What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-05-08 compared with 2025-11-07 · 151 added, 229 removed, 434 unchanged (47% of the section changed)

5 unchanged sentences

Actual results may differ materially from those contemplated by the forward-looking statements due to, among others, such possible events or factors such as:

changes in economic conditions generally or in the Company's market area, changes in policies by regulatory agencies, governmental legislation and regulation, tariffs and trade disruptions, fluctuations in interest rates, changes in liquidity requirements, demand for loans in the Company’s market area, changes in accounting and tax principles, estimates made on income taxes, competition with other entities that offer financial services, cybersecurity threats, economic or other disruptions caused by acts of terrorism, war or other conflicts, changes in geopolitical conditions, natural disasters, such as hurricanes, wild fires, freezes, flooding and other man-made disasters, health emergencies, epidemics or pandemics, climate changes or other catastrophic events and such other factors as described in the forward-looking statements under the caption Risk Factors in Item 1A.

of the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 (the “2025 Form 10-K”), and in other reports filed by us with the Securities and Exchange Commission (“SEC”) from time to time.

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Except as required by law, the Company undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events, or changes in its business, results of operations or financial condition over time.

During the quarter ended September 30, 2025, there were no material changes to the Risk Factors disclosed in the Company’s 2024 Annual Report on Form 10-K.

During the quarter ended March 31, 2026, there were no material changes to the Risk Factors disclosed in the Company’s 2025 Form 10-K.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

6 unchanged sentences

Crucial to the Company’s community banking strategy is growth in its commercial banking services, retail mortgage lending and retail banking services.

Through the branch network of its subsidiary bank, Hawthorn Bank (the “Bank”), the Company, with $1.93 billion in assets at September 30, 2025, provides a broad range of commercial and personal banking services.

Through the branch network of its subsidiary bank, Hawthorn Bank (the “Bank”), the Company, with $1.86 billion in assets at March 31, 2026, provides a broad range of commercial and personal banking services.

The Bank's specialties include commercial banking for small and mid-sized businesses, including equipment, operating, commercial real estate, Small Business Administration (“SBA”) loans, and personal banking services including real estate mortgage lending, installment and consumer loans, certificates of deposit, individual retirement and other time deposit accounts, checking accounts, savings accounts, and money market accounts.

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Furthermore, the success of the Company's growth strategy depends on its ability to maintain sufficient regulatory capital levels during periods in which general economic conditions are unfavorable and despite economic conditions being beyond its control.

The Company's subsidiary bank is a full-service bank that conducts general banking business, offering its customers checking and savings accounts, debit cards, certificates of deposit, safety deposit boxes and a wide range of lending services, including commercial and industrial loans, residential real estate loans, single payment personal loans, installment loans and credit card accounts.

In addition, the Bank provides trust and brokerage services.

The deposit accounts of the Bank are insured by the Federal Deposit Insurance Corporation (“FDIC”) to the extent provided by law.

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The Company is subject to supervision and examination by the Board of Governors of the Federal Reserve System.

The Wealth Management segment was immaterial to the Company’s total consolidated operating results for the periods presented in this report.

Accordingly, for presentation purposes, the financial information and discussion below is presented on an aggregated basis, except as otherwise noted.

Refer to Note 15, “Segment Information,” in the Company’s consolidated financial statements of further details regarding the financial results of each segment.

Executive Summary

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There can be no assurances that actual results will not differ from those estimates.

As of and for the As of and for the

Three Months Ended September 30, Nine Months Ended September 30,

As of and for the

Three Months Ended March 31,

(dollars in thousands, except per share data) 2026 2025

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Performance Ratios

Return on total assets 1.33% 1.00% 1.30% 1.00%

Return on stockholders' equity 15.21 12.87 15.13 13.24

Return on average total assets 1.26% 1.20%

Return on average stockholders' equity 13.07 14.29

Efficiency ratio (1)

62.30 66.23 63.68 67.73

Net interest margin, fully tax-equivalent 4.07 3.67

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(2) Book value per share is calculated using weighted average shares.

As of and for the Three Months Ended As of and for the Nine Months Ended

September 30, September 30,

As of and for the Three Months Ended

(dollars in thousands, except per share data) 2026 2025

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Results of Operations Highlights:

Consolidated net income was $6.1 million, or $0.88 per diluted share, and $17.6 million, or $2.53 per diluted share, for the three and nine months ended September 30, 2025, respectively, compared to $4.6 million, or $0.66 per diluted share, and $13.7 million, or $1.95 per diluted share, for the three and nine months ended September 30, 2024, respectively.

For the three and nine months ended September 30, 2025, the return on average assets was 1.33% and 1.30%, respectively, the return on average stockholders’ equity was 15.21% and 15.13%, respectively, and the efficiency ratio was 62.30% and 63.68%, respectively.

Net interest income was $16.9 million and $48.3 million for the three and nine months ended September 30, 2025, respectively, compared to $14.3 million and $43.2 million for the three and nine months ended September 30, 2024, respectively.

Net interest margin, on a fully taxable equivalent (“FTE”) basis, was 3.97% and 3.85% for the three and nine months ended September 30, 2025, respectively, compared to 3.36% for both the three and nine months ended September 30, 2024.

The change to net interest margin on a fully taxable equivalent basis is discussed in greater detail under the Average Balance Sheet Data and Rate and Volume Analysis sections.

Non-interest income was $3.7 million and $10.7 million for the three and nine months ended September 30, 2025, respectively, compared to $3.8 million and $10.8 million for the three and nine months ended September 30, 2024, respectively.

Consolidated net income was $5.7 million, or $0.83 per diluted share for the three months ended March 31, 2026, compared to $5.4 million, or $0.77 per diluted share, for the three months ended March 31, 2025.

For the three months ended March 31, 2026, the return on average assets was 1.26%, the return on average stockholders’ equity was 13.07%, and the efficiency ratio was 64.29%.

Net interest income was $17.1 million for the three months ended March 31, 2026, compared to $15.3 million for the three months ended March 31, 2025.

Net interest margin, on a fully taxable equivalent (“FTE”) basis, was 4.07% for the three months ended March 31, 2026, compared to 3.67% for the three months ended March 31, 2025.

The change to net interest margin on an FTE basis is discussed in greater detail under the Average Balance Sheet Data and Rate and Volume Analysis sections.

Non-interest income was $3.1 million for the three months ended March 31, 2026, compared to $3.5 million for the three months ended March 31, 2025.

These changes are discussed in greater detail under the Non-interest Income and Expense section.

Non-interest expense was $12.8 million and $37.6 million for the three and nine months ended September 30, 2025, respectively, compared to $12.0 million and $36.6 million for the three and nine months ended September 30, 2024, respectively.

Non-interest expense was $13.0 million for the three months ended March 31, 2026, compared to $12.5 million for the three months ended March 31, 2025.

These changes are discussed in greater detail under the Non-interest Income and Expense section.

Balance Sheet Highlights:

Cash and cash equivalents – Cash and cash equivalents increased $48.9 million to $99.9 million as of September 30, 2025 compared to $51.0 million as of December 31, 2024, and increased $45.7 million compared to $54.2 million as of September 30, 2024.

Cash and cash equivalents – Cash and cash equivalents decreased $2.4 million to $101.9 million as of March 31, 2026 compared to $104.3 million as of December 31, 2025, and decreased $0.3 million compared to $102.3 million as of March 31, 2025.

See the Liquidity Management section for further discussion.

Loans – Loans held for investment increased $47.8 million to $1.51 billion as of September 30, 2025 compared to $1.47 billion as of December 31, 2024, and increased $47.3 million compared to $1.47 billion as of September 30, 2024.

Asset quality – Non-performing assets totaled $7.3 million, or 0.48% of total loans, at September 30, 2025 compared to $4.2 million, or 0.29% of total loans, at December 31, 2024 and $8.5 million, or 0.58% of total loans, at September 30, 2024.

In the third quarter of 2025, the Company had net loan charge-offs of $0.04 million, or 0.01% of average loans, compared to net loan charge-offs $0.6 million, or 0.17% of average loans, in the same prior year quarter.

The allowance for credit losses was $21.9 million, or 1.45% of loans outstanding, at September 30, 2025 compared to $22.0 million, or 1.50% of loans outstanding, at December 31, 2024, and $21.9 million, or 1.50% of loans outstanding at September 30, 2024.

Loans – Loans held for investment decreased $32.6 million to $1.45 billion as of March 31, 2026 compared to $1.49 billion as of December 31, 2025, and decreased $16.2 million compared to $1.47 billion as of March 31, 2025.

Asset quality – Non-performing assets totaled $6.9 million, or 0.47% of total loans, at March 31, 2026 compared to $7.0 million, or 0.47% of total loans, at December 31, 2025 and $3.1 million, or 0.21% of total loans, at March 31, 2025.

In the first quarter of 2026, the Company had net loan charge-offs of $0.06 million, or 0.02% of average loans, compared to net loan recoveries of $0.02 million, or 0.01% of average loans, in the same prior year quarter.

The allowance for credit losses was $20.9 million, or 1.44% of loans outstanding, at March 31, 2026 compared to $21.1 million, or 1.42% of loans outstanding, at December 31, 2025, and $21.8 million, or 1.48% of loans outstanding, at March 31, 2025.

These changes are discussed in greater detail under the Lending and Credit Management section.

Deposit s – Total deposits decreased $7.3 million to $1.53 billion as of September 30, 2025 compared to $1.53 billion as of December 31, 2024, and increased $22.4 million compared to $1.50 billion as of September 30, 2024.

Federal Home Loan Bank (“FHLB”) advances and other borrowings – Total FHLB advances and other borrowings increased $95.6 million to $177.1 million as of September 30, 2025, compared to $81.5 million as of December 31, 2024, and increased $80.6 million compared to $96.5 million as of September 30, 2024.

Deposit s – Total deposits decreased $35.8 million to $1.52 billion as of March 31, 2026 compared to $1.55 billion as of December 31, 2025, and decreased $25.6 million compared to $1.54 billion as of March 31, 2025.

Federal Home Loan Bank (“FHLB”) advances and other borrowings – Total FHLB advances and other borrowings decreased $7.7 million to $94.4 million as of March 31, 2026, compared to $102.1 million as of December 31, 2025, and decreased $29.7 million compared to $124.1 million as of March 31, 2025.

Capital – The Company maintains its “well-capitalized” regulatory capital position.

At September 30, 2025, capital ratios were as follows:

At March 31, 2026, capital ratios were as follows:

total risk-based capital to risk-weighted assets 15.84%;

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It is affected both by changes in the level of interest rates and changes in the amounts and mix of interest earning assets and interest bearing liabilities.

The following tables present average balance sheet data, net interest income, average yields of earning assets, average costs of interest bearing liabilities, net interest spread and net interest margin on an FTE basis for each of the three and nine month periods ended September 30, 2025 and 2024, respectively.

The following tables present average balance sheet data, net interest income, average yields of earning assets, average costs of interest bearing liabilities, net interest spread and net interest margin on an FTE basis for each of the three month periods ended March 31, 2026 and 2025, respectively.

The average balances used in this table and other statistical data were calculated using average daily balances.

Three Months Ended September 30,

(dollars in thousands) Average Balance Interest Income/ Expense (1)

Rate Earned/ Paid (1)

Average Balance Interest Income/ Expense (1)

Rate Earned/ Paid (1)

Commercial $ 214,213 $ 3,821 7.08% $ 210,783 $ 3,592 6.78%

Real estate construction - residential 31,032 598 7.65 35,611 717 8.01

Real estate construction - commercial 64,791 1,277 7.82 61,546 1,269 8.20

Real estate mortgage - residential 378,863 5,597 5.86 369,068 5,235 5.64

Real estate mortgage - commercial 778,290 11,320 5.77 792,668 10,727 5.38

Installment and other consumer 10,950 186 6.74 15,977 235 5.85

Total loans 1,478,139 22,799 6.12 1,485,653 21,775 5.83

Loans held for sale 333 10 11.91 610 13 8.48

Investment securities:

Treasury 5,043 53 4.17 — — —

government and federal agency obligations 12,498 131 4.16 13,218 140 4.21

Obligations of states and political subdivisions 97,521 833 3.39 103,790 745 2.86

Mortgage-backed securities 76,014 729 3.80 61,907 530 3.41

Other debt securities 27,652 465 6.67 13,335 191 5.70

Total investment securities 218,728 2,211 4.01 192,250 1,606 3.32

Other investment securities 5,271 114 8.58 5,844 141 9.60

Interest bearing deposits in other financial institutions 21,590 256 4.70 34,099 469 5.47

Total interest earning assets 1,724,061 25,390 5.84% 1,718,456 24,004 5.56%

All other assets 126,307 117,429

Allowance for credit losses (21,688) (21,923)

Total assets $ 1,828,680 $ 1,813,962

LIABILITIES AND STOCKHOLDERS' EQUITY

Savings $ 273,814 $ 1,164 1.69% $ 273,470 $ 1,612 2.35%

NOW accounts 158,379 581 1.46 190,084 677 1.42

Interest checking 147,609 1,308 3.52 121,423 1,372 4.50

Money market 207,184 983 1.88 221,794 1,249 2.24

Time deposits 314,846 2,523 3.18 319,279 2,834 3.53

Total interest bearing deposits 1,101,832 6,559 2.36 1,126,050 7,744 2.74

Federal funds purchased and securities sold under agreements to repurchase 72 1 5.51 29 — —

Federal Home Loan Bank advances and other borrowings 86,203 718 3.30 99,293 759 3.04

Subordinated notes 49,486 860 6.89 49,486 989 7.95

Total borrowings 135,761 1,579 4.61 148,808 1,748 4.67

Total interest bearing liabilities 1,237,593 8,138 2.61% 1,274,858 9,492 2.96%

Demand deposits 417,628 385,298

Other liabilities 13,559 12,375

Total liabilities 1,668,780 1,672,531

Stockholders' equity 159,900 141,431

Total liabilities and stockholders' equity $ 1,828,680 $ 1,813,962

Net interest income (FTE) $ 17,252 $ 14,512

Net interest spread (FTE) 3.23% 2.59%

Net interest margin (FTE) 3.97% 3.36%

Nine months ended September 30,

Three Months Ended March 31,

(dollars in thousands) Average Balance Interest Income/ Expense (1)

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Net interest margin (FTE) 4.07% 3.67%

(1) Interest income and yields are presented on an FTE basis using the federal statutory income tax rate of 21%, net of nondeductible interest expense, for both the three and nine months ended September 30, 2025 and 2024.

Such adjustments totaled $0.4 million and $0.2 million for the three months ended September 30, 2025 and 2024, respectively, compared to $1.0 million and $0.6 million for the nine months ended September 30, 2025 and 2024, respectively.

(1) Interest income and yields are presented on an FTE basis using the federal statutory income tax rate of 21%, net of nondeductible interest expense, for the three months ended March 31, 2026 and 2025.

Such adjustments totaled $0.4 million and $0.2 million for the three months ended March 31, 2026 and 2025, respectively.

(2) Non-accruing loans are included in the average amounts outstanding.

Rate and Volume Analysis

The following table summarizes the changes in net interest income on an FTE basis, by major category of interest earning assets and interest bearing liabilities, identifying changes related to volumes and rates for the three and nine months ended September 30, 2025 compared to the three and nine months ending ended September 30, 2024, respectively.

The following table summarizes the changes in net interest income on an FTE basis, by major category of interest earning assets and interest bearing liabilities, identifying changes related to volumes and rates for the three months ended March 31, 2026 compared to the three months ended March 31, 2025.

The change in interest due to the combined rate/volume variance has been allocated to rate and volume changes in proportion to the absolute dollar amounts of change in each.

Three Months Ended September 30, Nine Months Ended September 30,

2024 2025 vs.

Change due to Change due to

(dollars in thousands) Total Change Average Volume Average Rate Total Change Average Volume Average Rate

Three Months Ended March 31,

Change due to

(dollars in thousands) Total Change Average Volume Average Rate

Interest income on a fully taxable equivalent basis:

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Time deposits (9,143) (760) (8,383)

Federal funds purchased and securities sold under agreements to repurchase 13 — 13

FHLB advances and other borrowings (2,460) (456) (2,004)

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Net interest income on an FTE basis $ (41,824) $ 259 $ (42,083)

Such adjustments totaled $0.4 million and $1.0 million for the three and nine months ended September 30, 2025, respectively, compared to $0.2 million and $0.6 million for the three and nine months ended September 30, 2024, respectively.

(1) Interest income and yields are presented on an FTE basis using the federal statutory income tax rate of 21%, net of nondeductible interest expense, for both the three months ended March 31, 2026 and 2025.

Such adjustments totaled $0.4 million for the three months ended March 31, 2026, compared to $0.2 million for the three months ended March 31, 2025.

(2) Non-accruing loans are included in the average amounts outstanding.

Financial results for the quarter ended September 30, 2025 compared to the quarter ended September 30, 2024, reflected an increase in net interest income on an FTE basis of $2.7 million, or 18.9%, and financial results for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 reflected an increase in net interest income on an FTE basis of $5.5 million, or 12.5%.

Measured as a percentage of average earning assets, the net interest margin (expressed on an FTE basis) increased to 3.97% for the quarter ended September 30, 2025 compared to 3.36% for the quarter ended September 30, 2024, and increased to 3.85% for the nine months ended September 30, 2025 compared to 3.36% for the nine months ended September 30, 2024.

Average interest earning assets increased $5.6 million, or 0.3%, to $1.72 billion for the quarter ended September 30, 2025 compared to $1.72 billion for the quarter ended September 30, 2024, and average interest bearing liabilities decreased $37.3 million, or 2.9%, to $1.24 billion for the quarter ended September 30, 2025 compared to $1.27 billion for the quarter ended September 30, 2024.

Average interest earning assets decreased $28.4 million, or 1.6%, to $1.71 billion for the nine months ended September 30, 2025 compared to $1.74 billion for the nine months ended September 30, 2024, and average interest bearing liabilities decreased $52.8 million, or 4.1%, to $1.24 billion for the nine months ended September 30, 2025 compared to $1.29 billion for the nine months ended September 30, 2024.

Total interest income (expressed on an FTE basis) was $25.4 million and $73.4 million for the three and nine months ended September 30, 2025, respectively, compared to $24.0 million and $72.0 million for the three and nine months ended September 30, 2024, respectively.

The Company’s rates earned on interest earning assets were 5.84% and 5.72% for the three and nine months ended September 30, 2025, respectively, compared to 5.56% and 5.52% for the three and nine months ended September 30, 2024, respectively.

Interest income on loans held for investment (expressed on an FTE basis) was $22.8 million and $65.7 million for the three and nine months ended September 30, 2025, respectively, compared to $21.8 million and $65.2 million for the three and nine months ended September 30, 2024, respectively.

Average loans outstanding decreased $7.5 million, or 0.5%, to $1.48 billion for the quarter ended September 30, 2025 compared to $1.49 billion for the quarter ended September 30, 2024.

The average yield on loans increased to 6.12% for the quarter ended September 30, 2025 compared to 5.83% for the quarter ended September 30, 2024.

Average loans outstanding decreased $41.8 million, or 2.8%, to $1.47 billion for the nine months ended September 30, 2025 compared to $1.51 billion for the nine months ended September 30, 2024.

The average yield on loans increased to 6.00% for the nine months ended September 30, 2025 compared to 5.78% for the nine months ended September 30, 2024.

Financial results for the quarter ended March 31, 2026 compared to the quarter ended March 31, 2025, reflected an increase in net interest income on an FTE basis of $1.9 million, or 12.4%.

Measured as a percentage of average earning assets, the net interest margin (expressed on an FTE basis) increased to 4.07% for the quarter ended March 31, 2026 compared to 3.67% for the quarter ended March 31, 2025.

Average interest earning assets increased $23.0 million, or 1.3%, to $1.74 billion for the quarter ended March 31, 2026 compared to $1.72 billion for the quarter ended March 31, 2025, and average interest bearing liabilities decreased $15.9 million, or 1.3%, to $1.24 billion for the quarter ended March 31, 2026 compared to $1.26 billion for the quarter ended March 31, 2025.

Total interest income (expressed on an FTE basis) was $24.8 million for the three months ended March 31, 2026, compared to $23.7 million for the three months ended March 31, 2025.

The Company’s rates earned on interest earning assets were 5.77% for the three months ended March 31, 2026, compared to 5.60% for the three months ended March 31, 2025.

Interest income on loans held for investment (expressed on an FTE basis) was $22.3 million for the three months ended March 31, 2026, compared to $21.3 million for the three months ended March 31, 2025.

Average loans outstanding increased $11.7 million, or 0.8%, to $1.48 billion for the quarter ended March 31, 2026 compared to $1.47 billion for the quarter ended March 31, 2025.

The average yield on loans increased to 6.11% for the quarter ended March 31, 2026 compared to 5.89% for the quarter ended March 31, 2025.

See the Lending and Credit Management section for further discussion of changes in the composition of the lending portfolio.

Interest income on available-for-sale securities (expressed on an FTE basis) was $2.2 million and $6.5 million for the three and nine months ended September 30, 2025, respectively, compared to $1.6 million and $4.6 million for the three and nine months ended September 30, 2024, respectively.

Average securities increased $26.5 million, or 13.8%, to $218.7 million for the quarter ended September 30, 2025 compared to $192.3 million for the quarter ended September 30, 2024.

The average yield on securities increased to 4.01% for the quarter ended September 30, 2025 compared to 3.32% for the quarter ended September 30, 2024.

Average securities increased $34.6 million, or 18.5%, to $220.9 million for the nine months ended September 30, 2025 compared to $186.3 million for the nine months ended September 30, 2024.

The average yield on securities increased to 3.95% for the nine months ended September 30, 2025 compared to 3.30% for the nine months ended September 30, 2024.

Interest income on available-for-sale securities (expressed on an FTE basis) was $1.9 million for the three months ended March 31, 2026, compared to $2.1 million for the three months ended March 31, 2025.

Average securities decreased $11.1 million, or 5.0%, to $211.2 million for the quarter ended March 31, 2026 compared to $222.3 million for the quarter ended March 31, 2025.

The average yield on securities decreased to 3.73% for the quarter ended March 31, 2026 compared to 3.76% for the quarter ended March 31, 2025.

See the Liquidity Management section for further discussion.

Total interest expense was $8.1 million and $24.1 million for the three and nine months ended September 30, 2025, respectively, compared to $9.5 million and $28.2 million for the three and nine months ended September 30, 2024, respectively.

The Company’s rates paid on interest bearing liabilities were 2.61% and 2.60% for the three and nine months ended September 30, 2025, respectively, compared to 2.96% and 2.92% for the three and nine months ended September 30, 2024, respectively.

Total interest expense was $7.3 million for the three months ended March 31, 2026, compared to $8.2 million for the three months ended March 31, 2025.

The Company’s rates paid on interest bearing liabilities were 2.39% for the three months ended March 31, 2026, compared to 2.64% for the three months ended March 31, 2025.

See the Liquidity Management section for further discussion.

Interest expense on deposits was $6.6 million and $19.9 million for the three and nine months ended September 30, 2025, respectively, compared to $7.7 million and $22.8 million for the three and nine months ended September 30, 2024, respectively.

Average interest bearing deposits decreased $24.2 million, or 2.2%, to $1.10 billion for the quarter ended September 30, 2025 compared to $1.13 billion for the quarter ended September 30, 2024.

The average cost of deposits decreased to 2.36% for the quarter ended September 30, 2025 compared to 2.74% for the quarter ended September 30, 2024.

Average interest bearing deposits decreased $21.4 million, or 1.9%, to $1.11 billion for the nine months ended September 30, 2025 compared to $1.14 billion for the nine months ended September 30, 2024.

The average cost of deposits decreased to 2.38% for the nine months ended September 30, 2025 compared to 2.68% for the nine months ended September 30, 2024.

Interest expense on borrowings was $1.6 million and $4.2 million for the three and nine months ended September 30, 2025, respectively, compared to $1.7 million and $5.4 million for the three and nine months ended September 30, 2024, respectively.

Average borrowings decreased $13.0 million, or 8.8%, to $135.8 million for the quarter ended September 30, 2025 compared to $148.8 million for the quarter ended September 30, 2024.

The average cost of borrowings decreased to 4.61% for the quarter ended September 30, 2025 compared to 4.67% for the quarter ended September 30, 2024.

Average borrowings decreased $31.3 million, or 20.3%, to $123.2 million for the nine months ended September 30, 2025 compared to $154.5 million for the nine months ended September 30, 2024.

The average cost of borrowings decreased to 4.55% for the nine months ended September 30, 2025 compared to 4.67% for the nine months ended September 30, 2024.

Interest expense on deposits was $5.9 million for the three months ended March 31, 2026, compared to $6.8 million for the three months ended March 31, 2025.

Average interest bearing deposits decreased $24.0 million, or 2.1%, to $1.11 billion for the quarter ended March 31, 2026 compared to $1.13 billion for the quarter ended March 31, 2025.

The average cost of deposits decreased to 2.15% for the quarter ended March 31, 2026 compared to 2.44% for the quarter ended March 31, 2025.

Interest expense on borrowings was $1.4 million for both the three months ended March 31, 2026 and March 31, 2025.

Average borrowings increased $8.1 million, or 6.5%, to $133.2 million for the quarter ended March 31, 2026 compared to $125.0 million for the quarter ended March 31, 2025.

The average cost of borrowings decreased to 4.33% for the quarter ended March 31, 2026 compared to 4.38% for the quarter ended March 31, 2025.

Non-interest Income

The following table shows the principal components of non-interest income for the three and nine months ended September 30, 2025 and 2024.

Three Months Ended September 30, Nine Months Ended September 30,

(dollars in thousands) 2025 2024 $ Change % Change 2025 2024 $ Change % Change

The following table shows the principal components of non-interest income for the three months ended March 31, 2026 and 2025.

Three Months Ended March 31,

(dollars in thousands) 2026 2025 $ Change % Change

Service charges and other fees $ 820 $ 914 $ (94) (10.3) %

9 unchanged sentences

(1) Total revenue is calculated as net interest income plus non-interest income.

Total non-interest income decreased $0.1 million, or 1.8%, to $3.7 million for the quarter ended September 30, 2025 compared to $3.8 million for the quarter ended September 30, 2024, and decreased $0.1 million, or 0.7%, to $10.7 million from $10.8 million for the nine months ended September 30, 2025 and September 30, 2024, respectively.

Compared to the prior year quarter, the decrease was primarily due to lower gains on sales of mortgage loans and lower net gains (losses) on sales of other real estate owned, offset by increases in wealth management revenue and service charges and other fees.

Service charges and other fees increased $0.1 million, or 6.7%, to $0.9 million for the quarter ended September 30, 2025 compared to $0.9 million for the quarter ended September 30, 2024 and increased $0.3 million, or 12.9%, to $2.8 million from $2.5 million for the nine months ended September 30, 2025 and September 30, 2024, respectively.

The increase for both the three and nine months ended September 30, 2025 was primarily attributable to an increase in service charge rates assessed on customer accounts beginning in the third quarter of 2024.

Earnings on bank-owned life insurance was $0.5 million for both quarters ended September 30, 2025 and September 30, 2024, and increased to $1.5 million for the nine months ended September 30, 2025 compared to $1.2 million for the nine months ended September 30, 2024.

Total non-interest income decreased $0.4 million, or 10.5%, to $3.1 million for the quarter ended March 31, 2026 compared to $3.5 million for the quarter ended March 31, 2025.

Compared to the prior year quarter, the decrease was primarily due to a write-down of a bank property held for sale.

No such activity occurred in the prior year quarter.

Service charges and other fees decreased $0.1 million, or 10.3%, to $0.8 million for the quarter ended March 31, 2026 compared to $0.9 million for the quarter ended March 31, 2025.

The decrease for the three months ended March 31, 2026 was primarily attributable to a decrease in overall service charges on accounts and lower NSF charges.

Earnings on bank-owned life insurance decreased to $0.49 million for the three months ended March 31, 2026 compared to $0.51 million for the three months ended March 31, 2025.

The Company purchased $35.0 million in bank-owned life insurance policies in the first quarter of 2024.

The earnings generated from these policies are primarily derived from the investment returns on the cash value component.

Wealth management revenue increased $0.2 million, or 54.3%, to $0.7 million for the quarter ended September 30, 2025 compared to $0.4 million for the quarter ended September 30, 2024.

For the nine months ended September 30, 2025,

wealth management revenue totaled $1.7 million, an increase of $0.4 million, or 33.3%, from $1.3 million for the nine months ended September 30, 2024.

The increases for both the three and nine month periods ended September 30, 2025 were primarily attributable the Company’s identification of a strategic opportunity to add resources and provide a structure for Wealth Management products and services.

Gain on sales of mortgage loans was $0.1 million for both quarters ended September 30, 2025 and September 30, 2024, and decreased to $0.3 million for the nine months ended September 30, 2025 compared to $0.8 million for the nine months ended September 30, 2024.

The Company sold mortgage loans totaling $2.2 million and $5.1 million for the three and nine months ended September 30, 2025, respectively, compared to $7.0 million and $45.0 million for the three and nine months ended September 30, 2024, respectively.

Gains (losses) on other real estate owned were zero for the quarter ended September 30, 2025 compared to gains of $0.3 million for the quarter ended September 30, 2024, and were losses of $0.2 million for the nine months ended September 30, 2025 compared to gains of $0.8 million for the nine months ended September 30, 2024.

The Company sold the remaining parcel related to a foreclosed property in the second quarter of 2024, and the Company recognized a $0.4 million release of the valuation write-down.

Moreover, the Company sold land previously intended for a new branch, resulting in a gain of $0.3 million in the third quarter of 2024.

Wealth management revenue increased $0.1 million, or 30.2%, to $0.6 million for the quarter ended March 31, 2026 compared to $0.5 million for the quarter ended March 31, 2025.

The increase for the three month period was primarily attributable to continued growth in accounts.

Gain on sales of mortgage loans decreased to $0.08 million for the three months ended March 31, 2026 compared to $0.13 million for the three months ended March 31, 2025.

The Company sold mortgage loans totaling $14.8 million for the three months ended March 31, 2026, compared to $1.2 million for the three months ended March 31, 2025.

Gains (losses) on other real estate owned were losses of $0.03 million for the quarter ended March 31, 2026 compared to gains of $0.02 million for the quarter ended March 31, 2025.

Non-interest Expense

The following table shows the principal components of non-interest expense for the three and nine months ended September 30, 2025 and 2024.

Three Months Ended September 30, Nine Months Ended September 30,

(dollars in thousands) 2025 2024 $ Change % Change 2025 2024 $ Change % Change

The following table shows the principal components of non-interest expense for the three months ended March 31, 2026 and 2025.

Three Months Ended March 31,

(dollars in thousands) 2026 2025 $ Change % Change

Salaries $ 5,369 $ 5,366 $ 3 0.1%

13 unchanged sentences

Total revenue is calculated as net interest income plus non-interest income.

Total non-interest expense increased $0.8 million, or 6.9%, to $12.8 million for the quarter ended September 30, 2025 compared to $12.0 million for the quarter ended September 30, 2024, and increased $1.0 million, or 2.7%, to $37.6 million for the nine months ended September 30, 2025 compared to $36.6 million for the nine months ended September 30, 2024.

Salaries expense increased $0.6 million, or 12.2%, to $5.7 million for the quarter ended September 30, 2025 compared to $5.1 million for the quarter ended September 30, 2024, and increased $0.8 million, or 4.8%, to $16.5 million for the nine months ended September 30, 2025 compared to $15.8 million for the nine months ended September 30, 2024.

The increases for both the three and nine months ended September 30, 2025 were primarily attributable to overall merit increases and focused recruiting efforts to hire more experienced candidates, which aligns with the Company’s overall strategic plan.

Occupancy expense, net, increased $0.1 million, or 10.4%, to $0.9 million for the quarter ended September 30, 2025 compared to $0.8 million for the quarter ended September 30, 2024, and increased $0.5 million, or 19.0%, to $2.8 million for the nine months ended September 30, 2025 compared to $2.4 million for the nine months ended September 30, 2024.

The increases for both the three and nine months ended September 30, 2025 primarily resulted from the opening of two new branch locations and one new operations facility.

Furniture and equipment expense decreased $0.1 million, or 13.2%, to $0.7 million for the quarter ended September 30, 2025 compared to $0.8 million for the quarter ended September 30, 2024, and decreased $0.1 million, or 5.2%, to $2.1 million for the nine months ended September 30, 2025 compared to $2.3 million for the nine months ended September 30, 2024.

Legal, examination and professional fees increased $0.1 million, or 24.3%, to $0.5 million for the quarter ended September 30, 2025 compared to $0.4 million for the quarter ended September 30, 2024, and decreased $0.3 million, or 18.8%, to $1.4 million for the nine months ended September 30, 2025 compared to $1.7 million for the nine months ended September 30, 2024.

Advertising and promotion increased $0.05 million, or 27.3%, to $0.3 million for the quarter ended September 30, 2025 compared to $0.2 million for the quarter ended September 30, 2024, and decreased $0.1 million, or 12.2%, to $0.6 million for the nine months ended September 30, 2025 compared to $0.7 million for the nine months ended September 30, 2024.

Postage, printing and supplies increased $0.1 million, or 64.7%, to $0.4 million for the quarter ended September 30, 2025 compared to $0.2 million for the quarter ended September 30, 2024, and increased $0.4 million, or 73.4%, to $1.0 million for the nine months ended September 30, 2025 compared to $0.6 million for the nine months ended September 30, 2024.

The increases for both the three and nine months ended September 30, 2025 were primarily the result of customer mailings related to an account consolidation project.

Income taxes as a percentage of earnings before income taxes as reported in the consolidated financial statements were 18.1% and 18.3% for the three and nine months ended September 30, 2025, respectively, compared to 18.7% and 18.2% for the three and nine months ended September 30, 2024, respectively.

The effective tax rate for each of the three and nine months ended September 30, 2025 and 2024 was lower than the U.S.

Total non-interest expense increased $0.5 million, or 4.0%, to $13.0 million for the quarter ended March 31, 2026 compared to $12.5 million for the quarter ended March 31, 2025.

Employee Benefits decreased $0.1 million, or 6.5%, to $1.4 million for the quarter ended March 31, 2026 compared to $1.5 million for the quarter ended March 31, 2025.

The decrease was primarily due to the timing of bonus payments and related payroll taxes and employer 401k match contributions, and also lower pension costs.

Occupancy expense, net, increased $0.06 million, or 6.0%, to $1.0 million for the quarter ended March 31, 2026 compared to $0.9 million for the quarter ended March 31, 2025.

The increase for the three months ended March 31, 2026 primarily resulted from the expansion of one branch and the opening of two new branch locations and one new operations facility in the first quarter of 2026.

Legal, examination, and professional fees increased $0.3 million, or 62.7%, to $0.8 million for the quarter ended March 31, 2026 compared to $0.5 million for the quarter ended March 31, 2025.

The increase was due to higher legal fees and fees related to the execution of a lease on a bank building held for sale.

Income taxes as a percentage of earnings before income taxes as reported in the consolidated financial statements were 19.5% for the three months ended March 31, 2026, compared to 18.4% for the three months ended March 31, 2025.

The effective tax rate for each of the three months ended March 31, 2026 and 2025 was lower than the U.S.

federal statutory rate of 21% primarily due to tax-free revenues.

1 unchanged sentence

Interest earned on the loan portfolio is a primary source of interest income for the Company.

Net loans represented 77.2% of total assets as of September 30, 2025 compared to 79.1% as of December 31, 2024.

Net loans represented 78.4% of total assets as of March 31, 2026 compared to 78.5% as of December 31, 2025.

Lending activities are conducted pursuant to an established loan policy approved by the Bank's Board of Directors.

3 unchanged sentences

Major classifications within the Company’s held-for-investment loan portfolio as of the dates indicated are as follows:

September 30, 2025 December 31, 2024

March 31, 2026 December 31, 2025

(dollars in thousands) Amount % of Loans Amount % of Loans

13 unchanged sentences

Additionally, CRE loans include 1-4 family property loans as well as land and development loans.

The following table shows the categories of the Company's non-owner occupied CRE loan portfolio at September 30, 2025 and December 31, 2024:

September 30, 2025 December 31, 2024

The following table shows the categories of the Company's non-owner occupied CRE loan portfolio at March 31, 2026 and December 31, 2025:

March 31, 2026 December 31, 2025

(dollars in thousands) Amount % of Loans Amount % of Loans

Multi Family $ 188,299 29.9 % $ 168,629 26.5 %

Retail $ 170,419 28.6 % $ 171,366 27.9 %

Multi Family 149,706 25.1 165,663 27.0

Hotel & Food Service 63,620 10.7 63,279 10.3

Office Buildings 52,187 8.3 47,042 7.4

Other Construction 53,476 9.0 55,947 9.1

1-4 Family Construction 35,869 5.7 32,045 5.0

Office Buildings 47,182 7.9 48,028 7.8

1-4 Family Const 42,487 7.1 39,609 6.4

Other Real Estate 24,149 4.0 24,379 4.0

Industrial 20,277 3.2 18,446 2.9

Land Subdivision 16,955 2.8 18,450 3.0

Industrial 15,480 2.6 15,765 2.6

Residential Building Construction 6,670 1.1 5,906 1.0

12 unchanged sentences

During this review, management will evaluate individual loans for expected credit losses when those loans do not share similar risk characteristics with loans evaluated using a collective (pooled) basis.

If management determines that it is probable that all amounts due on a loan will not be collected under the original terms of the loan agreement, the loan is individually analyzed and in conjunction with current economic conditions and loss experience, reserves are estimated as further discussed below.

If management determines that it is probable that all amounts due on a loan will not be collected under the

original terms of the loan agreement, the loan is individually analyzed and in conjunction with current economic conditions and loss experience, reserves are estimated as further discussed below.

Loans not individually evaluated are aggregated and collectively analyzed.

14 unchanged sentences

The model used depends on the loan portfolio segment.

believes, but there can be no assurance, that these procedures keep management informed of potential problem loans.

At September 30, 2025 and December 31, 2024, the ACL on loans included a qualitative adjustment of approximately $9.7 million and $11.2 million, respectively.

Management believes, but there can be no assurance, that these procedures keep management informed of potential problem loans.

At March 31, 2026 and December 31, 2025, the ACL on loans included a qualitative adjustment of approximately $10.0 million and $10.3 million, respectively.

Non-Performing Assets

The following table summarizes non-performing assets at the dates indicated:

September 30, December 31,

March 31, December 31,

(dollars in thousands) 2026 2025

1 unchanged sentence

Commercial, financial, and agricultural $ 834 $ 1,003

Real estate construction − residential — 454

Real estate construction − commercial — 49

Real estate mortgage − residential 5,714 5,656

6 unchanged sentences

Installment and other consumer 6 —

Total 855 210

Total non-performing loans (1)

13 unchanged sentences

(2) Non-performing assets include non-performing loans and other real estate owned and repossessed assets.

Total non-performing assets were $7.3 million, or 0.48% of total loans, at September 30, 2025 compared to $4.2 million, or 0.29% of total loans, at December 31, 2024.

Total non-accrual loans at September 30, 2025 increased $1.5 million, or 59.9%, to $4.1 million compared to $2.5 million at December 31, 2024.

The increase in non-accrual loans since December 31, 2024 was primarily due to the movement of one commercial relationship to non-accrual status.

There were $0.9 million in loans past due 90 days and still accruing interest at September 30, 2025 compared to $0.2 million at December 31, 2024.

Other real estate and repossessed assets were $2.4 million and $1.4 million at September 30, 2025 and December 31, 2024, respectively.

Total non-performing assets were $6.9 million, or 0.47% of total loans, at March 31, 2026 compared to $7.0 million, or 0.47% of total loans, at December 31, 2025.

Total non-accrual loans at March 31, 2026 decreased $0.1 million, or 0.8%, to $6.8 million compared to $6.8 million at December 31, 2025.

There were $0.01 million in loans past due 90 days and still accruing interest at March 31, 2026 compared to $0.03 million at December 31, 2025.

Other real estate and repossessed assets were $0.1 million at both March 31, 2026 and December 31, 2025.

Provision and Allowance for Credit Losses on Loans and Liability for Unfunded Commitments

1 unchanged sentence

The following table is a summary of the allocation of the allowance for credit losses at the end of the periods shown below:

September 30, 2025 December 31, 2024

March 31, 2026 December 31, 2025

(dollars in thousands) Amount % of loans to total loans Amount % of loans to total loans

5 unchanged sentences

Installment and other consumer 96 0.6 100 0.7

Unallocated 229 — (68) —

Total $ 20,933 100.0 % $ 21,111 100.0 %

The allowance for credit losses was $21.9 million, or 1.45% of loans outstanding, at September 30, 2025 compared to $22.0 million, or 1.50% of loans outstanding, at December 31, 2024.

The ratio of the allowance for credit losses to non-performing loans was 446.02% at September 30, 2025, compared to 802.48% at December 31, 2024.

The allowance for credit losses was $20.9 million, or 1.44% of loans outstanding, at March 31, 2026 compared to $21.1 million, or 1.42% of loans outstanding, at December 31, 2025.

The ratio of the allowance for credit losses to non-performing loans was 308.25% at March 31, 2026, compared to 307.52% at December 31, 2025.

Provision for (Release of) Credit Losses

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(dollars in thousands) 2026 2025

Provision for (release of) credit losses on loans $ 375 $ 593 $ (66) $ 875

(Release of) provision for credit losses for off-balance sheet commitments — (93) 50 (149)

Release of credit losses on loans $ (120) $ (282)

Provision for (release of) credit losses for off-balance sheet commitments 193 (58)

Total provision for (release of) credit losses $ 73 $ (340)

The Company recognized provision for credit losses of $0.4 million and a release of provision for credit losses of $0.02 million for the three and nine months ended September 30, 2025, respectively, compared to $0.5 million and $0.7 million of provision for credit losses for the three and nine months ended September 30, 2024, respectively.

The Company recognized provision for credit losses of $0.1 million for the three months ended March 31, 2026, compared to a $0.3 million release of credit losses for the three months ended March 31, 2025.

The following table summarizes the credit loss experience for the periods indicated:

Three Months Ended September 30,

(dollars in thousands) Net (Charge-offs) Recoveries Average Loans Net (Charge-offs) Recoveries / Average Loans (1)

Net (Charge-offs) Recoveries Average Loans Net (Charge-offs) Recoveries / Average Loans (1)

Commercial, financial, and agricultural $ 25 $ 214,213 0.05 % $ (254) $ 210,783 (0.48) %

Real estate construction − residential

— 31,032 — — 35,611 —

Real estate construction − commercial

— 64,791 — — 61,546 —

Real estate mortgage − residential

13 378,863 0.01 7 369,068 0.01

Real estate mortgage − commercial

(4) 778,290 — (343) 792,668 (0.17)

Installment and other consumer (75) 10,950 (2.72) (46) 15,977 (1.15)

Total $ (41) $ 1,478,139 (0.01) % $ (636) $ 1,485,653 (0.17) %

Nine Months Ended September 30,

Three Months Ended March 31,

(dollars in thousands) Net (Charge-offs) Recoveries Average Loans Net (Charge-offs) Recoveries / Average Loans (1)

13 unchanged sentences

Net Loan Charge-Offs/Recoveries

The Company’s net charge-offs were $0.04 million and $0.07 million for the three and nine months ended September 30, 2025, respectively, compared to $0.6 million and $2.7 million of net charge-offs for the three and nine months ended September 30, 2024, respectively.

The Company’s net charge-offs were $0.06 million for the three months ended March 31, 2026, compared to $0.02 million of net charge-offs for the three months ended March 31, 2025.

Loans Held for Sale

2 unchanged sentences

The loans are primarily sold to Freddie Mac, Fannie Mae, PennyMac and various other secondary market investors.

There were $1.4 million loans held for sale at September 30, 2025, and no loans held for sale at December 31, 2024.

There were $1.0 thousand of loans held for sale at March 31, 2026, and $0.6 million loans held for sale at December 31, 2025.

The Company generally does not retain long-term fixed rate residential mortgage loans in its portfolio.

Fixed rate loans conforming to standards required by the secondary market are offered to qualified borrowers but are not funded until the Company has a non-recourse purchase commitment from the secondary market at a predetermined price.

During the nine months ended September 30, 2025, the Company sold approximately $5.1 million of loans to investors compared to $45.0 million for the nine months ended September 30, 2024.

During the three months ended March 31, 2026, the Company sold approximately $14.8 million of loans to investors compared to $1.2 million for the three months ended March 31, 2025.

Liquidity and Capital Resources

8 unchanged sentences

The Company has a number of sources of funds to meet liquidity needs on a daily basis.

The Company’s most liquid assets are comprised of available-for-sale investment securities, not including other debt securities, federal funds sold, and excess reserves held at the Federal Reserve.

The following table shows the Company’s sources of funds as of September 30, 2025 and December 31, 2024.

(dollars in thousands) September 30, 2025 December 31, 2024

The Company’s most liquid assets are comprised of available-for-sale investment securities, not including other debt securities, federal funds sold, and excess

reserves held at the Federal Reserve.

The following table shows the Company’s sources of funds as of March 31, 2026 and December 31, 2025.

(dollars in thousands) March 31, 2026 December 31, 2025

Other interest bearing deposits $ 88,549 $ 87,680

3 unchanged sentences

Federal funds sold and resale agreements normally have overnight maturities and are used for general daily liquidity purposes.

The fair value of the available-for-sale investment portfolio was $216.7 million at September 30, 2025 and included an unrealized net loss of $24.7 million.

The fair value of the available-for-sale investment portfolio was $205.2 million at March 31, 2026 and included an unrealized net loss of $24.3 million.

The portfolio includes projected maturities and mortgage-backed securities pay-downs of approximately $1.5 million over the next twelve months, which offer resources to meet either new loan demand or reductions in the Company’s borrowings.

The Company pledges portions of its investment securities portfolio to secure public fund deposits, federal funds purchase lines, securities sold under agreements to repurchase, borrowing capacity at the Federal Reserve Bank, and for other purposes as required or permitted by law.

At September 30, 2025 and December 31, 2024, the Company’s unpledged securities in the available-for-sale portfolio totaled approximately $124.1 million and $136.3 million, respectively.

Total investment securities pledged for these purposes were as follows as of September 30, 2025 and December 31, 2024:

(dollars in thousands) September 30, 2025 December 31, 2024

At March 31, 2026 and December 31, 2025, the Company’s unpledged securities in the available-for-sale portfolio totaled approximately $99.6 million and $108.5 million, respectively.

Total investment securities pledged for these purposes were as follows as of March 31, 2026 and December 31, 2025:

(dollars in thousands) March 31, 2026 December 31, 2025

Federal Reserve Bank borrowings $ 8,071 $ 8,288

2 unchanged sentences

Liquidity is available from the Company’s base of core customer deposits, defined as demand, interest checking, savings, money market deposit accounts, and time deposits less than $250,000, less all brokered deposits under $250,000.

At September 30, 2025, such deposits totaled $1.44 billion and represented 94.1% of the Company’s total deposits.

At March 31, 2026, such deposits totaled $1.42 billion and represented 93.6% of the Company’s total deposits.

These core deposits are normally less volatile and are often tied to other products of the Company through long lasting relationships.

Core deposits at September 30, 2025 and December 31, 2024 were as follows:

(dollars in thousands) September 30, 2025 December 31, 2024

Core deposits at March 31, 2026 and December 31, 2025 were as follows:

(dollars in thousands) March 31, 2026 December 31, 2025

Non-interest bearing demand $ 425,433 $ 423,568

3 unchanged sentences

Total $ 1,421,414 $ 1,463,143

Estimated uninsured deposits totaled $339.6 million, including $89.9 million of certificates of deposit, at September 30, 2025, compared to $352.0 million, including $100.4 million of certificates of deposit, at December 31, 2024.

The Company's brokered deposits were consistent at $0.01 million at both September 30, 2025 and December 31, 2024.

Estimated uninsured deposits totaled $342.6 million, including $92.9 million of certificates of deposit, at March 31, 2026, compared to $384.6 million, including $90.5 million of certificates of deposit, at December 31, 2025.

The Company's brokered deposits were $4.0 million at March 31, 2026 and $0.5 million at December 31, 2025.

Other components of liquidity are the level of borrowings from third-party sources and the availability of future credit.

The Company’s outside borrowings are comprised of federal funds purchased, advances from the Federal Home Loan Bank (“FHLB”) and subordinated notes.

The Company’s outside borrowings are comprised of federal funds purchased, advances from the FHLB and subordinated notes.

Federal funds purchased are overnight borrowings obtained mainly from upstream correspondent banks with which the Company maintains approved credit lines.

As of September 30, 2025, under agreements with these unaffiliated banks, the Bank may borrow up to $35.0 million in federal funds on an unsecured basis and $7.5 million on a secured basis.

There were no federal funds purchased outstanding at September 30, 2025.

The Company may periodically borrow additional short-term funds from the Federal Reserve Bank through the discount window, although no such borrowings were outstanding at September 30, 2025.

As of March 31, 2026, under agreements with these unaffiliated banks, the Bank may borrow up to $35.0 million in federal funds on an unsecured basis and $7.5 million on a secured basis.

There were no federal funds purchased outstanding at March 31, 2026.

The Company may periodically borrow additional short-

term funds from the Federal Reserve Bank through the discount window, although no such borrowings were outstanding at March 31, 2026.

The Bank is a member of the FHLB and has access to credit products of the FHLB.

As of September 30, 2025, the Bank had $177.0 million in outstanding borrowings with the FHLB.

As of March 31, 2026, the Bank had $94.3 million in outstanding borrowings with the FHLB.

In addition, the Company has $49.5 million in outstanding subordinated notes issued to wholly-owned grantor trusts, funded by preferred securities issued by the trusts.

Borrowings outstanding at September 30, 2025 and December 31, 2024 were as follows:

(dollars in thousands) September 30, 2025 December 31, 2024

Borrowings outstanding at March 31, 2026 and December 31, 2025 were as follows:

(dollars in thousands) March 31, 2026 December 31, 2025

Federal Home Loan Bank advances $ 94,290 $ 102,000

6 unchanged sentences

The Federal Reserve Bank also establishes a collateral value of assets pledged to support borrowings from the discount window.

The following table reflects collateral value of assets pledged, borrowings, and letters of credit outstanding, in addition to the estimated future funding capacity available to the Company as of September 30, 2025:

September 30, 2025

March 31, 2026

(dollars in thousands) FHLB Federal Reserve Bank Federal Funds Purchased Lines Total

3 unchanged sentences

Total available $ 309,127 $ 7,518 $ 35,000 $ 351,645

At September 30, 2025, loans of $742.0 million were pledged to the FHLB as collateral for borrowings and letters of credit.

At September 30, 2025, investments with a market value of $8.1 million were pledged to secure federal funds purchase lines and borrowing capacity at the Federal Reserve Bank.

At March 31, 2026, loans of $724.6 million were pledged to the FHLB as collateral for borrowings and letters of credit.

At March 31, 2026, investments with a market value of $8.1 million were pledged to secure federal funds purchase lines and borrowing capacity at the Federal Reserve Bank.

Based upon the above, management believes the Company has more than adequate liquidity, both on balance sheet and through additional funding capacity with the FHLB, the Federal Reserve Bank and Federal funds purchased lines, to meet future anticipated liquidity needs in both the short- and long-term.

Sources and Uses of Funds

Cash and cash equivalents were $99.9 million at September 30, 2025 compared to $51.0 million at December 31, 2024 and $54.2 million at September 30, 2024.

The $45.7 million increase since September 30, 2024 resulted from changes in the various cash flows produced by operating, investing, and financing activities of the Company, as shown in the accompanying consolidated statements of cash flows for the nine months ended September 30, 2025.

Cash and cash equivalents were $101.9 million at March 31, 2026 compared to $104.3 million at December 31, 2025 and $102.3 million at March 31, 2025.

The $0.3 million decrease since March 31, 2025 resulted from changes in the various cash flows produced by operating, investing, and financing activities of the Company, as shown in the accompanying consolidated statements of cash flows for the three months ended March 31, 2026.

Cash flow provided by operating activities consists mainly of net income adjusted for certain non-cash items.

Operating activities provided total cash of $11.8 million for the nine months ended September 30, 2025.

Investing activities, consisting mainly of purchases, sales and maturities of available-for-sale securities, and changes in the level of the loan portfolio, used total cash of $44.6 million during the nine months ended September 30, 2025.

The cash outflow primarily consisted of $18.8 million in purchases of securities and a $4.2 million net increase in FHLB stock, partially offset by $26.7 million of proceeds from maturities and calls of available-for-sale securities and a $47.9 million net increase in loans held for investment.

Financing activities provided total cash of $81.7 million during the nine months ended September 30, 2025, resulting primarily from a $39.4 million increase in demand deposits, a $34.4 million net decrease in FHLB advances, and an $11.6 million increase in time deposits, partially offset by a $58.3 million decrease in interest bearing transaction accounts.

Operating activities provided total cash of $8.0 million for the three months ended March 31, 2026.

Investing activities, consisting mainly of purchases, sales and maturities of available-for-sale securities, and changes in the level of the loan portfolio, provided total cash of $33.1 million during the three months ended March 31, 2026.

The cash inflow primarily consisted of $5.9 million of proceeds from maturities and calls of available-for-sale securities, a $33.2 million net decrease in loans held for investment, and a $0.4 million net decrease in FHLB stock, partially offset by $4.5 million in purchases of securities.

Financing activities used total cash of $43.4 million during the three months ended March 31, 2026, resulting primarily from a $38.8 million decrease in interest bearing transaction accounts and a $7.7 million net decrease in FHLB advances, partially offset by a $1.1 million increase in time deposits, a $1.9 million increase in demand deposits, and a $1.9 million increase from financing obligations.

In the normal course of business, the Company enters into certain forms of off-balance sheet transactions, including unfunded loan commitments and letters of credit.

1 unchanged sentence

Management considers both on-balance sheet and off-balance sheet transactions in its evaluation of the Company’s liquidity.

The Company had $384.9 million in unused loan commitments and standby letters of credit as of September 30, 2025.

The Company had $414.4 million in unused loan commitments and standby letters of credit as of March 31, 2026.

Although the Company’s current liquidity resources are adequate to fund this commitment level, the nature of these commitments is such that the likelihood of such a funding demand is very low.

1 unchanged sentence

The Company’s ongoing liquidity needs primarily include funding its operating expenses, paying cash dividends to its shareholders and, to a lesser extent, repurchasing its shares of common stock.

The Company paid cash dividends to its shareholders totaling approximately $4.0 million and $3.7 million during the nine months ended September 30, 2025 and 2024, respectively.

The Company paid cash dividends to its shareholders totaling approximately $1.4 million and $1.3 million during the three months ended March 31, 2026 and 2025, respectively.

A large portion of the Company’s liquidity is obtained from the Bank in the form of dividends.

The Bank declared $16.0 million and $15.0 million in dividends to the Company during the nine months ended September 30, 2025 and 2024, respectively.

At September 30, 2025 and December 31, 2024, the Company had cash and cash equivalents totaling $21.8 million and $15.3 million, respectively.

The Bank declared $6.0 million and $0.0 million in dividends to the Company during the three months ended March 31, 2026 and 2025, respectively.

At March 31, 2026 and December 31, 2025, the Company had cash and cash equivalents totaling $28.4 million and $25.5 million, respectively.

Subject to declaration by the Company's Board of Directors, the Company expects to continue paying quarterly cash dividends as a part of its current capital allocation strategy.

4 unchanged sentences

The program has no termination date, may be suspended or discontinued at any time and does not obligate the Company to acquire any amount of common stock.

The Company repurchased 90,466 common shares under its repurchase programs during the first nine months of 2025 at an average cost of $27.72 per share totaling $2.5 million.

As of September 30, 2025, $8.7 million remained available for share repurchases pursuant to the Company's current repurchase program.

The Company repurchased 12,000 common shares under its repurchase programs during the first three months of 2026 at an average cost of $32.68 per share totaling $0.4 million.

As of March 31, 2026, $8.0 million remained available for share repurchases pursuant to the Company's current repurchase program.

On June 24, 2025, the Company filed a universal shelf registration statement on Form S-3 with the Securities and Exchange Commission, which became effective on July 2, 2025.

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Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios of CET1, Tier 1 and total capital to risk-weighted assets, and of Tier 1 capital to average assets, each as defined in the regulations.

Management believes, as of September 30, 2025, that the Company and the Bank meet all capital adequacy requirements to which they are subject.

Management believes, as of March 31, 2026, that the Company and the Bank meet all capital adequacy requirements to which they are subject.

Financial institutions are categorized as well capitalized or adequately capitalized, based on minimum total risk-based, Tier 1 risk-based, CET1 and Tier 1 leverage ratios.

As shown in the table below, the Company’s capital ratios exceeded the regulatory definition of adequately capitalized as of both September 30, 2025 and December 31, 2024.

As shown in the table below, the Company’s capital ratios exceeded the regulatory definition of adequately capitalized as of both March 31, 2026 and December 31, 2025.

Based upon the information in its most recently filed call report, the Bank met the capital ratios necessary to be well-capitalized.

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Because the Bank had less than $15.0 billion in total consolidated assets as of December 31, 2009, the Company is allowed to continue including its trust preferred securities, all of which were issued prior to May 19, 2010, as Tier 1 capital.

Under the Basel III Capital Rules, at both September 30, 2025 and December 31, 2024, the Company met all capital adequacy requirements and had regulatory capital ratios in excess of the levels established for well-capitalized institutions, as shown in the following table as the dates indicated:

Under the Basel III Capital Rules, at both March 31, 2026 and December 31, 2025, the Company met all capital adequacy requirements and had regulatory capital ratios in excess of the levels established for well-capitalized institutions, as shown in the following table as the dates indicated:

Actual Minimum Capital Required - Basel III Fully Phased-In Required to be Considered Well- Capitalized

(dollars in thousands) Amount Ratio Amount Ratio Amount Ratio

September 30, 2025

March 31, 2026

Total Capital (to risk-weighted assets):

24 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