SOUTHERN FIRST BANCSHARES INC 10-K

Item 8. Financial Statements and Supplementary Data MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING Management of Southern First Bancshares, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) of the Securities Exchange Act of 1934, as amended. The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the U.S. The Company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records, that in reasonable detail, accurately and fairly reflect the transactions and disposition of the Company’s assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit the preparation of the financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the Company are being made only in accordance with the authorizations of the Company’s management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material impact on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate due to changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate. Management conducted an evaluation of the effectiveness of the internal control over financial reporting based on the framework in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in 2013. Based on this evaluation under the COSO criteria, management concluded that the internal control over financial reporting was effective as of December 31, 2025. The effectiveness of the internal control structure over financial reporting as of December 31, 2025 has been audited by Elliott Davis, LLC, an independent registered public accounting firm, as stated in their report included in this Annual Report on Form 10-K, which expresses an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2025. /s/ R. Arthur Seaver, Jr. /s/ Christian J. Zych Chief Executive Officer Chief Financial Officer Southern First Bancshares, Inc. Southern First Bancshares, Inc. 69 Table of Contents Report of Independent Registered Public Accounting Firm To the Shareholders and Board of Directors of Southern First Bancshares, Inc. and Subsidiary Opinion on the Internal Control Over Financial Reporting We have audited Southern First Bancshares, Inc. and Subsidiary's (the “Company”) internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2025 and 2024 and the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2025 of the Company and our report dated February 24, 2026 expressed an unqualified opinion. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Elliott Davis, LLC Greenville, South Carolina February 24, 2026 70 Table of Contents Report of Independent Registered Public Accounting Firm (PCAOB ID 149 ) To the Shareholders and Board of Directors of Southern First Bancshares, Inc. and Subsidiary Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Southern First Bancshares, Inc. and Subsidiary (the “Company”) as of December 31, 2025 and 2024, the related consolidated statements of income, comprehensive income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 2025, and the related notes to the consolidated financial statements (collectively, the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013, and our report dated February 24, 2026, expressed an unqualified opinion on the effectiveness of the Company's internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Allowance for Credit Losses As described in Note 4 to the Company’s financial statements, the Company has a gross loan portfolio of $3.8 billion and related allowance for credit losses of $42.3 million as of December 31, 2025. As described by the Company in Note 1, the Company applied a discounted cash flow methodology on a segment-by-segment basis at the loan level including development of regression models to determine relationships between historical loss experience and macroeconomic variables. Historical loss rates used in the quantitative model were derived using both the Company's and peer bank data obtained from publicly-available sources such as federal call reports encompassing an economic cycle. Management also considers qualitative adjustments when estimating credit losses to consider the model's quantitative limitations. Qualitative adjustments to quantitative loss factors, either negative or positive, may include changes in the global, national and local economy, experience and depth of management, nature and volume of the loan portfolio, risk ratings and volume 71 Table of Contents and severity of past due loans and nonperforming assets, as well as concentration risks and changes in the underlying collateral for collateral dependent loans in the consideration of the qualitative portion of the allowance for credit loss. We identified the Company’s estimate of the allowance for credit losses as a critical audit matter. The principal considerations for our determination of the allowance for credit losses as a critical audit matter related to the high degree of subjectivity in the Company’s judgments in determining the qualitative factors. Auditing these complex judgments and assumptions by the Company involves especially challenging auditor judgment due to the nature and extent of audit evidence and effort required to address these matters, including the extent of specialized skill or knowledge needed. The primary procedures we performed to address this critical audit matter included the following: · We tested the design and operating effectiveness of controls relating to the Company’s determination of the allowance for credit losses, including controls over qualitative factors.   · We tested the design and operating effectiveness of controls relating to management’s review of reliability and accuracy of data used to calculate and estimate the various components of the allowance for credit losses, including accuracy of the calculation and validation procedures over the models.   · We evaluated the relevance and the reasonableness of assumptions related to evaluation of the loan portfolio, current economic conditions, and other risk factors used in development of the qualitative factors. · We evaluated the reasonableness of assumptions and data used by the Company in developing the qualitative factors by comparing these data points to internally developed and third-party sources, and other audit evidence gathered.  ·  We evaluated subsequent events and transactions and considered whether they corroborated or contradicted the Company’s estimate of allowance for credit losses.  /s/ Elliott Davis, LLC We have served as the Company's auditor since 1999. Greenville, South Carolina February 24, 2026 72 Table of Contents SOUTHERN FIRST BANCSHARES, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS December 31, (dollars in thousands, except share data) 2025 2024 ASSETS Cash and cash equivalents: Cash and due from banks $ 27,821 22,553 Federal funds sold 183,473 128,452 Interest-bearing deposits with banks 58,289 11,858 Total cash and cash equivalents 269,583 162,863 Investment securities: Investment securities available for sale 127,730 132,127 Other investments 20,063 19,490 Total investment securities 147,793 151,617 Mortgage loans held for sale 11,569 4,565 Loans 3,845,124 3,631,767 Less allowance for credit losses ( 42,280 ) ( 39,914 ) Loans, net 3,802,844 3,591,853 Bank owned life insurance 55,775 54,070 Property and equipment, net 83,465 88,794 Deferred income taxes, net 13,702 13,467 Other assets 18,763 20,364 Total assets $ 4,403,494 4,087,593 LIABILITIES Deposits $ 3,716,803 3,435,765 Federal Home Loan Bank advances and other borrowings 240,000 240,000 Subordinated debentures 24,903 24,903 Other liabilities 53,131 56,481 Total liabilities 4,034,837 3,757,149 SHAREHOLDERS’ EQUITY Preferred stock, par value $ .01 per share, 10,000,000 shares authorized - - Common stock, par value $ .01 per share, 20,000,000 shares authorized, 8,213,328 and 8,164,872 shares issued and outstanding at December 31, 2025 and December 31, 2024, respectively. 82 82 Nonvested restricted stock ( 1,338 ) ( 3,884 ) Additional paid-in capital 125,924 124,641 Accumulated other comprehensive loss ( 7,454 ) ( 11,472 ) Retained earnings 251,443 221,077 Total shareholders’ equity 368,657 330,444 Total liabilities and shareholders’ equity $ 4,403,494 4,087,593 See notes to consolidated financial statements that are an integral part of these consolidated statements. 73 Table of Contents SOUTHERN FIRST BANCSHARES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME For the years ended December 31, (dollars in thousands, except per share data) 2025 2024 2023 Interest income Loans $ 198,145 186,863 166,137 Investment securities 5,370 5,812 4,463 Federal funds sold and interest-bearing deposits with banks 7,966 8,537 6,998 Total interest income 211,481 201,212 177,598 Interest expense Deposits 95,624 108,774 91,373 Borrowings 10,906 11,216 8,571 Total interest expense 106,530 119,990 99,944 Net interest income 104,951 81,222 77,654 Provision for credit losses 2,950 125 1,260 Net interest income after provision for credit losses 102,001 81,097 76,394 Noninterest income Mortgage banking income 6,282 5,560 4,036 Service fees on deposit accounts 2,365 1,764 1,382 ATM and debit card income 2,377 2,337 2,245 Income from bank owned life insurance 1,705 1,569 1,379 Loss on sale of investment securities ( 515 ) - - Other income 924 911 818 Total noninterest income 13,138 12,141 9,860 Noninterest expenses Compensation and benefits 44,806 43,546 40,275 Occupancy 9,983 10,291 10,255 Outside service and data processing costs 8,528 7,741 7,078 Insurance 3,875 4,022 3,766 Professional fees 2,455 2,404 2,496 Marketing 1,529 1,412 1,357 Other 4,358 3,910 3,600 Total noninterest expenses 75,534 73,326 68,827 Income before income tax expense 39,605 19,912 17,427 Income tax expense 9,239 4,382 4,001 Net income available to common shareholders $ 30,366 15,530 13,426 Earnings per common share Basic $ 3.75 1.92 1.67 Diluted $ 3.72 1.91 1.66 Weighted average common shares outstanding Basic 8,091,322 8,080,623 8,046,633 Diluted 8,160,464 8,117,057 8,078,454 See notes to consolidated financial statements that are an integral part of these consolidated statements. 74 Table of Contents SOUTHERN FIRST BANCSHARES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME For the years ended December 31, (dollars in thousands) 2025 2024 2023 Net income $ 30,366 15,530 13,426 Other comprehensive income (loss): Unrealized gain (loss) on securities available for sale: Unrealized holding gain (loss) arising during the period, pretax 4,571 ( 165 ) 2,620 Tax benefit (expense) ( 960 ) 35 ( 552 ) Reclassification of realized loss 515 - - Tax benefit ( 108 ) - - Other comprehensive income (loss) 4,018 ( 130 ) 2,068 Comprehensive income $ 34,384 15,400 15,494 See notes to consolidated financial statements that are an integral part of these consolidated statements. 75 Table of Contents SOUTHERN FIRST BANCSHARES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY FOR THE YEARS ENDED DECEMBER 31, 2025, 2024 AND 2023 Common stock Preferred stock Nonvested restricted Additional paid-in Accumulated other comprehensive income Retained (dollars in thousands, except share data) Shares Amount Shares Amount stock capital (loss) Earnings Total December 31, 2022 8,011,045 $ 80 - $ - $ ( 3,306 ) $ 119,027 $ ( 13,410 ) $ 192,121 $ 294,512 Net income Common stock - - - - - - - 13,426 13,426 Proceeds from exercise of stock options 26,250 - - - - 518 - - 518 Issuance of restricted stock, net of forfeitures Preferred stock 50,891 1 - - ( 1,705 ) 1,704 - - - Compensation expense related to restricted stock, net of tax - - - - 1,415 - - - 1,415 Compensation expense related to stock options, net of tax - - - - - 528 - - 528 Other comprehensive income - - - - - - 2,068 - 2,068 December 31, 2023 8,088,186 $ 81 - $ - $ ( 3,596 ) $ 121,777 $ ( 11,342 ) $ 205,547 $ 312,467 Net income Additional paid-in capital - - - - - - - 15,530 15,530 Proceeds from exercise of stock options 16,250 - - - - 294 - - 294 Issuance of restricted stock, net of forfeitures Retained Earnings 60,436 1 - - ( 2,197 ) 2,196 - - - Compensation expense related to restricted stock, net of tax - - - - 1,909 - - - 1,909 Compensation expense related to stock options, net of tax - - - - - 374 - - 374 Other comprehensive loss - - - - - - ( 130 ) - ( 130 ) December 31, 2024 8,164,872 $ 82 - $ - $ ( 3,884 ) $ 124,641 $ ( 11,472 ) $ 221,077 $ 330,444 Net income Accumulated other comprehensive income (loss) - - - - - - - 30,366 30,366 Proceeds from exercise of stock options 68,500 - - - - 2,042 - - 2,042 Restricted shares withheld for taxes ( 12,850 ) - - - - ( 485 ) - - ( 485 ) Restricted stock awards (forfeitures) ( 7,194 ) - - - 307 ( 307 ) - - - Share based compensation expense, net of forfeitures - - - - 2,239 33 - - 2,272 Other comprehensive income - - - - - - 4,018 - 4,018 December 31, 2025 8,213,328 $ 82 - $ - $ ( 1,338 ) $ 125,924 $ ( 7,454 ) $ 251,443 $ 368,657 See notes to consolidated financial statements that are an integral part of these consolidated statements. 76 Table of Contents SOUTHERN FIRST BANCSHARES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS For the years ended December 31, (dollars in thousands) 2025 2024 2023 Operating activities Net income $ 30,366 15,530 13,426 Adjustments to reconcile net income to cash provided by operating activities: Provision for credit losses 2,950 125 1,260 Depreciation and other amortization 4,307 4,810 4,816 Accretion and amortization of securities discounts and premiums, net 430 554 61 Loss on sale of investment securities available for sale 515 - - Gain on sale of fixed assets - ( 28 ) - Net change in operating leases 87 145 233 Compensation expense related to stock options and restricted stock grants 2,272 2,283 1,943 Gain on sale of loans held for sale ( 6,338 ) ( 5,447 ) ( 3,790 ) Loans originated and held for sale ( 217,420 ) ( 188,906 ) ( 147,040 ) Proceeds from sale of loans held for sale 216,754 196,982 147,553 Increase in cash surrender value of bank owned life insurance ( 1,705 ) ( 1,569 ) ( 1,379 ) Increase in deferred tax asset ( 1,303 ) ( 1,232 ) ( 230 ) Decrease (increase) in other assets, net 1,876 ( 3,527 ) ( 1,378 ) Increase (decrease) in other liabilities, net ( 2,334 ) 5,838 2,178 Net cash provided by operating activities 30,457 25,558 17,653 Investing activities Increase (decrease) in cash realized from: Increase in loans, net ( 213,716 ) ( 30,408 ) ( 329,431 ) Purchase of property and equipment ( 581 ) ( 785 ) ( 1,242 ) Purchase of investment securities: Available for sale ( 32,457 ) ( 23,937 ) ( 63,224 ) Other investments ( 573 ) ( 4,301 ) ( 51,642 ) Proceeds from maturities, calls and repayments of investment securities: Available for sale 11,894 25,793 24,428 Other investments - 4,750 42,536 Proceeds from sales of investment securities available for sale 29,101 - - Proceeds from sale of fixed assets - 28 - Net cash used for investing activities ( 206,332 ) ( 28,860 ) ( 378,575 ) Financing activities Increase (decrease) in cash realized from: Increase in deposits, net 281,038 56,201 245,700 Increase (decrease) in Federal Home Loan Bank advances and other borrowings - ( 35,000 ) 100,000 Decrease in subordinated debentures - ( 11,500 ) - Proceeds from the exercise of stock options 2,042 294 518 Restricted shares withheld for taxes ( 485 ) - - Net cash provided by financing activities 282,595 9,995 346,218 Net increase (decrease) in cash and cash equivalents 106,720 6,693 ( 14,704 ) Cash and cash equivalents, beginning of year 162,863 156,170 170,874 Cash and cash equivalents, end of year $ 269,583 162,863 156,170 Supplemental information Cash paid for Interest $ 106,853 119,348 93,351 Income taxes 10,640 3,767 1,514 Schedule of non-cash transactions Unrealized gain (loss) on securities, net of income taxes 3,611 ( 130 ) 2,068 Right-of-use assets obtained in exchange for lease obligations: Operating leases - - 145 Foreclosure of other real estate 275 - - See notes to consolidated financial statements that are an integral part of these consolidated statements. 77 Table of Contents NOTE 1 – Summary of Significant Accounting Policies and Activities Southern First Bancshares, Inc. (the “Company”) is a South Carolina corporation that owns all of the capital stock of Southern First Bank (the “Bank”) and all of the stock of Greenville First Statutory Trust I and II (collectively, the “Trusts”). The Trusts are special purpose non-consolidated entities organized for the sole purpose of issuing trust preferred securities. The Bank’s primary federal regulator is the Federal Deposit Insurance Corporation (the “FDIC”). The Bank is also regulated and examined by the South Carolina Board of Financial Institutions. The Bank is primarily engaged in the business of accepting demand deposits and savings deposits insured by the FDIC, and providing commercial, consumer and mortgage loans to the general public. Basis of Presentation The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Southern First Bank. In consolidation, all significant intercompany transactions have been eliminated. The accounting and reporting policies conform to accounting principles generally accepted in the United States of America. In accordance with guidance issued by the Financial Accounting Standards Board (“FASB”), the operations of the Trusts have not been consolidated in these financial statements. Use of Estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amount of income and expenses during the reporting periods. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for credit losses, derivatives, real estate acquired in settlement of loans, fair value of financial instruments, evaluating investment securities for credit impairment and valuation of deferred tax assets. Risks and Uncertainties In the normal course of its business, the Company encounters two significant types of risks: economic and regulatory. There are three main components of economic risk: interest rate risk, credit risk and market risk. The Company is subject to interest rate risk to the degree that its interest-bearing liabilities mature or reprice at different speeds, or on different bases, than its interest-earning assets. Credit risk is the risk of default within the Company’s loan portfolio that results from borrowers’ inability or unwillingness to make contractually required payments. Market risk reflects changes in the value of collateral underlying loans receivable and the valuation of real estate held by the Company. There were several notable bank failures in 2023, driven primarily by liquidity challenges as depositors rapidly withdrew funds. These failures were exacerbated by the impact of rising interest rates, which left affected banks unable to sell long-term investment securities without incurring significant losses. In response, regulators took steps to stabilize the banking system, including ensuring that losses to the Deposit Insurance Fund used to support uninsured depositors would be recovered through a special assessment on banks, as mandated by law. While the banking disruptions seen in 2023 have largely stabilized, the financial environment remains uncertain, shaped by ongoing inflationary pressures, other bank failures in 2025, and persistent concerns around commercial real estate values and refinancing risks. In late 2024, the Federal Reserve began lowering interest rates in response to easing inflation and slowing growth. While lower rates can support loan demand, they may also compress net interest margins. The Federal Reserve is also continuing balance sheet reduction, contributing to some funding and market volatility. The long-term impact of these developments on the economy, financial institutions, and regulatory frameworks remains uncertain. The Company is subject to the regulations of various governmental agencies. These regulations can and do change significantly from period to period. The Company also undergoes periodic examinations by the regulatory agencies, which may subject it to changes with respect to valuation of assets, amount of required credit loss allowance and operating restrictions resulting from the regulators’ judgments based on information available to them at the time of their examinations. The Bank makes loans to individuals and businesses in the Upstate, Midlands, and Lowcountry regions of South Carolina as well as the Triangle, Triad and Charlotte regions of North Carolina and Atlanta, Georgia for various personal and commercial purposes. The Bank’s loan portfolio has a concentration of real estate loans. As of December 31, 2025 and 2024, real estate loans represented 82.8 % and 83.5 % of total loans, respectively. However, borrowers’ ability to repay their loans is not dependent upon any specific economic sector. 78 Table of Contents As of December 31, 2025, the Company’s and the Bank’s capital ratios were in excess of all regulatory requirements. While management believes that we have sufficient capital to withstand an extended economic recession, our reported and regulatory capital ratios could be adversely impacted by future credit losses. The Company maintains access to multiple sources of liquidity, including a $ 15.0 million holding company line of credit with another bank which could be used to support capital ratios at the subsidiary bank. As of December 31, 2025, the $ 15.0 million line was unused. Subsequent Events Subsequent events are events or transactions that occur after the balance sheet date but before financial statements are issued. Recognized subsequent events are events or transactions that provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements. Non-recognized subsequent events are events that provide evidence about conditions that did not exist at the date of the balance sheet but arose after that date. Management performed an evaluation to determine whether there have been any subsequent events since the balance sheet date and determined that no subsequent events occurred requiring accrual or disclosure. Reclassifications Certain amounts, previously reported, have been reclassified to state all periods on a comparable basis and had no effect on shareholders’ equity or net income. Change in Accounting Estimate During the first quarter of 2025, the Company changed its methodology for estimating the allowance for credit losses on loans by transitioning from a lifetime probability of default and loss given default model to a discounted cash flow (“DCF”) approach. The Company transitioned to the DCF method as it allows for a better estimation of credit losses through customization among the various inputs by loan segmentation. The DCF model uses regression techniques that relate one or more economic factors to the default rate of various portfolios to build reasonable and supportable forecasts to estimate future losses. The Company determined that the national gross domestic product and unemployment rate were the two economic factors which had the greatest correlation to historical performance for use in the forecasted portion of the model. In addition, the transition to the DCF model allowed the Company to reduce its reliance on qualitative factors and to analyze them on a more granular level, such as by segment. The refinement represents a change in accounting estimate under ASC Topic 250, Accounting Changes and Error Corrections, with prospective application beginning in the period of change. This change in accounting estimate did not have a material effect on the Company’s financial statements. Cash and Cash Equivalents Cash and cash equivalents include cash and due from banks, interest bearing deposits and federal funds sold. Cash and cash equivalents have original maturities of three months or less, and federal funds sold are generally purchased and sold for one-day periods. Accordingly, the carrying value of these instruments is deemed to be a reasonable estimate of fair value. At December 31, 2025 and 2024, included in cash and cash equivalents was $ 1.1 million and $ 5.4 million, respectively, on deposit with the Federal Reserve Bank. Investment Securities We classify our investment securities as held to maturity securities, trading securities and available for sale securities as applicable. Investment securities are designated as held to maturity if we have the intent and the ability to hold the securities to maturity. Held to maturity securities are carried at amortized cost, adjusted for the amortization of any related premiums or the accretion of any related discounts into interest income using a methodology which approximates a level yield of interest over the estimated remaining period until maturity. Investment securities that are purchased and held principally for the purpose of selling in the near term are reported as trading securities. Trading securities are carried at fair value with unrealized holding gains and losses included in earnings. 79 Table of Contents We classify investment securities as available for sale when at the time of purchase we determine that such securities may be sold at a future date or if we do not have the intent or ability to hold such securities to maturity. Securities designated as available for sale are recorded at fair value. Changes in the fair value of available for sale debt securities are included in shareholders’ equity as unrealized gains or losses, net of the related tax effect. Realized gains or losses on available for sale securities are computed on the specific identification basis. Allowance for Credit Losses – Investment Securities For available for sale debt securities in an unrealized loss position, the Company first assesses whether it intends to sell, or if it is more likely than not that it will be required to sell the security before recovery of the amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income with the establishment of an allowance under the Current Expected Credit Loss Model (“CECL”). For debt securities available for sale that do not meet the aforementioned criteria, the Company evaluates whether any decline in fair value is due to credit loss factors. In making this assessment, management considers any changes to the rating of the security by a rating agency and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of the cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income. Changes in the allowance for credit losses under CECL are recorded as provision for (or reversal of) credit loss expense. Losses are charged against the allowance when management believes the uncollectibility of an available for sale security is confirmed or when either of the criteria regarding intent or requirement to sell is met. At December 31, 2025 and 2024, there was no allowance for credit losses related to the available-for-sale portfolio. In addition, the Company did not have any held-to-maturity securities at December 31, 2025 and 2024, respectively. Accrued interest receivable on available for sale debt securities totaled $ 539,000 and $ 576,000 at December 31, 2025 and December 31, 2024, respectively, and was excluded from the estimate of credit losses. Other Investments Other investments include stock acquired for membership and regulatory purposes, such as Federal Home Loan Bank of Atlanta (“FHLB”) stock, investments in unconsolidated subsidiaries and other nonmarketable securities. FHLB stock is generally pledged against any borrowings from the FHLB and cash dividends on our FHLB stock are recorded in investment income. Other nonmarketable securities consist of investments in funds related to the Small Business Investment Company (“SBIC”) and Rural Business Investment Company (“RBIC”) programs, as well as an investment in a South Carolina not-for-profit corporation. No ready market exists for these stocks and they have no quoted market value. As a result, these securities are carried at cost and are periodically evaluated for impairment. Loans Loans are stated at the principal balance outstanding. Unamortized net loan fees and the allowance for possible credit losses are deducted from total loans on the balance sheets. Interest income is recognized over the term of the loan based on the principal amount outstanding. The net of loan origination fees received and direct costs incurred in the origination of loans is deferred and amortized to interest income over the contractual life of the loans adjusted for actual principal prepayments using a method approximating the interest method. Allowance for Credit Losses - Loans Under CECL, the allowance for credit losses on loans is a valuation allowance estimated at each balance sheet date in accordance with GAAP that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans. Management assesses the adequacy of the allowance on a quarterly basis. This assessment includes procedures to estimate the allowance and test the adequacy and appropriateness of the resulting balance. The level of the allowance is based upon management’s evaluation of historical default and loss experience, current and projected economic conditions, asset quality trends, known and inherent risks in the portfolio, adverse situations that may affect the borrowers’ ability to repay a loan, the estimated value of any underlying collateral, composition of the loan portfolio, industry and peer bank loan quality indications and other pertinent factors, including regulatory recommendations. Management believes the level of the allowance for credit losses is adequate to absorb all expected future losses inherent in the loan portfolio 80 Table of Contents at the balance sheet date. The allowance is increased through provision for credit losses and decreased by charge-offs, net of recoveries of amounts previously charged-off. The allowance for credit losses is measured on a collective basis for pools of loans with similar risk characteristics. The Company has identified the following pools of financial assets with similar risk characteristics for measuring expected credit losses: Commercial loans ● Owner occupied real estate - Owner occupied commercial mortgages consist of loans to purchase or re-finance owner occupied nonresidential properties. This includes office buildings, other commercial facilities, and farmland. Commercial mortgages secured by owner occupied properties are primarily dependent on the ability of borrowers to achieve business results consistent with those projected at loan origination. While these loans and leases are collateralized by real property in an effort to mitigate risk, it is possible the liquidation of collateral will not fully satisfy the obligation. ● Non-owner occupied real estate - Non-owner occupied commercial mortgages consist of loans to purchase or refinance investment nonresidential properties. This includes office buildings and other facilities rented or leased to unrelated parties, as well as farmland and multifamily properties. The primary risk associated with income producing commercial mortgage loans is the ability of the income-producing property that collateralizes the loan to produce adequate cash flow to service the debt. While these loans are collateralized by real property in an effort to mitigate risk, it is possible the liquidation of collateral will not fully satisfy the obligation. ● Construction - Construction loans consist of loans to finance land for development of commercial or residential real property and construction of multifamily apartments or other commercial properties. These loans are highly dependent on the supply and demand for commercial real estate as well as the demand for newly constructed residential homes and lots acquired for development. Deterioration in demand could result in decreased collateral values, which could make repayments of outstanding loans difficult for customers. ● Commercial business - Commercial business loans consist of loans or lines of credit to finance accounts receivable, inventory or other general business needs, business credit cards, and lease financing agreements for equipment, vehicles, or other assets. The primary risk associated with commercial and industrial and lease financing loans is the ability of borrowers to achieve business results consistent with those projected at origination. Failure to achieve these projections presents risk that the borrower will be unable to service the debt consistent with the contractual terms of the loan. Consumer loans ● Real estate - Residential mortgages consist of loans to purchase or refinance the borrower’s primary dwelling, second residence or vacation home and are often secured by 1-4 family residential property. Significant and rapid declines in real estate values can result in borrowers having debt levels in excess of the current market value of the collateral. ● Home equity - Home equity loans consist of home equity lines of credit and other lines of credit secured by first or second liens on the borrower’s primary residence. These loans are secured by both senior and junior liens on the residential real estate and are particularly susceptible to declining collateral values. This risk is elevated for loans secured by junior lines as a substantial decline in value could render the junior lien position effectively unsecured. ● Construction - Construction loans consist of loans to construct a borrower’s primary or secondary residence or vacant land upon which the owner intends to construct a dwelling at a future date. These loans are typically secured by undeveloped or partially developed land in anticipation of completing construction of a 1-4 family residential property. There is risk these construction and development projects can experience delays and cost overruns exceeding the borrower’s financial ability to complete the project. Such cost overruns can result in foreclosure of partially completed and unmarketable collateral. ● Other - Consumer loans consist of loans to finance unsecured home improvements, student loans, automobiles and revolving lines of credit that can be secured or unsecured. The value of the underlying collateral within this class is at risk of potential rapid depreciation which could result in unpaid balances in excess of the collateral. 81 Table of Contents On January 1, 2025, the Company transitioned to the DCF modeling approach to estimate the allowance for credit losses “ACL” on loans as it allows for a better estimation of credit losses through customization among the various inputs by loan segmentation. The DCF methodology is applied on a segment-by-segment basis at the loan level with a one-year reasonable and supportable forecast period, followed by a one-year reversion to the long-term average. The Company considers economic forecasts of national gross domestic product (“GDP”) and unemployment rates as reported by Fannie Mae to inform the model for loss estimation. Historical loss rates used in the quantitative model were derived using both the Bank’s and peer bank data obtained from publicly-available sources (i.e., federal call reports) encompassing an economic cycle. The peer group utilized by the Bank is comprised of financial institutions of relatively similar size (i.e., $1-$15 billion of total assets) and in similar markets. In addition, the DCF methodology considers the weighted average life of the portfolio, impacting the reaction time and the exposure to potential loss based on changes in the interest rate environment. Management also considers qualitative adjustments when estimating loan losses to take into account the model’s quantitative limitations. Qualitative adjustments to quantitative loss factors, either negative or positive, may include changes in lending policies; international, national, regional, and local conditions; volume and terms of loans; experience and depth of management; volume and severity of past due loans; concentrations of credit; and loan review results. The Company enhanced its qualitative factor framework to better address risks that are not reflected in the quantitative loss factors. The risk weightings associated with certain qualitative factors were revised based on new information reflecting the current economic and market environment. Prior to January 1, 2025, the Company used a lifetime probability of default and loss given default modeling approach to estimate the allowance for credit losses on loans. This method used historical correlations between default experience and the age of loans to forecast defaults and losses, assuming that a loan in a pool shares similar risk characteristics such as loan product type, risk rating and loan age, and demonstrates similar default characteristics as other loans in that pool, as the loan progresses through its lifecycle. The Company calculated lifetime probability of default and loss given default rates based on historical loss experience, which was used to calculate expected losses based on the pool’s loss rate and the age of loans in the pool. The Company used its own internal data to measure historical credit loss experience within the pools with similar risk characteristics over an economic cycle. The probability of default and loss given default method also includes assumptions of observed migration over the lifetime of the underlying loan data. While the Company’s policies and procedures used to estimate the allowance for credit losses, as well as the resulting provision for credit losses charged to income, are considered adequate by management and are reviewed periodically by regulators, model validators and internal audit, they are necessarily approximate and imprecise. There are factors beyond the Company’s control, such as changes in projected economic conditions, real estate markets or particular industry conditions which may materially impact asset quality and the adequacy of the allowance for credit losses and thus the resulting provision for credit losses. Accrued Interest Receivable Accrued interest receivable related to loans totaled $ 11.8 million and $ 11.0 million at December 31, 2025 and December 31, 2024, respectively, and was reported in other assets on the consolidated balance sheets. The Company elected not to measure an allowance for credit losses for accrued interest receivable and instead elected to reverse interest income on loans or securities that are placed on nonaccrual status, which is generally when the instrument is 90 days past due, or earlier if the Company believes the collection of interest is doubtful. The Company has concluded that this policy results in the timely reversal of uncollectable interest. Unfunded Commitments The Company estimates expected credit losses on commitments to extend credit over the contractual period in which the Company is exposed to credit risk on the underlying commitments, unless the obligation is unconditionally cancelable by the Company. The allowance for off-balance sheet credit exposures, which is reflected within other liabilities on the consolidated balance sheets, is adjusted for as an increase or decrease to the provision for credit losses. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life. The allowance is calculated using the same aggregate reserve rates calculated for the funded portion of loans at the portfolio level applied to the amount of commitments expected to fund. The Company’s CECL allowances will fluctuate over time due to macroeconomic conditions and forecasts as well as the size and composition of the loan portfolios. 82 Table of Contents Nonaccrual and Past Due Loans Loans are generally placed on nonaccrual status when principal or interest becomes 90 days past due, or when payment in full is not anticipated. When a loan is placed on nonaccrual status, interest accrued but not received is generally reversed against interest income. Cash receipts on nonaccrual loans are not recorded as interest income, but are used to reduce the loan’s principal balance. A nonaccrual loan is generally returned to accrual status and accrual of interest is resumed when payments have been made according to the terms and conditions of the loan for a continuous six-month period. Our loans are considered past due when contractually required principal or interest payments have not been made on the due dates. Nonperforming Assets Nonperforming assets include real estate acquired through foreclosure or deed taken in lieu of foreclosure, loans on nonaccrual status and loans past due 90 days or more and still accruing interest. Loans are placed on nonaccrual status when, in the opinion of management, the collection of additional interest is uncertain. Thereafter no interest is taken into income until such time as the borrower demonstrates the ability to pay both principal and interest. Individually Evaluated Loans Our individually evaluated loans include loans on nonaccrual status and other loans as needed. For loans that are classified as individually evaluated, an allowance is established when the fair value (discounted cash flows, collateral value, or observable market price) of the individually evaluated loan less costs to sell, are lower than the carrying value of that loan. A loan is considered individually evaluated when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due, among other factors. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as individually evaluated. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including, without limitation, the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. The allowance for credit loss is measured on a loan-by-loan basis for commercial and consumer loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent. Loan Charge-off Policy For commercial loans, we generally fully charge off or charge collateralized loans down to net realizable value when management determines the loan to be uncollectible; repayment is deemed to be projected beyond reasonable time frames; the loan has been classified as a loss by either our internal loan review process or our banking regulatory agencies; the client has filed bankruptcy and the loss becomes evident owing to a lack of assets; or the loan is 120 days past due unless both well-secured and in the process of collection. For consumer loans, we generally charge down to net realizable value when the loan is 180 days past due. Loan Modifications to Borrowers Experiencing Financial Difficulty Loans that are modified are reviewed by the Company to identify if the modification was due to a borrower experiencing financial difficulty. Terms may be modified to fit the ability of the borrower to repay in line with its current financial status. The modification of the terms of such loans includes one or a combination of the following: a reduction of the stated interest rate of the loan, an extension of the maturity date, a permanent reduction of the recorded investment of the loan, or an other-than-insignificant payment delay. Other Real Estate Owned (“OREO”) Real estate acquired through foreclosure is initially recorded at the lower of cost or estimated fair value less selling costs. Subsequent to the date of acquisition, it is carried at the lower of cost or fair value, adjusted for net selling costs. Fair values of real estate owned are reviewed regularly and write-downs are recorded when it is determined that the carrying value of real estate exceeds the fair value less estimated costs to sell. Costs relating to the development and improvement of such property are capitalized, whereas those costs relating to holding the property are expensed. Property and Equipment Property and equipment are stated at cost. Major repairs are charged to operations, while major improvements are capitalized. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets. 83 Table of Contents Upon retirement, sale, or other disposition of property and equipment, the cost and accumulated depreciation are eliminated from the accounts, and gain or loss is included in income from operations. Construction in progress is stated at cost, which includes the cost of construction and other direct costs attributable to the construction. No provision for depreciation is made on construction in progress until such time as the relevant assets are completed and put into use. Operating Leases The Company maintains operating leases on land and buildings for various office spaces. The operating right-of-use asset is included in property and equipment and the operating right-of-use liability is included in other liabilities on the balance sheets. The right-of-use asset and lease liability are recognized at lease commencement by calculating the net present value of the lease payments over the lease term. Bank Owned Life Insurance Policies Bank owned life insurance policies represent the cash value of policies on certain officers of the Company. Comprehensive Income Comprehensive income (loss) consists of net income and net unrealized gains (losses) on securities and is presented in the statements of shareholders’ equity and comprehensive income. The statement requires only additional disclosures in the consolidated financial statements; it does not affect our results of operations. Revenue from Contracts with Customers The Company records revenue from contracts with customers in accordance with Accounting Standards Codification Topic 606, “Revenue from Contracts with Customers” (“Topic 606”). Under Topic 606, the Company must identify the contract with a customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract, and recognize revenue when (or as) the Company satisfies a performance obligation. Significant revenue has not been recognized in the current reporting period that results from performance obligations satisfied in previous periods. The Company’s primary sources of revenue are derived from interest and dividends earned on loans, investment securities, and other financial instruments that are not within the scope of Topic 606. The Company has evaluated the nature of its contracts with customers and determined that further disaggregation of revenue from contracts with customers into more granular categories beyond what is presented in the Consolidated Statements of Income was not necessary. The Company generally fully satisfies its performance obligations on its contracts with customers as services are rendered and the transaction prices are typically fixed; charged either on a periodic basis or based on activity. Because performance obligations are satisfied as services are rendered and the transaction prices are fixed, the Company has made no significant judgments in applying the revenue guidance prescribed in Topic 606 that affect the determination of the amount and timing of revenue from contracts with customers. Income Taxes The financial statements have been prepared on the accrual basis. When income and expenses are recognized in different periods for financial reporting purposes versus for the purposes of computing income taxes currently payable, deferred taxes are provided on such temporary differences. Deferred tax assets and liabilities are recognized for the expected future tax consequences of events that have been recognized in the consolidated financial statements or tax returns. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be realized or settled. The Company believes that its income tax filing positions taken or expected to be taken on its tax returns will more likely than not be sustained upon audit by the taxing authorities and does not anticipate any adjustments that will result in a material adverse impact on the Company’s financial condition, results of operations, or cash flow. Therefore, no reserves for uncertain income tax positions have been recorded. The Company’s federal and state income tax returns are open and subject to examination from the 2022 tax return year and forward. 84 Table of Contents Stock-Based Compensation The Company has a stock-based employee compensation plan. Compensation cost is recognized for all stock options granted and for any outstanding unvested awards as if the fair value method had been applied to those awards as of the date of grant. Adoption of New Accounting Standard In January 2023, the Company adopted ASU 2022-02, “Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures” (“ASU 2022-02”), which eliminated the accounting guidance for troubled debt restructurings (“TDRs”) while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors when a borrower is experiencing financial difficulty. In addition, for public business entities, the guidance requires disclosure of current-period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of Subtopic 326-20. The Company adopted the guidance using the modified retrospective method. Upon adoption of this guidance, the Company no longer establishes a specific reserve for modifications to borrowers experiencing financial difficulty. Instead, these modifications are included in their respective cohort and a historical loss rate is applied to the current loan balance to arrive at the quantitative baseline portion of the allowance. The difference between the allowance previously determined and the current allowance was not material to the Company’s financial statements. In January 2023, the Company adopted ASU 2022-01, “Derivatives and Hedging (Topic 815): Fair Value Hedging – Portfolio Layer Method”, which intended to better align hedge accounting with an organization’s risk management strategies. The ASU became applicable to the Company in the second quarter of 2023 when we entered into a fair value hedge using the portfolio layer method. In December 2022, the FASB issued amendments to defer the sunset date of the Reference Rate Reform Topic of the Accounting Standards Codification from December 31, 2022 to December 31, 2024, because the current relief in Reference Rate Reform Topic may not cover a period of time during which a significant number of modifications may take place. The amendments were effective upon issuance. The amendments did not have a material effect on the Company’s financial statements. In November 2023, the FASB amended the Segment Reporting topic in the Accounting Standards Codification to improve disclosures about a public entity’s reportable segments and provide more detailed information about a reportable segment’s expenses. The amendments were effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption was permitted. Upon adoption, the Company applied the amendments retrospectively to all prior periods presented in the financial statements. The amendments did not have a material effect on the Company’s financial statements. In December 2023, the FASB amended the Income Taxes topic in the Accounting Standards Codification to improve the transparency of income tax disclosures. The amendments were effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The amendments did not have a material effect on the Company’s financial statements. Newly Issued, But Not Yet Effective Accounting Standards In November 2024, the FASB amended the Income Statement – Reporting Comprehensive Income topic in the Accounting Standards Codification to require public companies to disclose, in interim and annual reporting periods, additional information about certain expenses in the notes to the financial statements. The amendments are effective for annual periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company will apply the amendments retrospectively to all prior periods presented in the financial statements. The Company does not expect these amendments to have a material effect on its financial statements. In December 2025, the FASB amended the Interim Reporting topic in the Accounting Standards Codification to clarify current interim reporting requirements. The amendments are effective for interim reporting periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. The amendments in this update can be applied prospectively or retrospectively. The Company does not expect these amendments to have a material effect on its financial statements. 85 Table of Contents Operating Segments The Company adopted Accounting Standards Update 2023-07 “Segment Reporting (Topic 280) – Improvement to Reportable Segment Disclosures” on January 1, 2024. The Company, through the Bank, provides a broad range of financial services to individuals and companies in South Carolina, North Carolina, and Georgia. The Company operates through a single operating and reporting segment, primarily as a bank through services including demand, time and savings deposits; lending services; ATM processing and mortgage banking services. The Company’s chief operating decision maker, the Company’s Chief Executive Officer, assesses performance for the Company and decides how to allocate resources based on net income that also is reported on the income statement as consolidated net income. The measure of segment assets is reported on the balance sheet as total consolidated assets. While the chief operating decision maker monitors the operating results of its lines of business, operations are managed and financial performance is evaluated on a consolidated basis. Accordingly, all of the financial service operations are considered by management to be aggregated in one reportable operating segment. NOTE 2 – Investment Securities The amortized costs and fair value of investment securities are as follows: Schedule of amortized costs and fair value of investment securities December 31, 2025 Amortized Gross Unrealized Fair (dollars in thousands) Cost Gains Losses Value Available for sale Corporate bonds Corporate bonds [Member] $ 1,703 - 103 1,600 US government agencies US government agencies [Member] 13,225 33 980 12,278 State and political subdivisions State and political subdivisions [Member] 19,934 - 2,064 17,870 Asset-backed securities Asset-backed securities [Member] 16,505 32 118 16,419 Mortgage-backed securities Mortgage-backed securities [Member] 85,798 14 6,249 79,563 Total investment securities available for sale $ 137,165 79 9,514 127,730 December 31, 2024 Amortized Gross Unrealized Fair (dollars in thousands) Cost Gains Losses Value Available for sale Corporate bonds $ 2,121 - 194 1,927 US treasuries US treasuries [Member] 999 - 91 908 US government agencies 17,540 1 1,746 15,795 State and political subdivisions 22,387 - 3,065 19,322 Asset-backed securities 36,613 36 111 36,538 Mortgage-backed securities 66,988 19 9,370 57,637 Total investment securities available for sale $ 146,648 56 14,577 132,127 During 2025 and 2024, $ 11.9 million and $ 25.8 million, respectively, of investment securities matured or were called. No gain or loss was recognized on the maturities of the investment securities. During 2025 approximately $ 29.1 million of investment securities were either sold or called, resulting in a loss on sale of investment securities of $ 515,000 . The amortized costs and fair values of investment securities available for sale at December 31, 2025 and 2024, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because issuers have the right to prepay the obligations. 86 Table of Contents Schedule of amortized costs and fair values of investment securities available for sale by contractual maturity December 31, 2025 December 31, 2024 (dollars in thousands) Amortized Cost Fair Value Amortized Cost Fair Value Available for sale Due within one year $ 20 19 $ 470 461 Due after one through five years 12,207 11,261 17,897 16,154 Due after five through ten years 27,673 25,730 29,512 26,791 Due after ten years 97,265 90,720 98,769 88,721 Total investment securities $ 137,165 127,730 $ 146,648 132,127 The tables below summarize gross unrealized losses on investment securities and the fair market value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2025 and 2024. Schedule of gross unrealized losses on investment securities and fair market value of related securities December 31, 2025 Less than 12 months 12 months or longer Total (dollars in thousands) # Fair value Unrealized losses # Fair value Unrealized losses # Fair value Unrealized losses Available for sale Corporate bonds - $ - $ - 1 $ 1,600 $ 103 1 $ 1,600 $ 103 US government agencies - - - 7 8,367 980 7 8,367 980 State and political subdivisions - - - 29 17,870 2,064 29 17,870 2,064 Asset-backed securities 3 4,483 22 2 6,035 96 5 10,518 118 Mortgage-backed securities 7 34,538 163 57 42,546 6,086 64 77,084 6,249 Total investment securities 10 $ 39,021 $ 185 96 $ 76,418 $ 9,329 106 $ 115,439 $ 9,514 December 31, 2024 Less than 12 months 12 months or longer Total (dollars in thousands) # Fair value Unrealized losses # Fair value Unrealized losses # Fair value Unrealized losses Available for sale Corporate bonds - $ - $ - 1 $ 1,927 $ 194 1 $ 1,927 $ 194 US treasuries - - - 1 908 91 1 908 91 US government agencies 1 2,694 1 9 10,269 1,745 10 12,963 1,746 State and political subdivisions 3 1,436 153 30 17,886 2,912 33 19,322 3,065 Asset-backed securities 6 15,828 83 5 5,344 28 11 21,172 111 Mortgage-backed securities 6 8,226 409 61 45,360 8,961 67 53,586 9,370 Total investment securities 16 $ 28,184 $ 646 107 $ 81,694 $ 13,931 123 $ 109,878 $ 14,577 At December 31, 2025, the Company had 106 individual investments that were in an unrealized loss position. The unrealized losses were primarily attributable to changes in interest rates, rather than deterioration in credit quality and the issuers of these securities continue to make timely principal and interest payments under the contractual terms of the securities. The Company does not intend to sell these securities, and it is more likely than not that the Company will not be required to sell these securities before recovery of the amortized cost. Additional information related to the types of securities held at December 31, 2025, other than securities issued or guaranteed by US government entities or agencies including US Treasuries and substantially all of the Company’s mortgage-backed securities, is as follows: Corporate securities – The Company has one holding in corporate debt securities for which there have been no payment defaults. Municipal securities – All of the Company’s holdings of municipal bonds were investment grade and there have been no payment defaults. All of these securities have been rated A+ or higher by Moody’s or Standard & Poors or Fitch. Asset-backed securities – There were five investment grade asset-backed securities, and there have been no payment default on these securities. As such, there is no allowance for credit losses on available for sale securities recognized as of December 31, 2025. 87 Table of Contents Other investments are comprised of the following and are recorded at cost which approximates fair value: Schedule of other investments December 31, (dollars in thousands) 2025 2024 Federal Home Loan Bank stock $ 14,540 14,516 Other nonmarketable investments 5,120 4,571 Investment in Trust Preferred subsidiaries 403 403 Total other investments $ 20,063 19,490 The Company has evaluated other investments for impairment and determined that the other investments are not impaired as of December 31, 2025 and ultimate recoverability of the par value of the investments is probable. All of the FHLB stock is used to collateralize advances with the FHLB. At December 31, 2025 and 2024, there were no securities pledged as collateral for repurchase agreements from brokers. NOTE 3 – Mortgage Loans Held for Sale Mortgage loans originated and intended for sale in the secondary market are reported as loans held for sale and carried at fair value under the fair value option with changes in fair value recognized in current period earnings. Loans held for sale include mortgage loans which are saleable into the secondary mortgage markets and their fair values are estimated using observable quoted market or contracted prices or market price equivalents, which would be used by other market participants. At the date of funding of the mortgage loan held for sale, the funded amount of the loan, the related derivative asset or liability of the associated interest rate lock commitment, less direct loan costs becomes the initial recorded investment in the loan held for sale. Such amount approximates the fair value of the loan. At December 31, 2025, mortgage loans held for sale totaled $ 11.6 million compared to $ 4.6 million at December 31, 2024. Mortgage loans held for sale are considered de-recognized, or sold, when the Company surrenders control over the financial assets. Control is considered to have been surrendered when the transferred assets have been isolated from the Company, beyond the reach of the Company and its creditors; the purchaser obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets; and the Company does not maintain effective control over the transferred assets through an agreement that both entitles and obligates the Company to repurchase or redeem the transferred assets before their maturity or the ability to unilaterally cause the holder to return specific assets. Gains and losses from the sale of mortgage loans are recognized based upon the difference between the sales proceeds and carrying value of the related loans upon sale and are recorded in mortgage banking income in the statement of income. Mortgage banking income also includes the unrealized gains and losses associated with the loans held for sale and the realized and unrealized gains and losses from derivatives. Mortgage loans sold to investors by the Company, and which were believed to have met investor and agency underwriting guidelines at the time of sale, may be subject to repurchase or indemnification in the event of specific default by the borrower or subsequent discovery that underwriting standards were not met. The Company may, upon mutual agreement, agree to repurchase the loans or indemnify the investor against future losses on such loans. In such cases, the Company bears any subsequent credit loss on the loans. As appropriate, the Company establishes mortgage repurchase reserves related to various representations and warranties that reflect management’s estimate of losses. Historically, losses related to repurchased mortgage loans has not been material. NOTE 4 – Loans and Allowance for Credit Losses The Company makes loans to individuals and small businesses for various personal and commercial purposes primarily in the Upstate, Midlands, and Lowcountry regions of South Carolina, the Triangle, Triad, and Charlotte regions of North Carolina as well as Atlanta, Georgia. The Company’s loan portfolio is not concentrated in loans to any single borrower or a relatively small number of borrowers. The Company focuses its lending activities on businesses and individuals that reside in the markets that we serve. The principal component of the loan portfolio is loans secured by real estate mortgages which account for 82.8 % of total loans at December 31, 2025. Commercial loans comprise 55.2 % of total real estate loans and consumer loans account for 44.8 % . Commercial real estate loans are further categorized into owner occupied which represents 19.2 % of total loans and non-owner occupied loans which represents 24.9 % . Commercial construction loans represent only 1.7 % of the total loan portfolio. 88 Table of Contents In addition to monitoring potential concentrations of loans to particular borrowers or groups of borrowers, industries and geographic regions, management monitors exposure to credit risk from concentrations of lending products and practices such as loans that subject borrowers to substantial payment increases (e.g. principal deferral periods, loans with initial interest-only periods, etc.), and loans with high loan-to-value ratios. Additionally, there are industry practices that could subject the Company to increased credit risk should economic conditions change over the course of a loan’s life. For example, the Company makes variable rate loans and fixed rate principal-amortizing loans with maturities prior to the loan being fully paid (i.e. balloon payment loans). The various types of loans are individually underwritten and monitored to manage the associated risks. Loan Portfolio Composition The following table summarizes the composition of our loan portfolio. Total gross loans are recorded net of deferred loan fees and costs, which totaled $ 5.6 million and $ 6.2 million as of December 31, 2025 and December 31, 2024, respectively. Schedule of composition of our loan portfolio December 31 (dollars in thousands) 2025 2024 Commercial Owner occupied RE Owner occupied RE [Member] $ 736,979 19.2 % $ 651,597 17.9 % Non-owner occupied RE Non-owner occupied RE [Member] 956,812 24.9 % 924,367 25.5 % Construction Construction [Member] 63,666 1.7 % 103,204 2.8 % Business 619,667 16.0 % 556,117 15.3 % Total commercial loans Commercial [Member] 2,377,124 61.8 % 2,235,285 61.5 % Consumer Real estate Real estate [Member] 1,153,285 30.0 % 1,128,629 31.1 % Home equity Home equity [Member] 248,685 6.5 % 204,897 5.6 % Construction 24,997 0.6 % 20,874 0.6 % Other Other [Member] 41,033 1.1 % 42,082 1.2 % Total consumer loans Consumer [Member] 1,468,000 38.2 % 1,396,482 38.5 % Total gross loans, net of deferred fees 3,845,124 100.0 % 3,631,767 100.0 % Less – allowance for credit losses ( 42,280 ) ( 39,914 ) Total loans, net $ 3,802,844 $ 3,591,853 The composition of gross loans by rate type is as follows: Schedule of composition of gross loans by rate type December 31, (dollars in thousands) 2025 2024 Floating rate loans $ 979,180 697,897 Fixed rate loans 2,865,944 2,933,870 Total loans $ 3,845,124 3,631,767 At December 31, 2025, approximately $ 1.38 billion of the Company’s mortgage loans were pledged as collateral for advances from the FHLB, as set forth in Note 8. Credit Quality Indicators The Company tracks credit quality based on its internal risk ratings. Upon origination, a loan is assigned an initial risk grade, which is generally based on several factors such as the borrower’s credit score, the loan-to-value ratio, the debt-to-income ratio, etc. After loans are initially graded, they are monitored regularly for credit quality based on many factors, such as payment history, the borrower’s financial status, and changes in collateral value. Loans can be downgraded or upgraded depending on management’s evaluation of these factors. Internal risk-grading policies are consistent throughout each loan type. A description of the general characteristics of the risk grades is as follows: ● Pass— A pass loan ranges from minimal to average credit risk; however, still has acceptable credit risk. 89 Table of Contents ● Watch— A watch loan exhibits above average credit risk due to minor weaknesses and warrants closer scrutiny by management. · Special mention — A special mention loan has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or the institution’s credit position at some future date. ● Substandard— A substandard loan is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified must have a well-defined weakness, or weaknesses, which may jeopardize the liquidation of the debt. A substandard loan is characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. ● Doubtful— A doubtful loan has all of the weaknesses inherent in one classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of the currently existing facts, conditions and values, highly questionable and improbable. 90 Table of Contents The following table presents loan balances classified by credit quality indicators by year of origination as of December 31, 2025. Schedule of classified by credit quality indicators by year of origination December 31, 2025 (dollars in thousands) 2025 2024 2023 2022 2021 Prior Revolving Revolving Converted to Term Total Commercial Owner occupied RE Pass $ 109,796 62,028 36,348 187,991 120,627 187,495 100 596 704,981 Watch 2,062 438 5,833 5,734 2,249 9,929 - - 26,245 Special Mention 2,070 - - - - 3,424 - - 5,494 Substandard - - - 259 - - - - 259 Total Owner occupied RE 113,928 62,466 42,181 193,984 122,876 200,848 100 596 736,979 Non-owner occupied RE Pass 75,982 60,413 61,961 302,086 142,876 255,478 760 1,012 900,568 Watch - 618 1,653 13,553 13,886 9,453 - - 39,163 Special Mention - 144 - - 190 7,586 - - 7,920 Substandard - - - 2,244 - 6,917 - - 9,161 Total Non-owner occupied RE 75,982 61,175 63,614 317,883 156,952 279,434 760 1,012 956,812 Construction Pass 23,211 28,284 - 7,921 53 - - - 59,469 Watch - - - 1,766 2,431 - - - 4,197 Total Construction 23,211 28,284 - 9,687 2,484 - - - 63,666 Business Pass 109,351 42,578 44,987 100,908 28,743 55,659 210,992 465 593,683 Watch 799 719 1,180 3,006 2,186 4,090 8,675 402 21,057 Special Mention 71 652 - 621 - 664 1,807 - 3,815 Substandard 149 - 627 - - 74 262 - 1,112 Total Business 110,370 43,949 46,794 104,535 30,929 60,487 221,736 867 619,667 Current period gross write-offs - - - - - ( 78 ) ( 213 ) - ( 291 ) Total Commercial loans 323,491 195,874 152,589 626,089 313,241 540,769 222,596 2,475 2,377,124 Consumer Real estate Pass 136,015 58,846 125,186 254,815 248,173 276,765 - - 1,099,800 Watch 1,076 1,237 5,045 6,351 7,899 8,092 - - 29,700 Special Mention 193 489 1,513 5,158 2,434 7,568 - - 17,355 Substandard - 1,118 1,034 647 715 2,916 - - 6,430 Total Real estate 137,284 61,690 132,778 266,971 259,221 295,341 - - 1,153,285 Home equity Pass - - - - - - 232,962 - 232,962 Watch - - - - - - 8,730 - 8,730 Special Mention - - - - - - 5,501 - 5,501 Substandard - - - - - - 1,492 - 1,492 Total Home equity - - - - - - 248,685 - 248,685 Construction Pass 20,031 2,308 - - - - 648 - 22,987 Watch - - 2,010 - - - - - 2,010 Total Construction 20,031 2,308 2,010 - - - 648 - 24,997 Other Pass 5,048 623 586 1,062 340 1,102 31,027 - 39,788 Watch 23 134 34 24 322 109 135 - 781 Special Mention 13 26 5 316 47 38 19 - 464 Total Other 5,084 783 625 1,402 709 1,249 31,181 - 41,033 Current period gross write-offs ( 30 ) - - - ( 20 ) - ( 10 ) - ( 60 ) Total Consumer loans 162,399 64,781 135,413 268,373 259,930 296,590 280,514 - 1,468,000 Total loans $ 485,890 260,655 288,002 894,462 573,171 837,359 503,110 2,475 3,845,124 Total Current period gross write-offs ( 30 ) - - - ( 20 ) ( 78 ) ( 223 ) - ( 351 ) 91 Table of Contents The following table presents loan balances classified by credit quality indicators by year of origination as of December 31, 2024. December 31, 2024 (dollars in thousands) 2024 2023 2022 2021 2020 Prior Revolving Revolving Converted to Term Total Commercial Owner occupied RE Pass $ 51,338 47,997 186,361 122,306 66,561 145,743 160 238 620,704 Watch 480 1,180 3,638 1,962 8,828 11,012 - - 27,100 Special Mention - - 162 - - 2,840 - - 3,002 Substandard - - - - - 791 - - 791 Total Owner occupied RE 51,818 49,177 190,161 124,268 75,389 160,386 160 238 651,597 Non-owner occupied RE Pass 50,685 70,517 321,726 145,658 95,994 183,723 360 220 868,883 Watch - 954 6,081 10,238 4,705 8,435 - - 30,413 Special Mention - - - 7,579 - 8,882 - - 16,461 Substandard - - 969 - - 7,641 - - 8,610 Total Non-owner occupied RE 50,685 71,471 328,776 163,475 100,699 208,681 360 220 924,367 Current period gross write-offs - - - - - ( 1,029 ) - - ( 1,029 ) Construction Pass 24,076 26,501 34,067 15,000 - - - - 99,644 Watch - 2,420 1,140 - - - - - 3,560 Total Construction 24,076 28,921 35,207 15,000 - - - - 103,204 Business Pass 54,814 41,743 129,450 38,312 15,716 51,566 196,246 803 528,650 Watch - 132 5,353 2,174 1,423 5,243 8,776 389 23,490 Special Mention 660 95 805 - 65 533 - 206 2,364 Substandard 28 - - - 385 630 570 - 1,613 Total Business 55,502 41,970 135,608 40,486 17,589 57,972 205,592 1,398 556,117 Current period gross write-offs - - - ( 143 ) ( 347 ) ( 18 ) ( 72 ) - ( 580 ) Total Commercial loans 182,081 191,539 689,752 343,229 193,677 427,039 206,112 1,856 2,235,285 Consumer Real estate Pass 78,287 144,487 277,854 263,079 160,007 153,584 - - 1,077,298 Watch 671 2,409 6,961 8,573 4,147 4,632 - - 27,393 Special Mention 817 1,536 5,987 2,664 2,804 5,181 - - 18,989 Substandard 212 508 967 746 821 1,695 - - 4,949 Total Real estate 79,987 148,940 291,769 275,062 167,779 165,092 - - 1,128,629 Home equity Pass - - - - - - 188,451 - 188,451 Watch - - - - - - 9,114 - 9,114 Special Mention - - - - - - 6,173 - 6,173 Substandard - - - - - - 1,159 - 1,159 Total Home equity - - - - - - 204,897 - 204,897 Current period gross write-offs - - - - - - ( 45 ) - ( 45 ) Construction Pass 7,700 3,636 9,222 316 - - - - 20,874 Total Construction 7,700 3,636 9,222 316 - - - - 20,874 Other Pass 2,732 836 1,521 1,593 1,229 2,609 29,660 - 40,180 Watch 167 61 12 366 - 129 595 - 1,330 Special Mention 36 35 325 66 - 65 45 - 572 Total Other 2,935 932 1,858 2,025 1,229 2,803 30,300 - 42,082 Current period gross write-offs - - - - - ( 38 ) ( 42 ) - ( 80 ) Total Consumer loans 90,622 153,508 302,849 277,403 169,008 167,895 235,197 - 1,396,482 Total loans $ 272,703 345,047 992,601 620,632 362,685 594,934 441,309 1,856 3,631,767 Total Current period gross write-offs - - - ( 143 ) ( 347 ) ( 1,085 ) ( 159 ) - ( 1,734 ) 92 Table of Contents The following tables present loan balances by age and payment status. Schedule of loan balances by age payment status December 31, 2025 (dollars in thousands) Accruing 30-59 days past due Accruing 60-89 days past due Accruing 90 days or more past due Nonaccrual loans Accruing current Total Commercial Owner occupied RE $ - - - 259 736,720 736,979 Non-owner occupied RE - - - 6,917 949,895 956,812 Construction - - - - 63,666 63,666 Business 627 - - 189 618,851 619,667 Consumer Real estate 4,235 315 - 5,763 1,142,972 1,153,285 Home equity - 250 - 705 247,730 248,685 Construction - - - - 24,997 24,997 Other 33 - - - 41,000 41,033 Total loans $ 4,895 565 - 13,833 3,825,831 3,845,124 December 31, 2024 (dollars in thousands) Accruing 30-59 days past due Accruing 60-89 days past due Accruing 90 days or more past due Nonaccrual loans Accruing current Total Commercial Owner occupied RE $ 292 - - - 651,305 651,597 Non-owner occupied RE - - - 7,641 916,726 924,367 Construction - - - - 103,204 103,204 Business 1,319 - - 1,016 553,782 556,117 Consumer Real estate 3,839 938 - 1,908 1,121,944 1,128,629 Home equity 41 - - 312 204,544 204,897 Construction - - - - 20,874 20,874 Other - - - - 42,082 42,082 Total loans $ 5,491 938 - 10,877 3,614,461 3,631,767 As of December 31, 2025 and December 31, 2024, accruing loans 30 days or more past due represented 0.14 % and 0.18 % of the Company’s total loan portfolio, respectively. Commercial loans accruing 30 days or more past due were 0.02 % and 0.05 % of the Company’s total loan portfolio as of December 31, 2025 and December 31, 2024, respectively. Consumer loans accruing 30 days or more past due were 0.12 % and 0.13 % of total loans as of December 31, 2025 and December 31, 2024, respectively. Nonperforming assets The following table shows the nonperforming assets and the related percentage of nonperforming assets to total assets and gross loans. Generally, a loan is placed on nonaccrual status when it becomes 90 days past due as to principal or interest, or when we believe, after considering economic and business conditions and collection efforts, that the borrower’s financial condition is such that collection of the contractual principal or interest on the loan is doubtful. A payment of interest on a loan that is classified as nonaccrual is recognized as a reduction in principal when received. Other real estate owned represents one property at December 31, 2025. Activity related to the OREO property during the year was not material. Schedule of nonperforming assets December 31, (dollars in thousands) 2025 2024 Nonaccrual loans $ 13,833 10,877 Other real estate owned 275 - Total nonperforming assets $ 14,108 10,877 Nonperforming assets as a percentage of: Total assets 0.32 % 0.27 % Gross loans 0.37 % 0.30 % Total loans over 90 days past due $ 4,499 2,641 Loans over 90 days past due and still accruing - - 93 Table of Contents The table below summarizes nonaccrual loans by major categories for the periods presented. Schedule of nonaccrual loans by major categories December 31, 2025 December 31, 2024 Nonaccrual Nonaccrual Nonaccrual Nonaccrual loans loans Total loans loans Total with no with an nonaccrual with no with an nonaccrual (dollars in thousands) allowance allowance loans allowance allowance loans Commercial Owner occupied RE $ - 259 259 $ - - - Non-owner occupied RE 5,097 1,820 6,917 5,844 1,797 7,641 Business - 189 189 - 1,016 1,016 Total commercial 5,097 2,268 7,365 5,844 2,813 8,657 Consumer Real estate 4,122 1,641 5,763 1,526 382 1,908 Home equity 705 - 705 312 - 312 Total consumer 4,827 1,641 6,468 1,838 382 2,220 Total nonaccrual loans $ 9,924 3,909 13,833 $ 7,682 3,195 10,877 Foregone interest income on the nonaccrual loans for the years ended December 31, 2025 and 2024 was approximately $ 308,000 and $ 200,000 , respectively. We did no t recognize interest income on nonaccrual loans for the twelve months ended December 31, 2025 and December 31, 2024. Accrued interest of approximately $ 111,000 was reversed during the twelve months ended December 31, 2025 and approximately $ 113,000 was reversed during the twelve months ended December 31, 2024. The accrued interest reversed during 2025 was primarily related to consumer real estate loans, while the accrued interest reversed in 2024 was primarily related to commercial non-owner occupied and consumer real estate loans. Modifications to Borrowers Experiencing Financial Difficulty The allowance for credit losses incorporates an estimate of lifetime expected credit losses and is recorded on each asset upon origination or acquisition. The starting point for the estimate of the allowance for credit losses is historical loss information, which includes losses from modifications of receivables to borrowers experiencing financial difficulty. The Company uses a discounted cash flow model to determine the allowance for credit losses. An assessment of whether a borrower is experiencing financial difficulty is made on the date of a modification. Because the effect of most modifications made to borrowers experiencing financial difficulty is already included in the allowance for credit losses due to the measurement methodologies used to estimate the allowance, a change to the allowance for credit losses is generally not recorded upon modification. The following table shows the amortized cost basis of the loans modified to borrowers experiencing financial difficulty during the twelve months ended December 31, 2025, disaggregated by class of loans and type of concession granted and describes the financial effect of the modifications made to borrowers experiencing financial difficulty. Loan modifications to borrowers experiencing financial difficulty were not material for the twelve months ended December 31, 2024. Schedule of amortized cost basis of loans Term Extension (dollars in thousands) Amortized Cost Basis % of Total Loan Type Financial Effect Commercial Non-owner occupied $ 6,872 0.72 % Reduced interest rate to 2.00% from 5.06% on both loans. Extended maturity date to January 2, 2026 on both loans. Neither of the two loans modified during 2025 had a payment default during the period. The Company closely monitors the performance of the loans that are modified for borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. Both loans are in current payment status since the loan modification occurred in the fourth quarter of 2025. There have been no commitments to lend additional funds to the borrowers experiencing financial difficulty as of December 31, 2025. 94 Table of Contents Allowance for Credit Losses The following table summarizes the activity related to the allowance for credit losses for the years ended December 31, 2025, December 31, 2024 and December 31, 2023. The $ 2.5 million provision for credit losses for the 12 months ended December 31, 2025 was driven primarily by $ 213.4 million in loan growth for the year, while the $ 500,000 provision for credit losses for the 12 months ended December 31, 2024 was driven primarily by $ 29.1 million in loan growth for the year. In addition, expected loss rates declined during both years due to historically low charge-offs. Under the DCF methodology, expected loss rates are evaluated at the individual loan level using contractual cash flows, prepayment assumptions, reasonable and supportable economic forecasts, and other model inputs. Internal risk ratings continue to inform credit risk monitoring, segmentation, and qualitative adjustments, as applicable. The incorporation of the weighted average life of loan into the calculation was a key driver of the change in allocation between our commercial portfolio and our consumer portfolio as the weighted average life of our consumer loans is generally longer than that of our commercial loans, thus driving the changes in the expected loss rate to correlate to the expected life of the loan. As a result, the allocation of the ACL shifted among loan categories, reducing the ACL allotted to the commercial portfolio and increasing the ACL allotted to the consumer portfolio. Schedule of activity related to the allowance for credit losses For the year ended December 31, 2025 Commercial Consumer (dollars in thousands) Owner occupied RE Non-owner occupied RE Construction Business Real Estate Home Equity Construction Other Total Balance, beginning of period $ 5,482 10,219 940 7,745 12,359 2,655 115 399 39,914 Change in accounting estimate ( 1,673 ) ( 2,928 ) ( 156 ) 3,566 2,608 ( 1,232 ) 324 139 648 Provision for credit losses 102 ( 518 ) ( 173 ) 1,003 863 362 130 33 1,802 Loan charge-offs - - - ( 291 ) - - - ( 60 ) ( 351 ) Loan recoveries - - - 125 36 42 - 64 267 Net loan recoveries (charge-offs) - - - ( 166 ) 36 42 - 4 ( 84 ) Balance, end of period $ 3,911 6,773 611 12,148 15,866 1,827 569 575 42,280 Net charge-offs to average loans (annualized) 0.00 % Allowance for credit losses to gross loans 1.10 % Allowance for credit losses to nonperforming loans 305.65 % For the year ended December 31, 2024 Commercial Consumer (dollars in thousands) Owner occupied RE Non-owner occupied RE Construction Business Real Estate Home Equity Construction Other Total Balance, beginning of period $ 6,118 11,167 1,594 7,385 10,647 2,600 677 494 40,682 Provision for credit losses ( 636 ) 81 ( 654 ) 828 1,712 ( 155 ) ( 562 ) ( 114 ) 500 Loan charge-offs - ( 1,029 ) - ( 580 ) - ( 45 ) - ( 80 ) ( 1,734 ) Loan recoveries - - - 112 - 255 - 99 466 Net loan recoveries (charge-offs) - ( 1,029 ) - ( 468 ) - 210 - 19 ( 1,268 ) Balance, end of period $ 5,482 10,219 940 7,745 12,359 2,655 115 399 39,914 Net charge-offs to average loans (annualized) 0.04 % Allowance for credit losses to gross loans 1.10 % Allowance for credit losses to nonperforming loans 366.94 % For the year ended December 31, 2023 Commercial Consumer (dollars in thousands) Owner occupied RE Non-owner occupied RE Construction Business Real Estate Home Equity Construction Other Total Ba lance, beginning of period $ 5,867 10,376 1,292 7,861 9,487 2,551 893 312 38,639 Provision for credit losses 251 848 302 ( 755 ) 1,160 422 ( 216 ) 197 2,209 Loan charge-offs - ( 242 ) - ( 65 ) - ( 438 ) - ( 16 ) ( 761 ) Loan recoveries - 185 - 344 - 65 - 1 595 Net loan recoveries (charge-offs) - ( 57 ) - 279 - ( 373 ) - ( 15 ) ( 166 ) Balance, end of period $ 6,118 11,167 1,594 7,385 10,647 2,600 677 494 40,682 Net charge-offs to average loans (annualized) 0.00 % Allowance for credit losses to gross loans 1.13 % Allowance for credit losses to nonperforming loans 1026.55 % Collateral dependent loans are loans for which the repayment is expected to be provided substantially through the operation or sale of the collateral and the borrower is experiencing financial difficulty. The Company reviews individually evaluated 95 Table of Contents loans for designation as collateral dependent loans, as well as other loans that management of the Company designates as having higher risk. These loans do not share common risk characteristics and are not included within the collectively evaluated loans for determining the allowance for credit losses. Under CECL, for collateral dependent loans, the Company has adopted the practical expedient to measure the allowance for credit losses based on the fair value of collateral. The allowance for credit losses is calculated on an individual loan basis based on the shortfall between the fair value of the loan’s collateral, which is adjusted for liquidation costs/discounts, and amortized cost. If the fair value of the collateral exceeds the amortized cost, no allowance is required. The following table presents an analysis of collateral-dependent loans of the Company as of December 31, 2025 and December 31, 2024. Schedule of analysis of collateral-dependent loans December 31, 2025 Real Business (dollars in thousands) estate assets Total Commercial Owner occupied RE $ - 259 259 Non-owner occupied RE 6,917 - 6,917 Business 165 24 189 Total commercial 7,082 283 7,365 Consumer Real estate 5,763 - 5,763 Home equity 705 - 705 Total consumer 6,468 - 6,468 Total collateral dependent loans $ 13,550 283 13,833 December 31, 2024 Real Business (dollars in thousands) estate assets Total Commercial Non-owner occupied RE $ 7,641 - 7,641 Business 460 556 1,016 Total commercial 8,101 556 8,657 Consumer Real estate 1,908 - 1,908 Home equity 312 - 312 Total consumer 2,220 - 2,220 Total collateral dependent loans $ 10,321 556 10,877 Allowance for Credit Losses - Unfunded Loan Commitments The allowance for credit losses for unfunded loan commitments was $ 2.0 million and $ 1.5 million at December 31, 2025 and 2024, respectively, and is separately classified on the balance sheet within other liabilities. The following table presents the balance and activity in the allowance for credit losses for unfunded loan commitments for the twelve months ended December 31, 2025 and December 31, 2024. Schedule of allowance for credit losses for unfunded loan commitments For the years ended December 31, (dollars in thousands) 2025 2024 2023 Balance, beginning of period $ 1,456 1,831 2,780 Provision for (reversal of) credit losses 500 ( 375 ) ( 949 ) Balance, end of period $ 1,956 1,456 1,831 Unfunded Loan Commitments 843,630 719,084 724,606 Reserve for Unfunded Commitments 0.23 % 0.20 % 0.25 % NOTE 5 – Property and Equipment Property and equipment are stated at cost less accumulated depreciation. Components of property and equipment included in the consolidated balance sheets are as follows: 96 Table of Contents Schedule of components of property and equipment December 31, (dollars in thousands) 2025 2024 Land $ 11,244 11,244 Buildings 54,944 54,932 Leasehold improvements 5,789 5,789 Furniture and equipment 22,694 22,304 Software 427 409 Construction in process 219 56 Accumulated depreciation and amortization ( 30,854 ) ( 26,547 ) Property and equipment, excluding ROU assets 64,463 68,187 ROU assets 19,002 20,607 Total property and equipment $ 83,465 88,794 Construction in process at December 31, 2025 and 2024 consisted primarily of costs associated with information technology projects that will be within the next 12 months. Depreciation and amortization expense for the years ended December 31, 2025 and 2024 was $ 4.3 million and $ 4.7 million, respectively. Depreciation and amortization are charged to operations utilizing a straight-line method over the estimated useful lives of the assets. The estimated useful lives for the principal items follow: Schedule of estimated useful lives of property and equipment Type of Asset Life in Years Software 3 Furniture and equipment 5 to 7 Leasehold improvements Leasehold improvements [Member] 5 to 15 Buildings 40 NOTE 6 – Leases The Company had operating right-of-use (“ROU”) assets, included in property and equipment, of $ 19.0 million and $ 20.6 million as of December 31, 2025 and 2024, respectively. The Company had lease liabilities, included in other liabilities, of $ 21.7 million and $ 23.2 million as of December 31, 2025 and 2024, respectively. We maintain operating leases on land and buildings for various office spaces. The lease agreements have maturity dates ranging from January 2028 to February 2032, some of which include options for multiple five-year extensions. The weighted average remaining life of the lease term for these leases was 4.31 years and 4.95 years as of December 31, 2025 and 2024, respectively. The ROU asset and lease liability are recognized at lease commencement by calculating the present value of lease payments over the lease term. The ROU assets also include any initial direct costs incurred and lease payments made at or before commencement date and are reduced by any lease incentives. The discount rate used in determining the lease liability for each individual lease was the FHLB fixed advance rate which corresponded with the remaining lease term at implementation of the accounting standard and as of the lease commencement date for leases subsequently entered into. The weighted average discount rate for leases was 2.27 % and 2.28 % as of December 31, 2025 and 2024, respectively. Total operating lease costs were $ 2.5 million and $ 2.4 million for the years ended December 31, 2025 and 2024, respectively. 97 Table of Contents Operating lease payments due as of December 31, 2025 were as follows: Schedule of operating lease payments due Operating (dollars in thousands) Leases 2026 $ 2,210 2027 2,267 2028 2,015 2029 1,501 2030 1,522 Thereafter 17,164 Total undiscounted lease payments 26,679 Discount effect of cash flows 4,969 Total lease liability $ 21,710 NOTE 7 – Deposits The following is a detail of the deposit accounts: Schedule of detail of deposit accounts December 31, (dollars in thousands) 2025 2024 Noninterest bearing $ 732,287 683,081 Interest bearing: NOW accounts 423,270 314,588 Money market accounts 1,573,039 1,438,530 Savings 29,470 31,976 Time deposits 958,737 967,590 Total deposits $ 3,716,803 3,435,765 At December 31, 2025 and 2024, time deposits greater than $250,000 were $ 778.0 million and $ 774.0 million, respectively. Also, at December 31, 2025, the Company had $ 552.9 million deposits in brokered deposits, or deposits that were obtained outside the Company’s primary market, compared to $ 550.3 million at December 31, 2024. Interest expense on time deposits greater than $250,000 was $ 33.4 million for the year ended December 31, 2025, $ 34.8 million for the year ended December 31, 2024, and $ 22.5 million for the year ended December 31, 2023. At December 31, 2025 the scheduled maturities of time deposits are as follows: Schedule of maturities of time deposits (dollars in thousands) 2026 $ 846,094 2027 30,643 2028 81,522 2029 62 2030 416 Total time deposits $ 958,737 NOTE 8 – Federal Home Loan Bank Advances and Other Borrowings At December 31, 2025 and December 31, 2024, we had $ 240.0 million of convertible fixed rate FHLB advances with a weighted average rate of 3.74 % which was secured with approximately $ 1.38 billion of mortgage loans and $ 14.5 million of stock in the FHLB. At December 31, 2024, the $ 240.0 million was secured with approximately $ 1.29 billion of mortgage loans and $ 14.5 million of stock in the FHLB. Listed below is a summary of the terms and maturities of the advances outstanding at December 31, 2025 and 2024. 98 Table of Contents Schedule of terms and maturities of advances outstanding December 31, (dollars in thousands) 2025 2024 Maturity Amount Rate Amount Rate April 28, 2028 $ 40,000 3.51 % $ 40,000 3.51 % June 28, 2028 40,000 3.54 % 40,000 3.54 % July 10, 2028 40,000 3.87 % 40,000 3.87 % July 10, 2028 40,000 3.96 % 40,000 3.96 % May 15, 2029 35,000 3.90 % 35,000 3.90 % July 10, 2029 45,000 3.69 % 45,000 3.69 % Total FHLB advances outstanding $ 240,000 3.74 % $ 240,000 3.74 % NOTE 9 – Subordinated Debentures On June 26, 2003, Greenville First Statutory Trust I (a non-consolidated subsidiary) issued $ 6.0 million floating rate trust preferred securities with a maturity of June 26, 2033 . At December 31, 2025, the interest rate was 7.05 % and is indexed to the Three-month SOFR rate on the determination date plus 3.10 % and adjusted quarterly. The Company received from the Trust the $ 6.0 million proceeds from the issuance of the securities and the $ 186,000 initial proceeds from the capital investment in the Trust, and accordingly has shown the funds due to the Trust as $ 6.2 million junior subordinated debentures. On December 22, 2005, Greenville First Statutory Trust II (a non-consolidated subsidiary) issued $ 7.0 million floating rate trust preferred securities with a maturity of December 22, 2035 . At December 31, 2025, the interest rate was 5.39 % and is indexed to the Three-month SOFR rate on the determination date plus 1.44 % and adjusted quarterly. The Company received from the Trust the $ 7.0 million proceeds from the issuance of the securities and the $ 217,000 initial proceeds from the capital investment in the Trust, and accordingly has shown the funds due to the Trust as $ 7.2 million junior subordinated debentures. The current regulatory rules allow certain amounts of junior subordinated debentures to be included in the calculation of regulatory capital. However, provisions within the Dodd-Frank Act prohibit institutions that had more than $15 billion in assets on December 31, 2009 from including trust preferred securities as Tier 1 capital beginning in 2013, with one-third phased out over the two years ending in 2015. Financial institutions with less than $15 billion in total assets, such as the Bank, may continue to include their trust preferred securities issued prior to May 19, 2010 in Tier 1 capital, but cannot include in Tier 1 capital trust preferred securities issued after such date. On September 30, 2019, the Company entered into Subordinated Note Purchase Agreements (collectively, the “Purchase Agreement”) with certain qualified institutional buyers and accredited investors (the “Purchasers”) pursuant to which the Company sold and issued $ 23.0 million in aggregate principal amount of its 4.75 % Fixed-to-Floating Rate Subordinated Notes due 2029 (the “Notes”). The Notes were offered and sold by the Company to eligible purchasers in a private offering in reliance on the exemption from the registration requirements of Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”) and the provisions of Regulation D promulgated thereunder (the “Private Placement”). The Notes have a 10 ten-year term and, from and including the date of issuance to but excluding September 30, 2024, will bear interest at a fixed annual rate of 4.75 %, payable semi-annually in arrears, for the first five years of the term. From and including September 30, 2024 to but excluding the maturity date or early redemption date, the interest rate shall reset quarterly to an interest rate per annum equal to a benchmark rate (the Three-Month Term SOFR) plus 340.8 basis points (7.34% at December 31, 2025), payable quarterly in arrears. As provided in the Notes, the interest rate on the Notes during the applicable floating rate period may be determined based on a rate other than Three-Month Term SOFR. The Purchase Agreement contains certain customary representations, warranties and covenants made by the Company, on the one hand, and the Purchasers, severally and not jointly, on the other hand. On September 30, 2019, in connection with the sale and issuance of the Notes, the Company entered into a Registration Rights Agreement (the “Registration Rights Agreement”) with the Purchasers. Under the terms of the Registration Rights Agreement, the Company has agreed to take certain actions to provide for the exchange of the Notes for subordinated notes that are registered under the Securities Act and have substantially the same terms as the Notes (the “Exchange Notes”). Under certain circumstances, if the Company fails to meet its obligations under the Registration Rights Agreement, it would be required to pay additional interest to the holders of the Notes. 99 Table of Contents The Notes were issued under an Indenture, dated September 30, 2019 (the “Indenture”), by and between the Company and UMB Bank, National Association, as trustee. The Notes are not subject to any sinking fund and are not convertible into or, other than with respect to the Exchange Notes, exchangeable for any other securities or assets of the Company or any of its subsidiaries. The Notes are not subject to redemption at the option of the holder. The Notes are unsecured, subordinated obligations of the Company only and are not obligations of, and are not guaranteed by, any subsidiary of the Company. The Notes rank junior in right to payment to the Company’s current and future senior indebtedness. The Notes are intended to qualify as Tier 2 capital for regulatory capital purposes for the Company; however, the amount that is eligible to be included in Tier 2 capital will be reduced by 20% each year during the last five years before maturity date of the Notes beginning in the quarter ended December 31, 2024. On September 30, 2024, in conjunction with the semi-annual interest payment, the Company redeemed $ 11.5 million of the outstanding subordinated debt. NOTE 10 – Unused Lines of Credit At December 31, 2025, the Company had six lines of credit to purchase federal funds that totaled $ 128.5 million which were unused at December 31, 2025. The lines of credit are available on a one to 14 day basis for general corporate purposes of the Company. The lenders have reserved the right to withdraw the line at their option. The Company has an additional line of credit with the FHLB to borrow funds, subject to a pledge of qualified collateral. The Company has collateral that would support approximately $ 836.5 million in additional borrowings with the FHLB at December 31, 2025. At December 31, 2025, we had $ 181.2 million pledged and available with the Federal Reserve Discount Window. Comparatively, at December 31, 2024, we had $ 210.8 million pledged and available with the Federal Reserve Discount Window. The Company also has an unsecured, interest only line of credit for $ 15 million with another financial institution which was unused at December 31, 2025. The line bears interest at the U.S. Prime Rate plus 0.25 % and expires on March 5, 2026 . The loan agreement contains various financial covenants related to capital, earnings and asset quality. NOTE 11 – Derivative Financial Instruments The Company utilizes derivative financial instruments primarily to hedge its exposure to changes in interest rates. All derivative financial instruments are recognized as either assets or liabilities and measured at fair value. The Company enters into commitments to originate residential mortgage loans held for sale, at specified interest rates and within a specified period of time, with clients who have applied for a loan and meet certain credit and underwriting criteria (interest rate lock commitments). These interest rate lock commitments (“IRLCs”) meet the definition of a derivative financial instrument and are reflected in the balance sheet at fair value with changes in fair value recognized in current period earnings. Unrealized gains and losses on the IRLCs are recorded as derivative assets and derivative liabilities, respectively, and are measured based on the value of the underlying mortgage loan, quoted mortgage-backed securities (“MBS”) prices and an estimate of the probability that the mortgage loan will fund within the terms of the interest rate lock commitment, net of estimated commission expenses. The Company manages the interest rate and price risk associated with its outstanding IRLCs and mortgage loans held for sale by entering into derivative instruments such as forward sales of MBS. These derivatives are free-standing derivatives and are not designated as instruments for hedge accounting. Management expects these derivatives will experience changes in fair value opposite to changes in fair value of the IRLCs and mortgage loans held for sale, thereby reducing earnings volatility. The Company takes into account various factors and strategies in determining the portion of the mortgage pipeline (IRLCs and mortgage loans held for sale) it wants to economically hedge. The gain or loss resulting from the change in the fair value of the derivative is recognized in the Company’s statement of income during the period of change. The Company entered into a pay-fixed portfolio layer method (“PLM”) fair value swap, designated as a hedging instrument, with a total notional amount of $ 200.0 million and a maturity date of May 25, 2028 in the second quarter of 2023. The Company entered into a second pay-fixed PLM fair value swap, designated as a hedging instrument, with a total notional amount of $ 100.0 million and a maturity date of August 27, 2027 in the third quarter of 2024. Under the PLM method, the hedged item is designated as a hedged layer of a closed portfolio of financial loans that is anticipated to remain outstanding for the designated hedged period. Adjustments are made to record the swap at fair value on the consolidated balance sheets, with changes in fair value recognized in interest income. The carrying value of the fair value swap on the consolidated balance sheets will also be adjusted through interest income, based on changes in fair value attributable to changes in the hedged risk. On December 1, 2025, the Company terminated both of the pay-fixed PLM fair value swaps designated as hedging instruments. The cumulative fair value hedge basis adjustment of $ 2.4 million is included in gross loans and will be amortized over 77 months, which is the weighted average life of the remaining portfolio. 100 Table of Contents The following table represents the carrying value of the PLM hedged asset and liability and the cumulative fair value hedging adjustment included in the carrying value of the hedged instrument as of December 31, 2025 and December 31, 2024. Schedule of carrying value of hedged asset and liability and cumulative fair value hedging adjustment December 31, 2025 2024 (dollars in thousands) Carrying Amount Hedged Basis Adjustment Carrying Amount Hedged Basis Adjustment Fixed Rate Asset/Liability 1 $ - - $ 296,361 ( 3,638 ) 1 These amounts included the amortized cost basis of closed portfolios of fixed rate loans used to designate hedging relationships in which the hedged item is the stated amount of the assets in the closed portfolio anticipated to be outstanding for the designated hedged period. As of December 31, 2025, the amortized cost basis of the closed portfolio used in this hedging relationship was $ 609.2 million, the cumulative basis adjustment associated with this hedging relationship was $ 2.4 million, and the amount of the designated hedged item was $ 0 . The following table summarizes the Company’s outstanding financial derivative instruments at December 31, 2025 and December 31, 2024. Schedule of outstanding financial derivative instruments December 31, 2025 Fair Value (dollars in thousands) Notional Balance Sheet Location Asset/(Liability) Derivatives designated as hedging instruments: Fair value swap Fair value swap [Member] $ - Other assets $ - Derivatives not designated as hedging instruments: Mortgage loan interest rate lock commitments Mortgage loan interest rate lock commitments [Member] 22,264 Other assets 335 MBS forward sales commitments MBS forward sales commitments [Member] 15,000 Other liabilities ( 51 ) Total derivative financial instruments Total derivative financial instruments [Member] $ 37,264 $ 284 December 31, 2024 Fair Value (dollars in thousands) Notional Balance Sheet Location Asset/(Liability) Derivatives designated as hedging instruments: Fair value swap $ 300,000 Other assets $ 3,698 Derivatives not designated as hedging instruments: Mortgage loan interest rate lock commitments 15,841 Other assets 188 MBS forward sales commitments 10,500 Other assets 40 Total derivative financial instruments $ 326,341 $ 3,926 There was no accrued interest receivable related to the interest rate swap as of December 31, 2025. Accrued interest receivable related to the interest rate and swap as of December 31, 2024, totaled $ 259,000 , and is excluded from the fair value presented in the table above. The Company assesses the effectiveness of the fair value swap hedge with a regression analysis that compares the changes in forward curves to determine the value. The effective portion of changes in fair value of derivatives designated as fair value hedges is recorded through interest income. The Company does not offset derivative assets and derivative liabilities for financial statement presentation purposes. The following table summarizes the effect of the fair value hedging relationship recognized in the consolidated statements of income for the twelve months ended December 31, 2025 and December 31, 2024. 101 Table of Contents Schedule of summarize the effect of fair value hedging relationship recognized in the consolidated statement of income For the years ended December 31, (dollars in thousands) 2025 2024 Gain (loss) on fair value hedging relationship: Hedged asset/(liability) $ 6,100 4,179 Fair value derivative designated as hedging instrument ( 5,945 ) ( 4,149 ) Total gain (loss) recognized in interest income on loans $ 155 30 NOTE 12 – Fair Value Accounting FASB ASC 820, “Fair Value Measurement and Disclosures Topic,” defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. FASB ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value: Level 1 – Quoted market price in active markets Quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities include certain debt and equity securities that are traded in an active exchange market. Level 2 – Significant other observable inputs Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 2 assets and liabilities include fixed income securities and mortgage-backed securities that are held in the Company’s available-for-sale portfolio and valued by a third-party pricing service, as well as certain individually evaluated loans. Level 3 – Significant unobservable inputs Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. These methodologies may result in a significant portion of the fair value being derived from unobservable data. Fair Value of Financial Instruments Financial instruments require disclosure of fair value information, whether or not recognized in the consolidated balance sheets, when it is practical to estimate the fair value. A financial instrument is defined as cash, evidence of an ownership interest in an entity or a contractual obligation which requires the exchange of cash. Certain items are specifically excluded from the disclosure requirements, including the Company’s common stock, premises and equipment and other assets and liabilities. The following is a description of valuation methodologies used to estimate fair value for assets recorded at fair value. Fair value approximates carrying value for the following financial instruments due to the short-term nature of the instrument: cash and due from banks, federal funds sold, other investments, federal funds purchased, and securities sold under agreement to repurchase. Investment Securities Securities available for sale are valued on a recurring basis at quoted market prices where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable securities. Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange or U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter markets and money market funds. Level 2 securities include mortgage-backed securities and debentures issued by government sponsored entities, municipal bonds and corporate debt securities. In certain cases where there is limited activity or less transparency around inputs to valuations, securities are classified as Level 3 within the valuation hierarchy. Securities held to maturity are valued at quoted market prices or dealer quotes similar to securities available for sale. The carrying value of Other Investments, such as Federal Reserve Bank and FHLB stock, approximates fair value based on their redemption provisions. 102 Table of Contents Mortgage Loans Held for Sale Loans held for sale include mortgage loans which are saleable into the secondary mortgage markets and their fair values are estimated using observable quoted market or contracted prices or market price equivalents, which would be used by other market participants. These saleable loans are considered Level 2. Individually Evaluated Loans The Company does not record loans at fair value on a recurring basis. However, from time to time, a loan may be considered individually evaluated and an allowance for credit losses may be established. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered individually evaluated. Once a loan is identified as individually evaluated, management measures the impairment in accordance with FASB ASC 326. The fair value of individually evaluated loans is estimated using one of several methods, including collateral value, market value of similar debt, enterprise value, liquidation value and discounted cash flows. Those individually evaluated loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. In accordance with FASB ASC 820, “Fair Value Measurement and Disclosures,” individually evaluated loans where an allowance is established based on the fair value of collateral require classification in the fair value hierarchy. When the fair value of the collateral is based on an observable market price or a current appraised value, the Company considers the individually evaluated loan as nonrecurring Level 2. The Company’s current loan and appraisal policies require the Company to obtain updated appraisals on an “as is” basis at renewal, or in the case of an individually evaluated loan, on an annual basis, either through a new external appraisal or an appraisal evaluation. When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Company considers the individually evaluated loan as nonrecurring Level 3. The fair value of individually evaluated loans may also be estimated using the present value of expected future cash flows to be realized on the loan, which is also considered a Level 3 valuation. These fair value estimates are subject to fluctuations in assumptions about the amount and timing of expected cash flows as well as the choice of discount rate used in the present value calculation. Other Real Estate Owned OREO, consisting of properties obtained through foreclosure or in satisfaction of loans, is reported at the lower of cost or fair value, determined on the basis of current appraisals, comparable sales, and other estimates of value obtained principally from independent sources, adjusted for estimated selling costs (Level 2). At the time of foreclosure, any excess of the loan balance over the fair value of the real estate held as collateral is treated as a charge against the allowance for credit losses. Gains or losses on sale and generally any subsequent adjustments to the value are recorded as a component of real estate owned activity. When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Company considers the OREO as nonrecurring Level 3. Derivative Financial Instruments The Company estimates the fair value of IRLCs based on the value of the underlying mortgage loan, quoted MBS prices and an estimate of the probability that the mortgage loan will fund within the terms of the IRLC, net of commission expenses (Level 2). The Company estimates the fair value of forward sales commitments based on quoted MBS prices (Level 2). The Company estimates the fair value of the derivative liability based on changes in the benchmark interest rate component of the hedged loans. The estimated variable rate cash inflows were compared to the fixed rate outflows and such difference was discounted to a present value to estimate the fair value of the interest rate swaps. The components of the valuation were observable or could be corroborated by observable market data and, therefore, were classified within Level 2 of the valuation hierarchy. Assets and Liabilities Recorded at Fair Value on a Recurring Basis The tables below present the recorded amount of assets and liabilities measured at fair value on a recurring basis. 103 Table of Contents Schedule of assets and liabilities measured at fair value on a recurring basis December 31, 2025 (dollars in thousands) Level 1 Level 2 Level 3 Total Assets Level 1 [Member] Securities available for sale: Corporate bonds Level 2 [Member] $ - 1,600 - 1,600 US government agencies - 12,278 - 12,278 State and political subdivisions Level 3 [Member] - 17,870 - 17,870 Asset-backed securities - 16,419 - 16,419 Mortgage-backed securities - 79,563 - 79,563 Mortgage loans held for sale - 11,569 - 11,569 Mortgage loan interest rate lock commitments - 335 - 335 Total assets measured at fair value on a recurring basis $ - 139,634 - 139,634 Liabilities MBS forward sales commitments $ - 51 - 51 Total liabilities measured at fair value on a recurring basis $ - 51 - 51 December 31, 2024 (dollars in thousands) Level 1 Level 2 Level 3 Total Assets Securities available for sale: Corporate bonds $ - 1,927 - 1,927 US treasuries - 908 - 908 US government agencies - 15,795 - 15,795 State and political subdivisions - 19,322 - 19,322 Asset-backed securities - 36,538 - 36,538 Mortgage-backed securities - 57,637 - 57,637 Mortgage loans held for sale - 4,565 - 4,565 Mortgage loan interest rate lock commitments - 188 - 188 Derivative asset - 3,698 - 3,698 MBS forward sales commitments - 40 - 40 Total assets measured at fair value on a recurring basis $ - 140,618 - 140,618 The Company had no liabilities recorded at fair value on a recurring basis as of December 31, 2024. Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis The Company is predominantly an asset-based lender with real estate serving as collateral on approximately 83 % of loans as of December 31, 2025. Loans which are deemed to be individually evaluated are valued net of the allowance for credit losses, and other real estate owned is valued at the lower of cost or net realizable value of the underlying real estate collateral. Such market values are generally obtained using independent appraisals, which the Company considers to be level 2 inputs. The tables below present the recorded amount of assets and liabilities measured at fair value on a nonrecurring basis. 104 Table of Contents Schedule of assets and liabilities measured at fair value on a nonrecurring basis December 31, 2025 (dollars in thousands) Level 1 Level 2 Level 3 Total Assets Individually evaluated loans $ - 12,557 1,038 13,595 Other real estate owned - 275 - 275 Total assets measured at fair value on a nonrecurring basis $ - 12,832 1,038 13,870 December 31, 2024 Level 1 Level 2 Level 3 Total Assets Individually evaluated loans $ - 9,139 1,127 10,266 Total assets measured at fair value on a nonrecurring basis $ - 9,139 1,127 10,266 The Company had no liabilities carried at fair value or measured at fair value on a nonrecurring basis at December 31, 2025 or December 31, 2024. For Level 3 assets and liabilities measured at fair value on a recurring or nonrecurring basis as of December 31, 2025 and 2024, the significant unobservable inputs used in the fair value measurements were as follows: Schedule of unobservable inputs used in the fair value measurements Valuation Technique Significant Unobservable Inputs Range of Inputs Individually evaluated loans Appraised Value/ Discounted Cash Flows Discounts to appraisals or cash flows for estimated holding and/or selling costs or age of appraisal 0 - 25 % Fair Value of Financial Instruments Financial instruments require disclosure of fair value information, whether or not recognized in the consolidated balance sheets, when it is practical to estimate the fair value. A financial instrument is defined as cash, evidence of an ownership interest in an entity or a contractual obligation which requires the exchange of cash. Certain items are specifically excluded from the disclosure requirements, including the Company’s common stock, premises and equipment and other assets and liabilities. The following is a description of valuation methodologies used to estimate fair value for certain other financial instruments. Fair value approximates carrying value for the following financial instruments due to the short-term nature of the instrument: cash and due from banks, federal funds sold, other investments, federal funds purchased, and securities sold under agreement to repurchase. Loans – The valuation of loans held for investment is estimated using the exit price notion which incorporates factors, such as enhanced credit risk, illiquidity risk and market factors that sometimes exist in exit prices in dislocated markets. This credit risk assumption is intended to approximate the fair value that a market participant would realize in a hypothetical orderly transaction. The Company’s loan portfolio is initially fair valued using a segmented approach, using the eight categories as disclosed in Note 4 – Loans and Allowance for Credit Losses. Loans are considered a Level 3 classification. Deposits – Fair value for demand deposit accounts and interest-bearing accounts with no fixed maturity date is equal to the carrying value. The fair value of certificate of deposit accounts are estimated by discounting cash flows from expected maturities using current interest rates on similar instruments. FHLB Advances and Other Borrowings – Fair value for FHLB advances and other borrowings are estimated by discounting cash flows from expected maturities using current interest rates on similar instruments. Subordinated debentures – Fair value for subordinated debentures are estimated by discounting cash flows from expected maturities using current interest rates on similar instruments. The Company has used management’s best estimate of fair value based on the above assumptions. Thus, the fair values presented may not be the amounts that could be realized in an immediate sale or settlement of the instrument. In addition, any income taxes or other expenses, which would be incurred in an actual sale or settlement, are not taken into consideration in the fair value presented. 105 Table of Contents The estimated fair values of the Company’s financial instruments at December 31, 2025 and 2024 are as follows: Schedule of estimated fair values of the company's financial instruments December 31, 2025 (dollars in thousands) Carrying Amount Fair Value Level 1 Level 2 Level 3 Financial Assets: Other investments, at cost $ 20,063 20,063 - - 20,063 Loans (1) 3,787,729 3,592,123 - - 3,592,123 Financial Liabilities: Deposits 3,716,803 3,461,284 - 3,461,284 - FHLB and other borrowings 240,000 240,798 240,798 Subordinated debentures 24,903 26,658 - 26,658 - December 31, 2024 (dollars in thousands) Carrying Amount Fair Value Level 1 Level 2 Level 3 Financial Assets: Other investments, at cost $ 19,490 19,490 - - 19,490 Loans (1) 3,579,640 3,319,602 - - 3,319,602 Financial Liabilities: Deposits 3,435,765 3,158,893 - 3,158,893 - FHLB and other borrowings 240,000 237,543 237,543 Subordinated debentures 24,903 27,539 - 27,539 - (1) Carrying amount is net of the allowance for credit losses and individually evaluated loans. NOTE 13 – Earnings Per Common Share The following schedule reconciles the numerators and denominators of the basic and diluted earnings per share computations for the years ended December 31, 2025, 2024, and 2023. Dilutive common shares arise from the potentially dilutive effect of the Company’s outstanding stock options and unvested restricted stock. The assumed conversion of stock options and warrants can create a difference between basic and dilutive net income per common share. At December 31, 2025, 2024, and 2023, options totaling 6,913 , 153,755 , and 269,072 , respectively, were anti-dilutive in the calculation of earnings per share as their exercise price exceeded the fair market value. These options were therefore excluded from the diluted earnings per share calculation. Schedule of earnings per share For the years ended December 31, (dollars in thousands, except share data) 2025 2024 2023 Numerator: Net income $ 30,366 15,530 13,426 Net income available to common shareholders $ 30,366 15,530 13,426 Denominator: Weighted-average common shares outstanding - basic 8,091,322 8,080,623 8,046,633 Common stock equivalents 69,142 36,434 31,821 Weighted-average common shares outstanding - diluted 8,160,464 8,117,057 8,078,454 Earnings per common share: Basic $ 3.75 1.92 1.67 Diluted $ 3.72 1.91 1.66 NOTE 14 – Commitments and Contingencies The Company has an agreement with a data processor which expires in 2028 to provide certain item processing, electronic banking, and general ledger processing services. Components of this contract vary based on transaction and account volume, monthly charges and certain termination fees. The Company has commitments with various investment partners under the Small Business Investment Company (“SBIC”) and the Rural Business Investment Company (“RBIC”) programs for which we have committed to make capital contributions from time to time. These commitments totaled approximately $ 769,000 at December 31, 2025. 106 Table of Contents The Company may be subject to litigation and claims in the normal course of business. As of December 31, 2025, management believes there is no material litigation pending. NOTE 15 – Income Taxes The Company has elected to adopt ASU 2023-09 retrospectively. The components of income tax expense were as follows: Schedule of components of income tax expense For the years ended December 31, (dollars in thousands) 2025 2024 2023 Current income taxes: Federal $ 9,182 4,992 3,769 State 1,360 623 460 Total current tax expense 10,542 5,615 4,229 Deferred income benefit: Federal ( 1,284 ) ( 857 ) ( 228 ) State ( 19 ) ( 376 ) - Total deferred income benefit ( 1,303 ) ( 1,233 ) ( 228 ) Income tax expense $ 9,239 4,382 4,001 The following is a summary of the items that caused recorded income taxes to differ from taxes computed using the statutory tax rate: Schedule of taxes computed using the statutory tax rate For the years ended December 31, 2025 2024 2023 (dollars in thousands) Amount Percent Amount Percent Amount Percent Tax expense at statutory rate $ 8,317 21.00 % $ 4,182 21.00 % $ 3,660 21.00 % Effect of state income taxes, net of federal benefit (1) 1,059 2.67 % 195 0.98 % 364 2.09 % Non-taxable or nondeductible items: Exempt Income 5 0.01 % 13 0.07 % 7 0.04 % Effect of stock-based compensation ( 49 ) ( 0.12 )% 128 0.64 % 133 0.76 % Other ( 93 ) ( 0.23 )% ( 136 ) ( 0.68 )% ( 163 ) ( 0.94 )% Income tax expense $ 9,239 23.33 % $ 4,382 22.01 % $ 4,001 22.96 % (1) State taxes in South Carolina made up the majority (greater than 50 percent) of the tax effect in this category. The following table presents income taxes paid (net of refunds received). Schedule of income taxes paid For the years ended December 31, (dollars in thousands) 2025 2024 2023 Federal $ 9,410 3,295 925 State South Carolina 1,046 450 300 Georgia 41 - 185 North Carolina 23 110 103 Alabama ( 3 ) - 1 Income tax expense $ 10,517 3,855 1,514 107 Table of Contents The components of the deferred tax assets and liabilities are as follows: Schedule of components of the deferred tax assets and liabilities December 31, (dollars in thousands) 2025 2024 Deferred tax assets: Allowance for credit losses $ 9,125 8,636 Reserve for unfunded commitments 422 315 Unrealized loss on securities available for sale 1,982 3,050 Net deferred loan fees 1,214 1,343 Deferred compensation 1,668 1,557 Accrued bonuses 808 687 Lease liabilities 4,664 4,999 Other 659 608 Total deferred tax assets 20,542 21,195 Deferred tax liabilities: Property and equipment 2,329 2,892 Hedging transactions 99 79 Prepaid expenses 293 302 ROU assets 4,082 4,435 Other 37 20 Total deferred tax liabilities 6,840 7,728 Net deferred tax asset $ 13,702 13,467 The Company has analyzed the tax positions taken or expected to be taken in its tax returns and concluded it has no liability related to uncertain tax positions. NOTE 16 – Related Party Transactions Certain directors, executive officers, and companies with which they are affiliated, are clients of and have banking transactions with the Company in the ordinary course of business. These loans were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with persons not related to the lender. A summary of loan transactions with directors and executive officers, including their affiliates is as follows: Schedule of loan transactions with directors and executive officers, including their affiliates For the years ended December 31, (dollars in thousands) 2025 2024 Balance, beginning of year $ 25,145 25,252 New loans 39,600 7,000 Less loan payments ( 12,616 ) ( 7,107 ) Balance, end of year $ 52,129 25,145 Deposits by executive officers and directors and their related interests at December 31, 2025 and 2024, were $ 6.5 million and $ 7.0 million, respectively. The Company has a land lease with a director on the property for a branch office, with monthly payments of $ 10,749 . In addition, the Company periodically enters into various consulting agreements with the director for development, administration and advisory services related to the purchase of property and construction of current and future branch office sites, including the development of the new bank headquarters in Greenville, South Carolina. There were no payments to the director for these services during 2025 or 2024. The Company received rent payments from a company of which a director is a private investor and chairman of the board. Rent received totaled $ 93,000 and $ 91,000 for the twelve months ended December 31, 2025 and December 31, 2024, respectively. The Company is of the opinion that the lease payments and consulting fees represent market costs that could have been obtained in similar “arms length” transactions. 108 Table of Contents NOTE 17 – Financial Instruments with Off-Balance Sheet Risk In the ordinary course of business, and to meet the financing needs of its clients, the Company is a party to various financial instruments with off-balance sheet risk. These financial instruments, which include commitments to extend credit and standby letters of credit, involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized in the balance sheets. The contract amount of those instruments reflects the extent of involvement the Company has in particular classes of financial instruments. The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amounts of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments. Commitments to extend credit are agreements to lend to a client so long as there is no violation of any material condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require the payment of a fee. At December 31, 2025, unfunded commitments to extend credit were approximately $ 843.6 million, of which $ 81.4 million is at fixed rates and $ 762.2 million is at variable rates. At December 31, 2024, unfunded commitments to extend credit were approximately $ 719.1 million, of which $ 57.5 million is at fixed rates and $ 661.6 million is at variable rates. The Company evaluates each client’s credit-worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the borrower. Collateral varies but may include accounts receivable, inventory, property, plant and equipment, and commercial and residential real estate. See Note 4 – Loans and Allowance for Credit Losses for additional information on unfunded commitments. At December 31, 2025 and 2024, there was a $ 20.4 million and $ 16.2 million commitment, respectively, under letters of credit. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to clients. Collateral varies but may include accounts receivable, inventory, equipment, marketable securities and property. Since most of the letters of credit are expected to expire without being drawn upon, they do not necessarily represent future cash requirements. The fair value of off balance sheet lending commitments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties credit standing. The total fair value of such instruments is not material. NOTE 18 – Employee Benefit Plan On January 1, 2000, the Company adopted the Southern First Bancshares, Inc. Profit Sharing and 401(k) Plan for the benefit of all eligible employees. The Company contributes to the Plan annually upon approval by the Board of Directors. Contributions made to the Plan for the years ended December 31, 2025, 2024, and 2023 amounted to $ 1.2 million, $ 1.1 million, and $ 1.1 million, respectively. The Company also provides a nonqualified deferred compensation plan for 19 executive officers in the form of a Supplemental Executive Retirement Plan (“SERP”). The SERP provides retirement income for these officers. As of December 31, 2025 and 2024, the Company had an accrued benefit obligation of $ 7.8 million and $ 7.2 million, respectively. The Company incurred expenses related to this plan of $ 716,000 and $ 417,000 for the twelve months ended December 31, 2025 and December 31, 2024, respectively. The Company had a reversal of $ 1.1 million for the year ended December 31, 2023. NOTE 19 – Stock-Based Compensation The Company utilizes certain stock incentive plans as long-term retention programs intended to attract, retain, and provide incentives for key employees and non-employee directors in the form of incentive and non-qualified stock options, restricted stock, and restricted stock units. Shares are granted under plans approved by the Company’s shareholders. As of December 31, 2025, there were 204,531 shares available for grant under the 2020 Southern First Bancshares, Inc. Equity Incentive Plan. Compensation cost is recognized for stock options and restricted stock awards issued to employees and non-employee directors and is measured as the fair value of these awards on their date of grant. A Black-Scholes model is utilized to estimate the fair value of stock options, while the market price of the Company’s common stock at the date of grant is used as the fair value of restricted stock awards. Compensation cost is recognized over the required service period, generally defined as the vesting period for stock option and restricted stock awards. 109 Table of Contents Stock-based compensation expense was recorded as follows: Schedule of stock-based compensation expense For the years ended December 31, (dollars in thousands) 2025 2024 2023 Stock option expense $ 33 374 528 Restricted stock grant expense 2,239 1,909 1,415 Total stock-based compensation expense $ 2,272 2,283 1,943 Stock Options All stock options have an exercise price that is equal to the closing fair market value of the Company’s stock on the date the options were granted. Options granted under the plans generally vest over a four-year period and expire 10 years from the grant date. The Company did not grant any stock options during the years ended December 31, 2025, 2024, or 2023. At December 31, 2025, there was no remaining compensation cost related to nonvested stock option grants. The fair value of stock option grants that vested during 2025, 2024, and 2023 was $ 390,000 , $ 576,000 and $ 846,000 , respectively. A summary of the status of the stock option plan and changes for the period is presented below: Schedule of the status of the stock option plan and changes For the years ended December 31, 2025 2024 2023 Shares Weighted average exercise price Weighted Average Remaining Contractual Life Shares Weighted average exercise price Weighted Average Remaining Contractual Life Shares Weighted average exercise price Weighted Average Remaining Contractual Life Outstanding at beginning of year 312,599 $ 36.34 331,349 $ 35.51 427,224 $ 34.32 Granted - - - - - - Exercised ( 68,500 ) 29.82 ( 15,250 ) 17.17 ( 27,250 ) 20.18 Forfeited or expired ( 3,500 ) 42.30 ( 3,500 ) 41.55 ( 68,625 ) 34.15 Outstanding at end of year 240,599 $ 38.11 3.6 years 312,599 $ 36.34 4.1 years 331,349 $ 35.51 4.9 years Options exercisable at year-end 240,599 $ 38.11 3.6 years 288,849 $ 36.00 4.0 years 267,376 $ 34.48 4.5 years Weighted average fair value of options granted during the year $ - $ - $ - Shares available for grant 204,531 258,622 319,058 The aggregate intrinsic value (the difference between the Company’s closing stock price on the last trading day of the year and the exercise price, multiplied by the number of in-the-money options) of 240,599 and 312,599 stock options outstanding at December 31, 2025 and 2024 was $ 3.2 million and $ 1.4 million, respectively. The aggregate intrinsic value of 240,599 and 288,849 stock options exercisable at December 31, 2025 and 2024 was $ 3.2 million and $ 1.4 million, respectively. Stock Compensation Plan [Member] Restricted Stock Grants Shares of restricted stock granted to employees under the stock plans are subject to restrictions as to continuous employment for a specified time period following the date of grant. Under the 2020 Southern First Bancshares, Inc. Equity Incentive Plan, the Company may grant both restricted stock awards and restricted stock units. Restricted stock awards are issued and outstanding upon grant and restricted stock units are issued and outstanding upon vesting. During the vesting period, holders of restricted stock awards are entitled to full voting rights and dividends, if and when declared, while holders of restricted stock units have no rights to vote or dividends, if and when declared. At December 31, 2025, there was $ 3.7 million of total unrecognized compensation cost related to nonvested restricted stock grants. The cost is expected to be recognized over a weighted-average period of 2.4 years. A summary of the status of the Company’s nonvested restricted stock and changes for the years ended December 31, 2025, 2024, and 2023 is as follows: 110 Table of Contents Schedule of the status of the company's nonvested restricted stock and changes December 31, 2025 2024 2023 Restricted Shares Weighted Average Grant-Date Fair Value Restricted Shares Weighted Average Grant-Date Fair Value Restricted Shares Weighted Average Grant-Date Fair Value Nonvested at beginning of year 139,851 $ 40.85 109,533 $ 44.40 80,337 $ 52.53 Granted 65,685 37.09 65,373 36.47 69,880 37.12 Vested ( 44,559 ) 41.91 ( 30,118 ) 44.72 ( 21,695 ) 48.95 Forfeited ( 10,594 ) 40.74 ( 4,937 ) 37.95 ( 18,989 ) 46.83 Nonvested at end of year 150,383 $ 38.90 139,851 $ 40.85 109,533 $ 44.40 NOTE 20 – Dividends The ability of the Company to pay cash dividends is dependent upon receiving cash in the form of dividends from the Bank. The dividends that may be paid by the Bank to the Company are subject to legal limitations and regulatory capital requirements. Also, the payment of cash dividends on the Company’s common stock by the Company in the future will be subject to certain other legal and regulatory limitations (including the requirement that the Company’s capital be maintained at certain minimum levels) and will be subject to ongoing review by banking regulators. The Federal Reserve has issued a policy statement regarding the payment of dividends by bank holding companies. In general, the Federal Reserve’s policies provide that dividends should be paid only out of current earnings and only if the prospective rate of earnings retention by the bank holding company appears consistent with the organization’s capital needs, asset quality and overall financial condition. NOTE 21 – Regulatory Matters The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. The capital rules require banks and bank holding companies to maintain a minimum total risk-based capital ratio of at least 8%, a total Tier 1 capital ratio of at least 6%, a minimum common equity Tier 1 capital ratio of at least 4.5%, and a leverage ratio of at least 4%. Bank holding companies and banks are also required to hold a capital conservation buffer of common equity Tier 1 capital of 2.5% to avoid limitations on capital distributions and discretionary executive compensation payments. The capital conservation buffer was phased in incrementally over time, becoming fully effective on January 1, 2019, and consists of an additional amount of common equity equal to 2.5% of risk-weighted assets. To be considered “well-capitalized” for purposes of certain rules and prompt corrective action requirements, the Bank must maintain a minimum total risk-based capital ratio of at least 10%, a total Tier 1 capital ratio of at least 8%, a common equity Tier 1 capital ratio of at least 6.5%, and a leverage ratio of at least 5%. As of December 31, 2025, our capital ratios exceed these ratios and we remain “well capitalized.” The following table summarizes the capital amounts and ratios of the Bank and the Company and the regulatory minimum requirements at December 31, 2025 and 2024. 111 Table of Contents Schedule of capital amounts and ratios of the Bank and the Company and the regulatory minimum requirements Actual For capital adequacy purposes minimum To be well capitalized under prompt corrective action provisions minimum (dollars in thousands) Amount Ratio Amount Ratio Amount Ratio As of December 31, 2025 The Bank Total Capital (to risk weighted assets) $ 437,207 12.85 % $ 272,120 8.00 % $ 340,150 10.00 % Tier 1 Capital (to risk weighted assets) 394,927 11.61 % 204,090 6.00 % 272,120 8.00 % Common Equity Tier 1 Capital (to risk weighted assets) 394,927 11.61 % 153,068 4.50 % 221,098 6.50 % Tier 1 Capital (to average assets) 394,927 9.06 % 174,276 4.00 % 217,845 5.00 % The Company Total Capital (to risk weighted assets) 438,292 12.89 % 272,120 8.00 % n/a n/a Tier 1 Capital (to risk weighted assets) 389,112 11.44 % 204,090 6.00 % n/a n/a Common Equity Tier 1 Capital (to risk weighted assets) 376,112 11.06 % 153,068 4.50 % n/a n/a Tier 1 Capital (to average assets) 389,112 8.93 % 174,293 4.00 % n/a n/a Actual For capital adequacy purposes minimum To be well capitalized under prompt corrective action provisions minimum (dollars in thousands) Amount Ratio Amount Ratio Amount Ratio As of December 31, 2024 The Bank Total Capital (to risk weighted assets) $ 402,629 12.66 % $ 254,412 8.00 % $ 318,015 10.00 % Tier 1 Capital (to risk weighted assets) 362,875 11.41 % 190,809 6.00 % 254,412 8.00 % Common Equity Tier 1 Capital (to risk weighted assets) 362,875 11.41 % 143,107 4.50 % 206,709 6.50 % Tier 1 Capital (to average assets) 362,875 8.75 % 165,941 4.00 % 207,426 5.00 % The Company Total Capital (to risk weighted assets) 403,867 12.70 % 254,392 8.00 % n/a n/a Tier 1 Capital (to risk weighted assets) 354,916 11.16 % 190,794 6.00 % n/a n/a Common Equity Tier 1 Capital (to risk weighted assets) 341,916 10.75 % 143,096 4.50 % n/a n/a Tier 1 Capital (to average assets) 354,916 8.55 % 165,963 4.00 % n/a n/a NOTE 22 – Parent Company Financial Information Following is condensed financial information of Southern First Bancshares, Inc. (parent company only): Condensed Balance Sheets Schedule of condensed balance sheets December 31, (dollars in thousands) 2025 2024 Assets Cash and cash equivalents $ 5,544 3,641 Investment in subsidiaries 387,876 351,806 Other assets 148 149 Total assets $ 393,568 355,596 Liabilities and Shareholders’ Equity Accrued expenses $ 8 249 Subordinated debentures 24,903 24,903 Shareholders’ equity 368,657 330,444 Total liabilities and shareholders’ equity $ 393,568 355,596 112 Table of Contents Condensed Statements of Income Schedule of condensed statements of income For the years ended December 31, (dollars in thousands) 2025 2024 2023 Revenues Interest income $ 6 12 15 Total revenue 6 12 15 Expenses Interest expense 1,802 2,149 2,197 Other expenses 338 255 249 Total expenses 2,140 2,404 2,446 Income tax benefit 448 502 511 Loss before equity in undistributed net income of subsidiaries ( 1,686 ) ( 1,890 ) ( 1,920 ) Equity in undistributed net income of subsidiaries 32,052 17,420 15,346 Net income $ 30,366 15,530 13,426 Condensed Statements of Cash Flows Schedule of condensed statements of cash flows For the years ended December 31, (dollars in thousands) 2025 2024 2023 Operating activities Net income $ 30,366 15,530 13,426 Adjustments to reconcile net income to cash provided by operating activities Equity in undistributed net income of subsidiaries ( 32,052 ) ( 17,420 ) ( 15,346 ) Compensation expense related to stock options and restricted stock grants 2,272 2,283 1,943 Decrease (increase) in other assets 1 ( 3 ) ( 125 ) Increase (decrease) in accrued expenses ( 241 ) 49 110 Net cash provided by operating activities 346 439 8 Investing activities Investment in subsidiaries, net - 5,000 ( 5,000 ) Net cash provided by (used for) investing activities - 5,000 ( 5,000 ) Financing activities Proceeds from the exercise of stock options and warrants 2,042 294 518 Decrease in subordinated debentures - ( 11,500 ) - Restricted shares withheld for taxes ( 485 ) - - Net cash provided by (used for) financing activities 1,557 ( 11,206 ) 518 Net increase (decrease) in cash and cash equivalents 1,903 ( 5,767 ) ( 4,474 ) Cash and cash equivalents, beginning of year 3,641 9,408 13,882 Cash and cash equivalents, end of year $ 5,544 3,641 9,408 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.