First Internet Bancorp 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this report. This discussion and analysis includes certain forward-looking statements that involve risks, uncertainties, and assumptions. You should review the “Risk Factors” sections of this report and our Annual Report on Form 10-K for the year ended December 31, 2025 for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by such forward-looking statements. See also “Cautionary Note Regarding Forward-Looking Statements” at the beginning of this report. Overview First Internet Bancorp is a bank holding company headquartered in Fishers, Indiana that conducts its primary business activities through its wholly-owned subsidiary, First Internet Bank of Indiana (the “Bank”), an Indiana chartered bank. The Bank was the first state-chartered, Federal Deposit Insurance Corporation (“FDIC”) insured Internet bank and commenced banking operations in 1999. First Internet Bancorp was incorporated under the laws of the State of Indiana on September 15, 2005. On March 21, 2006, we consummated a plan of exchange by which we acquired all of the outstanding shares of the Bank. The Bank has three wholly-owned subsidiaries: First Internet Public Finance Corp., an Indiana corporation that provides a range of public and municipal finance lending and leasing products to governmental entities throughout the United States and acquires securities issued by state and local governments and other municipalities; JKH Realty Services, LLC, a Delaware limited liability company that manages other real estate owned properties as needed; and SPF15, Inc., an Indiana corporation that owns real estate used primarily for the Bank’s principal office. We offer a wide range of commercial, small business, consumer and municipal banking products and services. We conduct our consumer and small business deposit operations primarily through digital channels on a nationwide basis and have no traditional branch offices. Our consumer lending products are primarily originated on a nationwide basis through relationships with dealerships and financing partners. Our commercial banking products and services are delivered through a relationship banking model or through strategic partnerships and include commercial and industrial (“C&I”) lending, construction and investor commercial real estate lending, single tenant lease financing, public finance, specialty finance, small business lending, and commercial deposits and treasury management. Our C&I team provides credit solutions such as lines of credit, term loans, owner-occupied commercial real estate loans and corporate credit cards on a regional basis to commercial borrowers primarily in the Midwest and Southwest regions of the United States. We offer construction, investor commercial real estate loans and single tenant lease financing on a nationwide basis. Our public finance team provides a range of public and municipal lending and leasing products to government entities on a nationwide basis. Our specialty finance team manages our healthcare, franchise finance and equipment finance portfolios and our commercial deposits and treasury management team works with the other commercial teams to provide deposit products and treasury management services to our commercial and municipal lending customers as well as pursues commercial deposit opportunities in business segments where we have no credit relationships. 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 an active lender in the Small Business Administration (“SBA”) 7(a) program, closing $437.7 million in SBA 7(a) loans during the twelve months ended June 30,2026. We also offer a top-ranked small business checking account product to our country’s entrepreneurs. We offer payment, deposit, card and lending products and services through partnerships with financial technology companies and platforms (“fintechs”). With the rapid evolution of technology that enables small businesses to manage their finances digitally, fintechs are addressing a significantly growing marketplace. Fintechs have created robust digital offerings, unburdened by legacy technology architecture, to address growing customer expectations. Through partnerships with selected fintechs, we believe our ability to win and retain small business relationships will be significantly enhanced. 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 June 30, 2026, the Company had consolidated assets of $5.6 billion, consolidated deposits of $4.8 billion and shareholders’ equity of $363.5 million. 46 Results of Operations During the second quarter 2026, net income was $2.4 million, or $0.27 diluted earnings per share, compared to net income of $0.2 million, or $0.02 diluted earnings per share, during the second quarter 2025, representing an increase in net income of $2.2 million, or 1,126.4%, and an increase in diluted earnings per share of $0.25, or 1,250.0%. During the six months ended June 30, 2026, net income was $4.9 million, or $0.55 diluted earnings per share, compared to the six months ended June 30, 2025 net income of $1.1 million, or $0.13 per diluted share, resulting in an increase in net income of $3.7 million, or 329.2%, and an increase in diluted earnings per share of $0.42, or 323.1%. The $2.2 million increase in net income for the second quarter 2026 compared to the second quarter 2025 was due primarily to increases of $4.4 million, or 15.9%, in net interest income and $3.1 million, or 56.3%, in noninterest income, as well as a decrease of $0.2 million, or 1.4%, in the provision for credit losses, partially offset by an increase of $4.3 million, or 19.8%, in noninterest expense and a decrease of $1.3 million in income tax benefit. The $3.7 million increase in net income for the six months ended June 30, 2026 compared to the six months ended June 30, 2025 was due primarily to increases of $11.0 million, or 20.6%, in net interest income and $4.2 million, or 26.4% in noninterest income, partially offset by increases of $5.8 million, or 12.8%, in noninterest expense and $4.2 million, or 16.4%, in the provision for credit losses, as well as a decrease of $1.5 million in income tax benefit. During the second quarter 2026, return on average assets (“ROAA”), return on average shareholders’ equity (“ROAE”), and return on average tangible common equity (“ROATCE”) were 0.17%, 2.56% and 2.60%, respectively, compared to 0.01%, 0.20% and 0.20%, respectively, for the second quarter 2025. During the six months ended June 30, 2026, ROAA, ROAE and ROATCE were 0.17%, 2.64%, and 2.68%, respectively, compared to 0.04%, 0.58%, and 0.59%, respectively, for the six months ended June 30, 2025. During the second quarter 2026, pre-provision net revenue (“PPNR”) was $15.0 million, an increase of 27.7% from PPNR of $11.7 million for the second quarter 2025. The $3.3 million increase was due to increases of $4.4 million, or 15.9%, in net interest income and $3.1 million, or 56.3%, in noninterest income, partially offset by an increase of $4.3 million, or 19.8%, in noninterest expense. During the six months ended June 30, 2026, PPNR was $33.1 million, an increase of 39.5% from PPNR of $23.7 million for the six months ended June 30, 2025. The $9.4 million increase was due to increases of $11.0 million, or 20.6%, in net interest income and $4.2 million, or 26.4%, in noninterest income, partially offset by an increase of $5.8 million, or 12.8%, in noninterest expense. 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. Consolidated Average Balance Sheets and Net Interest Income Analyses For the periods presented, the following tables provide the average balances of interest-earning assets and interest-bearing liabilities and the related yields and cost of funds. The tables do not reflect any effect of income taxes except for net interest margin - FTE, as discussed below. Balances are based on the average of daily balances. Nonaccrual loans are included in average loan balances. 47 Three Months Ended June 30, 2026 June 30, 2025 (dollars in thousands) Average Balance Interest /Dividends Yield / Cost Average Balance Interest /Dividends Yield /Cost Assets Interest-earning assets Loans, including loans held-for-sale $ 3,838,432 $ 60,693 6.34 % $ 4,407,196 $ 66,685 6.07 % Securities - taxable 974,877 9,948 4.09 % 856,070 9,062 4.25 % Securities - non-taxable 73,865 629 3.42 % 78,924 654 3.32 % Other earning assets 561,255 5,366 3.83 % 396,829 4,485 4.53 % Total interest-earning assets 5,448,429 76,636 5.64 % 5,739,019 80,886 5.65 % Allowance for credit losses - loans (57,343) (49,073) Noninterest-earning assets 265,264 234,198 Total assets $ 5,656,350 $ 5,924,144 Liabilities Interest-bearing liabilities Interest-bearing demand deposits $ 1,356,003 $ 8,905 2.63 % $ 1,226,439 $ 9,767 3.19 % Savings accounts 18,765 39 0.83 % 21,760 46 0.85 % Money market accounts 1,304,538 10,334 3.18 % 1,187,782 11,087 3.74 % Fintech - brokered deposits 57,492 487 3.40 % — — — % Certificates and brokered deposits 2,047,005 20,555 4.03 % 2,356,958 25,894 4.41 % Total interest-bearing deposits 4,783,803 40,320 3.38 % 4,792,939 46,794 3.92 % Other borrowed funds 348,383 3,877 4.46 % 567,575 6,102 4.31 % Total interest-bearing liabilities 5,132,186 44,197 3.45 % 5,360,514 52,896 3.96 % Noninterest-bearing deposits 134,166 153,016 Other noninterest-bearing liabilities 19,751 18,744 Total liabilities 5,286,103 5,532,274 Shareholders’ equity 370,247 391,870 Total liabilities and shareholders’ equity $ 5,656,350 $ 5,924,144 Net interest income $ 32,439 $ 27,990 Interest rate spread 1 2.19% 1.69% Net interest margin 2 2.39% 1.96% Net interest margin - FTE 3 2.47% 2.04% 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. 48 Six Months Ended June 30, 2026 June 30, 2025 (dollars in thousands) Average Balance Interest /Dividends Yield /Cost Average Balance Interest /Dividends Yield /Cost Assets Interest-earning assets Loans, including loans held-for-sale $ 3,859,166 $ 121,532 6.35 % $ 4,325,518 $ 129,347 6.03 % Securities - taxable 959,066 19,444 4.09 % 838,222 17,525 4.22 % Securities - non-taxable 76,813 1,283 3.37 % 80,325 1,315 3.30 % Other earning assets 541,585 10,187 3.79 % 420,921 9,528 4.56 % Total interest-earning assets 5,436,630 152,446 5.65 % 5,664,986 157,715 5.61 % Allowance for credit losses - loans (56,728) (47,378) Noninterest-earning assets 266,152 230,079 Total assets $ 5,646,054 $ 5,847,687 Liabilities Interest-bearing liabilities Interest-bearing demand deposits $ 1,300,087 $ 17,073 2.65 % $ 1,092,127 $ 16,742 3.09 % Savings accounts 19,151 80 0.84 % 21,167 88 0.84 % Money market accounts 1,298,366 20,437 3.17 % 1,204,695 22,449 3.76 % Fintech - brokered deposits 28,905 487 3.40 % — — — % Certificates and brokered deposits 2,117,596 42,602 4.06 % 2,486,407 55,141 4.47 % Total interest-bearing deposits 4,764,105 80,679 3.42 % 4,804,396 94,420 3.96 % Other borrowed funds 350,240 7,730 4.45 % 484,897 10,209 4.25 % Total interest-bearing liabilities 5,114,345 88,409 3.49 % 5,289,293 104,629 3.99 % Noninterest-bearing deposits 138,710 144,494 Other noninterest-bearing liabilities 20,749 21,948 Total liabilities 5,273,804 5,455,735 Shareholders’ equity 372,250 391,952 Total liabilities and shareholders’ equity $ 5,646,054 $ 5,847,687 Net interest income $ 64,037 $ 53,086 Interest rate spread 1 2.16% 1.62% Net interest margin 2 2.38% 1.89% Net interest margin - FTE 3 2.46% 1.97% 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. 49 Rate/Volume Analysis The following table illustrates the impact of changes in the volume of interest-earning assets and interest-bearing liabilities and interest rates on net interest income for the periods indicated. 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 June 30, 2026 vs. June 30, 2025 Due to Changes in Six Months Ended June 30, 2026 vs. June 30, 2025 Due to Changes in (amounts in thousands) Volume Rate Net Volume Rate Net Interest income Loans, including loans held-for-sale $ (22,154) $ 16,162 $ (5,992) $ (23,789) $ 15,974 $ (7,815) Securities – taxable 2,852 (1,966) 886 3,377 (1,458) 1,919 Securities – non-taxable (124) 99 (25) (97) 65 (32) Other earning assets 4,688 (3,807) 881 4,494 (3,835) 659 Total (14,738) 10,488 (4,250) (16,015) 10,746 (5,269) Interest expense Interest-bearing deposits (88) (6,386) (6,474) (796) (12,945) (13,741) Other borrowed funds (3,602) 1,377 (2,225) (3,779) 1,300 (2,479) Total (3,690) (5,009) (8,699) (4,575) (11,645) (16,220) (Decrease) increase in net interest income $ (11,048) $ 15,497 $ 4,449 $ (11,440) $ 22,391 $ 10,951 Net interest income for the second quarter 2026 was $32.4 million, an increase of $4.4 million, or 15.9%, compared to $28.0 million for the second quarter 2025. The increase in net interest income was the result of a decrease of $8.7 million, or 16.4%, in total interest expense to $44.2 million for the second quarter 2026 from $52.9 million for the second quarter 2025, which was partially offset by a $4.3 million, or 5.3%, decrease in total interest income to $76.6 million for the second quarter 2026 from $80.9 million for the second quarter 2025. Net interest income for the six months ended June 30, 2026 was $64.0 million, an increase of $11.0 million, or 20.6%, compared to $53.1 million for the six months ended June 30, 2025. The increase in net interest income was the result of a decrease of $16.2 million, or 15.5%, in total interest expense to $88.4 million for the six months ended June 30, 2026 from $104.6 million for the six months ended June 30, 2025, which was partially offset by a $5.3 million, or 3.3%, decrease in total interest income to $152.4 million for the six months ended June 30, 2026 from $157.7 million for the six months ended June 30, 2025. The decrease in total interest income for the second quarter 2026 compared to second quarter 2025 was due primarily to a decrease in interest earned on loans, resulting from a decrease of $568.8 million, or 12.9%, in the average balance of loans including loans held-for-sale, partially offset by an increase of 27 bps in the yield earned on loans, including loans held-for-sale. The decrease in the average balance of loans was driven primarily by the sale of $851.2 million in single tenant lease financing loans that occurred in the second half of 2025, partially offset by an increase in loan growth for other portfolio segments. The decrease in total interest earned on loans was partially offset by increases in interest income related to other earning assets and securities. The average balance of other earning assets increased $164.4 million, or 41.4%, but was partially offset by a decrease of 70 bps in the yield earned on other earning assets. 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. Additionally, the average balance of securities increased $113.7 million, or 12.2%, while the yield earned on securities decreased 12 bps for the second quarter 2026 compared to the second quarter 2025. The yield on funded portfolio loan originations was 7.26% for the second quarter 2026, a decrease of 29 bps compared to the second quarter 2025, but still higher than the overall yield on the loan portfolio. The decrease in total interest income for the six months ended June 30, 2026 compared to the six months ended June 30, 2025 was due primarily to a decrease in interest earned on loans, resulting from a decrease of $446.4 million, or 10.8%, in the average balance of loans, including loans held-for-sale, partially offset by an increase of 32 bps in the yield on loans, including loans held-for-sale. The decrease in the average balance of loans was driven primarily by the sale of $851.2 million in single tenant lease financing loans that occurred in the second half of 2025, partially offset by an increase in loan growth for 50 other portfolio segments. The decrease in total interest income was partially offset by increases in interest income related to securities and other earning assets. The average balance of securities increased $117.3 million, or 12.8%, but was partially offset by a decrease of 10 bps in the yield earned on securities. Additionally, the average balance of other earning assets increased $120.7 million, or 28.7%; however, the yield on other earning assets decreased 77 bps for the six months ended June 30, 2026 compared to the six months ended June 30, 2025. 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 yield on funded portfolio loan originations was 6.88% for the six months ended June 30, 2026, a decrease of 60 bps compared to the six months ended June 30, 2025, but still higher than the overall yield on the loan portfolio. The decrease in total interest expense for the second quarter 2026 compared to the second quarter 2025 was due primarily to decreases of $5.3 million, or 20.6%, in interest expense associated with certificates and brokered deposits, $2.2 million, or 36.5%, in interest expense related to other borrowed funds, $0.9 million, or 8.8%, in interest expense associated with interest-bearing demand deposits and $0.8 million or 6.8% in interest expense associated with money market accounts. The decrease in interest expense related to certificates and brokered deposits was driven by a decrease of 38 bps in the cost of these deposits, as well as a decrease in the average balance of these deposits of $310.0 million, or 13.2%. The decrease in interest expense related to other borrowed funds was driven by a decrease in the average balance of $219.2 million, or 38.6%, partially offset by an increase of 15 bps in the cost of these funds. The decrease in interest expense related to interest-bearing demand deposits was driven by a decrease of 56 bps in the cost of these deposits, partially offset by an increase in the average balance of $129.6 million, or 10.6%. The decrease in interest expense related to money market deposits was driven by a decrease of 56 bps in the cost of these deposits, partially offset by an increase in the average balance of these deposits of $116.8 million, or 9.8%. The decreases in the cost of funds related to deposits was due primarily to declines in short term interest rates as well as lower pricing on certificates of deposits across all maturities. The decrease in total interest expense for the six months ended June 30, 2026 compared to the six months ended June 30, 2025 was due primarily to decreases of $12.5 million, or 22.7%, in interest expense associated with certificates and brokered deposits, $2.5 million, or 24.3%, in interest expense associated with other borrowed funds and $2.0 million, or 9.0%, in interest expense related to money market deposits. The decrease in interest expense related to certificates and brokered deposits was driven by a decrease of 41 bps in the cost of these deposits, as well as a decrease of $368.8 million, or 14.8%, in the average balance of these deposits. The decrease in interest expense related to other borrowed funds was driven by a decrease in the average balance of $134.7 million, or 27.8%, partially offset by a 20 bp increase in the cost of these funds. The decrease in interest expense related to money market deposits was driven primarily by a decrease of 59 bps in the cost of these deposits, partially offset by an increase of $93.7 million, or 7.8%, in the average balance of these deposits. The decreases in the cost of funds related to deposits was due primarily to declines in short term interest rates as well as lower pricing on certificates of deposits across all maturities. Overall, the cost of total interest-bearing liabilities for the second quarter 2026 decreased 51 bps to 3.45% from 3.96% for the second quarter 2025. The cost of total interest-bearing liabilities for the six months ended June 30, 2026 decreased 50 bps to 3.49% from 3.99% for the six months ended June 30, 2025. Net interest margin (“NIM”) was 2.39% for the second quarter 2026 compared to 1.96% for the second quarter 2025, an increase of 43 bps. On a fully-taxable equivalent (“FTE”) basis, NIM was 2.47% for the second quarter 2026 compared to 2.04% for the second quarter 2025, an increase of 43 bps. NIM was 2.38% for the six months ended June 30, 2026 compared to 1.89% for the six months ended June 30, 2025, an increase of 49 bps. FTE NIM was 2.46% for the six months ended June 30, 2026 compared to 1.97% for the six months ended June 30, 2025, an increase of 49 bps. The increase in the second quarter and six months ended June 30, 2026 NIM and FTE NIM compared to the second quarter and six months ended June 30, 2025 reflects the combination of higher yields on loans and continued improvement in the cost of funds related to deposits. 51 Noninterest Income The following table shows noninterest income for each of the periods presented. Three Months Ended Six Months Ended (amounts in thousands) June 30, 2026 June 30, 2025 June 30, 2026 June 30, 2025 Service charges and fees $ 1,112 $ 278 $ 1,956 $ 543 Loan servicing revenue 2,853 1,979 5,709 3,962 Loan servicing asset revaluation (1,579) (1,153) (2,639) (2,334) Gain on sale of loans 4,690 1,673 12,067 10,320 Other 1,609 2,780 3,110 3,493 Total noninterest income $ 8,685 $ 5,557 $ 20,203 $ 15,984 During the second quarter 2026, noninterest income was $8.7 million, representing an increase of $3.1 million, or 56.3%, compared to $5.6 million of noninterest income for the second quarter 2025. The increase in noninterest income was driven primarily by increases in gain on sale of loans, service charges and fees and net loan servicing, partially offset by a decrease in other noninterest income. The increase of $3.0 million, or 180.3%, in gain on sale of loans was due primarily to higher volume of loan sales in the second quarter 2026 compared to the second quarter 2025 when 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 $0.8 million, or 300.0%, in service charges and fees reflects higher fees earned on fintech deposits moved off-balance sheet into deposit networks. The increase of $0.4 million, or 54.2% in net loan servicing was due primarily to growth in the balance of the Company’s single tenant lease financing servicing portfolio, partially offset by the fair value adjustment to the loan servicing asset. The decrease of $1.2 million, or 42.1%, in other noninterest income was due primarily to lower distributions from fund investments, partially offset by an increase in fintech partnership revenue. During the six months ended June 30, 2026, noninterest income was $20.2 million, an increase of $4.2 million, or 26.4%, compared to $16.0 million for the six months ended June 30, 2025. The increase in noninterest income was due primarily to increases in gain on sale of loans, net loan servicing and service charges and fees, partially offset by a decrease in other noninterest income. The increase of $1.7 million, or 16.9%, in gain on sale of loans was due primarily to higher volume of loan sales for the six months ended June 30, 2026 compared to the same period in 2025 when 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 $1.4 million, or 88.6%, in net loan servicing was due to growth in the balance of the Company’s single tenant lease financing servicing portfolio, partially offset by the fair value adjustment to the loan servicing asset. The increase of $1.4 million, or 260.2%, in service charges and fees reflect higher fees earned on fintech deposits moved off-balance sheet into deposit networks. The decrease of $0.4 million, or 11.0%, in other noninterest income was due primarily to a planned distribution from a fund investment that occurred during the six months ended June 30, 2025, partially offset by an increase in fintech partnership revenue. Noninterest Expense The following table shows noninterest expense for each of the periods presented. Three Months Ended Six Months Ended (amounts in thousands) June 30, 2026 June 30, 2025 June 30, 2026 June 30, 2025 Salaries and employee benefits $ 13,570 $ 10,867 $ 26,806 $ 23,974 Marketing, advertising and promotion 706 702 1,321 1,349 Consulting and professional services 1,372 936 2,452 2,164 Data processing 774 656 1,549 1,291 Loan expenses 2,109 1,520 4,288 3,051 Premises and equipment 3,718 3,281 7,394 6,396 Deposit insurance premium 1,611 1,564 3,098 2,962 Other 2,262 2,274 4,241 4,170 Total noninterest expense $ 26,122 $ 21,800 $ 51,149 $ 45,357 52 Noninterest expense for the second quarter 2026 was $26.1 million, representing an increase of $4.3 million, or 19.8%, compared to $21.8 million for the second quarter 2025. The increase in noninterest expense was due primarily to increases in salaries and employee benefits, loan expenses, premises and equipment, and consulting and professional services. The increase of $2.7 million, or 24.9%, in salaries and employee benefits was due primarily to an increase in incentive compensation, as well as an increase in staffing related to small business lending and risk management. The increase of $0.6 million, or 38.8%, in loan expenses was due primarily to collection expense, as well as third party servicing associated with small business lending and fintech lending. The increase of $0.4 million, or 13.3%, in premises and equipment was due primarily to continued investment in technology to enhance the user experience in consumer and small business banking. The increase of $0.4 million, or 46.6%, in consulting and professional services was due primarily to an increase in consulting and audit fees. Noninterest expense for the six months ended June 30, 2026 was $51.1 million, an increase of $5.8 million, or 12.8%, compared to $45.4 million for the six months ended June 30, 2025. The increase was due primarily to increases in salaries and employee benefits, loan expenses, premises and equipment, consulting and professional services and data processing. The increase of $2.8 million, or 11.8%, in salaries and employee benefits was due primarily to an increase in incentive compensation, as well as an increase in staffing related to small business lending and risk management. The increase of $1.2 million, or 40.5%, in loan expenses was due primarily to collection expense, as well as third party servicing associated with small business lending and fintech lending. The increase of $1.0 million, or 15.6%, in premises and equipment was due primarily to continued investment in technology to enhance the user experience in consumer and small business banking. The increase of $0.3 million, or 13.3%, in consulting and professional services was due primarily to an increase in consulting fees. The increase of $0.3 million, or 20.0%, in data processing was the result of an increase in fees associated with the growth in fintech partnerships. The Company recorded an income tax benefit of $0.8 million for the second quarter 2026, compared to an income tax benefit of $2.1 million for the second quarter 2025. The Company recorded an income tax benefit of $1.5 million for the six months ended June 30, 2026, compared to an income tax benefit of $3.0 million for the six months ended June 30, 2025. The income tax benefits recognized during the second quarter 2026 and 2025 as well as the six months ended June 30, 2026 and June 30, 2025 reflect lower pre-tax earnings, as well as the benefit of tax exempt income. Financial Condition The following table shows summary balance sheet data for each of the periods presented. (amounts in thousands) Balance Sheet Data: June 30, 2026 December 31, 2025 Total assets $ 5,556,375 $ 5,571,647 Loans 3,811,073 3,746,728 Total securities 1,051,338 1,029,296 Loans held-for-sale 44,816 108,608 Noninterest-bearing deposits 131,366 146,879 Interest-bearing deposits 4,700,012 4,692,934 Total deposits 4,831,378 4,839,813 Advances from Federal Home Loan Bank 239,500 249,500 Total liabilities 5,192,828 5,211,880 Total shareholders’ equity 363,547 359,767 Total assets decreased $15.3 million, or 0.3%, to $5.6 billion at June 30, 2026 compared to $5.6 billion at December 31, 2025. The modest decline in balance sheet size was driven by the continued mix shift in the funding base as growth in fintech deposits was used to pay down higher-cost certificates and brokered deposits as well as maturing FHLB advances. Additionally, cash balances and proceeds from loan sales were used to fund new loan originations, construction draws and securities purchases. As of June 30, 2026, total shareholders’ equity was $363.5 million, an increase of $3.8 million, or 1.1%, compared to December 31, 2025. The increase in shareholders’ equity was due primarily to current period net income, partially offset by an increase in accumulated other comprehensive loss as unrealized losses on debt securities increased modestly during the quarter due to changes in market interest rates. Tangible common equity totaled $358.9 million as of June 30, 2026, representing an increase of $3.8 million, or 1.1%, compared to December 31, 2025. The ratio of total shareholders’ equity to total assets 53 increased to 6.54% as of June 30, 2026 from 6.46% as of December 31, 2025, and the ratio of tangible common equity to tangible assets increased to 6.46% as of June 30, 2026 from 6.38% as of December 31, 2025. Book value per common share increased 0.5% to $41.63 as of June 30, 2026 from $41.41 as of December 31, 2025 and tangible book value per common share increased 0.5% to $41.09 as of June 30, 2026 from $40.87 as of December 31, 2025. The increase in total shareholders’ equity and tangible common equity was partially offset by a small increase in the number of shares outstanding. 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. 54 Loan Portfolio Analysis The following table shows a summary of the Company’s loan portfolio for each of the periods presented. (dollars in thousands) June 30, 2026 December 31, 2025 Commercial loans Commercial and industrial $ 212,675 5.6 % $ 221,714 5.9 % Owner-occupied commercial real estate 51,749 1.4 % 48,575 1.3 % Investor commercial real estate 669,970 17.5 % 647,394 17.3 % Construction 427,076 11.2 % 372,668 9.9 % Single tenant lease financing 288,720 7.6 % 222,925 5.9 % Public finance 445,507 11.7 % 442,234 11.8 % Healthcare finance 121,287 3.2 % 139,469 3.7 % Small business lending 1 435,686 11.4 % 430,024 11.5 % Franchise finance 357,182 9.4 % 417,045 11.1 % Total commercial loans 3,009,852 79.0 % 2,942,048 78.4 % Consumer loans Residential mortgage 326,258 8.6 % 343,110 9.2 % Home equity 14,102 0.4 % 14,725 0.4 % Other consumer loans 441,788 11.6 % 425,458 11.4 % Total consumer loans 782,148 20.6 % 783,293 21.0 % Total commercial and consumer loans 3,792,000 99.6 % 3,725,341 99.4 % Net deferred loan origination costs, premiums and discounts on purchased loans and other 2 19,073 0.4 % 21,387 0.6 % Total loans 3,811,073 100.0 % 3,746,728 100.0 % Allowance for credit losses - loans (53,096) (55,686) Net loans $ 3,757,977 $ 3,691,042 1 Balances include $59.8 million and $52.2 million that are guaranteed by the U.S. government as of June 30, 2026 and December 31, 2025, respectively. 2 Includes carrying value adjustments of $17.3 million and $19.1 million related to terminated interest rate swaps associated with public finance loans as of June 30, 2026 and December 31, 2025, respectively. Total loans were $3.8 billion as of June 30, 2026, an increase of $64.3 million, or 1.7%, compared to December 31, 2025. Total commercial loan balances were $3.0 billion as of June 30, 2026, an increase of $67.8 million, or 2.3%, from December 31, 2025. Total consumer loan balances were $782.1 million as of June 30, 2026, a decrease of $1.1 million, or 0.2%, compared to December 31, 2025. Compared to December 31, 2025, the increase in commercial loan balances was driven by single tenant lease financing, investor commercial real estate and construction loans, partially offset by planned run-off in the franchise finance and healthcare finance portfolios. The Company made the strategic decision to allow the franchise finance and healthcare finance portfolios to run off and is not originating new loans in these segments. The Company expects these portfolios to continue to decline over time and is replacing this loan production with focused growth in other commercial lending areas such as single tenant lease financing, investor commercial real estate, construction, and small business lending segments. The slight decrease in consumer loan balances was due primarily to early payoff and principal amortization in the residential mortgage portfolio, partially offset by new origination activity in the other consumer loans portfolio. 55 Asset Quality Nonperforming loans are comprised of nonaccrual loans and loans 90 days past due and accruing. Nonperforming assets include nonperforming loans, other real estate owned (“OREO”) and other nonperforming assets, which generally consist of repossessed assets. The following table provides a summary of the Company’s nonperforming assets for each of the periods presented. (dollars in thousands) June 30, 2026 December 31, 2025 Nonaccrual loans Commercial loans: Commercial and industrial $ 218 $ 240 Single tenant lease financing — 1,665 Healthcare finance — 2,596 Small business lending 1 24,545 19,781 Franchise finance 15,070 26,978 Total commercial loans 39,833 51,260 Consumer loans: Residential mortgage 5,501 4,893 Other consumer loans 209 234 Total consumer loans 5,710 5,127 Total nonaccrual loans 45,543 56,387 Past due 90 days and accruing loans Commercial loans: Small business lending 34 — Franchise finance 14,398 1,144 Total commercial loans 14,432 1,144 Consumer loans: Residential mortgage 98 1,007 Total consumer loans 98 1,007 Total past due 90 days and accruing loans 14,530 2,151 Total nonperforming loans 60,073 58,538 Other real estate owned Small business lending 2,435 2,631 Single tenant lease financing 1,686 — Total other real estate owned 4,121 2,631 Other nonperforming assets 379 186 Total nonperforming assets $ 64,573 $ 61,355 Total nonperforming loans to total loans 1.58 % 1.56 % Total nonperforming assets to total assets 1.16 % 1.10 % Allowance for credit losses - loans to total loans 1.39 % 1.49 % Nonaccrual loans to total loans 1.20 % 1.50 % Allowance for credit losses - loans to nonaccrual loans 116.6 % 98.8 % Allowance for credit losses - loans to nonperforming loans 88.4 % 95.1 % 1 Balances include $19.2 million and $13.6 million that are guaranteed by the U.S. government as of June 30, 2026 and December 31, 2025, respectively. 56 Total nonperforming loans increased $1.5 million, or 2.5%, to $60.1 million as of June 30, 2026 compared to $58.5 million as of December 31, 2025 due primarily to an increase in accruing loans past due 90 days or more and nonaccrual loans in the small business lending portfolio, which generally consisted of SBA 7(a) guaranteed balances. These partially offset by decreases in nonaccrual loans in the franchise finance and healthcare finance portfolios. Total nonperforming assets increased $3.2 million, or 5.1%, to $64.6 million as of June 30, 2026, compared to $61.4 million as of December 31, 2025, due primarily to the accruing loans past due 90 days or more mentioned above. As of June 30, 2026, the Company had three small business lending properties and one single tenant lease financing property in OREO with a carrying value of $4.1 million. As of December 31, 2025, the Company had three small business lending properties in OREO with a carrying value of $2.6 million. Allowance for Credit Losses - Loans The following table provides a rollforward of the allowance for credit losses for each of the periods presented; 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 Six Months Ended Year Ended (dollars in thousands) June 30, 2026 June 30, 2025 June 30, 2026 June 30, 2025 December 31, 2025 Balance, beginning of period $ 56,496 $ 47,238 $ 55,686 $ 44,769 $ 44,769 Provision charged to expense 13,508 13,596 30,114 25,717 71,921 Losses charged off Commercial and industrial (245) — (447) — (153) Healthcare finance — — (38) — — Small business lending (5,037) (11,851) (14,437) (15,520) (39,650) Franchise finance (11,706) (2,238) (17,753) (8,086) (21,754) Residential mortgage (2) — (82) (11) (75) Other consumer loans (338) (359) (911) (672) (1,457) Total losses charged off (17,328) (14,448) (33,668) (24,289) (63,089) Recoveries Commercial and industrial 5 2 16 4 21 Small business lending 236 40 596 173 1,681 Franchise finance 145 18 209 18 94 Residential mortgage 2 1 2 7 19 Home equity 1 1 2 3 7 Other consumer loans 31 69 139 115 263 Total recoveries 420 131 964 320 2,085 Balance, end of period $ 53,096 $ 46,517 $ 53,096 $ 46,517 $ 55,686 Net charge-offs $ 16,908 $ 14,317 $ 32,704 $ 23,969 $ 61,004 Net charge-offs (recoveries) to average loans (annualized) Commercial and industrial 0.77 % (0.01 %) 0.65 % (0.01 %) 0.11 % Healthcare finance 0.00 % 0.00 % 0.06 % 0.00 % 0.00 % Small business lending 4.01 % 10.79 % 5.61 % 7.57 % 8.16 % Franchise finance 12.26 % 1.79 % 9.01 % 3.17 % 4.48 % Total commercial net charge-offs 2.20 % 1.57 % 2.11 % 1.35 % 1.76 % Residential mortgage 0.00 % 0.00 % 0.05 % 0.00 % 0.02 % Home equity (0.03 %) (0.02 %) (0.03 %) (0.03 %) (0.04 %) Other consumer loans 0.28 % 0.28 % 0.36 % 0.27 % 0.29 % Total consumer net charge-offs 0.16 % 0.14 % 0.22 % 0.14 % 0.16 % Total net charge-offs to average loans 1.77 % 1.31 % 1.71 % 1.12 % 1.45 % 57 The allowance for credit losses - loans (“ACL”) was $53.1 million as of June 30, 2026, compared to $55.7 million as of December 31, 2025. The ACL as a percentage of total loans was 1.39% at June 30, 2026, compared to 1.49% at December 31, 2025. The ACL as a percentage of nonperforming loans decreased to 88.4% as of June 30, 2026, compared to 95.1% as of December 31, 2025, due primarily to a decrease in the ACL related to franchise finance loans with specific reserves that were charged off. Excluding nonaccrual guaranteed balances, the ACL as a percentage of nonperforming loans increased to 129.8% as of June 30, 2026 compared to 124.0% as of December 31, 2025. Net charge-offs of $16.9 million were recognized during the second quarter 2026, resulting in net charge-offs to average loans of 1.77%, compared to net charge-offs of $14.3 million, or 1.31% of average loans, for the second quarter 2025. The increase in net charge-offs for the second quarter 2026 compared to the second quarter 2025 was driven primarily by an increase of $9.3 million in franchise finance net charge-offs, partially offset by a decrease of $6.5 million in small business lending net charge-offs. During the six months ended June 30, 2026, the Company recorded net charge-offs of $32.7 million, resulting in net charge-offs to average loans of 1.71%, compared to net charge-offs of $24.0 million, or 1.12% of average loans, during the six months ended June 30, 2025. The increase in net charge-offs for the six months ended June 30, 2026 compared to the six months ended June 30, 2025 was driven primarily by an increase of $9.7 million in franchise finance net charge-offs, partially offset by a decrease of $1.1 million in small business lending net charge-offs. The elevated franchise finance charge-offs include a concentration of specific borrower credits that had been identified in prior periods and reserved for through specific reserves, as the franchise finance portfolio continues to run off in connection with the Company’s strategic focus on other commercial lending areas. The provision for credit losses - loans for the second quarter 2026 declined slightly to $13.5 million, compared to $13.6 million for the second quarter 2025. The decrease in the provision for credit losses - loans for the second quarter 2026 compared to the second quarter 2025 was driven primarily by decreases in specific reserves and loan provision, partially offset by increases in net charge-offs. The provision for credit losses - loans during the six months ended June 30, 2026 was $30.1 million, compared to $25.7 million for the six months ended June 30, 2025. The increase in the provision for credit losses - loans for the six months ended June 30, 2026 compared to the six months ended June 30, 2025 was driven primarily by the increase in net charge-offs, partially offset by decreases in specific reserves and loan provision. 58 Investment Securities Portfolio The following tables show the amortized cost and approximate fair value of our investment securities portfolio by security type for each of the periods presented. (amounts in thousands) Amortized Cost June 30, 2026 December 31, 2025 Securities available-for-sale U.S. Government-sponsored agencies $ 54,787 $ 64,298 Municipal securities 57,663 64,777 Agency mortgage-backed securities - residential 436,922 409,718 Agency mortgage-backed securities - commercial 57,544 59,112 Private label mortgage-backed securities - residential 119,043 124,264 Asset-backed securities 43,194 42,492 Corporate securities 42,754 37,761 Total available-for-sale 811,907 802,422 Securities held-to-maturity, net carrying value Municipal securities 10,367 11,006 Agency mortgage-backed securities - residential 232,272 213,530 Agency mortgage-backed securities - commercial 5,598 5,635 Corporate securities 16,425 20,438 Total held-to-maturity, net carrying value 264,662 250,609 Total securities $ 1,076,569 $ 1,053,031 (amounts in thousands) Approximate Fair Value June 30, 2026 December 31, 2025 Securities available-for-sale U.S. Government-sponsored agencies $ 54,275 $ 63,764 Municipal securities 55,982 63,386 Agency mortgage-backed securities - residential 416,168 389,457 Agency mortgage-backed securities - commercial 56,711 58,477 Private label mortgage-backed securities - residential 117,945 123,673 Asset-backed securities 43,106 42,553 Corporate securities 42,489 37,377 Total available-for-sale 786,676 778,687 Securities held-to-maturity Municipal securities 9,856 10,551 Agency mortgage-backed securities - residential 220,319 203,715 Agency mortgage-backed securities - commercial 4,662 4,720 Corporate securities 15,734 19,829 Total held-to-maturity 250,571 238,815 Total securities $ 1,037,247 $ 1,017,502 The approximate fair value of available-for-sale investment securities increased $8.0 million, or 1.0%, to $786.7 million as of June 30, 2026, compared to $778.7 million as of December 31, 2025. The increase was due primarily to increases of $26.7 million in agency mortgage-backed securities - residential and $5.1 million in corporate securities, partially offset by decreases of $9.5 million in U.S. Government-sponsored agencies, $7.4 million in municipal securities, $5.7 million in private label mortgage-backed securities - residential and $1.8 million in agency mortgage-backed securities - commercial. The Company deployed available liquidity during the first half of 2026 into new purchases of short-duration agency securities, asset-backed securities and investment grade corporate securities, which was partially offset by net pay down activity in other security types. As of June 30, 2026, the Company had securities with a net carrying value of $264.7 million designated as held-to-maturity, compared to $250.6 million as of December 31, 2025. The increase was due primarily to purchases of CRA-eligible agency mortgage-backed securities - residential made in the first half of 2026. 59 Accrued Income and Other Assets Accrued income and other assets increased $3.8 million, or 4.3%, to $92.9 million at June 30, 2026, compared to $89.1 million at December 31, 2025. The increase was due primarily to increases of $3.2 million in various receivables and $1.0 million in equity investments, partially offset by a decrease of $0.5 million in prepaid assets. Accrued Expenses and Other Liabilities Accrued expenses and other liabilities decreased $0.6 million, or 4.1%, to $14.7 million at June 30, 2026, compared to $15.4 million at December 31, 2025. The decrease was due primarily to a decrease of $1.0 million in other liabilities, including unfunded loan commitment reserves, unfunded investment fund partnership commitments and lease liabilities, partially offset by an increase of $0.4 million in accrued salary and benefits. Deposits The following table shows the composition of the Company’s deposit base for each of the periods presented. (dollars in thousands) June 30, 2026 December 31, 2025 Noninterest-bearing deposits $ 131,366 2.7 % $ 146,879 3.0 % Interest-bearing demand deposits 1,493,178 30.9 % 1,120,850 23.2 % Savings accounts 18,738 0.4 % 18,991 0.4 % Money market accounts 1,245,591 25.8 % 1,272,845 26.3 % Fintech - brokered deposits 23,344 0.5 % — 0.0 % Certificates of deposits 1,683,450 34.8 % 2,004,909 41.4 % Brokered deposits 235,711 4.9 % 275,339 5.7 % Total deposits $ 4,831,378 100.0 % $ 4,839,813 100.0 % Total deposits of $4.8 billion at June 30, 2026 were virtually flat with December 31, 2025. However, there were increases of $372.3 million, or 33.2%, in interest-bearing demand deposits and $23.3 million in fintech - brokered deposits, more than offset by decreases of $321.5 million, or 16.0%, in certificates of deposits, $39.6 million, or 14.4%, in brokered deposits, $27.3 million, or 2.1%, in money market accounts and $15.5 million, or 10.6%, in noninterest-bearing deposits. The increase in interest-bearing demand deposits was driven by growth in fintech partnership deposits, which provided the ability to pay down certificates of deposits, higher-cost brokered deposits and money market accounts. Uninsured deposit balances represented 37% of total deposits at June 30, 2026, up from 33% at December 31, 2025. 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 31% as of June 30, 2026, compared to 27% as of December 31, 2025. The increase in uninsured deposit balances was impacted by increases in fintech payment volumes experienced on the last day of the quarter. Regulatory Capital Requirements The Company and the Bank are subject to various regulatory capital requirements administered by state and federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators about components, risk weighting and other factors. The Basel III Capital Rules became effective for the Company and the Bank on January 1, 2015, subject to a phase-in period for certain provisions. Quantitative measures established by the Basel III Capital Rules to ensure capital adequacy require the maintenance of minimum amounts and ratios of Common Equity Tier 1 capital, Tier 1 capital and Total capital, as defined in the regulations, to risk-weighted assets, and of Tier 1 capital to adjusted quarterly average assets (“Leverage Ratio”). 60 The Basel III Capital Rules were fully phased in on January 1, 2019 and require the Company and the Bank to maintain: 1) a minimum ratio of Common Equity Tier 1 capital to risk-weighted assets of 4.5%, plus a 2.5% “capital conservation buffer” (resulting in a minimum ratio of Common Equity Tier 1 capital to risk-weighted assets of 7.0%); 2) a minimum ratio of Tier 1 capital to risk-weighted assets of 6.0%, plus the capital conservation buffer (resulting in a minimum Tier 1 capital ratio of 8.5%); 3) a minimum ratio of Total capital to risk-weighted assets of 8.0%, plus the capital conservation buffer (resulting in a minimum Total capital ratio of 10.5%); and 4) a minimum Leverage Ratio of 4.0%. The capital conservation buffer is designed to absorb losses during periods of economic stress. 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 June 30, 2026 and December 31, 2025 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, 2026 and December 31, 2025, 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. Actual Minimum Capital Required - Basel III Minimum Required to be Considered Well Capitalized (dollars in thousands) Capital Amount Ratio Capital Amount Ratio Capital Amount Ratio As of June 30, 2026: Common equity tier 1 capital to risk-weighted assets Consolidated $ 352,155 8.90 % $ 276,922 7.00 % N/A N/A Bank 425,794 10.84 % 274,953 7.00 % $ 255,313 6.50 % Tier 1 capital to risk-weighted assets Consolidated 352,155 8.90 % 336,263 8.50 % N/A N/A Bank 425,794 10.84 % 333,871 8.50 % 314,232 8.00 % Total capital to risk-weighted assets Consolidated 483,405 12.22 % 415,383 10.50 % N/A N/A Bank 474,970 12.09 % 412,429 10.50 % 392,790 10.00 % Leverage ratio Consolidated 352,155 6.23 % 225,955 4.00 % N/A N/A Bank 425,794 7.57 % 224,885 4.00 % 281,102 5.00 % 61 Actual Minimum Capital Required - Basel III Minimum Required to be Considered Well Capitalized (dollars in thousands) Capital Amount Ratio Capital Amount Ratio Capital Amount Ratio As of December 31, 2025: Common equity tier 1 capital to risk-weighted assets Consolidated $ 350,350 8.97 % $ 273,335 7.00 % N/A N/A Bank 420,963 10.83 % 272,045 7.00 % $ 252,613 6.50 % Tier 1 capital to risk-weighted assets Consolidated 350,350 8.97 % 331,907 8.50 % N/A N/A Bank 420,963 10.83 % 330,340 8.50 % 310,908 8.00 % Total capital to risk-weighted assets Consolidated 488,170 12.50 % 410,003 10.50 % N/A N/A Bank 469,649 12.08 % 408,067 10.50 % 338,635 10.00 % Leverage ratio Consolidated 350,350 6.24 % 224,566 4.00 % N/A N/A Bank 420,963 7.53 % 223,717 4.00 % 279,646 5.00 % Shareholders’ Dividends The Company’s Board of Directors declared a cash dividend of $0.06 per share of common stock payable July 15, 2026 to shareholders of record as of June 30, 2026. 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 June 30, 2026, 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. If an event of default were to occur and the Company did not cure it, the Company would be prohibited from paying any dividends or making any other distributions to shareholders or from redeeming or repurchasing any common stock. Capital Resources The Company believes it has sufficient liquidity and capital resources to meet its cash and capital expenditure requirements for the next twelve months and longer. The Company may explore strategic alternatives, including additional asset, deposit or revenue generation channels that complement our small business, commercial, consumer and fintech banking platforms, which may require additional capital. 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 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 June 30, 2026. The stock repurchase authorization is scheduled to expire on September 30, 2027. Various factors determine the amount and timing of our share repurchases, including our capital requirements, organic growth and other strategic opportunities, economic and market conditions (including the trading price of our stock), and regulatory and legal considerations. 62 Liquidity Liquidity management is the process used by the Company to manage the continuing flow of funds necessary to meet its financial commitments on a timely basis and at a reasonable cost while also maintaining safe and sound operations. Liquidity, represented by cash and investment securities, is a product of the Company’s operating, investing and financing activities. The primary sources of funds are deposits, principal and interest payments on loans and investment securities, maturing loans and investment securities, access to wholesale funding sources and collateralized borrowings. In addition, the Company may elect to hold certain deposit balances off-balance sheet, with optionality to bring them back onto the balance sheet as funding needs evolve. 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 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 (“FHLB”) 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 June 30, 2026, on a consolidated basis, the Company had $1.2 billion in cash and cash equivalents and investment securities available-for-sale and $44.8 million in loans held-for-sale that were generally available for its cash needs. Additionally, the Company uses a custodial deposit arrangement for certain deposit programs whereby the Company, acting as custodian of account holder funds, places a portion of such account holder funds that are not needed to support near term liquidity needs at one or more third-party banks insured by the FDIC through the IntraFi One-Way Sell network. The Company remains the issuer of, and maintains the records for, all accounts under the applicable account holder agreements and, importantly, retains transactional authority to move funds on-and-off balance sheet as liquidity needs merit. Such off-balance sheet deposits totaled $2.4 billion at June 30, 2026 and $1.1 billion at December 31, 2025 and primarily consist of fintech partnership deposits. The Company can also generate funds from wholesale funding sources and collateralized borrowings. At June 30, 2026, the Bank had the ability to borrow an additional $1.5 billion from the FHLB, the 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. In addition to its operating expenses, the Company is responsible for paying any dividends declared to its common shareholders and interest and principal on outstanding debt. 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 June 30, 2026, the Company, on an unconsolidated basis, had $5.9 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 June 30, 2026, approved outstanding loan commitments, including unused lines of credit and standby letters of credit, amounted to $579.7 million. Certificates of deposits and brokered deposits scheduled to mature in one year or less at June 30, 2026 totaled $1.3 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. 63 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 and pre-provision net revenue 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. Although the Company believes these non-GAAP financial measures provide a greater understanding of its business, they should not be considered a substitute for financial measures determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP financial measures that may be presented by other companies. 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 Six Months Ended June 30, 2026 June 30, 2025 June 30, 2026 June 30, 2025 Total equity - GAAP $ 363,547 $ 390,239 $ 363,547 $ 390,239 Adjustments: Goodwill (4,687) (4,687) (4,687) (4,687) Tangible common equity $ 358,860 $ 385,552 $ 358,860 $ 385,552 Total assets - GAAP $ 5,556,375 $ 6,072,573 $ 5,556,375 $ 6,072,573 Adjustments: Goodwill (4,687) (4,687) (4,687) (4,687) Tangible assets $ 5,551,688 $ 6,067,886 $ 5,551,688 $ 6,067,886 Common shares outstanding 8,733,574 8,713,094 8,733,574 8,713,094 Book value per common share $ 41.63 $ 44.79 $ 41.63 $ 44.79 Effect of goodwill (0.54) (0.54) (0.54) (0.54) Tangible book value per common share $ 41.09 $ 44.25 $ 41.09 $ 44.25 Total shareholders’ equity to assets 6.54 % 6.43 % 6.54 % 6.43 % Effect of goodwill (0.08 %) (0.08 %) (0.08 %) (0.08 %) Tangible common equity to tangible assets 6.46 % 6.35 % 6.46 % 6.35 % Total average equity - GAAP $ 370,247 $ 391,870 $ 372,250 $ 391,952 Adjustments: Average goodwill (4,687) (4,687) (4,687) (4,687) Average tangible common equity $ 365,560 $ 387,183 $ 367,563 $ 387,265 Return on average shareholders’ equity 2.56 % 0.20 % 2.64 % 0.58 % Effect of goodwill 0.04 % 0.00 % 0.04 % 0.01 % Return on average tangible common equity 2.60 % 0.20 % 2.68 % 0.59 % 64 (dollars in thousands, except share and per share data) Three Months Ended Six Months Ended June 30, 2026 June 30, 2025 June 30, 2026 June 30, 2025 Total interest income $ 76,636 $ 80,886 $ 152,446 $ 157,715 Adjustments: Fully-taxable equivalent adjustments 1 1,142 1,157 2,302 2,326 Total interest income - FTE $ 77,778 $ 82,043 $ 154,748 $ 160,041 Net interest income $ 32,439 $ 27,990 $ 64,037 $ 53,086 Adjustments: Fully-taxable equivalent adjustments 1 1,142 1,157 2,302 2,326 Net interest income - FTE $ 33,581 $ 29,147 $ 66,339 $ 55,412 Net interest margin 2.39 % 1.96 % 2.38 % 1.89 % Effect of fully-taxable equivalent adjustments 1 0.08 % 0.08 % 0.08 % 0.08 % Net interest margin - FTE 2.47 % 2.04 % 2.46 % 1.97 % Net income - GAAP $ 2,367 $ 193 $ 4,876 $ 1,136 Adjustments : 1 Provision for credit losses 13,415 13,608 29,720 25,541 Income tax benefit (780) (2,054) (1,505) (2,964) Pre-provision net revenue $ 15,002 $ 11,747 $ 33,091 $ 23,713 1 Assuming a 21% tax rate Critical Accounting Policies and Estimates There have been no material changes in the Company’s critical accounting policies or estimates from those disclosed in its Annual Report on Form 10-K for the year ended December 31, 2025. Recent Accounting Pronouncements Refer to Note 15 to the condensed consolidated financial statements. 65