What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-02-27 compared with 2025-03-17 · 306 added, 538 removed, 1515 unchanged (36% of the section changed)

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This discussion should be read in conjunction with the consolidated financial statements and the related notes that appear elsewhere in this Form 10-K.

The Company restated its financial statements for the year ended December 31, 2023 and the quarters ended March 31, June 30, and September 30, 2023 and 2024 for misstatements between the balance sheet, income statement and statement of cash flows that were determined to be material to previously issued financial statements.

See “Note 23, Restatement of Prior Period Financial Statements” in Item 8 of this Form 10-K, for additional information related to the restatement, including descriptions of the misstatements and the impacts on our consolidated financial statements.

We are a bank holding company that operates through our wholly owned subsidiaries, Coastal Community Bank (“Bank”) and Arlington Olympic LLC.

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The community bank segment includes all community banking activities, with a primary focus 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 banking as a service (“BaaS”) that allows our broker-dealer and digital financial service partners to offer their customers banking services.

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

The CCBX segment had 28 partners as of December 31, 2025.

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Our principal lending products are commercial real estate loans, consumer loans, residential real estate, commercial and industrial loans and construction, land and land development loans.

Brokered Deposits Rulemaking

On July 30, 2024, the Board of Directors of the FDIC approved a proposed rule that would amend the FDIC’s regulations governing the classification and treatment of brokered deposits.

The proposal would, among other changes, broaden the definition of deposit broker to include agents that place or facilitate the placement of third-party deposits at

only one insured depository institution and narrow the exception to the definition of deposit broker for agents whose primary purpose is not the placement of funds with depository institutions.

While the Company is evaluating the potential impact of the proposed rule, if the rule is finalized as proposed, the Bank may be required to classify a greater amount of its deposits obtained with the involvement of third parties, such as CCBX partners, as brokered deposits.

An increase in the amount of brokered deposits on the Bank’s balance sheet could, among other consequences, increase the Bank’s deposit insurance assessment costs.

Recordkeeping for Custodial Accounts

On September 17, 2024, the FDIC issued a proposed rule that would impose recordkeeping and other compliance requirements on custodial deposit accounts with transactional features.

Under the proposed rule, FDIC-insured banks maintaining such custodial deposit accounts would be required to maintain updated and accurate account records identifying the beneficial owners of those deposits, the balance attributable to each beneficial owner, and the ownership category in which the deposited funds are held.

While we are evaluating the potential impact of the proposed rule, if the rule is finalized as proposed, it could increase the costs of operating BaaS arrangements such as the partnerships in our CCBX segment.

Third Party Risk Management Guidance

On July 25, 2024, the Federal Reserve, FDIC, and Office of the Comptroller of the Currency released a joint statement discussing potential risks related to arrangements between banks and third parties to deliver bank deposit products and services to end users, as well as examples of effective practices for the management of those risks.

Additionally, the agencies issued a request for information and comment on the nature of banks’ relationships with financial technology companies and effective risk management practices for those relationships.

The agencies also indicated that they are considering whether additional steps, such as enhancements to supervisory guidance, could help ensure that banks effectively manage risks associated with these various types of arrangements.

These developments suggest that the agencies are increasing their focus on third-party deposit arrangements and may expect financial institutions involved in these arrangements, such as us, to change their risk management and compliance practices, which may increase the costs of operating a BaaS business.

Key Factors Affecting our Business

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Net interest income is primarily a function of the average balances of interest-earning assets and interest-bearing liabilities and the yields and costs with respect to these assets and liabilities.

Average balances are influenced by internal considerations such as the types of products we offer and the amount of risk that we are willing to assume as well as external influences such as economic conditions, competition for loans and deposits, and interest rates.

Average balances are influenced by internal considerations such as the types of products we offer and the amount of risk that we are willing to assume as well as external influences

such as economic conditions, competition for loans and deposits, and interest rates.

The yields generated by our loans and securities are typically affected by short-term and long-term interest rates and, in the case of loans, competition for similar products in our market area.

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Business - Concentrations of Credit Risk section.

If our partners are unable to fulfill their

contracted obligations then the Bank would be exposed to additional credit losses as a result of this counterparty risk.

If our partners are unable to fulfill their contracted obligations then the Bank would be exposed to additional credit losses as a result of this counterparty risk.

Management regularly evaluates and manages this counterparty risk.

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Our efficiency ratio was 53.13% at December 31, 2025, compared to 42.38% at December 31, 2024.

This ratio decreased as a result of the increase in net interest income and credit enhancement income for the year ended December 31, 2024 compared to the year ended December 31, 2023.

This ratio increased as a result of an increase in net interest income, decrease in credit enhancement income and higher noninterest expenses for the year ended December 31, 2025 compared to the year ended December 31, 2024.

Economic Conditions

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In recent years, the Puget Sound region has experienced significant population gain, fueled in large part by the region’s technology industry, low unemployment and rising real estate values, all of which positively impacted our business.

The economic environment is continuously changing with bank failures, mergers, inflation, changing interest rates, global unrest, the war in Ukraine, conflicts in the Middle East, political environment, natural disasters, and trade issues that contribute to economic uncertainty which has caused increased market volatility and may lead to a significant decrease in consumer confidence and business generally.

The macro economic environment is continuously changing, primarily due to the pace of economic growth, inflation, changing interest rates, global trade tensions, tariffs, unemployment, global unrest, the war in Ukraine, conflicts in the Middle East, political uncertainty, natural disasters and trade issues that contribute to economic uncertainty which has caused increased market volatility and may lead to a significant decrease in consumer confidence and business generally.

Critical Accounting Estimates and Significant Accounting Policies

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These assumptions, estimates and judgments we use can be influenced by a number of factors, including the general economic environment.

Actual results could differ from these judgments and estimates under different conditions, resulting in a change that could have a material impact on the carrying values of our assets and liabilities and our results of operations.

We believe that of our accounting policies, the following accounting policies may involve a higher degree of judgment and complexity:

Securities are classified as available for sale when they might be sold before maturity.

Securities available for sale are carried at fair value.

Unrealized gains and losses are excluded from earnings and reported in other comprehensive income.

Securities within the available for sale portfolio may be used as part of our asset/liability strategy and may be pledged or sold in response to changes in interest rate risk, prepayment risk or other similar economic factors.

Securities held to maturity are carried at cost, adjusted for the amortization of premiums and the accretion of discounts and may be pledged.

Interest earned on these assets is included in interest income.

Interest income includes amortization of any purchase premium or discount.

Premiums and discounts on securities are amortized using the level-yield method, except for mortgage backed securities where prepayments are anticipated.

Gains and losses on sales are recorded on the trade date and determined using the specific identification method.

Management evaluates debt securities for credit losses, on at least a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation.

For securities in an unrealized loss position, management considers the extent and duration of the unrealized loss, and the financial condition and near-term prospects of the issuer.

Management also assesses whether it intends to sell, or it is more likely than not that it will be required to sell, a security in an unrealized loss position before recovery of its amortized cost basis.

If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as an impairment through earnings.

The credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis.

For more information and discussion related to securities, see “ Note 3 - Investment Securities” in the Consolidated Financial Statements.

Loans Held for Investment

Loans held for investment are those that management has the intent and ability to hold for the foreseeable future or until maturity or payoff at the principal and interest balance outstanding, net of deferred loan fees and costs.

Loans are typically secured by specific items of collateral including business assets, consumer assets, and commercial and residential real estate.

Commercial loans are expected to be repaid from cash flow from operations of businesses.

Interest income is accrued on the unpaid principal balance.

Loan origination fees and certain direct origination costs are deferred and recognized as adjustments to interest income using a level yield methodology or a method approximating the level yield methodology.

As of December 31, 2024, loans receivable totaled $3.49 billion, an increase of $465.0 million, or 15.4%, compared to $3.02 billion as of December 31, 2023.

Total loans receivable is net of $6.5 million in net deferred origination fees.

The increase in loans is largely attributed to growth in our CCBX segment as a result of growth from existing and new partners, combined with loan growth in the community bank segment.

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

Loans Held for Sale

CCBX loans held for sale consist of the portion of CCBX originated loans that the Company intends to sell back to the originating CCBX partner or its affiliate generally at par.

The Company sells loans to manage credit positions and concentrations with partners and across loan categories.

During the twelve months ended December 31, 2024, the Company transferred $1.55 billion in CCBX loans receivable to loans held for sale and subsequently sold $1.52 billion these loans.

As of December 31, 2024 there were $20.6 million CCBX loans held for sale and no CCBX 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 United States Department of Agriculture (“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 community bank loans held for sale at December 31, 2024 and 2023.

Equity Investments

Equity investments include amounts invested in stock, venture capital funds, partnerships, and other business ventures.

Some of these equity investments are in vendors/suppliers, private companies, government agencies, or government sponsored enterprises.

The Company directly holds stock in organizations such as the Federal Reserve Bank, Federal Home Loan Bank of Des Moines, private companies, and venture capital funds.

Equity investments are subject to the risk of loss if these organizations experience financial difficulties or fall on hard times.

The Company carries these investments at market value or cost if market value is not readily determinable.

During 2024, net contributions to private company equity investments totaled $72,000 and increased in value by $26,000.

In 2023, net contributions to private company equity investments totaled $125,000 and increased in value by $278,000.

The assumptions underlying these valuations represent management’s best estimates, which involve inherent uncertainties and the application of management’s judgment.

While we believe the assumptions and estimates we have made are reasonable and appropriate, different assumptions or estimates could have resulted in materially different fair values for these equity investments.

For more information and discussion related to securities, see Note 3 - Investment Securities” in the Consolidated Financial Statements.

Allowance for Credit Losses

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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.

The Company increased the allowance from $117.4 million at December 31, 2023 to $177.0 million at December 31, 2024.

The allowance was significantly increased in response to growth in CCBX loans.

The Company uses CCBX partner data, industry data and its own credit loss data to develop an appropriate allowance for the risk inherent in the CCBX new loan volume.

The Company decreased the allowance from $177.0 million at December 31, 2024 to $169.5 million at December 31, 2025.

The change is largely related to improved credit quality decreasing the provision for CCBX loans.

The Company uses CCBX partner data, industry data and its own credit loss data to develop an appropriate allowance for the risk inherent in the CCBX loan portfolio.

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

Stock-based Compensation

We grant stock options and restricted stock to our employees and directors.

We record the related compensation expense based on the grant date fair value calculated in accordance with the authoritative guidance issued by FASB.

We recognize these compensation costs on a straight-line basis over the requisite service period of the award.

We estimate the grant date fair value of stock options using the Black-Scholes valuation model.

Stock-based compensation expense related to awards of restricted stock and restricted stock units is based on the fair value at the grant date.

The determination of fair value using the Black-Scholes model is affected by the price of our common stock, as well as the input of other subjective assumptions.

These assumptions include, but are not limited to, the expected term of stock options and our stock price volatility.

The factors considered by our board of directors included the prices of known transactions in our common stock, the book value per share of our common stock, and our board of directors’ understanding of pricing multiples for comparable financial institutions that were not publicly traded.

The assumptions underlying these valuations represented management’s best estimate, which involved inherent uncertainties and the application of management’s judgment.

As a result, if we had used different assumptions or estimates, the fair value of our common stock and our stock-based compensation expense could have been materially different.

For more information and discussion related to stock-based compensation, see “Note 15 – Stock-based Compensation” in the Consolidated Financial Statements.

Revenue Recognition

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The Company generally fully satisfies its performance obligations on its contracts with customers as services are rendered and the transaction prices are typically fixed, charged either on a periodic basis or based on activity.

Because performance obligations are satisfied as services are rendered and the transaction prices are fixed, there is little judgment involved in applying Topic 606 that significantly affects the determination of the amount and timing of revenue from contracts with customers.

The recording of BaaS income and expense is dependent upon the contractual agreement with each partner, however in accordance with accounting guidance the recording of certain components of BaaS income are consistent across agreements.

Agreements with many of our CCBX partners provide for a credit enhancement which protects the Bank by absorbing incurred losses.

In accordance with accounting guidance, we estimate and record a provision for probable losses for these CCBX loans.

Because performance obligations are satisfied as services are

rendered and the transaction prices are fixed, there is little judgment involved in applying Topic 606 that significantly affects the determination of the amount and timing of revenue from contracts with customers.

The recording of BaaS income and expense is in accordance with accounting guidance, and is dependent upon the contractual agreement with each partner with certain components of BaaS income being consistent across agreements.

Agreements with many of our CCBX partners provide for a credit enhancement which protects the Bank by absorbing incurred credit and fraud losses.

In accordance with accounting guidance, we estimate and record a provision for probable losses for CCBX loans.

When the provision for credit losses - loans and provision for unfunded commitments is recorded, a credit enhancement asset is also recorded on the balance sheet through noninterest income (BaaS credit enhancement).

Incurred losses are recorded in the allowance for credit losses, the credit enhancement asset is relieved when credit enhancement recoveries are received from the CCBX partner.

Incurred losses are recorded in the allowance for credit losses, and the credit enhancement asset is relieved when credit enhancement payments and recoveries are received from the CCBX partner.

Many agreements with our CCBX partners also provide protection to the Bank from fraud by absorbing incurred fraud losses.

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For the year ended December 31, 2025, noninterest income subject to Topic 606 increased $9.7 million to $34.3 million, compared to $24.7 million for the year ended December 31, 2024.

The increase was largely due to an increase in BaaS fee income resulting from increased activity and growth with active CCBX partners.

The increase was largely due to an increase in BaaS program income resulting from increased activity and growth with active CCBX partners.

For more information and discussion related to revenue recognition, see “ Note 19 – Revenue Recognition” in the Consolidated Financial Statements.

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Financial Statements and Supplementary Data of this Form 10-K.

Year Ended December 31, 2024, Compared to Year Ended December 31, 2023 .

Net income for the year ended December 31, 2024 was $45.2 million, or $3.26 per diluted share, compared to $44.6 million, or $3.27 per diluted share, for the year ended December 31, 2023.

The increase in net income over the prior year was attributable to a $41.5 million increase in net interest income, $104.1 million increase in noninterest income partially offset by a $93.6 million increase in

the provision for credit losses - loans and a $51.7 million increase in noninterest expense.

The increase in noninterest income, provision expense and noninterest expense are largely related to CCBX loan and deposit growth.

The increase in interest expense is related to higher average interest bearing deposits and an increase in cost of deposits as a result of higher interest rates.

This section of this Form 10-K generally discusses 2025 and 2024 items and year-to-year comparisons between 2025 and 2024.

Discussions of 2023 items and year-to-year comparisons between 2024 and 2023 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024.

Year Ended December 31, 2025, Compared to Year Ended December 31, 2024 .

Net income for the year ended December 31, 2025 was $47.0 million, or $3.06 per diluted share, compared to $45.2 million, or $3.26 per diluted share, for the year ended December 31, 2024.

The increase in net income over the prior year was attributable to a $59.8 million increase in net interest income, $81.2 million increase in noninterest income partially offset by a $104.9 million increase in the provision for credit losses - loans and a $29.5 million increase in noninterest expense.

The increase in noninterest income, provision expense and noninterest expense are largely related to CCBX loan and deposit growth.

The increase in interest expense is related to higher average interest bearing deposits and an increase in cost of deposits as a result of higher interest rates.

Net income is up;

however, net income per diluted share is down as a result of the capital raise in December 2024 that increased the number of shares outstanding.

The increase in net income over the comparable period in the prior year was primarily attributable to an increase of $37.0 million in net interest income, partially offset by an increase of $10.6 million in BaaS loan expense.

The increase in interest income and BaaS loan expense is largely related to growth in CCBX loans.

Also contributing to the variance is an increase in BaaS program income of $9.4 million.

The increase is partially offset by a $15.8 million increase in salaries and employee benefits, a $4.7 million increase in legal and professional expenses and an $8.0 million increase in data processing and software licenses all related to growth and investments in technology.

Additionally, there was an increase in the provision for income taxes of $2.2 million as a result of higher net income, an increase in effective tax rate resulting from an increase in state taxes, and the taxability of certain equity awards.

Net Interest Income

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Net interest income for the year ended December 31, 2025, was $310.1 million, compared to $273.0 million for the year ended December 31, 2024, an increase of $37.0 million, or 13.6%.

Yield on loans receivable was 11.20% for the year ended December 31, 2024, compared to 10.36% for the year ended December 31, 2023.

The increase in net interest income compared to the year ended December 31, 2023 was largely related to growth in loans from CCBX and the community bank.

The increase in net interest income compared to the year ended December 31, 2024 was largely related to growth in CCBX loans and a decrease in interest expense as a result of lower interest rates.

Interest and fees on loans totaled $397.6 million for the year ended December 31, 2025 compared to $372.0 million for the year ended December 31, 2024.

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Average CCBX yield of 15.87% and 17.39% was earned on CCBX loans for the years ended December 31, 2025 and December 31, 2024, respectively.

This decrease in yield on loans receivable is the result of lower rates compared to the prior year period as well as a change in the loan mix.

Lower rate capital call lines were $101.5 million higher compared to December 31, 2024.

CCBX yield does not include the impact of BaaS loan expense.

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The tables later in this section illustrate the impact of BaaS loan expense on CCBX loan yield.

Community bank average loans receivable grew to $1.89 billion for the year ended December 31, 2024, compared to $1.73 billion for the year ended December 31, 2023, an increase of $166.5 million, or 9.6%.

Community bank average loans receivable was fairly flat at $1.88 billion for the year ended December 31, 2025, compared to $1.89 billion for the year ended December 31, 2024, representing a decrease of $8.5 million, or 0.4%.

Average yield of 6.52% was earned on community bank loans for the year ended December 31, 2025, compared to 6.54% for the year ended December 31, 2024.

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The average balance of interest earning deposits invested with other banks for the year ended December 31, 2025 was $671.7 million, compared to $405.5 million for the year ended December 31, 2024.

Additionally, the yield on these interest earning deposits with other banks increased 0.05%, compared to the year ended December 31, 2023.

Interest income on investment securities decreased $141,000 to $3.1 million, with a yield of 4.67% at December 31, 2024, compared to $3.2 million, and a yield of 2.66%, at December 31, 2023.

Average investment securities decreased $54.7 million from $120.2 million for the year ended December 31, 2023 to $65.5 million for the year ended December 31, 2024 as a result of available for sale (“AFS”) U.S.

Treasury securities that matured earlier in the year, partially offset by an increase in HTM securities resulting from securities purchased for CRA purposes.

Interest expense was $123.7 million for the year ended December 31, 2024, a $32.1 million increase from the year ended December 31, 2023.

Interest income on investment securities decreased $529,000 to $2.5 million.

Average investment securities decreased $19.2 million from $65.5 million for the year ended December 31, 2024 to $46.2 million for the year ended December 31, 2025 as a result of maturing securities and principal paydowns.

Interest expense was $119.6 million for the year ended December 31, 2025, a $4.2 million decrease from the year ended December 31, 2024.

Interest expense on deposits was $116.9 million for the year ended December 31, 2025, compared to $120.9 million for the year ended December 31, 2024.

The $31.9 million increase in interest expense on deposits was due to an increase in average interest bearing deposits of $510.2 million and an increase in interest rates.

The $4.0 million decrease in interest expense on deposits was due to decreases in interest rates despite an increase in average interest bearing deposits of $439.2 million.

Interest on borrowed funds was $2.6 million for the year ended December 31, 2025 and $2.8 million for the year ended December 31, 2024.

The $173,000 increase in interest expense on borrowed funds from the year ended December 31, 2023

is primarily the result of an increase in interest rates on the junior subordinated debt, which increased 0.22% to 7.77% for the year ended December 31, 2024, compared to 7.55% for the year ended December 31, 2023.

Net interest margin was 7.18% for the year ended December 31, 2024, compared to 6.88% for the year ended December 31, 2023.

The increase in net interest margin compared to the year ended December 31, 2023 was largely a result of an increase of 0.84% for yield on loans partially offset by an increase of 0.59% for cost of deposits, primarily due to growth in CCBX deposits.

Interest expense has increased and net interest margin was compressed as a result of growth in higher rate CCBX deposits.

Interest bearing deposits increased an average of $510.2 million for the year ended December 31, 2024, compared to the year ended December 31, 2023, and these deposits were tied to a higher Fed Funds rate for most of 2024.

Also contributing is the sale of higher risk and higher yielding loans during the quarters ended September 30, 2023, December 31, 2023 and March 31, 2024 in an effort to optimize and strengthen the balance sheet which increased year to date net interest margin.

Cost of funds was 3.49% for the year ended December 31, 2024, compared to 2.91% for the year ended December 31, 2023.

Cost of deposits for the year ended December 31, 2024 was 3.46%, which was a 0.58% increase, from 2.87% for the year ended December 31, 2023.

These increases were largely due to growth in CCBX interest bearing deposits tied to a higher Fed Funds rate for most of 2024, compared to the year ended December 31, 2023.

We expect the recent decrease in the Fed Funds rate will help to decrease the cost of deposits.

Total yield on loans receivable for the year ended December 31, 2024 was 11.20%, compared to 10.36% for the year ended December 31, 2023.

This increase in yield on loans receivable is primarily attributed to a 0.34% increase in yield and $166.5 million increase in average community bank loans compared to the year ended December 31, 2023.

For the year ended December 31, 2024, average CCBX loans increased $217.2 million, or 17.9%, with an average CCBX yield of 17.39%, compared to 16.30% for the year ended December 31, 2023.

CCBX yield does not include the impact of BaaS loan expense.

BaaS loan expense represents the amount paid or payable to partners for credit enhancements, fraud enhancements and servicing CCBX loans.

The tables later in this section illustrate the impact of BaaS loan expense on CCBX loan yield.

In light of our recent efforts to optimize and strengthen the balance sheet by selling higher yield CCBX loans back to the originating partners, combined with the recent decrease in the Fed Funds rate, total yield on loans have and may continue to flatten out as new CCBX loans are replacing higher risk and higher yielding loans that were sold or allowed to mature during the quarters ended September 30, 2023, December 31, 2023 and March 31, 2024.

Year Ended December 31, 2023, Compared to Year Ended December 31, 2022 .

Net interest income for the year ended December 31, 2023 was $231.6 million, compared to $171.8 million for the year ended December 31, 2022, an increase of $59.8 million, or 34.8%.

Yield on loans receivable was 10.36% for the year ended December 31, 2023, compared to 8.12% for the year ended December 31, 2022.

The increase in net interest income compared to the year ended December 31, 2022 was largely related to increased yield on loans from growth in higher yielding CCBX and community bank loans and interest rate increases on variable rate and new loans.

Average loans receivable for the year ended December 31, 2023 was $2.94 billion, compared to $2.26 billion for the year ended December 31, 2022.

Interest and fees on loans totaled $304.3 million for the year ended December 31, 2023 compared to $183.4 million for the year ended December 31, 2022.

The $120.9 million increase in interest and fees on loans for the year ended December 31, 2023, compared to the year ended December 31, 2022, was largely due to increased yield on loans from growth in higher yielding CCBX and community bank loans and an overall increase in interest rates.

Loan growth was $394.3 million, or 15.0%, for the year ended December 31, 2023, compared to December 31, 2022.

CCBX average loans receivable grew to $1.21 billion for the year ended December 31, 2023, compared to $742.4 million for the year ended December 31, 2022, an increase of $468.0 million, or 63.0%.

Average CCBX yield of 16.30% was earned on CCBX loans for the year ended December 31, 2023, compared to 13.85% for the year ended December 31, 2022.

CCBX yield does not include the impact of BaaS loan expense.

BaaS loan expense represents the amount paid or payable to partners for credit enhancements, fraud enhancements and servicing CCBX loans.

The tables later in this section illustrate the impact of BaaS loan expense on CCBX loan yield.

Also impacting the increase in loan interest is the increase in interest rates on variable rate loans resulting from the FOMC raising rates from 4.50% as of December 31, 2022 to 5.50% as of December 31, 2023, with the most recent increase during such period on July 26, 2023.

Interest income from interest earning deposits with other banks was $15.3 million at December 31, 2023, an increase of $8.6 million due to higher interest rates, compared to December 31, 2022.

The average balance of interest earning deposits invested with other banks for the year ended December 31, 2023 was $295.8 million, compared to $516.0 million for the year ended December 31, 2022.

This decrease was the result of increased loan demand.

Additionally, the yield on these interest earning deposits with other banks increased 3.88%, compared to the year ended December 31, 2022.

Interest income on investment securities increased to $3.2 million at December 31, 2023, compared to $1.7 million at December 31, 2022.

Average investment securities increased $26.9 million from $93.2 million for the year ended December 31, 2022 to $120.2 million for the year ended December 31, 2023 as a result of purchasing additional securities to hold for CRA purposes, and average yield increased to 2.66% for the year ended December 31, 2023, compared to 1.87% for the year ended December 31, 2022.

Interest expense was $91.6 million for the year ended December 31, 2023, a $71.2 million increase from the year ended December 31, 2022.

Interest expense on deposits was $89.0 million for the year ended December 31, 2023, compared to $19.0 million for the year ended December 31, 2022.

The $70.0 million increase in interest expense on deposits was primarily due to an increase in average interest bearing deposits of $671.0 million.

Interest on borrowed funds was $2.6 million for the year ended December 31, 2023, compared to $1.4 million for the year ended December 31, 2022.

The $1.3 million increase in interest expense on borrowed funds from the year ended December 31, 2022 was the result of a $16.4 million average balance increase in subordinated debt, which increased during the quarter ended December 31, 2022 partially offset by a decrease in average FHLB borrowings, which were paid off in full during the quarter ended March 31, 2022.

The FOMC increased the Fed Funds rate 1.00% during the twelve months ended December 31, 2023, with the most recent increase during such period on July 26, 2023.

The $179,000 decrease in interest expense on borrowed funds from the year ended December 31, 2024 is primarily the result of a decrease in interest rates on the junior subordinated debt, which decreased 1.00% to 6.77% for the year ended December 31, 2025, compared to 7.77% for the year ended December 31, 2024.

Net interest margin was 7.14% for the year ended December 31, 2025, compared to 7.18% for the year ended December 31, 2024.

The increase in net interest margin compared to the year ended December 31, 2022 was largely a result of an increase in higher rate loans.

Average loans increased $679.1 million, compared to the year ended December 31, 2022.

Also contributing to the increase in net interest margin compared to the year ended December 31, 2022 was a $8.6 million increase in interest earned on interest earning deposits invested in other banks.

These interest earning deposits earned an average rate of 5.19% for the year ended December 31, 2023, compared to an average rate of 1.30% for the year ended December 31, 2022.

The decrease in net interest margin compared to the year ended December 31, 2024 was largely a result of a decrease of 0.20% for yield on loans and a decrease of 0.93% on interest bearing deposits with other banks partially offset by a decrease of 0.48% for cost of deposits, despite a $439.2 million increase in average interest bearing deposits, many of which were impacted by a lower Fed Funds rate for all of 2025.

Cost of funds was 3.02% for the year ended December 31, 2025, compared to 3.49% for the year ended December 31, 2024.

Cost of deposits for the year ended December 31, 2023 was 2.87%, which was a 2.16% increase, from 0.71% for the year ended December 31, 2022.

These increases were largely due to an increase in interest rates and an increase in interest bearing deposits.

CCBX deposit growth also contributed to the increase in interest expense.

Cost of deposits for the year ended December 31, 2025 was 2.99%, which was a 0.48% decrease, from 3.46% for the year ended December 31, 2024.

These decreases were largely due to lower interest rates compared to the prior year period.

Total yield on loans receivable for the year ended December 31, 2025 was 11.00%, compared to 11.20% for the year ended December 31, 2024.

This increase in yield on loans receivable is primarily attributed to an increase in higher rate CCBX loans.

As of the year ended December 31, 2023, average CCBX loans increased $468.0 million, or 63.0%, with an average CCBX yield of 16.30%, compared to 13.85% at December 31, 2022.

CCBX yield does not include the impact of BaaS loan expense.

BaaS loan expense represents the amount paid or payable to partners for credit enhancements, fraud enhancements and servicing CCBX loans.

The tables later in this section illustrate the impact of BaaS loan expense on CCBX loan yield.

There was an increase in average community bank loans of $211.1 million, or 13.9%, which is net of an average $28.6 million decrease in PPP loans as a result of loan forgiveness and repayments, compared to the year ended December 31, 2022.

Average yield on community bank loans for the year ended December 31, 2023 was 6.20% compared to 5.32% for the year ended December 31, 2022.

The following tables (1) show the average yield on loans and cost of deposits by segment and (2) illustrate how BaaS loan interest income is affected by BaaS loan expense resulting in net BaaS loan income and the associated yield for the periods indicated:

This decrease in yield on loans receivable is primarily attributed to lower interest rates and a change in loan mix.

For the year ended December 31, 2025, average CCBX loans increased $302.4 million, or 21.2%,

with an average CCBX yield of 15.87%, compared to 17.39% for the year ended December 31, 2024.

There was a decrease in average community bank loans of $8.5 million, or 0.4%, compared to the year ended December 31, 2024.

Average yield on community bank loans for the year ended December 31, 2025 was 6.52%.

compared to 6.54% for the year ended December 31, 2024.

The following tables show the average yield on loans and cost of deposits by segment and also illustrates the impact of BaaS loan expense on CCBX yield on loans:

For the Year Ended

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A reconciliation of this non-GAAP measure is set forth in the section titled “GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures.”

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

For the Year Ended

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(2) Includes loans held for sale.

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

For the year ended December 31, 2025, net interest margin (net interest income divided by the average total interest earning assets) and net interest spread (average yield on total interest earning assets minus average cost of total interest bearing liabilities) were 7.14% and 6.36%, respectively, compared to 7.18% and 6.25%, respectively, for the year ended December 31, 2024.

The following table presents an analysis of the average balances of net interest income, net interest spread and net interest margin for the periods indicated.

Loan costs, net of fees included in interest income, totaled $8.9 million and $6.3 million for the years ended December 31, 2024 and 2023, respectively and loan fees, net of costs included in interest income totaled $3.2 million for the year ended December 31, 2022.

Loan fees, net of loan costs included in interest income, totaled $9.3 million, $8.9 million and $6.3 million for the years ended December 31, 2025, 2024 and 2023, respectively.

Average Balance Sheets

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(3) Net interest margin represents net interest income divided by the average total interest earning assets.

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

The following table presents an analysis of certain average balances, interest income and interest expense that are specific to each segment.

Items are that not directly attributed to the segment are not listed:

Items that are not directly attributed to the segment are not listed:

For the Year Ended

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$ 1,884,526 $ 122,956 6.52 % $ 1,893,011 $ 123,735 6.54 % $ 1,726,495 $ 106,983 6.20 %

Intrabank asset, net (6)

— — — — — — 123,156 796 0.65

Total interest earning assets 1,884,526 122,956 6.52 1,893,011 123,735 6.54 1,726,495 106,983 6.20

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Interest earning assets:

Loans receivable (1)

$ 186 $ 23 12.37 % $ — $ — — % $ — $ — — %

Interest earning deposits with

other banks 671,710 28,972 4.31 405,515 21,265 5.24 295,808 15,346 5.19

Investment securities, available for

Investment securities, available

33 1 3.03 16,162 350 2.17 100,260 2,158 2.15

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(6) Intrabank assets and liabilities are consolidated for period calculations and presented as intrabank asset, net or intrabank liability, net in the table above.

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

The following table presents information regarding the dollar amount of changes in interest income and interest expense for the periods indicated for each major component of interest earning assets and interest bearing liabilities and distinguishes between the changes attributable to changes in volume and changes attributable to changes in interest rates.

The table illustrates the $42.9 million increase in loan interest income that is attributable to an increase in loan volume and $24.8 million increase in loan interest income that is attributable to an increase in loan rates.

The table illustrates the $32.4 million increase in loan interest income that is attributable to an increase in loan volume partially offset by a decrease of $6.8 million in loan interest income attributed to a decrease in loan rates.

For purposes of this table, changes attributable to both rate and volume that cannot be segregated have been allocated to volume.

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Interest bearing deposits 15,353 (19,371) (4,018) 21,208 10,724 31,932

PPPLF borrowings — — — — — —

FHLB advances (5,706) 5,564 (142) 144 — 144

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Increase in net interest income $ 33,598 $ 3,439 $ 37,037 $ 27,069 $ 14,384 $ 41,453

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

Provision for Credit Losses

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Management’s Discussion and Analysis of Financial Condition and Operations—Financial Condition—Allowance for Credit Losses.”

The economic environment is continuously changing, due to the pace of economic growth, inflation, changing interest rates, unemployment, global unrest, the war in Ukraine, conflicts in the Middle East, the political environment, natural disasters, and trade issues that may impact the provision and therefore the allowance.

The macro economic environment is continuously changing, primarily due to the pace of economic growth, inflation, changing interest rates, global trade tensions, tariffs, unemployment, global unrest, the war in Ukraine, conflicts in the Middle East, political uncertainty, natural disasters, and trade issues that may impact the provision and therefore the allowance.

Gross loans, excluding loans held for sale, totaled $3.75 billion at December 31, 2025.

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The credit enhancement asset is relieved as credit enhancement payments are received from the CCBX partner or taken from the partner's cash reserve account.

The Company adopted the Current Expected Credit Loss (“CECL”) accounting standard effective January 1, 2023.

The CECL allowance model which calculates reserves over the life of the loan and is largely driven by portfolio characteristics, economic outlook, and other key methodology assumptions versus the prior accounting practice that utilized the incurred loss model.

The adoption of this ASU resulted in a one-time cumulative-effect adjustment to the allowance for credit losses as of the day of adoption.

Year Ended December 31, 2025, Compared to Year Ended December 31, 2024 .

The provision for credit losses - loans for the year ended December 31, 2025, was $189.4 million compared to $275.7 million for the year ended December 31, 2024.

The increase in the Company’s provision for credit losses - loans during the year ended December 31, 2024, is largely related to the provision for CCBX partner loans due to significant loan growth, a change in the mix of loans and an increase in loan balances with higher loss rates.

During the year ended December 31, 2024, a $277.8 million provision for credit losses - loans was recorded for loans originated through CCBX partners based on management’s analysis.

The factors used in management’s analysis for community bank credit losses indicated that a recapture of $2.1 million was needed for the year ended December 31, 2024 due in part to a change in remaining average lives.

Year Ended December 31, 2023, Compared to Year Ended December 31, 2022 .

The provision for credit losses - loans for the year ended December 31, 2023, was $184.0 million compared to $79.1 million for the year ended December 31, 2022.

The increase in the Company’s provision for credit losses - loans during the year ended December 31, 2023, is largely related to the provision for CCBX partner loans.

The decrease in the Company’s provision for credit losses - loans during the year ended December 31, 2025, is largely related to improvement in the performance of the CCBX portfolio and our focus on originating higher quality CCBX loans resulting in lower historical loss factors.

During the year ended December 31, 2025, a $190.0 million provision for credit losses - loans was recorded for loans originated through CCBX partners based on management’s analysis.

The factors used in management’s analysis for community bank credit losses indicated that a provision for credit losses - loans of $1.3 million was needed for the year ended December 31, 2023.

The factors used in management’s analysis for community bank credit losses indicated that a recapture of $666,000 was needed for the year ended December 31, 2025 due to a change in loan mix and updated prepayment speeds, partially offset by a slight increase in economic uncertainty.

The following table shows the provision expense by segment for the periods indicated:

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Net charge-offs for the year ended December 31, 2025 totaled $196.8 million, or 5.45% of total average loans, as compared to net charge-offs of $216.1 million, or 6.51% of total average loans, for the year ended December 31, 2024.

Net charge-offs were up significantly in 2024 compared to 2023 as a result of the growth in loans originated through CCBX partners.

In accordance with GAAP, CCBX losses are recorded as charge-offs, but CCBX partner agreements provide for a

credit enhancement that indemnifies and as a result CCBX partners reimburse the Bank for net-charge-offs on CCBX loans and negative deposit accounts, except in accordance with the program agreement for one partner where the Company is responsible for credit losses on approximately 5% of a $324.6 million loan portfolio.

Net charge-offs decreased in 2025 compared to 2024 as a result of the improvement in the performance of loans originated through CCBX partners and our focus on originating higher quality CCBX loans.

In accordance with GAAP, CCBX losses are recorded as charge-offs, but CCBX partner agreements provide for a credit enhancement that indemnifies the Bank from incurred losses, and as a result CCBX partners reimburse the Bank for net-charge-offs on CCBX loans and negative deposit accounts, except in accordance with the program agreement for one partner where the Company is responsible for credit losses on approximately 5% of a $321.3 million loan portfolio.

At December 31, 2025, our portion of this portfolio represented $22.1 million in loans.

Provision expense on these loans was $4.9 million and $6.0 million for the years ended December 31, 2025 and 2024, respectively, with net charge-offs of $4.6 million in 2025 and $5.6 million in 2024.

In 2024, $540,000 of net charge-offs were recognized for community bank loans and $215.5 million of net-charge-offs were recognized for CCBX loans.

In 2023, $52,000 of net charge-offs were recognized for community bank loans and $144.5 million of charge-offs were recognized for CCBX loans.

Net charge-offs for the year ended December 31, 2023 totaled $144.5 million, or 4.92% of total average loans, as compared to net charge-offs of $33.7 million, or 1.49% of total average loans, for the year ended December 31, 2022.

Net charge-offs were up significantly in 2023 compared to 2022 as a result of the growth in loans originated through CCBX partners.

Provision expense for the one CCBX partner that the Company is responsible for credit losses for was $5.1 million and $1.4 million for the years ended December 31, 2023 and 2022, respectively, with net charge-offs of $3.6 million in 2023 and $216,000 in 2022.

In 2023, $52,000 of net charge-offs were recognized for community bank loans and $144.5 million of net-charge-offs were recognized for CCBX loans.

In 2022, $382,000 of net charge-offs were recognized for community bank loans and $33.3 million of charge-offs were recognized for CCBX loans.

Although agreements with our CCBX partners provide for credit enhancements that provide protection to the Bank from credit and fraud losses by indemnifying or reimbursing incurred credit and fraud losses, if our partner is unable to fulfill their contracted obligation then the Bank would be exposed to additional loan and deposit losses (counterparty risk) if the cash flows on the loans were not sufficient to fund the reimbursement of loan losses.

If a CCBX partner does not replenish their cash reserve account the Bank may consider an alternative plan for funding the cash reserve, such as adjusting the funding amounts or timelines to better align with the partner's specific situation.

If a mutually agreeable funding plan is not achieved then the Bank could declare the agreement in default, take over servicing and cease paying the partner for servicing the loan and providing credit enhancements.

The Bank would evaluate any remaining credit enhancement asset from the CCBX partner in the event the partner failed to determine if a write-off is appropriate.

If a write-off occurs, the Bank would retain the full yield and any fee income on the loan portfolio going forward, and our BaaS loan expense would decrease once default occurs and payments to the CCBX partner are stopped.

For more information on activity within the credit enhancement asset account, see the discussion and table in “ Financial Condition - Allowance for Credit Losses - Loans”.

In 2025, $196.8 million of net-charge-offs were recognized for CCBX loans and $27,000 of net charge-offs were recognized for community bank loans.

In 2024, $215.5 million of charge-offs were recognized for CCBX loans and $540,000 of net charge-offs were recognized for community bank loans.

The following table show the total charge-off activity by segment for the periods indicated:

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average loans 0.00 % 11.38 % 5.45 % 0.03 % 15.10 % 6.51 % 0.00 % 11.94 % 4.92 %

% of CCBX net

covered by credit

enhancement 97.7 % 97.4 % 97.5 %

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

Noninterest Income

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Noninterest income does not include loan origination fees, which are generally recognized over the life of the related loan as an adjustment to yield using the interest or similar method.

For the year ended December 31, 2024, noninterest income totaled $308.2 million, an increase of $104.1 million, or 51.0%, compared to $204.1 million for the year ended December 31, 2023.

For the year ended December 31, 2023, noninterest income totaled $204.1 million, an increase of $81.2 million, or 66.0%, compared to $122.9 million for the year ended December 31, 2022.

For the year ended December 31, 2025, noninterest income totaled $231.6 million, a decrease of $76.6 million, or (24.9)%, compared to $308.2 million for the year ended December 31, 2024.

The decrease is largely attributed to lower BaaS indemnification income which is related to lower provision for credit losses on CCBX loans, partially offset by an increase of $9.4 million in BaaS program income.

The following table presents, for the periods indicated, the major categories of noninterest income:

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Servicing and other BaaS fees 5,795 4,743 3,855 1,052 22.2 888 23.0

Transaction fees 5,910 4,011 3,211 1,899 47.3 800 24.9

Interchange fees 6,933 4,252 2,583 2,681 63.1 1,669 64.6

Transaction and interchange fees 18,744 12,843 8,263 5,901 45.9 4,580 55.4

Reimbursement of expenses 4,952 2,489 1,122 2,463 99.0 1,367 121.8

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Total noninterest income $ 231,608 $ 308,205 $ 204,122 $ (76,597) (24.9 %) $ 104,083 51.0 %

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

A description of our largest noninterest income categories are below:

BaaS Income .

Our CCBX segment provides BaaS offerings that enable our broker dealer and digital financial service providers to offer their customers banking services.

Our CCBX segment provides BaaS offerings that enable our digital financial service providers to offer their customers banking services.

In exchange for providing these services, we earn fixed fees, volume-based fees and reimbursement of costs depending on the program agreement.

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For more information on the accounting for BaaS allowance for credit losses, reserve for unfunded commitments, credit enhancements and fraud enhancements see the section titled “CCBX – BaaS Reporting Information.”

For the year ended December 31, 2024, we earned $302.7 million in BaaS fees, which was an increase of $104.6 million, or 52.8%, over the year ended December 31, 2023, where we earned $198.2 million in BaaS fees.

The increase over the year ended December 31, 2023 was primarily due to an increase of $95.1 million in BaaS credit enhancements related to the allowance for credit losses and reserve for unfunded commitments and an increase of $2.7 million in BaaS fraud enhancements, and an increase of $6.8 million in total BaaS fee program income, which was the result of increased partner activity.

For the year ended December 31, 2023, we earned $198.2 million in BaaS fees, which was an increase of $81.0 million, or 69.2%, over the year ended December 31, 2022, where we earned $117.1 million in BaaS fees.

The increase over the year ended December 31, 2022 was primarily due to an increase of $101.4 million in BaaS credit enhancements related to the allowance for credit losses and reserve for unfunded commitments partially offset by $22.4 million less in BaaS fraud enhancements as a result of lower reported fraud, and an increase of $2.0 million in total BaaS fee program income, which was the result of increased partner activity.

For the year ended December 31, 2025, we earned $225.2 million in BaaS fees, which was a decrease of $77.6 million, or 25.6%, over the year ended December 31, 2024, when we earned $302.7 million in BaaS fees.

The decrease from the year ended December 31, 2024 was primarily due to a decrease of $85.2 million in BaaS credit enhancements related to the allowance for credit losses and reserve for unfunded commitments and a decrease of $1.8 million in BaaS fraud enhancements, partially offset by an increase of $9.4 million in total BaaS fee program income, which was the result of increased partner activity.

Service Charges and Fees.

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Together they constitute the largest component of our noninterest income, outside of BaaS fee income.

Service charges and fees were $3.7 million for the year ended December 31, 2024, a decrease of $116,000, or 3.0%, over the prior year primarily due to decreases in point-of-sale fees of $174,000 partially offset by an increase in service charges on deposit accounts of $87,000.

Service charges and fees were $3.9 million for the year ended December 31, 2023, an increase of $50,000, or 1.3%, over the prior year primarily due to increases in point-of-sale fees of $121,000 and service charges on deposit accounts of $32,000, partially offset by a decrease in overdraft fees of $97,000.

Service charges and fees were $3.6 million for the year ended December 31, 2025, a decrease of $180,000, or 4.8%, from the prior year primarily due to decreases in point-of-sale fees of $194,000 partially offset by an increase in service charges on deposit accounts of $9,000.

The following table presents service charges and fees for the periods indicated:

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Current market conditions are making interest rate swap agreements less attractive in the higher rate environment.

Loan referral fees were $168,000 for the year ended December 31, 2024, a decrease of $515,000, or 75.4%, over the year ended December 31, 2023.

Interest rate volatility, swap rates, and the timing of loan closings all impact the demand for long-term fixed rate swaps.

Loan referral fees were $683,000 for the year ended December 31, 2023, a decrease of $127,000, or 15.7%, over the year ended December 31, 2022.

Loan referral fees were $0 for the year ended December 31, 2025, a decrease of $168,000, or 100.0%, from the year ended December 31, 2024.

Interest rate volatility, swap rates, and the timing of loan closings all impact the demand for long-term fixed rate swaps.

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Unrealized gain (loss) on equity securities, net.

During the year ended December 31, 2024, we recognized an unrealized gain on equity securities of $27,000, compared to the year ended December 31, 2023, when we recognized a $279,000 unrealized holding loss on equity securities.

We hold $3.1 million in equity securities focused on entities providing products to the BaaS and financial services space.

During the year ended December 31, 2023, we recognized an unrealized gain on equity securities of $279,000, compared to the year ended December 31, 2022, when we recognized a $153,000 unrealized holding loss on equity securities.

During the year ended December 31, 2025, we recognized an unrealized loss on equity securities of $414,000, compared to the year ended December 31, 2024, when we recognized a $27,000 unrealized holding gain on equity securities.

We hold $3.3 million in equity securities focused on entities providing products to the BaaS and financial services space.

This category includes a variety of other income-producing activities, credit card fee income, wire transfer fees, interest earned on bank owned life insurance (“BOLI”), and SBA and USDA servicing fees.

Other noninterest income increased $640,000, or 72.4%, for the year ended December 31, 2024 compared to the year ended December 31, 2023, due in part to increased Federal Reserve Bank fee income resulting from higher incoming ACH activity.

Other noninterest income decreased $460,000, or 34.2%, for the year ended December 31, 2023 compared to the year ended December 31, 2022, due in part to the one-time cost of converting an existing BOLI policy to one that will yield higher returns in the future, which reduced BOLI earnings by $212,000.

Other noninterest income increased $1.8 million, or 116.9%, for the year ended December 31, 2025 compared to the year ended December 31, 2024, due in large part to the addition of sweep fee income in 2025.

Noninterest Expense

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The largest components of noninterest expense are BaaS loan and fraud expense combined and salaries and employee benefits.

Noninterest expense also includes operational expenses, such as legal and professional expenses, data processing and software licenses, occupancy, point of sale expense, FDIC assessment, director and staff expenses, excise taxes, marketing and other expenses.

For the year ended December 31, 2024, noninterest expense totaled $246.3 million, an increase of $51.7 million, or 26.6%, compared to $194.6 million for the year ended December 31, 2023.

Noninterest expense, excluding BaaS loan and BaaS fraud expense totaled $117.9 million and increased $10.3 million or 9.5%.

Noninterest expense also includes operational expenses, such as legal and professional expenses, data processing and software licenses, occupancy, point of sale expenses, FDIC assessments, director and staff expenses, excise taxes, marketing and other expenses.

For the year ended December 31, 2025, noninterest expense totaled $287.8 million, an increase of $41.5 million, or 16.8%, compared to $246.3 million for the year ended December 31, 2024.

Noninterest expense, excluding BaaS loan and BaaS fraud expense totaled $150.7 million and increased $32.8 million, or 27.8%.

The $15.8 million increase in salaries and employee benefits, $4.7 million increase in legal and professional expenses and $8.0 million increase in data processing and software licenses are all related to growth and enhancements in technology all of which are related to the growth of the Company and investments in technology and risk management.

The following table presents, for the periods indicated, the major categories of noninterest expense:

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Total noninterest expense $ 287,797 $ 246,309 $ 194,572 $ 41,488 16.8 % $ 51,737 26.6 %

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

Salaries and Employee Benefits.

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Salaries and employee benefits were $85.8 million for the year ended December 31, 2025, an increase of $15.8 million, or 22.7%, compared to $69.9 million for the year ended December 31, 2024.

Salaries and employee benefits expense growth has slowed but continues to increase primarily due to hiring staff for our CCBX segment and additional staff for our ongoing growth initiatives.

As our CCBX activities grow, and we invest more in technology we expect some continued growth in number of employees to support these lines of business but we are also working to automate our processes to reduce and/or slow future growth in hiring.

As of December 31, 2024, we had 488 full-time equivalent employees, compared to 507 at December 31, 2023.

Salaries and employee benefits were $66.5 million for the year ended December 31, 2023, an increase of $14.2 million, or 27.3%, compared to $52.2 million for the year ended December 31, 2022.

The increase was primarily due to hiring staff for our CCBX segment and additional staff for our ongoing community bank related growth initiatives.

As our CCBX segment grows, we expect to continue to add employees to support this line of business.

As of December 31, 2023, we had 507 full-time equivalent employees, compared to 448 at December 31, 2022

Contributing to the year-over-year variance in salaries and employee benefits was $2.1 million of employee restructuring costs related to organizational changes, including severance and other termination-related expenses.

These costs included approximately $2.5 million of non-recurring stock-based compensation associated with accelerated vesting and modification-date fair value adjustments of equity awards in connection with employee departures, partially offset by a $2.0 million credit to salaries and employee benefits due to the forfeiture of other equity awards.

As our CCBX activities grow and we invest more in technology, we expect some continued growth in number of employees to support these lines of business but are also working to automate our processes to reduce and/or slow future growth in hiring.

Legal and Professional Expenses .

Legal and professional expenses include legal (for contracts, program agreements, regulatory and other business issues, etc.), audit and accounting expenses, consulting fees, fees for recruiting and hiring employees, and IT related security expenses.

Legal and professional costs include legal, audit and accounting expenses, consulting fees, and fees for recruiting and hiring employees.

These expenses fluctuate with the development of contracts for CCBX customers, audit and accounting needs, and are impacted by our reporting cycle and timing of legal and professional services.

The expenses also reflect the costs associated with our infrastructure enhancement projects to improve our processing, automate processes, reduce compliance costs and enhance our data management.

Legal and professional expenses were $15.5 million for the year ended December 31, 2024 compared to $14.8 million for the year ended December 31, 2023, which is an increase of $703,000, or 4.7%.

Legal and professional expenses were $14.8 million for the year ended December 31, 2023 compared to $6.8 million for the year ended December 31, 2022, an increase of $8.0 million, or 119.0%.

The increase in legal and professional expenses were primarily focused on building infrastructure for future growth.

Legal and professional expenses were $20.3 million for the year ended December 31, 2025 compared to $15.5 million for the year ended December 31, 2024, which is an increase of $4.7 million, or 30.6%.

Data Processing and Software Licenses.

Data processing and s oftware licenses includes expenses related to obtaining and maintaining software required for our various functions and additional investments in software development and the amortization of those costs.

Data processing and software licenses include expenses related to obtaining and maintaining software required for our various functions and additional investments in software development and the amortization of those costs.

Capitalized software totaled $17.3 million as of December 31, 2025, compared to $15.7 million as of December 31, 2024.

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These expenses are expected to increase as we invest more in automated processing and as we grow product lines and our CCBX segment.

Amortization of capitalized software totaled $3.0 million for the year ended December 31, 2024, compared to $754,000 for the year ended December 31, 2023.

Amortization of capitalized software totaled $5.1 million for the year ended December 31, 2025, compared to $3.0 million for the year ended December 31, 2024.

Data processing costs were $23.5 million for the year ended December 31, 2025, compared to $15.5 million for the year ended December 31, 2024, an increase of $8.0 million, or 52.0%.

Data processing costs were $9.3 million for the year ended December 31, 2023, compared to $6.8 million for the year ended December 31, 2022, an increase of $2.5 million, or 37.2% due to higher data processing expenses resulting from growth and the addition of new products as well as increased investments in technology to automate and create efficiencies.

Occupancy Expenses.

Occupancy expenses were $3.9 million for the year ended December 31, 2024, compared to $4.2 million for the year ended December 31, 2023, a decrease of $236,000, or 5.7%.

This category includes building, leasehold, furniture, fixtures and equipment depreciation totaling $1.5 million and $1.6 million for years ended December 31, 2024 and 2023, respectively.

The decrease of $236,000 in occupancy expenses for 2024 compared to 2023, was primarily the result of $157,000 less in maintenance and repairs expenses.

Occupancy expenses rent, utilities, janitorial and other maintenance expenses, property insurances and taxes.

Occupancy expenses were $4.0 million for the year ended December 31, 2025, compared to $3.9 million for the year ended December 31, 2024, an increase of $56,000, or 1.4%.

This category includes building, leasehold, furniture, fixtures and equipment depreciation totaling $1.5 million for years ended December 31, 2025 and 2024.

Occupancy expenses include rent, utilities, janitorial and other maintenance expenses, property insurances and taxes.

Also included is depreciation on building, leasehold, furniture, fixtures and equipment.

Our hybrid and remote workforce has increased, which helps keep some occupancy expenses down, however do expect occupancy expenses to increase as we continue to grow.

Occupancy expenses were $4.2 million for the year ended December 31, 2023, compared to $4.2 million for the year ended December 31, 2022, a decrease of $47,000, or 1.1%.

This category includes building, leasehold, furniture, fixtures and equipment depreciation totaling $2.3 million and $1.8 million for years ended December 31, 2023 and 2022, respectively.

Point of Sale Expenses.

Point of sale expenses are incurred as part of the process that allows businesses to accept payment for goods or services.

Generally, point of sale expense increases as point of sale activity increases, as does point of sale income which is recognized in other income for the community bank and in BaaS program income for CCBX.

Point of sale expenses were $325,000 for the year ended December 31, 2024, compared to $481,000 for the year ended December 31, 2023, a decrease of $156,000, or 32.4%.

Point of sale expenses were $481,000 for the year ended December 31, 2023, compared to $368,000 for the year ended December 31, 2022, an increase of $113,000, or 30.7%

FDIC Assessment s.

FDIC assessments are assessed to fund the Deposit Insurance Fund (“DIF”) to insure and protect the depositors of insured banks and to resolve failed banks.

The assessment rate is based on a number of factors and recalculated each quarter.

As deposits increase, the FDIC assessment expense will generally increase.

On October 18, 2022 the FDIC finalized an increase of two basis points in the initial base deposit insurance assessment rates schedules, beginning with the first quarterly assessment period of 2023.

The rise is intended to increase the reserve ratio of the Deposit Insurance Fund to 1.35%, the statutory requirement.

The increase in the base rates will remain in place until the reserve ratio reaches or exceeds 2.0%.

The reserve ratio is 1.21% as of June 30, 2024.

The reserve ratio is negatively affected by growth in assets and bank failures.

FDIC assessments were $2.9 million for the year ended December 31, 2024, compared to $2.5 million for the year ended December 31, 2023, an increase of $339,000, or 13.4%.

FDIC assessments were $2.5 million for the year ended December 31, 2023, compared to $2.9 million for the year ended December 31, 2022, a decrease of $335,000, or 11.7%

Our hybrid and remote workforce has increased, which helps keep some occupancy expenses down, however we do expect occupancy expenses to increase as we continue to grow.

Director and Staff Expenses.

Director and staff expenses includes compensation for director service, continuing education for employees and other director and staff related expenses.

Director and staff expenses were $2.1 million for the year ended December 31, 2024 compared to $2.2 million for the year ended December 31, 2023, a decrease of $40,000, or 1.9%.

Expenses will fluctuate depending upon conferences and other professional events that are attended by employees as well as expenses related to employee travel, and continuing education.

Director and staff expenses were $2.7 million for the year ended December 31, 2025 compared to $2.1 million for the year ended December 31, 2024, an increase of $545,000, or 25.8%.

In 2023, we saw an increase in these expenses as the number of employees increased.

Excise Taxes .

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Gross income is reduced by certain allowed deductions, and income attributed to other states is also removed to arrive at the taxable base.

Although excise taxes increased as a result of increased income subject to excise taxes, expense was down compared to last year as a result of an apportionment study to quantify revenue earned outside the state of Washington that resulted in a $1.2 million refund during the second quarter of 2024.

Excise taxes increased primarily as a result of increased income subject to excise taxes.

CCBX income is sourced to the state where the partner does business, and the majority of partners are located outside the state of Washington.

Therefore, taxes we paid on CCBX income sourced to other states was in excess of what was actually owed.

Excise taxes were $1.2 million for the year ended December 31, 2024, compared to $2.0 million for the year ended December 31, 2023, a decrease of $822,000, or 41.6%.

Excise taxes were $2.0 million for the year ended December 31, 2023, compared to $2.2 million for the year ended December 31, 2022, a decrease of $228,000, or 10.3%.

Marketing and promotion costs were $162,000 for the year ended December 31, 2024, compared to $517,000 for the year ended December 31, 2023, a decrease of $355,000, or 68.7%.

Marketing and promotion costs will vary depending upon the deployment of branding and targeted advertising for the community bank and CCBX.

We are using more cost-effective advertising options, but expect costs to increase as we expand our marketing plan.

The year-over-year $1.7 million increase is largely due to a $1.2 million refund recorded during the year ended December 31, 2024, for which there was no similar entry in 2025.

Excise taxes were $2.9 million for the year ended December 31, 2025, compared to $1.2 million for the year ended December 31, 2024, an increase of $1.7 million, or 147.4%.

Marketing and promotion costs were $631,000 for the year ended December 31, 2025, compared to $162,000 for the year ended December 31, 2024, an increase of $469,000, or 289.5%.

This category includes dues and memberships, office supplies, mail services, telephone, examination fees, internal loan expenses, services charges from banks, operational losses, directors and officer’s insurance, donations, provision for unfunded commitments, and miscellaneous other expenses.

The provision for unfunded commitments has increased with the addition of CCBX loan partners.

Marketing and promotion costs will vary depending upon the deployment of branding and targeted advertising for the community bank and CCBX.

We expect costs to increase as we expand our marketing plan.

Other noninterest expense increased to $7.5 million for the year ended December 31, 2025, compared to $6.5 million for the year ended December 31, 2024, an increase of $1.0 million, or 15.5%.

The increase was due to $600,000 for exit costs associated with a fraud/compliance vendor, higher business development & sponsorships, and increased operational losses of which $120,000 was a nonrecurring one-time loss.

Other noninterest expense increased to $5.2 million for the year ended December 31, 2023, compared to $4.7 million for the year ended December 31, 2022, an increase of $572,000, or 12.3%.

The increase was largely due to overall increases resulting from growth for the year ended December 31, 2023, as compared to the same period last year.

Contributing to the increase was the $700,000 recognition of a payable related to the settlement of an employment-related matter.

BaaS loan and fraud expense.

Our CCBX segment provides BaaS offerings that enable our broker dealer and digital financial service providers to offer their customers banking services.

Our CCBX segment provides BaaS offerings that enable our digital financial service providers to offer their customers banking services.

Included in BaaS loan and fraud expense is partner loan expense including overdraft balances and BaaS fraud expense.

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Fraud losses are recorded when incurred as losses in noninterest expense, and the reimbursement from the CCBX partner is recorded in noninterest income, resulting in a net impact of zero to the income statement.

For the year ended December 31, 2024, BaaS loan and fraud expense was $128.4 million, compared to $86.9 million for the year ended December 31, 2023 and $82.9 million for the year ended December 31, 2022 as a result of increased partner activity.

as a result of increased partner activity.

For the year ended December 31, 2025, BaaS loan and fraud expense was $137.1 million, compared to $128.4 million for the year ended December 31, 2024 as a result of increased partner activity.

For more information on the accounting for BaaS loan and fraud expenses see the section titled “CCBX – BaaS Reporting Information.”

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(Decrease) Increase

(Decrease) (1)

BaaS loan expense $ 129,086 $ 118,536 $ 79,748 $ 10,550 $ 38,788

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Total BaaS loan and fraud expense $ 137,100 $ 128,370 $ 86,913 $ 8,730 $ 41,457

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

Income Tax Expense

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Valuation allowances are established when necessary to reduce our deferred tax assets to the amount expected to be realized.

The Company is subject to various state taxes that are assessed as CCBX activities and employees expand into other states, which has increased the overall tax rate used in calculating the provision for income taxes in the current and future periods.

The Company is subject to various state taxes that are assessed as CCBX activities and employees expand into new states, which increases the overall tax rate used in calculating the provision for income taxes in the current and future periods.

On July 4, 2025, the President signed H.R.

1, the “One Big Beautiful Bill Act, (the "Act") into law.

The legislation includes several changes to federal tax law that generally allow for more favorable deductibility of certain business expenses beginning in 2025, including the restoration of immediate expensing of domestic R&D expenditures, reinstatement of 100% bonus depreciation, and more favorable rules for determining the limitation on business interest expense.

The Act also made certain changes to the deductibility of the cost of meals and charitable contributions that are effective for tax years beginning after December 31, 2025.

The Company is taking advantage of the immediate deductibility of R&D expenditures, which has positively impacted the tax provision and resulted in a deferred tax liability as of December 31, 2025.

Year Ended December 31, 2025, Compared to Year Ended December 31, 2024.

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Our effective tax rates for the years ended December 31, 2025, and 2024, was 23.3% and 21.1%, respectively.

The $456,000 decrease in income tax expense, despite higher net income, was a result of the deductibility of certain equity awards.

Year Ended December 31, 2023, Compared to Year Ended December 31, 2022.

For the year ended December 31, 2023, income tax expense totaled $12.6 million, compared to $10.0 million for the year ended December 31, 2022.

Our effective tax rate for the year ended December 31, 2022 was 19.7%.

The $2.2 million increase in income tax expense was largely due to an increase in the state income tax rate used to calculate provision for income taxes and higher net income before income taxes.

The deductibility of certain equity awards also impacts income tax expense.

Segment Information

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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.

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

We also have a loan production office which is located in King county.

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

The CCBX segment had 28 relationships, at varying stages, including one signed letter of intent as of December 31, 2025.

The treasury & administration segment includes treasury management, overall administration and all other aspects of the Company.

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Total liabilities $ 1,957,800 $ 2,596,956 $ (304,278) $ 4,250,478 $ 1,896,846 $ 2,099,808 $ (314,150) $ 3,682,504

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

Community Bank

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Loans receivable net of deferred fees for the community bank segment increased $59.0 million, or 3.1%, to $1.94 billion as of December 31, 2025, compared to $1.88 billion as of December 31, 2024.

The increase in community bank loans receivable was the result of gross loan growth of $51.8 million.

Total community bank deposits increased $23.6 million, or 1.58%, to $1.52 billion, as of December 31, 2024, compared to $1.50 billion as of December 31, 2023.

The overall increase in community bank deposits was a result of exception pricing tactics added as a strategy at the end of the first quarter of 2024 to retain deposits and more effectively compete in the market.

Our cost of deposits for the community bank increased to 1.80% for the year ended December 31, 2024, compared to 1.14% for the year ended December 31, 2023, partially as a result of such measures and also due to higher interest rates.

The increase in community bank loans receivable is the result of loan growth and normal balance fluctuations.

Total community bank deposits increased $65.1 million, or 4.28%, as of December 31, 2025, compared to $1.52 billion as of December 31, 2024.

Our cost of deposits for the community bank was 1.71% for the year ended December 31, 2025.

CCBX total assets as of December 31, 2025 increased $497.1 million, or 23.7%, to $2.60 billion, compared to $2.10 billion as of December 31, 2024.

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 and $20.6 million loans remaining in loans held for sale as of December 31, 2024 compared to none at December 31, 2023.

We continue to sell loans back to the originating partner as part of our strategy to balance partner and lending limits, and manage the loan portfolio and credit quality.

Additionally, we retain a portion of the fee income for our role in processing transactions on sold credit card balances.

This is expected to provide an on-going and passive revenue stream with no on balance sheet risk.

During the year ended December 31, 2025, $6.69 billion in CCBX loans were transferred to loans held for sale, with $6.64 billion in loans sold and $71.2 million loans remaining in loans held for sale as of December 31, 2025 compared to $20.6 million at December 31, 2024.

We continue to reposition ourselves by managing CCBX credit and concentration levels in an effort to optimize our loan portfolio earnings and generate off balance sheet fee income.

We retain a portion of the fee income for our role in processing transactions on sold credit card balances.

This is expected to provide an on-going and recurring revenue stream without the additional on balance sheet risk.

Total CCBX loans receivable increased $204.0 million, or 12.7%, to $1.81 billion as of December 31, 2025, compared to $1.60 billion as of December 31, 2024.

The increase in loans receivable was

the result of increased activity with CCBX partners.

After deliberately reducing our other consumer and other loans portfolio during the third and fourth quarters of 2023 and first quarter of 2024 in an effort to optimize our loan portfolio, we have built back the CCBX portfolio with new loans that are more aligned with our long term objectives.

CCBX allowance for credit losses increased to $158.1 million as of December 31, 2024, compared to $95.8 million as of December 31, 2023, as a result of increased loan balances and the mix of loans with increased loss rates which has increased the allowance calculation/requirement.

CCBX partner agreements provide for credit enhancements that cover $223.0 million, or 97.4%, of the total gross charge-offs on CCBX loans for the twelve months ended December 31, 2024.

The increase in loans receivable is the result of increased activity with CCBX partners, net of $6.64 billion in loan sales.

As a result of an increase in the difference of average

deposits compared to average loans the intrabank asset increased $221.8 million to $633.6 million as of December 31, 2025, compared to $411.8 million as of December 31, 2024.

CCBX allowance for credit losses decreased to $151.3 million as of December 31, 2025, compared to $158.1 million as of December 31, 2024.

The decrease in the allowance is due to an improvement in the performance of the CCBX portfolio and our focus on originating higher quality CCBX loans resulting in lower historical loss factors.

As we continue to originate higher quality loans, these become a greater proportion of the CCBX portfolio, resulting in an improvement in expected losses and a reduced allowance.

CCBX partner agreements provide for credit enhancements that cover $192.2 million, or 97.7%, of the charge-offs on CCBX loans for the year ended December 31, 2025.

CCBX partners bear most of the responsibility for credit losses incurred which consequently gives them a vested interest in the performance of the portfolio.

We believe that this alignment of interests ensures that CCBX partners are motivated to implement robust risk management practices and maintain the overall health of the portfolio.

Total CCBX deposits increased $201.3 million, or 10.8%, to $2.06 billion, compared to $1.86 billion as of December 31, 2023, as a result of growth within the CCBX relationships.

This does not include an additional $273.2 million in CCBX deposits that were transferred off balance sheet to provide for increased FDIC insurance coverage to certain customers and to manage concentration levels, compared to $69.4 million as of December 31, 2023.

Treasury & Administration

Treasury & administration total assets as of December 31, 2024 increased $114.9 million, or 1,190.6%, to $124.6 million, compared to $9.7 million as of December 31, 2023.

Total securities decreased $103.0 million, or 68.5%, to $47.3 million as of December 31, 2024, compared to $150.4 million as of December 31, 2023, as a result of maturing AFS securities.

Total borrowings were $47.9 million as of December 31, 2024 and $47.7 million as of December 31, 2023.

Total CCBX deposits increased $493.8 million, or 23.9%, to $2.56 billion, compared to $2.06 billion as of December 31, 2024, primarily as a result of growth within the CCBX relationships and new partnerships.

This does not include an additional $843.6 million in CCBX deposits that were transferred off balance sheet to provide for increased FDIC insurance coverage to certain customers, compared to $273.2 million as of December 31, 2024.

Treasury & administration total assets as of December 31, 2025 increased $62.1 million, or 49.9%, to $186.7 million, compared to $124.6 million as of December 31, 2024, primarily due to an increase in cash and due from banks.

Total securities increased $926,000, or 2.0%, to $48.2 million as of December 31, 2025, compared to $47.3 million as of December 31, 2024, due to the purchase of CRA securities, partially offset by principal repayments on securities.

Total borrowings were $48.0 million as of both December 31, 2025 and December 31, 2024.

The following table presents summary financial information for each segment for the periods indicated.

December 31, 2025 December 31, 2024 December 31, 2023

(dollars in thousands) Community Bank CCBX Treasury & Administration Total Community Bank CCBX Treasury & Administration Total Community Bank CCBX Treasury & Administration Total

(dollars in thousands) Community Bank CCBX Treasury & Admin Total Community Bank CCBX Treasury & Admin Total Community Bank CCBX Treasury & Admin Total

INTEREST INCOME AND EXPENSE

Interest income $ 122,956 $ 274,608 $ 32,053 $ 429,617 $ 123,735 $ 248,286 $ 24,756 $ 396,777 $ 106,983 $ 197,306 $ 18,930 $ 323,219

Interest income (expense)

intrabank transfer (21,265) 30,221 (8,956) — (10,404) 19,071 (8,667) — 796 4,106 (4,902) —

Interest (expense)

income intrabank

transfer (13,788) 26,673 (12,885) — (21,265) 30,221 (8,956) — (10,404) 19,071 (8,667) —

Interest expense 26,805 90,109 2,638 119,552 26,897 94,035 2,817 123,749 17,354 71,646 2,644 91,644

Net interest income 82,363 211,172 16,530 310,065 75,573 184,472 12,983 273,028 79,225 144,731 7,619 231,575

Provision for credit

losses - loans (2,130) 277,793 — 275,663 1,322 182,721 — 184,043 719 78,345 — 79,064

(Recapture)/Provision for

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

losses (504) 193,135 — 192,631 (1,373) 278,980 — 277,607 1,111 182,881 — 183,992

Net interest income

after provision (recovery)

for credit losses - loans and

unfunded commitments 76,946 (94,508) 12,983 (4,579) 78,114 (38,150) 7,619 47,583 77,725 12,461 2,525 92,711

(expense) after

(recapture) for

credit losses 82,867 18,037 16,530 117,434 76,946 (94,508) 12,983 (4,579) 78,114 (38,150) 7,619 47,583

NONINTEREST INCOME

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December 31, 2025 December 31, 2024 December 31, 2023

(dollars in thousands) Community Bank CCBX Treasury & Administration Total Community Bank CCBX Treasury & Administration Total Community Bank CCBX Treasury & Administration Total

(dollars in thousands) Community Bank CCBX Treasury & Admin Total Community Bank CCBX Treasury & Admin Total Community Bank CCBX Treasury & Admin Total

NONINTEREST EXPENSE

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expense 47,870 203,408 36,519 287,797 36,536 175,272 34,501 246,309 37,974 128,118 28,480 194,572

Net income before income

taxes $ 44,852 $ 33,091 $ (20,626) $ 57,317 $ 45,115 $ 32,378 $ (20,360) $ 57,133 $ 49,874 $ 22,619 $ (21,872) $ 50,621

Net income before

income taxes $ 39,094 $ 41,057 $ (18,906) $ 61,245 $ 44,852 $ 33,091 $ (20,626) $ 57,317 $ 45,115 $ 32,378 $ (20,360) $ 57,133

Net Income 35,982 25,092 (15,855) 45,219 35,202 25,262 (15,885) 44,579 39,806 18,371 (17,552) 40,625

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

Income taxes 7,935 10,749 (4,432) 14,252 8,870 7,999 (4,771) 12,098 9,913 7,116 (4,475) 12,554

Net income (loss) 31,159 30,308 (14,474) 46,993 35,982 25,092 (15,855) 45,219 35,202 25,262 (15,885) 44,579

Community Bank

Year Ended December 31, 2025, Compared to Year Ended December 31, 2024.

Net interest income for the community bank was $75.6 million for the year ended December 31, 2024, a decrease of $3.7 million, or 4.6%, compared to $79.2 million for the year ended December 31, 2023.

The decrease in net interest income was largely due to increased interest expense on deposit accounts due to higher interest rates, partially offset by an increase in interest on loans receivable resulting from growth and higher loan yield.

As a result of the community bank having higher average loans than deposits for the year ended December 31, 2024 compared to the year ended December 31, 2023, intrabank interest expense for the community bank was $21.3 million for the year ended December 31, 2024, compared to intrabank interest expense of $10.4 million for the year ended December 31, 2023.

There was a recapture of the provision for credit losses - loans for the community bank of $2.1 million for the year ended December 31, 2024, compared to a provision for credit losses -loans of $1.3 million for the year ended December 31, 2023.

Net charge-offs to average loans for the community bank segment have remained consistently low and were 0.03% and 0.00% for the year ended December 31, 2024, and 2023, respectively.

Net interest income for the community bank was $82.4 million for the year ended December 31, 2025, an increase of $6.8 million, or 9.0%, compared to $75.6 million for the year ended December 31, 2024.

The increase in net interest income is due to lower interest expense, due largely to lower interest rates, on the intrabank transfer.

As a result of the community bank having higher average loans than deposits for the year ended December 31, 2025 compared to the year ended December 31, 2024, an intrabank interest expense for the community bank of $13.8 million was recorded for the year ended December 31, 2025, compared to intrabank interest expense of $21.3 million for the year ended December 31, 2024.

This was partially offset by lower interest income on loans due to a change in loan mix.

There was a provision recapture for credit losses for the community bank of $504,000 for the year ended December 31, 2025, compared to a provision recapture for credit losses of $1.4 million for the year ended December 31, 2024.

Net charge-offs to average loans for the community bank segment have remained consistently low and was 0.00% and 0.03% for the year ended December 31, 2025 and December 31, 2024, respectively.

Noninterest income for the community bank was $4.1 million for the year ended December 31, 2025, a decrease of $345,000, or 7.8%, compared to $4.4 million for the year ended December 31, 2024.

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The recognition of loan referral fees fluctuates in response to market conditions and as a result we may recognize more or less, or may not recognize any, loan referral fees in some periods.

Noninterest expenses for the community bank decreased $1.4 million, or 3.8%, to $36.5 million as of December 31, 2024, compared to $38.0 million as of December 31, 2023.

The decrease in noninterest expense is largely due to lower legal and professional expenses as some of our risk management infrastructure projects are being completed.

We continue to invest in our infrastructure and automation of our processes so that they are scalable.

Year Ended December 31, 2023, Compared to Year Ended December 31, 2022.

Net interest income for the community bank was $79.2 million for the year ended December 31, 2023, an increase of $781,000, or 1.0%, compared to $78.4 million for the year ended December 31, 2022.

The increase in net interest income is largely due to loan growth and increased interest rates on new and variable rate loans.

As a result of the community bank having higher average loans than deposits for the twelve months ended December 31, 2023 compared to the twelve months ended December 31, 2022, intrabank interest expense for the community bank was $10.4 million for the twelve months ended December 31, 2023, compared to intrabank interest income of $796,000 for the twelve months ended December 31, 2022.

Increased interest rates also contributed to the increase in intrabank interest expense.

Provision for credit losses - loans for the community bank was $1.3 million for the year ended December 31, 2023, compared to $719,000 for the year ended December 31, 2022, as a result of loan growth.

Net charge-offs to average loans for the community bank segment have remained consistently low and were 0.00% and 0.03% for the twelve months ended December 31, 2023, and 2022, respectively.

Noninterest income for the community bank was $5.0 million, for the year ended December 31, 2023, a decrease of $193,000, or 3.7%, compared to $5.2 million for the year ended December 31, 2022.

Loan referral fees decreased $127,000 for the twelve months ended December 31, 2023 compared to the twelve months ended December 31, 2022.

The recognition of loan referral fees fluctuates in response to market conditions and as a result we may recognize more or less, or may not recognize any, loan referral fees in some periods.

Noninterest expenses for the community bank increased $11.3 million, or 31.0%, to $47.9 million as of December 31, 2025, compared to $36.5 million as of December 31, 2024.

The increase is largely due to increased salaries and employee benefits as a result of growth, higher data processing and software licensing costs related to new reporting software that helps monitor and assess risk and to automate and create efficiencies in reporting, and increased legal and professional fees associated with our infrastructure enhancement projects to improve processing, automate processes, reduce compliance costs, and enhance our data management.

The increase in noninterest expense is largely due to higher salaries and employee benefits, data processing and software licenses and legal and

professional expenses all of which are related to the growth of Company and investments in technology and risk management.

We continue to invest in our infrastructure and the automation of our processes so that they are scalable.

Year Ended December 31, 2025, Compared to Year Ended December 31, 2024.

Net interest income for CCBX was $211.2 million for the year ended December 31, 2025, an increase of $26.7 million, or 14.5%, compared to $184.5 million for the year ended December 31, 2024.

The increase in net interest income was due to loan growth from active CCBX relationships.

During the year ended December 31, 2024, we sold $1.52 billion in CCBX loans as part of our strategy to optimize our CCBX portfolio and manage credit quality, portfolio limits and partner limits.

We are retaining a portion of the transaction processing fee income on sold credit card balances which provides on-going passive income without balance sheet risk.

As a result of having higher average deposits than loans for the year ended December 31, 2024 compared to the year ended December 31, 2023, intrabank interest income for CCBX was $30.2 million for the year ended December 31, 2024, compared to $19.1 million for the year ended December 31, 2023.

Provision for credit losses - loans was $277.8 million for the year ended December 31, 2024, compared to $182.7 million for the year ended December 31, 2023, as a result of loan origination growth and as a result of the mix of loan balances with increased loss rates which has impacted the allowance calculation.

Noninterest income for CCBX was $302.9 million for the year ended December 31, 2024, an increase of $104.2 million, or 52.5%, compared to $198.6 million for the year ended December 31, 2023, due to an increase of $95.1 million in BaaS credit enhancements related to the allowance for credit losses, $6.8 million increase in total BaaS program income, which was the result of increased activity with our CCBX partners, and a $2.7 million increase in BaaS fraud enhancements as a result of lower fraud.

Noninterest expenses for CCBX increased $47.2 million, or 36.8%, to $175.3 million as of December 31, 2024, compared to $128.1 million as of December 31, 2023.

The increase in noninterest expense was largely due to growth from active CCBX relationships resulting in an increase in BaaS loan expense and salaries and benefits, for the year ended December 31, 2024, compared to the year ended December 31, 2023.

The increase in net interest income is due to loan growth from active CCBX relationships.

During the year ended December 31, 2025, we sold $6.64 billion in CCBX loans as part of our strategy to optimize our CCBX portfolio, manage growth, credit quality, portfolio and partner limits.

We are retaining a portion of the transaction processing fee income on sold credit card receivables which provides ongoing and recurring income without balance sheet risk.

As a result of having higher average deposits than loans, but lower interest rates, for the year ended December 31, 2025 compared to the year ended December 31, 2024 intrabank interest income for CCBX was $26.7 million for the year ended December 31, 2025, compared to $30.2 million for the year ended December 31, 2024.

Provision for credit losses was $193.1 million for the year ended December 31, 2025, compared to $279.0 million for the year ended December 31, 2024.

The decrease in the provision is due to a change in loan mix and an improvement in the performance of the CCBX portfolio and our focus on originating higher quality CCBX loans resulting in lower historical loss factors.

As we continue to originate higher quality loans, these become a greater proportion of the CCBX portfolio, resulting in an improvement in expected losses and lower provision expense.

Noninterest income for CCBX was $226.4 million for the year ended December 31, 2025, a decrease of $76.4 million, or 25.2%, compared to $302.9 million for the year ended December 31, 2024, due to a decrease of $85.2 million in BaaS credit enhancements related to the allowance for credit losses and a $1.8 million decrease in BaaS fraud enhancements, partially offset by a $9.4 million increase in total BaaS program income, which was the result of increased activity with our CCBX partners.

Noninterest expenses for CCBX increased $28.1 million, or 16.1%, to $203.4 million for the year ended December 31, 2025, compared to $175.3 million for the year ended December 31, 2024.

The increase in noninterest expense is largely due to growth from active CCBX relationships resulting in an increase in BaaS loan expense and increased salaries and benefits, data processing and software licenses and legal and professional expenses all of which are related to the growth of Company and investments in technology and risk management, for the year ended December 31, 2025, compared to the year ended December 31, 2024.

For more information on the accounting for BaaS income and expenses see the section titled “ CCBX – BaaS Reporting Information.

Year Ended December 31, 2023, Compared to Year Ended December 31, 2022.

Net interest income for CCBX was $144.7 million for the year ended December 31, 2023, an increase of $53.9 million, or 59.4%, compared to $90.8 million for the year ended December 31, 2022.

The increase in net interest income is due largely to loan growth from CCBX relationships.

During the year ended December 31, 2023, we sold $599.9 million in higher yielding CCBX loans that have a greater potential for credit deterioration in an effort to optimize our CCBX loan portfolio.

The impact of these sales and the changes we are making in an effort to optimize and strengthen the balance sheet are expected to be reflected in our earnings in future periods.

We expect to see lower net income in the short term with lower loan yields and compressed margins but we will work to continue growing the CCBX portfolio with loans that we believe will strengthen the balance sheet and provide for long term stability and profitability.

As a result of having higher average deposits than loans for the twelve months ended December 31, 2023 compared to the twelve months ended December 31, 2022 intrabank interest income for CCBX was $19.1 million for the twelve months ended December 31, 2023, compared to $4.1 million for the twelve months ended December 31, 2022.

Increased interest rates also contributed to the increase in intrabank interest income.

Provision for credit losses - loans for CCBX was

$182.7 million for the year ended December 31, 2023, compared to $78.3 million for the year ended December 31, 2022, as a result of loan growth and higher loss rates from CCBX partners.

Noninterest income for CCBX was $198.6 million for the year ended December 31, 2023, an increase of $81.1 million, or 69.0%, compared to $117.5 million for the year ended December 31, 2022, due to an increase of $2.0 million in BaaS fee program income, which was the result of increased activity with Baas partners, including $101.4 million in BaaS credit enhancements related to the allowance for credit losses, and $22.4 million in BaaS fraud enhancements.

Noninterest expenses for CCBX increased $20.7 million, or 19.3%, to $128.1 million as of December 31, 2023, compared to $107.4 million as of December 31, 2022.

The increase in noninterest expense is largely due to growth from active CCBX relationships resulting in an increase in BaaS loan expense, BaaS fraud expense and increased salaries and benefits, for the twelve months ended December 31, 2023, compared to the twelve months ended December 31, 2022.

Also contributing to the increase in noninterest expense is higher legal and professional fees associated with our infrastructure enhancement projects to improve processing, automate processes, reduce compliance costs, and enhance our data management.

Treasury & Administration

Year Ended December 31, 2025, Compared to Year Ended December 31, 2024.

Net interest income for treasury & administration was $13.0 million for the year ended December 31, 2024, an increase of $5.3 million, or 70.4%, compared to $7.6 million for the year ended December 31, 2023, as a result of increased balances on interest earning assets and higher interest rates.

Noninterest income increased $391,000, or 78.0%, to $892,000 for the year ended December 31, 2024, compared to $501,000 for the year ended December 31, 2023.

Noninterest expense increased $6.0 million, or 21.1%, to $34.5 million for the year ended December 31, 2024, compared to $28.5 million for the year ended December 31, 2023, largely as a result of increased data processing and software license expense as a result of growth, partially offset by the $1.2 million credit in excise taxes due to the refund from the State of Washington as a result of an apportionment study we completed to quantify revenue earned outside of the state of Washington.

Year Ended December 31, 2023, Compared to Year Ended December 31, 2022.

Net interest income for treasury & administration was $7.6 million for the twelve months ended December 31, 2023, an increase of $5.1 million, or 201.7%, compared to $2.5 million for the twelve months ended December 31, 2022, as a result of increased interest rates.

Noninterest income increased $267,000, or 114.1%, to $501,000 for the twelve months ended December 31, 2023, compared to $234,000 for the twelve months ended December 31, 2022.

Noninterest expense increased $3.8 million, or 15.6%, to $28.5 million for the twelve months ended December 31, 2023, compared to $24.6 million for the twelve months ended December 31, 2022, largely as a result of increased salaries and employee benefits and legal and professional fees as a result of growth.

Net interest income for treasury & administration was $16.5 million for the year ended December 31, 2025, an increase of $3.5 million, or 27.3%, compared to $13.0 million for the year ended December 31, 2024, as a result of increased balances on interest earning assets.

Noninterest income increased $191,000, or 21.4%, to $1.1 million for the year ended December 31, 2025, compared to $892,000 for the year ended December 31, 2024.

Noninterest expense increased $2.0 million, or 5.8%, to $36.5 million for the year ended December 31, 2025, compared to $34.5 million for the year ended December 31, 2024, largely as a result of increased salaries and employee benefits and legal and professional expenses as a result of growth of the Company and investments in risk management.

Data processing and software expenses decreased $3.4 million compared to the year ended December 31, 2024 as more of these expenses have been directly expensed to the other segments.

Financial Condition

Our total assets increased $371.2 million to $4.12 billion, or 9.9% at December 31, 2024, compared to $3.75 billion at December 31, 2023.

This increase was largely the result of a $465.0 million increase in loans receivable, partially offset by a decrease of $99.5 million in AFS securities and a decrease of $35.8 million in interest earning deposits with other banks.

Our total assets increased $620.2 million, or 15.0%, to $4.74 billion at December 31, 2025 from $4.12 billion at December 31, 2024.

The increase is primarily comprised of a $263.0 million increase in loans receivable and a $286.7 million increase in interest earning deposits with other banks.

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 at par during the year ended December 31, 2024.

As of December 31, 2024 there were $20.6 million in loans held for sale and none as of December 31, 2023.

During the year ended December 31, 2025, $6.69 billion in CCBX loans were transferred to loans held for sale, with $6.64 billion in loans sold, $5.14 billion of which is new activity on previously sold credit card receivables.

As of December 31, 2025 there were $71.2 million in loans held for sale and $20.6 million as of December 31, 2024.

We will continue to sell loans back to the originating partner as part of our strategy to optimize our CCBX portfolio, manage growth, credit quality, portfolio and partner limits.

Additionally, we retain a portion of the fee income for our role in processing new transactions on previously sold credit card receivables, which continues to grow and is expected to provide increased and on-going revenue with no on-balance sheet risk or capital requirement.

Loan Portfolio

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As of December 31,

2024 2023 (1)

(dollars in thousands) Amount Percent Amount Percent

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Total commercial and industrial loans 454,085 12.1 293,373 8.4

293,373 8.4 291,291 9.6

Real estate loans:

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Loan Yield 11.00 % 11.20 %

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

The following tables detail the loans by segment which are included in the total loan portfolio table above:

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Gross CCBX loans receivable 1,808,094 100.0 % 1,604,019 100.0 %

Net deferred origination (fees) costs (442) (300)

Net deferred origination fees (542) (442)

Loans receivable $ 1,807,552 $ 1,603,577

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See the reconciliation of non-GAAP measures set forth in the section titled “GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures” for the impact of BaaS loan expense on CCBX yield.

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

Commercial and Industrial Loans .

Commercial and industrial loans increased $160.7 million, or 54.8%, to $454.1 million as of December 31, 2025, from $293.4 million as of December 31, 2024.

The increase in commercial and industrial loans receivable over December 31, 2023 was due to an increase of $21.5 million in capital call lines partially offset by a $19.4 million decrease in other commercial and industrial loans.

The increase in commercial and industrial loans receivable over December 31, 2024 was due to an increase of $101.5 million in capital call lines combined with a $59.2 million increase in other commercial and industrial loans.

Commercial and industrial loans are underwritten after evaluating and understanding the borrower’s ability to operate profitably and effectively.

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Most commercial and industrial loans are secured by the assets being financed or other business assets, such as accounts receivable, inventory or equipment, and we generally obtain personal guarantees on these loans.

Commercial and industrial loans included $48.6 million in loans to financial institutions as of December 31, 2024, and December 31, 2023.

Commercial and

industrial loans included $92.0 million and $48.6 million in loans to financial institutions as of December 31, 2025, and December 31, 2024, respectively.

Included in the commercial and industrial loan balance is $210.5 million and $109.0 million in capital call lines resulting from relationships with our CCBX partners as of December 31, 2025 and December 31, 2024, respectively, and $19.2 million and $34.0 million in CCBX other commercial loans as of December 31, 2025 and December 31, 2024, respectively.

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Construction, Land and Land Development Loans .

Construction, land and land development loans decreased $8.9 million, or 5.7%, to $148.2 million as of December 31, 2024, from $157.1 million as of December 31, 2023.

The decrease is attributed in part to the completion of projects related to these community bank loans.

Construction, land and land development loans increased $73.9 million, or 49.9%, to $222.1 million as of December 31, 2025, from $148.2 million as of December 31, 2024.

The increase is attributed to some new construction and development projects.

Unfunded loan commitments for construction, land and land development loans were $98.2 million at December 31, 2025, compared to $47.8 million at December 31, 2024.

Although we have seen a strong commercial and residential real estate market in the Puget Sound region in 2024, the economic environment is continuously changing with bank failures and mergers, inflation, higher interest rates, global unrest, the war in Ukraine, conflicts in the Middle East, political uncertainty, natural disasters and trade issues that have resulted in economic uncertainty and slowing in construction lending.

Although we have seen a strong commercial and residential real estate market in the Puget Sound region in 2025, the macro economic environment is continuously changing, primarily due to the pace of economic growth, inflation, changing interest rates, global trade tensions, tariffs, unemployment, global unrest, the war in Ukraine, conflicts in the Middle East, political uncertainty, natural disasters, and trade issues that have resulted in economic uncertainty and slowing in construction lending.

Construction, land and land development loans are comprised of loans to fund construction, land acquisition and land development construction.

The properties securing these loans are primarily located in the Puget Sound region and are comprised of both residential and commercial properties, including owner occupied properties and investor properties.

As of December 31, 2024, construction, land and land development loans included $83.2 million in commercial construction loans, $40.9 million in residential construction loans, $15.4 million in other construction, land and land development loans and $8.7 million in undeveloped land loans, compared to $81.5 million in commercial construction loans, $34.2 million in residential construction loans and $33.5 million in other construction, land and land development loans and $7.9 million in undeveloped land loans as of December 31, 2023.

As of December 31, 2025, construction, land and land development loans included $124.9 million in commercial construction loans, $39.1 million in other construction, land and land development loans, $37.4 million in residential construction loans and $20.7 million in undeveloped land loans, compared to $83.2 million in commercial construction loans, $40.9 million in residential construction loans and $15.4 million in other construction, land and land development loans and $8.7 million in undeveloped land loans as of December 31, 2024.

Residential Real Estate Loans .

Our one-to-four family residential real estate loans increased $6.3 million, or 1.4%, to $469.8 million as of December 31, 2024, from $463.4 million as of December 31, 2023 due to a decrease of $23.3 million in community bank loans partially offset by an increase of $29.7 million in CCBX loans.

Our one-to-four family residential real estate loans decreased $3.4 million, or 0.7%, to $466.4 million as of December 31, 2025, from $469.8 million as of December 31, 2024 due to a decrease of $3.6 million in CCBX loans partially offset by an increase of $229,000 in community bank loans.

As of December 31, 2025, there were $264.1 million in CCBX home equity loans included in residential real estate, compared to $267.7 million at December 31, 2024.

These home equity lines of credit are secured by residential real estate and are accessed by using a credit card.

These are first and second lien residential loans and require 18 months of home ownership.

These are first, second, and third lien residential loans and require 18 months of home ownership for non-owner occupied.

Term lengths are up to 30 years and lines range from $5,000 to $400,000.

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We last purchased residential mortgage loans in 2018.

As of December 31, 2024 and December 31, 2023, we held $6.1 million and $8.1 million, respectively, in purchased residential real estate mortgage loans.

As of December 31, 2025 and December 31, 2024, we held $4.4 million, in purchased residential real estate mortgage loans.

These loans purchased typically have a fixed rate with a term of 15 to 30 years and are collateralized by one-to-four family residential real estate.

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Commercial Real Estate Loans .

Commercial real estate loans increased $71.3 million, or 5.5%, to $1.37 billion as of December 31, 2024, from $1.30 billion as of December 31, 2023.

Commercial real estate loans decreased $88.9 million, or 6.5%, to $1.29 billion as of December 31, 2025, from $1.37 billion as of December 31, 2024.

These increases, which occurred across the various segments of our portfolio, were due to our commitment to continue growing the portfolio in the Puget Sound region.

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Consumer and Other Loans .

Consumer and other loans increased $393.5 million, or 48.4%, to $1.21 billion, from $813.5 million as of December 31, 2023, as a result of growth in CCBX loans originated through our partners.

We sold $850.9 million in CCBX credit cards loans and $167.3 million in CCBX consumer and other loans during the year ended December 31, 2024.

Consumer and other loans increased $121.7 million, or 10.1%, to $1.33 billion, from $1.21 billion as of December 31, 2024, as a result of growth in CCBX loans originated through our partners.

We sold $5.27 billion in CCBX credit cards loans and $281.8 million in CCBX consumer and other loans during the year ended December 31, 2025.

We expect that we will continue to sell CCBX loans as part of our on-going strategy to manage the loan portfolio and credit quality.

New loans are being booked with enhanced credit standards, which typically results in a lower interest rate than some of the higher risk loans that have paid off or that we have chosen to sell.

CCBX consumer loans totaled $1.19 billion as of December 31, 2024, compared to $811.9 million at December 31, 2023.

CCBX consumer loans totaled $1.31 billion as of December 31, 2025, compared to $1.19 billion at December 31, 2024.

CCBX consumer loans include cash secured and unsecured consumer loans, loan products designed to help consumers build credit, lines of credit, credit cards, other loans and overdrafts.

Consumer credit cards are open-ended and have interest rates ranging from 7.75% to the maximum rate allowable by state.

For short-term consumer loans, both secured and unsecured options are available and typically have fully-amortizing terms ranging from three months to five years.

Interest rates can be fixed or variable and range from 3.99% to the maximum allowable rate by state.

Consumer credit cards are open-ended and have interest rates ranging from a promotional rate of 0.00% to the maximum rate allowable by state.

For short-term consumer loans, both secured and unsecured options are available and typically have fully-amortizing terms ranging from two months to six years.

Interest rates can be fixed or variable up to the maximum allowable rate by state.

Our community bank consumer and other loans totaled $14.1 million as of December 31, 2025, compared to $13.5 million at December 31, 2024 and are comprised of personal lines of credit, automobile, boat, and recreational vehicle loans, and secured term loans.

Contractual Maturity Ranges .

The contractual maturity ranges of loans in our loan portfolio and the amount of such loans with fixed and floating interest rates in each maturity range as of date indicated are summarized in the following tables:

As of December 31, 2025

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Capital call lines $ 210,230 $ 250 $ — $ — $ 210,480

All other commercial and industrial loans 37,238 93,743 53,375 — 184,356

All other commercial and

industrial loans 54,496 98,233 90,876 — 243,605

Real estate loans:

Construction, land and land development loans 109,530 24,478 14,028 162 148,198

Construction, land and land

development loans 119,134 68,738 34,203 — 222,075

Residential real estate loans 56,648 296,836 67,258 45,610 466,352

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The following table summarizes our exposure by industry for our commercial real estate portfolio as of December 31, 2025:

(dollars in thousands) Outstanding Balance Available Loan Commitments Total Outstanding Balance & Available Commitment % of Total Loans

(dollars in thousands) Outstanding Balance Available Loan Commitments Total Outstanding Balance & Available Commitments % of Total Loans

(Outstanding Balance &

Available Commitment)

Available Commitments)

Average Loan Balance Number of Loans

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(dollars in thousands) Outstanding Balance Available Loan Commitments (1)

Total Outstanding Balance & Available Commitment (1)

Total Outstanding Balance & Available Commitments (1)

CCBX Portfolio Maximum Limit (1)

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(Outstanding Balance &

Available Commitment)

Available Commitments)

Average Loan Balance Number of Loans

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(dollars in thousands) Outstanding Balance Available Loan Commitments (1)

Total Outstanding Balance & Available Commitment (1)

Total Outstanding Balance & Available Commitments (1)

CCBX Portfolio Maximum Limit (1)

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(Outstanding Balance &

Available Commitment)

Available Commitments)

Average Loan Balance Number of Loans

CCBX residential real estate loans

Home equity line of credit $ 267,707 $ 453,369 $ 721,076 $ 375,000 13.2 % $ 27 10,092

Home equity lines of credit $ 264,059 $ 631,973 $ 896,032 $ 400,000 14.8 % $ 25 10,451

Community bank residential real estate loans

Closed end, secured by first liens 164,351 529 164,880 n/a 2.7 293 293

Home equity line of credit 25,506 43,102 68,608 n/a 1.3 109 234

Home equity lines of credit 28,294 50,302 78,596 n/a 1.3 257 257

Closed end, second liens 9,648 1,681 11,329 n/a 0.2 28 28

3 unchanged sentences

(dollars in thousands) Outstanding Balance Available Loan Commitments (1)

Total Outstanding Balance & Available Commitment (1)

Total Outstanding Balance & Available Commitments (1)

CCBX Portfolio Maximum Limit (1)

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(Outstanding Balance &

Available Commitment)

Available Commitments)

Average Loan Balance Number of Loans

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Retail and other loans

19,166 23,859 43,025 515,589 0.7 8 2,490

Community bank C&I loans

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Manufacturing 4,435 4,113 8,548 n/a 0.1 120 37

Maintenance and repair 7,751 278 8,029 n/a 0.1 646 12

Groups < 0.10% of total 84,185 29,543 113,728 n/a 1.9 390 216

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The following table details our concentration by category for our construction, land and land development loan portfolio as of December 31, 2025:

(dollars in thousands) Outstanding Balance Available Loan Commitments Total Outstanding Balance & Available Commitment % of Total Loans

(dollars in thousands) Outstanding Balance Available Loan Commitments Total Outstanding Balance & Available Commitments % of Total Loans

(Outstanding Balance &

Available Commitment)

Available Commitments)

Average Loan Balance Number of Loans

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Installment (closed end) consumer loans and revolving (open-ended loans, such as credit cards) originated through CCBX partners continue to accrue interest until they are charged-off at 120 days past due for installment loans (primarily unsecured loans to consumers) and 180 days past due for revolving loans (primarily credit cards).

These consumer loans are reported out as substandard loans, 90+ days past due and still accruing.

These consumer loans are reported as substandard loans, 90+ days past due and still accruing.

As a result of the type of loans (primarily consumer loans) originated through our CCBX partners, we anticipate that balances 90 days past due or more and still accruing will increase as those loans grow.

We continue to refine our credit approach with partners, widening the scope of loans that we are moving to nonaccrual status.

Additionally, some CCBX partners have instituted a collection practice that places certain loans on nonaccrual status to improve collectability.

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We actively manage problem assets to reduce our risk for loss.

We had $62.7 million, or 1.52%, in nonperforming assets as of December 31, 2024, compared to $53.8 million, or 1.44%, as of December 31, 2023.

We had $64.1 million in nonperforming assets as of December 31, 2025, compared to $62.7 million as of December 31, 2024.

This includes $33.1 million in CCBX loans more than 90 days past due and still accruing interest as of December 31, 2025, compared to $43.1 million at December 31, 2024.

All of our nonperforming assets were nonperforming loans as of December 31, 2025 and December 31, 2024.

The increase in nonperforming assets was due to an increase in CCBX nonaccrual loans of $19.5 million as a result of a new collection practice that places certain loans on nonaccrual status to improve collectability, $17.2 million of these loans are less than 90 days past due as of December 31, 2024.

This increase was partially offset by a $3.4 million decrease in CCBX partner loans that are 90 days or more past due and still accruing interest, and a decrease in community bank nonaccrual loans of $7.2 million during the twelve months ended December 31, 2024.

The balance of our nonperforming assets increased as a result of certain CCBX loans that are less than 90 days past due, which were placed on nonaccrual status.

Our accruing loans past due 90 days or more decreased $9.9 million and was partially offset by an increase of $5.0 million in CCBX nonaccrual loans primarily as a result of a new collection practice employed by certain CCBX partners that places specific loans on nonaccrual status to enhance collectability, $20.3 million of these loans are less than 90 days past due as of December 31, 2025.

Additionally, there was an increase in community bank nonaccrual loans of $6.4 million during the year ended December 31, 2025.

Our nonperforming loans to loans receivable ratio was 1.71% at December 31, 2025, compared to 1.80% at December 31, 2024.

Our community bank credit quality remains strong, as demonstrated by the low level of community bank nonperforming loan balances for the year ended December 31, 2024.

Our community bank credit quality remains strong, as demonstrated by the low level of community bank nonperforming loans to total loans receivable of 0.17% as of December 31, 2025.

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.

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Real estate loans:

Construction, land and land development — —

Residential real estate 38 —

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Total nonperforming assets to total assets 1.35 % 1.52 %

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

The following tables detail the community bank and CCBX nonperforming assets which are included in the total nonperforming assets table above.

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Total nonperforming CCBX loans to total loans receivable 1.54 % 1.79 %

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

As of December 31, 2025, $55.7 million of the $57.6 million in nonperforming CCBX loans were covered by CCBX partner credit enhancements.

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As of December 31, 2024, the allowance for credit losses totaled $177.0 million, or 5.08% of total loans.

The increase in the Company’s allowance for credit losses for the year ended December 31, 2024 compared to December 31, 2023, was largely related to the growth and composition for CCBX partner loans.

During the year ended December 31, 2024, a $277.8 million provision for credit losses - loans was recorded for CCBX partner loans based on management’s analysis.

The factors used in management’s analysis for community bank credit losses indicated that a recapture for credit losses - loans of $2.1 million was needed for the year ended December 31, 2024, largely due to the resolution and recapture of a specific allowance and a change in the average remaining life of community bank loans.

The economic environment is continuously changing with bank failures and mergers, inflation, higher interest rates, global unrest, the war in Ukraine, conflicts in the Middle East, the political environment, natural disasters, and trade issues that have resulted in economic uncertainty.

The decrease in the Company’s allowance for credit losses for the year ended December 31, 2025 compared to December 31, 2024, is largely related to improved credit quality decreasing the provision for CCBX loans.

During the year ended December 31, 2025, a $193.1 million provision for credit losses was recorded for CCBX loans.

The decrease in the allowance is due to a change in loan mix, an improvement in the performance of the CCBX portfolio and our focus on originating higher quality CCBX loans resulting in lower historical and future projected loss factors.

As we continue to originate higher quality loans, these higher quality loans become a greater proportion of the CCBX portfolio, resulting in a decrease in expected losses and a reduced allowance.

In general, 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.

The factors used in management’s analysis for community bank credit losses indicated that a provision recapture for credit losses - loans of $504,000 was needed for the year ended December 31, 2025, largely due to a change in the mix of community bank loans and updated prepayment speeds, offset by a slight increase in economic uncertainty.

The macro economic environment is continuously changing, primarily due to the pace of economic growth, inflation, changing interest rates, global trade tensions, tariffs, unemployment, global unrest, the war in Ukraine, conflicts in the Middle East, political uncertainty, natural disasters, and trade issues that have resulted in economic uncertainty.

As described above, 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.

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The table below shows the activity in the credit enhancement asset for the periods indicated:

As of or for the Twelve Months Ended December 31,

As of or for the Year Ended December 31,

(dollars in thousands) 2025 2024

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Credit recoveries settled with partner during period 20,326 13,027

Net losses pending settlement with partner 5,998 18,156

Net change in pending partner settlements (827) 5,998

Net (provision) charge-offs without credit enhancement 881 (472)

Credit enhancement at end of period 177,657 181,890

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

Many CCBX partners also pledge a cash reserve account at the Bank as collateral for loss exposure which the Bank can collect from when losses occur that is then replenished by the partner on a regular interval.

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The following table presents, as of and for the periods indicated, net charge-off information by segment:

The following tables present, as of and for the periods indicated, net charge-off information by segment:

December 31, 2025 December 31, 2024

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average loans 0.00 % 11.38 % 5.45 % 0.03 % 15.10 % 6.51 %

% of CCBX net

covered by credit

enhancement 97.7 % 97.4 %

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

December 31, 2023

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0.00 % 11.94 % 4.92 %

% of CCBX charge-offs covered by

credit enhancement 99.4 %

% of CCBX net charge-offs covered

by credit enhancement 97.5 %

The following tables present, as of and for the periods indicated, an analysis of the allowance for credit losses and other related data:

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Residential real estate 101 8 4

Commercial real estate 4 — —

Consumer and other 19,259 11,925 7,428

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Allowance to loans receivable 4.52 % 5.08 % 3.88 %

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

The allowance for credit losses to nonaccrual loans ratio decreased as of December 31, 2024, compared to December 31, 2023 as a result of an increase in nonaccrual loans of $12.2 million due to an increase in CCBX nonaccrual loans as a result of a new collection practice that places certain loans on nonaccrual status to improve collectability, partially offset by a decrease in nonaccrual community bank loans and a decrease in CCBX loans past due 90 days or more.

The allowance for credit losses increased $59.6 million for the year ended December 31, 2024 compared to the year ended December 31, 2023, largely due to the increase in loans originated through our CCBX partners.

The allowance for credit losses to nonaccrual loans ratio decreased as of December 31, 2025, compared to December 31, 2024, primarily as a result of an increase in nonaccrual loans of $11.4 million, largely due to an increase in CCBX nonaccrual loans as a result of a new collection practice that certain CCBX partners employ that places specific loans on nonaccrual status to enhance collectability, combined with a $6.4 million increase in nonaccrual community bank loans.

The allowance for credit losses decreased $7.5 million as of December 31, 2025 compared to December 31, 2024 largely due to a change in loan mix, an improvement in the performance of the CCBX portfolio and our focus on originating higher quality CCBX loans resulting in lower historical and future projected loss factors.

Agreements with our CCBX partners provide for a credit enhancement which protects the Bank by indemnifying or reimbursing incurred losses.

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We believe that this alignment of interests ensures that CCBX partners are motivated to implement robust risk management practices and maintain the overall health of the portfolio.

Net charge-offs on CCBX loans for the year ended December 31, 2024 that were covered by credit enhancements was $223.0 million.

At December 31, 2024, the allowance for credit losses for CCBX partner loans totaled $158.1 million, compared to $95.8 million at December 31, 2023.

Net charge-offs on CCBX loans for the year ended December 31, 2025 that were covered by credit enhancements were $192.2 million.

At December 31, 2025, the allowance for credit losses for CCBX loans totaled $151.3 million, compared to $158.1 million at December 31, 2024.

The following table presents the loans receivable and allowance for credit losses by segment for the period indicated:

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Allowance for credit losses (18,231) (151,299) (169,530) $ (18,924) $ (158,070) (176,994)

Allowance for credit losses to

total loans receivable 1.00 % 9.86 % 5.08 % 1.18 % 8.04 % 3.88 %

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

Allowance for credit losses

to total loans receivable 0.94 % 8.37 % 4.52 % 1.00 % 9.86 % 5.08 %

Although we believe that we have established our allowance for credit losses in accordance with GAAP and that the allowance for credit losses was adequate to provide for expected losses in the portfolio at all times shown above, future provisions for credit losses will be subject to ongoing evaluations of the risks in our loan portfolio.

We continue to have a low level of community bank charge-offs and nonperforming loans, however, the economic environment is continuously changing with potential for bank failures and mergers, inflation, higher interest rates, global unrest, the war in Ukraine, conflicts in the Middle East, political uncertainty, natural disasters and trade issues that have resulted in economic uncertainty.

We continue to have a low level of community bank charge-offs and nonperforming loans, however, The macro economic environment is continuously changing, primarily due to the pace of economic growth, inflation, changing interest rates, global trade tensions, tariffs, unemployment, global unrest, the war in Ukraine, conflicts in the Middle East, political uncertainty, natural disasters, and trade issues that have resulted in economic uncertainty.

If economic conditions worsen then Washington state and Puget Sound region may experience a more severe economic downturn, and our asset quality could deteriorate, which may require material additional provisions for credit losses.

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At December 31,

2024 2023 (1)

(dollars in thousands) Allowance

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Total allowance for credit losses $ 169,530 $ 176,994

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

We use our securities portfolio primarily as a source of liquidity and collateral that can be readily sold or pledged for public deposits, for CRA purposes or other business purposes.

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Agency collateralized mortgage obligations and U.S.

Agency residential mortgage-backed securities.

Agency residential mortgage-backed securities for Community Reinvestment Act ("CRA") purposes.

Because we target a loan-to-deposit ratio in the range of 90% to 100%, we prioritize liquidity over the earnings of our securities portfolio.

At December 31, 2024, our loan-to-deposit ratio was 97.8% due to our growth in both loans and deposits.

At December 31, 2025, our loan-to-deposit ratio was 92.2%, due primarily to our growth in both loans and deposits.

When our securities portfolio represents less than 5% of assets we focus on liquid securities.

To the extent our securities represent more than 5% of assets, absent an immediate need for liquidity, we may invest excess funds to provide a higher return.

As of December 31, 2024, the amortized cost of our investment securities totaled $47.3 million, a decrease of $103.6 million, or 68.6%, compared to $150.9 million as of December 31, 2023.

The decrease in the securities portfolio was due to $100.0 million of securities in the AFS portfolio maturing during the year ended December 31, 2024 partially offset by the purchase of HTM securities for CRA purposes.

Our investment portfolio consists of only $35,000 in securities classified as AFS and $47.3 million in held-to-maturity.

As of December 31, 2025, the amortized cost of our investment securities totaled $48.2 million, an increase of $925,000, or 2.0%, compared to $47.3 million as of December 31, 2024.

The increase in the securities portfolio was due to the purchase of CRA securities partially offset by principal paydowns during the year ended December 31, 2025.

Our investment portfolio consists of only $29,000 in securities classified as available-for-sale ("AFS") and $48.2 million in held-to-maturity securities for CRA purposes.

The carrying values of our investment securities classified as AFS are adjusted for unrealized gain or loss, and any gain or loss is reported on an after-tax basis as a component of other comprehensive income in shareholders’ equity.

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Securities available-for-sale:

Treasury securities $ — $ — $ 99,996 $ 99,461

Agency collateralized mortgage obligations $ 30 $ 29 $ 37 $ 35

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The Company has the following equity investments which do not have a readily determinable fair value and are held at cost minus impairment if any, plus or minus observable price changes in orderly transactions for an identical or similar investment of the same issuer.

This method will be applied until the investments do not qualify for the measurement election

(e.g., if the investment has a readily determinable fair value).

This method will be applied until the investments do not qualify for the measurement election (e.g., if the investment has a readily determinable fair value).

The Company will reassess at each reporting period whether the equity investments without a readily determinable fair value qualifies to be measured at cost minus impairment.

• 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.

• The Company had a $1.8 million and $2.2 million equity interest in a specialized bank technology company as of the quarters ended December 31, 2025, and December 31, 2024, respectively.

• The Company had a $350,000 equity interest in a technology company as of the quarters ended December 31, 2025, and December 31, 2024.

• The Company had a $42,000 and $47,000 equity interest in a technology company as of the quarters ended December 31, 2025, and December 31, 2024, respectively.

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

For the Twelve Months Ended

(dollars in thousands) 2025 2024 2023

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Carrying value, end of period $ 2,171 $ 2,619 $ 2,622

The Company has invested in funds that are accelerating technology for adoption by banks.

Additionally, the Company has invested in technology-focused funds, including those targeting innovation and adoption within the banking industry.

These equity investments are held at fair value, as reported by the funds.

During the year ended December 31, 2024, the Company contributed $72,000 with investment funds designed to help accelerate technology adoption at banks, and recognized net gains of $29,000, resulting in an equity interest of $910,000 at December 31, 2024.

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

During the year ended December 31, 2025, the Company contributed $556,000 in these funds and recognized net gains of $34,000, resulting in an equity interest of $1.5 million at December 31, 2025.

The Company has committed up to $1.1 million in capital for these equity funds, however, the Company is not obligated to fund these commitments prior to a capital call.

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

For the Twelve Months Ended

(dollars in thousands) 2025 2024 2023

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Total $ 48,248 5.383 % $ 48,248 5.383 %

Deferred tax assets, net decreased $206,000 to $3.6 million and other assets decreased $1.7 million to $13.6 million as of December 31, 2024, compared to December 31, 2023.

We offer a variety of deposit products that have a wide range of interest rates and terms, including demand, money market, savings, and time accounts as well as IntraFi network sweep deposits.

Deferred tax assets, net was zero as we moved to a deferred tax liability, net largely due to the impact of the Act, which permits the immediate expense of R&D costs for tax purposes.

Other assets decreased $6.6 million to $20.3 million as of December 31, 2025, compared to December 31, 2024.

During the year ended December 31, 2025, the Company completed a small asset acquisition that included the purchase of certain identifiable intangible assets.

The transaction was accounted for as an asset acquisition.

The acquired intangible asset is finite-lived and is being amortized over its estimated useful life.

The carrying amount of the intangible

asset was $4.5 million at December 31, 2025.

The acquisition did not have a material impact on the Company’s consolidated financial statements.

We offer a variety of deposit products that have a wide range of interest rates and terms, including demand, money market, savings, and time accounts as well as network sweep deposits.

Sweep deposits enable us to provide an FDIC insured deposit option to customers that have balances in excess of the FDIC insurance limit.

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Total deposits as of December 31, 2025 were $4.14 billion, an increase of $558.9 million, or 15.6%, compared to $3.59 billion as of December 31, 2024.

The increase in deposits was largely in due to an increase of $201.3 million in CCBX deposits.

The increase in deposits was largely due to an increase of $493.8 million in CCBX deposits.

Core deposits ended the quarter at $4.13 billion compared to $3.12 billion at December 31, 2024.

We define core deposits as all deposits except time deposits and brokered/other deposits.

Our cost of deposits for the community bank was 1.80% for the year ended December 31, 2024.

Additionally, as of December 31, 2024, there was $273.2 million in CCBX deposits that were transferred off balance sheet for increased FDIC insurance coverage and to manage deposit concentrations.

We define core deposits as all deposits except time deposits and brokered deposits.

Our cost of deposits was 1.56% for the community bank and 3.52% for CCBX for the three months ended December 31, 2025.

Additionally, as of December 31, 2025 there was $843.6 million in CCBX deposits that were transferred off balance sheet for increased FDIC insurance coverage and liquidity purposes.

Included in total deposits is $2.56 billion in CCBX deposits, an increase of $493.8 million, or 23.9%, compared to $2.06 billion as of December 31, 2024.

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The deposits from our CCBX segment are generally classified as interest bearing demand and money market accounts.

Total noninterest bearing deposits as of December 31, 2024 were $527.5 million, a decrease of $97.7 million, or 15.6%, compared to $625.2 million as of December 31, 2023.

Total noninterest bearing deposits as of December 31, 2025 were $579.6 million, an increase of $52.1 million, or 9.9%, compared to $527.5 million as of December 31, 2024.

Noninterest bearing deposits represent 14.0% and 14.7% of total deposits for December 31, 2025 and December 31, 2024, respectively.

Community bank noninterest bearing deposits totaled $493.0 million and $471.8 million at December 31, 2025 and December 31, 2024, respectively.

CCBX noninterest bearing deposits totaled $86.6 million and $55.7 million at December 31, 2025 and December 31, 2024, respectively.

Total interest bearing balances, excluding time deposits, as of December 31, 2025 were $3.55 billion, an increase of $512.0 million, or 16.8%, compared to $3.04 billion as of December 31, 2024.

The $323.5 million increase is due to CCBX growth in interest bearing deposits combined with an increase in community bank interest bearing deposits of $114.2 million.

The $512.0 million increase is primarily due to $507.0 million increase in CCBX interest bearing deposits combined with an increase in community bank interest bearing deposits of $49.2 million.

Included in total deposits is $460.3 million in IntraFi network interest bearing demand and money market sweep accounts as of December 31, 2025, which provides our customers with fully insured deposits through a sweep and exchange of deposits with other financial institutions.

The increase in community bank deposits was a result of the addition of some exception pricing tactics as a strategy at the end of the first quarter of 2024 to retain accounts and more effectively compete in the market.

Total time deposit balances as of December 31, 2024 were $17.5 million, a decrease of $811,000, or 4.4%, from $18.4 million as of December 31, 2023.

The decrease is due to our focus on core deposits and letting higher rate time deposits run off as they mature.

We have seen competitors increase rates on time deposits, and we have not globally matched their rates in response as we focus on growing and retaining less costly core deposits.

Total time deposit balances as of December 31, 2025 were $12.3 million, a decrease of $5.3 million, or 30.0%, from $17.5 million as of December 31, 2024.

The decrease is largely due to our focus on core deposits and letting higher rate time deposits run off as they mature.

We have seen competitors increase rates on time deposits, and have not globally matched their rates in response as we focus on growing and retaining less costly core deposits.

The following table sets forth deposit balances at the dates indicated.

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The increase in average deposits was primarily in interest bearing deposits.

We expect deposits to increase with continued growth in our primary market areas, increase in commercial lending relationships through which we seek deposit balances and continued business development efforts by branch managers, treasury service personnel and lenders.

We expect deposits to increase with continued growth in our primary market areas for the community bank and CCBX, through increases in commercial lending relationships for which we also seek deposit balances and the results of business development efforts by branch managers, treasury service personnel and lenders.

The average rate paid on total deposits was 2.99% for the year ended December 31, 2025, compared to 3.46% for the year ended December 31, 2024.

The average rate paid on interest bearing demand and money market accounts increased 0.46% for the year ended December 31, 2024 compared to the year ended December 31, 2023.

The average rate paid on other deposits decreased 0.31% for the year ended December 31, 2024, compared to the year ended December 31, 2023.

The average rate paid on time deposits of less than $100,000 increased 0.42% for the year ended December 31, 2024, compared to the year ended December 31, 2023.

The average rate paid on interest bearing demand and money market accounts decreased 0.78% for the year ended December 31, 2025 compared to the year ended December 31, 2024.

The average rate paid on other deposits increased 0.35% for the year ended December 31, 2025, compared to the year ended December 31, 2024.

The average rate paid on time deposits of less than $100,000 was unchanged for the year ended December 31, 2025, compared to the year ended December 31, 2024.

The average rate paid on time deposits greater than $100,000 increased 0.43% for the year ended December 31, 2025 compared to the year ended December 31, 2024.

The average rate paid on savings increased 0.68% for the year ended December 31, 2025, compared to the year ended December 31, 2024.

The overall higher average rate paid on interest bearing accounts in the year ended December 31, 2024 compared to the year ended December 31, 2023 was due to a higher interest rate environment.

The overall lower average rate paid on interest bearing accounts in the year ended December 31, 2025 compared to the year ended December 31, 2024 was due to a lower interest rate environment.

The following table presents the average balances and average rates paid on deposits for the periods indicated:

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Factors affecting the cost of funding interest-bearing assets include the volume of noninterest- and interest-bearing deposits, changes in market interest rates and economic conditions in the Puget Sound region and their impact on interest paid on deposits, competition from other financial institutions, as well as the ongoing execution of our growth strategies.

Cost of total interest-bearing liabilities is calculated as total interest expense divided by average total interest-bearing deposits plus average total borrowings.

total interest-bearing liabilities is calculated as total interest expense divided by average total interest-bearing deposits plus average total borrowings.

Our cost of total interest-bearing liabilities was 3.52% and 4.19% for the years ended December 31, 2025 and 2024, respectively.

The increase in our cost of deposits in 2024 was primarily due to rate increases from the FOMC.

The decrease in our cost of deposits in 2025 was primarily due to rate decreases from the FOMC.

We actively manage our interest rates on deposits, however, rate changes from the FOMC and competition can and do impact our deposit costs.

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Weighted average interest rate at end of period:

(1) No borrowings were outstanding during the period, except for an immaterial borrowing incurred to test the advance line.

Junior Subordinated Debentures.

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We may redeem the subordinated note, in whole or in part, without premium or penalty, in principal redemption multiples of $1,000, after November 1, 2027, subject to any required regulatory approvals.

Other Liabilities

Deferred tax liability, net increased to $853,000 from a net deferred asset as of December 31, 2025, largely due to the impact of the Act, which permits the immediate expense of R&D costs for tax purposes.

Liquidity and Capital Resources

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those options are more fully discussed below.

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

Our maximum concentration for any one partner is 30% of total assets.

As of December 31, 2025, we had two partners with deposits that together represent 45% of total deposits.

We continually monitor our liquidity position to ensure that our assets and liabilities are managed in a manner to meet all reasonably foreseeable short-term, long-term and strategic liquidity demands.

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Less commonly used sources of funding include borrowings from the Federal Reserve discount window, draws on established federal funds lines from unaffiliated commercial banks, funds from online rate services, brokered deposits, a one-way buy through an ICS account, and the issuance of debt or equity securities.

We believe we have ample liquidity resources to fund future growth and meet other cash needs as necessary and are closely monitoring liquidity in this uncertain economic environment.

The Company has pledged loans and securities totaling $957.9 million and $1.03 billion at December 31, 2024 and December 31, 2023, respectively, for borrowing lines at the FHLB and FRB.

We believe we have ample liquidity resources to fund future growth and meet other cash needs as necessary and are closely monitoring liquidity in this uncertain macro economic environment.

The Company has pledged loans and securities totaling $939.8 million and $957.9 million at December 31, 2025 and December 31, 2024, respectively, for borrowing lines at the FHLB and FRB.

Additional loans were pledged during 2023 to significantly increase the borrowing capacity of the Bank in the event of a liquidity crisis.

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There were no borrowings taken under these facilities during the twelve-months ended December 31, 2025 so the Bank has the maximum capacity in the event of a liquidity emergency.

The Bank’s current liquidity position is supported by liquid assets (cash and investments on the balance sheet), liabilities (capacity to borrow funds the same day), low levels of uninsured deposits ($543.0 million at December 31, 2024 and alternative sources of funds including the capacity to borrow up to $642.1 million from FHLB, the FRB discount window on a same day basis and a $50.0 million line of credit with a Banker’s Bank.

Cash on the balance sheet and

borrowing capacity of $1.14 billion represented 31.9% of total deposits and exceeded the $543.0 million in uninsured deposits as of December 31, 2024.

The board of directors and management is cognizant of the risk of uninsured deposits and has used fully insured IntraFi Network reciprocal deposits to reduce uninsured deposit.

The Bank’s current liquidity position is supported by liquid assets (cash and investments on the balance sheet), liabilities (capacity to borrow funds the same day), low levels of uninsured deposits ($641.3 million at December 31, 2025 and $543.0 million at December 31, 2024) and alternative sources of funds including the capacity to borrow up to $642.2 million from FHLB, the FRB discount window on a same day basis and a $50.0 million line of credit with a Banker’s Bank.

Cash on the balance sheet and borrowing capacity of $1.43 billion represented 34.5% of total deposits and exceeded the $641.3 million in uninsured deposits as of December 31, 2025.

The board of directors and management is cognizant of the risk of uninsured deposits and has used fully insured IntraFi Network reciprocal deposits to reduce uninsured deposits.

Fully insured IntraFi network reciprocal deposits totaled $460.3 million and $414.0 million at December 31, 2025 and December 31, 2024, respectively.

Uninsured deposits totaled $543.0 million at December 31, 2024 and totaled $558.6 million at December 31, 2023.

The board of directors adopted a policy requiring management take various actions, in its discretion, to return the liquidity ratio 10% or greater within 10 business days of the liquidity ratio being below 10% before the Bank’s liquidity contingency funding plan would be invoked.

The board of directors adopted a policy requiring management take various actions, in its discretion, to return the liquidity ratio to 10% or greater within 10 business days of the liquidity ratio being below 10% before the Bank’s liquidity contingency funding plan would be invoked.

If the liquidity ratio goes below 7.5% then the board of directors will be notified immediately, and the liquidity contingency funding plan would be invoked until the ratio is returned to 10% or more.

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During the quarter ended December 31, 2024, the Company completed a public offering of 1,380,000 shares of its common stock at a price to the public of $71.00 per share.

Gross proceeds from the offering of $98.0 million, before deducting underwriting discounts and offering expenses, will be used for general corporate purposes, including, without limitation, to support investment opportunities and the Bank’s growth.

Gross proceeds from the offering of $98.0 million, before deducting underwriting discounts and offering expenses, is used for general corporate purposes, including, without limitation, to support investment opportunities and the Bank’s growth.

A total of $50.0 million of those proceeds were contributed to the Bank in 2024, and the balance of the amount was retained in cash at the Company level.

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We expect to monitor and control growth in order to remain in compliance with all regulatory capital standards applicable to us.

In addition, the Company maintains an effective registration statement on Form S-3 with the Securities and Exchange Commission which allows the Company to raise additional capital in an amount up to $102.0 million.

The Company raised $98.0 million in December 2024 and $34.5 million in December 2021.

The Company, through a private placement, raised $25.0 million in subordinated debt in 2021 and repaid $10.0 million of subordinated debt with the proceeds and used the remainder for general corporate purposes.

On November 1, 2022 the

Company, through a private placement, raised $20.0 million of subordinated debt with the proceeds to be used for general corporate purposes.

In addition, the Company maintains an effective registration statement on

Form S-3 with the Securities and Exchange Commission which allows the Company to raise additional capital in an amount up to $102.0 million.

The Company raised $98.0 million in December 2024.

The following table presents the Company’s and the Bank’s regulatory capital ratios as of the dates presented, as well as the regulatory capital ratios that are required by Federal Reserve regulations to maintain “well-capitalized” status:

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The capital conservation buffer is an additional 2.5% of the amount necessary to meet the minimum risk-based capital requirements for total, tier 1, and common equity tier 1 risk-based capital.

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.

Material Cash Requirements and Capital Resources

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As of December 31, 2025 we had $2.31 billion in commitments to extend credit, compared to $1.96 billion as of December 31, 2024.

The $381.6 million decrease is largely attributed to a decrease of $297.8 million in credit cards, $57.9 million decrease in commercial and industrial capital call line commitments, $55.8 million decrease in commercial construction loans, partially offset by a $33.6 million increase in residential real estate commitments, related to CCBX loans and an increase of $17.8 million in consumer and other loan commitments, related to CCBX consumer loans.

The $345.2 million increase is largely attributed to a $102.3 million increase in credit cards, related to CCBX loans, a $185.0 million increase in residential real estate commitments, related to CCBX loans, an increase of $49.7 million in consumer and other loan commitments, related to CCBX consumer loans, and a $21.7 million increase in commercial construction loans, partially offset by a $31.8 million decrease in commercial and industrial capital call line commitments.

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:

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Capital call lines Business - Venture Capital $ 350,000 $ 350,000 $ —

All other commercial & industrial loans

All other commercial & industrial

Business - Small Business 515,589 480,069 35,520

Real estate loans:

Home equity lines of credit Home Equity - Secured Credit Cards 375,000 375,000 —

Home equity lines of credit Home Equity - Secured Credit

Cards 400,000 375,000 25,000

Consumer and other loans:

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Installment loans Consumer 1,740,813 1,774,533 (33,720)

Other consumer and other loans Consumer - Secured Credit Builder & Unsecured consumer 5,398 709,108 (703,710)

Other consumer and other loans Consumer - Secured Credit Builder

& Unsecured consumer 478,598 5,398 473,200

$ 4,385,000 $ 3,805,000 $ 580,000

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The following table shows the Company’s key performance ratios for the periods indicated.

Twelve Months Ended

2025 December 31,

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CCBX – BaaS Reporting Information

During the twelve months ended months ended December 31, 2024, $62.1 million was recognized in noninterest income BaaS credit enhancements related to the establishment of a credit enhancement asset for credit losses indemnified by our strategic partners and reserved for unfunded commitments for CCBX partner loans and deposits.

During the year ended December 31, 2025, $47.3 million was recognized in noninterest income BaaS credit enhancements related to the establishment of a credit enhancement asset for credit losses indemnified by our strategic partners and reserved for unfunded commitments for CCBX loans and deposits.

Agreements with our CCBX partners provide for a credit enhancement provided by the partner which protects the Bank by indemnifying or reimbursing incurred losses.

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We believe that this alignment of interests ensures that CCBX partners are motivated to implement robust risk management practices and maintain the overall health of the portfolio.

Credit losses and recoveries typically flow through the cash reserve account.

These cash reserve accounts are included in total deposits on the balance sheet.

Although agreements with our CCBX partners provide for credit enhancements that provide protection to the Bank from credit and fraud losses by indemnifying or reimbursing incurred credit and fraud losses, if our partner is unable to fulfill their contracted obligations then the Bank would be exposed to additional loan and deposit losses if the cash flows on the loans were not sufficient to fund the reimbursement of loan losses, as a result of this counterparty risk.

Many CCBX partners also pledge a cash reserve account at the Bank, which the Bank can collect from when losses occur that is then replenished by the partner on a regular interval.

Although agreements with our CCBX partners provide for credit enhancements that provide protection to the Bank from credit and fraud losses, if our partner is unable to fulfill their contractual obligation and if the cash flows on the loans were not sufficient to fund the reimbursement of loan losses, then the Bank would be exposed to additional loan and deposit losses as a result of this counterparty risk.

If a CCBX partner does not replenish their cash reserve account, the Bank may consider an alternative plan for funding the cash reserve.

This may involve the possibility of adjusting the funding amounts or timelines to better align with the partner's specific situation.

If a mutually agreeable funding plan is not achieved, then the Bank could declare the agreement in default, take over servicing and cease paying the partner for servicing the loan and providing credit enhancements.

The Bank would evaluate any remaining credit enhancement asset from the CCBX partner in the event the partner failed to fulfill its obligations and would determine if a write-off is appropriate.

If a write-off occurs, the Bank would retain the full yield and any fee income on the loan portfolio going forward, and our BaaS loan expense would decrease once default occurred and payments to the CCBX partner were stopped.

For CCBX partner loans the Bank records contractual interest earned from the borrower on loans in interest income, adjusted for origination costs which are paid or payable to the CCBX partner.

If a mutually agreeable funding plan is not agreed to, the Bank could declare the agreement in default, take over servicing and cease paying the partner for servicing the loan and providing credit enhancements.

The Bank would evaluate any remaining credit enhancement asset from the CCBX partner in the event the partner defaulted to determine if a write-off is appropriate.

If a write-off occurs, the Bank would stop payments to the CCBX partner and retain the full yield and any fee income on the loan portfolio going forward, decreasing our BaaS loan expense.

For CCBX loans the Bank records contractual interest earned from the borrower on loans in interest income, adjusted for origination costs which are paid or payable to the CCBX partner.

BaaS loan expense represents the amount paid or payable to partners for credit and fraud enhancements and servicing CCBX loans.

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(1) A reconciliation of this non-GAAP measure is set forth in the section titled “ GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures.

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

The increased activity of CCBX partners has resulted in increases in direct fees, expenses and interest for the year ended December 31, 2025 compared to the year ended December 31, 2024.

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2024 December 31,

Loan interest income $ 248,286 $ 197,306 $ 102,808

Total BaaS interest income $ 248,286 $ 197,306 $ 102,808

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

BaaS loan interest income $ 274,608 $ 248,286 $ 197,306

Total BaaS loan interest income $ 274,608 $ 248,286 $ 197,306

Interest expense Year Ended

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Total BaaS interest expense $ 90,109 $ 94,035 $ 71,646

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

(dollars in thousands) December 31,

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Servicing and other BaaS fees $ 5,795 $ 4,743 $ 3,855

Transaction fees 5,910 4,011 3,211

Interchange fees 6,933 4,252 2,583

Transaction and interchange fees 18,744 12,843 8,263

BaaS program income before reimbursement of expenses 24,539 17,586 12,118

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Total noninterest BaaS income $ 225,158 $ 302,748 $ 198,169

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

Servicing and other BaaS fees increased $888,000 in the year ended December 31, 2024 compared to the year ended December 31, 2023, while transaction fees and interchange fees increased $4.6 million, in the year ended December 31, 2024 compared to the year ended December 31, 2023.

Servicing and other BaaS fees increased $1,052,000 in the year ended December 31, 2025 compared to the year ended December 31, 2024, while transaction and interchange fees increased $5.9 million, in the year ended December 31, 2025 compared to the year ended December 31, 2024.

We expect servicing and other BaaS fees to decrease and transaction and interchange fees to increase, as partner activity grows and contracted minimum fees are replaced with recurring fees, which exceed those minimum fees.

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Total BaaS loan and fraud expense $ 137,100 $ 128,370 $ 86,913

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

GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures

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CCBX net interest margin, net of BaaS loan expense 3.50 % 3.30 % 4.13 %

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

Quantitative and Qualitative Disclosures about Market Risk

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Our objective is to measure the effect on net interest income and to adjust the balance sheet to minimize the inherent risk while at the same time maximizing income.

The FOMC raised interest rates 0.25% in mid-March 2022, 1.25% in the second quarter of 2022, 1.50% in the third quarter of 2022, 1.25% in the fourth quarter of 2022, 0.50% in the first quarter 2023, and 0.25% in the second quarter 2023 and 0.25% in the third quarter of 2023.

During the third quarter 2024, the FOMC lowered interest rates, for the first time since 2023, by 0.50% then two more times during the fourth quarter, totaling a decrease of 0.50% resulting in a Fed Funds target rate of 4.50% as of December 31, 2024.

The FOMC lowered the Fed Funds target range of 4.25%-4.50% by 0.25% in the third quarter of 2025 and by 0.50% in the fourth quarter of 2025, bringing the top end of the target range to 3.75% as of the filing date of this Annual Report on Form 10-K.

The timing and magnitude of any future and potential rate changes, expected to be further rate cuts, remains uncertain but will likely be closely tied to future inflationary trends.

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ALCO formulates strategies based on appropriate levels of interest rate risk.

In determining the

appropriate level of interest rate risk, ALCO considers the impact on earnings and capital on the current outlook on interest rates, potential changes in interest rates, regional economies, liquidity, business strategies and other factors.

ALCO meets regularly to review, among other things, the sensitivity of assets and liabilities to interest rate changes, the book and market values of assets and liabilities, unrealized gains and losses, purchase and sale activities, commitments to originate loans and the maturities of investments and borrowings.

In determining the appropriate level of interest rate risk, ALCO considers the impact on earnings and capital on the current outlook on interest rates, potential changes in interest rates, regional economies, liquidity, business strategies and other factors.

regularly to review, among other things, the sensitivity of assets and liabilities to interest rate changes, the book and market values of assets and liabilities, unrealized gains and losses, purchase and sale activities, commitments to originate loans and the maturities of investments and borrowings.

Additionally, ALCO reviews liquidity, cash flows, maturities of deposits and consumer and commercial deposit activity.

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-400 basis points (17.7)% 3.3%

The results illustrate that the Company’s static balance sheet remains liability sensitive, however, the dynamic balance sheet is slightly more neutral to rate shifts.

As the Company’s composition has shifted over time due to the growth of the CCBX segment to more variable/adjustable in nature, our interest rate risk profile has been mitigated, reducing variability in both rising and falling rate environments, as the community bank and CCBX segments work to offset one another.

The community bank segment remains asset sensitive and generally performs better in an increasing interest rate environment.

For the community bank, the drivers are primarily due to behavior of demand, money market and savings deposits during such rate fluctuations.

The results illustrate that the Company’s static balance sheet has now become asset sensitive, with the dynamic balance sheet displaying slightly more asset sensitivity due to most of the loan growth assumptions coming from fully adjustable-rate CCBX products.

The community bank segment remains asset sensitive and performs better in an increasing interest rate environment.

For the community bank, the loan portfolio is only approximately 20-25% adjustable rate, meaning the asset sensitivity is driven by the lower level of deposit repricing in rising rate environments.

We have found that, historically, offering rates on these community bank deposits change more slowly than changes in short-term market rates.

For the CCBX segment, the offering rates on the loan portfolio are modeled using partner contractual net yields which mostly adjust immediately with market shifts.

For this CCBX portfolio, the offering rates on approximately 60% of loans and the majority of deposits nearly fully reprice with changes in market rates.

During 2023, one of the material CCBX lending partners contractual yields converted to a fixed rate product, continuing to reduce the overall variability in the Company’s balance sheet.

As of December 31, 2024, the Company’s overall funding mix continues to be more heavily weighted towards the CCBX deposits which are primarily variable rate deposits aiding with the neutrality of the balance sheet and the overall shift to liability sensitive in the static model.

For this CCBX portfolio, the offering rates on approximately 97% of loans and the majority of deposits fully reprice with changes in market rates.

During 2025, one of the material CCBX lending partners contractual yields converted to an adjustable-rate product, causing the Company’s balance sheet to become slightly asset sensitive.

As of December 31, 2025, the Company’s overall funding mix continues to be more heavily weighted towards the CCBX deposits, which are primarily adjustable-rate deposits and work to partially offset some of the asset sensitivity in the static model.

The assumptions incorporated into the simulation model are inherently uncertain and, as a result, the model cannot precisely measure future net interest income or precisely predict the impact that fluctuations in market interest rates have on net interest income.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis