What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-05-05 compared with 2025-11-06 · 472 added, 582 removed, 509 unchanged (67% of the section changed)

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Unless we state otherwise or the context otherwise requires,

references in this Form 10-Q to “we,” “our,” “us” and “the Company” refer to South Plains Financial, Inc., a Texas corporation, our wholly-owned banking subsidiary, City Bank, a Texas banking association, and our other consolidated

subsidiaries.

References in this Form 10-Q to the “Bank” refer to City Bank.

C autionary Notice Regarding Forward-Looking Statements

This Form 10-Q contains statements that we believe are “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934,

as amended (the “Exchange Act”).

This Form 10-Q contains statements that we believe are “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as

amended (the “Exchange Act”).

These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance.

These statements are often, but not always, made through the use of

words or phrases such as “may,” “might,” “should,” “could,” “predict,” “potential,” “believe,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “strive,” “projection,” “goal,” “target,” “outlook,” “aim,”

“would,” “annualized” and “outlook,” or the negative version of those words or other comparable words or phrases of a future or forward-looking nature.

These forward-looking statements are not historical facts, and are based on current

expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control.

Accordingly, we caution you that any

such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions, estimates and uncertainties that are difficult to predict.

Although we believe that the expectations reflected in these

forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements.

These statements are often, but not always, made through the use of words or

phrases such as “may,” “might,” “should,” “could,” “predict,” “potential,” “believe,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “strive,” “projection,” “goal,” “target,” “outlook,” “aim,” “would,”

“annualized” and “outlook,” or the negative version of those words or other comparable words or phrases of a future or forward-looking nature.

These forward-looking statements are not historical facts, and are based on current expectations,

estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control.

Accordingly, we caution you that any such

forward-looking statements are not guarantees of future performance and are subject to risks, assumptions, estimates and uncertainties that are difficult to predict.

Although we believe that the expectations reflected in these forward-looking

statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements.

There are or will be important factors that could cause our actual results to differ materially from those indicated in these forward-looking statements, including, but not limited to, the following:

slower economic growth rates or potential recession in the United States and our market areas;

the impacts related to or resulting from uncertainty in the banking industry as a whole;

increased competition for deposits among traditional and nontraditional financial services companies, and related changes in deposit customer behavior;

risks relating to the acquisition of BOH Holdings, Inc.

(“BOH”) including, without limitation:

the expected impact of the transaction and on the combined entities’ operations, financial condition, and

financial results;

the businesses of South Plains and BOH may not be combined successfully, or such combination may take longer to accomplish than expected;

the cost savings from the transaction may not be fully realized or may take longer

to realize than expected;

operating costs, customer loss and business disruption following the transaction, including adverse effects on relationships with employees, may be greater than expected;

the risk of deposit and customer attrition;

and increased competitive pressures on solicitations of customers by competitors;

risks related to the integration of any other acquired businesses, including exposure to potential asset quality and credit quality risks and unknown or contingent liabilities, risks related to entering a new

geographic market, the time and costs associated with integrating systems, technology platforms, procedures and personnel, the ability to retain key employees and maintain relationships with significant customers, the need for additional

capital to finance such transactions, and possible failures in realizing the anticipated benefits from acquisitions;

potential recession in the United States and our market areas;

uncertainty or perceived instability in the banking industry as a whole;

increased competition for deposits and related changes in deposit customer behavior;

the lingering inflationary pressures, and the risk of the resurgence of elevated levels of inflation, in the United States and our market areas, and its impact on market interest rates, the economy and credit

our ability to effectively execute our expansion strategy and manage our growth, including identifying and consummating suitable acquisitions;

business and economic conditions, particularly those affecting our market areas, as well as the concentration of our business in such market areas;

adverse changes in customer spending, borrowing and savings habits;

the impact of pandemics, epidemics, or any other health-related crisis;

high concentrations of loans secured by real estate located in our market areas;

changes in unemployment rates in the United States and our market areas;

increases in unemployment rates in the United States and our market areas;

risks associated with our commercial loan portfolio, including the risk for deterioration in value of the general business assets that secure such loans;

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costs and effects of litigation, investigations or similar matters to which we may be subject, including any effect on our reputation;

natural disasters, severe weather, acts of god, acts of war or terrorism, geopolitical instability, public health outbreaks (such as coronavirus), other international or domestic calamities, and other events

beyond our control, including as a result of policies of the U.S.

severe weather, natural disasters, military conflicts (including the conflicts in the Middle East, the possible expansion of such conflicts and potential geopolitical and economic consequences), acts of

terrorism, geopolitical instability, domestic civil unrest or other external events, including as a result of the impact of the policies of the current U.S.

presidential administration or Congress;

a deterioration of the credit rating for United States long-term sovereign debt or the impact of uncertain or changing political conditions, including federal government shutdowns and uncertainty regarding

United States fiscal debt, deficit and budget matters;

uncertainty regarding United States fiscal debt, deficit and budget matters;

the impacts of tariffs, sanctions, and other trade policies of the United States and its global trading counterparts and the resulting impact on the Company and its customers;

the risks related to the development, implementation use and management of emerging technologies, including artificial intelligence and machine learning;

compliance with governmental and regulatory requirements, including the Dodd-Frank Act Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), Economic Growth, Regulatory Relief, and Consumer

Protection Act of 2018 (“EGRRCPA”), and others relating to banking, consumer protection, securities and tax matters;

changes in the laws, rules, regulations, interpretations or policies that apply to the Company’s business and operations, and any additional regulations, or repeals that may be forthcoming as a result thereof,

which could cause the Company to incur additional costs and adversely affect the Company’s business environment, operations and financial results;

changes in accounting principles and standards, including those related to loan loss recognition under the current expected credit loss, or CECL, methodology;

thereof, which could cause the Company to incur additional costs and adversely affect the Company’s business environment, operations and financial results;

our ability to navigate the uncertain impacts of current and future governmental monetary and fiscal policies, including the current and future policies of the Board of Governors of the Federal Reserve System

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In addition, our past results of operations are not necessarily indicative of our future results.

Accordingly, you should not rely on any forward-looking statements, which represent our beliefs, assumptions and estimates only as

of the dates on which such forward-looking statements were made.

Any forward-looking statement speaks only as of the date on which it is made, and we do not undertake any obligation to update or review any forward-looking statement, whether as

a result of new information, future developments or otherwise, except as required by applicable law.

Accordingly, you should not rely on any forward-looking statements, which represent our beliefs, assumptions and estimates only as of

the dates on which such forward-looking statements were made.

Any forward-looking statement speaks only as of the date on which it is made, and we do not undertake any obligation to update or review any forward-looking statement, whether as a

result of new information, future developments or otherwise, except as required by applicable law.

Available Information

The Company maintains an Internet web site at www.spfi.bank .

The Company makes available, free of charge, on its web site

(under www.spfi.bank/financials-filings/sec-filings ) the Company’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed

or furnished pursuant to Section 13(a) or Section 15(d) of the Exchange Act as soon as reasonably practicable after the Company files such material with, or furnishes it to, the SEC.

The Company also makes available, free of charge, through its

web site (under www.spfi.bank/corporate-governance/documents-charters ) links to the Company’s Code of Conduct and the charters for its board committees.

In addition, the SEC maintains an

Internet site (at www.sec.gov ) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.

The Company makes available, free of charge, on its web site (under www.spfi.bank/financials-filings/sec-filings

) the Company’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or Section 15(d) of the Exchange Act as soon as reasonably

practicable after the Company files such material with, or furnishes it to, the SEC.

The Company also makes available, free of charge, through its web site (under www.spfi.bank/corporate-governance/documents-charters

) links to the Company’s Code of Conduct and the charters for its board committees.

In addition, the SEC maintains an Internet site (at www.sec.gov ) that contains reports, proxy and information

statements, and other information regarding issuers that file electronically with the SEC.

The Company routinely posts important information for investors on its web site (under www.spfi.bank and, more specifically, under the News & Events tab at www.spfi.bank/news-events/press-releases ).

The Company intends to use its web site as a means of disclosing material non-public information and for complying with its

disclosure obligations under SEC Regulation FD (Fair Disclosure).

Accordingly, investors should monitor the Company’s web site, in addition to following the Company’s press releases, SEC filings, public conference calls, presentations and

The Company intends to use its web site as a means of disclosing material non-public information and for complying with its disclosure obligations under SEC

Regulation FD (Fair Disclosure).

Accordingly, investors should monitor the Company’s web site, in addition to following the Company’s press releases, SEC filings, public conference calls, presentations and webcasts.

The information contained on, or that may be accessed through, the Company’s web site is not incorporated by reference into, and is not a part of, this Form 10-Q.

We are a bank holding company headquartered in Lubbock, Texas, and our wholly-owned subsidiary, City Bank, is one of the largest independent banks in West Texas and has additional banking

operations in the Dallas, El Paso, Greater Houston, the Permian Basin, and College Station, Texas markets, and the Ruidoso, New Mexico market.

Through City Bank, we provide a wide range of commercial and consumer financial services to small and

medium-sized businesses and individuals in our market areas.

We are a bank holding company headquartered in Lubbock, Texas, and our wholly-owned subsidiary, City Bank, is one of the largest independent banks in West Texas and has additional banking operations

in the Dallas, El Paso, Greater Houston, the Permian Basin, and College Station, Texas markets, and the Ruidoso, New Mexico market.

Through City Bank, we provide a wide range of commercial and consumer financial services to small and medium-sized

businesses and individuals in our market areas.

Our principal business activities include commercial and retail banking, along with investment, trust and mortgage services.

Recent Developments

Mergers and Acquisitions

On April 1, 2026, SPFI acquired BOH Holdings, Inc., a Texas corporation (“BOH”), the bank holding company for Bank of Houston, in an all-stock transaction through the merger of BOH with and into SPFI, with SPFI

surviving the merger (the “Merger”).

Immediately after the Merger, Bank of Houston, a Texas state banking association and wholly-owned subsidiary of BOH, merged with and into City Bank, with City Bank surviving the merger.

Pursuant to the terms

of the Agreement and Plan of Reorganization, dated December 1, 2025 (the “Reorganization Agreement”), each share of BOH common stock held immediately prior to the effective time of the Merger was converted into the right to receive, without

interest, 0.1925 shares of SPFI common stock, as adjusted pursuant to the Reorganization Agreement, plus cash, without interest, in lieu of any fractional shares (collectively, the “Per Share Merger Consideration”).

The total aggregate consideration delivered to holders of BOH common stock was approximately 2.8 million shares of SPFI common stock.

The issuance of shares of SPFI common stock in connection with the Merger was

registered under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to a Registration Statement on Form S-4 (File No.

333-293068) initially filed by SPFI with the U.S.

Securities and Exchange Commission (the “SEC”) on January

30, 2026 and declared effective by the SEC on February 18, 2026.

At March 31, 2026, BOH had $685.0 million in assets, $631.9 million in total gross loans, and $595.6 million in deposits.

Results of Operations

We had net income of $16.3 million, or $0.96 per diluted common share, for the three months ended September 30, 2025, compared to net income of $11.2 million, or $0.66 per diluted common share for

the three months ended September 30, 2024.

Return on average equity (annualized) was 13.89% and return on average assets (annualized) was 1.47% for the three months ended September 30, 2025, compared to 10.36% and 1.05%, respectively, for the

three months ended September 30, 2024.

We had net income of $43.2 million, or $2.55 per diluted common share for the nine months ended September 30, 2025, compared to net income of $33.2 million, or $1.96 per diluted common share for

the nine months ended September 30, 2024.

Return on average equity (annualized) was 12.78% and return on average assets (annualized) was 1.33% for the nine months ended September 30, 2025, compared to 10.63% and 1.05%, respectively, for the

nine months ended September 30, 2024.

We had net income of $14.5 million, or $0.85 per diluted common share, for the three months ended March 31, 2026, compared to net income of $12.3 million, or $0.72 per diluted common share, for the

three months ended March 31, 2025.

Return on average equity (annualized) was 11.81% and return on average assets (annualized) was 1.31% for the three months ended March 31, 2026, compared to 11.30% and 1.16%, respectively, for the three months

ended March 31, 2025.

The increase in net income of $2.3 million was primarily the result of an increase of $4.3 million in net interest income and $670 thousand in noninterest income, partially offset by an increase of $2.5 million in noninterest

Net Interest Income

Net interest income is the principal source of the Company’s net income and represents the difference between interest income (interest and fees earned on assets, primarily loans and investment

securities) and interest expense (interest paid on deposits and borrowed funds).

Net interest income is the principal source of the Company’s net income and represents the difference between interest income (interest and fees earned on assets, primarily loans and investment securities) and interest

expense (interest paid on deposits and borrowed funds).

We generate interest income from interest-earning assets that we own, including loans and investment securities.

We incur interest expense from interest-bearing

liabilities, including interest-bearing deposits and other borrowings, notably FHLB advances and subordinated notes.

To evaluate net interest income, we measure and monitor (i) yields on our loans and other interest-earning assets, (ii) the

costs of our deposits and other funding sources, (iii) our net interest spread and (iv) our net interest margin.

We incur interest expense from interest-bearing liabilities, including

interest-bearing deposits and other borrowings, notably Federal Home Loan Bank of Dallas (“FHLB”) advances and subordinated notes.

To evaluate net interest income, we measure and monitor (i) yields on our loans and other interest-earning assets,

(ii) the costs of our deposits and other funding sources, (iii) our net interest spread and (iv) our net interest margin.

Net interest spread is the difference between rates earned on interest-earning assets and rates paid on interest-bearing

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interest-bearing and noninterest-bearing liabilities, are usually the largest drivers of periodic changes in net interest spread, net interest margin and net interest income.

The following tables present, for the periods indicated, information about:

The following table presents, for the periods indicated, information about:

(i) weighted average balances, the total dollar amount of interest income from interest-earning assets and the resultant

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purposes of this table, interest income, net interest margin and net interest spread are shown on a fully tax-equivalent basis.

Three Months Ended September 30,

Three Months Ended March 31,

(Dollars in thousands)

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Short-term borrowings

Notes payable & other longer-term borrowings

Subordinated debt

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Net interest margin (3)

Nine Months Ended September 30,

(Dollars in thousands)

Interest-earning assets:

Investment securities – taxable

Investment securities – non-taxable

Other interest-earning assets (2)

Total interest-earning assets

Noninterest-earning assets

Liabilities and Shareholders’ Equity:

Interest-bearing liabilities:

NOW, savings and money market deposits

Time deposits

Short-term borrowings

Notes payable & other longer-term borrowings

Subordinated debt

Junior subordinated deferrable interest debentures

Total interest-bearing liabilities

Noninterest-bearing liabilities:

Noninterest-bearing deposits

Other liabilities

Total noninterest-bearing liabilities

Shareholders’ equity

Total liabilities and shareholders’ equity

Net interest income

Net interest spread

Net interest margin (3)

Average loan balances include nonaccrual loans and loans held for sale.

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average interest rates.

The following tables set forth the effects of changing rates and volumes on our net interest income during the period shown.

Information is provided with respect to (i) effects on interest income attributable to changes

in volume (change in volume multiplied by prior rate) and (ii) effects on interest income attributable to changes in rate (changes in rate multiplied by prior volume).

The following table sets forth the effects of changing rates and volumes on our net interest income during the period shown.

Information is provided with respect to (i) effects on interest income attributable to changes in

volume (change in volume multiplied by prior rate) and (ii) effects on interest income attributable to changes in rate (changes in rate multiplied by prior volume).

Change applicable to both volume and rate have been allocated to volume.

Three Months Ended September 30,

2025 over 2024

Change due to:

(Dollars in thousands)

Interest-earning assets:

Investment securities – taxable

Investment securities – non-taxable

Other interest-earning assets

Total interest-earning assets

Interest-bearing liabilities:

NOW, Savings, MMDAs

Time deposits

Short-term borrowings

Notes payable & other borrowings

Subordinated debt

Junior subordinated deferrable interest debentures

Total interest-bearing liabilities

Nine Months Ended September 30,

Three Months Ended March 31,

2026 over 2025

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Short-term borrowings

Notes payable & other borrowings

Subordinated debt

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Total interest-bearing liabilities

Net interest income for the three months ended September 30, 2025 was $43.0 million, compared to $37.3 million for the three months ended September 30, 2024, an increase of $5.7 million, or 15.4%,

and was comprised of an increase of $2.9 million in interest income and a decrease of $2.8 million in interest expense.

The growth in interest income was primarily attributable to an increase of $2.4 million in loan interest income, which was a

result of growth of $23.6 million in average loans outstanding and an increase of 24 basis points in the yield on loans.

The $2.8 million decrease in interest expense was primarily related to a 49 basis point decrease in the interest rate paid

on interest-bearing deposits over the same period in 2024, partially offset by an increase of $71.5 million in average interest-bearing deposits.

Additionally, average noninterest-bearing demand deposits increased $34.1 million for the three

months ended September 30, 2025 as compared to the three months ended September 30, 2024.

For the three months ended September 30, 2025, net interest margin and net interest spread were 4.05% and 3.08%, respectively, compared to 3.65% and 2.55%, respectively, for the same period in

2024, which reflects the changes in interest income and interest expense discussed above.

Net interest income for the nine months ended September 30, 2025 was $124.0 million, compared to $108.6 million for the nine months ended September 30, 2024, an increase of $15.5 million, or

14.3%, and was comprised of an increase of $9.0 million in interest income and a decrease of $6.5 million in interest expense.

The growth in interest income was attributable to increases of $7.4 million in loan interest income and $3.6 million

in interest income on other interest-earning assets, partially offset by a decrease of $2.0 million in interest income on securities.

The increase in loan interest income resulted from growth of $31.9 million in average loans outstanding and an

increase of 26 basis points in the yield on loans, which includes approximately $2.4 million of loan interest and fees that were recognized during the second and third quarters of 2025 related to full repayment of loans that had previously been

on nonaccrual and/or in a workout status.

The increase in interest income on other interest-earning assets was primarily due to an increase of $157.3 million in average other interest-bearing assets, partially offset by a decline of 56 basis

points in the interest rate paid on those assets.

The decrease in interest income on securities was primarily due to a decline of $1.0 million in the interest recorded on fair value hedges on municipal securities as the indexed market rate

declined during the last four months of 2024.

The $6.5 million decrease in interest expense was primarily related to a 41 basis point decrease in the rate paid on interest-bearing deposits over the same period in 2024, partially offset by an

increase of $102.0 million in average interest-bearing deposits.

For the nine months ended September 30, 2025, net interest margin and net interest spread were 3.98% and 3.02%, respectively, compared to 3.61% and 2.53%, respectively, for the same period in

2024, which reflects the changes in interest income and interest expense discussed above.

The loan interest and fee items noted above positively affected net interest margin and net interest spread by approximately 8 basis points.

Net interest income for the three months ended March 31, 2026 was $42.9 million, compared to $38.5 million for the three months ended March 31, 2025, an increase of $4.3 million, or 11.2%.

increase in net interest income was comprised of an increase of $2.7 million, or 4.5%, in interest income and a decrease of $1.6 million, or 7.5%, in interest expense.

The growth in interest income was predominately attributable to increases of

$2.1 million in loan interest income and $1.0 million in interest on other interest-earning assets.

The increase in loan interest income was mainly due to growth of $55.6 million in average loans outstanding and a 16 basis point increase in the

yield on loans.

The increase in interest income on other interest-earning assets was due to an increase of $170.0 million in the average balance of these assets, partially offset by a decline of 53 basis points in the related yield due to the

decreases in the federal funds rate during the last four months of 2025.

The $1.6 million decrease in interest expense for the three months ended March 31, 2026 was primarily related to a 33 basis point decrease in the rate paid on interest-bearing liabilities over the same period in 2025

and a reduction of $592 thousand in interest expense as a result of the redemption of $50 million in subordinated debt securities on September 30, 2025, partially offset by growth of $159.9 million in interest-bearing deposits in the compared

For the three months ended March 31, 2026, net interest margin and net interest spread were 4.04% and 3.18%, respectively, compared to 3.81% and 2.87%, respectively, for the same period in 2025, which

reflects the changes in interest income and interest expense discussed above.

Provision for Credit Losses

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We establish an allowance for credit losses (“ACL”) through charges to earnings, which are shown in the consolidated statements of

comprehensive income (loss) as the provision for credit losses.

comprehensive income as the provision for credit losses.

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

The provision for credit losses is determined

by conducting a quarterly evaluation of the adequacy of our ACL and charging the shortfall or excess, if any, to the current quarter’s expense.

The provision for credit losses is determined by

conducting a quarterly evaluation of the adequacy of our ACL and charging the shortfall or excess, if any, to the current quarter’s expense.

This has the effect of creating variability in the amount and frequency of charges to our earnings.

The provision for credit losses and the amount of allowance for each period are dependent upon many factors, including loan growth, net charge offs, changes in the composition of the loan portfolio, delinquencies, management’s assessment of the

quality of the loan portfolio, the valuation of problem loans and the general economic conditions in our market areas.

The Company recorded a provision for credit losses of $500 thousand for the three months ended September 30, 2025, which was comparable to $495 thousand for the three months ended September 30,

The Company recorded a provision for credit losses of $3.4 million for the nine months ended September 30, 2025, compared to $3.1 million for the nine months ended September 30, 2024.

in provision of $300 thousand was largely attributable to an increase in provision for off-balance sheet credit exposures, compared to the same period in 2024, as the utilization of unfunded commitments had increased.

provision for credit losses and the amount of allowance for each period are dependent upon many factors, including loan growth, net charge-offs, changes in the composition of the loan portfolio, delinquencies, management’s assessment of the quality

of the loan portfolio, the valuation of problem loans and the general economic conditions in our market areas.

The provision for credit losses for the three months ended March 31, 2026 was $260 thousand, which was comparable to $420 thousand for the three months ended March 31, 2025.

The provision for credit losses is a significant factor in the Company’s operating results.

For further discussion regarding the provision for credit losses and management’s assessment of the adequacy of the ACL

for loans, see “Allowance for Credit Losses for Loans” and “Asset Quality” under “Financial Condition” in this Item 2, below.

For further discussion regarding the provision for credit losses and management’s assessment of the adequacy of the ACL for

loans, see “Allowance for Credit Losses for Loans” and “Asset Quality” under “Financial Condition” in this Item 2, below.

Noninterest Income

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Three Months Ended

September 30,

Nine Months Ended

September 30,

(Dollars in thousands)

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transfer, Small Business Investment Company (“SBIC”) investments, income from sweep accounts, and other miscellaneous services.

Noninterest income for the three months ended September 30, 2025 was $11.2 million, compared to $10.6 million for the three months ended September 30, 2024, an increase of $530 thousand, or 5.0%.

Significant changes in the components of noninterest income are detailed below.

Service charges on deposit accounts - Income from service charges on deposit accounts increased $243 thousand, or 12.0%, for the three months ended

September 30, 2025 as compared to the same period in 2024.

The increase was primarily the result of a continued focus on growing treasury management services and an increase in customer overdraft fees during the three months ended September 30,

2025 compared to the same period in 2024.

Mortgage banking activities - Income from mortgage banking activities increased $685 thousand, or 36.2%, to $2.6 million for

the three months ended September 30, 2025 from $1.9 million for the three months ended September 30, 2024.

This increase was mainly the result of a $925 thousand

negative fair value adjustment to our mortgage servicing rights portfolio in the third quarter of 2025 compared to a negative fair value adjustment of $2.1 million in the third quarter of 2024.

The fair value of the mortgage servicing rights

portfolio is affected by movements in market interest rates, which declined less during the third quarter of 2025 as compared to the same period of 2024.

This increase was partially offset by decreases in other mortgage income related to a

decline in originations of loans held for sale in the third quarter of 2025 as compared to the same period of 2024.

Other income and fees - Other income and fees decreased $652 thousand, or 27.0% for the three months ended September 30, 2025 as compared to the same period

The decrease was primarily the result of a net decrease of $590 thousand recognized for property insurance proceeds during the third quarter of 2024 as compared to the same period in 2025.

Noninterest income for the nine months ended September 30, 2025 was $34.0 million, compared to $34.8 million for the nine months ended September 30, 2024, a decrease of $798 thousand, or 2.3%.

Significant changes in the components of noninterest income are detailed below.

Service charges on deposit accounts - Income from service charges on deposit accounts increased $720 thousand, or 12.4%, for the nine months ended September

30, 2025 as compared to the same period in 2024.

The increase was primarily the result of a continued focus on growing treasury management services, which began building during 2024, and an increase in customer overdraft fees during the nine

months ended September 30, 2025 compared to the same period in 2024.

Mortgage banking activities - Income from mortgage banking activities decreased $938 thousand, or 10.2%, to $8.3 million for the nine months ended September

30, 2025 from $9.2 million for the nine months ended September 30, 2024.

This decrease was mainly the result of a decline in mortgage loan originations of $18.6 million, or 8.3%, in the current year period as compared to the prior year period.

Other income and fees - Other income and fees decreased $805 thousand, or 13.5%, for the nine months ended September 30, 2025 as compared to the same period

The decrease was primarily the result of a decrease of $490 thousand in income from SBIC investments and a net decrease of $611 thousand recognized for property insurance proceeds, partially offset by increases in income from sweep

accounts and gains on sales of fixed assets.

Noninterest income for the three months ended March 31, 2026 was $11.3 million, compared to $10.6 million for the three months ended March 31, 2025, an increase of $670 thousand, or 6.3%.

changes in the components of noninterest income are detailed below.

Mortgage banking activities - Income from mortgage banking activities increased $1.8 million, or 85.4%, to $3.9 million for the three months ended March 31,

2026 from $2.1 million for the three months ended March 31, 2025.

This increase was primarily due to a $250 thousand positive fair value adjustment to our mortgage servicing rights portfolio in the first quarter of 2026 compared to a negative fair

value adjustment of $1.6 million in the first quarter of 2025.

The fair value of the mortgage servicing rights portfolio is affected by movements in market interest rates, which increased during the first quarter of 2026 as compared to decreasing

during the first quarter of 2025.

Other income and fees - Other income and fees decreased $1.3 million, or 69.1%, for the three months ended March 31, 2026 as compared to the same period in

The decrease was primarily the result of a loss of $801 thousand in a SBIC investment, due to negative performance of one of the companies in the fund, and a decrease of $125 thousand in gain on sales of fixed assets, all in the first quarter

of 2026 as compared to the same period in 2025.

Noninterest Expense

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Three Months Ended

September 30,

Nine Months Ended

September 30,

(Dollars in thousands)

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Salaries and employee benefits

Occupancy expense, net

Occupancy and equipment, net

Professional services

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Other expenses include items such as banking regulatory assessments, telephone expenses, postage, courier fees, directors’ fees, and insurance.

Noninterest expense for the three months ended September 30, 2025 was $33.0 million compared to $33.1 million for the three months ended September 30, 2024, a decrease of $104 thousand, or 0.3%.

Significant changes in the components of noninterest expense are detailed below.

Salaries and employee benefits - Salaries and employee benefits increased $646 thousand, or 3.4%, from $18.8 million for the three months ended September

30, 2024 to $19.4 million for the three months ended September 30, 2025.

This increase was primarily driven by annual salary adjustments, which became effective in January of 2025.

Professional services - Professional services decreased $514 thousand, or 28.4% from $1.8 million for the three months ended September 30, 2024 to $1.3 million for the three

months ended September 30, 2025.

This decrease was primarily driven by decreases in legal fees.

Other expenses - Other expenses decreased $258 thousand, or 5.8%, from $4.4 million for the three months ended September 30, 2024 to $4.2 million for the

three months ended September 30, 2025.

This was primarily the result of a decrease of $179 thousand in the ineffective portion of fair value hedges.

Noninterest expense for the nine months ended September 30, 2025 was $99.6 million, compared to $97.6 million for the nine months ended September 30, 2024, an increase of $2.0 million, or 2.0%.

Significant changes in the components of noninterest expense are detailed below.

Salaries and employee benefits - Salaries and employee benefits increased $1.6 million, or 2.8%, from $57.0 million for the nine months ended September 30,

2024 to $58.6 million for the nine months ended September 30, 2025.

This increase was primarily driven by annual salary adjustments, which became effective in January of 2025.

IT and data services - IT and data services increased $361 thousand, or 11.4%, from $3.2 million for nine months ended September 30, 2024 to $3.5 million

for the nine months ended September 30, 2025.

The increase is primarily a result of the continued rising cost of technology services.

Noninterest expense for the three months ended March 31, 2026 was $35.5 million compared to $33.0 million for the three months ended March 31, 2025, an increase of $2.5 million, or 7.6%.

changes in the components of noninterest expense are detailed below.

There was a total of $1.5 million in acquisition related expenses recorded in the first quarter of 2026.

Salaries and employee benefits - Salaries and employee benefits increased $713 thousand, or 3.7%, from $19.4 million for the three months ended March 31, 2025

to $20.2 million for the three months ended March 31, 2026.

This increase was primarily driven by annual salary adjustments, which became effective in January of 2026, and based on new lender hires during the last twelve months.

Professional services - Professional services increased $1.2 million, or 70.8% from $1.7 million for the three months ended March 31, 2025 to $3.0 million for

the three months ended March 31, 2026.

This increase was primarily driven by $1.2 million of acquisition related expenses in the first quarter of 2026.

Financial Condition

Our total assets increased $247.2 million, or 5.8%, to $4.48 billion at September 30, 2025, compared to $4.23 billion at December 31, 2024.

Our gross loans held for investment decreased $1.6

million, or 0.1%, to $3.05 billion at September 30, 2025, compared to $3.06 billion at December 31, 2024.

Our securities portfolio decreased $6.1 million, or 1.1%, to $571.1 million at September 30, 2025, compared to $577.2 million at December

Total deposits increased $260.3 million, or 7.2%, to $3.88 billion at September 30, 2025, compared to $3.62 billion at December 31, 2024.

Our total assets increased $165.9 million, or 3.7%, to $4.65 billion at March 31, 2026, compared to $4.48 billion at December 31, 2025.

Our loans held for investment decreased $41.0 million, or 1.3%,

to $3.10 billion at March 31, 2026, compared to $3.14 billion at December 31, 2025.

Our securities portfolio increased $35.3 million, or 6.2%, to $602.9 million at March 31, 2026, compared to $567.5 million at December 31, 2025.

Total deposits

increased $153.5 million, or 4.0%, to $4.03 billion at March 31, 2026, compared to $3.87 billion at December 31, 2025.

Loan Portfolio

Our loans represent the largest portion of earning assets, greater than our securities portfolio or any other asset category, and the quality and diversification of the loan portfolio is an

important consideration when reviewing the Company’s financial condition.

Our loans represent the largest portion of earning assets, greater than our securities portfolio or any other asset category, and the quality and diversification of the loan portfolio is an important

consideration when reviewing the Company’s financial condition.

We originate substantially all of the loans in our portfolio, except certain loan participations that are independently underwritten by the Company prior to purchase.

Loans held for investment decreased $1.6 million, or 0.1%, to $3.05 billion at September 30, 2025, compared to $3.06 billion at December 31, 2024.

The decrease in loans was primarily a result of a

decrease of $46.5 million in multi-family property loans mainly due to the payoff of two loans totaling $39.6 million, partially offset by organic loan growth.

The following table shows the contractual maturities of our loans held for investment portfolio at September 30, 2025:

Loans held for investment decreased $41.0 million, or 1.3%, to $3.10 billion at March 31, 2026, compared to $3.14 billion at December 31, 2025.

The decline in loans occurred primarily in multi-family,

seasonal agricultural-related loans, and restaurant/retail loans, offset by increases in commercial land and development loans.

The following table shows the contractual maturities of our loans held for investment portfolio at March 31, 2026:

One Year or Less

Due after One

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Other consumer

The following table shows the distribution between fixed and adjustable interest rate loans for maturities greater than one year as of September 30, 2025:

The following table shows the distribution between fixed and adjustable interest rate loans for maturities greater than one year as of March 31, 2026:

(Dollars in thousands)

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Other consumer

At September 30, 2025, there was $1.57 billion in adjustable rate loans, with $875.0 million of these loans that mature or reprice in the next twelve months.

Of these loans that mature or reprice

in the next twelve months, $603.0 million will reprice immediately upon changes in the underlying index rate, with the remaining $272.0 million being subject to rate floors above the current index or a future repricing date.

At March 31, 2026, there was $1.6 billion in adjustable rate loans, with $904.0 million of these loans that mature or reprice in the next twelve months.

Of these loans that mature or reprice in the

next twelve months, $632.2 million will reprice immediately upon changes in the underlying index rate, with the remaining $271.8 million being subject to rate ceilings, floors above the current index, or a future repricing date.

The Wall Street Journal prime rate is the predominate index used by the Bank.

Further as of September 30, 2025, there is $192.9 million of fixed rate loans that mature in the next twelve months.

The Bank is primarily involved in real estate, commercial, agricultural and consumer lending activities with customers throughout Texas and Eastern New Mexico.

We have a collateral concentration,

as 72.7% of our loans were secured by real property as of September 30, 2025, compared to 73.7% as of December 31, 2024.

We believe that these loans are not concentrated in any one single property type and that they are geographically dispersed

throughout the areas we serve.

Although the Bank has diversified portfolios, its debtors’ ability to honor their contracts is substantially dependent upon the general economic conditions of the markets in which it operates, which consist

primarily of agribusiness, wholesale/retail, oil and gas and related businesses, healthcare industries and institutions of higher education.

Commercial real estate loans and residential construction loans represent 37.2% of loans held for

investment as of September 30, 2025 and represented 40.1% of loans held for investment as of December 31, 2024.

We have a collateral concentration, as

72.4% of our loans were secured by real property as of March 31, 2026, compared to 71.6% as of December 31, 2025.

We believe that these loans are not concentrated in any one single property type and that they are geographically dispersed throughout

the areas we serve.

agribusiness, wholesale/retail, oil and gas and related businesses, healthcare industries and institutions of higher education.

Commercial real estate loans and residential construction loans represent 37.3% of loans held for investment as of March

31, 2026 and represented 37.0% as of December 31, 2025.

Further, 96% of the total dollar amount of these loans are secured by collateral located in the state of Texas.

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underwriting guidelines to assess the borrowers’ historical cash flow to determine debt service, and we further stress test the debt service under higher interest rate scenarios.

Financial and performance covenants are used in commercial

lending to allow us to react to a borrower’s deteriorating financial condition, should that occur.

Financial and performance covenants are used in commercial lending to

allow us to react to a borrower’s deteriorating financial condition, should that occur.

Commercial Real Estate .

Our commercial real estate portfolio includes loans for commercial property that is owned by real estate investors, construction

loans to build owner-occupied properties, and loans to developers of commercial real estate investment properties and residential developments.

Our commercial real estate portfolio includes loans for commercial property that is owned by real estate investors, construction loans

to build owner-occupied properties, and loans to developers of commercial real estate investment properties and residential developments.

Residential construction loans are broken out separately below.

Commercial real estate loans are

subject to underwriting standards and processes similar to our commercial loans.

Commercial real estate loans are subject to

underwriting standards and processes similar to our commercial loans.

These loans are underwritten primarily based on projected cash flows for income-producing properties and collateral values for non-income-producing properties.

repayment of these loans is generally dependent on the successful operation of the property securing the loans or the sale or refinancing of the property.

Real estate loans may be adversely affected by conditions in the real estate markets or

in the general economy.

The repayment of

these loans is generally dependent on the successful operation of the property securing the loans or the sale or refinancing of the property.

Real estate loans may be adversely affected by conditions in the real estate markets or in the general

The properties securing our real estate portfolio are diversified by type and geographic location.

This diversity helps reduce the exposure to adverse economic events that affect any single market or industry.

Commercial real estate loans decreased $83.1 million, or 7.4%, to $1.04 billion as of September 30, 2025 from $1.12 billion as of December 31, 2024.

The decrease was primarily driven by decreases

of $105.4 million in multi-family loans and $30.3 million in hospitality loans, partially offset by increases in residential and commercial land development loans and other commercial real estate loans.

Commercial real estate loans decreased $11.7 million, or 1.1%, to $1.05 billion as of March 31, 2026 from $1.06 billion as of December 31, 2025.

The decrease was primarily driven by a decrease of

$31.0 million in multi-family loans, partially offset by an increase of $22.2 million in commercial land development loans.

Commercial – General and Specialized .

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

Underwriting standards have been designed to determine whether the borrower possesses sound business ethics and practices, to evaluate current and projected cash flows to determine the ability of the borrower to repay their obligations as

agreed, and to ensure appropriate collateral is obtained to secure the loan.

and to ensure appropriate collateral is obtained to secure the loan.

Commercial loans are primarily made based on the identified cash flows of the borrower and, secondarily, on the underlying collateral provided by the borrower.

commercial loans are secured by the assets being financed or other business assets, such as real estate, accounts receivable, or inventory, and typically include personal guarantees.

Owner-occupied real estate is included in commercial loans,

as the repayment of these loans is generally dependent on the operations of the commercial borrower’s business rather than on income-producing properties or the sale of the properties.

Commercial loans are grouped into two distinct

sub-categories:

specialized and general.

Most commercial

loans are secured by the assets being financed or other business assets, such as real estate, accounts receivable, or inventory, and typically include personal guarantees.

Owner-occupied real estate is included in commercial loans, as the repayment

of these loans is generally dependent on the operations of the commercial borrower’s business rather than on income-producing properties or the sale of the properties.

Commercial loans are grouped into two distinct sub-categories:

specialized and

Commercial related loans that are considered “specialized” include agricultural production and real estate loans, energy loans, and finance, investment, and insurance loans.

Commercial related loans that

contain a broader diversity of borrowers, sub-industries, or serviced industries are grouped into the “general category.” These include goods, services, restaurant & retail, construction, and other industries.

Performance of these loans is

subject to operating and cash flow results of the borrower, with risk in the volatility of operating results for particular industries.

Commercial specialized loans decreased $11.2 million, or 2.9%, to $377.8 million as of September 30, 2025 from $389.0 million as of December 31, 2024.

This decrease was primarily due to net

repayments of $9.2 million in seasonal agricultural-related loans and a decrease of $9.3 million in loans to finance and investment companies, partially offset by an increase of $7.3 million in energy sector loans.

Commercial general loans increased $71.9 million, or 12.9%, to $629.3 million as of September 30, 2025 from $557.4 million as of December 31, 2024.

The increase was primarily due to increases broadly across this

Commercial related loans that contain a broader diversity of

borrowers, sub-industries, or serviced industries are grouped into the “general category.” These include goods, services, restaurant & retail, construction, and other industries.

Performance of these loans is subject to operating and cash flow

results of the borrower, with risk in the volatility of operating results for particular industries.

Commercial general loans decreased $4.7 million, or 0.7%, to $654.6 million as of March 31, 2026 from $659.3 million as of December 31, 2025.

The decrease was primarily due to a decrease of $14.3

million in restaurant/retail loans, partially offset by an increase of $9.7 million in loans for goods and services.

Commercial specialized loans decreased $24.5 million, or 6.0%, to $384.9 million as of March 31, 2026 from $409.4 million as of December 31, 2025.

This decrease was primarily due to net repayments of

$24.4 million in seasonal agricultural-related loans.

We utilize a computer-based credit scoring analysis to supplement our policies and procedures in underwriting consumer loans.

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addresses types of consumer loans that may be originated and the collateral, if secured, which must be perfected.

The relatively smaller individual dollar amounts of consumer loans that are spread over numerous individual borrowers also

minimize our risk.

The relatively smaller individual dollar amounts of consumer loans that are spread over numerous individual borrowers also minimize

Residential real estate loans are included in consumer loans.

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characteristics of the borrower’s ability to repay the loan, a consideration of the debt to income ratio, employment and income stability, the loan-to-value ratio, and the age, condition and marketability of the collateral.

Consumer and other loans increased $26.8 million, or 3.0%, to $912.6 million as of September 30, 2025, from $885.8 million as of December 31, 2024.

The growth in these loans was primarily a result

of an increase of $26.2 million in residential mortgage loans.

As of September 30, 2025, our consumer loan portfolio was comprised of $592.6 million in 1-4 family residential loans, $256.3 million in auto loans, and $63.7 million in other

consumer loans.

Consumer and other loans decreased $3.5 million, or 0.4%, to $907.6 million as of March 31, 2026 from $911.1 million as of December 31, 2025.

As of March 31, 2026, our consumer loan portfolio was

comprised of $589.0 million in 1-4 family residential loans, $256.1 million in auto loans, and $62.6 million in other consumer loans.

Construction .

Loans for residential construction are for single-family properties to developers, builders, or end-users.

These loans are underwritten based

on estimates of costs and completed value of the project.

These loans are underwritten based on

estimates of costs and completed value of the project.

Funds are advanced based on estimated percentage of completion for the project.

Performance of these loans is affected by economic conditions as well as the ability to control costs of

the projects.

Construction loans decreased $5.9 million, or 5.7%, to $98.0 million as of September 30, 2025 from $103.9 million as of December 31, 2024.

Performance of these loans is affected by economic conditions as well as the ability to control costs of the

Construction loans increased $3.3 million, or 3.3%, to $103.4 million as of March 31, 2026 from $100.1 million as of December 31, 2025.

The commercial real estate and construction categories comprise the Company’s nonowner-occupied real estate loans.

Total nonowner-occupied real estate loans were $1.13 billion at September 30,

2025 and $1.22 billion at December 31, 2024.

Total nonowner-occupied real estate loans were $1.16 billion at March 31, 2026 and

$1.16 billion at December 31, 2025.

Nonowner-occupied commercial real estate loans are made up of income-producing commercial real estate property loans and construction, acquisition, and development property loans.

As of September 30,

2025, total income-producing commercial real estate property loans totaled $771.3 million and was comprised of $210.5 million of multi-family property loans, $187.9 million of retail property loans, $144.3 million of office property loans,

$30.7 million in hospitality loans, and $197.9 million in industrial and other property loans.

Industrial and other property loans include types such as industrial, warehouse, mini-storage, and convenience stores.

As of September 30, 2025,

total construction, acquisition, and development property loans totaled $362.5 million and was comprised of $98.0 million in residential construction property loans and $264.5 million of commercial construction and other land development loans.

The weighted average loan-to-value of income-producing nonowner-occupied commercial real estate loans was approximately 55% at September 30, 2025.

The weighted average loan-to-value of nonowner-occupied office commercial real estate loans was

approximately 58% at September 30, 2025.

Owner-occupied commercial real estate loans totaled $410.5 million at September 30, 2025 and $366.8 million at December 31, 2024.

As of March 31, 2026, total

income-producing commercial real estate property loans totaled $769.1 million and was comprised of $198.6 million of multi-family property loans, $181.8 million of retail property loans, $140.9 million of office property loans, $149.7 million in

industrial and warehouse loans, $41.8 million in hospitality loans, and $56.3 million in other property loans.

Other property loans include types such as mini-storage and convenience stores.

As of March 31, 2026, total construction, acquisition,

and development property loans totaled $387.3 million and was comprised of $103.4 million in residential construction property loans and $283.9 million of commercial construction and other land development loans.

The weighted average loan-to-value

of income-producing nonowner-occupied commercial real estate loans was approximately 58% at March 31, 2026.

The weighted average loan-to-value of nonowner-occupied office commercial real estate loans was approximately 57% at March 31, 2026.

Owner occupied commercial real estate loans totaled $416.7 million at March 31, 2026 and $419.0 million at December 31, 2025.

We are a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of our customers.

These financial instruments include commitments

to extend credit and standby letters of credit.

These financial instruments include commitments to

extend credit and standby letters of credit.

Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets.

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 to our customers is represented by the contractual or notional amount of those instruments.

Commitments to extend credit and standby letters of credit are not recorded as an asset or liability by the Company until the instrument is exercised.

The contractual or notional amounts of those instruments reflect the extent of involvement we

have 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 to our customers is represented by the contractual or notional amount of those instruments.

Commitments to

extend credit and standby letters of credit are not recorded as an asset or liability by the Company until the instrument is exercised.

The contractual or notional amounts of those instruments reflect the extent of involvement we have in particular

classes of financial instruments.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.

Commitments generally have fixed expiration dates

or other termination clauses and may require payment of a fee.

Commitments generally have fixed expiration dates or

other termination clauses and may require payment of a fee.

Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.

The Company uses

the same credit policies in making commitments and conditional obligations as they do for on-balance sheet instruments.

The amount and nature of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on

management’s credit evaluation of the potential borrower.

The Company uses the same

credit policies in making commitments and conditional obligations as they do for on-balance sheet instruments.

The amount and nature of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s

credit evaluation of the potential borrower.

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party.

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The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.

The Company holds collateral supporting those commitments for

which collateral is deemed necessary.

The Company holds collateral supporting those commitments for which

collateral is deemed necessary.

The following table summarizes commitments we have made as of the dates presented.

September 30,

(Dollars in thousands)

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Additional allowances are provided to those loans which appear to represent a greater than normal exposure to risk.

The quality of the loan portfolio and the adequacy of the ACL is assessed by regulatory examinations and the

Company’s internal and external loan reviews.

The quality of the loan portfolio and the adequacy of the ACL is assessed by regulatory examinations and the Company’s

internal and external loan reviews.

The ACL consists of two elements:

(1) specific valuation allowances established for expected losses on specifically analyzed loans and (2) collective valuation allowances calculated using comparable

and quantifiable information from both internal and external sources about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount.

Expected credit losses are estimated over the contractual term of the loans and adjusted for expected prepayments.

(1) specific valuation allowances established for expected losses on specifically analyzed loans and (2) collective valuation allowances calculated using comparable and

quantifiable information from both internal and external sources about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount.

Expected credit

losses are estimated over the contractual term of the loans and adjusted for expected prepayments.

To determine the adequacy of the ACL on loans, the Company applied a dual credit risk rating (“DCRR”) methodology that estimates each loan’s

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customized scorecard that risk rates each loan based on multiple probability of default and loss given default elements to measure the risk of the loan portfolio.

The ACL estimate incorporates the Company’s DCRR loan level risk rating

methodology and the expected default rate frequency term structure to derive loan level life of loan estimates of credit losses for every loan in the portfolio.

The estimated credit loss for each loan is adjusted based on one-year through the

cycle estimate of expected credit loss to a life of loan measurement that reflects current conditions and forecasts.

The life of loan expected loss is determined using the contractual weighted average life of the loan adjusted for

Prepayment speeds are determined by grouping the loans into pools based on segments and risk rating.

After the life of loan expected losses are determined, they are adjusted to reflect the Company’s reasonable and supportable

economic forecast over a selected range of a one to two years.

The ACL estimate incorporates the Company’s DCRR loan level risk rating methodology

and the expected default rate frequency term structure to derive loan level life of loan estimates of credit losses for every loan in the portfolio.

The estimated credit loss for each loan is adjusted based on one-year through the cycle estimate

of expected credit loss to a life of loan measurement that reflects current conditions and forecasts.

The life of loan expected loss is determined using the contractual weighted average life of the loan adjusted for prepayments.

Prepayment speeds

are determined by grouping the loans into pools based on segments and risk rating.

After the life of loan expected losses are determined, they are adjusted to reflect the Company’s reasonable and supportable economic forecast over a selected

range of a one to two years.

The Company has developed regression models to project net charge-off rates based on macroeconomic variables (“MEVs”), typically a one-year period is used.

MEV’s considered

in the analysis consist of data gathered from the St.

Louis Federal Reserve Research Database (“FRED”), such as, federal funds rate, 10-year treasury rates, 30-year mortgage rates, crude oil prices, consumer price index, housing price index,

unemployment rates, housing starts, gross domestic product, and disposable personal income.

These regression models are applied to the Company’s economic forecast to determine the corresponding net charge-off

The projected net charge-off rates for the given economic scenario are used to adjust the through the cycle expected losses.

Qualitative adjustments are also made to ACL results for additional risk factors that are relevant in

assessing the expected credit losses within our loan segments.

These qualitative factor (“Q-Factor”) adjustments may increase or decrease management’s estimate of the ACL by a calculated percentage based upon the estimated level of perceived

risk within a particular segment.

Q-Factor risk decisions consider concentrations of the loan portfolio, expected changes to the economic forecasts, large relationships, and other factors related to credit administration, such as borrower’s

risk rating and the potential effect of delayed credit score migrations.

Management quantifiably identifies segment percentage Q-Factor adjustments using a scorecard risk rating system scaled to historical loss experience within a segment and

management’s perceived risk for that particular segment.

In addition to the loan level evaluations, nonaccrual loans with a balance of $250 thousand or more are individually analyzed based on facts and circumstances of the loan to determine

if a specific allowance amount may be necessary.

Specific allowances may also be established for loans whose outstanding balances are below the above threshold when it is determined that the risk associated with the loan differs significantly

from the risk factor amounts established for its loan category.

The ACL for loans was $44.1 million at September 30, 2025, compared to $43.2 million at December 31, 2024, an increase of $888 thousand, or 2.1%.

The increase is a result of a provision for credit

losses on loans of $3.2 million being recorded during the nine months ended September 30, 2025, partially offset by net charge-offs of $2.3 million during the period.

The Company continues to closely monitor credit quality in light of the

ongoing economic uncertainty caused by, among other factors, the prolonged elevated interest rate environment, continued uncertainty regarding U.S.

trade and tariff policy and the lingering inflationary pressures, and the risk of the resurgence

of elevated levels of inflation, in the United States and our market areas.

MEV’s considered in the analysis consist of data

gathered from the St.

Louis Federal Reserve Research Database (“FRED”), such as, federal funds rate, 10-year treasury rates, 30-year mortgage rates, crude oil prices, consumer price index, housing price index, unemployment rates, housing starts,

gross domestic product, and disposable personal income.

These regression models are applied to the Company’s economic forecast to determine the corresponding net charge-off rates.

The projected net charge-off

rates for the given economic scenario are used to adjust the through the cycle expected losses.

Qualitative adjustments are also made to ACL results for additional risk factors that are relevant in assessing the expected credit losses within our

loan segments.

These qualitative factor (“Q-Factor”) adjustments may increase or decrease management’s estimate of the ACL by a calculated percentage based upon the estimated level of perceived risk within a particular segment.

Q-Factor risk

decisions consider concentrations of the loan portfolio, expected changes to the economic forecasts, large relationships, and other factors related to credit administration, such as borrower’s risk rating and the potential effect of delayed

credit score migrations.

Management quantifiably identifies segment percentage Q-Factor adjustments using a scorecard risk rating system scaled to historical loss experience within a segment and management’s perceived risk for that particular

In addition to the loan level evaluations, nonaccrual loans with a balance of $250 thousand or more are individually analyzed based on facts and circumstances of the loan to determine if a specific allowance amount may be necessary.

Specific allowances may also be established for loans whose outstanding balances are below the above threshold when it is determined that the risk associated with the loan differs significantly from the risk factor amounts established for its

loan category.

The ACL for loans was $44.8 million at March 31, 2026, compared to $45.1 million at December 31, 2025, a decrease of $309 thousand, or 0.7%.

The decrease is the result of net charge-offs and no

provision for credit losses on loans during the first quarter of 2026.

The Company continues to closely monitor credit quality in light of the ongoing economic uncertainty caused by, among other factors, the uncertain impacts of tariffs, sanctions

and other trade policies of the United States and its global trading counterparts, the prolonged elevated interest rate environment and the lingering inflationary pressures, and the risk of the resurgence of elevated levels of inflation, in the

United States and our market areas.

Accordingly, additional provisions for credit losses may be necessary in future periods.

The following table provides an analysis of the ACL for loans and other data during the periods indicated.

Three Months Ended

September 30,

Nine Months Ended

September 30,

Three Months Ended March 31,

(Dollars in thousands)

Average loans outstanding during the periods

Average loans outstanding during the period

Commercial real estate

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Loans held for sale

Total average loans outstanding during the periods

Net charge-offs (recoveries) during the periods

Total average loans outstanding during the period

Net charge-offs (recoveries) during the period

Commercial real estate

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Other consumer

Total net charge-offs (recoveries) during the periods

Ratio of net charge-offs (recoveries) to average loans during the periods

Total net charge-offs (recoveries) during the period

Ratio of net charge-offs (recoveries) to average loans during the period

Commercial real estate

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Other consumer

Total ratio of net charge-offs (recoveries) to average loans during the periods

Total ratio of net charge-offs (recoveries) to average loans during the period

The following table provides other loan data as of the dates indicated.

September 30,

(Dollars in thousands)

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Ratio of nonaccrual loans to total loans held for investment

Net charge-offs totaled $1.3 million and were 0.16% (annualized) of average loans outstanding for the three months ended September 30, 2025, compared to $887 thousand and 0.11% (annualized) for the three months

ended September 30, 2024.

The increase in net charge-offs in the third quarter of 2025 was primarily the result of a $541 thousand charge-off of a multi-family property loan in the third quarter of 2025.

charge-offs totaled $2.3 million and were 0.10% (annualized) of average loans outstanding for the nine months ended September 30, 2025, compared to $2.6 million and 0.11% (annualized) for the nine months ended September 30, 2024.

The decrease in net charge-offs for the nine months ended September 30, 2025 was primarily the result of a decrease of $586 thousand in net charge-offs of general commercial loans, partially offset by an increase of

$497 thousand in net charge-offs of commercial real estate loans in the first three quarters of 2025 compared to the same period in 2024.

The allowance for credit losses on loans as a percentage of loans held for investment was 1.45%

at September 30, 2025 and 1.42% at December 31, 2024.

Specific reserves for individually evaluated loans totaled $147 thousand at September 30, 2025 as compared to $552 thousand at December 31, 2024.

While the entire ACL for loans is available to absorb losses from any part of our loan portfolio, the following table sets forth the allocation of the ACL for loans for the periods presented and

the percentage of allowance in each classification to total allowance:

September 30, 2025

Net charge-offs totaled $309 thousand and were 0.04% (annualized) of average loans outstanding for the three months ended March 31, 2026, compared to $519 thousand and 0.07% (annualized) for the three

months ended March 31, 2025.

The decrease in net charge-offs in the first quarter of 2026 was primarily the result of a $283 thousand recovery on a 1-4 family residential loan in the first quarter of 2026.

The ACL for loans as a percentage of loans

held for investment was 1.44% at March 31, 2026 and 1.44% at December 31, 2025.

While the entire ACL for loans is available to absorb losses from any part of our loan portfolio, the following table sets forth the allocation of the ACL for loans for the periods presented and the

percentage of allowance in each classification to total allowance:

March 31, 2026

December 31, 2025

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Delinquent loans may remain on accrual status between 30 days and 90 days past due.

Loans on which

the accrual of interest has been discontinued are designated as nonaccrual loans.

Typically, the accrual of interest on loans is discontinued when principal or interest payments are past due 90 days or when, in the opinion of management, there

is a reasonable doubt as to collectability in the normal course of business.

Loans on which the

accrual of interest has been discontinued are designated as nonaccrual loans.

Typically, the accrual of interest on loans is discontinued when principal or interest payments are past due 90 days or when, in the opinion of management, there is a

reasonable doubt as to collectability in the normal course of business.

When loans are placed on nonaccrual status, all interest previously accrued but not collected is reversed against current period interest income.

Income on nonaccrual

loans is subsequently recognized only to the extent that cash is received and the loan’s principal balance is deemed collectible.

Loans are restored to accrual status when loans become well-secured and management believes full collectability of

principal and interest is probable.

Income on nonaccrual loans is

subsequently recognized only to the extent that cash is received and the loan’s principal balance is deemed collectible.

Loans are restored to accrual status when loans become well-secured and management believes full collectability of principal

and interest is probable.

Loans that exhibit characteristics different from their pool characteristics are evaluated on an individual basis.

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Fair value, where possible, is determined by independent appraisals, typically on an annual basis.

Between appraisal

periods, the fair value may be adjusted based on specific events, such as if deterioration of quality of the collateral comes to our attention as part of our problem loan monitoring process, or if discussions with the borrower lead us to

believe the last appraised value no longer reflects the actual market for the collateral.

The specific allowance amount on a collateral-dependent loan is charged-off to the allowance if deemed not collectible and the impairment amount on a loan

that is not collateral-dependent is set up as a specific reserve.

Real estate we acquire as a result of foreclosure or by deed-in-lieu of foreclosure is classified as other real estate owned (“OREO”) until sold and is initially recorded at fair value less costs

to sell when acquired, establishing a new cost basis.

Between appraisal periods,

the fair value may be adjusted based on specific events, such as if deterioration of quality of the collateral comes to our attention as part of our problem loan monitoring process, or if discussions with the borrower lead us to believe the last

appraised value no longer reflects the actual market for the collateral.

The specific allowance amount on a collateral-dependent loan is charged-off to the allowance if deemed not collectible and the impairment amount on a loan that is not

collateral-dependent is set up as a specific reserve.

Real estate we acquire as a result of foreclosure or by deed-in-lieu of foreclosure is classified as other real estate owned (“OREO”) until sold and is initially recorded at fair value less costs to

sell when acquired, establishing a new cost basis.

OREO and repossessed assets are reported as foreclosed assets.

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Nonperforming assets consist of nonperforming loans plus foreclosed assets.

At September 30, 2025, our total nonaccrual loans were $8.5 million, or 0.28% of total loans held for investment, as compared to $22.1 million, or 0.72% of total loans held for investment, at

December 31, 2024.

Any loans within this amount that exceeded $250 thousand were specifically analyzed and specific valuation allowances were established as necessary and included in the ACL for loans as of September 30, 2025 to cover any

probable loss.

This decrease of $13.6 million was predominantly due to a $19.0 million loan, which was previously on nonaccrual, that was repaid in full during the second quarter of 2025.

This decrease was partially offset with three loans

totaling $7.8 million being placed on nonaccrual status during the second and third quarters of 2025.

Nonperforming loans were $9.7 million at September 30, 2025, as compared to $24.0 million at December 31, 2024.

This decrease is mainly due to the nonaccrual changes noted above.

Classified loans include loans graded as substandard or doubtful.

At September 30, 2025, classified loans totaled $45.8 million, a decrease of $3.3 million from the total of $49.1 million at

At March 31, 2026, our total nonaccrual loans were $3.7 million, or 0.12% of total loans held for investment, as compared to $7.1 million, or 0.22% of total loans held for investment, at

December 31, 2025.

This change includes the payoff of a $19.0 million multi-family property loan during the second quarter of 2025, partially offset with other activity.

The Company collected a $31.8 million multi-family property loan that was

classified during the second quarter of 2025 and collected during the third quarter of 2025.

Occasionally, the Company modifies loans to borrowers in financial distress by providing principal forgiveness, term extensions, an other than insignificant payment delay, or interest rate

These loans within this amount that exceeded $250 thousand were specifically analyzed and specific valuation allowances were established as necessary and included in the ACL for loans as of March 31, 2026 to cover any probable

The decrease of $3.4 million is primarily the result of a $3.9 million loan on nonaccrual status at December 31, 2025 being repaid in full during the first quarter of 2026.

This decrease was partially offset by other loans being

placed on nonaccrual status during the first quarter of 2026.

Nonperforming loans were $5.1 million at March 31, 2026 and $9.8 million at December 31, 2025.

This decrease is mainly due to the nonaccrual changes noted above and a reduction

of $1.4 million in loans past due 90 days or more.

Occasionally, the Company modifies loans to borrowers in financial distress by providing principal forgiveness, term extensions, an other than insignificant payment delay, or interest rate reduction.

When principal forgiveness is provided, the amount of forgiveness is charged-off against the ACL for loans.

Typically, one type of concession, such as term extension, is granted initially.

If the borrower continues to experience

financial difficulty, another concession, such as principal forgiveness, may be granted.

If the borrower continues to experience financial

difficulty, another concession, such as principal forgiveness, may be granted.

In some cases, the Company provides multiple types of concessions on one loan.

The Company closely monitors the performance of loans that are modified to

borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts.

Upon the Company’s determination that a modified loan has subsequently been deemed to not be fully collectible, the uncollectible amount is

The Company closely monitors the performance of loans that are modified to borrowers

experiencing financial difficulty to understand the effectiveness of its modification efforts.

Upon the Company’s determination that a modified loan has subsequently been deemed to not be fully collectible, the uncollectible amount is written off.

Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the ACL for loans is adjusted by the same amount.

If a borrower on a restructured accruing loan has demonstrated performance under the previous terms, is not experiencing financial difficulty and shows the capacity to continue to perform under

the restructured terms, the loan will remain on accrual status.

Otherwise, the loan will be placed on nonaccrual status until the borrower demonstrates a sustained period of performance, which generally requires six consecutive months of

If a borrower on a modified accruing loan has demonstrated performance under the previous terms, is not experiencing financial difficulty and shows the capacity to continue to perform under the

restructured terms, the loan will remain on accrual status.

Otherwise, the loan will be placed on nonaccrual status until the borrower demonstrates a sustained period of performance, which generally requires six consecutive months of payments.

Securities Portfolio

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The securities portfolio serves the following purposes:

(i) it provides a source of pledged assets for securing certain deposits and borrowed funds, as may be required by law or by specific agreement with a depositor

(i) it provides a source of pledged assets for securing certain deposits and borrowed funds, as may be required by law or by specific agreement with a depositor or

(ii) it provides liquidity to even out cash flows from the loan and deposit activities of customers;

(iii) it can be used as an interest rate risk management tool, since it provides a large base of assets, the maturity and interest

rate characteristics of which can be changed more readily than the loan portfolio to better match changes in the deposit base and other funding sources of the Company;

and (iv) it is an alternative interest-earning asset when loan demand is

weak or when deposits grow more rapidly than loans.

(iii) it can be used as an interest rate risk management tool, since it provides a large base of assets, the maturity and interest rate

characteristics of which can be changed more readily than the loan portfolio to better match changes in the deposit base and other funding sources of the Company;

and (iv) it is an alternative interest-earning asset when loan demand is weak or when

deposits grow more rapidly than loans.

The securities portfolio consists of securities classified as either held-to-maturity or available-for-sale.

Securities consist primarily of state and municipal securities, mortgage-backed

securities and U.S.

Securities consist primarily of state and municipal securities, mortgage-backed securities

government sponsored agency securities.

We determine the appropriate classification at the time of purchase.

All held-to-maturity securities are reported at amortized cost, adjusted for premiums and discounts that are

recognized in interest income using the interest method over the period to maturity.

All held-to-maturity securities are reported at amortized cost, adjusted for premiums and discounts that are recognized in

interest income using the interest method over the period to maturity.

All available-for-sale securities are reported at fair value.

Our securities portfolio decreased $6.1 million, or 1.1%, to $571.1 million at September 30, 2025, compared to $577.2 million at December 31, 2024.

The decrease was primarily due to $20.8 million

in maturities, prepayments and calls, net of purchases, partially offset by a $16.7 million increase in the fair value of securities available for sale at September 30, 2025 as compared to December 31, 2024.

Total securities at March 31, 2026 were $602.9 million, representing an increase of $35.3 million, or 6.2%, compared to $567.5 million at December 31, 2025.

The increase was primarily due to $37.0

million in purchases, net of maturities, prepayments and calls and a $1.1 million increase in the fair value of securities available for sale at March 31, 2026 as compared to December 31, 2025.

Certain securities have fair values less than amortized cost and, therefore, contain unrealized losses.

At September 30, 2025, the fair value of the Company’s securities available for sale was

At March 31, 2026, the fair value of the Company’s available for sale securities was $71.1

million lower than the amortized cost.

At September 30, 2025, the Company evaluated whether the decline in fair value has resulted from credit losses or other factors.

Within this evaluation, management considers the extent to which fair

value is less than amortized cost, any changes to the rating of the security by rating agency, and adverse conditions specifically related to the security, among other factors.

Based on management’s evaluation no unrealized losses on securities

were determined to be due to credit loss.

At March 31, 2026, the Company evaluated whether the decline in fair value has resulted from credit losses or other factors.

Within this evaluation, management considers the extent to which fair value is less

than amortized cost, any changes to the rating of the security by rating agency, and adverse conditions specifically related to the security, among other factors.

Based on management’s evaluation no unrealized losses on securities were determined

to be due to credit loss.

Additionally, we anticipate full recovery of amortized cost with respect to these securities by maturity, or sooner in the event of a more favorable market interest rate environment.

We do not intend to

sell these securities and it is not probable that we will be required to sell them before recovery of the amortized cost basis, which may be at maturity, thus no ACL or losses have been recognized or realized in the consolidated financial

statements for securities in the portfolio.

We do not intend to sell these

securities and it is not probable that we will be required to sell them before recovery of the amortized cost basis, which may be at maturity, thus no ACL or losses have been recognized or realized in the consolidated financial statements for

securities in the portfolio.

The following table sets forth certain information regarding contractual maturities and the weighted average yields of our investment securities as of the date presented.

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differ from contractual maturities if borrowers have the right to call or prepay an obligation with or without call or prepayment penalties.

As of September 30, 2025

As of March 31, 2026

Due after One Year

4 unchanged sentences

Available-for-sale

U.S government and agencies

State and municipal

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certificate of deposits.

We remained focused on gathering noninterest-bearing demand deposit accounts through loan production, customer referrals, marketing staffs, mobile and online banking and various involvements with community networks.

Total deposits at September 30, 2025 were $3.88 billion, representing an increase of $260.3 million, or 7.2%, compared to $3.62 billion at December 31, 2024.

The increase since December 31, 2024

was due to organic growth and occurred broadly across commercial and retail deposits, with growth in both noninterest-bearing and interest-bearing deposits.

As of September 30, 2025, 27.1% of total deposits were comprised of noninterest-bearing

demand accounts, 62.0% of interest-bearing non-maturity accounts and 10.9% of time deposits.

We put continued effort into gathering noninterest-bearing demand deposit accounts through loan production, customer referrals, marketing staffs, mobile and online banking and various involvements with community networks.

Total deposits at March 31, 2026 were $4.03 billion, representing an increase of $153.5 million, or 4.0%, compared to $3.87 billion at December 31, 2025.

The increase in deposits was mainly due to a

seasonal increase in public fund deposits and organic growth occurring broadly across retail and commercial deposits, with growth in both noninterest-bearing and interest-bearing deposits.

As of March 31, 2026, 25.6% of total deposits were

comprised of noninterest-bearing demand accounts, 63.4% of interest-bearing non-maturity accounts and 11.0% of time deposits.

The following table shows the deposit mix as of the dates presented:

September 30, 2025

March 31, 2026

December 31, 2025

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The following table summarizes our average deposit balances and weighted average rates paid on deposits, on an annualized basis, for the periods indicated.

Three Months Ended September 30,

(Dollars in thousands)

Noninterest-bearing deposits

Interest-bearing deposits:

NOW and interest-bearing demand accounts

Savings accounts

Money market accounts

Time deposits

Total interest-bearing deposits

Total deposits

Nine Months Ended September 30,

Three Months Ended

March 31, 2026

March 31, 2025

(Dollars in thousands)

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Total deposits

In February 2025, the Company ended its deposit sweep program, whereby certain transaction accounts were being restructured into two legally separate accounts:

a checking (transaction) account and

a money market (non-transaction) account.

After ending the program, the balance for these accounts is all reported in NOW and interest-bearing demand accounts.

Previously, the balance was allocated between NOW and interest-bearing demand

accounts and money market accounts.

Time deposits issued in amounts of more than $250 thousand represent the type of deposit most likely to affect the Company’s future earnings because of interest rate sensitivity.

The effective

cost of these funds is generally higher than other time deposits because the funds are usually obtained at premium rates of interest.

The scheduled maturities of time deposits of more than $250 thousand as of September 30, 2025 follows:

The effective cost of

these funds is generally higher than other time deposits because the funds are usually obtained at premium rates of interest.

The scheduled maturities of time deposits of more than $250 thousand as of March 31, 2026 follows:

(Dollars in thousands)

The estimated amount of uninsured deposits as of September 30, 2025 was $1.38 billion.

This represented approximately 34% of total deposits.

Excluding collateralized public fund deposits,

uninsured and uncollateralized deposits was 27% as of September 30, 2025.

The estimated amount of uninsured deposits as of March 31, 2026 was $1.5 billion.

This represented approximately 37% of total deposits and excludes $400.7 million of collateralized public fund

Borrowed Funds

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FHLB Advances .

The FHLB allows us to borrow, both short and long-term, on a blanket floating lien status collateralized by first mortgage loans and

commercial real estate loans as well as FHLB stock.

At September 30, 2025 and December 31, 2024, we had total remaining borrowing capacity from the FHLB of $1.30 billion and $1.11 billion, respectively, with no outstanding balance.

FHLB borrowings during the three and nine months ended September 30, 2025 or 2024.

The FHLB allows us to borrow, both short and long-term, on a blanket floating lien status collateralized by first mortgage loans and commercial

real estate loans as well as FHLB stock.

At March 31, 2026 and December 31, 2025, we had total remaining borrowing capacity from the FHLB of $1.29 billion and $1.27 billion, respectively, with no outstanding balance.

We had no FHLB borrowings

during the three months ended March 31, 2026 or 2025.

The Company may use FHLB letters of credit to pledge to certain public deposits.

There was no outstanding balance of FHLB letters of credit at September 30, 2025.

The outstanding balance at December 31, 2024 was

$75.0 million.

There was no outstanding balance of FHLB letters of credit at March 31, 2026 and December 31, 2025.

Federal Reserve Bank of Dallas .

The Bank has a line of credit with the Federal Reserve Bank of Dallas (the “FRB”).

The amount of the line is determined on

a monthly basis by the FRB.

The line is collateralized by a blanket floating lien on all agriculture, commercial and consumer loans.

The amount of the line was $688.6 million and $654.0 million at September 30, 2025 and December 31, 2024,

respectively, with no outstanding balance.

We had no FRB borrowings during the three and nine months ended September 30, 2025 or 2024.

The amount of the line is determined on a monthly basis by the FRB.

collateralized by a blanket floating lien on all agriculture, commercial and consumer loans.

The amount of the line was $701.8 million and $659.7 million at March 31, 2026 and December 31, 2025, respectively.

There were no amounts outstanding on

the FRB line of credit at March 31, 2026 and December 31, 2025.

We had no long-term FRB borrowings during the three months ended March 31, 2026 or 2025.

Lines of Credit .

1 unchanged sentence

The total amount of the

lines was $140.0 million as of September 30, 2025 and December 31, 2024, respectively.

There were no short-term borrowings as of September 30, 2025 and December 31, 2024.

lines was $140.0 million as of March 31, 2026 and December 31, 2025.

The lines were not used, other than testing during the three months ended March 31, 2026 or the three months ended March 31, 2025.

Subordinated Debt .

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rate of 6.41% for the first seven years.

After the fixed rate period, these notes will float at the Wall Street Journal prime rate, with a floor of 4.0% and a ceiling of 7.5%.

After the fixed rate periods, these notes will float at the Wall Street Journal prime rate, with a floor of 4.0% and a ceiling of 7.5%.

These notes pay interest

1 unchanged sentence

Additionally, these notes are intended to qualify for Tier 2 capital treatment, subject to regulatory limitations.

On September 29, 2020, the Company issued $50.0 million in subordinated notes.

Proceeds were reduced by approximately $926 thousand in debt issuance costs.

These notes had a maturity date of

September 2030 with a fixed rate of 4.50% for the first five years.

On August 25, 2025, the Company notified holders (the “Redemption Notice”) of these notes that it had elected to redeem all of these outstanding notes effective on September

30, 2025 (the “Redemption Date”).

Each of these notes were redeemed pursuant to the terms of the Indenture, dated as of September 29, 2020, between the Company and UMB Bank, National Association, as trustee for these notes (the “Trustee”), at

the Redemption Price totaling $50.0 million in aggregate principal amount, plus accrued and unpaid interest (the “Redemption Price”).

As provided in the Redemption Notice, on the Redemption Date, the Trustee paid the relevant Redemption Price

to the holders of these notes appearing on the books and records of the Trustee on the Redemption Date.

The notes ceased to represent the right to payment of principal and interest upon the payment to the holders of the notes by the Trustee

representing the Redemption Price.

The Company received all necessary regulatory approvals for the redemption of these notes.

As of September 30, 2025, the total amount of subordinated debt outstanding was $14.1 million.

March 31, 2026, the total amount of subordinated debt outstanding was $14.1 million.

Junior Subordinated Deferrable Interest Debentures and Trust Preferred Securities .

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The Company records interest expense on the debentures in its consolidated financial statements.

The amount of debentures outstanding was $46.4 million at

September 30, 2025 and December 31, 2024.

The amount of debentures outstanding was $46.4 million at March 31,

2026 and December 31, 2025.

The Company has the right, as has been exercised in the past, to defer payments of interest on the securities for up to twenty consecutive quarters.

During such time, corporate dividends may not be

The Company is current in its interest payments on the debentures.

The chart below indicates certain information, as of September 30, 2025, about each of the statutory trusts and the junior subordinated deferrable interest debentures, including the date the

junior subordinated deferrable interest debentures were issued, outstanding amounts of trust preferred securities and junior subordinated deferrable interest debentures, the maturity date of the junior subordinated deferrable interest

debentures, and the interest rates on the junior subordinated deferrable interest debentures.

During such time, corporate dividends may not be paid.

The Company is

current in its interest payments on the debentures.

The chart below indicates certain information, as of March 31, 2026, about each of the statutory trusts and the junior subordinated deferrable interest debentures, including the date the junior

subordinated deferrable interest debentures were issued, outstanding amounts of trust preferred securities and junior subordinated deferrable interest debentures, the maturity date of the junior subordinated deferrable interest debentures, and the

interest rates on the junior subordinated deferrable interest debentures.

Name of Trust

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Interest payable quarterly with principal due at maturity.

Rate as of last reset date, prior to September 30, 2025.

Rate as of last reset date, prior to March 31, 2026.

Liquidity and Capital Resources

Liquidity refers to the measure of our ability to meet the cash flow requirements of depositors and borrowers, while at the same time meeting our operating, capital and strategic cash flow needs,

all at a reasonable cost.

Liquidity refers to the measure of our ability to meet the cash flow requirements of depositors and borrowers, while at the same time meeting our operating, capital and strategic cash flow needs, all

at a reasonable cost.

We continuously monitor our liquidity position to ensure that assets and liabilities are managed in a manner that will meet all short-term and long-term cash requirements.

We manage our liquidity position to meet the

daily cash flow needs of customers, while maintaining an appropriate balance between assets and liabilities to meet the return on investment objectives of our shareholders.

We manage our liquidity position to meet the daily

cash flow needs of customers, while maintaining an appropriate balance between assets and liabilities to meet the return on investment objectives of our shareholders.

Our liquidity position is supported by management of liquid assets and access to alternative sources of funds.

Our liquid assets include cash, interest-bearing deposits in correspondent banks,

federal funds sold, and fair value of unpledged investment securities.

Other available sources of liquidity include wholesale deposits, and additional borrowings from correspondent banks, FHLB advances, and the Federal Reserve discount window.

At September 30, 2025, the Bank had the capacity to borrow funds from the FHLB and the Federal Reserve discount window of up to approximately $1.3 billion and $688.6 million, respectively.

Our liquid assets include cash, interest-bearing deposits in correspondent banks, federal

funds sold, and fair value of unpledged investment securities.

Other available sources of liquidity include wholesale deposits, and additional borrowings from correspondent banks, FHLB advances, and the FRB discount window.

At March 31, 2026, the

Bank had the capacity to borrow funds from the FHLB and the Federal Reserve discount window of up to approximately $1.29 billion and $701.8 million, respectively.

Our short-term and long-term liquidity requirements are primarily met through cash flow from operations, redeployment of prepaying and maturing balances in our loan and investment portfolios, and

1 unchanged sentence

Other alternative sources of funds will supplement these primary sources to the extent necessary to meet additional liquidity requirements on either a short-term or long-term basis.

Management believes that the Company has adequate liquidity to meet its obligations.

However, if general economic conditions, potential recession in the United States and our market areas, the

impacts related to or resulting from bank failures and any uncertainty in the banking industry, including the associated impact to the Company and other financial institutions of any regulatory changes or other mitigation efforts taken by

government agencies in response thereto, increased competition for deposits and related changes in deposit customer behavior, changes in market interest rates, the resurgence of elevated levels of inflation or inflationary pressures in the

United States and our market areas, or other events, cause these sources of external funding to become restricted or are eliminated, the Company may not be able to raise adequate funds or may incur substantially higher funding costs or

operating restrictions in order to raise the necessary funds to support the Company’s operations and growth.

Total stockholders’ equity increased to $477.8 million as of September 30, 2025, compared to $438.9 million as of December 31, 2024, an increase of $38.9 million, or 8.9%.

The increase from December 31, 2024 was primarily the result of $43.2 million in net income for the nine months ended September 30, 2025 and an increase in accumulated other comprehensive income (“AOCI”) of $9.5 million related to fair value changes in available for sale securities and related fair value hedges , partially offset by $7.5 million of dividends paid and $8.5 million in repurchases of common stock for the nine months ended

September 30, 2025.

Total stockholders’ equity increased to $504.9 million as of March 31, 2026, compared to $493.8 million as of December 31, 2025, an increase of $11.1 million, or 2.2%.

The increase from December 31,

2025 was primarily the result of $14.5 million in net earnings, partially offset by $2.8 million of dividends paid for the three months ended March 31, 2026.

We are subject to various regulatory capital requirements administered by the federal and state banking regulators.

Failure to meet regulatory capital requirements may result in certain mandatory

and possible additional discretionary actions by regulators that, if undertaken, could have a direct material effect on our financial statements.

Under capital adequacy guidelines and the regulatory framework for “prompt corrective action”

(described below), we must meet specific capital guidelines that involve quantitative measures of our assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting policies.

The capital amounts and

classifications are subject to qualitative judgments by the federal banking regulators about components, risk weightings and other factors.

Qualitative measures established by regulation to ensure capital adequacy required us to maintain

minimum amounts and ratio of common equity tier 1 (“CET1”) capital, tier 1 capital and total capital to risk-weighted assets and of tier 1 capital to average consolidated assets, referred to as the “leverage ratio.”

Failure to meet regulatory capital requirements may result in certain mandatory and

possible additional discretionary actions by regulators that, if undertaken, could have a direct material effect on our financial statements.

Under capital adequacy guidelines and the regulatory framework for “prompt corrective action” (described

below), we must meet specific capital guidelines that involve quantitative measures of our assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting policies.

The capital amounts and classifications are

subject to qualitative judgments by the federal banking regulators about components, risk weightings and other factors.

Qualitative measures established by regulation to ensure capital adequacy required us to maintain minimum amounts and ratio of

common equity tier 1 (“CET1”) capital, tier 1 capital and total capital to risk-weighted assets and of tier 1 capital to average consolidated assets, referred to as the “leverage ratio.”

The risk-based capital ratios measure the adequacy of a bank’s capital against the riskiness of its assets and off-balance sheet activities.

Failure to maintain adequate capital is a basis for

“prompt corrective action” or other regulatory enforcement action.

Failure to maintain adequate capital is a basis for “prompt

corrective action” or other regulatory enforcement action.

In assessing a bank’s capital adequacy, regulators also consider other factors such as interest rate risk exposure;

liquidity, funding and market risks;

quality and level of

quality and level of earnings;

concentrations of credit, quality of loans and investments;

2 unchanged sentences

and management’s overall ability to monitor and control risks.

As of September 30, 2025 and December 31, 2024, both we and the Bank met all the capital adequacy requirements to which we and the Bank were subject.

At September 30, 2025, we and the Bank were

“well capitalized” under the regulatory framework for prompt corrective action.

Management believes that no conditions or events have occurred since September 30, 2025 that would materially adversely change such capital classifications.

time to time, we may need to raise additional capital to support our and the Bank’s further growth and to maintain our “well capitalized” status.

The table below reflects the Company’s (on a consolidated basis) and the Bank’s capital ratios as of the dates indicated.

September 30, 2025

As of March 31, 2026 and December 31, 2025, both we and the Bank met all the capital adequacy requirements to which we and the Bank were subject.

At March 31, 2026, we and the Bank were “well

capitalized” under the regulatory framework for prompt corrective action.

Management believes that no conditions or events have occurred since March 31, 2026 that would materially adversely change such capital classifications.

From time to time, we

may need to raise additional capital to support our and the Bank’s further growth and to maintain our “well capitalized” status.

The table below summarizes the capital requirements applicable to us and the Bank in order to be considered “well capitalized” from a regulatory perspective, as well as our and the Bank’s capital

ratios as of the dates indicated.

March 31, 2026

December 31, 2025

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Community Bank Leverage Ratio

On September 17, 2019, the federal banking agencies jointly finalized a rule to be effective January 1, 2020 and intended to simplify the regulatory capital requirements described above for

qualifying community banking organizations that opt into the Community Bank Leverage Ratio (“CBLR”) framework, as required by Section 201 of the EGRRCPA.

The final rule became effective on January 1, 2020, and the CBLR framework became

available for banks to use beginning with their March 31, 2020 Call Reports.

Under the final rule, if a qualifying community banking organization opts into the CBLR framework and meets all requirements under the framework, it will be considered

to have met the well-capitalized ratio requirements under the “prompt corrective action” regulations described above and will not be required to report or calculate risk-based capital.

In order to qualify for the CBLR framework, a community

banking organization must have a tier 1 leverage ratio of greater than 9%, less than $10 billion in total consolidated assets, and limited amounts of off-balance sheet exposures and trading assets and liabilities.

Although the Company and the

Bank are qualifying community banking organizations, the Company and the Bank have elected not to opt in to the CBLR framework at this time and will continue to follow the Basel III capital requirements as described in Part I, Item 1,

“Business,” under the subheading “Supervision and Regulation—Regulatory Capital Requirements,” in the 2024 Annual Report on Form 10-K.

On September 17, 2019, the federal banking agencies jointly finalized a rule to be effective January 1, 2020 and intended to simplify the regulatory capital requirements described above for qualifying community

banking organizations that opt into the Community Bank Leverage Ratio (“CBLR”) framework, as required by Section 201 of the EGRRCPA.

The final rule became effective on January 1, 2020, and the CBLR framework became available for banks to use

beginning with their March 31, 2020 Call Reports.

Under the final rule, if a qualifying community banking organization opts into the CBLR framework and meets all requirements under the framework, it will be considered to have met the

well-capitalized ratio requirements under the “prompt corrective action” regulations described above and will not be required to report or calculate risk-based capital.

In order to qualify for the CBLR framework, a community banking

organization must have a tier 1 leverage ratio of greater than 9%, less than $10 billion in total consolidated assets, and limited amounts of off-balance-sheet exposures and trading assets and liabilities.

On November 25, 2025, the federal

banking agencies jointly proposed changes to the CBLR framework intended to encourage broader adoption, including reducing the required leverage ratio from 9.0% to 8.0%;

however, the proposed rule has not yet been finalized.

Company and the Bank are qualifying community banking organizations, the Company and the Bank have elected not to opt in to the CBLR framework at this time and will continue to follow the requirements of the Basel III capital framework as

described above.

Treasury Stock

We repurchased stock in accordance with its previously-announced stock repurchase program during the nine months ended September 30, 2025.

For the three months ended September 30, 2025, we did not

repurchase any shares of common stock.

For the nine months ended September 30, 2025, we repurchased 259,046 shares of common stock for a total of $8.5 million.

These shares were retired immediately upon repurchase and not included in treasury

See Part II, Item 2, “Unregistered Sales of Equity Securities and Use of Proceeds,” of this Form 10-Q for further information.

The Company did not repurchase any stock in accordance with its previously-announced stock repurchase programs during the three months ended March 31, 2026.

See Part II, Item 2, “Unregistered Sales

of Equity Securities and Use of Proceeds,” of this Form 10-Q for further information.

Interest Rate Sensitivity and Market Risk

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The average lives of non-maturity deposit accounts are based on decay assumptions and are incorporated into the model.

the assumptions used in our analyses are inherently uncertain and, as a result, the model cannot precisely measure future net interest income or precisely predict the impact of fluctuations in market interest rates on net interest income.

Actual results will differ from the model’s simulated results due to timing, magnitude and frequency of interest rate changes as well as changes in market conditions and the application and timing of various management strategies.

assumptions used in our analyses are inherently uncertain and, as a result, the model cannot precisely measure future net interest income or precisely predict the impact of fluctuations in market interest rates on net interest income.

results will differ from the model’s simulated results due to timing, magnitude and frequency of interest rate changes as well as changes in market conditions and the application and timing of various management strategies.

On a quarterly basis, we run a simulation model for a static balance sheet and other scenarios.

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Non-parallel simulation involves analysis of interest income and expense under various changes in the shape of the yield curve.

Our internal policy regarding

internal rate risk simulations currently specifies that for gradual parallel shifts of the yield curve, estimated net interest income at risk for the subsequent one-year period should not decline by more than 7.5% for a 100 basis point shift,

15% for a 200 basis point shift, and 22.5% for a 300 basis point shift.

Our internal policy regarding internal

rate risk simulations currently specifies that for gradual parallel shifts of the yield curve, estimated net interest income at risk for the subsequent one-year period should not decline by more than 7.5% for a 100 basis point shift, 15% for a

200 basis point shift, and 22.5% for a 300 basis point shift.

The following table summarizes the simulated change in net interest income over a 12-month horizon as of the dates indicated:

September 30,

Change in Interest Rates (Basis Points)

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The Company’s asset and liability structure is substantially different from that of an industrial company in that virtually all assets and liabilities of the Company are monetary in nature.

Management believes

the impact of inflation on financial results depends upon the Company’s ability to react to changes in interest rates and by such reaction, reduce the inflationary impact on performance.

Interest rates do not necessarily move in the same

direction, or at the same magnitude, as the prices of other goods and services.

Management believes the

impact of inflation on financial results depends upon the Company’s ability to react to changes in interest rates and by such reaction, reduce the inflationary impact on performance.

Interest rates do not necessarily move in the same direction,

or at the same magnitude, as the prices of other goods and services.

However, other operating expenses do reflect general levels of inflation.

Management seeks to manage the relationship between interest rate-sensitive assets and

liabilities in order to protect against wide net interest income fluctuations, including those resulting from inflation.

Various information shown elsewhere in this Report will assist in the understanding of how well the Company is positioned

to react to changing interest rates and inflationary trends.

In particular, additional information related to the Company’s interest rate-sensitive assets and liabilities is contained in this Item 2, “Management’s Discussion and Analysis of

Financial Condition and Results of Operations” of this Report under the heading “Interest Rate Sensitivity and Market Risk.”

Management seeks to manage the relationship between interest rate-sensitive assets and liabilities in

order to protect against wide net interest income fluctuations, including those resulting from inflation.

Various information shown elsewhere in this Report will assist in the understanding of how well the Company is positioned to react to changing interest rates and inflationary trends.

In particular, additional

information related to the Company’s interest rate-sensitive assets and liabilities is contained in this Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Report under the heading “Interest

Rate Sensitivity and Market Risk.”

Non-GAAP Financial Measures

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excluding or including amounts, that are included or excluded, as the case may be, in the most directly comparable measure calculated and presented in accordance with GAAP as in effect from time to time in the U.S.

in our consolidated

statements of comprehensive income (loss), balance sheets or statements of cash flows.

Non-GAAP financial measures do not include operating and other statistical measures or ratios or statistical measures calculated using exclusively either

financial measures calculated in accordance with GAAP, operating measures or other measures that are not non-GAAP financial measures or both.

in our consolidated statements

of comprehensive income (loss), balance sheets or statements of cash flows.

Non-GAAP financial measures do not include operating and other statistical measures or ratios or statistical measures calculated using exclusively either financial

measures calculated in accordance with GAAP, operating measures or other measures that are not non-GAAP financial measures or both.

The non-GAAP financial measures that we discuss in this Report should not be considered in isolation or as a substitute for the most directly comparable or other financial measures calculated in

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Moreover, the manner in which we calculate the non-GAAP financial measures that we discuss in this Report may differ from that of other companies reporting measures with similar names.

It is important to understand how

other banking organizations calculate their financial measures with names similar to the non-GAAP financial measures we have discussed in this Report when comparing such non-GAAP financial measures.

It is important to understand how other

banking organizations calculate their financial measures with names similar to the non-GAAP financial measures we have discussed in this Report when comparing such non-GAAP financial measures.

Tangible Book Value Per Common Share .

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The most directly comparable GAAP financial measure for tangible book value per common share is book value per common share.

We believe that the tangible book value per common share measure is

important to many investors in the marketplace who are interested in changes from period to period in book value per common share exclusive of changes in intangible assets.

Goodwill and other intangible assets have the effect of increasing

total book value while not increasing our tangible book value.

We believe that the tangible book value per common share measure is important

to many investors in the marketplace who are interested in changes from period to period in book value per common share exclusive of changes in intangible assets.

Goodwill and other intangible assets have the effect of increasing total book value

while not increasing our tangible book value.

Tangible Common Equity to Tangible Assets .

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share, tangible book value per common share, total stockholders’ equity to total assets, and tangible common equity to tangible assets:

September 30, 2025

March 31, 2026

December 31, 2025

(Dollars in thousands)

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Our accounting and reporting policies conform to GAAP and conform to general practices within the industry in which we operate.

To prepare consolidated financial statements in conformity with

GAAP, management makes estimates, assumptions and judgments based on available information.

To prepare consolidated financial statements in conformity with GAAP,

management makes estimates, assumptions and judgments based on available information.

These estimates, assumptions and judgments affect the amounts reported in the consolidated financial statements and accompanying notes.

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information about these policies can be found in Note 1 of the Company’s consolidated financial statements as of December 31, 2025.

Allowance for Credit Losses.

The allowance for credit losses includes credit losses on loans as well as the off-balance-sheet credit exposure, which is

reported as a component of other liabilities on our consolidated balance sheets.

The ACL for loans is established for future expected credit losses through a provision for credit losses charged to earnings.

Expected losses are calculated using

comparable and quantifiable information both internal and external about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount.

credit losses are estimated over the contractual term of the loans and adjusted for expected prepayments when appropriate.

The ACL for loans is affected by charge-offs, recoveries and the provision for credit losses on loans.

The ACL for loans is evaluated on a quarterly basis by management and is based upon management’s review of the collectability of the loans in light of historical experience, the nature and volume

of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, and prevailing economic conditions.

This evaluation is inherently subjective, as it requires estimates that

are susceptible to significant revision as more information becomes available.

Allowance for Credit Losses on Loans.

The ACL for loans is established for future expected credit losses through a provision for credit losses charged to

Expected losses are calculated using comparable and quantifiable information both internal and external about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the

collectability of the reported amount.

Expected credit losses are estimated over the contractual term of the loans and adjusted for expected prepayments when appropriate.

The ACL for loans is affected by charge-offs, recoveries and the provision

for credit losses on loans.

The ACL for loans is evaluated on a quarterly basis by management and is based upon management’s review of the collectability of the loans in light of historical experience, the nature and volume of

the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, and prevailing economic conditions.

This evaluation is inherently subjective, as it requires estimates that are

susceptible to significant revision as more information becomes available.

The determination of the adequacy of the ACL for loans is based on estimates that are particularly susceptible to significant changes in the economic environment and

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

Mortgage Servicing Rights.

When mortgage loans are sold with servicing retained, servicing rights are initially recorded at fair value with the

consolidated statement of comprehensive income (loss) effect recorded in net gain on sale of loans.

Fair value is based on market prices for comparable mortgage servicing contracts, when available, or alternatively, is based on a valuation

model administered by a third-party that calculates present value of estimated future servicing income.

The fair values of servicing rights are subject to significant fluctuations in valuation model assumptions as a result of changes in

estimated and actual prepayment speeds and default rates and losses.

Estimating prepayment speed and/or discount rates within ranges that market participants would use in determining the fair value of the MSR requires significant management

Recently Issued Accounting Pronouncements

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pronouncements.

Quantitative and Qualitative Disclosure about Market Risk

The Company manages market risk, which, as a financial institution is primarily interest rate volatility, through the ALCO Committee of the Bank, in accordance with policies approved by its board

of directors.

The Company uses an interest rate risk simulation model and shock analysis to test the interest rate sensitivity of net interest income and fair value of equity, and the impact of changes in interest rates on other financial

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Interest Rate Sensitivity and Market Risk” herein for a discussion of how we manage market risk.

Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Form 10-Q, the Company carried out an evaluation, under the supervision and with the participation of its management, including its Chief Executive

Officer and Chief Financial Officer, of the effectiveness of the design and operation of its disclosure controls and procedures.

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and

procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management was required to apply judgment in evaluating its controls and procedures.

Based on this

evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or

the Exchange Act) were effective as of the end of the period covered by this Form 10-Q.

Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the three

months ended March 31, 2026 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

OTHER INFORMATION

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis