Live Oak Bancshares, Inc. 10-K

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview The following presents management’s discussion and analysis (“MD&A”) of the more significant factors that affected the Company's financial condition and results of operations for the year ended December 31, 2025 as compared to December 31, 2024. For a comparison of 2024 results to 2023 and other 2023 information not included herein, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under Part II, Item 7 of the 2024 Form 10-K/A filed with the SEC on November 17, 2025 . This discussion should be read in conjunction with the financial statements and related notes included elsewhere in this Annual Report on Form 10-K. Results of operations for the periods included in this review are not necessarily indicative of results to be obtained during any future period. Dollar amounts in tables are stated in thousands, except for per share amounts. Nature of Operations Live Oak Bancshares, Inc. (collectively with its subsidiaries including Live Oak Banking Company, the “Company”) is a financial holding company and a bank holding company headquartered in Wilmington, North Carolina, incorporated under the laws of North Carolina in December 2008. The Company conducts business operations primarily through its commercial bank subsidiary, Live Oak Banking Company (the “Bank”). The Bank was incorporated in February 2008 as a North Carolina-chartered commercial bank. The Bank specializes in providing lending and deposit-related services to small businesses nationwide. A significant portion of the loans originated by the Bank are partially guaranteed by the U.S. Small Business Administration (“SBA”) under the 7(a) Loan program and the U.S. Department of Agriculture (“USDA”) Rural Energy for America Program (“REAP”), Water and Environmental Program (“WEP”), Business & Industry (“B&I”) and Community Facilities loan programs. These loans are to small businesses and professionals with what the Bank believes are lower risk characteristics. Industries, or “verticals,” on which the Bank focuses its lending efforts are carefully selected. The Bank also lends more broadly to select borrowers outside of those verticals. As of December 31, 2025 , the Company’s wholly owned material subsidiaries were the Bank, Government Loan Solutions (“GLS”), Live Oak Grove, LLC (“Grove”) and Live Oak Ventures, Inc. (“Live Oak Ventures”). GLS is a management and technology consulting firm that advises and offers solutions and services to participants in the government guaranteed lending sector. GLS primarily provides services in connection with the settlement, accounting, and securitization processes for government guaranteed loans, including loans originated under the SBA 7(a) loan programs and USDA guaranteed loans. The Grove provides Company employees and business visitors with on-site dining at the Company’s Wilmington, North Carolina headquarters. Live Oak Ventures’ purpose is investing in businesses that align with the Company's strategic initiative to be a leader in financial technology. Canapi Advisors, LLC (“Canapi Advisors”) was a wholly owned subsidiary providing investment advisory services to a series of funds (the “Canapi Funds”) focused on providing venture capital to new and emerging financial technology companies. During the third quarter of 2024, the Canapi Funds were restructured and Canapi Advisors voluntarily withdrew as an investment advisor to the funds. Canapi Advisors was subsequently dissolved in the fourth quarter of 2024. During the fourth quarter of 2024, Live Oak Ventures consolidated its investment in Synply, Inc. as a result of its controlling interest in that entity. Synply is a cloud-based technology platform designed to simplify the loan syndication process for financial institutions. The non-controlling interest in Synply is disclosed according to the Company’s consolidation policy. As of December 31, 2025 , the Bank’s wholly owned subsidiaries were Live Oak Number One, Inc., Live Oak Clean Energy Financing LLC (“LOCEF”), Live Oak Private Wealth, LLC (“Live Oak Private Wealth”) and Tiburon Land Holdings, LLC (“TLH”). Live Oak Number One, Inc. holds properties foreclosed on by the Bank. LOCEF provides financing to entities for renewable energy applications. Live Oak Private Wealth provides high-net-worth individuals and families with strategic wealth and investment management services. TLH holds land adjacent to the Bank's headquarters consisting of wetlands and other protected property for the use and enjoyment of the Bank's employees and customers. 40 Table of Contents The Company generates revenue primarily from net interest income and secondarily through the origination and sale of government guaranteed loans. Income from the retention of loans consists principally of interest income. Income from the sale of loans is comprised of loan servicing revenue and revaluation of related servicing assets along with net gains on sales of loans. Offsetting these revenues are the cost of funding sources, provision for credit losses, any costs related to foreclosed assets and other operating costs such as salaries and employee benefits, travel, professional services, advertising and marketing and tax expense. The Company also has less routinely generated gains and losses arising from its financial technology investments. 41 Table of Contents Executive Summary The table below sets forth selected consolidated financial data as of the dates or for the periods indicated. As of and for the Year Ended December 31, 2025 2024 2023 Income Statement Data Net income attributable to common shareholders $ 102,823 $ 77,474 $ 73,898 Per Common Share Net income, diluted $ 2.23 $ 1.69 $ 1.64 Dividends declared - common 0.12 0.12 0.12 Book value per common share 25.06 22.12 20.23 Tangible book value per common share (1) 24.97 22.05 20.15 Performance Ratios Return on average assets 0.74 % 0.65 % 0.69 % Return on average common equity 9.47 7.94 8.66 Net interest margin 3.30 3.27 3.35 Efficiency ratio (1) 58.62 62.04 70.14 Noninterest income to total revenue 22.40 23.06 23.15 Dividend payout ratio 5.33 6.97 7.20 Selected Loan Metrics Loans and leases originated $ 6,209,639 $ 5,155,244 $ 3,946,873 Outstanding balance of sold loans serviced 5,599,724 4,715,895 4,238,328 Asset Quality Ratios Allowance for credit losses to loans and leases held for investment (2) 1.64 % 1.69 % 1.53 % Net charge-offs (2) $ 68,774 $ 46,692 $ 21,373 Net charge-offs to average loans and leases held for investment (2) (3) 0.63 % 0.52 % 0.28 % Nonperforming loans and leases at historical cost (2) Unguaranteed $ 101,371 $ 81,412 $ 39,285 Guaranteed 399,786 222,885 95,678 Total 501,157 304,297 134,963 Unguaranteed nonperforming historical cost loans and leases, to loans and leases held for investment (2) 0.87 % 0.82 % 0.48 % Nonperforming loans at fair value (4) Unguaranteed $ 7,715 $ 9,115 $ 7,230 Guaranteed 53,887 54,873 41,244 Total 61,602 63,988 48,474 Unguaranteed nonperforming fair value loans to loans held for investment (4) 2.96 % 2.77 % 1.86 % Consolidated Capital Ratios Common equity tier 1 capital (to risk-weighted assets) 10.53 % 11.04 % 11.73 % Tier 1 leverage capital (to average assets) 8.48 8.21 8.58 (1) See "Non-GAAP Measures" presented at the conclusion of this Item 7 for more information and a reconciliation to the most closely related GAAP measure. (2) Loans and leases at historical cost only (excludes loans measured at fair value). (3) Annual net charge-offs as a percentage of annual average loans and leases held for investment, at amortized cost. (4) Loans accounted for under the fair value option only (excludes loans and leases carried at historical cost). 42 Table of Contents The following is a summary of the Company's financial highlights and events for 2025: • Record year of loan production with total loans and leases held for sale and investment increasing by $1.81 billion, or 17.1%. Total loan originations in 2025 were $6.21 billion compared to $5.16 billion in 2024, an increase of 20.5%. Substantial loan production in 2025 was the primary driver of growth in total assets, which increased to $15.13 billion at December 31, 2025 as compared to $12.94 billion at December 31, 2024 , for an increase of $2.19 billion, or 16.9%. • Supporting loan growth, total deposits increased by $1.93 billion, or 16.4%, to $13.69 billion at the end of 2025 and shareholders’ equity increased $250.6 million, or 25.0%, driven by net income as discussed below and further bolstered by the issuance of depositary shares which resulted in net proceeds of $96.3 million . • Net income attributable to common shareholders increased $25.3 million, or 32.7%, from $77.5 million, or $1.69 per diluted share, to $102.8 million, or $2.23 per diluted share, largely due to the following items: ◦ Net interest income increased by $72.5 million, or 19.3%, largely the result of robust loan growth, which led to an increase in net interest margin to 3.30% for 2025 as compared to 3.27% for 2024. ◦ The provision for credit losses of $96.3 million remained relatively flat year over year. Total nonperforming unguaranteed loans and leases as a percentage of total loans and leases held for investment, excluding loans measured at fair value, increased from 0.82% at the end of 2024 to 0.87% at the end of 2025. Net charge-offs as a percentage of average held for investment loans and leases carried at amortized cost, for the years ended December 31, 2025 and 2024 , were 0.63% and 0.52%, respectively. ◦ Increased total noninterest income of $16.8 million, or 14.9%, and increased total noninterest expense of $35.6 million, or 11.7%. A detailed overview of key drivers of year-over-year changes in reported net income is outlined more fully in the opening to the section titled “Results of Operations.” Non-GAAP Financial Measures Statements included in this management's discussion and analysis include non-GAAP financial measures and should be read along with the accompanying tables, which provide a reconciliation of non-GAAP financial measures to GAAP financial measures. The reconciliation of non-GAAP measures is presented at the conclusion of this Item 7. Management believes that non-GAAP financial measures provide additional useful information that allows readers to evaluate the ongoing performance of the Company without regard to certain transactional activities. Non-GAAP financial measures should not be considered as an alternative to any measure of performance or financial condition as reported under GAAP, and investors should consider the Company's performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the Company. Non-GAAP financial measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the Company's results or financial condition as reported under GAAP. Management’s non-GAAP measures are not necessarily comparable to similarly named measures represented by other companies, as they may be calculated differently. 43 Table of Contents Results of Operations The Company reported net income attributable to common shareholders of $102.8 million, or $2.23 per diluted share, for 2025 compared to $77.5 million, or $1.69 per diluted share, for 2024. The increase in net income was largely due to the following items: • Increased net interest income of $72.5 million, or 19.3%; • Increased net gains on sales of loans of $12.7 million, or 25.4%, principally the result of higher loan sale volumes in 2025; • Increased equity method investments income of $28.3 million, largely comprised of a $24.1 million gain arising from the sale of the Company’s interest in Apiture, Inc. Key factors partially offsetting the year-over-year increase in net income were comprised of decreases in management fee and other noninterest income of $7.7 million and $20.2 million, respectively, combined with increases in salary and employee benefits, technology expense and income tax expense of $14.7 million, $8.7 million and $25.4 million, respectively. Net Interest Income and Margin Net interest income represents the difference between the income that the Company earns on interest-earning assets and the cost of interest-bearing liabilities. The Company’s net interest income depends upon the volume of interest-earning assets and interest-bearing liabilities and the interest rates that the Company earns or pays on them, respectively. Net interest income is affected by changes in the amount and mix of interest-earning assets and interest-bearing liabilities, referred to as “volume changes.” It is also affected by changes in yields earned on interest-earning assets and rates paid on interest-bearing deposits and other borrowed funds, referred to as “rate changes.” As a bank without a branch network, the Bank gathers deposits over the Internet and in the community in which it is headquartered. Due to the nature of a branchless bank and the relatively low overhead required for deposit gathering, the rates the Bank offers are generally above the industry average. For 2025, net interest income increased $72.5 million, or 19.3%, to $448.4 million compared to $375.9 million for 2024. This increase was principally due to the growth in the held for investment loan and lease portfolio outpacing growth in interest-bearing liabilities. Average interest-earning assets increased by $2.10 billion, or 18.2%, to $13.59 billion for 2025 , compared to $11.50 billion for 2024, while the yield on average interest-earning assets decreased by 39 basis points to 6.68%. The cost of funds on interest-bearing liabilities for 2025 decreased by 39 basis points to 3.72%, and the average balance of interest-bearing liabilities increased by $1.73 billion, or 16.3%, over 2024. The increase in average interest-bearing liabilities was largely driven by funding for significant loan originations and growth as well as maintenance of the Company's target liquidity profile. As indicated in the rate/volume table below, the overall increase discussed above is reflected in increased interest income of $96.1 million outpacing growth in interest expense of $23.6 million for 2025 compared to 2024. The net interest margin slightly increased from 3.27% for 2024 to 3.30% for 2025 . In January 2026, the Federal Reserve decided to maintain the federal funds upper target rate at 3.75%. The Federal Reserve released its most current federal funds target rate midpoint projections at its previous meeting in December 2025 which implied a decrease of approximately 25 basis points to 3.4% by the end of 2026 and a decrease of approximately 25 basis points to 3.1% by the end of 2027. There can be no assurance that any further decreases or increases in the Federal Funds rate will occur, and if they do, the amount and timing of actual adjustments are subject to change. See “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” for information about the Company’s sensitivity to interest rates. 44 Table of Contents Average Balances and Yields. The following table presents information regarding average balances for assets and liabilities, the total dollar amounts of interest income from average interest-earning assets, the total dollar amount of interest expense on average interest-bearing liabilities, and the resulting average yields and costs. The yields and costs for the periods indicated are derived by dividing the income or expense by the average balances for assets or liabilities, respectively, for the periods presented. Loan fees are included in interest income on loans. 2025 2024 2023 Average Balance Interest Average Yield/Rate Average Balance Interest Average Yield/Rate Average Balance Interest Average Yield/Rate Interest-earning assets: Interest-earning balances in other banks $ 703,886 $ 30,301 4.30 % $ 556,108 $ 29,118 5.24 % $ 584,691 $ 29,487 5.04 % Federal funds sold — — — — — — 34,529 1,624 4.70 Investment securities 1,418,580 47,591 3.35 1,283,161 38,413 2.99 1,237,458 33,497 2.71 Loans held for sale 401,771 32,963 8.20 372,803 34,903 9.36 539,197 48,235 8.95 Loans and leases held for investment (1) 11,068,810 797,617 7.21 9,285,908 709,938 7.65 7,905,875 575,432 7.28 Total interest-earning assets 13,593,047 908,472 6.68 11,497,980 812,372 7.07 10,301,750 688,275 6.68 Less: Allowance for credit losses on loans and leases (179,962) (138,766) (110,855) Noninterest-earning assets 537,794 557,297 493,968 Total assets $ 13,950,879 $ 11,916,511 $ 10,684,863 Interest-bearing liabilities: Interest-bearing checking $ 370,562 $ 16,171 4.36 % $ 326,410 $ 17,692 5.42 % $ 231,413 $ 12,718 5.50 % Savings 6,310,054 224,458 3.56 4,934,818 198,612 4.02 4,428,306 171,151 3.86 Money market accounts 133,566 429 0.32 131,636 739 0.56 125,279 721 0.58 Certificates of deposit 5,431,128 212,355 3.91 5,133,511 213,844 4.17 4,695,161 155,617 3.31 Total deposits 12,245,310 453,413 3.70 10,526,375 430,887 4.09 9,480,159 340,207 3.59 Other borrowings 108,062 6,701 6.20 94,512 5,580 5.90 61,743 2,763 4.48 Total interest-bearing liabilities 12,353,372 460,114 3.72 10,620,887 436,467 4.11 9,541,902 342,970 3.59 Noninterest-bearing deposits 403,508 239,078 215,327 Noninterest-bearing liabilities 64,630 80,549 74,046 Shareholders' equity 1,124,974 975,215 853,588 Non-controlling interest 4,395 782 — Total liabilities and shareholders' equity $ 13,950,879 $ 11,916,511 $ 10,684,863 Net interest income and interest rate spread $ 448,358 2.96 % $ 375,905 2.96 % $ 345,305 3.09 % Net interest margin 3.30 % 3.27 % 3.35 % Ratio of average interest-earning assets to average interest-bearing liabilities 110.04 % 108.26 % 107.96 % (1) Average loan and lease balances include non-accruing loans and leases. 45 Table of Contents Rate/Volume Analysis. The following table sets forth the effects of changing rates and volumes on net interest income. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior period volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior period rate). The total column represents the sum of the prior columns. For purposes of this table, changes attributable to changes in both rate and volume that cannot be segregated have been allocated proportionally based on the changes due to rate and the changes due to volume. 2025 vs. 2024 2024 vs. 2023 Increase (Decrease) Due to Increase (Decrease) Due to Rate Volume Total Rate Volume Total Interest income: Interest-earning balances in other banks $ (5,867) $ 7,050 $ 1,183 $ 1,100 $ (1,469) $ (369) Federal funds sold — — — — (1,624) (1,624) Investment securities 4,879 4,299 9,178 3,613 1,303 4,916 Loans held for sale (4,484) 2,544 (1,940) 1,900 (15,232) (13,332) Loans and leases held for investment (44,713) 132,392 87,679 31,529 102,977 134,506 Total interest income (50,185) 146,285 96,100 38,142 85,955 124,097 Interest expense: Interest-bearing checking (3,681) 2,160 (1,521) (211) 5,185 4,974 Savings (26,288) 52,134 25,846 7,480 19,981 27,461 Money market accounts (319) 9 (310) (18) 36 18 Certificates of deposit (13,506) 12,017 (1,489) 41,833 16,394 58,227 Other borrowings 301 820 1,121 1,116 1,701 2,817 Total interest expense (43,493) 67,140 23,647 50,200 43,297 93,497 Net interest income $ (6,692) $ 79,145 $ 72,453 $ (12,058) $ 42,658 $ 30,600 Provision for Credit Losses The provision for credit losses represents the amount necessary to be charged against the current period’s earnings to maintain the allowance for credit losses (“ACL”) on loans and leases at a level that the Company believes is appropriate in relation to the estimated losses inherent in the loan and lease portfolio. Beginning in the second quarter of 2024, the expense related to off-balance sheet credit exposures was also included in the provision for credit losses in response to growth in the amount of loans with applicable off-balance sheet credit risk. See Note 1 to the consolidated financial statements included in Item 8 of this Report under the subheading Allowance for Off-Balance Sheet Credit Exposures for additional information. Losses inherent in loan relationships are mitigated if a portion of the loan is guaranteed by the SBA or USDA. Typical SBA 7(a) and USDA guarantees range from 50% to 90% depending on loan size and type, which serve to reduce the risk profile of these loans. The Company believes that its focus on compliance with regulations and guidance from the SBA and USDA are key factors to managing this risk. The provision for credit losses was $96.3 million in 2025 , relatively flat compared to $96.2 million in 2024, with an increase of $91 thousand. Loans and leases held for investment at historical cost were $11.71 billion as of De cember 31, 2025, an increase of $1.81 billion , or 18.3%, c ompared to December 31, 2024. Net charge-offs for loans and leases carried at historical cost were $68.8 million, or 0.63% of average loans and leases held for investment at amortized cost, excluding loans measured at fair value, for 2025, compared to net charge-offs of $46.7 million, or 0.52%, for 2024, an increase of $22.1 million, or 47.3%. The increase in net charge-offs for 2025 was largely concentrated to individually evaluated loans with specific reserves recorded in prior periods. Net charge-offs are a key element of historical experience in the Company's estimation of the allowance for credit lo sses on loans and leases. 46 Table of Contents In addition, nonperforming loans and leases not guaranteed by the SBA or USDA, excluding $7.7 million and $9.1 million accounted for under the fair value option at December 31, 2025 and 2024, respectively, totaled $101.4 million, which was 0.87% of the held for investment loan and lease portfolio carried at historical cost at December 31, 2025, compared to $81.4 million, or 0.82% of loans and leases held for investment carried at historical cost at December 31, 2024. Noninterest Income Noninterest income is principally comprised of net gains from the sale of SBA and USDA-guaranteed loans along with servicing revenue and related revaluation of the servicing asset . Revenue from the sale of loans depends upon the volume, maturity structure and rates of underlying loans as well as the pricing and availability of funds in the secondary markets prevailing in the period between completed loan funding and closing of sale. In addition, the loan servicing asset revaluation is significantly impacted by changes in market rates and other underlying assumptions such as prepayment speeds. Net gain (loss) on loans accounted for under the fair value option is also significantly impacted by changes in market rates, prepayment speeds and inherent credit risk. Other less consistent elements of noninterest income include gains and losses on investments. The following table shows the components of noninterest income and the dollar and percentage changes for the periods presented. Years Ended December 31, 2024/2025 Increase (Decrease) 2023/2024 Increase (Decrease) 2025 2024 2023 Amount Percent Amount Percent Noninterest income Loan servicing revenue $ 34,902 $ 31,535 $ 27,399 $ 3,367 10.7 % $ 4,136 15.1 % Loan servicing asset revaluation (16,077) (12,155) 4,886 (3,922) 32.3 (17,041) 348.8 Net gains on sales of loans 62,420 49,770 38,812 12,650 25.4 10,958 28.2 Net gain (loss) on loans accounted for under the fair value option 1,216 2,403 (3,539) (1,187) 49.4 5,942 (167.9) Equity method investments (loss) income 17,387 (10,921) (5,994) 28,308 259.2 (4,927) 82.2 Equity security investments gains (losses), net 5,733 553 (969) 5,180 (936.7) 1,522 (157.1) Lease income 10,051 9,756 10,007 295 3.0 (251) (2.5) Management fee income — 7,658 13,324 (7,658) (100.0) (5,666) (42.5) Other noninterest income 13,826 34,053 20,074 (20,227) (59.4) 13,979 69.6 Total noninterest income $ 129,458 $ 112,652 $ 104,000 $ 16,806 14.9 % $ 8,652 8.3 % Years ended December 31, 2025 vs. 2024 For 2025 , noninterest income increased by $16.8 million, or 14.9%, compared to 2024 . The increase over the prior year is primarily a result of higher servicing revenue of $3.4 million, increased net gains on sales of loans of $12.7 million, $28.3 million in increased equity method investments income, largely associated with the earlier mentioned gain arising from the sale of the Company’s interest in Apiture, Inc. and a $5.2 million increase in equity security investments gains largely driven by a $9.0 million gain arising from the sale of a portfolio investment. Partially offsetting the increase in total noninterest income over the prior year-to-date period was a $3.9 million increase in loss related to the servicing asset revaluation combined with a $7.7 million decrease in management fee income due to the restructuring of the Canapi Funds in the third quarter of 2024 and a $20.2 million decrease in other noninterest income. The decrease in other noninterest income was largely due to fair value losses in equity warrant assets in 2025 of $5.5 million compared to 2024 higher income related to a $2.4 million gain from the sale of a building, a $6.7 million gain arising from an aircraft sale and a $5.7 million fair value gain in equity warrant assets. 47 Table of Contents The tables below reflect loan and lease production, sales of guaranteed loans and the aggregate balance in guaranteed loans sold that are being serviced. These components are key drivers of the Company's noninterest income. Three months ended December 31, Three months ended September 30, Three months ended June 30, Three months ended March 31, 2025 2024 2025 2024 2025 2024 2025 2024 Amount of loans and leases originated $ 1,638,113 $ 1,421,118 $ 1,648,711 $ 1,757,856 $ 1,526,592 $ 1,171,141 $ 1,396,223 $ 805,129 Guaranteed portions of loans sold 246,529 277,546 347,750 266,307 322,317 250,466 266,275 186,654 Outstanding balance of guaranteed loans sold (1) 3,897,790 3,379,477 3,856,253 3,300,524 3,685,981 3,177,629 3,486,533 3,057,641 Years ended December 31, 2025 2024 2023 2022 2021 Amount of loans and leases originated $ 6,209,639 $ 5,155,244 $ 3,946,873 $ 4,007,621 $ 4,480,725 Guaranteed portions of loans sold 1,182,871 980,973 877,551 580,889 668,462 Outstanding balance of guaranteed loans sold (1) 3,897,790 3,379,477 2,986,959 2,668,110 2,756,915 (1) This represents the outstanding principal balance of guaranteed loans serviced, as of the last day of the applicable period, which have been sold into the secondary market. Changes in various components of noninterest income are discussed in more detail below. Loan Servicing Asset Revaluation: The Company revalues its serviced loan portfolio at least quarterly. The valuation model incorporates assumptions that market participants would use in estimating future net servicing income, such as adequate compensation for servicing, the discount rate, the custodial earnings rate, ancillary income, prepayment speeds and default rates and losses, with prepayment speed and discount rate being the most sensitive assumptions. For 2025, there was a net loss on loan servicing asset revaluation of $16.1 million compared to a net loss of $12.2 million for 2024, resulting in a negative change of $3.9 million. The negative change in valuation of the servicing asset compared to 2024 was principally the result of principal paydowns or runoff as well as less favorable market conditions in 2025. Net Gains on Sales of Loans: For 2025, net gains on sales of loans increased $12.7 million, or 25.4%, compared to 2024. The volume of guaranteed loans sold increased $201.9 million, or 20.6%, over 2024 while the average net gain on loan sale premium remained stable at 107% in both 2024 and 2025, respectively. The increase in net gains on sales of loans over 2024 was principally related to a higher loan sale volume. Net Gain (Loss) on Loans Accounted for Under the Fair Value Option : For 2025, the Company had a net gain on loans accounted for under the fair value option of $1.2 million compared to a net gain of $2.4 million for 2024, a negative change of $1.2 million. The carrying amount of loans accounted for under the fair value option at December 31, 2025 and 2024 was $260.6 million (all classified as held for investment) and $328.7 million (all classified as held for investment), respectively, a decrease of $68.1 million, or 20.7%. The reduction in net gain arising from the valuation of loans accounted for under the fair value option was principally the result of credit downgrades in the derivation of fair value for a portion of the underlying loans. Noninterest Expense Noninterest expense comprises all operating costs of the Company, such as employee-related costs, travel, professional services, advertising and marketing expenses, exclusive of interest and income tax expense. 48 Table of Contents The following table shows the components of noninterest expense and the related dollar and percentage changes for the periods presented. Years Ended December 31, 2024/2025 Increase (Decrease) 2023/2024 Increase (Decrease) 2025 2024 2023 Amount Percent Amount Percent Noninterest expense Salaries and employee benefits $ 189,435 $ 174,707 $ 169,092 $ 14,728 8.4 % $ 5,615 3.3 % Non-employee expenses: Travel expense 7,031 7,170 7,149 (139) (1.9) 21 0.3 Professional services expense 10,752 11,023 7,737 (271) (2.5) 3,286 42.5 Advertising and marketing expense 12,222 11,148 12,559 1,074 9.6 (1,411) (11.2) Occupancy expense 9,762 10,000 8,490 (238) (2.4) 1,510 17.8 Technology expense 42,948 34,206 31,858 8,742 25.6 2,348 7.4 Equipment expense 14,427 13,826 14,997 601 4.3 (1,171) (7.8) Other loan origination and maintenance expense 18,469 17,254 14,804 1,215 7.0 2,450 16.5 Renewable energy tax credit investment impairment 735 530 14,644 205 38.7 (14,114) (96.4) FDIC insurance 14,672 10,835 16,670 3,837 35.4 (5,835) (35.0) Other expense 18,245 12,411 17,152 5,834 47.0 (4,741) (27.6) Total non-employee expenses 149,263 128,403 146,060 20,860 16.2 (17,657) (12.1) Total noninterest expense $ 338,698 $ 303,110 $ 315,152 $ 35,588 11.7 % $ (12,042) (3.8) % Total noninterest expense for 2025 increased $35.6 million, or 11.7%, compared to 2024. The increase in noninterest expense was predominately driven by the following items. Salaries and employee benefits : Total perso nnel expense for 2025 increased by $14.7 million, or 8.4%, compared to 2024 . The increase in salaries and employee benefits was principally related to continued investment in human resources to support strategic and growth initiatives. Total full-time equivalent employees increased from 1,014 at December 31, 2024 to 1,031 at December 31, 2025 . Salaries and employee benefits expense included $26.3 million of stock-based compensation for 2025 , compared to $26.4 million for 2024 . Expenses related to the employee stock purchase program, stock grants, stock option compensation and restricted stock expense are all considered stock-based compensation. Technology expense: Technology expense increased $8.7 million, or 25.6%, compared to the same period in 2024. This increase was primarily related to enhanced investments in the Company’s technology resources. FDIC insurance: FDIC insurance assessment expense increased $3.8 million, or 35.4%, compared to 2024 . This increase is largely the product of the Company’s continued growth combined with increased FDIC assessment rates. Other expense: Other expense increased $5.8 million, or 47.0%, compared to 2024 . The increase was principally driven by a $1.5 million special charitable donation during the fourth quarter of 2025 made in connection with the earlier discussed Apiture gain combined with a $2.8 million loss arising from the early buyout of the Company's sole bioenergy lease in the second quarter of 2025. Income Tax Expense Income tax expense and related effective tax rate in 2025 was $37.2 million and 26.0% compared to $11.8 million and 13.2% in 2024. The higher level of income tax expense in 2025 as compared to 2024 was largely the result of increased pretax income in 2025 and $10.6 million in tax credits related to the Company's fourth quarter of 2023 renewable energy investment that became eligible for an extra 10% in tax credits in the first quarter of 2024. 49 Table of Contents Discussion and Analysis of Financial Condition Total assets at December 31, 2025 were $15.13 billion, an increase of $2.19 billion, or 16.9%, compared to total assets of $12.94 billion at December 31, 2024 . The growth in total assets was principally driven by growth in total loans and leases held for investment and held for sale of $1.81 billion, or 17.1%, in 2025 , from $10.58 billion at December 31, 2024 to $12.39 billion at December 31, 2025 . This growth was a result of strong origination activity during 2025 of $6.21 billion. Total deposits were $13.69 billion at December 31, 2025 , an increase of $1.93 billion, or 16.4%, from $11.76 billion at December 31, 2024 . The increase in total deposits from the prior period was to support growth in the loan and lease portfolio as well as the Company's targeted liquidity levels. At December 31, 2025 , the Bank’s total uninsured deposits were approximately $2.16 billion, or 15.8%, of total deposits. Shareholders’ equity at December 31, 2025 was $1.25 billion as compared to $1.00 billion at December 31, 2024 . The book value per share of our common stock was $25.06 at December 31, 2025 compared to $22.12 at December 31, 2024 . Average equity to average assets was 8.1% for the year ended December 31, 2025 compared to 8.2% for the year ended December 31, 2024 . The increase in shareholders’ equity for 2025 was principally the result of $105.9 million in net income and $96.3 million in net proceeds from the issuance of depository shares. Loans Held for Sale & Serviced Portfolio Any loan or portion of a loan that the Company has the intent and ability to sell is classified as held for sale. The average age of the held for sale portfolio as of December 31, 2025 was 7.7 months from origination date. Approximately 2.9% of the current held for sale portfolio is older than two years. The majority of held for sale loans over one year old are composed of construction loans or other loans that have yet to fully fund. Construction loans typically have extended build out periods that inherently result in longer lead times between origination and the ultimate sale date. Approximately 28.8% of the held for sale portfolio is aged between one and two years. As of December 31, 2025 and 2024, the cumulative total outstanding balance of loans sold since May 2007 totaled $5.60 billion and $4.72 billion, respectively. The Company generally continues to service loans after the date of sale. As of December 31, 2025 and 2024, the total outstanding balance of loans and leases, including those serviced for others, was $18.03 billion and $15.32 billion, respectively. Loan and Lease Maturity As of December 31, 2025, $15.86 billion, or 88.0%, of the total outstanding balance of loans and leases, including those at fair value and those serviced for others, were variable rate loans that adjust at specified dates based on the prime lending rate or other variable indices. As of December 31, 2025, $12.23 billion, or 67.8%, of total outstanding balance of loans and leases, including those at fair value and those serviced for others, were variable rate loans that adjust on either a calendar monthly or calendar quarterly basis using the prime lending rate or other variable indices. At December 31, 2025, 90.9%, or $11.30 billion, of the combined held for sale and held for investment loan and lease portfolio, including those at fair value, were composed of variable rate loans. 50 Table of Contents At December 31, 2025, $5.00 billion, or 41.6%, of loans held for investment, including those at fair value, mature in less than five years. Loans and leases maturing in greater than five years total $7.01 billion of the total $12.01 billion. The variable rate portion of the total held for investment loans and leases is 90.8%, which reflects the Company’s strategy to minimize interest rate risk through the use of variable rate products. At December 31, 2025 Remaining Contractual Maturity of Total Held for Investment Loans and Leases One Year or Less After One Year and Through Five Years After Five Years and Through Fifteen Years After Fifteen Years Total (1) Fixed rate loans and leases: Commercial & Industrial Small Business Banking $ 15,897 $ 76,891 $ 149,463 $ 2,660 $ 244,911 Commercial Banking 11,897 40,682 78,572 192,161 323,312 Paycheck Protection Program 381 285 240 — 906 Total 28,175 117,858 228,275 194,821 569,129 Construction & Development Small Business Banking 622 400 39 — 1,061 Total 622 400 39 — 1,061 Commercial Real Estate Small Business Banking 11,062 56,833 20,118 117,830 205,843 Commercial Banking 1,232 55,284 5,533 2,950 64,999 Total 12,294 112,117 25,651 120,780 270,842 Commercial Land Small Business Banking 27,794 149,922 71,006 13,637 262,359 Total 27,794 149,922 71,006 13,637 262,359 Total fixed rate loans and leases 68,885 380,297 324,971 329,238 1,103,391 Variable rate loans and leases: Commercial & Industrial Small Business Banking 23,151 488,529 1,755,216 95,500 2,362,396 Commercial Banking 421,486 1,703,937 210,531 335,850 2,671,804 Total 444,637 2,192,466 1,965,747 431,350 5,034,200 Construction & Development Small Business Banking 44,284 46,813 47,956 610,027 749,080 Commercial Banking — 69,538 — — 69,538 Total 44,284 116,351 47,956 610,027 818,618 Commercial Real Estate Small Business Banking 30,116 273,688 403,775 2,546,971 3,254,550 Commercial Banking 186,467 1,105,487 12,866 57,575 1,362,395 Total 216,583 1,379,175 416,641 2,604,546 4,616,945 Commercial Land Small Business Banking 4,850 153,737 106,132 171,961 436,680 Total 4,850 153,737 106,132 171,961 436,680 Total variable rate loans and leases 710,354 3,841,729 2,536,476 3,817,884 10,906,443 Total held for investment loans and leases $ 779,239 $ 4,222,026 $ 2,861,447 $ 4,147,122 $ 12,009,834 (1) Excludes retained loan discount and net deferred costs. 51 Table of Contents Commercial Real Estate Commercial real estate loans as indicated by the FDIC include loans secured by the following: construction, land development, multifamily property and nonfarm, nonresidential real property. The following table provides information with respect to commercial real estate loans as of December 31, 2025. Guaranteed Unguaranteed Total (1) Held for Investment Loans: Owner Occupied Small Business Banking $ 1,379,511 $ 1,276,983 $ 2,656,494 Commercial Banking 18,172 57,820 75,992 Total 1,397,683 1,334,803 2,732,486 Non-Owner Occupied Small Business Banking 483,896 869,883 1,353,779 Commercial Banking 31,056 1,390,421 1,421,477 Total 514,952 2,260,304 2,775,256 Total Held for Investment Commercial Real Estate $ 1,912,635 $ 3,595,107 $ 5,507,742 Held for Sale Loans: Owner Occupied Small Business Banking $ 71,729 $ — $ 71,729 Total 71,729 — 71,729 Non-Owner Occupied Small Business Banking 191,944 — 191,944 Total 191,944 — 191,944 Total Held for Sale Commercial Real Estate $ 263,673 $ — $ 263,673 Total Commercial Real Estate Loans $ 2,176,308 $ 3,595,107 $ 5,771,415 % of Total Commercial Real Estate Loans 37.7 % 62.3 % 100.0 % (1) Excludes retained loan discount and net deferred costs. Asset Quality Management considers asset quality to be of primary importance. A formal loan review function, independent of loan origination, is used to identify and monitor problem loans. This function reports directly to the Risk Committee of the Board of Directors. Nonperforming Assets The Bank places loans and leases on nonaccrual status when they become 90 days past due as to principal or interest payments, or prior to that if management has determined based upon current information available to them that the timely collection of principal or interest is not probable. When a loan or lease is placed on nonaccrual status, any interest previously accrued as income but not actually collected is reversed and recorded as a reduction of loan or lease interest and fee income. Typically, collections of interest and principal received on a nonaccrual loan or lease are applied to the outstanding principal as determined at the time of collection of the loan or lease. Total nonperforming assets, including loans measured at fair value, at December 31, 2025 were $572.2 million, which represented a $200.5 million, or 53.9%, increase from December 31, 2024. These nonperforming assets, at December 31, 2025 were comprised of $564.0 million in nonaccrual loans and leases and $8.2 million in foreclosed assets. Of the $572.2 million of nonperforming assets, $460.9 million carried a government guarantee, leaving an unguaranteed exposure of $111.2 million in total nonperforming assets at December 31, 2025. This represents an increase of $19.7 million, or 21.5% from an unguaranteed exposure of $91.6 million at December 31, 2024. 52 Table of Contents The following table provides information with respect to nonperforming assets, excluding loans measured at fair value, at the dates indicated. 2025 (1) 2024 (1) Nonaccrual loans and leases: Total nonperforming loans and leases (all on nonaccrual) $ 501,157 $ 304,297 Foreclosed assets 8,208 1,944 Total nonperforming assets $ 509,365 $ 306,241 Allowance for credit losses on loans and leases $ 192,264 $ 167,516 Total nonperforming loans and leases to total loans and leases held for investment 4.28 % 3.07 % Total nonperforming loans and leases to total assets 3.37 % 2.41 % Allowance for credit losses on loans and leases to loans and leases held for investment 1.64 % 1.69 % Allowance for credit losses on loans and leases to total nonperforming loans and leases 38.36 % 55.05 % Nonaccrual loans and leases guaranteed by U.S. government: Total nonperforming loans and leases guaranteed by the U.S. government (all on nonaccrual) $ 399,786 $ 222,885 Foreclosed assets guaranteed by the U.S. government 6,798 1,753 Total nonperforming assets guaranteed by the U.S. government $ 406,584 $ 224,638 Allowance for credit losses on loans and leases $ 192,264 $ 167,516 Total nonperforming loans and leases not guaranteed by the U.S. government to total held for investment loans and leases 0.87 % 0.82 % Total nonperforming loans and leases not guaranteed by the U.S. government to total assets 0.68 % 0.65 % Allowance for credit losses on loans and leases to total nonperforming loans and leases not guaranteed by the U.S government 189.66 % 205.76 % (1) Excludes loans measured at fair value. Nonperforming assets, excluding loans measured at fair value, at December 31, 2025 were $509.4 million, which represented a $203.1 million, or 66.3%, increase from December 31, 2024 . These nonperforming assets, at December 31, 2025 were comprised of $501.2 million in nonaccrual loans and leases and $8.2 million in foreclosed assets. Of the $509.4 million of nonperforming assets, $406.6 million carried a government guarantee, leaving an unguaranteed exposure of $102.8 million in total nonperforming assets at December 31, 2025 . This represents an increase of $21.2 million, or 26.0%, from an unguaranteed exposure of $81.6 million at December 31, 2024 . See the below discussion related to the change in potential problem and impaired loans and leases for management’s overall observations regarding the change in total nonperforming loans and leases. As a percentage of the Bank’s total capital, nonperforming loans and leases, excluding loans measured at fair value, repres ented 39.0% at December 31, 2025, compared to 26.7% at December 31, 2024. Adjusting the ratio to include only the unguaranteed portion of nonperforming loans and leases at historical cost to reflect management’s belief that the greater magnitude of risk resides in this portion, the ratio at December 31, 2025 and 2024 was 7.9% and 7.2%, respectively. As of December 31, 2025 , and December 31, 2024 , potential problem (also referred to as criticized) and classified loans and leases, excluding loans measured at fair value, totaled $1.39 billion and $1.04 billion, respectively. The following is a discussion of these loans and leases. Risk Grades 50 through 80 represent the spectrum of criticized and classified loans and leases. For a complete description of the risk grading system, see “Credit Quality Indicators” in Note 3 to the notes to consolidated financial statements included in Item 8 of this Report. At December 31, 2025 , the portion o f criticized and classified loans and leases guaranteed by the SBA or USDA totaled $669.8 million and total portfolio unguaranteed exposure risk was $719.9 million, or 8.6% of total held for investment unguaranteed exposure carried at historic al cost. This compares to the December 31, 2024 portion of criticized and classified loans and leases guaranteed by the SBA or USDA which totaled $518.7 million and total portfolio unguaranteed exposure risk was $523.3 million, or 7.8% of total held for investment unguaranteed exposure carried at historical cost. 53 Table of Contents As of December 31, 2025 and December 31, 2024, loans and leases carried at historical cost within the following verticals comprise the largest portion of the tot al potential problem and classified loans and leases: As of December 31, 2025 As of December 31, 2024 Vertical % of Criticized and Classified Loans and Leases Vertical % of Criticized and Classified Loans and Leases General Lending 11.8% General Lending 15.1% Solar Energy 7.5 Bioenergy 11.1 Senior Housing 6.1 Senior Housing 9.9 Bioenergy 6.1 Healthcare 6.9 Sponsor Finance 6.1 Sponsor Finance 5.5 Auto Care + Auto Dealerships 5.9 Wine & Craft Beverage 5.3 Healthcare 5.4 Search Fund Lending 5.0 Self Storage 5.4 Community Facilities 4.8 RV Parks 4.0 Self Storage 4.6 % of Total Criticized and Classified Loans 58.3% % of Total Criticized and Classified Loans 68.2% Of the above listed verticals, Solar Energy, Bioenergy, Senior Housing, Sponsor Finance and Community Facilities is within the Company’s Commercial Banking division, the remainder of the above listed verticals are within the Small Business Banking division. The total $347.7 million increase in criticized and classified loans and leases in 2025 was comprised of $197.3 million in increased levels of Risk Grade 50 loans and leases, as discussed below, and $150.4 million in classified loans. The increase in classified loans in 2025 was primarily driven by portfolio growth and isolated borrower-specific credit migrations, including movement of several larger individual exposures and isolated industries into classified status based on performance trends identified through ongoing credit reviews. These changes reflect normal portfolio seasoning and idiosyncratic borrower developments, rather than broad-based or systemic credit deterioration. The Company believes that its underwriting and credit quality standards have remained high and continues to consider changing economic conditions as well as the current interest rate environment. Loans and leases that experience insignificant payment delays and payment shortfalls are generally not individually evaluated for the purpose of estimating the allowance for credit losses. The Bank generally considers an “insignificant period of time” from payment delays to be a period of 90 days or less. The Bank would consider a modification for a customer experiencing what is expected to be a short-term event that has temporarily impacted cash flow. This could be due, among other reasons, to illness, weather, impact from a one-time expense, slower than expected start-up, construction issues or other short-term issues. Credit personnel will review the request to determine if the customer is experiencing financial stress and how the event has impacted the ability of the customer to repay the loan or lease long term. At December 31, 2025, the Company had a total of $119.5 million in loans modified in 2025 to borrowers experiencing financial difficulty, excluding loans measured at fair value. Of the $119.5 million in loans modified, $116.2 million remained current and of the $119.5 million, $105.3 million were for an other-than-insignificant payment delay or term extension. Management endeavors to be proactive in its approach to identify and resolve problem loans and leases and is focused on working with the borrowers and guarantors of these loans and leases to provide loan and lease modifications when warranted. Management implements a proactive approach to identifying and classifying loans and leases as special mention (also referred to as criticized), Risk Grade 50. At December 31, 2025, and December 31, 2024, Risk Grade 50 loans and leases, excluding loans measured at fair value, totaled $727.2 million and $529.9 million, respectively, for a year-over-year increase of $197.3 million. Relative to total held for investment unguaranteed exposure carried at historical cost at December 31, 2024 and 2025, unguaranteed Risk Grade 50 loans and leases increased from $357.9 million, or 5.3%, to $465.7 million, or 5.5%, respectively. The increase in unguaranteed Risk Grade 50 loans and leases was primarily driven by idiosyncratic credit migration of several larger individual exposures into Risk Grade 50, reflecting borrower-specific performance considerations and credit actions, rather than a broad-based deterioration linked to the macroeconomic environment. 54 Table of Contents The largest year-over-year changes in Risk Grade 50 loans and leases carried at historical cost were within the foll owing verticals : December 31, 2025 vs. 2024 Increase (Decrease) Vertical $ % Solar Energy $ 88,396 44.8 % Sponsor Finance 33,586 17.0 Government Contractors 22,679 11.5 RV Parks 21,585 10.9 Emerging Markets 16,889 8.6 Auto Care 14,627 7.4 Care Services 10,816 5.5 Restoration 10,441 5.3 Quick Service Restaurants 9,869 5.0 Agriculture 8,118 4.1 Veterinary (14,398) (7.3) Wine and Craft Beverage (20,518) (10.4) Senior Housing (26,517) (13.4) Total of largest changes in RG 50 loans and leases $ 175,573 89.0% The change in Risk Grade 50 loans and leases, exclusive of loans measured at fair value, during 2025 was principally confined to 13 verticals, as reflected above. Of the above listed verticals, Solar Energy, Sponsor Finance, Government Contractors, Emerging Markets and Senior Housing are within the Company’s Commercial Banking division and the remainder of the above listed verticals are within the Small Business Banking division. At December 31, 2025, approximately 99.7% of loans and leases classified as Risk Grade 50 are performing with no relationships having payments past due more than 30 days. While the level of nonperforming assets fluctuates in response to changing economic and market conditions, in light of the relative size and composition of the loan and lease portfolio and management’s degree of success in resolving problem assets, management believes that a proactive approach to early identification and intervention is critical to successfully managing a small business loan portfolio. Allowance for Credit Losses on Loans and Leases The ACL of $167.5 million at December 31, 2024 , increased by $24.7 million, or 14.8%, to $192.3 million at December 31, 2025 . The ACL as a percentage of loans and leases held for investment at historical cost amounted to 1.6% and 1.7% at December 31, 2025 and 2024 , respectively. The increase in the ACL during 2025 was primarily the result of loan growth and charge-off activity amid a challenging macroeconomic environment, where elevated interest rates earlier in the year continued to pressure certain small business and commercial borrowers, despite more recent signs of stabilization in rate conditions. See also the above section captioned “Provision for Credit Losses” in “Results of Operations” for related information. 55 Table of Contents Actual past due held for investment loans and leases, inclusive of loans measured at fair value, have increased by $93.8 million since December 31, 2024. Total loans and leases 90 or more days past due increased $146.8 million, or 57.4%, compared to December 31, 2024. This increase was comprised of a $20.4 million increase in unguaranteed exposure combined with a $126.5 million increase in the guaranteed portion of past due loans compared to December 31, 2024. At December 31, 2025 and December 31, 2024, total held for investment unguaranteed loans and leases past due as a percentage of total held for investment unguaranteed loans and leases, inclusive of loans measured at fair value, was 0.9% and 1.3%, respectively. Total unguaranteed loans and leases past due were comprised of $69.2 million carried at historical cost, a decrease of $8.3 million, and $7.9 million measured at fair value, a decrease of $2.4 million, as of December 31, 2025 compared to December 31, 2024. Management continues to actively monitor and work to improve asset quality. Management believes the ACL of $192.3 million at December 31, 2025 is appropriate in light of the risk inherent in the loan and lease portfolio. Management’s judgments are based on numerous assumptions about current and expected events that it believes to be reasonable, but which may or may not prove to be valid. Accordingly, no assurance can be given that management’s ongoing evaluation of the loan and lease portfolio in light of changing economic conditions and other relevant circumstances will not require significant future additions to the ACL, thus adversely affecting the Company’s operating results. Additional information on the ACL is presented in “Note 3. Loans and Leases Held for Investment and Credit Quality” of the notes to consolidated financial statements in this report. The following table sets forth the breakdown of the allowance for credit losses on loans and leases carried at historical cost by category at the dates indicated. 2025 2024 Allowance Total Loans and Leases (1) % of Total Allowance % of Total Loans and Leases (1) Allowance Total Loans and Leases (1) % of Total Allowance % of Total Loans and Leases (1) Commercial & Industrial Small Business Banking $ 117,500 $ 2,519,774 61.1 % 21.4 % $ 95,341 $ 2,324,924 56.9 % 23.4 % Commercial Banking 26,688 2,954,283 13.9 25.2 33,666 2,457,359 20.1 24.8 Paycheck Protection Program — 906 — — — 2,361 — — Total 144,188 5,474,963 75.0 46.6 129,007 4,784,644 77.0 48.2 Construction & Development Small Business Banking 6,522 750,142 3.3 6.4 4,157 518,953 2.5 5.2 Commercial Banking 702 69,538 0.4 0.6 786 85,456 0.5 0.9 Total 7,224 819,680 3.8 7.0 4,943 604,409 3.0 6.1 Commercial Real Estate Small Business Banking 29,376 3,368,516 15.3 28.7 22,196 2,873,260 13.3 28.9 Commercial Banking 7,986 1,411,485 4.2 12.0 7,305 1,055,843 4.4 10.6 Total 37,362 4,780,001 19.4 40.7 29,501 3,929,103 17.6 39.5 Commercial Land Small Business Banking 3,490 674,565 1.8 5.7 4,065 616,453 2.4 6.2 Total 3,490 674,565 1.8 5.7 4,065 616,453 2.4 6.2 Total $ 192,264 $ 11,749,209 100.0 % 100.0 % $ 167,516 $ 9,934,609 100.0 % 100.0 % (1) Excludes loans measured at fair value. 56 Table of Contents Analysis of Loan and Lease Loss Experience. The following table sets forth an analysis of net charge-offs for loans and leases carried at historical cost to average total loans and leases, carried at historical cost, by category for the years indicated. 2025 2024 2023 Net Charge-offs (1) Average Total Loans & Leases (1)(2) % of Average Total Loans & Leases (1)(2) Net Charge-offs (1) Average Total Loans & Leases (1)(2) % of Average Total Loans & Leases (1)(2) Net Charge-offs (1) Average Total Loans & Leases (1)(2) % of Average Total Loans & Leases (1)(2) Commercial & Industrial Small Business Banking $ 41,407 $ 2,461,604 1.7 % $ 34,341 $ 2,231,976 1.5 % $ 13,705 $ 2,086,469 0.7 % Commercial Banking 18,497 2,640,950 0.7 8,703 2,138,080 0.4 7,966 1,566,488 0.5 Paycheck Protection Program — 1,403 — — 3,922 — — 8,283 — Total 59,904 5,103,957 1.2 43,044 4,373,978 1.0 21,671 3,661,240 0.6 Construction & Development Small Business Banking 958 441,632 0.2 338 289,198 0.1 — 274,777 — Commercial Banking — 58,747 — — 55,440 — — 48,144 — Total 958 500,379 0.2 338 344,638 0.1 — 322,921 — Commercial Real Estate Small Business Banking 8,414 3,275,995 0.3 3,105 2,811,072 0.1 1,416 2,463,238 0.1 Commercial Banking (579) 1,301,171 — 189 897,927 — (1,714) 583,917 (0.3) Total 7,835 4,577,166 0.2 3,294 3,708,999 0.1 (298) 3,047,155 — Commercial Land Small Business Banking 77 691,364 — 16 592,007 — — 505,692 — Commercial Banking — 515 — — — — — — — Total 77 691,879 — 16 592,007 — — 505,692 — Total $ 68,774 $ 10,873,381 0.6 % $ 46,692 $ 9,019,622 0.5 % $ 21,373 $ 7,537,008 0.3 % (1) Excludes loans measured at fair value. (2) Average loans and leases held for investment, at amortized cost. Investment Securities Investment securities totaled $1.43 billion at December 31, 2025, an increase of $179.2 million, or 14.4%, compared to $1.25 billion at December 31, 2024. The increase in the investment portfolio for 2025 was to support earnings through additional yield compared to cash alternatives, continue to provide a contingent funding source and act as a mechanism to manage the Company’s interest rate risk. This also included purchases of $301.0 million in mortgage-backed securities, including $84.3 million for purposes of complying with the Community Reinvestment Act and purchases of $106.2 million in collateralized mortgage obligations to diversify the reinvestment of portfolio cash flows. The investment securities portfolio consists entirely of available-for-sale securities. The Company purchases securities for the investment securities portfolio to manage interest rate risk, ensure a stable source of liquidity and to provide a steady source of income in excess of cost of funds. At December 31, 2025, the effective duration of the overall available-for-sale securities portfolio was approximately 3.14 years. 57 Table of Contents The following table sets forth the stated maturities and weighted average yields of investment securities at December 31, 2025. Weighted average yields were calculated using amortized cost and coupon rate at the balance sheet date. Yields are not presented on a tax-equivalent basis. Certain mortgage related securities have adjustable interest rates and will reprice annually within the various maturity ranges. These repricing schedules are not reflected in the tables below. Total Amortized Cost Within One Year After One to Five Years After Five to Ten Years After Ten Years Amortized Cost Average Yield Amortized Cost Average Yield Amortized Cost Average Yield Amortized Cost Average Yield U.S. government securities $ 13,603 $ — — % $ 3,731 2.89 % $ 9,872 4.43 % $ — — % Mortgage-backed securities 1,469,440 27,840 2.56 220,834 3.18 188,251 2.94 1,032,515 3.59 Municipal bonds 3,151 — — — — 3,056 4.50 95 5.22 Total securities $ 1,486,194 $ 27,840 2.56 % $ 224,565 3.18 % $ 201,179 3.04 % $ 1,032,610 3.59 % At December 31, 2025 and December 31, 2024, the Company had 98.9% and 98.4% of its total investment securities portfolio in mortgage-backed securities. The Company has continued to purchase mortgage-backed securities with the goal of obtaining a favorable yield versus cash alternatives while still maintaining a low risk profile within the investment portfolio. Deposits The following table sets forth the composition of deposits. 2025 2024 2023 Total Percent Total Percent Total Percent Period end: Noninterest-bearing demand deposits $ 515,051 3.8 % $ 318,890 2.7 % $ 259,270 2.5 % Interest-bearing deposits: Interest-bearing checking 415,152 3.0 351,284 3.0 301,006 2.9 Money market 163,989 1.2 147,533 1.3 135,551 1.3 Savings 6,711,000 49.0 5,282,812 44.9 4,497,376 43.8 Time deposits 5,883,467 43.0 5,659,975 48.1 5,081,816 49.5 Total 13,173,608 96.2 11,441,604 97.3 10,015,749 97.5 Total period end deposits $ 13,688,659 100.0 % $ 11,760,494 100.0 % $ 10,275,019 100.0 % Total uninsured deposits $ 2,164,911 15.8 % $ 1,705,780 14.5 % $ 1,457,800 14.2 % 2025 2024 2023 Total Percent Average Rate Total Percent Average Rate Total Percent Average Rate Average: Noninterest-bearing demand deposits $ 403,508 3.2 % — % $ 239,078 2.2 % — % $ 215,327 2.2 % — % Interest-bearing deposits: Interest-bearing checking 370,562 2.9 4.36 326,410 3.0 5.42 231,413 2.4 5.50 Money market 133,566 1.1 0.32 131,636 1.2 0.56 125,279 1.3 0.58 Savings 6,310,054 49.9 3.56 4,934,818 45.8 4.02 4,428,306 45.7 3.86 Time deposits 5,431,128 42.9 3.91 5,133,511 47.7 4.17 4,695,161 48.4 3.31 Total average deposits $ 12,648,818 100.0 % 3.70 % $ 10,765,453 100.0 % 4.09 % $ 9,695,486 100.0 % 3.59 % 58 Table of Contents Deposits increased to $13.69 billion at December 31, 2025 from $11.76 billion at December 31, 2024, an increase of $1.93 billion, or 16.4%. This increase was primarily due to the growth of the Company’s customer base in the savings and time deposit products, enhanced by a nationwide marketing campaign with attractive rates and additional wholesale funding, to support the significant loan growth in 2025. Noninterest-bearing deposits increased $196.2 million, or 61.5%, during 2025, and interest-bearing deposits increased $1.73 billion, or 15.1%, during the same period. The aggregate amount of time deposits in denominations of $250 thousand or more at December 31, 2025 was approximately $653.5 million. Of those deposits, $283.5 million was uninsured and 98.3% of the uninsured time deposit accounts were scheduled to mature within one year. The maturity profile of uninsured time deposits at December 31, 2025 is as follows: Maturity Period Three months or less More than three months to six months More than six months to twelve months More than twelve months Amount of time deposits in uninsured accounts $ 98,317 $ 60,545 $ 119,755 $ 4,913 Borrowings Total borrowings decreased $10.4 million at December 31, 2025 from December 31, 2024 as a result of the following: In March 2024, the Company entered into a 60-month term loan agreement of $100.0 million with a third party correspondent bank. The loan accrues interest at a fixed rate of 5.95% with monthly interest payments until maturity on March 28, 2029, and $33.0 million of principal to be paid in year 4, and $67.0 million of principal to be paid in year 5. The Company paid the lender a non-refundable $600 thousand loan origination fee upon signing of the note that is represented as a direct deduction from the carrying amount of the loan and will be amortized into interest expense over the life of the loan. In March 2021, the Company entered into a 60 -month term loan agreement of $50.0 million with a third party correspondent bank. The loan accrues interest at a fixed rate of 2.95% with a monthly payment sufficient to fully amortize the loan, with all remaining unpaid principal and interest due at maturity on March 30, 2026 . The Company paid the lender a non-refundable $325 thousand loan origination fee upon signing of the note that is presented as a direct deduction from the carrying amount of the loan and will be amortized into interest expense over the life of the loan. In September 2025, the Company modified a $100.0 million revolving line of credit with a third party correspondent bank. The line of credit is unsecured and accrues interest at 30-day SOFR plus 1.25%, with an interest rate cap of 6.75% and an interest rate floor of 2.75%. The line of credit was extended 12 months to a maturity date of October 10, 2028. Payments are interest only with all principal and accrued interest due at maturity. The terms of this loan require the Company to maintain minimum capital and debt service coverage ratios. The Company paid the lender a non-refundable $250 thousand renewal fee in September 2025 that will be amortized into interest expense over the life of the loan. As of December 31, 2025 and 2024 there was $100.0 million of available credit . Liquidity Management Liquidity management refers to the ability to meet day-to-day cash flow requirements based primarily on activity in loan and deposit accounts of the Company’s customers. Liquidity is immediately available from four major sources: (a) cash on hand and on deposit at other banks; (b) the outstanding balance of federal funds sold; (c) the market value of unpledged investment securities; and (d) availability under lines of credit, FHLB advances and the Federal Reserve Discount Window. A primary tool in the Company’s liquidity management process is the utilization of an Outflow Coverage Ratio (“OCR”) model to stress outflows in various scenarios with targeted days of liquidity coverage. The OCR model output is then used by management to ensure adequate liquidity sources are available during those future periods. At December 31, 2025, the total amount of these four liquidity source items was $4.89 billion, or 32.3% of total assets, a decrease of 0.1% of total assets from $4.20 billion, or 32.4% of total assets, at December 31, 2024. Investments in loans, securities and other assets are funded primarily by customer deposits, brokered deposits and loan sales. The Company maintains an investment securities portfolio that is available for both immediate and secondary contingent liquidity purposes, whether via pledging to the Federal Home Loan Bank, Federal Reserve Bank, or through liquidation. Additionally, the Company maintains a guaranteed and unguaranteed loan portfolio that is also a contingent liquidity source, whether via pledging to the Federal Reserve Discount Window or through liquidation. 59 Table of Contents At December 31, 2025, $565.8 million of the investment securities portfolio were pledged for unused borrowing capacity, leaving $861.6 million available to be pledged as collateral. Contractual Obligations The Company has entered into significant fixed and determinable contractual obligations for future payments. See the accompanying notes to the consolidated financial statements for expected timing of payments as of December 31, 2025. These include operating leases (Note 4. Leases), time deposits with stated maturity dates (Note 7. Deposits) and borrowings (Note 8. Borrowings). As of December 31, 2025, the Company also has $401.0 million in brokered deposits with $350.9 million scheduled to mature in less than a year and $50.1 million scheduled to mature within one to three years. Off-Balance Sheet Arrangements In the normal course of operations, the Company engages in a variety of financial transactions that, in accordance with GAAP, are not recorded in the consolidated financial statements included in Item 8 of this Report. These transactions involve, to varying degrees, elements of credit, interest rate and liquidity risk. Such transactions are used primarily to manage customers’ requests for funding and take the form of commitments to extend credit and standby letters of credit. In 2025, the Company entered into airplane purchase agreement commitments. For more information, see “Note 2. Securities” and “Note 11. Commitments and Contingencies” in the accompanying notes to the consolidated financial statements included in Item 8 of this Report. Asset/Liability Management and Interest Rate Sensitivity One of the primary objectives of asset/liability management is to maximize the net interest margin while minimizing the earnings risk associated with changes in interest rates. One method used to manage interest rate sensitivity is to measure, over various time periods, the interest rate sensitivity positions, or gaps. This method, however, addresses only the magnitude of timing differences and does not address earnings or market value. Therefore, management uses an earnings simulation model to prepare, on a regular basis, earnings projections based on a range of interest rate scenarios to more accurately measure interest rate risk. For more information, see Item 7A of this Report. Capital The maintenance of appropriate levels of capital is a management priority and is monitored on a regular basis. The Company’s principal goals related to the maintenance of capital are to provide adequate capital to support the Company’s risk profile consistent with the risk appetite approved by the Board of Directors; provide financial flexibility to support future growth and client needs; comply with relevant laws, regulations, and supervisory guidance; achieve optimal credit ratings for the Company and its subsidiaries; and provide a competitive return to shareholders. Management regularly monitors the capital position of the Company on both a consolidated and Bank level basis. In this regard, management’s goal is to maintain capital at levels that are in excess of the regulatory “well capitalized” levels. Risk-based capital ratios, which include Tier 1 Capital, Total Capital and Common Equity Tier 1 Capital, are calculated based on regulatory guidance related to the measurement of capital and risk-weighted assets. 60 Table of Contents Capital amounts and ratios as of December 31, 2025, 2024 and 2023 are presented in the table below. Actual Minimum Capital Requirement Minimum To Be Well Capitalized Under Prompt Corrective Action Provisions (1) Amount Ratio Amount Ratio Amount Ratio Consolidated - December 31, 2025 Common Equity Tier 1 (to Risk-Weighted Assets) $ 1,162,337 10.53 % $ 496,712 4.50 % N/A N/A Total Capital (to Risk-Weighted Assets) $ 1,397,451 12.66 % $ 883,043 8.00 % N/A N/A Tier 1 Capital (to Risk-Weighted Assets) $ 1,258,603 11.40 % $ 662,282 6.00 % N/A N/A Tier 1 Capital (to Average Assets) $ 1,258,603 8.48 % $ 593,767 4.00 % N/A N/A Bank - December 31, 2025 Common Equity Tier 1 (to Risk-Weighted Assets) $ 1,147,133 10.46 % $ 493,607 4.50 % $ 712,987 6.50 % Total Capital (to Risk-Weighted Assets) $ 1,285,129 11.72 % $ 877,523 8.00 % $ 1,096,904 10.00 % Tier 1 Capital (to Risk-Weighted Assets) $ 1,147,133 10.46 % $ 658,142 6.00 % $ 877,523 8.00 % Tier 1 Capital (to Average Assets) $ 1,147,133 7.77 % $ 590,666 4.00 % $ 738,333 5.00 % Consolidated - December 31, 2024 Common Equity Tier 1 (to Risk-Weighted Assets) $ 1,049,420 11.04 % $ 427,941 4.50 % N/A N/A Total Capital (to Risk-Weighted Assets) $ 1,169,061 12.29 % $ 760,784 8.00 % N/A N/A Tier 1 Capital (to Risk-Weighted Assets) $ 1,049,420 11.04 % $ 570,588 6.00 % N/A N/A Tier 1 Capital (to Average Assets) $ 1,049,420 8.21 % $ 511,293 4.00 % N/A N/A Bank - December 31, 2024 Common Equity Tier 1 (to Risk-Weighted Assets) $ 1,020,820 10.96 % $ 418,992 4.50 % $ 605,210 6.50 % Total Capital (to Risk-Weighted Assets) $ 1,138,006 12.22 % $ 744,874 8.00 % $ 931,093 10.00 % Tier 1 Capital (to Risk-Weighted Assets) $ 1,020,820 10.96 % $ 558,656 6.00 % $ 744,874 8.00 % Tier 1 Capital (to Average Assets) $ 1,020,820 8.04 % $ 507,725 4.00 % $ 634,657 5.00 % Consolidated - December 31, 2023 Common Equity Tier 1 (to Risk-Weighted Assets) $ 960,433 11.73 % $ 368,549 4.50 % N/A N/A Total Capital (to Risk-Weighted Assets) $ 1,063,157 12.98 % $ 655,198 8.00 % N/A N/A Tier 1 Capital (to Risk-Weighted Assets) $ 960,433 11.73 % $ 491,399 6.00 % N/A N/A Tier 1 Capital (to Average Assets) $ 960,433 8.58 % $ 447,561 4.00 % N/A N/A Bank - December 31, 2023 Common Equity Tier 1 (to Risk-Weighted Assets) $ 823,478 10.40 % $ 356,426 4.50 % $ 514,837 6.50 % Total Capital (to Risk-Weighted Assets) $ 922,876 11.65 % $ 633,646 8.00 % $ 792,057 10.00 % Tier 1 Capital (to Risk-Weighted Assets) $ 823,478 10.40 % $ 475,234 6.00 % $ 633,646 8.00 % Tier 1 Capital (to Average Assets) $ 823,478 7.41 % $ 444,480 4.00 % $ 555,600 5.00 % (1) Prompt corrective action provisions are not applicable at the bank holding company level. Critical Accounting Policies and Estimates The preparation of consolidated financial statements in accordance with GAAP requires the Company to make estimates and judgments that affect reported amounts of assets, liabilities, income and expenses and related disclosure of contingent assets and liabilities. The Company bases estimates on historical experience and on various other assumptions that are believed to be reasonable under current circumstances, results of which form the basis for making judgments about the carrying value of certain assets and liabilities that are not readily available from other sources. Estimates are evaluated on an ongoing basis. Actual results may differ from these estimates under different assumptions or conditions. 61 Table of Contents The Company’s accounting policies, including those for the Company’s critical accounting estimates are described in detail in “Note 1. Organization and Summary of Significant Accounting Policies” in the accompanying notes to the consolidated financial statements and are an integral part of the Company’s consolidated financial statements. A thorough understanding of these accounting policies is essential when reviewing the Company’s reported results of operations and financial position. The Company’s most critical accounting estimate is listed below. This estimate requires the Company to make difficult, subjective or complex judgments about matters that are inherently uncertain. Allowance for credit losses (ACL) The Company’s ACL at December 31, 2025 represents the Company’s current estimate of the lifetime credit losses expected from its loan and lease portfolio. Management estimates the ACL by projecting probability of default, loss given default and exposure at default, conditional on economic parameter(s), for the remaining contractual term. To determine the ACL as of December 31, 2025, the Company utilized an external baseline forecast to generate its quantitatively modeled expected losses and considered alternative economic forecast scenarios to qualitatively adjust the modeled ACL by loan portfolio in order to reflect management’s reasonable expectations of current and future economic conditions. The baseline forecast at December 31, 2025 assumes the Baa Corporate Bond Yield ending the fourth quarter of 2026 at 6.7%. One of the most significant judgments influencing the ACL is the external macroeconomic forecasts. Changes in the economic forecasts could significantly affect the estimated credit losses which could potentially lead to materially different allowance levels from one reporting period to the next. To illustrate a hypothetical sensitivity analysis, management calculated a quantitative allowance using a 100% weighting applied to an adverse scenario. In this adverse environment, the U.S. economy faces renewed weakness following late‑2025 softening in labor markets and persistent inflation pressures. Elevated interest rates – declining more slowly than anticipated – continue to suppress credit‑sensitive consumer spending and business investment, while the expanded tariff regime introduced in 2025 further elevates goods prices and weighs on supply chains. Also compiling into an adverse scenario are geopolitical tensions, including continued instability in Eastern Europe and heightened trade frictions with major partners, further disrupt supply chains and contribute to volatility in goods prices. These developments, combined with limited fiscal space and slowing job creation, push the U.S. economy into a mild recession by mid‑2026 under this scenario. Under this scenario, as an example, the Baa Corporate Bond Yield increases from baseline levels and remains elevated for an extended period. The estimated Baa Corporate Bond Yield in this scenario could reach 7.0% at the middle of 2026, approximately 120 basis points higher than the baseline scenario forecast start. To demonstrate the sensitivity to key economic parameters, management calculated the difference between a 100% baseline weighting and a 100% adverse scenario weighting for quantitative modeled results. This scenario would result in an incremental quantitative impact to the ACL of approximately $10.0 million at December 31, 2025. This resulting difference is not intended to represent an expected increase in ACL levels since (i) the Company may use a weighted approach applied to multiple economic scenarios for its ACL process, (ii) the highly uncertain economic environment, and (iii) the sensitivity analysis does not account for any qualitative adjustments incorporated by the Company as part of its overall ACL framework. Other Considerations While management utilizes its best judgment and information available, the ultimate adequacy of our ACL is dependent upon a variety of factors beyond our control, including the performance of our portfolios, the economy, and changes in interest rates. See “Note 1. Organization and Summary of Significant Accounting Policies” and “Note 3. Loans and Leases Held for Investment and Credit Quality” in the notes to consolidated financial statements for further details of the factors considered by the Company in estimating the necessary level of the ACL. 62 Table of Contents Non-GAAP Measures Some of the financial measures included in our selected historical consolidated financial data and elsewhere in this Report are not measures of financial performance recognized by GAAP. These non-GAAP financial measures are: “tangible shareholders’ equity;” “tangible assets;” “tangible shareholders’ equity to tangible assets;” “tangible book value per share;” and “efficiency ratio.” Management uses these non-GAAP financial measures in its analysis of the Company’s performance. • “Tangible shareho lders’ equity” is total shareholders’ equity less preferred stock, non-controlling interest, goodwill and other intangible assets. Management has not considered loan servicing rights as an intangible asset for purposes of this calculation. • “Tangible assets” is total assets less goodwill and other intangible assets. Management has not considered loan servicing rights as an intangible asset for purposes of this calculation. • “Tangible shareholders’ equity to tangible assets” is defined as the ratio of shareholders’ equity less preferred stock, non-controlling interest, goodwill and other intangible assets, divided by total assets less goodwill and other intangible assets. Management believes this measure is important because it shows relative changes from period to period in equity and total assets, each exclusive of changes in intangible assets. Management has not considered loan servicing rights as an intangible asset for purposes of this calculation. • “Tangible book value per share” is defined as total equity reduced by preferred stock, non-controlling interest, goodwill and other intangible assets divided by total common shares outstanding. Management believes this measure is important because it shows changes from period to period in book value per share exclusive of changes in intangible assets. Management has not considered loan servicing rights as an intangible asset for purposes of this calculation. • “Efficiency ratio” is defined as total noninterest expense divided by the sum of net interest income and noninterest income. Management believes this measure is important as an indicator of productivity because it shows the amount of noninterest expense that was required to generate a dollar of revenue. While the efficiency ratio is a measure of productivity, its value also reflects the unique attributes of the “high-touch business model” the Company employs. 63 Table of Contents The Company believes these non-GAAP financial measures provide useful information to management and investors that is supplementary to the financial condition, results of operations and cash flows computed in accordance with GAAP; however, the Company acknowledges that non-GAAP financial measures have a number of limitations. As such, you should not view these measures as a substitute for results determined in accordance with GAAP, and they are not necessarily comparable to non-GAAP financial measures that other companies use. The following table provides a reconciliation of these non-GAAP financial measures to the most closely related GAAP measure. Years Ended December 31, 2025 2024 2023 Total shareholders' equity $ 1,254,106 $ 1,003,496 $ 902,666 Less: Preferred stock 96,266 — — Non-controlling interest 4,238 — — Total common shareholders' equity $ 1,153,602 $ 1,003,496 $ 902,666 Less: Goodwill 1,797 1,797 1,797 Other intangible assets 2,165 1,568 1,721 Tangible shareholders' equity (a) $ 1,149,640 $ 1,000,131 $ 899,148 Shares outstanding (c) 46,032,402 45,359,425 44,617,673 Total assets $ 15,134,778 $ 12,943,380 $ 11,271,423 Less: Goodwill 1,797 1,797 1,797 Other intangible assets 2,165 1,568 1,721 Tangible assets (b) $ 15,130,816 $ 12,940,015 $ 11,267,905 Tangible shareholders' equity to tangible assets (a/b) 7.60% 7.73% 7.98% Tangible book value per share (a/c) $ 24.97 $ 22.05 $ 20.15 Efficiency ratio: Noninterest expense (d) $ 338,698 $ 303,110 $ 315,152 Net interest income 448,358 375,905 345,305 Noninterest income 129,458 112,652 104,000 Adjusted operating revenue (e) $ 577,816 $ 488,557 $ 449,305 Efficiency ratio (d/e) 58.62% 62.04% 70.14% 64 Table of Contents