CoastalSouth Bancshares, Inc.

Previous wording

The purpose of this discussion and analysis of financial condition and results of operations, also referred to hereafter as this MD&A, is to aid in understanding significant changes in the financial condition of CoastalSouth Bancshares, Inc. and our wholly owned subsidiary, Coastal States Bank, from December 31, 2024 through September 30, 2025 and on our results of operations for the three and nine months ended September 30, 2025 and 2024. This discussion and analysis should be read in conjunction with our audited consolidated financial statements and notes thereto for the year ended December 31, 2024 included in our Form S-1 that was declared effective by the Securities and Exchange Commission on July 1, 2025, relating to the IPO (the “Registration Statement”), 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 of financial condition and results of operations, also referred to hereafter as this MD&A, is to aid in understanding significant changes in the financial condition of CoastalSouth Bancshares, Inc. and our wholly owned subsidiary, Coastal States 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 on the Company’s 2025 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

This Quarterly Report on Form 10‑Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. These statements are often, but not always, made through the use of words or phrases such as “may,” “might,” “should,” “could,” “predict,” “potential,” “believe,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “strive,” “projection,” “goal,” “target,” “outlook,” “aim,” “would,” “annualized” and “outlook,” or the negative version of those words or other comparable words or phrases of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions, estimates and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements.

Current wording

This Quarterly Report on Form 10‑Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. These statements are often, but not always, made through the use of words or phrases such as “may,” “might,” “should,” “could,” “predict,” “potential,” “believe,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “strive,” “projection,” “goal,” “target,” “aim,” “would,” “annualized” and “outlook,” or the negative version of those words or other comparable words or phrases of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions, estimates and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements.

Previous wording

our ability to implement and adapt to changes our business strategies;

Current wording

our ability to implement and adapt to changes in our business strategies;

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our ability to retain our existing customers and attract and retain new customers relationships;

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our ability to retain our existing customers and attract and retain new customer relationships;

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a breach in security of our information systems, including the occurrence of a cyber-attack incidents or a deficiencies in cyber security;

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a breach in security of our information systems, including the occurrence of cyber-attack incidents or a deficiencies in cyber security;

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other economic, competitive, governmental, regulatory and operational factors affecting our operations, pricing, products and services described elsewhere in this prospectus.

Current wording

other economic, competitive, governmental, regulatory and operational factors affecting our operations, pricing, products and services described in the Company's 2025 Form 10-K.

Previous wording

other risks and factors identified in the Registration Statement that was filed with the SEC under the heading “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

Current wording

other risks and factors identified in the Company’s 2025 Form 10-K that was filed with the SEC under the heading “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

Previous wording

The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this Quarterly Report on Form 10-Q. Because of these risks and other uncertainties, our actual future results, performance or achievement, or industry results, may be materially different from the results indicated by the forward-looking statements in this Quarterly Report on Form 10-Q. In addition, our past results of operations are not necessarily indicative of our future results. These forward-looking statements represent our beliefs, assumptions and estimates only as of the dates on which they were made, as predictions of future events. However, the events and circumstances reflected in the forward-looking statements may not be achieved or occur. For example, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this prospectus, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. Any forward-looking statement speaks only as of the date on which it is made, and except as required by applicable law, we do not undertake any obligation to update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.

Current wording

The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this Quarterly Report on Form 10-Q. Because of these risks and other uncertainties, our actual future results, performance or achievement, or industry results, may be materially different from the results indicated by the forward-looking statements in this Quarterly Report on Form 10-Q. In addition, our past results of operations are not necessarily indicative of our future results. These forward-looking statements represent our beliefs, assumptions and estimates only as of the dates on which they were made, as predictions of future events. However, the events and circumstances reflected in the forward-looking statements may not be achieved or occur. For example, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. Any forward-looking statement speaks only as of the date on which it is made, and except as required by applicable law, we do not undertake any obligation to update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.

Previous wording

These statements are inherently uncertain, and we cannot guarantee future results, performance or achievements. For a discussion of these and other risks that may cause actual results to differ from expectations, refer to the section entitled “Risk Factors” and other information contained in our Registration Statement and our other periodic filings, including quarterly reports on Form 10-Q and current reports on Form 8-K, that we file from time to time with the SEC.

Current wording

These statements are inherently uncertain, and we cannot guarantee future results, performance or achievements. For a discussion of these and other risks that may cause actual results to differ from expectations, refer to the section entitled “Risk Factors” and other information contained on the Company’s 2025 Form 10-K and our other periodic filings, including quarterly reports on Form 10-Q and current reports on Form 8-K, that we file from time to time with the SEC.

Previous wording

CoastalSouth Bancshares, Inc. is a bank holding company headquartered in Atlanta, Georgia. We currently operate 11 retail banking branches in three primary markets, including the Lowcountry of South Carolina, Savannah, Georgia, and metro Atlanta, Georgia. CSB also operates four specialty lines of business each of which operates on a national platform, including Senior Housing, Marine Lending, Government Guaranteed Lending, and Mortgage Banker Finance. The deposits of CSB are insured by the FDIC. CSM, a wholly owned subsidiary of CSB, is a mortgage company focused on originating and selling residential mortgages to investors, some of which are retained in the portfolio.

Current wording

CoastalSouth Bancshares, Inc. (the "Company"), a bank holding company headquartered in Atlanta, Georgia. The Company was incorporated under the laws of the Commonwealth of Virginia on May 24, 2004, and converted to a corporation organized under the laws of the State of Georgia on May 12, 2023. We operate through our wholly-owned banking subsidiary, Coastal States Bank (the "Bank" or "CSB"), a South Carolina state-chartered commercial bank. We currently operate 11 retail banking branches in three primary markets, including the Lowcountry of South Carolina, Savannah, Georgia, and metro Atlanta, Georgia. CSB also operates four specialty lines of business, including Senior Housing, Marine Lending, Government Guaranteed Lending, and Mortgage Banker Finance ("MBF"). The deposits of CSB are insured by the FDIC. Coastal States Mortgage, Inc. (“CSM”), a wholly owned subsidiary of CSB, is a mortgage company focused on originating and single-family residential mortgages, some of which are retained in the portfolio. In this report on Form 10-Q, the words “the Company,” “we,” “us,” and “our” refer to CoastalSouth Bancshares, Inc., together with CSB and CSB’s wholly owned subsidiaries, except where the context requires otherwise.

Previous wording

Certain policies inherently have a greater reliance on the use of estimates, assumptions or judgments and as such, have a greater possibility of producing results that could be materially different than originally reported. We have identified the determination of our ACL, fair value measurements, stock-based compensation, and income taxes to be the accounting areas that require the most subjective or complex judgments, estimates and assumptions, and where changes in those judgments, estimates and assumptions (based on new or additional information, changes in the economic environment and/or market interest rates, etc.) could have a significant effect on our financial statements. Therefore, we consider these policies, discussed below, to be critical accounting estimates and discuss them directly with the Audit Committee of our Board.

Current wording

Certain policies inherently have a greater reliance on the use of estimates, assumptions or judgments and as such, have a greater possibility of producing results that could be materially different than originally reported. We have identified the determination of our ACL and fair value measurements to be the accounting areas that require the most subjective or complex judgments, estimates and assumptions, and where changes in those judgments, estimates and assumptions (based on new or additional information, changes in the economic environment and/or market interest rates, etc.) could have a significant effect on our financial statements. Therefore, we consider these policies, discussed below, to be critical accounting estimates and discuss them directly with the Audit Committee of our Board.

Previous wording

Our most significant accounting policies are presented in Note 1 of the consolidated financial statements as of December 31, 2024 included in our Registration Statement that was filed with the SEC. These policies, along with the disclosures presented in the other notes to the consolidated financial statements and in this MD&A, provide information on how significant assets and liabilities are valued in the financial statements and how those values are determined. There have been no significant changes to the accounting policies, estimates, and assumptions, or the judgments affecting the application of these estimates and assumptions from those disclosed in the Registration Statement.

Current wording

Our most significant accounting policies are presented in Note 1 of the consolidated financial statements as of December 31, 2025 included on the Company’s 2025 Form 10-K that was filed with the SEC. These policies, along with the disclosures presented in the other notes to the consolidated financial statements and in this MD&A, provide information on how significant assets and liabilities are valued in the financial statements and how those values are determined. There have been no significant changes to the accounting policies, estimates, and assumptions, or the judgments affecting the application of these estimates and assumptions from those disclosed on the Company’s 2025 Form 10-K.

Previous wording

Additional information on the loan portfolio and ACL can be found in the sections of this MD&A titled “Loans,” “Allowance for Credit Losses on Loans,” “Allowance for Credit Losses for Unfunded Commitments,” and “Nonperforming Loans.” Note 1 to the consolidated financial statements as of December 31, 2024 included our Registration Statement that was filed with the SEC includes additional information on accounting policies related to the ACL.

Current wording

Additional information on the loan portfolio and ACL can be found in the sections of this MD&A titled “Loans,” “Allowance for Credit Losses on Loans,” “Allowance for Credit Losses for Unfunded Commitments,” and “Nonperforming Loans.”Note 1 to the consolidated financial statements as of December 31, 2025 included on the Company’s 2025 Form 10-K that was filed with the SEC includes additional information on accounting policies related to the ACL.

Previous wording

The following table sets forth unaudited selected financial data for the most recent five quarters and the nine months ended September 30, 2025 and 2024. This data should be read in conjunction with the unaudited consolidated financial statements and accompanying notes included in Item 1 and the information contained in this Item 2.

Current wording

The following table sets forth unaudited selected financial data for the most recent five quarters and the three months ended March 31, 2026 and 2025. This data should be read in conjunction with the unaudited consolidated financial statements and accompanying notes included in Item 1 and the information contained in this Item 2.

Previous wording

The following discussion of our results of operations compares the three months ended September 30, 2025 and 2024. We reported net income for the three months ended September 30, 2025 of $6.7 million compared to net income of approximately $7.9 million for the three months ended September 30, 2024. The decrease of approximately $1.1 million was principally attributable to a lower noninterest income, primarily gain on sale of government guaranteed loans ("GGL"), coupled with a higher effective tax rate albeit with a higher taxable income.

Current wording

The following discussion of our results of operations compares the three months ended March 31, 2026 and 2025. We reported net income for the three months ended March 31, 2026 of $6.3 million compared to net income of approximately $5.1 million for the three months ended March 31, 2025. The increase of approximately $1.3 million was principally attributable to a higher net interest income, offset by higher noninterest expense, primarily salaries and employee benefits.

Previous wording

Net interest income for the three months ended September 30, 2025 was $19.2 million compared to $17.0 million for the three months ended September 30, 2024, an increase of $2.2 million, or 13.1%. This increase was primarily due to an increase in the average balance of our total interest-earning assets coupled with a decrease in the average rate paid on interest-bearing liabilities. The increase in the average balance for the interest-earning assets was primarily due to an increase in average loans outstanding. The yield on total earning assets and interest-bearing liabilities decreased by 23 and 58 basis points, respectively, during the same period.

Current wording

Net interest income for the three months ended March 31, 2026 was $19.7 million compared to $16.8 million for the three months ended March 31, 2025, an increase of $3.0 million, or 17.8%. This increase was primarily due to an increase in the average balance of our total interest-earning assets coupled with a decrease in the average rate paid on interest-bearing liabilities. The increase in the average balance for the interest-earning assets was primarily due to an increase in average federal funds sold and a net increase in average loans outstanding. The yield on total earning assets and interest-bearing liabilities decreased by 13 and 36 basis points, respectively, during the same period.

Previous wording

Total interest income for the three months ended September 30, 2025 was $32.9 million compared to $32.6 million for the three months ended September 30, 2024, an increase of $336 thousand, or 1.0%. This increase was primarily due to growth in our loans portfolio albeit with lower yields.

Current wording

Total interest income for the three months ended March 31, 2026 was $32.6 million compared to $30.0 million for the three months ended March 31, 2025, an increase of $2.5 million, or 8.5%. This increase was primarily due to growth in our loan portfolios notwithstanding with lower yields.

Previous wording

Interest and fees on LHFI were $24.6 million for the three months ended September 30, 2025 compared to $24.2 million for the three months ended September 30, 2024, an increase of $384 thousand, or 1.6%. This increase was primarily attributable to an increase in average LHFI of $103.5 million, or 7.2%, albeit with a decrease in yield. The yield on gross LHFI decreased by 37 basis points compared to the same period in 2024. Interest and fees on LHFS were $3.4 million for the three months ended September 30, 2025 compared to $3.0 million for the three months ended September 30, 2024. This increase was primarily due to an increase in the average balance of LHFS outstanding although the yield decreased by 26 basis points compared to the same period in 2024.

Current wording

Interest and fees on LHFI were $25.1 million for the three months ended March 31, 2026 compared to $22.3 million for the three months ended March 31, 2025, an increase of $2.8 million, or 12.6%. This increase was primarily attributable to an increase in average LHFI of $189.9 million, or 13.3%, despite a decrease in yield. The yield on gross LHFI decreased by 3 basis points compared to the same period in 2025. Interest and fees on LHFS were $2.9 million for the three months ended March 31, 2026 compared to $2.8 million for the three months ended March 31, 2025. This increase was primarily due to an increase in the average balance of LHFS outstanding whereas the yield decreased by 90 basis points compared to the same period in 2025.

Previous wording

Interest income on investment securities was $4.1 million for the three months ended September 30, 2025 compared to $4.2 million for the three months ended September 30, 2024. This decrease was primarily due to the fact that the average balance decreased by $13.5 million even though the the yield on investment securities increased by 12 basis points during the period.

Current wording

Interest income on investment securities was $3.6 million for the three months ended March 31, 2026 compared to $3.8 million for the three months ended March 31, 2025. This decrease was primarily due to the fact that the average balance increased by $8.5 million coupled with a 34 basis points decrease in yield on investment securities during the period.

Previous wording

Interest expense for the three months ended September 30, 2025 was $13.7 million compared to $15.6 million for the three months ended September 30, 2024. This decrease was primarily attributable to lower average borrowings, specifically the payoff of a $70.0 million Bank Term Funding Program ("BTFP") that was outstanding during the third quarter of 2024, coupled with a 58 basis point decrease in the average cost of overall total interest-bearing liabilities, primarily in money market and time deposit accounts as the rates were adjusted to align with the market. Average borrowings outstanding decreased from September 30, 2024 to September 30, 2025 by $84.2 million, or 87.1%, primarily due to the aforementioned BTFP payoff, while the cost increased by 797 basis points during the same period, which was principally due to a $236 thousand debt issuance costs which were accelerated due to calling of the Company's subordinated debt.

Current wording

Interest expense for the three months ended March 31, 2026 was $12.8 million compared to $13.3 million for the three months ended March 31, 2025. This decrease was primarily driven by lower average time deposits and borrowings, coupled with a 36 basis point decrease in the average cost of overall total interest-bearing liabilities, primarily in borrowings, due to the payoff of the Company's subordinated debt during the third quarter of 2025, and money market and time deposit accounts, as the rates were adjusted to align with the market.

Previous wording

Net interest margin for the three months ended September 30, 2025 and 2024 was 3.58% and 3.32%, respectively. 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. This increase in our net interest margin was primarily due to a combination of average total earning assets growth and a decrease in yield for average total interest-bearing liabilities. Average earning assets for the three months ended September 30, 2025 increased by $91.9 million compared to the three months ended September 30, 2024, principally due to growth of our loan portfolio. Average interest-bearing liabilities for the three months ended September 30, 2025 increased by $51.8 million compared to the three months ended September 30, 2024, driven by growth in average interest-bearing deposits.

Current wording

Net interest margin for the three months ended March 31, 2026 and 2025 was 3.59% and 3.38%, respectively. 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. This increase in our net interest margin was primarily due to a combination of average total earning assets growth and a decrease in yield for average total interest-bearing liabilities. Average earning assets for the three months ended March 31, 2026 increased by $219.7 million compared to the three months ended March 31, 2025, principally due to growth of our loan portfolios. Average interest-bearing liabilities for the three months ended March 31, 2026 increased by $129.1 million compared to the three months ended March 31, 2025, driven by growth in average interest-bearing deposits, primarily money market and demand deposits accounts.

Previous wording

Noninterest income for the three months ended September 30, 2025 was $2.1 million, a decrease of $861 thousand or 29.1%, compared to $3.0 million for the three months ended September 30, 2024. This decrease was primarily in gain on sale of GGL and a net decrease in other categories of noninterest income, primarily in other noninterest income.

Current wording

Noninterest income for the three months ended March 31, 2026 was approximately $2.0 million, an increase of $86 thousand or 4.6%, compared to approximately $1.9 million for the three months ended March 31, 2025. This increase was primarily in gain on sale of government guaranteed loans ("GGL") and mortgage related income, offset by a net decrease in other categories of noninterest income, primarily in other noninterest income.

Previous wording

Mortgage banking related income increased by $23 thousand to $299 thousand for the three months ended September 30, 2025 compared to $276 thousand for the three months ended September 30, 2024. This increase was primarily due to slightly higher secondary market mortgage production which is comprised primarily of activity related to the sale of consumer mortgage loans as well as loan origination fees such as closing charges, document review fees, application fees, other loan origination fees, and loan processing fees.

Current wording

Mortgage banking related income increased by $173 thousand to $394 thousand for the three months ended March 31, 2026 compared to $221 thousand for the three months ended March 31, 2025. This increase was primarily due to higher secondary market mortgage production which is comprised primarily of activity related to the sale of consumer mortgage loans as well as loan origination fees such as closing charges, document review fees, application fees, other loan origination fees, and loan processing fees.

Previous wording

Gain on sale of GGL decreased by $788 thousand to $878 thousand for the nine months ended September 30, 2025 compared to $1.7 million for the same period during 2024. The Company's gain on the sale of GGL volume increases or decreases based on the attractiveness of market premiums and the amount of inventory of loans that are saleable.

Current wording

Gain on sale of GGL increased by $337 thousand for the three months ended March 31, 2026. There were no GGL sales during the three months ended March 31, 2025. The Company's gain on the sale of GGL volume increases or decreases based on the attractiveness of market premiums and the amount of inventory of loans that are saleable.

Previous wording

Other noninterest income decreased by $222 thousand to $291 thousand for the three months ended September 30, 2025 compared to $513 thousand for the three months ended September 30, 2024. This decrease was primarily due to a nonrecurring $186.8 thousand other gain on OREO during three months ended September 30, 2024 and a net decrease in other categories within other noninterest income.

Current wording

Other noninterest income decreased by $468 thousand to $275 thousand for the three months ended March 31, 2026 compared to $743 thousand for the three months ended March 31, 2025. This decrease was primarily due to nonrecurring $438 thousand recognized income from a Small Business Investment Companies ("SBIC") partnership investment recognized during three months ended March 31, 2025 related to the sale of one of the underlying fund investments, coupled with a net decrease in other categories within other noninterest income.

Previous wording

Noninterest expense for the three months ended September 30, 2025 was $11.9 million compared to $10.8 million for the three months ended September 30, 2024, an increase of $1.0 million, or 9.5%. This increase was across all noninterest expense categories primarily in salaries and employee benefits, other professional services, software and other technology expense, and other noninterest expense.

Current wording

Noninterest expense for the three months ended March 31, 2026 was $13.0 million compared to $11.4 million for the three months ended March 31, 2025, an increase of $1.6 million, or 14.2%. This increase was across multiple noninterest expense categories primarily in salaries and employee benefits, occupancy and equipment, and software and other technology expense, coupled with a net increase in all other noninterest expense categories.

Previous wording

Salaries and employee benefits expense for the three months ended September 30, 2025 was $7.0 million compared to $6.7 million for the three months ended September 30, 2024, an increase of $258 thousand, or 3.8%. This increase was attributable to hiring new employees with skills and experience necessary to support our strategic goals. The average number of full-time equivalent employees was 194 for the three months ended September 30, 2025 compared to 181 for three months ended September 30, 2024.

Current wording

Salaries and employee benefits expense for the three months ended March 31, 2026 was $8.0 million compared to $6.7 million for the three months ended March 31, 2025, an increase of $1.4 million, or 20.2%. This increase was attributable to hiring new employees with skills and experience necessary to support our strategic goals coupled with annual merit increases. The average number of full-time equivalent employees was 201 for the three months ended March 31, 2026 compared to 180 for three months ended March 31, 2025.

Previous wording

Occupancy and equipment expense for the three months ended September 30, 2025 was $850 thousand compared to $754 thousand for the three months ended September 30, 2024, an increase of $96 thousand, or 12.7%. This increase was primarily due to new leases and rental increases, property taxes and depreciation, and upkeep related to the properties.

Current wording

Occupancy and equipment expense for the three months ended March 31, 2026 was $886 thousand compared to $788 thousand for the three months ended March 31, 2025, an increase of $98 thousand, or 12.4%. This increase was primarily due to new leases and rental increases, property taxes and depreciation, and upkeep related to the properties.

Previous wording

Software and technology expense for the three months ended September 30, 2025 was $788 thousand compared to $671 thousand for the three months ended September 30, 2024, an increase of $117 thousand, or 17.4%. This expense was primarily comprised of our information technology services, software licenses and maintenance and commensurate with the Company growth.

Current wording

Software and technology expense for the three months ended March 31, 2026 was $826 thousand compared to $703 thousand for the three months ended March 31, 2025, an increase of $123 thousand, or 17.5%. This expense was primarily comprised of our information technology services, software licenses and maintenance and commensurate with the Company growth.

Previous wording

Marketing and advertising expense for the three months ended September 30, 2025 was $245 thousand compared to $243 thousand for the three months ended September 30, 2024 and remained relatively flat. Marketing and advertising costs are associated with digital advertising, mailings, and sponsorship. Marketing and advertising expense is included in Other noninterest expenses in our Company’s Consolidated Statements of Operations.

Current wording

Marketing and advertising expense for the three months ended March 31, 2026 was $279 thousand compared to $233 thousand for the three months ended March 31, 2025. Marketing and advertising costs are associated with digital advertising, mailings, and sponsorship. Marketing and advertising expense is included in Other noninterest expenses in our Company’s Consolidated Statements of Operations.

Previous wording

Other noninterest expenses, excluding marketing and advertising expense, for the three months ended September 30, 2025 were $1.4 million compared to $1.2 million for the three months ended September 30, 2024, an increase of $166 thousand, or 14.0%. This increase was primarily attributable to increases in board of directors fees paid in cash, as no equity awards were granted to the Board of Directors in 2025, and general and administrative expense. Included in other noninterest expense for the three months ended September 30, 2025 and 2024 were directors’ fees paid in cash of $176 thousand and $79 thousand, respectively.

Current wording

Other noninterest expenses, excluding marketing and advertising expense, for the three months ended March 31, 2026 were $1.4 million compared to $1.3 million for the three months ended March 31, 2025, an increase of $63 thousand, or 4.8%. This increase was primarily attributable to increases in other noninterest expense and general and administrative expense, offset by decreases in Board of Directors fees and OREO write-downs as there were no write-downs during the current period. Included in other noninterest expense for the three months ended March 31, 2026 and 2025 were directors’ fees of $156 thousand and $176 thousand, respectively.

Previous wording

Income tax expense for the three months ended September 30, 2025 and 2024 was $2.0 million and $2.2 million, respectively. Effective tax rates were 23.2% and 22.1% for the three months ended September 30, 2025 and 2024, respectively. The increase in effective tax rate compared to the three months ended September 30, 2024 was due to a lower recognition of low income housing tax credits during the three months ended September 30, 2025.

Current wording

Income tax expense for the three months ended March 31, 2026 and 2025 was $2.0 million and $1.5 million, respectively. Effective tax rates were 23.6% and 23.4% for the three months ended March 31, 2026 and 2025, respectively. The increase in effective tax rate compared to the three months ended March 31, 2025 was due to a lower recognition of low income housing tax credits during the three months ended March 31, 2026.

Previous wording

The increasing trend in total assets was primarily attributable to growth of our loans held for investment portfolio.

Current wording

Total assets increased $42.0 million, or 1.8%, to $2.35 billion at March 31, 2026 compared to $2.31 billion at December 31, 2025. The increasing trend in total assets was primarily attributable to continued growth of our loan portfolio.

Previous wording

Loans represent the largest portion of our earning assets, substantially greater than the securities portfolio or any other of our asset category.

Current wording

Loans represent the largest portion of our earning assets, substantially greater than the securities portfolio or any other category of assets.

Previous wording

Average loans, including both LHFI and LHFS, were 79.4% and 77.7% of average earning assets as of September 30, 2025 and December 31, 2024, respectively. Therefore, the quality and diversification of our loan portfolio is an important consideration when reviewing our financial condition. The Company has established systematic procedures for approving and monitoring loans that vary depending on the size and nature of the loan and applies these procedures in a disciplined manner. Total gross loans of $1.78 billion at September 30, 2025 represent an increase of $201.1 million or 12.7% as compared to December 31, 2024.

Current wording

Average loans, including both LHFI and LHFS, were 79.6% and 79.8% of average earning assets as of March 31, 2026 and December 31, 2025, respectively. Therefore, the quality and diversification of our loan portfolio is an important consideration when reviewing our financial condition. The Company has established systematic procedures for approving and monitoring loans that vary depending on the size and nature of the loan and applies these procedures in a disciplined manner. Total gross loans of $1.83 billion at March 31, 2026 represent an increase of $41.6 million or 2.3% as compared to December 31, 2025.

Previous wording

LHFS are comprised of loans acquired through mortgage warehouse lending activities and origination of mortgage loans. We act as a warehouse lender by purchasing loans originated by third-party mortgage originators and selling these loans to other third-party investors. We also originate mortgage loans with customers through CSM and sell these loans to third-party investors. LHFS at September 30, 2025 were $231.6 million compared to $174.0 million at December 31, 2024. The growth in LHFS was due to increased mortgage refinance volume and growth in customers that originate higher volumes of loans.

Current wording

LHFS are primarily comprised of loans acquired through mortgage warehouse lending activities through our MBF division. We act as a warehouse lender by purchasing loans originated by third-party mortgage originators and selling these loans to other third-party investors. Additionally, we sell other types of loans, such as GGL or marine loans, through the normal course of business; when the Company has the intent to sell these loans, they are transferred from LHFI to LHFS. LHFS at March 31, 2026 were $202.6 million compared to $170.9 million at December 31, 2025. At March 31, 2026, LHFS from MBF were $202.2 million and other LHFS were $415 thousand; at December 31, 2025 all LHFS were from MBF. The growth in LHFS was due to increased mortgage refinance volume and growth in MBF customers that originate higher volumes of loans.

Previous wording

Gross LHFI increased $143.5 million, or 10.2%, to $1.55 billion as of September 30, 2025 compared to $1.41 billion at December 31, 2024. There was a higher market demand for our commercial and retail loan products during the nine months ended September 30, 2025 from December 31, 2024 as the Company experienced strong loan demand and has been able to close many deals in the pipeline.

Current wording

Gross LHFI increased $9.9 million, or 0.6%, to approximately $1.63 billion as of March 31, 2026 compared to $1.62 billion at December 31, 2025. There was a higher market demand for our ADC and owner-occupied CRE loans during the three months ended March 31, 2026 from December 31, 2025 as the Company experienced strong loan demand and continues to close many deals in the pipeline.

Previous wording

The Company engages in a full complement of lending activities, including CRE loans, construction loans, C&I, and consumer purpose loans. Our loan portfolio has concentrations of over 10% of LHFI in income producing CRE, senior housing, marine vessels loans, and residential mortgages with the remaining balance in other categories within commercial and retail loans categories.

Current wording

The Company engages in a full complement of lending activities, including CRE loans, construction loans, C&I, and consumer purpose loans. Our loan portfolio has concentrations of over 10% of LHFI in income producing CRE, senior housing, marine vessels loans, and residential mortgages with the remaining balance in other categories within commercial and retail loans categories. The Bank's ratio of commercial real estate loans, excluding owner-occupied loans, to total regulatory capital was 222.0% and 230.0% as of March 31, 2026 and December 31, 2025, respectively.

Previous wording

The following tables presents the maturity distribution of our loans as of September 30, 2025 and December 31, 2024. The tables show the distribution of such loans between those loans with predetermined (fixed) interest rates and those with variable (floating) interest rates:

Current wording

The following tables present the maturity distribution of our loans as of March 31, 2026 and December 31, 2025. The tables show the distribution of such loans between those loans with predetermined (fixed) interest rates and those with variable (floating) interest rates:

Previous wording

As of September 30, 2025, our total commercial loans comprised of $933.5 million or 60.1%, of loans, compared to $864.4 million, or 61.3% of loans, as of December 31, 2024. Our total commercial loans balances increased by $69.1 million, or 8.0% at September 30, 2025 compared to December 31, 2024.

Current wording

As of March 31, 2026, our total commercial loans comprised of approximately $1.01 billion or 61.9%, of loans, compared to $995.2 million, or 61.5% of loans, as of December 31, 2025. Our total commercial loans balances increased by $12.2 million, or 1.2% at March 31, 2026 compared to December 31, 2025.