CoastalSouth Q3 net income rises to $8.77M

Deposits and loans held for investment were $2,100.746 million and $1,786.923 million, respectively, at September 30, 2026.

Available on EDGAR 11/06/2026 - 04:17 PM EST Accepted by SEC EDGAR 11/06/2026 - 04:15 PM EST Learn about SEC filing dates

Rhea-AI Filing Summary

CoastalSouth Bancshares, Inc. (COSO) reported third-quarter net income of $8.772 million, compared with $6.741 million a year earlier; diluted earnings per share were $0.71 versus $0.54. Net interest income was $21.527 million, compared with $19.190 million. For the first nine months, net income was $22.434 million versus $17.756 million.

At September 30, 2026, total assets were $2,423.766 million, deposits were $2,100.746 million, and loans held for investment were $1,786.923 million. Net cash provided by operating activities for the nine months was $89.496 million, compared with net cash used of $22.340 million in the same 2025 period.

During the nine months, CoastalSouth repurchased $9.034 million of common stock and declared dividends of $0.15 per share. Available-for-sale securities had $26.9 million in unrealized losses at September 30; management determined the losses were from factors other than credit impairment.

2 points · 0 major

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It reads the document as published, with the same rules for every company, and it does not look at what the market expected or at how the stock traded, so a point can be objectively good on a day the stock falls.

Rhea-AI Sentiment measures something else, the tone of the wording.

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Positive

• Moderate pointThird-quarter net income was $8.772 million, versus $6.741 million a year earlier.
• Moderate pointNine-month operating cash flow was $89.496 million provided, versus $22.340 million used in 2025.

Negative

• None.

Filing Explained

By September 30, 2026, CoastalSouth had transferred 1,112,156 non-voting shares into voting common stock, leaving no non-voting shares outstanding; 11,734,134 voting shares were outstanding, and the transfer reclassified shares rather than creating new ones.

Key Figures

Third-quarter net income: $8.772 million Diluted earnings per share: $0.71 per share Net interest income: $21.527 million +3 more

6 metrics

Third-quarter net income $8.772 million Three months ended September 30, 2026; $6.741 million in 2025

Diluted earnings per share $0.71 per share Three months ended September 30, 2026; $0.54 in 2025

Net interest income $21.527 million Three months ended September 30, 2026; $19.190 million in 2025

Nine-month net income $22.434 million Nine months ended September 30, 2026; $17.756 million in 2025

Net cash provided (used) by operating activities $89.496 million provided Nine months ended September 30, 2026; $22.340 million used in 2025

Total deposits $2,100.746 million As of September 30, 2026; $1,987.684 million as of December 31, 2025

Key Terms

allowance for credit losses, available-for-sale securities, nonperforming, test-to-worst

4 terms

allowance for credit losses financial

"Allowance for credit losses on loans"

Allowance for credit losses is a reserve set aside by a financial institution to cover potential losses from borrowers who may not repay their loans. It acts like a safety net, helping the institution prepare for loans that might turn sour. For investors, it signals how cautious the institution is about the quality of its loans and potential risks to its financial health.

available-for-sale securities financial

"securities available-for-sale, at fair value"

Available-for-sale securities are investments in stocks, bonds or similar instruments that a company does not intend to trade frequently but may sell before they mature. They matter to investors because changes in the market value of these holdings show up as paper gains or losses on the company's balance sheet rather than immediately in profit, so they can affect reported net worth and the timing of income without changing day-to-day earnings. Think of them like items on a household shelf you might sell later: their value moves with the market even if you haven’t cashed out.

nonperforming financial

"Retail loans are considered to be nonperforming"

Nonperforming describes a loan, asset, or investment that is no longer delivering the expected payments or returns—for example, a borrower who has stopped making scheduled loan payments. For investors, a rising share of nonperforming items is like more engines in a fleet breaking down: it signals higher risk of losses, lower interest income, and the need for larger reserves, which can weaken a lender’s profitability and share value.

test-to-worst technical

"The hedge relationship will utilize a 'test-to-worst' methodology"

FAQ

AI-generated questions and answers. How Rhea-AI works. Not financial advice.

What was COSO's net income in the third quarter of 2026?

CoastalSouth reported third-quarter net income of $8.772 million, compared with $6.741 million for the three months ended September 30, 2025. Diluted earnings per share were $0.71, compared with $0.54.

What was COSO's loan mix at September 30, 2026?

Commercial loans were $1,145.869 million, or 64.2% of gross loans held for investment, and retail loans were $641.054 million, or 35.8%. At December 31, 2025, commercial loans were 61.5% and retail loans were 38.5% of gross loans held for investment.

AI-generated analysis. How Rhea-AI works. Not financial advice.

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2026

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______

Commission File Number: 001-42730

COASTALSOUTH BANCSHARES, INC.

(Exact Name of Registrant as Specified in its Charter)

Georgia	57-1184730
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
400 Galleria Parkway, Suite 1900 Atlanta, GA	30339
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (678) 396-4605

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, par value $1.00 per share		COSO		New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer		☐		Accelerated filer		☐
Non-accelerated filer		☒		Smaller reporting company		☒
Emerging growth company		☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 5, 2026, the registrant had 11,673,458 shares of common stock, $1.00 par value per share, outstanding.

Table of Contents

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	1
	Consolidated Balance Sheets as of September 30, 2026 (unaudited) and December 31, 2025	1
	Consolidated Statements of Income (unaudited) for the Three and Nine Months Ended September 30, 2026 and 2025	2
	Consolidated Statements of Comprehensive Income (unaudited) for the Three and Nine Months Ended September 30, 2026 and 2025	3
	Consolidated Statements of Shareholders' Equity (unaudited) for the Three and Nine Months Ended September 30, 2026 and 2025	4
	Consolidated Statements of Cash Flows (unaudited) for the Nine Months Ended September 30, 2026 and 2025	6
	Notes to Consolidated Financial Statements (unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	63
Item 4.	Controls and Procedures	64
PART II.	OTHER INFORMATION	64
Item 1.	Legal Proceedings	64
Item 1A.	Risk Factors	64
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	65
Item 3.	Defaults Upon Senior Securities	65
Item 4.	Mine Safety Disclosures	65
Item 5.	Other Information	65
Item 6.	Exhibits	66
Signatures		67

i

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

COASTALSOUTH BANCSHARES, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share and per share data)

		September 30,				December 31,
		2026				2025
		(Unaudited)				(Audited)
Assets
Cash and cash equivalents
Cash and due from banks		$	14,629			$	11,218
Interest-bearing accounts with other banks			10,814				30,320
Federal funds sold			19,775				38,229
Total cash and cash equivalents			45,218				79,767
Investments
Securities available-for-sale, at fair value			332,664				330,503
Non-marketable equity securities			8,926				8,759
Total investments			341,590				339,262
Loans held for sale			142,399				170,933
Loans held for investment			1,786,923				1,617,315
Allowance for credit losses on loans			(19,623	)			(18,743	)
Loans held for investment, net			1,767,300				1,598,572
Bank-owned life insurance			49,694				48,296
Premises, furniture and equipment, net			18,378				18,122
Deferred tax asset			17,613				16,370
Goodwill			4,708				4,708
Intangible assets			1,599				1,554
Other assets			35,267				29,002
Total assets		$	2,423,766			$	2,306,586
Liabilities
Deposits
Noninterest-bearing transaction accounts		$	340,427			$	312,251
Interest-bearing transaction accounts			213,146				214,620
Savings and money market			800,988				673,609
Time deposits			746,185				787,204
Total deposits			2,100,746				1,987,684
Other borrowings			30,000				30,000
Other liabilities			31,100				29,373
Total liabilities			2,161,846				2,047,057
Commitments and Contingencies (Note 4)
Shareholders' Equity
Preferred stock, $1.00 par value, 10,000,000 shares authorized, no shares issued   or outstanding		—				—
Voting common stock, $1.00 par value, 50,000,000 shares authorized, 11,734,134 and 10,868,256    shares issued and outstanding at September 30, 2026 and December 31, 2025, respectively			11,734				10,868
Non-voting common stock, $1.00 par value, 10,000,000 shares authorized, 0 and 1,112,156    shares issued and outstanding at September 30, 2026 and December 31, 2025, respectively			-				1,112
Capital surplus			181,518				189,882
Retained earnings			87,489				66,886
Accumulated other comprehensive loss			(18,821	)			(9,219	)
Total shareholders' equity			261,920				259,529
Total liabilities and shareholders' equity		$	2,423,766			$	2,306,586

The accompanying notes are an integral part of these consolidated financial statements.

1

COASTALSOUTH BANCSHARES, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

(Dollars in thousands, except per share data)

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2026				2025				2026				2025
Interest income
Loans, including fees
Loans held for investment		$	27,413			$	24,598			$	78,512			$	70,718
Loans held for sale			2,781				3,422				8,858				9,537
Investments
Taxable			3,788				3,907				10,771				11,176
Non-taxable			126				114				376				302
Non-marketable equity securities			152				104				422				322
Federal funds sold			486				616				1,687				2,277
Other earning assets from banks			132				129				378				375
Total interest income			34,878				32,890				101,004				94,707
Interest expense
Interest-bearing deposits			12,835				13,274				37,972				39,355
Other borrowings			516				426				1,096				1,325
Total interest expense			13,351				13,700				39,068				40,680
Net interest income			21,527				19,190				61,936				54,027
(Recovery) provision for credit losses			(429	)			653				611				2,034
Net interest income after provision for credit losses			21,956				18,537				61,325				51,993
Noninterest income
Bank-owned life insurance			476				461				1,398				1,349
Income from mortgage originations			375				299				1,172				846
Gain on sale of government guaranteed loans			1,558				613				2,202				878
Interchange income and card fees			244				238				773				761
Service charges on deposit accounts			268				208				736				634
Other noninterest income			408				281				1,217				1,308
Total noninterest income			3,329				2,100				7,498				5,776
Noninterest expense
Salaries and employee benefits			8,613				6,985				24,973				20,676
Occupancy and equipment			944				850				2,705				2,452
Software and other technology expense			894				788				2,581				2,210
Other professional services			503				571				1,730				2,237
Data processing			560				647				1,897				1,924
Regulatory assessment			353				419				1,032				1,124
Other noninterest expense			1,843				1,596				5,210				4,744
Total noninterest expense			13,710				11,856				40,128				35,367
Income before taxes			11,575				8,781				28,695				22,402
Income tax provision			2,803				2,040				6,261				4,646
Net income		$	8,772			$	6,741			$	22,434			$	17,756
Net income per common share:
Basic		$	0.73			$	0.57			$	1.87			$	1.64
Diluted		$	0.71			$	0.54			$	1.81			$	1.58

The accompanying notes are an integral part of these consolidated financial statements.

2

COASTALSOUTH BANCSHARES, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

(Dollars in thousands)

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2026				2025				2026				2025
Net income		$	8,772			$	6,741			$	22,434			$	17,756
Other comprehensive income (loss)
Unrealized gain (loss) on available-for-sale securities
Change in unrealized (loss) gain on available-for-sale securities			(10,153	)			3,232				(11,286	)			7,048
Reclassification adjustment for net loss on sale of securities   included in net income			-				10				-				10
Income tax effect			2,373				(758	)			2,638				(1,646	)
Unrealized (loss) gain on available-for-sale securities, net of tax			(7,780	)			2,484				(8,648	)			5,412
Unrealized (loss) gain on derivatives
Change in unrealized loss on cash flow hedges			(670	)			(355	)			(1,032	)			(649	)
Reclassification adjustment for net (loss) income included in   net income			(75	)			40				(223	)			(101	)
Income tax effect			179				76				301				180
Unrealized loss on derivative instruments, net of tax			(566	)			(239	)			(954	)			(570	)
Other comprehensive (loss) income, net of tax			(8,346	)			2,245				(9,602	)			4,842
Comprehensive income		$	426			$	8,986			$	12,832			$	22,598

The accompanying notes are an integral part of these consolidated financial statements.

3

COASTALSOUTH BANCSHARES, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited)

(Dollars in thousands)

																										Accumulated
		Common Stock																								Other
		Voting								Non-voting								Capital				Retained				Comprehensive
Three Months Ended:		Shares				Amount				Shares				Amount				Surplus				Earnings				Income (Loss)				Total
Balance, July 1, 2025			8,106,892			$	8,107				2,172,029			$	2,172			$	159,267			$	53,009			$	(13,190	)		$	209,365
Issuance of common stock upon initial public offering			1,700,000				1,700				-				-				30,158				-				-				31,858
Transfer from nonvoting to voting common stock			642,000				642				(642,000	)			(642	)			-				-				-				-
Stock-based compensation expense			-				-				-				-				229				-				-				229
Net income			-				-				-				-				-				6,741				-				6,741
Other comprehensive income, net of tax			-				-				-				-				-				-				2,245				2,245
Balance as of September 30, 2025			10,448,892			$	10,449				1,530,029			$	1,530			$	189,654			$	59,750			$	(10,945	)		$	250,438
Balance, July 1, 2026			12,003,040			$	12,003				-			$	-			$	188,851			$	79,324			$	(10,475	)		$	269,703
Net issuance of common stock under incentive plan			16,809				17				-				-				(59	)			-				-				(42	)
3,942 shares of common stock withheld in net settlement     upon issuance of common stock under incentive plan			-				-				-				-				(66	)			-				-				(66	)
Stock-based compensation expense			-				-				-				-				305				-				-				305
Repurchase of common stock			(285,715	)			(286	)			-				-				(7,513	)			-				-				(7,799	)
Net income			-				-				-				-				-				8,772				-				8,772
Other comprehensive loss, net of tax			-				-				-				-				-				-				(8,346	)			(8,346	)
Dividends declared on common stock ($0.05 per share)			-				-				-				-				-				(607	)			-				(607	)
Balance as of September 30, 2026			11,734,134			$	11,734				-			$	-			$	181,518			$	87,489			$	(18,821	)		$	261,920

Continued to following page.

4

COASTALSOUTH BANCSHARES, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited) - Continued

(Dollars in thousands)

																										Accumulated
		Common Stock																								Other
		Voting								Non-voting								Capital				Retained				Comprehensive
Nine Months Ended:		Shares				Amount				Shares				Amount				Surplus				Earnings				Income (Loss)				Total
Balance, January 1, 2025			8,098,117			$	8,098				2,172,029			$	2,172			$	158,755			$	41,994			$	(15,787	)		$	195,232
Net issuance of common stock under incentive plan			8,775				9				-				-				33				-				-				42
Issuance of common stock upon initial public offering			1,700,000				1,700				-				-				30,158				-				-				31,858
Transfer from nonvoting to voting common stock			642,000				642				(642,000	)			(642	)			-				-				-				-
Stock-based compensation expense			-				-				-				-				708				-				-				708
Net income			-				-				-				-				-				17,756				-				17,756
Other comprehensive income, net of tax			-				-				-				-				-				-				4,842				4,842
Balance as of September 30, 2025			10,448,892			$	10,449				1,530,029			$	1,530			$	189,654			$	59,750			$	(10,945	)		$	250,438
Balance, January 1, 2026			10,868,256			$	10,868				1,112,156			$	1,112			$	189,882			$	66,886			$	(9,219	)		$	259,529
Net issuance of common stock under incentive plan			87,928				88				-				-				93				-				-				181
28,693 shares of common stock withheld in net settlement     upon issuance of common stock under incentive plan			-				-				-				-				(698	)			-				-				(698	)
Transfer from nonvoting to voting common stock			1,112,156				1,112				(1,112,156	)			(1,112	)			-				-				-				-
Stock-based compensation expense			-				-				-				-				941				-				-				941
Repurchase of common stock			(334,206	)			(334	)			-				-				(8,700	)			-				-				(9,034	)
Net income			-				-				-				-				-				22,434				-				22,434
Other comprehensive loss, net of tax			-				-				-				-				-				-				(9,602	)			(9,602	)
Dividends declared on common stock ($0.15 per share)			-				-				-				-				-				(1,831	)			-				(1,831	)
Balance as of September 30, 2026			11,734,134			$	11,734				-			$	-			$	181,518			$	87,489			$	(18,821	)		$	261,920

The accompanying notes are an integral part of these consolidated financial statements.

5

COASTALSOUTH BANCSHARES, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(Dollars in thousands)

		Nine Months Ended
		September 30,
		2026				2025
Operating activities
Net income		$	22,434			$	17,756
Adjustments to reconcile net income to net cash provided (used) by operating activities:
Provision for credit losses			611				2,034
Depreciation expense and software amortization			1,274				1,114
Increase in cash value of bank-owned life insurance			(1,398	)			(1,349	)
Stock-based compensation expense			941				708
Net loss on sale of available-for-sale securities			-				10
Amortization of operating lease right-of-use assets			666				616
Amortization of debt issuance costs			-				275
Write-down on other real estate owned			-				99
Write-down on repossessed assets			22				119
Net loss on sales of repossessed assets			-				17
Net gain on sale of other real estate owned			-				(64	)
Gain on sale of government guaranteed loans, including originations of servicing rights			(2,202	)			(878	)
Gain on sale of other loans			(230	)			-
Income from mortgage operations			(1,172	)			(846	)
Discount accretion and premium amortization on securities available-for-sale			(684	)			(753	)
Amortization of intangible assets			339				407
Deferred income tax expense			1,695				420
Originations of loans held for sale			(4,674,717	)			(4,661,234	)
Proceeds from loans held for sale			4,747,433				4,617,614
Increase in other assets			(6,478	)			(1,731	)
Increase in other liabilities			962				3,326
Net cash provided (used) by operating activities			89,496				(22,340	)
Investing activities
Purchase of securities available-for-sale			(59,811	)			(44,005	)
Proceeds from sales of securities available-for-sale			-				4,956
Proceeds from paydowns, calls, and maturities on securities available-for-sale			46,422				48,244
Net purchase of non-marketable equity securities			(167	)			(552	)
Loan originations and principal collections, net			(210,665	)			(157,080	)
Net purchase of premises, furniture and equipment			(1,530	)			(1,504	)
Proceeds from sales of other real estate owned			-				829
Net cash used by investing activities			(225,751	)			(149,112	)

Continued to following page.

6

COASTALSOUTH BANCSHARES, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - Continued

(Dollars in thousands)

		Nine Months Ended
		September 30,
		2026				2025
Financing activities
Dividends paid on common stock		$	(1,805	)		$	-
Net increase in deposits			113,062				114,870
Net proceeds of Federal Home Loan Bank of Atlanta borrowings			-				10,000
Proceeds from initial public offering, net			-				31,858
Proceeds from issuance of common stock under incentive plan			181				42
Taxes paid in net settlement of tax obligation upon exercise of stock options			(93	)			-
Taxes paid in net settlement of tax obligation upon settlement of restricted stock units			(605	)			-
Repurchase of common stock			(9,034	)			-
Net repayment from commercial line of credit			-				(12,000	)
Net repayment of subordinated debt			-				(15,000	)
Net cash provided by financing activities			101,706				129,770
Net decrease in cash and cash equivalents			(34,549	)			(41,682	)
Cash and cash equivalents, beginning of year			79,767				67,961
Cash and cash equivalents, end of period		$	45,218			$	26,279
Cash paid during the period for:
Interest		$	40,813			$	38,969
Income taxes			572				1,615
Noncash investing and financing activities:
Unrealized (loss) gain on securities available-for-sale, net			(8,648	)			5,412
Unrealized loss on derivative instruments, net			(954	)			(570	)
Transfers from loans held for investment to loans held for sale			40,369				12,157
Right-of-use assets obtained in exchange for new operating lease liabilities			2,941				669
Lease liabilities arising from obtaining right-of-use assets			3,759				666

The accompanying notes are an integral part of these consolidated financial statements.

7

CoastalSouth Bancshares, Inc. and Subsidiary

Notes to Consolidated Financial Statements (unaudited)

NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited consolidated financial statements include the accounts of CoastalSouth Bancshares, Inc. (the “Company”) and its wholly-owned subsidiary. The Company owns 100% of Coastal States Bank (the “Bank”). The Bank has one wholly owned subsidiary, Coastal States Mortgage, Inc., a mortgage company focused on originating residential mortgages to sell to investors and to retain in the portfolio. The "Company” or “our,” as used herein, includes Coastal States Bank and Coastal States Mortgage, Inc.

These unaudited Consolidated Financial Statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) followed within the financial services industry for interim financial information and Article 10 of Regulation S-X. Accordingly, they do not include all of the information or notes required for complete financial statements.

In the opinion of management, all adjustments, consisting of normal and recurring items, considered necessary for a fair presentation of the Consolidated Financial Statements for the interim periods have been included. All significant intercompany accounts and transactions have been eliminated in consolidation. Certain amounts reported in prior periods have been reclassified to conform to the current year's presentation. These reclassifications did not have a material effect on previously reported net income, shareholders’ equity or cash flows.

Operating results for the three and nine months ended 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 as filed with the Securities and Exchange Commission ("SEC") on the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 (the “Company’s 2025 Form 10-K”).

The Company’s significant accounting policies are described in Note 1 of the Notes to Consolidated Financial Statements as filed with the SEC on the Company’s 2025 Form 10-K. There were no new accounting policies or changes to existing policies adopted during the nine months ended September 30, 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.

Operating Segments

The Company principally operates in one business segment, which is community banking.

Accounting standards require that information be reported about a company’s operating segments using a “management approach.” Reportable segments are identified in these standards as those revenue producing components for which separate financial information is produced internally and which are subject to evaluation by the Chief Operating Decision Maker ("CODM"). While the CODM monitors the revenue streams of the various products and services, operations are managed, and financial performance is evaluated on a Company-wide basis. Accordingly, all of the financial service operations are considered by management to be aggregated in one reportable segment.

The Company's CODM is the chief executive officer. The segment measure of profit or loss is consolidated net income according to the Consolidated Statements of Income, the measure of segment assets is total assets of the consolidated company according to the Consolidated Balance Sheets, and the accounting policies of the segment are the same as those described in the Consolidated Financial Statements within Note 1 for the year ended December 31, 2025 as filed with the SEC on the Company’s 2025 Form 10-K. The CODM monitors budgeted to actual results of net income to assess the company's performance, to make decisions on strategic initiatives, and to establish management's compensation. The segment's revenues are primarily derived from retail and commercial banking products and investment income.

Contingencies

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 September 30, 2026. Although the ultimate outcome of all claims and lawsuits outstanding as of 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.

Accounting Pronouncements Adopted in 2026

In November 2025, the Financial Accounting Standards Board ("FASB") issued ASU 2025-09, Derivatives and Hedging (Topic 815): Hedge Accounting Improvements. This Update amends certain aspects of the hedge accounting guidance in Topic 815. In addition to addressing stakeholder concerns, the amendments are intended to more closely align hedge accounting with the economics of an entity’s risk management activities. The purpose of the amendments was to better enable “entities to achieve and maintain hedge accounting for highly effective economic hedges” while reducing the occurrence of missed forecasted transactions and unintuitive hedge

8

CoastalSouth Bancshares, Inc. and Subsidiary
Notes to Consolidated Financial Statements (unaudited) - Continued

de-designation events. For public business entities, the amendments are effective for fiscal years beginning after December 15, 2026, and interim periods therein. Entities are permitted to early adopt the new guidance in any interim or annual period after the Update’s issuance. The Company early-adopted this ASU on July 27, 2026, and has under ASC 815-20-65-7e.1, modified its dual-purpose tests of effectiveness and similarity as well as under ASC 815-20-65-7e.3, modified the existing hedged risks to include Prime and SOFR based exposures. Under ASC 815-20-25-15, a group of transactions is eligible for hedging in a single hedge relationship if the hedged transactions in the group have a similar risk. The Company will assess for similarity of exposures using a dual-purpose test during the test of inception effectiveness at inception. The hedge relationship will utilize a 'test-to-worst' methodology as described in the basis of conclusions for ASU 2025-09 to test the hedge for effectiveness and the hedged items for similarity only against the least effective population within the group of hedged items - the floating rate assets indexed to the USD-PRIME-H15 rate published by the Federal Reserve's H.15 Daily Update ("Prime"). The adoption of this standard did not have a material effect on the Company’s Consolidated Financial Statements.

In July 2025, the FASB issued ASU 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. This ASU amended ASC 326-20 to provide a practical expedient (for all entities) and an accounting policy election (for all entities, other than public business entities, that elect the practical expedient) related to the estimation of expected credit losses for current accounts receivable and current contract assets that arise from transactions accounted for under ASC 606. Under ASU 2025-05, an entity is required to disclose whether it has elected to use the practical expedient and, if so, whether it has also applied the accounting policy election. An entity that makes the accounting policy election is required to disclose the date through which subsequent cash collections are evaluated. This ASU was effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods, with early adoption permitted and should be applied prospectively. The Company adopted this ASU on January 1, 2026, and has elected the practical expedient. The adoption of this standard did not have a material effect on the Company’s Consolidated Financial Statements.

Accounting Pronouncements Not Yet Adopted

In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements. This Update is intended to improve the navigability of the guidance in ASC 270, Interim Reporting, and to clarify when it applies. Under the amendments, an entity is subject to ASC 270 if it provides “interim financial statements and notes in accordance with GAAP.” The Update also addresses the form and content of such financial statements, adds lists to ASC 270 of the interim disclosures required by all other Codification topics, and establishes a principle under which an entity must “disclose events since the end of the last annual reporting period that have a material impact on the entity.” The amendments are not intended to “change the fundamental nature of interim reporting or expand or reduce current interim disclosure requirements.” These amendments apply to all entities that provide interim financial statements and notes in accordance with GAAP as per ASC 205-10-45-1A, regardless of whether those interim financial statements and notes are prepared (i) at the “same level of aggregation as the annual financial statements and notes” or (ii) as condensed statements. For public business entities, the amendments are effective for interim reporting periods within annual reporting periods beginning after December 15, 2027 with early adoption permitted for all entities. The adoption of this standard is not expected to have a material effect on the Company’s Consolidated Financial Statements.

In November 2025, the FASB issued ASU 2025-08, Financial Instruments—Credit Losses (Topic 326): Purchased Loans. This Update expands the use of the gross-up method to certain acquired loans beyond purchased financial assets with credit deterioration ("PCD assets"). Under the gross-up method an allowance for credit losses is recognized at the acquisition date with an offsetting entry to the asset’s amortized cost basis. Specifically, this Update (i) applies the gross-up method to acquired non-PCD assets that are ‘purchased seasoned loans’ and provides criteria for determining whether acquired loans qualify as purchased seasoned loans; (ii) for purchased seasoned loans, eliminates the Day 1 credit loss expense and reduces interest income recognized in subsequent periods (because the gross-up method will now apply to those loans); (iii) keeps the guidance for PCD assets unchanged; and (iv) results in narrow subsequent measurement differences between purchased seasoned loans and PCD assets. This Update is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2026, and is applied on a prospective basis with an early adoption permitted. The adoption of this standard is not expected to have a material effect on the Company’s Consolidated Financial Statements.

In September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. This Update modernizes the accounting for software costs that are accounted for under Subtopic 350-40, Intangibles—Goodwill and Other—Internal-Use Software (referred to as “internal-use software”). The Update changes the cost capitalization threshold by: (a) eliminating accounting consideration of software project development stages; cost capitalization would begin when (i) management has authorized and committed to funding the project and (ii) it is ‘probable’ the project will be completed and the software used to perform its intended function (the ‘probable-to-complete’ threshold); and (b) enhancing the guidance around the ‘probable-to-complete’ threshold. This Update also modifies the website development costs guidance by requiring entities to provide disclosures required under Subtopic 360-10 on property, plant & equipment to capitalized internal-use software and related amortization, regardless of how the internal-use software is classified on the balance sheet or how it was acquired. This Update is effective for all entities for annual reporting periods beginning after December 15, 2027, and interim reporting periods

9

CoastalSouth Bancshares, Inc. and Subsidiary
Notes to Consolidated Financial Statements (unaudited) - Continued

within those annual reporting periods with early adoption permitted as of the beginning of an annual reporting period. The Company intends to adopt this Update on a prospective transition approach. The adoption of this standard is not expected to have a material effect on the Company’s Consolidated Financial Statements.

The Company has further evaluated other Accounting Standards Updates issued during 2026 but does not expect those Updates to have a material impact on the Consolidated Financial Statements.

NOTE 2 — INVESTMENT SECURITIES

The amortized cost and estimated fair values of securities available-for-sale along with allowance for credit losses, gross unrealized gains and losses at September 30, 2026 and December 31, 2025 are summarized in the tables below:

		September 30, 2026
(In thousands of dollars)		Amortized Cost				Allowance for Credit Losses				Gross Unrealized Gains				Gross Unrealized Losses				Estimated Fair Value
U.S. Treasuries		$	1,000			$	-			$	-			$	54			$	946
Municipal obligations			62,293				-				-				9,282				53,011
Mortgage-backed securities			219,696				-				33				16,106				203,623
Asset-backed securities			22,532				-				172				299				22,405
Corporate debt securities			53,285				-				522				1,128				52,679
Total securities available-for-sale		$	358,806			$	-			$	727			$	26,869			$	332,664

		December 31, 2025
(In thousands of dollars)		Amortized Cost				Allowance for Credit Losses				Gross Unrealized Gains				Gross Unrealized Losses				Estimated Fair Value
U.S. Treasuries		$	5,996			$	-			$	-			$	146			$	5,850
Municipal obligations			64,878				-				114				6,350				58,642
Mortgage-backed securities			188,509				-				1,264				9,713				180,060
Asset-backed securities			26,897				-				237				134				27,000
Corporate debt securities			59,079				-				929				1,057				58,951
Total securities available-for-sale		$	345,359			$	-			$	2,544			$	17,400			$	330,503

The following is a summary of maturities of available-for-sale ("AFS") securities as of September 30, 2026. The amortized cost and estimated fair values are based on the contractual maturity dates. Actual maturities may differ from contractual maturities because borrowers may have the right to call or repay obligations with or without penalty. Mortgage-backed securities are not presented by maturity date because pay-downs are expected before contractual maturity dates.

		Amortized				Estimated
(In thousands of dollars)		Cost				Fair Value
Due in one year or less		$	-			$	-
Due after one year but within five years			18,011				17,458
Due after five years but within ten years			78,140				72,744
Due after ten years			42,959				38,839
Mortgage-backed securities			219,696				203,623
Total		$	358,806			$	332,664

The following table shows securities in unrealized loss position for which an allowance for credit losses ("ACL") has not been recorded and the length of time they were in continuous loss positions as of September 30, 2026:

		Less than								Twelve months
		Twelve months								or more								Total
		Estimated				Unrealized				Estimated				Unrealized				Estimated				Unrealized
(In thousands of dollars)		Fair Value				losses				Fair Value				losses				Fair Value				losses
U.S. Treasuries		$	-			$	-			$	946			$	54			$	946			$	54
Municipal obligations			4,183				195				48,828				9,087				53,011				9,282
Mortgage-backed securities			100,050				4,244				99,257				11,862				199,307				16,106
Asset-backed securities			8,086				192				6,382				107				14,468				299
Corporate debt securities			11,274				131				14,003				997				25,277				1,128
Total AFS securities		$	123,593			$	4,762			$	169,416			$	22,107			$	293,009			$	26,869

10

CoastalSouth Bancshares, Inc. and Subsidiary
Notes to Consolidated Financial Statements (unaudited) - Continued

The following table shows securities in unrealized loss position for which an ACL has not been recorded and the length of time they were in continuous loss positions as of December 31, 2025:

		Less than								Twelve months
		Twelve months								or more								Total
		Estimated				Unrealized				Estimated				Unrealized				Estimated				Unrealized
(In thousands of dollars)		Fair Value				losses				Fair Value				losses				Fair Value				losses
U.S. Treasuries		$	-			$	-			$	5,850			$	146			$	5,850			$	146
Municipal obligations			-				-				55,162				6,350				55,162				6,350
Mortgage-backed securities			9,712				58				107,857				9,655				117,569				9,713
Asset-backed securities			-				-				7,060				134				7,060				134
Corporate debt securities			2,963				38				16,480				1,019				19,443				1,057
Total AFS securities		$	12,675			$	96			$	192,409			$	17,304			$	205,084			$	17,400

AFS securities are recorded at fair market value. Of the 168 securities in an unrealized loss position at September 30, 2026, 55 had been in a continuous loss position for less than twelve months and 113 for twelve months or more. The Company believes, based on industry analyst reports, credit ratings and/or government guarantees, that the deterioration in value is attributable to changes in market interest rates and is not in the credit quality of the issuer and therefore, these losses are not considered credit-related and therefore are not required to be charged to the allowance.

Based on the results of management's review at September 30, 2026, none of the unrealized loss was attributable to credit impairment and all $26.9 million in unrealized loss was determined to be from factors other than credit. There can be no assurance that the Company will not conclude in future periods that conditions existing at that time indicate some or all of these securities may be sold or are credit-related impaired, which would require a charge to earnings in such periods.

The table below presents a summary of sales activities in the Company's investment securities AFS portfolio during the periods presented:

		For the Three Months Ended September 30,								For the Nine Months Ended September 30,
(In thousands of dollars)		2026				2025				2026				2025
Gross gains on sales of securities		$	-			$	-			$	-			$	-
Gross losses on sales of securities			-				(10	)			-				(10	)
Net realized losses on sales of securities available-for-sale		$	-			$	(10	)		$	-			$	(10	)
Sales proceeds		$	-			$	4,956			$	-			$	4,956

At September 30, 2026, investment securities with a book value of $263.7 million and a market value of $239.6 million were pledged to secure federal funds lines of credit, Federal Reserve Bank Discount Window credit availability, and municipal deposits. At December 31, 2025, investment securities with a book value of $63.8 million and a market value of $57.8 million were pledged to secure federal funds lines of credit, Federal Reserve Bank Discount Window credit availability, and municipal deposits.

NOTE 3 — LOANS AND ALLOWANCE FOR CREDIT LOSSES

Composition of Loan Portfolio

The Company engages in a full complement of lending activities, including commercial real estate loans ("CRE"), construction loans, commercial and industrial loans ("C&I"), and consumer purpose loans. While risk of loss in the Company’s portfolio is primarily tied to the credit quality of the various borrowers, risk of loss may increase due to factors beyond the Company’s control, such as local, regional and/or national economic downturns. General conditions in the real estate market may also impact the relative risk in the real estate portfolio. The following is a brief description of the major loans receivable categories:

Commercial Loans

Acquisition, Development, and Construction ("ADC") – ADC loans include both loans and credit lines for the purpose of purchasing, carrying, and developing land into residential subdivisions or various types of commercial developments, such as industrial, hospitality, warehouse, retail, office, and multi-family. This category also includes loans and credit lines for construction of residential developments, multi-family buildings, and commercial buildings. The Company generally engages in ADC lending primarily in local markets served by its branches, and through our homebuilder finance and government guaranteed lending lines of business. The Company recognizes that risks are inherent in the financing of commercial real estate development and construction. These risks include location, market conditions and price volatility, change in interest rates, demand for developed land, lots and buildings, desirability of features and styling of completed developments and buildings, competition from other developments and builders, traffic patterns, remote work patterns, governmental jurisdiction, tax structure, availability of utilities, roads, public transportation and schools,

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CoastalSouth Bancshares, Inc. and Subsidiary
Notes to Consolidated Financial Statements (unaudited) - Continued

availability of permanent financing for homebuyers, zoning, environmental restrictions, lawsuits, economic and business cycle, labor, and reputation of the builder or developer.

Each ADC loan is underwritten to address: (i) the desirability of the project, its market viability and projected absorption period; (ii) the creditworthiness of the borrower and the guarantor as to liquidity, cash flow and assets available to ensure performance of the loan; (iii) equity contribution to the project; (iv) the developer’s experience and success with similar projects; and (v) the value of the collateral. ADC loans are inspected periodically to ensure that the project is on schedule and eligible for requested draws. Inspections may be performed by construction inspectors hired by the Company or by appropriate loan officers and are conducted periodically to monitor the progress of a particular project. These inspections may also include discussions with project managers and engineers. Rising interest rates and the potential for slowing economic conditions could negatively impact borrowers’ and guarantors’ ability to repay their debt which could make more of the Company’s loans collateral-dependent.

Income Producing CRE – Income Producing CRE loans include loans to finance income producing commercial and multi-family properties. Lending in this category is generally limited to properties located in the Company’s market area with only limited exposure to properties located elsewhere but owned by in-market borrowers. Loans in this category include loans for neighborhood retail centers, medical and professional offices, single retail stores, warehouses and apartments leased generally to local businesses and residents. The underwriting of these loans takes into consideration the occupancy, rental rates, and local market demand as well as the financial health of the borrower. The primary risk associated with loans secured with income producing property is the inability of that property to produce adequate cash flow to service the debt. High unemployment, significant increases to interest rates, generally weak economic conditions and/or an oversupply in the market may result in our customers having difficulty achieving adequate occupancy and/or rental rates. Payments on such loans are often dependent on successful operation or management of the properties.

Owner-Occupied CRE – Owner-occupied CRE loans include loans secured by business facilities to finance business operations, equipment and owner-occupied facilities primarily for small and medium-sized enterprises. These include both lines of credit and term loans which are amortized over the useful life of the assets financed. Personal guarantees, if applicable, are generally required for these loans. The Company recognizes that risk from economic cycles, pandemics, government regulation, supply-chain disruptions, product innovations or obsolescence, operational errors, lawsuits, natural disasters, losses due to theft or embezzlement, health or loss of key personnel, or competitive situations may adversely affect the scheduled repayment of business loans. There were nil and $99 thousand of owner-occupied CRE other real estate owned write-downs during the nine months ended September 30, 2026 and 2025, respectively.

Senior Housing – Senior housing loans support senior adult facilities including independent living communities, assisted living and memory care communities, nursing homes or skilled nursing facilities, and continuing care retirement communities. The Company recognizes that risk from high resident turnover, pandemics, government regulation, operator risk, increases in acuity, availability and cost of qualified staffing resources, technology risk, and other risks such as liability, insurance, reimbursement and regulatory changes may impact repayment of these loans. Underwriting focuses primarily on operator quality and business operations.

Commercial and Industrial – C&I loans are loans and lines of credit to finance business operations, equipment and other non-real estate collateral primarily for small and medium-sized enterprises. These include both lines of credit and term loans which are amortized over the useful life of the assets financed. Personal and/or corporate guarantees are generally obtained where available and prudent. The Company recognizes that risk from economic cycles, commodity prices, pandemics, government regulation, supply-chain disruptions, product innovations or obsolescence, operational errors, lawsuits, natural disasters, losses due to theft or embezzlement, health or loss of key personnel or competitive situations may adversely affect the scheduled repayment of business loans.

Retail loans

Marine Vessels – Marine vessel loans are a type of consumer loan used to finance the purchase of a boat or other marine craft. Functioning similarly to auto loans and personal loans, these installment loans come with a repayment term, fixed monthly payments and variable-or-fixed interest rates. These loans are underwritten in accordance with the Company’s general loan policies and procedures and are generally secured with title or preferred ships' mortgage on the marine vessel. The Company recognizes that risk from economic cycles, pandemics, government regulation, natural disasters, losses due to theft, or changes to customer's ability to meet the scheduled repayment of marine vessel loan. At September 30, 2026 and December 31, 2025, there were $597 thousand and nil of repossessed marine assets, respectively. During the nine months ended September 30, 2026 and 2025, there were $22 thousand and $119 thousand of repossessed assets write-downs, respectively.

Residential Mortgages – Residential mortgages are first or second-lien loans secured by a primary residence or second home. This category includes permanent mortgage financing, construction loans to individual consumers, and home equity lines of credit. The loans are generally secured by properties located within the local market area of the Bank's retail footprint which originates and services the loan. These loans are underwritten in accordance with the Company’s general loan policies and procedures which require, among other things, proper documentation of each borrower’s financial condition, satisfactory credit history, and property value. In addition to loans originated through the Company’s branches, the Company originates and services residential mortgages sold in the secondary market which are underwritten and closed pursuant to investor and agency guidelines. At September 30, 2026 and December 31, 2025, there were $388 thousand and nil of residential mortgage loans in process of foreclosure, respectively. Additionally, the Company held no

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CoastalSouth Bancshares, Inc. and Subsidiary
Notes to Consolidated Financial Statements (unaudited) - Continued

foreclosed residential properties at September 30, 2026 or at December 31, 2025.

Cash Value Life Insurance Line of Credit ("CVLI") – Cash value life insurance encompasses multiple types of life insurance that contain a cash value account. This cash value component typically earns interest or other investment gains and grows tax-deferred. CVLI loans are generally lines of credit ("LOC") secured by cash value life insurance of the debtor and can be originated for personal or business purposes. Upon the delinquency of the loan or lapse of an insurance policy premium payment, the Company pursues liquidation of the policy cash value in order to satisfy the loan.

Other Consumer – Other consumer loans primarily include unsecured student loans and other secured and unsecured consumer purpose loans. Certain loans are secured by recreational vehicles and other such tangible property. These types of loans may be impacted by negative macroeconomic conditions impacting individual consumers, such as increased unemployment, which can reduce a borrower’s ability to repay the loan.

Loans held for sale ("LHFS") are comprised of loans acquired through mortgage warehouse lending activities in our Mortgage Banker Finance ("MBF") division and origination of mortgage loans. The Company serves as a warehouse lender by purchasing loans originated by third-party mortgage originators and selling these loans to other third-party investors. The Company also originates mortgage loans with customers through Coastal States Mortgage, Inc. ("CSM") and sells the majority of these loans to third-party investors. Additionally, we sell other types of loans, such as government guaranteed loans ("GGL") or marine loans, through the normal course of business; when the Company has the intent to sell these loans, they are transferred from LHFI to LHFS.

Following is a summary of the composition of the loan portfolio at September 30, 2026 and December 31, 2025:

		September 30, 2026								December 31, 2025
(Dollars in thousands)		Amount				%				Amount				%
Commercial loans
Acquisition, development and construction		$	134,395				7.5	%		$	119,352				7.4	%
Income producing CRE			449,103				25.1				378,179				23.4
Owner-occupied CRE			140,420				7.9				92,787				5.7
Senior housing			308,295				17.3				259,529				16.0
Commercial and industrial			113,656				6.4				145,380				9.0
Total commercial loans			1,145,869				64.2				995,227				61.5
Retail loans
Marine vessels			320,682				17.9				312,096				19.3
Residential mortgages			203,476				11.4				199,991				12.4
Cash value life insurance LOC			93,210				5.2				87,172				5.4
Other consumer			23,686				1.3				22,829				1.4
Total retail loans			641,054				35.8				622,088				38.5
Total gross loans held for investment ("LHFI"), net of unearned income			1,786,923				100.0	%			1,617,315				100.0	%
Less allowance for credit losses			(19,623	)							(18,743	)
LHFI, net		$	1,767,300							$	1,598,572
LHFS		$	142,399							$	170,933

Credit Quality Indicators

The Company monitors the credit quality of its commercial loan portfolio using internal credit risk ratings. These credit risk ratings are based upon established regulatory guidance and are assigned upon initial approval of credit to borrowers. Credit risk ratings are updated periodically after the initial assignment or whenever management becomes aware of information affecting the borrowers’ ability to fulfill their obligations. The Company utilizes the following categories of credit grades to evaluate its commercial loan portfolio:

Pass — Loans classified as pass are higher quality loans that do not fit any of the other categories below.

Special Mention — Loans classified as special mention have a potential weakness 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 Company's credit position at some future date.

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 Company will sustain some loss if the deficiencies are not corrected.

Doubtful — Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. The possibility of loss is high, but because of certain important and reasonably specific pending factors that may work to the advantage and strengthening of the credit quality of the loan, its classification as an estimated loss is deferred until its more exact status may be determined. Pending factors include proposed merger, acquisition, or liquidation

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CoastalSouth Bancshares, Inc. and Subsidiary
Notes to Consolidated Financial Statements (unaudited) - Continued

procedures, capital injection, perfecting liens on additional collateral and refinancing plans. The Company had no loans rated Doubtful at September 30, 2026 or December 31, 2025.

The Company monitors the credit quality of its retail portfolio based primarily on payment activity and credit scores. Payment activity is the primary factor considered in determining whether a retail loan should be classified as nonperforming. Retail loans are considered to be nonperforming if they are on nonaccrual status or if they are 90 days past due or greater.

The following tables present the risk category of commercial loans on amortized cost basis and, for 2026, gross charge-offs by vintage year as of September 30, 2026:

		Amortized Cost Basis by Origination Year
(In thousands of dollars)		2026				2025				2024				2023				2022				Prior				Revolvers				Revolvers Converted to Term				Total
Commercial loans
Acquisition, development and construction
Pass		$	58,536			$	64,878			$	7,388			$	3,005			$	249			$	216			$	123			$	-			$	134,395
Special mention			-				-				-				-				-				-				-				-				-
Substandard			-				-				-				-				-				-				-				-				-
Total acquisition, development    and construction		$	58,536			$	64,878			$	7,388			$	3,005			$	249			$	216			$	123			$	-			$	134,395
Current period gross charge-offs		$	-			$	-			$	-			$	-			$	-			$	-			$	-			$	-			$	-
Income producing CRE
Pass		$	74,737			$	83,765			$	80,652			$	36,611			$	110,249			$	61,364			$	650			$	-			$	448,028
Special mention			-				-				-				-				-				-				-				-				-
Substandard			-				-				-				-				-				1,075				-				-				1,075
Total income producing		$	74,737			$	83,765			$	80,652			$	36,611			$	110,249			$	62,439			$	650			$	-			$	449,103
Current period gross charge-offs		$	-			$	-			$	-			$	-			$	-			$	-			$	-			$	-			$	-
Owner-occupied CRE
Pass		$	54,648			$	14,945			$	5,450			$	8,871			$	13,938			$	30,692			$	501			$	200			$	129,245
Special mention			-				-				-				-				-				2,461				-				-				2,461
Substandard			-				670				87				198				3,364				4,395				-				-				8,714
Total owner occupied		$	54,648			$	15,615			$	5,537			$	9,069			$	17,302			$	37,548			$	501			$	200			$	140,420
Current period gross charge-offs		$	-			$	-			$	-			$	-			$	-			$	-			$	-			$	-			$	-
Senior housing
Pass		$	146,754			$	96,754			$	19,697			$	18,263			$	-			$	15,966			$	-			$	-			$	297,434
Special mention			-				-				-				-				-				-				-				-				-
Substandard			1,980				-				-				-				5,018				3,863				-				-				10,861
Total senior housing		$	148,734			$	96,754			$	19,697			$	18,263			$	5,018			$	19,829			$	-			$	-			$	308,295
Current period gross charge-offs		$	-			$	-			$	-			$	-			$	-			$	-			$	-			$	-			$	-
Commercial and industrial
Pass		$	20,175			$	29,101			$	16,812			$	9,761			$	7,698			$	11,009			$	12,517			$	2,882			$	109,955
Special mention			-				-				-				-				-				-				-				-				-
Substandard			-				-				-				-				519				1,789				-				1,393				3,701
Total non-real estate		$	20,175			$	29,101			$	16,812			$	9,761			$	8,217			$	12,798			$	12,517			$	4,275			$	113,656
Current period gross charge-offs		$	-			$	-			$	-			$	12			$	-			$	5			$	-			$	-			$	17

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CoastalSouth Bancshares, Inc. and Subsidiary
Notes to Consolidated Financial Statements (unaudited) - Continued

The following tables present the risk category of retail loans on amortized cost basis and, for 2026, gross charge-offs by vintage year as of September 30, 2026:

		Amortized Cost Basis by Origination Year
(In thousands of dollars)		2026				2025				2024				2023				2022				Prior				Revolvers				Revolvers Converted to Term				Total
Retail loans
Marine vessels
Performing		$	81,383			$	72,714			$	31,673			$	42,593			$	64,747			$	27,572			$	-			$	-			$	320,682
Nonperforming			-				-				-				-				-				-				-				-				-
Total marine vessels		$	81,383			$	72,714			$	31,673			$	42,593			$	64,747			$	27,572			$	-			$	-			$	320,682
Current period gross charge-offs		$	-			$	-			$	-			$	-			$	27			$	-			$	-			$	-			$	27
Residential mortgages
Performing		$	23,614			$	41,296			$	13,331			$	19,836			$	32,410			$	41,067			$	31,133			$	401			$	203,088
Nonperforming			-				-				-				388				-				-				-				-				388
Total residential mortgages		$	23,614			$	41,296			$	13,331			$	20,224			$	32,410			$	41,067			$	31,133			$	401			$	203,476
Current period gross charge-offs		$	-			$	-			$	-			$	-			$	-			$	-			$	-			$	-			$	-
Cash value life insurance LOC
Performing		$	-			$	-			$	-			$	-			$	-			$	-			$	86,348			$	6,862			$	93,210
Nonperforming			-				-				-				-				-				-				-				-				-
Total cash value life insurance      LOC		$	-			$	-			$	-			$	-			$	-			$	-			$	86,348			$	6,862			$	93,210
Current period gross charge-offs		$	-			$	-			$	-			$	-			$	-			$	-			$	-			$	-			$	-
Other consumer
Performing		$	6,785			$	4,573			$	1,078			$	896			$	42			$	10,147			$	140			$	-			$	23,661
Nonperforming			-				-				-				-				-				25				-				-				25
Total other consumer		$	6,785			$	4,573			$	1,078			$	896			$	42			$	10,172			$	140			$	-			$	23,686
Current period gross charge-offs		$	-			$	-			$	-			$	-			$	-			$	91			$	-			$	-			$	91

The following tables present the risk category of commercial loans on amortized cost basis and, for 2025, gross charge-offs by vintage year as of December 31, 2025:

		Amortized Cost Basis by Origination Year
(In thousands of dollars)		2025				2024				2023				2022				2021				Prior				Revolvers				Revolvers Converted to Term				Total
Commercial loans
Acquisition, development and construction
Pass		$	82,551			$	29,709			$	6,321			$	505			$	-			$	266			$	-			$	-			$	119,352
Special mention			-				-				-				-				-				-				-				-				-
Substandard			-				-				-				-				-				-				-				-				-
Total acquisition, development    and construction		$	82,551			$	29,709			$	6,321			$	505			$	-			$	266			$	-			$	-			$	119,352
Current period gross charge-offs		$	-			$	-			$	-			$	-			$	-			$	-			$	-			$	-			$	-
Income producing CRE
Pass		$	82,530			$	45,915			$	37,372			$	130,670			$	52,803			$	26,620			$	1,801			$	-			$	377,711
Special mention			-				-				-				-				-				-				-				-				-
Substandard			-				-				-				-				-				468				-				-				468
Total income producing		$	82,530			$	45,915			$	37,372			$	130,670			$	52,803			$	27,088			$	1,801			$	-			$	378,179
Current period gross charge-offs		$	-			$	-			$	-			$	-			$	-			$	-			$	-			$	-			$	-
Owner-occupied CRE
Pass		$	12,614			$	3,727			$	8,453			$	15,900			$	22,865			$	19,200			$	200			$	-			$	82,959
Special mention			-				-				205				-				-				2,534				-				-				2,739
Substandard			-				1,773				-				3,712				-				1,604				-				-				7,089
Total owner occupied		$	12,614			$	5,500			$	8,658			$	19,612			$	22,865			$	23,338			$	200			$	-			$	92,787
Current period gross charge-offs		$	-			$	-			$	-			$	-			$	-			$	-			$	-			$	-			$	-
Senior housing
Pass		$	100,332			$	53,744			$	23,930			$	32,683			$	12,084			$	14,043			$	-			$	-			$	236,816
Special mention			-				-				-				-				7,994				3,940				-				-				11,934
Substandard			-				-				-				4,458				6,321				-				-				-				10,779
Total senior housing		$	100,332			$	53,744			$	23,930			$	37,141			$	26,399			$	17,983			$	-			$	-			$	259,529
Current period gross charge-offs		$	-			$	-			$	-			$	-			$	-			$	-			$	-			$	-			$	-
Commercial and industrial
Pass		$	38,753			$	19,939			$	14,283			$	9,532			$	12,678			$	11,738			$	31,332			$	2,765			$	141,020
Special mention			-				-				-				-				-				-				212				-				212
Substandard			46				-				-				-				-				2,358				59				1,685				4,148
Total non-real estate		$	38,799			$	19,939			$	14,283			$	9,532			$	12,678			$	14,096			$	31,603			$	4,450			$	145,380
Current period gross charge-offs		$	-			$	-			$	33			$	-			$	-			$	-			$	-			$	-			$	33

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CoastalSouth Bancshares, Inc. and Subsidiary
Notes to Consolidated Financial Statements (unaudited) - Continued

The following tables present the risk category of retail loans on amortized cost basis and, for 2025, gross charge-offs by vintage year as of December 31, 2025:

		Amortized Cost Basis by Origination Year
(In thousands of dollars)		2025				2024				2023				2022				2021				Prior				Revolvers				Revolvers Converted to Term				Total
Retail loans
Marine vessels
Performing		$	88,651			$	43,226			$	60,924			$	80,217			$	19,359			$	19,719			$	-			$	-			$	312,096
Nonperforming			-				-				-				-				-				-				-				-				-
Total marine vessels		$	88,651			$	43,226			$	60,924			$	80,217			$	19,359			$	19,719			$	-			$	-			$	312,096
Current period gross charge-offs		$	-			$	162			$	-			$	-			$	-			$	-			$	-			$	-			$	162
Residential mortgages
Performing		$	40,123			$	23,539			$	21,055			$	42,331			$	23,654			$	24,681			$	23,970			$	248			$	199,601
Nonperforming			-				-				390				-				-				-				-				-				390
Total residential mortgages		$	40,123			$	23,539			$	21,445			$	42,331			$	23,654			$	24,681			$	23,970			$	248			$	199,991
Current period gross charge-offs		$	-			$	-			$	-			$	-			$	-			$	-			$	-			$	-			$	-
Cash value life insurance LOC
Performing		$	-			$	-			$	-			$	-			$	-			$	-			$	87,034			$	138			$	87,172
Nonperforming			-				-				-				-				-				-				-				-				-
Total cash value life insurance      LOC		$	-			$	-			$	-			$	-			$	-			$	-			$	87,034			$	138			$	87,172
Current period gross charge-offs		$	-			$	-			$	-			$	-			$	-			$	-			$	-			$	-			$	-
Other consumer
Performing		$	6,900			$	1,307			$	1,665			$	58			$	1,586			$	11,156			$	157			$	-			$	22,829
Nonperforming			-				-				-				-				-				-				-				-				-
Total other consumer		$	6,900			$	1,307			$	1,665			$	58			$	1,586			$	11,156			$	157			$	-			$	22,829
Current period gross charge-offs		$	-			$	-			$	-			$	-			$	-			$	265			$	-			$	-			$	265

Nonaccrual and Past Due Loans

A loan is placed on nonaccrual status when, in management’s judgment, the full collection of principal and/or interest income appears doubtful. Interest receivable that has been accrued and is subsequently determined to have doubtful collectability is charged to interest income. Interest on loans that are classified as nonaccrual is typically applied to principal until the loans are returned to accrual status. The Company’s loan policy states that a nonaccrual loan may be returned to accrual status when (i) none of its principal and interest is due and unpaid, and the Company expects repayment of the remaining contractual principal and interest, or (ii) it otherwise becomes well secured and in the process of collection. Restoration to accrual status on any given loan must be supported by a well-documented credit evaluation of the borrower’s financial condition and the prospects for full repayment, approved by the Company’s Chief Credit Officer. Past due loans are loans whose principal or interest is past due 30 days or more. During the nine months ended September 30, 2026 and 2025, there was $61 thousand and $8 thousand, respectively, of interest income reversed from income related to loans that were transferred to nonaccrual status.

The following table presents a summary of past due and nonaccrual loans as of September 30, 2026:

						Loans Past Due
(In thousands of dollars)		Current				30-59 Days Past Due				60-89 Days Past Due				90 Days or More and Accruing				Nonaccrual				Total Past Due and Nonaccrual				Total Loans Receivable
Acquisition, development and   construction		$	134,395			$	-			$	-			$	-			$	-			$	-			$	134,395
Income producing CRE			448,028				621				-				-				454				1,075				449,103
Owner-occupied CRE			136,637				269				-				-				3,514				3,783				140,420
Senior housing			301,297				-				-				-				6,998				6,998				308,295
Commercial and industrial			109,940				-				15				-				3,701				3,716				113,656
Marine vessels			320,682				-				-				-				-				-				320,682
Residential mortgages			202,945				-				143				-				388				531				203,476
Cash value life insurance LOC			93,210				-				-				-				-				-				93,210
Other consumer			23,609				41				11				25				-				77				23,686
Total		$	1,770,743			$	931			$	169			$	25			$	15,055			$	16,180			$	1,786,923

16

CoastalSouth Bancshares, Inc. and Subsidiary
Notes to Consolidated Financial Statements (unaudited) - Continued

The following table presents a summary of past due and nonaccrual loans as of December 31, 2025:

						Loans Past Due
(In thousands of dollars)		Current				30-59 Days Past Due				60-89 Days Past Due				90 Days or More and Accruing				Nonaccrual				Total Past Due and Nonaccrual				Total Loans Receivable
Acquisition, development and   construction		$	118,084			$	1,268			$	-			$	-			$	-			$	1,268			$	119,352
Income producing CRE			378,179				-				-				-				-				-				378,179
Owner-occupied CRE			89,713				-				-				-				3,074				3,074				92,787
Senior housing			248,750				-				-				-				10,779				10,779				259,529
Commercial and industrial			141,160				157				-				-				4,063				4,220				145,380
Marine vessels			311,483				613				-				-				-				613				312,096
Residential mortgages			199,373				228				-				-				390				618				199,991
Cash value life insurance LOC			87,172				-				-				-				-				-				87,172
Other consumer			22,778				51				-				-				-				51				22,829
Total		$	1,596,692			$	2,317			$	-			$	-			$	18,306			$	20,623			$	1,617,315

Individually Analyzed Collateral-Dependent Loans

As of September 30, 2026, there were $15.1 million of individually analyzed collateral-dependent loans which are primarily secured by real estate, equipment and receivables. All of the Company's nonaccrual loans at September 30, 2026 are collateral-dependent. The following table presents an analysis of nonaccrual loans that are also collateral-dependent financial assets and related allowance for credit losses:

(In thousands of dollars)		Nonaccrual Loans with No Allowance				Nonaccrual Loans with an Allowance				Total Nonaccrual Loans				Allowance for Credit Losses				Nonaccrual Interest Income Recognized
Income producing CRE		$	454			$	-			$	454			$	-			$	-
Owner-occupied CRE			3,316				198				3,514				37				-
Senior housing			6,998				-				6,998				-				-
Commercial and industrial			-				3,701				3,701				634				96
Residential mortgages			388				-				388				-				16
Total		$	11,156			$	3,899			$	15,055			$	671			$	112

As of December 31, 2025, there were $18.3 million of individually analyzed collateral-dependent loans which are primarily secured by real estate, equipment and receivables. All of the Company's nonaccrual loans at December 31, 2025, are collateral-dependent. The following table presents an analysis of nonaccrual loans that are also collateral-dependent financial assets and related allowance for credit losses:

(In thousands of dollars)		Nonaccrual Loans with No Allowance				Nonaccrual Loans with an Allowance				Total Nonaccrual Loans				Allowance for Credit Losses				Nonaccrual Interest Income Recognized
Income producing CRE		$	-			$	-			$	-			$	-			$	121
Owner-occupied CRE			3,074				-				3,074				-				9
Senior housing			4,458				6,321				10,779				298				-
Commercial and industrial			4,017				46				4,063				11				45
Residential mortgages			390				-				390				-				23
Cash value life insurance LOC			-				-				-				-				-
Total		$	11,939			$	6,367			$	18,306			$	309			$	198

Modifications to Borrowers Experiencing Financial Difficulty

The Company periodically provides modifications to borrowers experiencing financial difficulty. These modifications include either payment deferrals, term extensions, interest rate reductions, principal forgiveness or combinations of modification types. The determination of whether the borrower is experiencing financial difficulty is made on the date of the modification. When principal forgiveness is provided, the amount of principal forgiveness is charged off against the allowance for credit losses with a corresponding reduction in the amortized cost basis of the loan.

17

CoastalSouth Bancshares, Inc. and Subsidiary
Notes to Consolidated Financial Statements (unaudited) - Continued

There were no loans modified to borrowers experiencing financial difficulty during the three months ended September 30, 2026 and 2025.

The following table shows the amortized cost basis of the loans modified to borrowers experiencing financial difficulty, disaggregated by class of financing receivable and type of concession granted during the nine months ended September 30, 2026:

(Dollars in thousands)		Principal forgiveness				Payment deferral				Term extension				Interest rate reduction				Combination of term extension and payment delay				Combination of term extension and interest rate reduction				Total modified loans				Percent of total loan class
Commercial loans
Owner-occupied CRE		$	-			$	-			$	-			$	-			$	198			$	-			$	198				0.1	%
Senior housing			-				-				-				-				1,980				-				1,980				0.6	%
Total		$	-			$	-			$	-			$	-			$	2,178			$	-			$	2,178				0.1	%

The following table shows the amortized cost basis of the loans modified to borrowers experiencing financial difficulty, disaggregated by class of financing receivable and type of concession granted during the nine months ended September 30, 2025:

(Dollars in thousands)		Principal forgiveness				Payment deferral				Term extension				Interest rate reduction				Combination of term extension and payment delay				Combination of term extension and interest rate reduction				Total modified loans				Percent of total loan class
Commercial loans
Senior housing		$	-			$	-			$	-			$	-			$	6,383			$	-			$	6,383				2.9	%
Total		$	-			$	-			$	-			$	-			$	6,383			$	-			$	6,383				0.4	%

The Company had no unfunded commitments to borrowers experiencing financial difficulty for which the Company has modified their loans as of September 30, 2026 or September 30, 2025.

The following table describes the financial effect of the modifications made to borrowers experiencing financial difficulty during the nine months ended September 30, 2026:

Loan type		Financial effect
Combination of term extension and payment delay
Owner-occupied CRE		Extended maturity date 6 years and provided 8 months of partial payments.
Senior housing		Extended maturity for 9 months with provisional extension for 6 additional months upon meeting certain conditions.

The following table describes the financial effect of the modifications made to borrowers experiencing financial difficulty during the nine months ended September 30, 2025:

Loan type		Financial effect
Combination of term extension and payment delay
Senior housing		Provided term extension of 14 months and deferral of full principal and interest payments.

The Company monitors the performance of the loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table depicts the performance of loans that have been modified in the last 12 months as of September 30, 2026:

						Loans Past Due
(In thousands of dollars)		Current				30-59 Days Past Due				60-89 Days Past Due				90 Days or More Past Due				Total
Commercial real estate
Owner-occupied CRE		$	-			$	-			$	-			$	198			$	198
Senior housing			-				1,980				-				-				1,980
Total		$	-			$	1,980			$	-			$	198			$	2,178
Total nonaccrual loans included above		$	-			$	1,980			$	-			$	198			$	2,178

18

CoastalSouth Bancshares, Inc. and Subsidiary
Notes to Consolidated Financial Statements (unaudited) - Continued

The following table depicts the performance of loans that have been modified in the last 12 months as of September 30, 2025:

						Loans Past Due
(In thousands of dollars)		Current				30-59 Days Past Due				60-89 Days Past Due				90 Days or More Past Due				Total
Commercial real estate
Senior housing		$	-			$	6,383			$	-			$	-			$	6,383
Total		$	-			$	6,383			$	-			$	-			$	6,383
Total nonaccrual loans included above		$	-			$	6,383			$	-			$	-			$	6,383

The following table provides the amortized cost basis of financing receivables during the three months ended September 30, 2026 that had a payment default and were modified in the 12 months before default to borrowers experiencing financial difficulty:

(In thousands of dollars)		Principal Forgiveness				Payment Deferral				Term Extension				Interest Rate Reduction				Combination Term Extension and Payment Delay				Combination Term Extension and Principal Forgiveness				Combination Term Extension and Interest Rate Reduction
Commercial loans
Owner-occupied CRE		$	-			$	-			$	-			$	-			$	198			$	-			$	-
Senior housing			-				-				-				-				1,980				-				-
Total		$	-			$	-			$	-			$	-			$	2,178			$	-			$	-

The following table provides the amortized cost basis of financing receivables during the nine months ended September 30, 2026 that had a payment default and were modified in the 12 months before default to borrowers experiencing financial difficulty:

(In thousands of dollars)		Principal Forgiveness				Payment Deferral				Term Extension				Interest Rate Reduction				Combination Term Extension and Payment Delay				Combination Term Extension and Principal Forgiveness				Combination Term Extension and Interest Rate Reduction
Commercial loans
Owner-occupied CRE		$	-			$	-			$	-			$	-			$	198			$	-			$	-
Senior housing			-				-				-				-				1,980				-				-
Total		$	-			$	-			$	-			$	-			$	2,178			$	-			$	-

During the three months ended September 30, 2025, there were no financing receivables that had a payment default and were modified in the 12 months before default to borrowers experiencing financial difficulty.

The following table provides the amortized cost basis of financing receivables during the nine months ended September 30, 2025 that had a payment default and were modified in the 12 months before default to borrowers experiencing financial difficulty:

(In thousands of dollars)		Principal Forgiveness				Payment Deferral				Term Extension				Interest Rate Reduction				Combination Term Extension and Payment Delay				Combination Term Extension and Principal Forgiveness				Combination Term Extension and Interest Rate Reduction
Commercial loans
Senior housing		$	-			$	-			$	-			$	-			$	6,383			$	-			$	-
Total		$	-			$	-			$	-			$	-			$	6,383			$	-			$	-

Allowance for Credit Losses - Loans

The allowance for credit losses represents an allowance for expected losses over the remaining contractual life of the assets adjusted for prepayments. The contractual term does not consider extensions, renewals or modifications. The Company segregates the loan portfolio by type of loan and utilizes this segregation in evaluating exposure to risks within the portfolio.

19

CoastalSouth Bancshares, Inc. and Subsidiary
Notes to Consolidated Financial Statements (unaudited) - Continued

The following table presents a summary of the Company's allowance, by loan category for credit losses for the three months ended September 30, 2026:

		Beginning												Provision				Ending
(In thousands of dollars)		Balance				Charge-offs				Recoveries				(Release)				Balance
Three Months Ended September 30, 2026
Commercial loans
Acquisition, development, and construction		$	2,170			$	-			$	-			$	(401	)		$	1,769
Income producing CRE			7,216				-				-				(315	)			6,901
Owner-occupied CRE			1,066				-				-				29				1,095
Senior housing			3,637				-				-				474				4,111
Commercial and industrial			1,591				(5	)			10				(195	)			1,401
Total commercial loans			15,680				(5	)			10				(408	)			15,277
Retail loans
Marine vessels			1,425				-				-				135				1,560
Residential mortgages			2,295				-				1				40				2,336
Cash value life insurance LOC			88				-				-				9				97
Other consumer			329				(39	)			4				59				353
Total retail loans			4,137				(39	)			5				243				4,346
Total allowance for funded loans			19,817				(44	)			15				(165	)			19,623
Reserve for losses on   unfunded loan commitments			3,856				-				-				(264	)			3,592
Total ACL		$	23,673			$	(44	)		$	15			$	(429	)		$	23,215

The following table presents a summary of the Company's allowance, by loan category for credit losses for the nine months ended September 30, 2026:

		Beginning												Provision				Ending
(In thousands of dollars)		Balance				Charge-offs				Recoveries				(Release)				Balance
Nine Months Ended September 30, 2026
Commercial loans
Acquisition, development, and construction		$	1,623			$	-			$	-			$	146			$	1,769
Income producing CRE			7,027				-				-				(126	)			6,901
Owner-occupied CRE			870				-				-				225				1,095
Senior housing			4,051				-				-				60				4,111
Commercial and industrial			902				(17	)			24				492				1,401
Total commercial loans			14,473				(17	)			24				797				15,277
Retail loans
Marine vessels			1,412				(27	)			-				175				1,560
Residential mortgages			2,412				-				3				(79	)			2,336
Cash value life insurance LOC			82				-				-				15				97
Other consumer			364				(91	)			13				67				353
Total retail loans			4,270				(118	)			16				178				4,346
Total allowance for funded loans			18,743				(135	)			40				975				19,623
Reserve for losses on   unfunded loan commitments			3,956				-				-				(364	)			3,592
Total ACL		$	22,699			$	(135	)		$	40			$	611			$	23,215

20

CoastalSouth Bancshares, Inc. and Subsidiary
Notes to Consolidated Financial Statements (unaudited) - Continued

The following table presents a summary of the Company's allowance, by loan category for credit losses for the three months ended September 30, 2025:

		Beginning												Provision				Ending
(In thousands of dollars)		Balance				Charge-offs				Recoveries				(Release)				Balance
Three Months Ended September 30, 2025
Commercial loans
Acquisition, development, and construction		$	1,243			$	-			$	-			$	52			$	1,295
Income producing CRE			7,082				-				-				175				7,257
Owner-occupied CRE			762				-				-				(16	)			746
Senior housing			3,625				-				-				186				3,811
Commercial and industrial			831				(1	)			30				(75	)			785
Total commercial loans			13,543				(1	)			30				322				13,894
Retail loans
Marine vessels			1,376				(162	)			-				318				1,532
Residential mortgages			2,141				-				2				13				2,156
Cash value life insurance LOC			82				-				-				(1	)			81
Other consumer			355				-				6				4				365
Total retail loans			3,954				(162	)			8				334				4,134
Total allowance for funded loans			17,497				(163	)			38				656				18,028
Reserve for losses on   unfunded loan commitments			3,499				-				-				(3	)			3,496
Total ACL		$	20,996			$	(163	)		$	38			$	653			$	21,524

The following table presents a summary of the Company's allowance, by loan category for credit losses for the nine months ended September 30, 2025:

		Beginning												Provision				Ending
(In thousands of dollars)		Balance				Charge-offs				Recoveries				(Release)				Balance
Nine Months Ended September 30, 2025
Commercial loans
Acquisition, development, and construction		$	1,188			$	-			$	-			$	107			$	1,295
Income producing CRE			5,867				-				-				1,390				7,257
Owner-occupied CRE			543				-				-				203				746
Senior housing			4,576				-				-				(765	)			3,811
Commercial and industrial			751				(33	)			42				25				785
Total commercial loans			12,925				(33	)			42				960				13,894
Retail loans
Marine vessels			1,688				(162	)			-				6				1,532
Residential mortgages			2,015				-				7				134				2,156
Cash value life insurance LOC			88				-				-				(7	)			81
Other consumer			402				(239	)			37				165				365
Total retail loans			4,193				(401	)			44				298				4,134
Total allowance for funded loans			17,118				(434	)			86				1,258				18,028
Reserve for losses on   unfunded loan commitments			2,720				-				-				776				3,496
Total ACL		$	19,838			$	(434	)		$	86			$	2,034			$	21,524

NOTE 4 — COMMITMENTS AND CONTINGENCIES

In the normal course of business, the Company makes various commitments and incurs certain contingent liabilities that are not reflected in the Company’s financial statements. These commitments and contingent liabilities include various guarantees, commitments to extend credit and standby letters of credit. The Company does not anticipate any material losses as a result of these commitments and contingent liabilities.

Credit-Related Commitments

The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments consist of commitments to extend credit and standby letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheets. The contract amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments.

21

CoastalSouth Bancshares, Inc. and Subsidiary
Notes to Consolidated Financial Statements (unaudited) - Continued

The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit written are represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments. Financial instruments where contract amounts represent credit risk as of September 30, 2026 and December 31, 2025 include:

(In thousands of dollars)		September 30, 2026				December 31, 2025
Commitments to extend credit		$	548,163			$	510,977
Letters of credit			131				181
Total		$	548,294			$	511,158

Commitments to extend credit, including unused lines of credit, are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. A commitment involves, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheet. The Company’s exposure to credit loss in the event of nonperformance by the other party to the instrument is represented by the contractual notional amount of the instrument. Since certain commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.

Standby letters of credit are conditional commitments issued to guarantee a customer’s performance to a third party and have essentially the same credit risk as other lending facilities. Collateral held for commitments to extend credit and letters of credit varies but may include accounts receivable, inventory, property, plant, equipment and income-producing commercial properties. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan commitments to customers.

The Company maintains cash deposits with a financial institution that during the year are in excess of the insured limitation of the Federal Deposit Insurance Corporation. If the financial institution were not to honor its contractual liability, the Company could incur losses. Management is of the opinion that there is no material risk because of the financial strength of the institution.

Investments in Tax Credits and SBICs

The Company has invested capital in certain tax credit investments, including a limited partnership to obtain renewable energy tax credits generated by solar power projects, Small Business Investment Companies ("SBICs") that provide funds to qualifying small businesses, and other partnership investments. The following table summarizes the solar tax credit investment, SBICs and other partnership investments as of September 30, 2026 and December 31, 2025:

(In thousands of dollars)		Balance Sheet Location		September 30, 2026				December 31, 2025
Carrying amount
Solar tax credit		Other assets		$	1,404			$	1,701
SBICs		Other assets			1,181				765
Other		Other assets			1,824				1,844
Off-Balance-Sheet future funding commitments
Solar tax credit		N/A		$	4,905			$	1,193
SBICs		N/A			4,844				270
Other		N/A			363				138

The following table presents a summary of net provision (benefit) to income tax expense from tax credit investments recognized in the provision for income taxes related to the recognition of tax credits, amortization, adjustments to taxes payable from flow-through losses, and changes in deferred tax items, and the effect of SBICs and other investments for the three and nine months ended September 30, 2026 and 2025:

				Three Months Ended								Nine Months Ended
		Income Statement		September 30,								September 30,
(In thousands of dollars)		Location		2026				2025				2026				2025
Investments category
Investment in solar tax credits		Income tax (benefit) expense		$	(502	)		$	6			$	(567	)		$	(430	)
Investment in SBICs		Other noninterest income			22				-				32				453
Investment in other		Other noninterest income			7				30				15				70

22

CoastalSouth Bancshares, Inc. and Subsidiary
Notes to Consolidated Financial Statements (unaudited) - Continued

Contingencies

The Company is subject to claims and lawsuits which arise primarily in the ordinary course of business. Management is not aware of any legal proceedings which could have a material adverse effect on the financial position or operating results of the Company.

NOTE 5 — NET INCOME PER COMMON SHARE

Basic net income per common share is computed by dividing net income by the weighted-average number of common shares outstanding. Diluted income per share is computed by dividing net income by the weighted-average number of common shares outstanding and dilutive common share equivalents using the treasury stock method. Dilutive common share equivalents include common shares issuable upon exercise of outstanding in-the-money stock options, as well as restricted stock units. Potential common shares are not included in the denominator of the diluted per share computation when inclusion would be anti-dilutive. For the three and nine months ended September 30, 2026, there were nil and 500 common shares, respectively, that were not included in the potentially dilutive common shares. For the three and nine months ended September 30, 2025, there were no common shares that were not included in the potentially dilutive common shares.

Net income per common share was calculated as follows for the three and nine months ended September 30, 2026 and 2025:

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
(In thousands of dollars except share and per share amounts)		2026				2025				2026				2025
Net income per share - basic computation:
Net income available to common shareholders		$	8,772			$	6,741			$	22,434			$	17,756
Average common shares outstanding - basic			11,929,204				11,941,965				11,970,809				10,837,050
Basic net income per share		$	0.73			$	0.57			$	1.87			$	1.64
Diluted net income per share computation:
Net income available to common shareholders		$	8,772			$	6,741			$	22,434			$	17,756
Average common shares outstanding - basic			11,929,204				11,941,965				11,970,809				10,837,050
Incremental shares from assumed conversions
Stock options			345,476				279,682				339,708				269,626
Restricted stock units			96,842				103,815				110,904				111,296
Average common shares outstanding - diluted			12,371,522				12,325,462				12,421,421				11,217,972
Diluted net income per share		$	0.71			$	0.54			$	1.81			$	1.58

NOTE 6 — FAIR VALUE OF FINANCIAL INSTRUMENTS

US GAAP provides a framework for measuring and disclosing fair value which requires disclosures about the fair value of assets and liabilities recognized in the balance sheet, whether the measurements are made on a recurring basis (for example, available-for-sale investment securities) or on a nonrecurring basis (for example, collateral-dependent loans).

Fair value is defined as the exchange in price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. US GAAP also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The Company utilizes fair value measurements to record fair value adjustments to certain assets and to determine fair value disclosures. Securities available-for-sale are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record at fair value other assets on a nonrecurring basis, such as loans held for sale, loans held for investment and certain other assets. These nonrecurring fair value adjustments typically involve application of lower of cost or market accounting or write-downs of individual assets.

23

CoastalSouth Bancshares, Inc. and Subsidiary
Notes to Consolidated Financial Statements (unaudited) - Continued

Fair Value Hierarchy

The Company groups assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine the fair value. These levels are:

Level 1 Valuation is based upon quoted prices for identical instruments traded in active markets.

Level 2 Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

Level 3 Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include the use of option pricing models, discounted cash flow models and similar techniques.

Following is a description of valuation methodologies used for assets and liabilities recorded at fair value.

Securities AFS — Securities AFS are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security's credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level 1 securities include those traded on an active exchange such as the New York Stock Exchange that are traded by dealers or brokers in active over-the-counter markets and money market funds. Level 2 securities include mortgage-backed securities issued by government sponsored entities, municipal bonds and corporate debt securities. Securities classified as Level 3 include corporate debt securities in less liquid markets.

Equity Securities — Equity securities are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices. There were no equity securities held at September 30, 2026 and December 31, 2025.

Loans Held for Sale — Loans held for sale are comprised of loans originated for sale in the ordinary course of business and purchased with intent to sell through MBF. The fair value of loans originated for sale in the secondary market is based on purchase commitments or quoted prices for the same or similar loans and are classified as recurring Level 2. There were no loans held for sale requiring fair value adjustments at September 30, 2026 and December 31, 2025.

Collateral-Dependent Loans — The Company does not record loans at fair value on a recurring basis, however, from time to time, a loan is considered collateral-dependent and evaluated individually for impairment; an allowance for credit loss may be established for such loans. Collateral-dependent loans are loans where repayment is expected to be provided solely by the sale of the underlying collateral and there are no other available and reliable sources of repayment. If a loan is determined to be collateral-dependent, or if foreclosure is probable, the Company measures the net realizable value of the collateral (fair value less costs to sell) to determine the level of impairment for the loan. The valuation of collateral is supported by an appraisal, brokers price opinion, or other comparable market data. Otherwise, the Company performs a discounted cash flow analysis on the loan to determine the level of ACL needed. At September 30, 2026 and December 31, 2025, substantially all of the individually evaluated collateral-dependent loans were evaluated based upon the fair value of the collateral. Collateral-dependent loans where an allowance is established based on the fair value of collateral require classification in the fair value hierarchy. When the fair value of the collateral is based on an observable market price or a current appraised value, the Company records the loan as nonrecurring Level 2. When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Company records the loan as nonrecurring Level 3.

Other Real Estate Owned ("OREO") — Foreclosed assets are adjusted to fair value upon transfer of the loans to OREO. Real estate acquired in settlement of loans is recorded initially at estimated fair value of the property less estimated selling costs at the date of foreclosure. The initial recorded value may be subsequently reduced by additional allowances, which are charges to earnings if the estimated fair value of the property less estimated selling costs declines below the initial recorded value. OREO presented as measured on a non-recurring basis includes only those properties that had changes in valuation. Fair value is based upon independent market prices, appraised values of the collateral or management's estimation of the value of the collateral.

Repossessed Assets — Repossessed assets are adjusted to fair value upon transfer of the loans to other assets. Repossessed assets may include personal property, such as marine vessels, automobiles, or other non-real estate assets. These assets obtained in settlement of loans are recorded initially at estimated fair value less estimated selling costs at the date of repossession. The initial recorded value may be subsequently reduced by additional allowances, which are charges to earnings if the estimated fair value of the assets less estimated selling costs declines below the initial recorded value. Repossessed assets are presented as measured on a non-recurring basis includes only those assets that had changes in valuation. Fair value is based upon independent market prices, appraised values of the collateral or management's estimation of the value of the collateral.

24

CoastalSouth Bancshares, Inc. and Subsidiary
Notes to Consolidated Financial Statements (unaudited) - Continued

Derivative Financial Instruments — The Company’s derivative financial instruments, which are interest rate contracts, are valued using a discounted cash flow method that incorporates current market interest rates.

The table below presents the balances of assets and liabilities measured at fair value on a recurring basis by level within the hierarchy at September 30, 2026 and December 31, 2025:

		September 30, 2026
(In thousands of dollars)		Total				Level 1				Level 2				Level 3
Assets:
Available-for-sale securities
U.S. Treasuries		$	946			$	-			$	946			$	-
Municipal obligations			53,011				-				53,011				-
Mortgage-backed securities			203,623				-				203,623				-
Asset-backed securities			22,405				-				22,405				-
Corporate debt securities			52,679				-				52,679				-
Total		$	332,664			$	-			$	332,664			$	-
Other
Derivative assets		$	6,277			$	-			$	6,277			$	-
Liabilities:
Derivative liabilities		$	(1,103	)		$	-			$	(1,103	)		$	-

		December 31, 2025
(In thousands of dollars)		Total				Level 1				Level 2				Level 3
Assets:
Available-for-sale securities
U.S. Treasuries		$	5,850			$	-			$	5,850			$	-
Municipal obligations			58,642				-				58,642				-
Mortgage-backed securities			180,060				-				180,060				-
Asset-backed securities			27,000				-				27,000				-
Corporate debt securities			58,951				-				58,451				500
Total		$	330,503			$	-			$	330,003			$	500
Other
Derivative assets		$	6,135			$	-			$	6,135			$	-

The changes in Level 3 assets measured at fair value on a recurring basis at September 30, 2026 and December 31, 2025 are summarized as follows:

		Corporate
(In thousands of dollars)		Debt Securities
Fair value, January 1, 2026		$	500
Total net gains included in:
Net income			-
Other comprehensive income			-
Purchases, sales, issuances and settlements, net			(500	)
Transfers into/out of Level 3			-
Fair value, September 30, 2026		$	-
Fair value, January 1, 2025			500
Total net gains included in:
Net income			-
Other comprehensive income			-
Purchases, sales, issuances and settlements, net			-
Transfers into/out of Level 3			-
Fair value, December 31, 2025		$	500

There were no Level 3 liabilities measured at fair value on a recurring basis at September 30, 2026 and December 31, 2025.

Certain assets and liabilities are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). The following table presents the assets and liabilities carried on the balance sheet by caption and by level within the valuation hierarchy (as described above) for which a nonrecurring change in fair value has been recorded during the nine months ended September 30, 2026 and the year ended December 31, 2025.

25

CoastalSouth Bancshares, Inc. and Subsidiary
Notes to Consolidated Financial Statements (unaudited) - Continued

		September 30, 2026
(In thousands of dollars)		Total				Level 1				Level 2				Level 3
Repossessed assets		$	597			$	-			$	-			$	597
Collateral-dependent loans, net			14,384				-				-				14,384
Total		$	14,981			$	-			$	-			$	14,981

		December 31, 2025
(In thousands of dollars)		Total				Level 1				Level 2				Level 3
Collateral-dependent loans, net		$	17,997			$	-			$	-			$	17,997
Total		$	17,997			$	-			$	-			$	17,997

There were no liabilities measured at fair value on a nonrecurring basis at September 30, 2026 and December 31, 2025.

The following tables present quantitative information about the unobservable inputs used in Level 3 fair value measurements at September 30, 2026 and December 31, 2025:

September 30, 2026		(In thousands of dollars)
Financial Instrument		Net Carrying Value				Valuation Technique		Unobservable Input		Input
Repossessed assets		$	597			Third party appraisal or broker's price opinion		Management discount for costs to sell		10%
Collateral-dependent loans,   net			14,384			Third party appraisal or broker's price opinion		Management discount for costs to sell		10%

December 31, 2025		(In thousands of dollars)
Financial Instrument		Net Carrying Value				Valuation Technique		Unobservable Input		Input
Collateral-dependent loans,   net		$	17,997			Third party appraisal or broker's price opinion		Management discount for costs to sell		10%

Fair Value of Financial Instruments

The following tables include the estimated fair value of the Company’s financial assets and financial liabilities. The methodologies for estimating the fair value of financial assets and financial liabilities measured on a recurring and nonrecurring basis are discussed above. The methodologies for estimating the fair value for other financial assets and financial liabilities are discussed below. The estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies. However, considerable judgment is required to interpret market data in order to develop the estimates of fair value. Accordingly, the estimates presented below are not necessarily indicative of the amounts the Company could realize in a current market exchange. The use of different market assumptions and/or estimation techniques may have a material effect on the estimated fair value amounts at September 30, 2026.

		September 30, 2026
(In thousands of dollars)		Carrying Amount				Fair Value				Level 1				Level 2				Level 3
Financial Assets:
Cash and cash equivalents		$	45,218			$	45,218			$	45,218			$	-			$	-
Loans held for sale			142,399				142,399				-				142,399
Loans held for investment, net			1,767,300				1,737,012				-				-				1,737,012
Non-marketable equity securities			8,926				8,926				-				-				8,926
Financial Liabilities:
Deposits			2,100,746				1,924,105				-				1,924,105				-
Other borrowings			30,000				29,988				-				29,988				-

26

CoastalSouth Bancshares, Inc. and Subsidiary
Notes to Consolidated Financial Statements (unaudited) - Continued

		December 31, 2025
(In thousands of dollars)		Carrying Amount				Fair Value				Level 1				Level 2				Level 3
Financial Assets:
Cash and cash equivalents		$	79,767			$	79,767			$	79,767			$	-			$	-
Loans held for sale			170,933				170,933				-				170,933
Loans held for investment, net			1,598,572				1,565,718				-				-				1,565,718
Non-marketable equity securities			8,759				8,759				-				-				8,759
Financial Liabilities:
Deposits			1,987,684				1,884,592				-				1,884,592				-
Other borrowings			30,000				30,002				-				30,002				-

Cash and cash equivalents — The carrying amounts of cash and due from banks and federal funds sold approximate their fair values.

Loans held for sale — Loans held for sale are carried at the lower of cost or fair value. These loans currently consist of one-to-four family residential real estate loans originated for sale to qualified third parties. Fair value is based upon the contractual price to be received from these third parties, which may be different than cost.

Loans held for investment, net — Fair values are estimated for portfolios of loans with similar financial characteristics if collateral-dependent. Loans are segregated by type. The fair value of performing loans is calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect observable market information incorporating the credit, liquidity, yield and other risks inherent in the loan. The estimate of maturity is based upon the Company’s historical experience with repayments for each loan classification, modified, as required, by an estimate of the effect of the current economic and lending conditions. Fair value for significant non-performing loans is generally based upon recent external appraisals. If appraisals are not available, estimated cash flows are discounted using a rate commensurate with the risk associated with the estimated cash flows. Assumptions regarding credit risk, cash flows and discounted rates are judgmentally determined using available market information and specific borrower information.

Non-marketable equity securities — Non-marketable equity securities are carried at original cost basis, as cost approximates fair value and there is no ready market for such investments.

Deposits — The fair value of deposits with no stated maturity date, such as noninterest-bearing demand deposits, savings and money market and checking accounts, is based on the discounted value of estimated cash flows. The fair value of time deposits is based upon the discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered for deposits of similar remaining maturities.

Other borrowings — The fair value of the Company’s Federal Home Loan Bank of Atlanta ("FHLBA"), line of credit and subordinated debt advances are estimated based upon the discounted value of contractual cash flows. The fair value of investment securities sold under agreements to repurchase approximates the carrying amount because of the short maturity of these borrowings. The discount rate is estimated using rates quoted for the same or similar issues or the current rates offered to the Company for debt of the same remaining maturities.

NOTE 7 — REVENUE RECOGNITION

Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (“ASC 606”), establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied.

The Company’s sources of revenue are generated from both interest and noninterest revenue streams. The majority of our revenue-generating transactions are not subject to ASC 606. Revenue streams generated by fees and interest from financial instruments, investments, and transfers and servicing of these assets are excluded from this disclosure.

The Company has certain revenue streams within the scope of ASC 606 contained within noninterest income. The Company’s contracts with customers generally do not contain terms that require significant judgment to determine the amount of revenue to recognize.

27

CoastalSouth Bancshares, Inc. and Subsidiary
Notes to Consolidated Financial Statements (unaudited) - Continued

The tables below presents the revenue streams within the scope of the standard and is followed by a description of each noninterest income revenue stream for the periods presented:

		Three Months Ended												Nine Months Ended
		September 30, 2026												September 30, 2026
(In thousands of dollars)		Within Scope				Out of Scope				Total				Within Scope				Out of Scope				Total
Noninterest income:
Bank-owned life insurance		$	-			$	476			$	476			$	-			$	1,398			$	1,398
Income from mortgage originations			-				375				375				-				1,172				1,172
Gain on sale of government guaranteed loans			-				1,558				1,558				-				2,202				2,202
Interchange income and card fees			244				-				244				773				-				773
Service charges on deposit accounts			268				-				268				736				-				736
Other noninterest income			111				297				408				142				1,075				1,217
Total noninterest income		$	623			$	2,706			$	3,329			$	1,651			$	5,847			$	7,498

		Three Months Ended												Nine Months Ended
		September 30, 2025												September 30, 2025
(In thousands of dollars)		Within Scope				Out of Scope				Total				Within Scope				Out of Scope				Total
Noninterest income:
Bank-owned life insurance		$	-			$	461			$	461			$	-			$	1,349			$	1,349
Income from mortgage originations			-				299				299				-				846				846
Gain on sale of government guaranteed loans			-				613				613				-				878				878
Interchange income and card fees			238				-				238				761				-				761
Service charges on deposit accounts			208				-				208				634				-				634
Losses on sale of available-for-sale securities1			-				(10	)			(10	)			-				(10	)			(10	)
Other noninterest income			18				273				291				53				1,265				1,318
Total noninterest income		$	464			$	1,636			$	2,100			$	1,448			$	4,328			$	5,776

(1) Included in other noninterest income on the Consolidated Statements of Income.

Bank-owned life insurance — The Company’s income from bank-owned life insurance primarily represents changes in the cash surrender value of such life insurance policies held on certain key employees, for which the Company is the owner and beneficiary. Revenue is recognized in each period based on the change in cash surrender value during the period.

Income from mortgage originations — The Company earns mortgage production income which is comprised primarily of activity related to the sale of consumer mortgage loans as well as loan origination fees such as closing charges, document review fees, application fees, other loan origination fees, and loan processing fees.

Gain on sale of government guaranteed loans — The Company records a gain from the sale of government guaranteed loans to third parties at the time the transfer is complete. The gain on sale is recognized as a result of the recognition of mortgage servicing rights and premiums paid by the buyer for the purchase of the loan.

Interchange income and card fees — The Company earns interchange fees from debit cardholder transactions conducted through a payment network. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are earned daily.

Service charges on deposit accounts — The Company earns fees from its deposit customers for transaction-based, account maintenance, and overdraft services. Transaction-based fees, which include services such as ATM use fees and stop payment charges, are recognized at the time the transaction is executed as that is the point in time the Company fulfills the customer’s request. Account maintenance fees, which relate primarily to monthly maintenance, are earned over the course of a month, representing the period over which the Company satisfies the performance obligation. Overdraft fees are recognized at the point in time that the overdraft occurs. Service charges are withdrawn from the customer’s account balance.

Losses on sale of available-for-sale securities — The Company recognizes realized gains or losses from the sale of its available-for-sale securities at the trade date and recognizes periodic mark-to-market adjustments on equity securities resulting from changes in fair value.

Other noninterest income — Other noninterest income consists primarily of loan fees, which are out of the scope of ASC Topic 606. The items within scope of the standard primarily relate to contracts with third parties for miscellaneous referral or broker income.

Contract assets and liabilities — A contract asset balance typically occurs when an entity performs a service for a customer before the customer payment of consideration, creating a contract receivable, or before payment is due, creating a contract asset. In contrast, a contract liability balance is an entity’s obligation to transfer a service to a customer for which the entity has already received payment of consideration from the customer. The Company’s noninterest revenue streams that are within the scope of ASC 606 are largely based

28

CoastalSouth Bancshares, Inc. and Subsidiary
Notes to Consolidated Financial Statements (unaudited) - Continued

on transactional activity which typically occurs at a point in time immediately after the performance obligations have been satisfied. Consideration is often received immediately or shortly after the Company satisfies its performance obligation and revenue is recognized. The Company does not typically enter into long-term revenue contracts with customers. Therefore, the Company does not experience significant contract balances. As of September 30, 2026 and 2025, the Company did not have any significant contract balances.

NOTE 8 — LEASES

The Company has entered into several operating leases for properties for branch banking and other banking operations. The leases have various initial terms and expire on various dates. The lease agreements generally provide that the Company is responsible for ongoing repairs and maintenance, insurance, and real estate taxes. The leases also provide for renewal options and certain scheduled increases in monthly lease payments. The Company does not consider exercise of any of these lease renewal options to be reasonably certain.

Leases with an initial term of 12 months or less are not recorded on the balance sheet. For these short-term leases, lease expense is recognized on a straight-line basis over the lease term. Rental expense recorded under short-term lease for the three months ended September 30, 2026 and 2025 was $13 thousand and nil, respectively. Rental expense recorded under short-term lease for the nine months ended September 30, 2026 and 2025 was $24 thousand and $13 thousand, respectively. At September 30, 2026 and December 31, 2025, the Company had no leases classified as finance leases.

At September 30, 2026 and December 31, 2025, the Company had an operating lease right-of-use ("ROU") asset of $6.2 million and $3.9 million, respectively, and an operating lease liability of $7.5 million and $4.6 million, respectively. The ROU asset and operating lease liability are recorded in other assets and other liabilities, respectively, in the Consolidated Balance Sheets.

Rental expense recorded under long-term leases for the three months ended September 30, 2026 and 2025 was $322 thousand and $266 thousand, respectively. Rental expense recorded under long-term leases for the nine months ended September 30, 2026 and 2025 was $880 thousand and $819 thousand, respectively.

The weighted-average remaining lease term and the weighted-average discount rate for operating leases were 6.24 years and 3.69%, respectively, at September 30, 2026.

A maturity analysis of the Company's operating lease liabilities and reconciliation of the undiscounted cash flows to the operating lease liability at September 30, 2026 is as follows (in thousands of dollars):

September 30, 2027		$	1,260
September 30, 2028			1,473
September 30, 2029			1,346
September 30, 2030			1,334
September 30, 2031			1,251
Thereafter			1,924
Total undiscounted cash flows			8,588
Discount on cash flows			(1,043	)
Total lease liability		$	7,545

NOTE 9 — DERIVATIVE FINANCIAL INSTRUMENTS

The Company utilizes interest rate swaps and options agreements as part of its asset-liability management strategy to help mitigate its interest rate risk. The notional amount of the interest rate swaps does not represent amounts exchanged by the parties. The amount exchanged is determined by reference to the notional amount and the other terms of the individual interest rate swap agreements. Derivative financial instruments are recorded in the Consolidated Balance Sheets as either an asset or a liability (in other assets or other liabilities, respectively) and measured at fair value.

29

CoastalSouth Bancshares, Inc. and Subsidiary
Notes to Consolidated Financial Statements (unaudited) - Continued

The Company presents derivative position gross on the balance sheet. The following tables reflect the derivatives recorded on the balance sheet as of the dates indicated:

		Included in Other Assets								Included in Other Liabilities
(In thousands of dollars)		Notional				Fair				Notional				Fair
September 30, 2026		Amount				Value				Amount				Value
Derivatives designated as hedges:
Interest rate swaps related to        cash flow hedges		$	25,000			$	3,649			$	-			$	-
Interest rate collars related to        cash flow hedges			-				-				250,000				(1,103	)
Interest rate swaps related to        fair value hedges			25,535				2,628				-				-
Total						$	6,277							$	(1,103	)

		Included in Other Assets								Included in Other Liabilities
(In thousands of dollars)		Notional				Fair				Notional				Fair
December 31, 2025		Amount				Value				Amount				Value
Derivatives designated as hedges:
Interest rate swaps related to        cash flow hedges		$	75,000			$	2,931			$	-			$	-
Interest rate collars related to        cash flow hedges			150,000				1,195				-				-
Interest rate swaps related to        fair value hedges			25,535				2,009				-				-
Total						$	6,135							$	-

The Company did not have any derivatives that are not designated as hedges as of September 30, 2026 and December 31, 2025.

Fair Value Hedges

Fair value hedge interest rate swaps mature on various dates with a combined notional amount of $25.5 million at September 30, 2026 and December 31, 2025. The risk management objective with respect to the fair value hedges is to hedge the interest rate risk associated with longer duration municipal securities. These fair value hedges convert the fixed rates of the bonds to a floating leg of the overnight Secured Overnight Financing Rate ("Overnight SOFR") + 26.161 basis points. The hedges were determined to be effective during the periods presented. The Company expects these hedges to remain effective during the remaining term of the swap.

The following table presents the amounts recorded on the balance sheet related to cumulative basis adjustment for the fair value hedges as of September 30, 2026 and December 31, 2025:

										Cumulative Amount of Fair
Line Item in the										Value Hedging Adjustment
Balance Sheet in										Included in the Carrying
Which the Hedged		Carrying Amount								Amount of the
Item is Included		of the Hedged Assets								Hedged Assets
		September 30,				December 31,				September 30,				December 31,
(In thousands of dollars)		2026				2025				2026				2025
Securities available-for-sale		$	23,045			$	23,725			$	(2,736	)		$	(2,109	)

As of September 30, 2026 and December 31, 2025, the total notional amount of the pay-fixed/receive variable interest rate swap portfolio was $25.5 million. There were no hedging adjustments on the balances above for discontinued relationships.

The following table summarizes information about the interest rate swaps designated as fair value hedges at September 30, 2026:

(Dollars in thousands)
Notional amount of fair value hedges		$	25,535
Weighted average maturity in years			3.24

30

CoastalSouth Bancshares, Inc. and Subsidiary
Notes to Consolidated Financial Statements (unaudited) - Continued

The following table presents the change in fair value for derivatives designated as fair value hedges as well as the offsetting change in fair value on the hedged item for the periods indicated:

		Three Months Ended September 30,								Nine Months Ended September 30,
(In thousands of dollars)		2026				2025				2026				2025
Interest rate contracts: Gain or (Loss)
Change in fair value of interest rate swaps hedging    available-for-sale securities		$	468			$	(166	)		$	619			$	(1,058	)
Change in fair value of hedged available-for-sale securities		$	(474	)		$	175			$	(627	)		$	1,082

The following table presents the effect of fair value hedge accounting on the Consolidated Statements of Income and the location and amount of gain or (loss) recognized in income on fair value hedging relationships for the periods indicated:

		Three Months Ended September 30,								Nine Months Ended September 30,
		2026				2025				2026				2025
		Interest Income (Offset to AOCI)				Interest Income (Offset to AOCI)				Interest Income (Offset to AOCI)				Interest Income (Offset to AOCI)
(In thousands of dollars)
Gain or (loss) on fair value hedging relationships
Interest contracts:
Change in fair value of interest rate swaps hedging    available-for-sale securities		$	468			$	(166	)		$	619			$	(1,058	)
Change in fair value of hedged available-for-sale securities		$	(474	)		$	175			$	(627	)		$	1,082

Cash Flow Hedges

Two interest rate collars, one of which is forward-starting, with maturities of November 30, 2029, ($100.0 million notional) and November 30, 2028 ($150.0 million notional), were outstanding as of September 30, 2026. The Company designates both as cash flow hedges under the same hedging program. The risk management objective is to hedge forecasted interest rate receipts on floating rate loans indexed to Prime and SOFR. The hedged receipts are the interest payments on the first unhedged $100.0 million and $150.0 million, respectively, of a pool of such loans, for payments received from November 30, 2026 through November 30, 2029 and from November 30, 2025 to November 30, 2028, respectively. For both hedges, ineffectiveness is measured by modeling the hypothetical derivative as a four-legged collar with two bought and two sold legs due to embedded floors in the assets. Both hedges were determined to be effective during the periods presented, and the Company expects them to remain effective for the remaining term of each collar.

A cash flow hedge interest rate swap that matures on October 21, 2030 had a notional amount of $25.0 million as of September 30, 2026. The risk management objective with respect to the cash flow hedge is to hedge the risk of variability in the Company’s cash flows (future interest payments) attributable to changes in the 3-month LIBOR rate pertaining to fluctuations in market interest rates on $25.0 million of FHLBA, brokered certificates of deposit or other fixed rate advances for that period. The objective of the hedge is to offset the variability of cash flows due to the rollover of its fixed-rate 3-month FHLBA or another fixed rate advance every quarter from October 31, 2022 to October 21, 2030. After June 30, 2023, both LIBOR hedge and hedged item converted to Overnight SOFR as hedged item utilizes a benchmark rate component. The hedge was determined to be effective during the periods presented. The Company expects the hedge to remain effective during the remaining term of the swap.

The tables below present the gains and (losses) recognized in accumulated other comprehensive income ("AOCI") and the location in the Consolidated Statements of Income of the gains and (losses) reclassified from other comprehensive income ("OCI") into earnings for derivatives designated as cash flow hedges for the periods indicated:

Three Months Ended September 30, 2026
(In thousands of dollars)
Derivatives in Cash Flow Hedging Relationships		Amount of Gain (Loss) Recognized in OCI on Derivative				Location of Gain (Loss) Reclassified from OCI into Income		Amount of Gain (Loss) Reclassified from OCI into Income (pre-tax)
Interest rate contracts						Interest income (expense)
Effective portion		$	(491	)		Effective portion		$	184
Deferred tax		$	(179	)		Amount excluded from the assessment of effectiveness and amortized into earnings		$	(109	)

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CoastalSouth Bancshares, Inc. and Subsidiary
Notes to Consolidated Financial Statements (unaudited) - Continued

Three Months Ended September 30, 2025
(In thousands of dollars)
Derivatives in Cash Flow Hedging Relationships		Amount of Gain (Loss) Recognized in OCI on Derivative				Location of Gain (Loss) Reclassified from OCI into Income		Amount of Gain (Loss) Reclassified from OCI into Income (pre-tax)
Interest rate contracts						Interest income (expense)
Effective portion		$	(279	)		Effective portion		$	316
Deferred tax		$	(76	)		Amount excluded from the assessment of effectiveness and amortized into earnings		$	(356	)

Nine Months Ended September 30, 2026
(In thousands of dollars)
Derivatives in Cash Flow Hedging Relationships		Amount of Gain (Loss) Recognized in OCI on Derivative				Location of Gain (Loss) Reclassified from OCI into Income		Amount of Gain (Loss) Reclassified from OCI into Income (pre-tax)
Interest rate contracts						Interest income (expense)
Effective portion		$	(731	)		Effective portion		$	548
Deferred tax		$	(301	)		Amount excluded from the assessment of effectiveness and amortized into earnings		$	(325	)

Nine Months Ended September 30, 2025
(In thousands of dollars)
Derivatives in Cash Flow Hedging Relationships		Amount of Gain (Loss) Recognized in OCI on Derivative				Location of Gain (Loss) Reclassified from OCI into Income		Amount of Gain (Loss) Reclassified from OCI into Income (pre-tax)
Interest rate contracts						Interest income (expense)
Effective portion		$	(469	)		Effective portion		$	939
Deferred tax		$	(180	)		Amount excluded from the assessment of effectiveness and amortized into earnings		$	(838	)

Gains and losses on interest rate swaps related to funding liabilities are recorded in interest income/expense. To the extent these derivatives are effective in offsetting the variability of the hedged cash flows, changes in the derivatives’ fair value will not be included in current earnings but are reported as a component of OCI in the Consolidated Statements of Changes in Shareholders’ Equity. These changes in fair value will be included in earnings of future periods when earnings are also affected by the changes in the hedged cash flows. To the extent these derivatives are not effective, changes in their fair values are immediately included in other income or expense.

The following tables summarize information about the interest rate swaps and option collars designated as cash flow hedges at September 30, 2026 (All rates described below are indexed to SOFR):

(Dollars in thousands)
Notional Amount - Pay Fixed Swap		$	25,000
Weighted average fixed pay rate			1.06	%
Weighted average 3-month receive rate			3.97	%
Weighted average maturity in years			4.06
During the next twelve months, the Company estimates that will be    reclassified from OCI as a decrease to interest expense		$	684
During the next twelve months, the Company estimates that will be    reclassified from Deferred Tax as a decrease to interest expense		$	216

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CoastalSouth Bancshares, Inc. and Subsidiary
Notes to Consolidated Financial Statements (unaudited) - Continued

(Dollars in thousands)
Notional Amount Collars		$	250,000
Weighted average bought floor strike			3.25	%
Weighted average sold floor strike (*)			1.00	%
Weighted average bought cap strike (*)			6.55	%
Weighted average sold cap strike			5.15	%
Weighted average maturity in years		2.57
During the next twelve months, the Company estimates that will be    reclassified from OCI as a decrease to interest income		$	330
During the next twelve months, the Company estimates that will be    reclassified from Deferred Tax as a decrease to interest income		$	104

(*) Applies only to the $150.0 million notional collar. The $100.0 million notional collar does not have a sold floor or bought cap.

NOTE 10 — ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following were changes in accumulated other comprehensive income (loss) by component, net of tax, for the three months ended September 30, 2026 and 2025:

	Gains and Losses				Gains and Losses
(In thousands of dollars)	on Securities				on
Three Months Ended September 30, 2026	Available-for-Sale				Cash Flow Hedges				Total
Beginning balance	$	(12,261	)		$	1,786			$	(10,475	)
Other comprehensive loss before reclassification, net of tax		(7,780	)			(509	)			(8,289	)
Amounts reclassified from accumulated other comprehensive income, net      of tax		-				(57	)			(57	)
Net current period other comprehensive loss		(7,780	)			(566	)			(8,346	)
Ending balance	$	(20,041	)		$	1,220			$	(18,821	)
Three Months Ended September 30, 2025
Beginning balance	$	(15,785	)		$	2,595			$	(13,190	)
Other comprehensive income (loss) before reclassification, net of tax		2,476				(270	)			2,206
Amounts reclassified from accumulated other comprehensive income,      net of tax		8				31				39
Net current period other comprehensive income (loss)		2,484				(239	)			2,245
Ending balance	$	(13,301	)		$	2,356			$	(10,945	)

The following were changes in accumulated other comprehensive income (loss) by component, net of tax, for the nine months ended September 30, 2026 and 2025:

	Gains and Losses				Gains and Losses
(In thousands of dollars)	on Securities				on
Nine Months Ended September 30, 2026	Available-for-Sale				Cash Flow Hedges				Total
Beginning balance	$	(11,393	)		$	2,174			$	(9,219	)
Other comprehensive loss before reclassification, net of tax		(8,648	)			(783	)			(9,431	)
Amounts reclassified from accumulated other comprehensive loss, net      of tax		-				(171	)			(171	)
Net current period other comprehensive loss		(8,648	)			(954	)			(9,602	)
Ending balance	$	(20,041	)		$	1,220			$	(18,821	)
Nine Months Ended September 30, 2025
Beginning balance	$	(18,713	)		$	2,926			$	(15,787	)
Other comprehensive income (loss) before reclassification, net of tax		5,404				(493	)			4,911
Amounts reclassified from accumulated other comprehensive income (loss),      net of tax		8				(77	)			(69	)
Net current period other comprehensive income (loss)		5,412				(570	)			4,842
Ending balance	$	(13,301	)		$	2,356			$	(10,945	)

The following were significant amounts reclassified out of each component of other comprehensive income (loss) for the three months ended September 30, 2026 and 2025:

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CoastalSouth Bancshares, Inc. and Subsidiary
Notes to Consolidated Financial Statements (unaudited) - Continued

		(In thousands of dollars)
Details about Accumulated Other Comprehensive Income (Loss) Components		Three Months Ended September 30, 2026				Three Months Ended September 30, 2025				Affected Line Item Where Net Income is Presented
Realized (gains) losses on available-for-sale securities		$	-			$	10			Losses on sale of available-for-sale securities
			-				(2	)		Income tax benefit
		$	-			$	8			Net income
Realized (gains) losses on cash flow hedges		$	109			$	356			Interest income - Loans held-for-investment
			(184	)			(316	)		Interest expense - Interest-bearing deposits
			18				(9	)		Income tax provision (benefit)
		$	(57	)		$	31			Net (loss) income

The following were significant amounts reclassified out of each component of other comprehensive income (loss) for the nine months ended September 30, 2026 and 2025:

		(In thousands of dollars)
Details about Accumulated Other Comprehensive Income (Loss) Components		Nine Months Ended September 30, 2026				Nine Months Ended September 30, 2025				Affected Line Item Where Net Income is Presented
Realized (gains) losses on available-for-sale securities		$	-			$	10			Losses on sale of available-for-sale securities
			-				(2	)		Income tax benefit
		$	-			$	8			Net income
Realized (gains) losses on cash flow hedges		$	325			$	838			Interest income - Loans held-for-investment
			(548	)			(939	)		Interest expense - Interest-bearing deposits
			52				24			Income tax provision
		$	(171	)		$	(77	)		Net loss

NOTE 11 — SUBSEQUENT EVENTS

Subsequent events are events or transactions that occur after the balance sheet date but before financial statements are issued. Recognized subsequent events are events or transactions that provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements. Non-recognized subsequent events are events that provide evidence about conditions that did not exist at the date of the balance sheet but arose after that date.

On October 19, 2026, the Company’s Board of Directors declared a quarterly cash dividend of $0.06 per share on the Company’s common stock. The dividend is payable on November 24, 2026 to shareholders of record as of November 10, 2026.

The Company evaluated subsequent events through the date its financial statements were issued, and there were no other subsequent events requiring accrual or disclosure through November 6, 2026.

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

The purpose of this discussion and analysis of financial condition and results of operations, also referred to hereafter as this MD&A, is to aid in understanding significant changes in the financial condition of CoastalSouth Bancshares, Inc. and our wholly owned subsidiary, Coastal States Bank, as of December 31, 2025 and September 30, 2026, and on our results of operations for the three and nine months ended 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 on the Company’s 2025 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.

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10‑Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. 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,” “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.

A number of important factors could cause our actual results to differ materially from those indicated in these forward-looking statements, including the following:

•general economic and business conditions in our local markets, including conditions affecting employment levels, interest rates, inflation, supply chains, the threat of recession, volatile equity capital markets, property and casualty insurance costs, collateral values, customer income, creditworthiness and confidence, spending and savings that may affect customer bankruptcies, defaults, charge-offs and deposit activity; and the impact of the foregoing on client behavior, including the velocity and levels of deposit withdrawals and loan repayment, the risk of accelerated deposit outflows driven by digital banking channels, real-time payments, or social media-driven concerns that may materially increase liquidity risk;

•the occurrence of significant natural disasters, including hurricanes;

•our ability to successfully execute our business strategy to achieve profitable growth;

•our ability to implement and adapt to changes in our business strategies;

•the impact of adverse developments, or actual or perceived instability, in the banking industry, on client confidence, liquidity, and regulatory responses to these developments (including increases in the cost of our deposit insurance assessments and increased regulatory scrutiny), our ability to effectively manage our liquidity risk and any growth plans, and the availability of capital and funding;

•our ability to manage growth and to increase operating efficiency;

•our ability to access cost-effective funding in the future;

•restrictions or limitations on access to funds from historical and alternative sources of liquidity could adversely affect our overall liquidity, which could restrict our ability to make payments on our obligations and our ability to support asset growth and sustain our operations and the operations of the Bank;

•our ability to successfully manage our credit risk and the sufficiency of our allowance for credit losses (“ACL”);

•the adequacy of our reserves (including ACL), including the appropriateness of our methodology for calculating such reserves;

•factors that may impact the performance of our loan portfolio, including real estate values and liquidity in our primary service market areas, the financial health of our borrowers and the success of various projects that we finance;

•inflation and changes in the interest rate environment that can reduce our margins or reduce the fair value of the financial instruments due to changes in consumer spending, borrowing and savings habits;

•our ability to attract and maintain business banking relationships with well-qualified businesses, real estate developers and investors with proven track records in the market areas that we serve;

•our ability to retain our existing customers and attract and retain new customer relationships;

35

•our focus on small and mid-sized businesses;

•our capital requirements as an insured depository institution;

•concentration of our loan portfolio in real estate loans, changes in the prices, values and sales volumes of commercial and residential real estate;

•credit and lending risks associated with our construction and development, commercial real estate, commercial and industrial, residential real estate and Small Business Administration ("SBA") loan portfolios;

•a breach in security of our information systems, including the occurrence of cyber-attack incidents or deficiencies in cyber security;

•risks and costs related to the development and use of artificial intelligence in our industry and generally;

•political instability or civil unrest and/or acts of war or terrorism;

•changes or new fiscal and monetary policies of the federal government and its agencies;

•our ability to comply with consumer protection laws, including the CRA and fair lending laws;

•our ability to comply with various governmental and regulatory requirements, including supervisory actions by federal and state banking agencies;

•other economic, competitive, governmental, regulatory and operational factors affecting our operations, pricing, products and services described in the Company's 2025 Form 10-K.

•changes in the quality or composition of our loan or investment portfolios;

•our hedging strategies to mitigate risks associated with changes in interest rates;

•our dependence on third-party service providers;

•inaccuracies or other failures from the use of models, including the failure of assumptions and estimates, as well as differences in, and changes to, economic, market and credit conditions;

•continued or increasing competition and innovation from other financial institutions, credit unions, and non-bank financial services companies, many of which are subject to different regulations than we are;

•our ability to attract and retain skilled people;

•changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the FASB, the SEC or the Public Company Accounting Oversight Board;

•risks related to potential acquisitions;

•changes in the scope and cost of FDIC insurance and other coverage;

•restraints on the ability of the Bank to pay dividends to us, which could limit our liquidity;

•our ability to maintain adequate internal controls over financial reporting;

•potential claims, damages, penalties, fines, costs and reputational damage resulting from pending or future litigation, regulatory proceedings and enforcement actions;

•the makeup of our asset mix and investments;

•our ability to manage our growth;

•our ability to increase our operating efficiency;

•the risk that balance sheet, revenue growth, and loan growth expectations may differ from actual results;

•a deterioration of the credit rating for U.S. long-term sovereign debt, actions that the U.S. government may take to avoid exceeding the debt ceiling, and uncertainties surrounding the federal budget and economic policy, including the impact of tariffs and trade policies; and

•other risks and factors identified in the Company’s 2025 Form 10-K that was filed with the SEC under the heading “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this Quarterly Report on Form 10-Q. Because of these risks and other uncertainties, our actual future results, performance or achievement, or industry results, may be materially different from the results indicated by the forward-looking statements in this Quarterly Report on Form 10-Q. In addition, our past results of operations are not necessarily indicative of our future results. These forward-looking statements represent our beliefs, assumptions and estimates only as of the dates on which they were made, as predictions of future events. However, the events and circumstances reflected in the forward-looking statements may not be achieved or occur. For example, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have

36

conducted an exhaustive inquiry into, or review of, all potentially available relevant information. Any forward-looking statement speaks only as of the date on which it is made, and except as required by applicable law, we do not undertake any obligation to update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.

These statements are inherently uncertain, and we cannot guarantee future results, performance or achievements. For a discussion of these and other risks that may cause actual results to differ from expectations, refer to the section entitled “Risk Factors” and other information contained on the Company’s 2025 Form 10-K and our other periodic filings, including quarterly reports on Form 10-Q and current reports on Form 8-K, that we file from time to time with the SEC.

Overview

CoastalSouth Bancshares, Inc. (the "Company"), is a bank holding company headquartered in Atlanta, Georgia. The Company was incorporated under the laws of the Commonwealth of Virginia on May 24, 2004, and converted to a corporation organized under the laws of the State of Georgia on May 12, 2023. We operate through our wholly-owned banking subsidiary, Coastal States Bank (the "Bank" or "CSB"), a South Carolina state-chartered commercial bank. We currently operate 12 retail banking branches in three primary markets, including the Lowcountry of South Carolina, Savannah, Georgia, and metro Atlanta, Georgia. CSB also operates four specialty lines of business, including Senior Housing, Marine Lending, Government Guaranteed Lending, and Mortgage Banker Finance ("MBF"). The deposits of CSB are insured by the FDIC. Coastal States Mortgage, Inc. (“CSM”), a wholly owned subsidiary of CSB, is a mortgage company focused on originating single-family residential mortgages, some of which are retained in the portfolio. In this report on Form 10-Q, the words “the Company,” “we,” “us,” and “our” refer to CoastalSouth Bancshares, Inc., together with CSB and CSB’s wholly owned subsidiaries, except where the context requires otherwise.

The following discussion and analysis is intended to assist readers in their analysis and understanding of our consolidated financial statements and summary historical financial information appearing in this Quarterly Report on Form 10-Q and should be read in conjunction therewith. This discussion and analysis presents our financial condition and results of operations on a consolidated basis, unless otherwise specified.

Critical Accounting Policies and Estimates

Our accounting and reporting policies are in accordance with GAAP and conform to general practices within the banking industry. Application of these principles requires management to make estimates, assumptions or judgments that affect the amounts reported in the financial statements and the accompanying notes. These estimates are based on information available as of the date of the financial statements; accordingly, as this information changes, the financial statements could reflect different estimates or judgments. Estimates, assumptions or judgments are necessary when assets and liabilities are required to be recorded at fair value, when a decline in the value of an asset not carried on the financial statements at fair value warrants an impairment write-down or valuation reserve to be established, or when an asset or liability needs to be recorded contingent upon future events. Carrying assets and liabilities at fair value results in more financial statement volatility. The fair values and the information used to record the valuation adjustments for certain assets and liabilities are based either on quoted market prices or are provided by other third-party sources.

Certain policies inherently have a greater reliance on the use of estimates, assumptions or judgments and as such, have a greater possibility of producing results that could be materially different than originally reported. We have identified the determination of our ACL and fair value measurements to be the accounting areas that require the most subjective or complex judgments, estimates and assumptions, and where changes in those judgments, estimates and assumptions (based on new or additional information, changes in the economic environment and/or market interest rates, etc.) could have a significant effect on our financial statements. Therefore, we consider these policies, discussed below, to be critical accounting estimates and discuss them directly with the Audit Committee of our Board.

Our most significant accounting policies are presented in Note 1 of the consolidated financial statements as of December 31, 2025 included on the Company’s 2025 Form 10-K that was filed with the SEC. These policies, along with the disclosures presented in the other notes to the consolidated financial statements and in this MD&A, provide information on how significant assets and liabilities are valued in the financial statements and how those values are determined. There have been no significant changes to the accounting policies, estimates, and assumptions, or the judgments affecting the application of these estimates and assumptions from those disclosed on the Company’s 2025 Form 10-K.

Allowance for Credit Losses

The ACL represents management’s current estimate of credit losses for the remaining estimated life of financial instruments, with particular applicability on our balance sheet to loans held-for-investment and unfunded loan commitments. Estimating the amount of the ACL requires significant judgment and the use of estimates related to historical experience, current conditions, reasonable and supportable forecasts, and the value of collateral on collateral-dependent loans. The loan portfolio also represents the largest asset type on our consolidated balance sheet. Credit losses are charged against the allowance, while recoveries of amounts previously charged off

37

are credited to the allowance. A provision for credit losses is charged to operations based on management’s periodic evaluation of the factors previously mentioned, as well as other pertinent factors.

There are many factors affecting the ACL; some are quantitative while others require qualitative judgment. Although management believes its process for determining the allowance adequately considers the potential factors that could potentially result in credit losses, the process includes subjective elements and is susceptible to significant change. To the extent actual outcomes are worse than management estimates, additional provision for credit losses could be required that could adversely affect our earnings or financial position in future periods.

Additional information on the loan portfolio and ACL can be found in the sections of this MD&A titled “Loans,” “Allowance for Credit Losses on Loans,” “Allowance for Credit Losses for Unfunded Commitments,” and “Nonperforming Loans.” Note 1 to the consolidated financial statements as of December 31, 2025 included on the Company’s 2025 Form 10-K that was filed with the SEC includes additional information on accounting policies related to the ACL.

Fair Value Measurements

ASC 820 defines fair value as the price that would be received to sell a financial asset or paid to transfer a financial liability in an orderly transaction between market participants at the measurement date. The degree of management judgment involved in determining the fair value of assets and liabilities is dependent upon the availability of quoted market prices or observable market parameters. For financial instruments that trade actively and have quoted market prices or observable market parameters, there is minimal subjectivity involved in measuring fair value. When observable market prices and parameters are not available, management judgment is necessary to estimate fair value.

The fair values for AFS securities are generally based upon quoted market prices or observable market prices for similar instruments. Management utilizes a third-party pricing service to assist with determining the fair value of our securities portfolio. The pricing service uses observable inputs when available including benchmark yields, reported trades, broker-dealer quotes, issuer spreads, benchmark securities, bids and offers. These values take into account recent market activity as well as other market observable data such as interest rate, spread and prepayment information.

The Company’s derivative financial instruments, which are interest rate contracts, are valued using a discounted cash flow method that incorporates current market interest rates. We use derivative financial instruments primarily to manage our interest rate risk.

From time to time, we may record assets at fair value on a nonrecurring basis, usually as a result of the write-downs of individual assets due to impairment or to value real estate or property obtained through foreclosure or repossession. In particular, nonaccrual loans may be carried at the fair value of collateral if repayment is expected solely from the collateral. Although management believes its processes for determining the fair value of collateral-dependent loans are appropriate, the processes require management judgment and assumptions and the value of such assets at the time they are revalued or divested may be significantly different from management’s determination of fair value.

In addition, changes in market conditions may reduce the availability of quoted prices or observable data. See Note 6 of our consolidated financial statements as of September 30, 2026, included elsewhere in this Quarterly Report on Form 10-Q, for a complete discussion of fair value of financial assets and liabilities and their related measurement practices.

Emerging Growth Company

Pursuant to the Jumpstart Our Business Startups Act of 2012 (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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Selected Financial Data

The following table sets forth unaudited selected financial data for the most recent five quarters and the nine months 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.

			As of and for the Three Months Ended																								As of and for the Nine Months Ended
(dollars in thousands except			September 30,					June 30,					March 31,					December 31,					September 30,					September 30,					September 30,
per share amounts)			2026					2026					2026					2025					2025					2026					2025
Selected Operating Data:
Interest income		$		34,878			$		33,558			$		32,568			$		33,006			$		32,890			$		101,004			$		94,707
Interest expense				13,351					12,893					12,824					13,143					13,700					39,068					40,680
Net interest income				21,527					20,665					19,744					19,863					19,190					61,936					54,027
(Recovery) provision for credit losses				(429	)				658					382					1,162					653					611					2,034
Noninterest income				3,329					2,202					1,967					2,295					2,100					7,498					5,776
Noninterest expense				13,710					13,374					13,044					12,262					11,856					40,128					35,367
Income tax expense				2,803					1,502					1,956					1,598					2,040					6,261					4,646
Net income				8,772					7,333					6,329					7,136					6,741					22,434					17,756
Share and Per Share Data:
Basic earnings per share		$		0.73			$		0.61			$		0.53			$		0.60			$		0.57			$		1.87			$		1.64
Diluted earnings per share		$		0.71			$		0.59			$		0.51			$		0.58			$		0.54			$		1.81			$		1.58
Dividends per share		$		0.05			$		0.05			$		0.05			$	n/a				$	n/a				$		0.15			$	n/a
Book value per share		$		22.32			$		22.47			$		21.94			$		21.66			$		20.91			$		22.32			$		20.91
Tangible book value per common share (1)		$		21.90			$		22.06			$		21.52			$		21.25			$		20.49			$		21.90			$		20.49
Shares of common stock outstanding				11,734,134					12,003,040					11,985,414					11,980,412					11,978,921					11,734,134					11,978,921
Weighted average diluted shares    outstanding				12,371,522					12,447,791					12,440,809					12,387,619					12,325,462					12,421,421					11,217,972
Selected Balance Sheet Data:
Total assets		$		2,423,766			$		2,420,993			$		2,348,547			$		2,306,586			$		2,255,389			$		2,423,766			$		2,255,389
Securities available-for-sale, at   fair value (2)				332,664					348,582					347,533					330,503					334,955					332,664					334,955
Gross loans held for investment				1,786,923					1,705,370					1,627,261					1,617,315					1,552,976					1,786,923					1,552,976
Loans held for sale				142,399					223,112					202,615					170,933					231,593					142,399					231,593
Allowance for credit losses				19,623					19,817					18,826					18,743					18,028					19,623					18,028
Goodwill and other intangible assets				6,307					6,246					6,243					6,262					6,186					6,307					6,186
Total deposits				2,100,746					2,047,671					2,057,144					1,987,684					1,949,672					2,100,746					1,949,672
Core deposits (3)				1,773,730					1,793,743					1,798,553					1,680,650					1,654,764					1,773,730					1,654,764
Other borrowings				30,000					75,000					-					30,000					25,000					30,000					25,000
Total shareholders' equity				261,920					269,703					262,923					259,529					250,438					261,920					250,438

(1) We calculate tangible book value per common share as total shareholders' equity less goodwill and other intangibles, excluding mortgage servicing rights, divided by the outstanding number of our shares of common stock at the end of the relevant period. Tangible book value per common share is a non-GAAP financial measure, and, as we calculate tangible book value per common share, the most comparable GAAP measure is book value per common share. See our reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures under the caption "Non-GAAP Financial Measure Reconciliations."

(2) We did not have securities held to maturity in any of the periods presented.

(3) This is a non-GAAP financial measure. See our reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures under the caption "Non-GAAP Financial Measure Reconciliations."

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			As of and for the Three Months Ended																								As of and for the Nine Months Ended
			September 30,					June 30,					March 31,					December 31,					September 30,					September 30,					September 30,
(dollars in thousands)			2026					2026					2026					2025					2025					2026					2025
Performance Ratios:
Pre-tax pre-provision net revenue   (PPNR) (4)		$		11,146			$		9,493			$		8,667			$		9,896			$		9,434			$		29,306			$		24,436
Return on average assets (ROAA) (5)				1.45		%			1.24		%			1.10		%			1.24		%			1.20		%			1.27		%			1.09		%
Return on average equity (5)				12.88					11.02					9.71					11.02					10.84					11.23					10.91
Return on average tangible common    equity (ROATCE) (4)(5)				13.12					11.23					9.90					11.24					11.07					11.44					11.17
Dividend payout ratio				6.92					8.33					9.69				n/a					n/a						8.16				n/a
Net interest rate spread (5)(6)				2.99					2.97					2.90					2.87					2.83					2.95					2.76
Net interest margin (5)(7)				3.70					3.66					3.59					3.60					3.58					3.65					3.48
Efficiency ratio (8)				55.16					58.49					60.08					55.34					55.69					57.79					59.14
Noninterest income to average total    assets (5)				0.55					0.37					0.34					0.40					0.37					0.42					0.35
Noninterest expense to average total    assets (5)				2.26					2.27					2.27					2.13					2.11					2.27					2.17
Average interest-earning assets to    average interest-bearing liabilities				130.86					130.15					129.61					130.41					129.16					130.22					127.34
Average equity to average total assets				11.22					11.29					11.34					11.22					11.08					11.28					9.99
Asset Quality Data:
Net charge-offs to average LHFI (5)				0.01		%			0.01		%			0.01		%			0.00		%			0.03		%			0.01		%			0.03		%
Net charge-offs to total average    loans (5)				0.01					0.01					0.01					0.00					0.03					0.01					0.03
Total allowance for credit losses    to total LHFI				1.10					1.16					1.16					1.16					1.16					1.10					1.16
Total allowance for credit losses    to total loans				1.02					1.03					1.03					1.05					1.01					1.02					1.01
Total allowance for credit losses    to nonperforming loans				130.13					108.16					103.54					102.39					127.03					130.13					127.03
Nonperforming loans to gross LHFI				0.84					1.07					1.12					1.13					0.91					0.84					0.91
Nonperforming assets to total assets				0.62					0.76					0.77					0.79					0.63					0.62					0.63
Adjusted nonperforming assets to   total assets (4)				0.45					0.61					0.62					0.62					0.43					0.45					0.43
Balance Sheet Ratios:
Loan-to-deposit ratio				91.84		%			94.18		%			88.95		%			89.97		%			91.53		%			91.84		%			91.53		%
Noninterest bearing deposits to   total deposits				16.21					17.38					15.12					15.71					16.08					16.21					16.08
Capital Ratios:
Total shareholders' equity to total   assets				10.81		%			11.14		%			11.20		%			11.25		%			11.10		%			10.81		%			11.10		%
Tangible common equity to tangible    assets (9)				10.63					10.96					11.01					11.06					10.91					10.63					10.91
Tier 1 leverage ratio (10)				11.07					11.12					11.21					11.18					11.15					11.07					11.15
Common equity tier 1 ratio (10)				12.30					12.30					12.19					12.30					11.94					12.30					11.94
Tier 1 risk-based capital ratio (10)				12.30					12.30					12.19					12.30					11.94					12.30					11.94
Total risk-based capital ratio (10)				13.36					13.39					13.25					13.31					12.90					13.36					12.90
Other:
Number of branches				12					11					11					11					11					12					11
Number of full-time equivalent     employees				210					201					201					196					194					207					187

(4) This is a non-GAAP financial measure. See our reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures under the caption "Non-GAAP Financial Measure Reconciliations."

(5) Represent annualized data.

(6) Represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities for the periods.

(7) Net interest margin represents net interest income as a percent of average interest-earning assets for the periods.

(8) The efficiency ratio represents noninterest expense divided by sum of net interest income and noninterest income.

(9) We calculate tangible common equity as total shareholders' equity less goodwill and other intangibles, excluding mortgage servicing rights, we calculate tangible assets as total assets less goodwill and other intangibles, excluding mortgage servicing rights. This is a non-GAAP financial measure. See our reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures under the caption "Non-GAAP Financial Measure Reconciliations."

(10) Ratios are for Coastal States Bank only.

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Results of Operations — Comparison of Results of Operations for the Three Months Ended September 30, 2026 and 2025

The following discussion of our results of operations compares the three months ended September 30, 2026 and 2025. We reported net income for the three months ended September 30, 2026 of $8.8 million compared to net income of approximately $6.7 million for the three months ended September 30, 2025. The increase of approximately $2.0 million was principally attributable to higher net interest income and noninterest income coupled with a lower provision for credit losses, offset by higher noninterest expense, primarily salaries and employee benefits, and income tax provision.

Net Interest Income

The following table presents, for the periods indicated, 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) interest rate spread; and (v) net interest margin. The income and yield from non-taxable investment securities was not adjusted for tax equivalency.

		For the Three Months Ended September 30,
		2026														2025
		Average					Interest and					Yield /				Average					Interest and					Yield /
(dollars in thousands)		Balance					Fees					Rate				Balance					Fees					Rate
Earning Assets:
Cash and due from banks		$		23,841			$		132				2.20		%	$		21,058			$		129				2.43		%
Federal funds sold				51,509					486				3.74					52,240					616				4.68
Investment securities				356,044					4,066				4.53					339,619					4,125				4.82
Loans:
Loans held for sale				145,169					2,781				7.60					167,424					3,422				8.11
Gross loans held for investment				1,733,109					27,413				6.28					1,543,363					24,598				6.32
Total earning assets				2,309,672					34,878				5.99					2,123,704					32,890				6.14
Noninterest-earning assets				98,517														102,274
Total assets		$		2,408,189												$		2,225,978
Interest-bearing liabilities:
Demand deposits		$		222,231			$		623				1.11		%	$		195,812			$		385				0.78		%
Money market deposits				726,364					5,384				2.94					599,475					4,834				3.20
Savings deposits				35,783					48				0.53					35,414					45				0.50
Time deposits				728,378					6,780				3.69					801,066					8,010				3.97
Total interest-bearing deposits				1,712,756					12,835				2.97					1,631,767					13,274				3.23
Borrowings				52,175					516				3.92					12,463					426				13.56
Total interest-bearing liabilities		$		1,764,931			$		13,351				3.00		%	$		1,644,230			$		13,700				3.31		%
Noninterest-bearing liabilities:
Noninterest-bearing deposits		$		343,110												$		306,133
Other noninterest-bearing liabilities				29,996														28,927
Total noninterest-bearing liabilities				373,106														335,060
Shareholders' equity				270,152														246,688
Total liabilities and shareholders' equity		$		2,408,189												$		2,225,978
Net interest income							$		21,527												$		19,190
Net interest spread													2.99		%												2.83		%
Net interest margin													3.70		%												3.58		%

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 tables set forth the effects of changing interest rates and volumes on our net interest income during the periods indicated. The 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). Changes applicable to both volumes and rate have been allocated to volume.

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		Three Months Ended September 30, 2026 Compared to Three Months Ended September 30, 2025
		Increase (Decrease) Due to Change in:
(dollars in thousands)		Volume					Yield/Rate					Total Change
Earning Assets:
Cash and due from banks		$		69			$		(66	)		$		3
Federal funds sold				521					(651	)				(130	)
Investment securities				1,254					(1,313	)				(59	)
Loans:
Loans held for sale				495					(1,136	)				(641	)
Gross loans held for investment				3,800					(985	)				2,815
Total earning assets		$		6,139			$		(4,151	)		$		1,988
Interest-bearing liabilities:
Demand deposits		$		(629	)		$		867			$		238
Money market deposits				2,628					(2,078	)				550
Savings deposits				(10	)				13					3
Time deposits				1,697					(2,927	)				(1,230	)
Total interest-bearing deposits		$		3,686			$		(4,125	)		$		(439	)
Borrowings				1,691					(1,601	)				90
Total interest-bearing liabilities		$		5,377			$		(5,726	)		$		(349	)
Net interest income		$		762			$		1,575			$		2,337

Net interest income for the three months ended September 30, 2026 was $21.5 million compared to $19.2 million for the three months ended September 30, 2025, an increase of $2.3 million, or 12.2%. This increase was primarily due to an increase in the average balance of our total interest-earning assets coupled with a decrease in the average rate paid on interest-bearing liabilities. The increase in the average balance for the interest-earning assets was primarily due to an increase in average loans held-for-investment outstanding and investment securities; offset by a net decrease in other categories, primarily loans held-for-sale. The yield on total earning assets and interest-bearing liabilities decreased by 15 and 31 basis points, respectively, during the same period.

Total interest income for the three months ended September 30, 2026 was $34.9 million compared to $32.9 million for the three months ended September 30, 2025, an increase of $2.0 million, or 6.0%. This increase was primarily due to growth in our loans held-for-investment portfolio, notwithstanding lower yields; offset by a net decrease in other categories, primarily loans held-for-sale and federal funds sold.

Interest and fees on LHFI were $27.4 million for the three months ended September 30, 2026 compared to $24.6 million for the three months ended September 30, 2025, an increase of $2.8 million, or 11.4%. This increase was primarily attributable to an increase in average LHFI of $189.7 million, or 12.3%, despite a decrease in yield. The yield on gross LHFI decreased by 5 basis points compared to the same period in 2025. Interest and fees on LHFS were $2.8 million for the three months ended September 30, 2026 compared to $3.4 million for the three months ended September 30, 2025. This decrease was primarily due to a decrease in yield by 51 basis points, coupled with a decrease in the average balance of LHFS outstanding compared to the same period in 2025.

Interest income on investment securities remained flat at $4.1 million for the three months ended September 30, 2026 and 2025. Investment securities average balance increased by $16.4 million, notwithstanding a 29 basis points decrease in yield during the period.

Interest expense for the three months ended September 30, 2026 was $13.4 million compared to $13.7 million for the three months ended September 30, 2025, a decrease of $349 thousand, or 2.5%. This decrease was primarily driven by lower average time deposits, coupled with a 31 basis point decrease in the average cost of overall total interest-bearing liabilities, primarily in borrowings, due to the payoff of the Company's subordinated debt towards the end of third quarter of 2025, and money market and time deposit accounts, as rates continued to align with the market.

Net interest margin for the three months ended September 30, 2026 and 2025 was 3.70% and 3.58%, respectively. 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. This increase in our net interest margin was primarily due to a combination of average total earning assets growth and a decrease in yield for average total interest-bearing liabilities. Average earning assets for the three months ended September 30, 2026 increased by $186.0 million compared to the three months ended September 30, 2025, principally due to growth of our loans held-for-investment portfolio and investment securities. Average interest-bearing liabilities for the three months ended September 30, 2026 increased by $120.7 million compared to the three months ended September 30, 2025, driven by growth in average interest-bearing deposits, primarily money market and demand deposits accounts and borrowings; offset by a net decrease in other interest-bearing liabilities categories, primarily time deposits.

Provision for Credit Losses

There was a recovery for credit losses during the three months ended September 30, 2026 of $429 thousand compared to a provision for credit losses of $653 thousand during the three months ended September 30, 2025, a decrease of $1.1 million or 165.7%. This decrease was due to updates to loss rates and economic scenarios and reductions to reserves on individually evaluated loans, offset by

42

increased reserves related to loan growth during the three months ended September 30, 2026 compared to the three months ended September 30, 2025. Our allowance for credit losses as a percentage of gross LHFI was 1.10% and 1.16% at September 30, 2026 and 2025, respectively.

Noninterest Income

Noninterest income for the three months ended September 30, 2026 was approximately $3.3 million, an increase of $1.2 million or 58.5%, compared to approximately $2.1 million for the three months ended September 30, 2025. This increase was principally across the board, but primarily in gain on sale of GGL and other noninterest income.

The following table sets forth the various components of our noninterest income for the periods indicated:

		Three Months Ended September 30,
(dollars in thousands)		2026					2025					Increase (decrease)
Noninterest income:
Bank-owned life insurance		$		476			$		461			$		15				3.3		%
Income from mortgage originations				375					299					76				25.4
Gain on sale of government guaranteed loans				1,558					613					945				154.2
Interchange and card fee income				244					238					6				2.5
Service charges on deposit accounts				268					208					60				28.8
Other noninterest income				408					281					127				45.2
Total noninterest income		$		3,329			$		2,100			$		1,229				58.5		%

Mortgage banking related income increased by $76 thousand to $375 thousand for the three months ended September 30, 2026 compared to $299 thousand for the three months ended September 30, 2025. This increase was primarily due to higher secondary market mortgage production which is comprised primarily of activity related to the sale of consumer mortgage loans as well as loan origination fees such as closing charges, document review fees, application fees, other loan origination fees, and loan processing fees.

Gain on sale of GGL increased by $945 thousand for the three months ended September 30, 2026 compared to $613 thousand for the three months ended September 30, 2025. The Company's gain on the sale of GGL volume increases or decreases based on the attractiveness of market premiums and the amount of inventory of loans that are saleable.

Other noninterest income increased by $127 thousand to $408 thousand for the three months ended September 30, 2026 compared to $281 thousand for the three months ended September 30, 2025. This increase was primarily due to gain on sale of other loans, offset by a net decrease in other categories within other noninterest income.

Changes to income from bank-owned life insurance policies ("BOLI"), interchange and card fee income, and service charges on deposit accounts remained fairly comparable between three months ended September 30, 2026 and three months ended September 30, 2025.

Noninterest Expense

Noninterest expense for the three months ended September 30, 2026 was $13.7 million compared to $11.9 million for the three months ended September 30, 2025, an increase of $1.9 million, or 15.6%. This increase was primarily in salaries and employee benefits, coupled with a net increase in all other noninterest expense categories, primarily other noninterest expense, and software and other technology expense.

The following table sets forth the major components of our noninterest expense for the three months ended September 30, 2026 and 2025:

		Three Months Ended September 30,
(dollars in thousands)		2026					2025					Increase (decrease)
Noninterest expense:
Salaries and employee benefits		$		8,613			$		6,985			$		1,628				23.3		%
Occupancy and equipment				944					850					94				11.1
Software and other technology expense				894					788					106				13.5
Other professional services				503					571					(68	)			(11.9	)
Data processing				560					647					(87	)			(13.4	)
Regulatory assessment				353					419					(66	)			(15.8	)
Marketing and advertising				313					245					68				27.8
Other noninterest expense				1,530					1,351					179				13.2
Total noninterest expense		$		13,710			$		11,856			$		1,854				15.6		%

Salaries and employee benefits expense for the three months ended September 30, 2026 was $8.6 million compared to $7.0 million for the three months ended September 30, 2025, an increase of $1.6 million, or 23.3%. This increase was attributable to hiring new employees with skills and experience necessary to support our strategic goals coupled with annual merit increases. The average number of full-time equivalent employees was 210 for the three months ended September 30, 2026 compared to 194 for three months ended September 30, 2025.

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Occupancy and equipment expense for the three months ended September 30, 2026 was $944 thousand compared to $850 thousand for the three months ended September 30, 2025, an increase of $94 thousand, or 11.1%. This increase was primarily due to new leases and rental increases, property taxes and depreciation, and upkeep related to the properties.

Software and other technology expense for the three months ended September 30, 2026 was $894 thousand compared to $788 thousand for the three months ended September 30, 2025, an increase of $106 thousand, or 13.5%. This expense was primarily comprised of our information technology services, software licenses and maintenance and commensurate with the Company's growth.

Other professional services expense for the three months ended September 30, 2026 was $503 thousand compared to $571 thousand for the three months ended September 30, 2025, a decrease of $68 thousand, or 11.9%. This decrease was across multiple categories, primarily due to lower accounting fees, outside professional services, and recruiting fees; offset by a net increase in other categories, primarily legal fees expense.

Data processing expense for the three months ended September 30, 2026 was $560 thousand compared to $647 thousand for the three months ended September 30, 2025, a decrease of $87 thousand, or 13.4%. The data processing expense decrease was due to lower wire and account processing volumes, and other processing costs.

FDIC insurance and regulatory assessment expense for the three months ended September 30, 2026 was $353 thousand compared to $419 thousand for the three months ended September 30, 2025, a decrease of $66 thousand, or 15.8%. This decrease was primarily attributable to changes in the Bank's asset mix and growth rates.

Marketing and advertising expense for the three months ended September 30, 2026 was $313 thousand compared to $245 thousand for the three months ended September 30, 2025. Marketing and advertising costs are associated with digital advertising, mailings, and sponsorship. Marketing and advertising expense is included in Other noninterest expenses in our Company’s Consolidated Statements of Income.

Other noninterest expense, excluding marketing and advertising expense, for the three months ended September 30, 2026 were $1.5 million compared to approximately $1.4 million for the three months ended September 30, 2025, an increase of $179 thousand, or 13.2%. This increase was primarily attributable to increases across the board, principally other noninterest expense and deposit related expenses, offset by a decrease in Board of Directors fees. Included in other noninterest expense for the three months ended September 30, 2026 and 2025 were directors’ fees of $137 thousand and $176 thousand, respectively.

Income Tax Expense

Income tax expense for the three months ended September 30, 2026 and 2025 was $2.8 million and $2.0 million, respectively. Effective tax rates were 24.2% and 23.2% for the three months ended September 30, 2026 and 2025, respectively. The increase in effective tax rate was primarily due to a reduction in the deferred tax asset related to state taxes during the third quarter of 2026 of approximately $641 thousand. Excluding discrete items related to this deferred tax asset write-down and other stock-based compensation activity, the Company's effective tax rate at the end of the third quarter was 20.05%.

Results of Operations — Comparison of Results of Operations for the Nine Months Ended September 30, 2026 and 2025

The following discussion of our results of operations compares the nine months ended September 30, 2026 and 2025. We reported net income for the nine months ended September 30, 2026 of $22.4 million compared to net income of $17.8 million for the nine months ended September 30, 2025. The increase of $4.7 million was primarily due to growth of our net interest income as a result of an overall better performance, coupled with a higher noninterest income during the nine months ended September 30, 2026; offset by an increase in noninterest expense that was commensurate with our strategic growth.

Net Interest Income

The following table presents, for the periods indicated, 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) interest rate spread; and (v) net interest margin. The income and yield from non-taxable investment securities was not adjusted for tax equivalency.

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		For the Nine Months Ended September 30,
		2026														2025
		Average					Interest and					Yield /				Average					Interest and					Yield /
(dollars in thousands)		Balance					Fees					Rate				Balance					Fees					Rate
Earning Assets:
Cash and due from banks		$		24,180			$		378				2.09		%	$		21,509			$		375				2.33		%
Federal funds sold				60,421					1,687				3.73					67,659					2,277				4.50
Investment securities				352,870					11,569				4.38					337,852					11,800				4.67
Loans:
Loans held for sale				157,918					8,858				7.50					157,409					9,537				8.10
Gross loans held for investment				1,673,572					78,512				6.27					1,493,081					70,718				6.33
Total earning assets				2,268,961					101,004				5.95					2,077,510					94,707				6.09
Noninterest-earning assets				98,655														101,460
Total assets		$		2,367,616												$		2,178,970
Interest-bearing liabilities:
Demand deposits		$		216,075			$		1,593				0.99		%	$		196,921			$		1,078				0.73		%
Money market deposits				716,956					15,736				2.93					584,943					13,856				3.17
Savings deposits				35,457					144				0.54					35,274					132				0.50
Time deposits				736,173					20,499				3.72					791,445					24,289				4.10
Total interest-bearing deposits				1,704,661					37,972				2.98					1,608,583					39,355				3.27
Borrowings				37,784					1,096				3.88					22,845					1,325				7.75
Total interest-bearing liabilities		$		1,742,445			$		39,068				3.00		%	$		1,631,428			$		40,680				3.33		%
Noninterest-bearing liabilities:
Noninterest-bearing deposits		$		329,028												$		301,997
Other noninterest-bearing liabilities				29,002														27,944
Total noninterest-bearing liabilities				358,030														329,941
Shareholders' equity				267,141														217,601
Total liabilities and shareholders' equity		$		2,367,616												$		2,178,970
Net interest income							$		61,936												$		54,027
Net interest spread													2.95		%												2.76		%
Net interest margin													3.65		%												3.48		%

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 tables set forth the effects of changing interest rates and volumes on our net interest income during the periods indicated. The 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). Changes applicable to both volumes and rate have been allocated to volume.

		Nine Months Ended September 30, 2026 Compared to Nine Months Ended September 30, 2025
		Increase (Decrease) Due to Change in:
(dollars in thousands)		Volume					Yield/Rate					Total Change
Earning Assets:
Cash and due from banks		$		72			$		(69	)		$		3
Federal funds sold				102					(692	)				(590	)
Investment securities				1,059					(1,290	)				(231	)
Loans:
Loans held for sale				582					(1,261	)				(679	)
Gross loans held for investment				8,994					(1,200	)				7,794
Total earning assets		$		10,809			$		(4,512	)		$		6,297
Interest-bearing liabilities:
Demand deposits		$		(151	)		$		666			$		515
Money market deposits				3,694					(1,814	)				1,880
Savings deposits				(8	)				20					12
Time deposits				223					(4,013	)				(3,790	)
Total interest-bearing deposits		$		3,758			$		(5,141	)		$		(1,383	)
Borrowings				952					(1,181	)				(229	)
Total interest-bearing liabilities		$		4,710			$		(6,322	)		$		(1,612	)
Net interest income		$		6,099			$		1,810			$		7,909

Net interest income for the nine months ended September 30, 2026 was $61.9 million compared to $54.0 million for the nine months ended September 30, 2025, an increase of $7.9 million, or 14.6%. This increase was primarily due to an increase in the average balance of our total interest-earning assets while the yield decreased at a lower rate compared with the decrease in the average rate paid on interest-bearing liabilities despite growth in average interest-bearing liabilities. The increase in the average balance for the total interest-earning assets was primarily due to growth in average loans held-for-investment. The yield on total earning assets and interest-bearing liabilities decreased by 14 and 33 basis points, respectively, during the same period.

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Total interest income for the nine months ended September 30, 2026 was $101.0 million compared to $94.7 million for the nine months ended September 30, 2025, an increase of $6.3 million, or 6.6%. This increase was primarily due to growth in our average total earning assets by $191.5 million principally in the average LHFI portfolio, notwithstanding a decrease in yields by 14 basis points for the total earning assets from the comparable period.

Interest and fees on LHFI were $78.5 million for the nine months ended September 30, 2026 compared to $70.7 million for the nine months ended September 30, 2025, an increase of $7.8 million, or 11.0%. This increase was primarily attributable to growth of average LHFI which grew by $180.5 million, notwithstanding the yield decrease by 6 basis points compared to the same period last year. Interest and fees on LHFS were $8.9 million for the nine months ended September 30, 2026 compared to $9.5 million for the nine months ended September 30, 2025, a decrease of $679 thousand, or 7.1%, coupled with a decrease in yields by 60 basis points.

Interest income on investment securities was $11.6 million for the nine months ended September 30, 2026 compared to $11.8 million for the nine months ended September 30, 2025, a decrease of $231 thousand, or 2.0%. This decrease was primarily driven by the yield on investment securities decreasing by 29 basis points, notwithstanding an increase in the average balance by $15.0 million.

Interest expense for the nine months ended September 30, 2026 was $39.1 million compared to approximately $40.7 million for the nine months ended September 30, 2025, a decrease of $1.6 million, or 4.0%. This decrease was primarily attributable to a 33 basis point decrease in the average yield on overall total interest-bearing liabilities, primarily in money market and time deposits accounts, due to rates adjustments, coupled with a decrease in yield for the borrowings. Average borrowings outstanding increased from September 30, 2025 to September 30, 2026 by $14.9 million, or 65.4%, while the yield decreased by 387 basis points, primarily due to the repayment of the Company's subordinated debt towards the end of third quarter of 2025.

Net interest margin for the nine months ended September 30, 2026 and 2025 was 3.65% and 3.48%, respectively. 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. This increase in our net interest margin was primarily due to a 33 basis points decrease in the rate on interest-bearing liabilities, partially offset by a 14 basis points decrease in total earning assets yield.

Provision for Credit Losses

Provision for credit losses for the nine months ended September 30, 2026 was $611 thousand compared to $2.0 million for the nine months ended September 30, 2025, a decrease of $1.4 million. This decrease was primarily attributable to higher reserves related to loan growth and an increase in reserves of individually analyzed collateral-dependent loans during the nine months ended September 30, 2025, offset by other changes in loss rates and economic conditions during the nine months ended September 30, 2026. Our allowance for credit losses as a percentage of gross LHFI at September 30, 2026 and 2025 was 1.10% and 1.16%, respectively.

Noninterest Income

Noninterest income for the nine months ended September 30, 2026 was $7.5 million, an increase of $1.7 million or 29.8%, compared to $5.8 million for the nine months ended September 30, 2025. This increase was across multiple categories, primarily gain on sale of GGL, income from mortgage originations and service charges on deposit accounts, offset by a decrease in other noninterest income.

The following table sets forth the various components of our noninterest income for the periods indicated:

		Nine Months Ended September 30,
(dollars in thousands)		2026					2025					Increase (decrease)
Noninterest income:
Bank-owned life insurance		$		1,398			$		1,349			$		49				3.6		%
Income from mortgage originations				1,172					846					326				38.5
Gain on sale of government guaranteed loans				2,202					878					1,324				150.8
Interchange and card fee income				773					761					12				1.6
Service charges on deposit accounts				736					634					102				16.1
Other noninterest income				1,217					1,308					(91	)			(7.0	)
Total noninterest income		$		7,498			$		5,776			$		1,722				29.8		%

Mortgage banking related income increased by $326 thousand to $1.2 million for the nine months ended September 30, 2026 compared to $846 thousand for the nine months ended September 30, 2025. This increase was primarily due to higher revenue from mortgage production which is comprised primarily of activity related to the sale of consumer mortgage loans as well as loan origination fees such as closing charges, document review fees, application fees, other loan origination fees, and loan processing fees, albeit slightly lower secondary market volume.

Gain on sale of GGL increased by $1.3 million to $2.2 million for the nine months ended September 30, 2026 compared to $878 thousand for the nine months ended September 30, 2025. The Company's gain on the sale of GGL volume increases or decreases based on the attractiveness of market premiums and the amount of inventory of loans that are saleable.

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Service charges on deposit accounts increased by $102 thousand to $736 thousand for the nine months ended September 30, 2026 compared to $634 thousand for the nine months ended September 30, 2025. This increase was attributable to higher number of NSF and overdraft fees charged during the nine months ended September 30, 2026.

Other noninterest income decreased by $91 thousand to $1.2 million for the nine months ended September 30, 2026 compared to approximately $1.3 million for the nine months ended September 30, 2025. This decrease was primarily due to a previously disclosed nonrecurring $438 thousand of income recognized from a Small Business Investment Company ("SBIC") partnership investment related to the sale of one of the fund's underlying investments during 2025; offset by a net increase in other noninterest income, primarily gain on sale of other loans and SBA loan servicing fees. Apart from this SBIC partnership related income and gain on sale of other loans, the largest component of other non-interest income generally consists of SBA loan servicing fees. SBA loan servicing fees increased by $93 thousand during the nine months ended September 30, 2026 compared to the same period in 2025.

Changes to BOLI income and interchange and card fee income remained relatively comparable between the nine months ended September 30, 2026 and 2025.

Noninterest Expense

Noninterest expense for the nine months ended September 30, 2026 was $40.1 million compared to $35.4 million for the nine months ended September 30, 2025, an increase of $4.8 million, or 13.5%. This increase was across multiple noninterest expense categories but primarily in salaries and employee benefits, due to Company's growth and compensation adjustments; offset by a net decrease in other categories, primarily other professional services.

The following table sets forth the major components of our noninterest expense for the nine months ended September 30, 2026 and 2025:

		Nine Months Ended September 30,
(dollars in thousands)		2026					2025					Increase (decrease)
Noninterest expense:
Salaries and employee benefits		$		24,973			$		20,676			$		4,297				20.8		%
Occupancy and equipment				2,705					2,452					253				10.3
Software and other technology expense				2,581					2,210					371				16.8
Other professional services				1,730					2,237					(507	)			(22.7	)
Data processing				1,897					1,924					(27	)			(1.4	)
Regulatory assessment				1,032					1,124					(92	)			(8.2	)
Marketing and advertising				868					747					121				16.2
Other noninterest expense				4,342					3,997					345				8.6
Total noninterest expense		$		40,128			$		35,367			$		4,761				13.5		%

Salaries and employee benefits expense for the nine months ended September 30, 2026 was $25.0 million compared to $20.7 million for the nine months ended September 30, 2025, an increase of approximately $4.3 million, or 20.8%. This increase was attributable to hiring new employees with skills and experience necessary to support our strategic goals and annual salary adjustments. The average number of full-time equivalent employees was 207 for the nine months ended September 30, 2026 compared to 187 for the nine months ended September 30, 2025.

Occupancy and equipment expense for the nine months ended September 30, 2026 was $2.7 million compared to $2.5 million for the nine months ended September 30, 2025, an increase of approximately $253 thousand, or 10.3%. This increase was primarily due to new leases and rental increases, property taxes and depreciation, and upkeep related to the properties.

Software and technology expense for the nine months ended September 30, 2026 was $2.6 million compared to $2.2 million for the nine months ended September 30, 2025, an increase of $371 thousand, or 16.8%. This expense primarily comprised information technology services, software licenses and maintenance and was generally commensurate with the Company's growth.

Other professional services expense for the nine months ended September 30, 2026 was $1.7 million compared to $2.2 million for the nine months ended September 30, 2025, a decrease of $507 thousand, or 22.7%. This decrease was primarily in loan-collection-related expenses and employees recruiting fees; offset by a net increase in other categories, principally legal fees.

Data processing expense for the nine months ended September 30, 2026 was $1.9 million similar to $1.9 million for the nine months ended September 30, 2025. Data processing expense was in line with the Company's wire and account processing volumes and other processing costs that were commensurate with growth, generally.

FDIC insurance and regulatory assessment expense for the nine months ended September 30, 2026 was approximately $1.0 million compared to $1.1 million for the nine months ended September 30, 2025, a decrease of $92 thousand, or 8.2%. This decrease was primarily attributable to changes in asset mix and asset growth rates from 2025 to 2026.

Marketing and advertising expense for the nine months ended September 30, 2026 was $868 thousand compared to $747 thousand for the nine months ended September 30, 2025, an increase of $121 thousand, or 16.2%. This increase was primarily attributable to

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higher marketing and advertising costs associated with increased digital advertising, mailings, and sponsorships during 2026. Marketing and advertising expense is included in other noninterest expenses in our Company’s Consolidated Statements of Income.

Other noninterest expense, excluding marketing and advertising expense, for the nine months ended September 30, 2026 were $4.3 million compared to approximately $4.0 million for the nine months ended September 30, 2025, an increase of $345 thousand, or 8.6%. This increase was across multiple categories but primarily was attributable to increases in general and administrative expense, other noninterest expense and other loan expense; offset by a net decrease in other noninterest categories, primarily board of directors fees and OREO writedowns. Included in other noninterest expenses for the nine months ended September 30, 2026 and 2025 were directors’ fees paid in cash of $406 thousand and $527 thousand, respectively.

Income Tax Expense

Income tax expense for the nine months ended September 30, 2026 and 2025 was $6.3 million and $4.6 million, respectively. Effective tax rates were 21.8% and 20.7% for the nine months ended September 30, 2026 and 2025, respectively. The increase in effective tax rate was primarily due to varying amounts of tax credits recognized in the comparative periods, offset by the write-off of a state deferred tax asset and other discrete items related to stock-based compensation. We carried a net deferred tax asset of $17.6 million  and $16.3 million at September 30, 2026 and 2025, respectively.

Financial Condition

Total Assets

Total assets increased $117.2 million, or 5.1%, to $2.42 billion at September 30, 2026 compared to $2.31 billion at December 31, 2025. The increasing trend in total assets was primarily attributable to continued growth of our loans held-for-investment portfolio.

Loans

Loans represent the largest portion of our earning assets, substantially greater than the securities portfolio or any other category of assets.

Average loans, including both LHFI and LHFS, were 80.7% and 79.8% of average earning assets as of September 30, 2026 and December 31, 2025, respectively. Therefore, the quality and diversification of our loan portfolio is an important consideration when reviewing our financial condition. The Company has established systematic procedures for approving and monitoring loans that vary depending on the size and nature of the loan and applies these procedures in a disciplined manner. Total gross loans of $1.93 billion at September 30, 2026 represent an increase of $141.1 million or 7.9% as compared to December 31, 2025.

LHFS are primarily comprised of loans acquired through mortgage warehouse activities through our MBF division. We act as a warehouse lender by purchasing loans originated by third-party mortgage originators and selling these loans to other third-party investors. Additionally, we sell other types of loans, such as GGL or marine loans, through the normal course of business; when the Company has the intent to sell these loans, they are transferred from LHFI to LHFS. LHFS at September 30, 2026 were $142.4 million compared to $170.9 million at December 31, 2025. The decrease in LHFS was due to decreased mortgage warehouse volume driven by increases in market interest rates on mortgages that tempered demand.

Gross LHFI increased $169.6 million, or 10.5%, to $1.79 billion as of September 30, 2026 compared to approximately $1.62 billion at December 31, 2025. There was a higher market demand across our commercial and retail loans portfolio during the nine months ended September 30, 2026 from December 31, 2025 as the Company experienced strong loan demand and continues to close many deals in the pipeline.

The Company engages in a full complement of lending activities, including CRE loans, construction loans, C&I, and consumer purpose loans. Our loan portfolio has concentrations of over 10% of LHFI in income producing CRE, senior housing, marine vessels loans, and residential mortgages with the remaining balance in other categories within commercial and retail loans categories. The Bank's ratio of commercial real estate loans, excluding owner-occupied loans, to total regulatory capital was 253.0% and 230.0% as of September 30, 2026 and December 31, 2025, respectively. The Bank's ratio of acquisition, development and construction loans to total regulatory capital was 52.5% and 54.5% as of September 30, 2026 and December 31, 2025, respectively.

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The following table presents the balance and associated percentage of each major category in our loan portfolio as of September 30, 2026 and December 31, 2025:

			As of September 30, 2026										As of December 31, 2025
(dollars in thousands)			Amount				% of Total						Amount				% of Total
Commercial loans
Acquisition, development, and construction		$		134,395				7.5		%		$		119,352				7.4		%
Income producing CRE				449,103				25.1						378,179				23.4
Owner-occupied CRE				140,420				7.9						92,787				5.7
Senior housing				308,295				17.3						259,529				16.0
Commercial and industrial				113,656				6.4						145,380				9.0
Total commercial loans		$		1,145,869				64.2		%		$		995,227				61.5		%
Retail loans
Marine vessels		$		320,682				17.9		%		$		312,096				19.3		%
Residential mortgages				203,476				11.4						199,991				12.4
Cash value life insurance LOC				93,210				5.2						87,172				5.4
Other consumer				23,686				1.3						22,829				1.4
Total retail loans		$		641,054				35.8		%		$		622,088				38.5		%
Gross loans held for investment		$		1,786,923				100.0		%		$		1,617,315				100.0		%
Allowance for credit losses				(19,623	)									(18,743	)
Total loans held for investment, net		$		1,767,300								$		1,598,572

The Company has established a policy for managing concentration limits in the loan portfolio for commercial real estate, senior housing, and marine lending, among other loan types. All loan types are within established limits. We use underwriting guidelines to assess the borrowers’ historical cash flow to determine debt service, and we further stress test the debt service under higher interest rate scenarios. Financial and performance covenants are used in commercial lending agreements, when appropriate, to allow us to react to a borrower’s deteriorating financial condition, should that occur.

The following table presents the maturity distribution of our loans as of September 30, 2026. The tables show the distribution of such loans between those loans with predetermined (fixed) interest rates and those with variable (floating) interest rates:

		As of September 30, 2026
		Due in One Year or Less								Due after One Year Through Five Years								Due after Five Years Through Fifteen Years								Due after Fifteen Years
(dollars in thousands)		Fixed Rate				Adjustable Rate				Fixed Rate				Adjustable Rate				Fixed Rate				Adjustable Rate				Fixed Rate				Adjustable Rate				Total
Commercial loans
Acquisition, development, and   construction		$	51			$	62,738			$	686			$	63,574			$	-			$	2,545			$	-			$	4,801			$	134,395
Income producing CRE			86,917				35,457				99,854				164,138				11,953				28,220				1,113				21,451				449,103
Owner-occupied CRE			8,416				2,078				60,821				5,896				5,703				31,701				1,215				24,590				140,420
Senior housing			942				83,945				13,926				209,482				-				-				-				-				308,295
Commercial and industrial			5,714				4,594				31,801				21,592				26,175				23,326				6				448				113,656
Total commercial loans		$	102,040			$	188,812			$	207,088			$	464,682			$	43,831			$	85,792			$	2,334			$	51,290			$	1,145,869
Retail loans
Marine vessels		$	4,592			$	-			$	12			$	-			$	33,148			$	521			$	263,620			$	18,789			$	320,682
Residential mortgages			6,097				1,517				4,561				1,658				9,545				8,653				92,310				79,135				203,476
Cash value life insurance LOC			-				22,333				-				70,877				-				-				-				-				93,210
Other consumer			415				63				1,199				1				9,042				85				12,547				334				23,686
Total retail loans		$	11,104			$	23,913			$	5,772			$	72,536			$	51,735			$	9,259			$	368,477			$	98,258			$	641,054
Gross loans held for      investment		$	113,144			$	212,725			$	212,860			$	537,218			$	95,566			$	95,051			$	370,811			$	149,548			$	1,786,923

The following is a discussion of the Company's segments and classes of LHFI:

Commercial Loans

As of September 30, 2026, our commercial loan portfolio comprised of approximately $1.15 billion or 64.2%, of loans, compared to $995.2 million, or 61.5% of loans, as of December 31, 2025. Our total commercial loan balances increased by $150.6 million, or 15.1% at September 30, 2026 compared to December 31, 2025.

Following below are our principal commercial loans portfolio categories:

Acquisition, Development, and Construction – ADC loans include both loans and credit lines for the purpose of purchasing, carrying, and developing land into residential subdivisions or various types of commercial developments, such as industrial, hospitality, warehouse, retail, office, and multi-family. This category also includes loans and credit lines for construction of residential developments, multi-family buildings, and commercial buildings. The Company generally engages in ADC lending primarily in local markets served by its branches, and through our homebuilder finance and government guaranteed lending lines of business. The Company recognizes that risks are inherent in the financing of commercial real estate development and construction. These risks include location, market conditions and price volatility, change in interest rates, demand for developed land, lots and buildings, desirability of

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features and styling of completed developments and buildings, competition from other developments and builders, traffic patterns, remote work patterns, governmental jurisdiction, tax structure, availability of utilities, roads, public transportation and schools, availability of permanent financing for homebuyers, zoning, environmental restrictions, lawsuits, economic and business cycle, labor, and reputation of the builder or developer.

Each ADC loan is underwritten to address: (i) the desirability of the project, its market viability and projected absorption period; (ii) the creditworthiness of the borrower and the guarantor as to liquidity, cash flow and assets available to ensure performance of the loan; (iii) equity contribution to the project; (iv) the developer’s experience and success with similar projects; and (v) the value of the collateral. ADC loans are inspected periodically to ensure that the project is on schedule and eligible for requested draws. Inspections may be performed by construction inspectors hired by the Company or by appropriate loan officers and are conducted periodically to monitor the progress of a particular project. These inspections may also include discussions with project managers and engineers. Rising interest rates and the potential for slowing economic conditions could negatively impact borrowers’ and guarantors’ ability to repay their debt which could make more of the Company’s loans collateral-dependent.

The following table presents the balance and associated percentage of each category in our ADC loan portfolio as of September 30, 2026 and December 31, 2025:

			As of September 30, 2026										As of December 31, 2025
(dollars in thousands)			Amount				% of Total						Amount				% of Total
ADC Loans by Type
Residential Builder		$		64,864				48.3		%		$		51,324				43.0		%
Multifamily				17,607				13.1						20,886				17.5
Office				-				0.0						904				0.8
Retail				2,580				1.9						666				0.5
Restaurant				833				0.6						-				0.0
Hospitality				14,277				10.6						3,255				2.7
Other				34,234				25.5						42,317				35.5
Total ADC loans		$		134,395				100.0		%		$		119,352				100.0		%

As of September 30, 2026, our ADC loans comprised of $134.4 million, or 7.5%, of loans, compared to $119.4 million, or 7.4% of loans, as of December 31, 2025. Our ADC loan balances increased $15.0 million or 12.6% since December 31, 2025 due to continued demand of the ADC loans in our markets.

Income Producing CRE – Income producing CRE loans include loans to finance income-producing commercial and multifamily properties. Lending in this category is generally limited to properties located in the Company’s market area with only limited exposure to properties located elsewhere but owned by in-market borrowers. Loans in this category include loans for neighborhood retail centers, medical and professional offices, single retail stores, warehouses and apartments leased generally to local businesses and residents. The underwriting of these loans takes into consideration the occupancy, rental rates, and local market demand as well as the financial health of the borrower. The primary risk associated with loans secured with income producing property is the inability of that property to produce adequate cash flow to service the debt. High unemployment, significant increases to interest rates, generally weak economic conditions and/or an oversupply in the market may result in our customers having difficulty achieving adequate occupancy and/or rental rates. Payments on such loans are often dependent on successful operation or management of the properties. The Company's income producing CRE portfolio is diverse, with exposure spread across multiple real estate purposes.

The following table presents the balance and associated percentage of each category in our income producing CRE loan portfolio as of September 30, 2026 and December 31, 2025:

			As of September 30, 2026										As of December 31, 2025
(dollars in thousands)			Amount				% of Total						Amount				% of Total
Income Producing CRE by Type
Hospitality		$		154,873				34.5		%		$		146,540				38.8		%
Retail				82,115				18.3						77,586				20.5
Office				44,828				10.0						28,100				7.4
Multifamily				72,439				16.1						41,682				11.0
Industrial				10,327				2.3						5,442				1.4
Restaurant				14,785				3.3						9,909				2.6
Medical				1,370				0.3						1,644				0.5
Other				68,366				15.2						67,276				17.8
Total income producing CRE loans		$		449,103				100.0		%		$		378,179				100.0		%

As of September 30, 2026, our income producing CRE loans comprised of $449.1 million, or 25.1%, of loans, compared to $378.2 million, or 23.4% of loans, as of December 31, 2025. The weighted average original or renewal loan-to-value ("LTV") of income producing CRE loans with an outstanding balance of greater than $500 thousand, which makes up 97.6% and 96.8% of the income producing CRE balances was 59.0% and 59.7% as of September 30, 2026 and December 31, 2025, respectively. Our income producing CRE loan balances increased $70.9 million, or 18.8% since December 31, 2025 as the demand has improved for this loan type.

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Owner-Occupied CRE – Owner-occupied CRE loans include loans secured by business facilities to finance business operations, equipment and owner-occupied facilities primarily for small and medium-sized enterprises. These include both lines of credit and term loans which are amortized over the useful life of the assets financed. Personal guarantees, if applicable, are generally required for these loans. The Company recognizes that risk from economic cycles, pandemics, government regulation, supply chain disruptions, product innovations or obsolescence, operational errors, lawsuits, natural disasters, losses due to theft or embezzlement, health or loss of key personnel, or competitive situations may adversely affect the scheduled repayment of business loans.

The following table presents the balance and associated percentage of each category in our owner-occupied CRE loan portfolio as of September 30, 2026 and December 31, 2025:

			As of September 30, 2026										As of December 31, 2025
(dollars in thousands)			Amount				% of Total						Amount				% of Total
Owner-occupied CRE by Type
Office		$		19,613				14.0		%		$		11,903				12.8		%
Restaurant				21,878				15.6						22,275				24.0
Medical				6,184				4.4						6,911				7.5
Retail				3,768				2.7						3,254				3.5
Industrial				9,878				7.0						8,972				9.7
Other				79,099				56.3						39,472				42.5
Total owner-occupied CRE loans		$		140,420				100.0		%		$		92,787				100.0		%

As of September 30, 2026, our owner-occupied CRE loans comprised of $140.4 million, or 7.9%, of loans, compared to $92.8 million, or 5.7% of loans, as of December 31, 2025. The weighted average original or renewal LTV of owner-occupied CRE loans with an outstanding balance of greater than $500 thousand, which makes up 83.2% and 74.0% of the owner-occupied CRE loans was 69.2% and 74.9% as of September 30, 2026 and December 31, 2025, respectively. Our owner-occupied CRE loan balances increased $47.6 million or 51.3% since December 31, 2025 although the competition remains fierce for this loan type.

Senior Housing – Senior housing loans support senior adult facilities, including loans for independent living communities, assisted living and memory care communities, nursing homes or skilled nursing facilities, and continuing care retirement communities. The Company recognizes that risk from high resident turnover, pandemics, government regulation, operator risk, increases in acuity, availability and cost of qualified staffing resources, technology risk, and other risks such as liability, insurance, reimbursement and regulatory changes may impact repayment of these loans. Underwriting focuses primarily on operator quality and business operations rather than income producing CRE property quality metrics.

The following table presents the balance and associated percentage of each category in our senior housing loans portfolio as of September 30, 2026 and December 31, 2025:

			As of September 30, 2026										As of December 31, 2025
(dollars in thousands)			Amount				% of Total						Amount				% of Total
Senior housing loans by Type
Independent living communities		$		70,592				22.9		%		$		51,032				19.7		%
Assisted living and memory care facilities				237,703				77.1						205,406				79.1
Nursing homes or skilled nursing facilities				-				0.0						3,091				1.2
Total senior housing loans		$		308,295				100.0		%		$		259,529				100.0		%

As of September 30, 2026, our senior housing loans comprised of $308.3 million or 17.3%, of loans, compared to $259.5 million, or 16.0% of loans as of December 31, 2025. The weighted average original or renewal LTV of senior housing loans was 63.0% and 52.8% as of September 30, 2026 and December 31, 2025, respectively. Our senior housing loans were comprised of 54.6% owner-occupied CRE, 43.2% non-owner occupied CRE and 2.2% construction loans as of September 30, 2026, and were comprised of 50.4% owner-occupied CRE, 41.9% non-owner occupied CRE and 7.7% construction loans at December 31, 2025. Our senior housing loan balances increased $48.8 million or 18.8% since December 31, 2025; nevertheless, the Company continues monitoring its concentration of senior housing loans.

Commercial and Industrial – C&I loans are loans and lines of credit to finance business operations, equipment and other non-real estate collateral primarily for small and medium-sized enterprises. These include both lines of credit and term loans which are amortized over the useful life of the assets financed. Personal and/or corporate guarantees are generally obtained where available and prudent. The Company recognizes that risk from economic cycles, commodity prices, pandemics, government regulation, supply-chain disruptions, product innovations or obsolescence, operational errors, lawsuits, natural disasters, losses due to theft or embezzlement, health or loss of key personnel or competitive situations may adversely affect the scheduled repayment of business loans.

As of September 30, 2026, our C&I loans comprised of $113.7 million, or 6.4% of loans, compared to $145.4 million, or 9.0% of loans, as of December 31, 2025. Our C&I loan balances decreased by $31.7 million or 21.8% since December 31, 2025 due to lower production.

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Retail Loans

As of September 30, 2026, our total retail loans comprised of $641.1 million, or 35.8% of loans, compared to $622.1 million, or 38.5% of loans, as of December 31, 2025. Our total retail loan balances increased $19.0 million or 3.0% since December 31, 2025 due to an increase in production and demand across the board for our retail products.

Following below are our principal retail loans portfolio categories:

Residential Mortgages – Residential mortgages are first or second-lien loans secured by a primary residence or second home. This category includes permanent mortgage financing, construction loans to individual consumers, and home equity lines of credit. The loans are generally secured by properties located within the local market area of the Bank's retail footprint which originates and services the loan. These loans are underwritten in accordance with the Company’s general loan policies and procedures which require, among other things, proper documentation of each borrower’s financial condition, satisfactory credit history, and property value. In addition to loans originated through the Company’s branches, the Company originates and services residential mortgages sold in the secondary market which are underwritten and closed pursuant to investor and agency guidelines. Significant and rapid declines in real estate values can result in residential mortgage loan borrowers having debt levels in excess of the current market value of the collateral.

As of September 30, 2026, our residential mortgage loans comprised of $203.5 million, or 11.4% of loans, compared to $200.0 million, or 12.4% of loans, as of December 31, 2025. Our residential mortgage loan balances increased modestly by $3.5 million or 1.7% since December 31, 2025 due to continued modest demand for our residential mortgage products.

During the nine months ended September 30, 2026, we originated $29.5 million and sold $16.1 million in home mortgage loans. During the year ended December 31, 2025, we originated $93.3 million and sold $46.6 million in home mortgage loans.

Marine Vessels – Marine vessel loans are a type of consumer loan used to finance the purchase of a boat or other marine craft. Functioning similarly to auto loans and personal loans, these installment loans come with a repayment term, fixed monthly payments and variable-or-fixed interest rates. These loans are underwritten in accordance with the Company’s general loan policies and procedures and are generally secured with title or preferred ships' mortgage on the marine vessel. The Company recognizes that risk of repayment can increase due to changes in economic cycles, pandemics, government regulation, natural disasters, or theft of marine vessels.

As of September 30, 2026, our marine vessels loans comprised of $320.7 million or 17.9%, of loans, compared to $312.1 million, or 19.3% of loans, as of December 31, 2025. Our marine vessels loan balances increased modestly by $8.6 million or 2.8% since December 31, 2025 due to the Company's intentional management of portfolio concentration.

Cash Value Life Insurance Line of Credit – Cash value life insurance ("CVLI") encompasses multiple types of life insurance that contain a cash value account. This cash value component typically earns interest or other investment gains and grows tax deferred. CVLI loans are generally lines of credit secured by cash value life insurance of the debtor and can be originated for personal or business purposes. Upon the delinquency of the loan or lapse of an insurance policy premium payment, the Company pursues liquidation of the policy cash value in order to satisfy the loan.

As of September 30, 2026, our CVLI loans comprised of $93.2 million, or 5.2% of loans, compared to $87.2 million, or 5.4% of loans, as of December 31, 2025. Our CVLI loan balances increased modestly by $6.0 million or 6.9% since December 31, 2025 as higher interest rates continue to soften demand for the product.

Other Consumer – As of September 30, 2026, our other consumer loans comprised of $23.7 million, or 1.3% of loans, compared to $22.8 million, or 1.4% of loans, as of December 31, 2025. Our other consumer loan balances increased modestly by $857 thousand or 3.8% since December 31, 2025 as higher interest rates continue to soften demand for the product.

The following table presents the balance and associated percentage of each category in our other consumer loans portfolio as of September 30, 2026 and December 31, 2025:

			As of September 30, 2026										As of December 31, 2025
(dollars in thousands)			Amount				% of Total						Amount				% of Total
Other consumer loans by Type
Unsecured student loans		$		7,172				30.3		%		$		8,712				38.2		%
Secured consumer purpose loans				16,314				68.9						13,921				61.0
Unsecured consumer purpose loans				200				0.8						196				0.8
Total other consumer loans		$		23,686				100.0		%		$		22,829				100.0		%

Internally Assigned Grades on LHFI

The Company utilizes an internal loan classification system for the Commercial portfolio that is updated to perpetually grade loans according to certain credit quality indicators. These credit quality indicators include, but are not limited to, recent credit performance, delinquency, liquidity, cash flows, debt coverage ratios, collateral type and LTV ratio. The Company determines its risk rating classification of the Retail lending portfolio based on nonaccrual and delinquency status in accordance with the Uniform Retail Credit Classification guidance and industry norms. See Note 3 to the consolidated financial statements.

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The following tables provides details of the Company’s loan and lease portfolio by segment, class, and internally
assigned grade at September 30, 2026 and December 31, 2025:

		As of September 30, 2026
(dollars in thousands)		Pass					Special mention					Substandard					Total
Commercial loans
Acquisition, development, and construction	$		134,395			$		-			$		-			$		134,395
Income producing CRE			448,028					-					1,075					449,103
Owner-occupied CRE			129,245					2,461					8,714					140,420
Senior housing			297,434					-					10,861					308,295
Commercial and industrial			109,955					-					3,701					113,656
Retail loans (1)
Marine vessels			320,682					-					-					320,682
Residential mortgages			203,088					-					388					203,476
Cash value life insurance LOC			93,210					-					-					93,210
Other consumer			23,661					-					25					23,686
Total	$		1,759,698			$		2,461			$		24,764			$		1,786,923

(1) Retail loans are not risk rated but are classified as performing or nonperforming. Performing loans are presented in the Pass category and nonperforming loans are in the Substandard category.

		As of December 31, 2025
(dollars in thousands)		Pass					Special mention					Substandard					Total
Commercial loans
Acquisition, development, and construction	$		119,352					-					-			$		119,352
Income producing CRE			377,711					-					468					378,179
Owner-occupied CRE			82,959					2,739					7,089					92,787
Senior housing			236,816					11,934					10,779					259,529
Commercial and industrial			141,020					212					4,148					145,380
Retail loans (1)
Marine vessels			312,096					-					-					312,096
Residential mortgages			199,601					-					390					199,991
Cash value life insurance LOC			87,172					-					-					87,172
Other consumer			22,829					-					-					22,829
Total	$		1,579,556			$		14,885			$		22,874			$		1,617,315

(1) Retail loans are not risk rated but are classified as performing or nonperforming. Performing loans are presented in the Pass category and nonperforming loans are in the Substandard category.

Pass rated loans were 98.5% of total LHFI at September 30, 2026 as compared to 97.7% at December 31, 2025. Special mention rated loans were 0.1% of total LHFI at September 30, 2026 as compared to 0.9% at December 31, 2025. Substandard loans were 1.4% of total LHFI at September 30, 2026 similar to 1.4% at December 31, 2025. The primary cause of the decrease in special mention loans during the comparative periods was a downgrade to substandard; however, several substandard loans showing improved financial condition were upgraded to pass, leaving the substandard balance comparable with the prior year end.

Nonperforming Loans

Loans are considered past due or delinquent when the contractual principal or interest due in accordance with the terms of the loan agreement or any portion thereof remains unpaid after the due date of the scheduled payment. Loans are placed on nonaccrual status when it becomes probable that interest is not fully collectable generally when the loan becomes 90 days past due. Once loans are placed on nonaccrual status, previously accrued but unpaid interest is reversed from interest income, and the accrual of interest income is suspended. Future payments received are applied to the principal balance of the loan. If and when borrowers demonstrate the sustained ability to repay such loans in accordance with the loan’s contractual terms, the loan may be returned to accrual status. Loans which become 90 days past due are reviewed for collectability of principal. Principal amounts deemed uncollectible are charged off against the provision for credit losses on loans, unless such loans are in the process of modification, collection through repossession, or foreclosure. Certain consumer loans are not placed on nonaccrual but are monitored and charged-off at 120 days past due.

Real estate we acquire as a result of foreclosure or by deed-in-lieu of foreclosure is classified as other real estate owned until sold and is recorded at the lower of cost or fair value, minus estimated costs to sell. Subsequent to foreclosure, losses resulting from the periodic revaluation of the property are charged to loss on OREO, net and a new carrying value is established. Any gains or losses realized at the time of disposal or subsequent write-downs are reflected in the Consolidated Statements of Income. Expenses to maintain such assets are included in net cost of operation of OREO.

Nonperforming loans include loans 90 days or more past due and still accruing and loans accounted for on a nonaccrual basis. Nonperforming assets consist of nonperforming loans in addition to OREO, if any.

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The following table sets forth the allocation of our nonperforming assets among our different asset categories as of September 30, 2026 and December 31, 2025:

			September 30,				December 31,
(dollars in thousands)			2026				2025
Nonaccrual loans (1)			$	15,055			$	18,306
Past due loans 90 days and still accruing				25				-
Total nonperforming loans				15,080				18,306
Other real estate owned				-				-
Total nonperforming assets			$	15,080			$	18,306
Nonperforming loans to gross LHFI				0.84	%			1.13	%
Nonperforming assets to total assets				0.62	%			0.79	%
Allowance for credit losses to total LHFI				1.10	%			1.16	%

(1) Nonaccrual loans include balances of approximately $4.2 million and $4.1 million that are covered by government guarantees at September 30, 2026 and December 31, 2025, respectively.

Nonperforming loans were $15.1 million and $18.3 million at September 30, 2026 and December 31, 2025, respectively. The decrease in nonperforming loans was primarily due to a $4.2 million paydown of one nonaccrual senior housing loan, offset by modest additions to nonaccrual loans.

The following table sets forth the major classifications of nonaccrual loans as of September 30, 2026 and December 31, 2025:

		September 30,					December 31,
(dollars in thousands)		2026					2025
Commercial loans
Income producing CRE		$	454				$	-
Owner-occupied CRE			3,514					3,074
Senior housing			6,998					10,779
Commercial and industrial			3,701					4,063
Retail loans
Residential mortgages			388					390
Total nonaccrual loans		$	15,055				$	18,306

Allowance for Credit Losses on Loans

The ACL on loans is a valuation allowance estimated at each balance sheet date in accordance with GAAP that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans. The ACL represents management's best estimate of credit losses expected over the life of the loan, adjusted for expected contractual payments and the impact of prepayment expectations. ACL is not required for LHFS and is only recorded for LHFI.

The Company estimates the ACL on loans based on the underlying loans’ amortized cost basis, which is the amount at which the financing receivable is originated or acquired, adjusted for applicable accretion or amortization of premium, discount, and net deferred fees or costs, collection of cash, and charge-offs. In the event that collection of principal becomes uncertain, the Company has policies in place to reverse accrued interest in a timely manner. It is the Company's policy to write off uncollectible interest receivable of LHFI when it is considered uncollectible, which is generally when an asset is placed on nonaccrual and exclude it from the ACL.

Expected credit losses are reflected in the ACL through a charge to provision for credit losses. When the Company deems all or a portion of a loan to be uncollectible the appropriate amount is written off and the ACL is reduced by the same amount. Loans are charged off against the ACL when management believes the collection of the principal is unlikely. Subsequent recoveries of previously charged off amounts, if any, are credited to the ACL when received. See Note 1 of our consolidated financial statements as of December 31, 2025 on the Company’s 2025 Form 10-K for additional information regarding ACL policy.

It is management's policy to maintain the ACL at a level adequate for risks inherent in the loan portfolio. Based on the information currently available, management believes that our ACL is adequate. However, the loan portfolio can be adversely affected if economic conditions or the real estate market in our market areas were to weaken. The effect of such events, although uncertain at this time, could result in an increase in the level of nonperforming loans and increased loan losses, which could adversely affect our future growth and profitability. No assurance of the ultimate level of credit losses can be given with any certainty.

The allowance for credit losses on loans was $19.6 million at September 30, 2026 compared to $18.7 million at December 31, 2025, an increase of $880 thousand, or 4.7%, primarily attributed to increased loan volume and changes to individually analyzed loans, offset by other changes in loss rates.

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Analysis of the Allowance for Credit Losses on Loans. The following table provides an analysis of the ACL on loans and net charge-offs for the periods presented:

		As of				As of
(dollars in thousands)		September 30, 2026				December 31, 2025
Allowance for credit losses on loans at end of period (1)		$	19,623			$	18,743
Loan balances:
Total loans held for investment, end of period		$	1,786,923			$	1,617,315
Average loans held for investment		$	1,673,572			$	1,511,831
Net charge-offs to average LHFI			0.01	%			0.02	%
Allowance for credit losses on loans to total LHFI (1)			1.10	%			1.16	%
Nonaccrual loans as a percentage of end of period loans			0.84	%			1.13	%
Allowance for credit losses on loans to nonaccrual loans   at end of period (1)			130.34	%			102.39	%
Allowance for credit losses on loans to total nonperforming loans   at end of period (1)			130.13	%			102.39	%

(1) Excludes allowance for credit losses for unfunded loans commitments.

At September 30, 2026, the ACL on loans totaled $19.6 million, or 1.10% of LHFI, compared to $18.7 million, or 1.16% of LHFI, at December 31, 2025. The ACL on loans as a percentage of loans held-for-investment was 1.10% as of September 30, 2026, compared to 1.16% as of December 31, 2025.

For the nine months ended September 30, 2026, our net charge-off ratio as a percentage of average loans, as annualized, was 0.01%, compared to 0.02% for the year ended December 31, 2025. Originating and maintaining high quality loans is a top priority for the management.

As of September 30, 2026, our ratio of nonperforming assets to total assets was 0.62%, compared to 0.79% as of December 31, 2025. The decrease was primarily due to a $4.2 million paydown of one nonaccrual senior housing loan, offset by modest additions to nonaccrual loans. Adjusted nonperforming assets1, which excludes the guaranteed portions of nonaccrual loans, was $10.9 million, or 0.45% of total assets, at September 30, 2026 compared to $14.2 million, or 0.62% of total assets, at December 31, 2025.

The following table allocates the allowance for credit losses on loans by loan category for the periods presented:

		As of September 30, 2026									As of December 31, 2025
(dollars in thousands)		Amount				% of Loans in each category to total loans					Amount				% of Loans in each category to total loans
Commercial loans
Acquisition, development, and   construction		$	1,769				7.5		%		$	1,623				7.4		%
Income producing CRE			6,901				25.1					7,027				23.4
Owner-occupied CRE			1,095				7.9					870				5.7
Senior housing			4,111				17.3					4,051				16.0
Commercial and industrial			1,401				6.4					902				9.0
Total commercial loans		$	15,277				64.2		%		$	14,473				61.5		%
Retail loans
Marine vessels			1,560				17.9					1,412				19.3
Residential mortgages			2,336				11.4					2,412				12.4
Cash value life insurance LOC			97				5.2					82				5.4
Other consumer			353				1.3					364				1.4
Total retail loans		$	4,346				35.8		%		$	4,270				38.5		%
Total allowance for credit losses      on loans		$	19,623				100.0		%		$	18,743				100.0		%

Allowance for Credit Losses for Unfunded Commitments

The Company records an ACL for unfunded loan commitments, unless the commitments to extend credit are unconditionally cancelable, through a charge to provision for credit losses in the Company’s Consolidated Statements of Income. The ACL for unfunded commitment exposures is estimated by loan segment at each balance sheet date under the CECL model using the same methodologies as portfolio loans, taking into consideration the likelihood that funding will occur. The ACL for unfunded commitments is included in Other liabilities on the Company’s Consolidated Balance Sheets.

As of September 30, 2026, the ACL for unfunded commitments was $3.6 million compared to $4.0 million at December 31, 2025. The decrease in the ACL for unfunded commitments was primarily due to a reduction in unfunded commitments exposure, considering projected funding rates, coupled with a decrease in modeled loss rates.

1 Considered non-GAAP financial measure - See Section named "Non-GAAP Financial Measure Reconciliations" for reconciliation of GAAP to non-GAAP financial measures.

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Net Charge-offs

The following table summarizes net charge-offs to average loans for the nine months ended September 30, 2026, as annualized, and for the year ended December 31, 2025:

		For the Nine Months Ended										For the Year Ended
		September 30, 2026										December 31, 2025
(dollars in thousands)		Average Loans				Net Charge-offs (Recoveries)				Net Charge-offs to Average Loans (1)		Average Loans				Net Charge-offs (Recoveries)				Net Charge-offs to Average Loans
Commercial loans
Acquisition, development,  and construction		$	130,983			$	-			0.00%		$	95,304			$	-			0.00%
Income producing CRE			400,971				-			0.00%			351,976				-			0.00%
Owner-occupied CRE			100,694				-			0.00%			88,869				-			0.00%
Senior housing			261,177				-			0.00%			235,392				-			0.00%
Commercial and industrial			150,038				(7	)		-0.01%			152,268				(13	)		-0.01%
Retail loans
Marine vessels			313,505				27			0.01%			296,493				162			0.05%
Residential mortgages			204,479				(3	)		(0.00%)			182,995				(35	)		-0.02%
Cash value life insurance LOC			88,066				-			0.00%			87,222				-			0.00%
Other consumer			23,659				78			0.44%			21,312				221			1.04%
		$	1,673,572			$	95			0.01%		$	1,511,831			$	335			0.02%

(1) Represents annualized September 30, 2026 data.

Net charge-offs were $95 thousand and $335 thousand as of September 30, 2026 and December 31, 2025, respectively.

Deposits

Deposits represent our Bank’s primary source of funds. We gather deposits primarily through our branch locations and targeting new deposit relationships by our bankers. We offer a variety of deposit products including demand deposits accounts, interest-bearing products, savings accounts, and certificates of deposit ("CDs"). We put continued effort into gathering noninterest demand deposits accounts through marketing to our existing and new loan customers, customer referrals, and expansion into new markets. As the Company wins new loan customers and targets new deposit relationships with competitive rates on interest bearing accounts, our bankers are focused on ensuring that we win the entire deposit relationships, including operating accounts, so that we can preserve our attractive mix of deposits.

Total deposits increased $113.1 million, or 5.7%, to $2.10 billion at September 30, 2026 compared to $1.99 billion at December 31, 2025. As of September 30, 2026, 16.2% of total deposits were comprised of noninterest-bearing deposits accounts and 83.8% of interest-bearing deposit accounts compared to 15.7% and 84.3%, respectively, as of December 31, 2025. These changes were due to a continued result of pursuing and winning new deposit relationships as well as maintaining our existing deposit relationships; notwithstanding to seasonal outflows associated with our property management clients experienced during the third quarter of 2026.

At September 30, 2026, we had total brokered CDs of $257.0 million, or 12.2% of total deposits, compared to $307.0 million, or 15.5% of total deposits, at December 31, 2025. We selectively use brokered CDs, subject to certain well defined limits, to support targeted loan growth, manage liquidity, and manage interest rate risk. Our level of brokered CDs varies from time to time depending on competitive interest rate conditions and other factors and tends to increase as a percentage of total deposits when the brokered CDs are less costly than issuing internet certificates of deposit or borrowing from the FHLBA.

At September 30, 2026, our ICS money market One-Way Buy deposits were $70.0 million, or 3.3% of total deposits. There were no ICS money market One-Way Buy deposits at December 31, 2025. We use ICS One-Way Buy to deliberately purchase floating-rate wholesale deposits from the IntraFi network to inject liquidity and replace longer-term liabilities without a reciprocal deposit exchange.

The Company also had reciprocal deposits of $159.0 million and $174.5 million at September 30, 2026 and December 31, 2025, respectively.

As of September 30, 2026, our fifteen largest depositor relationships, excluding brokered deposits and One-Way Buy deposits, totaled $227.0 million, or 10.8%, of total deposits. Our deposits with directors and affiliated entities totaled $40.1 million as of September 30, 2026. A withdrawal of some or all of these balances over a short period could create liquidity pressure, require the use of higher-cost funding sources, or impact balance sheet stability, particularly during periods of market stress or declining depositor confidence.

Time deposits that exceed the FDIC insurance limit of $250 thousand at September 30, 2026 and December 31, 2025 were estimated to be $192.7 million and $186.4 million, respectively.

At September 30, 2026, our uninsured deposits were $816.3 million, or 38.9% of total deposits, compared to $719.4 million, or 36.2% of total deposits, at December 31, 2025.

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The following table summarizes our average deposit balances and weighted average rates as of September 30, 2026 and December 31, 2025:

			As of September 30, 2026										As of December 31, 2025
(dollars in thousands)			Average Balance				Weighted Average Rate(1)						Average Balance				Weighted Average Rate
Noninterest-bearing demand deposits		$		329,028			−			%		$		307,464			−			%
Interest-bearing demand deposits				216,075				0.99						199,395				0.76
Money market deposits				716,956				2.93						593,291				3.12
Savings deposits				35,457				0.54						35,179				0.50
Certificates of deposit				736,173				3.72						793,184				4.05
Total interest-bearing deposits		$		1,704,661				2.98		%		$		1,621,049				3.23		%
Total deposits		$		2,033,689				2.50		%		$		1,928,513				2.71		%

(1) Annualized weighted average rate for September 30, 2026.

The following tables set forth the maturity of time deposits as of September 30, 2026:

				As of September 30, 2026
(dollars in thousands)				Three Months					Three to Six Months					Six to Twelve Months					After Twelve Months					Total
Time deposits ($250,000 or less)			$		298,912			$		177,667			$		77,280			$		12,835			$		566,694
Time deposits (more than $250,000)					77,615					72,819					28,792					265					179,491
Total time deposits			$		376,527			$		250,486			$		106,072			$		13,100			$		746,185

Commercial Mortgage Servicing Rights

As of September 30, 2026 and December 31, 2025, we serviced $142.1 million and $124.4 million, respectively, of SBA and United States Department of Agriculture loans for others. The size of this loan servicing portfolio has grown over the last few years as we consistently originated and sold portions of these loans that we originate while retaining loan servicing rights. Activity for commercial mortgage servicing rights was as follows:

			Nine Months Ended					Year Ended
(dollars in thousands)			September 30, 2026					December 31, 2025
Balance, beginning of period		$		1,266			$		1,237
Additions				384					412
Disposals				-					-
Other changes(1)				(248	)				(383	)
Balance, end of period		$		1,402			$		1,266

(1) Comprised of amortization.

Our commercial mortgage servicing rights are included in intangible assets on our consolidated balance sheets and are reported net of amortization and impairment, if any.

Other Borrowings

The Company utilizes FHLBA advances as a supplementary funding source to finance our operations. These FHLBA advances are collateralized by securities owned by the Company and held in safekeeping by the FHLBA, FHLBA stock owned by the Company, and certain qualifying loans secured by real estate, including residential mortgage loans, home equity lines of credit and commercial real estate loans.

At September 30, 2026 and December 31, 2025, we had a maximum borrowing capacity from the FHLBA of $450.6 million and $176.3 million, respectively. We had $30.0 million of FHLBA advances outstanding as of September 30, 2026 and December 31, 2025.

The Company had no borrowings outstanding on a line of credit as of September 30, 2026 and December 31, 2025 which had a maximum commitment availability of $15.0 million at September 30, 2026 and December 31, 2025.

Investment Portfolio

The securities portfolio is the second largest component of our interest-earning assets and is managed to: (i) generate a prudent level of income consistent with our liquidity, credit, and interest rate risk objectives; (ii) support overall balance sheet management by helping manage interest rate and market risk exposures arising from our loan and funding activities; (iii) provide a readily available source of liquidity when funds are not immediately deployed into loans or are needed to meet deposit outflows and other liquidity needs; and (iv) provide eligible collateral for public funds and other secured funding arrangements.

We classify our securities as either available-for-sale or held-to-maturity at the time of purchase. Investment securities not classified as either held-to-maturity or trading are classified as available-for-sale. All of the securities in our investment portfolio were classified as available-for-sale as of September 30, 2026 and December 31, 2025. Investment securities available-for-sale are stated at fair value, with the unrealized gains and losses, net of tax, reported as a separate component of AOCI in the Consolidated Statements of

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Comprehensive Income. Monthly adjustments are made to reflect changes in the fair value of our available-for-sale securities.

Securities available-for-sale consist primarily of U.S. Treasuries, municipal obligations, mortgage-backed securities, asset-backed securities, and corporate debt securities. No issuer of the available-for-sale securities comprised more than ten percent of our shareholders’ equity as of September 30, 2026 and December 31, 2025, except Federal Home Loan Mortgage Corp ("FHLMC") and Federal National Mortgage Association ("FNMA') within those periods.

The following table summarizes the fair value of the available-for-sale securities portfolio as of September 30, 2026 and December 31, 2025:

			As of September 30,															As of December 31,
			2026															2025
(dollars in thousands)			Amortized Cost					Fair Value					Unrealized Gain (Loss)					Amortized Cost					Fair Value					Unrealized Gain (Loss)
U.S. Treasuries		$		1,000			$		946			$		(54	)		$		5,996			$		5,850			$		(146	)
Municipal obligations				62,293					53,011					(9,282	)				64,878					58,642					(6,236	)
Mortgage-backed securities				219,696					203,623					(16,073	)				188,509					180,060					(8,449	)
Asset-backed securities				22,532					22,405					(127	)				26,897					27,000					103
Corporate debt securities				53,285					52,679					(606	)				59,079					58,951					(128	)
Total available for sale securities		$		358,806			$		332,664			$		(26,142	)		$		345,359			$		330,503			$		(14,856	)

Certain securities have fair values less than amortized cost and, therefore, contain unrealized losses. At September 30, 2026, we evaluated securities available-for-sale which had an unrealized loss to determine whether the decline in the fair value below the amortized cost basis (impairment) is due to credit-related factors or noncredit-related factors. Any impairment that is not credit-related is recognized in other comprehensive income, net of applicable taxes. Credit-related impairment is recognized as an ACL on the balance sheet, limited to the amount by which the amortized cost basis exceeds the fair value with a charge to earnings. We do not intend to sell these securities, and it is not more likely than not that we will be required to sell them before recovery of the amortized cost basis, which may be at maturity.

The following table sets forth certain information regarding contractual maturities and the weighted average yields of our investment securities as of September 30, 2026. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Yields were computed using coupon interest, adding discount accretion or subtracting premium amortization, as appropriate, considering the expected life of each security. The weighted average yield for each maturity range was computed using the amortized cost of each security within the applicable maturity range. The yield on non-taxable investments was not adjusted for tax equivalency.

		As of September 30, 2026
		Due in One Year or Less										Due after One Year Through Five Years										Due after Five Years Through Ten Years										Due after Ten Years
(dollars in thousands)		Amortized Cost				Weighted Average Yield						Amortized Cost				Weighted Average Yield						Amortized Cost				Weighted Average Yield						Amortized Cost				Weighted Average Yield
U.S. Treasuries	$		-				-		%		$		1,000				1.28		%		$		-				-		%		$		-				-		%
Municipal obligations			-				-						7,046				1.92						32,217				2.15						23,030				3.11
Mortgage-backed securities			699				3.04						35,041				3.07						9,829				4.53						174,127				3.70
Asset-backed securities			-				-						121				2.01						5,027				4.70						17,384				4.83
Corporate debt securities			-				-						9,844				6.99						40,896				6.43						2,545				5.81
Total available for sale securities	$		699				3.04		%		$		53,052				3.61		%		$		87,969				4.55		%		$		217,086				3.75		%

We utilize interest rate swaps agreements for some of our AFS securities as part of our asset-liability management strategy to help mitigate its interest rate risk. The carrying amount of our hedged available-for-sale securities associated with fair value hedges was $23.0 million and $23.7 million as of September 30, 2026 and December 31, 2025, respectively.

Liquidity

The term liquidity refers to the measure of our ability to meet cash flow requirements of our depositors and borrowers, while at the same time meeting our operational, capital, and strategic cash flow needs, all at a reasonable cost. We continuously monitor our liquidity position to ensure that assets and liabilities are managed in a manner that will meet all short-term and long-term cash requirements. We manage our liquidity position to meet the daily cash flow needs of customers, while maintaining an appropriate balance between assets and liabilities in order to meet the return on investment objectives of our shareholders.

The Bank’s Asset and Liability Committee, as well as the Credit and Risk Committee of the Board of Directors are the primary groups responsible for monitoring the Bank’s liquidity position. We have identified various liquidity metrics and ratios, including the volatile funds ratio, non-core funding dependency ratio and loan to deposit ratio that these committees use to monitor the Bank’s liquidity position. Further, these groups are also responsible for reviewing and monitoring the stress testing of the Bank's overall liquidity under multiple liquidity stress scenarios. As of September 30, 2026 the Bank was in compliance with all internal policies and guidelines.

Our liquidity position is supported by management of our liquid assets and access to alternative sources of funds. Our liquid assets include cash, interest-bearing deposits in correspondent banks, federal funds sold, and fair value of unpledged investment securities.

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Other available sources of liquidity include wholesale deposits, and additional borrowings from correspondent banks, FHLBA advances, and the Federal Reserve discount window.

Our short-term and long-term liquidity requirements are primarily met through cash flow from operations, redeployment of prepaying and maturing balances in our loan and investment portfolios, and new customer deposits. Other alternative sources of funds will supplement these primary sources to the extent necessary to meet additional liquidity requirements on either a short-term or long-term basis.

As part of our liquidity management strategy, we open federal funds lines with our correspondent banks. As of September 30, 2026 and December 31, 2025, we had $72.0 million and $69.5 million, respectively, of unsecured federal funds lines with no amounts advanced.

As of September 30, 2026 and December 31, 2025, we had access to the Federal Reserve’s discount window in the amount of $160.1 million and $29.8 million, respectively. There were no borrowings outstanding as of September 30, 2026 and December 31, 2025 for the Federal Reserve’s discount window. We had pledged investment securities at September 30, 2026 and December 31, 2025 totaling $8.6 million and $9.1 million, respectively, as collateral for federal funds purchased. In addition, at September 30, 2026 and December 31, 2025, we also had pledged investment securities with a fair value of nil and $31.6 million, respectively, and pledged loans with an unpaid principal balance of $340.9 million and nil, respectively, as collateral at the Federal Reserve Bank.

At September 30, 2026 and December 31, 2025, we had $30.0 million of outstanding advances from the FHLBA and a letter of credit for $2.0 million. Based on the values of collateral pledged, we had $418.6 million and $144.3 million as of September 30, 2026 and December 31, 2025, respectively, of additional borrowing availability with the FHLBA. At September 30, 2026 and December 31, 2025, we had pledged investment securities with a fair value of $187.6 million and nil, respectively, and pledged loans with an unpaid principal balance of $453.8 million and $283.4 million, respectively, as collateral for the FHLBA advances. We also maintain relationships in the capital markets with brokers to issue certificates of deposits.

Capital Requirements

The Bank is subject to various regulatory capital requirements administered by the Federal Reserve. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary actions by regulators that, if undertaken, could have a direct adverse material effect on the Company's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum ratios. These include a Common Equity Tier 1 ("CET1") risk-based capital ratio, a Tier 1 risk-based capital ratio, which includes CET1 and additional Tier 1 capital, and a total risk-based capital ratio, which includes Tier 1 and Tier 2 capital. CET1 is primarily comprised of the sum of common stock instruments and related surplus net of treasury stock plus retained earnings less certain adjustments and deductions, including with respect to goodwill, intangible assets, mortgage servicing assets, and deferred tax assets subject to temporary timing differences. Additional Tier 1 capital is primarily comprised of noncumulative perpetual preferred stock. Tier 2 capital consists of instruments disqualified from Tier 1 capital, including qualifying subordinated debt and a limited amount of loan loss reserves up to a maximum of 1.25% of risk-weighted assets, subject to certain eligibility criteria. The capital rules also define the risk-weights assigned to assets and off-balance sheet items to determine the risk-weighted asset components of the risk-based capital rules, including, for example, certain “high volatility” commercial real estate, past due assets, structured securities, and equity holdings.

The Bank is also required to maintain capital at a minimum level based on total assets, which is known as the Tier 1 leverage ratio. The leverage capital ratio is the ratio of Tier 1 capital to quarterly average assets net of goodwill, certain other intangible assets, and certain required deduction items require the Bank to maintain:

(i) a minimum leverage ratio of Tier 1 capital to average total assets, after certain adjustments, of 4.0%,

(ii) a minimum ratio of Tier 1 capital to risk-weighted assets of 6.0%,

(iii) a minimum ratio of total-capital to risk-weighted assets of 8.0% and,

(iv) a minimum ratio of CET1 to risk-weighted assets of 4.5%.

In addition, the capital rules require a capital conservation buffer of 2.5% above each of the minimum risk-based capital ratio requirements (CET1, Tier 1, and total capital), comprised of CET1, which is designed to absorb losses during periods of economic stress. These buffer requirements must be met for a bank or bank holding company to be able to pay dividends, engage in share buybacks, or make discretionary bonus payments to executive management without restriction. Our capital conservation buffer was $116.2 million and $110.5 million as of September 30, 2026 and December 31, 2025, respectively.

Prompt Corrective Action — The Federal Banking agencies have broad powers with which to require companies to take prompt corrective action to resolve problems of insured depository institutions that do not meet minimum capital requirements. The law establishes five capital categories for this purpose:

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(i) well-capitalized;

(ii) adequately capitalized;

(iii) undercapitalized;

(iv) significantly undercapitalized; and

(v) critically undercapitalized.

To be well-capitalized, the Bank must maintain at least the following capital ratios:

•6.5% CET1 to risk-weighted assets;

•8.0% Tier 1 capital to risk-weighted assets;

•10.0% Total capital to risk-weighted assets; and

•5.0% Tier 1 leverage ratio.

The table below summarizes the capital requirements applicable to the Bank in order to be considered “well-capitalized” from a regulatory perspective, as well as the Bank’s capital ratios as of September 30, 2026 and December 31, 2025. Because the Company is a small bank holding company under the guidelines of the Federal Reserve and is not required to report consolidated capital ratios for regulatory purposes, capital ratios are presented for the Bank only.

The Bank exceeded all regulatory capital requirements and was considered to be “well-capitalized” as of the dates reflected per the table below.

There have been no conditions or events since September 30, 2026 that management believes would change this classification.

The following table summarizes the capital amounts and ratios of CSB and the regulatory minimum requirements at September 30, 2026 and December 31, 2025:

		Ratio at September 30,				Ratio at December 31,				Regulatory Capital Ratio				Regulatory Capital Ratio Requirements including Capital Conservation				Minimum Requirements for "Well Capitalized" Depository
		2026				2025				Requirements				Buffer				Institution
Coastal States Bank
Total capital (to risk-weighted assets)			13.36	%			13.31	%			8.00	%			10.50	%			10.00	%
Tier 1 capital (to risk-weighted assets)			12.30	%			12.30	%			6.00	%			8.50	%			8.00	%
CET1 capital (to risk-weighted assets)			12.30	%			12.30	%			4.50	%			7.00	%			6.50	%
Tier 1 leverage			11.07	%			11.18	%			4.00	%			4.00	%			5.00	%

Dividends — The sole source of funds available to pay shareholders' dividends is from the Company’s earnings. As of September 30, 2026, $1.8 million in common stock dividends were declared by the Company as of year-to-date. There were no common stock dividends declared or paid as of December 31, 2025. Any future determination to pay dividends to holders of our common stock will depend on our results of operations, financial condition, capital requirements, banking regulations, contractual restrictions and any other factors that our Board of Directors may deem relevant.

Contractual Obligations

The following tables contain supplemental information regarding our total contractual obligations at September 30, 2026 and December 31, 2025:

				Payments Due at September 30, 2026
(dollars in thousands)				Within One Year					One to Three Years					Three to Five Years					After Five Years					Total
Deposits without a stated maturity			$		1,354,561			$		-			$		-			$		-			$		1,354,561
Time deposits					733,084					12,986					115					-					746,185
Other borrowings (1)					30,000					-					-					-					30,000
Operating lease liabilities					1,260					2,819					2,585					1,924					8,588
Total contractual obligations			$		2,118,905			$		15,805			$		2,700			$		1,924			$		2,139,334

(1) $30 million due within one year represents FHLBA advance outstanding.

				Payments Due at December 31, 2025
(dollars in thousands)				Within One Year					One to Three Years					Three to Five Years					After Five Years					Total
Deposits without a stated maturity			$		1,200,480			$		-			$		-			$		-			$		1,200,480
Time deposits					723,130					63,991					83					-					787,204
Other borrowings (1)					30,000					-					-					-					30,000
Operating lease liabilities					809					1,683					1,433					1,116					5,041
Total contractual obligations			$		1,954,419			$		65,674			$		1,516			$		1,116			$		2,022,725

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(1) $30 million due within one year represents FHLBA advance outstanding.

We believe that we will be able to meet our contractual obligations as they come due through the maintenance of adequate cash levels. We expect to maintain adequate cash levels through profitability, loan and securities repayment and maturity activity and continued deposit gathering activities. We have in place various borrowing mechanisms for both short-term and long-term liquidity needs.

Off-Balance Sheet Arrangements

The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments consist of commitments to extend credit and standby letters of credit.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. A commitment involves, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheet. The Company’s exposure to credit loss in the event of nonperformance by the other party to the instrument is represented by the contractual notional amount of the instrument. Since certain commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company uses the same credit policies in making commitments to extend credit as it does for on-balance-sheet instruments.

Letters of credit are conditional commitments issued to guarantee a customer’s performance to a third party and have essentially the same credit risk as other lending facilities. Collateral held for commitments to extend credit and letters of credit varies but may include accounts receivable, inventory, property, plant, equipment and income-producing commercial properties.

See Note 4 of our consolidated financial statements as of September 30, 2026, included elsewhere in this Form 10-Q, for more information regarding our off-balance sheet arrangements as of September 30, 2026 and December 31, 2025.

Non-GAAP Financial Measure Reconciliations

The measures entitled return on average tangible common equity, tangible book value per common share, tangible common equity, tangible assets, adjusted nonperforming assets to total assets, adjusted nonperforming assets, pre-tax, pre-provision net revenue ("PPNR"), tangible common equity to tangible assets and core deposits are not measures recognized under accounting principles generally accepted in the United States of America (“GAAP”) and therefore are considered non-GAAP financial measures. The most comparable GAAP measures to these measures are return on average shareholders’ equity, book value per share, total shareholders’ equity, total assets, total nonperforming assets to total assets, total nonperforming assets, net income, total common equity to total assets, and total deposits, respectively.

Management believes that these non-GAAP financial measures and the information they provide are useful to investors since these measures permit investors to view the Company’s performance using the same tools that management uses to evaluate the Company’s past performance and prospects for future performance. While management believes that these non-GAAP financial measures are useful in evaluating our performance, this information should be considered as supplemental and not as a substitute for or superior to the related financial information prepared in accordance with GAAP. Additionally, these non-GAAP financial measures should be considered as additional views of the way the Company’s financial measures are affected by significant items and other factors, and since they are not required to be uniformly applied, they may not be comparable to other similarly titled measures at other companies.

The following table reconciles, as of the dates set forth below, shareholders’ equity (on a GAAP basis) to tangible equity and total assets (on a GAAP basis) to tangible assets and calculates our tangible book value per common share.

		As of
		September 30,				June 30,				March 31,				December 31,				September 30,
(dollars in thousands)		2026				2026				2026				2025				2025
Tangible Common Equity:
Total shareholders' equity		$	261,920			$	269,703			$	262,923			$	259,529			$	250,438
Less: Goodwill and intangibles			(6,307	)			(6,246	)			(6,243	)			(6,262	)			(6,186	)
Adjusted for: Mortgage servicing      rights			1,402				1,313				1,280				1,266				1,156
Tangible Common Equity		$	257,015			$	264,770			$	257,960			$	254,533			$	245,408
Common share outstanding			11,734,134		$		12,003,040				11,985,414				11,980,412				11,978,921
Book value per common share			22.32				22.47				21.94				21.66				20.91
Tangible book value per common share			21.90				22.06				21.52				21.25				20.49
Tangible assets:
Total assets		$	2,423,766			$	2,420,993			$	2,348,547			$	2,306,586			$	2,255,389
Less: goodwill and intangibles			(6,307	)			(6,246	)			(6,243	)			(6,262	)			(6,186	)
Adjusted for: Mortgage servicing     rights			1,402				1,313				1,280				1,266				1,156
Tangible assets		$	2,418,861			$	2,416,060			$	2,343,584			$	2,301,590			$	2,250,359
Tangible common equity to    tangible assets			10.63	%			10.96	%			11.01	%			11.06	%			10.91	%

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The following table reconciles, as of the dates set forth below, the calculation of the return on average equity (on a GAAP basis) to the calculation of the return on average tangible equity and the calculation of the adjusted return on average tangible equity.

		As of and for the Three Months Ended																				As of and for the Nine Months Ended
		September 30,				June 30,				March 31,				December 31,				September 30,				September 30,				September 30,
(dollars in thousands)		2026				2026				2026				2025				2025				2026				2025
Net income		$	8,772			$	7,333			$	6,329			$	7,136			$	6,741			$	22,434			$	17,756
Average shareholders' equity			270,152				266,974				264,232				256,814				246,688				267,141				217,601
Return on average shareholders' equity			12.88				11.02	%			9.71	%			11.02	%			10.84	%			11.23	%			10.91	%
Average Tangible Common Equity:
Average shareholders' equity		$	270,152			$	266,974			$	264,232			$	256,814			$	246,688			$	267,141			$	217,601
Less: Average goodwill and intangibles			(6,235	)			(6,229	)			(6,270	)			(6,166	)			(6,176	)			(6,245	)			(6,224	)
Adjusted for: Average mortgage    servicing rights			1,315				1,281				1,291				1,155				1,128				1,296				1,136
Average tangible common equity		$	265,232			$	262,026			$	259,253			$	251,803			$	241,640			$	262,192			$	212,513
Return on average tangible common (1)   equity			13.12	%			11.23	%			9.90	%			11.24	%			11.07	%			11.44	%			11.17	%

(1) Represents annualized data.

The following table reconciles, as of the dates set forth below, the calculation of the nonperforming assets to total assets ratio (on a GAAP basis) and the calculation of the adjusted nonperforming assets to total assets ratio. Adjusted nonperforming assets to total assets ratio is calculated by adjusting for the guaranteed portions of nonaccrual loans from the total nonperforming assets.

		As of
		September 30,				June 30,				March 31,				December 31,				September 30,
(dollars in thousands)		2026				2026				2026				2025				2025
Total nonperforming assets		$	15,080			$	18,322			$	18,183			$	18,306			$	14,192
Total assets			2,423,766				2,420,993				2,348,547				2,306,586				2,255,389
GAAP-based nonperforming assets   to total assets			0.62	%			0.76	%			0.77	%			0.79	%			0.63	%
Total nonperforming assets		$	15,080			$	18,322			$	18,183			$	18,306			$	14,192
Adjusted for:
Guaranteed portions of nonaccrual   loans			(4,217	)			(3,542	)			(3,657	)			(4,089	)			(4,457	)
Adjusted nonperforming assets		$	10,863			$	14,780			$	14,526			$	14,217			$	9,735
Total assets		$	2,423,766			$	2,420,993			$	2,348,547			$	2,306,586			$	2,255,389
Adjusted nonperforming assets to    total assets			0.45	%			0.61	%			0.62	%			0.62	%			0.43	%

The following table reconciles net income (on a GAAP basis), as of the dates set forth below, to the calculation of the pre-tax, pre-provision net revenue ("PPNR"). PPNR is calculated by adjusting for the income tax expense and the provision for credit losses to the net income.

		As of and for the Three Months Ended																				As of and for the Nine Months Ended
		September 30,				June 30,				March 31,				December 31,				September 30,				September 30,				September 30,
(dollars in thousands)		2026				2026				2026				2025				2025				2026				2025
Net income (GAAP-based)		$	8,772			$	7,333			$	6,329			$	7,136			$	6,741			$	22,434			$	17,756
Plus:
Income tax expense			2,803				1,502				1,956				1,598				2,040				6,261				4,646
Provision for credit losses			(429	)			658				382				1,162				653				611				2,034
Pre-tax, pre-provision net revenue		$	11,146			$	9,493			$	8,667			$	9,896			$	9,434			$	29,306			$	24,436

The following table reconciles total deposits, as of the dates set forth below, to the calculation of the Company's core deposits.

		As of
		September 30,				June 30,				March 31,				December 31,				September 30,
(dollars in thousands)		2026				2026				2026				2025				2025
Total Deposits		$	2,100,746			$	2,047,671			$	2,057,144			$	1,987,684			$	1,949,672
Less:
Brokered CDs			257,016				253,928				258,591				307,034				294,908
ICS money market One-Way Buy			70,000				-				-				-				-
Core deposits (1)		$	1,773,730			$	1,793,743			$	1,798,553			$	1,680,650			$	1,654,764

(1) The Company defines its core deposits as total deposits less brokered certificates of deposit and IntraFi Cash Service ("ICS") One-Way Buy demand and money market deposits.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market Risk

Market risk is the risk of loss arising from adverse changes in the fair value of financial instruments due to changes in interest rates, exchange rates, and equity prices. The Company’s market risk is composed primarily of interest rate risk inherent in the normal course of lending and deposit-taking activities. We are also exposed to market risk in our investing activities.

Interest Rate Risk Management

Net interest income is our most significant component of earnings and we consider interest rate risk to be our most significant market risk. Our net interest income results from the difference between the yields we earn on our interest-earning assets, primarily loans and investments, and the rates that we pay on our interest-bearing liabilities, primarily deposits and borrowings. When interest rates change, the yields we earn on our interest-earning assets and the rates we pay on our interest-bearing liabilities do not necessarily move in tandem with each other because of the difference between their maturities and repricing characteristics which can negatively impact net interest income.

Interest rates are highly sensitive to many factors that are beyond our control, including general economic conditions and policies of various governmental and regulatory agencies and, in particular, the Federal Reserve. Changes in monetary policy, including changes in interest rates, influence not only the interest we receive on loans and investments and the amount of interest we pay on deposits and borrowings, but such changes could also affect the average duration of our loan portfolio, investment securities and other interest-earning assets.

Our goal is to structure our asset/liability composition to maximize net interest income while managing interest rate risk so as to minimize the adverse impact of changes in interest rates on net interest income and capital in either a rising or declining interest rate environment. Profitability is affected by fluctuations in interest rates. A sudden and substantial change in interest rates may impact our earnings adversely because the interest rates of the underlying assets and liabilities do not change at the same speed, to the same extent or on the same basis.

One of the tools management uses to estimate and manage the sensitivity of net interest revenue to changes in interest rates is an asset/liability simulation model. Resulting estimates are based upon multiple assumptions for each scenario, including loan and deposit re-pricing characteristics and the rate of prepayments. The ALCO periodically reviews the assumptions for reasonableness based on historical data and future expectations; however, actual net interest revenue may differ from model results. The primary objective of the simulation model is to measure the potential change in net interest revenue over time using multiple interest rate scenarios. The base scenario assumes rates remain flat and is the scenario to which all others are compared, in order to measure the change in net interest revenue. Policy limits are based on immediate rate shock scenarios which are compared to the base scenario. Other scenarios analyzed may include ramped rate shocks, delayed rate shocks, yield curve steepening or flattening, or other variations in rate movements. While the primary policy scenarios focus on a 12-month time frame, longer time horizons are also modeled.

Our policy is based on the 12-month impact on net interest revenue of interest rate shocks. Our shock scenario assumes rates immediately change the full amount at the scenario onset. The following table presents our interest sensitivity position at September 30, 2026 and December 31, 2025:

		Net Interest Income Sensitivity
		12 Month Projection
(Shock in basis points)		-200					-100					+100					+200
September 30, 2026			(4.70	)	%			(3.36	)	%			4.09		%			6.98		%
December 31, 2025			(4.12	)	%			(3.03	)	%			4.20		%			7.36		%

There has been no significant change in the Company's estimated net interest income sensitivity position from December 31, 2025. From a net interest income perspective, the Company generally has an asset sensitive rate position. The Treasury yield curve has remained relatively flat across certain maturities which can make modeling net interest income under changing rate scenarios more complex. A flat yield curve environment can be unfavorable for many financial institutions, including the Bank, because short-term interest rates influence both deposit pricing and the yields on floating-rate assets, while longer-term rates more directly influence pricing on fixed-rate loans and investment securities. When the yield curve flattens, the spread between longer-term asset yields and shorter-term funding costs may narrow, which can pressure our NIM.

Economic Value of Equity

We also compute amounts by which the net present value of our assets and liabilities (economic value of equity or “EVE”) would change in the event of a range of assumed changes in market interest rates. This model uses a discounted cash flow analysis to measure the interest rate sensitivity of net portfolio value. The model estimates the economic value of each type of asset, liability and off-balance

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sheet contract under the assumptions that the yield curve increases or decreases instantaneously, with changes in interest rates representing immediate and permanent, parallel shifts in the yield curve.

The following table sets forth the calculation of the estimated changes in our EVE that would result from the designated immediate changes in the yield curve at September 30, 2026 and December 31, 2025:

		Economic Value of Equity Sensitivity
(Shock in basis points)		-200					-100					+100					+200
September 30, 2026			(3.11	)	%			(1.36	)	%			(0.36	)	%			(3.04	)	%
December 31, 2025			(3.17	)	%			(1.21	)	%			0.82		%			(0.47	)	%

As previously noted, these assumptions are inherently uncertain, and actual results may differ from simulated results. The current interest rate path is less certain for 2026, and further rate increases or decreases are contingent upon improving inflationary conditions. Further changes to interest rates and monetary policy are dependent upon the Federal Reserve's assessment of economic data as it becomes available. We would expect net interest income to decline somewhat in a decreasing interest rate environment and to increase in an increasing interest rate environment, as our model reflects that interest-earning assets reprice faster than interest-bearing deposits which is attributable to assumed deposit betas and repricing lags as there is continued strong market competition for core deposits.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

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 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 September 30, 2026.

Changes in Internal Control over Financial Reporting

During the quarter ended 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.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings

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 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.

Item 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed under the section entitled “Risk Factors” on the Company’s 2025 Form 10-K. These factors could materially and adversely affect our business, financial condition, liquidity, results of operations and capital position, and could cause our actual results to differ materially from our historical results or the results contemplated by the forward-looking statements contained in this report. Please be aware that these risks may change over time and other risks may prove to be important in the future.

There are no material changes during the period covered by this report to the risk factors previously disclosed on the Company’s 2025 Form 10-K.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

c) Issuer Purchases of Equity Securities.

The table below sets forth information regarding the Company’s repurchase of shares of its outstanding common stock during the three-month period ended September 30, 2026.

Period		Total Number of Shares Repurchased				Average Price Paid Per Share(1)(2)				Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs				Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs(2)(3)  (in thousands)
July 1, 2026 to July 31, 2026			45,392			$	26.91				45,392			$	12,543
August 1, 2026 to August 31, 2026			45,454			$	27.43				45,454			$	11,296
September 1, 2026 to September 30, 2026			194,869			$	27.06				194,869			$	6,022
Total			285,715			$	27.10				285,715

(1) Excludes commissions.

(2) Excludes exercise taxes on shares repurchased.

(3) In May 2026, the Company announced that the Board of Directors had authorized a stock repurchase plan (the “2026 Repurchase Plan”), pursuant to which the Company may purchase, from time to time, up to an aggregate amount of $15.0 million of its shares of common stock with an effective date of May 1, 2026, and an expiration date of April 30, 2027, unless extended by the Board. Repurchases under the 2026 Repurchase Plan may be made from time to time in the open market, by accelerated share repurchase programs, in privately negotiated transactions, or otherwise in compliance with Rule 10b-18 of the Securities Exchange Act of 1934 (the “Exchange Act”), in each case subject to applicable regulatory requirements and other factors that may be considered by the Company in its sole discretion. Repurchases may also be made pursuant to a trading plan under Rule 10b5-1 of the Exchange Act, which would permit shares to be repurchased when the Company might otherwise be precluded from doing so because of self-imposed trading blackout periods or other regulatory restrictions. The 2026 Repurchase Program does not obligate the Company to repurchase any particular amount of common stock and may be extended, modified, amended, suspended, or discontinued by the Board at any time.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

(a)None.

(b)None.

(c)Pursuant to Item 408(a) of Regulation S-K, none of the Company's directors or executive officers adopted, terminated or modified a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the three months ended September 30, 2026.

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Item 6. Exhibits

Exhibit Number		Description of Exhibit
3.1		Articles of Incorporation (incorporated by reference to Exhibit 3.1 to CoastalSouth Bancshares, Inc. on Form S-1 filed with the SEC on June 6, 2025)
3.2		Fourth Amended and Restated ByLaws (incorporated by reference to Exhibit 3.2 to CoastalSouth Bancshares, Inc. on Form 8-K filed with the SEC on July 24, 2026)
31.1*		Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*		Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*		Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*		Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS		Inline XBRL Instance Document
101.SCH		Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

* Filed herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		CoastalSouth Bancshares, Inc.
Date: November 6, 2026		By:	/s/ Stephen R. Stone
			Stephen R. Stone
			President and Chief Executive Officer
Date: November 6, 2026		By:	/s/ Anthony P. Valduga
			Anthony P. Valduga
			Chief Financial Officer & Chief Operating Officer

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