BLUE RIDGE BANKSHARES, INC.

Previous wording

The Company makes certain forward-looking statements in this Form 10-K that are subject to risks and uncertainties. These forward-looking statements represent plans, estimates, objectives, goals, guidelines, expectations, intentions, projections, and statements of management’s beliefs concerning future events, business plans, objectives, expected operating results, and the assumptions upon which those statements are based. Forward-looking statements include without limitation, any statement that may predict, forecast, indicate, or imply future results, performance or achievements, and are typically identified with words such as “may,” “could,” “should,” “will,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “aim,” “intend,” “plan,” or words or phases of similar meaning. The Company cautions that the forward-looking statements are based largely on management’s expectations and are subject to a number of known and unknown risks and uncertainties that are subject to change based on factors which are, in many instances, beyond the its control. Actual results, performance, or achievements could differ materially from those contemplated, expressed, or implied by the forward-looking statements.

Current wording

The Company makes certain forward-looking statements in this Form 10-K that are subject to risks and uncertainties. These forward-looking statements represent plans, estimates, objectives, goals, guidelines, expectations, intentions, projections, and statements of management’s beliefs concerning future events, business plans, objectives, expected operating results, and the assumptions upon which those statements are based. Forward-looking statements include without limitation, any statement that may predict, forecast, indicate, or imply future results, performance or achievements, and are typically identified with words such as “may,” “could,” “should,” “will,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “aim,” “intend,” “plan,” or words of similar meaning. The Company cautions that the forward-looking statements are based largely on management’s expectations and are subject to a number of known and unknown risks and uncertainties that may change based on factors which are, in many instances, beyond its control. Actual results, performance, or achievements could differ materially from those contemplated, expressed, or implied by the forward-looking statements.

Previous wording

the ability to maintain capital levels adequate to support the Company's business and to comply with the Consent Order directives;

Current wording

the ability to maintain capital levels adequate to support the Company's business;

Previous wording

the timely development of competitive new products and services and the acceptance of these products and services by new and existing customers;

Current wording

the usage of advances and changes in technological and social media to develop timely and competitive products and services, and the acceptance of these products and services by new and existing customers;

Previous wording

adverse developments in the financial industry generally, such as recent bank failures, responsive measures to mitigate and manage such developments, related supervisory and regulatory actions and costs, and related impacts on customer and client behavior;

Current wording

adverse developments in the financial industry generally, such as bank failures, responsive measures to mitigate and manage such developments, supervisory and regulatory actions and costs, and related impacts on customer and client behavior;

Previous wording

the Company’s involvement in, and the outcome of, any litigation, legal proceedings, or enforcement actions that may be instituted against the Company;

Current wording

the Company’s involvement in, and the outcome of, any litigation, legal proceedings, or enforcement actions that may be instituted against the Company; and

Previous wording

The accounting principles the Company applies under GAAP are complex and require management to apply significant judgment to various accounting, reporting, and disclosure matters. Management must use assumptions, judgments, and estimates when applying these principles where precise measurements are not possible or practical. The Company views these policies as critical because they are highly dependent upon subjective or complex judgments, assumptions, and estimates. Changes in such judgments, assumptions, and estimates may have a significant impact on the consolidated financial statements. Actual results, in fact, could differ from initial estimates.

Current wording

The accounting principles the Company applies under GAAP are complex and require management to apply significant judgment to various accounting, reporting, and disclosure matters. Management must use assumptions, judgments, and estimates when applying these principles where precise measurements are not possible or practical. The Company views the following policies as critical because they are highly dependent upon subjective or complex judgments, assumptions, and estimates. Changes in such judgments, assumptions, and estimates may have a significant impact on the consolidated financial statements. Actual results, in fact, could differ from initial estimates.

Previous wording

The allowance for credit losses represents management’s best estimate of credit losses over the remaining life of the loan portfolio. Loans are charged-off against the ACL when management believes the loan balance is no longer collectible. Subsequent recoveries of previously charged-off amounts (recoveries) are recorded as increases to the ACL. The provision for credit losses is an amount sufficient to bring the ACL to an estimated balance that management considers adequate to absorb lifetime expected losses in the Company’s held for investment loan portfolio. The ACL is a valuation account that is deducted from the loans’ recorded investment to present the net amount expected to be collected on the loans. In accordance with Accounting Standards Codification ("ASC") 326, Credit Losses, the Company elected to exclude accrued interest from the recorded investment basis in its determination of the ACL for loans held for investment, and instead reverses accrued but unpaid interest through interest income in the period in which the loan is placed on nonaccrual status.

Current wording

The ACL represents management’s best estimate of credit losses over the remaining life of the Company's held for investment loan portfolio. Loans are charged-off against the ACL when management believes the loan balance is no longer collectible. Subsequent recoveries of previously charged-off amounts (recoveries) are recorded as increases to the ACL. The provision for (recovery of) credit losses is an amount sufficient to bring the ACL to an estimated balance that management considers adequate to absorb lifetime expected losses in the Company’s held for investment loan portfolio. The ACL is a valuation account that is deducted from the loans' recorded investment to present the net amount expected to be collected on the loan portfolio. In accordance with ASC 326, the Company elected to exclude accrued interest from the recorded investment basis in its determination of the ACL for loans held for investment, and instead reverses accrued but unpaid interest through interest income in the period in which the loan is placed on nonaccrual status.

Previous wording

In applying future economic forecasts, the Company utilizes a forecast period of one year and then reverts to the mean of historical loss rates on a straight-line basis over the following one-year period. The Company considers economic forecasts of national gross domestic product and unemployment rates from the Federal Open Market Committee to inform the model for loss estimation. Historical loss rates used in the quantitative model are derived using both the Bank’s and peer bank data obtained from publicly-available sources (i.e., federal call reports). The Bank’s peer group utilized is comprised of financial institutions of relatively similar size (i.e., $1 - $5 billion of total assets) and in similar markets. Management also considers qualitative adjustments when estimating loan losses to take into account the model’s quantitative limitations. Qualitative adjustments to quantitative loss factors, either negative or positive, may include considerations of trends in delinquencies, changes in volume and terms of loans, effects of changes in lending policy, experience and depth of management, regional and local economic trends and conditions, concentrations of credit, and loan review results.

Current wording

In applying future economic forecasts, the Company utilizes a forecast period of one year and then reverts to the mean of historical loss rates on a straight-line basis over the following one-year period. The Company considers economic forecasts of national gross domestic product and unemployment rates from the Federal Open Market Committee to inform the model for loss estimation. Historical loss rates used in the quantitative model were derived using both the Bank's and peer bank data obtained from publicly-available sources (i.e., federal call reports) encompassing an economic cycle. The Bank's peer group utilized is comprised of financial institutions of relatively similar size (i.e., $1 - $5 billion of total assets) and in similar markets. Management also considers qualitative adjustments when estimating loan losses to take into account the model's quantitative limitations. Qualitative adjustments to quantitative loss factors, either negative or positive, may include considerations of trends in delinquencies, changes in volume and terms of loans, effects of changes in lending policy, experience and depth of management, regional and local economic trends and conditions, concentrations of credit, and loan review results.

Previous wording

For those loans that do not share similar risk characteristics, the Company evaluates the ACL needs on an individual (or loan-by-loan) basis. This population of individually evaluated loans (or loan relationships with the same primary source of repayment) is determined on a quarterly basis and is based on whether (1) the risk grade of the loan is substandard or worse and the balance exceeds $500,000, (2) the risk grade of the loan is special mention and the balance exceeds $1,000,000, or (3) the loan’s terms differ significantly from other pooled loans. Measurement of credit loss is based on the expected future cash flows of an individually evaluated loan, discounted at the loan’s effective interest rate, or measured on an observable market value, if one exists, or the estimated market value of the collateral underlying the loan discounted for estimated costs to sell the collateral for collateral-dependent loans. In limited circumstances, the collateral value for a collateral-dependent loan may be based on the enterprise value of a company. The enterprise value method involves assessing the borrower’s ability to repay the loan by estimating the total value of its business, including both debt and equity. This approach is typically used where the recoverable value is based on the fair value of the company as a going concern, adjusted for the priority of the Company's claim. If the net value applying these measures is less than the loan’s amortized cost, a specific reserve is recorded in the ACL and charged-off in the period when management believes the loan balance is no longer collectible.

Current wording

For those loans that do not share similar risk characteristics, the Company evaluates the ACL needs on an individual (or loan-by-loan) basis. This population of individually evaluated loans (or loan relationships with the same primary source of repayment) is determined on a quarterly basis and is based on whether (1) the risk grade of the loan is substandard or worse and the balance exceeds $500,000, (2) the risk grade of the loan is special mention and the balance exceeds $1,000,000, or (3) the loan's terms or risks differ significantly from other pooled loans. Measurement of credit loss is based on the expected future cash flows of an individually evaluated loan, discounted at the loan's effective interest rate, or measured on an observable market value, if one exists, or the estimated market value of the collateral underlying the loan discounted for estimated costs to sell the collateral for collateral-dependent loans. In limited circumstances, the collateral value for a collateral-dependent loan may be based on the enterprise value of a company. The enterprise value method involves assessing the borrower’s ability to repay the loan by estimating the total value of its business, including both debt and equity. This approach is typically used where the recoverable value is based on the fair value of the company as a going concern, adjusted for the priority of the company's claim. If the net value applying these measures is less than the loan's recorded investment, a specific reserve is recorded in the ACL and charged-off in the period when management believes the loan balance is no longer collectible.

Previous wording

Credit losses are an inherent part of the Company’s business. The Company has an ACL management "work group", which includes executive and senior management of the accounting and credit administration teams, who approve the key methodologies and assumptions, as well as the final ACL. While management uses available information at the time of estimation to determine expected lifetime credit losses on loans, future changes in the ACL may be necessary based on changes in portfolio composition, portfolio credit quality, changes in underlying facts for individually evaluated loans, and/or changes in current and forecasted economic conditions. In addition, bank regulatory agencies and the Company's independent auditors periodically review its ACL and may require an increase in the ACL or the recognition of further loan charge-offs, based on judgments that are different than those of management. Additional provisions for such losses, if necessary, would be recorded as a charge to earnings.

Current wording

The Company has an ACL management "work group", which includes executive and senior management of the accounting and credit administration teams, who approve the key methodologies and assumptions, as well as the final ACL, on a quarterly basis. While management uses available information at the time of estimation to determine expected credit losses on loans, future changes in the ACL may be necessary based on changes in portfolio composition, portfolio credit quality, changes in underlying facts for individually evaluated loans, and/or economic conditions. In addition, bank regulatory agencies and the Company's independent auditors periodically review its ACL and may require an increase in the ACL or the recognition of further loan charge-offs, based on judgments different than those of management.

Previous wording

Income taxes are accounted for using the balance sheet method in accordance with ASC 740, Accounting for Income Taxes. Per ASC 740, the objective is to (a) recognize the amount of taxes payable or refundable for the current year, and (b) defer tax liabilities and assets for the future tax consequences of events that have been recognized in the financial statements or federal income tax returns. Deferred tax assets and liabilities are determined based on the tax effects of the temporary differences between the book (i.e., financial statement) and tax bases of the various balance sheet assets and liabilities, and give current recognition to changes in tax rates and laws. Temporary differences are reversed in the period in which an amount or amounts become taxable or deductible.

Current wording

Income taxes are accounted for using the balance sheet method in accordance with ASC 740, Accounting for Income Taxes, and recently adopted ASU No. 2023-09 – Income Taxes (Topic 740): Improvements to Income Tax Disclosures (collectively "ASC 740"). Per ASC 740, the objective is to (a) recognize the amount of taxes payable or refundable for the current year, and (b) defer tax liabilities and assets for the future tax consequences of events that have been recognized in the financial statements or federal income tax returns. Deferred tax assets and liabilities are determined based on the tax effects of the temporary differences between the book (i.e., financial statement) and tax bases of the various balance sheet assets and liabilities and give current recognition to changes in tax rates and laws. Temporary differences are reversed in the period in which an amount or amounts become taxable or deductible.

Previous wording

For the year ended December 31, 2024, the Company reported a net loss of $15.4 million compared to a net loss of $51.8 million for 2023. Basic and diluted loss per share were ($0.31) for 2024 compared to ($2.73) for 2023. The net loss of $51.8 million for the year ended December 31, 2023 included an after-tax goodwill impairment charge of $26.8 million and a $4.7 million after-tax settlement reserve for the the previously disclosed Employee Stock Ownership Plan ("ESOP") litigation assumed in the 2019 acquisition of Virginia Community Bankshares, Inc. ("VCB"). After-tax regulatory remediation expenses for 2024 and 2023 were $3.6 million and $8.1 million, respectively.

Current wording

For the year ended December 31, 2025, the Company reported net income of $10.7 million compared to a net loss of $15.4 million for 2024. Diluted income (loss) per share was $0.11 for 2025 compared to ($0.31) for 2024. Contributing to the net loss in 2024 was a $6.3 million after-tax non-cash negative fair value adjustment of an equity investment the Company holds in a fintech company. Additionally, for 2024, the Company reported $3.6 million of after-tax regulatory remediation expenses, while none were reported for 2025.

Previous wording

(1) Computed on a fully taxable equivalent basis assuming a 22.32% and 22.65% income tax rate for the years ended December 31, 2024 and 2023, respectively.

Current wording

(1) Computed on a fully taxable equivalent basis assuming a 21.96% and 22.32% income tax rate for the years ended December 31, 2025 and 2024, respectively.

Previous wording

(4) Includes accretion of fair value adjustments (discounts) on acquired loans of $1.1 million and $2.6 million for the years ended December 31, 2024 and 2023, respectively.

Current wording

(4) Includes accretion of fair value adjustments (discounts) on acquired loans of $1.6 million and $1.1 million for the years ended December 31, 2025 and 2024, respectively.

Previous wording

(5) Includes amortization of fair value adjustments (premiums) on assumed time deposits of $0.3 million and $0.8 million for the years ended December 31, 2024 and 2023, respectively.

Current wording

(5) Includes amortization of fair value adjustments (premiums) on assumed time deposits of $0.1 million and $0.3 million for the years ended December 31, 2025 and 2024, respectively.

Previous wording

(6) Includes amortization of fair value adjustments (premiums) on assumed subordinated notes of $100 thousand for both years ended December 31, 2024 and 2023.

Current wording

(6) Includes amortization of fair value adjustments (premiums) on assumed subordinated notes of $0.1 million for both years ended December 31, 2025 and 2024.

Previous wording

Average interest-earning assets were $2.85 billion for the year ended December 31, 2024 compared to $3.03 billion for the same period of 2023, a $188.1 million decrease. This decrease was primarily attributable to lower average balances of loans held for investment and securities, which decreased $190.7 million and $36.5 million, respectively, partially offset by higher average balances of interest-earning deposits in other banks. The Company selectively reduced its loan portfolio, primarily loans outside of the Bank's geographic market, in order to meet the liquidity needs to exit fintech BaaS depository operations. Total interest income (on a taxable equivalent basis) decreased by $8.7 million to $160.4 million for the year ended December 31, 2024 compared to the year ended 2023. This decrease was primarily due to lower average balances of loans held for investment. Interest income in 2024 and 2023 included accretion of fair value adjustments (discounts) on acquired loans of $1.1 million and $2.6 million, respectively.

Current wording

Average interest-earning assets were $2.49 billion for the year ended December 31, 2025 compared to $2.85 billion for the same period of 2024, a $354.9 million decrease. This decrease was primarily attributable to lower average balances of loans held for investment, which declined $303.1 million. To transition the Company to a more traditional community banking model, the Company selectively reduced its loan portfolio to borrowers outside of the Bank's geographic markets by approximately $120.0 million in 2025. Generally, these loans carried higher yields but also presented greater credit risk than the remainder of the Company's loan portfolio. Total interest income (on a taxable equivalent basis) decreased by $22.5 million to $137.8 million for the year ended December 31, 2025 compared to the year ended December 31, 2024. This decrease was primarily due to lower average balances of loans held for investment, partially offset by fee income of $3.5 million associated with the extension and subsequent payoff of a previously criticized out-of-market loan. The yields on loans held for investment in 2025 and 2024 were 5.89% and 5.87%, respectively. In 2025, a large previously criticized out-of-market loan relationship paid off resulting in $3.5 million of fee income, which had a positive 15 basis point effect on the yield on loans held for investment in 2025. Interest income in 2025 and 2024 also included accretion of fair value adjustments (discounts) on acquired loans of $1.6 million and $1.1 million, respectively.

Previous wording

Average interest-bearing liabilities were $2.20 billion for the year ended December 31, 2024 compared to $2.31 billion for the same period of 2023, a $114.0 million decrease. Of this decrease, $50.3 million was attributable to lower average balances of FHLB advances, while $45.0 million was attributable to lower average balances of interest-bearing deposits, primarily due to a decline in fintech BaaS deposits. Average fintech-related deposit balances were $260.0 million and $653.2 million for the years ended December 31, 2024 and December 31, 2023, respectively. Interest expense increased by $5.7 million to $81.7 million for the year ended December 31, 2024 compared to the 2023 period. Higher interest expense was primarily attributable to higher rates paid on interest-bearing deposits, primarily time deposits, partially offset by a decline in deposits related to the Bank's fintech operations. These changes reflect the balance sheet repositioning that facilitated the exit of fintech BaaS depository operations and towards a more traditional community bank model. The interest rates for the majority of the fintech-related accounts are index-priced, with the index being the federal funds rate. The cost of fintech-related deposits was 3.86% in 2024, while the cost of deposits of customers in the Bank's primary markets (also excluding brokered deposits) was 3.15% in the same period. Brokered time deposits also contributed to the higher interest expense in the 2024 period in the amount of $23.9 million. The cost of average interest-bearing liabilities increased to 3.72% in 2024 from 3.29% in 2023, while the cost of funds increased to 3.04% in 2024 from 2.56% in 2023. Interest expense in the 2024 and 2023 periods included the amortization of fair value adjustments (premium) on assumed time deposits of $0.3 million and $0.8 million, respectively, which was a reduction to interest expense.

Current wording

Average interest-bearing liabilities were $1.79 billion for the year ended December 31, 2025 compared to $2.20 billion for the same period of 2024, a $407.0 million decrease. The majority of this decline ($307.7 million) was attributable to decreases in average interest-bearing deposits, primarily fintech-related deposits ($237.0 million) and wholesale time deposits ($173.3 million). These changes reflect the balance sheet repositioning as the Company moved towards a more traditional community bank model. Interest expense decreased by $22.7 million to $58.9 million for the year ended December 31, 2025 compared to the 2024 period, largely driven by the decline in average balances and the cost of interest-bearing deposits. The cost of average interest-bearing liabilities decreased to 3.29% in 2025 from 3.72% in 2024, while the cost of funds decreased to 2.66% in 2025 from 3.04% in 2024. Interest expense in the 2025 and 2024 periods included the amortization of fair value adjustments (premium) on assumed time deposits of $0.1 million and $0.3 million, respectively, which was a reduction to interest expense.

Previous wording

Net interest income (on a taxable equivalent basis) was $78.7 million for the year ended December 31, 2024 compared to $93.1 million for the year ended December 31, 2023, while net interest margin was 2.77% and 3.07% for the same respective periods. Accretion and amortization of purchase accounting adjustments had a 5 basis point and 12 basis point positive effect on net interest margin for the same respective periods. The decrease in net interest income in 2024 was primarily due to lower average balances of loans held for investment and higher rates on deposits, primarily time deposits. The Company anticipates that future net interest income and net interest margin will be positively affected as it anticipates loan balance declines to stabilize with new and renewed loans at higher market rates and a further reduction in higher cost brokered deposits.

Current wording

Net interest income (on a taxable equivalent basis) was $78.9 million for the year ended December 31, 2025 compared to $78.7 million for the year ended December 31, 2024, while net interest margin was 3.17% and 2.77% for the same respective periods. The aforementioned fee income of $3.5 million had a positive 12 basis point effect on net interest margin in 2025. Accretion and amortization of purchase accounting adjustments had a 7 basis point and 5 basis point positive effect on net interest margin for the same respective periods. The decrease in net interest income in 2025 was primarily due to lower average balances of loans held for investment, partially offset by lower average balances of and rates paid on interest-bearing demand accounts, money market accounts, and time deposits. The Company anticipates that future net interest income and net interest margin will be positively affected as portions of the loan portfolio reprice and amortize, and new production is added in a higher interest rate environment than portions of the existing portfolio. Additionally, maturities of higher-cost time deposits, including brokered deposits, are expected to have a positive effect on net interest margin as new and renewed deposits are anticipated to be sourced at lower rates.

Previous wording

(Recovery of ) Provision for Credit Losses. The Company recorded a recovery of credit losses of $5.1 million for the year ended December 31, 2024 compared to a provision for credit losses of $22.3 million for the year ended December 31, 2023, a decrease of $27.4 million. The recovery of credit losses in 2024 was primarily attributable to an $8.4 million recovery from the sale of a specialty finance loan reserved for in 2023 and 2022 and lower reserve needs due to loan portfolio balance reductions, partially offset by higher specific reserves for certain purchased loans. Provision for credit losses in 2023 was primarily composed of specific reserves on the previously reported group of specialty finance loans, partially offset by a credit to provision for credit losses on unfunded commitments, as the Company actively worked to reduce these balances.

Current wording

Recovery of Credit Losses. The Company recorded a recovery of credit losses of $4.0 million for the year ended December 31, 2025 compared to $5.1 million for the year ended December 31, 2024. The recovery of credit losses in 2025 was primarily due to loan portfolio balance reductions, recoveries of loans charged off in prior years, and reductions to reserves on individually evaluated loans. The recovery of credit losses in 2024 was primarily attributable to an $8.4 million recovery from the sale of a specialty finance loan reserved for in 2023 and 2022, lower reserve needs due to loan portfolio balance reductions, and lower balances of loan commitments, partially offset by higher specific reserves for certain purchased loans.

Previous wording

Income Tax Expense. For the year ended December 31, 2024, the Company recorded an income tax benefit of $1.1 million (effective income tax rate of 6.8%) compared to income tax benefit of $7.1 million (effective income tax rate of 12.0%) for the same period of 2023. The effective income tax rate in the 2024 period was primarily attributable to the surrender of the majority of the Company's investment in bank owned life insurance, which resulted in a taxable gain and nondeductible penalties. The effective income tax rate in the 2023 period was primarily attributable to the $26.8 million goodwill impairment charge, which was not tax deductible.

Current wording

Income Tax Expense. For the year ended December 31, 2025, the Company recorded income tax expense of $3.1 million (effective income tax rate of 22.3%) compared to an income tax benefit of $1.1 million (effective income tax rate of 6.8%) for the same period of 2024. The effective income tax rate in the 2024 period was primarily attributable to income tax expense on the surrender of the majority of the Company's investment in bank owned life insurance, which resulted in a taxable gain and nondeductible penalties.

Previous wording

The current lending environment for commercial real estate (“CRE”) loans has heightened risk due to a higher interest rate environment. Potential negative impacts include higher debt service burdens for floating rate loans and fixed rate loans that mature and require renewal or refinancing. As these loans mature, they may be repriced at significantly higher interest rates, leading to increased debt service costs that can strain borrowers' ability to meet payment obligations. In some cases, the higher cost of refinancing may lead to loan defaults, particularly if property cash flows have not increased proportionally.

Current wording

While the Federal Reserve has reduced the target Fed Funds rate by 175 basis points from a recent peak, the current lending environment for commercial real estate (“CRE”) loans has heightened risk due to a higher interest rate environment than had existed when these loans may have been originated. Potential negative impacts may include higher debt service burdens for floating rate loans and fixed rate loans originated in a lower rate environment that reprice or mature, requiring renewal or refinancing. As these loans mature, they may be repriced at significantly higher interest rates leading to increased debt service costs that can strain borrowers' ability to meet payment obligations. In some cases, the higher cost of refinancing may lead to loan defaults, particularly if property cash flows have not increased relatively.

Previous wording

In response to the heightened risk, earlier in 2024, the Bank’s credit policy and risk committee conducted a targeted review of certain of the Bank’s loan types, including office loans, to confirm its internal risk ratings. In addition, the Bank’s credit administration department led by its Chief Credit Officer performs a periodic analysis of emerging trends by geography where the Bank has the largest concentrations by CRE property type. The analysis includes all real estate property types and geographic markets represented in the loan portfolio. This analysis is provided to the board of directors to assess whether the CRE lending strategy and risk appetite continue to be appropriate, considering changes in local market conditions and the Bank’s exposure to collateral type concentrations. Also, concentration limits by real estate collateral type are approved and monitored by the board of directors. As of December 31, 2024, all limits are in compliance.

Current wording

The Bank’s credit administration department led by its Chief Credit Officer performs periodic analyses of emerging trends by geography and property type where the Bank has larger concentrations by CRE property type. These analyses include all real estate property types and geographic markets represented in the loan portfolio and are provided to the Bank's board of directors to assess whether the CRE lending strategy and risk appetite continue to be appropriate, considering changes in local market conditions and the Bank’s exposure to collateral type concentrations. Also, concentration limits by real estate collateral type are approved and monitored by the Bank's board of directors. As of December 31, 2025, all limits are in compliance.

Previous wording

The following table presents the remaining maturities, based on contractual maturity, by loan type and by rate type (variable or fixed) as of December 31, 2024.

Current wording

The following table presents the remaining maturities, based on contractual maturity, by loan type and by rate type (variable or fixed) as of December 31, 2025. Loans shown in the one year or less column are term loans that have a stated maturity date within twelve months. Variable rate loans reprice at various intervals (monthly or quarterly) and the rate is tied to a published index such as the Fed Prime rate, U.S. Treasury bond indices, or the Secured Overnight Funding Rate.

Previous wording

Allowance for Credit Losses. In determining the adequacy of the Company’s ACL, management makes estimates based on facts available at the time the ACL is determined. Such estimation requires significant judgment at the time made. Management believes that the Company’s ACL was adequate as of December 31, 2024 and December 31, 2023. There can be no assurance, however, that adjustments to the ACL will not be required in the future. Changes in the economic assumptions underlying management’s estimates and judgments, adverse developments in the economy, on a national basis or in the Company’s market area, and changes in the circumstances of particular borrowers are criteria, among others, that could increase the level of the ACL required, resulting in charges to the provision for credit losses for loans. In addition, bank regulatory agencies periodically review the Bank's ACL and may, on occasion, require an increase in the ACL or the recognition of further loan charge-offs, based on their judgment of the facts at the time of their review that may differ than that of management.

Current wording

Allowance for Credit Losses. In determining the adequacy of the Company’s ACL, management makes estimates based on facts available at the time the ACL is determined. Such estimation requires significant judgment at the time made. Management believes that the Company’s ACL was adequate as of December 31, 2025 and December 31, 2024. There can be no assurance, however, that adjustments to the ACL will not be required in the future. Changes in the economic assumptions underlying management’s estimates and judgments, adverse developments in the economy, on a national basis or in the Company’s market area, and changes in the circumstances of particular borrowers are criteria, among others that could increase the level of the ACL required, resulting in charges to the provision for credit losses for loans. In addition, bank regulatory agencies periodically review the Bank's ACL and may require an increase in the ACL or the recognition of further loan charge-offs, based on their judgment of the facts at the time of their review that may differ than that of management.

Previous wording

The ACL includes specific reserves for individually evaluated loans and a general allowance applicable to all loan categories; however, management has allocated the ACL by loan type to provide an indication of the relative risk characteristics of the loan portfolio. The allocation is an estimate and should not be interpreted as an indication that charge-offs will occur in these amounts or that the allocation indicates future trends, and does not restrict the usage of the general allowance for any specific loan or category. The following table presents the allocation of the ACL by loan category and the percentage of loans in each category to total loans as of the dates stated.

Current wording

The ACL includes specific reserves for individually evaluated loans and a general allowance applicable to all loan categories; however, management has allocated the ACL by loan type to provide an indication of the relative risk characteristics of the loan portfolio. The allocation is an estimate and should not be interpreted as an indication that charge-offs will occur in these amounts or that the allocation indicates future trends, and does not restrict the usage of the allowance for any specific loan or category. The following table presents the allocation of the ACL by loan category and the percentage of loans in each category to total loans as of the dates stated.

Previous wording

Loans are generally placed into nonaccrual status when they are past due 90 days or more as to either principal or interest or when, in the opinion of management, the collection of principal and/or interest is in doubt. A loan remains in nonaccrual status until the loan is current as to payment of both principal and interest or past due less than 90 days and the borrower demonstrates the ability to pay and remain current. When cash payments are received, they are applied to principal first, then to accrued interest. It is the Company's policy not to record interest income on nonaccrual loans until principal has become current. In certain instances, accruing loans that are past due 90 days or more as to principal or interest may not be placed on nonaccrual status, if the Company determines that the loans are well-secured and are in the process of collection.

Current wording

Loans are generally placed into nonaccrual status when they are past due 90 days or more as to either principal or interest or when, in the opinion of management, the collection of principal and/or interest is in doubt. A loan remains in nonaccrual status until the loan is current as to payment of both principal and interest or past due less than 90 days and the borrower demonstrates the ability to pay and remain current for a sustained period of time, generally six months, or when the loan otherwise becomes well-secured and in the process of collection. When cash payments are received, they are applied to principal first, then to accrued interest. It is the Company's policy not to record interest income on nonaccrual loans until the loan has returned to accrual status. In certain instances, accruing loans that are past due 90 days or more as to principal or interest may not be placed on nonaccrual status, if the Company determines that the loans are well-secured and are in the process of collection.

Previous wording

OREO includes properties that have been substantively repossessed or acquired in complete or partial satisfaction of debt. Such properties, which are held for resale, are initially stated at fair value, including a reduction for the estimated selling expenses, which becomes the carrying value. In subsequent periods, such properties are stated at the lower of the restated carrying value or fair value.

Current wording

OREO generally includes properties that have been substantively repossessed or acquired in complete or partial satisfaction of debt. Such properties, which are held for resale, are initially stated at fair value, including a reduction for the estimated selling expenses, which becomes the new carrying value. In subsequent periods, such properties are stated at the lower of the restated carrying value or fair value. In limited cases, the Bank may receive non-cash consideration, including equity interests, pursuant to negotiated or court-approved settlements with borrowers. The fair value of nonmarketable equity interests are generally estimated using a discounted cash flow analysis based on management’s assumptions regarding expected future cash flows, timing, and a risk-adjusted discount rate. These assets, which are reported with OREO on the Company's consolidated balance sheets, are subsequently carried at the lower of cost or fair value, less estimated costs to sell, and are periodically evaluated for impairment.

Previous wording

Nonperforming loans, which include nonaccrual loans and loans past due 90 days and still accruing interest, decreased $37.6 million from prior year end, to $25.4 million as of December 31, 2024. This decline primarily reflects the sale of the previously noted specialty finance loan, which had a $32.8 million carrying value and specific reserve of $9.6 million at December 31, 2023. The decline in nonperforming loans positively affected the asset quality measures above.

Current wording

Nonperforming loans, which include nonaccrual loans and loans past due 90 days and still accruing interest, decreased $1.7 million from prior year end, to $23.8 million as of December 31, 2025.

Previous wording

Investment Securities. The investment portfolio is used as a source of interest income, credit risk diversification, and liquidity, as well as to manage interest rate sensitivity and provide collateral for short-term borrowings. Securities in the investment portfolio classified as securities available for sale may be sold in response to changes in market interest rates, securities’ prepayment risk, liquidity needs, and other similar factors, and are carried at estimated fair value. The fair value of the Company’s investment securities available for sale was $312.0 million and $321.1 million at December 31, 2024 and 2023, respectively. Primarily as a result of market interest rates in the year ended December 31, 2024, the Company’s portfolio of securities available for sale had a net unrealized loss of approximately $55.5 million as of the same date. Of the unrealized loss in the portfolio at December 31, 2024, approximately 81.0% was related to securities backed by U.S. government agencies.

Current wording

Investment Securities. The investment portfolio is used as a source of interest income, credit risk diversification, and liquidity, as well as to manage interest rate sensitivity and provide collateral for short-term borrowings. Securities in the investment portfolio classified as securities available for sale may be sold in response to changes in market interest rates, securities’ prepayment risk, liquidity needs, and other similar factors, and are carried at estimated fair value. The fair value of the Company’s investment securities available for sale was $332.9 million and $312.0 million at December 31, 2025 and 2024, respectively. Primarily as a result of market interest rates, the Company’s portfolio of securities available for sale had a net unrealized loss of approximately $40.3 million as of December 31, 2025. Of the unrealized loss in the portfolio at December 31, 2025, approximately 84% was related to securities backed by U.S. government agencies.

Previous wording

As of December 31, 2024 and 2023, the majority of the investment securities portfolio consisted of securities rated investment grade by a leading rating agency. Investment grade securities are judged to have a low risk of default, to be of the best quality and carry the smallest degree of investment risk. At December 31, 2024 and 2023, securities with a fair value of $268.9 million and $35.8 million, respectively, were pledged to secure the Bank's borrowing facility with the FHLB. As of December 31, 2024, the Company had pledged securities with a fair value of $16.3 million as collateral for the FRB Discount Window, and as of December 31, 2023, the Company had pledged $260.9 million as collateral for the FRB Bank Term Funding Program (“BTFP”).

Current wording

At December 31, 2025 and 2024, securities with a fair value of $174.3 million and $268.9 million, respectively, were pledged to secure the Bank's borrowing facility with the FHLB. As of December 31, 2025 and 2024, the Company had pledged securities with a fair value of $0 and $16.3 million as collateral for the FRB Discount Window. The decline in pledged securities as of December 31, 2025 from December 31, 2024 with both FHLB and FRB reflects the release of securities held as collateral.

Previous wording

The Company reviews its available for sale investment securities portfolio for potential credit losses at least quarterly. At December 31, 2024 and 2023, the majority of securities in an unrealized loss position were of investment grade; however, a portion did not have a third-party investment grade available (securities with fair values of of $29.3 million and $20.5 million, respectively). These securities were primarily subordinated debt instruments issued by bank holding companies and are classified as corporate bonds. Investment securities with unrealized losses are generally a result of pricing changes due to changes in the interest rate environment since purchase and not as a result of permanent credit impairment. Contractual cash flows for mortgage backed and U.S. Treasury and agencies securities are guaranteed and/or funded by the U.S. government. Municipal securities with unrealized losses showed no indication that the contractual cash flows will not be received when due. The Company does not intend to sell nor does it believe that it will be required to sell, any of its impaired securities prior to the recovery of the amortized cost. No ACL has been recognized for investment securities as of December 31, 2024 and 2023.

Current wording

The Company reviews its available for sale investment securities portfolio for potential credit losses at least quarterly. Investment grade securities are judged to have a low risk of default, to be of the best quality and carry the smallest degree of investment risk. As of December 31, 2025 and 2024, the majority of the investment securities portfolio consisted of securities rated investment grade by a leading rating agency; however, a portion of securities in an unrealized loss position did not have a third-party investment grade available (securities with fair values of of $23.5 million and $29.3 million, respectively). These securities were primarily subordinated debt instruments issued by bank holding companies and are classified as corporate bonds. Investment securities with unrealized losses are generally a result of pricing changes due to changes in the interest rate environment since purchase and not as a result of permanent credit impairment. Contractual cash flows for mortgage backed and U.S. Treasury and agencies securities are guaranteed and/or funded by the U.S. government. Municipal securities with unrealized losses showed no indication that the contractual cash flows will not be received when due. The Company does not intend to sell nor does it believe that it will be required to sell, any of its impaired securities prior to the recovery of the amortized cost. No ACL has been recognized for investment securities as of December 31, 2025 and 2024.

Previous wording

Restricted equity investments consisted of stock in the FHLB (carrying basis $9.4 million and $12.3 million at December 31, 2024 and 2023, respectively), FRB stock (carrying basis of $9.4 million and $5.9 million at December 31, 2024 and 2023, respectively), and stock in the Company’s correspondent bank (carrying basis of $468 thousand at both December 31, 2024 and 2023). Restricted equity investments are carried at cost.

Current wording

Restricted equity investments consisted of stock in the FHLB (carrying basis $9.1 million and $9.4 million at December 31, 2025 and 2024, respectively), FRB stock (carrying basis of $9.4 million at both December 31, 2025 and 2024, respectively), and stock in the Company’s correspondent bank (carrying basis of $0.5 million at both December 31, 2025 and 2024). Restricted equity investments are carried at cost.

Previous wording

The Company also has various other equity investments, including an investment in a fintech company and limited partnerships, totaling $4.8 million and $12.9 million as of December 31, 2024 and 2023, respectively. The Company reports such investments at fair value if observable market transactions have occurred in similar securities, resulting in a new carrying value that is evaluated for impairment no less than quarterly. These impairment analyses may include quantitative and/or qualitative information obtained either directly from the investee, a third-party broker, or a third-party valuation firm. If a potential impairment has been identified, the carrying value of the investment would be written down to its estimated fair market value through a charge to earnings. In the second quarter of 2024, the Company identified potential impairment triggers related to one of its investments, mainly due to regulatory pressures on banks partnering with fintech companies in the BaaS sector. These pressures led some fintech companies to announce cost-saving measures and at least one to seek bankruptcy protection. As a result, the Company engaged a third-party valuation firm to value the Company's investment in a fintech company. This valuation resulted in an $8.5 million impairment charge, recorded in fair value adjustments of other equity investments, to adjust the investment to its estimated fair market in the second quarter of 2024.

Current wording

The Company also has various other equity investments, including an investment in a fintech company and limited partnerships, totaling $4.9 million and $4.8 million as of December 31, 2025 and 2024, respectively. The Company reports such investments at fair value if observable market transactions have occurred in similar securities, resulting in a new carrying value that is evaluated for indication of impairment no less than quarterly. These impairment analyses may include quantitative and/or qualitative information obtained either directly from the investee, a third-party broker, or a third-party valuation firm. If a potential impairment has been identified, the carrying value of the investment would be written down to its estimated fair market value through a charge to earnings. In the second quarter of 2024, the Company identified impairment indicators related to one of its investments, resulting in an $8.5 million impairment charge that was recorded in fair value adjustments of other equity investments on the consolidated statements of operations. No such potential impairment indicators were noted in 2025.

Previous wording

The following table presents the amortized cost of the investment portfolio by contractual maturities, as well as the weighted average yields, for each of the maturity ranges as of and for the periods stated. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

Current wording

The following table presents the amortized cost of the investment portfolio by contractual maturities, as well as the weighted average yields, for each of the maturity ranges as of the date and for the periods stated. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

Previous wording

Deposits. The principal sources of funds for the Company are deposits, including transaction accounts (demand deposits and money market accounts), time deposits, and savings accounts, of customers in the Company’s primary geographic market area. Such customers provide the Bank a source of fee income and cross-marketing opportunities and are generally a lower cost source of funding for the Bank.

Current wording

Deposits. The principal sources of funds for the Company are deposits, including transaction accounts (demand and money market accounts), time deposits, and savings accounts, of customers in the Company’s primary geographic market area. Such customers provide the Bank a source of fee income and cross-marketing opportunities and are generally a lower cost source of funding for the Bank.

Previous wording

Brokered deposit balances are sourced through intermediaries and are an unsecured source of funding for the Bank. Brokered deposits were added throughout 2023 and early 2024 to enhance liquidity in light of financial industry events that began in March 2023 and in anticipation of the exit of the Company's fintech BaaS deposit operations. Brokered deposits represented approximately 18.5% and 20.1% of total deposits as of December 31, 2024 and 2023, respectively, and were all time deposits at December 31, 2024. The Bank has a liquidity management program, with oversight of the Bank’s asset and liability committee (the “ALCO”) that sets forth guidelines for the desired maximum level of brokered deposits, which is 20.0% of total deposits. As noted, the Company issued brokered deposits as part of its liquidity management plan, and as a result, the Company's brokered deposit levels have approximated the high-end of the guideline at December 31, 2024. In recent quarters, the Company has reduced levels of brokered deposits and expects to continue to reduce levels in future periods to a level of 10.0% or less of total deposits. As certain brokered deposits have multiple-year terms, the Company expects brokered deposits to be a funding source for several years. The ALCO monitors brokered deposit concentrations as part of its liquidity risk management program.

Current wording

Brokered deposit balances are sourced through intermediaries and are an unsecured source of funding for the Bank. Brokered deposits were added throughout 2023 and early 2024 to enhance liquidity and in anticipation of the exit of the Company's fintech BaaS deposit operations. The Bank has a liquidity management program, with oversight of the Bank’s asset and liability committee (the “ALCO”), that sets forth guidelines for the desired maximum level of brokered deposits, which is 20.0% of total deposits. In recent quarters, the Company has reduced its level of higher-priced brokered deposits by sourcing non-brokered deposits and through cash flows from the loan portfolio, and expects to continue reducing brokered deposits in future periods to 10.0% or less of total deposits. The ALCO monitors brokered deposit concentrations as part of its liquidity risk management program.

Previous wording

Total deposits decreased $386.6 million from $2.57 billion as of December 31, 2023 to $2.18 billion as of December 31, 2024, as:

Current wording

Total deposits decreased $268.3 million to $1.91 billion as of December 31, 2025 from $2.18 billion as of December 31, 2024, as:

Previous wording

Brokered deposits decreased $113.0 million from approximately $515.5 million, or 20.1% of total deposits, as of December 31, 2023 to approximately $402.5 million, or 18.5% of total deposits, as of December 31, 2024; and

Current wording

Brokered deposits decreased $163.8 million from approximately $402.5 million, or 18.5% of total deposits, as of December 31, 2024 to approximately $238.7 million, or 12.5% of total deposits, as of December 31, 2025.

Previous wording

Estimated uninsured deposits totaled approximately $399.3 million as of December 31, 2024, or 18.0% of total deposits, compared to $573.9 million, or 22.3% of total deposits, as of December 31, 2023. Excluding fintech BaaS deposits, estimated uninsured deposits were 18.1% and 18.2% of total deposits as of December 31, 2024 and 2023, respectively. Uninsured deposit amounts are based on estimates as of the reported date.

Current wording

Estimated uninsured deposits totaled approximately $397.0 million as of December 31, 2025, or 19.4% of total deposits, compared to $399.3 million, or 18.0% of total deposits, as of December 31, 2024. Uninsured deposit amounts are based on estimates as of the reported dates.