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Item 7. Management’s Discussion and Analysis

2026-03-16 compared with 2025-03-17 · 287 added, 179 removed, 629 unchanged (43% of the section changed)

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Non-GAAP Financial Measures

This document contains non-GAAP financial measures denoted throughout our MD&A by reference to “non-GAAP.” We believe these non-GAAP financial measures provide useful information to investors because they are used by management to evaluate our operating performance and to make day-to-day operating decisions.

This report contains non-GAAP financial measures denoted throughout our MD&A by reference to “non-GAAP.” We believe these non-GAAP financial measures provide useful information to investors because they are used by management to evaluate our operating performance and to make day-to-day operating decisions.

In addition, we believe our non-GAAP results in any given reporting period reflect our on-going financial performance in that period and, accordingly, are useful to consider in addition to our GAAP financial results.

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The following summary should be read in conjunction with the MD&A section in its entirety.

Net income of $31.0 million for the year ended December 31, 2024 decreased $4.9 million, or 13.7% when compared to the prior year.

Net income of $40.1 million as adjusted excludes the impact of $3.3 million after-tax merger-related expenses, $3.2 million after-tax impact from the Initial IFH ACL Provision on non-PCD loans and a $2.6 million non-recurring equity and debt investment write-down that was nondeductible for tax purposes (non-GAAP) for the year ended December 31, 2024.

There were no adjustments made to net income for the year ended December 31, 2023.

Net interest income of $154.7 million increased $13.2 million from the prior year primarily due to increased average balances of $325.7 million in portfolio loans, partially offset by higher funding costs primarily resulting from the additional average deposit volume funding the loan growth.

Interest income included $0.7 million and interest expense included $1.4 million from net purchase accounting amortization resulting from the IFH acquisition.

Net income of $57.2 million for the year ended December 31, 2025 increased $26.2 million, or 84.6% when compared to the prior year, augmented in part by the acquisition of IFH and strong organic growth.

Net income as adjusted for the year ended December 31, 2025 of $56.3 million excludes the impact of $3.5 million after-tax impact from issuing a call of brokered time deposits acquired from the IFH transaction (“Call of Brokered Time Deposits”) and $2.6 million after-tax merger-related expenses.

Net income as adjusted for the year ended December 31, 2024 included $3.3 million of after-tax merger-related expenses, $3.2 from the Initial IFH ACL Provision on non-purchased credit deteriorated loans, and $2.6 million of non-recurring equity and debt investment write-down that was nondeductible for tax purposes (non-GAAP).

Net interest income of $196.0 million increased $41.2 million from the prior year primarily driven by organic growth and the acquisition of IFH.

For more information on the computation of non-GAAP financial measures, see “Non-GAAP Financial Measures and Reconciliations.”

The net interest margin decreased 12 basis points to 6.10% for the year ended December 31, 2025 compared to 6.22% for the prior year.

The elevated interest rate environment increased the yield on cash, investments, and commercial bank loan yields but was offset by a slightly lower loan yield from OpenSky credit card loans.

The overall cost of interest-bearing liabilities decreased the net interest spread to 4.81% for the year ended December 31, 2024 compared to 5.25% for the prior year.

Core net interest margin, excluding credit card loans (as adjusted, non-GAAP), was 4.00% for the year ended December 31, 2024, compared to 3.96% for the prior year.

For the year ended December 31, 2024, average interest earning

assets increased $342.4 million, or 16.0%, to $2.5 billion as compared to the same period in 2023, and the average yield on interest earning assets increased 3 basis points.

The yield on portfolio loans, as adjusted (non-GAAP, excluding credit card loans) was 7.03% for the year ended December 31, 2024, compared to 6.65% for the prior year.

Compared to the same period in the prior year, average interest-bearing liabilities increased $288.5 million, or 22.7%, while the average cost of interest-bearing liabilities increased 47 basis points to 3.76% from 3.29%.

The decrease was primarily driven by the acquisition of commercial loans from IFH, which diluted the impact from OpenSky™.

For the year ended December 31, 2025, average interest earning assets increased $727.9 million, or 29.3%, to $3.2 billion as compared to the same period in 2024, and the average yield on interest earning assets decreased 46 basis points as a result of the acquisition of commercial loans from IFH, diluting the impact from OpenSky TM .

The Commercial Bank net interest margin was 4.38% for the year ended December 31, 2025, which included 15 basis points related to the Call of Brokered Time Deposits, compared to 3.93% for the prior year.

For the year ended December 31, 2025, the Commercial Bank average interest earning assets increased $713.4 million, or 30.2%, to $3.1 billion as compared to the same period in 2024, driven by the acquired interest-earning assets from IFH and strong organic growth during 2025.

The Commercial Bank yield on portfolio loans (non-GAAP, excluding credit card loans) was 6.99% for the year ended December 31, 2025, which included 4 basis points of purchase accounting accretion, compared to 7.03% for the prior year, which included 3 basis points of purchase accounting amortization.

Excluding purchase accounting, the Commercial Bank loan yield decreased 11 basis points primarily due to changes in the rate environment.

Compared to the same period in the prior year, average interest-bearing liabilities increased $548.7 million, or 35.2%, while the average cost of interest-bearing liabilities decreased 68 basis points to 3.1% from 3.8%.

For additional details, see “Non-GAAP Financial Measures and Reconciliations.”

For the year ended December 31, 2024, the provision for credit losses was $17.7 million, an increase of $8.1 million from the prior year.

The variance included the Initial IFH non-PCD ACL Provision of $4.2 million and $4.5 million from organic commercial portfolio loan growth, partially offset by a $0.6 million reduction from the OpenSky TM credit card portfolio.

For the year ended December 31, 2025, the provision for credit losses was $15.0 million, a decrease of $2.8 million from the prior year.

The provision for credit losses for the year-ended December 31, 2024 included the initial IFH ACL provision of $4.2 million.

Excluding this, the provision for credit losses increased $1.2 million which was primarily due to increased provision expense for OpenSky™ due to growth in the unsecured credit card portfolio.

Net charge-offs for the year ended December 31, 2025 were $12.4 million, or 0.45% of average portfolio loans, compared to $9.0 million, or 0.42% of average portfolio loans, for the same period in 2024.

The $9.0 million in net charge-offs during the year ended December 31, 2024 was comprised primarily of credit card portfolio net charge-offs, with $3.6 million related to secured and partially secured cards while $3.4 million was related to unsecured cards.

The $12.4 million in net charge-offs during the year ended December 31, 2025 were comprised, in part, of OpenSky™ credit card portfolio net charge-offs, with $5.4 million related to unsecured cards and $1.6 million related to secured and partially secured cards.

Further, $3.4 million of net charge-offs were related to commercial and industrial loans, $1.9 million were related to owner-occupied commercial real estate loans, and $0.3 million were related to construction loans.

For the year ended December 31, 2025, noninterest income of $49.2 million increased $17.8 million, or 56.6%, from the same period in 2024.

This increase was primarily driven by contributions from the IFH acquisition, including government loan servicing revenue (Windsor) of $4.0 million, government lending revenue (gain on sale) of $2.3 million and revenue from loan servicing rights of $1.0 million, offset by a non-recurring equity and debt write-down of $2.6 million related to an IFH investment.

Other income increased $0.9 million primarily related to a previous investment in an SBIC, while credit card fees declined $1.3 million.

This increase was primarily driven by reporting results from the IFH acquisition for a full year in 2025 compared to only three months in 2024.

Activity from IFH included increased government loan servicing revenue (Windsor™) of $11.5 million, increased government lending

revenue of $1.9 million, offset by decreased loan servicing rights of $0.5 million.

The noninterest income also increased $2.6 million as a result of 2024 including non-recurring equity and debt write-down related to an IFH investment.

For the year ended December 31, 2025, noninterest expense of $155.1 million increased $28.9 million, or 22.9%, from the same period in 2024, largely due to the IFH acquisition.

The increase was primarily driven by a $7.3 million, or 14.9%, increase in salaries and employee benefits, a $3.9 million increase in merger-related expenses, a $2.6 million, or 45.3%, increase in occupancy and equipment primarily related to increased contract expense from the IFH acquisition, and a $2.0 million, or 7.8%, increase in data processing expense, partially offset by a $1.4 million, or 15.4%, decrease in professional fees due to a reduction in third party consulting fees.

On October 1, 2024, in connection with the IFH acquisition, the Company acquired total assets of $559.4 million, net of purchase accounting adjustments, including gross loans of $373.5 million, loans held for sale of $41.7 million and goodwill and intangible assets of $37.2 million while liabilities assumed totaled $475.9 million including total deposits of $459.0 million.

For the year ended December 31, 2024, the acquisition of IFH resulted in an increase in average assets of $134.3 million, an increase in average interest earning assets of $121.8 million, an increase in average gross loans of $105.0 million, and an increase in average total deposits of $117.4 million.

The increase was primarily driven by a $16.1 million, or 28.8%, increase in salaries and employee benefits, a $3.1 million increase in occupancy and equipment, a $3.1 million increase in professional fees, and a $2.1 million, or 7.6%, increase in data processing expense.

Total assets at December 31, 2025 were $3.6 billion, an increase of $399.3 million, or 12.5%, from the balance at December 31, 2024.

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Total liabilities at December 31, 2025 were $3.2 billion, an increase of $352.7 million, or 12.4%, from the balance at December 31, 2024.

Total liability growth was primarily due to a $865.9 million increase in deposits partially offset by a decrease in other borrowed funds of $15.0 million when comparing December 31, 2024 to December 31, 2023.

Stockholders’ equity increased to $355.1 million as of December 31, 2024, compared to $254.9 million at December 31, 2023.

Total liability growth was primarily due to a $331.3 million increase in deposits and a $28.0 million increase in FHLB advances, partially offset by a decrease in other borrowed funds of $10.0 million when comparing December 31, 2025 to December 31, 2024.

Stockholders’ equity increased to $401.8 million as of December 31, 2025, compared to $355.1 million at December 31, 2024, or 13.1%.

Deposits were $3.1 billion at December 31, 2025, an increase of $331.3 million or 12.0%, from the balance at December 31, 2024.

Average deposits of $2.9 billion for the year ended December 31, 2025 increased $711.6 million, or 32.8%, as compared to the prior year.

Average noninterest-bearing deposit

balances increased $20.3 million to $675.4 million, or 31.1% of total average deposits for the year ended December 31, 2024, as compared to $655.0 million, or 35.1% of total average deposits for the prior year.

Average noninterest-bearing deposit balances increased $136.4 million to $811.8 million, and represented 28.2% of total average deposits for the year ended December 31, 2025, as compared to $675.4 million, which represented 31.1% of total average deposits for the prior year.

The Bank’s OpenSky ™ Division, including shared service and corporate allocations contributed $14.6 million of income before taxes for the year ended December 31, 2025, a decrease of $2.7 million for the segment from the prior year.

The $2.7 million decrease was primarily attributable to $1.5 million of increased provision for credit losses, $0.8 million of decreased interest income, and $1.3 million of increased data processing expense related to investments in OpenSky ™ initiatives and other investments in technology, partially offset by $1.4 million of increased fee revenue from higher credit card fees.

Average OpenSky ™ loan balances, net of reserves and deferred fees of $125.8 million for the year ended December 31, 2025 increased $10.2 million, or 8.9%, as compared to the prior year.

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Gross unsecured loan balances of $61.4 million at December 31, 2025 increased $18.9 million, or 44.7%, compared to $42.4 million at December 31, 2024.

For the year ended December 31, 2024, noninterest income of $16.1 million decreased $1.2 million due primarily to a decline in credit card fees as compared to the prior year.

For the year ended December 31, 2025, noninterest income of $17.4 million increased $1.3 million due primarily to higher credit-card related fees.

The Bank’s Capital Bank Home Loans division including shared service and corporate allocations contributed a net loss before taxes of $2.6 million for the year ended December 31, 2025 as compared to a net loss before taxes of $2.5 million in the prior year.

The Bank’s Capital Bank Home Loans division saw an increase in mortgage originations during the year ended December 31, 2025 when compared to the prior year.

An elevated interest rate environment dampened home loan sales and home loan refinances.

Gain on sale margins were down from 2.76% for the twelve months ended December 31, 2023 to 2.59% for the twelve months ended December 31, 2024.

The Bank’s Windsor Advantage division, including shared service and corporate allocations, contributed net income before taxes of $1.9 million for the year ended December 31, 2024 following the acquisition of IFH on October 1, 2024.

Gross government loan servicing revenue (Windsor) totaled $4.6 million, including $0.6 million of Capital Bank related servicing fees, during the fourth quarter 2024.

Windsor's total servicing portfolio was $2.5 billion at December 31, 2024.

The lower interest rate environment increased home loan sales and home loan refinances.

Gain on sale margins were up from 2.59% for the year ended December 31, 2024 to 2.70% for the year ended December 31, 2025.

The Bank’s Windsor Advantage™ division, including shared service and corporate allocations, contributed net income before taxes of $5.1 million for the year ended December 31, 2025 compared to $1.9 million for the year ended December 31, 2024.

The increase was primarily driven by reporting results

from the IFH acquisition for a full year in 2025 compared to only three months in 2024.

Gross government loan servicing revenue (Windsor™) totaled $19.6 million, as compared to $4.5 million for the year ended December 31, 2024.

Gross government loan servicing revenue included Capital Bank related servicing fees of $4.1 million and $0.5 million in 2025 and 2024, respectively.

When the gross government loan servicing revenue from 2024 is annualized to $18.1 million this represents an increase of $1.5 million, or 8.2%.

Windsor's™ total servicing portfolio was $3.1 billion at December 31, 2025, compared to $2.5 billion at December 31, 2024.

Critical Accounting Estimates

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The Company provides additional information on its ACL in “Note 1 - Nature of Business and Basis of Presentation” in the “Notes to the Consolidated Financial Statements” contained in Part II, Item 8 "Financial Statements and Supplementary Data.”

We account for business combinations under ASC 805, Business Combinations using the acquisition method of accounting and record the identifiable assets acquired, liabilities assumed and consideration

paid at fair value at the acquisition date.

We account for business combinations under ASC 805, Business Combinations using the acquisition method of accounting and record the identifiable assets acquired, liabilities assumed and consideration paid at fair value at the acquisition date.

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

The fair values are preliminary estimates subject to adjustments during the measurement period, which does not exceed one year after acquisition.

As of December 31, 2025, the measurement period for the acquisition has closed and the acquisition accounting is finalized.

The application of business combination principles, including the determination of the fair value of net assets acquired, requires the use of significant estimates and assumptions under ASC 820, Fair Value Measurement.

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Determining estimated fair value requires a significant amount of judgment and estimates.

If our assumptions change, or errors are determined in its calculations, the fair value could materially change resulting in an adjustment to our goodwill or identifiable net assets acquired, including identified intangible assets.

As of December 31, 2025, the Company believes that the fair value of the assets acquired, liabilities assumed and consideration paid at fair value at the acquisition date was appropriately determined in accordance with GAAP.

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Provision for credit losses 14,965 17,720 (15.5) %

Provision for (release of) credit losses on unfunded commitments 385 (101) (481.2) %

Provision for credit losses on unfunded commitments 188 385 (51.2) %

Net interest income after provision for credit losses 180,839 136,641 32.3 %

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Net income $ 57,170 $ 30,972 84.6 %

Net income for the year ended December 31, 2024 was $31.0 million compared to net income of $35.9 million for the same period in 2023, a 13.7% decrease.

Net income was $40.1 million as adjusted to exclude the impact of $3.3 million after-tax merger-related expenses, $3.2 million after-tax impact from the Initial IFH ACL Provision on non-PCD loans and a $2.6 million non-recurring equity and debt investment write-down that was nondeductible for tax purposes (non-GAAP), for the year ended December 31, 2024.

Net interest income increased $13.2 million, or 9.3%, to $154.7 million when comparing the year ended December 31, 2024 to the year ended December 31, 2023, primarily due to increased average balances of $325.7 million in portfolio loans, partially offset by higher funding costs primarily resulting from the additional average deposit volume funding loan growth.

Net income for the year ended December 31, 2025 was $57.2 million compared to net income of $31.0 million for the same period in 2024, a 84.6% increase, augmented in part by the IFH acquisition.

During the year, the Bank issued a call of brokered time deposits acquired from the IFH transaction (“Call of Brokered Time Deposits”), resulting in the accelerated accretion of $4.6 million, or $3.5 million after-tax income.

The Bank also incurred $2.6 million of after-tax related merger expenses.

Net income, as adjusted (non-GAAP) to exclude the after-tax impact of $3.5 million for the Call of Brokered Time Deposits and $2.6 million of after-tax related merger expenses, was $56.3 million for the year ended December 31, 2025.

Net interest income increased $41.2 million, or 26.7%, to $196.0 million when comparing the year ended December 31, 2025 to the year ended December 31, 2024, primarily due to the average balances of portfolio loans increasing by $623.1 million, partially offset by higher funding costs primarily resulting from the additional average deposit volume funding loan growth.

For more information on the computation of non-GAAP financial measures, see “Non-GAAP Financial Measures and Reconciliations.”

The provision for credit losses for the year ended December 31, 2024 was $17.7 million, an increase of $8.1 million, or 84.4%, from the provision for credit losses for the year ended December 31, 2023.

variance included the initial IFH ACL provision of $4.2 million on non-PCD loans and $4.5 million from organic commercial portfolio loan growth, partially offset by $0.6 million from OpenSky credit card portfolio.

The provision for credit losses for the year ended December 31, 2025 was $15.0 million, a decrease of $2.8 million, or 15.5%, from the provision for credit losses for the year ended December 31, 2024.

The decrease was driven by $4.2 million of lower provisions in the commercial loan portfolio, primarily driven by 2024 including the initial IFH ACL provision of $4.2 million, partially offset by $1.5 million of additional OpenSky™ provisions during the year.

Net charge-offs for the year ended December 31, 2025 were $12.4 million, or 0.45% of average portfolio loans, compared to $9.0 million, or 0.42% of average loans for the same period in 2024.

Net charge-offs were comprised, in part, of OpenSky credit card portfolio loans of $3.6 million related to secured and partially secured while $3.4 million was related to unsecured cards.

For the year ended December 31, 2024, noninterest income was $31.4 million, an increase of $6.4 million, or 25.8%, from $25.0 million in the prior year period primarily driven by contributions from the IFH acquisition.

Government loan servicing revenue (Windsor) totaled $4.0 million, government lending revenue totaled $2.3 million and loan servicing rights totaled $1.0 million, offset by a non-recurring equity and debt write-down of $2.6 million related to an IFH investment.

Mortgage banking revenue of $7.1 million increased $2.3 million, primarily due to an increase in home loan sales while credit card fees of $16.0 million declined $1.3 million from lower interchange and other fee income recognized compared to the prior year.

Net charge-offs were comprised, in part, of net charge-offs related to OpenSky™ credit card portfolio loans, specifically $5.4 million of net charge-offs were related to unsecured cards and $1.6 million were related to secured and partially secured cards.

During the year, there were $2.0 million of recoveries resulting from the sale of charged-off OpenSky™ credit card receivables.

Further, $3.4 million of net charge-offs were related to commercial and industrial loans and $1.9 million were related to owner-occupied commercial real estate loans.

The $3.4 million of net charge-offs for commercial and industrial loans were primarily attributable to unguaranteed portions of SBA loans.

One purchased credit deteriorated (“PCD”) loan represented $1.5 million of the $1.9 million net charge-offs for owner-occupied commercial real estate loans.

A specific reserve of $2.8 million was originally recorded for the loan, which was then sold to a third party allowing for $1.3 million of the reserve to be released and the remaining $1.5 million to be charged off.

For the year ended December 31, 2025, noninterest income was $49.2 million, an increase of $17.8 million, or 56.6%, from $31.4 million in the prior year period, primarily driven by contributions from

the IFH acquisition.

Activity from IFH included increased government loan servicing revenue (Windsor™) of $11.5 million, increased government lending revenue of $1.9 million, offset by decreased loan servicing rights of $0.5 million.

Noninterest income was also higher due to 2024 including the non-recurring equity and debt write-down of $2.6 million related to an IFH investment.

Credit card fees of $17.4 million increased $1.4 million, primarily from other credit-card related fees associated with the unsecured product, while mortgage banking revenue of $7.5 million increased $0.3 million as home loan sales remained stable compared to the prior year.

Noninterest expense was $155.1 million for the year ended December 31, 2025, as compared to $126.2 million for the year ended December 31, 2024, an increase of $28.9 million, or 22.9% largely due to the IFH acquisition.

The change includes increases in salaries and employee benefits expenses of $7.3 million, or 14.9%, merger-related expenses of $3.9 million, advertising expenses of $0.2 million, other operating expenses of $0.8 million and data processing expense of $2.0 million, partially offset by decreases in professional fees of $1.4 million and other operational losses of $0.9 million.

The change includes increases in salaries and employee benefits expenses of $16.1 million, or 28.8%, occupancy and equipment of $3.1 million, professional fees of $3.1 million, other operating expenses of $2.3 million, data processing expense of $2.1 million, loan processing of $1.6 million and regulatory assessment expenses of $1.4 million, partially offset by decreases in merger-related expenses of $0.6 million, operational and other card fraud related losses of $0.2 million and advertising expenses of $0.1 million.

Net Interest Income and Net Margin Analysis

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(1) Includes nonaccrual loans.

(2) For the years ended December 31, 2024 and 2023, portfolio loans yield excluding credit card loans was 7.03% and 6.65%, respectively.

(3) For the years ended December 31, 2024 and 2023, credit card loans accounted for 222 and 264 basis points of the reported net interest margin, respectively.

The net interest margin decreased 38 basis points to 6.22% for the year ended December 31, 2024 from the same period in 2023.

Net interest margin, excluding credit card loans, was 4.00% and 3.96%, respectively, for years ended December 31, 2024 and 2023.

(2) For the years ended December 31, 2025 and 2024, collectively, Commercial Bank Loan Yield was 6.99% and 7.03%, respectively.

(3) For the years ended December 31, 2025 and 2024, collectively, Commercial Bank Net Interest Margin was 4.38% and 3.93%, respectively.

The net interest margin decreased 12 basis points to 6.10% for the year ended December 31, 2025 from the same period in 2024, primarily driven by the commercial loans acquired from IFH, for a full year in 2025 compared to only one quarter in 2024, and strong organic growth in the Commercial Bank loan portfolio which further diluted the impact from OpenSky™.

Commercial Bank net interest margin increased to 4.38% for the year ended December 31, 2025, which included 15 basis points from the Call of Brokered Time Deposits, compared to 3.93% for the same period in 2024.

For more information on the computation of non-GAAP financial measures, see “Non-GAAP Financial Measures and Reconciliations.”

For the year ended December 31, 2024, average interest earning assets increased $342.4 million, or 16.0%, to $2.5 billion as compared to the same period in 2023, and the average yield on interest earning assets increased 3 basis points.

Rate/Volume Analysis of Net Interest Income

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When comparing the years ended December 31, 2025 to 2024, the largest positive impact to total interest income was the growth in interest earning assets, strengthened in part by the IFH acquisition.

Growth (change due to volume) in the loan portfolio, excluding credit cards, contributed $22.8 million to the increase in interest income, while elevated interest rates on portfolio loans contributed $6.5 million for the year ended December 31, 2024 compared to the prior year.

On a standalone basis, interest income attributable to the credit card portfolio declined by $1.3 million year over year primarily due to a reduction in yield.

Growth (change due to volume) in the loan portfolio, excluding credit cards, contributed $42.8 million and growth in credit card loans contributed $4.9 million to the increase in interest income.

Growth in the loan and credit card portfolios were both partially offset by decreased interest rates for the year ended December 31, 2025 compared to the prior year.

On a standalone basis, interest income attributable to the interest-bearing deposits contributed $3.6 million to the increase in interest income.

The variance in interest expense year over year was primarily impacted by growth in interest-bearing liabilities, augmented in part by the IFH acquisition.

Growth in interest bearing liabilities contributed $12.3 million to increased interest expense, including $9.5 million from growth in time deposits, partially offsetting the increase in total interest income.

Growth in interest bearing liabilities contributed $17.6 million to increased interest expense, including $9.3 million from growth in time deposits and $8.9 million from growth in money market accounts, partially offset by rate savings of $6.7 million for time deposits and $4.4 million for money market accounts.

Provision for Credit Losses

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For a description of the factors taken into account by our management in determining the ACL, see “Financial Condition— Allowance for Credit Losses.”

For the year ended December 31, 2024, the provision for credit losses was $17.7 million, an increase of $8.1 million from the recorded provision for credit losses of $9.6 million for the year ended December 31, 2023.

The variance included the Initial IFH ACL provision on non-PCD loans of $4.2 million and $4.5 million from organic commercial portfolio loan growth, partially offset by a $0.6 million reduction from the OpenSky TM credit card portfolio.

Net charge-offs for the year ended December 31, 2024 were $9.0 million, or 0.42% of average portfolio loans, compared to $8.5 million, or 0.47% of average portfolio loans, for the same period in 2023.

For the year ended December 31, 2025, the provision for credit losses was $15.0 million, a decrease of $2.8 million from the recorded provision for credit losses of $17.7 million for the year ended December 31, 2024.

The decrease was driven by $4.2 million of lower provisions in the commercial loan portfolio, primarily driven by the initial IFH ACL provision of $4.2 million recognized in 2024, partially offset by $1.5 million of additional OpenSky™ provisions during the year.

Net charge-offs for the year ended December 31, 2025 were $12.4 million, or 0.45% of average portfolio loans, compared to $9.0 million, or 0.42% of average loans for the same period in 2024.

The $12.4 million in net charge-offs during the year ended December 31, 2025 was comprised primarily of credit card portfolio net charge-offs, with $1.6 million related to secured and partially secured cards while $5.4 million was related to unsecured cards.

The ACL as a percent of portfolio loans was 1.85% at December 31, 2024 as compared to 1.50% at December 31, 2023.

While the legacy Capital Bank portfolio credit metrics are relatively consistent with prior year, the increase in the ACL provision year-over-year is attributable to the IFH acquisition, most notably a few PCD loans that required elevated ACL coverage and are not consistent with the current product offering and stronger underwriting at IFH at the time of the acquisition.

During the year, there was $2.0 million of recoveries resulting from the sale of charged off OpenSky™ credit card receivables included within net charge-offs.

The sale of charged off OpenSky™ credit card receivables reduced the reserve required for OpenSky™, resulting in a $1.3 million reduction to the provision.

Further, $3.4 million of net charge-offs were related to commercial and industrial loans and $1.9 million were related to owner-occupied commercial real estate loans.

The $3.4 million of net charge-offs for commercial and industrial loans were primarily attributable to unguaranteed portions of SBA loans.

One PCD loan represented $1.5 million of the $1.9 million net charge-offs for owner-occupied commercial real estate loans.

A specific reserve of $2.8 million was originally recorded for the loan, which was then sold to a third party resulting in the release of $1.3 million from the reserve, with the remaining $1.5 million to be charged off.

The ACL as a percent of portfolio loans was 1.85% at December 31, 2025 and December 31, 2024.

The maintenance of a high-quality loan portfolio, with an adequate allowance for expected credit losses, will continue to be a primary objective for the Company.

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Noninterest Income

A primary source of recurring noninterest income are credit card fees, such as interchange fees and statement fees, mortgage banking revenue and Windsor Advantage fee income in connection with its servicing, processing and packaging of SBA and USDA loans for its financial institution clients.

A primary source of recurring noninterest income are credit card fees, such as interchange fees and statement fees, Windsor Advantage™ fee income in connection with its servicing, processing and packaging of SBA and USDA loans for its financial institution clients, and mortgage banking revenue.

Noninterest income does not include (i) loan origination fees to the extent they exceed the direct loan origination costs, which are generally recognized over the life of the related loan as an adjustment to yield using the interest method or (ii) annual, renewal and late fees related to our credit card portfolio, which are generally recognized over the twelve month life of the related loan as an adjustment to yield using the interest method.

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Service charges on deposit accounts $ 1,316 $ 883 49.0 %

$ 883 $ 964 (8.4) %

Credit card fees 17,366 15,999 8.5

15,999 17,273 (7.4)

Mortgage banking revenue 7,472 7,146 4.6

7,146 4,896 46.0

Government lending revenue 4,222 2,301 83.5

Government loan servicing and packaging revenue 15,513 3,993 288.5

Loan servicing rights (government guaranteed) 1,013 —

Loan servicing rights 545 1,013 (46.2)

Non-recurring equity and debt investment write-down — (2,620) (100.0)

1 unchanged sentence

Total noninterest income $ 49,187 $ 31,410 56.6 %

$ 31,410 $ 24,975 25.8 %

For the year ended December 31, 2024, noninterest income of $31.4 million increased $6.4 million, or 25.8%, from the same period in 2023 primarily due to contributions from the IFH acquisition.

Government loan servicing revenue (Windsor Advantage) totaled $4.0 million, government lending revenue totaled $2.3 million and revenue from loan servicing rights totaled $1.0 million, offset by a non-recurring equity and debt write-down of $2.6 million related to a legacy IFH investment.

In December of 2024 the Company became aware of certain financial conditions at a legacy IFH investment which indicated the need to evaluate the investment for impairment.

Based upon the Company’s financial evaluation of a legacy IFH investment it was determined that the value of the Company’s investment in a legacy IFH investment was impaired and a write-down of the investment value was required.

The Company does not hold any additional equity securities nor does the Company plan to enter into equity security arrangements in the future, therefore the Company does not expect any future deferred tax benefits associated with the impairment.

Mortgage banking revenue of $7.1 million, for the year ended December 31, 2024, increased $2.3 million due to an increase in home loan sales as compared to the prior year.

For the year ended December 31, 2024, credit card fees of $16.0 million declined $1.3 million as a result of lower interchange and other fee income recognized compared to the prior year.

The Bank’s Capital Bank Home Loans division experienced an increase of 48.7% in mortgage originations during the year ended December 31, 2024 when compared to the same period in the prior year.

For the year ended December 31, 2025, noninterest income of $49.2 million increased $17.8 million, or 56.6%, from the same period in 2024.

This increase was primarily due to the contributions from the IFH acquisition for a full year in 2025 compared to only three months in 2024.

Noninterest income for the year-ended December 31, 2024 included a $2.6 million non-recurring equity and debt write-down related to an IFH investment.

Excluding this, non-interest income increased $15.2 million, which was driven by an increase in government loan servicing revenue (Windsor™) of $11.5 million, an increase in government lending revenue of $1.9 million, an increase in credit card fees of $1.4 million, and an increase in mortgage banking revenue of $0.3 million.

Mortgage banking revenue of $7.5 million for the year ended December 31, 2025, increased $0.3 million as home loan sales remained stable compared to the prior year.

For the year ended December 31, 2025, credit card fees of $17.4 million increased $1.4 million primarily as a result of credit-card related fees associated with the unsecured product.

The Bank’s Capital Bank Home Loans division experienced an increase of 11.7% in mortgage originations during the year ended December 31, 2025 when compared to the prior year.

Origination volumes increased $35.0 million, to $334.1 million, for the year ended December 31, 2025, when compared to $299.1 million for the same period in the prior year.

Gain on sale margins were down from 2.76% for the twelve months ended December 31, 2023 to 2.59% for the year ended December 31, 2024.

Gain on sale margins were up from 2.59% for the year ended December 31, 2024 to 2.70% for the year ended December 31, 2025.

Mortgage loans sold are subject to repurchase in circumstances where documentation is deficient or the underlying loan becomes delinquent or pays off within a specified period following loan funding and sale.

The Bank has established a reserve under generally accepted accounting principles for possible repurchases.

The Bank has established a reserve for possible repurchases.

The reserve was $2.3 million at December 31, 2025 and $2.3 million at December 31, 2024.

The Bank repurchased one loan totaling $296 thousand during the year ended December 31, 2024.

The Bank did not repurchase any loans during the year ended December 31, 2025.

The Bank repurchased one loan totaling $296 thousand during the year ended December 31, 2024.

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3,988 2,431 64.0

Foreclosed real estate expenses, net 2 7 (71.4)

Merger-related expenses 3,361 3,930 (14.5)

Operational losses 3,714 4,613 (19.5)

Outside service providers 1,878 1,932 (2.8)

Operational and other card fraud related losses 3,509 3,714 (5.5)

Regulatory assessment expenses 3,371 1,937 74.0

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For the year ended December 31, 2025, noninterest expense of $155.1 million increased $28.9 million, or 22.9%, from the same period in 2024, primarily from the IFH acquisition.

The increase was primarily driven by a $7.3 million, or 14.9%, increase in salaries and employee benefits due largely to the acquisition of IFH.

Merger-related expenses were $3.9 million.

Occupancy and equipment expense increased $2.6 million, or 45.3%, primarily related to increased contract expense from the IFH acquisition of $0.5 million and software depreciation of $0.4 million.

Other operating expenses increased $0.8 million including an increase in insurance related expenses and other miscellaneous expenses.

Data processing expense increased $2.0 million, or 7.8%, outside service providers expense decreased $0.1 million, or 2.8% and professional fees decreased $1.4 million, or 15.4%, due to a reduction in third party consulting fees.

The increase was primarily driven by a $16.1 million, or 28.8%, increase in salaries and employee benefits due largely to the acquisition of IFH and headcount growth.

Professional fees increased $3.1 million, or 39.7%, most of which is comprised of professional fees associated with investments in shared service areas.

Occupancy and equipment expense increased $3.1 million, or 38.2%, other operating expenses increased $2.3 million, or 28.0%, data processing expense increased $2.1 million, or 7.6%, and loan processing fees increased $1.6 million or 64.0%.

Regulatory assessment expenses increased $1.4 million, primarily in consequence of the acquisition of IFH.

Merger-related expenses of $3.4 million decreased $0.6 million, or 14.5%, from the same period due to the acquisition accounting being finalized on September 30, 2025.

Income Tax Expense

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Our effective tax rates for those periods were 23.7% and 26.0%, respectively.

The elevated tax rate in 2024 resulted from the non-deductibility of a non-recurring equity and debt investment write down, in a legacy IFH investment, along with certain merger-related expenses.

The elevated tax rate in 2024 resulted from the non-deductibility of a non-recurring equity and debt investment write down associated with a legacy IFH investment, along with certain merger-related expenses.

In December of 2024, the Company became aware of certain financial conditions in a legacy IFH investment which indicated the need to evaluate the investment for impairment.

The Company does not hold any additional equity securities, therefore the Company does not expect any future deferred tax benefits associated with the impairment.

Based upon the Company’s financial evaluation of that investment, it was determined that a write-down of the investment value was required.

The Company does not hold any additional equity securities;

therefore, the Company does not expect any future deferred tax benefits associated with such investment.

Financial Condition

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Dividends per share $ 0.44 $ 0.36 22.2

_______________

(1) See “Non-GAAP Financial Measures and Reconciliations” for a reconciliation of non-GAAP measures.

Total assets at December 31, 2025 increased $399.3 million from the balance at December 31, 2024.

Net portfolio loans, which exclude mortgage loans held for sale, totaled $2.6 billion as of December 31, 2024, an increase of $726.9 million, or 38.2%, from $1.9 billion at December 31, 2023.

Net portfolio loans, which exclude mortgage loans held for sale, totaled $3.0 billion as of December 31, 2025, a n increase of $329.3 million, or 12.52%, from $2.6 billion at December 31, 2024.

Deposits totaled $3.1 billion at December 31, 2025, an increase of $331.3 million from $2.8 billion at December 31, 2024.

Investment Securities

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The following tables summarize the contractual maturities, without consideration of call features or pre-refunding dates and weighted-average yields, of investment securities at December 31, 2025 and the amortized cost and carrying value of those securities as of the indicated dates.

The weighted average yields were calculated by multiplying the amortized cost of each individual security by its yield, dividing that figure by the portfolio total, and then summing the value of these results to arrive at the weighted

average yield.

Yields on tax-exempt investments are not calculated on a fully tax equivalent basis.

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As described in “Note 3 - Investment Securities” in the “Notes to the Consolidated Financial Statements” at December 31, 2025, management determined the Company does not have the intent to sell, nor is it more likely than not that it will be required to sell, available-for-sale debt securities in an unrealized loss position at December 31, 2025 before it is able to recover the amortized cost basis.

Further, management reviewed the Company’s holdings as of December 31, 2024 and concluded there were no credit-related declines in fair value.

Further, management reviewed the Company’s holdings as of December 31, 2025 and concluded that there were no credit-related declines in fair value.

Additional information related to the types of securities held at December 31, 2025, other than securities issued or guaranteed by U.S.

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Corporate Securities – There have been no payment defaults on any of the Company’s holdings of corporate debt securities.

There are 5 securities all of which are subordinated debt of other financial institutions with face amounts ranging from $0.5 million to $2 million.

There are three securities all of which are subordinated debt of other financial institutions with face amounts ranging from $0.5 million to $2 million.

Municipal Securities – All of the Company’s holdings of municipal bonds were investment grade and there have been no payment defaults.

Summary ratings information at December 31, 2024, based on the amortized cost basis and reflecting the lowest enhanced or underlying rating by Moody’s, Standard & Poors or Fitch, is as follows:

Summary ratings information at December 31, 2025, based on the amortized cost basis and reflecting the lowest enhanced or underlying rating by Moody’s, Standard & Poor’s or Fitch, is as follows:

AAA – 76% of the portfolio;

Asset-backed Securities – There were 3 investment grade asset-backed securities, and there have been no payment defaults on these securities.

Asset-backed Securities – There are three investment grade asset-backed securities, and there have been no payment defaults on these securities.

As such, it is deemed the above listed securities are not in an unrealized loss position due to credit-related issues and no further analysis is warranted as of December 31, 2025.

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Business equity lines of credit are commercial purpose lines of credit primarily secured by the business owners residential properties.

Lender finance loans totaling $28.6 million as of December 31, 2024 are also included in the commercial real estate loan category.

Lender finance loans totaling $41.4 million as of December 31, 2025 and $28.6 million as of December 31, 2024 are also included in the commercial real estate loan category.

Lender finance loans are loans to companies used to purchase finance receivables or extend finance receivables to the underlying obligors and are secured primarily by the finance receivables held by our borrowers.

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Construction Loans .

Construction loans are offered within the Company’s Washington, D.C.

Construction loans are offered primarily within the Company’s Washington, D.C.

and Baltimore, Maryland metropolitan operating areas to builders, primarily for the construction of single-family homes and condominium and townhouse conversions or renovations and, to a lesser extent, to individuals.

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These 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 business loans are secured by a lien on general business assets including, among other things, available real estate, accounts receivable, promissory notes, inventory and equipment.

Most commercial business loans are secured by a lien on general business assets including, among other things, available real estate, accounts receivable, promissory notes, inventory and/or equipment.

Personal guaranties from the borrower or other principal are generally obtained.

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Acquired loans, including those acquired in a business combination, are evaluated to determine if they have experienced more-than-insignificant deterioration in credit quality since origination.

When the condition exists, these loans are referred to as purchased credit deteriorated, or PCD.

When the condition exists, these loans are referred to as PCD.

An allowance is recognized for a PCD loan by adding it to the purchase price or fair value in a business combination.

There is no provision for credit losses recognized upon acquisition of a PCD loan since the initial allowance is established through purchase accounting.

PCD loans are grouped with organically created loans in their applicable loan category.

After initial recognition, the accounting for a PCD loan follows the credit loss model that applies to the loan category.

Purchased financial loans that do not have a more-than-significant deterioration in credit quality since origination are accounted for in a manner consistent with originated loans.

Purchased financial loans that do not have a more-than-insignificant deterioration in credit quality since origination are accounted for in a manner consistent with originated loans.

An allowance for credit losses is recorded with a corresponding charge to provision for credit losses.

Subsequent to the acquisition date, the methods utilized to estimate the required ACL for these loans is similar to the method used for organically originated loans.

It was identified during the twelve months ended December 31, 2025 that one of the loans acquired from IFH should have been assigned as a PCD loan based on facts and circumstances that existed as of the acquisition date.

The loan was reclassified as a PCD loan and a specific ACL reserve of $3.4 million was established as a measurement period adjustment to the Day-1 purchase accounting.

The repayment of loans is a source of additional liquidity for the Company.

The following table details contractual maturities of our portfolio loans, along with an analysis of loans maturing after one year categorized by rate characteristics.

Loans with adjustable interest rates are shown as maturing in the period during which the contract is due.

The table does not reflect the effects of possible prepayments.

As of December 31, 2025

or Less One to

Five Years Over

Five Years to Fifteen Years After Fifteen Years

(in thousands) Amount Amount Amount Amount Total

Residential $ 177,824 $ 292,318 $ 71,908 $ 223,758 $ 765,808

Commercial 219,221 444,973 301,973 30,914 997,081

Construction 290,286 59,683 9,597 — 359,566

Commercial and industrial 254,361 162,263 139,626 142,039 698,289

Credit card 142,397 — — — 142,397

Other consumer 528 117 1,285 — 1,930

Total portfolio loans, gross $ 1,084,617 $ 959,354 $ 524,389 $ 396,711 $ 2,965,071

Loans above maturing after one year categorized by rate characteristic:

Predetermined Interest Rates Floating or Variable Rates Total

Residential $ 370,152 $ 217,832 $ 587,984

Commercial 410,228 367,632 777,860

Construction 34,731 34,549 69,280

Commercial and industrial 157,729 286,199 443,928

Other consumer 1,402 — 1,402

Total portfolio loans, gross $ 974,242 $ 906,212 $ 1,880,454

The following tables present non owner-occupied and owner-occupied commercial real estate loans and multi-family loans and the weighted average loan-to-value (“LTV”) and fixed rate maturities by year and loan type:

Non-owner-occupied commercial real estate loans, including multi-family

As of December 31, 2025

(in thousands) Amount Average Loan Size Weighted Average LTV (1)

% of Non Owner-Occupied Commercial Real Estate Loans % of Total Portfolio Loans, Gross

Multi-family $ 213,239 $ 1,657 53.9 % Not Applicable 7.2 %

Retail $ 182,847 $ 1,792 53.7 % 34.3 % 6.2 %

Mixed use 152,956 2,010 53.6 % 28.7 % 5.2 %

Industrial 59,447 1,050 43.4 % 11.2 % 2.0 %

Hotel 70,906 5,065 47.3 % 13.3 % 2.4 %

Office 25,123 1,004 50.5 % 4.7 % 0.8 %

41,862 1,412 52.6 % 7.8 % 1.4 %

Total non-owner-occupied commercial real estate loans $ 533,141 $ 1,758 51.0 % 100.0 % 18.0 %

Total portfolio loans, gross $ 2,965.071

Scheduled maturities of fixed rate non-owner-occupied commercial real estate loans, including multi-family

As of December 31, 2025

(in thousands) 2026 2027 2028 2029 2030 and Onwards Total

Multi-family $ 45,002 $ 23,729 $ 46,324 $ 34,566 $ 64,072 $ 213,693

Retail $ 23,058 $ 38,081 $ 2,053 $ 25,338 $ 94,288 $ 182,818

Mixed use 71,775 30,783 4,624 25,248 22,318 154,748

Industrial 19,095 9,361 3,248 5,476 23,724 60,904

Hotel 15,142 — — 1,443 54,321 70,906

Office 3,683 5,878 155 8,673 6,711 25,100

Other 20,290 6,660 8,280 2,140 3,751 41,121

Total fixed rate non owner-occupied commercial real estate loans $ 153,043 $ 90,763 $ 18,360 $ 68,318 $ 205,113 $ 535,597

Owner-occupied commercial real estate loans

As of December 31, 2025

(in thousands) Amount Average Loan Size Weighted Average LTV (1)

% of Owner-Occupied Commercial Real Estate Loans % of Total Portfolio Loans, Gross

Industrial $ 110,303 $ 1,216 50.5 % 26.3 % 3.7 %

Office 55,171 712 57.1 % 13.2 % 1.9 %

Retail 66,864 867 57.8 % 16.0 % 2.3 %

Mixed use 16,826 893 46.3 % 4.0 % 0.6 %

169,537 1,139 53.8 % 40.5 % 5.7 %

Total owner-occupied commercial real estate loans $ 418,701 $ 1,096 53.5 % 100.0 % 14.1 %

Total portfolio loans, gross $ 2,965,071

Scheduled maturities of fixed rate owner-occupied commercial real estate loans

As of December 31, 2025

(in thousands) 2026 2027 2028 2029 2030 and Onwards Total

Industrial $ 11,091 $ 9,989 $ 6,719 $ 22,771 $ 60,054 $ 110,624

Office 3,485 2,447 2,795 9,360 37,442 55,529

Retail 5,518 8,606 7,939 8,746 35,965 66,774

Mixed use 2,576 873 907 6,353 6,261 16,970

Other 39,003 7,562 1,946 8,507 114,895 171,913

Total fixed rate owner-occupied commercial real estate loans $ 61,673 $ 29,477 $ 20,306 $ 55,737 $ 254,617 $ 421,810

_______________

(1) Weighted average LTV is calculated by reference to the most recent available appraisal of the property securing each loan.

(2) Other non-owner-occupied commercial real estate loans include land loans of $13.7 million, special purpose loans of $8.7 million, skilled nursing home loans of $8.5 million, and other loans of $10.9 million.

(3) Other owner-occupied commercial real estate loans include special purpose loans of $94.6 million, skilled nursing home loans of $30.2 million, religious facility loans of $25.1 million, and other loans of $19.6 million.

Nonperforming Assets

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repayments deemed to be extended out beyond reasonable time frames, customer bankruptcy and lack of assets, and/or collateral deficiencies.

Consumer credit card balances are moved into the charge off queue after they become more than 90 days past due and are charged off not later than 120 days after they become past due.

Secured consumer credit card balances are eligible for charge-off after they become more than 90 days past due.

Unsecured consumer credit card balances are eligible for charge-off after they become more than 150 days past due and are charged off not later than 180 days after they become past due.

Otherwise, loans that are past due for 180 days or more are charged off unless the loan is well-secured and in the process of collection.

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pass/watch, special mention, substandard, doubtful or loss.

The classifications of loans reflect

a judgment about the risks of default and loss associated with each loan.

The classifications of loans reflect a judgment about the risks of default and loss associated with each loan.

Credit ratings are reviewed regularly and then adjusted regularly to reflect the degree of risk and loss that our management believes to be appropriate for each credit.

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The Company has an experienced credit administration function, which provides independent analysis of credit requests and the management of problem credits.

The credit department has developed and implemented analytical procedures for evaluating credit requests, has refined the Company’s risk rating system, and continually endeavors to adapt and enhance the monitoring of the loan portfolio.

The credit department has developed and implemented analytical procedures for evaluating credit requests, administers the Company’s risk rating system, and endeavors to adapt and enhance the monitoring of the loan portfolio.

The loan portfolio analysis process is intended to contribute to the identification of weaknesses before they become more severe.

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Loans that are deemed special mention, substandard, doubtful or loss are listed in the Bank’s Problem Loan Status Report.

The Problem Loan Status Report provides a detailed summary of the borrower and guarantor status, loan accrual status, collateral evaluation and includes a description of the planned collection and administration program designed to mitigate the Bank’s risk of loss and remove the loan from problem status.

the loan from problem status.

The Special Asset Committee reviews the Problem Loan Status Report on a quarterly basis for borrowers with an overall loan exposure in excess of $250,000.

At December 31, 2024, the recorded investment in individually assessed loans was $34.9 million, requiring a specific reserve of $9.3 million.

At December 31, 2023, the recorded investment in individually assessed loans was $16.0 million, requiring a specific reserve of $0.4 million.

At December 31, 2025, the recorded investment in individually assessed loans was $52.8 million, requiring a specific reserve of $9.9 million, whereas at December 31, 2024 the recorded investment in individually assessed loans was $34.9 million, requiring a specific reserve of $9.3 million.

The $52.8 million of individually assessed loans at December 31, 2025 included two loan relationships totaling $15.9 million, with a combined reserve of $7.2 million as of December 31, 2025.

The $34.9 million of individually assessed loans at December 31, 2024 included a single multi-unit residential real estate loan secured by four properties with a balance of $7.6 million at December 31, 2024.

At December 31, 2025, nonperforming assets were $58.3 million, an increase of $28.0 million from December 31, 2024.

Nonperforming assets consisted of nonperforming loans of $54.4 million and other real-estate owned of $3.9 million.

The nonperforming loans of $54.4 million represented a $24.2 million increase from December 31, 2024.

Credit metrics were impacted by the two loan relationships previously mentioned, both of which were acquired as part of the IFH transactions.

These two loan relationships accounted for a combined $15.9 million increase to nonperforming assets.

One relationship across three loans accounted for an $8.8 million increase to nonperforming assets.

One loan of $5.0 million was previously identified as a PCD loan, which had a specific ACL reserve of $3.8 million established from Day-1 purchase accounting of the IFH acquisition.

The other two are USDA loans with an unguaranteed balance of $3.8 million secured by underlying assets, which have no ACL reserve recorded.

The other relationship accounted for a $7.1 million increase to nonperforming assets.

As previously mentioned, the loan was recharacterized as a PCD loan as a measurement period adjustment to the Day-1 purchase accounting from the IFH acquisition.

The measurement period adjustment for this loan resulted in recording a specific ACL reserve of $3.4 million during the year, or a 12 basis points impact to the ACL Coverage Ratio.

Past Due Loans

The past due loans balance increased $26.7 million, from $66.8 million or 2.5% of gross loans as of December 31, 2024 to $93.5 million or 3.2% of gross loans as of December 31, 2025.

As described above, there were two loan relationships acquired from IFH, which amounted to $15.9 million and were identified as nonperforming assets as of December 31, 2025.

When the $15.9 million of loan relationships acquired from IFH are excluded from the balances as of December 31, 2025, the adjusted past due loan balance of $77.6 million represents 2.6% of adjusted gross loans, which is generally consistent with the 2.5% ratio at December 31, 2024.

Allowance for Credit Losses

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Total 1.85 % 1.85 % 1.84 % 1.15 % 100 % 161 %

At December 31, 2025, the ACL coverage ratio was 1.85% and remained flat when compared to December 31, 2024.

It was identified during the year ended December 31, 2025 that one of the loans acquired from IFH should have been assigned as a PCD loan based on facts and circumstances that existed as of the acquisition date.

The loan was reclassified as a PCD loan and a specific ACL reserve of $3.4 million was established as a measurement period adjustment to the Day-1 purchase accounting.

Total charge-offs for the year ended December 31, 2025 and December 31, 2024 were primarily comprised of credit card charge-offs resulting both from the aging of the portfolio and the shift from an almost exclusively secured card portfolio to a portfolio that also includes partially secured and unsecured exposures.

1 unchanged sentence

For the Years Ended December 31,

(in thousands) Net Charge-offs Average Loans Percent of average portfolio loans Net Charge-offs Average Loans Percent of average portfolio loans

(in thousands) Net Charge-offs (Recoveries) Average Loans Percent of average portfolio loans Net Charge-offs Average Loans Percent of average portfolio loans

Residential $ (109) $ 720,871 (0.02) % $ 907 $ 616,739 0.15 %

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As the loan portfolio and ACL review processes continue to evolve, there may be changes to elements of the allowance and this may influence the overall level of the allowance maintained.

Historically, the Bank has enjoyed a high-quality loan portfolio with relatively low levels of net charge-offs and low delinquency rates.

Historically, the Bank has experienced a high-quality loan portfolio with relatively low levels of net charge-offs and delinquency rates.

The maintenance of a high-quality portfolio will continue to be a priority.

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Total Liabilities

Total liabilities at December 31, 2024 increased $880.5 million from December 31, 2023, primarily due to the IFH acquisition.

Total liabilities at December 31, 2025 increased $352.7 million, from December 31, 2024 due to growth in the deposit portfolio of $331.0 million.

Deposits are a major source of funding for the Company.

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$ 2,880,540 2.21 % $ 2,168,900 2.59 %

Deposit costs increased 46 basis points during the year ended December 31, 2024 due, in large part, to a series of interest rate increases implemented by the Federal Reserve beginning in early 2022 and continuing into 2023 and the corresponding mix shift from low and no interest bearing deposits to higher rate money market accounts and time deposits.

However, average noninterest-bearing deposit balances increased $20.3 million when compared to December 31, 2023, as growth in the number of customer accounts and corresponding balances outpaced the decision by some depositors to move balances from noninterest-bearing deposit accounts to interest-bearing deposit accounts.

Deposit costs decreased 38 basis points during the year ended December 31, 2025 as compared to the year ended December 31, 2024, primarily driven by a 15 basis points reduction related to the Call of Brokered Time Deposits, as well as growth in customer money market deposits and a shift in product mix, and the Bank’s ability to reduce deposit pricing in response to a declining interest rate environment.

Noninterest-bearing deposits represented 27.6% of total deposits at December 31, 2025 compared to 29.4% at December 31, 2024.

Uninsured deposits were approximately $703.2 million as of December 31, 2024, representing 25.5% of the Company's deposit portfolio, compared to $789.4 million, or 41.6%, at December 31, 2023.

Uninsured deposits were approximately $1.3 billion as of December 31, 2025, representing 40.9% of the Company's deposit portfolio, compared to $979.3 million, or 35.5%, at December 31, 2024.

The uninsured amounts are estimates based on the methodologies and assumptions used for the Bank’s regulatory reporting requirements.

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We utilize short-term and long-term borrowings to supplement deposits to fund our lending and investment activities, each of which is discussed below.

Total borrowings decreased during the year ended December 31, 2024 to $34.1 million from $49.1 million at December 31, 2023.

Total borrowings increased during the year ended December 31, 2025 to $52.1 million from $34.1 million at December 31, 2024.

FHLB Advances .

The FHLB allows us to borrow up to 25% of our assets on a blanket floating lien status collateralized by certain securities and loans.

As of December 31, 2024, approximately $625.0 million in real estate loans were pledged as collateral to the FHLB and our total borrowing capacity from the FHLB was $507.5 million.

As of December 31, 2024, no investment securities were pledged with the FHLB.

As of December 31, 2025, approximately $874.1 million in real estate loans and $124.3 million of investment securities were pledged as collateral to the FHLB and our total borrowing capacity from the FHLB was $656.3 million.

We utilize these borrowings to meet liquidity needs and to fund certain fixed rate loans in our portfolio.

1 unchanged sentence

Other borrowed funds .

The Company has also issued junior subordinated debentures and other subordinated notes.

At December 31, 2024, these other borrowings amounted to $12.1 million, consisting of Floating Rate Junior Subordinated Deferrable Interest Debentures and subordinated notes.

At December 31, 2024, our Floating Rate Junior Subordinated Deferrable Interest Debentures amounted to $2.1 million.

The Floating Rate Junior Subordinated Deferrable Interest Debentures (the “Floating Rate Debentures”) were issued in June of 2006, mature on June 15, 2036, and may be redeemed prior to that date under certain circumstances.

The Company has also issued junior subordinated debentures.

At December 31, 2025, these other borrowings amounted to $2.1 million, consisting of Floating Rate Junior Subordinated Deferrable Interest Debentures (the “Floating Rate Debentures”).

The Floating Rate Debentures were issued in June of 2006, mature on June 15, 2036, and may be redeemed prior to that date under certain circumstances.

The principal amount of the Floating Rate Debentures has not changed since issuance, and they accrue interest at a floating rate equal to the three-month CME Term SOFR plus a spread adjustment of 0.26161% (or 26.161 basis points) plus 187 basis points, payable quarterly.

As of December 31, 2025, the rate for the Floating Rate Debentures was 5.85%.

On November 30, 2020, the Company issued $10.0 million in subordinated notes due in 2030 (the “Notes”).

The Notes have a ten year term and have a fixed rate of 5.00% for the first five years;

thereafter, the rate resets quarterly to a benchmark rate, which is expected to be the three-month SOFR, plus 490 basis points.

The Notes may be redeemed in part or in whole, upon the occurrence of certain events.

Federal Reserve Bank of Richmond .

The Federal Reserve Bank of Richmond has an available borrower in custody arrangement which allows us to borrow on a collateralized basis.

The Company’s borrowing capacity under the Federal Reserve’s discount window program was $110.2 million as of December 31, 2024.

Certain commercial loans are pledged under this arrangement.

During the first quarter of 2023, we established a line of credit under the Federal Reserve Bank’s Bank Term Funding Program (“BTFP”).

As of March 31, 2024, participation in the BTFP had concluded and the Company had no outstanding balances under the BTFP at December 31, 2024.

The Federal Reserve Bank of Richmond provides access to liquidity under the Federal Reserve’s discount window through borrower-in-custody (“BIC”) and national book-entry (“NBE”) arrangements, which allow us to borrow on a collateralized basis using different types of collateral.

The Company’s total borrowing capacity under the Federal Reserve’s discount window was $125.3 million as of December 31, 2025.

Other Borrowings.

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strategies, policies, procedures and limits used to manage and mitigate liquidity risk;

liquidity risk measurement and monitoring systems (including assessments of the current and prospective cash flows or sources and uses of funds) that are believed to be commensurate with the

complexity and business activities of the Bank;

liquidity risk measurement and monitoring systems (including assessments of the current and prospective cash flows or sources and uses of funds) that are believed to be commensurate with the complexity and business activities of the Bank;

active management of intraday liquidity and collateral;

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Other potential funding sources include brokered certificates of deposit, deposit listing services, CDARS, borrowings from the FHLB and other lines of credit.

As of December 31, 2024, we had $485.5 million of available borrowing capacity from the FHLB, $20.6 million of available borrowing capacity from the Federal Reserve Bank of Richmond Borrower in Custody program and available lines of credit of $76.0 million with other correspondent banks.

Further, unpledged investment securities available as collateral for potential additional borrowings totaled $131.4 million at December 31, 2024.

As of December 31, 2025, we had $606.3 million of available borrowing capacity from the FHLB, $31.1 million of available borrowing capacity from the Federal Reserve Bank of Richmond BIC arrangement secured by pledged commercial loans and available lines of credit of $76.0 million with other correspondent banks.

The Company’s borrowing capacity under the Federal Reserve’s discount window program through the NBE arrangement was $94.2 million as of December 31, 2025.

Unpledged investment securities available as collateral for potential additional borrowings totaled $9.3 million at December 31, 2025.

Cash and cash equivalents were $255.6 million at December 31, 2025.

Capital Resources

Stockholders’ equity increased $100.3 million for the year ended December 31, 2024 compared to December 31, 2023 largely due to the common stock issued in connection with the IFH acquisition of $70.9 million and net income of $31.0 million for the year ended December 31, 2024.

In connection with the acquisition of IFH, the Company temporarily suspended repurchases under its stock repurchase program during the first quarter of 2024.

Stockholders’ equity increased $46.6 million for the year ended December 31, 2025 compared to December 31, 2024 largely due to net income of $57.2 million for the year ended December 31, 2025.

Shares repurchased and retired for the year ended December 31, 2025, as part of the Company's stock repurchase program, totaled 419,643 shares at an average price of $27.79, for a total cost of $11.7 million including commissions.

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To the extent unrealized losses on investment securities available-for-sale result from credit losses, unrealized losses are recorded as a charge against earnings.

The investment securities section of the MD&A and Notes 1 and 3 to the consolidated financial statements provide additional information concerning management’s evaluation of investment securities available-for-sale for credit losses at December 31, 2024.

The Company uses several indicators of capital strength.

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Failure to meet minimum capital requirements can precipitate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a material effect on the Company’s financial condition.

Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of its assets, liabilities, and certain off-balance sheet items as calculated under regulatory

accounting practices.

The capital amounts and classifications are also subject to qualitative judgments by the regulators.

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The ability of the Company to continue to grow is dependent on its earnings and those of the Bank, and the ability to obtain additional funds for contribution to the Bank’s capital, through additional borrowings, through the sale of additional common stock or preferred stock, or through the issuance of additional qualifying capital instruments, such as subordinated debt.

The capital levels required to be maintained by the Company and Bank may be impacted as a result of the Bank’s concentrations in commercial real estate loans.

See “Risks Related to Our Operations and the Regulation of Our Industry” in Part I, Item 1A - Risk Factors.

The capital levels required to be maintained by the Company and Bank may be impacted as a result of the Bank’s concentrations in

commercial real estate loans.

See “Risks Related to Our Operations and the Regulation of Our Industry” in Part I, Item 1A.

- Risk Factors.

As of December 31, 2025, the Company and the Bank were in compliance with all applicable regulatory capital requirements to which it was subject, and the Bank was classified as “well capitalized” for purposes of the prompt corrective action regulations.

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December 31, 2024

Tier 1 leverage ratio (to average assets) $ 270,019 12.14 % $ 89,004 4.00 % N/A N/A

Tier 1 capital (to risk-weighted assets) 270,019 15.55 104,175 6.00 N/A N/A

Tier 1 leverage ratio (to average assets) $ 346,840 11.07 % $ 125,348 4.00 % $ 156,685 5.00 %

Tier 1 capital (to risk-weighted assets) 346,840 13.83 150,512 6.00 200,683 8.00

Common equity tier 1 capital ratio (to risk-weighted assets)

267,957 15.43 78,132 4.50 N/A N/A

Total capital ratio (to risk-weighted assets) 301,817 17.38 138,900 8.00 N/A N/A

344,778 13.74 112,884 4.50 163,055 6.50

Total capital ratio (to risk-weighted assets) 388,425 15.48 200,683 8.00 250,853 10.00

Tier 1 leverage ratio (to average assets) $ 283,828 9.17 % $ 123,818 4.00 % $ 154,772 5.00 %

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Non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as a substitute for our results reported under GAAP.

Earnings Metrics, as Adjusted Year Ended

Core Earnings Metrics Year Ended

(in thousands, except per share data) December 31, 2025 December 31, 2024

Net Income $ 57,170 $ 30,972

Income from the Call of Brokered Time Deposits, Net of Tax (3,489) —

Merger-Related Expenses, Net of Tax 2,609 3,308

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IFH Non-PCD ACL Provision, Net of Tax — 3,169

Net Income, as Adjusted $ 40,069 $ 35,871

Core Net Income $ 56,290 $ 40,069

Weighted Average Common Shares - Diluted 16,768 14,640

Earnings per Share - Diluted $ 3.41 $ 2.12

Earnings per share - Diluted, as Adjusted $ 2.74 $ 2.55

Core Earnings per Share - Diluted $ 3.36 $ 2.74

Average Assets $ 3,348,674 $ 2,554,049

Return on Average Assets 1.71 % 1.21 %

Return on Average Assets, as Adjusted 1.57 % 1.64 %

Core Return on Average Assets 1.68 % 1.57 %

Average Equity $ 377,741 $ 287,420

Return on Average Equity 15.13 % 10.78 %

Return on Average Equity, as Adjusted 13.94 % 14.91 %

Net Interest Income (a) $ 154,746 $ 141,526

Core Return on Average Equity 14.90 % 13.94 %

Net Interest Income $ 195,992 $ 154,746

Noninterest Income 49,187 31,410

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63.25 % 67.80 %

Net Interest Income $ 195,992 $ 154,746

Call of Brokered Time Deposits 4,618 —

Core Net Interest Income (a) $ 191,374 $ 154,746

Noninterest Income 49,187 31,410

Non-Recurring Equity and Debt Investment Write-Down — 2,620

Noninterest Income, as Adjusted (b) $ 34,030 $ 24,975

Total Revenue, as Adjusted (a) + (b) $ 188,776 $ 166,501

Core Fee Revenue (b) $ 49,187 $ 34,030

Core Revenue (a) + (b) $ 240,561 $ 188,776

Noninterest Expense $ 155,082 $ 126,219

Merger-Related Expenses 3,361 3,930

Noninterest Expense, as Adjusted $ 122,289 $ 110,767

Efficiency Ratio, as Adjusted (1)

Core Noninterest Expense $ 151,721 $ 122,289

Core Efficiency Ratio (1)

63.07 % 64.78 %

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(1) The efficiency ratio is calculated by dividing noninterest expense by total revenue (net interest income plus noninterest income).

Net Interest Margin, as Adjusted Year Ended

Commercial Bank Net Interest Margin Year Ended

(in thousands) December 31, 2025 December 31, 2024

Net Interest Income $ 154,746 $ 141,526

Credit Card Loan Income

59,821 61,096

Net Interest Income, as Adjusted $ 94,925 $ 80,430

Commercial Bank Net Interest Income $ 134,619 $ 92,756

Average Interest Earning Assets 3,215,483 2,487,607

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139,344 124,863

Total Average Interest Earning Assets, as Adjusted $ 2,372,026 $ 2,030,759

Net Interest Margin, as Adjusted 4.00% 3.96%

Portfolio Loans Receivable Yield, as Adjusted Year Ended

Average Commercial Bank Interest Earning Assets $ 3,076,139 $ 2,362,744

Commercial Bank Net Interest Margin 4.38% 3.93%

Commercial Bank Portfolio Loans Receivable Yield Year Ended

(in thousands) December 31, 2025 December 31, 2024

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Credit Card Loan Income 59,848 59,821

Portfolio Loans Receivable Interest Income, as Adjusted $ 142,525 $ 113,282

Commercial Bank Portfolio Loans Receivable Interest Income $ 184,532 $ 142,525

Average Portfolio Loans Receivable 2,765,758 2,142,638

Average Credit Card Loans 125,824 115,581

Total Average Portfolio Loans Receivable, as Adjusted $ 2,027,057 $ 1,702,518

Portfolio Loans Receivable Yield, as Adjusted 7.03% 6.65%

Total Commercial Bank Average Portfolio Loans Receivable $ 2,639,934 $ 2,027,057

Commercial Bank Portfolio Loans Receivable Yield 6.99% 7.03%

Pre-tax, Pre-Provision Net Revenue ("PPNR") Year Ended

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Provision for Credit Losses 14,965 17,720

Provision for (Release of) Credit Losses on Unfunded Commitments 385 (101)

Provision for Credit Losses on Unfunded Commitments 188 385

PPNR $ 90,097 $ 59,937

PPNR, as Adjusted Year Ended

Core PPNR Year Ended

(in thousands) December 31, 2025 December 31, 2024

$ 30,972 $ 35,871

Net Income $ 57,170 $ 30,972

Income Tax Expense 17,774 10,860

Provision for Credit Losses 14,965 17,720

Provision for (Release of) Credit Losses on Unfunded Commitments 385 (101)

Provision for Credit Losses on Unfunded Commitments 188 385

Income from the Call of Brokered Time Deposits (4,618) —

Merger-Related Expenses 3,361 3,930

Non-Recurring Equity and Debt Investment Write-Down — 2,620

PPNR, as Adjusted $ 66,487 $ 55,734

Allowance for Credit Losses to Total Portfolio Loans Year Ended

Core PPNR $ 88,840 $ 66,487

Allowance for Credit Losses to Total Portfolio Loans

(in thousands) December 31, 2025 December 31, 2024

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Allowance for Credit Losses to Total Portfolio Loans 1.85% 1.85%

Nonperforming Assets to Total Assets Year Ended

Commercial Bank Allowance for Credit Losses to Commercial Bank Portfolio Loans

(in thousands) December 31, 2025 December 31, 2024

Allowance for Credit Losses $ 54,660 $ 48,652

Credit Card Allowance for Credit Losses 8,232 6,402

Commercial Bank Allowance for Credit Losses $ 46,428 42,250

Total Portfolio Loans 2,959,457 2,630,163

Gross Credit Card Loans 137,905 122,928

Commercial Bank Portfolio Loans $ 2,821,552 2,507,235

Commercial Bank Allowance for Credit Losses to Total Portfolio Loans 1.65% 1.70%

Nonperforming Assets to Total Assets

(in thousands) December 31, 2025 December 31, 2024

Total Nonperforming Assets $ 58,276 $ 30,241

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Nonperforming Assets to Total Assets 1.62% 0.94%

Nonperforming Loans to Total Portfolio Loans Year Ended

Nonperforming Loans to Total Portfolio Loans

(in thousands) December 31, 2025 December 31, 2024

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Net Charge-Offs to Average Portfolio Loans 0.45% 0.42%

Tangible Book Value per Share Year Ended

Tangible Book Value per Share

(in thousands, except share and per share data) December 31, 2025 December 31, 2024

Total Stockholders' Equity $ 401,757 $ 355,139

Preferred Equity

Intangible Assets

40,740 36,943

Tangible Common Equity $ 361,017 $ 318,196

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(in thousands) December 31, 2025 December 31, 2024

Net Income, as Adjusted $ 40,069 $ 35,871

Core Net Income $ 56,290 $ 40,069

Intangible Amortization, Net of Tax 798 198

Net Tangible Income, as Adjusted $ 40,267 $ 35,871

Core Return on Average Equity, as Adjusted 14.01 % 14.91 %

Core Return on Average Tangible Common Equity, as Adjusted 14.36 % 14.91 %

Core Net Tangible Income $ 57,088 $ 40,267

Core Return on Average Tangible Common Equity 16.84 % 14.30 %

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

What changed 10-K

Item 7. Management’s Discussion and Analysis