What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-03-07 compared with 2024-03-15 · 492 added, 640 removed, 1412 unchanged (44% of the section changed)

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Description Page Number

Report s of Independent Registered Public Accounting Firm (PCAOB ID:

Reports of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Balance Sheets as of December 31, 2024 and 2023

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Consolidated Statements of Shareholders’ Equity for the Years Ended December 31, 2024 and 2023

Consolidated Statements of Cash Flows for the Years Ended December 31, 2023 a nd 2022

Consolidated Statements of Cash Flows for the Years Ended December 31,2024 and 2023

Notes to Consolidated Financial Statements

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated March 7, 2025 expressed an unqualified opinion.

Change in Accounting Principle

As discussed in Note 1 to the financial statements, the Company has changed its method of accounting for allowance for credit losses effective January 1, 2023, due to the adoption of Financial Accounting Standards Board Accounting Standards Codification No.

326, Financial Instruments – Credit Losses (ASC 326).

The Company adopted the new credit loss standard using the modified retrospective method such that prior period amounts are not adjusted and continue to be reported in accordance with previously applicable generally accepted accounting principles.

The adoption of the new credit loss standard and its subsequent application is also communicated as a critical audit matter below.

Basis for Opinion

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Allowance for Credit Losses (“ACL”) on Loans – Modeling Techniques and Qualitative Adjustments

As disclosed in Notes 1 and 4 and the explanatory paragraph above, on January 1, 2023, the Company adopted ASC 326 which replaced the probable incurred loss methodology with a current expected credit loss (“CECL”) methodology.

As of January 1, 2023, the Company recorded a reduction in retained earnings, net of tax of $5.3 million as a cumulative-effect adjustment using a modified retrospective approach.

The cumulative effect adjustment for the ACL on loans was $3.5

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As of December 31, 2023, the Company’s ACL on loans was $23.9 million and provision for credit losses on loans was $12.1 million for the year then ended.

As disclosed in Notes 1 and 4 to the consolidated financial statements, as of December 31, 2024 the Company’s ACL on loans was $18.3 million and provision for credit losses on loans was $3.4 million for the year then ended.

The Company primarily uses a discounted cash flow ("DCF") methodology using the amortized cost method (excluding interest) to calculate the ACL on loans, which the Company has applied to identified loan segments with similar risk characteristics.

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Our audit procedures to address this critical audit matter primarily included the following:

• Tested the operating effectiveness of controls over the modeling techniques and qualitative adjustments used in the estimate for ACL on loans as of both adoption date of January 1, 2023 and as of December 31, 2023, including:

• Tested the operating effectiveness of controls over the modeling techniques and qualitative adjustments used in the estimate for ACL on loans as of December 31, 2024, including:

• The Company's ACL committee's oversight and approval of management's application of accounting policies, selection and implementation of modeling techniques, and evaluation of qualitative adjustments determined by management.

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• Management's controls over third-party model validation and testing of model performance including the conceptual soundness and viability of the modeling techniques selected.

• Substantively tested management’s application of the selected modeling techniques and qualitative adjustments used in the estimate for ACL on loans as of both adoption date of January 1, 2023 and as of December 31, 2023, including:

• Substantively tested management’s application of the selected modeling techniques and qualitative adjustments used in the estimate for ACL on loans as of December 31, 2024, including:

• Evaluated the appropriateness of the accounting policies, modeling techniques employed, including but not limited to evaluating their conceptual soundness and evaluated the reasonableness of significant assumptions and judgments used the evaluation of ACL on loans.

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March 7, 2025

Table of Content s

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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March 7, 2025

Table of Content s

FIRST WESTERN FINANCIAL, INC.

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(in thousands, except share amounts)

2023 December 31,

Cash and cash equivalents:

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Total cash and cash equivalents 236,041 254,442

Held-to-maturity securities, at amortized cost, net of allowance for credit losses of $ 71 and $ 0 (fair value of $ 66,617 and $ 74,718 ), respectively

Held-to-maturity debt securities, net of allowance for credit losses of $ 71 and $ 71 (fair value of $ 68,161 and $ 66,617 ), respectively

75,724 74,102

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Allowance for credit losses ( 18,330 ) ( 23,931 )

( 23,931 ) ( 17,183 )

Loans, net 2,407,235 2,506,984

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Other receivables 5,710 4,467

Other real estate owned, net 35,929 —

Goodwill and other intangible assets, net 31,627 31,854

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90,000,000 shares authorized;

9,581,183 and 9,495,440 shares issued and outstanding as of December 31, 2023 and December 31, 2022, respectively

9,667,142 and 9,581,183 shares issued and outstanding as of December 31, 2024 and 2023, respectively

Additional paid-in capital 193,585 192,894

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Total liabilities and shareholders’ equity $ 2,919,037 $ 2,975,462

(1) Allowance for credit loss amounts for periods prior to the ASC 326 adoption date of January 1, 2023 are reported in accordance with previously applicable GAAP .

See accompanying notes to consolidated financial statements.

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FIRST WESTERN FINANCIAL, INC.

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Income on company-owned life insurance 431 378

Net gain on equity interests — 7

Net loss on loans accounted for under the fair value option ( 999 ) ( 2,010 )

Unrealized (loss)/gain recognized on equity securities ( 22 ) 342

Unrealized loss recognized on equity securities ( 33 ) ( 22 )

Other 581 ( 775 )

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Amortization of other intangible assets 226 250

Net gain on assets held for sale — ( 4 )

Net gain on sale of other real estate owned — ( 44 )

Other 7,436 5,374

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Diluted 0.87 0.54

(1) Provision for credit loss amounts for periods prior to the ASC 326 adoption date of January 1, 2023 are reported in accordance with previously applicable GAAP.

See accompanying notes to consolidated financial statements.

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FIRST WESTERN FINANCIAL, INC.

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Net income $ 8,473 $ 5,225

Other comprehensive (loss)/income:

Unrealized losses on available-for-sale securities — ( 2,591 )

Income tax effect — 638

Other comprehensive income:

Amortization of net unrealized loss for the reclassification of available-for-sale securities transferred to held-to-maturity included in interest income 501 354

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Income tax effect ( 13 ) ( 19 )

Total other comprehensive income/(loss) 319 ( 1,740 )

Total other comprehensive income 420 319

Comprehensive income $ 8,893 $ 5,544

See accompanying notes to consolidated financial statements.

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FIRST WESTERN FINANCIAL, INC.

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Balance, January 1, 2023 9,495,440 $ 190,494 $ 51,887 $ ( 1,517 ) $ 240,864

Net income — — 21,698 — 21,698

Other comprehensive loss, net of tax and reclassifications — — — ( 1,740 ) ( 1,740 )

Settlement of share awards 67,860 ( 876 ) — — ( 876 )

Options exercised 8,309 179 — — 179

Stock-based compensation — 2,562 — — 2,562

Balance, December 31, 2022 9,495,440 $ 190,494 $ 51,887 $ ( 1,517 ) $ 240,864

Cumulative change in accounting principle (1)

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Stock-based compensation — 1,843 — — 1,843

Balance, December 31, 2023 9,581,183 $ 192,894 $ 51,042 $ ( 1,198 ) $ 242,738

Balance as of December 31, 2023 9,581,183 $ 192,894 $ 51,042 $ ( 1,198 ) $ 242,738

Net income — — 8,473 — 8,473

Other comprehensive income, net of tax and reclassifications — — — 420 420

Repurchase of common stock ( 5,501 ) ( 89 ) — — ( 89 )

Settlement of share awards 91,460 ( 706 ) — — ( 706 )

Stock-based compensation — 1,486 — — 1,486

Balance as of December 31, 2024 9,667,142 $ 193,585 $ 59,515 $ ( 778 ) $ 252,322

_____________________________

(1) Refer to Note 1 – Organization and Summary of Significant Accounting Policies for further information.

See accompanying notes to consolidated financial statements.

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FIRST WESTERN FINANCIAL, INC.

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Net income $ 8,473 $ 5,225

Adjustments to reconcile net income to net cash used in operating activities:

Adjustments to reconcile net income to net cash (used in) provided by operating activities:

Net amortization of investment securities ( 75 ) ( 14 )

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Provision for credit losses 1,933 10,355

Loss on loans held for sale 178 12

Net loss on loans held for sale 105 178

Net gain on mortgage loans ( 4,912 ) ( 2,826 )

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Proceeds from mortgage loans 369,629 280,462

Loss/(Gain) on disposal of fixed assets 8 ( 21 )

Loss on disposal of fixed assets — 8

Depreciation and amortization 2,565 2,377

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Deferred income tax expense

Increase in cash surrender value of company-owned life insurance ( 378 ) ( 349 )

Income on company-owned life insurance ( 431 ) ( 378 )

Stock-based compensation 1,486 1,843

Gain on assets held for sale — ( 4 )

Gain on sale of other real estate owned — ( 44 )

Change in fair value of equity securities 22 ( 342 )

Change in fair value of loans accounted for under the fair value option 2,010 891

Provision for other real estate owned 1,107 —

Unrealized loss recognized on equity securities 33 22

Net loss on loans accounted for under the fair value option 999 2,010

Net changes in operating assets and liabilities:

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Change in accrued interest payable and other liabilities ( 827 ) 1,589

Net cash provided by operating activities 21,880 48,278

Net cash (used in) provided by operating activities ( 544 ) 21,880

Cash flows from investing activities

Activity in available-for-sale securities:

Maturities, prepayments, and calls — 3,218

Purchases — ( 9,000 )

Activity in held-to-maturity securities:

Activity in held-to-maturity debt securities:

Maturities, prepayments, and calls 8,736 7,243

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Purchase of loans ( 23,259 ) ( 1,173 )

Proceeds from sale of assets held for sale — 125

Proceeds from sale of other real estate owned — 422

Net cash used in investing activities ( 66,391 ) ( 558,798 )

Net cash provided by (used in) investing activities 66,441 ( 66,391 )

Cash flows from financing activities

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Proceeds from Federal Reserve borrowings 10,000 361,660

Payments on subordinated notes — ( 6,575 )

Proceeds from subordinated notes, net of issuance costs — 19,509

Repurchase of common stock ( 89 ) —

Proceeds from the exercise of stock options — 245

Settlement of restricted stock ( 439 ) ( 876 )

Net cash provided by financing activities 102,441 320,049

Cash paid for withholding taxes on share-based awards ( 706 ) ( 439 )

Net cash (used in) provided by financing activities ( 84,298 ) 102,441

Net change in cash and cash equivalents ( 18,401 ) 57,930

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Cash and cash equivalents, end of period $ 236,041 $ 254,442

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FIRST WESTERN FINANCIAL, INC.

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(in thousands)

Years Ended December 31,

Supplemental cash flow information:

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Dissolution of RSI entity — 751

Change in unrealized (loss)/gain on available-for-sale securities — ( 2,591 )

Lease right-of-use-asset obtained in exchange for lease liabilities 12,619 2,992

Transfer of securities from available-for-sale to held-to-maturity — 58,727

Transfer from loans to other real estate owned — 378

(1) Provision for credit loss amounts for periods prior to the ASC 326 adoption date of January 1, 2023 are reported in accordance with previously applicable GAAP.

Transfers from loans, net of participations, to other real estate owned 27,390 —

See accompanying notes to consolidated financial statements.

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FIRST WESTERN FINANCIAL, INC.

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("RSI"), which was wholly owned by FWFI, was dissolved on March 21, 2023.

The Company provides a fully-integrated suite of wealth management services including private banking, personal trust, investment management, mortgage loans, and institutional asset management services to individual and corporate clients principally in Colorado (metro Denver, Aspen, Boulder, Fort Collins and Vail Valley), Arizona (Phoenix and Scottsdale), California (Century City), Montana (Bozeman), and Wyoming (Jackson Hole, Pinedale, and Rock Springs).

The Company provides a fully-integrated suite of wealth management services including private banking, personal trust, investment management, mortgage loans, and institutional asset management services to individual and corporate clients principally in Colorado (metro Denver, Aspen, Boulder, Fort Collins, Loveland, and Vail Valley), Arizona (Phoenix and Scottsdale), California (Century City), Montana (Bozeman), and Wyoming (Jackson Hole, Pinedale, Rock Springs, and Cheyenne).

The Company’s revenues are generated from its full range of product offerings as noted above, but principally from net interest income (the interest income earned on the Bank’s assets net of funding costs), fee-based wealth advisory, investment management, asset management and personal trust services, and net gains earned on mortgage loans.

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Material estimates that are particularly susceptible to significant change include:

the determination of the allowance for credit losses, the evaluation of goodwill impairment, and the fair value of financial instruments.

the determination of the allowance for credit losses, the evaluation of goodwill impairment, and the fair value of certain financial instruments.

Concentration of Credit Risk :

Most of the Company’s lending activity is to clients located in and around metro Denver, Aspen, Fort Collins, Boulder, and Vail, Colorado;

Most of the Company’s lending activity is to clients located in and around metro Denver, Aspen, Fort Collins, Loveland, Boulder, and Vail, Colorado;

Phoenix and Scottsdale, Arizona;

Bozeman, Montana;

and Jackson, Pinedale, and Rock Springs, Wyoming.

and Jackson, Cheyenne, Pinedale, and Rock Springs, Wyoming.

The Company does not believe it h as significant concentrations in any one industry or customer.

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Declines in real estate values in the primary markets the Company operates in could negatively impact the Company.

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Cash and Cash Equivalents :

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Investment Securities :

Investments we intend to hold for an indefinite period of time, but not necessarily to maturity, are classified as available-for-sale and are recorded at fair value using current market information from a pricing service, with unrealized gains and losses excluded from earnings and reported in other comprehensive income, net of tax.

The carrying values of our investment securities classified as available-for-sale 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.

Investments for which we have the intent and ability to hold to their maturity are classified as held-to-maturity securities and are recorded at amortized cost.

Securities held-to-maturity are carried at cost, adjusted for the amortization of premiums and the accretion of discounts using the level-yield method over the remaining period until maturity.

Equity mutual funds are recorded at fair value within the Other assets line of the Consolidated Balance Sheets with changes recorded in the Unrealized gain/(loss) recognized on equity securities line of the Consolidated Statements of Income.

Investments for which we have the intent and ability to hold to their maturity are classified as held-to-maturity debt securities and are recorded at amortized cost.

Held-to-maturity debt securities are carried at cost, adjusted for the amortization of premiums and the accretion of discounts using the level-yield method over the remaining period until maturity.

Net purchase premiums and discounts are recognized in interest income using the interest method over the terms of the securities, without anticipating prepayments, except for mortgage-backed securities where prepayments are anticipated.

Equity mutual funds are recorded at fair value within the Other assets line of the Consolidated Balance Sheets with changes recorded in the Unrealized loss recognized on equity securities line of the Consolidated Statements of Income.

The Company invests in projects to create affordable housing.

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Under the proportional amortization method, the initial cost of the investment is amortized in proportion to the tax credits and other benefits received and recognized as a component of applicable income tax expense in the Consolidated Statements of Income.

Prior to the adoption of ASU 2016-13, Financial Instruments—Credit Losses (Topic 326) ("ASU 2016-13"), credit declines in the fair value of available-for-sale securities and held-to-maturity securities below their cost that are deemed to be other-than-temporary are recorded in earnings as realized losses in Non-interest income.

Held-to maturity securities are carried at amortized cost when management has the positive intent and ability to hold them to maturity.

The majority of our held-to-maturity investment portfolio consists of securities issues by U.S.

ACL - Held-to-maturity (“HTM”) debt securities :

On January 1, 2023, the Company adopted FASB ASU 2016-13, Financial Instruments - Credit Losses, which significantly changed the allowance for credit loss accounting policies for debt securities.

The following debt securities and allowance for credit loss accounting policies are presented under Accounting Standards Codification (“ASC”) Topic 326.

The majority of our held-to-maturity investment portfolio consists of securities issued by U.S.

government entities and agencies.

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With respect to these securities, we consider the risk of credit loss to be zero and, therefore, we have elected the practical expedient to not record an ACL for these securities.

The Company's non-government backed securities include private label CMO and MBS and bank subordinated debt.

The Company's non-government backed securities include private label collateralized mortgage obligations ("CMO") and mortgage-backed securities ("MBS") debt securities and corporate bonds.

Private label refers to private institutions such as brokerage firms, banks, and home builders, that also securitize mortgages.

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The estimate of expected credit losses considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts.

Management classifies the held-to-maturity portfolio into the following major security types:

Corporate bonds and Corporate CMO and MBS.

Management reviewed the collectability of corporate CMO and MBS securities taking into consideration such factors as the asset quality of the corporate bond issuers and credit support and delinquencies associated with the corporate CMO and MBS.

Management reviewed the collectability of CMO and MBS debt securities and corporate bonds taking into consideration factors such as the asset quality and delinquencies of the issuers.

Correspondent Bank Stock :

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Both cash and stock dividends are reported as income when received.

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Mortgage Loans Held for Sale :

Mortgage loans originated and intended for sale in the secondary market are carried at fair value.

Net unrealized losses, if any, are recorded and charged to earnings.

Servicing rights are released when the associated mortgage loans are sold.

Gains and losses on sales of mortgage loans are based on the difference between the selling price and the carrying value of the related loan sold.

Loans the Company has the intent and ability to hold for the foreseeable future, until maturity, or until payoff are reported at their outstanding unpaid principal balances, adjusted for charge-offs and recoveries, net of deferred costs (fees) and unamortized premiums/(unaccreted discounts), and the allowance for credit losses.

Mortgage loans held for sale generally consist of long-term, fixed rate, conforming, single-family residential real estate loans intended to be sold on the secondary market.

Mortgage loans held for sale are recorded at fair value and are typically sold with servicing rights released.

Changes in the fair values of mortgage loans held for sale are included in the Net gain on mortgage loans line of the Condensed Consolidated Statements of Income.

Fair value elections are made at the time of origination based on the Company’s fair value election policy.

Interest income is accrued on unpaid principal balances.

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MSLP loans of $ 1.7 million and $ 5.1 million as of December 31, 2024 and 2023, respectively, are included in this category.

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Past Due Loans :

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Loans can be returned to accrual status when there is a sustained period of repayment performance (usually six-months or longer) and the collectability of future payments is reasonably assured.

COVID-19 Loan Modifications :

As a result of the COVID-19 pandemic, a loan modification program was designed and implemented to assist our clients experiencing financial stress resulting from the economic impacts caused by the global pandemic.

The Company offered loan extensions, temporary payment moratoriums, and financial covenant waivers for commercial and consumer borrowers impacted by the pandemic who have a pass risk rating and have not been delinquent over 30 days on payments in the prior two years, primarily for a period of 180 days or less .

Allowance for Credit Losses (“ACL”), subsequent to adoption of ASU 2016-13:

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

ASU 2016-13 replaces the incurred loss model with an expected loss model, which is referred to as the current expected credit loss ("CECL") model.

Allowance for Credit Losses (“ACL”) loans :

On January 1, 2023, the Company adopted Financial Accounting Standards Board ("FASB") Accounting Standards Update ("ASU") 2016-13, Financial Instruments - Credit Losses, which significantly changed the loan and allowance for credit loss accounting policies.

The following loan and allowance for credit loss accounting policies are presented under Accounting Standards Codification ("ASC") Topic 326.

The ACL is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans.

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The Company elected to not measure an ACL for accrued interest receivables, as we write off applicable accrued interest receivable balances in a timely manner when a loan is placed on non-accrual status, in which any accrued but uncollected interest is reversed from current income.

Loans are charged off against the allowance when management believes the uncollectibility of a loan balance is confirmed.

Loans are charged off against the allowance when management believes the uncollectability of a loan balance is confirmed.

Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off.

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Qualitative adjustments to historical loss data are made based on management’s assessment of the risks that may lead to a future credit loss or differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, changes in environmental and economic conditions, or other relevant factors.

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ACL - off-balance sheet credit exposures :

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The loss rates used are calculated using the same assumptions as the associated funded balance.

Allowance for Loan Losses , prior to the adoption of ASU-2016-13:

The Company’s allowance for loan losses is an estimate of the probable incurred credit losses and is comprised of (i) the allowance for loan losses and (ii) the reserve for unfunded commitments.

The reserve for unfunded commitments is included in Other liabilities in the accompanying Consolidated Balance Sheets and the loan balances in the accompanying Consolidated Balance Sheets are reported net of the allowance for loan losses.

The allowance for loan losses is established through a provision for credit losses, which is a noncash charge to earnings.

Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed.

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

The allowance for loan losses is comprised of specific credit loss reserves and general credit loss reserves.

The impairment of a specific loan is measured based either on (i) the present value of expected future cash flows discounted at the loan’s effective interest rate, or (ii) the fair value of the underlying collateral, less costs to sell, if the repayment is expected to be provided predominantly by the sale of the underlying collateral.

Specific impairments are measured on a loan-by-loan basis if risk characteristics are unique to an individual borrower.

The general credit loss reserve covers non-impaired loans and is established by evaluating the incurred loss on homogenous pools of loans, not specifically reviewed for impairment as noted above, that have common risk characteristics.

The general credit loss reserve is based on historical loss experiences adjusted for nine qualitative factors on all loans in the portfolio not considered impaired.

Certain factors are applied to each pool and certain factors are applied to all non-individually reviewed loans.

The reserve for unfunded commitments represents the estimate for probable credit losses inherent in unfunded commitments to extend credit.

Unfunded commitments to extend credit include commercial and standby letters of credit, unused lines of credit, and unfunded loan commitments expected to be funded, unless the obligation is unconditionally cancellable by the Company.

The process used to determine the reserve for unfunded commitments is consistent with the process for determining the allowance for credit losses, adjusted for estimated funding probabilities.

Changes to the level of the reserve for unfunded commitments are recognized through the provision for credit losses for off-balance sheet credit exposures, included in the non-interest other expense line of the Consolidated Statements of Income.

Modifications :

On January 1, 2023, the Company adopted FASB ASU 2022-02, Financial Instruments - Credit Losses, Troubled Debt Restructurings and Vintage Disclosures, which eliminated the accounting guidance for troubled debt restructurings (“TDRs”) by creditors in Accounting Standard Codification (“ASC”) Subtopic 310-40, and enhanced the disclosure requirements for certain loan refinancing and restructures by creditors when a borrower is experiencing financial difficulty.

The company identifies modifications to borrowers experiencing financial difficulty as a loan that has been modified for the borrower that is experiencing financial difficulties.

The Company considers some of the indicators that a borrower is experiencing financial difficulty to be:

currently in payment default on any of their debt, declaring bankruptcy, going concern, and other indicators of inability to meet obligations.

This list does not include all potential indicators of a borrower’s financial difficulties.

The allowance for credit losses on loans that are considered modifications to borrowers experiencing financial difficulty are measured using the same method as all other loans held for investment.

Transfers of Financial Assets :

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Furniture/equipment and software are depreciated using the straight-line method and recognized over the estimated useful lives of the assets, ranging from 3 to 7 years.

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Accounts Receivable :

Accounts receivable primarily represents the billed but unpaid fees from trust and investment advisory services owed by clients, which are typically calculated as a percentage of average invested balances.

The majority of the Company’s investment advisory clients are billed quarterly in arrears based on the daily average balance in the client’s trust or investment accounts for that quarter.

Other Receivables :

Other accounts receivables represents miscellaneous receivables that are not presented separately in the Consolidated Balance Sheets.

Other Real Estate Owned ("OREO") :

Property acquired by foreclosure or deed-in-lieu of foreclosure is initially recorded at fair value less estimated selling cost at acquisition date, establishing a new cost basis.

The Company is considered to have received physical possession of real estate property collateralizing a loan upon the occurrence of either the Company obtaining legal title to the property or the borrower conveying all interest in the property through a deed-in-lieu or similar agreement.

Fair value is determined as the amount that could be reasonably expected in a current sale between a willing buyer and a willing seller in an orderly transaction between market participants at the measurement date.

Subsequent to the initial acquisition, if the fair value of the asset, less estimated selling cost, is less than the cost of the property, a loss is recognized within non-interest expense and the asset carrying value is reduced.

Gain or loss on disposition of OREO is recorded in non-interest income.

In determining the fair value of the properties on the date of transfer and any subsequent estimated losses of net realizable value, the fair value of other real estate acquired by foreclosure or deed-in-lieu of foreclosure is determined primarily based upon appraisal or evaluation of the underlying property value.

Goodwill and Other Intangible Assets :

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Other definite-lived intangible assets, including customer relationship intangibles, are amortized on an accelerated basis over periods representing the estimated remaining lives of the assets of one to ten years and are evaluated for impairment when events or changes in circumstances indicate the carrying values of such assets may not be recoverable.

After the company recorded the impact of a loan related subsequent event, Management updated the Goodwill impairment analysis as of December 31, 2023.

As of December 31, 2024, the Company believes the carrying value of its goodwill not to be impaired and other intangible assets to be recoverable.

Accounts Receivable :

The majority of the Company’s investment advisory clients are billed quarterly in arrears based on the daily average balance in the client’s trust or investment accounts for that quarter.

Other Receivables :

Other accounts receivables represents miscellaneous receivables that are not presented separately in the Consolidated Balance Sheets.

Company-Owned Life Insurance :

The Company has purchased life insurance policies on certain current and former officers and key employees.

Company-owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or other amounts due that are probable a t settlement.

Leases represent a contract that conveys the right to control the use of identified property, plant, or equipment (an identified asset) for a period of time in exchange for consideration.

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The landlord/tenant incentives are recorded as a reduction to the right of use asset and depreciated on a straight line basis over the remaining lease term once the assets are placed in service.

Other Real Estate Owned :

Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at fair value, less selling costs, at the date of foreclosure, establishing a new cost basis in the asset.

Physical possession of residential real estate property collateralizing a residential mortgage loan occurs when legal title is obtained upon completion of foreclosure or when the borrower conveys all interest in the property to satisfy the loan through completion of a deed in lieu of foreclosure or through similar legal agreement.

Subsequent to foreclosure, valuations are periodically performed by management, with any subsequent declines in value recorded as a charge to expense through an impairment recorded directly against the other real estate owned assets.

Changes in the valuation allowance are recorded as provision for losses on other real estate owned.

Revenue and expenses from operations related to other real estate owned are included in the Provision on other real estate owned line of the Consolidated Statements of Income.

Company-Owned Life Insurance :

The Company has purchased life insurance policies on certain current and former officers and key employees.

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Derivatives :

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In order to manage the interest rate risk on our uncommitted IRLC and mortgage loans held for sale pipeline, the Company enters into mortgage derivative financial instruments called To Be Announced ("TBA"), which we refer to as forward commitments.

TBA agreements are forward contracts to purchase mortgage backed securities ("MBS") that will be issued by a US Government Sponsored Enterprise.

TBA agreements are forward contracts to purchase mortgage backed securities that will be issued by a US Government Sponsored Enterprise.

The Bank purchases or sells these derivatives to offset the changes in value of our mortgage loans held for sale and IRLC adjusted pipeline where we have exposure to interest rate volatility.

Changes in the fair values of these derivatives are included in the Net gain on mortgage loans line of the Consolidated Statements of Income.

Deposit products include money market accounts, demand deposit accounts, time-deposit accounts (typically certificates of deposit), interest checking accounts, and savings accounts.

Our accounts are federally insured by the FDIC up to the legal maximum amount.

Deposit Concentrations :

Total deposits have some concentration through third party networks or sources.

As of December 31, 2024, $ 963.2 million or 38.3 % of Total deposits were made up of reciprocal deposits and $ 134.5 million or 5.4 % were sourced through deposit brokers.

As of December 31, 2024, 32.0 % of our total deposits consisted of our 10 largest depositors.

Short-term and long-term borrowing sources utilized to supplement deposits and meet liquidity needs.

A blanket pledge and security agreement is in place with FHLB that requires certain loans and securities to be pledged as collateral for any outstanding borrowings under the agreement.

Our borrowing facilities include various financial and other covenants, including, but not limited to, a requirement that the Bank maintains regulatory capital that is deemed "well capitalized" by federal banking agencies.

Bank Term Funding Program :

On March 12, 2023, in response to two large bank failures, the Federal Reserve Board announced it would make additional funding available to eligible depository institutions to help assure banks have the ability to meet the needs of depositors.

The additional funding was made available through the creation of a new Bank Term Funding Program (“BTFP”), offering loans of up to one year in length to banks, savings associations, credit unions, and other eligible depository institutions pledging U.S.

Treasuries, agency debt and mortgage-backed securities, and other qualifying assets valued at par as collateral.

The BTFP was meant to be an additional resource of liquidity against high-quality securities, eliminating an institutions need to quickly sell those securities in times of stress.

See Note 9 – Borrowings for details on the Company’s borrowings.

Loan Commitments and Related Financial Instruments :

Financial instruments include off-balance sheet credit instruments, such as unused lines of credit, commitments to make loans and commercial and standby letters of credit.

The face amount for these items represents the exposure to loss, before considering customer collateral or ability to repay.

Such financial instruments are recorded when they are funded.

Loss Contingencies :

Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated.

Management does not believe there are such matters that will have a material effect on the consolidated financial statements.

Stock-Based Compensation :

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The Company determines the fair value of the restricted and performance stock units as well as restricted stock awards based on the estimated market value of the underlying shares at the date of grant.

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

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Comprehensive income consists of net income and other comprehensive income.

Other comprehensive income includes unrealized gains and losses on securities available-for-sale, net of taxes, which subsequent to being transferred to held-to-maturity securities, are amortized with an offsetting entry to interest income as a yield adjustment through earnings over the remaining term of the securities.

Other comprehensive income includes unrealized gains and losses on securities available-for-sale, net of taxes, which subsequent to being transferred to held-to-maturity debt securities, are amortized with an offsetting entry to interest income as a yield adjustment through earnings over the remaining term of the securities.

Other comprehensive income also includes unrealized gains and losses on cash flow hedges, net of taxes, which are also recognized as a separate component of equity.

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See Note 12 – Earnings Per Common Share for the common share equivalents that have been included and excluded from the calculation of earnings per common share.

Loan Commitments and Related Financial Instruments :

Financial instruments include off-balance sheet credit instruments, such as unused lines of credit, commitments to make loans and commercial and standby letters of credit.

The face amount for these items represents the exposure to loss, before considering customer collateral or ability to repay.

Such financial instruments are recorded when they are funded.

Loss Contingencies :

Management does not believe there are such matters that will have a material effect on the consolidated financial statements.

Deposit products include money market accounts, demand deposit accounts, time-deposit accounts (typically certificates of deposit), NOW accounts (interest checking accounts), and savings accounts.

Our accounts are federally insured by the FDIC up to the legal maximum amount.

Deposit Concentrations :

Total deposits have some concentration through third party networks or sources.

As of December 31, 2023 $ 1.00 billion or 39.6 % of Total deposits were made up of reciprocal deposits and $ 165.4 million or 6.5 % were sourced through deposit brokers.

As of December 31, 2023, 23.9 % of our total deposits consisted of our 10 largest depositors.

Short-term and long-term borrowing sources utilized to supplement deposits and meet liquidity needs.

A blanket pledge and security agreement is in place with FHLB that requires certain loans and securities to be pledged as collateral for any outstanding borrowings under the agreement.

Bank Term Funding Program :

The additional funding has been made available through the creation of a new

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Bank Term Funding Program (“BTFP”), offering loans of up to one year in length to banks, savings associations, credit unions, and other eligible depository institutions pledging U.S.

Treasuries, agency debt and mortgage-backed securities, and other qualifying assets valued at par as collateral.

The BTFP is meant to be an additional resource of liquidity against high-quality securities, eliminating an institutions need to quickly sell those securities in times of stress.

See Note 9 – Borrowings for details on the Company’s borrowings.

Fair Value of Financial Instruments :

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SOFR is based on a broad segment of the overnight Treasury repurchase market and is intended to be a measure of the cost of borrowing cash overnight collateralized by Treasury securities.

On December 21, 2022, the FASB issued Accounting Standards Update (ASU) 2022-06, Reference Rate Reform

On December 21, 2022, the FASB issued Accounting Standards Update (ASU) 2022-06, Reference Rate Reform (Topic 848):

Deferral of the Sunset Date of Topic 848.

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ASU 2022-06 extends the period of time financial statement preparers can utilize the reference rate reform relief guidance through December 31, 2024.

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Certain of the Company’s assets and liabilities are indexed to LIBOR, with exposure extending beyond December 31, 2023.

In general, the transition away from LIBOR may result in increased market risk, credit risk, operational risk, and business risk for the Company.

The Company developed a LIBOR transition plan, which addressed governance, risk management, legal, operational, systems, fallback language, and other aspects of planning.

The company no longer originates LIBOR indexed loans and has transitioned existing LIBOR loans to SOFR.

As of December 31, 2023, all loans indexed to LIBOR have been converted to the new index.

The Company completed a LIBOR transition plan, which addressed governance, risk management, legal, operational, systems, fallback language, and other aspects of planning.

The Company no longer originates LIBOR indexed loans and a s of December 31, 2023, all loans indexed to LIBOR were converted to the new index.

Consumer indexed loans are being managed in accordance with Interagency Guidance.

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The following reflect recent accounting pronouncements that have been adopted by the Company during the Company’s fiscal year ended December 31, 2024.

In March 2022, the FASB issued ASU 2022-02, Financial Instruments – Credit Losses (Topic 326);

Troubled Debt Restructurings (“TDR”) and Vintage Disclosures.

This ASU was effective for the Company on January 1, 2023.

The amendments eliminate the TDR recognition and measurement guidance and instead require an entity to evaluate whether the modification represents a new loan or a co ntinuation of an existing loan (consistent with accounting for other modifications).

The amendments also enhance existing disclosure requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty.

The Company adopted ASU 2022-02 on January 1, 2023.

Refer to Note 4 – Loans and the Allowance for Credit Losses for additional information on the required disclosures.

On January 1, 2023, the Company adopted ASU 2016-13, Financial Instruments—Credit Losses (Topic 326 - Measurement of Credit Losses on Financial Instruments, as amended) ("ASU 2016-13").

ASU 2016-13 replaces the incurred loss model with an expected loss model, which is referred to as the current expected credit loss ("CECL") methodology.

The CECL methodology is applicable to the measurement of credit losses on the financial assets measured at amortized cost, including loan receivables, available for sale debt securities, and held-to-maturity debt securities.

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

The Company adopted ASU 2016-13 on January 1, 2023 using the modified retrospective method with no adjustments to prior period comparative financial statements for all financial assets measured at amortized cost and off-balance sheet credit exposure as well as held to maturity securities.

In accordance with the standard, management did not reassess whether modifications to individual acquired financial assets accounted for in pools were troubled debt restructurings as of the date of adoption.

Upon adoption the Company recorded a decrease to retained earnings of $ 5.3 million, net of tax.

The total transition adjustment prior to the tax impact included $ 3.5 million related to allowance for credit losses on loans, $ 3.5 million related to off-balance sheet commitments, and $ 0.1 million related to held-to-maturity securities.

Results for reporting periods beginning on or after January 1, 2023 are presented under ASU 2016-13 while prior period amounts continue to be reported in accordance with previously applicable GAAP.

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

(dollars in thousands) Balance at January 1, 2023 (before adjustment) Cumulative effect adjustment amount Balance January 1, 2023 (after adjustment)

Allowance for credit losses:

loans $ ( 17,183 ) $ ( 3,470 ) $ ( 20,653 )

Allowance for credit losses:

held-to-maturity securities — ( 71 ) ( 71 )

Deferred tax assets, net 6,914 1,703 8,617

Allowance for credit losses on off-balance sheet exposures 419 3,481 3,900

Shareholders’ equity

Retained earnings, net of tax 51,887 ( 5,319 ) 46,568

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On November 27, 2023, the FASB issued ASU 2023-07 Segment Reporting - Improvements to Reportable Segment Disclosures, which provided additional transparency into a company's reportable segments’ significant expenses on an interim and annual basis.

This guidance was effective for companies with fiscal years beginning after December 14, 2023 and interim periods with fiscal years beginning after December 15, 2024.

The Company adopted ASU 2023-07 on January 1, 2024 on a retrospective approach.

Refer to Note 18 - Segment Reporting for additional information.

Recently issued accounting pronouncements, not yet adopted :

The following reflects recently issued accounting pronouncements and the impact thereof to the Company.

On August 23, 2023 the FASB issued ASU 2023-05 Business Combinations - Joint Venture Formations (Subtopic 805-60) Recognition and Initial Measurement.

This ASU applies to the formation of entities that meet the definition of a joint venture (or a corporate joint venture) as defined in the FASB Accounting Standards Codification Master Glossary.

While joint ventures are defined in the Master Glossary, there has been no specific guidance in the Codification that applies to the formation accounting by a joint venture in its separate financial statements.

The amendments in the ASU require that a joint venture apply a new basis of accounting upon formation.

As a result, a newly formed joint venture, upon formation, would initially measure its assets and liabilities at fair value (with exceptions to fair value measurement that are consistent with the business combinations guidance).

The Company does not presently have any joint ventures that would be impacted but will evaluate as needed.

On March 29, 2023 the FASB issued ASU 2023-02 Investments in Tax Structures which changes the accounting methodology to allow proportional amortization method to be expanded beyond investments in low income tax housing tax credits (“LIHTC”) structures.

This guidance is effective January 1, 2024 and currently the Company does not have any investments that would be impacted but will evaluate as other investments are considered as early adoption is permitted.

On November 27, 2023, the FASB issued ASU 2023-07 Segment Reporting - Improvements to Reportable Segment Disclosures, which provides additional transparency into a company's' reportable segments’ significant expenses on an interim and annual basis.

This guidance is effective for companies with fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024.

Companies must adopt the changes to the segment reporting guidance on a retrospective basis.

Early adoption is permitted.

The Company expects to adopt this standard beginning with its first quarter ending March 31, 2024.

The Company is currently evaluating these new disclosure requirements and does not expect the adoption to have a material impact.

On December 14, 2023, the FASB issued ASU 2023-09 Income Taxes - Improvements to Income Tax Disclosures, which enhances a company's income tax disclosures to include additional information related to rate reconciliations and income taxes paid.

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The Company is currently evaluating these new disclosure requirements and does not expect the adoption to have a material impact.

NOTE 2 – INVESTMENT SECURITIES

The following presents the amortized cost, fair value, and allowance for credit losses of securities held-to-maturity and the corresponding amounts of gross unrecognized gains and losses as of the date noted (dollars in thousands):

On November 4, 2024, the FASB issued ASU 2024-03 Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures, which requires companies to disclose additional information about certain expenses.

This guidance is effective for companies with fiscal years beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027.

Early adoption is permitted.

The Company expects to adopt this standard beginning January 1, 2027.

The Company is currently evaluating these new disclosure requirements and does not expect the adoption to have a material impact.

NOTE 2 – DEBT SECURITIES

The following presents the amortized cost, fair value, and allowance for credit losses of debt securities held-to-maturity and the corresponding amounts of gross unrecognized gains and losses as of the date noted (dollars in thousands):

December 31, 2024 Amortized

Value Allowance for Credit Losses

Investment securities held-to-maturity:

Debt securities held-to-maturity:

Treasury debt $ 246 $ — $ ( 4 ) $ 242 $ —

Corporate bonds 23,578 — ( 2,801 ) 20,777 ( 71 )

GNMA mortgage-backed securities – residential 34,579 — ( 3,410 ) 31,169 —

FNMA mortgage-backed securities – residential 6,035 — ( 509 ) 5,526 —

Government CMO and MBS - commercial 5,836 9 ( 377 ) 5,468 —

Government National Mortgage Association ("GNMA") MBS – residential

31,361 — ( 3,383 ) 27,978 —

Federal National Mortgage Association ("FNMA") MBS – residential

12,011 — ( 689 ) 11,322 —

Government collateralized mortgage obligations ("GMO") and MBS – commercial 5,075 5 ( 483 ) 4,597 —

Corporate CMO and MBS 3,524 — ( 279 ) 3,245 —

Total debt securities held-to-maturity

$ 75,795 $ 5 $ ( 7,639 ) $ 68,161 $ ( 71 )

Total securities held-to-maturity $ 74,173 $ 9 $ ( 7,565 ) $ 66,617 $ ( 71 )

(1) Refer to Note 1 – Organization and Summary of Significant Accounting Policies for further information on our credit loss methodology.

(2) Management reviewed the collectability of corporate CMO and MBS securities taking into consideration such factors as the asset quality of the corporate bond issuers and credit support and delinquencies associated with the corporate CMO and MBS.

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December 31, 2023 Amortized

Investment securities held-to-maturity:

Treasury debt $ 243 $ — $ ( 9 ) $ 234

Corporate bonds 23,819 — ( 2,453 ) 21,366

GNMA mortgage-backed securities – residential 39,426 — ( 2,800 ) 36,626

FNMA mortgage-backed securities – residential 6,708 — ( 506 ) 6,202

Government CMO and MBS - commercial 6,786 13 ( 403 ) 6,396

Corporate CMO and MBS 4,074 — ( 180 ) 3,894

Total securities held-to-maturity $ 81,056 $ 13 $ ( 6,351 ) $ 74,718

Net amortization of premiums and discounts related to mortgage securities during each of the years ended December 31, 2023 and 2022 totaled an immaterial amount and $ 0.1 million, respectively, and is included in Net interest income in the Consolidated Statements of Income.

The following presents securities with unrecognized losses aggregated by major security type and length of time in a continuous unrecognized loss position as of the date noted (dollars in thousands, before tax):

Less than 12 Months 12 Months or Longer Total

December 31, 2022 Fair

Value Unrecognized

Investment securities held-to-maturity:

Value Allowance for Credit Losses

Debt securities held-to-maturity:

Treasury debt $ 253 $ — $ ( 11 ) $ 242 $ —

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FNMA mortgage-backed securities – residential 6,035 — ( 509 ) 5,526 —

Government CMO and MBS - commercial 5,591 ( 403 ) — — 5,591 ( 403 )

Government GMO and MBS – commercial 5,836 9 ( 377 ) 5,468 —

Corporate CMO and MBS 3,783 — ( 238 ) 3,545 —

Total $ 58,574 $ ( 4,543 ) $ 15,339 $ ( 1,808 ) $ 73,913 $ ( 6,351 )

The Company reassessed classification of investment securities and, effective April 1, 2022, elected to transfer all securities, fair valued at $ 58.7 million, from available-for-sale to held-to-maturity.

The related unrealized loss of $ 2.3 million included in other comprehensive income on April 1, 2022 remained in other comprehensive income and is being amortized out with an offsetting entry to interest income as a yield adjustment through earnings over the remaining term of the securities.

No gain or loss was recorded at the time of transfer.

As of December 31, 2023, the amortized cost and estimated fair value of held-to-maturity securities have contractual maturity dates shown in the table below (dollars in thousands).

Total debt securities held-to-maturity

$ 74,173 $ 9 $ ( 7,565 ) $ 66,617 $ ( 71 )

Net accretion of premiums and discounts related to held-to-maturity debt securities during each of the years ended December 31, 2024 and 2023 totaled $ 0.1 million and $ 0.0 million, respectively, and is included in Net interest income in the Consolidated Statements of Income.

As of December 31, 2024, the amortized cost and estimated fair value of held-to-maturity debt securities have contractual maturity dates shown in the table below (dollars in thousands).

Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

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Total $ 75,795 $ 68,161

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During year ended December 31, 2022, the Company committed $ 6.0 million in total to two bank technology funds.

During the year ended December 31, 2023, the Company made $ 0.8 million in contributions to both partnerships and received a $ 0.1 million return on investment.

During the year ended December 31, 2022, the Company made $ 1.3 million in contributions to both partnerships and received a $ 0.1 million return on investment.

As of December 31, 2023, the Company held a balance of $ 2.0 million which is included in Other assets in the accompanying Consolidated Balance Sheets.

In 2022, the Company committed $ 6.0 million in total to two bank technology funds.

During the year ended December 31, 2024 and 2023, the Company made $ 0.5 million and $ 0.8 million in contributions to the partnerships, respectively.

During the year ended December 31, 2024 and 2023, the Company received a $ 0.3 million and $ 0.1 million return on investment from the partnerships, respectively.

As of December 31, 2024 and 2023, the Company held a balance of $ 2.5 million and $ 2.0 million, respectively, which is included in Other assets in the accompanying Consolidated Balance Sheets.

The Company may be obligated to invest up to an additional $ 3.5 million in future contributions.

In 2014, the Company began investing in a small business investment company ("SBIC") fund administered by the Small Business Administration.

The Company made $ 0.2 million in contributions to the SBIC fund during the year ended December 31, 2023.

During the year ended December 31, 2022, the Company did not make any contributions to the SBIC fund and received a $ 0.1 million return of capital.

The Company made $ 0.2 million and $ 0.2 million in contributions to the SBIC fund during the years ended December 31, 2024 and 2023, respectively.

As of December 31, 2024 and 2023, the Company held a balance of $ 2.4 million and $ 2.2 million, respectively, in the SBIC fund, which is included in Other assets in the accompanying Consolidated Balance Sheets.

The Company may be obligated to invest up to an additional $ 0.6 million in future SBIC investments.

As of December 31, 2023, securities with market values totaling $ 45.1 million were pledged to secure various public deposits and credit facilities of the Company, including $ 39.3 million pledged under the BTFP program (refer to Note 1 – Organization and Summary of Significant Accounting Policies for more information on the BTFP program).

As of December 31, 2022, securities with carrying values of $ 22.6 million were pledged to secure various public deposits and credit facilities of the Company.

As of December 31, 2023, there were no holdings of securities of any one issuer in an amount greater than 10 % of shareholders’ equity.

As of December 31, 2022, there were no holdings of securities of any one issuer, other than the U.S.

As of December 31, 2024, securities with market values totaling $ 31.1 million were pledged to secure various public deposits and credit facilities of the Company.

As of December 31, 2023, securities with carrying values of $ 45.1 million were pledged to secure various public deposits and credit facilities of the Company, including $ 39.3 million pledged under the BTFP program (refer to Note 1 – Organization and Summary of Significant Accounting Policies for more information on the BTFP program).

As of December 31, 2024 and 2023, there were no holdings of debt securities of any one issuer, other than the U.S.

Government sponsored entities and agencies, in an amount greater than 10 % of shareholders’ equity.

The Company did not sell any securities during the years ended December 31, 2024 or 2023.

Allowance for Credit Losses for HTM Securities

Allowance for Credit Losses for HTM Debt Securities

Management measures expected credit losses on Held-to-maturity debt securities on a collective basis by major security type.

The majority of our held-to-maturity investment portfolio consists of securities issues by U.S.

The majority of our held-to-maturity investment portfolio consists of securities issued by U.S.

government entities and agencies and we consider the risk of credit loss to be zero and, therefore, we do not record an ACL.

The Company's non-government backed securities include private label CMO and MBS and bank subordinated debt.

The Company's non-government backed securities are paying within the agreed upon terms and there are no securities on non-accrual status.

Accrued interest receivable on held-to-maturity debt securities totaled $ 0.4 million at December 31, 2023 and is excluded from the estimate of credit losses.

The Company's non-government backed debt securities include private label CMO and MBS and corporate bonds.

Accrued interest receivable on held-to-maturity debt securities totaled $ 0.3 million and $ 0.4 million at December 31, 2024 and 2023, respectively, and and is excluded from the estimate of credit losses.

Refer to Note 1 – Organization and Summary of Significant Accounting Policies for additional information on the Company’s methodology on estimating credit losses.

The following table presents the activity in the allowance for credit losses for debt securities held-to-maturity by major security type for the year ended December 31, 2023:

December 31, 2023 Corporate Bonds Corporate CMO (1)

The following table presents the activity in the allowance for credit losses for Held-to-maturity debt securities by major security type for the years ended:

Year Ended December 31,

(dollars in thousands) Corporate Bonds Corporate CMO Corporate Bonds Corporate CMO

Allowance for credit losses:

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Total ending allowance balance $ 71 $ — $ 71 $ —

(1) Management reviewed the collectability of corporate CMO and MBS securities taking into consideration such factors as the asset quality of the corporate bond issuers and credit support and delinquencies associated with the corporate CMO and MBS.

(2) Refer to Note 1 – Organization and Summary of Significant Accounting Policies for further information on our credit loss methodology

The Company monitors the credit quality of held-to-maturity securities on a quarterly basis.

As of December 31, 2023, there were no held-to-maturity securities past due or on non-accrual .

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The Company monitors the credit quality of held-to-maturity debt securities on a quarterly basis.

As of December 31, 2024, there were no held-to-maturity debt securities past due or on non-accrual.

NOTE 3 – CORRESPONDENT BANK STOCK

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The following table presents a summary of the Company’s loans at amortized cost as of the dates noted:

(Dollars in thousands) December 31,

2023 December 31,

(dollars in thousands) 2024 2023

Cash, Securities and Other $ 119,834 $ 139,947

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Allowance for credit losses ( 18,330 ) ( 23,931 )

( 23,931 ) ( 17,183 )

Total, net 2,399,952 2,493,258

Loans accounted for under the fair value option (1)

13,726 23,321

Loans, net $ 2,407,235 $ 2,506,984

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(1) Allowance for credit loss amounts for periods prior to the ASC 326 adoption date of January 1, 2023 are reported in accordance with previously applicable GAAP.

(1) Includes $ 7.5 million and $ 14.1 million of unpaid principal balance of loans held for investment measured at fair value as of December 31, 2024 and December 31, 2023 respectively.

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As of December 31, 2023, the Cash, Securities, and Other portion of the loan portfolio included $ 4.2 million of PPP loans, or 3.0 % of the total category.

As of December 31, 2023, the Company’s Commercial and Industrial loans included three Main Street Lending Program (“MSLP”) loans with the net carrying amount of $ 5.1 million, or 1.5 % of the total category.

Two of these loans are risk rated Substandard with one of those on non-accrual after a modification was completed during the fourth quarter of 2023.

The remaining MSLP loan is risk rated Pass.

As of December 31, 2022, the Company’s Commercial and Industrial loans included five MSLP loans with the net carrying amount of $ 5.9 million, or 1.6 % of the total category.

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Loan Modifications

On January 1, 2023 the Company adopted ASU 2022-02, which introduces new reporting requirements for modifications of loans to borrowers experiencing financial difficulty.

GAAP requires that certain types of modifications of loans in response to a borrower’s financial difficulty be reported and include the following;

(i) principal forgiveness, (ii) interest rate reduction, (iii) other than insignificant payment delay, (iv) term extension, or (v) any combination of the foregoing.

ASU 2022-02 eliminates the recognition measurement guidance for troubled debt restructured ("TDR") loans, and instead requires an entity to evaluate whether a modification represents a new loan or a continuation of an existing loan in accordance with ASC Topic 310-20, Receivables - Nonrefundable Fees and Other Costs.

If a modification results in a new loan under the guidance, the Company will recognize any unearned deferred net revenue and measure the ACL on the loan on a collective basis rather than individually analyzed.

In 2021, the deferral period ended for all non-acquired loans previously modified and payments have resumed under the original terms.

As of December 31, 2023, the Company’s loan portfolio included 41 non-acquired loans which were previously modified under the loan modification program, totaling $ 71.3 million.

Through the Teton Acquisition, the Company acquired loans which were previously modified and are still in their deferral period.

As of December 31, 2023, there were 14 of these loans, totaling $ 2.9 million.

All loans modified in response to COVID-19 are classified as performing and pass rated as of December 31, 2023.

These loans are included in the allowance for credit loss general reserve in accordance with ASU 2016-13.

Management continues to focus on loan level reviews and portfolio monitoring to address the changing environment.

Management believes the diversity of the loan portfolio is prudent and remains consistent with the credit culture and goals of the Bank.

Interest accrued during the modification term on modified loans is deferred to the end of the loan term.

Accrued interest receivable is excluded from the estimate of credit losses.

As of December 31, 2024, the Company’s Commercial and Industrial loans included one Main Street Lending Program (“MSLP”) loan with a net carrying amount of $ 1.7 million, or 0.8 % of the total category.

This MSLP loan is risk rated pass.

As of December 31, 2023, the Company’s Commercial and Industrial loans included three MSLP loans with the net carrying amount of $ 5.1 million, or 1.5 % of the total category.

The following presents, by class, an aging analysis of the amortized cost basis in loans past due as of the date noted (dollars in thousands):

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Total $ 9,320 $ — $ 12,574 $ 21,894 $ 2,396,388 $ 2,418,282 $ 7,283 $ 2,425,565

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December 31, 2023 30-59

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Total $ 21,074 $ 2,672 $ 45,090 $ 68,836 $ 2,448,353 $ 2,517,189 $ 13,726 $ 2,530,915

_____________________________

(1) Refer to Note 16 – Fair Value for additional information on the measurement of loans accounted for under the fair value option.

As of December 31, 2024, the Company did not have any loans more than 90 days delinquent and accruing interest.

As of December 31, 2023, the Company had one loan, totaling $ 0.3 million, in the 1-4 Family Residential portfolio that was more than 90 days delinquent and accruing interest.

As of December 31, 2022, the Company had one loan, totaling an immaterial amount, in the Commercial and Industrial portfolio that was more than 90 days delinquent and accruing interest.

The following table presents the amortized cost basis as of December 31, 2023 of the loans modified to borrowers experiencing financial difficulty disaggregated by class of financing receivable and type of concession granted during the year ended December 31, 2023.

The percentage of the amortized cost basis of loans that were modified to borrowers in financial distress as compared to the amortized cost basis of each class of financing receivable is also presented below.

Loan Modifications

GAAP requires that certain types of modifications of loans in response to a borrower’s financial difficulty be reported and include the following;

(i) principal forgiveness, (ii) interest rate reduction, (iii) other than insignificant payment delay, (iv) term extension, or (v) any combination of the foregoing.

The following table presents the amortized cost basis as of December 31, 2024 of loans modified to borrowers experiencing financial difficulty disaggregated by class of financing receivable and type of concession granted during the year ended December 31, 2024:

(dollars in thousands) Principal forgiveness Interest rate reduction Term extension Combination:

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Total $ — $ — $ 967 $ — $ —

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The following table presents the financial effect by type of modification made to borrowers experiencing financial difficulty for the period ended December 31, 2023:

Principal forgiveness Interest rate reduction Term extension

Commercial and Industrial Reduced the amortized cost basis of the loan by $ 185 thousand

Added a weighted-average 2.8 years to the life of the loan, which reduced monthly payment amounts for the borrower

Commercial and Industrial — —

Six months of interest payments were deferred to the maturity of the loan.

Principal payment of $ 988 thousand was deferred 0.6 years

The following table presents the amortized cost basis as of December 31, 2023 of loans modified to borrowers experiencing financial difficulty disaggregated by class of financing receivable and type of concession granted during the year ended December 31, 2023:

(dollars in thousands) Principal forgiveness Interest rate reduction Term extension Combination:

term extension and principal forgiveness Combination:

term extension and interest rate reduction Total class of financing receivable

Commercial and Industrial $ — $ — $ 2,123 $ 183 $ — 0.7 %

Added a weighted-average 0.5 years to the life of the loan

For all loans that have been modified during the period, the borrowers continue to pay as agreed.

Total $ — $ — $ 2,123 $ 183 $ —

The following table present the financial effect by type of modification made to borrowers experiencing financial difficulty during the periods noted:

Year Ended December 31,

(dollars in thousands) Principal forgiveness Weighted average interest rate reduction Weighted average term extension Principal forgiveness Weighted average interest rate reduction Weighted average term extension

Commercial and Industrial — — 5 months $ 185 — 9 months

There were no loans that experienced a default during the years ended December 31, 2024 and 2023, subsequent to being granted a modification in the preceding twelve months.

In 2021, the deferral period ended for all non-acquired loans previously modified and payments have resumed under the original terms.

As of December 31, 2024 and 2023, the Company’s loan portfolio included 36 and 41 non-acquired loans, respectively, which were previously modified under the loan modification program, totaling $ 56.4 million and $ 71.3 million, respectively.

Through the Teton Acquisition, the Company acquired loans which were previously modified.

As of December 31, 2024 and 2023, there were 11 and 14 of these loans, respectively, totaling $ 2.5 million and $ 2.9 million, respectively.

All loans modified in response to COVID-19 are classified as performing and pass rated as of December 31, 2024.

These loans are included in the allowance for credit loss general reserve in accordance with ASU 2016-13.

Non-Accrual Loans

2 unchanged sentences

In all cases, loans are placed on non-accrual status or charged off if collection of interest or principal is considered doubtful.

The following presents the amortized cost basis of loans on non-accrual status and loans past due over 89 days still accruing by class as of the date noted (dollars in thousands).

The following presents the amortized cost basis of loans on non-accrual status and loans past due over 89 days still accruing by class as of the date noted:

December 31, 2024

2 unchanged sentences

Cash, Securities, and Other $ 1,704 $ 1,704 $ —

Consumer and Other 4 7,504 —

Construction and Development 2,719 2,719 —

1-4 Family Residential 578 3,016 285

Owner Occupied CRE — 3,980 —

Commercial and Industrial 10,870 11,048 —

Total $ 12,574 $ 12,752 $ —

_____________________________

(1) As of December 31, 2024, the Company had an allowance of $ 0.1 million on non-performing loans.

The following presents the recorded investment in non-accrual loans by class as of the date noted (dollars in thousands):

Cash, Securities and Other $ 4

Consumer and Other 146

Construction and Development 201

Owner Occupied CRE 1,165

Commercial and Industrial 10,833

Total $ 12,349

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The following presents impaired loans by portfolio and related valuation allowance as of the periods presented (in thousands):

December 31, 2023

Investment Unpaid

Balance Allowance

Impaired loans with no related valuation allowance:

(dollars in thousands) Non-accrual loans with no ACL Total non-accrual loans (1)

Loans past due over 89 days still accruing

Cash, Securities, and Other $ 1,704 $ 1,704 $ —

Consumer and Other 4 7,504 —

Construction and Development 2,719 2,719 —

3 unchanged sentences

Total $ 7,360 $ 50,816 $ 285

Total impaired loans:

____________________________

(1) As of December 31, 2023, the Company had an allowance of $ 3.8 million on non-performing loans.

The Company recognized $ 0.0 million and $ 0.2 million of interest income on non-accrual loans during the years ended December 31, 2024 and 2023, respectively.

Collateral Dependent Loans

A loan is considered collateral dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral.

The following presents the amortized cost basis of collateral-dependent loans, which are individually evaluated to determine expected credit losses, by class of loans as of the date noted:

As of December 31, 2024

Collateral Dependent Loans

(dollars in thousands) Secured by Real Estate Secured by Cash and Securities Secured by Other Total

Cash, Securities, and Other $ — $ 1,704 $ — $ 1,704

Consumer and Other — — —

Construction and Development 201 201 —

Commercial and Industrial — — 12,015 12,015

1-4 Family Residential — — —

Owner Occupied CRE 1,165 1,165 —

Total $ — $ 1,704 $ 12,015 $ 13,719

The Company recognized $ 0.2 million of interest income on non-accrual loans during the year ended December 31, 2023.

The Company recognized an immaterial amount of interest income on non-accrual loans during the year ended December 31, 2022.

Non-accrual loans, excluding loans held for investment measured at fair value, are classified as collateral dependent loans and are individually evaluated.

The following presents the amortized cost basis of collateral-dependent loans, which are individually evaluated to determine expected credit losses, by class of loans as of the date noted (dollars in thousands):

As of December 31, 2023

8 unchanged sentences

Total $ 9,715 $ 1,704 $ 39,393 $ 50,812

The Company recorded $ 8.8 million and $ 0.2 million of charge-offs, net of recoveries, during the year ended December 31, 2023 and December 31, 2022, respectively.

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Allowance for Credit Losses

Beginning January 1, 2023, the allowance for credit losses for loans is measured on the loan’s amortized cost basis, excluding interest receivable.

Interest receivable excluded at December 31, 2023 and December 31, 2022 was $ 10.8 million and $ 9.8 million, respectively, presented in Accrued interest receivable on the Consolidated Balance Sheets.

Other Real Estate Owned

Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis.

They are subsequently accounted for at lower of cost or fair value less estimated costs to sell.

Fair value is commonly based on recent real estate appraisals which are updated no less frequently than on an annual basis.

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

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

In the year ended December 31, 2024, the Company recorded $ 37.0 million of OREO as a result of obtaining physical possession of foreclosed properties as partial consideration for amounts owed on non-performing loans related to an isolated loan relationship.

During the quarter ended December 31, 2024, the Company recorded an OREO provision of $ 1.1 million.

As of December 31, 2024, these OREO properties had a carrying amount of $ 35.9 million.

As of December 31, 2023, the Company did not own any OREO properties.

Operating expenses related to OREO were $ 0.2 million and $ 0.0 million for the years ended December 31, 2024 and 2023, respectively.

As of December 31, 2024 and 2023, there were no loans secured by real estate in the process of foreclosure.

Allowance for Credit Losses on Loans

The Allowance for credit losses for loans is measured on the loan’s amortized cost basis, excluding interest receivable.

Interest receivable excluded at December 31, 2024 and 2023 was $ 9.8 million and $ 10.8 million, respectively, presented in Accrued interest receivable on the Consolidated Balance Sheets.

Refer to Note 1 – Organization and Summary of Significant Accounting Policies for additional information related to the Company’s methodology on estimated credit losses.

The Allowance for credit losses on loans (“ACL”) represents Management’s best estimate of current expected credit losses on loans considering available information, from internal and external sources, relevant to assessing collectibility over the loans’ contractual terms, adjusted for expected prepayments when appropriate.

Our quantitative discounted cash flow models use economic forecasts including;

The Allowance for credit losses for loans represents Management’s best estimate of current expected credit losses on loans considering available information, from internal and external sources, relevant to assessing collectability over the loans’ contractual terms, adjusted for expected prepayments when appropriate.

Our quantitative discounted cash flow models use twelve-month economic forecasts including;

housing price index (“HPI”), gross domestic product (“GDP”), and national unemployment.

The HPI, GDP, and unemployment twelve month forecasts used in our model as of December 31, 2023 is based on a slightly improved macro-economic forecast assuming a soft landing as compared to assumptions previously used as of January 1, 2023 projecting the likelihood of a deeper recession.

As a result, we forecasted decreased probability of default rates and loss given default rates which in turn reduced our model loss rates, partially offset by loan growth and changes in our segment mix, resulting in a $ 0.5 million release of provision on pooled loans for the year ended December 31, 2023.

The allowance on credit losses on non-performing loans was $ 3.8 million as of December 31, 2023.

The $ 5.6 million decrease in Allowance for credit losses during the year ended December 31, 2024 was predominately due to net pay downs in the loan portfolio, modest HPI, GDP, and unemployment forecast improvements, and the migration of one loan relationship out of non-performing loans and into OREO, pay downs, and charge-offs.

Allocation of a portion of the allowance for credit losses to one category of loans does not preclude its availability to absorb losses in other categories.

The following table presents the gross loan activity in the allowance for credit losses by portfolio segment during the periods presented (dollars in thousands):

Cash, Securities and Other Consumer and Other Construction and Development 1-4 Family Residential Non-Owner Occupied CRE Owner Occupied CRE Commercial and Industrial Total

The following table presents the gross loan activity in the allowance for credit losses by portfolio segment during the periods presented:

(dollars in thousands) Cash, Securities and Other Consumer and Other Construction and Development 1-4 Family Residential Non-Owner Occupied CRE Owner Occupied CRE Commercial and Industrial Total

Changes in allowance for credit losses for the year ended December 31, 2024:

Beginning balance, prior to the adoption of ASU 2016-13 $ 1,198 $ 191 $ 2,025 $ 6,309 $ 3,490 $ 1,510 $ 2,460 $ 17,183

Impact of adopting ASU 2016-13 193 106 4,681 ( 2,808 ) ( 689 ) ( 104 ) 2,091 3,470

Provision (release) for credit losses ( 430 ) ( 94 ) 1,239 856 ( 476 ) ( 372 ) 11,354 12,077

Beginning balance $ 961 $ 124 $ 7,945 $ 4,370 $ 2,325 $ 1,034 $ 7,172 $ 23,931

(Release of) provision for credit losses ( 551 ) 82 ( 2,761 ) 824 2,015 ( 380 ) 4,210 3,439

Charge-offs — ( 50 ) — — — — ( 9,352 ) ( 9,402 )

1 unchanged sentence

Ending balance $ 410 $ 185 $ 5,184 $ 5,200 $ 4,340 $ 654 $ 2,357 $ 18,330

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(dollars in thousands) Cash,

and Other Consumer and Other Construction

3 unchanged sentences

Industrial Total

Changes in allowance for loan losses for the year ended December 31, 2022 (1) :

Beginning balance $ 1,598 $ 266 $ 1,092 $ 3,553 $ 2,952 $ 1,292 $ 2,979 $ 13,732

(Recovery of)/provision for loan losses ( 399 ) 84 933 2,756 538 218 ( 448 ) 3,682

Changes in allowance for credit losses for the year ended December 31, 2023:

Beginning balance, prior to the adoption of ASU 2016-13 $ 1,198 $ 191 $ 2,025 $ 6,309 $ 3,490 $ 1,510 $ 2,460 $ 17,183

Impact of adopting ASU 2016-13 193 106 4,681 ( 2,808 ) ( 689 ) ( 104 ) 2,091 3,470

(Release of) provision for credit losses ( 430 ) ( 94 ) 1,239 856 ( 476 ) ( 372 ) 11,354 12,077

Charge-offs — ( 101 ) — — — — ( 8,737 ) ( 8,838 )

1 unchanged sentence

Ending balance $ 961 $ 124 $ 7,945 $ 4,370 $ 2,325 $ 1,034 $ 7,172 $ 23,931

Allowance for loan losses as of December 31, 2022 allocated to loans evaluated for impairment (1) :

Individually $ — $ — $ — $ — $ — $ — $ — $ —

Collectively 1,198 191 2,025 6,309 3,490 1,510 2,460 17,183

Ending balance $ 1,198 $ 191 $ 2,025 $ 6,309 $ 3,490 $ 1,510 $ 2,460 $ 17,183

Loans as of December 31, 2022, evaluated for impairment (1) :

Individually $ 4 $ — $ 201 $ — $ — $ 1,165 $ 10,833 $ 12,203

Collectively 165,666 26,539 288,296 898,154 496,776 214,891 350,195 2,440,517

Measured at fair value — 23,415 — — — — — 23,415

Ending balance $ 165,670 $ — $ 49,954 $ — $ 288,497 $ — $ 898,154 $ — $ 496,776 $ — $ 216,056 $ — $ 361,028 $ — $ 2,476,135

(1) The allowance for credit losses for periods prior to the ASU 2016-13 adoption date of January 1, 2023 are reported in accordance with previously applicable GAAP which presented loan balances gross rather than amortized cost.

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Credit Quality Indicators

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Loans accounted for under the fair value option are not rated.

The following table presents the amortized cost basis of loans by credit quality indicator, by class of financing receivable, and year of origination for term loans as of December 31, 2023.

The following tables present the amortized cost basis of loans by credit quality indicator, by class of financing receivable, and year of origination for term loans as of December 31, 2024 and 2023.

For revolving lines of credit that converted to term loans, if the conversion involved a credit decision, such loans are included in the origination year in which the credit decision was made.

If revolving lines of credit converted to term loans without a credit decision, such lines of credit are included in the “Revolving lines of credit converted to term” column in the following table.

Term Loans Amortized Cost by Origination Year

5 unchanged sentences

Doubtful — — — — — — — —

Not rated — — — — — — — —

Total Cash, Securities, and Other $ 11,564 $ 6,123 $ 3,649 $ 13,157 $ 5,143 $ 13,912 $ 66,286 $ 119,834

6 unchanged sentences

Not rated (1)

1 — 6,215 940 71 56 — 7,283

Total Consumer and Other $ 3,588 $ 4 $ 7,733 $ 1,295 $ 451 $ 604 $ 11,090 $ 24,765

1 unchanged sentence

Construction and Development

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Pass $ 48,872 $ 58,224 $ 191,874 $ 992 $ 9,395 $ — $ 839 $ 310,196

2 unchanged sentences

Doubtful — — — — — — — —

Not rated — — — — — — — —

Total Construction and Development $ 49,341 $ 62,040 $ 191,874 $ 992 $ 9,395 $ — $ 839 $ 314,481

5 unchanged sentences

Doubtful — — — — — — — —

Not rated — — — — — — — —

Total 1-4 Family Residential $ 98,612 $ 89,537 $ 351,026 $ 126,116 $ 104,427 $ 63,930 $ 129,253 $ 962,901

Current year-to-date gross write-offs $ — $ — $ — $ — $ — $ — $ — $ —

Term Loans Amortized Cost by Origination Year

December 31, 2024 2024 2023 2022 2021 2020 Prior Revolving Loans Amortized Cost Basis Total

Non-Owner Occupied CRE

3 unchanged sentences

Doubtful — — — — — — — —

Not rated — — — — — — — —

Total Non-Owner Occupied CRE $ 48,445 $ 42,527 $ 260,055 $ 101,067 $ 70,896 $ 57,676 $ 30,573 $ 611,239

5 unchanged sentences

Doubtful — — — — — — — —

Not rated — — — — — — — —

Total Owner Occupied CRE $ 4,177 $ 3,126 $ 46,130 $ 41,663 $ 29,402 $ 45,640 $ 1,881 $ 172,019

5 unchanged sentences

Doubtful — — — — — — — —

Not rated — — — — — — — —

Total Commercial and Industrial $ 22,889 $ 10,375 $ 60,833 $ 11,324 $ 9,857 $ 38,108 $ 66,940 $ 220,326

6 unchanged sentences

Total $ 238,616 $ 213,732 $ 921,300 $ 295,614 $ 229,571 $ 219,870 $ 306,862 $ 2,425,565

_____________________________

(1) Includes loans held for investment measured at fair value as of December 31, 2024.

Includes fair value adjustments on loans held for investment

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accounted for under the fair value option.

The following presents, by class and by credit quality indicator, the recorded investment in the Company’s loans as of the date noted (dollars in thousands):

December 31, 2022 Pass Special

Mention Substandard Not Rated Total

Includes fair value adjustments on loans held for investment accounted for under the fair value option.

Term Loans Amortized Cost by Origination Year

December 31, 2023 2023 2022 2021 2020 2019 Prior Revolving Loans Amortized Cost Basis Total

Cash, Securities, and Other

Pass $ 8,091 $ 17,878 $ 17,181 $ 5,966 $ 6,337 $ 13,188 $ 69,602 $ 138,243

Special mention — — — — — — — —

Substandard — — — — — — 1,704 1,704

Doubtful — — — — — — — —

Total Cash, Securities, and Other $ 8,091 $ 17,878 $ 17,181 $ 5,966 $ 6,337 $ 13,188 $ 71,306 $ 139,947

Current year-to-date gross write-offs $ — $ — $ — $ — $ — $ — $ — $ —

Consumer and Other

Pass $ 614 $ 2,013 $ 647 $ 633 $ 797 $ 24 $ 14,800 $ 19,528

Special mention — — — — — — — —

Substandard — — — — — — 7,500 7,500

Doubtful — — — — — — — —

Not rated (1)

— 10,469 2,544 614 99 — — 13,726

Total Consumer and Other $ 614 $ 12,482 $ 3,191 $ 1,247 $ 896 $ 24 $ 22,300 $ 40,754

Current year-to-date gross write-offs $ — $ — $ — $ 8 $ 91 $ 2 $ — $ 101

Term Loans Amortized Cost by Origination Year

December 31, 2023 2023 2022 2021 2020 2019 Prior Revolving Loans Amortized Cost Basis Total

Construction and Development

Pass $ 32,509 $ 231,103 $ 42,796 $ 21,615 $ — $ — $ 431 $ 328,454

Special mention — 14,343 — — — — — 14,343

Substandard 2,719 — — — — — — 2,719

Doubtful — — — — — — — —

Total Construction and Development $ 35,228 $ 245,446 $ 42,796 $ 21,615 $ — $ — $ 431 $ 345,516

Current year-to-date gross write-offs $ — $ — $ — $ — $ — $ — $ — $ —

1-4 Family Residential

Pass $ 97,901 $ 373,525 $ 143,694 $ 108,815 $ 37,756 $ 31,452 $ 131,806 $ 924,949

Special mention — — — — — — — —

Substandard 578 2,438 — — — — — 3,016

Doubtful — — — — — — — —

Total 1-4 Family Residential $ 98,479 $ 375,963 $ 143,694 $ 108,815 $ 37,756 $ 31,452 $ 131,806 $ 927,965

Current year-to-date gross write-offs $ — $ — $ — $ — $ — $ — $ — $ —

Non-Owner Occupied CRE

Pass $ 42,799 $ 197,122 $ 125,726 $ 75,026 $ 24,411 $ 53,056 $ 20,553 $ 538,693

Special mention — — — 4,999 — — — 4,999

Substandard — — — — — — — —

Doubtful — — — — — — — —

Total Non-Owner Occupied CRE $ 42,799 $ 197,122 $ 125,726 $ 80,025 $ 24,411 $ 53,056 $ 20,553 $ 543,692

Current year-to-date gross write-offs $ — $ — $ — $ — $ — $ — $ — $ —

Owner Occupied CRE

Pass $ 3,229 $ 46,751 $ 44,805 $ 37,957 $ 5,555 $ 51,259 $ 2,325 $ 191,881

Special mention — — — — — — — —

Substandard — — 3,980 — — — — 3,980

Doubtful — — — — — — — —

Total Owner Occupied CRE $ 3,229 $ 46,751 $ 48,785 $ 37,957 $ 5,555 $ 51,259 $ 2,325 $ 195,861

Current year-to-date gross write-offs $ — $ — $ — $ — $ — $ — $ — $ —

Commercial and Industrial

Pass $ 38,497 $ 59,612 $ 15,430 $ 13,457 $ 6,430 $ 16,068 $ 152,782 $ 302,276

Special mention — — — — — — 649 649

Substandard 1,618 — 29,355 1,674 — 920 688 34,255

Doubtful — — — — — — — —

Total Commercial and Industrial $ 40,115 $ 59,612 $ 44,785 $ 15,131 $ 6,430 $ 16,988 $ 154,119 $ 337,180

Current year-to-date gross write-offs $ — $ 8,737 $ — $ — $ — $ — $ — $ 8,737

Total pass $ 223,640 $ 928,004 $ 390,279 $ 263,469 $ 81,286 $ 165,047 $ 392,299 $ 2,444,024

Total special mention — 14,343 — 4,999 — — 649 19,991

Total substandard 4,915 2,438 33,335 1,674 — 920 9,892 53,174

Total doubtful — — — — — — — —

Total not rated — 10,469 2,544 614 99 — — 13,726

Total $ 228,555 $ 955,254 $ 426,158 $ 270,756 $ 81,385 $ 165,967 $ 402,840 $ 2,530,915

_____________________________

(1) Includes loans held for investment measured at fair value as of December 31, 2023.

Includes fair value adjustments on loans held for investment accounted for under the fair value option.

In accordance with ASC 855, Subsequent Events, the Company has determined that there was a subsequent event that provided additional evidence about conditions that existed at the date of the balance sheet.

The effects of the subsequent event have been fully recognized in this Form 10-K.

NOTE 5 – PREMISES AND EQUIPMENT, NET

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During the year ended December 31, 2024 and 2023, the Company retired an immaterial amount of equipment and software for an immaterial loss.

Depreciation expense for premises and equipment for the years ended December 31, 2023 and 2022 totaled $ 2.2 million and $ 1.8 million, respectively.

Depreciation expense for Premises and equipment, net for the years ended December 31, 2024 and 2023 totaled $ 2.3 million and $ 2.2 million, respectively.

NOTE 6 – GOODWILL AND OTHER INTANGIBLE ASSETS

The following presents changes in the carrying amount of goodwill as of the dates noted:

(Dollars in thousands) December 31,

2023 December 31,

Beginning balance $ 30,400 $ 30,588

Acquisition activity — ( 188 )

Ending balance $ 30,400 $ 30,400

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The Company initially recorded $ 6.4 million of goodwill as a result of the Teton Acquisition on December 31, 2021.

In the first quarter of 2022, goodwill was adjusted by $( 0.2 ) million as a result of the measurement period adjustments.

The goodwill impairment analysis includes the determination of the carrying value of the reporting unit, including the existing goodwill, and estimating the fair value of the reporting unit.

If the fair value is less than its carrying amount, goodwill impairment is recognized equal to the difference between the fair value and its carrying amount, not to exceed its carrying amount.

Goodwill totaled $ 30.4 million as of December 31, 2024 and 2023.

As of December 31, 2024, there has not been any impairment of goodwill identified or recorded.

Goodwill is tested annually for impairment on October 31 or earlier upon the occurrence of certain events.

6 unchanged sentences

and unanticipated competition.

The impact to bank stocks triggered by the closure of two well-known regional banks caused a significant decline in bank stock prices in March of 2023, including our stock price.

As a result, the Company performed a quantitative goodwill impairment test as of October 31, 2023 with the assistance of an independent third-party firm specializing in goodwill impairment valuations for financial institutions.

The quantitative impairment testing involves management judgment, using widely accepted valuation techniques, such as the market approach (earnings multiples and/or transaction multiples) and the income approach (discounted cash flow ("DCF") method).

In applying these methodologies, the Company utilizes several factors, including actual operating results, future business plans, economic projections and market data.

The Company provided a five year forecast for the analysis based on the historical growth we have experienced, in addition, we provided a stressed scenario which forecasted growth using assumptions similar to the economic environment in 2023.

Both scenarios produced an estimated fair value that exceeded the carrying value of goodwill.

After the company recorded the impact of a loan related subsequent event, Management updated the Goodwill impairment analysis as of December 31, 2023.

As of December 31, 2023, there has not been any impairment of goodwill identified or recorded.

Goodwill totaled $ 30.4 million as of December 31, 2023 and 2022.

The goodwill impairment analysis includes the determination of the carrying value of the reporting unit, including the existing goodwill, and estimating the fair value of the reporting unit.

If the fair value is less than its carrying amount, goodwill impairment is recognized equal to the difference between the fair value and its carrying amount, not to exceed its carrying amount.

The following presents the Company’s intangible assets and related accumulated amortization as of the dates noted:

3 unchanged sentences

Other intangible assets, net $ 1,227 $ 1,454

Amortization expense on definite-lived customer relationship and non-compete intangible assets was $ 0.3 million for the years ended December 31, 2023 and 2022.

Amortization expense on definite-lived customer relationship and non-compete intangible assets was $ 0.2 million and $ 0.3 million for the years ended December 31, 2024 and 2023, respectively.

The following presents the expected amortization expense on definite-lived intangible assets existing as of December 31, 2024 (dollars in thousands):

Year Ending December 31, Expense

Thereafter 304

Total $ 1,227

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NOTE 7 – LEASES

2 unchanged sentences

The Company elected to not include short-term leases with initial terms of twelve months or less, on the Consolidated Balance Sheets.

The following table presents the classification of the right-of-use assets and corresponding liabilities within the Consolidated Balance Sheets, as of the dates noted (dollars in thousands):

2023 December 31,

The following table presents the classification of the right-of-use assets and corresponding liabilities within the Consolidated Balance Sheets, as of the dates noted:

(dollars in thousands) 2024 2023

Lease Right-of-Use Assets Classification

7 unchanged sentences

The amount of the right-of-use asset and lease liability are impacted by the discount rate used to calculate the present value of the minimum lease payments over the term of the lease.

2023 December 31,

The following table presents information related to operating leases:

Weighted-Average Remaining Lease Term

5 unchanged sentences

The Company recognized lease costs in Occupancy and equipment expense in the accompanying Consolidated Statements of Income.

The following table represents the Company’s net lease costs during the periods presented (dollars in thousands):

The following table represents the Company’s net lease costs during the periods presented:

Year Ended December 31,

(dollars in thousands) 2024 2023

Operating lease cost $ 3,370 $ 2,964

1 unchanged sentence

Lease costs, net $ 5,652 $ 4,917

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The following table presents a maturity analysis of the Company’s operating lease liabilities on an annual basis for each of the next five years and total amounts thereafter (dollars in thousands):

6 unchanged sentences

In accordance with ASC 842, these leases have been accounted for as operating leases.

During the year ended December 31, 2023 and 2022, the Company recognized $ 0.3 million of lease income.

The following table presents a maturity analysis of the Company’s lease payments to be received on an annual basis for each of the next five years and total amounts thereafter (dollars in thousands):

During the years ended December 31, 2024 and 2023, the Company recognized $ 0.3 million of lease income.

The following table presents a maturity analysis of the Company’s lease payments to be received on an annual basis for each of the next three years and total amounts thereafter (dollars in thousands):

Year Ending December 31, Undiscounted Operating Lease Income

2 unchanged sentences

The following table presents the Company’s interest-bearing deposits as of the dates noted:

(Dollars in thousands) December 31,

2023 December 31,

(dollars in thousands) 2024 2023

Money market deposit accounts $ 1,513,605 $ 1,386,149

Time deposits 471,415 496,452

Negotiable order of withdrawal accounts 147,488 234,778

Interest checking accounts 139,374 147,488

Savings accounts 14,212 16,371

Total interest-bearing deposits $ 2,138,606 $ 2,046,460

Estimated aggregate time deposits of $250 or greater $ 91,038 $ 77,972

Aggregate time deposits of $250 or greater $ 96,310 $ 91,038

Overdraft balances classified as loans totaled $ 0.2 million and $ 0.1 million as of December 31, 2024 and 2023, respectively.

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The following table presents the scheduled maturities of all time deposits for the next five years ending December 31 (dollars in thousands):

3 unchanged sentences

NOTE 9 – BORROWINGS

The Bank has executed a blanket pledge and security agreement with the FHLB that requires certain loans and securities be pledged as collateral for any outstanding b orrowings under the agreement.

The collateral pledged as of December 31, 2023 and December 31, 2022 amounted to $ 1.31 billion and $ 1.26 billion, respectively.

The Bank has executed a blanket pledge and security agreement with the FHLB which requires certain loans and securities be pledged as collateral for any outstanding b orrowings under the agreement.

The collateral pledged as of December 31, 2024 and 2023 amounted to $ 1.30 billion and $ 1.31 billion, respectively.

Based on this collateral and the Company’s holdings of FHLB stock, the Company was eligible to borrow an additional $ 582.0 million as of December 31, 2024.

Each advance is payable at its maturity date.

On March 12, 2023, the FRB announced it would make additional funding available to eligible depository institutions to help assure banks have the ability to meet the needs of depositors made available through the creation of a new Bank Term Funding Program ("BTFP").

The BTFP is meant to be an additional resource of liquidity against high-quality securities, eliminating an institutions need to quickly sell those securities in times of stress.

As of December 31, 2023, the Company has pledged a par value of $ 44.3 million in securities under the BTFP and borrowed $ 31.0 million w ith a maturity date of March 27, 2024.

The rate for the borrowings is based on the one year overnight swap rate plus 10 b asis points but no lower than the interest rate on reserve balances in effect on the day the loan is made and is fixed over the term of the advance based on the date of the advance.

The BTFP was meant to be an additional resource of liquidity against high-quality securities, eliminating an institution's need to quickly sell those securities in times of stress.

As of December 31, 2023 , the Company had pledged a par value of $ 44.3 million in securities under the BTFP and borrowed $ 31.0 million with a maturity date of March 27, 2024 .

In 2024 , an additional $ 10.0 million was borrowed and $ 41.0 million was repaid, resulting in no outstanding balance as of December 31, 2024 .

Upon maturity, the Company renewed a three-month $ 50.0 million FHLB advance on October 1, 2024.

The rate for the borrowing is adjusted daily based on the SOFR rate plus 15.5 basis points.

The advance matured on January 2, 2025 and was renewed for an additional three months.

The Company had the following required maturities on FHLB and FRB borrowings as of the dates noted (dollars in thousands):

Maturity Date Rate % December 31,

2023 December 31,

May 5, 2023 0.76 % $ — $ 10,000

January 1, 2024 (1)

5.55 41,175 131,498

Maturity Date Rate % 2024 2023

March 27, 2024 4.78 % $ — $ 30,997

March 29, 2024 5.60 — 50,000

January 1, 2025 (1)

4.57 5,000 41,175

January 2, 2025 4.53 50,000 —

Total $ 55,000 $ 122,172

_____________________________

(1) The borrowing has a one day, automatic daily renewal maturity date, subject to FHLB discretion not to renew.

5 unchanged sentences

As of December 31, 2024 and 2023, there were no amounts outstanding on any of the federal funds lines.

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On January 1, 2022, the Company redeemed the subordinated notes due December 31, 2026 in the amount of $ 6.6 million, which were redeemable on or after January 1, 2022.

The redemption price was equal to 100 % of the principal amount being redeemed, plus accrued and unpaid interest up to, but excluding the date of redemption.

The following presents the Company's subordinated notes included in the Subordinated notes line of the Consolidated Balance Sheets as of the periods noted (dollars in thousands):

Issuance Date Stated Rate Interest Paid Maturity Carrying Value Initial Debt Issuance Costs Remaining Net Balance (1)

The following presents the Company's subordinated notes included in the Subordinated notes line of the Consolidated Balance Sheets (dollars in thousands):

Issuance Date Stated Rate Interest Paid Maturity Carrying Value Initial Debt Issuance Costs Remaining Net Balance as of December 31, 2024 (1)

March 2020 5.125 % per annum until 3/31/2025, then alternative rate plus 450 basis points until maturity

8 unchanged sentences

(1) Remaining net balance includes amortization of debt issuance costs.

For the years ended December 31, 2023 and 2022, the Company recorded $ 2.7 million and $ 1.4 million, respectively, of interest expense related to the collective subordinated notes.

For the years ended December 31, 2024 and 2023, the Company recorded $ 2.7 million of interest expense related to the collective subordinated notes.

The subordinated notes are included in Tier 2 capital under current regulatory guidelines and interpretations, subject to limitations.

10 unchanged sentences

The following table presents the Company’s financial instruments whose contract amounts represent credit risk, as of the dates noted:

December 31, 2023 December 31, 2022

(dollars in thousands) Fixed Rate Variable Rate Fixed Rate Variable Rate

3 unchanged sentences

Commitments to make loans 4,029 15,563 5,275 7,115

Table of Content s

Unused lines of credit are agreements to lend to a client as long as there is no violation of any condition established in the contract.

15 unchanged sentences

Allowance for Credit Losses on Off-Balance Sheet Credit Exposures

To estimate the ACL on unfunded loan commitments, the Company determines the probability of funding based on historical utilization statistics for unfunded loan commitments.

To estimate the ACL on unfunded loan commitments that are not unconditionally cancellable, the Company determines the probability of funding based on historical utilization statistics for unfunded loan commitments.

Loss rates are calculated using the same assumptions as the associated funded balance.

3 unchanged sentences

Impact of adopting ASU 2016-13 — 3,481

(Release) provision for credit losses ( 1,722 )

Release of credit losses ( 1,506 ) ( 1,722 )

Ending balance $ 672 $ 2,178

4 unchanged sentences

The Company’s common stock has no par value and each holder of common stock is entitled to one vote for each share (though certain voting restrictions may exist on non-vested restricted stock) held.

On January 6, 2022, the Company filed a Form S-3 Registration Statement with the SEC providing that the Company may offer and sell from time to time, separately or together, in multiple series or in one or more offering, any combination of common stock, preferred stock, debt securities, warrants, depository shares and units, up to a maximum aggregate offer price of $ 100 million.

During the year ended December 31, 2023, the Company sold no shares of common stock.

Table of Content s

Restricted Stock Awards

In 2017, the Company issued 105,264 shares of common stock ("Restricted Stock Awards") with a value of $ 3.0 million to the sole member of EMC Holdings, LLC ("EMC"), subject to forfeiture based on his continued employment with the Company.

Half of the Restricted Stock Awards ($ 1.5 million or 52,632 shares) vested ratably over five years .

These awards fully vested during the year ended December 31, 2022.

The remaining $ 1.5 million, or 52,632 shares, were eligible to be earned based on performance of the mortgage division of the Company.

As of December 31, 2023, all restricted stock awards were fully vested and no unrecognized compensation expense remained.

During the year ended December 31, 2022, the Company recognized compensation expense of $ 0.2 million for the Restricted Stock Awards.

During the year ended December 31, 2022, 10,527 shares of the restricted stock awards vested.

As of December 31, 2022, all restricted stock awards were fully vested and no unrecognized compensation expense remains.

On June 13, 2024, the Company announced that its Board of Directors authorized the repurchase of up to 200,000 shares of the Company’s common stock, no par value, from time to time, within one year (the “2024 Repurchase Plan”) and that the Board of Governors of the Federal Reserve System advised the Company that it has no objection to the Company’s 2024 Repurchase Plan.

The Company may repurchase shares in privately negotiated transactions, in the open market, including pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 promulgated by the Securities and Exchange Commission, or otherwise in a manner that complies with applicable federal securities laws.

The 2024 Repurchase Plan does not obligate the Company to acquire a specific dollar amount or number of shares and it may be extended, modified or discontinued at any time without notice.

During the year ended December 31, 2024, the Company repurchased 5,501 shares under the authorization of the 2024 Repurchase Plan.

As of December 31, 2024, there were 194,499 shares available for repurchase under the plan.

Stock-Based Compensation Plans

15 unchanged sentences

Forfeited or expired ( 51,175 ) 21.43

Outstanding as of December 31, 2023 130,936 23.79 1.5 (1)

Options fully vested/exercisable as of December 31, 2023 130,936 23.79 1.5 (1)

Outstanding as of December 31, 2024 79,761 25.30 1.02 years (1)

Options fully vested/exercisable as of December 31, 2024 79,761 25.30 1.02 years (1)

_____________________________

(1) Nonqualified stock options outstanding at the end of the period and those fully vested/exercisable had immaterial aggregate intrinsic values.

As of December 31, 2023 and December 31, 2022, there were 130,936 and 184,165 options, respectively, that were exercisable.

As of December 31, 2024 and 2023, there were 79,761 and 130,936 options, respectively, that were exercisable.

Exercise prices are between $ 24.32 and $ 27.00 per share, and the options are exercisable for a period of ten years from the original grant date and expire on various dates between 2025 and 2026.

Table of Content s

During the year ended December 31, 2023, 12,260 options were exercised as at a weighted average exercise price of $ 20.00 , which resulted in $ 0.2 million of cash received.

Restricted Stock Units

1 unchanged sentence

Historically, the Company has granted certain associates restricted stock units which are earned over time or based on various performance measures and convert to common stock upon vesting, which are summarized here and expanded further below.

The following table presents the activity for the Time Vesting Units, the Financial Performance Units and the Market Performance Units during the year ended December 31, 2023:

The following table presents the activity for the Time Vesting Units and the Financial Performance Units during the year ended December 31, 2024:

Units Financial

9 unchanged sentences

Time Vesting Units

Time Vesting Units are granted to full-time associates and board members at the date approved by the Company’s board of directors.

Time Vesting Units are granted to full-time associates and Board of Director members at the date approved by the Company’s Board of Directors.

The Company granted 75,070 Time Vesting Units with a five-year service period during the year ended December 31, 2024, that vest in equal installments of 20 % on the anniversary of the grant date, assuming continuous employment through the scheduled vesting dates.

4 unchanged sentences

If the Company achieves the financial metrics, which include various thresholds from 0 % up to 150 %, then the Financial Performance Units will have a subsequent vesting period.

Table of Content s

The following table presents the Company’s existing Financial Performance Units as of December 31, 2024 (dollars in thousands, except share amounts):

3 unchanged sentences

Financial Metric End Date Vesting Requirement End Date

May 1, 2019 through April 30, 2020 150 % 59,449 $ — 0.0 years December 31, 2021 December 31, 2023

May 1, 2020 through December 31, 2020, excluding November 18, 2020 150 % 67,905 183 1.0 year December 31, 2022 December 31, 2023

May 1, 2020 through December 31, 2020, excluding November 18, 2020 150 % 54,617 — 0.0 years December 31, 2022 December 31, 2024

On November 18, 2020 114 % 10,760 31 0.9 years December 31, 2022 50 % November 18, 2023 and 2025

May 3, 2021 through August 11, 2021 74 % 24,504 270 2.0 years December 31, 2023 December 31, 2025

May 3, 2021 through August 11, 2021 55 % 15,436 85 1.0 year December 31, 2023 December 31, 2025

May 2, 2022 through November 2, 2022, excluding August 4, 2022 (2)

4 unchanged sentences

— % — — 3.0 years December 31, 2025 December 31, 2027

On May 1, 2024 100 % 39,728 577 4.0 years December 31, 2026 December 31, 2028

_____________________________

(1) Represents the expected unrecognized stock-based compensation expense recognition period.

(2) Performance threshold was not met for the years ended December 31, 2024, December 31, 2023, and December 31, 2022 and, therefore, no compensation expense was recognized for the years ended December 31, 2024, December 31, 2023, and December 31, 2022.

(3) As the performance threshold is not expected to be met in future performance periods, there is no related unrecognized compensation as of December 31, 2024.

(3) Performance threshold was not met for the year ended December 31, 2023.

The 100% threshold is expected to be met for the year ended December 31, 2024.

The following table presents the Company’s Financial Performance Units activity for the years noted December 31 (dollars in thousands):

2 unchanged sentences

May 1, 2019 through April 30, 2020 — 22,577 $ — $ 68

22,577 — $ 68 $ 122

May 1, 2020 through December 31, 2020, excluding November 18, 2020 (1)

2 unchanged sentences

May 3, 2021 through August 11, 2021 — — ( 48 ) ( 135 )

— — ( 135 ) 273

May 2, 2022 through November 2, 2022, excluding August 4, 2022 (2)

322 65,425 — —

On August 4, 2022 (3)

1 unchanged sentence

On May 1, 2023 (4)

On May 1, 2024 42,805 — 96 —

_____________________________

(1) Granted shares represent the final performance period payout percentage above the 100 % threshold initially granted

(2) Performance threshold was not met for the years ended December 31, 2023 and December 31, 2022 and, therefore, no compensation expense was recognized for the years ended December 31, 2023 and December 31, 2022.

(3) Performance threshold was not met for the years ended December 31, 2023 and December 31, 2022.

The 100 % threshold is expected to be met for the year ended December 31, 2024.

(4) Performance threshold was not met for the year ended December 31, 2023, therefore, no compensation expense was recognized for the year ended December 31, 2023.

Table of Content s

Market Performance Units

Market Performance Units were granted to certain key associates and are earned based on growth in the value of the Company’s common stock, and were dependent on the Company completing an initial public offering of stock during a defined period of time.

On July 23, 2018, the Company completed its initial public offering and the Market Performance Units performance condition was met.

Subsequent to the performance condition there was also a market condition as a vesting requirement for the Market Performance Units.

If the Company's common stock was trading at or above certain prices, over a performance period which ended on June 30, 2020, the Market Performance Units would have been determined to be earned and vest following the completion of a subsequent service period, which ended on June 30, 2022.

The Company's common stock did not trade at or above the required prices over the performance period and as a result, no Market Performance Units were eligible to be earned.

As of the end of the subsequent service period, or June 30, 2022, the Company had no remaining unrecognized compensation expense related to the Market Performance Units.

(3) Performance threshold was not met for the years ended December 31, 2024, December 31, 2023, and December 31, 2022 and, therefore, compensation expense recognized during the years ended December 31, 2023 and December 31,2022 was reversed during the year ended December 31, 2024.

(4) Performance threshold was not met for the years ended December 31, 2024 and December 31, 2023, therefore, no compensation expense was recognized for the years ended December 31, 2024 and December 31, 2023

NOTE 12 – EARNINGS PER COMMON SHARE

13 unchanged sentences

Financial Performance Units 76,747 113,114

Market Performance Units — 3,413

Total diluted effect of common stock equivalents 106,371 184,860

2 unchanged sentences

Diluted earnings per share was computed without consideration to potentially dilutive instruments as their inclusion would have been anti-dilutive.

Table of Content s

The following table presents potentially dilutive securities excluded from the diluted earnings per share calculation during the periods presented:

5 unchanged sentences

NOTE 13 – INCOME TAXES

The following table presents the components of the Company’s income tax expense as of December 31 (dollars in thousands):

The following table presents the components of the Company’s income tax expense:

(dollars in thousands)

Federal $ 247 $ 60

State and local ( 264 ) ( 281 )

Total current tax (benefit)/expense ( 221 ) 6,573

Total current tax benefit ( 17 ) ( 221 )

Federal 2,766 1,844

State and local 357 213

Valuation allowance — 76

Total deferred tax expense 3,123 2,057

Income tax expense $ 3,106 $ 1,836

The following is a reconciliation of income taxes reflected on the Consolidated Statements of Income for the years ended December 31, 2023 and 2022, with income tax expense computed by applying the United States federal income tax rate of 21 % to income before income taxes (dollars in thousands):

The following is a reconciliation of income taxes reflected on the Consolidated Statements of Income for the years ended December 31, 2024 and 2023, with income tax expense computed by applying the United States federal income tax rate of 21% to income before income taxes:

(dollars in thousands)

Income tax expense computed at 21% statutory rate

4 unchanged sentences

LIHTC investment proportional amortization 759 484

Valuation allowance — 76

Other, net 426 192

Income tax expense $ 3,106 $ 1,836

Table of Content s

The following table presents the principal components of the Company’s deferred tax items as of December 31 (dollars in thousands):

The following table presents the principal components of the Company’s deferred tax items:

(dollars in thousands)

Deferred tax assets:

3 unchanged sentences

Loans accounted for under the fair value option 174 216

Deferred Rent - Liability 2,579 2,706

Lease liability

Stock-based compensation 840 1,423

Provision on other real estate owned 261 —

Other intangible assets 81 186

8 unchanged sentences

Depreciation ( 2,787 ) ( 2,311 )

Deferred Rent - Asset ( 2,113 ) ( 2,085 )

Right-of-use asset

( 4,523 ) ( 2,113 )

Acquired loans fair market value adjustments ( 301 ) ( 196 )

3 unchanged sentences

Net deferred tax asset $ 3,079 $ 6,407

(1) Provision for credit loss amounts for periods prior to the ASC 326 adoption date of January 1, 2023 are reported in accordance with previously applicable GAAP.

Management believes it is more likely than not that the results of future operations will generate sufficient taxable income to realize the total deferred tax assets.

6 unchanged sentences

There are no federal or state tax examinations currently in progress.

Table of Content s

NOTE 14 – EMPLOYEE BENEFIT PLANS

5 unchanged sentences

The Bank extends credit to certain covered parties including Company directors, executive officers, and their affiliates.

As of December 31, 2023 and December 31, 2022, there were no delinquent or non-performing loans to any executive officer or director of the Company.

As of December 31, 2024 and 2023, there were no delinquent or non-performing loans to any executive officer or director of the Company.

These covered parties, along with principal owners, management, immediate family of management or principal owners, a parent company and its subsidiaries, trusts for the benefit of employees, and other parties, may be considered related parties.

The following table presents a summary of related-party loan activity as of the dates noted (dollars in thousands):

December 31, 2023 December 31, 2022

Balance, beginning of year $ 16,859 $ 12,833

The following table presents a summary of related-party loan activity for the fiscal years then ended:

Year Ended December 31,

(dollars in thousands)

Balance at beginning of year $ 25,358 $ 16,859

Funded loans 12,515 13,427

1 unchanged sentence

Changes in related parties ( 3,757 ) 284

Balance, end of period $ 25,358 $ 16,859

Deposits from related parties held by the Bank as of December 31, 2023 and December 31, 2022 totaled $ 16.3 million and $ 36.9 million, respectively.

The Company leases office spaces from entities controlled by one of the Company’s board members.

Balance at end of period $ 4,732 $ 25,358

Deposits from related parties held by the Bank as of December 31, 2024 and 2023 totaled $ 16.4 million and $ 16.3 million, respectively.

The Company leases office spaces from entities controlled by one of the Company’s Board of Director members.

During each of the years ended December 31, 2024 and 2023, the Company incurred $ 0.2 million of expense related to these leases.

9 unchanged sentences

Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

Table of Content s

Recurring Fair Value

2 unchanged sentences

Equity Warrants :

Fair value of equity warrants of private companies are priced using a Black-Scholes option pricing model to estimate the fair value by using strike prices, option expiration dates, risk-free interest rates, and option volatility assumptions (Level 3).

Fair value of equity warrants of private companies are priced using a Black-Scholes option pricing model to estimate the asset fair value by using strike prices, option expiration dates, risk-free interest rates, and option volatility assumptions (Level 3).

Guarantee Asset and Liability :

25 unchanged sentences

The fair value of loans held for sale is determined using actual quoted commitments from third party investors resulting in a Level 1 classification.

Table of Content s

Where commitments are not yet available, fair value is estimated based on quotes for similar assets resulting in Level 2 classification.

The following tables present assets and liabilities measured on a recurring basis as of the dates noted (dollars in thousands):

7 unchanged sentences

Mortgage loans held for sale $ — $ 25,455 $ — $ 25,455

Loans held for sale $ — $ 251 $ — $ 251

Loans held at fair value $ — $ — $ 7,283 $ 7,283

Forward commitments and FSC $ — $ 225 $ — $ 225

Equity securities $ 630 $ 122 $ — $ 752

14 unchanged sentences

Mortgage loans held for sale $ — $ 7,254 $ — $ 7,254

Loans held for sale $ 1,965 $ — $ — $ 1,965

Loans held at fair value $ — $ — $ 13,726 $ 13,726

4 unchanged sentences

Equity warrants $ — $ — $ 795 $ 795

There were no transfers between levels during the year ended December 31, 2023 or 2022.

On April 1, 2022, the Company elected to transfer all securities classified as available-for-sale to held-to-maturity and are now carried at amortized cost.

See Note 2 – Investment Securities for more information.

As of December 31, 2023, and December 31, 2022, equity securities, equity warrants, IRLC, and guarantee assets have been recorded at fair value within the Other assets line item in the Consolidated Balance Sheets.

Swap derivative asset $ — $ 763 $ 763

Financial Liabilities

Forward commitments and FSC $ — $ 358 $ — $ 358

Swap derivative liabilities $ — $ 740 $ — $ 740

There were no transfers between levels during the years ended December 31, 2024 or 2023.

As of December 31, 2024, and 2023, equity securities, equity warrants, IRLC, and guarantee assets have been recorded at fair value within the Other assets line item in the Consolidated Balance Sheets.

All changes are recorded in Non-interest income in the Consolidated Statements of Income.

Table of Content s

Fair Value Option

4 unchanged sentences

Additionally, management has elected the fair value option for mortgage loans originated and held for sale and loans held for sale.

As of December 31, 2022, the Company reclassified $ 2.0 million of loans held for investment to loans held for sale.

The transfer occurred at the point in time the Company decided to sell the loan and received a commitment from third party investors to purchase the loan.

During the year ended December 31, 2023, the Company reclassified $ 39.2 million of loans held for investment to loans held for sale.

The transfers occurred at the point in time the Company decided to sell the loans and received a commitment from third party investors to purchase the loans.

As of December 31, 2023, a total of $ 40.8 million reclassified loans held for sale have been sold.

As of December 31, 2023, there were no loans reclassified from held for investment to held for sale.

There were no loans accounted for under the fair value option that were 90 days or more past due and still accruing interest as of December 31, 2023 or December 31, 2022.

As of December 31, 2023, there were 98 loans, totaling $ 0.2 million accounted for under the fair value option that were on nonaccrual.

During the years ended December 31, 2024 and 2023, the Company reclassified $ 5.8 million and $ 39.2 million, respectively, of loans held for investment to loans held for sale.

The transfers occurred at the point in time the Company decided to sell the loans.

During the years ended December 31, 2024 and 2023, a total of $ 5.4 million and $ 40.8 million, respectively, reclassified loans held for sale were sold.

As of December 31, 2024 and 2023, there were $ 0.3 million and $ 0.0 million of loans held for sale, respectively.

As of December 31, 2024, there were 37 loans totaling $ 0.1 million, accounted for under the fair value option that were on non-accrual.

As of December 31, 2023, there were 98 loans, totaling $ 0.2 million accounted for under the fair value option that were on nonaccrual.

During the year ended December 31, 2023, the Company recorded net charge-offs of $ 1.7 million on loans accounted for under the fair value option to Net loss on loans accounted for under the fair value option on the Consolidated Statements of Income.

During the year ended December 31, 2022, the Company recorded an immaterial amount of charge-offs on loans accounted for under the fair value option.

D uring the year ended December 31, 2024 and 2023 , the Company recorded net charge-offs of $ 1.2 million and $ 1.7 million on loans accounted for under the fair value option to Net loss on loans accounted for under the fair value option on the Consolidated Statements of Income.

The following tables provide more information about the fair value carrying amount and unpaid principal outstanding of loans accounted for under the fair value option as of the dates noted:

3 unchanged sentences

Mortgage loans held for sale $ 25,455 $ 25,217 $ 238 $ — $ — $ — $ — $ — $ —

Loans held for sale 251 594 ( 343 ) 251 594 ( 343 ) 251 594 ( 343 )

Loans held for investment, fair value option 7,283 7,507 ( 224 ) 47 52 ( 5 ) 47 52 ( 5 )

4 unchanged sentences

Mortgage loans held for sale $ 7,254 $ 7,106 $ 148 $ — $ — $ — $ — $ — $ —

Loans held for sale 1,965 1,984 ( 19 ) — — — — — —

Loans held for investment, fair value option 13,726 14,129 ( 403 ) 210 220 ( 10 ) 210 220 ( 10 )

$ 20,980 $ 21,235 $ ( 255 ) $ 210 $ 220 $ ( 10 ) $ 210 $ 220 $ ( 10 )

Table of Content s

The following table presents the changes in fair value of loans accounted for under the fair value option as of the dates noted (dollars in thousands):

Changes in Fair Value 2023 2022

Year Ended December 31,

(dollars in thousands) 2024 2023

Mortgage loans held for sale $ 41 $ 59

2 unchanged sentences

$ ( 2 ) $ ( 270 )

The following summarizes the activity pertaining to loans accounted for under the fair value option as of the dates noted (dollars in thousands):

The following summarizes the activity pertaining to loans accounted for under the fair value option for the years noted (dollars in thousands):

Year Ended December 31,

Mortgage loans held for sale 2024 2023

5 unchanged sentences

Balance at end of period $ 25,455 $ 7,254

Year Ended December 31,

Loans held for sale 2024 2023

5 unchanged sentences

Balance at end of period $ 251 $ —

Year Ended December 31,

Loans held for investment, fair value option 2024 2023

5 unchanged sentences

Balance at end of period $ 7,283 $ 13,726

Table of Content s

Nonrecurring Fair Value

Other Real Estate Owned ("OREO") :

Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis.

They are subsequently accounted for at lower of cost or fair value less estimated costs to sell.

Fair value is commonly based on recent real estate appraisals which are updated no less frequently than on an annual basis.

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

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

Such adjustments can be significant and typically result in Level 3 classifications of the inputs for determining fair value.

OREO is evaluated annually for additional impairment and adjusted accordingly.

Collateral Dependent Loans :

The fair value of collateral dependent loans individually analyzed and not included in the pooled loan analysis under the ACL is generally based on recent appraisals and the value of any credit enhancements associated with the loan.

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

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

Such adjustments can be significant and typically result in Level 3 classifications of the inputs for determining fair value.

Collateral dependent loans are evaluated monthly and adjusted accordingly if needed.

Appraisals for both collateral-dependent impaired loans and OREO are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Company.

Once received, the Company reviews the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry-wide statistics.

The following table presents assets measured at fair value on a nonrecurring basis as of the dates noted (dollars in thousands):

December 31, 2023 Quoted

Active Markets

for Identical

(Level 1) Significant

(Level 2) Significant

(Level 3) Reported

Collateral dependent loans

Consumer and Other $ — $ — $ 7,500 $ 7,500

1-4 Family Residential — — 2,438 2,438

Commercial and Industrial — — 25,738 25,738

Owner Occupied CRE — — 3,980 3,980

Total $ — $ — $ 39,656 $ 39,656

The credit enhancement - guarantee asset value approach was utilized for estimating the fair value of non-recurring assets.

There were no assets measured on a nonrecurring basis for the year ended December 31, 2022.

During the year ended December 31, 2022, the Company recorded $ 0.4 million of OREO as a result of obtaining physical possession of a foreclosed property as partial consideration for amounts owed on a collateral dependent loan.

The Company sold the property during the year ended December 31, 2022, resulting in an immaterial gain.

As of December 31, 2023 and December 31, 2022, the Company did not own any OREO properties.

Table of Content s

As of December 31, 2023, total collateral dependent loans measured using fair value had amortized cost of $ 43.5 million and were classified as Level 3.

Collateral dependent loans accounted for $ 3.8 million of the allowance on non-performing loans as of December 31, 2023 and no specific reserves as of December 31, 2022.

The Company recorded $ 8.8 million of charge-offs during the year ended December 31, 2023 and no charge-offs during the year ended December 31, 2022.

Level 3 Analysis

The following presents a reconciliation for Level 3 instruments measured at fair value on a recurring basis as of the dates noted (dollars in thousands):

Year Ended December 31, 2023 Corporate Bonds Loans Held at Fair Value FSC Guarantee Asset IRLC Equity Warrants

Year Ended December 31, 2024 Loans Held at Fair Value Guarantee Asset IRLC Equity Warrants

Beginning balance $ 13,726 $ 189 $ 345 $ 795

2 unchanged sentences

Gains/(losses) in net income, net 179 26 742 ( 30 )

Transfer to held-to-maturity — — — — — —

Net charge-offs ( 1,178 ) — — —

1 unchanged sentence

Ending balance $ 7,283 $ 235 $ 358 $ 765

Year Ended December 31, 2022 Corporate Bonds Loans Held at Fair Value FSC Guarantee Asset IRLC Equity Warrants

Year Ended December 31, 2023 Loans Held at Fair Value Guarantee Asset IRLC Equity Warrants

Beginning balance $ 23,321 $ 143 $ 229 $ 825

2 unchanged sentences

Gains/(losses) in net income, net ( 309 ) 38 1,391 ( 30 )

Unrealized gains, net 102 — — — — —

Transfer to held-to-maturity ( 6,215 ) — — — — —

Net charge-offs ( 1,700 ) — — —

Other settlements ( 8,759 ) ( 24 ) — —

Ending balance $ 13,726 $ 189 $ 345 $ 795

Table of Content s

Nonrecurring Fair Value

Other Real Estate Owned ("OREO") :

Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis.

They are subsequently accounted for at lower of cost or fair value less estimated costs to sell.

Fair value is commonly based on recent real estate appraisals which are updated no less frequently than on an annual basis.

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

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

Such adjustments can be significant and typically result in Level 3 classifications of the inputs for determining fair value.

OREO is evaluated annually for additional impairment and adjusted accordingly.

Collateral Dependent Loans, net of ACL :

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

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

Such adjustments can be significant and typically result in Level 3 classifications of the inputs for determining fair value.

Collateral dependent loans are evaluated monthly and adjusted accordingly if needed.

Appraisals for both collateral-dependent loans and OREO are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Company.

The following presents quantitative information about Level 3 assets measured on a recurring and nonrecurring basis as of the dates noted:

12 unchanged sentences

Remaining life 21.3 % to 63.8 % ( 30.2 %)

4.62 % ( 4.62 %)

2.00 to 2.03 years

4.05 % to 4.16 % ( 4.14 )%

Nonrecurring fair value

1-4 Family Residential 10,314 Appraisal value Commission, cost to sell, closing costs 5 % ( 5 )%

Commercial and Industrial 25,615 Appraisal value Commission, cost to sell, closing costs 6 % ( 6 )%

Collateral dependent loans:

Consumer and Other $ 7,500 Credit enhancement - guarantee asset value Market rate adjustments 46 % ( 8 %)

1-4 Family Residential 2,438 Credit enhancement - guarantee asset value Market rate adjustments 46 % ( 8 %)

Commercial and Industrial 24,792 Credit enhancement - guarantee asset value Market rate adjustments 46 % ( 8 %)

Commercial and Industrial 148 Sales comparison,

Market approach -

guideline transaction

method Loss given default 14 % to 62 % ( 20 %)

Commercial and Industrial 799 Credit enhancement - guarantee asset value Market rate adjustments 21 % ( 11 %)

Owner Occupied CRE 3,980 Credit enhancement - guarantee asset value Market rate adjustments 46 % ( 8 %)

Commercial and Industrial 784 Sales Comparison-Market Value Approach Market rate adjustments 11 % ( 11 %)

Commercial and Industrial 36 Sales comparison, Market approach - guideline transaction method Loss given default 80 % ( 80 )%

Quantitative Information about Level 3 Fair Value Measurements as of December 31, 2023

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Risk-free interest rate

Remaining life 32.7 % to 88.9 % ( 34.8 )% 4.04 % to 4.14 % ( 4.05 )% 0 to 4 years

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Remaining life 20.1 % to 23.0 % ( 22.4 )%

4.62 % ( 4.62 )%

2 to 2.03 years

Nonrecurring fair value

Collateral dependent loans:

Consumer and Other 7,500 Sales Comparison-Market Value Approach Market rate adjustments 46 % ( 8 )%

1-4 Family Residential 2,438 Sales Comparison-Market Value Approach Market rate adjustments 46 % ( 8 )%

Commercial and Industrial 24,791 Sales Comparison-Market Value Approach Market rate adjustments 46 % ( 8 )%

Commercial and Industrial 148 Sales comparison,

Market approach -

guideline transaction

method Loss given default 14 % to 62 % ( 20 )%

Commercial and Industrial 799 Sales Comparison-Market Value Approach Market rate adjustments 11 % ( 11 )%

Owner Occupied CRE 3,980 Sales Comparison-Market Value Approach Market rate adjustments 46 % ( 8 )%

Estimated Fair Value of Other Financial Instruments

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Cash and cash equivalents $ 236,041 $ 236,041 $ — $ —

Held-to-maturity securities, net of ACL 74,102 243 58,229 8,144

Held-to-maturity debt securities, net of ACL

75,724 242 60,044 7,875

Loans, net (1)

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Cash and cash equivalents $ 254,442 $ 254,442 $ — $ —

Held-to-maturity securities 81,056 234 67,433 7,051

Held-to-maturity debt securities, net of ACL

74,102 243 58,229 8,144

Loans, net (1)

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FHLB borrowings – fixed rate 41,175 41,175 — —

FHLB borrowings – floating rate 50,000 — 49,986 —

Federal Reserve borrowings – fixed rate 34,536 3,539 30,936 —

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Accrued interest payable 3,793 3,793 — —

(1) Excludes loans accounted for under the fair value option of $ 13.7 million and $ 23.3 million as of December 31, 2023 and December 31, 2022, respectively, as these are carried at fair value.

(2) Term deposits due within one year totaling $ 414.6 million and $ 181.0 million as of December 31, 2023 and December 31, 2022, respectively, are classified under Level 1 fair value measurement.

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(1) Excludes loans accounted for under the fair value option of $ 7.3 million and $ 13.7 million as of December 31, 2024 and 2023, respectively, as these are carried at fair value.

(2) Term deposits due within one year totaling $ 429.0 million and $ 414.6 million as of December 31, 2024 and 2023, respectively, are classified under Level 1 fair value measurement.

The fair value estimates presented and discussed above are based on pertinent information available to management as of the dates specified.

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Therefore, current estimates of fair value may differ significantly from the amounts presented herein.

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The methods and assumptions, not previously presented, used to estimate fair values are described as follows:

Cash and Cash Equivalents and Restricted Cash :

The carrying amounts of cash and cash equivalents and restricted cash approximate fair values as maturities are less than 90 days and balances are generally in accounts bearing current market interest rates.

Held-to-maturity securities :

Cash and Cash Equivalents :

The carrying amounts of cash and cash equivalents approximate fair values as maturities are less than 90 days and balances are generally in accounts bearing current market interest rates.

Held-to-maturity debt securities :

The fair values for held-to-maturity investment securities are determined by quoted market prices, if available (Level 1).

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Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits.

Fixed Rate Borrowings :

Fixed and Floating Rate Borrowings :

Borrowings with fixed rates are valued using inputs such as discounted cash flows and current interest rates for similar instruments and borrowers with similar credit ratings.

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The swap hedges the benchmark index (SOFR) with a receive float/pay fixed swap for the period March 21, 2023 through April 1, 2026.

The notional amount of the interest rate swap as of December 31, 2023 was $ 50.0 million.

As of December 31, 2023, this hedge was determined to be effective, and the Company expects the hedge to remain effective during the remaining terms of the swap.

The notional amount of the interest rate swap as of December 31, 2024 and 2023 was $ 50.0 million.

As of December 31, 2024 and 2023, this hedge was determined to be effective, and the Company expects the hedge to remain effective during the remaining terms of the swap.

Derivatives Not Designated as Hedges:

During the year ended December 31, 2023, the Company entered into interest rate swaps to offset interest rate exposure with its commercial and residential variable rate loan clients.

The Company periodically enters into interest rate swaps to offset interest rate exposure with its commercial variable rate loan clients.

Clients with variable rate loans may choose to enter into an interest rate swap to hedge the interest rate risk on the loan and effectively pay a fixed rate payment.

The Company will simultaneously enter into an interest rate swap on the same underlying loan and notional amount to hedge risk on the fixed rate loan.

The notional amount of interest rate swaps with its loan customers as of December 31, 2023 was $ 30.3 million.

The notional amount of interest rate swaps with its loan customers as of December 31, 2024 and 2023, was $ 70.4 million and $ 30.3 million, respectively.

While these derivatives represent economic hedges, they do not qualify as hedges for accounting purposes.

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The Company presents derivative position gross on the balance sheet.

The following table reflects the fair value of derivatives recorded on the Consolidated Balance Sheets as of December 31, 2023:

December 31, 2023

(Dollars in thousands) Notional Amount Fair Value

The following table reflects the fair value of derivatives recorded on the Consolidated Balance Sheets as of the dates noted:

December 31, 2024 December 31, 2023

(dollars in thousands) Notional Amount Fair Value Notional Amount Fair Value

Included in other assets:

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Total included in other liabilities $ 956 $ 740

The effect of cash flow hedge accounting on accumulated other comprehensive income for the year ended December 31, 2023 is as follows (dollars in thousands):

Year Ended December 31, 2023 Unrealized Gain (Loss) Recorded in OCI on Derivative Location of Gain (Loss) Reclassified from OCI into Income Amount of Gain (Loss) Reclassified from OCI into Income

The effect of cash flow hedge accounting on accumulated other comprehensive income for the years ended December 31, 2024 and 2023 were as follows:

December 31, 2024 December 31, 2023

(dollars in thousands) Unrealized Gain (Loss) Recorded in OCI on Derivative Location of Gain (Loss) Reclassified from OCI into Income Amount of Gain (Loss) Reclassified from OCI into Income Unrealized Gain (Loss) Recorded in OCI on Derivative Location of Gain (Loss) Reclassified from OCI into Income Amount of Gain (Loss) Reclassified from OCI into Income

Interest rate contracts $ 39 $ — $ — $ 58 $ — $ —

For the year ended December 31, 2023, the Company recorded $ 0.5 million of interest income related to the swap to Other borrowed funds interest expense on the Consolidated Statements of Income.

The effect of derivatives not designated as hedging instruments recorded in Other non-interest income on the Consolidated Statements of Income for the year ended December 31, 2023 was $ 0.1 million .

For the year ended December 31, 2024 and 2023, the Company recorded $ 0.7 million and $ 0.5 million, respectively, of interest income related to the swap to Other borrowed funds interest expense on the Consolidated Statements of Income.

The effect of derivatives not designated as hedging instruments recorded in Other non-interest income on the Consolidated Statements of Income for the years ended December 31, 2024 and 2023 was $ 0.0 million and $ 0.1 million, respectively.

NOTE 18 – SEGMENT REPORTING

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The measure of profit or loss used by the CODM to identify and measure the Company’s reportable segments is income before income tax.

The CODM uses income before income tax to determine resource allocation during the annual budget and forecast process and to monitor monthly budgeted versus actual results in assessing performance of the segments.

The Wealth Management segment consists of operations relative to the Company’s fully integrated wealth management products and services.

Services provided include deposit, loan, insurance, and trust and investment management advisory products and services.

Parent company activity primarily consists of subordinated debt interest expense and is included within Wealth Management as management evaluates and makes business decisions for Wealth Management, including the parent company, collectively as one segment.

The Mortgage segment consists of operations relative to the Company’s residential mortgage service offerings.

Mortgage products and services are financial in nature for which premiums are recognized, net of expenses, upon the sale of mortgage loans to third parties.

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The following presents the financial information for each segment that is specifically identifiable or based on allocations using internal methods for the years ended December 31, 2023 and 2022 (dollars in thousands):

The following presents the financial information for each segment that is specifically identifiable or based on allocations using internal methods as of or during the periods presented (dollars in thousands):

As of and for the year ended December 31, 2024 Wealth

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Net interest income, after provision for credit losses

Non-interest income 19,053 2,895 21,948

61,259 1,132 62,391

Net gain on mortgage loans — 4,912 4,912

All other non-interest income (1)

22,768 — 22,768

Total income before non-interest expense

84,027 6,044 90,071

Salaries and employee benefits expense

41,442 3,598 45,040

Depreciation and amortization expense 2,535 30 2,565

All other non-interest expense (2)

29,421 1,466 30,887

Income before income taxes

$ 10,629 $ 950 $ 11,579

Goodwill $ 30,400 $ — $ 30,400

Total assets 2,966,612 8,850 2,975,462

2,891,615 27,422 2,919,037

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(1) All other non-interest income for Wealth Management primarily includes Trust and investment management fees, Bank fees, Risk management and insurance fees, Net loss on loans accounted for under the fair value option, and Other.

(2) All other non-interest expense for Wealth Management primarily includes Occupancy and equipment, Professional services, Technology and information systems, Data processing, Marketing, and Other.

All other non-interest expense for Mortgage primarily includes Occupancy and equipment, Data processing, and Other.

As of and for the year ended December 31, 2023 Wealth

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Net interest income, after provision for loan losses

Non-interest income 22,760 4,930 27,690

60,029 721 60,750

Net gain on mortgage loans — 2,826 2,826

All other non-interest income (1)

19,122 — 19,122

Total income before non-interest expense

79,151 3,547 82,698

Salaries and employee benefits expense

40,656 4,546 45,202

Depreciation and amortization expense 2,344 33 2,377

All other non-interest expense (2)

Income before income taxes $ 31,268 $ ( 2,440 ) $ 28,828

26,491 1,567 28,058

Income (loss) before income taxes $ 9,660 $ ( 2,599 ) $ 7,061

Goodwill $ 30,400 $ — $ 30,400

Total assets 2,856,708 10,040 2,866,748

2,966,612 8,850 2,975,462

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(2) All other non-interest expense for Wealth Management primarily includes Occupancy and equipment, Professional services, Technology and information systems, Data processing, Marketing, and Other.

All other non-interest expense for Mortgage primarily includes Occupancy and equipment, Data processing, and Other.

NOTE 19 – LOW-INCOME HOUSING TAX CREDIT INVESTMENTS

On December 19, 2019, the Company invested in a low-income housing tax credit ("LIHTC") investment.

On June 26, 2023, the Company entered into two additional LIHTC investments for $ 3.0 million per investment.

As of December 31, 2023, total unfunded commitments related to LIHTC investments totaled $ 4.9 million.

As of December 31, 2022, there were no unfunded commitments related to LIHTC investments.

As of December 31, 2023 and December 31, 2022, the total balance of all LIHTC investments was $ 3.1 million and $ 2.4 million, respectively.

On June 26, 2023, the Company entered into two LIHTC investments for $ 3.0 million per investment.

As of December 31, 2024 and 2023, total unfunded commitments related to LIHTC investments totaled $ 4.1 million and $ 4.9 million, respectively.

As of December 31, 2024 and 2023, the total balance of all LIHTC investments was $ 3.1 million and $ 3.1 million, respectively.

These balances are reflected in the Other assets line item of the Consolidated Balance Sheets.

The Company uses the proportional amortization method to account for this investment.

The Company uses the proportional amortization method to account for these investments.

Amortization expense is included within the Income tax expense line item of the Consolidated Statements of Income.

During the years ended December 31, 2024 and 2023, the Company recognized amortization expense of $ 0.8 million and $ 0.5 million, respectively.

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Additionally, during the years ended December 31, 2023 and 2022, the Company recognized $ 0.4 million of tax credits and other benefits from the LIHTC investment.

Additionally, during the years ended December 31, 2024 and 2023, the Company recognized $ 0.7 million and $ 0.4 million, respectively, of tax credits and other benefits from the LIHTC investments.

During the years ending December 31, 2024 and 2023, the Company did not incur any impairment losses.

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Investments in subsidiaries are stated using the equity method of accounting.

December 31, December 31,

Condensed Balance Sheets 2024 2023

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Investment in subsidiaries 282,491 268,966

Loans, net — —

Other assets 5,474 5,530

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Condensed Statements of Income 2024 2023

Interest income $ — $ 46

Non-interest (loss)/income ( 1,280 ) 7

Total (loss)/income ( 1,280 ) 53

Non-interest loss ( 338 ) ( 1,280 )

Total loss ( 338 ) ( 1,280 )

Interest expense 2,951 2,928

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Net income $ 8,473 $ 5,225

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Year Ended December 31,

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Net income $ 8,473 $ 5,225

Depreciation and amortization 225 167

Deferred income tax expense ( 3,856 ) 941

Undistributed equity in subsidiaries ( 11,617 ) ( 8,762 )

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Change in other liabilities ( 147 ) ( 77 )

Net cash provided by/(used in) operating activities ( 5,195 ) 42

Cash flows from investing activities

Investment in subsidiaries — ( 6,009 )

Loan and note receivable originations and principal collections — 1,978

Net cash used in investing activities — ( 4,031 )

Net cash used in operating activities ( 3,010 ) ( 5,195 )

Cash flows from financing activities

Proceeds from subordinated notes, net of issuance costs — 19,509

Payment on subordinated notes — ( 6,575 )

Repurchase of common stock ( 89 ) —

Settlement of restricted stock ( 706 ) ( 439 )

Proceeds from the exercise of stock options — 245

Net cash provided by/(used in) financing activities ( 194 ) 12,237

Net cash used in financing activities ( 795 ) ( 194 )

Net change in cash and cash equivalents ( 3,805 ) ( 5,389 )

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NOTE 21 – OTHER NON-INTEREST EXPENSE

Other non-interest expense as shown in the Consolidated Statements of Income is detailed in the following schedule to the extent the components exceed one percent of total interest income and other income (dollars in thousands):

Year Ended December 31,

Other non-interest expense 2023 2022

(dollars in thousands) 2024 2023

Corporate development and related $ 2,904 $ 2,685

Loan and deposit related 2,564 2,124

Provision for other real estate owned 1,107 —

Other 861 565

Total other non-interest expense $ 7,436 $ 5,374

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NOTE 22 – REGULATORY CAPITAL MATTERS

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The final rules implementing Basel Committee on Banking Supervision’s capital guidelines for U.S.

banks ("Basel III rules") has been fully phased in.

The net unrealized gain or loss on available-for-sale securities is not included in computing regulatory capital.

During the years ended December 31, 2023, First Western made no capital injections into the Bank and made $ 6.0 million of capital injections into the Bank during the year ended December 31, 2022.

Management believes as of December 31, 2023, First Western and the Bank meet all capital adequacy requirements to which they are subject to.

banks ("Basel III rules") have been fully phased in.

The net unrealized gain or loss on held-to-maturity debt securities included in AOCI and accumulated net gains or losses on cash flow hedges are not included in computing regulatory capital.

During the years ended December 31, 2024 and 2023, First Western made no capital injections into the Bank.

Management believes as of December 31, 2024, First Western and the Bank meet all capital adequacy requirements to which they are subject.

Prompt corrective action regulations for First Western and the Bank provide five classifications:

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and (iii) a total capital ratio of 10.5 %.

Banks are subject to limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses if their capital level falls below the buffer amount.

Banks are subject to limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses if its capital level falls below the buffer amount.

These limitations establish a maximum percentage of eligible retained income that can be utilized for such activities.

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Management believes there are no conditions or events since December 31, 2024 that have changed the categorization of First Western and the Bank as well capitalized.

Management believes First Western and the Bank met all capital adequacy requirements to which they are subject to as of December 31, 2023 and December 31, 2022.

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Management believes First Western and the Bank met all capital adequacy requirements to which they are subject to as of December 31, 2024 and 2023.

The following presents the actual and required capital amounts and ratios as of the dates noted (dollars in thousands):

Actual Required for Capital Adequacy Purposes(1) To be Well Capitalized

Actual Required for Capital Adequacy Purposes (1)

To be Well Capitalized

Corrective Action

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As of December 31, 2024, $ 113.8 million of retained earnings is available to pay dividends from the Bank.

As of December 31, 2023 and December 31, 2022 no dividends were declared and paid by the Bank.

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As of December 31, 2024 and 2023, no dividends were declared and paid by the Bank.

NOTE 23 – SUBSEQUENT EVENTS

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On February 19, 2025 the Company sold one OREO property that had a carrying value of $ 25.6 million as of December 31, 2024.

The sale resulted in a gain of $ 1.0 million.

Additionally, the Company is under contract to sell an OREO property that is expected to close in March 2025.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data