Commercial Bancgroup, Inc.

Previous wording

The following discussion and analysis of our financial condition and results of operations should be read together with our unaudited consolidated financial statements and related notes included elsewhere in this Report and our audited consolidated financial statements and the related notes and the discussion under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for the fiscal year ended December 31, 2025 included in the2025 Annual Report*. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions that could cause actual results to differ materially from our expectations. Factors that could cause or contribute to such differences include those discussed below and elsewhere in this Report, particularly in the section titled “Cautionary Note Regarding Forward-Looking Statements” as well as the section titled “Risk Factors” in the 2025 Annual Report. We assume no obligation to update any of these forward-looking statements except to the extent required by law.*

Current wording

The following discussion and analysis of our financial condition and results of operations should be read together with our unaudited consolidated financial statements and related notes included elsewhere in this Report and our audited consolidated financial statements and the related notes and the discussion under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the 2025 Annual Report. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions that could cause actual results to differ materially from our expectations. Factors that could cause or contribute to such differences include those discussed below and elsewhere in this Report, particularly in the section titled “Cautionary Note Regarding Forward-Looking Statements,” as well as in the section titled “Risk Factors” in the 2025 Annual Report. We assume no obligation to update any of these forward-looking statements except to the extent required by law.

Previous wording

The Company is a bank holding company headquartered in Harrogate, Tennessee that has elected under the BHC Act to become a financial holding company. We were incorporated in Tennessee in 1975, and we operate primarily through our wholly owned subsidiary, the Bank, a Tennessee-chartered banking corporation organized in 1976. We provide banking services from 34 offices in select markets in Kentucky, North Carolina, and Tennessee, and we also operate one loan production office in Lincolnton, North Carolina. The Bank is a full-service community banking institution that offers traditional consumer and commercial products and services to serve businesses and individuals in our markets.

Current wording

The Parent Company is a bank holding company headquartered in Harrogate, Tennessee that has elected under the BHC Act to become a financial holding company. The Parent Company was incorporated in Tennessee in 1975 and operates primarily through its wholly owned subsidiary, the Bank, a Tennessee-chartered banking corporation organized in 1976. We provide banking services from 34 offices in select markets in Kentucky, North Carolina, and Tennessee, and we also operate one loan production office in Lincolnton, North Carolina. The Bank is a full-service community banking institution that offers traditional consumer and commercial products and services to serve businesses and individuals in our markets.

Previous wording

Our consolidated financial statements are prepared in accordance with GAAP and follow general practices within the banking industry. The application of these principles requires management to make estimates, assumptions and complex judgements that affect amounts presented in our consolidated financial statements. These estimates, assumptions and judgements are based on information available as of the date of the financial statements; accordingly, as this information changes, the consolidated financial statements could reflect different estimates, assumptions, and judgements. Management has identified the ACL as a critical accounting policy as included in Note 1 of our consolidated financial statements as of and for the fiscal year ended December 31, 2025, and included in the 2025 Annual Report to be an accounting area that requires the most complex and subjective judgements and, as such, could be most subject to revision as new and additional information becomes available or circumstances change, including changes in the economic climate and interest rate changes. These policies, along with the disclosures presented in the other notes to the consolidated financial statements and in this analysis and discussion, 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 policies, estimates, and assumptions, from those disclosed in the 2025 Annual Report.

Current wording

Our consolidated financial statements are prepared in accordance with GAAP and follow general practices within the banking industry. The application of these principles requires management to make estimates, assumptions and complex judgements that affect amounts presented in our consolidated financial statements. These estimates, assumptions and judgements are based on information available as of the date of the financial statements; accordingly, as this information changes, the consolidated financial statements could reflect different estimates, assumptions, and judgements. Management has identified the ACL, as a critical accounting policy included in Note 1 of our consolidated financial statements as of and for the fiscal year ended December 31, 2025, and included in the 2025 Annual Report, to be an accounting area that requires the most complex and subjective judgements and, as such, could be most subject to revision as new and additional information becomes available or circumstances change, including changes in the economic climate and interest rate changes. Critical accounting policies we have identified, along with the disclosures presented in the notes to our consolidated financial statements and in this discussion and analysis, 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 policies, estimates, and assumptions, from those disclosed in the 2025 Annual Report.

Previous wording

Pursuant to the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), as an emerging growth company, we can elect to opt out of the extended transition period for adopting any new or revised accounting standards. We have elected to take advantage of the extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we may adopt the standard on the application date for private companies. We have elected to take advantage of the scaled disclosures and other relief under the JOBS Act, and we may take advantage of some or all of the reduced regulatory and reporting requirements that will be available to us under the JOBS Act, so long as we qualify as an emerging growth company.

Current wording

Pursuant to the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), as an emerging growth company, the Parent Company can elect to opt out of the extended transition period for adopting any new or revised accounting standards. The Parent Company has elected to take advantage of the extended transition period, which means that when a standard is issued or revised and it has different application dates for public and private companies, the Parent Company may adopt the standard on the application date for private companies. The Parent Company has elected to take advantage of the scaled disclosures and other relief under the JOBS Act, and the Parent Company may take advantage of some or all of the reduced regulatory and reporting requirements that will be available to us under the JOBS Act, so long as it qualifies as an emerging growth company.

Previous wording

Net interest income is our principal source of net income and represents the difference between interest income and interest expense. We generate interest income from interest-earning assets that we own, including loans and investment securities. We incur interest expense from interest-bearing liabilities, including interest-bearing deposits and other borrowings, notably FHLB advances, outstanding holding company loan agreement with Community Trust Bank, Inc. (the “CTB Loan”) and the Subordinated Debentures. To evaluate net interest income, we measure and monitor: (i) yields on our loans and other interest-earning assets; (ii) the cost of our deposits and other funding sources; (iii) our net interest spread; and (iv) our net interest margin. Net interest spread is the difference between rates earned on interest-earning assets and rates paid on interest-bearing liabilities. Net interest margin is a ratio of net interest income to average interest earning assets for the same period.

Current wording

Net interest income is our principal source of net income and represents the difference between interest income and interest expense. We generate interest income from interest-earning assets that we own, including loans and investment securities. We incur interest expense from interest-bearing liabilities, including interest-bearing deposits and other borrowings, notably FHLB advances and outstanding loans to the Parent Company and Parent Company subordinated debt securities. To evaluate net interest income, we measure and monitor: (i) yields on our loans and other interest-earning assets; (ii) the cost of our deposits and other funding sources; (iii) our net interest spread; and (iv) our net interest margin. Net interest spread is the difference between rates earned on interest-earning assets and rates paid on interest-bearing liabilities. Net interest margin is a ratio of net interest income to average interest earning assets for the same period.

Previous wording

Noninterest income primarily consists of: (i) service charges on deposit accounts; (ii) net realized gains on the sale of premises and equipment; (iii) net realized gains on the sale of foreclosed assets; (iv) automated teller machine (“ATM”) and debit card fees; (v) benefits from changes in the cash surrender value of bank owned life insurance (“BOLI”); and (vi) other miscellaneous fees and income.

Current wording

Noninterest income primarily consists of: (i) service charges on deposit accounts; (ii) net realized gains on the sale of premises and equipment; (iii) net realized gains on the sale of foreclosed assets; (iv) ATM and debit card fees; (v) benefits from changes in the cash surrender value of bank owned life insurance (“BOLI”); and (vi) other miscellaneous fees and income.

Previous wording

Deposits primarily consist of commercial and personal accounts maintained by businesses and individuals in our primary market areas. We also utilize brokered deposits (Multi-Bank Securities, Inc. and LPL Financial) and non-brokered deposits (National CD Rateline), certificates of deposits and reciprocal deposits through a third-party network that effectively allows depositors to receive insurance on amounts greater than the FDIC insurance limit, which is currently $250,000 per depositor, per FDIC-insured bank for each account ownership category. We manage liquidity based on factors that include liquid assets to loans, cash flow projections, short-term funding needs and sources, and the availability of unused funding sources. As of March 31, 2026, approximately $305.0 million was available for borrowing on committed lines with the FHLB and $77.5 million was available for purchases of federal funds from correspondents on an overnight uncommitted basis.

Current wording

Deposits primarily consist of commercial and personal accounts maintained by businesses and individuals in our primary market areas. We also utilize brokered deposits (Multi-Bank Securities, Inc. and LPL Financial) and non-brokered deposits (National CD Rateline), certificates of deposits and reciprocal deposits through a third-party network that effectively allows depositors to receive insurance on amounts greater than the FDIC insurance limit, which is currently $250,000 per depositor, per FDIC-insured bank for each account ownership category. We manage liquidity based on factors that include liquid assets to loans, cash flow projections, short-term funding needs and sources, and the availability of unused funding sources. As of June 30, 2026, approximately $227.2 million was available for borrowing on committed lines with the FHLB and $102.5 million was available for purchases of federal funds from correspondents on an overnight uncommitted basis.

Previous wording

Results of Operations for the Three Months Ended March 31, 2026 and 2025

Current wording

Results of Operations for the Three and Six Months Ended June 30, 2026 and 2025

Previous wording

The following table shows the average outstanding balance of each principal category of our assets, liabilities and shareholders’ equity, together with the average yields on our assets and average costs of our liabilities, for the periods indicated. Yields and costs are calculated by dividing the annualized income or expense by the average daily balances of the corresponding assets or liabilities for the same period.

Current wording

The following tables show the average outstanding balance of each principal category of our assets, liabilities and shareholders’ equity, together with the average yields on our assets and average costs of our liabilities, for the periods indicated. Yields and costs are calculated by dividing the annualized income or expense by the average daily balances of the corresponding assets or liabilities for the same period.

Previous wording

The following table sets forth the effects of changing rates and volumes on our net interest income during the periods shown. Information is provided with respect to: (i) effects on interest income attributable to changes in volume (change in volume multiplied by prior rate), and (ii) effects on interest income attributable to changes in rate (changes in rate multiplied by prior volume). For purposes of this table, changes attributable to both rate and volume that cannot be segregated have been proportionately allocated to both volume and rate.

Current wording

The following tables set forth the effects of changing rates and volumes on our net interest income during the periods shown. Information is provided with respect to: (i) effects on interest income attributable to changes in volume (change in volume multiplied by prior rate), and (ii) effects on interest income attributable to changes in rate (changes in rate multiplied by prior volume). For purposes of these tables, changes attributable to both rate and volume that cannot be segregated have been proportionately allocated to both volume and rate.

Previous wording

The increase in interest income was attributable to a $88.6 million, or 4.9%, increase in average gross loans outstanding as of March 31, 2026, compared to March 31, 2025, offset by a 0.3% decrease in the yield on gross total loans. The increase in average gross loans outstanding was primarily due to organic loan growth in the Nashville-Davidson — Murfreesboro — Franklin, Tennessee MSA (the “Nashville MSA”), the Knoxville, Tennessee MSA (the “Knoxville MSA”) and the Charlotte-Concord-Gastonia, North Carolina-South Carolina MSA (the “Charlotte MSA”). In addition to the decrease in interest income on loans, the decrease in interest income was attributable to a $64.9 million, or 43.0%, decrease in average other interest-earning assets as of March 31, 2026, as compared to March 31, 2025, and a 1.4% decrease in the yield on other interest-earning assets compared to the same period in 2025.

Current wording

The decrease in interest and dividend income for the six months ended June 30, 2026 was primarily attributable to a $96.8 million, or 5.4%, increase in average gross loans outstanding as of June 30, 2026, compared to June 30, 2025, offset by a 0.4% decrease in the yield on gross total loans. The decrease in interest income for the three months ended June 30, 2026 was primarily attributable to a $104.9 million, or 5.8%, increase in average gross loans outstanding as of June 30, 2026, compared to December 31, 2025, offset by a 0.3% decrease in the yield on gross total loans. For both periods, the increase in average gross loans outstanding was primarily due to organic loan growth in the Nashville MSA, the Knoxville MSA and the Charlotte MSA.

Previous wording

The provision for credit losses for the three months ended March 31, 2026, was $122 thousand compared to $0 for the three months ended March 31, 2025. The provision recorded for the three months ended March 31, 2026, was based on an increase in the number of loans outstanding. There were no significant net charge-offs in the three months ended March 31, 2026.

Current wording

The provision for credit losses on loans for the three months ended June 30, 2026, was $404 thousand compared to $0 for the three months ended June 30, 2025. There were no significant net charge-offs in the three months ended June 30, 2026.

Previous wording

The ACL as a percentage of total loans was 0.97% at both March 31, 2026, and December 31, 2025.

Current wording

The ACL as a percentage of total loans was 0.96% at June 30, 2026, compared to 0.97% at December 31, 2025.

Previous wording

Noninterest income for the three months ended March 31, 2026, was $2.6 million compared to $2.4 million for the three months ended March 31, 2025, an increase of $0.1 million, or 6.1%. The following table sets forth the major components of our noninterest income for the three months ended March 31, 2026 and 2025:

Current wording

Noninterest income for the three months ended June 30, 2026, was $2.7 million compared to $2.2 million for the three months ended June 30, 2025, an increase of $0.5 million, or 19.2%. Noninterest income for the six months ended June 30, 2026, was $5.2 million compared to $4.7 million for the six months ended June 30, 2025, an increase of $0.5 million, or 12.3%. The following table sets forth the major components of our noninterest income for the three and six months ended June 30, 2026 and 2025:

Previous wording

Customer service fees include fees for overdraft privilege charges, insufficient funds charges, account analysis service fees on commercial accounts, and monthly account service fees. These fees increased $126 thousand, or 19.2%, to $781 thousand for the three months ended March 31, 2026, from $655 thousand for the three months ended March 31, 2025. This increase was primarily the result of normal fluctuations in our operations.

Current wording

Customer service fees include fees for overdraft privilege charges, insufficient funds charges, account analysis service fees on commercial accounts, and monthly account service fees. These fees increased $100 thousand, or 14.8%, to $774 thousand for the three months ended June 30, 2026, from $674 thousand for the three months ended June 30, 2025. This increase was primarily the result of an increase in customer transactions. For the six months ended June 30, 2026, customer service fees increased $227 thousand, or 17.0%, to $1.6 million from $1.3 million for the six months ended June 30, 2025. This increase was primarily the result of an increase in customer transactions.

Previous wording

Noninterest expense for the three months ended March 31, 2026 was $11.1 million compared to $10.6 million for the three months ended March 31, 2025, an increase of $506 thousand, or 4.8%, which was primarily a result of a loss on the early extinguishment of debt. The following table sets forth the major components of our noninterest expense for the three months ended March 31, 2026 and 2025:

Current wording

Noninterest expense for the three months ended June 30, 2026 was $10.9 million compared to $10.7 million for the three months ended June 30, 2025, an increase of $147 thousand, or 1.4%, which was primarily a result of increases in professional fees. Noninterest expense for the six months ended June 30, 2026 was $22.0 million compared to $21.3 million for the six months ended June 30, 2025, an increase of $653 thousand, or 3.1%, which was primarily a result of a loss on the retirement of debt. The following table sets forth the major components of our noninterest expense for the three and six months ended June 30, 2026 and 2025:

Previous wording

Salaries and employee benefits primarily include: (i) amounts paid to employees for base pay, incentive compensation, and bonuses; (ii) health and other related insurance paid by the Bank on behalf of our employees; and (iii) the annual cost for any increases in the liability for non-qualified plans maintained for certain key employees. Salaries and employee benefits for the three months ended March 31, 2026 were $5.7 million, an increase of $0.1 million, or 1.6%, compared to $5.6 million for the three months ended March 31, 2025. This slight increase was primarily due to pay increases net of turnover.

Current wording

Salaries and employee benefits primarily include: (i) amounts paid to employees for base pay, incentive compensation, and bonuses; (ii) health and other related insurance expenses paid by the Bank on behalf of our employees; and (iii) the annual cost for any increases in the liability for non-qualified plans maintained for certain key employees. Salaries and employee benefits remained consistent at $5.7 million for the three months ended June 30, 2026 increasing by $26 thousand, or 0.5%, compared to the corresponding period in 2025. For the six months ended June 30, 2026, salaries and employee benefits were $11.4 million, an increase of $116 thousand, or 1.0%, compared to $11.3 million for the six months ended June 30, 2025. These slight increases were primarily due to pay increases net of turnover.

Previous wording

Occupancy expenses consist of depreciation on property, premises, equipment and software, rent expense for leased facilities, maintenance agreements on equipment, property taxes, and other expenses related to maintaining owned or leased assets. Occupancy expenses for the three months ended March 31, 2026 were $0.84 million compared to $0.87 million for the three months ended March 31, 2025, a decrease of $0.03 million, or 3.7%. The decrease was primarily attributable to normal fluctuations

Current wording

Occupancy expenses consist of depreciation on property, premises, equipment and software, rent expense for leased facilities, maintenance agreements on equipment, property taxes, and other expenses related to maintaining owned or leased assets. Occupancy expenses for the three months ended June 30, 2026 were $856 thousand compared to $916 thousand for the three months ended June 30, 2025, a decrease of $60 thousand, or 6.6%. For the six months ended June 30, 2026, occupancy expenses were $1.7 million compared to $1.8 million for the six months ended June 30, 2025, a decrease of $0.1 million, or 5.1%. These decreases were primarily attributable to normal fluctuations.

Previous wording

Data processing expenses, which primarily consist of expenses for data processing services for core processing, decreased $0.1 million, or 8.8%, to $1.1 million for the three months ended March 31, 2026 from $1.2 million for the three months ended March 31, 2025.

Current wording

Data processing expenses, which primarily consist of expenses for data processing services for core processing, decreased $0.1 million, or 4.5%, to $1.1 million for the three months ended June 30, 2026 from $1.2 million for the three months ended June 30, 2025. For the six months ended June 30, 2026, data processing expenses decreased $0.2 million, or 6.7%, to $2.2 million from $2.4 million for the six months ended June 30, 2025.

Previous wording

Professional fees expenses, which include legal fees, audit and accounting fees, and consulting fees, increased $0.1 million, or 7.2%, to $0.2 million for the three months ended March 31, 2026 compared to $0.1 million for the three months ended March 31, 2025. This increase was primarily the result of the higher professional fees associated with becoming a public company in the fourth quarter of 2025.

Current wording

Professional fees expenses, which include legal fees, audit and accounting fees, and consulting fees, increased $154 thousand, or 53.8%, to $440 thousand for the three months ended June 30, 2026 compared to $286 thousand for the three months ended June 30, 2025. For the six months ended June 30, 2026, professional fees increased $168 thousand, or 34.9%, to $649 thousand compared to $481 thousand for the six months ended June 30, 2025. These increases were primarily the result of higher professional fees associated with our additional reporting obligations as a public company.

Previous wording

Other expenses increased $0.5 million, or 35.8%, to $2.0 million for the three months ended March 31, 2026, compared to $1.5 million for the three months ended March 31, 2025. This increase was primarily attributable to a write-off of a discount of $0.6 million due to the redemption of the Subordinated Debentures and Trust Preferred Securities.

Current wording

Other expenses decreased $20 thousand, or 1.0%, to $1.65 million for the three months ended June 30, 2026, compared to $1.67 million for the three months ended June 30, 2025. This decrease was primarily attributable to normal expense monitoring and control. For the six months ended June 30, 2026, other expenses increased $0.5 million, or 16.5%, to $3.7 million compared to $3.2 million for the six months ended June 30, 2025. This increase was primarily attributable to a write-off of a discount of $0.6 million due to the redemption of the Subordinated Debentures and Trust Preferred Securities.

Previous wording

We have four loan portfolio segments: (i) real estate (which is divided into four classes), (ii) commercial, (iii) consumer and (iv) other. A segment is generally determined based on the initial measurement attribute, risk characteristics of the loan, and method for monitoring and assessing credit risk. Classes within the real estate portfolio segment include (i) CRE, (ii) C&D, (iii) residential, and (iv) other.

Current wording

We have three loan portfolio segments: (i) real estate (which is divided into four classes), (ii) commercial, and (iii) consumer and other. Prior period segment presentation has been reclassified to combine the “Consumer” and “Other” loan segments into “Consumer and Other” to conform to current period presentation and historical MD&A disclosures. This reclassification has no impact on total loans or net financial results for any period presented. A segment is generally determined based on the initial measurement attribute, risk characteristics of the loan, and method for monitoring and assessing credit risk. Classes within the real estate portfolio segment include (i) CRE, (ii) C&D, (iii) residential, and (iv) other.

Previous wording

Consumer— This loan portfolio segment includes non-real estate secured direct loans to consumers for household, family, and other personal expenditures. In addition to consumer installment loans, this portfolio segment also includes secured and unsecured personal lines of credit as well as overdraft protection lines. Loans in this portfolio segment are sensitive to unemployment and other key consumer economic measures.

Current wording

Consumer and Other— This loan portfolio segment includes non-real estate secured direct loans to consumers for household, family, and other personal expenditures; tax-exempt commercial loans; undisbursed loans of all types; and unpaid overdrafts on deposit accounts. In addition to consumer installment loans, this portfolio segment also includes secured and unsecured personal lines of credit as well as overdraft protection lines. Loans in this portfolio segment are sensitive to unemployment and other key consumer economic measures.

Previous wording

Net loans were $1.9 billion as of March 31, 2026, an increase of $18.4 million, or 1.0%, from December 31, 2025. The increase in net loans outstanding was primarily due to organic loan growth in the Nashville MSA, the Knoxville MSA and the Charlotte MSA.

Current wording

Net loans were $1.9 billion as of June 30, 2026, an increase of $66.4 million, or 3.6%, from December 31, 2025. The increase in net loans outstanding was primarily due to organic loan growth in the Nashville MSA, the Knoxville MSA and the Charlotte MSA.

Previous wording

The majority of our loans are priced with a fixed rate and a one-to-five-year maturity. This type of loan has historically been about 43.0% of total loans over the past two years because the majority of our commercial loans are priced with five-year balloons.

Current wording

The majority of our loans are priced with a fixed rate and a one-to-five-year maturity. This type of loan has historically been about 40% of total loans over the past two years because the majority of our commercial loans are priced with five-year balloons.

Previous wording

We are primarily involved in real estate, commercial, and consumer lending activities with customers throughout our markets in Kentucky, North Carolina, and Tennessee. About 90.0% and 89.5% of our total loans were secured by real property as of March 31, 2026 and December 31, 2025, respectively. We believe that these loans are not concentrated in any one single property type and that they are geographically dispersed throughout our markets. Our debtors’ ability to repay their loans is substantially dependent upon the economic conditions of the markets in which we operate, which consist primarily of the Nashville MSA, Knoxville MSA, Chattanooga, and Kingsport in Tennessee and the Charlotte MSA in North Carolina.

Current wording

We are primarily involved in real estate, commercial, and consumer lending activities with customers throughout our markets in Kentucky, North Carolina, and Tennessee. About 89.8% and 89.5% of our total loans were secured by real property as of June 30, 2026 and December 31, 2025, respectively. We believe that these loans are not concentrated in any one single property type and that they are geographically dispersed throughout our markets. Our debtors’ ability to repay their loans is substantially dependent upon the economic conditions of the markets in which we operate, which consist primarily of the Nashville MSA, the Knoxville MSA, Chattanooga, and Kingsport in Tennessee and the Charlotte MSA in North Carolina.

Previous wording

CRE loans were 58.7% of total loans as of March 31, 2026, and represented 59.2% of total loans as of December 31, 2025. C&D loans were 10.3% of total loans as of March 31, 2026, and represented 9.4% of total loans as of December 31, 2025. The ratio of our CRE loans to total risk-based bank capital was 417% as of March 31, 2026 and 435% as of December 31, 2025. C&D loans represented 73.0% of total risk-based bank capital as of March 31, 2026 as compared to 69.1% as of December 31, 2025.

Current wording

CRE loans were 59.0% of total loans as of June 30, 2026, and represented 59.2% of total loans as of December 31, 2025. C&D loans were 10.0% of total loans as of June 30, 2026, and represented 9.4% of total loans as of December 31, 2025. The ratio of our CRE loans to total risk-based bank capital was 275% as of June 30, 2026 and 276% as of December 31, 2025. C&D loans represented 65% of total risk-based bank capital as of June 30, 2026 as compared to 59% as of December 31, 2025.

Previous wording

C&D loans increased $18.5 million, or 10.5%, to $195.2 million as of March 31, 2026, from $176.7 million as of December 31, 2025. The majority of this increase was due to new loan volume. Residential C&D loans were relatively flat compared to commercial C&D loans.

Current wording

C&D loans increased $25.1 million, or 14.2%, to $201.8 million as of June 30, 2026, from $176.7 million as of December 31, 2025. The majority of this increase was due to loan growth as well as an increase in funded balances as the projects funded near completion. Residential C&D loans were $36.5 million compared to $165.3 million in commercial C&D loans as of June 30, 2026.

Previous wording

*Residential.*We offer one-to-four family mortgage loans on both owner-occupied primary residences and investor-owned residences, which made up approximately 89.0% of our residential loan portfolio as of March 31, 2026. Our residential loans also include home equity lines of credit, which totaled $37.0 million, or approximately 9.8% of our residential portfolio, as of March 31, 2026. By offering a full line of residential loan products, the owners of the small to medium-sized businesses that we lend to are able to use us, instead of a competitor, for financing a personal residence.

Current wording

We offer one-to-four family mortgage loans on both owner-occupied primary residences and investor-owned residences, which made up approximately 17.8% and 18.1% of our loan portfolio as of June 30, 2026, and December 31, 2025, respectively. Our residential loans also include home equity lines of credit, which totaled $39.7 million, or approximately 2.04% of our portfolio, as of June 30, 2026, and $38.9 million, or approximately 2.07% of our portfolio, as of December 31, 2025. By offering a full line of residential loan products, the owners of the small to medium-sized businesses that we lend to are able to use us, instead of a competitor, for financing a personal residence.

Previous wording

*Commercial Real Estate.*Our CRE loan portfolio includes loans for commercial property that is owned by real estate investors, construction loans to build owner-occupied properties, and loans to developers of CRE investment properties and residential developments. CRE loans are subject to underwriting standards and processes similar to our commercial loans. These loans are underwritten primarily based on projected cash flows for income-producing properties and collateral values for non-income-producing properties. The repayment of these loans is generally dependent on the successful operation of the properties securing the loans or the sale or refinancing of the property. Real estate loans may be adversely affected by conditions in the real estate markets or in the general economy. The properties securing our real estate portfolio are diversified by type and geographic location. We believe this diversity helps reduce our exposure to adverse economic events that may affect any single market or industry. CRE loans remained constant at $1.1 billion as of March 31, 2026 and December 31, 2025, respectively. This decrease was primarily driven by customer payoffs. As of March 31, 2026, our CRE portfolio was comprised of $357.4 million in non-owner occupied CRE loans and $432.5 million in owner-occupied properties and $212.1 million in multi-family properties.

Current wording

Our CRE loan portfolio includes loans for commercial property that is owned by real estate investors, construction loans to build owner-occupied properties, and loans to developers of CRE investment properties and residential developments. CRE loans are subject to underwriting standards and processes similar to our commercial loans. These loans are underwritten primarily based on projected cash flows for income-producing properties and collateral values for non-income-producing properties. The repayment of these loans is generally dependent on the successful operation of the properties securing the loans or the sale or refinancing of the property. Real estate loans may be adversely affected by conditions in the real estate markets or in the general economy. The properties securing our real estate portfolio are diversified by type and geographic location. We believe this diversity helps reduce our exposure to adverse economic events that may affect any single market or industry. CRE loans remained constant at $1.1 billion as of June 30, 2026 and December 31, 2025. As of June 30, 2026, our CRE portfolio was comprised of $397.2 million in non-owner occupied CRE loans and $484.6 million in owner-occupied properties and $258.1 million in multi-family properties, as compared to $388.7 million in non-owner occupied CRE loans and $466.1 million in owner-occupied properties and $257.8 million in multi-family properties as of December 31, 2025.

Previous wording

Commercial loans decreased $3.2 million, or 1.85%, to $171.0 million as of March 31, 2026, from $174.2 million as of December 31, 2025.

Current wording

Commercial loans increased $5.7 million, or 3.3%, to $179.9 million as of June 30, 2026, from $174.2 million as of December 31, 2025.

Previous wording

Consumer and other loans (non-real estate loans) decreased $3.3 million, or 14.7%, to $19.5 million as of March 31, 2026, from $22.9 million as of December 31, 2025.

Current wording

Consumer and other loans (non-real estate loans) decreased $3.4 million, or 14.6%, to $19.5 million as of June 30, 2026, from $22.9 million as of December 31, 2025.

Previous wording

On March 31, 2026, and December 31, 2025, loan participations sold to third parties (which are not included in the accompanying consolidated balance sheets) totaled $116.5 million and $116.0 million, respectively. We sell participations to manage our credit exposures to borrowers. On March 31, 2026, and December 31, 2025, loan participations purchased totaled $0. The variance in loan participations sold comes from sales of participations in the ordinary course of business.

Current wording

As of June 30, 2026, and December 31, 2025, loan participations sold to third parties (which are not included in the accompanying consolidated balance sheets) totaled $37.5 million and $116.0 million, respectively. We sell participations to manage our credit exposures to borrowers. As of June 30, 2026, and December 31, 2025, loan participations purchased totaled $0. The variance in loan participations sold comes from sales of participations in the ordinary course of business.

Previous wording

Our ACL was $18.3 million at March 31, 2026 compared to $18.1 million at December 31, 2025, an increase of $0.2 million, or 1.3%. A provision of $122 thousand was recorded for the three months ended March 31, 2026 compared to $0 for the three months ended March 31, 2025. Additional provisions were recorded based on national, regional and economic conditions and changes in the volume and nature of our loan portfolio.

Current wording

Our ACL was $18.7 million at June 30, 2026 compared to $18.1 million at December 31, 2025, an increase of $0.6 million, or 3.5%. A provision of $404 thousand was recorded for the three months ended June 30, 2026 compared to $0 for the three months ended June 30, 2025. For the six months ended June 30, 2026, a provision of $526 thousand was recorded compared to $0 for the six months ended June 30, 2025.

Previous wording

Net charge-offs for the three months ended March 31, 2026 totaled $0.1 million. Net charge-offs for the year ended December 31, 2025 totaled ($0.3) million.

Current wording

Net charge-offs for the six months ended June 30, 2026 totaled $100 thousand. Net charge-offs for the year ended December 31, 2025, totaled $525 thousand.

Previous wording

Real estate that we acquire as a result of foreclosure or by deed-in-lieu of foreclosure is classified as foreclosed assets held for sale (OREO) until sold and is initially recorded at fair value less costs to sell when acquired, establishing a new carrying value. OREO totaled approximately $0.6 million at March 31, 2026, and $0.3 million at December 31, 2025.

Current wording

Real estate that we acquire as a result of foreclosure or by deed-in-lieu of foreclosure is classified as foreclosed assets held for sale (OREO) until sold and is initially recorded at fair value less costs to sell when acquired, establishing a new carrying value. OREO totaled approximately $0.8 million at June 30, 2026, and $0.3 million at December 31, 2025.

Previous wording

Nonaccrual loans were $5.9 million at March 31, 2026. We had no loans 90 days past due and still accruing at March 31, 2026.

Current wording

Nonaccrual loans were $6.7 million at June 30, 2026, compared to $6.2 million at December 31, 2025. We had no loans 90 days past due and still accruing at June 30, 2026, or December 31, 2025.

Previous wording

***Allowance for Credit Losses (ACL) — Held-to-Maturity Securities:***Management measures expected credit losses on held-to-maturity debt securities on a collective basis by major security type and any other risk characteristics used to segment the portfolio. Accrued interest receivable on held-to-maturity debt securities totaled $528,655 and $291,460 as of March 31, 2026, and December 31, 2025, respectively.

Current wording

***Allowance for Credit Losses (ACL) — Held-to-Maturity Securities:***Management measures expected credit losses on held-to-maturity debt securities on a collective basis by major security type and any other risk characteristics used to segment the portfolio. Accrued interest receivable on held-to-maturity debt securities totaled $215,406 and $291,460 as of June 30, 2026, and December 31, 2025, respectively.

Previous wording

The Company sold no held-to-maturity securities prior to maturity during the three months ended March 31, 2026 or the fiscal year ended December 31, 2025.

Current wording

The Company sold no held-to-maturity securities prior to maturity during the six months ended June 30, 2026 or the fiscal year ended December 31, 2025.

Previous wording

We maintain investments in BOLI policies to help control employee benefit costs, as a protection against loss of certain employees and as a tax planning strategy. We are the sole owner and beneficiary of these BOLI policies. At March 31, 2026, BOLI policies totaled $46.5 million compared to $46.6 million at December 31, 2025. The decrease represents increases in the cash surrender values of the policies net of a slight reduction in the policies’ total value due to an insured’s death.

Current wording

We maintain investments in BOLI policies to help control employee benefit costs, as a protection against loss of certain employees and as a tax planning strategy. We are the sole owner and beneficiary of these BOLI policies. At June 30, 2026, the carrying value of our BOLI policies was $46.6 million unchanged from December 31, 2025.