What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-08-06 compared with 2026-05-06 · 259 added, 174 removed, 583 unchanged (43% of the section changed)

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Such forward-looking statements are inherently subject to many uncertainties in the Company’s operations and business environment.

Factors that could affect actual results or outcomes include the matters described under the caption “Risk Factors” in Item 1A of our annual report on Form 10-K for the year ended December 31, 2025, filed with the SEC on March 5, 2026, (“2025 10-K”), and the following:

• conditions in the financial markets and economic conditions generally;

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• public company reporting obligations;

• costs and risks associated with responding to actions of activist stockholders;

• changes in federal or state tax laws;

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The forward-looking statements made herein are only made as of the date of this filing and the Company undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances occurring after the date of this report.

The following discussion sets forth management’s discussion and analysis of our consolidated financial condition as of March 31, 2026, and our consolidated results of operations for the three months ended March 31, 2026, compared to the same period in the prior fiscal year ended March 31, 2025.

The following discussion sets forth management’s discussion and analysis of our consolidated financial condition as of June 30, 2026, and our consolidated results of operations for the three and six months ended June 30, 2026, compared to the same period in the prior fiscal year ended June 30, 2025.

This discussion should be read in conjunction with the interim consolidated financial statements and the condensed notes thereto included with this report and with Management’s Discussion and Analysis of Financial Condition and Results of Operations and the financial statements and notes related thereto included in our 2025 10-K.

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PERFORMANCE SUMMARY

We reported net income of $3.8 million or $0.39 per diluted share for the three months ended March 31, 2026, compared to net income of $3.2 million or $0.32 per diluted share for the three months ended March 31, 2025, respectively.

The following is a summary of some of the significant factors that affected our operating results for the three months ended March 31, 2026, and March 31, 2025.

Compared to the first quarter of 2025, the first quarter of 2026 net interest income increased $1.4 million.

The first quarter 2026 increase from the same period in 2025 was largely due to:

(1) a 20 basis point increase in loan yields due to new loan originations and existing loans repricing at higher rates;

and (2) a 28 basis point decrease in deposits costs;

(3) a reduction in other borrowings, largely due to the redemption of subordinated debt on September 1, 2025, partially offset by a lower average balance of loans with growth in lower yielding interest-bearing cash.

We reported net income of $1.1 million and $4.9 million, or $0.11 and $0.50 per diluted share for the three and six months ended June 30, 2026, compared to net income of $3.3 million and $6.5 million, or $0.33 and $0.65 per diluted share for the three and six months ended June 30, 2025, respectively.

The following is a summary of some of the significant factors that affected our operating results for the three and six months ended June 30, 2026, and June 30, 2025.

Compared to the second quarter of 2025, the second quarter of 2026 net interest income increased $0.2 million.

The second quarter of 2026 increase from the same period in 2025 was largely due to:

(1) a $0.7 million decrease in interest expense due to lower deposit costs;

(2) the impact of the September 2025 subordinated debt redemption;

and (3) the impact of higher portfolio yields which was partially offset by:

(1) a $0.5 million decrease in interest income due to $1.1 million of loan payoff income recognized in the second quarter of 2025;

(2) the impact of higher nonaccrual loan balances;

and (3) the repurchase of delinquent government loans in the second quarter of 2026.

The total provision for credit losses for the second quarter ended June 30, 2026, was $4.325 million compared to a provision for credit losses of $1.350 million for the quarter ended June 30, 2025.

The second quarter of 2026 provision was largely due to:

(1) a net increase of $3.1 million in specific reserves on nonaccrual loans to $6.3 million and (2) charge-offs of $1.4 million.

The second quarter of 2025 provision was largely due to:

(1) the impact of three 30-89 days delinquent commercial relationships resulting in a $0.7 million provision;

(2) the impact of modestly worsening macro-economic assumptions used by our third party provider of $0.3 million;

(3) provision on new loans with longer contractual life outpacing previously established provisions on prepaying and maturing loans of $0.15 million;

and (4) an increase in off-balance sheet commitments for new construction loan originations of $0.2 million.

Non-interest income decreased $0.2 million in the second quarter of 2026, compared to the second quarter of 2025, primarily due to lower gains on the sale of loans of $0.3 million.

Non-interest expense decreased $0.2 million in the second quarter of 2026 from $10.8 million in the second quarter of 2025.

The decrease was primarily due to lower compensation costs and lower data processing costs.

Provision for income taxes decreased to $0.14 million in the second quarter of 2026, from $0.78 million in the second quarter of 2025, primarily due to lower pre-tax income and a lower effective tax rate.

For the six months ended June 30, 2026, net interest income increased $1.6 million from the same period in 2025.

The impact of higher loan portfolio yields and lower deposit interest expense in the first quarter of 2026 compared to the first quarter of 2025 were the primary reasons for the change along with the second quarter of 2026 changes discussed above.

The total provision for credit losses for the six months ended June 30, 2026, was $5.075 million compared to a provision for credit losses of $1.100 million for the six months ended June 30, 2025.

The $3.0 million was attributable to the factors discussed above.

The total provision for credit losses for the first quarter ended March 31, 2026, was $0.75 million compared to a negative provision for credit losses of $0.25 million for the quarter ended March 31, 2025.

The first quarter of 2026 provision was largely due to:

(1) a net increase of $0.4 million, with increases in reserves on impaired loans, partially offset by loss rates on collectively evaluated loans;

(1) a net increase of $0.4 million, with increases in reserves on impaired loans, partially offset by lower loss rates on collectively evaluated loans;

(2) modest charge-offs of $0.2 million;

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and (4) the net impact of new loan growth, net of a decrease in the portfolio duration of $0.05 million.

The first quarter ended March 31, 2025, negative provision for credit losses was primarily due to decreases in ACL related to:

(1) on-balance sheet ACL of $0.1 million, and (2) reductions in off-balance sheet reserves to fund commitments of $0.3 million.

Non-interest income increased $0.5 million in the first quarter of 2026, compared to the first quarter of 2025, primarily due to higher gains on the sale of loans, due in part to the backlog of SBA loans unable to be sold during the fourth quarter of 2025, due to the government shutdown and then sold in the first quarter of 2026.

Non-interest expense increased $0.2 million in the first quarter of 2026 from $10.5 million in the first quarter of 2025.

The increase was primarily due to an increase in compensation due to the full quarter impact of the 2025 annual employee pay raises and benefit expenses, partially offset by lower data processing costs.

Provision for income taxes increased to $0.88 million in the first quarter of 2026, from $0.78 million in the first quarter of 2025, primarily due to the impact of a 2025 tax credit investment.

The total benefit, i.e., negative provision, for credit losses for the first quarter ended March 31, 2025, of $0.25 million was due to decreases in ACL related to a decrease in on-balance sheet ACL of $0.35 million, partially offset by an increase in off-balance sheet reserves to fund commitments of $0.1 million.

Non-interest income increased $0.3 million for the six-month period ended June 30, 2026, compared to the same period in 2025, primarily due to an increase in other income in the first quarter of 2026 due to the reversal of a $0.1 million lease liability and $0.1 million higher loan servicing income.

Non-interest expense increased slightly by $63 thousand in the six-month period ended June 30, 2026, compared to the same period in 2025, primarily due to higher second quarter other expense primarily due to higher nonperforming asset, higher compensation expense and higher professional services, partially offset by lower data processing expenses.

Provision for income taxes decreased by 0.5 million in the six months ended June 30, 2026, compared to the same period in 2025, due to a decrease in pre-tax income and a lower effective tax rate.

When comparing year-over-year results, changes in net interest income, provision for credit losses, non-interest income and non-interest expense are primarily due to the items discussed above.

See the remainder of this section for a more thorough discussion.

CRITICAL ACCOUNTING ESTIMATES

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Allowance for credit losses for collateral dependent loans are based on the fair value of the underlying collateral relative to the amortized cost of the loans.

For loans that are not collateral dependent, the allowance for credit losses is based on the present value of expected future cash flows discounted at the loan’s original effective interest rate through the repayment period;

and (2) a collective allowance for loans not specifically identified in (1) above.

The allowance for these loans is estimated by pooling loans with a similar risk profile and calculating a collective loss rate using the pool’s risk drivers, historical loss experience, and reasonable and supportable future economic forecasts to project lifetime losses.

supportable future economic forecasts to project lifetime losses.

This collectively estimated loss is adjusted for qualitative factors.

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Net interest margin currently exceeds interest rate spread because non-interest-bearing sources of funds (“net free funds”), principally demand deposits and stockholders’ equity, also support interest earning assets.

The narrative below discusses net interest income, and net interest margin for the three-month periods ended March 31, 2026, and March 31, 2025, respectively.

Net interest income was $13.0 million for the three months ended March 31, 2026, compared to $11.6 million for the three months ended March 31, 2025.

Compared to the first quarter of 2025, the first quarter of 2026 net interest income increased $1.4 million.

The first quarter 2026 increase from the same period in 2025 was largely due to:

(1) a 20 basis point

increase in loan yields due to new loan originations and existing loans repricing at higher rates;

and (2) a 28 basis point decrease in deposit rates, largely due to lower short-term interest rates resulting from Federal Open Market Committee

(“ FOMC”) decreases in the overnight Fed Funds rate;

and (3) a reduction in other borrowings largely due to the redemption of subordinated debt on September 1, 2025;

partially offset by a 75 basis point decrease in interest-bearing cash yields due to FOMC decreases in the overnight Fed Funds rate.

The net interest margin for the three-month period ended March 31, 2026, increased to 3.18%, compared to 2.85%, for the three-month period ended March 31, 2025.

The higher net interest margin was due to:

(1) a decrease in liability costs of 30 basis points;

(2) a net increase of 20 basis points in loan yields;

partially offset by (3) lower yields on interest-bearing cash at the Federal Reserve;

and (4) the combination of a decrease in average balances of higher yielding loans and an increase in the average balance of lower yielding cash.

The narrative below discusses net interest income, and net interest margin for the three-month and six-month periods ended June 30, 2026, and June 30, 2025, respectively.

Net interest income was $13.5 million for the three months ended June 30, 2026, compared to $13.3 million for the three months ended June 30, 2025.

The second quarter 2026 increase from the same period in 2025 was largely due to:

(1) $0.7 million decrease in interest expense largely due to the impact of the Federal Open Market Committee (“FOMC’) overnight Fed Funds interest rates decreasing 75 basis points in the third and fourth quarters of 2025 and lower expense due to the redemption of $15 million of 6% subordinated debt in the third quarter of 2025;

and (2) higher loan portfolio interest rates, partially offset by:

(1) a reduction in loan interest income of $1.1 million as the second quarter of 2025 and various income recognized, largely due to loan payoffs;

(2) lower interest income in the second quarter of 2026 due to the impact of an increase in nonaccrual loans and the repurchase of delinquent government loans;

and (3) the impact of lower interest rates on cash and cash equivalents resulting from a 75 basis points reduction in overnight interest rates in the third and fourth quarter of 2025 by the FOMC.

The net interest margin for the three-month period ended June 30, 2026, decreased to 3.22%, compared to 3.27%, for the three-month period ended June 30, 2025.

The lower net interest margin was due to a 28 basis point reduction in loan yields due to loan interest income discussed above partially offset by lower liability costs of 27 basis points.

Net interest income was $26.5 million for the six-month period ended June 30, 2026, compared to $24.9 million for the six months ended June 30, 2025.

The net interest margin for the six-month period ended June 30, 2026, increased to 3.20%, compared to 3.06%, for the six-month period ended June 30, 2025.

The higher net interest margin was primarily due to a decrease in liability costs of 29 basis points, mainly due to:

(1) lower short-term Fed Funds interest rates discussed above;

(2) a decrease in the cost of FHLB advances;

and (3) the September 2025 redemption of 6% $15 million subordinated debt;

which was partially offset by:

(1) lower short-term interest rates effecting both cash and cash equivalent and equity security yields;

(2) lower comparable loan yields due to one-time June 2025 loan income recognition, largely due to loan payoffs;

and (3) the second quarter 2026 negative impact of an increase in nonaccrual loans and the repurchase of government guaranteed loans, which was partially offset by higher loan portfolio yields.

Average Balances, Net Interest Income, Yields Earned and Rates Paid.

The following net interest income analysis table presents interest income from average interest earning assets, expressed in dollars and yields, and interest expense on average interest-bearing liabilities, expressed in dollars and rates on a tax equivalent basis.

Shown below is the weighted average tax equivalent yield on interest earning assets, rates paid on interest-bearing liabilities and the resultant spread at or during the three-month periods ended March 31, 2026, and March 31, 2025.

Shown below is the weighted average tax equivalent yield on interest earning assets, rates paid on interest-bearing liabilities and the resultant spread at or during the three and six-month periods ended June 30, 2026, and June 30, 2025.

Non-accruing loans have been included in the table as loans carrying a zero yield.

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(Dollar amounts in thousands)

Three months ended March 31, 2026, compared to the three months ended March 31, 2025:

Three months ended March 31, 2026

Three months ended March 31, 2025

Three months ended June 30, 2026, compared to the three months ended June 30, 2025:

Three months ended June 30, 2026

Three months ended June 30, 2025

Balance Interest

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Average interest earning assets to average interest-bearing liabilities 1.26 1.26

NET INTEREST INCOME ANALYSIS ON A TAX EQUIVALENT BASIS

(Dollar amounts in thousands)

Six months ended June 30, 2026, compared to the six months ended June 30, 2025:

Six months ended June 30, 2026 Six months ended June 30, 2025

Balance Interest

Expense Average

Balance Interest

Expense Average

Average interest earning assets:

Cash and cash equivalents $ 102,093 $ 1,870 3.69 % $ 46,097 $ 1,017 4.45 %

Loans receivable 1,346,246 38,091 5.71 % 1,358,314 38,707 5.75 %

Investment securities 211,806 3,279 3.12 % 225,902 3,544 3.16 %

Other investments 12,497 310 5.00 % 12,448 337 5.46 %

Total interest earning assets $ 1,672,642 $ 43,550 5.25 % $ 1,642,761 $ 43,605 5.35 %

Average interest bearing liabilities:

Savings accounts $ 150,168 $ 585 0.79 % $ 163,908 $ 742 0.91 %

Demand deposits 383,082 3,630 1.91 % 377,512 4,018 2.15 %

Money market accounts 397,571 5,042 2.56 % 363,463 5,046 2.80 %

CD’s 343,642 6,353 3.73 % 343,353 7,078 4.16 %

Total deposits $ 1,274,463 $ 15,610 2.47 % $ 1,248,236 $ 16,884 2.73 %

FHLB advances and other borrowings 51,872 1,426 5.54 % 63,200 1,816 5.79 %

Total interest bearing liabilities $ 1,326,335 $ 17,036 2.59 % $ 1,311,436 $ 18,700 2.88 %

Net interest income $ 26,514 $ 24,905

Interest rate spread 2.66 % 2.47 %

Net interest margin 3.20 % 3.06 %

Average interest earning assets to average interest bearing liabilities 1.26 1.25

Rate/Volume Analysis.

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For each category of interest earning assets and interest-bearing liabilities, information is provided on changes attributable to:

(1) changes in volume, which are changes in the average outstanding balances multiplied by the prior period rate (i.e., holding the initial rate constant);

and (2) changes in rate, which are changes in average interest rates multiplied by the prior period volume (i.e., holding the initial balance constant).

(1) changes in volume, which are changes in the average outstanding balances multiplied by the prior period rate (i.e., holding the initial rate constant) and (2) changes in rate, which are changes in average interest rates multiplied by the prior period volume (i.e., holding the initial balance constant).

Rate changes have been discussed previously in the net interest income section above.

Changes in asset volume include an increase in interest-bearing cash, resulting from the cash deployment of the 2025 loan shrinkage as the bank reduced non-strategic relationships, and the reinvestment of investment securities amortization of mortgage-backed certificates, U.S.

government securities and student loan asset-backed securities into interest-bearing cash.

government securities and student loan asset-backed securities into interest-bearing cash and the increase in deposits being invested in interest-bearing cash at the Federal Reserve.

RATE / VOLUME ANALYSIS

(Dollar amounts in thousands)

Three months ended March 31, 2026, compared to the three months ended March 31, 2025.

Three months ended June 30, 2026, compared to the three months ended June 30, 2025:

Increase (decrease) due to

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Net interest income $ 385 $ (192) $ 193

The table below shows the principal balance and current contractual rate of fixed-rate loans, securities, and certificates of deposits as of March 31, 2026, that mature or reprice for the remaining three quarters of 2026 and the four quarters of 2027.

Portfolio Contractual Repricing:

RATE / VOLUME ANALYSIS

(Dollar amounts in thousands)

Six months ended June 30, 2026, compared to the six months ended June 30, 2025:

Increase (decrease) due to

Volume Rate Net

Interest income:

Cash and cash equivalents $ 1,075 $ (222) $ 853

Loans receivable (343) (273) (616)

Investment securities (219) (46) (265)

Other investments 1 (28) (27)

Total interest earning assets 514 (569) (55)

Interest expense:

Savings accounts (59) (98) (157)

Demand deposits 59 (447) (388)

Money market accounts 453 (457) (4)

CD’s 6 (731) (725)

Total deposits 459 (1,733) (1,274)

FHLB advances and other borrowings (285) (105) (390)

Total interest bearing liabilities 174 (1,838) (1,664)

Net interest income $ 340 $ 1,269 $ 1,609

The table below shows the principal balance and current contractual rate of fixed-rate loans, securities, and certificates of deposits as of June 30, 2026, that mature or reprice for the remaining two quarters of 2026 and the four quarters of 2027.

Portfolio Contractual Fixed Rate Repricing by Future Quarters:

(in millions, except yields)

Q2 2026 Q3 2026 Q4 2026 Q1 2027 Q2 2027 Q3 2027 Q4 2027

Q3 2026 Q4 2026 Q1 2027 Q2 2027 Q3 2027 Q4 2027

Maturing or Repricing Loans:

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Lifetime losses on these loans are estimated based on the loans’ individual characteristics.

The total provision for credit losses for the second quarter ended June 30, 2026, was $4.325 million compared to a provision for credit losses of $1.350 million for the quarter ended June 30, 2025.

The second quarter of 2026 provision was largely due to:

(1) a net increase of $3.1 million, in specific reserves on nonaccrual loans to $6.3 million and (2) charge-offs of

$1.4 million.

The second quarter of 2025 provision expense was largely due to:

(1) the impact of three 30-89 day delinquent commercial relationships resulting in a $0.7 million provision;

(2) the impact of modestly worsening macro-economic assumptions used by our third party provider of $0.3 million;

(3) provisions on new loans with longer contractual life outpacing previously established provisions on prepaying and maturing loans of $0.15 million;

and (4) an increase in off-balance sheet commitments from new construction loan originations of $0.2 million.

The total provision for credit losses for the six months ended June 30, 2026, was $5.075 million compared to a provision for credit losses of $1.100 million for the six months ended June 30, 2025.

The second quarter of 2026 changes compared to the second quarter of 2025 are discussed above.

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partially offset by an increase in off-balance sheet reserves to fund commitments of $0.1 million.

Continued stable economic conditions in our markets, as evidenced by unemployment rates below the national average in our two largest population centers, have resulted in positive overall economic trends for businesses.

The impact of higher interest rates and the impact of an inverted yield forecast are factored into the third-party model used for economic conditions in computing the ACL.

Note that in discussing ACL allocations, the entire ACL balance is available for any loan that, in management’s judgment, should be charged off.

Management believes that the provision recorded for the current year’s three-month period is adequate in view of the present condition of our loan portfolio and the sufficiency of collateral supporting our non-performing loans.

We continually monitor non-performing loan relationships and will adjust our provision, as necessary, if changing facts and circumstances require a change in the ACL.

Management believes that the provision recorded for the current year’s three and six-month periods is adequate in view of the present condition of our loan portfolio and the sufficiency of collateral supporting our nonperforming loans.

We continually monitor nonperforming loan relationships and will adjust our provision, as necessary, if changing facts and circumstances require a change in the ACL.

In addition, a decline in the quality of our loan portfolio as a result of general economic conditions, factors affecting particular borrowers, or our market areas, or otherwise, could all affect the adequacy of our ACL.

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Non-interest Income .

The following table reflects the various components of non-interest income for the three-month periods ended March 31, 2026 and 2025, respectively.

Three months ended March 31,

2026 2025 % Change

The following table reflects the various components of non-interest income for the three and six-month periods ended June 30, 2026 and 2025, respectively.

Three months ended June 30, Six months ended June 30,

2026 2025 % Change 2026 2025 % Change

Non-interest Income:

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Loan fees and service charges 129 237 (45.57) % 267 357 (25.21) %

Net (losses) gains on equity securities (59) 10 N/M

Net gains on equity securities 160 99 N/M 101 109 N/M

Other 267 240 11.25 % 644 483 33.33 %

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N/M means not meaningful

Loan servicing income increased largely due to servicing income received for semi-annual agricultural loan payments serviced for others.

Gain on sale of loans increased in the three-month period ended March 31, 2026, compared to the three-month period ended March 31, 2025.

Higher gains on SBA loan sales account for approximately two-thirds of the increase, with the remainder of the increase due to higher gains on sale of residential loans.

The increase in other income for the three-month period ending March 31, 2026, compared to the same period in 2025, was primarily due to the termination of the remaining lease obligation on a previously closed branch.

Loan servicing income increased for the six months ended June 30, 2026, compared to the six months ended June 30, 2025, largely due to higher originated servicing income recorded due to higher residential gains on sale.

Gain on sale of loans decreased in the three-month period ended June 30, 2026, compared to the three-month period ended June 30, 2025.

Lower gains on SBA loan sales contributed to most of the decrease, partially offset by higher residential gains on sale.

Loan fees and service charges decreased for the three-month and six-month period ended June 30, 2026, compared to the same periods in 2025 due to lower customer activity in the second quarter of 2026.

Other income increased for the six-month period ending June 30, 2026, compared to the same period in 2025, primarily due to the termination of the remaining lease obligation in the first quarter of 2026 on a previously closed branch.

To a lesser extent, income for Bank owned life insurance increased.

Non-interest Expense.

The following table reflects the various components of non-interest expense for the three-month periods ended March 31, 2026 and 2025, respectively.

Three months ended March 31,

2026 2025 % Change

The following table reflects the various components of non-interest expense for the three and six-month periods ended June 30, 2026 and 2025, respectively.

Three months ended June 30, Six months ended June 30,

2026 2025 % Change 2026 2025 % Change

Non-interest Expense:

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Professional services 514 432 18.98 % 1,119 940 19.04 %

Gains on repossessed assets, net — 4 N/M

Gains on repossessed assets, net (12) — N/M (12) 4 N/M

Other 1,100 649 69.49 % 1,730 1,313 31.76 %

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N/M means not meaningful

Compensation expense for the three-month period ended March 31, 2026, increased from the same period in 2025, due to annual employee pay raises, effective late first quarter of 2025, higher incentive accruals due to higher pre-tax income, and higher benefit costs.

Data processing expense for the three-months ended March 31, 2026, decreased from the same 2025 period, largely due to contract renegotiations which lowered our costs.

Amortization of intangibles decreased for the three-month period ending March 31, 2026, from the same 2025 period, as an intangible was fully amortized in the third quarter of 2025.

Compensation expense for the three-month period ended June 30, 2026, decreased from the same period in 2025, due to lower incentive accruals partially offset by the annual merit raises included in the last payroll period of the first quarter.

Data processing expense for the three and six-months ended June 30, 2026, decreased from the same 2025 periods, largely due to contract renegotiations which lowered our costs.

Amortization of intangibles decreased for the three-month and six-month periods ending June 30, 2026, from the same 2025 periods, as an intangible was fully amortized in the third quarter of 2025.

Other expense for the three and six-months ended June 30, 2026, increased from the same 2025 periods, primarily due to costs associated with higher nonperforming assets in the second quarter of 2026.

Income Taxes.

Provision for income taxes increased to $0.88 million in the first quarter of 2026, or an effective tax rate of 18.9%, from $0.78 million in the first quarter of 2025, or an effective tax rate of 19.6%, due to higher pre-tax income.

Provision for income taxes decreased to $0.14 million in the second quarter of 2026, from $0.78 million in the second quarter of 2025.

For the six months ended June 30, 2026, income tax expense decreased $0.5 million to $1.0 million, compared to the same period in 2025.

The effective tax rate was 10.9% for the quarter ended June 30, 2026, compared to 18.9% for the quarter ended March 31, 2026, and 19.2% for the quarter ended June 30, 2025.

The decrease in the effective tax rate in the second quarter of 2026 from the first quarter of 2026 was due to (1) the reduction in the effective tax rate for the full year, based on lower pre-tax income, with the six-month impact recognized in the second quarter resulting in a lower effective tax rate of 4.6% and (2) a reduction in the effective tax rate of 3.4% due to the increased benefit of securities maturities.

BALANCE SHEET ANALYSIS

Cash and Cash Equivalents.

Cash and cash equivalents increased $30.3 million to $149.2 million at March 31, 2026, compared to $118.9 million at December 31, 2025.

This increase was primarily due to an increase in interest-bearing cash provided by deposit growth, partially offset by loan growth.

Cash and cash equivalents increased $2.9 million to $121.8 million at June 30, 2026, compared to $118.9 million at December 31, 2025.

This increase was primarily due to deposit growth partially offset by loan growth.

Investment Securities.

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Our investment portfolio is comprised of securities available-for-sale and securities held-to-maturity.

Securities available-for-sale decreased $3.2 million during the three months ended March 31, 2026, to $130.9 million from $134.1 million at December 31, 2025.

There were principal repayments of $3.0 million, and a net decrease in the corporate debt portfolio due to redemptions of $1.3 million.

Securities available-for-sale decreased $5.7 million during the six months ended June 30, 2026, to $128.4 million from $134.1 million at December 31, 2025.

There were principal repayments of $7.6 million and redemptions of $3.1 million in the corporate debt portfolio.

These reductions were partially offset by purchases of $4.3 million of corporate debt and a decrease in the unrealized loss of $0.7 million.

Securities held-to-maturity decreased $1.2 million to $79.0 million during the three-month period ended March 31, 2026, from $80.2 million at December 31, 2025, due to principal repayments.

Securities held-to-maturity decreased $2.8 million to $77.4 million during the six-month period ended June 30, 2026, from $80.2 million at December 31, 2025, due to principal repayments.

The amortized cost and market values of our available-for-sale securities by asset categories as of the dates indicated below were as follows:

Available-for-sale securities Amortized

March 31, 2026

June 30, 2026

government agency obligations $ 7,257 $ 7,229

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Held-to-maturity securities Amortized

March 31, 2026

June 30, 2026

Obligations of states and political subdivisions $ 300 $ 291

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The composition of our available-for-sale portfolios by credit rating as of the dates indicated below was as follows:

March 31, 2026 December 31, 2025

June 30, 2026 December 31, 2025

Available-for-sale securities Amortized

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The composition of our held-to-maturity portfolio by credit rating as of the dates indicated was as follows:

March 31, 2026 December 31, 2025

June 30, 2026 December 31, 2025

Held-to-maturity securities Amortized

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Total $ 77,415 $ 61,481 $ 80,210 $ 64,117

At March 31, 2026, the Bank has pledged certain of its mortgage-backed securities with a carrying value of $31.6 million as collateral to secure a line of credit with the Federal Reserve Bank.

As of March 31, 2026, there were no borrowings outstanding on this Federal Reserve Bank line of credit.

As of March 31, 2026, the Bank has pledged certain of its U.S.

At June 30, 2026, the Bank has pledged certain of its mortgage-backed securities with a carrying value of $31.1 million as collateral to secure a line of credit with the Federal Reserve Bank.

As of June 30, 2026, there were no borrowings outstanding on this Federal Reserve Bank line of credit.

As of June 30, 2026, the Bank has pledged certain of its U.S.

Government Agency securities with a carrying value of $0.04 million and mortgage-backed securities with a carrying value of $1.7 million as collateral against specific municipal deposits.

As of March 31, 2026, the Bank also has mortgage-backed securities with a carrying value of $0.4 million pledged as collateral to the Federal Home Loan Bank of Des Moines.

As of June 30, 2026, the Bank also has mortgage-backed securities with a carrying value of $0.4 million pledged as collateral to the Federal Home Loan Bank of Des Moines.

At December 31, 2025, the Bank has pledged certain of its mortgage-backed securities with a carrying value of $32.1 million as collateral to secure a line of credit with the Federal Reserve Bank.

3 unchanged sentences

As of December 31, 2025, the Bank also has mortgage-backed securities with a carrying value of $0.4 million pledged as collateral to the Federal Home Loan Bank of Des Moines.

Total loans outstanding, net of deferred loan fees and costs and unamortized discount on acquired loans, increased by $0.02 billion, to $1.36 billion as of March 31, 2026, from $1.34 billion at December 31, 2025.

The following table reflects the composition of our loan portfolio at March 31, 2026, and December 31, 2025:

March 31, 2026 December 31, 2025

Total loans outstanding, net of deferred loan fees and costs and unamortized discount on acquired loans, increased by $0.04 billion, to $1.38 billion as of June 30, 2026, from $1.34 billion at December 31, 2025.

The following table reflects the composition of our loan portfolio at June 30, 2026, and December 31, 2025:

June 30, 2026 December 31, 2025

Amount Percent Amount Percent

26 unchanged sentences

The level of owner-occupied property versus non-owner-occupied property are tracked and monitored on a regular basis.

The following table lists the portfolio characteristics of our major commercial real estate loan portfolio at March 31, 2026:

The following table lists the portfolio characteristics of our major commercial real estate loan portfolio at June 30, 2026:

Non-Owner Occupied CRE Owner- Occupied CRE Multi-family CRE Construction and Development CRE

12 unchanged sentences

Other 33 % 5 % 10 % 24 %

The following table further disaggregates the composition of our commercial real estate loan portfolio by selected industry components at March 31, 2026:

The following table further disaggregates the composition of our commercial real estate loan portfolio by selected industry components at June 30, 2026:

Campground Hotel Restaurant Office

75 unchanged sentences

Collateral dependency is determined using the practical expedient when:

(1) the borrower is experiencing financial difficulty;

and (2) repayment is expected to be provided substantially through the sale or operation of the collateral.

(1) the borrower is experiencing financial difficulty and (2) repayment is expected to be provided substantially through the sale or operation of the collateral.

In addition, various regulatory agencies periodically review the ACL.

3 unchanged sentences

The Allowance for Credit Losses - Unfunded Commitments on off-balance sheet exposures is included in other liabilities on the consolidated balance sheet.

Allowance for Credit Losses - Loans Roll Forward

Allowance for Credit Losses - Loans

(in thousands, except ratios)

March 31, 2026 and Three Months Ended December 31, 2025 and Three Months Ended

June 30, 2026 and Three Months Ended March 31, 2026 and Three Months Ended December 31, 2025 and Three Months Ended

Allowance for Credit Losses (“ACL”)

12 unchanged sentences

Total recoveries of loans previously charged off:

Net loan recoveries/(charge-offs) (“NCOs”) (193) 16

Additions/(reversals) to ACL - Loans via provision for credit losses charged to operations 758 203

Net loan (charge-offs)/recoveries (“NCOs”) (1,417) (193) 16

Additions to ACL - Loans via provision for credit losses charged to operations 4,350 758 203

ACL - Loans, at end of period $ 25,899 $ 22,966 $ 22,401

4 unchanged sentences

Commercial/Agricultural Real Estate C&I/Agricultural operating Residential Mortgage Consumer Installment Total

Three months ended March 31, 2026

Three months ended June 30, 2026

Allowance for Credit Losses - Loans:

2 unchanged sentences

Recoveries — 2 — 4 6

Additions to ACL - Loans via provision for credit losses charged to operations 3,744 493 108 5 4,350

ACL - Loans, at end of period $ 21,421 $ 2,272 $ 2,047 $ 159 $ 25,899

Commercial/Agricultural Real Estate C&I/Agricultural operating Residential Mortgage Consumer Installment Total

Six months ended June 30, 2026

Allowance for Credit Losses - Loans:

ACL - Loans, at beginning of period $ 17,654 $ 2,358 $ 2,230 $ 159 $ 22,401

Charge-offs (591) (1,032) — (1) (1,624)

Recoveries — 2 5 7 14

Additions/(reversals) to ACL - Loans via provision for credit losses charged to operations 4,358 944 (188) (6) 5,108

7 unchanged sentences

Recoveries 92 51 53 29 225

(Reversals)/additions to ACL - Loans via provision for credit losses charged to operations 1,097 1,071 (312) (62) 1,794

Additions/(reversals) to ACL - Loans via provision for credit losses charged to operations 1,097 1,071 (312) (62) 1,794

ACL - Loans, at end of period $ 17,654 $ 2,358 $ 2,230 $ 159 $ 22,401

Allowance for Credit Losses - Loans to Percentage

Allowance for Credit Losses - Loans Percentage

(in thousands, except ratios)

3 unchanged sentences

ACL - Loans to loans, end of period 1.87 % 1.67 %

In addition to the ACL - Loans, the Company has established an ACL - Unfunded Commitments of $0.48 million at March 31, 2026, and $0.49 million at December 31, 2025, classified in other liabilities on the consolidated balance sheets.

In addition to the ACL - Loans, the Company has established an ACL - Unfunded Commitments of $0.457 million at June 30, 2026, and $0.490 million at December 31, 2025, classified in other liabilities on the consolidated balance sheets.

Allowance for Credit Losses - Unfunded Commitments:

(in thousands)

March 31, 2026 and Three Months Ended December 31, 2025 and Twelve Months Ended

June 30, 2026 and Three Months Ended June 30, 2025 and Three Months Ended June 30, 2026 and Six Months Ended June 30, 2025 and Six Months Ended

ACL - Unfunded commitments, beginning of period $ 482 $ 435 $ 490 $ 334

Additions (reversals) to ACL - Unfunded commitments via provision for credit losses charged to operations (8) 156

(Reversals)/additions to ACL - Unfunded commitments via provision for credit losses charged to operations (25) 192 (33) 293

ACL - Unfunded commitments, end of period $ 457 $ 627 $ 457 $ 627

8 unchanged sentences

When interest accruals are discontinued, interest credited to income is reversed.

If collection is in doubt, cash receipts on non-accrual loans are used to reduce principal rather than being recorded as interest income.

If collection is in doubt, cash receipts on nonaccrual loans are used to reduce principal rather than being recorded as interest income.

The following table identifies the various components of nonperforming assets and other balance sheet information as of the dates indicated below and changes in the ACL for the periods then ended:

March 31, 2026 and Three Months Then Ended (1) December 31, 2025 and Twelve Months Then Ended (1)

June 30, 2026 and Six Months Then Ended (1) December 31, 2025 and Twelve Months Then Ended (1)

Nonperforming assets:

30 unchanged sentences

Total recoveries of loans previously charged off:

Net loan recoveries/(charge-offs) (“NCOs”) (193) 58

Additions (reversals) to ACL - loans via provision for credit losses charged to operations 758 1,794

Net loan (charge-offs)/recoveries (“NCOs”) (1,610) 58

Additions to ACL - loans via provision for credit losses charged to operations 5,108 1,794

ACL - Loans, at end of period $ 25,899 $ 22,401

10 unchanged sentences

Quarter Ended

2026 March 31,

2026 December 31,

1 unchanged sentence

2025 June 30,

2025 March 31,

Balance, beginning of period $ 17,303 $ 15,853 $ 15,614 $ 11,609 $ 13,091

4 unchanged sentences

Balance, end of period $ 31,561 $ 17,303 $ 15,853 $ 15,614 $ 11,609

Nonperforming assets were $18.2 million at March 31, 2026, compared to $16.7 million at December 31, 2025.

This net increase was largely due to the addition of the government guaranteed portion of loans totaling $1.4 million in the quarter ended March 31, 2026.

The government guaranteed portion of loans was $2.4 million at March 31, 2026.

In addition, the unguaranteed portion of loans originated with government guarantees increased $0.6 million in the quarter.

The unguaranteed portion of loans originated with government guarantees was $1.5 million at March 31, 2026.

For the nonaccrual unguaranteed loan portion of $1.5 million, there were specific reserves of approximately 50% of the loan balance at March 31, 2026.

Nonperforming assets were $32.4 million at June 30, 2026, compared to $16.7 million at December 31, 2025.

The increase was largely due to the addition of a $4.2 million owner-occupied commercial real estate loan secured by real estate and equipment, with a specific reserve established equal to the owner-occupied real estate loan exposure, a local loan relationship totaling $5.7 million secured by two campgrounds, a multi-use multi-family/retail loan of $2.7 million that had performed for 10 years and a net increase in repurchased government guaranteed loans totaling $2.8 million.

The non-guaranteed portion of the loans originated with partial government guarantees increased $0.7 million for the six months ended June 30, 2026, to $1.2 million.

There are specific reserves of approximately 25% on the non-guaranteed government loans.

Refer to the “Allowance for Credit Losses - Loans” and “Nonperforming Loans, Potential Problem Loans and Foreclosed Properties” sections above for more information related to nonperforming loans.

The tables below detail Loan Modifications Made to Borrowers Experiencing Financial Difficulty during the three months ended March 31, 2026:

Term Extension

Loan Class Amortized Cost Basis at March 31, 2026 % of Total Class of Financing Receivables

Commercial and industrial $ 750 0.66 %

Other-Than-Insignificant Payment Delay

Loan Class Amortized Cost Basis at March 31, 2026 % of Total Class of Financing Receivables

Agricultural real estate $ 189 0.27 %

Term Extension

Loan Class Financial Effect

Commercial and industrial A weighted average of 6 months was added to the term of the loans

Other-Than-Insignificant Payment Delay

Loan Class Financial Effect

Agricultural real estate Payments were deferred a weighted average of 6 months

There were no loan modifications made to borrowers experiencing financial difficulty during the three months ended June 30, 2026.

The table below shows a summary of criticized loans, split by special mention and substandard loans for the past five quarters.

Changes in balances over $3 million include changes in special mention commercial loans in the second quarter of 2025, due to one new $9 million multi-family loan that is experiencing slower leasing activity than expected.

In the third quarter of 2025, the $9 million special mention loan moved to substandard and nonaccrual, which was partially offset by the payoff of a $5.2 million substandard loan that was on nonaccrual.

Special mention loans decreased $4.6 million to $19.9 million at June 30, 2026, from $24.5 million at December 31, 2025, primarily due to a $5.4 million owner-occupied commercial real estate loan secured by real estate and equipment which moved to substandard.

Substandard loans increased $13.8 million to $35.2 million at June 30, 2026, from $21.4 million at December 31, 2025, primarily due to:

(1) a $4.2 million owner-occupied commercial real estate loan secured by real estate and equipment, with a specific reserve established equal to the owner-occupied real estate loan exposure with the loan balance reduced by $1.2 million due to a charge-off moving from special mention;

(2) a local loan relationship totaling $5.7 million secured by two campgrounds;

(3) a multi-use multi-family/retail loan of $2.7 million that had performed for 10 years;

and (4) a net increase in repurchased government guaranteed loans totaling $2.8 million.

Special mention loans increased $1.3 million to $24.5 million at December 31, 2025, from June 30, 2025, largely due to increases in the fourth quarter of 2025, due to the addition of two loan relationships:

(1) a $5.7 million relationship on 3 businesses, largely secured by real estate;

(2) a $5.3 million owner-occupied commercial real estate and equipment loan, partially offset by;

and (3) a $9 million special mention loan that moved to substandard in the third quarter of 2025.

Substandard loans increased $3.5 million primarily due to an increase in nonaccrual loan balances due to changes in the third quarter of one new $9 million multi-family loan that is experiencing slower leasing activity than expected moving from special mention, which was partially offset by the payoff of a $5.2 million substandard loan that was on nonaccrual.

(in thousands)

(Loan balance at unpaid principal balance) March 31,

(Loan balance at unpaid principal balance) June 30,

2026 March 31,

2026 December 31,

1 unchanged sentence

2025 June 30,

2025 March 31,

Special mention loan balances $ 19,863 $ 25,894 $ 24,473 $ 12,920 $ 23,201

10 unchanged sentences

Although management believes that the assumptions used to evaluate the MSRs for impairment are reasonable, future adjustment may be necessary if future economic conditions differ substantially from the economic assumptions used to determine the value of MSRs.

The fair market value of the Company’s MSR asset was $4.8 million at March 31, 2026, compared to $5.1 million at March 31, 2025.

The unpaid balances of one-to-four family residential real estate loans serviced for others as of March 31, 2026, and December 31, 2025, were $473.0 million and $474.0 million, respectively.

The fair market value of the Company’s MSR asset as a percentage of its servicing portfolio at March 31, 2026, and December 31, 2025, was 1.02% and 0.98%, respectively.

Total deposits increased $41.5 million during the three months ended March 31, 2026, to $1.57 billion.

The fair market value of the Company’s MSR asset was $5.1 million at June 30, 2026, and $4.7 million at December 31, 2025.

The unpaid balances of one-to-four family residential real estate loans serviced for others as of June 30, 2026, and December 31, 2025, were $471.8 million and $474.0 million, respectively.

The fair market value of the Company’s MSR asset as a percentage of its servicing portfolio at June 30, 2026, and December 31, 2025, was 1.08% and 0.98%, respectively.

Total deposits increased $30.3 million during the six months ended June 30, 2026, to $1.55 billion.

The increase was largely due to the growth in commercial and public deposits, most of which are seasonal.

Deposits by type for five quarters are detailed below:

2026 March 31,

2026 December 31,

1 unchanged sentence

2025 June 30,

2025 March 31,

Consumer deposits $ 884,335 $ 887,998 $ 889,109 $ 855,226 $ 856,467

3 unchanged sentences

Total deposits $ 1,554,417 $ 1,565,622 $ 1,524,099 $ 1,480,554 $ 1,478,416

At March 31, 2026, the deposit portfolio composition was 57% consumer, 28% commercial, 14% public, and 1% wholesale deposits compared to 57% consumer, 28% commercial, 14% public and 1% wholesale deposits at December 31, 2025.

At June 30, 2026, the deposit portfolio composition was 57% consumer, 28% commercial, 13% public, and 2% wholesale deposits compared to 58% consumer, 28% commercial, 12% public and 2% wholesale deposits at December 31, 2025.

Deposit composition by type for five quarters are detailed below:

2026 December 31,

2025 September 30, 2025 June 30, 2025 March 31,

2026 March 31,

2026 December 31, 2025 September 30, 2025 June 30,

Non-interest bearing demand deposits $ 274,822 $ 271,396 $ 264,394 $ 262,535 $ 260,248

4 unchanged sentences

Total deposits $ 1,554,417 $ 1,565,622 $ 1,524,099 $ 1,480,554 $ 1,478,416

Uninsured and uncollateralized deposits were $322.6 million, or 20% of total deposits, at March 31, 2026, and $323.5 million, or 21% of total deposits, at December 31, 2025.

Uninsured deposits alone at March 31, 2026, were $499.6 million, or 32% of total deposits, and $478.4 million, or 31% of total deposits at December 31, 2025.

On-balance sheet liquidity, collateralized new borrowing capacity, and uncommitted federal funds borrowing availability was $799 million, or 248% of uninsured and uncollateralized deposits at March 31, 2026.

Uninsured and uncollateralized deposits were $312.5 million, or 20% of total deposits, at June 30, 2026, and $323.5 million, or 21% of total deposits, at December 31, 2025.

Uninsured deposits alone at June 30, 2026, were $479.4 million, or 31% of total deposits, and $478.4 million, or 31% of total deposits at December 31, 2025.

On-balance sheet liquidity, collateralized new borrowing capacity, and uncommitted federal funds borrowing availability was $781 million, or 246% of uninsured and uncollateralized deposits at June 30, 2026.

At December 31, 2025, on-balance sheet liquidity, collateralized new borrowing capacity and uncommitted federal funds availability totaled $792 million, or 245% of uninsured and uncollateralized deposits.

Federal Home Loan Bank (FHLB) advances and Other Borrowings.

A summary of Federal Home Loan Bank (FHLB) advances and other borrowings at March 31, 2026, and December 31, 2025, is as follows:

March 31, 2026 December 31, 2025

A summary of Federal Home Loan Bank (FHLB) advances and other borrowings at June 30, 2026, and December 31, 2025, is as follows:

June 30, 2026 December 31, 2025

Stated Maturity Amount Range of Stated Rates Stated Maturity Amount Range of Stated Rates

10 unchanged sentences

Totals $ 51,885 $ 51,804

(1) The FHLB advances bear fixed rates, require interest-only monthly payments, and are collateralized by a blanket lien on pre-qualifying first mortgages, home equity lines, multi-family loans, and certain other loans which had pledged balances of $1,039.3 million and $1,017.6 million at March 31, 2026 and December 31, 2025, respectively.

At March 31, 2026, the Bank’s available and unused portion under the FHLB borrowing arrangement was approximately $410.1 million compared to $433.7 million as of December 31, 2025.

(2) Maximum month-end borrowed amounts outstanding under this borrowing agreement were $0 million and $5.0 million, during the three months ended March 31, 2026 and the twelve months ended December 31, 2025, respectively.

(3) There were no FHLB borrowings outstanding as of March 31, 2026 and December 31, 2025.

(1) The FHLB advances bear fixed rates, require interest-only monthly payments, and are collateralized by a blanket lien on pre-qualifying first mortgages, home equity lines, multi-family loans, and certain other loans which had pledged balances of $1,054.2 million and $1,017.6 million at June 30, 2026 and December 31, 2025, respectively.

At June 30, 2026, the Bank’s available and unused portion under the FHLB borrowing arrangement was approximately $427.5 million compared to $433.7 million as of December 31, 2025.

(2) Maximum month-end borrowed amounts outstanding under this borrowing agreement were $0 million and $5.0 million, during the six months ended June 30, 2026 and the twelve months ended December 31, 2025, respectively.

(3) There were no FHLB borrowings outstanding as of June 30, 2026 and December 31, 2025.

(4) Senior notes, entered into by the Company consist of the following:

(a) A term note, which was originally entered into in June of 2019 and subsequently refinanced in March 2022, modified in February of 2023, and refinanced in May 2024, requiring quarterly interest-only payments through January 2029, and quarterly principal and interest payments thereafter.

(a) A $12 million term note, which was originally entered into in June 2019 and subsequently refinanced in March 2022, modified in February 2023, and refinanced in May 2024, requiring quarterly interest-only payments through January 2029, and quarterly principal and interest payments thereafter.

Interest is variable, based on US Prime rate minus 75 basis points with a floor rate of 3.00%.

(b) A $5.0 term note entered into in October 2025, requiring quarterly interest-only payments through October 2028, and quarterly principal and interest payments thereafter.

(b) A $5 million term note entered into in October 2025, requiring quarterly interest-only payments through October 2028, and quarterly principal and interest payments thereafter.

Interest is variable, based on US Prime rate minus 75 basis points with a floor rate of 4.00%.

1 unchanged sentence

(a) The Company’s Subordinated Note Purchase Agreement entered into with certain purchasers in August 2020, which bore a fixed interest rate of 6.00% for five years.

On July 7, 2025, the Board of Directors approved the redemption of the entire $15,000 balance of the 6% subordinated debentures due September 1, 2030, which were scheduled to reprice on September 1, 2025, to the Secured Overnight Financing Rate (“SOFR”) plus 591 basis points.

On July 7, 2025, the Board of Directors approved the redemption of the entire $15 million balance of the 6% subordinated debentures due September 1, 2030, which were scheduled to reprice on September 1, 2025, to the Secured Overnight Financing Rate (“SOFR”) plus 591 basis points.

The redemption occurred on September 1, 2025.

1 unchanged sentence

In April 2027, the fixed interest rate will be reset quarterly to equal the three-month term SOFR plus 329 basis points.

The note is callable by the Bank when, and anytime after, the floating rate is

initially set.

The note is callable by the Company when, and anytime after, the floating rate is initially set.

Interest-only payments are due semi-annually each year during the fixed interest period and quarterly during the floating interest period.

FHLB advances were $0 as of March 31, 2026, and December 31, 2025.

There were no FHLB advances as of June 30, 2026, and December 31, 2025.

The Bank has an irrevocable Standby Letter of Credit Master Reimbursement Agreement with the Federal Home Loan Bank.

This irrevocable standby letter of credit (“LOC”) is supported by loan collateral as an alternative to directly pledging investment securities on behalf of a municipal customer as collateral for their interest-bearing deposit balances.

The Bank’s current unused borrowing capacity, supported by loan collateral as of March 31, 2026, is approximately $410.1 million.

At March 31, 2026, and December 31, 2025, the Bank had the ability to borrow $24.0 million and $24.9 million from the Federal Reserve Bank of Minneapolis.

The borrowing capacity is based on mortgage-backed securities pledged with a carrying value of $31.6 million and $32.1 million as of March 31, 2026, and December 31, 2025, respectively.

There were no related Federal Reserve borrowings outstanding as of March 31, 2026, or December 31, 2025.

The Bank’s current unused borrowing capacity, supported by loan collateral as of June 30, 2026, is approximately $427.5 million.

At June 30, 2026, and December 31, 2025, the Bank had the ability to borrow $23.7 million and $24.5 million from the Federal Reserve Bank of Minneapolis.

The borrowing capacity is based on mortgage-backed securities pledged with a carrying value of $31.1 million and $32.1 million as of June 30, 2026, and December 31, 2025, respectively.

There were no related Federal Reserve borrowings outstanding as of June 30, 2026, or December 31, 2025.

The Bank maintains two unsecured federal funds purchased lines of credit with banking partners which total $70 million.

These lines bear interest at the lender banks announced daily federal funds rate, mature daily, and are revocable at the discretion of the lending institution.

There were no borrowings outstanding on these lines of credit as of March 31, 2026, or December 31, 2025.

There were no borrowings outstanding on these lines of credit as of June 30, 2026, or December 31, 2025.

See Note 7, “Federal Home Loan Bank Advances and Other Borrowings” for more information.

Stockholders’ Equity.

Stockholders’ equity was $190.9 million at March 31, 2026, compared to $187.9 million at December 31, 2025.

Stockholders’ equity was $191.3 million at June 30, 2026, compared to $187.9 million at December 31, 2025.

The increase in stockholders’ equity was attributable to:

(1) net income of $3.8 million for the three-month period ended March 31, 2026;

and (2) a decrease from December 31, 2025, in net unrealized losses from the AFS securities portfolio reflected in accumulated other comprehensive income of $0.2 million.

This increase was partially offset by the quarterly cash dividend paid in February to common stockholders of $0.105 per share, or $1 million.

The Company did not repurchase any shares of common stock in the quarter ended March 31, 2026.

As of March 31, 2026, approximately 113 thousand shares remain available for repurchase under the current authorization.

The timing and amount of any share repurchases under the new authorization will be determined by management based on market conditions and other considerations.

The new share repurchase authorization does not obligate the Company to repurchase any shares of its common stock.

(1) net income of $4.9 million for the six-month period ended June 30, 2026;

(2) a decrease from December 31, 2025, in net unrealized losses from the AFS securities portfolio reflected in accumulated other comprehensive income of $0.4 million;

and (3) net stock activity of $0.1 million related to stock exercises, common stock surrendered, common stock repurchased and stock based compensation expense.

This increase was partially offset by the quarterly cash dividends paid in February 2026 and May 2026 to common stockholders of $0.105 per share each quarter, or $2.0 million.

The Company repurchased approximately 881 shares of common stock in the quarter ended June 30, 2026.

As of July 23, 2026, this share repurchase authorization expired with no shares repurchased from July 1, 2026 through July 23, 2026.

Liquidity and Asset / Liability Management.

2 unchanged sentences

A key metric we monitor is our liquidity ratio, calculated as cash and unpledged securities portfolio divided by total assets.

At March 31, 2026, our on-balance sheet liquidity ratio increased by 1.4% to 16.2% from the December 31, 2025, level.

At June 30, 2026, our on-balance sheet liquidity ratio decreased by 0.5% to 14.3% from the December 31, 2025, level.

There are no material customers or industry deposit concentrations.

At March 31, 2026, the deposit portfolio composition was 57% consumer, 28% commercial, 14% public, and 1% wholesale deposits compared to 57% consumer, 28% commercial, 13% public and 2% wholesale deposits at December 31, 2025.

Uninsured and uncollateralized deposits were $322.6 million, or 20% of total deposits, at March 31, 2026, and $323.5 million, or 21% of total deposits, at December 31, 2025.

Uninsured deposits alone, i.e., excluding fully secured government deposits, at March 31, 2026, were $499.6 million, or 32% of total deposits, and $478.4 million, or 31% of total deposits at December 31, 2025.

Uninsured and uncollateralized deposits were $312.5 million, or 20% of total deposits, at June 30, 2026, and $323.5 million, or 21% of total deposits, at December 31, 2025.

Uninsured deposits alone, i.e., excluding fully secured government deposits, at June 30, 2026, were $479.4 million, or 31% of total deposits, and $478.4 million, or 31% of total deposits at December 31, 2025.

8 unchanged sentences

Our borrowing arrangement with the FHLB calls for pledging certain qualified real estate, commercial and industrial loans, and borrowing up to 75% of the value of those loans, not to exceed 35% of the Bank’s total assets.

Currently, we have approximately $410.1 million available to borrow under this arrangement, supported by loan collateral as of March 31, 2026.

Currently, we have approximately $427.5 million available to borrow under this arrangement, supported by loan collateral as of June 30, 2026.

We also had borrowing capacity of $23.7 million at the Federal Reserve Bank.

The Bank maintains $70 million of uncommitted federal funds purchased lines with correspondent banks as part of our contingency funding plan.

While the Bank does not have formal brokered certificate lines of credit with counterparties at March 31, 2026, we believe that the Bank could access this market based on dialogue with selected brokers used in the past, which provides an additional potential source of liquidity, as further evidenced by access to this market during the past four quarters.

While the Bank does not have formal brokered certificate lines of credit with counterparties at June 30, 2026, we believe that the Bank could access this market based on dialogue with selected brokers used in the past, which provides an additional potential source of liquidity, as further evidenced by access to this market during the past four quarters.

See Note 7, “Federal Home Loan Bank and Other Borrowings” of “Notes to Consolidated Financial Statements” which are included in Part I, Item 1, “Financial Statements and Supplementary Data” of this Form 10-Q, for further detail.

1 unchanged sentence

Management believes that our liquidity is adequate, and to management’s knowledge, there are no known events or uncertainties that will result or are likely to reasonably result in a material increase or decrease in our liquidity.

Off-Balance Sheet Liabilities .

Off-Balance Sheet Arrangements .

In the ordinary course of business, the Bank has entered into off-balance sheet financial instruments, issued to meet customer financial needs.

1 unchanged sentence

These instruments include unused commitments for lines of credit, overdraft protection lines of credit and home equity lines of credit, as well as commitments to extend credit.

As of March 31, 2026, the Company had approximately $332.0 million in unused loan commitments, compared to approximately $198.8 million in unused commitments as of December 31, 2025.

In addition, there are $3.0 million of commitments for contributions of capital to an SBIC and an investment company at March 31, 2026.

As of June 30, 2026, the Company had approximately $228.0 million in unused loan commitments, compared to approximately $198.8 million in unused commitments as of December 31, 2025.

In addition, there are $2.8 million of commitments for contributions of capital to an SBIC and an investment company at June 30, 2026.

These commitments totaled $3.2 million at December 31, 2025.

Capital Resources.

As of March 31, 2026, and December 31, 2025, the amounts and ratios for our capital levels are noted below for the Bank and the Company.

As of June 30, 2026, and December 31, 2025, the amounts and ratios for our capital levels are noted below for the Bank and the Company.

Below are the amounts and ratios for our capital levels as of the dates noted below for the Bank:

4 unchanged sentences

Amount Ratio Amount Ratio Amount Ratio

As of March 31, 2026 (Unaudited)

As of June 30, 2026 (Unaudited)

Total capital (to risk weighted assets) $ 217,120 14.2 % $ 122,375 > = 8.0 % $ 152,969 > = 10.0 %

7 unchanged sentences

Tier 1 leverage ratio (to adjusted total assets) 194,639 11.3 % 68,711 > = 4.0 % 85,888 > = 5.0 %

At March 31, 2026, and December 31, 2025, the Bank was categorized as “Well Capitalized” under Prompt Corrective Action Provisions, as determined by the OCC, our primary regulator.

At June 30, 2026, and December 31, 2025, the Bank was categorized as “Well Capitalized” under Prompt Corrective Action Provisions, as determined by the OCC, our primary regulator.

Below are the amounts and ratios for our capital levels as of the dates noted below for the Company:

1 unchanged sentence

Amount Ratio Amount Ratio

As of March 31, 2026 (Unaudited)

As of June 30, 2026 (Unaudited)

Total capital (to risk weighted assets) $ 225,950 14.7 % $ 122,605 > = 8.0 %

8 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis