What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-03-11 compared with 2025-03-12 · 169 added, 189 removed, 575 unchanged (38% of the section changed)

7 unchanged sentences

Results of Operations

During the twelve months ended December 31, 2024, net income was $25.3 million, or $2.88 per diluted share, compared to net income of $8.4 million, or $0.95 per diluted share, for the twelve months ended December 31, 2023 and net income of $35.5 million, or $3.70 per diluted share, for the twelve months ended December 31, 2022.

The $16.9 million increase in net income for the twelve months ended December 31, 2024 compared to the twelve months ended December 31, 2023 was due primarily to an increase of $21.2 million, or 81.2%, in noninterest income, an increase of $12.5 million, or 16.7%, in net interest income, partially offset by an increase of $10.7 million, or 13.4%, in noninterest expense, an increase of $5.7 million, in income tax expense and an increase of $0.4 million, or 2.5%, in provision for credit losses.

During the twelve months ended December 31, 2025, net loss was $35.2 million, or $4.03 diluted loss per share, compared to net income of $25.3 million, or $2.88 per diluted share, for the twelve months ended December 31, 2024 and net income of $8.4 million, or $0.95 per diluted share, for the twelve months ended December 31, 2023.

The $60.4 million decrease in net income for the twelve months ended December 31, 2025 compared to the twelve months ended December 31, 2024 was due primarily to an increase of $55.2 million, or 323.6%, in provision for credit losses, a decrease of $44.6 million, or 94.3%, in noninterest income and an increase of $4.9 million, or 5.5%, in noninterest expense, partially offset by an increase of $26.4 million, or 30.2%, in net interest income and a decrease of $18.0 million in income tax expense.

During the twelve months ended December 31, 2025, the Company closed on the sale of $851.2 million of single tenant lease financing loans recognizing a pre-tax loss of $38.2 million on the transaction.

The transaction was executed as part of an initiative to strengthen the Company’s regulatory capital ratios and improve its interest rate risk position.

While the loss on the transaction negatively impacted shareholders’ equity and regulatory capital, the transaction significantly reduced risk-weighted assets, resulting in a net positive effect on regulatory capital ratios.

Furthermore, the loan sale reduced the Company’s interest rate risk profile by reducing exposure to longer-duration assets.

Additionally, the Company expects the transaction to have a beneficial impact on key profitability metrics, such as net interest margin and return on average assets, in future periods.

During the twelve months ended December 31, 2025, return on average assets (“ROAA”), return on average equity (“ROAE”) and return on average tangible common equity (“ROATCE”) were (0.60%), (9.15%) and (9.26%), respectively.

The Company recognized gains of $2.9 million from termination of interest rate swap agreements and $1.8 million from prepayment of FHLB advances as well as expenses of $0.5 million in IT termination fees and $0.1 million in anniversary expenses.

Adjusted net income for the twelve months ended December 31, 2024, was $22.0 million, and adjusted diluted earnings per share was $2.51.

Excluding the after tax net loss on the sale of the single tenant lease financing loans, adjusted net loss for the twelve months ended December 31, 2025, was $5.7 million, and adjusted diluted loss per share was $0.66.

Additionally, for the twelve months ended December 31, 2025, adjusted ROAA, adjusted ROAE and adjusted ROATCE were (0.10%), (1.49%) and (1.51%), respectively.

Due to the steep decline in consumer mortgage volumes and the negative outlook for consumer mortgage lending, the Company decided to exit its consumer mortgage business during the first quarter 2023.

This included its nationwide digital direct-to-consumer mortgage platform that originated residential loans for sale in the secondary market, as well as its local traditional consumer mortgage and construction-to-permanent business.

In connection with this decision, the Company recognized $3.1 million of mortgage operations and exit costs during the twelve months ended December 31, 2023.

The Company also recognized $0.1 million of mortgage banking revenue during the twelve months ended December 31, 2023.

Additionally, during the twelve months ended December 31, 2023, the Company recognized a $6.9 million partial charge-off related to a commercial and industrial participation loan with a balance of $9.8 million, prior to the partial charge-off, that was moved to nonaccrual status late in the first quarter 2023.

The Company received payment for the remaining balance of the participation loan during 2023.

The decrease in net income of $27.1 million for the twelve months ended December 31, 2023 compared to the twelve months ended December 31, 2022 was due primarily to a decrease of $22.2 million, or 22.9%, in net interest income, an increase of $11.7 million, or 234.6%, in provision for loan losses and an increase of $6.2 million, or 8.4%, in noninterest expense, partially offset by a decrease of $8.0 million, or 176.3%, in income tax expense and an increase of $4.9 million, or 22.9%, in noninterest income.

The increase in net income of $16.9 million for the twelve months ended December 31, 2024 compared to the twelve months ended December 31, 2023 was due primarily to increases of $21.2 million, or 81.2%, in noninterest income and $12.5 million, or 16.7%, in net interest income, partially offset by increases of $10.7 million, or 13.4%, in noninterest expense, $5.7 million in income tax expense and $0.4 million, or 2.5%, in provision for credit losses.

During the twelve months ended December 31, 2024, ROAA, ROAE and ROATCE were 0.46%, 6.70% and 6.78%, respectively.

Excluding the impact of exiting consumer mortgage and the partial charge-off, adjusted net income for the twelve months ended December 31, 2023 was $16.2 million and adjusted diluted earnings per share was $1.83.

The Company recognized gains of $2.9 million from the termination of interest rate swap agreements and $1.8 million from the prepayment of FHLB advances, as well as expenses of $0.5 million in IT termination fees and $0.1 million in anniversary expenses.

Adjusted for these items, net income for the twelve months ended December 31, 2024 was $22.0 million, and adjusted diluted earnings per share was $2.51.

Additionally, for the twelve months ended December 31, 2024, adjusted ROAA, adjusted ROAE and adjusted ROATCE were 0.40%, 5.83% and 5.90%, respectively.

14 unchanged sentences

Total interest-earning assets 5,662,897 320,157 5.65 % 5,285,026 291,887 5.52 % 4,809,840 239,442 4.98 %

Allowance for credit losses (42,758) (36,038) (29,143)

Allowance for credit losses - loans (51,440) (42,758) (36,038)

Noninterest-earning assets 237,366 220,462 194,712

47 unchanged sentences

Total 6,168 (4,281) 1,887 20,034 19,938 39,972

Increase /(decrease) in net interest income $ 3,183 $ 9,290 $ 12,473 $ 8,562 $ (30,751) $ (22,189)

Increase in net interest income $ 13,721 $ 12,662 $ 26,383 $ 3,183 $ 9,290 $ 12,473

Net interest income for the twelve months ended December 31, 2025 was $113.8 million, an increase of $26.4 million, or 30.2%, compared to $87.4 million for the twelve months ended December 31, 2024.

3 unchanged sentences

Additionally, the average balance of securities increased $149.0 million, or 19.3%, and the yield earned on the securities portfolio increased 13 bps.

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 originations was 8.29% for the twelve months ended December 31, 2024, an increase of 5 bps compared to the twelve months ended December 31, 2023.

The increase in total interest expense was due primarily to increases of $29.8 million, or 34.8%, in interest expense associated with certificates and brokered deposits, $4.6 million, or 329.6%, in interest expense associated with fintech - brokered deposits and $4.3 million, or 68.9%, in interest expense associated with interest-bearing demand deposits.

The increase in interest expense related to certificates and brokered deposits was driven by an increase of 55 bps in the cost of these deposits, as well as an increase of $390.2 million, or 19.1%, in the average balance of these deposits.

The increase in the average balance of these deposits was driven by strong consumer and small business demand for certificates of deposits in 2024, partially offset by lower brokered deposit balances, as the Company used on-balance sheet liquidity to pay down higher-cost balances throughout 2024.

The increase in interest expense related to fintech - brokered deposits was driven primarily by an increase of $108.8 million, or 329.6%, in the average balance of these deposits.

The balance of these deposits is driven by payments volume associated with one of the Company’s fintech partnerships, which increased significantly year-over-year.

The increase in interest expense related to interest-bearing demand deposits was due primarily to a 42 bp increase in the cost of these deposits, as well as an increase of $128.0 million, or 35.0%, in the average balance of these deposits.

The increase in the average balance of these deposits was due to growth in deposit activity from certain fintech partnerships.

The increase in the cost of funds across all of these deposit types reflects the impact of the elevated interest rate environment throughout 2024.

Net interest margin (“NIM”) was 1.65% for the twelve months ended December 31, 2024 compared to 1.56% for the twelve months ended December 31, 2023.

The increase in total interest income was partially offset by a 95 bp decrease in the yield on other earning assets.

The increase in the yield earned on loans was driven by new originations throughout the year as the yield on funded portfolio originations was 7.31%, well above the overall loan portfolio yield.

Additionally, the yield earned on the loan portfolio benefitted from the sale of the single tenant lease financing loans, which had interest rates below the overall loan portfolio yield.

The increase in the yield earned on securities was primarily driven by new securities purchases during the year, partially offset by the maturity of an interest rate swap designed to enhance the yield on certain municipal securities.

The decrease in the yield earned on other earning assets was due mainly to the impact of decreases in the Fed Funds rates on cash balances held at the Federal Reserve.

The increase in total interest expense was due primarily to an increase of $25.6 million, or 244.6%, in interest expense associated with interest-bearing demand deposits, partially offset by decreases of $8.7 million, or 7.5%, in interest expense associated with certificates and brokered deposits, $5.6 million, or 10.9%, in interest expense associated with money market accounts and $3.4 million, or 15.7%, 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 378 bp increase in the cost of these deposits, as well as an increase of $516.3 million, or 81.2%, in the average balance of these deposits.

The decrease in interest expense related to certificates and brokered deposits was driven by a 39 bp decline in cost of these deposits, partially offset by a slight increase in the average balance of these deposits.

The decrease in the cost of funds was due to the combination of lower rates on new certificates of deposit production and using on-balance sheet liquidity to paydown higher-cost brokered deposits as they matured.

The decrease in interest expense related to money

market accounts was driven primarily by a decrease of 49 bps in the cost of these deposits, partially offset by a slight increase in the average balance of these deposits.

The decrease in the cost of funds was due to the impact of decreases in the Fed Funds rate late in 2024 and in the second half of 2025.

The decrease in interest expense related to other borrowed funds was driven by a decrease in the average balance of $207.2 million, or 32.9%, partially offset by an 87 bp increase in the cost of these funds.

The decrease in the average balance of other borrowed funds was driven primarily by the early paydown of Federal Home Loan Bank advances late in 2024 as the Company deployed excess on-balance liquidity to reduce the size of the balance sheet and lower interest expense in future periods.

The increase in the cost of the funds was due mainly to the cost of one issuance of subordinated debt repricing higher as its fixed-rate term expired in the third quarter of 2024 and converted to variable rate.

Net interest margin (“NIM”) was 2.01% for the twelve months ended December 31, 2025 compared to 1.65% for the twelve months ended December 31, 2024, an increase of 36 bps.

On a fully-taxable equivalent (“FTE”) basis, NIM was 2.09% for the twelve months ended December 31, 2025 compared to 1.74% for the twelve months ended December 31, 2024, an increase of 35 bps.

The increase in NIM and FTE NIM compared to the twelve months ended December 31, 2023 reflects the decelerating pace of increase in the cost of interest-bearing deposits and the Company’s focus on shifting the loan composition towards variable rate and higher-yielding products.

The increase in NIM and FTE NIM compared to the twelve months ended December 31, 2024 reflects the combination of higher yields on loans and securities and continued improvement in the cost of funds related to deposits.

Noninterest Income

6 unchanged sentences

Mortgage banking activities — — 76

Gain on sale of loans 33,329 20,526 11,372

(Loss) gain on sale of loans (8,313) 33,329 20,526

Other 6,395 9,406 2,302

Total noninterest income $ 2,712 $ 47,345 $ 26,125

During the twelve months ended December 31, 2024, noninterest income totaled $47.3 million, representing an increase of $21.2 million, or 81.2%, compared to $26.1 million for the twelve months ended December 31, 2023.

The increase in noninterest income was driven primarily by increases of $12.8 million in gain on sale of loans, $7.1 million in other income and $1.3 million in net loan servicing revenue.

The increase in gain on sale of loans was due primarily to an increase of 48.8% in the volume of SBA 7(a) guaranteed loan sales as well as an increase of 83 bps to 108.17% in net gain on sale premium for the year.

The increase in other income was due primarily to distributions from fund investments, as well as a gain on termination of interest rate swaps of $2.9 million and a gain on prepayment of FHLB advances of $1.8 million.

The increase in net loan servicing revenue 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 income for the twelve months ended December 31, 2025 was $2.7 million, representing a decrease of $44.6 million, or 94.3%, compared to $47.3 million for the twelve months ended December 31, 2024.

Excluding the pre-tax loss of $38.2 million on the sale of the single tenant lease financing loans, adjusted noninterest income for the twelve months ended December 31, 2025 was $40.9 million.

Excluding the gain on termination of interest rate swaps of $2.9 million and the gain on prepayment of FHLB advances of $1.8 million, adjusted noninterest income for the twelve months ended December 31, 2024 was $42.6 million.

The decline in adjusted noninterest income of $1.7 million, or 3.9%, was due primarily to a decrease of $3.4 million, or 10.2%, in gain on sale of loans, partially offset by an increase of $1.7 million in other noninterest income.

During 2025, the Company recognized $29.4 million in gain of sales of U.S.

Small Business Administration (“SBA”) 7(a) guaranteed loans compared to $33.2 million in 2024.

The decrease was due mainly to a decrease in sold loan volume as the Company implemented a process change in the second quarter 2025 to hold SBA loans held-for-sale longer before selling into the secondary market.

This process change had a one quarter effect as gain on sale revenue reverted to normalized levels in the third quarter 2025.

The increase in other noninterest income was primarily driven by higher fintech partnership revenue resulting from increased program management fees and higher payments volume.

Noninterest Expense

11 unchanged sentences

Total noninterest expense $ 95,027 $ 90,110 $ 79,436

Noninterest expense for the twelve months ended December 31, 2024 was $90.1 million, representing an increase of $10.7, or 13.4%, compared to $79.4 million for the twelve months ended December 31, 2023.

The increase was due primarily to increases of $6.4 million, or 14.2%, in salaries and employee benefits, $1.3 million, or 12.3%, in premises and equipment, $1.1 million, or 28.9%, in deposit insurance premium, $0.9 million, or 14.8%, in other expenses and $0.7 million, or 21.5%, in consulting and professional fees.

The increase in salaries and employee benefits was due primarily to higher small business lending incentive compensation and staff additions in small business lending and risk management, as well as higher incentive compensation accruals based on the increase in net income in 2024.

The increase in premises and equipment was due primarily to non-recurring IT termination fees, property taxes and software maintenance expense.

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

The increase in other expenses was due primarily to various expenses, none of which were individually significant.

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

The following table reconciles reported income provision tax (benefit) to that computed at the statutory federal tax rate for the three most recent years.

Twelve Months Ended December 31,

Noninterest expense for the twelve months ended December 31, 2025 was $95.0 million, representing an increase of $4.9 million or 5.5%, compared to $90.1 million for the twelve months ended December 31, 2024.

Excluding the IT termination fees of $0.5 million and anniversary expenses of $0.1 million, adjusted noninterest expense for the twelve months ended December 31, 2024 was $89.5 million.

The decline in adjusted noninterest expense of $5.5 million, or 6.1%, was due primarily to increases of $2.2 million, or 19.4%, in premises and equipment, $1.4 million, or 21.9%, in other noninterest expense and $1.1 million, or 22.2%, in deposit insurance premium.

The increase in premises and equipment was driven by higher software maintenance costs.

The increase in other noninterest expense was due mainly to higher fintech volume activity and the increase in deposit insurance premium was due to changes in the composition of the loan portfolio.

In December 2023, the FASB issued ASU 2023-09, which expands income tax disclosure requirements to include additional information related to the rate reconciliation of our effective tax rates to statutory rates.

The Company adopted ASU 2023-09 on a prospective basis for the year ended December 31, 2025.

December 31, 2025

(amounts in thousands) Amount Percent

federal statutory tax rate $ (10,682) (21.0 %)

State and local income tax, net of federal tax effect 1

(1,189) (2.3 %)

Tax credits (206) (0.4 %)

Nontaxable or nondeductible items:

Income from tax-exempt securities and loans (3,497) (6.9 %)

Other (127) (0.3 %)

Total $ (15,701) (30.9 %)

1 The states that contribute to the majority (greater than 50%) of the tax effect in the category include Indiana and Florida for 2025.

The following table reconciles reported income tax provision (benefit) to that computed at the statutory federal tax rate for the years ended December 31, 2024 and 2023, in accordance with the guidance prior to the adoption of ASU 2023-09.

(amounts in thousands) 2024 2023

7 unchanged sentences

Income tax provision (benefit) $ 2,266 $ (3,477)

We recognized an income tax provision of $2.3 million and an effective tax rate of 8.2% in 2024, compared to an income tax benefit of $3.5 million in 2023.

Our federal statutory tax rate was 21% in 2024 and 2023.

In 2024 and 2023, the variance from the federal statutory rate was due primarily to tax-exempt income.

We recognized an income tax benefit of $15.7 million in 2025, compared to an income tax provision of $2.3 million and an effective tax rate of 8.2% in 2024 and a benefit of $3.5 million in 2023.

Our federal statutory tax rate was 21% in 2024.

The variance from the federal statutory rate 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.

The income tax benefits recognized during 2023 also reflect the benefit of tax exempt income relative to stated pre-tax income, as well as the impact on pre-tax income from mortgage exit costs and the partial charge-off of a commercial and industrial participation loan in 2023.

The income tax benefit recognized during 2025 also reflects the impact of a pre-tax loss of $38.2 million from the loss on the sale of the single tenant lease financing loans.

Financial Condition

11 unchanged sentences

Total shareholders' equity 359,767 384,063

Total assets increased $570.3 million, or 11.0%, to $5.7 billion as of December 31, 2024 compared to $5.2 billion as of December 31, 2023.

Balance sheet growth was driven primarily by an increase in total deposits of $866.2 million, or 21.3%.

The increase in deposits was used, in part, to fund loan growth, as loan balances increased $330.4 million.

Furthermore, additional liquidity from the increase in deposits was deployed to reduce advances from the FHLB, which declined as FHLB advances decreased $319.9 million, or 52.0%.

As deposit growth outpaced loan growth, balance sheet liquidity increased as the combined balance of cash and securities increased $195.7 million, or 17.7%, and the percentage of loans to deposits declined to 84.5% as of December 31, 2024 from 94.4% as of December 31, 2023.

As of December 31, 2024, total shareholders’ equity was $384.1 million, an increase of $21.3 million, or 5.9%, compared to December 31, 2023.

The increase in shareholders’ equity was due primarily to the net income earned during 2024, partially offset by an increase in accumulated other comprehensive loss.

Tangible common equity totaled $379.4 million as of December 31, 2024, representing an increase of $21.3 million, or 5.9%, compared to December 31, 2023.

Total assets decreased $166.2 million, or 2.9%, to $5.6 billion as of December 31, 2025 compared to $5.7 billion as of December 31, 2024.

The decrease was driven by a decline in loans due to the single tenant lease financing loan sale and lower franchise finance balances, partially offset by higher investor commercial real estate, commercial and industrial and small business lending balances.

Total liabilities declined $141.9 million, or 2.7%, to $5.2 billion at December 31, 2025 compared to $5.4 billion at December 31, 2024.

The decrease was due mainly to a decrease in total deposits, as well as a decline in advances from the Federal Home Loan Bank.

Increased liquidity from growth in fintech partnership deposits allowed the Company to pay down higher cost brokered deposits and advances from the Federal Home Loan Bank throughout 2025.

Additionally, following the sale of the single tenant lease financing loans, the Company moved a significant amount of fintech deposits off-balance sheet in order to manage the overall size of the balance sheet.

As of December 31, 2025, total shareholders’ equity was $359.8 million, a decrease of $24.3 million, or 6.3%, compared to December 31, 2024.

The decrease in shareholders’ equity was due primarily to the net loss during 2025, partially offset by a decrease in accumulated other comprehensive loss as unrealized losses on securities declined during the year.

Tangible common equity totaled $355.1 million as of December 31, 2025, representing a decrease of $24.3 million, or 6.4%, compared to December 31, 2024.

The ratio of total shareholders’ equity to total assets decreased to 6.46% as of December 31, 2025 from 6.69% as of December 31, 2024 and the ratio of tangible common equity to tangible assets decreased to 6.38% as of December 31, 2025 from 6.62% as of December 31, 2024.

Book value per common share increased 5.6% to $44.31 as of December 31, 2024 from $41.97 as of December 31, 2023.

Tangible book value per share increased 5.6% to $43.77 as of December 31, 2024 from $41.43 as of December 31, 2023.

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.

Book value per common share decreased 6.5% to $41.41 as of December 31, 2025 from $44.31 as of December 31, 2024.

Tangible book value per share decreased 6.6% to $40.87 as of December 31, 2025 from $43.77 as of December 31, 2024.

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

Refer to the “Reconciliation of Non-GAAP Financial Measures” section of Item 7 of Part II of this report, Management's Discussion and Analysis of Financial Condition and Results of Operations for additional information.

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2 Includes carrying value adjustments of $19.1 million and $22.9 million related to terminated interest rate swaps associated with public finance loans as of December 31, 2025 and December 31, 2024, respectively.

Total loans were $4.2 billion as of December 31, 2024, an increase of $330.4 million, or 8.6%, compared to December 31, 2023.

Total commercial loan balances were $3.3 billion, as of December 31, 2024, an increase of $336.7 million, or 11.2%, from December 31, 2023.

Total consumer loan balances were $801.4 million as of December 31, 2024, an increase of $4.5 million, or 0.6%, compared to December 31, 2023.

Compared to December 31, 2023, in connection with the Company’s focus on variable rate products, the increase in commercial loan balances was driven by growth in the construction, investor commercial real estate and small business lending portfolios.

The increase was partially offset by continued runoff in the healthcare finance portfolio and a decrease in the fixed-rate public finance portfolio.

Additionally, commercial and industrial balances declined due primarily to early payoffs.

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

Total loans were $3.7 billion as of December 31, 2025, a decrease of $423.9 million, or 10.2%, compared to December 31, 2024.

Total commercial loan balances were $2.9 billion, as of December 31, 2025, a decrease of $400.5 million, or 12.0%, from December 31, 2024.

Total consumer loan balances were $783.3 million as of December 31, 2025, a decrease of $18.1 million, or 2.3%, compared to December 31, 2024.

Compared to December 31, 2024, the decrease in commercial loan balances was driven by the sale of the single tenant lease financing loans, planned run-off in the franchise finance and healthcare finance portfolios and a decline in the fixed rate public finance portfolio.

The decreases were partially offset by increases in investor commercial real estate, which was driven by completed construction projects that were moved to investor commercial real estate upon entering their stabilization period, as well as growth in the commercial and industrial and small business lending portfolios.

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

Loan Maturities and Rate Sensitivity

35 unchanged sentences

Commercial loans:

Commercial and industrial $ 240 $ —

Single tenant lease financing 1,665 —

Healthcare finance 2,596 —

Small business lending 1

19,781 11,429

Franchise finance 26,978 10,382

8 unchanged sentences

Small business lending — 1,320

Franchise finance 1,144 —

Total commercial loans 1,144 1,320

6 unchanged sentences

Other real estate owned

Small business lending 2,631 —

Residential mortgage — 272

8 unchanged sentences

Allowance for credit losses - loans to nonperforming loans 95.1 % 157.5 %

1 Balances include $13.6 million and $4.9 million that are guaranteed by the U.S.

government as of December 31, 2025 and December 31, 2024, respectively.

A loan is individually evaluated, when, based on current information or events, it is probable that we will be unable to collect all amounts due (principal and interest) according to the contractual terms of the loan agreement.

2 unchanged sentences

Generally, loans are placed on nonaccrual status at 90 days past due and accrued interest is reversed against earnings, unless the loan is well secured and in the process of collection.

The accrual of interest on individually evaluated loans is discontinued when, in management’s opinion, the borrower may be unable to meet payments as they become due.

Individually evaluated loans include nonperforming loans and also include loans where concessions have been granted to borrowers experiencing financial difficulties.

accrual of interest on individually evaluated loans is discontinued when, in management’s opinion, the borrower may be unable to meet payments as they become due.

Individually evaluated loans include nonperforming loans and may also include loans where concessions have been granted to borrowers experiencing financial difficulties.

These concessions could include a reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance, or other actions intended to maximize collection.

3 unchanged sentences

however, we did not own any securities classified as such during the two-year period ended December 31, 2025.

Total nonperforming loans increased $18.5 million, or 185.3%, to $28.4 million as of December 31, 2024 compared to $10.0 million as of December 31, 2023, due primarily to increases in nonperforming loans related to the small business lending, franchise finance and residential mortgage portfolios, as well as an increase in accruing loans past due 90 days or more.

Total nonperforming assets increased $18.6 million, or 179.2%, to $28.9 million as of December 31, 2024, compared to $10.4 million as of December 31, 2023, due primarily to the increases in nonperforming loans mentioned above, as well as an increase in loan repossessions (“REPO”), partially offset by a decrease in other real estate owned (“OREO”).

Total nonperforming loans increased $30.1 million, or 106.0%, to $58.5 million as of December 31, 2025 compared to $28.4 million as of December 31, 2024, due primarily to an increase in nonperforming loans in the franchise finance and small business lending portfolios during the year.

Total nonperforming assets increased $32.5 million, or 112.3%, to $61.4 million as of December 31, 2025, compared to $28.9 million as of December 31, 2024, due primarily to the aforementioned increase in nonperforming loans and an increase in OREO related to small business lending.

As of December 31, 2025, the Company had three small business lending properties in OREO with a carrying value of $2.6 million.

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

As of December 31, 2023, the Company had two residential mortgage properties in OREO with a carrying value of $0.4 million.

Allowance for Credit Losses - Loans

3 unchanged sentences

Balance, beginning of period $ 44,769 $ 38,774

Adoption of ASU 2016-13 (CECL) — 2,962

Balance, beginning of period 38,774 34,699

Provision charged to expense 71,921 18,815

1 unchanged sentence

Commercial and industrial (153) —

Investor commercial real estate — (591)

Single tenant lease financing — (195)

Healthcare finance — (605)

Small business lending (39,650) (10,441)

5 unchanged sentences

Small business lending 1,681 325

Franchise finance 94 —

Residential mortgage 19 1

4 unchanged sentences

Net charge-offs $ 61,004 $ 12,820

Net (recoveries) charge-offs to average loans (annualized)

Net charge-offs (recoveries) to average loans (annualized)

Commercial and industrial 0.11 % (0.01 %)

Investor commercial real estate — % 0.47 %

Single tenant lease financing — % 0.02 %

Healthcare finance — % 0.25 %

Small business lending 8.16 % 3.39 %

7 unchanged sentences

The determination of the ACL and the related provision for credit losses are components of our significant accounting policies as discussed within Note 1 to our consolidated financial statements.

The adequacy of the allowance for credit losses and the provision are based on the review and evaluation of the loan portfolio and reflect management’s assessment of the risks and potential losses within the portfolio.

The adequacy of the ACL and the provision are based on the review and evaluation of the loan portfolio and reflect management’s assessment of the risks and potential losses within the portfolio.

This evaluation uses a discounted cash flow analysis based on historical loss data, reasonable and supportable forecasts and prepayment rates, as well as qualitative factors such as economic and business conditions, portfolio growth, concentrations of credit in the portfolio, trends in risk grades, delinquencies within the portfolio and changes in our lending policies and practices.

1 unchanged sentence

Although management believes it uses the best information available to make determinations with respect to the ACL, future adjustments may be necessary if economic conditions differ substantially from those in the assumptions used to determine the size of the ACL.

The ACL was $44.8 million as of December 31, 2024, compared to an ACL of $38.8 million as of December 31, 2023.

The increase in the ACL reflects growth and higher coverage ratios in certain portfolios, as well as additional reserves for nonperforming small business lending and franchise finance loans, partially offset by the impact of economic data on forecasted loss rates and qualitative factors for other portfolios.

The ACL was $55.7 million as of December 31, 2025, compared to $44.8 million as of December 31, 2024.

The increase in the ACL reflects updated assumptions to the Company’s CECL model, including updates that significantly increased the ACL related to small business lending, as well as additional specific reserves related to franchise finance loans that were placed on nonaccrual during the year, partially offset by the removal of specific reserves for small business lending and franchise finance loans that were charged off.

Furthermore, the ACL as a percentage of total loans was impacted by lower total loan balances following the sale of the single tenant lease financing loans.

The ACL as a percentage of total loans was 1.49% as of December 31, 2025, compared to 1.07% at December 31, 2024.

The ACL as a percentage of nonperforming loans decreased to 157.5% as of December 31, 2024, compared to 389.2% as of December 31, 2023.

The ACL as a percentage of nonperforming loans decreased to 95.1% as of December 31, 2025, compared to 157.5% as of December 31, 2024, as the increase in nonperforming loans outweighed the increase in the ACL.

The provision for credit losses - loans was $71.9 million for the twelve months ended December 31, 2025 compared to $18.8 million for the twelve months ended December 31, 2024.

The increase in the provision for credit losses - loans for the twelve months ended December 31, 2024 was driven primarily by increases in net charge-offs in the small business lending and franchise finance portfolios, as well as growth in ACL discussed above, partially offset by lower net charge-offs in the commercial and industrial portfolio.

The increase in the provision for credit losses - loans for the twelve months ended December 31, 2025 was driven primarily by the net charge-offs and the increase in the ACL related to small business lending and the additional specific reserves related to franchise finance discussed above, partially offset by the decrease in the ACL resulting from the sale of the single tenant lease financing loans mentioned above and by the decrease in specific reserves related to small business lending and franchise finance loans that were charged off.

Investment Securities Portfolio

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Investment securities that are acquired and held principally for the purpose of selling them in the near term with the objective of generating economic profits on short-term differences in market characteristics are classified as “trading securities.” We did not classify any securities as trading securities as of December 31, 2025 and 2024.

Securities that we intend to hold until maturity are classified as “held-to-maturity” securities, and all other investment securities are classified as “available-for-sale.” The carrying values of available-for-sale investment securities are adjusted for unrealized gains or losses as a valuation allowance and any gain or loss is reported on an after-tax basis as a component of other comprehensive income (loss).

We periodically evaluate each security in an unrealized loss position to determine if there is an impairment.

1 unchanged sentence

We have the ability and intent to hold all investment securities in an unrealized loss position resulting from interest rate changes to the earlier of the forecasted recovery or the maturity of the underlying investment security.

As of December 31, 2024, we did not have any investment securities of a single issuer that exceeded 10% of shareholders’ equity.

As of December 31, 2025, and 2024, we did not have any investment securities of a single issuer that exceeded 10% of shareholders’ equity.

The term “issuer” excludes the U.S.

12 unchanged sentences

Total securities available-for-sale 802,422 626,854

Securities held-to-maturity

Securities held-to-maturity, net carrying value

Municipal securities 11,006 12,843

2 unchanged sentences

Corporate securities 20,438 29,408

Total securities held-to-maturity, net 249,796 227,153

Total securities held-to-maturity, net carrying value 250,609 249,796

Total securities $ 1,053,031 $ 876,650

18 unchanged sentences

The approximate fair value of investment securities available-for-sale increased $191.3 million, or 32.6%, to $778.7 million as of December 31, 2025 compared to $587.4 million as of December 31, 2024.

The increase was due primarily to increases of $63.0 million in agency mortgage-backed securities - residential, $25.0 million in private label mortgage-backed securities - residential, $24.4 million in agency mortgage-backed securities - commercial, and $15.7 million in asset-backed securities, partially offset by decreases of $12.4 million in U.S.

Government-sponsored agencies securities and $4.8 million in municipal securities.

The increase was primarily attributable to new purchase activity within the available-for-sale portfolios, partially offset by net paydown activity.

The increase was due primarily to increases of $119.8 million in agency mortgage-backed securities - residential, $77.9 million in private label mortgage-backed securities - residential and $18.7 million in asset-backed securities, partially offset by decreases of $19.1 million in U.S.

Government-sponsored agencies securities and $4.9 million in agency mortgage-backed securities - commercial.

The Company deployed liquidity during 2025 primarily into new purchases of available-for-sale variable-rate mortgage-backed and asset-backed securities, which was partially offset by net pay down activity in other security types.

As of December 31, 2025, the Company had securities with a net carrying value of $250.6 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.

The slight increase was due primarily to purchases of CRA-eligible agency mortgage-backed securities - residential made in the first quarter 2025, which was partially offset by net paydown activity of corporate and municipal securities.

Investment Maturities

The following table summarizes the contractual maturity schedule (without regard to repricing schedules) of our investment securities at their amortized cost and their weighted average yields at December 31, 2025.

1 year or less More than 1 year

(dollars in thousands) 1 year or less More than 1 year

to 5 years More than 5 years

to 10 years More than 10 years Total

(dollars in thousands) Amortized

Government-sponsored agencies

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Accrued income and other assets increased $26.1 million, or 41.4%, to $89.1 million at December 31, 2025 compared to $63.0 million at December 31, 2024.

The increase was due primarily to increases of $12.9 million in equity investments, $3.0 million related to a bond that was called on December 30, 2024 and $2.3 million in income tax receivable, partially offset by a decrease of $5.6 million in derivative assets.

The increase was due primarily to increases of $14.5 million in deferred tax assets and $10.4 million in equity investments.

The following table presents the composition of our deposit base as of the end of the last two years.

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Money market accounts 1,272,845 26.3 % 1,183,789 24.0 %

Fintech - brokered deposits 1

— — % 74,401 1.8 %

Certificates of deposits 2,004,909 41.4 % 2,133,455 43.2 %

1 unchanged sentence

Total $ 4,839,813 100.0 % $ 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 $866.2 million, or 21.3%, to $4.9 billion as of December 31, 2024 compared to $4.1 billion as of December 31, 2023.

This increase was due primarily to increases of $528.3 million, or 32.9%, in certificates of deposits, $493.7 million, or 122.5%, in interest-bearing demand deposits and $13.0 million, or 10.5%, in noninterest-bearing deposits, partially offset by decreases of $64.5 million, or 5.2%, in money market accounts, $28.3 million, or 4.8%, in brokered deposits and $1.5 million, or 7.2%, in savings accounts.

The increase in certificates of deposits was due primarily to strong consumer and small business demand in 2024.

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

The decrease in money market accounts was driven by general customer withdraw activity which was due to larger-balance accounts that can experience volatility from time-to-time.

The decrease in brokered deposits was driven by using excess liquidity to paydown higher-cost deposits throughout the year.

Uninsured deposit balances represented 25% of total deposits as of December 31, 2024 and 2023.

Total deposits decreased $93.4 million, or 1.9%, to $4.8 billion as of December 31, 2025 compared to $4.9 billion as of December 31, 2024.

This decrease was due primarily to decreases of $287.7 million, or 51.1%, in brokered deposits and $128.5 million, or 6.0%, in certificates of deposits, partially offset by increases of $224.2 million, or 25.0%, in interest-bearing demand deposits, $89.1 million, or 7.5%, in money market accounts and $10.4 million, or 7.6%, in noninterest-bearing deposits.

The Company experienced strong growth in fintech partnership deposits during 2025, driving the increases in interest-bearing demand and noninterest-bearing deposits.

The strong growth, combined with liquidity from the sale of the single tenant lease financing loans, provided the ability to pay down maturing higher-cost brokered deposits and certificates of deposit.

Additionally, following the sale of the single tenant lease financing loans, the Company moved a significant amount of fintech partnership deposits off-balance sheet in order to manage the size of the balance sheet and improve profitability and balance sheet metrics.

As of December 31, 2025, the Company had $859.9 million of fintech deposits on-balance sheet and $1.1 billion of deposits off-balance sheet, providing flexibility for future funding and liquidity needs.

Uninsured deposit balances represented 33% of total deposits at December 31, 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 20% as of December 31, 2024, compared to 19% as of December 31, 2023.

The following tables present contractual interest rates paid on time deposits, their scheduled maturities, and the scheduled maturities for time deposits greater than $250,000.

subtracting these types of deposits, the adjusted uninsured deposit balance drops to 27% as of December 31, 2025, compared to 20% as of December 31, 2024.

The following tables present contractual interest rates paid on time deposits and brokered deposits, their scheduled maturities, and the scheduled maturities for time deposits greater than $250,000.

Time Deposit Maturities at December 31, 2025

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Weighted average interest rate at end of period 3.56 % 3.39 %

3.39 % 3.04 %

Weighted average interest rate during period 3.67 % 2.93 %

2.93 % 3.00 %

1 Excludes the impact of interest rate swaps.

Refer to Note 18 to our consolidated financial statements for additional information about derivative financial instruments.

Accrued Expenses and Other Liabilities

Accrued expenses and other liabilities increased $3.8 million, or 26.5%, to $17.9 million at December 31, 2024, compared to $14.2 million at December 31, 2023.

The increase was due primarily to increases of $2.3 million in accrued salary and benefits and $3.1 million in various expenses and liabilities, partially offset by a decrease of $1.6 million in the reserve for unfunded commitments.

Accrued expenses and other liabilities decreased $2.6 million, or 14.4%, to $15.4 million at December 31, 2025, compared to $17.9 million at December 31, 2024.

The decrease was due primarily to decreases of $3.0 million in accrued salary and benefits and $1.1 million in other accrued expenses, partially offset by increases of $1.1 million in unfunded commitments and $0.4 million in the reserve for unfunded loan commitments

Liquidity and Capital Resources

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While scheduled payments and maturities of loans and investment securities are relatively predictable sources of funds, deposit flows are greatly influenced by interest rates, general economic conditions and competition.

Therefore, the Company supplements deposit growth and enhances interest rate risk management through borrowings and wholesale funding, which are generally advances from the Federal Home Loan Bank and brokered deposits.

Therefore, the Company may supplement deposit growth and enhance interest rate risk management through borrowings and wholesale funding, which are generally advances from the Federal Home Loan Bank and brokered deposits.

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 December 31, 2025, on a consolidated basis, the Company had $1.2 billion in cash and cash equivalents and investment securities available-for-sale, and $108.6 million in loans held-for-sale that were generally available for our cash needs.

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

At December 31, 2024, 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.

Importantly, the Company also had access to an additional $1.1 billion in the form of off-balance sheet deposits sold into the IntraFi deposit network.

In addition, the Company can generate funds from wholesale funding sources and collateralized borrowings.

At December 31, 2025, the Company had the ability to borrow an additional $1.7 billion from the Federal Home Loan Bank, Federal Reserve and correspondent bank Fed Funds lines of credit.

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

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1 Amounts do not include associated interest payments.

In October 2021, the Company’s Board of Directors approved a stock repurchase program authorizing the repurchase of up to $30.0 million of the Company’s outstanding common stock from time to time on the open market or in privately negotiated transactions.

In October 2022, the Company’s Board of Directors increased the authorization to $35.0 million.

The Company repurchased a total of 855,956 shares at an average price of $36.31 per share under the program through December 19, 2022.

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.

The stock repurchase authorization expired as of December 31, 2024.

Under this program, the Company repurchased 10,500 shares of common stock at an average price of $26.95 per share during 2024, 502,525 shares of common stock at an average price of $18.40 per share during 2023, and 46,497 shares of common stock at an average price of $24.42 per share during 2022.

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.

Under the program, the Company repurchased 559,522 shares of common stock, at an average price of $19.06, for a total investment of $10.7 million.

On October 20, 2025, the Board of Directors of the Company authorized the repurchase of up to $25.0 million of the Company's outstanding common stock from time to time on the open market or in privately negotiated transactions.

Under the program, the Company repurchased 27,998 shares of common stock, at an average price of $18.64, for a total investment of $0.5 million as of December 31, 2025.

The stock repurchase authorization is scheduled to expire on September 30, 2027.

Reconciliation of Non-GAAP Financial Measures

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, adjusted noninterest income, adjusted noninterest expense, adjusted income before income taxes, adjusted income tax provision (benefit), 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, adjusted total revenue, pre-provision net revenue, adjusted pre-provision net revenue, adjusted noninterest income, adjusted noninterest expense, adjusted (loss) income before income taxes, adjusted income tax (benefit) provision, adjusted net (loss) 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 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.

38 unchanged sentences

Total revenue - GAAP $ 116,472 $ 134,722 $ 101,029

Loss on sale of loans 38,234 — —

Mortgage-related revenue — — (65)

2 unchanged sentences

Adjusted total revenue $ 154,706 $ 129,989 $ 100,964

Net (loss) income - GAAP $ (35,168) $ 25,276 $ 8,417

Provision for credit losses 72,314 17,070 16,653

Income tax (benefit) provision (15,701) 2,266 (3,477)

Pre-provision net revenue $ 21,445 $ 44,612 $ 21,593

Loss on sale of loans 38,234 — —

Mortgage-related revenue — — (65)

IT termination fees — 357 —

Anniversary expenses — 95 —

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

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

Adjusted pre-provision net revenue $ 59,679 $ 40,331 $ 21,528

Noninterest income - GAAP $ 2,712 $ 47,345 $ 26,125

Loss on sale of loans 38,234 — —

Mortgage-related revenue — — (65)

4 unchanged sentences

Mortgage-related costs — — (3,052)

Acquisition-related expenses — — (273)

IT termination fees — (452) —

Nonrecurring consulting fee — — (875)

Write-down of Software — — (125)

Discretionary inflation bonus — — (531)

Accelerated equity compensation — — (289)

Anniversary expenses — (120) —

Adjusted noninterest expense $ 95,027 $ 89,538 $ 76,384

Income before income taxes - GAAP $ 27,542 $ 4,940 $ 40,100

Income (loss) before income taxes - GAAP $ (50,869) $ 27,542 $ 4,940

Loss on sale of loans 38,234

Mortgage-related revenue — — (65)

1 unchanged sentence

Partial charge-off of C&I participation loan — — 6,914

Acquisition-related expenses — — 273

IT termination fees — 452 —

Nonrecurring consulting fee — — 875

Write-down of software — — 125

Discretionary inflation bonus — — 531

Accelerated equity compensation — — 289

Anniversary expenses — 120 —

4 unchanged sentences

(dollars in thousands, except share and per share data) At or For The Twelve Months Ended December 31,

2024 2023 2022

Income tax provision (benefit) - GAAP $ 2,266 $ (3,477) $ 4,559

(dollars in thousands, except share and per share data) 2025 2024 2023

Income tax (benefit) provision - GAAP $ (15,701) $ 2,266 $ (3,477)

Loss on sale of loans 8,785 — —

Mortgage-related revenue — — (14)

1 unchanged sentence

Partial charge-off of C&I participation loan — — 1,452

Acquisition-related expenses — — 57

IT termination fees — 95 —

Nonrecurring consulting fee — — 184

Write-down of software — — 26

Discretionary inflation bonus — — 112

Accelerated equity compensation — — 61

Anniversary expenses — 25 —

1 unchanged sentence

Gain on termination of interest rate swaps — (610) —

Adjusted income tax provision (benefit) $ 1,392 $ (1,398) $ 4,999

Net income - GAAP $ 25,276 $ 8,417 $ 35,541

Adjusted income tax (benefit) provision $ (6,916) $ 1,392 $ (1,398)

Net (loss) income - GAAP $ (35,168) $ 25,276 $ 8,417

Loss on sale of loans 29,449 — —

Mortgage-related revenue — — (51)

2 unchanged sentences

IT termination fees — 357 —

Acquisition-related expenses — — 216

Nonrecurring consulting fee — — 691

Write-down of software — — 99

Discretionary inflation bonus — — 419

Accelerated equity compensation — — 228

Anniversary expenses — 95 —

1 unchanged sentence

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

Adjusted net income $ 21,989 $ 16,239 $ 37,194

Adjusted net (loss) income $ (5,719) $ 21,989 $ 16,239

Diluted average common shares outstanding 8,729,970 8,765,725 8,858,890

Diluted earnings per share - GAAP $ 2.88 $ 0.95 $ 3.70

Mortgage-related revenue — (0.01) —

Mortgage-related costs — 0.27 —

Diluted (loss) earnings per share - GAAP $ (4.03) $ 2.88 $ 0.95

Effect of loss on sale of loans 3.37 — —

Effect of mortgage-related revenue — — (0.01)

Effect of mortgage-related costs — — 0.27

Effect of partial charge-off of C&I participation loan — — 0.62

Effect of acquisition-related expenses — — 0.02

Effect of IT termination fees — 0.04 —

Effect of nonrecurring consulting fee — — 0.07

Effect of write-down of software — — 0.01

Effect of discretionary inflation bonus — — 0.04

Effect of accelerated equity compensation — — 0.02

Effect of anniversary expenses — 0.01 —

1 unchanged sentence

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

Adjusted diluted earnings per share $ 2.51 $ 1.83 $ 3.86

1 Assuming a 21% tax rate

(dollars in thousands, except share and per share data) At or For The Twelve Months Ended December 31,

2024 2023 2022

Adjusted diluted (loss) earnings per share $ (0.66) $ 2.51 $ 1.83

Return on average assets (0.60 %) 0.46 % 0.17 %

Effect of loss on sale of loans 0.50 % 0.00 % 0.00 %

Effect of mortgage-related revenue 0.00 % 0.00 % 0.00 %

1 unchanged sentence

Effect of partial charge-off of C&I participation loan 0.00 % 0.00 % 0.11 %

Effect of acquisition-related expenses 0.00 % 0.00 % 0.01 %

Effect of IT termination fees 0.00 % 0.01 % 0.00 %

Effect of nonrecurring consulting fee 0.00 % 0.00 % 0.02 %

Effect of discretionary inflation bonus 0.00 % 0.00 % 0.01 %

Effect of accelerated equity compensation 0.00 % 0.00 % 0.01 %

Effect of anniversary expenses 0.00 % 0.00 % 0.00 %

Effect of gain on prepayment of FHLB advances 0.00 % (0.03 %) 0.00 %

1 unchanged sentence

Adjusted return on average assets (0.10 %) 0.40 % 0.33 %

1 Assuming a 21% tax rate

(dollars in thousands, except share and per share data) At or For The Twelve Months Ended December 31,

(dollars in thousands, except share and per share data) 2025 2024 2023

Return on average shareholders' equity (9.15 %) 6.70 % 2.35 %

Effect of loss on sale of loans 7.66 % 0.00 % 0.00 %

Effect of mortgage-related revenue 0.00 % 0.00 % (0.01 %)

1 unchanged sentence

Effect of partial charge-off of C&I participation loan 0.00 % 0.00 % 1.53 %

Effect of acquisition-related expenses 0.00 % 0.00 % 0.06 %

Effect of IT termination fees 0.00 % 0.09 % 0.00 %

Effect of nonrecurring consulting fee 0.00 % 0.00 % 0.19 %

Effect of write-down of software 0.00 % 0.00 % 0.03 %

Effect of discretionary inflation bonus 0.00 % 0.00 % 0.11 %

Effect of accelerated equity compensation 0.00 % 0.00 % 0.06 %

Effect of anniversary expenses 0.00 % 0.03 % 0.00 %

3 unchanged sentences

Return on average tangible common equity (9.26 %) 6.78 % 2.38 %

Effect of loss on sale of loans 7.75 % 0.00 % 0.00 %

Effect of mortgage-related revenue 0.00 % 0.00 % (0.01 %)

1 unchanged sentence

Effect of partial charge-off of C&I participation loan 0.00 % 0.00 % 1.55 %

Effect of acquisition-related expenses 0.00 % 0.00 % 0.06 %

Effect of IT termination fees 0.00 % 0.10 % 0.00 %

Effect of nonrecurring consulting fee 0.00 % 0.00 % 0.19 %

Effect of write-down of software 0.00 % 0.00 % 0.03 %

Effect of subordinated debt redemption cost 0.00 % 0.00 % 0.00 %

Effect of discretionary inflation bonus 0.00 % 0.00 % 0.11 %

Effect of accelerated equity compensation 0.00 % 0.00 % 0.06 %

Effect of anniversary expenses 0.00 % 0.03 % 0.00 %

47 unchanged sentences

Funding rates are based on a historical analysis of the Company’s portfolio, while estimates of credit losses are determined using the same loss rates as funded loans.

Allowance for Loan Losses

Management believes the allowance for loan losses is a critical accounting policy that requires the most significant judgments and assumptions used in the preparation of our consolidated financial statements.

An estimate of potential losses inherent in the loan portfolio is determined and an allowance for those losses is established by considering factors including historical loss rates, expected cash flows, estimated collateral values, and other qualitative factors.

The allowance for loan losses represents management’s best estimate of losses inherent in the existing loan portfolio.

The allowance for loan losses is increased by the provision for loan losses charged to expense and reduced by loans charged off, net of recoveries.

Management evaluates the allowance for loan losses quarterly.

If the underlying assumptions later prove to be inaccurate based on subsequent loss evaluations, the allowance for loan losses is adjusted.

Management estimates the appropriate level of allowance for loan losses by separately evaluating impaired and non-impaired loans.

A specific allowance is assigned to an impaired loan when expected cash flows or collateral do not justify the carrying amount of the loan.

The methodology used to assign an allowance to a non-impaired loan is more subjective.

Generally, the allowance assigned to non-impaired loans is determined by applying historical loss rates to existing loans with similar risk characteristics, adjusted for qualitative factors including changes in economic and business conditions, unemployment rates, concentrations of credit, changes in the nature and volume of the portfolio, terms of loans, risk grades, trends in charge-offs and recoveries, trends in delinquencies, nonaccrual loans, and impaired loans, and changes in lending policies and procedures.

Because the economic and business climate in any given industry or market, and its impact on any given borrower, can change rapidly, the risk profile of the loan portfolio is periodically assessed and adjusted when appropriate.

Notwithstanding these procedures, there still exists the possibility that the assessment could prove to be significantly incorrect and that an immediate adjustment to the allowance for loan losses would be required.

Recent Accounting Pronouncements

5 unchanged sentences

Cash flow hedges were used to convert certain variable rate liabilities into fixed rate liabilities.

At December 31, 2024, we had no interest rate swaps that were classified as either fair value or cash flow hedges.

At December 31, 2023, we had interest rate swaps with a notional amount of $200.0 million.

At December 31, 2025 and 2024, we had no interest rate swaps that were classified as either fair value or cash flow hedges.

Refer to Note 18 to our 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-K

Item 7. Management’s Discussion and Analysis