What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2026-08-06 compared with 2026-05-05 · 494 added, 402 removed, 579 unchanged (61% of the section changed)

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

C autionary Notice Regarding Forward-Looking Statements

Cautionary 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

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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,”

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.

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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;

(“BOH”) and acquisitions generally including disruption to current plans and operations and our ability to recognize the expected benefits and

synergies of completed acquisitions;

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;

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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

credit quality;

elevated asset prices;

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

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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

(“Federal Reserve”) and as a result of initiatives of the Trump administration.

System (“Federal Reserve”) and as a result of initiatives of the Trump administration.

The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this Form 10-Q and the risk factors set forth in our 2025

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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.

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

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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 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).

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 webcasts.

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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”).

On April 1, 2026, SPFI acquired BOH Holdings, Inc., a Texas corporation (“BOH”) in an all-stock transaction through the merger of BOH with and into SPFI, with SPFI surviving the merger (the “Merger”).

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.

At March 31, 2026, BOH had approximately $685.0 million in assets,

$631.9 million in total gross loans, and $595.6 million in deposits.

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.

For further information regarding the acquisition of BOH, see Note 2 in the Notes to the Consolidated Financial Statements included in Item 1 of this Report.

Results of Operations

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

We had net income of $19.0 million, or $0.96 per diluted common share, for the three months ended June 30, 2026, compared to net income of $14.6 million, or $0.86 per diluted common share for the

three months ended June 30, 2025.

Return on average equity (annualized) was 12.17% and return on average assets (annualized) was 1.44% for the three months ended June 30, 2026, compared to 13.05% and 1.34%, respectively, for the three months

ended June 30, 2025.

Details of the changes in the various components are further discussed below.

We had net income of $33.5 million, or $1.82 per diluted common share for the six months ended June 30, 2026, compared to net income of $26.9 million, or $1.58 per diluted common share for the six months ended June

Return on average equity (annualized) was 12.02% and return on average assets (annualized) was 1.38% for the six months ended June 30, 2026, compared to 12.19% and 1.25%, respectively, for the six months ended June 30, 2025.

the changes in the various components are further discussed below.

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).

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 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

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 liabilities.

Net interest margin is calculated as the annualized net interest income on a fully tax-equivalent basis divided by average interest-earning assets.

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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 table presents, for the periods indicated, information about:

The following tables present, 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 March 31,

Three Months Ended June 30,

Average Balance

(Dollars in thousands)

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Net interest margin (3)

Six Months Ended June 30,

Average Balance

(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 Stockholders’ Equity:

Interest-bearing liabilities:

NOW, savings and money market deposits

Time deposits

Short-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

Stockholders’ 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.

Includes income and average balances for interest-earning deposits at other banks, nonmarketable securities, federal funds sold, and other miscellaneous interest-earning assets.

Includes income and average balances for interest-earning deposits at other banks, nonmarketable securities, federal funds sold, and other miscellaneous interest-earning

Net interest margin is calculated as the annualized net interest income, on a fully tax-equivalent basis, divided by average interest-earning assets.

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average interest rates.

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

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

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

Three Months Ended March 31,

Three Months Ended June 30,

2026 over 2025

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Total interest-bearing liabilities

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

Six Months Ended June 30,

2026 over 2025

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

Subordinated debt

Junior subordinated deferrable interest debentures

Total interest-bearing liabilities

Net interest income for the three months ended June 30, 2026 was $50.3 million, compared to $42.5 million for the three months ended June 30, 2025, an increase of $7.8 million, or 18.5%, and was

comprised of an increase of $10.9 million in interest income, partially offset by an increase of $3.0 million in interest expense.

The growth in interest income was primarily attributable to an increase of $10.2 million in loan interest income,

which was a result of growth of $683.0 million in average loans outstanding, partially offset by a decrease of 18 basis points in the yield on loans due to a decline in market interest rates.

The $3.0 million increase in interest expense was

primarily related to an increase of $709.2 million in average interest-bearing deposits, partially offset by a decrease of 17 basis points in the interest rate paid on these deposits over the same period in 2025.

Additionally, average

noninterest-bearing demand deposits increased $112.0 million for the three months ended June 30, 2026 as compared to the three months ended June 30, 2025.

The increase in loans and deposits was largely attributable to the BOH acquisition.

For the three months ended June 30, 2026, net interest margin and net interest spread were 4.00% and 3.15%, respectively, compared to 4.07% and 3.11%, respectively, for the same period in 2025,

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

Net interest income for the six months ended June 30, 2026 was $93.2 million, compared to $81.0 million for the six months ended June 30, 2025, an increase of $12.2 million, or 15.0%, and was comprised of an

increase of $13.6 million in interest income, partially offset by an increase of $1.4 million in interest expense.

The growth in interest income was attributable to increases of $12.3 million in loan interest income and $2.0 million in interest

income on other interest-earning assets.

The increase in loan interest income resulted from growth of $369.3 million in average loans outstanding as the yield on loans remained flat.

The increase in interest income on other interest-earning

assets was primarily due to an increase of $186.6 million in average other interest-bearing assets, partially offset by a decline of 59 basis points in the interest rate paid on those assets.

The $1.4 million increase in interest expense was

primarily related to an increase of $434.5 million in average interest-bearing deposits, partially offset by a 23 basis point decrease in the rate paid on these deposits over the same period in 2025.

The increase in interest expense on deposits

was partially offset by a reduction of $1.3 million in interest expense as a result of the redemption of $50 million in subordinated debt securities on September 30, 2025.

The increase in loans and deposits was largely attributable to the BOH

For the six months ended June 30, 2026, net interest margin and net interest spread were 4.02% and 3.17%, respectively, compared to 3.94% and 2.99%, respectively, for the same period in 2025, which

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

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

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.

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 June 30, 2026 was $350 thousand, compared to $2.5 million for the three months ended June 30, 2025.

The decrease in provision of $2.2 million was primarily

attributable to the increase in specific reserves, and increase in loan balances, and several credit quality downgrades that occurred during the second quarter of 2025.

The provision for credit losses for the six months ended June 30, 2026 was $610 thousand, compared to $2.9 million for the six months ended June 30, 2025.

The decrease in provision of $2.3 million, as noted above,

was largely attributable to the increase in specific reserves, and increase in loan balances, and several credit quality downgrades that occurred during the first two quarters of 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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The following table sets forth the major components of our noninterest income for the periods indicated:

Three Months Ended

Three Months Ended June 30,

Six Months Ended June 30,

Increase (decrease)

(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 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%.

Noninterest income for the three months ended June 30, 2026 was $14.1 million, compared to $12.2 million for the three months ended June 30, 2025, an increase of $2.0 million, or 16.3%.

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.

Service charges on deposit accounts - Income from service charges on deposit accounts increased $268 thousand, or 12.8%, for the three months ended June 30, 2026 as compared

to the same period in 2025.

The increase was largely attributable to continued focus on deposit growth and the BOH acquisition.

Bank card services and interchange fees - Income from bank card services and interchange fees increased $339 thousand, or 9.0%, for the three months ended

June 30, 2026 as compared to the same period in 2025.

The increase was primarily the result of an increased focus on business purchase card activity during the three months ended June 30, 2026 compared to the same period in 2025, in addition to

new activity as a result of the BOH acquisition.

Mortgage banking activities - Income from mortgage banking activities increased $1.2 million, or 34.4%, to $4.8 million for the three months ended June 30, 2026 from $3.6

million for the three months ended June 30, 2025.

This increase was partially the result of a $515 thousand positive fair value adjustment to our mortgage servicing rights portfolio in the second quarter of

2026 compared to a negative fair value adjustment of $156 thousand in the second quarter of 2025.

The fair value of the mortgage servicing rights portfolio is affected by movements in market interest rates, which increased during the second

quarter of 2026 as compared to decreasing during the second quarter of 2025.

Additionally, there was an increase in other mortgage income related to an increase in originations of loans held for sale in the second quarter of 2026 as compared to

the same period of 2025.

Noninterest income for the six months ended June 30, 2026 was $25.4 million, compared to $22.8 million for the six months ended June 30, 2025, an increase of $2.6 million, or 11.6%.

changes in the components of noninterest income are detailed below.

Mortgage banking activities - Income from mortgage banking activities increased $3.0 million, or 53.3%, to $8.8 million for the six months ended June 30, 2026 from $5.7

million for the six months ended June 30, 2025.

This increase was mainly the result of a $765 thousand positive fair value adjustment to our mortgage servicing rights portfolio for the six months ended June 30, 2026 compared to a negative fair

value adjustment of $1.7 million for the same period in 2025.

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

decreases in the same period within 2025.

Additionally, there was an increase in other mortgage income related to an increase in originations of loans held for sale in the first two quarters of 2026 as compared to the same period in the prior

Other income and fees - Other income and fees decreased $1.3 million, or 37.6%, for the six months ended June 30, 2026 as compared to the same period in 2025.

The decrease was primarily the result of a decrease of $497 thousand in income from SBIC investments and a decrease of $224 thousand on gains on sales of fixed assets.

Noninterest Expense

The following table sets forth the major components of our noninterest expense for the periods indicated:

Three Months Ended

Three Months Ended June 30,

Six Months Ended June 30,

Increase (decrease)

(Dollars in thousands)

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Total noninterest expense

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 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%.

Other expenses include items such as banking regulatory assessments, intangible asset amortization, data conversion expenses, telephone expenses, postage, courier fees, directors’ fees, and insurance.

Noninterest expense for the three months ended June 30, 2026 was $39.9 million compared to $33.5 million for the three months ended June 30, 2025, an increase of $6.3 million, or 18.8%.

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.

There was a total of $1.1 million of acquisition related expenses recorded in the three months ended June 30, 2026.

This total was comprised of $708 thousand in personnel

expenses and $343 thousand in data conversion expenses.

Salaries and employee benefits - Salaries and employee benefits increased $3.8 million, or 19.3%, from $19.8 million for the three months ended June 30, 2025 to $23.5 million

for the three months ended June 30, 2026.

This increase was primarily driven by personnel expenses related to the BOH acquisition - both recurring core and one-time expenses, annual salary adjustments, and new lender hires during the last twelve

Occupancy and equipment, net - Occupancy expenses increased $358 thousand or 9.0%, from $4.0 million for the three months ended June 30, 2025 to $4.3 million for the three

months ended June 30, 2026.

This increase was primarily related to new costs related to the acquisition of BOH.

IT and data services - IT and data services increased $787 thousand or 66.6%, to $2.0 million for the three months ended June 30, 2026 from $1.2 million for the three months

ended June 30, 2025.

This increase was largely related to the acquisition of BOH, in addition to rising software costs and costs related to the implementation of a new loan origination system.

Other expenses - Other expenses increased $1.1 million, or 27.0%, from $4.0 million for the three months ended June 30, 2025 to $5.2 million for the three

months ended June 30, 2026.

This was primarily the result of increases for data conversion expenses related to the BOH acquisition and new core expenses after the acquisition of BOH.

Noninterest expense for the six months ended June 30, 2026 was $75.4 million, compared to $66.6 million for the six months ended June 30, 2025, an increase of $8.8 million, or 13.2%.

Significant changes in the

components of noninterest expense are detailed below.

There was a total of $2.6 million of acquisition related expenses recorded in the six months ended June 30, 2026.

This total was comprised of $708 thousand in personnel expenses, $1.2 million

in professional services expense, and $693 thousand in data conversion expenses.

Salaries and employee benefits - Salaries and employee benefits increased $4.5 million, or 11.6%, from $39.1 million for the six months ended June 30, 2025 to $43.7 million

for the six months ended June 30, 2026.

This increase was primarily driven by personnel expenses related to the BOH acquisition - both recurring core and one-time expenses, annual salary adjustments and new lender hires during the last twelve

Professional services - Professional services increased $1.2 million, or 33.3% from $3.6 million for the three months ended June 30, 2025 to $4.8 million for the three months

ended June 30, 2026.

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

IT and data services - IT and data services increased $1.0 million, or 42.8%, from $2.3 million for six months ended June 30, 2025 to $3.3 million for the

six months ended June 30, 2026.

The increase is primarily a result of the acquisition of BOH, additionally, there has been continued rising cost of technology services and new costs related to the implementation of a new loan origination system.

Other expenses - Other expenses increased $1.3 million, or 15.5%, from $8.2 million for the six months ended June 30, 2025 to $9.5 million for the six months ended June 30, 2026.

This was primarily the

result of increases for data conversion expenses related to the BOH acquisition and new core expenses after the acquisition of BOH.

Financial Condition

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.

Our total assets increased $910.7 million, or 20.3%, to $5.39 billion at June 30, 2026, compared to $4.48 billion at December 31, 2025.

Our loans held for investment increased $626.9 million, or

19.9%, to $3.77 billion at June 30, 2026, compared to $3.14 billion at December 31, 2025.

Our securities portfolio decreased $12.1 million, or 2.1%, to $555.4 million at June 30, 2026, compared to $567.5 million at December 31, 2025.

deposits increased $766.5 million, or 19.8%, to $4.64 billion at June 30, 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 $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

Loans held for investment increased $626.9 million, or 19.9%, to $3.77 billion at June 30, 2026, compared to $3.14 billion at December 31, 2025.

The increase in loans was primarily a result of an

increase of $631.9 million in loans from the BOH acquisition.

The following table shows the contractual maturities of our loans held for investment portfolio at June 30, 2026:

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 March 31, 2026:

The following table shows the distribution between fixed and adjustable interest rate loans for maturities greater than one year as of June 30, 2026:

(Dollars in thousands)

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Other consumer

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.

At June 30, 2026, there was $1.94 billion in adjustable rate loans, with $1.23 billion of these loans that mature or reprice in the next twelve months.

Of these loans that mature or reprice in the

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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.

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 37.3% of loans held for investment as of March

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

74.6% of our loans were secured by real property as of June 30, 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.

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 39.2% of loans held for

investment as of June 30, 2026 and represented 37.0% of loans held for investment as of December 31, 2025.

Further, 95% 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.

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

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 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 $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 real estate loans increased $267.9 million, or 25.2%, to $1.33 billion as of June 30, 2026 from $1.06 billion as of December 31, 2025.

The increase was primarily due to increases broadly

across this segment related to the BOH acquisition.

Commercial – General and Specialized .

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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.

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

specialized and general.

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 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.

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 increased $20.0 million, or 4.9%, to $429.4 million as of June 30, 2026 from $409.4 million as of December 31, 2025.

The increase was primarily due to increases in loans to finance and

investment companies as a result of the BOH acquisition, partially offset by net repayments of $14.0 million in seasonal agricultural-related loans.

Commercial general loans increased $168.1 million, or 25.5%, to $827.5 million as of June 30, 2026 from $659.3 million as of December 31, 2025.

The increase was primarily due to increases broadly across this

segment related to the BOH acquisition.

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

Consumer and other loans increased $127.8 million, or 14.0%, to $1.04 billion as of June 30, 2026, from $911.1 million as of December 31, 2025.

The growth in these loans was primarily a result of an

increase of $124.2 million in residential mortgage loans, mostly related to the BOH acquisition.

As of June 30, 2026, our consumer loan portfolio was comprised of $714.0 million in 1-4 family residential loans, $263.8 million in auto loans, and

$61.1 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

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.

Construction loans increased $43.1 million, or 43.1%, to $143.2 million as of June 30, 2026 from $100.1 million as of December 31, 2025.

This increase was primarily due to the acquisition of BOH.

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

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

Total nonowner-occupied real estate loans were $1.48 billion at June 30, 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 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.

As of June 30, 2026, total

income-producing commercial real estate property loans totaled $993.6 million and was comprised of $229.8 million of multi-family property loans, $277.2 million of retail property loans, $182.9 million of office property loans, $160.4 in

industrial and warehouse loans, $45.6 million in storage facilities loans, $41.5 million in hospitality loans, and $56.2 million in other property loans.

Other property loans include types such as RV parks and convenience stores.

As of June 30,

2026, total construction, acquisition, and development property loans totaled $482.2 million and was comprised of $143.8 million in residential construction property loans and $338.4 million of commercial construction and other land development

The weighted average loan-to-value of income-producing nonowner-occupied commercial real estate loans was approximately 57% at June 30, 2026.

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

approximately 56% at June 30, 2026.

Owner-occupied commercial real estate loans totaled $538.9 million at June 30, 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.

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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 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.

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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.

June 30, 2026

December 31, 2025

(Dollars in thousands)

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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

probability of default and loss given default to calculate the expected credit loss to non-analyzed loans.

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 probability of default and loss given default to calculate the expected

credit loss to non-analyzed loans.

The DCRR process quantifies the expected credit loss at the loan level for the entire loan portfolio.

Loan grades are assigned by a

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.

Loan grades are assigned by a 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 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 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.

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

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 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 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 $53.1 million at June 30, 2026, compared to $45.1 million at December 31, 2025, an increase of $7.9 million, or 17.6%.

The increase was largely driven by $8.5 million of ACL recorded for loans acquired in the BOH

acquisition and a $350 thousand provision for ACL being recorded during the six months ended June 30, 2026, partially offset by net charge-offs of $878 thousand during the period.

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 March 31,

Three Months Ended

Six Months Ended

(Dollars in thousands)

Average loans outstanding during the period

Average loans outstanding during periods

Commercial real estate

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Loans held for sale

Total average loans outstanding during the period

Net charge-offs (recoveries) during the period

Total average loans outstanding during the periods

Net charge-offs (recoveries) during the periods

Commercial real estate

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Other consumer

Total net charge-offs (recoveries) during the period

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

Total net charge-offs (recoveries) during the periods

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

Commercial real estate

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Other consumer

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

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

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

June 30, 2026

December 31, 2025

(Dollars in thousands)

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Ratio of nonaccrual loans to total loans held for investment

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.

Net charge-offs totaled $569 thousand and were 0.06% (annualized) of average loans outstanding for the three months ended June 30, 2026, which is comparable to $458 thousand and 0.06% (annualized)

for the three months ended June 30, 2025.

Net charge-offs totaled $878 thousand and were 0.05% (annualized) of average loans outstanding for the six months ended June 30, 2026, which is comparable to $977 thousand and 0.06% (annualized) for the

six months ended June 30, 2025.

The allowance for credit losses on loans as a percentage of loans held for investment was 1.41% at June 30, 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

June 30, 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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Nonperforming assets consist of nonperforming loans plus foreclosed assets.

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

At June 30, 2026, our total nonaccrual loans were $6.9 million, or 0.18% of total loans held for investment, which is comparable to $7.1 million, or 0.22% of total loans held for investment, at

December 31, 2025.

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.

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 to cover any probable loss.

Nonperforming loans were $9.5 million at June 30, 2026, which is comparable to $9.8 million at December 31, 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

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 written off.

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

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.

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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.

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

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

securities and U.S.

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.

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.

Total securities at June 30, 2026 were $555.4 million, representing a decrease of $12.1 million, or 2.1%, compared to $567.5 million at December 31, 2025.

The decrease was primarily due to $21.0 million in

maturities, net of purchases, prepayments and calls, partially offset by $6.8 million in securities acquired from BOH, and a $3.2 million increase in the fair value of securities available for sale at June 30, 2026 as compared to December 31,

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

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

At June 30, 2026, the fair value of the Company’s securities available for sale was $66.9

million lower than the amortized cost.

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

At June 30, 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

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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.

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

Expected maturities may

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

As of March 31, 2026

One Year or Less

Due after One Year

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Through Ten Years

Amortized Cost

Weighted Average Yield

Amortized Cost

Weighted Average Yield

Amortized Cost

Weighted Average Yield

Amortized Cost

Weighted Average Yield

June 30, 2026

(Dollars in thousands)

Available-for-sale

U.S government and agencies

State and municipal

Residential mortgage-backed securities

Commercial mortgage-backed securities

Mortgage-backed securities - residential

Mortgage-backed securities - commercial

Collateralized mortgage obligations

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Total available-for-sale

As of December 31, 2025

Due after One Year

Through Five Years

Due after Five Years

Through Ten Years

(Dollars in thousands)

December 31, 2025

Available-for-sale

State and municipal

Residential mortgage-backed securities

Commercial mortgage-backed securities

Mortgage-backed securities - residential

Mortgage-backed securities - commercial

Collateralized mortgage obligations

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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.

Total deposits at June 30, 2026 were $4.64 billion, representing an increase of $766.5 million, or 19.8%, compared to $3.87 billion at December 31, 2025.

The increase since December 31, 2025 was largely due to

deposits acquired from BOH with additional organic growth and a seasonal increase in public fund deposits in both noninterest-bearing and interest-bearing deposits occurring broadly across retail and commercial deposits.

As of June 30, 2026,

24.8% of total deposits were comprised of noninterest-bearing demand accounts, 62.2% of interest-bearing non-maturity accounts and 13.0% of time deposits.

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

March 31, 2026

June 30, 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

March 31, 2026

March 31, 2025

Three Months Ended June 30,

(Dollars in thousands)

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Total deposits

Six Months Ended June 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

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 March 31, 2026 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 June 30, 2026 follows:

(Dollars in thousands)

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

The estimated amount of uninsured deposits as of June 30, 2026 was $1.73 billion.

This represented approximately 37% of total deposits and excludes $375.9 million of collateralized public fund

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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 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 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 June 30, 2026 and December 31, 2025, we had total remaining borrowing capacity from the FHLB of $1.32 billion and $1.27 billion, respectively, with no outstanding balance.

There were $15 million in FHLB advances

assumed in the acquisition of BOH.

These advances had a weighted-average interest rate of 3.89% and were repaid in May of 2026.

We had no other FHLB borrowings during the three and six months ended June 30, 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 March 31, 2026 and December 31, 2025.

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

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.

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 $788.7 million and $659.7 million at June 30, 2026 and December 31, 2025, respectively,

with no outstanding balance.

We had no FRB borrowings during the three and six months ended June 30, 2026 or 2025.

Lines of Credit .

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The total amount of the

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.

lines was $140.0 million as of June 30, 2026 and December 31, 2025, with no outstanding balance.

The lines were not used, other than overnight testing, during the three and six months ended June 30, 2026 or 2025.

Subordinated Debt .

In December 2018, the Company issued $14.1 million of subordinated notes that have a maturity date of December 2030 and an average fixed

rate of 6.41% for the first seven years.

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

quarterly, are unsecured, and may be called by the Company at any time after the remaining maturity is five years or less.

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

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

In December 2018, the Company issued $14.1 million of subordinated notes that have a maturity date of December 2030 and a weighted-average

fixed rate of 6.41% for the first seven years.

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

of 6.75% as of June 30, 2026.

These notes pay interest quarterly, are unsecured, and may be called by the Company at any time after the remaining maturity is five years or less.

Additionally, these notes are intended to qualify for Tier 2 capital

treatment, subject to regulatory limitations.

As of June 30, 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 trusts are not consolidated and the debentures issued by the

Company to the trusts are reflected in the Company’s consolidated balance sheets.

Company to the trusts are reflected in the consolidated balance sheets.

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

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

2026 and December 31, 2025.

The amount of debentures outstanding was $46.4 million at June 30, 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 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.

The Company is current

in its interest payments on the debentures.

The chart below indicates certain information, as of June 30, 2026, about each of the statutory trusts and the junior subordinated deferrable interest debentures, including the date the junior

the interest rates on the junior subordinated deferrable interest debentures.

Name of Trust

Trust Preferred

Maturity Date of

Trust Preferred

Securities and

Debentures (1)

Interest Rate of

Trust Preferred

Securities and

Amount of Trust Preferred Securities

Amount of Debentures

Stated Maturity Date of Trust Preferred Securities and Debentures (1)

Interest Rate of Trust Preferred Securities and

Debentures (2)(3)

(Dollars in thousands)

South Plains Financial Capital Trust III

CME Term SOFR + 291 bps;

South Plains Financial Capital Trust IV

CME Term SOFR + 165 bps;

South Plains Financial Capital Trust V

CME Term SOFR + 176 bps;

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Interest payable quarterly with principal due at maturity.

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

Rate as of last reset date, prior to June 30, 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 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 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.

June 30, 2026, 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 $788.7 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

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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.

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.

Total stockholders’ equity was $629.8 million as of June 30, 2026, compared to $493.8 million as of December 31, 2025, an increase of $135.9 million, or 27.5%.

The increase from December 31, 2025 was primarily the

result of $117.5 million in common stock issued related to the BOH acquisition, $33.5 million in net income for the six months ended June 30, 2026 and an increase in accumulated other comprehensive income (“AOCI”) of $2.7 million related to fair

value changes in available for sale securities and related fair value hedges, partially offset by $6.0 million of dividends paid and $12.8 million in repurchases of common stock for the six months ended June 30, 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 earnings;

quality and level of

concentrations of credit, quality of loans and investments;

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

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

As of June 30, 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 June 30, 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

Management believes that no conditions or events have occurred since June 30, 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.

dates indicated.

June 30, 2026

December 31, 2025

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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.

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%.

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 requirements of the Basel III capital framework as described above.

Treasury Stock

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.

We repurchased stock in accordance with our previously-announced stock repurchase program and also in a privately negotiated transaction during the three and six months ended June 30, 2026.

three and six months ended June 30, 2026, we repurchased 310,965 shares of common stock for a total of $12.8 million.

For the three months ended June 30, 2025, we repurchased 9,046 shares of common stock for a total of $276 thousand.

months ended June 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 stock.

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

June 30, 2026

December 31, 2025

Change in Interest Rates (Basis Points)

Percent Change in

Net Interest Income

Percent Change in

Net Interest Income

Percent Change in Net Interest Income

Impact of Inflation

3 unchanged sentences

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

March 31, 2026

December 31, 2025

(Dollars in thousands)

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The following is a discussion of the critical accounting policies and significant estimates that we believe require us to make the most complex or subjective decisions or assessments.

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

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

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.

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

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.

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

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

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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