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REGULATORY MATTERS

3 Months Ended

Mar. 31, 2026

6. REGULATORY MATTERS

The Bank is subject to various regulatory capital requirements administered by federal banking agencies. Capital adequacy regulations and, additionally, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet minimum capital requirements can initiate regulatory action. The effects of accumulated other comprehensive income or loss is not included in computing regulatory capital. Management believes as of March 31, 2026, the Bank meets all capital adequacy requirements to which it is subject.

In addition to the minimum capital requirements discussed above, the Bank is also required to maintain a capital buffer above the requirements set forth in the capital adequacy regulations. Failure to maintain the required buffer could impair the Bank’s ability to pay dividends to the Company and to pay certain compensation to its executives.

Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized or worse, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. At March 31, 2026 and December 31, 2025, the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the institution’s category.

Under a policy of the Federal Reserve applicable to bank holding companies with less than $3.0 billion in consolidated assets, the Company is not subject to consolidated regulatory capital requirements.

The following table sets forth the Bank’s actual and required capital amounts (in thousands) and ratios under current regulations:


												Minimum Capital					Minimum to Be Well
												Adequacy Requirement					Capitalized Under
							Minimum Capital					with Capital					Prompt Corrective
		Actual Capital					Adequacy Requirement					Conservation Buffer					Action Provisions
		Amount			Ratio		Amount			Ratio		Amount			Ratio		Amount			Ratio
March 31, 2026
Total capital to risk-weighted assets		$	229,949		14.57	%	$	126,248		8.00	%	$	165,700		10.50	%	$	157,809		10.00	%
Tier 1 capital to risk-weighted assets			210,222		13.32	%		94,686		6.00	%		134,138		8.50	%		126,248		8.00	%
Common equity tier 1 capital to risk-weighted assets			210,222		13.32	%		71,014		4.50	%		110,467		7.00	%		102,576		6.50	%
Tier 1 capital to average total assets			210,222		9.20	%		91,414		4.00	%		N/A		N/A			114,268		5.00	%

December 31, 2025
Total capital to risk-weighted assets		$	222,739		14.06	%	$	126,770		8.00	%	$	166,385		10.50	%	$	158,462		10.00	%
Tier 1 capital to risk-weighted assets			204,431		12.90	%		95,077		6.00	%		134,693		8.50	%		126,770		8.00	%
Common equity tier 1 capital to risk-weighted assets			204,431		12.90	%		71,308		4.50	%		110,923		7.00	%		103,000		6.50	%
Tier 1 capital to average total assets			204,431		9.05	%		90,398		4.00	%		N/A		N/A			112,997		5.00	%

Dividend restrictions - The Company’s principal source of funds for dividend and debt service payments is dividends received from the Bank. During the three months ended March 31, 2026 the Bank paid $2.3 million in cash dividends to the Company. Banking regulations limit the amount of dividends that may be paid without prior approval of regulatory agencies. As of March 31, 2026, the Bank had $24.9 million of retained net income available for dividends to the Company, without obtaining regulatory approval, provided that the Bank satisfies the regulatory capital requirements, including the capital conservation buffer, disclosed above. The Company made capital contributions of $6.0 million to the Bank during the three months ended March 31, 2026.

- Definition

The entire disclosure for regulatory capital requirement for depository and lending institutions. Institutions include, but not are not limited to, finance company, insured depository institution, bank holding company, savings and loan association holding company, bank and savings institution not federally insured, mortgage company, foreign financial institution and credit union.

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