UNITED
STATES

 SECURITIES
AND EXCHANGE COMMISSION

 WASHINGTON,
DC 20549

 FORM

ANNUAL REPORT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

 For
the fiscal year ended December 31, 2024

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: 001-38910

 (Exact
name of registrant as specified in its charter)

 Texas

 82-0764846

 State or other jurisdiction of incorporation or organization

 (I.R.S. Employer Identification Number)

 16200 Dallas Parkway, Suite 190, Dallas, Texas

 75248

 (Address of principal executive offices)

 (ZIP Code)

 Registrant's telephone number, including area code:
 ( 972) 720-9000

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

 Title of each class

 Trading Symbol(s)

 Name of each exchange on which registered

 Series B preferred stock, $0.01 par value per share

 TECTP

 The Nasdaq Stock Market, LLC

registered pursuant to Section 12(g) of the Act: None

by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No

by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No

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 such shorter period that the registrant was required to filed such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes No

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 such shorter period that the registrant was
required to submit such files). Yes No

by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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.

by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report.

 If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements.

by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b).

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

 The
shares of registrant's common stock are not listed or quoted on an exchange, and as a result, there is no public market price to
calculate the aggregate market value.

 The
number of shares outstanding of the registrant's common stock as of March 27, 2025 was 6,776,601 shares.

 TABLE
OF CONTENTS

 Item 1. Business

 Item 1A. Risk Factors

 Item 1B. Unresolved Staff Comments

 Item 1C. Cybersecurity

 Item 2. Properties

 Item 3. Legal Proceedings

 Item 4. Mine Safety Disclosures

 Item 5. Market for Registrant's Common Equity and Related Shareholder Matters and Issuer Purchases of Equity Securities

 Item 6. [Reserved]

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

 Item 7A. Quantitative and Qualitative Disclosures about Market Risk

 Item 8. Financial Statements and Supplementary Data

 Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure

 Item 9A. Controls and Procedures

 Item 9B. Other Information

 Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

 Item 10. Directors, Executive Officers, and Corporate Governance

 Item 11. Executive Compensation

 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters

 Item 13. Certain Relationships and Related Transactions and Director Independence

 Item 14. Principal Accountant Fees and Services

 Item 15. Exhibits and Financial Statement Schedules

 Item 16. Form 10-K Summary

 PART
I

 CAUTIONARY
STATEMENT REGARDING FORWARD LOOKING STATEMENTS

 This
Annual Report on Form 10-K for the year ended December 31, 2024 (this "Form 10-K") contains certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). When used in this Form 10-K, words such as "anticipate,"
"believe," "estimate," "expect," "intend," "predict," "project,"
and similar expressions, as they relate to us or our management, identify forward-looking statements. These forward-looking statements
are not historical facts and are based on information currently available to our management. 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 could differ materially from those contemplated by the forward-looking statements as a result of
certain factors, including but not limited, to those listed in "Item 1A-Risk Factors" of this Form 10-K and the following:

 potential
 recession in the United States and our market areas, and its impact on our borrowers, particularly
 U.S. Small Business Administration ("SBA") loan borrowers, who may be particularly
 vulnerable during economic downturns;

 risks
 associated with generating most of our loan growth and having most of our loan portfolio
 in SBA loans, which have higher default rates and credit losses than traditional commercial
 loans;

 risks
 associated with our recent CEO transition at the Bank, which is our largest operating subsidiary;

 the
 impacts related to or resulting from uncertainty in the banking industry as a whole;

 liquidity
 risks, including those related to having enough liquid assets to meet depositor demands;

 risks
 associated with generating deposits from retail sources without a branch network so that
 we can fund our loan portfolio and growth;

 risks
 associated with higher cost deposits relative to our peer group, which has an impact on our
 net interest margin and profits;

 increased
 competition for deposits and related changes in deposit customer behavior;

 risks
 associated with the lingering inflationary pressures, and the risk of the resurgence of elevated
 levels of inflation, in the United States and our market areas, and its impact on market
 interest rates, the economy and credit quality;

 the
 adequacy of the allowance for credit losses;

 changes
 in market interest rates, which could negatively impact our borrowers, many of which have
 loans with a rate of interest that adjusts based on changes in short-term rates (which are
 influenced by inflation);

 fluctuation
 in the value of our investment securities;

 changes
 in the economy generally and the regulatory response thereto;

 changes
 in the economy of the State of Texas, our primary market;

 increases
 in unemployment rates in the United States and our market areas;

 risks
 associated with implementing aspects of our expansion strategy, whether through additional
 services and products or acquisitions;

 the
 need to hold more capital in order to comply with consolidated capital ratios;

 our
 ability to raise additional capital, particularly during times of stress;

 competition
 from other banks, financial institutions and wealth and investment management firms and our
 ability to retain our clients;

 risks
 associated with having one referral source, Cain Watters & Associates, LLC ("Cain
 Watters"), comprise a substantial part of our business;

 our
 reliance on key personnel and the ability to attract and retain the personnel necessary to
 implement our business plan;

 risks
 specific to commercial loans and borrowers (particularly dental and SBA loans), including
 the risk of declines in commercial real estate prices or deterioration in value of the general
 business assets that secure such loans;

 our
 ability to continue to originate loans (including SBA loans);

 impairment
 of our goodwill or other intangible assets;

 claims
 and litigation pertaining to our fiduciary responsibilities;

 generating
 investment returns for our wealth management, brokerage and other customers that are satisfactory
 to them;

 our
 ability to manage our credit risk;

 regulatory
 scrutiny related to our loan portfolio, including commercial real estate;

 the
 earnings capacity of our borrowers;

 our
 inability to identify and address potential conflicts of interest;

 our
 ability to maintain effective internal control over financial reporting;

 the
 accuracy of estimates and assumptions;

 the
 development of an active, liquid market for the Series B preferred stock;

 the
 soundness of other counterparty financial institutions and certain securities brokerage firms;

 technological
 change in the banking, investment, brokerage and insurance industry;

 our
 ability to protect against and manage fraudulent activity and cybersecurity risk, including
 cyber incidents or other failures, disruptions or breaches of our information security systems
 or infrastructure, or those of our third-party vendors or other service providers, and identify
 theft;

 our
 reliance on communications, information, operating and financial control systems technology
 and related services from third-party service providers;

 natural
 disasters and epidemics and pandemics;

 the
 effects of terrorism and acts of war or threat thereof;

 environmental
 liabilities;

 legislative
 changes or the adoption of tax reform policies;

 uncertainty
 regarding United States fiscal debt, deficit and budget matters;

 political
 instability and changes in tariffs and trade barriers, including potential changes in U.S.
 and international trade policies and the resulting impact on the Company and its customers;

 compliance
 with laws and regulations of the financial services industry, supervisory actions, capital
 requirements, the Bank Secrecy Act, anti-money laundering laws, consumer laws, and other
 statutes and regulations;

 regulation
 of broker-dealers and investment advisors;

 the
 enactment of regulations relating to privacy, information security and data protection;

 legal
 and regulatory examinations, proceedings, investigations and inquiries, fines and sanctions;

 future
 issuances of preferred stock or debt securities and its impact on the Series B preferred
 stock;

 our
 ability to manage our existing and future preferred stock and indebtedness;

 our
 ability to pay dividends;

 the
 continuation of securities analysts coverage of the company;

 our
 management and board of directors have significant control over our business;

 risks
 related to being a "controlled company" under applicable Nasdaq rules;

 the
 costs and expenses of being a public company; and

 changes
 in the laws, rules, regulations, interpretations or policies relating to financial institutions,
 accounting, tax, trade, current and future governmental monetary and fiscal policies, including
 the uncertain impacts of quantitative tightening and current and future policies of the Board
 of Governors of the Federal Reserve System ("Federal Reserve") and as a result
 of initiatives of the Trump administration.

 Such
statements reflect the current views of our management with respect to future events and are subject to these and other risks, uncertainties
and assumptions relating to our operations, results of operations, growth strategy and liquidity. All subsequent written and oral forward-looking
statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by this paragraph. We undertake
no obligation to publicly update or otherwise revise any forward-looking statements, whether as a result of new information, future events
or otherwise, except as required by law.

 Item
1. Business.

 Our
Company

Financial, Inc. (the "Company," "we," "us," or "our") is a financial holding company
headquartered in Dallas, Texas offering banking, trust, investment advisory, third-party administration and recordkeeping, securities
brokerage, underwriting, and insurance services to high net worth individuals, small businesses and institutions across the United States.
The Company was formed in late 2016 for the purpose of acquiring T Bancshares, Inc. ("T Bancshares"), and its wholly owned
subsidiary, T Bank, National Association (the "Bank"). T Bancshares was incorporated under the laws of the State of Texas
on December 23, 2002 to serve as the bank holding company for the Bank. On May 13, 2019, we completed a merger with Tectonic Holdings,
LLC ("Tectonic Holdings"), a company with whom we had common ownership (the "Tectonic Merger"). Through the Tectonic
Merger, we acquired Tectonic Advisors, LLC ("Tectonic Advisors") and Sanders Morris LLC ("Sanders Morris"), as
well as its subsidiary, HWG Insurance Agency LLC ("HWG"), which expanded our financial services to include investment advisory,
securities brokerage, investment banking, and insurance services.

 As
of December 31, 2024 we had, on a consolidated basis, $863.4 million in assets, $660.2 million in total loans held for investment, $47.0
million in loans held for sale, $711.1 million in deposits and $113.4 million in shareholders' equity. Net income for the year
ended December 31, 2024 was $13.9 million. The Company's Series B preferred stock is traded on the Nasdaq Capital Market under
the symbol "TECTP".

 Overview

 The
Bank, a full-service, nationally chartered commercial banking association headquartered in Dallas, Texas providing traditional community
banking services, as well as factoring services, trust services and third party administration services.

Advisors is a registered investment advisor with the U.S. Securities and Exchange Commission (the "SEC") providing investment
advisory services to individuals, institutions (including affiliates) and families. It advises on portfolios of assets for an asset-based
fee. As of December 31, 2024, Tectonic Advisors had approximately $4.4 billion in client assets under management ("AUM")
(which includes $2.0 billion of AUM held by the Bank as a fiduciary).

 Sanders
Morris is a registered broker-dealer with Financial Industry Regulatory Authority ("FINRA"), and registered investment advisor
with the SEC. Through Sanders Morris, we serve clients on their investment portfolios as an advisor or broker (often with limited powers
of attorney). We also execute trades for institutions and households, and provide investment banking services to corporate entities.
As of December 31, 2024, Sanders Morris had approximately $1.1 billion in client advisory assets under management, and client brokerage
assets of $2.4 billion, bringing total client assets to $3.5 billion at Sanders Morris.

 HWG
is an insurance agency registered with the Texas Department of Insurance ("TDI"), and is focused on offering life and disability
coverages.

 General.
 The Bank is a full-service commercial bank offering a broad range of commercial and consumer banking services to small- to medium-sized
businesses, single-family residential and commercial contractors and consumers. The Bank strives to generate an attractive risk-adjusted
return on assets and capital by providing niche lending services and generating significant non-interest income through its factoring
and trust services. Lending services include commercial loans to small- to medium-sized businesses and professional concerns as well
as consumers. The Bank offers a wide range of deposit services including demand deposits, regular savings accounts, money market accounts,
individual retirement accounts, and certificates of deposit with fixed rates and a range of maturity options. The Bank also offers trust
services. These services are provided through a variety of delivery systems including automated teller machines, mobile banking and internet
banking.

 Lending
Services. From its single location, the Bank operates three lending verticals where it has established expertise: SBA and U.S.
Department of Agriculture ("USDA"), dental and other professionals and traditional community banking. We believe our lending
products provide an important diversity of risk and opportunity, which differentiates us from most community banks our size. The Bank
also offers factoring services through its Integra Division. See the discussion of "Factored Receivables" below.

 SBA
and USDA. The Bank originates and services commercial and real estate loans under programs guaranteed by the SBA and the USDA representing
approximately 64.4% of the Bank's total lending services as of December 31, 2024. Generally 75% to 80% of the principal balance
of these loans is guaranteed by these agencies. These loans generally offer borrowers more flexible terms and conditions than available
through conventional commercial loans. Examples of more flexible terms include longer amortization periods, lower required down payments,
and less borrower operating history. These loans are generally secured by equipment, real estate, and other tangible collateral. Loan-to-value
ratios may, in some instances, be higher than conventional loans. Loans secured by business assets that do not include real estate have
terms that are generally not more than 10 years and are fully amortizing. Loans secured by real estate as the principal collateral are
generally 25 years or less and are also generally fully amortizing. Loans can be adjustable rate loans, but may also be fixed for the
term of the loan. Repayment of the loans is based on an analysis of the borrower's ability to generate sufficient income from operations.
This analysis may rely more heavily on projected future earnings than on conventional loans. The Bank also analyzes the industry sector
to determine the feasibility of the projected income.

 There
is generally an active secondary market for the guaranteed portion of these loans. Because the guaranteed portion carries the full faith
and credit guarantee of an agency of the U.S. government, the guaranteed portion of the loan can generally be sold for a premium at the
time of the sale. We may sell the guaranteed portion or retain the guaranteed portion on our balance sheet based on, among other things,
our view of the premiums being paid for such guaranteed portions, our desire to generate additional capital for the Bank and/or the funding
costs and sources to fund such loans. As the guaranteed portion of the SBA/USDA loans age, the premium that such portions can generate
typically declines. Therefore, we typically make the determination about whether to sell the guaranteed portion of such loans shortly
after such loans are certified as guaranteed by either the SBA or USDA, as applicable.

 Dental
and Other Professionals. The Bank offers loans to the dental industry and other small-to-medium sized businesses. The principal referral
source of the dental loans is Cain Watters. Most of the partners of Cain Watters are shareholders in the Company, and three partners
serve on our board of directors. Cain Watters has been highly successful in providing a variety of consulting services to dentists and
dental companies for over 30 years with a national client base. Cain Watters refers loans to a variety of lenders (including the Bank),
who compete on price, terms and service. We view the dental lending vertical as highly competitive.

 Traditional
Community Banking. The Bank offers traditional lending services, including commercial and industrial, commercial real estate, construction
and, on a very limited basis, consumer loans (each as further described below). The majority of these loans are to commercial enterprises
in the Dallas, Texas area. Commercial and Industrial Loans. Loans for commercial purposes in various lines of businesses
are a major component of the Bank's loan portfolio. The targets in the commercial loan markets are retail establishments, professional
service providers, in particular dentists, and small- to medium-sized businesses. See "—Dental and Other Professionals"
above. Commercial lending generally involves greater credit risk than residential mortgage or consumer lending and involves risks that
are different from those associated with commercial real estate lending. The terms of these loans vary by purpose and by type of underlying
collateral, if any. The commercial loans are primarily underwritten on the basis of the borrower's ability to service the loan
from income and their creditworthiness. Although commercial loans may be collateralized by equipment or other business assets, the liquidation
of collateral in the event of a borrower default may represent an insufficient source of repayment because equipment and other business
assets may, among other things, be obsolete or of limited use. Accordingly, the repayment of a commercial loan depends primarily on the
creditworthiness and projected cash flow of the borrower (and any guarantors), while liquidation of collateral is considered a secondary
source of repayment. On some of these loans, the Bank takes a security interest in real estate as a prudent practice and measure and
not as the principal collateral for the loan.

 The
Bank will typically make equipment loans for a fixed term of generally not more than 10 years at fixed or variable rates, with the loan
fully amortized over the term. Loans to support working capital will typically have terms not exceeding one year and will usually be
secured by accounts receivable, inventory or personal guarantees of the principals of the business. For loans secured by accounts receivable
or inventory, principal will typically be repaid or reduced with cash generated as the accounts receivable and/or inventory is converted
into cash, and for loans secured with other types of collateral, principal will typically be repaid over the term of the loan or due
at maturity.

 Real
Estate Loans. The Bank makes owner occupied and non-owner occupied commercial real estate loans, residential and commercial construction
and development loans, and residential real estate loans. The Bank often uses appraisals to assess the collateral value of such real
estate. However, the Company's use of appraisals in deciding whether to make a loan on or secured by real property does not ensure
the value of the real property collateral if it must ultimately be foreclosed upon and sold.

Real Estate. Commercial real estate loan terms generally are limited to 25 years or less. Interest rates may be fixed or adjustable,
although rates typically are not fixed for loans with maturity dates exceeding 10 years. The Bank generally requires personal guarantees
from the principal owners of the property supported by a review by the Bank's management of the principal owners' personal
financial statements. Risks associated with commercial real estate loans include fluctuations in the value of real estate, tenant vacancy
rates and the quality of the borrower's management.

 Residential
Real Estate. The Bank's residential real estate loans consist of loans to acquire and renovate existing homes for subsequent
re-sale, residential new construction loans, residential loans purchased in the secondary market, residential rental properties, and
on a limited basis, traditional mortgage lending for one-to-four family owner occupied property. Loans are generally made in accordance
with the Bank's appraisal and loan policy with the ratio of the loan principal to the value of collateral (typically established
by independent appraisal).

Installment Loans. On a limited basis, the Bank makes loans to individuals for personal, family and household purposes, including
secured and unsecured installment and term loans. These loans are typically to the principals and employees of our business customers.
Repayment of consumer loans depends upon the borrower's financial stability and is more likely to be adversely affected by divorce,
job loss, illness and personal hardships than repayment of other loans. Because many consumer loans are secured by depreciable assets
such as boats, cars and trailers, the loan should be amortized over the useful life of the asset. The loan officer will review the borrower's
past credit history, past income level, debt history and, when applicable, cash flow and determine the impact of all these factors on
the ability of the borrower to make future payments as agreed. The principal competitors for consumer loans are the established banks
and finance companies in our market.

 Lending
Policy. The Bank's delegations of authority, which are approved by its board of directors, provide for various levels of
officer lending authority. The Bank has an independent third-party review that evaluates the quality of loans on a periodic basis and
determines if loans are originated in accordance with the guidelines established by its board of directors. Additionally, our board of
directors has formed a directors' loan committee with members named by board resolution to provide the following oversight:

 ensure
 compliance with loan policy, procedures and guidelines as well as appropriate regulatory
 requirements;

 approve
 loans with net Bank exposure over $4 million;

 monitor
 delinquent, non-accrual loans and classified loans;

 monitor
 loan portfolio concentrations and quality through a variety of metrics;

 monitor
 our loan servicing and review systems; and

 review
 the adequacy of the credit loss reserve.

 We
believe we follow a relatively conservative lending policy, but one that we believe permits prudent risks to assist businesses and consumers
in our lending market. Interest rates vary depending on our cost of funds, the loan maturity, the degree of risk and other loan terms.
The Bank does not make any loans to any of its directors, executive officers or their affiliates.

 Lending
Limits. The Bank's lending activities are subject to a variety of lending limits. Differing limits apply based on the type
of loan or the nature of the borrower, including the borrower's relationship to the Bank. In general, however, the Bank is able
to loan to any one borrower a maximum amount equal to either:

 15%
 of the Bank's capital and surplus and allowance for credit losses;

 25%
 of its capital and surplus and allowance for credit losses if the amount that exceeds 15%
 is secured by cash or readily marketable collateral, as determined by reliable and continuously
 available price quotations; or

 any
 amount when the loan is fully secured by a segregated deposit at the Bank and the Bank has
 perfected its security interest in the deposit.

 These
legal limits will increase or decrease as the Bank's capital increases or decreases as a result of its earnings or losses, among
other reasons.

 Credit
Risks. The principal economic risk associated with each category of loans that the Bank makes is the creditworthiness of the
borrower. Borrower creditworthiness is affected by general economic conditions and the strength of the relevant business market segment.
General economic factors affecting a borrower's ability to repay include interest, inflation and employment rates, as well as other
factors affecting a borrower's customers, suppliers and employees. The well-established financial institutions in our primary service
area currently make proportionately more loans to medium- to large-sized businesses than the Bank. Many of the Bank's anticipated
commercial loans will likely be made to small- to medium-sized businesses that may be less able to withstand competitive, economic and
financial pressures than larger borrowers.

Receivables. The Bank offers financing to smaller transportation companies across the United States primarily through factoring
of accounts receivables through its Integra Division. We directly purchase the receivables generated by our clients, primarily transportation,
energy and staffing companies, at a discount to their face value. The transactions are structured to provide the clients with immediate
working capital when there is a mismatch between trade payable payments to the client for services rendered and the required payment
of operating costs, such as fuel and insurance costs, incurred to provide such good or service. The receivables are typically collected
30 to 60 days after delivery.

 Investments.
 The Bank invests a portion of its assets in available for sale securities, which include U.S. Treasuries, U.S. government agencies,
mortgage-backed securities, direct obligations of quasi government agencies including Fannie Mae, Freddie Mac, and the Federal Home Loan
Bank. In addition, the Bank may make investments in held to maturity assets, including certain municipal or state obligations or securities
that it believes have a similar risk profile thereto. These investments include, among other things, securities issued pursuant to Property
Assessed Clean Energy programs ("PACE") and Public Improvement District/Tax Increment Reinvestment Zone ("PID/TIRZ")
investments. These investment contracts or bonds originate under a contractual obligation between the property owners, the local county
or city administration, and a third-party administrator and sponsor. Generally, as a property assessment, the total assessment is repaid
in installments over a period of 5 to 32 years by the then current property owner(s). Investments in instruments other than U.S. Treasuries
carry a degree of risk, including risk of default, market fluctuations and lack of liquidity.

 Deposit
Services. To fund its loan and securities portfolio, the Bank offers a wide range of deposit services including demand deposits,
regular savings accounts, money market accounts, individual retirement accounts, and certificates of deposit with fixed rates and a range
of maturity options. In addition, the Bank can access uninvested cash from customers of its Trust Division by moving portions of it into
money market deposits. As of December 31, 2024, the Bank deposits included $29.4 million available from the funds of trust clients.

 In
addition to traditional lobby banking services, the Bank offers robust e-banking services, via on-line and mobile devices, to both consumers
and businesses. These services include remote check deposits, bill payment, electronic transfer of funds between financial institutions,
person-to-person payments, positive pay, as well as traditional internet services such as balance inquiries and internal funds transfers.
The Bank provides a courier and mobile banking concierge service throughout the Dallas MSA and offers its customers free usage of any
automated teller machine in the world through its debit card. We also offer an on-line only option to open transaction, savings, and
certificate deposits that is marketed via the internet to attract consumer deposits.

 As
of December 31, 2024, the Bank had total deposits of approximately $716.5 million which includes $5.4 million of intercompany deposits
of the parent company and other subsidiaries, for a net balance of $711.1 million. Time deposits of $250 thousand and over totaled $112.3
million as of December 31, 2024. The Bank had $50.0 million of brokered deposits through an Insured Cash Sweep One-Way Buy Agreement
as of December 31, 2024.

 Borrowings.
In addition to deposits, we utilize advances from the Federal Home Loan Bank of Dallas (the "FHLB"), and other borrowings,
such as a line of credit with the Federal Reserve Bank of Dallas (the "FRB") and borrowings under the Bank Term Funding Program
("BTFP"), along with long-term subordinated notes as supplementary funding sources to finance our operations. At December
31, 2024, the Company had no borrowings with the FRB under the lines of credit or the BTFP. The Bank had $10.0 million, or 1.3% of total
liabilities, borrowed under FHLB, and the debt at T Bancshares, net of debt issuance costs, totaled $12.0 million, or 1.6% of total liabilities.

 Other
Financial Services

 General.
 We provide a variety of investment and insurance services to our clients through one or more subsidiaries, including investment
advisory, asset management, stock and bond investments, institutional trading, private investments and access to public offerings and
other investments. By providing our clients with a broad array of investment products and services, we believe that we can attract clients
seeking differentiated investment solutions and retain them over a longer period of time. These services include:

 Trust
Services. The Company provides trust services to individuals and defined contribution and benefit plans established by small
businesses for their owners and employees. We have approximately 1,800 trust accounts in 48 states. The Bank has established common
pooled funds to comingle our clients' capital to invest in stocks, bonds, exchange-traded funds or other investments and thereby
provide a smaller investor with broader diversification and access to professional investment advisors. The Bank had approximately $2.1
billion in market value of trust assets as of December 31, 2024.

 We
currently have six common pooled funds for qualified plans and another three for personal trust (individual) investors. Each common pooled
fund is established for a particular asset class or investment strategy, and each invests in stocks, bonds and/or exchange traded funds
(depending on the fund's strategy), often selected by a registered investment sub-advisor(s) retained by the Bank to serve the
particular common pooled fund. The suite of common pooled funds provides an investor with the ability to diversify across asset classes
(e.g., equities, fixed income or real assets) and managers. We also have common pooled funds that invest in ETFs (as selected by Tectonic
Advisors), which provide our investors with the ability to invest in passive portfolios. We believe that the benefit of a common pooled
fund is that it provides investors with access to managers that might not be accessible to individual or smaller investors, sometimes
with a lower cost than in a mutual fund format.

 The
Bank has retained Tectonic Advisors under a long-term contract to provide investment advisory services in selecting managers and certain
investments and constructing the allocations of the common pooled funds. The Bank generates fees by providing administrative services
to the common pooled funds and providing trust services to the plans and the individual investors.

 Cain
Watters has referred substantially all of the clients of the Bank's Trust Division. Cain Watters specializes in providing financial
planning, accounting, tax and advisory services to small businesses, principally dental practices. Cain Watters refers certain of its
clients to the Trust Division to provide custodial and fiduciary services for their defined benefit and contribution plans and also their
personal assets. Cain Watters is not obligated to make such referrals and refers its clients to other service providers that are competitive
with the Bank. The Bank competes on the basis of service and investment performance. However, the Bank and Cain Watters are parties to
an agreement which, among other provisions, obligates each party to preserve the other's business relationship with their mutual
clients. This agreement was renewed on December 1, 2022 under an automatic extension clause, and was subsequently amended effective January
31, 2023 to provide for termination upon the dissolution of either party or upon a mutually agreeable date in the event of the sale of
the Company. As of December 31, 2024, the partners of Cain Watters owned approximately 29.4% of the Company, and three partners of Cain
Watters serve on the board of directors of the Company.

 Third
Party Administration. The Nolan Company ("Nolan"), a third party administrator ("TPA") based in Overland
Park, Kansas, operates as a department within the Bank doing business under the name of The Nolan Company. Founded in 1979, Nolan provides
clients with retirement plan design and administrative services, specializing in ministerial recordkeeping, administration, actuarial
and design services for retirement plans of small businesses and professional practices. Similar to the Trust Division, Cain Watters
refers substantially all of the clients of the Bank's Nolan Division. We believe that offering TPA services allows us to serve
our clients more fully and to attract new clients to our trust platform.

 Investment
Advisory. Tectonic Advisors and Sanders Morris are registered investment advisors regulated by the SEC. They provide investment
advisory and due diligence services to their respective clients for an asset-based or a performance-based fee.

Advisors provides investment advice to the board of director's trust committee in the management of its $2.1 billion of common
pooled funds under a long-term agreement that has been in effect since 2006, the current form of which renewed in December 2022 under
an automatic extension clause within the agreement, and was subsequently extended effective January 31, 2023 to a duration that terminates
upon the dissolution of either party or upon a mutually agreeable date in the event of a sale of the Company. Pursuant to this agreement,
Tectonic Advisors provides investment advice, asset allocation advice and third party manager research for the construction of portfolios.
Tectonic Advisors provides advice on eight common pooled funds, which are combined in various manners to develop different portfolios
for investors (ranging from a conservative allocation to an aggressive allocation). Tectonic Advisors works with the Bank's Trust
Division, and the board of director's trust committee, in the management of these common pooled funds and portfolios and meets
with the Trust Division and trust committee on a quarterly basis. In addition to services provided to the Bank, Tectonic Advisors provides
investment advisory research and due diligence services to Cain Watters under a continuing agreement.

Advisors and Sanders Morris also provide advisory services to high net worth families and other clients. In doing so, Tectonic Advisors
and Sanders Morris develop portfolios based on the stated needs, investment objectives and desires of the client. These portfolios might
encompass the entirety (or almost the entirety) of a client's liquid investable assets (outside of cash) or just a portion. In
addition, Tectonic Advisors offers an income portfolio and Sanders Morris offers a managed, occasionally hedged portfolio and also short-term
fixed income management to certain clients.

 Brokerage.
 Through Sanders Morris, we purchase and sell stocks and other securities for high net worth clients, often on a discretionary
basis, in consideration for brokerage commissions based on trading activity. In addition, we provide institutional trading and other
services to money managers, institutions, and individual accounts. We also provide clients with access to private investments that are
sourced by us in consideration for a placement fee or commission. Finally, we provide margin loans offered through our clearing firms,
Pershing LLC and Interactive Brokers LLC, and periodically serve as a member of an underwriting or selling group member in public offerings,
which we offer to our clients. As of December 31, 2024, Sanders Morris had approximately $2.9 million in net regulatory capital as defined
by Financial Industry Regulatory Authority ("FINRA") to support its broker-dealer activities.

 Sanders
Morris earns revenue by charging fees and trading commissions for managing the investment assets of clients. Fees and trading commissions
are typically charged based on trading activity and/or portfolio size. In addition, we also generate substantial revenue from a traditional,
commission-based structure where we earn commissions on client purchase and sale transactions. Sanders Morris also serves as a placement
agent on a "best efforts" basis of private placements of equity and fixed income securities. Sanders Morris participates
in syndicates of public offerings, typically as a selling group member. Sanders Morris can also participate in public offerings as an
underwriter, which means that Sanders Morris takes principal risk on the placement of the securities but earns a higher fee.

 Finally,
Sanders Morris has an institutional trading business, which is based in Dallas, Texas. This group provides trading, research, structured
solutions and other financial services to clients that include: registered investment advisors, high net worth families and individuals,
money managers, hedge funds and others. This business typically charges a commission on trading activity. It competes on the basis of
service and solutions.

 Insurance.
 Through our insurance agency, HWG, we occasionally provide disability and life insurance as a broker. HWG is an insurance agency
licensed under the TDI. HWG generates its commissions through the sale of policies as a broker to clients and also receives renewal premiums
from past policies sold (and which are renewing). HWG is currently generating most of its revenues from renewals.

 Competition

 The
market for financial services is rapidly changing and intensely competitive and is likely to become more competitive as the number and
types of market entrants increases. The Bank competes in both lending and attracting funds with a wide range of financial institutions
within our markets, including local, regional and national commercial banks, savings and loan associations, and credit unions. We also
compete with consumer finance companies, pension trusts, mutual funds, insurance companies, mortgage bankers and brokers, brokerage and
investment banking firms, asset management and advisory firms, online and discount brokers, private trust companies, venture capital,
private equity and hedge funds, asset-based nonbank lenders, government agencies, third-party payment processors, financial technology
companies and certain other non-financial institutions, which may offer more favorable financing alternatives than the Bank. We believe
that our principal competitive advantages include our regional focus and our long-standing relationships with our clients.

 In
addition, the investment services business (including brokerage, private placements, syndication, and other financial advice) is highly
competitive. The principal competitive factors influencing our businesses are:

 expertise
 and quality of the professional staff;

 reputation
 in the marketplace;

 existing
 client relationships;

 performance
 of investment strategies or product offerings;

 advertising
 and sales promotion efforts,

 types,
 quality, and price of our products and services; and

 the
 technology platform through which a customer accesses our products and services.

 The
financial services industry has become considerably more concentrated as many securities firms have either ceased operations, been acquired
by, or merged into other firms. Many of these larger firms have significantly greater financial and other resources than we do and can
offer their customers more product offerings, lower pricing, broader research capabilities, access to international markets, and other
products and services we do not offer, which may give these firms a competitive advantage over us.

 As
we seek to expand our business, we face competition in the pursuit of clients interested in our services, the recruitment and retention
of wealth management professionals, and the identification and acquisition of other wealth management firms that can be integrated into
our group.

 Our
Market Area

 We
are based in Dallas, Texas, which is our largest market. The Bank's principal banking markets include Dallas, Tarrant, Denton,
Collin and Rockwall counties in North Texas. However, our business is also national in scope. Our national business includes: banking
for small businesses (particularly dental practices), SBA and USDA loans, factoring, trust and custodial services, and participant directed
recordkeeping and third-party administration. In addition, we provide investment advisory and brokerage services through Tectonic Advisors
and Sanders Morris.

 Human
Capital Resources

 We
had approximately 215 employees as of December 31, 2024. We believe our employee relations to be good and we have no collective bargaining
agreements with any employees.

 As
part of our business philosophy, we believe that we must offer and maintain market competitive compensation and benefit programs in order
to attract and retain employees who serve our customers, including competitive compensation, paid time off, an employee retirement plan,
bonus and other incentive compensation plans, and modern equipment and support.

 The
health and well-being of our employees is a priority for our business. Our full-time officers and employees are provided hospitalization
and major medical insurance. We pay a substantial portion of the premiums for these coverages. We also provide other basic insurance
coverages including dental, life, and long-term disability insurance.

 Other
Available Information

 We
file or furnish with the SEC annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and other reports
required by Section 13(a) or 15(d) of the Exchange Act. Electronic copies of our SEC filings are available to the public at the SEC's
website at  In addition, our annual reports on Form 10-K, quarterly reports on
Form 10-Q, current reports on Form 8-K, and other reports required by Section 13(a) or 15(d) of the Exchange Act are available through
our website, www.t.financial, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the
SEC.

 The
Company routinely posts important information for investors on its website, www.t.financial. The Company intends to use its website as
a means of disclosing material non-public information and for complying with its disclosure obligations under SEC Regulation FD (Fair
Disclosure). Accordingly, investors should monitor the Company's website, in addition to following the Company's press releases,
SEC filings, public conference calls, presentations and webcasts.

 Our
website and the information contained on or accessible through our website is not incorporated by reference into, and is not a part of,
this Form 10-K.

 SUPERVISION
AND REGULATION

 Set
forth below is a description of the significant elements of the laws and regulations applicable to the Company and its operating subsidiaries.
The description is qualified in its entirety by reference to the full text of the statutes, regulations and policies that are described.
Moreover, these statutes, regulations and policies are continually under review by the U.S. Congress and state legislatures, and federal
and state regulatory agencies. A change in statutes, regulations or regulatory policies applicable to the Company or its operating subsidiaries
could have a material effect on our business.

 Regulatory
Agencies

 As
a registered bank holding company, the Company is subject to the supervision and regulation of the Federal Reserve and, acting under
delegated authority, the FRB, pursuant to the Bank Holding Company Act of 1956, as amended (the "BHC Act"). As a national
bank, the Bank is subject to the supervision and regulation of the Office of the Comptroller of the Currency (the "OCC").
Sanders Morris is a registered broker-dealer with the SEC and FINRA, and a registered investment advisor with the SEC. Tectonic Advisors
is an SEC registered investment advisor. HWG is an insurance agency registered with the TDI.

 Bank
Holding Company Regulation

 BHC
Act. As a registered bank holding company, the Company is required to furnish to the Federal Reserve annual and quarterly reports
of its operations and may also be required to furnish such additional information and reports as the Federal Reserve or the FRB may require.
The Company elected to become a financial holding company in 2018, as further described under "—Financial Holding Company
Status."

 Under
the BHC Act, the Company must obtain the prior approval of the Federal Reserve before (i) acquiring direct or indirect ownership or control
of any class of voting securities of any bank or bank holding company if, after the acquisition, the Company would directly or indirectly
own or control 5% or more of the class; (ii) acquiring all or substantially all of the assets of another bank or bank holding company;
or (iii) merging or consolidating with another bank holding company.

 Under
the BHC Act, any company must obtain the approval of the Federal Reserve prior to acquiring control of the Company or the Bank. For purposes
of the BHC Act, "control" is conclusively presumed to exist upon the acquisition of 25% or more of the outstanding voting
securities of a bank or bank holding company, but may arise based on facts and circumstances even with ownership below 5.00% up to 24.99%.
On September 30, 2020, the Federal Reserve's final rule revising the Federal Reserve's regulations related to determinations
of whether a company has "control" over another company, including a bank holding company or a bank, for purposes of the
BHC Act, became effective. The final rule created a tiered system of non-control presumptions based upon the percentage of any class
of voting securities held by an acquirer and the presence of other indicia of control. The final rule's four categories of tiered
presumptions of non-control, based upon the percentage of ownership of any class of voting securities held by an acquirer, are (i) less
than 5%, (ii) 5% to 9.99%, (iii) 10% to 14.99%, and (iv) 15% to 24.99%. By codifying the non-control presumptions, the final rule provides
greater transparency with respect to the total level of equity, representative directors, management interlocks, limiting contractual
provisions and business relationships that would be permissible to the Federal Reserve in order to avoid a determination of control.
The Federal Reserve's final rule applies to control determinations under the BHC Act, but does not apply to the Change in Bank
Control Act of 1978, as amended (the "CIBCA").

 Change
in Bank Control Act. The CIBCA and the related regulations of the Federal Reserve require any person or group of persons acting
in concert (except for companies required to make application under the BHC Act), to file a written notice with the Federal Reserve before
the person or group acquires control of the Company. The CIBCA provides that a person, which includes a natural person or entity, directly
or indirectly, has "control" of a bank or bank holding company if it (i) owns, controls, or has the power to vote 25% or
more of the voting securities of the bank or bank holding company, (ii) controls the election of directors, trustees, or general partners
of the company, (iii) has a controlling influence over the management or policies of the company, or (iv) conditions in any manner the
transfer of 25% or more of the voting securities of the company upon the transfer of 25% or more of the outstanding shares of any class
of voting securities of another company. Accordingly, the CIBCA requires that prior to the acquisition of any class of voting securities
of a bank or bank holding company that prior notice to the Federal Reserve be provided, if, immediately after the transaction, the acquiring
person (or persons acting in concert) will own, control, or hold the power to vote 25% or more of any class of voting securities of the
bank or bank holding company. A rebuttable presumption of control arises under the CIBCA where a person (or persons acting in concert)
controls 10% or more, but less than 25%, of a class of the voting stock of a company or insured bank (i) which is a reporting company
under the Exchange Act, such as the Company, or (ii) such ownership interest is greater than the ownership interest held by any other
person (or persons acting in concert).

 Permitted
Activities. The BHC Act also limits the investments and activities of bank holding companies. In general, a bank holding company
is prohibited from acquiring direct or indirect ownership or control of more than 5% of the voting shares of a company that is not a
bank or a bank holding company or from engaging directly or indirectly in activities other than those of banking, managing or controlling
banks, providing services for its subsidiaries and various non-bank activities that are deemed to be closely related to banking. The
activities of the Company are subject to these legal and regulatory limitations under the BHC Act and the implementing regulations of
the Federal Reserve.

 Volcker
Rule. Section 13 of the BHC Act, commonly known as the "Volcker Rule," generally prohibits insured depository institutions
and their affiliates (including their holding companies) from sponsoring or acquiring an ownership interest in certain investment funds,
including hedge funds and private equity funds. The Volcker Rule also places restrictions on proprietary trading, which could impact
certain hedging activities. However, Section 203 of the Economic Growth, Regulatory Relief and Consumer Protection Act (the "EGRRCPA")
exempts community banks from the restrictions of the Volcker Rule if (i) the community bank, and every entity that controls it, has total
consolidated assets equal to or less than $10 billion; and (ii) trading assets and liabilities of the community bank, and every entity
that controls it, is equal to or less than 5% of its total consolidated assets. As the consolidated assets of the Company are less than
$10 billion and the Company does not currently exceed the 5% threshold, this aspect of the Volcker Rule does not have any impact on the
Company's consolidated financial statements at this time.

Holding Company Status. A bank holding company may also elect to become a "financial holding company," by which a
qualified bank holding company may engage, directly or through its non-bank subsidiaries, in any activity that is financial in nature
or incidental to such financial activity or in any other activity that is complementary to a financial activity and does not pose a substantial
risk to the safety and soundness of depository institutions or the financial system generally. A bank holding company can successfully
elect to be regulated as a financial holding company if all of its depository institution subsidiaries meet certain prescribed standards
pertaining to management, capital adequacy and compliance with the Community Reinvestment Act ("CRA"), such as being "well-capitalized"
and "well-managed," and must have a CRA rating of at least "satisfactory." Financial holding companies remain
subject to regulation and oversight by the Federal Reserve.

 If
a financial holding company ceases to meet the above requirements, the Federal Reserve's regulations provide that the financial
holding company must enter into an agreement with the Federal Reserve to comply with all applicable capital and management requirements.
Until the financial holding company returns to compliance, the Federal Reserve may impose limitations or conditions on its activities,
and the company may not commence any of the broader financial activities permissible for financial holding companies or acquire a company
engaged in such financial activities without prior approval of the Federal Reserve. Restrictions imposed on a financial holding company's
activities by the Federal Reserve may not necessarily be made known to the public. If the financial holding company does not return to
compliance within 180 days, the Federal Reserve may require divestiture of the financial holding company's depository institutions.
Failure to satisfy the financial holding company requirements could also result in loss of financial holding company status. The Company
made this election in 2018, and became a financial holding company.

 Source
of Strength. In accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act")
and long-standing Federal Reserve policy, a bank holding company is required to act as a source of financial and managerial strength
to any subsidiary bank. The holding company is expected to commit resources to support its subsidiary bank, including at times when the
holding company may not be in a financial position to provide such support. A bank holding company's failure to meet its source-of-strength
obligations may constitute an unsafe and unsound practice. The source-of-strength doctrine most directly affects bank holding companies
in situations where the bank holding company's subsidiary bank fails to maintain adequate capital levels.

 Sound
Banking Practice. The Federal Reserve also has the power to order a bank holding company to terminate any activity or investment,
or to terminate its ownership or control of any subsidiary, when it has reasonable cause to believe that the continuation of such activity
or investment or such ownership or control constitutes a serious risk to the financial safety, soundness or stability of any subsidiary
bank of the bank holding company. For example, a holding company could not impair its subsidiary bank's soundness by causing it
to make funds available to non-banking subsidiaries or their customers if the Federal Reserve believed it not prudent to do so.

 The
Federal Reserve has the power to assess civil money penalties for unsafe or unsound practices. The Financial Institutions Reform, Recovery
and Enforcement Act of 1989 ("FIRREA"), expanded the Federal Reserve's authority to prohibit activities of bank holding
companies and their non-banking subsidiaries which represent unsafe and unsound banking practices or which constitute violations of laws
or regulations. FIRREA increased the amount of civil money penalties, which the Federal Reserve can assess for activities conducted on
a knowing and reckless basis, if those activities caused a substantial loss to a depository institution. The penalties can be as high
as $1.0 million for each day the activity continues. FIRREA also expanded the scope of individuals and entities against which such penalties
may be assessed.

 Dividends,
Distributions, Stock Redemptions and Repurchases. Dividends and distributions from our subsidiary companies are the Company's
principal source of cash revenues. The Company's earnings and activities are affected by legislation, regulations, local legislative
and administrative bodies and decisions of courts in the jurisdictions in which we conduct business. These include limitations on the
ability of the Bank to pay dividends to the Company and the Company's ability to pay dividends to its shareholders. Consistent
with its policy that bank and financial holding companies should serve as a source of financial strength for their subsidiary banks,
it is the policy of the Federal Reserve that bank holding companies should pay cash dividends on preferred and common stock only out
of income available over the past year and only if prospective earnings retention is consistent with the organization's expected
future needs and financial condition. The policy provides that bank holding companies should not maintain a level of cash dividends that
undermines the bank holding company's ability to serve as a source of strength to its banking subsidiary. Consistent with such
policy, a banking organization should have comprehensive policies on dividend payments that clearly articulate the organization's
objectives and approaches for maintaining a strong capital position and achieving the objectives of the policy statement.

 In
addition, we are subject to certain restrictions on the making of distributions as a result of the requirement that the Bank maintain
an adequate level of capital as described below. As a Texas corporation, we are restricted under the Texas Business Organizations Code
(the "TBOC") from paying dividends under certain conditions. Under Texas law, we cannot pay dividends to shareholders if
the dividends exceed our surplus or if after giving effect to the dividends, we would be insolvent.

 In
the event that the Board authorizes the payment of a dividend by the Company, any such dividend will be consistent with our capital needs,
asset quality and overall financial condition (as a financial holding company). However, there can be no assurance that this will be
the case in the future and, if it is found that our dividend is not consistent with our capital needs and/or asset quality or if our
financial condition deteriorates, we may not be able to pay dividends on our Series B preferred stock.

 Bank
holding companies must consult with the Federal Reserve before redeeming or repurchasing any equity or other capital instrument included
in tier 1 or tier 2 capital prior to stated maturity, if (x) such redemption or repurchase could have a material effect on the level
or composition of the organization's capital base, or (y) as a result of such redemption or repurchase, there is a net reduction
of the outstanding amount of common stock or preferred stock outstanding below the amounts outstanding at the beginning of the quarter
in which the redemption or repurchase occurs. In addition, bank holding companies are unable to repurchase shares equal to 10% or more
of their net worth if they would not be well-capitalized (as defined by the Federal Reserve) after giving effect to such repurchase.
Bank holding companies experiencing financial weaknesses, or that are at significant risk of developing financial weaknesses, must consult
with the Federal Reserve before redeeming or repurchasing common stock or other regulatory capital instruments.

 Imposition
of Liability for Undercapitalized Subsidiaries. The Federal Deposit Insurance Corporation Act of 1991 ("FDICIA"),
requires bank regulators to take "prompt corrective action" to resolve problems associated with insured depository institutions.
In the event an institution becomes "undercapitalized," it must submit a capital restoration plan. The capital restoration
plan will not be accepted by the regulators unless each company "having control of" the undercapitalized institution "guarantees"
the subsidiary's compliance with the capital restoration plan until it becomes "adequately capitalized." For purposes
of this statute, the Company has control of the Bank. Under FDICIA, the aggregate liability of all companies controlling a particular
institution is limited to the lesser of 5% of the depository institution's total assets at the time it became undercapitalized
or the amount necessary to bring the institution into compliance with applicable capital standards. FDICIA grants greater powers to bank
regulators in situations where an institution becomes "significantly" or "critically" undercapitalized or fails
to submit a capital restoration plan. For example, a bank holding company controlling such an institution can be required to obtain prior
Federal Reserve approval of proposed distributions, consent to a merger or divest the troubled institution or other affiliates.

 Anti-Tying
Restrictions. Bank holding companies and affiliates are prohibited from tying the provision of services, such as extensions of
credit, to other services offered by the holding company or its affiliates. While we and our other affiliates offer services, no such
services are tied to one another or conditioned upon one another.

 Bank

 The
Bank is a national bank chartered under the National Bank Act. The Bank is a member of the Federal Reserve. In addition, its deposits
are insured by the Federal Deposit Insurance Corporation ("FDIC") to the maximum extent permitted by law. National banks,
such as the Bank, are subject to extensive regulation, supervision and examination by the OCC. As an insured depository institution and
member bank, the Bank is also subject to regulation by the FDIC and the Federal Reserve, although the OCC is the Bank's primary
federal regulator. The bank regulatory agencies have the power to enforce compliance with applicable banking laws and regulations. These
requirements and restrictions include requirements to maintain reserves against deposits, restrictions on the nature and amount of loans
that may be made and the interest that may be charged thereon and restrictions relating to investments and other activities of the Bank.

 National
Banking Associations. Banks organized as national banking associations under the National Bank Act are subject to regulation
and examination by the OCC. The supervision and regulation by the OCC is primarily intended to protect the interests of depositors of
the Bank, not the Bank's shareholders. The National Bank Act, among other things:

 restricts
 investments and other activities of the Bank;

 restricts
 the nature and amount of loans that the Bank may make and the interest that may be charged; and

 requires
 the Bank to maintain reserves against deposits.

 Deposit
Insurance. The FDIC insures the deposits of federally insured banks, such as the Bank, and thrifts, up to prescribed statutory
limits for each depositor through the Deposit Insurance Fund (the "DIF"), and safeguards the safety and soundness of the
banking and thrift industries. The Dodd-Frank Act set the standard maximum deposit insurance amount as $250,000. The amount of FDIC assessments
paid by each insured depository institution is based on the Bank's total assets and its relative risk of default as measured by
regulatory capital ratios and other supervisory factors. Under the Dodd-Frank Act, each institution's assessment base is determined
based on its average consolidated total assets less average tangible equity, and there is a scorecard method for calculating assessments
that combines CAMELS (an acronym that refers to the five components of a bank's condition that are addressed: capital
adequacy, asset quality, management, earnings, and liquidity) ratings and specified forward-looking financial measures to determine each
institution's risk to the DIF.

 In
accordance with the Dodd-Frank Act, the FDIC adopted a plan to restore the DIF to the 1.35% ratio but did not change its assessment schedule.
Under the FDIC's restoration plan, FDIC staff will update its projections for the DIF balance and DIF reserve ratio at least semiannually
while the restoration plan is in effect. On October 18, 2022, the FDIC adopted a final rule applicable to all insured depository institutions
increasing initial base deposit insurance assessment rate schedules by 2 basis points, beginning in the first quarterly assessment period
of 2023. The FDIC also issued notices maintaining a DIF reserve ratio of 2.0% for 2023 and 2024. The increase in assessment rate schedules
is intended to increase the likelihood that the DIF reserve ratio be restored to at least the statutory minimum of 1.35% by September
30, 2028, the statutory deadline set by the Dodd-Frank Act. The assessment rate schedules will remain in effect unless and until the
DIF reserve ratio meets or exceeds 2.0% in order to support growth in the DIF in progressing toward the FDIC's long-term goal of a 2.0%
designated reserve ratio for the DIF. FDIC staff may in the future recommend additional assessment rate adjustments if deemed necessary.

 Separately,
in connection with the U.S. Treasury Secretary's invocation of the systemic risk exception declared on March 12, 2023, in response
to the failure of two insured depository institutions in that year and the appointment of the FDIC as receiver for such failed insured
depository institutions, the FDIC adopted a final rule in November 2023 that implements a special assessment to recover the DIF's
losses from protecting uninsured depositors following the closures of such failed insured depository institutions. This rule is effective
on April 1, 2024 and affects only those insured depository institutions with more than $5 billion in total assets. Affected institutions
must pay such special assessment over eight quarterly assessment periods, the first of which will be reflected on the first quarterly
assessment period for January 1 through March 31, 2024, with the first payment due on June 28, 2024. In June 2024, due to the increased
estimate of losses, the FDIC announced that it projects that the special assessment will be collected for an additional two quarters
beyond the initial eight-quarter collection period, at a lower rate. This updated assessment was made under the FDIC's final rule
whereby the estimated loss pursuant to the systemic risk determination can be periodically adjusted. The FDIC has also retained the ability
to cease collection early, extend the special assessment collection period and impose a final shortfall special assessment. This rule
is not applicable for the Company. However, the FDIC also reserved the right to impose a one-time "shortfall assessment"
at the conclusion of the special assessment if there are DIF losses that have not been fully recovered. It is possible that further increases
in deposit insurance are adopted by the FDIC that could apply to the Bank.

 Additionally,
under the Federal Deposit Insurance Act (the "FDIA"), the FDIC may terminate deposit insurance upon a finding that the institution
has engaged in unsafe and unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable
law, regulation, rule, order or condition imposed by the FDIC.

 Payment
of Dividends. The Company is a legal entity separate and distinct from the Bank. To the extent the Company desires to have dividends
paid by the Bank, the Bank may be limited in its ability to pay dividends without prior regulatory approval. The Bank is required by
federal law to obtain the prior approval of the OCC to declare and pay dividends if the total of all dividends declared in any calendar
year would exceed the total of (1) the Bank's net profits (as defined and interpreted by regulation) for that year plus (2) its
retained net profits (as defined and interpreted by regulation) for the preceding two calendar years, less any required transfers to
surplus. In addition, the Bank may only pay dividends to the extent that retained net profits (including the portion transferred to surplus)
exceed bad debts (as defined by regulation).

 The
payment of dividends by the Bank is affected by the requirement to maintain adequate capital pursuant to applicable capital adequacy
guidelines and regulations, and the Bank is generally prohibited from paying any dividends if, following payment thereof, the institution
would be undercapitalized. Notwithstanding the availability of funds for dividends, however, the OCC may prohibit the payment of dividends
by the Bank if the OCC determines such payment would constitute an unsafe or unsound practice. In addition, under the Basel III rules,
institutions that seek the freedom to pay dividends will have to maintain the capital conservation buffer.

 Regulatory
Capital Requirements. Under the Basel III capital regulations, the minimum capital level requirements are (i) a common equity
Tier 1 ("CET1") capital ratio of 4.5%; (ii) a Tier 1 capital ratio of 6.0%; (iii) a total capital ratio of 8.0%; and (iv)
a Tier 1 leverage ratio of 4.0%. CET1 generally consists of common stock; retained earnings; accumulated other comprehensive income,
or AOCI, unless an institution elects to exclude AOCI from regulatory capital; and certain minority interests; all subject to applicable
regulatory adjustments and deductions. Tier 1 capital generally consists of CET1 and noncumulative perpetual preferred stock. Tier 2
capital generally consists of other preferred stock and subordinated debt meeting certain conditions plus an amount of the allowance
for loan and lease losses up to 1.25% of assets. Total capital is the sum of Tier 1 and Tier 2 capital. As of December 31, 2024, the
Bank exceeded all Basel III regulatory minimum capital requirements.

 In
addition to the minimum capital requirements, the Bank must maintain a capital conservation buffer that consists of additional CET1 capital
greater than 2.5% of risk-weighted assets above the required minimum levels in order to avoid limitations on paying dividends, repurchasing
shares and paying discretionary bonuses.

 The
CET1 requirements also changed the risk-weighting of certain assets including a 150% risk weight (up from 100%) for certain high volatility
commercial real estate acquisition development and construction loans and for non-residential mortgage loans that are 90 days or more
past due or otherwise on non-accrual status; a 20% (up from 0%) credit conversion factor for the unused portion of a commitment with
an original maturity of one year or less that is not unconditionally cancellable; and a 250% risk weight (up from 100%) for mortgage
servicing rights and deferred tax assets that are not deducted from capital.

 Community
Bank Leverage Ratio. On September 17, 2019, the federal banking regulators published final rules implementing a simplified measure
of capital adequacy for certain banking organizations that have less than $10 billion in total consolidated assets. Under the final
rules, which went into effect on January 1, 2020, depository institutions and depository institution holding companies that have
less than $10 billion in total consolidated assets and meet other qualifying criteria, including a leverage ratio of greater than
9%, off-balance-sheet exposures of 25% or less of total consolidated assets and trading assets plus trading liabilities of
5% or less of total consolidated assets, are deemed "qualifying community banking organizations" and are eligible to opt
into the "Community Bank Leverage Ratio," or CBLR, framework. A qualifying community banking organization that elects to
use the CBLR framework and that maintains a leverage ratio of greater than 9% is considered to have satisfied the generally applicable
risk-based and leverage capital requirements under the Basel III rules and, if applicable, is considered to have met the "well
capitalized" ratio requirements for purposes of its primary federal regulator's prompt corrective action rules, discussed
below. The final rules include a two-quarter grace period during which a qualifying community banking organization that temporarily
fails to meet any of the qualifying criteria, including the greater-than-9% CBLR requirement, is generally still deemed "well
capitalized" so long as the banking organization maintains a leverage capital ratio greater than 8%. A banking organization that
fails to maintain a leverage capital ratio greater than 8% is not permitted to use the grace period and must comply with the generally
applicable requirements under the Basel III rules and file the appropriate regulatory reports.

 Although
the Company and the Bank are qualifying community banking organizations, the Company and the Bank have elected not to use the CBLR framework,
but may make such an election in the future.

 Prompt
Corrective Regulatory Action. Under applicable federal statutes, the OCC is required to take "prompt corrective action"
if the Bank does not meet specified minimum capital requirements. For these purposes, the law establishes five capital categories: well
capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized. Under the OCC's
prompt corrective action regulations, an institution is deemed to be:

 "well
 capitalized" if it has a total capital ratio of 10.0% or greater, a Tier 1 capital ratio of 8.0% or greater, a CET1 capital
 ratio of 6.5% or greater, a Tier 1 leverage ratio of 5.0% or greater and is not subject to a capital maintenance requirement;

 "adequately
 capitalized" if it has a total capital ratio of 8.0% or greater, a Tier 1 capital ratio of 6.0% or greater, a CET1 capital
 ratio of 4.5% or greater and a Tier 1 leverage ratio of 4.0% or greater;

 "undercapitalized"
 if it has a total capital ratio of less than 8.0%, a Tier 1 capital ratio of less than 6.0%, a CET1 capital ratio of less than 4.5%
 or a Tier 1 leverage ratio of less than 4.0%;

 "significantly
 undercapitalized" if it has a total capital ratio of less than 6.0%, a Tier 1 capital ratio of less than 4.0%, a CET1 capital
 ratio of less than 3.0% or a Tier 1 leverage ratio of less than 3.0%; and

 "critically
 undercapitalized" if it has a ratio of tangible equity to total assets that is equal to or less than 2.0%.

 If
the Bank were to become undercapitalized, it would be subject to growth limitations and would be required to submit a capital restoration
plan to the OCC. The OCC may not accept such a plan without determining, among other things, that the plan is based on realistic assumptions
and is likely to succeed in restoring the Bank's capital. In addition, for a capital restoration plan to be acceptable, the Company
must guarantee that the Bank will comply with such capital restoration plan. If the Bank were to fail to submit an acceptable plan, it
would be treated as if it were "significantly undercapitalized." "Significantly undercapitalized" depository
institutions may be subject to a number of requirements and restrictions, including orders to sell sufficient voting stock to become
"adequately capitalized," requirements to reduce total assets and cessation of receipt of deposits from correspondent banks
and other depositary sources, particularly if such deposits are higher cost deposits. "Critically undercapitalized" institutions
are subject to the appointment of a receiver or conservator.

 As
of December 31, 2024, the Bank qualified as "well capitalized" under the prompt corrective action rules.

 Interstate
Banking and Branching. Effective June 1, 1997, the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the "Riegle-Neal
Act") amended the FDIA, and certain other statutes, to permit state and national banks with different home states to merge across
state lines with approval of the appropriate federal banking agency, unless the home state of a participating bank had passed legislation
prior to May 31, 1997, expressly prohibiting interstate mergers. Under the Riegle-Neal Act, once a state or national bank has established
branches in a state, that bank may establish and acquire additional branches at any location in the state at which any bank involved
in the interstate merger transaction could have established or acquired branches under applicable federal or state law. If a state opts
out of interstate branching within the specified time period, no bank in any other state may establish a branch in the state which has
opted out, whether through an acquisition or de novo.

 However,
under the Dodd-Frank Act, the national branching requirements have been relaxed and national banks and state banks are able to establish
branches in any state if that state would permit the establishment of the branch by a state bank chartered in that state. The OCC accepts
applications for interstate merger and branching transactions, subject to certain limitations on the ages of the banks to be acquired
and the total amount of deposits within the state that a bank or financial holding company may control. Since our primary service area
is Texas, we do not expect that the ability to operate in other states will have any material impact on our growth strategy. We may,
however, face increased competition from out-of-state banks that branch or make acquisitions in our primary markets in Texas.

 Restrictions
on Transactions with Affiliates. The Bank is subject to the provisions of Section 23A and 23B of the Federal Reserve Act (the
"Affiliates Act"). Affiliates of a bank include, among other entities, the bank's holding company and companies that
are under common control with the bank. In our case, Tectonic Advisors, Sanders Morris, HWG and Cain Watters are all considered affiliates
of the Bank.

 These
provisions place limits on the amount of:

 loans
 or extensions of credit to affiliates;

 investments
 in affiliates;

 assets
 that may be purchased from affiliates;

 the
 amount of loans or extensions of credit to third parties collateralized by the securities
 or obligations of affiliates; and

 the
 guarantee, acceptance or letter of credit issued on behalf of an affiliate.

 The
total amount of the above transactions is limited in amount, as to any one affiliate, to 10% of the Bank's capital and surplus
and, as to all affiliates combined, to 20% of the Bank's capital and surplus. In addition to the limitation on the amount of these
transactions, each of the above transactions must also meet specified collateral requirements. The Bank must also comply with other provisions
designed to avoid the purchase or acquisition of low-quality assets from affiliates. The Dodd-Frank Act expanded the scope of Section
23A of the Affiliates Act, which now includes investment funds managed by an institution as an affiliate, as well as other procedural
and substantive hurdles.

 Section
23B of the Affiliates Act, among other things, prohibits the Bank from engaging in any transaction with an affiliate unless the transaction
is on terms substantially the same, or at least as favorable to the bank or its subsidiaries, as those prevailing at the time for comparable
transactions with nonaffiliated companies.

 Loans
to Insiders. Under federal law, the Bank is also subject to restrictions on extensions of credit to its executive officers, directors,
principal shareholders and their related interests. These extensions of credit (1) must be made on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for comparable transactions with third parties, (2) must follow credit
underwriting procedures at least as stringent as those applicable to comparable transactions with third parties, and (3) must not involve
more than the normal risk of repayment or present other unfavorable features. The Dodd-Frank Act expanded coverage of transactions with
insiders by including credit exposure arising from derivative transactions (which are also covered by the expansion of Section 23A of
the Affiliates Act). The Dodd-Frank Act prohibits an insured depository institution from purchasing or selling an asset to an executive
officer, director, or principal shareholder (or any related interest of such a person) unless the transaction is on market terms, and,
if the transaction exceeds 10% of the institution's capital, it is approved in advance by a majority of the disinterested directors.

Real Estate Lending Concentrations. The federal banking agencies, including the OCC, have promulgated guidance governing financial
institutions with concentrations in commercial real estate lending. The guidance provides that a bank has a concentration in commercial
real estate lending if (i) total reported loans for construction, land development, and other land represent 100% or more of total capital
or (ii) total reported loans secured by multifamily and non-farm nonresidential properties (excluding loans secured by owner-occupied
properties) and loans for construction, land development, and other land represent 300% or more of total capital and the bank's
commercial real estate loan portfolio has increased 50% or more during the prior 36 months. If a concentration is present, management
must employ heightened risk management practices that address the following key elements: including board and management oversight and
strategic planning, portfolio management, development of underwriting standards, risk assessment and monitoring through market analysis
and stress testing, and maintenance of increased capital levels as needed to support the level of commercial real estate lending.

 On
December 18, 2015, the federal banking agencies jointly issued a "Statement on Prudent Risk Management for Commercial Real Estate
Lending." In June 2023, in response to the increased risk relating to commercial real estate loans, the federal banking agencies
issued a final Interagency Policy Statement on Prudent Commercial Real Estate Loan Accommodations and Workouts. The new policy statement
updates, expands on and supersedes existing guidance from 2009 and supplements the guidance from 2015. Most notably, it (i) adds a new
discussion of short-term loan accommodations, (ii) expands guidance regarding the evaluation and assessment of guarantors to also encompass
loan sponsors, (iii) incorporates information about changes to accounting principles since 2009, and (iv) updates and expands the illustrative
examples of commercial real estate loan workouts.

 As
of December 31, 2024, the Company did not exceed the levels to be considered to have a concentration in commercial real estate lending
and believes its credit administration to be consistent with the aforementioned policy statements and advisory guidance.

 Brokered
Deposit Restrictions. Well capitalized institutions are not subject to limitations on brokered deposits, while an adequately
capitalized institution is able to accept, renew or roll over brokered deposits only with a waiver from the FDIC and are subject to certain
restrictions on the yield paid on such deposits. Undercapitalized institutions are generally not permitted to accept, renew, or roll
over brokered deposits. As of December 31, 2024, the Bank qualified as "well capitalized" for purposes of the brokered deposit
restrictions.

 Technology
Risk Management, Cybersecurity and Consumer Privacy. Federal banking regulators have issued various policy statements emphasizing
the importance of technology risk management and supervision in evaluating the safety and soundness of depository institutions with respect
to banks that contract with outside vendors to provide data processing and core banking functions. The use of technology-related products,
services, delivery channels and processes exposes a bank to various risks, particularly operational, privacy, security, strategic, reputation
and compliance risk. Banks are generally expected to prudently manage technology-related risks as part of their comprehensive risk management
policies by identifying, measuring, monitoring and controlling risks associated with the use of technology.

 On
July 26, 2023, the SEC adopted final rules that require public companies to promptly disclose material cybersecurity incidents in a Current
Report on Form 8-K and detailed information regarding their cybersecurity risk management, strategy, and governance on an annual basis
in an Annual Report on Form 10-K. Companies are required to report on Form 8-K any cybersecurity incident they determine to be material
within four business days of making that determination. See Item 1C "Cybersecurity" in Part I of this Form 10-K. These SEC
rules, and any other regulatory guidance, are in addition to notification and disclosure requirements under state and federal banking
law and regulations.

 Under
Section 501 of the Gramm-Leach-Bliley Act of 1999 (the "GLBA"), the federal banking agencies have established appropriate
standards for financial institutions regarding the implementation of safeguards to ensure the security and confidentiality of customer
records and information, protection against any anticipated threats or hazards to the security or integrity of such records and protection
against unauthorized access to or use of such records or information in a way that could result in substantial harm or inconvenience
to a customer. Among other matters, the rules require each bank to implement a comprehensive written information security program that
includes administrative, technical and physical safeguards relating to customer information.

 Under
the GLBA, a financial institution must also provide its customers with a notice of privacy policies and practices. Section 502 prohibits
a financial institution from disclosing nonpublic personal information about a customer to nonaffiliated third parties unless the institution
satisfies various notice and opt-out requirements and the customer has not elected to opt out of the disclosure. Under Section 504, the
agencies are authorized to issue regulations as necessary to implement notice requirements and restrictions on a financial institution's
ability to disclose nonpublic personal information about customers to nonaffiliated third parties. Under the final rule the regulators
adopted, all banks must develop initial and annual privacy notices which describe in general terms the bank's information sharing
practices. Banks that share nonpublic personal information about customers with nonaffiliated third parties must also provide customers
with an opt-out notice and a reasonable period of time for the customer to opt out of any such disclosure (with certain exceptions).
Limitations are placed on the extent to which a bank can disclose an account number or access code for credit card, or deposit or transaction
accounts to any nonaffiliated third party for use in marketing.

 In
November 2021, the federal bank regulatory agencies issued a joint rule establishing computer-security incident notification requirements
for banking organizations and their service providers. Beginning May 1, 2022, a bank holding company, such as the Company, and an FDIC-supervised
depository institution, such as the Bank, are required to notify the Federal Reserve or FDIC, respectively, as soon as possible and no
later than 36 hours after a determination that a computer-security incident that rises to the level of a notification incident has occurred.

 Anti-Money
Laundering. Under federal law, including the Bank Secrecy Act (the "BSA"), as amended by the Uniting and Strengthening
America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the "USA PATRIOT Act"),
and as further amended by the National Defense Authorization Act for Fiscal Year 2021 (the "National Defense Authorization Act"),
and implementing regulations, certain types of financial institutions, including insured depository institutions, must maintain anti-money
laundering ("AML") programs that include established internal policies, procedures and controls; a designated compliance
officer; an ongoing training program; and testing of the program by an independent audit function. Financial institutions are restricted
from entering into specified financial transactions and account relationships and must meet enhanced standards for due diligence, client
identification and recordkeeping, including in their dealings with non-U.S. financial institutions and non-U.S. clients. Financial institutions
must take reasonable steps to conduct enhanced scrutiny of account relationships to guard against money laundering and to report any
suspicious information maintained by financial institutions.

 On
May 10, 2016, the Financial Crimes Enforcement Network ("FinCEN") issued a final rule regarding customer due diligence requirements
for covered financial institutions in connection with their BSA and AML policies. The final rule adds a requirement that banks understand
the nature and purpose of customer relationships and identify the "beneficial owner" (25% or more ownership interest) of
legal entity customers. The formal implementation date was May 11, 2018. Bank regulators routinely examine institutions for compliance
with these obligations and they must consider an institution's AML compliance when considering regulatory applications filed by
the institution, including applications for banking mergers and acquisitions. The regulatory authorities have imposed "cease and
desist" orders and civil money penalty sanctions against institutions found to be violating these obligations.

 Further,
on January 1, 2021, Congress passed the National Defense Authorization Act, which enacted the most significant overhaul of the BSA and
related AML laws since the USA PATRIOT Act. Notable amendments include (1) significant changes to the collection of beneficial ownership
information and the establishment of a beneficial ownership registry, which requires corporate entities (generally, any corporation,
limited liability company, or other similar entity with 20 or fewer employees and annual gross income of $5 million or less) to report
beneficial ownership information to FinCEN (which will be maintained by FinCEN and made available upon request to financial institutions);
(2) enhanced whistleblower provisions, which provide that one or more whistleblowers who voluntarily provide original information leading
to the successful enforcement of violations of the anti-money laundering laws in any judicial or administrative action brought by the
Secretary of the Treasury or the Attorney General resulting in monetary sanctions exceeding $1 million (including disgorgement and interest
but excluding forfeiture, restitution, or compensation to victims) will receive not more than 30 percent of the monetary sanctions collected
and will receive increased protections; (3) increased penalties for violations of the BSA; (4) improvements to existing information sharing
provisions that permit financial institutions to share information relating to suspicious activity reports (SARs) with foreign branches,
subsidiaries, and affiliates (except those located in China, Russia, or certain other jurisdictions) for the purpose of combating illicit
finance risks; and (5) expanded duties and powers of FinCEN. Many of the amendments, including those with respect to beneficial ownership,
require the Department of Treasury and FinCEN to promulgate rules.

 On
September 29, 2022, FinCEN issued a final rule establishing a beneficial ownership information reporting requirement, pursuant to the
CTA. The rule requires most corporations, limited liability companies, and other entities created in or registered to do business in
the United States to report information about their beneficial owners-the persons who ultimately own or control the company, to FinCEN.
On December 22, 2023, FinCEN issued a final rule regarding access by authorized recipients to beneficial ownership information that will
be reported to FinCEN pursuant to Sec. 6403 of the CTA, which is part of the NDAA. The regulations implement strict protocols required
by the CTA to protect sensitive personally identifiable information reported to FinCEN and establish the circumstances in which specified
recipients have access to beneficial ownership information, along with data protection protocols and oversight mechanisms applicable
to each recipient category. The disclosure of beneficial ownership information to authorized recipients in accordance with appropriate
protocols and oversight will help law enforcement and national security agencies prevent and combat money laundering, terrorist financing,
tax fraud, and other illicit activity, as well as protect national security.

 In
July 2024, the federal banking agencies, including the Federal Reserve and OCC, proposed amendments to update the requirements for supervised
institutions to establish, implement and maintain effective, risk-based and reasonably designed AML and countering the financing of terrorism
("CFT") programs. The proposed amendments would require supervised institutions to identify, evaluate and document the regulated
institution's money laundering, terrorist financing and other illicit finance activity risks, as well as consider, as appropriate,
FinCEN's published national AML/CFT priorities.

 Office
of Foreign Assets Control ("OFAC") Regulation. The United States has imposed economic sanctions that affect transactions
with designated foreign countries, nationals and others. These are typically known as the OFAC rules based on their administration by
OFAC. The OFAC-administered sanctions targeting countries take many different forms. Generally, however, they contain one or more of
the following elements: (i) restrictions on trade with, or investment in, a sanctioned country, including prohibitions against direct
or indirect imports from and exports to a sanctioned country and prohibitions on "U.S. persons" engaging in financial transactions
relating to making investments in, or providing investment-related advice or assistance to, a sanctioned country; and (ii) the blocking
of assets in which the government or specially designated nationals of the sanctioned country have an interest by prohibiting transfers
of property subject to U.S. jurisdiction (including property in the possession or control of U.S. persons). Blocked assets (e.g., property
and bank deposits) cannot be paid out, withdrawn, set off or transferred in any manner without a license from OFAC. The Bank is responsible
for, among other things, blocking accounts of, and transactions with, such targets and countries, prohibiting unlicensed trade and financial
transactions with them and reporting blocked transactions after their occurrence. Failure to comply with these sanctions could have serious
legal and reputational consequences.

Financial Protection Bureau ("CFPB"). The CFPB was created under the Dodd-Frank Act to centralize responsibility
for consumer financial protection with broad rulemaking, supervision and enforcement authority over a wide range of consumer protection
laws that apply to all banks and thrifts, including the Equal Credit Opportunity Act, Truth in Lending Act ("TILA"), Real
Estate Settlement Procedures Act, Fair Credit Reporting Act, Home Mortgage Disclosure Act, Truth in Savings Act, Fair Debt Collection
Act, the consumer financial privacy provisions of the GLBA and certain other statutes. Banking institutions with total assets of $10.0
billion or less, such as the Bank, remain subject to the supervision and enforcement of their primary federal banking regulator with
respect to the federal consumer financial protection laws and such additional regulations as may be adopted by the CFPB.

 Community
Reinvestment Act. The CRA and the regulations issued thereunder are intended to encourage banks to help meet the credit needs
of their entire communities, including low- and moderate-income neighborhoods, consistent with safe and sound operations. The regulators
examine banks and assign each bank a public CRA rating. The CRA then requires bank regulators to take into account the bank's record
of meeting the needs of its community when considering certain applications by a bank, including applications to establish a banking
center or to conduct certain mergers or acquisitions. The Federal Reserve is also required to consider the CRA records of a bank holding
company's controlled banks when considering an application by the bank holding company to acquire a bank or to merge with another
bank holding company.

 The
federal banking agencies have adopted regulations which measure a bank's compliance with its CRA obligations on a performance based
evaluation system. This system bases CRA ratings on an institution's actual lending service and investment performance rather than
the extent to which the institution conducts needs assessments, documents community outreach or complies with other procedural requirements.
The ratings range from a high of "outstanding" to a low of "substantial noncompliance." The Bank had a CRA rating
of "satisfactory" as of its most recent CRA assessment.

 An
unsatisfactory CRA record could substantially delay approval or result in denial of an application. See "Risk Factors—Risks
Related to Our Regulatory Environment—We are subject to numerous laws designed to protect consumers, including the CRA and fair
lending laws, and failure to comply with these laws could lead to a wide variety of sanctions."

Z. On April 5, 2011, the Federal Reserve's final rule on loan originator compensation and steering (Regulation Z) became
final. Regulation Z is more commonly known as the regulation that implements TILA. Regulation Z address two components of mortgage lending,
i.e., loans secured by a dwelling, and implements restrictions and guidelines for: (i) prohibited payments to loan originators, and (ii)
prohibitions on steering. Under Regulation Z, a creditor is prohibited from paying, directly or indirectly, compensation to a mortgage
broker or any other loan originator that is based on a mortgage transaction's terms or conditions, except the amount of credit
extended, which is deemed not to be a transaction term or condition. In addition, Regulation Z prohibits a loan originator from "steering"
a consumer to a lender or a loan that offers less favorable terms in order to increase the loan originator's compensation, unless
the loan is in the consumer's interest. Regulation Z also contains a record-retention provision requiring that, for each transaction
subject to Regulation Z, the financial institution maintain records of the compensation it provided to the loan originator for that transaction
as well as the compensation agreement in effect on the date the interest rate was set for the transaction. These records must be maintained
for two years.

 UDAP
and UDAAP. Banking regulatory agencies have increasingly used a general consumer protection statute to address "unfair",
"deceptive" or "abusive" acts and business practices that may not necessarily fall directly under the purview
of a specific banking or consumer finance law. Section 5 of the Federal Trade Commission Act, referred to as the FTC Act, is the primary
federal law that prohibits unfair or deceptive acts or practices, referred to as UDAP, and unfair methods of competition in or affecting
commerce. "Unjustified consumer injury" is the principal focus of the FTC Act. UDAP laws and regulations were expanded under
the Dodd-Frank Act to apply to "unfair, deceptive or abusive acts or practices" referred to as UDAAP, and were delegated
to CFPB for rulemaking. The federal banking agencies have the authority to enforce such rules and regulations. Under the Dodd-Frank Act,
CFPB looks to various factors to assess whether an act or practice is unfair, including whether it causes or is likely to cause substantial
injury to consumers, the injury is not reasonably avoidable by consumers, and the injury is not outweighed by countervailing benefits
to consumers or to competition. A key focus of CFPB is whether an act or practice hinders a consumer's decision-making.

 Incentive
Compensation Guidance

 The
federal bank regulatory agencies have issued comprehensive guidance intended to ensure that the incentive compensation policies of banking
organizations do not undermine the safety and soundness of those organizations by encouraging excessive risk-taking. The incentive compensation
guidance sets expectations for banking organizations concerning their incentive compensation arrangements and related risk-management,
control and governance processes. The incentive compensation guidance, which covers all employees that have the ability to materially
affect the risk profile of an organization, either individually or as part of a group, is based upon three primary principles: (1) balanced
risk-taking incentives; (2) compatibility with effective controls and risk management; and (3) strong corporate governance. Any deficiencies
in compensation practices that are identified may be incorporated into the organization's supervisory ratings, which can affect
its ability to make acquisitions or take other actions. In addition, under the incentive compensation guidance, a banking organization's
federal supervisor may initiate enforcement action if the organization's incentive compensation arrangements pose a risk to the
safety and soundness of the organization. Further, the Basel III capital rules limit discretionary bonus payments to bank executives
if the institution's regulatory capital ratios fail to exceed certain thresholds.

 In
October 2022, the SEC adopted a final rule directing national securities exchanges and associations, including the NASDAQ, to implement
listing standards that require listed companies to adopt policies mandating the recovery or "clawback" of excess incentive-based
compensation earned by a current or former executive officer during the three fiscal years preceding the date the listed company is required
to prepare an accounting restatement, including to correct an error that would result in a material misstatement if the error were corrected
in the current period or left uncorrected in the current period. The final rule requires the Company to adopt a clawback policy within
60 days after such listing standard becomes effective. In accordance with Rule 10D-1 promulgated by the SEC under the Exchange Act and
Nasdaq Listing Rule 5608, the Company adopted and implemented a compensation recovery policy, effective as of October 2, 2023.

 Other
Regulations. The Bank's operations are also subject to various federal laws such as the:

 Home
 Mortgage Disclosure Act of 1975, requiring financial institutions to provide information to enable the public and public officials
 to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves;

 Equal
 Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit;

 Fair
 Credit Reporting Act of 1978 and its amendment, the Fair and Accurate Credit Transactions Act of 2003, governing the use and provision
 of information to credit reporting agencies;

 Fair
 Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies;

 Right
 to Financial Privacy Act, which imposes a duty to maintain the confidentiality of consumer financial records and prescribes procedures
 for complying with administrative subpoenas of financial records; and

 Electronic
 Funds Transfer Act and Regulation E issued by the Federal Reserve to implement that act, which govern automatic deposits to, and
 withdrawals from, deposit accounts and customers' rights and liabilities arising from the use of automated teller machines
 and other electronic banking services.

 Effect
of Governmental Monetary Policies. The commercial banking business is affected not only by general economic conditions but also
by the monetary policies of the Federal Reserve. Some of the instruments of monetary policy available to the Federal Reserve include
changes in the discount rate on member bank borrowings, the fluctuating availability of borrowings at the "discount window,"
open market operations, the imposition of, and changes in, reserve requirements against member banks' deposits and assets of foreign
branches, the imposition of, and changes in, reserve requirements against certain borrowings by banks and their affiliates and the placing
of limits on interest rates that member banks may pay on time and savings deposits. Such policies influence to a significant extent the
overall growth of bank loans, investments and deposits as well as the interest rates charged on loans or paid on time and savings deposits.
We cannot predict the nature of future fiscal and monetary policies and the effect of such policies on our future business and our earnings.

 Environmental
Laws Potentially Impacting the Bank. We are subject to state and federal environmental laws and regulations. The Comprehensive
Environmental Response, Compensation and Liability Act, ("CERCLA"), is a federal statute that generally imposes strict liability
on all prior and present "owners and operators" of sites containing hazardous waste. However, Congress acted to protect secured
creditors by providing that the term "owner and operator" excludes a person whose ownership is limited to protecting its
security interest in the site. Since the enactment of the CERCLA, this "secured creditor exemption" has been the subject
of judicial interpretations which have left open the possibility that lenders could be liable for cleanup costs on contaminated property
that they hold as collateral for a loan, which costs often substantially exceed the value of the property.

 Regulatory
Reform and Legislation. From time to time, various legislative and regulatory initiatives are introduced in Congress, as well
as by regulatory agencies. These initiatives and others may at times include proposals to expand or contract the powers of bank holding
companies and depository institutions or proposals to substantially change the financial institution regulatory system. Such legislation
could change banking statutes and the operating environment of the Company or the Bank in substantial and unpredictable ways. If enacted,
such legislation could increase or decrease the cost of doing business, limit or expand permissible activities or affect the competitive
balance among banks, savings associations, credit unions and other financial institutions. The Company cannot predict whether any such
legislation will be enacted, and, if enacted, the effect that it, or any implementing regulations, would have on the financial condition
or results of operations of the Company. A change in statutes, regulations or regulatory policies applicable to the Company or our subsidiaries
could have a material effect on the Company's business, financial condition and results of operations.

 Broker-Dealer

 The
securities industry is heavily regulated. The SEC is responsible for the administration of the federal securities laws and serves as
a supervisory body over all national securities exchanges and associations. The regulation of broker-dealers has, to a large extent,
been delegated by the federal securities laws to the FINRA and other self-regulatory organizations ("SROs"). These SROs include,
among others, all the national securities and commodities exchanges and the FINRA. Subject to approval by the SEC and certain other regulatory
authorities, SROs adopt rules that govern the industry and conduct periodic examinations of the operations of our broker-dealer subsidiary.
Sanders Morris is registered in all 50 states and is also subject to regulation under the laws of these jurisdictions.

 Broker-Dealer
Net Capital Rules. As a registered broker-dealer and member of FINRA, Sanders Morris is subject to certain net capital requirements
of Rule 15c3-1 under the Exchange Act. The net capital rules, which specify minimum net capital requirements for registered broker-dealers,
are designed to measure the financial soundness and liquidity of broker-dealers. Failure to maintain the required net capital may subject
a firm to suspension or revocation of registration by the SEC and suspension or expulsion by other regulatory bodies, and ultimately
may require its liquidation. Further, a decline in a broker-dealer's net capital below certain "early warning levels,"
even though above minimum capital requirements, could cause material adverse consequences for the broker-dealer. Sanders Morris conducts
business on a national basis as an introducing firm, using a third-party firm for securities clearing and custody functions.

 Broker-Dealer
Supervision. Sanders Morris is subject to other rules and regulations covering all aspects of the securities business, including
sales and trading practices, public offerings, use and safekeeping of clients' funds and securities, recordkeeping and reporting,
and the conduct of directors, officers and employees. Broker-dealers are also regulated by state securities administrators in those jurisdictions
where they do business. Compliance with many of the rules and regulations applicable to us involves a number of risks because the rules
and regulations are subject to varying interpretations. Regulators make periodic examinations and review annual, monthly and other reports
on Sanders Morris' operations, track record and financial condition. Violations of rules and regulations governing a broker-dealer's
actions could result in censure, penalties and fines, the issuance of cease-and-desist orders, the suspension or expulsion from the securities
industry of such broker-dealer or its officers or employees, or other similar adverse consequences. The rules of the Municipal Securities
Rulemaking Board, which are enforced by the SEC and FINRA, apply to the municipal securities activities of Sanders Morris.

 Anti-Money
Laundering. Sanders Morris, like the Bank, is subject to the BSA and the USA PATRIOT Act. These acts contain anti-money laundering
and financial transparency laws and mandate the implementation of various regulations applicable to broker-dealers and other financial
services companies. Sanders Morris, like the Bank, has established policies, procedures and systems designed to comply with these regulations.

Investor Protection Corporation ("SIPC"). As a registered broker-dealer and FINRA member organization, Sanders Morris
is required by federal law to belong to the SIPC, which provides, in the event of the liquidation of a broker-dealer, protection for
securities held in customer accounts held by the firm of up to $500,000 per customer, subject to a limitation of $250,000 on claims for
cash balances. SIPC is principally funded through assessments on registered broker-dealers. SIPC protection does not insure against fluctuations
in the market value of securities.

BI and Form CRS Relationship Summary ("Form CRS"). On June 5, 2019, the SEC adopted Regulation Best Interest ("Regulation
BI"), elevating the standard of care for broker-dealers from the current "suitability" requirement to a "best
interest" standard when making a recommendation of any securities transaction to a retail customer. The "best interest"
standard requires a broker-dealer to make recommendations without putting its financial interests ahead of the interests of a retail
customer. The SEC also adopted Form CRS, which requires registered investment advisors ("RIAs") and broker-dealers to deliver
to retail investors a succinct, plain English summary about the relationship and services provided by the firm and the required standard
of conduct associated with the relationship and services. In connection with adopting Regulation BI, the SEC added new record-making
and recordkeeping rules. The compliance date for Regulation BI and the related rules is June 30, 2020, and Sanders Morris and Tectonic
Advisors met this requirement. Regulation BI imposes disclosure and policy and procedural obligations that could impact the compensation
our wealth management business and its representatives receive for selling certain types of products, particularly those that offer different
compensation across different share classes (such as mutual funds and variable annuities). In addition, Regulation BI prohibits a broker-dealer
and its associated persons from using the term "adviser" or "advisor" if the broker-dealer is not an RIA or the
associated person is not a supervised person of an RIA.

 Investment
Advisor Regulation

 As
registered investment advisors under the Investment Advisers Act of 1940 (the "Advisers Act"), Tectonic Advisors and Sanders
Morris are subject to the requirements of regulations under both the Advisers Act and certain state securities laws and regulations.
Such requirements relate to, among other things, limitations on the ability of investment advisors to charge performance-based or non-refundable
fees to clients, record-keeping and reporting requirements, disclosure requirements, limitations on principal transactions between an
advisor or its affiliates and advisory clients, and general anti-fraud prohibitions.

 ERISA.
Certain of our subsidiaries are subject to the Employee Retirement Income Security Act ("ERISA") and Sections 4975(c)(1)(A),
(B), (C) or (D) of the Internal Revenue Code of 1986, as amended (the "Code"), and to regulations promulgated thereunder,
insofar as they are a "fiduciary" under ERISA with respect to benefit plan clients or otherwise deal with benefit plan clients.
ERISA and applicable provisions of the Code impose certain duties on persons who are fiduciaries under ERISA, prohibit certain transactions
involving ERISA plan clients (including, without limitation, employee benefit plans (as defined in Section 3(3) of ERISA), individual
retirement accounts and Keogh plans) and provide monetary penalties for violations of these prohibitions.

 Investment
Advisor Supervision. The SEC is authorized to institute proceedings and impose sanctions for violations of the Advisers Act,
ranging from fines and censure to termination of an investment adviser's registration. Investment advisers also are subject to
certain state securities laws and regulations. Non-compliance with the Advisers Act or other federal and state securities laws and regulations
could result in investigations, sanctions, disgorgement, fines or other similar consequences.

 Insurance

 HWG
is an insurance agency registered with the TDI. Regulation of insurance brokerage is generally performed at a state, rather than a national,
level. HWG operates in multiple states/jurisdictions, and as a result, both HWG and its agent(s) are subject to various state regulatory
and licensing requirements. HWG monitors compliance with the various state insurance regulators, and also has relationships with third
party vendors to ensure compliance and awareness among HWG and its agent(s) of relevant requirements and changes, and emerging regulatory
issues.

 Item
1A. Risk Factors.

 Our
business and results of operations are subject to numerous risks and uncertainties, many of which are beyond our control. The
material risks and uncertainties that management believes affect the Company are described below. Additional risks and uncertainties
that management is not aware of, or that management currently deems immaterial, may also impair the Company's business
operations. This Form 10-K is qualified in its entirety by these risk factors. If any of the following risks actually occur, our
business, financial condition and results of operations could be materially and adversely affected. If this were to happen, the
value of our securities could decline significantly, and you could lose all or part of your investment. Some statements in the
following risk factors constitute forward-looking statements. Please refer to "Cautionary Note Regarding
Forward-Looking Statements" elsewhere in this Form 10-K.

 Summary
of Risk Factors

 Below
is a summary of the principal factors that we believe make an investment in our securities risky. This summary does not address all of
the risks that we face. Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can
be found below and should be carefully considered, together with other information in this Form 10-K and our other filings with the SEC,
before making an investment decision regarding our securities.

 Risks
Related to Our Business:

 Our
 business has been and may continue to be adversely affected by current conditions in the
 financial markets and economic conditions generally.

 Risks
 associated with generating most of our loan growth and having most of our loan portfolio
 in SBA loans, which have higher default rates and credit losses than traditional commercial
 loans.

 Risks
 associated with our recent CEO transition at the Bank, which is our largest operating subsidiary.

 Liquidity
 risk, including our ability to maintain our deposit base or other funding sources, could
 adversely affect our ability to fund operations and hurt our financial condition.

 We
 depend on wholesale funding sources, which causes our cost of funds to be higher and poses
 future funding risks if the Bank becomes less than "well capitalized", which
 may require us to liquidate loans or impede our growth.

 We
 may not be able to grow and maintain our deposit base or other funding sources, and deposit
 outflows may increase reliance on wholesale borrowings and brokered deposits.

 We
 are subject to interest rate risk and changes in interest rates could affect our net interest
 margins and net interest income, the value of assets and obligations, and the availability
 and cost of capital or liquidity.

 Our
 securities portfolio is subject to risk of loss; the fair value of our investment securities
 can fluctuate due to factors outside of our control.

 We
 are subject to consolidated capital ratio requirements and therefore have to hold additional
 capital.

 If
 we are unable to sell additional services and products to existing clients or attract new
 clients in a manner that is cost-effective and assures client success, we will not be able
 to grow our business.

 We
 may not be able to implement aspects of our expansion strategy, which may adversely affect
 our ability to maintain our historical earnings trends.

 New
 lines of business or new products and services may subject us to additional risks.

 Acquisitions
 may subject us to integration risks and other unknown risks.

 Growth
 of our business could result in increased costs.

 The
 soundness of other financial institutions could adversely affect us. Negative public opinion
 regarding us or failure to maintain our reputation in the communities we serve could adversely
 affect our business and prevent us from growing our business.

 Significant
 revenues and profits are generated as a result of our relationship with Cain Watters, and
 a change in the relationship or decline in Cain Watters' business could adversely affect
 us.

 We
 depend on key personnel, and may have difficulty identifying, attracting and retaining necessary
 personnel to execute our business strategy and successfully expand our operations. This risk
 includes the risk of retirement of key professionals in leadership roles, including loan
 officers, members of our SBA team, and financial advisors and brokers.

 The
 employment market has become increasingly competitive; We may have difficulty attracting
 and retaining skilled personnel.

 A
 decline in general business and economic conditions and any regulatory responses to such
 conditions could have a material adverse effect on our business, financial position, results
 of operations and growth prospects.

 Lower
 trucking margins and revenues negatively impact trucking industry and factoring.

 Our
 business is concentrated in, and dependent upon, the continued growth and welfare of our
 primary market, and adverse economic conditions in such market could negatively impact our
 operations and clients.

 We
 have a loan concentration related to the acquisition and financing of dental practices.

 A
 governmental shutdown or curtailment of government guaranteed loan programs could affect
 a segment of our business.

 We
 face specific risks associated with retention of unguaranteed portions of SBA loans.

 lending generally involves a higher degree of risk than retail residential mortgage lending.

 The
 level of our commercial real estate loan portfolio may subject us to heightened regulatory
 scrutiny.

 Our
 factoring services through the Bank's Integra Division are concentrated in the transportation
 industry and economic conditions or other factors negatively impacting the transportation
 industry could adversely affect our factoring business.

 The
 success of our trust services is dependent upon market fluctuations and a non-diversified
 source for its growth.

 We
 are subject to possible claims and litigation pertaining to fiduciary responsibility.

 We
 could suffer material credit losses. Our levels of nonperforming assets could increase, which
 could adversely affect our results of operations and financial condition, and could result
 in losses in the future.

 Our
 allowance for credit losses may not be sufficient to absorb actual losses.

 The
 small- to medium-sized businesses that we lend to may have fewer resources to weather adverse
 business conditions, which may impair their ability to repay a loan, and such impairment
 could adversely affect our results of operations and financial condition.

 Our
 commercial finance clients, particularly with respect to the Bank's Integra Division,
 may lack the operating history, cash flows or balance sheet necessary to support other financing
 options and may expose us to additional credit risk, especially if our additional controls
 for such products are ineffective in mitigating such additional risks.

 Certain
 of our loans are not secured by property but dependent on the earning capacity of the borrower.
 The Company's use of appraisals in deciding whether to make a loan on or secured by
 real property does not ensure the value of the real property collateral.

 Fee
 revenue will represent a significant portion of our consolidated revenue and is subject to
 decline, among other things, in the event of a reduction in, or changes to, the level or
 type of investment activity by our clients and market declines.

 The
 business operations of Sanders Morris may face limitations due to net capital requirements.

 The
 wealth management, trust and brokerage business is highly competitive. If we are not able
 to compete successfully against current and future competitors, our business, financial condition,
 and results of operations will be adversely affected.

 Underperformance
 or declines in our investments may reduce the profitability of our wealth management and
 advisory business.

 Our
 wealth management and brokerage business is subject to reputational risk.

 Standard
 investment management contracts we have with our clients are terminable without cause and
 on relatively short notice by our clients.

 We
 continue to experience pricing pressures in areas of our business which may impair our future
 revenue and profitability.

 We
 face strong competition from other insurance agencies, which may adversely affect our operations
 and financial condition.

 A
 failure to appropriately identify and address potential conflicts of interest could adversely
 affect our businesses. We may incur significant losses due to ineffective risk management
 processes and strategies.

 If
 we fail to maintain effective internal control over financial reporting, we may not be able
 to report our financial results accurately and timely, in which case our business may be
 harmed.

 Our
 estimates and assumptions in the preparation of our financial statements may not be accurate.

 We
 may be required to recognize a significant charge to earnings if our goodwill or other intangible
 assets become impaired.

 We
 may elect or be compelled to seek additional capital, but that capital may not be available,
 or it may be dilutive.

 We
 face intense competition from larger banks and financial institutions that could hurt our
 business.

 A
 third party systems failure could significantly disrupt our business, result in regulatory
 action against us, or limit our growth.

 Fraudulent
 activity, breaches of our information security, and cybersecurity attacks could adversely
 affect our ability to conduct our business, manage our exposure to risk, result in the disclosure
 or misuse of confidential or proprietary information, increase our costs to maintain and
 update our operational and security systems and infrastructure, and adversely impact our
 results of operations, liquidity and financial condition, as well as cause legal or reputational
 harm.

 Factoring
 products offered by the Bank's Integra Division may expose us to an increased risk
 of fraud.

 We
 rely on client and counterparty information, which subjects us to risks if that information
 is not accurate or is incomplete.

 Climate
 change and related legislative and regulatory initiatives may materially affect the Company's
 business and results of operations.

 The
 Company is subject to environmental risks associated with owning real estate or collateral.

 Risks
Related to Our Regulatory Environment:

 We
 are subject to extensive government regulation and supervision, which could constrain our
 growth and profitability.

 Federal
 banking agencies periodically conduct examinations of our banking business, and our failure
 to comply with any supervisory actions which we are, or may become, subject to as a result
 of such examinations may adversely affect us.

 We
 are subject to numerous laws designed to protect consumers and failure to comply with these
 laws could lead to a wide variety of sanctions.

 We
 face a risk of noncompliance and enforcement action with the BSA and other anti-money laundering
 laws.

 Additional
 regulations and rule making impacting the transportation industry may have a disproportionate
 impact on the small-to-mid-sized trucking businesses that comprise our primary transportation
 factoring clients and adversely affect the factoring business conducted by the Bank's
 Integra Division.

 Sanders
 Morris and Tectonic Advisors are subject to substantial regulation and failure to comply
 with applicable requirements will adversely affect our business.

 Regulations
 relating to privacy, information security and data protection could increase our costs, affect
 or limit how we collect and use personal information and adversely affect our business opportunities.

 We
 can be subject to legal and regulatory proceedings, investigations and inquiries related
 to conduct risk.

 Risks
Related to an Investment in the Series B Preferred Stock:

 The
 Series B preferred stock is subordinate to our existing and future indebtedness, which could
 adversely impact our ability to pay dividends on the Series B preferred stock.

 The
 Series B preferred stock may be junior in rights and preferences to our future preferred
 stock. Additional issuances of preferred stock or securities convertible into preferred stock
 may dilute existing holders.

 Dividends
 on the Series B preferred stock are discretionary and non-cumulative, and our future ability
 to pay dividends is subject to restrictions.

 Dividends
 on the Series B preferred stock vary and any dividends declared may be less than the initial
 fixed annual rate in effect prior to May 15, 2024.

 The
 Series B preferred stock may be redeemed at our option, and you may not be able to reinvest
 the redemption price you receive in a similar security.

 Investors
 should not expect us to redeem the Series B preferred stock on or any time after the date
 it becomes redeemable.

 Holders
 of the Series B preferred stock have limited voting rights.

 A
 liquid market for the Series B preferred stock may not be sustained, which may impair your
 ability to sell your shares.

 The
 market price of the Series B preferred stock may become subject to substantial fluctuations.

 analysts may not continue coverage on us.

 The
 Series B preferred stock is not rated.

 Subject
 to regulatory requirements and the terms of the Series B preferred stock, the Company may,
 and currently intends to, pay dividends on its common stock and any such payment reduces
 the capital of the Company available to the Series B preferred stock.

 Our
 management and board of directors have significant control over our business.

 We
 are a "controlled company" within the meaning of the rules of Nasdaq, and as
 such, we qualify for exemptions from certain corporate governance requirements. As a result,
 you may not have the same protections afforded to shareholders of companies that are subject
 to such requirements.

 The
 interests of our controlling shareholders may not coincide with yours and with whose decisions
 you may disagree.

 Our
 corporate organizational documents and provisions of federal and state law to which we are
 subject contain certain provisions that could have an anti-takeover effect and may delay,
 make more difficult or prevent an attempted acquisition that you may favor or an attempted
 replacement of our board of directors or management.

 An
 investment in the Series B preferred stock is not an insured deposit and is subject to risk
 of loss.

 Risks
Related to Our Business

 Our
business has been and may continue to be adversely affected by current conditions in the financial markets and economic conditions generally.

 Our
business and operations, which primarily consist of lending money to customers in the form of loans, borrowing money from customers in
the form of deposits and investing in securities, are sensitive to general business and economic conditions in the U.S. Uncertainty about
the federal fiscal policymaking process, and the medium and long-term fiscal outlook of the federal government and U.S. economy, is a
concern for businesses, consumers and investors in the U.S. Our business is also significantly affected by monetary and related policies
of the U.S. government and its agencies. In 2022 and 2023, the Federal Open Market Committee ("FOMC") of the Federal Reserve
repeatedly raised their target benchmark interest rate in response to the ongoing inflationary environment in the United States, resulting
in subsequent prime rate increases of 525 basis points between March of 2022 and July of 2023. While the target benchmark rate and the
prime rate were decreased by 100 basis points in 2024, sustained levels or future increases in market interest rates may have an adverse
effect on our business, financial condition and results of operations as it could reduce the demand for loans and affect the ability
of our borrowers to repay their indebtedness subjecting us to potential credit losses. Changes in any of these policies are beyond our
control. Adverse economic conditions and government policy responses to such conditions could have a material adverse effect on our business,
financial condition, results of operations and prospects. All of these factors are detrimental to our business, and the interplay between
these factors can be complex and unpredictable.

 In
addition, the inflationary outlook in the United States remains uncertain. Inflationary pressures remain relatively elevated and a persistent
inflationary environment could result in sustained higher interest rates for a prolonged period of time, which may expose the Company
to interest rate risk. In addition, higher interest rates could slow economic growth and lead to a recessionary environment, which could
negatively impact the Company's growth, credit quality, net interest margin and its financial results. The risks to our business
from inflation depends on the durability of the current inflationary pressures in our markets. Transitory increases in inflation are
unlikely to have a material impact on our business or earnings. However, more persistent inflation could lead to tighter-than-expected
monetary policy which could, in turn, increase the borrowings costs of our customers, making it more difficult for them to repay their
loans or other obligations. Higher interest rates may be needed to tame persistent inflationary price pressures, which could also push
down asset prices and weaken economic activity. A deterioration in economic conditions in the United States and our markets could result
in an increase in loan delinquencies and non-performing assets, decreases in loan collateral values and a decrease in demand for our
products and services, all of which, in turn, would adversely affect our business, financial condition and results of operations.

 We
experience elevated risks associated with SBA 7(a) loans due to higher default rates and borrower sensitivity to rising interest rates.

 Our
loan portfolio includes a significant allocation to Small Business Administration (SBA) 7(a) loans, which, while partially guaranteed
by the SBA, present unique risk considerations:

 Increased
 Default Rates: Recent analyses indicate a significant rise in defaults within the SBA
 7(a) loan program during recessions, particularly during the Great Recession (2007-2009).

 Variable
 Interest Rate Exposure: SBA 7(a) loans typically feature variable interest rates tied
 to benchmarks like the prime rate. As interest rates rise, borrowers face increased debt
 service obligations, potentially straining their cash flows and elevating the likelihood
 of loan defaults.

 Hesitancy
 Amid Rising Rates: The current high-interest-rate environment can lead to increased caution
 among potential SBA borrowers. Concerns about escalating borrowing costs have resulted in
 reduced loan demand and a slowdown in loan originations, which could impact our growth prospects
 in this lending segment.

 These
factors collectively heighten the credit risk associated with our SBA 7(a) loan portfolio. Should these trends persist or intensify,
they could adversely affect our financial condition and results of operations.

 We
may experience potential adverse effects arising from our recent CEO transition.

 The
recent transition in our executive leadership, with Mr. Howard stepping down as the Bank's long-term Chief Executive Officer (CEO)
and Mr. Sherman assuming the role, presents several potential risks that could adversely affect our operations and financial performance:

 Loss
 of Institutional Knowledge and Experience: Mr. Howard's extensive tenure provided deep
 insights into our bank's operations, culture, and strategic direction. His departure may
 result in a loss of valuable institutional knowledge, which could impact decision-making
 processes and the execution of long-term strategies.

 Disruption
 of Established Relationships: Mr. Howard cultivated strong relationships with key stakeholders,
 including major clients, investors, regulators, and community leaders. The transition may
 lead to uncertainties or shifts in these relationships, potentially affecting customer retention,
 investor confidence, and regulatory interactions.

 Cultural
 and Strategic Shifts: A change in leadership can lead to shifts in organizational culture
 and strategic priorities. Differences in management style and vision between Mr. Howard and
 Mr. Sherman could result in misalignment within the organization, affecting employee morale
 and the cohesive pursuit of corporate objectives.

 Retention
 of Key Personnel: Leadership transitions can influence the stability of our management
 team and broader employee base. The departure of Mr. Howard may prompt other key personnel
 to reassess their positions within the Bank, potentially leading to turnover that could disrupt
 operations and continuity.

 Integration
 of New Leadership: Mr. Sherman's integration into the CEO role requires time and adaptation.
 During this period, there may be challenges in maintaining the momentum of ongoing projects,
 initiatives, and strategic plans, which could affect our competitive positioning and financial
 results.

 While
we are committed to ensuring a smooth leadership transition, these factors could collectively or individually have a material adverse
effect on our business, financial condition, and results of operations.

 Liquidity
risk, including our ability to maintain our deposit base or other funding sources, could adversely affect our ability to fund operations
and hurt our financial condition.

 Liquidity
is essential to our banking business, as we use cash to make loans and purchase investment securities and other interest-earning assets
and to fund deposit withdrawals that occur in the ordinary course of our business. Our principal sources of liquidity include earnings,
deposits, repayment by clients of loans we have made to them, and the proceeds from sales by us of our equity securities or from borrowings
that we may obtain. In addition, from time to time, we borrow from the FHLB. Potential alternative sources of liquidity include the sale
of loans, the acquisition of national market non-core deposits, the issuance of additional collateralized borrowings such as the FHLB,
advances, access to the Federal Reserve discount window and the issuance of additional equity securities and/or debt.

 If
our ability to obtain funds from these sources becomes limited, these sources become restricted or are eliminated, or the costs of those
funds increase, or we are unable to effectively manage the repayment and maturity schedules of our loans and investment securities, whether
due to factors that affect us specifically, including our financial performance, or due to factors that affect the financial services
industry in general, including weakening economic conditions or negative views and expectations about the prospects for the financial
services industry as a whole, then our ability to grow our banking and investment advisory and trust businesses would be harmed, which
could have a material adverse effect on our business, financial condition, results of operations and prospects. Further, the Company
may incur substantially higher funding costs in order to obtain the necessary funds to support the Company's operations and growth or
may be required to sell or restrict operations, or restrict the payment of dividends. Furthermore, if the Company is unable to raise
adequate funds through external sources, the Company may need to sell assets with unrealized losses in order to generate additional liquidity,
which could decrease the capital of the Company and have an adverse effect on our business, financial condition and results of operations.

 We
depend on wholesale funding sources, which causes our cost of funds to be higher when compared to other financial institutions and poses
future funding risks if the Bank becomes less than "well capitalized" under the prompt corrective action framework, or PCA.

 We
use certain non-core, wholesale funding sources, including the FHLB advances and deposit listing services. As of December 31, 2024, our
use of such wholesale funding sources amounted to approximately $353 million, or 48.6% of total funding. Although we intend to increase
our efforts to reduce our reliance on wholesale funding sources, we may not be able to increase our market share of core-deposit funding
in our highly competitive market area. We further expect to increase our core funding as we develop the capacity for consumers to open
on-line digital accounts. The rates on these digital accounts can be highly competitive and may increase our cost of funds, which could
have a material adverse effect on our net interest income margins. Listing service deposit rates are very market sensitive. At times,
the cost of these funds can exceed the cost of core deposits in our market area as well as digital deposits, which could have a material
adverse effect on our net interest income margins. Wholesale funding is subject to certain practical limits such as the FHLB's
maximum borrowing capacity and our liquidity targets. Our maximum borrowing capacity from the FHLB is based on the amount and fair market
value and face amount, respectively, of commercial loans and securities we can pledge. If we are unable to pledge sufficient collateral
to secure funding from the FHLB, we may lose access to this source of liquidity that we have historically relied upon. Additionally,
we are required to establish limits on certain types of deposits including brokered deposits and listing service deposits, as well as
total wholesale funding sources. If we reach these limits, future asset growth may be reduced or halted. If we are unable to access any
of these types of funding sources or if our costs related to them increase, our liquidity and ability to support demand for loans could
be materially adversely affected. If we were not able to replace such wholesale funding, we may have to liquidate loans, which may be
at losses that would have a material adverse effect on our capital, our business and your investment in the Company.

 We
may not be able to grow and maintain our deposit base, and deposit outflow may increase reliance on wholesale borrowings and brokered
deposits.

 Our
future growth will largely depend on our ability to maintain and grow our deposit base and our ability to retain our trust clients, who
provide deposits. As of December 31, 2024, the Bank had a loan to deposit ratio of 92.8%. In the current environment of elevated interest
rates, our deposits may not be as stable or as interest rate insensitive as similar deposits may have been in the past, and some existing
or prospective deposit customers of banks generally, including the Bank, may be inclined to pursue other investment alternatives, which
may negatively impact our net interest margin. Additionally, negative news about the Company or the Bank, or the banking industry in
general, could negatively impact market and/or customer perceptions of the Company and the Bank, which could lead to a loss of depositor
confidence and an increase in deposit withdrawals. The account and deposit balances can decrease when clients perceive alternative investments,
such as the stock market or real estate, as providing a better risk/return tradeoff. In addition, if interest rates rise, competition
for deposits may increase, which could result in clients moving money out of the Bank. As a general matter, deposits are typically a
lower cost source of funds than external wholesale funding (brokered deposits and borrowed funds), because interest rates paid for deposits
are typically less than interest rates charged for wholesale funding. If, as a result of competitive pressures, market interest rates,
alternative investment opportunities that present more attractive returns to customers, general economic conditions or other events,
the balance of the Company's deposits decreases relative to the Company's overall banking operations, the Company may have
to rely more heavily on wholesale or other sources of external funding, or may have to increase deposit rates to maintain deposit levels
in the future. Any such increased reliance on wholesale funding, or increases in funding rates in general, could have a negative impact
on the Company's net interest income and, consequently, on its results of operations and financial condition. Furthermore, the
portion of our deposit portfolio that is comprised of large uninsured deposits may be more likely to be withdrawn rapidly under adverse
economic conditions. If our clients, including our trust clients, move money out of bank deposits into investments or to other financial
institutions, we could lose a relatively low-cost source of funds, increasing our funding costs and reducing our net interest income
and net income.

 The
Company is subject to interest rate risk and changes in interest rates could affect our net interest margins and net interest income,
the value of our assets and obligations, and the availability and cost of capital or liquidity.

 Our
profitability is dependent to a large extent on our net interest income, which is the difference between interest income we earn as a
result of interest paid to us on loans and investments and interest we pay to third parties such as our depositors and those from whom
we borrow funds. As interest rates change, net interest income is affected.

rates are highly sensitive to many factors that are beyond our control, including (among others) general and regional and local economic
conditions, the monetary policies of the Federal Reserve, bank regulatory requirements, competition from other banks and financial institutions
and a change over time in the mix of our loans and investment securities, on the one hand, and on our deposits and other liabilities,
on the other hand. Sustained low levels of market interest rates, as we have experienced prior to 2022, would continue to place downward
pressure on our net interest margins and, therefore, on our earnings. Conversely, increases in interest rates, though they could increase
our interest margins absent a commensurate rise in our cost of funds, also have the potential to affect borrowers' ability to repay,
particularly for the small and medium sized businesses to which we lend, subjecting us to potential credit losses. This effect could
be exacerbated by an inflationary environment. Further, elevated interest rates generally reduce loan demand and may result in slower
loan growth and may encourage current borrowers to repay loans early. All of these factors are detrimental to our business, and the interplay
between these factors can be complex and unpredictable.

 Our
net interest margins and earnings also could be adversely affected if we are unable to adjust our interest rates on loans and deposits
on a timely basis in response to changes in economic conditions or monetary policies. For example, if the rates of interest we pay on
deposits, borrowings and other interest-bearing liabilities increase faster than we are able to increase the rates of interest we charge
on loans or the yields we realize on investments and other interest-earning assets, our net interest income and, therefore, our earnings
will decrease. Conversely, in an environment of decreasing interest rates, loan originations may also decline, and our borrowers may
experience difficulties meeting their obligations or seek to refinance their loans for lower rates, which may adversely affect income
from these lending activities and negatively impact our net interest margin. These circumstances could not only result in increased loan
defaults, foreclosures and charge-offs, but also reduce collateral values and necessitate further increases to the allowance for credit
losses, which could have a material adverse effect on our business, financial condition and results of operations. Also, changes in interest
rates might impact the values of equity and debt securities under management and administration, which may have a negative impact on
fee income.

 Further,
rising short-term interest rates are likely to result in declines in both fixed income (bond) and stock prices. Declining fixed
income and stock prices will result in a decline in the value and potentially the volume of both trust assets on which the Bank provides
fiduciary services and the assets under management at Tectonic Advisors and Sanders Morris, as well as declining capital markets, private
placement and brokerage activities of Sanders Morris – as does an economic recession. This will have an adverse impact on
the revenues and earnings of the Company. An economic recession will also result in higher losses on the Bank's loan portfolio
and its factored receivables portfolio and decreased economic activity, both of which negatively impact Bank earnings and capital. Thus,
an economic recession negatively impacts almost every aspect of the Company's business and will have a negative and adverse effect
on the earnings, capital and financial position of the Company.

 Our
securities portfolio is subject to risk of loss; the fair value of our investment securities can fluctuate due to factors outside of
our control.

 As
of December 31, 2024, the fair value of our investment securities portfolio was $45.3 million. The Bank invests a portion of its assets
in U.S. Treasuries, U.S. government agencies, mortgage-backed securities, direct obligations of quasi government agencies including Fannie
Mae, Freddie Mac, and the FHLB, and federal funds sold. In addition, the Bank may make investments in certain municipal or state obligations
or securities that it believes have a similar risk profile thereto, or Other Securities. Other Securities include, among other things,
securities issued pursuant to PACE and PID/TIRZ programs. These programs are created by state and local municipalities to finance energy
efficiency upgrades or renewable energy installations for residential, commercial and industrial property owners. Investments in instruments
other than U.S. Treasuries carry a degree of risk, including risk of default, market fluctuations and lack of liquidity.

 Factors
beyond our control can significantly influence and cause adverse changes to occur in the fair values of securities in that portfolio.
These factors include, but are not limited to, rating agency actions in respect of the investment securities in our portfolio, defaults
by the issuers of such securities, concerns with respect to the enforceability of the payment or other key terms of such securities,
changes in market interest rates, continued instability in the capital markets and lack of liquidity or marketability. Any of these factors,
as well as others, could cause other-than-temporary impairments and realized or unrealized losses in future periods and declines in other
comprehensive income, which could materially and adversely affect our business, results of operations, financial condition and prospects.
As discussed above, the FOMC repeatedly raised their target benchmark interest rate in 2022 and 2023, resulting in subsequent prime rate
increases of 525 basis points between March of 2022 and July of 2023, and further resulting in a significant increase in market interest
rates during the year ended December 31, 2023. The FOMC reduced their target benchmark interest rate in September of 2024, November of
2024 and December of 2024, resulting in subsequent prime rate decreases of 100 basis points. If market interest rates rise, the market
value of the fixed income bond portfolio will decrease, resulting in unrealized losses, and depending on the extent of the rise in interest
rates, the increase in unrealized losses could be significant over the short-term. The non-credit portion of unrealized losses on the
Bank's available for sale securities portfolio are booked to AOCI, a component of shareholders' equity, and unrealized losses net
of the related tax effect as of December 31, 2024 totaled $1.6 million, which represents approximately 1.4% of our total capital. A significant
increase in market rates may have a negative impact on book value per common share and return on average shareholders' equity ratios.
The Company's bond portfolio is expected to mature at par and therefore the unrealized losses in the portfolio that result from
higher market interest rates will decrease as the bonds become closer to maturity. However, if the Company were required to sell investment
securities with an unrealized loss for any reason, including liquidity needs, the unrealized loss would become realized and reduce both
net income for the reported period and regulatory capital, which as currently reported, excludes unrealized losses on investment securities.

 In
addition, the process for determining whether an impairment of a security is other-than-temporary usually requires complex, subjective
judgments, which could subsequently prove to have been wrong, regarding the future financial performance and liquidity of the issuer
of the security, the fair value of any collateral underlying the security and whether and the extent to which the principal of and interest
on the security will ultimately be paid in accordance with its payment terms. Further, any loss from any such Other Securities or any
other securities in our portfolio would negatively impact the capital of the Bank and such impact could be material.

 We
are subject to consolidated capital ratio requirements, and therefore have to hold additional capital.

 Prior
to our initial public offering in May 2019, the Company qualified as a "small bank holding company." This meant, among other
things, that the Company was not subject to minimum consolidated capital requirements. Upon consummation of the Tectonic Merger, we ceased
to qualify as a small bank holding company and must maintain certain minimum capital ratios on a consolidated basis with the Bank. As
described further below, our failure to meet capital requirements could, among other things, affect client and investor confidence, our
ability to grow, our costs of funds, our ability to pay dividends on preferred and common stock, our ability to make acquisitions, and
adversely affect our business, results of operations and financial condition.

 If
we are unable to sell additional services and products to existing clients or attract new clients in a manner that is cost-effective
and assures client success, we will not be able to grow our business, which could adversely affect our results of operations and financial
condition.

 In
order to grow our business, we must continue to attract new clients in a cost-effective manner and enable these clients to realize the
benefits associated with our products and services. Part of our strategic plan is to market our suite of financial services and products
across the clients of our subsidiaries. We may not be able to attract clients from one of our subsidiaries to use another subsidiary
for different financial services or products. This could be for a variety of reasons, including as a result of their continued use of
our competitors and/or other impediments that hinder their ability to migrate to or adopt our financial products or services. If we are
unable to entice existing clients to expand their use of our financial products and services, we may see an increase in our client acquisition
costs which could have a material adverse effect on our business, results of operations and financial condition.

 We
may not be able to implement aspects of our expansion strategy, which may adversely affect our ability to maintain our historical earnings
trends.

 We
may not be able to sustain our growth at the rate we have enjoyed during the past several years. A downturn in local economic market
conditions, particularly in the real estate market, a failure to attract and retain high performing personnel, heightened competition
from other financial services providers, and an inability to attract additional deposits in a cost-effective manner and lending clients,
among other factors, could limit our ability to grow as rapidly as we have in the past and as such may have a negative effect on our
business, financial condition and results of operations. In addition, risks associated with failing to maintain effective financial and
operational controls as we grow, such as maintaining appropriate loan underwriting procedures, determining adequate allowances and complying
with regulatory accounting requirements, including increased credit losses, reduced earnings and potential regulatory penalties and restrictions
on growth, all could have a negative effect on our business, financial condition and results of operations.

 New
lines of business or new products and services may subject us to additional risk.

 From
time to time, we may implement new lines of business or offer new products and services within existing lines of business. There are
substantial risks and uncertainties associated with these efforts, particularly in instances where the markets are not fully developed.
In acquiring, developing and/or marketing new lines of business and/or new products and services, we may invest significant time and
resources. Initial timetables for the introduction and development of new lines of business and/or new products or services may not be
achieved and price and profitability targets may not prove feasible. External factors, such as compliance with regulations, competitive
alternatives, and shifting market preferences, may also impact the successful implementation of a new line of business and/or a new product
or service. Furthermore, any new line of business and/or new product or service could have a significant impact on the effectiveness
of our system of internal controls. Failure to successfully manage these risks in the integration, development and implementation of
new lines of business and/or new products or services could have a material adverse effect on our business and, in turn, our financial
condition and results of operations.

 Acquisitions
may subject us to integration risks and other unknown risks.

 Although
we plan to continue to grow our business organically, we also intend to pursue acquisition opportunities that we believe complement our
activities and have the ability to enhance our profitability and provide attractive risk-adjusted returns. Acquisitions involve inherent
uncertainty and we cannot determine all potential events, facts and circumstances that could result in loss or increased costs. Our due
diligence or risk mitigation efforts may not be sufficient to protect against any such loss or increased costs. Moreover, any acquisitions
may require the approval of our bank regulators and we may not be able to obtain such approvals on acceptable terms, if at all.

 In
addition, certain events may arise after the date of an acquisition, or we may learn of certain facts, events or circumstances after
the closing of an acquisition, that may affect our financial condition or performance or subject us to risk of loss. These events include,
but are not limited to: retaining key employees and clients, achieving anticipated synergies, meeting expectations and otherwise realizing
the undertaking's anticipated benefits; litigation resulting from circumstances occurring at the acquired entity prior to the date
of acquisition; loan downgrades and credit loss provisions resulting from underwriting of certain acquired loans determined not to meet
our credit standards; personnel changes that cause instability within a department; and other events relating to the performance of our
business.

 Mergers
and acquisitions frequently result in the recording of goodwill and other intangible assets, which are subject to potential impairments
in the future and that could harm our financial results. In addition, if we finance acquisitions by issuing convertible debt or equity
securities, our existing shareholders may be diluted, which could affect the market price of the Series B preferred stock. As a result,
if we fail to properly evaluate mergers, acquisitions or investments, we may not achieve the anticipated benefits of any such merger
or acquisition, and we may incur costs in excess of what we anticipate. The failure to successfully evaluate and execute mergers, acquisitions
or investments or otherwise adequately address these risks could materially harm our business, financial condition and results of operations.

 Growth
of our business could result in increased costs.

 Our
overall profitability would be negatively affected if investments and expenses associated with the growth of our business are not matched
or exceeded by the revenue that is derived from such growth. Further, expanding existing and/or new business lines may involve recruiting
and hiring new personnel. Hiring new personnel, especially professionals, is an inherently risky endeavor. The person needs to be a good
fit within the organization, the person needs to be able to execute within the Company's existing corporate structure (which may
differ from his/her previous place of employment) and the person may need to attract his or her clients (and prospective clients) to
the Company. If any of these (or other) factors do not occur, the Company may have to terminate such person's employment and/or
such person may leave the Company, which means that the cost of hiring, compensation paid and/or termination costs (including potential
litigation) may impact the Company's results of operations in a negative and adverse manner. In addition, such personnel may be
employed by competitors, and the retention of such individuals may require us to enter into guaranteed compensation contracts for a period
following commencement of employment. The compensation terms provided for in such contracts may be fixed in whole or in part. Any guaranteed
compensation expenses that cannot be adjusted based on the success or profitability of the offices could reduce our operating margins.
Expansion also creates a need for additional compliance, documentation, risk management and internal control procedures, and often involves
the hiring of additional personnel to monitor such procedures. To the extent such procedures are not adequate to appropriately monitor
any new or expanded business, we could be exposed to a material loss or regulatory sanction.

 The
soundness of other financial institutions could adversely affect us.

 Our
ability to engage in routine funding transactions could be adversely affected by the actions and commercial soundness of other financial
institutions. Financial services institutions are interrelated as a result of trading, clearing, counterparty, or other relationships,
or the public's perception of the soundness of the nation's financial system. We have exposure to many different counterparties
and we routinely execute transactions with counterparties in the financial services industry, including brokers and dealers, commercial
banks, investment banks, mutual and hedge funds, and other institutional clients. As a result, defaults by, or even rumors or questions
about, one or more financial services institutions, or the financial services industry generally, could lead to market-wide liquidity
problems and could lead to losses or defaults by us or by other institutions. Many of these transactions expose us to credit risk in
the event of default of our counterparty or client. In addition, our credit risk may be exacerbated when the collateral held by us cannot
be realized upon or is liquidated at prices not sufficient to recover the full amount of the receivable due us. Finally, if the public
views the nation's financial system (specifically, small banks and/or investment companies) as unstable, customers might withdraw
their funds, resulting in losses. Any such forgoing losses could be material and could materially and adversely affect our business,
financial condition, and results of operations.

 In
addition, we do not provide custodial services for our clients. Instead, client investment accounts are maintained under custodial arrangements
with large, well established securities brokerage firms or bank institutions that provide custodial services, or, collectively, custodial
firms, either directly or through arrangements made by us with those firms. As a result, the performance of, or even rumors or questions
about the integrity or performance of, any of those custodial firms could adversely affect the confidence of our clients in the services
provided by those firms or otherwise adversely impact their custodial holdings. Such an occurrence could negatively impact our ability
to retain existing or attract new clients and, as a result, could have a material adverse effect on our business, financial condition,
results of operations and prospects.

 Negative
public opinion regarding us or failure to maintain our reputation in the communities we serve could adversely affect our business and
prevent us from growing our business.

 Reputation
risk, or the risk to our business, earnings and capital from negative public opinion is inherent in our business. Negative public opinion
– and the risk of it – has increased given the increasing prevalence of social media and its impact on the banking industry.
Negative public opinion can result from our actual or alleged conduct in any number of activities, including lending practices, corporate
governance and acquisitions, and from actions taken by government regulators and community organizations in response to those activities.
Negative public opinion can adversely affect our ability to keep and attract customers and employees and can expose us to litigation
and regulatory action and adversely affect our results of operations. Furthermore, to the extent that depositors - particularly uninsured
depositors - become concerned about the Bank's financial condition or solvency, such depositors could withdraw they funds and create
a "run on the bank". Although we take steps to minimize reputational risk in dealing with our customers and communities,
this risk will always be present given the nature of our business. In addition, companies are facing increased scrutiny from customers,
regulators, investors, and other stakeholders related to their environmental, social and governance ("ESG") practices and
disclosure. Investor advocacy groups, investment funds and influential investors are also increasingly focused on these practices, especially
as they relate to the environment, health and safety, diversity, labor conditions and human rights. For example, certain investors are
beginning to incorporate the business risks of climate change and the adequacy of companies' responses to climate change and other
ESG matters as part of their investment theses. These shifts in investing priorities may result in adverse effects on the trading price
of the Company's preferred stock if investors determine that the Company has not made sufficient progress on ESG matters. In addition,
new government regulations could also result in new or more stringent forms of ESG oversight and expanding mandatory and voluntary reporting,
diligence, and disclosure. Increased ESG-related compliance costs could result in increases to our overall operational costs.

 Significant
revenues and profits are generated as a result of our relationship with Cain Watters, and a change in the relationship or decline in
Cain Watters' business could adversely affect us.

 Cain
Watters provides advisory services to approximately 3,100 dental professionals across the United States and plays a meaningful role in
referring trust, TPA, participant directed 401k plans and lending business to the Bank. In addition, Tectonic Advisors generates a substantial
portion of its revenues and profits under a long-term contract to provide advisory and due diligence services to assist in the management
of assets of clients of Cain Watters and Cain Watters has referred almost entirely all of the clients of Nolan and the Bank's Trust
Division. In the event that the Cain Watters' relationship does not continue (for whatever reason), such a change could have a
material adverse effect on the profits and operations of the Company.

 Historically,
the partners of Cain Watters had most of the client relationships. Thus, most of the referrals to the Bank and Tectonic Advisors have
historically been through the partners of Cain Watters, each of whom has a relatively long relationship with the Bank and Tectonic Advisors
and also is a shareholder of the Company. However, Cain Watters has experienced significant growth over the past few years and has expanded
its client service and planning teams to accommodate this growth. The leaders of these teams, called planners, are younger, have significant
influence over clients' decisions regarding service providers and are more technologically focused and, given this, may refer their
clients to other providers at rates greater than historical averages, which would have (over time) a material adverse effect on the Bank
and the Company.

 In
addition, Cain Watters is subject to, and has periodically faced, business challenges associated with litigation over private placements
conducted by affiliates between 2006-2009, which were negatively impacted by the financial crisis and subsequent collapse in the energy
markets, and lower assets under management resulting from the market correction. Further, to the extent that clients suffer losses or
poor performance on these or other investments, they may move their money from Cain Watters to another advisor, which could have a material
adverse impact on Cain Watters and also the Company.

 We
believe that any material adverse effect on the business of Cain Watters could have a material adverse effect on the Company. Cain Watters'
business is primarily focused on dental practices. To the extent that the dental industry is disrupted or dental practices are adversely
impacted for whatever reason, the Company's business may be adversely impacted as well.

 We
depend on key personnel, and may have difficulty identifying, attracting and retaining necessary personnel, to execute our business strategy
and successfully expand our operations. This risk includes the risk of retirement of key professionals in leadership roles, including
loan officers, members of our SBA team, and financial advisors and brokers.

 We
are reliant on key members of our senior management team, business development officers within the Bank (who are critical to generating
loan growth) and financial advisors and brokers (who are critical to driving asset growth at Tectonic Advisors and Sanders Morris). Personnel
changes will occur from time to time, and we cannot predict whether significant resignations and retirements will occur or whether we
will be able to recruit additional qualified personnel. With the exception of certain members of senior management, none of our professionals
are subject to employment agreements and are free to leave at any time. Further, certain of our executive officers, financial advisors
and brokers and SBA loan production officers are either financially secure or, in some cases, beyond retirement age for many Americans,
and do not have to work. Thus, these individuals are more susceptible to retirement. Departures, particularly of key employees in leadership
or client development roles, may cause client defections due to close relationships between clients and such professionals. While we
have succession plans in place, the loss of any key employee may have a material adverse effect on our business and prospects. If we
are unable to retain our key employees or attract, recruit, integrate, or retain other skilled professionals in the future, our business
could suffer materially in the future.

 The
employment market has become increasingly competitive; We may have difficulty attracting and retaining skilled personnel.

 The
employment market has become increasingly competitive over the past few years. We derive a substantial portion of our revenue from the
efforts of our professional team, including loan officers, members of our SBA team, and financial advisors and brokers. Therefore, our
future success depends, in large part, on our ability to attract, recruit, and retain qualified financial services professionals. Competition
for the best people in many activities engaged in by us is intense including with respect to compensation and emerging workplace practices,
accommodations, and remote work options, and we may not be able to replace personnel promptly at acceptable compensation levels or at
all, and may have difficulty retaining them. These circumstances have led to escalating compensation packages in the industry. Up-front
payments, increased payouts, and guaranteed contracts have made recruiting and retaining these professionals more expensive and more
difficult and can lead to departures by current professionals. The unexpected loss of personnel could impact our ability to serve our
clients timely, and could also negatively impact our internal operations, including regulatory compliance. A lack of skilled, seasoned
personnel with knowledge of our business and our market could reduce the performance of certain areas of our business, increase our error
rate in key areas, affect our ability to grow our business, and lead to a lack of talented professionals ready to advance into leadership
roles in the longer term. Due to these potential effects, the tightening employment market could have a material adverse impact on our
business, financial condition and results of operations.

 A
decline in general business and economic conditions and any regulatory responses to such conditions could have a material adverse effect
on our business, financial position, results of operations and growth prospects.

 As
a business operating in the bank and non-bank financial services industries, our business and operations are sensitive to general business
and economic conditions in the United States, generally, and particularly the State of Texas. If the U.S. or Texas economies weaken,
our growth and profitability from our lending, deposit and investment operations could be constrained. Unfavorable or uncertain economic
and market conditions could lead to credit quality concerns related to borrower repayment ability and collateral protection as well as
reduced demand for the products and services we offer. In addition, economic conditions in foreign countries, including global political
hostilities, U.S. and foreign tariff policies and uncertainty over the stability of the euro currency, could affect the stability of
global financial markets, which could hinder domestic economic growth. Concerns about the performance of international economies can
impact the economy and financial markets here in the United States. If the national, regional and local economies experience worsening
economic conditions, including high levels of unemployment, our growth and profitability could be constrained. Weak economic conditions
are characterized by, among other indicators, deflation, elevated levels of unemployment, fluctuations in debt and equity capital markets,
increased delinquencies on commercial, mortgage and consumer loans, residential and commercial real estate, price declines and lower
home sales and commercial activity. A significant outbreak of disease pandemics or other adverse public health developments in the population
could result in a widespread health crisis that could adversely affect the economies and financial markets of many countries, resulting
in an economic downturn that could adversely affect our customers' businesses and results of operations. Our business is also significantly
affected by monetary and related policies of the U.S. government and its agencies.

 In
addition, declines in the U.S. stock markets directly impact our Investment Services segment and also our trust assets. With any such
declines, our assets under management and advisement and trust assets decline in value and clients are less apt to invest. Since our
investment advisory revenues are based on assets, this leads to a decline in our Investment Services and trust revenues. In addition,
even though our brokerage revenues are not based on assets, brokerage revenues may also be impacted by declines in the stock market because
investors may be less inclined to trade stocks and/or bonds. Since our brokerage revenues are based on activity, we would likely see
a decline in brokerage revenues as a result of stock market declines.

 In
recent years, economic growth has been uneven, and opinions vary on the strength and direction of the economy. Uncertainties continue
regarding the potential for a renegotiation of international trade agreements and the effect of the legislation enacted by the past presidential
administration, and the impact such actions and the policies of the administration of President Donald Trump may have on economic and
market conditions. A trade war or other governmental action related to tariffs or international trade agreements or policies and a reduction
of the federal government workforce, as well as the ongoing conflicts in Ukraine and the Middle East or other potential epidemics or
pandemics, have the potential to negatively impact our and/or our customers' costs, demand for our customers' products, and/or
the U.S. economy or certain sectors thereof and, thus, adversely affect our business, financial condition, and results of operations.

 The
Federal Reserve's policy decisions in response to the inflationary environment may further impact our ability to attract deposits,
and could have an adverse effect on our business, financial condition and results of operations as increased interest rates could reduce
the demand for loans and affect the ability of our borrowers to repay their indebtedness subjecting us to potential credit losses. Changes
in any of these policies are influenced by macroeconomic conditions and other factors that are beyond our control. Adverse economic conditions
and government policy responses to such conditions could have a material adverse effect on our business, financial condition, results
of operations and growth prospects. All of these factors are detrimental to our business, and the interplay between these factors can
be complex and unpredictable.

 In
addition, the inflationary outlook in the United States remains uncertain. Inflation continues to be reported at relatively high levels,
and the resurgence of elevated levels of inflation could result in higher interest rates for a prolonged period of time, which may expose
the Company to interest rate risk. In addition, higher interest rates could slow economic growth and lead to a recessionary environment,
which could negatively impact the Company's growth, credit quality, net interest margin and its financial results. The risks to
our business from inflation depends on the durability of the current inflationary pressures in our markets. Transitory increases in inflation
are unlikely to have a material impact on our business or earnings. However, more persistent inflation could lead to tighter-than-expected
monetary policy which could, in turn, increase the borrowings costs of our customers, making it more difficult for them to repay their
loans or other obligations. High interest rates may be needed to tame persistent inflationary price pressures, which could also push
down asset prices and weaken economic activity. A deterioration in economic conditions in the United States and our markets could result
in an increase in loan delinquencies and non-performing assets, decreases in loan collateral values and a decrease in demand for our
products and services, all of which, in turn, would adversely affect our business, financial condition and results of operations.

 SBA
program reductions may have an adverse effect on our SBA lending operations.

 Small
businesses seeking SBA loans might face delays or reduced access to funding from budget cuts, which could strain their financial stability
and, in turn, affect their repayment capacity. This scenario could lead to increased default rates in our SBA loan portfolio, thereby
negatively impacting our asset quality and profitability.

 While
we strive to mitigate these risks through diversified lending practices and contingency planning, the inherent uncertainties associated
with potential SBA program reductions pose challenges to our SBA lending operations. Such events could materially and adversely affect
our business, financial condition, and results of operations.

 Lower
Trucking Margins and Revenues Negatively Impact Trucking Industry and Factoring

 The trucking industry,
particularly over-the-road trucking, is a volatile industry and sees the freight rates increase or decline based on the state of the
economy, customer demand and/or supply and demand considerations in the trucking industry. During 2024, freight rates – which
are the rates that trucking companies charge customers for transportation services – continued a prolonged lower levels
(generally) across the industry from their peak in 2021, for over-the-road trucking. Thus, revenues have declined, on a per
truck basis, for most trucking companies by 30% or more from their peak in 2021, causing a significant decline in the amount of over
the road factored receivables. Further, diesel prices – a key cost of trucking companies – have continued to stay at
elevated levels. The industry did see some relief as the price of diesel fell in 2024, but prices remain elevated as compared to
prices in 2021.

 Our
business is concentrated in, and dependent upon, the continued growth and welfare of our primary market, and adverse economic conditions
in such market could negatively impact our operations and clients.

 Although
we provide services nationwide, our business is concentrated primarily in the State of Texas. Our success depends to a certain extent
upon the business activity, population, income levels, employment trends, deposits and real estate activity in this primary market. Although
our clients' business and financial interests may extend beyond our primary market, adverse conditions that affect our primary
market could reduce our growth rate, affect the ability of our clients to repay their loans, affect the value of collateral underlying
our loans, affect our ability to attract deposits, affect the ability of our clients to make additional investments or cause such clients
to withdraw their investments, affect the value of our assets under management and generally affect our business, financial condition,
results of operations and future prospects.

 We
have a loan concentration related to the acquisition and financing of dental practices.

 Loan
concentrations are considered to exist when there are amounts loaned to a multiple number of borrowers engaged in similar activities
that would cause them to be similarly impacted by economic or other conditions. As of December 31, 2024, our loan portfolio included
$76.2 million of loans to the dental industry, representing approximately 11.4% of our total funded loans. These loans include practice
acquisition loans, dental equipment loans, and dental facility loans. We had no charge-offs during 2024 and 2023 in our dental portfolio
assets. We believe that these loans are conservatively underwritten to credit worthy borrowers and are diversified geographically. However,
to the extent that there is a decline in the dental industry in general, we may incur significant losses in our loan portfolio as a result
of this concentration.

 A
governmental shutdown or curtailment of government guaranteed loan programs could affect a segment of our business.

 A
major segment of our business consists of originating and periodically selling government guaranteed loans, in particular those guaranteed
by the USDA and SBA. From time to time, the government agencies that guarantee these loans reach their internal limits and cease to guarantee
loans. In addition, these agencies may change their rules for loans or Congress may adopt legislation that would have the effect of discontinuing
or changing the loan programs. Non-governmental programs could replace government programs for some borrowers, but the terms might not
be equally acceptable. Therefore, if these changes occur, the volume of loans to small businesses and industrial borrowers of the types
that now qualify for government guaranteed loans could decline. Also, the profitability of these loans could decline. As the funding
of the guaranteed portion of 7(a) loans has historically been a major portion of our business, a long-term decrease or discontinuation
in the funding for the 7(a) loan program may have an unfavorable impact on our future performance and results of operations. In addition,
any default by the U.S. government on its obligations or any prolonged government shutdown could, among other things, impede our ability
to originate SBA or USDA loans or sell such loans in the secondary market, which could materially and adversely affect our business,
financial condition and results of operations. Finally, recent policy shifts under the current Presidential administration have led to
significant changes within the SBA, including workforce reductions and office relocations. These actions could impact the SBA's
capacity to process and support loan programs effectively. Such changes may adversely affect our ability to originate SBA-backed loans,
potentially leading to reduced loan volumes and affecting our financial performance.

 We
face specific risks associated with retention of unguaranteed portions of SBA loans.

 SBA
7(a) loans are generally guaranteed up to 75% of the loan amount by the SBA, the remaining 25% being unguaranteed. As of December 31,
2024, the unguaranteed portion of our SBA loans totaled $90.6 million, representing 13.5% of our total loan portfolio. Given that the
SBA requires that the Bank only make loans to borrowers that do not have access to conventional bank financing, the unguaranteed portion
of these loans carry greater risk than traditional loans. As the Bank's loan portfolio of the unguaranteed portion of SBA loans
grows, its risk of loss due to defaults also grows. The Bank has a reserve for such unguaranteed portion of SBA loans. To the extent
that this reserve is not adequate to cover losses, the Bank will suffer losses to its capital base and such losses could be material.

lending generally involves a higher degree of risk than retail residential mortgage lending.

real estate loans are generally viewed as having more risk of default than owner-occupied residential real estate loans and typically
have larger balances. The underlying commercial real estate values, lower demand for office and retail space, increase costs to complete
construction projects. Customer cash flows can be more easily influenced by adverse conditions in the related industries, the real estate
market or in the economy.

real estate values may be elevated and the outlook for commercial real estate remains dependent on the broader economic environment and,
specifically, how major subsectors respond to higher interest rate environment and prices for commodities, goods and services. Credit
performance across the industry over the medium- and long-term is susceptible to economic and market forces. Some degree of general instability
in the broad commercial real estate market may occur in the coming quarters as loans are refinanced at higher interest rates and in markets
with higher vacancy rates under current economic conditions. Instability and uncertainty in the commercial real estate markets could
have a material adverse effect on our financial condition and results of operations.

 The
level of our commercial real estate loan portfolio may subject us to heightened regulatory scrutiny.

 The
banking regulators have promulgated joint guidance on sound risk management practices for financial institutions with concentrations
in commercial real estate lending. Under the guidance, a financial institution that is actively involved in commercial real estate lending
should perform a risk assessment to identify potential concentrations in commercial real estate lending. A financial institution may
have such a concentration if, among other factors: (i) total outstanding loans for construction, land development, and other land represent
100% or more of total risk-based capital ("CRE 1 Concentration"); or (ii) total outstanding loans for construction, land
development and other land and loans secured by multifamily and non-owner occupied non-farm, non-residential properties (excluding loans
secured by owner-occupied properties) represent 300% or more of total risk-based capital ("CRE 2 Concentration"), and the
institution's commercial real estate loan portfolio has increased by 50% or more during the prior 36-month period. In such an instance,
management should employ heightened risk management practices, including board and management oversight and strategic planning, development
of underwriting standards, risk assessment and monitoring through market analysis and stress testing. As of December 31, 2024, our CRE
1 Concentration level was 87.0% and our CRE 2 Concentration level was 123.3%. We may, at some point, be considered to have a concentration
in the future, or our risk management practices may be found to be deficient, which could result in increased reserves and capital costs
as well as potential regulatory enforcement action.

 Our
factoring services through the Bank's Integra factoring division are concentrated in the transportation industry and economic conditions
or other factors negatively impacting the transportation industry could adversely affect our factoring business; factoring invoice levels
are at historical highs.

 Factoring
for small-sized trucking businesses constituted the vast majority of our total factoring portfolio as of December 31, 2024, calculated
based on the gross receivables from the purchase of invoices from such trucking businesses compared to our total gross receivables in
the purchase of factored receivables as of such date. The Company began providing factoring services for the energy industry and the
staffing industry during 2023, and as of December 31, 2024, these services constitute approximately 30% of the Company's total
factoring portfolio. Given the concentration of our factoring business in the transportation industry, economic conditions or other factors
that negatively impact the transportation industry could impact our factoring revenues, as the revenues we earn from purchasing transportation
invoices are directly correlated with the amount of transportation activity generated by our factoring clients (i.e., the volume of transportation
invoices they are able to generate by providing their services). Reductions in economic activity will typically cause a decrease in the
volume of goods in commerce available to be transported by our factoring clients. Increased costs associated with operating a trucking
business, such as may be caused by increases in the prices of oil and diesel fuel, may cause a diminished demand for trucking services
as our clients pass those costs along to their customers. Conversely, decreases in the price of diesel fuel may cause the size of our
factoring portfolio to decrease, as the price of diesel fuel typically directly correlates with the size of the invoices we purchase
from our factoring clients. Additionally, the factoring industry may not continue its historical growth and we may face increased competition.
Our failure to compete effectively in our market could restrain our growth or cause us to lose market share. Any of such events could
impact the returns we realize on our factoring activity or result in a decrease in the overall amount of our factoring activity and could
have an adverse effect on our business, financial condition and results of operations.

 The
success of our trust services is dependent upon market fluctuations and a non-diversified source for its growth.

 We
offer traditional fiduciary services such as serving as executor, trustee, agent, administrator or custodian for individuals, nonprofit
organizations, employee benefit plans and organizations. As of December 31, 2024, the Bank had approximately $2.1 billion in trust assets.
The level of assets under management is significantly impacted by the market value of the assets. To date, virtually all of the growth
in our assets under management relates to one registered investment advisor, Cain Watters, who has advised its clients of the existence
of our trust services. We have not compensated the registered investment advisor in any way for making its clients aware of our trust
services and cannot assure you that the investment advisor will continue to notify its clients of our trust services or that those clients
will open trust accounts at the Bank. Related to this, the Bank and Cain Watters are parties to an agreement which includes a provision
obligating each party to preserve the other's business relationship with their mutual clients. However, in the event that the Cain
Watters' relationship does not continue (for whatever reason) to refer client to the Bank's Trust Division, such a change
could have a material adverse effect on the future growth and, thus, profits and operations of the Company. In addition, we are subject
to regulatory supervision with respect to these trust services that may restrain our growth and profitability.

 We
are subject to possible claims and litigation pertaining to fiduciary responsibility.

 Clients
could make claims and take legal action pertaining to our performance of our fiduciary responsibilities. Whether client claims and legal
action related to our performance of our fiduciary responsibilities are founded or unfounded, if such claims and legal actions are not
resolved in a manner favorable to us, they may result in significant financial liability and/or adversely affect our market perception
of our products and services as well as impact client demand for those products and services. Although we have not experienced any material
claims or litigation pertaining to fiduciary responsibility, the occurrence of any financial liability or reputational damage could have
a material adverse effect on our business, which, in turn, could have a material adverse effect on our financial condition and results
of operations.

 We
could suffer material credit losses.

 There
are risks inherent in making any loan, including risks inherent in dealing with individual borrowers, risks of non-payment, risks resulting
from uncertainties as to the future value of collateral and risks resulting from changes in economic and industry conditions and increases
in inflation and interest rates. Changes in the economy can cause the assumptions that we made at origination to change and can cause
borrowers to be unable to make payments on their loans, and significant changes in collateral values can cause us to be unable to collect
the full value of loans we make. Increases in interest rates and inflation increase costs and decrease profits, reducing the ability
of a borrower to make payments on its loan. This is particularly true in our SBA portfolio, which focuses on less creditworthy borrowers
in accordance with the SBA's mandate. There is no assurance that our credit risk monitoring and loan approval procedures are or
will be adequate or will reduce the inherent risks associated with lending. Our credit administration personnel and our policies and
procedures may not adequately adapt to changes in economic or any other conditions affecting clients and the quality of our loan portfolio.
Any failure to manage such credit risks may materially adversely affect our business, financial condition and results of operations.

 Our
levels of nonperforming assets could increase, which could adversely affect our results of operations and financial condition, and could
result in losses in the future.

 As
of December 31, 2024, our nonperforming loans (which consist of non-accrual loans, loans past due 90 days or more and still accruing
interest and loan modifications to borrowers experiencing financial difficulty that are not performing in accordance with their modified
terms) totaled $15.9 million (of which $11.4 million is guaranteed). We had no other real estate owned at December 31, 2024. However,
our nonperforming assets may continue to remain at low levels or we may experience increases in nonperforming assets in the future. Our
nonperforming assets adversely affect our net income in various ways. We do not record interest income on non-accrual loans or other
real estate owned, thereby adversely affecting our net interest income, net income and returns on assets and equity, and our loan administration
costs increase, which together with reduced interest income adversely affects our efficiency ratio. When we take collateral in foreclosure
and similar proceedings, we are required to mark the collateral to its then-fair market value and estimate disposition costs, which may
result in a loss. These nonperforming loans and other real estate owned also increase our risk profile and the level of capital our regulators
believe is appropriate for us to maintain in light of such risks. The resolution of nonperforming assets requires significant time commitments
from management and can be detrimental to the performance of their other responsibilities. Further, since many of our loans are located
outside of our primary market area, collecting delinquent loans would be more difficult for our staff relative to our competitors. If
we experience increases in nonperforming loans and nonperforming assets, our net interest income may be negatively impacted and our loan
administration costs could increase, each of which could have an adverse effect on our net income and related ratios, such as returns
on assets and equity.

 Our allowance for credit losses may not
be sufficient to absorb actual losses.

 Experience in the banking industry
indicates that a portion of our loans in all categories of our lending business will become delinquent, and some may only be partially
repaid or may never be repaid at all. Our methodology for establishing the adequacy of the allowance for credit losses depends on subjective
application of risk grades as indicators of borrowers' ability to repay. Deterioration in general economic conditions and unforeseen
risks affecting clients may have an adverse effect on borrowers' capacity to repay timely their obligations before risk grades could
reflect those changing conditions. In times of improving credit quality, with growth in our loan portfolio, the allowance for credit losses
may decrease as a percent of total loans. Changes in economic and market conditions may increase the risk that the allowance would become
inadequate if borrowers experience economic and other conditions adverse to their businesses. Maintaining the adequacy of our allowance
for credit losses may require that we make significant and unanticipated increases in our provisions for credit losses, which could materially
affect our results of operations and capital adequacy. Recognizing that many of our loans individually represent a significant percentage
of our total allowance for credit losses, adverse collection experience in a relatively small number of loans could require an increase
in our allowance.

 Federal regulators, as an integral
part of their respective supervisory functions, periodically review our allowance for credit losses. The regulatory agencies may require
us to change classifications or grades on loans, increase the allowance for credit losses with large provisions for credit losses and
recognize further loan charge-offs based upon their judgments, which may be different from ours. Any increase in the allowance for credit
losses required by these regulatory agencies could have a negative effect on our results of operations and financial condition.

 Our legal lending limits may impair our
ability to attract borrowers and ability to compete with larger financial institutions.

 Our per client lending limit
at December 31, 2024, was approximately $15.1 million. Accordingly, the size of loans which we can offer to potential clients is less
than the size which many of our competitors with larger lending limits are able to offer. This limit has affected and will continue to
affect our ability to seek relationships with larger businesses in our market area. We accommodate loans in excess of our lending limit
through the sale of portions of such loans to other banks. However, we may not be successful in attracting or maintaining clients seeking
larger loans or in selling portions of such larger loans on terms that are favorable to us.

 The small- to medium-sized businesses that
we lend to may have fewer resources to weather adverse business conditions, which may impair their ability to repay a loan, and such impairment
could adversely affect our results of operations and financial condition.

 Our business development and
marketing strategies primarily serve the banking and financial services needs of small- to medium-sized businesses. These businesses generally
have fewer financial resources in terms of capital or borrowing capacity than larger entities, frequently have smaller market shares than
their competition, may be more vulnerable to economic downturns and/or increases in interest rates and inflationary pressure, often need
substantial additional capital to expand or compete and may experience substantial volatility in operating results, any of which may impair
a borrower's ability to repay a loan. In addition, the success of a small- to medium-sized business often depends on the management
skills, talents and efforts of one or two people or a small group of people, and the death, disability or resignation of one or more of
these people could have a material adverse impact on the business and its ability to repay its loans. If general economic conditions negatively
impact Texas or the specific markets in which we operate and small- to medium-sized businesses are adversely affected or our borrowers
are otherwise affected by adverse business conditions, our business, financial condition and results of operations could be adversely
affected.

 Our commercial
finance clients, particularly with respect to the Bank's Integra factoring division, may lack the operating history, cash flows
or balance sheet necessary to support other financing options and may expose us to additional credit risk, especially if our additional
controls for such products are ineffective in mitigating such additional risks.

 A
significant portion of our loan portfolio consists of commercial finance products. Some of these commercial finance products, particularly
asset-based loans and our factored receivables through the Bank's Integra Division, arise out of relationships with clients who
lack the operating history, cash flows or balance sheet necessary to qualify for other financing options. We attempt to control for the
additional credit risk in these relationships through credit management processes employed in connection with these transactions. However,
if such controls are ineffective in controlling this additional risk or if we fail to follow the procedures we have established for managing
this additional risk, we could be exposed to additional losses with respect to such product lines that could have an adverse effect on
our business, financial condition and results of operations.

 Certain of our loans are not secured by
property but dependent on the earning capacity of the borrower.

 Certain of our loans are not
collateralized or fully collateralized by tangible property, but are made on the basis of the cash flow (earnings) being generated by
the borrower. These include, without limitation, certain loans to dentists to either buy out another dentist in a dental practice and/or
to buy into a dental practice or to purchase or establish a dental practice. In this case, the borrower may be the dentist and/or the
dental practice, neither of which may have sufficient tangible assets (cash, marketable securities, real estate or other tangible assets)
to fully secure or even secure a portion of the loan being made. Rather, we look to the earning power and capacity of the dentist and/or
dental practice as the primary source of repayment of the loan. In the event that the dentist or dental practice's earning power
is insufficient to service or repay the loan, the additional collateral is usually insufficient to cover the outstanding loan balance,
in which case we lose substantially all of the loan balance. In the event that these loans default at a high rate, we will likely recover
very little from the underlying collateral, in which case the Bank could suffer significant losses and you could lose some or all of your
investment in your Series B preferred stock.

 The Company's use of appraisals in
deciding whether to make a loan on or secured by real property does not ensure the value of the real property collateral.

 In considering whether to make
a loan secured by real property, we generally require an appraisal of the property. However, an appraisal is only an estimate of the value
of the property at the time the appraisal is made, and an error in fact or judgment could adversely affect the reliability of an appraisal.
In addition, events occurring after the initial appraisal may cause the value of the real estate to decrease. As a result of any of these
factors, the value of collateral backing a loan may be less than supposed, and if a default occurs, we may not recover the outstanding
balance of the loan.

 Fee revenue represents a significant portion
of our consolidated revenue and is subject to decline, among other things, in the event of a reduction in, or changes to, the level or
type of investment activity by our clients and market declines.

 A significant portion of our
revenue is the result of fee-based services related to investment advisory, trust services, insurance and brokerage activities. This contrasts
with many commercial banks that may rely more heavily on interest-based sources of revenue, such as loans. For the year ended December
31, 2024, consolidated non-interest income represented approximately 58.5% of our consolidated gross revenue (which is net interest income
plus non-interest income). The level of these fees is influenced by several factors, including the mix and volume of our assets under
custody and administration and our assets under management, market declines (which reduce asset values), the value and type of securities
positions held (with respect to assets under custody) and the volume of portfolio transactions, and the types of products and services
used by our clients.

 In addition, our combined clients
include private investors, defined benefit and contribution plans, institutional investors, such as mutual funds, collective investment
funds, hedge funds and other investment pools, and investment managers. Economic, market or other factors that reduce the level or rates
of savings in or with those institutions, either through reductions in financial asset valuations or through changes in investor preferences,
could materially reduce our fee revenue or have a material adverse effect on our consolidated results of operations. These clients also,
by their nature, are often able to exert pricing pressure, and this, combined with strong competitive forces in the markets for our services,
has resulted in, and may continue to result in, significant pressure to reduce the fees we charge for our services in both our asset servicing
and asset management business lines.

 The business operations of Sanders Morris
may face limitations due to net capital requirements.

 As a registered broker-dealer,
Sanders Morris is subject to the net capital rules administered by the SEC and FINRA. These rules, which specify minimum net capital requirements
for registered broker-dealers and FINRA members, are designed to assure that broker-dealers maintain adequate net capital in relation
to their liabilities and the size of their client's business. These requirements have the effect of requiring that a substantial
portion of a broker-dealer's assets be kept in cash or highly liquid investments. Failure to maintain the required net capital may
subject a firm to suspension or revocation of its registration by the SEC and suspension or expulsion by FINRA and other regulatory bodies.
Compliance with these net capital rules could limit operations that require extensive capital, such as underwriting or trading activities.

 These net capital rules could
also restrict our ability to withdraw capital in situations where Sanders Morris has more than the minimum required capital. We may be
limited in our ability to pay dividends, implement our strategies, pay interest or repay principal on our debt, and redeem or repurchase
our outstanding preferred or common stock. In addition, a change in these net capital rules or new rules affecting the scope, coverage,
calculation, or amount of the net capital requirements, or a significant operating loss or significant charge against net capital, could
have similar effects.

 The wealth management, trust and brokerage
business is highly competitive. If we are not able to compete successfully against current and future competitors, our business, financial
condition, and results of operations will be adversely affected.

 The wealth management, trust
and brokerage business is highly competitive, and we expect it to remain so. We compete directly with many other national and regional
full service financial services firms, banks, insurance companies, asset management and advisory firms, and, to a lesser extent, with
on-line and discount brokers. Further, many online brokers have gone to a "no commission" structure, putting additional pressure
on our brokerage operations. We also compete for wealth management services with commercial banks, private trust companies, sponsors of
mutual funds, financial planning firms, venture capital, private equity and hedge funds, and other wealth managers. Moreover, we compete
with ETFs that generally track passive investing strategies and charge lower management fees than active strategies, which may affect
both the profitability of asset managers, on whose success we in part depend, and the perceived value of our investment services regarding
ETFs. A continued lessening of investor interest in actively managed equity funds could decrease demand for and/or pricing on our investment
services.

 We are a small firm. Many of
our competitors have more personnel and financial resources than we do. Larger competitors are able to advertise their products and services
on a national or regional basis and may have a greater number and variety of products and distribution outlets for their products, larger
client bases, and greater name recognition. These larger and better capitalized competitors may be better able to respond to changes in
the wealth management and institutional services industries, to finance acquisitions, to fund internal growth, and to compete for market
share generally.

 Increased competition may result
in pricing pressures, reduced revenue and loss of market share. Further, as a strategic response to changes in the competitive environment,
we may from time to time make certain pricing, service, or marketing decisions or acquisitions that also could materially and adversely
affect our business and results of operations. In addition, new technologies and the expansion of existing technologies may increase competitive
pressures on us. The growth of online wealth management tools that provide automated, algorithm-based portfolio management advice, sometimes
called robo-advice, may further accelerate the adoption of passively managed portfolios and reduce demand for and/or pricing on our investment
services. Consequently, we may not be able to compete successfully against current and future competitors. If we are unable to compete
effectively, our business, financial condition, and results of operations will be adversely affected.

 Underperformance or declines in our investments,
in either relative or absolute terms, may reduce the profitability of our wealth management and advisory business.

 Investment performance is one
of the most important factors in retaining existing clients and competing for new wealth management business. Underperformance or market
declines in our investments could reduce our revenue and impair our growth in a number of ways:

 existing
 clients may withdraw funds from our wealth management business in favor of better performing
 products;

 asset-based
 advisory fees could decline as a result of a decrease in the value of assets under management;

 our
 ability to attract funds from existing and new clients might diminish;

 firms
 with which we have business relationships may terminate their relationships with us; and

 our
 wealth managers and investment advisors may depart, whether to join a competitor or otherwise.

 Even when market conditions
are generally favorable, our investment performance may be adversely affected by the investment style of our asset managers and the particular
investments that they make. To the extent our investment style, security selection or investment results underperform other investment
styles, selections or results, in either relative or absolute terms, the revenue and profitability of our wealth management business will
likely be reduced and our ability to retain and attract new clients and funds will likely be impaired.

 Standard investment management contracts
we have with our clients are terminable without cause and on relatively short notice by our clients, which makes us vulnerable to short-term
declines in the performance of the securities under our management.

 Like most investment advisory
and wealth management businesses, the investment advisory contracts we have with our clients are typically terminable by the client without
cause upon less than 30 days' notice. As a result, even short-term declines in the performance of the securities we manage, which
can result from factors outside our control, such as adverse changes in market or economic condition or the poor performance of some of
the investments we have recommended to our clients, could lead some of our clients to move assets under our management to other asset
classes such as broad index funds or treasury securities, or to investment advisors which have investment product offerings or investment
strategies different than ours. Therefore, our operating results are heavily dependent on the financial performance of our investment
portfolios and the investment strategies we employ in our investment advisory businesses and even short-term declines in the performance
of the investment portfolios we manage for our clients, whatever the cause, could result in a decline in assets under management and a
corresponding decline in investment management fees, which would adversely affect our results of operations.

 We continue to experience pricing pressures
in areas of our business which may impair our future revenue and profitability.

 We continue to experience pricing
pressures on investment advisory fees, as well as trading margins and commissions in fixed income and equity trading. In the fixed income
market, regulatory requirements have resulted in greater price transparency, leading to price competition and decreased trading margins.
In the equity market, we experience pricing pressure from institutional clients to reduce commissions, partially due to the industry trend
toward unbundling fees related to research and execution and the trend towards "no commission" trading. Our trading margins
have been further compressed by the use of electronic and direct market access trading, which has created additional competitive pressure.
In addition, we face pricing pressures in our advisory business, which has seen new entrants compete for clients on the basis of price.
We believe that price competition and pricing pressures in these and other areas will continue as investors continue to reduce the amounts
they are willing to pay, including by reducing the number of advisory and brokerage firms they use, and some of our competitors seek to
obtain market share by reducing advisory fees, commissions or margins.

 We face strong competition from other insurance
agencies, which may adversely affect our operations and financial condition.

 The insurance industry is highly
competitive and has, historically, been characterized by periods of significant price competition, alternating with periods of greater
pricing discipline during which competitors focus on other factors, including service, experience, the strength of agent and policyholder
relationships, reputation, speed and accuracy of claims payment, perceived financial strength, ratings, scope of business, commissions
paid and policy and contract terms and conditions. Our insurance business competes with many other insurers, including large national
companies that have greater financial, marketing and management resources than HWG. Many of these competitors also have better ratings
and market recognition than our insurance business.

 In addition, a number of new,
proposed or potential industry developments also could increase competition in HWG's industry. These developments include changes
in practices and other effects caused by the Internet (including direct marketing campaigns by HWG's competitors in established
and new geographic markets), which have led to greater competition in the insurance business and increased expectations for customer service.
These developments could prevent our insurance business from expanding its book of business.

 Our insurance business also
faces competition from new entrants into the insurance market. New entrants do not have historic claims or losses to address and, therefore,
may be able to price policies on a basis that is not favorable to our insurance business. New competition could reduce the demand for
HWG's insurance products, which could have a material adverse effect on our financial condition and results of operations.

 A failure to appropriately identify and
address potential conflicts of interest could adversely affect our businesses.

 Due to the scope of our businesses
and our client base, we regularly address potential conflicts of interest, including situations where our services to a particular client
or our own investments or other interests conflict, or are perceived to conflict, with the interests of another client, as well as situations
where one or more of our businesses have access to material non-public information that may not be shared with other businesses within
the firm and situations where we may be a creditor of an entity with which we also have an advisory or other relationship. In addition,
our status as a bank holding company subjects us to heightened regulation and increased regulatory scrutiny by the Federal Reserve with
respect to transactions between our entities that are or could be viewed as affiliates of ours and, under the Volcker Rule, transactions
between our subsidiaries (including Sanders Morris and Tectonic Advisors) and certain covered funds.

 We may incur significant losses due to ineffective
risk management processes and strategies.

 We seek to monitor and control
our risk exposures through a risk and control framework encompassing a variety of separate but complementary financial, credit, operational
and compliance systems, and internal control and management review processes. However, those systems and review processes and the judgments
that accompany their application may not be effective and, as a result, we may not anticipate every economic and financial outcome in
all market environments or the specifics and timing of such outcomes, particularly in the event of the kinds of dislocations in market
conditions experienced in recent years, which highlight the limitations inherent in using historical data to manage risk. If those systems
and review processes prove to be ineffective in identifying and managing risks, we could be subjected to increased regulatory scrutiny
and regulatory restrictions could be imposed on our business, including on our potential future business lines, as a result of which our
business and operating results could be adversely affected.

 If we fail to maintain effective internal
control over financial reporting, we may not be able to report our financial results accurately and timely, in which case our business
may be harmed, investors may lose confidence in the accuracy and completeness of our financial reports, we could be subject to regulatory
penalties and the price of the Series B preferred stock may decline.

 Our management is responsible
for establishing and maintaining adequate internal control over financial reporting and for evaluating and reporting on that system of
internal control. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. As a public company,
we are required to comply with the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act"), and other rules that govern public
companies, including making annual assessments of the effectiveness of our internal control over financial reporting. In addition, when
we cease to be an emerging growth company, our independent registered public accounting firm may be required to report on the effectiveness
of our internal control over financial reporting. We will continue to periodically test and update, as necessary, our internal control
systems, including our financial reporting controls. Our actions, however, may not be sufficient to result in an effective internal control
environment. In particular, we may not be able to maintain effective internal control over segment reporting.

 Our management may conclude
that our internal control over financial reporting is not effective due to our failure to cure any identified material weakness, significant
deficiency or otherwise. Moreover, even if our management concludes that its internal control over financial reporting is effective, our
independent registered public accounting firm may conclude that our internal control over financial reporting is not effective. In addition,
during the course of the evaluation, documentation and testing of our internal control over financial reporting, we may identify deficiencies
that we may not be able to remediate in time to meet the deadline imposed by FDICIA. Any such deficiencies may also subject us to adverse
regulatory consequences. If we fail to achieve and maintain the adequacy of our internal control over financial reporting, as these standards
are modified, supplemented or amended from time to time, we may be unable to report our financial information on a timely basis, we may
not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with the Sarbanes-Oxley
Act or the FDICIA, and we may suffer adverse regulatory consequences or violations of listing standards.

 Any future failure to maintain
effective internal control over financial reporting could impair the reliability of our financial statements which in turn could harm
our business, impair investor confidence in the accuracy and completeness of our financial reports and our access to the capital markets,
cause the price of the Series B preferred stock to decline and subject us to regulatory penalties and litigation.

 We are required to make significant estimates
and assumptions in the preparation of our financial statements and our estimates and assumptions may not be accurate.

 The preparation of our consolidated
financial statements in conformity with GAAP requires our management to make significant estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements,
and the reported amounts of income and expense during the reporting periods. The processes the Company uses to estimate its probable credit
losses and to measure the fair value of financial instruments, as well as the processes used to estimate the effects of changing interest
rates and other market measures on the company's financial condition and results of operations, depends upon the use of analytical
and forecasting models. These models reflect assumptions that may not be accurate, particularly in times of market stress or other unforeseen
circumstances. Even if these assumptions are adequate, the models may prove to be inadequate or inaccurate because of other flaws in their
design or their implementation. If the models the Company uses for interest rate risk and asset-liability management are inadequate, the
Company may incur increased or unexpected losses upon changes in market interest rates or other market measures. If the models the Company
uses for determining its probable credit losses are inadequate, the allowance for credit losses may not be sufficient to support future
charge-offs. If the models the Company uses to measure the fair value of financial instruments are inadequate, the fair value of such
financial instruments may fluctuate unexpectedly or may not accurately reflect what the Company could realize upon sale or settlement
of such financial instruments. Any such failure in the Company's analytical or forecasting models could have a material adverse
effect on the Company's business, financial condition and results of operations.

 We may be required to recognize a significant
charge to earnings if our goodwill or other intangible assets become impaired.

 Goodwill and purchased intangible
assets with indefinite lives are not amortized, but are reviewed for impairment annually and more frequently when events or changes in
circumstances indicate that the carrying value of an asset may not be recoverable. We assess the recoverability of the unamortized balance
of our finite-lived intangible assets when indicators of potential impairment are present. Factors that may indicate that the carrying
value of our goodwill or other intangible assets may not be recoverable include a decline in our stock price and market capitalization
and slower growth rates in our industry. We will continue to evaluate the carrying value of our goodwill and other intangible assets.
The recognition of a significant charge to earnings in our consolidated financial statements resulting from any impairment of our goodwill
or other intangible assets could materially adversely impact our business, financial condition and results of operations.

 We may elect or be compelled to seek additional
capital, but that capital may not be available, or it may be dilutive.

 Our ability to raise capital
in the future, if needed, will depend on conditions in the capital markets, which are outside our control, and on our financial performance.
Accordingly, we cannot be assured of our ability to raise capital when needed, on favorable terms or at all. If we cannot raise additional
capital when needed, we will be subject to increased regulatory supervision and the imposition of restrictions on our growth and business.
These outcomes could negatively impact our ability to operate or further expand our operations through acquisitions and may result in
increases in operating expenses and reductions in revenues that could have a material adverse effect on our financial condition and results
of operations. In addition, in order to raise additional capital, we may need to issue shares of our preferred or common stock that would
reduce our shareholders' percentage ownership interest to the extent they do not participate in future offerings. Also, if we are
unable to raise additional capital, we may be required to take alterative actions which may include the sale of income-producing assets
to meet our capital requirements, which could have an adverse impact on our results of operations and ability to generate income.

 We face intense competition from larger
banks, financial institutions and financial technology (FinTech) companies that could hurt our business.

 We conduct our business operations
in markets where the banking business is highly competitive and is dominated by large multi-state and in-state banks with operations and
offices covering wide geographic areas. We also compete with other financial service businesses, including investment advisory and wealth
management firms, mutual fund companies, financial technology companies, and securities brokerage and investment banking firms that offer
competitive banking and financial products and services as well as products and services that we do not offer. Larger banks and many of
those other financial service organizations have greater financial, technology and marketing resources than we do that enable them to
conduct extensive advertising campaigns, promote ease of use through technology and/or shift resources to regions or activities of greater
potential profitability. They also have substantially more capital and higher lending limits than we do, which enable them to attract
larger clients and offer financial products and services that we are unable to offer, putting us at a disadvantage in competing with them
for loans and deposits and investment management clients. In addition, we face increased competition from financial technology firms that
offer their solutions online and/or through the use of mobile phone apps and other technological means, which are increasingly preferred
by younger consumers of financial services. If we are unable to compete effectively with those banking or other financial services businesses,
we could find it more difficult to attract new and retain existing clients and our net interest margins, net interest income and investment
management fees could decline, which could materially adversely affect our business, results of operations and prospects, and could cause
us to incur losses in the future.

 We continually encounter technological change,
and we may have fewer resources than many of our competitors to invest in technological improvements.

 The financial services industry
is undergoing rapid technological changes with frequent introductions of new technology-driven products and services. The effective use
of technology increases efficiency and enables financial institutions to better serve clients and to reduce costs. Our future success
will depend, in part, upon our ability to address the needs of our clients by using technology to provide products and services that will
satisfy client demands for convenience, as well as to create additional efficiencies in our operations. Many national vendors provide
turn-key services that allow smaller banks to compete with institutions that have substantially greater resources to invest in technological
improvements. However, these technology services many not be as sophisticated or adoptable as some of our larger competitors and we may
be subject to long-term contracts that impede our ability to change vendors to adapt to a changing technology marketplace. Thus, we may
not be able to effectively implement new technology-driven products and services or be successful in marketing these products and services
to our clients.

 We depend on third party systems, so a systems
failure could significantly disrupt our business. These and other operational risks may disrupt our business, result in regulatory action
against us, or limit our growth.

 Our business depends highly
on our ability to process, on a daily basis, a large number of transactions across numerous and diverse markets, and the transactions
we process have become increasingly complex.

 Consequently, we rely heavily
on our communications and financial, accounting, and other data processing systems, including systems provided by our clearing brokers
and service providers. We face operational risk arising from mistakes made in the confirmation or settlement of transactions or from transactions
not being properly recorded, evaluated, or accounted.

 If any of these systems do
not operate properly or are disabled, we could suffer financial loss, a disruption of our business, liability to clients, regulatory intervention,
or reputational damage. Any failure or interruption of our systems, the systems of our clearing brokers or custodians, or third party
trading systems could cause delays or other problems in our securities trading activities, which could have a material adverse effect
on our operating results. In addition, our clearing brokers and custodians provide our principal disaster recovery system. We cannot provide
assurance that we or our clearing brokers or custodians will not suffer any systems failures or interruption, including ones caused by
earthquake, fire, other natural disasters, power or telecommunications failure, act of God, act of war, terrorism, or otherwise, or that
our or our clearing brokers' back-up procedures and capabilities in the event of any such failure or interruption will be adequate.
The inability of our or our clearing brokers' or custodians' systems to accommodate an increasing volume of transactions could
also constrain our ability to expand our business.

 We are exposed
to cybersecurity risks associated with our internet-based systems and online commerce security, and our information systems could experience
an interruption, failure, breach in security, or cyber-attack.

 The
Company relies heavily on public utilities infrastructures, internal information and operating systems, and cloud-based solutions and
storage to conduct its business, and these systems could fail in a variety of ways. In addition, the use of network, cloud-based, or third-party
hosted systems expose the Company to the increased sophistication and activity of cyber-criminals, both domestic and international. A
cyber incident is considered to be any adverse event that threatens the confidentiality, integrity, or availability of the information
resources of the Company. These incidents may be an intentional attack or an unintentional event and could involve blocking the Company
from accessing its own systems or remote servers in exchange for a ransom payment, gaining unauthorized access directly to our information
systems, or indirectly through our vendors and customers systems or servers, for purposes of misappropriating assets, stealing confidential
corporate information or customers' Personally Identifiable Information, corrupting data, denying access or causing operational
disruption. The Company's independent third-party service providers or their subcontractors may also have access to customers'
personal information and therefore also expose the Company to cybersecurity risk. Additionally, vendors' and customers' home,
business or mobile information systems and the servers they rely on, are at risk of fraudulent corporate account takeovers which the Company
may not be able to detect. There is no guarantee the Company's counteractions will be successful or that the Company will have the
resources or technical expertise to anticipate, detect or prevent rapidly evolving types of cyber-attacks.

 Third
party or internal systems and networks may fail to operate properly or become disabled due to deliberate attacks or unintentional events.
Our operations are vulnerable to disruptions from human error, natural disasters, power loss, computer viruses, spam attacks, denial of
service attacks, unauthorized access and other unforeseen events. Undiscovered data corruption could render our customer information inaccurate.
These events may obstruct our ability to provide services and process transactions. While we believe we are in compliance with all applicable
privacy and data security laws, an incident could put our customer confidential information at risk. Although we have not experienced
a cyber-incident which has compromised our data or systems, we can never be certain that all of our systems are entirely free from vulnerability
to breaches of security or other technological difficulties or failures. We monitor and modify, as necessary, our protective measures
in response to the perpetual evolution of cyber threats.

 The
occurrence of any failures or disruptions of infrastructure, or breakdown, breach, failures or interruptions of the Company's information
systems, access points, or those hosted by third-party service providers and customers, or in the cloud, or the Company's inability
to detect, respond, disclose and correct such occurrence or compromise in a timely manner, could result in an interruption in our ability
to conduct transactions for an indeterminable length of time, could expose customers' personal and confidential information to unauthorized
parties, increase the risk of fraud or theft, subject the Company to increased operational costs to detect and rectify the situation,
damage the Company's reputation and deter customers from using the Company's services, and increase the Company insurance
cost or the ability to obtain adequate cyber insurance coverage. In addition, as a result of any breach, we could incur higher costs to
conduct our business, to increase protection or related to remediation. Furthermore, our customers could terminate their accounts with
us because of a cyber-incident which occurred on their own system or with that of an unrelated third party, which is outside of our control.
In addition, a security breach could also subject us to additional regulatory scrutiny and expose us to civil litigation and possible
financial liability.

 We are subject
to certain operating risks related to employee error and customer, employee and third party misconduct and fraudulent activity, which
could harm our reputation and business.

 Employee
error or employee and customer misconduct or fraudulent activity could subject us to financial losses or regulatory sanctions and harm
our reputation. Misconduct by our employees could include hiding unauthorized activities from us, improper or unauthorized activities
on behalf of our customers or improper use of confidential information, and misconduct or fraud by our customers could include check "kiting"
or fraud, wire fraud or other dishonest activities. It is not always possible to prevent employee error or misconduct, and the precautions
we take to prevent and detect this activity may not always be effective. Because the nature of the financial services business involves
a high volume of transactions, certain errors may be repeated or compounded before they are discovered and rectified. Our necessary dependence
upon processing systems to record and process transactions and our large transaction volume may further increase the risk that employee
errors, tampering or manipulation of those systems will result in losses that are difficult to detect. Employee error or misconduct could
also subject us to financial claims. If our internal control systems fail to prevent or detect an occurrence, or if any resulting loss
is not insured, exceeds applicable insurance limits or if insurance coverage is denied or not available, it could have a material adverse
effect on our business, financial condition and results of operations.

 Factoring products
offered by the Bank's Integra factoring division may expose us to an increased risk of fraud.

 We
rely on the structural features embedded in the factoring products offered by the Bank's Integra Division to mitigate the credit
risk associated with such products. With respect to our factoring products, we purchase the underlying invoices of our customers and become
the direct payee under such invoices, thus transferring the credit risk in such transactions from our customers to the underlying account
debtors on such invoices. In the event one or more of our customers fraudulently represents the existence or validity of an invoice we
purchase in the case of a factoring transaction, we may advance more funds to such customer than we otherwise would and lose the benefit
of the structural protections of our products with respect to such advances. In such event we could be exposed to material additional
losses with respect to such factoring products. Although we believe we have controls in place to monitor and detect fraud with respect
to our factoring products, there is no guarantee such controls will be effective. Losses from such fraudulent activity could have a material
impact on our business, financial condition and results of operations.

 We rely on client and counterparty information,
which subjects us to risks if that information is not accurate or is incomplete.

 When deciding whether to extend
credit or enter into other transactions with clients or counterparties, we may rely on information provided by or on behalf of those clients
and counterparties, including audited financial statements and other financial information. We may also rely on representations made by
clients and counterparties that the information they provide is accurate and complete. We conduct appropriate due diligence on such client
information and, where practical and economical, we engage valuation and other experts or sources of information to assist with assessing
collateral and other client risks. Our financial results could be adversely affected if the financial statements, collateral value or
other financial information provided by clients or counterparties are incorrect.

 Climate change and government action and societal responses
may materially affect the Company's business and results of operations.

 Climate change can increase
the likelihood of the occurrence and severity of natural disasters and can also result in longer-term shifts in climate patterns such
as extreme heat, sea level rise, more frequent and prolonged drought, stronger and more frequent storms and other instances of extreme
weather. Such significant climate change effects may negatively impact the Company's geographic markets, disrupting the operations
of the Company, our customers or third parties on which we rely. Damages to real estate underlying mortgage loans or real estate collateral,
declines in economic conditions in geographic markets in which the Company's customers operate and increased premiums for and reduced
availability of insurance may impact our customers' ability to repay loans or maintain deposits due to climate change effects, which
could increase our delinquency rates and average credit loss

 Moreover, as the effects
of climate change continue to create a level of concern for the state of the global environment, companies are facing increasing
scrutiny from customers, regulators, investors and other stakeholders related to their environmental, social and governance ("ESG")
practices and disclosure. New government regulations could result in more stringent forms of ESG oversight and reporting and diligence
and disclosure requirements. Increased ESG related compliance costs, in turn, could result in increases to our overall operational costs.
Conversely, there has been increasing anti-ESG sentiment in the U.S., which has led and is likely to continue to lead to new anti-ESG
policies and legislative and regulatory requirements discouraging or preventing ESG-related initiatives. As a result, we may face heightened
and potentially conflicting regulatory and legal requirements, as well as reputational scrutiny. Failure to adapt to or comply with regulatory
requirements or investor or stakeholder expectations and standards, including with respect to the Company's involvement in certain
industries or projects associated with causing or exacerbating climate change, may negatively affect the Company's reputation and
commercial relationships, which could adversely affect our business.

 A natural disaster could harm our business.

 We have clients across the
United States, but concentrations in California (subject to earthquakes and wildfires), Florida (hurricanes) and Texas (hurricanes, tornadoes,
wildfires and flooding). The nature and level of natural disasters cannot be predicted. These natural disasters could harm our operations
through interference with communications, including the interruption or loss of our computer systems, which could prevent or impede us
from gathering deposits, originating loans and processing and controlling our flow of business, as well as through the destruction of
facilities and our operational, financial and management information systems. Additionally, natural disasters could negatively impact
the values of collateral securing our borrowers' loans and interrupt our borrowers' abilities to conduct their business in
a manner to support their debt obligations, either of which could result in losses and increased provisions for credit losses for us.

 The costs and effects of litigation, investigations
or similar matters, or adverse facts and developments related thereto, could materially affect our business, operating results and financial
condition.

 We may be involved from time
to time in a variety of litigation, investigations or similar matters arising out of our business. It is inherently difficult to assess
the outcome of these matters, and we may not prevail in proceedings or litigation. Our insurance may not cover all claims that may be
asserted against us and indemnification rights to which we are entitled may not be honored, and any claims asserted against us, regardless
of merit or eventual outcome, may harm our reputation. Should the ultimate judgments or settlements in any litigation or investigation
significantly exceed our insurance coverage, they could have a material adverse effect on our business, financial condition and results
of operations. In addition, premiums for insurance covering the financial and banking sectors are rising. We may not be able to obtain
appropriate types or levels of insurance in the future, nor may we be able to obtain adequate replacement policies with acceptable terms
or at historic rates, if at all.

 The Company is subject to environmental
risks associated with owning real estate or collateral.

 The cost of cleaning up or
paying damages and penalties associated with environmental problems could increase the Company's operating expenses and result in
a decline in the underlying collateral. When a borrower defaults on a loan secured by real property, the Company may purchase the property
in foreclosure or accept a deed to the property surrendered by the borrower. The Company may also take over the management of commercial
properties whose owners have defaulted on loans. The Company also owns and leases premises where banking and other facilities are located.
While the Company's lending, foreclosure and facilities policies and guidelines are intended to exclude properties with an unreasonable
risk of contamination, hazardous substances could exist on some of the properties that the Company may own, acquire, manage or occupy.
Environmental laws could force the Company to clean up the properties at the Company's expense. It may cost much more to clean a
property than the property is worth and it may be difficult or impossible to sell contaminated properties. The Company could also be liable
for pollution generated by a borrower's operations if the Company takes a role in managing those operations after a default.

 Risks Related to Our Regulatory Environment

 We are subject to extensive government regulation
and supervision, which could constrain our growth and profitability.

 We are subject to extensive
regulation, supervision and legal requirements that govern almost all aspects of our operations. These laws and regulations are not intended
to protect our shareholders. Rather, these laws and regulations are intended to protect customers, depositors, the DIF and the overall
financial stability of the banking system in the United States. These laws and regulations, among other matters, prescribe minimum capital
requirements, impose limitations on the business activities in which we can engage, limit the dividend or distributions that the Bank
can pay to us, restrict the ability of institutions to guarantee any debt we may issue and impose certain specific accounting requirements
on us that may be more restrictive and may result in greater or earlier charges to earnings or reductions in our capital than generally
accepted accounting principles would require. Compliance with laws and regulations can be difficult and costly, and changes to laws and
regulations often impose additional compliance costs. Our failure to comply with these laws and regulations, even if the failure follows
good faith effort or reflects a difference in interpretation, could subject us to restrictions on our business activities, fines and other
penalties, any of which could adversely affect our results of operations, capital base and the price of our securities. Further, any new
laws, rules and regulations could make compliance more difficult or expensive or otherwise adversely affect our business, financial condition
and results of operations. The banking industry remains heavily regulated. Compliance with such regulations may increase our costs and
limit our ability to pursue business opportunities.

 See "Supervision and
Regulation" for additional information regarding the supervisory and regulatory issues facing the Company.

 We are subject to stringent capital requirements
that may limit our operations and potential growth.

 We are subject to various regulatory
capital requirements on a consolidated basis, and at both the Bank and Sanders Morris separately. Failure to meet minimum capital requirements
can initiate certain mandatory, and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material
effect on our 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 our assets, liabilities and certain off-balance sheet commitments
as calculated under these regulations. The failure to meet the established capital requirements under the prompt corrective action framework
could result in one or more of our regulators placing limitations or conditions on our activities, including our growth initiatives, or
restricting the commencement of new activities, and such failure could subject us to a variety of enforcement remedies available to the
federal regulatory authorities, including limiting our ability to pay dividends, issuing a directive to increase our capital and terminating
the Bank's FDIC deposit insurance. FDIC deposit insurance is critical to the continued operation of the Bank. In addition, an inability
to meet the capital requirements under the Basel III regulatory capital reforms, would prevent us from being able to pay certain discretionary
bonuses to our executive officers and dividends to our shareholders.

 Many factors affect the calculation
of our risk-based assets and our ability to maintain the level of capital required to achieve acceptable capital ratios. For example,
changes in risk weightings of assets relative to capital and other factors may combine to increase the amount of risk-weighted assets
in the Tier 1 risk-based capital ratio and the total risk-based capital ratio. Any increases in our risk-weighted assets will require
a corresponding increase in our capital to maintain the applicable ratios. In addition, recognized credit losses in excess of amounts
reserved for such losses, loan impairments and other factors will decrease our capital, thereby reducing the level of the applicable ratios.

 Our failure to remain well-capitalized
for bank regulatory purposes, either under the Basel III regime or the community bank leverage ratio framework, could affect client and
investor confidence, our ability to grow, our costs of funds, our ability to pay competitive rates to attract and retain deposits, FDIC
insurance costs, our ability to pay dividends on preferred and common stock, our ability to make acquisitions, and our business, results
of operations and financial condition. In addition, if we cease to be a well-capitalized institution for bank regulatory purposes, the
interest rates that we pay on deposits and our ability to accept brokered deposits may be restricted.

 Federal banking agencies periodically conduct
examinations of our banking business, including compliance with laws and regulations, and our failure to comply with any supervisory actions
which we are, or may become, subject to as a result of such examinations may adversely affect us.

 The OCC, the Federal Reserve
and the FDIC may conduct examinations of our business, including for compliance with applicable laws and regulations. As a result of an
examination, regulatory agencies may determine that the financial condition, capital resources, asset quality, asset concentrations, earnings
prospects, management, liquidity, sensitivity to market risk, or other aspects of any of our operations are unsatisfactory, or that we
or our management are in violation of any law, regulation or guideline in effect from time to time. Regulatory agencies may take a number
of different remedial actions, including the power to enjoin "unsafe or unsound" practices, to require affirmative actions
to correct any conditions resulting from any violation or practice, to issue an administrative order that can be judicially enforced,
to direct an increase in our capital, to restrict our growth, to change the composition of our concentrations in portfolio or balance
sheet assets, to assess civil monetary penalties against officers or directors, to remove officers and directors and, if such conditions
cannot be corrected or there is an imminent risk of loss to depositors, the FDIC may terminate our deposit insurance. A regulatory action
against us could have a material adverse effect on our business, results of operations, financial condition and prospects.

 We are subject to numerous laws designed
to protect consumers, including the CRA and fair lending laws, and failure to comply with these laws could lead to a wide variety of sanctions.

 The CRA, the Equal Credit Opportunity
Act, the Fair Housing Act and other fair lending laws and regulations impose nondiscriminatory lending requirements on financial institutions.
The U.S. Department of Justice, the CFPB, and other federal agencies are responsible for enforcing these laws and regulations. A successful
regulatory challenge to an institution's performance under the CRA or fair lending laws and regulations could result in a wide variety
of sanctions, including damages and civil money penalties, injunctive relief, restrictions on mergers and acquisitions activity, restrictions
on expansion, and restrictions on entering new business lines. Private parties may also have the ability to challenge an institution's
performance under fair lending laws in private class action litigation. Any such actions could have a material adverse effect on our business,
financial condition, results of operations and prospects.

 We face a risk of noncompliance and enforcement
action with the BSA and other anti-money laundering statutes and regulations.

 The BSA, as amended by the
USA PATRIOT Act, and as further amended by the National Defense Authorization Act, and other laws and regulations require financial institutions,
among other duties, to institute and maintain effective anti-money laundering programs and file suspicious activity and currency transaction
reports as appropriate. FinCEN, established by the U.S. Department of the Treasury to administer the BSA, is authorized to impose significant
civil money penalties for violations of those requirements and has recently engaged in coordinated enforcement efforts with the individual
federal banking regulators, as well as the U.S. Department of Justice, Drug Enforcement Administration and Internal Revenue Service (the
"IRS"). There is also increased scrutiny of compliance with the sanctions rules enforced by OFAC. If our policies, procedures
and systems are deemed deficient or the policies, procedures and systems of any financial institutions that we may acquire in the future
are deemed deficient, we could be subject to liability, including fines and regulatory actions such as restrictions on our ability to
pay dividends and the necessity to obtain regulatory approvals to proceed with certain aspects of our business plan, which could negatively
impact our business, financial condition and results of operations. Although we have not been subject to fines or other penalties, or
suffered business or reputational harm, as a result of money laundering activities, failure to maintain and implement adequate programs
to combat money laundering and terrorist financing could also have serious reputational consequences for us. Any of these results could
materially and adversely affect our business, financial condition, results of operations and prospects.

 Additional regulations and rule making impacting
the transportation industry may have a disproportionate impact on the small-to-mid-sized trucking businesses that comprise our primary
transportation factoring clients and adversely affect the factoring business conducted by the Bank's Integra factoring division.

 Our primary transportation
factoring clients are small-sized owner-operators and trucking fleets. Recently implemented federal regulations, and regulations proposed
to be implemented in the future, may significantly increase the costs and expenses or reduce the ability to generate revenue associated
with owning or operating a trucking fleet. These regulations include rule making proposed by the Federal Motor Carrier Safety Administration
of the United States Department of Transportation ("FMCSA") under the Compliance, Safety, Accountability ("CSA")
initiative, maximum hours of service limitations imposed by the FMCSA, electronic log requirements, and regulations proposed by the federal
Food and Drug Administration ("FDA") requiring increased labeling and monitoring by carriers of any commodity transported
that is regulated by the FDA. The costs and burdens of compliance with these requirements will have a disproportionate impact on the small-to-mid-sized
trucking businesses that comprise our client base and may force some or all of these businesses out of the market. Such an occurrence
could impact the returns we realize on the factoring activity conducted by the Bank's Integra Division or result in a decrease
in the overall amount of factoring activity conducted by the Bank's Integra Division and could have an adverse effect on our
business, financial condition and results of operations.

 Sanders Morris and Tectonic Advisors are
subject to substantial regulation. If we fail to comply with applicable requirements, our business will be adversely affected.

 Tectonic Advisors and Sanders
Morris are subject to extensive regulation under both federal and state laws. Sanders Morris is registered as a broker-dealer with the
SEC and FINRA; Tectonic Advisors and Sanders Morris are registered with the SEC as investment advisors. The SEC is the federal agency
responsible for the administration of federal securities laws. In addition, SROs, principally FINRA and the securities exchanges, are
actively involved in the regulation of broker-dealers. Tectonic Advisors and Sanders Morris are also subject to regulation by state securities
commissions in those states in which we do business. The principal purpose of regulation and discipline of broker-dealers is the protection
of clients and the securities markets rather than protection of creditors and shareholders of broker-dealers. Broker-dealers are subject
to regulations that cover all aspects of the securities business, including sales methods, trade practices among broker-dealers, use and
safekeeping of clients' funds and securities, capital structure of securities firms, record-keeping, and the conduct of directors,
officers, and employees.

 As investment advisors, Sanders
Morris and Tectonic Advisors are subject to the Advisers Act. The Advisers Act imposes numerous obligations on registered investment advisers,
including fiduciary, record keeping, operational and disclosure obligations. Moreover, the Advisers Act grants broad administrative powers
to regulatory agencies such as the SEC to regulate investment advisory businesses. Sanders Morris and Tectonic Advisors are also subject
to the provisions and regulations of ERISA to the extent that they act as a "fiduciary" under ERISA with respect to certain
of their clients. ERISA and the applicable provisions of the federal tax laws impose a number of duties on persons who are fiduciaries
under ERISA and prohibit certain transactions involving the assets of each ERISA plan which is a client, as well as certain transactions
by the fiduciaries (and certain other related parties) to such plans. Additionally, like other investment advisory and broker-dealer companies,
Sanders Morris and Tectonic Advisors face the risks of lawsuits by clients. The outcome of regulatory proceedings and lawsuits is uncertain
and difficult to predict. An adverse resolution of any regulatory proceeding or lawsuit could result in substantial costs or reputational
harm to Sanders Morris or Tectonic Advisors and, therefore, could have an adverse effect on the ability to retain key relationship and
wealth managers, and to retain existing clients or attract new clients, any of which could have a material adverse effect on our business,
financial condition, results of operations and prospects.

 Sanders Morris is subject to
periodic examinations by the SEC and FINRA and Tectonic Advisors by the SEC. In these examinations, personnel from FINRA or the SEC (as
applicable) make a visit to the office(s) of Sanders Morris or Tectonic Advisors and review the files, business practices and personnel.
These reviews are often based on a pre-examination checklist or areas of interest, often based on the risks associated with Sanders Morris'
or Tectonic Advisors' business. The examiners consult with their home office and, at the end of the examination, often issue a letter
setting forth areas requiring attention. However, under certain circumstances, a poor examination or a violation brought to the SEC's
or FINRA's attention can result in an administrative proceeding.

 The SEC, FINRA, and state securities commissions
may conduct administrative proceedings that can result in:

 censure, fines, or civil penalties;

 issuance of cease-and-desist orders;

 deregistration, suspension, or expulsion of a broker-dealer or investment advisor;

 suspension or disqualification of the broker-dealer's officers or employees;

 prohibition against engaging in certain lines of business; and

 other adverse consequences.

 In the last five years, neither
Tectonic Advisors nor Sanders Morris has received what either believes is a poor examination by any of their federal or state regulators,
been subject to any material administrative proceeding or been found to be in material violation by their federal or state regulators
or experienced an imposition of any material penalties, censure, fines or cease-and-desist orders by such regulators. The imposition of
any penalties or orders on us could have a material adverse effect on our business, financial condition, and results of operations. The
investment banking and brokerage industries have recently come under scrutiny at both the state and federal levels, and the cost of compliance
and the potential liability for noncompliance has increased as a result.

 Our ability to comply with
laws and regulations relating to our financial services businesses depends in large part upon maintaining a system to monitor compliance
and our ability to attract and retain qualified compliance personnel. Although we believe we are in material compliance with all applicable
laws and regulations, we may not be able to comply in the future. Any noncompliance could have a material adverse effect on our business,
financial condition, and results of operations.

 Regulations relating to privacy, information
security and data protection could increase our costs, affect or limit how we collect and use personal information and adversely affect
our business opportunities.

 We are subject to various privacy,
information security and data protection laws, including requirements concerning security breach notification, and we could be negatively
impacted by these laws. For example, our business is subject to the GLBA, which, among other things: (i) imposes certain limitations on
our ability to share non-public personal information about our clients with non-affiliated third parties; (ii) requires that we provide
certain disclosures to clients about our information collection, sharing and security practices and afford clients the right to "opt
out" of any information sharing by us with non-affiliated third parties (with certain exceptions); and (iii) requires we develop,
implement and maintain a written comprehensive information security program containing safeguards appropriate based on our size and complexity,
the nature and scope of our activities, and the sensitivity of client information we process, as well as plans for responding to data
security breaches. Various state and federal banking regulators and states and foreign countries have also enacted data security breach
notification requirements with varying levels of individual, consumer, regulatory or law enforcement notification in certain circumstances
in the event of a security breach. Moreover, legislators and regulators in the United States and other countries are increasingly adopting
or revising privacy, information security and data protection laws that potentially could have a significant impact on our current and
planned privacy, data protection and information security-related practices, our collection, use, sharing, retention and safeguarding
of consumer or employee information, and some of our current or planned business activities. This could also increase our costs of compliance
and business operations and could reduce income from certain business initiatives. This includes increased privacy-related enforcement
activity at the federal level, by the Federal Trade Commission, as well as at the state level, such as with regard to mobile applications.

 Compliance with current or
future privacy, data protection and information security laws (including those regarding security breach notification) affecting client
or employee data to which we are subject could result in higher compliance and technology costs and could restrict our ability to provide
certain products and services, which could have a material adverse effect on our business, financial condition or results of operations.
Our failure to comply with privacy, data protection and information security laws could result in potentially significant regulatory or
governmental investigations or actions, litigation, fines, sanctions and damage to our reputation, which could have a material adverse
effect on our business, financial condition or results of operations.

 We can be subject to legal and regulatory
proceedings, investigations and inquiries related to conduct risk.

 U.S. authorities have been
increasingly focused on "conduct risk," a term that is used to describe the risks associated with behavior by employees and
agents, including third-party vendors, that could harm clients, consumers, investors or the markets, such as failures to safeguard consumers'
and investors' personal information, failures to identify and manage conflicts of interest and improperly creating, selling and
marketing products and services. In addition to increasing compliance risks, this focus on conduct risk could lead to more regulatory
or other enforcement proceedings and litigation, including for practices which historically were acceptable but are now receiving greater
scrutiny. Further, while we take numerous steps to prevent and detect conduct by employees and agents that could potentially harm clients,
investors or the markets, such behavior may not always be deterred or prevented. Banking regulators have also focused on the overall culture
of financial services firms. In addition to regulatory restrictions or structural changes that could result from perceived deficiencies
in our culture, such focus could also lead to additional regulatory proceedings. Although we have not been subject to any material conduct
risk investigations or inquiries in the past eight years, the occurrence of such proceedings, investigations or inquiries could damage
our reputation, disrupt our business, increase our costs and causes losses in the future.

 Risks Related to an Investment in the Series
B Preferred Stock

 The Series B preferred stock is an equity
security and is subordinate to our existing and future indebtedness, which could adversely impact our ability to pay dividends on the
Series B preferred stock.

 The shares of Series B preferred
stock are equity interests and do not constitute indebtedness of ours. This means that the Series B preferred stock ranks junior to all
our existing and future indebtedness and our other non-equity claims with respect to assets available to satisfy claims against us, including
claims in the event of our liquidation.

 As of December 31, 2024, our
total liabilities were approximately $750.0 million, and we may incur additional indebtedness in the future to increase our capital resources
or fund strategic acquisitions or other business efforts. Additionally, if our capital ratios or the capital ratios of the Bank fall below
minimum ratios required by the Federal Reserve, we or the Bank could be required to raise additional capital by making additional offerings
of debt securities, including senior or subordinated notes, or other applicable securities that could rank senior to the Series B preferred
stock. The Series B preferred stock places no restrictions on our business or operations or on our ability to incur indebtedness or engage
in any transactions, subject only to the limited voting rights referred to below. In addition, dividends on the Series B preferred stock
are payable only when, as, and if declared by our board of directors out of assets legally available therefor. In the event of our liquidation,
dissolution or winding-up of our affairs, our assets will be available to pay obligations on the Series B preferred stock only after all
of our indebtedness and other liabilities have been paid. Accordingly, our existing and future indebtedness may restrict the payment of
dividends on the Series B preferred stock. Further, if we are unable to or do not pay dividends on the Series B preferred stock, the market
price of the Series B preferred stock may decline.

 The Series B preferred stock may be junior
in rights and preferences to our future preferred stock.

may rank junior to preferred stock issued in the future that by its terms is expressly senior in rights and preferences to the Series
B preferred stock, although the affirmative vote or consent of the holders of at least 66 2 3 %
of all outstanding shares of the Series B preferred stock is required to authorize or issue any shares of stock senior in rights and preferences
to the Series B preferred stock. The terms of any future preferred stock expressly senior to the Series B preferred stock may restrict
dividend payments on the Series B preferred stock.

 Additional issuances of preferred stock
or securities convertible into preferred stock may further dilute existing holders of the Series B preferred stock.

 We may determine that it is
advisable, or we may encounter circumstances where we determine it is necessary, to issue additional shares of preferred stock, securities
convertible into, exchangeable for or that represent an interest in preferred stock, or preferred stock-equivalent securities to fund
strategic initiatives or other business needs or to build additional capital. Our board of directors is authorized to cause us to issue
one or more classes or series of preferred stock from time to time without any action on the part of the shareholders, including issuing
additional shares of Series B preferred stock. Our board of directors also has the power, without shareholder approval, to set the terms
of any such classes or series of preferred stock that may be issued, including voting rights, dividend rights and preferences over the
Series B preferred stock with respect to dividends or upon our dissolution, winding-up and liquidation and other terms.

 Although the affirmative vote
or consent of the holders of at least 66 2 3 % of all outstanding shares of the Series
B preferred stock is required to authorize or issue any shares of capital stock senior in rights and preferences to the Series B preferred
stock, if we issue preferred stock in the future with voting rights that dilute the voting power of the Series B preferred stock, the
rights of holders of the Series B preferred stock or the market price of the Series B preferred stock could be adversely affected. The
market price of the Series B preferred stock could decline as a result of these other offerings, as well as other sales of a large block
of Series B preferred stock or similar securities in the market thereafter, or the perception that such sales could occur. Holders of
the Series B preferred stock are not entitled to preemptive rights or other protections against dilution.

 Payment of dividends by the Company on its
common stock, corporate spin-offs or other corporate actions may diminish the amount of capital and/or earning power of the Company to
pay dividends on, or redeem, its Series B preferred stock.

 Subject to regulatory requirements
and the terms of the Series B preferred stock, the Company may: (a) and currently intends to, pay dividends on its common stock and any
such payment reduces the capital of the Company available to the Series B preferred stock and (b) undertake certain corporate actions,
including, without limitation, spinning off subsidiaries and/or businesses to its stockholders, selling businesses to third parties, (c)
making acquisitions using capital from the Company and (d) borrowing and/or investing its capital to make acquisitions and/or for other
purposes (hiring key personnel, etc.). In each of these cases, the holders of the Series B preferred stock may not have the ability to
block certain of such actions and, in such case, the capital base and/or earnings of the Company may be negatively impacted. In such case,
the ability of the Company to pay dividends on and/or redeem the Series B preferred stock may be negatively impacted.

 Dividends on the Series B preferred stock
are discretionary and non-cumulative, and our future ability to pay dividends is subject to restrictions.

 Although we intend to continue
to pay dividends on the Series B preferred stock, dividends on the Series B preferred stock are discretionary and are not mandatory or
cumulative. If our board of directors does not declare a dividend on the Series B preferred stock or if our board of directors authorizes
and we declare less than a full dividend in respect of a Dividend Period, the holders of the Series B preferred stock will have no right
to receive any dividend or a full dividend, as the case may be, for the Dividend Period, and we will have no obligation to pay a partial
or full dividends for that Dividend Period at any time, whether or not our board of directors declares a dividend on the Series B preferred
stock or any other class or series of our capital stock for any future Dividend Period. Any declaration and payment of dividends on the
Series B preferred stock depends upon, among other factors, our earnings and financial condition, liquidity and capital requirements,
the general economic and regulatory climate, our ability to service any equity or debt obligations senior to the Series B preferred stock,
dividend restrictions contained in any credit agreements and other factors deemed relevant by our board of directors.

 The Bank and Sanders Morris
are subject to capital ratios. In addition, the Company is subject to consolidated capital ratios, which take into account its underlying
subsidiaries' capital position and the capital position of the Company. To the extent that Sanders Morris and/or the Bank suffer
losses (including, without limitation, credit losses at the Bank), they may fail to meet their minimum capital requirements necessary
for them to pay dividends to the Company, which would impact the Company's ability to pay dividends on the preferred stock. In
addition, to the extent that the Company and/or its underlying subsidiaries (including the Bank) suffer losses that cause the Company
to be less than "well capitalized", then the Company, even if it has cash available to it, would not be permitted to pay dividends
on the preferred stock without regulatory approval, which may not be granted. Accordingly, any losses suffered by the Company or
any of its subsidiaries, particularly credit losses at the Bank, might have a material adverse effect on the Company, including on the
ability of the Company to pay dividends on the preferred stock.

 The Federal Reserve has indicated
that bank holding companies should carefully review their dividend policy in relation to the organization's overall asset quality,
current and prospective earnings and level, composition and quality of capital. The guidance provides that we inform and consult with
the Federal Reserve prior to declaring and paying a dividend that exceeds earnings for the period for which the dividend is being paid
or that could result in an adverse change to our capital structure, including interest on any debt obligations.

 In addition, the Company
is a separate and distinct legal entity from its subsidiaries. It receives substantially all of its revenue from dividends paid by or
distributions made from its subsidiaries. These dividends and distributions are the principal source of funds to pay dividends on our
preferred stock and common stock and interest and principal on our debt. Various federal and/or state laws and regulations limit the amount
of dividends or distributions that our bank and nonbank subsidiaries may pay to the Company. In the event our subsidiaries are unable
to pay dividends or make distributions to the Company, the Company may not be able to service debt or pay dividends on the Series B preferred
stock. The inability to receive dividends and distributions from our subsidiaries could have a material adverse effect on the Company's
business, financial condition, results of operations and liquidity.

 Dividends on the Series B preferred stock
will vary and any dividends declared may be less than the initial fixed annual rate in effect prior to May 15, 2024.

 As described in further detail
in the description of the Series B preferred stock attached to this Form 10-K, commencing on May 15, 2024, the annual dividend rate on
the Series B preferred stock equals three-month CME Term SOFR, plus a spread of 672 basis points per annum. Notwithstanding the foregoing,
in the event that three-month CME Term SOFR is less than zero, three-month CME Term SOFR shall be deemed to be zero. Therefore, any dividends
declared on or after May 15, 2024 will vary from period to period and could be more or less than the fixed rate for the initial period.
We have no control over a number of factors that may affect market interest rates, including geopolitical conditions and economic, financial,
political, regulatory, judicial or other events that affect the markets generally and that are important in determining the existence,
magnitude and longevity of market rate risk.

 The Series B preferred stock may be redeemed
at our option, and you may not be able to reinvest the redemption price you receive in a similar security.

 Beginning on May 15, 2024 and
subject to the approval of the Federal Reserve (if then required), at our option, we may redeem the Series B preferred stock at any time,
either in whole or in part, for cash, on any dividend payment date. We may also redeem the Series B preferred stock at our option, subject
to the approval of the Federal Reserve (if then required), at any time, in whole, but not in part, within 90 days following the occurrence
of a Regulatory Capital Treatment Event (as defined in the description of the Series B preferred stock attached to this Form 10-K), such
as a proposed change in law or regulation with respect to whether the Series B preferred stock qualifies as an "additional Tier
1 capital" instrument.

 Although the terms of the Series
B preferred stock were established at issuance to satisfy the criteria for "additional Tier 1 capital" instruments consistent
with Basel III as set forth in the joint final rulemaking issued in July 2013 by the Federal Reserve, the FDIC and the OCC, it is possible
that the Series B preferred stock may not satisfy the criteria set forth in future rulemakings or interpretations. As a result, a Regulatory
Capital Treatment Event could occur whereby we would have the right, subject to prior approval of the Federal Reserve (if then required),
to redeem the Series B preferred stock in accordance with its terms prior to May 15, 2024, or any date thereafter.

 If we redeem the Series B preferred
stock for any reason, you may not be able to reinvest the redemption proceeds you receive in a similar security or earn similar rate of
return on any investment. See the description of the Series B preferred stock attached to this Form 10-K for more information on redemption
of the Series B preferred stock.

 Investors should not expect us to redeem
the Series B preferred stock on the date it becomes redeemable or on any particular date after it becomes redeemable.

is a perpetual equity security. This means that it has no maturity or mandatory redemption date and is not redeemable at the option of
the holders of the Series B preferred stock. The Series B preferred stock may be redeemed by us at our option, either in whole or in part,
for cash, on any dividend payment date, or in whole, but not in part, at any time within 90 days following a Regulatory Capital Treatment
Event. Any decision we may make at any time to propose a redemption of the Series B preferred stock will depend upon, among other things,
our evaluation of our capital position, the composition of our shareholders' equity and general market conditions at that time.

 In addition, our right to redeem
the Series B preferred stock is subject to limitations. Under the Federal Reserve's current risk-based capital guidelines applicable
to bank holding companies, any redemption of the Series B preferred stock is subject to prior approval of the Federal Reserve. We cannot
assure you that the Federal Reserve will approve any redemption of the Series B preferred stock that we may propose. There also can be
no assurance that, if we propose to redeem the Series B preferred stock without replacing such capital with common equity Tier 1 capital
or additional Tier 1 capital instruments, the Federal Reserve will authorize such redemption. We understand that the factors that the
Federal Reserve will consider in evaluating a proposed redemption, or a request that we be permitted to redeem the Series B preferred
stock without replacing it with common equity Tier 1 capital or additional Tier 1 capital instruments, include its evaluation of the overall
level and quality of our capital components, considered in light of our risk exposures, earnings and growth strategy, and other supervisory
considerations, although the Federal Reserve may change these factors at any time.

 Holders of the Series B preferred stock
have limited voting rights.

 Holders of the Series B preferred
stock have no voting rights with respect to matters that generally require the approval of our common shareholders. Holders of the Series
B preferred stock have voting rights only with respect to (i) authorizing, creating or issuing any capital stock ranking senior to the
Series B preferred stock as to dividends and rights (including redemption payments) upon liquidation, dissolution or winding up, or reclassifying
any authorized capital stock into any such shares of such capital stock or issuing any obligation or security convertible into or evidencing
the right to purchase any such shares of capital stock, (ii) amending, altering or repealing any provision of our certificate of formation
or the designation, including by merger, consolidation or otherwise, so as to adversely affect the rights, powers or preferences of the
Series B preferred stock, (iii) the election of two directors, if dividends have not been declared or paid in an aggregate amount equal
to the equivalent of at least six or more quarterly Dividend Periods, whether or not consecutive, (voting as a class with holders of shares
of any other series of preferred stock ranking equally as to the payment of dividends and having equivalent voting rights), and (iv) as
otherwise required by applicable law. See the description of the Series B preferred stock attached to this Form 10-K for more information.

 An active, liquid market for the Series
B preferred stock may not be sustained, which may impair your ability to sell your shares.

is currently traded on the Nasdaq Global Market, but an active, liquid trading market for the Series B preferred stock may not exist or,
if it exists, may not be sustained over time. A public trading market having the desired characteristics of depth, liquidity and orderliness
depends upon the presence in the marketplace and independent decisions of willing buyers and sellers of the Series B preferred stock,
over which we have no control. Without an active, liquid trading market for the Series B preferred stock, shareholders may not be able
to sell their shares at the volume, prices and times desired. Moreover, the lack of an established market could materially and adversely
affect the value of the Series B preferred stock. The market price of the Series B preferred stock could decline significantly due to
failure to pay dividends, actual or anticipated issuances or sales of the Series B preferred stock or other securities in the future.

 The market price of the Series B preferred
stock may become subject to substantial fluctuations, which may make it difficult for you to sell your shares at the volume, prices and
times desired.

 The market price of the Series
B preferred stock may become highly volatile. There are many factors that may affect the market price and trading volume of the Series
B preferred stock, including, without limitation:

 actual or anticipated fluctuations in our operating results, financial condition or asset quality;

 changes in economic or business conditions;

 the effects of, and changes in, trade, monetary and fiscal policies, including the interest rate policies of the Federal Reserve;

 recommendations by securities analysts;

 operating and stock price performance of companies that investors deemed comparable to us;

 additional or anticipated sales of the Series B preferred stock or other securities by us or our existing shareholders;

 additions or departures of key personnel;

 perceptions in the marketplace regarding our competitors or us;

 significant acquisitions or business combinations, strategic partnerships, joint ventures or capital commitments by or involving our
competitors or us;

 other economic, competitive, governmental, regulatory and technological factors affecting our operations, pricing, products and services;
and

 other news, announcements or disclosures (whether by us or others) related to us, our competitors, our primary markets or the financial
services industry.

 The stock market and, in particular,
the market for financial institution stocks have experienced substantial fluctuations in recent years, which in many cases have been unrelated
to the operating performance and prospects of particular companies. In addition, significant fluctuations in the trading volume in the
Series B preferred stock may cause significant price variations to occur. Increased market volatility may materially and adversely affect
the market price of the Series B preferred stock, which could make it difficult to sell your shares at the volume, prices and times desired.

 Securities analysts may not continue coverage
on us, or may publish an unfavorable report.

 The trading market for the
Series B preferred stock depends, in part, on the research and reports that securities analysts publish about us and our business. We
do not have any control over these securities analysts. If one or more of these analysts cease to cover us or fail to publish regular
reports on us, we could lose visibility in the financial markets, which could cause the price or trading volume of the Series B preferred
stock to decline. If we are the subject of an unfavorable report, the price of the Series B preferred stock may decline.

 The Series B preferred stock is not rated.

is not rated by any rating agency. Unrated securities usually trade at a discount to similar, rated securities. As a result, there is
a risk that the Series B preferred stock may trade at a price that is lower than they might otherwise trade if rated by a rating agency.
It is possible, however, that one or more rating agencies might independently determine to assign a rating to the Series B preferred stock.
In addition, we may elect to issue other securities for which we may seek to obtain a rating. If any ratings are assigned to the Series
B preferred stock in the future or if we issue other securities with a rating, such ratings, if they are lower than market expectations
or are subsequently lowered or withdrawn, could adversely affect the market for or the market value of the Series B preferred stock.

 Our management and board of directors have
significant control over our business.

 As of March 27, 2025, our directors,
executive officers and affiliates (including partners of Cain Watters) beneficially owned an aggregate of 5,111,293 shares, or approximately
71.21% of our outstanding shares of common stock. Consequently, our management and board of directors may be able to significantly affect
our affairs and policies, including the outcome of the election of directors and the potential outcome of other matters submitted to a
vote of our shareholders, such as mergers, the sale of substantially all of our assets and other extraordinary corporate matters. This
influence may also have the effect of delaying or preventing changes of control or changes in management or limiting the ability of our
other shareholders to approve transactions that they may deem to be in the best interests of our Company. The interests of these insiders
could conflict with the interests of our other shareholders, including you.

 We are a "controlled company"
within the meaning of the rules of NASDAQ, and as such, we qualify for exemptions from certain corporate governance requirements. As a
result, you may not have the same protections afforded to shareholders of companies that are subject to such requirements.

 We are a "controlled
company" under Nasdaq's corporate governance listing standards, meaning that more than 50% of the voting power for the election
of our board of directors is held by a single person, entity or group. As a controlled company, we are exempt from the obligation to comply
with certain corporate governance requirements, including the requirements:

 that a majority of our board of directors consists of "independent directors," as defined under Nasdaq rules;

 that director nominations are selected, or recommended for the board of directors' selection, by either (i) the independent directors constituting a majority of the board of directors' independent directors in a vote in which only independent directors participate, or (ii) a nominating and corporate governance committee that is composed entirely of independent directors; and

 that we have a compensation committee that is composed entirely of independent directors. We intend to avail ourselves of certain of these other exemptions for as long as we remain a "controlled company." Accordingly, our shareholders may not have the same protections afforded to shareholders of companies that are subject to all of NASDAQ's corporate governance requirements, which could make our stock less attractive to investors or otherwise harm our stock price.

 We are controlled by the majority shareholders,
whose interests may not coincide with yours and with whose decisions you may disagree.

 A. Haag Sherman, Darrell W.
Cain, Steven B. Clapp, Thomas Sanders, other members of the board, management and partners of Cain Watters, and certain other existing
shareholders (collectively, the "Majority Shareholders") currently own more than 50% of our outstanding shares of common stock.
So long as the Majority Shareholders continue to control more than 50% of our outstanding shares of common stock, they will have the ability,
if they vote in the same manner, to determine the outcome of certain matters requiring only common shareholder approval, including the
election of directors and certain amendments to our certificate of formation, bylaws and other corporate governance documents. In addition,
this concentration of ownership may delay or prevent a change in control of our Company and make some transactions more difficult or impossible
without the support of the Majority Shareholders. In any of these matters, the interests of the Majority Shareholders may differ from
or conflict with our interests as a company or the interests of other shareholders. Accordingly, the Majority Shareholders could influence
us to enter into transactions or agreements that other shareholders would not approve or make decisions with which other shareholders
may disagree.

 Our corporate organizational documents and
provisions of federal and state law to which we are subject contain certain provisions that could have an anti-takeover effect and may
delay, make more difficult or prevent an attempted acquisition that you may favor or an attempted replacement of our board of directors
or management.

 Our certificate of formation
and our bylaws (each as amended and restated) may have an anti-takeover effect and may delay, discourage or prevent an attempted acquisition
or change of control or a replacement of our incumbent board of directors or management. Our governing documents include provisions that:

 subject to the rights of the holders of the Series B preferred stock, empower our board of directors, without shareholder approval, to issue our preferred stock, the terms of which, including voting power, are to be set by our board of directors;

 eliminate cumulative voting in elections of directors;

 subject to certain exceptions, permit our board of directors to alter, amend or repeal our amended and restated bylaws or to adopt new bylaws;

 require shareholders that wish to bring business before annual or special meetings of shareholders, or to nominate candidates for election as directors at our annual meeting of shareholders, to provide timely notice of their intent in writing; and

 enable our board of directors to increase, between annual meetings, the number of persons serving as directors and to fill the vacancies created as a result of the increase by a majority vote of the directors present at a meeting of directors at which there is a quorum.

 Banking laws also impose notice,
approval, and ongoing regulatory requirements on any shareholder or other party that seeks to acquire direct or indirect "control"
of an FDIC-insured depository institution or its holding company. These laws include the BHC Act and the CIBCA. These laws could delay
or prevent an acquisition.

 Furthermore, our bylaws provide
that the state or federal courts located in Dallas County, Texas, the county in which the city of Dallas is located, will be the exclusive
forum for: (i) any actual or purported derivative action or proceeding brought on our behalf; (ii) any action asserting a claim of breach
of fiduciary duty by any of our current or former directors or officers; (iii) any action asserting a claim against us or our current
or former directors or officers arising pursuant to the TBOC, our certificate of formation, or our bylaws; or (iv) any action asserting
a claim against us or our current or former officers or directors that is governed by the internal affairs doctrine, in each case subject
to said courts having personal jurisdiction over the indispensable parties named as defendants therein. Any person purchasing or otherwise
acquiring any interest in any shares of our capital stock will be deemed to have notice of and to have consented to this provision of
our certificate of formation. The exclusive forum provision may limit a shareholder's ability to bring a claim in a judicial forum
that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits. Alternatively,
if a court were to find the exclusive forum provision to be inapplicable or unenforceable in an action, we may incur additional costs
associated with resolving such action in other jurisdictions, which could have a material adverse effect on our business, financial condition,
results of operations and growth prospects.

 The obligations associated with being a
public company require significant resources and management attention, which increase our costs of operations and may divert focus from
our business operations.

 We incur substantial legal,
accounting, administrative and other costs and expenses related to operating as a public company, and these costs will be higher because
we no longer qualify as an "emerging growth company," as defined in the Jumpstart Our
Business Startups Act (the "JOBS Act"). We are subject to the reporting requirements of the Exchange Act, which requires
that we file annual, quarterly and current reports with respect to our business and financial condition and proxy and other information
statements, and the rules and regulations implemented by the SEC, the Sarbanes-Oxley Act, the Dodd-Frank Act, the Public
Company Accounting Oversight Board ("PCAOB") and NASDAQ, each of which imposes additional reporting and other obligations
on public companies. As a public company, compliance with these reporting requirements and other SEC and NASDAQ rules make certain operating
activities more time-consuming, and we also incur significant legal, accounting, insurance and other expenses. Additionally, any failure
by us to file our periodic reports with the SEC in a timely manner could, among other things, harm our reputation, cause our investors
and potential investors to lose confidence in us, restrict trading in or reduce the market price of the Series B preferred stock, and
potentially limit our ability to access the capital markets. Furthermore, the corporate infrastructure demanded of a public company may
divert management's attention from implementing our operating strategy, which could prevent us from successfully implementing our
strategic initiatives and improving our results of operations. We incur expenses to maintain our internal control and procedures for financial
reporting and accounting systems to meet our reporting obligations as a public company. We cannot predict or estimate the amount of additional
costs we may incur in the future in order to continue to comply with these requirements, and these costs may materially increase our general
and administrative expenses over time, and such increases would reduce our profitability.

 An investment in the Series B preferred
stock is not an insured deposit and is subject to risk of loss.

is not a savings account, deposit or other obligation of any of our bank or nonbank subsidiaries and is not insured or guaranteed by the
FDIC or any other government agency. Your investment is subject to investment risk, and you must be capable of affording the loss of your
entire investment.

 Item 1B. Unresolved Staff Comments

 Not applicable.

 Item 1C. Cybersecurity.

 Cybersecurity Risk Management

 Cybersecurity is critical
to supporting our business and protecting our customers in an increasingly complex environment. We face a variety of cybersecurity threats
including attacks that are common to most industries, such as ransomware and denial-of-service, as well as attacks from advanced and highly
organized adversaries targeting financial services companies. Our information systems have from time to time experienced such attacks
despite our best efforts to prevent them. Our customers, suppliers, and other third parties also face similar cybersecurity threats, and
a cybersecurity incident impacting any party could have a material impact on our operations, performance, or operating results. None of
these threats or incidents have to date materially affected our business strategy, results of operations, or financial condition. However,
we cannot assure that any future security breaches will not occur or that any such events that have occurred or may occur in the future
will not result in material harm to our business, operations, reputation or profitability. These threats and related risks highlight the
importance of allocating resources to protect the Company and our customers. For more information on how cybersecurity risk may materially
affect the Company's business strategy, results of operations or financial condition, please refer to Item 1A, Risk Factors, of
this Form 10-K.

 The Company maintains a
formal Information Security Program that includes risk assessments regularly conducted by internal resources as well as third-party experts.
These assessments are used to evaluate potential security threats that may have a negative impact on the organization, detect potential
vulnerabilities and mitigate any identified security risks. Our program leverages industry standards and frameworks and is designed to
protect the confidentiality, integrity, and availability of our information assets and systems.

 The Information Security
Program is led by the Chief Information Security Officer ("CISO"), who reports to the Chief Executive Officer. The CISO has
oversight of the Company's risk management framework, which includes the Information Security Program. The CISO provides program
oversight and direction, including adjustments in response to changes in technology, threats, business processes, and regulatory or statutory
requirements. The CISO works collaboratively with information technology staff, operational management, counterparts at third-party vendors
and functional stakeholders to implement a program designed to protect our information systems from cybersecurity threats and promptly
respond to potential cybersecurity incidents. The CISO has over 20 years of experience in the fields of information technology and cybersecurity
and maintains multiple professional cybersecurity certifications.

 Our Information Security
Program consists of several elements including:

 Incident
 Monitoring and Response. We have 24x7 security cybersecurity monitoring, which utilizes
 both third-party cybersecurity experts and leading tools to monitor activity in our information
 systems. We also maintain an incident response plan and playbooks that define our response
 to a cybersecurity incident, including a cross-functional incident response process that
 includes key stakeholders such as senior leaders and legal, and leverages our technological
 resources and third-party service providers. Through ongoing communication with these teams,
 the CISO monitors the prevention, detection, mitigation, and remediation of cybersecurity
 incidents in real time, and reports such incidents to leadership when appropriate pursuant
 to internal guidelines governing the reporting of such events.

 Threat
 and Vulnerability Management. We maintain a threat and vulnerability management program
 that leverages multiple data sources to proactively identify, assess, and mitigate changing
 cybersecurity risks. This program incorporates vulnerability scanning and threat intelligence
 capabilities, which are in place to help safeguard information assets. We
 also share and receive threat intelligence with government agencies, the Financial Services
 Information Sharing and Analysis Center ("FS-ISAC") and cybersecurity vendors and
 leaders in the cybersecurity industry.

 Infrastructure
 and Data Protection. We have technical and organizational safeguards that are designed
 to protect our networks, systems, and data from cybersecurity threats, including: firewalls,
 intrusion prevention and detection systems, network and endpoint anti-malware protections,
 and access controls such as privileged access management. Our information security and information
 technology teams collaborate regularly to assess the security of current and future infrastructure
 changes.

 Third-Party Risk Management. We run a third-party risk management program designed to identify and manage risks, including cybersecurity risks, involving our third-party providers. This includes performing due diligence and assessment of each provider's cybersecurity posture as well as periodic re-assessments.

 Security
 Training and Awareness. We provide ongoing education and training to employees regarding
 cybersecurity threats and the role they play in helping prevent and detect these threats.
 This includes regular phishing simulations, with training provided for any failures, as well
 as periodic communications via the internal company portal concerning threats, best practices,
 and technology changes to improve security. We also work with the Company marketing department
 to periodically publish articles on our website to raise security awareness with our customers.

 While we maintain teams
that specialize in cybersecurity and information technology, we also leverage third-party experts to provide objective feedback on our
program and posture. These are accomplished via penetration tests, security posture assessments, and technology consulting. These independent
evaluations help validate existing controls, identify potential focus areas, and aid in securely deploying technology in an increasingly
complex environment.

 Our Information Security
Program is evaluated regularly by both the internal audit function as well as third-party audit firms. These audits help ensure our program
is appropriate to address the changing threat landscape and aligns to industry standards such as the National Institute of Standards and
Technology Cybersecurity Framework, as well as other legal and regulatory guidance including the Federal Financial Institutions Examination
Council Cybersecurity Assessment Tool, the Bankers Electronic Crimes Taskforce Ransomware Self-Assessment Tool, and the Gramm-Leach-Bliley
Act. Controls are reviewed for adequacy and design at least annually, and both internal and third-party audits aid in identifying areas
for continued focus, providing assurance that controls are appropriately designed and operating effectively. Additionally, we meet
regularly with examiners from the Office of the Comptroller of the Currency to review our cybersecurity program and discuss the changing
threat landscape.

 Our cybersecurity personnel
maintain current knowledge through training, obtaining professional certifications, and participation in industry groups such as FS-ISAC,
American Bankers Association, and the Texas Bankers Association. Company cybersecurity personnel expand and test their knowledge of cyber
threats and countermeasures through additional on-the-job training and periodic simulated exercises to practice their response to real-life
threats. We maintain a training budget, and personnel are encouraged to obtain formal training and industry-approved certifications as
appropriate for their roles and responsibilities.

 The Technology Committee
of our board of directors is responsible for overseeing our information security and technology programs, including management's
actions to identify, assess, mitigate, and remediate or prevent material cybersecurity issues and risks. Our Chief Information Security
Officer provides quarterly reports to the Technology Committee of our board of directors regarding the information security program and
the technology program, key enterprise cybersecurity initiatives, and other matters relating to cybersecurity processes. The Technology
Committee of our board of directors reviews and approves our information security and technology budgets and strategies at least annually.
Additionally, the Technology Committee of our board of directors reviews our cyber security risk profile on at least an annual basis.

 Item 2.
Properties.

 Our main office is located
in a two-story, approximately 33,000 square foot commercial office building located at 16200 Dallas Parkway, Dallas, Texas 75248, which
is owned by the Bank. The Bank occupies approximately 36% of the building and leases out the remainder to other tenants.

 We also lease space at: (a)
600 Travis, Houston, Texas 77002, comprising 14,402 square feet (expires in April 2026) for offices of Sanders Morris, Tectonic Advisors
and HWG, (b) 17 Cowboys Way, Suite 250, Frisco, Texas 75034, comprising 2,141 square feet (expires in January 2034) for offices of Tectonic
Advisors and HWG, (c) 5950 Sherry Lane, Suite 470, Dallas, Texas 75225, comprising 2,508 square feet, which lease expires in August 2029
for offices of Sanders Morris's Dallas branch, (d) 8900 Indian Creek Parkway, Overland Park, Kansas 66210, comprising 4,947 square
feet, which lease expires in May 2027 for offices of the Bank's Nolan division, and (e) 6300 Ridglea Place, Fort Worth, Texas 76116,
comprising 4,139 square feet, which lease expires in January 2027 for offices of the Bank's Integra Division. Management believes
that the principal terms of the leases are consistent with prevailing market terms and conditions and that these facilities are in good
condition and adequate to meet our current needs.

 Item 3. Legal
Proceedings.

 We are involved, from time
to time, as plaintiff or defendant in various legal actions arising in the normal course of our business. Based on the information presently
available, management believes that the ultimate outcome in such proceedings, in the aggregate, will not have a material adverse effect
on the financial condition or results of operations of the Company on a consolidated basis. However, changes in circumstances or additional
information could result in additional accruals or resolution of these matters in excess of established accruals, which could adversely
affect our financial condition, results of operations or cash flows, potentially materially.

 Item 4. Mine Safety
Disclosures.

 Not applicable.

 Item 5. Market
for Registrant's Common Equity and Related Shareholder Matters and Issuer Purchases of Equity Securities.

 Market Information

 There is no established public
trading market for our common stock. Our Series B preferred stock is quoted on the Nasdaq Global Market under the symbol "TECTP".

 Holders of Record

 As of March 27, 2025, we
had 91 holders of record of our common stock.

 Dividends

 Although we intend to pay
dividends on the Series B preferred stock, dividends on the Series B preferred stock are not cumulative or mandatory. If our board of
directors does not declare a dividend on the Series B preferred stock or if our board of directors authorizes and we declare less than
a full dividend in respect of any dividend period, the holders of the Series B preferred stock will have no right to receive any dividend
or a full dividend and we will have no obligation to pay a dividend or to pay full dividends for that dividend period at any time, whether
or not dividends on the Series B preferred stock or any other class or series of our preferred stock or common stock are declared for
any future dividend period.

 It
is the policy of our board of directors to reinvest earnings for such period of time as is necessary to ensure our successful operations.
During the year ended 2024, and after declaring and paying dividends on our Series B preferred stock, our board of directors declared
and paid certain quarterly dividends on our common stock, which is not registered with the SEC, and does not trade publicly. As a financial
holding company, our ability to pay cash dividends is dependent upon the ability of our bank and non-bank subsidiaries to pay cash dividends.
Future dividends will depend on our consolidated earnings, capital and regulatory requirements, financial condition, and other factors
considered relevant by our board of directors. In addition, we are subject to regulatory restrictions on our payment of dividends. For
more information regarding the Company's ability to pay dividends, please refer to the " Supervision and Regulation "
section under Item 1 of this Form 10-K.

 Securities Authorized for Issuance Under Equity
Compensation Plans

 Information
regarding stock-based compensation awards outstanding and available for future grants as of December 31, 2024, segregated between
stock-based compensation plans approved by shareholders and stock-based compensation plans not approved by shareholders, is presented
in the table below.

 Plan
 Category

securities

 to be issued

upon exercise of

 outstanding

options,

 warrants, and

rights (a)

 Weighted

average

 exercise

price of

 outstanding

options, warrants,

and rights

 (b)

securities

 remaining

available for

future issuance

 under equity

 compensation

plans

 (excluding securities

 reflected in (a))

 Equity compensation plans approved by security holders:

 2017 Equity Incentive Plan

 156,500

 $
 5.23

 365,000

 Item 6. [RESERVED]

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

 This management's
discussion and analysis of financial condition and results of operations contains forward-looking statements that involve risks and uncertainties.
Please see "Cautionary Statement Regarding Forward-Looking Statements" for a discussion of the uncertainties, risks and assumptions
associated with these statements. The following discussion and analysis of our financial condition and results of operations should be
read in conjunction with our consolidated financial statements and accompanying notes included elsewhere in this Annual Report on Form
10-K. Our actual results could differ significantly from those anticipated in these estimates and
in the forward-looking statements as a result of certain factors, including those discussed in the section of this Form 10-K captioned
"Risk Factors," and elsewhere in this Form 10-K.

 Company Overview

 We are a financial holding
company headquartered in Dallas, Texas. We provide a wide array of financial products and services including banking, trust, investment
advisory, securities brokerage, factoring, third-party administration, qualified plan recordkeeping and insurance services to individuals,
small businesses and institutions across the United States.

 We operate through four
main direct and indirect subsidiaries: (i) T Bancshares, Inc. which was incorporated under the laws of the State of Texas on December
23, 2002 to serve as the bank holding company for the Bank, (ii) Sanders Morris, a registered broker-dealer with FINRA, and registered
investment advisor with the SEC, (iii) Tectonic Advisors a registered investment advisor registered with the SEC focused generally on
managing money for relatively large, affiliated institutions and investment advisors, as well as for their clients, and (iv) HWG, an insurance
agency registered with the TDI.

 The Bank offers a broad
range of commercial and consumer banking and trust services primarily to small- to medium-sized businesses and their employees, and other
institutions. The Bank's traditional fiduciary services clients primarily consist of clients of Cain Watters. The Bank also offers
lending services, including commercial loans to small-to medium-sized businesses and professional concerns, as well as consumers, Nolan,
operating from its office in Overland Park, Kansas as a division within the Bank, offers third party administration ("TPA")
services, and Integra, operating from its Fort Worth, Texas office as a division within the Bank, offers factoring services.

 The Bank's technological
capabilities, including worldwide free ATM withdrawals, sophisticated on-line banking capabilities, electronic funds transfer capabilities,
and economical remote deposit solutions, allow most customers to be served regardless of their geographic location. The Bank serves its
local geographic market which includes Dallas, Tarrant, Denton, Collin and Rockwall counties which encompass an area commonly referred
to as the Dallas/Fort Worth Metroplex. The Bank also provides focused services to the dental and other health professional industries
through a centralized loan and deposit platform that operates out of its main office in Dallas, Texas. In addition, the Bank serves the
small business community by offering loans guaranteed by the SBA and the USDA.

 Sanders Morris provides
brokerage, advisory, and wealth management services to high and ultra-high net worth individuals in a broad geographic area that includes
Texas, with a concentration of clients in the Houston, Texas metroplex area, as well as clients across the United States. Tectonic Advisors
provides advisory and wealth management services primarily to affiliated institutions and their clients, including the Bank, Cain Watters,
and their clients, under long-standing advisory and due diligence agreements.

 We have two operating segments:
Banking and Other Financial Services. Our Banking segment encompasses both commercial and consumer banking services, as well as factoring
services. Our Other Financial Services segment includes the activities of Tectonic Advisors, Sanders Morris, the Bank's Trust Division,
which includes Nolan, and HWG. A third category, HoldCo and Other, includes the Bank's immediate parent, T Bancshares, and related
subordinated debt, as well as operations of the financial holding company that serves as parent for the group overall. See the section
entitled Segment Reporting, below, for more information.

 The consolidated financial
statements include the accounts of the Company and its wholly owned subsidiaries, T Bancshares, the Bank, Tectonic Advisors, Sanders Morris,
and through Sanders Morris, HWG. All intercompany transactions and balances are eliminated in consolidation.

 Critical Accounting Policies
and Estimates

 We prepare consolidated
financial statements based on GAAP and customary practices within the financial services industry. These policies, in certain areas, require
management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. While
we base estimates on historical experience, current information and other factors deemed to be relevant, actual results could differ from
those estimates.

 We consider accounting estimates
to be critical to reported financial results if (i) the accounting estimate requires management to make assumptions about matters
that are highly uncertain at the time we make the accounting estimate and (ii) different estimates that management reasonably could
have used for the accounting estimate in the current period, or changes in the accounting estimate that are reasonably likely to occur
from period to period, could have a material impact on the financial statements.

 As
discussed in Note 1 – Summary of Significant Accounting Policies, the Company adopted ASU 2016-13, Financial Instruments - Credit
Losses (Topic 326) (ASC 326): Measurement of Credit Losses on Financial Instruments, effective on January 1, 2023, pursuant to the
delayed adoption allowable for smaller reporting companies, replacing allowance allocations calculated in accordance with ASC Topic 310,
 Receivables, and allowance allocations calculated in accordance with FASB ASC Topic 450, Contingencies discussed in
the 2022 Form 10-K. Upon adoption of the current expected credit loss ("CECL") methodology,
the Company recorded an increase of $1.4 million to the allowance for credit losses for loans and $237,505 to the allowance for credit
losses for unfunded commitments. In addition, the Company recognized a cumulative effect reduction to retained earnings totaling
$1.3 million, net of a recorded deferred tax asset of $341,662. In the case of loans, the allowance for credit losses is a contra-asset
valuation account, calculated in accordance with ASC 326, that is deducted from the amortized cost basis of loans to present the
net amount expected to be collected. In the case of off-balance-sheet credit exposures, the allowance for credit losses is a liability
account, calculated in accordance with ASC 326, reported as a component of other liabilities in our consolidated balance sheets.
The amount of each allowance account represents management's best estimate of current expected credit losses on these financial instruments
considering available information, from internal and external sources, relevant to assessing exposure to credit loss over the contractual
term of the instrument. Relevant available information includes historical credit loss experience, current conditions and reasonable and
supportable forecasts. While historical credit loss experience provides the basis for the estimation of expected credit losses, adjustments
to historical loss information may be made for differences in current portfolio-specific risk characteristics, environmental conditions
or other relevant factors. While management utilizes its best judgment and information available, the ultimate adequacy of our allowance
accounts is dependent upon a variety of factors beyond our control, including the performance of our portfolios, the economy, changes
in interest rates and the view of the regulatory authorities toward classification of assets. See the section captioned "Allowance
for Credit Losses" elsewhere in this discussion as well as Note 1 – Summary
of Significant Accounting Policies and Note 3 - Loans and Allowance for Credit Losses for more details on the impact
of the Company's adoption of the CECL methodology, including related accounting policies.

 Performance Summary

 Net income available to
common shareholders decreased by $1.6 million, or 11.6%, to $12.1 million for the year ended December 31, 2024 from $13.7 million for
the year ended December 31, 2023. Earnings per diluted common share were $1.68 and $1.87 for the years ended December 31, 2024 and 2023,
respectively. The decrease in net income for 2024 over 2023 included a $7.1 million increase in non-interest expense, a $3.6 million increase
in the provision for credit losses and a $299,000 increase in preferred stock dividends, partly offset by a $4.7 million increase in net
interest income, a $5.3 million increase in non-interest income and a $549,000 decrease in income tax expense. For the year ended December
31, 2024, annual return on average assets was 1.75%, compared to 2.38% for the prior year, and annual return on average equity was 12.66%,
compared to 15.04% for the prior year.

 Our accounting and reporting
policies conform to GAAP and the prevailing practices in the banking industry. However, this Form 10-K contains financial information
determined by methods other than in accordance with GAAP, which includes return on average tangible common equity. We calculate return
on average tangible common equity as net income available to common shareholders (net income less dividends paid on preferred stock) divided
by average tangible common equity. The most directly comparable GAAP financial measure for tangible common equity is average total shareholders'
equity. We believe these non-GAAP measures and ratios, when taken together with the corresponding GAAP measures and ratios, provide meaningful
supplemental information regarding our performance. We believe investors benefit from referring to these non-GAAP measures and ratios
in assessing our operating results and related trends, and when planning and forecasting future periods. However, these non-GAAP measures
and ratios should be considered in addition to, and not as a substitute for or preferable to, measures and ratios prepared in accordance
with GAAP.

 The following table reconciles
net income to income available to common shareholders and presents the calculation of return on average tangible common equity:

 As of and
 for the
 Year Ended

 2024

 As of and
 for the
 Year Ended
 2023

 Income available to common shareholders

 $

 12,083

 $

 13,667

 Average shareholders' equity

 $

 110,088

 $

 101,176

 Less: average goodwill

 Less: average core deposit intangible

 Less: average preferred stock

 17,250

 17,250

 Average tangible common equity

 $

 71,136

 $

 62,014

 Return on average tangible common equity

 16.99

 %

 22.04

 %

 Total assets grew by $186.1
million, or 27.5%, to $863.4 million as of December 31, 2024, from $677.3 million as of December 31, 2023. This increase was primarily
due to increases of $165.4 million in loans held for investment, $20.4 million in loans held for sale and $5.0 million in cash and cash
equivalents, partly offset by a decrease of $4.1 million in investments.

 Shareholders' equity
increased $6.5 million, or 6.1%, to $113.4 million as of December 31, 2024, from $106.9 million as of December 31, 2023. See analysis
of shareholders' equity in the section captioned "Capital Resources and Regulatory Capital Requirements" included elsewhere
in this discussion.

 Results of Operations

 Details of the changes in
the various components of net income are discussed below.

 Net Interest Income

 Net interest income is the
difference between interest income on interest-earning assets, such as loans, investment securities, and interest-bearing cash, and interest
expense on interest-bearing liabilities, such as deposits and borrowings. Changes in net interest income result from changes in volume
and spread, and are reflected in the net interest margin, as well as changes in average interest rates. Volume refers to the average dollar
level of interest-earning assets and interest-bearing liabilities. Spread refers to the difference between the average yield on interest-earning
assets and the average rate paid on interest-bearing liabilities. Margin refers to net interest income divided by average interest-earning
assets, and is influenced by the level and relative mix of interest-earning assets and interest-bearing liabilities.

 The
Federal Reserve influences the general market rates of interest, including the deposit and loan rates offered by many financial institutions.
Interest rates are highly sensitive to many factors that are beyond the control of the Company, including changes in the expected rate
of inflation, the influence of general and local economic conditions and the monetary and fiscal policies of the United States government,
its agencies and various other governmental regulatory authorities. As of December 31, 2024, the
target range for the federal funds rate was 4.25% to 4.50%.

 The following table presents
the changes in net interest income and identifies the changes due to differences in the average volume of interest-earning assets and
interest–bearing liabilities and the changes due to changes in the average interest rate on those assets and liabilities. The
changes in net interest income due to changes in both average volume and average interest rate have been allocated to the average volume
change or the average interest rate change in proportion to the absolute amounts of the change in each.

 2024 vs 2023

 Increase (Decrease) Due to Change in

 Rate

 Volume

 Total

 Interest-bearing deposits and federal funds sold

 $

 $

 1,905

 $

 2,080

 Loans, net of unearned discount (1)

 3,668

 11,232

 14,900

 Total earning assets

 3,950

 13,211

 17,161

 Savings and interest-bearing demand

 (9

)

 (8

)

 Money market deposit accounts

 1,504

 2,987

 7,209

 10,196

 FHLB and other borrowings

 (16

)

 (3

)

 Total interest-bearing liabilities

 3,577

 8,929

 12,506

 Changes in net interest income

 $

 $

 4,282

 $

 4,655

 (1)
 Include non-accrual loans.

 Net interest income increased
$4.7 million, or 17.2%, from $27.4 million for the year ended December 31, 2023, to $32.0 million for year ended December 31, 2024. Net
interest margin for the year ended December 31, 2024 and 2023 was 4.23% and 4.58%, respectively, a decrease of 35 basis points. The increase
in net interest income was primarily due to an increase in the average volume of and average yield of loans and an increase in the average
volume of and to a lesser extent the increase in the average yield of interest-bearing deposits (primarily amounts held in an interest-bearing
account at the FRB). The impact of these increases was partly offset by an increase in the average volume of and cost of time deposits
and money market deposits and by an increase in the average volume of borrowings.

 The average volume of interest-earning
assets increased $159.8 million, or 26.8%, from $597.1 million for the year ended December 31, 2023, to $756.9 million for the year ended
December 31, 2024. The increase during 2024 included a $122.5 million, or 24.9%, increase in the average volume of loans, a $35.5 million,
or 64.8%, increase in average volume interest-bearing deposits (primarily amounts held in an interest-bearing account at the Federal Reserve),
and a $1.8 million, or 3.5%, increase in the average volume of securities.

 The average yield on interest-earning
assets increased 63 basis points from 7.78% for the year ended December 31, 2023, to 8.41% for the year ended December 31, 2024, due to
the changes in market interest rates and changes in the mix of interest-earning assets. The average yield for loans increased 73 basis
points from 8.47% for the year ended December 31, 2023, to 9.20% for the year ended December 31, 2024. The average yield on interest-bearing
deposits increased 32 basis points from 5.05% for the year ended December 31, 2023, to 5.37% for the year ended December 31, 2024. The
average yield on securities increased 20 basis points from 4.11% for the year ended December 31, 2023, to 4.31% for the year ended December
31, 2024.

 The average volume of interest-bearing
liabilities increased $170.4 million, or 39.2%, from $435.0 million for the year ended December 31, 2023, to $605.4 million for the year
ended December 31, 2024. The increase during 2024 primarily included a $137.4 million, or 49.9%, increase in average volume of time deposits,
a $19.9 million, or 15.0%, increase in money market deposits, and a $15.1 million increase in average volume of borrowings. The average
interest rate paid on interest-bearing liabilities increased 83 basis points from 4.39% for the year ended December 31, 2023, to 5.22%
for the year ended December 31, 2024. The average interest rate paid on interest-bearing deposits increased 89 basis points from 4.23%
for the year ended December 31, 2023, to 5.12% for the year ended December 31, 2024 and the average cost of subordinated notes increased
73 basis points from 9.97% for the year ended December 31, 2023, to 10.70% for the year ended December 31, 2024, due to the aforementioned
change in the market interest rates. The average cost of FHLB and other borrowings decreased 54 basis points from 5.46% for the year ended
December 31, 2023, to 4.92% for the year ended December 31, 2024 due to the interest rate offered by the Federal Reserve for the BTFP.

 The following table sets forth our average balances
of assets, liabilities and shareholders' equity, in addition to the major components of net interest income and our net interest
margin, for the years ended December 31, 2024 and 2023.

 Year Ended December 31,

 2024

 2023

 Yield

 Yield

 Assets

 Interest-bearing deposits and federal funds sold

 $

 90,277

 $

 4,844

 5.37

 %

 $

 54,770

 $

 2,764

 5.05

 %

 52,677

 2,272

 4.31

 50,874

 2,091

 4.11

 Loans, net of unearned discount (1)

 613,955

 56,512

 9.20

 491,448

 41,612

 8.47

 Total earning assets

 756,909

 8.41

 597,092

 7.78

 Cash and other assets

 49,119

 48,320

 Allowance for credit losses

 (7,525

)

 (5,743

)

 $

 798,503

 $

 639,669

 Liabilities and Shareholders' Equity

 Savings and interest-bearing demand

 $

 10,084

 0.48

 %

 $

 12,041

 0.47

 %

 Money market deposit accounts

 152,368

 7,657

 5.03

 132,471

 6,153

 4.64

 412,925

 21,736

 5.26

 275,540

 11,540

 4.19

 Total interest-bearing deposits

 575,377

 29,441

 5.12

 420,052

 17,749

 4.23

 FHLB and other borrowings

 18,045

 4.92

 2,951

 5.46

 1,284

 10.70

 1,196

 9.97

 Total interest-bearing liabilities

 605,422

 31,612

 5.22

 435,003

 19,106

 4.39

 Non-interest-bearing deposits

 67,804

 92,230

 Other liabilities

 15,189

 11,260

 Total liabilities

 688,415

 538,493

 Shareholders' equity

 110,088

 101,176

 Total liabilities and shareholders' equity

 $

 798,503

 $

 639,669

 Net interest income

 $

 32,016

 $

 27,361

 Net interest spread

 3.19

 %

 3.39

 %

 Net interest margin

 4.23

 %

 4.58

 %

 (1)
 Includes non-accrual loans.

 Provision for Credit Losses

 As discussed in Note 1 –
Summary of Significant Accounting Policies in the accompanying notes to consolidated financial statements, the Company adopted the CECL
accounting standard effective on January 1, 2023. The measurement of expected credit losses under the CECL methodology is applicable to
financial assets measured at amortized cost, including loans and held-to-maturity debt securities, as well as off-balance sheet credit
exposures. Provision for credit losses is determined by management as the amount to be added to the allowance for credit loss accounts
for various types of financial instruments to bring the allowance to a level deemed appropriate by management to absorb expected credit
losses over the lives of the respective financial instruments. Management actively monitors the
Company's asset quality and provides appropriate provisions based on such factors as historical loss experience, current conditions
and reasonable and supportable forecasts.

instruments are charged-off against the allowance for credit losses when appropriate. Although management believes it uses the best information
available to make determinations with respect to the provision for credit losses, forecasted economic conditions continue to remain uncertain
due to the rising interest rate environment and persistent high inflation levels in the United States. Accordingly, future adjustments
may be necessary if economic conditions differ from the assumptions used in making the determination.

 The following table presents the components of
provision for credit losses:

 Year Ended December 31,

 2024

 2023

 Provision for credit losses related to:

 Loans

 $
 4,583

 $
 1,333

 Held to maturity securities

 -

 -

 Off-balance sheet credit exposures

 (45
)

 Total

 $
 4,848

 $
 1,288

 Provision expense for loans
is generally reflective of change in loan volume and mix as well as charge-offs or specific reserves taken during the respective period.
Provision expense is also impacted by the economic outlook and changes in macroeconomic variables. The provision expense recorded for
the year ended December 31, 2024 and 2023 driven by the loss rate and charge-offs. See "Allowance for Credit Losses" elsewhere
in this discussion for further analysis of our provision for credit losses related to loans.

 Changes in the allowance
for off-balance sheet credit exposures are generally driven by the remaining unfunded loan commitments expected to fund loans and to changes
in the assumptions to project loss rates. The credit provision for the year ended December 31, 2024 was due to increased outstanding loan
commitments to fund.

 Non-Interest Income

 The components of non-interest income were as
follows:

 Year Ended December 31,

 2024

 2023

 Trust income

 $
 7,481

 $
 6,442

 Gain on sale of loans

 Advisory income

 18,355

 14,910

 Brokerage income

 8,096

 7,527

 Service fees and other income

 10,548

 10,037

 Rental income

 Total

 $
 45,072

 $
 39,804

 Total non-interest income
for the year ended December 31, 2024, increased $5.3 million, or 13.2%, as compared to the year ended December 31, 2023. Changes in the
various components of non-interest income are discussed below.

 Trust Income. Trust
income is earned from trust services provided by the Bank on the value of managed and non-managed assets held in custody. Changes in asset
values and the volatility of the bond and equity markets impact the market value of trust assets and the related fees. Trust income for
the year ended December 31, 2024, increased $1.0 million, or 16.1%, compared to the year ended December 31, 2023. Trust income increased
between the two years due to an increase in the average market value of the trust assets over the year ended December 31, 2024, from an
increase in asset values of $205.5 million between the two periods from net asset inflows to the Bank's Trust Division of $30.3
million and asset appreciation of $175.2 million.

 Gain on sale of loans.
 The gain on sale of loans primarily reflects the gain from the sale of the guaranteed portion of SBA 7(a) and USDA loans originated
by the Bank's SBA lending group. Gain on sale of loans decreased $347,000 during the year ended December 31, 2024, or 59.7%, related
to the gain on sale of $3.8 million of USDA loans, compared to the year ended December 31, 2023, during which there was a gain on sale
of loans resulting from the sale of $5.8 million of USDA loans.

 Advisory income.
Advisory fees are typically based on a percentage of the underlying average asset value for a given period, where each percentage point
represents 100 basis points. These revenues are of a recurring nature but are directly affected by increases and decreases in the values
of the underlying assets. In addition to fees based on a percentage of underlying assets, payments under certain advisory agreements at
Sanders Morris are based on the performance of the respective account, measured as a percentage of the increase achieved in the asset
values in the respective account. Performance-based fees, though the agreements may remain in place from year to year, are far less predictable,
given the uncertainty of the ability to achieve an increase of the same level as in prior periods, or at all. For the year ended December
31, 2024, advisory income increased $3.4 million, or 23.1%, compared to the year ended December 31, 2023. This increase during the year
ended December 31, 2024, was primarily due to an increase in advisory fees based on a percentage of the assets under management at Tectonic
Advisors totaling $1.5 million and an increase in performance advisory fees at Sanders Morris totaling $1.4 million.

 Brokerage income.
Brokerage revenues are generally based on a per share fee or commission to trade a share of a particular stock, bond or other security.
In addition, brokerage revenues in this context include private placements, participation in syndication of public offerings, and certain
other brokerage revenues, including interest earned on margin lending. Brokerage revenue is dependent on the volume of trading, cash held
in brokerage accounts which funds margin lending, and on private placement and syndication activity during the period. Brokerage income
for the year ended December 31, 2024, increased $569,000, or 7.6%, compared to the year ended December 31, 2023. This increase is primarily
due to an increase in traditional brokerage activity of $1.3 million. In addition, broker dealer services increased $190,000, and federated
rebates increased $88,000, offset by a decrease in revenue from margin lending of $621,000, a decrease in private placements of $226,000,
and a decrease in syndicate deals of $169,000, offset by immaterial increases of $7,000.

 The table below reflects
a rollforward of our client assets, which includes both advisory and brokerage assets, as of December 31, 2024 and 2023, and the inflows
and outflows and market appreciation during the years then ended. Our brokerage and advisory assets experienced an increase of approximately
$967.7 million, or 14.1%, and an increase of $1.7 billion, or 32.5%, during the years ended December 31, 2024 and 2023, respectively.
The increase for the year ended December 31, 2024 was related to market appreciation of $398.3 million, or 5.8%, and positive net flows
of $569.5 million, or 8.3%.

 Advisors

 Sanders

 Morris

 Total

 As of January 1, 2023

 $
 2,723,465

 $
 2,476,006

 $
 5,199,471

 Client inflows

 956,123

 1,459,223

 2,415,346

 Client outflows

 (477,325
)

 (1,068,957
)

 (1,546,282
)

 Net flows

 478,798

 390,266

 869,064

 Market appreciation/(depreciation)

 446,142

 375,015

 821,157

 As of December 31, 2023

 3,648,405

 $
 3,241,287

 $
 6,889,692

 Client inflows

 897,860

 691,332

 1,589,192

 Client outflows

 (540,100
)

 (479,601
)

 (1,019,701
)

 Net flows

 357,760

 211,731

 569,491

 Market appreciation

 367,730

 30,522

 398,252

 $
 4,373,895

 $
 3,483,540

 $
 7,857,435

 Service fees and other
income. Service fees include fees for deposit-related services and third-party administrative fees from the Bank's Nolan Division.
Service fees and other income for the year ended December 31, 2024, increased $511,000, or 5.1%, compared to the year ended December 31,
2023. The increase was primarily the result of an allowance of $217,000 related to not readily marketable securities in our Other Financial
Services segment in the previous year, whereas there was no allowance for the year ended December 31, 2024. In addition, there were increases
in pension administration fees of $211,000, an increase in consulting fees of $189,000, an increase of $131,000 in bank service fees,
an increase from a loss recognized on disposition of net readily marketable securities of $100,000 in the previous year and no losses
during the year ended December 31, 2024, and an increase in interest income of $66,000. These increases were offset by a decrease in other
income from the recovery of unclaimed funds at Sanders Morris of $264,000 in the previous year, a decrease in net loan servicing fees
of $115,000, and individually immaterial decreases of $24,000.

 Rental income. The
Company receives monthly rental income from tenants leasing space in the bank building. Rental income for the year ended December 31,
2024, increased $51,000, or 16.6%, compared to the year ended December 31, 2023, due to abatements given to tenants during the first two
quarters of 2023.

 Non-Interest Expense

 The components of non-interest expense were as
follows:

 Year Ended December 31,

 2024

 2023

 $
 37,022

 $
 31,288

 2,008

 1,984

 Trust expenses

 2,511

 2,265

 Brokerage and advisory direct costs

 2,126

 1,936

 Professional fees

 1,773

 1,813

 1,172

 Other expense

 7,308

 6,594

 Total

 $
 53,920

 $
 46,821

 Total non-interest expense
for the year ended December 31, 2024, increased $7.1 million, or 15.2%, compared to the year ended December 31, 2023. Changes in the various
components of non-interest income are discussed below.

 Salaries and employee
benefits. Salaries and employee benefits include employee salaries and related payroll expense, incentive compensation, health insurance,
benefit plans and payroll taxes. Salaries and employee benefits for the year ended December 31, 2024, increased $5.7 million, or 18.3%,
compared to the year ended December 31, 2023. In our Other Financial Services segment, salaries and employee benefits increased $1.8 million.
The increase was primarily from an increase in commissions paid at Sanders Morris related to increases in performance based advisory fees,
traditional brokerage, private placement, and syndicated offerings activity of $1.5 million, increases in bonuses of $675,000, and an
increase in salaries of $160,000, offset by decreases in payroll taxes and other benefits of $363,000. Salaries, bonuses and payroll taxes
at Tectonic Advisors decreased $658,000, due to the move of the technology and accounting staff to the HoldCo and Other category, where
salaries, bonuses and payroll taxes increased $725,000. Salaries and employee benefits at the Bank's Nolan division increased $329,000
related to staff increases and overtime pay to accommodate the increase in the number of plans administered and merit increases, as well
as increases in the cost of health insurance. Salaries, taxes and other benefits in our trust group within our Other Financial Services
segment increased $205,000 related to staffing additions to accommodate additional recordkeeping clients and duplication of personnel
during staff changes, as well as the amortization of retention bonuses. Salaries and employee benefits in our Banking segment increased
$3.2 million, primarily driven by increases in staff and merit increases of $2.7 million, $1.9 million of which was within the Bank's
SBA team and $667,000 within the Bank's Integra Division, where increases in loan volumes increased commissions paid. In addition,
there were increases of $463,000 in the Banks payroll taxes and other employee benefits.

expense. Occupancy and equipment expenses include building, furniture, fixtures and equipment depreciation and maintenance costs.
Occupancy and equipment expenses for the year ended December 31, 2024, increased $24,000, or 1.2%, compared to the year ended December
31, 2023. The increase is primarily due to an increase in occupancy and equipment expense in our HoldCo and Other category of $68,000,
led by an increase in central area maintenance of $78,000 from new lease agreements in our Houston and Frisco offices in May and April
2023, respectively. Occupancy and equipment expense in our Other Financial Services segment remained flat, with an increase of $29,000
at Sanders Morris related to increases in common area maintenance for the Houston office being offset by decreases in depreciation and
rent expense. Tectonic Advisors had a decrease in expense of $19,000 related to the movement of staff to the HoldCo and Other category
and a decrease in repairs and maintenance expense. The Bank's Trust and Nolan divisions had a net decrease of $10,000 related primarily
to a decrease in depreciation expense at the Nolan Division. Occupancy and equipment expense in our Banking segment decreased $46,000,
primarily from a decrease of $41,000 in facilities expense at the bank facility and the Bank's Integra Division. Depreciation expense
decreased $9,000, due to decreases in furniture, fixtures and equipment and building improvements across all segments. The remaining variances
in our occupancy and equipment expense were individually immaterial.

 Trust expenses. Trust
expenses are incurred in our Other Financial Services segment, and include advisory fees paid on the common trust funds managed by the
Company based on the value of the assets held in custody. Changes in asset values and the volatility of the bond and equity markets impacts
the market value of trust assets and the related expenses. The monthly advisory fees are assessed based on the market value of assets
at month-end. Trust expenses for the year ended December 31, 2024, increased by $246,000, or 10.9%, compared to the year ended December
31, 2023, based on increases in asset values of the Bank's common trust funds.

 Brokerage and advisory
direct costs. Brokerage and advisory direct costs for the year ended December 31, 2024, increased $190,000, or 9.8%, compared to the
year ended December 31, 2023. Brokerage and advisory direct costs are incurred primarily in our Other Financial Services segment and include
the cost of clearing firm services and fees on advisory assets from custodians and certain referral fees, as well as information services
related to our advisory and trading activity. The increase is primarily due to an increase in brokerage and advisory direct costs at Sanders
Morris and HWG of $141,000, related to an increase in clearing firm service fees, exchange clearing fees, advisory clearing fees service
fees and execution charges of $184,000, offset by a decrease in information services and referral fees of $43,000. Tectonic Advisors'
brokerage and advisory direct costs increased $49,000, due to increases in service fees and information services related to additional
advisory staff and an increase in the volume of accounts on our platform.

 Professional fees.
Professional fees, which include legal, consulting, audit and tax fees, for the year ended December 31, 2024, decreased $40,000, or 2.2%,
compared to the year ended December 31, 2023. The decrease was the result of decreases in our Banking segment of $77,000, primarily
related to collections efforts on past due loans and foreclosed assets and various other matters, including the impact of work around
FASB ASC 326 in our regulatory filings during the year ended December 31, 2023 which increased expense in that period. The decreases were
offset by an increase in our HoldCo and Other category of $3,000, which was primarily due to audit and tax consulting increase
of $159,000, and an increase in legal matters of $52,000, offset by a decrease of $208,000 in professional consulting fees for projects
involving robotic process automation. Our Other Financial Services segment increased $34,000, due to an increase in professional fees
at Tectonic Advisors of $49,000 related to work on our investment portal, which was offset by decreases in consulting, actuarial, and
auditing fees elsewhere in the segment.

 Data processing.
Data processing includes costs related to the Company's operating systems, including its banking and trust platforms. Data processing
expenses for the year ended December 31, 2024, increased $231,000, or 24.5%, compared to the year ended December 31, 2023. The increase
was due to increases in data processing expenses within the Banking segment of $175,000 and an increase of $57,000 in our Other Financial
Services segment. The increase in our Banking segment was related to general increases in
other data processing services, and the depletion of credits provided by one of the Bank's vendors. The increase in our Other Financial
Services segment was related to an increase in costs at the Bank's Trust Division of $53,000 and immaterial increases at the Bank's
Nolan division.

 Other expense. Other
expenses include costs for insurance, FDIC and OCC assessments, directors' fees, and regulatory filing fees related to our brokerage
business, business travel, management fees, and other operational expenses. Other expenses for the year ended December 31, 2024, increased
$714,000, or 10.8%, compared to the year ended December 31, 2023. The increase includes increases in software costs and licensing of $416,000
at our Banking segment and $48,000 at our HoldCo and Other category, offset by a decrease of $12,000 at our Other Financial Services segment,
increases in loan and other real estate operating costs at the Bank of $172,000 and its Nolan and Trust divisions of $64,000, increases
in trading errors of $148,000 in our Other Financial Services segment, increases in payroll processing fees of $80,000 across all segments,
and increases in travel and lodging of $106,000 in the Banking and HoldCo and Other category offset by a decrease of $32,000 in our Other
Financial Services segment. These increases were offset by decreases in employee recruitment of $199,000, which were primarily at our
Banking segment, where costs decreased by $194,000 related to hiring of additional business development officers in the Bank's SBA
and Integra divisions in the previous year, and decreases in advertising and marketing expense across all segments of the Company of $86,000,
and other individually immaterial increases of $9,000.

 Income Taxes

 Income tax expense was $4.4
million, for an effective tax rate of 23.9%, for the year ended December 31, 2024, compared to $3.8 million, for an effective tax rate
of 20.1%, for the year ended December 31, 2023. The effective income tax rates differed from the U.S. statutory federal income tax rate
of 21% during 2024 and 2023 primarily due to the effect of the income tax effects associated with state income tax and with stock-based
compensation, among other things, and their relative proportion to total pre-tax net income.

 Segment Reporting

 The Company's primary
reportable segments consist of Banking and Other Financial Services which have been determined based on our organizational structure.
A third category, HoldCo and Other, is included in the tabular format below. The activity in the Holdco and Other was disclosed as a reportable
segment prior to September 30, 2024, but the Company has determined that the activity does not constitute a reportable segment and will
be presented as the Holdco and Other category. A description of each business and the methodologies used to measure financial performance
is described in Note 15. Operating Segments in the accompanying notes to consolidated financial statements elsewhere in this
report. Details of net income (loss) by operating segment are discussed in more detail below.

 The following table presents key metrics related
to our segments:

 Year Ended December 31, 2024

 Other

 Services

 HoldCo and

 Other

 Consolidated

 $

 $
 -

 $
 -

 $

 30,328

 -

 1,284

 31,612

 4,848

 -

 -

 4,848

 Net interest income after provision for credit losses

 28,452

 -

 (1,284
)

 27,168

 Noninterest Income

 Trust income

 -

 7,481

 -

 7,481

 Advisory income

 18,355

 Brokerage income

 -

 8,096

 -

 8,096

 Service fees and other income

 1,176

 9,372

 -

 10,548

 Other

 -

 -

 Total noninterest income

 1,768

 43,304

 -

 45,072

 Noninterest expense

 15,415

 18,289

 3,318

 37,022

 1,036

 2,008

 Trust expenses

 -

 2,511

 -

 2,511

 Brokerage and advisory direct costs

 -

 2,125

 2,126

 Professional fees

 1,773

 -

 1,172

 Other

 4,200

 2,358

 7,308

 Total noninterest expense

 21,475

 27,721

 4,724

 53,920

 Income before income taxes

 8,745

 15,583

 (6,008
)

 18,320

 Income tax expense

 3,780

 2,165

 (1,560
)

 4,385

 Net income

 $
 4,965

 $
 13,418

 $
 (4,448
)

 $

 Year Ended December 31, 2023

 Other

 Services

 HoldCo and

 Other

 Consolidated

 $

 $
 -

 $
 -

 $

 17,909

 -

 1,197

 19,106

 1,288

 -

 -

 1,288

 Net interest income after provision for credit losses

 27,270

 -

 (1,197
)

 26,073

 Noninterest Income

 Trust income

 -

 6,442

 -

 6,442

 Advisory income

 14,910

 14,910

 Brokerage income

 -

 7,527

 -

 7,527

 Service fees and other income

 1,162

 8,975

 (100
)

 10,037

 Other

 -

 -

 Total noninterest income

 2,050

 37,854

 (100
)

 39,804

 Noninterest expense

 12,223

 16,471

 2,594

 31,288

 1,035

 1,984

 Trust expenses

 -

 2,265

 -

 2,265

 Brokerage and advisory direct costs

 -

 1,936

 -

 1,936

 Professional fees

 1,813

 -

 Other

 3,369

 2,562

 6,594

 Total noninterest expense

 17,400

 25,581

 3,840

 46,821

 Income before income taxes

 11,920

 12,273

 (5,137
)

 19,056

 Income tax expense

 3,499

 1,564

 (1,227
)

 3,836

 Net income

 $
 8,421

 $
 10,709

 $
 (3,910
)

 $

 Income before taxes for
the year ended December 31, 2024, decreased $3.2 million, or 26.6%, compared to the year ended December
31, 2023. The decrease was primarily the result of a $4.1 million increase in non-interest expense, a $3.6 million increase
in the provision for credit losses and a $282,000 decrease in non-interest income, partly offset by a $4.7 million increase
in net interest income.

 Net interest income for
the year ended December 31, 2024, increased $4.7 million, or 16.6%, compared to the year ended December 31, 2023.
The increase in net interest income was primarily due to an increase in the average volume of and average yield of loans and an increase
in the average volume of and to a lesser extent the increase in the average yield of interest-bearing deposits (primarily amounts held
in an interest-bearing account at the FRB). The impact of these increases was partly offset by an increase in the average volume of and
cost of time deposits and money market deposits and by an increase in the average volume of borrowings. See the analysis of net interest
income included in the section captioned "Net Interest Income" included elsewhere in this discussion.

 The provision for credit
losses for the year ended December 31, 2024, increased $3.6 million, or 276.4%, compared to the year ended December 31, 2023. See "Provision
for Credit Losses" and "Allowance for Credit Losses" included elsewhere in this discussion for further analysis of credit
loss provision related to loans and off-balance sheet commitments.

 Non-interest income for
the year ended December 31, 2024, decreased $282,000, or 13.8%, compared to the year ended December 31, 2023. The decrease was primarily
due to a $347,000 decrease in gain on sale of SBA/USDA loans, $115,000 decrease for loan servicing fees, partly offset by a $118,000 increase
in factoring fees, a $14,000 increase in deposit service fees and a $51,000 increase in rental income due to abatements given to tenants
during the first two quarters of 2023. See the analysis of non-interest income included in the section captioned "Non-Interest Income"
included elsewhere in this discussion.

 Non-interest expense for
the year ended December 31, 2024, increased $4.1 million, or 23.4%, compared to the year ended December 31, 2023. Salaries and employee
benefits increased $3.2 million primarily due to increases in staff with the expansion of our SBA lending and Integra factoring, along
with increases in annual merit, market and incentive bonuses and commissions. Occupancy and equipment expense decreased $46,000 primarily
due to decrease in facilities repairs and maintenance expense. Professional fees decreased $77,000 primarily due to lower legal fees related
to loan collections and various other matters, and lower audit fees, partially offset by consulting fees. Data processing expense increased
$175,000 as a result of a reduction of discounts provided by the Bank's core system vendor related to the change in the core system
during 2021, along with normal annual increase in data processing costs. Other expenses increased $831,000, which included increases of
416,000 for software development in our lending and Integra divisions, $262,000 for advertising and marketing costs primarily in the Bank's
Integra Division, $113,000 for FDIC assessment, $63,000 for travel and meals, $61,000 for payroll processing fees, $40,000 for loan costs,
and $40,000 for card settlement fees, among other things. The increases from these items was partly offset by a decrease of $194,000 in
employee recruitment fees, among other things. See the analysis of non-interest expense included in the section captioned "Non-Interest
Expense" included elsewhere in this discussion.

 Other Financial Services

 Income before taxes for
the year ended December 31, 2024, increased $3.3 million, or 27.0%, compared to the year ended December 31, 2023. The increase was
primarily the result of a $5.4 million increase in non-interest income which was offset by a $2.1 million increase in non-interest expense.

 Non-interest income for
the year ended December 31, 2024 increased $5.4 million, or 14.4%, compared to the year ended December 31, 2023. The increase was due
to an increase in advisory income of $3.4 million and an increase in trust income of $1.0 million driven by an increase in advisory assets
from net flows and asset appreciation, and, in the case of advisory income, from an increase in performance based advisory fees of $1.4
million compared to the year ended December 31, 2023. Brokerage income increased $569,000, primarily due to an increase in traditional
brokerage activity from over-the-counter trading of $994,000, an increase in options trading of $319,000, an increase in investment banking
activity of $190,000, and an increase in federated rebates of $88,000, with the majority of these increases related to an increase in
market activity generally compared to the year ended December 31, 2023. These increases in brokerage income were offset by decreases in
margin participation revenue of $621,000, in private placement and syndicated offerings activity of $226,000 and $169,000, respectively,
and in insurance commissions revenue of $72,000, and other individually immaterial fluctuations in brokerage income totaling $66,000.
Lastly, service fees and other income increased $397,000, primarily from increases in third party administration fees at the Bank's
Nolan division of $211,000, and at Sanders Morris, a decrease in impairment losses on not readily marketable securities of $217,000, an
increase of $189,000 in consulting fees and an increase in interest income of $66,000. These increases were offset by a decrease in other
income from a one-time recovery of funds during the year ended December 31, 2023 of $281,000. See the analysis of non-interest income
included in the section captioned "Non-Interest Income" above in this discussion.

 Non-interest expense for
the year ended December 31, 2024 increased $2.1 million, or 8.4%, compared to the year ended December 31, 2023. The increase was primarily
from an increase in salaries and employee benefits of $1.8 million, the majority of which was at Sanders Morris of $1.9 million, where
commission expense increased $1.5 million driven by commissions on performance based advisory fee revenue, bonuses increased $675,000,
and salaries increased $160,000. These increases were offset by a decrease in payroll taxes and other benefits expense of $363,000 at
Sanders Morris. Salaries and employee benefits also increased at the Bank's Nolan and Trust divisions by $329,000 and $205,000,
respectively, primarily from increases in staffing on the participant directed services team and merit increases, and increases in payroll
taxes and health insurance expense. These increases were offset by a decrease in salaries and employee benefits at Tectonic Advisors of
$658,000, primarily from the movement of staff to Tectonic Financial, Inc., which falls under the HoldCo segment. Trust expenses increased
by $246,000 related to increases in trust assets discussed above under non-interest income, and brokerage and advisory direct costs, incurred
primarily at Sanders Morris and Tectonic Advisors, increased by $189,000 related to an increase in clearing fees, execution charges, and
information service fees. In addition, professional fees increased $34,000 and data processing fees increased $56,000. These increases
were offset by a decrease in other operating expenses of $203,000, primarily from a decrease in advertising and marketing expense of $284,000,
which was offset by an increase in the cost of trading errors of $148,000, and other individually immaterial fluctuations totaling $67,000.
See also the analysis of non-interest expense included in the section captioned "Non-Interest Expense" included elsewhere
in this discussion.

 HoldCo and Other

 The net loss before taxes
at HoldCo and Other increased by $871,000, or 17.0%, during the year ended December 31, 2024, compared to the year ended December
31, 2023. Non-interest income increased $100,000 due to a loss on the disposition of not readily marketable securities of $100,000 for
the year ended December 31, 2023, compared to no loss during the year ended December 31, 2024.

 Non-interest expense increased
$884,000, or 23.0%, which included an increase in salaries and employee benefits of $724,000, primarily related to the movement of accounting
and technology staff from Tectonic Advisors to Tectonic Financial, Inc. in July of 2023 to allow for more accurate allocation of costs
given that these personnel frequently work on matters across the business. Other expense increased $87,000, primarily from an increase
in travel expenses of $49,000 from an increase in travel between our offices in Houston and Dallas, software and software licenses of
$48,000 and computer services of $33,000 related to an increase in software development activities, which were offset by a decrease in
advertising and marketing expense of $64,000 from a decrease in social media advertising, and other individually immaterial increases
totaling $21,000. Occupancy and equipment expense increased by $69,000 during the year ended December 31, 2024 compared to the year ended
December 31, 2023 from increases in rent and common area maintenance at both our Frisco and Houston offices, where our accounting, technology
and management personnel office, and movement of staff from our Other Financial Services segment to Tectonic Financial, Inc. In addition,
our professional fees and brokerage and advisory direct costs increased by $3,000 and $1,000, respectively. See also the analysis of non-interest
expense included in the section captioned "Non-Interest Expense" included elsewhere in this discussion.

 Financial Condition

 Investment Securities

 The
primary purpose of the Company's investment portfolio is to provide a source of earnings for liquidity management purposes, to provide
collateral to pledge against borrowings, and to control interest rate risk. In managing the portfolio, the Company seeks to attain the
objectives of safety of principal, liquidity, diversification, and maximized return on investment. Securities are classified as available
for sale when we intend to hold for an indefinite period of time but might be sold before maturity. Securities available for sale are
carried at fair value, with unrealized holding gains and losses reported as a separate component of stockholders' equity as other
comprehensive income (loss), net of tax. Securities are classified as held to maturity and carried at amortized cost when management has
the positive intent and ability to hold them to maturity.

and 2023, securities available for sale consisted of U.S. Treasuries, U.S. government agency securities and mortgage-backed securities
guaranteed by U.S. government agencies. Securities held to maturity consist of PACE and PID/TIRZ investments. These investment contracts
or bonds located in Texas, California and Florida, originate under a contractual obligation between the property owners, the local county
or city administration, and a TPA and sponsor. PACE assessments are created to fund the purchase and installation of energy saving improvements
to the property such as solar panels. PID/TIRZ assessments are used to pay for the development costs of a residential subdivision. Generally,
as a property assessment, the total assessment is repaid in installments over a period of 5 to 32 years by the then current property owner(s).
Each installment is collected by the County or City Tax Collector where the property is located. The assessments are an obligation of
the property.

 Restricted securities consisted
of FRB stock, having an amortized cost and fair value of $2.2 million as of December 31, 2024 and 2023, and FHLB stock, having an amortized
cost and fair value of $2.1 million and $2.0 million as of December 31, 2024 and 2023, respectively.

 The following presents the
amortized cost and fair values of the securities portfolio as of the dates indicated:

 As of December 31, 2023

 Cost

 Cost

 U.S. Treasuries

 $

 -

 $

 -

 $

 3,906

 $

 3,894

 15,573

 15,644

 6,783

 6,416

 5,731

 5,456

 Total securities available for sale

 $

 22,356

 $

 $

 25,281

 $

 Securities held to maturity:

 Property assessed clean energy

 $

 $

 $

 1,326

 $

 1,254

 Public improvement district/TIRZ

 21,712

 19,854

 22,868

 22,595

 Total securities held to maturity

 $

 $

 20,702

 $

 24,194

 $

 23,849

 Securities, restricted:

 Other

 $

 4,284

 $

 4,284

 $

 4,176

 $

 4,176

 The following table summarizes
the maturity distribution schedule with corresponding weighted-average yields of securities available for sale and securities held to
maturity as of December 31, 2024. Yields are calculated based on amortized cost. Mortgage-backed securities are included in maturity categories
based on their stated maturity date. Expected maturities may differ from contractual maturities because issuers may have the right to
call or prepay obligations. Other securities classified as restricted include stock in the FRB and the FHLB, which have no maturity date.
These securities have been included in the total column only and are not included in the total yield.

 Maturing

 One Year

 or Less

 After One Year

 Through

 Five Years

 After Five Years

 Through

Ten Years

 After

 Ten Years

 Total

 Yield

 Yield

 Yield

 Yield

 Yield

 $
 1,000

 0.52
 %

 $
 10,998

 1.03
 %

 $

 3.62
 %

 $
 3,505

 1.01
 %

 $
 15,573

 1.00
 %

 -

 -

 2,461

 3.74

 2.75

 3,524

 4.16

 6,783

 3.84

 Total

 $
 1,000

 0.52
 %

 $
 13,459

 1.53
 %

 $

 2.82
 %

 $
 7,029

 2.59
 %

 $
 22,356

 1.87
 %

 Securities held to maturity:

 PACE

 $
 -

 -
 %

 $
 -

 -%

 $

 6.87
 %

 $

 7.29
 %

 $

 7.14
 %

 PID/TIRZ

 -

 -

 4.12

 -

 -

 21,031

 6.27

 21,712

 6.20

 Total

 $
 -

 -
 %

 $

 4.12
 %

 $

 6.87
 %

 $
 21,625

 6.30
 %

 $

 6.24
 %

 Loan Portfolio Composition

 Total loans, excluding allowance
for credit losses, increased $168.3 million, or 33.6%, to $669.4 million at December 31, 2024, compared to $501.1 million at December
31, 2023. The increase includes $143.0 million for SBA loans, $17.2 million for real estate loans and a $10.9 million increase in factored
receivables. The increases were partly offset by a $2.4 million decrease in commercial and industrial loans. SBA loans comprise the largest
group of loans in our portfolio totaling $411.9 million, or 61.5% of the total loans, at December 31, 2024, compared to $268.9 million,
or 53.7% of the total loans, at December 31, 2023. Commercial and industrial loans totaled $80.1 million, or 12% of the total loans, at
December 31, 2024, compared to $82.5 million, or 16.5% of the total loans, at December 31, 2023. Real estate loans totaled $138.8
million, or 20.7% of the total loans, at December 31, 2024, compared to $121.6 million, or 24.2% of the total loans, at December 31, 2023.

 The following table sets
forth the composition of our loans held for investment as of the dates indicated:

 2024

 2023

 Percent

 Percent

 $

 11.9
 %

 $
 82,483

 16.5
 %

 0.1

 0.2

 8,209

 1.2

 8,181

 1.6

 11.5

 13.7

 8.0

 8.9

 SBA 7(a) guaranteed

 231,931

 34.7

 162,144

 32.4

 SBA 7(a) unguaranteed

 96,466

 14.4

 64,858

 12.9

 SBA 504

 12.5

 41,906

 8.4

 USDA

 2,120

 0.3

 2,124

 0.4

 5.4

 5.0

 Total Loans

 $

 100.0
 %

 $

 100.0
 %

 The Company initially records
the guaranteed portion of the SBA 7(a) and USDA loans as held for sale at the lower of cost or fair value. Loans held for sale totaled
$47.0 million and $26.6 million at December 31, 2024 and 2023, respectively. During the year ended December 31, 2024 and 2023, the Company
elected to reclassify $91.6 million and $52.6 million of the SBA loans held for sale to held for investment. The Company determined that
holding these loans provides better long-term risk adjusted returns than selling the loans.

 Loan Origination/Risk
Management. The Company has certain lending policies and procedures in place that are designed
to maximize loan income with an acceptable level of risk. Management reviews and approves these policies and procedures on an annual basis
and makes changes as appropriate. Management receives and reviews monthly reports related to loan originations, loan quality, concentrations
of credit, loan delinquencies and nonperforming and potential problem loans. Diversification in the loan portfolio is a means of managing
risk associated with fluctuations in economic conditions, both by type of loan and geographic location.

loans, which are predominantly loans to dentists, are underwritten based on historical and projected income of the business and individual
borrowers and guarantors. The Company utilizes a comprehensive global debt service coverage analysis to determine debt service coverage
ratios. This analysis compares global cash flow of the borrowers and guarantors on an individual credit to existing and proposed debt
after consideration of personal and business related other expenses. Collateral is generally a lien on all available assets of the business
borrower including intangible assets. Credit worthiness of individual borrowers and guarantors is established through the use of credit
reports and credit scores.

 Consumer loans are evaluated
on the basis of credit worthiness as established through the use of credit reports and credit scores. Additional credit quality indicators
include borrower debt to income ratios based on verifiable income sources.

 Real estate mortgage loans
are evaluated based on collateral value as well as global debt service coverage ratios based on historical and projected income from all
related sources including the collateral property, the borrower, and all guarantors where applicable.

 The Company originates SBA
loans which are sometimes sold into the secondary market. The Company continues to service these loans after sale and is required under
the SBA programs to retain specified amounts. The two primary SBA loan programs that the Company offers are the basic SBA 7(a) loan guaranty
program and the SBA 504 loan program in conjunction with junior lien financing from a Certified Development Company ("CDC").

 The SBA 7(a) program serves
as the SBA's primary business loan program to help qualified small businesses obtain financing when they might not be eligible for
business loans through normal lending channels. Loan proceeds under this program can be used for most business purposes including working
capital, machinery and equipment, furniture and fixtures, land and building (including purchase, renovation and new construction), leasehold
improvements and debt refinancing. Loan maturity is generally up to 10 years for non-real estate collateral and up to 25 years for real
estate collateral. The SBA 7(a) loan is approved and funded by a qualified lender, partially guaranteed by the SBA and subject to applicable
regulations. In general, the SBA guarantees up to 75% of the loan amount depending on loan size. The Company is required by the SBA to
service the loan and retain a contractual minimum of 5% on all SBA 7(a) loans, but generally retains 25% (the unguaranteed portion). The
servicing spread is 1% of the guaranteed portion of the loan that is sold in the secondary market.

 The SBA 504 program is an
economic development-financing program providing long-term, low down payment loans to businesses. Typically, an SBA 504 project includes
a loan secured from a private-sector lender with a senior lien, a loan secured from a CDC (funded by a 100% SBA-guaranteed debenture)
with a junior lien covering up to 40% of the total cost, and a contribution of at least 10% equity from the borrower. Debenture limits
are $5.0 million for regular 504 loans and $5.5 million for those SBA 504 loans that meet a public policy goal.

 The SBA has designated the
Bank as a "Preferred Lender." As a Preferred Lender, the Bank has been delegated loan approval, closing and most servicing
and liquidation authority from the SBA.

 The Company also offers
Business & Industry ("B&I") program loans through the USDA. These loans are similar to the SBA product, except they
are guaranteed by the USDA. The guaranteed amount is generally 80%. B&I loans are made to businesses in designated rural areas and
are generally larger loans to larger businesses than the SBA 7(a) loans. Similar to the SBA 7(a) product, they can be sold into the secondary
market. These loans can be utilized for rural commercial real estate and equipment. The loans can have maturities up to 30 years and the
rates can be fixed or variable.

 Construction and land development
loans are evaluated based on the borrower's and guarantor's credit worthiness, past experience in the industry, track record
and experience with the type of project being considered, and other factors. Collateral value is determined generally by independent appraisal
utilizing multiple approaches to determine value based on property type.

 For all loan types, the
Company establishes guidelines for its underwriting criteria including collateral coverage ratios, global debt service coverage ratios,
and maximum amortization or loan maturity terms.

 Loan concentrations are
considered to exist when there are amounts loaned to multiple borrowers engaged in similar activities that would cause them to be similarly
impacted by economic or other conditions. As of December 31, 2024, our loan portfolio included $76.2 million of loans, approximately 11.4%
of our total funded loans to the dental industry, as compared to $78.2 million of loans, approximately 15.6% of our total funded loans
December 31, 2023. We believe that these loans are to credit worthy borrowers and are diversified geographically.

 The following table presents
the contractual maturity distribution of loans held for investment and the distribution between fixed and floating interest rate loans
held for investment as of December 31, 2024:

 Maturity Distribution of Loan Portfolio

 One Year
 or Less

 Over One Year
 Through
 Five Years

 Over Five Years
 Through
 Fifteen Years

 Over
 Fifteen Years

 Total
 Loans
 Receivable

 $
 2,681

 $
 12,566

 $
 64,822

 $
 -

 $

 -

 -

 6,148

 -

 1,368

 8,209

 12,752

 21,868

 41,644

 7,323

 1,309

 44,977

 SBA 7(a) guaranteed

 5,817

 97,807

 128,274

 231,931

 SBA 7(a) unguaranteed

 2,867

 43,765

 49,793

 96,466

 SBA 504

 -

 -

 11,472

 72,048

 USDA

 -

 -

 -

 2,120

 2,120

 -

 -

 -

 Total

 $
 47,217

 $
 40,883

 $
 241,043

 $
 340,224

 $

 Loans Due After One Year

 Fixed
 Rate

 Floating
 Rate

 Total

 $
 73,053

 $
 4,335

 $
 77,388

 -

 5,878

 1,638

 7,516

 7,395

 68,869

 76,264

 46,287

 46,521

 SBA 7(a) guaranteed

 3,531

 228,367

 231,898

 SBA 7(a) unguaranteed

 1,147

 95,278

 96,425

 SBA 504

 -

 USDA

 -

 2,120

 2,120

 -

 -

 -

 Total

 $
 91,736

 $
 530,414

 $
 622,150

 Scheduled contractual principal
repayments of loans do not reflect the actual life of such assets. The average life of loans is less than their average contractual terms
due to prepayments.

 Loans acquired in acquisitions
are initially recorded at fair value with no carryover of the related allowance for credit losses. The fair value of the loans is determined
using market participant assumptions in estimating the amount and timing of principal and interest cash flows initially expected to be
collected on the loans and discounting those cash flows at an appropriate market rate of interest. Under the accounting model for acquired
loans, the excess of cash flows expected to be collected over the carrying amount of the loans, referred to as the "accretable yield,"
is accreted into interest income over the life of the loans.

 Non-performing Assets

 Our primary business segments
are Banking and Other Financial Services, and as outlined above, the Banking segment's primary business is lending. That activity
entails potential credit losses, the magnitude of which depends on a variety of economic factors affecting borrowers which are beyond
our control. While we have instituted underwriting guidelines and policies and credit review procedures to protect us from avoidable credit
losses, some losses will inevitably occur.

 Loans are considered past
due when principal and interest payments have not been received as of the date such payments are contractually due. Loans are placed on
non-accrual status when management has concerns relating to the ability to collect the loan interest and generally when such loans are
90 days or more past due.

 Foreclosed assets represent
property acquired as the result of borrower defaults on loans. Foreclosed assets are recorded at estimated fair value, less estimated
selling costs, at the time of foreclosure. Write-downs occurring at foreclosure are charged against the allowance for possible credit
losses. On an ongoing basis, properties are appraised as required by market indications and applicable regulations. Write-downs are provided
for subsequent declines in value and are included in other non-interest expense along with other expenses related to maintaining the properties.

 The following table sets
forth certain information regarding non-performing assets by type, including ratios of such loans to total loans as of the dates indicated:

 Loan

Category to

 Total Loans

 Loan

Category to

 Total Loans

 Non-accrual loans:

 $

 2,278

 0.34

 %

 $

 0.02

 %

 0.02

 0.02

 SBA guaranteed

 11,374

 1.70

 1,951

 0.39

 SBA unguaranteed

 2,137

 0.32

 0.05

 Total non-accrual loans

 15,908

 2.38

 2,423

 0.48

 Commercial and industrial past due 90 days

 -

 -

 0.00

 Factored receivables past due 90 days

 -

 0.03

 Total non-performing assets

 $

 15,938

 2.38

 %

 $

 2,570

 0.51

 %

 Allowance for Credit Losses

 As discussed in Note 1
– Summary of Significant Accounting Policies in the accompanying notes to consolidated financial statements, our policies and procedures
related to accounting for credit losses changed on January 1, 2023, in connection with the adoption of the CECL methodology as codified
in ASC 326. In the case of loans and securities, allowances for credit losses are contra-asset valuation accounts, calculated in accordance
with ASC 326, that are deducted from the amortized cost basis of these assets to present the net amount expected to be collected.
When management deems all or a portion of a loan to be uncollectible, the appropriate amount is charged-off against the allowance. Subsequent
recoveries, if any, are credited to the allowance. In the case of off-balance-sheet credit exposures, the allowance for credit losses
is a liability account, calculated in accordance with ASC 326, reported as a component of other liabilities in our consolidated balance
sheets. The amount of each allowance account represents management's best estimate of CECL on these financial instruments considering
available information, from internal and external sources, relevant to assessing exposure to credit loss over the contractual term of
the instrument. Relevant available information includes historical credit loss experience, current conditions and reasonable and supportable
forecasts. While historical credit loss experience provides the basis for the estimation of expected credit losses, adjustments to historical
loss information may be made for differences in current portfolio-specific risk characteristics, environmental conditions or other relevant
factors. While management utilizes its best judgment and information available, the ultimate adequacy of our allowance accounts is dependent
upon a variety of factors beyond our control, including the performance of our portfolios, the economy, changes in interest rates and
the view of the regulatory authorities toward classification of assets. For additional information regarding critical accounting policies,
refer to Note 1 – Summary of Significant Accounting Policies and Note 3 - Loans and Allowance for Credit Losses in
the accompanying notes to the consolidated financial statements.

 The Company uses the open
pool life method to estimate expected losses for all of the Company's loan pools. The loan portfolio pools were selected in order
to generally align with the loan categories specified in the quarterly call reports required to be filed with the Federal Financial Institutions
Examination Council, except that the dental, SBA and USDA loans, are segregated in separate pools. For dental and SBA 7(a) loans, the
Company adjusts the pool life for expected prepayment speeds.

 For all loan pools, management
has determined two years represents a reasonable and supportable forecast period and reverts to a historical loss rate over two years
on a straight-line basis. Management leverages economic projections from a reputable and independent third party to inform its loss driver
forecasts over the two year forecast period. Other internal and external indicators of economic forecasts are also considered by management
when developing the forecast metrics.

 Management estimates the
allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions,
and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses.
Adjustments to historical loss information are made for differences in current loan-specific risk characteristics. See the discussion
of Q-Factors described below.

 The allowance for credit
losses is measured based on call report segment as these types of loans exhibit similar risk characteristics. The allowance for credit
losses for each segment is measured through the use of the open pool method. Loans that do not share risk characteristics are evaluated
on an individual basis. Loans evaluated individually are not also included in the collective evaluation. For those loans that are classified
as impaired, an allowance is established when the discounted cash flows, collateral value or observable market price of the impaired loan
is lower than the carrying value of that loan.

 Expected credit losses are
estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate. The contractual term excludes expected
extensions, renewals and modifications unless management has a reasonable expectation at the reporting date that troubled debt restructuring
will be executed with an individual borrower or the extension or renewal options are included in the original or modified contract at
the reporting date and are not unconditionally cancellable by the Company.

 Management qualitatively
adjusts model results for risk factors ("Q-Factor") that are not considered within our modeling processes but are nonetheless
relevant in assessing the expected credit losses within our loan pools. These Q-Factors and other qualitative adjustments may increase
or decrease management's estimate of expected credit losses by a calculated percentage or amount based upon the estimated level
of risk. The various risks that may be considered in making Q-Factor and other qualitative adjustments include, among other things, the
impact of (i) changes in lending policies, procedures and strategies; (ii) staff experience; (iii) changes in volume and trends in classified
loans, delinquencies and nonaccruals; (iv) concentration risk; (v) trends in underlying collateral values; (vi) external factors such
as competition, legal and regulatory environment; and (vii) economic conditions.

 Upon the adoption of ASC 326
effective on January 1, 2023, the total amount of the allowance for credit losses for loans estimated using the CECL methodology
increased $1.4 million compared to the total amount of the allowance for credit losses for loans estimated as of December 31, 2022
using the prior incurred loss model under GAAP.

 The following table sets
forth the allocation of the allowance for credit losses, the percentage of loans in each category to total gross loans and the ratio of
allowance allocated to loans in each category as of the date indicated:

 Allocated

 % of Loan

 Portfolio

 ACL to

 Loans

 Allocated

 % of Loan

 Portfolio

 ACL to

 Loans

 $
 2,418

 11.9
 %

 3.0
 %

 $
 2,495

 16.5
 %

 3.0
 %

 0.1

 3.3

 0.2

 2.0

 1.2

 1.1

 1.6

 0.9

 11.5

 1.0

 13.7

 0.9

 8.1

 0.3

 8.9

 0.3

 SBA

 5,149

 61.5

 1.2

 2,484

 53.7

 0.9

 USDA

 0.3

 1.0

 0.4

 0.9

 Factored receivables

 5.4

 1.5

 5.0

 1.8

 Total Loans

 $
 9,183

 100.0
 %

 1.4
 %

 $
 6,308

 100.0
 %

 1.3
 %

 The table below presents a summary of the Company's
net loan credit experience and provisions to the allowance for credit losses for the period indicated:

 As of and for the Year Ended

 December 31

 2024

 2023

 Average loans outstanding

 $
 613,955

 $
 491,448

 Gross loans held for investment outstanding at end of period

 $

 $

 Allowance for credit losses at beginning of period

 $
 6,308

 $
 4,513

 Impact of adopting ASC 326

 -

 1,390

 4,583

 1,333

 Charge offs:

 (12
)

 (214
)

 SBA 7(a)

 (1,238
)

 (329
)

 (818
)

 (637
)

 Total charge-offs

 (2,068
)

 (1,180
)

 Recoveries:

 -

 SBA 7(a)

 Total recoveries

 Net charge-offs

 (1,708
)

 (928
)

 Allowance for credit losses at end of period

 $
 9,183

 $
 6,308

 Ratio of allowance to end of period loans

 1.37
 %

 1.26
 %

 Ratio of net charge-offs to average loans

 0.28
 %

 0.19
 %

 Deposits are attracted principally
from our primary geographic market area with the exception of time deposits, which, due to the Company's attractive rates, are attracted
from across the nation. The Company offers a broad selection of deposit products, including demand deposit accounts, NOW accounts, money
market accounts, regular savings accounts, term certificates of deposit and retirement savings plans (such as IRAs). Deposit account terms
vary, with the primary differences being the minimum balance required, the time period the funds must remain on deposit, and the associated
interest rates. Management sets the deposit interest rates periodically based on a review of deposit flows and a survey of rates among
competitors and other financial institutions. The Company relies on customer service and long-standing relationships with customers to
attract and retain deposits, and also on CD listing services.

 The Company participates
in the One-Way Buy Insured Cash Sweep ("ICS") service, which provides for one-way buy transactions among banks for the purpose
of purchasing cost-effective floating-rate funding without collateralization or stock purchase requirements. Management believes these
sources represent a reliable and cost-efficient alternative funding source for the Company. However, to the extent that our condition
or reputation deteriorates, or to the extent that there are significant changes in market interest rates which we do not elect to match,
we may experience an outflow of brokered deposits. In that event we would be required to obtain alternate sources for funding. As of December
31, 2024, total deposits included $50.0 million of ICS brokered deposits.

 Total deposits increased
$184.3 million, or 35.0%, to $711.1 million as of December 31, 2024, from $526.9 million as of December 31, 2023. The following table
sets forth our average deposit account balances, the percentage of each type of deposit to total deposits, and average cost of funds for
each category of deposits for the periods indicated:

 Year Ended December 31, 2024

 Year Ended December 31, 2023

 Percent of

 Rate

 Percent of

 Rate

 Non-interest-bearing deposits

 $

 67,804

 10.5

 %

 0.00

 %

 $

 92,230

 18.0

 %

 0.00

 %

 Savings and interest-bearing demand

 10,084

 1.6

 0.48

 12,041

 2.3

 0.47

 Money market accounts

 152,368

 23.7

 5.03

 132,471

 25.9

 4.64

 412,925

 64.2

 5.26

 275,540

 53.8

 4.19

 Total deposits

 $

 643,181

 100.0

 %

 4.58

 %

 $

 512,282

 100.0

 %

 3.46

 %

 The
following table provides information on the maturity distribution of the time deposits of $250,000 and over as of December 31, 2024:

 Maturing

 Three months or less

 $
 42,504

 37.9
 %

 Over three months to six months

 31,934

 28.4

 Over six months to 12 months

 31,788

 28.3

 Over 12 months

 6,072

 5.4

 Total

 $
 112,298

 100.0
 %

 Total estimated uninsured deposits, including
certificates of deposits, were approximately $48.7 million (6.8% of total deposits) and $59.3 million (11.3% of total deposits) as of
December 31, 2024 and 2023, respectively.

 Borrowings

 The table below presents
balances of each of the borrowing facilities as of the dates indicated:

 2024

 2023

 Borrowings:

 FHLB borrowings

 $

 $
 -

 FRB borrowings (BTFP)

 -

 21,000

 $
 22,000

 $
 33,000

 The Company has a credit
line with the FHLB with borrowing capacity of $67.0 million secured by commercial loans. The Company determines its borrowing needs and
renews the advances accordingly at varying terms. The Company had $10.0 million borrowings with FHLB as of December 31, 2024 and no borrowing
with FHLB as of December 31, 2023.

 The Company also has a credit
line with the FRB with borrowing capacity of $38.6 million, which is secured by commercial loans. The company had no borrowings from the
FRB at December 31, 2024 and 2023.

 As part of the BTFP, the
Federal Reserve offered loans of up to one year in length to banks and other eligible depository institutions pledging U.S. treasuries,
agency debt and mortgage-backed securities, and other qualifying assets as collateral, which are assessed at par value. The Bank pledged
available for sale securities with par value of $23.3 million to provide additional liquidity to meet the needs of depositors as of December
31, 2023. The Company borrowed $21.0 million related to the BTFP as of December 31, 2023, with interest rate of 4.85% and maturing on
December 26, 2024. The borrowing was paid off during October 2024 and the securities were unpledged. The Company had no borrowings under
the BTFP as of December 31, 2024.

 As of December 31, 2024 and
2023, T Bancshares had subordinated notes totaling $12.0 million, consisting of $8.0 million issued in 2017 bearing an interest rate of
three month CME Term SOFR plus a tenor spread adjustment of 0.26161% plus 5.125%, with interest payable quarterly and maturing on July
20, 2027, at which all principal is due, and $4.0 million issued in 2018 bearing interest rate of three month CME Term SOFR plus a tenor
spread adjustment of 0.26161% plus 4.348%, with interest payable quarterly and maturing on March 31, 2028, at which all principal is due.
 The subordinated notes are unsecured and subordinated in right of payment to the payment of our
existing and future senior indebtedness and structurally subordinated to all existing and future indebtedness of our subsidiaries.

 Capital Resources and Regulatory Capital Requirements

 Shareholders' equity
increased $6.5 million, or 6.2%, to $113.4 million as of December 31, 2024, from $106.9 million as of December 31, 2023. The increase
included net income of $13.9 million, $98,000 related to stock compensation expense, $180,000 net after-tax other comprehensive income.
The increases were partly offset by the repurchase of stock options and common stock in the amount of $1.3 million and $1.6 million, respectively,
and dividends paid on the Series B preferred stock and on the common stock in the amounts of $1.9 million and $2.8 million, respectively.

 Together with the Bank,
the Company is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum
capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could
have a direct material effect on the Bank's and, accordingly, the Company's financial statements. Under capital adequacy guidelines
and the regulatory framework for prompt corrective action, the Company must meet specific capital guidelines that involve quantitative
measures of the Company's assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices.
The Company's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk
weightings and other factors. As of December 31, 2024, the Company and the Bank met all capital adequacy requirements to which they were
subject. As of December 31, 2024, the Bank qualified as "well capitalized" under the prompt corrective action regulations
of Basel III and the OCC.

 Quantitative measures established
by regulations to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of total
and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined in the regulations), common equity Tier 1 capital
(as defined in the regulations) to risk-weighted assets, and of Tier 1 capital (as defined in the regulations) to average assets (as defined
in the regulations).

 The following table presents our regulatory capital
ratios, as well as those of the Bank, as of the dates indicated:

 Ratio

 Ratio

 Tectonic Financial, Inc.

 Tier 1 Capital (to Average Assets)

 $
 93,406

 11.32
 %

 $
 86,847

 13.97
 %

 Common Equity Tier 1 (to Risk Weighted Assets)

 76,156

 13.37

 69,597

 15.74

 Tier 1 Capital (to Risk Weighted Assets)

 93,406

 16.39

 86,847

 19.65

 Total Capital (to Risk Weighted Assets)

 100,559

 17.65

 92,385

 20.90

 Tier 1 Capital (to Average Assets)

 $

 11.46
 %

 $

 14.26
 %

 Common Equity Tier 1 (to Risk Weighted Assets)

 16.62

 20.04

 Tier 1 Capital (to Risk Weighted Assets)

 16.62

 20.04

 Total Capital (to Risk Weighted Assets)

 100,615

 17.88

 92,957

 21.29

 In addition to the regulatory
requirements of the federal banking agencies, Sanders Morris is subject to the regulatory framework applicable to registered investment
advisors under the SEC's Division of Investment Management. Sanders Morris is also regulated by FINRA, which, among other requirements,
imposes minimums on its net regulatory capital. As of December 31, 2024, Sanders Morris is in compliance with FINRA's net regulatory
capital requirements.

 Liquidity

 Our liquidity relates to
our ability to maintain a steady flow of funds to support our ongoing operating, investing and financing activities. Our board of directors
establishes policies and analyzes and manages liquidity to ensure that adequate funds are available to meet normal operating requirements
in addition to unexpected customer demands for funds, such as high levels of deposit withdrawals or loan demand, in a timely and cost-effective
manner. The most important factor in the preservation of liquidity is maintaining public confidence that facilitates the retention and
growth of a large, stable supply of core deposits and funds. Ultimately, public confidence is generated through profitable operations,
sound credit quality and a strong capital position. Liquidity management is viewed from a long-term and a short-term perspective as well
as from an asset and liability perspective. We monitor liquidity through a regular review of loan and deposit maturities and forecasts,
incorporating this information into a detailed projected cash flow model.

 The Bank's liquidity
is monitored by its management, the Asset-Liability Committee and its board of directors who review historical funding requirements, current
liquidity position, sources and stability of funding, marketability of assets, options for attracting additional funds, and anticipated
future funding needs, including the level of unfunded commitments.

 The Company's primary
sources of funds are retail, small business, custodial, commercial deposits, brokered deposits, loan repayments, maturity of investment
securities, other short-term borrowings, and other funds provided by operations. Our liquidity position is enhanced by our ability to
raise additional funds as needed in the wholesale markets. While scheduled loan repayments and maturing investments are relatively predictable,
deposit flows and loan prepayments are more influenced by interest rates, general economic conditions, and competition. The Company will
maintain investments in liquid assets based upon management's assessment of (1) the need for funds, (2) expected deposit flows,
(3) yields available on short-term liquid assets, and (4) objectives of the asset/liability management program.

 The Company had cash and
cash equivalents of $63.7 million, or 7.4% of total assets, as of December 31, 2024. In addition to the on-balance sheet liquidity available,
the Company has lines of credit with the FHLB and the FRB, which provide the Company with a source of off-balance sheet liquidity. As
of December 31, 2024, the Company's borrowing capacity with the FHLB was $67.0 million, or 7.8% of assets, of which $10.0 million
was utilized, and borrowing capacity with the FRB was $38.6 million, or 4.5% of assets, of which none was utilized. In addition, as of
December 31, 2024, the Company had approximately $230.4 million of SBA guaranteed loans held for investment that could be sold to investors.

 Off-Balance Sheet Arrangements and Contractual
Obligations

 We are a party to financial
instruments with off-balance sheet risk in the normal course of business to meet the financing needs of our customers. These financial
instruments include commitments to extend credit and standby letters of credit. These instruments involve, to varying degrees, elements
of credit risk in excess of the amount recognized in the accompanying balance sheets. Our exposure to credit loss in the event of non-performance
by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual
amount of those instruments. We follow the same credit policies in making commitments and conditional obligations as we do for on-balance
sheet instruments.

 Commitments to extend credit
are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally
have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments may expire without
being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The amount of credit extended is
based on management's credit evaluation of the customer and, if deemed necessary, may require collateral.

 Standby letters of credit
are conditional commitments issued by us to guarantee the performance of a customer to a third party. The credit risk involved in issuing
letters of credit is essentially the same as that involved in extending loans to customers.

 The following table presents
future contractual obligations to make future payments, excluding interest, for the periods indicated:

 Less than

 One

Year

 One to

 Three

Years

 Over Three

to Five

Years

 Over Five

 Years

 Total

 FHLB borrowings

 $

 $

 -

 $

 -

 $

 -

 $

 -

 8,000

 4,000

 -

 457,376

 25,290

 -

 483,083

 Minimum lease payments

 2,209

 Total

 $

 468,145

 $

 34,028

 $

 4,746

 $

 $

 507,292

 The following table presents
contractual financial commitments for the periods indicated, however some of these commitments may expire unused or only partially used,
so the total amounts do not necessarily reflect future cash requirements.

 Less than

 One

Year

 One to

Three

Years

 Over Three

to Five

Years

 Over Five

 Years

 Total

 Undisbursed loan commitments

 $

 12,024

 $

 $

 -

 $

 60,294

 $

 72,343

 Standby letters of credit

 -

 -

 -

For Credit Losses - Off-Balance-Sheet Credit Exposures The allowance for credit losses for off-balance sheet credit exposures
is calculated under the CECL model, representing expected credit losses over the contractual
period for which the Company is exposed to credit risk resulting from a contractual obligation to extend credit. Off-balance sheet credit
exposures primarily consist of amounts available under outstanding commitments to extend credit and letters of credit detailed above.
 The allowance for credit losses for off-balance sheet credit exposures is estimated by loan segment
at each balance sheet date using the same methodologies as portfolio loans, taking into consideration the likelihood that funding will
occur based on historical utilization rates. Upon adoption of ASC 326
on January 1, 2023, the impact of adoption was $238,000 to the allowance for credit losses for off-balance-sheet credit exposure,
and subsequent to adoption we recognized a credit loss benefit related to off-balance-sheet credit exposures totaling $45,000 for the
year ended December 31, 2023, leaving a balance of $193,000 in the allowance for credit losses for off-balance sheet credit exposures
as of December 31, 2023. Further information regarding our policies and methodology used to estimate the allowance for credit losses for
off-balance-sheet credit exposures is presented in Note 12 – Commitments and Contingencies in the accompanying notes to consolidated
financial statements.

 Item 7A. Quantitative
and Qualitative Disclosures about Market Risk.

 Interest Rate Sensitivity and Market Risk

 As a financial institution,
our primary component of market risk is interest rate volatility. Our asset liability management policy provides management with guidelines
for effective funds management and we have established a measurement system for monitoring the net interest rate sensitivity position.

 Fluctuations in interest
rates will ultimately impact both the level of income and expense recorded on most of our assets and liabilities, and the market value
of all interest-earning assets and interest-bearing liabilities, other than those which have a short term to maturity. Interest rate risk
is the potential of economic losses due to future interest rate changes. These economic losses can be reflected as a loss of future net
interest income and/or a loss of current fair market values. The objective is to measure the effect on net interest income and to adjust
the balance sheet to minimize the inherent risk while at the same time maximizing income.

 We manage exposure to interest
rates by structuring the balance sheet in the ordinary course of business. We use no off-balance-sheet financial instruments to manage
interest rate risk.

 Our exposure to interest
rate risk is managed by the Bank's Asset Liability Committee in accordance with policies approved by the Bank's board of directors.
The committee formulates strategies based on appropriate levels of interest rate risk. In determining the appropriate level of interest
rate risk, the committee considers the impact on earnings and capital of the current outlook on interest rates, potential changes in interest
rates, liquidity, business strategies and other factors.

 The Asset Liability Committee
meets regularly to review, among other things, the sensitivity of assets and liabilities to interest rate changes, the book and market
values of assets and liabilities, unrealized gains and losses, purchase and sale activities, commitments to originate loans and the maturities
of investments and borrowings. Additionally, the committee reviews liquidity, cash flow flexibility, maturities of deposits and consumer
and commercial deposit activity. We employ methodologies to manage interest rate risk which include an analysis of relationships between
interest-earning assets and interest-bearing liabilities, and an interest rate shock simulation model.

 We use interest rate risk
simulation models and shock analysis to test the interest rate sensitivity of net interest income and the impact of changes in interest
rates on other financial metrics. The assumptions used are inherently uncertain and, as a result, the model cannot precisely measure future
net interest income or precisely predict the impact of fluctuations in market interest rates on net interest income. Actual results will
differ from the model's simulated results due to timing, magnitude and frequency of interest rate changes as well as changes in
market conditions and the application and timing of various management strategies.

 On at least an annual basis,
we run various stress tests to measure the impact on net interest income from changes in market interest rates under various scenarios.
Under the static model, rates are shocked instantaneously and ramped rates change over a twelve-month horizon based upon parallel yield
curve shifts. Parallel shock scenarios assume instantaneous parallel movements in the yield curve compared to a flat yield curve scenario.
Additionally, we run non-parallel simulation involving analysis of interest income and expense under various changes in the shape of the
yield curve.

 The Company's asset
liability management model indicated that it was in an asset sensitive position in terms of its income simulation as of December 31,
2024. The following table summarizes the impact of an instantaneous, sustained simulated change in net interest income over a 12-month
horizon as of December 31, 2024

 Change in Interest Rates (basis points)

 % Change

 in Net

 Income

 +200

 8.99

 +100

 4.49

 -100

 (4.20
)

 -200

 (7.85
)

 We have found that, historically,
interest rates on deposits change more slowly than changes in the discount and federal funds rates. This assumption is incorporated into
the simulation model and is generally not fully reflected in a gap analysis, meaning that process by which we measure the gap between
interest rate sensitive assets verses interest rate sensitive liabilities. The assumptions incorporated into the model are inherently
uncertain and, as a result, the model cannot precisely measure future net interest income or precisely predict the impact of fluctuations
in market interest rates on net interest income. Actual results will differ from the model's simulated results due to timing, magnitude
and frequency of interest rate changes as well as changes in market conditions and the application and timing of various strategies.

 Item 8. Financial Statements and Supplementary Data

 REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 To
the Board of Directors and Shareholders of

Financial, Inc.

 Opinion
on the Financial Statements

 We
have audited the accompanying consolidated balance sheets of Tectonic
Financial, Inc. (the "Company") as of December 31, 2024, and 2023, and the
related consolidated statements of income, comprehensive income, changes in shareholders' equity, and cash flows for
the years then ended, and the related notes (collectively referred to as the "financial
statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the
Company as of December 31, 2024, and 2023, and the results of their operations and their cash flows for the years then ended, in
conformity with accounting principles generally accepted in the United States of America.

 Basis
for Opinion

 These
financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial
statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United
States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company
is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits,
we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion
on the effectiveness of the entity's internal control over financial reporting. Accordingly, we express no such opinion.

 Our
audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error
or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits
provide a reasonable basis for our opinion.

 Critical
Audit Matter

 The
critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was
communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are
material to the financial statements and (2) involved especially challenging, subjective, or complex judgments. The communication of
the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by
communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or
disclosures to which it relates.

for Credit Losses for Loans – Qualitative Factors

 Description
of the Matter

 As
described in Notes 1 and 3 to the consolidated financial statements, the Company accounts for credit losses under Accounting Standards
Codification ("ASC") 326, Financial Instruments – Credit Losses. ASC 326 requires the measurement of expected
lifetime credit losses for financial assets measured at amortized cost. As of December 31, 2024, the balance of the allowance for credit
losses on loans was approximately $9.2 million. The Company's allowance for credit losses represents management's best estimate
of expected losses in the loan portfolio. Estimates of expected credit losses for loans are based on reasonable and supportable forecasts
of future economic conditions, historical loss experience and qualitative factors.

estimates the allowance for credit losses balance using relevant available information, from internal and external sources, relating
to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience provides the basis
for the estimation of expected credit losses. Adjustments to historical loss information are made for differences in changes in
lending policies and procedures, including changes in underwriting standards, collection, charge-off, and recovery practices not
considered elsewhere in estimating credit losses, changes in experience, ability, and depth of lending management and other relevant
staff, changes in the volume and severity of past due loans, the volume of non-accrual loans, and the volume and severity of
adversely classified or graded loans, changes in the international, national, regional and local economic and business conditions
and developments that affect the collectability of the portfolio, including the condition of various market segments, unemployment
rate; dental practice global debt service coverage ratio, the existence and effect of any concentration of credit and changes in the
level of such concentrations, and commercial real estate lending internal policy and regulatory threshold concentration limits or
other relevant factors.

 Our
determination that auditing the qualitative adjustments of the allowance for credit losses for loans is a critical audit matter is a
result of the high degree of subjectivity involved in management's assessment of the risk of loss associated with the qualitative
adjustments and the determination of the adjustment amounts to historical loss rates for current conditions, and reasonable and supportable
forecasts.

 How
We Addressed the Matter in Our Audit

 The
primary procedures performed to address this critical audit matter included:

 Obtaining
 an understanding of the internal controls over the Company's preparation and review
 of the qualitative factors used in the allowance for credit loss calculation.

 Performing
 substantive testing of management's process for assessing and assigning the qualitative
 factors, including assessing the relevance and reliability of internally sourced and externally
 sourced data used to develop the factors and evaluating for reasonableness the judgments
 and assumptions used in the determination and adequacy of the adjustment amounts.

 Testing
 the completeness and accuracy of the internally sourced data used in the calculation.

 Evaluation
 of the reasonableness of management's judgments related to qualitative factors including
 forecasts to test the qualitative factors' conformity with management's policies
 and consistency applied period over period.

 /s/
 Whitley Penn LLP

 We
have served as the Company's auditor since 2018.

 Plano,
Texas

 March
31, 2025

BALANCE SHEETS

 2024

 2023

 (In thousands, except share amounts)

 ASSETS

 Cash and due from banks

 $
 5,849

 $
 5,016

 Interest-bearing deposits

 55,864

 52,481

 Federal funds sold

 2,010

 1,270

 Total cash and cash equivalents

 63,723

 Securities available for sale

 Securities held to maturity

 24,194

 Securities, restricted at cost

 4,284

 4,176

 Loans held for sale

 46,980

 26,573

 Loans, net of allowance for credit losses of $ 9,183 and $ 6,308, respectively

 660,184

 494,787

 Bank premises and equipment, net

 4,730

 4,758

 Goodwill

 Deferred tax asset

 1,433

 Other assets

 17,682

 18,785

 $
 863,380

 $
 677,346

 LIABILITIES

 Demand deposits:

 Non-interest-bearing

 $
 63,130

 $
 68,433

 Interest-bearing

 164,934

 150,023

 483,083

 308,435

 Total deposits

 711,147

 526,891

 Borrowed funds

 21,000

 Other liabilities

 16,804

 10,598

 Total liabilities

 749,951

 570,489

 Commitments and contingencies (see Note 12)

 SHAREHOLDERS' EQUITY

 Preferred Stock 9.00 % fixed to floating rate series B non-cumulative, perpetual ($.01 par value; 1,725,000 shares authorized, 1,725,000 shares issued and outstanding at December 31, 2024, and December 31, 2023)

 Common stock, $ 0.01 par value; 40,000,000 shares authorized; 7,250,453 shares issued and 7,080,101 shares outstanding at December 31, 2024, and 7,186,453 shares issued and 7,102,680 shares outstanding at December 31, 2023

 Additional paid-in capital

 50,015

 51,246

 Treasury stock, at cost; 170,352 shares and 83,773 shares as of December 31, 2024, and December 31, 2023

 ( 3,203
)

 ( 1,575
)

 Retained earnings

 68,168

 58,917

 Accumulated other comprehensive loss

 ( 1,640
)

 ( 1,820
)

 Total shareholders' equity

 113,429

 106,857

 Total liabilities and shareholders' equity

 $
 863,380

 $
 677,346

 See

STATEMENTS OF INCOME

 YEARS

 (In thousands, except per share data and share amounts)

 2024

 2023

 Interest Income

 Loans, including fees

 $
 56,512

 $
 41,612

 2,272

 2,091

 Federal funds sold

 Interest-bearing deposits

 4,791

 2,719

 Interest Expense

 29,441

 17,749

 Borrowed funds

 2,171

 1,357

 31,612

 19,106

 Net interest income

 32,016

 27,361

 4,848

 1,288

 Net interest income after provision for credit losses

 27,168

 26,073

 Non-interest Income

 Trust income

 7,481

 6,442

 Gain on sale of loans

 Advisory income

 18,355

 14,910

 Brokerage income

 8,096

 7,527

 Service fees and other income

 10,548

 10,037

 Rental income

 Total non-interest income

 45,072

 39,804

 Non-interest Expense

 37,022

 31,288

 2,008

 1,984

 Trust expenses

 2,511

 2,265

 Brokerage and advisory direct costs

 2,126

 1,936

 Professional fees

 1,773

 1,813

 1,172

 Other

 7,308

 6,594

 Total non-interest expense

 53,920

 46,821

 Income before Income Taxes

 18,320

 19,056

 Income tax expense

 4,385

 3,836

 Net Income

 Preferred stock dividends

 1,852

 1,553

 Net income available to common stockholders

 $
 12,083

 $
 13,667

 Earnings per common share:

 Basic

 $
 1.71

 $
 1.94

 Diluted

 1.68

 1.87

 Weighted average common shares outstanding

 7,076,436

 7,057,430

 Weighted average diluted shares outstanding

 7,213,951

 7,292,668

 See

STATEMENTS OF COMPREHENSIVE INCOME

 YEARS

 2024

 2023

 Net Income

 $

 $

 Other Comprehensive Income:

 Change in unrealized loss on investment securities available for sale

 Tax effect

 Other comprehensive income

 Comprehensive Income

 $
 14,115

 $
 15,768

 See

STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

 YEARS

 Series B

 Preferred Stock

 Common

 Stock

 Additional

 Paid-in Capital

 Treasury

 Stock

 Retained

 Earnings

 Accumulated

 Other
 Comprehensive
 Loss

 Total

 at January 1, 2023

 $

 50,695

 ( 481
)

 48,564

 ( 2,368
)

 96,498

 Cumulative
 change in accounting principle (adoption of ASC 326)

 -

 -

 -

 -

 ( 1,286
)

 -

 ( 1,286
)

 at January 1, 2023, as adjusted for change in accounting principle (adoption of ASC 326)

 50,695

 ( 481
)

 47,278

 ( 2,368
)

 95,212

 Issuance
 of common stock

 -

 ( 1
)

 -

 -

 -

 -

 Purchase
 of treasury stock at cost

 -

 -

 -

 ( 1,094
)

 -

 -

 ( 1,094
)

 Repayments
 of note receivable utilized to exercise options

 -

 -

 -

 -

 -

 Cash dividends - common stock ($ 0.10 per share)

 -

 -

 -

 -

 ( 2,028
)

 -

 ( 2,028
)

 Cash dividends - Series B preferred stock ($ 0.225 per share)

 -

 -

 -

 -

 ( 1,553
)

 -

 ( 1,553
)

 Net
 income

 -

 -

 -

 -

 -

 Other
 comprehensive income

 -

 -

 -

 -

 -

 Stock
 based compensation

 -

 -

 -

 -

 -

 at December 31, 2023

 $

 $

 $
 51,246

 $
 ( 1,575
)

 $
 58,917

 $
 ( 1,820
)

 $
 106,857

 Purchase
 of treasury stock at cost

 -

 -

 -

 ( 1,628
)

 -

 -

 ( 1,628
)

 Cashout
 of stock options

 -

 -

 ( 1,329
)

 -

 -

 -

 ( 1,329
)

 Cash dividends - common stock ($ 0.10 per share)

 -

 -

 -

 -

 ( 2,832
)

 -

 ( 2,832
)

 Cash dividends - Series B preferred stock ($ 0.268 per share)

 -

 -

 -

 -

 ( 1,852
)

 -

 ( 1,852
)

 Net
 income

 -

 -

 -

 -

 -

 Other
 comprehensive income

 -

 -

 -

 -

 -

 Stock
 based compensation

 -

 -

 -

 -

 -

 at December 31, 2024

 $

 $

 $
 50,015

 $
 ( 3,203
)

 $
 68,168

 $
 ( 1,640
)

 $
 113,429

 See

STATEMENTS OF CASH FLOWS

 YEARS

 2024

 2023

 Cash Flows from Operating Activities

 Net income

 $

 $

 Adjustments to reconcile net income to net cash used in operating activities:

 Loss on disposition of securities not readily marketable

 —

 4,848

 1,288

 Depreciation

 Accretion of discount on loans

 ( 51
)

 ( 19
)

 Core deposit intangible amortization

 Securities discount accretion, net

 ( 106
)

 ( 93
)

 Origination of loans held for sale

 ( 116,530
)

 ( 51,336
)

 Proceeds from payments and sales of loans held for sale

 4,653

 6,632

 Gain on sale of loans

 ( 234
)

 ( 581
)

 Stock based compensation

 Deferred income taxes

 ( 592
)

 ( 56
)

 Servicing assets, net

 Net change in:

 Other assets

 ( 4,513
)

 Other liabilities

 5,940

 ( 608
)

 Net cash used in operating activities

 ( 86,632
)

 ( 33,186
)

 Cash Flows from Investing Activities

 Purchase of securities available for sale

 ( 703,491
)

 ( 405,803
)

 Principal payments, calls and maturities of securities available for sale

 706,555

 404,198

 Principal payments of securities held to maturity

 1,517

 1,115

 Purchase of securities, restricted

 ( 20,886
)

 ( 11,502
)

 Proceeds from sale of securities, restricted

 20,778

 10,822

 Net change in loans

 ( 78,287
)

 Purchases of premises and equipment

 ( 213
)

 ( 376
)

 Net cash used in investing activities

 ( 74,027
)

 ( 643
)

 Cash Flows from Financing Activities

 Net change in demand deposits

 9,608

 ( 12,879
)

 Net change in time deposits

 174,648

 46,745

 Proceeds from borrowed funds

 728,600

 471,900

 Repayment of borrowed funds

 ( 739,600
)

 ( 450,900
)

 Repayments on note receivable utilized to exercise stock options

 —

 Dividends paid on common stock

 ( 2,832
)

 ( 2,028
)

 Dividends paid on Series B preferred shares

 ( 1,852
)

 ( 1,553
)

 Cash out of stock options

 ( 1,329
)

 —

 Purchase of treasury stock at cost

 ( 1,628
)

 ( 1,094
)

 Net cash provided by financing activities

 165,615

 50,441

 Net change in cash and cash equivalents

 4,956

 16,612

 Cash and cash equivalents at beginning of year

 42,155

 Cash and cash equivalents at end of year

 $
 63,723

 $

 Non Cash Transactions

 Transfers from loans held for sale to loans held for investment

 $
 91,640

 $
 52,575

 Lease liabilities incurred in exchange for right-of-use assets

 $

 $

 Supplemental disclosures of cash flow information

 Cash paid during the year for:

 $
 31,277

 $
 18,785

 Income taxes

 $
 3,775

 $
 3,350

 See

 Notes
to Consolidated Financial Statements

 Note
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 Organization
and Nature of Operations

Financial, Inc. (the "Company," "we," "us," or "our") is a financial holding company
that offers, through its subsidiaries, banking and other financial services including trust, investment advisory, securities brokerage,
factoring, third-party administration, qualified plan recordkeeping and insurance services to individuals, small businesses and institutions
across the United States.

 We
operate through four main direct and indirect subsidiaries: (i) T Bancshares, Inc. ("T Bancshares"), which was incorporated
under the laws of the State of Texas on December 23, 2002 to serve as the bank holding company for T Bank, N.A., a national association
(the "Bank"), (ii) Sanders Morris LLC ("Sanders Morris"), a registered broker-dealer with the Financial Industry
Regulatory Authority ("FINRA"), and registered investment advisor with the Securities and Exchange Commission, ("SEC"),
(iii) Tectonic Advisors, LLC ("Tectonic Advisors") a registered investment advisor registered with the SEC focused generally
on managing money for relatively large, affiliated institutions as well as for their clients, which include individuals, businesses,
and qualified plans and (iv) HWG Insurance Agency LLC ("HWG"), an insurance agency registered with the Texas Department of
Insurance ("TDI").

 We
are headquartered in Dallas, Texas. The Bank operates through a main office located at 16200 Dallas Parkway, Dallas, Texas. Our other
subsidiaries operate from offices in Houston, Dallas, and Frisco, Texas. Our Houston office is located at 600 Travis Street, 59 th
 Floor, Houston, Texas, and includes the home offices of Sanders Morris and HWG, as well as Tectonic Advisors' family office
services team. Our Dallas office, which is a branch office of Sanders Morris, is at 5950 Sherry Lane, Suite 470, Dallas, Texas. Our main
office for Tectonic Advisors is located at 17 Cowboys Way, Suite 250, Frisco, Texas, and also includes a branch office of HWG.

 The
Bank offers a broad range of commercial and consumer banking and trust services primarily to small- to medium-sized businesses and their
employees, and other institutions. The Nolan Company ("Nolan"), operating from its office in Overland Park, Kansas as a division
within the bank, offers third party administration ("TPA") services, and Integra Funding Solutions, LLC ("Integra"),
also operating as a division within the Bank from Integra's office in Fort Worth, Texas, offers factoring services. The Bank's
technological capabilities, including worldwide free ATM withdrawals, sophisticated on-line banking capabilities, electronic funds transfer
capabilities, and economical remote deposit solutions, allow most customers to be served regardless of their geographic location. The
Bank serves its local geographic market which includes Dallas, Tarrant, Denton, Collin and Rockwall counties in Texas which encompass
an area commonly referred to as the Dallas/Fort Worth Metroplex. The Bank also serves the dental and other health professional industries
through a centralized loan and deposit platform that operates out of its main office in Dallas, Texas. In addition, the Bank serves the
small business community by offering loans guaranteed by the U.S. Small Business Administration ("SBA") and the U.S. Department
of Agriculture ("USDA").

 The
Bank offers a wide range of deposit services including demand deposits, regular savings accounts, money market accounts, individual retirement
accounts, and certificates of deposit with fixed rates and a range of maturity options. Lending services include commercial loans to
small- to medium-sized businesses and professional concerns as well as consumers. The Bank also offers wealth management and trust services.
The Bank's traditional fiduciary services clients primarily consist of clients of Cain Watters & Associates L.L.C. ("Cain
Watters"). The Bank, Cain Watters and Tectonic Advisors entered into an advisory services agreement related to the trust operations
in April 2006, which has been amended from time to time, most recently in July 2016. See Note 13, Related Parties, to these consolidated
financial statements for more information. In addition, the Nolan division of the Bank offers TPA services and provides clients with
retirement plan design and administrative services, specializing in ministerial recordkeeping, administration, actuarial and design services
for retirement plans of small businesses and professional practices. We believe offering TPA services allows us to serve our clients
more fully and to attract new clients to our trust platform.

 Basis
of Presentation. The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, T Bancshares,
the Bank, Tectonic Advisors, Sanders Morris, and through Sanders Morris, HWG. All intercompany transactions and balances are eliminated
in consolidation.

 Use
of Estimates

 The
preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amount of assets, liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenue and expense during the reporting period, as well as the disclosures
provided. Changes in assumptions or in market conditions could significantly affect the estimates. The determination of the allowance
for credit losses, the fair value of stock options, the fair values of financial instruments and other real estate owned, and the status
of contingencies are particularly susceptible to significant change in recorded amounts.

 Cash
and Cash Equivalents

 The
Company maintains its cash in bank deposit accounts, which, at times, may exceed federally insured limits. The Company has not experienced
any losses in such accounts and does not believe it is exposed to significant credit risk on cash and cash equivalents.

 For
purposes of the consolidated statements of cash flows, cash and cash equivalents include cash on hand, deposits with other financial
institutions, and federal funds sold. Net cash flows are reported for customer loan and deposit transactions.

 Trust
Assets

 Property
held for customers in a fiduciary capacity, other than trust cash on deposit at the Bank, is not included in the accompanying consolidated
financial statements since such items are not assets of the Company.

are classified as held to maturity and carried at amortized cost when management has the positive intent and ability to hold them until
maturity. Securities to be held for indefinite
periods of time are classified as available for sale and carried at fair value, with the unrealized holding gains and losses reported
as a component of other comprehensive income, net of tax. Securities held for resale are classified as trading and are carried at fair
value, with changes in unrealized holding gains and losses included in income. Management determines the appropriate classification of
securities at the time of purchase. Securities with limited marketability, such as stock in the FRB and the FHLB are carried at cost.
Securities not readily marketable are carried at cost.

income includes amortization of purchase premiums and accretion of purchase discounts. Premiums and discounts on securities are generally
amortized on the interest method with a constant effective yield without anticipating prepayments, except for mortgage-backed securities
where prepayments are anticipated. Premiums on callable securities are amortized to their earliest
call date. Gains and losses are recorded on the trade date and determined using the basis of the cost of specific securities sold.

Receivables

 Integra,
operating as a division of the Bank, purchases invoices on completed work from its factoring clients. Integra also makes, from time
to time, short-term advances to its clients on transportation contracts for upcoming loads or, to a much lesser extent, makes over-advances
on the existing purchased invoices. Funds are advanced to the client based on the applicable advance rate, less fees, as agreed to in
each individual factoring agreement. The gross amount (face value) of the invoices purchased are recorded by Integra as factored
receivables, and the unadvanced portions of the invoices purchased, less discount and origination fees, are considered deferred client
reserves and recorded as other liabilities in the Company's consolidated balance sheets. The deferred client reserves are
held to settle any payment disputes or collection short payments, and become reserves due to client when the receivables are collected.
Reserves due to client may be used to pay clients' obligations to various third parties as directed by the client, are periodically
withdrawn by clients, and are reported as deposits in the Company's consolidated balance sheets.

 Unearned
factoring fees and unearned net origination fees are deferred revenue and recognized as interest income in the Company's consolidated
income statements over the weighted average collection period for the entire portfolio of factored receivables. Subsequent factoring
fees are recognized in interest income as incurred by the client and deducted from the clients' reserve balances.

 Other
factoring-related fees, which include ACH and wire transfer fees, fuel card funding fees, carrier payment fees, fuel advance fees, and
other similar fees, are recognized as incurred and are reported by the Company as non-interest income.

 Loans
Held for Sale

 Loans
which are originated or purchased and are intended for sale in the secondary market are carried at the lower of cost or estimated fair
value determined on an aggregate basis. Valuation adjustments, if any, are recognized through a valuation allowance by charges to non-interest
income and direct loan origination costs and fees are deferred at origination of the loan and are recognized in non-interest income upon
sale of the loan. Loans held for sale are comprised of the guaranteed portion of SBA and USDA loans. The Company did not incur a lower
of cost or market valuation provision in the years ended December 31, 2024 and 2023. The Company elected to reclassify $ 91.6 million
and $ 52.6 million of the SBA 7(a) loans held for sale to loans held for investment during the years ended December 31, 2024 and 2023,
respectively.

 Loans

 Loans
that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at the principal
balance outstanding, net of unearned interest, unearned discount, deferred loan fees, and allowance for credit losses. Interest income
is accrued on the unpaid principal balance. Discount on acquired loans and net loan origination fees are deferred and recognized in interest
income using the level-yield method without anticipating prepayments.

income on commercial business and commercial real estate loans is discontinued when the loan becomes 90 days delinquent unless the credit
is well secured and in process of collection. Unsecured consumer loans are generally charged off when the loan becomes 90 days past due.
Consumer loans secured by collateral other than real estate are charged off after a review of all factors affecting the ability to collect
on the loan, including the borrower's history, overall financial condition, resources, guarantor support, and the realizable value
of any collateral. However, any consumer loan past due 180 days is charged off. Past due status is based on the contractual terms of
the loan. In all cases, loans are placed on non-accrual or charged off at an earlier date if collection of principal or interest is considered
doubtful.

 All
interest accrued but not received for loans placed on non-accrual are reversed against interest income. Interest received on such loans
is accounted for on a cash-basis or cost-recovery method, until qualifying for return to accrual basis. Loans are returned to accrual
status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

 New
Accounting Pronouncements

 The
Company adopted Accounting Standards Update ("ASU") 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement
of Credit Losses on Financial Instruments ("ASC 326"), effective on January 1, 2023. The guidance replaces the incurred loss
methodology with an expected loss methodology that is referred to as the current expected credit loss ("CECL") methodology. The
CECL model requires the measurement of all expected credit losses for financial assets measured at amortized cost and certain off-balance-sheet
credit exposures based on historical experience, current conditions, and reasonable and supportable forecasts. ASC 326 requires enhanced
disclosures related to the significant estimates and judgments used in estimating credit losses as well as the credit quality and underwriting
standards of a company's portfolio. ASU 2016-13 permits the use of estimation techniques that are practical and relevant to
the Company's circumstances, as long as they are applied consistently over time and faithfully estimate expected credit losses
in accordance with the standard. In addition, ASC 326 made changes to the accounting for available for sale debt securities. One
such change is to require credit losses to be presented as an allowance rather than as a write-down on available for sale debt securities
management does not intend to sell or believes that it is more likely than not they will be required to sell. Management has made a policy
election to exclude accrued interest receivable on available for sale securities from the estimate of credit losses and report accrued
interest separately in other assets in the consolidated balance sheets.

 The
Company adopted ASC 326 using the modified retrospective method for loans and off-balance-sheet ("OBS") credit exposures. Results
for reporting periods beginning after January 1, 2023, are presented under ASC 326 while prior period amounts continue to be reported
in accordance with previously applicable incurred loss model under GAAP. The Company recorded a one-time cumulative-effect
adjustment to the allowance for credit losses of $ 1.4 million which was recognized through a $ 1.1 million adjustment to retained earnings,
net of tax. This adjustment brought the beginning balance of the allowance for credit losses to $ 5.9 million as of January
1, 2023. In addition, the Company recorded a $ 237,505 reserve on unfunded commitments which is recorded in other liabilities
in the Company's consolidated balance sheet, and was recognized through a $ 188,000 adjustment to retained earnings, net of tax.

 The
Company adopted ASC 326 using the prospective transition approach for debt securities for which other-than-temporary impairment had been
recognized prior to January 1, 2023. Upon adoption of ASC 326, the Company determined that an allowance for credit losses for debt securities
was not required. At December 31, 2024 and 2023, no allowance for credit losses on available-for-sale securities was recorded.

 ASU
2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures ("ASU 2022-02"),
eliminates the accounting guidance for troubled debt restructurings in ASC Subtopic 310-40, Receivables -Troubled Debt Restructurings
by Creditors, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower
is experiencing financial difficulty. Additionally, ASU 2022-02 requires entities to disclose current-period gross write-offs by year
of origination for financing receivables and net investments in leases within the scope of ASC Subtopic 326-20, Financial Instruments
– Credit Losses – Measured at Amortized Cost. The Company adopted ASU 2022-02 on a modified retrospective basis effective
on January 1, 2023. The adoption did not have a significant impact on the Company's consolidated financial statements.

 In
November 2023, the FASB issued ASU No. 2023-07 "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures"
(ASU 2023-07). The update expands segment disclosure requirements for public entities to require disclosure of significant segment expenses
and other segment items on an annual and interim basis and to provide in interim periods all disclosures about a reportable segment's
profit or loss and assets that are currently required annually. The Company adopted ASU 2023-07 for the annual period beginning on January
1, 2024 and interim periods beginning on January 1, 2025 with retrospective application to all prior periods presented. See Note 15.
Operating Segments for further information.

for Credit Losses

 As
further discussed below under " New Accounting Pronouncements " t he Company adopted Accounting Standards Update
("ASU") 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,"
on January 1, 2023. Accounting Standards Codification ("ASC") Topic 326 ("ASC 326") replaces the previous "incurred
loss" methodology with an "expected loss" methodology which encompasses allowances for losses expected to be incurred
over the life of the portfolio. The new current expected credit loss ("CECL") model requires the measurement of all
expected credit losses for financial assets measured at amortized cost and certain off-balance-sheet credit exposures based on historical
experience, adjusted for qualitative factors and current conditions, and reasonable and supportable forecasts. The Company adopted ASC
326 using the modified retrospective method for loans and OBS credit exposures.

for credit losses – loans: In accordance with ASC 326, Measurement of Credit Losses on Financial Instruments, the
allowance for credit losses on loans is a valuation account that is deducted from the amortized cost basis of loans to present management's
best estimate of the net amount expected to be collected. Loans, or portions thereof, are charged-off against the allowance for credit
losses when management believes that collectability of the principal is unlikely. Subsequent recoveries, if any, are credited to the
allowance. The allowance is increased (decreased) by provisions (or reversals of) reported in the income statement as a component of
provision for credit losses. Management has made the accounting policy election to exclude accrued interest receivable on loans from
the estimate of credit losses and reports accrued interest separately in other assets in the consolidated balance sheets.

 The
Company adopted ASU 2016-13 effective on January 1, 2023. The guidance replaces the incurred loss methodology with an expected loss methodology
that is referred to as the CECL methodology. The new CECL model requires the measurement of all expected credit losses for financial
assets measured at amortized cost and certain off-balance-sheet credit exposures based on historical experience, current conditions,
and reasonable and supportable forecasts. The Company adopted ASC 326 using the modified retrospective method for loans and OBS credit
exposures.

for credit losses - available for sale securities: For available for sale securities in an unrealized loss position, the Company
first assesses whether it intends to sell or it is more-likely-than-not that it will be required to sell the securities before recovery
of the amortized cost basis. If either of these criteria is met, the securities amortized cost basis is written down to fair value as
a current period expense. If either of the above criteria is not met, the Company evaluates whether the decline in fair value is the
result of credit losses or other factors. In making this assessment, management may consider various factors including the extent to
which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, performance of any underlying
collateral and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit
loss exists, the present value of cash flows expected to be collected are compared to the amortized cost basis of the security and any
excess of the amortized cost basis over the present value of expected cash flows is recorded as an allowance for credit loss, limited
to the amount by which the fair value is less than the amortized cost basis. Any impairment not recorded through an allowance for credit
loss is recognized in other comprehensive income as a non credit-related impairment.

 The
Company evaluates whether the decline in fair value has resulted from credit losses or other factors based upon our analysis of the underlying
risk characteristics, including credit ratings, such as bond ratings, and other qualitative factors related to our available for sale
securities and in consideration of our historical credit loss experience and internal forecasts. If this assessment indicates that a
credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis
of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists
and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized
cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income.
Changes in the allowance for credit losses are recorded as provision for (or reversal of) credit loss expense. Losses are charged against
the allowance when management believes the uncollectability of a security is confirmed or when either of the criteria regarding intent
or requirement to sell is met.

 Changes
in the allowance for credit losses are recorded as provision for (or reversal of) credit losses. Available for sale securities are charged
off against the allowance or, in the absence of any allowance, written down through income when deemed uncollectible by management or
when either of the aforementioned criteria regarding intent or requirement to sell is met.

for credit losses - held to maturity securities: The allowance for credit losses on held to maturity securities is a valuation account
that is deducted from the amortized cost basis of held to maturity securities to present management's best estimate of the net amount
expected to be collected. Held to maturity securities are charged-off against the allowance when deemed uncollectible by management.
Adjustments to the allowance are reported in the income statement as a component of provision for credit losses. Management measures
expected credit losses on held to maturity securities on a collective basis by major security type with each type sharing similar risk
characteristics and considers historical credit loss information that is adjusted for current conditions and reasonable and supportable
forecasts along with payment and delinquency history.

has made the accounting policy election to exclude accrued interest receivable on available for sale and held to maturity securities
from the estimate of credit losses and report accrued interest separately in other assets in the consolidated balance sheet.

for credit losses on off-balance sheet credit exposures: The allowance for credit losses on off-balance sheet credit exposures
is a liability account, calculated in accordance with ASC 326, representing expected credit losses over the contractual period for which
the Company is exposed to credit risk resulting from a contractual obligation to extend credit. No allowance is recognized if we have
the unconditional right to cancel the obligation. The allowance is reported as a component of other liabilities in the consolidated balance
sheets. Adjustments to the allowance are reported in the income statement as a component of provision for credit losses. Further information
regarding Company policies and methodology used to estimate the allowance for credit losses on off-balance sheet credit exposures is
presented in Note 12. Commitments and Contingencies.

 Premises
and Equipment

 Land
is carried at cost. Premises and equipment are stated at cost less accumulated depreciation. Buildings and related components are depreciated
using the straight-line method with useful lives ranging from 5 to 39 years. Furniture and equipment are depreciated using the straight-line
method with useful lives ranging from 3 to 10 years. Land improvements are depreciated using the straight-line method with useful lives
ranging from 3 to 10 years. Leasehold improvements are depreciated using the straight-line method over the lease term or estimated life,
whichever is shorter. Repair and maintenance costs are expensed as incurred.

 We
lease certain office facilities and office equipment under operating leases. We also own certain office facilities which we lease to
outside parties under operating lessor leases. Under the lease standards, for operating leases other than those considered to be short-term,
we recognize lease right-of-use assets and related lease liabilities. Such amounts are reported as components of other assets and other
liabilities, respectively, on our accompanying consolidated balance sheet. We do not recognize short-term operating leases on our balance
sheet. A short-term operating lease has an original term of 12 months or less and does not have a purchase option that is likely to be
exercised.

 In
recognizing lease right-of-use assets and related lease liabilities, we account for lease and non-lease components (such as taxes, insurance,
and common area maintenance costs) separately as such amounts are generally readily determinable under our lease contracts. Lease payments
over the expected term are discounted using our incremental borrowing rate referenced to the Federal Home Loan Bank Secure Connect advance
rates for borrowings of similar term. We also consider renewal and termination options in the determination of the term of the lease.
If it is reasonably certain that a renewal or termination option will be exercised, the effects of such options are included in the determination
of the expected lease term. Generally, we cannot be reasonably certain about whether or not we will renew a lease until such time the
lease is within the last two years of the existing lease term. However, renewal options related to our regional headquarters facilities
or operations centers are evaluated on a case-by-case basis, typically in advance of such time frame. When we are reasonably certain
that a renewal option will be exercised, we measure/remeasure the right-of-use asset and related lease liability using the lease payments
specified for the renewal period or, if such amounts are unspecified, we generally assume an increase (evaluated on a case-by-case basis
in light of prevailing market conditions) in the lease payment over the final period of the existing lease term.

 Foreclosed
Assets

 Assets acquired through or instead
of loan foreclosure are held for sale and are initially recorded at fair value less estimated selling costs when acquired, establishing
a new cost basis. Costs after acquisition are generally expensed. If the fair value of the asset declines, a write-down is recorded through
expense. The valuation of foreclosed assets is subjective in nature and may be adjusted in the future because of changes in economic
conditions. The Company had no foreclosed assets at December 31, 2024 and 2023.

 Servicing
Rights

 The
guaranteed portion of certain SBA and USDA loans can be sold into the secondary market. Servicing rights are recognized as separate assets
when loans are sold with servicing retained. Servicing rights are amortized in proportion to, and over the period of, estimated future
net servicing income. The Company uses industry prepayment statistics in estimating the expected life of the loans. Management evaluates
its servicing rights for impairment quarterly. Servicing rights are evaluated for impairment based upon the fair value of the rights
as compared to amortized cost. Fair value is determined using discounted future cash flows calculated on a loan-by-loan basis and aggregated
by predominant risk characteristics. The initial servicing rights and resulting gain on sale are calculated based on the difference between
the actual par and bids on an individual loan basis.

 Intangible
Assets

 Intangible
assets consist of goodwill and core deposit intangibles. Goodwill represents the excess purchase price over the fair value of net assets
acquired in business acquisitions. The core deposit intangible represents the excess intangible value of acquired deposit customer relationships
as determined by valuation specialists. The core deposit intangibles are being amortized over 58 to 100 months on a straight-line basis.
Goodwill is not amortized but rather is evaluated for impairment on at least an annual basis or more frequently if management believes
indicators of impairment exist. The Company performed its annual impairment test of goodwill and core deposit intangibles during 2024
and 2023, as required by FASB ASC 350, Intangibles—Goodwill and Other. The 2024 and 2023 tests indicated no impairment
of the Company's goodwill or core deposit intangibles.

 Stock
Based Compensation

 The
Company has a share-based employee compensation plan, which is described more fully in Note 11. The Company accounts for it stock-based
compensation in accordance with applicable accounting guidance for share-based payments. This guidance requires all share-based payments
to be recognized on the consolidated statements of income based on their fair values. Compensation costs for awards with graded vesting
are recognized on a straight-line basis over the vesting period.

 Advertising
Costs

 Advertising
costs are expensed as incurred. Advertising costs totaled $ 473,000 and $ 558,000 for the years ended December 31, 2024 and 2023, respectively,
and are included in other expense on the consolidated statements of income.

 Income
Taxes

 The
Company accounts for income taxes utilizing the asset and liability method. Under this method, deferred tax assets and liabilities are
recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using the enacted tax rates expected
to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred
tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

 The
Company accounts for uncertainties in income taxes in accordance with current accounting guidance which prescribes a recognition threshold
and a measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in
a tax return. Benefits from tax positions should be recognized in the financial statements only when it is more likely than
not that the tax position will be sustained upon examination by the appropriate taxing authority that would have full knowledge of all
relevant information. A tax position that meets the more-likely-than-not recognition threshold is measured at the largest amount of cumulative
benefit that is greater than fifty percent likely of being realized upon ultimate settlement. Tax positions that previously failed to
meet the more-likely-than-not recognition threshold should be recognized in the first subsequent financial reporting period in which
that threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not recognition threshold should
be derecognized in the first subsequent financial reporting period in which that threshold is no longer met. No uncertain tax positions
have been recognized.

 The
Company files a consolidated income tax return with our subsidiaries. Federal income tax expense
or benefit has been allocated to subsidiaries on a separate return basis.

 Comprehensive
Income

 Comprehensive income consists of net income and other comprehensive
income. Other comprehensive income includes net unrealized gains and losses on available for sale securities, which are recognized as
a separate component of equity. Comprehensive income for the years ended December 31, 2024 and 2023 is reported in the accompanying
consolidated statements of comprehensive income.

 Transfer
of Financial Assets

 Transfers
of financial assets are accounted for as sales when control over the assets has been surrendered. Control over transferred assets is
deemed to be surrendered when (i) the assets have been isolated from the Company, (ii) the transferee obtains the right (free of conditions
that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (iii) the Company does not maintain
effective control over the transferred assets through an agreement to repurchase them before their maturity. Transfer of financial assets
are comprised of the guaranteed portion of SBA and USDA loans which have been sold.

 Loss
Contingencies

 Loss
contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood
of loss is probable and an amount or range of loss can be reasonably estimated.

 Fair
Value of Financial Instruments

 Fair
values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in Note
16. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments,
and other factors, especially in the absence of broad markets for particular items. Changes in assumptions or in market conditions could
significantly affect the estimates.

 Revenue
Recognition

 The
Company recognizes revenue in accordance with FASB ASC 606, Revenue from Contracts with Customers ("Topic 606"). Topic
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 derives a portion of its revenue from loan and investment income which are specifically excluded from the scope of this standard.
Of the Company's remaining sources of income, substantially all sources of banking revenue are recognized either by transaction
(ATM, interchange, wire transfer, etc.) or when the Company charges a customer for a service that has already been rendered (monthly
service charges, account fees, monthly trust management fees, monthly premise rental income, etc.). Payment for such performance obligations
are generally received at the time the performance obligations are satisfied. Other non-interest income primarily includes items such
as gains on the sale of loans held for sale and servicing fees, none of which are subject to the requirements of Topic 606.

 The
scope of ASC 606 focuses on revenue from contracts with customers, which includes fees from asset management services and commission
income and fees and commissions from investment banking services, as well as fees earned by the Bank's Nolan division for their
third party administration services. These items make up the majority of the non-interest income on our income statement. Under
Topic 606, the recognition and measurement of revenue is based on the assessment of individual contract terms. Significant judgment is
required to determine whether performance obligations are satisfied at a point in time or over time; how to allocate transaction prices
where multiple performance obligations are identified; when to recognize revenue based on the appropriate measure of the Company's
progress under the related agreement; and whether constraints on variable consideration should be applied due to uncertain future events.

 Advisory
Fees

 Investment
advisory fees: The Company provides investment advisory services on a daily basis. The Company believes the performance obligation
for providing advisory services is satisfied over time because the customer is receiving and consuming the benefits as they are provided
by the Company. For the majority of accounts, fee arrangements are based on a percentage applied to the customer's assets under
management. Fees calculated in this manner are generally received monthly or quarterly and are recognized as revenue ratably over the
period as they relate specifically to the services provided in that period, which are distinct from the services provided in other periods.

 Performance
fees: The Company receives fees under certain of its agreements which vary based on specified performance measures, for example,
when a separate account exceeds a specified benchmark or contractual hurdle over a contractual performance period. These performance
fees may be paid in addition to standard investment advisory fees. Currently, most of the Company's contracts of this nature specify
an annual performance period. These fees are earned once account returns have exceeded these specified performance measures for the performance
period, and are calculated as a percentage of account returns. These performance fees are considered variable consideration as the uncertainty
is dependent on the value of the assets at future points in time as well as meeting a specified hurdle rate, both of which are highly
susceptible to factors outside the Company's influence. Revenues are recognized in the last period of the performance period specified
in the respective contract since this is the point at which the Company can conclude that a significant reversal will not occur.

 Other
advisory fees: The Company provides general advisory services on an ongoing basis, which may include: operational advice, advice
to management on strategic and other initiatives and/or advice on prospective mergers and acquisitions. Revenue is recognized over time
for these advisory arrangements, given that under the relevant agreements, the performance obligations are simultaneously provided by
the Company and consumed by the customer.

 Commissions

 Brokerage
commissions: The Company buys and sells securities on behalf of its customers through its arrangements with its clearing firm.
Each time a customer enters into a buy or sell transaction, the Company charges a commission. Commissions and clearing expenses are recorded
each month based upon the trade date, which is the date that the Company fills the trade order by finding and contracting with a counterparty
and confirms the trade with the customer. The Company believes that the performance obligation is satisfied on the trade date because
that is when the underlying financial instrument or purchaser is identified, the pricing is agreed upon and the risks and rewards of
ownership have been transferred to/from the customer.

 Syndication
and private placement commissions: The Company participates in the syndication of public securities offerings and in private placement
offerings for business entities that want to raise funds through a sale of securities. With respect to public securities offerings, the
Company may make a commitment to acquire securities from the issuer, or the Company may participate in the syndication group on a best
efforts, non-committed basis. With respect to private placement offerings, the performance obligation is the consummation of the sale
of securities of the issuer, typically on a "best efforts" basis. Revenues are earned from fees arising from these securities
offerings, and are recognized when the performance obligation is satisfied, generally the trade date. The Company believes that the trade
date is the appropriate point in time to recognize revenue for these securities transactions as there are no significant actions which
the Company needs to take subsequent to this date and the issuer obtains the control and benefit of the capital markets offering at that
point.

 Accounting
Changes, Reclassifications and Restatements

 Certain
items in prior financial statements have been reclassified to conform to the current presentation but have no effect on the reported
results of operations.

 Earnings
per Share

 Basic
earnings per share is computed based on the weighted-average number of shares outstanding during each year. Diluted earnings per share
is computed using the weighted-average shares and all potential dilutive shares outstanding during the period. The following table sets
forth the computation of basic and diluted earnings per share ("EPS") for the following periods:

 Years ended December 31,

 (In thousands, except per share data)

 2024

 2023

 Net income available to common shareholders

 $
 12,083

 $
 13,667

 Weighted average shares outstanding

 7,076

 7,057

 Effect of dilutive shares

 Weighted average diluted shares outstanding

 7,214

 7,293

 Basic earnings per share

 $
 1.71

 $
 1.94

 Diluted earnings per share

 $
 1.68

 $
 1.87

 Note
2. Securities

 A
summary of amortized cost and cost and fair value of securities is presented below.

 Cost

 Gross
 Gains

 Gross

 Fair
 Value

 U.S government agencies

 $
 15,573

 $
 -

 $
 1,709

 $

 6,783

 -

 6,416

 Total securities available for sale

 $
 22,356

 $
 -

 $
 2,076

 $

 Securities held to maturity:

 Property assessed clean energy

 $

 $
 -

 $

 $

 Public improvement district/tax increment reinvestment zone

 21,712

 1,925

 19,854

 Total securities held to maturity

 $

 $

 $
 2,009

 $
 20,702

 Securities, restricted:

 Other

 $
 4,284

 $
 -

 $
 -

 $
 4,284

 Cost

 Gross
 Gains

 Gross

 U.S. Treasuries

 $
 3,906

 $
 -

 $

 $
 3,894

 U.S government agencies

 15,644

 -

 2,017

 5,731

 -

 5,456

 Total securities available for sale

 $
 25,281

 $
 -

 $
 2,304

 $

 Securities held to maturity:

 Property assessed clean energy

 $
 1,326

 $
 -

 $

 $
 1,254

 Public improvement district/tax increment reinvestment zone

 22,868

 22,595

 Total securities held to maturity

 $
 24,194

 $

 $

 $
 23,849

 Securities, restricted:

 Other

 $
 4,176

 $
 -

 $
 -

 $
 4,176

available for sale consist of U.S. government agency securities and mortgage-backed securities guaranteed by U.S. government agencies.
Securities held to maturity consist of Property Assessed Clean Energy ("PACE") and Public Improvement District/Tax Increment
Reinvestment Zone ("PID/TIRZ") investments. These investment contracts or bonds located in Texas, California and Florida,
originate under a contractual obligation between the property owners, the local county or city administration, and a third-party administrator
and sponsor. PACE assessments are created to fund the purchase and installation of energy saving improvements to the property such as
solar panels. PID/TIRZ assessments are used to pay for the development costs of a residential subdivision. Generally, as a property assessment,
the total assessment is repaid in installments over a period of 5 to 32 years by the then current property owner(s). Each installment
is collected by the County or City Tax Collector where the property is located. The assessments are an obligation of the property. Securities,
restricted consist of Federal Reserve Bank of Dallas ("FRB") and Federal Home Loan Bank of Dallas ("FHLB") stock,
which are carried at cost.

 As
of December 31, 2024 and 2023, securities available for sale with a fair value of $ 1.0 million and $ 988,000, respectively, were pledged
against trust deposit balances held at the Bank. During March 2023, the Board of Governors of the Federal Reserve System (the "Federal
Reserve") created the Bank Term Funding Program ("BTFP"), which was made available to banks in response to liquidity
concerns in the United States banking system. The BTFP allows the whole par value of available for sale securities to be included as
the collateral value. As of December 31, 2023, securities with a par value of $ 23.3 million were pledged to the Federal Reserve under
the BTFP, which $ 21.0 million was borrowed against. As of December 31, 2024, there were no securities pledged to secure borrowings at
FRB, resulting from the payoff of the BTFP advance in October 2024. As of December 31, 2024 and 2023, there were no securities pledged
to the FHLB. There were no sales and no related gains or losses in 2024 and 2023.

 As
of December 31, 2024 and 2023, the Bank held FRB stock in the amount of $ 2.2 million. The Bank held FHLB stock in the amount of $ 2.1
million and $ 2.0 million as of December 31, 2024 and 2023, all of which were classified as restricted securities.

 The table below indicates the
length of time individual investment available-for-sale securities have been in a continuous loss position as of December 31, 2024 and
December 31, 2023:

 Less than 12 months

 12 months or longer

 Total

 $
 -

 $
 -

 $

 $
 1,709

 $

 $
 1,709

 2,567

 3,849

 6,416

 Total

 $
 2,567

 $

 $
 17,713

 $
 1,998

 $

 $
 2,076

 Less than 12 months

 12 months or longer

 Total

 U.S. Treasuries

 $

 $

 $

 $

 $
 1,978

 $

 -

 -

 2,017

 2,017

 1,022

 4,434

 5,456

 Total

 $
 2,010

 $

 $
 19,051

 $
 2,297

 $
 21,061

 $
 2,304

 Beginning January 1, 2023, the
Company evaluates all securities quarterly to determine if any debt securities in a loss position require an allowance for credit losses
in accordance with ASC 326. The Company had a total of nineteen (19) available-for-sale securities in the unrealized loss position as
of December 31, 2024.

 As
of December 31, 2024 and 2023, no allowance for credit losses has been recognized on available for sale and held to maturity securities
in an unrealized loss position as management does not believe any of the securities are impaired due to reasons of credit quality. This
is based upon our analysis of the underlying risk characteristics, including credit ratings, and other qualitative factors related to
our securities and in consideration of our historical credit loss experience and internal forecasts, along with current payment history
and no delinquent payments as of December 31, 2024 and 2023. The issuers of these securities are U.S. government agencies who continue
to make timely principal and interest payments under the contractual terms of the securities. Furthermore, management does not have the
intent to sell any of the securities classified as available for sale in the table above and believes that it is more likely than not
that we will not have to sell any such securities before a recovery of cost. The unrealized losses are due to increases in market interest
rates over the yields available at the time the underlying securities were purchased. The fair value is expected to recover as the securities
approach their maturity date or repricing date or if market yields for such investments decline.

 The
amortized cost and estimated fair value of securities as of December 31, 2024, are presented below by contractual maturity. Expected
maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations. Residential mortgage-backed
securities are shown separately since they are not due at a single maturity date.

 Available for Sale

 Held to Maturity

 Cost

 Cost

 Due in one year or less

 $
 1,000

 $

 $
 -

 $
 -

 Due after one year through five years

 10,998

 10,068

 Due after five years through ten years

 Due after ten years

 3,005

 2,357

 21,625

 19,714

 6,783

 6,416

 -

 -

 Total

 $
 22,356

 $

 $

 $
 20,702

 Note
3. Loans and Allowance for Credit Losses on Loans

 Major
classifications of loans held for investment are as follows:

 2024

 2023

 $

 $
 82,483

 8,209

 8,181

 SBA:

 SBA 7(a) guaranteed

 231,931

 162,144

 SBA 7(a) unguaranteed

 96,466

 64,858

 SBA 504

 41,906

 USDA

 2,120

 2,124

 Factored receivables

 Gross loans

 Less:

 Allowance for credit losses

 9,183

 6,308

 Net loans

 $
 660,184

 $
 494,787

 As
of December 31, 2024, our loan portfolio included $ 76.2 million of loans, approximately 11.4 % of our total funded loans to the dental
industry, as compared to $ 78.2 million of loans, approximately 15.6 % of our total funded loans at December 31, 2023. The Bank believes
that these loans are to credit worthy borrowers and are diversified geographically.

 Accrued
interest receivable on loans totaled $ 4.3 million and $ 3.1 million at December 31, 2024 and 2023, respectively, and is included in other
assets in the Company's consolidated balance sheets.

 The
Company serves the small business community by offering loans promulgated under the SBA's 7(a) and 504 loan programs, and loans
guaranteed by the USDA. SBA 7(a) and USDA loans are typically guaranteed by each agency in amounts ranging from 75 % to 80 % of the principal
balance. For SBA construction loans, the Company records the guaranteed funded portion of the loans as held for sale. When the SBA loans
are fully funded, the Company may sell the guaranteed portion into the secondary market, on a servicing-retained basis, or reclassify
from loans held for sale to loans held for investment if the Company determines that holding these loans provide better long-term risk
adjusted returns than selling the loans. In calculating gain on the sale of loans, the Company performs an allocation based on the relative
fair values of the sold portion and retained portion of the loan. The Company's assumptions are validated by reference to external
market information.

 The
Company had $ 47.0 million and $ 26.6 million of SBA/USDA loans held for sale as of December 31, 2024 and December 31, 2023, respectively.
The Company sold the guaranteed portion of one USDA loan totaling $ 3.8 million, resulting in a gain on sale loans of $ 234,000 for the
year ended December 31, 2024. The Company sold the guaranteed portion of one USDA loan totaling $ 5.8 million, resulting in a gain on
sale loans of $ 581,000 for the year ended December 31, 2023. The Company elected to reclassify $ 91.6 million and $ 52.6 million, respectively,
of the SBA 7(a) loans held for sale to loans held for investment during the years ended December 31, 2024 and 2023.

 Loan
Origination/Risk Management.

 The
Company maintains written loan origination policies, procedures, and processes which address credit quality at several levels including
individual loan level, loan type, and loan portfolio levels.

and industrial loans, which are predominantly loans to dentists, are underwritten based on historical and projected income of the business
and individual borrowers and guarantors. The Company utilizes a comprehensive global debt service coverage analysis to determine debt
service coverage ratios. This analysis compares global cash flow of the borrowers and guarantors on an individual credit to existing
and proposed debt after consideration of personal and business related other expenses. Collateral is generally a lien on all available
assets of the business borrower including intangible assets. Credit worthiness of individual borrowers and guarantors is established
through the use of credit reports and credit scores.

loans are evaluated on the basis of credit worthiness as established through the use of credit reports and credit scores. Additional
credit quality indicators include borrower debt to income ratios based on verifiable income sources.

 Real
estate mortgage loans are evaluated based on collateral value as well as global debt service coverage ratios based on historical and
projected income from all related sources including the collateral property, the borrower, and all guarantors where applicable.

 The
Company originates SBA loans which are sometimes sold into the secondary market. The Company continues to service these loans after sale
and is required under the SBA programs to retain specified amounts. The two primary SBA loan programs that the Company offers are the
basic 7(a) loan guaranty program and the 504 loan program in conjunction with junior lien financing from a Certified Development Company
("CDC"). The SBA has designated the Bank as a "Preferred Lender." As an SBA Preferred Lender, the Bank has been
delegated loan approval, closing and most servicing and liquidation authority from the SBA.

 The
7(a) program serves as the SBA's primary business loan program to help qualified small businesses obtain financing when they might
not be eligible for business loans through normal lending channels. Loan proceeds under this program can be used for most business purposes
including working capital, machinery and equipment, furniture and fixtures, land and building (including purchase, renovation and new
construction), leasehold improvements and debt refinancing. Loan maturity is generally up to 10 years for non-real estate collateral
and up to 25 years for real estate collateral. The 7(a) loan is approved and funded by a qualified lender, partially guaranteed by the
SBA and subject to applicable regulations. In general, the SBA guarantees up to 75% of the loan amount depending on loan size. The Company
is required by the SBA to service the loan and retain a contractual minimum of 5% on all SBA 7(a) loans, but generally retains 25% (the
unguaranteed portion). The servicing spread is 1% of the guaranteed portion of the loan that is sold in the secondary market.

 The
504 program is an economic development-financing program providing long-term, low down payment loans to businesses. Typically, a 504
project includes a loan secured from a private-sector lender with a senior lien, a loan secured from a CDC (funded by a 100% SBA-guaranteed
debenture) with a junior lien covering up to 40% of the total cost, and a contribution of at least 10% equity from the borrower. Debenture
limits are $5.0 million for regular 504 loans and $5.5 million for those 504 loans that meet a public policy goal.

 The
Company also offers Business & Industry ("B&I") program loans through the USDA. These loans are similar to the SBA
product, except they are guaranteed by the USDA. The guaranteed amount is generally 80%. B&I loans are made to businesses in designated
rural areas and are generally larger loans to larger businesses than the SBA 7(a) loans. Similar to the SBA 7(a) product, they can be
sold into the secondary market. These loans can be utilized for rural commercial real estate and equipment. The loans can have maturities
up to 30 years and the rates can be fixed or variable.

 Construction
and land development loans are evaluated based on the borrower's and guarantor's credit worthiness, past experience in the
industry, track record and experience with the type of project being considered, and other factors. Collateral value is determined generally
by independent appraisal utilizing multiple approaches to determine value based on property type.

 The
Bank engages in third-party factoring of certain business' accounts receivable invoices. The Bank's factoring clients are
primarily in the transportation industry. Each account debtor is credit qualified, confirming credit worthiness and stability, because
the underlying debtor represents the substantive underlying credit risk. Some factored receivables are full recourse to and personally
guaranteed by the factoring client. In such cases, the client is credit qualified under specific policy guidelines. Concentration limits
are set and monitored for aggregate factored receivables, account debtors, and individual factoring clients. In addition, we consider
the overall state of each specific industry, primarily over-the-road trucking, in our evaluation of the credit worthiness of the factoring
client and the underlying debtor.

 For
all loan types, the Company establishes guidelines for its underwriting criteria including collateral coverage ratios, global debt service
coverage ratios, and maximum amortization or loan maturity terms.

 At
the portfolio level, the Company monitors concentrations of loans based on several criteria including loan type, collateral type, industry,
geography, and other factors. The Company also performs periodic market research and economic analysis at a local geographic and national
level. Based on this research, the Company may from time to time change the minimum or benchmark underwriting criteria applied to the
above loan types.

 Loans
are placed on non-accrual status when, in management's opinion, the borrower may be unable to meet payment obligations as they
become due, as well as when required by regulatory provisions. Loans may be placed on non-accrual status regardless of whether or not
such loans are considered past due. When interest accrual is discontinued, all unpaid accrued interest is reversed. A loan may be returned
to accrual status when all the principal and interest amounts contractually due are brought current and future principal and interest
amounts contractually due are reasonably assured, which is typically evidenced by a sustained period of repayment performance by the
borrower.

 Year-end
non-accrual loans, segregated by class of loans, were as follows:

 Total
 Non-Accrual

 Non-Accrual with No

for Credit

 Total
 Non-Accrual

 Non-Accrual

with No

for Credit

 $
 2,278

 $
 1,635

 $
 -

 $
 -

 Real estate - residential

 SBA guaranteed

 11,374

 6,600

 1,951

 1,951

 SBA unguaranteed

 2,137

 1,878

 Total

 $
 15,908

 $
 10,232

 $
 2,423

 $
 2,423

 The
Company recognized $ 188,000 and $ 19,000 of interest income on non-accrual loans during the year ended December 31, 2024 and 2023, respectively.

 From
time to time, we may modify certain loans to borrowers who are experiencing financial difficulty. In some cases, these modifications
may result in new loans. Loan modifications to borrowers experiencing financial difficulty may be in the form of a principal forgiveness,
an interest rate reduction, an other-than-insignificant payment delay, or a term extension or a combination thereof, among other things.
As of December 31, 2024, there was one SBA 7(a) loan modification with an outstanding balance of $ 798,000, or 0.13 % of total loans for
an interest rate reduction. As of December 31, 2023, the period-end balance of loan modifications included a SBA loan with an outstanding
balance of $ 1.1 million to temporarily reduce the interest rate and a SBA loan with an outstanding balance of $ 2.4 million to temporarily
lower the monthly payment amounts. The modified loans were current as of December 31, 2024, and there were no commitments to lend additional
funds to these borrowers at December 31, 2024.

 Under ASC 326, the allowance for credit losses is a valuation account
that is deducted from the amortized cost basis of loans to present the net amount expected to be collected on the loans. Loans, or portions
thereof, are charged-off against the allowance when they are deemed uncollectible. The Company's allowance for credit losses for
loans consists of two components: (1) a specific valuation allowance based on probable losses on specifically identified loans including
collateral dependent loans and (2) a general valuation allowance based on historical credit loss experience, general economic conditions
and other qualitative risk factors both internal and external to the Company.

 The Company uses the open pool life method to estimate expected losses
for all of the Company's loan pools. For modeling purposes, the loan portfolio pools were selected in order to generally align with
the loan categories specified in the quarterly call reports required to be filed with the Federal Financial Institutions Examination Council,
except for the dental, SBA and USDA loans, are segregated in separate pools.

 Loans that do not share risk characteristics are evaluated on an individual
basis and are not included in the collective evaluation. In setting the specific valuation allowance, the Company follows a loan review
program to evaluate the credit risk in the total loan portfolio and assigns risk grades to each loan. Through this loan review process,
the Company maintains an internal list of loans, which along with the delinquency list of loans, helps management assess the overall quality
of the loan portfolio and the adequacy of the allowance for credit losses. All loans are reviewed on a quarterly basis in order to determine
whether a specific reserve is required. For certain loans, the Company allocates a specific reserve primarily based on the value of the
collateral securing the loan or when the discounted cash flows for the loan is lower than the carrying value of that loan. A loan is considered
to be collateral dependent when, based upon management's assessment, the borrower is experiencing financial difficulty and repayment
is expected to be provided substantially through the operation or sale of the collateral. In such
cases, expected credit losses are based on the fair value of the collateral at the measurement date, adjusted for estimated selling
costs if satisfaction of the loan depends on the sale of the collateral. We reevaluate the fair value of collateral supporting collateral
dependent loans on a quarterly basis.

 In determining the amount of the general valuation allowance, management
starting point is the historical lifetime credit loss experience. Management qualitatively adjusts the model for risk factors (Q-Factors),
which include (i) changes in lending policies and procedures, including changes in underwriting standards, collection, charge-off, and
recovery practices not considered elsewhere in estimating credit losses, (ii) changes in experience, ability, and depth of lending management
and other relevant staff, (iii) changes in the volume and severity of past due loans, the volume of non-accrual loans, and the volume
and severity of adversely classified or graded loans, (iv) changes in the international, national, regional and local economic and business
conditions and developments that affect the collectability of the portfolio, including the condition of various market segments, (v) unemployment
rate; (vi) dental practice global debt service coverage ratio, (vii) the existence and effect of any concentration of credit and changes
in the level of such concentrations, and (viii) commercial real estate lending internal policy and regulatory threshold concentration
limits. Historical lifetime credit loss experience is determined by utilizing an open-pool ("cumulative loss rate") methodology.
The utilization of reasonable and supportable forecasts includes an immediate reversion to lifetime historical loss rates. For all loan
pools, management has determined two years represents a reasonable and supportable forecast period and reverts to a historical loss rate
over two years on a straight-line basis. Based on a review of these factors for each loan type, the Company applies an estimated percentage
to the outstanding balance of each loan type, excluding any loan that has a specific reserve allocated to it. Allocation of a portion
of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

estimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current
conditions, and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected
credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics.

 The
following table presents the amortized cost basis of collateral-dependent loans by class of loans as of December 31, 2024:

 Real Estate

 Business Assets

 Total

 SBA guaranteed

 $
 1,141

 $

 $
 1,815

 SBA unguaranteed

 Total

 $
 1,491

 $

 $
 2,371

 Real estate - residential

 $

 $
 -

 $

 SBA unguaranteed

 -

 Total

 $

 $
 -

 $

 Loans
are considered past due if the required principal and interest payments have not been received as of the date such payments were due.
The Company's past due loans (including both accruing and non-accruing loans) are as follows:

 30-89 Days

 90 Days or

More

 Total

 Total

 Total

 Total

90 Days

Past Due

Still

 Past Due

 Past Due

 Past Due

 Loans

 Accruing

 $
 -

 $

 $

 $
 79,483

 $

 $
 -

 -

 -

 -

 -

 -

 8,146

 8,209

 -

 -

 -

 -

 -

 -

 -

 -

 -

 SBA

 2,430

 4,015

 6,445

 405,472

 411,917

 -

 USDA

 1,432

 -

 1,432

 2,120

 -

 Factored receivables

 1,623

 1,634

 34,262

 Total

 $
 5,485

 $
 4,675

 $
 10,160

 $
 659,207

 $

 $

 $

 $
 -

 $

 $
 82,453

 $
 82,483

 $
 -

 -

 -

 -

 -

 -

 8,088

 8,181

 -

 -

 -

 -

 -

 -

 -

 -

 -

 SBA

 -

 1,167

 1,167

 267,741

 268,908

 -

 USDA

 -

 -

 -

 2,124

 2,124

 -

 Factored receivables

 1,026

 24,018

 Total

 $
 1,002

 $
 1,314

 $
 2,316

 $
 498,779

 $

 $

 As
part of the on-going monitoring of the credit quality of the Company's loan portfolio, management tracks certain credit quality
indicators including internal credit risk based on past experiences as well as external statistics and factors. Loans are graded in one
of six categories: (i) pass, (ii) pass-watch, (iii) special mention, (iv) substandard, (v) doubtful, or (vi) loss. Loans
graded as loss are charged-off.

 The
classifications of loans reflect a judgment about the risks of default and loss associated with the loan. The Company reviews the ratings
on credits quarterly. No significant changes were made to the loan risk grading system definitions and allowance for credit loss methodology
during the past year. Ratings are adjusted to reflect the degree of risk and loss that is felt to be inherent in each credit. The Company's
methodology is structured so that specific allocations are increased in accordance with deterioration in credit quality (and a corresponding
increase in risk and loss) or decreased in accordance with improvement in credit quality (and a corresponding decrease in risk and loss).

rated pass are acceptable loans, appropriately underwritten, bearing an ordinary risk of loss to the Company. Loans in this category
are loans to highly credit worthy borrowers with financial statements presenting a good primary source as well as an adequate secondary
source of repayment.

rated pass-watch loans have been determined to require enhanced monitoring for potential weaknesses which require further investigation.
They have no significant delinquency in the past twelve months. This rating causes the loan to be actively monitored with greater frequency
than pass loans and allows appropriate downgrade transition if verifiable adverse events are confirmed. This category may also include
loans that have improved in credit quality from special mention but are not yet considered pass loans.

rated special mention show clear signs of financial weaknesses or deterioration in credit worthiness; however, such concerns are not
so pronounced that the Company generally expects to experience significant loss within the short-term. Such credits typically maintain
the ability to perform within standard credit terms and credit exposure is not as prominent as credits rated more harshly.

rated substandard are those in which the normal repayment of principal and interest may be, or has been, jeopardized by reason of adverse
trends or developments of a financial, managerial, economic or political nature, or important weaknesses exist in collateral. A protracted
workout on these credits is a distinct possibility. Prompt corrective action is therefore required to strengthen the Company's
position, and/or to reduce exposure and to assure that adequate remedial measures are taken by the borrower. Credit exposure becomes
more likely in such credits and a serious evaluation of the secondary support to the credit is performed. Guaranteed portions of SBA
loans graded substandard are generally on non-accrual due to the limited amount of interest covered by the guarantee, usually 60 days
maximum. However, there typically will be no exposure to loss on the principal amount of these guaranteed portions of the loan.

rated doubtful are those in which full collection of principal appears highly questionable, and which some degree of loss is anticipated,
even though the ultimate amount of loss may not yet be certain and/or other factors exist which could affect collection of debt. Based
upon available information, positive action by the Company is required to avert or minimize loss.

 Loans
classified loss are considered uncollectible and of such little value that their continuance as bankable assets is not warranted. This
classification does not mean that the loan has absolutely no recovery or salvage value, but rather that it is not practical or desirable
to defer writing off this asset even though partial recovery may be affected in the future.

 The
following table summarizes the amortized cost basis of loans by year of origination and internal ratings as of December 31, 2024:

 Term
 Loans by Origination Year

 Revolving

 (In
 thousands)

 2024

 2023

 2022

 2021

 2020

 Prior

 Loans

 Total

 and industrial

 Pass

 $
 10,049

 $
 12,224

 $
 21,458

 $
 14,486

 $
 6,660

 $
 9,754

 $
 2,635

 $
 77,266

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 1,537

 -

 2,160

 -

 -

 -

 -

 Total

 $
 10,049

 $
 12,224

 $
 22,026

 $
 14,795

 $
 7,049

 $
 11,291

 $
 2,635

 $

 $
 -

 $

 $
 -

 $

 $
 -

 $
 -

 $
 -

 $

 installment

 Pass

 $

 $

 $

 $

 $
 -

 $

 $

 $

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 Total

 $

 $

 $

 $

 $
 -

 $

 $

 $

 $
 -

 $
 -

 $
 -

 $
 -

 $
 -

 $
 -

 $
 -

 $
 -

 Real
 estate–- residential

 Pass

 $

 $

 $
 3,142

 $
 2,034

 $

 $

 $
 -

 $
 7,783

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 Total

 $

 $

 $
 3,142

 $
 2,034

 $

 $

 $
 -

 $
 8,209

 $
 -

 $
 -

 $
 -

 $
 -

 $
 -

 $
 -

 $
 -

 $
 -

 Real
 estate–- commercial

 Pass

 $
 22,830

 $
 5,881

 $
 10,533

 $
 7,180

 $
 3,864

 $
 19,294

 $
 -

 $
 69,582

 -

 -

 -

 -

 -

 -

 -

 -

 -

 5,134

 -

 -

 -

 5,134

 -

 1,504

 -

 -

 -

 -

 -

 1,504

 -

 -

 -

 -

 -

 -

 -

 -

 Total

 $
 22,830

 $
 7,385

 $
 10,533

 $
 12,314

 $
 4,383

 $
 19,294

 $
 -

 $

 $
 -

 $
 -

 $
 -

 $
 -

 $
 -

 $
 -

 $
 -

 $
 -

 Real
 estate – construction/land

 Pass

 $
 14,586

 $
 11,747

 $
 8,299

 $
 -

 $
 -

 $
 -

 $
 -

 $
 34,632

 -

 -

 6,853

 -

 -

 -

 -

 6,853

 -

 -

 6,001

 -

 -

 -

 -

 6,001

 -

 2,538

 -

 3,820

 -

 -

 -

 6,358

 -

 -

 -

 -

 -

 -

 -

 -

 Total

 $
 14,586

 $
 14,285

 $
 21,153

 $
 3,820

 $
 -

 $
 -

 $
 -

 $

 $
 -

 $
 -

 $
 -

 $
 -

 $
 -

 $
 -

 $
 -

 $
 -

 SBA
 7(a)

 Pass

 $
 100,958

 $
 59,192

 $
 47,632

 $
 54,332

 $
 16,622

 $
 38,239

 $
 -

 $
 316,975

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 2,644

 1,746

 1,160

 1,084

 3,018

 -

 9,652

 -

 -

 -

 -

 -

 -

 Loss

 -

 -

 -

 -

 -

 -

 -

 -

 Total

 $
 101,688

 $
 62,028

 $
 50,226

 $
 55,492

 $
 17,706

 $
 41,257

 $
 -

 $
 328,397

 $

 $

 $

 $

 $
 -

 $

 $
 -

 $
 1,238

 SBA

 Pass

 $
 16,449

 $
 26,389

 $
 6,684

 $
 1,193

 $
 5,932

 $
 11,804

 $
 -

 $
 68,451

 -

 -

 7,349

 -

 -

 -

 -

 7,349

 -

 -

 -

 3,756

 -

 -

 -

 3,756

 -

 -

 -

 -

 -

 3,964

 -

 3,964

 -

 -

 -

 -

 -

 -

 -

 -

 Total

 $
 16,449

 $
 26,389

 $
 14,033

 $
 4,949

 $
 5,932

 $
 15,768

 $
 -

 $

 $
 -

 $
 -

 $
 -

 $
 -

 $
 -

 $
 -

 $
 -

 $
 -

 USDA

 Pass

 $
 -

 $
 -

 $
 -

 $
 -

 $
 -

 $

 $
 -

 $

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 1,325

 -

 -

 -

 -

 1,325

 -

 -

 -

 -

 -

 -

 -

 -

 Total

 $
 -

 $
 -

 $
 1,325

 $
 -

 $
 -

 $

 $
 -

 $
 2,120

 $
 -

 $
 -

 $
 -

 $
 -

 $
 -

 $
 -

 $
 -

 $
 -

 Receivables

 Pass

 $

 $
 -

 $
 -

 $
 -

 $
 -

 $
 -

 $
 -

 $

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 Total

 $

 $
 -

 $
 -

 $
 -

 $
 -

 $
 -

 $
 -

 $

 $

 $

 $

 $
 -

 $
 -

 $
 -

 $
 -

 $

 Total

 Pass

 $
 201,405

 $
 116,007

 $
 97,838

 $
 79,391

 $
 33,986

 $
 80,631

 $
 2,695

 $
 611,953

 14,397

 -

 -

 -

 15,500

 -

 6,601

 8,890

 -

 -

 -

 15,829

 6,686

 3,071

 5,289

 1,398

 8,638

 -

 25,389

 -

 -

 -

 -

 -

 Loss

 -

 -

 -

 -

 -

 -

 -

 Total

 $
 202,442

 $
 122,885

 $
 122,528

 $
 93,570

 $
 35,978

 $
 89,269

 $
 2,695

 $

 $
 1,087

 $

 $

 $

 $
 -

 $

 $
 -

 $
 2,068

 The
following table summarizes the amortized cost basis of loans by year of origination, internal ratings, and gross write-offs by year of
origination as of December 31, 2023:

 Term
 Loans by Origination Year

 Revolving

 2023

 2022

 2021

 2020

 2019

 Prior

 Loans

 Total

 and industrial

 Pass

 $
 14,632

 $
 23,938

 $
 16,625

 $
 7,769

 $
 5,229

 $
 9,289

 $
 1,847

 $
 79,329

 -

 -

 -

 -

 1,178

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 1,768

 -

 1,883

 -

 -

 -

 -

 -

 -

 Total

 $
 14,632

 $
 24,542

 $
 16,968

 $
 8,208

 $
 5,229

 $
 11,057

 $
 1,847

 $
 82,483

 $
 -

 $

 $
 -

 $
 -

 $
 -

 $
 -

 $
 -

 $

 installment

 Pass

 $

 $

 $

 $

 $

 $

 $

 $

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 Total

 $

 $

 $

 $

 $

 $

 $

 $

 $
 -

 $
 -

 $
 -

 $
 -

 $
 -

 $
 -

 $
 -

 $
 -

 Real
 estate–- residential

 Pass

 $

 $
 4,679

 $
 1,944

 $

 $
 -

 $

 $
 -

 $
 8,054

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 Total

 $

 $
 4,679

 $
 1,944

 $

 $
 -

 $

 $
 -

 $
 8,181

 $
 -

 $
 -

 $
 -

 $
 -

 $
 -

 $
 -

 $
 -

 $
 -

 Real
 estate–- commercial

 Pass

 $
 13,330

 $
 10,920

 $
 18,970

 $
 4,917

 $
 8,937

 $
 11,718

 $
 -

 $

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 Total

 $
 13,330

 $
 10,920

 $
 18,970

 $
 4,917

 $
 8,937

 $
 11,718

 $
 -

 $

 $
 -

 $
 -

 $
 -

 $
 -

 $
 -

 $
 -

 $
 -

 $
 -

 Real
 estate – construction/land

 Pass

 $
 21,358

 $
 23,305

 $
 -

 $
 -

 $
 -

 $
 -

 $
 -

 $

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 Total

 $
 21,358

 $
 23,305

 $
 -

 $
 -

 $
 -

 $
 -

 $
 -

 $

 $
 -

 $
 -

 $
 -

 $
 -

 $
 -

 $
 -

 $
 -

 $
 -

 SBA
 7a

 Pass

 $
 40,937

 $
 47,509

 $
 49,245

 $
 14,946

 $
 12,782

 $
 22,533

 $
 -

 $
 187,952

 3,209

 9,343

 7,137

 5,267

 5,704

 -

 31,409

 -

 1,364

 1,217

 2,550

 -

 5,834

 -

 -

 -

 1,751

 -

 -

 -

 -

 -

 -

 -

 -

 Loss

 -

 -

 -

 -

 -

 -

 Total

 $
 41,686

 $
 51,311

 $
 59,164

 $
 23,576

 $
 19,622

 $
 31,643

 $
 -

 $
 227,002

 $
 -

 $
 -

 $
 -

 $
 -

 $

 $

 $
 -

 $

 SBA

 Pass

 $
 4,186

 $
 7,235

 $
 6,755

 $
 7,512

 $
 6,610

 $
 9,608

 $
 -

 $
 41,906

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 Total

 $
 4,186

 $
 7,235

 $
 6,755

 $
 7,512

 $
 6,610

 $
 9,608

 $
 -

 $
 41,906

 $
 -

 $
 -

 $
 -

 $
 -

 $
 -

 $
 -

 $
 -

 $
 -

 USDA

 Pass

 $
 -

 $
 1,320

 $
 -

 $
 -

 $
 -

 $

 $
 -

 $
 2,124

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 Total

 $
 -

 $
 1,320

 $
 -

 $
 -

 $
 -

 $

 $
 -

 $
 2,124

 $
 -

 $
 -

 $
 -

 $
 -

 $
 -

 $
 -

 $
 -

 $
 -

 Receivables

 Pass

 $

 $
 -

 $
 -

 $
 -

 $
 -

 $
 -

 $
 -

 $

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 Total

 $

 $
 -

 $
 -

 $
 -

 $
 -

 $
 -

 $
 -

 $

 $

 $

 $
 -

 $
 -

 $
 -

 $
 -

 $
 -

 $

 Total

 Pass

 $
 120,232

 $
 119,034

 $
 93,727

 $
 35,950

 $
 33,652

 $
 54,252

 $
 1,917

 $
 458,764

 3,813

 9,686

 7,368

 5,267

 5,704

 -

 32,587

 -

 1,364

 1,217

 2,550

 -

 5,834

 -

 -

 2,695

 -

 3,761

 -

 -

 -

 -

 -

 -

 Loss

 -

 --

 -

 -

 Total

 $
 120,981

 $
 123,440

 $
 103,989

 $
 45,019

 $
 40,492

 $
 65,257

 $
 1,917

 $

 $

 $

 $
 -

 $
 -

 $

 $

 $
 -

 $
 1,180

 The
following table details activity in the allowance for credit losses on loans by portfolio segment for year ended December 31, 2024 and
2023.

 (In
 thousands)

 and

Industrial

Installment

 Real
 Estate

Residential

 Real
 Estate

 Real
 Estate

Construction

and Land

 SBA

 USDA

 Receivables

 Total

 December
 31, 2024

 Beginning

 $
 2,495

 $

 $

 $

 $

 $
 2,485

 $

 $

 $
 6,308

 Provision
 for credit losses

 ( 65
)

 ( 28
)

 3,826

 4,583

 Charge-offs

 ( 12
)

 -

 -

 -

 -

 ( 1,238
)

 -

 ( 818
)

 ( 2,068
)

 Recoveries

 -

 -

 -

 -

 -

 -

 Net
 charge-offs

 ( 12
)

 -

 -

 -

 -

 ( 1,162
)

 -

 ( 534
)

 ( 1,708
)

 Ending
 balance

 $
 2,418

 $

 $

 $

 $

 $
 5,149

 $

 $

 $
 9,183

 December
 31, 2023

 Beginning

 $
 1,302

 $

 $

 $

 $

 $
 1,505

 $

 $

 $
 4,513

 Impact
 of adopting ASC 326

 1,042

 ( 32
)

 ( 308
)

 ( 33
)

 -

 1,390

 Provision
 for credit losses

 ( 9
)

 1,333

 Charge-offs

 ( 214
)

 -

 -

 -

 -

 ( 328
)

 -

 ( 638
)

 ( 1,180
)

 Recoveries

 -

 -

 -

 -

 -

 Net
 charge-offs

 ( 200
)

 -

 -

 -

 -

 ( 259
)

 -

 ( 469
)

 ( 928
)

 Ending
 balance

 $
 2,495

 $

 $

 $

 $

 $
 2,485

 $

 $

 $
 6,308

continues to closely monitor for credit changes resulting from the uncertain forecasted economic conditions, the continued elevated interest
rate environment, and the persistent high inflation levels in the United States and our market areas, and potential recession in the
United States and our market areas. Additional provisions for credit losses may be necessary in future periods.

 Note
4. Premises and Equipment and Leases

 Year-end
premises and equipment were as follows:

 2024

 2023

 Land

 $

 $

 Leasehold improvements

 Building

 4,626

 4,568

 Furniture and equipment

 6,409

 6,196

 Less: accumulated depreciation

 ( 1,679
)

 ( 1,438
)

 Balance at end of period

 $
 4,730

 $
 4,758

 Depreciation
of premises and equipment totaled $ 241,000 and $ 247,000 for the years ended December 31, 2024 and 2023, respectively. There were no disposals
of equipment during 2024 and 2023.

 Under
the lease accounting standards, right-of-use assets represent our right to utilize the underlying asset during the lease term, while
the lease liability represents the obligation to make periodic lease payments over the life of the lease. As of December 31, 2024 and
2023, right-of-use assets and related lease liabilities totaled $1.9 million and $2.5 million, and $2.0 million and $ 1.6 million, respectively,
and are included in other assets and other liabilities, respectively, on our accompanying consolidated balance sheets. Cash paid for
the operating leases for the years ended December 31, 2024 and 2023 was $ 685,000 and $ 582,000, respectively. As of December 31, 2024
and 2023, the weighted average remaining lease term was 60 months and 64 months, respectively, and the weighted average discount rate
was 4.03 % and 4.12 %, respectively.

 As
of December 31, 2024, the minimum rental commitments under these noncancelable operating leases are as follows:

 2025

 $

 2026

 2027

 2028

 2029

 Thereafter

 Total minimum rental payments

 2,209

 Less: Interest

 ( 236
)

 Present value of lease liabilities

 $
 1,973

 Rent
expense under all operating lease obligations aggregated approximately $ 706,000 and $ 674,000 for the years ended December 31, 2024 and
2023, respectively.

 The
Company currently receives rental income from seven tenants in its headquarters building for office space the Company does not occupy.
Aggregate future minimum rentals to be received under non-cancelable leases as of

 December
31, 2024 through 2031 were as follows.

 2025

 $

 2026

 2027

 2028

 2029

 Thereafter

 Total minimum rental payments

 $
 1,199

 Note
5. Other Real Estate Owned

 There
was no other real estate owned as of December 31, 2024 and 2023.

 Note
6. Goodwill and Core Deposit Intangible

 Goodwill
and core deposit intangible assets were as follows:

 2024

 2023

 Goodwill

 $

 $

 Core deposit intangible

 Core deposit intangible is amortized
on a straight-line basis over the estimated lives of the deposits, which range from five ( 5) to twelve ( 12) years. The core deposit intangible
amortization totaled $ 210,000 for the years ended December 31, 2024 and 2023, respectively.

 The
carrying basis and accumulated amortization of the core deposit intangible as of December 31, 2024 and 2023 were as follows:

 2024

 2023

 Gross carrying basis

 $
 1,708

 $
 1,708

 Accumulated amortization

 ( 1,559
)

 ( 1,349
)

 Net carrying amount

 $

 $

 The
core deposit intangible of $ 149,000 will be amortized in 2025.

 Note
7. Deposits

were as follows:

 Non-interest bearing demand

 $
 63,130

 %

 $
 68,433

 %

 Interest-bearing demand (NOW)

 4,903

 4,295

 Money market accounts

 154,316

 139,596

 Savings accounts

 5,715

 6,132

 483,083

 308,435

 Total

 $
 711,147

 %

 $
 526,891

 %

 The
aggregate amount of demand deposit overdrafts that have been reclassified as loans as of December 31, 2024 and 2023 was insignificant.

 As
of December 31, 2024 the scheduled maturities of time deposits were as follows:

 2025

 $
 457,376

 2026

 21,534

 2027

 3,756

 2028

 2029

 Total

 $
 483,083

 The
aggregate amount of time deposits that exceeded the $ 250,000 FDIC insurance limit totaled $ 112.3 million and $ 71.9 million at December
31, 2024 and 2023, respectively.

 Note
8. Borrowed Funds and Subordinated Notes

 The Company has a blanket lien credit line with the FHLB with borrowing
capacity of $ 67.0 million secured by commercial loans. The Company determines its borrowing needs and utilizes overnight advance accordingly
at varying terms. The Company had $ 10.0 million of borrowings with FHLB as of December 31, 2024 and no borrowings with FHLB as of December
31, 2023.

 The
Company also has a credit line with the FRB with borrowing capacity of $ 38.6 million, which is secured by commercial loans. The Company
had no borrowings under this line from the FRB at December 31, 2024 and 2023.

 As part of the BTFP, the Federal Reserve offered loans of up to one
year in length to banks and other eligible depository institutions pledging U.S. treasuries, agency debt and mortgage-backed securities,
and other qualifying assets as collateral, which are assessed at par value. The Bank pledged available for sale securities with par value
of $ 23.3 million to provide additional liquidity to meet the needs of depositors as of December 31, 2023. The Company borrowed $ 21.0 million
related to the BTFP as of December 31, 2023, with interest rate of 4.85 % and maturing on December 26, 2024. The BTFP borrowing was paid
off during October 2024 and the securities were unpledged. The Company had no borrowings under the BTFP as of December 31, 2024.

 As
of December 31, 2024 and 2023, T Bancshares had an outstanding subordinated note for $ 8.0 million issued in 2017 bearing an interest
rate of three-month CME Term SOFR plus a spread adjustment of 0.26161% plus 5.125 %, with interest payable quarterly and maturing on July
20, 2027, at which all principal is due. As of December 31, 2024 and 2023, the rate was 10.03406 % and 10.78165 %, respectively. As of
December 31, 2024 and 2023, T Bancshares also had an outstanding subordinated note for $ 4.0 million issued in 2018 bearing a fixed interest
rate of 7.125 % payable semi-annually up to July 18, 2023, and converting to variable rate of three-month CME Term SOFR plus a spread
adjustment of 0.26161% plus 4.348 %, payable quarterly, and maturing on March 31, 2028. As of December 31, 2024 and 2023, the rate was
 9.25706 % and 10.00465 %, respectively. The subordinated notes are unsecured and subordinated in
right of payment to the payment of our existing and future senior indebtedness and structurally subordinated to all existing and future
indebtedness of our subsidiaries.

 Note
9. Benefit Plans

 The
Company funds certain costs for medical benefits in amounts determined at the discretion of management. The Company has a retirement
savings 401(k) plan covering substantially all employees of the Bank, and a second 401(k) plan covering substantially all employees of
Sanders Morris and Tectonic Advisors.

 Under
both 401(k) plans covering the Company's employees, an employee may contribute up to the annual maximum contribution allowed for
a given year under IRS regulations. The Company matches 100 % of the employee's contribution on the first 1% of the employee's
compensation and 50 % of the employee's contribution on the next 5% of the employee's compensation, up to the maximum amount
under IRS regulations.

 At
its discretion, the Company may also make additional annual contributions to the 401(k) plans. Each of the 401(k) plans is a participant
directed plan, and as such, contributions to such 401(k) plan are invested as directed by the respective 401(k) plan participant.

 The
amount of employer contributions charged to expense under the two plans was $ 814,000 and $ 707,000 for the years ended December 31, 2024
and 2023, respectively, and is included in salaries and employee benefits on the consolidated statements of income. There was no accrual
payable to either plan as of December 31, 2024 and 2023.

 Note
10. Income Taxes

 The
provision (benefit) for income taxes consists of the following:

 2024

 2023

 Current:

 Federal income tax

 $
 3,776

 $
 3,801

 State income tax

 1,201

 Total current

 4,977

 3,892

 Deferred federal

 ( 592
)

 ( 56
)

 Income tax expense

 $
 4,385

 $
 3,836

 A
reconciliation between reported income tax expense and the amounts computed by applying the U.S. federal statutory income tax rate of
 21 % to income before income taxes is presented in the following table.

 2024

 2023

 Income tax expense computed at the statutory rate

 $
 3,848

 $
 4,001

 State income tax, net

 Other

 ( 411
)

 ( 237
)

 Income tax expense, as reported

 $
 4,385

 $
 3,836

 The
tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities as
of December 31, 2024 and 2023 are as follows:

 2024

 2023

 Deferred tax assets:

 Allowance for credit losses

 $
 2,070

 $
 1,411

 Non-accrual loan interest

 Servicing asset valuation allowance

 -

 Accrued liabilities

 Stock compensation

 Lease liabilities under operating leases

 Net unrealized loss on securities available for sale

 Total deferred tax assets

 3,314

 2,297

 Deferred tax liabilities:

 Net deferred loan costs

 ( 1,229
)

 ( 742
)

 Depreciation and amortization

 ( 348
)

 ( 327
)

 Held-to-maturity securities premium

 ( 12
)

 ( 19
)

 Loan discount

 ( 57
)

 ( 75
)

 Adjustment for FHLB stock

 ( 6
)

 ( 5
)

 Intangible assets

 ( 229
)

 ( 240
)

 Total deferred tax liabilities

 ( 1,881
)

 ( 1,408
)

 Net deferred tax asset

 $
 1,433

 $

 Projections
for continued levels of profitability will be reviewed quarterly and any necessary adjustments to the deferred tax assets will be recognized
in the provision or benefit for income taxes. In assessing the realization rate of deferred tax assets, management considers whether
it is more likely than not that some portion or all of the deferred tax assets will not be realized. The realization of deferred tax
assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. No
valuation allowance for deferred tax assets was recorded at December 31, 2024 and 2023, as management believes it is more likely than
not that all of the deferred tax assets will be realized against deferred tax liabilities and projected future taxable income.

 Note
11. Stock Compensation Plans

 The
board of directors and shareholders adopted the Amended and Restated Tectonic Financial, Inc. 2017 Equity Incentive Plan ("Plan").
The Plan is administered by the Compensation Committee of the board of directors and authorizes the granting of options, stock appreciation
rights, restricted stock and restricted stock units to employees, directors and consultants in order to promote the success of the Company's
business. Incentive stock options may be granted only to employees of the Company, or a parent or subsidiary of the Company. The Company
reserved 750,000 authorized shares of common stock for the Plan. The term of each option is no longer than 10 years from the date of
the grant. At December 31, 2024, the Company had 365,000 shares of
common stock remaining available for future grants.

 The
Company accounts for stock-based employee compensation plans using the fair value-based method of accounting. The fair value of each
option award is estimated on the date of grant by a third party using a closed form option valuation (Black-Scholes) model. The fair
value of each grant award is estimated on the date of grant by a third party using the market approach based on the application of latest
12-month Company metrics to guideline public company multiples.

 On
September 27, 2021, 40,000 shares of restricted stock of the Company with an exercise price of $ 10.00 and an intrinsic value of $ 6.92
were granted with a contract life through December 31, 2021. Sanders Morris issued a full recourse secured promissory note at the time
of the grant. These shares of restricted stock vested immediately, and were exercised on October 29, 2021, with the grantees utilizing
the proceeds of the promissory note from Sanders Morris to fund the exercise price. This note receivable is recognized within a contra-equity
account, with payments by the grantees reducing this balance as they occur. Once exercised, the shares were subject to a right of repurchase
by the Company under certain circumstances, which this right expired on December 31, 2023.

 During
the year ended December 31, 2024, the Company repurchased 100,000 fully vested stock options for consideration equal to $ 18.80 per share
less the option exercise price applicable to the stock options, which was an average of $ 5.70 per share. The effect of the repurchase
on the Company's financial statements was substantially similar to the effect had the options been exercised in a cashless exercise,
with the exception that due to the options not having been exercised, they were returned to the authorized shares available under the
Plan.

 The
number of option shares outstanding were 67,500 and 167,500 as of December 31, 2024 and 2023, respectively, and the weighted average
exercise price at December 31, 2024 and 2023 was $ 5.23 and $ 5.51, respectively. The weighted average contractual life of the stock awards
as of December 31, 2024 and 2023 was 2.37 years and 3.37 years, respectively. Stock options outstanding at the end of the period had
immaterial aggregate intrinsic values. The weighted-average grant date fair value of the options as of December 31, 2024 and 2023 was
$ 1.90 and $ 1.98, respectively. Under Topic 805, the grant date fair value has been restated as though the Tectonic Merger, under which
Tectonic Holdings, LLC merged with and into Tectonic Financial, Inc., had occurred upon the date at which the entities came under common
control.

 As
of December 31, 2024 and 2023, all stock options outstanding
were vested, and there was no remaining unrecognized compensation cost. The Company recorded compensation expense on a straight-line
basis over the vesting periods, and for the 40,000 shares of restricted stock granted September 27, 2021, over the right of repurchase
period. The Company recorded salaries and employee benefits expense on our consolidated statements of income in connection with the options
issued and restricted stock issued under the plan of $ 81,000 for the year ended December 31, 2023.

 On September 30, 2020, the
Company granted restricted stock units totaling 210,000 shares of common stock. On November 12, 2024, the Company granted restricted stock
units totaling 75,000 shares of common stock. The fair value of each unit award was estimated on the date of grant by a third party using
the market approach based on the application of latest 12-month Company metrics to guideline public company multiples. The vesting schedules
vary by award, with all of the units awarded vesting over a six year period. The restricted stock units are subject to accelerated vesting
due to death, total disability, or change in control of the Company.

 As
of December 31, 2024, 89,000 awarded units of restricted stock were outstanding, and the grant date fair value was $ 4.81. During the
year ended December 31, 2024, 64,000 units awarded became vested and shares were issued. During the year ended December 31, 2023, 92,000
units awarded became vested and shares were issued. The weighted average contractual life as of December 31, 2024 and 2023 was 3.11 years
and 1.18 years, respectively. The Company is recording compensation expense on a straight-line basis over the respective vesting periods.
For the years ended December 31, 2024 and 2023, the Company recorded salaries and employee benefits expense on our consolidated statements
of income of $ 98,000 and $ 221,000, respectively, related to the restricted stock awards. As of December 31, 2024 and 2023, there was
$ 360,000 and $ 98,000, respectively, of unrecognized compensation cost related to the restricted stock awards.

 As
of December 31, 2024 and 2023, 89,000 and 78,000 restricted stock units awarded were outstanding, respectively. The weighted average
grant date fair value of the awards as of December 31, 2024, was $ 4.81.

 Note
12. Commitments and Contingencies

 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 include commitments to extend credit and standby letters of credit. These instruments
involve, to varying degrees, elements of credit risk in excess of the amount recognized in the accompanying consolidated balance
sheets. The Company's exposure to credit loss in the event of non-performance by the other party to the financial instruments
for commitments to extend credit and standby letters of credit is 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.

 Commitments
to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments
may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.

 The
following table summarizes loan commitments:

 2024

 2023

 Undisbursed loan commitments

 $
 72,343

 $
 45,743

 Standby letters of credit

 $
 72,505

 $
 45,905

For Credit Losses - Off-Balance-Sheet Credit Exposures. The allowance for credit losses for off-balance-sheet credit exposures is
a liability account, calculated in accordance with ASC 326, representing expected credit losses over the contractual period for
which we are exposed to credit risk resulting from a contractual obligation to extend credit. No allowance is recognized if we have the
unconditional right to cancel the obligation. Off-balance-sheet credit exposures primarily consist of amounts available under outstanding
lines of credit and letters of credit detailed in the table above. For the period of exposure, the estimate of expected credit losses
considers both the likelihood that funding will occur, and the amount expected to be funded over the estimated remaining life of the
commitment or other off-balance-sheet exposure. The likelihood and expected amount of funding are based on historical utilization rates.
The amount of the allowance represents management's best estimate of expected credit losses on commitments expected to be funded
over the contractual life of the commitment. Estimating credit losses on amounts expected to be funded uses the same methodology as described
for loans in Note 3 - Loans and Allowance for Credit Losses, as if such commitments were funded.

 The following table details activity in the allowance for credit losses
for off-balance-sheet commitments included in other liabilities in the accompanying consolidated balance sheets.

 2024

 2023

 Beginning balance

 $

 $
 -

 Impact of adopting ASC 326

 -

 Provision for off-balance sheet credit exposure

 ( 45
)

 Ending balance

 $

 $

 The
Company is involved in various regulatory inspections, inquiries, investigations and proceedings, and litigation matters that arise from
time to time in the ordinary course of business. The process of resolving matters through litigation or other means is inherently uncertain,
and it is possible that an unfavorable resolution of these matters, will adversely affect the Company, its results of operations, financial
condition and cash flows. The Company's regular practice is to expense legal fees as services are rendered in connection with legal
matters, and to accrue for liabilities when payment is probable.

 The
Company, through its wholly owned subsidiary Sanders Morris, has uncommitted financing arrangements with clearing brokers that finance
its customer accounts, certain broker-dealer balances, and firm trading positions. Although these customer accounts and broker-dealer
balances are not reflected on the consolidated balance sheets for financial reporting purposes, Sanders Morris has generally agreed to
indemnify these clearing brokers for losses they may sustain in connection with the accounts, and therefore, retains risk on these accounts.
Sanders Morris is required to maintain certain cash or securities on deposit with its clearing brokers. Deposits with clearing organizations
were $ 250,000 as of December 31, 2024 and 2023.

 Employment
Agreements

 The
Company is party to amended and restated employment agreement with Ken Bramlage, Executive Vice President and Chief Financial Officer
of the Company. The employment agreement had a three year term and now is year to year. Prior to September 27, 2024, the Company was
party to amended and restated employment agreement with Mr. Howard. On September 27, 2024, Mr. Howard resigned from the Boards of Directors
of the Company, TBI and the Bank, and as President of the Company, President and Chief Executive Officer of TBI and the Bank effective
in January 2025, at which time Mr. Howard transitioned to an executive advisor role in connection with the Transition Services Agreement
dated September 27, 2024 between Mr. Howard and the Company, TBI and the Bank. The Transition Services Agreement replaces Mr. Howard's
prior Amended and Restated Employment Agreement with the Company, TBI and the Bank providing for the transition of his duties and responsibilities
to Mr. A. Haag Sherman effective in January 2025, which was approved by the Boards of Directors of the Company, TBI and the Bank. The
Company entered into an employment agreement with A. Haag Sherman, Chief Executive Officer of the Company, in connection with the Company's
merger with Tectonic Holdings and its initial public offering. Messrs. Sherman employment agreement had a four year term and now is year
to year.

 Note
13. Related Parties

 Advisors'
service agreements: In January 2006, the Company entered into a services agreement (the "Tectonic Advisors-CWA Services Agreement")
with Cain Watters. The owners of Cain Watters together hold approximately 29.5 % ownership in the Company. Under the Tectonic Advisors-CWA
Services Agreement, Cain Watters pays the Company for due diligence and research services on investment alternatives available to Cain
Watters' clients. The Company earned $ 102,000 and $ 257,000 during the years ended December 31, 2024 and 2023, respectively, under
the Tectonic Advisors-CWA Services Agreement. These fees are included in investment advisory and other related services in the accompanying
consolidated statements of income. In a given period, fees are received from custodians by both Cain Watters and Tectonic Advisors under
the various agreements, and at times, these amounts are in excess of amounts payable under the Tectonic Advisors-CWA Services Agreement,
such that amounts may be payable back to Cain Watters. The Company had $ 309,000 and $ 95,000 in fees payable, respectively, related to
these services at December 31, 2024 and 2023, respectively, which are included in other liabilities and other assets, respectively, on
the consolidated balance sheets.

 CWA
Fee Allocation Agreement: In January 2006, Tectonic Advisors entered into an agreement (the "Fee Allocation Agreement")
with Cain Watters with reference to its advisory agreement with the Bank. Tectonic Advisors had $ 231,000 and $ 215,000 payable to Cain
Watters related to this agreement at December 31, 2024 and 2023, respectively, which are included in other liabilities on the accompanying
consolidated balance sheets.

 Certain officers, directors and their affiliated companies had depository
accounts with the Bank as of December 31, 2024 and 2023, totaling approximately $ 7.0 million and $ 7.7 million, respectively. None of those
deposit accounts have terms more favorable than those available to any other depositor. As of December 31, 2024 and 2023, there were no
loans or unfunded commitments outstanding to directors of the Bank or their affiliated companies.

 Note
14. Regulatory Matters

 The
Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to
meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if
undertaken, could have a direct material effect on the Bank's and, accordingly, the Company's business, results of operations
and financial condition. 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 GAAP, regulatory reporting requirements, and regulatory capital standards. The Bank's capital amounts
and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Furthermore,
the Bank's regulators could require adjustments to regulatory capital not reflected in these financial statements.

 Quantitative
measures established by regulatory capital standards to ensure capital adequacy require the Bank to maintain minimum amounts and ratios
(set forth in the table below) of total and tier 1 capital to risk-weighted assets, common equity Tier 1 ("CET1") capital
to total risk-weighted assets, and of tier 1 capital to average assets. To be categorized as "well-capitalized" under the
prompt corrective action framework, the Bank must maintain (i) a Total risk-based capital ratio of 10 %; (ii) a Tier 1 risk-based capital
ratio of 8 %; (iii) a Tier 1 leverage ratio of 5 %; and (iv) a CET1 risk-based capital ratio of 6.5.

 In
addition, the Basel III regulatory capital reforms ("Basel III") implemented a capital conservation buffer of 2.5 %. The Basel
III minimum capital ratio requirements as applicable to the Bank are summarized in the table below.

 BASEL III
 Minimum for
 Capital
 Adequacy
 Requirements

 BASEL III
 Additional
 Capital
 Conservation
 Buffer

 BASEL III
 Ratio with
 Capital
 Conservation
 Buffer

 Total Risk Based Capital (total capital to risk weighted assets)

 8.0
 %

 2.5
 %

 10.5
 %

 Tier 1 Risk Based Capital (tier 1 to risk weighted assets)

 6.0
 %

 2.5
 %

 8.5
 %

 Common Equity Tier 1 Risk Based ( CET1 to risk weighted assets)

 4.5
 %

 2.5
 %

 7.0
 %

 Tier 1 Leverage Ratio (tier 1 to average assets)

 4.0
 %

 -
 %

 4.0
 %

 Accordingly,
a financial institution may be considered "well capitalized" under the prompt corrective action framework, but not satisfy
the Basel III capital ratios. As of December 31, 2024, the Bank's regulatory capital ratios are in excess of the capital conservation
buffer and the levels established for "well capitalized" institutions under the Basel III rules.

 The
regulatory capital ratios of the Company and the Bank are as follows:

 Actual

 Minimum Capital

 Required - Basel III

 Required to be

 Considered

Well Capitalized

 Ratio

 Ratio

 Ratio

 Total Capital (to Risk Weighted Assets)

 $
 100,559

 17.65
 %

 $
 59,823

 10.50
 %

 $
 56,974

 10.00
 %

 100,615

 17.88

 59,094

 10.50

 56,280

 10.00

 Tier 1 Capital (to Risk Weighted Assets)

 93,406

 16.39

 48,428

 8.50

 45,579

 8.00

 16.62

 47,838

 8.50

 45,024

 8.00

 Common Equity Tier 1 (to Risk Weighted Assets)

 76,156

 13.37

 39,882

 7.00

 37,033

 6.50

 16.62

 39,396

 7.00

 36,582

 6.50

 Tier 1 Capital (to Average Assets)

 93,406

 11.32

 33,006

 4.00

 41,258

 5.00

 11.46

 32,665

 4.00

 40,832

 5.00

 As of December 31, 2023

 Total Capital (to Risk Weighted Assets)

 $
 92,385

 20.90
 %

 $
 46,415

 10.50
 %

 $
 44,205

 10.00
 %

 92,957

 21.29

 45,835

 10.50

 43,652

 10.00

 Tier 1 Capital (to Risk Weighted Assets)

 86,847

 19.65

 37,574

 8.50

 35,364

 8.00

 20.04

 37,105

 8.50

 34,922

 8.00

 Common Equity Tier 1 (to Risk Weighted Assets)

 69,597

 15.74

 30,944

 7.00

 28,733

 6.50

 20.04

 30,557

 7.00

 28,374

 6.50

 Tier 1 Capital (to Average Assets)

 86,847

 13.97

 24,861

 4.00

 31,076

 5.00

 14.26

 24,534

 4.00

 30,667

 5.00

 Dividend
Restrictions. Banking regulations may limit the amount of dividends that may be paid. Approval by regulatory authorities is required
if the effect of dividends declared (including those on the Series A preferred stock) would cause the regulatory capital of the Bank
and/or the Company to fall below specified minimum levels. Approval is also required if dividends declared exceed the net profits for
that year combined with the retained net profits for the preceding two years. As of December 31, 2024, approximately $ 30.7 million was
available for the declaration of dividends by the Bank to the Company without prior approval of regulatory agencies and still maintain
its "well capitalized" status. In addition, as
a Texas corporation, we are restricted under the Texas Business Organizations Code from paying dividends under certain conditions. Under
Texas law, we cannot pay dividends to shareholders if the dividends exceed our surplus or if after giving effect to the dividends, we
would be insolvent.

 In
addition to the regulatory requirements of the federal banking agencies, Sanders Morris and Tectonic Advisors are subject to the regulatory
framework applicable to registered investment advisors under the SEC's Division of Investment Management, and additionally, Sanders
Morris is regulated by FINRA, which, among other requirements, imposes minimums on its net regulatory capital.

 Note
15. Operating Segments

 The
Company's primary reportable segments consist of Banking and Other Financial Services, which have been determined based on our
organizational structure, and is consistent with the presentation of financial information to the chief operating decision maker to evaluate
segment performance, develop strategy, and allocate resources. The Company's chief operating decision maker is our Chief Executive Officer.

 The
Banking segment consists of operations relative to the Company's full service banking operations, including providing depository,
lending and factoring services to individual and business customers, and other related banking services.

 The
Other Financial Services segment includes fee-based services in the areas of trust, retirement services, and financial management services,
including investment advisory, personal wealth management and securities brokerage services to both individuals and businesses.

 A
third category, HoldCo and Other, is included in the tabular format below. The activity in Holdco and Other was disclosed as a reportable
segment prior to September 30, 2024, but the Company has determined that the activity does not constitute a reportable segment and will
be presented as the Holdco and Other category going forward. Note that the allocation of income and expenses to what is now referenced
as the Holdco and Other category has not changed; it is the same activity formerly presented in the Holdco segment, and includes the
operations of the Bank's holding company (T Bancshares), as well as certain activities of the financial holding company which serves
as T Bancshares's parent. T Bancshares activity consists only of the subordinated debt that it holds. The parent company's
principal activities include the direct ownership of T Bancshares and the non-banking subsidiaries, and the issuance of equity. The principal
source of revenue of the HoldCo and Other category is dividends from our subsidiaries. Expenses that are directly attributable to the
Company's Banking and Other Financial Services segments such as, but not limited to, occupancy, salaries and benefits to employees that
are fully dedicated to the segment, and certain technology costs that can be attributed to specific users or functional areas within
the segment, are allocated as such. The Company makes considerable investments in shared services that benefit the entire organization,
and these expenses are allocated to the HoldCo and Other category. The Company allocates such expenses to the HoldCo and Other category
in order for the Company's chief operating decision maker and investors to have clear visibility into the operating performance of each
reportable segment.

 Changes
in management structure or allocation methodologies and procedures may result in future changes to previously reported segment financial
data.

 The
tables below present the financial information for each segment that is specifically identifiable, or based on allocations using internal
methods, for the years ended December 31, 2024 and 2023:

 Other
 Services

 HoldCo and Other

 Consolidated

 Year Ended December 31, 2024

 Income Statement

 $

 $
 -

 $
 -

 $

 30,328

 -

 1,284

 31,612

 4,848

 -

 -

 4,848

 Net interest income (loss) after provision for credit losses

 28,452

 -

 ( 1,284
)

 27,168

 Non-interest income

 1,768

 43,304

 -

 45,072

 15,415

 18,289

 3,318

 37,022

 All other non-interest expense

 6,060

 9,432

 1,406

 16,898

 Income (loss) before income tax

 $
 8,745

 $
 15,583

 $
 ( 6,008
)

 $
 18,320

 Goodwill and other intangibles

 $
 19,239

 $
 2,350

 $
 -

 $
 21,589

 $
 847,113

 $
 15,036

 $
 1,231

 $
 863,380

 Other
 Services

 HoldCo and Other

 Consolidated

 Year Ended December 31, 2023

 Income Statement

 $

 $
 -

 $
 -

 $

 17,909

 -

 1,197

 19,106

 1,288

 -

 -

 1,288

 Net interest income (loss) after provision for credit losses

 27,270

 -

 ( 1,197
)

 26,073

 Non-interest income

 2,050

 37,854

 ( 100
)

 39,804

 12,223

 16,471

 2,594

 31,288

 All other non-interest expense

 5,177

 9,110

 1,246

 15,533

 Income (loss) before income tax

 $
 11,920

 $
 12,273

 $
 ( 5,137
)

 $
 19,056

 Goodwill and other intangibles

 $
 19,449

 $
 2,350

 $
 -

 $
 21,799

 $
 663,001

 $
 12,661

 $
 1,684

 $
 677,346

 Note
16. Fair Value of Financials Instruments

 The
fair value of an asset or liability is the price that would be received to sell that asset or paid to transfer that liability in an orderly
transaction occurring in the principal market (or most advantageous market in the absence of a principal market) for such asset or liability.
In estimating fair value, the Company utilizes valuation techniques that are consistent with the market approach, the income approach
and/or the cost approach. Such valuation techniques are consistently applied. Inputs to valuation techniques include the assumptions
that market participants would use in pricing an asset or liability. FASB ASC Topic 820, Fair Value Measurement, establishes a
fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or
liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:

 Level 1
Inputs - Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability
to access at the measurement date.

 Level 2
Inputs - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly
or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or
similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability
(such as interest rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated
by market data by correlation or other means.

 Level 3
Inputs - Unobservable inputs for determining the fair values of assets or liabilities that reflect an entity's own assumptions
about the assumptions that market participants would use in pricing the assets or liabilities.

 Where
quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. If
quoted market prices are not available, then fair values are estimated by using quoted prices of securities with similar characteristics
or independent asset pricing services and pricing models, the inputs of which are market-based or independently sourced market parameters,
including, but not limited to, yield curves, interest rates, volatilities, prepayments, defaults, cumulative loss projections and cash
flows. Such securities are classified in Level 2 of the valuation hierarchy. In certain cases where Level 1 or Level 2 inputs
are not available, securities are classified within Level 3 of the hierarchy. The Company has no securities in the Level 1 or Level
3 inputs.

 The
following table summarizes securities available for sale measured at fair value on a recurring basis, segregated by the level of the
valuation inputs within the fair value hierarchy utilized to measure fair value:

 Level 1
 Inputs

 Level 2
 Inputs

 Level 3
 Inputs

 Total

 $
 -

 $

 $
 -

 $

 -

 6,416

 -

 6,416

 As of December 31, 2023

 U.S. Treasuries

 $
 -

 $
 3,894

 $
 -

 $
 3,894

 -

 -

 -

 5,456

 -

 5,456

 Market
valuations of our investment securities which are classified as Level 2 are provided by an independent third party. The fair values are
determined by using several sources for valuing fixed income securities. Their techniques include pricing models that vary based on the
type of asset being valued and incorporate available trade, bid and other market information. In accordance with the fair value hierarchy,
the market valuation sources include observable market inputs and are therefore considered Level 2 inputs for purposes of determining
the fair values.

 The Company considers transfers between the levels of the hierarchy
to be recognized at the end of related reporting periods. During the years ended December 31, 2024 and December 31, 2023, no assets for
which fair value is measured on a recurring basis transferred between any levels of the hierarchy.

 Certain
financial assets and financial 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).

assets measured at fair value on a non-recurring basis during the reported periods include impaired loans and loans held for sale.

 Collateral
dependent loans. The significant unobservable inputs (Level 3) used in the fair value
measurement of collateral for collateral-dependent loans primarily relate to the specialized discounting criteria applied to the borrower's
reported amount of collateral. The amount of the collateral discount depends upon the condition and marketability of the collateral, as
well as other factors which may affect the collectability of the loan. As the Company's primary objective in the event of default
would be to liquidate the collateral to settle the outstanding balance of the loan, collateral that is less marketable would receive a
larger discount. During the reported periods, there was no allowance for credit losses for collateral-dependent real estate and business
assets loans.

 The
valuation of our not readily marketable investment securities which are classified as Level 3 are based on the Company's own assumptions
and inputs that are both significant to the fair value measurement, and are unobservable.

 Our
assessment of the significance of a particular input to the Level 3 fair value measurements in their entirety requires judgment and considers
factors specific to the assets. It is reasonably possible that a change in the estimated fair value for instruments measured using Level
3 inputs could occur in the future.

 Loans
held for sale. Loans held for sale include the guaranteed portion of SBA and USDA loans and are reported at the lower of cost or
estimated fair value. Fair value for SBA and USDA loans is based on market indications available in the market. There were no impairments
reported for the periods presented.

 Non-financial assets measured at fair value on a non-recurring basis
include other real estate owned which, upon initial recognition, are re-measured and reported at fair value through a charge-off to the
allowance for credit losses. Additionally, foreclosed assets which, subsequent to their initial recognition, are re-measured at fair value
through a write-down included in other non-interest expense. Regulatory guidelines require the Company to reevaluate the fair value of
foreclosed assets on at least an annual basis. The fair value of foreclosed assets, upon initial recognition and impairment, are re-measured
using Level 2 inputs based on observable market data. Estimated fair value of other real estate is based on appraisals. Appraisers are
selected from the list of approved appraisers maintained by management. As of December 31, 2024 and 2023, there were no foreclosed assets.
There were no foreclosed assets re-measured during the years ended December 31, 2024 and 2023.

 The
methods and assumptions used to estimate fair value of financial assets and financial liabilities that are not measured and reported
at fair value on a recurring basis or non-recurring basis are described as follows:

 Carrying
amount is the estimated fair value for cash and cash equivalents, restricted securities, accrued interest receivable and accrued interest
payable. The estimated fair value of demand and savings deposits is the carrying amount since rates are regularly adjusted to market
rates and amounts are payable on demand. For borrowed funds and variable rate loans or deposits that re-price frequently and fully, the
estimated fair value is the carrying amount. For fixed rate loans or deposits and for variable rate loans or deposits with infrequent
re-pricing, fair value is based on discounted cash flows using current market rates applied to the estimated life and credit risk. For
loans held for sale, the estimated fair value is based on market indications for similar assets in the active market. The estimated fair
value of other financial instruments and off-balance-sheet loan commitments approximate cost and are not considered significant to this
presentation.

 The
Company adds a servicing asset when loans are sold and the servicing is retained, and uses the amortization method for the treatment
of the servicing asset. The servicing asset is carried at lower of cost or fair value. Loan servicing assets do not trade in an
active, open market with readily observable prices. Accordingly, fair value is estimated using a discounted cash flow model having
significant inputs of discount rate, prepayment speed and default rate. Due to the nature of the valuation inputs, servicing rights
are classified within Level 3 of the hierarchy. During the year ended December 31, 2024, the company added servicing assets totaling
$ 63,000 in connection with the sale of a $ 3.8 million USDA loan. During the year ended December 31, 2023, the Company added
servicing assets totaling $ 38,000 in connection with the sale of a $ 5.8 million USDA loan. For the years ended December 31, 2024 and
2023, the Company amortized $ 146,000 and $ 56,000, respectively, using the amortization method for the treatment of servicing loans.
The Company reversed $ 38,000 and $ 35,000 of the servicing assets allowance for the year ended December 31, 2024 and 2023.

 FASB
ASC Topic 825, Financial Instruments, requires disclosure of the fair value of financial assets and financial liabilities,
including those financial assets and financial liabilities that are not measured and reported at fair value on a recurring basis or non-recurring
basis. The estimated fair value approximates carrying value for cash and cash equivalents and accrued interest. The methodologies for
other financial assets and financial liabilities that are not measured and reported at fair value on a recurring basis or non-recurring
basis are discussed below:

held to maturity. The securities in this category are PACE and
PID/TIRZ investments. These investment contracts or bonds originate under a contractual obligation
between the property owners, the local county administration, and a third-party administrator and sponsor. The fair value of these investments
are estimated using observable market inputs in a discounted cash flow analysis.

 Loans.
 The estimated fair value approximates carrying value for variable-rate loans that reprice frequently and with no significant change
in credit risk. The fair value of fixed-rate loans and variable-rate loans which reprice on an infrequent basis is estimated by discounting
future cash flows using the current interest rates at which similar loans with similar terms would be made to borrowers of similar credit
quality.

 Deposits.
 The fair values of demand deposits, savings deposits are, by definition, equal to the amount payable on demand and, therefore, approximate
their carrying amounts. The fair values for time deposits are estimated using a discounted cash flow calculation that utilizes interest
rates currently being offered on time deposits with similar contractual maturities.

 Borrowed
Funds. The estimated fair value approximates carrying value for short-term borrowings. The fair value of long-term fixed-rate borrowings
is estimated using quoted market prices, if available, or by discounting future cash flows using current interest rates for similar financial
instruments. The estimated fair value approximates carrying value for variable-rate junior subordinated deferrable interest debentures
that reprice quarterly.

 Loan
Commitments, Standby and Commercial Letters of Credit. Our lending commitments have variable interest rates and "escape"
clauses if the customer's credit quality deteriorates. Therefore, the fair values of these items are not significant and are not
included in the following table.

 Carrying
amounts and estimated fair values of other financial instruments by level of valuation input were as follows:

 Carrying

 Financial assets:

 Level 1 inputs:

 Cash and cash equivalents

 $
 63,723

 $
 63,723

 Level 2 inputs:

 Securities available for sale

 Securities, restricted

 4,284

 4,284

 Loans held for sale

 46,980

 51,013

 Accrued interest receivable

 5,234

 5,234

 Level 3 inputs:

 Securities held to maturity

 20,702

 Loans, net

 660,184

 664,290

 Servicing asset

 Financial liabilities:

 Level 1 inputs:

 Non-interest bearing deposits

 63,130

 63,130

 Level 2 inputs:

 Interest bearing deposits

 648,017

 651,533

 Borrowed funds and subordinated debt

 22,000

 22,000

 Accrued interest payable

 1,248

 1,248

 Carrying

 Financial assets:

 Level 1 inputs:

 Cash and cash equivalents

 $

 $

 Level 2 inputs:

 Securities available for sale

 Securities, restricted

 4,176

 4,176

 Loans held for sale

 26,573

 28,671

 Accrued interest receivable

 4,829

 4,829

 Level 3 inputs:

 Securities held to maturity

 24,194

 23,849

 Loans, net

 494,787

 484,848

 Servicing asset

 Financial liabilities:

 Level 1 inputs:

 Non-interest bearing deposits

 68,433

 68,433

 Level 2 inputs:

 Interest bearing deposits

 458,458

 459,549

 Borrowed funds and subordinated debt

 33,000

 33,000

 Accrued interest payable

 Note
17. Recent Accounting Pronouncements

 ASU
No. 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures." ASU 2023-09 requires public
business entities to disclose in their rate reconciliation table additional categories of information about federal, state and foreign
income taxes and to provide more details about the reconciling items in some categories if items meet a quantitative threshold. ASU 2023-09
also requires all entities to disclose income taxes paid, net of refunds, disaggregated by federal, state and foreign taxes for annual
periods and to disaggregate the information by jurisdiction based on a quantitative threshold, among other things. ASU 2023-09 is
effective for us on January 1, 2025 and is not expected to have a significant impact on our financial statements.

 Note
18. Parent Company Condensed Financial Statements

 CONDENSED
BALANCE SHEETS

 2024

 2023

 ASSETS

 Cash and due from banks

 $
 3,906

 $

 Investment in subsidiaries

 109,057

 104,954

 Other assets

 1,136

 1,619

 $
 114,099

 $
 106,929

 LIABILITIES AND SHAREHOLDERS' EQUITY

 Other liabilities

 $

 $

 Shareholders' equity

 113,429

 106,857

 Total liabilities and shareholders' equity

 $
 114,099

 $
 106,929

 CONDENSED
STATEMENTS OF INCOME

 YEARS

 2024

 2023

 Income from subsidiaries

 $
 16,673

 $
 17,523

 Other income

 Total income

 17,571

 18,330

 Non-interest expense:

 3,399

 2,674

 Professional and administrative

 Other

 Total non-interest expense

 4,927

 4,085

 Income before income taxes

 12,644

 14,245

 Income tax benefit

 ( 1,291
)

 ( 975
)

 Net Income

 $

 $

 CONDENSED
STATEMENTS OF COMPREHENSIVE INCOME

 YEARS

 2024

 2023

 Net Income

 $

 $

 Other comprehensive income:

 Change in unrealized loss on investment securities available for sale

 Tax effect

 Other comprehensive income

 Comprehensive income

 $
 14,115

 $
 15,768

 CONDENSED
STATEMENTS OF CASH FLOWS

 YEARS

 2024

 2023

 Cash Flows from Operating Activities

 Net income

 $

 $

 Adjustments to reconcile net income to net cash used in operating activities:

 Equity in income of subsidiaries

 ( 16,673
)

 ( 17,523
)

 Loss on disposition of securities not readily marketable

 -

 Depreciation and amortization

 Stock based compensation

 Net change in other assets

 ( 882
)

 Net change in other liabilities

 ( 401
)

 Net cash used in operating activities

 ( 1,555
)

 ( 3,263
)

 Cash Flows from Investing Activities

 Purchase of property and equipment

 ( 4
)

 ( 70
)

 Distributions from subsidiaries

 12,750

 5,700

 Net cash provided by investing activities

 12,746

 5,630

 Cash Flows from Financing Activities

 Repurchase of stock options

 ( 1,329
)

 -

 Dividends paid on Series B Preferred Shares

 ( 1,852
)

 ( 1,553
)

 Dividends on common stock

 ( 2,832
)

 ( 2,028
)

 Purchase of treasury stock at cost

 ( 1,628
)

 ( 1,094
)

 Net cash used in financing activities

 ( 7,641
)

 ( 4,675
)

 Net change in cash and cash equivalents

 3,550

 ( 2,308
)

 Cash and cash equivalents at beginning of period

 2,664

 Cash and cash equivalents at end
 of period

 $
 3,906

 $

 Supplemental disclosures of cash flow information

 Cash paid during the year for:

 Income taxes

 $
 3,775

 $
 3,350

 Item 9. Changes In and Disagreements with
Accountants on Accounting and Financial Disclosure.

 None.

 Item 9A. Controls and Procedures.

 Our
principal executive officer and principal financial officer have evaluated the effectiveness of our "disclosure controls and procedures"
(as defined in Rule 13a-15(e) and 15d-15(e) of the Exchange Act, "Disclosure Controls") as of the end of the period covered
by this Form 10-K. Our management, including the principal executive officer and principal financial officer, does not expect that our
Disclosure Controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only
reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect
the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the
inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances
of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making
can be faulty, and that breakdowns can occur because of simple error or mistake. The design of any system of controls also is based
in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in
achieving its stated goals under all potential future conditions.

 Based
on such evaluation, our principal executive officer and principal financial officer have concluded that, as of the end of the period covered
by this Form 10-K, the Company's disclosure controls and procedures were effective to provide reasonable assurance that the information
required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the rules and forms of the SEC and is accumulated and communicated to the Company's
management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding
required disclosure.

 Management's Report on Internal Control
over Financial Reporting

 This
Form 10-K does not include an attestation report of the Company's registered public accounting firm regarding internal controls
over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting
firm pursuant to rules of the SEC that permit the Company to provide only management's report in this Form 10-K.

of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f)
and 15d-15(f) of the Exchange Act. The Company's internal control over financial reporting system is designed to provide reasonable
assurance to management and the Board of Directors regarding the reliability of the Company's financial reporting and the preparation
of published financial statements in accordance with generally accepted accounting principles.

 Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those
systems determined to be effective can provide only reasonable assurance with respect to the financial statement preparation and presentation.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 As
of December 31, 2024, management assessed the effectiveness of the Company's internal control over financial reporting based on
the criteria for effective internal control over financial reporting established in "Internal Control-Integrated Framework,"
issued by the Committee of Sponsoring Organizations ("COSO") of the Treadway Commission in 2013. Based on this assessment,
management determined that the Company maintained effective internal control over financial reporting as of December 31, 2024.

 Whitley
Penn LLP, Dallas, Texas, (U.S. PCAOB Auditor Firm I.D.: 726) an independent registered public accounting firm, audited the consolidated
financial statements of the Company for the years ended December 31, 2024 and 2023 included in this Annual Report on Form 10-K. Their
report is included in "Item 8. Financial Statements and Supplementary Data." This Annual Report on Form 10-K does not include
an attestation report of the Company's registered public accounting firm on the Company's internal control over financial
reporting due to the Company's status as a Smaller Reporting Company.

 Changes in Internal Control over Financial
Reporting

 There was no change in our
internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) during the quarter ended
December 31, 2024, that has materially affected, or is reasonably likely to materially affect, the Company's internal control over
financial reporting. The design of any system of controls and procedures is based in part upon certain assumptions about the likelihood
of future events. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions,
regardless of how remote.

 Item 9B. Other Information.

 During
the three months ended December 31, 2024, none of the directors or officers of the Company adopted or terminated a "Rule 10b5-1 trading
arrangement" or a "non-Rule 10b5-1 trading arrangement," as each term is defined in Item 408 of Regulation S-K.

 Item 9C. Disclosure regarding Foreign Jurisdictions that Prevent
Inspections.

 Not applicable.

 Item 10. Directors, Executive Officers, and
Corporate Governance

 General

 We have an experienced executive
management team and board of directors. Our board of directors is comprised of eight directors who are elected by our shareholders at
each annual meeting of shareholders for a term of one year. Our directors hold office until the next annual meeting of shareholders following
their election and thereafter until their successors shall have been duly elected and qualified. Our executive officers are appointed
by our board of directors and hold office until their successors are duly appointed and qualified, or until their earlier death, resignation
or removal.

 Pursuant to our certificate
of formation and bylaws, our board of directors must be comprised of no less than one nor more than 15 directors, and is currently comprised
of eight directors. The exact number of directors may be fixed from time to time within the range set forth in our bylaws by resolution
of our board of directors.

 As discussed in greater detail
below, our board of directors has affirmatively determined that Eric Langford, Thomas McDougal, Barb Bomersbach, and Thomas Henley qualify
as independent directors based upon the rules of Nasdaq and the SEC. There are no arrangements or understandings between any of the directors,
executive officers and any other person pursuant to which he or she was selected as a director.

 Directors and Executive Officers

 Directors. The
following table sets forth certain information regarding our directors, including their ages and the years that they began serving as
directors of the Company:

 Name

 Position with the Company

 Age at

March 1,

2025

Since

 Barb Bomersbach

 Mar 2019

 Darrell W. Cain

 Chairman

 Nov 2018

 Steven B. "Brad" Clapp

 May 2017

 Thomas H. Henley

 Feb 2025

 Eric Langford

 May 2017

 Thomas McDougal

 May 2017

 Thomas R. Sanders

 May 2017

 Director; President; Chief Executive Officer

 Oct 2016

 Executive
Officers. The following table sets forth certain information regarding our executive officers, including their positions and
length of service with the Company.

 Name

 Position with the
 Company

 Age at

March 1,

2025

Since

 Executive Vice President & Chief Financial Officer

 —

 David J. Clifford

 Chief Operating Officer

 —

 President; Chief Executive Officer

 Oct 2016

 The following is a brief discussion
of the business and banking background and experience of our directors and executive officers for at least the past five years. With respect
to directors, the biographies also contain information regarding the person's experience, qualifications, attributes or skills that
led to the conclusion that the person should serve as a director. Unless otherwise indicated, directors and senior officers have held
their positions for the past five years. No director or executive officer has any family relationship, as defined in Item 401 of Regulation
S-K, with any other director or with any of our executive officers.

 Board of Directors

 Barb Bomersbach.
Ms. Bomersbach has served as a director of the Company since March 2019. Ms. Bomersbach currently serves as a financial advisor to companies
in the energy sector. From 2010 to 2021 she served as Chief Financial Officer of Tristate Midstream, a natural gas gathering company.
Prior to that, Ms. Bomersbach was the Chief Financial Officer of Wynn Crosby, an upstream oil and gas company, in 2009. Ms. Bomersbach
is a Certified Public Accountant and Chartered Financial Analyst, and graduated summa cum laude from Texas A&M University with a
BBA and MS in Accounting. We believe Ms. Bomersbach brings to the Board of Directors experience in financial and accounting matters,
internal controls and compliance (from an accounting standpoint). Ms. Bomersbach is our audit committee financial expert.

 Darrell W. Cain. Mr. Cain is the non-executive Chairman of the Company. Mr. Cain has served as a director of the Company since November 2018, former Chairman of Tectonic Holdings from 2015 to May 2019 and a partner at Cain Watters since 1983. Mr. Cain founded Cain Watters in 1983 as an accounting and investment advisory firm specializing in financial planning, working exclusively with members of the dental profession, and served as its President from 1983 until 2008; he is currently a partner of Cain Watters. Mr. Cain previously served on the board of directors of T Bancshares and the Bank from their formation until October 2005. Mr. Cain is a graduate of Baylor University where he received both a Bachelor of Business Administration and Master of Public Accounting degree. He holds certified public accountant and investment advisor representative designations. We believe Mr. Cain brings to our board of directors significant investment, financial planning and financial skills important to the oversight of enterprise and operational risk management of the Company.

 Steven B. "Brad"
Clapp. Mr. Clapp has served as a director of the Company, T Bancshares and the Bank since May 2017 and served as a board member of
Tectonic Holdings from 2015 until its merger with the Company in May 2019. Mr. Clapp is a partner of Cain Watters and currently serves
as the Partner in Charge of Information Technology, in addition to his duties of managing the financial plans of approximately 60-70
families. He has served the clients of the firm in various planning roles including the development of financial plans, tax planning
and practice valuations. He joined Cain Watters in 1998 and became a partner in 2008. Mr. Clapp started his career at the international
accounting firm KPMG in 1996. Mr. Clapp is a graduate of The University of Arkansas and The University of Denver. We believe Mr. Clapp
brings to the board of directors strong investment, accounting and financial skills important to the oversight of our financial reporting
and operational risk management.

 Thomas
H. Henley. Mr. Henley, age 59, has been a managing director at Bernhard Capital Partners since February 2019. From March 2016 to
February 2019, Mr. Henley served as Senior Managing Director at the UAW Retiree Medical Benefits Trust, a purchaser of retiree healthcare
benefits, as a leader of the investment team and a member of the Investment Committee. Mr. Henley has more than 25 years of experience
in private equity investing, both domestically and internationally. Mr. Henley earned a Bachelor of Science degree, majoring in Petroleum
Engineering, from Stanford University and a Master of Business Administration from the Anderson Graduate School of Management at the
University of California, Los Angeles, where he received a Chevron Fellowship in Finance. Mr. Henley brings to the board of directors
longstanding investment and leadership experience.

 Eric Langford.
Mr. Langford is a founding director of T Bancshares and the Bank since February 2003 and a director of the Company since May 2017.
He has been active in the real estate industry for almost 40 years as an investor and developer. Since 1995, he has managed Langford
Property Company. He previously served as Senior Vice President for two leading national real estate firms, Opus West Corporation
from 2003 to 2006 and Koll Development Company from 1993 to 2000. A 65-year resident of Dallas, Mr. Langford was the founding
President of North Texas Commercial Association of Realtors, which awarded him with the Stemmons Service Award, the highest honor in
the Dallas real estate industry. Mr. Langford is a magna cum laude graduate from Texas A&M University. We
believe that Mr. Langford's expansive business experience in the real estate industry provides leadership and management
experience that is beneficial to the board of directors.

 Thomas
McDougal, DDS. Dr. McDougal has been a director of T Bancshares and the Bank since February 2003 and a director of the Company since
May 2017. He served as Captain in the United States Air Force for two years. Dr. McDougal is a practicing dentist, having been in private
practice since 1970. In 1970, Dr. McDougal founded his dental practice in Richardson, Texas which today is McDougal and Richards Dentistry.
He received a Bachelor of Science degree from Oklahoma State University and his Doctor of Dental Surgery degree from Baylor University.
He serves on the board of directors of several national dental associations, and served as President of the Dallas County Dental Society
and the American Academy of Dental Practice. He has been an adjunct professor at Baylor College of Dentistry since 2008 and has been
on the teaching faculty at the Center for Aesthetic and Restorative Dentistry since 2005. We believe Dr. McDougal's experience
as a practicing dentist and leadership roles in the dental community provide particular benefit in overseeing our dental lending program
and trust line of business as well as his corporate governance experience.

 Thomas
R. Sanders. Mr. Sanders has served as a director of the Company, T Bancshares and the Bank since May 2017 and was a director
of Tectonic Holdings from 2015 until the Tectonic Merger. Mr. Sanders has been a partner of Cain Watters since 2008 after joining the
firm in 2002. He currently serves as a member of the mentoring committee as well as the internal quality control committee helping financial
planners at CWA grow personally and professionally. Mr. Sanders also manages the financial planning relationship for more than 65 of
the firm's clients representing assets under management approximating $300 million. Mr. Sanders started his career at Deloitte
where he spent four years in their tax department including several international assignments. Mr. Sanders graduated from Baylor University
in 1998 with a Bachelor of Business Administration and a Masters of Science in Taxation. We believe that Mr. Sanders' tax expertise
enhances the skill set of our board of directors.

 A. Haag
Sherman. In connection with the Tectonic Merger, Mr. Sherman was appointed as a director and the Chief Executive Officer
of the Company. Prior to such appointment, Mr. Sherman served as Chairman of the Company from November 2017 until the Tectonic Merger,
and as Chairman of T Bancshares and the Bank since May 2017. Mr. Sherman was also the Chief Executive Officer and a director of
Tectonic Holdings from 2015 until May 2019. Prior to joining the Company, Mr. Sherman co-founded Salient Partners, LP (a Houston-based
investment firm) in 2002 and served in various executive positions, including Chief Executive Officer and Chief Investment Officer, through
October 2011. In addition, he previously served as an executive officer and partner of The Redstone Companies from 1998 to 2002 where
he, among other things, managed a private equity portfolio (where he was responsible for two finance companies). Mr. Sherman has served
as a director of Hilltop Holdings, Inc. since its acquisition of PlainsCapital Corporation in November 2012. He previously served as
a director of PlainsCapital from September 2009 to November 2012. Mr. Sherman has served as a member of the board of directors
of CBIZ, Inc. since August 2020. He currently serves on the Executive Committee of Episcopal High School in Bellaire, Texas (where he
previously served as Executive Chairman), the Board of Trustees of the Episcopal Health Foundation, a member of the Investment Committee
of the Episcopal Diocese of Texas and on the Governing Council of the Miller Center at the University of Virginia. Mr. Sherman graduated
cum laude from Baylor University in 1988 with a Bachelor of Business Administration with majors in Accounting and Economics and received
a Juris Doctorate, with honors, from the University of Texas School of Law in 1992. Mr. Sherman previously served as an adjunct professor
of law at The University of Texas School of Law. Mr. Sherman previously practiced corporate law at Akin, Gump, Strauss, Hauer & Feld,
LLP from 1992 to 1996 and was an auditor at Price Waterhouse, a public accounting firm, from 1988 to 1989. Mr. Sherman is an attorney
and certified public accountant. We believe that Mr. Sherman's leadership, board expertise, legal background and experience in
financial services, including banking, trust and finance companies, qualify him to serve on our board of directors.

 Executive Officers and Other Significant
Employees

 Ken Bramlage.
Mr. Bramlage has served as Executive Vice President and Chief Financial Officer of the Company since May 2017 and holds the same
positions at T Bancshares and the Bank. He joined the Bank in July 2008 as Vice President and Controller and was promoted to Senior
Vice President and Chief Financial Officer in April 2010 and Executive Vice President and Chief Financial Officer in 2013. Prior to
joining the Company, Mr. Bramlage was Vice President and Controller for a $1.0 billion savings bank headquartered in Olathe, Kansas
since April 1999. Mr. Bramlage earned a Bachelor of Administration degree in Accounting at Kansas State University in 1984 and
became licensed as a certified public accountant in the state of Texas in 1985.

 David Clifford. Mr. Clifford was appointed as Chief Operating Officer of the Company effective November 14, 2023. Prior to such date, he had served as Chief Strategy Officer of the Company since January 1, 2018. Before joining the Company, from 2004 through 2011, Mr. Clifford served as the Director of Marketing and Intermediary Services at Salient Partners, LP ("Salient") and was responsible for retail sales and distribution efforts. Mr. Clifford also served as the Head of Salient's Sales and Distribution Platform, where he assisted in the development and marketing of alternative investment programs. Mr. Clifford began his career as an Associate and Consultant in the Helsinki, Finland office at McKinsey & Company ("McKinsey"). While at McKinsey, Mr. Clifford focused on serving high technology and telecommunications companies in the Nordic region. Mr. Clifford has a Bachelor of Business Administration in Finance from the University of Texas at Austin and a Masters of Business Administration from the Helsinki School of Economics.

 Code of Business Conduct and Ethics

 We
have adopted a Code of Business Conduct and Ethics, which is applicable to all directors, officers and employees of the Company and the
Bank. The full text of our Code of Business Conduct and Ethics is posted to the Company's website which is located at  corporate governance.
We will post any amendments to our Code of Business Conduct and Ethics, or waivers of its requirements, on our website.

 Insider
Trading Policy

 The
Company has adopted an Insider Trading Policy which sets forth the procedure regarding trading by insiders in securities of the Company.
The Company believes that its Insider Trading Policy is reasonably designed to promote compliance with insider trading laws, rules and
regulations and listing standards applicable to the Company. A copy of the Company's Insider Trading Policy was filed as an exhibit
to this Form 10-K and is available on the Company's website which is located at  corporate governance.

 Audit Committee

 The
members of our Audit Committee are Eric Langford, Thomas McDougal, and Barb Bomersbach, with Barb Bomersbach serving as chair of our Audit
Committee. Our board of directors has evaluated the independence of each of the members of our Audit Committee and has affirmatively determined
that each of the members of our Audit Committee (1) is an "independent director" under the rules of NASDAQ, (2) satisfies
the additional independence standards under applicable SEC rules for audit committee service, and (3) has the ability to read and understand
fundamental financial statements. The board of directors has determined that Barb Bomersbach qualifies as an "audit committee financial
expert," as defined by the SEC. The board of directors believes that the members of the Audit Committee are able to read and understand
the consolidated financial statements of the Company and are familiar with the Company and its business.

 Delinquent
Section 16(a) Reports

 Section
16(a) of the Exchange Act requires our directors and executive officers and persons who own more than 10% of our outstanding common stock
to file reports of ownership and changes in ownership of our equity securities, including our common stock with the SEC. Such persons
are required by the SEC's regulations to furnish us with copies of all reports they file pursuant to Section 16.

 Based
solely on a review of the reports furnished to us, or written representations from reporting persons that all reportable transactions
were reported, we believe that during the fiscal year ended December 31, 2024, our officers, directors and greater than 10% owners timely
filed all reports they were required to file under Section 16(a), except that Darrell Cain inadvertently failed to timely report the sale
of 5,000 shares of our Series B non-cumulative perpetual preferred stock on November 26, 2024 and the sale of 2,000 shares of our Series
B non-cumulative perpetual preferred stock on December 2, 2024, which resulted in the late filing of Form 4 related to both transactions
in our Series B non cumulative perpetual preferred stock being filed with the SEC on December 12, 2024. These failures to timely file
were inadvertent and have been reported.

 Item 11. Executive Compensation

 We are a "smaller
reporting company," as defined in Item 10(f)(1) of Regulation S-K. As such, we are eligible to take advantage of certain
exemptions from various reporting requirements that are applicable to other public companies that are not smaller reporting companies.
These include, but are not limited to, reduced disclosure obligations regarding executive compensation.

 Our "named executive
officers," which consist of our principal executive officer and the two other most highly compensated executive officers, are A.
Haag Sherman, Chief Executive Officer, Ken Bramlage, Chief Financial Officer, and David Clifford, Chief Operating Officer.

 Summary Compensation Table

 The following table sets forth information regarding
the compensation paid to, awarded to, or earned by our named executive officers for the fiscal years indicated.

 Name and Principal Position

 Year

 Salary
 ($)

 Bonus
 ($)

 Stock Awards
 ($)

 Option
 Awards
 ($)

 Non-Equity
 Incentive Plan

 Compensation
 ($)

 All Other
 Compensation (1)

 ($)

 Total

 ($)

 2024

 375,000

 325,000

 —

 —

 —

 12,591

 712,591

 Chief
 Executive Officer

 2023

 375,000

 325,000

 —

 —

 —

 12,293

 712,293

 2024

 201,250

 107,500

 —

 —

 —

 11,433

 320,183

 Chief
 Financial Officer

 2023

 185,000

 92,500

 —

 —

 —

 10,504

 288,004

 David Clifford

 2024

 375,000

 165,000

 240,500

 —

 —

 12,255

 780,500

 Chief
 Operating Officer

 2023

 375,000

 150,000

 —

 —

 —

 11,730

 536,730

 (1)
 The amounts shown in this column
are composed of the following items:

 Name

 Year

 Company 401(k) Match

 Life Insurance Premiums

 Total "All Other Compensation"

 Haag Sherman

 2024

 $
 12,075

 $

 $
 12,591

 2023

 11,550

 12,293

 2024

 10,641

 11,434

 2023

 9,712

 10,504

 David Clifford

 2024

 $
 12,075

 $

 $
 12,255

 2023

 11,550

 11,730

 General

 We compensate our named executive
officers through a combination of base salary, annual discretionary bonuses, equity awards and other benefits, including perquisites.
Our board of directors believes the executive compensation packages that we provide to our executives, including the named executive officers,
should reward performance. Each element of compensation is designed to achieve a specific purpose and to contribute to a total package
that is competitive with similar packages provided by other institutions that compete for the services of individuals like our named executive
officers.

 Base Salary

 We provide each of our named
executive officers with a competitive fixed annual base salary. The base salaries for our named executive officers are reviewed annually
by the board of directors by taking into account the results achieved by each executive, his or her future potential, scope of responsibilities
and experience and competitive pay practices. Based upon the comprehensive review, the board of directors has determined the base salaries
to be equitable and competitive for our market.

 Bonuses

 Our named executive officers
receive incentive and/or bonus payments based on their employment agreements, as described below.

 Stock-Based Compensation Awards

 Stock-based compensation awards
may consist of options to acquire shares of our common stock, restricted stock awards, restricted stock units or performance stock units
issued pursuant to the Amended and Restated T Acquisition, Inc. 2017 Equity Incentive Plan (the "Amended and Restated Equity Plan"),
which, as described more fully below, allows the Compensation Committee to establish the terms and conditions of the awards, subject to
the terms of the Amended and Restated Equity Plan.

 Other Benefits and Perquisites

 The named executive officers
participate in our broad-based employee welfare benefit plans, such as medical, dental, vision, supplemental disability and term life
insurance. The named executive officers also participate in our 401(k) plans. Under the Tectonic Retirement Plan and Trust, in which Mr.
Sherman and Mr. Clifford are participants, we match 100% of an employee's contribution up to the first 1% and 50% up to next 5%
of such employee's salary up to the 401(k) limit, identical to the T Bank, N.A. Employees Savings Plan. The named executive officers
are provided the same benefits, and participate in the cost at the same rate, as all other employees.

 We provide our named executive
officers with certain perquisites that we believe are reasonable and consistent with our overall compensation program to better enable
us to attract and retain superior employees for key positions. The Compensation Committee will review the levels of perquisites and other
personal benefits provided to named executive officers. Based on this periodic review, perquisites will be awarded or adjusted on an individual
basis.

 Employment Agreements and Arrangements

 We have entered into an employment
agreement with each of Mr. Sherman and Mr. Bramlage. The following is a summary of the material terms of such agreements. The Company
has not entered into any material plan, contract or arrangement to which Mr. Clifford is a party.

 Haag Sherman. Mr. Sherman's employment agreement has an initial term of four years and automatic one-year renewals thereafter unless either party provides written notice of its intent not to renew at least 90 days prior to the renewal date. Under Mr. Sherman's employment agreement, he is entitled to an annual base salary that is currently $375,000 and is eligible to receive an annual performance-based bonus payment to the extent the applicable performance criteria are satisfied.

 Mr. Sherman is also eligible
to receive certain other employee benefits and perquisites in accordance with our established policies, as described above. In addition,
Mr. Sherman's employment agreement provides for certain restrictive covenants and severance benefits in the event of a qualifying
termination of employment and certain payments in connection with a "change in control" of the Company. See "—Potential
Payments upon a Termination of Employment or a Change in Control."

 Ken Bramlage.
As amended and restated, the employment agreement is for a term expiring on May 14, 2020 and automatic one-year renewals thereafter unless
either party provides written notice of its intent not to renew at least 90 days prior to the renewal date. Under Mr. Bramlage's
amended and restated employment agreement, he is entitled to an annual base salary that is currently $216,524 and is eligible to receive
an annual performance-based bonus payment to the extent the applicable performance criteria are satisfied.

 Mr. Bramlage is also eligible
to receive certain other employee benefits and perquisites in accordance with our established policies, as described above. In addition,
Mr. Bramlage's amended and restated employment agreement provides for certain restrictive covenants and severance benefits in the
event of a qualifying termination of employment and certain payments in connection with a "change in control" of the Company.
See "—Potential Payments upon a Termination of Employment or a Change in Control."

 David Clifford.
Under Mr. Clifford's employment arrangement, he is entitled to an annual base salary that is currently $375,000 and is eligible
to receive an annual performance-based bonus payment to the extent the applicable performance criteria are satisfied.

 Mr. Clifford is also eligible
to receive certain other employee benefits and perquisites in accordance with our established policies, as described above.

 Amended and Restated T Acquisition, Inc. 2017 Equity Incentive
Plan

 The board of directors and Company shareholders have adopted the Amended
and Restated Equity Plan. The Amended and Restated Equity Plan is intended to enable the Company to remain competitive and innovative
in its ability to attract, motivate, reward, and retain the services of key employees and outside directors. The Amended and Restated
Equity Plan allows for the granting of incentive stock options, non-qualified stock options, stock appreciation rights ("SARs"),
restricted stock, restricted stock units, performance awards, dividend equivalent rights, and other awards which may be granted singly,
in combination, or in tandem. The Amended and Restated Equity Plan is expected to provide flexibility to the Company's compensation
methods in order to adapt the compensation of key employees and outside directors to a changing business environment (after giving due
consideration to competitive conditions and the impact of accounting rules and federal tax laws).

 The following is a brief description of the Amended and Restated Equity
Plan and is qualified in its entirety by reference to the Amended and Restated Equity Plan that is filed as an exhibit to this Form 10-K.

 Purpose.
The purpose of our Amended and Restated Equity Plan is to attract, motivate, reward, and retain the services of key employees and
outside directors by providing them with additional incentives, and to promote the success of our Company's business.

 Administration.
Our board of directors or one or more committees appointed by our board of directors will administer the Amended and Restated Equity
Plan.

 Eligibility.
Persons eligible to receive awards under the Amended and Restated Equity Plan include our officers, employees, consultants and
members of our board of directors. Our board of directors or one or more committees appointed by our board of directors will
determine from time to time the participants to whom awards will be granted.

 Authorized Shares; Limits on Awards. The
maximum number of common shares that may be issued or transferred pursuant to awards under the Amended and Restated Equity Plan equals
750,000 shares, all of which may be subject to incentive stock option treatment. The Current Plan reserves 750,000 shares of our common
stock, of which 230,000 stock options and 285,000 restricted stock grants have been awarded, however 30,000 stock options were forfeited
and 100,000 stock options were repurchased, and thus 130,000 shares were returned to the reserve under the Amended and Restated Equity
Plan, leaving 365,000 shares remaining available for issuance.

 The maximum aggregate number of common shares that may be issued pursuant
to all awards under the Amended and Restated Equity Plan shall increase annually on the first day of each fiscal year following the adoption
of the Amended and Restated Equity Plan by the number of common shares equal to the lesser of (i) three percent of the total issued and
outstanding common shares on the first day of such fiscal year, or (ii) such lesser amount determined by our board of directors.

 Adjustments or Changes in Capitalization. In
the event of any change in the outstanding common shares by reason of a stock split, stock dividend or other non-recurring dividends or
distributions, recapitalization, merger, consolidation, spin-off, combination, repurchase or exchange of stock, reorganization, liquidation,
dissolution or other similar corporate transaction that affects our common stock, the aggregate number of shares of common stock available
under the Amended and Restated Equity Plan or subject to outstanding awards (including the exercise price of any awards) shall be adjusted
as our board of directors deems necessary or appropriate.

 Incentive Awards. The Amended and
Restated Equity Plan authorizes stock options, SARs, restricted stock, restricted stock units, performance-based awards, as well as other
awards (described in the Amended and Restated Equity Plan) that are responsive to changing developments in management compensation. The
Amended and Restated Equity Plan retains the flexibility to offer competitive incentives and to tailor benefits to specific needs and
circumstances. Any award may be paid or settled in cash. An option or SAR will expire, or other award will vest, in accordance with the
schedule set forth in the applicable award agreement.

 Stock
Option. A stock option is the right to purchase common shares at a future date at a specified price per share generally
equal to, but no less than, the fair market value of a share on the date of grant. An option may either be an Incentive Stock
Option, or ISO, or a nonstatutory stock option, or NSO. ISO benefits are taxed differently from NSOs, and are subject to more
restrictive terms and are limited in amount by the Code and the Amended and Restated Equity Plan. Full payment for shares purchased
on the exercise of any option must be made at the time of such exercise in a manner approved by our board of directors.

 SARs. A
SAR is the right to receive payment of an amount equal to the excess of the fair market value of a common share on the date of
exercise of the SAR over the base price of the SAR. The base price will be established by our board of directors at the time of
grant of the SAR but will not be less than the fair market value of a share on the date of grant. SARs may be granted in connection
with other awards or independently.

 Restricted
Stock. A restricted stock award is typically for a fixed number of common shares subject to restrictions. Our board of
directors specifies the price, if any, the participant must pay for such shares and the restrictions (which may include, for
example, continued service and/or performance standards) imposed on such shares. A stock bonus may be granted by our board of
directors to any eligible person to reward exceptional or special services, contributions or achievements in the manner and on such
terms and conditions (including any restrictions on such shares) as determined from time to time by our board of directors. The
number of shares so awarded shall be determined by our board of directors and may be granted independently or in lieu of a cash
bonus.

 Restricted Stock
Units. A restricted stock unit is similar to a SAR except that it entitles the recipient to receive an amount equal to the
fair market value of a common share.

 Performance-Based
Awards. Our board of directors may designate any award, the exercisability or settlement of which is subject to the
achievement of performance conditions, as a performance-based award. In order to qualify as performance-based compensation, the
performance objective(s) used for the performance-based award must be from the list of performance objectives set forth in the
Amended and Restated Equity Plan. The performance objectives set forth in the Amended and Restated Equity Plan are: interest income
and expense; net earnings or net income; net interest margin; efficiency ratio; reduction in non-accrual loans and non-interest
expense; growth in non-interest income and ratios to earnings assets; net revenue growth and ratio to earning assets; capital
ratios; asset or liability interest rate sensitivity and gap; effective tax rate; deposit growth and composition; liquidity
management; securities portfolio (value, yield, spread, maturity, or duration); asset growth and composition (loans, securities);
non-interest income (e.g., fees, premiums and commissions, loans, wealth management, treasury management, insurance, funds
management) and expense; overhead ratios, productivity ratios; credit quality measures; return on assets; return on equity; economic
value of equity; compliance and CAMELS or other regulatory ratings; internal controls; enterprise risk measures (e.g., interest
rate, loan concentrations, portfolio composition, credit quality, operational measures, compliance ratings, balance sheet,
liquidity, insurance); volume in production or loans; non-performing asset or non-performing loan levels or ratios or loan
delinquency levels; provision for credit losses or net charge-offs; cash flow; cost; revenues; sales; ratio of debt to debt plus
equity; net borrowing, credit quality or debt ratings; profit before tax; economic profit; earnings before interest and taxes;
earnings before interest, taxes, depreciation and amortization; gross margin; profit margin; earnings per share; operating earnings;
capital expenditures; expenses or expense levels; economic value added; ratio of operating earnings to capital spending or any other
operating ratios; free cash flow; net profit; net sales; net asset value per share; the accomplishment of mergers, acquisitions,
dispositions, public offerings or similar extraordinary business transactions; sales growth; price of the Company's stock;
return on investment; equity or shareholders' equity; market share; inventory levels, inventory turn or shrinkage; customer
satisfaction; or total shareholder return. Our board of directors may select any number of performance objectives from this list of
performance objectives when establishing the performance measures of a performance-based award, but such objectives must be set no
later than 90 days after the beginning of the applicable performance period. The Amended and Restated Equity Plan allows performance
objectives to be described in terms of objectives that are related to an individual participant or objectives that are company-wide
or related to a subsidiary, division, department, region, function or business unit and may be measured on an absolute or cumulative
basis or on the basis of percentage of improvement over time, and may be measured in terms of company performance (or performance of
the applicable subsidiary, division, department, region, function or business unit) or measured relative to selected peer companies
or a market index.

 Acceleration of Awards; Possible Early Termination of Awards. Upon
a change in control of our Company, outstanding awards under the Amended and Restated Equity Plan will be assumed or substituted on the
same terms. However, if the successor corporation does not assume or substitute the outstanding awards, then vesting of these awards will
fully accelerate, and in the case of options or SARs, will become immediately exercisable. For this purpose, a change in control is defined
to include certain changes in the majority of our board of directors, the sale of all or substantially all of our Company's assets,
and the consummation of certain mergers or consolidations.

 Transfer Restrictions. Subject to certain
exceptions, awards under the Amended and Restated Equity Plan are not transferable by the recipient other than by will or the laws of
descent and distribution and are generally exercisable, during the recipient's lifetime, only by him or her.

 Termination of or Changes to the Amended and Restated Equity
Plan. Our board of directors may amend or terminate the Amended and Restated Equity Plan at any time and in any
manner. Unless required by applicable law or listing agency rule, stockholder approval for any amendment will not be required. Unless
previously terminated by our board of directors, the Amended and Restated Equity Plan will terminate on March 27, 2029. Generally speaking,
outstanding awards may be amended, subject, however, to the consent of the holder if the amendment materially and adversely affects the
holder.

 Federal Income Tax Treatment of Awards under the Amended and Restated
Equity Plan

 Federal income tax consequences (subject to change) relating to awards
under the Amended and Restated Equity Plan are summarized in the following discussion. This summary is not intended to be exhaustive and,
among other considerations, does not describe the deferred compensation provisions of Section 409A of the Code to the extent an award
is subject to and does not satisfy those rules, nor does it describe state, local, or international tax consequences.

 For NSOs, the Company is generally entitled to deduct (and the optionee
recognizes taxable income in) an amount equal to the difference between the option exercise price and the fair market value of the shares
at the time of exercise. For ISOs, our Company is generally not entitled to a deduction nor does the participant recognize income at the
time of exercise. The current federal income tax consequences of other awards authorized under the Amended and Restated Equity Plan generally
follow certain basic patterns: SARs are taxed and deductible in substantially the same manner as NSOs; nontransferable restricted stock
subject to a substantial risk of forfeiture results in income recognition equal to the excess of the fair market value over the price
paid (if any) only at the time the restrictions lapse (unless the recipient elects to accelerate recognition as of the date of grant);
bonuses and performance share awards are generally subject to tax at the time of payment; cash-based awards are generally subject to tax
at the time of payment; and compensation otherwise effectively deferred is taxed when paid. Our Company will generally have a corresponding
deduction at the time the participant recognizes income. However, as for those awards subject to ISO treatment, our Company would generally
have no corresponding compensation deduction.

 Outstanding Equity Awards at Fiscal Year End

 The following table sets forth our outstanding equity awards as of
December 31, 2024:

 Option Awards

 Stock Awards

 Name

 Underlying
 Unexercised
 Options
 Exercisable
 (#)

 Underlying
 Unexercised
 Options
 Unexercisable
 (#)

 Option
 Exercise
 Price

 Option
 Expiration
 Date

 Shares or
 Units of Stock
 That Have
 Not Vested
 (#)

 Market
 Value of
 Shares or
 Units of Stock
 That Have
 Not Vested
 ($)

 —

 —

 $
 —

 —

 —

 —

 (1)(2)

 —

 $
 4.30
 (2)

 05/15/2027

 —

 —

 David Clifford

 —

 —

 $
 —

 —

 60,000
 (3)

 $
 1,128,000

 (1)

 10,000 stock options vested on May 15, 2021.

 (2)

 Represents 4-Year Tectonic Financial Options to purchase 10,000 shares of the Company's common stock at an exercise price of $4.30.

 (3)

 30,000 stock awards vested on December 31, 2023, 10,000 stock awards vested on December 31, 2024, and the remaining 60,000 stock awards will vest: 10,000 on December 31, 2025, and 50,000 on July 1, 2028.

 Potential Payments Upon a Termination of Employment or a Change
in Control

 Below we have described the severance and other change in control benefits
to which Mr. Sherman and Mr. Bramlage would be entitled upon a termination of employment and in connection with certain terminations of
their employment or a change in control.

 Severance. If we terminate Mr. Sherman's employment
for any reason other than for "cause" (as defined in each respective employment agreement), or the executive terminates his
employment for "good reason" (as defined in each respective employment agreement), the executive shall be entitled to (A)
receive base salary through the date of such termination, (B) pay in lieu of any unused vacation in accordance with our normal practice,
(C) any health benefits to which the executive is receiving immediately prior to such termination at the same expense as other employees
for such selected employee benefit plans and programs for a period of 24 months (unless otherwise covered by another plan), and (D) a
severance payment to be paid in 24 equal monthly installments, which equals an amount of cash equal to two times the sum of (x) the executive's
base salary at the time of termination, (y) the average annual bonus (excluding change of control payments) paid to the executive with
respect to each of the three prior fiscal years, plus (z) a pro-rated annual bonus for the year in which the executive's employment
terminates. All of the amounts and benefits described above are conditioned upon the executive executing a general release and waiver
of claims in a form provided by us at the time of termination.

 If we terminate Mr. Bramlage's employment for any reason other
than for "cause," or the executive terminates his employment for "good reason," the executive shall be entitled
to (A) receive base salary through the date of such termination, (B) pay in lieu of any unused vacation in accordance with our normal
practice, (C) any health benefits to which the executive is receiving immediately prior to such termination at the same expense as other
employees for such selected employee benefit plans and programs for a period of 12 months (unless otherwise covered by another plan),
and (D) a severance payment to be paid in 12 equal monthly installments, which equals an amount of cash equal to the sum of (x) the executive's
base salary at the time of termination, (y) the average annual bonus (excluding change of control payments) paid to the executive with
respect to each of the three prior fiscal years, plus (z) a pro-rated annual bonus for the year in which the executive's employment
terminates. All of the amounts and benefits described above are conditioned upon the executive executing a general release and waiver
of claims in a form provided by us at the time of termination.

 Change in Control. Subject to the terms of the respective
employment agreements, in the event of a change in control (as defined in the respective employment agreement of Mr. Bramlage), Mr. Bramlage
will be eligible to receive a cash lump sum payment equal to 1.0 times his base amount payable by us within 30 days upon a change in control
or under such other terms as may be mutually agreed. In the event that the executive is also entitled to any of the severance payments
and benefits discussed above, any change in control will be offset by such amount.

 Director Compensation

 The following table shows compensation paid to members of our board
of directors and the board of directors of the Company and the Bank during 2024. From the May 2024 meeting forward, the Company's
non-employee directors received a fee of $5,000 per meeting and $1,250 for Audit Committee plus $1,250 for servicing as chairperson of
the Audit Committee) paid in cash. For the joint board meetings held by the Company and the Bank, non-employee directors received a fee
of $1,200 per meeting paid in cash, as well as the following committee meeting fees: $300 per Audit Committee meeting, $300 per Asset
Liability Committee meeting, $300 per Technology Committee meeting, $300 per Trust Committee meeting, $300 per Loan Committee meeting,
$300 per Executive Committee meeting and $300 per Compensation Committee meeting, all paid in cash. Prior to the May 2024 meeting, the
Company's non-employee directors received a fee of $5,000 per meeting paid in cash. For the joint board meetings held by the Company
and the Bank, non-employee directors received a fee of $1,000 per meeting paid in cash, as well as the following committee meeting fees:
$250 per Audit Committee meeting, $250 per Asset Liability Committee meeting, $250 per Technology Committee meeting, $250 per Trust Committee
meeting, $125 per Loan Committee meeting, $125 per Executive Committee meeting and $125 per Compensation Committee meeting, all paid in
cash.

 Fees Earned or
 Paid in Cash

 Stock/Option
 Awards (1)

 Total

 Barb Bomersbach

 30,000

 30,000

 Darrell W. Cain

 —

 —

 —

 Steven B. Clapp

 10,450
 (2)

 10,450

 Eric Langford

 42,175
 (3)

 —

 42,175
 (3)

 Thomas McDougal

 37,875
 (4)

 —

 37,875
 (4)

 Thomas R. Sanders

 9,800
 (2)

 —

 9,800
 (2)

 —

 —

 —

 Dan Wicker

 17,450
 (2)

 —

 17,450
 (2)

 (1)

 No stock/option awards were made to the directors during 2024.

 (2)

 Represents fees paid in cash for serving on the boards of directors of the Company and the Bank.

 (3)

 Includes $17,175 in fees paid in cash for serving on the boards of directors of the Bank.

 (4)

 Includes $12,875 in fees paid in cash for serving on the boards of directors of the Bank.

 Item 12. Security Ownership of Certain Beneficial Owners and Management
and Related Shareholder Matters

 The following table provides information regarding the beneficial ownership
of our capital stock as of March 27, 2025 for:

 each of our directors;

 each of our named executive officers;

 all of our directors and executive officers as a group; and

 each shareholder who beneficially owns more than 5% of our common stock.

 We have determined beneficial ownership in accordance with the rules
of the SEC. These rules generally provide that a person is the beneficial owner of securities if such person has or shares the power to
vote or direct the voting of securities, or to dispose or direct the disposition of securities, or has the right to acquire such powers
within 60 days. Shares of common stock that may be acquired by an individual or group within sixty days of March 27, 2025, pursuant to
the exercise of options, warrants or other rights, are deemed to be outstanding for the purpose of computing the percentage ownership
of such individual or group, but are not deemed to be outstanding for the purpose of computing the percentage ownership of any other person
shown in the table. The table below calculates the percentage of beneficial ownership of our common stock based on 6,776,601 shares of
voting common stock and 1,725,000 shares of non-voting Series B preferred stock outstanding as of March 27, 2025. Except as disclosed
in the footnotes to this table and subject to applicable community property laws, we believe that each person identified in the table
has sole voting and investment power over all of the shares shown opposite such person's name.

 Except as indicated below, the address for each shareholder listed
in the table below is: 16200 Dallas Parkway, Suite 190, Dallas, Texas 75248.

 Common Stock
 Beneficially Owned

 Series B Preferred Stock
 Beneficially Owned

 Name of Beneficial Owner

 Number

 Percentage

 Number

 Percentage

 Directors and Named Executive Officers:

 Barb Bomersbach

 -

 -

 2,500

 *

 Ken Bramlage (3)

 28,537

 *

 -

 -

 Darrell W. Cain (1)

 215,100

 3.17
 %

 -

 -

 Steven B. "Brad" Clapp (1),(2)

 215,100

 3.17
 %

 -

 -

 David Clifford

 70,000

 1.03

 -

 -

 Eric Langford

 (4)

 *

 -

 -

 Thomas McDougal

 (4)

 *

 29,967

 1.74
 %

 Thomas R. Sanders

 215,100

 3.17
 %

 -

 -

 A. Haag Sherman (5)

 2,121,000

 31.30
 %

 5,000

 *

 Directors and Executive Officers as a Group (9 Persons)

 2,865,337

 42.28
 %

 37,467

 2.17
 %

 Greater than 5% Shareholders:

 Tracey Bolt (6)

 405,173

 5.98
 %

 -

 -

 *

 Represents beneficial ownership of less than 1%.

 (1)

 All shares of common stock are pledged to a third party bank under the terms of a loan agreement, which loan is current.

 (2)

 Includes 5,000 shares held in an IRA for the benefit of Mr. Clapp's spouse.

 (3)

 Includes options covering 10,000 shares of our common stock which vested on May 15, 2021.

 (4)

 250 of these shares are subject to a repurchase right by the Company upon (i) the retirement of such individual as a director of the Bank, (ii) notice by either party of its desire to sell or repurchase the shares, as the case may be, or (iii) the filing of a bankruptcy petition affecting the director.

 (5)

 Includes 1,739,000 shares held by The Sherman 2018 Irrevocable Trust for which Mr. Sherman serves as trustee and 370,000 shares held by Sherman Tectonic FLP LP for which Mr. Sherman serves as the Chief Executive Officer of the general partner. Mr. Sherman has granted an option to certain other employees of Cain Watters to purchase from him or one of his affiliates up to 25,000 shares of our common stock at an exercise price of $2.15.

 (6)

 Includes 27,878 shares held by The Crane Basin Irrevocable Trust and 27,878 shares held by The Hamilton Irrevocable Trust.

 Item 13. Certain Relationships and Related
Transactions and Director Independence

 Controlled Company

 We are a "controlled
company" within the meaning of the Nasdaq corporate governance standards. As a result, although the members of our Audit Committee
are required to be independent, we are not required to have a majority of our board of directors be independent, nor are we required to
have a compensation committee or an independent nominating function under the Nasdaq rules. We intend to avail ourselves of the controlled
company exemptions while we remain a controlled company.

 Director Independence

 Our Series B preferred stock
is listed on the Nasdaq Global Market and, consequently, we are required to comply with the rules of the Nasdaq Stock Market with respect
to the independence of directors who serve on our board of directors and its committees. Under the rules of Nasdaq, a majority of the
members of the board of directors must be "independent directors" by the one-year anniversary of the time we cease to be a
controlled company. The rules of Nasdaq, as well as those of the SEC, impose several other requirements with respect to the independence
of our directors. Applying these standards, our board of directors has determined that each of Eric Langford, Thomas McDougal, Barb Bomersbach
and Thomas H. Henley is an "independent director" as that term is defined in Rule 5605(a)(2) of the Nasdaq rules. The board
of directors has also determined that the members of the Audit Committee are independent under the heightened standards of independence
required by Section 5605(c)(2)(A) of the Nasdaq rules. In making these determinations, the board of directors considered the banking relationships
with directors and their related interests which we enter into in the ordinary course of our business, the arrangements which are disclosed
below in this Item 13 and the compensation arrangements described in Item 12 of this Form 10-K.

 Certain Relationships and Related Party Transactions

 Policies and Procedures Regarding Related Person
Transactions

 Transactions by us or the
Bank with related persons are subject to regulatory requirements and restrictions. These requirements and restrictions include the Affiliates
Act and the Federal Reserve's Regulation W (which governs certain transactions by the Bank with its affiliates) and the Federal
Reserve's Regulation O (which governs certain loans by the Bank to its executive officers, directors and principal shareholders).
We have adopted policies to comply with these regulatory requirements and restrictions.

 In addition, our board of
directors has adopted a written policy governing the approval of related person transactions that complies with all applicable requirements
of the SEC and Nasdaq concerning related person transactions. Related person transactions are transactions in which we are a participant,
the amount involved exceeds $120,000 and a related person has or will have a direct or indirect material interest. Related persons of
the Company include directors (including nominees for election as directors), executive officers, beneficial holders of more than 5% of
our capital stock and the immediate family members of these persons. Our executive management team, in consultation with outside counsel,
as appropriate, will review potential related person transactions to determine if they are subject to the policy. In determining whether
to approve a related person transaction, that committee will consider, among other factors, the fairness of the proposed transaction,
the direct or indirect nature of the related person's interest in the transaction, the appearance of an improper conflict of interest
for any director or executive officer taking into account the size of the transaction and the financial position of the related person,
whether the transaction would impair an outside director's independence, the acceptability of the transaction to our regulators
and the potential violations of other corporate policies.

 In addition to the compensation
arrangements with directors and executive officers described in "Executive Compensation" above, the following is a description
of each transaction since January 1, 2024, and each proposed transaction in which:

 we
 have been or are to be a participant;

 the
 amount involved exceeds or will exceed $120,000; and

 any
 of our directors, executive officers or beneficial holders of more than five percent of our
 capital stock, or any immediate family member, of or person sharing the household with, any
 of these individuals (other than tenants or employees), had or will have a direct or indirect
 material interest.

 Other Transactions

 The Company.
The following are related party agreements and transactions to which the Company and/or any of its subsidiaries are a party and which
are discussed in the next section.

 Cain Watters Services Agreement. Darrell W. Cain, the founder of Cain Watters, was a co-founder of T Bancshares, the predecessor, and served on the board of directors of T Bancshares when it was founded in 2003. At his request, the Bank established the Trust Division to serve clients of Cain Watters, which was accomplished in 2006. Since that time, the Bank has served as a fiduciary and custodian on behalf of clients referred by Cain Watters and, given the importance of this strategic relationship for both parties, partners of Cain Watters currently occupy four board seats of the Company and own approximately 31.20% of the issued and outstanding common stock of the Company. Notwithstanding the foregoing, the Company and Cain Watters have sought to have their relationship, as it relates to the trust services provided by the Bank, to be defined by an agreement. The Cain Watters – T Bank Agreement (the "Cain Watters Services Agreement") was entered into as of August 23, 2012 by and between the Bank and Cain Watters. Under this agreement, each party agrees to preserve one another's business relationships with their respective clients, including mutual clients, and agrees not to solicit or otherwise encourage clients to change service providers with respect to the services provided to such clients by one another. This provision includes Cain Watters' best efforts to preserve the Bank's business relationships with clients of Cain Watters with respect to the Bank CIFs. This agreement provided for automatic one-year renewals, and was amended effective January 31, 2023 such that the termination clause coincides with the Support Services Agreement (see below). The Cain Watters Service Agreement can be terminated earlier, among other events, upon the termination of the Tectonic Advisors Agreement, which can be terminated upon (among other things) a change of control of the Bank. No fee is payable under this agreement.

 As Successor in Interest
to Tectonic Holdings. The following are related party agreements and transactions to which Tectonic Holdings and/or each
of its subsidiaries (Tectonic Advisors, Sanders Morris, HWG and/or Miller-Green) were a party and which are not previously described in
the preceding section.

 Due Diligence Agreement. On February 15, 2006, III:I Financial Management Research, L.P. (since renamed Tectonic Advisors) and Cain Watters entered into an agreement pursuant to which Tectonic Advisors would provide the following services to Cain Watters: (a) research on investments and securities, (b) asset selection and allocation analysis, (c) due diligence on asset management companies and managers, (d) research on long and short-term prospects for investments in all markets and in all forms, (e) capital market analysis, (f) research on anticipated national and global economic issues and outlooks, (g) research on the economic environment, investments and securities of other countries, (h) assistance in coordination, implementation, and management of investment solutions, (i) performance of a defined list of investment related "global services," specifically for pension clients of Cain Watters and (j) certain other services. In addition, Tectonic Advisors provides certain reporting and other information. The fees paid under this agreement are set forth in the Support Services Agreement described below. The term of this agreement is through January 14, 2026, with automatic one-year renewals unless terminated by either party.

 Support Services Agreement. The Support Services Agreement, dated February 5, 2015 (the "Support Services Agreement"), was entered into by and between Tectonic Advisors and Cain Watters. Pursuant to the Support Services Agreement, Tectonic Advisors provides certain financial advisory and research services to CWA, including: asset management services, investment management oversight and management and trading of model portfolios and shall be paid a fee from revenues ("CWA Revenues") generated from all CWA assets under management ("CWA Asset Base"). The CWA Revenue split shall be as follows: (i) Tectonic Advisors shall be entitled to receive an asset based fee of 35 basis points on the CWA Asset Base and (ii) CWA shall be entitled to receive the remainder; provided, however, that 25 basis points on the CWA Asset Base above $2.5 billion shall be taken ratably from Tectonic Advisors and CWA and shall be allocated to CWA, consistent with past practices. During the year ended December 31, 2023, Tectonic Advisors earned $257,000 under the Support Services Agreement. These fees are included in investment advisory and other related services in the accompanying consolidated statements of operations. Tectonic Advisors had $309,000 in fees payable related to these services at December 31, 2024.

 Fee Allocation
Agreement. In January 2006, Tectonic Advisors entered into an agreement with Cain Watters with reference to its advisory agreement
with the Bank. Tectonic Advisors had $231,000 payable to Cain Watters related to this agreement at December 31, 2024, which is included
in the accounts payable, related parties line items in the consolidated balance sheet. This agreement was amended effective January 31,
2023 such that the termination clause coincides with the Support Services Agreement (see below).

 Other Related Transactions.
Other miscellaneous related party transactions resulted in other amounts due from related parties of less than $1,000, included within
accounts receivable, related parties on the consolidated balance sheet as of December 31, 2024.

 Ordinary Banking Relationships

 Certain of our officers,
directors and principal shareholders, as well as their immediate family members and affiliates, are customers of, or have or have had
transactions with us or the Bank in the ordinary course of business. These transactions include deposits, loans, wealth management products
and other financial services related transactions. Related party transactions are made in the ordinary course of business, on substantially
the same terms, including interest rates and collateral (where applicable), as those prevailing at the time for comparable transactions
with persons not related to us, and do not involve more than normal risk of collectability or present other features unfavorable to us.
Any loans we originate with officers, directors and principal shareholders, as well as their immediate family members and affiliates,
are approved by our board of directors in accordance with the Bank's regulatory requirements.

 As
of the date of this Form 10-K, no related party loans were categorized as nonaccrual, past due, restructured or potential problem loans.
We expect to continue to enter into transactions in the ordinary course of business on similar terms with our officers, directors and
principal shareholders, as well as their immediate family members and affiliates.

 Item 14. Principal Accountant Fees and Services

 Audit Committee Pre-Approval

 The Audit Committee's
charter authorizes the Audit Committee to approve, in advance, all auditing services and non-audit services that are otherwise permitted
by law that are provided to the Company by its independent auditors. In addition, the Audit Committee has the authority to review and,
in its sole discretion, approve in advance the Company's independent auditors' annual engagement letter, including the proposed
fees contained therein.

 Fees Billed by Independent Registered Public
Accounting Firm

 The Audit Committee has reviewed
the following audit and non-audit fees billed to the Company by Whitley Penn LLP for 2024 and 2023 for purposes of considering whether
such fees are compatible with maintaining the auditor's independence and concluded that such fees did not impair Whitley Penn LLP's
independence. The policy of the Audit Committee is to pre-approve all audit and non-audit services performed by Whitley Penn LLP before
the services are performed, including all of the services described under "Audit Fees", "Tax Fees" and "All
Other Fees" below. The Audit Committee has pre-approved all of the services provided by Whitley Penn LLP in accordance with the
policies and procedures described in the section titled "—Audit Committee Pre-Approval."

 For the Year Ended

 2024

 2023

 Audit Fees (1)

 $

 270,231

 $

 217,624

 Tax Fees (2)

 63,221

 46,760

 All Other Fees (3)

 37,200

 52,314

 Total Fees

 $

 370,652

 $

 316,698

 (1)
 Audit fees consist of the aggregate
fees billed for professional services rendered for the audit of our annual financial statements included in our Annual Report on Form 10-K
and a review of financial statements included in our Quarterly Reports on Form 10-Q.

 (2)
 Tax compliance fees consisted
of tax return filing fees and miscellaneous state and federal income tax related issues. Tax consulting services include routine tax
advice and consultation.

 (3)
 Other fees are those associated
with services not captured in the other categories, such as operational reviews.

 Item 15. Exhibits and Financial Statement
Schedules

 Exhibit No.

 Description of Exhibit

 2.1

 Amended and Restated Agreement and Plan of Merger by and between T Acquisition, Inc. and Tectonic Holdings, LLC, dated March 28, 2019 (schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K; however, the registrant hereby agrees to furnish a copy of any omitted schedule or similar attachment to the SEC upon request)(incorporated by reference from Exhibit 2.1 to the Registration Statement on Form S-1 filed with the SEC on April 18, 2019 (File No. 333-230949))

 2.2

 Purchase and Sale Agreement by and between Tectonic Holdings, LLC and Summer Wealth Management, LLC, dated August 3, 2016, as amended (schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K; however, the registrant hereby agrees to furnish a copy of any omitted schedule or similar attachment to the SEC upon request)(incorporated by reference from Exhibit 2.2 to the Amendment No. 1 to the Registration Statement on Form S-1/A filed with the SEC on May 6, 2019 (File No. 230949))

 2.3

 Agreement and Plan of Merger by and among Tectonic Financial, Inc., T Bancshares, Inc. and Integra Funding Solutions, LLC, and joined in by The Bolt Family Irrevocable Trust, IF Holdings, LLC, Doug Waidelich, The Crane Basin Irrevocable Trust, The Hamilton Irrevocable Trust, Tracy A. Bolt, and Randall W. Woods, dated June 18, 2021 (schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K; however, the registrant hereby agrees to furnish a copy of any omitted schedule or similar attachment to the SEC upon request.) (incorporated by reference from Exhibit 2.1 to the Current Report on Form 8-K filed with the SEC on June 24, 2021 (File No. 001-38910))

 3.1

 Amended and Restated Certificate of Formation (incorporated by reference from Exhibit 3.1 to Amendment No. 2 to the Registration Statement on Form S-1/A filed with the SEC on May 9, 2019 (File No. 333-230949))

 3.2

 Certificate of Designation of 10.0% Series A Non-Cumulative Perpetual Preferred Stock (incorporated by reference from Exhibit 3.1 to the Current Report on Form 8-K filed with the SEC on May 16, 2019 (File No. 001-38910))

 3.3

 Certificate of Designation of 9.00% Fixed-to-Floating Rate Series B Non-Cumulative Perpetual Preferred Stock (incorporated by reference from Exhibit 3.2 to the Current Report on Form 8-K filed with the SEC on May 16, 2019 (File No. 001-38910))

 3.4

 Certificate of Amendment to effect Reverse Stock Split (incorporated by reference from Exhibit 3.3 to the Current Report on Form 8-K filed with the SEC on May 16, 2019 (File No. 001-38910))

 3.5

 Amended and Restated Bylaws (incorporated by reference from Exhibit 3.5 to Amendment No. 1 to the Registration Statement on Form S-1/A filed with the SEC on May 6, 2019 (File No. 333-230949))

 4.1

 Specimen common stock certificate of Tectonic Financial, Inc. (incorporated by reference from Exhibit 4.1 to Amendment No. 1 to the Registration Statement on Form S-1/A filed with the SEC on May 6, 2019 (File No. 333-230949))

 4.2

 Subordinated Note Purchase Agreement for 7.125% Fixed-to-Floating Subordinated Notes due 2027, dated July 17, 2017 (incorporated by reference from Exhibit 4.2 to Amendment No. 1 to the Registration Statement on Form S-1/A filed with the SEC on May 6, 2019 (File No. 333-230949))

 4.3

 Description of Series B Preferred Stock (incorporated by reference from Exhibit 4.3 to the Company's Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC on March 31, 2020 (File No. 001-38910))

 10.1

 Employment Agreement of A. Haag Sherman, dated May 1, 2019 (incorporated by reference from Exhibit 10.1 to Amendment No. 1 to the Registration Statement on Form S-1/A filed with the SEC on May 6, 2019 (File No. 333-230949))

 10.2.1

 Amended and Restated Employment Agreement of Patrick Howard, dated May 1, 2019 (incorporated by reference from Exhibit 10.2 to Amendment No. 1 to the Registration Statement on Form S-1/A filed with the SEC on May 6, 2019 (File No. 333-230949))

 10.2.2

 Transition Services Agreement, dated September 27, 2024, by and among Tectonic Financial, Inc., T Bancshares, Inc., T Bank, National Association, and Patrick Howard (incorporated by reference from Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on September 30, 2024 (File No. 001-38910)).

 10.3

 Amended and Restated Employment Agreement of Ken Bramlage, dated May 1, 2019 (incorporated by reference from Exhibit 10.4 to Amendment No. 1 to the Registration Statement on Form S-1/A filed with the SEC on May 6, 2019 (File No. 333-230949))

 10.4

 T Acquisition, Inc. Amended and Restated 2017 Equity Incentive Plan (incorporated by reference from Exhibit 10.4 to the Registration Statement on Form S-1 filed with the SEC on April 18, 2019 (File No. 333-230949))

 10.5

 Form Notice of Stock Option Award and of Stock Option Award Agreement under T Acquisition, Inc. 2017 Equity Incentive Plan (incorporated by reference from Exhibit 10.5 to the Registration Statement on Form S-1 filed with the SEC on April 18, 2019 (File No. 333-230949))

 10.6

 Advances and Security Agreement by and between the Federal Home Loan Bank of Dallas and T Bank, N.A., dated June 29, 2006 (incorporated by reference from Exhibit 10.6 to Amendment No. 1 to the Registration Statement on Form S-1/A filed with the SEC on May 6, 2019 (File No. 333-230949))

 10.7

 Fee Allocation Agreement by and between Cain Watters & Associates, P.L.L.C. and Tectonic Advisors, LLC (f/k/a III: I Financial Management Research, L.P.), dated July 17, 2008 (incorporated by reference from Exhibit 10.7 to Amendment No. 1 to the Registration Statement on Form S-1/A filed with the SEC on May 6, 2019 (File No. 333-230949))

 10.7.1

 First Amendment to the Fee Allocation Agreement by and between Cain Watters & Associates, P.L.L.C. and Tectonic Advisors, LLC (f/k/a III: I Financial Management Research, L.P.), effective January 31, 2023

 10.8

 Due Diligence Agreement by and between Cain Watters & Associates, P.L.L.C. and Tectonic Advisors, LLC (f/k/a III:I Financial Management Research, L.P.), dated February 15, 2006 (incorporated by reference from Exhibit 10.8 to Amendment No. 1 to the Registration Statement on Form S-1/A filed with the SEC on May 6, 2019 (File No. 333-230949))

 10.8.1

 Supplement to Due Diligence Agreement by and between Cain, Watters & Associates, P.L.L.C. and Tectonic Advisors, LLC (f/k/a III:I Financial Management Research, L.P.), dated November 5, 2007 (incorporated by reference from Exhibit 10.8.1 to Amendment No. 1 to the Registration Statement on Form S-1/A filed with the SEC on May 6, 2019 (File No. 333-230949))

 10.8.2

 First Amendment to the Due Diligence Agreement by and between Cain Watters & Associates, P.L.L.C. and Tectonic Advisors, LLC (f/k/a III:I Financial Management Research, L.P.), effective January 31, 2023

 10.10

 Agreement by and between T Bank, N.A. and Cain Watters & Associates, P.L.L.C., dated August 23, 2012 (incorporated by reference from Exhibit 10.10 to Amendment No. 1 to the Registration Statement on Form S-1/A filed with the SEC on May 6, 2019 (File No. 333-230949))

 10.10.1

 Second Amendment to the Agreement by and between T Bank, N.A. and Cain Watters & Associates, P.L.L.C., effective January 31, 2023

 10.11

 Unit Option - Buy Down Agreement by and between A. Haag Sherman and the optionees named therein, dated February 5, 2015 (incorporated by reference from Exhibit 10.11 to Amendment No. 1 to the Registration Statement on Form S-1/A filed with the SEC on May 6, 2019 (File No. 333-230949))

 10.12

 Management Services Agreement by and between Tectonic Advisors, LLC and Tectonic Services, LLC, dated February 5, 2015 (incorporated by reference from Exhibit 10.12 to Amendment No. 1 to the Registration Statement on Form S-1/A filed with the SEC on May 6, 2019 (File No. 333-230949))

 10.13

 Amended and Restated Promissory Note payable to TIB The Independent BankersBank, N. A., dated May 11, 2017 (incorporated by reference from Exhibit 10.13 to Amendment No. 1 to the Registration Statement on Form S-1/A filed with the SEC on May 6, 2019 (File No. 333-230949))

 10.14

 Loan Agreement by and among Tectonic Merger Sub, Inc., T Bancshares, Inc. and TIB The Independent Bankers Bank, N.A., dated May 11, 2017 (incorporated by reference from Exhibit 10.14 to Amendment No. 1 to the Registration Statement on Form S-1/A filed with the SEC on May 6, 2019 (File No. 333-230949))

 10.15

 Guaranty Agreement by and between Sanders Morris Harris LLC and TIB The Independent BankersBank, N.A., dated May 11, 2017 (incorporated by reference from Exhibit 10.15 to Amendment No. 1 to the Registration Statement on Form S-1/A filed with the SEC on May 6, 2019 (File No. 333-230949))

 10.16

 Guaranty Agreement by and between Tectonic Advisors, LLC and TIB The Independent BankersBank, N.A., dated May 11, 2017 (incorporated by reference from Exhibit 10.16 to Amendment No. 1 to the Registration Statement on Form S-1/A filed with the SEC on May 6, 2019 (File No. 333-230949))

 10.17

 Guaranty Agreement by and between Tectonic Holdings, LLC and TIB The Independent BankersBank, N.A., dated May 11, 2017 (incorporated by reference from Exhibit 10.17 to Amendment No. 1 to the Registration Statement on Form S-1/A filed with the SEC on May 6, 2019 (File No. 333-230949))

 10.18

 Renewal, Extension, and Modification of Loan by and among Tectonic Merger Sub, Inc., T Bancshares, Inc. and TIB The Independent BankersBank, N.A., dated May 11, 2018 (incorporated by reference from Exhibit 10.18 to Amendment No. 1 to the Registration Statement on Form S-1/A filed with the SEC on May 6, 2019 (File No. 333-230949))

 10.19

 Management Services Agreement by and between Tectonic Holdings, LLC and Tectonic Services, LLC, dated February 5, 2015 (incorporated by reference from Exhibit 10.19 to Amendment No. 1 to the Registration Statement on Form S-1/A filed with the SEC on May 6, 2019 (File No. 333-230949))

 10.19.1

 Amendment to Management Services Agreement by and between Tectonic Advisors, LLC, Sanders Morris Harris LLC, Miller-Green Financial Services, LLC, HWG Insurance Agency, LLC and Tectonic Services, LLC, dated March 1, 2017 (incorporated by reference from Exhibit 10.19.1 to Amendment No. 1 to the Registration Statement on Form S-1/A filed with the SEC on May 6, 2019 (File No. 333-230949))

 10.19.2

 Second Amendment to Management Services Agreement by and between Tectonic Services, LLC, Tectonic Advisors, LLC, Sanders Morris Harris LLC, Miller-Green Financial Services LLC and HWG Insurance Agency LLC, dated October 1, 2017 (incorporated by reference from Exhibit 10.19.2 to Amendment No. 1 to the Registration Statement on Form S-1/A filed with the SEC on May 6, 2019 (File No. 333-230949))

 10.20

 Support Services Agreement by and between Cain Watters & Associates, P.L.L.C. and Tectonic Advisors, LLC, dated February 5, 2015 (schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. Tectonic Financial agrees to furnish supplementally to the SEC a copy of any omitted schedule upon request) (incorporated by reference from Exhibit 10.20 to Amendment No. 1 to the Registration Statement on Form S-1/A filed with the SEC on May 6, 2019 (File No. 333-230949))

 10.20.1

 First Amendment to the Support Services Agreement by and between Cain Watters & Associates, P.L.L.C. and Tectonic Advisors, LLC (f/k/a III: I Financial Management Research, L.P.), effective January 31, 2023

 10.21

 Insurance Contribution Agreement by and between Cain Watters & Associates, P.L.L.C. and Tectonic Holdings, LLC, dated February 5, 2015 (incorporated by reference from Exhibit 10.21 to Amendment No. 1 to the Registration Statement on Form S-1/A filed with the SEC on May 6, 2019 (File No. 333-230949))

 10.22

 Amended and Restated Investment Advisory Agreement by and between T Bank, N.A. and Tectonic Advisors, LLC, dated May 14, 2015 (incorporated by reference from Exhibit 10.22 to Amendment No. 1 to the Registration Statement on Form S-1/A filed with the SEC on May 6, 2019 (File No. 333-230949))

 10.22.1

 Third Amendment to the Amended and Restated Investment Advisory Agreement by and between T Bank, N.A. and Tectonic Advisors, LLC (f/k/a III: I Financial Management Research, L.P.), effective January 31, 2023

 10.23

 Loan Agreement by and between Dental Community Financial Holdings, Ltd., and Tectonic Advisors, LLC, dated January 1, 2017 (incorporated by reference from Exhibit 10.23 to Amendment No. 1 to the Registration Statement on Form S-1/A filed with the SEC on May 6, 2019 (File No. 333-230949))

 10.23.1

 Promissory Note made payable to Dental Community Financial Holdings, Ltd. by Tectonic Advisors, LLC, dated January 1, 2017 (incorporated by reference from Exhibit 10.23.1 to Amendment No. 1 to the Registration Statement on Form S-1/A filed with the SEC on May 6, 2019 (File No. 333-230949))

 10.24

 Tax Sharing Agreement by and between T Acquisition, Inc., T Bancshares, Inc. and T Bank N.A., dated May 15, 2017 (incorporated by reference from Exhibit 10.24 to Amendment No. 1 to the Registration Statement on Form S-1/A filed with the SEC on May 6, 2019 (File No. 333-230949))

 10.25

 Tax Sharing Agreement by and between T Acquisition, Inc. and Tectonic Holdings, LLC, effective May 15, 2017 (incorporated by reference from Exhibit 10.25 to Amendment No. 1 to the Registration Statement on Form S-1/A filed with the SEC on May 6, 2019 (File No. 333-230949))

 10.26

 Expense Sharing Agreement by and between T Bank N.A. and Tectonic Holdings, LLC, effective May 15, 2017 (incorporated by reference from Exhibit 10.26 to Amendment No. 1 to the Registration Statement on Form S-1/A filed with the SEC on May 6, 2019 (File No. 333-230949))

 19.1

 Insider Trading Policy of Tectonic Financial, Inc.*

 21.1

 Subsidiaries of Tectonic Financial, Inc.*

 31.1

 Rule 13a-14(a) Certification of Principal Executive Officer*

 31.2

 Rule 13a-14(a) Certification of Principal Financial Officer*

 32.1

 Section 1350 Certification**

 Compensation Recovery Policy (incorporated by reference from Exhibit 97 to the Company's Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on April 1, 2024 (File No. 001-38910)

 101.INS

 101.SCH

 101.CAL

 Document*

 101.DEF

 101.LAB

 101.PRE

 *

 Filed herewith

 **

 Furnished herewith

 Management contract or compensatory plan or arrangement

 Item 16. Form 10-K Summary.

 None.

 SIGNATURES

 Pursuant to the requirements
of Section 13 or 15(d) 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.

 Tectonic Financial, Inc.

 Dated: March 31, 2025

 By:

 /s/ A. Haag Sherman

 President and Chief Executive Officer

 (Principal Executive Officer)

 Pursuant to the requirements
of the Securities Exchange Act of 1934, this Form 10-K has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.

 SIGNATURE

 TITLE

 DATE

 /s/ A. Haag Sherman

 Director, Chairman, President, Chief Executive Officer and

 Principal Executive Officer

 /s/ Ken Bramlage

 Executive Vice President, Chief
 Financial Officer and

 Principal Accounting Officer

 /s/ Barb Bomersbach

 Barb Bomersbach

 /s/ Darrell Cain

 Darrell Cain

 /s/ Steven B. Clapp

 Steven B. Clapp

 /s/ Thomas H. Henley

 Thomas H. Henley

 /s/ Eric Langford

 Eric Langford

 /s/ Thomas McDougal

 Thomas McDougal, DDS

 /s/ Thomas Sanders

 Thomas Sanders

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