HomeTrust Bancshares, Inc.

1. Summary of Significant Accounting Policies

The consolidated unaudited financial statements presented in this report include the accounts of HomeTrust Bancshares, Inc., a Maryland corporation (“HomeTrust”), and its wholly-owned subsidiary, HomeTrust Bank (the “Bank”). As used throughout this report, the term the “Company” refers to HomeTrust and its consolidated subsidiary, unless the context otherwise requires. HomeTrust is a bank holding company primarily engaged in the business of planning, directing and coordinating the business activities of the Bank. The Bank is a North Carolina state chartered bank and provides a wide range of retail and commercial banking products within its geographic footprint, which includes: North Carolina (the Asheville metropolitan area, the "Piedmont" region, Charlotte and Raleigh/Cary), South Carolina (Greenville and Charleston), East Tennessee (Kingsport/Johnson City and Morristown), Southwest Virginia (the Roanoke Valley) and Georgia (Greater Atlanta). The Company operates under a single set of corporate policies and procedures and its operations are considered to be aggregated inone reportable operating segment for financial reporting purposes.

As a result of its merger with Quantum on February 12, 2023, HomeTrust became the 100% successor owner of the Quantum Capital Statutory Trust II ("the Trust") Delaware trust. The sole assets of the trust represented the proceeds of offerings loaned in exchange for subordinated debentures with similar terms to the trust preferred securities; however, the Company elected to redeem the junior subordinated debt securities on June 15, 2026 as discussed further in "Note 7 – Borrowings – Junior Subordinated Debentures." As its sole purpose has been fulfilled, the Company dissolved the trust in the third quarter of 2026.

The accompanying unaudited consolidated financial statements have been prepared in accordance with US GAAP for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X as promulgated by the SEC. Accordingly, they do not include all the information and footnotes required by US GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the financial position and results of operations for the periods presented have been included. It is recommended that these unaudited interim consolidated financial statements be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31,2025 ("2025 Form 10-K") filed with the SEC on March 13, 2026. The results of operations for the nine months ended September 30, 2026 are not necessarily indicative of results that may be expected for the fiscal year ending December 31, 2026, the period which will be covered on a Report on Form 10-K.

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect amounts reported in the financial statements. Various elements of the Company's accounting policies, by their nature, are inherently subject to estimation techniques, valuation assumptions and other subjective assessments. In particular, management has identified the determination of the provision and the ACL on loans as an accounting policy that, due to the judgments, estimates and assumptions inherent in the policy, is critical to an understanding of the Company's financial statements. This policy and the related judgments, estimates and assumptions are described in greater detail in the notes to the Consolidated Financial Statements and Management's Discussion and Analysis of Financial Condition and Results of Operations (Critical Accounting Policies and Estimates) in the 2025 Form 10-K. Management believes that the judgments, estimates and assumptions used in the preparation of the financial statements are appropriate based on the factual circumstances at the time. However, given the sensitivity of the financial statements to this critical accounting policy, the use of other judgments, estimates and assumptions could result in material differences in the Company's results of operations or financial condition. Further, subsequent changes in economic or market conditions could have a material impact on these estimates and the Company's financial condition and operating results in future periods.

Reclassifications and corrections. To maintain consistency and comparability, certain amounts from prior periods have been reclassified to conform to current period presentation with no effect on net income or stockholders’ equity as previously reported.

2. Recent Accounting Pronouncements

Newly Issued but Not Yet Effective Accounting Standards

ASU 2024-03, "Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses."In November 2024, the FASB issued ASU 2024-03 which requires entities to disclose more detailed information about certain costs and expenses related to purchases of inventory, employee compensation, depreciation and intangible asset amortization amongst other items. This ASU is effective for public business entities for annual reporting periods beginning after December 15, 2026 and interim periods beginning after December 15, 2027. The adoption of the provisions of ASU 2024-03 is not expected to have an impact on the Company's operating results or financial condition, but will impact disclosures.

ASU 2025-06, "Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software."In September 2025, the FASB issued ASU 2025-06 which removes all references to prescriptive and sequential software development stages (i.e., project stages), instead requiring an entity to start capitalizing software costs when both of the following occur: 1) management has authorized and committed to funding the software project, and 2) it is probable that the project will be completed and the software will be used to perform the intended function. This ASU is effective for public business entities for interim and annual reporting periods beginning after December 15, 2027. The adoption of the provisions of ASU 2025-06 is not expected to have a material effect on the Company's operating results or financial condition.

ASU 2025-08, "Financial Instruments—Credit Losses (Topic 326): Purchased Loans."In November 2025, the FASB issued ASU 2025-08 which simplifies the accounting for acquired loans under CECL by expanding the use of the gross-up method to a new category of purchased seasoned loans, defined as acquired loans purchased more than 90 days after origination, or through a business combination, when the acquirer was not involved in the origination. This ASU is effective for public business entities for interim and annual reporting periods beginning after December 15, 2026. The adoption of the provisions of ASU 2025-06 is not expected to have an impact on the Company's operating results or financial condition, but will impact the Company's accounting for future purchased loans.

3. Debt Securities

Debt securities available for sale consist of the following at the dates indicated:

Debt securities available for sale by contractual maturity at September 30, 2026 and December 31, 2025 are shown below. MBS are not included in the maturity categories because the borrowers in the underlying pools may prepay without penalty; therefore, it is unlikely that the securities will pay at their stated maturity schedule.

The Company hadno sales of debt securities available for sale andno gross realized gains or losses were recognized during the nine months ended September 30, 2026 or 2025.

Debt securities available for sale with amortized costs totaling $44,785 and $73,944 and market values of $43,063 and $74,987 at September 30, 2026 and December 31, 2025, respectively, were pledged as collateral to secure various public deposits and other borrowings.

The gross unrealized losses and the fair value of debt securities available for sale aggregated by the length of time that individual securities have been in a continuous unrealized loss position as of September 30, 2026 and December 31, 2025 were as follows:

The total number of securities with unrealized losses at September 30, 2026 and December 31, 2025 were 148 and 119, respectively.

Management evaluates securities for impairment where there has been a decline in fair value below the amortized cost basis of a security to determine whether there is a credit loss associated with the decline in fair value on at least a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. All debt securities available for sale in an unrealized loss position as of September 30, 2026 continue to perform as scheduled and management does not believe that there is a credit loss or that a provision for credit losses is necessary. Also, as part of management's evaluation of its intent and ability to hold investments for a period of time sufficient to allow for any anticipated recovery in the market, management considers its investment strategy, cash flow needs, liquidity position, capital adequacy and interest rate risk position. Management does not currently intend to sell the securities within the portfolio and it is not more-likely-than-not that securities will be required to be sold. See "Note 1 – Summary of Significant Accounting Policies" in our 2025 Form 10-K for further discussion.

Management continues to monitor all of its securities with a high degree of scrutiny. There can be no assurance that management will not conclude in future periods that conditions existing at that time indicate some or all of its securities may be sold or would require a charge to earnings as a provision for credit losses in such periods.

Management excludes the accrued interest receivable balance from the amortized cost basis in measuring ECLs on investment securities and does not record an ACL on accrued interest receivable. As of September 30, 2026 and December 31, 2025, the accrued interest receivable for debt securities available for sale was $526 and $554, respectively.

4. Loans Held For Sale

Loans held for sale, at the lower of cost or fair value, consist of the following as of the dates indicated:

The carrying balance of loans held for sale, at fair value, was $4,172 and $7,005 at September 30, 2026 and December 31, 2025, respectively, while the amortized cost of these loans was $4,207 and $6,896, respectively, at the same dates.

5. Loans and Allowance for Credit Losses on Loans

Loans consist of the following at the dates indicated(1):

(1) September 30, 2026 and December 31, 2025 accrued interest receivable of $12,664 and $15,305 was accounted for separately from the amortized cost basis.

All qualifying one-to-four family loans, HELOCs, commercial real estate loans and FHLB of Atlanta stock are pledged as collateral by a blanket pledge to secure outstanding FHLB advances.

Loans are made to the Company's executive officers, directors and their associates during the ordinary course of business. The aggregate amount of loans to related parties totaled $0 at both September 30, 2026 and December 31, 2025. In relation to these loans are unfunded commitments that totaled approximately $3 at both September 30, 2026 and December 31, 2025.

Loans are monitored for credit quality on a recurring basis and the composition of the loans outstanding by credit quality indicator is provided below. Loan credit quality indicators are developed through review of individual borrowers on an ongoing basis. Generally, loans are monitored for performance on a quarterly basis with the credit quality indicators adjusted as needed. The indicators represent the rating for loans as of the date presented based on the most recent assessment performed. These credit quality indicators are defined as follows:

Pass –A pass rated loan is not adversely classified because it does not display any of the characteristics for adverse classification.

Special Mention –A special mention loan has potential weaknesses that deserve management’s close attention. If left uncorrected, such potential weaknesses may result in deterioration of the repayment prospects or collateral position at some future date. Special mention loans are not adversely classified and do not warrant adverse classification.

Substandard –A substandard loan is inadequately protected by the current net worth and paying capacity of the obligor, or of the collateral pledged, if any. Loans classified as substandard generally have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt. These loans are characterized by the distinct possibility of loss if the deficiencies are not corrected.

Doubtful –A loan classified as doubtful has all the weaknesses inherent in a loan classified substandard with the added characteristic that the weaknesses make collection or liquidation in full highly questionable and improbable, on the basis of currently existing facts, conditions and values.

Loss –Loans classified as loss are considered uncollectible and of such little value that their continuing to be carried as a loan is not warranted. This classification is not necessarily equivalent to no potential for recovery or salvage value, but rather that it is not appropriate to defer a full write-off even though partial recovery may be effected in the future.

The following table presents the credit risk profile by risk grade for commercial real estate, commercial, residential real estate and consumer loans by origination year as of September 30, 2026. Also included in the table detailing loan balances are gross charge-offs for the nine months ended September 30, 2026:

(1)As previously announced, on July 24, 2023, the Board of Directors approved a change in the Company's fiscal year end from June 30 to December 31. "2023-S" represents the six-month transition period ended December 31, 2023. All subsequent periods are based on a calendar year end.

The following table presents the credit risk profile by risk grade for commercial real estate, commercial, residential real estate and consumer loans by origination year as of December 31, 2025. Also included in the table detailing loan balances are gross charge-offs for the year ended December 31, 2025:

(1)As previously announced, on July 24, 2023, the Board of Directors approved a change in the Company's fiscal year end from June 30 to December 31. "2023-S" represents the six-month transition period ended December 31, 2023. All subsequent periods are based on a calendar year end.

The following tables present aging analyses of past due loans (including nonaccrual loans) by segment and class as of the dates indicated.

(1)Of the past due totals presented above, $14,444 and $14,307 of these balances were fully guaranteed by the SBA as of September 30, 2026 and December 31, 2025, respectively.

(2)Reflects a change in prior period disclosures where, for loans with monthly payments, they were previously considered past due when a loan is in arrears two or more payments. Under the updated disclosure, these loans are considered past due when the loan is in arrears one or more payments. The most significant impact was to the "30-89 Days" column where the total balance increased by $37,194, with the one-to-four family residential real estate portfolio making up $22,393 of the change.

The following table presents the recorded investment in loans on nonaccrual status, by segment and class, including restructured loans. It also includes interest income recognized on nonaccrual loans for the nine months ended September 30, 2026.

(1)Of the nonaccrual totals presented above, $22,665 and $14,885 of these balances were fully guaranteed by the SBA as of September 30, 2026 and December 31, 2025, respectively.

The following tables present analyses of the ACL on loans by segment for the periods indicated below. In addition to the provision (benefit) for credit losses on loans presented below, a provision of $15 and benefit of $660 for off-balance sheet credit exposures were recorded for the three and nine months ended September 30, 2026, respectively. Provisions of $260 and $918 for off-balance sheet credit exposures were recorded for the three and nine months ended September 30, 2025, respectively.

A loan is considered to be collateral dependent when the borrower is experiencing financial difficulty and the repayment is expected to be provided substantially through the operation or sale of the collateral. The following tables provide a breakdown between loans identified as CDAs and non-CDAs, by segment and class, as well as collateral coverage for those loans at the dates indicated below:

Modifications to Borrowers Experiencing Financial Difficulty

The Company modifies loans to borrowers experiencing financial difficulty by providing principal forgiveness, a term extension, an other-than-insignificant payment delay or interest rate adjustments. In some cases, the Company provides multiple types of modifications on one loan. Typically, one type of modification, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another modification, such as principal forgiveness, may be granted. For loans included in the combination columns in the table below, multiple types of modifications have been made on the same loan within the current reporting period.

The following tables present the amortized cost basis of loans at September 30, 2026 and 2025, that were both experiencing financial difficulty and modified during the three and nine months ended September 30, 2026 and 2025, by class and type of modification. The percentage of the amortized cost basis of loans that were modified to borrowers in financial difficulty as compared to the amortized cost basis of each class of financing receivable is also presented.

The following tables present the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty for the periods indicated below:

The following tables present loans that had a payment default during the periods indicated that had previously been modified within the prior twelve months. For purposes of these tables, a loan is considered to be in default when it becomes 30 days contractually past due under the modified terms.

Off-Balance Sheet Credit Exposure

The Company maintains a separate reserve for credit losses on off-balance sheet credit exposures, including unfunded loan commitments, which is included in other liabilities on the consolidated balance sheet. The reserve for credit losses on off-balance sheet credit exposures is adjusted as a provision for credit losses in the consolidated statement of income. The estimate includes consideration of the likelihood that funding will occur and an estimate of ECLs on commitments expected to be funded over its estimated life, utilizing the same models and approaches for the Company's other loan portfolio segments described above, as these unfunded commitments share similar risk characteristics as its loan portfolio segments. The Company has identified the unfunded portion of certain lines of credit as unconditionally cancellable credit exposures, meaning the Company can cancel the unfunded commitment at any time. No credit loss estimate is reported for off-balance sheet credit exposures that are unconditionally cancellable by the Company or for undrawn amounts under such arrangements that may be drawn prior to the cancellation of the arrangement. At September 30, 2026 and December 31, 2025, the ACL on off-balance sheet credit exposures included in other liabilities was $3,485 and $4,145, respectively.

6. Deposits

Deposit accounts at the dates indicated consist of the following:

Deposits received from executive officers, directors and their associates totaled approximately $1,612 and $1,105 at September 30, 2026 and December 31, 2025, respectively.

As of September 30, 2026, scheduled maturities of certificates of deposit were as follows:

Certificates of deposit with balances of $250 or greater totaled $159,345 and $198,473 at September 30, 2026 and December 31, 2025, respectively. Generally, deposit amounts in excess of $250 are not federally insured.

7. Borrowings

Junior Subordinated Debentures

On February 21, 2007, Quantum formed a Delaware statutory trust, Quantum Capital Statutory Trust II (the "Trust"), which issued $11,000 of trust preferred securities that were designed to qualify as Tier I capital under Federal Reserve Board guidelines. All of the common securities of the Trust were owned by Quantum. The proceeds from the issuance of the common securities and the trust preferred securities were used by the Trust to purchase $11,341 of junior subordinated debentures of Quantum. As a result of its merger with Quantum on February 12, 2023, HomeTrust became the 100% successor owner of the common securities of the Trust.

The trust preferred securities, which accrued and paid quarterly distributions at a floating rate of 3-month Term SOFR plus 2.20%, were mandatorily redeemable upon maturity of the debentures on March 15, 2037 or upon earlier redemption as provided in the indenture, and the Company elected to redeem the trust preferred securities in whole on June 15, 2026. The redemption price was the principal amount and any accrued but unpaid interest. The Company had previously established a fair value mark (discount) on the junior subordinated debt securities when accounting for the referenced merger, which was being accreted into income through interest expense. Associated with the redemption of the debt instruments, the remaining unaccreted discount of $1,079 was written off through other noninterest expense.

Other Borrowings

Borrowings, outside of junior subordinated debt, consisted of the following at the dates indicated:

All qualifying one-to-four family loans, HELOCs, commercial real estate loans, multifamily loans and FHLB of Atlanta stock are pledged as collateral to secure outstanding FHLB advances while commercial construction loans, indirect auto loans, and equipment and municipal leases are pledged as collateral to secure outstanding FRB advances. At September 30, 2026 and December 31, 2025, the Company had the ability to borrow $338,146 and $355,296, respectively, through additional FHLB advances and $480 and $66,347, respectively, through the unused portion of a line of credit with the FRB.

At September 30, 2026 and December 31, 2025, the Company maintained revolving lines of credit with four unaffiliated banks which totaled $135,000 and $165,000, respectively. At both dates, the aggregate outstanding balance on the revolving lines of credit was $0.

8. Leases

As Lessee - Operating Leases

The Company's operating leases primarily include office space and bank branches. Certain leases include one or more options to renew, with renewal terms that can extend the lease term up to 15 additional years. The exercise of lease renewal options is at management's sole discretion. When it is reasonably certain that the Company will exercise our option to renew or extend the lease term, that option is included in estimating the value of the ROU and lease liability. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants. Most of the Company's lease agreements include periodic rate adjustments for inflation. The depreciable life of ROU assets and leasehold improvements are limited to the shorter of the useful life or the expected lease term. Leases with an initial term of 12 months or less are not recorded on the Company's Consolidated Balance Sheet. The Company recognizes lease expenses for these leases over the lease term.

The following tables present supplemental balance sheet information related to operating leases. ROU assets are included in other assets and lease liabilities are included in other liabilities.

The following schedule summarizes aggregate future minimum lease payments under these operating leases at September 30, 2026:

The following table presents components of operating lease expense for the periods indicated:

The following table presents supplemental operating lease cash flow information for the periods indicated:

As Lessor - General

The Company leases equipment to commercial end users under operating and finance lease arrangements. The Company's equipment finance leases consist mainly of construction, transportation, healthcare and manufacturing equipment. Many of its operating and finance leases offer the lessee the option to purchase the equipment at fair value or for a fixed purchase option, and most of the leases that do not have a purchase option include renewal provisions resulting in some leases continuing beyond initial contractual terms. The Company's leases do not include early termination options, and continued rent payments are due if leased equipment is not returned at the end of the lease.

As Lessor - Operating Leases

Operating lease income is recognized as a component of noninterest income on a straight-line basis over the lease term. Lease terms range fromone toseven years. Assets related to operating leases are included in other assets and the corresponding depreciation expense is recorded on a straight-line basis as a component of other noninterest expense. The net book value of leased assets totaled $18,270 and $25,415 with a residual value of $9,697 and $13,167 as of September 30, 2026 and December 31, 2025, respectively.

The following schedule summarizes, as of September 30, 2026, aggregate future minimum lease payments to be received:

As Lessor - Financing Leases

Finance lease income is recognized as a component of loan interest income over the lease term. The finance leases are included as a component of the equipment finance class of financing receivables under the commercial loan segment of the loan portfolio. For the three months ended September 30, 2026 and 2025, interest income on equipment finance leases totaled $1,403 and $1,377, respectively. For the nine months ended September 30, 2026 and 2025, interest income on equipment finance leases totaled $4,384 and $3,879, respectively.

The lease receivable component of finance lease net investment included within the equipment finance class of financing receivables was $73,317 and $82,305 at September 30, 2026 and December 31, 2025, respectively.

The following schedule summarizes, as of September 30, 2026, aggregate future minimum finance lease payments to be received:

9. Equity Incentive Plan

The Company historically provided stock-based awards through the 2013 Omnibus Incentive Plan, which provided for awards of restricted stock, restricted stock units, stock options, stock appreciation rights and cash awards to directors, directors emeritus, officers, employees and advisory directors. On November 14, 2022, at the Company's annual meeting, stockholders approved the 2022 Omnibus Incentive Plan which provides for the same types of awards as described under the 2013 Omnibus Incentive Plan. Going forward, any future grants will be made under this plan.

The cost of equity-based awards under the 2022 Omnibus Incentive Plan generally is based on the fair value of the awards on their grant date. The maximum number of shares that may be utilized for awards under the plan is 1,000,000. Shares of common stock issued under the plan will be issued out of authorized but unissued shares, some or all of which may be repurchased shares.

The table below presents share-based compensation expense and the estimated related tax benefit for stock options and restricted stock for the periods indicated:

The table below presents stock option activity and related information for the periods indicated below:

There were no options granted during the nine months ended September 30, 2026 or 2025.

At September 30, 2026, the Company had $28 of unrecognized compensation expense related to 9,000 stock options originally scheduled to vest over afive-year period. The weighted average period over which compensation cost related to non-vested awards is expected to be recognized was 0.4 years at September 30, 2026. At September 30, 2025, the Company had $125 of unrecognized compensation expense related to 25,380 stock options originally scheduled to vest over afive-year period. The weighted average period over which compensation cost related to non-vested awards is expected to be recognized was 0.7 years at September 30, 2025.

The table below presents restricted stock award activity and related information:

(1)Restricted stock awards granted in calendar year 2026 are scheduled to vest over 1.0 year for director awards and 3.0 years for employee awards. All restricted stock awards granted prior to calendar year 2026 are scheduled to vest over 1.0 year for director awards and 5.0 years for employee awards.

(2)Performance-based restricted stock units are scheduled to vest over 3.0 years assuming the applicable financial goals are met.

At September 30, 2026, unrecognized compensation expense was $5,592 related to 210,103 shares of restricted stock. The weighted average period over which compensation cost related to non-vested awards is expected to be recognized was 1.5 years at September 30, 2026. At September 30, 2025, unrecognized compensation expense was $4,341 related to 176,305 shares of restricted stock. The weighted average period over which compensation cost related to non-vested awards is expected to be recognized was 1.7 years at September 30, 2025.

10. Net Income per Share

The following is a reconciliation of the numerator and denominator of basic and diluted net income per share of common stock for the periods indicated:

Potential dilutive shares are excluded from the computation of earnings per share if their effect is anti-dilutive. There wereno stock options that were anti-dilutive as of September 30, 2026 or 2025.

11. Commitments and Contingencies

Loan Commitments – Legally binding commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many commitments may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. In the normal course of business, there are various outstanding commitments to extend credit that are not reflected in the consolidated financial statements.

The table below presents details of loan commitments outstanding as of the dates indicated:

(1)Fixed rate commitments had terms ranging from three to 30 years as of each date presented.

(2)Principally second mortgage home equity loans and overdraft protection loans.

The commitments presented in the above table represent the Company’s exposure to credit risk and, in the opinion of management, have no more than the normal lending risk that the Company commits to its borrowers.

The Company has two types of commitments related to certain one-to-four family loans held for sale: rate lock commitments and forward loan commitments. Rate lock commitments are commitments to extend credit to a customer that has an interest rate lock and are considered derivative instruments. The rate lock commitments do not qualify for hedge accounting. In order to mitigate the risk from interest rate fluctuations, the Company enters into forward loan sale commitments such as TBAs, mandatory delivery commitments with investors, or best efforts forward sale commitments with investors. The fair value of these interest rate lock commitments was not material at September 30, 2026 or December 31, 2025.

Equity Investment Commitments – The Company invests in a variety of equity investments. For investments where the Company's original commitment amount has not been funded in full, the table below summarizes the Company's outstanding commitments:

Although the remaining capital contributions may or may not be called in the future, under the terms of the associated agreements, the Company's exposure will not extend beyond the amount of the original commitments. The disclosure does not include equity investments where either the Company's capital commitments have been fully funded or the investment is winding down.

Guarantees – Standby letters of credit obligate the Company to meet certain financial obligations of its customers, if, under the contractual terms of the agreement, the customers are unable to do so. The financial standby letters of credit issued by the Company are irrevocable and payment is only guaranteed upon the borrower's failure to perform its obligations to the beneficiary. Total commitments under standby letters of credit as of September 30, 2026 and December 31, 2025 were $51,461 and $55,491, respectively. There was no liability recorded for these letters of credit at September 30, 2026 or December 31, 2025.

Litigation – From time to time, the Company is involved in litigation matters in the ordinary course of business. These proceedings and the associated legal claims are often contested, and the outcome of individual matters is not always predictable. These claims and counter claims typically arise during the course of collection efforts on problem loans or with respect to actions to enforce liens on properties in which the Company holds a security interest. The Company is not a party to any pending legal proceedings that management believes would have a material adverse effect on the Company’s financial condition or results of operations.

12. Fair Value of Financial Instruments

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect a company's own assumptions about the assumptions that market participants would use in pricing an asset or liability.

A financial instrument's level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The following is a description of valuation methodologies used for assets recorded at fair value. As of September 30, 2026 and December 31, 2025, the Company did not have any liabilities recorded at fair value.

The methods of determining the fair value of assets and liabilities presented in this note are consistent with the methodologies disclosed in Note 20 of the 2025 Form 10-K.

Financial Assets Recorded at Fair Value

The following table presents financial assets measured at fair value on a recurring basis at the dates indicated:

Debt securities available for sale are valued on a recurring basis at quoted market prices where available. If quoted market prices are not available, fair values are based on quoted prices of comparable securities. Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange or U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter markets and money market funds. Level 2 securities include MBS and debentures issued by GSEs, municipal bonds and corporate debt securities. The Company has no Level 3 securities.

Loans held for sale carried at fair value are valued at the individual loan level using quoted secondary market prices.

There were no transfers between levels during the nine months ended September 30, 2026 or 2025.

The following table presents financial assets measured at fair value on a non-recurring basis at the date indicated:

No financial assets were measured at fair value on a non-recurring basis as of September 30, 2026.

A loan is considered to be collateral dependent when, based on current information and events, the Company expects repayment of the financial assets to be provided substantially through the operation or sale of the collateral and the Company has determined that the borrower is experiencing financial difficulty as of the measurement date. For real estate loans, the fair value of the loan's collateral is determined by a third-party appraisal, which is then adjusted for the estimated selling and closing costs related to liquidation of the collateral (typically ranging from 8% to 12% of the appraised value). For this asset class, the actual valuation methods (income, sales comparable or cost) vary based on the status of the project or property. Additional discounts of 5% to 15% may be applied depending on the age of the appraisals. The unobservable inputs may vary depending on the age of the appraisals. The unobservable inputs may vary depending on the individual asset with no one of the three methods being the predominant approach. For non-real estate loans, the fair value of the loan's collateral may be determined using an appraisal, net book value per the borrower's financial statements or aging reports, adjusted or discounted based on management's historical knowledge, changes in market conditions from the time of the valuation and management's expertise and knowledge of the customer and customer's business.

The stated carrying value and estimated fair value amounts of financial instruments as of September 30, 2026 and December 31, 2025, are summarized below:

The Company had off-balance sheet financial commitments, which included approximately $1,267,837 and $1,234,381 of commitments to originate loans, undisbursed portions of construction loans, unused lines of credit and standby letters of credit at September 30, 2026 and December 31, 2025, respectively (see "Note 11 – Commitments and Contingencies"). Since these commitments are based on current rates, the carrying amount approximates the fair value.