MetroCity Bankshares reports $24.3 million net income for Q3 2026

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For the quarterly period ended June September 30, 2026

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As of August 4, November 3, 2026, the registrant had 28,781,229 shares of common stock, par value $0.01 per share, issued and outstanding.

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Financial statements 138 changes

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Loans, less allowance for credit losses of $ 25,818 25,753 and $ 27,843 , respectively

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Common stock, $ 0.01 par value, 40,000,000 shares authorized, 28,781,229 and 28,817,967 shares issued and outstanding as of June September 30, 2026 and December 31, 2025, respectively

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Gain on sale of assets

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Unrealized holding gains (losses) on securities available for sale ( 268 1,128 )

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Balance, April 1, 2026

Balance, July 1, 2026

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Balance, June 30, 2026

Balance, April 1, 2025

Balance, September 30, 2026

Balance, July 1, 2025

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Vesting of restricted stock

Repurchase of common stock

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Balance, June 30, 2025

Dividends declared on common stock ($ 0.23 0.25 per share)

Balance, September 30, 2025

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Balance, June 30, 2026

Dividends declared on common stock ($ 0.54 0.83 per share)

Balance, September 30, 2026

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Balance, June 30, 2025

Dividends declared on common stock ($ 0.46 0.71 per share)

Balance, September 30, 2025

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Six Months Ended June 30,

Nine Months Ended September 30,

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Gain on sale of foreclosed real estate

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Increase (decrease) in accrued interest payable

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Six Months Ended June 30,

Nine Months Ended September 30,

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Transfer of branch held for sale from premises and equipment, net to other real estate

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Initial recognition of operating right-of-use assets

Supplemental disclosures of cash flow information - Cash paid: during the year for:

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Operating results for the six nine months ended June September 30, 2026 are not necessarily indicative of the results that may be expected for the year ending December 31, 2026. These statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2025.

The Company's significant accounting policies are described in Note 1 of the Notes to Consolidated Financial Statements for the year ended December 31, 2025, which are included in the Company's Annual Report on Form 10-K for the year ended December 31, 2025 (the "Company's 2025 Form 10-K"). There were no new accounting policies or changes to existing policies adopted during the first six nine months of 2026 which had a significant effect on the Company's results of operations or statement of financial condition. For interim reporting purposes, the Company follows the same basic accounting policies and considers each interim period as an integral part of an annual period.

Due to the nature of their activities, the Company and its subsidiary are at times engaged in various legal proceedings that arise in the course of normal business, some of which were outstanding as of June September 30, 2026. Although the ultimate outcome of all claims and lawsuits outstanding as of June September 30, 2026 cannot be ascertained at this time, it is the opinion of management that these matters, when resolved, will not have a material adverse effect on the Company's results of operations or financial condition.

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Allowance for credit losses on purchased credit detoriated deterioriated loans and purchased seasoned loans ( 9,885 )

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The selected unaudited proforma financial information is presented as if the Company had acquired First IC on January 1, 2025 and is for illustrative purposes and is not necessarily indicative of the financial results of the combined company had the acquisition actually been completed at the beginning of the period presented, nor does it indicate future results for any other interim or full-year period. The net interest income, noninterest income, net income are presented had First IC been acquired on January 1, 2025 and net income attributable to First IC for the six nine months ended June September 30, 2025 would have been $ 90.6 137.4 million, $ 14.9 22.6 million, $ 40.3 60.8 million, and $ 6.3 9.5 million, respectively.

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The amortized costs, gross unrealized gains and losses, and estimated fair values of securities available for sale as of June September 30, 2026 and December 31, 2025 are summarized as follows:

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The amortized costs and estimated fair values of investment securities available for sale at June September 30, 2026 by contractual maturity are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

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Accrued interest receivable for securities available for sale totaled $ 167,000 and $ 214,000 as of June September 30, 2026 December 31, 2025, respectively. This accrued interest receivable is included in the "accrued interest receivable" line item on the Company's Consolidated Balance Sheets.

As of June September 30, 2026 and December 31, 2025, the Company had securities pledged to the Federal Reserve Bank Discount Window with a carrying amount of $ 12.3 10.0 million and $ 12.8 million, respectively. For the six nine months ended June September 30, 2026, the Company had proceeds from the sale of investment securities of $ 19.3 million which resulted in gross gains of $ 10,000 . There were no securities sold during the three months ended June September 30, 2026 and the three and six nine months ended June September 30, 2025.

Information pertaining to securities with gross unrealized losses at June September 30, 2026 and December 31, 2025 aggregated by investment category and length of time that individual securities have been in a continuous loss position, are summarized in the table below.

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At June September 30, 2026 the thirty-one twenty-eight securities available for sale ( 11 8 municipal securities and 20 mortgage-backed securities) with an unrealized loss have depreciated 11.60 16.9 % from the Company's amortized cost basis. Eighteen Sixteen of these securities have been in a loss position for greater than twelve months.

The Company does not believe that the securities available for sale that were in an unrealized loss position as of June September 30, 2026 represent a credit loss impairment. As of June September 30, 2026, there have been no payment defaults, nor do we currently expect any future payment defaults. Furthermore, the Company does not intend to sell these securities, and it is not more likely than not that the Company will be required to sell the investment securities before recovery of their amortized cost basis, which may be at maturity.

As of June September 30, 2026 and December 31, 2025, the Company had equity securities with carrying values totaling $ 18.5 17.7 million and $ 18.6 million, respectively. The equity securities consist of our investment in a market-rate bond mutual fund that invests in high quality fixed income bonds, mainly government agency securities whose proceeds are designed to positively impact community development throughout the United States. The mutual fund focuses exclusively on providing affordable housing to low- and moderate-income borrowers and renters, including those in Majority Minority Census Tracts.

During the three months ended June September 30, 2026 and 2025, we recognized an unrealized loss of $ 82,000 743,000 and an unrealized gain of $ 41,000 124,000 , respectively, in net income on our equity securities. During the six nine months ended June September 30, 2026 and 2025, we recognized an unrealized loss of $ 165,000 908,000 and an unrealized gain of $ 181,000 305,000 , respectively. These unrealized gains and losses are recorded in "Other Income" on the Consolidated Statements of Income.

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Major classifications of loans held for investment at June September 30, 2026 and December 31, 2025 are summarized as follows:

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The Company elected to exclude accrued interest receivable from the amortized cost basis of loans disclosed throughout this note. As of June September 30, 2026 and December 31, 2025, accrued interest receivable for loans totaled $ 20.0 20.2 million and $ 20.0 million, respectively, and is included in the "accrued interest receivable" line item on the Company's Consolidated Balance Sheets.

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A summary of changes in the allowance for credit losses by portfolio segment for the three and six nine months ended June September 30, 2026 and 2025 is as follows:

Three Months Ended June September 30, 2026

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Three Months Ended June September 30, 2025

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Six Months Ended June 30, 2026

Nine Months Ended September 30, 2026

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Six Months Ended June 30, 2025

Nine Months Ended September 30, 2025

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The allowance for credit losses was $ 25.8 million as of June September 30, 2026 compared to $ 27.8 million as of December 31, 2025, a decrease of $ 2.0 million. The decrease was primarily driven by lower loan balances. and reduced reserves on individually analyzed loans.

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The Company records an allowance for credit losses on unfunded loan commitments, unless the commitments to extend credit are unconditionally cancelable, through a charge to provision for unfunded commitments in the Company's Consolidated Statements of Income. The allowance for credit losses on off-balance sheet credit exposures is estimated by loan segment using the same methodologies as portfolio loans, taking into consideration the likelihood that funding will occur. The allowance for unfunded commitments totaled $ 535,000 539,000 , $ 287,000 and $ 195,000 233,000 as of June September 30, 2026, December 31, 2025 and June September 30, 2025, respectively, and is included in "Other Liabilities" on the Company's Consolidated Balance Sheets.

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Collateral-dependent loans are loans for which the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. The Company measures expected credit losses on collateral-dependent loans using the fair value of the collateral as of the reporting date. The Company also uses the collateral's fair value to measure expected credit losses whenever foreclosure is probable. When repayment depends on the sale of the collateral, the allowance for credit losses is measured as the amount by which the loan's amortized cost basis exceeds the collateral's fair value, less estimated costs to sell. When repayment depends only on the operation of the collateral, the allowance for credit losses is measured as the amount by which the loan's amortized cost basis exceeds the collateral's fair value, without a deduction for estimated costs to sell. Any portion of a loan deemed uncollectible is charged off against the allowance for credit losses when that determination is made.

Collateral-dependent loans are loans for which foreclosure is probable or loans for which the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. The estimated credit losses for these loans are based on the collateral's fair value, less selling costs. In most cases, the Company records a partial charge-off to reduce the loan's carrying value to the collateral's fair value, less selling costs, at the time of foreclosure. As of June September 30, 2026, there were $ 37.1 33.6 million, $ 11.0 12.5 million and $ 911,000 680,000 of collateral-dependent loans which were secured by commercial real estate, residential real estate, and commercial equipment, respectively. As of December 31, 2025, there were $ 46.4 million, $ 10.3 million and $ 1.4 million of collateral-dependent loans which were secured by commercial real estate, residential real estate, and commercial equipment, respectively. The allowance for credit losses allocated to these loans as of June September 30, 2026 and December 31, 2025 was $ 2.0 1.9 million and $ 2.3 million, respectively.

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The following summarizes the Company's past due and nonaccrual loans, by portfolio segment, as of June September 30, 2026 and December 31, 2025:

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The following table presents an analysis of nonaccrual loans with and without a related allowance for credit losses as of June September 30, 2026 and December 31, 2025:

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The following tables present the loan portfolio's amortized cost by loan type, risk rating and year of origination as of June September 30, 2026 and December 31, 2025. There were no loans with a risk rating of Doubtful or Loss at June September 30, 2026 and December 31, 2025.

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During three and six months ended June 30, 2026, no loan modification were made to borrowers experiencing financial difficulty. During the three months ended June 30, 2025, no loan modification were made to borrowers experiencing financial difficulty.

Six months ended June 30, 2025

(Dollars in thousands)

Construction and development

Commercial real estate

Commercial and industrial

Residential real estate

The following table presents the financial effect of the loan modifications made to borrowers experiencing financial difficulty during the six months ended June 30, 2025.

(Dollars in thousands)

Three Months Ended March 31, 2025

Construction and development

Commercial real estate

Commercial and industrial

Residential real estate

During the six three and nine months ended June September 30, 2025, 2026, there was one commercial real estate loan modification totaling $ 12.2 1.8 million made to a borrower experiencing financial difficulty. The borrower of this loan modification was granted P&I a principal and interest payment deferrals totaling $ 324,000 60,000 , so no payments were payment was required to be made during the deferral period which ended ends in May 2025. The following table presents the amortized cost basis of loan modifications made to borrowers experiencing financial difficulty during the six months ended June 30, 2025. December 2026.

During the nine months ended September 30, 2025, there was one commercial real estate loan modification totaling $ 12.2 million made to a borrower experiencing financial difficulty. The borrower of this loan modification was granted principal and interest payment deferrals totaling $ 324,000 so no payments were required to be made during the deferral period, which ended in May 2026.

No charge-offs of previously modified loans were recorded during the three and six nine months ended June September 30, 2026 and 2025.

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The Company sells the guaranteed portion of certain SBA and USDA loans it originates and continues to service the sold portion of the loan. The portion of the loans sold are not included in the financial statements of the Company. As of June September 30, 2026 and December 31, 2025, the unpaid principal balances of serviced loans totaled $ 682.2 676.2 million and $ 685.5 million, respectively.

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For the Six Months Ended June 30,

For the Three Months Ended June September 30,

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and 58 more changes in the filing

MD&A 1 change

The purpose of this discussion and analysis is to focus on significant changes in the financial condition of MetroCity Bancshares, Bankshares, Inc. and our wholly owned subsidiary, Metro City Bank, from December 31, 2025 through June September 30, 2026 and on our results of operations for the three and six nine months ended June September 30, 2026 and 2025. This discussion and analysis should be read in conjunction with our audited consolidated financial statements and notes thereto for the year ended December 31, 2025 included in our Annual Report on Form 10-K, and information presented elsewhere in this Quarterly Report on Form 10-Q, particularly the unaudited consolidated financial statements and related notes appearing in Item 1.

Forward-looking statements 110 changes

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These forward-looking statements reflect our current views with respect to, among other things, future events, and our financial performance. These statements are often, but not always, made through the use of words or phrases such as "may," "might," "should," "could," "predict," "potential," "believe," "expect," "continue," "will," "anticipate," "seek," "estimate," "intend," "plan," "strive," "projection," "goal," "target," "outlook," "aim," "would," "annualized", and "outlook," or the negative version of those words or other comparable words or phrases of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management's beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions, estimates, and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements.

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● changes in the interest rate environment (including changes to the federal funds rate and the impact on the level and composition of deposits (as well as the cost of, and competition for, deposits), loan demand, liquidity and the values of loan collateral, securities and market fluctuations, and interest rate sensitive assets and liabilities), and competition in our markets may result in increased funding costs or reduced earning assets asset yields, thus reducing our margins and net interest income;

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● the effects of war or other conflicts, regime change, civil unrest, acts of terrorism, acts of God, natural disasters, health emergencies, epidemics or pandemics, climate changes, or other catastrophic events that may affect general economic conditions or cause other disruptions and/or increase costs, including, but not limited to, property and casualty and other insurance cost; costs;

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Our accounting and reporting estimates conform with U.S. GAAP and general practices within the financial services industry. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. We consider accounting estimates that can (1) to be replaced by critical when (1) other reasonable estimates could be used and/or (2) changes to an estimate from period to period that could have a material impact on the presentation of our financial condition, changes in financial condition or results of operations as well as (3) when those estimates that require significant and complex assumptions about matters that are highly uncertain. to be critical accounting estimates. We consider our critical accounting policies to include the allowance for credit losses, servicing assets, fair value of financial instruments and income taxes.

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A consequence of lending activities is that we may incur credit losses. The amount of such losses will vary depending upon the risk characteristics of the loan lease portfolio as affected by economic conditions such as rising interest rates and the financial performance of borrowers.

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See Note 1 and Note 4 of our consolidated financial statements as of December 31, 2025 in the Company's 2025 Form 10-K and Note 1 and Note 4 of our consolidated financial statements as of June September 30, 2026, included elsewhere in this Form 10-Q, for additional information on the reserve and allowance for credit losses.

MetroCity Bankshares, Inc. is a bank holding company headquartered in the Atlanta metropolitan area. We operate through our wholly-owned banking subsidiary, Metro City Bank, a Georgia state-chartered commercial bank that was founded in 2006. We currently operate 27 full-service branch locations and two loan production offices in multi-ethnic communities in Alabama, Florida, Georgia, New York, New Jersey, Texas, California, and Virginia. As of June September 30, 2026, we had total assets of $4.52 $4.60 billion, total loans, net, of $3.93 billion, total deposits of $3.49 $3.56 billion and total shareholders' equity of $567.9 $583.9 million.

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The following table sets forth unaudited selected financial data for the most recent five quarters and the nine-month periods ended September 30, 2026 and 2025. This data should be read in conjunction with the unaudited consolidated financial statements and accompanying notes included in Item 1 and the information contained in this Item 2.

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As of or for the Six Nine Months Ended

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Operating Efficiency ratio ratio-operating (1)(2)

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Net charge-offs/(recoveries) charge-offs/ (recoveries) to average loans held for investment (0.01) (0.00)

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(1) Non-GAAP measure, see "Explanation of Certain Unaudited "Non-GAAP Financial Measures" for more information and for a reconciliation to GAAP.

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For the Six Months Ended June 30

This Form 10-Q includes financial information determined by methods other than in accordance with generally accepted accounting principles ("GAAP"). This financial information includes "adjusted return on average shareholders' equity", which excludes average accumulated other comprehensive income or loss from average shareholders'' equity and adds back merger-related expenses, net of tax, to net income and tangible book value per share , which excludes goodwill and core deposit intangibles from shareholders'' equity and "operating efficiency ratio" which excludes merger merger-related expenses from noninterest expense. These measures should be viewed in addition to, and not as an alternative to or substitute for, measures determined in accordance with GAAP and are not necessarily comparable to non-GAAP measures that may be presented by other companies.

The following table reconciles the non-GAAP financial measurement for return on average equity, tangible book value per share and operating efficiency ratio to their respective most directly comparable GAAP measurements for the three and six nine months ended June September 30, 2026 and 2025:

For the Three Months Ended June September 30

For the Nine Months Ended September 30

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Return on average shareholders' equity reconciliation

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Less: average accumulated other comprehensive income (loss)

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Adjusted total shareholders' equity (non-GAAP)

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Impact of First IC-merger related expenses included in noninterest expense (0.54) (0.24)

Operating Efficiency ratio ratio-operating (non-GAAP)

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We recorded net income of $22.1 $24.3 million for the three months ended June September 30, 2026 compared to $16.8 $17.3 million for the three months ended June September 30, 2025, an increase of $5.3 $7.0 million, or 31.5%. 40.7%. This increase was due to an $11.8 million increase in net interest income, of $11.9 million, and a $2.9 million decrease in provision for credit losses of $921,000, income taxes, offset by increases a $5.4 million increase in noninterest expense, of $5.8 million a $471,000 reduction in credit-loss recovery and income tax expense of $1.7 a $1.8 million decrease in noninterest income.

For the six nine months ended June September 30, 2026 we recorded net income of $44.5 $68.7 million compared to $33.1 $50.4 million for the six nine months ended June September 30, 2025, an increase of $11.3 $18.4 million, or 34.2%. 36.4%. This increase was due to an a $37.6 million increase in net interest income, of $25.8 million an increase in noninterest income of $923,000, and a decrease in provision for credit losses of $1.9 $1.4 million increase in credit-loss recovery, offset by an $18.9 million increase in noninterest expense, of $13.5 million, an $871,000 decrease in noninterest income, and an $885,000 increase in income tax expense. of $3.8 million.

Basic and diluted earnings per common share for the three months ended June September 30, 2026 was $0.77 $0.84 and $0.76, $0.84, respectively, compared to $0.66 $0.68 and $0.65 $0.67 for the basic and diluted earnings per common share for the three months ended June September 30, 2025. For the six nine months ended June September 30, 2026, basic and diluted earnings per common share was $1.55 $2.39 and $1.53, $2.37, respectively, compared to $1.30 $1.98 and $1.29 $1.96 for the same period in 2025, respectively.

Interest income totaled $70.4 $69.7 million for the three months ended June September 30, 2026, an increase of $16.4 $15.7 million, or 30.3%, 29.1%, from the three months ended June September 30, 2025, primarily due to an increase in the average balance of gross loans of $847.8 $766.9 million, and an increase in the average balance of investments of $30.1 $44.8 million, and a 26 33 basis point increase in the loan yield, along with $1.4 million $949,000 in accretion income on purchase purchased credit deteriorated loans from the First IC merger that occurred in the fourth quarter of 2025. The increase in average loans is due to an increase of $646.3 $607.9 million in average commercial real estate loans, and an increase of $153.4 $104.7 million in average residential real estate loans.

Interest income totaled $141.4 $211.1 million for the six nine months ended June September 30, 2026 compared to $106.6 $160.6 million for the same period in 2025, an increase of $34.8 $50.6 million, or 32.7%, 31.5%, primarily due to a 30 31 basis point increase in the loan yield, along with $2.3 $3.2 million in accretion income on purchase purchased credit deteriorated loans from the First IC merger that occurred in the fourth quarter of 2025 coupled with an increase in average loan balances of $853.0 $823.3 million, as well as an increase in the average total investment balance of $108.6 $87.1 million, offset by a decrease of 58 57 basis points in the yield on average total investments. The increase in average loans is due to an increase of $579.7 $588.6 million in average commercial real estate loans, an increase of $25.0 $31.0 million in average construction and development loans, an increase of $15.7 $14.2 million in average commercial and industrial loans, and $232.1 an $189.2 million increase in average residential mortgage loans. As compared to the six nine months ended June September 30, 2025, the yield on average interest-earning assets increased by 21 23 basis points to 6.54% 6.53% from 6.33% with the yield on average loans increasing by 30 basis points and the yield on average total investments decreasing by 58 basis points. 6.30%.

Interest expense for the three months ended June September 30, 2026 increased $4.5 $4.0 million, or 20.5%, 17.8%, to $26.4 $26.2 million compared to interest expense of $21.9 $22.2 million for the three months ended June September 30, 2025, primarily due to a $578.2 $562.8 million increase in average interest-bearing deposit balances, and offset with by a $16.0 $49.6 million decrease in the average borrowings balance. Average time deposits and money market deposits increased by $383.3 $355.3 million and $79.6 $115.3 million, respectively, and average interest-bearing demand deposits and savings accounts increased by $115.4 $92.2 million primarily from the First IC merger in the fourth quarter of 2025.

Interest expense totaled $52.9 $79.0 million for the six nine months ended June September 30, 2026, an increase of $9.0 $13.0 million, or 20.6%, 19.7%, compared to the same period in 2025, primarily due to a $636.4 $611.6 million increase in average interest-bearing deposit balances. Average borrowings outstanding for June the nine months ended September 30, 2026 increased decreased by $15.0 $6.8 million compared to the same period in 2025.

The Company currently has effective interest rate derivative agreements totaling $750.0 $650.0 million that are designated as cash flow hedges of our deposit accounts indexed to the Federal Funds Effective Rate. The weighted average pay rate for these interest rate derivatives is 1.70%. At June September 30, 2026, the Company had interest rate swap agreements with aggregate notional amounts of $300.0 $200.0 million and interest rate cap agreements with aggregate notional amounts of $450.0 million, all designated as cash flow hedges of deposit accounts indexed to the Federal Funds Effective Rate. The Company has determined these hedging relationships to be highly effective since inception. During the three months ended June September 30, 2026, we recorded a $1.5 million credit to interest expense from the benefit received on these interest-rate derivatives, compared to $4.2 a $3.8 million credit during the three months ended June September 30, 2025. Based on the Federal Funds Effective Rate as of June September 30, 2026 (3.63%), (3.88%), the Company would estimate to estimates that it will record a credit to interest expense of approximately $1.9 million $680,000 for the remainder of 2026 from the benefit received on these interest rate derivatives, however actual results may vary based on changes in market conditions and hedge performance. See Note 9 of our consolidated financial statements as of June September 30, 2026 included elsewhere in this Form 10-Q, for additional information on these interest rate derivatives.

The net interest margin for the three months ended June September 30, 2026 increased by 34 39 basis points to 4.11% 4.07% from 3.77% 3.68% for the three months ended June September 30, 2025, primarily due to a 23 28 basis points point increase in the yield on average interest-bearing interest-earning assets of $4.30 $4.24 billion, offset by three and a six basis point decrease in the cost of average interest-earning interest-bearing liabilities of $3.2 $3.1 billion. Average earning assets for the three months ended June September 30, 2026 increased by $877.9 $811.7 million from the three months ended June September 30, 2025, due to a $847.8 $766.9 million increase in average loans and a $30.1 $44.8 million increase in average total investments. Average interest-bearing liabilities for the three months ended June September 30, 2026 increased by $562.2 $513.1 million from the three months ended June September 30, 2025, driven by increases in average interest-bearing deposits of $578.3 $562.8 million offset by a decrease in average borrowings of $16.0 $49.6 million.

The net interest margin for the six nine months ended June September 30, 2026 increased by 38 basis points to 4.10% 4.09% from 3.72% 3.71% for the six nine months ended June September 30, 2025, primarily due to a 21 23 basis point increase in the yield on average interest-bearing interest-earning assets of $4.4 $4.3 billion, and a 14 an 11 basis point decrease in the cost of average interest-bearing liabilities of $3.2 billion. Average earning assets increased by $961.6 $910.4 million, due to a $108.6 an $87.1 million increase in average total investments and a $853.0 $823.3 million increase in average loans. Average interest-bearing liabilities increased by $651.4 $604.8 million, primarily driven by a $636.4 $611.6 million increase in average interest-bearing deposit balances and an increase offset by a decrease in average borrowings of $15.0 $6.8 million.

Net interest margin and net interest income are influenced by internal and external factors. Internal factors include balance sheet changes on both volume and mix and pricing decisions, and external factors include changes in market interest rates, competition, and the shape of the interest rate yield curve. The year-over-year increase in our net interest margin is primarily driven by a reduction of funding cost, reflecting improved deposit pricing higher yields on average interest-earning assets and the benefit lowere costs of interest rate derivative hedges, partially offset by modest compression in asset yields. average interest-bearing liablilities.

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The following tables present, for the three and six nine months ended June September 30, 2026 and 2025, information about: (i) weighted average balances, the total dollar amount of interest income from interest-earning assets and the resultant average yields; (ii) average balances, the total dollar amount of interest expense on interest-bearing liabilities and the resultant average rates; (iii) net interest income; (iv) the interest rate spread; and (v) the net interest margin.

Three Months Ended June September 30,

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Six Months Ended June 30,

Nine Months Ended September 30,

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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 sets forth the effects of changing rates and volumes on our net interest income during the period periods shown. Information is provided with respect to (i) effects on interest income attributable to changes in volume (change in volume multiplied by prior rate) and (ii) effects on interest income attributable to changes in rate (changes in rate multiplied by prior volume). Change Changes applicable to both volumes volume and rate have been allocated to volume.

Three Months Ended June September 30, 2026 Compared to Three Months Ended June September 30, 2025

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Six Nine Months Ended June September 30, 2026 Compared to Six Nine Months Ended June September 30, 2025

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The provision for credit losses reflects our internal calculation and judgment of the appropriate amount of the allowance for credit losses. We maintain the allowance for credit losses at levels we believe are appropriate to cover our estimate of expected credit losses over the life of loans in the portfolio as of the end of the reporting period. The allowance for credit losses is determined through detailed quarterly analyses of our loan portfolio. The allowance for credit losses is based on our loss experience, changes in the economic environment, reasonable and supportable forecasts, as well as an ongoing assessment of credit quality and environmental factors not reflective reflected in historical loss rates. Additional qualitative factors that are considered in determining the amount of the allowance for credit losses are c oncentrations of credit risk (geographic, large borrower, and industry), changes in underwriting standards, changes in collateral value, experience and depth of lending staff, trends in delinquencies, and the volume and terms of loans.

We recorded a recovery for credit losses of $792,000 $72,000 during the three months ended June September 30, 2026 compared to a provision recovery for credit losses of $129,000 $543,000 recorded during the three months ended June September 30, 2025. We recorded a recovery for credit losses of $1.7 million during the nine months ended September 30, 2026 compared to a recovery for credit loss losses of $279,000 recorded during the nine months ended September 30, 2025. The recovery for credit losses recorded during the three and nine months ended June September 30, 2026 was primarily driven by lower loan balances. and reduced reserves on individually analyzed loans. Our ACL as a percentage of gross loans for the periods ended June September 30, 2026, December 31, 2025 and June September 30, 2025 was 0.66%, 0.65%, 0.68% and 0.60%, respectively. Our ACL as a percentage of gross loans is relatively lower than that of our peers due to our high percentage of residential mortgage loans, which tend to have lower allowance for credit loss ratios compared to other commercial or consumer loans due to their low LTVs.

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Noninterest income for the three months ended June 30, 2026 was $5.8 million, an increase of $22,000, or 0.4%, compared to $5.7 million for the three months ended June 30, 2025. Noninterest income for the six months ended

June 30, 2026 was $12.2 million, an increase of $923,000, or 8.2%, compared to $11.2 million for the six months ended June 30, 2025

Six Months Ended June 30,

Noninterest income for the three months ended September 30, 2026 was $4.4 million, a decrease of $1.8 million, or 29.0%, compared to $6.2 million for the three months ended September 30, 2025. Noninterest income for the nine months ended September 30, 2026 was $16.5 million, a decrease of $871,000, or 5.0%, compared to $17.4 million for the nine months ended September 30, 2025.

The following table sets forth the major components of our noninterest income for the three and six nine months ended June September 30, 2026 and 2025.

Three Months Ended June September 30,

Nine Months Ended September 30,

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Gain on sale of assets

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June 30, 2026 with average premiums of 7.99% compared to $37.3 million sold during the same period in 2025 with average premiums of 5.80%.

Other noninterest income decreased by $129,000, or 13.4%, to $834,000 for the three months ended June 30, 2026 compared to $963,000 for the three months ended June 30, 2025. Other noninterest income was $1.5 million for the six months ended June 30, 2026 compared to $1.7 million for the same period in 2025, a decrease of $229,000 , or 13.2%. The largest component of other noninterest income is the income on bank owned life insurance which totaled $641,000 and $1.3 million for three and six months ended June 30, 2026, respectively compared to $620,000 and $1.2 million for the three and six months ended June 30, 2025 respectively. Also included in other noninterest income are fair value gains/losses on our equity securities, which totaled $82,000 (loss) and $165,000 (loss) for the three and six months ended June 30, 2026, respectively, compared to $41,000 (gain) and $181,000 (gain) for the three and six months ended June 30, 2025.

These increases were primarily driven by higher personnel, occupancy, and data processing costs, as well as $1.9 million of merger related expenses. Excluding merger related expenses, noninterest expense reflects the full quarter impact of the acquisition and is expected to stabilize as integration activities progress and operational efficiencies are realized.

Service charges on deposit accounts increased $453,000, $378,000, or 89.7%, 68.6%, to $958,000 $929,000 for the three months ended June September 30, 2026 compared to $505,000 $551,000 for the three months ended June September 30, 2025. Service charges on deposit accounts were $1.8 $2.7 million for the six nine months ended June September 30, 2026 compared to $1.0 $1.6 million for the same period in 2025, an increase of $801,000, $1.2 million, or 79.7%. 75.8%. These increases were primarily attributable to higher service charges on business checking accounts, analysis fees, overdraft fees, and charge back fees as a result of the First IC acquisition that occurred in the fourth quarter of 2025.

Other service charges, commissions, and fees decreased $192,000, $839,000, or 11.9%, 35.3%, to $1.4 $1.5 million for the three months ended June September 30, 2026 compared to $1.6 $2.4 million for the three months ended June September 30, 2025. Other service charges, commissions, and fees decreased 207,000, $1.0 million or 6.4%, 18.7%, to $3.0 $4.5 million for the six nine months ended June September 30, 2026 compared to $3.2 $5.6 million for the six nine months ended June September 30, 2025. These increases decreases were attributable to higher lower origination and processing fees earned from our origination of residential mortgage loans. Mortgage loan originations totaled $75.4 $85.1 million and $177.3 $262.4 million during the three and six nine months ended June September 30, 2026, compared to $93.2 $168.6 million and $184.3 $352.8 million during the same periods in 2025.

Gain on sale of residential mortgage loans totaled $0 for the three and six nine months ended June September 30, 2026. Gain on sale of residential mortgage loans totaled $579,000 $166,000 and 978,000 $1.1 million for the three and six nine months ended June September 30, 2025, as we sold $54.3 $18.2 million and $94.4 $112.6 million in residential mortgage loans during these period periods with an average premium of 1.09% 1.06% and 1.08%, respectively .

Gain on sale of SBA loans totaled $1.5 million $685,000 for the three months ended June September 30, 2026 compared to $643,000 $558,000 for the three months ended June September 30, 2025. We sold $27.1 $9.7 million in SBA loans during the three months ended June September 30, 2026 with average premiums of 8.21%. 8.16%. We sold $20.7 $13.4 million in SBA loans during the three months ended June September 30, 2025 with average premiums of 5.66%. 6.13%. Gain on sale of SBA loans totaled $2.6 $3.3 million for the six nine months ended June September 30, 2026 compared to $1.3 $1.9 million for the same period in 2025. We sold $46.8 $56.5 million in SBA loans during the six nine months ended September 30, 2026 with average premiums of 8.02% compared to $50.7 million sold during the same period in 2025 with average premiums of 5.89%.

Mortgage loan servicing income, net of amortization, decreased by $510,000, $282,000, or 65.3%, 54.7%, to $271,000 $234,000 during the three months ended June September 30, 2026 compared to $781,000 $516,000 for the three months ended June September 30, 2025. Mortgage loan servicing income, net of amortization, decreased by $822,000, $1.1 million, or 58.9%, 57.7%, to $577,000 $811,000 for the six nine months ended June September 30, 2026 compared to $1.4 $1.9 million for the six nine months ended June September 30, 2025. The changes in mortgage loan servicing income were primarily due to decreases in servicing fees, increases in mortgage servicing amortization, and decreases in capitalized mortgage servicing assets. Our total residential mortgage loan servicing portfolio was $463.5 $429.5 million at June September 30, 2026 compared to $559.1 $538.7 million at June September 30, 2025.

SBA servicing income increased decreased by $86,000, $340,000, or 13.4%, 28.3%, to $728,000 $863,000 for the three months ended June September 30, 2026 compared to $642,000 $1.2 million for the three months ended June September 30, 2025. SBA servicing income increased $1.0 million, $738,000, or 69.3% 26.8% to $2.6 $3.5 million for the six nine months ended June September 30, 2026, compared to $1.6 $2.8 million for the same period of 2025. Our total SBA and USDA loan servicing portfolio was $682.2 $676.2 million as of June September 30, 2026 compared to $480.9 $460.7 million as of June September 30, 2025. Included in SBA servicing income for the three and six nine months ended June September 30, 2026 was $814,000 $1.1 million and $2.1 $3.1 million in SBA servicing fees, respectively, compared to $1.0 million and $2.0 $3.0 million, respectively for the three and six nine months ended June September 30, 2025, respectively. Our SBA servicing rights are carried at fair value and the inputs used to calculate fair value change from period to period. During the three and six nine months ended June September 30, 2026, fair value decreased by $86,000 $218,000 and increased by $580,000 $361,000 on our SBA servicing rights, respectively compared to an increase of $165,000 and a decrease of $286,000 during the same periods in 2025, fair value decreased by $344,000 and $451,000 on our SBA servicing rights. respectively.

Other noninterest income decreased by $694,000, or 85.9%, to $114,000 for the three months ended September 30, 2026 compared to $808,000 for the three months ended September 30, 2025. Other noninterest income was $1.6 million for the nine months ended September 30, 2026 compared to $2.5 million for the same period in 2025, a decrease of $923,000, or 36.3%. Also included in other noninterest income are fair value gains/losses on our equity securities, which totaled $743,000 (loss) and $908,000 (loss) for the three and nine months ended September 30, 2026, respectively, compared to $124,000 (gain) and $305,000 (gain) for the three and nine months ended September 30, 2025. These equity securities consist of the Company's investment in a mutual fund holding high-quality fixed income securities, which supports affordable housing in the Company's markets and qualifies under the Community Reinvestment Act. Under GAAP, changes in the fair value of this investment are recognized in earnings, even though the underlying holdings are bonds. This investment remains an important part of the Bank's community development strategy, particularly following the completion of our recent merger.

Noninterest expense for the three months ended June September 30, 2026 was $20.0 million compared to $14.1 $14.7 million for the three months ended June September 30, 2025, an increase of $5.8 $5.4 million, or 41.4%. 36.6%.

Noninterest expense for the six nine months ended June September 30, 2026 was $41.4 $61.4 million compared to $27.9 $42.6 million for the six nine months ended June September 30, 2025, an increase of $13.5 $18.9 million or 48.3%. 44.3%.

The following table sets forth the major components of our noninterest expense for the three and six nine months ended June September 30, 2026 and 2025. (Dollars in thousands)

Three Months Ended September 30,

Nine Months Ended September 30,

(Dollars in thousands)

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Advertising expenses for the three and six months ended June 30, 2026 remained relatively flat compared to the same periods in 2025.

Salaries and employee benefits expense for the three months ended June September 30, 2026 was $11.3 $11.7 million compared to $8.5 $9.0 million for the three months ended June September 30, 2025, an increase of $2.8 million, or 32.6%. 31.2%. Salaries and employee benefits expense for the six nine months ended June September 30, 2026 was $22.9 $34.6 million compared to $17.0 $26.0 million for the six nine months ended June September 30, 2025, an increase of $5.8 $8.6 million, or 34.0%. 33.1%. These increases were primarily attributable to higher employee salaries and incentives, and employee insurance as a result of the First IC acquisition that occurred in fourth quarter of 2025.

Occupancy and equipment expense for the three months ended June September 30, 2026 was $2.3 $2.4 million, an increase of $948,000, $1.0 million, or 68.7%, 72.1%, compared to the three months ended June September 30, 2025. Occupancy and equipment expense for the six nine months ended June September 30, 2026 was $4.8 $7.2 million, an increase of $2.0 $3.0 million, or 70.3%, 70.9%, compared to the six nine months ended June September 30, 2025. These increases were primarily due to higher property taxes, utilities, maintenance expense, rent expense, and depreciation expense from the acquisition of First IC that occurred in fourth quarter of 2025.

Data processing expense for the three months ended June September 30, 2026 was $535,000 $636,000 compared to $329,000 $394,000 for the three months ended June September 30, 2025, an increase of $206,000, $242,000, or 62.6%. 61.4%. Data processing expense for the six nine months ended June September 30, 2026 was $1.2 $1.9 million, an increase of $543,000, $785,000, or 80.6%, 73.5%, compared to the six nine months ended June September 30, 2025. These increases were primarily due to the continued growth in our loans and deposits from the acquisition of First IC that occurred in fourth quarter of 2025, as well as enhancements to our existing systems.

Advertising expenses for the three and nine months ended September 30, 2026 was $310,000 and $711,000, compared to $161,000 and $477,000 for the three and nine months ended September 30, 2025.

Merger-related expenses for the three months ended June September 30, 2026 was $270,000 $117,000 compared to $333,000 $301,000 for the three months ended June September 30, 2025. Merger-related expenses for the six nine months ended June September 30, 2026 was $1.9 $2.1 million compared to $595,000 $896,000 for the six nine months ended June September 30, 2025. The increase for the six nine months is related to the acquisition of First IC being completed in the fourth quarter of 2025 with legal fees, integration fees, and conversion expenses in the first quarter of 2026.

Other expenses for the three months ended June September 30, 2026 were $5.3 $4.8 million compared to $3.4 $3.5 million for the three months ended June September 30, 2025, an increase of $1.9 $1.4 million, or 57.4%. 39.1%. Other expenses for the six nine months ended June September 30, 2026 were $10.2 $15.0 million compared to $6.5 $9.9 million for the six nine months ended June September 30, 2025 an increase of $3.7 $5.1 million, or 57.7%. 51.2%. This increase was primarily due to core deposit amortization, additional banking costs from First IC merger, FDIC insurance premiums, security expenses, and loan-related expenses.

Income tax expense for the six three months ended June September 30, 2026 and 2025 was $16.4 $3.7 million and $12.6 $6.6 million, respectively. The Company's effective tax rates were 27.0% 13.1% and 27.6% for the six three months ended June September 30, 2026 and 2025, respectively.

Income tax expense for the three nine months ended June September 30, 2026 and 2025 was $8.5 $20.1 million and $6.8 $19.2 million, respectively. The Company's effective tax rates were 27.7% 22.6% and 28.9% 27.6% for the three nine months ended June September 30, 2026 and 2025, respectively.

The decrease in the effective income tax rate for the quarter was primarily driven by the utilization of tax credits during the current period.

Total assets decreased $248.4 $170.6 million, or 5.2%, 3.6%, to $4.52 $4.60 billion at June September 30, 2026 as compared to $4.77 billion at December 31, 2025. The decrease in total assets was primarily attributable to decreases of $117.0 $66.7 million in cash and cash equivalents, $21.0 $24.0 million in securities, $93.1 $95.4 million in loans, net, $8.4 $9.7 million in loans held for sale, and $6.5 million in Federal Home Loan Bank stock, offset by a $35.2 million increase in other assets, primarily related to an increase in income taxes receivable resulting from the utilization of tax credits during the quarter.

Our investment securities portfolio made up 0.99% 0.89% of our total assets at June September 30, 2026 compared to 1.38% at December 31, 2025.

Gross loans held for investment decreased $94.3 $98.1 million, or 2.3%, 2.4%, to $3.98 billion as of June September 30, 2026 as compared to $4.08 billion as of December 31, 2025. Our loan decrease during the six nine months ended June September 30, 2026 was comprised of a decrease of $97.3 $81.2 million, or 6.2%, 5.2%, in commercial real estate loans, a decrease of $11.4 $14.6 million, , or 11.8% 15.2% in commercial and industrial loans, a decrease of $13.2 $41.8 million, or 0.6% 1.8%, in residential real estate loans, offset by an increase of $27.6 $39.9 million, or 65.9% 95.4%, in construction and development loans. We had loans held for sale of $1.4 million $0 as of June September 30, 2026 compared to $9.7 million in loans held for sale as of December 31, 2025.

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As of June September 30, 2026 and December 31, 2025, we serviced $682.2 $676.2 million and $685.5 million, respectively, in SBA and USDA loans for others. We carried a servicing asset of $11.2 $11.0 million and $10.6 million at June September 30, 2026 and December 31, 2025, respectively. See Note 5 of our consolidated financial statements as of June September 30, 2026, included elsewhere in this Form 10-Q, for additional information on the activity for SBA and USDA loan servicing rights for the three and six nine months ended June September 30, 2026 and 2025.

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and 30 more changes in the filing

Market risk 2 changes

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Interest rate risk is the risk to earnings and value arising from changes in market interest rates. Interest rate risk arises from timing differences in the repricings repricing and maturities of interest-earning assets and interest-bearing liabilities (repricing risk), changes in the expected maturities of assets and liabilities arising from embedded options, such as borrowers' ability to prepay home mortgage loans at any time and depositors' ability to redeem certificates of deposit before maturity (option risk), changes in the shape of the yield curve where interest rates increase or decrease in a nonparallel fashion (yield curve risk), and changes in spread relationships between different yield curves, such as U.S. Treasuries and Federal funds Effective Rates (basis risk).

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Potential changes to our net interest income in hypothetical rising and declining rate scenarios calculated as of June September 30, 2026 and December 31, 2025 are presented in the following table:

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Controls and procedures 2 changes

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The Company's management, including the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of June September 30, 2026. The Company's disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the U.S. Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of June September 30, 2026.

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During the quarter ended June September 30, 2026, there was no change in the Company's internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rules 13a-15 or 15d-15 of the Exchange Act that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting. The Company is continually monitoring and assessing changes in processes and activities to determine any potential impact on the design and operating effectiveness of internal controls over financial reporting.

Legal proceedings 1 change

We are a party to various legal proceedings such as claims and lawsuits arising in the course of our normal business activities. Although the ultimate outcome of all claims and lawsuits outstanding as of June September 30, 2026 cannot be ascertained at this time, it is the opinion of management that these matters, when resolved, will not have a material adverse effect on our business, results of operations or financial condition.

Unregistered sales of stock 1 change

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There were no common shares repurchased for the three months ended June September 30, 2026.

Other information 1 change

During the second third quarter of 2026, no executive officers or directors adopted Rule 10b5-1 trading plans and no directors or executive officers terminated a Rule 10b5-1 trading plan or adopted or terminated a non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation S-K).

Exhibits 4 changes

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Date: August 7, 2026

Date: November 5, 2026

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Date: August 7, 2026

Date: November 5, 2026

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