What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-03-17 compared with 2024-03-15 · 761 added, 446 removed, 1483 unchanged (45% of the section changed)

1 unchanged sentence

The information required by this item follows.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of

To the Shareholders and the Board of Directors

Coastal Financial Corporation

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In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2024 and 2023, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 15, 2024 expressed an unqualified opinion on the Company’s internal control over financial reporting.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 17, 2025 expressed an adverse opinion on the Company’s internal control over financial reporting due to material weaknesses.

Restatement of Previously Issued Financial Statements

As described in note 23 to the consolidated financial statements, the 2023 consolidated financial statements have been restated.

Change in Accounting Principle

As discussed in Note 2 to the consolidated financial statements, in the year ended December 31, 2023, the Company adopted new accounting guidance Accounting Standards Update 2016-13 Financial Instruments – Credit Losses (Topic 326):

During the year ended December 31, 2023, the Company changed its method of accounting for credit losses due to the adoption of Accounting Standards Update 2016-13 Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Statements.

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As described in Notes 1 and 4 to the consolidated financial statements, the balance of the Company’s allowance for credit losses – loans was $177 million at December 31, 2024.

The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of loans held for investment to present the net carrying value at the amount expected to be collected.

The allowance for credit losses - loans is a valuation account that is deducted from the amortized cost basis of loans held for investment to present the net carrying value at the amount

expected to be collected.

The allowance for credit losses – loans is maintained at a level sufficient to provide for expected credit losses over the lives of the loans based on evaluating historical credit loss experience and making qualitative reserve factor adjustments to historical loss information for each loan category for differences in the specific risk characteristics in the current loan portfolio based on reasonable and supportable forecasts.

These qualitative reserve factors include

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borrower’s financial condition and credit rating, volume and severity of delinquent and classified loans, and environmental business conditions to capture general and economic market conditions.

These qualitative reserve factors include borrowers’ financial condition and credit rating, volume and severity of delinquent and classified loans, and environmental and business factors to capture general and economic market conditions.

We identified the estimation of qualitative reserve factors used in the allowance for credit losses – loans, as a critical audit matter.

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Auditing management’s judgments regarding the qualitative reserve factors applied to the allowance for credit losses - loans involved especially challenging and subjective auditor judgment when performing audit procedures and evaluating the results of those procedures.

The primary procedures we performed to address this critical audit matter included:

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

Our audit procedures related to qualitative reserve factors included the following, among others:

• Testing the design, implementation, and operating effectiveness of controls relating to management’s calculation of the allowance for credit losses - loans, including controls over the identification and assessment of the qualitative reserve factors used.

• Obtaining management’s analysis and supporting documentation related to the qualitative reserve factors and testing whether the factors used in the calculation of the allowance for credit losses – loans are supported by the analysis provided by management.

• Testing the appropriateness of the methodology and significant assumptions used in the calculation of the allowance for credit losses – loans, testing completeness and accuracy of the data used in the calculation, testing estimation and application of the qualitative reserve factors determined by management and used in the calculation, and recalculating the balance of the allowance for credit losses – loans.

• Testing the appropriateness of the methodology and significant assumptions used in the calculation of the allowance for credit losses – loans, testing completeness and accuracy of the data used in the calculation, testing the estimation and application of the qualitative reserve factors determined by management, and recalculating the balance of the allowance for credit losses – loans.

/s/ Moss Adams LLP

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We have served as the Company’s auditor since 2016.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of

To the Shareholders and the Board of Directors

Coastal Financial Corporation

Opinion on Internal Control over Financial Reporting

Adverse Opinion on Internal Control over Financial Reporting

We have audited Coastal Financial Corporation and subsidiaries’ (the “Company”) internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by COSO.

In our opinion, because of the effect of the material weaknesses identified below on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of Coastal Financial Corporation and subsidiaries as of December 31, 2024 and 2023, the related consolidated statements of income, comprehensive income, changes in shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”) and our report dated March 17, 2025, expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management Report on Internal Control over Financial Reporting included in Item 9A.

Basis for Adverse Opinion on Internal Control over Financial Reporting

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting included in Item 9A.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

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We believe that our audit provides a reasonable basis for our opinion.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

The following material weaknesses have been identified and included in management’s assessment in Item 9A:

• The Company has an ineffective control environment and did not maintain the risk assessment and control activities components of the COSO framework resulting in the Company not appropriately designing and implementing sufficient internal controls around the accounting and financial reporting related to information provided by BaaS partners.

• A deficiency in the design of controls related to the BaaS lending partner accounting policies reflected in BaaS partner reports that could impact the Company’s use of such reports to record interest income, BaaS loan expense and the related balance sheet accounts.

• A deficiency in the design of controls related to the proper presentation of BaaS partner interchange fees on point of sale transactions that conforms with the Company’s adopted accounting policies.

We considered the material weaknesses in determining the nature, timing, and extent of audit tests applied in our audit of the Company’s consolidated financial statements as of and for the year ended December 31, 2024, and our opinion on such consolidated financial statements was not affected.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

A company’s internal control over financial reporting includes those policies and

procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

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We have served as the Company’s auditor since 2016.

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COASTAL FINANCIAL CORPORATION AND SUBSIDIARY

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2024 December 31,

(as restated -

Cash and due from banks $ 36,533 $ 31,345

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Other investments 10,800 10,227

Loans held for sale 20,600 —

Loans receivable 3,486,565 3,021,542

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Premises and equipment, net 27,431 22,090

Operating lease right-of-use assets 5,932 5,018

Lease right-of-use assets 5,219 5,932

Accrued interest receivable 21,104 23,458

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Accrued interest payable 962 892

Operating lease liabilities 6,124 5,234

Lease liabilities 5,398 6,124

CCBX payable 29,171 30,290

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Retained earnings 210,529 165,311

Accumulated other comprehensive loss, net of tax ( 469 ) ( 2,334 )

Accumulated other comprehensive

loss, net of tax ( 2 ) ( 469 )

Total shareholders’ equity 438,704 294,978

1 unchanged sentence

See accompanying Notes to Consolidated Financial Statements.

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COASTAL FINANCIAL CORPORATION AND SUBSIDIARY

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2024 2023 2022

(as restated -

INTEREST AND DIVIDEND INCOME

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PROVISION FOR CREDIT LOSSES 277,607 183,992 79,064

Net interest income after provision for credit losses - loans

and unfunded commitments 54,735 92,711 69,522

Net interest income/(expense) after provision for credit losses ( 4,579 ) 47,583 92,711

NONINTEREST INCOME

Deposit service charges and fees 3,854 3,804 3,698

Service charges and fees 3,738 3,854 3,804

Loan referral fees 168 683 810

1 unchanged sentence

Unrealized gain (loss) on equity securities, net 27 279 ( 153 )

Gain on sale of bank branch including deposits and loans, net — — 1,263

Other income 1,524 884 1,344

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Other expense 6,484 5,224 4,652

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Noninterest expense, excluding BaaS loan and BaaS fraud expense 117,939 107,659 82,168

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See accompanying Notes to Consolidated Financial Statements.

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COASTAL FINANCIAL CORPORATION AND SUBSIDIARY

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Securities available-for-sale

Unrealized holding income (loss) during the period 2,418 ( 2,959 ) ( 38 )

Income tax (expense) benefit related to unrealized holding gain/loss ( 553 ) 621 8

OTHER COMPREHENSIVE INCOME (LOSS), net of tax 1,865 ( 2,338 ) ( 30 )

Unrealized holding income during the period 535 2,418 ( 2,959 )

Income tax expense related to unrealized holding gain/loss ( 69 ) ( 553 ) 621

OTHER COMPREHENSIVE INCOME, net of tax 466 1,865 ( 2,338 )

COMPREHENSIVE INCOME $ 45,685 $ 46,444 $ 38,287

See accompanying Notes to Consolidated Financial Statements.

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COASTAL FINANCIAL CORPORATION AND SUBSIDIARY

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Net income — — 44,579 — 44,579

Adjustment to retained earnings;

adoption of ASU 2016- 13 — 0 — 734 — 734

Issuance of restricted stock awards 13,538 — — — —

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Stock-based compensation — 3,688 — — 3,688

Stock issuance and net proceeds from

public offering — — — — —

Other comprehensive loss, net of tax — — — 1,865 1,865

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Net income — — 45,219 — 45,219

Adjustment to retained earnings;

adoption of ASU 2016- 13 — 0 — 734 — 734

Issuance of restricted stock awards 16,698 — — — —

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Stock-based compensation — 4,844 — — 4,844

Stock issuance and net proceeds from

public offering 1,380,000 91,801 — — 91,801

Other comprehensive income,

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See accompanying Notes to Consolidated Financial Statements.

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COASTAL FINANCIAL CORPORATION AND SUBSIDIARY

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2024 2023 2022

(as restated -

CASH FLOWS FROM OPERATING ACTIVITIES

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Gain on sales of loans — ( 253 ) —

Net discount accretion on investment securities ( 25 ) ( 50 ) 32

Net amortization (accretion) on investment securities 5 ( 25 ) ( 50 )

Unrealized holding (gain) loss on equity investment ( 27 ) ( 279 ) 153

Stock-based compensation 4,844 3,688 2,517

Gain on sale of bank branch, including deposits and loans — — ( 1,263 )

Increase in bank-owned life insurance value ( 485 ) 27 ( 360 )

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Purchase of loan participations — — ( 52 )

Proceeds from sale of loans related to sale of bank branch — — 4,092

Increase in loans receivable, net ( 2,024,548 ) ( 1,047,310 ) ( 912,518 )

Net cash transfer for branch sale — — ( 19,980 )

Purchases of premises and equipment, net ( 9,900 ) ( 6,245 ) ( 2,838 )

Net cash used by investing activities ( 608,566 ) ( 594,012 ) ( 987,948 )

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CASH FLOWS FROM FINANCING ACTIVITIES

Net increase in demand deposits, NOW and money market, and savings 553,932 467,744 980,766

Net increase in demand deposits, money market, and savings 225,779 553,932 467,744

Net decrease in time deposits ( 811 ) ( 11,089 ) ( 14,010 )

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Increase from subordinated debt proceeds — — 19,625

Decrease from subordinated debt repayment — — ( 10,000 )

Net advances from Paycheck Protection Program Liquidity Facility — — ( 153,716 )

Proceeds from exercise of stock options 1,396 618 1,468

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CASH, DUE FROM BANKS AND RESTRICTED CASH, beginning of year 483,128 342,139 813,161

CASH, DUE FROM BANKS AND RESTRICTED CASH, end of quarter $ 483,128 $ 342,139 $ 813,161

CASH, DUE FROM BANKS AND RESTRICTED CASH, end of year $ 452,513 $ 483,128 $ 342,139

SUPPLEMENTAL SCHEDULE OF OPERATING AND INVESTING ACTIVITIES

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Fair value adjustment of securities available-for-sale, gross $ 535 $ 2,418 $ ( 2,959 )

Operating lease right-of-use assets $ 1,747 $ — $ 41

Operating lease liabilities $ ( 1,747 ) $ — $ ( 41 )

Lease liabilities arising from obtaining right-of-use assets $ 122 $ 1,747 $ —

Transfer from loans to loans held for sale $ 1,545,470 $ 599,946 $ 152,546

Adjustment to retained earnings - adoption of ASU 2016-13,

net of deferred tax $ ( 734 ) $ — $ —

Adjustment to retained earnings - adoption of ASU 2016-13, net of deferred tax $ — $ ( 734 ) $ —

(1) See Note 23, Restatement of Prior Period Financial Statements.

See accompanying Notes to Consolidated Financial Statements.

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COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES

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CDs with other financial institutions, federal funds sold and cash flows from loans and deposits are reported as net increases or decreases under cash flows from investing activities or from financing activities.

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The Company maintains its cash in depository institution accounts, which, at times, may exceed federally insured limits.

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These equity investments without a readily determined fair value include:

• The Company has a $ 2.2 million equity interest in a specialized bank technology company as of December 31, 2023 and December 31, 2022 .

• The Company has a $ 350,000 equity interest in a technology company as of the years ended December 31, 2023 and December 31, 2022.

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• The Company contributed $ 50,000 to a technology company during the year ended December 31, 2023, there was no equity ownership as of December 31, 2022.

• a $ 2.2 million equity interest in a specialized bank technology company as of December 31, 2024 and December 31, 2023;

• a $ 350,000 equity interest in a technology company as of the years ended December 31, 2024 and December 31, 2023;

• a $ 47,000 and $ 50,000 equity interest in a technology company as of the years ended December 31, 2024, and December 31, 2023, respectively.

The following table shows the activity in equity investments without a readily determinable fair value for the dates shown:

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The Company has committed up to $ 480,000 in capital for these equity funds.

One firm decided to wind down their technology fund and their fund balance decreased $ 176,000 in 2023, leaving $ 22,000 in that fund as of December 31, 2023.

The following table shows the activity in equity fund investments held at fair value for the dates shown:

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Loans are returned to accrual status when all principal and interest amounts contractually due are brought current, borrower has demonstrated ability to make regular payments, generally a period of at least six months, and future payments are reasonably assured.

For installment/closed-end, and revolving/open-end consumer loans originated through CCBX lending partners loans will accrue interest until 120 and 180 days past due, respectively, which is consistent with regulatory guidelines for consumer loans of this nature, and an allowance is recorded through provision expense for these expected losses.

For installment/closed-end, and revolving/open-end consumer loans originated through CCBX lending partners loans will typically accrue interest until 120 and 180 days past due, respectively, which is consistent with regulatory guidelines for consumer loans of this nature, and an allowance is recorded through provision expense for these expected losses.

For installment/closed-end and revolving/open-end consumer loans originated through CCBX lending partners with balances outstanding beyond 120 days and 180 days, respectively, principal and capitalized interest outstanding is charged off against the allowance and accrued interest outstanding is reversed against interest income.

Partners may elect to stop accruing interest on loans prior to the days past due referenced above, and some CCBX partners have instituted a collection practice that places certain loans on nonaccrual status to improve collectibility, but interest will not continue accruing beyond those days.

The allowance for credit losses is comprised of amounts charged against income in the form of the provision for credit losses, less charged-off loans, net of recoveries.

When available information confirms that specific loans or portions

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thereof are uncollectible, identified amounts are charged against the allowance for credit losses.

When available information confirms that specific loans or portions thereof are uncollectible, identified amounts are charged against the allowance for credit losses.

The existence of some or all of the following criteria will generally confirm that a loss has been incurred:

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(3) the estimated fair value of the loan collateral is significantly below the current loan balance;

and (4) there is little or no near-term prospect for improvement.

(4) there is little or no near-term prospect for improvement;

and (5) loan modification with principal reduction.

Subsequent recoveries, if any, are credited to the allowance for credit losses.

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Also included in the ACL are qualitative reserves to cover losses that are expected, but in the Company’s assessment may not be adequately represented in the quantitative method.

For example, factors that the Company considers include environmental business conditions, borrower’s financial condition, credit rating and the volume and severity of past due loans and non-accrual loans.

Based on this analysis, the Company records a provision for credit losses to maintain the allowance at appropriate levels.

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The Company has elected to exclude accrued interest receivable from the amortized cost basis in its ACL calculation as accrued interest is written off in a timely manner when deemed uncollectible.

For more information and discussion related to the allowance for credit losses on loans, see “Note 4 - Loans and Allowance for Credit Losses” in the Consolidated Financial Statements.

For more information and discussion related to the allowance for credit losses on loans, see “Note 4 - Loans and Allowance for Credit Losses”.

In addition to the ACL on loans held for investment, CECL requires a balance sheet liability for expected losses on unfunded commitments, which is recognized if both the following conditions are met:

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The unfunded commitments that are not unconditionally cancelable by the Company are allowed for using the same loss rate as the funded commitment applied against the estimated utilization of these commitments and the probability of funding.

Loans held-for-sale - During the year ended December 31, 2023, the Company transferred $ 599.9 million in CCBX loans receivable to loans held for sale.

The loans sold to the originating partners are in accordance with partner

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agreements and are primarily sold for credit and concentration management.

As of December 31, 2023 and 2022 there were no loans held for sale.

Loans held-for-sale - During the year ended December 31, 2024, the Company transferred $ 1.55 billion in CCBX loans receivable to loans held for sale.

These loans are sold to the originating partners in accordance with partner agreements and are primarily sold for credit and concentration management.

Credit card loans are sold to the originating partner while retaining a portion of the interchange or transaction fee income on these sold credit card accounts.

The Company sells these loans to provide an additional source of noninterest income without adding on-balance-sheet risk.

As of December 31, 2024 there were $ 20.6 million loans held for sale and no loans were held for sale as of December 31, 2023.

Community bank loans held-for-sale consist of the guaranteed portion of SBA loans and USDA loans the Company intends to sell after origination and are reflected at the lower of aggregate cost or fair value.

Loans are generally sold with servicing of the sold portion retained by the Company when the sale of the loan occurs, the premium received is combined with the estimated present value of future cash flows on the related servicing asset and recorded as a gain on sale of loans in noninterest income.

There were no loans held for sale at December 31, 2023 and 2022.

There were no community bank loans held for sale at December 31, 2024 and 2023.

Loan sales recognition - The Company recognizes a sale on loans if the transferred portion (or portions) and any portion that continues to be held by the transferor are participating interests.

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estimate of utilization) for each segment and then utilizes the ACL loss rates for each segment on an aggregate basis to calculate the allowance for unfunded commitments.

The reserve for unfunded commitments was $ 582,000 and $ 974,000 as of December 31, 2023 and 2022, respectively, and includes a reserve for community bank loans and CCBX loans.

The reserve for unfunded commitments was $ 2.5 million and $ 582,000 as of December 31, 2024 and 2023, respectively.

The reserve for community bank loans was $ 1.2 million and the reserve for CCBX loans was $ 1.3 million as of December 31, 2024.

Premises and equipment - Premises and equipment are stated at cost less accumulated depreciation.

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The Company may also capitalize costs related to specific upgrades and enhancements when it is probable the expenditures will result in additional functionality.

Once the software is substantially complete and ready for its intended use, capitalization ceases and the asset is amortized straight line over its estimated useful life, which is typically three years.

Once the software is substantially complete and ready for its intended use, capitalization ceases and the asset is amortized straight line over its estimated

useful life, which is typically three years.

Amortization expense is included in data processing and software licenses in the Consolidated Statements of Income.

Maintenance and repairs are charged to operating expenses.

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Depreciable assets sold or retired are removed from the asset and related accumulated depreciation accounts and any gain or loss is reflected in the income statement.

These assets are

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reviewed for impairment when events indicate their carrying value may not be recoverable.

These assets are reviewed for impairment when events indicate their carrying value may not be recoverable.

If management determines impairment exists, the asset is reduced with an offsetting charge to the income statement.

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The right-of-use asset is measured at the amount of the lease liability adjusted for any prepaid rent, lease incentives and initial direct costs incurred.

The right-of-use asset and lease liability is amortized over the individual lease terms.

The right-of-use asset and lease liability are amortized over the individual lease terms.

Lease expense for lease payments is recognized on a straight-line basis over the lease term.

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A Black-Scholes model is utilized to estimate the fair value of stock options, while the market price of the Company’s common stock at the grant date is used for restricted stock awards and restricted stock units and is determined on the basis of objective criteria including trade data.

The fair value of market-based units is estimated on the grant date using a Monte Carlo simulation model.

Compensation cost is recognized over the requisite service period, generally defined as the vesting period.

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Application of the two-class method resulted in the equivalent earnings per share to the treasury method.

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Basic earnings per common share is computed by dividing net earnings allocated to common shareholders by the weighted-average number of common shares outstanding during the applicable period, excluding outstanding participating securities.

Diluted earnings per common share is computed using the weighted-average number of shares determined for the basic earnings per common share computation plus the dilutive effect of stock using the treasury stock method.

Stock options that are anti-dilutive are not included in the calculation of diluted EPS.

Stock awards that are anti-dilutive are not included in the calculation of diluted EPS.

Comprehensive income - Accounting principles generally require that recognized revenue, expenses, gains, and losses be included in net income.

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Lending activities include the origination of real estate, commercial and industrial, and consumer loans.

Interest income on loans is the Company’s primary source of revenue, and is supplemented by interest income from investment securities, deposit service charges, and other service provided activities.

Interest income on loans is the Company’s primary source of revenue, and is supplemented by interest income from investment securities, service charges, and other service provided activities.

The CCBX segment provides banking as a service (“BaaS”) that allows our broker-dealer and digital financial service partners to offer their customers banking services.

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Reclassifications - Certain amounts reported in prior years' consolidated financial statements may have been reclassified to conform to the current presentation with no effect on shareholders’ equity or net income.

Restatement of prior period Financial Statements - During the fourth quarter of 2024, the Company completed a review of the accounting treatment for certain CCBX loan types and concluded that it had not appropriately accounted for recognition of interest income and BaaS expense for certain BaaS partner loans in its CCBX segment.

In addition, the Company concluded that reimbursement of expenses associated with certain BaaS partners had not been appropriately accounted for under Topic 606, where the Company acts as an agent.

The Company determined the impacts of these misstatements were material to the previously issued financial statements as of and for the year ended December 31, 2023.

The financial statements as of December 31, 2022 were also revised for certain immaterial items.

See Note 23, Restatement of Prior Period Financial Statements, for additional information and quantification of prior period restatement impacts.

Note 2 - Recent accounting standards

Implementation of ASU 2016-13 - On January 1, 2023, the Company adopted ASU 2016-13, Financial Instruments — Credit Losses (Topic 326) :

Measurement of Credit Losses on Financial Instruments, which replaces the incurred loss with an expected loss methodology that is referred to as the current expected credit loss ("CECL") methodology.

The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized costs, including loan receivables and held-to-maturity debt securities.

It also applies to off-balance sheet credit exposures not accounted for as insurance (loan commitments, standby letters of credit, financial guarantees, and other similar instruments) and net investments in certain leases.

In addition, ASC 326 made changes to the accounting for available-for-sale debt securities.

One such change is to require increases or decreases in credit losses be presented as an allowance rather than as a write-down on available-for-sale debt securities management does not intend to sell or believe it is more likely than not the Company will be required to sell the security before recovery of the amortized cost basis.

The Company adopted ASC 326 using the modified retrospective method.

Results for the reporting periods beginning after January 1, 2023 are presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP.

The day one CECL adjustment for community bank loans included a reduction of $ 310,000 to the community bank allowance in the first quarter of 2023 and a reduction of $ 340,000 related to the community bank unfunded commitment reserve in the first quarter of 2023.

This was offset by an increase to the CCBX allowance for $ 4.2 million in the same period.

There was a CECL day one increase to the indemnification asset in the amount of $ 4.5 million due to the mirror image approach related to the credit enhancement for CCBX loans.

Net, the day one impact for the Bank’s transition to CECL was an increase of $ 954,000 in the first quarter of 2023, which included an income tax impact of $ 220,000 , resulting in an increase to retained earnings of $ 734,000 , net of income taxes.

Management has separately evaluated its held-to-maturity investment securities and determined that no loss reserves were required.

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The following table illustrates the impact of ASU 2016-13:

January 1, 2023

under ASC 326 Pre-ASC 326

Adoption Impact of

ASC 326 Adoption

Allowance for credit losses $ 77,881 $ 74,029 $ 3,852

CCBX credit enhancement asset 57,842 53,377 4,465

Deferred tax asset 18,238 18,458 ( 220 )

Unfunded commitment reserve 634 974 ( 340 )

Shareholders' Equity:

Retained earnings 120,732 119,998 734

Implementation of ASU 2022-02 - On January 1, 2023, the Company adopted ASU 2022-02, Financial Instruments - Credit Losses (Topic 326):

Troubled Debt Restructurings ("TDR") and Vintage Disclosures.

The ASU eliminated the accounting guidance for TDR loans by creditors while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty.

Additionally, the ASU requires public business entities to disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases.

This ASU was effective upon adoption of ASU 2016-13 and was applied on a prospective basis.

See “ Note 4 - Loans and Allowance for Credit Losses (“ACL”)” for more information on loans that were modified to borrowers experiencing financial difficulty during the twelve months ended months ended December 31, 2023.

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In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures, to provide financial statement users with more disaggregated expense information about a public entity’s reportable segments.

The ASU addresses the concern that more segment information is needed, including allowing the disclosure of multiple measures of segment profit or loss, requiring the disclosure of significant segment expenses, and requiring the qualitative disclosure of other segment items.

This ASU is effective for all entities for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024 and was implemented by the Company as of the fiscal year ended December 31, 2024.

Note 3 - Investment Securities

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Available-for-sale

Treasury securities $ 99,996 $ — $ ( 535 ) $ 99,461 $ —

Agency collateralized

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Total investment securities $ 47,323 $ 149 $ ( 732 ) $ 46,740 $ —

Value Allowance for Credit Losses

(dollars in thousands)

2 unchanged sentences

Treasury securities $ 99,996 $ — $ ( 535 ) $ 99,461 $ —

Agency collateralized mortgage obligations 54 — ( 3 ) 51

Agency residential mortgage-backed securities 1 — — 1

Municipal bonds 250 — — 250

Total available-for-sale securities 100,272 — ( 2,955 ) 97,317

Agency collateralized

mortgage obligations 45 — ( 2 ) 43 —

Total available-for-sale

securities 100,041 — ( 537 ) 99,504 —

Held-to-maturity

Agency residential mortgage-backed securities 1,036 — ( 120 ) 916

Agency residential

mortgage-backed securities 50,860 467 ( 286 ) 51,041 —

Total investment securities $ 150,901 $ 467 $ ( 823 ) $ 150,545 $ —

Table of Content s

Accrued interest on available-for-sale securities was less than $1,000 and $ 718,000 at December 31, 2024 and December 31, 2023, respectively.

Accrued interest on held-to-maturity securities was $ 218,000 and $ 234,000 at December 31, 2024 and December 31, 2023, respectively.

Accrued interest on securities is excluded from the balances in the preceding table of securities receivable, and is included in accrued interest receivable on the Company's consolidated balance sheets.

The amortized cost and fair value of debt securities at December 31, 2024, by contractual maturity, are shown below.

5 unchanged sentences

December 31, 2024

Amounts maturing in

One year or less $ 99,996 $ 99,461 $ — $ —

After one year through five years — — — —

99,996 99,461 — —

Agency residential mortgage-backed securities and collateralized mortgage obligations $ 37 $ 35 $ 47,286 $ 46,705

$ 37 $ 35 $ 47,286 $ 46,705

Investment securities with amortized cost of $21.8 million and $ 37.8 million at December 31, 2023 and December 31, 2022 respectively, were pledged to secure public deposits and for other purposes as required or permitted by law and an additional $25.0 million in securities were pledged for borrowing lines at December 31, 2023, with no securities pledged for borrowing lines at December 31, 2022.

During the year ended December 31, 2023, a total of 16 U.S.

Agency mortgage backed securities were purchased for a total of $ 50.2 million, for CRA purposes during the year ended December 31, 2023.

There were no sales of investments during the year ended December 31, 2023 or December 31, 2022.

At December 31, 2023 and December 31, 2022, there were nine and six securities, respectively, in an unrealized loss position.

Investment securities with amortized cost of $ 19.2 million and $ 21.8 million at December 31, 2024 and December 31, 2023 respectively, were pledged to secure public deposits and for other purposes as required or permitted by law and an additional $ 24.0 million and $ 25.0 million in securities were pledged for borrowing lines at December 31, 2024 and December 31, 2023, respectively.

During the twelve months ended December 31, 2024, two securities matured, consisting of a total of $ 100.0 million in AFS U.S.

Treasury securities.

During the twelve months ended December 31, 2024, no securities were purchased.

There were no sales of investments during the year ended December 31, 2024, December 31, 2023 or December 31, 2022.

At December 31, 2024 there were sixteen securities with a $ 732,000 unrealized loss.

At December 31, 2023 there were nine securities with a $ 823,000 unrealized loss.

The following table shows the investments’ gross unrealized losses and fair values, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position for which an allowance for credit losses has not been recorded:

3 unchanged sentences

Available-for-sale

Treasury securities $ — $ — $ 99,461 $ 535 $ 99,461 $ 535

Agency collateralized mortgage obligations $ — $ — $ 35 $ 2 $ 35 $ 2

3 unchanged sentences

Total investment securities $ 27,781 $ 219 $ 10,327 $ 513 $ 38,108 $ 732

Table of Content s

Management has evaluated the above securities and does not believe that any individual unrealized loss as of December 31, 2024 will be recognized into income.

6 unchanged sentences

Note 4 - Loans and Allowance for Credit Losses (“ACL”)

During the year ended December 31, 2023, $ 599.9 million in CCBX loans were transferred to loans held for sale, with $ 599.9 million in loans sold.

A portion of these loans were sold at par and a portion were sold with a gain on sale of $ 253,000 .

Pricing is dependent upon the agreement with the partner.

Loans Held for Sale

During the year ended December 31, 2024, $ 1.55 billion in CCBX loans were transferred to loans held for sale, with $ 1.52 billion in loans sold.

These loans were sold at par.

The Company sells CCBX loans to manage loan portfolio size by partner and by loan category.

Partner loan limits are established and documented in the relevant partner agreement.

As of December 31, 2023 and December 31, 2022, there were no loans held for sale.

The Company adopted the CECL methodology for measuring credit losses as of January 1, 2023.

All disclosures as of and for the twelve months ended months ended December 31, 2023 are presented in accordance with Topic 326.

The Company did not recast comparative financial periods and has presented those disclosures under previously applicable GAAP.

There were $ 20.6 million loans held for sale as of December 31, 2024 and no loans held for sale as of December 31, 2023.

Loans Held for Investment

The composition of the loan portfolio is as follows as of the periods indicated:

December 31, December 31,

2024 2023 (1)

(dollars in thousands)

11 unchanged sentences

All other commercial & industrial loans

33,961 54,295

Real estate loans:

7 unchanged sentences

Loans receivable $ 3,486,565 3,021,542

Table of Content s

Consolidated (dollars in thousands)

Commercial and industrial loans $ 312,628

Real estate loans:

Construction, land, and land development 214,055

Residential real estate 449,157

Commercial real estate 1,048,752

Consumer and other loans 608,771

Gross loans receivable 2,633,363

Net deferred origination fees and premiums ( 6,107 )

Loans receivable $ 2,627,256

(1) See Note 23, Restatement of Prior Period Financial Statements.

Accrued interest on loans, which is excluded from the balances in the preceding table of loans receivable, was $ 20.5 million and $ 23.5 million at December 31, 2024 and December 31, 2023, respectively, and was included in accrued interest receivable on the Company's consolidated balance sheets.

Included in commercial and industrial loans is $ 109.0 million and $ 87.5 million in capital call lines, as of December 31, 2024 and December 31, 2023, respectively, provided to venture capital firms through one of our BaaS clients.

These loans are secured by the capital call rights and are individually underwritten to the Bank’s credit standards and the underwriting is reviewed by the Bank on every line.

Also included in commercial and industrial loans are Paycheck Protection Program (“PPP”) loans of $ 3.0 million and $ 4.7 million at December 31, 2023 and December 31, 2022, respectively.

PPP loans are 100 % guaranteed by the SBA.

These loans are secured by the capital call rights and are individually underwritten to the Bank’s credit standards and the underwriting is reviewed by the Bank on every line/loan.

Consumer and other loans includes overdrafts of $ 7.4 million and $ 2.8 million at December 31, 2024 and December 31, 2023, respectively.

Community bank overdrafts were $ 255,000 and $ 94,000 at December 31, 2023 and December 31, 2022, respectively and CCBX overdrafts were $ 2.5 million and $ 2.6 million at December 31, 2023 and December 31, 2022, respectively.

The Company has pledged loans totaling $ 1.01 billion and $ 220.1 million at December 31, 2023 and December 31, 2022, respectively, for borrowing lines at the FHLB and FRB.

Community bank overdrafts were $ 147,000 and $ 255,000 at December 31, 2024 and

December 31, 2023, respectively and CCBX overdrafts were $ 7.3 million and $ 2.5 million at December 31, 2024 and December 31, 2023, respectively.

The Company has pledged loans totaling $ 933.9 million and $ 1.01 billion at December 31, 2024 and December 31, 2023, respectively, for borrowing lines at the FHLB and FRB.

Loans are pledged to increase and maintain the borrowing capacity of the Bank in the event of a liquidity crisis.

The balance of SBA and USDA loans and participations serviced for others totaled $ 4.1 million and $ 8.7 million at December 31, 2024 and December 31, 2023, respectively.

The balance of MSLP loans participated and serviced for others totaled $ 53.4 million and $ 58.0 million at December 31, 2023 and December 31, 2022, respectively, with $ 2.8 million and $ 3.1 million outstanding and included in commercial and industrial loans as of December 31, 2023 and December 31, 2022, respectively.

The gross balance of MSLP loans participated and serviced for others totaled $ 50.3 million and $ 53.4 million at December 31, 2024 and December 31, 2023, respectively, with $ 2.6 million and $ 2.8 million in MSLP loans on the balance sheet and included in commercial and industrial loans at December 31, 2024 and December 31, 2023, respectively.

Servicing is retained on the gross balance.

The Company, through the community bank, at times purchases individual loans at fair value as of the acquisition date.

6 unchanged sentences

As of December 31, 2024, $ 202.7 million is included in consumer and other loans and $ 5.4 million is included in commercial and industrial loans, compared to $ 39.4 million in consumer and other loans and $ 6.3 million in commercial and industrial loans as of December 31, 2023.

Table of Content s

The following is a summary of the Company’s loan portfolio segments:

1 unchanged sentence

Also included in commercial and industrial loans are $ 29.9 million in unsecured loans originated through CCBX partners as of December 31, 2024, compared to $ 52.7 million as of December 31, 2023.

Loan types in this segment include PPP loans, revolving lines of credit, term loans, and loans secured by liquid collateral such as cash deposits or marketable securities.

In addition, included in commercial and industrial loans are loans to other financial institutions.

Loan types include revolving lines of credit, term loans, PPP loans, and loans secured by liquid collateral such as cash deposits or marketable securities.

Also included in commercial and industrial loans are loans to other financial institutions.

Additionally, the Company issues letters of credit on behalf of its customers.

10 unchanged sentences

Additionally, the fair value of the underlying collateral may fluctuate as market conditions change.

The Company occasionally originates land loans for the purpose of facilitating the ultimate construction of a home or commercial building.

occasionally originates land loans for the purpose of facilitating the ultimate construction of a home or commercial building.

The primary risks include the borrower’s ability to pay and the inability of the Company to recover its investment due to a material decline in the fair value of the underlying collateral.

6 unchanged sentences

Commercial real estate (includes owner occupied and nonowner occupied) - Commercial real estate loans include various types of loans for which the Company holds real property as collateral.

We make commercial mortgage loans collateralized by owner-occupied and non-owner-occupied real estate, as well as multi-family residential loans.

We have commercial mortgage loans totaling $ 386.8 million that are collateralized by owner-occupied real-estate and $ 565.5 million that are collateralized by non-owner-occupied real estate, as well as $ 412.0 million of multi-family residential loans and $ 10.5 million of farmland loans, as of December 31, 2024.

The primary risks of commercial real estate loans include the borrower’s inability to pay, material decreases in the value of the collateralized real estate and significant increases in interest rates, which may make the real estate loan unprofitable.

4 unchanged sentences

Repayment of these loans is dependent on the borrower’s ability to pay and the fair value of the underlying collateral.

As of December 31, 2023 $ 816.4 million in CCBX loans are included in consumer and other loans, compared to $ 607.0 million at December 31, 2022.

Table of Content s

As of December 31, 2024, $ 1.19 billion in CCBX loans are included in consumer and other loans compared to $ 811.9 million at December 31, 2023.

Not included in this category is $ 267.7 million and $ 238.0 million as of December 31, 2024 and December 31, 2023, respectively, in home equity lines of credit that are secured by residential real estate and are accessed by using a credit card.

These credit card accessed home equity lines of credit are classified as residential real estate per regulatory guidelines.

Past due and Nonaccrual Loans

31 unchanged sentences

Loans receivable $ 3,486,565

Table of Content s

Consolidated 30-89

Past Due Total

3 unchanged sentences

December 31, 2023 (1)

Commercial and industrial loans $ 393 $ 486 $ 879 $ 311,749 $ 312,628 $ 404

Community Bank

Commercial and industrial

loans $ — $ — $ — $ 149,502 $ 149,502 $ —

Real estate loans:

Construction, land and land development

— — — 157,100 157,100 —

Residential real estate 44 — 44 225,347 225,391 —

1 unchanged sentence

Consumer and other loans 2 — 2 1,626 1,628 —

Total community bank $ 46 $ 7,145 $ 7,191 $ 1,829,963 $ 1,837,154 $ —

Commercial and industrial loans:

Capital call lines $ — $ — $ — $ 87,494 $ 87,494 $ —

All other commercial &

industrial loans

3,432 2,086 5,518 48,777 54,295 2,086

Less net deferred origination fees and premiums ( 6,107 )

Real estate loans:

Residential real

estate loans 3,198 1,115 4,313 $ 233,722 $ 238,035 $ 1,115

Consumer and other loans:

Credit cards 28,383 34,835 63,218 $ 442,619 $ 505,837 $ 34,835

Other consumer and

other loans 29,603 8,486 38,089 $ 267,938 $ 306,027 $ 8,486

Total CCBX 64,616 46,522 111,138 1,080,550 1,191,688 46,522

Total Consolidated 64,662 53,667 118,329 2,910,513 3,028,842 46,522

Less net deferred origination fees and

Loans receivable $ 3,021,542

(1) See Note 23, Restatement of Prior Period Financial Statements.

There were $ 43.1 million in loans past due 90 days or more and still accruing interest as of December 31, 2024, and $ 46.5 million as of December 31, 2023.

The increase is attributed to loans originated through CCBX lending partners which continue to accrue interest up to 180 days past due.

The balance is attributed to loans originated through CCBX lending partners which continue to accrue interest up to 180 days past due.

As of December 31, 2024 and December 31, 2023, $ 41.8 million and $ 44.3 million, respectively of loans past due 90 days or more and still accruing interest are covered by credit enhancements provided by our CCBX partners that protect the Bank against losses.

Some CCBX partners have instituted a collection practice that places certain loans on nonaccrual status to improve collectability and amounts projected to not be collected are written-off.

The accrual of interest on community bank loans is discontinued when, in management’s opinion, the borrower may be unable to meet payments as they become due or when they are 90 days past due as to either principal or interest, unless they are well secured and in the process of collection.

Installment/closed-end, and revolving/open-end consumer loans originated through CCBX lending partners will continue to accrue interest until 120 and 180 days past due, respectively and an allowance is recorded through provision expense for these expected losses.

For installment/closed-end and revolving/open-end consumer loans originated through CCBX lending partners with balances outstanding beyond 120 days and 180 days past due, respectively, principal and capitalized interest outstanding is charged off against the allowance and accrued interest outstanding is reversed against interest income.

and accrued interest outstanding is reversed against interest income.

These consumer loans are reported as nonperforming/substandard, 90 days or more days past due and still accruing.

3 unchanged sentences

Loans may be returned to accruing status if the Company believes that all remaining principal and interest is fully collectible and there has been at least six months of sustained repayment performance since the loan was placed on nonaccrual.

Table of Content s

An analysis of nonaccrual loans by category consisted of the following at the periods indicated:

December 31, December 31,

Total Nonaccrual Nonaccrual with No ACL Total Nonaccrual

Total Nonaccrual Nonaccrual with No ACL Nonaccrual with

ACL Total Nonaccrual Nonaccrual with No ACL

(dollars in thousands)

2 unchanged sentences

Real estate loans:

Construction, land and land development — — 66

Residential real estate — — — 170 170

Commercial real estate — — — 7,145 7,145

Total Community Bank nonaccrual loans $ 100 $ 100 $ — $ 7,315 $ 7,315

Commercial and industrial loans $ 234 $ — $ 234 $ — $ —

Consumer and other loans:

Total nonaccrual loans $ 7,315 $ 7,315 $ 7,080

Table of Content s

Credit cards 10,262 — 10,262 — —

Consumer and other consumer loans 8,967 — 8,967 — —

Total CCBX nonaccrual loans $ 19,463 $ — $ 19,463 $ — $ —

Total Consolidated nonaccrual loans $ 19,563 $ 100 $ 19,463 $ 7,315 $ 7,315

In some circumstances, the Company modifies loans in response to borrower financial difficulty, and generally provides for a temporary modification of loan repayment terms.

In order for a modified loan to be considered for accrual status, the loan’s collateral coverage generally will be greater than or equal to 100% of the loan balance, the loan is current on payments, and the borrower must either prefund an interest reserve or demonstrate the ability to make payments from a verified source of cash flow for an extended period of time, usually at least six months in duration.

In January 2023, the Company adopted ASU 2022-02, “Financial Instruments - Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures” (“ASU 2022-02”), which eliminated the accounting guidance for TDRs while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors when a borrower is experiencing financial difficulty.

This guidance was applied on a prospective basis.

No loans were modified for community bank borrowers experiencing financial difficulty in the twelve months ended months ended December 31, 2023 .

The following table presents the CCBX loans at December 31, 2023 that were both experiencing financial difficulty and were modified during the year ended December 31, 2023 by class and by type of modification.

The percentage of the loans that were modified to borrowers in financial distress as compared to the total of each class of loans is also presented below.

Principal Forgiveness Term Extension Interest Rate Reduction Principal Forgiveness & Payment Delay Principal Forgiveness, Payment Delay & Term Extension Total Total Class of Financing Receivable

One loan was modified for a community bank borrower experiencing financial difficulty in the twelve months ended months ended December 31, 2024, and no community bank loans were modified in the twelve months ended December 31, 2023 .

The Company has no commitment to lend additional amounts to this borrower.

The following table presents the community bank loan that was both experiencing financial difficulty and was modified during the year by class and by type of modification for the periods indicated with the percentage of community bank loans that were modified to borrowers in financial distress as compared to the total of each class of community bank loans.

Also presented is the financial effect of the loan modification to the borrower experiencing financial difficulty for the year ended as indicated.

Financial Effect of the Loan Modifications

December 31, 2024 Principal Forgiveness & Interest Rate Reduction Total Total Class of Financing Receivable Principal Forgiveness Weighted Average Interest Rate Reduction

(dollars in thousands)

Community Bank

Commercial and industrial loans $ 101 $ 101 0.07 % $ 82 9.75 %

Total $ 101 $ 101 0.01 % $ 82 9.75 %

The Company has no commitment to lend additional amounts to the borrower in the table above.

No community bank modified loans to borrowers experiencing financial difficulty were past due as of December 31, 2024 and there were no payment defaults on this loan during the year ended December 31, 2024.

The following table presents the CCBX loans that were both experiencing financial difficulty and were modified during the years ended December 31, 2024 and 2023 by class and by type of modification for the periods indicated.

The percentage of the CCBX loans that were modified to borrowers in financial distress as compared to the total of each class of CCBX loans is also presented below.

December 31, 2024 Principal Forgiveness Term Extension Interest Rate Reduction Principal Forgiveness & Payment Delay Principal Forgiveness, Payment Delay & Term Extension Total Total Class of Financing Receivable

(dollars in thousands)

Commercial and industrial loans:

All other commercial & industrial loans

4 unchanged sentences

Total $ 11,067 $ 8,663 $ 17,287 $ 8,880 $ 34 $ 45,931 1.32 %

December 31, 2023 Principal Forgiveness Term Extension Interest Rate Reduction Principal Forgiveness & Payment Delay Principal Forgiveness, Payment Delay & Term Extension Total Total Class of Financing Receivable

(dollars in thousands)

Commercial and industrial loans:

All other commercial & industrial loans

$ — $ 1,247 $ — $ 27 $ 18 $ 1,292 2.38 %

Consumer and other loans:

Credit cards 1 — 4,201 — — 4,202 0.83

Other consumer and other loans — 13,571 — 3,838 2,846 20,255 6.62

Total $ 1 $ 14,818 $ 4,201 $ 3,865 $ 2,864 $ 25,749 0.85 %

The Company has committed to lend additional amounts totaling $ 201,000 to the borrowers included in the previous table.

The performance of loans modified is monitored to understand the effectiveness of the modification efforts.

The following table presents the performance of such loans that have been modified in the last 12 months:

Table of Content s

The following table presents the performance of such loans that have been modified in the last 12 months as of the periods indicated:

December 31, 2024 30-89

Past Due Total Past Due

7 unchanged sentences

Total CCBX $ 10,772 $ 11,708 $ 22,480

The following table presents the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty for the year ended December 31, 2023:

Principal Forgiveness Weighted Average Interest Rate Reduction Weighted Average Term Extension (years)

December 31, 2023 30-89

Past Due Total Past Due

(dollars in thousands)

1 unchanged sentence

All other commercial & industrial loans

$ 268 $ 219 $ 487

Consumer and other loans:

Credit cards 1,747 1,436 3,183

Other consumer and other loans 3,436 716 4,152

Total CCBX $ 5,451 $ 2,371 $ 7,822

The following table presents the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty for the years ended as indicated below:

December 31, 2024 Principal Forgiveness Weighted Average Interest Rate Reduction Weighted Average Term Extension (years)

(dollars in thousands)

Commercial and industrial loans:

All other commercial & industrial loans

$ 138 — % 1.4

Consumer and other loans:

Credit cards 7,938 14.6 n/a

Other consumer and other loans 6,001 — 1.7

Total CCBX $ 14,077 14.6 % 1.6

December 31, 2023 Principal Forgiveness Weighted Average Interest Rate Reduction Weighted Average Term Extension (years)

(dollars in thousands)

Commercial and industrial loans:

All other commercial & industrial loans

Real estate loans:

4 unchanged sentences

Total CCBX $ 42 20.5 % 0.8

The following table presents the total of loans that had a payment default during the year ended December 31, 2023 and were modified in the twelve months prior to that default to borrowers experiencing financial difficulty.

Table of Content s

Term Extension Interest Rate Reduction Principal Forgiveness & Payment Delay Principal Forgiveness, Payment Delay & Term Extension Total

The following table presents the total of loans that had a payment default during the periods indicated and were modified in the twelve months prior to that default to borrowers experiencing financial difficulty.

December 31, 2024 Principal Forgiveness Term Extension Interest Rate Reduction Principal Forgiveness & Payment Delay Total

(dollars in thousands)

6 unchanged sentences

Total $ 10,417 $ 5,254 $ 12,050 $ 1,792 $ 29,513

December 31, 2023 Term Extension Interest Rate Reduction Principal Forgiveness & Payment Delay Principal Forgiveness, Payment Delay & Term Extension Total

(dollars in thousands)

Commercial and industrial loans:

All other commercial & industrial loans

$ 487 $ — $ 5 $ — $ 492

Consumer and other loans:

Credit cards — 3,924 — — 3,924

Other consumer and other loans 3,155 — 1,143 619 4,917

Total $ 3,642 $ 3,924 $ 1,148 $ 619 $ 9,333

Upon the Company’s determination that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of the loan) is written off.

7 unchanged sentences

Typically, an individual loan grade will not be changed from the prior period unless there is a specific indication of credit deterioration or improvement.

Credit deterioration is evidenced by delinquency, direct communications with the borrower or other borrower information that becomes known to management.

Credit deterioration is evidenced by

delinquency, direct communications with the borrower or other borrower information that becomes known to management.

Credit improvements are evidenced by known facts regarding the borrower or the collateral property.

10 unchanged sentences

If a loan or a portion thereof is classified as Loss, it must be charged-off, meaning the amount of the loss is charged against the allowance for credit losses, thereby reducing that reserve.

Table of Content s

Management considers the guidance in ASC 310-20 when determining whether a modification, extension, or renewal of loan constitutes a current period origination.

As of December 31, 2023 and December 31, 2022, based on the most recent analysis performed, the risk category of community bank loans by year of origination is as follows:

The following tables show the risk category of community bank loans by year of origination for the periods indicated, based on the most recent analysis performed as of each period end:

Term Loans Amortized Cost Basis by Origination Year

7 unchanged sentences

Doubtful — — — — — — — — —

Total commercial and industrial

loans - All other commercial and

industrial loans $ 15,882 $ 56,428 $ 15,566 $ 10,155 $ 12,429 $ 1,442 $ 36,580 $ 1,020 $ 149,502

Current period gross write-offs $ — $ — $ — $ — $ — $ 46 $ — $ — $ 46

Real estate loans -

Construction, land and land

Total commercial and industrial loans - All

other commercial and industrial loans $ 12,016 $ 11,672 $ 43,490 $ 13,177 $ 8,109 $ 7,634 $ 32,801 $ 21,496 $ 150,395

Current period gross charge-offs $ — $ 92 $ — $ — $ — $ 167 $ — $ — $ 259

Real estate loans - Construction, land and land

development loans

2 unchanged sentences

Substandard — — — — — — — — $ —

Doubtful — — — — — — — — $ —

Total real estate loans -

Construction, land and land

development loans $ 75,129 $ 49,275 $ 24,400 $ 5,184 $ 914 $ 1,598 $ 600 $ — $ 157,100

Current period gross write-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —

Table of Content s

Term Loans Amortized Cost Basis by Origination Year

2 unchanged sentences

As of December 31, 2024

Real estate loans -

Residential real estate loans

Doubtful — — — — — — — — $ —

Total real estate loans - Construction, land

and land development loans $ 34,089 $ 70,457 $ 34,937 $ 5,180 $ 755 $ 2,180 $ 600 $ — $ 148,198

Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —

Real estate loans - Residential real estate loans

Pass $ 13,194 $ 30,332 $ 37,576 $ 37,834 $ 25,838 $ 27,159 $ 26,565 $ 15 $ 198,513

2 unchanged sentences

Doubtful — — — — — — — — $ —

Total real estate loans -

Residential real estate loans $ 32,352 $ 42,460 $ 41,157 $ 30,287 $ 31,982 $ 22,469 $ 24,496 $ 188 $ 225,391

Current period gross write-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —

Real estate loans -

Commercial real estate loans

Total real estate loans - Residential real

estate loans $ 15,475 $ 30,332 $ 38,660 $ 37,834 $ 25,844 $ 27,159 $ 26,745 $ 15 $ 202,064

Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —

Real estate loans - Commercial real estate loans

Pass $ 96,199 $ 302,470 $ 279,902 $ 219,503 $ 129,904 $ 310,251 $ 8,982 $ 1,657 $ 1,348,868

2 unchanged sentences

Doubtful — — — — — — — — —

Total real estate loans -

Commercial real estate loans $ 244,169 $ 306,586 $ 228,178 $ 145,697 $ 133,843 $ 235,581 $ 7,760 $ 1,719 $ 1,303,533

Current period gross write-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —

Total real estate loans - Commercial real

estate loans $ 111,558 $ 302,470 $ 283,086 $ 224,751 $ 130,060 $ 312,237 $ 8,982 $ 1,657 $ 1,374,801

Current period gross charge-offs $ — $ — $ — $ — $ 41 $ 223 $ — $ — $ 264

Consumer and other loans - Other consumer and

Pass $ 1,447 $ 53 $ 8,269 $ 2 $ 249 $ 3,337 $ 185 $ — $ 13,542

Other Loan Especially Mentioned — — — — — — — — $ —

Substandard — — — — — — — — $ —

Doubtful — — — — — — — — —

Total consumer and other loans - Other

consumer and other loans $ 1,447 $ 53 $ 8,269 $ 2 $ 249 $ 3,337 $ 185 $ — $ 13,542

Other consumer and other loans

Current period gross charge-offs $ 31 $ — $ — $ — $ — $ — $ — $ — $ 31

Term Loans Amortized Cost Basis by Origination Year

Community Bank 2024 2023 2022 2021 2020 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted To Term Total

(dollars in thousands)

As of December 31, 2024

Total community bank loans receivable

Pass $ 156,945 $ 414,806 $ 404,174 $ 274,979 $ 164,855 $ 350,561 $ 67,354 $ 23,168 $ 1,856,842

2 unchanged sentences

Doubtful — — — — — — — — —

Total consumer and other

loans - Other consumer and

other loans $ 323 $ 272 $ 5 $ 679 $ 38 $ 164 $ 147 $ — $ 1,628

Current period gross write-offs $ 18 $ — $ — $ — $ — $ — $ — $ — $ 18

Table of Content s

Total community bank loans $ 174,585 $ 414,984 $ 408,442 $ 280,944 $ 165,017 $ 352,547 $ 69,313 $ 23,168 $ 1,889,000

Current period gross charge-offs $ 31 $ 92 $ — $ — $ 41 $ 390 $ — $ — $ 554

Term Loans Amortized Cost Basis by Origination Year

2 unchanged sentences

As of December 31, 2023

Commercial and industrial loans

Pass $ 15,882 $ 56,428 $ 15,566 $ 10,044 $ 12,429 $ 1,442 $ 33,412 $ 1,020 $ 146,223

Other Loan Especially Mentioned — — — 111 — — 3,168 — $ 3,279

Substandard — — — — — — — — $ —

Doubtful — — — — — — — — —

Total commercial and industrial loans - All

other commercial and industrial loans $ 15,882 $ 56,428 $ 15,566 $ 10,155 $ 12,429 $ 1,442 $ 36,580 $ 1,020 $ 149,502

Current period gross charge-offs $ — $ — $ — $ — $ — $ 46 $ — $ — $ 46

Real estate loans - Construction, land and land

development loans

Pass $ 75,129 $ 49,275 $ 20,811 $ 2,859 $ 914 $ 1,598 $ — $ — $ 150,586

Other Loan Especially Mentioned — — 3,589 2,325 — — — — $ 5,914

Substandard — — — — — — 600 — $ 600

Doubtful — — — — — — — — $ —

Total real estate loans - Construction, land

and land development loans $ 75,129 $ 49,275 $ 24,400 $ 5,184 $ 914 $ 1,598 $ 600 $ — $ 157,100

Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —

Real estate loans - Residential real estate loans

Pass $ 32,352 $ 41,362 $ 39,137 $ 30,259 $ 31,982 $ 22,429 $ 24,396 $ 18 $ 221,935

Other Loan Especially Mentioned — 1,098 2,020 28 — 40 100 — $ 3,286

Substandard — — — — — — — 170 $ 170

Doubtful — — — — — — — — $ —

Total real estate loans - Residential real

estate loans $ 32,352 $ 42,460 $ 41,157 $ 30,287 $ 31,982 $ 22,469 $ 24,496 $ 188 $ 225,391

Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —

Term Loans Amortized Cost Basis by Origination Year

Community Bank 2023 2022 2021 2020 2019 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted To Term Total

(dollars in thousands)

As of December 31, 2023

Real estate loans - Commercial real estate loans

Pass $ 244,169 $ 303,329 $ 222,287 $ 144,602 $ 126,437 $ 233,482 $ 7,509 $ 1,719 $ 1,283,534

Other Loan Especially Mentioned — 3,257 5,891 171 506 2,099 100 — $ 12,024

Substandard — — — 924 6,900 — 151 — $ 7,975

Doubtful — — — — — — — — —

Total real estate loans - Commercial real

estate loans $ 244,169 $ 306,586 $ 228,178 $ 145,697 $ 133,843 $ 235,581 $ 7,760 $ 1,719 $ 1,303,533

Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —

Consumer and other loans - Other consumer and

Pass $ 323 $ 272 $ 5 $ 679 $ 38 $ 164 $ 147 $ — $ 1,628

Other Loan Especially Mentioned — — — — — — — — $ —

Substandard — — — — — — — — $ —

Doubtful — — — — — — — — —

Total consumer and other loans - Other

consumer and other loans $ 323 $ 272 $ 5 $ 679 $ 38 $ 164 $ 147 $ — $ 1,628

Current period gross charge-offs $ 18 $ — $ — $ — $ — $ — $ — $ — $ 18

Total community bank loans receivable

4 unchanged sentences

Total community bank loans $ 367,855 $ 455,021 $ 309,306 $ 192,002 $ 179,206 $ 261,254 $ 69,583 $ 2,927 $ 1,837,154

Current period gross write-offs $ 18 $ — $ — $ — $ — $ 46 $ — $ — $ 64

Current period gross charge-offs $ 18 $ — $ — $ — $ — $ 46 $ — $ — $ 64

The Company considers the performance of the CCBX loan portfolio and its impact on the allowance for credit losses.

5 unchanged sentences

As of December 31, 2024

Commercial and industrial loans -

Capital call lines

Commercial and industrial loans - Capital call lines

Payment performance

1 unchanged sentence

Nonperforming — — — — — — — — —

Total commercial and industrial

loans - Capital call lines $ — $ — $ — $ — $ — $ — $ 87,494 $ — $ 87,494

Current period gross write-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —

Total commercial and industrial loans - Capital

call lines $ — $ — $ — $ — $ — $ — $ 109,017 $ — $ 109,017

Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —

Commercial and industrial loans - All other

commercial and industrial loans

All other commercial and industrial loans

Payment performance

1 unchanged sentence

Nonperforming — 856 141 — — — 243 — 1,240

Total commercial and industrial

loans - All other commercial and

industrial loans $ 43,600 $ 7,112 $ 9 $ 11 $ — $ — $ 3,566 $ — $ 54,298

Current period gross write-offs $ 3,848 $ 2,502 $ 15 $ 16 $ — $ — $ 224 $ — $ 6,605

Table of Content s

Total commercial and industrial loans - All

other commercial and industrial loans $ 1,049 $ 23,830 $ 4,093 $ 5 $ 12 $ — $ 4,972 $ — $ 33,961

Current period gross charge-offs $ 503 $ 11,845 $ 1,956 $ 2 $ 5 $ — $ 986 $ — $ 15,297

Real estate loans - Residential real estate loans

Payment performance

Performing $ — $ — $ — $ — $ — $ — $ 255,779 $ 9,320 $ 265,099

Nonperforming — — — — — — 2,608 — 2,608

Total real estate loans - Residential real estate

loans $ — $ — $ — $ — $ — $ — $ 258,387 $ 9,320 $ 267,707

Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ 5,006 $ — $ 5,006

Consumer and other loans - Credit cards

Payment performance

Performing $ — $ — $ — $ — $ — $ — $ 483,755 $ 47 $ 483,802

Nonperforming — — — — — — 44,752 — 44,752

Total consumer and other loans - Credit cards $ — $ — $ — $ — $ — $ — $ 528,507 $ 47 $ 528,554

Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ 130,825 $ — $ 130,825

Term Loans Amortized Cost Basis by Origination Year

2 unchanged sentences

As of December 31, 2024

Real estate loans -

Residential real estate loans

Consumer and other loans - Other consumer and

Payment performance

1 unchanged sentence

Nonperforming 1,727 7,324 4,042 732 — 15 116 — 13,956

Total real estate loans -

Residential real estate loans $ — $ — $ — $ — $ — $ — $ 213,550 $ 24,485 $ 238,035

Current period gross write-offs $ — $ — $ — $ — $ — $ — $ 4,641 $ — $ 4,641

Total consumer and other loans - Other

consumer and other loans $ 432,125 $ 160,846 $ 49,009 $ 2,634 $ 47 $ 207 $ 19,912 $ — $ 664,780

Current period gross charge-offs $ 13,759 $ 34,352 $ 14,702 $ 3,580 $ 24 $ 282 $ 10,710 $ — $ 77,409

Total CCBX loans receivable

Payment performance

1 unchanged sentence

Nonperforming 1,727 8,180 4,183 732 — 15 47,719 — 62,556

Total consumer and other

loans - Credit cards $ — $ — $ — $ — $ — $ — $ 502,704 $ 3,133 $ 505,837

Current period gross write-offs $ — $ — $ — $ — $ — $ — $ 61,358 $ — $ 61,358

Consumer and other loans -

Other consumer and other loans

Total CCBX loans $ 433,174 $ 184,676 $ 53,102 $ 2,639 $ 59 $ 207 $ 920,795 $ 9,367 $ 1,604,019

Current period gross charge-offs $ 14,262 $ 46,197 $ 16,658 $ 3,582 $ 29 $ 282 $ 147,527 $ — $ 228,537

Term Loans Amortized Cost Basis by Origination Year

CCBX 2023 2022 2021 2020 2019 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted To Term Total (1)

(dollars in thousands)

As of December 31, 2023

Commercial and industrial loans - Capital call lines

Payment performance

1 unchanged sentence

Nonperforming — — — — — — — — —

Total consumer and other

loans - Other consumer and

other loans $ 220,253 $ 53,806 $ 7,365 $ 98 $ 425 $ 327 $ 28,300 $ — $ 310,574

Current period gross write-offs $ 17,815 $ 43,115 $ 11,574 $ 84 $ 346 $ 217 $ 6,178 $ — $ 79,329

Total CCBX loans receivable

Total commercial and industrial loans - Capital

call lines $ — $ — $ — $ — $ — $ — $ 87,494 $ — $ 87,494

Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —

Commercial and industrial loans - All other

commercial and industrial loans

Payment performance

1 unchanged sentence

Nonperforming 1,333 277 — — — — 476 — 2,086

Total CCBX loans $ 263,853 $ 60,918 $ 7,374 $ 109 $ 425 $ 327 $ 835,614 $ 27,618 $ 1,196,238

Current period gross write-offs $ 21,663 $ 45,617 $ 11,589 $ 100 $ 346 $ 217 $ 72,401 $ — $ 151,933

Table of Content s

Loans by credit quality risk ratings are as follows as of the periods indicated:

Consolidated Pass Other Loans

Mentioned Sub-

Standard Doubtful Total

(dollars in thousands)

December 31, 2022

Total commercial and industrial loans - All other

commercial and industrial loans $ 43,599 $ 7,110 $ 9 $ 11 $ — $ — $ 3,566 $ — $ 54,295

Real estate loans:

Construction, land, and land development 206,304 7,685 66 — 214,055

Residential real estate 448,185 96 876 — 449,157

Commercial real estate 1,030,650 11,201 6,901 — 1,048,752

Current period gross charge-offs $ 3,848 $ 2,502 $ 15 $ 16 $ — $ — $ 224 $ — $ 6,605

Real estate loans - Residential real estate loans

Payment performance

Performing $ — $ — $ — $ — $ — $ — $ 212,435 $ 24,485 $ 236,920

Nonperforming — — — — — — 1,115 — 1,115

Total real estate loans - Residential real estate

loans $ — $ — $ — $ — $ — $ — $ 213,550 $ 24,485 $ 238,035

Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ 4,641 $ — $ 4,641

Consumer and other loans - Credit cards

Payment performance

Performing $ — $ — $ — $ — $ — $ — $ 469,049 $ 1,953 $ 471,002

Nonperforming — — — — — — 33,655 1,180 34,835

Total consumer and other loans - Credit cards $ — $ — $ — $ — $ — $ — $ 502,704 $ 3,133 $ 505,837

Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ 61,358 $ — $ 61,358

Term Loans Amortized Cost Basis by Origination Year

CCBX 2023 2022 2021 2020 2019 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted To Term Total (1)

(dollars in thousands)

As of December 31, 2023

Consumer and other loans - Other consumer and other

Payment performance

Performing $ 212,694 $ 49,711 $ 6,715 $ 95 $ 408 $ 309 $ 27,609 $ — $ 297,541

Nonperforming 4,229 3,074 475 — 7 10 691 — 8,486

Total consumer and other loans - Other

consumer and other loans $ 216,923 $ 52,785 $ 7,190 $ 95 $ 415 $ 319 $ 28,300 $ — $ 306,027

$ 2,573,935 $ 26,201 $ 33,227 $ — 2,633,363

Less net deferred origination fees ( 6,107 )

Loans receivable $ 2,627,256

Table of Content s

Current period gross charge-offs $ 17,815 $ 43,115 $ 11,574 $ 84 $ 346 $ 217 $ 6,178 $ — $ 79,329

Total CCBX loans receivable

Payment performance

Performing $ 254,960 $ 56,544 $ 6,724 $ 106 $ 408 $ 309 $ 799,677 $ 26,438 $ 1,145,166

Nonperforming $ 5,562 $ 3,351 $ 475 $ — $ 7 $ 10 $ 35,937 $ 1,180 $ 46,522

Total CCBX loans $ 260,522 $ 59,895 $ 7,199 $ 106 $ 415 $ 319 $ 835,614 $ 27,618 $ 1,191,688

Current period gross charge-offs $ 21,663 $ 45,617 $ 11,589 $ 100 $ 346 $ 217 $ 72,401 $ — $ 151,933

(1) See Note 23, Restatement of Prior Period Financial Statements.

Allowance for Credit Losses ("ACL")

On January 1, 2023, the Company adopted ASU 2016-13, which replaces the incurred loss methodology with an expected loss methodology that is referred to as CECL.

See Note 1, Description of Business and Summary of Significant Accounting Policies.

As a result of implementing CECL, there was a one-time adjustment to the 2023 opening allowance balance of $ 3.9 million.

CCBX loans have a higher level of expected losses than our community bank loans, which is reflected in the factors for the allowance for credit losses.

10 unchanged sentences

The Company earns 100 % of the interest income on the aforementioned $ 20.6 million of loans.

Table of Content s

The following tables summarize the allocation of the ACL, as well as the activity in the ACL attributed to various segments in the loan portfolio, as of and for the year ended December 31, 2023 and the allocation and activity of the loans and allowance for loan losses ("ALLL ") attributed to the various segments in the loan portfolio for the year ended December 31, 2022:

The following tables summarize the allocation of the ACL, as well as the activity in the ACL attributed to various segments in the loan portfolio, as of and for the years ended December 31, 2024 and December 31, 2023.

Industrial Construction,

5 unchanged sentences

Twelve Months Ended December 31, 2024

ALLL balance, December 31, 2022 $ 4,831 $ 7,425 $ 4,142 $ 5,470 $ 50,996 $ 1,165 $ 74,029

Impact of adopting CECL (ASC 326) 1,428 ( 1,589 ) 1,623 1,240 2,315 ( 1,165 ) $ 3,852

Provision for credit losses or (recapture) 9,264 550 11,921 731 161,577 — 184,043

15,523 6,386 17,686 7,441 214,888 — 261,924

Loans charged-off ( 6,651 ) — ( 4,641 ) — ( 140,705 ) — ( 151,997 )

Recoveries of loans previously charged-off 5 — 4 — 7,022 — 7,031

Net charge-offs ( 6,646 ) — ( 4,637 ) — ( 133,683 ) — ( 144,966 )

ACL Balance, December 31, 2023 $ 8,894 $ 6,386 $ 13,049 $ 7,441 $ 81,611 $ — $ 117,381

Twelve Months Ended December 31, 2022

ALLL Balance, December 31, 2021 $ 3,221 $ 6,984 $ 4,598 $ 6,590 $ 7,092 $ 147 $ 28,632

Provision for credit losses or (recapture) 16,605 ( 2,947 ) 4,199 1,279 256,527 — 275,663

3 unchanged sentences

Net charge-offs ( 14,448 ) — ( 4,998 ) ( 264 ) ( 196,340 ) — ( 216,050 )

ALLL Balance, December 31, 2022 $ 4,831 $ 7,425 $ 4,142 $ 5,470 $ 50,996 $ 1,165 $ 74,029

ACL balance, December 31, 2024 $ 11,051 $ 3,439 $ 12,250 $ 8,456 $ 141,798 $ — $ 176,994

Twelve Months Ended December 31, 2023 (1)

ALLL Balance, December 31, 2022 $ 4,831 $ 7,425 $ 4,142 $ 5,470 $ 50,996 $ 1,165 $ 74,029

Impact of adopting CECL (ASC 326) 1,428 ( 1,589 ) 1,623 1,240 2,315 ( 1,165 ) $ 3,852

Provision for credit losses or (recapture) 9,264 550 11,921 731 161,577 — 184,043

3 unchanged sentences

Net charge-offs ( 6,629 ) — ( 4,637 ) — ( 133,277 ) — ( 144,543 )

ALLL balance, December 31, 2021 $ 3,221 $ 6,984 $ 4,598 $ 6,590 $ 7,092 $ 147 $ 28,632

Table of Content s

ACL Balance, December 31, 2023 $ 8,894 $ 6,386 $ 13,049 $ 7,441 $ 81,611 $ — $ 117,381

(1) See Note 23, Restatement of Prior Period Financial Statements.

There was an unfunded commitments provision of $ 1.9 million for the twelve months ended December 31, 2024 and an unfunded commitments recapture of $ 51,000 for the twelve months ended December 31, 2023.

The following table presents the collateral dependent loans, which are individually evaluated to determine expected credit losses, and the related ACL allocated to these loans:

Real Estate Business Assets Total ACL

(dollars in thousands;

December 31, 2023

Real estate loans:

Residential real estate $ 170 $ — $ 170 $ —

Commercial real estate 7,145 — 7,145 —

Total $ 7,315 $ — $ 7,315 $ —

The following table is a summary of information pertaining to impaired loans as of the period indicated.

Loans originated through CCBX partners are reported using pool accounting and are not subject to individual impairment analysis, therefore CCBX loans are not included in this table.

Balance Recorded

Allowance Recorded

Allowance Total

Investment Related

Business Assets Total ACL

(dollars in thousands)

1 unchanged sentence

Commercial and industrial loans $ 100 $ 100 $ —

Real estate loans:

Construction, land and land development 67 66 — 66 —

Residential real estate — — — — —

Commercial real estate 6,901 6,901 — 6,901 —

Total $ 100 $ 100 $ —

The following tables summarize the average recorded investment and interest income recognized on impaired loans by loan class for the period indicated:

Twelve Months Ended

December 31, 2022 December 31, 2021

Investment Interest Income

Recognized Average

Investment Interest Income

Real Estate Total ACL

(dollars in thousands)

Commercial and industrial loans $ 121 $ — $ 498 $ —

December 31, 2023

Real estate loans:

Construction, land and land development 40 — — —

Residential real estate $ 170 $ 170 $ —

1 unchanged sentence

Total $ 7,315 $ 7,315 $ —

Table of Content s

Note 5 – Premises and Equipment

11 unchanged sentences

Premises and equipment, net $ 27,431 $ 22,090

Depreciation and amortization on premises and equipment charged to expense totaled $ 2.3 million and $ 1.8 million for the years ended December 31, 2023 and 2022, respectively.

Depreciation and amortization on land, buildings, leasehold improvements, furniture and equipment is charged to occupancy expense and totaled $ 1.5 million, $ 1.6 million and $ 1.5 million for the years ended December 31, 2024, 2023 and 2022, respectively.

Amortization on software is charged to data processing and software licenses and totaled $ 3.0 million, $ 754,000 and $ 329,000 for the years ended December 31, 2024, 2023 and 2022, respectively.

Note 6 – Leases

The Company has committed to rent premises used in business operations under non-cancelable operating leases and determines if an arrangement meets the definition of a lease upon inception.

Operating lease right-of-use (“ROU”) assets represent a right to use an underlying asset for the contractual lease term.

Operating lease liabilities represent an obligation to make lease payments arising from the lease.

Any new operating leases entered into will be recognized as an operating lease ROU asset and operating lease liability at the commencement date of the new lease.

The Company’s leases do not provide an implicit interest rate, therefore the Company used its incremental collateralized borrowing rates commensurate with the underlying lease terms to determine the present value of operating lease liabilities at the inception of the lease.

The weighted average discount rate of operating lease liabilities at December 31, 2023 was 4.0 %.

The Company has committed to rent premises and equipment used in business operations under non-cancelable operating and finance leases and determines if an arrangement meets the definition of a lease upon inception.

Operating and finance lease right-of-use (“ROU”) assets represent a right to use an underlying asset for the contractual lease term.

Lease liabilities represent an obligation to make lease payments arising from the lease.

A lease ROU asset and lease liability will be recognized for any new leases at the commencement of the new lease.

The weighted average discount rate as of December 31, 2024 was

for operating leases and 4.75 % for finance leases and is based off the discount rate and term at the time the lease is originated or renewed.

The Company’s operating lease agreements contain both lease and non-lease components, which are generally accounted for separately.

2 unchanged sentences

Operating lease terms include options to extend when it is reasonably certain that the Company will exercise such options, determined on a lease-by-lease basis.

At December 31, 2023, lease expiration dates ranged from less than two months to 21.2 years, with additional renewal options on certain leases typically ranging from 5 to 10 years.

At December 31, 2024, lease expiration dates ranged from less than one month to 21.2 years, with additional renewal options on certain leases typically ranging from zero to 10 years.

At December 31, 2024, the dollar weighted average remaining lease term for the Company’s operating leases was 8.4 years.

Rental expense for operating leases is recognized on a straight-line basis over the lease term and amounted to $ 1.2 million and $ 1.4 million for the years ended December 31, 2023 and 2022, respectively.

Variable lease components, such as fair market value adjustments, are expensed as incurred and not included in ROU assets and operating lease liabilities.

Table of Content s

The weighted average remaining lease term for the Company's finance lease was 1.8 years.

Rental expense for operating leases is recognized on a straight-line basis over the lease term and amounted to $ 1.2 million for the years ended December 31, 2024 and 2023 and $ 1.4 million for the year ended December 31, 2022.

Variable lease components, such as inflation adjustments, are expensed as incurred and not included in ROU assets and operating lease liabilities.

Amortization expense for finance leases is recognized on a straight-line basis over the lease term and amounted to $ 43,000 for the twelve months ended December 31, 2024.

Interest on finance leases was $ 5,000 for the twelve months ended December 31, 2024.

This is a new lease for 2024, so there was no amortization or interest expense for the twelve months ended December 31, 2023 and 2022.

The following sets forth, as of December 31, 2024, the minimum annual lease payments under the terms of these leases, inclusive of renewal options that the Company is reasonably certain to renew:

Operating Finance

(dollars in thousands) December 31,

2025 $ 977 $ 36

2030 and thereafter 2,304 —

11 unchanged sentences

Operating lease expense (1)

1,020 $ 1,074 1,281

Variable lease expense 362 236 193

Finance lease cost

Right-of-use amortization (2)

Interest expense (3)

Total lease expense $ 1,430 $ 1,310 $ 1,474

Cash paid reducing operating lease liabilities $ 1,334 $ 1,473 $ 1,419

(1) Included in net occupancy expense in the Consolidated Statements of Income.

Cash paid from operating leases $ 1,396 $ 1,334 $ 1,473

Cash paid from finance leases $ 47 $ — $ —

(1) Included in net occupancy expense and in the Consolidated Statements of Income.

(2) Included in other expense in the Consolidated Statements of Income.

(3) Included in interest on borrowed funds Consolidated Statements of Income.

Note 7 - Deposits

4 unchanged sentences

Demand, noninterest bearing $ 527,524 $ 625,202

NOW and money market 2,640,240 1,804,399

Interest bearing demand and money market 2,529,084 2,640,240

Savings 66,826 76,562

Brokered deposits 1 101,546

Other deposits 444,351 1

Time deposits less than $250,000 11,252 13,917

1 unchanged sentence

Total deposits $ 3,585,332 $ 3,360,363

Table of Content s

The following table presents the maturity distribution of time deposits as of December 31, 2024:

5 unchanged sentences

Four to five years 279

Included in total deposits is $ 340.1 million in IntraFi network reciprocal NOW and money market sweep accounts as of December 31, 2023, which provides our customers with fully insured deposits through a sweep and exchange of deposits with other financial institutions.

Included in total deposits is $ 414.0 million in IntraFi network reciprocal interest bearing demand and money market sweep accounts as of December 31, 2024, compared to $ 340.1 million as of December 31, 2023, which provides our customers with fully insured deposits through a sweep and exchange of deposits with other financial institutions.

Note 8 – Federal Home Loan Bank Advances and Other Borrowings

At December 31, 2024 and December 31, 2023 the Company had no overnight or term FHLB advances.

FHLB advances are secured by a blanket pledge of eligible collateral including first lien single family and multi-family mortgages with a carrying value of $ 321.5 million and $ 175.1 million at December 31, 2023 and 2022, respectively.

FHLB advances are secured by a blanket pledge of eligible collateral including first lien single family and multi-family mortgages and certain mortgage backed securities with a carrying value of $ 303.0 million and $ 321.5 million at December 31, 2024 and 2023, respectively.

The Company has available borrowing capacity of an additional $ 173.3 million from FHLB at December 31, 2024, subject to certain collateral requirements and with interest at then stated rate.

14 unchanged sentences

There were no borrowings outstanding on this line of credit at December 31, 2024 or 2023.

Table of Content s

Note 9 – Subordinated Debt

12 unchanged sentences

The note matures on November 1, 2032 , is fixed for five years at 7.000 %, and thereafter is variable at a floating rate, calculated quarterly, based on the 3-month SOFR + 2.90 %.

Subordinated debt interest expense of $ 2.4 million and $ 1.2 million was recognized during 2023 and 2022, respectively, and accrued interest payable on these notes totaled $ 515,000 and $ 535,000 at December 31, 2023 and 2022, respectively.

Subordinated debt interest expense of $ 2.4 million was recognized during 2024 and 2023 and $ 1.2 million was recognized during 2022, and accrued interest payable on these notes totaled $ 515,000 at December 31, 2024 and 2023.

Note 10 – Junior Subordinated Debentures

10 unchanged sentences

Prior to June 30, 2023, the debentures bore interest at a rate per annum equal to the 3-month LIBOR plus 2.10 %.

Beginning with rate adjustments subsequent to June 30, 2023, the rate is based off three-month CME Term SOFR plus 0.26 %.

Beginning with rate adjustments subsequent to June 30, 2023, the rate is based off three-month CME Term SOFR plus a spread adjustment of 0.26 % and margin of 2.10 %.

The effective rate as of December 31, 2024 and December 31, 2023 was 6.72 % and 7.75 %, respectively.

6 unchanged sentences

The trust preferred securities issued by the trust rank equally with the common securities in right of payment, except that if an event of default under the indenture governing the note has occurred and is continuing, the preferred securities will rank senior to the common securities in right of payment.

Table of Content s

Note 11 – Income Taxes

2 unchanged sentences

(dollars in thousands)

Current tax expense $ ( 1,325 ) $ 21,014 $ 10,383

Deferred tax benefit 13,879 ( 11,018 ) ( 3,011 )

Current tax expense (benefit) $ 11,960 $ ( 1,325 ) $ 21,014

Deferred tax expense (benefit) 138 13,879 ( 11,018 )

Total tax expense $ 12,098 $ 12,554 $ 9,996

8 unchanged sentences

Excess executive compensation 167 0.3 145 0.3 128 0.3

Bank owned life insurance earnings ( 39 ) ( 0.1 ) ( 76 ) ( 0.2 ) ( 36 ) ( 0.1 )

Effect of tax-exempt interest income ( 71 ) ( 0.1 ) ( 77 ) ( 0.1 ) ( 84 ) ( 0.2 )

Bank owned life insurance earnings ( 102 ) ( 0.2 ) ( 39 ) ( 0.1 ) ( 76 ) ( 0.2 )

Stock-based compensation ( 993 ) ( 1.7 ) ( 728 ) ( 1.3 ) ( 987 ) ( 1.9 )

4 unchanged sentences

The intent of this agreement is that each member of the consolidated group will incur no greater tax liability than it would have incurred on a stand-alone basis.

Table of Content s

The net deferred tax asset consists of the following temporary differences and carryforward items at December 31:

2024 2023 (1)

(dollars in thousands)

15 unchanged sentences

Net deferred tax asset $ 3,600 $ 3,806

(1) see Note 23, Restatement of Prior Period Financial Statements

The determination of the amount of deferred income tax assets which are more likely than not to be realized is primarily dependent on projections of future earnings, which are subject to uncertainty and estimates that may change given economic conditions and other factors.

2 unchanged sentences

All available evidence, both positive and negative is considered to determine whether, based on the weight of that evidence, a valuation allowance is needed.

Based upon its analysis of available evidence, including recent profitability, management has determined that it is “more likely than not” that the Company’s deferred income tax assets as of December 31, 2023 will be fully realized and therefore no valuation allowance was recorded.

Based upon its

analysis of available evidence, including recent profitability, management has determined that it is “more likely than not” that the Company’s deferred income tax assets as of December 31, 2024 will be fully realized and therefore no valuation allowance was recorded.

CCBX partners reimburse the Bank for credit losses on loans covered by credit enhancements, therefore the credit enhancement recovery deferred tax liability partially offsets the allowance for credit losses deferred tax asset.

8 unchanged sentences

All loans included in such transactions were made on substantially the same terms, including interest rate and collateral, as those prevailing at the time for comparable transactions with other persons, and did not, in the opinion of management, involve more than normal credit risk or present other unfavorable features.

Table of Content s

A summary of loan transactions follows:

10 unchanged sentences

The Company also uses other law firms for legal counsel and specialties such as regulatory and SEC counsel.

For fiscal year ended December 31, 2023 and 2022, total payments for legal services were $ 1.0 million and $ 864,000 , respectively.

The Company leased one facility from a related party in 2023 and 2022.

For fiscal years ended December 31, 2024, 2023 and 2022, total payments to Adams and Duncan, Inc.

for legal services were $ 971,000 , $ 1.0 million and $ 864,000 respectively.

The Company leased one facility from a related party in 2023.

The Everett branch facility is leased from a group of investors, one of which was a director until he retired from the board in May 2023.

8 unchanged sentences

The Company uses the same credit policies in making such commitments as it does for instruments that are included in the consolidated balance sheets.

Table of Content s

At December 31, 2023 and 2022, the Company had a reserve for unfunded commitments of $ 582,000 and $ 974,000 , respectively, included in other liabilities on the consolidated balance sheet.

At December 31, 2024 and 2023, the Company had a reserve for unfunded commitments of $ 2.5 million and $ 582,000 , respectively, included in other liabilities on the consolidated balance sheet.

The following table presents commitments associated with outstanding commitments to extend credit, standby and commercial letters of credit and equity investment commitments as of the periods indicated:

(dollars in thousands) 2024 2023

unaudited) 2023 2022

Commitments to extend credit:

5 unchanged sentences

Commercial real estate loans 34,222 54,289

Credit cards $ 717,198 $ 1,014,959

Consumer and other loans 18,553 779

15 unchanged sentences

(dollars in thousands) 2024 2023

unaudited) 2023 2022

Commitments to extend credit:

2 unchanged sentences

Residential real estate loans 453,369 418,761

Consumer and other loans 1,015,156 792,447

Credit cards, consumer and other loans 733,005 1,015,156

Total commitments to extend credit $ 1,756,426 $ 2,051,898

As of December 31, 2024, $ 1.30 billion in CCBX commitments to extend credit are unconditionally cancelable, compared to $ 1.63 billion at December 31, 2023.

The increase in unconditionally cancelable commitments is attributed to growth in CCBX loans.

Commitments that are unconditionally cancelable allow us to better manage loan growth, credit concentrations and liquidity.

These unconditionally cancelable commitments are attributed to activity in CCBX loans.

Commitments that are unconditionally cancelable allow us to manage loan growth, credit concentrations and liquidity.

We also limit CCBX partners to a maximum aggregate customer loan balance originated and held on our balance sheet, as shown in the table below.

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(dollars in thousands;

unaudited) Type of Lending Maximum Portfolio Size

(dollars in thousands) Type of Lending Maximum Portfolio Size

Commercial and industrial loans:

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It is the opinion of management that the disposition or ultimate resolution of such claims and lawsuits will not have a material adverse effect on the financial position of the Company.

Note 14 – Concentration of Credit Risk

Note 14 – Concentration Risk

Most of the community bank’s business activity is with customers who are concentrated in the state of Washington.

2 unchanged sentences

Uninsured deposits in bank accounts held by the Company and Bank at December 31, 2024 and 2023, totaled $ 10.1 million and $ 6.3 million, respectively.

Deposits obtained through our CCBX segment are a significant source of liquidity for us.

Partner program agreements govern the relationship and are valid for a given period of time.

Prior to exiting, the partner would need to provide us adequate notice as stipulated in the agreement that they were not going to renew the program agreement and intend to move the deposits.

The movement to an alternate BaaS provider is cumbersome and would be over a period of time, which would allow us the opportunity to put alternate liquidity in place.

As of December 31, 2024, we have two partners with deposits that are in excess of 10% of total deposits and represent 44% of total deposits.

Loans to the same borrower are generally limited, by state banking regulations, to 20 % of the Bank’s capital and surplus.

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The 2018 Coastal Financial Corporation Omnibus Plan (“2018 Plan”) authorizes the Company to grant awards, including but not limited to, stock options, restricted stock units, and restricted stock awards, to eligible employees, directors or individuals that provide service to the Company, up to an aggregate of 500,000 shares of common stock.

On May 24, 2021, the Company’s shareholders approved the First Amendment to the 2018 Plan, which increased the authorized plan shares by 600,000 .

The 2018 Plan replaces both the 2006 Plan and the Directors’ Stock Bonus Plan (“2006 Plan”).

On May 24, 2021, the Company’s shareholders approved the First Amendment to the 2018 Plan, which increased the

authorized plan shares by 600,000 .

The 2018 Plan replaced both the 2006 Plan and the Directors’ Stock Bonus Plan.

Existing awards will vest under the terms granted and no further awards will be granted under these prior plans.

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Compensation expense related to unvested stock option awards is reversed at date of forfeiture.

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There were no new options granted in the year ended December 31, 2024.

A summary of stock option activity under the Company’s Plan during the year ended December 31, 2024:

Options Shares Weighted-

Options Number of Shares Weighted-

Price Weighted-

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Restricted Stock Units

In the first quarter of 2023, the Company granted 73,611 restricted stock units under the 2018 Plan to employees, which vest ratably over 4 years and 1,084 restricted stock units which vest ratably over 5 years.

In the second quarter of 2023, the Company granted 9,827 restricted stock units under the 2018 Plan to employees, which vest ratably over 5 years.

In the third quarter of 2023, the Company granted 4,000 restricted stock units under the 2018 Plan to employees, which vest ratably over 3 years and 2,150 restricted stock units that vest ratably over 5 years.

In the fourth quarter of 2023, the Company granted no restricted stock units under the 2018 Plan.

During the year ended December 31, 2024, the Company granted 163,901 restricted stock units under the 2018 Plan to employees, which vest ratably over various terms ranging from 3 years to 5 years.

Additionally, the Company granted to an employee 60,000 performance-based restricted stock units ("PSUs") under the 2018 Plan that are eligible to vest on the first day of each month beginning on October 1, 2024 until April 30, 2028, subject to continuous employment with the Company and the achievement of certain stock price conditions, and 15,000 PSUs that are eligible to vest on April 30, 2028, subject to continuous employment with the Company and the achievement of specified performance goals.

Restricted stock units provide for an interest in Company common stock to the recipient, the underlying stock is not issued until certain conditions are met.

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The Company expects to recognize that cost over the remaining weighted-average vesting period of approximately 4.0 years.

Compensation expense recorded related to restricted stock units was $ 2.9 million and $ 1.9 million for the year ended December 31, 2023 and 2022, respectively.

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Compensation expense recorded related to restricted stock units was $ 3.9 million, $ 2.9 million and $ 1.9 million for the years ended December 31, 2024, 2023 and 2022, respectively.

A summary of the Company’s nonvested restricted stock units at December 31, 2024 and changes during the year is presented below:

Nonvested shares - RSUs Shares Weighted-

Nonvested shares - RSUs Number of Shares Weighted-

(dollars in thousands, except per share amounts)

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Granted 238,901 $ 44.06

Forfeited ( 15,032 ) $ 36.70

Forfeited or expired ( 17,982 ) $ 36.98

Vested ( 66,806 ) $ 33.61

1 unchanged sentence

Restricted Stock Awards

There were no new restricted stock awards granted to employees in the year ended December 31, 2023.

There were no restricted stock awards granted to employees in the year ended December 31, 2024.

The fair value of restricted stock awards is equal to the fair value of the Company’s stock at the date of grant.

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Committee chairs receive additional stock in an amount that varies depending upon the nature and frequency of the committee meetings.

The audit committee chair receives additional stock with a market value of approximately $ 10,000 , non-financial risk and compensation committee chairs receive additional stock with a market value of approximately $ 7,500 , and the asset liability & investment, credit and nominating & governance chairs receive additional stock with a market value of approximately $ 5,000 .

The audit committee chair receives additional stock with a market value of approximately $ 15,000 , non-financial risk and compensation committee chairs receive additional stock with a market value of approximately $ 12,500 , and the asset liability & investment, credit, technology, and nominating & governance chairs receive additional stock with a market value of approximately $ 10,000 .

Stock is granted as of each annual meeting date and vest one day prior to the next annual meeting date.

During the vesting period, the grants are considered participating securities.

In May 2023, there were 13,538 shares granted to ten directors at an estimated fair value of $ 35.10 per share.

As of December 31, 2023, there was $ 194,000 of total unrecognized compensation expense related to director stock awards.

Compensation expense related to the Plan totaled $ 432,000 and $ 295,000 for the years ended December 31, 2023 and 2022, respectively.

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As of December 31, 2024, there was $ 298,000 of total unrecognized compensation expense related to director restricted stock awards which the Company expects to recognize over the remaining average vesting period of approximately five months .

Director compensation expense recorded related to the 2018 Plan totaled $ 625,000 , $ 432,000 and $ 295,000 for the for the years ended December 31, 2024, 2023 and 2022, respectively.

A summary of the Company’s nonvested shares at December 31, 2024 and changes during the year is presented below:

Nonvested shares - RSAs Shares Weighted-

Nonvested shares - RSAs Number of Shares Weighted-

(dollars in thousands, except per share amounts)

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Company matching contributions will be approved by the board of directors annually on a discretionary basis.

In 2023 and 2022, the Company provided matching contributions totaling $ 1.6 million and $ 1.3 million, respectively.

In 2024, 2023 and 2022, the Company provided matching contributions totaling $ 1.8 million, $ 1.6 million, and $ 1.3 million, respectively.

Deferred compensation plan - The Company established a deferred compensation plan in 2003 for certain management personnel.

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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 financial statements of the Bank and the Company.

Historically, the Company had been operating under the Small Bank Holding Company Policy Statement, which exempts bank holding companies that have total consolidated assets of less than $3.0 billion and meet other criteria from the Federal Reserve’s risk-based- and leverage capital rules.

Because the Company’s consolidated assets exceeded $3.0 billion as of September 30, 2022, the Company is no longer eligible for the Federal Reserve’s Small Bank Holding Company Policy Statement and is evaluated relative to the capital adequacy standards established by the Federal Reserve.

A bank holding company that crosses the $3.0 billion total consolidated assets threshold as of June 30 of a particular year is no longer permitted to file reports as a small holding company beginning the following March.

The Company’s total consolidated assets were in excess of $3.0 billion as of June 30, 2023, and as a consequence, beginning in March 2024, the Company will no longer prepare and file financial reports with the Federal Reserve as a small bank holding company.

The Company’s total consolidated assets were in excess of $3.0 billion as of June 30, 2023, and as a consequence, beginning in March 2024, the Company ceased preparing and filing financial reports with the Federal Reserve as a small bank holding company.

Under the regulatory capital adequacy guidelines, the Company and Bank must meet specific capital adequacy guidelines that involve quantitative measures of their assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices.

The Company’s and Bank’s capital ratios and the Bank’s classification under the

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prompt corrective action guidelines are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

The Company’s and Bank’s capital ratios and the Bank’s classification under the prompt corrective action guidelines are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Company and Bank to maintain minimum amounts and ratios of total risk-based capital, Tier 1 capital and common equity Tier 1 capital to risk- weighted assets (as defined in the regulations), and Tier 1 capital to average adjusted total consolidated assets (as defined).

6 unchanged sentences

Management believes the Company and the Bank exceed all capital adequacy requirements to which they are subject, including the ratios described below and the capital conservation buffer, as of December 31, 2024.

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The Company and Bank’s actual and required capital amo unts and ratios are as follows:

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Prior to September 30, 2022, the Company operated under the Small Bank Holding Company Policy Statement and therefore was not subject to Basel III capital adequacy requirements.

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Note 18 - Fair Value Measurements

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Other investments 10,800 10,800 — 8,181 2,619

Loans held for sale 20,600 20,600 — 20,600

Loans receivable 3,486,565 3,460,131 — — 3,460,131

18 unchanged sentences

Deposits $ 3,360,363 $ 3,359,867 $ — $ 3,359,867 $ —

FHLB advances — — — — —

Subordinated debt 44,144 43,908 — 43,908 —

1 unchanged sentence

Accrued interest payable 892 892 — 892 —

(1) See Note 23, Restatement of Prior Period Financial Statements.

The Company measures and discloses certain assets and liabilities at fair value.

3 unchanged sentences

Observable inputs reflect market data obtained from independent sources, while

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unobservable inputs reflect the Company’s estimates for market assumptions.

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Available-for-sale

Treasury securities $ 99,461 $ — $ — $ 99,461

Agency collateralized mortgage obligations $ — $ 35 $ — $ 35

4 unchanged sentences

Agency collateralized mortgage obligations — 43 — 43

Agency residential mortgage-backed securities — 1 — 1

Municipals — 250 — 250

$ 99,461 $ 43 $ — $ 99,504

3 unchanged sentences

The factors used in the fair values estimates are subject to change subsequent to the dates the fair value estimates are completed, therefore, current estimates of fair value may differ significantly from the amounts presented herein.

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Items measured at fair value on a nonrecurring basis – The following table presents financial assets and liabilities measured at fair value on a nonrecurring basis and the level within the fair value hierarchy of the fair value measurements for those assets at the dates indicated:

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December 31, 2023

Impaired loans $ — $ — $ 7,080 $ 7,080

Collateral dependent loans $ — $ — $ 7,315 $ 7,315

Equity securities — — 2,622 2,622

Total $ — $ — $ 9,937 $ 9,937

The amounts disclosed above represent the fair values at the time the nonrecurring fair value measurements were made, and not necessarily the fair value as of the dates reported on.

Individually evaluated loans - Fair values for individually evaluated loans are estimated using the fair value of the collateral less selling costs if the loan results in a Level 3 classification.

1 unchanged sentence

Individually evaluated loans carried at fair value generally receive specific allocations of the allowance for credit losses.

For collateral dependent real estate loans, fair value is commonly based on recent real estate appraisals.

These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach.

Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available.

Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.

Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification.

Individually evaluated loans are evaluated on a quarterly basis for additional credit losses and adjusted accordingly.

The estimated fair values of financial instruments disclosed above follow the guidance in ASU 2016-01 which prescribes an “exit price” approach in estimating and disclosing fair value of financial instruments incorporating discounts for credit, liquidity, and marketability factors.

The allowance for individually evaluated loans is calculated using either the collateral value method, which considers the likely source of repayment as the value of the collateral less estimated costs to sell, or the net present value method, which considers the contractual principal and interest terms and estimated cash flows available from the borrower to satisfy the debt.

Valuation is measured based on the fair value of the underlying collateral or the discounted cash expected future cash flows.

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Equity securities – The Company measures equity securities without readily determinable fair values at cost less impairment (if any), plus or minus observable price changes from an identical or similar investment of the same issuer, with price changes recognized in earnings .

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Assets measured at fair value using significant unobservable inputs (Level 3)

1 unchanged sentence

These equity securities are included in other investments on the balance sheet.

• The Company had a $ 2.2 million equity interest in a specialized bank technology company as of December 31, 2024 and December 31, 2023 .

• The Company had a $ 350,000 equity interest in a technology company as of the years ended December 31, 2024 and December 31, 2023.

• The Company had a $ 47,000 and $ 50,000 equity interest in a technology company as of the years ended December 31, 2024, and December 31, 2023, respectively.

For the Year Ended

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The following table provides a description of the valuation technique, unobservable inputs, and qualitative information about the unobservable inputs for the Company’s assets and liabilities classified as Level 3 and measured at fair value on a nonrecurring basis at the date indicated:

(unaudited) Valuation Technique Unobservable Inputs December 31, 2023 Weighted Average Rate

Valuation Technique Unobservable Inputs December 31, 2024 Weighted Average Rate December 31, 2023 Weighted Average Rate

Collateral dependent loans Collateral valuations Discount to appraised value 8.0 % 8.0 %

(unaudited) Valuation Technique Unobservable Inputs December 31, 2022 Weighted Average Rate

Impaired loans Collateral valuations Discount to appraised value 8.0 %

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Note 19 – Revenue from Contracts with Customers

3 unchanged sentences

(dollars in thousands)

Deposit service charges and fees

Service charges and fees

Interchange income $ 2,002 $ 2,176 $ 2,055

6 unchanged sentences

Other income (2)

323 603 1,313

Total noninterest income subject to Topic 606 24,673 18,100 16,410

2 unchanged sentences

Gain (loss) on equity investment 27 279 ( 153 )

Gain on sale of branch — — 1,263

Gain on sale of loans, net — 253 —

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wire transfer fees, annuity fees, mortgage broker fees and brokerage fees.

(3) See Note 23, Restatement of Prior Period Financial Statements.

A description of the Company’s revenue streams accounted for under Topic 606 is as follows:

Service Charges on Deposit Accounts:

Service Charges on Accounts:

The Company earns fees from deposit customers for transaction-based, account maintenance and overdraft services.

Transaction-based fees, which include services such as ATM use fees, stop payment charges, statement rendering, and ACH fees, are recognized at the time the transaction is executed at the point in the time the Company fulfills the customer’s request.

Transaction-based fees, which include services such as ATM use fees, stop payment charges, statement rendering, and ACH fees, are recognized at the time the transaction is executed.

This point in time is when the Company fulfills the customer’s request.

Account maintenance fees, which relate primarily to monthly maintenance, are earned over the course of a month, representing the period over which the Company satisfies the performance obligation.

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Merchant service fees are included in Services Charges on Deposit Accounts in the consolidated statements of income.

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Loan Referral Fees:

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BaaS fraud enhancement 9,834 7,165 29,571 2,669 ( 22,406 )

Total BaaS enhancements / guarantees 184,929 105,945 10,591 78,984 95,354

Total BaaS enhancements / indemnifications 282,673 184,929 105,945 97,744 78,984

Total BaaS fees $ 302,748 $ 198,169 $ 117,138 $ 104,579 $ 81,031

(1) See Note 23, Restatement of Prior Period Financial Statements.

Note 20 - Earnings Per Common Share

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Under the two-class method, earnings available to common shareholders for the period are allocated between common shareholders and participating securities according to dividends declared (or accumulated) and participation rights in undistributed earnings, however the difference in the two-class method was not significant.

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Note 21 – Segment Reporting

As defined in ASC 280, Segment Reporting , an operating segment is a component of an enterprise that engages in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the enterprise’s chief operating decision makers to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available.

As defined in ASC 280, Segment Reporting, an operating segment is a component of an enterprise that engages in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the enterprise’s chief operating decision makers (“CODM”) to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available.

We evaluate performance based on an internal performance measurement accounting system, which provides line of business results.

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the community bank, CCBX, and treasury & administration.

The Executive Leadership Team, which includes the CEO, Presidents, CFO and other key executive members, which the Company has designated as the CODMs, evaluates the financial performance of the Company’s segments by evaluating interest income and expense, noninterest income and significant expenses.

The community bank segment includes all community banking activities.

A primary focus of the community bank is on providing a wide range of banking products and services to consumers and small to medium sized businesses in the broader Puget Sound region in the state of Washington and through the Internet and our mobile banking application.

We currently operate 14 full-service banking locations, 12 of which are located in Snohomish County, where we are the largest community bank by deposit market share, and two of which are located in neighboring counties ( one in King County and one in Island County).

The CCBX segment provides BaaS that allows our broker-dealer and digital financial service partners to offer their customers banking services.

The CCBX segment has 24 relationships, at varying stages, including three signed letters of intent as of December 31, 2024.

The treasury & administration segment includes investments, debt and other reporting items that are not specific to the community bank or CCBX segments.

The management accounting policies and processes utilized in compiling segment financial information are highly subjective and, unlike financial accounting, are not based on authoritative guidance similar to GAAP.

As a result, reported segments and the financial information of the reported segments are not necessarily comparable with similar information reported by other financial institutions.

Additionally, because of the interrelationships of the various segments, the information presented is not indicative of how the segments would perform if they operated as independent entities.

Changes in management structure or allocation methodologies and procedures may result in future changes to previously reported segment financial data.

Furthermore, changes in management structure or allocation methodologies and procedures may result in changes in reported segment financial data.

The Company continues to evaluate its methodology on allocating items to the Company’s various segments to support strategic business decisions by the Company’s executive leadership.

Income and expenses that are specific to a segment are directly posted to each segment.

Additionally, certain indirect expenses are allocated to each segment utilizing various metrics, such as number of employees, utilization of space, and allocations based on loan and deposit balances.

We have implemented a transfer pricing process that credits or charges the community bank and CCBX segments with intrabank interest income or expense for the difference in average loans and average deposits, with the treasury & administration segment as the offset for those entries.

Financial information concerning the Company's reportable segments and the reconciliation to the consolidated financial results is shown in the following tables for the periods indicated.

The segment structure changed after 2021, therefore some items are reported as “N/A” for the year ended December 31, 2021.

December 31, 2024 December 31, 2023 (1)

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Securities — — 47,321 47,321 — — 150,364 150,364

Loans held for sale — 20,600 — 20,600 — — — —

Total loans receivable 1,882,988 1,603,577 — 3,486,565 1,830,154 1,191,388 — 3,021,542

8 unchanged sentences

Total liabilities $ 1,896,846 $ 2,099,808 $ ( 314,150 ) $ 3,682,504 $ 1,843,430 $ 1,896,924 $ ( 285,327 ) $ 3,455,027

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(1) See Note 23, Restatement of Prior Period Financial Statements.

Year Ended December 31, 2024 Year Ended December 31, 2023 (1)

3 unchanged sentences

Interest income $ 123,735 $ 248,286 $ 24,756 $ 396,777 $ 106,983 $ 197,306 $ 18,930 $ 323,219

Interest income (expense)

intrabank transfer ( 10,404 ) 19,071 ( 8,667 ) — 796 4,106 ( 4,902 ) —

Interest income (expense) intrabank transfer ( 21,265 ) 30,221 ( 8,956 ) — ( 10,404 ) 19,071 ( 8,667 ) —

Interest expense 26,897 94,035 2,817 123,749 17,354 71,646 2,644 91,644

Net interest income 75,573 184,472 12,983 273,028 79,225 144,731 7,619 231,575

Provision for credit

losses - loans 1,322 182,721 — 184,043 719 78,345 — 79,064

(Recapture)/Provision for

unfunded commitments ( 211 ) 160 — ( 51 ) — — — —

Net interest income after

provision for credit

losses - loans and

unfunded commitments 78,114 ( 30,998 ) 7,619 54,735 77,725 12,461 2,525 92,711

Provision/(Recapture) for credit losses - loans ( 2,130 ) 277,793 — 275,663 1,322 182,721 — 184,043

Provision for unfunded commitments 757 1,187 — 1,944 ( 211 ) 160 — ( 51 )

Net interest income/(expense) after provision for credit losses - loans and unfunded commitments 76,946 ( 94,508 ) 12,983 ( 4,579 ) 78,114 ( 38,150 ) 7,619 47,583

NONINTEREST INCOME

Deposit service charges and fees 3,810 44 — 3,854 3,757 47 — 3,804

Service charges and fees 3,691 47 — 3,738 3,810 44 — 3,854

Other income 751 76 892 1,719 1,165 433 501 2,099

15 unchanged sentences

Net Income $ 35,982 $ 25,092 $ ( 15,855 ) $ 45,219 35,202 25,262 ( 15,885 ) 44,579

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(1) See Note 23, Restatement of Prior Period Financial Statements.

Year Ended December 31, 2022

2 unchanged sentences

INTEREST INCOME AND EXPENSE

Interest income $ 76,551 $ 6,532 N/A $ 83,083

Interest income (expense)

intrabank transfer N/A N/A N/A —

Interest expense 3,547 99 N/A 3,646

Net interest income 73,004 6,433 N/A 79,437

Provision for credit

losses - loans 1,275 8,640 N/A 9,915

(Recapture)/Provision for

unfunded commitments — — N/A —

Net interest income after

provision for credit

losses - loans and

unfunded commitments 71,729 ( 2,207 ) N/A 69,522

Interest income $ 80,544 $ 102,808 $ 8,818 $ 192,170

Interest income (expense) intrabank transfer $ 796 $ 4,106 $ ( 4,902 ) —

Interest expense 2,896 16,108 $ 1,391 20,395

Net interest income 78,444 90,806 $ 2,525 171,775

Provision/(Recapture) for credit losses - loans 719 78,345 $ — 79,064

Net interest income/(expense) after provision for credit losses - loans and unfunded commitments 77,725 12,461 2,525 92,711

NONINTEREST INCOME

Deposit service charges and fees 3,698 — N/A 3,698

Other income 7,015 98 N/A 7,113

BaaS program income — 6,716 N/A 6,716

BaaS indemnification income — 10,591 N/A 10,591

Service charges and fees 3,757 47 $ — 3,804

Other income 1,411 356 $ 234 2,001

BaaS program income — 11,193 $ — 11,193

BaaS indemnification income — 105,945 $ — 105,945

Noninterest income (1)

10,713 17,405 N/A 28,118

5,168 117,541 $ 234 122,943

NONINTEREST EXPENSE

Salaries and employee benefits 32,562 4,539 N/A 37,101

Occupancy 4,039 89 N/A 4,128

Data processing and software licenses 4,509 442 N/A 4,951

Legal and professional expenses 2,654 479 N/A 3,133

Other expense 7,783 1,686 N/A 9,469

BaaS loan expense — 2,976 N/A 2,976

BaaS fraud expense — 1,505 N/A 1,505

Total noninterest expense 51,547 11,716 N/A 63,263

Net income before income taxes 30,895 3,482 N/A 34,377

Income taxes 6,638 734 N/A 7,372

Net Income 24,257 2,748 N/A 27,005

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Salaries and employee benefits 20,476 18,007 $ 13,745 52,228

Occupancy 3,843 257 $ 119 4,219

Data processing and software licenses 3,285 1,806 $ 1,725 6,816

Legal and professional expenses 213 3,163 $ 3,384 6,760

Other expense 5,202 1,285 $ 5,658 12,145

BaaS loan expense — 53,294 $ — 53,294

BaaS fraud expense — 29,571 $ — 29,571

Total noninterest expense 33,019 107,383 $ 24,631 165,033

Net income before income taxes 49,874 22,619 ( 21,872 ) 50,621

Income taxes 10,068 4,248 ( 4,320 ) 9,996

Net Income 39,806 18,371 ( 17,552 ) 40,625

Note 22 – Parent Company Only Condensed Financial Information

1 unchanged sentence

2024 December 31,

(dollars in thousands)

Cash $ 47,739 $ 5,479

13 unchanged sentences

2024 2023 2022

(dollars in thousands)

INTEREST INCOME

19 unchanged sentences

NET INCOME $ 45,219 $ 44,579 $ 40,625

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Year ended December 31,

2024 2023 2022

(dollars in thousands)

CASH FLOWS FROM OPERATING ACTIVITIES:

16 unchanged sentences

Proceeds from subordinated debt — — 19,625

Repayment of subordinated debt — - ( 10,000 )

Net cash provided by financing activities 93,196 618 21,093

2 unchanged sentences

Cash, end of year $ 47,739 $ 5,479 $ 22,904

Note 23 – Restatement of Prior Period Financial Statements

Restatement Background

The Company has restated herein the impacted line items to the Consolidated Balance Sheet, Consolidated Income Statement, and Consolidated Statement of Cash flows as of and for the year ended December 31, 2023.

In addition, the Company has restated the impacted line items to its unaudited quarterly Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Income and Cash Flows for the first three quarters of and each of the years ended December 31, 2024 and December 31, 2023.

Description of Misstatements

• BaaS partner loans

Certain interest income and BaaS loan expense amounts were misstated due to differences between BaaS lending partner accounting policies and the Company’s accounting policies.

The Company made an adjustment to decrease interest and fees on loans with a corresponding decrease to BaaS loan expense as well as the related Balance Sheet accounts impacted.

• Presentation of BaaS partner interchange fees on point of sale transaction

Reimbursement of expenses for interchange fees associated with certain BaaS partners had not been appropriately accounted for under Topic 606, where the Company acts as an agent.

The Company should have been recording these transactions on a net basis in Non-Interest Expense but reported the transaction gross in both Non-Interest Income and Non-Interest Expense.

As a result, the Company made an adjustment to reduce reimbursement of expenses included in Non-Interest Income with a corresponding decrease to point of sale expense in Non-Interest Expense.

Neither of these misstatements had any impact on consolidated pre-tax or net income.

Other Immaterial Adjustments

The restatement of the historical consolidated financial statements also includes the correction of its Consolidated Statement of Income for the year ended December 31, 2022 related to BaaS partner interchange fees.

The Company determined this correction did not, either individually or in the aggregate, result in a material misstatement of its previously issued consolidated financial statements for the year ended December 31, 2022.

Description of Restatement Tables

The following tables present the amounts previously reported and a reconciliation of the restatement amounts reported on the restated Consolidated Balance Sheets, the restated Consolidated Statements of Income and the restated Consolidated Statements of Cash Flows for the periods presented.

Further information regarding the misstatements and related restatements are summarized in the tables below.

Corrected Consolidated Balance Sheets As of

December 31, 2023

(dollars in thousands) As Previously Reported Adjustment As Restated

Loans receivable $ 3,026,092 $ ( 4,550 ) $ 3,021,542

Allowance for credit losses ( 116,958 ) ( 423 ) ( 117,381 )

Total loans receivable, net 2,909,134 ( 4,973 ) 2,904,161

CCBX credit enhancement asset 107,921 4,973 112,894

Accrued interest receivable

26,819 ( 3,361 ) 23,458

Total assets 3,753,366 ( 3,361 ) 3,750,005

CCBX payable 33,651 ( 3,361 ) 30,290

Total liabilities 3,458,388 ( 3,361 ) 3,455,027

Total liabilities and shareholders' equity 3,753,366 ( 3,361 ) 3,750,005

Retained earnings 165,311 — 165,311

Corrected Consolidated Statements of Income Year Ended

December 31, 2023

(dollars in thousands) As Previously Reported Adjustment As Restated

Interest and fees on loans $ 311,441 $ ( 7,152 ) $ 304,289

Total interest income 330,371 ( 7,152 ) 323,219

Net interest income 238,727 ( 7,152 ) 231,575

Net interest income/(expense) after provision for credit losses 54,735 ( 7,152 ) 47,583

Reimbursement of expenses 4,175 ( 3,053 ) 1,122

BaaS program income 16,293 ( 3,053 ) 13,240

Total noninterest income 207,175 ( 3,053 ) 204,122

Point of sale expense 3,534 ( 3,053 ) 481

Noninterest expense, excluding BaaS loan and BaaS fraud expense 110,712 ( 3,053 ) 107,659

BaaS loan expense

86,900 ( 7,152 ) 79,748

BaaS loan and fraud expense 94,065 ( 7,152 ) 86,913

Total noninterest expense 204,777 ( 10,205 ) 194,572

Net income 44,579 — 44,579

Corrected Consolidated Statement of Cash Flows Year Ended

December 31, 2023

(dollars in thousands) As Previously Reported Adjustment As Restated

Net change in CCBX credit enhancement asset $ ( 50,079 ) $ ( 4,973 ) $ ( 55,052 )

Net change in CCBX payable 13,232 ( 3,361 ) 9,871

Net change in other assets and liabilities ( 15,919 ) 3,361 ( 12,558 )

Net cash provided by operating activities 196,513 ( 4,973 ) 191,540

Increase in loans receivable, net

( 1,052,283 ) 4,973 ( 1,047,310 )

Net cash used by investing activities ( 598,985 ) 4,973 ( 594,012 )

Corrected Consolidated Balance Sheets As of As of

September 30, 2024 June 30, 2024

(dollars in thousands;

unaudited) As Previously Reported Adjustment As Restated As Previously Reported Adjustment As Restated

Loans receivable $ 3,418,832 $ ( 4,938 ) $ 3,413,894 $ 3,326,460 $ ( 4,647 ) $ 3,321,813

Allowance for credit losses ( 170,263 ) ( 1,411 ) ( 171,674 ) ( 147,914 ) ( 964 ) ( 148,878 )

Total loans receivable, net 3,248,569 ( 6,349 ) 3,242,220 3,178,546 ( 5,611 ) 3,172,935

CCBX credit enhancement asset 167,251 6,349 173,600 143,485 5,611 149,096

Accrued interest receivable

23,664 ( 1,349 ) 22,315 23,617 ( 1,997 ) 21,620

Total assets 4,065,821 ( 1,349 ) 4,064,472 3,961,546 ( 1,997 ) 3,959,549

CCBX payable 39,188 ( 1,349 ) 37,839 34,536 ( 1,997 ) 32,539

Total liabilities 3,733,891 ( 1,349 ) 3,732,542 3,644,853 ( 1,997 ) 3,642,856

Total liabilities and shareholders' equity 4,065,821 ( 1,349 ) 4,064,472 3,961,546 ( 1,997 ) 3,959,549

Retained earnings 197,162 — 197,162 183,706 — 183,706

Corrected Consolidated Balance Sheets As of As of

March 31, 2024 September 30, 2023

(dollars in thousands;

unaudited) As Previously Reported Adjustment As Restated As Previously Reported Adjustment As Restated

Loans receivable $ 3,199,554 $ ( 4,453 ) $ 3,195,101 $ 2,967,035 $ ( 3,289 ) $ 2,963,746

Allowance for credit losses ( 139,258 ) ( 683 ) ( 139,941 ) ( 101,085 ) ( 110 ) ( 101,195 )

Total loans receivable, net 3,060,296 ( 5,136 ) 3,055,160 2,865,950 ( 3,399 ) 2,862,551

CCBX credit enhancement asset 137,276 5,136 142,412 91,867 3,399 95,266

Accrued interest receivable

24,681 ( 2,196 ) 22,485 23,428 ( 1,443 ) 21,985

Total assets 3,865,258 ( 2,196 ) 3,863,062 3,678,265 ( 1,443 ) 3,676,822

CCBX payable 33,095 ( 2,196 ) 30,899 38,229 ( 1,443 ) 36,786

Total liabilities 3,561,549 ( 2,196 ) 3,559,353 3,393,815 ( 1,443 ) 3,392,372

Total liabilities and shareholders' equity 3,865,258 ( 2,196 ) 3,863,062 3,678,265 ( 1,443 ) 3,676,822

Retained earnings 172,110 — 172,110 156,299 — 156,299

Corrected Consolidated Balance Sheets As of As of

June 30, 2023 March 31, 2023

(dollars in thousands;

unaudited) As Previously Reported Adjustment As Restated As Previously Reported Adjustment As Restated

Loans receivable $ 3,007,553 $ ( 1,950 ) $ 3,005,603 $ 2,837,204 $ ( 770 ) $ 2,836,434

Allowance for credit losses ( 110,762 ) ( 51 ) ( 110,813 ) ( 89,123 ) — ( 89,123 )

Total loans receivable, net 2,896,791 ( 2,001 ) 2,894,790 2,748,081 ( 770 ) 2,747,311

CCBX credit enhancement asset 96,928 2,001 98,929 76,395 770 77,165

Accrued interest receivable

21,581 ( 783 ) 20,798 19,321 ( 319 ) 19,002

Total assets 3,535,283 ( 783 ) 3,534,500 3,451,033 ( 319 ) 3,450,714

CCBX payable 27,714 ( 783 ) 26,931 30,794 ( 319 ) 30,475

Total liabilities 3,262,621 ( 783 ) 3,261,838 3,192,270 ( 319 ) 3,191,951

Total liabilities and shareholders' equity 3,535,283 ( 783 ) 3,534,500 3,451,033 ( 319 ) 3,450,714

Retained earnings 146,029 — 146,029 133,123 — 133,123

Corrected Consolidated Statements of Income Three Months Ended Nine Months Ended

September 30, 2024 September 30, 2024

(dollars in thousands;

unaudited) As Previously Reported Adjustment As Restated As Previously Reported Adjustment As Restated

Interest and fees on loans $ 99,590 $ 86 $ 99,676 $ 275,155 $ 1,291 $ 276,446

Total interest income 105,079 86 105,165 293,038 1,291 294,329

Net interest income 72,187 86 72,273 199,360 1,291 200,651

Net interest income/(expense) after

provision for credit losses 1,930 86 2,016 ( 16,380 ) 1,291 ( 15,089 )

Reimbursement of expenses 1,843 ( 1,278 ) 565 4,514 ( 2,837 ) 1,677

BaaS program income 6,436 ( 1,278 ) 5,158 17,357 ( 2,837 ) 14,520

Total noninterest income 80,068 ( 1,278 ) 78,790 236,941 ( 2,837 ) 234,104

Point of sale expense 1,351 ( 1,278 ) 73 3,072 ( 2,837 ) 235

Noninterest expense, excluding

BaaS loan and BaaS fraud expense 30,920 ( 1,278 ) 29,642 89,127 ( 2,837 ) 86,290

BaaS loan expense

32,612 86 32,698 86,525 1,291 87,816

BaaS loan and fraud expense 34,696 86 34,782 91,316 1,291 92,607

Total noninterest expense 65,616 ( 1,192 ) 64,424 180,443 ( 1,546 ) 178,897

Net income 13,456 — 13,456 31,852 — 31,852

Corrected Consolidated Statements of Income Three Months Ended Six Months Ended

June 30, 2024 June 30, 2024

(dollars in thousands;

unaudited) As Previously Reported Adjustment As Restated As Previously Reported Adjustment As Restated

Interest and fees on loans $ 90,944 $ ( 65 ) $ 90,879 $ 175,565 $ 1,205 $ 176,770

Total interest income 97,487 ( 65 ) 97,422 187,959 1,205 189,164

Net interest income 66,237 ( 65 ) 66,172 127,173 1,205 128,378

Net interest income/(expense) after

provision for credit losses 3,912 ( 65 ) 3,847 ( 18,310 ) 1,205 ( 17,105 )

Reimbursement of expenses 1,637 ( 780 ) 857 2,670 ( 1,559 ) 1,111

BaaS program income 6,096 ( 780 ) 5,316 10,921 ( 1,559 ) 9,362

Total noninterest income 69,918 ( 780 ) 69,138 156,873 ( 1,559 ) 155,314

Point of sale expense 852 ( 780 ) 72 1,721 ( 1,559 ) 162

Noninterest expense, excluding

BaaS loan and BaaS fraud expense 27,949 ( 780 ) 27,169 58,207 ( 1,559 ) 56,648

BaaS loan expense

29,076 ( 65 ) 29,011 53,913 1,205 55,118

BaaS loan and fraud expense 30,860 ( 65 ) 30,795 56,620 1,205 57,825

Total noninterest expense 58,809 ( 845 ) 57,964 114,827 ( 354 ) 114,473

Net income 11,596 — 11,596 18,396 — 18,396

Corrected Consolidated Statements of Income Three Months Ended

March 31, 2024

(dollars in thousands;

unaudited) As Previously Reported Adjustment As Restated

Interest and fees on loans $ 84,621 $ 1,270 $ 85,891

Total interest income 90,472 1,270 91,742

Net interest income 60,936 1,270 62,206

Net interest income/(expense) after provision for credit losses ( 22,222 ) 1,270 ( 20,952 )

Reimbursement of expenses 1,033 ( 779 ) 254

BaaS program income 4,825 ( 779 ) 4,046

Total noninterest income 86,955 ( 779 ) 86,176

Point of sale expense 869 ( 779 ) 90

Noninterest expense, excluding BaaS loan and BaaS fraud expense 30,258 ( 779 ) 29,479

BaaS loan expense

24,837 1,270 26,107

BaaS loan and fraud expense 25,760 1,270 27,030

Total noninterest expense 56,018 491 56,509

Net income 6,800 — 6,800

Corrected Consolidated Statements of Income Three Months Ended Nine Months Ended

September 30, 2023 September 30, 2023

(dollars in thousands;

unaudited) As Previously Reported Adjustment As Restated As Previously Reported Adjustment As Restated

Interest and fees on loans $ 83,652 $ ( 1,704 ) $ 81,948 $ 230,282 $ ( 3,968 ) $ 226,314

Total interest income 88,331 ( 1,704 ) 86,627 242,128 ( 3,968 ) 238,160

Net interest income 62,229 ( 1,704 ) 60,525 179,070 ( 3,968 ) 175,102

Net interest income/(expense) after

provision for credit losses 34,976 ( 1,704 ) 33,272 55,867 ( 3,968 ) 51,899

Reimbursement of expenses 1,152 ( 888 ) 264 3,099 ( 2,244 ) 855

BaaS program income 4,401 ( 888 ) 3,513 11,924 ( 2,244 ) 9,680

Total noninterest income 34,579 ( 888 ) 33,691 142,481 ( 2,244 ) 140,237

Point of sale expense 1,068 ( 888 ) 180 2,635 ( 2,244 ) 391

Noninterest expense, excluding

BaaS loan and BaaS fraud expense 30,648 ( 888 ) 29,760 84,098 ( 2,244 ) 81,854

BaaS loan expense

23,003 ( 1,704 ) 21,299 62,590 ( 3,968 ) 58,622

BaaS loan and fraud expense 25,853 ( 1,704 ) 24,149 68,976 ( 3,968 ) 65,008

Total noninterest expense 56,501 ( 2,592 ) 53,909 153,074 ( 6,212 ) 146,862

Net income 10,270 — 10,270 35,567 — 35,567

Corrected Consolidated Statements of Income Three Months Ended Six Months Ended

June 30, 2023 June 30, 2023

(dollars in thousands;

unaudited) As Previously Reported Adjustment As Restated As Previously Reported Adjustment As Restated

Interest and fees on loans $ 80,199 $ ( 1,375 ) $ 78,824 $ 146,630 $ ( 2,264 ) $ 144,366

Total interest income 83,686 ( 1,375 ) 82,311 153,797 ( 2,264 ) 151,533

Net interest income 62,350 ( 1,375 ) 60,975 116,841 ( 2,264 ) 114,577

Net interest income/(expense) after

provision for credit losses 10,097 ( 1,375 ) 8,722 20,891 ( 2,264 ) 18,627

Reimbursement of expenses 1,026 ( 703 ) 323 1,947 ( 1,356 ) 591

BaaS program income 3,948 ( 703 ) 3,245 7,523 ( 1,356 ) 6,167

Total noninterest income 58,595 ( 703 ) 57,892 107,902 ( 1,356 ) 106,546

Point of sale expense 814 ( 703 ) 111 1,567 ( 1,356 ) 211

Noninterest expense, excluding

BaaS loan and BaaS fraud expense 28,340 ( 703 ) 27,637 53,450 ( 1,356 ) 52,094

BaaS loan expense 22,033 ( 1,375 ) 20,658 39,587 ( 2,264 ) 37,323

BaaS loan and fraud expense 23,570 ( 1,375 ) 22,195 43,123 ( 2,264 ) 40,859

Total noninterest expense 51,910 ( 2,078 ) 49,832 96,573 ( 3,620 ) 92,953

Net income 12,906 — 12,906 25,297 — 25,297

Corrected Consolidated Statements of Income Three Months Ended

March 31, 2023

(dollars in thousands;

unaudited) As Previously Reported Adjustment As Restated

Interest and fees on loans $ 66,431 $ ( 889 ) $ 65,542

Total interest income 70,111 ( 889 ) 69,222

Net interest income 54,491 ( 889 ) 53,602

Net interest income/(expense) after provision for credit losses 10,794 ( 889 ) 9,905

Reimbursement of expenses 921 ( 653 ) 268

BaaS program income 3,575 ( 653 ) 2,922

Total noninterest income 49,307 ( 653 ) 48,654

Point of sale expense 753 ( 653 ) 100

Noninterest expense, excluding BaaS loan and BaaS fraud expense 25,110 ( 653 ) 24,457

BaaS loan expense

17,554 ( 889 ) 16,665

BaaS loan and fraud expense 19,553 ( 889 ) 18,664

Total noninterest expense 44,663 ( 1,542 ) 43,121

Net income 12,391 — 12,391

Corrected Consolidated Statement of Cash Flows Nine Months Ended Six Months Ended

September 30, 2024 June 30, 2024

(dollars in thousands;

unaudited) As Previously Reported Adjustment As Restated As Previously Reported Adjustment As Restated

Net change in CCBX credit enhancement asset $ ( 59,330 ) $ ( 6,349 ) $ ( 65,679 ) $ ( 35,564 ) $ ( 5,611 ) $ ( 41,175 )

Net change in CCBX payable 5,537 ( 1,349 ) 4,188 885 ( 1,997 ) ( 1,112 )

Net change in other assets and liabilities 4,248 1,349 5,597 2,194 1,997 4,191

Net cash provided by operating activities 197,813 ( 6,349 ) 191,464 134,451 ( 5,611 ) 128,840

Increase in loans receivable, net

( 1,218,640 ) 6,349 ( 1,212,291 ) ( 645,787 ) 5,611 ( 640,176 )

Net cash used by investing activities ( 465,112 ) 6,349 ( 458,763 ) 313,976 5,611 319,587

Corrected Consolidated Statement of Cash Flows Three Months Ended Nine Months Ended

March 31, 2024 September 30, 2023

(dollars in thousands;

unaudited) As Previously Reported Adjustment As Restated As Previously Reported Adjustment As Restated

Net change in CCBX credit enhancement asset $ ( 29,355 ) $ ( 5,136 ) $ ( 34,491 ) $ ( 34,025 ) $ ( 3,399 ) $ ( 37,424 )

Net change in CCBX payable ( 556 ) ( 2,196 ) ( 2,752 ) 17,810 ( 1,443 ) 16,367

Net change in other assets and liabilities ( 312 ) 2,196 1,884 ( 13,299 ) 1,443 ( 11,856 )

Net cash provided by operating activities 61,900 ( 5,136 ) 56,764 146,236 ( 3,399 ) 142,837

Increase in loans receivable, net

( 311,264 ) 5,136 ( 306,128 ) ( 823,221 ) 3,399 ( 819,822 )

Net cash used by investing activities ( 132,801 ) 5,136 ( 127,665 ) ( 486,209 ) 3,399 ( 482,810 )

Corrected Consolidated Statement of Cash Flows Six Months Ended Three Months Ended

June 30, 2023 March 31, 2023

(dollars in thousands;

unaudited) As Previously Reported Adjustment As Restated As Previously Reported Adjustment As Restated

Net change in CCBX credit enhancement asset $ ( 39,086 ) $ ( 2,001 ) $ ( 41,087 ) $ ( 18,553 ) $ ( 770 ) $ ( 19,323 )

Net change in CCBX payable 7,295 ( 783 ) 6,512 10,375 ( 319 ) 10,056

Net change in other assets and liabilities 5,562 783 6,345 3,177 319 3,496

Net cash provided by operating activities 81,115 ( 2,001 ) 79,114 46,631 ( 770 ) 45,861

Increase in loans receivable, net

( 585,510 ) 2,001 ( 583,509 ) ( 295,583 ) 770 ( 294,813 )

Net cash used by investing activities ( 493,834 ) 2,001 ( 491,833 ) ( 273,123 ) 770 ( 272,353 )

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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 8. Financial Statements and Supplementary Data