the average balance of loans receivable which increased interest income by $6.9 million.

In addition, the average loan yield increased from 4.59% for the year ended December 31, 2023, to 5.15% for the year ended

December 31, 2024, which increased interest income by $4.8 million.

Interest income on securities decreased by $1.7 million to $7.0 million for the year ended December 31, 2024, compared to $8.7 million for the year ended December 31, 2023.

The decrease in

interest income on securities primarily resulted from a decrease of $59.5 million in the average balance of securities, which decreased interest income by $1.6 million.

In addition, we had a decrease of 2 basis points in the average interest

yield earned on investment securities during 2024, which decreased interest income by $71 thousand.

Other interest income increased by $5.0 million in 2024, compared to the same period in 2023, primarily due to an increase of $87.9 million in the average balance of

interest-earnings deposits, which increased interest income by $4.6 million during the year ended December 31, 2024, compared to the year ended December 31, 2023.

Interest expense on deposits increased by $5.7 million during the year ended December 31, 2024, compared to the year ended December 31, 2023, primarily due to an increase of 94 basis points in

the average cost of deposits.

The average cost of deposits increased to 2.24% for 2024, compared to 1.30% for 2023, which increased interest expense by $5.0 million.

Interest expense on borrowings increased by $7.0 million to $17.3 million during the year ended December 31, 2024, compared to $10.3 million during the year ended December 31, 2023.

was primarily due to an increase in the average balance of outstanding Bank Fund Term Program borrowings of $91.5 million, which increased interest expense by $4.7 million, and a $22.6 million increase in the average balance of FHLB advances,

which increased interest expense by $1.1 million.

Further, a 102 basis point increase in the average rate paid on securities sold under agreements to repurchase increased interest expense by $803 thousand.

The net interest margin decreased to 2.40% for the year ended December 31, 2024 from 2.55% for the year ended December 31, 2023, primarily due to the average cost of funds increasing to 3.16%

for the year ended December 31, 2024 from 2.15% for the year ended December 31, 2023 due to rate increases by the Federal Reserve.

This increase was partially offset by an improvement of 61 basis points in the average yield earned on

average interest-earning assets.

This increase was primarily due to a $28.7 million increase in the average balance of loans receivable which increased interest income by $1.5 million.

In addition, the average loan yield increased from 5.15% for the year ended December 31, 2024,

to 5.26% for the year ended December 31, 2025, which increased interest income by $1.0 million.

Interest income on securities decreased by $622 thousand to $6.4 million for the year ended December 31, 2025, compared to $7.0 million for the year ended

December 31, 2024.

The decrease in interest income on securities primarily resulted from a decrease of $55.2 million in the average balance of securities, which decreased interest income by $2.4 million.

This decrease was partially offset by an

increase of 41 basis points in the average interest yield earned on investment securities during 2025, which increased interest income by $1.7 million.

Other interest income decreased by $4.5 million in 2025, compared to the same period in 2024, primarily due to a decrease of $72.8 million in

the average balance of interest-earnings deposits, which decreased interest income by $3.3 million during the year ended December 31, 2025, compared to the year ended December 31, 2024, as well as a 96 basis points decrease in the average

interest yield earned on interest-earnings deposits, which decreased other income by $837 thousand.

Interest expense on deposits increased by $6.7 million during the year ended December 31, 2025, compared to the year ended December 31, 2024, primarily due

to a $128.9 million increase in the average balance of deposits, which increased interest expense by $4.1 million, as well as an increase of 53 basis points in the average cost of deposits.

The average cost of deposits increased to 2.77% for 2025,

compared to 2.24% for 2024, which increased interest expense by $2.7 million.

Interest expense on borrowings decreased by $10.8 million to $8.2 million during the year ended December 31, 2025, compared to $19.0 million during the year

ended December 31, 2024.

The decrease was primarily due to a $108.9 million decrease in the average outstanding balance of borrowings, which decreased interest expense by $4.9 million, and a decrease in the average balance of outstanding Bank Fund

Term Program borrowings of $92.3 million.

The net interest margin increased to 2.64% for the year ended December 31, 2025 from 2.34% for the year ended December 31, 2024, due to an increase in the

average yield earned on average interest-earning assets from 4.70% for the year ended December 31, 2024 to 4.88% for the year ended December 31, 2025.

In addition, the average cost of funds decreased from 3.23% for the year ended December 31, 2024

to 3.07% for the year ended December 31, 2025.

Analysis of Net Interest Income

Net interest income is the difference between income on interest earning assets and the expense on interest-bearing liabilities.

Net interest income depends upon the relative amounts of interest

earning assets and interest-bearing liabilities and the interest rates earned or paid on them.

The following table sets forth average balances, average yields and costs, and certain other information for the years indicated.

balances are daily average balances.

The yields set forth below include the effect of deferred loan fees, deferred origination costs, and discounts and premiums that are amortized or accreted to interest income or expense.

We do not accrue

interest on loans that are on non-accrual status;

Net interest income depends

upon the relative amounts of interest earning assets and interest-bearing liabilities and the interest rates earned or paid on them.

The following table sets forth average balances, average yields and costs, and certain other information for the

years indicated.

All average balances are daily average balances.

The yields set forth below include the effect of deferred loan fees, deferred origination costs, and discounts and premiums that are amortized or accreted to interest income or

We do not accrue interest on loans that are on non-accrual status;

however, the balance of these loans is included in the total average balance, which has the effect of reducing average loan yields.

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Non-interest-earning assets

Liabilities and Stockholders’ Equity

Liabilities and Equity

Interest-bearing liabilities:

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Total deposits

FHLB advances

BTFP borrowing

Other borrowings

Securities sold under agreements to repurchase

Total borrowings

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Non-interest-bearing liabilities

Stockholders’ equity

Total liabilities and stockholders’ equity

Total liabilities and equity

Net interest rate spread (2)

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Amount is net of deferred loan fees, loan discounts and loans in process, and includes deferred origination costs, loan premiums and loans receivable held for sale.

Includes non‑accrual interest of $102 thousand, reflecting interest recoveries on non‑accrual loans that were paid off for the year ended December 31, 2022.

Net interest rate spread represents the difference between the yield on average interest‑earning assets and the cost of average interest‑bearing liabilities.

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Changes in our net interest income are a function of changes in both rates and volumes of interest earning assets and interest-bearing liabilities.

The following table sets forth information

regarding changes in our interest income and expense for the years indicated.

Information is provided in each category with respect to (i) changes attributable to changes in volume (changes in volume multiplied by prior rate), (ii) changes

attributable to changes in rate (changes in rate multiplied by prior volume), and (iii) the total change.

The changes attributable to the combined impact of volume and rate have been allocated proportionately to the changes due to volume and

the changes due to rate.

following table sets forth information regarding changes in our interest income and expense for the years indicated.

Information is provided in each category with respect to (i) changes attributable to changes in volume (changes in volume

multiplied by prior rate), (ii) changes attributable to changes in rate (changes in rate multiplied by prior volume), and (iii) the total change.

The changes attributable to the combined impact of volume and rate have been allocated proportionately

to the changes due to volume and the changes due to rate.

Year Ended December 31, 2025

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Total deposits

FHLB advances

BTFP borrowing

Other borrowings

Securities sold under agreements to repurchase

Total borrowings

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Provision for Credit Losses

During the year ended December 31, 2024, we recorded a provision for credit losses of $664 thousand, compared to a provision for credit losses of $933 thousand during the same period in 2023.

No loan charge-offs were recorded during the year ended December 31, 2024 or 2023.

The Bank recorded a recovery of $216 thousand during the fourth quarter of 2023.

We also recorded a recovery of provision for off-balance sheet loan

commitments of $91 thousand and $2 thousand for the years ended December 31, 2024 and 2023, respectively.

During the year ended December 31, 2025, we recorded a provision for credit losses of $2.2 million, compared to a provision for credit losses of $660

thousand during the same period in 2024.

During the year ended December 31, 2025, we recorded loan charge-offs of $1.2 million.

No loan charge-offs were recorded during the year ended December 31, 2024.

We also recorded a recovery of provision for

off-balance sheet loan commitments of $53 thousand and $91 thousand for the years ended December 31, 2025 and 2024, respectively.

See “Allowance for Credit Losses” for additional information.

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For the year ended December 31, 2025, non-interest income totaled $1.8 million, compared to $1.6 million for the year-ended December 31, 2024.

The decrease of $3.8 million in

non-interest income was primarily the result of non-recurring income of $3.7 million from a grant from the CDFI Fund’s Equitable Recovery Program recognized during 2023.

Non‑Interest Expense

Non-interest expenses totaled $29.9 million for the year ended December 31, 2024, compared to $27.4 million for the year ended December 31, 2023, primarily due to increases

in compensation and benefits expenses of $1.9 million and professional fees of $323 thousand.

The increase of $1.9 million in compensation and benefits expense during 2024 compared to 2023 reflects the investment in additional executives and staff to support growth and strengthen overall

controls and management depth.

The increase in professional services expense was primarily due to the costs associated with third-party professionals that were retained in connection with the Company’s remediation efforts of the weaknesses

in internal controls that were identified during preparation of the financial statements for the third quarter of 2023.

Non-interest expenses totaled $57.2 million for the year ended December 31, 2025, compared to $29.9 million for the year ended December 31,

This $27.3 million increase was primarily due to the $25.9 million goodwill impairment and a $1.3 million increase in compensation and benefits expense.

Income tax expense or benefit is computed by applying the statutory federal income tax rate of 21%.

State taxes are recorded at the State of California tax rate and Washington, D.C.

according to the state apportionment calculation as the Bank’s operations are conducted in both California and the Washington, D.C.

The Company recorded an income tax expense of $814 thousand for the year ended December 31, 2024,

representing an effective tax rate of 29.4%, compared to an income tax expense of $2.0 million for the year ended December 31, 2023, representing an effective tax rate of 30.4%.

The effective tax rate for each year differs from the 21%

federal statutory rate due to the impact of state taxes as well as various permanent tax differences, vesting of stock-based compensation and other discrete items.

Our deferred tax asset totaled $8.8 million at December 31, 2024 and $9.5 million at December 31, 2023.

See Note 1 “Summary of Significant Accounting Policies” and Note 14 “Income Taxes” of the

Notes to Consolidated Financial Statements for a further discussion of income taxes and a reconciliation of income tax at the federal statutory tax rate to the actual income tax benefit.

State and local taxes are recorded at the State of

California tax rate and Washington, D.C.

tax rate, according to the state apportionment calculation as the Bank’s operations are conducted in both California and the Washington, D.C.

The Company recorded an income tax expense of $338 thousand

for the year ended December 31, 2025, representing an effective tax rate of (1.4)%, compared to an income tax expense of $815 thousand for the year ended December 31, 2024, representing an effective tax rate of 29.4%.

The effective tax rate for

each year differs from the 21% federal statutory rate due to the impact of state and local taxes as well as various permanent tax differences, vesting of stock-based compensation and other discrete items.

Our deferred tax assets totaled $6.7 million at December 31, 2025 and $8.9 million at December 31, 2024.

See Note 1 “Summary of Significant Accounting

Policies” and Note 14 “Income Taxes” of the Notes to Consolidated Financial Statements for a further discussion of income taxes and a reconciliation of income tax at the federal statutory tax rate to the actual income tax expense.

Comparison of Financial Condition at December 31, 2025 and 2024

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As of December 31, 2025, we had $256.8 million of investment securities classified as available-for-sale, compared to $203.9 million at December 31, 2024.

The decrease during 2024 was primarily

due to principal payments and maturities.

The increase during 2025 was primarily due to purchases of investment securities.

Loans Receivable Held for Investment

Loans receivable held for investment, net of the allowance for credit losses, totaled $968.9 million at December 31, 2024, compared to $880.5 million at December 31, 2023.

The increase of $88.4

million in loans receivable held for investment during 2024 was primarily due to originations of $157.7 million in new loans, $80.9 million of which were multi-family loans, $50.8 million in commercial real estate loans, $17.6 million in

other commercial loans, $7.6 million in construction loans, and $800 thousand in SBA loans.

Loans receivable held for investment, net of the allowance for credit losses, totaled $1.0 billion at December 31, 2025, compared to $1.0 billion at December

The increase of $16.6 million in loans receivable held for investment during 2025 was primarily due to originations of $45.6 million in new loans.

The Bank also purchased $78.0 of loans during the year ended December 31, 2025, which

included $59.1 million of other commercial loans and $18.9 million of SBA loans.

Loan repayments during 2025 totaled $36.6 million.

During 2023, the Bank originated $162.1 million in new loans, $78.9 million of which were multi-family loans, $40.0 million of which were construction loans, $28.3 million of which were

commercial real estate loans, and $15.0 million of which were other commercial loans.

During 2024, the Bank originated $160.9 million in new loans, $80.9 million of which were multi-family loans, $50.8 million of which were commercial real

estate loans, $19.4 million of which were other commercial loans, $8.9 million of which were construction loans, and $800 thousand of which were SBA loans.

Loan repayments during 2024 totaled $72.4 million.

Allowance for Credit Losses

Effective January 1, 2023, the Company accounts for credit losses on loans in accordance with ASC 326, which requires the Company to record an estimate of expected lifetime credit losses for

loans at the time of origination or acquisition.

The ACL is maintained at a level deemed appropriate by management to provide for expected credit losses in the portfolio as of the date of the consolidated statements of financial condition.

The Company accounts for credit losses on loans in accordance with ASC 326, which requires the Company to record an estimate of expected lifetime credit

losses for loans at the time of origination or acquisition.

The ACL is maintained at a level deemed appropriate by management to provide for expected credit losses in the portfolio as of the date of the consolidated statements of financial

Estimating expected credit losses requires management to use relevant forward-looking information, including the use of reasonable and supportable forecasts.

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The Company measures the ACL for each of its loan segments using the WARM method.

The weighted average remaining life, including the effect of estimated prepayments, is calculated for each loan pool on a

quarterly basis.

The weighted average remaining life, including the effect of estimated prepayments, is calculated for each loan pool on a quarterly

The Company then estimates a loss rate for each pool using both its own historical loss experience and the historical losses of a group of peer institutions during the period from 2004 through the most recent quarter.

Our ACL was $8.1 million or 0.83% of our gross loans receivable held for investment at December 31, 2024 compared to $7.3 million, or 0.83% of our gross loans receivable held for investment at

December 31, 2023.

The increase was primarily due to growth in the loan portfolio.

Our non-performing loans consist of delinquent loans that are 90 days or more past due and other loans, including loans modified in response to a borrower’s financial difficulty, that do not

qualify for accrual status.

At December 31, 2024, NPLs totaled $264 thousand compared to $0 at December 31, 2023.

Our ACL was $9.4 million or 0.92% of our gross loans receivable held for investment at December 31, 2025 compared to $8.4 million, or 0.83% of our gross

loans receivable held for investment at December 31, 2024.

The increase was primarily due to an increase in specific reserves on collateral dependent loans.

Our non-performing loans (“NPLs”) consist of delinquent loans that are 90 days or more past due and non-accrual loans.

At December 31, 2025, non-performing

loans totaled $11.2 million compared to $264 thousand at December 31, 2024.

The Bank did not have any REO at December 31, 2025 or 2024.

There were no loans that were modified in response to a borrower’s

financial difficulty during 2024 or 2023.

We believe the ACL is adequate to cover expected losses in the loan portfolio as of December 31, 2024, but because of uncertainty regarding the future value of the loan portfolio, there can be

no assurance that actual losses will not exceed the estimated amounts.

During the years ended December 31, 2025 and 2024, loans of $3.1 million and $5.9 million, respectively, were

modified in response to a borrower’s financial difficulty.

We believe the ACL is adequate to cover expected losses in the loan portfolio as of December 31, 2025, but because of uncertainty regarding the future value

of the loan portfolio, there can be no assurance that actual losses will not exceed the estimated amounts.

In addition, the OCC and the FDIC periodically review the ACL as an integral part of their examination process.

These agencies may require an increase in the ACL based on

their judgments of the information available to them at the time of their examinations.

These agencies may require an

increase in the ACL based on their judgments of the information available to them at the time of their examinations.

See Note 1 “Summary of Significant Accounting Policies” to the Company’s Consolidated Financial Statements for further discussion.

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Net office properties and equipment decreased by $167 thousand to $8.7 million at December 31, 2025 from $8.9 million as of December 31, 2024.

Depreciation expense was $424 thousand and $385

thousand for the years 2024 and 2023, respectively.

expense was $410 thousand and $424 thousand for the years ended December 31, 2025 and 2024, respectively.

Goodwill and Core Deposit Intangible

As a result of the Merger, the Company recorded $25.9 million of goodwill.

Goodwill acquired in a purchase business combination that is determined to have an indefinite useful life is not

amortized, but is tested for impairment at least annually or more frequently if events and circumstances exist that indicate the necessity for such impairment tests to be performed.

No impairment charges were recorded during 2024 for goodwill impairment.

Management’s assessment of goodwill is performed in accordance with ASC 350-20 – Intangibles-Goodwill

and Other , which allows the Company to perform a qualitative assessment of goodwill to determine if it is more likely than not the fair value of the Company’s equity is below its carrying value.

The Company performed its qualitative

and quantitative assessment as of September 30, 2024.

Goodwill acquired in a business combination is considered to have an indefinite

useful life and is not amortized, but is tested for impairment at least annually or more frequently if events or changes in circumstances indicate that impairment may exist.

The Company engaged a third-party valuation specialist to perform its

annual goodwill impairment test as of September 30, 2025.

Based on the quantitative assessment, the fair value of the reporting unit was less than its carrying amount, resulting in a full impairment of goodwill.

On October 15, 2025, management,

with oversight from the Audit Committee of the Board of Directors, concluded that the Company’s goodwill was fully impaired.

Accordingly, the Company recorded a non-cash goodwill impairment charge of $25.9 million for the quarter ended September

The Company recorded $3.3 million of core deposit intangible asset as a result of the Merger.

The core deposit intangible asset is amortized on an accelerated basis reflecting the pattern in

which the economic benefits of the intangible asset are consumed or otherwise used up.

The core deposit intangible asset is amortized on an

accelerated basis reflecting the pattern in which the economic benefits of the intangible asset are consumed or otherwise used up.

The estimated life of the core deposit intangible is approximately 10 years.

During the year ended December 31, 2024, the Company recorded $336 thousand of

amortization expense related to the core deposit intangible asset.

The following table outlines the estimated amortization expense related to the core deposit intangible asset during the next five fiscal years and thereafter:

During the year ended December 31, 2025,

the Company recorded $315 thousand of amortization expense related to the core deposit intangible asset.

The following table outlines the estimated amortization expense related to the core deposit intangible asset during the next five fiscal years and

(In thousands)

Deposits at December 31, 2025 were $917.6 million compared to $745.4 million at December 31, 2024.

The increase in deposits of $62.8 million was primarily caused by an increase in Insured Cash

Sweep (“ICS”) deposits.

The increase in deposits of $172.2 million was primarily

caused by increases in money market deposits and certificates of deposit.

Five customer relationships accounted for approximately 28% of our deposit balances at December 31, 2025.

We expect to maintain these relationships with these customers for the foreseeable

We expect to maintain these relationships with

these customers for the foreseeable future.

As of December 31, 2025 and 2024, approximately $413.5 million and $268.8 million of our total deposits were not insured by FDIC insurance.

Total borrowings at December 31, 2024 consisted of advances to the Bank from the FHLB of $195.5 million and repurchase agreements of $66.6 million, compared to advances from the FHLB of $209.3

million, repurchase agreements of $73.5 million and borrowings associated with the BTFP of $100.0 million at December 31, 2023.

Balances of outstanding FHLB advances decreased to $195.5 million at December 31, 2024, from $209.3 million at December 31, 2023, primarily due to repayments of FHLB advances of

$352.8 million, partially offset by $339.0 million in advances from the FHLB.

Total borrowings at December 31, 2025 consisted of advances to the Bank from the FHLB of $72.0 million and repurchase agreements of $80.8

million, compared to advances from the FHLB of $195.5 million, repurchase agreements of $66.6, and secured borrowings of $31.4 million at December 31, 2024.

Balances of outstanding FHLB advances decreased to $72.0 million at December 31, 2025, from $195.5 million at December 31, 2024, primarily due

to repayments of FHLB advances of $1.1 billion, partially offset by $955.8 million in advances from the FHLB.

The weighted average rate on FHLB advances was 3.79% at December 31, 2025, compared to 4.03% at December 31, 2024.

Borrowings under the BTFP with the Federal Reserve were $100.0 million as of December 31, 2023.

This borrowing was paid off in December 2024.

The interest rate was fixed at 4.84% and the borrowing matured on

December 29, 2024.

Investment securities with a book value of $107.3 million and a fair value of $98.3 million were pledged as collateral for this borrowing as of December 31, 2023.

The Bank enters into agreements under which it sells securities subject to an obligation to repurchase the same or similar securities.

Under these arrangements, the Bank may

transfer legal control over the assets but still retain effective control through an agreement that both entitles and obligates the Bank to repurchase the assets.

As a result, these repurchase agreements are accounted for as collateralized

financing agreements (i.e., secured borrowings) and not as a sale and subsequent repurchase of securities.

The obligation to repurchase the securities is reflected as a liability in the Bank’s consolidated statements of financial condition,

while the securities underlying the repurchase agreements remain in the respective investment securities asset accounts.

arrangements, the Bank may transfer legal control over the assets but still retain effective control through an agreement that both entitles and obligates the Bank to repurchase the assets.

As a result, these repurchase agreements are accounted for

as collateralized financing agreements (i.e., secured borrowings) and not as a sale and subsequent repurchase of securities.

The obligation to repurchase the securities is reflected as a liability in the Bank’s consolidated statements of financial

condition, while the securities underlying the repurchase agreements remain in the respective investment securities asset accounts.

In other words, there is no offsetting or netting of the investment securities assets with the repurchase agreement

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These agreements mature on a daily basis.

The fair value of securities pledged totaled $83.3 million as

of December 31, 2024 and included $46.5 million of U.S.

Treasuries, $27.1 million of federal agency debt, $5.5 million of federal agency mortgage-backed securities, and $4.2 million of SBA pools.

As of December 31, 2023, securities sold

under agreements to repurchase totaled $73.5 million at an average rate of 2.60%.

The fair value of securities pledged totaled $ 89.0 million as of December 31, 2023 and included $47.8 million of U.S.

Treasuries, $30.2 million of federal agency debt, and $11.0 million of federal agency mortgage-backed securities.

The fair value of securities pledged totaled $83.7 million as of

December 31, 2025.

As of December 31, 2024, securities sold under agreements to repurchase totaled $66.6 million at an average rate of 3.62%.

One customer relationship accounted for 91% of our balance of securities sold under agreements to repurchase.

We expect to maintain this relationship for the foreseeable future.

In connection with the New Market Tax Credit activities of City First Bank, CFC 45 is a partnership whose members include CFNMA and City First New Markets Fund II, LLC.

This CDE acts in effect

as a pass-through for a Merrill Lynch allocation totaling $14.0 million that needed to be deployed.

In December 2015, Merrill Lynch made a $14.0 million non-recourse loan to CFC 45, whereby CFC 45 passed that loan through to a QALICB.

loan to the QALICB was secured by a Leasehold Deed of Trust that, due to the pass-through, non-recourse structure, was operationally and ultimately for the benefit of Merrill Lynch rather than CFC 45.

Debt service payments received by CFC 45

from the QALICB were passed through to Merrill Lynch in return for which CFC 45 received a servicing fee.

This note was paid off during January 2024.

The financial statements of CFC 45 are consolidated with those of the Bank and the Company.

Stockholders’ Equity

Stockholders’ equity was $285.2 million, or 21.9% of the Company’s total assets, at December 31, 2024, compared to $281.9 million, or 20.5% of the Company’s total assets, at December 31, 2023.

On October 31, 2023 the Company purchased 244,771 shares of its Class A (voting) Common Stock (adjusted for the 1-for-8 reverse stock split effective November 1, 2023) from the Federal Deposit Insurance

Corporation (“FDIC”), which obtained the shares when it was appointed receiver for First Republic Bank upon its closure earlier in 2023.

The purchased shares represented just under 4.0% of the Company’s total voting shares prior to the

purchase, and over 2.6% of the Company’s total common equity.

The Company purchased the shares at a price of $7.2760 per share (adjusted for the 1-for-8 reverse stock split effective November 1, 2023), which represented the 20-day volume

weighted average price for the Class A shares over the period ended October 24, 2023.

We expect to maintain this relationship for the

foreseeable future.

Equity was $262.8 million, or 19.6% of the Company’s total assets, at December 31, 2025, compared to $285.0 million, or 21.4% of the Company’s total assets,

at December 31, 2024.

Use of Non-GAAP Financial Measures

Management uses non-GAAP measures because they provide information to investors about the underlying operational performance and trends of the Company.

disclosures should not be considered in isolation or as a substitute for results determined in accordance with GAAP and are not necessarily comparable to non-GAAP performance measures which may be presented by other bank holding companies.

Management compensates for these limitations by providing detailed reconciliations between GAAP information and the non-GAAP financial measures.

The tables below reconcile the GAAP financial measures to the associated non-GAAP financial measures.

The Company’s book value per common share was $12.28 at December 31, 2025, and its tangible book value per common share was $12.12 at December

Tangible book value per common share is a

non-GAAP measurement that excludes goodwill and the net unamortized core deposit intangible asset, which were both originally recorded in connection with the Merger.

The Company uses this non-GAAP financial measure to provide meaningful

supplemental information regarding the Company’s financial condition and operational performance, and to enhance comparability with banks that have not recorded goodwill and core deposit intangibles in a merger transaction.

A reconciliation

between common book value (calculated in accordance with GAAP) and tangible book value per common share December 31, 2024 is shown as follows:

Tangible book value per common share is a non-GAAP measurement that excludes goodwill and the net unamortized core deposit intangible asset, which were both originally recorded in connection with the CFBanc merger.

The Company uses this

non-GAAP financial measure to provide supplemental information regarding the Company’s financial condition and operational performance.

A reconciliation between common book value and tangible book value per common share is shown as follows:

Equity Capital

December 31, 2025

(Dollars in thousands)

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Tangible book value

Equity Capital

December 31, 2024

(Dollars in thousands)

Common book value

Net unamortized core deposit intangible

Tangible book value

The Company calculates net income before preferred dividends and goodwill impairment by adding preferred stock dividends and goodwill impairment to net

(loss) income available to common shareholders.

Earnings per common share - diluted before preferred dividends and goodwill impairment is calculated by dividing net income before preferred dividends and goodwill impairment by the weighted average

common shares outstanding for diluted earnings per common share.

The Company considers this information important to shareholders because it illustrates net income and earnings per common share - diluted excluding the impact of preferred dividends

and goodwill impairment.

For the Year Ended December 31,

(Dollars in thousands)

Net (loss) income available to common shareholders

Preferred stock dividends - ECIP

Goodwill impairment

Net income before preferred dividends and goodwill impairment

Weighted average common shares outstanding for diluted earnings per common share

Earnings per common share - diluted before preferred dividends and goodwill impairment

Capital Resources

Our principal subsidiary, City First, must comply with capital standards established by the OCC in the conduct of its business.

Failure to comply with such capital requirements may result in

significant limitations on its business or other sanctions.

Failure to comply with such

capital requirements may result in significant limitations on its business or other sanctions.

As a “small bank holding company,” we are not subject to consolidated capital requirements under the new Basel III capital rules.

The current regulatory capital requirements and

possible consequences of failure to maintain compliance are described in Part I, Item 1 “Business‑Regulation” and in Note 16 “Regulatory Matters” of the Notes to Consolidated Financial Statements.

The objective of liquidity management is to ensure that we have the continuing ability to fund operations and meet our obligations on a timely and cost-effective basis.

The Bank’s sources of

funds include deposits, advances from the FHLB, other borrowings, proceeds from the sale of loans and investment securities, and payments of principal and interest on loans and investment securities.

The Bank is currently approved by the FHLB

of Atlanta to borrow up to 25% of total assets to the extent the Bank provides qualifying collateral and holds sufficient FHLB stock.

This approved limit and collateral requirement would have permitted the Bank to borrow an additional $174.3

million at December 31, 2024 based on pledged collateral.

In addition, the Bank had additional lines of credit of $10.0 million with other financial institutions as of that date.

The current regulatory

capital requirements and possible consequences of failure to maintain compliance are described in Part I, Item 1 “Business‑Regulation” and in Note 16 “Regulatory Matters” of the Notes to Consolidated Financial Statements.

The objective of liquidity management is to ensure that we have the continuing ability to fund operations and meet our obligations on a timely and

cost-effective basis.

The Bank’s sources of funds include deposits, advances from the FHLB, other borrowings, proceeds from the sale of loans and investment securities, and payments of principal and interest on loans and investment securities.

Bank is currently approved by the FHLB of Atlanta to borrow up to 25% of total assets to the extent the Bank provides qualifying collateral and holds sufficient FHLB stock.

At December 31, 2025, the Bank had $243.3 million of credit available.

addition, the Bank had additional lines of credit of $10.0 million with other financial institutions as of that date.

The Bank has a significant concentration of deposits with five long‑time customers that accounted for approximately 28% of its deposits as of December 31,

In addition, the Bank has a

significant concentration of short-term borrowings from one customer that accounted for 88% of out the outstanding balance of securities sold under agreements to repurchase as of December 31, 2024.

The Bank expects to maintain these

relationships with the customers for the foreseeable future.

As of December 31, 2024, approximately $268.8 million of our total deposits (including deposits from affiliates) were not insured by FDIC insurance, which represented 32% of total deposits.

The Bank’s primary uses of funds include withdrawals of and interest payments on deposits, originations of loans, purchases of investment securities, and the payment of operating expenses.

when the Bank has more funds than required for reserve requirements or short‑term liquidity needs, the Bank invests excess cash with the Federal Reserve Bank or other financial institutions.

The Bank’s liquid assets at December 31, 2024

consisted of $61.4 million in cash and cash equivalents and $17.6 million in securities available‑for‑sale that were not pledged, compared to $105.2 million in cash and cash equivalents and $186.0 million in securities available‑for‑sale that

were not pledged at December 31, 2023.

In addition, the Bank has a significant concentration of short-term borrowings from one customer that accounted for 91% of out the outstanding balance of securities sold under agreements to repurchase as of December 31, 2025.

The Bank expects

to maintain these relationships with the customers for the foreseeable future.

As of December 31, 2025, approximately $413.5 million of our total deposits (including deposits from affiliates) were not insured by FDIC insurance, which

represented 41% of total deposits.

The Bank’s primary uses of funds include withdrawals of and interest payments on deposits, originations of loans, purchases of investment securities, and the

payment of operating expenses.

Also, when the Bank has more funds than required for reserve requirements or short‑term liquidity needs, the Bank invests excess cash with the Federal Reserve Bank or other financial institutions.

The Bank’s liquid

assets at December 31, 2025 consisted of $10.5 million in cash and cash equivalents and $161.1 million in securities available‑for‑sale that were not pledged, compared to $61.4 million in cash and cash equivalents and $17.6 million in securities

available‑for‑sale that were not pledged at December 31, 2024.

We believe that the Bank has sufficient liquidity to support growth over the foreseeable future.

The Company’s liquidity, separate from the Bank, is based primarily on the proceeds from financing transactions, such as the preferred stock sold to the U.S.

Treasury in 2022 and the private

placements completed in December 2016 and April 2021, and dividends received from the Bank in 2023 and 2024.

The Company recorded consolidated net cash inflows from operating activities of $1.4 million and $7.6 million during the years ended December 31, 2024 and 2023, respectively.

cash inflows from operating activities during 2024 were primarily attributable to net income of $2.0 million, a $1.4 million increase in other assets and a $641 thousand net change in deferred loan origination costs, partially

offset by a $3.1 million net decrease in accrued expenses and other liabilities .

Net cash inflows from operating activities during 2023 were primarily attributable to net income of $4.5 million and a $2.3

million net increase in accrued expenses and other liabilities .

The Company recorded consolidated net cash inflows from investing activities of $28.2 million and outflows from investing activities of $100.0 million during the years ended

December 31, 2024 and 2023, respectively.

Net cash inflows from investing activities during 2024 were primarily attributable to $117.1 of principal payments and maturities on available-for-sale securities, partially offset by $89.3 million

of net loan originations.

Net cash outflows from investing activities during 2023 were primarily attributable to $115.3 million of net loan originations .

The Company recorded consolidated net cash outflows from financing activities of $73.4 million and inflows from financing activities of $181.5 million during the years ended

December 31, 2024 and 2023, respectively.

Net cash outflows from financing activities during 2024 were primarily attributable to $352.8 million of FHLB repayments, $100.0 million of BTFP repayments, and $14.0 million notes payable

repayments, partially offset by $339.0 million of proceeds from FHLB advances and a $62.8 million net increase in deposits.

Net cash inflows from financing activities during 2023 were primarily attributable to

$456.1 million of proceeds from FHLB advances and $100.0 million of proceeds from the BTFP, partially offset by $375.1 million of FHLB repayments.

We believe that the Company’s existing cash, cash equivalents and marketable securities will be sufficient to meet our liquidity requirements and capital expenditure needs over at least the next

Treasury in 2022 and the private placements completed in December 2016 and April 2021, and dividends received from the Bank in 2024 and 2025.

The Company recorded consolidated net cash inflows from operating activities of $230 thousand and $1.4 million during the years ended December

31, 2025 and 2024, respectively.

Net cash inflows from operating activities during 2025 were primarily attributable to the addback of the goodwill impairment of $25.9 million, which more than offset the net loss of $24.8 million.

Net cash inflows

from operating activities during 2024 were primarily attributable to net income of $2.0 million, a $1.4 million decrease in other assets and a $641 thousand net change in deferred loan origination costs, partially offset by a $3.1 million net

decrease in accrued expenses and other liabilities.

The Company recorded consolidated net cash outflows from investing activities of $79.4 million and inflows from investing activities of $28.3

million during the years ended December 31, 2025 and 2024, respectively.

Net cash outflows from investing activities during 2025 were primarily attributable to $150.5 million of purchases of available-for-sale securities, $20.0 million of bank

owned life insurance purchases, and $19.0 million of net loan originations, partially offset by $105.1 million of principal payments and maturities of available-for-sale securities.

Net cash inflows from investing activities during 2024 were

primarily attributable to $117.1 of principal payments and maturities on available-for-sale securities, partially offset by $89.2 million of net loan originations.

The Company recorded consolidated net cash inflows from financing activities of $28.3 million and outflows from financing activities of $73.5

million during the years ended December 31, 2025 and 2024, respectively.

Net cash inflows from financing activities during 2025 were primarily attributable to $955.8 million of proceeds from FHLB advances and a $172.2 million increase in

deposits, partially offset by $1.1 billion of FHLB repayments and $31.4 million of repayments of other borrowings.

Net cash outflows from financing activities during 2024 were primarily attributable to $352.8 million of FHLB repayments, $100.0

million of BTFP repayments, and $14.0 million notes payable repayments, partially offset by $339.0 million of proceeds from FHLB advances and a $62.8 million net increase in deposits.

We believe that the Company’s existing cash, cash equivalents and marketable securities will be sufficient to meet our liquidity requirements and capital

expenditure needs over at least the next 12 months.

Off‑Balance‑Sheet Arrangements and Contractual Obligations

We are party to financial instruments with off‑balance‑sheet risk in the normal course of our business, primarily in order to meet the financing needs of our customers.

These instruments

involve, to varying degrees, elements of credit, interest rate and liquidity risk.

In accordance with GAAP, these instruments are either not recorded in the consolidated financial statements or are recorded in amounts that differ from the

notional amounts.

We are party to financial instruments with off‑balance‑sheet risk in the normal course of our business, primarily in order to meet the financing needs of our

These instruments involve, to varying degrees, elements of credit, interest rate and liquidity risk.

In accordance with GAAP, these instruments are either not recorded in the consolidated financial statements or are recorded in amounts

that differ from the notional amounts.

Such instruments primarily include lending commitments and lease commitments as described below.

Lending commitments include commitments to originate loans and to fund lines of credit.

Commitments to extend credit are agreements to lend to a customer if there is no violation of any

condition established in the commitment.

Commitments to extend credit are agreements to lend to a customer if

there is no violation of any condition established in the commitment.

Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee by the borrower.

Since some of the commitments are expected to expire without being drawn

upon, the total commitment amounts do not necessarily represent future cash requirements.

Since some of the commitments are expected to

expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.

We evaluate creditworthiness on a case‑by‑case basis.

Our maximum exposure to credit risk is represented by the contractual amount of the instruments.

Our maximum exposure to credit risk is represented by the contractual amount

of the instruments.

In addition to our lending commitments, we have contractual obligations related to operating lease commitments.

Operating lease commitments are obligations under various non‑cancellable

operating leases on buildings and land used for office space and banking purposes.

Operating lease commitments are obligations

under various non‑cancellable operating leases on buildings and land used for office space and banking purposes.

The following table details our contractual obligations at December 31, 2025.

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Impact of Inflation and Changing Prices

Our consolidated financial statements, including accompanying notes, have been prepared in accordance with GAAP which require the measurement of financial position and operating results

primarily in terms of historical dollars without considering the changes in the relative purchasing power of money over time due to inflation.

Our consolidated financial statements, including accompanying notes, have been prepared in accordance with GAAP which require the measurement of financial

position and operating results primarily in terms of historical dollars without considering the changes in the relative purchasing power of money over time due to inflation.

The impact of inflation is reflected in increased costs of our operations.

Unlike industrial

companies, nearly all our assets and liabilities are monetary in nature.

Unlike industrial companies, nearly all our assets and liabilities are monetary in nature.

As a result, interest rates have a greater impact on our performance than do the effects of general levels of inflation.

Interest rates do not necessarily move in the

same direction or to the same extent as the price of goods and services.

As a result, the Bank’s performance is influenced by general macroeconomic conditions, both domestic and foreign, the monetary and fiscal policies of the federal government, and the policies of

the regulatory agencies.

Interest rates do not necessarily

move in the same direction or to the same extent as the price of goods and services.

As a result, the Bank’s performance is influenced by general macroeconomic conditions, both domestic and foreign, the monetary and fiscal policies of the

federal government, and the policies of the regulatory agencies.

The Federal Reserve implements national monetary policies (such as seeking to curb inflation and combat recession) by its open-market operations in U.S.

government securities, by adjusting the required level of

reserves for financial institutions subject to its reserve requirements, and by varying the discount rate applicable to borrowings by banks from the Federal Reserve Banks.

The actions of the Federal Reserve in these areas can influence the

growth of loans, investments, and deposits, and also affect interest rates charged on loans and deposits.

government securities, by

adjusting the required level of reserves for financial institutions subject to its reserve requirements, and by varying the discount rate applicable to borrowings by banks from the Federal Reserve Banks.

The actions of the Federal Reserve in these

areas can influence the growth of loans, investments, and deposits, and also affect interest rates charged on loans and deposits.

The nature and impact of any future changes in monetary policies cannot be predicted.

Critical Accounting Estimates

Critical accounting estimates are those that involve a significant level of estimation uncertainty, and which have had or are reasonably likely to have a material impact on the financial

condition or results of operations of the registrant.

Critical accounting estimates are those that involve a significant level of estimation uncertainty, and which have had or are reasonably likely to have a

material impact on the financial condition or results of operations of the registrant.

This discussion highlights those accounting estimates that management considers critical.

All accounting policies are important, however, and therefore you are encouraged to review each of

the policies included in Note 1 “Summary of Significant Accounting Policies” of the Notes to Consolidated Financial Statements to gain a better understanding of how our financial performance is measured and reported.

Management has identified

the Company’s critical accounting estimates as follows:

All accounting policies are important, however, and therefore you are

encouraged to review each of the policies included in Note 1 “Summary of Significant Accounting Policies” of the Notes to Consolidated Financial Statements to gain a better understanding of how our financial performance is measured and reported.

Management has identified the Company’s critical accounting estimates as follows:

Allowance for Credit Losses

In originating loans, we recognize that losses may be experienced on loans and that the risk of loss may vary as a result of many factors, including the type of loan being made, the

creditworthiness of the borrower, general economic conditions and, in the case of a secured loan, the quality of the collateral for the loan.

Effective January 1, 2023, the Company accounts for the ACL on loans in accordance with ASC 326,

which requires the Company to recognize estimates for lifetime losses on loans and off-balance sheet loan commitments at the time of origination or acquisition.

The recognition of losses at origination or acquisition represents the

Company’s best estimate of the lifetime expected credit loss associated with a loan, given the facts and circumstances associated with the particular loan, and involves the use of significant management judgment and estimates, which are

subject to change based on management’s on-going assessment of the credit quality of the loan portfolio and changes in economic forecasts used in the model.

In originating loans, we recognize that losses may be experienced on loans and that the risk of loss may vary as a result of

many factors, including the type of loan being made, the creditworthiness of the borrower, general economic conditions and, in the case of a secured loan, the quality of the collateral for the loan.

The Company accounts for the ACL on loans in

accordance with ASC 326, which requires the Company to recognize estimates for lifetime losses on loans and off-balance sheet loan commitments at the time of origination or acquisition.

The recognition of losses at origination or acquisition

represents the Company’s best estimate of the lifetime expected credit loss associated with a loan, given the facts and circumstances associated with the particular loan, and involves the use of significant management judgment and estimates,

which are subject to change based on management’s on-going assessment of the credit quality of the loan portfolio and changes in economic forecasts used in the model.

The Company uses the weighted-average remaining maturity (“WARM”) method when

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The weighted average remaining life, including the effect of estimated prepayments, is calculated for each loan pool on a quarterly basis.

The Company then estimates a

loss rate for each pool using both its own historical loss experience and the historical losses of a group of peer institutions during the period from 2004 through the most recent quarter.

The Company then estimates a loss

rate for each pool using both its own historical loss experience and the historical losses of a group of peer institutions during the period from 2004 through the most recent quarter.

The Company’s ACL model also includes adjustments for qualitative factors, where appropriate.

Qualitative adjustments may include, but are not limited to, factors such as:

(i) changes in lending

policies and procedures, including changes in underwriting standards and collections, charge offs, and recovery practices;

Qualitative adjustments may include, but are not limited to,

factors such as:

(i) changes in lending policies and procedures, including changes in underwriting standards and collections, charge offs, and recovery practices;

(ii) changes in international, national, regional, and local conditions;

(iii) changes in the nature and volume of the

portfolio and terms of loans;

changes in the nature and volume of the portfolio and terms of loans;

(iv) changes in the experience, depth, and ability of lending management;

(v) changes in the volume and severity of past due loans and other similar conditions;

(vi) changes in the quality of the organization’s

loan review system;

(vi) changes in

the quality of the organization’s loan review system;

(vii) changes in the value of underlying collateral for collateral dependent loans;

(viii) the existence and effect of any concentrations of credit and changes in the levels of such concentrations;

and (ix) the effect of

other external factors (i.e., competition, legal and regulatory requirements) on the level of estimated credit losses.

These qualitative factors incorporate the concept of reasonable and supportable forecasts, as required by ASC 326.

(viii) the existence and effect of any concentrations of credit and changes in the levels of such

concentrations;

and (ix) the effect of other external factors (i.e., competition, legal and regulatory requirements) on the level of estimated credit losses.

These qualitative factors incorporate the concept of reasonable and supportable forecasts,

as required by ASC 326.

The Company has a credit portfolio review process designed to detect problem loans.

Problem loans are typically those of a substandard or worse internal risk grade, and may consist of loans on

nonaccrual status, loans that have recently been modified in response to a borrower’s deteriorating financial condition, loans where the likelihood of foreclosure on underlying collateral has increased, collateral dependent loans, and other

loans where concern or doubt over the ultimate collectability of all contractual amounts due has become elevated.

Such loans may, in the opinion of management, be deemed to no longer possess risk characteristics similar to other loans in the

loan portfolio, because the specific attributes and risks associated with the loan have likely become unique as the credit quality of the loan deteriorates.

As such, these loans may require individual evaluation to determine an appropriate

ACL for the loan.

Problem loans are typically those of a substandard or worse internal risk

grade, and may consist of loans on nonaccrual status, loans that have recently been modified in response to a borrower’s deteriorating financial condition, loans where the likelihood of foreclosure on underlying collateral has increased, collateral

dependent loans, and other loans where concern or doubt over the ultimate collectability of all contractual amounts due has become elevated.

Such loans may, in the opinion of management, be deemed to no longer possess risk characteristics similar

to other loans in the loan portfolio, because the specific attributes and risks associated with the loan have likely become unique as the credit quality of the loan deteriorates.

As such, these loans may require individual evaluation to determine

an appropriate ACL for the loan.

When a loan is individually evaluated, the Company typically measures the expected credit loss for the loan based on a discounted cash flow approach, unless the loan has been deemed collateral dependent.

Collateral dependent

loans are loans where the repayment of the loan is expected to come from the operation of and/or eventual liquidation of the underlying collateral.

The ACL for collateral dependent loans is determined using estimates of the fair value of the

underlying collateral, less estimated selling costs.

dependent loans are loans where the repayment of the loan is expected to come from the operation of and/or eventual liquidation of the underlying collateral.

The ACL for collateral dependent loans is determined using estimates of the fair value of

the underlying collateral, less estimated selling costs.

The estimation of the appropriate level of the ACL requires significant judgment by management.

Although management uses the best information available to make these estimations, future

adjustments to the ACL may be necessary due to economic, operating, regulatory, and other conditions that may extend beyond the Company’s control.

Changes in management’s estimates of forecasted net losses could materially change the level of

Although management uses the best information available to

make these estimations, future adjustments to the ACL may be necessary due to economic, operating, regulatory, and other conditions that may extend beyond the Company’s control.

Changes in management’s estimates of forecasted net losses could

materially change the level of the ACL.

Additionally, various regulatory agencies, as an integral part of their examination process, periodically review the Company’s ACL and credit review process.

Such agencies may require the Company to recognize additions to the ACL

based on judgments different from those of management.

Such agencies may require the Company to recognize

additions to the ACL based on judgments different from those of management.

The excess of consideration paid over fair value of net assets acquired for acquisitions is recorded as goodwill.

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A goodwill impairment test is performed by comparing the fair value of the reporting unit with its carrying value.

An impairment charge is recorded for the amount by which the carrying amount exceeds the reporting unit’s fair value.

impairment charge is recorded for the amount by which the carrying amount exceeds the reporting unit’s fair value.

A weighted average of both the market and income approaches is used in valuing the reporting unit’s fair value.

are assigned to the approaches regarding fair value and the sensitivity of other weighting scenarios is considered.

The market approach incorporates comparable public company information, valuation multiples and consideration of a market

control premium along with data related to comparable observed purchase transactions in the financial services industry.

The income approach consists of discounting projected future cash flows, which are derived from internal forecasts and

economic expectations for the reporting unit.

Weightings are

assigned to the approaches regarding fair value and the sensitivity of other weighting scenarios is considered.

The market approach incorporates comparable public company information, valuation multiples and consideration of a market control

premium along with data related to comparable observed purchase transactions in the financial services industry.

The income approach consists of discounting projected future cash flows, which are derived from internal forecasts and economic

expectations for the reporting unit.

The significant inputs and assumptions for the income approach include a discount rate and projected earnings of the Company in future years for which there is inherent uncertainty.

sensitivity of a range of reasonable discount rates based on the current economic environment is considered.

Our quantitative annual impairment tests as of September 30, 2024 and 2023 did not result in impairment.

However, changing economic conditions that may

adversely affect the Company’s performance, the fair value of its assets and liabilities, or its stock price could result in future impairment.

Any resulting impairment loss could have a material adverse impact on the Company’s financial

condition and results of operations.

Management will continue to monitor events that could influence this conclusion in the future.

The sensitivity of a range of

reasonable discount rates based on the current economic environment is considered.

The Company engaged a third-party valuation specialist to perform its annual goodwill impairment test as of September 30, 2025.

Based on the quantitative

assessment, the fair value of the reporting unit was less than its carrying amount, resulting in a full impairment of goodwill.

On October 15, 2025, management, with oversight from the Audit Committee of the Board of Directors, concluded that the

Company’s goodwill was fully impaired.

Accordingly, the Company recorded a non-cash goodwill impairment charge of $25.9 million for the quarter ended September 30, 2025.

See Note 7 to the Consolidated Financial Statements in “Item 8.

Financial Statements and Supplementary Data”

for further information.

Statements and Supplementary Data” for further information.

The Company’s accounting policies and discussion of recent accounting pronouncements is included in Note 1 to the Consolidated Financial Statements in “Item

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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