What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-08-06 compared with 2025-05-07 · 251 added, 174 removed, 406 unchanged (51% of the section changed)

26 unchanged sentences

We believe that we differentiate ourselves from larger financial institutions by providing a full suite of services to emerging small businesses and entrepreneurs on a nationwide basis.

We are one of the fastest-growing lenders in the Small Business Administration (“SBA”) 7(a) program, closing $113.8 million in SBA 7(a) loans during the three months ended March 31, 2025, and currently rank as the 8th largest SBA 7(a) lender for the SBA’s year-to-date 2025 fiscal year.

We are one of the fastest-growing lenders in the Small Business Administration (“SBA”) 7(a) program, closing $282.8 million in SBA 7(a) loans during the six months ended June 30, 2025, and currently rank as the 7th largest SBA 7(a) lender for the SBA’s year-to-date 2025 fiscal year.

We also offer a top-ranked small business checking account product to our country’s entrepreneurs.

4 unchanged sentences

Furthermore, we believe partnering with select fintechs will allow us to further diversify our revenue sources, acquire deposits and pursue additional asset generation capabilities.

As of March 31, 2025, the Company had consolidated assets of $5.9 billion, consolidated deposits of $4.9 billion and stockholders’ equity of $387.7 million.

As of June 30, 2025, the Company had consolidated assets of $6.1 billion, consolidated deposits of $5.3 billion and stockholders’ equity of $390.2 million.

Results of Operations

During the first quarter 2025, net income was $0.9 million, or $0.11 diluted earnings per share, compared to net income of $5.2 million, or $0.59 diluted earnings per share, during the first quarter 2024, representing a decrease in net income of $4.2 million, or 81.8%, and a decrease in diluted earnings per share of $0.48, or 81.4%.

The $4.2 million decrease in net income for the first quarter 2025 compared to the first quarter 2024 was due primarily to increases of $9.5 million, or 387.5%, in the provision for credit losses and $2.5 million, or 12.0%, in noninterest expense, partially offset by increases of $4.4 million, or 21.0%, in net interest income and $2.1 million, or 24.9%, in noninterest income as well as a $1.3 million income tax benefit.

During the first quarter 2025, return on average assets (“ROAA”), return on average shareholders’ equity (“ROAE”), and return on average tangible common equity (“ROATCE”) were 0.07%, 0.98%, and 0.99%, respectively, compared to 0.40%, 5.64%, and 5.71%, respectively, for the first quarter 2024.

Pre-tax, pre-provision income (“PTPP”) was $12.0 million, an increase of 48.5%, from PTPP of $8.1 million for the first quarter 2024.

The $3.9 million increase was due to increases of $8.7 million, or 12.7%, in interest income and $2.1 million, or 24.9%, in noninterest income, partially offset by increases of $4.3 million, or 9.1%, in interest expense and $2.5 million, or 12.0%, in noninterest expense.

During the second quarter 2025, net income was $0.2 million, or $0.02 diluted earnings per share, compared to net income of $5.8 million, or $0.67 diluted earnings per share, during the second quarter 2024, representing a decrease in net income of $5.6 million, or 96.7%, and a decrease in diluted earnings per share of $0.65, or 97.0%.

During the six months ended June 30, 2025, net income was $1.1 million, or $0.13 diluted earnings per share, compared to the six months ended June 30, 2024 net income of $11.0 million, or $1.25 per diluted share, resulting in a decrease in net income of $9.8 million, or 89.6%, and a decrease in diluted earnings per share of $1.12, or 89.6%.

The $5.6 million decrease in net income for the second quarter 2025 compared to the second quarter 2024 was due primarily to an increase of $9.6 million, or 237.6%, in the provision for credit losses and a decrease of $5.5 million, or 49.6%, in noninterest income, partially offset by increases of $6.7 million, or 31.2%, in net interest income as well as a $2.3 million income tax benefit and a decrease of $0.5 million, or 2.4%, in noninterest expense.

The $9.8 million decrease in net income for the six months ended June 30, 2025 compared to the six months ended June 30, 2024 was due primarily to increases of $19.1 million, or 294.2%, in the provision for credit loss and $2.0 million, or 4.6%, in noninterest expense and a decrease of $3.4 million, or 17.5%, in noninterest income, partially offset by an increase of $11.0 million, or 26.2%, in net interest income and a $3.6 million in income tax benefit.

During the second quarter 2025, return on average assets (“ROAA”), return on average shareholders’ equity (“ROAE”), and return on average tangible common equity (“ROATCE”) were 0.01%, 0.20%, and 0.20%, respectively, compared to 0.44%, 6.28%, and 6.36%, respectively, for the second quarter 2024.

During the six months ended June 30, 2025, ROAA, ROAE and ROATCE were 0.04%, 0.58%, and 0.59%, respectively, compared to 0.42%, 5.96%, and 6.04%, respectively, for the six months ended June 30, 2024.

During the second quarter 2025, pre-tax, pre-provision income (“PTPP”) was $11.7 million, an increase of 17.2% from PTPP of $10.0 million for the second quarter 2024.

The $1.7 million increase was due to an increase of $6.7 million, or 31.2%, in net interest income and a decrease of $0.5 million, or 2.4%, in noninterest expense, partially offset by a decrease of $5.5 million, or 49.6%, in noninterest income.

During the six months ended June 30, 2025, PTPP income was $23.7 million, an increase of 31.1% from PTPP of $18.1 million for the six months ended June 30, 2024.

The $5.6 million increase was due to an increase of $11.0 million, or 26.2%, in net interest income, partially offset by a decrease of $3.4 million, or 17.5%, in noninterest income and an increase of $2.0 million, or 4.6%, in noninterest expense.

During the second quarter 2024, the Company recognized $0.5 million in IT termination fees and $0.1 million in anniversary expenses.

Excluding these items, adjusted net income for the second quarter 2024 was $6.2 million and adjusted diluted earnings per share was $0.72.

Additionally, for the second quarter 2024, adjusted ROAA, adjusted ROAE and adjusted ROATCE were 0.48%, 6.77% and 6.85%, respectively.

During the six months ended June 30, 2024, the Company recognized $0.5 million in IT termination fees and $0.1 million in anniversary expenses.

Excluding these items, adjusted net income for the six months ended June 30, 2024 was $11.4 million and adjusted diluted earnings per share was $1.30.

Additionally, for the six months ended June 30, 2024, adjusted ROAA, adjusted ROAE and adjusted ROATCE were 0.43%, 6.20% and 6.29%, respectively.

Refer to the “Reconciliation of Non-GAAP Financial Measures” section of Part I, Item 2 of this report, Management’s Discussion and Analysis of Financial Condition and Results of Operations for additional information.

5 unchanged sentences

Three Months Ended

March 31, 2025 December 31, 2024 March 31, 2024

(dollars in thousands) Average Balance Interest /Dividends Yield /Cost Average Balance Interest /Dividends Yield /Cost Average Balance Interest /Dividends Yield /Cost

June 30, 2025 June 30, 2024

(dollars in thousands) Average Balance Interest /Dividends Yield /Cost Average Balance Interest /Dividends Yield /Cost

Interest-earning assets

24 unchanged sentences

Interest rate spread 1

1.55% 1.42% 1.39 %

Net interest margin 2

1.82% 1.67% 1.66 %

Net interest margin - FTE 3

1.91% 1.75% 1.75 %

1 Yield on total interest-earning assets minus cost of total interest-bearing liabilities.

6 unchanged sentences

See “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of this measure to its most directly comparable GAAP measure.

Six Months Ended

June 30, 2025 June 30, 2024

(dollars in thousands) Average Balance Interest /Dividends Yield /Cost Average Balance Interest /Dividends Yield /Cost

Interest-earning assets

Loans, including

loans held-for-sale $ 4,325,518 $ 129,347 6.03 % $ 3,914,656 $ 112,529 5.78 %

Securities - taxable 838,222 17,525 4.22 % 648,860 12,170 3.77 %

Securities - non-taxable 80,325 1,315 3.30 % 75,163 1,939 5.19 %

Other earning assets 420,921 9,528 4.56 % 451,582 12,488 5.56 %

Total interest-earning assets 5,664,986 157,715 5.61 % 5,090,261 139,126 5.50 %

Allowance for credit losses - loans (47,378) (39,986)

Noninterest-earning assets 230,079 220,081

Total assets $ 5,847,687 $ 5,270,356

Interest-bearing liabilities

Interest-bearing demand deposits $ 1,092,127 $ 16,742 3.09 % $ 444,615 $ 4,658 2.11 %

Savings accounts 21,167 88 0.84 % 22,754 96 0.85 %

Money market accounts 1,204,695 22,449 3.76 % 1,230,488 25,746 4.21 %

Fintech - brokered deposits — — — % 102,514 2,230 4.37 %

Certificates and brokered deposits 2,486,407 55,141 4.47 % 2,279,621 53,894 4.75 %

Total interest-bearing deposits 4,804,396 94,420 3.96 % 4,079,992 86,624 4.27 %

Other borrowed funds 484,897 10,209 4.25 % 684,456 10,441 3.07 %

Total interest-bearing liabilities 5,289,293 104,629 3.99 % 4,764,448 97,065 4.10 %

Noninterest-bearing deposits 144,494 115,140

Other noninterest-bearing liabilities 21,948 21,170

Total liabilities 5,455,735 4,900,758

Shareholders’ equity 391,952 369,598

Total liabilities and shareholders’ equity $ 5,847,687 $ 5,270,356

Net interest income $ 53,086 $ 42,061

Interest rate spread 1

Net interest margin 2

Net interest margin - FTE 3

1 Yield on total interest-earning assets minus cost of total interest-bearing liabilities.

2 Net interest income divided by total average interest-earning assets (annualized).

3 On an FTE basis assuming a 21% tax rate.

Net interest income is adjusted to reflect income from assets such as municipal loans and securities that are exempt from Federal income taxes.

This is to recognize the income tax savings that facilitates a comparison between taxable and tax-exempt assets.

The Company believes that it is a standard practice in the banking industry to present net interest margin and net interest income on a fully-taxable equivalent basis, as these measures provide useful information to make peer comparisons.

Net interest margin - FTE represents a non-GAAP financial measure.

See “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of this measure to its most directly comparable GAAP measure.

Rate/Volume Analysis

1 unchanged sentence

The change in interest not due solely to volume or rate has been allocated in proportion to the absolute dollar amounts of the change in each.

Three Months Ended March 31, 2025 vs.

December 31, 2024 Due to Changes in Three Months Ended March 31, 2025 vs.

March 31, 2024 Due to Changes in

Three Months Ended June 30, 2025 vs.

June 30, 2024 Due to Changes in Six Months Ended June 30, 2025 vs.

June 30, 2024 Due to Changes in

(amounts in thousands) Volume Rate Net Volume Rate Net

10 unchanged sentences

(Decrease) increase in net interest income $ (8,756) $ 15,419 $ 6,663 $ (1,168) $ 12,193 $ 11,025

Net interest income for the first quarter 2025 was $25.1 million, an increase of $4.4 million, or 21.0%, compared to $20.7 million for the first quarter 2024.

The increase in net interest income was the result of an $8.7 million, or 12.7%, increase in total interest income to $76.8 million for the first quarter 2025 from $68.2 million for the first quarter 2024, partially offset by a $4.3 million, or 9.1%, increase in total interest expense to $51.7 million for the first quarter 2025 from $47.4 million for the first quarter 2024.

The increase in total interest income for the first quarter 2025 compared to first quarter 2024 was due primarily to an increase in interest earned on loans, resulting from an increase of 26 bps in the yield earned on loans, including loans held-for-sale, as well as an increase of $350.3 million, or 9.0%, in the average balance of loans, including loans held-for-sale.

Additionally, the average balance of securities increased $198.4 million, or 28.2%, and the yield earned on the securities portfolio increased 29 bps for the first quarter 2025 compared to the first quarter 2024.

The yield on funded portfolio loan originations was 7.78% for the first quarter 2025, a decrease of 107 bps compared to the first quarter 2024, reflective of 100 bps of Fed rate cuts in the second half of 2024.

Net interest income for the second quarter 2025 was $28.0 million, an increase of $6.7 million, or 31.2%, compared to $21.3 million for the second quarter 2024.

The increase in net interest income was the result of a $9.9 million, or 14.0%, increase in total interest income to $80.9 million for the second quarter 2025 from $71.0 million for the second quarter 2024, partially offset by a $3.3 million, or 6.6%, increase in total interest expense to $52.9 million for the second quarter 2025 from $49.6 million for the second quarter 2024.

Net interest income for the six months ended June 30, 2025 was $53.1 million, an increase of $11.0 million, or 26.2%, compared to $42.1 million for the six months ended June 30, 2024.

The increase in net interest income was the result of an $18.6 million, or 13.4%, increase in total interest income to $157.7 million for the six months ended June 30, 2025 from $139.1 million for the six months ended June 30, 2024.

The increase in total interest income was partially offset by a $7.6 million, or 7.8%, increase in total interest expense to $104.6 million for the six months ended June 30, 2025 from $97.1 million for the six months ended June 30, 2024.

The increase in total interest income for the second quarter 2025 compared to second quarter 2024 was due primarily to an increase in interest earned on loans, resulting from an increase of 24 bps in the yield earned on loans, including loans held-for-sale, as well as an increase of $470.5 million, or 12.0%, in the average balance of loans, including loans held-for-sale.

Additionally, the average balance of securities increased $190.5 million, or 25.6%, and the yield earned on the securities portfolio increased 15 bps for the second quarter 2025 compared to the second quarter 2024.

The yield on funded portfolio loan originations was 7.55% for the second quarter 2025, a decrease of 133 bps compared to the second quarter 2024, reflective of 100 bps of Fed rate cuts in the second half of 2024.

However, new origination yields remained well above the overall loan portfolio yield, helping to drive both total interest income and the loan portfolio yield higher.

The increase in total interest expense for the first quarter 2025 compared to the first quarter 2024 was due primarily to increases of $4.9 million, or 233.5%, in interest expense associated with interest-bearing demand deposits and $2.9 million, or 10.8%, in interest expense associated with certificates and brokered deposits, partially offset by decreases of $1.3 million, or 10.3%, in interest expense associated with money market accounts and $1.2 million, or 22.5%, in interest expense associated with other borrowed funds.

When combined with deposits formerly classified as fintech – brokered deposits, the increase in interest expense related to interest-bearing demand deposits was driven by an increase in the average balance of $173.2 million, or 22.1%, compared to the the fourth quarter of 2024 due to continued growth in fintech deposits, while the cost of fund increased 41 bps due to the change in deposit mix.

The increase in interest expense related to certificates and brokered deposits was driven by an increase in the average deposit balance of $371.2 million, or 16.5%, partially offset by a decrease of 20 bps in the cost of these deposits.

The increase in total interest income for the six months ended June 30, 2025 compared to the six months ended June 30, 2024 was due primarily to an increase in interest earned on loans, resulting from an increase of 25 bps in the yield on loans, including loans held-for-sale, as well as an increase of $410.9 million, or 10.5%, in the average balance of loans, including loans held-for-sale.

Additionally, the average balance of securities increased $194.5 million, or 26.9%, and the yield earned on the securities portfolio increased 22 bps for the six months ended June 30, 2025 compared to the six months ended June 30, 2024.

The increase in total interest income was partially offset as the yield on other earning assets decreased 100 bps and the average balance of other earning assets decreased $30.7 million, or 6.8%.

The increase in the yield earned on loans and securities was due to the impact of the continued elevated interest rate environment on both existing and newly-originated interest-earning assets.

The yield on funded portfolio loan originations was 7.57% for the six months ended June 30, 2025, a decrease of 119 bps compared to the six months ended June 30, 2024.

The increase in total interest expense for the second quarter 2025 compared to the second quarter 2024 was due primarily to increases of $7.2 million, or 280.5%, in interest expense associated with interest-bearing demand deposits and $1.0 million, or 18.7%, in interest expense associated with other borrowed funds, partially offset by decreases of $2.0 million, or 15.2%, in interest expense associated with money market accounts and $1.6 million, or 5.9%, in interest expense associated with certificates and brokered deposits.

When combined with deposits formerly classified as fintech – brokered deposits, the increase in interest expense related to interest-bearing demand deposits was driven by an increase in the average balance of $632.7 million, or 106.5%, compared to the second quarter of 2024 due to continued growth in fintech deposits, while the cost of funds increased 57 bps due to the change in deposit mix.

The decrease in interest expense related to money market accounts was driven by a decrease in the average deposit balance of $55.2 million, or 4.4%, as well as a 49 bp decrease in the cost of these deposits.

The decrease in interest expense related to certificates and brokered deposits was driven by a decrease of 37 bps in the cost of these deposits, partially offset by an increase in the average deposit balance of $43.8 million.

The increase in the average balance of these deposits was driven by strong consumer and small business demand for certificates of deposits, partially offset by lower brokered deposit balances as the Company used on-balance sheet liquidity to pay down higher-cost brokered deposits, which is expected to positively impact deposit costs in future periods.

The decrease in interest expense related to money market accounts was driven by a 41 bp decrease in cost of these deposits.

The decrease in interest expense related to other borrowed funds was driven by a decrease in the average balance of $127.5 million, or 24.1%, partially offset by an increase of 31bps in the cost of funds.

Overall, the cost of total interest-bearing liabilities for the first quarter 2025 decreased 4 bps to 4.02% from 4.06% for the first quarter 2024.

Net interest margin (“NIM”) was 1.82% for the first quarter 2025 compared to 1.66% for the first quarter 2024, an increase of 16 bps.

On a fully-taxable equivalent (“FTE”) basis, NIM was 1.91% for the first quarter 2025 compared to 1.75% for the first quarter 2024, an increase of 16 bps.

The increase in the first quarter 2025 NIM and FTE NIM compared to the first quarter 2024 reflects the combination of deploying cash balances into higher yielding loans and securities and continued improvement in the cost of funds related to deposits.

The increase in interest expense related to other borrowed funds was driven by an increase of 114 bps in the cost of funds, partially offset by a decrease in the average balance of $84.6 million, or 13.0%.

The increase in total interest expense for the six months ended June 30, 2025 compared to the six months ended June 30, 2024 was due primarily to increases of $12.1 million, or 259.4%, in interest expense associated with interest-bearing demand deposits and $1.2 million, or 2.3%, in interest expense associated with certificates and brokered deposits, partially offset by decreases of $3.3 million, or 12.8%, in interest expense associated with money market deposits and $0.2 million, or 2.2%, in interest expense associated with other borrowed funds.

When combined with deposits formerly classified as fintech - brokered deposits, the increase in interest expense related to interest-bearing demand deposits was due primarily to a 56 bp increase in the cost of these deposits, as well as an increase of $545.0 million, or 99.6%, in the average balance of these deposits.

The increase in interest expense related to certificates and brokered deposits was driven by an increase of $206.8 million, or 9.1%, in the average balance of these deposits, partially offset by a decrease of 28 bps in the cost of these deposits.

The decrease in interest expense related to money market accounts was driven primarily by a decrease of $25.8 million, or 2.1%, in the average balance of these deposits as well as a decrease of 45 bps in the cost of these deposits.

The decrease in interest expense related to other borrowed funds was driven by a decrease in the average balance of $199.6 million, or 29.2%, partially offset by a 118 bp increase in the cost of these funds.

Overall, the cost of total interest-bearing liabilities for the second quarter 2025 decreased 18 bps to 3.96% from 4.14% for the second quarter 2024.

The cost of total interest-bearing liabilities for the six months ended June 30, 2025 decreased 11 bps to 3.99% from 4.10% for the six months ended June 30, 2024.

Net interest margin (“NIM”) was 1.96% for the second quarter 2025 compared to 1.67% for the second quarter 2024, an increase of 29 bps.

On a fully-taxable equivalent (“FTE”) basis, NIM was 2.04% for the second quarter 2025 compared to 1.76% for the second quarter 2024, an increase of 28 bps.

NIM was 1.89% for the six months ended June 30, 2025 compared to

1.67% for the six months ended June 30, 2024, an increase of 22 bps.

FTE NIM was 1.97% for the six months ended June 30, 2025 compared to 1.76% for the six months ended June 30, 2024, an increase of 21 bps.

The increase in the second quarter and six months ended June 30, 2025 NIM and FTE NIM compared to the second quarter and six months ended June 30, 2024 reflects the combination of deploying cash balances into higher yielding loans and securities and continued improvement in the cost of funds related to deposits.

Noninterest Income

The following table shows noninterest income for each of the periods presented.

Three Months Ended

(amounts in thousands) March 31,

2025 December 31,

2024 March 31,

Three Months Ended Six Months Ended

(amounts in thousands) June 30,

2025 June 30,

2024 June 30,

2025 June 30,

Service charges and fees $ 278 $ 246 $ 543 $ 466

1 unchanged sentence

Loan servicing asset revaluation (1,153) (829) (2,334) (1,263)

Mortgage banking activities — — —

Gain on sale of loans 1,673 8,292 10,320 14,828

1 unchanged sentence

Total noninterest income $ 5,557 $ 11,033 $ 15,984 $ 19,380

During the first quarter 2025, noninterest income was $10.4 million, representing an increase of $2.1 million, or 24.9%, compared to $8.3 million for the first quarter 2024.

The increase in noninterest income was due primarily to increases in gain on sale of loans, partially offset by a decrease in net loan servicing revenue.

The increase of $2.1 million, or 32.3%, in gain on sale of loans was due primarily to an increase of 36.2% in the volume of U.S.

Small Business Administration (“SBA”) 7(a) guaranteed loan sales, partially offset by a decrease of 36 bps in the net premium earned on loan sales.

The decrease in net loan servicing was due to the fair value adjustment to the loan servicing asset, partially offset by growth in the balance of the Company’s SBA 7(a) servicing portfolio.

During the second quarter 2025, noninterest income was $5.6 million, representing a decrease of $5.4 million, or 49.6%, compared to $11.0 million for the second quarter 2024.

The decrease in noninterest income was due primarily to a decrease in gain on sale of loans, partially offset by increases in other revenue and net loan servicing revenue.

The decrease of $6.6 million, or 79.8%, in gain on sale of loans was due to a decrease in the volume of U.S.

Small Business Administration (“SBA”) 7(a) guaranteed loans sales, as the Company implemented a process change to hold SBA loans for a longer period of time before selling them in the secondary market.

The increase of $0.9 million, or 49.9%, in other noninterest income was due primarily to a planned distribution from a fund investment.

The increase of $0.2 million, or 28.9%, in net loan servicing was due to growth in the balance of the Company’s SBA 7(a) servicing portfolio, partially offset by the fair value adjustment to the loan servicing asset.

During the six months ended June 30, 2025, noninterest income was $16.0 million, a decrease of $3.4 million, or 17.5%, compared to $19.4 million for the six months ended June 30, 2024.

The decrease in noninterest income was due primarily to a decrease in gain on sale of loans, partially offset by increases in other income and net loan servicing revenue.

The decrease of $4.5 million, or 30.4%, in gain on sale of loans was due to a decrease in the volume of SBA 7(a) guaranteed loans sales, as the Company implemented a process change to hold SBA for a longer period of time before selling them in the secondary market.

The increase of $0.9 million, or 36.7%, in other noninterest income was due primarily to a planned distribution from a fund investment.

The increase of $0.1 million, or 6.4%, in net loan servicing was due to growth in the balance of the Company’s SBA 7(a) servicing portfolio, partially offset by the fair value adjustment to the loan servicing asset.

Noninterest Expense

The following table shows noninterest expense for each of the periods presented.

Three Months Ended

(amounts in thousands) March 31,

2025 December 31,

2024 March 31,

Three Months Ended Six Months Ended

(amounts in thousands) June 30,

2025 June 30,

2024 June 30,

2025 June 30,

Salaries and employee benefits $ 10,867 $ 12,462 $ 23,974 $ 24,258

7 unchanged sentences

Total noninterest expense $ 21,800 $ 22,336 22336000 $ 45,357 $ 43,359

Noninterest expense for the first quarter 2025 was $23.6 million, compared to $21.0 million for the first quarter 2024.

The increase of $2.5 million, or 12.0%, was due primarily to increases of $1.3 million in salaries and employee benefits, $0.4 million in consulting and professional fees, $0.3 million in premises and equipment, $0.3 million in deposit insurance premium, $0.2 million in other expenses.

The increase in salaries and employee benefits was due primarily to higher small business lending incentive compensation, as well as staff additions in small business lending and risk management.

The increase in consulting and professional fees is due primarily to increased legal and audit fees.

The increase in premises and equipment was due primarily to property taxes, as well as software maintenance expense.

The increase in deposit insurance premium was due to year-over-year asset growth and changes in the composition of the loan and deposit portfolios.

The increase in other expenses is due primarily to increases in service fees.

The Company recorded an income tax benefit of $0.9 million for the first quarter 2025, compared to an income tax provision of $0.4 million and an effective tax rate of 7.6% for the first quarter 2024.

Noninterest expense for the second quarter 2025 was $21.8 million, representing a decrease of $0.5 million, or 2.4%, compared to $22.3 million for the second quarter 2024.

The decrease in noninterest expense was due primarily to decreases in salaries and employee benefits, partially offset by increases in other expenses, deposit insurance premium and premises and equipment.

The decrease of $1.6 million, or 12.8%, in salaries and employee benefits was driven primarily by a reduction in incentive compensation.

The increase of $0.6 million, or 32.7%, in other expense was due primarily to higher fintech volume activity.

The increase of $0.4 million, or 33.4%, in deposit insurance premium was due to year-over-year asset growth and changes in the composition of the loan portfolio.

The increase of $0.1 million, or 4.0%, in premises and equipment was due primarily to software maintenance expense.

Noninterest expense for the six months ended June 30, 2025 was $45.4 million, an increase of $2.0 million, or 4.6%, compared to $43.4 million for the six months ended June 30, 2024.

The increase was due primarily to increases in other expense, deposit insurance premium, premises and equipment, and consulting and professional fees, partially offset by a decrease in salaries and employee benefits.

The increase of $0.8 million, or 23.7%, in other expense was due primarily to higher fintech volume activity.

The increase of $0.6 million, or 27.8%, in deposit insurance premium was due to year-over-year asset growth and changes in the composition of the loan portfolio.

The increase of $0.4 million, or 7.0%, in premises and equipment was due primarily to software maintenance expense.

The increase of $0.3 million, or 15.4%, in consulting and professional fees was due mainly to increased legal and audit fees.

The decrease of $0.3 million, or 1.2%, in salaries and employee benefits was driven primarily by a reduction in incentive compensation.

The Company recorded an income tax benefit of $2.1 million for the second quarter 2025, compared to an income tax provision of $0.2 million and an effective tax rate of 3.6% for the second quarter 2024.

The Company recorded an income tax benefit of $3.0 million for the six months ended June 30, 2025, compared to an income tax provision of $0.6 million and an effective tax rate of 5.6% for the six months ended June 30, 2024.

The income tax benefits recognized during the second quarter 2025 and the six months ended June 30, 2025 reflect lower pre-tax earnings, as well as the benefit of tax exempt income.

The variance from the federal statutory rate for the second quarter 2024 and the six months ended June 30, 2024 was due primarily to tax-exempt income.

Interest income on certain loans or securities issued by governmental, municipal and not-for-profit entities, and earnings from bank-owned life insurance were the primary components of tax-exempt income.

Financial Condition

3 unchanged sentences

2025 December 31,

2024 March 31,

Total assets $ 6,072,573 $ 5,737,859

7 unchanged sentences

Total shareholders’ equity 390,239 384,063

Total assets increased $113.7 million, or 2.0%, to $5.9 billion at March 31, 2025 compared to $5.7 billion at December 31, 2024.

The increase was due primarily to an increase in deposits driven by growth in fintech partnerships which was used in conjunction with on-balance sheet liquidity to fund loan growth, purchase securities and pay down higher cost CD maturities and brokered deposits.

As of March 31, 2025, total shareholders’ equity was $387.7 million, an increase of $3.7 million, or 1.0%, compared to December 31, 2024.

The increase in shareholders’ equity was due primarily to the net income earned during the quarter and a decrease in accumulated other comprehensive loss as unrealized losses on securities decreased during the quarter.

Tangible common equity totaled $383.1 million as of March 31, 2025, representing an increase of $3.7 million, or 1.0%, compared to December 31, 2024.

The ratio of total shareholders’ equity to total assets decreased to 6.63% as of March 31, 2025 from 6.69% as of December 31, 2024, and the ratio of tangible common equity to tangible assets decreased to 6.55% as of March 31, 2025 from 6.62% as of December 31, 2024.

Book value per common share increased 0.6% to $44.58 as of March 31, 2025 from $44.31 as of December 31, 2024.

Tangible book value per share increased 0.6% to $44.04 as of March 31, 2025 from $43.77 as of December 31, 2024.

Total assets increased $334.7 million, or 5.8%, to $6.1 billion at June 30, 2025 compared to $5.7 billion at December 31, 2024.

The increase was due primarily to an increase in deposits driven by growth in fintech partnerships, which was used in conjunction with on-balance sheet liquidity to fund loan growth, purchase securities and pay down higher cost brokered deposits and FHLB advances.

As of June 30, 2025, total shareholders’ equity was $390.2 million, an increase of $6.2 million, or 1.6%, compared to December 31, 2024.

The increase in shareholders’ equity was due primarily to a decrease in accumulated other comprehensive loss as unrealized losses on securities decreased during the six months ended June 30, 2025.

Tangible common equity totaled $385.6 million as of June 30, 2025, representing an increase of $6.2 million, or 1.6%, compared to December 31, 2024.

The ratio of total shareholders’ equity to total assets decreased to 6.43% as of June 30, 2025 from 6.69% as of December 31, 2024, and the ratio of tangible common equity to tangible assets decreased to 6.35% as of June 30, 2025 from 6.62% as of December 31, 2024.

Book value per common share increased 1.1% to $44.79 as of June 30, 2025 from $44.31 as of December 31, 2024.

Tangible book value per share increased 1.1% to $44.25 as of June 30, 2025 from $43.77 as of December 31, 2024.

The increase in both book value per common share and tangible book value per share was driven primarily by the increases in total shareholders’ equity and tangible common equity.

2 unchanged sentences

The following table shows a summary of the Company’s loan portfolio for each of the periods presented.

(dollars in thousands) March 31,

(dollars in thousands) June 30,

2025 December 31,

2024 March 31,

Commercial loans

12 unchanged sentences

Home equity 16,668 0.4 % 18,274 0.4 %

Other consumer 412,553 9.7 % 407,947 9.8 % 380,675 9.7 %

Other consumer loans 421,581 9.6 % 407,947 9.8 %

Total consumer loans 797,171 18.2 % 801,381 801381000 19.2 %

5 unchanged sentences

Net loans $ 4,316,045 $ 4,125,877

1 Includes carrying value adjustments of $22.1 million, $22.9 million and $26.9 million related to terminated interest rate swaps associated with public finance loans as of March 31, 2025, December 31, 2024 and March 31, 2024, respectively.

Total loans were $4.3 billion as of March 31, 2025, an increase of $83.8 million, or 2.0%, compared to December 31, 2024.

Total commercial loan balances were $3.4 billion as of March 31, 2025, up $89.5 million, or 2.7%, from December 31, 2024.

Total consumer loan balances were $797.7 million as of March 31, 2025, a decrease of $3.7 million, or 0.5%, compared to December 31, 2024.

Compared to December 31, 2024, in connection with the Company’s focus on variable rate and higher-yielding products, the increase in commercial loan balances was driven by growth in the construction, investor commercial real estate, small business lending, and commercial and industrial portfolios.

These increases were partially offset by a decrease in the franchise finance portfolio and continued runoff in the healthcare finance portfolio, as well as decreases in the owner-occupied commercial real estate and public finance portfolios.

1 Includes carrying value adjustments of $21.2 million and $22.9 million related to terminated interest rate swaps associated with public finance loans as of June 30, 2025 and December 31, 2024, respectively.

Total loans were $4.4 billion as of June 30, 2025, an increase of $191.9 million, or 4.6%, compared to December 31, 2024.

Total commercial loan balances were $3.5 billion as of June 30, 2025, up $197.7 million, or 5.9%, from December 31, 2024.

Total consumer loan balances were $797.2 million as of June 30, 2025, a decrease of $4.2 million, or 0.5%, compared to December 31, 2024.

Compared to December 31, 2024, in connection with the Company’s focus on variable rate products, as well as capitalizing on the overall higher interest rate environment, the increase in commercial loan balances was driven by growth in the investor commercial real estate, commercial and industrial, small business lending and single tenant lease financing portfolios.

These increases were partially offset by decreases in the construction, franchise finance and public finance portfolios, as well as continued runoff in the healthcare finance portfolio.

The decrease in construction balances was partially due to completed projects that were moved to investor commercial real estate upon entering their stabilization period.

The slight decrease in consumer loan balances was due primarily to a decrease in the residential mortgage portfolio, partially offset by origination activity in the other consumer loans portfolio.

3 unchanged sentences

The following table provides a summary of the Company’s nonperforming assets for each of the periods presented.

(dollars in thousands) March 31,

(dollars in thousands) June 30,

2025 December 31,

2024 March 31,

Nonaccrual loans

Commercial loans:

Single tenant lease financing $ 1,665 $ —

Small business lending 11,582 11,429

3 unchanged sentences

Residential mortgage 3,927 4,083

Other consumer 164 61 129

Other consumer loans 124 61

Total consumer loans 4,051 4,144

2 unchanged sentences

Commercial loans:

Commercial and industrial 16 —

Small business lending 2,370 1,320

Franchise finance — — 230

Total commercial loans 2,386 1,320

1 unchanged sentence

Residential mortgage — 1,142

Other consumer 34 4 —

Other consumer loans — 4

Total consumer loans — 1,146

14 unchanged sentences

Allowance for credit losses - loans to nonperforming loans 106.8 % 157.5 %

Total nonperforming loans increased $5.8 million, or 20.5%, to $34.2 million as of March 31, 2025 compared to $28.4 million as of December 31, 2024 due primarily to an increase in nonperforming loans in franchise finance and small business lending during the year.

Total nonperforming assets increased $7.0 million, or 24.3%, to $35.9 million as of March 31, 2025, compared to $28.9 million as of December 31, 2024, due primarily to the increase in nonperforming loans in franchise finance and small business lending mentioned above, and an increase in OREO related to small business lending.

As of March 31, 2025, the Company had two small business lending properties in OREO with a carrying value of $1.5 million.

Total nonperforming loans increased $15.1 million, or 53.2%, to $43.5 million as of June 30, 2025 compared to $28.4 million as of December 31, 2024 due primarily to an increase in nonperforming loans in the franchise finance, single tenant lease financing and small business lending portfolios during the year.

Total nonperforming assets increased $16.6 million, or 57.6%, to $45.5 million as of June 30, 2025, compared to $28.9 million as of December 31, 2024, due primarily to the increase in nonperforming loans mentioned above and an increase in OREO related to small business lending.

As of June 30, 2025, the Company had two small business lending properties and one residential mortgage property in OREO with carrying values of

$1.5 million and $0.2 million, respectively.

As of December 31, 2024, the Company had one residential mortgage property in OREO with a carrying value of $0.3 million.

2 unchanged sentences

however, allocation of a portion of the allowance to one segment does not preclude its availability to absorb losses in other segments.

Three Months Ended

(dollars in thousands) March 31,

Three Months Ended Six Months Ended Year Ended

(dollars in thousands) June 30,

2025 June 30,

2024 June 30,

2025 June 30,

2024 December 31,

2024 March 31,

Balance, beginning of period $ 47,238 $ 40,891 $ 44,769 $ 38,774 $ 38,774

1 unchanged sentence

Losses charged off

Single tenant lease financing — 195 — 195 195

Small business lending 11,851 573 15,520 862 10,441

1 unchanged sentence

Residential mortgage — — 11 69 159

Other consumer 314 249 175

Other consumer loans 359 160 672 335 1,009

Total losses charged off 14,448 1,505 24,289 2,038 13,270

1 unchanged sentence

Small business lending 40 65 173 105 325

Franchise finance 18 — 18 — —

Residential mortgage 1 — 7 1 1

Home equity 1 1 3 3 7

Other consumer 46 21 23

Other consumer loans 69 31 115 54 109

Total recoveries 131 99 320 167 450

3 unchanged sentences

Commercial and industrial 0.00 % 0.00 % (0.01 %) (0.01 %) (0.01 %)

Single tenant lease financing 0.00 % 0.04 % 0.00 % 0.04 % 0.02 %

Small business lending 5.43 % 0.37 % 7.57 % 0.57 % 3.39 %

3 unchanged sentences

Home equity (0.01 %) (0.01 %) (0.03 %) (0.03 %) (0.03 %)

Other consumer 0.36 % 0.26 % 0.21 %

Other consumer loans 0.41 % 0.20 % 0.38 % 0.20 % 0.28 %

Total consumer net charge-offs 0.07 % 0.03 % 0.14 % 0.09 % 0.13 %

Total net charge-offs to average loans 1.31 % 0.14 % 1.12 % 0.10 % 0.32 %

The allowance for credit losses - loans (“ACL”) was $47.2 million as of March 31, 2025, compared to $44.8 million as of December 31, 2024.

The increase in the ACL reflects the addition of specific reserves related to franchise finance and small business lending loans that were placed on nonaccrual during the quarter and growth in the overall loan portfolio, partially offset by the impact of economic metrics on qualitative factors in certain portfolios.

The net increase to specific reserves totaled $3.3 million, of which, $2.5 million related to franchise finance and $0.8 million related to small business lending.

The ACL as a percentage of total loans was 1.11% at March 31, 2025, compared to 1.07% at December 31, 2024.

The ACL as a percentage of nonperforming loans decreased to 138.0% as of March 31, 2025, compared to 157.5% as of December 31, 2024 as the percentage increase in nonperforming loans outpaced the increase in the overall loan portfolio.

Net charge-offs of $9.7 million were recognized during the first quarter 2025, resulting in net charge-offs to average loans of 0.92%, compared to net charge-offs of $0.5 million, or 0.05% of average loans, for the first quarter 2024.

Net charge-offs in the first quarter of 2025 were elevated as the Company continued to take action to resolve problem loans in the small business lending and franchise finance portfolios.

The increase in net charge-offs included $3.5 million in small business lending and $0.3 million in consumer loan portfolios.

Approximately $5.8 million of net charge-offs recognized during the quarter were related to franchise finance loans with $2.6 million of existing specific reserves.

The provision for credit losses - loans in the first quarter 2025 was $12.1 million, compared to $2.6 million for the first quarter 2024.

The increase in the provision for credit losses - loans for the first quarter 2025 was driven primarily by the

elevated net charge-offs, the additional specific reserves discussed above and overall growth in the loan portfolio, partially offset by the impact of economic metrics on qualitative factors in certain portfolios.

The allowance for credit losses - loans (“ACL”) was $46.5 million as of June 30, 2025, compared to $44.8 million as of December 31, 2024.

The increase in the ACL reflects the addition of specific reserves related to franchise finance loans that were placed on nonaccrual during the six month period ended June 30, 2025 and growth in the overall loan portfolio, partially offset by the removal of specific reserves for small business lending and franchise finance loans that were charged off.

The ACL as a percentage of total loans was 1.07% at both June 30, 2025 and December 31, 2024.

The ACL as a percentage of nonperforming loans decreased to 106.8% as of June 30, 2025, compared to 157.5% as of December 31, 2024 as the percentage increase in nonperforming loans outpaced the increase in the overall loan portfolio.

Net charge-offs of $14.3 million were recognized during the second quarter 2025, resulting in net charge-offs to average loans of 1.31%, compared to net charge-offs of $1.4 million, or 0.14% of average loans, for the second quarter 2024.

Net charge-offs in the second quarter 2025 were elevated as the Company continued to take action to resolve problem loans in the small business lending and franchise finance portfolios.

Approximately $11.9 million of net charge-offs recognized during

the quarter were related to small business lending and $2.2 million were related to franchise finance loans, with $7.3 million of existing specific reserves previously applied to these loans.

During the six months ended June 30, 2025, the Company recorded net charge-offs of $24.0 million, compared to net charge-offs of $1.9 million during the six months ended June 30, 2024.

The increase in net charge-offs for the six months ended June 30, 2025 was driven primarily by $15.5 million in net charge-offs related to small business lending and $8.1 million in net charge-offs related to franchise finance loans, as the Company continued to take action to resolve problem loans in these portfolios.

The provision for credit losses - loans in the second quarter 2025 was $13.6 million, compared to $3.9 million for the second quarter 2024.

The increase in the provision for credit losses - loans for the second quarter 2025 was driven primarily by the net charge-offs and additional specific reserves discussed above, as well as overall growth in the loan portfolio, partially offset by the decrease in specific reserves related to small business lending and franchise finance loans that were charged off.

The provision for credit losses - loans during the six months ended June 30, 2025 was $25.7 million, compared to $6.5 million for the six months ended June 30, 2024.

The increase in the provision for credit losses - loans for the six months ended June 30, 2025 was driven primarily by the net charge-offs and additional specific reserves discussed above, as well as overall growth in the loan portfolio, partially offset by the decrease in specific reserves related to small business lending and franchise finance loans that were charged off.

Investment Securities Portfolio

1 unchanged sentence

(amounts in thousands)

Amortized Cost March 31,

Amortized Cost June 30,

2025 December 31,

2024 March 31,

Securities available-for-sale

15 unchanged sentences

(amounts in thousands)

Approximate Fair Value March 31,

Approximate Fair Value June 30,

2025 December 31,

2024 March 31,

Securities available-for-sale

14 unchanged sentences

Total securities $ 899,324 $ 816,206

The approximate fair value of available-for-sale investment securities increased $94.4 million, or 16.1%, to $681.8 million as of March 31, 2025, compared to $587.4 million as of December 31, 2024.

The increase was due primarily to increases of $101.4 million in agency mortgage-backed securities - residential and $4.3 million in corporate securities, partially offset by decreases of $4.5 million in U.S.

Government-sponsored agencies, $2.7 million in municipal securities and $2.5 million in private label mortgage-backed securities - residential.

The Company deployed liquidity during the first quarter of 2025 into new purchases of variable-rate agency mortgage-backed security-residential, which was within certain available-for-sale portfolios, partially offset by net pay down activity.

As of March 31, 2025, the Company had securities with a net carrying value of $276.5 million designated as held-to-maturity, compared to $249.8 million as of December 31, 2024.

The approximate fair value of available-for-sale investment securities increased $57.3 million, or 9.8%, to $644.7 million as of June 30, 2025, compared to $587.4 million as of December 31, 2024.

The increase was due primarily to an increase of $88.4 million in agency mortgage-backed securities - residential, partially offset by decreases of $10.1 million in U.S.

Government-sponsored agencies, $6.4 million in private label mortgage-backed securities - residential, $6.2 million in corporate securities, $4.3 million in asset-backed securities, $2.2 million in municipal securities and $1.9 million in agency mortgage-backed securities - commercial.

The Company deployed liquidity during the first half of 2025 into new purchases of available-for-sale variable-rate agency mortgage-backed securities - residential, partially offset by net pay down activity in other security types.

As of June 30, 2025, the Company had securities with a net carrying value of $271.7 million designated as held-to-maturity, compared to $249.8 million as of December 31, 2024.

The increase was due primarily to purchases of CRA-eligible agency mortgage-backed securities - residential.

Accrued Income and Other Assets

Accrued income and other assets increased $3.8 million, or 6.0%, to $66.8 million at March 31, 2025, compared to $63.0 million at December 31, 2024.

The increase was due primarily to increases of $4.1 million in equity fund investments, $0.8 million in prepaid assets and $0.1 million in both deferred tax assets and derivative assets, partially offset by a decrease in receivables related to a bond that was called in the fourth quarter 2024.

Accrued income and other assets increased $9.6 million, or 15.3%, to $72.6 million at June 30, 2025, compared to $63.0 million at December 31, 2024.

The increase was due primarily to increases of $5.3 million in equity fund investments, $3.3 million in prepaid assets and $0.8 million in deferred tax assets.

Accrued Expenses and Other Liabilities

Accrued expenses and other liabilities decreased $1.6 million, or 8.8%, to $16.4 million at March 31, 2025, compared to $17.9 million at December 31, 2024.

The decrease was due primarily to decreases of $3.1 million in accrued salary and benefits, partially offset by $1.4 million in other various expenses and liabilities, none of which were individually significant.

Accrued expenses and other liabilities decreased $5.8 million, or 32.4%, to $12.1 million at June 30, 2025, compared to $17.9 million at December 31, 2024.

The decrease was due primarily to decreases of $5.1 million in accrued salary and benefits and $0.8 million in other liabilities.

The following table shows the composition of the Company’s deposit base for each of the periods presented.

(dollars in thousands) March 31,

(dollars in thousands) June 30,

2025 December 31,

2024 March 31,

Noninterest-bearing deposits $ 145,166 2.7 % $ 136,451 2.8 %

Interest-bearing demand deposits 1,458,123 27.5 % 896,661 18.2 %

1,103,540 22.3 % 896,661 18.2 % 423,529 9.9 %

Savings accounts 20,902 0.4 % 19,823 0.4 %

Money market accounts 1,210,960 22.9 % 1,183,789 24.0 %

Fintech - brokered deposits 1

— — % — — % 107,911 2.5 %

Certificates of deposits 2,146,356 40.5 % 2,133,455 43.2 %

1 unchanged sentence

Total deposits $ 5,298,789 100.0 % $ 4,933,206 100.0 %

1 Fintech - brokered deposits that had been previously classified as brokered deposits were reclassified to interest-bearing demand deposits as of December 31, 2024.

Total deposits increased $12.4 million, or 0.3%, to $4.9 billion as of March 31, 2025, compared to $4.9 billion as of December 31, 2024.

The increase was due primarily to increases of $206.9 million, or 23.1%, in interest-bearing demand deposits, $108.4 million, or 9.2%, in money market accounts and $15.4 million, or 11.3%, in noninterest-bearing deposits, partially offset by decreases of $216.4 million, or 38.4%, in brokered deposits and $103.7 million, or 4.9%, in certificates of deposits.

Total deposits increased $365.6 million, or 7.4%, to $5.3 billion as of June 30, 2025, compared to $4.9 billion as of December 31, 2024.

The increase was due primarily to increases of $561.5 million, or 62.6%, in interest-bearing demand deposits, $27.2 million, or 2.3%, in money market accounts, $12.9 million, or 0.6%, in certificates of deposit and $8.7 million or 6.4%, in noninterest-bearing deposits, partially offset by a decrease of $245.7 million, or 43.7%, in brokered deposits.

The increase in interest-bearing demand deposits was due primarily to growth in fintech partnership deposits.

When combined with the liquidity provided by growth in money market accounts, the Company paid down a significant amount of higher-cost brokered deposits and maturing certificates of deposits.

Uninsured deposit balances represented 27% of total deposits at March 31, 2025, up from 25% at December 31, 2024.

When combined with the liquidity provided by growth in money market accounts, the Company paid down a significant amount of higher-cost brokered deposits.

Uninsured deposit balances represented 27% of total deposits at June 30, 2025, up from 25% at December 31, 2024.

These balances include Indiana-based municipal deposits, which are insured by the Indiana Board for Depositories, as well as larger balance accounts under contractual agreements that only allow withdrawal under certain conditions.

After subtracting these types of deposits, the adjusted uninsured deposit balance drops to 22% as of March 31, 2025, compared to 20% as of December 31, 2024.

After subtracting these types of deposits, the adjusted uninsured deposit balance drops to 22% as of June 30, 2025, compared to 20% as of December 31, 2024.

Regulatory Capital Requirements

11 unchanged sentences

Failure to maintain the minimum Common Equity Tier 1 capital ratio plus the capital conservation buffer will result in potential restrictions on a banking institution’s ability to pay dividends, repurchase stock and/or pay discretionary compensation to its employees.

The following tables present actual and required capital ratios as of March 31, 2025 and December 31, 2024 for the Company and the Bank under the Basel III Capital Rules.

The minimum required capital amounts presented include the minimum required capital levels as of March 31, 2025 and December 31, 2024, which are based on the Basel III Capital Rules.

The following tables present actual and required capital ratios as of June 30, 2025 and December 31, 2024 for the Company and the Bank under the Basel III Capital Rules.

The minimum required capital amounts presented include the minimum required capital levels as of June 30, 2025 and December 31, 2024, which are based on the Basel III Capital Rules.

Capital levels required to be considered well capitalized are based upon prompt corrective action regulations, as amended to reflect the changes under the Basel III Capital Rules.

3 unchanged sentences

(dollars in thousands) Capital Amount Ratio Capital Amount Ratio Capital Amount Ratio

As of March 31, 2025:

As of June 30, 2025:

Common equity tier 1 capital to risk-weighted assets

26 unchanged sentences

Shareholders’ Dividends

The Company’s Board of Directors declared a cash dividend of $0.06 per share of common stock payable April 15, 2025 to shareholders of record as of March 31, 2025.

The Company’s Board of Directors declared a cash dividend of $0.06 per share of common stock payable July 15, 2025 to shareholders of record as of June 30, 2025.

The Company expects to continue to pay cash dividends on a quarterly basis;

however, the declaration and amount of any future cash dividends will be subject to the sole discretion of the Board of Directors and will depend upon many factors, including the Company’s results of operations, financial condition, capital requirements, regulatory and contractual restrictions (including with respect to the Company’s outstanding subordinated debt), business strategy and other factors deemed relevant by the Board of Directors.

As of March 31, 2025, the Company had $107.0 million principal amount of subordinated debt outstanding evidenced by the 2029 Notes, 2030 Note and 2031 Notes.

As of June 30, 2025, the Company had $107.0 million principal amount of subordinated debt outstanding evidenced by the 2029 Notes, 2030 Note and 2031 Notes.

The agreements that govern our outstanding subordinated debt prohibit the Company from paying any dividends on its common stock or making any other distributions to shareholders at any time when there shall have occurred, and be continuing to occur, an event of default under the applicable agreement.

4 unchanged sentences

If the Company is unable to secure such capital at favorable terms, its ability to take advantage of such opportunities could be adversely affected.

On December 19, 2022, the Company's Board of Directors approved a new stock repurchase program to replace the prior program.

The new program authorized the repurchase of up to $25.0 million of our outstanding common stock from time to time on the open market or in privately negotiated transactions.

On December 19, 2022, the Company's Board of Directors approved a stock repurchase program that authorized the repurchase of up to $25.0 million of our outstanding common stock from time to time on the open market or in privately negotiated transactions.

The stock repurchase authorization expired on December 31, 2024.

8 unchanged sentences

The Company holds cash and investment securities that qualify as liquid assets to maintain adequate liquidity to ensure safe and sound operations and meet its financial commitments.

At March 31, 2025, on a consolidated basis, the Company had $1.1 billion in cash and cash equivalents and investment securities available-for-sale and $31.7 million in loans held-for-sale that were generally available for its cash needs.

At June 30, 2025, on a consolidated basis, the Company had $1.1 billion in cash and cash equivalents and investment securities available-for-sale and $126.5 million in loans held-for-sale that were generally available for its cash needs.

The Company can also generate funds from wholesale funding sources and collateralized borrowings.

At March 31, 2025, the Bank had the ability to borrow an additional $1.7 billion from the FHLB, the Federal Reserve and correspondent bank Fed Funds lines of credit, which when combined with cash balances, totaled $2.1 billion and represented 194% of adjusted uninsured deposit balances.

At June 30, 2025, the Bank had the ability to borrow an additional $1.9 billion from the FHLB, the Federal Reserve and correspondent bank Fed Funds lines of credit, which when combined with cash balances, totaled $2.3 billion and represented 200% of adjusted uninsured deposit balances.

The Company is a separate legal entity from the Bank and must provide for its own liquidity.

1 unchanged sentence

The Company’s primary sources of funds are cash maintained at the holding company level and dividends from the Bank, the payment of which is subject to regulatory limits.

At March 31, 2025, the Company, on an unconsolidated basis, had $12.7 million in cash for debt servicing and operating expenses.

At June 30, 2025, the Company, on an unconsolidated basis, had $13.6 million in cash for debt servicing and operating expenses.

The Company uses its sources of funds primarily to meet ongoing financial commitments, including withdrawals by depositors, credit commitments to borrowers, operating expenses and capital expenditures.

At March 31, 2025, approved outstanding loan commitments, including unused lines of credit and standby letters of credit, amounted to $626.2 million.

Certificates of deposits and brokered deposits scheduled to mature in one year or less at March 31, 2025 totaled $1.4 billion.

At June 30, 2025, approved outstanding loan commitments, including unused lines of credit and standby letters of credit, amounted to $584.5 million.

Certificates of deposits and brokered deposits scheduled to mature in one year or less at June 30, 2025 totaled $1.5 billion.

Management is not aware of any other events or regulatory requirements that, if implemented, are likely to have a material effect on either the Company’s or the Bank’s liquidity.

1 unchanged sentence

This Management’s Discussion and Analysis contains financial information determined by methods other than in accordance with GAAP.

Non-GAAP financial measures, specifically tangible common equity, tangible assets, tangible book value per common share, tangible common equity to tangible assets, average tangible common equity, return on average tangible common equity, total interest income - FTE, net interest income - FTE, net interest margin - FTE, adjusted total revenue, pre-tax, pre-provision income, adjusted pre-tax, pre-provision income, adjusted noninterest income, adjusted income before income taxes, adjusted income tax (benefit) provision, adjusted net income, adjusted diluted earnings per share, adjusted return on average assets, adjusted return on average shareholders’ equity and adjusted return on average tangible common equity are used by the Company’s management to measure the strength of its capital and analyze profitability, including its ability to generate earnings on tangible capital invested by its shareholders.

Non-GAAP financial measures, specifically tangible common equity, tangible assets, tangible book value per common share, tangible common equity to tangible assets, average tangible common equity, return on average tangible common equity, total interest income - FTE, net interest income - FTE, net interest margin - FTE, pre-tax, pre-provision income, adjusted noninterest expense, adjusted income before income taxes, adjusted income tax (benefit) provision, adjusted net income, adjusted diluted earnings per share, adjusted return on average assets, adjusted return on average shareholders’ equity and adjusted return on average tangible common equity are used by the Company’s management to measure the strength of its capital and analyze profitability, including its ability to generate earnings on tangible capital invested by its shareholders.

The Company also believes that it is a standard practice in the banking industry to present total interest income, net interest income and net interest margin on a fully-taxable equivalent basis, as those measures provide useful information for peer comparisons.

1 unchanged sentence

Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the following table for each of the periods presented.

(dollars in thousands, except share and per share data) Three Months Ended

2025 December 31,

2024 March 31,

(dollars in thousands, except share and per share data) Three Months Ended Six Months Ended

2025 June 30,

2024 June 30,

2025 June 30,

Total equity - GAAP $ 390,239 $ 371,953 $ 390,239 $ 371,953

17 unchanged sentences

Return on average tangible common equity 0.20 % 6.36 % 0.59 % 6.04 %

(dollars in thousands, except share and per share data) Three Months Ended

2025 December 31,

2024 March 31,

(dollars in thousands, except share and per share data) Three Months Ended Six Months Ended

2025 June 30,

2024 June 30,

2025 June 30,

Total interest income $ 80,886 $ 70,961 $ 157,715 $ 139,126

11 unchanged sentences

1 Assuming a 21% tax rate

(dollars in thousands, except share and per share data) Three Months Ended

2025 December 31,

2024 March 31,

Total revenue- GAAP $ 35,523 $ 39,487 $ 29,081

Gain on prepayment of FHLB advances — (1,829) —

Gain on termination of swaps — (2,904) —

Adjusted total revenue $ 35,523 $ 34,754 $ 29,081

(dollars in thousands, except share and per share data) Three Months Ended Six Months Ended

2025 June 30,

2024 June 30,

2025 June 30,

Net income-GAAP $ 193 $ 5,775 $ 1,136 $ 10,956

2 unchanged sentences

Pre-tax, pre-provision income $ 11,747 $ 10,024 $ 23,713 $ 18,082

Pre-tax, pre-provision income $ 11,967 $ 15,530 $ 8,058

Gain on prepayment of FHLB advances — (1,829) —

Gain on termination of swaps — (2,904) —

Adjusted pre-tax, pre-provision income $ 11,967 $ 10,797 $ 8,058

Noninterest income - GAAP $ 10,427 $ 15,936 $ 8,347

Gain on prepayment of FHLB advances — (1,829) —

Gain on termination of swaps — (2,904) —

Adjusted noninterest income $ 10,427 $ 11,203 $ 8,347

Income before income taxes - GAAP $ 34 $ 8,329 $ 5,610

Gain on prepayment of FHLB advances — (1,829) —

Gain on termination of swaps — (2,904) —

Adjusted income before income taxes $ 34 $ 3,596 $ 5,610

Noninterest expense - GAAP $ 21,800 $ 22,336 $ 45,357 $ 43,359

IT termination fees — (452) — (452)

Anniversary expenses — (120) — (120)

Adjusted noninterest expense $ 21,800 $ 21,764 $ 45,357 $ 42,787

(Loss) Income before income taxes - GAAP $ (1,861) $ 5,993 $ (1,828) $ 11,603

IT termination fees — 452 — 452

Anniversary expenses — 120 — 120

Adjusted (loss) income before income taxes $ (1,861) $ 6,565 $ (1,828) $ 12,175

Income tax (benefit) provision - GAAP $ (2,054) $ 218 $ (2,964) $ 647

Gain on prepayment of FHLB advances — (384) —

Gain on termination of swaps — (610) —

IT termination fees — 95 — 95

Anniversary expenses — 25 — 25

Adjusted income tax (benefit) provision $ (2,054) $ 338 $ (2,964) $ 767

Net income - GAAP $ 193 $ 5,775 $ 1,136 $ 10,956

Gain on prepayment of FHLB advances — (1,445) —

Gain on termination of swaps — (2,294) —

IT termination fees — 357 — 357

Anniversary expenses — 95 — 95

Adjusted net income $ 193 $ 6,227 $ 1,136 $ 11,408

1 Assuming a 21% tax rate

(dollars in thousands, except share and per share data) Three Months Ended

2025 December 31,

2024 March 31,

Diluted average common shares outstanding 8,760,374 8,656,215 8,784,005 8,750,017

Diluted earnings per share - GAAP $ 0.02 $ 0.67 $ 0.13 $ 1.25

Effect of gain on prepayment of FHLB advances — (0.16) —

Effect of gain on termination of swaps — (0.26) —

Effect of IT termination fees — 0.04 — 0.04

Effect of anniversary expenses — 0.01 — 0.01

Adjusted diluted earnings per share $ 0.02 $ 0.72 $ 0.13 $ 1.30

Return on average assets 0.01 % 0.44 % 0.04 % 0.42 %

Effect of gain on prepayment of FHLB advances — (0.10 %) —

Effect of gain on termination of swaps — (0.16 %) —

Effect of IT termination fees 0.00 % 0.03 % 0.00 % 0.01 %

Effect of anniversary expenses 0.00 % 0.01 % 0.00 % 0.00 %

Adjusted return on average assets 0.01 % 0.48 % 0.04 % 0.43 %

Return on average shareholders' equity 0.20 % 6.28 % 0.58 % 5.96 %

Effect of gain on prepayment of FHLB advances — (1.48 %) —

Effect of gain on termination of swaps — (2.34 %) —

Effect of IT termination fees 0.00 % 0.39 % 0.00 % 0.19 %

Effect of anniversary expenses 0.00 % 0.10 % 0.00 % 0.05 %

Adjusted return on average shareholders' equity 0.20 % 6.77 % 0.58 % 6.20 %

1 Assuming a 21% tax rate

(dollars in thousands, except share and per share data) Three Months Ended Six Months Ended

2025 June 30,

2024 June 30,

2025 June 30,

Return on average tangible common equity 0.20 % 6.36 % 0.59 % 6.04 %

Effect of gain on prepayment of FHLB advances — (1.49 %) —

Effect of gain on termination of swaps — (2.37 %) —

Effect of IT termination fees 0.00 % 0.39 % 0.00 % 0.20 %

Effect of anniversary expenses 0.00 % 0.10 % 0.00 % 0.05 %

Adjusted return on average tangible common equity 0.20 % 6.85 % 0.59 % 6.29 %

10 unchanged sentences

In December 2024, the Company terminated interest rate swaps utilized as cash flow hedges against Federal Home Loan Bank advances.

As a result, the Company had no interest rate swaps that were classified as either fair value or cash flow hedges either at March 31, 2025 or at December 31, 2024.

As a result, the Company had no interest rate swaps that were classified as either fair value or cash flow hedges either at June 30, 2025 or at December 31, 2024.

Refer to Note 12 to the condensed consolidated financial statements for additional information about derivative financial instruments.

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