SOUTHERN FIRST BANCSHARES INC 10-Q

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended June 30, 2026 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from to Commission file number 000-27719 Southern First Bancshares, Inc. (Exact name of registrant as specified in its charter) South Carolina 58-2459561 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 6 Verdae Boulevard Greenville , S.C. 29607 (Address of principal executive offices) (Zip Code) 864 - 679-9000 (Registrant’s telephone number, including area code) Not Applicable (Former name, former address, and former fiscal year, if changed since last report) Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock SFST The Nasdaq Global Market Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ☐ Accelerated filer ☒ Non-accelerated filer ☐ Smaller Reporting Company ☐ Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 9,471,755 shares of common stock, par value $0.01 per share, were issued and outstanding as of July 28, 2026. Table of Contents SOUTHERN FIRST BANCSHARES, INC. AND SUBSIDIARY June 30, 2026 Form 10-Q INDEX Page PART I – CONSOLIDATED FINANCIAL INFORMATION Item 1. Consolidated Financial Statements Consolidated Balance Sheets 3 Consolidated Statements of Income 4 Consolidated Statements of Comprehensive Income 5 Consolidated Statements of Shareholders’ Equity 6 Consolidated Statements of Cash Flows 7 Notes to Unaudited Consolidated Financial Statements 8 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 27 Item 3. Quantitative and Qualitative Disclosures about Market Risk 45 Item 4. Controls and Procedures 46 PART II – OTHER INFORMATION Item 1. Legal Proceedings 46 Item 1A. Risk Factors 46 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 47 Item 3. Defaults upon Senior Securities 47 Item 4. Mine Safety Disclosures 47 Item 5. Other Information 47 Item 6. Exhibits 47 2 Table of Contents PART I. CONSOLIDATED FINANCIAL INFORMATION Item 1. CONSOLIDATED FINANCIAL STATEMENTS SOUTHERN FIRST BANCSHARES, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS June 30, December 31, (dollars in thousands, except share data) 2026 2025 (Unaudited) (Audited) ASSETS Cash and cash equivalents: Cash and due from banks $ 30,102 27,821 Federal funds sold 259,049 183,473 Interest-bearing deposits with banks 72,483 58,289 Total cash and cash equivalents 361,634 269,583 Investment securities: Investment securities available for sale 144,388 127,730 Other investments 20,484 20,063 Total investment securities 164,872 147,793 Mortgage loans held for sale 8,594 11,569 Loans 4,030,255 3,845,124 Less allowance for credit losses ( 44,232 ) ( 42,280 ) Loans, net 3,986,023 3,802,844 Bank owned life insurance 56,677 55,775 Property and equipment, net 88,006 83,465 Deferred income taxes, net 13,946 13,702 Other assets 20,419 18,763 Total assets $ 4,700,171 4,403,494 LIABILITIES Deposits $ 3,935,452 3,716,803 Federal Home Loan Bank advances and other borrowings 240,000 240,000 Subordinated debentures 13,403 24,903 Other liabilities 59,048 53,131 Total liabilities 4,247,903 4,034,837 SHAREHOLDERS’ EQUITY Preferred stock, par value $ .01 per share, 10,000,000 shares authorized - - Common stock, par value $ .01 per share, 20,000,000 shares authorized, 9,468,467 and 8,213,328 shares issued and outstanding at June 30, 2026 and December 31, 2025, respectively. 95 82 Nonvested restricted stock ( 912 ) ( 1,338 ) Additional paid-in capital 188,932 125,924 Accumulated other comprehensive loss ( 8,372 ) ( 7,454 ) Retained earnings 272,525 251,443 Total shareholders’ equity 452,268 368,657 Total liabilities and shareholders’ equity $ 4,700,171 4,403,494 See notes to consolidated financial statements that are an integral part of these consolidated statements. 3 Table of Contents SOUTHERN FIRST BANCSHARES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME (Unaudited) For the three months For the six months ended June 30, ended June 30, (dollars in thousands, except share data) 2026 2025 2026 2025 Interest income Loans $ 53,077 48,992 104,334 96,077 Investment securities 1,504 1,357 2,903 2,760 Federal funds sold and interest-bearing deposits with banks 3,550 1,969 5,505 3,128 Total interest income 58,131 52,318 112,742 101,965 Interest expense Deposits 23,094 24,300 44,791 47,869 Borrowings 2,667 2,723 5,322 5,418 Total interest expense 25,761 27,023 50,113 53,287 Net interest income 32,370 25,295 62,629 48,678 Provision for credit losses 1,025 700 2,325 1,450 Net interest income after provision for credit losses 31,345 24,595 60,304 47,228 Noninterest income Mortgage banking income 1,323 1,569 2,816 2,993 Service fees on deposit accounts 866 567 1,621 1,106 ATM and debit card income 651 586 1,238 1,138 Income from bank owned life insurance 457 413 902 816 Other income 211 199 470 394 Total noninterest income 3,508 3,334 7,047 6,447 Noninterest expenses Compensation and benefits 12,252 11,674 24,232 22,978 Occupancy 2,551 2,523 5,042 5,071 Outside service and data processing 2,416 2,189 4,683 4,226 Insurance 858 910 1,749 1,919 Professional fees 782 609 1,456 1,118 Marketing 423 397 822 771 Other 1,111 1,034 2,423 2,088 Total noninterest expenses 20,393 19,336 40,407 38,171 Income before income tax expense 14,460 8,593 26,944 15,504 Income tax expense 3,265 2,012 5,862 3,657 Net income $ 11,195 6,581 21,082 11,847 Earnings per common share Basic $ 1.22 0.81 2.43 1.46 Diluted 1.20 0.81 2.39 1.46 Weighted average common shares outstanding Basic 9,184,699 8,118,895 8,676,877 8,098,737 Diluted 9,318,515 8,133,789 8,808,517 8,122,215 See notes to consolidated financial statements that are an integral part of these consolidated statements. 4 Table of Contents SOUTHERN FIRST BANCSHARES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) For the three months ended June 30, For the six months ended June 30, (dollars in thousands) 2026 2025 2026 2025 Net income $ 11,195 6,581 21,082 11,847 Other comprehensive income (loss): Unrealized gain (loss) on securities available for sale: Unrealized holding gain (loss) arising during the period, pretax ( 642 ) 516 ( 1,162 ) 2,358 Tax benefit (expense) 135 ( 109 ) 244 ( 495 ) Other comprehensive income (loss) ( 507 ) 407 ( 918 ) 1,863 Comprehensive income $ 10,688 6,988 20,164 13,710 See notes to consolidated financial statements that are an integral part of these consolidated statements. 5 Table of Contents SOUTHERN FIRST BANCSHARES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited) Accumulated other comprehensive income (loss) Retained earnings For the three months ended June 30, Additional paid-in capital Common stock Preferred stock Nonvested restricted Additional paid-in Accumulated other comprehensive Retained (dollars in thousands, except share data) Shares Amount Shares Amount stock capital income (loss) earnings Total March 31, 2025 8,168,865 $ 82 - $ - $ ( 3,372 ) $ 124,561 $ ( 10,016 ) $ 226,343 $ 337,598 Net income - - - - - - - 6,581 6,581 Proceeds from exercise of stock options 13,000 - - - - 306 - - 306 Restricted shares withheld for taxes ( 1,150 ) - - - - ( 35 ) - - ( 35 ) Share-based compensation expense, net of forfeitures - - - - 598 7 - - 605 Other comprehensive income - - - - - - 407 - 407 June 30, 2025 8,180,715 $ 82 - $ - $ ( 2,774 ) $ 124,839 $ ( 9,609 ) $ 232,924 $ 345,462 March 31, 2026 8,247,665 $ 82 - $ - $ ( 1,302 ) $ 127,168 $ ( 7,865 ) $ 261,330 $ 379,413 Net income - - - - - - - 11,195 11,195 Net issuance of common stock 1,207,500 13 - - - 61,262 - - 61,275 Proceeds from exercise of stock options 6,000 - - - - 239 - - 239 Net issuance of restricted stock 8,150 - - - ( 312 ) 312 - - - Restricted shares withheld for taxes ( 848 ) - - - - ( 49 ) - - ( 49 ) Share-based compensation expense, net of forfeitures - - - - 702 - - - 702 Other comprehensive loss - - - - - - ( 507 ) - ( 507 ) June 30, 2026 9,468,467 $ 95 - $ - $ ( 912 ) $ 188,932 $ ( 8,372 ) $ 272,525 $ 452,268 For the six months ended June 30, Common stock Preferred stock Nonvested restricted Additional paid-in Accumulated other comprehensive Retained (dollars in thousands, except share data) Shares Amount Shares Amount stock capital income (loss) earnings Total December 31, 2024 8,164,872 $ 82 - - $ ( 3,884 ) $ 124,641 $ ( 11,472 ) $ 221,077 $ 330,444 Net income - - - - - - - 11,847 11,847 Proceeds from exercise of stock options 25,500 - - - - 516 - - 516 Restricted shares withheld for taxes ( 9,657 ) - - - - ( 350 ) - - ( 350 ) Share-based compensation expense, net of forfeitures - - - - 1,110 32 - - 1,142 Other comprehensive income - - - - - - 1,863 - 1,863 June 30, 2025 8,180,715 $ 82 - $ - $ ( 2,774 ) $ 124,839 $ ( 9,609 ) $ 232,924 $ 345,462 December 31, 2025 8,213,328 $ 82 - $ - $ ( 1,338 ) $ 125,924 $ ( 7,454 ) $ 251,443 $ 368,657 Net income - - - - - - - 21,082 21,082 Net issuance of common stock 1,207,500 13 - - - 61,262 - - 61,275 Proceeds from exercise of stock options 41,750 - - - - 1,538 - - 1,538 Net issuance of restricted stock 18,302 - - - ( 899 ) 899 - - - Restricted shares withheld for taxes ( 12,413 ) - - - - ( 691 ) - - ( 691 ) Share-based compensation expense, net of forfeitures - - - - 1,325 - - - 1,325 Other comprehensive loss - - - - - - ( 918 ) - ( 918 ) June 30, 2026 9,468,467 $ 95 - $ - $ ( 912 ) $ 188,932 $ ( 8,372 ) $ 272,525 $ 452,268 Nonvested restricted stock See notes to consolidated financial statements that are an integral part of these consolidated statements. 6 Table of Contents SOUTHERN FIRST BANCSHARES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) For the six months ended June 30, (dollars in thousands) 2026 2025 Operating activities Net income $ 21,082 11,847 Adjustments to reconcile net income to cash provided by operating activities: Provision for credit losses 2,325 1,450 Depreciation and other amortization 1,901 2,297 Accretion and amortization of securities discounts and premium, net ( 175 ) 221 Net change in operating leases 270 48 Gain on sale of real estate owned ( 3 ) - Stock-based compensation expense 1,325 1,142 Gain on sale of loans held for sale ( 2,916 ) ( 2,813 ) Loans originated and held for sale ( 102,396 ) ( 102,716 ) Proceeds from sale of loans held for sale 108,287 99,355 Increase in cash surrender value of bank owned life insurance ( 902 ) ( 816 ) Decrease in deferred tax asset - 1 (Increase) decrease in other assets ( 556 ) 2,450 Increase in other liabilities 576 5,591 Net cash provided by operating activities 28,818 18,057 Investing activities Increase (decrease) in cash realized from: Increase in loans, net ( 186,905 ) ( 115,378 ) Purchase of property and equipment ( 1,596 ) ( 221 ) Purchase of investment securities: Available for sale ( 25,471 ) - Other investments ( 421 ) ( 24 ) Payments and maturities, calls and repayments of investment securities: Available for sale 7,826 5,397 Other investments - ( 392 ) Proceeds from the sale of real estate acquired in settlement of loans 529 - Net cash used for investing activities ( 206,038 ) ( 110,618 ) Financing activities Increase (decrease) in cash realized from: Increase in deposits, net 218,649 200,564 Repayment of subordinated debentures ( 11,500 ) - Proceeds from issuance of common stock 61,275 - Proceeds from the exercise of stock options 1,538 516 Restricted shares withheld for taxes ( 691 ) ( 350 ) Net cash provided by financing activities 269,271 200,730 Net increase in cash and cash equivalents 92,051 108,169 Cash and cash equivalents at beginning of the period 269,583 162,863 Cash and cash equivalents at end of the period $ 361,634 271,032 Supplemental information Cash paid for Interest $ 50,288 52,945 Income taxes 7,066 4,654 Schedule of non-cash transactions Unrealized (loss) gain on securities, net of income taxes ( 918 ) 1,863 Foreclosure of other real estate 1,626 275 Right-of-use assets obtained in exchange for lease obligations: Operating leases 5,761 - See notes to consolidated financial statements that are an integral part of these consolidated statements. 7 Table of Contents SOUTHERN FIRST BANCSHARES, INC. AND SUBSIDIARY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 – Summary of Significant Accounting Policies Nature of Business Southern First Bancshares, Inc. (the “Company”) is a South Carolina corporation that owns all of the capital stock of Southern First Bank (the “Bank”) and all of the stock of Greenville First Statutory Trusts I and II (collectively, the “Trusts”). The Trusts are special purpose non-consolidated entities organized for the sole purpose of issuing trust preferred securities. The Bank’s primary federal regulator is the Federal Deposit Insurance Corporation (the “FDIC”). The Bank is also regulated and examined by the South Carolina Board of Financial Institutions. The Bank is primarily engaged in the business of accepting demand deposits and savings deposits insured by the FDIC, and providing commercial, consumer and mortgage loans to the general public. Basis of Presentation The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six month periods ended June 30, 2026 are not necessarily indicative of the results that may be expected for the year ending December 31, 2026. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 as filed with the U.S. Securities and Exchange Commission (“SEC”) on February 24, 2026. The consolidated financial statements include the accounts of the Company and the Bank. In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810, “Consolidation,” the financial statements related to the Trusts have not been consolidated. Risks and Uncertainties In the normal course of its business, the Company is subject to economic and regulatory risks. The principal economic risks inherent in the Company’s business include interest rate risk, credit risk, liquidity risk and market risk. Interest rate risk arises from changes in market interest rates and from differences in the repricing and maturity characteristics of the Company’s interest-earning assets and interest-bearing liabilities. Credit risk is the risk of loss arising from a borrower’s inability or unwillingness to satisfy contractual repayment obligations. Liquidity risk is the risk that the Company may be unable to meet cash flow needs, fund loan demand, satisfy depositor withdrawal requests or otherwise operate on a cost-effective basis in the ordinary course of business. Market risk reflects changes in the value of collateral securing loans, the valuation of real estate held by the Company, the fair value of investment securities and loans, and broader changes in financial market conditions. The Company also operates in a highly regulated industry and may be affected by changes in laws, regulations, regulatory expectations and supervisory practices. The Federal Reserve has stated that economic activity is expanding at a solid pace despite elevated uncertainty and that inflation remains elevated relative to its 2% objective, in part reflecting supply shocks affecting certain sectors, including energy. Changes in interest rates, inflation, economic growth, employment conditions, trade and tariff policies, energy prices, supply disruptions, geopolitical developments and other domestic and international events may affect loan demand, deposit levels and funding costs, asset quality, borrower repayment capacity and the value of financial assets. In addition, credit conditions in certain sectors, including commercial real estate, continue to warrant close attention, particularly as loans mature and borrowers face refinancing risk. The extent to which these factors, as well as any related legislative, regulatory or supervisory responses, may adversely affect the Company’s business, financial condition, results of operations and cash flows remains uncertain. The Company is subject to the regulations of various governmental agencies. These regulations can and do change significantly from period to period. The Company also undergoes periodic examinations by the regulatory agencies, which may subject the Company to changes with respect to the valuation of assets, the amount of required credit 8 Table of Contents loss allowance and operating restrictions resulting from the regulators’ judgments based on information available to them at the time of their examinations. The Bank makes loans to individuals and businesses in the Upstate, Midlands, and Lowcountry regions of South Carolina as well as the Triangle, Triad and Charlotte regions of North Carolina and Atlanta, Georgia for various personal and commercial purposes. The Bank’s loan portfolio has a concentration of real estate loans. As of June 30, 2026 and December 31, 2025, real estate loans represented 81.0 % and 82.8 %, respectively, of total loans. However, borrowers’ ability to repay their loans is not dependent upon any specific economic sector. As of June 30, 2026, the Company’s and the Bank’s capital ratios were in excess of all regulatory requirements. While management believes that we have sufficient capital to withstand an extended economic recession, our reported and regulatory capital ratios could be adversely impacted by future credit losses. The Company maintains access to multiple sources of liquidity, including a $ 15.0 million holding company line of credit with another bank which could be used to support capital ratios at the subsidiary bank. As of June 30, 2026, the $ 15.0 million line was unused. Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amount of income and expenses during the reporting periods. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for credit losses, real estate acquired in the settlement of loans, fair value of financial instruments, and valuation of deferred tax assets. Change in Accounting Estimate During the first quarter of 2025, the Company changed its methodology for estimating the allowance for credit losses (“ACL”) on loans by transitioning from a lifetime probability of default and loss given default model to a discounted cash flow (“DCF”) approach. The Company transitioned to the DCF method as it allows for a better estimation of credit losses through customization among the various inputs by loan segmentation. The DCF model uses regression techniques that relate one or more economic factors to the default rate of various portfolios to build reasonable and supportable forecasts to estimate future losses. The Company determined that the national gross domestic product and unemployment rate were the two economic factors which had the greatest correlation to historical performance for use in the forecasted portion of the model. In addition, the transition to the DCF model allowed the Company to reduce its reliance on qualitative factors and to analyze them on a more granular level, such as by segment. The refinement represents a change in accounting estimate under ASC Topic 250, Accounting Changes and Error Corrections , with prospective application beginning in the period of change. This change in accounting estimate did not have a material effect on the Company’s financial statements. Reclassifications Certain amounts, previously reported, have been reclassified to present all periods on a comparable basis and such reclassification had no effect on shareholders’ equity or net income. Subsequent Events Subsequent events are events or transactions that occur after the balance sheet date but before financial statements are issued. Recognized subsequent events are events or transactions that provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements. Non-recognized subsequent events are events that provide evidence about conditions that did not exist at the date of the balance sheet but arose after that date. Newly Issued, But Not Yet Effective Accounting Standards In November 2024, the FASB amended the Income Statement – Reporting Comprehensive Income topic in the Accounting Standards Codification to require public companies to disclose, in interim and annual reporting periods, additional information about certain expenses in the notes to the financial statements. The amendments are effective for annual periods beginning after December 15, 2026, and interim reporting periods beginning after 9 Table of Contents December 15, 2027. Early adoption is permitted. The Company will apply the amendments retrospectively to all prior periods presented in the financial statements. The Company does not expect these amendments to have a material effect on its financial statements. In December 2025, the FASB amended the Interim Reporting topic in the Accounting Standards Codification to clarify current interim reporting requirements. The amendments are effective for interim reporting periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. The amendments may be applied either prospectively or retrospectively to any or all prior periods presented in the financial statements. The Company does not expect these amendments to have a material effect on its financial statements. NOTE 2 – Investment Securities The amortized costs and fair value of investment securities are as follows: Schedule of amortized costs and fair value of investment securities June 30, 2026 Amortized Gross Unrealized Fair (dollars in thousands) Corporate bonds [Member] Cost Gains Losses Value Available for sale Asset-backed securities [Member] Corporate bonds $ 1,692 - 109 1,583 US government agencies US government agencies [Member] 12,635 34 1,036 11,633 State and political subdivisions State and political subdivisions [Member] 19,820 - 2,109 17,711 Asset-backed securities 12,258 6 114 12,150 Mortgage-backed securities Mortgage-backed securities [Member] 108,580 9 7,278 101,311 Total investment securities available for sale $ 154,985 49 10,646 144,388 December 31, 2025 Amortized Gross Unrealized Fair Cost Gains Losses Value Available for sale Corporate bonds $ 1,703 - 103 1,600 US government agencies 13,225 33 980 12,278 State and political subdivisions 19,934 - 2,064 17,870 Asset-backed securities 16,505 32 118 16,419 Mortgage-backed securities 85,798 14 6,249 79,563 Total investment securities available for sale $ 137,165 79 9,514 127,730 Contractual maturities and yields on the Company’s investment securities at June 30, 2026 and December 31, 2025 are shown in the following table. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. 10 Table of Contents Schedule of maturities and yields on the company’s investment securities June 30, 2026 Less than one year One to five years Five to ten years Over ten years Total (dollars in thousands) Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield Available for sale Corporate bonds Corporate bonds [Member] $ - - $ 1,583 2.04 % $ - - $ - - $ 1,583 2.04 % US government agencies US government agencies [Member] - - 4,833 1.37 % 6,800 4.02 % - - 11,633 2.92 % State and political subdivisions State and political subdivisions [Member] - - 3,439 1.61 % 4,579 2.27 % 9,693 2.12 % 17,711 2.06 % Asset-backed securities Asset-backed securities [Member] - - - - - - 12,150 4.69 % 12,150 4.69 % Mortgage-backed securities Mortgage-backed securities [Member] 21 2.21 % 6,820 3.62 % 14,871 3.42 % 79,599 4.09 % 101,311 3.96 % Total investment securities Total investment securities [Member] $ 21 2.21 % $ 16,675 2.40 % $ 26,250 3.37 % $ 101,442 3.41 % $ 144,388 3.68 % December 31, 2025 Less than one year One to five years Five to ten years Over ten years Total (dollars in thousands) Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield Available for sale Corporate bonds $ - - $ 1,600 2.04 % $ - - $ - - $ 1,600 2.04 % US government agencies - - 4,871 1.37 % 7,407 4.39 % - - 12,278 3.20 % State and political subdivisions - - 2,561 1.62 % 5,565 2.21 % 9,744 2.41 % 17,870 2.23 % Asset-backed securities - - - - 3,486 5.19 % 12,933 5.12 % 16,419 5.14 % Mortgage-backed securities 19 2.37 % 2,229 1.70 % 9,272 2.74 % 68,043 4.17 % 79,563 3.93 % Total investment securities $ 19 2.37 % $ 11,261 1.59 % $ 25,730 3.43 % $ 90,720 4.12 % $ 127,730 3.76 % The tables below summarize gross unrealized losses on investment securities and the fair market value of the related securities at June 30, 2026 and December 31, 2025, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position. Schedule of gross unrealized losses on investment securities and fair market value of related securities June 30, 2026 Less than 12 months 12 months or longer Total (dollars in thousands) # Fair value Unrealized losses # Fair value Unrealized losses # Fair value Unrealized losses Available for sale Corporate bonds - $ - $ - 1 $ 1,583 $ 109 1 $ 1,583 $ 109 US government agencies - - - 7 8,312 1,036 7 8,312 1,036 State and political subdivisions - - - 29 17,711 2,109 29 17,711 2,109 Asset-backed securities 1 2,224 7 3 7,330 107 4 9,554 114 Mortgage-backed securities 20 60,948 1,118 54 36,650 6,160 74 97,598 7,278 Total investment securities 21 $ 63,172 $ 1,125 94 $ 71,586 $ 9,521 115 $ 134,758 $ 10,646 December 31, 2025 Less than 12 months 12 months or longer Total (dollars in thousands) # Fair value Unrealized losses # Fair value Unrealized losses # Fair value Unrealized losses Available for sale Corporate bonds - $ - $ - 1 $ 1,600 $ 103 1 $ 1,600 $ 103 US government agencies - - - 7 8,367 980 7 8,367 980 State and political subdivisions - - - 29 17,870 2,064 29 17,870 2,064 Asset-backed securities 3 4,483 22 2 6,035 96 5 10,518 118 Mortgage-backed securities 7 34,538 163 57 42,546 6,086 64 77,084 6,249 Total investment securities 10 $ 39,021 $ 185 96 $ 76,418 $ 9,329 106 $ 115,439 $ 9,514 11 Table of Contents At June 30, 2026, the Company had 115 individual investments that were in an unrealized loss position. The unrealized losses were primarily attributable to changes in interest rates, rather than deterioration in credit quality and the issuers of these securities continue to make timely principal and interest payments under the contractual terms of the securities. The Company does not intend to sell these securities, and it is more likely than not that the Company will not be required to sell these securities before recovery of the amortized cost. Additional information related to the types of securities held at June 30, 2026, other than securities issued or guaranteed by US government entities or agencies including US Treasuries and substantially all of the Company’s mortgage-backed securities, is as follows: Corporate securities – The Company has one holding in corporate debt securities for which there have been no payment defaults. State and political subdivisions – All of the Company’s holdings of municipal bonds were investment grade and there have been no payment defaults. All of these securities have been rated A+ or higher by Moody’s or Standard & Poor’s or Fitch. Asset-backed securities – There were four investment grade asset-backed securities, and there have been no payment defaults on these securities. As such, there is no allowance for credit losses on available for sale securities recognized as of June 30, 2026. Other investments are comprised of the following and are recorded at cost which approximates fair value. Schedule of other investments (dollars in thousands) June 30, 2026 December 31, 2025 Federal Home Loan Bank stock $ 14,796 14,540 Other nonmarketable investments 5,285 5,120 Investment in Trust Preferred subsidiaries 403 403 Total other investments $ 20,484 20,063 The Company has evaluated other investments for impairment and determined that the other investments are not impaired as of June 30, 2026 and December 31, 2025 and ultimate recoverability of the par value of the investments is probable. All of the FHLB stock is used to collateralize advances to the FHLB. At June 30, 2026 and December 31, 2025, there were no securities pledged as collateral for repurchase agreements from brokers. NOTE 3 – Mortgage Loans Held for Sale Mortgage loans originated and intended for sale in the secondary market are reported as loans held for sale and carried at fair value under the fair value option with changes in fair value recognized in current period earnings. Loans held for sale and their fair values are estimated using observable quoted market or contracted prices or market price equivalents, which would be used by other market participants. At the date of funding of the mortgage loan held for sale, the funded amount of the loan, the related derivative asset or liability of the associated interest rate lock commitment, less direct loan costs becomes the initial recorded investment in the loan held for sale. Such amount approximates the fair value of the loan. At June 30, 2026, mortgage loans held for sale totaled $ 8.6 million compared to $ 11.6 million at December 31, 2025. 12 Table of Contents NOTE 4 – Loans and Allowance for Credit Losses The following table summarizes the composition of our loan portfolio. Total gross loans are recorded net of deferred loan fees and costs, which totaled $ 5.6 million as of June 30, 2026 and December 31, 2025. Schedule of composition of our loan portfolio   Owner occupied RE [Member] June 30, 2026 December 31, 2025 (dollars in thousands) Commercial [Member] Amount % of Total Amount % of Total Commercial Owner occupied real estate (“RE”) $ 755,419 18.7 % $ 736,979 19.2 % Non-owner occupied RE Owner occupied RE [Member] 967,698 24.0 % 956,812 24.9 % Construction Construction [Member] 66,105 1.6 % 63,666 1.7 % Business 713,017 17.7 % 619,667 16.0 % Total commercial loans Consumer [Member] 2,502,239 62.0 % 2,377,124 61.8 % Consumer Real estate Real estate [Member] 1,167,282 29.0 % 1,153,285 30.0 % Home equity Home equity [Member] 273,017 6.8 % 248,685 6.5 % Construction Non-owner occupied RE [Member] 36,371 0.9 % 24,997 0.6 % Other Other [Member] 51,346 1.3 % 41,033 1.1 % Total consumer loans 1,528,016 38.0 % 1,468,000 38.2 % Total gross loans, net of deferred fees 4,030,255 100.0 % 3,845,124 100.0 % Less—allowance for credit losses ( 44,232 ) ( 42,280 ) Total loans, net $ 3,986,023 $ 3,802,844 Maturities and Sensitivity of Loans to Changes in Interest Rates The information in the following tables summarizes the loan maturity distribution by type and related interest rate characteristics based on the contractual maturities of individual loans, including loans which may be subject to renewal at their contractual maturity. Renewal of such loans is subject to review and credit approval, as well as modification of terms upon maturity. Actual repayments of loans may differ from the maturities reflected below, because borrowers have the right to prepay obligations with or without prepayment penalties. Schedule of loan maturity distribution by type and related interest rate June 30, 2026 (dollars in thousands) One year or less After one but within five years After five but within fifteen years After fifteen years Total Commercial Owner occupied RE $ 42,286 359,275 336,375 17,483 755,419 Non-owner occupied RE 144,483 633,640 174,150 15,425 967,698 Construction 23,326 27,401 15,378 - 66,105 Business 162,903 398,046 149,731 2,337 713,017 Total commercial loans 372,998 1,418,362 675,634 35,245 2,502,239 Consumer Real estate 22,820 110,592 200,666 833,204 1,167,282 Home equity 5,116 32,483 231,425 3,993 273,017 Construction 30,308 2,857 3,206 - 36,371 Other 12,661 33,776 4,234 675 51,346 Total consumer loans 70,905 179,708 439,531 837,872 1,528,016 Total gross loans, net of deferred fees $ 443,903 1,598,070 1,115,165 873,117 4,030,255 13 Table of Contents December 31, 2025 (dollars in thousands) One year or less After one but within five years After five but within fifteen years After fifteen years Total Commercial Owner occupied RE $ 49,286 294,424 374,220 19,049 736,979 Non-owner occupied RE 160,526 588,542 190,475 17,269 956,812 Construction 17,357 27,808 18,501 - 63,666 Business 139,003 349,904 127,474 3,286 619,667 Total commercial loans 366,172 1,260,678 710,670 39,604 2,377,124 Consumer Real estate 26,591 115,347 218,489 792,858 1,153,285 Home equity 6,073 36,692 201,872 4,048 248,685 Construction 19,053 1,379 4,565 - 24,997 Other 5,548 30,433 4,406 646 41,033 Total consumer loans 57,265 183,851 429,332 797,552 1,468,000 Total gross loans, net of deferred fees $ 423,437 1,444,529 1,140,002 837,156 3,845,124 The following table summarizes loans due after one year (i.e., excluding loans due one year or less), by category and by interest rate type. Schedule of loans due after one year by category June 30, 2026 December 31, 2025 Interest Rate Interest Rate (dollars in thousands) Fixed Floating or Adjustable Fixed Floating or Adjustable Commercial Owner occupied RE $ 647,368 65,765 $ 630,228 57,465 Non-owner occupied RE 683,524 139,691 682,360 113,926 Construction 12,511 30,268 11,455 34,854 Business 299,411 250,703 285,215 195,449 Total commercial loans 1,642,814 486,427 1,609,258 401,694 Consumer Real estate 915,575 228,887 963,817 162,877 Home equity 8,498 259,403 8,789 233,823 Construction 6,063 - 5,944 - Other 8,302 30,383 9,100 26,385 Total consumer loans 938,438 518,673 987,650 423,085 Total gross loans, net of deferred fees $ 2,581,252 1,005,100 $ 2,596,908 824,779 Credit Quality Indicators The Company tracks credit quality based on its internal risk ratings. Upon origination, a loan is assigned an initial risk grade, which is generally based on several factors such as the borrower’s credit score, the loan-to-value ratio, the debt-to-income ratio, etc. After loans are initially graded, they are monitored regularly for credit quality based on many factors, such as payment history, the borrower’s financial status, and changes in collateral value. Loans can be downgraded or upgraded depending on management’s evaluation of these factors. Internal risk-grading policies are consistent throughout each loan type. A description of the general characteristics of the risk grades is as follows: · Pass— A pass loan ranges from minimal to average credit risk; however, it still has acceptable credit risk. · Watch—A watch loan exhibits above average credit risk due to minor weaknesses and warrants closer scrutiny by management. 14 Table of Contents · Special mention—A special mention loan has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or the institution’s credit position at some future date. · Substandard—A substandard loan is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified must have a well-defined weakness, or weaknesses, which may jeopardize the liquidation of the debt. A substandard loan is characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. · Doubtful—A doubtful loan has all of the weaknesses inherent in one classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of the currently existing facts, conditions and values, highly questionable and improbable. 15 Table of Contents The following table presents loan balances classified by credit quality indicators by year of origination as of June 30, 2026. Schedule of classified by credit quality indicators by year of origination June 30, 2026 (dollars in thousands) 2026 2025 2024 2023 2022 Prior Revolving Revolving Converted to Term Total Commercial Owner occupied RE Pass $ 59,742 99,307 56,797 32,760 169,821 289,389 61 - 707,877 Watch 938 2,036 432 5,531 2,807 12,752 - - 24,496 Special Mention - 3,501 - 1,229 12,245 3,404 - - 20,379 Substandard - 2,166 - - 248 253 - - 2,667 Total Owner occupied RE 60,680 107,010 57,229 39,520 185,121 305,798 61 - 755,419 Non-owner occupied RE Pass 84,361 74,619 49,444 59,301 272,554 370,525 2,358 - 913,162 Watch - - 490 968 21,429 19,904 - - 42,791 Special Mention - - 267 476 - 7,678 - - 8,421 Substandard - - - - 1,294 2,030 - - 3,324 Total Non-owner occupied RE 84,361 74,619 50,201 60,745 295,277 400,137 2,358 - 967,698 Construction Pass 13,408 29,605 15,762 - 2,911 42 - - 61,728 Watch - - - - 2,517 1,860 - - 4,377 Total Construction 13,408 29,605 15,762 - 5,428 1,902 - - 66,105 Business Pass 75,599 108,185 39,260 40,000 89,837 61,212 248,694 1,626 664,413 Watch - 3,397 638 442 2,132 24,061 7,174 73 37,917 Special Mention - 58 649 722 652 632 6,255 - 8,968 Substandard - 546 - 626 - 72 475 - 1,719 Total Business 75,599 112,186 40,547 41,790 92,621 85,977 262,598 1,699 713,017 Current period gross write-offs - - - - - - ( 174 ) - ( 174 ) Total Commercial loans 234,048 323,420 163,739 142,055 578,447 793,814 265,017 1,699 2,502,239 Consumer Real estate Pass 95,491 129,857 53,364 105,691 239,100 495,721 - - 1,119,224 Watch 194 99 392 4,169 5,235 15,393 - - 25,482 Special Mention - 187 879 2,329 5,087 9,087 - - 17,569 Substandard - - 1,295 1,244 626 1,842 - - 5,007 Total Real estate 95,685 130,143 55,930 113,433 250,048 522,043 - - 1,167,282 Current period gross write-offs - - ( 28 ) - - - - - ( 28 ) Home equity Pass - - - - - - 258,583 - 258,583 Watch - - - - - - 8,643 - 8,643 Special Mention - - - - - - 5,347 - 5,347 Substandard - - - - - - 444 - 444 Total Home equity - - - - - - 273,017 - 273,017 Construction Pass 10,503 21,428 1,547 - - - 642 - 34,120 Watch - 194 - 2,057 - - - - 2,251 Total Construction 10,503 21,622 1,547 2,057 - - 642 - 36,371 Other Pass 3,131 4,451 540 520 901 1,224 39,367 - 50,134 Watch - 19 109 24 15 408 230 - 805 Special Mention - 8 21 4 311 45 18 - 407 Total Other 3,131 4,478 670 548 1,227 1,677 39,615 - 51,346 Current period gross write-offs - ( 4 ) - - - ( 22 ) ( 5 ) - ( 31 ) Total Consumer loans 109,319 156,243 58,147 116,038 251,275 523,720 313,274 - 1,528,016 Total loans $ 343,367 479,663 221,886 258,093 829,722 1,317,534 578,291 1,699 4,030,255 Total Current period gross write-offs - ( 4 ) ( 28 ) - - ( 22 ) ( 179 ) - ( 233 ) 16 Table of Contents The following table presents loan balances classified by credit quality indicators by year of origination as of December 31, 2025. December 31, 2025 (dollars in thousands) 2025 2024 2023 2022 2021 Prior Revolving Revolving Converted to Term Total Commercial Owner occupied RE Pass $ 109,796 62,028 36,348 187,991 120,627 187,495 100 596 704,981 Watch 2,062 438 5,833 5,734 2,249 9,929 - - 26,245 Special Mention 2,070 - - - - 3,424 - - 5,494 Substandard - - - 259 - - - - 259 Total Owner occupied RE 113,928 62,466 42,181 193,984 122,876 200,848 100 596 736,979 Non-owner occupied RE Pass 75,982 60,413 61,961 302,086 142,876 255,478 760 1,012 900,568 Watch - 618 1,653 13,553 13,886 9,453 - - 39,163 Special Mention - 144 - - 190 7,586 - - 7,920 Substandard - - - 2,244 - 6,917 - - 9,161 Total Non-owner occupied RE 75,982 61,175 63,614 317,883 156,952 279,434 760 1,012 956,812 Construction Pass 23,211 28,284 - 7,921 53 - - - 59,469 Watch - - - 1,766 2,431 - - - 4,197 Total Construction 23,211 28,284 - 9,687 2,484 - - - 63,666 Business Pass 109,351 42,578 44,987 100,908 28,743 55,659 210,992 465 593,683 Watch 799 719 1,180 3,006 2,186 4,090 8,675 402 21,057 Special Mention 71 652 - 621 - 664 1,807 - 3,815 Substandard 149 - 627 - - 74 262 - 1,112 Total Business 110,370 43,949 46,794 104,535 30,929 60,487 221,736 867 619,667 Current period gross write-offs - - - - - ( 78 ) ( 213 ) - ( 291 ) Total Commercial loans 323,491 195,874 152,589 626,089 313,241 540,769 222,596 2,475 2,377,124 Consumer Real estate Pass 136,015 58,846 125,186 254,815 248,173 276,765 - - 1,099,800 Watch 1,076 1,237 5,045 6,351 7,899 8,092 - - 29,700 Special Mention 193 489 1,513 5,158 2,434 7,568 - - 17,355 Substandard - 1,118 1,034 647 715 2,916 - - 6,430 Total Real estate 137,284 61,690 132,778 266,971 259,221 295,341 - - 1,153,285 Home equity Pass - - - - - - 232,962 - 232,962 Watch - - - - - - 8,730 - 8,730 Special Mention - - - - - - 5,501 - 5,501 Substandard - - - - - - 1,492 - 1,492 Total Home equity - - - - - - 248,685 - 248,685 Construction Pass 20,031 2,308 - - - - 648 - 22,987 Watch - - 2,010 - - - - - 2,010 Total Construction 20,031 2,308 2,010 - - - 648 - 24,997 Other Pass 5,048 623 586 1,062 340 1,102 31,027 - 39,788 Watch 23 134 34 24 322 109 135 - 781 Special Mention 13 26 5 316 47 38 19 - 464 Total Other 5,084 783 625 1,402 709 1,249 31,181 - 41,033 Current period gross write-offs ( 30 ) - - - ( 20 ) - ( 10 ) - ( 60 ) Total Consumer loans 162,399 64,781 135,413 268,373 259,930 296,590 280,514 - 1,468,000 Total loans $ 485,890 260,655 288,002 894,462 573,171 837,359 503,110 2,475 3,845,124 Total Current period gross write-offs ( 30 ) - - - ( 20 ) ( 78 ) ( 223 ) - ( 351 ) 17 Table of Contents The following tables present loan balances by age and payment status. Schedule of loan balances by age and payment status June 30, 2026 (dollars in thousands) Accruing 30-59 days past due Accruing 60-89 days past due Accruing 90 days or more past due Nonaccrual loans Accruing current Total Commercial Owner occupied RE $ 1,283 - - 2,667 751,469 755,419 Non-owner occupied RE 964 - - 2,030 964,704 967,698 Construction - - - - 66,105 66,105 Business 326 92 - 1,330 711,269 713,017 Consumer Real estate 282 755 - 4,805 1,161,440 1,167,282 Home equity 242 - - 354 272,421 273,017 Construction - - - - 36,371 36,371 Other 21 - - - 51,325 51,346 Total loans $ 3,118 847 - 11,186 4,015,104 4,030,255 December 31, 2025 (dollars in thousands) Accruing 30-59 days past due Accruing 60-89 days past due Accruing 90 days or more past due Nonaccrual loans Accruing current Total Commercial Owner occupied RE $ - - - 259 736,720 736,979 Non-owner occupied RE - - - 6,917 949,895 956,812 Construction - - - - 63,666 63,666 Business 627 - - 189 618,851 619,667 Consumer Real estate 4,235 315 - 5,763 1,142,972 1,153,285 Home equity - 250 - 705 247,730 248,685 Construction - - - - 24,997 24,997 Other 33 - - - 41,000 41,033 Total loans $ 4,895 565 - 13,833 3,825,831 3,845,124 As of June 30, 2026 and December 31, 2025, accruing loans 30 days or more past due represented 0.10 % and 0.14 % of the Company’s total loan portfolio, respectively. Commercial loans accruing 30 days or more past due were 0.07 % and 0.02 % of the Company’s total loan portfolio as of June 30, 2026, and December 31, 2025, respectively. Consumer loans accruing 30 days or more past due were 0.03 % and 0.12 % of total loans as of June 30, 2026, and December 31, 2025, respectively. The table below summarizes nonaccrual loans by major categories for the periods presented. Schedule of nonaccrual loans by major categories June 30, 2026 December 31, 2025 Nonaccrual Nonaccrual Nonaccrual Nonaccrual loans loans Total loans loans Total with no with an nonaccrual with no with an nonaccrual (dollars in thousands) allowance allowance loans allowance allowance loans Commercial Owner occupied RE $ 2,419 248 2,667 $ - 259 259 Non-owner occupied RE 333 1,697 2,030 5,097 1,820 6,917 Business - 1,330 1,330 - 189 189 Total commercial 2,752 3,275 6,027 5,097 2,268 7,365 Consumer Real estate 3,113 1,692 4,805 4,122 1,641 5,763 Home equity 104 250 354 705 - 705 Total consumer 3,217 1,942 5,159 4,827 1,641 6,468 Total nonaccrual loans $ 5,969 5,217 11,186 $ 9,924 3,909 13,833 18 Table of Contents The Company did no t recognize interest income on nonaccrual loans for the three or six months ended June 30, 2026 and June 30, 2025. Accrued interest reversed during the three months ended June 30, 2026 was approximately $ 61,000 , while accrued interest reversed during the three months ended June 30, 2025 was no t material. Accrued interest reversed during the six months ended June 30, 2026 and June 30, 2025 was approximately $ 179,000 and $ 47,000 , respectively. Foregone interest income on the nonaccrual loans for the three-month period ended June 30, 2026 and 2025 was approximately $ 220,000 and $ 126,000 , respectively. Foregone interest income on the nonaccrual loans for the six month period ended June 30, 2026 was $ 288,000 and $ 200,000 for the six month period ended June 30, 2025. The table below summarizes information regarding nonperforming assets. Schedule of nonperforming assets (dollars in thousands) June 30, 2026 December 31, 2025 Nonaccrual loans $ 11,186 13,833 Other real estate owned 1,375 275 Total nonperforming assets $ 12,561 14,108 Nonperforming assets as a percentage of: Total assets 0.27 % 0.32 % Gross loans 0.31 % 0.37 % Total loans over 90 days past due $ 5,983 4,499 Loans over 90 days past due and still accruing - - Modifications to Borrowers Experiencing Financial Difficulty The allowance for credit losses incorporates an estimate of lifetime expected credit losses and is recorded on each asset upon origination or acquisition. The starting point for the estimate of the allowance for credit losses is historical loss information, which includes losses from modifications of receivables to borrowers experiencing financial difficulty. The Company uses a discounted cash flow model to determine the allowance for credit losses. An assessment of whether a borrower is experiencing financial difficulty is made on the date of a modification. Because the effect of most modifications made to borrowers experiencing financial difficulty is already included in the allowance for credit losses due to the measurement methodologies used to estimate the allowance, a change to the allowance for credit losses is generally not recorded upon modification. Loan modifications to borrowers experiencing financial difficulty were not material for the three and six months ended June 30, 2026 and June 30, 2025, respectively. Allowance for Credit Losses The Company maintains an allowance for credit losses to provide for expected credit losses. Losses are charged against the allowance when management believes that the principal is uncollectable. Subsequent recoveries, if any, are credited to the allowance. Allocations of the allowance are made for specific loans and for pools of similar types of loans, although the entire allowance is available for any loan that, in management’s judgment, should be charged against the allowance. A provision for credit losses is taken based on management’s ongoing evaluation of the appropriate allowance balance. A formal evaluation of the adequacy of the ACL is conducted quarterly. This assessment includes procedures to estimate the allowance and test the adequacy and appropriateness of the resulting balance. The level of the allowance is based upon management’s evaluation of historical default and loss experience, current and projected economic conditions, asset quality trends, known and inherent risks in the portfolio, adverse situations that may affect the borrowers’ ability to repay a loan, the estimated value of any underlying collateral, composition of the loan portfolio, industry and peer bank loan quality indications and other pertinent factors, including regulatory recommendations. Management believes the level of the ACL is adequate to absorb all expected future losses inherent in the loan portfolio at the balance sheet date. The allowance is increased through provision for credit losses and decreased by charge-offs, net of recoveries of amounts previously charged-off. On January 1, 2025, the Company transitioned to the DCF modeling approach to estimate the ACL on loans as it allows for a better estimation of credit losses through customization among the various inputs by loan segmentation. 19 Table of Contents The DCF methodology is applied on a segment-by-segment basis at the loan level with a one-year reasonable and supportable forecast period, followed by a one-year reversion to the long-term average. The Company considers economic forecasts of national gross domestic product (“GDP”) and unemployment rates as reported by Fannie Mae to inform the model for loss estimation. Historical loss rates used in the quantitative model were derived using both the Bank’s and peer bank data obtained from publicly-available sources (i.e., federal call reports) encompassing an economic cycle. The peer group utilized by the Bank is comprised of financial institutions of relatively similar size (i.e., $1-$15 billion of total assets) and in similar markets. In addition, the DCF methodology considers the weighted average life of the portfolio, impacting the reaction time and the exposure to potential loss based on changes in the interest rate environment. Management also considers qualitative adjustments when estimating loan losses to take into account the model’s quantitative limitations. Qualitative adjustments to quantitative loss factors, either negative or positive, may include changes in lending policies; international, national, regional, and local conditions; volume and terms of loans; experience and depth of management; volume and severity of past due loans; effects of changes in lending policy; concentrations of credit; and loan review results. The Company enhanced its qualitative factor framework to better address risks that are not reflected in the quantitative loss factors. The following tables summarize the activity related to the allowance for credit losses for the three and six months ended June 30, 2026 and June 30, 2025. Schedule of activity related to the allowance for credit losses Three months ended June 30, 2026 Commercial Consumer (dollars in thousands) Owner occupied RE Non- owner occupied RE Construction Business Real Estate Home Equity Construction Other Total Balance, beginning of period $ 3,460 5,882 982 13,427 16,314 2,452 353 508 43,378 Provision for (reversal of) credit losses for loans ( 101 ) ( 129 ) ( 108 ) 820 310 61 ( 10 ) 107 950 Loan charge-offs - - - ( 100 ) ( 28 ) - - ( 27 ) ( 155 ) Loan recoveries - - - 56 - 3 - - 59 Net loan recoveries (charge-offs) - - - ( 44 ) ( 28 ) 3 - ( 27 ) ( 96 ) Balance, end of period $ 3,359 5,753 874 14,203 16,596 2,516 343 588 44,232 Net charge-offs to average loans (annualized) 0.01 % Allowance for credit losses to gross loans 1.10 % Allowance for credit losses to nonperforming loans 395.41 % Three months ended June 30, 2025 Commercial Consumer (dollars in thousands) Owner occupied RE Non- owner occupied RE Construction Business Real Estate Home Equity Construction Other Total Balance, beginning of period $ 3,934 7,333 582 11,131 15,193 1,549 487 478 40,687 Provision for (reversal of) credit losses for loans 69 84 ( 120 ) 213 340 96 ( 32 ) - 650 Loan charge-offs - - - ( 63 ) - - - ( 5 ) ( 68 ) Loan recoveries - - - 12 - 4 - - 16 Net loan recoveries (charge-offs) - - - ( 51 ) - 4 - ( 5 ) ( 52 ) Balance, end of period $ 4,003 7,417 462 11,293 15,533 1,649 455 473 41,285 Net charge-offs to average loans (annualized) 0.01 % Allowance for credit losses to gross loans 1.10 % Allowance for credit losses to nonperforming loans 362.35 % 20 Table of Contents Six months ended June 30, 2026 Commercial Consumer (dollars in thousands) Owner occupied RE Non- owner occupied RE Construction Business Real Estate Home Equity Construction Other Total Balance, beginning of period $ 3,911 6,773 611 12,148 15,866 1,827 569 575 42,280 Provision for (reversal of) credit losses for loans ( 552 ) ( 1,031 ) 263 2,160 758 684 ( 226 ) 44 2,100 Loan charge-offs - - - ( 174 ) ( 28 ) - - ( 31 ) ( 233 ) Loan recoveries - 11 - 69 - 5 - - 85 Net loan recoveries (charge-offs) - 11 - ( 105 ) ( 28 ) 5 - ( 31 ) ( 148 ) Balance, end of period $ 3,359 5,753 874 14,203 16,596 2,516 343 588 44,232 Net charge-offs to average loans (annualized) 0.01 % Allowance for credit losses to gross loans 1.10 % Allowance for credit losses to nonperforming loans 395.41 % Six months ended June 30, 2025 Commercial Consumer (dollars in thousands) Owner occupied RE Non- owner occupied RE Construction Business Real Estate Home Equity Construction Other Total Balance, beginning of period $ 5,482 10,219 940 7,745 12,359 2,655 115 399 39,914 Provision for (reversal of) credit losses for loans ( 1,479 ) ( 2,802 ) ( 478 ) 3,615 3,174 ( 1,014 ) 340 44 1,400 Loan charge-offs - - - ( 141 ) - - - ( 5 ) ( 146 ) Loan recoveries - - - 74 - 8 - 35 117 Net loan recoveries (charge-offs) - - - ( 67 ) - 8 - 30 ( 29 ) Balance, end of period $ 4,003 7,417 462 11,293 15,533 1,649 455 473 41,285 Net charge-offs to average loans (annualized) 0.00 % Allowance for credit losses to gross loans 1.10 % Allowance for credit losses to nonperforming loans 362.35 % There was a provision for credit losses of $ 950,000 and $ 650,000 for the three months ended June 30, 2026 and June 30, 2025, respectively. In addition, the provision for credit losses was $ 2.1 million and $ 1.4 million for the six months ended June 30, 2026 and June 30, 2025, respectively. Collateral dependent loans are loans for which the repayment is expected to be provided substantially through the operation or sale of the collateral, and where the borrower is experiencing financial difficulty. The Company reviews individually evaluated loans for designation as collateral dependent loans, as well as other loans that management of the Company designates as having higher risk. These loans do not share common risk characteristics and are not included within the collectively evaluated loans for determining the allowance for credit losses. Under CECL, for collateral dependent loans, the Company has adopted the practical expedient to measure the allowance for credit losses based on the fair value of collateral. The allowance for credit losses is calculated on an individual loan basis based on the shortfall between the fair value of the loan’s collateral, which is adjusted for liquidation costs/discounts, and amortized cost. If the fair value of the collateral exceeds the amortized cost, no allowance is required. 21 Table of Contents The following tables present an analysis of collateral-dependent loans of the Company as of June 30, 2026 and December 31, 2025. Schedule of analysis of collateral-dependent loans June 30, 2026 Real Business (dollars in thousands) estate assets Total Commercial Owner occupied RE $ 3,184 248 3,432 Non-owner occupied RE 2,029 - 2,029 Business 158 1,173 1,331 Total commercial 5,371 1,421 6,792 Consumer Real estate 5,334 - 5,334 Home equity 354 - 354 Total consumer 5,688 - 5,688 Total collateral dependent loans $ 11,059 1,421 12,480 December 31, 2025 Real Business (dollars in thousands) estate assets Total Commercial Owner occupied RE $ - 259 259 Non-owner occupied RE 6,917 - 6,917 Business 165 24 189 Total commercial 7,082 283 7,365 Consumer Real estate 5,763 - 5,763 Home equity 705 - 705 Total consumer 6,468 - 6,468 Total collateral dependent loans $ 13,550 283 13,833 Allowance for Credit Losses - Unfunded Loan Commitments The allowance for credit losses for unfunded loan commitments was $ 2.2 million and $ 2 .0 million at June 30, 2026 and December 31, 2025, respectively, and is separately classified on the balance sheet within other liabilities. The following table presents the balance and activity in the ACL for unfunded loan commitments for the three and six months ended June 30, 2026 and June 30, 2025. Schedule of allowance for credit losses for unfunded loan commitments Three months ended (dollars in thousands) June 30, 2026 June 30, 2025 Balance, beginning of period $ 2,106 1,456 Provision for credit losses 75 50 Balance, end of period $ 2,181 1,506 Total unfunded loan commitments $ 926,485 791,253 Reserve for unfunded commitments to total unfunded loan commitments 0.24 % 0.19 % Six months ended (dollars in thousands) June 30, 2026 June 30, 2025 Balance, beginning of period $ 1,956 1,456 Provision for credit losses 225 50 Balance, end of period $ 2,181 1,506 Total unfunded loan commitments $ 926,485 791,253 Reserve for unfunded commitments to total unfunded loan commitments 0.24 % 0.19 % 22 Table of Contents NOTE 5 – Leases The Company had operating right-of-use (“ROU”) assets, included in property and equipment, of $ 23.9 million and $ 19 .0 million as of June 30, 2026 and December 31, 2025, respectively. The Company had lease liabilities, included in other liabilities, of $ 26.8 million and $ 21.7 million as of June 30, 2026 and December 31, 2025, respectively. We maintain operating leases on land and buildings for various office spaces. The lease agreements have maturity dates ranging from January 2028 to December 2036, some of which include options for multiple five-year extensions which have been included in the calculations of the ROU assets and liabilities. The weighted average remaining life of the lease term for these leases was 5.32 years and 4.31 years as of June 30, 2026 and December 31, 2025, respectively. The ROU asset and lease liability are recognized at lease commencement by calculating the present value of lease payments over the lease term. The ROU assets also include any initial direct costs incurred and lease payments made at or before commencement date and are reduced by any lease incentives. The discount rate used in determining the lease liability for each individual lease was the FHLB fixed advance rate which corresponded with the remaining lease term as of the lease commencement date. The weighted average discount rate for leases was 3.18 % and 2.27 % as of June 30, 2026 and December 31, 2025, respectively. The total operating lease costs were $ 740,000 and $ 617,000 for the three months ended June 30, 2026, and 2025, respectively, and $ 1.5 million and $ 1.2 million for the six months ended June 30, 2026 and 2025. Cash paid for amounts included in the measurement of lease liabilities was $ 550,000 and $ 537,000 for the three months ended June 30, 2026, and 2025, respectively, and $ 1.1 million for the six months ended June 30, 2026 and 2025. Operating lease payments due as of June 30, 2026 were as follows: Schedule of operating lease payments due Operating (dollars in thousands) Leases 2026 $ 1,110 2027 2,568 2028 2,327 2029 1,826 2030 1,959 Thereafter 26,236 Total undiscounted lease payments 36,026 Discount effect of cash flows 9,200 Total lease liability $ 26,826 NOTE 6 – Derivative Financial Instruments The Company utilizes derivative financial instruments primarily to hedge its exposure to changes in interest rates. All derivative financial instruments are recognized as either assets or liabilities and measured at fair value. The Company enters into commitments to originate residential mortgage loans held for sale, at specified interest rates and within a specified period of time, with clients who have applied for a loan and meet certain credit and underwriting criteria (interest rate lock commitments). These interest rate lock commitments (“IRLCs”) meet the definition of a derivative financial instrument and are reflected in the balance sheet at fair value with changes in fair value recognized in current period earnings. Unrealized gains and losses on the IRLCs are recorded as derivative assets and derivative liabilities, respectively, and are measured based on the value of the underlying mortgage loan, quoted mortgage-backed securities (“MBS”) prices and an estimate of the probability that the mortgage loan will fund within the terms of the interest rate lock commitment, net of estimated commission expenses. The Company manages the interest rate and price risks associated with its outstanding IRLCs and mortgage loans held for sale by entering into derivative instruments such as forward sales of MBS. These derivatives are free-standing derivatives and are not designated as instruments for hedge accounting. Management expects these derivatives will experience changes in fair value opposite to changes in fair value of the IRLCs and mortgage loans 23 Table of Contents held for sale, thereby reducing earnings volatility. The Company takes into account various factors and strategies in determining the portion of the mortgage pipeline (IRLCs and mortgage loans held for sale) it wants to economically hedge. The gain or loss resulting from the change in the fair value of the derivative is recognized in mortgage banking income during the period of change. On December 1, 2025, the Company terminated $ 300 million of pay-fixed portfolio layer method fair value swaps previously designated as hedging instruments. At termination, the cumulative fair value hedge basis adjustment, included in gross loans, was $ 2.4 million, which will be amortized over the weighted average life of the remaining portfolio, or 77 months. The following table summarizes the Company’s outstanding financial derivative instruments at June 30, 2026 and December 31, 2025. Schedule of outstanding financial derivative instruments June 30, 2026 Fair Value (dollars in thousands) Notional Balance Sheet Location Asset/(Liability) Derivatives not designated as hedging instruments: Mortgage loan interest rate lock commitments Mortgage loan interest rate lock commitments [Member] 11,475 Other assets 135 MBS forward sales commitments MBS forward sales commitments [Member] 7,500 Other liabilities ( 30 ) Total derivative financial instruments Total derivative financial instruments [Member] $ 18,975 $ 105 December 31, 2025 Fair Value (dollars in thousands) Notional Balance Sheet Location Asset/(Liability) Derivatives not designated as hedging instruments: Mortgage loan interest rate lock commitments 22,264 Other assets 335 MBS forward sales commitments 15,000 Other liabilities ( 51 ) Total derivative financial instruments $ 37,264 $ 284 NOTE 7 – Fair Value Accounting FASB ASC 820, “Fair Value Measurement and Disclosures,” defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. FASB ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value: Level 1 – Quoted market price in active markets Quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities include certain debt and equity securities that are traded in an active exchange market. Level 2 – Significant other observable inputs Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 2 assets and liabilities include fixed income securities and mortgage-backed securities that are held in the Company’s available-for-sale portfolio and valued by a third-party pricing service, as well as certain individually evaluated loans. 24 Table of Contents Level 3 – Significant unobservable inputs Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. These methodologies may result in a significant portion of the fair value being derived from unobservable data. The methods of determining the fair value of assets and liabilities presented in this note are consistent with our methodologies disclosed in Note 12 of the Company’s 2025 Annual Report on Form 10-K. See Note 6 for how the derivative asset fair value is determined. The Company’s loan portfolio is initially fair valued using a segmented approach, using the eight categories of loans as disclosed in Note 4 – Loans and Allowance for Credit Losses. Loans are considered a Level 3 classification. Assets and Liabilities Recorded at Fair Value on a Recurring Basis The tables below present the recorded amount of assets and liabilities measured at fair value on a recurring basis as of June 30, 2026 and December 31, 2025. Schedule of assets and liabilities measured at fair value on a recurring basis June 30, 2026 (dollars in thousands) Level 1 Level 2 Level 3 Total Assets Level 1 [Member] Securities available for sale Corporate bonds Level 2 [Member] $ - 1,583 - 1,583 US government agencies Level 3 [Member] - 11,633 - 11,633 State and political subdivisions - 17,711 - 17,711 Asset-backed securities - 12,150 - 12,150 Mortgage-backed securities - 101,311 - 101,311 Mortgage loans held for sale - 8,594 - 8,594 Mortgage loan interest rate lock commitments - 135 - 135 Total assets measured at fair value on a recurring basis $ - 153,117 - 153,117 Liabilities MBS forward sales commitments $ - 30 - 30 Total liabilities measured at fair value on a recurring basis $ - 30 - 30 December 31, 2025 (dollars in thousands) Level 1 Level 2 Level 3 Total Assets Securities available for sale: Corporate bonds $ - 1,600 - 1,600 US government agencies - 12,278 - 12,278 State and political subdivisions - 17,870 - 17,870 Asset-backed securities - 16,419 - 16,419 Mortgage-backed securities - 79,563 - 79,563 Mortgage loans held for sale - 11,569 - 11,569 Mortgage loan interest rate lock commitments - 335 - 335 Total assets measured at fair value on a recurring basis $ - 139,634 - 139,634 Liabilities MBS forward sales commitments $ - 51 - 51 Total liabilities measured at fair value on a recurring basis $ - 51 - 51 25 Table of Contents Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis The tables below present the recorded amount of assets and liabilities measured at fair value on a nonrecurring basis as of June 30, 2026 and December 31, 2025. Schedule of assets and liabilities measured at fair value on a nonrecurring basis As of June 30, 2026 (dollars in thousands) Level 1 Level 2 Level 3 Total Assets Individually evaluated loans, net of reserves $ - 9,842 - 9,842 Other real estate owned - 1,375 - 1,375 Total assets measured at fair value on a nonrecurring basis $ - 11,217 - 11,217 As of December 31, 2025 (dollars in thousands) Level 1 Level 2 Level 3 Total Assets Individually evaluated loans, net of reserves $ - 12,557 1,038 13,595 Other real estate owned - 275 - 275 Total assets measured at fair value on a nonrecurring basis $ - 12,832 1,038 13,870 The Company had no liabilities carried at fair value or measured at fair value on a nonrecurring basis as of June 30, 2026 and December 31, 2025. For Level 3 assets and liabilities measured at fair value on a recurring or nonrecurring basis as of June 30, 2026 and December 31, 2025, the significant unobservable inputs used in the fair value measurements were as follows: Schedule of unobservable inputs used in the fair value measurements Valuation Technique Significant Unobservable Inputs Range of Inputs Individually evaluated loans Appraised Value/ Discounted Cash Flows Discounts to appraisals or cash flows for estimated holding and/or selling costs or age of appraisal. Estimated future cash flows, risk-adjusted discount rates, borrower performance and recovery assumptions, and expected cash-collection timing. 0 - 25 % Fair Value of Financial Instruments Financial instruments require disclosure of fair value information, whether or not recognized in the consolidated balance sheets, when it is practical to estimate the fair value. A financial instrument is defined as cash, evidence of an ownership interest in an entity or a contractual obligation which requires the exchange of cash. Certain items are specifically excluded from the disclosure requirements, including the Company’s common stock, premises and equipment and other assets and liabilities. 26 Table of Contents The estimated fair values of the Company’s financial instruments at June 30, 2026 and December 31, 2025 are as follows: Schedule of estimated fair values of the company’s financial instruments June 30, 2026 (dollars in thousands) Carrying Amount Fair Value Level 1 Level 2 Level 3 Financial Assets: Other investments, at cost $ 20,484 20,484 - - 20,484 Loans 1 3,973,543 3,793,893 - - 3,793,893 Financial Liabilities: Deposits 3,935,452 3,605,776 - 3,605,776 - FHLB and other borrowings 240,000 236,211 - 236,211 - Subordinated debentures 13,403 15,143 - 15,143 - December 31, 2025 (dollars in thousands) Carrying Amount Fair Value Level 1 Level 2 Level 3 Financial Assets: Other investments, at cost $ 20,063 20,063 - - 20,063 Loans 1 3,787,729 3,592,123 - - 3,592,123 Financial Liabilities: Deposits 3,716,803 3,461,284 - 3,461,284 - FHLB and other borrowings 240,000 240,798 - 240,798 - Subordinated debentures 24,903 26,658 - 26,658 - 1 Carrying amount is net of the allowance for credit losses and individually evaluated loans. NOTE 8 – Earnings Per Common Share The following schedule reconciles the numerators and denominators of the basic and diluted earnings per share computations for the three and six month periods ended June 30, 2026 and 2025. Dilutive common shares arise from the potentially dilutive effect of the Company’s stock options and unvested restricted stock that were outstanding at June 30, 2026. The assumed conversion of stock options can create a difference between basic and dilutive net income per common share. For the three and six month periods ended June 30, 2026, there were no anti-dilutive shares. For the three and six month periods ended June 30, 2025, 210,017 options were excluded from diluted EPS because they were anti-dilutive. Schedule of earnings per common share Three months ended June 30, Six months ended June 30, (dollars in thousands, except share data) 2026 2025 2026 2025 Numerator: Net income available to common shareholders $ 11,195 6,581 21,082 11,847 Denominator: Weighted-average common shares outstanding – basic 9,184,699 8,118,895 8,676,877 8,098,737 Common stock equivalents 133,816 14,894 131,640 23,478 Weighted-average common shares outstanding – diluted 9,318,515 8,133,789 8,808,517 8,122,215 Earnings per common share: Basic $ 1.22 0.81 2.43 1.46 Diluted 1.20 0.81 2.39 1.46 Item 2. MANAGEMENT’S DISCUSSION AND Analysis of Financial Condition and Results of Operations. The following discussion reviews our results of operations for the three and six month periods ended June 30, 2026 as compared to the three and six month periods ended June 30, 2025 and assesses our financial condition as of June 30, 2026 as compared to December 31, 2025. You should read the following discussion and analysis in conjunction with the accompanying consolidated financial statements and the related notes and the consolidated financial statements and the related notes for the year ended December 31, 2025 included in our Annual Report on 27 Table of Contents Form 10-K for that period. Results for the three and six month periods ended June 30, 2026 are not necessarily indicative of the results for the year ending December 31, 2026 or any future period. Unless the context requires otherwise, references to the “Company,” “we,” “us,” “our,” or similar references mean Southern First Bancshares, Inc. and its consolidated subsidiary. References to the “Bank” refer to Southern First Bank. Cautionary Warning Regarding forward-looking statements This report contains statements which constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). Forward-looking statements may relate to our financial condition, results of operations, plans, objectives, or future performance. These statements are based on many assumptions and estimates and are not guarantees of future performance. Our actual results may differ materially from those anticipated in any forward-looking statements, as they will depend on many factors about which we are unsure, including many factors which are beyond our control. The words “may,” “would,” “could,” “should,” “will,” “seek to,” “strive,” “focus,” “expect,” “anticipate,” “predict,” “project,” “potential,” “believe,” “continue,” “assume,” “intend,” “plan,” and “estimate,” as well as similar expressions, are meant to identify such forward-looking statements. Potential risks and uncertainties that could cause our actual results to differ from those anticipated in any forward-looking statements include, but are not limited to: · Restrictions or conditions imposed by our regulators on our operations; · Increases in competitive pressure in the banking and financial services industries; · Changes in access to funding or increased regulatory requirements with regard to funding, which could impair our liquidity; · Changes in deposit flows, which may be negatively affected by a number of factors, including rates paid by competitors, general interest rate levels, regulatory capital requirements, returns available to clients on alternative investments and general economic or industry conditions; · Credit losses as a result of declining real estate values, increasing interest rates, increasing unemployment, changes in payment behavior or other factors; · Credit losses due to loan concentration; · Changes in the amount of our loan portfolio collateralized by real estate and weaknesses in the real estate market; · Our ability to successfully execute our business strategy; · Our ability to attract and retain key personnel; · The success and costs of our expansion into potential new markets; · Risks with respect to future mergers or acquisitions, including our ability to successfully expand and integrate the businesses and operations that we acquire and realize the anticipated benefits of the mergers or acquisitions; · Changes in the interest rate environment which could reduce anticipated or actual margins; · Changes in political, economic, legislative, or regulatory conditions, including new governmental initiatives affecting the financial services industry and potential disruptions resulting from U.S. federal government funding lapses, shutdowns, or related fiscal policy uncertainty; · Changes in economic conditions resulting in, among other things, a deterioration in credit quality; · Changes occurring in business conditions and inflation; · Increased cybersecurity risk, including potential business disruptions or financial losses; · Changes in technology; · The adequacy of the level of our allowance for credit losses and the amount of loan loss provisions required in future periods; 28 Table of Contents · Examinations by our regulatory authorities, including the possibility that the regulatory authorities may, among other things, require us to increase our allowance for credit losses or write-down assets; · Changes in U.S. monetary policy, the level and volatility of interest rates, the capital markets and other market conditions that may affect, among other things, our liquidity and the value of our assets and liabilities; · Any increase in FDIC assessments which will increase our cost of doing business; · Risks associated with complex and changing regulatory environments, including, among others, with respect to data privacy, artificial intelligence (“AI”), information security, climate change or other environmental, social and governance matters, and labor matters, relating to our operations; · The rate of delinquencies and amounts of loans charged-off; · The rate of loan growth in recent years and the lack of seasoning of a portion of our loan portfolio; · Our ability to maintain appropriate levels of capital and to comply with our capital ratio requirements; · Adverse changes in asset quality and resulting credit risk-related losses and expenses; · Changes in accounting standards, rules and interpretations and the related impact on our financial statements; · Risks associated with actual or potential litigation or investigations by customers, regulatory agencies or others; · Adverse effects of failures by our vendors to provide agreed upon services in the manner and at the cost agreed; · The potential effects of events beyond our control that may have a destabilizing effect on financial markets and the economy, such as epidemics and pandemics; war, terrorism, or other geopolitical conflicts or instability, including the war in Ukraine, the ongoing conflict involving the United States, Israel and Iran and other conflicts in the Middle East, political and economic instability and military and diplomatic developments involving Venezuela, and tensions between China and Taiwan; disruptions in our customers’ supply chains or transportation networks; disruptions to global energy markets or critical shipping routes; essential utility outages; trade disputes and related tariffs; and disruptions caused by widespread cybersecurity incidents; and · Other risks and uncertainties detailed in Part I, Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2025, in Part II, Item 1A, “Risk Factors” of our Quarterly Reports on Form 10-Q, and in our other filings with the SEC. If any of these risks or uncertainties materialize, or if any of the assumptions underlying such forward-looking statements proves to be incorrect, our results could differ materially from those expressed in, implied or projected by, such forward-looking statements. We urge investors to consider all of these factors carefully in evaluating the forward-looking statements contained in this Quarterly Report on Form 10-Q. We make these forward-looking statements as of the date of this document and we do not intend, and assume no obligation, to update the forward-looking statements or to update the reasons why actual results could differ from those expressed in, or implied or projected by, the forward-looking statements, except as required by law. OVERVIEW Our business model continues to be client-focused, utilizing relationship teams to provide our clients with a specific banker contact and support team responsible for all of their banking needs. The purpose of this structure is to provide a consistent and superior level of professional service, and we believe it provides us with a distinct competitive advantage. We consider exceptional client service to be a critical part of our culture, which we refer to as “ClientFIRST.” At June 30, 2026, we had total assets of $4.70 billion, a 6.7% increase from total assets of $4.40 billion at December 31, 2025. The largest component of our total assets is loans which were $4.03 billion and $3.85 billion at June 30, 2026, and December 31, 2025, respectively. Our liabilities and shareholders’ equity at June 30, 2026 totaled $4.2 billion and $452.3 million, respectively, compared to liabilities of $4.03 billion and shareholders’ equity of $368.7 million at December 31, 2025. The principal component of our liabilities is deposits which were $3.94 billion and $3.72 billion at June 30, 2026 and December 31, 2025, respectively. 29 Table of Contents Like most community banks, we derive the majority of our income from interest received on our loans and investments. Our primary source of funds for making these loans and investments is our deposits, on which we pay interest. Consequently, one of the key measures of our success is our amount of net interest income, or the difference between the income on our interest-earning assets, such as loans and investments, and the expense on our interest-bearing liabilities, such as deposits and borrowings. Another key measure is the spread between the yield we earn on these interest-earning assets and the rate we pay on our interest-bearing liabilities, which is called our net interest spread. In addition to earning interest on our loans and investments, we earn income through fees and other charges to our clients. Our net income to common shareholders was $11.2 million and $6.6 million for the three months ended June 30, 2026, and 2025, respectively. Diluted earnings per share (“EPS”) was $1.20 for the second quarter of 2026 as compared to $0.81 for the same period in 2025. Our net income to common shareholders was $21.1 million and $11.8 million for the six months ended June 30, 2026 and 2025, respectively. Diluted EPS was $2.39 for the six months ended June 30, 2026 as compared to $1.46 for the same period of 2025. The increase in net income for the three and six months ended June 30, 2026 was primarily driven by an increase in net interest income. RESULTS OF OPERATIONS Net Interest Income and Margin Our level of net interest income is determined by the level of earning assets and the management of our net interest margin. Our net interest income was $32.4 million for the second quarter of 2026, a 28.0% increase over net interest income of $25.3 million for the second quarter of 2025, driven primarily by a $5.8 million increase in interest income on our interest-earning assets combined with a $1.3 million decrease in interest expense on our interest-bearing liabilities. In addition, our net interest margin, on a tax-equivalent (TE) basis, was 2.87% for the second quarter of 2026 compared to 2.50% for the same period in 2025. We have included a number of tables to assist in our description of various measures of our financial performance. For example, the “Average Balances, Income and Expenses, Yields and Rates” table reflects the average balance of each category of our assets and liabilities as well as the yield we earned or the rate we paid with respect to each category during the three and six month periods ended June 30, 2026 and 2025. A review of this table shows that our loans typically provide higher interest yields than do other types of interest-earning assets, which is why we direct a substantial percentage of our earning assets into our loan portfolio. Similarly, the “Rate/Volume Analysis” tables demonstrate the effect of changing interest rates and changing volume of assets and liabilities on our financial condition during the periods shown. We also track the sensitivity of our various categories of assets and liabilities to changes in interest rates, and we have included tables to illustrate our interest rate sensitivity with respect to interest-earning accounts and interest-bearing accounts. The following tables entitled “Average Balances, Income and Expenses, Yield and Rates” set forth information related to our average balance sheets, average yields on assets, and average costs of liabilities. We derived these yields by dividing income or expense by the average balance of the corresponding assets or liabilities. We derived average balances from the daily balances throughout the periods indicated. During the same periods, we had no securities purchased with agreements to resell. All investments owned have an original maturity of over one year. Nonaccrual loans are included in the following tables. Loan yields have been reduced to reflect the negative impact on our earnings of loans on nonaccrual status. The net of capitalized loan costs and fees are amortized into interest income on loans. 30 Table of Contents Average Balances, Income and Expenses, Yields and Rates For the Three Months Ended June 30, 2026 2025 (dollars in thousands) Average Balance Income/ Expense Yield/ Rate (1) Average Balance Income/ Expense Yield/ Rate (1) Interest-earning assets Federal funds sold and interest-bearing deposits with banks $ 384,694 $ 3,550 3.70 % $ 179,095 $ 1,969 4.41 % Investment securities, taxable 147,886 1,473 4.00 % 141,898 1,315 3.72 % Investment securities, nontaxable (2) 6,283 40 2.57 % 7,740 55 2.83 % Loans (3) 3,978,639 53,077 5.35 % 3,724,064 48,992 5.28 % Total interest-earning assets 4,517,502 58,140 5.16 % 4,052,797 52,331 5.18 % Noninterest-earning assets 157,905 154,051 Total assets $ 4,675,407 $ 4,206,848 Interest-bearing liabilities NOW accounts $ 500,978 1,738 1.39 % $ 331,811 752 0.91 % Savings & money market 1,752,548 12,908 2.95 % 1,566,345 13,398 3.43 % Time deposits 871,563 8,448 3.89 % 942,880 10,150 4.32 % Total interest-bearing deposits 3,125,089 23,094 2.96 % 2,841,036 24,300 3.43 % FHLB advances and other borrowings 240,000 2,252 3.76 % 240,000 2,270 3.79 % Subordinated debentures 24,777 415 6.72 % 24,903 453 7.30 % Total interest-bearing liabilities 3,389,866 25,761 3.05 % 3,105,939 27,023 3.49 % Noninterest-bearing liabilities 848,704 758,626 Shareholders’ equity 436,837 342,283 Total liabilities and shareholders’ equity $ 4,675,407 $ 4,206,848 Net interest spread 2.11 % 1.69 % Net interest income (tax equivalent) / margin $ 32,379 2.87 % $ 25,308 2.50 % Less: tax-equivalent adjustment (2) 9 13 Net interest income $ 32,370 $ 25,295 (1) Annualized for the three month period. (2) The tax-equivalent adjustment to net interest income adjusts the yield for assets earning tax-exempt income to a comparable yield on a taxable basis. (3) Includes loans held for sale and nonaccrual loans. Our net interest margin (TE) increased by 37 basis points to 2.87% during the second quarter of 2026, compared to the second quarter of 2025, driven primarily by an increase in our average interest-earning assets combined with a decrease in rates paid on our interest-bearing liabilities. Our average interest-earning assets grew by $464.7 million during the second quarter of 2026 from the prior year, while the average yield on these assets decreased by two basis points to 5.16%. In comparison, our average interest-bearing liabilities grew by $283.9 million during the second quarter of 2026 from the prior year, while the rate on these liabilities decreased 44 basis points to 3.05%. The increase in average interest-earning assets for the second quarter of 2026 related primarily to an increase of $254.6 million in our average loan balances from the prior year combined with a $205.6 million increase in the average balance of Federal funds sold and interest-bearing deposits with banks. While the total yield on our interest-earning assets decreased two basis points, driven by a 71 basis point decrease in the yield on our Federal funds sold and interest-bearing deposits with banks, the yield on our loan portfolio increased seven basis points from the prior year. The increase in average interest-bearing liabilities for the second quarter of 2026 related primarily to an increase of $284.1 million in our average interest-bearing deposits. The 44 basis point decrease in cost of our interest-bearing liabilities was driven by a 47 basis point decrease in the cost of our interest-bearing deposits. Our net interest spread was 2.11% for the second quarter of 2026 compared to 1.69% for the same period in 2025. The net interest spread is the difference between the yield we earn on our interest-earning assets and the rate we pay on our interest-bearing liabilities. The two-basis point decrease in yield on our interest-earning assets, combined 31 Table of Contents with the 44 basis point decrease in the rate on our interest-bearing liabilities, resulted in a 42 basis point increase in our net interest spread for the 2026 period. We seek to fund increased loan volumes by growing our core deposits, but, subject to internal policy limits on the amount of wholesale funding we may maintain, will utilize wholesale funding to fund shortfalls, if any, or provide additional liquidity. To the extent that our dependence on wholesale funding sources increases, our net interest margin would likely be negatively impacted as we may not be able to reduce the rates we pay on these deposits as quickly as we can on core deposits as rates have and may continue to decline. We continue to deploy various asset liability management strategies to manage our risk to interest rate fluctuations. Average Balances, Income and Expenses, Yields and Rates For the Six Months Ended June 30, 2026 2025 (dollars in thousands) Average Balance Income/ Expense Yield/ Rate (1) Average Balance Income/ Expense Yield/ Rate (1) Interest-earning assets Federal funds sold and interest-bearing deposits with banks $ 298,346 $ 5,505 3.72 % $ 143,655 $ 3,128 4.39 % Investment securities, taxable 136,979 2,842 4.18 % 123,076 2,677 4.39 % Investment securities, nontaxable (2) 13,944 79 1.15 % 7,827 108 2.78 % Loans (3) 3,939,041 104,334 5.34 % 3,699,127 96,077 5.24 % Total interest-earning assets 4,388,310 112,760 5.18 % 3,973,685 101,990 5.18 % Noninterest-earning assets 157,189 175,216 Total assets $ 4,545,499 $ 4,148,901 Interest-bearing liabilities NOW accounts $ 461,472 2,840 1.24 % $ 319,328 1,350 0.85 % Savings & money market 1,701,183 24,727 2.93 % 1,543,614 26,149 3.42 % Time deposits 883,268 17,224 3.93 % 936,617 20,370 4.39 % Total interest-bearing deposits 3,045,923 44,791 2.97 % 2,799,559 47,869 3.45 % FHLB advances and other borrowings 240,000 4,496 3.78 % 240,000 4,514 3.79 % Subordinated debentures 24,839 826 6.71 % 24,903 904 7.32 % Total interest-bearing liabilities 3,310,762 50,113 3.05 % 3,064,462 53,287 3.51 % Noninterest-bearing liabilities 828,308 745,766 Shareholders’ equity 406,429 338,673 Total liabilities and shareholders’ equity $ 4,545,499 $ 4,148,901 Net interest spread 2.13 % 1.67 % Net interest income (tax equivalent) / margin $ 62,647 2.88 % $ 48,703 2.47 % Less: tax-equivalent adjustment (2) 18 25 Net interest income $ 62,629 $ 48,678 (1) Annualized for the six month period. (2) The tax-equivalent adjustment to net interest income adjusts the yield for assets earning tax-exempt income to a comparable yield on a taxable basis. (3) Includes mortgage loans held for sale. During the first six months of 2026, our net interest margin (TE) increased by 41 basis points to 2.88%, compared to 2.47% for the first six months of 2025, driven primarily by an increase in our average interest-earning assets combined with a decrease in rates paid on our interest-bearing liabilities. Our average interest-earning assets grew by $414.6 million during the first half of 2026 from the prior year, while the average yield remained constant at 5.18%. In comparison, our average interest-bearing liabilities grew by $246.3 million from prior year, while the rate of these liabilities decreased by 46 basis points to 3.05%. The increase in average interest-earning assets for the first half of 2026 related primarily to a $239.9 million increase in our average loan balances combined with a $154.7 million increase in the average balance of Federal funds sold and interest-bearing deposits with banks. While the yield on our interest-earning assets remained stable at 5.18%, the yield on our loan portfolio increased 10 basis points from the prior year to 5.34%. Offsetting this increase was a 67 basis point decrease in the yield on Federal Funds sold and interest-bearing deposits with banks as the Federal Reserve lowered the federal funds rate by 75 basis points during the fourth quarter of 2025. 32 Table of Contents The increase in average interest-bearing liabilities for the first half of 2026 was driven by an increase in interest-bearing deposits of $246.4 million. The primary driver of the 46 basis point decrease in the rate of our interest-bearing liabilities was a 48 basis point decrease in the cost of our interest-bearing deposits, which was driven by the 75 basis point decrease in the federal funds rate which has a strong correlation to the cost of our non-maturity deposits. Our net interest spread was 2.13% for the first half of 2026 compared to 1.67% for the same period in 2025. The net interest spread is the difference between the yield we earn on our interest-earning assets and the rate we pay on our interest-bearing liabilities. The 46 basis point decrease in the rate on our interest-bearing liabilities resulted in a 46 basis point increase in our net interest spread for 2026. Rate/Volume Analysis Net interest income can be analyzed in terms of the impact of changing interest rates and changing volume. The following tables set forth the effect which the varying levels of interest-earning assets and interest-bearing liabilities and the applicable rates have had on changes in net interest income for the periods presented. Three Months Ended June 30, 2026 vs. 2025 June 30, 2025 vs. 2024 Increase (Decrease) Due to Increase (Decrease) Due to (dollars in thousands) Volume Rate Rate/ Volume Total Volume Rate Rate/ Volume Total Interest income Loans $ 3,349 689 47 4,085 $ 48 2,348 51 2,447 Investment securities 41 103 3 147 (4 ) (54 ) (3 ) (61 ) Federal funds sold and interest-bearing deposits with banks 2,576 (431 ) (564 ) 1,581 125 (827 ) 88 (614 ) Total interest income 5,966 361 (514 ) 5,813 169 1,467 136 1,772 Interest expense Deposits 2,539 (3,391 ) (354 ) (1,206 ) (87 ) (3,769 ) (60 ) (3,916 ) FHLB advances and other borrowings - (18 ) - (18 ) - 22 - 22 Subordinated debentures (2 ) (37 ) 1 (38 ) 51 (222 ) 70 (101 ) Total interest expense 2,537 (3,446 ) (353 ) (1,262 ) (36 ) (3,969 ) 10 (3,995 ) Net interest income $ 3,429 3,807 (161 ) 7,075 $ 205 5,436 126 5,767 Net interest income, the largest component of our income, was $32.4 million for the second quarter of 2026 and $25.3 million for the second quarter of 2025, a $7.1 million, or 28.0%, increase year over year. The increase during 2026 was driven by a $5.8 million increase in interest income primarily due to an increase in average loan balances and average balances in Federal funds sold and interest-bearing deposits with banks, as well as a $1.3 million decrease in interest expense primarily due to lower rates on our interest-bearing deposits. Six Months Ended June 30, 2026 vs. 2025 June 30, 2025 vs. 2024 Increase (Decrease) Due to Increase (Decrease) Due to (dollars in thousands) Volume Rate Rate/ Volume Total Volume Rate Rate/ Volume Total Interest income Loans $ 6,231 1,903 123 8,257 $ 64 3,795 68 3,927 Investment securities 6 137 - 143 (7 ) (123 ) (6 ) (136 ) Federal funds sold and interest-bearing deposits with banks 3,368 (477 ) (514 ) 2,377 83 (880 ) 62 (735 ) Total interest income 9,605 1,563 (391 ) 10,777 140 2,792 124 3,056 Interest expense Deposits 4,451 (6,889 ) (640 ) (3,078 ) (174 ) (6,983 ) (122 ) (7,279 ) FHLB advances and other borrowings - (18 ) - (18 ) - 38 - 38 Subordinated debentures (2 ) (76 ) - (78 ) 105 (456 ) 143 (208 ) Total interest expense 4,449 (6,983 ) (640 ) (3,174 ) (69 ) (7,401 ) 21 (7,449 ) Net interest income $ 5,156 8,546 249 13,951 $ 209 10,193 103 10,505 33 Table of Contents Net interest income for the first half of 2026 was $62.6 million compared to $48.7 million for 2025, a $14.0 million, or 28.7%, increase. The increase in net interest income during 2026 was driven by a $10.8 million increase in interest income, related primarily to an increase in average loan balances. In addition, interest expense decreased by $3.2 million driven by lower rates on our interest-bearing deposits. Provision for Credit Losses The provision for credit losses, which includes a provision for losses on unfunded commitments, is a charge to earnings to maintain the allowance for credit losses and reserve for unfunded commitments at levels consistent with management’s assessment of expected losses in the loan portfolio at the balance sheet date. We review the adequacy of the allowance for credit losses on a quarterly basis. Please see the discussion included in Note 4 – Loans and Allowance for Credit Losses for a description of the factors we consider in determining the amount of the provision we expense each period to maintain this allowance. We recorded a provision for credit losses of $1.0 million during the second quarter of 2026, compared to a provision for credit losses of $700,000 in the second quarter of 2025. The provision during the second quarter of 2026 was driven primarily by growth in our loan portfolio and included a provision of $950,000 for credit losses and a $75,000 provision for unfunded commitments. The $700,000 provision in 2025, which included a $650,000 provision for credit losses and a $50,000 reserve for unfunded commitments was also driven primarily by growth in our loan portfolio. Our provision expense was $2.3 million and $1.5 million for the six months ended June 30, 2026 and June 30, 2025, respectively. The $2.3 million provision expense for the first half of 2026 included a $2.1 million provision for credit losses and a $225,000 reserve for unfunded commitments. The increase in provision expense during the first six months of 2026 was primarily due to loan growth during the first half of the year. The $1.5 million provision expense for the first half of 2025 included $1.4 million provision for credit losses and a $50,000 reserve for unfunded commitments. Noninterest Income The following table sets forth information related to our noninterest income. Three months ended June 30, Six months ended June 30, (dollars in thousands) 2026 2025 2026 2025 Mortgage banking income $ 1,323 1,569 2,816 2,993 Service fees on deposit accounts 866 567 1,621 1,106 ATM and debit card income 651 586 1,238 1,138 Income from bank owned life insurance 457 413 902 816 Other income 211 199 470 394 Total noninterest income $ 3,508 3,334 7,047 6,447 Noninterest income was $3.5 million for the second quarter of 2026, a $174,000, or 5.2%, increase from noninterest income of $3.3 million for the second quarter of 2025. The increase in noninterest income during 2026, compared to 2025, resulted primarily from an increase in service fees on deposit accounts and ATM and debit card income. Service fees on deposit accounts increased $299,000, or 52.7% over the prior year driven by higher transaction volume, fee income on our commercial credit cards and additional wire fee income. Partially offsetting these increases, was a $246,000, or 15.7%, decrease in mortgage banking income which was driven by changes in the market rates from the time the loan was locked. Noninterest income was $7.0 million for the first half of 2026, a $600,000, or 9.3%, increase from noninterest income of $6.4 million for the first half of 2025. The year over year increase was driven by a $515,000, or 46.6%, increase in service fees on deposit accounts and a $100,000, or 8.8%, increase in ATM and debit card income over the prior year. Partially offsetting these increases was a $177,000, or 5.9%, decrease in mortgage banking income from the first half of 2025. 34 Table of Contents Noninterest expenses The following table sets forth information related to our noninterest expenses. Three months ended June 30, Six months ended June 30, (dollars in thousands) 2026 2025 2026 2025 Compensation and benefits $ 12,252 11,674 24,232 22,978 Occupancy 2,551 2,523 5,042 5,071 Outside service and data processing costs 2,416 2,189 4,683 4,226 Insurance 858 910 1,749 1,919 Professional fees 782 609 1,456 1,118 Marketing 423 397 822 771 Other 1,111 1,034 2,423 2,088 Total noninterest expense $ 20,393 19,336 40,407 38,171 Noninterest expense was $20.4 million for the second quarter of 2026, a $1.1 million, or 5.5%, increase from noninterest expense of $19.3 million for the second quarter of 2025. The increase in noninterest expense was driven primarily by the following: · Compensation and benefits expense increased $578,000, or 5.0%, relating primarily to an increase in salaries and commissions expenses. · Outside service and data processing costs increased $227,000, or 10.4%, relating primarily to increases in software licensing and maintenance costs, electronic banking, and other services we provide to our clients which are driven by increased volume. · Professional fees increased $173,000, or 28.4%, relating primarily to an increase in director’s fees, legal fees and audit and accounting fees. · Other noninterest expenses increased $77,000, or 7.4%, relating primarily to an increase in travel and entertainment expenses and other employee related expenses. Partially offsetting the above increases was a decrease in insurance expense of $52,000, or 5.7%, due to lower FDIC assessment expense during the second quarter of 2026. Noninterest expense was $40.4 million for the first half of 2026, a $2.2 million, or 5.9%, increase from noninterest expense of $38.2 million for the first half of 2025. The increase in noninterest expense was driven primarily by the following: · Compensation and benefits expense increased $1.3 million, or 5.5%, relating primarily to annual salary increases, commissions, and other employee benefit expenses. · Outside service and data processing costs increased $457,000, or 10.8%, relating primarily to increases in software licensing and maintenance costs, ATM card related expenses, and other business electronic banking services we provide to our clients. · Professional fees increased $338,000, or 30.2%, relating primarily to an increase in director’s fees, legal fees and audit and accounting fees. · Other noninterest expenses increased $335,000, or 16.0%, relating primarily to an increase in electronic banking losses and operational losses, employee travel and other employee expenses. Partially offsetting the above increases was a decrease in insurance expense of $170,000, or 8.9%, due to lower FDIC assessment expense during the first half of 2026. Our efficiency ratio was 56.8% for the second quarter of 2026, compared to 67.5% for the second quarter of 2025. The efficiency ratio represents the percentage of one dollar of expense required to be incurred to earn a full dollar of revenue and is computed by dividing noninterest expense by the sum of net interest income and noninterest income. The improvement during the 2026 period was driven primarily by the increase in net interest income. 35 Table of Contents We incurred income tax expense of $3.3 million and $2.0 million for the three months ended June 30, 2026 and 2025, respectively, and $5.9 million and $3.7 million for the six months ended June 30, 2026 and 2025. Our effective tax rate was 21.8% and 23.6% for the six months ended June 30, 2026 and 2025, respectively. The decrease in the effective tax rate was driven by the effect of equity compensation transactions in comparison to our income before income tax expense. Balance Sheet Review Investment Securities At June 30, 2026, the $164.9 million in our investment securities portfolio represented approximately 3.5% of our total assets. Our available for sale investment portfolio included corporate bonds, US treasuries, US government agency securities, state and political subdivisions, asset-backed securities and mortgage-backed securities with a fair value of $144.4 million and an amortized cost of $155.0 million, resulting in an unrealized loss of $10.6 million. At December 31, 2025, the $147.8 million in our investment securities portfolio represented approximately 3.4% of our total assets, including investment securities with a fair value of $127.7 million and an amortized cost of $137.2 million for an unrealized loss of $9.4 million. In addition, other investments, which include FHLB Stock and other nonmarketable investments, increased $421,000 from December 31, 2025 to $20.5 million at June 30, 2026. Loans Since loans typically provide higher interest yields than other types of interest earning assets, a substantial percentage of our earning assets are invested in our loan portfolio. Average loans, excluding mortgage loans held for sale, for the six months ended June 30, 2026 and 2025 were $3.93 billion and $3.69 billion, respectively (the average loan balances reflected in the “Average Balances, Income and Expenses, Yields and Rates” tables above include mortgage loans held for sale, as noted in footnote (3) to those tables, and therefore differ from the amounts presented here). Before the allowance for credit losses, total loans outstanding at June 30, 2026 and December 31, 2025 were $4.03 billion and $3.85 billion, respectively. The principal component of our loan portfolio is loans secured by real estate mortgages. As of June 30, 2026, our loan portfolio included $3.27 billion, or 81.0%, of real estate loans, compared to $3.18 billion, or 82.8%, at December 31, 2025. Most of our real estate loans are secured by residential or commercial property. We obtain a security interest in real estate, in addition to any other available collateral, in order to increase the likelihood of the ultimate repayment of the loan. Generally, we limit the loan-to-value ratio on loans to coincide with the appropriate regulatory guidelines. We attempt to maintain a relatively diversified loan portfolio to help reduce the risk inherent in concentration in certain types of collateral and business types. Home equity lines of credit totaled $273.0 million as of June 30, 2026, of which approximately 49% were in a first lien position, while the remaining balance was in second liens. At December 31, 2025, our home equity lines of credit totaled $248.7 million, of which approximately 47% were in first lien positions, while the remaining balance was in second liens. The average home equity loan had a balance of approximately $115,000 and a loan to value of 75% as of June 30, 2026, compared to an average loan balance of $108,000 and a loan to value of approximately 73% as of December 31, 2025. Further, 0.18% and 0.38% of our total home equity lines of credit were over 30 days past due as of June 30, 2026 and December 31, 2025, respectively. Following is a summary of our loan composition at June 30, 2026 and December 31, 2025. During the first six months of 2026, our loan portfolio increased by $185.1 million, or 9.7% annualized, primarily driven by a $125.1 million increase in commercial loans with $93.4 million of the increase being in commercial business loans. In addition, our consumer loans grew by $60.0 million with $24.3 million being in home equity loans. Our consumer real estate portfolio, which increased by $14.0 million during the first half of 2026 includes high quality 1-4 family consumer real estate loans. Our average consumer real estate loan currently has a principal balance of $469,000, a term of 24 years, and an average rate of 4.66% as of June 30, 2026, compared to a principal balance of $472,000, a term of 24 years, and an average rate of 4.55% as of December 31, 2025. 36 Table of Contents June 30, 2026 December 31, 2025 (dollars in thousands) Amount % of Total Amount % of Total Commercial Owner occupied RE $ 755,419 18.7 % $ 736,979 19.2 % Non-owner occupied RE 967,698 24.0 % 956,812 24.9 % Construction 66,105 1.6 % 63,666 1.7 % Business 713,017 17.7 % 619,667 16.0 % Total commercial loans 2,502,239 62.0 % 2,377,124 61.8 % Consumer Real estate 1,167,282 29.0 % 1,153,285 30.0 % Home equity 273,017 6.8 % 248,685 6.5 % Construction 36,371 0.9 % 24,997 0.6 % Other 51,346 1.3 % 41,033 1.1 % Total consumer loans 1,528,016 38.0 % 1,468,000 38.2 % Total gross loans, net of deferred fees 4,030,255 100.0 % 3,845,124 100.0 % Less—allowance for credit losses (44,232 ) (42,280 ) Total loans, net $ 3,986,023 $ 3,802,844 We have included the table below to provide additional clarity on our commercial real estate exposure. We have not identified any geographic concentrations within these collateral types. The table below presents the majority of our commercial real estate exposure by collateral type which are included in the commercial business, construction, and non-owner occupied segments. June 30, 2026 (dollars in thousands) Outstanding % of Loan Portfolio Average Loan Size Weighted Average LTV Collateral Office $ 230,575 5.72 % $ 1,468 55 % Retail 209,491 5.20 % 1,665 50 % Hotel 148,948 3.70 % 7,963 47 % Multifamily 94,981 2.36 % 2,376 46 % December 31, 2025 (dollars in thousands) Outstanding % of Loan Portfolio Average Loan Size Weighted Average LTV Collateral Office $ 221,425 5.76 % $ 1,377 53 % Retail 186,692 4.86 % 1,611 50 % Hotel 144,155 3.75 % 7,651 48 % Multifamily 101,703 2.64 % 2,462 43 % Our level of non-owner occupied commercial real estate loans represents 237.3% of the Bank’s total risk-based capital at June 30, 2026 compared to 236.5% at December 31, 2025. Nonperforming assets Nonperforming assets include real estate acquired through foreclosure or deed taken in lieu of foreclosure and loans on nonaccrual status. Generally, a loan is placed on nonaccrual status when it becomes 90 days past due as to principal or interest, or when we believe, after considering economic and business conditions and collection efforts, that the borrower’s financial condition is such that collection of the contractual principal or interest on the loan is doubtful. A payment of interest on a loan that is classified as nonaccrual is recognized as a reduction in principal when received. Our policy with respect to nonperforming loans requires the borrower to make a minimum of six consecutive payments in accordance with the loan terms and to show capacity to continue performing into 37 Table of Contents the future before that loan can be placed back on accrual status. As of June 30, 2026 and December 31, 2025 we had no loans that were 90 days past due and still accruing. Following is a summary of our nonperforming assets. (dollars in thousands) June 30, 2026 December 31, 2025 Commercial Owner occupied RE $ 2,667 259 Non-owner occupied RE 2,030 6,917 Business 1,330 189 Consumer Real estate 4,805 5,763 Home equity 354 705 Total nonaccrual loans 11,186 13,833 Other real estate owned 1,375 275 Total nonperforming assets $ 12,561 14,108 At June 30, 2026, nonperforming assets were $12.6 million, or 0.27% of total assets and 0.31% of gross loans. Comparatively, nonperforming assets were $14.1 million, or 0.32% of total assets and 0.37% of gross loans at December 31, 2025. The increase in commercial owner occupied loans was primarily due to one loan being moved to non-accrual status during the first quarter of 2026, while the decrease in commercial non-owner occupied loans was primarily driven by the payoff of one large non-residential loan. The amount of foregone interest income on nonaccrual loans in the second quarter of 2026 and 2025 was $220,000 and $126,000, respectively. At June 30, 2026 and December 31, 2025, the allowance for credit losses represented 395.41% and 305.65% of the total amount of nonperforming loans, respectively. A significant portion of the nonperforming loans at June 30, 2026 were secured by real estate. We have evaluated the underlying collateral on these loans and believe that the collateral on these loans is sufficient to minimize future losses. As a general practice, most of our commercial loans and a portion of our consumer loans are originated with relatively short maturities of less than ten years. As a result, when a loan reaches its maturity, we frequently renew the loan and thus extend its maturity using similar credit standards as those used when the loan was first originated. Due to these loan practices, we may, at times, renew loans which are classified as nonaccrual after evaluating the loan’s collateral value and financial strength of its guarantors. Nonaccrual loans are renewed at terms generally consistent with the ultimate source of repayment and rarely at reduced rates. In these cases, we will generally seek additional credit enhancements, such as additional collateral or additional guarantees to further protect the loan. When a loan is no longer performing in accordance with its stated terms, we will typically seek performance under the guarantee. In addition, at June 30, 2026, 81.0% of our loans were collateralized by real estate and 88.6% of our individually evaluated loans were secured by real estate. We utilize third party appraisers to determine the fair value of collateral dependent loans. Our current loan and appraisal policies require us to obtain updated appraisals on an annual basis, either through a new external appraisal or an appraisal evaluation. Individually evaluated loans are reviewed on a quarterly basis to determine the level of credit loss. As of June 30, 2026, we did not have any individually evaluated real estate loans carried at a value in excess of the appraised value. We typically charge-off a portion or create a specific reserve for individually evaluated loans when we do not expect repayment to occur as agreed upon under the original terms of the loan agreement. At June 30, 2026, individually evaluated loans totaled $12.5 million, for which $6.0 million of these loans had a reserve of approximately $2.6 million allocated in the allowance for credit losses. Comparatively, individually evaluated loans totaled $15.1 million at December 31, 2025 for which $5.2 million of these loans had a reserve of approximately $1.5 million allocated in the allowance for credit losses. 38 Table of Contents Allowance for Credit Losses The allowance for credit losses was $44.2 million, representing 1.10% of outstanding loans and providing coverage of 395.41% of nonperforming loans at June 30, 2026, compared to $42.3 million, or 1.10% of outstanding loans and 305.65% of nonperforming loans at December 31, 2025. At June 30, 2025, the ACL was $41.3 million, or 1.10% of outstanding loans and 362.35% of nonperforming loans. Under the DCF methodology, expected loss rates are evaluated at the individual loan level using contractual cash flows, prepayment assumptions, reasonable and supportable economic forecasts, and other model inputs. Internal risk ratings continue to inform credit risk monitoring, segmentation, and qualitative adjustments, as applicable. The incorporation of the weighted average life of loan into the calculation was a key driver of the change in allocation between our commercial portfolio and our consumer portfolio as the weighted average life of our consumer loans is generally longer than that of our commercial loans, thus driving the changes in the expected loss rate to correlate to the expected life of the loan. As a result, the allocation of the ACL shifted among loan categories, reducing the ACL allotted to the commercial portfolio and increasing the ACL allotted to the consumer portfolio. The following table summarizes the allocation of the allowance for credit losses among the various loan categories. June 30, 2026 December 31, 2025 (dollars in thousands) Amount % (1) Amount % (1) Commercial Owner occupied RE $ 3,359 18.7 % $ 3,911 19.2 % Non-owner occupied RE 5,753 24.0 % 6,773 24.9 % Construction 874 1.6 % 611 1.7 % Business 14,203 17.7 % 12,148 16.0 % Total commercial 24,189 62.0 % 23,443 61.8 % Consumer Real estate 16,596 29.0 % 15,866 30.0 % Home equity 2,516 6.8 % 1,827 6.5 % Construction 343 0.9 % 569 0.6 % Other 588 1.3 % 575 1.1 % Total consumer 20,043 38.0 % 18,837 38.2 % Total allowance for credit losses $ 44,232 100.0 % $ 42,280 100.0 % (1) Percentage of loans in each category to total loans. Deposits and Other Interest-Bearing Liabilities Our primary source of funds for loans and investments is our deposits and advances from the FHLB. In the past, we have chosen to obtain a portion of our certificates of deposits from areas outside of our market in order to obtain longer term deposits than are readily available in our local market. Our internal guidelines regarding the use of brokered CDs limit our brokered CDs to 30% of total deposits, which allows us to take advantage of the attractive terms that wholesale funding can offer while mitigating the related inherent risk. Our retail deposits represented $3.56 billion, or 90.4% of total deposits, while our brokered deposits represented $379.4 million, or 9.6%, of total deposits at June 30, 2026. At December 31, 2025, retail deposits represented $3.16 billion, or 85.1%, of our total deposits, and brokered deposits were $552.9 million, representing 14.9% of our total deposits. The $392.1 million increase in retail deposits during the first six months of 2026 relates to our intense focus on growing client and core deposits and allowed us to reduce the balance of our brokered deposits by $173.5 million during the same period. Our loan-to-deposit ratio was 102% at June 30, 2026 and 103% at December 31, 2025. 39 Table of Contents The following is a detail of our deposit accounts: June 30, December 31, (dollars in thousands) 2026 2025 Non-interest bearing $ 799,246 732,287 Interest bearing: NOW accounts 538,443 423,270 Money market accounts 1,765,697 1,573,039 Savings 29,460 29,470 Time deposits 423,199 405,848 Total retail deposits 3,556,045 3,163,914 Brokered deposits 379,407 552,889 Total deposits $ 3,935,452 3,716,803 Our primary focus is on increasing core deposits, which exclude out-of-market deposits and time deposits of $250,000 or more, in order to provide a relatively stable funding source for our loan portfolio and other earning assets. In addition, at June 30, 2026 and December 31, 2025, we estimate that we have approximately $1.8 billion and $1.5 billion, or 46.8% and 39.6% of total deposits, respectively, in uninsured deposits, including related interest accrued and unpaid. Since it is not reasonably practicable to provide a precise measure of uninsured deposits, the amounts above are estimates and are based on the same methodologies and assumptions used by the FDIC for the Bank’s regulatory reporting requirements. The following table shows the average balance amounts and the average rates paid on deposits. Six months ended June, 2026 2025 (dollars in thousands) Amount Rate Amount Rate Noninterest-bearing demand deposits $ 788,252 0.00 % $ 690,017 0.00 % Interest-bearing demand deposits 500,978 1.14 % 319,328 0.85 % Money market accounts 1,722,807 2.89 % 1,511,760 3.48 % Savings accounts 29,741 0.15 % 31,854 0.31 % Time deposits less than $250,000 173,176 3.22 % 185,203 3.84 % Time deposits greater than $250,000 698,387 4.18 % 751,414 4.52 % Total deposits $ 3,913,341 2.31 % $ 3,489,576 2.77 % During the first six months of 2026, our average transaction account balances increased by $488.8 million, or 19.1%, from the prior year, while our average time deposit balances decreased by $65.1 million, or 7.0%. The increase in our average transaction account balances is the result of our focus on growing core deposits. All of our time deposits are certificates of deposits. The maturity distribution of our time deposits $250,000 or more at June 30, 2026 and December 31, 2025 was as follows: June 30, December 31, (dollars in thousands) 2026 2025 Three months or less $ 242,526 215,650 Over three through six months 215,431 180,050 Over six through twelve months 38,425 271,920 Over twelve months 130,253 110,334 Total time deposits $ 626,635 777,954 Time deposits that meet or exceed the FDIC insurance limit of $250,000 at June 30, 2026 and December 31, 2025 were $626.6 million and $778.0 million, respectively. We have a relationship with IntraFi Promontory Network, allowing us to provide deposit customers with access to aggregate FDIC insurance in amounts exceeding $250,000. 40 Table of Contents This gives us the ability, as and when needed, to attract and retain large deposits from insurance conscious customers. With IntraFi, we have the option to keep deposits on balance sheet or sell them to other members of the network. At June 30, 2026 and December 31, 2025, we had $240.0 million of convertible fixed rate FHLB advances with a weighted average rate of 3.70% and 3.74%, respectively. At June 30, 2026, the $240.0 million was secured with approximately $1.40 billion of mortgage loans and $14.8 million of stock in the FHLB. At December 31, 2025, the $240.0 million was secured with approximately $1.38 billion of mortgage loans and $14.5 million of stock in the FHLB. Listed below is a summary of the terms and maturities of the advances outstanding at June 30, 2026 and December 31, 2025. (dollars in thousands) June 30, 2026 December 31, 2025 Maturity Amount Rate Amount Rate April 28, 2028 $ - - $ 40,000 3.51 % June 28, 2028 40,000 3.54 % 40,000 3.54 % July 10, 2028 40,000 3.87 % 40,000 3.87 % July 10, 2028 40,000 3.96 % 40,000 3.96 % May 15, 2029 35,000 3.90 % 35,000 3.90 % July 10, 2029 45,000 3.69 % 45,000 3.69 % April 28, 2031 40,000 3.26 % - - Total FHLB Advances outstanding $ 240,000 3.70 % $ 240,000 3.74 % Liquidity and Capital Resources Liquidity is our ability to fund operations, to meet depositor withdrawals, to provide for customers’ credit needs, and to meet maturing obligations and existing commitments. Our liquidity principally depends on our cash flows from operating activities, investment in and maturity of assets, changes in balances of deposits and borrowings, and our ability to borrow funds. The several large bank failures across the United States in the first five months of 2023 exemplify the potential serious results of the unexpected inability of insured depository institutions to obtain needed liquidity to satisfy deposit withdrawal requests, including how quickly such requests can accelerate once uninsured depositors lose confidence in an institution’s ability to satisfy its obligations to depositors. We seek to ensure our funding needs are met by maintaining a level of liquidity through asset and liability management. Liquidity management involves monitoring our sources and uses of funds in order to meet our day-to-day cash flow requirements while maximizing profits. Liquidity management is made more complicated because different balance sheet components are subject to varying degrees of management control. For example, the timing of maturities of our investment portfolio is fairly predictable and subject to a high degree of control at the time investment decisions are made. However, net deposit inflows and outflows are far less predictable and are not subject to the same degree of control. At June 30, 2026 and December 31, 2025 our cash and cash equivalents totaled $361.6 million and $269.6 million, respectively, or 7.7% and 6.1% of total assets, respectively. Our investment securities at June 30, 2026 and December 31, 2025 amounted to $164.9 million and $147.8 million, respectively, or 3.5% and 3.4% of total assets, respectively. Investment securities traditionally provide a secondary source of liquidity since they can be converted into cash in a timely manner. Our ability to maintain and expand our deposit base and borrowing capabilities serves as our primary source of liquidity. We plan to meet our future cash needs through the liquidation of temporary investments, the generation of deposits, loan payoffs, and from additional borrowings. In addition, we will receive cash upon the maturity and sale of loans and the maturity of investment securities. We maintain five federal funds purchased lines of credit with correspondent banks totaling $113.5 million for which there were no borrowings against the lines of credit at June 30, 2026. We also had $145.9 million pledged and available with the Federal Reserve Discount Window at June 30, 2026. Comparatively, at December 31, 2025, we had $181.2 million pledged and available with the Federal Reserve Discount Window. 41 Table of Contents We are also a member of the FHLB, from which applications for borrowings can be made. The FHLB requires that securities, qualifying mortgage loans, and stock of the FHLB owned by the Bank be pledged to secure any advances from the FHLB. The unused borrowing capacity currently available from the FHLB at June 30, 2026 was $832.1 million, based primarily on the Bank’s qualifying mortgages available to secure any future borrowings. However, we are able to pledge additional securities to the FHLB in order to increase our available borrowing capacity. In addition, at June 30, 2026 and December 31, 2025 we had $302.4 million and $231.9 million, respectively, of letters of credit outstanding with the FHLB to secure client deposits. We have a relationship with IntraFi Promontory Network, allowing us to provide deposit customers with access to aggregate FDIC insurance in amounts exceeding $250,000. This gives us the ability, as and when needed, to attract and retain large deposits from insurance conscious customers. With IntraFi, we have the option to keep deposits on balance sheet or sell them to other members of the network. Additionally, subject to certain limits, the Bank can use IntraFi to purchase cost-effective funding without collateralization and in lieu of generating funds through traditional brokered CDs or the FHLB. In this manner, IntraFi can provide us with another funding option. Thus, it serves as a deposit-gathering tool and an additional liquidity management tool. Under the Economic Growth, Regulatory Relief, and Consumer Protection Act, a well capitalized bank with a CAMELS rating of 1 or 2 may hold reciprocal deposits up to the lesser of 20% of its total liabilities or $5 billion without those deposits being treated as brokered deposits. We also have a line of credit with another financial institution for $15.0 million, which was unused at June 30, 2026. The line of credit was renewed on March 5, 2026 at an interest rate of the U.S. Prime Rate plus 0.25% and matures on March 5, 2027. We believe that our existing stable base of core deposits, federal funds purchased lines of credit with correspondent banks, availability with the Federal Reserve Discount Window, and borrowings from the FHLB will enable us to successfully meet our long-term liquidity needs. However, as short-term liquidity needs arise, we have the ability to sell a portion of our investment securities portfolio to meet those needs. Total shareholders’ equity was $452.3 million at June 30, 2026 and $368.7 million at December 31, 2025. The $83.6 million increase from December 31, 2025 is primarily related to the issuance of 1,207,500 shares of common stock on April 17, 2026 in a public offering. The common stock was issued at $54.00 per share for net proceeds of $61.3 million. Proceeds from the offering are being used for general corporate purposes, including supporting organic growth initiatives, providing capital to the Bank, repurchasing or redeeming outstanding indebtedness, and funding working capital needs. Consistent with this use, on June 30, 2026, in conjunction with the quarterly interest payment, we applied a portion of these proceeds to redeem the remaining $11.5 million of outstanding subordinated debt. The increase in shareholders’ equity was also driven by net income of $21.1 million for the first half of 2026. The following table shows the return on average assets (net income divided by average total assets), return on average equity (net income divided by average equity), equity to assets ratio (average equity divided by average assets), and tangible common equity ratio (total equity less preferred stock divided by total assets) annualized for the six months ended June 30, 2026 and the year ended December 31, 2025. June 30, 2026 December 31, 2025 Return on average assets 0.94 % 0.72 % Return on average equity 10.46 % 8.73 % Return on average common equity 10.46 % 8.73 % Average equity to average assets ratio 8.94 % 8.20 % Tangible common equity to assets ratio 9.62 % 8.37 % Under the capital adequacy guidelines, regulatory capital is classified into two tiers. These guidelines require an institution to maintain a certain level of Tier 1 and Tier 2 capital to risk-weighted assets. Tier 1 capital consists of common shareholders’ equity, excluding the unrealized gain or loss on securities available for sale, minus certain intangible assets. In determining the amount of risk-weighted assets, all assets, including certain off-balance sheet assets, are multiplied by a risk-weight factor of 0% to 100% based on the risks believed to be inherent in the type 42 Table of Contents of asset. Tier 2 capital consists of Tier 1 capital plus the general reserve for credit losses, subject to certain limitations. We are also required to maintain capital at a minimum level based on total average assets, which is known as the Tier 1 leverage ratio. Regulatory capital rules, which we refer to as Basel III, impose minimum capital requirements for bank holding companies and banks. The Basel III rules apply to all national and state banks and savings associations regardless of size and bank holding companies and savings and loan holding companies other than “small bank holding companies,” generally holding companies with consolidated assets of less than $3 billion. In order to avoid restrictions on capital distributions or discretionary bonus payments to executives, a covered banking organization must maintain a “capital conservation buffer” on top of our minimum risk-based capital requirements. This buffer must consist solely of common equity Tier 1, but the buffer applies to all three measurements (common equity Tier 1, Tier 1 capital and total capital). The capital conservation buffer consists of an additional amount of CET1 equal to 2.5% of risk-weighted assets. To be considered “well capitalized” for purposes of certain rules and prompt corrective action requirements, the Bank must maintain a minimum total risk-based capital ratio of at least 10%, a total Tier 1 capital ratio of at least 8%, a common equity Tier 1 capital ratio of at least 6.5%, and a leverage ratio of at least 5%. As of June 30, 2026 our capital ratios exceed these ratios and we remain “well capitalized.” The following table summarizes the capital amounts and ratios of the Bank and the regulatory minimum requirements. June 30, 2026 Actual For capital adequacy purposes minimum plus the capital conservation buffer To be well capitalized under prompt corrective action provisions minimum (dollars in thousands) Amount Ratio Amount Ratio Amount Ratio Total Capital (to risk weighted assets) $ 461,057 12.84 % $ 287,340 8.00 % $ 359,174 10.00 % Tier 1 Capital (to risk weighted assets) 416,825 11.61 % 215,505 6.00 % 287,340 8.00 % Common Equity Tier 1 Capital (to risk weighted assets) 416,825 11.61 % 161,628 4.50 % 233,463 6.50 % Tier 1 Capital (to average assets) 416,825 8.89 % 187,474 4.00 % 234,343 5.00 % December 31, 2025 Actual For capital adequacy purposes minimum plus the capital conservation buffer To be well capitalized under prompt corrective action provisions minimum (dollars in thousands) Amount Ratio Amount Ratio Amount Ratio Total Capital (to risk weighted assets) $ 437,207 12.85 % $ 272,120 8.00 % $ 340,150 10.00 % Tier 1 Capital (to risk weighted assets) 394,927 11.61 % 204,090 6.00 % 272,120 8.00 % Common Equity Tier 1 Capital (to risk weighted assets) 394,927 11.61 % 153,068 4.50 % 221,098 6.50 % Tier 1 Capital (to average assets) 394,927 9.06 % 174,276 4.00 % 217,845 5.00 % 43 Table of Contents The following table summarizes the capital amounts and ratios of the Company and the minimum regulatory requirements. June 30, 2026 Actual For capital adequacy purposes minimum plus the capital conservation buffer (1) To be well capitalized under prompt corrective action provisions minimum (dollars in thousands) Amount Ratio Amount Ratio Amount Ratio Total Capital (to risk weighted assets) $ 517,872 14.42 % $ 287,338 8.00 % N/A N/A Tier 1 Capital (to risk weighted assets) 473,640 13.19 % 215,503 6.00 % N/A N/A Common Equity Tier 1 Capital (to risk weighted assets) 460,640 12.83 % 161,628 4.50 % N/A N/A Tier 1 Capital (to average assets) 473,640 10.10 % 187,493 4.00 % N/A N/A December 31, 2025 Actual For capital adequacy purposes minimum plus the capital conservation buffer To be well capitalized under prompt corrective action provisions minimum (1) (dollars in thousands) Amount Ratio Amount Ratio Amount Ratio Total Capital (to risk weighted assets) $ 438,292 12.89 % 272,120 8.00 % N/A N/A Tier 1 Capital (to risk weighted assets) 389,112 11.44 % 204,090 6.00 % N/A N/A Common Equity Tier 1 Capital (to risk weighted assets) 376,112 11.06 % 153,068 4.50 % N/A N/A Tier 1 Capital (to average assets) 389,112 8.93 % 174,293 4.00 % N/A N/A (1) The prompt corrective action provisions are only applicable at the Bank level. The Bank exceeded the general minimum regulatory requirements to be considered “well capitalized.” The ability of the Company to pay cash dividends to shareholders is dependent upon receiving cash in the form of dividends from the Bank. The dividends that may be paid by the Bank to the Company are subject to legal limitations and regulatory capital requirements. Since our inception, we have not paid cash dividends to shareholders. Effect of Inflation and Changing Prices The effect of relative purchasing power over time due to inflation has not been taken into account in our consolidated financial statements. Rather, our financial statements have been prepared on a historical cost basis in accordance with generally accepted accounting principles. Unlike most industrial companies, our assets and liabilities are primarily monetary in nature. Therefore, the effect of changes in interest rates will have a more significant impact on our performance than will the effect of changing prices and inflation in general. In addition, interest rates may generally increase as the rate of inflation increases, although not necessarily in the same magnitude. As discussed previously, we seek to manage the relationships between interest sensitive assets and liabilities in order to protect against wide rate fluctuations, including those resulting from inflation. Off-Balance Sheet Risk Commitments to extend credit are agreements to lend money to a client as long as the client has not violated any material condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require the payment of a fee. At June 30, 2026 unfunded commitments to extend credit were $926.5 million, of which $100.5 million were at fixed rates and $826.0 million were at variable rates. At December 31, 2025, unfunded commitments to extend credit were $843.6 million, of which approximately $81.4 million were at fixed rates and $762.2 million were at variable rates. A significant portion of the unfunded commitments related to commercial business loans and consumer home equity lines of credit. We evaluate each client’s credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by us upon extension of credit, is based on our credit evaluation of the borrower. The type of collateral varies but may include accounts receivable, inventory, property, plant and equipment, and commercial and residential real estate. 44 Table of Contents As of June 30, 2026 the reserve for unfunded commitments was $2.2 million or 0.24%, compared to $2.0 million or 0.23% as of December 31, 2025. At June 30, 2026 and December 31, 2025, there were commitments under letters of credit for $20.6 million and $20.4 million, respectively. The credit risk and collateral involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. Since most of the letters of credit are expected to expire without being drawn upon, they do not necessarily represent future cash requirements. Except as disclosed in this report, we are not involved in off-balance sheet contractual relationships, unconsolidated related entities that have off-balance sheet arrangements or transactions that could result in liquidity needs or other commitments that significantly impact earnings. Critical Accounting Estimates We have adopted various accounting policies that govern the application of accounting principles generally accepted in the United States and with general practices within the banking industry in the preparation of our financial statements. Certain accounting policies inherently involve a greater reliance on the use of estimates, assumptions and judgments and, as such, have a greater possibility of producing results that could be materially different than originally reported, which could have a material impact on the carrying values of our assets and liabilities and our results of operations. Of the significant accounting policies used in the preparation of our consolidated financial statements, we have identified certain items as critical accounting policies based on the associated estimates, assumptions, judgments and complexity. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2025, for a description our significant accounting policies that use critical accounting estimates. Accounting, Reporting, and Regulatory Matters See Note 1 – Summary of Significant Accounting Policies in the accompanying notes to consolidated financial statements included elsewhere in this report for details of recently issued accounting pronouncements and their expected impact on our consolidated financial statements. Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption. Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Market risk is the risk of loss from adverse changes in market prices and rates, which principally arises from interest rate risk inherent in our lending, investing, deposit gathering, and borrowing activities. Other types of market risks, such as foreign currency exchange rate risk and commodity price risk, do not generally arise in the normal course of our business. We actively monitor and manage our interest rate risk exposure to seek to control the mix and maturities of our assets and liabilities utilizing a process we call asset/liability management. The essential purposes of asset/liability management are to seek to ensure adequate liquidity and to maintain an appropriate balance between interest sensitive assets and liabilities in order to minimize potentially adverse impacts on earnings from changes in market interest rates. Our asset/liability management committee (“ALCO”) monitors and considers methods of managing exposure to interest rate risk by repricing assets or liabilities, selling securities available for sale, replacing an asset or liability at maturity, by adjusting the interest rate during the life of an asset or liability, or by the use of derivatives such as interest rate swaps and other hedging instruments. Managing the amount of assets and liabilities repricing in the same time interval helps to hedge the risk and minimize the impact on net interest income of rising or falling interest rates. We have both an internal ALCO consisting of senior management that meets no less than quarterly and a board risk committee that meets quarterly, and both committees are responsible for maintaining the level of interest rate sensitivity of our interest sensitive assets and liabilities within board-approved limits. 45 Table of Contents As of June 30, 2026, the following table summarizes the forecasted impact on net interest income using a base case scenario given upward and downward movements in interest rates of 100, 200, and 300 basis points based on forecasted assumptions of prepayment speeds, nominal interest rates and loan and deposit repricing rates. Estimates are based on current economic conditions, historical interest rate cycles and other factors deemed to be relevant. However, underlying assumptions may be impacted in future periods which were not known to management at the time of the issuance of the Consolidated Financial Statements. Therefore, management’s assumptions may or may not prove valid. No assurance can be given that changing economic conditions and other relevant factors impacting our net interest income will not cause actual occurrences to differ from underlying assumptions. In addition, this analysis does not consider any strategic changes to our balance sheet which management may consider as a result of changes in market conditions. Interest rate scenario Change in net interest income from base Up 300 basis points (5.92 )% Up 200 basis points (3.28 )% Up 100 basis points (1.44 )% Base - Down 100 basis points 1.41 % Down 200 basis points 4.51 % Down 300 basis points 7.97 % Item 4. CONTROLS AND PROCEDURES. Evaluation of Disclosure Controls and Procedures Management, including our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this report. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports we file and submit under the Exchange Act is (i) recorded, processed, summarized and reported as and when required and (ii) accumulated and communicated to our management, including our Chief Executive Officer and the Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Changes in Internal Control over Financial Reporting There has been no change in the Company’s internal control over financial reporting during the six months ended June 30, 2026, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. PART II. OTHER INFORMATION Item 1. LEGAL PROCEEDINGS. We are a party to claims and lawsuits arising in the course of normal business activities. Management is not aware of any material pending legal proceedings against the Company which, if determined adversely, would have a material adverse impact on our financial position, results of operations or cash flows. Item 1A. RISK FACTORS. Investing in shares of our common stock involves certain risks, including those identified and described in Item 1A. of our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, as well as cautionary statements contained in this Quarterly Report on Form 10-Q, including those under the caption “Cautionary Warning Regarding Forward-Looking Statements” set forth in Part I, Item 2 of this Form 10-Q, risks and matters described elsewhere in this Form 10-Q, and in our other filings with the SEC. There have been no material changes to the risk factors previously disclosed in the Company’s (i) Annual Report on Form 10-K for fiscal year ended December 31, 2025. 46 Table of Contents Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. (a) Sales of Unregistered Securities – None (b) Use of Proceeds – Not applicable (c) Issuer Purchases of Securities The following table reflects share repurchase activity during the second quarter of 2026: (d) Maximum (c) Total Number (or Number of Approximate Shares (or Dollar Value) of Units) Shares (or (a) Total Purchased as Units) that May Number of Part of Publicly Yet Be Shares (or (b) Average Announced Purchased Units) Price Paid per Plans or Under the Plans Period Purchased Share (or Unit) Programs or Programs April 1, 2026 – April 30, 2026 - - - $ 5,000,000 May 1, 2026 – May 31, 2026 - - - $ 5,000,000 June 1, 2026 – June 30, 2026 - - - $ 5,000,000 Total - - - $ 5,000,000 * On June 17, 2025, we announced a share repurchase plan allowing us to repurchase up to $5.0 million of shares of our common stock (the “Repurchase Plan”). We are not obligated to purchase any such shares under the Repurchase Plan, and the Repurchase Plan may be discontinued, suspended or restarted at any time; however, repurchases under the Repurchase Plan after May 22, 2026 would require additional approval of our Board of Directors and the Federal Reserve. As of June 30, 2026, we did not repurchase any of the shares authorized for repurchase under the Repurchase Plan prior to its expiration. Item 3. DEFAULTS UPON SENIOR SECURITIES. None. Item 4. MINE SAFETY DISCLOSURES. Not applicable. Item 5. OTHER INFORMATION. Trading Plans During the three months ended June 30, 2026, no director or “officer” of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408 of Regulation S-K of the Securities Act of 1933. Item 6. EXHIBITS. The exhibits required to be filed as part of this Quarterly Report on Form 10-Q are listed in the Index to Exhibits attached hereto and are incorporated herein by reference. 47 Table of Contents INDEX TO EXHIBITS Exhibit Number Description 31.1 Rule 13a-14(a) Certification of the Principal Executive Officer. 31.2 Rule 13a-14(a) Certification of the Principal Financial Officer. 32 Section 1350 Certifications. 101 The following materials from the Quarterly Report on Form 10-Q of Southern First Bancshares, Inc. for the quarter ended June 30, 2026, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statement of Changes in Shareholders’ Equity, (v) Consolidated Statements of Cash Flows and (vi) Notes to Unaudited Consolidated Financial Statements. 104 Cover Page Interactive Data File (embedded within the Inline XBRL document) 48 Table of Contents SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SOUTHERN FIRST BANCSHARES, INC. Registrant Date: August 3, 2026 /s/ R. Arthur Seaver, Jr. R. Arthur Seaver, Jr. Chief Executive Officer (Principal Executive Officer) Date: August 3, 2026 /s/ Christian J. Zych Christian J. Zych Chief Financial Officer (Principal Financial Officer) 49