What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2026-08-04 compared with 2026-05-05 · 207 added, 117 removed, 395 unchanged (45% of the section changed)

67 unchanged sentences

The Bank also lends more broadly to select borrowers outside of those verticals.

As of March 31, 2026, the Company’s wholly owned material subsidiaries were the Bank, Government Loan Solutions (“GLS”), Live Oak Grove, LLC (“Grove”) and Live Oak Ventures, Inc.

As of June 30, 2026, the Company’s wholly owned material subsidiaries were the Bank, Government Loan Solutions (“GLS”), Live Oak Grove, LLC (“Grove”) and Live Oak Ventures, Inc.

(“Live Oak Ventures”).

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The non-controlling interest in Synply is disclosed according to the Company’s consolidation policy.

As of March 31, 2026, t he Bank’s wholly owned subsidiaries were Live Oak Number One, Inc., Live Oak Clean Energy Financing LLC (“LOCEF”), Live Oak Private Wealth, LLC (“Live Oak Private Wealth”) and Tiburon Land Holdings, LLC (“TLH”).

As of June 30, 2026, t he Bank’s wholly owned subsidiaries were Live Oak Number One, Inc., Live Oak Clean Energy Financing LLC (“LOCEF”), Live Oak Private Wealth, LLC (“Live Oak Private Wealth”) and Tiburon Land Holdings, LLC (“TLH”).

Live Oak Number One, Inc.

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Performance Summary

Three months ended March 31, 2026 compared with three months ended March 31, 2025

For the three months ended March 31, 2026, the Company reported net income attributable to common shareholders of $27.9 million, or $0.60 per diluted share, compared to net income attributable to common shareholders of $9.7 million, or $0.21 per diluted share, for the three months ended March 31, 2025.

Three months ended June 30, 2026 compared with three months ended June 30, 2025

For the three months ended June 30, 2026, the Company reported net income attributable to common shareholders of $34.7 million, or $0.74 per diluted share, compared to net income attributable to common shareholders of $23.4 million, or $0.51 per diluted share, for the three months ended June 30, 2025.

The increase in net income was principally due to the following items:

• Increased net interest income of $16.1 million, or 14.8%;

• Provision for credit losses decreased by $8.9 million, or 30.6%, to $20.1 million, compared to $29.0 million for the first quarter of 2025;

Key factors largely offsetting the increase in net income are increased levels of salaries and employee benefits of $3.8 million and income tax expense of $6.7 million.

• Decrease in other noninterest expense of $3.3 million, or 54.0%, principally due to a loss associated with a bioenergy lease in 2025.

Key factors offsetting the increase in net income are increased levels of provision for credit losses of $2.5 million and salaries and employee benefits of $2.8 million.

Six months ended June 30, 2026 compared with six months ended June 30, 2025

For the six months ended June 30, 2026, the Company reported net income attributable to common shareholders of $62.6 million, or $1.35 per diluted share, compared to net income attributable to common shareholders of $33.1 million, or $0.72 per diluted share, for the six months ended June 30, 2025.

The increase in net income was largely due to the following items:

• Increased net interest income of $35.0 million, or 16.7%;

• Provision for credit losses decreased by $6.3 million, or 12.1%, to $45.9 million, compared to $52.2 million for the first half of 2025;

• Increase in equity method investment income of $4.2 million, or 85.0%, largely a product of decreased flow-through losses associated with Apiture, Inc.

which was sold in the fourth quarter of 2025;

• Decrease in other noninterest expense of $3.2 million, or 36.8%, associated with the above mentioned prior year bioenergy lease loss.

Key factors largely offsetting the increase in net income were comprised of increased levels of salaries and employee benefits of $6.6 million, income tax expense of $8.0 million and preferred stock dividends of $4.2 million.

Net Interest Income and Margin

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Due to the nature of a branchless bank and the relatively low overhead required for deposit gathering, the rates that the Bank offers are generally above the industry average.

Three months ended March 31, 2026 compared with three months ended March 31, 2025

For the three months ended March 31, 2026, net interest income increased $18.9 million, or 18.8%, to $119.4 million compared to $100.5 million for the three months ended March 31, 2025.

This increase was principally due to the growth in the held for investment loan and lease portfolio outpacing growth in interest-bearing liabilities, offset by the decrease in average yield on interest-earning assets outpacing the decrease in average cost of funds.

Average interest-earning assets increased by $2.06 billion, or 16.1%, to $14.82 billion for the first quarter of 2026, compared to $12.76 billion for the first quarter of 2025, while the yield on average interest-earning assets decreased 37 basis points to 6.40%.

The cost of funds on interest-bearing liabilities for the first quarter of 2026 decreased 42 basis points to 3.48% and the average balance of interest-bearing liabilities increased by $1.63 billion, or 13.9%, over the first quarter of 2025.

Three months ended June 30, 2026 compared with three months ended June 30, 2025

For the three months ended June 30, 2026, net interest income increased $16.1 million, or 14.8%, to $125.3 million compared to $109.2 million for the three months ended June 30, 2025.

This increase was principally due to the growth in the held for investment loan and lease portfolio outpacing growth in interest-bearing liabilities.

Average interest-earning assets increased by $1.72 billion, or 12.9%, to $15.08 billion for the second quarter of 2026, compared to $13.36 billion for the second quarter of 2025, while the yield on average interest-earning assets decreased 30 basis points to 6.43%.

The cost of funds on interest-bearing liabilities for the second quarter of 2026 decreased 33 basis points to 3.45% and the average balance of interest-bearing liabilities increased by $1.31 billion, or 10.7%, over the second quarter of 2025.

As indicated in the rate/volume analysis below, the overall increase discussed above is reflected in increased interest income of $17.4 million outpacing growth in interest expense of $1.3 million for the second quarter of 2026 compared to the second quarter of 2025.

The net interest margin increased from 3.28% for the second quarter of 2025 to 3.33% for the second quarter of 2026.

Six months ended June 30, 2026 compared with six months ended June 30, 2025

For the six months ended June 30, 2026, net interest income increased $35.0 million, or 16.7%, to $244.7 million compared to $209.8 million for the six months ended June 30, 2025.

This increase was principally due to the growth in the held for investment loan and lease portfolio outpacing growth in interest-bearing liabilities.

Average interest-earning assets increased by $1.89 billion, or 14.5%, to $14.95 billion for the six months ended June 30, 2026, compared to $13.06 billion for the six months ended June 30, 2025, while the yield on average interest-earning assets decreased 33 basis points to 6.42%.

The cost of funds on interest-bearing liabilities for the six months ended June 30, 2026 decreased 37 basis points to 3.47%, and the average balance of interest-bearing liabilities increased by $1.47 billion, or 12.3%, over the six months ended June 30, 2025.

The increase in average interest-bearing liabilities was largely driven by funding for significant loan originations and growth as well as maintenance of the Company's target liquidity profile.

As indicated in the rate/volume analysis below, the overall increase discussed above is reflected in increased interest income of $20.8 million outpacing growth in interest expense of $1.9 million for the first quarter of 2026 compared to the first quarter of 2025.

The net interest margin increased from 3.20% for the first quarter of 2025 to 3.27% for the first quarter of 2026.

In March 2026, the Federal Reserve decided to maintain the federal funds upper target rate at 3.75%.

The Federal Reserve released its most current federal funds target rate midpoint projections at its previous meeting in March 2026 which implied a decrease of approximately 25 basis points to 3.4% by the end of 2026 and a decrease of approximately 25 basis points to 3.1% by the end of 2027.

There can be no assurance that any further decreases or increases in the Federal Funds rate will occur, and if they do, the amount and timing of actual adjustments are subject to change.

See “Item 7A.

Quantitative and Qualitative Disclosures About Market Risk” for information about the Company’s sensitivity to interest rates.

As indicated in the rate/volume analysis below, the overall increase discussed above is reflected in increased interest income of $38.2 million outpacing growth in interest expense of $3.2 million for the six months ended June 30, 2026 compared to the six months ended June 30, 2025.

The net interest margin increased from 3.24% for the six months ended June 30, 2025 to 3.30% for the six months ended June 30, 2026.

Average Balances and Yields.

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Loan fees are included in interest income on loans.

Three Months Ended March 31,

Three Months Ended June 30,

Balance Interest Average

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(1) Average loan and lease balances include non-accruing loans and leases.

Six Months Ended June 30,

Interest Average

Interest-earning assets:

Interest-earning balances in other banks $ 719,969 $ 13,327 3.73 % $ 654,896 $ 14,523 4.47 %

Investment securities 1,505,923 26,420 3.54 1,394,450 22,737 3.29

Loans held for sale 520,864 20,233 7.83 394,846 16,620 8.49

Loans and leases held for investment (1)

12,202,716 415,601 6.87 10,617,166 383,509 7.28

Total interest-earning assets 14,949,472 475,581 6.42 13,061,358 437,389 6.75

Allowance for credit losses on loans and leases

(191,921) (175,728)

Noninterest-earning assets 542,632 536,823

Total assets $ 15,300,183 $ 13,422,453

Interest-bearing liabilities:

Savings 7,041,243 113,709 3.26 5,892,536 108,133 3.70

Certificates of deposit 5,683,643 105,305 3.74 5,477,278 108,024 3.98

Other interest-bearing deposits 604,355 8,609 2.87 479,071 8,111 3.41

Total deposits 13,329,241 227,623 3.44 11,848,885 224,268 3.82

Borrowings 101,527 3,220 6.40 110,684 3,368 6.14

Total interest-bearing liabilities 13,430,768 230,843 3.47 11,959,569 227,636 3.84

Noninterest-bearing deposits 513,801 359,084

Noninterest-bearing liabilities 49,297 56,214

Shareholders' equity 1,302,127 1,043,145

Non-controlling interest 4,190 4,441

Total liabilities and shareholders' equity

$ 15,300,183 $ 13,422,453

Net interest income and interest rate spread

$ 244,738 2.95 % $ 209,753 2.91 %

Net interest margin 3.30 % 3.24 %

Ratio of average interest-earning assets to average interest-bearing liabilities

111.31 % 109.21 %

(1) Average loan and lease balances include non-accruing loans and leases.

Rate/Volume Analysis.

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For purposes of this table, increases or decreases attributable to changes in both rate and volume that cannot be segregated have been allocated proportionally based on the changes due to rate and the changes due to volume.

Three Months Ended March 31,

Increase (Decrease) Due to

Rate Volume Total

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

2025 2026 vs.

Increase (Decrease) Due to Increase (Decrease) Due to

Rate Volume Total Rate Volume Total

Interest income:

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The Company believes that its focus on compliance with regulations and guidance from the SBA and USDA are key factors to managing this risk.

For the first quarter of 2026, there was a provision for credit losses of $20.1 million compared to $29.0 million for the same period in 2025, a decrease of $8.9 million.

The decrease over the first quarter of 2025 was primarily driven by lower levels of specific reserves required on individually evaluated loans in the first quarter of 2026.

Loans and leases held for investment at historical cost were $11.91 billion as of March 31, 2026, increasing by $1.54 billion, or 14.8%, compared to March 31, 2025.

Net charge-offs for loans and leases carried at historical cost were$18.6 million, or 0.63% of average quarterly loans and leases held for investment, carried at historical cost, on an annualized basis, for the three months ended March 31, 2026, compared to net charge-offs of $6.8 million, or 0.27%, for the three months ended March 31, 2025, an increase of $11.8 million, or 174.4%.

The increase in net charge-offs in the first quarter of 2026 was largely concentrated to individually evaluated loans with specific reserves recorded in prior periods.

Net charge-offs are a key element of historical experience in the Company's estimation of the allowance for credit losses on loans and leases.

In addition, nonperforming loans and leases not guaranteed by the SBA or USDA, excluding $6.9 million and $9.9 million accounted for under the fair value option at March 31, 2026 and 2025, respectively, totaled $116.8 million, which was 0.98% of the held for investment loan and lease portfolio carried at historical cost at March 31, 2026, compared to $99.9 million, or 0.96% of loans and leases held for investment carried at historical cost at March 31, 2025.

For the second quarter of 2026, there was a provision for credit losses of $25.8 million compared to $23.3 million for the same period in 2025, an increase of $2.5 million, primarily attributed to loan growth during the second quarter of 2026.

For the six months ended June 30, 2026, there was a provision for credit losses of $45.9 million compared to $52.2 million for the same period in 2025, a decrease of $6.3 million.

The decrease compared to the second quarter of 2025 reflects an improved economic forecast and improved credit quality which more than offset the impact of loan growth during the period.

Loans and leases held for investment at historical cost were $12.40 billion as of June 30, 2026, increasing by $1.69 billion, or 15.8%, compared to June 30, 2025.

Net charge-offs for loans and leases carried at historical cost were $24.2 million, or 0.80% of average quarterly loans and leases held for investment, carried at historical cost, on an annualized basis, for the three months ended June 30, 2026, compared to net charge-offs of $31.4 million, or 1.19%, for the three months ended June 30, 2025, a decrease of $7.2 million, or 23.2%.

For the six months ended June 30, 2026, net charge-offs totaled $42.7 million compared to $38.2 million for the six months ended June 30, 2025, an increase of $4.5 million, or 11.8%.

In addition, nonperforming loans and leases not guaranteed by the SBA or USDA, excluding $6.6 million and $8.9 million accounted for under the fair value option at June 30, 2026 and 2025, respectively, totaled $124.3 million, which was 1.00% of the held for investment loan and lease portfolio carried at historical cost at June 30, 2026, compared to $59.6 million, or 0.56% of loans and leases held for investment carried at historical cost at June 30, 2025.

Noninterest Income

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In addition, the loan servicing revaluation is significantly impacted by changes in market rates and other underlying assumptions such as prepayment speeds and default rates.

Net loss on loans accounted for under the fair value option is also significantly impacted by changes in market rates, prepayment speeds and inherent credit risk.

Net gain (loss) on loans accounted for under the fair value option is also significantly impacted by changes in market rates, prepayment speeds and inherent credit risk.

Other less consistent elements of noninterest income include gains and losses on investments.

The following table shows the components of noninterest income and the dollar and percentage changes for the periods presented.

Three Months Ended March 31, 2026/2025 Increase (Decrease)

Three Months Ended June 30, 2026/2025 Increase (Decrease)

2026 2025 Amount Percent

3 unchanged sentences

Net gains on sales of loans 17,554 17,570 (16) (0.1)

Net loss on loans accounted for under the fair value option

(1,165) (1,034) (131) (12.7)

Equity method investments (loss) income (817) (2,239) 1,422 63.5

Net gain on loans accounted for under the fair value option 291 1,082 (791) (73.1)

Equity method investments income (loss) 74 (2,716) 2,790 102.7

Equity security investments gains, net — 1,004 (1,004) (100.0)

2 unchanged sentences

Total noninterest income $ 30,807 $ 30,455 $ 352 1.2 %

For the three months ended March 31, 2026, noninterest income increased by $3.7 million, or 16.6%, compared to the three months ended March 31, 2025.

Principal changes when compared with the first quarter of 2025 are a $1.2 million decrease in loss related to the servicing asset revaluation combined with a $1.4 million decrease in equity method investment losses, principally associated with cessation of flow-through losses from Apiture, Inc.

Six Months Ended June 30, 2026/2025 Increase (Decrease)

2026 2025 Amount Percent

Noninterest income

Loan servicing revenue $ 18,288 $ 16,863 $ 1,425 8.5 %

Loan servicing asset revaluation (7,765) (7,785) 20 0.3

Net gains on sales of loans 32,979 33,008 (29) (0.1)

Net (loss) gain on loans accounted for under the fair value option (874) 48 (922) (1,920.8)

Equity method investments income (loss) (743) (4,955) 4,212 85.0

Equity security investments gains, net — 1,024 (1,024) (100.0)

Lease income 4,373 5,676 (1,303) (23.0)

Other noninterest income 10,623 8,947 1,676 18.7

Total noninterest income $ 56,881 $ 52,826 $ 4,055 7.7 %

For the three and six months ended June 30, 2026, noninterest income increased by $352 thousand and $4.1 million, or 1.2% and 7.7% respectively, compared to the prior three and six month periods in 2025.

This increase for both periods was due to the decrease in equity method investment losses associated with cessation of flow-through losses from Apiture, Inc.

which was sold in the fourth quarter of 2025.

The following tables reflects loan and lease production, sales of guaranteed loans and the aggregate balance in guaranteed loans sold.

This transaction increased noninterest income in the second quarter and first half of 2026 by $2.8 million and $4.2 million, respectively, when compared with the prior three and six month periods of 2025.

The following tables reflect loan and lease production, sales of guaranteed loans and the aggregate balance in guaranteed loans sold.

These components are key drivers of the Company's noninterest income.

Three Months Ended March 31, For years ended December 31,

Three months ended June 30, Three months ended March 31,

2026 2025 2026 2025

Amount of loans and leases originated $ 1,548,432 $ 1,526,592 $ 1,368,311 $ 1,396,223

Guaranteed portions of loans sold 318,556 322,317 275,488 266,275

Outstanding balance of guaranteed loans sold (1)

4,125,710 3,685,981 4,018,059 3,486,533

Six Months Ended June 30, For years ended December 31,

2026 2025 2025 2024 2023 2022

Amount of loans and leases originated

$ 2,916,743 $ 2,922,815 $ 6,209,639 $ 5,155,244 $ 3,946,873 $ 4,007,621

Guaranteed portions of loans sold

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(1) This represents the outstanding principal balance of guaranteed loans serviced, as of the last day of the applicable period, which have been sold into the secondary market.

Change in Loan Servicing Asset Revaluation:

The Company revalues its serviced loan portfolio at least quarterly.

The valuation model incorporates assumptions that market participants would use in estimating future net servicing income, such as adequate compensation for servicing, the discount rate, the custodial earnings rate, ancillary income, prepayment speeds and default rates and losses, with prepayment speed and discount rate being the most sensitive assumptions.

For the three months ended March 31, 2026, there was a net loss on loan servicing asset revaluation of $3.5 million, compared to a net loss of $4.7 million for the three months ended March 31, 2025.

The positive change in valuation of the servicing asset compared to the first quarter of 2025 was principally the result of improved market conditions in 2026.

Noninterest Expense

1 unchanged sentence

The following table shows the components of noninterest expense and the related dollar and percentage changes for the periods presented.

Three Months Ended March 31, 2026/2025 Increase (Decrease)

Three Months Ended June 30, 2026/2025 Increase (Decrease)

2026 2025 Amount Percent

9 unchanged sentences

Other loan origination and maintenance expense 4,864 4,190 674 16.1

Renewable energy tax credit investment impairment

26 270 (244) (90.4)

FDIC insurance 4,788 3,545 1,243 35.1

2 unchanged sentences

Total noninterest expense $ 84,525 $ 85,222 $ (697) (0.8) %

Total noninterest expense for the three months ended March 31, 2026, increased $4.5 million, or 5.6%, compared to the same period in 2025.

The changes within noninterest expense for the comparable three month periods was largely driven by components, discussed below.

Six Months Ended June 30, 2026/2025 Increase (Decrease)

2026 2025 Amount Percent

Noninterest expense

Salaries and employee benefits $ 98,130 $ 91,537 $ 6,593 7.2 %

Total personnel expense for the three months ended March 31, 2026 increased by $3.8 million, or 8.4%, compared to the same period in 2025.

The increase over the first three months of 2025 is principally related to investment in human resources to support strategic and growth initiatives.

Salaries and employee benefits expense included $6.9 million of stock-based compensation for the three months ended March 31, 2026, compared to $6.8 million for the three months ended March 30, 2025, respectively.

Non-employee expenses:

Travel expense 3,396 3,698 (302) (8.2)

Professional services expense 5,454 5,898 (444) (7.5)

Advertising and marketing expense 5,785 8,085 (2,300) (28.4)

Occupancy expense 4,774 5,106 (332) (6.5)

Technology expense 19,357 19,317 40 0.2

Equipment expense 7,355 7,430 (75) (1.0)

Other loan origination and maintenance expense 10,783 8,775 2,008 22.9

Renewable energy tax credit investment impairment 26 270 (244) (90.4)

FDIC insurance 9,189 7,096 2,093 29.5

Other expense 5,569 8,817 (3,248) (36.8)

Total non-employee expenses 71,688 74,492 (2,804) (3.8)

Total noninterest expense $ 169,818 $ 166,029 $ 3,789 2.3 %

Total noninterest expense for the three and six months ended June 30, 2026, decreased $697 thousand, or 0.8%, and increased $3.8 million, or 2.3%, compared to the same periods in 2025.

The changes within noninterest expense for the comparable three and six month periods was largely driven by components discussed below.

Salaries and employee benefits:

Total personnel expense for the three and six months ended June 30, 2026 increased by $2.8 million, or 6.0%, and $6.6 million, or 7.2%, compared to the same periods in 2025, respectively.

The increase over both comparative periods of 2025 is principally related to investment in human resources to support strategic and growth initiatives.

Salaries and employee benefits expense included $7.4 million and $14.2 million of stock-based compensation for the three and six months ended June 30, 2026, respectively, compared to $6.9 million and $13.7 million for the three and six months ended June 30, 2025, respectively.

Expenses related to the employee stock purchase program, stock grants, stock option compensation and restricted stock expense are all considered stock-based compensation.

Advertising and marketing expense:

For the three and six months ended June 30, 2026, advertising and marketing expense decreased $1.7 million, or 38.1%, and $2.3 million, or 28.4%, compared to the same periods in 2025.

The decrease was largely related to lower levels of promotional spending.

Other loan origination and maintenance expense:

For the three months ended March 31, 2026, other loan origination and maintenance expense increased $1.3 million, or 29.1%, compared to the same period in 2025.

For the three and six months ended June 30, 2026, other loan origination and maintenance expense increased $674 thousand, or 16.1%, and $2.0 million, or 22.9%, compared to the same periods in 2025.

This increase was primarily related to maintenance of the Company's ongoing growth in the guaranteed loan portfolio.

FDIC insurance:

For the three and six months ended June 30, 2026, FDIC insurance increased $1.2 million, or 35.1%, and $2.1 million, or 29.5%, compared to the same periods in 2025.

This increase is largely the product of the Company’s continued growth combined with increased FDIC assessment rates.

Other expense :

For the three and six months ended June 30, 2026, other expense decreased $3.3 million, or 54.0%, and $3.2 million, or 36.8%, respectively, compared to the same periods in 2025.

The decrease over both comparative periods was principally driven by a $2.8 million loss arising from the early buyout of the Company's sole bioenergy lease in the second quarter of 2025.

Income Tax Expense

For the three months ended March 31, 2026, income tax expense was $10.1 million compared to income tax expense of $3.5 million in the first quarter of 2025, and the Company’s effective tax rates were 25.3% and 26.4%, respectively.

The higher level of income tax expense for the first quarter of 2026 as compared to the first quarter of 2025 was largely the result of heightened pretax income during the current period.

For the three months ended June 30, 2026, income tax expense was $9.1 million compared to income tax expense of $7.8 million in the second quarter of 2025, and the Company’s effective tax rates were 19.9% and 25.0%, respectively.

For the six months ended June 30, 2026, income tax expense was $19.3 million compared to $11.3 million for the six months ended June 30, 2025, and the Company’s effective tax rates were 22.4% and 25.4%, respectively.

The higher level of income tax expense over both comparative periods was largely the result of heightened pretax income during the current year, partially offset by a $2.1 million benefit associated with tax credit purchases during the second quarter of 2026.

Discussion and Analysis of Financial Condition

March 31, 2026 vs.

June 30, 2026 vs.

December 31, 2025

Total assets at March 31, 2026 were $15.30 billion, an increase of $165.3 million, or 1.1%, compared to total assets of $15.13 billion at December 31, 2025.

The growth in total assets was principally driven by total loans and leases held for investment and held for sale increasing by $199.9 million, or 1.6%, in 2026, from $12.39 billion at December 31, 2025 to $12.59 billion at March 31, 2026.

This growth was a result of strong origination activity during the first quarter of 2026 of $1.37 billion.

Total deposits were $13.84 billion at March 31, 2026, an increase of $146.4 million, or 1.1%, from $13.69 billion at December 31, 2025.

Total assets at June 30, 2026 were $16.04 billion, an increase of $903.4 million, or 6.0%, compared to total assets of $15.13 billion at December 31, 2025.

The growth in total assets was principally driven by total loans and leases held for investment and held for sale increasing by $749.0 million, or 6.0%, in 2026, from $12.39 billion at December 31, 2025 to $13.14 billion at June 30, 2026.

This growth was a result of strong origination activity during the first half of 2026 of $2.92 billion.

Total deposits were $14.55 billion at June 30, 2026, an increase of $858.9 million, or 6.3%, from $13.69 billion at December 31, 2025.

The increase in total deposits from the prior period was to support growth in the loan and lease portfolio as well as the Company's targeted liquidity levels.

At March 31, 2026, the Bank’s total uninsured deposits were approximately $2.38 billion, or 17.0%, of total deposits.

Total shareholders' equity was $1.28 billion at March 31, 2026, an increase of $27.7 million, or 2.2%, from $1.25 billion at December 31, 2025.

The increase in total shareholders' equity from the prior period was largely due to net income of $29.9 million combined with net share-based compensation activity of $3.9 million, offset by other comprehensive loss of $2.7 million and cash dividends of $2.1 million and $1.4 million related to preferred and common stock shares, respectively.

At June 30, 2026, the Bank’s total uninsured deposits were approximately $2.44 billion, or 16.6%, of total deposits.

Total shareholders' equity was $1.32 billion at June 30, 2026, an increase of $62.8 million, or 5.0%, from $1.25 billion at December 31, 2025.

The increase in total shareholders' equity from the prior period was largely due to net income of $66.7 million.

Commercial Real Estate

1 unchanged sentence

construction, land development, multifamily property and nonfarm, nonresidential real property.

The following table provides information with respect to commercial real estate loans as of March 31, 2026.

The following table provides information with respect to commercial real estate loans as of June 30, 2026.

Guaranteed Unguaranteed Total (1)

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Typically, collections of interest and principal received on a nonaccrual loan or lease are applied to the outstanding principal as determined at the time of collection of the loan or lease.

Total nonperforming assets, including loans measured at fair value, at March 31, 2026 were $519.0 million, which represented a $53.1 million, or 9.3%, decrease from December 31, 2025.

These nonperforming assets at March 31, 2026 were comprised of $507.0 million in nonaccrual loans and leases and $12.0 million in foreclosed assets.

Of the $519.0 million of nonperforming assets, $391.0 million carried a government guarantee, leaving an unguaranteed exposure of $128.0 million in total nonperforming assets at March 31, 2026.

Total nonperforming assets, including loans measured at fair value, at June 30, 2026 were $542.5 million, which represented a $29.7 million, or 5.2%, decrease from December 31, 2025.

These nonperforming assets at June 30, 2026 were comprised of $531.5 million in nonaccrual loans and leases and $11.0 million in foreclosed assets.

Of the $542.5 million of nonperforming assets, $407.2 million carried a government guarantee, leaving an unguaranteed exposure of $135.3 million in total nonperforming assets at June 30, 2026.

This represents an increase of $24.1 million, or 21.6%, from an unguaranteed exposure of $111.2 million at December 31, 2025.

The following table provides information with respect to nonperforming assets, excluding loans measured at fair value, at the dates indicated.

March 31, 2026 (1)

June 30, 2026 (1)

December 31, 2025 (1)

9 unchanged sentences

Nonaccrual loans and leases guaranteed by U.S.

Total nonperforming loans and leases guaranteed by the U.S government (all on nonaccrual) $ 327,409 $ 399,786

Total nonperforming loans and leases guaranteed by the U.S.

government (all on nonaccrual) $ 346,419 $ 399,786

Foreclosed assets guaranteed by the U.S.

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(1) Excludes loans measured at fair value.

Nonperforming assets, excluding loans measured at fair value, at March 31, 2026 were $456.2 million, which represented a $53.2 million, or 10.4%, decrease from December 31, 2025.

These nonperforming assets at March 31, 2026 were comprised of $444.2 million in nonaccrual loans and leases and $12.0 million in foreclosed assets.

Of the $456.2 million of nonperforming assets, $336.1 million carried a government guarantee, leaving an unguaranteed exposure of $120.1 million in total nonperforming assets at March 31, 2026.

Nonperforming assets, excluding loans measured at fair value, at June 30, 2026 were $481.8 million, which represented a $27.6 million, or 5.4%, decrease from December 31, 2025.

These nonperforming assets at June 30, 2026 were comprised of $470.8 million in nonaccrual loans and leases and $11.0 million in foreclosed assets.

Of the $481.8 million of nonperforming assets, $354.4 million carried a government guarantee, leaving an unguaranteed exposure of $127.4 million in total nonperforming assets at June 30, 2026.

This represents an increase of $24.6 million, or 23.9%, from an unguaranteed exposure of $102.8 million at December 31, 2025.

See the below discussion related to the change in potential problem and individually evaluated loans and leases for management’s overall observations regarding growth in total nonperforming loans and leases.

As a percentage of the Bank’s total capital, nonperforming loans and leases, excluding loans measured at fair value, represented 33.6% at March 31, 2026, compared to 39.0% at December 31, 2025.

Adjusting the ratio to include only the unguaranteed portion of nonperforming loans and leases at historical cost to reflect management’s belief that the greater magnitude of risk resides in this portion, the ratios at March 31, 2026 and December 31, 2025 were 8.8% and 7.9%, respectively.

As of March 31, 2026, and December 31, 2025, potential problem (also referred to as criticized or Risk Grade 50) and classified loans and leases, excluding loans measured at fair value, totaled $1.33 billion and $1.39 billion, respectively.

As a percentage of the Bank’s total capital, nonperforming loans and leases, excluding loans measured at fair value, represented 34.2% at June 30, 2026, compared to 39.0% at December 31, 2025.

Adjusting the ratio to include only the unguaranteed portion of nonperforming loans and leases at historical cost to reflect management’s belief that the greater magnitude of risk resides in this portion, the ratios at June 30, 2026 and December 31, 2025 were 9.0% and 7.9%, respectively.

As of June 30, 2026, and December 31, 2025, potential problem (also referred to as criticized or Risk Grade 50) and classified loans and leases, excluding loans measured at fair value, totaled $1.23 billion and $1.39 billion, respectively.

The following is a discussion of these loans and leases.

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For a complete description of the risk grading system, see “Credit Quality Indicators” in Note 3 in the notes to consolidated financial statements in the Company’s 2025 Form 10-K.

At March 31, 2026 , the portion of criticized and classified loans and leases guaranteed by the SBA or USDA totaled $653.4 million and total portfolio unguaranteed exposure risk was $680.8 million , or 7.9% of total held for investment unguaranteed exposure carried at historical cost.

At June 30, 2026 , the portion of criticized and classified loans and leases guaranteed by the SBA or USDA totaled $628.9 million and total portfolio unguaranteed exposure risk was $601.6 million , or 6.5% of total held for investment unguaranteed exposure carried at historical cost.

This compares to the December 31, 2025 portion of criticized and classified loans and leases guaranteed by the SBA or USDA which totaled $669.8 million and total portfolio unguaranteed exposure risk was $719.9 million , or 8.6% of total held for investment unguaranteed exposure carried at historical cost .

As of March 31, 2026 and December 31, 2025, loans an d leases carried at historical cost within the following verticals comprise the largest portion of the total potential problem and classified loans and leases:

As of March 31, 2026 As of December 31, 2025

As of June 30, 2026 and December 31, 2025, loans an d leases carried at historical cost within the following verticals comprise the largest portion of the total potential problem and classified loans and leases:

As of June 30, 2026 As of December 31, 2025

Vertical % of Criticized and Classified Loans and Leases

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General Lending 13.7% General Lending 11.8%

Solar Energy 8.0 Solar Energy 7.5

Healthcare 6.7 Solar Energy 7.5

Sponsor Finance 6.6 Senior Housing 6.1

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Self Storage 5.7 Sponsor Finance 6.1

Healthcare 5.6 Auto Care + Auto Dealerships 5.9

Senior Housing 4.9 Healthcare 5.4

Wine & Craft Beverages 4.9 Self Storage 5.4

Solar Energy 4.8 Auto Care + Auto Dealerships 5.9

ABL General 4.8 Healthcare 5.4

Wine and Craft Beverages 4.7 Self Storage 5.4

RV Parks 4.6 RV Parks 4.0

% of Total Criticized and Classified Loans 58.2% % of Total Criticized and Classified Loans 58.3%

Of the above listed verticals, Senior Housing, Sponsor Finance, Bioenergy, and Solar Energy are within the Company’s Commercial Banking division , the remainder of the above listed verticals are within the Small Business Banking division.

The total $55.4 million decrease in potential problem and classified loans and leases in the first three months of 2026 was comprised of $15.5 million in increased levels of Risk Grade 50 loans and leases, as discussed below and $70.9 million in decreased levels of classified loans.

The overall decrease in classified loans in the first quarter of 2026 was primarily driven by one $84.9 million Renewable Energy relationship that was moved out of loans resulting in no losses in the quarter due to the combination of a sale and related government guarantee.

The remainder of the change (increase) is due to isolated borrower-specific credit migrations, including movement of several larger individual exposures and isolated industries into classified status based on performance trends identified through ongoing credit reviews.

Of the above listed verticals, Senior Housing, Sponsor Finance, Bioenergy, ABL General, and Solar Energy are within the Company’s Commercial Banking division , the remainder of the above listed verticals are within the Small Business Banking division.

The total $159.1 million decrease in potential problem and classified loans and leases in the first six months of 2026 was comprised of $82.8 million in decreased levels of Risk Grade 50 loans and leases, as discussed below, and $76.4 million in decreased levels of classified loans.

The overall decrease in classified loans in the first half of 2026 was largely driven by one $84.9 million Renewable Energy relationship that was moved out of loans resulting in no losses in the first quarter due to the combination of a sale and related government guarantee.

The remainder of the overall decrease is due to isolated borrower-specific credit migrations, including movement of several larger individual exposures and isolated industries into classified status based on performance trends identified through ongoing credit reviews.

These changes largely reflect the effects of normal growth and isolated borrower performance migrations rather than any systemic credit deterioration.

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Loans and leases that experience insignificant payment delays and payment shortfalls are generally not individually evaluated for the purpose of estimating the allowance for credit losses.

The Bank generally considers an “insignificant period of time” from payment delays to be a period of 90 days or less.

The Bank considers an “insignificant period of time” from payment deferrals to be a period of 90 days or less.

The Bank would consider a modification for a customer experiencing what is expected to be a short-term event that has temporarily impacted cash flow.

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Credit personnel will review the request to determine if the customer is experiencing financial stress and how the event has impacted the ability of the customer to repay the loan or lease long term.

At March 31, 2026, the Company had a total of $43.2 million in loans modified in 2026 to borrowers experiencing financial difficulty, excluding loans measured at fair value, $42.8 million of which remained current and $30.1 million of which are for an other-than-insignificant payment delay or term extension.

These types of deferrals are generally granted 90 days at a time.

Collection efforts are typically escalated if, after two or three deferral periods, the cash flow event has not been resolved.

At June 30, 2026, the Company had a total of $78.3 million in loans modified in 2026 to borrowers experiencing financial difficulty, excluding loans measured at fair value, $71.2 million of which remained current and $63.2 million of which are for an other-than-insignificant payment delay or term extension.

Management endeavors to be proactive in its approach to identify and resolve problem loans and leases and is focused on working with the borrowers and guarantors of these loans and leases to provide loan and lease modifications when warranted.

Management implements a proactive approach to identifying and classifying loans and leases as special mention (also referred to as criticized), Risk Grade 50.

At March 31, 2026, and December 31, 2025, Risk Grade 50 loans and leases, excluding loans measured at fair value, totaled $742.7 million and $727.2 million, respectively, for an increase of $15.5 million.

Relative to total held for investment unguaranteed exposure carried at historical cost at December 31, 2025 and March 31, 2026, unguaranteed Risk Grade 50 loans and leases decreased from $465.7 million, or 5.5%, to $462.3 million, or 5.3%, respectively.

At June 30, 2026, and December 31, 2025, Risk Grade 50 loans and leases, excluding loans measured at fair value, totaled $644.5 million and $727.2 million, respectively, for a decrease of $82.8 million.

Relative to total held for investment unguaranteed loan exposure carried at historical cost at December 31, 2025 and June 30, 2026, unguaranteed Risk Grade 50 loans and leases decreased from $465.7 million, or 5.5%, to $401.7 million, or 4.3%, respectively.

The largest year-to-date changes in Risk Grade 50 loans and leases carried at historical cost were within the foll owing verticals :

March 31, 2026 vs.

June 30, 2026 vs.

December 31, 2025 Increase (Decrease)

Sponsor Finance $ 13,414 86.7 %

Auto Care & Auto Dealerships 12,708 82.1

Hotels 11,952 77.2

Wine and Craft Beverages 10,647 68.8

Service Contractors 8,155 52.7

ABL General $ 34,995 42.3 %

Agriculture 9,035 10.9

Educational Services 5,334 34.5

Veterinary 5,236 33.8

Wine and Craft Beverages 9,017 10.9

Care Services 8,957 10.8

RV Parks (8,454) (54.6)

Service Contractors 7,660 9.3

Venture Banking 7,453 9.0

Self Storage (7,551) (9.1)

Funeral Homes and Cemeteries (11,560) (14.0)

Emerging Markets (15,396) (18.6)

Sponsor Search (20,700) (25.0)

Government Contract (28,026) (33.9)

Senior Housing (37,634) (45.5)

Government Contractors (27,603) (178.4)

Solar Energy (45,558) (55.1)

Total of largest changes in Risk Grade 50 loans and leases $ (89,308) (108.0)%

The change in Risk Grade 50 loans and leases, exclusive of loans measured at fair value, during the first three months of 2026 was principally confined to 13 verticals, as reflected above.

Of the above listed verticals Sponsor Finance, Government Contractors, Senior Housing and Hotels are within the Company’s Commercial Banking division and the remainder of the above listed verticals are within the Small Business Banking division.

At March 31, 2026, approximately 99.6% of loans and leases classified as Risk Grade 50 are performing with no relationships having payments past due more than 30 days.

The change in Risk Grade 50 loans and leases, exclusive of loans measured at fair value, during the first six months of 2026 was principally confined to 13 verticals, as reflected above.

Of the above listed verticals, ABL General, Venture Banking, Emerging Markets, Government Contract, Senior Housing, and Solar Energy are within the Company’s Commercial Banking division and the remainder of the above listed verticals are within the Small Business Banking division.

At June 30, 2026, approximately 97.3% of loans and leases classified as Risk Grade 50 are performing with no relationships having payments past due more than 30 days.

While the level of nonperforming assets fluctuates in response to changing economic and market conditions, in light of the relative size and composition of the loan and lease portfolio and management’s degree of success in resolving problem assets, management believes that a proactive approach to early identification and intervention is critical to successfully managing a small business loan portfolio.

Allowance for Credit Losses on Loans and Leases

The ACL of $192.3 million at December 31, 2025, increased by $1.0 million, or 0.5%, to $193.3 million at March 31, 2026.

The ACL as a percentage of loans and leases held for investment at historical cost amounted to 1.6% at both December 31, 2025 and March 31, 2026.

The increase in the ACL during the first three months of 2026 was primarily the result of loan growth and charge off impacts amid a challenging macroeconomic environment, where elevated interest rates and inflationary pressures have placed financial strain on some small business and commercial borrowers.

The ACL of $192.3 million at December 31, 2025, increased by $1.2 million, or 0.6%, to $193.4 million at June 30, 2026.

The ACL as a percentage of loans and leases held for investment at historical cost amounted to 1.6% at both December 31, 2025 and June 30, 2026.

The increase in the ACL during the first six months of 2026 was primarily the result of loan growth, partially offset by improving credit migration.

See also the above section captioned “Provision for Credit Losses” in “Results of Operations” for related information.

Actual past due held for in vestment loans and leases, inclusive of loans measured at fair value, have decreased by $40.2 million since December 31, 2025.

Actual past due held for in vestment loans and leases, inclusive of loans measured at fair value, have increased by $2.3 million since December 31, 2025.

Total loans and leases 90 or more days past due decreased $35.3 million, or 8.8%, compared to December 31, 2025.

This decrease was comprised of a $22.6 million increase in unguaranteed exposure combined with a $58.0 million decrease in the guaranteed portion of past due loans compared to December 31, 2025.

At March 31, 2026 and December 31, 2025, total held for investment unguaranteed loans and leases past due as a percentage of total held for investment unguaranteed loans and leases, inclusive of loans measured at fair value, was 1.1% and 0.9%, respectively.

Total unguaranteed loans and leases past due were comprised of $89.0 million carried at historical cost, an increase of $19.8 million, and $7.6 million measured at fair value, a decrease of $266 thousand, as of March 31, 2026 compared to December 31, 2025.

At June 30, 2026 and December 31, 2025, total held for investment unguaranteed loans and leases past due as a percentage of total held for investment unguaranteed loans and leases, inclusive of loans measured at fair value, was 1.3% and 0.9%, respectively.

Total unguaranteed loans and leases past due, inclusive of loans measured at fair value, were $117.4 million, an increase of $40.3 million, as of June 30, 2026 compared to December 31, 2025.

Management continues to actively monitor and work to improve asset quality.

Management believes the ACL of $193.3 million at March 31, 2026 is appropriate in light of the risk inherent in the loan and lease portfolio.

Management believes the ACL of $193.4 million at June 30, 2026 is appropriate in light of the risk inherent in the loan and lease portfolio.

Management’s judgments are based on numerous assumptions about current and expected events that it believes to be reasonable, but which may or may not be valid.

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The OCR model output is then used by management to ensure adequate liquidity sources are available during those future periods.

At March 31, 2026, the total amount of these four liquidity source items was $4.96 billion, or 32.4% of total assets, an increase of 0.1% of total assets from $4.89 billion, or 32.3% of total assets, at December 31, 2025.

As of March 31, 2026 and December 31, 2025, the Company’s unused borrowing capacity was $4.09 billion and $3.97 billion, respectively, based upon securities and loans identified as available for collateral.

At June 30, 2026, the total amount of these four liquidity source items was $5.07 billion, or 31.6% of total assets, a decrease of 0.7% of total assets from $4.89 billion, or 32.3% of total assets, at December 31, 2025.

As of June 30, 2026 and December 31, 2025, the Company’s unused borrowing capacity was $4.08 billion and $3.97 billion, respectively, based upon securities and loans identified as available for collateral.

Unused borrowing capacity consists of access through the Federal Reserve Bank's discount window, available lines of credit with the Federal Home Loan Bank and other correspondent banks, and access to a repurchase agreement.

If additional collateral is available, the Company's aggregate borrowing capacity with all of the above sources is $7.77 billion and $7.54 billion as of March 31, 2026 and December 31, 2025, respectively.

If additional collateral is available, the Company's aggregate borrowing capacity with all of the above sources is $7.75 billion and $7.54 billion as of June 30, 2026 and December 31, 2025, respectively.

Loans and other assets are funded primarily by customer deposits, brokered deposits and loan sales.

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Additionally, the Company maintains a guaranteed and unguaranteed loan portfolio that is also a contingent liquidity source, whether via pledging to the Federal Reserve Discount Window or through liquidation.

At March 31, 2026, $540.0 million of the investment securities portfolio were pledged for unused borrowing capacity, leaving $894.5 million available to be pledged as collateral.

At June 30, 2026, $508.4 million of the investment securities portfolio were pledged for unused borrowing capacity, leaving $959.5 million available to be pledged as collateral.

Contractual Obligations

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One method used to manage interest rate sensitivity is to measure the repricing differences, or interest rate gaps, between interest-earning assets and interest-bearing liabilities, across various time periods.

As of March 31, 2026, the balance sheet’s total cumulative gap position was 6.7%, meaning that over the entire life of the Company's assets and liabilities, more assets will reprice than liabilities.

As of June 30, 2026, the balance sheet’s total cumulative gap position was 6.4%, meaning that over the entire life of the Company's assets and liabilities, more assets will reprice than liabilities.

For further information, see Item 3.

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Therefore, management also uses an earnings simulation model to prepare, on a regular basis, earnings projections based on a range of instantaneous parallel interest rate shocks applied to a static balance sheet and non-parallel interest rate shocks applied to a dynamic balance sheet to measure interest rate risk.

As of March 31, 2026, the Company’s interest rate risk profile under the instantaneous parallel interest rate shock scenarios applied to a static balance sheet is moderately asset-sensitive.

As of June 30, 2026, the Company’s interest rate risk profile under the instantaneous parallel interest rate shock scenarios applied to a static balance sheet is moderately asset-sensitive.

For more information, see Item 3.

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Risk-based capital ratios, which include Tier 1 Capital, Total Capital and Common Equity Tier 1 Capital, are calculated based on regulatory guidance related to the measurement of capital and risk-weighted assets.

Capital amounts and ratios as of March 31, 2026, and December 31, 2025, are presented in the table below.

Capital amounts and ratios as of June 30, 2026, and December 31, 2025, are presented in the table below.

Actual Minimum Capital

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Amount Ratio Amount Ratio Amount Ratio

Consolidated - March 31, 2026

Consolidated - June 30, 2026

Common Equity Tier 1 (to Risk-Weighted Assets) $ 1,233,039 10.42 % $ 532,583 4.50 % N/A N/A

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Tier 1 Capital (to Average Assets) 1,329,305 8.59 618,882 4.00 N/A N/A

Bank - March 31, 2026

Bank - June 30, 2026

Common Equity Tier 1 (to Risk-Weighted Assets) $ 1,230,412 10.46 % $ 529,095 4.50 % $ 764,249 6.50 %

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Except as described in Note 1.

Basis of Presentation, there were no changes related to critical accounting policies and estimates during the first quarter of 2026.

Basis of Presentation, there were no changes related to critical accounting policies and estimates during 2026.

Changes in this estimate, that are likely to occur from period to period, or the use of different estimates that the Company could have reasonably used in the current period, could have a material impact on the Company’s financial position or results of operations.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis