Common use of Month Term SOFR Clause in Contracts

Month Term SOFR. Under the benchmark transition provisions of the Subordinated Notes, if the calculation agent determines that a Benchmark Transition Event and its related Benchmark Replacement Date have occurred with respect to Three-Month Term SOFR, then the interest rate on the Subordinated Notes during the floating rate period will be determined using the next-available Benchmark Replacement (as defined in the Subordinated Notes) (which may include a related Benchmark Replacement Adjustment). However, the Benchmark Replacement may not be the economic equivalent of Three-Month Term SOFR. For example, Compounded SOFR, the first available Benchmark Replacement, is the compounded average of the daily Secured Overnight Financing Rates calculated in arrears, while Three-Month Term SOFR is intended to be a forward-looking rate with a tenor of three months. In addition, very limited market precedent exists for securities that use Compounded SOFR as the rate basis, and the method for calculating Compounded SOFR in those precedents varies. Further, the ISDA Fallback Rate, which is another Benchmark Replacement, has not yet been established and may change over time. Under the benchmark transition provisions of the Subordinated Notes, if a particular Benchmark Replacement or Benchmark Replacement Adjustment cannot be determined, then the next-available Benchmark Replacement or Benchmark Replacement Adjustment will apply. These replacement rates and adjustments may be selected or formulated by (i) the Relevant Governmental Body (such as the ARRC), (ii) ISDA or (iii) in certain circumstances, the calculation agent. In addition, the benchmark transition provisions expressly authorize the calculation agent to make certain changes, which are defined in the terms of the Subordinated Notes as “Benchmark Replacement Conforming Changes,” with respect to, among other things, the determination of interest periods, and the timing and frequency of determining rates and making payments of interest. The application of a Benchmark Replacement and Benchmark Replacement Adjustment, and any implementation of Benchmark Replacement Conforming Changes, could result in adverse consequences to the amount of interest that accrues on the Subordinated Notes during the floating rate period, which could adversely affect the return on, value of and market for the Subordinated Notes. Further, there is no assurance that the characteristics of any Benchmark Replacement will be similar to the then-current Benchmark that it is replacing, or that any Benchmark Replacement will produce the economic equivalent of the then-current Benchmark that it is replacing. The calculation agent will determine the interest rate during the floating rate period. Any exercise of discretion by us under the terms of the Subordinated Notes, including, without limitation, any discretion exercised by us acting as calculation agent, could present a conflict of interest. In making the required determinations, decisions and elections, we may have economic interests that are adverse to the interests of the holders of the Subordinated Notes, and those determinations, decisions or elections could have a material adverse effect on the yield on, value of and market for the Subordinated Notes. Any determination by us, as the calculation agent, will be conclusive and binding absent manifest error. There is no established public market for the Subordinated Notes, and we cannot assure you that an active trading market for the Subordinated Notes will develop. If no active trading market develops, you may not be able to resell the Subordinated Notes at their fair market value or at all. We do not intend to apply for listing the Subordinated Notes on any securities exchange. Future trading prices of the Subordinated Notes will depend on many factors, including, among other things, prevailing interest rates, our operating results, our financial condition and the market for similar securities. We cannot assure you as to the development or liquidity of any trading market for the Subordinated Notes. The liquidity of any market for the Subordinated Notes will depend on a number of factors, including: ◦ the number of holders of the Subordinated Notes; ◦ our operating performance and financial condition; ◦ the market for similar securities; ◦ the interest of securities dealers in making a market in the Subordinated Notes; and ◦ prevailing interest rates. We cannot assure you that the market, if any, for the Subordinated Notes will be free from similar disruptions or that any such disruptions may not adversely affect the prices at which you may sell your Subordinated Notes. Therefore, we cannot assure you that you will be able to sell your Subordinated Notes at a particular time or the price that you receive when you sell will be favorable. We may redeem the Subordinated Notes, in whole or in part, and without premium or penalty, at any time five years after the issue date, subject to certain conditions. You should assume that we will exercise our redemption option if we are able to obtain capital at a lower cost than we must pay on the Subordinated Notes or if it is otherwise in our interest to redeem the Subordinated Notes. We may also redeem the Subordinated Notes, in whole, but not in part, and without premium or penalty, upon the occurrence of certain events at any time, including within the first five years after the issue date. If the Subordinated Notes are redeemed, you may be required to reinvest your principal at a time when you may not be able to earn a return that is as high as you were earning on the Subordinated Notes. If you hold a Subordinated Note, you will not be entitled to any rights with respect to our capital stock (including, without limitation, voting rights and rights to receive any dividends or other distributions on our capital stock) by virtue of holding a Subordinated Note. Our officers and directors will make all decisions with respect to our management. Holders of the Subordinated Notes have no right or power to take part in our management. Prospective investors will be entirely reliant on our officers and directors to effectively manage our business so that we may meet our debt obligations when they fall due. Our obligations under the Subordinated Notes are unsecured and will rank junior to our Senior Indebtedness, as defined in the Subordinated Notes. We may also obtain indebtedness from time to time that is secured by all or substantially all of our assets. If we default on payments of our Senior Indebtedness, or if any of these senior obligations are accelerated or any judicial proceeding with respect to a default is pending, we will not be able to make payments on the Subordinated Notes unless we cure the default. If we are declared bankrupt or insolvent, or if we default under such secured indebtedness, the lenders could declare all of the funds borrowed thereunder, together with accrued interest, immediately due and payable. If we were unable to repay such indebtedness, the lenders could foreclose on the pledged assets to the exclusion of holders of the Subordinated Notes, even if an event of default exists under the Subordinated Notes. In any such event, because the Subordinated Notes are not secured by any of our assets, it is possible that there would be no assets remaining from which your claims could be satisfied or, if any assets remained, they might be insufficient to satisfy your claims fully. The Subordinated Notes will be our obligations only, are not obligations of or deposits in the Bank or its other subsidiaries, and are not insured by any government or private agency. Because we are a holding company, our rights and the rights of our creditors, including the holders of the Subordinated Notes, to participate in any distribution of the assets of the Bank or our other subsidiaries, upon a liquidation, reorganization, or insolvency of the Bank or our other subsidiaries (and the consequent right of the holders of the Subordinated Notes to participate in those assets) will be subject to the claims of the creditors of the Bank or our other subsidiaries (including depositors in our subsidiaries). If we are a creditor of the Bank or its other subsidiaries, our claims would be subject to any prior security interest in the assets of the Bank or our other subsidiaries and any indebtedness of our subsidiaries senior to our indebtedness. The Subordinated Notes are also effectively subordinated to all of the liabilities of the Bank or our other subsidiaries, to the extent of their assets, since they are separate and distinct legal entities with no obligation to pay any amounts due under our indebtedness, including the Subordinated Notes, or to make any funds available to make payments on the Subordinated Notes, whether by paying dividends or otherwise.

Month Term SOFR. Under the benchmark transition provisions of the Subordinated Notessubordinated notes, if the calculation agent determines that a Benchmark Transition Event and its related Benchmark Replacement Date have occurred with respect to Three-Month Term SOFR, then the interest rate on the Subordinated Notes subordinated notes during the floating rate period will be determined using the next-available Benchmark Replacement (as defined in the Subordinated Notes) (which may include a related Benchmark Replacement Adjustment). However, the Benchmark Replacement may not be the economic equivalent of Three-Month Term SOFR. For example, Compounded SOFR, the first available Benchmark Replacement, is the compounded average of the daily Secured Overnight Financing Rates calculated in arrears, while Three-Month Term SOFR is intended to be a forward-looking rate with a tenor of three months. In addition, very limited market precedent exists for securities that use Compounded SOFR as the rate basis, and the method for calculating Compounded SOFR in those precedents varies. Further, the ISDA Fallback Rate, which is another Benchmark Replacement, has not yet been established and may change over time. Under the benchmark transition provisions of the Subordinated Notessubordinated notes, if a particular Benchmark Replacement or Benchmark Replacement Adjustment cannot be determined, then the next-available Benchmark Replacement or Benchmark Replacement Adjustment will apply. These replacement rates and adjustments may be selected or formulated by (i) the Relevant Governmental Body (such as the ARRC), (ii) ISDA or (iii) in certain circumstances, the calculation agent. In addition, the benchmark transition provisions expressly authorize the calculation agent to make certain changes, which are defined in the terms of the Subordinated Notes subordinated notes as “Benchmark Replacement Conforming Changes,” with respect to, among other things, the determination of interest periods, and the timing and frequency of determining rates and making payments of interest. The application of a Benchmark Replacement and Benchmark Replacement Adjustment, and any implementation of Benchmark Replacement Conforming Changes, could result in adverse consequences to the amount of interest that accrues on the Subordinated Notes subordinated notes during the floating rate period, which could adversely affect the return on, value of and market for the Subordinated Notessubordinated notes. Further, there is no assurance that the characteristics of any Benchmark Replacement will 000-0000-0000/2/AMERICAS be similar to the then-current Benchmark that it is replacing, or that any Benchmark Replacement will produce the economic equivalent of the then-current Benchmark that it is replacing. The calculation agent will determine Subject to the interest rate during the floating rate period. Any exercise of discretion by us under the terms prior approval of the Subordinated NotesFederal Reserve, including, without limitation, any discretion exercised by us acting as calculation agent, could present a conflict of interest. In making to the required determinations, decisions and electionsextent that such approval is then required, we may have economic interests that are adverse redeem the subordinated notes at our option in whole but not in part beginning with the interest payment date of November 30, 2025, and on any interest payment date thereafter. In addition, at any time at which any subordinated notes remain outstanding, subject to the interests prior approval of the Federal Reserve, to the extent that such approval is then required, we may redeem the subordinated notes in whole but not in part upon the occurrence of (i) a “Tier 2 Capital Event,” (ii) a “Tax Event” or (iii) if we are required to register as an investment company pursuant to the 1940 Act. In the event that we redeem the subordinated notes, holders of the Subordinated Notessubordinated notes will receive only the principal amount of the subordinated notes plus any accrued and unpaid interest to, but excluding, such earlier redemption date. If any redemption occurs, holders of the subordinated notes will not have the opportunity to continue to accrue and those determinations, decisions or elections could have a material adverse effect on be paid interest to the yield on, value of and market for the Subordinated Notesstated maturity date. Any determination such redemption may have the effect of reducing the income or return that you may receive on an investment in the subordinated notes by us, as reducing the calculation agent, will be conclusive and binding absent manifest error. There is no established public market for term of the Subordinated Notes, and we cannot assure you that an active trading market for the Subordinated Notes will developinvestment. If no active trading market developsthis occurs, you may not be able to resell reinvest the Subordinated Notes proceeds at their fair market value or at all. We do not intend to apply for listing the Subordinated Notes on any securities exchange. Future trading prices of the Subordinated Notes will depend on many factors, including, among other things, prevailing an interest rates, our operating results, our financial condition and the market for similar securities. We cannot assure you as rate comparable to the development or liquidity of any trading market for the Subordinated Notes. The liquidity of any market for the Subordinated Notes will depend on a number of factors, including: ◦ the number of holders of the Subordinated Notes; ◦ our operating performance and financial condition; ◦ the market for similar securities; ◦ the interest of securities dealers in making a market in the Subordinated Notes; and ◦ prevailing interest rates. We cannot assure you that the market, if any, for the Subordinated Notes will be free from similar disruptions or that any such disruptions may not adversely affect the prices at which you may sell your Subordinated Notes. Therefore, we cannot assure you that you will be able to sell your Subordinated Notes at a particular time or the price that you receive when you sell will be favorable. We may redeem the Subordinated Notes, in whole or in part, and without premium or penalty, at any time five years after the issue date, subject to certain conditions. You should assume that we will exercise our redemption option if we are able to obtain capital at a lower cost than we must pay rate paid on the Subordinated Notes or if it is otherwise in our interest to redeem the Subordinated Notes. We may also redeem the Subordinated Notes, in whole, but not in part, and without premium or penalty, upon the occurrence of certain events at any time, including within the first five years after the issue date. If the Subordinated Notes are redeemed, you may be required to reinvest your principal at a time when you may not be able to earn a return that is as high as you were earning on the Subordinated Notes. If you hold a Subordinated Note, you will not be entitled to any rights with respect to our capital stock (including, without limitation, voting rights and rights to receive any dividends or other distributions on our capital stock) by virtue of holding a Subordinated Note. Our officers and directors will make all decisions with respect to our management. Holders of the Subordinated Notes have no right or power to take part in our management. Prospective investors will be entirely reliant on our officers and directors to effectively manage our business so that we may meet our debt obligations when they fall duesubordinated notes. Our obligations under the Subordinated Notes are subordinated notes will be unsecured and will rank junior to our Senior Indebtednessthe following, unless, by their terms, the obligation ranks equal with, or junior to, the subordinated notes: • any of the Company’s indebtedness and obligations of, or guaranteed or assumed by, the Company for money borrowed, whether or not evidenced by bonds, debentures, securities, notes or other similar instruments, and including, but not limited to, and all obligations to the Company’s general creditors and secured creditors; • any of the Company’s obligations for the payment of the purchase price of property or assets acquired other than in the ordinary course of business; • any of the Company’s obligations, contingent or otherwise, in respect of any letters of credit, bankers’ acceptances, security purchase facilities and similar direct credit substitutes; • any of the Company’s capital lease obligations; • any of the Company’s obligations in respect of interest rate swap, cap or other agreements, interest rate future or option contracts, currency swap agreements, currency future or option contracts, commodity contracts and other similar arrangements or derivative products; • any of the Company’s obligations to its general creditors, as defined in for purposes of the Subordinated Notes. We capital adequacy regulations of the Federal Reserve applicable to the Company, as the same may also obtain indebtedness be amended or modified from time to time that time; • any of the above listed types of obligations of other persons for the payment for which the Company is responsible or liable, directly or indirectly, as obligor, guarantor or otherwise arising from an off-balance sheet guarantee; • any of the above listed types of obligations of other persons secured by all any lien on any of the Company’s property or substantially all assets whether or not the Company assumes that obligation; and • any amendments, renewals, extensions, modifications and refundings of our assetsany of the above listed obligations. 000-0000-0000/2/AMERICAS If we default on payments under any of our Senior Indebtednessthese obligations that are senior to the subordinated notes, or if any of these senior obligations are accelerated or any judicial proceeding with respect to a default is pending, we will not be able to make payments on the Subordinated Notes subordinated notes, unless we cure the default. If we are declared bankrupt or insolvent, or if we default under such secured indebtednessAdditionally, the lenders could declare all subordinated notes will (i) rank equally in right of the funds borrowed thereunder, together with accrued interest, immediately payment to our outstanding $13.5 million fixed-to-floating rate subordinated notes due 2025 and payable(ii) rank senior to our floating rate junior subordinated debt securities due 2036 (underlying our outstanding trust preferred securities). If we were unable liquidate, go bankrupt or dissolve, we would be able to repay such indebtedness, pay under the lenders could foreclose on the pledged assets subordinated notes only after we have paid in full all of our liabilities that are senior to the exclusion subordinated notes. As of holders September 30, 2020, we had $13.5 million par value of Senior Indebtedness outstanding on a consolidated basis consisting of our fixed-to-floating rate subordinated notes due 2025. The subordinated notes do not limit the Subordinated Notes, even if an event amount of default exists under the Subordinated NotesSenior Indebtedness that we may incur. In any such event, because the Subordinated Notes The subordinated notes are not secured by obligations of, or guaranteed by, any of our assets, it is possible that there would be no assets remaining from which your claims could be satisfied or, if subsidiaries or any assets remained, they might be insufficient to satisfy your claims fullythird party. The Subordinated Notes will be our obligations only, are not obligations of or deposits in the Bank or its other subsidiaries, and are not insured by any government or private agency. Because we are As a holding companyresult, our rights right and the rights of our creditors, including the holders of the Subordinated Notessubordinated notes, to participate in any distribution of the assets of the Bank or any of our other subsidiaries, subsidiaries upon a its liquidation, reorganization, reorganization or insolvency of the Bank or our other subsidiaries (and the consequent right of the holders of the Subordinated Notes to participate in those assets) will otherwise would be subject to the prior claims of creditors of that subsidiary. In the event of any such distribution of assets of the Bank, the claims of depositors and other general or subordinated creditors of the Bank would be entitled to priority over the claims of ours or our other subsidiaries (including depositors in our subsidiaries). If we are a creditor holders of the Bank or its other subsidiariessubordinated notes. Accordingly, our claims would be subject to any prior security interest in the assets of the Bank or our other subsidiaries and any indebtedness of our subsidiaries senior to our indebtedness. The Subordinated Notes subordinated notes are also effectively structurally subordinated to all of the existing and future liabilities and obligations of our subsidiaries. Claims on the Company by third-party creditors include those by holders of our long-term debt and there are substantial obligations with respect to deposit liabilities and federal funds purchased, other short-term borrowings and various other financial obligations. As of September 30, 2020, we had $13.5 million par value of Senior Indebtedness outstanding on a consolidated basis, and the Bank had $1.7 billion of deposits and $22.2 million of FHLB advances, to which the subordinated notes will be structurally subordinated. As a holding company, our principal source of funds to service our debt, including the subordinated notes, is dividends from our subsidiaries. For the year ended December 31, 2019, our interest expense on our debt obligations was $886 thousand (holding company only). Since the Company is a legal entity separate and distinct from the Bank and does not conduct stand-alone operations, its ability to pay dividends depends on the ability of the Bank to pay dividends to it. As a depository institution, the deposits of which are insured by the FDIC, the Bank’s primary federal regulator, the OCC, is authorized, and under certain circumstances is required, to determine that the payment of dividends or other distributions by a bank would be an unsafe or unsound practice and to prohibit that payment. The National Bank Act and OCC regulations generally allow a national bank to pay dividends on common stock only out of net income for the calendar year to date and retained earnings from the prior two calendar years. Additionally, the Federal Deposit Insurance Act, generally prohibits an insured depository institution from making any capital distribution (including payment of a dividend) or paying any management fee to its parent holding company if the depository institution would thereafter be undercapitalized. The federal banking agencies have also issued policy statements which provide that bank holding companies and insured banks should generally only pay dividends out of current earnings. Bank are also prohibited from paying dividends when doing so would cause them to fall below regulatory minimum capital levels. The total amount available for payment of dividends by the Bank was approximately $30.0 million at September 30, 2020, based on the Bank maintaining enough capital to be considered well capitalized and other regulatory restrictions on subsidiary bank dividend payments. During the year ended December 31, 2019, the Bank paid dividends of $3.5 million to the Company. In addition, federal bank regulatory agencies have the authority to prohibit the Bank from engaging in unsafe or unsound practices in conducting their business. The payment of dividends or other transfers of funds to the Company, depending on the financial condition of the Bank, could be deemed an unsafe or unsound practice. Dividend payments from the Bank would also be prohibited under the “prompt corrective action” regulations of federal bank regulators if the Bank is, or after payment of such dividends would be, undercapitalized under such regulations. In addition, the Bank is subject to restrictions under federal law that limit their ability to 000-0000-0000/2/AMERICAS transfer funds or other items of value to us and our non-bank subsidiaries, including affiliates, whether in the form of loans and other extensions of credit, investments and asset purchases, or as other transactions involving the transfer of value. Unless an exemption applies, these transactions by the Bank with the Company are limited to 10% of the Bank’s capital stock and surplus and, with respect to all such transactions with affiliates in the aggregate, to 20% of the Bank’s capital stock and surplus. Moreover, loans and extensions of credit by the Bank to its affiliates, including the Company, generally are required to be secured in specified amounts. A bank’s transactions with its non-bank affiliates also are required generally to be on arm’s-length terms. As of September 30, 2020, there were no such transactions between the Bank and the Company other than for shared services which are conducted on arm’s-length terms. We can provide no assurance that we will receive dividends or other distributions from the Bank and our other subsidiariessubsidiaries in an amount sufficient to pay interest on or principal of the subordinated notes. Payment of principal on the subordinated notes may be accelerated only in the case of certain events of bankruptcy or insolvency involving us or the Bank. There is no automatic acceleration, or right of acceleration, in the case of default in the payment of principal of or interest on the subordinated notes, or in the performance of any of our other obligations under the subordinated notes. Our regulators can, in the event we or the Bank become subject to an enforcement action, prohibit the Bank from paying dividends to the Company, and prevent our payment of interest or principal on the subordinated notes and any dividends on our capital stock, but such limits will not permit acceleration of the subordinated notes. In addition to our currently outstanding indebtedness and any additional indebtedness we may incur pursuant to this offering, we may be able to borrow substantial additional indebtedness, including senior debt, in the future. If new indebtedness is incurred in addition to our current debt levels, the related risks that we now face could increase. Our indebtedness, including the indebtedness we may incur in the future, could have important consequences for the holders of the subordinated notes, including: • limiting our ability to satisfy our obligations with respect to the subordinated notes; • increasing our vulnerability to general adverse economic and industry conditions; • limiting our ability to obtain additional financing to fund future working capital, capital expenditures and other general corporate requirements; • requiring a substantial portion of our cash flow from operations for the payment of principal of, and interest on, our indebtedness and thereby reducing our ability to use our cash flow to fund working capital, capital expenditures and general corporate requirements; • limiting our flexibility in planning for, or reacting to, changes in our business and the industry; and • putting us at a disadvantage compared to competitors with less indebtedness. The subordinated notes do not limit the incurrence of additional indebtedness by us, including secured indebtedness, which would be effectively senior to the subordinated notes to the extent of their assets, since they are separate and distinct legal entities with no obligation the value of the collateral securing such indebtedness. 000-0000-0000/2/AMERICAS Our ability to pay any amounts due under make payments on our indebtedness, including the Subordinated Notessubordinated notes, and to fund planned capital expenditures will depend on our ability to generate cash in the future. We cannot assure you that our business will generate sufficient cash flow from operations or that future borrowings will be available to us in an amount sufficient to enable us to pay interest on and principal of our indebtedness, including the subordinated notes, or to make any funds available fund our other liquidity needs. The covenants in the subordinated notes governing the subordinated notes are limited. In addition, the subordinated notes do not limit our or our subsidiaries’ ability to make payments on further issue additional subordinated notes, including additional notes of the Subordinated Notessame series as the subordinated notes, whether by paying dividends or otherwiseto incur additional debt. As a result, the terms of the subordinated notes do not protect you in the event of an adverse change in our financial condition or results of operations.

Month Term SOFR. Under the benchmark transition provisions of the Subordinated Notes, if the calculation agent determines that a Benchmark Transition Event and its related Benchmark Replacement Date have occurred with respect to Three-Month Term SOFR, then the interest rate on the Subordinated Notes during the floating rate period will be determined using the next-available Benchmark Replacement (as defined in the Subordinated Notes) (which may include a related Benchmark Replacement Adjustment). However, the Benchmark Replacement may not be the economic equivalent of Three-Month Term SOFR. For example, Compounded SOFR, the first available Benchmark Replacement, is the compounded average of the daily Secured Overnight Financing Rates calculated in arrears, while Three-Month Term SOFR is intended to be a forward-looking rate with a tenor of three months. In addition, very limited market precedent exists for securities that use Compounded SOFR as the rate basis, and the method for calculating Compounded SOFR in those precedents varies. Further, the ISDA Fallback Rate, which is another Benchmark Replacement, has not yet been established and may change over time. Under the benchmark transition provisions of the Subordinated Notes, if a particular Benchmark Replacement or Benchmark Replacement Adjustment cannot be determined, then the next-available Benchmark Replacement or Benchmark Replacement Adjustment will apply. These replacement rates and adjustments may be selected or formulated by (i) the Relevant Governmental Body (such as the ARRC), (ii) ISDA or (iii) in certain circumstances, the calculation agent. In addition, the benchmark transition provisions expressly authorize the calculation agent to make certain changes, which are defined in the terms of the Subordinated Notes as “Benchmark Replacement Conforming Changes,” with respect to, among other things, the determination of interest periods, and the timing and frequency of determining rates and making payments of interest. The application of a Benchmark Replacement and Benchmark Replacement Adjustment, and any implementation of Benchmark Replacement Conforming Changes, could result in adverse consequences to the amount of interest that accrues on the Subordinated Notes during the floating rate period, which could adversely affect the return on, value of and market for the Subordinated Notes. Further, there is no assurance that the characteristics of any Benchmark Replacement will be similar to the then-current Benchmark that it is replacing, or that any Benchmark Replacement will produce the economic equivalent of the then-current Benchmark that it is replacing. We will act as the initial calculation agent, and we may continue to serve as calculation agent during the floating rate period. The calculation agent will determine make certain determinations, decisions or elections with respect to the interest rate during the floating rate period. Any exercise of discretion by us under the terms of the Subordinated Notes, including, without limitation, any discretion exercised by us acting as calculation agent, could present a conflict of interest. In making the required determinations, decisions and elections, we may have economic interests that are adverse to the interests of the holders of the Subordinated Notes, and those determinations, decisions or elections could have a material adverse effect on the yield on, value of and market for the Subordinated Notes. Any determination by us, as the calculation agent, will be conclusive and binding absent manifest error. There is no established public market for the Subordinated Notes, and we cannot assure you that an active trading market for the Subordinated Notes will develop. If no active trading market develops, you may not be able to resell the Subordinated Notes at their fair market value or at all. We do not intend to apply for listing the Subordinated Notes on any securities exchange. Future trading prices of the Subordinated Notes will depend on many factors, including, among other things, prevailing interest rates, our operating results, our financial condition and the market for similar securities. We cannot assure you as to the development or liquidity of any trading market for the Subordinated Notes. The liquidity of any market for the Subordinated Notes will depend on a number of factors, including: ◦ • the number of holders of the Subordinated Notes; ◦ • our operating performance and financial condition; ◦ • the market for similar securities; ◦ • the interest of securities dealers in making a market in the Subordinated Notes; and ◦ • prevailing interest rates. We cannot assure you that the market, if any, for the Subordinated Notes will be free from similar disruptions or that any such disruptions may not adversely affect the prices at which you may sell your Subordinated Notes. Therefore, we cannot assure you that you will be able to sell your Subordinated Notes at a particular time or the price that you receive when you sell will be favorable. The credit ratings on the Subordinated Notes are an assessment by rating agencies of our ability to pay our debts when due. These ratings are not recommendations to purchase, hold or sell the Subordinated Notes, inasmuch as the ratings do not comment as to market price or suitability for a particular investor, are limited in scope, and do not address all material risks relating to an investment in the Subordinated Notes, but rather reflect only the view of each rating agency at the time the rating is issued. The ratings are based on current information furnished to the ratings agencies by us and information obtained by the ratings agencies from other sources. An explanation of the significance of such rating may be obtained from such rating agency. There can be no assurance that such credit ratings will remain in effect for any given period of time or that such ratings will not be lowered, suspended or withdrawn entirely by the rating agencies, if, in each rating agency’s judgment, circumstances so warrant. Any ratings of our long‐term debt are based on a number of factors, including our financial strength as well as factors not entirely within our control, including conditions affecting the financial services industry generally. There can be no assurance that we will not receive adverse changes in our ratings in the future, which could adversely affect the cost and other terms upon which we are able to obtain funding and the way in which we are perceived in the capital markets. Actual or anticipated changes or downgrades in our credit ratings, including any announcement that our ratings are under review for a downgrade, could affect the market value and liquidity of the Subordinated Notes and increase our borrowing costs. We may redeem the Subordinated Notes, in whole or in part, and without premium or penalty, at any time five years after the issue date, subject to certain conditions. You should assume that we will exercise our redemption option if we are able to obtain capital at a lower cost than we must pay on the Subordinated Notes or if it is otherwise in our interest to redeem the Subordinated Notes. We may also redeem the Subordinated Notes, in whole, but not in part, and without premium or penalty, upon the occurrence of certain events at any time, including within the first five years after the issue date. If the Subordinated Notes are redeemed, you may be required to reinvest your principal at a time when you may not be able to earn a return that is as high as you were earning on the Subordinated Notes. If you hold a Subordinated Note, you will not be entitled to any rights with respect to our capital stock (including, without limitation, voting rights and rights to receive any dividends or other distributions on our capital stock) by virtue of holding a Subordinated Note. Our officers and directors will make all decisions with respect to our management. Holders of the Subordinated Notes have no right or power to take part in our management. Prospective investors will be entirely reliant on our officers and directors to effectively manage our business so that we may meet our debt obligations when they fall due. Our obligations under the Subordinated Notes are unsecured and will rank junior we may be able to our Senior Indebtedness, as defined in the Subordinated Notes. We may also obtain indebtedness from time to time that is secured by all or substantially all of our assets. If we default on payments of our Senior Indebtedness, or if any of these senior obligations are accelerated or any judicial proceeding with respect to a default is pending, we will not be able to make payments on the Subordinated Notes unless we cure the default. If we are declared bankrupt or insolvent, or if we default under such secured indebtedness, the lenders could declare all of the funds borrowed thereunder, together with accrued interest, immediately due and payable. If we were unable to repay such indebtedness, the lenders could foreclose on the pledged assets to the exclusion of holders of the Subordinated Notes, even if an event of default exists under the Subordinated Notes. In any such event, because the Subordinated Notes are not secured by any of our assets, it is possible that there would be no assets remaining from which your claims could be satisfied or, if any assets remained, they might be insufficient to satisfy your claims fully. The Subordinated Notes will be our obligations only, are not obligations of or deposits in the Bank or its other subsidiaries, and are not insured by any government or private agency. Because we are a holding company, our rights and the rights of our creditors, including the holders of the Subordinated Notes, to participate in any distribution of the assets of the Bank or our other subsidiaries, upon a liquidation, reorganization, or insolvency of the Bank or our other subsidiaries (and the consequent right of the holders of the Subordinated Notes to participate in those assets) will be subject to the claims of the creditors of the Bank or our other subsidiaries (including depositors in our subsidiaries). If we are a creditor of the Bank or its other subsidiaries, our claims would be subject to any prior security interest in the assets of the Bank or our other subsidiaries and any indebtedness of our subsidiaries senior to our indebtedness. The Subordinated Notes are also effectively subordinated to all of the liabilities of the Bank or our other subsidiaries, to the extent of their assets, since they are separate and distinct legal entities with no obligation to pay any amounts due under our indebtedness, including the Subordinated Notes, or to make any funds available to make payments on the Subordinated Notes, whether by paying dividends or otherwise.

Month Term SOFR. Under the benchmark transition provisions of the Subordinated Notes, if the calculation agent determines that a Benchmark Transition Event and its related Benchmark Replacement Date have occurred with respect to Three-Month Term SOFR, then the interest rate on the Subordinated Notes during the floating rate period will be determined using the next-available Benchmark Replacement (as defined in the Subordinated Notes) (which may include a related Benchmark Replacement Adjustment). However, the Benchmark Replacement may not be the economic equivalent of Three-Month Term SOFR. For example, Compounded SOFR, the first available Benchmark Replacement, is the compounded average of the daily Secured Overnight Financing Rates calculated in arrears, while Three-Month Term SOFR is intended to be a forward-looking rate with a tenor of three months. In addition, very limited market precedent exists for securities that use Compounded SOFR as the rate basis, and the method for calculating Compounded SOFR in those precedents varies. Further, the ISDA Fallback Rate, which is another Benchmark Replacement, has not yet been established and may change over time. Under the benchmark transition provisions of the Subordinated Notes, if a particular Benchmark Replacement or Benchmark Replacement Adjustment cannot be determined, then the next-available Benchmark Replacement or Benchmark Replacement Adjustment will apply. These replacement rates and adjustments may be selected or formulated by (i) the Relevant Governmental Body (such as the ARRC), (ii) ISDA or (iii) in certain circumstances, the calculation agent. In addition, the benchmark transition provisions expressly authorize the calculation agent to make certain changes, which are defined in the terms of the Subordinated Notes as “Benchmark Replacement Conforming Changes,” with respect to, among other things, the determination of interest periods, and the timing and frequency of determining rates and making payments of interest. The application of a Benchmark Replacement and Benchmark Replacement Adjustment, and any implementation of Benchmark Replacement Conforming Changes, could result in adverse consequences to the amount of interest that accrues on the Subordinated Notes during the floating rate period, which could adversely affect the return on, value of and market for the Subordinated Notes. Further, there is no assurance that the characteristics of any Benchmark Replacement will be similar to the then-current Benchmark that it is replacing, or that any Benchmark Replacement will produce the economic equivalent of the then-current Benchmark that it is replacing. The calculation agent will determine the interest rate during the floating rate period. Any exercise of discretion by us under the terms of the Subordinated Notes, including, without limitation, any discretion exercised by us acting as calculation agent, could present a conflict of interest. In making the required determinations, decisions and elections, we may have economic interests that are adverse to the interests of the holders of the Subordinated Notes, and those determinations, decisions or elections could have a material adverse effect on the yield on, value of and market for the Subordinated Notes. Any determination by us, as the calculation agent, will be conclusive and binding absent manifest error. There is no established public market for the Subordinated Notes, and we cannot assure you that an active trading market for the Subordinated Notes will develop. If no active trading market develops, you may not be able to resell the Subordinated Notes at their fair market value or at all. We do not intend to apply for listing the Subordinated Notes on any securities exchange. Future trading prices of the Subordinated Notes will depend on many factors, including, among other things, prevailing interest rates, our operating results, our financial condition and the market for similar securities. We cannot assure you as to the development or liquidity of any trading market for the Subordinated Notes. The liquidity of any market for the Subordinated Notes will depend on a number of factors, including: ◦ • the number of holders of the Subordinated Notes; ◦ • our operating performance and financial condition; ◦ • the market for similar securities; ◦ • the interest of securities dealers in making a market in the Subordinated Notes; and ◦ • prevailing interest rates. We cannot assure you that the market, if any, for the Subordinated Notes will be free from similar disruptions or that any such disruptions may not adversely affect the prices at which you may sell your Subordinated Notes. Therefore, we cannot assure you that you will be able to sell your Subordinated Notes at a particular time or the price that you receive when you sell will be favorable. We may redeem the Subordinated Notes, in whole or in part, and without premium or penalty, at any time five years after the issue date, subject to certain conditions. You should assume that we will exercise our redemption option if we are able to obtain capital at a lower cost than we must pay on the Subordinated Notes or if it is otherwise in our interest to redeem the Subordinated Notes. We may also redeem the Subordinated Notes, in whole, but not in part, and without premium or penalty, upon the occurrence of certain events at any time, including within the first five years after the issue date. If the Subordinated Notes are redeemed, you may be required to reinvest your principal at a time when you may not be able to earn a return that is as high as you were earning on the Subordinated Notes. If you hold a Subordinated Note, you will not be entitled to any rights with respect to our capital stock (including, without limitation, voting rights and rights to receive any dividends or other distributions on our capital stock) by virtue of holding a Subordinated Note. Our officers and directors will make all decisions with respect to our management. Holders of the Subordinated Notes have no right or power to take part in our management. Prospective investors will be entirely reliant on our officers and directors to effectively manage our business so that we may meet our debt obligations when they fall due. Our obligations under the Subordinated Notes are unsecured and will rank junior we may be able to our Senior Indebtedness, as defined in the Subordinated Notes. We may also obtain indebtedness from time to time that is secured by all or substantially all of our assets. If we default on payments of our Senior Indebtedness, or if any of these senior obligations are accelerated or any judicial proceeding with respect to a default is pending, we will not be able to make payments on the Subordinated Notes unless we cure the default. If we are declared bankrupt or insolvent, or if we default under such secured indebtedness, the lenders could declare all of the funds borrowed thereunder, together with accrued interest, immediately due and payable. If we were unable to repay such indebtedness, the lenders could foreclose on the pledged assets to the exclusion of holders of the Subordinated Notes, even if an event of default exists under the Subordinated Notes. In any such event, because the Subordinated Notes are not secured by any of our assets, it is possible that there would be no assets remaining from which your claims could be satisfied or, if any assets remained, they might be insufficient to satisfy your claims fully. Your right to receive payments on the Subordinated Notes is structurally subordinated to indebtedness of our bank subsidiary, Spirit of Texas Bank, SSB (the “Bank”) and our other subsidiaries. The Subordinated Notes will be our obligations only, are not obligations of or deposits in the Bank or its other subsidiaries, and are not insured by any government or private agency. Because we are a holding company, our rights and the rights of our creditors, including the holders of the Subordinated Notes, to participate in any distribution of the assets of the Bank or our other subsidiaries, upon a liquidation, reorganization, or insolvency of the Bank or our other subsidiaries (and the consequent right of the holders of the Subordinated Notes to participate in those assets) will be subject to the claims of the creditors of the Bank or our other subsidiaries (including depositors in our subsidiaries). If we are a creditor of the Bank or its other subsidiaries, our claims would be subject to any prior security interest in the assets of the Bank or our other subsidiaries and any indebtedness of our subsidiaries senior to our indebtedness. The Subordinated Notes are also effectively subordinated to all of the liabilities of the Bank or our other subsidiaries, to the extent of their assets, since they are separate and distinct legal entities with no obligation to pay any amounts due under our indebtedness, including the Subordinated Notes, or to make any funds available to make payments on the Subordinated Notes, whether by paying dividends or otherwise.