What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2026-08-06 compared with 2026-05-08 · 222 added, 143 removed, 442 unchanged (45% of the section changed)

10 unchanged sentences

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

During the quarter ended June 30, 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 $1.86 billion in assets at March 31, 2026, 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 $1.77 billion in assets at June 30, 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.

13 unchanged sentences

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

On April 29, 2026, the Company entered into an agreement to acquire FSC Bancshares, Inc.

(“FSC”) in a cash-and-stock merger valued at approximately $28.3 million, with the transaction expected to close in the third quarter of 2026, subject to FSC shareholder approval and other customary closing conditions.

Refer to Note 17, “Pending Acquisition”, in the Company’s consolidated financial statements for further details regarding this pending transaction.

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.

Refer to Note 15, “Segment Information,” in the Company’s consolidated financial statements for 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

Three Months Ended March 31,

As of and for the As of and for the

Three Months Ended June 30, Six Months Ended June 30,

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

Net interest income $ 17,258 $ 16,142 $ 34,360 $ 31,436

Provision for (release of) for credit losses 73 (340)

Provision for (release of) credit losses 238 (51) 311 (391)

Non-interest income 5,377 3,545 8,477 7,008

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Efficiency ratio (1)

60.73 62.32 62.44 64.43

Net interest margin, fully tax-equivalent 4.16 3.89 4.11 3.78

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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 Three Months Ended As of and for the Six Months Ended

June 30, June 30,

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

18 unchanged sentences

Results of Operations Highlights:

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.

Consolidated net income was $7.3 million, or $1.06 per diluted share, and $13.1 million, or $1.89 per diluted share, for the three and six months ended June 30, 2026, respectively, compared to $6.1 million, or $0.88 per diluted share, and $11.5 million, or $1.65 per diluted share, for the three and six months ended June 30, 2025, respectively.

For the three and six months ended June 30, 2026, the return on average assets was 1.63% and 1.45%, respectively, the return on average stockholders’ equity was 16.39% and 14.74%, respectively, and the efficiency ratio was 60.73% and 62.44%, respectively.

Net interest income was $17.3 million and $34.4 million for the three and six months ended June 30, 2026, respectively, compared to $16.1 million and $31.4 million for the three and six months ended June 30, 2025, respectively.

Net interest margin, on a fully taxable equivalent (“FTE”) basis, was 4.16% and 4.11% for the three and six months ended June 30, 2026, respectively, compared to 3.89% and 3.78% for the three and six months ended June 30, 2025, respectively.

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.

Non-interest income was $5.4 million and $8.5 million for the three and six months ended June 30, 2026, respectively, compared to $3.5 million and $7.0 million for the three and six months ended June 30, 2025, respectively.

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

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.

Non-interest expense was $13.7 million and $26.7 million for the three and six months ended June 30, 2026, respectively, compared to $12.3 million and $24.8 million for the three and six months ended June 30, 2025, respectively.

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 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.

Cash and cash equivalents – Cash and cash equivalents decreased $71.6 million to $32.7 million as of June 30, 2026 compared to $104.3 million as of December 31, 2025, and decreased $67.6 million compared to $100.3 million as of June 30, 2025.

See the Liquidity Management section for further discussion.

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.

Loans – Loans held for investment decreased $70.4 million to $1.42 billion as of June 30, 2026 compared to $1.49 billion as of December 31, 2025, and decreased $46.5 million compared to $1.46 billion as of June 30, 2025.

Asset quality – Non-performing assets totaled $7.5 million, or 0.53% of total loans, at June 30, 2026 compared to $7.0 million, or 0.47% of total loans, at December 31, 2025 and $5.2 million, or 0.35% of total loans, at June 30, 2025.

In the second quarter of 2026, the Company had net loan charge-offs of $0.14 million, or 0.04% of average loans, compared to net loan charge-offs of $0.05 million, or 0.01% of average loans, in the same prior year quarter.

The allowance for credit losses was $20.7 million, or 1.46% of loans outstanding, at June 30, 2026 compared to $21.1 million, or 1.42% of loans outstanding, at December 31, 2025, and $21.6 million, or 1.47% of loans outstanding, at June 30, 2025.

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

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.

Deposit s – Total deposits decreased $66.0 million to $1.49 billion as of June 30, 2026 compared to $1.55 billion as of December 31, 2025, and decreased $29.8 million compared to $1.52 billion as of June 30, 2025.

Federal Home Loan Bank (“FHLB”) advances and other borrowings – Total FHLB advances and other borrowings decreased $72.7 million to $29.4 million as of June 30, 2026, compared to $102.1 million as of December 31, 2025, and decreased $110.7 million compared to $140.1 million as of June 30, 2025.

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

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

At June 30, 2026, capital ratios were as follows:

total risk-based capital to risk-weighted assets 16.40%;

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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 month periods ended March 31, 2026 and 2025, 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 and six month periods ended June 30, 2026 and 2025, respectively.

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

Three Months Ended March 31,

Three Months Ended June 30,

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

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Net interest margin (FTE) 4.16% 3.89%

(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.

(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 June 30, 2026 and 2025.

Such adjustments totaled $0.3 million and $0.4 million for the three months ended June 30, 2026 and 2025, respectively.

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

Six Months Ended June 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 $ 209,020 $ 7,247 6.99% $ 203,966 $ 6,672 6.60%

Real estate construction - residential 40,665 1,491 7.39 29,317 1,146 7.88

Real estate construction - commercial 85,237 3,230 7.64 73,268 2,791 7.68

Real estate mortgage - residential 365,980 10,421 5.74 370,800 10,686 5.81

Real estate mortgage - commercial 741,253 21,553 5.86 768,940 21,223 5.57

Installment and other consumer 9,260 302 6.58 12,623 401 6.41

Total loans $ 1,451,415 $ 44,244 6.15% $ 1,458,914 $ 42,919 5.93%

Loans held for sale 951 7 1.48% 130 5 7.76%

Investment securities:

Treasury 5,514 115 4.21 4,984 105 4.25

government and federal agency obligations 4,248 73 3.47 13,228 281 4.28

Obligations of states and political subdivisions 103,189 1,615 3.16 99,342 1,671 3.39

Mortgage-backed securities 73,367 1,400 3.85 79,345 1,543 3.92

Other debt securities 29,801 889 6.02 25,091 721 5.79

Total investment securities 216,119 4,092 3.82 221,990 4,321 3.93

Other investment securities 4,901 212 8.72 4,422 205 9.35

Federal funds sold — — — — — —

Interest bearing deposits in other financial institutions 44,585 886 4.01 23,818 539 4.56

Total interest earning assets $ 1,717,971 $ 49,441 5.80% $ 1,709,274 $ 47,989 5.66%

All other assets 126,320 121,496

Allowance for credit losses (21,226) (22,034)

Total assets $ 1,823,065 $ 1,808,736

LIABILITIES AND STOCKHOLDERS' EQUITY

Savings $ 261,397 $ 1,776 1.37% $ 273,648 $ 2,505 1.85%

NOW accounts 167,456 1,242 1.50 197,537 1,407 1.44

Interest checking 172,568 2,626 3.07 141,637 2,667 3.80

Money market 186,199 1,526 1.65 206,561 1,856 1.81

Time deposits 301,084 4,386 2.94 301,580 4,886 3.27

Total interest bearing deposits 1,088,704 11,556 2.14 1,120,963 13,321 2.40

Federal funds purchased and securities sold under agreements to repurchase 4 26 1310.77 51 1 3.95

Federal Home Loan Bank advances and other borrowings 78,409 1,252 3.22 67,304 903 2.71

Subordinated notes 49,486 1,552 6.32 49,486 1,708 6.96

Total borrowings 127,899 2,830 4.46 116,841 2,612 4.51

Total interest bearing liabilities $ 1,216,603 $ 14,386 2.38% $ 1,237,804 $ 15,933 2.60%

Demand deposits 411,607 404,945

Other liabilities 16,116 12,437

Total liabilities $ 1,644,326 $ 1,655,186

Stockholders' equity 178,739 153,550

Total liabilities and stockholders' equity $ 1,823,065 $ 1,808,736

Net interest income (FTE) $ 35,055 $ 32,056

Net interest spread (FTE) 3.42% 3.06%

Net interest margin (FTE) 4.11% 3.78%

(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 six months ended June 30, 2026 and 2025.

Such adjustments totaled $0.7 million and $0.6 million for the six months ended June 30, 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 months ended March 31, 2026 compared to the three months ended March 31, 2025.

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 six months ended June 30, 2026 compared to the three and six months ended June 30, 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 March 31,

Change due to

(dollars in thousands) Total Change Average Volume Average Rate

Three Months Ended June 30, Six Months Ended June 30,

2025 2026 vs.

Change due to Change due to

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

Interest income on a fully taxable equivalent basis:

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Net interest income on an FTE basis $ 1,068 $ (59) $ 1,127 $ 2,999 $ 230 $ 2,769

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.

(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 each of the three and six months ended June 30, 2026 and 2025.

Such adjustments totaled $0.3 million and $0.7 million for the three and six months ended June 30, 2026, respectively, compared to $0.4 million and $0.6 million for the three and six months ended June 30, 2025, respectively.

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

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.

Financial results for the quarter ended June 30, 2026 compared to the quarter ended June 30, 2025, reflected an increase in net interest income on an FTE basis of $1.1 million, or 6.5%.

Measured as a percentage of average earning assets, the net interest margin (expressed on an FTE basis) increased to 4.16% for the quarter ended June 30, 2026 compared to 3.89% for

the quarter ended June 30, 2025 and increased to 4.11% for the six months ended June 30, 2026 compared to 3.78% for the six months ended June 30, 2025.

Average interest earning assets remained consistent at $1.70 billion for the quarters ended June 30, 2026 and June 30, 2025, and average interest bearing liabilities decreased $26.5 million, or 2.2%, to $1.19 billion for the quarter ended June 30, 2026 compared to $1.22 billion for the quarter ended June 30, 2025.

Average interest earning assets increased $8.7 million, or 0.5%, to $1.72 billion for the six months ended June 30, 2026 compared to $1.71 billion for the six months ended June 30, 2025, and average interest bearing liabilities decreased $21.2 million, or 1.7%, to $1.22 billion for the six months ended June 30, 2026 compared to $1.24 billion for the six months ended June 30, 2025.

Total interest income (expressed on an FTE basis) was $24.7 million and $49.4 million for the three and six months ended June 30, 2026, respectively, compared to $24.3 million and $48.0 million for the three and six months ended June 30, 2025, respectively.

The Company’s rates earned on interest earning assets were 5.83% and 5.80% for the three and six months ended June 30, 2026, respectively, compared to 5.72% and 5.66% for the three and six months ended June 30, 2025, respectively.

Interest income on loans held for investment (expressed on an FTE basis) was $22.0 million and $44.2 million for the three and six months ended June 30, 2026, respectively, compared to $21.7 million and $42.9 million for the three and six months ended June 30, 2025, respectively.

Average loans outstanding decreased $26.5 million, or 1.8%, to $1.43 billion for the quarter ended June 30, 2026 compared to $1.45 billion for the quarter ended June 30, 2025.

The average yield on loans increased to 6.18% for the quarter ended June 30, 2026 compared to 5.98% for the quarter ended June 30, 2025.

Average loans outstanding decreased $7.5 million, or 0.5%, to $1.45 billion for the six months ended ended June 30, 2026 compared to $1.46 billion for the six months ended June 30, 2025.

The average yield on loans increased to 6.15% for the six months ended June 30, 2026 compared to 5.93% for the six months ended June 30, 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 $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.

Interest income on available-for-sale securities (expressed on an FTE basis) was $2.1 million and $4.1 million for the three and six months ended June 30, 2026, respectively, compared to $2.3 million and $4.3 million for the three and six months ended June 30, 2025, respectively.

Average securities decreased $0.8 million, or 0.3%, to $220.9 million for the quarter ended June 30, 2026 compared to $221.7 million for the quarter ended June 30, 2025.

The average yield on securities decreased to 3.90% for the quarter ended June 30, 2026 compared to 4.09% for the quarter ended June 30, 2025.

Average securities decreased $5.9 million, or 2.6%, to $216.1 million for the six months ended June 30, 2026 compared to $222.0 million for the six months ended June 30, 2025.

The average yield on securities decreased to 3.82% for the six months ended June 30, 2026 compared to 3.93% for the six months ended June 30, 2025.

See the Liquidity Management section for further discussion.

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.

Total interest expense was $7.1 million and $14.4 million for the three and six months ended June 30, 2026, respectively, compared to $7.8 million and $15.9 million for the three and six months ended June 30, 2025, respectively.

The Company’s rates paid on interest bearing liabilities were 2.38% for both the three and six months ended June 30, 2026, respectively, compared to 2.55% and 2.60% for the three and six months ended June 30, 2025, respectively.

See the Liquidity Management section for further discussion.

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.

Interest expense on deposits was $5.7 million and $11.6 million for the three and six months ended June 30, 2026, respectively, compared to $6.5 million and $13.3 million for the three and six months ended June 30, 2025, respectively.

Average interest bearing deposits decreased $40.4 million, or 3.6%, to $1.07 billion for the quarter ended June 30, 2026 compared to $1.11 billion for the quarter ended June 30, 2025.

The average cost of deposits decreased to 2.13% for the quarter ended June 30, 2026 compared to 2.35% for the quarter ended June 30, 2025.

Average interest bearing deposits decreased $32.3 million, or 2.9%, to $1.09 billion for the six months ended June 30, 2026 compared to $1.12 billion for the six months ended June 30, 2025.

The average cost of deposits decreased to 2.14% for the six months ended June 30, 2026 compared to 2.40% for the six months ended June 30, 2025.

Interest expense on borrowings was $1.4 million and $2.8 million for the three and six months ended June 30, 2026, respectively, compared to $1.3 million and $2.6 million for the three and six months ended June 30, 2025, respectively.

Average borrowings increased $14.0 million, or 12.8%, to $122.7 million for the quarter ended June 30, 2026 compared to $108.7 million for the quarter ended June 30, 2025.

The average cost of borrowings decreased to 4.61% for the quarter ended June 30, 2026 compared to 4.65% for the quarter ended June 30, 2025.

Average borrowings increased $11.1 million, or 9.5%, to $127.9 million for the six months ended June 30, 2026 compared to $116.8 million for the six months ended June 30, 2025.

The average cost of borrowings decreased to 4.5% for the six months ended June 30, 2026 compared to 4.51% for the six months ended June 30, 2025.

Non-interest Income

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

The following table shows the principal components of non-interest income for the three and six months ended June 30, 2026 and 2025.

Three Months Ended June 30, Six Months Ended June 30,

(dollars in thousands) 2026 2025 $ Change % Change 2026 2025 $ Change % Change

Service charges and other fees $ 815 $ 940 $ (125) (13.3) % $ 1,635 $ 1,853 $ (218) (11.8) %

9 unchanged sentences

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

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 $0.1 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.

Total non-interest income increased $1.8 million, or 51.7%, to $5.4 million for the quarter ended June 30, 2026 compared to $3.5 million for the quarter ended June 30, 2025, and increased $1.5 million, or 21.0% to $8.5 million for the six months ended June 30, 2026 compared to $7.0 million for the six months ended June 30, 2025.

The increase for the three and six months ended June 30, 2026 was primarily due to gains recorded on other real estate owned and premises and equipment held for sale.

Service charges and other fees decreased $0.1 million, or 13.3%, to $0.8 million for the quarter ended June 30, 2026 compared to $0.9 million for the quarter ended June 30, 2025, and decreased $0.2 million, or 11.8%, to $1.6 million for the six months ended June 30, 2026 compared to $1.9 million for the six months ended June 30, 2025.

The decrease for the three and six months ended June 30, 2026 was primarily attributable to a decrease in overall service charges on accounts and lower NSF charges.

Wealth management revenue increased $0.1 million, or 20.7%, to $0.7 million for the quarter ended June 30, 2026 compared to $0.5 million for the quarter ended June 30, 2025, and increased $0.3 million, or 25.0% to $1.3 million for the six months ended June 30, 2026 compared to $1.0 million for the six months ended June 30, 2025.

The increase for the three and six months ended June 30, 2026 was primarily attributable to continued growth in accounts.

Gains on other real estate owned were $0.3 million for the quarter ended June 30, 2026 compared to losses of $0.2 million for the quarter ended June 30, 2025, and gains of $0.3 million for the six months ended June 30, 2026 compared to losses of $0.2 million for the six months ended June 30, 2025.

The increase for the three and six months ended June 30, 2026 is primarily attributed to a large sale of other real estate owned during the quarter ended June 30, 2026.

Non-interest Expense

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

The following table shows the principal components of non-interest expense for the three and six months ended June 30, 2026 and 2025.

Three Months Ended June 30, Six Months Ended June 30,

(dollars in thousands) 2026 2025 $ Change % Change 2026 2025 $ Change % Change

Salaries $ 6,179 $ 5,415 $ 764 14.1% $ 11,547 $ 10,780 $ 767 7.1%

13 unchanged sentences

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

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.

Total non-interest expense increased $1.5 million, or 12.0%, to $13.7 million for the quarter ended June 30, 2026 compared to $12.3 million for the quarter ended June 30, 2025, and increased $2.0 million, or 8.0%, to $26.7 million for the six months ended June 30, 2026 compared to $24.8 million for the six months ended June 30, 2025.

Salaries increased $0.8 million, or 14.1%, to $6.2 million for the quarter ended June 30, 2026 compared to $5.4 million for the quarter ended June 30, 2025, and increased $0.8 million, or 7.1%, to $11.5 million for the six months ended June 30, 2026 compared to $10.8 million for the six months ended June 30, 2025.

The increase for the three and six months ended June 30, 2026 is attributed to incentive payouts paid during the periods and increases in number of full-time equivalent employees.

Occupancy expense, net, decreased $0.1 million, or 9.3%, to $0.9 million for the quarter ended June 30, 2026 compared to $0.9 million for the quarter ended June 30, 2025, and remained consistent at $1.9 million for the six months ended June 30, 2026 and 2025.

The decrease for the quarter ended June 30, 2026 primarily resulted from rental income received from renting a bank property that was held for sale.

That property was sold during the quarter ended June 30, 2026.

Furniture and equipment expense increased $0.1 million, or 17.5%, to $0.8 million for the quarter ended June 30, 2026 compared to $0.7 million for the quarter ended June 30, 2025 and increased $0.1 million, or 6.5%, to $1.6 million for the six months ended June 30, 2026 compared to $1.5 million for the six months ended June 30, 2025.

The increase is attributed to an increase in maintenance fees paid during the quarter.

Legal, examination, and professional fees increased $0.5 million, or 120.6%, to $0.9 million for the quarter ended June 30, 2026, compared to $0.4 million for the quarter ended June 30, 2025, and increased $0.8 million, or 89.6%, to $1.7 million for the six months ended June 30, 2026 compared to $0.9 million for the six months ended June 30, 2025.

The increase for the three and six months ended June 30, 2026 is attributed to legal and professional fees incurred for the acquisition of FSC Bancshares, Inc.

Postage, printing, and supplies decreased $0.1 million, or 40.9%, to $0.2 million for the quarter ended June 30, 2026, compared to $0.3 million for the quarter ended June 30, 2025, and decreased $0.1 million, or 21.2%, to $0.5 million for the six months ended June 30, 2026 compared to $0.6 million for the six months ended June 30, 2025.

The decrease is attributed to customer mailings sent in conjunction with an account consolidation project in the prior year quarter.

Income taxes as a percentage of earnings before income taxes as reported in the consolidated financial statements was 18.0% and 18.6% for the three and six months ended June 30, 2026, respectively, compared to 18.3% for both the three and six months ended June 30, 2025.

The effective tax rate for each of the three and six months ended June 30, 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 78.4% of total assets as of March 31, 2026 compared to 78.5% as of December 31, 2025.

Net loans represented 79.9% of total assets as of June 30, 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:

March 31, 2026 December 31, 2025

June 30, 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 March 31, 2026 and December 31, 2025:

March 31, 2026 December 31, 2025

The following table shows the categories of the Company's non-owner occupied CRE loan portfolio at June 30, 2026 and December 31, 2025:

June 30, 2026 December 31, 2025

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

4 unchanged sentences

Office Buildings 44,832 7.7 48,028 7.8

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

1-4 Family Construction 42,307 7.3 39,609 6.4

Other Real Estate 23,421 4.0 24,379 4.0

15 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.

15 unchanged sentences

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.

At June 30, 2026 and December 31, 2025, the ACL on loans included a qualitative adjustment of approximately $9.4 million and $10.3 million, respectively.

Non-Performing Assets

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

March 31, December 31,

June 30, December 31,

(dollars in thousands) 2026 2025

6 unchanged sentences

Loans contractually past due 90 days or more and still accruing:

Commercial, financial, and agricultural 2 —

Real estate mortgage − residential 156 29

15 unchanged sentences

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

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.

Total non-performing assets were $7.5 million, or 0.53% of total loans, at June 30, 2026 compared to $7.0 million, or 0.47% of total loans, at December 31, 2025.

Total non-accrual loans at June 30, 2026 decreased $0.3 million, or 5.0%, to $6.5 million compared to $6.8 million at December 31, 2025.

There were $0.16 million in loans past due 90 days and still accruing interest at June 30, 2026 compared to $0.03 million at December 31, 2025.

Other real estate and repossessed assets were $0.8 million and $0.1 million at June 30, 2026 and December 31, 2025, respectively.

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:

March 31, 2026 December 31, 2025

June 30, 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 93 0.7 100 0.7

Unallocated 162 — — —

Total $ 20,730 100.0 % $ 21,111 100.0 %

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.

The allowance for credit losses was $20.7 million, or 1.46% of loans outstanding, at June 30, 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 311.50% at June 30, 2026, compared to 307.52% at December 31, 2025.

Provision for (Release of) Credit Losses

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(dollars in thousands) 2026 2025 2026 2025

Release of credit losses on loans $ (65) $ (159) $ (185) $ (441)

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

Provision for credit losses for off-balance sheet commitments 303 108 496 50

Total provision for (release of) credit losses $ 238 $ (51) $ 311 $ (391)

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 Company recognized provision for credit losses of $0.2 million and $0.3 million for the three and six months ended June 30, 2026, respectively, compared to release of provision for credit losses $0.1 million and $0.4 million for the three and six months ended June 30, 2025, respectively.

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

Three Months Ended March 31,

Three Months Ended June 30,

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

11 unchanged sentences

Total $ (138) $ 1,426,073 (0.04) % $ (51) $ 1,452,591 — %

Six Months Ended June 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 $ (143) $ 209,020 (0.14) % $ 68 $ 203,966 0.03 %

Real estate construction − residential

— 40,665 — — 29,317 —

Real estate construction − commercial

22 85,237 0.05 — 73,268 —

Real estate mortgage − residential

10 365,980 0.01 5 370,800 —

Real estate mortgage − commercial

(24) 741,253 (0.01) 22 768,940 —

Installment and other consumer (61) 9,260 (1.33) (128) 12,623 (1.01)

Total $ (196) $ 1,451,415 (0.03) % $ (33) $ 1,458,914 — %

(1) Annualized ratio of net (charge-offs) recoveries to average loans by loan type.

Net Loan Charge-Offs/Recoveries

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.

The Company’s net charge-offs were $0.1 million and $0.2 million for the three and six months ended June 30, 2026, respectively, compared to $0.05 million and $0.03 million of net charge-offs for the three and six months ended June 30, 2025, respectively.

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

There were $0.2 million of loans held for sale at June 30, 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 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.

During the six months ended June 30, 2026, the Company sold approximately $18.1 million of loans to investors compared to $2.9 million for the six months ended June 30, 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 March 31, 2026 and December 31, 2025.

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

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 June 30, 2026 and December 31, 2025.

(dollars in thousands) June 30, 2026 December 31, 2025

Other interest bearing deposits $ 9,835 $ 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 $205.2 million at March 31, 2026 and included an unrealized net loss of $24.3 million.

The fair value of the available-for-sale investment portfolio was $233.5 million at June 30, 2026 and included an unrealized net loss of $22.2 million.

The portfolio includes projected maturities and mortgage-backed securities pay-downs of approximately $1.4 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 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

At June 30, 2026 and December 31, 2025, the Company’s unpledged securities in the available-for-sale portfolio totaled approximately $122.7 million and $108.4 million, respectively.

Total investment securities pledged for these purposes were as follows as of June 30, 2026 and December 31, 2025:

(dollars in thousands) June 30, 2026 December 31, 2025

Federal Reserve Bank borrowings $ 8,367 $ 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 March 31, 2026, such deposits totaled $1.42 billion and represented 93.6% of the Company’s total deposits.

At June 30, 2026, such deposits totaled $1.39 billion and represented 93.5% 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 March 31, 2026 and December 31, 2025 were as follows:

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

Core deposits at June 30, 2026 and December 31, 2025 were as follows:

(dollars in thousands) June 30, 2026 December 31, 2025

Non-interest bearing demand $ 416,389 $ 423,568

3 unchanged sentences

Total $ 1,392,020 $ 1,463,143

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.

Estimated uninsured deposits totaled $310.8 million, including $92.1 million of certificates of deposit, at June 30, 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 June 30, 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.

1 unchanged sentence

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

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.

As of June 30, 2026, under agreements with these unaffiliated banks, the Bank may borrow up to $35.0 million in federal funds on an unsecured basis and $7.9 million on a secured basis.

There were no federal funds purchased outstanding at June 30, 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 June 30, 2026.

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

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

As of June 30, 2026, the Bank had $29.3 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 March 31, 2026 and December 31, 2025 were as follows:

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

Borrowings outstanding at June 30, 2026 and December 31, 2025 were as follows:

(dollars in thousands) June 30, 2026 December 31, 2025

Federal Home Loan Bank advances $ 29,291 $ 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 March 31, 2026:

March 31, 2026

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

June 30, 2026 December 31, 2025

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

Advance equivalent $ 427,009 $ 7,891 $ 35,000 $ 469,900 $ 437,998 $ 7,796 $ 35,000 $ 480,794

2 unchanged sentences

Total available $ 372,894 $ 7,891 $ 35,000 $ 415,785 $ 254,373 $ 7,796 $ 35,000 $ 297,169

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.

At June 30, 2026, loans of $707.7 million were pledged to the FHLB as collateral for borrowings and letters of credit.

At June 30, 2026, investments with a market value of $8.4 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 $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 and cash equivalents were $32.7 million at June 30, 2026 compared to $104.3 million at December 31, 2025 and $100.3 million at June 30, 2025.

The $67.6 million decrease since June 30, 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 six months ended June 30, 2026.

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

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.

Operating activities provided total cash of $18.1 million for the six months ended June 30, 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 $50.4 million during the six months ended June 30, 2026.

The cash inflow primarily consisted of $11.9 million of proceeds from maturities and calls of available-for-sale securities, a $72.2 million net decrease in loans held for investment, and a $3.3 million net increase in FHLB stock, partially offset by $36.5 million in purchases of securities.

Financing activities used total cash of $140.1 million during the six months ended June 30, 2026, resulting primarily from a $51.3 million decrease in interest bearing transaction accounts, a $7.5 million decrease in time deposits, a $7.2 million decrease in demand deposits, and a $72.7 million net decrease in FHLB advances, partially offset by 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 $414.4 million in unused loan commitments and standby letters of credit as of March 31, 2026.

The Company had $404.9 million in unused loan commitments and standby letters of credit as of June 30, 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 $1.4 million and $1.3 million during the three months ended March 31, 2026 and 2025, respectively.

The Company paid cash dividends to its shareholders totaling approximately $2.8 million and $2.7 million during the six months ended June 30, 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 $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.

The Bank declared $12.0 million and $10.0 million in dividends to the Company during the six months ended June 30, 2026 and 2025, respectively.

At June 30, 2026 and December 31, 2025, the Company had cash and cash equivalents totaling $32.7 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 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.

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

As of June 30, 2026, $8.0 million remained available for share repurchases pursuant

to the Company's current repurchase program.

On July 29, 2026, the Company’s Board of Directors amended the repurchase program to increase the authorized repurchase limit to $10.0 million.

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.

The shelf registration statement is intended to provide us with financial flexibility to raise capital from the offering of up to $150 million of any combination of common stock, preferred stock, debt securities, depositary shares, warrants, purchase contracts, purchase units, subscription rights and units in one or multiple offerings while the shelf registration statement is effective.

On April 29, 2026, the Company entered into an agreement to acquire FSC Bancshares, Inc.

in a cash-and-stock merger valued at approximately $28.3 million, with the transaction expected to close in the third quarter of 2026, subject to FSC shareholder approval and other customary closing conditions.

Refer to Note 17, “Pending Acquisition”, in the Company’s consolidated financial statements for further details regarding this pending transaction.

Capital Management

8 unchanged sentences

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

Management believes, as of June 30, 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 March 31, 2026 and December 31, 2025.

As shown in the table below, the Company’s capital ratios exceeded the regulatory definition of adequately capitalized as of both June 30, 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.

4 unchanged sentences

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 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:

Under the Basel III Capital Rules, at both June 30, 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

March 31, 2026

June 30, 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