BLUE RIDGE BANKSHARES, INC. 10-Q

Item 2. Management’s Discussion and Analysis o f Financial Condition and Results of Operations The following presents management’s discussion and analysis of the Company’s consolidated financial condition and the results of the Company's operations. This discussion should be read in conjunction with the unaudited consolidated financial statements and the notes thereto included in this Form 10-Q and the audited consolidated financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2025 (the “ 2025 Form 10-K ” ). Results of operations for the three and six months ended June 30, 2026 are not necessarily indicative of the results of operations for the balance of 2026, or for any other period. As used in this report, the terms “the Company,” “we,” “us,” and “our” refer to Blue Ridge Bankshares, Inc. and its consolidated subsidiaries. The term “Bank” refers to Blue Ridge Bank, National Association. Cautionary Note About Forward-Looking Statements The Company makes certain forward-looking statements in this Form 10-Q that are subject to risks and uncertainties. These forward-looking statements represent plans, estimates, objectives, goals, guidelines, expectations, intentions, projections, and statements of management’s beliefs concerning future events, business plans, objectives, expected operating results, and the assumptions upon which those statements are based. Forward-looking statements include without limitation, any statement that may predict, forecast, indicate, or imply future results, performance or achievements, and are typically identified with words such as “may,” “could,” “should,” “will,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “aim,” “intend,” “plan,” or words of similar meaning. The Company cautions that the forward-looking statements are based largely on management’s expectations and are subject to a number of known and unknown risks and uncertainties that may change based on factors which are, in many instances, beyond its control. Actual results, performance, or achievements could differ materially from those contemplated, expressed, or implied by the forward-looking statements. The following factors, among others, could cause the Company’s financial performance to differ materially from that expressed in such forward-looking statements: • the strength of the United States economy in general and the strength of the local economies in which the Company conducts operations; • the effects of, and changes in, the macroeconomic environment and financial market conditions, including monetary and fiscal policies, interest rates, and inflation; • reputational risk and potential adverse reactions of the Company’s customers, suppliers, employees, or other business partners; • the quality and composition of the Company’s loan and investment portfolios, including changes in the level of the Company’s nonperforming assets and charge-offs; • the Company’s management of risks inherent in its loan portfolio, the credit quality of its borrowers, and the risk of a prolonged downturn in the real estate market, which could impair the value of the Company’s collateral and its ability to sell collateral upon any foreclosure; • the ability to maintain adequate liquidity by growing and retaining deposits and secondary funding sources, especially if the Company's or its industry's reputation becomes damaged; • the emergence of digital assets and payment stablecoins, and evolving legislative or regulatory frameworks, which could alter deposit flows, competition, and credit intermediation and, in turn, adversely affect the Company’s funding, liquidity, or overall financial performance; • the ability to maintain capital levels adequate to support the Company's business; • the ability of the Company to implement cost-saving initiatives and efficiency measures, as well as increase earning assets, in order to yield acceptable levels of profitability; • the ability to generate sufficient future taxable income for the Company to realize its deferred tax assets, including the net operating loss carryforward; • the usage of advances and changes in technological and social media to develop timely and competitive products and services, and the acceptance of these products and services by new and existing customers; • the willingness of users to substitute competitors’ products and services for the Company’s products and services; 30 • the impact of unanticipated outflows of deposits; • potential exposure to fraud, negligence, computer theft, and cyber-crime; • adverse developments in the financial industry generally, such as bank failures, responsive measures to mitigate and manage such developments, supervisory and regulatory actions and costs, and related impacts on customer and client behavior; • changing bank regulatory conditions, policies or programs, whether arising as new legislation or regulatory initiatives, that could lead to restrictions on activities of banks generally, or the Bank in particular, more restrictive regulatory capital requirements, increased costs, including deposit insurance premiums, regulation or prohibition of certain income producing activities or changes in the secondary market for loans and other products; • political developments, including government shutdowns and other significant disruptions and changes in the funding, size, scope and effectiveness of the federal government, its agencies and services; • the impact of changes in financial services policies, laws, and regulations, including laws, regulations, and policies concerning taxes, banking, securities, real estate and insurance, and the application thereof by bank regulatory bodies and the three branches of the federal government; • the effect of changes in accounting standards, policies, and practices as may be adopted from time to time; • estimates of the fair value and other accounting values, subject to impairment assessments, of certain of the Company’s assets and liabilities; • geopolitical conditions, including acts or threats of terrorism and/or military conflicts, or actions taken by the United States or other governments in response to acts or threats of terrorism and/or military conflicts, which could impact business and economic conditions in the United States and abroad; • the economic impact of duties, tariffs, or other barriers or restrictions on trade, any retaliatory countermeasures, and the volatility and uncertainty arising therefrom; • the occurrence or continuation of widespread health emergencies or pandemics, significant natural disasters, severe weather conditions, floods, and other catastrophic events; • the Company’s involvement in, and the outcome of, any litigation, legal proceedings, or enforcement actions that may be instituted against the Company; and • other risks and factors identified in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” sections and elsewhere in the 2025 Form 10-K and in this Form 10-Q and in filings the Company makes from time to time with the Securities and Exchange Commission (“SEC”). The foregoing factors should not be considered exhaustive and should be read together with other cautionary statements that are included in the 2025 Form 10-K and this Form 10-Q, including those discussed in the section entitled "Risk Factors" in those filings. If one or more of the factors affecting forward-looking information and statements proves incorrect, then actual results, performance, or achievements could differ materially from those expressed in, or implied by, forward-looking information and statements contained in this Form 10-Q. Therefore, the Company cautions not to place undue reliance on its forward-looking information and statements. The Company will not update the forward-looking statements to reflect actual results or changes in the factors affecting the forward-looking statements. New risks and uncertainties may emerge from time to time, and it is not possible for the Company to predict their occurrence or how these risks and uncertainties will affect it. Special Cash Dividend and Warrants On March 30, 2026, the Company announced a special cash dividend of $0.60 per share of the Company's common stock totaling approximately $54.1 million, of which $53.2 million was paid on April 27, 2026 to shareholders of record as of the close of business on April 13, 2026. On March 30, 2026, the Company announced that the holders of outstanding warrants to purchase the Company's common stock (the "Warrants") representing a majority of shares of common stock underlying such Warrants approved an amendment and restatement of the Warrants (the "Warrant Amendment"). Pursuant to the Warrant Amendment, in connection with certain cash distributions to holders of the Company's common stock while the Warrants are 31 outstanding, the per share exercise price of each Warrant is reduced by the per share dividend amount in lieu of cash distributions to Warrant holders, including the special cash dividends of $0.25 per share paid in November 2025 and $0.60 per share paid in April 2026. As a result, the previously accrued $6.1 million (for dividends to be paid upon exercise of the Warrants) was reversed in the first quarter of 2026, and, upon execution of the amended and restated Warrants, the strike price of the Warrants reduces to $1.65 per common share. The table below presents information pertaining to the Warrants as of and for the periods stated. Warrants Issued April 3, 2024 Warrants Issued June 13, 2024 Total Warrants Balance, December 31, 2025 21,895,999 2,424,000 24,319,999 Warrants exercised — — — Balance, March 31, 2026 21,895,999 2,424,000 24,319,999 Warrants exercised (204,000 ) — (204,000 ) Balance, June 30, 2026 21,691,999 2,424,000 24,115,999 Remaining exercise term (years) as of June 30, 2026 2.76 2.95 Warrants Issued April 3, 2024 Warrants Issued June 13, 2024 Total Warrants Balance, December 31, 2024 29,027,999 2,424,000 31,451,999 Warrants exercised (2,762,000 ) — (2,762,000 ) Balance, March 31, 2025 26,265,999 2,424,000 28,689,999 Warrants exercised (1,016,000 ) — (1,016,000 ) Balance, June 30, 2025 25,249,999 2,424,000 27,673,999 General There were no changes to the Critical Accounting Policies disclosed in Item 7 of the 2025 Form 10-K. Certain amounts presented in the consolidated financial statements of prior periods have been reclassified to conform to current year presentations. The reclassifications had no effect on net income, net income per share, total assets, total liabilities, or stockholders’ equity as previously reported. Comparison of Financial Condition as of June 30, 2026 and December 31, 2025 Total assets were $2.33 billion as of June 30, 2026, a decrease of $105.3 million from $2.43 billion as of December 31, 2025. Approximately half of this decrease was attributable to a decrease in cash and due from banks ($54.3 million), while the remainder was due to decreases in securities available for sale ($15.9 million), loans held for sale ($14.8 million) and loans held for investment ($12.3 million). Cash and due from banks declined due to the special cash dividend paid of $53.2 million and the reduction of brokered time deposits of approximately $52.9 million. The decline in available for sale securities was due to bonds called or matured ($9.6 million) and portfolio amortization ($16.4 million), partially offset by bond purchases ($11.1 million). Included in the reduction of loans held for investment in the first half of 2026 were payoffs and paydowns of $32.2 million of out-of-market loans. The decline in loans held for sale reflected the Company's complete exit from its indirect fintech lending activities in the first quarter of 2026. The allowance for credit losses ("ACL") was $22.0 million and $19.4 million as of June 30, 2026 and December 31, 2025, respectively. The increase since year-end primarily reflects the addition of specific reserves for out-of-market loans. Loans held for investment increased $19.6 million during the second quarter of 2026, primarily driven by growth in commercial and residential mortgage loans. During the second quarter of 2026, the Company partnered with a third-party residential mortgage originator, whereby the Company purchases adjustable-rate mortgage loans originated generally within its market area. Purchases under this program totaled $17.3 million during the second quarter of 2026, inclusive of purchase premiums. This program provides a primary mortgage product to the Company's consumer customers. Total deposits were $1.86 billion as of June 30, 2026, a net decrease of $48.8 million from December 31, 2025. The decline in the first half of 2026 was primarily due to a $52.9 million decrease in brokered time deposits. Excluding the decline in brokered deposits, deposits increased $4.1 million in the first half of 2026. 32 Total stockholders’ equity decreased by $48.3 million to $275.4 million as of June 30, 2026, from $323.7 million at December 31, 2025, primarily due to the special cash dividend ($54.1 million) announced March 30, 2026, partially offset by a $6.1 million reversal of accrued dividends due to the aforementioned Warrant Amendment. Comparison of Results of Operations for the Three and Six Months Ended June 30, 2026 and 2025 For the three months ended June 30, 2026, the Company reported a net loss of $1.3 million, or ($0.01) per diluted common share, compared to net income of $1.3 million, or $0.01 per diluted common share, for the same period of 2025. Net loss for the three months ended June 30, 2026 included an after-tax $3.2 million provision for credit losses, compared to an after-tax benefit for recovery of credit losses of $0.5 million for the same period of 2025. Loans from a single out-of-market relationship originated prior to 2024 were placed on nonaccrual at June 30, 2026, and a reserve was established for the loans in the amount of $2.9 million ($2.3 million after tax). Net loss for the three months ended June 30, 2026 also included $0.3 million of after-tax expenses related to severance, compared to $0.2 million for the same period of 2025. Severance expenses include amounts associated with previously-announced executive officer transitions. The 2025 period also included an after-tax benefit of $1.0 million from the recovery of non-credit related amounts reserved for in the prior year, as the Company concluded outstanding exit activities with a former fintech banking-as-a-service (“BaaS”) partner. For the six months ended June 30, 2026, the Company reported a net loss of $0.5 million, or ($0.01) per diluted common share, compared to net income of $0.9 million, or $0.01 per diluted common share, for the same period of 2025. Net loss for the six months ended June 30, 2026 included after-tax severance expenses of $1.7 million, while net income for the six months ended June 30, 2025 included after-tax severance costs of $0.8 million. Net Interest Income. Net interest income is the excess of interest earned on loans, investments, and other interest-earning assets less the interest paid on deposits and borrowings and is the Company’s primary revenue source. Net interest income is thereby affected by overall balance sheet size, changes in interest rates, and changes in the mix of investments, loans, deposits, and borrowings. Net interest income for the three and six months ended June 30, 2026 was $16.5 million and $33.4 million, respectively, a decline of $3.3 million and $5.4 million from the same respective periods in 2025, primarily due to declines in average loan balances. The following table presents the average balance sheets for the three months ended June 30, 2026 and 2025. Also shown are the amounts of interest earned on interest-earning assets, with related tax-equivalent yields, and interest 33 expense on interest-bearing liabilities, with related rates, as well as a volume and rate analysis of changes in net interest income for the periods stated. Average Balances, Income and Expense, Yields and Rates For the three months ended June 30, 2026 2025 Total Increase/ Increase/(Decrease) Due to (Dollars in thousands) Average Balance Interest Yield/ Rate (1) Average Balance Interest Yield/ Rate (1) (Decrease) Volume (2) Rate (2) Average Assets Taxable securities $ 334,805 $ 2,486 2.97 % $ 336,749 $ 2,574 3.06 % $ (88 ) $ (15 ) $ (73 ) Tax-exempt securities (3) 12,021 98 3.26 % 12,346 82 2.66 % 16 (2 ) 18 Total securities 346,826 2,584 2.98 % 349,095 2,656 3.04 % (72 ) (17 ) (55 ) Interest-earning deposits in other banks 99,998 882 3.53 % 127,656 1,359 4.26 % (477 ) (294 ) (183 ) Federal funds sold 2,278 21 3.69 % 860 10 4.65 % 11 16 (5 ) Loans held for sale — — — 24,150 1,394 23.09 % (1,394 ) (1,394 ) — Loans held for investment (4,5,6) 1,831,788 25,381 5.54 % 2,024,075 29,336 5.80 % (3,955 ) (2,787 ) (1,168 ) Total average interest-earning assets 2,280,890 28,868 5.06 % 2,525,836 34,755 5.50 % (5,887 ) (4,476 ) (1,411 ) Less: allowance for credit losses (19,176 ) (23,091 ) Total noninterest-earning assets 106,058 128,153 Total average assets $ 2,367,772 $ 2,630,898 Average Liabilities and Stockholders’ Equity: Interest-bearing demand, money market, and savings $ 686,784 $ 3,001 1.75 % $ 729,730 $ 3,162 1.73 % $ (161 ) $ (186 ) $ 25 Time (7) 797,851 7,582 3.80 % 905,453 9,640 4.26 % (2,058 ) (1,146 ) (912 ) Total interest-bearing deposits 1,484,635 10,583 2.85 % 1,635,183 12,802 3.13 % (2,219 ) (1,332 ) (887 ) FHLB borrowings 150,000 1,447 3.86 % 150,000 1,447 3.86 % — — — Subordinated notes and other borrowings (8) 14,697 273 7.43 % 34,553 646 7.48 % (373 ) (371 ) (2 ) Total average interest-bearing liabilities 1,649,332 12,303 2.98 % 1,819,736 14,895 3.27 % (2,592 ) (1,703 ) (889 ) Noninterest-bearing demand deposits 396,280 441,422 Other noninterest-bearing liabilities 44,224 30,609 Stockholders' equity 277,936 339,131 Total average liabilities and stockholders’ equity $ 2,367,772 $ 2,630,898 Net interest income and margin (9) $ 16,565 2.91 % $ 19,860 3.15 % $ (3,295 ) $ (2,773 ) $ (522 ) Cost of funds (10) 2.41 % 2.63 % Net interest spread (11) 2.08 % 2.23 % (1) Annualized. (2) Change in income/expense due to both volume and rate has been allocated in proportion to the absolute dollar amounts of the change in each. (3) Computed on a fully taxable equivalent basis assuming a 21.96% and 22.32% income tax rate for the three months ended June 30, 2026 and 2025, respectively. (4) Includes deferred loan fees/costs. (5) Non-accrual loans have been included in the computations of average loan balances. (6) Includes accretion of fair value adjustments (discounts) on acquired loans of $147 thousand and $370 thousand for the three months ended June 30, 2026 and 2025, respectively. (7) Includes amortization of fair value adjustments (premiums) on assumed time deposits of $0 and $25 thousand for the three months ended June 30, 2026 and 2025, respectively. (8) Includes amortization of fair value adjustments (premiums) on assumed subordinated notes of $14 thousand and $25 thousand for the three months ended June 30, 2026 and 2025, respectively. (9) Net interest margin is net interest income divided by average interest-earning assets. (10) Cost of funds is total interest expense divided by total interest-bearing liabilities and non-interest bearing demand deposits. (11) Net interest spread is the yield on average interest-earning assets less the cost of average interest-bearing liabilities. Average balances of interest-earning assets decreased $244.9 million to $2.28 billion for the three months ended June 30, 2026, compared to $2.53 billion for the same period of 2025. This decrease reflected lower average balances of loans held for investment and loans held for sale, reflective of the Company's efforts to selectively reduce its portfolio of out-of-market loans and its exit from its indirect fintech lending partnerships. The yield on average loans held for investment was 5.54% and 5.80% for the second quarters of 2026 and 2025, respectively. The decline in yield on loans held for investment was primarily due to a decline in higher yielding out-of-market loans and lower accretion of discounts on acquired loans. Accretion of discounts on acquired loans had a three and seven basis point positive effect on yield on loans held for investment for the respective periods. The exit of fintech lending operations, represented by loans held for sale, also had a unfavorable effect on yields on interest-earning assets. Average balances of interest-bearing liabilities decreased $170.4 million to $1.65 billion for the three months ended June 30, 2026, compared to $1.82 billion for the same period of 2025. The decrease was primarily due to a $118.7 million reduction of average balances of brokered deposits, reported in time deposits, and a $19.9 million reduction in average borrowings due to the Company's redemption of a portion of its subordinated notes in the late second and early third quarters of 2025. Cost of deposits was 2.25% for the three months ended June 30, 2026, compared to 2.47% for the same period of 2025, while cost of funds was 2.41% and 2.63%, for the respective periods. Lower cost of deposits and funds in the second quarter of 2026 relative to the year-ago period were primarily due to the reduction in average balances of higher cost brokered deposits paid off upon maturity and the partial redemption of the Company's subordinated notes. Cost of deposits, excluding brokered deposits, was 1.97% for the second quarter of 2026 compared to 2.05% for the second quarter of 2025. 34 Net interest income (on a taxable equivalent basis) for the three months ended June 30, 2026 was $16.6 million compared to $19.9 million for the same period in 2025. Interest income declined $5.9 million to $28.9 million for the three months ended June 30, 2026, primarily due to the decline in average balances of loans held for investment, loans held for sale, and interest-earning deposits in other banks, which collectively declined $244.1 million from the three months ended June 30, 2025. Interest expense declined $2.6 million to $12.3 million for the three months ended June 30, 2026, largely driven by lower average balances of brokered deposits, which declined $118.7 million from the same period of 2025. Net interest margin was 2.91% and 3.15% for the second quarters of 2026 and 2025, respectively. The following table presents the average balance sheets for the six months ended June 30, 2026 and 2025. Also shown are the amounts of interest earned on interest-earning assets, with related tax-equivalent yields, and interest expense on interest-bearing liabilities, with related rates, as well as a volume and rate analysis of changes in net interest income for the periods stated. Average Balances, Income and Expense, Yields and Rates For the six months ended June 30, 2026 2025 Total Increase/ Increase/(Decrease) Due to (Dollars in thousands) Average Balance Interest Yield/ Rate (1) Average Balance Interest Yield/ Rate (1) (Decrease) Volume (2) Rate (2) Average Assets Taxable securities $ 339,267 $ 5,018 2.96 % $ 330,945 $ 4,994 3.02 % $ 24 $ 126 $ (102 ) Tax-exempt securities (3) 12,048 191 3.17 % 12,410 163 2.63 % 28 (5 ) 33 Total securities 351,315 5,209 2.97 % 343,355 5,157 3.00 % 52 121 (69 ) Interest-earning deposits in other banks 113,051 1,945 3.44 % 145,116 3,057 4.21 % (1,112 ) (675 ) (437 ) Federal funds sold 1,812 33 3.64 % 1,121 25 4.46 % 8 15 (7 ) Loans held for sale 2,333 319 27.35 % 26,788 2,760 20.61 % (2,441 ) (2,520 ) 79 Loans held for investment (4,5,6) 1,839,121 50,771 5.52 % 2,056,638 59,124 5.75 % (8,353 ) (6,253 ) (2,100 ) Total average interest-earning assets 2,307,632 58,277 5.05 % 2,573,018 70,123 5.45 % (11,846 ) (9,312 ) (2,534 ) Less: allowance for credit losses (19,223 ) (22,920 ) Total noninterest-earning assets 107,068 125,957 Total average assets $ 2,395,477 $ 2,676,055 Average Liabilities and Stockholders’ Equity: Interest-bearing demand, money market, and savings $ 693,565 $ 6,036 1.74 % $ 724,909 $ 6,512 1.80 % $ (476 ) $ (282 ) $ (194 ) Time (7) 802,868 15,307 3.81 % 947,238 20,482 4.32 % (5,175 ) (3,122 ) (2,053 ) Total interest-bearing deposits 1,496,433 21,343 2.85 % 1,672,147 26,994 3.23 % (5,651 ) (3,403 ) (2,248 ) FHLB borrowings 150,000 2,879 3.84 % 150,000 2,879 3.84 % — — — Subordinated notes and other borrowings (8) 14,705 564 7.68 % 37,159 1,382 7.44 % (818 ) (835 ) 18 Total average interest-bearing liabilities 1,661,138 24,786 2.98 % 1,859,306 31,255 3.36 % (6,469 ) (4,238 ) (2,230 ) Noninterest-bearing demand deposits 392,313 449,743 Other noninterest-bearing liabilities 40,991 29,210 Stockholders' equity 301,035 337,796 Total average liabilities and stockholders’ equity $ 2,395,477 $ 2,676,055 Net interest income and margin (9) $ 33,491 2.90 % $ 38,868 3.02 % $ (5,377 ) $ (5,074 ) $ (304 ) Cost of funds (10) 2.41 % 2.71 % Net interest spread (11) 2.07 % 2.09 % (1) Annualized. (2) Change in income/expense due to both volume and rate has been allocated in proportion to the absolute dollar amounts of the change in each. (3) Computed on a fully taxable equivalent basis assuming a 21.96% and 22.32% income tax rate for the six months ended June 30, 2026 and 2025, respectively. (4) Includes deferred loan fees/costs. (5) Non-accrual loans have been included in the computations of average loan balances. (6) Includes accretion of fair value adjustments (discounts) on acquired loans of $311 thousand and $736 thousand for the six months ended June 30, 2026 and 2025, respectively. (7) Includes amortization of fair value adjustments (premiums) on assumed time deposits of $1 thousand and $60 thousand for the six months ended June 30, 2026 and 2025, respectively. (8) Includes amortization of fair value adjustments (premiums) on assumed subordinated notes of $28 thousand and $49 thousand for the six months ended June 30, 2026 and 2025, respectively. (9) Net interest margin is net interest income divided by average interest-earning assets. (10) Cost of funds is total interest expense divided by total interest-bearing liabilities and non-interest bearing demand deposits. (11) Net interest spread is the yield on average interest-earning assets less the cost of average interest-bearing liabilities. Average interest-earning assets were $2.31 billion for the six months ended June 30, 2026, compared to $2.57 billion for the same period of 2025, a $265.4 million decrease. This decrease was primarily due to declines in average balances of loans held for investment and loans held for sale, which decreased $217.5 million and $24.5 million, respectively, reflective of the Company's efforts to selectively reduce its portfolio of out-of-market loans and its exit from its indirect fintech lending partnerships. Total interest income (on a taxable equivalent basis) decreased $11.8 million for the six months ended June 30, 2026 from the same period of 2025, primarily due to loan portfolio reductions, while the yield on interest-earning assets declined 40 basis points. The yield on average loans held for investment was 5.52% and 5.75% for the first halves of 2026 and 2025, respectively. The decline in yield on loans held for investment was primarily due to a decline in higher yielding out-of-market loans and lower accretion of discounts on acquired loans. Accretion of discounts on acquired loans had a three and seven basis point positive effect on yield on loans held for investment for the same respective periods. 35 Average interest-bearing liabilities were $1.66 billion for the six months ended June 30, 2026 compared to $1.86 billion for the same period of 2025, a $198.2 million decrease. Interest expense decreased by $6.5 million to $24.8 million for the six months ended June 30, 2026, compared to the same period of 2025. Cost of deposits was 2.26% for the six months ended June 30, 2026, compared to 2.54% for the same period of 2025, while cost of funds decreased to 2.41% for the first half of 2026 from 2.71% for the first half of 2025. Lower cost of deposits and funds in the 2026 period was primarily the result of the payoff of higher cost brokered time deposits at maturity. Cost of deposits, excluding brokered deposits, was 1.97% for the first half of 2026 compared to 2.12% for the same period of 2025. Net interest income (on a taxable equivalent basis) was $33.5 million for the six months ended June 30, 2026, compared to $38.9 million for the same period in 2025. Net interest margin was 2.90% and 3.02% for the first halves of 2026 and 2025, respectively. Provision for (Recovery of) Credit Losses . A provision for credit losses on loans of $3.5 million was reported for the three months ended June 30, 2026, whereas a recovery of credit losses on loans of $0.7 million was reported for the three months ended June 30, 2025. The provision for credit losses on loans for the second quarter of 2026 was primarily due to additions to specific loan reserves, net loan charge-offs, and loan portfolio growth of $19.6 million for the quarter. The provision for credit losses on loans for the 2026 period included a $2.9 million reserve established for loans associated with a single out-of-market relationship originated prior to 2024. The recovery of credit losses on loans for the second quarter of 2025 was primarily due to loan portfolio reductions. A provision for credit losses on loans of $2.9 million and a recovery of credit losses on loans of $0.7 million were reported for the six months ended June 30, 2026 and 2025, respectively. A provision for credit losses on unfunded commitments was $0.6 million for the three and six months ended June 30, 2026. The second quarter of 2026 provision was due to an increase in committed but unfunded lines of credit to commercial construction borrowers. There was no provision for credit losses on unfunded commitments in the same respective periods of 2025. Noninterest Income . The following tables present a summary of noninterest income and the dollar and percentage change for the periods presented. For the three months ended (Dollars in thousands) June 30, 2026 June 30, 2025 Change $ Change % Service charges on deposit accounts $ 642 $ 721 $ (79 ) (11.0 %) Bank and purchase card interchange income, net 620 626 (6 ) (1.0 %) Wealth and trust management fees 520 409 111 27.1 % Residential mortgage banking income — 117 (117 ) (100.0 %) Loss on sale of securities available for sale (123 ) — (123 ) (100.0 %) Other 111 1,371 (1,260 ) (91.9 %) Total noninterest income $ 1,770 $ 3,244 $ (1,474 ) (45.4 %) For the six months ended (Dollars in thousands) June 30, 2026 June 30, 2025 Change $ Change % Service charges on deposit accounts $ 1,274 $ 1,178 $ 96 8.1 % Bank and purchase card interchange income, net 1,165 1,193 (28 ) (2.3 %) Wealth and trust management fees 984 863 121 14.0 % Residential mortgage banking income — 841 (841 ) (100.0 %) Loss on sale of securities available for sale (123 ) — (123 ) 100.0 % Other 818 2,241 (1,423 ) (63.5 %) Total noninterest income $ 4,118 $ 6,316 $ (2,198 ) (34.8 %) The declines in residential mortgage banking income for the 2026 periods compared to the 2025 periods were attributable to the sale of the Company's mortgage division in the first quarter of 2025. The declines in other noninterest income for the comparative periods were primarily the result of the $0.6 million loss recognized in the second quarter of 2026 upon the liquidation of an equity method investment made in 2022, the Company's exit from fintech indirect 36 lending in the first quarter of 2026, and the receipt of proceeds heldback from the 2024 sale of mortgage servicing rights. Noninterest Expense. The following tables present a summary of noninterest expense and the dollar and percentage change for the periods stated. For the three months ended (Dollars in thousands) June 30, 2026 June 30, 2025 Change $ Change % Salaries and employee benefits $ 9,028 $ 13,000 $ (3,972 ) (30.6 %) Occupancy and equipment 1,062 1,129 (67 ) (5.9 %) Technology and communication 1,916 2,565 (649 ) (25.3 %) Legal and regulatory filings 477 395 82 20.8 % Advertising and marketing 423 128 295 230.5 % Audit fees 226 459 (233 ) (50.8 %) FDIC insurance 318 1,027 (709 ) (69.0 %) Intangible amortization 191 234 (43 ) (18.4 %) Other contractual services 344 433 (89 ) (20.6 %) Other taxes and assessments 842 955 (113 ) (11.8 %) Other 1,064 1,684 (620 ) (36.8 %) Total noninterest expense $ 15,891 $ 22,009 $ (6,118 ) (27.8 %) For the six months ended (Dollars in thousands) June 30, 2026 June 30, 2025 Change $ Change % Salaries and employee benefits $ 20,085 $ 25,610 $ (5,525 ) (21.6 %) Occupancy and equipment 2,301 2,510 (209 ) (8.3 %) Technology and communication 3,903 5,349 (1,446 ) (27.0 %) Legal and regulatory filings 1,059 834 225 27.0 % Advertising and marketing 1,188 319 869 272.4 % Audit fees 481 1,037 (556 ) (53.6 %) FDIC insurance 738 2,124 (1,386 ) (65.3 %) Intangible amortization 393 478 (85 ) (17.8 %) Other contractual services 546 1,028 (482 ) (46.9 %) Other taxes and assessments 1,670 1,876 (206 ) (11.0 %) Other 2,268 3,795 (1,527 ) (40.2 %) Total noninterest expense $ 34,632 $ 44,960 $ (10,328 ) (23.0 %) As the Company transitioned to a more traditional community banking model and remediated the requirements under the consent order with the Bank's primary regulator, which was terminated in the fourth quarter of 2025, the number of employees decreased from 442 as of December 31, 2024, to 302 as of December 31, 2025, and to 269 as of June 30, 2026, or by 39% and 11%, respectively. As a result, the Company reported lower expenses for salaries and employee benefits and technology and communication costs. Included in salaries and employee benefits expense for the three and six months ended June 30, 2026 were severance costs of $0.4 million and $2.1 million, respectively, compared to $0.3 million and $1.0 million for the same respective periods of 2025. Higher advertising and marketing expenses for the 2026 periods compared to the 2025 periods were the result of marketing campaigns designed to drive growth, which launched in the second half of 2025. The decline in Federal Deposit Insurance Corporation ("FDIC") insurance premiums primarily reflected lower assessment rates for the 2026 periods relative to the 2025 periods. The declines in other noninterest expense during the 2026 periods relative to the 2025 periods were primarily due to lower third-party loan servicing costs and losses on the repurchase of loans previously sold. Income Tax Expense . For the three and six months ended June 30, 2026, the effective income tax rates were 20.5% and 10.9%, respectively, compared to 27.0% and 2.8% for the three and six months ended June 30, 2025, respectively. The effective income tax rate for the first half of 2026 was primarily a result of the Company's marginal pre-tax loss in the period, while the effective income tax rate for the second quarter of 2025 was primarily driven by the potential elimination of deductibility of compensation costs in future taxable periods. The effective income tax rate for the six months ended June 30, 2025 included the effect of a $0.3 million favorable adjustment related to a change in the state tax rate applied to the accumulated unrealized loss on the available for sale securities portfolio. 37 Analysis of Financial Condition Loan Portfolio. The Company makes loans to commercial entities and to individuals. Loan terms vary as to interest rate, repayment, and collateral requirements based on the type of loan and the creditworthiness of the borrower. Credit risk tends to be geographically concentrated in that a majority of the loans are to borrowers located in the markets served by the Company. All loans are underwritten within specific lending policy guidelines that are established to maximize the Company’s profitability within an acceptable level of business risk . The following table presents the Company’s loan portfolio by category of loan and the percentage of loans in each category to total loans as of the dates stated. June 30, 2026 December 31, 2025 (Dollars in thousands) Amount Percent Amount Percent Commercial and industrial $ 276,589 14.9 % $ 282,745 15.2 % Real estate – construction, commercial 54,611 2.9 % 51,738 2.8 % Real estate – construction, residential 28,844 1.6 % 31,772 1.7 % Real estate – commercial 823,378 44.5 % 824,721 44.2 % Real estate – residential 636,830 34.4 % 636,743 34.2 % Real estate – farmland 4,368 0.2 % 4,580 0.2 % Consumer 27,383 1.5 % 32,213 1.7 % Gross loans held for investment 1,852,003 100.0 % 1,864,512 100.0 % Deferred costs, net of loan fees 1,458 1,205 Gross loans held for investment, net of deferred costs 1,853,461 1,865,717 Less: allowance for credit losses (22,039 ) (19,444 ) Net loans $ 1,831,422 $ 1,846,273 Loans held for sale (not included in totals above) $ — $ 14,769 The Company has pledged certain qualifying loans as collateral for borrowing facilities. Commercial and residential mortgages totaling $637.0 million and $695.1 million were pledged with the Federal Home Loan Bank of Atlanta ("FHLB") as of June 30, 2026 and December 31, 2025, respectively. Construction and commercial and industrial loans totaling $45.3 million and $72.8 million as of June 30, 2026 and December 31, 2025, respectively, were pledged with the Federal Reserve Bank of Richmond (“FRB”) Discount Window. The following table presents the Company’s portfolio of commercial real estate loans by property type as of the dates stated. June 30, 2026 December 31, 2025 (Dollars in thousands) Amount Percent Amount Percent Commercial real estate – owner occupied $ 172,904 21.0 % $ 166,683 20.2 % Commercial real estate – non-owner occupied Hospitality 153,105 18.6 % 154,077 18.7 % Multi-family 204,847 24.9 % 217,130 26.3 % Retail 92,245 11.2 % 94,821 11.5 % Office 57,815 7.0 % 55,650 6.7 % Mixed use 47,009 5.7 % 42,886 5.2 % Warehouse and industrial 39,422 4.8 % 40,136 4.9 % Other 56,031 6.8 % 53,338 6.5 % Total real estate – commercial $ 823,378 100.0 % $ 824,721 100.0 % While the Federal Reserve has reduced the target Fed Funds rate by 175 basis points from a recent peak, the current lending environment for commercial real estate (“CRE”) loans has heightened risk due to a higher interest rate environment than had existed when the Company's loans may have been originated. Potential negative impacts may include higher debt service burdens for floating rate loans and fixed rate loans originated in a lower rate environment that reprice or mature, requiring renewal or refinancing. As these loans mature, they may be repriced at higher interest rates leading to increased debt service costs that can strain borrowers' ability to meet payment obligations. In some 38 cases, the higher cost of refinancing may lead to loan defaults, particularly if property cash flows have not increased relatively. Additionally, collateral values overall may be impaired by higher capitalization rates, further complicating refinancing efforts and increasing credit risk to the Bank. Certain CRE collateral types have experienced declining occupancy, demand, and rental rates, which could potentially lead to material declines in property level economics and further weaken borrowers' ability to service their debt. The Bank’s credit administration department led by the Chief Risk Officer and Chief Credit Officer performs periodic analyses of emerging trends by geography and property type where the Bank has larger concentrations by CRE property type. These analyses include all real estate property types and geographic markets represented in the loan portfolio and are provided to the Bank's board of directors to assess whether the CRE lending strategy and risk appetite continue to be appropriate, considering changes in local market conditions and the Bank’s exposure to collateral type concentrations. Also, concentration limits by real estate collateral type are approved and monitored by the Bank's board of directors. As of June 30, 2026, the Bank was in compliance with board approved limits. The following table presents the remaining maturities, based on contractual maturity, by loan type and by rate type (variable or fixed), as of June 30, 2026. Loans shown in the one year or less column are term loans that have a stated maturity date within twelve months. Variable rate loans reprice at various intervals (monthly or quarterly) and the rate is tied to a published index such as the Fed Prime rate, U.S. Treasury bond indices, or the Secured Overnight Funding Rate. Variable rate Fixed rate (Dollars in thousands) Total Maturities One Year or Less Total 1-5 years 5-15 years More than 15 years Total 1-5 years 5-15 years More than 15 years Commercial and industrial $ 276,589 $ 43,163 $ 127,097 $ 97,546 $ 18,876 $ 10,675 $ 106,329 $ 40,771 $ 47,355 $ 18,203 Real estate – construction, commercial 54,611 8,436 37,937 30,119 3,528 4,290 8,238 7,668 570 — Real estate – construction, residential 28,844 20,858 1,547 1,228 7 312 6,439 5,194 — 1,245 Real estate – commercial 823,378 134,733 403,031 107,393 126,237 169,401 285,614 200,362 78,245 7,007 Real estate – residential 636,830 14,094 373,932 31,383 62,137 280,412 248,804 36,750 24,834 187,220 Real estate – farmland 4,368 1,536 1,769 — 1,504 265 1,063 260 110 693 Consumer 27,383 1,719 3,957 3,930 27 — 21,707 19,349 2,358 — Gross loans $ 1,852,003 $ 224,539 $ 949,270 $ 271,599 $ 212,316 $ 465,355 $ 678,194 $ 310,354 $ 153,472 $ 214,368 Allowance for Credit Losses . In determining the adequacy of the Company’s ACL, management makes estimates based on facts available at the time the ACL is determined. Such estimation requires significant judgment at the time made. Management believes that the Company’s ACL was adequate as of June 30, 2026 and December 31, 2025. There can be no assurance, however, that adjustments to the ACL will not be required in the future. Changes in the economic assumptions underlying management’s estimates and judgments, adverse developments in the economy, on a national basis or in the Company’s market area, and changes in the circumstances of particular borrowers are criteria, among others that could increase the level of the ACL required, resulting in charges to the provision for credit losses for loans. In addition, bank regulatory agencies periodically review the Bank's ACL and may require an increase in the ACL or the recognition of further loan charge-offs, based on their judgment of the facts at the time of their review that may differ than that of management. The following tables present an analysis of the change in the ACL by loan type as of and for the periods stated. For the three months ended June 30, 2026 (Dollars in thousands) Commercial and industrial Real estate – construction, commercial Real estate – construction, residential Real estate – commercial Real estate – residential Real estate – farmland Consumer Total ACL, beginning of period $ 3,846 $ 655 $ 208 $ 6,276 $ 7,602 $ 12 $ 585 $ 19,184 Provision for (recovery of) credit losses - loans 3,365 175 46 9 (307 ) (1 ) 213 3,500 Charge-offs (1,845 ) — (15 ) (304 ) (132 ) — (381 ) (2,677 ) Recoveries 1,806 — — 41 31 — 154 2,032 Net charge-offs (39 ) — (15 ) (263 ) (101 ) — (227 ) (645 ) ACL, end of period $ 7,172 $ 830 $ 239 $ 6,022 $ 7,194 $ 11 $ 571 $ 22,039 Ratio of net charge-offs to average loans outstanding -0.01 % 0.00 % -0.06 % -0.03 % -0.02 % 0.00 % -0.80 % -0.04 % For the three months ended June 30, 2025 (Dollars in thousands) Commercial and industrial Real estate – construction, commercial Real estate – construction, residential Real estate – commercial Real estate – residential Real estate – farmland Consumer Total ACL, beginning of period $ 5,726 $ 1,992 $ 552 $ 5,998 $ 8,171 $ 18 $ 669 $ 23,126 Provision for (recovery of) credit losses - loans 147 (720 ) (154 ) (119 ) (69 ) (3 ) 218 (700 ) Charge-offs (2,537 ) — — — (107 ) — (448 ) (3,092 ) Recoveries 2,510 — — — 6 — 124 2,640 Net charge-offs (27 ) — — — (101 ) — (324 ) (452 ) ACL, end of period $ 5,846 $ 1,272 $ 398 $ 5,879 $ 8,001 $ 15 $ 563 $ 21,974 Ratio of net charge-offs to average loans outstanding -0.01 % 0.00 % 0.00 % 0.00 % -0.01 % 0.00 % -0.78 % -0.02 % 39 For the six months ended June 30, 2026 (Dollars in thousands) Commercial and industrial Real estate – construction, commercial Real estate – construction, residential Real estate – commercial Real estate – residential Real estate – farmland Consumer Total ACL, beginning of period $ 4,337 $ 678 $ 264 $ 5,959 $ 7,655 $ 14 $ 537 $ 19,444 Provision for (recovery of) credit losses - loans 2,393 152 (10 ) 326 (361 ) (3 ) 403 2,900 Charge-offs (3,856 ) — (15 ) (304 ) (132 ) — (633 ) (4,940 ) Recoveries 4,298 — — 41 32 — 264 4,635 Net recoveries (charge-offs) 442 — (15 ) (263 ) (100 ) — (369 ) (305 ) ACL, end of period $ 7,172 $ 830 $ 239 $ 6,022 $ 7,194 $ 11 $ 571 $ 22,039 Ratio of net recoveries (charge-offs) to average loans outstanding 0.15 % 0.00 % -0.06 % -0.03 % -0.02 % 0.00 % -1.26 % -0.02 % For the six months ended June 30, 2025 (Dollars in thousands) Commercial and industrial Real estate – construction, commercial Real estate – construction, residential Real estate – commercial Real estate – residential Real estate – farmland Consumer Total ACL, beginning of period $ 5,767 $ 2,057 $ 540 $ 5,963 $ 7,933 $ 18 $ 745 $ 23,023 (Recovery of) provision for credit losses - loans (42 ) (785 ) (142 ) (359 ) 184 (3 ) 447 (700 ) Charge-offs (4,661 ) — — (63 ) (123 ) — (1,035 ) (5,882 ) Recoveries 4,782 — — 338 7 — 406 5,533 Net recoveries (charge-offs) 121 — — 275 (116 ) — (629 ) (349 ) ACL, end of period $ 5,846 $ 1,272 $ 398 $ 5,879 $ 8,001 $ 15 $ 563 $ 21,974 Ratio of net recoveries (charge-offs) to average loans outstanding 0.03 % 0.00 % 0.00 % 0.04 % -0.02 % 0.00 % -1.47 % -0.02 % Of the $2.7 million and $3.1 million of loan charge-offs recognized during the three months ended June 30, 2026 and 2025, respectively, $1.8 million and $2.4 million for the same respective periods were attributable to business and consumer credit cards originated through a partnership with a third-party company. Under this arrangement, the third-party provides the Bank limited credit loss protection. Accordingly, the Bank records charge-offs based on the credit card portfolio activity and recognizes recoveries upon receipt of payments under the credit loss protection agreement, which fully offset these charge-offs during the same respective periods. Of the $4.9 million and $5.9 million of loan charge-offs recognized during the six months ended June 30, 2026 and 2025, respectively, $3.3 million and $4.3 million for the same respective periods were attributable to this third-party arrangement. The Bank received payments under the credit loss protection agreement that fully offset these charge-offs during the respective periods. Since the inception of this partnership in early 2023, the Bank has not incurred any net credit losses under this program. The ACL includes specific reserves for individually evaluated loans and a general allowance applicable to loans pooled by loan categories; however, management has allocated the ACL by loan type to provide an indication of the relative risk characteristics of the loan portfolio. The allocation is an estimate and should not be interpreted as an indication that charge-offs will occur in these amounts or that the allocation indicates future trends, and does not restrict the usage of the allowance for any specific loan or category. The following table presents the allocation of the ACL by loan category and the percentage of loans in each category to total loans as of the dates stated. June 30, 2026 December 31, 2025 (Dollars in thousands) ACL Amount % of Loans ACL Amount % of Loans Commercial and industrial $ 7,172 14.9 % $ 4,337 15.2 % Real estate – construction, commercial 830 2.9 % 678 2.8 % Real estate – construction, residential 239 1.6 % 264 1.7 % Real estate – commercial 6,022 44.5 % 5,959 44.2 % Real estate – residential 7,194 34.4 % 7,655 34.2 % Real estate – farmland 11 0.2 % 14 0.2 % Consumer 571 1.5 % 537 1.7 % Total $ 22,039 100.0 % $ 19,444 100.0 % 40 Nonperforming Assets. The following table presents a summary of nonperforming assets and various measures as of the dates stated. (Dollars in thousands) June 30, 2026 December 31, 2025 Nonaccrual loans held for investment $ 28,629 $ 20,605 Loans past due 90 days and still accruing 2,551 3,158 Total nonperforming loans $ 31,180 $ 23,763 Other real estate owned ("OREO") 1,601 1,683 Total nonperforming assets $ 32,781 $ 25,446 Loans held for investment $ 1,853,461 $ 1,865,717 Total assets $ 2,327,317 $ 2,432,589 ACL on loans held for investment $ 22,039 $ 19,444 ACL to loans held for investment 1.19 % 1.04 % ACL to nonaccrual loans 76.98 % 94.37 % ACL to nonperforming loans 70.68 % 81.82 % Nonaccrual loans to loans held for investment 1.54 % 1.10 % Nonperforming loans to loans held for investment 1.68 % 1.27 % Nonperforming loans to total assets 1.34 % 0.98 % Nonperforming assets to total assets 1.41 % 1.05 % Loans are generally placed into nonaccrual status when they are past due 90 days or more as to either principal or interest or when, in the opinion of management, the collection of principal and/or interest is in doubt. A loan remains in nonaccrual status until the loan is current as to payment of both principal and interest or past due less than 90 days and the borrower demonstrates the ability to pay and remain current for a sustained period of time, generally six months, or when the loan otherwise becomes well-secured and in the process of collection. When cash payments are received, they are applied to principal first, then to accrued interest. It is the Company's policy not to record interest income on nonaccrual loans until the loan has returned to accrual status. In certain instances, accruing loans that are past due 90 days or more as to principal or interest may not be placed on nonaccrual status, if the Company determines that the loans are well-secured and are in the process of collection. The changes in nonperforming loans, the ACL, and the related ratios above at June 30, 2026 from December 31, 2025 were primarily attributable to loans from a single out-of-market relationship originated prior to 2024 totaling $11.4 million. The loans, classified as commercial and industrial, remained current through May 2026 but became delinquent when the borrower failed to make its June 2026 payment. Consequently, the loans were placed on nonaccrual at June 30, 2026. Subsequent to June 30, 2026, the borrower reported that its business had ceased operations. In light of this development and management's estimate of expected credit losses, the Company established a reserve of approximately $2.9 million, as of June 30, 2026. The Company believes the credit issues affecting this borrower are unique and not systematic to the Company's overall portfolio. OREO generally includes properties that have been substantively repossessed or acquired in complete or partial satisfaction of debt. Such properties, which are held for resale, are initially stated at fair value, including a reduction for the estimated selling expenses, which becomes the new carrying value. In limited cases, the Bank may receive non-cash consideration, including equity interests, pursuant to negotiated or court-approved settlements with borrowers. The fair value of nonmarketable equity interests are generally estimated using a discounted cash flow analysis based on management’s assumptions regarding expected future cash flows, timing, and a risk adjusted discount rate. These assets, which are reported with OREO on the Company's consolidated balance sheets, are subsequently carried at the lower of cost or fair value, less estimated costs to sell, and are periodically evaluated for impairment. In subsequent periods, such properties are stated at the lower of the restated carrying value or fair value. As of both June 30, 2026 and December 31, 2025, the Company's nonmarketable equity interest assets totaled $0.2 million. As of June 30, 2026 and December 31, 2025, OREO included a property with a carrying value of $1.4 million that served as collateral for a government guaranteed loan. The guaranteed portion of the loan (90%) is owned by the U.S. Small Business Administration ("SBA"), and the Company is obligated to remit to the SBA its share of the liquidation proceeds upon the sale of the property. Accordingly, the Company recorded a $1.2 million liability, reported in other liabilities on the Company's consolidated balance sheets as of both June 30, 2026 and December 31, 2025, representing the SBA's contractual interest in the expected proceeds from the sale of the property. 41 Investment Securities. The investment portfolio is used as a source of interest income, credit risk diversification, and liquidity, as well as to manage interest rate sensitivity and provide collateral for borrowings. Securities in the investment portfolio classified as securities available for sale ("AFS") may be sold in response to changes in market interest rates, securities’ prepayment risk, liquidity needs, and other similar factors, and are carried at estimated fair value. The fair value of the Company’s investment securities AFS portfolio was $317.0 million as of June 30, 2026, a decrease of $15.9 million from $332.9 million at December 31, 2025. The decline in AFS securities was due to bonds called or matured ($9.6 million), portfolio amortization ($16.4 million), and fair value adjustments ($1.0 million), partially offset by bond purchases ($11.1 million). As a result of elevated market interest rates, the Company’s portfolio of AFS securities had net unrealized losses of approximately $41.3 million and $40.3 million as of June 30, 2026 and December 31, 2025, respectively, of which approximately 85% and 84%, respectively, were related to securities backed by U.S. government agencies. As of June 30, 2026 and December 31, 2025, the majority of the investment securities portfolio consisted of securities rated investment grade by a leading rating agency. Investment grade securities are judged to have a low risk of default, to be of the best quality, and to carry the smallest degree of investment risk. At June 30, 2026 and December 31, 2025, securities with a fair value of $163.8 million and $174.3 million, respectively, were pledged to secure the Bank’s borrowing facility with the FHLB. The Company reviews its investment securities AFS portfolio for potential credit losses at least quarterly. Investment securities AFS with unrealized losses are generally a result of pricing changes due to changes in the interest rate environment and not as a result of permanent credit impairment. The Company does not intend to sell nor does it believe that it will be required to sell any of its impaired securities prior to the recovery of the amortized cost. Due to these factors, no ACL has been recognized for AFS securities as of both June 30, 2026 and December 31, 2025. Restricted equity investments consisted of stock in the FHLB (carrying basis $8.9 million and $9.1 million at June 30, 2026 and December 31, 2025, respectively), FRB stock (carrying value of $7.4 million and $9.4 million as of June 30, 2026 and December 31, 2025, respectively), and stock in the Company’s correspondent bank (carrying value of $0.5 million at both June 30, 2026 and December 31, 2025). Restricted equity investments are carried at cost. The Company has various other equity investments, including an investment in a fintech company and limited partnerships, totaling $5.0 million and $4.9 million as of June 30, 2026 and December 31, 2025, respectively. The Company also holds other investments, primarily in early-stage focused investment funds, which totaled $18.0 million and $20.8 million as of June 30, 2026 and December 31, 2025, respectively, and are reported in other investments on the consolidated balance sheets. During the second quarter of 2026, the Company recognized a $0.6 million loss upon the liquidation of an investment made in 2022. The loss reflects the difference between the investment’s carrying value and the distribution received upon the final liquidation of the investment subsequent to June 30, 2026. As of June 30, 2026 and December 31, 2025, the carrying value of this investment was $3.2 million and $6.3 million, respectively. Over the period it was held, the investment generated cumulative pre-tax income of approximately $1.9 million. The Company had no investment securities classified as held to maturity as of June 30, 2026 or December 31, 2025. The following table presents the amortized cost of the investment portfolio by contractual maturities, as well as the weighted average yields for each of the maturity ranges as of and for the period stated. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. June 30, 2026 Within One Year One to Five Years Five to Ten Years Over Ten Years (Dollars in thousands) Amortized Cost Weighted Average Yield Amortized Cost Weighted Average Yield Amortized Cost Weighted Average Yield Amortized Cost Weighted Average Yield Total Amortized Cost Securities available for sale Mortgage backed securities $ 25 — $ 6,095 1.98 % $ 16,742 2.41 % $ 183,516 2.49 % $ 206,378 U.S. Treasury and agencies 12,499 0.95 % 31,426 1.34 % 31,865 2.32 % 87 4.24 % 75,877 State and municipal 824 3.56 % 15,620 2.37 % 27,752 2.32 % 3,674 3.48 % 47,870 Corporate bonds 2,500 5.83 % 5,500 7.61 % 19,655 4.11 % 500 4.00 % 28,155 Total $ 15,848 $ 58,641 $ 96,014 $ 187,777 $ 358,280 Deposits. The principal sources of funds for the Company are deposits, including transaction accounts (demand and money market accounts), time deposits, and savings accounts, of customers in the Bank’s primary geographic market 42 area. Such customers provide the Bank a source of fee income and cross-marketing opportunities and are generally a lower cost source of funding. Brokered deposit balances are sourced through intermediaries and are an unsecured source of funding for the Bank. Brokered deposits were added throughout 2023 and early 2024 to enhance liquidity and in anticipation of the exit of the Company's fintech BaaS deposit operations. The Bank has a liquidity management program, with oversight of the Bank’s asset and liability committee (the “ALCO”), that sets forth guidelines and monitors for the desired maximum level of brokered deposits, which is 20.0% of total deposits. In recent quarters, the Company has reduced its level of brokered deposits by sourcing non-brokered deposits and with cash flows from the loan portfolio. Total deposits decreased $48.8 million from $1.91 billion as of December 31, 2025 to $1.86 billion as of June 30, 2026, as: • Brokered deposits decreased $52.9 million from $238.7 million, or 12.5% of total deposits, as of December 31, 2025 to $185.8 million, or 10.0% of total deposits, as of June 30, 2026; and • Deposits, excluding brokered deposits, increased $4.1 million from $1.67 billion as of December 31, 2025 to $1.68 billion as of June 30, 2026. Estimated uninsured deposits totaled approximately $430.3 million as of June 30, 2026, or 23.1% of total deposits, compared to $397.0 million, or 20.8% of total deposits, as of December 31, 2025. Uninsured deposit amounts are based on estimates as of the reported dates. The following table presents a summary of average deposits and the weighted average rate paid for the periods stated. The decline in average balances for noninterest-bearing demand accounts reflects the exit of fintech-related deposits. For the six months ended June 30, 2026 June 30, 2025 (Dollars in thousands) Average Balance Average Rate Average Balance Average Rate Noninterest-bearing demand $ 392,313 — $ 449,743 — Interest-bearing: Demand 231,271 1.09 % 242,640 1.03 % Savings 101,506 0.32 % 102,512 0.28 % Money market 360,788 2.56 % 379,757 2.70 % Time 802,868 3.81 % 947,238 4.32 % Total interest-bearing $ 1,496,433 $ 1,672,147 Total average deposits $ 1,888,746 $ 2,121,890 The following table presents maturities of time deposits for certificates of deposits of $250 thousand or greater as of the dates stated. (Dollars in thousands) June 30, 2026 December 31, 2025 Maturing in: 3 months or less $ 58,518 $ 38,475 Over 3 months through 6 months 36,972 33,385 Over 6 months through 12 months 36,905 49,776 Over 12 months 48,686 33,676 $ 181,081 $ 155,312 The Company's brokered deposits were issued in denominations of $1 thousand each under master certificates, and therefore are excluded from the table above. Borrowings. The Company uses short-term and long-term borrowings primarily from the FHLB and FRB, to fund assets and operations. The following table presents information regarding the balances of borrowings as of June 30, 43 2026 and December 31, 2025, and the average balances for the six months ended June 30, 2026 and year ended December 31, 2025. The weighted average rate was 3.84% and 3.87% for the same periods, respectively. (Dollars in thousands) Period-End Balance Highest Month-End Balance Average Balance FHLB borrowings $ 150,000 $ 150,000 $ 150,000 As of June 30, 2026, FHLB advances were secured by collateral consisting of a blanket lien on qualifying pledged loans in the Company’s residential, multifamily, and commercial real estate mortgage loan portfolios with a lendable value of $366.3 million, as well as selected pledged investment securities with a lendable value of $155.6 million. The FRB Discount Window borrowing facility was secured by qualifying pledged construction and commercial and industrial loans with a lendable value totaling $45.3 million as of June 30, 2026. The Company had $14.7 million of subordinated notes, net, outstanding as of both June 30, 2026 and December 31, 2025. Prior to June 1, 2025, the Company's subordinated notes had been comprised of a $15 million issuance in May 2020 maturing June 1, 2030 (the “2030 Note”) and a $25 million issuance in October 2019 maturing October 15, 2029 (the “2029 Notes”). On June 1, 2025, the Company completed the $15.0 million redemption of the 2030 Note. The interest rate on the 2030 Note was 6.0% up to the redemption date. Interest expense on the 2030 Note was $0.2 million and $0.4 million for the three and six months ended June 30, 2025, respectively, prior to the redemption date. On July 15, 2025, the Company completed a $10.0 million partial redemption of the 2029 Notes. As of June 30, 2026, the interest rate on the 2029 Notes, which resets quarterly, was 8.01%. As of June 30, 2026, the net carrying amount of the 2029 Notes was $14.7 million, inclusive of a $0.2 million purchase accounting adjustment. For the three months ended June 30, 2026 and 2025, the effective interest rate on the 2029 Notes was 7.43% and 7.48%, respectively, inclusive of the amortization of the purchase accounting adjustment (premium). For the six months ended June 30, 2026 and 2025, the effective interest rate on the 2029 Notes was 7.68% and 7.44%, respectively, inclusive of the amortization of the purchase accounting adjustment (premium). Subsequent to June 30, 2026, on July 15, 2026, the Company redeemed the remainder of the 2029 Notes totaling $14.7 million, inclusive of a $0.2 million purchase accounting adjustment (premium), plus accrued and unpaid interest totaling $0.3 million. Upon the completion of this redemption, the Company had no outstanding subordinated notes. Liquidity . Liquidity is essential to the Company’s business. The Company’s liquidity could be impaired by unforeseen outflows of cash, including deposits, or the inability to access the capital and/or brokered funding markets. This situation may arise due to circumstances that the Company may be unable to control, such as general market disruption, negative views about the Company or the financial services industry generally, or an operational problem that affects the Company or a third party. The Company’s ability to borrow from other financial institutions on favorable terms or at all could be adversely affected by disruptions in the markets in which they operate or other events. Deposits are the primary source of the Company’s liquidity. Cash flows from amortizing or maturing assets also provide funding to meet the liquidity needs of the Company. Deposits are sourced from the Bank’s customers and, as needed, through brokered deposit markets. The brokered deposit markets are accessed through brokers or through the IntraFi Network (“IntraFi”), of which the Bank is a member. IntraFi facilitates the Bank attaining brokered deposits via an on-line marketplace. The Bank also utilizes IntraFi's reciprocal deposit services to offer its high-value customers access to FDIC insurance through IntraFi's network of banks. The Company has established a formal liquidity contingency plan that provides guidelines for liquidity management. Pursuant to the Company’s liquidity contingency plan, liquidity needs are forecasted based on anticipated changes in the balance sheet. In this forecast, the Company expects to maintain a liquidity cushion. Management then stress tests the Company’s liquidity position under several different stress scenarios, from moderate to severe. Guidelines for the forecasted liquidity cushion and for liquidity cushions for each stress scenario have been established and are reviewed by the ALCO. Management also monitors the Company’s liquidity position on a day-to-day basis through daily cash monitoring and short- and long-term cash flow forecasting and believes its sources of liquidity are adequate to conduct the business of the Company. 44 The following table presents information on the Company's available sources of liquidity as of the date stated. (Dollars in thousands) Capacity Less: Outstanding Borrowings Available Balance Cash and due from banks $ 61,691 Fed funds sold 2,353 Unpledged securities available for sale 153,178 Total $ 217,222 Borrowings FHLB $ 521,936 $ 220,060 (1) $ 301,876 FRB 45,314 — 45,314 Unsecured line of credit 10,000 — 10,000 Total $ 577,250 $ 220,060 $ 357,190 Available liquidity as of June 30, 2026 $ 574,412 (1) Outstanding borrowings are comprised of advances of $150.0 million and letters of credit totaling $70.1 million, of which $70.0 million served as collateral for public deposits with the Treasury Board of the Commonwealth of Virginia. Estimated uninsured deposits at June 30, 2026 were approximately $430.3 million. In the unlikely event that uninsured deposit balances leave the Bank over a short period of time, management could satisfy the demand with its available liquidity. Capital. Capital adequacy is an important measure of financial stability and performance. The Company’s objectives are to maintain a level of capitalization that is sufficient to support the Company's strategic objectives. Banks and bank holding companies are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, possibly additional discretionary, actions by regulators that, if undertaken, could have a direct material effect on the Company's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, financial institutions must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. A financial institution's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Banks must hold a capital conservation buffer of 2.50% above the adequately capitalized risk-based capital ratios for all ratios except the Tier 1 leverage ratio. If a banking organization dips into its capital conservation buffer, it is subject to limitations on certain activities, including payment of dividends, share repurchases, and discretionary compensation to certain officers. Additionally, regulators may place certain restrictions on dividends paid by banks. Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized; although, these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. The Company adopted Accounting Standards Codification 326, Financial Instruments - Credit Losses (referred to herein as "current expected credit losses" or "CECL") effective January 1, 2023. Federal and state banking regulations allow financial institutions to irrevocably elect to phase-in the after-tax cumulative effect adjustment to retained earnings (the "CECL Transitional Amount") over a three-year period. The three-year phase-in of the CECL Transitional Amount to regulatory capital was 25%, 50%, and 25% in 2023, 2024, and 2025, respectively. The Bank made this irrevocable election effective with its first quarter 2023 call report. The CECL Transitional Amount was $8.1 million and was fully phased in during the first quarter of 2026 as a reduction to the regulatory capital amounts and ratios. The 45 full $8.1 million reduction is reflected as of June 30, 2026, compared to a $6.1 million reduction as of December 31, 2025. The following tables present the capital ratios to which banks are subject to be adequately and well capitalized, as well as the capital and capital ratios for the Bank as of the dates stated. Adequately capitalized ratios include the conservation buffer, if applicable. June 30, 2026 Actual For Capital Adequacy Purposes To Be Well Capitalized (Dollars in thousands) Amount Ratio Amount Ratio Amount Ratio Total risk based capital (to risk-weighted assets) Blue Ridge Bank, N.A. $ 287,818 16.36 % $ 184,724 10.50 % $ 175,928 10.00 % Tier 1 capital (to risk-weighted assets) Blue Ridge Bank, N.A. $ 265,805 15.10 % $ 149,625 8.50 % $ 140,824 8.00 % Common equity tier 1 capital (to risk-weighted assets) Blue Ridge Bank, N.A. $ 265,805 15.10 % $ 123,221 7.00 % $ 114,419 6.50 % Tier 1 leverage (to average assets) Blue Ridge Bank, N.A. $ 265,805 11.23 % $ 94,677 4.00 % $ 118,346 5.00 % December 31, 2025 Actual For Capital Adequacy Purposes To Be Well Capitalized (Dollars in thousands) Amount Ratio Amount Ratio Amount Ratio Total risk based capital (to risk-weighted assets) Blue Ridge Bank, N.A. $ 339,784 19.16 % $ 186,188 10.50 % $ 177,322 10.00 % Tier 1 capital (to risk-weighted assets) Blue Ridge Bank, N.A. $ 322,320 18.18 % $ 150,724 8.50 % $ 141,858 8.00 % Common equity tier 1 capital (to risk-weighted assets) Blue Ridge Bank, N.A. $ 322,320 18.18 % $ 124,125 7.00 % $ 115,259 6.50 % Tier 1 leverage (to average assets) Blue Ridge Bank, N.A. $ 322,320 13.04 % $ 98,859 4.00 % $ 123,574 5.00 % The decline in the Bank's capital amounts and capital ratios from December 31, 2025 was primarily attributable to the special cash dividend declared on March 30, 2026. Commitments and Contingencies 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 and involve the same credit risk and evaluation as making a loan to a customer. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer’s credit worthiness, in a manner similar to that if underwriting a loan. As of June 30, 2026 and December 31, 2025, the Company had outstanding loan commitments of $285.5 million and $247.2 million, respectively. Of these amounts, $35.7 million and $35.2 million were unconditionally cancelable at the sole discretion of the Company as of the same respective dates. Conditional commitments are issued by the Company in the form of financial stand-by letters of credit, which guarantee payment to the underlying beneficiary (i.e., third party) if the customer fails to meet its designated financial obligation. As of June 30, 2026 and December 31, 2025, commitments under outstanding financial stand-by letters of credit totaled $9.7 million and $6.3 million, respectively. The credit risk of issuing stand-by letters of credit can be greater than the risk involved in extending loans to customers. For the three and six months ended June 30, 2026, the Company recorded a $0.6 million provision for credit losses for unfunded commitments due to an increase in committed but unfunded lines of credit to commercial construction borrowers. The reserve for unfunded commitments, which is included in other liabilities on the consolidated balance sheets, was $1.4 million and $0.8 million as of June 30, 2026 and December 31, 2025, respectively. The Company has investments in various partnerships and limited liability companies. Pursuant to these investments, the Company commits to an investment amount that may be fulfilled in future periods. At June 30, 2026 46 and December 31, 2025, the Company had future commitments outstanding totaling $4.6 million and $4.9 million, respectively, related to these investments. Interest Rate Risk Management As a financial institution, the Company is exposed to various business risks, including interest rate risk. Interest rate risk is the risk to earnings and value arising from volatility in market interest rates. Interest rate risk arises from timing differences in the repricing and cash flows of interest-earning assets and interest-bearing liabilities, changes in the expected cash flows of assets and liabilities arising from embedded options, such as borrowers' ability to prepay loans and depositors' ability to redeem certificates of deposit before maturity, changes in the shape of the yield curve where interest rates increase or decrease in a nonparallel fashion, and changes in spread relationships between different yield curves, such as U.S. Treasuries and other market-based index rates. The Company’s goal is to maximize net interest income without incurring excessive interest rate risk. Management of net interest income and interest rate risk must be consistent with the level of capital and liquidity that the Bank maintains. The Company manages interest rate risk through the ALCO comprised of members of management, with oversight by a committee of its board of directors. The ALCO is responsible for monitoring the Company’s interest rate risk in conjunction with liquidity and capital management, pursuant to policy guidelines approved by the board of directors. The Company employs an independent firm to model its interest rate sensitivity that uses a net interest income simulation model as its primary tool to measure interest rate sensitivity. Assumptions for modeling are developed based on expected activity in the balance sheet. For maturing assets, assumptions are created for the redeployment of these assets. For maturing liabilities, assumptions are developed for the replacement of these funding sources. Assumptions are also developed for assets and liabilities that could reprice during the modeled time period. These assumptions also cover how management expects rates to change on non-maturity deposits, such as demand, money market, and savings accounts, as well as certificates of deposit. Based on inputs that include the current balance sheet, the current level of interest rates, and the developed assumptions, the model produces an expected level of net interest income assuming that market rates remain unchanged. This is considered the base case. The model then simulates what net interest income would be based on specific changes in interest rates. The rate simulations are performed for a two-year period and include rapid rate changes of down 100 basis points to 400 basis points and up 100 basis points to 400 basis points. The results of these simulations are then compared to the base case. The following table presents the estimated change in net interest income under various rate change scenarios as of the date presented. The scenarios assume rate changes occur instantaneously and in a parallel manner, which means the changes are the same on all points of the rate curve. Estimated changes set forth below are dependent on material assumptions, such as those previously discussed. June 30, 2026 Instantaneous Parallel Rate Shock Scenario Change in Net Interest Income - Year 1 Change in Net Interest Income - Year 2 Change in interest rates: +400 basis points $ 5,091 7.0 % $ 9,821 12.3 % +300 basis points 3,850 5.3 % 7,558 9.5 % +200 basis points 2,624 3.6 % 5,238 6.6 % +100 basis points 1,360 1.9 % 2,768 3.5 % Base case -100 basis points (1,729 ) (2.4 %) (3,569 ) (4.5 %) -200 basis points (3,250 ) (4.5 %) (7,095 ) (8.9 %) -300 basis points (3,885 ) (5.4 %) (9,381 ) (11.8 %) -400 basis points (4,686 ) (6.5 %) (12,038 ) (15.1 %) Stress testing the balance sheet and net interest income using instantaneous parallel rate shock movements in the yield curve is a regulatory and banking industry practice. However, these stress tests may not represent a realistic forecast of future interest rate movements in the yield curve. In addition, instantaneous parallel rate shock modeling is not a predictor of actual future performance of earnings. It is a financial metric used to manage interest rate risk and track the movement of the Company’s interest rate risk position over a historical time frame for comparison purposes. The Company's AFS securities portfolio is reported at fair value, with the unrealized gain or loss representing the difference in amortized cost and fair value reported net of tax as a component of shareholders' equity. Changes in 47 market interest rates affect the valuation of the securities portfolio, as market interest rates at reporting dates may differ than those interest rates in effect when the securities were purchased. The Company does not intend to sell, nor does it believe it will be required to sell the AFS securities; therefore, any unrealized gains or losses in the Company's AFS securities portfolio are deemed temporary. Any unrealized gains or losses for individual securities will diminish as the securities reach maturity. The asset and liability repricing characteristics of the Company’s assets and liabilities will have a significant impact on its future interest rate risk profile. Item 3. Quantitative and Qualitati ve Disclosures about Market Risk This information is incorporated herein by reference to the information in section "Interest Rate Risk Management" within Part I, Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations" of this Form 10-Q.