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Item 7. Management’s Discussion and Analysis

2026-03-25 compared with 2025-03-27 · 125 added, 115 removed, 382 unchanged (39% of the section changed)

5 unchanged sentences

Although the majority of our loans were fixed-rate loans, with the growth in the commercial lending portfolio in 2025, many of our originations were loans with adjustable rates.

We also invest in securities, which

have historically consisted primarily of mortgage-backed securities and obligations issued by U.S.

We also invest in securities, which have historically consisted primarily of mortgage-backed securities and obligations issued by U.S.

government sponsored enterprises and others, state and municipal securities, collateralized mortgage obligations, corporate bonds, and Federal Home Loan Bank stock.

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Net interest income is the difference between the interest income we earn on our interest-earning assets and the interest we pay on our interest-bearing liabilities.

Our results of operations also are affected by our provisions for credit losses, non-interest income and non-interest expense.

Our results of operations also are affected by our provision for credit losses, non-interest income and non-interest expense.

Non-interest income currently consists primarily of service charges on deposit accounts, other service charges and fees, income from bank owned life insurance, gains and losses on the sale or disposal of assets and other income.

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At December 31, 2025, one-to-four family residential mortgage loans totaled $140.4 million, or 45.8% of total loans.

This amount includes one- to four-family residential mortgage loans originated in the Dallas Metroplex.

We have originated one-to-four family residential mortgage loans secured primarily by owner-occupied properties primarily located in the northern and eastern sections of the Dallas Metroplex for over ten years and continue to do so primarily through existing relationships and word-of-mouth referrals.

At December 31, 2024, these loans amounted to $44.6 million and included $27.8 million of jumbo loans.

This amount includes one- to four-family residential mortgage loans originated in the Dallas Fort Worth Metroplex.

We have originated one-to-four family residential mortgage loans secured primarily by owner-occupied properties located in the Dallas Fort Worth Metroplex for over ten years and continue to do so primarily through existing relationships and word-of-mouth referrals.

At December 31, 2025, these loans amounted to $42.4 million and included $14.8 million of jumbo loans with current balances exceeding the 2025 conforming loan limits.

● Grow and diversify our loan portfolio prudently .

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Edgewood is located in a growth area of our market because of its closer proximity to Dallas.

The increase in population in our market area as well as the expansion in Smith county has provided opportunities for

residential mortgage lending, construction and land lending, and commercial real estate lending.

The increase in population in our market area as well as the expansion in Smith county has provided opportunities for residential mortgage lending, construction and land lending, and commercial real estate lending.

We closed a loan production office in Canton, Texas in 2024 after determining that we can adequately meet the loan demand of that area through the use of technology and other resources.

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At December 31, 2025, commercial real estate loans amounted to $61.5 million, or 20.1% of total loans compared to $56.1 million, or 18.9% at December 31, 2024, and construction and land loans amounted to $48.4 million, or 15.8% of total loans compared to $54.1 million, or 18.2% at December 31, 2024.

In 2024, we sold a block of 111 residential loans totaling $24.3 million to reallocate into commercial real estate and other categories to accelerate diversifying the portfolio with a goal of increasing our interest income and mitigating interest rate risk.

In 2024, we sold a block of 111 residential loans totaling $24.3 million to reallocate into commercial real estate and other categories to accelerate diversification of the portfolio with a goal of increasing our interest income and mitigating interest rate risk.

Our commercial real estate loans and construction and land loans have higher credit risk than our residential mortgage loans.

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Our total nonperforming assets to total assets ratio was 2.65% and 0.62% at December 31, 2025 and 2024, respectively.

This increase is due primarily to the foreclosure of one multi-family property, now held in other real estate owned and currently for sale.

Our strategy for credit risk management continues to focus on having an experienced team of credit professionals, well-defined policies and procedures, appropriate loan underwriting criteria and active credit monitoring.

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We consider the accounting policies discussed below to be critical accounting policies.

The estimates and assumptions that we use are based on historical experience and various other factors and are believed to be reasonable under the circumstances.

The estimates and assumptions that we use are

based on historical experience and various other factors and are believed to be reasonable under the circumstances.

Actual results may differ from these estimates under different assumptions or conditions, resulting in a change that could have a material impact on the carrying value of our assets and liabilities and our results of operations.

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At December 31,

(In thousands)

Selected Financial Condition Data:

At December 31,

Selected Financial Condition Data (Amounts in thousands):

Cash and cash equivalents

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Total shareholders' equity

For the Years Ended December 31,

(In thousands)

Selected Operating Data:

For the Twelve Months Ended December 31,

Selected Operating Data (Amounts in thousands):

Interest income

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Net interest income after provision for credit losses

Noninterest (loss) income

Noninterest income (loss)

Noninterest expense

Loss before income taxes

Income tax benefit

Income (Loss) before income taxes

Income tax expense (benefit)

Net income (loss)

At or For the Years Ended

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Total assets were $429.8 million as of December 31, 2025, a decrease of $13.7 million, or 3.1%, when compared to total assets of $443.5 million as of December 31, 2024.

The decrease was due primarily to a decrease in securities of $22.0 million, or 18.4%, to $97.3 million at December 31, 2024 from $119.3 million at December 31, 2023 and a decrease in interest bearing deposits in banks of $2.6 million, or 21.1%, to $9.7 million at December 31, 2024 from $12.3 million at December 31, 2023 partially offset by an increase in net loans and leases of $13.8 million, or 4.9%, to $293.7 million at December 31, 2024 from $279.9 million at December 31, 2023, an increase in other real estate owned of $318,000, or 196.3% to $480,000 at December 31, 2024 which consisted of two buildings the Company had purchased for expansion and had listed for sale, an increase of $343,000, or 8.8%, to $4.3 million at December 31, 2024 in restricted investments carried at cost, which includes $3.5 million in FHLB stock.

The increase in loans was net of the sale of 111 performing residential mortgage loans totaling $24.3 million at a loss of $3.8 million, net of mortgage servicing rights retained, as part of a portfolio repositioning strategy to take advantage of repricing opportunities with the goal of increasing yield, shortening weighted average life and diversifying the loan portfolio by reducing the concentration in residential mortgage loans.

The decrease in securities included sales of securities to partially fund loan

growth and a paydown in FHLB advances of $27.0 million, or 35.1%, to $49.9 million at December 31, 2024 from $76.9 million at December 31, 2023 partially offset by an increase in deposits of $18.6 million, or 5.9%, to $335.8 million at December 31, 2024 from $317.2 million at December 31, 2023.

The decrease was due primarily to a decrease in securities of $19.1 million, or 19.6%, to $78.2 million at December 31, 2025 from $97.3 million at December 31, 2024, a decrease in cash and equivalents of $6.8 million, or 51.1%, to $6.5 million at December 31, 2025 from $13.3 million at December 31, 2024, and a decrease in interest bearing deposits in banks of $4.2 million, or 43.3%, to $5.5 million at December 31, 2025 from $9.7 million at December 31, 2024 partially offset by an increase in net loans and leases of $9.5 million, or 3.2%, to $303.2 million at December 31, 2025 from $293.7 million at December 31, 2024, and an increase in other real estate owned of $8.8 million, or 1837.5% to $9.3 million at December 31, 2025 which consisted of a foreclosed multifamily property, two parcels of land received in lieu of foreclosure, and a building the Bank had purchased for expansion and had listed for sale.

The decrease in securities included sales of securities for general liquidity purposes.

Cash and Cash Equivalents.

Total cash and cash equivalents (which includes fed funds sold) increased $230,000, or 1.5%, to $13.3 million (including $9.3 million in Fed Funds sold) at December 31, 2024 from $13.1 million (including $7.6 million in Fed Funds sold) at December 31, 2023.

These accounts provided a favorable yield while maintaining a high level of liquidity.

The Bank continued to strategically hold more liquid assets while restructuring the loan portfolio throughout 2024.

Total cash and cash equivalents (which includes fed funds sold) decreased $6.8 million, or 51.1%, to $6.5 million (including $2.6 million in Fed Funds sold) at December 31, 2025 from $13.3 million (including $9.3 million in Fed Funds sold) at December 31, 2024.

These balances provided a favorable yield while maintaining adequate liquidity for strategic funding needs.

Interest Bearing Deposits in Banks.

Interest bearing deposits in banks decreased $4.2 million, or 43.3%, to $5.5 million at December 31, 2025, from $9.7 million at December 31, 2024.

The decrease was primarily the result of a reduction of $3.2 million in Qwickrate Certificates of Deposit (CDs).

The Bank utilizes the Qwickrate listing service, which is a resource where banks can purchase and sell Certificates of Deposit (CDs) with other banks to invest excess funds in CDs at a competitive rate.

At December 31, 2024, there were no Qwickrate CDs with other banks.

Those funds were used primarily to fund loan growth and reduce FHLB debt.

The decrease was the result of general funding needs for loan growth, and the paydown of maturing FHLB Advances and brokered deposits, and a decrease in core deposits.

Securities Available for Sale.

Securities available for sale decreased by $15.3 million, or 20.3%, to $59.9 million at December 31, 2025 from $75.2 million at December 31, 2024.

The decrease in securities resulted primarily from sales of securities in 2024 to take advantage of the current market interest rate spreads.

During the twelve months ended December 31, 2024, we had sales of securities of $20.1 million partially offset by strategic purchases of $19.4 million in securities with more attractive yields or overall terms and received paydowns and payoffs of $18.4 million.

Net unrealized losses on the available for sale portfolio, including derivatives, decreased by $826,000, or 14.8%, to $4.8 million, net of tax, from $5.7 million, net of tax, due primarily to decreases in market interest rates.

The decrease in securities resulted primarily from sales of securities in 2025 for general liquidity purposes.

During the year ended December 31, 2025, we had sales of securities of $23.8 million partially offset by strategic purchases of $23.7 million in securities with more attractive yields or overall terms and received paydowns and payoffs of $17.7 million.

Additionally, we purchased $30.0 million in short-term US treasury securities as part of a tax management strategy.

Unrealized losses on the available for sale portfolio decreased by $2.6 million, or 40.0%, to $3.9 million, from $6.5 million, due primarily to decreases in market interest rates.

Gross unrealized losses on the available for sale portfolio consisting of 66 securities decreased from $6.5 million, or 8.0% of the portfolio’s amortized cost of $81.6 million at December 31, 2024, to $3.9 million, or 6.1% of the amortized cost of $63.8 million at December 31, 2025.

These unrealized losses are due to increases in market interest rates since the time of purchase.

At December 31, 2024, the AFS portfolio was comprised of 12.2% residential mortgage backed securities, 61.9% collateralized mortgage obligations, 17.7% state and municipal securities and 8.2% corporate bonds.

At December 31, 2025, the AFS portfolio was comprised of 59.7% collateralized mortgage obligations, 16.0% corporate bonds, 14.6% state and municipal securities, and 9.7% residential mortgage backed securities.

Securities Held to Maturity.

Securities held to maturity decreased by $3.8 million, or 17.2%, to $18.3 million at December 31, 2025 from $22.1 million at December 31, 2024.

This decrease is primarily due to principal repayments of $3.4 million and one call of $395,000.

This decrease is primarily due to principal repayments of $3.4 million and maturities of $365,000.

At December 31, 2025, the portfolio was comprised of 88.1% residential mortgage backed securities, 6.6% state and municipal securities and 5.3% U.S.

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Net loans and leases receivable increased $9.5 million, or 3.2%, to $303.2 million at December 31, 2025 from $293.7 million at December 31, 2024.

The increase in loans was primarily due to an increase in commercial real estate loans and construction and land loans from investing the funds from the sale of 111 performing residential mortgage loans totaling $24.3 million being sold at a loss of $3.8 million, net of mortgage servicing rights retained of $239,000.

The sales were part of a portfolio repositioning strategy to take advantage of repricing opportunities with the goal of increasing yield, shortening weighted average life and diversifying the loan portfolio by reducing concentration risk in residential mortgage loans.

In addition to the loan sale, there was $98.1 million in loan originations partially offset by $53.7 million in payoffs and other principal reductions and $13.5 million in contractual repayments.

The loan portfolio has become more diverse in line with the Bank’s strategic plan to increase loans in the commercial real estate sector.

Loans secured by residential real estate, multifamily and farmland decreased $24.2 million, or 12.8%, to $165.6 million, or 55.8% of the loan portfolio, at December 31, 2024 from $189.8 million, or 67.1% of total loans at December 31, 2023 and commercial real estate loans increased $14.3 million, or 34.2%, to $56.1 million, or 18.9% of total loans at December 31, 2024 from $41.8 million, or 14.8% of total loans at December 31, 2023.

Construction and land loans increased $16.6 million, or 44.3%, to $54.1 million at December 31, 2024 from $37.5 million at December 31, 2023.

The increase in loans was primarily due to an increase in loans secured by farmland and commercial real estate, as well as municipal loans and commercial loans.

Farmland loans increased $7.6 million, or 80.0%, from $9.5 million for the year ended December 31, 2024 to $17.1 million for the year ended December 31, 2025.

Commercial real estate loans increased $5.4 million, or 9.6%, from $56.1 million for the year ended December 31, 2024 to $61.5 million for the year ended December 31, 2025.

Municipal loans increased $5.6 million, or 60.2%, from $9.3 million for the year ended December 31, 2024 to $14.9 million for the year ended December 31, 2025.

Commercial loans increased $2.5 million, or 39.7%, from $6.3 million for the year ended December 31, 2024 to $8.8 million for the year ended December 31, 2025.

These increases were partially offset by a decrease in construction and land loans of $5.7 million, or 10.5% from $54.1 million for the year ended December 31, 2024 to $48.4 million for the year ended December 31, 2025 due to the foreclosure of a multifamily property in our primary market.

1-4 family residential and multifamily real estate loans decreased $4.8 million, or 3.1%, from $156.1 million for the year ended December 31, 2024 to $151.3 million for the year ended December 31, 2025.

There was $86.8 million in loan originations partially offset by $44.3 million in payoffs and other principal reductions and $11.9 million in contractual repayments.

Loan portfolio diversification efforts continue in line with the Bank’s strategic plan to increase loans in the commercial real estate portfolio.

Loans secured by residential and multifamily real estate decreased $4.8 million, or 3.1%, to $151.3 million, or 49.4% of the loan portfolio, at December 31, 2025, from $156.1 million, or 52.5% of total loans at December 31, 2024.

Construction and land loans decreased $5.7 million, or 10.5%, to $48.4 million, or 15.8% of total loans at December 31, 2025, from $54.1 million, or 18.2% of total loans at December 31, 2024.

Farmland loans increased $7.6 million, or 80.0%, to $17.1 million, or 5.6% of total loans at December 31, 2025, from $9.5 million, or 3.2% of total loans at December 31, 2024.

Municipal loans increased $5.6 million, or 60.2%, to $14.9 million, or 4.8% of the loan portfolio at December 31, 2025, from $9.3 million, or 3.1% of total loans at December 31.

loans increased $2.5 million, or 39.7%, to $8.8 million, or 2.8% of total loans at December 31, 2025, from $6.3 million, or 2.1% of total loans at December 31, 2024.

Commercial real estate loans increased $5.4 million, or 9.6%, to $61.5 million, or 20.1% of total loans at December 31, 2025, from $56.1 million, or 18.9% of total loans at December 31, 2024.

At December 31, 2025, commercial real estate loans consisted of $26.9 million owner occupied and $34.6 million non-owner occupied real estate.

At December 31, 2024, commercial real estate loans primarily include loans collateralized by self-storage facilities ($16.3 million), commercial rental properties ($7.6 million), gas stations with convenience stores ($10.5 million), churches ($4.5 million), rural water district assets ($3.8 million), restaurants ($3.6 million), and hotels ($923,000).

At December 31, 2025, commercial real estate loans primarily include loans collateralized by gas stations with convenience stores ($16.7 million), self-storage facilities ($15.6 million), and commercial rental properties ($11.4 million).

At December 31, 2025, $18.5 million in commercial real estate loans are outside of our primary market area.

During the year ended December 31, 2025, loan originations totaled $86.7 million of which $10.3 million were renewals or refinancings of existing loans with Broadstreet Bank (including interim construction loans converting to a permanent loan), resulting in net originations of $76.4 million.

Originations consisted primarily of $11.1 million in one-to-four family residential mortgage loans, $2.7 million in multifamily loans, interim construction loans of $25.2 million (when fully funded upon completion), $19.5 million in commercial real estate loans, $5.1 million in consumer loans, $5.0 million in commercial and industrial loans, $17.7 million in land and development loans, $3.2 million in farmland loans and $8.5 million in municipal loans.

Originated interim construction loans included $7.9 million in commercial construction, $15.1 million in residential construction loans, including 16 speculative residential loans of $6.5 million, two subdivision loans totaling $1.6 million and one multi-family construction loan totaling $598,000.

Originations consisted primarily of $11.4 million in one-to-four family residential mortgage loans, $2.1 million in multifamily loans, interim construction loans of $27.0 million (when fully funded upon completion), $18.9 million in commercial real estate loans, $2.2 million in consumer and other loans, $2.6 million in commercial and industrial loans, $6.9 million in land and development loans, $9.7 million in farmland loans and $5.9 million in municipal loans.

Originated interim construction loans included $2.7 million in commercial construction, $19.1 million in residential construction loans, including 22 speculative residential loans of $10.4 million, and four infrastructure development loans totaling $5.2 million.

During the year ended December 31, 2025, interim construction loans (when fully funded upon completion) decreased by $6.5 million, or 15.2%, to $36.0 million at December 31, 2025 from $42.5 million at December 31, 2024.

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Construction loans continue to be a large segment of our loan portfolio with the majority of the loans being originated in our primary market.

Deposits increased $18.6 million, or 5.9%, to $335.8 million at December 31, 2024 from $317.2 million at December 31, 2023.

Core deposits (defined as all deposits other than certificates of deposit) increased $7.4 million, or 3.7%, to $205.9 million at December 31, 2024 from $198.5 million at December 31, 2023.

Other real estate owned.

Other real estate owned increased $8.8 million, or 1,837.5%, to $9.3 million at December 31, 2025 from $480,000 at December 31, 2024.

At December 31, 2024, there were two properties in other real estate owned that were properties the Bank had purchased for expansion and in 2024 decided to sell.

One of these properties was sold in 2025 and one remains at a value of $167,000 at December 31, 2025.

Four additional properties were added to other real estate owned.

One of these was sold at a gain and three remain at December 31, 2025 including a residential development property in Dallas, Texas, with a carrying value of $1.3 million, a commercial development property in North Richland Hills, Texas, with a carrying value of $2.1 million, and a multi-family property in our primary service area with a carrying value of $5.7 million.

We are actively marketing all four other real estate owned properties.

Deposits decreased $7.9 million, or 2.4%, to $327.9 million at December 31, 2025 from $335.8 million at December 31, 2024.

Core deposits (defined as all deposits other than certificates of deposit) decreased $11.8 million, or 5.7%, to $194.1 million at December 31, 2025 from $205.9 million at December 31, 2024.

Retail certificates of deposit increased $5.1 million, or 4.8%, to $113.1 million at December 31, 2025 from $107.9 million at December 31, 2024.

Brokered deposits increased $10.0 million, or 83.4%, to $22.0 million at December 31, 2024, from $12.0 million at December 31, 2023.

The increase in brokered CDs primarily funded the $10.0 million prepayment of FHLB advances.

In 2023, we increased the rate on money market accounts and matched CD rates as part of a retention effort during a time of rising market interest rates and a competitive deposit market.

Although rates decreased in 2024, the movement within the portfolio to higher yielding accounts and the additional brokered CDs are the primary reasons for an increase in our average cost of deposits of 42 basis points, or 17.4%, to 2.83% at December 31, 2024, compared to 2.41% at December 31, 2023.

Brokered deposits decreased $4.0 million, or 18.2%, to $18.0 million at December 31, 2025, from $22.0 million at December 31, 2024.

We have lowered rates on most interest-bearing deposit accounts but continue to match short-term CD rates as part of a retention effort due to a competitive deposit market.

With the decline in deposit rates, we have seen a migration of deposits from non-maturity deposits into higher yielding CDs.

The average cost of interest-bearing deposits has declined 13 basis points, or 4.9%, to 2.46% at December 31, 2025, compared to 2.59% at December 31, 2024.

At December 31, 2025, there were 195 accounts with balances in excess of the $250,000 FDIC insurance limit with a total balance of $94.6 million, or 28.9% of deposits.

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Advances from the Federal Home Loan Bank.

Advances from the Federal Home Loan Bank decreased by $27.0 million, or 35.1%, to $49.9 million at December 31, 2024 from $76.9 million at December 31, 2023 due primarily to the payoff of nine advances totaling $30.7 million and normal principal payments on amortizing advances of $1.3 million partially offset by a short-term purchase of $5.0 million.

Seven advances totaling $25.7 million had matured and two advances totaling $10.0 million were prepaid to take advantage of favorable market conditions.

Advances from the Federal Home Loan Bank decreased by $4.2 million, or 8.4%, to $45.7 million at December 31, 2025 from $49.9 million at December 31, 2024 due to maturities and principal payments on amortizing advances.

Shareholders’ Equity.

Total shareholders’ equity decreased $1.6 million, or 3.0%, to $52.1 million at December 31, 2024 from $53.7 million at December 31, 2023.

This decrease was primarily due to a $1.3 million net loss for the year ended December 31, 2024 resulting primarily from the pre-tax loss of $3.8 million, net of mortgage servicing rights retained, on the sale of residential mortgage loans.

The Company also repurchased 107,431 shares of its common stock for a decrease of $1.6 million and paid quarterly dividends totaling $504,000, partially offset by a decrease in the accumulated other comprehensive loss of $826,000, an increase in equity of $223,000 for the 2024 funding of the Broadstreet Bank leveraged ESOP with the release of 15,862 ESOP shares to participants and $757,000 related to accruals for the equity incentive plan for the year ended December 31, 2024.

Total shareholders’ equity increased $1.7 million, or 3.3%, to $53.8 million at December 31, 2025 from $52.1 million at December 31, 2024.

This increase was primarily due to $2.8 million net income for the year ended December 31, 2025, a decrease in the other comprehensive loss of $1.7 million, $607,000 in expense related to the equity incentive plan for the year ended December 31, 2025, and an increase in equity of $253,000 for the 2025 funding of the Broadstreet Bank leveraged ESOP with the release of 15,472 ESOP shares to participants.

At December 31, 2025, the unallocated ESOP contra equity account was $1.9 million.

The Company also repurchased 196,968 shares of its common stock for a decrease of $3.2 million and paid quarterly dividends totaling $593,000.

At December 31, 2025, Broadstreet Bank opted to use the community bank leverage ratio framework (Tier 1 capital to average assets) for regulatory capital purposes.

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Federal funds sold and other

Total interest-earning assets

Total change in interest-earning assets

Interest-bearing liabilities:

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Other interest-bearing liabilities

Total interest-bearing liabilities

Total change in interest-bearing liabilities

Change in net interest income

Comparison of Operating Results for the Years Ended December 31, 2025 and December 31, 2024

The net loss was $1.3 million for the year ended December 31, 2024, compared to a net loss of $733,000 for the year ended December 31, 2023, an increased loss of $572,000, or 78.0%.

The increase in the loss was primarily due to a $3.8 million loss on the sale of loans as part of a strategic repositioning of the balance sheet.

This was partially offset by an increase of $1.5 million, or 13.4%, in net interest income, a $190,000 gain on the sale of securities and a decrease in the provision for credit losses of $198,000.

A loss on the sale of securities of $1.7 million was recognized in the prior year ending December 31, 2023.

Net income was $2.8 million for the year ended December 31, 2025, compared to a net loss of $1.3 million for the year ended December 31, 2024, an increase of $4.1 million.

This increase was primarily due to a $3.8 million loss on the sale of loans recorded in the year ended December 31, 2024 as part of a strategic repositioning of the balance sheet.

Additionally, interest expense decreased $725,000, or 7.1%, to $9.2 million for the year ended December 31, 2025 from $9.9 million for the year ended December 31, 2024.

This was partially offset by an increase in the provision for credit losses of $673,000, or 425.9%, to $831,000 for the year ended December 2025 from $158,000 for the year ended December 31, 2024, which was primarily related to a foreclosed multi-family property within our primary service area.

Interest Income.

Interest income increased $3.5 million, or 18.4%, to $22.5 million for the year ended December 31, 2024 from $19.0 million at December 31, 2023.

Interest income was unchanged at $22.5 million for the years ended December 31, 2024 and 2025.

This was primarily the result of increased interest income on loans resulting from an increase in the average balance and average yield for the year ended December 31, 2025.

There was an increase in average interest earning assets of $15.3 million, or 3.8%, to $420.4 million at December 31, 2024 from $405.1 million at December 31, 2023 and an increase of 66 basis points, or 14.0%, in average yield on interest–earning assets from 4.68% at December 31, 2023 to 5.34% at December 31, 2024.

This was offset by decreased interest on securities resulting from a decrease in the average balance for the year ended December 31, 2025, as well as decreases in interest on deposits in banks and federal funds sold resulting from a decrease in average balances and average yield for the year ended December 31, 2025.

Interest income on financial derivatives decreased following the termination of the remaining swap contracts in the first quarter of 2025.

There was a decrease in average interest earning assets of $12.3 million, or 2.9%, to $408.1 million at December 31, 2025 from $420.4 million at December 31, 2024 which was offset by an increase of 17 basis points, or 3.2%, in average yield on interest–earning assets from 5.34% at December 31, 2024 to 5.51% at December 31, 2025.

Interest income on the securities portfolio decreased $341,000, or 7.6% to $4.1 million for the year ended December 31, 2025, from $4.5 million for the year ended December 31, 2024.

This decrease is primarily due to a decrease in the average balance of securities of $13.1 million, or 11.8%, from $110.9 million, for the year ended December 31, 2024 to $97.8 million for the year ended December 31, 2025.

The average yield on securities declined by seven basis points, or 1.8%, from 4.10% for the year ended December 31, 2023 to 4.03% for the year ended December 31, 2024.

The yield decrease is reflective of changes in the securities portfolio due to maturities, principal payments, and strategic purchases and sales.

In 2024, the Company sold eight securities totaling $20.1 million at a gain of $190,000 and purchased nine securities totaling $19.4 million as part of a balance sheet restructuring strategy to increase interest income and diversify the portfolio.

The average yield on securities increased by 18 basis points, or 4.5%, from 4.03% for the year ended December 31, 2024 to 4.21% for the year ended December 31, 2025.

The yield increase is reflective of changes in the securities portfolio due to maturities, principal payments, and strategic purchases and sales.

In 2025, the Company sold 20 securities totaling $23.8 million at a gain of $117,000 and purchased 16 securities totaling $23.7 million as part of a balance sheet restructuring strategy to increase interest income and diversify the portfolio.

The Company also purchased $30.0 million in short-term securities as part of a tax management strategy.

Interest income on net loans and leases increased $1.8 million, or 11.0%, to $17.7 million for the year ended December 31, 2025 from $15.9 million for the year ended December 31, 2024 primarily due to an increase of $15.4 million, or 5.4%, in the average balance of the loan portfolio from $282.9 million for the year ended December 31, 2024 to $298.3 million for the year ended December 31, 2025, and an increase of 30 basis points, or 5.3%, in the average yield on loans from 5.63% for the year ended December 31, 2024 to 5.93% for the year ended December 31, 2025.

The increased yield on loans is primarily due to increased market interest rates, higher loan rates and fees primarily from an increase in commercial real estate as part of the execution of a strategic restructuring of the loan portfolio in which $24.3 million in residential loans were sold and replaced with other higher-yielding loans.

Dividends on restricted investments including stock in the Federal Home Loan Bank and Texas Independent Bank (TIB) increased $62,000, or 39.0%, from $159,000 for the year ended December 31, 2023 to $221,000 for the year ended December 31, 2024.

This increase resulted primarily from an increase in yield of 103 basis points, or 20.1%, from 5.14% for the year ended December 31, 2023 to 6.17% for the year ended December 31, 2024 and an increase in average balance of $488,000, or 15.8%, from $3.1 million for the year ended December 31, 2023 to $3.6 million for the year ended December 31, 2024.

Interest income from interest bearing deposits in banks increased $271,000, or 60.0%, from $452,000 for the year ended December 31, 2023 to $723,000 for the year ended December 31, 2024, resulting primarily from the increase in average yield of 31 basis points, or 6.1%, from 5.14% for the year ended December 31, 2023 to 5.45% for the year ended December 31, 2024 and an increase in average interest bearing deposits of $4.5 million, or 51.0% from $8.8 million for the year ended December 31, 2023 to $13.3 million for the year ended December 31, 2024.

There was also an increase of $484,000 in fed funds interest income for the year ended December 31, 2024 primarily from an increase of 27 basis points, or 5.3%, in average yield on fed funds sold from 5.11% for the year ended December 31, 2023 to 5.38% for the year ended December 31, 2024 and a $8.8 million, or 237.8%, increase in average fed funds sold from $3.7 million for the year ended December 31, 2023 to $12.5 million for the year ended December 31, 2024.

The increases in interest bearing deposits in banks and fed funds are primarily the result of holding the funds from the loan sale in these accounts while waiting to originate new loans, core deposit growth, maturities and principal reductions from the securities portfolio, an increase in brokered deposits, and is partially offset by a reduction in FHLB advances.

The increase in yields on deposits in banks and fed funds is reflective of the increase in market interest rates.

Interest income from the fair value hedge was $450,000 for the year ended December 31, 2024.

The Company entered into an interest rate swap agreement in the year ended December 31, 2024 to convert a portion of its interest rate exposure from fixed rates to floating rates to help manage the interest rate risk position.

The increased yield on loans is primarily due to changes in market interest rates, higher loan rates and fees primarily from an increase in commercial real estate, and a decrease in residential real estate as part of the execution of a strategic restructuring of the loan portfolio in which $24.3 million in residential loans were sold and replaced with other higher-yielding loans in 2024.

Dividends on restricted investments including stock in the Federal Home Loan Bank and Texas Independent Bank (TIB) decreased $54,000, or 24.4%, from $221,000 for the year ended December 31, 2024 to $167,000 for the year ended December 31, 2025.

This decrease resulted primarily from an decrease in average balance of $650,000, or 18.1%, from $3.6 million for the year ended December 31, 2024 to $2.9 million for the year ended December 31, 2025, and a decrease in yield of 48 basis points, or 7.8%, from 6.17% for the year ended December 31, 2024 to 5.69% for the year ended December 31, 2025.

Interest income from interest bearing deposits in banks decreased $400,000, or 55.3%, from $723,000 for the year ended December 31, 2024 to $323,000 for the year ended December 31, 2025, resulting primarily from a decrease in average yield of 111 basis points, or 20.3%, from 5.45% for the year ended December 31, 2024 to 4.34% for the year ended December 31, 2025 and a decrease in average interest bearing deposits of $5.9 million, or 44.4% from $13.3 million for the year ended December 31, 2024 to $7.4 million for the year ended December 31, 2025.

There was also a decrease of $464,000 in fed funds interest income for the year ended December 31, 2025 primarily from a decrease of 105 basis points, or 19.6%, in average yield on fed funds sold from 5.38% for the year ended December 31, 2024 to 4.33% for the year ended December 31, 2025 and a $7.7 million, or 61.6%, decrease in average fed funds sold from $12.5 million for the year ended December 31, 2024 to $4.8 million for the year ended December 31, 2025.

The decreases in interest bearing deposits in banks and fed funds are primarily the result of loan growth, paydown of FHLB advances and brokered deposits, and a decrease in core deposits.

The decrease in yields on deposits in banks and fed funds is reflective of a decrease in market interest rates.

The Company recorded a net interest expense from the fair value hedge of $10,000 for the year ended December 31, 2025 following termination of the remaining swap contracts in the first quarter.

This is a decrease of $460,000, or 102.2% from interest income of $450,000 for the year ended December 31, 2024.

The Company had entered into the interest rate swap agreement in 2023 to convert a portion of its interest rate exposure from fixed rates to floating rates to help manage the interest rate risk position.

Refer to additional detail regarding the fair value hedge in Note 20 – Derivatives of the accompanying consolidated financial statements.

Interest Expense.

Interest expense increased $2.0 million, or 25.3%, to $9.9 million for the year ended December 31, 2024 from $7.9 million for the year ended December 31, 2023 due primarily to an increase in the average yield on interest bearing liabilities of 42 basis points, or 17.2%, from 2.41% for the year ended December 31, 2023 to 2.83% for the year ended December 31, 2024 and an increase in the average balance of interest-bearing liabilities of $22.1 million, or 6.7%, from $328.2 million for the year ended December 31, 2023 to $350.3 million for the year ended December 31, 2024 primarily due to an increase in deposit and funding costs.

Interest expense on deposit accounts increased $2.0 million, or 37.8%, to $7.3 million for the year ended December 31, 2024 from $5.3 million for the year ended December 31, 2023, due to an increase in the average deposit cost of 51 basis points, or 24.4%, from 2.08% for the year ended December 31, 2023 to 2.59% for the year ended December 31, 2024 and an increase in average interest-bearing deposits of $25.0 million, or 9.8%, from $256.4 million for the year ended December 31, 2023 to $281.4 million for the year ended December 31, 2024, with the increase being primarily in higher cost certificates of deposit and money market deposits, offset by a decrease in lower cost savings accounts.

This migration to higher yielding accounts is due to the interest rate environment, competition and additional brokered deposits.

At December 31, 2024, market rates had levelled off some and the Bank’s deposit rates had decreased.

Interest expense on Federal Home Loan Bank advances increased $38,000, or 1.5%, to $2.6 million for the year ended December 31, 2024.

Interest expense decreased $725,000, or 7.3%, to $9.2 million for the year ended December 31, 2025 from $9.9 million for the year ended December 31, 2024 due primarily to a decrease in the average balance of interest-bearing liabilities of $11.5 million, or 3.3%, from $350.3 million for the year ended December 31, 2024 to $338.8 million for the year ended December 31, 2025 and a decrease in the average cost of interest bearing liabilities of 12 basis points, or 4.2%, from 2.83% for the year ended December 31, 2024 to 2.71% for the year ended December 31, 2025 primarily due to an decrease in deposit costs.

Interest expense on deposit accounts decreased $188,000, or 2.6%, to $7.1 million for the year ended December 31, 2025 from $7.3 million for the year ended December 31, 2024, due to a decrease in the average deposit cost of 13 basis points, or 4.9%, from 2.59% for the year ended December 31, 2024 to 2.46% for the year ended December 31, 2025 and partially offset by an increase in average interest-bearing deposits of $7.0 million, or 2.5%, from $281.4 million for the year ended December 31, 2024 to $288.4 million for the year ended December 31, 2025.

The increase in average interest-bearing deposit balances were primarily in higher cost certificates of deposit accounts and partially offset by a decrease in lower cost interest-bearing demand and savings accounts.

This shift to higher yielding accounts is due primarily to an increase in the average balance of brokered deposits.

At December 31, 2025, market rates had leveled off some and the Bank’s deposit rates had decreased.

Interest expense on Federal Home Loan Bank advances decreased $536,000, or 20.6%, to $2.1 million for the year ended December 31, 2025 from $2.6 million for the year ended December 31, 2024.

The average balance of Federal Home Loan Bank advances decreased by $18.0 million, or 26.4%, to $50.2 million for the year ended December 31, 2025 from $68.2 million for the year ended December 31, 2024.

This was offset by an increase in average cost of 30 basis points, or 7.9%, from 3.81% for the year ended December 31, 2024 to 4.11% for the year ended December 31, 2025.

As overall liquidity has improved, this has enabled the Company to pay down FHLB advances to $49.9 million at December 31, 2024.

The Company has paid down FHLB advances to $45.7 million at December 31, 2025.

Net Interest Income .

Net interest income increased $1.5 million, or 13.5%, to $12.6 million for the year ended December 31, 2024 from $11.1 million for the year ended December 31, 2023, primarily due to an increase in interest-earning assets of $15.3 million, or 3.8%, to $420.4 million at December 31, 2024 from $405.1 million at December 31, 2023, and an increase in net interest rate spread of 24 basis points, or 10.6%, from 2.27% for the year ended December 31, 2023 to 2.51% for the year ended December 31, 2024.

Net interest income increased $764,000, or 6.1%, to $13.3 million for the year ended December 31, 2025 from $12.6 million for the year ended December 31, 2024, primarily due to an increase in net interest rate spread of 29 basis points, or 11.5%, from 2.51% for the year ended December 31, 2024 to 2.80% for the year ended December 31, 2025.

Net interest margin increased 28 basis points to 3.26% for the year ended December 31, 2025 from 2.98% for the year ended December 31, 2024.

Provision for Credit Losses.

Based on management’s analysis of the adequacy of the allowance for credit losses , the provision for credit losses was $158,000 for the year ended December 31, 2024, compared to $356,000 for the year ended December 31, 2023, a decrease of $198,000, or 55.6%, primarily due to significant loan growth in 2023, and the adoption of ASC 326 on January 1, 2023.

See the CECL discussion in the accompanying consolidated financial statements for further explanation of the Bank’s transition to the new methodology.

Based on management’s analysis of the adequacy of the allowance for credit losses , the provision for credit losses was $831,000 for the year ended December 31, 2025, compared to $158,000 for the year ended December 31, 2024, an increase of $673,000, or 425.9%, primarily due to loan growth as well as provision expense recorded following the charge-off of a loan and subsequent foreclosure of a multi-family property.

Noninterest Income.

Noninterest income decreased $2.3 million, or 641.0%, to a loss of $1.9 million for the year ended December 31, 2024 from $352,000 for the year ended December 31, 2023.

This decrease is primarily due to a $3.8 million loss on the sale of loans as part of a strategic balance sheet repositioning executed during the year ended December 31, 2024, a $287,000 expense on the disposal of a fixed asset related to the new branch partially offset by a $190,000 gain on the sale of securities.

A loss $1.7 million on the sale of securities was recognized in the year ended December 31, 2023.

Noninterest income increased $5.0 million, or 263.2%, to $3.1 million for the year ended December 31, 2025 from a net loss of $1.9 million for the year ended December 31, 2024.

This decrease is primarily due to a $3.8 million loss on the sale of residential loans as part of a strategic balance sheet repositioning executed during the year ended December 31, 2024, a $287,000 expense on the disposal of a fixed asset recorded in the year ended December 31, 2024, a $495,000 fair value adjustment on a commercial development property received in lieu of foreclosure, a $198,000 gain on other investment, and $230,000 in rental income on foreclosed properties recorded in the year ended December 31, 2025.

Noninterest Expense.

Noninterest expense increased $273,000, or 2.3%, to $12.3 million for the year ended December 31, 2024 from $12.0 million for the year ended December 31, 2023 primarily due to the increase in occupancy and equipment costs and other expenses.

Noninterest expense decreased $72,000, or 0.6%, to $12.2 million for the year ended December 31, 2025 from $12.3 million for the year ended December 31, 2024 primarily due to compensation and benefits paid to terminated employees in the year ended December 31, 2024, and partially offset by an increase in expense related to foreclosed properties in the year ended December 31, 2025.

Salary and employee benefit expenses decreased by $308,000, or 4.5%, to $6.5 million for the year ended December 31, 2025 from $6.8 million for the year ended December 31, 2024.

This is due primarily to an increase in equity award expenses of $229,000 including an extraordinary $129,000 initial vesting expense and nonrecurring expenses of $230,000 related to executive changes in 2024 being offset primarily by reduced executive salary expense related to the CEO transition and the termination of the deferred compensation executive incentive plan on December 31, 2023.

The remaining increase was due to normal increases in wages, insurance costs and payroll taxes.

Occupancy and equipment expenses increased by $268,000, or 32.1%, primarily due to depreciation, building expense and property taxes associated with two new bank branch locations opened in 2024.

Other expenses combined increased $381,000, or 19.0%, from $2.0 million for the year ended December 31, 2023 to $2.4 million for the year ended December 31, 2024 including a $172,000 increase in audit and accounting expenses related primarily to additional loan review, a $69,000 increase in FDIC assessments due to an overall increase in the assessment rate, and a $67,000 increase in employee training expense.

Increases for the year ended December 31, 2024 were primarily related to growth, including branch completion, employee recruitment and price increases in all types of services the Company incurred due to inflationary pressures.

Income Tax Benefit.

The i ncome tax benefit increased by $272,000, or 133.3%, from $204,000 for the year ended December 31, 2023 to $476,000 for the year ended December 31, 2024 due primarily to the increase in the taxable loss.

This is due primarily to an extraordinary $129,000 initial vesting expense and nonrecurring expenses of $230,000 related to executive changes in 2024, and is partially offset by normal increases in wages, insurance costs and payroll taxes.

Technology expense decreased $137,000, or 31.5%, to $298,000 for the year ended December 31, 2025 from $435,000 for the year ended December 31, 2024 due primarily to card processing fees incurred in the first half of 2024 associated with a “tap” debit card implementation project.

Other expenses combined increased $361,000, or 15.1%, from $2.4 million for the year ended December 31, 2024 to $2.7 million for the year ended December 31, 2025 which included a $256,000 increase in expense related to foreclosed properties held in other real estate owned and a $119,000 increase in marketing expense due to contracting with an outside marketing firm and expanding our reach through additional advertising channels.

Income Tax Expense.

Income tax expense increased by $998,000 to $522,000 for the year ended December 31, 2025 from a tax benefit of $476,000 for the year ended December 31, 2024 due primarily to the increase in the taxable income.

The effective tax rate was 15.5% and 26.7% for the years ended December 31, 2025 and 2024, respectively.

The increase in the effective tax rate was primarily due to taxable income increasing at a faster rate than nontaxable income.

The decrease in the effective tax rate was due to the non-recurring loan sale and related loss for the year ended December 31, 2024, which was taxed at the marginal rate.

Management of Market Risk

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Therefore, a principal part of our operations is to manage interest rate risk and limit the exposure of our financial condition and results of operations to changes in market interest rates.

Our Risk Management and Interest Rate Risk Management Officer is responsible for evaluating the interest rate risk inherent in our assets and liabilities, for determining the level of risk that is appropriate, given our business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the policy and guidelines approved by our board of directors.

Our Asset/Liability Committee is responsible for evaluating the interest rate risk inherent in our assets and liabilities, for determining the level of risk that is appropriate, given our business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the policy and guidelines approved by our board of directors.

We currently utilize a third-party modeling program, prepared on a quarterly basis, to evaluate our sensitivity to changing interest rates, given our business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the guidelines approved by the board of directors.

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● managing our investment securities portfolio so as to reduce the average maturity and effective life of the portfolio;

● continuing to diversify our investment securities portfolio by continuing to add collateralized mortgage obligations (CMOs) and subordinated debt;

● diversifying our securities portfolio by continuing to add collateralized mortgage obligations (CMOs) and subordinated debt;

● managing our borrowings from the Federal Home Loan Bank of Dallas;

● managing our loan services by adding wholesale lending products to continue to offer these services while reducing interest rate risk in the loan portfolio;

● continuing to diversify our loan portfolio by adding more commercial-related loans, which typically have shorter maturities, adjustable rates, and fee income;

● continuing to diversify our loan portfolio by adding more commercial loans, which typically have shorter maturities, adjustable rates, and fee income;

● Derivatives.

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We estimate what our net interest income would be for a 12-month period.

We then calculate what the net interest income would be for the same period under the assumptions that the United States Treasury yield curve increases or decreases instantaneously by 200 and 400 basis point increments, with changes in interest rates representing immediate and permanent, parallel shifts in the yield curve.

We then calculate what the net interest income would be for the same period under the assumptions that the United States Treasury yield curve increases or decreases instantaneously by various rate change scenarios ranging from 100 to 400 basis point increments, with changes in interest rates representing immediate and permanent, parallel shifts in the yield curve.

A basis point equals one-hundredth of one percent, and 100 basis points equals one percent.

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This model uses a discounted cash flow analysis and an option-based pricing approach to measure the interest rate sensitivity of net portfolio value.

The model estimates the economic value of each type of asset, liability and off-balance sheet contract under the assumptions that the United States Treasury yield curve increases or decreases instantaneously by 200 and 400 basis point increments, with changes in interest rates representing immediate and permanent, parallel shifts in the yield curve.

The model estimates the economic value of each type of asset, liability and off-balance

sheet contract under the assumptions that the United States Treasury yield curve increases or decreases instantaneously by rate change scenarios ranging from 100 to 400 basis point increments, with changes in interest rates representing immediate and permanent, parallel shifts in the yield curve.

The tables below set forth the calculation of the estimated changes in our EVE that would result from the designated immediate changes in the United States Treasury yield curve.

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(4) EVE Ratio represents EVE divided by the present value of assets.

The table above indicates that at December 31, 2024, in the event of an instantaneous parallel 200 basis point increase in interest rates, we would experience a 0.78% increase in EVE, and in the event of an instantaneous 200 basis point decrease in interest rates, we would experience a 8.65% decrease in EVE.

The table above indicates that at December 31, 2025, in the event of an instantaneous parallel 200 basis point increase in interest rates, we would experience a 0.98% decrease in EVE, and in the event of an instantaneous 200 basis point decrease in interest rates, we would experience a 7.03% decrease in EVE.

Certain shortcomings are inherent in the methodologies used in the above interest rate risk measurements.

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Accordingly, although the tables provide an indication of our interest rate risk exposure at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates, and actual results may differ.

Interest rate risk calculations also may not reflect the fair values of financial instruments.

For example, increases in market interest rates can decrease the fair values of our loans, mortgage servicing rights, deposits and borrowings.

Liquidity and Capital Resources

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Our primary sources of funds are deposits, principal and interest payments on loans and securities, and proceeds from maturities of securities and loans.

We are also able to borrow from the Federal Home

Loan Bank of Dallas.

We are also able to borrow from the Federal Home Loan Bank of Dallas.

At December 31, 2025, we had outstanding advances of $45.7 million from the Federal Home Loan Bank of Dallas.

At December 31, 2025, we had unused borrowing capacity of $100.3 million with the Federal Home Loan Bank of Dallas.

In addition, at December 31, 2024, we had three unused lines of credit which included an unsecured $10.0 million and a secured $3.0 million line of credit with Texas Independent Bankers Bank and an unsecured $5.0 million line of credit with First Horizon Bank.

In addition, at December 31, 2025, we had two unused lines of credit for a total of $8.0 million, which included an unsecured $3.0 million line of credit with Texas Independent Bankers Bank and an unsecured $5.0 million line of credit with First Horizon Bank.

At December 31, 2025, there was no outstanding balance with any of these facilities.

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Unrealized losses on the HTM securities were $1.5 million, or 8.2% of the $18.3 million HTM portfolio and 2.6% of capital.

The total gross unrealized losses are $9.0 million, or 8.7% of the $103.7 million securities portfolio and are 18.8% of capital.

The total gross unrealized losses are $5.4 million, or 6.6% of the $82.1 million securities portfolio and 9.5% of capital.

The securities portfolio includes $31.8 million, or 38.8%, that are agency issued and guaranteed by the U.S.

These losses are the result of market interest rate increases and we continue to monitor the portfolio for credit and other risks.

The net unrealized loss on AFS securities and derivative combined, and the corresponding other comprehensive loss, net of tax, was $4.8 million, or 9.9% of capital.

The net unrealized loss on AFS securities, and the corresponding other comprehensive loss, net of tax, was $3.1 million, or 5.8% of capital.

Over the next 24 months from December 31, 2025, we anticipate $38.9 million in incoming cash flow from the securities portfolio with $20.7 million in 2026 and 18.2 million in 2027.

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During 2023, the Bank entered into interest rate swap agreements with a total notional amount of $25 million to hedge the risk of changes in the fair value of fixed rate AFS securities for changes in the SOFR benchmark rate.

December 31, 2024, the derivatives were highly effective and offset the unrealized loss on AFS securities by $329,000 bringing the accumulated other comprehensive loss from $5.1 million to $4.8 million.

In the first quarter of 2025, the Bank terminated these swap agreements at a gain of $463,000, which will be recognized in income over the remaining life of the underlying securities.

Our asset quality remains strong.

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The Company continues to monitor rates and loan demand weekly and align pricing accordingly.

Housing supply and demand are monitored for indicators of a significant change in the local housing markets.

The Bank has raised in-house mortgage rates while continuing to offer secondary market options to moderate loan funding and we have seen a decrease in mortgage demand due to higher market interest rates.

We are monitoring housing supply and demand, primarily in our Mineola and Lindale markets where home sales and new home construction have been active, for indicators of a significant changes in the local housing markets.

The decrease in mortgage demand has been offset by increases in commercial real estate and construction and land loan demand.

We are not currently utilizing internet deposit listing service CDs, but we did attain an additional $10 million in brokered CDs in 2024 to help maintain liquidity while prepaying $10 million in FHLB borrowings.

Housing supply and

demand are monitored for indicators of a significant change in the local housing markets.

The Bank adjusts in-house mortgage rates based on market pricing while continuing to offer secondary market options to moderate loan funding and we have seen a moderate increase in mortgage demand due to relatively lower market interest rates.

We are monitoring housing supply and demand, primarily in our Mineola, Lindale and Tyler markets where home sales and new home construction have been active, for indicators of a significant changes in the local housing markets.

Construction and residential real estate loan balances have declined, but the overall loan growth has been driven by increases in commercial real estate, farmland, commercial and municipal loans.

At December 31, 2025 we have $2.7 million in internet deposit listing service CDs, and $18.0 million in callable brokered CDs, and have paid down $4.2 million in FHLB borrowings.

The following are the various liquidity sources we had available at December 31, 2025 that we could use as needed:

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Management expects that a substantial portion of these time deposits will be retained.

However, if a substantial portion of these time deposits is not retained, we may utilize advances from the Federal Home Loan Bank of Dallas or raise interest rates on deposits to attract new accounts, which may result in higher levels of interest expense.

However, if a substantial portion of these time deposits is not retained, we may utilize advances from the Federal Home Loan Bank of Dallas or other wholesale funding sources, or raise interest rates on deposits to attract new accounts, which may result in higher levels of interest expense.

Contractual Obligations.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis