MetroCity Bankshares, Inc.: Form 10-Q for the period ended Mar 31, 2026

The purpose of this discussion and analysis is to focus on significant changes in the financial condition of MetroCity Bancshares, Inc. and our wholly owned subsidiary, Metro City Bank, from December 31, 2025 through March 31, 2026 and on our results of operations for the three months ended March 31, 2026 and 2025. This discussion and analysis should be read in conjunction with our audited consolidated financial statements and notes thereto for the year ended December 31, 2025 included in our Annual Report on Form 10-K, and information presented elsewhere in this Quarterly Report on Form 10-Q, particularly the unaudited consolidated financial statements and related notes appearing in Item 1.

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (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.

A number of important factors could cause our actual results to differ materially from those indicated in these forward-looking statements, including those factors discussed elsewhere in this quarterly report and the following:

• general economic and business conditions in our local markets, including conditions affecting employment levels, interest rates, inflation, tariffs or trade wars (including reduced consumer spending, supply chain issues, and adverse impacts to credit quality), a sustained increase in commodity prices, slowdowns in economic growth, the threat of recession, volatile equity capital markets, property and casualty insurance costs, collateral values, customer income, creditworthiness and confidence, spending and savings that may affect customer bankruptcies, defaults, charge-offs and deposit activity; and the impact of the foregoing on customer and client behavior (including the velocity and levels of deposit withdrawals and loan repayment);
• changes in the interest rate environment (including changes to the federal funds rate and the impact on the level and composition of deposits (as well as the cost of, and competition for, deposits), loan demand, liquidity and the values of loan collateral, securities and market fluctuations, and interest rate sensitive assets and liabilities), and competition in our markets may result in increased funding costs or reduced earning assets yields, thus reducing our margins and net interest income;
• uncertainties surrounding geopolitical events, trade policy, taxation policy, and monetary policy which continue to impact the outlook for future economic growth, including U.S. imposition of tariffs and consideration of responsive actions by these nations or the expansion of import fees and tariffs among a larger group of nations, which is bringing greater ambiguity to the outlook for future economic growth;
• adverse developments in the banking industry and the impact of such developments on customer confidence, liquidity and regulatory responses to these developments (including increases in the cost of our deposit insurance assessments and increased regulatory scrutiny), our ability to effectively manage our liquidity risk and any growth plans and the availability of capital and funding;
• our ability to comply with applicable capital and liquidity requirements, including our ability to generate liquidity internally or raise capital on favorable terms, including continued access to the debt and equity capital markets;
• the risk that a future economic downturn and contraction could have a material adverse effect on our capital, financial condition, credit quality, results of operations and future growth, including the risk that the strength of the current economic environment could be weakened by the continued impact of prolonged elevated interest rates and inflation;
• factors that can impact the performance of our loan portfolio, including real estate values and liquidity in our primary market areas, the financial health of our borrowers and the success of various projects that we finance;
• concentration of our loan portfolio in real estate loans;
• changes in the prices, values and sales volumes of commercial and residential real estate, especially as they relate to the value of collateral supporting the Company’s loans;
• weakness in the real estate market, including the secondary residential mortgage market, which can affect, among other things, the value of collateral securing mortgage loans, mortgage loan originations and delinquencies, profits on sales of mortgage loans, and the value of mortgage servicing rights;
• credit and lending risks associated with our construction and development, commercial real estate, commercial and industrial, residential real estate and SBA loan portfolios;
• negative impacts related to our mortgage banking services, including declines in our mortgage originations or profitability due to prolonged elevated interest rates and increased competition and regulation, the Bank’s or third party’s failure to satisfy mortgage servicing obligations, loan modifications, the effects of judicial or regulatory requirements or guidance, and the possibility of the Bank being required to repurchase mortgage loans or indemnify buyers;
• the impact of prolonged elevated interest rates on our financial projections, models and guidance;
• our ability to attract sufficient loans that meet prudent credit standards;
• our ability to attract and maintain business banking relationships with well-qualified businesses, real estate developers and investors with proven track records in our market areas;
• our ability to successfully manage our credit risk and the sufficiency of our allowance for credit losses (“ACL”);
• the adequacy of our reserves (including ACL) and the appropriateness of our methodology for calculating such reserves;
• our ability to successfully execute our business strategy to achieve profitable growth;
• the concentration of our business within our geographic areas of operation and to the general Asian-American population within our primary market areas;
• our ability to manage our growth;
• the risks related to the pending First IC Corporation (“First IC”) merger including, without limitation: (i) the diversion of management’s time on issues related to the merger; (ii) unexpected transaction costs, including the costs of integrating operations; (iii) the risks that the businesses will not be integrated successfully or that such integration may be more difficult, time-consuming or costly than expected; (iv) the potential failure to fully or timely realize expected revenues and revenue synergies, (v) the risk of deposit and customer attrition and changes

in deposit mix; (vi) unexpected operating and other costs, which may differ or change from expectations; (vii) the risks of customer and employee loss and business disruptions, including, without limitation, as the result of difficulties in maintaining relationships with employees; and (viii) increased competitive pressures and solicitations of customers by competitors, and similar risks associated with any future acquisitions or business combinations;

• potential delays or other problems in implementing and executing our growth, expansion and acquisition or divestment strategies, including delays in obtaining regulatory or other necessary approvals or the failure to realize any anticipated benefits or synergies from any acquisitions or growth strategies;
• our ability to increase our operating efficiency;
• significant turbulence or a disruption in the capital or financial markets and the effect of a fall in stock market prices on our investment securities;
• risks that our cost of funding could increase, in the event we are unable to continue to attract stable, low-cost deposits and reduce our cost of deposits;
• inability of our risk management framework (including internal controls) to effectively mitigate credit risk, interest rate risk, liquidity risk, price risk, compliance risk, operational risk (including by virtue of our relationships with third-party business partners, as well as our relationships with third-party vendors and other service providers), strategic risk, reputational risk and other risks inherent to the business of banking;
• our ability to maintain expenses in line with current projections;
• the makeup of our asset mix and investments;
• external economic, political and/or market factors, such as changes in monetary and fiscal policies and laws, including those that impact the value of the U.S. Dollar in relation to the currencies of other advanced and emerging market countries and the money supply, and also including the interest rate policies of the Federal Reserve, inflation or deflation, changes in the demand for loans, and fluctuations in consumer spending, borrowing and savings habits, which may have an adverse impact on our financial condition;
• the institution and outcome of litigation and other legal proceedings against us or to which we may become subject to and the potential effect on our reputation;
• negative publicity and the impact on our reputation; including the speed and scale at which information can spread through social media or digital channels, which could amplify adverse market or customer reactions;
• the impact of recent and future legislative and regulatory changes and changes to supervisory, examination and enforcement priorities;
• the potential implementation of a regulatory reform agenda under the current presidential administration that is significantly different than that of the prior administration, impacting rulemaking, supervision, examination and enforcement priorities of the federal banking agencies;
• examinations by our regulatory authorities;
• continued or increasing competition from other financial institutions, credit unions, and non-bank financial services companies (including fintech companies), many of which are subject to different regulations than we are;
• challenges arising from unsuccessful attempts to expand into new geographic markets, products, or services;
• restraints on the ability of the Bank to pay dividends to us, which could limit our liquidity;
• 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;
• inaccuracies in our assumptions about future events, which could result in material differences between our financial projections and actual financial performance;
• changes in our management personnel or our inability to retain, motivate and hire qualified management personnel;
• the dependence of our operating model on our ability to attract and retain experienced and talented bankers in each of our markets, which may be impacted as a result of labor shortages;
• our ability to identify and address cyber-security risks, fraud and systems errors, including the impact on our reputation and the costs and effects required to address such risks, fraud and systems errors;
• disruptions, security breaches, or other adverse events, failures or interruptions in, or attacks on, our information technology systems, which may be exacerbated by the continued development and implementation of generative artificial intelligence, including risks arising from reliance on third-party AI tools, model limitations, data integrity issues or regulatory uncertainty, and the cost of defending against them and any reputational or other financial risks following such a cybersecurity incident;
• our business relationships with, and reliance upon, third parties that have strategic partnerships with us or that provide key components of our business infrastructure, including the costs of services and products provided to us by third parties, and disruptions in service, security breaches, financial difficulties with or other adverse events affecting a third-party vendor or business relationship;
• an inability to keep pace with the rate of technological advances due to a lack of resources to invest in new technologies;
• fraudulent and negligent acts by our clients, employees or vendors and our ability to identify and address such acts;
• risks related to potential acquisitions;
• the impact of any claims or legal actions to which we may be subject, including any effect on our reputation;
• compliance with governmental and regulatory requirements, including the Dodd-Frank Act and others relating to banking, consumer protection, securities and tax matters, and our ability to maintain licenses required in connection with commercial mortgage origination, sale and servicing operations;
• changes in the scope and cost of Federal Deposit Insurance Corporation (“FDIC”) insurance and other coverage;
• changes in our accounting standards;
• changes in federal tax law or policy;
• the effects of war or other conflicts, regime change, civil unrest, acts of terrorism, acts of God, natural disasters, health emergencies, epidemics or pandemics, climate changes, or other catastrophic events that may affect general economic conditions or cause other disruptions and/or increase costs, including, but not limited to, property and casualty and other insurance cost;
• a deterioration of the credit rating for U.S. long-term sovereign debt, actions that the U.S. government may take to avoid exceeding the debt ceiling, and uncertainties surrounding the debt ceiling and the federal budget;
• action or inaction by the federal government, including as a result of any prolonged government shutdown (including a partial shutdown) or government intervention in the U.S. financial system; and
• other risks and factors identified in the Company’s 2025 Form 10-K, including those identified under the heading “Risk Factors”, and detailed from time to time in our other filings with the U.S. Securities and Exchange Commission.

The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this Quarterly Report on Form 10-Q. Because of these risks and other uncertainties, our actual future results, performance or achievement, or industry results, may be materially different from the results indicated by the forward looking statements in this Quarterly Report on Form 10-Q. In addition, our past results of operations are not necessarily indicative of our future results. You are cautioned not to place undue reliance on these forward looking statements, which represent our beliefs, assumptions and estimates only as of the dates on which they 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 revise any forward-looking statement, whether as a result of new information, future events, changes in assumptions or otherwise, except as required by law.

Critical Accounting Policies and Estimates

Our accounting and reporting estimates conform with U.S. GAAP and general practices within the financial services industry. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. We consider accounting estimates that can (1) be replaced by other reasonable estimates and/or (2) changes to an estimate from period to period that have a material impact on the presentation of our financial condition, changes in financial condition or results of operations as well as (3) those estimates that require significant and complex assumptions about matters that are highly uncertain to be critical accounting estimates. We consider our critical accounting policies to include the allowance for credit losses, servicing assets, fair value of financial instruments and income taxes.

Critical accounting estimates include a high degree of uncertainty in the underlying assumptions. Management bases its estimates on historical experience, current information and other factors deemed relevant. The development, selection and disclosure of our critical accounting estimates are reviewed with the Audit Committee of the Company’s Board of Directors. Actual results could differ from these estimates. For additional information regarding critical accounting policies, refer to “Part II - Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates” and Note 1 of our consolidated financial statements as of December 31, 2025 in the Company’s 2025 Form 10-K. There have been no significant changes in the Company’s application of critical accounting policies since December 31, 2025.

Reserve for Credit Losses

A consequence of lending activities is that we may incur credit losses. The amount of such losses will vary depending upon the risk characteristics of the loan lease portfolio as affected by economic conditions such as rising interest rates and the financial performance of borrowers.

The reserve for credit losses consists of the allowance for credit losses (“ACL”) and the allowance for unfunded commitments. The estimate of expected credit losses under the current expected credit loss (“CECL”) methodology is based on relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amounts. Historical loss experience is generally the starting point for estimating expected credit losses. We then consider whether the historical loss experience should be adjusted for loan-specific risk characteristics or current conditions at the reporting date that did not exist over the period from which historical experience was used. Finally, we consider forecasts about future economic conditions that are reasonable and supportable. The allowance for unfunded commitments represents the expected credit losses on off-balance sheet commitments such as unfunded commitments to extend credit. This allowance is estimated by loan segment at each balance sheet date under the CECL model using the same methodologies as portfolio loans, taking into consideration the likelihood that funding will occur.

Management’s evaluation of the appropriateness of the reserve for credit losses is often the most critical of accounting estimates for a financial institution. Our determination of the amount of the reserve for credit losses is a critical accounting estimate as it requires significant reliance on the credit risk rating we assign to individual borrowers, the use of estimates and significant judgment as to the amount and timing of expected future cash flows, reliance on historical loss rates on homogenous portfolios, consideration of our quantitative and qualitative evaluation of economic factors, and the reliance on our reasonable and supportable forecasts. The reserve for credit losses attributable to each portfolio segment also includes an amount for inherent risks not reflected in the historical analyses. Relevant factors include, but are not limited to, concentrations of credit risk (geographic, large borrower, and industry), changes in underwriting standards, changes in collateral values, experience and depth of lending staff, trends in delinquencies, and the volume and terms of loans.

See Note 1 and Note 4 of our consolidated financial statements as of December 31, 2025 in the Company’s 2025 Form 10-K and Note 1 and Note 4 of our consolidated financial statements as of March 31, 2026, included elsewhere in this Form 10-Q, for additional information on the reserve and allowance for credit losses.

Overview

MetroCity Bankshares, Inc. is a bank holding company headquartered in the Atlanta metropolitan area. We operate through our wholly-owned banking subsidiary, Metro City Bank, a Georgia state-chartered commercial bank that was founded in 2006. We currently operate 30 full-service branch locations in multi-ethnic communities in Alabama, Florida, Georgia, New York, New Jersey, Texas and Virginia. As of March 31, 2026, we had total assets of $4.69 billion, total loans of $3.97 billion, total deposits of $3.63 billion and total shareholders’ equity of $554.2 million.

We are a full-service commercial bank focused on delivering personalized service in an efficient and reliable manner to the small to medium-sized businesses and individuals in our markets, predominantly Asian-American communities in growing metropolitan markets in the Eastern U.S. and Texas. We offer a suite of loan and deposit products tailored to meet the needs of the businesses and individuals already established in our communities, as well as first generation immigrants who desire to establish and grow their own businesses, purchase a home, or educate their children in the United States. Through our diverse and experienced management team and talented employees, we are able to speak the language of our customers and provide them with services and products in a culturally competent manner.

Selected Financial Data

The following table sets forth unaudited selected financial data for the most recent five quarters. This data should be read in conjunction with the unaudited consolidated financial statements and accompanying notes included in Item 1 and the information contained in this Item 2.

(Dollars in thousands, except per share data)

(1) Non-GAAP measure, see “Explanation of Certain Unaudited Non-GAAP Financial Measures” for more information and for a reconciliation to GAAP.

(2) Represents noninterest expense divided by total revenue (net interest income and total noninterest income).

Non-GAAP Financial Measures

This Form 10-Q includes financial information determined by methods other than in accordance with generally accepted accounting principles (“GAAP”). This financial information includes “return on average equity”, which excludes average accumulated other comprehensive income and merger-related expenses and tangible book value per shares , which excludes goodwill and core deposit intangible and “efficiency ratio - operation which excludes merger expenses from noninterest expense. These measures should be viewed in addition to, and not as an alternative to or substitute for, measures determined in accordance with GAAP, and are not necessarily comparable to non-GAAP measures that may be presented by other companies.

The following table reconciles the non-GAAP financial measurement for return on average equity, tangible book value per share and efficiency ratio – operating to their respective most directly comparable GAAP measurements for the three months ended March 31, 2026 and 2025:

(Dollars in thousands)

Results of Operations

We recorded net income of $22.3 million for the three months ended March 31, 2026 compared to $16.3 million for the three months ended March 31, 2025, an increase of $6.0 million, or 36.9%. This increase was due to an increase in net interest income of $13.9 million, an increase in noninterest income of $901,000, and a decrease in provision for credit losses of $948,000, offset by increases in noninterest expense of $7.6 million and income tax expense of $2.1 million.

Basic and diluted earnings per common share for the three months ended March 31, 2026 was $0.78 and $0.77, respectively, compared to $0.64 and $0.63 for the basic and diluted earnings per common share for the three months ended March 31, 2025.

Interest Income

Interest income totaled $71.0 million for the three months ended March 31, 2026, an increase of $18.5 million, or 35.2%, from the three months ended March 31, 2025, primarily due to an increase in average balance of gross loans of $856.2 million, and an increase in average balance of investments of $188.0 million, and a 34 basis points increase in the loan yield, along with $892,000 in accretion income on purchase credit deteriorated loans from the First IC merger that occurred in fourth quarter of 2025. The increase in average loans is due to an increase of $510.4 million in average commercial real estate loans, and an increase of $311.7 million in average residential real estate loans.

Interest Expense

Interest expense for the three months ended March 31, 2026 increased $4.5 million, or 20.7%, to $26.5 million compared to interest expense of $22.0 million for the three months ended March 31, 2025, primarily due to a $695.3 million increase in average deposit balances, coupled with a $46.3 million increase in the average borrowings balance offset by a 23 basis points decrease in interest bearing liabilities costs. Average time deposits and money market deposits increased by $410.9 million and $165.4 million, respectively, and average interest-bearing demand deposits and savings accounts increased by $118.9 million primarily from the First IC merger in fourth quarter of 2025.

The Company currently has effective interest rate derivative agreements totaling $625.0 million that are designated as cash flow hedges of our deposit accounts indexed to the Federal Funds Effective rate. The weighted average pay rate for these interest rate derivatives is 3.16%. During the three months ended March 31, 2026, we recorded a credit to interest expense of $2.3 million, respectively, from the benefit received on these interest rate derivatives compared to a credit to interest expense of $4.1 million recorded during the three month periods ended March 31, 2025, respectively. Based on the Federal Funds Effective rate as of March 31, 2026 (3.64%), the Company would estimate to record a credit to interest expense of approximately $9.3 million for the remainder of 2026 from the benefit received on these interest rate derivatives, however actual results may vary based on changes in market and hedge performance. See Note 9 of our consolidated financial statements as of March 31, 2026 included elsewhere in this Form 10-Q, for additional information on these interest rate derivatives.

Net Interest Margin

The net interest margin for the three months ended March 31, 2026 increased by 41 basis points to 4.08% from 3.67% for the three months ended March 31, 2025, primarily due to a 23 basis points decrease in the cost of average interest-bearing liabilities of $3.30 billion, and a 20 basis points increase in the yield on average interest-earning assets of $4.42 billion. Average earning assets for the three months ended March 31, 2026 increased by $1.04 billion from the three months ended March 31, 2025, due to a $856.2 million increase in average loans and a $188.0 million increase in average total investments. Average interest-bearing liabilities for the three months ended March 31, 2026 increased by $741.6 million from the three months ended March 31, 2025, driven by increases in average interest-bearing deposits of $695.3 million and average borrowings of $46.3 million.

Net interest margin and net interest income are influenced by internal and external factors. Internal factors include balance sheet changes on both volume and mix and pricing decisions, and external factors include changes in market interest rates, competition and the shape of the interest rate yield curve. The increase in our net interest margin is primarily driven by a reduction of funding cost, reflecting improved deposit pricing and the benefit of interest rate derivative hedges, partially offset by modest compression in asset yields.

Average Balances, Interest and Yields

The following tables present, for the three months ended March 31, 2026 and 2025, 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.

(Dollars in thousands)

(1) Includes income and average balances for term federal funds, interest-earning cash accounts, and other miscellaneous earning assets.

(2) Average loan balances include nonaccrual loans and loans held for sale.

Rate/Volume Analysis

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 table sets forth the effects of changing rates and volumes on our net interest income during the period shown. Information is provided with respect to (i) effects on interest income attributable to changes in volume (change in volume multiplied by prior rate) and (ii) effects on interest income attributable to changes in rate (changes in rate multiplied by prior volume). Change applicable to both volumes and rate have been allocated to volume.

(Dollars in thousands)

(1) Includes income and average balances for term federal funds, interest-earning cash accounts, and other miscellaneous earning assets.

(2) Average loan balances include nonaccrual loans and loans held for sale.

Provision for Credit Losses

The provision for credit losses reflects our internal calculation and judgment of the appropriate amount of the allowance for credit losses. We maintain the allowance for credit losses at levels we believe are appropriate to cover our estimate of expected credit losses over the life of loans in the portfolio as of the end of the reporting period. The allowance for credit losses is determined through detailed quarterly analyses of our loan portfolio. The allowance for credit losses is based on our loss experience, changes in the economic environment, reasonable and supportable forecasts, as well as an ongoing assessment of credit quality and environmental factors not reflective in historical loss rates. Additional qualitative factors that are considered in determining the amount of the allowance for credit losses are concentrations of credit risk (geographic, large borrower, and industry), changes in underwriting standards, changes in collateral value, experience and depth of lending staff, trends in delinquencies, and the volume and terms of loans.

We recorded a recovery for credit losses of $813,000 during the three months ended March 31, 2026 compared to a provision for credit losses of $135,000 recorded during the three months ended March 31, 2025. The recovery for credit loss recorded during the three months ended March 31, 2026 was primarily driven by lower loan balances and reduced reserves on individually analyzed loans. Our ACL as a percentage of gross loans for the periods ended March 31, 2026, December 31, 2025 and March 31, 2025 was 0.66%, 0.68% and 0.59%, respectively. Our ACL as a percentage of gross loans is relatively lower than our peers due to our high percentage of residential mortgage loans, which tend to have lower allowance for credit loss ratios compared to other commercial or consumer loans due to their low LTVs.

See the section captioned “Allowance for Credit Losses” elsewhere in this document for further analysis of our provision for credit losses.

Noninterest Income

Noninterest income for the three months ended March 31, 2026 was $6.4 million, an increase of $901,000, or 16.5%, compared to $5.5 million for the three months ended March 31, 2025.

The following table sets forth the major components of our noninterest income for the three months ended March 31, 2026 and 2025

(Dollars in thousands)

Service charges on deposit accounts increased $348,000, or 69.6%, to $848,000 for the three months ended March 31, 2026 compared to $500,000 for the three months ended March 31, 2025. These increases were primarily attributable to higher service charges on business checking accounts, analysis fees, overdraft fees and charge back fees as a result of the First IC acquisition that occurred in fourth quarter of 2025.

Other service charges, commissions and fees decreased $15,000, or 0.9%, to $1.6 million for the three months ended March 31, 2026 compared to $1.6 million for the three months ended March 31, 2025.

Gain on sale of residential mortgage loans totaled $0 for the three months ended March 31, 2026. Gain on sale of residential mortgage loans totaled $399,000 for the three months ended March 31, 2025, as we sold $40.1 million in residential mortgage loans during these periods with an average premium of 1.06%.

Gain on sale of SBA loans totaled $1.0 million for the three months ended March 31, 2026 compared to $658,000 for the three months ended March 31, 2025. We sold $19.7 million in SBA loans during the three ended March 31, 2026 with average premiums of 7.68%. We sold $16.6 million in SBA loans during the three months ended March 31, 2025 with average premiums of 5.97%.

Mortgage loan servicing income, net of amortization, decreased by $312,000, or 50.5%, to $306,000 during the three months ended March 31, 2026 compared to $618,000 for the three months ended March 31, 2025. The changes in mortgage loan servicing income were primarily due to decreases in servicing fees, increases in mortgage servicing amortization, and decreases in capitalized mortgage servicing assets. Included in mortgage loan servicing income for the three months ended March 31, 2026 was $482,000 in mortgage servicing fees compared to $566,000 for the three months ended March 31, 2025 and capitalized mortgage servicing assets of $126,000 for the three months ended March 31, 2026 compared to $310,000 for the three months ended March 31, 2025. These amounts were offset by mortgage loan servicing asset amortization of $176,000 for the three months ended March 31, 2026 compared to $118,000 during the three months ended March 31, 2025. Our total residential mortgage loan servicing portfolio was $496.6 million at March 31, 2026 compared to $537.6 million at March 31, 2025.

SBA servicing income increased by $992,000, or 108.7%, to $1.9 million for the three months ended March 31, 2026 compared to $913,000 for the three months ended March 31, 2025. Our total SBA and USDA loan servicing portfolio was $699.0 million as of March 31, 2026 compared to $474.1 million as of March 31, 2025. Included in SBA servicing income for the three months ended March 31, 2026 was $1.2 million in SBA servicing fees compared to $1.0 million for the three months ended March 31, 2025. Our SBA servicing rights are carried at fair value and the inputs used to calculate fair value change from period to period. During the three months ended March 31, 2026, we recorded a $666,000 fair value increase to our SBA servicing rights compared to a $104,000 fair value charge to our SBA servicing rights during the three months ended March 31, 2025.

Other noninterest income decreased by $100,000, or 13.0%, to $672,000 for the three months ended March 31, 2026 compared to $772,000 for the three months ended March 31, 2025. The largest component of other noninterest income is the income on bank owned life insurance which totaled $638,000 for the three months ended March 31, 2026 compared to $615,000 for the three months ended March 31, 2025. Also included in other noninterest income are fair value gains/losses on our equity securities, which totaled $82,000 (loss) for the three months ended March 31, 2026, respectively, compared to $140,000 (gain) for the three months ended March 31, 2025.

Noninterest Expense

Noninterest expense for the three months ended March 31, 2026 was $21.4 million compared to $13.8 million for the three months ended March 31, 2025, an increase of $7.6 million, or 55.4%.

The following table sets forth the major components of our noninterest expense for the three months ended March 31, 2026 and 2025:

(Dollars in thousands)

Salaries and employee benefits expense for the three months ended March 31, 2026 was $11.5 million compared to $8.5 million for the three months ended March 31, 2025, an increase of $3.0 million, or 35.4%. These increases were primarily driven by higher personnel, occupancy, and data processing costs, as well as $1.7 million of merger related expenses. Excluding merger related expenses, noninterest expense reflects the full quarter impact of the acquisition and is expected to stabilize as integration activities progress and operational efficiencies are realized.

Occupancy and equipment expense for the three months ended March 31, 2026 was $2.4 million, an increase of $1.0 million, or 71.8%, compared to the three months ended March 31, 2025. These increases were primarily due to higher property taxes, utilities, maintenance expense, rent expense, and depreciation expense from the acquisition of First IC that occurred in fourth quarter of 2025.

Data processing expense for the three months ended March 31, 2026 was $682,000 compared to $345,000 for the three months ended March 31, 2025, an increase of $337,000, or 97.7%. These increases were primarily due to the continued growth in our loans and deposits from the acquisition of First IC that occurred in fourth quarter of 2025, as well as enhancements to our existing systems.

Advertising expenses for the three months ended March 31, 2026 remained relatively flat compared to the same periods in 2025.

Merger-related expenses for the three months ended March 31, 2026 was $1.7 million compared to $262,000 for the three months ended March 31, 2025. The increase is related to the acquisition of First IC being completed in fourth quarter of 2025 with legal fees, integration fees and conversion expenses in the first quarter of 2026.

Other expenses for the three months ended March 31, 2026 were $4.9 million compared to $3.1 million for the three months ended March 31, 2025, an increase of $1.8 million, or 58.0%. This increase was primarily due to core deposit amortization, additional banking costs from First IC merger quarter merger, FDIC insurance premiums, security expenses, loan-related expenses.

Income Tax Expense

Income tax expense for the three months ended March 31, 2026 and 2025 was $7.9 million and $5.8 million, respectively. The Company’s effective tax rates were 26.2% for the three months ended March 31, 2026 and 2025, respectively.

Financial Condition

Total assets decreased $80.0 million, or 1.7%, to $4.69 billion at March 31, 2026 as compared to $4.77 billion at December 31, 2025. The decrease in total assets was primarily attributable to decreases of $20.6 million in securities, $50.3 million in loans, $9.7 million in loans held for sale, and $4.1 million in Federal Home Loan Bank stock offset by an increase in cash and cash equivalents of $3.9 million.

Our investment securities portfolio made up 0.96% of our total assets at March 31, 2026 compared to 1.38% at December 31, 2025.

Loans

Gross loans held for investment decreased $50.3 million, or 1.2%, to $4.00 billion as of March 31, 2026 as compared to $4.05 billion as of December 31, 2025. Our loan decrease during the three months ended March 31, 2026 was comprised of an increase of $10.7 million, or 25.5%, in construction and development loans, an increase of $14.1 million, or 0.6%, in residential real estate loans, an increase of $16,000, or 2.6%, in consumer and other loans, offset by a decrease of $4.5 million, or 4.7%, in commercial and industrial loans, and a decrease of $68.0 million, or 4.4%, in commercial real estate loans. We had loans held for sale of $0 as of March 31, 2026 compared to $9.7 million in loans held for sale as of December 31, 2025.

The following table presents the ending balance of each major category in our loan portfolio held for investment at the dates indicated.

(Dollars in thousands)

SBA and USDA Loan Servicing

As of March 31, 2026 and December 31, 2025, we serviced $699.0 million and $685.5 million, respectively, in SBA and USDA loans for others. We carried a servicing asset of $11.3 million and $10.6 million at March 31, 2026 and December 31, 2025, respectively. See Note 5 of our consolidated financial statements as of March 31, 2026, included elsewhere in this Form 10-Q, for additional information on the activity for SBA and USDA loan servicing rights for the three months ended March 31, 2026 and 2025.

Residential Mortgage Loan Servicing

As of March 31, 2026, we serviced $496.5 million in residential mortgage loans for others compared to $537.6 million as of December 31, 2025. We carried a servicing asset, net of amortization, of $1.5 million and $1.7 million at March 31, 2026 and December 31, 2025. Amortization relating to the mortgage loan servicing asset was $176,000 for the three months ended March 31, 2026 compared to $118,000 for the three months ended March 31, 2025, respectively. During the three months ended March 31, 2026 and March 31, 2025, we recorded fair value impairment recoveries of $0 and $42,000, respectively, on our mortgage servicing asset. See Note 6 of our consolidated financial statements as of March 31, 2026, included elsewhere in this Form 10-Q, for additional information on the activity for mortgage loans servicing rights for the three months ended March 31, 2026 and 2025.

Asset Quality

Nonperforming Loans

Asset quality remained strong during the first quarter of 2026 as our nonperforming loans to total loans remained low at 0.42% as of March 31, 2026. Nonperforming loans were $16.8 million at March 31, 2026 compared to $25.2 million at December 31, 2025. The decrease from December 31, 2025 to March 31, 2026 was attributable to a $8.4 million decrease in nonaccrual loans. We did not recognize any interest income on nonaccrual loans during the three months ended March 31, 2026 and 2025.

The following table sets forth the allocation of our nonperforming assets among our different asset categories as of the dates indicated. Nonperforming loans include nonaccrual loans and loans past due 90 days or more and still accruing interest. Nonperforming assets consist of nonperforming loans plus foreclosed real estate. Nonaccrual loans at March 31, 2026 comprised of $8.8 million of commercial real estate loans, $1.2 million of commercial and industrial loans and $6.9 million of residential real estate loans. Nonaccrual loans at December 31, 2025 comprised of $14.8 million of commercial real estate loans, $1.3 million of commercial and industrial loans, and $9.1 million of residential real estate loans.

(Dollars in thousands)

Allowance for Credit Losses

The allowance for credit losses was $26.7 million at March 31, 2026 compared to $27.8 million at December 31, 2025, a decrease of $1.1 million. The decrease was primarily due to the decrease in reserves mainly due to decrease in loan balances and reserves on individually analyzed loans.

We maintain a reserve for credit losses that consists of two components, the allowance for credit losses and the allowance for unfunded commitments. The allowance for credit losses provides for the risk of credit losses expected in our loan portfolio and is based on loss estimates derived from a comprehensive quarterly evaluation. The evaluation reflects analyses of individual borrowers for impairment coupled with analysis of historical loss experience in various loan pools that have been grouped based on similar risk characteristics, supplemented as necessary by credit judgment that considers observable trends, conditions, reasonable and supportable forecasts, and other relevant environmental and economic factors. The level of the allowance for credit losses is adjusted by recording an expense or credit through the provision for credit losses. The level of the allowance for unfunded commitments is adjusted by recording an expense or credit in other noninterest expense. The allowance for unfunded commitments had a balance of $345,000 as of March 31, 2026 compared to $282,000 as of March 31, 2025.

Loans that do not share risk characteristics are evaluated on an individual basis. For collateral dependent loans where the Company has determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and the Company expects repayment of the loan to be provided substantially through the operation or sale of the collateral, the ACL is measured based on the difference between the fair value of the collateral and the amortized cost basis of the loan as of the measurement date. When repayment is expected to be from the operation of the collateral, expected credit losses are calculated as the amount by which the amortized cost basis of the loan exceeds the present value of expected cash flows from the operation of the collateral. When repayment is expected to be from the sale of the collateral, expected credit losses are calculated as the amount by which the amortized costs basis of the loan exceeds the fair value of the underlying collateral less estimated cost to sell. The ACL may be zero if the fair value of the collateral at the measurement date exceeds the amortized cost basis of the loan.

The impact of utilizing the CECL approach to calculate the allowance for credit losses will be significantly influenced by the composition, characteristics and quality of our loan portfolio, as well as the prevailing economic conditions and forecasts utilized. Material changes to these and other relevant factors may result in greater volatility to the provision for credit losses, and therefore, greater volatility to our reported earnings. See Note 1 and Note 4 of our consolidated financial statements as of March 31, 2026, included elsewhere in this Form 10-Q, and as of in the Company’s 2025 Form 10-K, for additional information on the on the allowance for credit losses and the allowance for unfunded commitments.

It is the policy of management to maintain the allowance for credit losses at a level adequate for risks inherent in the loan portfolio. The FDIC and GA DBF also review the allowance for credit losses as an integral part of their examination process. Based on information currently available, management believes that our allowance for credit losses is adequate. However, the loan portfolio can be adversely affected if economic conditions and the real estate market in our market areas were to weaken. The effect of such events, although uncertain at this time, could result in an increase in the level of nonperforming loans and increased credit losses, which could adversely affect our future growth and profitability. No assurance of the ultimate level of credit losses can be given with any certainty.

Analysis of the Allowance for Credit Losses. The following table provides an analysis of the allowance for credit losses, provision for credit losses and net charge-offs for the periods presented below:

(Dollars in thousands)

(1) Excludes loans held for sale.

Management believes the allowance for credit losses is adequate to provide for losses expected in the loan portfolio as of March 31, 2026.

Deposits

Deposits were $3.63 billion at March 31, 2026, a decrease of $19.3 million, compared to total deposits of $3.65 billion at December 31, 2025, and an increase of $889.6 million, or 32.5%, compared to total deposits of $2.74 billion at March 31, 2025. The decrease in total deposits at March 31, 2026 compared to December 31, 2025 was due to a $27.4 million decrease in interest-bearing demand deposits, a $66.1 million decrease in time deposits, offset by a $1.1 million increase in savings accounts, $54.7 million increase in money market accounts and a $18.4 million increase in noninterest-bearing demand deposits. Noninterest-bearing deposits were $799.2 million at March 31, 2026, compared to $780.8 million at December 31, 2025 and $540.0 million at March 31, 2025. Noninterest-bearing deposits constituted 22.0% of total deposits at March 31, 2026, compared to 21.4% at December 31, 2025 and 19.7% at March 31, 2025. Interest-bearing deposits were $2.83 billion at March 31, 2026, compared to $2.87 billion at December 31, 2025 and $2.20 billion at March 31, 2025. Interest-bearing deposits constituted 78.0% of total deposits at March 31, 2026, compared to 78.6% at December 31, 2025 and 80.3% at March 31, 2025.

As of March 31, 2026 and December 31, 2025, the Company had estimated uninsured deposits of $1.16 billion and $1.09 billion, respectively. These estimates were derived using the same methodologies and assumptions used for the Bank’s regulatory reporting. Uninsured deposits were 31.9% of total deposits at March 31, 2026, compared to 29.6% at December 31, 2025. As of March 31, 2026, we had $1.69 billion of available borrowing capacity at the Federal Home Loan Bank ($989.1 million), Federal Reserve Discount Window ($629.8 million) and various other financial institutions (fed fund lines totaling $67.5 million).

We had $785.0 million of brokered deposits, or 21.6% of total deposits, at March 31, 2026 compared to $747.8 million, or 20.5% of total deposits, at December 31, 2025. We use brokered deposits, subject to certain limitations and requirements, as a source of funding to support our asset growth and augment the deposits generated from our branch network, which are our principal source of funding. Our level of brokered deposits varies from time to time depending on competitive interest rate conditions and other factors and tends to increase as a percentage of total deposits when the brokered deposits are less costly than issuing internet certificates of deposit or borrowing from the Federal Home Loan Bank.

We use interest rate swap and cap agreements to hedge our deposit accounts that are indexed to the Federal Funds Effective Rate. These swap agreements are designated as cash flow hedges. As of March 31, 2026, the total amount of deposits tied to the Federal Funds Effective Rate was $854.9 million. See Note 9 of our consolidated financial statements as of March 31, 2026, included elsewhere in this Form 10-Q, for additional information.

The following tables summarize our average deposit balances and weighted average rates for the three months ended March 31, 2026 and 2025.

(Dollars in thousands)

The weighted average rates shown in the tables above are inclusive of the benefit received from the interest rate derivatives that hedge our deposit accounts tied to the Federal Funds Effective Rate. During the three months ended March 31, 2026, we recorded a credit to interest expense of $2.3 million from the benefit received on these interest rate derivatives compared to a credit to interest expense of $4.3 million recorded during the three months ended March 31, 2025. These benefits resulted in a 34 basis points reduction to the total deposits weighted average rate for the three months ended March 31, 2026, respectively, compared to a 79 basis points reduction for three months ended March 31, 2025, respectively.

Borrowed Funds

Other than deposits, we also utilized FHLB advances as a supplementary funding source to finance our operations. The advances from the FHLB are collateralized by residential real estate loans. At March 31, 2026 and December 31, 2025, we had available borrowing capacity from the FHLB of $1.41 billion and $1.09 billion, respectively. At March 31, 2026 and December 31, 2025, we had $425.0 million and $510.0 million, respectively, of outstanding advances from the FHLB.

In addition to our advances with the FHLB, we maintain federal funds agreements with our correspondent banks. Our available borrowings under these agreements was $67.5 million and $52.5 million at March 31, 2026 and December 31, 2025. We did not have any advances outstanding under these agreements as of March 31, 2026 and December 31, 2025. We also have access to the Federal Reserve’s discount window in the amount of $618.1 million and $600.4 million at March 31, 2026 and December 31, 2025, respectively. No discount window borrowings were outstanding as of March 31, 2026 and December 31, 2025. We also maintain relationships in the capital markets with brokers to issue certificates of deposit and money market accounts, if necessary.

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.

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/brokered deposits, and additional borrowings from correspondent banks, FHLB advances, and the Federal Reserve discount window.

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.

As part of our liquidity management strategy, we open federal funds lines with our correspondent banks. As of March 31, 2026 and December 31, 2025, we had $67.5 million and $52.5 million, respectively, of unsecured federal funds lines with no amounts advanced. In addition, the Company had Federal Reserve Discount Window funds available of approximately $618.1 million and $600.4 million at March 31, 2026 and December 31, 2025, respectively. The FRB discount window line is collateralized by a pool of construction and development, commercial real estate and commercial and industrial loans with carrying balances totaling $765.7 million as of March 31, 2026, as well as all of the Company’s municipal and mortgage-backed securities. There were no outstanding borrowings on this line as of March 31, 2026 and December 31, 2025.

At March 31, 2026 and December 31, 2025, we had $425.0 million and $510.0 million, respectively, of outstanding advances from the FHLB. Based on the values of loans pledged as collateral, we had $989.0 million and $577.9 million of additional borrowing availability with the FHLB as of March 31, 2026 and December 31, 2025, respectively. We also maintain relationships in the capital markets with brokers to issue certificates of deposit and money market accounts, if necessary.

Capital Requirements

The Company and the Bank are required under federal law to maintain certain minimum capital levels based on ratios of capital to total assets and capital to risk-weighted assets. The required capital ratios are minimums, and the federal banking agencies may determine that a banking organization, based on its size, complexity or risk profile, must maintain a higher level of capital in order to operate in a safe and sound manner. Risks such as concentration of credit risks and the risk arising from non-traditional activities, as well as the institution’s exposure to a decline in the economic value of its capital due to changes in interest rates, and an institution’s ability to manage those risks are important factors that are to be taken into account by the federal banking agencies in assessing an institution’s overall capital adequacy.

The table below summarizes the capital requirements applicable to the Company and the Bank in order to be considered “well-capitalized” from a regulatory perspective, as well as the Company’s and the Bank’s capital ratios as of March 31, 2026 and December 31, 2025. The Bank exceeded all regulatory capital requirements and was considered to be “well-capitalized” as of March 31, 2026 and December 31, 2025. As of December 31, 2025, the FDIC categorized the Bank as well-capitalized under the prompt corrective action framework. There have been no conditions or events since December 31, 2025 that management believes would change this classification. While the Company believes that it has sufficient capital to withstand an extended economic recession, its reported and regulatory capital ratios could be adversely impacted in future periods.

Dividends

On April 15, 2026, the Company declared a cash dividend of $0.29 per share, payable on May 8, 2026, to common shareholders of record as of April 29, 2026. Any future determination to pay dividends to holders of our common stock will depend on our results of operations, financial condition, capital requirements, banking regulations, contractual restrictions and any other factors that our board of directors may deem relevant.

Off-Balance Sheet Arrangements

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 our consolidated balance sheet. 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 amount does not necessarily represent future cash requirements. We evaluate each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if we deem collateral is necessary upon extension of credit, is based on management’s credit evaluation of the counterparty.

Standby letters of credit are conditional commitments issued by us to guarantee the performance of a customer to a third party. They are intended to be disbursed, subject to certain condition, upon request of the borrower.

See Note 10 of our consolidated financial statements as of March 31, 2026, included elsewhere in this Form 10-Q, for more information regarding our off-balance sheet arrangements as of March 31, 2026 and December 31, 2025.

Market Risk

Market risk represents the risk of loss due to changes in market values of assets and liabilities. We incur market risk in the normal course of business through exposures to market interest rates, equity prices, and credit spreads. We have identified interest rate risk as our primary source of market risk.

Interest Rate Risk

Interest rate risk is the risk to earnings and value arising from changes in market interest rates. Interest rate risk arises from timing differences in the repricings and maturities of interest-earning assets and interest-bearing liabilities (repricing risk), changes in the expected maturities of assets and liabilities arising from embedded options, such as borrowers’ ability to prepay home mortgage loans at any time and depositors’ ability to redeem certificates of deposit before maturity (option risk), changes in the shape of the yield curve where interest rates increase or decrease in a nonparallel fashion (yield curve risk), and changes in spread relationships between different yield curves, such as U.S. Treasuries and Federal funds effective (basis risk).

Our board of directors establishes broad policy limits with respect to interest rate risk. As part of this policy, the asset liability committee, or ALCO, establishes specific operating guidelines within the parameters of the board of directors’ policies. In general, the ALCO focuses on ensuring a stable and steadily increasing flow of net interest income through managing the size and mix of the balance sheet. The management of interest rate risk is an active process which encompasses monitoring loan and deposit flows complemented by investment and funding activities. Effective management of interest rate risk begins with understanding the dynamic characteristics of assets and liabilities and determining the appropriate interest rate risk posture given business forecasts, management objectives, market expectations, and policy constraints.

An asset sensitive position refers to a balance sheet position in which an increase in short-term interest rates is expected to generate higher net interest income, as rates earned on our interest-earning assets would reprice upward more quickly than rates paid on our interest-bearing liabilities, thus expanding our net interest margin. Conversely, a liability sensitive position refers to a balance sheet position in which an increase in short-term interest rates is expected to generate lower net interest income, as rates paid on our interest-bearing liabilities would reprice upward more quickly than rates earned on our interest-earning assets, thus compressing our net interest margin.

Interest rate risk measurement is calculated and reported to the ALCO at least quarterly. The information reported includes period-end results and identifies any policy limits exceeded, along with an assessment of the policy limit breach and the action plan and timeline for resolution, mitigation, or assumption of the risk.

Evaluation of Interest Rate Risk

We use income simulations, an analysis of core funding utilization, and economic value of equity (EVE) simulations as our primary tools in measuring and managing interest rate risk. These tools are utilized to quantify the potential earnings impact of changing interest rates over a two year simulation horizon (income simulations) as well as identify expected earnings trends given longer term rate cycles (long term simulations, core funding utilizations, and EVE simulation). A standard gap report and funding matrix will also be utilized to provide supporting detailed information on the expected timing of cashflow and repricing opportunities.

There are an infinite number of potential interest rate scenarios, each of which can be accompanied by differing economic/political/regulatory climates; can generate multiple differing behavior patterns by markets, borrowers, depositors, etc.; and can last for varying degrees of time. Therefore, by definition, interest rate risk sensitivity cannot be predicted with certainty. Accordingly, the Bank’s interest rate risk measurement philosophy focuses on maintaining an appropriate balance between theoretical and practical scenarios; especially given the primary objective of the Bank’s overall asset/liability management process is to facilitate meaningful strategy development and implementation.

Therefore, we model a set of interest rate scenarios capturing the financial effects of a range of plausible rate scenarios, the collective impact of which will enable the Bank to clearly understand the nature and extent of its sensitivity to interest rate changes. Doing so necessitates an assessment of rate changes over varying time horizons and of varying/sufficient degrees such that the impact of embedded options within the balance sheet are sufficiently examined.

We use a net interest income simulation model to measure and evaluate potential changes in our net interest income. We run three standard and plausible simulations comparing current or flat rates with a +/- 200 basis point ramp in rates over 12 and 24 months. These rate scenarios are considered appropriate as we believe they represent a more realistic range of rate movements that could occur in the near to medium term. This analysis also provides the foundation for historical tracking of interest rate risk. The impact of interest rate derivatives, such as interest rate swaps and caps, is included in the model.

Potential changes to our net interest income in hypothetical rising and declining rate scenarios calculated as of March 31, 2026 and December 31, 2025 are presented in the following table:

We also model the impact of rate changes on our Economic Value of Equity, or EVE. We base the modeling of EVE based on interest rate shocks as shocks are considered more appropriate for EVE, which accelerates future interest rate risk into current capital via a present value calculation of all future cashflows from the Bank’s existing inventory of assets and liabilities. Our simulation model incorporates interest rate shocks of +/- 100, 200, 300, and 400 basis points. The results of the model are presented in the table below:

Our simulation model incorporates various assumptions, which we believe are reasonable but which may have a significant impact on results such as: (i) the timing of changes in interest rates; (ii) shifts or rotations in the yield curve; (iii) re-pricing characteristics for market-rate-sensitive instruments; (iv) varying loan prepayment speeds for different interest rate scenarios; and (v) the overall growth and mix of assets and liabilities. Because of limitations inherent in any approach used to measure interest rate risk, simulation results are not intended as a forecast of the actual effect of a change in market interest rates on our results but rather as a means to better plan and execute appropriate asset-liability management strategies and manage our interest rate risk.

Evaluation of Disclosure Controls and Procedures

The Company’s management, including the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of March 31, 2026. The Company’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the U.S. Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2026.

Changes in Internal Control over Financial Reporting

During the quarter ended March 31, 2026, there was no change in the Company’s internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rules 13a-15 or 15d-15 of the Exchange Act that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. The Company is continually monitoring and assessing changes in processes and activities to determine any potential impact on the design and operating effectiveness of internal controls over financial reporting.

In addition to the other information set forth in this Quarterly Report, you should carefully consider the factors discussed in “Part I – Item 1A – Risk Factors” of the Company’s 2025 Form 10-K, which could materially affect its business, financial position, results of operations, cash flows, or future results. Please be aware that these risks may change over time and other risks may prove to be important in the future. New risks may emerge at any time, and we cannot predict such risks or estimate the extent to which they may affect our business, financial condition or results of operations, or the trading price of our securities.

There are no material changes during the period covered by this Report to the risk factors previously disclosed in the Company’s 2025 Form 10-K.