MetroCity Bankshares, Inc.

Previous wording

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.

Current wording

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 June 30, 2026 and on our results of operations for the three and six months ended June 30, 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.

Previous wording

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

Current wording

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.

Previous wording

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.

Current wording

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

Previous wording

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.

Current wording

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 27 full-service branch locations and two loan production offices in multi-ethnic communities in Alabama, Florida, Georgia, New York, New Jersey, Texas, California, and Virginia. As of June 30, 2026, we had total assets of $4.52 billion, total loans of $3.93 billion, total deposits of $3.49 billion and total shareholders’ equity of $567.9 million.

Previous wording

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

Current wording

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 share , which excludes goodwill and core deposit intangibles and “operating efficiency ratio” 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.

Previous wording

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:

Current wording

The following table reconciles the non-GAAP financial measurement for return on average equity, tangible book value per share and operating efficiency ratio to their respective most directly comparable GAAP measurements for three and six months ended June 30, 2026 and 2025:

Previous wording

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.

Current wording

We recorded net income of $22.1 million for the three months ended June 30, 2026 compared to $16.8 million for the three months ended June 30, 2025, an increase of $5.3 million, or 31.5%. This increase was due to an increase in net interest income of $11.9 million, and a decrease in provision for credit losses of $921,000, offset by increases in noninterest expense of $5.8 million and income tax expense of $1.7 million.

Previous wording

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.

Current wording

Basic and diluted earnings per common share for the three months ended June 30, 2026 was $0.77 and $0.76, respectively, compared to $0.66 and $0.65 for the basic and diluted earnings per common share for the three months ended June 30, 2025. For the six months ended June 30, 2026, basic and diluted earnings per common share was $1.55 and $1.53, respectively, compared to $1.30 and $1.29 for the same period in 2025, respectively.

Previous wording

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.* *

Current wording

Interest income totaled $70.4 million for the three months ended June 30, 2026, an increase of $16.4 million, or 30.3%, from the three months ended June 30, 2025, primarily due to an increase in average balance of gross loans of $847.8 million, and an increase in average balance of investments of $30.1 million, and a 26 basis point increase in the loan yield, along with $1.4 million 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 $646.3 million in average commercial real estate loans, and an increase of $153.4 million in average residential real estate loans.* *

Previous wording

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.

Current wording

Interest expense for the three months ended June 30, 2026 increased $4.5 million, or 20.5%, to $26.4 million compared to interest expense of $21.9 million for the three months ended June 30, 2025, primarily due to a $578.2 million increase in average deposit balances and offset with a $16.0 million decrease in the average borrowings balance. Average time deposits and money market deposits increased by $383.3 million and $79.6 million, respectively, and average interest-bearing demand deposits and savings accounts increased by $115.4 million primarily from the First IC merger in fourth quarter of 2025.

Previous wording

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.

Current wording

The Company currently has effective interest rate derivative agreements totaling $750.0 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 1.70%. At June 30, 2026, the Company had interest rate swap agreements with aggregate notional amounts of $300.0 million and interest rate cap agreements with aggregate notional amounts of $450.0 million, all designated as cash flow hedges of deposit accounts indexed to the Federal Funds Effective Rate. The Company has determined these hedging relationships to be highly effective since inception. During the three months ended June 30, 2026, we recorded a $1.5 million credit to interest expense from the benefit received on these interest-rate derivatives, compared to $4.2 million credit during the three months ended June 30, 2025. Based on the Federal Funds Effective rate as of June 30, 2026 (3.63%), the Company would estimate to record a credit to interest expense of approximately $1.9 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 June 30, 2026 included elsewhere in this Form 10-Q, for additional information on these interest rate derivatives.

Previous wording

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.

Current wording

The net interest margin for the three months ended June 30, 2026 increased by 34 basis points to 4.11% from 3.77% for the three months ended June 30, 2025, primarily due to a 23 basis points increase in the yield on average interest-bearing assets of $4.30 billion, offset by three basis point decrease in the cost of average interest-earning liabilities of $3.2 billion. Average earning assets for the three months ended June 30, 2026 increased by $877.9 million from the three months ended June 30, 2025, due to a $847.8 million increase in average loans and a $30.1 million increase in average total investments. Average interest-bearing liabilities for the three months ended June 30, 2026 increased by $562.2 million from the three months ended June 30, 2025, driven by increases in average interest-bearing deposits of $578.3 million offset by a decrease in average borrowings of $16.0 million

Previous wording

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

Current wording

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.

Previous wording

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.

Current wording

The following tables present, for the three and six months ended June 30, 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.

Previous wording

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

Current wording

We recorded a recovery for credit losses of $792,000 during the three months ended June 30, 2026 compared to a provision for credit losses of $129,000 recorded during the three months ended June 30, 2025. The recovery for credit loss recorded during the three months ended June 30, 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 June 30, 2026, December 31, 2025 and June 30, 2025 was 0.66%, 0.68% and 0.60%, 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.

Previous wording

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

Current wording

The following table sets forth the major components of our noninterest income for three and six months ended June 30, 2026 and 2025.

Previous wording

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.

Current wording

Service charges on deposit accounts increased $453,000, or 89.7%, to $958,000 for the three months ended June 30, 2026 compared to $505,000 for the three months ended June 30, 2025. Service charges on deposit accounts were $1.8 million for the six months ended June 30, 2026 compared to $1.0 million for the same period in 2025, an increase of $801,000, or 79.7%. 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.

Previous wording

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.

Current wording

Other service charges, commissions, and fees decreased $192,000, or 11.9%, to $1.4 million for the three months ended June 30, 2026 compared to $1.6 million for the three months ended June 30, 2025. Other service charges, commissions, and fees decreased 207,000, or 6.4%, to $3.0 million for the six months ended June 30, 2026 compared to $3.2 million for the six months ended June 30, 2025. These increases were attributable to higher origination and processing fees earned from our origination of residential mortgage loans. Mortgage loan originations totaled $75.4 million and $177.3 million during the three and six months ended June 30, 2026, compared to $93.2 million and $184.3 million during the same periods in 2025.

Previous wording

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%.

Current wording

Gain on sale of residential mortgage loans totaled $0 for the three and six months ended June 30, 2026. Gain on sale of residential mortgage loans totaled $579,000 and 978,000 for the three and six months ended June 30, 2025, as we sold$54.3 million and $94.4 million in residential mortgage loans during these period with an average premium of 1.09% and 1.08%, respectively.

Previous wording

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%.

Current wording

Gain on sale of SBA loans totaled $1.5 million for the three months ended June 30, 2026 compared to $643,000 for the three months ended June 30, 2025. We sold $27.1 million in SBA loans during the three months ended June 30, 2026 with average premiums of 8.21%. We sold $20.7 million in SBA loans during the three months ended June 30, 2025 with average premiums of 5.66%. Gain on sale of SBA loans totaled $2.6 million for the six months ended June 30, 2026 compared to $1.3 million for the same period in 2025. We sold $46.8 million in SBA loans during the six months ended

Previous wording

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.

Current wording

Mortgage loan servicing income, net of amortization, decreased by $510,000, or 65.3%, to $271,000 during the three months ended June 30, 2026 compared to $781,000 for the three months ended June 30, 2025. Mortgage loan servicing income, net of amortization, decreased by $822,000, or 58.9%, to $577,000 for the six months ended June 30, 2026 compared to $1.4 million for the six months ended June 30, 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. Our total residential mortgage loan servicing portfolio was $463.5 million at June 30, 2026 compared to $559.1 million at June 30, 2025.

Previous wording

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.

Current wording

SBA servicing income increased by $86,000, or 13.4%, to $728,000 for the three months ended June 30, 2026 compared to $642,000 for the three months ended June 30, 2025. SBA servicing income increased $1.0 million, or 69.3% to $2.6 million for the six months ended June 30, 2026, compared to $1.6 million for the same period of 2025. Our total SBA and USDA loan servicing portfolio was $682.2 million as of June 30, 2026 compared to $480.9 million as of June 30, 2025. Included in SBA servicing income for three and six months ended June 30, 2026 was $814,000 and $2.1 million in SBA servicing fees compared to $1.0 million and $2.0 million, respectively for the three and six months ended June 30, 2025, respectively. 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 and six months ended June 30, 2026, fair value decreased by $86,000 and increased by $580,000 on our SBA servicing rights, respectively compared to the same periods in 2025 fair value decreased by $344,000 and $451,000 on our SBA servicing rights.

Previous wording

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.

Current wording

Other noninterest income decreased by $129,000, or 13.4%, to $834,000 for the three months ended June 30, 2026 compared to $963,000 for the three months ended June 30, 2025. Other noninterest income was $1.5 million for the six months ended June 30, 2026 compared to $1.7 million for the same period in 2025, a decrease of $229,000 , or 13.2%. The largest component of other noninterest income is the income on bank owned life insurance which totaled $641,000 and $1.3 million for three and six months ended June 30, 2026, respectively compared to $620,000 and $1.2 million for the three and six months ended June 30, 2025 respectively. Also included in other noninterest income are fair value gains/losses on our equity securities, which totaled $82,000 (loss) and $165,000 (loss) for the three and six months ended June 30, 2026, respectively, compared to $41,000 (gain) and $181,000 (gain) for the three and six months ended June 30, 2025.

Previous wording

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.

Current wording

These increases were primarily driven by higher personnel, occupancy, and data processing costs, as well as $1.9 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.

Previous wording

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

Current wording

The following table sets forth the major components of our noninterest expense for the three and six months ended June 30, 2026 and 2025

Previous wording

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.

Current wording

Occupancy and equipment expense for the three months ended June 30, 2026 was $2.3 million, an increase of $948,000, or 68.7%, compared to the three months ended June 30, 2025. Occupancy and equipment expense for the six months ended June 30, 2026 was $4.8 million, an increase of $2.0 million, or 70.3%, compared to the six months ended June 30, 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.

Previous wording

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.

Current wording

Data processing expense for the three months ended June 30, 2026 was $535,000 compared to $329,000 for the three months ended June 30, 2025, an increase of $206,000, or 62.6%. Data processing expense for the six months ended June 30, 2026 was $1.2 million, an increase of $543,000, or 80.6%, compared to the six months ended June 30, 2025. 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.

Previous wording

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

Current wording

Advertising expenses for the three and six months ended June 30, 2026 remained relatively flat compared to the same periods in 2025.

Previous wording

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.

Current wording

Merger-related expenses for the three months ended June 30, 2026 was $270,000 compared to $333,000 for the three months ended June 30, 2025. Merger-related expenses for the six months ended June 30, 2026 was $1.9 million compared to $595,000 for the six months ended June 30, 2025. The increase for the six months 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.

Previous wording

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.

Current wording

Other expenses for the three months ended June 30, 2026 were $5.3 million compared to $3.4 million for the three months ended June 30, 2025, an increase of $1.9 million, or 57.4%. Other expenses for the six months ended June 30, 2026 were $10.2 million compared to $6.5 million for the six months ended June 30, 2025 an increase of $3.7 million, or 57.7%. This increase was primarily due to core deposit amortization, additional banking costs from First IC merger, FDIC insurance premiums, security expenses, and loan-related expenses.

Previous wording

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.

Current wording

Income tax expense for the three months ended June 30, 2026 and 2025 was $8.5 million and $6.8 million, respectively. The Company’s effective tax rates were 27.7% and 28.9% for the three months ended June 30, 2026 and 2025, respectively.

Previous wording

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.

Current wording

Total assets decreased $248.4 million, or 5.2%, to $4.52 billion at June 30, 2026 as compared to $4.77 billion at December 31, 2025. The decrease in total assets was primarily attributable to decreases of $117.0 million in cash and cash equivalents, $21.0 million in securities, $93.1 million in loans, net, $8.4 million in loans held for sale, and $6.5 million in Federal Home Loan Bank stock.

Previous wording

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

Current wording

Our investment securities portfolio made up 0.99% of our total assets at June 30, 2026 compared to 1.38% at December 31, 2025.

Previous wording

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.

Current wording

Gross loans held for investment decreased $94.3 million, or 2.3%, to $3.98 billion as of June 30, 2026 as compared to $4.08 billion as of December 31, 2025. Our loan decrease during the six months ended June 30, 2026 was comprised of a decrease of $97.3 million, or 6.2%, in commercial real estate loans, a decrease of $11.4 million , or 11.8% in commercial and industrial loans, a decrease of $13.2 million, or 0.6% in residential real estate loans, offset by an increase of $27.6 million, or 65.9% in construction and development loans. We had loans held for sale of $1.4 million as of June 30, 2026 compared to $9.7 million in loans held for sale as of December 31, 2025.

Previous wording

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.

Current wording

As of June 30, 2026 and December 31, 2025, we serviced $682.2 million and $685.5 million, respectively, in SBA and USDA loans for others. We carried a servicing asset of $11.2 million and $10.6 million at June 30, 2026 and December 31, 2025, respectively. See Note 5 of our consolidated financial statements as of June 30, 2026, included elsewhere in this Form 10-Q, for additional information on the activity for SBA and USDA loan servicing rights for the three and six months ended June 30, 2026 and 2025.

Previous wording

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.

Current wording

As of June 30, 2026, we serviced $463.5 million in residential mortgage loans for others compared to $702.6 million as of December 31, 2025. We carried a servicing asset, net of amortization, of $1.3 million and $1.7 million at June 30, 2026 and December 31, 2025. Amortization relating to the mortgage loan servicing asset was $176,000 and $352, 000 for the three and six months ended June 30, 2026 compared to $137,000 and $255,000 three and six months ended June 30, 2025, respectively. During three and six months ended June 30, 2026 we recorded no fair value adjustments

Previous wording

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.

Current wording

Asset quality remained strong during the second quarter of 2026 as our nonperforming loans to total loans remained low at 0.57% as of June 30, 2026. Nonperforming loans were $22.5 million at June 30, 2026 compared to $25.2 million at December 31, 2025. The decrease from December 31, 2025 to June 30, 2026 was attributable to a $7.7 million decrease in nonaccrual loans, offset by an increase in past due loans 90 days more and still accruing related to one $5.1 million loan, which is well secured and in process of collection. We did not recognize any interest income on nonaccrual loans during the three and six months ended June 30, 2026 and 2025.

Previous wording

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.

Current wording

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 June 30, 2026 comprised of $7.1 million of commercial real estate loans, $1.0 million of commercial and industrial loans and $9.4 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.

Previous wording

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.

Current wording

The allowance for credit losses was $25.8 million at June 30, 2026 compared to $27.8 million at December 31, 2025, a decrease of $2.0 million. The decrease was primarily reflected lower reserves resulting from reduced loan balances and changes in reserves on individually analyzed loans.

Previous wording

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.

Current wording

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 provision for credit losses. The allowance for unfunded commitments had a balance of $535,000 as of June 30, 2026 compared to $195,000 as of June 30, 2025.