Commercial Bancgroup, Inc. 10-K

Item 8. Financial Statements Page Report of Independent Public Accounting Firm (PCAOB No. 00669 ) F-2 Consolidated Balance Sheets as of December 31, 2025 and 2024 F-3 Consolidated Statements of Income for the Years Ended December 31, 2025 and 2024 F-4 Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2025 and 2024 F-5 Consolidated Statements of Changes in Shareholders’ Equity for the Years Ended December 31, 2025 and 2024 F-6 Consolidated Statements of Cash Flows for the Years Ended December 31, 2025 and 2024 F-7 Notes to Consolidated Financial Statements F-9 F- 1 Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders Commercial Bancgroup, Inc. and Subsidiary Harrogate, Tennessee Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Commercial Bancgroup, Inc. and Subsidiary (the Company) as of December 31, 2025 and 2024, and the related consolidated statements of income, comprehensive income, changes in shareholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2025, and the related notes (collectively referred to as the financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. We have served as the Company’s auditor since 2018. /s/ Mauldin & Jenkins, LLC Chattanooga, Tennessee March 24, 2026 200 W. MARTIN LUTHER KING BLVD, SUITE 1100 ● CHATTANOOGA, TENNESSEE 37402 ● 423-756-6133 ● FAX 423-756-2727 ● www.mjcpa.com MEMBERS OF THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS F- 2 Commercial Bancgroup, Inc. Consolidated Balance Sheets As of December 31, 2025 and 2024 2025 2024 Assets Cash and due from banks $ 26,393,695 $ 18,991,800 Federal funds sold 25,328,744 43,742,762 Interest-bearing deposits in banks 92,596,490 115,463,354 Cash and cash equivalents 144,318,929 178,197,916 Available-for-sale securities 43,136,672 47,937,616 Held-to-maturity securities 97,728,121 128,216,954 Loans, net of allowance for credit losses of $ 18,096,173 and $ 18,205,421 at December 31, 2025 and 2024, respectively 1,855,437,066 1,788,791,583 Premises and equipment, net 49,765,202 50,288,378 Restricted stock, at cost 11,375,500 8,264,150 Foreclosed assets held for sale, net 253,000 831,662 Interest receivable 7,451,045 7,187,304 Bank owned life insurance 46,647,762 45,883,124 Core deposits and other intangibles 4,256,382 5,824,968 Goodwill 8,510,852 8,514,092 Deferred tax asset 1,002,784 1,078,881 Other 21,571,666 30,194,510 Total assets $ 2,291,454,981 $ 2,301,211,138 Liabilities and Shareholders’ Equity Liabilities Deposits Demand $ 913,985,722 $ 976,481,028 Savings, NOW and money market 414,715,894 385,614,692 Time 487,032,489 576,501,235 Total deposits 1,815,734,105 1,938,596,955 Short-term borrowings 88,251,290 3,391,566 Long-term debt 78,587,361 105,772,642 Interest payable 2,961,874 4,224,695 Other liabilities 20,576,519 28,969,497 Total liabilities 2,006,111,149 2,080,955,355 Shareholders’ equity Common stock $ 0.01 par value; 50,000,000 shares authorized; 13,697,987 shares issued and outstanding on December 31, 2025; 12,113,144 at December 31, 2024 136,980 121,131 Additional paid-in capital 38,376,658 9,388,181 Retained earnings 247,505,096 212,310,977 Accumulated other comprehensive loss ( 674,902 ) ( 1,564,506 ) Total shareholders’ equity 285,343,832 220,255,783 Total liabilities and shareholders’ equity $ 2,291,454,981 $ 2,301,211,138 See Notes to Consolidated Financial Statements F- 3 Commercial Bancgroup, Inc. Consolidated Statements of Income For the years ended December 31, 2025 and 2024 2025 2024 Interest and Dividend Income Loans, including fees $ 112,301,119 $ 113,391,226 Debt securities-taxable 3,714,003 2,678,546 Debt securities-tax-exempt 442,351 368,332 Dividends on restricted stock 620,866 699,728 Interest-bearing deposits in banks and federal funds sold 4,525,749 6,075,137 Total interest and dividend income 121,604,088 123,212,968 Interest expense Deposits 37,106,745 40,352,584 Short-term borrowings 148,287 204,963 Long-term debt 3,918,512 5,071,831 Total interest expense 41,173,544 45,629,378 Net interest income 80,430,544 77,583,590 Provision for credit losses 463,326 1,828,644 Net interest income after provision for credit losses 79,967,218 75,754,946 Noninterest Income Customer service fees 2,844,047 3,040,449 Net gains on sales of premises and equipment 37,605 759,482 Net gains on sales of foreclosed assets 160,996 153,346 ATM fees 3,413,367 3,281,291 Increase in BOLI 1,291,936 1,198,572 Other 2,182,208 2,444,769 Total noninterest income 9,930,159 10,877,910 Noninterest Expense Salaries and employee benefits 22,764,385 24,872,660 Occupancy 3,263,688 3,786,162 Data processing 4,530,481 4,234,564 Deposit insurance premiums 972,084 1,128,574 Professional fees 846,243 1,017,108 Depreciation and amortization 3,706,284 4,109,259 Other 6,396,835 6,912,551 Total noninterest expense 42,480,000 46,060,878 Income before income taxes 47,417,377 40,571,978 Provision for income taxes 10,221,179 8,886,195 Net Income 37,196,198 31,685,783 Less: net income attributable to noncontrolling interest - 275,857 Net income attributable to Commercial Bancgroup, Inc. $ 37,196,198 $ 31,409,926 Earnings per share: Basic $ 2.95 $ 2.58 Diluted $ 2.95 $ 2.54 See Notes to Consolidated Financial Statements F- 4 Commercial Bancgroup, Inc. Consolidated Statements of Comprehensive Income For the years ended December 31, 2025 and 2024 2025 2024 Net income attributable to Commercial Bancgroup, Inc. $ 37,196,198 $ 31,409,926 Other comprehensive income: Unrealized holding gains on securities available for sale arising during the year 958,597 1,114,724 Tax benefit ( 243,052 ) ( 286,150 ) Reclassification adjustment for accretion of unrealized Holding(gains) losses included in accumulated other comprehensive income from the transfer of securities from available-for-sale to held-to-maturity 235,643 ( 744,167 ) Tax (benefit) expense ( 61,584 ) 75,362 Other comprehensive income, net of tax 889,604 159,769 Comprehensive income 38,085,802 31,569,695 Comprehensive income attributable to noncontrolling interest - 1,551 Total Comprehensive income attributable to Commercial Bancgroup, Inc. $ 38,085,802 $ 31,568,144 See Notes to Consolidated Financial Statements F- 5 Commercial Bancgroup, Inc. Consolidated Statements of Changes in Shareholders’ Equity For the years ended December 31, 2025 and 2024 Other Additional Comprehensive Non- Common Paid-In Retained Income Controlling Stock Capital Earnings (Loss) Interest TOTAL Balance - January 1, 2024 $ 122,118 $ 9,073,467 $ 182,903,720 $ ( 1,724,275 ) $ 5,402,293 $ 195,777,323 Net income - - 31,409,926 - 275,857 31,685,783 Other comprehensive income - - - 159,769 - 159,769 Stock compensation - 2,143,530 - - - 2,143,530 Dividends paid to shareholders ($ 0.16 per share) - - ( 2,002,669 ) - - ( 2,002,669 ) Acquisition of minority interest - - - - ( 5,678,150 ) ( 5,678,150 ) Repurchase of stock ( 98,550 shares) ( 987 ) ( 1,828,816 ) - - - ( 1,829,803 ) Balance - December 31, 2024 121,131 9,388,181 212,310,977 ( 1,564,506 ) - 220,255,783 Net income - - 37,196,198 - - 37,196,198 Other comprehensive income - - - 889,604 - 889,604 Stock compensation - 124,375 - - - 124,375 Dividends paid to shareholders ($ 0.17 per share) - - ( 2,002,079 ) - - ( 2,002,079 ) Issuance of common stock, net –( 1,458,343 shares) 14,584 29,846,167 - - - 29,860,751 Issuance of common stock – stock grant ( 179,688 shares) 1,797 ( 1,797 ) - - - - Repurchase of stock ( 53,188 shares) ( 532 ) ( 980,268 ) - - - ( 980,800 ) Balance - December 31, 2025 $ 136,980 $ 38,376,658 $ 247,505,096 $ ( 674,902 ) $ - $ 285,343,832 See Notes to Consolidated Financial Statements F- 6 Commercial Bancgroup, Inc. Consolidated Statements of Cash Flows For the years ended December 31, 2025 and 2024 2025 2024 Operating Activities Net income $ 37,196,198 $ 31,685,783 Items not requiring (providing) cash Depreciation 2,137,698 2,301,828 Amortization of core deposit intangible 1,568,586 1,807,431 Securities amortization and (accretion), net ( 1,644,745 ) 484,515 Provision for credit losses 463,326 1,828,644 Stock compensation 124,375 2,143,530 Provision for losses on foreclosed assets 4,500 41,750 Deferred income taxes ( 227,793 ) ( 1,140,719 ) Net realized gains on sales of foreclosed assets ( 160,996 ) ( 153,346 ) Gains on sales of premises and equipment ( 37,605 ) ( 759,482 ) Changes in Interest receivable ( 263,741 ) 1,053,212 Other assets 8,622,844 ( 1,773,556 ) Other liabilities ( 8,133,383 ) 1,183,115 Increase in BOLI ( 1,291,936 ) ( 1,198,572 ) Interest payable ( 1,262,821 ) 1,171,802 Net cash provided by operating activities 37,094,507 38,675,935 Investing Activities Purchases of available-for-sale securities ( 31,760,163 ) ( 30,342,662 ) Proceeds from sales, maturities and calls of available-for-sale securities 37,917,827 33,969,465 Proceeds from sales, maturities and calls of held-to-maturity securities 134,859,796 47,344,967 Purchases of held-to-maturity securities ( 103,193,334 ) ( 16,930,325 ) Net change in loans ( 67,600,420 ) ( 121,081,897 ) Purchase of premises and equipment, net ( 1,865,126 ) ( 3,041,086 ) Proceeds from sales of premises and equipment 288,209 3,474,228 Proceeds from the sales of foreclosed assets 1,286,293 747,928 Purchase of restricted stock, at cost ( 5,559,800 ) ( 1,497,328 ) Redemption of restricted stock, at cost 2,448,450 2,345,028 Death benefits received 527,298 80,780 Payments relating to foreclosed assets ( 11,989 ) - Net cash used in investing activities $ ( 32,662,959 ) $ ( 84,930,902 ) See Notes to Consolidated Financial Statements F- 7 Commercial Bancgroup, Inc. Consolidated Statements of Cash Flows For the years ended December 31, 2025 and 2024 2025 2024 Financing Activities Net (decrease) increase in deposits $ ( 122,862,850 ) $ 118,712,636 Proceeds from short-term borrowings 184,954,724 69,360,463 Repayments of short-term borrowings ( 100,095,000 ) ( 72,015,428 ) Proceeds from long-term borrowings 8,330,500 2,146,001 Repayments of long-term borrowings ( 35,515,781 ) ( 40,180,902 ) Repurchase of common stock ( 980,800 ) ( 1,829,803 ) Issuance of common stock, net 29,860,751 - Acquisition of minority interest - ( 5,678,150 ) Payment of dividends ( 2,002,079 ) ( 2,002,669 ) Net cash provided by (used in) financing activities ( 38,310,535 ) 68,512,148 (Decrease) increase in cash and cash equivalents ( 33,878,987 ) 22,257,181 Cash and cash equivalents, beginning of year 178,197,916 155,940,735 Cash and cash equivalents, end of year $ 144,318,929 $ 178,197,916 Supplemental Cash Flows Information Interest paid $ 42,436,365 $ 44,457,576 Income taxes paid $ 9,500,530 $ 9,750,000 Supplemental Disclosures of Noncash Items Unrealized gain(loss) on AFS securities $ 889,604 $ 159,769 Transfer of loans to OREO $ 539,146 $ 421,963 See Notes to Consolidated Financial Statements F- 8 Commercial Bancgroup, Inc. Notes to Consolidated Financial Statements December 31, 2025 and 2024 Note 1. Summary of Significant Accounting Policies Nature of operations: Commercial Bancgroup, Inc. (the “Company”) is a bank holding company incorporated in the State of Tennessee whose principal activity is the ownership and management of its wholly-owned subsidiary, Commercial Bank (the Bank). The Bank is primarily engaged in providing a full range of banking and financial services to individual and corporate customers in Claiborne, Hamblen, Union, Knox, Sullivan, Washington, Williamson, Cocke and Hamblen Counties in Tennessee and Knox, Bell, Harlan, Laurel and Whitley Counties in Kentucky. Effective May of 2023, Commercial Bancgroup acquired 76.83 % of the stock of AB&T Financial Corporation, which owns 100 % of Alliance Bank & Trust Company. Alliance Bank & Trust Company (AB&T) provided banking and financial services to individual and corporate customers in Gastonia and Cleveland counties in North Carolina. The acquisition occurred in two steps and was completed on June 30, 2024, when Commercial Bancgroup acquired the remaining minority ( 23.17 %) ownership interest in AB&T Financial Corporation and merged Alliance Bank & Trust Company into the operations of Commercial Bank. Alliance was merged into operations of the Bank on July 1, 2024. Basis of presentation: The Company’s accounting and reporting policies conform to accounting principles generally accepted in the United States (“GAAP”) and to generally accepted practices within the banking industry. Certain prior period balances have been reclassified to conform to the current period presentation. Initial Public Offering On October 3, 2025, we completed an initial public offering (“IPO”) of 7,173,000 shares of our common stock at an IPO price of $ 24.00 per share, with 1,458,343 shares sold by us and 5,714,758 shares sold by certain selling shareholders. We received net proceeds of approximately $ 29.9 million, after deducting underwriting discounts and commissions of approximately $ 2.3 million and offering expenses, including legal, accounting, and other expenses, of approximately $ 2.8 million. On October 7, 2025, the Company used $ 20.5 million of its net proceeds from the IPO to fully repay its outstanding holding company loan agreement with Community Trust Bank, Inc. (the “CTB Loan”). Change in presentation due to stock reclassification and stock split: Pursuant to the IPO, on September 18, 2025, the Company filed with the Tennessee Secretary of State an Amended and Restated Charter providing for (i) the automatic reclassification and conversion of each outstanding share of Class B common stock, $ 10.00 par value per share (“Class B Common Stock’) into 1.15 shares of common stock, $ 0.01 par value per share (our “common stock”), and the automatic reclassification and conversion of each outstanding share of Class C common stock $ 10.00 par value per share into 1.05 shares of common stock and (ii) effective immediately following the reclassification, a 250-for-1 forward stock split whereby each holder of common stock received 249 additional shares of common stock for each share owned as of immediately following the reclassification. All share and per share amounts set forth in the consolidated financial statements of the Company have been retroactively restated to reflect the reclassification and conversion and stock split as if they had occurred as of the earliest period presented. F- 9 Commercial Bancgroup, Inc. Notes to Consolidated Financial Statements December 31, 2025 and 2024 Note 1. Summary of Significant Accounting Policies, Continued Initial Public Offering, Continued In addition to the reclassification and stock split, the Company is authorized to issue 10,000,000 shares of preferred stock, $ 0.01 par value per share. As of December 31, 2025, no preferred shares have been issued or are outstanding. The Board of Directors of the Company (the “Board of Directors”) has the authority to issue preferred stock in one or more series and to determine the rights, preferences, privileges, and restrictions of each series, including dividend rights, conversion rights, voting rights, terms of redemption, and liquidation preferences. Principles of consolidation: The consolidated financial statements include the accounts of the Company and the Bank. All significant intercompany accounts and transactions have been eliminated in consolidation. Use of estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for credit losses, valuation of real estate acquired in connection with foreclosures or in satisfaction of loans, valuation of deferred tax assets and fair values of financial instruments. Business combinations: The Company applies the acquisition method of accounting for business combinations. Under the acquisition method, the acquiring entity recognizes the assets acquired and liabilities assumed at their acquisition date fair values. Management utilizes prevailing valuation techniques appropriate for the asset or liability being measured in determining these fair values. This method often involves estimates based on third party valuations based on discounted cash flow analyses or other valuation techniques, all of which are inherently subjective. Any excess of the purchase price over the fair value of net assets and other identifiable intangible assets acquired is recorded as goodwill. Assets acquired and liabilities assumed from contingencies must also be recognized at fair value if the fair value can be determined during the measurement period. Acquisition-related costs, including conversion and restructuring charges, are expensed as incurred. Fair values are subject to refinement over the measurement period, not to exceed one year after the closing date. Basic and diluted earnings per common share: Basic earnings per common share is based on net income available to common stockholders divided by the weighted-average number of common shares outstanding during the period. Diluted earnings per share reflect additional potential common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income that would result from the assumed issuance. Potential common shares that may be issued by the Company relate to stock awards. F- 10 Commercial Bancgroup, Inc. Notes to Consolidated Financial Statements December 31, 2025 and 2024 Note 1. Summary of Significant Accounting Policies, Continued Significant concentrations of credit risk: The Company maintains cash balances at financial institutions whose accounts are insured by the Federal Deposit Insurance Corporation (FDIC) up to statutory limits. At times during the year, the Company’s balances with financial institutions exceeded FDIC insurance limits. Management considers bank balances in excess of FDIC limits to be a normal business risk. Cash and cash equivalents: The Company considers all liquid investments with original maturities of three months or less to be cash equivalents. Cash and Cash equivalents consist of cash on hand, due from banks, interest-bearing deposits in banks and federal funds sold. Interest-bearing deposits in banks are carried at cost. Investment securities: Investment securities are classified as either held-to-maturity or available-for-sale securities. In determining such classification, securities that the Company has the positive intent and ability to hold to maturity are classified as “held-to-maturity” and are carried at amortized cost. Securities not classified as held-to-maturity are classified as “available-for-sale” and recorded at fair value, with unrealized gains and losses excluded from earnings and reported in other comprehensive income net of tax. Purchase premiums and discounts are recognized in interest income using the interest method over the terms of the securities. Premiums on callable debt securities are amortized to their earliest call date. Gains and losses on the sale of available-for-sale securities are recorded on the trade date and are determined using the specific identification method. The Company has made a policy election to exclude accrued interest from the amortized cost basis of debt securities and report accrued interest in interest receivable in the consolidated balance sheets. Interest receivable on available-for-sale debt securities totaled $ 110,526 and $ 124,431 as of December 31, 2025 and 2024, respectively. A debt security is placed on nonaccrual status at the time any principal or interest payments become more than 90 days delinquent or if full collection of interest or principal becomes uncertain. Accrued interest for a security placed on nonaccrual is reversed against interest income. There was no accrued interest related to debt securities reversed against interest income for the years ended December 31, 2025 and 2024. F- 11 Commercial Bancgroup, Inc. Notes to Consolidated Financial Statements December 31, 2025 and 2024 Note 1. Summary of Significant Accounting Policies, Continued Allowance for credit losses (ACL): Available-for-sale Securities: The Company evaluates available-for-sale securities in an unrealized loss position to determine if credit losses exist. The Company first evaluates whether it intends to sell, or it is more likely than not that it will be required to sell an security before recovering its amortized cost basis. If either of these conditions exists, the security’s amortized cost basis is written down to fair value through income. If either of the aforesaid conditions does not exist, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If credit loss exists, the Company recognizes an ACL, limited to the amount by which the amortized cost basis exceeds the fair value. Any impairment not recognized through an ACL is recognized in other comprehensive income, net of tax. Changes in the ACL are recorded as provision for credit loss expense (or reversal). Losses are charged against the allowance when management believes the collectability of an available-to-sale security is confirmed or when either of the criteria regarding intent or requirement to sell is met. Held-to-maturity Securities: Management measures expected credit losses on held-to-maturity debit securities on a collective basis by major security type and any other risk characteristics used to segment the portfolio. Interest receivable on held-to-maturity debt securities totaled $ 291,460 and $ 230,223 as of December 31, 2025 and 2024, respectively. The estimate of expected credit losses considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. Securities borrowed or purchased under agreements to resell, and securities loaned or sold under agreements to repurchase are treated as collateralized financial transactions. These agreements are recorded at the amount at which the securities were acquired or sold plus accrued interest. It is the Company’s policy to take possession of securities purchased under resale agreements. The market value of these securities is monitored, and additional securities are obtained when deemed appropriate to ensure such transactions are adequately collateralized. The Company also monitors its exposure with respect to securities sold under repurchase agreements, and a request for the return of excess securities held by the counterparty is made when deemed appropriate. Loans: Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoffs are reported at amortized cost (net of the ACL). Amortized cost is the principal balance outstanding adjusted for unearned income, charge-offs, the allowance for credit losses, any unamortized deferred fees or costs on originated loans and unamortized premiums or discounts on purchased loans. Interest receivable reported in interest receivable on the consolidated balance sheets, totaled to $ 6,895,763 and $ 6,679,881 as of December 31, 2025 and 2024, respectively and is excluded from the estimate of credit losses. Interest income is accrued based on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, as well as premiums and discounts, are deferred and amortized as a level yield adjustment over the respective term of the loan. F- 12 Commercial Bancgroup, Inc. Notes to Consolidated Financial Statements December 31, 2025 and 2024 Note 1. Summary of Significant Accounting Policies, Continued Allowance for credit losses (ACL) - continuted: The accrual of interest on mortgage and commercial loans is discontinued and placed on nonaccrual status at the time the loan is 90 days delinquent unless the credit is well-secured and in process of collection. Mortgage loans are charged off at 180 days past due, and commercial loans are charged off to the extent principal or interest is deemed uncollectible. Consumer and credit card loans continue to accrue interest until they are charged off no later than 120 days past due unless the loan is in the process of collection. Past due status is based on contractual terms of the loan. In all cases, loans are placed on nonaccrual or charged-off at an earlier date if collection of principal or interest is considered doubtful. All interest accrued but not collected for loans that are placed on nonaccrual or charged-off are reversed against interest income. The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Under the cost-recovery method, interest income is not recognized until the loan balance is reduced to zero. Under the cash-basis method, interest income is recorded when the payment is received in cash. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. Purchased Credit Deteriorated (PCD) loans: The Company has purchased loans, some of which have experienced more than insignificant credit deterioration since origination. PCD loans are recorded at the amount paid. An allowance for credit losses is determined using the same methodology as other loans held for investment. The initial allowance for credit losses determined on a collective basis is allocated to individual loans. The sum of the loan’s purchase price and allowance for credit losses becomes its initial amortized cost basis. The difference between initial amortized cost basis and the par value of the loan is a noncredit discount or premium, which is amortized into interest income over the life of the loan. Subsequent changes to the allowance for credit losses are recorded through credit loss expense. Under the current expected credit loss model, the ACL on loans is a valuation allowance estimated at each balance sheet date in accordance with GAAP that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans. The Company estimates the ACL on loans based on the underlying loans’ amortized cost basis, which is the amount at which the financing receivable is originated or acquired, adjusted for applicable accretion or amortization of premium, discount, and net deferred fees or costs, collection of cash, and charge-offs. In the event that collection of principal becomes uncertain, the Bank has policies in place to reverse accrued interest in a timely manner. Therefore, the Bank has made a policy election to exclude accrued interest from the measurement of ACL. Expected credit losses are reflected in the allowance for credit losses through a charge to provision for credit losses. The Company measures expected credit losses of loans on a collective (pool) basis, when the loans share similar risk characteristics. Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate. The contractual term excludes expected extensions, renewals, and modifications unless the extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancellable by the Company. F- 13 Commercial Bancgroup, Inc. Notes to Consolidated Financial Statements December 31, 2025 and 2024 Note 1. Summary of Significant Accounting Policies, Continued Allowance for credit losses (ACL) – loans : The Company’s methodologies for estimating the ACL consider available relevant information about the collectability of cash flows, including information about past events, current conditions, and reasonable and supportable forecasts. The methodologies apply historical loss information, adjusted for asset-specific characteristics, economic conditions at the measurement date, and forecasts about future economic conditions over a period that has been determined to be reasonable and supportable, to the identified pools of loans with similar risk characteristics for which the historical loss experience was observed. Weighted Average Remaining Maturity (WARM) Method: The Company’s primary methodology for estimating expected credit losses for all loan types is the weighted average remaining maturity method. The WARM CECL methodology uses average annual loss rate along with a simple but reasonable forecast based on a “regression’ analysis of the loan history dating back 18 years. The dependent variable will be the entity’s loss rate, based on changes in the Prime Lending rate over that same period. The Company will utilize the Prime Lending Rate as the independent variable due to that being the tool most commonly utilized by the Federal Reserve to either accelerate and/or slow down the economy. Additionally, the allowance for credit losses calculation includes qualitative adjustments to account for risk factors that may not be incorporated in the quantitatively derived allowance estimate. Qualitative adjustments may increase or decrease the allowance estimate. Qualitative factors considered include: changes in lending policies and procedures, including underwriting standards, collection, charge-off and recovery practices; national, regional and local economic and business conditions and developments that affect the collectability of the portfolio, including the condition of various market segments; nature and volume of the portfolio and terms of loans; experience, depth and ability of lending management; volume and severity of past due loans, the volume of non-accrual loans, and the volume and severity of adversely classified or graded loans; quality of loan review system; underlying collateral values; concentrations of credit and changes in the level of such concentrations; and the effect of other external factors such as competition, legal and regulatory requirements. Allowance for Credit Losses on Off-Balance Sheet Credit Exposures: The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The allowance for credit losses on off-balance sheet credit exposures is adjusted through credit loss expense. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life. F- 14 Commercial Bancgroup, Inc. Notes to Consolidated Financial Statements December 31, 2025 and 2024 Note 1. Summary of Significant Accounting Policies, Continued Allowance for credit losses (ACL) – loans : Collateral-Dependent Loans: Loans that do not share risk characteristics are evaluated on an individual basis. For Collateral-dependent loans where the Company has determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and the Company expects repayment of the loan to be provided substantially through the operation or sale of the collateral, the ACL is measured based on the difference between the fair value of the collateral and the amortized cost basis of the loan as of the measurement date. When repayment is expected to be from the operation of the collateral, expected credit losses are calculated as the amount by which the amortized cost basis of the loan exceeds the present value of expected cash flows from the operation of the collateral. The Company may, in the alternative, measure the expected credit loss as the amount by which the amortized cost basis of the loan exceeds the estimated fair value of the collateral. When repayment is expected to be from the sale of the collateral, expected credit losses are calculated as the amount by which the amortized costs basis of the loan exceeds the fair value of the underlying collateral less estimated cost to sell. The ACL may be zero if the fair value of the collateral at the measurement date exceeds the amortized cost basis of the loan. Charge-Offs and Recoveries: Loan losses are charged against the allowance when management believes the collection of a loan’s principal is unlikely. Subsequent recoveries are credited to the allowance. If the loan is Collateral-dependent, the loss is more easily identified and is charged-off when it is identified, usually based upon receipt of an appraisal. However, when a loan has guarantor support, and the guarantor demonstrates willingness and capacity to support the debt, the Company may carry the estimated loss as a reserve against the loan while collection efforts with the guarantor are pursued. If, after collection efforts with the guarantor are complete, the deficiency is still considered uncollectible, the loss is charged-off and any further collections are treated as recoveries. Loan commitments and financial instruments: Financial instruments include off-balance sheet credit instruments, such as commitments to make loans and commercial letters of credit issued to meet customer financing needs. The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for off-balance sheet loan commitments is represented by the contractual amount of those instruments. Such financial instruments are recorded when they are funded. The Company records an allowance for credit losses on off-balance sheet credit exposures, unless the commitments to extend credit are unconditionally cancelable through a charge to provision for unfunded commitments in the Company’s statements of income. The ACL on off-balance sheet credit exposures is estimated by loan segment at each balance sheet date under the current expected credit loss model using the same methodologies as portfolio loans, taking into consideration the likelihood that funding will occur as well as any third-party guarantees and is included in other liabilities on the Company’s balance sheets. F- 15 Commercial Bancgroup, Inc. Notes to Consolidated Financial Statements December 31, 2025 and 2024 Note 1. Summary of Significant Accounting Policies, Continued Premises and equipment: Depreciable assets are stated at cost less accumulated depreciation. Depreciation is charged to expense using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are capitalized and depreciated using the straight-line method over the terms of the respective leases or the estimated useful lives of the improvements, whichever is shorter. Expected terms include lease option periods to the extent that the exercise of such options is reasonably assured. The estimated useful lives for each major depreciable classification of premises and equipment are as follows: Buildings and improvements 35 - 40 years Leasehold improvements 5 - 10 years Furniture and Fixtures 7 years Software 3 - 5 years Equipment 3 - 5 years Leases: Leases are classified as operating or finance leases at the lease commencement date. The Company leases certain locations and equipment. The Company records leases on the balance sheet in the form of a lease liability for the present value of future minimum payments under the lease terms and a right-of-use asset equal to the lease liability adjusted for items such as deferred or prepaid rent, lease incentives, and any impairment of the right-of-use asset. The discount rate used in determining the lease liability is based upon incremental borrowing rates the Company could obtain for similar loans as of the date of commencement or renewal. The Company does not record leases on the consolidated balance sheets that are classified as short term (less than one year). At lease inception, the Company determines the lease term by considering the minimum lease term and all optional renewal periods that the Company is reasonably certain to renew. The lease term is also used to calculate straight-line rent expense. The depreciable life of leasehold improvements is limited by the estimated lease term, including renewals if they are reasonably certain to be renewed. The Company’s leases do not contain residual value guarantees or material variable lease payments that will impact the Company’s ability to pay dividends or cause the Company to incur additional expenses. Operating lease expense consists of a single lease cost allocated over the remaining lease term on a straight-line basis, variable lease payments not included in the lease liability, and any impairment of the right-of-use asset. Rent expense and variable lease expense are included in other operating expenses on the Company’s consolidated statements of income. The Company’s variable lease expense includes rent escalators that are based on market conditions and include items such as common area maintenance, utilities, parking, property taxes, insurance and other costs associated with the lease. The Company has elected to treat property leases that include both lease and non-lease components as a single component and account for it as a lease. F- 16 Commercial Bancgroup, Inc. Notes to Consolidated Financial Statements December 31, 2025 and 2024 Note 1. Summary of Significant Accounting Policies, Continued Long-lived asset impairment: The Company evaluates the recoverability of the carrying value of long-lived assets whenever events or circumstances indicate the carrying amount may not be recoverable. If a long-lived asset is tested for recoverability and the undiscounted estimated future cash flows expected to result from the use and eventual disposition of the asset is less than the carrying amount of the asset, the asset cost is adjusted to fair value and an impairment loss is recognized as the amount by which the carrying amount of a long-lived asset exceeds its fair value. No asset impairment was recognized during the years ended December 31, 2025 and 2024. Restricted stock: Federal Reserve Bank (FRB) and Federal Home Loan Bank (FHLB) stock are required investments for institutions that are members of the FRB and FHLB systems. The required investment in the common stock is based on a predetermined formula, carried at cost and evaluated for impairment. Foreclosed assets held for sale: Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at fair value less cost to sell at the date of foreclosure, establishing a new cost basis. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less cost to sell. Costs incurred subsequent to acquisition relating to development and improvement of the property are capitalized up to fair value less cost to sell. Revenue and expenses from operations and changes in the valuation allowance are included in net income or expense from foreclosed assets. Bank owned life insurance: The Company purchases life insurance policies on certain key executives and records purchases at an amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or amounts due that are probable at settlement. Intangible assets: Intangible assets consist of goodwill and core deposit intangible assets that result from business combinations. Goodwill represents the excess of the purchase price over the fair value of net assets acquired that is allocated to the appropriate reporting unit when acquired. Core deposit intangible asset represent the future earnings potential of acquired deposit relationships that are amortized over their remaining useful lives. F- 17 Commercial Bancgroup, Inc. Notes to Consolidated Financial Statements December 31, 2025 and 2024 Note 1. Summary of Significant Accounting Policies, Continued Intangible assets, continued: An interim analysis of goodwill is performed quarterly, and goodwill is tested for impairment annually, on December 31, or more frequently if events or circumstances indicate there may be impairment. The Company has one reporting unit, Commercial Bank. If the Company elects to perform a qualitative assessment, it evaluates factors such as macroeconomic conditions, industry and market considerations, overall financial performance, changes in stock price, and progress towards stated objectives in determining if it is more likely than not that the fair value of their reporting unit is less than its carrying amount. If the Company concludes that it is more likely than not that the fair value of our reporting unit is less than its carrying amount, a quantitative test is performed; otherwise, no further testing is required. The quantitative test consists of comparing the fair value of the reporting unit to its carrying amount, including goodwill. If the fair value of the reporting unit is greater than its book value, no goodwill impairment exists. If the carrying amount of the reporting unit is greater than its calculated fair value, a goodwill impairment charge is recognized for the difference. Management has concluded that there was no goodwill impairment for 2025 and 2024. Derivatives: Derivatives are recognized as assets and liabilities on the consolidated balance sheets and measured at fair value. For exchange-traded contracts, fair value is based on quoted market prices. For non-exchange traded contracts, fair value is based on dealer quotes, pricing models, discounted cash flow methodologies, or similar techniques for which the determination of fair value may require significant management judgment or estimation. For asset/liability management purposes, the Company uses interest rate swap agreements to hedge various exposures or to modify interest rate characteristics of various balance sheet accounts. Interest rate swaps are contracts in which a series of interest rate cash flows are exchanged over a prescribed period. The notional amount on which the interest payments are based is not exchanged. The Company is exposed to losses if a counterparty fails to make its payments under a contract in which the Company is in the net receiving position. The Company anticipates that the counterparties will be able to fully satisfy their obligations under the agreements. Interest rate derivative financial instruments receive hedge accounting treatment only if they are designated as a cash flow hedge and are expected to be, and are, effective in substantially reducing interest rate risk arising from the assets and liabilities identified as exposing the Company to risk. Those derivative financial instruments that do not meet specified hedging criteria are recorded at fair value with changes in fair value recorded in income. If periodic assessment indicates derivatives no longer provide an effective hedge, the derivative contracts would be closed out and settled, or classified as a trading activity. F- 18 Commercial Bancgroup, Inc. Notes to Consolidated Financial Statements December 31, 2025 and 2024 Note 1. Summary of Significant Accounting Policies, Continued Transfers of financial assets: Transfers of financial assets are accounted for as sales when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (l) the assets have been isolated from the Company - put presumptively beyond the reach of the transferor and its creditors, even in bankruptcy or other receivership, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity or the ability to unilaterally cause the holder to return specific assets. Income taxes: The Company accounts for income taxes in accordance with income tax accounting guidance (ASC 740, Income Taxes ). The income tax accounting guidance results in two components of income tax expense: current and deferred. Current income tax expense reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to the taxable income or excess of deductions over revenues. The Company determines deferred income taxes using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax bases of assets and liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur. Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred tax assets are reduced by a valuation allowance if, based on the evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized. Management performs an evaluation of all income tax positions taken or expected to be taken in the course of preparing the Company’s income tax returns to determine whether the income tax positions meet a “more likely than not” standard of being sustained under examination by the applicable taxing authorities. Management has performed its evaluation of all income tax positions taken on all open income tax returns and has determined that there were no positions taken that do not meet the “more likely than not” standard. Accordingly, there are no provisions for income taxes, penalties or interest receivable or payable relating to uncertain income tax positions in the accompanying financial statements. The Company recognizes interest and penalties on income taxes as a component of income tax expense. The Company files income tax returns in the U.S. federal jurisdiction, the state of Tennessee, the state of Kentucky and state of North Carolina. The Company is no longer subject to U.S. federal income tax examinations by tax authorities of years before 2022. The State of Tennessee has a statute of limitations of four years as does the State of Kentucky; therefore, the Company’s 2021 through 2024 franchise and excise tax returns remain subject to examination. The Company files consolidated income tax returns with its subsidiary. Advertising costs: The Company follows the policy of charging the costs for advertising to expense as incurred. Advertising expense charged to operations was $ 235,471 and $ 181,064 for the years ended December 31, 2025 and 2024, respectively. F- 19 Commercial Bancgroup, Inc. Notes to Consolidated Financial Statements December 31, 2025 and 2024 Note 1. Summary of Significant Accounting Policies, Continued Comprehensive income: Comprehensive income consists of net income and other comprehensive income, net of applicable income taxes. Other comprehensive income includes unrealized gains and losses on available-for-sale securities. Revenue from contracts with customers: All of the Company’s revenue from contracts with customers in the scope of ASC 606 is recognized within noninterest income. Following is a discussion of key revenues within the scope of Topic 606: Customer service fees : Revenue from customer service charges is earned through account servicing, overdraft, non-sufficient funds, and other deposit-related services. Revenue is recognized for these services either over time, corresponding with deposit accounts’ monthly cycle, or at point in time for transaction-related services and fees. Payment for service charges on deposit accounts is primarily received immediately or in the following month through a direct charge to customers’ accounts. Net realized gains on sale of foreclosed assets : Net realized gains on sales of foreclosed assets is recognized when the buyer obtains control, which generally occurs at the time of an executed deed. The Company believes this criterion is met when the buyer closes on the property and the Company has no other performance obligations. Net gains on sale of premise and equipment: Net realized gains on sales of premise and equipment is recognized when the buyer obtains control, which generally occurs at the time the of an executed deed or transfer of title. The Company believes this criterion is met when the buyer closes on the property or equipment and the Company has no other performance obligations. ATM/debit card fees: ATM fees represent charges to customers for transactions completed at the Bank’s ATMs or through third-party ATMs, including cash withdrawals, balance inquiries, and other ATM-related services. The Bank recognizes revenue from ATM fees at the point in time when the customer completes the transaction, which is the point when the Bank satisfies its performance obligation. For each debit card transaction, the Bank charges a fee, typically a fixed amount, which is recognized as revenue upon the completion of the transaction. The performance obligation is considered satisfied when the transaction is processed and the requested service is provided to the customer. Other Income: The other income includes insurance commissions, letter of credit fee, management fee income, safe deposit box rent, investments services income, rental income and miscellaneous income. The Bank recognizes the revenue at point in time as these are transaction-related services except for rental income which is recognized over time due to the monthly cycle. Stock-Based Compensation: Compensation cost is recognized for restricted stock and restricted stock unit awards issued to employees and directors, based on the fair value of these awards at the date of grant based on the market price of the Company’s common stock at the date of grant. Compensation cost is recognized over the requisite service period, generally defined as the vesting period. The Company’s accounting policy is to recognize forfeitures as they occur. F- 20 Commercial Bancgroup, Inc. Notes to Consolidated Financial Statements December 31, 2025 and 2024 Note 1. Summary of Significant Accounting Policies, Continued Segment Reporting: While the chief decision-makers monitor the revenue streams of various products and services, operations are managed, and financial performance is evaluated on a Company-wide basis. Operating segments are aggregated into one as operating results for all segments are similar. Accordingly, all of the financial service operations are considered by management to aggregated in one reportable operating segment. Adoption of new accounting standards: ASU 2023-09, Improvements to Income Tax Disclosures This ASU enhances income tax disclosures by requiring public business entities to disclose additional qualitative and quantitative information about the reconciliation of the effective tax rate to the statutory federal rate, including disaggregated information for federal, state, and foreign income taxes, as well as greater detail regarding reconciling items that exceed a specified threshold. The amendments are effective for annual reporting periods beginning after December 15, 2024 and were applied on a retrospective basis. The Company adopted ASU 2023-09 effective January 1, 2025. Adoption of this standard did not have an impact on the Company’s consolidated financial position, results of operations, or cash flows, but resulted in expanded income tax disclosures. Newly issued accounting standards updates: ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopin 220-40) – Disaggregation of Income Statement Expenses: The amendments in this Update require disclosure, in the notes to the financial statements, of specified information about certain costs and expenses. The amendments require that at each interim and annual reporting period entity: ● Disclose the amounts of (a) purchases of inventory, (b) employee compensation, (c) depreciation, (d) intangible asset amortization, and (e) depreciation, depletion, and amortization as part of oil and gas-producing activities included in each relevant expense caption. ● Disclose a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively. ● Disclose the total amount of selling expenses and, in annual reporting periods, an entity’s definition of selling expenses. The amendments are effective for annual periods beginning after December 15, 2026. The amendments should be applied on a prospective basis. These amendments should be applied (1) prospectively to financial statements issued after effective date of this Update or (2) retrospectively to any or all prior periods presented in the financial statements. The Company is currently evaluating the impact of this standard as well as the impact on the financial statements and disclosures. F- 21 Commercial Bancgroup, Inc. Notes to Consolidated Financial Statements December 31, 2025 and 2024 Note 2. Restriction on Cash and Due from Banks The Company is required to maintain reserve funds in cash and/or on deposit with the Federal Reserve Bank. As of December 31, 2025 and December 31, 2024, there was no reserve requirement since the Federal Reserve lowered the reserve rate to 0 % for both years. Note 3. Securities The amortized cost and approximate fair values, together with gross unrealized gains and losses, of securities are as follows: December 31, 2025 Gross Gross Amortized unrealized unrealized Fair cost gains losses value Available-for-sale securities: U.S. Government and federal agency $ 14,830,375 $ - $ - $ 14,830,375 U.S. Government-sponsored enterprises (GSEs) 5,395 - - 5,395 Mortgage-backed: GSE residential 13,295,371 44,013 ( 552,361 ) 12,787,023 State and political subdivisions 15,780,242 13,988 ( 280,351 ) 15,513,879 $ 43,911,383 $ 58,001 $ ( 832,712 ) $ 43,136,672 December 31, 2024 Gross Gross Amortized unrealized unrealized Fair cost gains losses value Available-for-sale securities: U.S. Government and federal agency $ 15,276,583 $ - $ ( 7,938 ) $ 15,268,645 U.S. Government-sponsored enterprises (GSEs) 55,792 - ( 263 ) 55,529 Mortgage-backed: GSE residential 17,084,785 7,733 ( 949,087 ) 16,143,431 State and political subdivisions 17,253,763 144 ( 783,896 ) 16,470,011 $ 49,670,923 $ 7,877 $ ( 1,741,184 ) $ 47,937,616 F- 22 Commercial Bancgroup, Inc. Notes to Consolidated Financial Statements December 31, 2025 and 2024 Note 3. Securities, Continued December 31, 2025 Gross Gross Amortized unrealized unrealized Fair cost gains losses value Held-to-maturity securities: U.S. Government and federal agency $ 42,681,410 $ 2,286 $ ( 805,096 ) $ 41,878,600 U.S. Government-sponsored enterprises (GSEs) 13,599,444 - ( 290,909 ) 13,308,535 Mortgage-backed: GSE residential 37,534,375 175,285 ( 2,185,363 ) 35,524,297 State and political subdivisions 3,912,892 12,509 ( 180,955 ) 3,744,446 $ 97,728,121 $ 190,080 $ ( 3,462,323 ) $ 94,455,878 December 31, 2024 Gross Gross Amortized unrealized unrealized Fair cost gains losses value Held-to-maturity securities: U.S. Government and federal agency $ 87,467,213 $ - $ ( 3,027,363 ) $ 84,439,850 U.S. Government-sponsored enterprises (GSEs) 19,270,853 - ( 711,256 ) 18,559,597 Mortgage-backed: GSE residential 19,030,532 - ( 3,166,401 ) 15,864,131 State and political subdivisions 2,448,356 - ( 269,776 ) 2,178,580 $ 128,216,954 $ - $ ( 7,174,796 ) $ 121,042,158 The Company uses a systematic methodology to determine its ACL for debt securities held-to-maturity considering the effects of past events, current conditions, and reasonable and supportable forecasts on the collectability of the portfolio. The ACL is a valuation account that is deducted from the amortized cost basis to present the net amount expected to be collected on the held-to-maturity portfolio. The Company monitors the held-to-maturity portfolio on a quarterly basis to determine whether a valuation account would need to be recorded. Based on management’s review, the Company’s held-to-maturity securities have no expected credit losses and no related allowance for credit losses has been established. U.S. Government sponsored enterprises include entities such as Federal Nation Mortgage Association, Federal Home Loan Mortgage Corporation, and Federal Home Loan Banks. F- 23 Commercial Bancgroup, Inc. Notes to Consolidated Financial Statements December 31, 2025 and 2024 Note 3. Securities, Continued The amortized cost and fair value of available-for-sale securities and held-to-maturity securities at December 31, 2025, by contractual maturity, are shown below. Actual maturities may differ from contractual maturities of mortgage-backed securities because the mortgages underlying the securities may be called or repaid without penalty. Therefore, these securities are not included in the maturity categories in the following summary. Available for sale Held to maturity Amortized Fair Amortized Fair cost value cost value Within one year $ 18,186,821 $ 18,170,631 $ 38,116,366 $ 37,734,560 One to five years 6,142,403 6,041,273 20,598,285 19,740,682 Five to ten years 4,337,970 4,222,285 98,458 100,102 After ten years 1,948,818 1,915,460 1,380,637 1,356,237 Mortgage-backed securities 13,295,371 12,787,023 37,534,375 35,524,297 Totals $ 43,911,383 $ 43,136,672 $ 97,728,121 $ 94,455,878 The market value of securities pledged as collateral, to secure public deposits and for other purposes, was $ 137,592,549 and $ 168,979,774 at December 31, 2025 and 2024, respectively. The book value of securities sold under agreements to repurchase amounted to $ 3,251,290 and $ 3,391,565 and at December 31, 2025 and 2024, respectively. There were no sales of available-for-sale securities during the year ended December 31, 2025 and 2024. The following tables show the Company’s investments’ gross unrealized losses and fair value of the Company’s investments with unrealized losses aggregated by investment class and length of time that individual securities have been in a continuous unrealized loss position on December 31, 2025 and December 31, 2024. December 31, 2025 Less than 12 months 12 months or more Total Fair Unrealized Fair Unrealized Fair Unrealized value loss value loss value loss Available-for-sale Securities U.S. Government and federal agency $ - $ - $ - $ - $ - $ - U.S. Government sponsored enterprises (GSEs) - - - - - - Mortgage-backed: GSE residential 1,495,320 ( 7,133 ) 7,504,304 ( 545,228 ) 8,999,624 ( 552,361 ) State and political subdivisions 1,475,852 ( 9,631 ) 12,056,009 ( 270,720 ) 13,531,861 ( 280,351 ) Total $ 2,971,172 $ ( 16,764 ) $ 19,560,313 $ ( 815,948 ) $ 22,531,485 $ ( 832,712 ) F- 24 Commercial Bancgroup, Inc. Notes to Consolidated Financial Statements December 31, 2025 and 2024 Note 3. Securities, Continued December 31, 2024 Less than 12 months 12 months or more Total Fair Unrealized Fair Unrealized Fair Unrealized value loss value loss value loss Available-for-sale Securities U.S. Government and federal agency $ 15,268,645 $ ( 7,938 ) $ - $ - $ 15,268,645 $ ( 7,938 ) U.S. Government sponsored enterprises (GSEs) 40,442 ( 175 ) 15,087 ( 88 ) 55,529 ( 263 ) Mortgage-backed: GSE residential 4,146,548 ( 34,750 ) 9,147,669 ( 914,337 ) 13,294,217 ( 949,087 ) State and political subdivisions 1,400,048 ( 81,299 ) 15,034,961 ( 702,597 ) 16,435,009 ( 783,896 ) Total $ 20,855,604 $ ( 124,162 ) $ 24,197,717 $ ( 1,617,022 ) $ 45,053,321 $ ( 1,741,184 ) As of December 31, 2025, the Company had 117 securities in an unrealized loss position. No ACL has been recognized on any securities in an unrealized loss position as management does not believe any of the securities are impaired due to reasons of credit quality. This is based upon an analysis of the underlying risk characteristics, including credit ratings, and other qualitative factors related to available for sale securities and in consideration of historical credit loss experience and internal forecasts. The issuers of these securities continue to make timely principal and interest payments under the contractual terms of the securities. Furthermore, the Company does not have the intent to sell any of the securities classified in the tables above and believes that it is more likely than not that they will not have to sell any such securities before a recovery of cost. The unrealized losses are due to increases in market interest rates over the yields available at the time the underlying securities were purchased. The fair value is expected to recover as the securities approach their maturity date or repricing date or if market yields for such investments decline. F- 25 Commercial Bancgroup, Inc. Notes to Consolidated Financial Statements December 31, 2025 and 2024 Note 4. Loans and Allowance for Credit Losses Portfolio segmentation: At December 31, 2025 and 2024, the Company’s loans consist of the following: 2025 2024 Real estate secured: Commercial $ 1,113,439,836 $ 1,006,206,845 Construction and land development 176,688,073 199,799,772 Residential 377,942,535 369,308,057 Other 14,823,962 16,815,790 Total real estate secured 1,682,894,406 1,592,130,464 Commercial 174,248,316 201,593,312 Consumer 15,416,544 15,213,998 Other 7,450,885 6,744,117 Total loans 1,880,010,151 1,815,681,891 Less Net deferred loan fees, premiums and discounts 6,476,912 8,684,887 Allowance for credit losses 18,096,173 18,205,421 Net loans $ 1,855,437,066 $ 1,788,791,583 For purposes of the disclosures, the loan portfolio was disaggregated into segments and then further disaggregated into classes for certain disclosures. A portfolio segment is defined as the level at which an entity develops and documents a systematic method for determining its allowance for credit losses. There are four loan portfolio segments that include real estate secured, commercial, consumer and other loans. A class is generally determined based on the initial measurement attribute, risk characteristic of the loan, and an entity’s method for monitoring and assessing credit risk. Classes within the real estate secured portfolio segment include commercial, construction and land development, residential, and other. Commercial, consumer and other loans are a class in itself. Portfolio segmentation, continued: Risk characteristics relevant to each portfolio segment and class are as follows: Commercial real estate: Commercial real estate loans are primarily made based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. Commercial real estate lending typically involves higher loan principal amounts and the repayment of these loans is generally largely dependent on the successful operation of the property securing the loan. Commercial real estate loans may be more adversely affected by conditions in the real estate markets or in the general economy. The properties securing the Company’s commercial real estate portfolio are diverse in terms and type. This diversity helps reduce the Company’s exposure to adverse economic events that affect any single market or industry. Management monitors and evaluates commercial real estate loans based on collateral, geography and risk grade criteria. The Company also utilizes third-party experts to provide insight and guidance about economic conditions and trends affecting market areas it serves. In addition, management tracks the level of owner-occupied commercial real estate loans versus non-owner-occupied loans. Non-owner-occupied commercial real estate loans are loans secured by multifamily and commercial properties where the primary source of repayment is derived from rental income associated with the property (that is, loans for which 50 percent or more of the source of repayment comes from third party, nonaffiliated, rental income) or the proceeds of the sale, refinancing, or permanent financing of the property. These loans are made to finance income-producing properties such as apartment buildings, office and industrial buildings, and retail properties. Owner-occupied commercial real estate loans are loans where the primary source of repayment is the cash flow from the ongoing operations and business activities conducted by the party, or affiliate of the party, who owns the property. F- 26 Commercial Bancgroup, Inc. Notes to Consolidated Financial Statements December 31, 2025 and 2024 Note 4. Loans and Allowance for Credit Losses, Continued Portfolio segmentation, continued: Construction and land development: Loans for non-owner-occupied real estate construction or land development are generally repaid through cash flow related to the operation, sale or refinance of the property. The Company also finances construction loans for owner-occupied properties. A portion of the Company’s construction and land portfolio segment is comprised of loans secured by residential product types (residential land and single-family construction). With respect to construction loans to developers and builders that are secured by non-owner-occupied properties that the Company may originate from time to time, the Company generally requires the borrower to have an existing relationship with the Company and have a proven record of success. Construction and land development loans are underwritten utilizing feasibility studies, independent appraisal reviews, sensitivity analysis of absorption and lease rates, market sales activity, and financial analysis of the developers and property owners. Construction loans are generally based upon estimates of costs and value associated with the complete project. These estimates may be inaccurate. Construction loans often involve the disbursement of substantial funds with repayment substantially dependent on the success of the ultimate project. Sources of repayment for these types of loans may be pre-committed permanent loans from approved long-term lenders, sales of developed property or an interim loan commitment from the Company until permanent financing is obtained. These loans are closely monitored by on-site inspections and are considered to have higher risks than other real estate loans due to their ultimate repayment being sensitive to interest rate changes, governmental regulation of real property, general economic conditions and the availability of long-term financing. Residential real estate: Residential real estate loans represent loans to consumers or investors to finance a residence. These loans are typically financed on 15 to 30 year amortization terms, but generally with shorter maturities of 5 to 15 years. Many of these loans are extended to borrowers to finance their primary or secondary residence. Loans to an investor secured by a 1-4 family residence will be repaid from either the rental income from the property or from the sale of the property. This loan segment also includes home equity loans which are secured by a first or second mortgage on the borrower’s residence. This allows customers to borrow against the equity in their home. Loans in this portfolio segment are underwritten and approved based on a number of credit quality criteria including limits on maximum Loan-to-Value (LTV), minimum credit scores, a maximum debt to income. Real estate market values as of the time the loan is made directly affect the amount of credit extended and, in addition, changes in these residential property values impact the depth of potential losses in this portfolio segment. Commercial: The commercial loan portfolio segment includes commercial loans to commercial customers for use in normal business operations to finance working capital needs, equipment purchases or other expansion projects. Collection risk in this portfolio segment is driven by the creditworthiness of underlying borrowers, particularly cash flow from customers’ business operations. Commercial loans are primarily made based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of borrowers, however, may not be as expected and the collateral securing these loans may fluctuate in value. Most commercial loans are secured by the assets being financed or other business assets such as accounts receivable or inventory and may incorporate a personal guarantee; however, some short-term loans may be made on an unsecured basis. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers. Consumer: The consumer loan portfolio segment includes non-real estate secured direct loans to consumers for household, family, and other personal expenditures. Consumer loans may be secured or unsecured and are usually structured with short- or medium-term maturities. These loans are underwritten and approved based on a number of consumer credit quality criteria including limits on maximum LTV on secured consumer loans, minimum credit scores, and maximum debt to income. Many traditional forms of consumer installment credit have standard monthly payments and fixed repayment schedules of one to five years. These loans are made with either fixed or variable interest rates that are based on various indices. Installment loans fill a variety of needs, such as financing the purchase of an automobile, a boat, a recreational vehicle, or other large personal items, or for consolidating debt. These loans may be unsecured or secured by an assignment of title, as in an automobile loan, or by money in a bank account. In addition to consumer installment loans, this portfolio segment also includes secured and unsecured personal lines of credit as well as overdraft protection lines. Loans in this portfolio segment are sensitive to unemployment and other key consumer economic measures. Other: The other loan portfolio segment primarily consists of tax-exempt commercial loans, undisbursed loans of all types, and unpaid overdrafts on deposit accounts. F- 27 Commercial Bancgroup, Inc. Notes to Consolidated Financial Statements December 31, 2025 and 2024 Note 4. Loans and Allowance for Credit Losses, Continued Allowance for credit losses on loans: The allowance for credit losses represents an allowance for expected losses over the remaining contractual life of the assets. The contractual term does not consider extensions, renewals or modifications. The Company segregates the loan portfolio by type of loan and utilizes this segregation in evaluating exposure to risks within the portfolio. The following tables detail activity in the allowance for credit losses by portfolio segment for the period ended December 31, 2025 and 2024. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories. As of December 31, 2025 (Dollars are in thousands) Beginning balance Charge offs Recoveries Provision Ending balance Real estate secured: Commercial $ 10,380 $ ( 301 ) $ 151 $ 808 $ 11,038 Construction and land development 2,240 - 201 ( 472 ) 1,969 Residential 3,471 ( 121 ) 64 122 3,536 Other 1 - - 94 95 Total real estate secured 16,092 ( 422 ) 416 552 16,638 Commercial 1,776 ( 362 ) 11 ( 288 ) 1,137 Consumer 338 ( 251 ) 83 102 272 Other ( 1 ) - - 50 49 Total loans $ 18,205 $ ( 1,035 ) $ 510 $ 416 $ 18,096 As of December 31, 2024 (Dollars are in thousands) Beginning balance Charge offs Recoveries Provision Ending balance Real estate secured: Commercial $ 8,243 $ ( 49 ) $ 75 $ 2,111 $ 10,380 Construction and land development 2,019 - - 221 2,240 Residential 3,449 ( 52 ) 9 65 3,471 Other 56 - - ( 55 ) 1 Total real estate secured 13,767 ( 101 ) 84 2,342 16,092 Commercial 2,164 ( 177 ) 54 ( 265 ) 1,776 Consumer 439 ( 151 ) 32 18 338 Other 265 - - ( 266 ) ( 1 ) Total loans $ 16,635 $ ( 429 ) $ 170 $ 1,829 $ 18,205 Credit quality indicators: The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually to classify the loans as to credit risk. This analysis includes loans with an outstanding balance greater than $ 250,000 and non-homogeneous loans, such as commercial real estate loans. This analysis is performed on an annual basis. F- 28 Commercial Bancgroup, Inc. Notes to Consolidated Financial Statements December 31, 2025 and 2024 Note 4. Loans and Allowance for Credit Losses, Continued Credit quality indicators, continued: The Company uses the following definitions for risk ratings: Pass – Loans in this category are considered to have a low likelihood of loss based on relevant information analyzed about the ability of the borrowers to service their debt and other factors. Special Mention – Loans in this category are currently protected but are potentially weak, including adverse trends in the borrower’s operations, credit quality or financial strength. Those loans constitute an undue and unwarranted credit risk but not to the point of justifying a substandard classification. The credit risk may be relatively minor yet constitute an unwarranted risk in light of the circumstances. Special mention loans have potential weaknesses which may, if not checked or corrected, weaken the loan or inadequately protect the Company’s credit position at some future date. Substandard – A substandard loan is inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified as substandard must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt; they are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. Doubtful – Loans classified as doubtful have all the weaknesses inherent in loans classified as substandard, plus the added characteristic that the weaknesses make the collection or liquidation in full on the basis of currently existing facts, conditions, and values highly questionable and improbable. Loss – Loans classified as loss are considered uncollectable and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off this worthless loan even though partial recovery may be affected in the future. F- 29 Commercial Bancgroup, Inc. Notes to Consolidated Financial Statements December 31, 2025 and 2024 Note 4. Loans and Allowance for Credit Losses, Continued Credit quality indicators, continued: The following table presents the Company’s recorded investment in loans by credit quality indicators by year of origination as of December 31, 2025: Revolving Revolving to term 2025 2024 2023 2022 2021 Prior loans loans Total Real estate secured: Commercial Pass $ 102,885,714 $ 111,666,784 $ 162,830,567 $ 281,669,895 $ 190,324,863 $ 241,290,993 $ 13,862,876 $ - $ 1,104,531,692 Special mention - - 7,930,006 - 219,733 664,268 - - 8,814,007 Substandard 94,137 - - - - - - - 94,137 Doubtful - - - - - - - - - Total Commercial $ 102,979,851 $ 111,666,784 $ 170,760,573 $ 281,669,895 $ 190,544,596 $ 241,955,261 $ 13,862,876 $ - $ 1,113,439,836 Current period gross charge-offs $ - $ - $ - $ 17,534 $ - $ 283,786 $ - $ - $ 301,320 Construction and land development Pass $ 53,196,910 $ 43,520,877 $ 12,473,607 $ 15,620,448 $ 8,620,865 $ 8,627,110 $ 33,953,780 $ - $ 176,013,567 Special mention 78,318 - - - - - - - 78,318 Substandard - - 560,322 - - 35,836 - - 596,158 Doubtful - - - - - - - - - Total construction and land development $ 53,275,228 $ 43,520,877 $ 13,033,929 $ 15,620,448 $ 8,620,865 $ 8,662,946 $ 33,953,780 $ - $ 176,688,073 Current period gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ - $ - Residential Pass $ 32,828,788 $ 34,638,627 $ 35,463,653 $ 58,094,457 $ 41,323,508 $ 130,758,970 $ 38,474,995 $ - $ 371,582,998 Special mention - - - - - 689,694 143,093 - 832,787 Substandard - 535,978 622,007 494,536 99,402 3,774,827 - - 5,526,750 Doubtful - - - - - - - - - Total residential $ 32,828,788 $ 35,174,605 $ 36,085,660 $ 58,588,993 $ 41,422,910 $ 135,223,491 $ 38,618,088 $ - $ 377,942,535 Current period gross charge-offs $ - $ - $ - $ - $ - $ 120,509 $ - $ - $ 120,509 Other Pass $ 220,500 $ 212,339 $ 1,944,007 $ 1,143,176 $ - $ 10,845,718 $ 458,222 $ - $ 14,823,962 Special mention - - - - - - - - - Substandard - - - - - - - - - Doubtful - - - - - - - - - Total other $ 220,500 $ 212,339 $ 1,944,007 $ 239,878 $ - $ 10,845,718 $ 458,222 $ - $ 14,823,962 Current period gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ - $ - Total real estate loans $ 189,304,367 $ 190,574,605 $ 221,824,169 $ 265,057,401 $ 240,588,371 $ 396,687,416 $ 86,892,966 $ - $ 1,682,894,406 Total real estate loans – current period gross charge - offs $ - $ - $ - $ 17,534 $ - $ 404,295 $ - $ - $ 421,829 Non-real estate secured Commercial Pass $ 33,125,842 $ 14,281,843 $ 37,968,734 $ 26,640,349 $ 4,973,672 $ 16,544,998 $ 39,788,460 $ - $ 173,323,928 Special mention - - 480,232 - 77,839 234,821 - - 792,892 Substandard - - 88,924 - - 42,572 - - 131,496 Doubtful - - - - - - - - - Total commercial $ 33,125,872 $ 14,281,843 $ 38,537,890 $ 12,962,527 $ 5,051,511 $ 16,822,391 $ 39,788,460 $ - $ 174,248,316 Current period gross charge-offs $ - $ - $ 7,141 $ 347,229 $ 8,000 $ - $ - $ - $ 362,370 Consumer Pass $ 9,808,038 $ 3,107,808 $ 990,245 $ 299,800 $ 368,676 $ 322,733 $ 419,757 $ - $ 15,317,057 Special mention 16,814 - - - - 3,917 - - 20,731 Substandard 5,724 22,156 - 18,030 - 31,802 1,044 - 78,756 Doubtful - - - - - - - - - Total consumer $ 9,830,576 $ 3,129,964 $ 990,245 $ 317,830 $ 368,676 $ 358,452 $ 420,801 $ - $ 15,416,544 Current period gross charge-offs $ 1,063 $ 33,033 $ 11,021 $ 12,467 $ - $ 8,208 $ 185,083 $ - $ 250,875 Other Pass $ 161,113 $ 5,054,100 $ 1,172,892 $ - $ - $ 125,092 $ 937,688 $ - $ 7,450,885 Special mention - - - - - - - - - Substandard - - - - - - - - - Doubtful - - - - - - - - - Total others $ 161,113 $ 5,054,100 $ 1,172,892 $ - $ - $ 125,092 $ 937,688 $ - $ 7,450,885 Current period gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ - $ - Total loans $ 232,421,928 $ 213,040,512 $ 262,525,196 $ 383,980,691 $ 246,008,558 $ 413,993,351 $ 128,039,915 $ - $ 1,880,010,151 Total current period gross charge-offs $ 1,063 $ 33,033 $ 18,162 $ 377,230 $ 8,000 $ 412,503 $ 185,083 $ - $ 1,035,074 F- 30 Commercial Bancgroup, Inc. Notes to Consolidated Financial Statements December 31, 2025 and 2024 Note 4. Loans and Allowance for Credit Losses, Continued Credit quality indicators, continued: The following table presents the Company’s recorded investment in loans by credit quality indicators by year of origination as of December 31, 2024: Revolving Revolving to term 2024 2023 2022 2021 2020 Prior loans loans Total Real estate secured: Commercial Pass $ 74,062,572 $ 134,177,320 $ 281,634,276 $ 200,968,090 $ 48,180,246 $ 251,402,010 $ 11,687,742 $ - $ 1,002,112,256 Special mention - - 217,387 2,554,211 255,730 578,113 - - 3,605,441 Substandard - - 131,353 - 45,110 312,685 - - 489,148 Doubtful - - - - - - - - - Total Commercial $ 74,062,572 $ 134,177,320 $ 281,983,016 $ 203,522,301 $ 48,481,086 $ 252,292,808 $ 11,687,742 $ - $ 1,006,206,845 Current period gross charge-offs $ - $ - $ - $ - $ - $ 48,560 $ - $ - $ 48,560 Construction and land development Pass $ 49,718,279 $ 57,789,669 $ 22,765,767 $ 16,986,717 $ 11,053,291 $ 5,665,441 $ 35,118,777 $ - $ 199,097,941 Special mention - - - - 407,846 293,985 - - 701,831 Substandard - - - - - - - - - Doubtful - - - - - - - - - Total construction and land development $ 49,718,279 $ 57,789,669 $ 22,765,767 $ 16,986,717 $ 11,461,137 $ 5,959,426 $ 35,118,777 $ - $ 199,799,772 Current period gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ - $ - Residential Pass $ 26,437,836 $ 36,617,917 $ 64,512,640 $ 44,308,505 $ 40,298,138 $ 112,643,931 $ 39,132,829 $ - $ 363,951,796 Special mention - - - - - 720,903 144,380 - 865,283 Substandard 491,732 74,062 515,481 - 54,639 3,355,064 - - 4,490,978 Doubtful - - - - - - - - - Total residential $ 26,929,568 $ 36,691,979 $ 65,028,121 $ 44,308,505 $ 40,352,777 $ 116,719,898 $ 39,277,209 $ - $ 369,308,057 Current period gross charge-offs $ - $ - $ - $ 4,143 $ - $ 48,361 $ - $ - $ 52,504 Other Pass $ 222,509 $ 2,295,430 $ 1,603,658 $ 239,878 $ 299,467 $ 10,861,737 $ 1,293,111 $ - $ 16,815,790 Special mention - - - - - - - - - Substandard - - - - - - - - - Doubtful - - - - - - - - - Total other $ 222,509 $ 2,295,430 $ 1,603,658 $ 239,878 $ 299,467 $ 10,861,737 $ 1,293,111 $ - $ 16,815,790 Current period gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ - $ - Total real estate loans $ 150,932,928 $ 230,954,398 $ 371,380,562 $ 265,057,401 $ 100,594,467 $ 385,833,869 $ 87,376,839 $ - $ 1,592,130,464 Total real estate loans – current period gross charge-offs $ - $ - $ - $ 4,143 $ - $ 96,921 $ - $ - $ 101,064 Non-real estate secured Commercial Pass $ 28,531,060 $ 53,548,762 $ 29,932,635 $ 12,926,112 $ 15,174,653 $ 12,004,986 $ 48,857,733 $ - $ 200,975,951 Special mention - 543,282 - - - - - - 543,282 Substandard - 21,458 - 36,405 - 16,216 - - 74,079 Doubtful - - - - - - - - - Total commercial $ 28,531,060 $ 54,113,502 $ 29,932,635 $ 12,962,527 $ 15,174,653 $ 12,021,202 $ 48,857,733 $ - $ 201,593,312 Current period gross charge-offs $ - $ - $ - $ 73,978 $ 173 $ 102,504 $ - $ - $ 176,655 Consumer Pass $ 9,345,126 $ 2,771,310 $ 1,066,679 $ 633,186 $ 387,000 $ 351,779 $ 603,554 $ - $ 15,158,614 Special mention - - - - 7,810 - - - 7,810 Substandard 642 17,420 22,641 - - 6,871 - - 47,574 Doubtful - - - - - - - - - Total consumer $ 9,345,768 $ 2,788,730 $ 1,089,320 $ 633,186 $ 394,810 $ 358,650 $ 603,554 $ - $ 15,213,998 Current period gross charge-offs $ 54,554 $ 16,651 $ 25,950 $ 363 $ 53,298 $ - $ - $ - $ 150,816 Other Pass $ 5,036,024 $ 1,292,956 $ - $ - $ - $ 165,595 $ 249,542 $ - $ 6,744,117 Special mention - - - - - - - - - Substandard - - - - - - - - - Doubtful - - - - - - - - - Total others $ 5,036,024 $ 1,292,956 $ - $ - $ - $ 165,595 $ 249,542 $ - $ 6,744,117 Current period gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ - $ - Total loans $ 193,845,779 $ 289,149,586 $ 402,402,517 $ 278,653,114 $ 116,163,930 $ 398,379,316 $ 137,087,648 $ - $ 1,815,681,890 Total current period gross charge-offs $ 54,554 $ 16,651 $ 25,950 $ 78,484 $ 53,471 $ 199,425 $ - $ - $ 428,535 There were no loans classified in the Loss category as of December 31, 2025 and 2024. There were no revolving loans converted to term as of December 31, 2025 and 2024. F- 31 Commercial Bancgroup, Inc. Notes to Consolidated Financial Statements December 31, 2025 and 2024 Note 4. Loans and Allowance for Credit Losses, Continued Nonaccrual and past due loans: A loan is placed on nonaccrual status when, in management’s judgment, the collection of the interest income appears doubtful. Interest receivable that has been accrued and is subsequently determined to have doubtful collectability is charged to interest income. Interest on loans that are classified as nonaccrual is subsequently applied to principal until the loans are returned to accrual status. The Company’s loan policy states that a nonaccrual loan may be returned to accrual status when (i) none of its principal and interest is due and unpaid, and the Company expects repayment of the remaining contractual principal and interest, or (ii) it otherwise becomes well secured and in the process of collection. Restoration to accrual status on any given loan must be supported by a well-documented credit evaluation of the borrower’s financial condition and the prospects for full repayment. Past due loans are accruing loans whose principal or interest is past due 30 days or more. The following table is a summary of the Company’s nonaccrual loans by major categories for the period indicated: December 31, 2025 Nonaccrual Nonaccrual Total loans with loans with nonaccrual no allowance an allowance loans Real estate secured: Commercial $ - $ - $ - Construction and land development 596,158 - 596,158 Residential 5,150,312 288,509 5,438,821 Other - - - Total real estate secured loans 5,746,740 288,509 6,034,979 Commercial 131,497 - 131,497 Consumer 78,756 - 78,756 Other - - - Total loans $ 5,956,723 $ 288,509 $ 6,245,232 December 31, 2024 Nonaccrual Nonaccrual Total loans with loans with nonaccrual no allowance an allowance loans Real estate secured: Commercial $ 444,038 $ - $ 444,038 Construction and land development 6,094 - 6,094 Residential 4,185,489 305,489 4,490,978 Other - - - Total real estate secured loans 4,635,621 305,489 4,941,110 Commercial 74,078 - 74,078 Consumer 43,824 - 43,824 Other - - - Total loans $ 4,753,523 $ 305,489 $ 5,059,012 F- 32 Commercial Bancgroup, Inc. Notes to Consolidated Financial Statements December 31, 2025 and 2024 Note 4. Loans and Allowance for Credit Losses, Continued Nonaccrual and past due loans, continued: There was no interest income recognized on nonaccrual loans during the years ended December 31, 2025 or 2024. Aging analysis: The following table presents an aging analysis of past due loans by category as of period indicated below: As of December 31, 2025 Loans 30-59 days past due Loans 60-89 days past due Accruing loans 90 or more days past due Nonaccrual loans Total noncurrent loans Current loans Total loans Real estate secured: Commercial $ 259,065 $ - $ - $ - $ 259,065 $ 1,113,180,771 $ 1,113,439,836 Construction and land development 35,176 - - 596,158 631,334 176,056,739 176,688,073 Residential 4,199,811 1,346,718 - 5,438,821 10,985,350 366,957,185 377,942,535 Other - - - - - 14,823,962 14,823,962 Total real estate secured 4,494,052 1,346,718 - 6,034,979 11,875,749 1,671,018,657 1,682,894,406 Commercial 136,485 186,241 - 131,497 454,223 173,794,093 174,248,316 Consumer 65,466 48,083 - 78,756 192,305 15,224,239 15,416,544 Other - - - - - 7,450,885 7,450,885 Total loans $ 4,696,003 $ 1,581,042 $ - $ 6,245,232 $ 12,522,277 $ 1,867,487,874 $ 1,880,010,151 As of December 31, 2024 Loans 30-59 days past due Loans 60-89 days past due Accruing loans 90 or more days past due Nonaccrual loans Total noncurrent loans Current loans Total loans Real estate secured: Commercial $ 426,560 $ - $ - $ 444,038 $ 870,598 $ 1,005,336,247 $ 1,006,206,845 Construction and land development 211,228 27,149 - 6,094 244,471 199,555,301 199,799,772 Residential 5,346,415 658,875 - 4,490,978 10,496,268 358,811,789 369,308,057 Other - - - - - 16,815,790 16,815,790 Total real estate secured 5,984,203 686,024 - 4,941,110 11,611,337 1,580,519,127 1,592,130,464 Commercial 111,514 306,153 - 74,078 491,746 201,101,566 201,593,312 Consumer 114,427 3,118 2,202 43,824 163,570 15,050,427 15,213,998 Other - - - - - 6,744,117 6,744,117 Total loans $ 6,210,144 $ 995,295 $ 2,202 $ 5,059,012 $ 12,266,653 $ 1,803,415,238 $ 1,815,681,891 F- 33 Commercial Bancgroup, Inc. Notes to Consolidated Financial Statements December 31, 2025 and 2024 Note 4. Loans and Allowance for Credit Losses, Continued Collateral-dependent loans: Collateral-dependent loans are loans where repayment is expected to be provided substantially through the operation or sale of the collateral when the borrower is experiencing financial difficulty. If the Company determines that foreclosure is probable, these loans are written down to the lower of cost or collateral value less estimated costs to sell. When repayment is expected to be from the operation of the collateral, the allowance for credit losses is calculated as the amount by which the amortized cost basis of the financial asset exceeds the present value of expected cash flows from the operation of the collateral. The Company may, in the alternative, measure the allowance for credit loss as the amount by which the amortized cost basis of the financial asset exceeded the estimated fair value of the collateral. The following table provides a summary of collateral-dependent loans by collateral type as of December 31, 2025 and 2024. Collateral type 2025 2024 Single Family Residence $ 1,958,890 $ 1,721,316 Commercial Real Estate - 255,730 Land 560,322 293,985 $ 2,519,212 $ 2,271,031 The carrying amount of purchased credit deteriorated loans at December 31, 2025 and 2024 are as follows: 2025 2024 Real estate secured: Commercial $ 3,017,002 $ 5,038,501 Construction and land development 2,306,911 2,383,036 Residential 1,662,178 1,768,090 Other - - Total real estate secured 6,986,091 9,189,627 Commercial 1,730,050 5,206,784 Consumer 3,917 7,810 Other - - Total loans $ 8,720,058 $ 14,404,221 F- 34 Commercial Bancgroup, Inc. Notes to Consolidated Financial Statements December 31, 2025 and 2024 Note 4. Loans and Allowance for Credit Losses, Continued Modifications to borrowers experiencing financial difficulty: The Company periodically provides modifications to borrowers experiencing financial difficulty. These modifications include either payment deferrals, term extensions, interest rate reductions, principal forgiveness or combinations of modification types. The determination of whether the borrower is experiencing financial difficulty is made on the date of the modification. When principal forgiveness is provided, the amount of principal forgiveness is charged off against the allowance for credit losses with a corresponding reduction in the amortized cost basis of the loan. A modified loan is tracked for at least 12 months following the modifications granted. At December 31, 2025 and 2024, loans modified to borrowers experiencing financial difficulty during the year were immaterial. The Company has no unfunded commitments to borrowers experiencing financial difficulty for which the Company has modified their loans on December 31, 2025 and 2024. Unfunded commitments: The Company maintains an allowance for off-balance sheet credit exposures such as unfunded balances for existing lines of credit, commitments to extend future credit, as well as both standby and commercial letters of credit when there is a contractual obligation to extend credit and when this extension of credit is not unconditionally cancellable (i.e., commitment cannot be cancelled at any time). The allowance for off-balance sheet credit exposures is adjusted as a provision for credit loss expense. The estimate includes consideration of the likelihood that funding will occur, which is based on a historical funding study derived from internal information, and an estimate of expected credit losses on commitments expected to be funded over its estimated life, which are the same loss rates that are used in computing the allowance for credit losses on loans. The allowance for credit losses for unfunded loan commitments of $ 117,534 and $ 70,000 at December 31, 2025 and 2024, respectively, is separately classified on the consolidated balance sheet within other liabilities. Note 5. Premises and Equipment 2025 2024 Land and land improvements $ 17,199,368 $ 17,350,753 Buildings and improvements 48,312,176 47,159,512 Furniture, fixtures and equipment 13,285,338 13,557,620 Construction in progress 416,217 459,288 79,213,099 78,527,173 Less: Accumulated depreciation ( 29,447,897 ) ( 28,238,795 ) Total $ 49,765,202 $ 50,288,378 Depreciation expense, included in depreciation and amortization on the consolidated statements of income, for the years ended December 31, 2025, and 2024 amounted to $ 2,137,698 and $ 2,301,828 , respectively. Construction in progress includes capital expenditures for branch renovations and construction of a new branch. Branch renovations are substantially complete and estimated costs to complete are insignificant. Estimated cost to complete the new branch cannot be reasonably estimated as construction has not been started as information necessary for construction bids has not been completed. F- 35 Commercial Bancgroup, Inc. Notes to Consolidated Financial Statements December 31, 2025 and 2024 Note 6. Other Intangible Assets Goodwill : The change in goodwill during the year is as follows: 2025 2024 Beginning of year $ 8,514,092 $ 8,510,852 Adjustments ( 3,240 ) 3,240 End of year $ 8,510,852 $ 8,514,092 Core Deposit Intangibles (CDI): The carrying basis and accumulated amortization of core deposit intangibles on December 31 were: 2025 2024 Gross balance $ 13,061,936 $ 13,061,936 Accumulated amortization 8,805,554 7,236,968 Carrying amount $ 4,256,382 $ 5,824,968 The change in core deposit intangibles during the year is as follows: 2025 2024 Beginning of year $ 5,824,968 $ 7,632,399 Amortization ( 1,568,586 ) ( 1,807,431 ) End of year $ 4,256,382 $ 5,824,968 The estimated amortization expense of CDI for each of the following five years and thereafter is: 2026 $ 1,522,214 2027 1,183,335 2028 1,114,976 2029 435,857 Total $ 4,256,382 F- 36 Commercial Bancgroup, Inc. Notes to Consolidated Financial Statements December 31, 2025 and 2024 Note 7. Time Deposits Time deposits in denominations of $ 250,000 or more were $ 109,582,584 and $ 94,566,467 on December 31, 2025 and December 31, 2024, respectively. Brokered deposits were $ 47,979,000 and $ 174,918,000 on December 31, 2025 and December 31, 2024, respectively. At December 31, 2025, the scheduled maturities of time deposits are as follows: 2026 $ 436,081,678 2027 32,724,641 2028 9,622,697 2029 3,240,794 2030 5,362,679 $ 487,032,489 Note 8. Short-Term Borrowings Short-term borrowings included the following at December 31: 2025 2024 Securities sold under repurchase agreements $ 3,251,290 $ 3,391,566 FHLB Cash Management Advance 75,000,000 - Fed Funds Purchased 10,000,000 - Total short-term borrowings $ 88,251,290 $ 3,391,566 Securities sold under agreements to repurchase generally mature within one day to four days from the transaction date. The weighted average interest rate on December 31, 2025 and 2024 was 2.57 % and 3.27 %, respectively. The maximum month-end balance during 2025 and 2024 was $ 6,632,284 and $ 6,046,056 , respectively. The average outstanding balance during the years ended December 31, 2025 and 2024 amounted to $ 4,846,327 and $ 4,519,370 , respectively, with an average rate paid of 2.64 % and 3.53 %, respectively. Securities sold under agreements to repurchase are collateralized by securities with fair market values exceeding the total balance of the agreement. As of December 31, 2025, the Company has a short-term FHLB cash management advance totally $ 75,000,000 . This borrowing had an interest rate of 3.89 % and matures on March 30, 2026 As of December 31, 2025, the Company had federal funds purchased totaling $ 10,000,000 . These borrowings had a weighted average interest rate of 4.05 % and a maturity of 14 days. F- 37 Commercial Bancgroup, Inc. Notes to Consolidated Financial Statements December 31, 2025 and 2024 Note 9. Long-Term Debt FHLB advances and notes payable consisted of the following components: 2025 2024 Federal Home Loan Bank advances, principal and interest payments of at fixed interest rates from 0.69 % to 5.33 % $ 60,552,956 $ 65,580,576 Notes payable to Community Trust, principal and interest payments of $ 667,000 due quarterly beginning January 27, 2020, at the prime rate, with the balance due January 30, 2035, secured by Commercial Bancgroup, Inc. stock. - 21,451,660 Trust Preferred Securities, interest payment due quarterly at SOFR plus 2.4 %. 5,576,896 5,507,284 PBD Holdings, LLC Promissory Note, payment due quarterly at 3.75 %, maturing September 2026 . 12,457,509 13,233,122 Total $ 78,587,361 $ 105,772,642 The FHLB advances are secured by mortgage loans totaling $ 638,653,000 at December 31, 2025. The advances, requiring monthly principal and interest payments at fixed interest rates from 0.69 % to 5.33 %, are subject to restrictions or penalties in the event of prepayment. These advances mature at various dates between 2026 and 2041. On January 27, 2020, the Company executed a Loan Agreement with Community Trust Bank, Inc., Pikeville, Kentucky, to refinance the existing holding company debt. This loan was for $ 28,500,000 and was repayable in quarterly principal and interest payments based on a 15 -year amortization at Prime Rate, daily adjustable. The company prepaid the outstanding balance of the loan in 2025. With the acquisition of Citizens Bank on January 2, 2018, the Company assumed Citizens Bank Capital Trust (the “Trust”). The Trust was formed during 2004 as a statutory trust formed under the laws of the state of Delaware and is wholly owned by the Company. In September 2004, the Trust issued variable rate preferred securities with an aggregate liquidation amount of $ 6,000,000 ($ 1,000 per preferred security) to a third-party investor. The Company then issued variable rate junior debentures aggregating $ 6,186,000 to the Trust. The junior subordinated debentures are the sole assets of the Trust. The junior subordinated debentures and the preferred securities pay interest and dividends, respectively, on a quarterly basis, at a variable interest rate equal to the three-month SOFR plus 2.40 % adjusted quarterly which was 6.41 % and 6.89 % on December 31, 2025 and December 31, 2024, respectively. These junior subordinated debentures will mature in 2034, at which time the preferred securities can be redeemed. The junior subordinated debentures and preferred securities can be redeemed, in whole or in part, beginning October 7, 2009, at a redemption price of $ 1,000 per preferred security. The Company has provided a full, irrevocable, and unconditional guarantee on a subordinated basis of the obligations of the Trust under the preferred securities in the event of the occurrence of an event of default, as fined in such guarantee. The trust agreement contains provisions that enable the Company to defer making interest payments for a period of up to five years . However, the Company would be restricted from paying dividends on or redeeming its common stock during any deferral. The face amount of the subordinated debentures at December 31, 2025 and December 31, 2024, is $ 6,186,000 . Unamortized discount is $ 609,104 and $ 678,716 at December 31, 2025 and December 31, 2024, respectively. Aggregate annual maturities of long-term debt at December 31, 2025, are: Debt 2026 $ 12,606,826 2027 304,433 2028 99,305 2029 292,907 2030 11,308 Thereafter 65,272,582 $ 78,587,361 F- 38 Commercial Bancgroup, Inc. Notes to Consolidated Financial Statements December 31, 2025 and 2024 Note 10. Income Taxes The provision for income taxes includes these components: 2025 2024 Taxes currently payable Federal $ 9,290,556 $ 9,301,169 State 1,158,416 725,745 Total Current 10,448,972 10,026,914 Deferred income taxes Federal ( 289,857 ) ( 838,604 ) State 62,064 ( 302,115 ) Total Deferred ( 227,793 ) ( 1,140,719 ) Income tax expense $ 10,221,179 $ 8,886,195 A reconciliation of income tax expense at the statutory rate to the Company’s actual income tax expense is shown below: 2025 2024 Amount Percent Amount Percent Computed at the statutory rate $ 9,930,934 21.00 % $ 8,520,115 21.00 % State income taxes, net of federal income tax effect* 964,179 2.04 % 334,668 0.82 % Tax credit investments ( 74,054 ) - 0.16 % ( 126,598 ) - 0.31 % Nontaxable or nondeductible items Tax exempt income, net of interest expense disallowance ( 124,415 ) - 0.26 % ( 116,015 ) - 0.29 % Bank-owned life insurance ( 271,307 ) - 0.57 % ( 251,700 ) - 0.62 % Transaction expenses - 0.00 % 135,148 0.33 % Change in valuation allowance ( 59,854 ) - 0.13 % 323,761 0.80 % Other items, net ( 144,304 ) - 0.31 % 66,816 0.16 % $ 10,221,179 21.61 % $ 8,886,195 21.90 % * State taxes in Kentucky and Tennessee made up the majority (greater than 50 percent) of the tax effect in this category. F- 39 Commercial Bancgroup, Inc. Notes to Consolidated Financial Statements December 31, 2025 and 2024 Note 10. Income Taxes, Continued The significant components of deferred tax assets and liabilities as of December 31, 2025 and 2024, are presented below. The tax effect of temporary differences related to deferred taxes shown on the balance sheet were: 2025 2024 Deferred tax assets Allowance for credit losses $ 4,420,605 $ 4,351,118 Valuation allowance for foreclosed assets 63,636 266,128 Deferred compensation 148,873 242,513 Loan marks 558,490 1,193,812 Accrued expenses - 449,624 Deferred loan fees 851,370 778,767 Stock compensation 31,514 668,233 Other 711,798 796,889 Net operating loss, net of valuation allowance 2,595,608 2,661,417 Unrealized losses on available-for-sale securities 238,795 542,685 9,620,689 11,951,186 Valuation allowance ( 1,935,803 ) ( 1,995,657 ) Total assets $ 7,684,886 $ 9,995,529 Deferred tax liabilities Depreciation $ ( 3,986,561 ) $ ( 5,012,260 ) FHLB stock dividends ( 76,749 ) ( 386,675 ) Deposit-based intangibles ( 1,085,388 ) ( 1,493,984 ) Other ( 448,396 ) ( 884,090 ) Gain on purchase of bank ( 1,085,008 ) ( 1,099,639 ) Total liabilities ( 6,682,102 ) ( 8,876,648 ) Net deferred tax asset $ 1,002,784 $ 1,078,881 The Company has deferred tax assets of and $ 2,595,608 and $ 2,661,417 at December 31, 2025 and 2024, respectively, relating to federal net operating loss (NOL) carryforwards from the acquisitions of the National Bank of Tennessee (NBT), Newport, Tennessee, Citizens Bank of New Tazewell (Citizens), New Tazewell, Tennessee, and AB&T Financial Corporation and Alliance Bank & Trust Company (AB&T), Gastonia, North Carolina. Both NOLs are subject to limitation under IRC §382. A portion of the federal NOL generated by NBT and AB&T will expire unused due to §382 limits. A valuation allowance is recorded for the amount that will expire unused. The NOL generated by Citizens is expected to be fully utilized and no valuation allowance is recorded related to the Citizens NOL. F- 40 Commercial Bancgroup, Inc. Notes to Consolidated Financial Statements December 31, 2025 and 2024 Note 10. Income Taxes, Continued Income taxes paid (net of refunds received) were as follows: 2025 2024 Income taxes paid (received) Federal taxes paid $ 8,940,530 $ 7,900,000 State and city taxes paid Kentucky * 500,000 North Carolina 135,000 * Tennessee 425,000 1,350,000 Total state and city taxes paid 560,000 1,850,000 Total income taxes paid $ 9,500,530 $ 9,750,000 * Jurisdiction below the 5 percent of total income taxes paid (net of refunds) threshold for the period presented. Note 11. Regulatory Matters The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Quantitative measures established by regulation to ensure capital adequacy require the Banks to maintain minimum amounts and ratios (set forth in the table below) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier I capital to average assets (as defined). Management believes as of December 31, 2025 and December 31, 2024, that the Bank meets all capital adequacy requirements to which is subject. In addition to these requirements, the Bank is subject to an institution specific capital conservation buffer, which must exceed 2.50 %, to avoid limitations on distributions and discretionary bonus payments. As of December 31, 2025, the most recent notification from the FDIC categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum total risk-based, Tier I risk-based and Tier I leverage ratios as set forth in the table. There are no conditions or events since that notification that management believes have changed the Bank’s category. F- 41 Commercial Bancgroup, Inc. Notes to Consolidated Financial Statements December 31, 2025 and 2024 Note 11. Regulatory Matters, Continuted The Banks’ actual capital amounts and ratios are presented in the table (dollars in thousands). Minimum to be well Minimum capitalized under for capital prompt corrective Actual adequacy purposes action provisions Amount Ratio Amount Ratio Amount Ratio As of December 31, 2025: Total capital (to risk-weighted assets) $ 255,727 13.5 % $ 151,732 8.0 % $ 189,665 10.0 % Tier I capital (to risk-weighted assets) $ 237,827 12.5 % $ 113,799 6.0 % $ 151,732 8.0 % Common equity Tier 1 capital (to risk-weighted assets) $ 237,827 12.5 % $ 85,349 4.5 % $ 123,282 6.5 % Tier 1 capital (to average assets) $ 237,827 10.8 % $ 88,218 4.0 % $ 110,272 5.0 % Minimum to be well Minimum capitalized under for capital prompt corrective Actual adequacy purposes action provisions Amount Ratio Amount Ratio Amount Ratio As of December 31, 2024: Total capital (to risk-weighted assets) $ 253,949 13.5 % $ 150,920 8.0 % $ 188,650 10.0 % Tier I capital (to risk-weighted assets) $ 235,674 12.5 % $ 113,190 6.0 % $ 150,920 8.0 % Common equity Tier 1 capital (to risk-weighted assets) $ 235,674 12.5 % $ 84,892 4.5 % $ 122,622 6.5 % Tier 1 capital (to average assets) $ 235,674 10.6 % $ 89,209 4.0 % $ 111,511 5.0 % F- 42 Commercial Bancgroup, Inc. Notes to Consolidated Financial Statements December 31, 2025 and 2024 Note 12. Related-Party Transactions At December 31, 2025 and December 31, 2024, the Company had loans outstanding to executive officers, directors, significant shareholders and their affiliates (related parties). The following table summarizes related party loans: 2025 2024 Loans, beginning of year $ 69,274,462 $ 72,534,349 Advances 6,355,791 3,923,049 Repayments ( 4,396,650 ) ( 2,405,521 ) Changes in related parties - ( 4,777,415 ) Loans, end of year $ 71,233,603 $ 69,274,462 Deposits from related parties held by the Company at December 31, 2025 and 2024 totaled $ 47,687,527 and $ 26,018,291 , respectively. In management’s opinion, such loans and other extensions of credit and deposits were made in the ordinary course of business and were made on substantially the same terms (including interest rates and collateral) as those prevailing at the time for comparable transactions with other persons. Further, in management’s opinion, these loans did not involve more than normal risk of collectability or present other unfavorable features. Note 13. Employee Benefits 401(k) and deferred compensation plans : The Bank has a retirement savings 401(k) plan covering substantially all employees. Employees may contribute up to 50 % of their compensation with the Bank matching 100 % of the employee’s contribution on the first 2 % of the employee’s compensation and 50 % on the next 4 % contributed by the employee. Employer contributions, including a discretionary profit- sharing contribution, charged to expense for 2025 and 2024 were $ 609,177 and $ 570,670 , respectively. Also, the Bank has a deferred compensation agreement with certain active and retired officers. The Bank has recognized a liability for such agreements in the amounts of $ 582,576 and $ 943,921 for the years ended December 31, 2025 and December 31, 2024, respectively and are included in other liabilities on the consolidated balance sheets. The charge to expense for the agreements was $ 83,285 and $ 43,579 for 2025 and 2024. Stock awards: The Chief Executive Officer (CEO) was granted 35,938 shares of Commercial Bancgroup, Inc. stock in 2024. Prior to 2025, 35,938 shares were awarded annually contingent on the CEO employment with the Company as of December 31 st of each year. Since the stock was not actively traded at the time of the awards, the Company’s best estimate of the fair value of the stock was book value per share as approved by the Company’s board of directors. In addition, the board of directors approved an award of 107,812 shares of Commercial Bancgroup, Inc. stock for the successful acquisition of AB&T in 2024. Since the stock was not actively traded at the time of the awards, the Company’s best estimate of the fair value of the stock is book value per share as approved by the Company’s board of directors. F- 43 Commercial Bancgroup, Inc. Notes to Consolidated Financial Statements December 31, 2025 and 2024 Note 13. Employee Benefits, Continued Stock compensation expense for these awards was $ 2,143,530 for 2024. Note 14. Stock-based compensation Restricted Stock Units: The Company grants restricted stock units (“RSUs”) to certain employees, officers, and members of the Board of Directors under the Company’s equity incentive plan. The equity incentive plan permits the grant up to 850,000 shares. Each RSU represents the right to receive one share of the Company’s common stock upon vesting. RSUs do not carry voting rights or dividend rights until the underlying shares are issued. RSUs are subject solely to time-based vesting conditions and generally vest over a service period of one to three years , with vesting occurring in equal annual installments, provided the grantee remains in continuous service with the Company through the applicable vesting date. The grant-date fair value of RSUs is measured based on the closing market price of the Company’s common stock on the grant date. Compensation cost related to RSUs is recognized on a straight-line basis over the requisite service period and is recorded in the consolidated statements of operations within salaries and employee benefits. The Company accounts for forfeitures as they occur. The following table summarizes RSU activity for the year ended December 31, 2025: Weighted Average Number of Grant Date RSUs Fair Value Outstanding at beginning of year - $ - Granted 45,783 24.02 Vested - - Forfeited or cancelled - - End of year 45,783 $ 24.02 As of December 31, 2025, unrecognized compensation cost related to unvested RSUs was $ 974,375 , which is expected to be recognized over a weighted-average remaining vesting period of 1.64 years. Upon vesting of RSUs, the Company may withhold shares to satisfy minimum statutory tax withholding requirements. Shares withheld for tax purposes are accounted for as equity transactions and are recorded as a reduction to additional paid-in capital. Cash paid for employee tax withholding obligations is classified as a financing activity in the consolidated statements of cash flows. RSUs do not accrue dividend equivalents prior to vesting. Dividends declared on shares issued upon vesting are recognized in the period in which such dividends are paid. Stock-based compensation expense related to RSUs was $ 124,375 , and $ 0 for the years ended December 31, 2025, and 2024, respectively. Recognized tax benefit was not material for the year ended December 31, 2025. F- 44 Commercial Bancgroup, Inc. Notes to Consolidated Financial Statements December 31, 2025 and 2024 Note 15. Leases A lease is defined as a contract, or part of a contract, that covers the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. On January 1, 2022 the Company adopted ASU No. 2016-02 Leases (Topic 842) and all subsequent ASUs that modified Topic 842. For the Company, Topic 842 primarily affected the accounting treatment for operating lease agreements in which the Company is the lessee. Lessee accounting: Substantially all of the leases in which the Company is the lessee are comprised of real estate property for branches and office space with terms extending through 2059. Substantially all leases are classified as operating leases, and therefore, were previously not recognized on the Company’s consolidated balance sheets. With the adoption of Topic 842, operating lease agreements are required to be recognized on the consolidated balance sheets as a right-of-use (“ROU”) asset and a corresponding lease liability. The Company elected to use the optional transition method, which allowed for a modified retrospective method of adoption without restating comparable periods. The Company also elected the relief package of practical expedients for which there is no requirement to reassess existence of leases, their classification, and initial direct costs. The Company also applied the exemption for short-term leases with a term of less than one year and therefore does not recognize a lease liability or right-of-use asset on the balance sheet but instead recognizes lease payments as an expense over the lease term as appropriate. The following table represents the consolidated balance sheets classification of the Company’s ROU assets and lease liabilities. The Company elected not to include short-term leases (i.e., leases with initial terms of twelve months or less), or equipment leases (deemed immaterial) on the consolidated balance sheets. Classification on December 31, December 31, Lease consolidated balance sheet 2025 2024 Operating lease ROU asset Other assets $ 1,410,315 $ 1,530,735 Operating lease liability Other liabilities $ 1,352,837 $ 1,541,545 F- 45 Commercial Bancgroup, Inc. Notes to Consolidated Financial Statements December 31, 2025 and 2024 Note 15. Leases, Continued The calculated amounts of the ROU assets and lease liabilities in the table above are impacted by the length of the lease term and the discount rate used to present value the minimum lease payments. The Company’s lease agreements often include one or more options to renew at the Company’s discretion. If at lease inception, the Company considers the exercising of a renewal option to be reasonably certain, the Company will include the extended term in the calculation of the ROU asset and lease liability. Regarding the discount rate, Topic 842 requires the use of the rate implicit in the lease whenever this rate is readily determinable. As this rate was determinable, the Company utilized this rate at lease inception. For operating leases existing prior to January 1, 2023, the rate for the remaining lease term as of January 1, 2023 was used. 2025 2024 Weighted-average remaining lease term for operating 19.74 years 19.73 years Weighted-average discount rate for operating leases 3.25 % 3.25 % Future undiscounted lease payments for operating leases with initial or remaining terms of one year or more as of December 31, 2025, were as follows: Operating leases 2026 $ 149,629 2027 149,264 2028 148,629 2029 148,629 2030 148,629 Thereafter 1,193,335 Total undisclosed lease payments 1,938,115 Amounts representing imputed interest 585,278 Net lease liabilities $ 1,352,837 Total lease expense for 2025 and 2024 was approximately $ 167,000 and $ 264,000 , respectively. F- 46 Commercial Bancgroup, Inc. Notes to Consolidated Financial Statements December 31, 2025 and 2024 Note 16. Disclosures About Fair Value of Assets and Liabilities ASC 820, Fair Value Measurements, defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 also specifies a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value: Level 1: Quoted prices in active markets for identical assets or liabilities. Level 2: Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Following is a description of the valuation methodologies and inputs used for assets and liabilities measured at fair value on a recurring basis and recognized in the accompanying consolidated balance sheets, as well as the general classification of such assets and liabilities pursuant to the valuation hierarchy. Available-for-sale securities: Where quoted market prices are available in an active market, securities are classified within Level l of the valuation hierarchy. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics or discounted cash flows. Level 2 securities include all of the Company’s available-for-sale securities, consisting of U.S. Treasury, government agencies, municipals and mortgage-backed securities. Inputs used to estimate the fair value of Level 2 securities when pricing models are used include the security’s call date, maturity date, interest rate and current market interest rates. In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy. Interest rate swap agreements: The fair value is estimated using inputs including the remaining term of the agreement and current market interest rates, that are observable or that can be corroborated by observable marked data and, therefore, are classified within Level 2 of the valuation hierarchy. F- 47 Commercial Bancgroup, Inc. Notes to Consolidated Financial Statements December 31, 2025 and 2024 Note 16. Disclosures About Fair Value of Assets and Liabilities, Continued The following table presents the fair value measurements of assets and liabilities recognized in the accompanying consolidated balance sheets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at December 31: December 31, 2025 Quoted prices Significant in active other Significant markets for observable unobservable Fair identical assets inputs inputs value (Level 1) (Level 2) (Level 3) Assets U.S. Government and federal agency $ 14,830,375 $ - $ 14,830,375 $ - U.S. Government sponsored enterprises (GSEs) 5,395 - 5,395 - Mortgage-backed: GSE residential 12,787,023 - 12,787,023 - State and political subdivision securities 15,513,879 - 15,513,879 - Interest rate swaps 14,130,763 - 14,130,763 - Liabilities Interest rate swaps 14,130,763 - 14,130,763 - December 31, 2024 Quoted prices Significant in active other Significant markets for observable unobservable Fair identical assets inputs inputs value (Level 1) (Level 2) (Level 3) Assets U.S. Government and federal agency $ 15,268,645 $ - $ 15,268,645 $ - U.S. Government sponsored enterprises (GSEs) 55,929 - 55,929 - Mortgage-backed: GSE residential 16,143,431 - 16,143,431 - State and political subdivision securities 16,470,010 - 16,470,010 - Interest rate swaps 22,178,477 - 22,178,477 - Liabilities Interest rate swaps 22,178,477 - 22,178,477 - The Company has no assets or liabilities whose fair values are measured using Level 3 inputs on a recurring basis. Following is a description of the valuation methodologies and inputs used for assets and liabilities measured at fair value on a nonrecurring basis and recognized in the accompanying consolidated balance sheets, as well as the general classification of such assets and liabilities pursuant to the valuation hierarchy. F- 48 Commercial Bancgroup, Inc. Notes to Consolidated Financial Statements December 31, 2025 and 2024 Note 16. Disclosures About Fair Value of Assets and Liabilities, Continued Collateral-dependent and individually evaluated: The fair value of Collateral-dependent loans was primarily measured based on the value of the collateral securing these loans and classified within Level 3 of the fair value hierarchy. Collateral may be real estate and/or business assets including equipment, inventory, and/or accounts receivable. The Company determines the value of the collateral based on independent appraisals performed by qualified licensed appraisers. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Appraised values are discounted for costs to sell and may be discounted further based on management’s historical knowledge, changes in market conditions from the date of the most recent appraisal, and/or management’s expertise and knowledge of the customer and the customer’s business. Such discounts by management are subjective and are typically significant unobservable inputs for determining fair value. These loans are reviewed and evaluated on at least a quarterly basis for additional impairment and adjusted accordingly, based on the same factors discussed above. Foreclosed assets held for sale: The fair value is estimated using the fair value method of measuring the amount of impairment. This method requires obtaining a current independent appraisal of the collateral and applying a discount factor to the value. The fair value method is classified within Level 3 of the fair value hierarchy. The following table presents the fair value measurement of assets and liabilities measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at December 31: 2025 Fair Value Measurements Using Fair value (Level 1) (Level 2) (Level 3) Foreclosed assets held for sale $ - $ - $ - $ - Collateral-dependent loans $ 230,000 $ - $ - $ 230,000 2024 Fair Value Measurements Using Fair value (Level 1) (Level 2) (Level 3) Foreclosed assets held for sale $ 73,020 $ - $ - $ 73,020 Collateral-dependent loans $ 230,000 $ - $ - $ 230,000 F- 49 Commercial Bancgroup, Inc. Notes to Consolidated Financial Statements December 31, 2025 and 2024 Note 16. Disclosures About Fair Value of Assets and Liabilities, Continued Foreclosed assets held for sale, continued: The following table presents additional quantitative information about assets measured at fair value on a nonrecurring basis and for which we have utilized Level 3 inputs to determine fair value at December 31: 2025 Significant Fair Valuation unobservable Weighted value techniques (1) inputs average Foreclosed assets held for sale $ - Appraisal Estimated costs to sell 0 % Collateral-dependent loans $ 230,000 Appraisal Estimated costs to sell 8 % 2024 Significant Fair Valuation unobservable Weighted value techniques (1) inputs average Foreclosed assets held for sale $ 73,020 Appraisal Estimated costs to sell 25 % Collateral-dependent loans $ 230,000 Appraisal Estimated costs to sell 8 % (1) The fair value is generally determined through independent appraisals of the underlying collateral, which may include Level 3 inputs that are not identifiable, or by using the discounted cash flow method if the loan is not Collateral-dependent. F- 50 Commercial Bancgroup, Inc. Notes to Consolidated Financial Statements December 31, 2025 and 2024 Note 16. Disclosures About Fair Value of Assets and Liabilities, Continued Fair values of financial instruments: The carrying amounts and estimated fair values of financial instruments not carried at fair value, at December 31, 2025 and 2024, are as follows: 2025 Carrying Fair value measurements amount Level 1 Level 2 Level 3 Total Financial assets Cash and cash equivalents $ 144,318,929 $ 144,318,929 $ - $ - $ 144,318,929 Held-to-maturity securities U.S. Government and federal agency 42,681,410 - 41,878,600 - 41,878,600 U.S. Government-sponsored enterprises (GSEs) 13,599,444 - 13,308,535 - 13,308,535 Mortgage-backed: GSE residential 37,534,375 - 35,524,297 - 35,524,297 State and political subdivisions 3,912,892 - 3,744,446 - 3,744,446 97,728,121 - 94,455,878 - 94,455,878 Loans Receivable 1,855,434,066 - - 1,820,894,000 1,820,894,000 Interest rate swaps 14,130,763 - 14,130,763 - 14,130,763 Financial Liabilities Time Deposits 487,032,489 - 485,172,000 - 485,172,000 Long-Term borrowings 78,587,361 - 77,385,800 - 77,385,800 Short-Term borrowings 88,251,290 88,251,290 - - 88,251,290 Interest rate swaps 14,130,763 - 14,130,763 - 14,130,763 F- 51 Commercial Bancgroup, Inc. Notes to Consolidated Financial Statements December 31, 2025 and 2024 Note 16. Disclosures About Fair Value of Assets and Liabilities, Continued Fair values of financial instruments, continued: 2024 Carrying Fair value measurements amount Level 1 Level 2 Level 3 Total Financial assets Cash and cash equivalents $ 178,197,916 $ 178,197,916 $ - $ - $ 178,197,916 Held-to-maturity securities U.S. Government and federal agency 87,467,213 - 84,439,850 - 84,439,850 U.S. Government-sponsored enterprises (GSEs) 19,270,853 - 18,559,597 - 18,559,597 Mortgage-backed: GSE residential 19,030,532 - 15,864,131 - 15,864,131 State and political subdivisions 2,448,356 - 2,178,581 - 2,178,581 128,216,954 - 121,042,159 - 121,042,159 Loans Receivable 1,788,791,583 - - 1,742,200,000 1,742,200,000 Interest rate swaps 22,178,477 - 22,178,477 - 22,178,477 Financial Liabilities Time Deposits 576,501,235 - 574,604,000 - 574,604,000 Long-Term borrowings 105,182,081 - 109,165,065 - 109,165,065 Short-Term borrowings 3,391,566 3,391,566 - - 3,391,566 Interest rate swaps 22,178,477 - 22,178,477 - 22,178,477 Note 17. Significant Estimates and Concentrations The Company originates primarily real estate, commercial, and consumer loans to customers primarily in Claiborne County and surrounding counties. The ability of the majority of the Company’s customers to honor their contractual loan obligations is dependent on the economy in the local area. At December 31, 2025 and 2024, 90 % and 88 %, respectively, of the Company’s loan portfolio is concentrated in loans secured by real estate, of which a substantial portion is secured by real estate in the Company’s primary market area. Accordingly, the ultimate collectability of the loan portfolio and recovery of the carrying amount of foreclosed assets is susceptible to changes in real estate conditions in the Company’s primary market area. The other concentrations of credit by type of loan are set forth in Note 4. Current economic conditions: Management is confident that current underwriting standards have achieved sufficient loan to value and operating margins to meet potential changes in the economic environments in the markets we serve. The accompanying financial statements have been prepared using values and information currently available to the Company. Given the volatility of current economic conditions, the values of assets and liabilities recorded in the financial statements could change rapidly, resulting in material future adjustments in asset values, the allowance for credit losses and capital that could negatively impact on the Company’s ability to meet regulatory capital requirements and maintain sufficient liquidity. F- 52 Commercial Bancgroup, Inc. Notes to Consolidated Financial Statements December 31, 2025 and 2024 Note 18. Commitments and Contingencies Standby letters of credit: Standby letters of credit are irrevocable conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Financial standby letters of credit are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing and similar transactions. Performance standby letters of credit are issued to guarantee performance of certain customers under non-financial contractual obligations. The credit risk involved in issuing standby letters of credit is essentially the same as that involved in extending loans to customers. Should the Company be obligated to perform under the standby letters of credit, the Company may seek recourse from the customer for reimbursement of amounts paid. The Company had total outstanding standby letters of credit amounting to approximately $ 24,502,000 and $ 45,505,000 at December 31, 2025 and December 31, 2024, respectively, with terms ranging from 30 days to five years. At December 31, 2025 and 2024, the Company’s deferred revenue under standby letter of credit agreements was $ 0 . Lines of credit: Lines of credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Lines of credit generally have fixed expiration dates. Since a portion of the line may expire without being drawn upon, the total unused lines do not necessarily represent future cash requirements. Each customer’s creditworthiness is evaluated on a case-by-case basis. The amount of collateral obtained, if deemed necessary, is based on management’s credit evaluation of the counterparty. Collateral held varies but may include accounts receivable, inventory, property, plant and equipment, commercial real estate and residential real estate. Management uses the same credit policies in granting lines of credit as it does for on-balance-sheet instruments. On December 31, 2025, the Company had granted unused lines of credit to borrowers aggregating approximately $ 274,407,000 for real estate, commercial lines and open-end consumer lines. On December 31, 2024, unused lines of credit to borrowers aggregated approximately $ 354,509,000 for commercial lines and open-end consumer lines. Contingencies: Various legal proceedings to which the Company is party arise from time to time in the normal course of business. Management believes there are no current proceedings that would materially impact the consolidated financial statements. F- 53 Commercial Bancgroup, Inc. Notes to Consolidated Financial Statements December 31, 2025 and 2024 Note 19. Derivatives Not Designated as Hedges The Company enters into interest rate swaps with certain loan customers. The Company then enters into corresponding offsetting derivatives with third parties, which results in offsetting revenues and expenses within interest income. While these derivatives represent economic hedges, they do not qualify as hedges for accounting purposes. The Company presents derivative positions gross on the consolidated balance sheets. The derivatives recorded on the consolidated balance sheet, in other assets and other liabilities, are as follows: December 31, 2025 December 31, 2024 Notional Fair Notional Fair amount value amount value Included in other assets: Interest rate swaps related to customer loans $ 268,822,286 $ 14,130,763 $ 262,864,970 $ 22,178,477 Included in other liabilities: Interest rate swaps related to customer loans $ 268,822,286 $ 14,130,763 $ 262,864,970 $ 22,178,477 Note 20. Dividend Restrictions The Company’s principal source of funds for dividend payments is dividends received from the Bank. Banking regulations limit the amount of dividends that may be paid without prior approval of regulatory agencies. As of December 31, 2025, approximately $ 33,074,000 of retained earnings was available to pay dividends. F- 54 Commercial Bancgroup, Inc. Notes to Consolidated Financial Statements December 31, 2025 and 2024 Note 21. Parent Company Financial Information Condensed financial information of Commercial Bancgroup, Inc. is presented as follows: Balance Sheets December 31, 2025 and 2024 2025 2024 Assets Cash and due from banks $ 41,053,403 $ 1,033,714 Investment in subsidiaries 240,933,329 238,056,051 Loans, net of allowance for credit losses 12,420,681 13,143,989 Other 9,161,729 8,919,934 Total assets $ 303,569,142 $ 261,153,688 Liabilities Long-term debt $ 18,034,405 $ 40,192,065 Other 190,905 705,840 Total liabilities 18,225,310 40,897,905 Stockholders’ Equity Common stock 136,980 121,131 Additional paid-in capital 38,376,658 9,388,181 Retained earnings 247,505,096 212,310,977 Accumulated other comprehensive loss ( 674,902 ) ( 1,564,506 ) Total stockholders’ equity 285,343,832 220,255,783 Total liabilities and stockholders’ equity $ 303,569,142 $ 261,153,688 F- 55 Commercial Bancgroup, Inc. Notes to Consolidated Financial Statements December 31, 2025 and 2024 Note 21. Parent Company Financial Information, Continued Statements of Income For the years ended December 31, 2025 and 2024 2025 2024 Interest Income Loans, including fees $ 538,150 $ 568,785 Other 13,286 14,996 Total Interest Income 551,436 583,781 Equity in Earnings 1,845,550 23,142,846 Dividend Income 37,800,000 12,900,000 Interest Expense: Long-term debt 2,154,194 2,983,783 Total Interest Expense 2,154,194 2,983,783 Net Interest Income before provision for credit losses 38,042,792 33,642,844 Provision for Credit Losses - - Net Interest Income After Provision for Credit Losses 38,042,792 33,642,844 Noninterest Expense Salaries and employee benefits 311,441 2,364,852 Professional fees 700,395 425,496 Other 349,926 689,962 Total Noninterest Expense 1,361,762 3,480,310 Income Before Income Tax Benefits 36,681,030 30,162,534 Provision for Income Tax Benefits ( 515,168 ) ( 1,247,392 ) Net Income $ 37,196,198 $ 31,409,926 F- 56 Commercial Bancgroup, Inc. Notes to Consolidated Financial Statements December 31, 2025 and 2024 Note 21. Parent Company Financial Information, Continued Statements of Cash Flows For the years ended December 31, 2025 and 2024 2025 2024 Operating activities Net income $ 37,196,198 $ 31,409,926 Items not requiring (providing) cash Equity in undistributed earnings ( 1,845,550 ) ( 23,142,846 ) Other assets and liabilities ( 898,854 ) 328,300 Stock compensation 124,375 2,143,530 Net cash provided by operating activities 34,576,169 10,738,910 Investing activities Net change in loans 723,308 694,362 Net cash provided by investing activities 723,308 694,362 Financing activities Decrease in long-term debt ( 22,157,660 ) ( 1,966,563 ) Repurchase of common stock ( 980,800 ) ( 1,829,803 ) Issuance of common stock, net 29,860,751 - Acquisition of minority interest - ( 5,678,150 ) Payment of dividends ( 2,002,079 ) ( 2,002,669 ) Net cash provided (used) by financing activities 4,720,212 ( 11,477,185 ) Increase (decrease) in cash and cash equivalents 40,019,689 ( 43,913 ) Cash and cash equivalents, beginning of year 1,033,714 1,077,627 Cash and cash equivalents, end of year $ 41,053,403 $ 1,033,714 F- 57 Commercial Bancgroup, Inc. Notes to Consolidated Financial Statements December 31, 2025 and 2024 Note 22. Earnings Per Share The factors used in the earnings per share computation follow: 2025 2024 Basic Net income $ 37,196,198 $ 31,409,926 Weighted average common shares outstanding 12,605,127 12,187,560 Basic earnings per share $ 2.95 $ 2.58 Diluted Net income $ 37,196,198 $ 31,409,926 Weighted average common shares outstanding for basic EPS 12,605,127 12,187,560 Add: Dilutive effects of assumed exercise of stock grants 6,043 179,688 Average shares and dilutive common shares 12,611,170 12,367,248 Diluted earnings per common share $ 2.95 $ 2.54 Dilutive common shares on December 31, 2024, represent shares that have been awarded but have not been issued to the recipient. (See Note 13 regarding discussion of the award.) Dilutive common shares on December 31, 2025, represent restricted stock units that have been awarded but have not vested and issued to the recipient. (See Note 14 regarding discussion of stock compensation.) Note 23. Subsequent Events Subsequent events are events or transactions that occur after the balance sheet date but before financial statements are issued. Recognized subsequent events are events or transactions that provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements. Non-recognized subsequent events are events that provide evidence about conditions that did not exist at the date of the balance sheet but arose after that date. Prepayment of Long-Term Debt Subsequent to December 31, 2025, the Company prepaid its outstanding long-term debt under the Citizens Bank Capital Trust in the aggregate principal amount of $ 6.0 million. The prepayment resulted in a loss on extinguishment of debt of approximately $ 609,000 , primarily related to and the write-off of unamortized discount on the notes. In accordance with ASC 855, Subsequent Events, this transaction is a non-recognized subsequent event, and therefore no adjustments have been made to the accompanying financial statements as of and for the year ended December 31, 2025. Issuance of Restricted Stock Units Subsequent to December 31, 2025, on January 1, 2026, the Company granted 17,311 restricted stock units (“RSUs”) to certain employees and officers under the Company’s equity incentive plan. Each RSU represents the right to receive one share of the Company’s common stock upon vesting. The RSUs vest over 3 years subject to continued service. The grant-date fair value was $ 24.56 per RSU, determined using the Company’s closing market price on the grant date, for an aggregate grant-date fair value of $ 425,193 . The Company expects to recognize the associated stock-based compensation expense on a straight-line basis over the requisite service period. In accordance with ASC 855, Subsequent Events, this transaction is a non-recognized subsequent event, and therefore no adjustments have been made to the accompanying financial statements as of and for the year ended December 31, 2025. F- 58 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.