Commercial Bancgroup, Inc. 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2026 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 001-42889 Commercial Bancgroup, Inc. (Exact Name of Registrant as Specified in its Charter) Tennessee 62-1039469 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 6710 Cumberland Gap Parkway Harrogate , Tennessee 37752 (Address of principal executive offices) (Zip Code) Registrant’s telephone number, including area code: (423) 869-5151 Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock, par value $0.01 per share CBK The Nasdaq Stock Market LLC Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Smaller reporting company ☒ Emerging growth company ☒ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ As of August 12, 2026, the registrant had 13,701,269.5 shares of common stock, $0.01 par value per share, outstanding. Page PART I. FINANCIAL INFORMATION 2 Item 1. Financial Statements. 2 Consolidated Balance Sheets as of June 30, 2026 (unaudited) and December 31, 2025. 2 Consolidated Statements of Income (unaudited) for the Three and Six Months Ended June 30, 2026 and 2025. 3 Consolidated Statements of Comprehensive Income (unaudited) for the Three and Six Months Ended June 30, 2026 and 2025. 4 Consolidated Statements of Changes in Shareholders’ Equity (unaudited) for the Three and Six Months Ended June 30, 2026 and 2025. 5 Consolidated Statements of Cash Flows (unaudited) for the Six Months Ended June 30, 2026 and 2025. 6 Notes to Unaudited Consolidated Financial Statements. 8 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. 39 Item 3. Quantitative and Qualitative Disclosures About Market Risk. 70 Item 4. Controls and Procedures. 70 PART II. OTHER INFORMATION 71 Item 1. Legal Proceedings. 71 Item 1A. Risk Factors. 71 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. 71 Item 3. Defaults Upon Senior Securities. 72 Item 4. Mine Safety Disclosures. 72 Item 5. Other Information. 72 Item 6. Exhibits. 73 Signatures. 74 i CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q (this “Report”) contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may include statements relating to the strategies, future operations, future financial position or performance, future revenue, projected costs, prospects, plans, objectives of management and expected market growth of Commercial Bancgroup, Inc., a Tennessee corporation (the “Parent Company”), and its consolidated subsidiaries (collectively, the “Company,” “we,” “our,” “us,” or similar terms). These statements are often, but not always, made through the use of words or phrases such as “may,” “might,” “should,” “could,” “predict,” “potential,” “believe,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “strive,” “projection,” “goal,” “target,” “aim,” “would,” “annualized” and “outlook,” or the negative version of these words or other similar words or phrases of a future or forward-looking nature. These forward-looking statements are not statements of historical facts and are based on assumptions and estimates that we believe to be reasonable in light of the information available to us at this time. However, these forward-looking statements are subject to significant risks and uncertainties, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date such statements are made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements. A number of important factors could cause our actual results to differ materially from those indicated in these forward-looking statements, including the following: ● business and economic conditions nationally, regionally and in our target markets, particularly in Kentucky, North Carolina, and Tennessee and the particular geographic areas in which we operate; ● the level of, or changes in the level of, interest rates and inflation, including the effects thereof on our earnings and financial condition and the market value of our investment and loan portfolios; ● the concentration of our loan portfolio in real estate loans and changes in the prices, values and sales volumes of commercial and residential real estate; ● the concentration of our business within our geographic areas of operation in Kentucky, North Carolina, and Tennessee and neighboring markets; ● credit and lending risks associated with our commercial real estate (“CRE”), commercial, and construction and land development (“C&D”) loan portfolios; ● risks associated with our focus on lending to small and mid-sized businesses; ● our ability to maintain important deposit customer relationships, maintain our reputation or otherwise avoid liquidity risks; ● changes in demand for our products and services; ● the failure of assumptions and estimates underlying the establishment of allowances for possible credit losses and other asset impairments, valuations of assets and liabilities, and other calculations; ● the sufficiency of our capital, including sources of such capital and the extent to which capital may be used or required; ii ● our inability to maintain a “satisfactory” rating under the Community Reinvestment Act; ● risks that our cost of funding could increase in the event we are unable to continue to attract stable, low-cost deposits or maintain or reduce our cost of deposits; ● our inability to raise necessary capital to fund our growth strategy and operations or to meet increased required minimum regulatory capital levels; ● our ability to execute and prudently manage our growth and execute on our business strategy, including expansionary activities; ● the composition of and changes in our management team and our ability to attract, incentivize and retain key personnel; ● the effects of competition from a wide variety of local, regional, national and other providers of financial, investment, trust and other wealth management services and insurance services, including the disruption effects of financial technology and other competitors who are not subject to the same regulations as the Company; ● the deterioration of our asset quality or the value of collateral securing loans; ● changes in our accounting standards; ● the effectiveness of our risk management framework, including internal controls; ● severe weather, natural disasters, pandemics, epidemics, acts of war, terrorism, or other external events, such as the transition risk associated with climate change, and other matters beyond our control; ● changes in technology or products or services that may be more difficult or costly, or less effective, than anticipated; ● the risks of acquisitions and other expansionary activities, including without limitation our ability to identify and consummate transactions with potential future acquisition candidates, the time and costs associated with pursuing such transactions, our ability to successfully integrate operations as part of such transactions and our ability, and possible failures, to achieve expected gains, revenue growth, expense savings and/or other synergies from such transactions; ● our ability to maintain our historical rate of growth; ● failure to keep pace with technological change, including the increasing use of artificial intelligence, or difficulties when implementing new technologies; ● systems failures or interruptions involving our risk management framework, our information technology and telecommunications systems or third-party service providers; ● our ability to identify and address unauthorized data access, cyber-crime and other threats to data security and customer privacy; ● our compliance with governmental and regulatory requirements, including the Bank Holding Company Act of 1956, as amended (the “BHC Act”), and other laws relating to banking, consumer protection, securities and tax matters, and our ability to maintain licenses required in connection with mortgage origination, sale and servicing operations; ● compliance with the Bank Secrecy Act of 1970, Office of Foreign Assets Control rules and anti-money laundering laws and regulations; iii ● governmental monetary and fiscal policies; ● changes in laws, rules, or regulations, or interpretations thereof, or policies relating to financial institutions or accounting, tax, trade, monetary or fiscal matters; ● the ability of our Parent Company to receive dividends from its wholly owned subsidiary bank, Commercial Bank (the “Bank”), and our ability to satisfy our obligations as they become due; ● the institution and outcome of litigation and other legal proceedings against us or to which we become subject; ● the limited experience of our management team in managing and operating a public company; ● the incremental costs of operating as a public company; ● our ability to meet our obligations as a public company, including our obligations under Section 404 of the Sarbanes-Oxley Act of 2002; and ● other risks and factors described under the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Parent Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025 filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 24, 2026 (the “2025 Annual Report”) and in subsequent filings of the Parent Company with the SEC. The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this Report. If one or more events related to these or other risks or uncertainties materialize, or if our underlying assumptions or estimates prove to be incorrect, actual results may differ materially from what we anticipate. Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date it is made, and we do not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Report. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in or implied by any forward-looking statements. iv Commercial Bancgroup, Inc. Consolidated Financial Statements (Unaudited) 1 PART I—FINANCIAL INFORMATION Item 1. Financial Statements. Commercial Bancgroup, Inc. Consolidated Balance Sheets (Unaudited) (Audited) June 30, December, 31 2026 2025 Assets Cash and due from banks $ 22,313,240 $ 26,393,695 Federal funds sold 8,787,117 25,328,744 Interest-bearing deposits in banks 139,013,949 92,596,490 Cash and cash equivalents 170,114,306 144,318,929 Available-for-sale securities 38,553,064 43,136,672 Held-to-maturity securities 94,342,911 97,728,121 Loans, net of allowance for credit losses of $ 18,722,469 and$ 18,096,173 on June 30, 2026 and December 31, 2025, respectively 1,921,813,487 1,855,437,066 Premises and equipment, net 50,144,628 49,765,202 Restricted stock, at cost 12,528,400 11,375,500 Foreclosed assets held for sale, net 755,497 253,000 Interest receivable 7,128,855 7,451,045 Bank owned life insurance 46,618,666 46,647,762 Core deposits and other intangibles 3,501,530 4,256,382 Goodwill 8,510,852 8,510,852 Deferred tax asset 1,076,181 1,002,784 Other 21,495,914 21,571,666 Total assets $ 2,376,584,291 $ 2,291,454,981 Liabilities and Shareholders’ Equity Liabilities Deposits Demand $ 942,633,089 $ 913,985,722 Savings, NOW and money market 413,904,250 414,715,894 Time 516,634,975 487,032,489 Total deposits 1,873,172,314 1,815,734,105 Short-term borrowings 102,569,888 88,251,290 Long-term debt 73,247,223 78,587,361 Interest payable 2,575,110 2,961,874 Other liabilities 22,401,223 20,576,519 Total liabilities 2,073,965,758 2,006,111,149 Shareholders’ equity Common stock $ 0.01 par value; 50,000,000 shares authorized; 13,701,270 shares issued and outstanding on June 30, 2026; 13,697,987 on December 31, 2025 137,013 136,980 Additional paid-in capital 38,683,769 38,376,658 Retained earnings 264,515,272 247,505,096 Accumulated other comprehensive loss ( 717,521 ) ( 674,902 ) Total shareholders’ equity 302,618,533 285,343,832 Total liabilities and shareholders’ equity $ 2,376,584,291 $ 2,291,454,981 See Condensed Notes to Consolidated Financial Statements (Unaudited) 2 Commercial Bancgroup, Inc. Consolidated Statements of Income (Unaudited) For the three and six months ended June 30, 2026 and 2025 Three Months Ended Six Months Ended June 30, June 30, 2026 2025 2026 2025 Interest and Dividend Income Loans, including fees $ 28,395,966 $ 28,431,357 $ 56,071,287 $ 56,361,313 Debt securities-taxable 831,964 1,069,861 1,670,009 2,044,816 Debt securities-tax-exempt 108,797 116,190 222,854 226,155 Dividends on restricted stock 151,011 148,453 297,701 308,437 Interest-bearing time deposits 666,464 1,093,217 1,355,550 2,683,867 Total interest and dividend income 30,154,202 30,859,078 59,617,401 61,624,588 Interest expense Deposits 8,031,786 9,717,906 16,347,256 20,011,375 Short-term borrowings 40,407 43,617 87,564 74,612 Long-term debt 566,785 1,038,550 1,189,659 2,139,822 Total interest expense 8,638,978 10,800,073 17,624,479 22,225,809 Net interest income 21,515,224 20,059,005 41,992,922 39,398,779 Provision for credit losses 399,289 - 521,259 - Net interest income after provision for credit losses 21,115,935 20,059,005 41,471,663 39,398,779 Noninterest Income Customer service fees 774,323 674,494 1,555,807 1,329,317 Net gains on sales of premises and equipment 30,000 32,440 30,000 4,459 Net gains on sales of foreclosed assets - - 106,553 3,550 ATM fees 977,177 891,704 1,831,638 1,690,449 Increase in bank owned life insurance 314,906 335,519 626,549 643,531 Other 553,910 289,869 1,091,073 995,391 Total noninterest income 2,650,316 2,224,026 5,241,620 4,666,697 Noninterest Expense Salaries and employee benefits 5,682,974 5,657,365 11,399,103 11,282,996 Occupancy 855,825 916,041 1,698,721 1,790,889 Data processing 1,099,459 1,151,315 2,200,517 2,358,359 Deposit insurance premiums 202,337 245,494 444,356 470,988 Professional fees 440,410 285,841 649,357 480,941 Depreciation and amortization 941,554 802,639 1,874,713 1,751,007 Loss on retirement of debt - - 603,303 - Other 1,649,959 1,666,726 3,089,033 3,171,028 Total noninterest expense 10,872,518 10,725,421 21,959,103 21,306,208 Income before income taxes 12,893,733 11,557,610 24,754,180 22,759,268 Provision for income taxes 2,678,067 2,658,018 5,004,076 5,168,070 Net Income $ 10,215,666 $ 8,899,592 $ 19,750,104 $ 17,591,198 Earnings per share: Basic $ 0.75 $ 0.73 $ 1.44 $ 1.44 Diluted $ 0.74 $ 0.73 $ 1.44 $ 1.44 See Condensed Notes to Consolidated Financial Statements (Unaudited) 3 Commercial Bancgroup, Inc. Consolidated Statements of Comprehensive Income (Unaudited) For the three and six months ended June 30, 2026 and 2025 Three Months Ended Six Months Ended June 30, June 30, 2026 2025 2026 2025 Net income $ 10,215,666 $ 8,899,592 $ 19,750,104 $ 17,591,198 Other comprehensive income: Unrealized holding gains (losses) on securities available for sale arising during the period 100,740 161,024 ( 147,525 ) 381,312 Tax (expense) benefit ( 26,330 ) ( 15,102 ) 38,554 ( 72,669 ) Reclassification adjustment for accretion of unrealized holding losses included in accumulated other comprehensive income from the transfer of securities from available-for-sale to held-to-maturity 44,827 57,099 89,827 128,580 Tax (expense) ( 11,714 ) ( 14,923 ) ( 23,475 ) ( 33,603 ) Other comprehensive income (loss), net of tax 107,523 188,098 ( 42,619 ) 403,620 Comprehensive income $ 10,323,189 $ 9,087,690 $ 19,707,485 $ 17,994,818 See Condensed Notes to Consolidated Financial Statements (Unaudited) 4 Commercial Bancgroup, Inc. Consolidated Statements of Changes in Shareholders’ Equity (Unaudited) For the three and six months ended June 30, 2026 and 2025 Other Additional Comprehensive Common Paid-In Retained Income Stock Capital Earnings (Loss) TOTAL Balance - January 1, 2025 $ 121,131 $ 9,388,181 $ 212,310,977 $ ( 1,564,506 ) $ 220,255,783 Net income - - 17,591,198 - 17,591,198 Other comprehensive income - - - 403,620 403,620 Dividends paid to shareholders ($ 0.17 per share) - - ( 2,002,079 ) - ( 2,002,079 ) Issuance of stock grants ( 179,688 shares) 1,797 ( 1,797 ) - - - Repurchase of stock ( 53,188 shares) ( 532 ) ( 980,268 ) - - ( 980,800 ) Balance – June 30, 2025 $ 122,396 $ 8,406,116 $ 227,900,096 $ ( 1,160,886 ) $ 235,267,722 Balance - January 1, 2026 $ 136,980 $ 38,376,658 $ 247,505,096 $ ( 674,902 ) $ 285,343,832 Net income - - 19,750,104 - 19,750,104 Other comprehensive loss - - - ( 42,619 ) ( 42,619 ) Dividends paid to shareholders ($ 0.20 per share) - - ( 2,739,928 ) - ( 2,739,928 ) Stock compensation - 307,144 - - 307,144 Issuance of stock related to restricted stock units ( 3,283 shares) 33 ( 33 ) - - - Balance – June 30, 2026 $ 137,013 $ 38,683,769 $ 264,515,272 $ ( 717,521 ) $ 302,618,533 Balance - March 31, 2025 $ 122,396 $ 8,406,116 $ 219,000,504 $ ( 1,348,984 ) $ 226,180,031 Net income - - 8,899,592 - 8,899,592 Other comprehensive income - - - 188,098 188,098 Balance – June 30, 2025 $ 122,396 $ 8,406,116 $ 227,900,096 $ ( 1,160,886 ) $ 235,267,722 Balance - March 31, 2026 $ 136,980 $ 38,536,072 $ 255,669,735 $ ( 825,044 ) $ 293,517,743 Net income - - 10,215,666 - 10,215,666 Other comprehensive income - - - 107,523 107,523 Dividends paid to shareholders ($ 0.10 per share) - - ( 1,370,129 ) - ( 1,370,129 ) Stock compensation - 147,730 - - 147,730 Issuance of stock related to restricted stock units ( 3,283 shares) 33 ( 33 ) - - - Balance – June 30, 2026 $ 137,013 $ 38,683,769 $ 264,515,272 $ ( 717,521 ) $ 302,618,533 See Condensed Notes to Consolidated Financial Statements (Unaudited) 5 Commercial Bancgroup, Inc. Consolidated Statements of Cash Flows (Unaudited) For the six months ended June 30, 2026 and 2025 Six Months Ended June 30, 2026 2025 Operating Activities Net income $ 19,750,104 $ 17,591,198 Items not requiring (providing) cash Depreciation 1,119,861 960,810 Amortization of core deposit intangible 754,852 790,197 Securities amortization and (accretion), net ( 60,664 ) ( 979,895 ) Provision for credit losses 521,259 - Stock compensation expense 307,144 - Provision for losses on foreclosed assets - 4,500 Net realized gains losses on foreclosed assets ( 106,553 ) ( 3,550 ) Net gains on sales of premises and equipment ( 30,000 ) ( 4,459 ) Changes in Interest receivable 322,190 103,315 Other assets 75,752 7,507,216 Other liabilities 1,824,703 ( 6,028,395 ) Increase in bank owned life insurance ( 626,549 ) ( 597,043 ) Deferred income taxes ( 58,318 ) ( 56,728 ) Interest payable ( 386,764 ) 320,745 Net cash provided by operating activities 23,407,017 19,607,911 Investing Activities Purchases of available-for-sale securities ( 15,038,672 ) ( 16,929,788 ) Proceeds from sales, maturities and calls of available-for-sale securities 19,707,085 35,479,367 Proceeds from, maturities and calls of held-to-maturity securities 18,289,894 44,421,401 Purchases of held-to-maturity securities ( 14,986,523 ) ( 72,891,789 ) Net change in loans ( 67,473,177 ) 14,977,938 Purchase of premises and equipment, net ( 1,499,287 ) ( 1,049,005 ) Proceeds from sales of premises and equipment 30,000 43,900 Proceeds from sales of foreclosed assets 359,554 255,064 Payments relating to foreclosed assets ( 180,000 ) - Proceeds from bank owned life insurance 655,645 - (Purchase) redemption of restricted stock, at cost ( 1,152,900 ) 156,590 Net cash (used in) provided by investing activities $ ( 61,288,381 ) $ 4,463,678 (Continued) See Condensed Notes to Consolidated Financial Statements (Unaudited) 6 Commercial Bancgroup, Inc. Consolidated Statements of Cash Flows (Unaudited) For the six months ended June 30, 2026 and 2025 Six Months Ended June 30, 2026 2025 Financing Activities Net increase (decrease) in deposits $ 57,438,209 $ ( 87,349,052 ) Proceeds from short-term borrowings 14,318,598 42,908,594 Proceeds from long-term borrowings 5,901,100 - Repayments of long-term borrowings ( 11,241,238 ) ( 3,563,814 ) Repurchase of stock - ( 980,800 ) Payment of dividends ( 2,739,928 ) ( 2,002,079 ) Net cash provided by (used in) financing activities 63,676,741 ( 50,987,151 ) Increase (decrease) in cash and cash equivalents 25,795,377 ( 26,915,562 ) Cash and cash equivalents, beginning of period 144,318,929 178,197,916 Cash and cash equivalents, end of period $ 170,114,306 $ 151,282,354 Supplemental Cash Flows Information Interest paid $ 18,011,243 $ 21,905,064 Income taxes paid $ 4,310,000 $ 4,500,000 Supplemental Disclosures of Noncash Items Unrealized gain(loss) on AFS securities $ ( 147,525 ) $ 381,312 Transfer of loans to OREO $ 575,497 $ 286,146 See Condensed Notes to Consolidated Financial Statements (Unaudited) 7 Commercial Bancgroup, Inc. Condensed Notes to Consolidated Financial Statements (Unaudited) For purposes of these Notes to Consolidated Financial Statements (Unaudited), references to the “Company” are to Commercial Bancgroup, Inc. only and do not include its subsidiaries, unless otherwise expressly stated. Note 1. Summary of Significant Accounting Policies Nature of operations: The Company is a bank holding company incorporated in the State of Tennessee whose principal activity is the ownership and management of the Bank. The Bank is primarily engaged in providing a full range of banking and financial services to individual and corporate customers in Claiborne, Union, Knox, Sullivan, Washington, Williamson, Cocke and Hamblen Counties in Tennessee, Knox, Bell, Harlan, Laurel and Whitley Counties in Kentucky and Gastonia and Cleveland Counties in North Carolina. Basis of presentation: The Company’s accounting and reporting policies conform to accounting principles generally accepted in the United States (“GAAP”) for interim financial information and to generally accepted practices within the banking industry. Accordingly, these financial statements do not include all the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six month periods ended June 30, 2026 are not necessarily indicative of the results that may be expected for the year ending December 31, 2026. For further information, refer to the consolidated financial statements and footnotes thereto in the 2025 Annual Report. 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 with Community Trust Bank, Inc. (the “CTB Loan”). Change in presentation due to stock reclassification and stock split: In connection with the initial public offering of its common stock, 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 then outstanding share of the Company’s Class B common stock, $ 10.00 par value per share, into 1.15 shares of common stock and the automatic reclassification and conversion of each then outstanding share of the Company’s Class C common stock, $ 10.00 par value per share, into 1.05 shares of common stock and (ii) effective immediately following this reclassification and conversion, 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 and conversion. 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. The Company is authorized to issue 10,000,000 shares of preferred stock, $ 0.01 par value per share. As of June 30, 2026, 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. 8 Commercial Bancgroup, Inc. Condensed Notes to Consolidated Financial Statements (Unaudited) Note 1. Summary of Significant Accounting Policies, Continued 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 GAAP 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 (“ACL”), 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. 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 ACL, 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 $ 6,674,080 and $ 6,895,763 as of June 30, 2026, and December 31, 2025, 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. 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 is 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 ACL is determined using the same methodology as other loans held for investment. The initial ACL determined on a collective basis is allocated to individual loans. The sum of the loan’s purchase price and ACL 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 ACL are recorded through credit loss expense. 9 Commercial Bancgroup, Inc. Condensed Notes to Consolidated Financial Statements (Unaudited) Note 1. Summary of Significant Accounting Policies, Continued Allowance for credit losses (ACL) – loans : 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 Company has policies in place to reverse accrued interest in a timely manner. Therefore, the Company has made a policy election to exclude accrued interest from the measurement of the ACL. Expected credit losses are reflected in the ACL through a charge to provision for credit losses. The Company measures expected credit losses on 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. 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 WARM method. The WARM CECL (Current Expected Credit Losses) 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 ACL 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, underwriting standards, and collection and 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 and legal and regulatory requirements. 10 Commercial Bancgroup, Inc. Condensed Notes to Consolidated Financial Statements (Unaudited) Note 1. Summary of Significant Accounting Policies, Continued Allowance for credit losses (ACL) – loans, continued: ACL 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 ACL 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 a commitment expected to be funded over its estimated life. 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 cost 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 ACL 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. 11 Commercial Bancgroup, Inc. Condensed Notes to Consolidated Financial Statements (Unaudited) Note 1. Summary of Significant Accounting Policies, Continued 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, a 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-for-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 debt 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 $ 215,406 and $ 291,460 as of June 30, 2026 and December 31, 2025, 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. 12 Commercial Bancgroup, Inc. Condensed Notes to Consolidated Financial Statements (Unaudited) Note 2. Securities The amortized cost and approximate fair values, together with gross unrealized gains and losses, of securities are as follows: June 30, 2026 Gross Gross Amortized unrealized unrealized Fair cost gains losses value Available-for-sale securities: U.S. Government and federal agency $ 15,022,819 $ - $ ( 13,069 ) $ 15,009,750 U.S. Government-sponsored enterprises (GSEs) 1,832 - ( 9 ) 1,823 Mortgage-backed: GSE residential 11,758,689 3,562 ( 648,963 ) 11,113,288 State and political subdivisions 12,691,960 1,647 ( 265,404 ) 12,428,203 $ 39,475,300 $ 5,209 $ ( 927,445 ) $ 38,553,064 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 13 Commercial Bancgroup, Inc. Condensed Notes to Consolidated Financial Statements (Unaudited) Note 2. Securities, Continued June 30, 2026 Gross Gross Amortized unrealized unrealized Fair cost gains losses value Held-to-maturity securities: U.S. Government and federal agency $ 42,519,879 $ - $ ( 571,103 ) $ 41,948,876 U.S. Government-sponsored enterprises (GSEs) 13,728,209 - ( 276,071 ) 13,452,138 Mortgage-backed: GSE residential 34,191,493 15,625 ( 2,317,310 ) 31,889,808 State and political subdivisions 3,903,330 8,595 ( 190,775 ) 3,721,150 $ 94,342,911 $ 24,220 $ ( 3,355,159 ) $ 91,011,972 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 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 ACL has been established as of each of June 30, 2026 and December 31, 2025. U.S. Government sponsored enterprises include entities such as the Federal National Mortgage Association, Federal Home Loan Mortgage Corporation, and Federal Home Loan Banks (“FHLB”). 14 Commercial Bancgroup, Inc. Condensed Notes to Consolidated Financial Statements (Unaudited) Note 2. Securities, Continued The amortized cost and fair value of available-for-sale securities and held-to-maturity securities on June 30, 2026, 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 $ 16,398,911 $ 16,378,657 $ 48,006,450 $ 47,540,400 One to five years 6,806,993 6,649,845 10,668,116 10,130,338 Five to ten years 2,561,368 2,511,555 98,582 98,537 After ten years 1,949,339 1,899,719 1,378,270 1,351,889 Mortgage-backed securities 11,758,689 11,113,288 34,191,493 31,889,808 Totals $ 39,475,300 $ 38,553,064 $ 94,342,911 $ 91,011,972 The market value of securities pledged as collateral, to secure public deposits and for other purposes, was $ 114,676,135 and $ 137,592,549 on June 30, 2026 and December 31, 2025, respectively. The book value of securities sold under agreements to repurchase amounted to $ 2,569,888 and $ 3,251,290 on June 30, 2026 and December 31, 2025, respectively. There were no sales of available-for-sale securities during the three or six months ended June 30, 2026 and 2025. 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 as of June 30, 2026 and December 31, 2025. June 30, 2026 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 $ 15,009,750 $ ( 13,069 ) $ - $ - $ 15,009,750 $ ( 13,069 ) U.S. Government sponsored enterprises (GSEs) - - 1,823 ( 9 ) 1,823 ( 9 ) Mortgage-backed: GSE residential 4,036,433 ( 76,955 ) 6,861,276 ( 572,008 ) 10,897,709 ( 648,963 ) State and political subdivisions 3,616,733 ( 43,629 ) 7,036,292 ( 221,775 ) 10,653,025 ( 265,404 ) Total $ 22,662,916 $ ( 133,653 ) $ 13,899,391 $ ( 793,792 ) $ 36,562,307 $ ( 927,445 ) 15 Commercial Bancgroup, Inc. Condensed Notes to Consolidated Financial Statements (Unaudited) Note 2. Securities, Continued 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 ) As of June 30, 2026, the Company had 138 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 the Company 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 dates or repricing dates or if market yields for such investments decline. 16 Commercial Bancgroup, Inc. Condensed Notes to Consolidated Financial Statements (Unaudited) Note 3. Loans and Allowance for Credit Losses Portfolio segmentation: On June 30, 2026 and December 31, 2025, the Company’s loans consisted of the following: June 30, December 31, 2026 2025 Real estate secured: Commercial $ 1,140,479,845 $ 1,113,439,836 Construction and land development 201,780,994 176,688,073 Residential 387,142,497 377,942,535 Other 18,336,360 14,823,962 Total real estate secured 1,747,739,696 1,682,894,406 Commercial 179,934,505 174,248,316 Consumer and other 19,534,967 22,867,429 Total loans 1,947,209,168 1,880,010,151 Less Net deferred loan fees, premiums and discounts 6,673,212 6,476,912 Allowance for credit losses 18,722,469 18,096,173 Net loans $ 1,921,813,487 $ 1,855,437,066 For purposes of disclosure, 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 ACL. There are three loan portfolio segments, including real estate, commercial, and consumer and other loans. Prior period segment presentation has been reclassified to combine the “Consumer” and “Other” loan segments into “Consumer and Other” to conform to current period presentation and historical MD&A disclosures. A class is generally determined based on the initial measurement attribute, risk characteristics 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. Each of commercial, consumer and other loans is its own class. 17 Commercial Bancgroup, Inc. Condensed Notes to Consolidated Financial Statements (Unaudited) Note 3. Loans and Allowance for Credit Losses, Continued 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 of 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 % 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 an affiliate of the party, who owns the property. 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 development 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. 18 Commercial Bancgroup, Inc. Condensed Notes to Consolidated Financial Statements (Unaudited) Note 3. Loans and Allowance for Credit Losses, Continued Portfolio segmentation, continued: 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 homes. 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, and 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 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 and other: The consumer and other loan portfolio segment includes non-real estate secured direct loans to consumers for household, family, and other personal expenditures, tax-exempt commercial loans, undisbursed loans of all types, and unpaid overdrafts on deposit accounts. 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. 19 Commercial Bancgroup, Inc. Condensed Notes to Consolidated Financial Statements (Unaudited) Note 3. Loans and Allowance for Credit Losses, Continued ACL on loans: The ACL 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 ACL by portfolio segment for the periods ended June 30, 2026 and June 30, 2025. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories. Six months ended as of June 30, 2026 (Dollars are in thousands) Beginning balance Charge offs Recoveries Provision Ending balance Real estate secured: Commercial $ 11,038 $ - $ 114 $ 157 $ 11,309 Construction and land development 1,969 - - 276 2,245 Residential 3,536 - 1 23 3,560 Other 95 - - ( 2 ) 93 Total real estate secured 16,638 - 115 454 17,207 Commercial 1,137 - 2 188 1,327 Consumer and other 321 ( 33 ) 16 ( 116 ) 188 Total loans $ 18,096 $ ( 33 ) $ 133 $ 526 $ 18,722 Six months ended as of June 30, 2025 (Dollars are in thousands) Beginning balance Charge offs Recoveries Provision Ending balance Real estate secured: Commercial $ 10,380 $ ( 18 ) $ 43 $ - $ 10,405 Construction and land development 2,240 - 202 - 2,442 Residential 3,471 ( 121 ) 18 - 3,368 Other 1 - - - 1 Total real estate secured 16,092 ( 139 ) 263 - 16,216 Commercial 1,776 ( 314 ) 3 - 1,465 Consumer and other 337 ( 51 ) 22 - 308 Total loans $ 18,205 $ ( 504 ) $ 288 $ - $ 17,989 20 Commercial Bancgroup, Inc. Condensed Notes to Consolidated Financial Statements (Unaudited) Note 3. Loans and Allowance for Credit Losses, Continued 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 certain 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. 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 the presence of adverse trends in the borrower’s operations, credit quality or financial strength. These 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 considering the circumstances. Special mention loans have potential weaknesses which may, if not checked or corrected, weaken the loans 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 Company 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. 21 Commercial Bancgroup, Inc. Condensed Notes to Consolidated Financial Statements (Unaudited) Note 3. 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 June 30, 2026: Revolving Revolving to term 2026 2025 2024 2023 2022 Prior loans loans Total Real estate secured: Commercial Pass $ 74,722,998 $ 109,091,721 $ 103,083,594 $ 163,191,625 $ 275,063,736 $ 390,556,299 $ 15,614,499 $ - $ 1,131,324,472 Special mention - - - 7,971,312 - 863,416 - - 8,834,728 Substandard - 85,210 - - - 235,435 - - 320,645 Doubtful - - - - - - - - - Total Commercial $ 74,722,998 $ 109,176,931 $ 103,083,594 $ 171,162,937 $ 275,063,736 $ 391,655,150 $ 15,614,499 $ - $ 1,140,479,845 Current period gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ - $ - Construction and land development Pass $ 23,205,914 $ 70,694,905 $ 42,262,684 $ 11,532,654 $ 6,714,225 $ 11,761,252 $ 35,217,736 $ - $ 201,389,370 Special mention - 359,318 - - - - - - 359,318 Substandard - - - - - 32,306 - - 32,306 Doubtful - - - - - - - - - Total construction and land development $ 23,205,914 $ 71,054,223 $ 42,262,684 $ 11,532,654 $ 6,714,225 $ 11,793,558 $ 35,217,736 $ - $ 201,780,994 Current period gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ - $ - Residential Pass $ 18,492,720 $ 35,536,622 $ 34,054,900 $ 32,050,353 $ 56,021,181 $ 164,837,894 $ 39,163,783 $ - $ 380,157,453 Special mention - - - - - 538,900 92,011 - 630,911 Substandard - - 280,706 622,558 371,445 5,079,424 - - 6,354,133 Doubtful - - - - - - - - - Total residential $ 18,492,720 $ 35,536,622 $ 34,335,606 $ 32,672,911 $ 56,392,626 $ 170,456,218 $ 39,255,794 $ - $ 387,142,497 Current period gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ - $ - Other Pass $ 3,812,299 $ 216,945 $ 206,326 $ 1,861,092 $ 1,069,268 $ 10,686,531 $ 483,899 $ - $ 18,336,360 Special mention - - - - - - - - - Substandard - - - - - - - - - Doubtful - - - - - - - - - Total other $ 3,812,299 $ 216,945 $ 206,326 $ 1,861,092 $ 1,069,268 $ 10,686,531 $ 483,899 $ - $ 18,336,360 Current period gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ - $ - Total real estate loans $ 120,233,931 $ 215,984,721 $ 179,888,210 $ 217,229,594 $ 339,239,855 $ 584,591,457 $ 90,571,928 $ - $ 1,747,739,696 Total real estate loans – current period gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ - $ - Non-real estate secured Commercial Pass $ 11,237,262 $ 32,272,018 $ 12,429,025 $ 35,500,136 $ 24,478,545 $ 19,696,572 $ 43,388,119 $ - $ 179,001,677 Special mention - - - 475,516 - 208,988 - - 684,504 Substandard - - 117,716 22,769 - 77,839 30,000 - 248,324 Doubtful - - - - - - - - - Total commercial $ 11,237,262 $ 32,272,018 $ 12,546,741 $ 35,998,421 $ 24,478,545 $ 19,983,399 $ 43,418,119 $ - $ 179,934,505 Current period gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ - $ - Consumer and Other Pass $ 4,483,784 $ 3,905,656 $ 7,136,121 $ 1,607,347 $ 195,134 $ 612,640 $ 1,482,138 $ - $ 19,422,820 Special mention 17,488 14,374 - - - 1,892 - - 33,754 Substandard 13,312 - 16,198 4,680 9,426 34,777 - - 78,393 Doubtful - - - - - - - - - Total consumer and other $ 4,514,584 $ 3,920,030 $ 7,152,319 $ 1,612,027 $ 204,560 $ 649,309 $ 1,482,138 $ - $ 19,534,967 Current period gross charge-offs $ 558 $ 22,229 $ 7,600 $ 1,295 $ - $ - $ - $ - $ 32,726 Total loans $ 135,985,777 $ 252,176,769 $ 199,587,270 $ 254,840,042 $ 363,922,960 $ 605,224,165 $ 135,472,185 $ - $ 1,947,209,168 Total current period gross charge-offs $ 558 $ 22,229 $ 7,600 $ 1,295 $ - $ 1,044 $ - $ - $ 32,726 22 Commercial Bancgroup, Inc. Condensed Notes to Consolidated Financial Statements (Unaudited) Note 3. 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 and other Pass $ 9,969,151 $ 8,161,908 $ 2,163,137 $ 299,800 $ 368,676 $ 447,825 $ 1,357,445 $ - $ 22,767,942 Special mention 16,814 - - - - 3,917 - - 20,731 Substandard 5,724 22,156 - 18,030 - 31,802 1,044 - 78,756 Doubtful - - - - - - - - - Total consumer and other $ 9,991,689 $ 8,184,064 $ 2,163,137 $ 317,830 $ 368,676 $ 483,544 $ 1,358,489 $ - $ 22,867,429 Current period gross charge-offs $ 1,063 $ 33,033 $ 11,021 $ 12,467 $ - $ 8,208 $ 185,083 $ - $ 250,875 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 There were no loans classified in the Loss category as of June 30, 2026 or December 31, 2025. There were no revolving loans converted to term loans as of June 30, 2026 or December 31, 2025. 23 Commercial Bancgroup, Inc. Condensed Notes to Consolidated Financial Statements (Unaudited) Note 3. 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 as of the dates indicated: June 30, 2026 Nonaccrual Nonaccrual Total loans with loans with nonaccrual no allowance an allowance loans Real estate secured: Commercial $ - $ - $ - Construction and land development 32,306 - 32,306 Residential 6,302,170 - 6,302,170 Other - - - Total real estate secured loans 6,334,476 - 6,334,476 Commercial 248,324 - 248,324 Consumer and other 78,393 - 78,393 Total loans $ 6,661,193 $ - $ 6,661,193 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 and other 78,756 - 78,756 Total loans $ 5,956,723 $ 288,509 $ 6,245,232 There was no interest income recognized on nonaccrual loans for the six months ended June 30, 2026 or 2025. 24 Commercial Bancgroup, Inc. Condensed Notes to Consolidated Financial Statements (Unaudited) Note 3. Loans and Allowance for Credit Losses, Continued Aging analysis: The following table presents an aging analysis of past due loans by category as of the dates indicated: As of June 30, 2026 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 $ 373,516 $ 116,647 $ - $ - $ 490,163 $ 1,139,989,682 $ 1,140,479,845 Construction and land development 182,313 - - 32,306 214,619 201,566,375 201,780,994 Residential 3,288,362 1,869,225 - 6,302,170 11,459,757 375,682,740 387,142,497 Other - - - - - 18,336,360 18,336,360 Total real estate secured 3,844,191 1,985,872 - 6,334,476 12,164,539 1,735,575,157 1,747,739,696 Commercial 90,400 114,122 - 248,324 452,846 179,481,659 179,934,505 Other 75,207 42,564 - 78,393 196,164 19,338,803 19,534,967 Total loans $ 4,009,798 $ 2,142,558 $ - $ 6,661,193 $ 12,813,549 $ 1,934,395,619 $ 1,947,209,168 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 and other 65,466 48,083 - 78,756 192,305 22,675,124 22,867,429 Total loans $ 4,696,003 $ 1,581,042 $ - $ 6,245,232 $ 12,522,277 $ 1,867,487,874 $ 1,880,010,151 25 Commercial Bancgroup, Inc. Condensed Notes to Consolidated Financial Statements (Unaudited) Note 3. 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 ACL 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 ACL as the amount by which the amortized cost basis of the financial asset exceeds the estimated fair value of the collateral. The following table provides a summary of collateral-dependent loans by collateral type as of June 30, 2026 and December 31, 2025. June 30, December 31, 2026 2025 Collateral type Single Family Residence $ 2,234,946 $ 1,958,890 Land - 560,322 $ 2,234,946 $ 2,519,212 The carrying amounts of purchased credit deteriorated loans as of June 30, 2026 and December 31, 2025 are as follows: June 30, December 31, 2026 2025 Real estate secured: Commercial $ 2,878,779 $ 3,017,002 Construction and land development 2,267,112 2,306,911 Residential 1,349,800 1,662,178 Other - - Total real estate secured 6,495,691 6,986,091 Commercial 1,545,065 1,730,050 Consumer 1,892 3,917 Other - - Total loans $ 8,042,648 $ 8,720,058 26 Commercial Bancgroup, Inc. Condensed Notes to Consolidated Financial Statements (Unaudited) Note 3. 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 ACL 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. On June 30, 2026 and December 31, 2025, loans modified to borrowers experiencing financial difficulty during the year were immaterial. The Company had no unfunded commitments to borrowers experiencing financial difficulty for which the Company has modified their loans on June 30, 2026 or December 31, 2025. 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, and 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 their estimated lives, which are the same loss rates that are used in computing the ACL on loans. The ACL for unfunded loan commitments of $ 113,102 and $ 117,535 on June 30, 2026 and December 31, 2025, respectively, is separately classified on the consolidated balance sheet within other liabilities. Note 4. Premises and Equipment June 30, December 31, 2026 2025 Land and land improvements $ 17,199,368 $ 17,199,368 Buildings and improvements 48,600,854 48,312,176 Furniture, fixtures and equipment 13,486,287 13,285,338 Construction in progress 1,257,131 416,217 80,543,640 79,213,099 Less: Accumulated depreciation ( 30,399,012 ) ( 29,447,897 ) Total $ 50,144,628 $ 49,765,202 Depreciation expense, included in depreciation and amortization on the consolidated statements of income, for the six months ended June 30, 2026, and 2025 amounted to $ 1,119,861 and $ 960,810 , 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 additional costs to complete the new branch are approximately $ 2,387,000 on June 30, 2026. 27 Commercial Bancgroup, Inc. Condensed Notes to Consolidated Financial Statements (Unaudited) Note 5. Other Intangible Assets Goodwill : FASB ASC No. 2021-03, “Goodwill and Other (Topic 350),” regarding testing goodwill for impairment, provides an entity the option to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The Company performs its annual goodwill impairment test as of December 31 of each year. As of the latest impairment analysis on December 31, 2025, management determined there was no goodwill impairment. The carrying amount of goodwill as of both June 30, 2026 and December 31, 2025 was approximately $ 8,511,000 . Core Deposit Intangibles (CDI): The carrying basis and accumulated amortization of CDIs on June 30, 2026 and December 31, 2025 were: June 30, December 31, 2026 2025 Gross balance $ 13,061,936 $ 13,061,936 Accumulated amortization 9,560,406 8,805,554 Carrying amount $ 3,501,530 $ 4,256,382 The change in CDIs during the six months ended June 30, 2026 and the fiscal year ended December 31, 2025 is as follows: June 30, December 31, 2026 2025 Beginning of period $ 4,256,382 $ 5,824,968 Amortization ( 754,852 ) ( 1,568,586 ) End of period $ 3,501,530 $ 4,256,382 As of June 30, 2026, the estimated amortization expense of CDIs for future periods is as follows: Remainder of 2026 $ 767,362 2027 1,183,335 2028 1,114,976 2029 435,857 Total $ 3,501,530 28 Commercial Bancgroup, Inc. Condensed Notes to Consolidated Financial Statements (Unaudited) Note 6. Short-Term Borrowings Short-term borrowings included the following on June 30, 2026 and December 31, 2025: June 30, December 31, 2026 2025 Securities sold under repurchase agreements $ 2,569,888 $ 3,251,290 FHLB Cash Management Advance 100,000,000 75,000,000 Fed Funds Purchased - 10,000,000 Total short-term borrowings $ 102,569,888 $ 88,251,290 Securities sold under agreements to repurchase generally mature within one day to four days from the transaction date. The weighted average interest rate on June 30, 2026 and December 31, 2025 was 2.32 % and 2.57 %, respectively. The maximum month-end balance during the six months ended June 30, 2026 and the fiscal year ended December 31, 2025 was $ 5,067,842 and $ 6,632,284 , respectively. The average outstanding balance during the six months ended June 30, 2026 and the fiscal year ended December 31, 2025 amounted to $ 3,702,396 and $ 4,846,327 , respectively, with an average rate paid of 3.10 % and 2.64 %, respectively. Securities sold under agreements to repurchase are collateralized by securities with fair market values exceeding the total balance of the agreement. As of June 30, 2026 and December 31, 2025, the Company had short-term FHLB cash management advances totaling $ 100,000,000 and $ 75,000,000 , respectively, with interest rates of 3.85 % and 3.89 %, respectively, and ninety-day maturities. The June 30, 2026 balance matures on September 28, 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. Note 7. Long-Term Debt FHLB advances and notes payable consisted of the following components as of the dates indicated: June 30, December 31, 2026 2025 FHLB advances, principal and interest payments at fixed interest rates from 0.69 % to 5.03 % $ 61,189,272 $ 60,552,956 Trust Preferred Securities, interest payment due quarterly at SOFR plus 2.4 %. - 5,576,896 PBD Promissory Note, payments due quarterly at 3.75 %, maturing September 2026 . 12,057,951 12,457,509 Total $ 73,247,223 $ 78,587,361 The FHLB advances were secured by mortgage loans totaling $ 686,491,000 on June 30, 2026. The advances, requiring monthly principal and interest payments at fixed interest rates from 0.69 % to 5.03 %, are subject to restrictions or penalties in the event of prepayment. These advances mature at various dates between 2026 and 2041. With the acquisition of Citizens Bancorp, Inc. (“Citizens Bancorp”) and its bank subsidiary, Citizens Bank, on January 2, 2018, the Company assumed Citizens Bank Capital Trust I (the “Trust”). The Trust was formed during 2004 as a statutory trust under the laws of the State of Delaware and until its cancellation on January 21, 2026, was wholly owned by the Company. In September 2004, the Trust issued variable rate preferred securities (the “Trust Preferred Securities”) with an aggregate liquidation amount of $ 6,000,000 ($ 1,000 per Trust Preferred Security) to a third-party investor. Citizens Bancorp then issued variable rate junior subordinated debentures aggregating $ 6,186,000 to the Trust (the “Subordinated Debentures”). The Subordinated Debentures were the sole assets of the Trust. The Subordinated Debentures and the Trust Preferred Securities paid interest and dividends, respectively, on a quarterly basis, at a variable interest rate equal to the three-month Secured Overnight Financing Rate (“SOFR”) plus 2.40 % adjusted quarterly which was 6.41 % on December 31, 2025. The Subordinated Debentures and Trust Preferred Securities were redeemable prior to maturity, in whole or in part, beginning October 7, 2009, at a redemption price of $ 1,000 per preferred security. 29 Commercial Bancgroup, Inc. Condensed Notes to Consolidated Financial Statements (Unaudited) Note 7. Long-Term Debt, Continued The face amount of the Subordinated Debentures was $ 6,186,000 on December 31, 2025. Unamortized discount was $ 661,313 on December 31, 2025. The Company redeemed the Subordinated Debentures, and the Trust redeemed the Trust Preferred Securities, in January 2026 with a resulting loss on early retirement of $ 603,303 recognized during the quarter ended March 31, 2026. The aggregate annual maturities of the Company’s long-term debt on June 30, 2026, were: Debt Remainder of 2026 $ 17,245,892 2027 4,760,018 2028 4,844,774 2029 4,923,364 2030 7,544,679 Thereafter 33,928,496 $ 73,247,223 Note 8. 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, banks must meet specific capital guidelines that involve quantitative measures of a 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 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 in the regulations) and of Tier I capital to average assets (as defined in the regulations). Management believes that as of June 30, 2026 and December 31, 2025, the Bank met all capital adequacy requirements to which it 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 June 30, 2026, 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 below. There are no conditions or events since that notification that management believes have changed the Bank’s capitalization category. The Bank’s actual capital amounts and ratios as of June 30, 2026 and December 31, 2025 are presented in the tables below (dollars in thousands). Actual Minimum for capital adequacy purposes Minimum to be well capitalized under prompt corrective action provisions Amount Ratio Amount Ratio Amount Ratio As of June 30, 2026: Total capital (to risk-weighted assets) $ 278,850 14.0 % $ 159,719 8.0 % $ 199,649 10.0 % Tier I capital (to risk-weighted assets) $ 260,015 13.0 % $ 119,789 6.0 % $ 159,719 8.0 % Common equity Tier 1 capital (to risk-weighted assets) $ 260,015 13.0 % $ 89,842 4.5 % $ 129,772 6.5 % Tier 1 capital (to average assets) $ 260,015 11.6 % $ 89,788 4.0 % $ 112,235 5.0 % 30 Commercial Bancgroup, Inc. Condensed Notes to Consolidated Financial Statements (Unaudited) Note 8. Regulatory Matters, Continued Actual Minimum for capital adequacy purposes Minimum to be well capitalized under prompt corrective 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 % Note 9. 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 of awards with respect to up to 850,000 shares of common stock. 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 income within salaries and employee benefits. The Company accounts for forfeitures as they occur. 31 Commercial Bancgroup, Inc. Condensed Notes to Consolidated Financial Statements (Unaudited) Note 9. Stock-Based Compensation, Continued Restricted Stock Units, continued: The following table summarizes RSU activity for the six months ended June 30, 2026: Weighted Average Number of Grant Date RSUs Fair Value Outstanding at beginning of period 45,783 $ 24.02 Granted 22,983 25.72 Vested and shares issued ( 3,283 ) 24.34 Forfeited or cancelled ( 618 ) 24.56 Outstanding at end of period 64,865 $ 24.60 As of June 30, 2026, unrecognized compensation cost related to unvested RSUs was $ 1,248,370 , which is expected to be recognized over a weighted-average remaining vesting period of 2.24 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 $ 307,144 and $ 0 for the six months ended June 30, 2026, and 2025, respectively. Recognized tax benefit was not material for the six months ended June 30, 2026. Note 10. 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. 32 Commercial Bancgroup, Inc. Condensed Notes to Consolidated Financial Statements (Unaudited) Note 10. Disclosures About Fair Value of Assets and Liabilities, Continued 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, and interest rate and current market interest rates. In certain cases where Level 1 and Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy. Interest rate swap agreements: The fair value of interest rate swap agreements 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. The following tables present 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 fell on June 30, 2026 and December 31, 2025: June 30, 2026 Quoted prices Significant in active other Significant markets for observable unobservable identical assets inputs inputs Fair value (Level 1) (Level 2) (Level 3) Assets U.S. Government and federal agency $ 15,009,750 $ - $ 15,009,750 $ - U.S. Government sponsored enterprises (GSEs) 1,823 - 1,823 - Mortgage-backed: GSE residential 11,113,288 - 11,113,288 - State and political subdivision securities 12,428,203 - 12,428,203 - Interest rate swaps 15,693,711 - 15,693,711 - Liabilities Interest rate swaps 15,693,711 - 15,693,711 - 33 Commercial Bancgroup, Inc. Condensed Notes to Consolidated Financial Statements (Unaudited) Note 10. Disclosures About Fair Value of Assets and Liabilities, Continued Interest rate swap agreements, continued: December 31, 2025 Quoted prices Significant in active other Significant markets for observable unobservable identical assets inputs inputs Fair 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 - 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. 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 of foreclosed assets held for sale 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 tables present 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 fell on June 30, 2026 and December 31, 2025: June 30, 2026 Fair Value Measurements Using Fair value (Level 1) (Level 2) (Level 3) Foreclosed assets held for sale $ - $ - $ - $ - Collateral-dependent loans $ - $ - $ - $ - 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 34 Commercial Bancgroup, Inc. Condensed Notes to Consolidated Financial Statements (Unaudited) Note 10. Disclosures About Fair Value of Assets and Liabilities, Continued Foreclosed assets held for sale, continued: The following tables present 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 as of June 30, 2026 and December 31, 2025: June 30, 2026 Significant Valuation unobservable Weighted Fair value techniques (1) inputs average Foreclosed assets held for sale $ - Appraisal Estimated costs to sell - Collateral-dependent loans $ - Appraisal Estimated costs to sell - December 31, 2025 Significant Valuation unobservable Weighted Fair value techniques (1) inputs average Foreclosed assets held for sale $ - Appraisal Estimated costs to sell - 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. Fair values of financial instruments: The carrying amounts and estimated fair values of financial instruments not carried at fair value, on June 30, 2026 and December 31, 2025, are as follows: June 30, 2026 Carrying Fair value measurements amount Level 1 Level 2 Level 3 Total Financial assets Cash and cash equivalents $ 170,114,306 $ 170,114,306 $ - $ - $ 170,114,306 Held-to-maturity securities U.S. Government and federal agency 42,519,879 - 41,948,876 - 41,948,876 U.S. Government-sponsored enterprises (GSEs) 13,728,209 - 13,452,138 - 13,452,138 Mortgage-backed: GSE residential 34,191,493 - 31,889,808 - 31,889,808 State and political subdivisions 3,903,330 - 3,721,150 - 3,721,150 94,342,911 - 91,011,972 - 91,011,972 Loans Receivable 1,921,813,487 - - 1,899,203,000 1,899,203,000 Interest rate swaps 15,693,711 - 15,693,711 - 15,693,711 Financial Liabilities Time Deposits 516,634,975 - 513,166,000 - 513,166,000 Long-Term borrowings 73,247,223 - 66,840,000 - 66,840,000 Short-Term borrowings 102,569,888 102,569,888 - - 102,569,888 Interest rate swaps 15,693,711 - 15,693,711 - 15,693,711 35 Commercial Bancgroup, Inc. Condensed Notes to Consolidated Financial Statements (Unaudited) Note 10. Disclosures About Fair Value of Assets and Liabilities, Continued Fair values of financial instruments, continued: December 31, 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 1,855,437,066 - - 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 Note 11. Significant Estimates and Concentrations The Company originates primarily real estate, commercial, and consumer loans to customers primarily in markets where are our branches are located. 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. On both June 30, 2026 and December 31, 2025, 90 % of the Company’s loan portfolio was concentrated in loans secured by real estate, of which a substantial portion is secured by real estate in the Company’s primary market areas. 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 areas. The other concentrations of credit by type of loan are set forth in Note 3. 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 ACL and capital that could negatively impact the Company’s ability to meet regulatory capital requirements and maintain sufficient liquidity. 36 Commercial Bancgroup, Inc. Condensed Notes to Consolidated Financial Statements (Unaudited) Note 12. 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 nonfinancial 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 $ 24,331,000 and $ 24,502,000 on June 30, 2026 and December 31, 2025, respectively, with terms ranging from 30 days to five years . On both June 30, 2026 and December 31, 2025, the Company’s deferred revenue under standby letters 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 conditions established in the contract. Lines of credit generally have fixed expiration dates. Because 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 June 30, 2026, the Company had granted unused lines of credit to borrowers aggregating approximately $ 288,715,000 for commercial lines and open-end consumer lines. On December 31, 2025, unused lines of credit to borrowers aggregated approximately $ 274,407,000 for commercial lines and open-end consumer lines. Contingencies: From time to time, the Company is party to litigation and other legal matters incidental to the conduct of its business. Such matters are subject to many uncertainties and outcomes are not predictable with assurance. The Company accrues liabilities for such matters when it is probable that future expenditures will be made and such expenditures can be reasonably estimated. As of June 30, 2026, the Company was not involved in any such matters, individually or in the aggregate, which management believes would have a material adverse effect on the Company’s business, financial condition, results of operations, or cash flows. 37 Commercial Bancgroup, Inc. Condensed Notes to Consolidated Financial Statements (Unaudited) Note 13. 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 its consolidated balance sheets. The derivatives recorded on the consolidated balance sheets as of June 30, 2026 and December 31, 2025, were as follows: June 30, 2026 December 31, 2025 Notional Fair Notional Fair amount value amount value Included in other assets: Interest rate swaps related to customer loans $ 262,058,551 $ 15,693,711 $ 268,822,286 $ 14,130,763 Included in other liabilities: Interest rate swaps related to customer loans $ 262,058,551 $ 15,693,711 $ 268,822,286 $ 14,130,763 Note 14. Earnings Per Share The factors used in the earnings per share computation for the three and six months ended June 30, 2026 and 2025, are presented below: Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 Basic Net income $ 10,215,666 $ 8,899,592 $ 19,750,104 $ 17,591,198 Weighted average common shares outstanding 13,700,296 12,239,644 13,699,148 12,188,624 Basic earnings per share $ 0.75 $ 0.73 $ 1.44 $ 1.44 Diluted Net income $ 10,215,666 $ 8,899,592 $ 19,750,104 $ 17,591,198 Weighted average common shares outstanding for basic EPS 13,700,296 12,239,644 13,699,148 12,188,624 Add: Dilutive effects of assumed vesting of equity awards 22,431 - 22,431 - Average diluted common shares 13,722,727 12,239,644 13,721,579 12,188,624 Diluted earnings per common share $ 0.74 $ 0.73 $ 1.44 $ 1.44 Diluted common shares represent restricted stock units that have been awarded but have not vested with the underlying shares having been issued to the recipient. (See Note 9 regarding discussion of stock compensation.) Note 15. Subsequent Events In July 2026, the Company declared a dividend of $ 0.12 per share payable on September 30, 2026, for holders of record on September 15, 2026. This represents an increase of 20 % over the prior quarterly dividend of $ 0.10 per share. 38 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition and results of operations should be read together with our unaudited consolidated financial statements and related notes included elsewhere in this Report and our audited consolidated financial statements and the related notes and the discussion under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the 2025 Annual Report. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions that could cause actual results to differ materially from our expectations. Factors that could cause or contribute to such differences include those discussed below and elsewhere in this Report, particularly in the section titled “Cautionary Note Regarding Forward-Looking Statements,” as well as in the section titled “Risk Factors” in the 2025 Annual Report. We assume no obligation to update any of these forward-looking statements except to the extent required by law. Overview The Parent Company is a bank holding company headquartered in Harrogate, Tennessee that has elected under the BHC Act to become a financial holding company. The Parent Company was incorporated in Tennessee in 1975 and operates primarily through its wholly owned subsidiary, the Bank, a Tennessee-chartered banking corporation organized in 1976. We provide banking services from 34 offices in select markets in Kentucky, North Carolina, and Tennessee, and we also operate one loan production office in Lincolnton, North Carolina. The Bank is a full-service community banking institution that offers traditional consumer and commercial products and services to serve businesses and individuals in our markets. Our management’s discussion and analysis of financial condition and results of operations is intended to provide the reader with information that will assist in the understanding of our business, results of operations, financial condition and financial statements; changes in certain key items in our financial statements from period to period; and the primary factors that we use to evaluate our business. Critical Accounting Policies and Estimates Our consolidated financial statements are prepared in accordance with GAAP and follow general practices within the banking industry. The application of these principles requires management to make estimates, assumptions and complex judgements that affect amounts presented in our consolidated financial statements. These estimates, assumptions and judgements are based on information available as of the date of the financial statements; accordingly, as this information changes, the consolidated financial statements could reflect different estimates, assumptions, and judgements. Management has identified the ACL, as a critical accounting policy included in Note 1 of our consolidated financial statements as of and for the fiscal year ended December 31, 2025, and included in the 2025 Annual Report, to be an accounting area that requires the most complex and subjective judgements and, as such, could be most subject to revision as new and additional information becomes available or circumstances change, including changes in the economic climate and interest rate changes. Critical accounting policies we have identified, along with the disclosures presented in the notes to our consolidated financial statements and in this discussion and analysis, provide information on how significant assets and liabilities are valued in the financial statements and how those values are determined. There have been no significant changes to the accounting policies, estimates, and assumptions, or the judgments affecting the application of these policies, estimates, and assumptions, from those disclosed in the 2025 Annual Report. 39 Emerging Growth Company Pursuant to the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), as an emerging growth company, the Parent Company can elect to opt out of the extended transition period for adopting any new or revised accounting standards. The Parent Company has elected to take advantage of the extended transition period, which means that when a standard is issued or revised and it has different application dates for public and private companies, the Parent Company may adopt the standard on the application date for private companies. The Parent Company has elected to take advantage of the scaled disclosures and other relief under the JOBS Act, and the Parent Company may take advantage of some or all of the reduced regulatory and reporting requirements that will be available to us under the JOBS Act, so long as it qualifies as an emerging growth company. Three and Six Months ended June 30, 2026 Highlights Results of Operations ● We had net income of $10.2 million for the three months ended June 30, 2026, compared to $8.9 million for the three months ended June 30, 2025, an increase of $1.3 million, or 14.8%. Net income for the six months ended June 30, 2026, was $19.8 million, compared to $17.6 million for the six months ended June 30, 2025, an increase of $2.2 million, or 12.3%. In each case, the increase was primarily the result of a decrease in interest expense due to a reduction of long-term debt and brokered deposits. ● We had net income before income taxes of $12.9 million for the three months ended June 30, 2026, compared to $11.6 million for the three months ended June 30, 2025, an increase of $1.3 million, or 11.6%. Net income before income taxes for the six months ended June 30, 2026, was $24.8 million, compared to $22.8 million for the six months ended June 30, 2025, an increase of $2.0 million, or 8.8%. In each case, the increase was primarily the result of an increase in net interest income after provision for credit losses. Noninterest expense was relatively flat and, while noninterest income increased for both periods, the amount of the increase was not significant to net income. ● Net interest income was $21.5 million for the three months ended June 30, 2026, compared to $20.1 million for the three months ended June 30, 2025, an increase of $1.4 million, or 7.3%. Net interest income was $42.0 million for the six months ended June 30, 2026, compared to $39.4 million for the six months ended June 30, 2025, an increase of $2.6 million, or 6.6%. In each case, the increase was primarily the result of a decrease in interest expense due to a reduction of long-term debt and brokered deposits . ● Noninterest income was $2.7 million for the three months ended June 30, 2026, compared to $2.2 million for the three months ended June 30, 2025, an increase of $0.4 million, or 19.2%. Noninterest income was $5.2 million for the six months ended June 30, 2026, compared to $4.7 million for the six months ended June 30, 2025, an increase of $0.5 million, or 12.3%. In each case, the increase was primarily the result of an increase in customer service fees and automated teller machine (“ATM”) transaction fees. ● Noninterest expense was $10.9 million for the three months ended June 30, 2026, compared to $10.7 million for the three months ended June 30, 2025 an increase of $0.2 million, or 1.4%. The increase was primarily the result of an increase in professional fees. Noninterest expense was $22.0 million for the six months ended June 30, 2026, compared to $21.3 million for the six months ended June 30, 2025, an increase of $0.7 million, or 3.1%. The increase was primarily the result of a loss on retirement of debt. 40 Financial Condition ● Total assets were $2.4 billion as of June 30, 2026, an increase of $85.1 million, or 3.7%, from December 31, 2025. ● Net loans were $1.9 billion as of June 30, 2026, an increase of $66.4 million, or 3.6%, from December 31, 2025. This increase was substantially the result of organic loan growth in the Nashville-Davidson — Murfreesboro — Franklin, Tennessee metropolitan statistical area (the “Nashville MSA”), the Knoxville, Tennessee metropolitan statistical area (the “Knoxville MSA”), and the Charlotte-Concord-Gastonia, North Carolina-South Carolina metropolitan statistical area (the “Charlotte MSA”). ● Total deposits were $1.9 billion as of June 30, 2026, an increase of $57.4 million, or 3.2%, from December 31, 2025. This increase was primarily driven by a $29.6 million increase in time deposits to $516.6 million at June 30, 2026, from $487.0 million at December 31, 2025. Noninterest bearing demand deposits increased $30.5 million, or 7.7%, to $428.4 million as of June 30, 2026, from $397.8 million as of December 31, 2025. Brokered deposits increased $7.4 million, or 15.4%, to $55.4 million as of June 30, 2026 from $48.0 million as of December 31, 2025. ● Non-brokered deposits were $1.8 billion as of June 30, 2026, an increase of $50.0 million, or 2.8%, from December 31, 2025. This increase was primarily driven by normal customer activity. ● Asset quality remained stable with nonperforming assets to total assets of 0.31% as of June 30, 2026, compared to 0.28% as of December 31, 2025. The ACL to total loans was 0.96% as of June 30, 2026, compared to 0.97% as of December 31, 2025. ● Book value per share increased $1.26, or 6.0%, to $22.09 at June 30, 2026, from $20.83 at December 31, 2025. Primary Factors Used to Evaluate Our Business and Results of Operations The most significant factors we use to evaluate our business and results of operations are net income, return on average assets (“ROAA”) and return on average equity (“ROAE”). We also use net interest income, noninterest income, noninterest expense and efficiency ratio. Net Income Our net income depends substantially on net interest income, which is the difference between interest earned on interest-earning assets (usually interest-bearing cash, investment securities and loans) and the interest expense incurred in connection with interest-bearing liabilities (usually interest-bearing deposits and borrowings). Our net income also depends on noninterest income, which is income generated other than by our interest-earning assets. Other factors that influence our net income include our provisions for credit losses, income taxes, and noninterest expenses, which include our fixed and variable overhead costs and other miscellaneous operating expenses. Return on Average Assets We monitor ROAA to measure our operating performance and to determine how efficiently our assets are being used to generate net income. In determining ROAA for a given period, net income is divided by the average total assets for that period. Return on Average Equity We use ROAE to assess our effectiveness in utilizing shareholders’ equity to generate net income. In determining ROAE for a given period, net income is divided by the average shareholders’ equity for that period. 41 Net Interest Income Net interest income is our principal source of net income and represents the difference between interest income and interest expense. We generate interest income from interest-earning assets that we own, including loans and investment securities. We incur interest expense from interest-bearing liabilities, including interest-bearing deposits and other borrowings, notably FHLB advances and outstanding loans to the Parent Company and Parent Company subordinated debt securities. To evaluate net interest income, we measure and monitor: (i) yields on our loans and other interest-earning assets; (ii) the cost of our deposits and other funding sources; (iii) our net interest spread; and (iv) our net interest margin. Net interest spread is the difference between rates earned on interest-earning assets and rates paid on interest-bearing liabilities. Net interest margin is a ratio of net interest income to average interest earning assets for the same period. Changes in market interest rates and interest rates we earn on interest-earning assets or pay on interest-bearing liabilities, as well as the volume and types of interest-earning assets, interest-bearing liabilities and noninterest-bearing liabilities, are usually the largest drivers of periodic changes in net interest spread, net interest margin and net interest income. Noninterest Income Noninterest income primarily consists of: (i) service charges on deposit accounts; (ii) net realized gains on the sale of premises and equipment; (iii) net realized gains on the sale of foreclosed assets; (iv) ATM and debit card fees; (v) benefits from changes in the cash surrender value of bank owned life insurance (“BOLI”); and (vi) other miscellaneous fees and income. Our income from service charges on deposit accounts, which includes nonsufficient funds fees, is impacted by several factors, including number of accounts, products utilized and account holder cash management behaviors. These are further impacted by deposit products utilized by customers, marketing of new products and other factors. Net realized gains on the sale of premises and equipment reflects non-recurring gains from sales of property and equipment no longer needed for operations. Net realized gains on the sale of foreclosed assets reflects net gains from the sale of real estate classified as other real estate owned (“OREO”). ATM and debit card fees includes ATM transaction fees charged to non-bank customers for the use of our ATMs and interchange income. Income on BOLI, which is non-taxable, reflects changes in the cash surrender value of our BOLI policies, which is the amount that the Bank may realize under these insurance policies. Our other miscellaneous fees and income can include items such as other service fees and other nonrecurring items. All of these can vary based on customer activity and other factors. Noninterest Expense Noninterest expense primarily consists of: (i) salaries and employee benefits; (ii) occupancy expenses; (iii) professional fees; (iv) data processing expenses; (v) Federal Deposit Insurance Corporation (“FDIC”) deposit insurance premiums; (vi) depreciation and amortization; and (vii) other operating expenses. Salaries and employee benefits include compensation, employee benefits and employer tax expenses for our personnel. Occupancy expenses include utility expenses, property taxes, lease expense, and property maintenance related items. Professional fees include expenses for legal, accounting, consulting, and third-party internal audit and review services. Data processing expenses include expenses paid to our primary third-party data processor and other ancillary service providers as well as telecommunication and data services expenses. Other operating expenses include marketing, telephone, supplies, travel and entertainment expenses, armored carrier services fees and director fees. 42 Efficiency Ratio The efficiency ratio is defined as operating expenses divided by fee income plus tax equivalent net interest income. As a general rule, the lower a financial institution’s efficiency ratio, the better the performance. Primary Factors Used to Evaluate Our Financial Condition The most significant factors we use to evaluate and manage our financial condition include asset quality, capital, liquidity, net income growth and profitability versus peer group banks. Asset Quality We monitor the quality of our assets based upon various factors, including level and severity of deterioration in borrower cash flows and asset quality. Problem assets are assessed and reported as delinquent, classified, nonperforming, nonaccrual or troubled debt restructurings. We also monitor credit concentrations. We manage the ACL to reflect loan volumes, identified credit and collateral conditions, economic conditions and other qualitative factors. Capital We monitor capital using regulatory capital ratios. Factors other than regulatory capital rules used include overall financial condition, including the trend and volume of problem assets, reserves, risks, level and quality of earnings, and anticipated growth, including acquisitions. Liquidity Deposits primarily consist of commercial and personal accounts maintained by businesses and individuals in our primary market areas. We also utilize brokered deposits (Multi-Bank Securities, Inc. and LPL Financial) and non-brokered deposits (National CD Rateline), certificates of deposits and reciprocal deposits through a third-party network that effectively allows depositors to receive insurance on amounts greater than the FDIC insurance limit, which is currently $250,000 per depositor, per FDIC-insured bank for each account ownership category. We manage liquidity based on factors that include liquid assets to loans, cash flow projections, short-term funding needs and sources, and the availability of unused funding sources. As of June 30, 2026, approximately $227.2 million was available for borrowing on committed lines with the FHLB and $102.5 million was available for purchases of federal funds from correspondents on an overnight uncommitted basis. Net Income Growth We monitor net income growth monthly, quarterly and annually. Net income growth is compared to prior month, prior year to date, and budget. Profitability Versus Peer Group Banks We monitor the Bank’s profitability metrics compared to those of peer banks with comparable size and markets. Profitability metrics include ROAA, ROAE, net interest spread, and overhead efficiency ratio. Specific peer bank comparisons are provided to the board of directors of the Bank quarterly. 43 Results of Operations for the Three and Six Months Ended June 30, 2026 and 2025 The following tables show the average outstanding balance of each principal category of our assets, liabilities and shareholders’ equity, together with the average yields on our assets and average costs of our liabilities, for the periods indicated. Yields and costs are calculated by dividing the annualized income or expense by the average daily balances of the corresponding assets or liabilities for the same period. Three Months Ended June 30, 2026 Three Months Ended June 30, 2025 Average Balance Interest Yield/Rate Average Balance Interest Yield/Rate (Dollars in thousands) Assets: Interest-earnings assets: Gross loans, net of unearned income (1) $ 1,902,119 $ 28,396 6.0 % $ 1,797,215 $ 28,431 6.3 % Investment securities 138,726 1,092 3.1 % 186,641 1,186 2.5 % Other interest-earning assets 77,015 666 3.5 % 106,158 1,242 4.7 % Total interest-earning assets $ 2,117,860 $ 30,154 5.7 % $ 2,090,014 $ 30,859 5.8 % Allowance for credit losses (18,497 ) (17,989 ) Noninterest-earning assets 202,388 176,200 Total Assets $ 2,301,751 $ 2,248,225 Liabilities and Shareholders’ Equity: Interest-bearing liabilities: Interest-bearing demand deposits $ 540,531 $ 2,501 1.9 % $ 530,674 $ 2,951 2.2 % NOW, savings and money market deposits 417,468 1,415 1.4 % 388,132 1,487 1.5 % Time deposits 494,379 4,116 3.3 % 573,199 5,280 3.7 % FHLB advances 60,270 452 3.0 % 65,272 437 2.7 % Other borrowings 18,050 155 3.4 % 40,213 645 6.4 % Total interest-bearing liabilities $ 1,530,698 $ 8,639 2.3 % $ 1,597,490 $ 10,800 2.4 % Noninterest-bearing liabilities: Noninterest-bearing deposits $ 444,701 — $ 408,456 Other liabilities 28,723 — 36,527 Total noninterest-bearing liabilities $ 473,424 — $ 444,983 Shareholders’ equity $ 297,631 — $ 205,752 Total liabilities and shareholders’ equity $ 2,301,753 — $ 2,248,225 Net Interest Income $ 21,515 $ 20,059 Net Interest Spread (2) 3.44 % 3.40 % Net Interest Margin (3) 4.06 % 3.84 % (1) Includes nonaccrual loans. (2) Net interest spread is the difference between interest rates earned on interest-earning assets and interest rates paid on interest-bearing liabilities. (3) Net interest margin is a ratio of net interest income to average interest-earning assets for the same period. 44 Six Months Ended June 30, 2026 Six Months Ended June 30, 2025 Average Balance Interest Yield/Rate Average Balance Interest Yield/Rate (Dollars in thousands) Assets: Interest-earnings assets: Gross loans, net of unearned income (1) $ 1,892,611 $ 56,071 5.9 % $ 1,795,846 $ 56,362 6.3 % Investment securities 139,475 2,191 3.1 % 186,623 2,579 2.8 % Other interest-earning assets 81,484 1,355 3.3 % 128,525 2,684 4.2 % Total interest-earning assets $ 2,113,570 $ 59,617 5.6 % $ 2,110,994 $ 61,625 5.8 % Allowance for credit losses (18,390 ) (18,242 ) Noninterest-earning assets 203,754 176,107 Total Assets $ 2,298,934 $ 2,268,859 Liabilities and Shareholders’ Equity: Interest-bearing liabilities: Interest-bearing demand deposits $ 558,256 $ 5,310 1.9 % $ 552,539 $ 6,277 2.3 % NOW, savings and money market deposits 415,001 2,840 1.4 % 388,331 2,922 1.5 % Time deposits 487,092 8,197 3.4 % 557,517 10,813 3.9 % FHLB advances 60,396 919 3.0 % 63,534 879 2.8 % Other borrowings 19,203 358 3.7 % 44,774 1,335 6.0 % Total interest-bearing liabilities $ 1,539,948 $ 17,624 2.3 % $ 1,606,695 $ 22,226 2.8 % Noninterest-bearing liabilities: Noninterest-bearing deposits $ 437,772 $ 401,935 Other liabilities 28,158 36,319 Total noninterest-bearing liabilities $ 465,930 $ 438,254 Shareholders’ equity $ 293,058 $ 223,912 Total liabilities and shareholders’ equity $ 2,298,936 $ 2,268,861 Net Interest Income $ 41,993 $ 39,399 Net Interest Spread (2) 3.35 % 3.07 % Net Interest Margin (3) 3.97 % 3.73 % Increases and decreases in interest income and interest expense result from changes in average balances (volume) of interest-earning assets and interest-bearing liabilities, as well as changes in average interest rates. The following tables set forth the effects of changing rates and volumes on our net interest income during the periods shown. Information is provided with respect to: (i) effects on interest income attributable to changes in volume (change in volume multiplied by prior rate), and (ii) effects on interest income attributable to changes in rate (changes in rate multiplied by prior volume). For purposes of these tables, changes attributable to both rate and volume that cannot be segregated have been proportionately allocated to both volume and rate. 45 Three Months Ended June 30, 2026 over 2025 Changes due to: Total Volume Rate Variance (Dollars in thousands) Interest-Earning Assets: Loans $ 1,660 $ (1,695 ) $ (35 ) Investment securities (304 ) 210 (94 ) Other interest earning assets (341 ) (235 ) (576 ) Total increase (decrease) in interest income 1,014 (1,719 ) (705 ) Interest-Bearing Liabilities: NOW, savings, money market, and interest-bearing demand deposits 167 (689 ) (522 ) Time deposits (726 ) (438 ) (1,164 ) FHLB advances (33 ) 48 15 Other borrowings (355 ) (135 ) (490 ) Total increase (decrease) in interest expense (948 ) (1,213 ) (2,161 ) Increase (decrease) in net interest income $ 1,962 $ (506 ) $ 1,456 Six Months Ended June 30, 2026 over 2025 Changes due to: Total Volume Rate Variance (Dollars in thousands) Interest-Earning Assets: Loans $ 3,037 $ (3,328 ) $ (291 ) Investment securities (652 ) 264 (388 ) Other interest earning assets (982 ) (347 ) (1,329 ) Total increase (decrease) in interest income 1,403 (3,411 ) (2,008 ) Interest-Bearing Liabilities: NOW, savings, money market, and interest-bearing demand deposits 266 (1,315 ) (1,049 ) Time deposits (1,366 ) (1,250 ) (2,616 ) FHLB advances (43 ) 83 40 Other borrowings (762 ) (215 ) (977 ) Total increase (decrease) in interest expense (1,905 ) (2,697 ) (4,602 ) Increase (decrease) in net interest income $ 3,729 $ (1,135 ) $ 2,594 Net interest income for the three months ended June 30, 2026 was $21.5 million compared to $20.1 million for the three months ended June 30, 2025, an increase of $1.4 million, or 7.3%. The increase in net interest income was comprised of an approximately $0.7 million, or 2.3%, decrease in interest income and dividend income, offset by an approximately $2.2 million, or 20.0%, decrease in interest expense. The primary drivers of changes in interest expense and income were adjustments to deposit rates and a reduction in long term debt. For the three months ended June 30, 2026, net interest margin and net interest spread were 4.06% and 3.44%, respectively, compared to 3.84% and 3.40%, respectively, for the same period in 2025. 46 Net interest income for the six months ended June 30, 2026 was $42.0 million compared to $39.4 million for the six months ended June 30, 2025, an increase of $2.6 million, or 6.6%. The increase in net interest income was comprised of an approximately $2.0 million, or 3.3%, decrease in interest income and dividend income, offset by an approximately $4.6 million, or 20.7%, decrease in interest expense. For the six months ended June 30, 2026, net interest margin and net interest spread were 3.97% and 3.35%, respectively, compared to 3.73% and 3.07%, respectively, for the same period in 2025. The decrease in interest and dividend income for the six months ended June 30, 2026 was primarily attributable to a $96.8 million, or 5.4%, increase in average gross loans outstanding as of June 30, 2026, compared to June 30, 2025, offset by a 0.4% decrease in the yield on gross total loans. The decrease in interest income for the three months ended June 30, 2026 was primarily attributable to a $104.9 million, or 5.8%, increase in average gross loans outstanding as of June 30, 2026, compared to December 31, 2025, offset by a 0.3% decrease in the yield on gross total loans. For both periods, the increase in average gross loans outstanding was primarily due to organic loan growth in the Nashville MSA, the Knoxville MSA and the Charlotte MSA. Provision for Credit Losses Credit risk is inherent in the business of making loans. We establish an ACL through charges to earnings, which are shown in the statements of income as the provision for credit losses. Specifically identifiable and quantifiable known losses are promptly charged off against the allowance. The provision for credit losses is determined by conducting a quarterly evaluation of the adequacy of our ACL and charging the shortfall or excess, if any, to the current quarter’s expense. This has the effect of creating variability in the amount and frequency of charges to our earnings. The provision for credit losses and level of allowance for each period are dependent upon many factors, including loan growth, net charge offs, changes in the composition of the loan portfolio, delinquencies, management’s assessment of the quality of the loan portfolio, the valuation of problem loans and the general economic conditions in our market areas. The provision for credit losses on loans for the three months ended June 30, 2026, was $404 thousand compared to $0 for the three months ended June 30, 2025. There were no significant net charge-offs in the three months ended June 30, 2026. The provision for credit losses on loans for the six months ended June 30, 2026, was $526 thousand compared to $0 for the six months ended June 30, 2025. There were no significant net charge-offs in the six months ended June 30, 2026. The ACL as a percentage of total loans was 0.96% at June 30, 2026, compared to 0.97% at December 31, 2025. 47 Noninterest Income While interest income remains the largest single component of our total revenues, noninterest income is an important contributing component. Our most significant sources of noninterest income include customer service fees, which include overdraft program fees, and bank card services and interchange fees. Noninterest income for the three months ended June 30, 2026, was $2.7 million compared to $2.2 million for the three months ended June 30, 2025, an increase of $0.5 million, or 19.2%. Noninterest income for the six months ended June 30, 2026, was $5.2 million compared to $4.7 million for the six months ended June 30, 2025, an increase of $0.5 million, or 12.3%. The following table sets forth the major components of our noninterest income for the three and six months ended June 30, 2026 and 2025: Three Months Ended June 30, 2026 2025 Increase (Decrease) (Dollars in thousands) Noninterest income: Customer service fees $ 774 $ 674 $ 100 Net gains (losses) on sales of premises and equipment 30 32 (2 ) Net gains (losses) on sales of foreclosed assets - - - ATM and debit card fees 977 892 85 Increase in BOLI 315 336 (21 ) Other income and fees (1) 554 290 264 Total noninterest income $ 2,650 $ 2,224 $ 426 (1) Other income and fees includes income and fees associated with miscellaneous services. Six Months Ended June 30, 2026 2025 Increase (Decrease) (Dollars in thousands) Noninterest income: Customer service fees $ 1,556 $ 1,329 $ 227 Net gains (losses) on sales of premises and equipment 30 4 26 Net gains (losses) on sales of foreclosed assets 107 4 103 ATM and debit card fees 1,832 1,691 141 Increase in BOLI 626 644 (18 ) Other income and fees (1) 1,091 995 96 Total noninterest income $ 5,242 $ 4,667 $ 575 (1) Other income and fees includes income and fees associated with miscellaneous services. 48 Customer service fees include fees for overdraft privilege charges, insufficient funds charges, account analysis service fees on commercial accounts, and monthly account service fees. These fees increased $100 thousand, or 14.8%, to $774 thousand for the three months ended June 30, 2026, from $674 thousand for the three months ended June 30, 2025. This increase was primarily the result of an increase in customer transactions. For the six months ended June 30, 2026, customer service fees increased $227 thousand, or 17.0%, to $1.6 million from $1.3 million for the six months ended June 30, 2025. This increase was primarily the result of an increase in customer transactions. ATM and debit card fees increased $85 thousand, or 9.5%, to $977 thousand for the three months ended June 30, 2026, from $892 thousand for the three months ended June 30, 2025. For the six months ended June 30, 2026, ATM and debit card fees increased $141 thousand, or 8.3%, to $1.8 million from $1.7 million for the six months ended June 30, 2025. These increases were primarily the result of increased usage of Commercial Bank ATMs. The income on BOLI decreased $21 thousand, or 6.3%, to $315 thousand for the three months ended June 30, 2026, from $336 thousand for the three months ended June 30, 2025. For the six months ended June 30, 2026, income on BOLI decreased $18 thousand, or 2.8%, to $626 thousand from $644 thousand for the six months ended June 30, 2025. These decreases were primarily the result of a decrease in the earnings rate and death benefits in previous periods. Other income and fees increased $264 thousand, or 91.0%, to $554 thousand for the three months ended June 30, 2026 from $290 thousand for the three months ended June 30, 2025. This was primarily due to a BOLI death benefit payment of $103 thousand during 2026 and other normal fluctuations in customer transactions. For the six months ended June 30, 2026, other income and fees increased $96 thousand, or 9.5%, to $1.1 million from $1.0 million for the six months ended June 30, 2025. This increase was primarily due to normal fluctuations in our operations. Noninterest Expense Noninterest expense for the three months ended June 30, 2026 was $10.9 million compared to $10.7 million for the three months ended June 30, 2025, an increase of $147 thousand, or 1.4%, which was primarily a result of increases in professional fees. Noninterest expense for the six months ended June 30, 2026 was $22.0 million compared to $21.3 million for the six months ended June 30, 2025, an increase of $653 thousand, or 3.1%, which was primarily a result of a loss on the retirement of debt. The following table sets forth the major components of our noninterest expense for the three and six months ended June 30, 2026 and 2025: Three Months Ended June 30, 2026 2025 Increase (Decrease) (Dollars in thousands) Noninterest expense: Salaries and employee benefits $ 5,683 $ 5,657 $ 26 Occupancy expenses 856 916 (60 ) Data processing 1,099 1,151 (52 ) Deposit insurance premiums 202 245 (43 ) Professional fees 440 286 154 Depreciation and amortization 942 803 139 Other expenses (1) 1,650 1,667 (17 ) Total noninterest expense $ 10,872 $ 10,725 $ 147 (1) Other expenses include items such as telephone expenses, marketing and advertising expenses, debit card expenses, courier fees, directors’ fees, and insurance. 49 Six Months Ended June 30, 2026 2025 Increase (Decrease) (Dollars in thousands) Noninterest expense: Salaries and employee benefits $ 11,399 $ 11,283 $ 116 Occupancy expenses 1,699 1,791 (92 ) Data processing 2,200 2,358 (158 ) Deposit insurance premiums 444 471 (27 ) Professional fees 649 481 168 Depreciation and amortization 1,875 1,751 124 Other expenses (1) 3,693 3,171 522 Total noninterest expense $ 21,959 $ 21,306 $ 653 (1) Other expenses include items such as telephone expenses, marketing and advertising expenses, debit card expenses, courier fees, directors’ fees, and insurance. Salaries and employee benefits primarily include: (i) amounts paid to employees for base pay, incentive compensation, and bonuses; (ii) health and other related insurance expenses paid by the Bank on behalf of our employees; and (iii) the annual cost for any increases in the liability for non-qualified plans maintained for certain key employees. Salaries and employee benefits remained consistent at $5.7 million for the three months ended June 30, 2026 increasing by $26 thousand, or 0.5%, compared to the corresponding period in 2025. For the six months ended June 30, 2026, salaries and employee benefits were $11.4 million, an increase of $116 thousand, or 1.0%, compared to $11.3 million for the six months ended June 30, 2025. These slight increases were primarily due to pay increases net of turnover. Occupancy expenses consist of depreciation on property, premises, equipment and software, rent expense for leased facilities, maintenance agreements on equipment, property taxes, and other expenses related to maintaining owned or leased assets. Occupancy expenses for the three months ended June 30, 2026 were $856 thousand compared to $916 thousand for the three months ended June 30, 2025, a decrease of $60 thousand, or 6.6%. For the six months ended June 30, 2026, occupancy expenses were $1.7 million compared to $1.8 million for the six months ended June 30, 2025, a decrease of $0.1 million, or 5.1%. These decreases were primarily attributable to normal fluctuations. Data processing expenses, which primarily consist of expenses for data processing services for core processing, decreased $0.1 million, or 4.5%, to $1.1 million for the three months ended June 30, 2026 from $1.2 million for the three months ended June 30, 2025. For the six months ended June 30, 2026, data processing expenses decreased $0.2 million, or 6.7%, to $2.2 million from $2.4 million for the six months ended June 30, 2025. Professional fees expenses, which include legal fees, audit and accounting fees, and consulting fees, increased $154 thousand, or 53.8%, to $440 thousand for the three months ended June 30, 2026 compared to $286 thousand for the three months ended June 30, 2025. For the six months ended June 30, 2026, professional fees increased $168 thousand, or 34.9%, to $649 thousand compared to $481 thousand for the six months ended June 30, 2025. These increases were primarily the result of higher professional fees associated with our additional reporting obligations as a public company. Depreciation and amortization for the three months ended June 30, 2026 was $940 thousand compared to $800 thousand for the three months ended June 30, 2025, an increase of approximately $140 thousand, or 17.3%. For the six months ended June 30, 2026, depreciation and amortization was $1.9 million compared to $1.8 million for the six months ended June 30, 2025, an increase of approximately $0.1 million, or 7.1%. These increases were primarily attributable to normal capital improvements for our current branches. Other expenses decreased $20 thousand, or 1.0%, to $1.65 million for the three months ended June 30, 2026, compared to $1.67 million for the three months ended June 30, 2025. This decrease was primarily attributable to normal expense monitoring and control. For the six months ended June 30, 2026, other expenses increased $0.5 million, or 16.5%, to $3.7 million compared to $3.2 million for the six months ended June 30, 2025. This increase was primarily attributable to a write-off of a discount of $0.6 million due to the redemption of the Subordinated Debentures and Trust Preferred Securities. 50 Financial Condition Total assets were $2.4 billion as of June 30, 2026, an increase of $85.1 million, or 3.7%, from December 31, 2025. This increase was primarily the result of an increase of $67.0 million in gross loans less deferred fees and discounts. Loan Portfolio Loans represent the largest portion of our earning assets, greater than the securities portfolio or any other asset category, and the quality and diversification of the loan portfolio is an important consideration when reviewing our financial condition. We have three loan portfolio segments: (i) real estate (which is divided into four classes), (ii) commercial, and (iii) consumer and other. Prior period segment presentation has been reclassified to combine the “Consumer” and “Other” loan segments into “Consumer and Other” to conform to current period presentation and historical MD&A disclosures. This reclassification has no impact on total loans or net financial results for any period presented. A segment is generally determined based on the initial measurement attribute, risk characteristics of the loan, and method for monitoring and assessing credit risk. Classes within the real estate portfolio segment include (i) CRE, (ii) C&D, (iii) residential, and (iv) other. Our loan clients primarily consist of small to medium-sized business, the owners and operators of these businesses, and other professionals, entrepreneurs and high net worth individuals. We believe owner-occupied and investment CRE loans, residential construction loans and commercial business loans provide us with higher risk-adjusted returns, shorter maturities and more sensitivity to interest rate fluctuations, and are complemented by our relatively lower risk residential real estate loans to individuals. The following describes risk characteristics relevant to each of the loan portfolio segments: Real estate — We offer various types of real estate loan products, which are divided into the classes described below. All loans within this portfolio segment are particularly sensitive to the valuation of real estate. ● C&D loans include extensions of credit to real estate developers or investors where repayment is dependent on the sale of the real estate or income generated from the real estate collateral. ● Residential loans include one-to-four-family first mortgage loans, which are repaid by various means such as a borrower’s income, the sale of the property, or rental income derived from the property. These also include second lien or open-end residential real estate loans, such as home equity lines, which are typically repaid by the same means as one-to-four-family first mortgages. ● CRE loans include both owner-occupied CRE loans and other CRE loans, such as commercial loans secured by income producing properties. Owner-occupied CRE loans made to operating businesses are long-term financings of land and buildings and are repaid by cash flows generated from business operations. Real estate loans for income-producing properties such as apartment buildings, office and industrial buildings, and retail shopping centers are repaid from rent income derived from the properties. ● Other real estate loans include loans collateralized by farmland. Commercial — This loan portfolio segment includes loans to commercial customers for use in normal business operations to finance working capital needs, equipment purchases, leases, or expansion projects. Loans are repaid by business cash flows. Collection risk in this portfolio is driven by the creditworthiness of the underlying borrower, particularly cash flows from the borrower’s business operations. 51 Consumer and Other — This loan portfolio segment includes non-real estate secured direct loans to consumers for household, family, and other personal expenditures; tax-exempt commercial loans; undisbursed loans of all types; and unpaid overdrafts on deposit accounts. 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. The following table presents our balances and associated percentages of the composition of loans by loan portfolio segment, excluding loans held for sale, on the dates indicated: Loan Portfolio Segments As of June 30, 2026 As of December 31, 2025 Amount % of Total Amount % of Total (Dollars in thousands) Real Estate Loans: Commercial $ 1,140,480 59 % $ 1,113,440 59 % Construction and land development 201,781 10 % 176,688 9 % Residential 387,142 20 % 377,943 20 % Other 18,336 1 % 14,824 1 % Commercial 179,935 9 % 174,248 9 % Consumer and other 19,535 1 % 22,867 1 % Total loans $ 1,947,209 100 % $ 1,880,010 100 % Deferred loan fees and discounts 6,673 6,477 Allowance for credit losses 18,722 18,096 Loans, net $ 1,921,813 $ 1,855,437 Net loans were $1.9 billion as of June 30, 2026, an increase of $66.4 million, or 3.6%, from December 31, 2025. The increase in net loans outstanding was primarily due to organic loan growth in the Nashville MSA, the Knoxville MSA and the Charlotte MSA. 52 The following table shows the contractual maturities of the Company’s loans, excluding loan discounts, as of June 30, 2026, and December 31, 2025, respectively: As of June 30, 2026 Due in One Year or Less Due after One Year Through Five Years Due after Five Years Fixed Rate Adjustable Rate Fixed Rate Adjustable Rate Fixed Rate Adjustable Rate Total (Dollars in thousands) Real Estate: Construction and land development $ 6,402 $ 34,507 $ 27,283 $ 99,193 $ 5,767 $ 28,629 $ 201,781 Residential 18,361 7,371 18,323 38,185 50,161 254,742 387,142 Commercial real estate 219,935 25,781 302,874 304,600 30,557 256,733 1,140,480 Other 98 18 6,868 10,152 227 974 18,336 Commercial 32,080 31,185 22,235 63,448 1,187 29,799 179,935 Consumer and other 10,538 509 6,374 500 1,358 256 19,535 Total Loans $ 287,412 $ 99,372 $ 383,956 $ 516,078 $ 89,258 $ 571,133 $ 1,947,209 As of December 31, 2025 Due in One Year or Less Due after One Year Through Five Years Due after Five Years Fixed Rate Adjustable Rate Fixed Rate Adjustable Rate Fixed Rate Adjustable Rate Total (Dollars in thousands) Real Estate: Construction and land development $ 16,036 $ 35,403 $ 29,331 $ 67,293 $ 10,202 $ 18,424 $ 176,689 Residential 9,080 8,382 22,664 36,553 51,800 249,462 377,941 Commercial real estate 156,594 22,646 345,028 303,721 23,782 261,669 1,113,440 Other 90 369 3,213 9,902 244 1,007 14,824 Commercial 23,696 29,453 29,031 60,418 1,154 30,496 174,248 Consumer and other 10,784 3,260 6,600 317 1,534 372 22,867 Total Loans $ 216,280 $ 99,513 $ 435,867 $ 478,204 $ 88,716 $ 561,430 $ 1,880,010 The majority of our loans are priced with a fixed rate and a one-to-five-year maturity. This type of loan has historically been about 40% of total loans over the past two years because the majority of our commercial loans are priced with five-year balloons. We are primarily involved in real estate, commercial, and consumer lending activities with customers throughout our markets in Kentucky, North Carolina, and Tennessee. About 89.8% and 89.5% of our total loans were secured by real property as of June 30, 2026 and December 31, 2025, respectively. We believe that these loans are not concentrated in any one single property type and that they are geographically dispersed throughout our markets. Our debtors’ ability to repay their loans is substantially dependent upon the economic conditions of the markets in which we operate, which consist primarily of the Nashville MSA, the Knoxville MSA, Chattanooga, and Kingsport in Tennessee and the Charlotte MSA in North Carolina. CRE loans were 59.0% of total loans as of June 30, 2026, and represented 59.2% of total loans as of December 31, 2025. C&D loans were 10.0% of total loans as of June 30, 2026, and represented 9.4% of total loans as of December 31, 2025. The ratio of our CRE loans to total risk-based bank capital was 275% as of June 30, 2026 and 276% as of December 31, 2025. C&D loans represented 65% of total risk-based bank capital as of June 30, 2026 as compared to 59% as of December 31, 2025. 53 We have established concentration limits in our loan portfolio for CRE loans by loan type, including collateral and industry, among others. All loan types are within established limits other than our hotels/motels category, which has occasionally exceeded our limit of 50% of total risk-based capital. For further information on the risks associated with the concentration of our loan portfolio in certain industries, please see the risk factor titled “We have a concentration of credit exposure to borrowers in certain industries, and we also target small to medium-sized businesses and make other loans that may carry increased levels of credit risk” in the section titled “Risk Factors” in the 2025 Annual Report. Despite this category being outside of our established limits, we believe lending risk in this category is mitigated by a significant portion of the financed properties being owner-occupied hotels/motels, meaning that the properties are run by their owners. All but one of the hotel/motel projects currently in our loan portfolio are “flag” hotels. Further, our exposure to the hotels/motels category is geographically dispersed throughout the states of Florida, Kentucky, North Carolina, South Carolina, and Tennessee. We have restricted lending on lodging projects to existing clients only for the foreseeable future. Our lending concentration in the hotels/motels sector is actively managed by our senior management team, including our President and Chief Executive Officer and Chief Credit Officer. We require all business purpose loans to be underwritten by a centralized underwriting department located in Harrogate, Tennessee. Industry-tested underwriting guidelines are used to assess a borrower’s historical cash flow to determine debt service, and we further stress test the debt service under higher interest rate scenarios. Financial and performance covenants are used in commercial lending to allow us to react to a borrower’s deteriorating financial condition, should that occur. Construction and Land Development. Loans for residential construction are for single-family properties and to developers or investors. These loans are underwritten based on estimates of costs and the completed value of the project. Funds are advanced based on estimated percentage of completion for the project. Performance of these loans is affected by economic conditions as well as the ability to control the costs of the projects. This category also includes commercial construction projects. C&D loans increased $25.1 million, or 14.2%, to $201.8 million as of June 30, 2026, from $176.7 million as of December 31, 2025. The majority of this increase was due to loan growth as well as an increase in funded balances as the projects funded near completion. Residential C&D loans were $36.5 million compared to $165.3 million in commercial C&D loans as of June 30, 2026. We offer one-to-four family mortgage loans on both owner-occupied primary residences and investor-owned residences, which made up approximately 17.8% and 18.1% of our loan portfolio as of June 30, 2026, and December 31, 2025, respectively. Our residential loans also include home equity lines of credit, which totaled $39.7 million, or approximately 2.04% of our portfolio, as of June 30, 2026, and $38.9 million, or approximately 2.07% of our portfolio, as of December 31, 2025. By offering a full line of residential loan products, the owners of the small to medium-sized businesses that we lend to are able to use us, instead of a competitor, for financing a personal residence. Our CRE loan portfolio includes loans for commercial property that is owned by real estate investors, construction loans to build owner-occupied properties, and loans to developers of CRE investment properties and residential developments. CRE loans are subject to underwriting standards and processes similar to our commercial loans. These loans are underwritten primarily based on projected cash flows for income-producing properties and collateral values for non-income-producing properties. The repayment of these loans is generally dependent on the successful operation of the properties securing the loans or the sale or refinancing of the property. Real estate loans may be adversely affected by conditions in the real estate markets or in the general economy. The properties securing our real estate portfolio are diversified by type and geographic location. We believe this diversity helps reduce our exposure to adverse economic events that may affect any single market or industry. CRE loans remained constant at $1.1 billion as of June 30, 2026 and December 31, 2025. As of June 30, 2026, our CRE portfolio was comprised of $397.2 million in non-owner occupied CRE loans and $484.6 million in owner-occupied properties and $258.1 million in multi-family properties, as compared to $388.7 million in non-owner occupied CRE loans and $466.1 million in owner-occupied properties and $257.8 million in multi-family properties as of December 31, 2025. Commercial. Commercial loans are underwritten after evaluating and understanding the borrower’s ability to operate profitably. Underwriting standards have been designed to determine whether the borrower possesses sound business ethics and practices, to evaluate current and projected cash flows to determine the ability of the borrower to repay its obligations, and to ensure appropriate collateral is obtained to secure the loan. Commercial loans are primarily made based on the identified cash flows of the borrower and, secondarily, on the underlying collateral provided by the borrower. Most commercial loans are secured by the assets being financed or other business assets, such as real estate, accounts receivable, or inventory, and typically include personal guarantees. Owner-occupied real estate is included in commercial loans, as the repayment of these loans is generally dependent on the operations of the commercial borrower’s business rather than on income-producing properties or the sale of the properties. 54 Commercial loans increased $5.7 million, or 3.3%, to $179.9 million as of June 30, 2026, from $174.2 million as of December 31, 2025. Consumer and Other. We utilize our central underwriting department for all consumer loans over $200,000 in total credit exposure regardless of collateral type. Loans below this threshold are underwritten by the responsible loan officer in accordance with our consumer loan policy. The loan policy addresses types of consumer loans that may be originated and the requisite collateral, if any, which must be perfected. We believe relatively smaller individual dollar amounts of consumer loans that are spread over numerous individual borrowers helps minimize risk. Consumer and other loans (non-real estate loans) decreased $3.4 million, or 14.6%, to $19.5 million as of June 30, 2026, from $22.9 million as of December 31, 2025. Loan Participations In the normal course of business, we periodically sell participating interests in loans to other banks and investors. All participations are sold on a proportionate basis with all cash flows divided proportionately among the participants and no party has the right to pledge or exchange the entire financial asset without the consent of all the participants. Other than standard 90-day prepayment provisions and standard representations and warranties, participating interests are sold without recourse. We also purchase loan participations from time to time. As of June 30, 2026, and December 31, 2025, loan participations sold to third parties (which are not included in the accompanying consolidated balance sheets) totaled $37.5 million and $116.0 million, respectively. We sell participations to manage our credit exposures to borrowers. As of June 30, 2026, and December 31, 2025, loan participations purchased totaled $0. The variance in loan participations sold comes from sales of participations in the ordinary course of business. Allowance for Credit Losses (ACL) The ACL is funded as losses are estimated through a provision for credit losses charged to expense. Credit losses are charged against the allowance when management believes the collectability of a loan balance is confirmed. Confirmed losses are charged off immediately. Subsequent recoveries, if any, are credited to the allowance. The ACL is an amount that management believes will be adequate to absorb estimated losses relating to specifically identified loans, as well as probable credit losses inherent in the balance of the loan portfolio. The ACL is evaluated on a regular basis by management and is based upon management’s periodic review of the collectability of loans in light of historical experience, the nature and volume of the loan portfolio, the overall portfolio quality, specific problem loans, current economic conditions that may affect borrowers’ ability to pay, the estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. This evaluation does not include the effects of expected losses on specific loans or groups of loans that are related to future events or expected changes in economic conditions. 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 Company has policies in place to reverse accrued interest in a timely manner. Therefore, the Company has made a policy election to exclude accrued interest from the measurement of the ACL. 55 Expected credit losses are reflected in the ACL through a charge to provision for credit losses. The Company measures expected credit losses on 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. 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. The Company’s primary methodology for estimating expected credit losses for all loan types is the WARM method. The WARM current expected credit losses methodology uses average annual loss rate along with a simple but reasonable forecast based on a “regression” analysis of loan history dating back 18 years. The dependent variable is an entity’s loss rate, based on changes in the Prime Lending Rate over the same period. The Company utilizes the Prime Lending Rate as the independent variable due to it being the tool most commonly utilized by the Federal Reserve to either accelerate and/or slow down the economy. Additionally, the ACL 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, and collection, charge-off and recovery practices; national, regional and local economic and business conditions and developments that affect the collectability of the loan portfolio, including the condition of various market segments; nature and volume of the loan 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 the 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 and legal and regulatory requirements. Our ACL was $18.7 million at June 30, 2026 compared to $18.1 million at December 31, 2025, an increase of $0.6 million, or 3.5%. A provision of $404 thousand was recorded for the three months ended June 30, 2026 compared to $0 for the three months ended June 30, 2025. For the six months ended June 30, 2026, a provision of $526 thousand was recorded compared to $0 for the six months ended June 30, 2025. 56 The following table provides an analysis of the ACL at the dates indicated. As of June 30, 2026 As of December 31, 2025 (Dollars in thousands) Average loans outstanding $ 1,902,119 $ 1,791,550 Total loans outstanding at end of period $ 1,940,536 $ 1,873,533 Allowance for credit losses at beginning of period $ 18,096 $ 18,205 Charge-offs: Commercial real estate - (301 ) Construction and land development - — Residential real estate - (121 ) Commercial - (362 ) Consumer and other (33 ) (251 ) Total charge-offs (33 ) (1,035 ) Recoveries: Commercial real estate 114 151 Construction and land development - 201 Residential real estate 1 64 Commercial 2 11 Consumer and other 16 83 Total recoveries 133 510 Net (charge-offs) recoveries $ (100 ) $ (525 ) Provision for credit losses $ 526 $ 416 Balance at end of period $ 18,722 $ 18,096 Ratio of allowance to end of period loans 0.96 % 0.97 % Ratio of net (charge-offs) recoveries to average loans 0.00 % (0.01 )% Net charge-offs for the six months ended June 30, 2026 totaled $100 thousand. Net charge-offs for the year ended December 31, 2025, totaled $525 thousand. Nonperforming Loans Loans are considered delinquent when principal or interest payments are past due 30 days or more. Delinquent loans may remain on accrual status between 30 days and 90 days past due. Loans on which the accrual of interest has been discontinued are designated as nonaccrual loans. Typically, the accrual of interest on loans is discontinued when principal or interest payments are past due 90 days or when, in the opinion of management, there is a reasonable doubt as to collectability in the normal course of business. When loans are placed on nonaccrual status, all interest previously accrued but not collected is reversed against current period interest income. Income on nonaccrual loans is subsequently recognized only to the extent that cash is received and the loan’s principal balance is deemed collectible. Loans are restored to accrual status when the loans become well-secured and management believes full collectability of principal and interest is probable. 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 costs 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. 57 Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at fair value less estimated selling costs. Any write-down to fair value at the time of transfer to OREO is charged to the ACL. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less estimated costs to sell. Costs of improvements are capitalized, whereas costs related to holding OREO and subsequent write-downs to the value thereof are expensed. Any gains and losses realized at the time of disposal are reflected in income. Real estate that we acquire as a result of foreclosure or by deed-in-lieu of foreclosure is classified as foreclosed assets held for sale (OREO) until sold and is initially recorded at fair value less costs to sell when acquired, establishing a new carrying value. OREO totaled approximately $0.8 million at June 30, 2026, and $0.3 million at December 31, 2025. Nonperforming loans include nonaccrual loans and loans past due 90 days or more. Nonperforming assets consist of nonperforming loans plus OREO and collateral taken in foreclosure or similar proceedings. Nonaccrual loans were $6.7 million at June 30, 2026, compared to $6.2 million at December 31, 2025. We had no loans 90 days past due and still accruing at June 30, 2026, or December 31, 2025. Total nonperforming assets increased approximately $0.9 million from December 31, 2025 to June 30, 2026. The increase was primarily the result of an increase in foreclosed assets held for sale for 1-4 family foreclosures and a slight increase in nonaccruals, primarily residential real estate loans. The following tables present the contractual aging of the recorded investment and loan discount in current and past due loans by class of loans as of June 30, 2026, and December 31, 2025: Contractual Aging of Recorded Investments As of June 30, 2026 Current 30 – 89 Days Past Due 90+ Days Past Due Nonaccrual Total (Dollars in thousands) Real estate mortgages: Commercial real estate $ 1,139,990 $ 490 $ - $ - $ 1,140,480 Construction and land development 201,566 182 - 32 201,781 Residential real estate 375,683 5,158 - 6,302 387,142 Other 18,336 - - - 18,336 Commercial 179,482 205 - 248 179,935 Consumer and other 19,339 118 - 78 19,535 Total loans $ 1,934,396 $ 6,152 $ - $ 6,661 $ 1,947,209 Contractual Aging of Recorded Investments As of December 31, 2025 Current 30 – 89 Days Past Due 90+ Days Past Due Nonaccrual Total (Dollars in thousands) Real estate mortgages: Commercial real estate $ 1,113,181 $ 259 $ — $ — $ 1,113,440 Construction and land development 176,057 35 — 596 176,688 Residential real estate 366,957 5,546 — 5,439 377,942 Other 14,824 — — — 14,824 Commercial 173,794 323 — 131 174,248 Consumer and other 22,675 114 — 79 22,868 Total loans $ 1,867,488 $ 6,277 $ — $ 6,245 $ 1,880,010 58 Nonperforming Assets The following table sets forth the allocation of our nonperforming assets among different asset categories as of the dates indicated. Nonperforming assets consist of nonperforming loans plus OREO and repossessed property. Nonperforming loans include nonaccrual loans and loans past due 90 days or more. As of June 30, 2026 As of December 31, 2025 (Dollars in Thousands) Nonaccrual loans $ 6,661 $ 6,245 Loans past due 90 days or more and still accruing - - Total nonperforming loans 6,661 6,245 OREO 755 253 Repossessed property - — Total nonperforming assets $ 7,416 $ 6,498 Modified loans – nonaccrual (1) $ - $ — Modified loans – accruing $ - $ — Allowance for credit losses $ 18,722 $ 18,096 Total loans, net of discounts and deferred fees, outstanding at end of period $ 1,940,536 $ 1,873,533 Nonperforming loans to total loans 0.34 % 0.33 % Nonperforming assets to total loans and OREO 0.38 % 0.33 % Allowance for credit losses to nonperforming loans 281 % 290 % Allowance for credit losses to total loans, net of discounts and deferred fees 0.96 % 0.97 % Nonaccrual loans by category: Real estate: Commercial real estate $ - $ -- Construction and land development 32 596 Residential and other 6,302 5,439 Commercial 248 131 Consumer and other 78 79 Total $ 6,661 $ 6,245 (1) Troubled debt restructured loans are excluded from nonperforming loans unless they otherwise meet the definition of nonaccrual loans or are more than 90 days past due. Modifications to Borrowers Experiencing Financial Difficulty On occasion, the Bank modifies loans to borrowers in financial distress by providing principal forgiveness, term extensions, interest rate reductions, or payment delays. When principal forgiveness is provided, the amount of forgiveness is charged-off against the ACL. In some cases, the Bank provides multiple types of concessions on one loan. On January 1, 2023, the Company adopted Accounting Standards Update (“ASU”) 2023-02 — Financial Instruments — Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures (“ASU 2023-02”). ASU 2023-02 eliminates the troubled debt restructuring (TDR) measurement and recognition guidance and requires that entities evaluate whether a modification represents a new loan or a continuation of an existing loan consistent with the accounting for other loan modifications. Additional disclosures relating to modifications to borrowers experiencing financial difficulty are required under ASU 2023-02. The Company adopted this ASU on a prospective basis. These loans are excluded from our nonperforming loans unless they otherwise meet the definition of nonaccrual loans or are past due 90 days or more after the restructuring. The balance of these loans as of June 30, 2026 and December 31, 2025, was immaterial. 59 Credit Quality Credit quality and trends in the loan portfolio segments are measured and monitored regularly. Detailed reports, by product, collateral, accrual status, and other applicable criteria, are reviewed by our Chief Credit Officer. In addition to the past due and nonaccrual criteria, we also evaluate loans according to an internal risk grading system. Loans are segregated between pass, special mention, substandard, doubtful, and loss categories, which conform to regulatory definitions. A description of the general characteristics of the risk categories and definitions of those segregations follows. 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, for example, as a result of adverse trends in the borrower’s operations, credit quality or financial strength. These 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 Bank’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, and they are characterized by the distinct possibility that the Bank 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 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 the asset even though partial recovery may be effected in the future. The following tables summarize the risk categories of our loan portfolio based upon the most recent analysis performed as of June 30, 2026, and December 31, 2025, respectively: Outstanding Loan Balance by Internal Risk Grades As of June 30, 2026 Pass Special Mention Substandard Doubtful Total (Dollars in thousands) Real estate: Commercial real estate $ 1,131,324 $ 8,835 $ 321 $ - $ 1,140,480 Construction and land development 201,389 359 32 - 201,781 Residential 380,157 631 6,354 - 387,142 Other 18,336 - - - 18,336 Commercial 179,002 685 248 - 179,934 Consumer and other 19,423 34 78 - 19,535 Total loans $ 1,929,632 $ 10,543 $ 7,034 $ - $ 1,947,209 60 Outstanding Loan Balance by Internal Risk Grades As of December 31, 2025 Pass Special Mention Substandard Doubtful Total (Dollars in thousands) Real estate: Commercial real estate $ 1,104,532 $ 8,814 $ 94 $ — $ 1,113,440 Construction and land development 176,014 78 596 — 176,688 Residential 371,583 833 5,527 — 377,943 Other 14,824 — — — 14,824 Commercial 173,324 793 131 — 174,248 Consumer and other 22,768 21 79 — 22,868 Total loans $ 1,863,045 $ 10,539 $ 6,427 $ — $ 1,880,011 Securities Portfolio Our securities portfolio serves the following purposes: (i) it provides liquidity to supplement cash flows from the loan and deposit activities of customers; (ii) it can be used as an interest rate risk management tool because it provides a large base of assets and we can change the maturity and interest rate characteristics more easily than those of the loan portfolio to better match changes in the deposit base and other Company funding sources; (iii) it is an alternative interest-earning asset when loan demand is weak or when deposits grow more rapidly than loans; and (iv) it provides a source of pledged assets for securing certain deposits and borrowed funds, as may be required by law or by specific agreement with a depositor or lender. Our securities portfolio consists of securities classified as available-for-sale or held-to-maturity. 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 (loss) net of tax. Our securities portfolio consists of U.S. government and federal agency securities, U.S. government sponsored enterprise securities, mortgage-backed securities, and state and political subdivisions obligations. We determine the appropriate classification at the time of purchase. The following tables summarize the fair value of our securities portfolio as of the dates presented. June 30, 2026 December 31, 2025 Amortized Cost Fair Value Unrealized Gain/(Loss) Amortized Cost Fair Value Unrealized Gain/(Loss) Available-for-Sale U.S. government and federal agencies $ 15,023 $ 15,010 $ (13 ) $ 14,830 $ 14,830 $ — U.S. government-sponsored enterprises (GSEs) 2 2 - 5 5 — State and political subdivisions 12,692 12,428 (264 ) 15,780 15,514 (266 ) Mortgage-backed securities 11,758 11,113 (645 ) 13,295 12,787 (508 ) Total Available-for-Sale $ 39,475 $ 38,553 $ (922 ) $ 43,910 $ 43,136 $ (774 ) June 30, 2026 December 31, 2025 Amortized Cost Fair Value Unrealized Gain/(Loss) Amortized Cost Fair Value Unrealized Gain/(Loss) Held-to-Maturity U.S. government and federal agencies $ 42,520 $ 41,949 $ (571 ) $ 42,681 $ 41,879 $ (803 ) U.S. government-sponsored enterprises (GSEs) 13,728 13,452 (276 ) 13,599 13,309 (291 ) State and political subdivisions 3,903 3,721 (182 ) 3,913 3,744 (168 ) Mortgage-backed securities 34,191 31,890 (2,302 ) 37,534 35,524 (2,010 ) Total Held-to-Maturity $ 94,343 $ 91,012 $ (3,331 ) $ 97,728 $ 94,456 $ (3,272 ) Certain securities have fair values less than amortized cost and, therefore, contain unrealized losses. At June 30, 2026, we evaluated the securities that had an unrealized loss for other-than-temporary impairment and determined all declines in value to be temporary. We anticipate full recovery of amortized cost with respect to these securities by maturity, or sooner in the event of a more favorable market interest rate environment. We do not intend to sell these securities, and it is not probable that we will be required to sell them before recovery of the amortized cost basis, which may be at maturity. 61 The following tables set forth certain information regarding contractual maturities and the weighted average yields of our investment securities as of June 30, 2026 and December 31, 2025. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. As of June 30, 2026 Due in One Year or Less Due after One Year through Five Years Due after Five Years through Ten Years Due after Ten Years Amortized Cost Weighted Average Yield Amortized Cost Weighted Average Yield Amortized Cost Weighted Average Yield Amortized Cost Weighted Average Yield (Dollars in thousands) Available-for-Sale U.S. government and federal agencies 15,023 3.64 % — — — — — — U.S. government sponsored enterprises (GSEs) 2 7.81 % — — — — — — State and political subdivisions 1,374 3.36 % 6,087 3.38 % 2,561 4.23 % 1,949 3.78 % Mortgage-backed securities 62 3.06 % 2,061 2.98 % 3,235 2.49 % 6,401 3.41 % Total Available-for-Sale $ 16,461 3.61 % $ 8,868 3.29 % $ 5,796 3.26 % $ 8,350 3.50 % As of December 31, 2025 Due in One Year or Less Due after One Year through Five Years Due after Five Years through Ten Years Due after Ten Years Amortized Cost Weighted Average Yield Amortized Cost Weighted Average Yield Amortized Cost Weighted Average Yield Amortized Cost Weighted Average Yield (Dollars in thousands) Available-for-Sale U.S. government and federal agencies $ 14,830 3.54 % — — — — — — U.S. government sponsored enterprises (GSEs) 5 8.11 % — — — — — — State and political subdivisions 3,351 0.68 % 6,142 2.88 % 4,338 3.97 % 1,949 4.86 % Mortgage-backed securities 31 3.33 % 2,452 3.23 % 3,481 2.34 % 7,331 3.54 % Total Available-for-Sale $ 18,217 3.38 % $ 8,594 2.98 % $ 7,819 3.24 % $ 9,280 3.8 % 62 As of June 30, 2026 Due in One Year or less Due after One Year through Five Years Due after Five Years through Ten Years Due after Ten Years Amortized Cost Weighted Average Yield Amortized Cost Weighted Average Yield Amortized Cost Weighted Average Yield Amortized Cost Weighted Average Yield (Dollars in thousands) Held-to-Maturity U.S. government and federal agencies $ 40,036 1.96 % $ 2,484 1.17 % $ - - % $ - - % U.S. government-sponsored enterprises (GSEs) 7,970 3.24 % 5,758 1.59 % - - % - - % State and political subdivisions - - % 2,426 1.47 % 99 4.37 % 1,379 5.04 % Mortgage-backed securities - - % - - % 5,466 1.20 % 28,725 4.09 % Total Held-to-Maturity $ 48,006 2.17 % $ 10,668 1.46 % $ 5,565 1.26 % $ 30,104 4.13 % As of December 31, 2025 Due in One Year or less Due after One Year through Five Years Due after Five Years through Ten Years Due after Ten Years Amortized Cost Weighted Average Yield Amortized Cost Weighted Average Yield Amortized Cost Weighted Average Yield Amortized Cost Weighted Average Yield (Dollars in thousands) Held-to-Maturity U.S. government and federal agencies $ 30,234 2.19 % $ 12,448 0.93 % $ - - % $ - - % U.S. government-sponsored enterprises (GSEs) 7,883 3.24 % 5,716 1.59 % - - % - - % State and political subdivisions - - % 2,434 1.47 % 98 4.37 % 1,381 5.04 % Mortgage-backed securities - - % - - % - - % 37,534 3.65 % Total Held-to-Maturity $ 38,117 2.35 % $ 20,598 1.18 % $ 98 4.37 % $ 38,915 3.70 % 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, a security before recovering its amortized cost basis. If either condition exists, the security’s amortized cost basis is written down to fair value through income. If either aforesaid condition 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 (loss), 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 uncollectability of an available-for-sale security is confirmed or when either of the criteria regarding intent or requirement to sell is met. Allowance for Credit Losses (ACL) — Held-to-Maturity Securities: Management measures expected credit losses on held-to-maturity debt securities on a collective basis by major security type and any other risk characteristics used to segment the portfolio. Accrued interest receivable on held-to-maturity debt securities totaled $215,406 and $291,460 as of June 30, 2026, and December 31, 2025, respectively. 63 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. The Company sold no held-to-maturity securities prior to maturity during the six months ended June 30, 2026 or the fiscal year ended December 31, 2025. Bank-Owned Life Insurance We maintain investments in BOLI policies to help control employee benefit costs, as a protection against loss of certain employees and as a tax planning strategy. We are the sole owner and beneficiary of these BOLI policies. At June 30, 2026, the carrying value of our BOLI policies was $46.6 million unchanged from December 31, 2025. Deposits Deposits represent our primary and most vital source of funds. We offer a variety of deposit products including demand deposits accounts, interest-bearing products, savings accounts and certificates of deposit. The Bank also acquires brokered deposits, QwickRate internet certificates of deposit, and reciprocal deposits through the Promontory network. The reciprocal deposits include both the Certificate of Deposit Account Registry Service (CDARS) and Insured Cash Sweep programs. We are a member of the Promontory network, which effectively allows depositors to receive FDIC insurance on amounts greater than the FDIC insurance limit, which is currently $250,000 per depositor, per issued bank for each account ownership category. The Promontory network allows institutions to break large deposits into smaller amounts and place them in a network of other Promontory institutions to ensure full FDIC insurance is gained on the entire deposit. Generally, internet and reciprocal deposits are not brokered deposits for regulatory purposes. Our strong asset growth requires us to place a greater emphasis on both interest and noninterest-bearing deposits. Deposit accounts are added by loan production cross-selling, customer referrals, marketing advertisements, mobile and online banking and our involvement within our communities. Total deposits were $1.9 billion at June 30, 2026 and $1.8 billion at December 31, 2025. As of June 30, 2026, 22.9% of total deposits was comprised of noninterest-bearing demand deposits, 49.5% of total deposits was comprised of interest-bearing non-maturity accounts and 27.6% of total deposits was comprised of time deposits. As of December 31, 2025, 21.9% of total deposits was comprised of noninterest-bearing demand deposits, 51.2% of total deposits was comprised of interest-bearing non-maturity accounts and 26.8% of total deposits was comprised of time deposits. The following table summarizes our deposit balances as of June 30, 2026, and December 31, 2025: As of June 30, 2026 As of December 31, 2026 2025 Balance % of Total Balance % of Total (Dollars in thousands) Noninterest-bearing demand deposits $ 428,381 22.9 % $ 397,835 21.9 % Interest-bearing deposits: Interest-bearing demand deposits 514,252 27.5 % 516,151 28.4 % NOW, savings and money market 413,904 22.1 % 414,716 22.8 % Time deposits 516,635 27.6 % 487,032 26.8 % Total interest-bearing deposits 1,444,791 77.1 % 1,417,899 78.1 % Total deposits $ 1,873,172 100.0 % $ 1,815,734 100 % 64 The following tables set forth the maturity of time deposits as of June 30, 2026, and December 31, 2025: As of June 30, 2026 Maturity Within: Three Months Three Months Through 12 Months Over 12 Months Through 3 Years Over 3 Years Total (Dollars in thousands) Time deposits ($250,000 or less) $ 109,216 $ 240,560 $ 53,107 $ 5,842 $ 408,725 Time deposits (greater than $250,000) 16,453 90,070 1,387 - 107,910 Total time deposits $ 125,669 $ 330,630 $ 34,494 $ 5,842 $ 516,635 As of December 31, 2025 Maturity Within: Three Months Three Months Through 12 Months Over 12 Months Through 3 Years Over 3 Years Total (Dollars in thousands) Time deposits ($250,000 or less) $ 161,783 $ 176,711 $ 33,093 $ 5,363 $ 376,950 Time deposits (greater than $250,000) 40,542 57,046 12,495 — 110,082 Total time deposits $ 202,325 $ 233,757 $ 45,588 $ 5,363 $ 487,032 Time deposits issued in amounts of greater than $250,000 represent the type of deposit most likely to affect our future earnings because of interest rate sensitivity. The effective cost of these funds is generally higher than other time deposits because the funds are usually obtained at premium rates of interest. Borrowed Funds In addition to deposits, we utilize advances from the FHLB and other borrowings as a supplementary funding source to finance our operations. FHLB Advances. The FHLB allows us to borrow, on both a short and long-term basis, collateralized by a blanket floating lien on first mortgage loans and CRE loans as well as FHLB stock. At June 30, 2026, and December 31, 2025, we had borrowing capacity from the FHLB of $227.2 million and $276.0 million, respectively. We had $100.0 million of cash management advance FHLB borrowings as of June 30, 2026 and $75 million as of December 31, 2025. We had long-term FHLB borrowings of $61.2 million and $60.6 million as of June 30, 2026, and December 31, 2025, respectively. All of our outstanding FHLB advances have fixed rates of interest. The following table sets forth our FHLB borrowings as of June 30, 2026, and December 31, 2025: As of June 30, 2026 As of December 31, 2025 (Dollars in thousands) Long-term FHLB borrowings outstanding at end of period $ 61,189 $ 60,553 Weighted average interest rate at end of period 2.92 % 2.88 % Maximum month-end balance $ 61,189 $ 66,202 Average balance outstanding during the period $ 60,238 $ 62,419 Weighted average interest rate during the period 3.05 % 2.92 % 65 Lines of Credit. The Bank has uncollateralized, uncommitted federal funds lines of credit with multiple banks as a source of funding for liquidity management. The total amount of these lines of credit was $102.5 million as of June 30, 2026, all of which was available. The total amount of the lines of credit was $102.5 million as of December 31, 2025, of which $92.5 million was available. Federal Reserve Discount Window. The Bank has a line of credit with the Federal Reserve Discount Window collateralized with CRE loans. There were no amounts outstanding under this line of credit as of June 30, 2026, or December 31, 2025. Community Trust Bank Loan Agreement. In April 2015, the Parent Company executed a Loan Agreement with Community Trust Bank, Inc. (“CTB”), Pikeville, Kentucky (the “Community Trust Loan Agreement”), which was later amended and restated on January 27, 2020, providing for a loan by CTB to the Parent Company. The loan was collateralized by all of the issued and outstanding shares of stock of the Bank. The Community Trust Loan Agreement included various financial and nonfinancial covenants. On October 7, 2025, the Parent Company repaid this loan in full. Trust Preferred Securities. With the acquisition of Citizens Bancorp, Inc. and its bank subsidiary, Citizens Bank, in 2018, we also acquired the Trust. In September 2004, the Trust issued the Trust Preferred Securities with an aggregate liquidation amount of $6,000,000 ($1,000 per trust preferred security) to a third-party investor. Citizens Bancorp then issued variable rate junior subordinated debentures aggregating $6,186,000 to the Trust. The Subordinated Debentures were the sole assets of the Trust. The Subordinated Debentures and the Trust Preferred Securities paid interest and dividends, on a quarterly basis, at a variable interest rate equal to three-month SOFR plus 2.40% adjusted quarterly, which was 6.41% on December 31, 2025. The Subordinated Debentures and the Trust Preferred Securities were redeemable prior to maturity, in whole or in part. On January 7, 2026, the Company redeemed the Subordinated Debentures and the Trust Preferred Securities in full. Liquidity and Capital Resources Liquidity Liquidity refers to the measure of our ability to meet the cash flow requirements of depositors and borrowers, while at the same time meeting our operating, capital and strategic cash flow needs, all at a reasonable cost. We continuously monitor our liquidity position to ensure that assets and liabilities are managed in a manner that will meet all of our short-term and long-term cash requirements. We manage our liquidity position to meet the daily cash flow needs of customers while maintaining an appropriate balance between assets and liabilities to meet the return on investment objectives of our shareholders. Interest rate sensitivity involves the relationships between rate-sensitive assets and liabilities and is an indication of the probable effects of interest rate fluctuations on our net interest income. Interest rate-sensitive assets and liabilities are those with yields or rates that are subject to change within a future time period due to maturity or changes in market rates. A model is used to project future net interest income under a set of possible interest rate movements. The Bank’s Asset/Liability Committee reviews this information to determine if the projected future net interest income levels would be acceptable. We attempt to stay within acceptable net interest income levels. Our liquidity position is supported by management of liquid assets and access to alternative sources of funds. Our liquid assets include cash, interest-bearing deposits in correspondent banks, federal funds sold, and the fair value of unpledged investment securities. Other available sources of liquidity include wholesale deposits and additional borrowings from correspondent banks, FHLB advances, and the Federal Reserve Discount Window. Our short-term and long-term liquidity requirements are primarily met through cash flow from operations, redeployment of prepaying and maturing balances in our loan and investment securities portfolios and increases in customer deposits. Other alternative sources of funds will supplement these primary sources to the extent necessary to meet additional liquidity requirements on either a short-term or long-term basis. 66 The Company and the Bank are separate corporate entities. The Company’s liquidity depends primarily upon dividends received from the Bank and capital and debt instruments issued by the Company. Statutory and regulatory limitations apply to the Bank’s payment of dividends to the Company. See the sections titled “Risk Factors – Legal, Regulatory and Compliance Risks – Our Ability to pay dividends is subject to restriction by various laws and regulations and other factors” and “Supervision and Regulation — Payment of Dividends and Repurchases of Capital Instruments” in the 2025 Annual Report. The Company relies on its liquidity to pay interest and principal on Company indebtedness, company operating expenses, and dividends to Company shareholders. As of June 30, 2026 As of December 31, 2025 Current On-Balance Sheet (in thousands) Cash and cash equivalents $ 170,114 $ 144,319 Unpledged available-for-sale and held-to-maturity securities 15,230 22,873 Total on-balance sheet $ 185,344 $ 167,192 As of June 30, 2026 As of December 31, 2025 Available Sources of Liquidity (in thousands) Federal Reserve & FHLB remaining borrowing capacity $ 227,239 $ 275,961 Correspondent banks borrowing capacity 102,500 92,500 Brokered CDs capacity 230,047 230,357 Total available sources $ 559,786 $ 598,818 Capital Requirements We are subject to various regulatory capital requirements administered by the federal and state banking regulators. Failure to meet applicable regulatory capital requirements may result in certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a direct material effect on our financial statements. Under regulatory capital adequacy guidelines and the regulatory framework for “prompt corrective action” (described below), we must meet specific capital guidelines that involve quantitative measures of our assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting policies. The capital amounts and classifications are subject to qualitative judgments by the federal banking regulators about components, risk weightings and other factors. Because the Company has total consolidated assets of less than $3 billion and otherwise qualifies for the application of the Federal Reserve’s Small Bank Holding Company Policy Statement, the Company currently is not subject to federal capital adequacy guidelines on a consolidated basis. Rather, the regulatory capital requirements are applied to and assessed at the Bank. See the section titled “Supervision and Regulation” in the 2025 Annual Report. The tables below summarize the capital requirements applicable to the Bank in order for the Bank to satisfy the minimum capital requirements of the capital adequacy guidelines and to be considered “well-capitalized” from a regulatory perspective under the prompt corrective action framework, as well as the Company’s and the Bank’s capital ratios as of June 30, 2026, and December 31, 2025. The Federal Deposit Insurance Act (“FDIA”) requires, among other things, that the federal banking regulators take prompt corrective action with respect to FDIC-insured depository institutions that do not meet certain minimum capital requirements. Under the FDIA, insured depository institutions are divided into five capital categories: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized. Under applicable FDIA regulations, an institution is considered to be well capitalized if it has a common equity Tier 1 capital ratio (“CET1 capital”) of at least 6.5%, a leverage ratio of at least 5%, a Tier 1 risk-based capital ratio of at least 8%, and a total risk-based capital ratio of at least 10%, and it is not subject to a directive, order or written agreement to meet and maintain specific capital levels. 67 The Bank exceeded all the minimum regulatory capital requirements under the federal capital adequacy guidelines (Basel III), and the Bank met all the minimum capital requirements to be considered “well-capitalized” under the prompt corrective action framework, as of the dates reflected in the tables below. Actual Required Minimum Under Capital Adequacy Guidelines Minimum to be Considered “Well Capitalized” Under PCA Amount Ratio Amount Ratio Amount Ratio (Dollars in thousands) As of June 30, 2026: Tier 1 capital (to average assets) (leverage) Company $ 292,230 12.7 % N/A N/A N/A N/A Bank $ 260,015 11.6 % $ 89,788 4.0 % $ 112,235 5.0 % CET1 capital (to risk-weighted assets) Company $ 292,230 14.5 % N/A N/A N/A N/A Bank $ 260,015 13.0 % $ 89,842 4.5 % $ 129,772 6.5 % Tier 1 capital (to risk-weighted assets) Company $ 292,230 14.5 % N/A N/A N/A N/A Bank $ 260,015 13.0 % $ 119,789 6.0 % $ 159,719 8.0 % Total capital (to risk-weighted assets) Company $ 310,953 15.5 % N/A N/A N/A N/A Bank $ 278,850 14.0 % $ 159,719 8.0 % $ 199,649 10.0 % Actual Required Minimum Under Capital Adequacy Guidelines Minimum to be Considered “Well Capitalized” Under PCA Amount Ratio Amount Ratio Amount Ratio (Dollars in thousands) As of December 31, 2025: Tier 1 capital (to average assets) (leverage) Company $ 229,716 10.7 % N/A N/A N/A N/A Bank $ 237,827 10.8 % $ 88,218 4.0 % $ 110,272 5.0 % CET1 capital (to risk-weighted assets) Company $ 224,174 12.1 % N/A N/A N/A N/A Bank $ 237,827 12.5 % $ 85,349 4.5 % $ 123,282 6.5 % Tier 1 capital (to risk-weighted assets) Company $ 229,716 12.5 % N/A N/A N/A N/A Bank $ 237,827 12.5 % $ 113,799 6.0 % $ 151,732 8.0 % Total capital (to risk-weighted assets) Company $ 247,705 13.4 % N/A N/A N/A N/A Bank $ 255,727 13.5 % $ 151,732 8.0 % $ 189,665 10.0 % 68 Contractual Obligations The following tables contain supplemental information regarding our total contractual obligations at June 30, 2026, and December 31, 2025: Payments Due at June 30, 2026 Within One Year One to Five Years After Five Years Total (Dollars in thousands) Time deposits $ 456,299 $ 60,336 $ - $ 516,635 Short-term borrowings 102,570 - - 102,570 Long-term borrowings 17,246 22,073 33,928 73,247 Subordinated debt securities — — — — Total contractual obligations $ 576,115 $ 82,409 $ 33,928 $ 692,452 Payments Due at December 31, 2025 Within One Year One to Five Years After Five Years Total (Dollars in thousands) Time deposits $ 436,082 $ 50,950 $ — $ 487,032 Short-term borrowings 88,251 — — 88,251 Long-term borrowings 12,607 707 59,696 73,010 Subordinated debt securities — — 5,577 5,577 Total contractual obligations $ 536,940 $ 51,657 $ 65,273 $ 653,870 We believe that we will be able to meet our contractual obligations as they come due through the maintenance of adequate cash levels. We expect to maintain adequate cash levels through profitability, loan and securities repayment and maturity activity and continued deposit gathering activities. We have in place various borrowing mechanisms for both short-term and long-term liquidity needs. Off-Balance Sheet Arrangements We are a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of our customers. These financial instruments include commitments to extend credit and standby letters of credit. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in our consolidated balance sheets. Our exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit to our customers is represented by the contractual or notional amount of those instruments. Commitments to extend credit and standby letters of credit are not recorded as an asset or liability by us until the instrument is exercised. The contractual or notional amounts of these instruments reflect the extent of involvement we have in particular classes of financial instruments. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require the payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. We use the same credit policies in making commitments and conditional obligations as we do for on-balance sheet instruments. The amount and nature of collateral obtained, if deemed necessary by us upon extension of credit, is based on management’s credit evaluation of the potential borrower. Standby letters of credit are conditional commitments issued by us to guarantee the performance of a customer to a third party. These guarantees are primarily issued to support public and private short-term borrowing arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. We hold collateral supporting such commitments for which collateral is deemed necessary. 69 The following table summarizes commitments we had made as of the dates presented. As of June 30, As of December 31, 2026 2025 (Dollars in thousands) Commitments to grant loans and unfunded commitments under lines of credit $ 288,715 $ 274,407 Standby letters of credit 24,331 24,503 Total $ 313,046 $ 298,910 Item 3. Quantitative and Qualitative Disclosures About Market Risk. Not required. Item 4. Controls and Procedures. Evaluation of Disclosure Controls and Procedures The Company’s management, including the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of June 30, 2026. The Company’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of June 30, 2026. Changes in Internal Control over Financial Reporting During the quarter ended June 30, 2026, there was no change in the Company’s internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or 15d-15 of the Exchange Act that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. 70 PART II—OTHER INFORMATION Item 1. Legal Proceedings. From time to time, the Company and the Bank are parties to various legal proceedings in the ordinary course of their respective businesses, including proceedings to collect loans or enforce security interests. In the opinion of management, none of these legal proceedings currently pending will, when resolved, have a material adverse effect on the business, financial condition or results of operations of the Company or the Bank. Item 1A. Risk Factors. In addition to the other information set forth in this Report, you should carefully consider the factors discussed under the section titled “Risk Factors” in the 2025 Annual Report . These factors could materially and adversely affect our business, financial condition, liquidity, results of operations and capital position, and could cause our actual results to differ materially from our historical results or the results contemplated by the forward-looking statements contained in this Report. Please be aware that these risks may change over time and other risks may prove to be important in the future. There have been no material changes to the risk factors previously disclosed in the 2025 Annual Report . Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. (a) Unregistered Sales of Equity Securities We did not sell any unregistered equity securities during the fiscal quarter ended June 30, 2026. (b) Use of Proceeds from Sale of Registered Equity Securities None. 71 (c) Purchases of Equity Securities by the Issuer The following table contains information regarding shares of Parent Company common stock repurchased by the Parent Company during the three months ended June 30, 2026. Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Maximum Number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under the Plans or Programs (1) April 1 - April 30, 2026 — $ — — $ — May 1 - May 31, 2026 — — — $ 10,000,000 June 1 - June 30, 2026 — — — $ 10,000,000 Total — $ — — $ 10,000,000 (1) On April 27, 2026, the Parent Company’s board of directors authorized a stock repurchase plan pursuant to which, beginning May 1, 2026, the Parent Company may repurchase up to $10 million of the Parent Company’s outstanding common stock (the “Repurchase Plan”). As of June 30, 2026, the Parent Company had not repurchased any shares of common stock under the Repurchase Plan. The Repurchase Plan does not obligate the Parent Company to repurchase any certain dollar amount or number of shares. The Repurchase Plan may be extended, modified, amended, suspended, or discontinued at any time. The Repurchase Plan is effective through the close of business on April 30, 2027. Use of Proceeds None. Item 3. Defaults Upon Senior Securities. None. Item 4. Mine Safety Disclosures. None. Item 5. Other Information. Insider Trading Arrangements During the three months ended June 30, 2026, none of the Parent Company’s directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted , terminated or modified a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408 of Regulation S-K). 72 Item 6. Exhibits. List of Exhibits Number Description 31.1* Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2* Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1** Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2** Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 101.INS Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. 101.SCH Inline XBRL Taxonomy Extension Schema with Embedded Linkbase Documents 104 Cover Page Interactive Data File (embedded within the Inline XBRL document) * Filed herewith ** This exhibit shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any filings. 73 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Commercial Bancgroup, Inc. Date: August 12, 2026 By: /s/ Terry L. Lee Name: Terry L. Lee Title: President and Chief Executive Officer Commercial Bancgroup, Inc. Date: August 12, 2026 By: /s/ Philip J. Metheny Name: Philip J. Metheny Title: Senior Executive Vice President, Chief Financial Officer 74