FS Bancorp, Inc.

FS BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Table Dollar Amounts in Thousands, Except Per Share Amounts)

NOTE 1 –** BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

Nature of Operations – FS Bancorp, Inc. (the “Company”) was incorporated in* September**2011* as the holding company for1st Security Bank of Washington (the “Bank” or*“1st* Security Bank”) in connection with the Bank’s conversion from the mutual to stock form of ownership which was completed on* July 9, 2012.The Bank is a community-based savings bank with32* full-service bank branches, a headquarters that also originates loans and accepts deposits, and loan production offices in suburban communities in the greater Puget Sound area, the Kennewick-Pasco-Richland metropolitan area of Washington, also known as the Tri-Cities, Goldendale, Vancouver, and White Salmon, Washington and Manzanita, Newport, Ontario, Tillamook, Waldport, and the Portland metropolitan area of Oregon. The Bank provides loan and deposit services to customers who are predominantly small- and middle-market businesses and individuals. The Company and its subsidiary are subject to regulation by certain federal and state agencies and undergo periodic examination by these regulatory agencies.

On* August 19, 2026,the Company completed its acquisition of Pacific West Bancorp (“Pacific West”), pursuant to the Agreement and Plan of Merger dated February 25, 2026 (the “Merger Agreement”) by and between FS Bancorp and Pacific West. Under the terms of the Merger Agreement, Pacific West merged with and into FS Bancorp (“Pacific West Acquisition”), with FS Bancorp as the surviving corporation. Immediately after the Pacific West Acquisition, FS Bancorp merged Pacific West Bank, a wholly-owned subsidiary of Pacific West, with and into1st* Security Bank of Washington as the surviving bank. For additional information, see “Note2 – Business Combination.”

Financial Statement Presentation – The accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and in accordance with the instructions to Form10‑Q and Article10 of Regulation S-X as promulgated by the Securities and Exchange Commission (“SEC”). These unaudited interim consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form10‑K which includes all the audited financial statements and footnotes required by U.S. GAAP for complete financial statements for the year ended* December 31, 2025*. In the opinion of management, all normal adjustments and recurring accruals considered necessary for a fair presentation of the financial position and results of operations for the periods presented have been included. Certain prior-period amounts have been reclassified to conform to the current period presentation. These matters didnot have an impact on net income or earnings per share for the periods presented.

The results for thethree andnine months ended* September 30, 2026*, arenot necessarily indicative of the results that* maybe expected for the year ending December 31,*2026, or any other future period. The preparation of financial statements, in conformity with U.S. GAAP, requires management to make estimates and assumptions that affect amounts reported in the financial statements. Actual results could differ from these estimates. Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for credit losses (“ACL”).

Amounts presented in the consolidated financial statements and footnote tables are rounded to the nearest thousand dollars, except for per share amounts. Amounts above*$1.0* million are rounded toone decimal place, and amounts above*$1.0* billion are rounded totwo decimal places.

Principles of Consolidation– The consolidated financial statements include the accounts of FS Bancorp and its wholly owned subsidiary,1st Security Bank. All material intercompany accounts have been eliminated in consolidation.

Segment Reporting –*** The Company operates intwo business segments through the Bank: commercial and consumer banking and home lending. The Company’s business segments are determined based on the products and services provided, as well as the nature of the related business activities, and they reflect the way financial information is regularly reviewed for the purpose of allocating resources and evaluating performance of the Company’s businesses. The results for these business segments are based on management’s accounting process, which assigns income statement items and assets to each responsible operating segment. This process is dynamic and is based on management’s view of the Company’s operations. See “Note14* – Business Segments.”

Subsequent Events– The Company has evaluated events and transactions after* September 30, 2026*, for potential recognition or disclosure.

11

RECENT ACCOUNTING PRONOUNCEMENTS

In* October**2023,* the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative. The amendments incorporate into the Accounting Standards Codification certain disclosure and presentation requirements currently included in SEC regulations. Each amendment will become effective prospectively upon the SEC’s removal of the related disclosure requirement from its rules. The Company is currently evaluating the impact of ASU2023-06 and doesnot expect its adoption to have a material effect on its consolidated financial statements.

In* January 2025,the FASB issued guidance within ASU2025*-01, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic220*-40): Disaggregation of Income Statement Expenses.The amendment amends the effective date of ASU2024*-03 to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning after* December 15, 2026,and interim periods within annual reporting periods beginning after December 15, 2027.Early adoption of ASU2024*-03 is permitted. The Company is currently evaluating the impact of ASU2024-03, as amended by ASU2025-01, but doesnot expect it to have a material effect on its consolidated financial statements.

In* December 2025,the FASB issued guidance within ASU2025*-11, Interim Reporting. The ASU is intended to improve the navigability of the guidance in ASC270 and clarify when it applies. Under the amendments, an entity is subject to ASC270 if it provides “interim financial statements and notes in accordance with GAAP.” The ASU is effective for interim periods in fiscal years beginning after* December 15, 2027,for public business entities, with aone*-year deferral for all other entities. Early adoption is permitted for all entities. The Company is currently evaluating the impact of this ASU but doesnot expect it to have a material effect on its consolidated financial statements.

Application of New Accounting Guidance Adopted in2026**

In* November 2025,the FASB issued ASU2025‑08,* Financial Instruments—Credit Losses (Topic326*): Purchased Loans*, which makes significant changes to the accounting for certain acquired seasoned loans subject to the CECL model. It doesnot change the existing models for originated assets, purchased credit deteriorated (“PCD”) assets or other acquired assets. PCD assets are acquired individual financial assets (or acquired groups of financial assets with similar risk characteristics) that as of the date of acquisition have experienced a more-than-insignificant deterioration in credit quality since origination. The ASU creates a new model for certain purchased loans expanding the gross-up approach to a newly created category of purchased seasoned loans (“PSL”). Purchased seasoned loans are accounted for using the gross-up method, with initial ACL recognized through a gross up to loans and the noncredit discount accreted into interest income over the life of the loan. Under this method, the initial ACL is recognized as an increase to the amortized cost basis of the acquired loans, rather than as an immediate credit loss expense. The new standard is effective for annual periods beginning after* December 15, 2026and interim reporting periods within those annual periods. Early adoption is permitted. The Company elected early adoption of this ASU as of January 1, 2026.The adoption of ASU2025*-08 resulted in an increase of $1.8 million in loans receivable classified as PSL and a corresponding increase of $1.8 million in the allowance for credit losses related to the Pacific West Bank Acquisition.

NoTE 2 –** Business Combination**

The Company completed the Pacific West Acquisition* August 19, 2026,pursuant to the Merger Agreement, for total consideration of $35.3 million, consisting of 430,149 shares of FS Bancorp common stock and $16.9 million in cash. Under the terms of the Merger Agreement, Pacific West merged with and into FS Bancorp, with FS Bancorp as the surviving corporation. Immediately after the Pacific West Acquisition, FS Bancorp merged Pacific West Bank, a wholly-owned subsidiary of Pacific West, with and into1st* Security Bank of Washington, a wholly-owned subsidiary of FS Bancorp, with1st Security Bank of Washington as the surviving bank. Pacific West was formed by local business owners for the community and its principal business activities prior to the acquisition were offering business banking services and commercial lending products. The primary objective for the acquisition was to expand FS Bancorp’s presence in the Portland metro area and offer additional banking and lending products for former Pacific West customers as well as attract new customers.

The Pacific West Acquisition was accounted for under the acquisition method of accounting and accordingly, the assets acquired and liabilities assumed were recorded at their fair values on* August 19, 2026,the date of acquisition. Determining the fair value of assets and liabilities is a complicated process involving significant judgment regarding methods and assumptions used to calculate estimated fair values. Fair values are preliminary and subject to refinement for up toone* year after the closing date of the acquisition as information relative to the closing date fair values become available.

12

The application of the acquisition method of accounting resulted in a bargain purchase gain of $1.7 million for thethree andnine months ended* September 30, 2026* and was reported as a component of noninterest income on our Consolidated Statements of Income. The bargain purchase gain resulted from the negotiated purchase price, which reflected Pacific West’s historical financial performance and earnings profile, being less than the fair value of the identifiable net assets acquired. The gain was also impacted by changes in the estimated fair values of certain assets acquired and liabilities assumed between the announcement and closing of the transaction, including an increase in the value of the core deposit intangible resulting in part from higher market interest rates and the corresponding increased economic value of the acquired deposit relationships. Under the terms of the merger agreement, Pacific West shareholders could elect to receive either FS Bancorp common stock or cash, subject to established proration and adjustment procedures. Pacific West shareholders making a cash election orno election received $12.93 in cash for each share of Pacific West common stock. Because stock elections were oversubscribed, shareholders making a stock election had 82.7% of their Pacific West shares exchanged for FS Bancorp common stock at an exchange ratio of 0.30 shares of FS Bancorp common stock for each Pacific West share, with the remaining 17.3% exchanged for $12.93 in cash per Pacific West share. Cash was also paid in lieu of fractional FS Bancorp shares based on a value of $43.12 per share.

The Company incurred acquisition-related costs of $2.5 million and $3.2 million for thethree andnine months ended* September 30, 2026,*respectively, which were expensed as incurred and are included in acquisition costs in noninterest expense on our Consolidated Statements of Income.

The following table summarizes the consideration paid, the aggregate amount recognized for each major class of assets acquired and liabilities assumed by the Company in the Pacific West Acquisition:

(1) Stock price is as of the closing date.

The following is a description of the methods used to determine the fair values of significant assets and liabilities presented above.

Cash and cash equivalents: Carrying amounts approximate fair value due to the short-term nature.

Investment securities: Fair values were based on quoted prices when available or, whennot observable, on market-based inputs and valuation models using discounted cash flows.

Loans receivable, net: Athird-party valuation was performed to estimate the fair value of the loans held for investment. Each loan was valued individually using discounted cash flow approach, incorporating contractual terms, expected credit losses, prepayment assumptions, and market-based discount rates. The present value of expected cash flows, adjusted for credit loss expectations, was used to determine fair value.

13

The Company early adopted ASU2025-08 as of* January 1, 2026,on a prospective basis. Under this guidance, the acquired financial assets are to be classified as either PCD, loans that have experienced more than insignificant credit deterioration since origination, or PSL. All loans, other than credit card receivables, that are acquired as part of a business combination accounted for using the acquisition method in accordance with Subtopic805*-20 that donot meet the definition of a PCD loan are determined to be PSLs. Loans acquired are recorded at fair value withno carryover of the related allowance for credit losses. The allowance for credit losses is determined on a collective basis and is allocated to the individual loans. The sum of the loan’s purchase price and the allowance for credit losses becomes its initial amortized cost basis. The difference between the initial amortized cost basis and the par value of the loan is a noncredit discount or premium, which is amortized into interest income over the life of the loan. As a result of adopting ASU2025-08, eligible non-PCD loans acquired in a business combination are accounted for using the gross-up approach applicable to PSLs.

The Company determined, based on risk ratings, nonaccrual status, delinquency, and modifications to borrowers experiencing financial difficulty at the acquisition date, that the acquired loans classified as PSLs hadnot experienced more than insignificant credit deterioration since origination and, therefore, didnot meet the definition of PCD loans. The PSLs had a fair value of $228.0 million, gross contractual amounts receivable of $230.6 million, and contractual cash flowsnot expected to be collected of $1.8 million at the acquisition date.

The following table provides a reconciliation between the unpaid principal balance of acquired PCD loans and the fair value at the acquisition date:

Premises and equipment: Fair values were determined using a market approach, supported bythird-party appraisals and broker opinions of value for land, office buildings, and branch facilities.

Other intangible assets: Core deposit intangible assets represent the value of certain acquired deposit relationships. Athird-party valuation was performed to estimate the fair value of the core deposit intangible. Fair value was estimated using a discounted cash flow methodology based on the present value of expected cost savings from utilizing core deposit funding compared to alternative funding sources. Key assumptions included expected customer attrition rates, net maintenance costs of the deposit base, alternative cost of funds, and interest costs associated with customer deposits. The resulting intangible assets are amortized over 10 years.

Deposits: Fair values for demand and savings deposits were estimated to equal the amounts payable on demand at the acquisition date. Fair values for the time deposits were determined using a discounted cash flow approach that applied current market interest rates to the contractual terms of the deposits.

The Company determined that the disclosure requirements related to the amounts of revenues and earnings of Pacific West included in the consolidated statements of operations since the* August 19, 2026*acquisition date was impracticable. The financial and operating results of Pacific West were commingled with the Company’s financial activity and operating results as of the acquisition date.

14

The following unaudited pro forma consolidated financial information reflects the results of operations of the Company for thethree andnine months ended* September 30, 2026and2025,* as if the Pacific West Acquisition had been completed on* January 1, 2025.Pro forma adjustments reflect changes in interest income from the accretion of discounts and premiums on acquired loans, changes in interest expense from amortization or accretion of fair value adjustments on interest-bearing deposits, and the amortization of the core deposit intangibles as if the deposits had been acquired on January 1, 2025.These pro forma results have been prepared for illustrative purposes only and are based on estimates and assumptions that have been made solely for purposes of developing such pro forma information and arenot* necessarily indicative of what the Company’s operating results would have been, had the acquisition actually taken place at the beginning of the previous annual period. The amounts donot reflect anticipated operating cost savings, revenue enhancements, or other synergies expected to result from the Pacific West Acquisition. Actual results* may*differ from the unaudited pro forma information presented.

(1) Pro forma net income before provision for income taxes for thethree andnine months ended* September 30, 2026was adjusted to exclude acquisition-related costs of$2.5* million and*$3.2* million, respectively, as well as the $1.7 million bargain purchase gain recognized in connection with the transaction. Noninterest income was also adjusted to exclude the bargain purchase gain. The pro forma results assume the acquisition-related costs and bargain purchase gain were recognized in thefirst quarter of2025.

NOTE3 – INVESTMENTS

The following tables present the amortized costs, unrealized gains, unrealized losses, estimated fair values of securities available-for-sale and held-to-maturity, and the ACL on securities available-for-sale and held-to-maturity at* September 30, 2026* and* December 31, 2025*:

15

The following table presents the activity in the ACL on securities held-to-maturity by major security type for thethree andnine months ended* September 30, 2026and2025*:

Management measures expected credit losses on held-to-maturity debt securities on an individual basis. The estimate of expected credit losses considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. Credit loss reserves increased during the period due to new securities purchases replacing called investments, which resulted in longer average lives and a corresponding increase in the calculated reserve. Accrued interest receivable totaled $748,000 and $271,000 on held-to-maturity debt securities and $1.8 million and $1.2 million on available-for-sale debt securities as of* September 30, 2026* and* December 31, 2025*, respectively. Accrued interest receivable on securities is reported in “Accrued interest receivable” on the Consolidated Balance Sheets and is excluded from the calculation of the ACL.

The Company monitors the credit quality of debt securities held-to-maturity quarterly using credit rating, material event notices, and changes in market value. The following table summarizes the amortized cost of debt securities held-to-maturity at the dates indicated, aggregated by credit quality indicator:

At* September 30, 2026* and* December 31, 2025*, there wereno debt securities held-to-maturity that were classified as either nonaccrual or90 days or more past due and still accruing interest.

16

The following table presents, as of* September 30, 2026*, investment securities which were pledged to secure borrowings, public deposits, or other obligations as permitted or required by law:

Investment securities that were in an unrealized loss position at the dates indicated are presented in the following tables, based on the length of time individual securities have been in an unrealized loss position.

The unrealized losses associated with our investment securities are believed to be caused by changing market conditions and considered to be temporary, and the Company doesnot intend and isnot likely to be required to sell these securities prior to maturity. Management monitors the published credit ratings of the issuers of the debt securities for material ratings or outlook changes. Substantially all the Company’s municipal bond portfolio is comprised of obligations of states and political subdivisions located within the Company’s geographic footprint that are monitored through quarterly or annual financial review utilizing published credit ratings. All the municipal bond securities are investment grade.

17

All of the available-for-sale mortgage-backed securities and asset-backed securities in an unrealized loss position are issued or guaranteed by government-sponsored enterprises, and the available-for-sale corporate securities are all investment grade and monitored for rating or outlook changes. Based on the Company’s evaluation of these securities, no credit impairment was recorded for thethree andnine months ended* September 30, 2026and2025*.

The contractual maturities of securities available-for-sale and held-to-maturity at the dates indicated are listed below. Expected maturities of mortgage-backed securities* maydiffer from contractual maturities because borrowers mayhave the right to call or prepay the obligations; therefore, these securities are classified separately withno* specific maturity date.

18

The proceeds and resulting gains and losses from sales of securities available-for-sale for thethree andnine months ended* September 30, 2026*:

There wereno sales of securities available-for-sale for thethree andnine months ended* September 30, 2025*.

NOTE 4 –** LOANS RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES**–** LOANS**

The composition of the loan portfolio was as follows at the dates indicated:

The loans listed above for* September 30, 2026*, include $252.6 million of loans acquired at fair value on* August 19, 2026,*as part of the Pacific West Acquisition.

Loan amounts are net of unearned loan fees in excess of unamortized costs, unamortized net discounts on acquired loans, and premiums on purchased loans of $10.9 million as of* September 30, 2026*, and $8.6 million as of* December 31, 2025*. Net loans donot include accrued interest receivable.

19

Most of the Company’s CRE and multi-family real estate, construction, residential, and commercial business lending activities are with customers located in Western Washington, the Oregon Coast, or near our loan production offices in Vancouver and the Tri-Cities, Washington. While the Company primarily originates real estate, consumer, and commercial business loans in these market areas, it also originates indirect home improvement loans, including solar-related home improvement loans, through a network of home improvement contractors and dealers located throughout Washington, Oregon, California, Idaho, Colorado, Arizona, Minnesota, Nevada, Texas, Utah, Massachusetts, Montana, and New Hampshire. Depending on underwriting guidelines, these indirect home improvement loans* maybe secured by collateral, with legal documentation that establishes the Company's rights to the collateral, where practicable. Local economic conditions may*affect borrowers’ ability to meet the stated repayment terms.

At* September 30, 2026*, the Company held approximately $1.13 billion in loans that are pledged as collateral for FHLB borrowings, compared to approximately $1.08 billion at* December 31, 2025*. The Company held approximately $549.4 million in loans that are pledged as collateral for the Federal Reserve Bank of San Francisco (the “FRB”) line of credit at* September 30, 2026*, compared to approximately $580.9 million at* December 31, 2025*.

The Company has defined its loan portfolio intofour segments that reflect the structure of the lending function, the Company’s strategic plan and the way management monitors performance and credit quality. Thefour loan portfolio segments are: (a) CRE, (b) residential real estate, (c) consumer, and (d) commercial business. Each segment is further disaggregated into classes based on the risk characteristics of the borrower and/or the collateral securing the loan. The following is a summary of the Company’s loan portfolio segments and classes:

CRE Loans

Multi-Family Lending. Apartment term lending (five or more units) and community reinvestment loans for low to moderate income borrowers in the Company’s footprint.

CRE Lending. Loans originated by the Company primarily secured by income-producing properties, including retail centers, warehouses, and office buildings located in its market areas.

Commercial and Speculative Construction and Development Lending. Loans originated for the construction of, and secured by, commercial real estate,one-to-four-family, and multi-family properties and tracts of land for development that arenot pre-sold. Customone-to-four-family construction loans to the intended occupant of the residence are included under residential custom construction lending described below.

Residential Real Estate Loans

One-to-Four-Family Real Estate Lending. One-to-four-family residential loans include both owner occupied properties (includingsecond homes), and non-owner occupied properties with up tofour units. These loans, which are originated by the Company or periodically purchased from other banks, are secured byfirst mortgages onone-to-four-family residences in our market areas and are intended to be held in the Company's portfolio (excludes loans held for sale).

Home Equity Lending. Loans originated by the Company secured bysecond mortgages onone-to-four-family residences, including home equity lines of credit within the Company's market areas.

Residential Custom Construction Lending. Custom construction loans to intended occupants ofone-to-four family residences.

Consumer Loans

Indirect Home Improvement. Fixture secured loans for home improvement are originated by the Company through its network of home improvement contractors and dealers. These loans are secured by the personal property installed in, on, or at the borrower’s real property, and* maybe perfected with aUCC‑2* financing statement filed in the county of the borrower’s residence. These indirect home improvement loans include replacement windows, siding, roofing, spas, and other home fixture installations, including solar related home improvement projects.

Marine. Loans originated by the Company, secured by boats, to borrowers primarily located in states where the Company originates consumer loans.

Other Consumer. Loans originated by the Company to consumers in our retail branch footprint, including automobiles, direct home improvement loans, loans on deposits, and other consumer loans, primarily consisting of personal lines of credit and credit cards.

20

Commercial Business Loans

C&I Lending.C&I loans originated by the Company to local small- and mid-sized businesses in its market area are secured primarily by accounts receivable, inventory, and personal property, plant and equipment. Some C&I loans purchased by the Company are outside of its market area. C&I loans are made based on the borrower’s ability to repay from the cash flow of the borrower’s business. At September 30, 2026 and* December 31, 2025*, C&I loans included Small Business Administration and United States Department of Agriculture guaranteed certificates of $37.8 million and $44.8 million, respectively.

Warehouse Lending. Loans originated to non-depository financial institutions and secured by notes originated by the non-depository financial institution. The Company hastwo distinct warehouse lending divisions: commercial warehouse re-lending secured by notes on construction loans and mortgage warehouse re-lending secured by notes related toone-to-four-family loans. The Company’s commercial construction warehouse lines are secured by notes related to construction loans and are typically guaranteed by principals with experience in construction lending. Mortgage warehouse lines are funded throughthird-party residential mortgage bankers. Under this program, the Company provides short-term funding to mortgage banking companies for the purpose of originating residential mortgage loans for sale into the secondary market.

Allowance for Credit Losses

The following tables detail activity in the ACL on loans by loan categories at or for thethree andnine months ended* September 30, 2026and2025*:

21

The increase in the provision for credit losses on loans for thethree andnine months ended* September 30, 2026*, was primarily attributable to higher charge-offs in the consumer and CRE portfolios, as well as higher organic loan growth during thethree months ended* September 30, 2026.*

Loan Modifications to Borrowers Experiencing Financial Difficulty

The Company* maymodify the contractual terms of a loan to a borrower experiencing financial difficulty as a part of ongoing loss mitigation strategies. These modifications mayresult in an interest rate reduction, term extension, an other-than-insignificant payment delay, or a combination thereof. The Company typically doesnot* offer principal forgiveness. An assessment of whether a borrower is experiencing financial difficulty is made on the date of a modification. The effect of most modifications made to borrowers experiencing financial difficulty is already included in the ACL on loans because of the measurement methodologies used to estimate the allowance.

The following tables present the amortized cost basis of loans that were both experiencing financial difficulty and modified during thethree andnine months ended* September 30, 2026and2025*, by class and by type of modification. The tables also present the percentage of the amortized cost basis of loans that were modified to borrowers experiencing financial difficulty relative to the total amortized cost basis of each class of financing receivable, as well as the financial effect of the modification.

As of* September 30, 2026*, there wereno commitments to lend additional funds to borrowers experiencing financial difficulty whose terms had been modified during thenine months ended* September 30, 2026*. As of* December 31, 2025,there wereno commitments to lend additional funds to borrowers experiencing financial difficulty whose terms had been modified during the year ended December 31, 2025.*

22

The Company closely monitors the performance of loans modified to borrowers experiencing financial difficulty to evaluate the effectiveness of its modification efforts. There wereno loans modified within the prior12 months that were delinquent as of* September 30, 2026*. The following table presents the performance of such loans that were modified within the prior12 months as of* September 30, 2025*:

There wereno loans to borrowers experiencing financial difficulty that had a payment default during thethree andnine months ended* September 30, 2026and2025*, and were modified in the12 months prior to that default.

Nonaccrual and Past Due Loans

The following tables provide information pertaining to the aging analysis of contractually past due loans and nonaccrual loans at* September 30, 2026* and* December 31, 2025*:

23

There wereno loans90 days or more past due and still accruing interest at both* September 30, 2026* and* December 31, 2025*.

There were $1.2 million and $156,000 in residential real estate loans in the process of foreclosure at* September 30, 2026* and* December 31, 2025*, respectively.

Credit Quality Indicators

As part of the Company’s ongoing monitoring of the credit quality of the loan portfolio, management tracks certain credit quality indicators including trends related to (i) the risk grading of loans, (ii) the level of classified loans, (iii) net charge-offs, (iv) nonperforming loans, and (v) the general economic conditions in the Company’s markets.

The Company utilizes a risk grading matrix to assign a risk grade to its real estate and commercial business loans. Loans are graded on a scale of1 to10, with loans in risk grades1 to6 reported as “Pass” and loans in risk grades7 to10 reported as classified loans in the Company’s ACL analysis.

24

A description of the10 risk grades is as follows:

Homogeneous loans are risk rated based upon the Federal Financial Institutions Examination Council’s Uniform Retail Credit Classification and Account Management Policy. Loans classified under this policy at the Company are consumer loans which include indirect home improvement, solar, marine, other consumer, andone-to-four-familyfirst andsecond liens. Under the Uniform Retail Credit Classification and Account Management Policy, loans that are current or less than90 days past due are graded “Pass” and risk rated*“4”* or*“5”* internally. Loans that are past due more than90 days are classified “Substandard” and risk graded*“8”* internally until the loan has demonstrated consistent performance, typicallysix months of contractual payments. Closed-end loans that are120 days past due and open-end loans that are180 days past due are charged off based on the value of the collateral less cost to sell. Management* may*choose to conservatively risk rate credits even if they are paying in accordance with the loan’s terms.

CRE (owner occupied, non-owner occupied, commercial construction and development, and multi-family) and commercial business loans are evaluated individually for their risk classification and* may*be classified as “Substandard” even if current on their loan payment obligations. The Company regularly reviews credits for accuracy of risk grades whenever we receive new information. Borrowers are generally required to submit financial information at regular intervals. Typically, commercial borrowers with lines of credit are required to submit financial information with reporting intervals ranging from monthly to annually depending on credit size, risk, and complexity. In addition, non-owner-occupied CRE borrowers with loans exceeding a certain dollar threshold are usually required to submit rent rolls or property income statements annually. We monitor construction loans monthly. We also review loans graded “Watch” or worse, regardless of loan type,no less than quarterly.

25

The following tables summarize risk rated loan balances and total current period gross charge-offs by category, as of the dates indicated. Term loans that were renewed or extended for periods longer than90 days are presented as new originations in the year of the most recent renewal or extension.

26

27