NORTHPOINTE BANCSHARES INC (NPB)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Introduction

The following section presents additional information and highlights significant changes in the financial condition of Northpointe Bancshares, Inc. (the “Company”) and our wholly owned subsidiary, Northpointe Bank (the “Bank”), from December 31, 2025 through March 31, 2026, and on our results of operations for the three months ended March 31, 2026 and 2025. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q. This discussion and analysis contains forward-looking statements that involve risk, uncertainties and assumptions. Certain risks, uncertainties and other factors, including but not limited to those set forth under “Cautionary Note Regarding Forward-Looking Statements,” “Risk Factors,” and elsewhere in this Quarterly Report on Form 10-Q, may cause actual results to differ materially from those projected in the forward looking statements. We assume no obligation to update any of these forward-looking statements.

Business Overview

We are a bank holding company headquartered in Grand Rapids, Michigan. Our common stock is traded on the New York Stock Exchange under the ticker symbol NPB. Through our Bank, we focus on (1) providing a best-in-class platform for independent mortgage bankers nationwide to utilize as an alternative to traditional mortgage warehouse lending (we refer to this business as our Mortgage Purchase Program, or “MPP”) and (2) offering attractive products and services to our residential mortgage and digital banking retail customers.

Our residential lending business provides a comprehensive range of financing options nationwide through two main channels: consumer direct and traditional retail. We are a nationwide mortgage lender, with 122 mortgage originators across 25 states. These channels combine the convenience of online, self-service platforms with the personalized service of an experienced residential mortgage loan officer. Both residential mortgage loan origination channels are supported by our proprietary point-of-service digital platform that streamlines the loan application and closing processes. Our consumer direct and traditional retail channels primarily originate mortgage loans which are saleable through an end investor. In addition, our traditional retail channel selectively originates first-lien home equity lines which are tied seamlessly to a demand deposit sweep account (we refer to the loans we originate as “All-in-One” or “AIO” loans). We have one bank branch located in Grand Rapids, Michigan and physical loan production offices located in 24 cities in 15 states across the country, which are supported by our centralized operations and back-office support teams based in Grand Rapids, Michigan.

Our results of operations are driven by a combination of net interest income, which is the difference between interest income from interest-earning assets and interest expense on interest-bearing liabilities, as well as fee income from a variety of sources. Key components of noninterest income include gains from the sale loans, loan servicing fees, MPP fees, service charges from our deposit services, and other fees. Our principal operating expense, aside from interest expense, consists of salaries and employee benefits, including commissions paid to loan originators, occupancy and equipment costs, data processing expense, professional fees, and provisions for credit losses. Our income is affected by regulatory, economic, and competitive factors that influence interest rates, residential loan demand and deposits costs. In addition, we are subject to interest rate risk to the degree that our interest-earnings assets mature or reprice at different times or at different speeds than our interest-bearing liabilities.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and follow general practices within the banking industry. Application of these principles requires management to make estimates, assumptions and complex judgments that affect amounts presented in our consolidated financial statements. These estimates, assumptions and judgments 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 judgments.

Our accounting and reporting policies are in accordance with GAAP and conform to general practices within the banking industry. Accounting and reporting policies for the allowance for credit losses (“ACL”), the lender risk account (“LRA”) for loans we have sold to the Federal Home Loan Bank of Indianapolis (“FHLB”), and the capitalized mortgage loan servicing

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rights (“MSR”) are deemed critical since they involve the use of estimates and require significant management judgments. Application of assumptions different than those that we have used could result in material changes in our financial position or results of operations.

Our methodology for determining the ACL and related provision for credit losses is described later in this section under “Provision for Credit Losses” and “Loan Portfolio”. In particular, this area of accounting requires a significant amount of judgment because a multitude of factors can influence the ultimate collection of a loan or other type of credit. It is extremely difficult to precisely measure the amount of expected credit losses in our loans held for investment (“HFI”) portfolio. We use a rigorous process to attempt to estimate the necessary ACL and related provision for credit losses, but there can be no assurance that our modeling process will successfully identify all of the expected credit losses in our loan portfolio. The assumptions around establishing reasonable and supportable economic forecasts are particularly subjective. We believe the assumptions we utilize in estimating our ACL are reasonable based upon accepted industry practices and represent neither the most conservative nor aggressive assumptions.

We have established an LRA for loans sold to the FHLB. The LRA is initially funded through a reduction in the purchase price of 1.20% of the loan balance, maintained by the FHLB and is used to offset credit losses over the life of the loans sold to the FHLB. If the LRA has not been depleted by losses, funds are returned to the Company over time, beginning after five years and continuing through 25 years. We carry the asset at estimated fair value. The fair value of the LRA is determined based on a valuation model used by an independent third party, which is determined using an income approach with various assumptions including expected cash flows, market discount rates, prepayment speeds, expected loss rates and other factors. These assumptions are particularly subjective and can have a material effect on the estimated LRA balance and income. We believe the assumptions that we utilize in estimating fair value are reasonable based upon accepted industry practices and represent neither the most conservative nor aggressive assumptions.

We establish MSR assets when we sell loans with servicing retained and when we purchase mortgage servicing. MSRs are measured at fair value, with new capitalization reported in net gain on sale of loans and any subsequent changes reported in loan serving fees. The fair value of our MSRs are determined based on a valuation model used by an independent third party. There are several critical assumptions involved in establishing the value of this asset including estimated future prepayment speeds on the underlying mortgage loans, the interest rate used to discount the net cash flows from the mortgage loan servicing, the estimated amount of ancillary income that will be received in the future (such as late fees) and the estimated cost to service the mortgage loans. These assumptions are particularly subjective and can have a material effect on the estimated MSR balances and income. We believe the assumptions that we utilize in our valuation are reasonable based upon accepted industry practices for valuing mortgage loan servicing rights and represent neither the most conservative nor aggressive assumptions.

Emerging Growth Company

Pursuant to 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.

Recent Developments

On December 9, 2025, we issued $70.0 million in aggregate principal amount of our 7.50% Fixed-to-Floating Rate Subordinated Notes due 2035. The proceeds of this issue, along with cash reserves, was used to redeem the remaining $77.0 million of our 8.25% Fixed-to-Floating Rate Non-Cumulative Perpetual Series A Preferred Stock (“Series A”) on December 30, 2025. We elected to redeem the Series A preferred stock because its interest rate was scheduled to reset to a higher rate on January 2, 2026. Preferred stock dividends and related costs for the year ended December 31, 2025 included $3.2 million in unamortized deal issuance costs related to the redemption of the Series A preferred stock, and a special one-time dividend of $2.50 per share paid on June 30, 2025 on our Series A preferred stock and our 8.25% Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series B (“Series B”).

On March 12, 2026, the Company issued $20.0 million of subordinated notes due March 15, 2036. The notes become redeemable on March 15, 2031. Interest payments are due on June 15 and December 15 of each year at a fixed rate of 7.50% through March 15, 2031 and convert to a variable rate of three-month SOFR plus 4.15% with payments due quarterly.

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More detail on our subordinated notes and preferred stock is provided in Note 9 and Note 10, respectively, in our Notes to Consolidated Financial Statements.

On July 4, 2025, “An Act to Provide for Reconciliation Pursuant to Title II of H. Con. Res. 14,” more commonly referred to as the “One Big Beautiful Bill Act” (“OBBBA”) was signed into law. OBBBA enacted broad changes to the domestic and international taxation arena by extending many expiring Tax Cuts and Jobs Act tax provisions among other individual and business tax relief measures, along with funding national defense and border security, cutting certain federal spending programs, phasing out certain renewable energy credits created by the Inflation Reduction Act, and raising the national debt ceiling, among other things. These changes did not have a material impact on our federal income tax expense or liability for the year ended December 31, 2025 or for the three months ended March 31, 2026. We do not expect these changes to have a material impact on future periods.

Highlights of the First Quarter of 2026

•Net income available to common stockholders was $21.7 million for the three months ended March 31, 2026, an increase of $6.7 million, or 44.3%, from $15.0 million for the three months ended March 31, 2025.

•Earnings per diluted common share was $0.62 for the three months ended Ma

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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

Introduction

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. This discussion and analysis contains forward-looking statements that involve risk, uncertainties and assumptions. Certain risks, uncertainties and other factors, including but not limited to those set forth under “Cautionary Note Regarding Forward-Looking Statements,” “Risk Factors,” and elsewhere in this Annual Report on Form 10-K, may cause actual results to differ materially from those projected in the forward-looking statements. We assume no obligation to update any of these forward-looking statements.

Business Overview

Northpointe Bancshares, Inc. (the “Company”) is a bank holding company headquartered in Grand Rapids, Michigan. Our common stock is traded on the New York Stock Exchange under the ticker symbol NPB. Through our wholly-owned subsidiary, Northpointe Bank (the “Bank”), we focus on (1) providing a best-in-class platform for independent mortgage bankers nationwide to utilize as an alternative to traditional mortgage warehouse lending (we refer to this business as our Mortgage Purchase Program, or “MPP”) and (2) offering attractive products and services to our residential mortgage and digital banking retail customers.

Our residential lending business provides a comprehensive range of financing options nationwide through two main channels: consumer direct and traditional retail. We are a nationwide mortgage lender, with 122 mortgage originators across 25 states. These channels combine the convenience of online, self-service platforms with the personalized service of an experienced residential mortgage loan officer. Both residential mortgage loan origination channels are supported by our proprietary point-of-service digital platform that streamlines the loan application and closing processes. Our consumer direct and traditional retail channels primarily originate mortgage loans which are saleable through an end investor. In addition, our traditional retail channel selectively originates first-lien home equity lines which are tied seamlessly to a demand deposit sweep account (we refer to the loans we originate as “All-in-One” or “AIO” loans). We have one bank branch located in Grand Rapids, Michigan and physical loan production offices located in 25 cities in 15 states across the country, which are supported by our centralized operations and back-office support teams based in Grand Rapids, Michigan.

Our results of operations are driven by a combination of net interest income, which is the difference between interest income from interest-earning assets and interest expense on interest-bearing liabilities, as well as fee income from a variety of sources. Key components of noninterest income include gains from the sale loans, loan servicing fees, MPP fees, service charges from our deposit services, and other fees. Our principal operating expense, aside from interest expense, consists of salaries and employee benefits, including commissions paid to loan originators, occupancy and equipment costs, data processing expense, professional fees, and provisions for credit losses. Our income is affected by regulatory, economic, and competitive factors that influence interest rates, residential loan demand and deposits costs. In addition, we are subject to interest rate risk to the degree that our interest-earnings assets mature or reprice at different times or at different speeds than our interest-bearing liabilities.

Known Trends and Uncertainties

Our results of operations and financial condition are influenced by several known trends and uncertainties that management believes are reasonably likely to have a material impact on future performance. These trends and uncertainties include changes in residential mortgage origination volumes, interest rate levels and volatility, competition for deposits and broader macroeconomic conditions affecting housing demand. In particular, sustained changes in interest rates may affect net interest margin, mortgage refinancing activity, gain on sale revenue, customer deposit behavior, and the valuation of mortgage servicing rights. Management continually evaluates these factors in assessing operating performance, capital adequacy, and liquidity planning.

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Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and follow general practices within the banking industry. Application of these principles requires management to make estimates, assumptions and complex judgments that affect amounts presented in our consolidated financial statements. These estimates, assumptions and judgments 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 judgments.

Our accounting and reporting policies are in accordance with GAAP and conform to general practices within the banking industry. Accounting and reporting policies for the allowance for credit losses (“ACL”), the lender risk account (“LRA”) for loans we have sold to the Federal Home Loan Bank of Indianapolis (“FHLB”), and the capitalized mortgage loan servicing rights (“MSR”) are deemed critical since they involve the use of estimates and require significant management judgments. Application of assumptions different than those that we have used could result in material changes in our financial position or results of operations.

Our methodology for determining the ACL and related provision for credit losses is described later in this section under “Provision for Credit Losses” and “Loan Portfolio”. In particular, this area of accounting requires a significant amount of judgment because a multitude of factors can influence the ultimate collection of a loan or other type of credit. It is extremely difficult to precisely measure the amount of expected credit losses in our loans held for investment (“HFI”) portfolio. We use a rigorous process to attempt to estimate the necessary ACL and related provision for credit losses, but there can be no assurance that our modeling process will successfully identify all of the expected credit losses in our loan portfolio. The assumptions around establishing reasonable and supportable economic forecasts are particularly subjective. We believe the assumptions we utilize in estimating our ACL are reasonable based upon accepted industry practices and represent neither the most conservative nor aggressive assumptions.

We have established an LRA for loans sold to the FHLB. The LRA is funded through a reduction of the purchase price and maintained by the FHLB at an initial amount of 1.20% of the loan balance and is used to offset credit losses over the life of the loans sold by the Company to the FHLB. If the LRA has not been depleted by losses, funds are returned to the Company over time, beginning after five years and continuing through 25 years. We carry the asset at estimated fair value. The fair value of our LRA is determined based on a valuation model used by an independent third party, which is determined using an income approach with various assumptions including expected cash flows, market discount rates, prepayment speeds, expected loss rates and other factors. These assumptions are particularly subjective and can have a material effect on the estimated LRA balance and income. We believe the assumptions that we utilize in estimating fair value are reasonable based upon accepted industry practices and represent neither the most conservative nor aggressive assumptions.

We establish MSR assets when we sell loans with servicing retained and when we purchase mortgage servicing. MSRs are measured at fair value, with new capitalization reported in net gain on sale of loans and any subsequent changes reported in loan servicing fees. The fair value of our MSRs are determined based on a valuation model used by an independent third party. There are several critical assumptions involved in establishing the value of this asset including estimated future prepayment speeds on the underlying mortgage loans, the interest rate used to discount the net cash flows from the mortgage loan servicing, the estimated amount of ancillary income that will be received in the future (such as late fees) and the estimated cost to service the mortgage loans. These assumptions are particularly subjective and can have a material effect on the estimated MSR balances and income. We believe the assumptions that we utilize in our valuation are reasonable based upon accepted industry practices for valuing mortgage loan servicing rights and represent neither the most conservative nor aggressive assumptions.

Emerging Growth Company

Pursuant to 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.

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Recent Developments

On December 9, 2025, we issued $70.0 million in aggregate principal amount of our 7.50% Fixed-to-Floating Rate Subordinated Notes due 2035. The proceeds of this issue, along with cash reserves, was used to redeem the remaining $77.0 million of our 8.25% Fixed-to-Floating Rate Non-Cumulative Perpetual Series A Preferred Stock (“Series A”) on December 30, 2025. We elected to redeem the Series A preferred stock because its interest rate was scheduled to reset to a higher rate on January 2, 2026. Preferred stock dividends and related costs for the year ended December 31, 2025 included $3.2 million in unamortized deal issuance costs related to the redemption of the Series A preferred stock, and a special one-time dividend of $2.50 per share paid on June 30, 2025 on our Series A preferred stock and our 8.25% Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series B (“Series B”).

On March 12, 2026, the Company issued $20.0 million of subordinated notes due March 15, 2036. The notes become redeemable on March 15, 2031. Interest payments are due on June 15 and December 15 of each year at a fixed rate of 7.50% through March 15, 2031 and convert to a variable rate of three-month SOFR plus 4.24% with payments due quarterly.

More detail on our subordinated notes and preferred stock is provided in Note 9 and Note 11, respectively, in our Notes to Consolidated Financial Statements.

On July 4, 2025, “An Act to Provide for Reconciliation Pursuant to Title II of H. Con. Res. 14,” more commonly referred to as the “One Big Beautiful Bill Act” (“OBBBA”) was signed into law. OBBBA enacted broad changes to the domestic and international taxation arena by extending many expiring Tax Cuts and Jobs Act tax provisions among other individual and business tax relief measures, along with funding national defense and border security, cutting certain federal spending programs, phasing out certain renewable energy credits created by the Inflation Reduction Act, and raising the national debt ceiling, among other things. These changes did not have a material impact on our federal income tax expense or liability for the year ended December 31, 2025. We do not expect these changes to have a material impact on future periods.

Primary Factors Used to Evaluate our Business

In addition to net income, the primary factors we use to evaluate and manage our results of operations include net interest income, noninterest income and noninterest expense.

Net Interest Income

Net interest income is generally the most significant contributor to our net income. Net interest income represents interest income from interest earning assets, primarily our loan portfolio, including MPP, residential mortgage loans, and our first lien home equity product AIO loans, as well as interest earned on our liquid assets primarily invested at the Federal Reserve and FHLB dividends, less interest expense on interest-bearing liabilities, such as deposits, FHLB advances, and other borrowings, which are used to fund those assets. The amount of our net interest income is affected by overall loan demand, economic conditions, the slope of the yield curve, and changes in the absolute level of interest rates, the amounts and composition of our loan portfolio and interest-bearing liabilities.

For 2025 and 2024, net interest income accounted for more than half of our total revenue. During periods when market conditions are such that industry residential loan originations are significantly higher, it is expected that noninterest income will grow substantially, driven primarily by gain on sale of mortgage loans, resulting in net interest income dropping to under half of total revenue.

Noninterest Income

Noninterest income consists of service charges on deposits and related fees, loan servicing fees, MPP related fees, net gains on the sale of loans and other noninterest income. Noninterest income is a key contributor to our net income and is expected to account for more than half of our revenue in market conditions when industry residential mortgage loan origination volumes are significantly higher.

Noninterest Expense

Noninterest expense includes salaries and employee benefits, occupancy and equipment costs, data processing expense, professional fees, and other taxes and insurance and other noninterest expense. In evaluating our level of noninterest expense, we also monitor our efficiency ratio. As a residential real estate mortgage-focused bank, our efficiency ratio will typically be higher than other non-mortgage focused banks and will tend to decrease significantly with any meaningful increase in industry

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mortgage originations. The efficiency ratio represents noninterest expense divided by the sum of net interest income and noninterest income.

We continually seek to identify ways to streamline our business and operate more efficiently, which has enabled us to reduce our noninterest expense in both absolute terms and as a percentage of our revenue while continuing to achieve growth in total loans and assets. A significant component of our expense base is mortgage- related commissions, which are variable in nature and increase or decrease in line with residential mortgage originations. We also proactively manage our production-related back-office expenses and will right size those expenses where possible based on the anticipated level of production.

Over the past several years, and most notably since becoming a public company, we have made investments in people and technology to continue our growth strategy, and to bolster our risk management functions including cybersecurity. We believe we are well positioned to continue our growth trajectory without meaningful additions to our current cost structure.

Public Company Costs

We completed our initial public offering in February of 2025. As a result, we have incurred additional costs associated with operating as a public company in 2025. While we expect certain public company costs to moderate over time as we scale and gain operating efficiencies, we expect that these costs will continue to be elevated from additional personnel, legal, consulting, regulatory, insurance, accounting, investor relations and other expenses that we did not incur as a private company.

The Sarbanes-Oxley Act, as well as rules adopted by the SEC, the FDIC, and NYSE, requires public companies to implement specified corporate governance practices that were previously inapplicable to us as a private company. These additional rules and regulations will increase our legal, regulatory and financial compliance costs and will make some activities more time-consuming and costly.

Financial Condition

The primary factors we use to evaluate and manage our financial condition include asset quality, liquidity and capital.

Asset Quality

We manage the quality of our loans based upon trends at the overall loan portfolio level as well as within specific product types. We measure and monitor key factors that include the level and trend of classified, delinquent, nonaccrual and nonperforming assets, collateral coverage and credit scores and debt service coverage, where applicable. These metrics directly impact our evaluation of the adequacy of our allowance for credit losses.

Liquidity

We manage liquidity based upon factors that include the level of diversification of our funding sources, the composition and duration of our deposits, the availability of unused funding sources, off-balance sheet obligations, the amount of cash we hold and the availability of assets to be readily converted into cash without undue loss. Our liquidity position benefits significantly from the fact that over half of the loan portfolio is in MPP, in which loans typically have a dwell time on the client’s facility for less than 30 days after the loan is funded, and which we have the unilateral right not to fund. We maintain appropriate funding capacity through our diversified and nimble funding structure, which includes a scalable digital banking platform, non-brokered rate board time deposits, brokered CDs, and access to funding from the FHLB and other smaller facilities. The FDIC evaluates the liquidity of our Bank on a stand-alone basis pursuant to applicable guidance and policies.

Capital

We manage our capital by tracking the level and quality of capital with consideration given to our overall financial condition, our asset quality, our level of allowance for credit losses, our geographic and industry concentrations, and other risk factors in our balance sheet, including interest rate sensitivity and off-balance-sheet commitments. Bank holding companies and banks are subject to various regulatory capital requirements administered by federal bank and state regulatory agencies. Our Bank is subject to minimum risk-based and leverage capital requirements under federal regulations implementing the Basel III framework, and to regulatory thresholds that must be met for an insured depository institution to be classified as “well-capitalized” under the prompt corrective action framework. Our capital ratios and the capital ratios of our Bank at December 31, 2025 exceeded all applicable minimum capital requirements and the regulatory standards for our Bank to be “well- capitalized.”

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Highlights for 2025

•Net income available to common stockholders for the year ended December 31, 2025 was $71.6 million, an increase of $24.5 million, or 51.9%, from $47.2 million for the year ended December 31, 2024.

•Earnings per diluted common share increased to $2.11 for 2025, compared to $1.83 for 2024.

•Net interest income before provision for the year ended December 31, 2025 increased by $36.5 million compared to the year ended December 31, 2024, reflecting $1.17 billion increase in average interest-earning assets and a 16 basis point improvement in net interest margin.

•Noninterest expense for the year ended December 31, 2025 increased by $14.6 million compared to the year ended December 31, 2024, primarily driven by higher incentive compensation expense reflecting the improvement in financial performance.

•Demonstrated strong balance sheet growth.

•MPP facilities increased by $1.71 billion at December 31, 2025 compared to December 31, 2024.

•AIO loans increased by $120.5 million at December 31, 2025 compared to December 31, 2024.

•Total deposits increased by $1.45 billion at December 31, 2025 compared to December 31, 2024, and include growth in the Company’s diversified digital deposit banking platform including two new deposit relationships added during 2025, along with growth in brokered CDs.

•Liquidity remained stable, with total cash and cash equivalents of $496.5 million at December 31, 2025, up $120.2 million, or 31.9% compared to $376.3 million at December 31, 2024.

•As of December 31, 2025, our capital ratios were above all regulatory requirements to be considered well-capitalized.

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Results of Operations

Net Interest Income

The following table presents average balance sheet information, interest income, interest expense and the corresponding average yield earned and rates paid for the years ended December 31, 2025 and 2024:

____________________

(1)Loan balance includes loans HFI and held for sale. Nonaccrual loans are included in total loan balances and no adjustment has been made for these loans in the yield calculation. Interest income on loans includes amortization of deferred loan fees, net of deferred loan costs.

(2)Net loan fees of $144,000 and $303,000 for 2025 and 2024, respectively, are included in interest income.

(3)Average yield based on carrying value and there are no tax-exempt securities in the portfolio.

(4)Noninterest-earning assets includes the allowance for credit losses.

(5)Net interest spread is the average yield on total interest-earning assets minus the average rate on total interest-bearing liabilities.

(6)Net interest margin is net interest income divided by total average interest-earning assets.

Increases and decreases in interest income and interest expense result from changes in average balances (volume) of interest-earning assets and interest-bearing liabilities, as well as changes in average interest rates. The following table shows the

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effect that these factors had on the interest earned from our interest-earning assets and interest incurred on our interest-bearing liabilities. The effect of changes in volume is determined by multiplying the change in volume by the current period’s average rate. The effect of rate changes is calculated by multiplying the change in average rate by the previous period’s volume. The change in interest due to both rate and volume has been allocated to rate and volume changes in proportion to the relationship of the absolute dollar amounts of the changes in each.

For the year ended December 31, 2025, net interest income totaled $150.7 million, an increase of $36.5 million, or 32.0%, from $114.2 million for the year ended December 31, 2024. This year-over-year increase was driven primarily by a $1.17 billion increase in average-earning assets and a 16 basis point improvement in net interest margin.

Average interest-earning assets increased to $6.15 billion at December 31, 2025, compared to $4.98 billion at December 31, 2024, reflecting strong growth in MPP and AIO loans, partially offset by continued run-off from the remainder of the loans HFI portfolio.

Net interest margin increased to 2.45% for the year ended December 31, 2025, compared to 2.29% for the year ended December 31, 2024. This increase was driven primarily by a decrease in the average rate paid on interest-bearing deposits, consistent with the decrease in the federal funds rate, which outpaced the decrease in the yield earned on interest-earning assets.

Provision (Benefit) for Credit Losses

The provision (benefit) for credit losses represents a charge (gain) to earnings necessary to establish an allowance for credit losses that, in management’s evaluation, is adequate to provide coverage for all expected future credit losses. The provision (benefit) for credit losses is impacted by inherent risk characteristics in our loan portfolio, the level of nonperforming loans and net charge-offs, both current and historic, recent historical and projected future economic conditions, loan growth, the direction of the change in collateral values, and the level of actual net charge-offs incurred. Our provision (benefit) for credit losses reflect risks in the HFI loan portfolio, which is comprised predominately of collateralized single-family mortgage loans, with very low historical loss experience. Our provision (benefit) for credit losses reflects both our loans HFI portfolio and the unfunded commitments on that portfolio.

For the year ended December 31, 2025, total provision for credit losses was $2.1 million compared to a provision benefit of $328,000 for the year ended December 31 2024. This increase was driven primarily by higher levels of net charge-offs and additional provisions related to the continued growth in MPP and AIO loans.

The provision for credit losses related to loans was an expense of $2.2 million for the year ended December 31, 2025, reflecting net charge-offs of $2.9 million and an ending allowance for credit losses of $10.4 million. For the year ended

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December 31, 2024, the provision for credit losses related to loans was an expense of $881,000, reflecting $2.0 million in net charge-offs and an ending allowance for credit losses of $11.2 million.

The provision for unfunded loan commitments was a benefit of $55,000 for the year ended December 31, 2025, as compared to a benefit of $1.2 million for the year ended December 31, 2024. The decrease reflects lower levels of unfunded commitments driven primarily by continued run-off in the construction loan portfolio.

Noninterest income

The following table presents the major components of our noninterest income for the years ended December 31, 2025 and 2024:

For the year ended December 31, 2025, noninterest income totaled $91.0 million, an increase of $18.1 million, or 24.8%, from $72.9 million for the year ended December 31, 2024. This increase was driven primarily by higher net gains on sales of loans and other noninterest income, partially offset by lower loan servicing fees.

The following tables present the major components of our loan servicing fees and net gain on sale of loans for the years ended December 31, 2025 and 2024:

For the year ended December 31, 2025, loan servicing fees decreased by $4.2 million compared to the year ended December 31, 2024. This decrease was largely due to the bulk sale of mortgage servicing rights early in 2024, as we made the strategic decision to scale back that part of our business.

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(1) - Includes the change in fair value of interest rate locks, loans held for sale, and loans HFI.

(2) - Includes proceeds from portfolio loan sales, which are netted against any associated changes in fair value of loans to determine total gain or loss on sale.

(3) - Includes (a) net premium from sale of loans, (b) loan origination fees, points and costs, (c) provision from investor reserves, (d) gain or loss from forward commitments from hedging, and (e) change in fair value of lender risk account.

For the year ended December 31, 2025, net gain on sale of loans increased by $20.5 million compared to the year ended December 31, 2024. The table above shows the components of net gain on sale of loans and pulls out the effect of fair value adjustments and portfolio sales to show operational gain on sale of loans held for sale. Net gain on sale of loans for the year ended December 31, 2025 included a gain of $9.4 million from the combined change in fair value of loans HFI and LRA, both attributable to changes in market interest rates, and a gain of $1.2 million on the sale of portfolio loans. For the year ended December 31, 2024, the combined change in fair value of fair value of loans HFI and LRA totaled $11.2 million and included a net loss on sale of portfolio loans of $9.6 million. Excluding these items, net gain on sale of loans was $66.5 million for the year ended December 31, 2025, an increase of $11.4 million from $55.1 million for the year ended December 31, 2024. This increase was driven primarily by higher saleable residential mortgage rate lock commitments and originations.

For the year ended December 31, 2025, other noninterest income increased by $2.0 million compared to the year ended December 31, 2024. This increase was driven primarily by higher gains on the extinguishment of debt and on sales of real estate owned, along with a $1.1 million loss from premium refunded on certain loans in the bulk MSR sale (delinquency, underwriting deficiencies, etc.) recorded for the year ended December 31, 2024. We recognized a $2.0 million gain on the extinguishment of $102.5 million in FHLB advances for the year ended December 31, 2025, compared to a $1.7 million gain on the extinguishment of $50.0 million in FHLB advances for the year ended December 31, 2024.

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Noninterest expense

The following table presents the major components of our noninterest expense for the years ended December 31, 2025 and 2024:

For the year ended December 31, 2025, noninterest expense totaled $129.2 million, an increase of $14.6 million, or 12.8%, from $114.6 million for the year ended December 31, 2024. The increase was driven primarily by higher salaries and benefits expense and professional fees. The table below identifies the primary components of salaries and benefits:

For the year ended December 31, 2025, salaries and employee benefits expense increased by $12.4 million compared to the year ended December 31, 2024. This increase was driven primarily by higher bonus and incentive compensation, reflecting the improvement in business activity over the prior year level, additional restricted stock expense from the initial public offering, as well as higher variable compensation related to the increase in mortgage production and higher medical insurance costs. Base salaries and other compensation decreased by $691,000 for the year ended December 31, 2025 compared to the year ended December 31, 2024. This decrease was driven primarily by our strategic decision to private label ousource the non-specialized mortgage servicing business to a scaled sub-servicer. Our average full time equivalent employees (FTE) for 2025 was 483 compared to 491 for 2024.

For the year ended December 31, 2025, occupancy and equipment expense decreased by $1.0 million compared to the year ended December 31, 2024, driven primarily by lower lease expense as we leased out portions of our corporate space.

For the year ended December 31, 2025, professional fees increased by $2.1 million compared to the year ended December 31, 2024 primarily related to higher ongoing customary public company compliance costs.

For the year ended December 31, 2025, other taxes and insurance increased by $560,000 compared to the year ended December 31, 2024 driven primarily by higher FDIC assessment expense resulting from the growth in assets and continued utilization of capital.

For the year ended December 31, 2025, other noninterest expense increased by $841,000 compared to the year ended December 31, 2024, reflecting increased loan servicing expense related to the outsourcing of our non-specialty servicing business and higher loan repurchase reserve expense, partially offset by reductions in other categories, including marketing, loan collections and intangible amortization/impairment.

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Preferred stock dividends and related costs

For the year ended December 31, 2025, preferred stock dividends and related costs were $11.8 million, an increase of $3.8 million, or 47.4%, from $8.0 million for the year ended December 31, 2024. For the year ended December 31, 2025, this included $3.2 million in unamortized deal issuance costs related to the redemption of Series A preferred stock, along with a special one-time dividend of $2.50 per share, totaling $255,000, paid on June 30, 2025 on the Company’s Series A and Series B preferred stock. The special dividend was paid in connection with amendments made to the Company’s Series A and Series B preferred stock to extend the registration rights agreements deadlines to January 2, 2026 for Series A and to January 2, 2027 for Series B.

Income tax expense

Total income tax expense was $27.0 million for the year ended December 31, 2025, compared to $17.7 million for the year ended December 31, 2024, primarily attributable to the increase in pretax net income. The effective tax rate was 24.44% for or the year ended December 31, 2025 compared to 24.31% for or the year ended December 31, 2024.

Operating Segment Analysis

We have two reporting segments, Retail Banking and MPP. As discussed in Note 21 of our Consolidated Financial Statements, our reportable segments have been determined based on management’s focus and internal reporting structure.

The MPP segment provides collateralized mortgage purchase facilities to independent mortgage bankers nationwide. The Retail Banking segment provides a vast array of financial products and services to consumers nationwide. These include residential mortgages, AIO Loans, other consumer loans, and loan servicing, as well as various types of deposit products, including checking, savings and time deposit accounts. It also includes general and administrative expenses for the enterprise-wide support functions, which are allocated among the segments, internal funds transfer pricing offsets resulting from allocations to or from the other segments, and certain elimination entries.

Our reported segments and the financial information disclosed in the reported segments are not necessarily comparable with similar information reported by other financial institutions. Furthermore, changes in management structure or allocation methodologies and procedures may result in future changes to previously reported operating segment financial information.

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The following tables present our reported segment results for the years ended December 31, 2025 and 2024:

(1) Noninterest income for MPP only includes MPP related fees. All other components of noninterest income are reflected in Retail Banking.

(2) Includes data processing, professional services, office supplies and other miscellaneous expenses.

(3) Reflects corporate overhead expense allocations used by both business segments; primarily consisting of corporate admin, finance, technology, human resources, risk, marketing, wire services and occupancy related allocations.

MPP

For the year ended December 31, 2025, our MPP segment reported net income before preferred dividends of $44.4 million, an increase of $18.5 million, or 71.3%, over the $25.9 million reported for the year ended December 31, 2024. This increase was driven primarily by an 88.9% increase in average balances reflecting strong new customer acquisition and market share gains, partially offset by higher salaries and employee benefits related to the improvement in financial performance, as well as an increase in expense allocations.

Retail Banking

For the year ended December 31, 2025, our Retail Banking segment reported net income before preferred dividends of $39.0 million, an increase of $9.8 million, or 33.4%, over the $29.2 million reported for the year ended December 31, 2024. This increase was driven primarily by higher noninterest income, reflecting higher gain on the sale of loans, and higher net interest income for the improvement in net interest margin and growth in AIO loans, partially offset by an increase in noninterest expense.

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Discussion and Analysis of Financial Condition

The following table summarizes selected components of our balance sheets as of December 31, 2025 and 2024:

Total Assets

Total assets were $7.02 billion at December 31, 2025, a 34.4% increase from $5.22 billion at December 31, 2024. This $1.80 billion increase was primarily driven by higher loan balances, including loans HFI and loans held for sale, which increased by $1.69 billion during 2025.

Management believes that continued growth in MPP and AIO loans, competition for deposits, and change in interest rates represent the most significant trends affecting the Company’s financial condition, liquidity profile, and capital planning.

Loan Portfolio

The following table presents the balance and associated percentage of each major loan type within our portfolio, including net deferred fees and costs, as of the dates indicated:

(1)AIO and Other Consumer / Home Equity are aggregated into Home equity lines of credit loans within the tables in our consolidated financial statements.

(2)Residential Mortgage loans consist of Closed end first liens, Closed end second liens, and Land development loans.

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Our loan portfolio includes both loans HFI and loans held for sale and over 99% of the portfolio is comprised of loans collateralized by residential real estate. At December 31, 2025, our loans HFI portfolio represented 95.1% of our gross loans. As evidence of our strong underwriting and diligent risk controls, our largest loan category, MPP, has not experienced any charge-offs since we began this lending program in 2010 and our second largest loan category, residential mortgages, has experienced very low net charge-offs throughout our history.

Our MPP business offers facilities to independent mortgage banking companies located around the country. These are floating rate, short term loans that are collateralized by single-family mortgage loans that these mortgage banks are preparing to be delivered to the secondary mortgage market. In most cases, mortgage loans sit in the mortgage banking company’s facility for less than 30 days after the loan is funded.

Residential mortgage loans include fixed or adjustable-rate residential real estate loans collateralized by one-to-four family properties. Our portfolio is geographically diversified across the United States. To mitigate interest rate risk, most of the loans we choose to hold in our portfolio are floating rate loans. The majority of our residential mortgage loans at December 31, 2025 are first liens.

AIO loans are floating rate, first mortgage revolving equity loans that include a checking account linked to the revolving equity loan.

We also have a smaller portfolio of construction loans, home equity lines of credit, and commercial loans, which combined represented less than 4% of the overall loan portfolio as of December 31, 2025.

At December 31, 2025, our total loans net of allowance for credit losses including loans held for sale was $6.32 billion compared to $4.63 billion on December 31, 2024. This loan growth was primarily attributable to the strong growth in MPP balances, which increased by 100.2% from December 31, 2024, reflecting the strength of scalable technology, long-standing strong relationships built by account executives since inception, as well as our ability to capitalize on recent market disruption within the business line. Another key driver of our overall loan growth is growth in our AIO loans, which increased by 19.7% to $732.6 million at December 31, 2025, from $612.1 million at December 31, 2024.

At December 31, 2025, residential mortgage loans comprised 28.0% of our total loan portfolio compared to 54.1% for MPP and 11.6% for AIO loans. As of December 31, 2024, residential mortgage loans comprised 41.9% of our total loan portfolio compared to 36.8% for MPP and 13.2% for AIO loans. The reduction in residential mortgage loans as a percentage of total loans reflects normal amortization and pay-offs, as we continue to focus on growing our two main portfolios, AIO and MPP. Outside of these two portfolios, no other significant loans are being added to the loans HFI portfolio. While MPP represents a significant and growing portion of our loan portfolio, management actively monitors concentration risk, liquidity characteristics, and counterparty exposure associated with this business line.

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Contractual Maturities and Rate Structures of Loan Portfolio

The following table sets forth the contractual maturities and rate structures at December 31, 2025 and 2024:

Contractual Loan Maturities as of December 31, 2025

_____________________

(1)AIO and Other Consumer / Home Equity are aggregated into Home equity lines of credit loans within the tables in our consolidated financial statements.

(2)Residential Mortgage loans consist of Closed end first liens, Closed end second liens, and Land development loans.

Contractual Loan Maturities as of December 31, 2024

_____________________

(1)AIO and Other Consumer / Home Equity are aggregated into Home equity lines of credit loans within the tables in our consolidated financial statements.

(2)Residential Mortgage loans consist of Closed end first liens, Closed end second liens, and Land development loans.

Our mortgage loan portfolio has ARMs which reset annually after the initial fixed rate period, which ranges from one to 10 years. AIO adjustable rate loans reset monthly. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

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At December 31, 2025, 54.4% of our total loan portfolio had a contractual maturity of less than one year, up from 37.3% at December 31, 2024. This increase was driven primarily by the strong growth in our MPP business over the period. Our MPP facilities are floating rate and generally have terms of 30 days or less given that is the time period that a funded mortgage stays in our mortgage banking clients facility prior to the sale of the mortgage in the secondary market. Very few of our loans have intermediate contractual maturities of between one and fifteen years. As of December 31, 2025, 45.1% of total loans had contractual maturities of longer than 15 years, compared to 62.1% at December 31, 2024. Within our two largest categories of longer duration loans, 77.0% of residential mortgage and 100% of our AIO Loans were floating rate at December 31, 2025.

Nonperforming Assets

The following table provides details of our nonperforming and restructured assets as of the dates presented and certain other related information:

_____________________

(1)Includes loans which are reported at fair value (see Note 18 of our consolidated financial statements).

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At December 31, 2025, nonperforming assets were $92.7 million, compared to $82.0 million at December 31, 2024. The increase in nonperforming assets was primarily driven by normal aging in the residential mortgage portfolio which contributed to higher nonperforming first liens and HELOCs. Nonperforming assets as a percent of total assets decreased to 1.32% at December 31, 2025 compared to 1.57% at December 31, 2024, reflecting the growth in our MPP portfolio which does not have any non-performing assets.

Excluding the portion of our loans that are wholly or partially guaranteed by the U.S. Government, nonperforming assets to total assets decreased to 0.92% at December 31, 2025, compared to 0.95% at December 31, 2024. At December 31, 2025, approximately 31% of our nonperforming loans have a form of government guarantee.

The Company uses a risk grading system for our loans to aid us in evaluating the overall credit of our loan portfolio and assessing the adequacy of our allowance for credit losses. All loans are categorized into a risk category at the time of origination. Loans are re-evaluated for proper risk grading as new information such as payment patterns, collateral condition and other relevant information comes to our attention.

The Company categorized each loan into credit risk categories based on current financial information, overall debt service coverage, comparison against industry averages, collateral coverage, historical payment experience, and current economic trends. The Company uses the following definitions for credit risk ratings:

A)Performing. Residential real estate credits not covered by the non-performing definition below.

B)Non-performing. Residential real estate loans classified as non-performing are generally loans on nonaccrual status.

C)Pass. Commercial credits not covered by the definitions below are pass credits, which are not considered to be adversely rated.

D)Special Mention (Watch). Loans classified as special mention, or watch credits, have a potential weakness or weaknesses that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

E)Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution may sustain some loss if the deficiencies are not corrected.

F)Doubtful. These are loans in which the collection or liquidation of the entire debt is highly questionable or improbable. Typically, the possibility of loss is extremely high. The losses on these loans are deferred until all pending factors have been addressed.

Our classified assets are described in more detail in Note 3 of the Notes to Consolidated Financial Statements.

Allowance for Credit Losses and Net Charge-Offs

The ACL is established through a provision for credit losses charged to operations. Loans are charged against the allowance for credit losses when management believes that the collectability of the principal is unlikely. Subsequent recoveries of previously charged off amounts, if any, are credited to the allowance for credit losses. The allowance for credit losses is evaluated on a regular basis by management and is based on management’s periodic review of the collectability of the loans considering historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, and prevailing economic conditions. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available. While the entire ACL is available to absorb losses from all loans, the following table represents management’s allocation of our allowance for credit losses by loan category, and the percentage of allowance for credit losses in each category, for the periods indicated:

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The following table provides an analysis of the activity in our allowance for the periods indicated:

The allowance for credit losses was 0.17% of total loans as of December 31, 2025 compared to 0.25% as of December 31, 2024. This ratio includes MPP balances, which carry significantly lower reserves given the lack of loss history, and fair value loans, which are reserved for outside of the estimation of the ACL.

Management estimates the allowance by using relevant available information from internal and external sources related to historical loss experience, current borrower risk characteristics, current economic conditions, reasonable and supportable

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forecasts, and other relevant factors. The allowance is measured on a collective or pool basis when similar risk characteristics exist or on an individual basis when loans have unique risk characteristics which differentiate them from other loans within the loan segment. The process for estimating credit losses incorporates methodologies and procedures specific to the residential and commercial loan portfolios, each of which has unique risk characteristics. Our ACL methodology is described in more detail in Note 1 of the Notes to Consolidated Financial Statements.

Our ACL, and associated percentage of total loans, reflect the relative credit risk of our loan portfolio. These include the seasoning of the portfolio, LTV, FICO score, debt to income ratio (“DTI”) and collateral coverage. Given these risk characteristics, and the stark contrast to other financial institutions with a commercial heavy loan portfolio, our allowance and associated ratios will be much lower than those of bank peers with similar asset size. This nuance is also evidenced by the low level of charge-offs we have incurred. Additionally, as discussed above, our MPP portfolio makes up an increasing portion of our total loan portfolio and we have yet to experience any loss on that portfolio, so the allowance allocations are minimal for the residential mortgage portfolio. We also have purchased mortgage insurance on certain high loan to value loans, further minimizing our loss potential on those loans. Our annualized net charge-off rate was 0.05% for the year ended December 31, 2025 and 0.04% for the year ended December 31, 2024.

Mortgage Servicing Rights

MSRs are the contractual agreement to service existing mortgage loans held by other investors. MSRs were most typically created on mortgages that were originated by the Company but sold to third parties. Additionally, a small portion of our MSRs were acquired from other mortgage originators. The MSR asset represents future cash flows the Company expects to receive from the mortgage for which it has the contractual right to service. MSRs totaled $17.0 million at December 31, 2025, up from $15.1 million at December 31, 2024, but well below prior year historical levels. In 2024, the Company made a strategic decision to sell the majority of its mortgage servicing portfolio. Since then, the MSR portfolio and related assets have grown slightly, with that growth coming from new loans sold servicing retained.

Investment Portfolio

The Company has historically maintained a very small debt securities portfolio relative to other banking institutions, as our strategy remains to invest in highly liquid loans or hold liquidity in cash or cash equivalents. At December 31, 2025, debt securities totaled $4.7 million, or 0.07%, of total assets compared to $8.6 million, or 0.16% of total assets at December 31, 2024. This decrease in balances from December 31, 2024 was due to the sale of a $4.0 million corporate bond during the third quarter of 2025. This bond was sold at par, resulting in no realized gain or loss on the sale.

The following table presents the carrying value of our investment portfolio as of the dates indicated:

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The following table presents the par value of our debt securities by their stated maturities, as well as the weighted average yields for each maturity range as of the dates indicated:

______________________

(1)Weighted-average yields on investment securities are computed based on par value and exclude any premiums or discounts recorded. There are no tax-exempt securities in the portfolio.

Deposits

Deposits are the primary source of funding our business operations. At December 31, 2025, total deposits were $4.87 billion, compared to $3.42 billion at December 31, 2024. This $1.45 billion, or 42.3%, increase in deposits was driven primarily by a higher level of brokered CDs, and growth in our diversified digital deposit banking platform including two new deposit relationships added during 2025. During 2025, we completed an initiative to onboard a new custodial account relationship, totaling approximately $250 million in new interest bearing demand deposits. In addition, we added a new deposit platform providing an additional $251 million in interest bearing demand deposits at December 31, 2025. The growth in deposits during 2025 demonstrates our ability to quickly scale up our diversified digital deposit base and respond to market opportunities to fund stronger loan growth.

The following table summarizes our deposit composition by average deposits and average rates paid for the periods indicated:

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The following tables set forth the maturity of time deposits for the periods indicated (dollars in thousands):

Total uninsured deposits were $379.0 million at December 31, 2025 and $309.9 million at December 31, 2024.

The following table shows the portion of time deposits that are uninsured, by remaining time until maturity, at December 31, 2025:

Borrowings

Another key source of funding for us are collateralized borrowings from the FHLB. At December 31, 2025, our total FHLB borrowings were $1.42 billion, up $163.8 million from $1.26 billion at December 31, 2024. At December 31, 2025, we had $1.52 billion in additional borrowing capacity at the FHLB. During the fourth quarter of 2024, we paid off a $50.0 million FHLB advance, recognizing a $1.7 million gain on debt extinguishment. We executed another early payoff of $102.5 million in FHLB advances in the first quarter of 2025, recognizing a gain of $2.0 million. Both of these extinguishments were funded through our receipt of new contractual interest bearing deposits with a similar duration.

The following table is a summary of our outstanding FHLB Advances for the periods indicated:

We also have a $20.0 million unsecured line of credit with another financial institution that we utilize for holding company liquidity needs. The line of credit carries a floating rate (7.37% at December 31, 2025) and is subject to annual renewal and matures on October 21, 2026. This line had a balance of $17.0 million at December 31, 2025 and no balance at December 31, 2024.

Subordinated Debentures and Subordinated Debentures Issued through Trusts

At December 31, 2025, we had $95.0 million in outstanding subordinated debenture notes. These notes were issued to investors in two separate private placements, one in 2024 and one in late 2025. We also had a $15.0 million subordinated note issued in 2018, which was redeemed and repaid in the first quarter of 2025. The remaining two outstanding subordinated notes

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totaling $95.0 million at December 31, 2025 qualified as Tier 2 capital at our Bank entity. See also “Recent Developments” in this Item 7 for further discussion about the 2025 issuance of subordinated debentures.

At December 31, 2024, we had $40.0 million in outstanding subordinated debenture notes. These notes were issued to investors in two separate private placements, one in 2018 and one in 2019. The 2019 note placement for $20.0 million was called on September 30, 2024 and we replaced it with a $25.0 million note on August 22, 2024. The two outstanding subordinated notes totaling $40.0 million at December 31, 2024 qualified as Tier 2 capital at our Bank entity.

At December 31, 2025, and 2024 we had $5.0 million in subordinated debentures issued through trusts due on March 17, 2034, but callable on March 17, 2025, which qualifies as Tier 1 capital at our Bank entity.

The following tables provide a summary of our outstanding subordinated notes and subordinated debentures issued through trusts for the periods indicated:

Impact of Inflation and Changing Prices

The Company’s financial statements included herein have been prepared in accordance with GAAP which presently requires the Company to measure financial position and operating results primarily in terms of historic dollars. Changes in the relative value of money due to inflation or recession are generally not considered. The primary effect of inflation on the operations of the Company is reflected in increased operating costs, and the Company has experienced material effects of inflation during the last four fiscal years due to the government's monetary policies and the current economic climate. In management’s opinion, changes in interest rates affect the financial condition of a financial institution to a far greater degree

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than changes in the inflation rate. While interest rates are greatly influenced by changes in the inflation rate, they do not necessarily change at the same rate or in the same magnitude as the inflation rate. Interest rates are highly sensitive to many factors that are beyond the control of the Company, including changes in the expected rate of inflation, the influence of general and local economic conditions and the monetary and fiscal policies of the United States government, its agencies and various other governmental regulatory authorities, among other things, as further discussed in the next section.

Liquidity

Liquidity refers to our capacity to meet our cash obligations at a reasonable cost. Our cash obligations require us to have cash flow that is adequate to fund loan growth and maintain on-balance sheet liquidity while meeting present and future obligations of deposit withdrawals, borrowing maturities and other contractual cash obligations. In managing our cash flows, management regularly confronts situations that can give rise to increased liquidity risk. These include funding mismatches, market constraints in accessing sources of funds and the ability to convert assets into cash. Changes in economic conditions or exposure to credit, market, operational, legal and reputational risks also could affect our Bank’s liquidity risk profile and are considered in the assessment of liquidity management. The Company is a corporation separate and apart from our Bank and, therefore, must provide for its own liquidity, including liquidity required to meet its debt service requirements on its senior notes and junior subordinated debentures. The Company’s main source of cash flow is dividends declared and paid to it by the Bank.

There are statutory and regulatory limitations that affect the ability of our Bank to pay dividends to the Company. See the section entitled “Supervision and Regulation” and our forward-looking statements elsewhere in this Form 10-K for more information. We believe that these limitations will not impact our ability to meet our ongoing short-term cash obligations. For contingency purposes, the Company typically maintains a minimum level of cash to fund two year’s projected operating cash flow needs and debt service. We continually monitor our liquidity position to ensure that our assets and liabilities are managed in a manner to meet all reasonably foreseeable short-term, long-term and strategic liquidity demands. Management has established a comprehensive management process for identifying, measuring, monitoring and controlling liquidity risk.

Because of its critical importance to the viability of our Bank, liquidity risk management is fully integrated into our risk management processes. Critical elements of our liquidity risk management include: effective corporate governance consisting of oversight by the board of directors and active involvement by management; appropriate strategies, policies, procedures and limits used to manage and mitigate liquidity risk; comprehensive liquidity risk measurement and monitoring systems including stress tests that are commensurate with the complexity of our business activities; active management of intraday liquidity and collateral; an appropriately diverse mix of existing and potential future funding sources; adequate levels of highly liquid marketable securities free of legal, regulatory, or operational impediments, that can be used to meet liquidity needs in stressful situations; comprehensive contingency funding plans that sufficiently address potential adverse liquidity events and emergency cash flow requirements; and internal controls and internal audit processes sufficient to determine the adequacy of our Bank’s liquidity risk management process.

The Company considers the maintenance of adequate liquidity to be an important part of managing risk. Consistent with our balance sheet strategy, we have intentionally kept our liquidity primarily in cash and interest-bearing deposits rather than investing heavily in investment securities, which typically includes significant unrealized gains or losses.

Our liquidity position is supported by management of our liquid assets and liabilities and access to alternative sources of funds. Our liquidity requirements are met primarily through our deposits, FHLB advances and the principal and interest payments we receive on loans and investment securities. Cash on hand, cash at third-party banks, and maturing or prepaying balances in our loan portfolios are our most liquid assets. Additionally, the Company has a unilateral right not to fund its MPP facilities, it could exercise within 30 days, if needed or as necessary, to generate additional liquidity. Other sources of liquidity that are routinely available to us include funds from retail and wholesale deposits, advances from the FHLB and proceeds from the sale of loans. See “FHLB Advances” above for more information regarding FHLB advances that are available to us. Less commonly used sources of funding include other borrowings and lines of credit. We believe we have ample liquidity resources to fund future growth and meet other cash needs as necessary.

Capital Adequacy

We and our Bank are subject to various regulatory capital requirements administered by the federal and state banking regulators. Our capital management consists of providing equity to support our current operations and future growth. Failure to meet minimum regulatory capital requirements may result in mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a direct material effect on our consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, our Bank must meet specific capital guidelines that involve quantitative measures of our assets, liabilities and off-balance sheet items as calculated under regulatory accounting

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policies. As of December 31, 2025, we and our Bank exceeded all applicable minimum regulatory capital requirements, including the capital conservation buffer applicable to our Bank, and our Bank qualified as “well-capitalized” for purposes of the FDIC’s prompt corrective action regulations.

The following table presents our regulatory capital ratios as of the dates presented, as well as the regulatory capital ratios that are required by FDIC regulations for our Bank to maintain “well-capitalized” status:

Regulatory Capital Ratios

Off-balance Sheet Arrangements

In the normal course of business, we enter into lending commitments that are not on our consolidated balance sheet. The largest component is lending commitments to our MPP customers, which the Company has a unilateral right not to fund. The remainder are undrawn revolving loan commitments on our AIO Loans and undrawn commitments on home equity lines of credit. While these commitments represent contractual cash requirements, a portion of these commitments to extend credit are expected to expire without being drawn upon. Therefore, future commitments do not necessarily represent future cash requirements.

The following is a summary of our off-balance commitments outstanding as of the dates presented.

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