SOUTH PLAINS FINANCIAL, INC. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations for the periods covered by this Quarterly Report on Form 10-Q (this “Form 10-Q”) and should be read in conjunction with our consolidated financial statements and the accompanying notes thereto included in this Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2025 (the “2025 Annual Report on Form 10-K”) filed with the U.S. Securities and Exchange Commission (the “SEC”) pursuant to Rule 424(b) of the Securities Act of 1933, as amended (the “Securities Act”), on March 5, 2026. Unless we state otherwise or the context otherwise requires, references in this Form 10-Q to “we,” “our,” “us” and “the Company” refer to South Plains Financial, Inc., a Texas corporation, our wholly-owned banking subsidiary, City Bank, a Texas banking association, and our other consolidated subsidiaries. References in this Form 10-Q to the “Bank” refer to City Bank. 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 amended (the “Exchange Act”). These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. These statements are often, but not always, made through the use of words or phrases such as “may,” “might,” “should,” “could,” “predict,” “potential,” “believe,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “strive,” “projection,” “goal,” “target,” “outlook,” “aim,” “would,” “annualized” and “outlook,” or the negative version of those words or other comparable words or phrases of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions, estimates and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements. There are or will be important factors that could cause our actual results to differ materially from those indicated in these forward-looking statements, including, but not limited to, the following: ● risks relating to the acquisition of BOH Holdings, Inc. (“BOH”) and acquisitions generally including disruption to current plans and operations and our ability to recognize the expected benefits and synergies of completed acquisitions; ● risks related to the integration of any other acquired businesses, including exposure to potential asset quality and credit quality risks and unknown or contingent liabilities, risks related to entering a new geographic market, the time and costs associated with integrating systems, technology platforms, procedures and personnel, the ability to retain key employees and maintain relationships with significant customers, the need for additional capital to finance such transactions, and possible failures in realizing the anticipated benefits from acquisitions; ● potential recession in the United States and our market areas; ● uncertainty or perceived instability in the banking industry as a whole; ● increased competition for deposits and related changes in deposit customer behavior; ● the lingering inflationary pressures, and the risk of the resurgence of elevated levels of inflation, in the United States and our market areas, and its impact on market interest rates, the economy and credit 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; ● the impact of pandemics, epidemics, or any other health-related crisis; ● high concentrations of loans secured by real estate located in our market areas; ● increases in unemployment rates in the United States and our market areas; ● risks associated with our commercial loan portfolio, including the risk for deterioration in value of the general business assets that secure such loans; 30 Table of Contents ● potential changes in the prices, values and sales volumes of commercial and residential real estate securing our real estate loans; ● risks associated with our agricultural loan portfolio, including the heightened sensitivity to weather conditions, commodity prices, and other factors generally outside the borrowers and our control; ● risks related to the significant amount of credit that we have extended to a limited number of borrowers and in a limited geographic area; ● public funds deposits comprising a relatively high percentage of our deposits; ● potential impairment on the goodwill we have recorded or may record in connection with business acquisitions; ● our ability to maintain our reputation; ● our ability to successfully manage our credit risk and the sufficiency of our allowance for credit losses; ● our ability to attract, hire and retain qualified management personnel; ● our dependence on our management team, including our ability to retain executive officers and key employees and their customer and community relationships; ● interest rate fluctuations, which could have an adverse effect on our profitability; ● competition from banks, credit unions and other financial services providers; ● our ability to keep pace with technological change or difficulties we may experience when implementing new technologies; ● cybersecurity risk, including cyber incidents or other failures, disruptions or breaches of our operational or security systems or infrastructure, or those of our third-party vendors or other service providers, including as a result of a cyber attack, could impact the Company’s reputation, increase regulatory oversight, and impact the financial results of the Company; ● our ability to maintain effective internal control over financial reporting; ● employee error, fraudulent activity by employees or customers and inaccurate or incomplete information about our customers and counterparties; ● increased capital requirements imposed by banking regulators, which may require us to raise capital at a time when capital is not available on favorable terms or at all; ● our ability to maintain adequate liquidity and to raise necessary capital to fund our acquisition strategy and operations or to meet increased minimum regulatory capital levels; ● costs and effects of litigation, investigations or similar matters to which we may be subject, including any effect on our reputation; ● severe weather, natural disasters, military conflicts (including the conflicts in the Middle East, the possible expansion of such conflicts and potential geopolitical and economic consequences), acts of terrorism, geopolitical instability, domestic civil unrest or other external events, including as a result of the impact of the policies of the current U.S. presidential administration or Congress; ● uncertainty regarding United States fiscal debt, deficit and budget matters; ● the impacts of tariffs, sanctions, and other trade policies of the United States and its global trading counterparts and the resulting impact on the Company and its customers; ● the risks related to the development, implementation use and management of emerging technologies, including artificial intelligence and machine learning; 31 Table of Contents ● compliance with governmental and regulatory requirements, including the Dodd-Frank Act Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018 (“EGRRCPA”), and others relating to banking, consumer protection, securities and tax matters; ● changes in accounting principles and standards, including those related to loan loss recognition under the current expected credit loss, or CECL, methodology; ● changes in the laws, rules, regulations, interpretations or policies that apply to the Company’s business and operations, and any additional regulations, or repeals that may be forthcoming as a result thereof, which could cause the Company to incur additional costs and adversely affect the Company’s business environment, operations and financial results; and ● 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. 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 Annual Report on Form 10-K. Because of these risks and other uncertainties, our actual future results, performance or achievements, or industry results, may be materially different from the results indicated by the forward-looking statements in this Form 10-Q. In addition, our past results of operations are not necessarily indicative of our future results. Accordingly, you should not rely on any forward-looking statements, which represent our beliefs, assumptions and estimates only as of the dates on which such forward-looking statements were made. Any forward-looking statement speaks only as of the date on which it is made, and we do not undertake any obligation to update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by applicable law. Available Information The Company maintains an Internet web site at www.spfi.bank . The Company makes available, free of charge, on its web site (under www.spfi.bank/financials-filings/sec-filings ) the Company’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or Section 15(d) of the Exchange Act as soon as reasonably practicable after the Company files such material with, or furnishes it to, the SEC. The Company also makes available, free of charge, through its web site (under www.spfi.bank/corporate-governance/documents-charters ) links to the Company’s Code of Conduct and the charters for its board committees. In addition, the SEC maintains an Internet site (at www.sec.gov ) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The Company 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. The information contained on, or that may be accessed through, the Company’s web site is not incorporated by reference into, and is not a part of, this Form 10-Q. Overview We are a bank holding company headquartered in Lubbock, Texas, and our wholly-owned subsidiary, City Bank, is one of the largest independent banks in West Texas and has additional banking operations in the Dallas, El Paso, Greater Houston, the Permian Basin, and College Station, Texas markets, and the Ruidoso, New Mexico market. Through City Bank, we provide a wide range of commercial and consumer financial services to small and medium-sized businesses and individuals in our market areas. Our principal business activities include commercial and retail banking, along with investment, trust and mortgage services. Recent Developments Mergers and Acquisitions On April 1, 2026, SPFI acquired BOH Holdings, Inc., a Texas corporation (“BOH”) 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. 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. 32 Table of Contents 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 $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 30, 2025. 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. Details of 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). 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 liabilities. Net interest margin is calculated as the annualized net interest income on a fully tax-equivalent basis divided by average interest-earning assets. Changes in the market interest rates and interest rates we earn on interest-earning assets or pay on interest-bearing liabilities, as well as the volume and types of interest-earning assets, 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. 33 Table of Contents 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 average yields; (ii) average balances, the total dollar amount of interest expense on interest-bearing liabilities and the resultant average rates; (iii) net interest income; (iv) the interest rate spread; and (v) the net interest margin. For purposes of this table, interest income, net interest margin and net interest spread are shown on a fully tax-equivalent basis. Three Months Ended June 30, 2026 2025 Average Balance Interest Yield/Rate Average Balance Interest Yield/Rate (Dollars in thousands) Assets: Interest-earning assets: Loans (1) $ 3,777,590 $ 64,113 6.81 % $ 3,094,558 $ 53,894 6.99 % Investment securities – taxable 482,264 4,238 3.52 % 508,508 4,700 3.71 % Investment securities – non-taxable 152,399 1,077 2.83 % 152,202 1,015 2.67 % Other interest-earning assets (2) 660,395 5,808 3.53 % 456,818 4,747 4.17 % Total interest-earning assets 5,072,648 75,236 5.95 % 4,212,086 64,356 6.13 % Noninterest-earning assets 231,192 166,763 Total assets $ 5,303,840 $ 4,378,849 Liabilities and Stockholders’ Equity: Interest-bearing liabilities: NOW, savings and money market deposits $ 2,871,819 $ 18,353 2.56 % $ 2,326,779 $ 15,890 2.74 % Time deposits 602,818 5,363 3.57 % 438,697 4,172 3.81 % Short-term borrowings 3,739 38 4.08 % 18 - 0.00 % Subordinated debt 14,100 238 6.77 % 64,031 835 5.23 % Junior subordinated deferrable interest debentures 46,393 662 5.72 % 46,393 735 6.35 % Total interest-bearing liabilities 3,538,869 24,654 2.79 % 2,875,918 21,632 3.02 % Noninterest-bearing liabilities: Noninterest-bearing deposits 1,102,345 990,343 Other liabilities 36,540 63,679 Total noninterest-bearing liabilities 1,138,885 1,054,022 Stockholders’ equity 626,086 448,909 Total liabilities and stockholders’ equity $ 5,303,840 $ 4,378,849 Net interest income $ 50,582 $ 42,724 Net interest spread 3.15 % 3.11 % Net interest margin (3) 4.00 % 4.07 % Six Months Ended June 30, 2026 2025 Average Balance Interest Yield/Rate Average Balance Interest Yield/Rate (Dollars in thousands) Assets: Interest-earning assets: Loans (1) $ 3,453,878 $ 116,797 6.82 % $ 3,084,563 $ 104,471 6.83 % Investment securities – taxable 486,188 8,523 3.54 % 509,431 9,392 3.72 % Investment securities – non-taxable 152,832 2,157 2.85 % 152,716 2,029 2.68 % Other interest-earning assets (2) 608,467 10,625 3.52 % 421,899 8,606 4.11 % Total interest-earning assets 4,701,365 138,102 5.92 % 4,168,609 124,498 6.02 % Noninterest-earning assets 206,067 169,222 Total assets $ 4,907,432 $ 4,337,831 Liabilities and Stockholders’ Equity: Interest-bearing liabilities: NOW, savings and money market deposits $ 2,669,649 $ 33,407 2.52 % $ 2,314,562 $ 31,401 2.74 % Time deposits 519,734 9,187 3.56 % 440,297 8,488 3.89 % Short-term borrowings 1,871 38 4.10 % 11 - 0.00 % Subordinated debt 14,100 481 6.88 % 64,008 1,670 5.26 % Junior subordinated deferrable interest debentures 46,393 1,321 5.74 % 46,393 1,468 6.38 % Total interest-bearing liabilities 3,251,747 44,434 2.76 % 2,865,271 43,027 3.03 % Noninterest-bearing liabilities: Noninterest-bearing deposits 1,045,930 962,557 Other liabilities 46,948 64,875 Total noninterest-bearing liabilities 1,092,878 1,027,432 Stockholders’ equity 562,807 445,128 Total liabilities and shareholders’ equity $ 4,907,432 $ 4,337,831 Net interest income $ 93,668 $ 81,471 Net interest spread 3.17 % 2.99 % Net interest margin (3) 4.02 % 3.94 % (1) Average loan balances include nonaccrual loans and loans held for sale. (2) Includes income and average balances for interest-earning deposits at other banks, nonmarketable securities, federal funds sold, and other miscellaneous interest-earning assets. (3) Net interest margin is calculated as the annualized net interest income, on a fully tax-equivalent basis, divided by average interest-earning assets. 34 Table of Contents Increases and decreases in interest income and interest expense result from changes in average balances (volume) of interest-earning assets and interest-bearing liabilities, as well as changes in average interest rates. The following tables set forth the effects of changing rates and volumes on our net interest income during the period shown. Information is provided with respect to (i) effects on interest income attributable to changes in volume (change in volume multiplied by prior rate) and (ii) effects on interest income attributable to changes in rate (changes in rate multiplied by prior volume). Change applicable to both volume and rate have been allocated to volume. Three Months Ended June 30, 2026 over 2025 Change due to: Volume Rate Total Variance (Dollars in thousands) Interest-earning assets: Loans $ 11,896 $ (1,677 ) $ 10,219 Investment securities – taxable (243 ) (219 ) (462 ) Investment securities – non-taxable 1 61 62 Other interest-earning assets 2,115 (1,054 ) 1,061 Total interest-earning assets 13,769 (2,889 ) 10,880 Interest-bearing liabilities: NOW, Savings, MMDAs 3,722 (1,259 ) 2,463 Time deposits 1,561 (370 ) 1,191 Short-term borrowings - 38 38 Subordinated debt (651 ) 54 (597 ) Junior subordinated deferrable interest debentures - (73 ) (73 ) Total interest-bearing liabilities 4,632 (1,610 ) 3,022 Net change $ 9,137 $ (1,279 ) $ 7,858 Six Months Ended June 30, 2026 over 2025 Change due to: Volume Rate Total Variance (Dollars in thousands) Interest-earning assets: Loans $ 12,508 $ (182 ) $ 12,326 Investment securities – taxable (429 ) (440 ) (869 ) Investment securities – non-taxable 2 126 128 Other interest-earning assets 3,806 (1,787 ) 2,019 Total interest-earning assets 15,887 (2,283 ) 13,604 Interest-bearing liabilities: NOW, Savings, MMDAs 4,817 (2,811 ) 2,006 Time deposits 1,531 (832 ) 699 Short-term borrowings - 38 38 Subordinated debt (1,302 ) 113 (1,189 ) Junior subordinated deferrable interest debentures - (147 ) (147 ) Total interest-bearing liabilities 5,046 (3,639 ) 1,407 Net change $ 10,841 $ 1,356 $ 12,197 35 Table of Contents 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 acquisition. 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. Provision for Credit Losses Credit risk is inherent in the business of making loans. We establish an allowance for credit losses (“ACL”) through charges to earnings, which are shown in the consolidated statements of comprehensive income as the provision for credit losses. Credit losses on loans are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. The provision for credit losses is determined by conducting a quarterly evaluation of the adequacy of our ACL and charging the shortfall or excess, if any, to the current quarter’s expense. This has the effect of creating variability in the amount and frequency of charges to our earnings. The provision for credit losses and the amount of allowance for each period are dependent upon many factors, including loan growth, net charge offs, changes in the composition of the loan portfolio, delinquencies, management’s assessment of the quality of the loan portfolio, the valuation of problem loans and the general economic conditions in our market areas. The 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. 36 Table of Contents 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. Noninterest Income While interest income remains the largest single component of total revenues, noninterest income is an important contributing component. The largest portion of our noninterest income is associated with our mortgage banking activities. Other sources of noninterest income include service charges on deposit accounts, and bank card services and interchange fees. The following table sets forth the major components of our noninterest income for the periods indicated: Three Months Ended June 30, Six Months Ended June 30, 2026 2025 Increase (decrease) 2026 2025 Increase (decrease) (Dollars in thousands) Noninterest income: Service charges on deposit accounts $ 2,366 $ 2,098 $ 268 $ 4,621 $ 4,239 $ 382 Bank card services and interchange fees 4,110 3,771 339 7,326 7,150 176 Mortgage banking activities 4,847 3,606 1,241 8,765 5,719 3,046 Investment commissions 466 426 40 1,021 860 161 Fiduciary income 802 694 108 1,591 1,432 159 Other income and fees (1) 1,552 1,570 (18 ) 2,114 3,390 (1,276 ) Total noninterest income $ 14,143 $ 12,165 $ 1,978 $ 25,438 $ 22,790 $ 2,648 (1) Other income and fees includes income and fees associated with the increase in the cash surrender value of life insurance, safe deposit box rental, check printing, collections, legal settlements, wire transfer, Small Business Investment Company (“SBIC”) investments, income from sweep accounts, and other miscellaneous services. 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%. Significant changes in the components of noninterest income are detailed below. 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%. Significant 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 year. 37 Table of Contents 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 June 30, Six Months Ended June 30, 2026 2025 Increase (decrease) 2026 2025 Increase (decrease) (Dollars in thousands) Noninterest expense: Salaries and employee benefits $ 23,517 $ 19,708 $ 3,809 $ 43,671 $ 39,149 $ 4,522 Occupancy and equipment, net 4,330 3,972 358 8,283 7,999 284 Professional services 1,850 1,874 (24 ) 4,805 3,604 1,201 Marketing and development 1,032 919 113 2,033 1,824 209 IT and data services 1,968 1,181 787 3,349 2,345 1,004 Bankcard expenses 1,616 1,579 37 3,224 3,033 191 Appraisal expenses 375 236 139 566 428 138 Other expenses (1) 5,176 4,074 1,102 9,459 8,191 1,268 Total noninterest expense $ 39,864 $ 33,543 $ 6,321 $ 75,390 $ 66,573 $ 8,817 (1) 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%. Significant changes in the components of noninterest expense are detailed below. 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 months. 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 months. 38 Table of Contents 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 $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. Total 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. 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 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 in One Year or Less Due after One Year Through Five Years Due after Five Years Through Fifteen Years Due after Fifteen Years Total (Dollars in thousands) Commercial real estate $ 324,181 $ 724,554 $ 231,053 $ 52,732 $ 1,332,520 Commercial - specialized 117,558 208,404 70,989 32,429 429,380 Commercial - general 202,434 387,516 158,280 79,222 827,452 Consumer: 1-4 family residential 72,973 162,820 109,443 368,778 714,014 Auto loans 4,018 159,309 100,483 - 263,810 Other consumer 8,369 39,620 13,071 - 61,060 Construction 116,557 22,400 2,095 2,146 143,198 Total loans $ 846,090 $ 1,704,623 $ 685,414 $ 535,307 $ 3,771,434 The following table shows the distribution between fixed and adjustable interest rate loans for maturities greater than one year as of June 30, 2026: Fixed Rate Adjustable Rate (Dollars in thousands) Commercial real estate $ 381,887 $ 626,452 Commercial - specialized 121,172 190,650 Commercial - general 242,322 382,696 Consumer: 1-4 family residential 369,601 271,440 Auto loans 259,792 - Other consumer 52,691 - Construction 7,884 18,757 Total loans $ 1,435,349 $ 1,489,995 39 Table of Contents 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 next twelve months, $695.8 million will reprice immediately upon changes in the underlying index rate, with the remaining $532.9 million being subject to rate ceilings, floors above the current index or a future repricing date. The Wall Street Journal prime rate is the predominate index used by the Bank. The Bank is primarily involved in real estate, commercial, agricultural and consumer lending activities with customers throughout Texas and Eastern New Mexico. We have a collateral concentration, as 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. 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 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. We have established concentration limits in the loan portfolio for commercial real estate loans and unsecured lending, among other loan types. All loan types are within established limits. We use 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. 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. Residential construction loans are broken out separately below. 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 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 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 . Commercial loans are underwritten after evaluating and understanding the borrower’s ability to operate profitably. Underwriting standards have been designed to determine whether the borrower possesses sound business ethics and practices, to evaluate current and projected cash flows to determine the ability of the borrower to repay their obligations as agreed, and to ensure appropriate collateral is obtained to secure the loan. Commercial loans are primarily made based on the identified cash flows of the borrower and, secondarily, on the underlying collateral provided by the borrower. Most commercial loans are secured by the assets being financed or other business assets, such as real estate, accounts receivable, or inventory, and typically include personal guarantees. Owner-occupied real estate is included in commercial loans, as the repayment of these loans is generally dependent on the operations of the commercial borrower’s business rather than on income-producing properties or the sale of the properties. Commercial loans are grouped into two distinct sub-categories: specialized and 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 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. Consumer . We utilize a computer-based credit scoring analysis to supplement our policies and procedures in underwriting consumer loans. Our loan policy addresses types of consumer loans that may be originated and the collateral, if secured, which must be perfected. The relatively smaller individual dollar amounts of consumer loans that are spread over numerous individual borrowers also minimize our risk. Residential real estate loans are included in consumer loans. We generally require mortgage title insurance and hazard insurance on these residential real estate loans. All consumer loans are generally dependent on the risk 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. 40 Table of Contents 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. Funds are advanced based on estimated percentage of completion for the project. Performance of these loans is affected by economic conditions as well as the ability to control costs of the projects. Construction loans 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 $1.48 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 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 loans. 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. These financial instruments include commitments to extend credit and standby letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets. The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit to our customers is represented by the contractual or notional amount of those instruments. Commitments to extend credit and standby letters of credit are not recorded as an asset or liability by the Company until the instrument is exercised. The contractual or notional amounts of those instruments reflect the extent of involvement we have in particular classes of financial instruments. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. 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. Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private short-term borrowing arrangements. 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 following table summarizes commitments we have made as of the dates presented. June 30, 2026 December 31, 2025 (Dollars in thousands) Commitments to grant loans and unfunded commitments under lines of credit $ 737,832 $ 554,286 Standby letters of credit 36,348 30,681 Total $ 774,180 $ 584,967 41 Table of Contents Allowance for Credit Losses for Loans The ACL for loans is established for future expected credit losses through a provision for credit losses charged to earnings. Management evaluates the appropriate level of the ACL on a quarterly basis. The analysis takes into consideration the results of an ongoing loan review process, the purpose of which is to determine the level of credit risk within the portfolio and to ensure proper adherence to underwriting and documentation standards. Additional allowances are provided to those loans which appear to represent a greater than normal exposure to risk. The quality of the loan portfolio and the adequacy of the ACL is assessed by regulatory examinations and the Company’s internal and external loan reviews. The ACL consists of two elements: (1) specific valuation allowances established for expected losses on specifically analyzed loans and (2) collective valuation allowances calculated using comparable and quantifiable information from both internal and external sources about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. Expected credit losses are estimated over the contractual term of the loans and adjusted for expected prepayments. 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. 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 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 June 30, Six Months Ended June 30, 2026 2025 2026 2025 (Dollars in thousands) Average loans outstanding during periods Commercial real estate $ 1,490,081 $ 1,096,884 $ 1,272,021 $ 1,112,634 Commercial – specialized 418,472 378,668 407,695 379,246 Commercial – general 743,403 598,036 698,459 580,014 Consumer: 1-4 family residential 663,854 583,520 627,705 574,743 Auto loans 259,206 261,078 258,447 260,010 Other consumer 61,918 64,236 62,004 64,278 Construction 124,519 100,254 113,787 101,288 Loans held for sale 16,137 11,882 13,760 12,350 Total average loans outstanding during the periods $ 3,777,590 $ 3,094,558 $ 3,453,878 $ 3,084,563 Net charge-offs (recoveries) during the periods Commercial real estate $ 64 $ - $ 64 $ - Commercial – specialized 38 (47 ) 9 (81 ) Commercial – general 237 31 397 85 Consumer: 1-4 family residential (4 ) (41 ) (299 ) (48 ) Auto loans 75 353 325 603 Other consumer 159 162 382 423 Construction - - - (5 ) Total net charge-offs (recoveries) during the periods $ 569 $ 458 $ 878 $ 977 Ratio of net charge-offs (recoveries) to average loans during the periods Commercial real estate 0.00 % 0.00 % 0.01 % 0.00 % Commercial – specialized 0.01 % (0.01 )% 0.00 % (0.02 )% Commercial – general 0.03 % 0.01 % 0.06 % 0.01 % Consumer: 1-4 family residential 0.00 % (0.01 )% (0.05 )% (0.01 )% Auto loans 0.03 % 0.14 % 0.13 % 0.23 % Other consumer 0.26 % 0.25 % 0.62 % 0.66 % Construction 0.00 % 0.00 % 0.00 % 0.00 % Total ratio of net charge-offs (recoveries) to average loans during the periods 0.02 % 0.01 % 0.03 % 0.03 % The following table provides other loan data as of the dates indicated. June 30, 2026 December 31, 2025 (Dollars in thousands) Total loans held for investment outstanding $ 3,771,434 $ 3,144,502 Nonaccrual loans $ 6,857 $ 7,070 Allowance for credit losses on loans $ 53,076 $ 45,131 Ratio of allowance to total loans held for investment 1.41 % 1.44 % Ratio of allowance to nonaccrual loans 774.04 % 638.35 % Ratio of nonaccrual loans to total loans held for investment 0.18 % 0.22 % 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. 42 Table of Contents 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: June 30, 2026 December 31, 2025 Amount % of Total Amount % of Total (Dollars in thousands) Commercial real estate $ 18,431 34.7 % $ 15,214 33.8 % Commercial – specialized 6,839 12.9 % 5,231 11.6 % Commercial – general 8,224 15.5 % 7,448 16.5 % Consumer: 1-4 family residential 9,653 18.2 % 11,103 24.6 % Auto loans 3,449 6.5 % 3,033 6.7 % Other consumer 1,004 1.9 % 1,150 2.5 % Construction 5,476 10.3 % 1,952 4.3 % Total allowance for credit losses $ 53,076 100.0 % $ 45,131 100.0 % Asset Quality Loans are considered delinquent when principal or interest payments are past due 30 days or more. 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. 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. Loans that exhibit characteristics different from their pool characteristics are evaluated on an individual basis. Loans evaluated individually are not included in the collective ACL evaluation. Income from loans on nonaccrual status is recognized to the extent cash is received and when the loan’s principal balance is deemed collectible. Depending on a particular loan’s circumstances, we analyze loans for specific allowance based upon either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price, or the fair value of the collateral less estimated costs to sell if the loan is collateral dependent. A loan is considered collateral dependent when repayment of the loan is based solely on the liquidation of the collateral. Fair value, where possible, is determined by independent appraisals, typically on an annual basis. Between appraisal periods, the fair value may be adjusted based on specific events, such as if deterioration of quality of the collateral comes to our attention as part of our problem loan monitoring process, or if discussions with the borrower lead us to believe the last appraised value no longer reflects the actual market for the collateral. The specific allowance amount on a collateral-dependent loan is charged-off to the allowance if deemed not collectible and the impairment amount on a loan that is not collateral-dependent is set up as a specific reserve. Real estate we acquire as a result of foreclosure or by deed-in-lieu of foreclosure is classified as other real estate owned (“OREO”) until sold and is initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. OREO and repossessed assets are reported as foreclosed assets. Nonperforming loans include nonaccrual loans and loans past due 90 days or more. Nonperforming assets consist of nonperforming loans plus foreclosed assets. 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. 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 reduction. When principal forgiveness is provided, the amount of forgiveness is charged-off against the ACL for loans. Typically, one type of concession, such as term extension, is granted initially. If the borrower continues to experience financial difficulty, another concession, such as principal forgiveness, may be granted. 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. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the ACL for loans is adjusted by the same amount. If a borrower on a modified accruing loan has demonstrated performance under the previous terms, is not experiencing financial difficulty and shows the capacity to continue to perform under the restructured terms, the loan will remain on accrual status. Otherwise, the loan will be placed on nonaccrual status until the borrower demonstrates a sustained period of performance, which generally requires six consecutive months of payments. 43 Table of Contents Securities Portfolio The securities portfolio is the second largest component of the Company’s interest-earning assets, and the structure and composition of this portfolio is important to an analysis of the financial condition of the Company. The securities portfolio serves the following purposes: (i) it provides a source of pledged assets for securing certain deposits and borrowed funds, as may be required by law or by specific agreement with a depositor or lender; (ii) it provides liquidity to even out cash flows from the loan and deposit activities of customers; (iii) it can be used as an interest rate risk management tool, since it provides a large base of assets, the maturity and interest rate characteristics of which can be changed more readily than the loan portfolio to better match changes in the deposit base and other funding sources of the Company; and (iv) it is an alternative interest-earning asset when loan demand is weak or when deposits grow more rapidly than loans. The securities portfolio consists of securities classified as either held-to-maturity or available-for-sale. Securities consist primarily of state and municipal securities, mortgage-backed securities and U.S. 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 available-for-sale securities are reported at fair value. 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, 2025. Certain securities have fair values less than amortized cost and, therefore, contain unrealized losses. 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 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 than amortized cost, any changes to the rating of the security by rating agency, and adverse conditions specifically related to the security, among other factors. Based on management’s evaluation no unrealized losses on securities were determined to be due to credit loss. Additionally, we anticipate full recovery of amortized cost with respect to these securities by maturity, or sooner in the event of a more favorable market interest rate environment. We do not intend to sell these securities and it is not probable that we will be required to sell them before recovery of the amortized cost basis, which may be at maturity, thus no ACL or losses have been recognized or realized in the consolidated financial statements for securities in the portfolio. 44 Table of Contents 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. Due in One Year or Less Due after One Year Through Five Years Due after Five Years Through Ten Years Due after 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 State and municipal $ - 0.00 % $ 5,064 3.01 % $ 13,882 2.53 % $ 178,729 2.37 % Mortgage-backed securities - residential 51 1.67 % 997 2.33 % 221 3.47 % 287,475 2.29 % Mortgage-backed securities - commercial - 0.00 % 2,530 4.07 % 46,558 2.31 % 1,499 4.55 % Collateralized mortgage obligations - 0.00 % 62,876 4.26 % - 0.00 % 3,814 5.21 % Asset-backed and other amortizing securities - 0.00 % 227 3.00 % 1,850 3.20 % 10,923 2.75 % Other securities - 0.00 % - 0.00 % 5,599 7.49 % - 0.00 % Total available-for-sale $ 51 1.67 % $ 71,694 4.13 % $ 68,110 2.81 % $ 482,440 2.36 % December 31, 2025 Available-for-sale State and municipal $ 545 3.46 % $ 5,079 2.72 % $ 12,841 2.40 % $ 180,951 2.38 % Mortgage-backed securities - residential 41 1.33 % 1,040 2.06 % 518 2.97 % 301,112 2.29 % Mortgage-backed securities - commercial - 0.00 % 1,525 4.03 % 47,244 2.31 % - 0.00 % Collateralized mortgage obligations - 0.00 % - 0.00 % 63,398 4.56 % 4,310 5.30 % Asset-backed and other amortizing securities - 0.00 % 254 2.99 % 2,069 3.19 % 11,649 2.75 % Other securities - 0.00 % 5,000 7.53 % - 0.00 % - 0.00 % Total available-for-sale $ 586 3.31 % $ 12,898 4.69 % $ 126,070 3.47 % $ 498,022 2.36 % Deposits Deposits represent the Company’s primary and most vital source of funds. We offer a variety of deposit products including demand deposits accounts, interest-bearing products, savings accounts and certificate of deposits. We put continued effort into gathering noninterest-bearing demand deposit accounts through loan production, customer referrals, marketing staffs, mobile and online banking and various involvements with community networks. Total deposits at 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: June 30, 2026 December 31, 2025 Amount % of Total Amount % of Total (Dollars in thousands) Noninterest-bearing deposits $ 1,151,641 24.8 % $ 1,023,517 26.4 % NOW and other transaction accounts 1,554,184 33.5 % 1,307,596 33.8 % Money market and other savings 1,330,583 28.7 % 1,111,529 28.7 % Time deposits 604,218 13.0 % 431,435 11.1 % Total deposits $ 4,640,626 100.0 % $ 3,874,077 100.0 % 45 Table of Contents 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 June 30, 2026 2025 Average Balance Weighted Average Rate Average Balance Weighted Average Rate (Dollars in thousands) Noninterest-bearing deposits $ 1,102,345 0.00 % $ 990,343 0.00 % Interest-bearing deposits: NOW and interest-bearing demand accounts 1,345,763 2.16 % 1,250,852 2.64 % Savings accounts 136,368 0.68 % 132,428 0.81 % Money market accounts 1,389,688 3.14 % 943,499 3.14 % Time deposits 602,818 3.57 % 438,697 3.81 % Total interest-bearing deposits 3,474,637 2.74 % 2,765,476 2.91 % Total deposits $ 4,576,982 2.08 % $ 3,755,819 2.14 % Six Months Ended June 30, 2026 2025 Average Balance Weighted Average Rate Average Balance Weighted Average Rate (Dollars in thousands) Noninterest-bearing deposits $ 1,045,930 0.00 % $ 962,557 0.00 % Interest-bearing deposits: NOW and interest-bearing demand accounts 1,335,408 2.27 % 1,086,742 2.78 % Savings accounts 134,735 0.69 % 133,356 0.81 % Money market accounts 1,199,506 3.02 % 1,094,464 2.92 % Time deposits 519,734 3.56 % 440,297 3.89 % Total interest-bearing deposits 3,189,383 2.69 % 2,754,859 2.92 % Total deposits $ 4,235,313 2.03 % $ 3,717,416 2.16 % 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 June 30, 2026 follows: Three Months Three to Six Months Six to 12 Months After 12 Months Total (Dollars in thousands) $ 86,922 $ 40,757 $ 42,466 $ 7,676 $ 177,821 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 deposits. Borrowed Funds In addition to deposits, we may utilize advances from the FHLB and other borrowings as a supplementary funding source to finance our operations. 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 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. 46 Table of Contents 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 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. 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 . The Bank has uncollateralized lines of credit with multiple banks as a source of funding for liquidity management. The total amount of the 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 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 . Between March 2004 and June 2007, the Company formed three wholly-owned statutory business trusts solely for the purpose of issuing trust preferred securities, the proceeds of which were invested in junior subordinated deferrable interest debentures. The trusts are not consolidated and the debentures issued by the 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 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 June 30, 2026, about each of the statutory trusts and the junior subordinated deferrable interest debentures, including the date the junior subordinated deferrable interest debentures were issued, outstanding amounts of trust preferred securities and junior subordinated deferrable interest debentures, the maturity date of the junior subordinated deferrable interest debentures, and the interest rates on the junior subordinated deferrable interest debentures. Name of Trust Issue Date 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) SPFCT III 2004 $ 10,000 $ 10,310 2034 3-mo. CME Term SOFR + 291 bps; 6.58% SPFCT IV 2005 20,000 20,619 2035 3-mo. CME Term SOFR + 165 bps; 5.33% SPFCT V 2007 15,000 15,464 2037 3-mo. CME Term SOFR + 176 bps; 5.44% Total $ 45,000 $ 46,393 (1) May be redeemed at the Company’s option. (2) Interest payable quarterly with principal due at maturity. (3) Rate as of last reset date, prior to June 30, 2026. Liquidity and Capital Resources Liquidity 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. 47 Table of Contents Our liquidity position is supported by management of liquid assets and access to alternative sources of funds. Our liquid assets include cash, interest-bearing deposits in correspondent banks, federal funds sold, and fair value of unpledged investment securities. Other available sources of liquidity include wholesale deposits, and additional borrowings from correspondent banks, FHLB advances, and the Federal Reserve discount window. At 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 increases in customer deposits. 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. Capital 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.” 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. 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; concentrations of credit, quality of loans and investments; risks of any nontraditional activities; effectiveness of bank policies; and management’s overall ability to monitor and control risks. 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 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. 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. June 30, 2026 December 31, 2025 Amount Ratio Amount Ratio (Dollars in thousands) Consolidated: Total capital (to risk-weighted assets) $ 706,237 16.54 % $ 622,485 17.26 % Tier 1 capital (to risk-weighted assets) 647,574 15.16 % 566,107 15.70 % CET 1 capital (to risk-weighted assets) 602,574 14.11 % 521,107 14.45 % Tier 1 capital (to average assets) 647,574 12.21 % 566,107 12.53 % City Bank: Total capital (to risk-weighted assets) $ 619,057 14.50 % $ 537,444 14.91 % Tier 1 capital (to risk-weighted assets) 571,674 13.39 % 492,355 13.66 % CET 1 capital (to risk-weighted assets) 571,674 13.39 % 492,355 13.66 % Tier 1 capital (to average assets) 571,674 10.79 % 492,355 10.90 % 48 Table of Contents Community Bank Leverage Ratio On September 17, 2019, the federal banking agencies jointly finalized a rule to be effective January 1, 2020 and intended to simplify the regulatory capital requirements described above for qualifying community banking organizations that opt into the Community Bank Leverage Ratio (“CBLR”) framework, as required by Section 201 of the EGRRCPA. The final rule became effective on January 1, 2020, and the CBLR framework became available for banks to use beginning with their March 31, 2020 Call Reports. Under the final rule, if a qualifying community banking organization opts into the CBLR framework and meets all requirements under the framework, it will be considered to have met the well-capitalized ratio requirements under the “prompt corrective action” regulations described above and will not be required to report or calculate risk-based capital. In order to qualify for the CBLR framework, a community banking organization must have a tier 1 leverage ratio of greater than 9%, less than $10 billion in total consolidated assets, and limited amounts of off-balance-sheet exposures and trading assets and liabilities. 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 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. For the 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. For the six 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 As a financial institution, our primary component of market risk is interest rate volatility. Our interest rate risk policy provides management with the guidelines for effective funds management, and we have established a measurement system for monitoring our net interest rate sensitivity position. We have historically managed our sensitivity position within our established guidelines. Interest rate sensitivity involves the relationships between rate-sensitive assets and liabilities and is an indication of the probable effects of interest rate fluctuations on the Company’s net interest income. Interest rate-sensitive assets and liabilities are those with yields or rates that are subject to change within a future time period due to maturity or changes in market rates. The model is used to project future net interest income under a set of possible interest rate movements. The Company’s Investment/Asset Liability Committee (“ALCO Committee”) reviews this information to determine compliance with the limits set by the Bank’s board of directors. Fluctuations in interest rates will ultimately impact both the level of income and expense recorded on most of our assets and liabilities, and the market value of all interest-earning assets and interest-bearing liabilities, other than those which have a short term to maturity. Interest rate risk is the potential of economic losses due to future interest rate changes. These economic losses can be reflected as a loss of future net interest income and/or a loss of current fair market values. The objective is to measure the effect on net interest income and to adjust the balance sheet to minimize the inherent risk while at the same time maximizing income. We manage our exposure to interest rates by structuring our balance sheet in the ordinary course of business. Based upon the nature of our operations, we are not subject to foreign exchange or commodity price risk. We do not own any trading assets. Our exposure to interest rate risk is managed by the ALCO Committee, in accordance with policies approved by the Bank’s board of directors. The ALCO Committee formulates strategies based on appropriate levels of interest rate risk. In determining the appropriate level of interest rate risk, the ALCO Committee considers the impact on earnings and capital on the current outlook on interest rates, potential changes in interest rates, regional economies, liquidity, business strategies and other factors. The ALCO Committee meets regularly to review, among other things, the sensitivity of assets and liabilities to interest rate changes, the book and market values of assets and liabilities, commitments to originate loans and the maturities of investments and borrowings. Additionally, the ALCO Committee reviews liquidity, cash flow flexibility, maturities of deposits and consumer and commercial deposit activity. Management employs methodologies to manage interest rate risk, which include an analysis of relationships between interest-earning assets and interest-bearing liabilities and an interest rate shock simulation model. 49 Table of Contents We use interest rate risk simulation models and shock analyses 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 metrics. Contractual maturities and re-pricing opportunities of loans are incorporated in the model. The average lives of non-maturity deposit accounts are based on decay assumptions and are incorporated into the model. All of the assumptions used in our analyses are inherently uncertain and, as a result, the model cannot precisely measure future net interest income or precisely predict the impact of fluctuations in market interest rates on net interest income. Actual results will differ from the model’s simulated results due to timing, magnitude and frequency of interest rate changes as well as changes in market conditions and the application and timing of various management strategies. On a quarterly basis, we run a simulation model for a static balance sheet and other scenarios. These models test the impact on net interest income from changes in market interest rates under various scenarios. Under the static model, rates are shocked instantaneously and ramped rates change over a 12-month and 24-month horizon based upon parallel and non-parallel yield curve shifts. Parallel shock scenarios assume instantaneous parallel movements in the yield curve compared to a flat yield curve scenario. Non-parallel simulation involves analysis of interest income and expense under various changes in the shape of the yield curve. Our internal policy regarding internal rate risk simulations currently specifies that for gradual parallel shifts of the yield curve, estimated net interest income at risk for the subsequent one-year period should not decline by more than 7.5% for a 100 basis point shift, 15% for a 200 basis point shift, and 22.5% for a 300 basis point shift. 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 +300 0.53 (3.03 ) +200 0.6 (1.91 ) +100 0.54 (0.89 ) -100 (1.6 ) (0.26 ) -200 (1.66 ) 0.27 Impact of Inflation Our consolidated financial statements and related notes included elsewhere in this Form 10-Q have been prepared in accordance with GAAP. GAAP requires the measurement of financial position and operating results in terms of historical dollars, without considering changes in the relative value of money over time due to inflation or recession. 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. 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.” Non-GAAP Financial Measures Our accounting and reporting policies conform to GAAP and the prevailing practices in the banking industry. However, we also evaluate our performance based on certain additional financial measures discussed in this Report as being non-GAAP financial measures. We classify a financial measure as being a non-GAAP financial measure if that financial measure excludes or includes amounts, or is subject to adjustments that have the effect of excluding or including amounts, that are included or excluded, as the case may be, in the most directly comparable measure calculated and presented in accordance with GAAP as in effect from time to time in the U.S. in our consolidated statements of comprehensive income (loss), balance sheets or statements of cash flows. Non-GAAP financial measures do not include operating and other statistical measures or ratios or statistical measures calculated using exclusively either financial measures calculated in accordance with GAAP, operating measures or other measures that are not non-GAAP financial measures or both. The non-GAAP financial measures that we discuss in this Report should not be considered in isolation or as a substitute for the most directly comparable or other financial measures calculated in accordance with GAAP. Moreover, the manner in which we calculate the non-GAAP financial measures that we discuss in this Report may differ from that of other companies reporting measures with similar names. It is important to understand how other banking organizations calculate their financial measures with names similar to the non-GAAP financial measures we have discussed in this Report when comparing such non-GAAP financial measures. 50 Table of Contents Tangible Book Value Per Common Share . Tangible book value per share is a non-GAAP measure generally used by investors, financial analysts and investment bankers to evaluate financial institutions. The most directly comparable GAAP financial measure for tangible book value per common share is book value per common share. We believe that the tangible book value per common share measure is important to many investors in the marketplace who are interested in changes from period to period in book value per common share exclusive of changes in intangible assets. Goodwill and other intangible assets have the effect of increasing total book value while not increasing our tangible book value. Tangible Common Equity to Tangible Assets . Tangible common equity to tangible assets is a non-GAAP measure generally used by investors, financial analysts and investment bankers to evaluate financial institutions. We calculate tangible common equity, as described above, and tangible assets as total assets less goodwill, core deposit intangibles and other intangible assets, net of accumulated amortization. The most directly comparable GAAP financial measure for tangible common equity to tangible assets is total common stockholders’ equity to total assets. We believe that this measure is important to many investors in the marketplace who are interested in the relative changes from period to period of tangible common equity to tangible assets, each exclusive of changes in intangible assets. Goodwill and other intangible assets have the effect of increasing both total stockholders’ equity and assets while not increasing our tangible common equity or tangible assets. The following table reconciles, as of the dates set forth below, total stockholders’ equity to tangible common equity and total assets to tangible assets and then presents book value per common share, tangible book value per common share, total stockholders’ equity to total assets, and tangible common equity to tangible assets: June 30, 2026 December 31, 2025 (Dollars in thousands) Total stockholders' equity $ 629,765 $ 493,837 Less: Goodwill and other intangibles (72,218 ) (20,448 ) Tangible common equity $ 557,547 $ 473,389 Total assets $ 5,391,206 $ 4,480,500 Less: Goodwill and other intangibles (72,218 ) (20,448 ) Tangible assets $ 5,318,988 $ 4,460,052 Shares outstanding 18,839,105 16,293,577 Total stockholders' equity to total assets 11.68 % 11.02 % Tangible common equity to tangible assets 10.48 % 10.61 % Book value per share $ 33.43 $ 30.31 Tangible book value per share $ 29.60 $ 29.05 Critical Accounting Policies and Estimates Our accounting and reporting policies conform to GAAP and conform to general practices within the industry in which we operate. To prepare consolidated financial statements in conformity with GAAP, management makes estimates, assumptions and judgments based on available information. These estimates, assumptions and judgments affect the amounts reported in the consolidated financial statements and accompanying notes. These estimates, assumptions and judgments are based on information available as of the date of the consolidated financial statements and, as this information changes, actual results could differ from the estimates, assumptions and judgments reflected in the consolidated financial statements. In particular, management has identified several accounting policies that, due to the estimates, assumptions and judgments inherent in those policies, are critical in understanding our consolidated financial statements. We evaluate our estimates on an ongoing basis. 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. Additional 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 earnings. Expected losses are calculated using comparable and quantifiable information both internal and external about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. 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. 51 Table of Contents The ACL for loans is evaluated on a quarterly basis by management and is based upon management’s review of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, and prevailing economic conditions. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available. The determination of the adequacy of the ACL for loans is based on estimates that are particularly susceptible to significant changes in the economic environment and market conditions. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Recently Issued Accounting Pronouncements See Note 1, Summary of Significant Accounting Policies, in the notes to the consolidated financial statements included elsewhere in this Form 10-Q regarding the impact of new accounting pronouncements.