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Item 2. Management’s Discussion and Analysis

2025-08-07 compared with 2025-05-08 · 337 added, 176 removed, 522 unchanged (50% of the section changed)

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While there is no assurance that any list of risks and uncertainties or risk factors is complete, below are certain factors which could cause actual results to differ materially from those contained or implied in the forward-looking statements:

• general economic conditions, (including the interest rate environment, government economic and monetary policies, the strength of global financial markets and inflation/deflation and supply chain issues), whether national or regional, and conditions in the lending markets in which we participate that may have an adverse effect on the demand for our loans and other products, our credit quality and related levels of nonperforming assets and loan losses, and the value and salability of the real estate that we own or that is the collateral for our loans;

• adverse developments in the banking industry highlighted by high-profile bank failures and the potential impact of such developments on customer confidence, liquidity, and regulatory responses to these developments;

• the strength of the United States (“U.S.”) economy and general economic conditions, (including the interest rate environment, government economic and monetary policies, the strength of global financial markets and inflation/deflation and supply chain issues), whether national or regional, and conditions in the lending markets in which we participate that may have an adverse effect on the demand for our loans and other products, our credit quality and related levels of nonperforming assets and loan losses, and the value and salability of the real estate that we own or that is the collateral for our loans;

• the ability to effectively manage the information technology systems, including third-party vendors, cyber or data privacy incidents or other failures, disruptions or security breaches, and risk related to the development and use of artificial intelligence;

• the ability to develop and use technologies to provide products and services that will satisfy customer demands;

• results of examinations of us by our regulators, including the possibility that our regulators may, among other things, require us to increase our allowance for credit losses or to write-down assets;

• results of examinations of us by our regulators, including the possibility that our regulators may, among other things, require us to increase our reserve for loan losses or to write-down assets;

• changing bank regulatory conditions, policies or programs, whether arising as new legislation or regulatory initiatives, which could lead to restrictions on activities of banks generally, or our subsidiary bank in particular, more restrictive regulatory capital requirements, increased costs, including deposit insurance premiums, regulation or prohibition of certain income producing activities or changes in the secondary market for loans and other products;

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• the effect of any change in federal government enforcement of federal laws affecting the cannabis industry;

• the effect of changes in accounting policies and practices, as may be adopted by the Financial Accounting Standards Board (the “FASB”), the Securities and Exchange Commission (the “SEC”), the Public Company Accounting Oversight Board and other regulatory agencies;

• the effect of changes in accounting policies and practices, as may be adopted by the Financial Accounting Standards Board, the U.S.

Securities and Exchange Commission (the “SEC”), the Public Company Accounting Oversight Board and other regulatory agencies;

• changes in U.S.

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financial regulatory system;

• a deterioration of the credit rating for U.S.

long-term sovereign debt, actions that the U.S.

government may take to avoid exceeding the debt ceiling, and uncertainties surrounding the debt ceiling and the federal budget;

• the impact of recent or future changes in Federal Deposit Insurance Corporation (the “FDIC”) insurance assessment rate or the rules and regulations related to the calculation of the FDIC insurance assessment amount, including any special assessments;

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• geopolitical conditions, including acts or threats of terrorism, actions taken by the United States or other governments in response to acts of terrorism, and/or military conflicts, which could impact business and economic conditions in the United States and abroad;

• and other factors that may affect our future results.

Additional factors that could cause actual results to differ materially from those expressed in the forward-looking statements are discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 (the “2024 Annual Report”) filed with SEC and available at the SEC’s website (www.sec.gov).

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(the “Bank”).

The Bank currently operates 40 full-service branches in Anne Arundel County, Baltimore County, Charles County, Calvert County, St.

Mary’s County, Howard County, Kent County, Queen Anne’s County, Caroline County, Talbot County, Dorchester County and Worcester County in Maryland, Kent and Sussex County in Delaware, and in Accomack County, Stafford County, Spotsylvania County, and Fredericksburg city in Virginia.

The Bank currently operates 40 full-service branches in Maryland, Delaware and Virginia.

The Company, through Wye Financial Partners, a division of the Bank, offers full-service investment, insurance and financial planning services through our broker/dealer, LPL Financial.

The Company, through Wye Trust, a division of the Bank, offers wealth management, corporate trustee services and trust administration to customers within our market areas and nationwide.

The Company offers title services through its wholly-owned subsidiary, Mid-Maryland Title Company, Inc.

(the “Title Company”), which engages in residential and commercial real estate settlement activities and offers title insurance policies, title search and lien satisfaction services.

The Company offered title services through its wholly-owned subsidiary, Mid-Maryland Title Company, Inc.

(the “Title Company”), which engaged in residential and commercial real estate settlement activities and offered title insurance policies, title search and lien satisfaction services.

The Title Company ceased conducting real estate closings effective March 31, 2025.

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of the 2024 Annual Report for additional details concerning the determination of the ACL on loans.

The Company’s net income for the first quarter of 2025 was $13.8 million, or $0.41 per diluted common share, compared to $13.3 million, or $0.40 per diluted common share, for the fourth quarter of 2024.

The Company had net income of $8.2 million, or $0.25 per diluted common share, for the first quarter of 2024.

First Quarter 2025 Highlights

• Improved Return on Average Assets (“ROAA”) – The Company reported ROAA of 0.91% for the first quarter of 2025, compared to 0.86% for the fourth quarter of 2024 and 0.57% for the first quarter of 2024.

generally accepted accounting principles (“GAAP”) ROAA (1) was 1.02% for the first quarter of 2025, compared to 0.94% for the fourth quarter of 2024 and first quarter of 2024.

• Increased Net Interest Income (“NII”) and Net Interest Margin (“NIM”) – NII for the first quarter of 2025 increased $2.0 million to $46.0 million from $44.0 million for the fourth quarter of 2024.

NIM increased 21 basis points (“bps”) to 3.24% during the first quarter of 2025 from 3.03% in the fourth quarter of 2024.

NIM, excluding net accretion income (“core NIM”) increased from 2.85% to 3.02%.

Excluding accretion interest, loan yields increased 17 bps and funding costs decreased 10 bps, for the comparable periods.

Interest expense for the first quarter of 2025 decreased $2.4 million when compared to the fourth quarter of 2024.

All products repriced at favorable rates, and were partially offset by the seasonal run off of municipal deposits.

NII and NIM were $41.1 million and 3.08%, respectively, for the first quarter of 2024.

• Net Income Growth – Net income for the first quarter of 2025 increased $482 thousand to $13.8 million, from $13.3 million in the fourth quarter of 2024.

Net income increased due primarily to higher net interest income, which was partially offset by lower non-interest income due to lower mortgage banking activity and the absence of the one-time gain on sale of other assets in the fourth quarter of 2024.

Net income for the first quarter of 2024 was $8.2 million.

• Stable Asset Quality – Nonperforming assets to total assets were 0.31% for the first quarter of 2025, a decrease from 0.40% for the fourth quarter of 2024 and an increase from 0.28% for the first quarter of 2024.

Classified assets to total assets were 0.36% in the first quarter of 2025, a decrease when compared to 0.45% for the fourth quarter of 2024 and an increase when compared to 0.26% for the first quarter of 2024.

The allowance for credit losses (“ACL”) was $58.0 million at March 31, 2025 compared to $57.9 million at December 31, 2024 and $57.3 million at March 31, 2024.

The ACL as a percentage of loans remained flat at 1.21% at March 31, 2025, compared to December 31, 2024 and decreased compared to 1.23% at March 31, 2024.

• Improved Operating Leverage – The efficiency ratio for the first quarter of 2025 was 63.64% when compared to 64.21% in the fourth quarter of 2024 and 76.93% for the first quarter of 2024.

The non-GAAP efficiency ratio (1) , which excludes amortization, was 59.25% for the first quarter of 2025, compared to 60.28% for the fourth quarter of 2024 and 62.37% for the first quarter of 2024.

The Company’s net income for the second quarter of 2025 was $15.5 million, or $0.46 per diluted common share, compared to $13.8 million, or $0.41 per diluted common share, for the first quarter of 2025.

The Company had net income of $11.2 million, or $0.34 per diluted common share, for the second quarter of 2024.

Second Quarter 2025 Highlights

• Net Income Growth – Net income for the second quarter of 2025 increased $1.7 million to $15.5 million, from $13.8 million in the first quarter of 2025.

Net income increased primarily due to higher net interest income (“NII”) and noninterest income driven by higher mortgage banking activity, partially offset by higher noninterest expense.

Net income for the first half of 2025 was $29.3 million, compared to $19.4 million for the first half of 2024.

• Improved Return on Average Assets (“ROAA”) – The Company reported ROAA of 1.03% for the second quarter of 2025, compared to 0.91% for the first quarter of 2025 and 0.77% for the second quarter of 2024.

generally accepted accounting principles (“GAAP”) ROAA (1) was 1.15% for the second quarter of 2025, compared to 1.02% for the first quarter of 2025 and 0.91% for the second quarter of 2024.

• Net Interest Margin (“NIM”) Expansion – Net interest income for the second quarter of 2025 increased $1.2 million to $47.3 million from $46.0 million for the first quarter of 2025.

NIM increased 11 basis points (“bps”) to 3.35% during the second quarter of 2025 from 3.24% in the first quarter of 2025.

NIM excluding accretion (1) increased for the comparable periods from 3.02% to 3.10%.

Exc luding accretion interest, loan yields increased 2 bps and funding costs decreased 4 bps for the comparable periods.

Net interest income increased due to modest loan growth, slightly higher accelerated accretion income, and loan and securities repricing, coupled with lower cost of deposits during the period.

• Book Value per Share Growth – Book value per share increased to $16.94 at June 30, 2025 from $16.55 at March 31, 2025 and $15.74 at June 30, 2024 .

• Stable Asset Quality – Nonperforming assets to total assets were 0.33% for the second quarter of 2025, an increase from 0.31% for the first quarter of 2025 and 0.29% for the second quarter of 2024.

Classified assets to total assets were 0.37% in the second quarter of 2025, an increase when compared to 0.36% for the first quarter of 2025 and 0.33% for the second quarter of 2024.

The allowance for credit losses (“ACL”) was $58.5 million at June 30, 2025, compared to $57.9 million at December 31, 2024 and $58.5 million at June 30, 2024.

The ACL as a percentage of loans remained flat at 1.21% at June 30, 2025 compared to December 31, 2024, and decreased compared to 1.24% at June 30, 2024.

• Improved Operating Leverage – The efficiency ratio for the second quarter of 2025 was 60.83% compared to 63.64% in the first quarter of 2025 and 66.23% for the second quarter of 2024.

The non-GAAP efficiency ratio (1) , which excludes amortization, was 56.73% for the second quarter of 2025, compared to 59.25% for the first quarter of 2025 and 61.05% for the second quarter of 2024.

Management anticipates ongoing expense management and technology investments will result in continued improvements in operating leverage over time.

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(1) See the Reconciliation of GAAP and non-GAAP Measures tables.

SUMMARY OF OPERATING RESULTS

A comparison of the results of operations for the three months ended March 31, 2025 and 2024 is presented below.

Three Months Ended March 31,

A comparison of the results of operations for the three and six months ended June 30, 2025 and 2024 is presented below.

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

($ in thousands) 2025 2024 2025 2024

OPERATING DATA

Interest income $ 76,063 $ 71,139

Interest expense 30,034 30,004

Total interest income $ 76,620 $ 73,106 $ 152,684 $ 144,245

Total interest expense 29,368 30,966 59,403 60,970

Net interest income 47,252 42,140 93,281 83,275

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NII after provision for credit losses 45,724 40,059 90,725 80,787

Noninterest income 7,003 6,567

Noninterest expense 33,747 36,698

Total noninterest income 9,318 8,440 16,320 15,007

Total noninterest expense 34,410 33,499 68,157 70,197

Income before income taxes 20,632 15,000 38,888 25,597

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Net income $ 15,507 $ 11,234 $ 29,271 $ 19,418

Three Months Ended March 31,

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

2025 2024 2025 2024

KEY OPERATING RATIOS

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Return on average tangible common equity (“ROATCE”) non-GAAP (1)

13.50 10.97 13.01 9.55

Average total equity to average total assets 9.28 8.90 9.11 8.92

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Net interest margin 3.35 3.11 3.30 3.09

Efficiency ratio (2)

Efficiency ratio – GAAP (2)

60.83 66.23 62.19 71.42

Noninterest income to average assets 0.62 0.58 0.54 0.52

Noninterest expense to average assets 2.29 2.31 2.26 2.43

Net operating expense to average assets (3)

Net operating expense to average assets – GAAP (3)

1.67 1.73 1.72 1.91

COMMON SHARE DATA

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(3) Net operating expense is the sum of noninterest expense offset by noninterest income.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2025 AND 2024

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2025 AND 2024

Summary of Financial Results

The Company reported net income for the three months ended March 31, 2025 of $13.8 million, or $0.41 diluted earnings per common share, compared to $8.2 million, or diluted earnings per common share of $0.25, for the three months ended March 31, 2024.

The Company’s ROAA, ROACE and ROATCE were 0.91%, 10.20% and 14.05%, respectively, for the three months ended March 31, 2025, compared to 0.57%, 6.38% and 13.39%, respectively, for the three months ended March 31, 2024.

The Company reported net income for the three months ended June 30, 2025 of $15.5 million, or $0.46 diluted earnings per common share, compared to $11.2 million, or diluted earnings per common share of $0.34, for the three months ended June 30, 2024.

The Company’s ROAA, non-GAAP ROAA, ROACE and ROATCE were 1.03%, 1.15%, 11.13% and 13.50%, respectively, for the three months ended June 30, 2025, compared to 0.77%, 0.91%, 8.70% and 10.97%, respectively, for the three months ended June 30, 2024.

The following table presents selected consolidated statement of operations data for each of the periods indicated.

Three Months Ended March 31,

Three Months Ended June 30,

($ in thousands) 2025 2024 $ Change % Change

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Tax-equivalent NII is NII adjusted for the tax-favored status of income from certain loans and investments.

As shown in the table below, tax-equivalent NII was $46.1 million for the first quarter of 2025 and $41.2 million for the first quarter of 2024.

The increase was primarily due to increases in interest and fees on loans of $1.9 million, interest on deposits at other banks of $2.4 million and interest on investment securities of $582 thousand.

Three Months Ended March 31,

As shown in the table below, tax-equivalent NII was $47.3 million for the second quarter of 2025 and $42.2 million for the second quarter of 2024.

The increase was primarily due to increases in interest and fees on loans of $2.4 million and interest on deposits at other banks of $1.0 million, as well as a decrease in interest expense on short-term borrowings of $1.0 million.

Three Months Ended June 30,

($ in thousands) 2025 2024 $ Change % Change

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Average Balances and Yields

The following table presents the distribution of the average consolidated balance sheets, interest income/expense, and annualized yields earned and rates paid for the three months ended March 31, 2025 and 2024.

Three Months Ended March 31,

($ in thousands) Average Balance Interest (1), (4)

Yield/Rate Average Balance Interest (1), (4)

The following table presents the distribution of the average consolidated balance sheets, interest income, interest expense and annualized yields earned and rates paid for the three months ended June 30, 2025 and 2024.

Three Months Ended June 30,

($ in thousands) Average Balance Interest Yield/Rate Average Balance Interest Yield/Rate

Earning assets

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Consumer 298,544 4,036 5.42 330,819 4,265 5.19

Credit cards 6,686 86 5.22 7,457 167 9.01

Credit card 6,122 121 7.93 8,378 201 9.65

Total loans 4,833,558 69,774 5.79 4,706,510 67,372 5.76

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Tax-exempt (1)

652 8 4.91 658 8 4.86

Interest-bearing deposits 143,171 1,588 4.45 47,372 578 4.91

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Interest-bearing checking $ 720,967 $ 5,697 3.17 % $ 711,138 $ 5,550 3.14 %

Money market and savings 1,799,707 10,015 2.26 1,669,074 10,160 2.45

Money market and savings deposits 1,747,854 9,580 2.20 1,690,157 10,291 2.45

Time deposits 1,258,802 12,000 3.82 1,175,542 11,650 3.99

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Interest-bearing deposits (4)

3,737,343 27,369 2.94 3,584,590 27,585 3.10

FHLB advances 50,000 605 4.85 143,769 1,930 5.40

Subordinated debt and Guaranteed preferred beneficial interest in junior subordinated debentures (“TRUPS”) (4)

74,102 1,394 7.55 72,680 1,451 8.03

Total interest-bearing liabilities 3,861,445 29,368 3.05 3,801,039 30,966 3.28

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Net interest margin 3.35 3.11

Net interest margin excluding accretion (3)

Cost of funds 2.17 2.36

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(3) Interest income on loans includes accreted loan fees, net of costs and accretion of discounts on acquired loans, which are included in the yield calculations.

There were $3.7 million and $4.2 million of accretion interest on loans for the three months ended March 31, 2025 and 2024, respectively.

(4) Interest expense on deposits and borrowing includes amortization of deposit premiums and amortization of borrowing fair value adjustment.

There were $334 thousand and $367 thousand of amortization of deposits premium, and $232 thousand and $220 thousand of amortization of borrowing fair value adjustment for the three months ended March 31, 2025 and 2024, respectively.

There were $4.2 million and $4.5 million of accretion interest on loans for the three months ended June 30, 2025 and 2024, respectively.

(4) Interest expense on deposits and borrowings includes amortization of deposit discounts and amortization of borrowing fair value adjustments.

There were $435 thousand and $421 thousand of amortization of deposit discounts, and $232 thousand and $243 thousand of amortization of borrowing fair value adjustments for the three months ended June 30, 2025 and 2024, respectively.

Rate and Volume Analysis

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Changes in rate-volume (changes in rate multiplied by the change in volume) have been allocated to changes due to volume.

Three Months Ended March 31, 2025 Compared to the Three Months Ended March 31, 2024

Three Months Ended June 30, 2025 Compared to the Three Months Ended June 30, 2024

($ in thousands) Volume Due to Rate Total

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Time deposits 848 (498) 350

Brokered deposits 19 (21) (2)

Advances from FHLB (1,128) (197) (1,325)

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Interest rates earned and paid are affected by general economic conditions, particularly changes in market interest rates, and by competitive factors, government policies and actions of regulatory authorities.

NII was $46.0 million for the first quarter of 2025, compared to $41.1 million for the first quarter of 2024.

The increase was primarily due to increases in interest and fees on loans of $1.9 million , interest on deposits at other banks of $2.4 million and interest on investment securities of $582 thousand.

The Company’s NIM increased to 3.24% for the first quarter of 2025 from 3.08% for the first quarter of 2024.

Comparing the first quarter of 2025 to the first quarter of 2024, the Company’s interest-earning asset yields remained flat at 5.35% while the cost of funds repriced at a faster pace resulting in a decrease of 11 basis points to 2.20% from 2.31% for the same period.

NII was $47.3 million for the second quarter of 2025, compared to $42.1 million for the second quarter of 2024.

The Company’s NIM increased to 3.35% for the second quarter of 2025 from 3.11% for the second quarter of 2024.

Comparing the second quarter of 2025 to the second quarter of 2024, the Company’s interest-earning asset yields increased to 5.44% from 5.39%, while the cost of funds repriced at a faster pace, which resulted in a decrease of 19 bps basis points, from 2.36% to 2.17% for the same period.

Provision for Credit Losses (“PCL”) and ACL

See discussion of the Bank’s PCL and ACL in the asset quality discussion in the analysis of financial condition in this management’s discussion and analysis of financial condition and results of operations.

Refer to the discussion of the Bank’s PCL and ACL in the asset quality discussion in the analysis of financial condition in this management’s discussion and analysis of financial condition and results of operations.

Noninterest Income

Total noninterest income for the first quarter of 2025 was $7.0 million, an increase of $436 thousand from $6.6 million for the first quarter of 2024.

Total noninterest income for the second quarter of 2025 was $9.3 million, an increase of $878 thousand from $8.4 million for the second quarter of 2024.

The increase was primarily due to an increase in mortgage banking activity, driven by increased mortgage servicing activity and lower prepayment rates.

Noninterest Expense

Total noninterest expense of $33.7 million for the first quarter of 2025 decreased $3.0 million when compared to the first quarter of 2024 total noninterest expense of $36.7 million.

The decrease in total noninterest expense from the first quarter of 2024 was primarily due to the absence of the fraud losses incurred in connection with the credit card fraud incident in the first quarter of 2024 partially offset by higher salaries and benefits expense and software and data processing costs.

The Company reported income tax expense of $4.5 million and $2.4 million for the three months ended March 31, 2025 and 2024, respectively.

The effective tax rate for the first quarter of 2025 and 2024 was 24.6% and 22.8%, respectively.

Total noninterest expense of $34.4 million for the second quarter of 2025 increased $911 thousand when compared to the second quarter of 2024 total noninterest expense of $33.5 million.

The increase in total noninterest expense from the second quarter of 2024 was primarily due to higher salaries and benefits expense and software and data processing costs, partially offset by lower operating expenses in the second quarter of 2025.

The Company reported income tax expense of $5.1 million and $3.8 million for the three months ended June 30, 2025 and 2024, respectively.

The effective tax rate for the second quarter of 2025 and 2024 was 24.8% and 25.1%, respectively.

RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2025 AND 2024

Summary of Financial Results

The Company reported net income for the six months ended June 30, 2025 of $29.3 million, or $0.88 diluted earnings per common share, compared to $19.4 million, or diluted earnings per share of $0.58, for the six months ended June 30, 2024.

The Company’s ROAA, non-GAAP ROAA, ROACE and ROATCE were 0.97%, 1.09%, 10.67% and 13.01%, respectively, for the six months ended June 30, 2025, compared to 0.67%, 0.92%, 7.54% and 9.55%, respectively, for the six months ended June 30, 2024.

The following table presents selected consolidated statement of operations data for each of the periods indicated.

Six Months Ended June 30,

($ in thousands) 2025 2024 $ Change % Change

Interest and dividend income $ 152,684 $ 144,245 $ 8,439 5.9 %

Interest expense 59,403 60,970 (1,567) (2.6)

Net interest income 93,281 83,275 10,006 12.0

Provision for credit losses 2,556 2,488 68 2.7

Noninterest income 16,320 15,007 1,313 8.7

Noninterest expense 68,157 70,197 (2,040) (2.9)

Income before income taxes 38,888 25,597 13,291 51.9

Income tax expense 9,617 6,179 3,438 55.6

Net income $ 29,271 $ 19,418 $ 9,853 50.7

Net Interest Income

As shown in the table below, tax-equivalent net interest income increased $10.0 million to $93.4 million for the six months ended June 30, 2025, compared to $83.4 million for the six months ended June 30, 2024.

The increase in net interest income was primarily due to an increase in total interest income of $8.4 million, or 5.9%, which included an increase in interest and fees on loans of $4.3 million, or 3.2%, and an increase in interest on deposits with other banks of $3.5 million, or 224.9%.

The increase in interest and fees on loans was primarily due to the increase in the average balance of loans of $128.6 million, or 2.7%.

The decrease in total interest expense was primarily due to a decrease in interest on deposits of $641 thousand, a decrease in interest expense on long-term borrowings of $488 thousand and a decrease in interest expense on short-term borrowings of $438 thousand.

The decreases in borrowings were related to lower FHLB advances in 2025.

Six Months Ended June 30,

($ in thousands) 2025 2024 $ Change % Change

Interest and dividend income

Loans, including fees $ 137,343 $ 133,045 $ 4,298 3.2 %

Interest and dividends on investment securities

10,344 9,662 682 7.1

Interest on deposits with banks 4,997 1,538 3,459 224.9

Total interest and dividend income $ 152,684 $ 144,245 $ 8,439 5.9

Interest expense

Deposits $ 55,440 $ 56,081 $ (641) (1.1) %

Short-term borrowings 1,203 1,641 (438) (26.7)

Long-term debt 2,760 3,248 (488) (15.0)

Total Interest Expense $ 59,403 $ 60,970 $ (1,567) (2.6)

Taxable-equivalent adjustment $ 161 $ 161 $ — — %

Tax-equivalent net interest income $ 93,442 $ 83,436 $ 10,006 12.0 %

Average Balances and Yields

Six Months Ended June 30,

($ in thousands) Average Balance Interest Yield/ Rate Average Balance Interest Yield/ Rate

Earning assets

Loans (1), (2), (3)

Commercial real estate $ 2,557,316 $ 73,167 5.77 % $ 2,520,796 $ 71,743 5.72 %

Residential real estate 1,363,076 37,448 5.54 1,291,225 35,179 5.48

Construction 352,564 11,222 6.42 309,661 9,306 6.04

Commercial 228,535 7,363 6.50 220,248 8,070 7.37

Consumer 301,515 8,094 5.41 330,998 8,537 5.19

Credit card 6,403 207 6.52 7,918 368 9.35

Total loans 4,809,409 137,501 5.77 4,680,846 133,203 5.72

Investment securities

Taxable 673,567 10,332 3.07 680,042 9,650 2.84

Tax-exempt (1)

653 15 4.59 659 15 4.55

Interest-bearing deposits 228,488 4,997 4.41 62,324 1,538 4.96

Total earning assets 5,712,117 $ 152,845 5.40 5,423,871 $ 144,406 5.35

Cash and due from banks 46,912 47,320

Other assets 374,641 393,439

Allowance for credit losses (58,331) (57,554)

Total assets $ 6,075,339 $ 5,807,076

Interest-bearing liabilities

Interest-bearing checking $ 789,949 $ 12,722 3.25 % $ 910,831 $ 11,911 2.63 %

Money market and savings deposits 1,773,637 19,595 2.23 1,679,615 20,451 2.45

Time deposits 1,233,666 23,031 3.76 1,177,557 23,374 3.99

Brokered deposits 4,888 92 3.80 14,107 345 4.92

Interest-bearing deposits (4)

3,802,140 55,440 2.94 3,782,110 56,081 2.98

FHLB advances 50,000 1,203 4.85 73,885 1,987 5.41

Subordinated debt and Guaranteed preferred beneficial interest in junior subordinated debentures (“TRUPS”) (4)

73,971 2,760 7.52 72,549 2,902 8.04

Total interest-bearing liabilities 3,926,111 59,403 3.05 3,928,544 60,970 3.12

Noninterest-bearing deposits 1,555,405 1,321,705

Accrued expenses and other liabilities 40,594 39,100

Stockholders’ equity 553,229 517,727

Total liabilities and stockholders’ equity $ 6,075,339 $ 5,807,076

Net interest income $ 93,442 $ 83,436

Net interest spread 2.35 % 2.23 %

Net interest margin 3.30 3.09

Net interest margin excluding accretion (3)

Cost of funds 2.19 2.34

Cost of deposits 2.09 2.21

Cost of debt 6.45 6.71

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(1) All amounts are reported on a tax-equivalent basis computed using the statutory federal income tax rate of 21.0%, exclusive of nondeductible interest expense.

(2) Average loan balances include nonaccrual loans.

(3) Interest income on loans includes accreted loan fees, net of costs and accretion of discounts on acquired loans, which are included in the yield calculations.

There were $8.0 million and $8.7 million of accretion interest on loans for the six months ended June 30, 2025 and 2024, respectively.

(4) Interest expense on deposits and borrowings includes amortization of deposit discounts and amortization of borrowing fair value adjustments.

There were $769 thousand and $788 thousand of amortization of deposit discounts, and $463 thousand and $463 thousand of amortization of borrowing fair value adjustments for the six months ended June 30, 2025 and 2024, respectively.

Rate and Volume Analysis

The following table presents changes in volume and rate related to interest income and interest expense for the periods indicated.

Six Months Ended June 30, 2025 Compared to the Six Months Ended June 30, 2024

($ in thousands) Volume Due to Rate Total

Interest income from earning assets:

Commercial real estate $ 799 $ 625 $ 1,424

Residential real estate 1,885 384 2,269

Construction 1,332 584 1,916

Commercial 243 (950) (707)

Consumer (804) 361 (443)

Credit cards (50) (111) (161)

Taxable investment securities (479) 1,161 682

Interest-bearing deposits 2,683 776 3,459

Total interest income $ 5,609 $ 2,830 $ 8,439

Interest-bearing liabilities:

Interest-bearing checking deposits $ (1,989) $ 2,800 $ 811

Money market and savings deposits 976 (1,832) (856)

Time deposits 1,000 (1,343) (343)

Brokered deposits (175) (78) (253)

Advances from FHLB (579) (205) (784)

Subordinated debt 45 (187) (142)

Total interest-bearing liabilities (722) (845) (1,567)

Net change in net interest income $ 6,331 $ 3,675 $ 10,006

The Company’s NIM increased from 3.09% for the six months ended June 30, 2024 to 3.30% for the six months ended June 30, 2025.

Margins were higher due to a $288.2 million increase in interest-earning asset balances and a 5 basis point increase in interest-earning asset yields.

These positive movements were coupled with lower cost interest-bearing deposits.

The increase in the average balances of interest-bearing deposits of $20.0 million was offset by a 4 basis point decrease in the associated rates paid, as well as a $23.9 million decrease in the average balance of FHLB advances and a 56 basis point decrease in the associated rates paid.

Net accretion income impacted net interest margin by 24 basis points and 27 basis points for the six months ended June 30, 2025 and 2024, respectively, which resulted in NIMs excluding accretion of 3.06% and 2.82% for the same periods.

Provision for Credit Losses and ACL

Noninterest Income

Total noninterest income for the six months ended June 30, 2025 was $16.3 million, an increase of $1.3 million, or 8.8%, when compared to the same period in 2024.

The increase was primarily due to higher gains on sales of loans held for sale of $453 thousand, mortgage banking revenue of $383 thousand and other noninterest income of $249 thousand.

Noninterest Expense

Total noninterest expense was $68.2 million for the six months ended June 30, 2025, a decrease of $2.0 million, or 2.9%, when compared to the same period in 2024.

Noninterest expense decreased primarily due to the absence of the $4.3 million credit card fraud event during the six months ended June 30, 2024, which was partially offset by higher salaries and employee benefit expenses of $1.3 million and an increase of $1.3 million in software and data processing expense in the six months ended June 30, 2025.

The Company reported income tax expense of $9.6 million and $6.2 million for the six months ended June 30, 2025 and 2024, respectively.

The effective tax rate was 24.73% for the six months ended June 30, 2025 and 24.14% for the six months ended June 30, 2024.

The 2024 effective tax rate was impacted by nondeductible merger costs incurred.

Liquidity is our ability to meet cash demands as they arise.

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We derive liquidity through increased customer deposits, non-reinvestment of the cash flow from the investment portfolio, loan repayments, borrowings and income from earning assets.

As seen in the consolidated statements of cash flows, the net decrease in cash and cash equivalents was $70.8 million for the first three months of 2025, compared to a net decrease of $257.9 million for the first three months of 2024.

The decrease in cash and cash equivalents in the first three months of 2025 was mainly due to the decrease of $70.5 million in interest-bearing deposits, partially offset by an increase of $2.2 million in noninterest-bearing deposits.

As seen in the consolidated statements of cash flows, the net decrease in cash and cash equivalents was $274.9 million for the first six months of 2025, compared to a net decrease of $233.5 million for the first six months of 2024.

The decrease in cash and cash equivalents in the first six months of 2025 was mainly due to the decrease of $227.5 million in interest-bearing deposits, partially offset by an increase of $12.3 million in noninterest-bearing deposits.

To the extent that deposits are not adequate to fund customer loan demand, liquidity needs can be met in the short-term fund markets.

At March 31, 2025, the Bank had approximately $1.35 billion of available liquidity, including $389.0 million in cash and cash equivalents, $319.0 million in unpledged securities, $729.5 million in secured borrowing capacity at the FHLB of Atlanta, partially offset by FHLB advances and a letter of credit of $50.0 million and $39.1 million, respectively.

At June 30, 2025, the Bank had approximately $1.16 billion of available liquidity, including $185.0 million in cash and cash equivalents, $316.5 million in unpledged securities and $740.7 million in secured borrowing capacity at the FHLB of Atlanta, partially offset by FHLB advances and a letter of credit of $50.0 million and $33.1 million, respectively.

The Bank has arrangements with other correspondent banks whereby it has $95.0 million available in federal funds lines of credit and a reverse repurchase agreement available to meet any short-term needs which may not otherwise be funded by the Bank’s portfolio of readily marketable investments that can be converted to cash.

Through the FHLB, the Bank had available lendable collateral of approximately $729.5 million and $743.6 million at March 31, 2025 and December 31, 2024, respectively.

Through the FHLB, the Bank had available lendable collateral of approximately $740.7 million and $743.6 million at June 30, 2025 and December 31, 2024, respectively.

The Bank has pledged, under a blanket lien, all qualifying residential and commercial real estate loans under borrowing agreements with the FHLB of Atlanta.

The following table presents the Company’s liquidity in use and liquidity available as of March 31, 2025.

March 31, 2025

The following table presents the Company’s liquidity in use and liquidity available as of June 30, 2025.

June 30, 2025

($ in thousands) Liquidity in Use Liquidity Available

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The Bank and Company are also required to maintain capital at a minimum level based on quarterly average assets, which is known as the leverage ratio.

The Bank was deemed “well-capitalized” under applicable regulatory capital requirements at March 31, 2025.

The Bank was deemed “well-capitalized” under applicable regulatory capital requirements at June 30, 2025.

The Company evaluates capital resources by the ability to maintain adequate regulatory capital ratios.

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The final rule currently applies to all depository institutions and bank holding companies and savings and loan holding companies with total consolidated assets of more than $3 billion.

As of March 31, 2025, the Bank and the Company were in compliance with all applicable regulatory capital requirements to which they were subject, and the Bank was classified as “well-capitalized” for purposes of the prompt corrective action regulations.

The following tables present the applicable capital ratios for the Company and the Bank as of March 31, 2025 and December 31, 2024.

March 31, 2025 Tier 1 Leverage Ratio Common Equity Tier 1 Ratio Tier 1 Risk-Based Capital Ratio Total Risk-Based Capital Ratio

As of June 30, 2025, the Bank and the Company were in compliance with all applicable regulatory capital requirements to which they were subject, and the Bank was classified as “well-capitalized” for purposes of the prompt corrective action regulations.

The following tables present the applicable capital ratios for the Company and the Bank as of June 30, 2025 and December 31, 2024.

June 30, 2025 Tier 1 Leverage Ratio Common Equity Tier 1 Ratio Tier 1 Risk-Based Capital Ratio Total Risk-Based Capital Ratio

The Company 8.65 % 9.90 % 10.51 % 12.65 %

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The Bank 8.58 10.75 10.75 11.97

On May 1, 2025, the Company announced that its Board of Directors declared a cash dividend of $0.12 per share, payable on May 23, 2025, to holders of record of shares of common stock as of May 12, 2025.

On August 1, 2025, the Company announced that its Board of Directors declared a cash dividend of $0.12 per share, payable on August 25, 2025, to holders of record of shares of common stock as of August 11, 2025.

See Note 10 – “Regulatory Capital Requirements” in the “Notes to Consolidated Financial Statements” included in Part I, Item 1.

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There is an uncertainty of the potential impact to the Company’s consolidated financial statements if the federal government takes actions against the Company.

As of March 31, 2025, the Company has not accrued an amount for the potential impact of any such actions.

As of June 30, 2025, the Company has not accrued an amount for the potential impact of any such actions.

The following is a summary of the level of business activities with our cannabis customers:

• Deposit and loan balances at March 31, 2025 were approximately $175.9 million, or 3.2% of total deposits, and $83.0 million, or 1.7% of total gross loans, respectively.

Deposit and loan balances at December 31, 2024 were approximately $151.4 million, or 2.7% of total deposits, and $82.6 million, or 1.7% of total gross loans, respectively.

• Interest and noninterest income for the three months ended March 31, 2025, were approximately $1.1 million and $241 thousand, respectively.

Interest and noninterest income for the three months ended March 31, 2024, were approximately $1.0 and $293 thousand, respectively.

For information about risks relating to liquidity, see “Risk Factors – Risks Relating to Our Business” included in Part I, Item 1A.

• At June 30, 2025, deposit balances were $141.5 million, or 2.66% of total deposits, and loan balances were $84.6 million, or 1.75% of total gross loans.

At December 31, 2024, deposit balances were $151.4 million, or 2.74% of total deposits, and loan balances were $82.6 million, or 1.73% of total gross loans.

• Interest and noninterest income for the six months ended June 30, 2025, were approximately $2.2 million and $467 thousand, respectively.

Interest and noninterest income for the six months ended June 30, 2024, were approximately $2.0 million and $558 thousand, respectively.

For information about risks related with our banking services provided to the cannabis industry, see “Risk Factors – Risks Relating to Our Business” included in Part I, Item 1A.

in the 2024 Annual Report.

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Balance Sheet Summary

Total assets were $6.18 billion at March 31, 2025, a decrease of $54.2 million, or 0.9%, when compared to $6.23 billion at December 31, 2024.

The aggregate decrease was primarily due to decreases in cash and cash equivalents of $70.8 million and held to maturity (“HTM”) securities of $11.5 million, partially offset by increases in available for sale (“AFS”) securities of $29.9 million and loans held for investment of $5.5 million.

The ratio of the ACL as a percentage of loans was 1.21% and 1.21% at March 31, 2025 and December 31, 2024, respectively.

Total assets were $6.04 billion at June 30, 2025, a decrease of $192.9 million, or 3.1%, when compared to $6.23 billion at December 31, 2024.

The decrease was primarily due to decreases in cash and cash equivalents of $274.9 million and held to maturity (“HTM”) securities of $21.8 million, partially offset by increases in loans held for investment of $55.6 million and available for sale (“AFS”) securities of $38.5 million.

The ratio of the ACL as a percentage of loans was 1.21% and 1.21% at June 30, 2025 and December 31, 2024, respectively.

Cash and Cash Equivalents

Cash and cash equivalents totaled $389.0 million at March 31, 2025, compared to $459.9 million at December 31, 2024.

Cash and cash equivalents totaled $185.0 million at June 30, 2025, compared to $459.9 million at December 31, 2024.

Total cash and cash equivalents fluctuate due to transactions in process and other liquidity demands.

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We have the intent and ability to hold such securities until maturity.

At March 31, 2025, 27.6% of the portfolio of debt securities was classified as AFS and 72.4% was classified as HTM, compared to 23.7% and 76.3% respectively, at December 31, 2024.

At June 30, 2025, 29.0% of the portfolio of debt securities was classified as AFS and 71.0% was classified as HTM, compared to 23.7% and 76.3% respectively, at December 31, 2024.

See Note 2 – “Investment Securities” in the “Notes to Consolidated Financial Statements” included in Part I, Item 1.

of this Quarterly Report on Form 10-Q for additional details on the composition of our investment portfolio.

Investment securities, including restricted stock and equity securities, totaled $675.1 million at March 31, 2025, an $18.7 million or 2.9% increase, compared to $656.4 million at December 31, 2024.

At March 31, 2025, AFS securities, carried at fair value, totaled $179.1 million, compared to $149.2 million at December 31, 2024.

At March 31, 2025, AFS securities consisted of 84.9% mortgage-backed, 11.4% U.S.

Investment securities, including restricted stock and equity securities, totaled $673.3 million at June 30, 2025, a $17.0 million, or 2.6% increase, compared to $656.4 million at December 31, 2024.

At June 30, 2025, AFS securities, carried at fair value, totaled $187.7 million, compared to $149.2 million at December 31, 2024.

At June 30, 2025, AFS securities consisted of 86.6% mortgage-backed, 10.9% U.S.

government agencies and 2.5% corporate bonds, compared to 82.0%, 13.5% and 4.4%, respectively, at December 31, 2024.

At March 31, 2025, the accumulated other comprehensive loss was $6.3 million, compared to $7.5 million at December 31, 2024.

At March 31, 2025, HTM securities, carried at amortized cost, totaled $469.6 million, compared to $481.1 million at December 31, 2024.

At March 31, 2025, HTM securities consisted of 70.0% mortgage-backed, 27.5% U.S.

At June 30, 2025, the accumulated other comprehensive loss was $5.6 million, compared to $7.5 million at December 31, 2024.

At June 30, 2025, HTM securities, carried at amortized cost, totaled $459.2 million, compared to $481.1 million at December 31, 2024.

At June 30, 2025, HTM securities consisted of 69.9% mortgage-backed, 28.1% U.S.

government agencies and 2.0% other debt securities, compared to 70.0%, 27.5% and 2.5%, respectively, at December 31, 2024.

At March 31, 2025 and December 31, 2024, 97.2% and 97.1%, respectively, of the Bank’s carrying value of its investment portfolio consisted of securities issued or guaranteed by U.S.

At June 30, 2025 and December 31, 2024, 97.9% and 97.1%, respectively, of the Bank’s carrying value of its investment portfolio consisted of securities issued or guaranteed by U.S.

government agencies or government-sponsored agencies.

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Conversely, securities rated below investment grade, which are labeled as speculative grade by the rating agencies, are considered to have distinctively higher credit risk than investment grade securities.

There were no speculative grade HTM securities at March 31, 2025 or December 31, 2024.

There were no speculative grade HTM securities at June 30, 2025 or December 31, 2024.

HTM securities that are not rated are agency mortgage-backed securities sponsored by U.S.

government agencies, as well as direct obligations of the agencies, with the remainder being sub-debt of other banks.

The following table shows the amortized cost of HTM securities based on their lowest publicly available credit rating as of March 31, 2025.

March 31, 2025

The following table shows the amortized cost of HTM securities based on their lowest publicly available credit rating as of June 30, 2025.

June 30, 2025

Investment Grade

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We originate residential mortgage loans for sale on the secondary market, which are recorded at fair value.

At March 31, 2025 and December 31, 2024 , the fair value of loans held for sale amounted to $15.7 million and $19.6 million, respectively.

The Bank makes certain representations to purchasers in the sale of the mortgage loans related to loan ownership, loan compliance and legality, and accurate documentation.

At June 30, 2025 and December 31, 2024 , the fair value of loans held for sale amounted to $34.3 million and $19.6 million, respectively.

The Bank makes certain representations to purchasers in the sale of mortgage loans related to loan ownership, loan compliance and legality, and accurate documentation.

If a loan is found to be out of compliance with any of the representations subsequent to the date of purchase, the Bank may be required to repurchase the loan or indemnify the purchaser.

At March 31, 2025 the Bank repurchased one loan of $415 thousand.

No loans were repurchased as of December 31, 2024 .

No loans were repurchased during the three months ended June 30, 2025 or 2024, or during the six months ended June 30, 2024.

During the six months ended June 30, 2025, the Bank repurchased one loan of $415 thousand.

Loans Held for Investment

The following table summarizes the Company’s loan portfolio at March 31, 2025 and December 31, 2024.

($ in thousands) March 31, 2025 % December 31, 2024 % $ Change % Change

The following table summarizes the Company’s loan portfolio at June 30, 2025 and December 31, 2024.

($ in thousands) June 30, 2025 % of Total Loans December 31, 2024 % of Total Loans $ Change % Change

Commercial real estate $ 2,603,974 54.0 % $ 2,557,806 53.6 % $ 46,168 1.8 %

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Total loans 4,827,628 100.0 % 4,771,988 100.0 % 55,640 1.2

Allowance for credit losses on loans (58,042) (57,910) (132) 0.2 %

allowance for credit losses (58,483) (57,910) (573) 1.0

Total loans, net $ 4,769,145 $ 4,714,078 $ 55,067 1.2

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or (2) total non-owner occupied CRE loans representing 300% or more of the institution’s total risk-based capital and the institution’s non-owner occupied CRE loan portfolio (including construction) has increased 50% or more during the prior 36 months are identified as having potential CRE concentration risk.

Institutions which are deemed to have concentrations in CRE lending are expected to employ heightened levels of risk management with respect to their CRE portfolios, and may be required to hold

higher levels of capital.

Institutions which are deemed to have concentrations in CRE lending are expected to employ heightened levels of risk management with respect to their CRE portfolios, and may be required to hold higher levels of capital.

The Bank has a concentration in CRE loans, and experienced significant growth in its CRE portfolio with its acquisition of The Community Financial Corporation and its wholly-owned subsidiary, Community Bank of the Chesapeake.

Non-owner occupied CRE loans totaled $2.12 billion and $2.08 billion at March 31, 2025 and December 31, 2024, respectively, and as a percentage of the Bank’s Tier 1 Capital + ACL were 357.37% and 359.52%, respectively.

Construction loans totaled $365.7 million and $336.0 million at March 31, 2025 and December 31, 2024, respectively, and as a percentage of the Bank’s Tier 1 Capital + ACL were 61.69% and 57.99%, respectively.

Non-owner occupied CRE loans totaled $2.14 billion and $2.08 billion at June 30, 2025 and December 31, 2024, respectively, and as a percentage of the Bank’s Tier 1 Capital + ACL were 354.15% and 359.52%, respectively.

Construction loans totaled $349.6 million and $336.0 million at June 30, 2025 and December 31, 2024, respectively, and as a percentage of the Bank’s Tier 1 Capital + ACL were 57.77% and 57.99%, respectively.

The CRE portfolio has increased in the past two years.

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Monitoring practices are part of the Bank’s credit and risk departments’ annual test plans and are adjusted as needed on a quarterly basis if external or internal conditions merit changes.

The Bank’s CRE monitoring plans include stress testing analysis to evaluate changes in collateral values and changes in cash flow debt service coverage ratios as a result of increasing interest rates or declines in customer net operating revenues.

The Bank’s CRE monitoring plans include stress testing analysis to evaluate changes in

collateral values and changes in cash flow debt service coverage ratios as a result of increasing interest rates or declines in customer net operating revenues.

We may be required to maintain higher levels of capital as a result of our CRE concentrations, which could require us to obtain additional capital or be required to sell/participate portions of loans, which may adversely affect shareholder returns.

Non-Owner Occupied CRE Loans

March 31, 2025

June 30, 2025

($ in thousands) Amount Average Loan Size % of Non-Owner Occupied CRE Loans % of Total Portfolio Loans, Gross

Retail $ 466,209 $ 2,454 21.8 % 9.7 %

Office/Office Condo 367,899 1,552 17.4 7.7

Multi-Family (5+ Units) 271,812 2,303 12.8 5.7

Office 356,104 1,490 16.6 7.4

Multifamily (5+ units) 276,222 2,302 12.9 5.7

Industrial/warehouse 212,915 1,532 9.9 4.4

1-4 family dwelling 196,272 529 9.2 4.1

Motel/hotel 194,811 3,976 9.1 4.0

Commercial - Improved 184,833 1,349 8.7 3.9

440,449 721 20.5 9.1

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____________________________________

(1) Other non-owner occupied CRE loans include 1-4 family dwelling loans of $164.9 million, lot/land loans of $94.5 million, self-storage loans of $72.5 million and other loans of $100.7 million.

(2) The balances for our non-owner occupied CRE portfolio as of March 31, 2025, as presented in this table, coincide with our internal evaluation of risk for the purpose of monitoring loan concentrations in accordance with internal and regulatory guidelines.

(1) Other non-owner occupied CRE loans include commercial - improved loans of $160.5 million, lot/land loans of $93.7 million, self-storage loans of $72.5 million and other loans of $113.7 million.

(2) The balances for our non-owner occupied CRE portfolio as of June 30, 2025, as presented in this table, coincide with our internal evaluation of risk for the purpose of monitoring loan concentrations in accordance with internal and regulatory guidelines.

(3) Excludes loans held for sale of $34.3 million.

Owner Occupied CRE Loans

March 31, 2025

June 30, 2025

($ in thousands) Amount Average Loan Size % of Owner Occupied CRE Loans % of Total Portfolio Loans, Gross

Commercial – improved $ 199,122 $ 1,164 27.3 % 4.1 %

Office/Office Condo 133,591 522 18.9 2.8

Office 128,194 507 17.6 2.7

Industrial/warehouse 95,292 662 13.1 2.0

Church 63,500 894 9.0 1.3

Retail 65,214 609 8.9 1.3

Restaurant 60,476 1,008 8.3 1.2

181,152 1,029 24.8 3.8

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____________________________________

(1) Other owner occupied CRE loans include marine/boat slips of $44.1 million, restaurant loans of $60.0 million, fire/CMS building loans of $25.7 million and other loans of $56.7 million.

(1) Other owner occupied CRE loans include church loans of $57.1 million, marina/boat loans of $39.4 million, auto service center loans of $30.1 million and other loans of $54.5 million.

(2) Excludes loans held for sale of $34.3 million.

Office CRE Loan Portfolio

The Bank’s office CRE loan portfolio, which includes owner occupied and non-owner occupied CRE loans, was $501.5 million, or 10.5% of total loans of $4.78 billion at March 31, 2025.

The Bank’s office CRE loan portfolio included $136.8 million, or 27.3% of the total with medical tenants, and $54.6 million, or 10.9% of the total with government or government contractor tenants.

The Bank’s office CRE loan portfolio, which includes owner occupied and non-owner occupied CRE loans, was $484.3 million, or 10.0% of total loans of $4.83 billion at June 30, 2025.

The Bank’s office CRE loan portfolio included $135.5 million, or 28.0% of total office CRE loans, with medical tenants, and $54.4 million, or 11.2% of total office CRE loans, with government or government contractor tenants.

There were 492 loans in the office CRE loan portfolio with an average and median loan size of $1.0 million and $369 thousand, respectively.

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LTV collateral values are based on the most recent appraisal, which varies from the initial loan boarding to interim credit reviews.

LTV estimates for the office CRE loan portfolio are summarized below and LTV collateral values are based on the most recent appraisal, which may vary from the appraised value at loan origination.

LTV estimates for the office CRE loan portfolio are summarized in the table below and LTV collateral values are based on the most recent appraisal, which may vary from the appraised value at loan origination.

LTV Range ($ in thousands)

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Greater than 80% 14 11,013 2.3

Grand total 493 $ 501,490 100.0 %

The Bank had 18 office CRE loans totaling $163.6 million that were greater than $5.0 million at March 31, 2025, compared to 18 office CRE loans totaling $164.5 million at December 31, 2024.

The decrease in this portfolio segment was the result of normal amortization and two large loan payoffs in the first quarter of 2025.

For the office CRE portfolio, at March 31, 2025, the average loan debt-service coverage ratio was 1.8x and the average LTV was 49.0%.

Total 492 $ 484,298 100.0 %

The Bank had 17 office CRE loans totaling $150.9 million that were greater than $5.0 million at June 30, 2025, compared to 18 office CRE loans totaling $164.5 million at December 31, 2024.

The decrease in this portfolio segment was the result of normal amortization and the change in purpose of collateral of an $11.0 million loan from office to school .

For the office CRE portfolio, at June 30, 2025, the average loan debt-service coverage ratio was 1.8x and the average LTV was 48.4%.

Of the office CRE portfolio balance, 80.5% is secured by properties in rural or suburban areas with limited exposure to metropolitan cities and 97.0% are secured by properties with five stories or less.

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Maturity of Loan Portfolio

The following table below sets forth the maturities and interest rate sensitivity of the loan portfolio at March 31, 2025.

Demand loans, loans having no stated schedule of repayments and no stated maturity, and overdrafts are reported as due in one year or less.

The following table below sets forth the maturities and interest rate sensitivity of the loan portfolio at June 30, 2025.

Demand loans, loans having no stated schedule of repayments and no stated maturity, and overdrafts are reported as maturing within one year.

($ in thousands) Maturing Within One Year Maturing After One But Within Five Years Maturing After Five But Within 15 Years Maturing After 15 Years Total

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Credit cards 1,504 3,063 1,693 — 6,260

Totals $ 530,372 $ 1,133,399 $ 1,125,814 $ 1,987,904 $ 4,777,489

Total $ 351,240 $ 1,222,800 $ 1,229,703 $ 2,023,885 $ 4,827,628

Fixed-interest rate loans $ 251,386 $ 1,022,386 $ 791,931 $ 357,904 $ 2,423,607

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Asset Quality

The following table summarizes asset quality information and ratios at March 31, 2025 and December 31, 2024.

($ in thousands) March 31, 2025 December 31, 2024

The following table summarizes asset quality information and ratios at June 30, 2025 and December 31, 2024.

($ in thousands) June 30, 2025 December 31, 2024

ASSET QUALITY

Total portfolio loans $ 4,827,628 $ 4,771,988

Special mention loans 65,564 33,519

Classified loans 19,930 24,679

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22,566 28,173

Total classified loans and special mention loans 85,494 58,198

Allowance for credit losses on loans

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Nonaccrual loans, OREO, repossessed assets and BEFD modifications $ 26,342 $ 26,158

($ in thousands) March 31, 2025 December 31, 2024

($ in thousands) June 30, 2025 December 31, 2024

ASSET QUALITY RATIOS

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Classified assets to risk-based capital (1)

Allowance for credit losses on loans to total portfolio loans

Allowance for credit losses on loans to nonaccrual loans 348.49 275.66

Past due loans – 31 to 89 days to total portfolio loans 0.19 % 0.18 %

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Allowance for Credit Losses on Loans

The ACL was $58.0 million at March 31, 2025, $57.9 million at December 31, 2024 and $57.3 million at March 31, 2024.

There were net charge-offs of $554 thousand for the three months ended March 31, 2025, compared to net charge-offs of $565 thousand for the three months ended March 31, 2024.

The ratio of annualized net charge-offs to average loans was 0.05% for the three months ended March 31, 2025 and 2024.

The ACL was $58.5 million at June 30, 2025, $57.9 million at December 31, 2024 and $58.5 million at June 30, 2024.

There were net charge-offs of $649 thousand for the three months ended June 30, 2025, compared to net charge-offs of $886 thousand for the three months

ended June 30, 2024.

There were net charge-offs of $1.2 million for the six months ended June 30, 2025, compared to net charge-offs of $1.5 million for the six months ended June 30, 2024.

The ratio of annualized net charge-offs to average loans was 0.05% and 0.08% for the three months ended June 30, 2025 and 2024, respectively.

The ratio of annualized net charge-offs to average loans was 0.05% and 0.06% for the six months ended June 30, 2025 and 2024, respectively.

Management remains focused on its efforts to dispose of problem loans and to prudently charge-off nonperforming loans to enable the Company to maintain overall credit quality.

The ACL as a percentage of period-end loans was 1.21% at March 31, 2025 and December 31, 2024.

The ACL as a percentage of period-end loans was 1.21% at June 30, 2025 and December 31, 2024.

The following table allocates the ACL by portfolio loan category as of the dates indicated.

The allocation of the ACL to each category is not necessarily indicative of future losses and does not restrict the use of the ACL to absorb losses in any category.

March 31, 2025 December 31, 2024

June 30, 2025 December 31, 2024

($ in thousands) ACL Average Balance % (1)

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(1) Percent of loans in each category to total portfolio loans.

The following table presents the net charge-offs or recoveries by average loan portfolio category for the three months ended March 31, 2025 and 2024.

The following table presents the net charge-offs or recoveries by average loan portfolio category for the three and six months ended June 30, 2025 and 2024.

Three Months Ended

March 31, 2025 March 31, 2024

June 30, 2025 June 30, 2024

($ in thousands) Net (Charge-offs) Recoveries Average Balance (1)

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(1) Excludes loans held for sale.

Six Months Ended

June 30, 2025 June 30, 2024

($ in thousands) Net (Charge-offs)

Recoveries Average Balance (1)

% Net (Charge-offs)

Recoveries Average Balance (1)

Commercial real estate $ 78 $ 2,557,316 (0.01) % $ — $ 2,520,796 — %

Residential real estate 3 1,363,076 — 3 1,291,225 —

Construction 1 352,564 — (6) 309,661 —

Commercial 85 228,535 (0.08) (20) 220,248 0.02

Consumer (939) 301,515 0.63 (1,242) 330,998 0.76

Credit cards (431) 6,403 13.57 (186) 7,918 —

(1,203) 4,809,409 0.05 (1,451) 4,680,846 0.06

Allowance for credit losses — (58,331) — — (57,554) —

Total net charge-off and average loans $ (1,203) $ 4,751,078 0.05 $ (1,451) $ 4,623,292 0.06

Classified Assets and Special Mention Assets

Classified assets decreased $6.1 million to $22.0 million, or 0.4% of total assets, at March 31, 2025, from $28.2 million, or 0.5% of total assets, at December 31, 2024.

Classified assets decreased $5.6 million to $22.6 million, or 0.4% of total assets, at June 30, 2025, from $28.2 million, or 0.5% of total assets, at December 31, 2024.

Classified assets are substandard loans, repossessed assets and OREO.

The decrease was primarily due to decrease in substandard loans of $5.2 million and repossessed assets of $886 thousand.

The decrease was primarily due to a decrease in substandard loans of $4.7 million and a decrease of $858 thousand in repossessed assets.

Special mention loans increased to $65.6 million at June 30, 2025 from $33.5 million at December 31, 2024.

Management considers classified assets to be an important measure of asset quality.

Decreases in classified and special mention loan categories were due to loans related to our marine lending portfolio and residential mortgages, all of which are diverse in origination date.

The Company’s risk rating process for classified loans is an important input into the Company’s allowance methodology.

Risk ratings are an important input into the Company’s ACL qualitative framework.

Increases in special mention loan categories were due to loans related to our multifamily commercial real estate portfolio.

Management believes these assets are well collateralized and will continue to monitor the cash flow.

The Company’s risk rating process for classified loans is an important input into the Company’s allowance methodology and ACL qualitative framework.

Nonperforming Assets

Nonperforming assets were $18.9 million, or 0.3% of total assets, at March 31, 2025, compared to $24.8 million, or 0.4% of total assets, at December 31, 2024.

The balance of nonperforming assets decreased primarily due to a decrease of nonaccrual loans of $5.6 million and a decrease of $886 thousand of repossessed assets, partially offset by an increase in loans 90 days or more past due of $600 thousand.

Nonperforming assets were $19.6 million, or 0.3% of total assets, at June 30, 2025, compared to $24.8 million, or 0.4% of total assets, at December 31, 2024.

The balance of nonperforming assets decreased primarily due to a decrease of nonaccrual loans of $4.2 million and a decrease of $858 thousand of repossessed assets.

Off-Balance Sheet Credit Exposure Reserve

The Company’s reserve for off-balance sheet credit exposure was $1.5 million and $1.1 million at March 31, 2025 and December 31, 2024, respectively.

The Company’s reserve for off-balance sheet credit exposure was $1.9 million and $1.1 million at June 30, 2025 and December 31, 2024, respectively.

The Company is monitoring line of credit usage and has not seen substantive increases in usage or expected usage.

Company will continue to monitor activity for potential increases in the off-balance sheet reserve in future quarters as customers use available liquidity.

The following is a breakdown of the Company’s deposit portfolio at March 31, 2025 and December 31, 2024:

($ in thousands) March 31, 2025 December 31, 2024

The Company will continue to monitor activity for potential increases in the off-balance sheet reserve in future quarters as customers use available liquidity.

The following is a breakdown of the Company’s deposit portfolio at June 30, 2025 and December 31, 2024:

($ in thousands) June 30, 2025 December 31, 2024

Balance % Balance % $ Change % Change

4 unchanged sentences

Time deposits 1,273,285 24.0 1,181,561 21.4 91,724 7.8

Brokered deposits 10,806 0.2 — — 10,806 —

Total interest-bearing 3,738,838 70.4 3,965,521 71.7 (226,683) (5.7)

Total deposits $ 5,313,958 100.0 % $ 5,528,336 100.0 % $ (214,378) (3.9)

Total deposits decreased $68.0 million, or 1.2%, to $5.46 billion at March 31, 2025 when compared to December 31, 2024.

The decrease in total deposits was primarily due to a decrease in interest bearing demand deposits of $125.6 million, partially offset by an increase in time deposits of $60.8 million.

The decrease in deposits is attributable to seasonal municipal runoff and a decrease in interest rate-sensitive cannabis-related deposits.

Total estimated uninsured deposits were $940.6 million, or 17.2% of total deposits, at March 31, 2025 and $905.3 million, or 16.4% of total deposits, at December 31, 2024.

At March 31, 2025, there were $165.0 million included in uninsured deposits that the Bank secured using the market value of pledged collateral.

The Bank’s uninsured deposits, excluding the market value of pledged collateral, at March 31, 2025 were $775.6 million, or 14.2% of total deposits.

Total deposits decreased $214.4 million, or 3.9%, to $5.3 billion at June 30, 2025 when compared to December 31, 2024.

The decrease in total deposits was primarily due to a decrease in interest-bearing demand deposits of $214.8 million and money market and savings

deposits of $114.4 million, partially offset by an increase in time deposits of $91.7 million.

The decrease in deposits is primarily attributable to seasonal municipal runoff.

Total estimated uninsured deposits were $886.8 million, or 16.7% of total deposits, at June 30, 2025 and $905.3 million, or 16.4% of total deposits, at December 31, 2024.

At June 30, 2025, there were $118.0 million included in uninsured deposits that the Bank secured using the market value of pledged collateral.

The Bank’s uninsured deposits, excluding the market value of pledged collateral, at June 30, 2025 were $768.7 million, or 14.5% of total deposits.

The Bank is required to monitor large deposit relationships and concentration risks in accordance with regulatory guidance.

1 unchanged sentence

Regulatory guidance defines a large depositor as a customer or entity that owns or controls 2% or more of the Bank’s total deposits.

At March 31, 2025, the Bank had one local municipal customer deposit relationships that exceeded 2% of total deposits, totaling $221.7 million, which represented 4.1% of total deposits of $5.47 billion.

At June 30, 2025, the Bank had three local municipal customer deposit relationships that exceeded 2% of total deposits, totaling $403.3 million, which represented 7.6% of total deposits of $5.32 billion.

At December 31, 2024, there were three customer deposit relationships that exceeded 2% of total deposits, totaling $547.4 million, which represented 9.9% of total deposits of $5.54 billion.

Wholesale Funding – Short-Term Borrowings and Brokered Deposits

The Company’s wholesale funding, which includes FHLB advances and brokered deposits, was $50.0 million at March 31, 2025 and December 31, 2024.

The Company’s wholesale funding, which includes FHLB advances and brokered deposits, was $60.8 million and $50.0 million at June 30, 2025 and December 31, 2024, respectively.

The $50.0 million FHLB advance was for an initial term of 18-months at a rate of 4.79%.

This advance has the option to be called by FHLB at any time and matures on November 7, 2025.

At March 31, 2025 and December 31, 2024, the Company had no brokered deposits and securities sold under agreements to repurchase or overnight borrowings from correspondent banks.

At June 30, 2025, the Company had $10.8 million of brokered deposits and no securities sold under agreements to repurchase or overnight borrowings from correspondent banks.

At December 31, 2024, the Company had no brokered deposits or securities sold under agreements to repurchase or overnight borrowings from correspondent banks.

For FDIC call reporting purposes, reciprocal deposits are classified as brokered deposits when they exceed 20% of a bank’s liabilities or $5.0 billion .

Reciprocal deposits decreased $189.8 million to $1.46 billion at March 31, 2025, compared to $1.65 billion at December 31, 2024.

Reciprocal deposits as a percentage of the Bank’s liabilities at March 31, 2025 and December 31, 2024 were 26.2% and 29.3%, respectively.

For call reporting purposes, $344.4 million of reciprocal deposits were considered brokered at March 31, 2025, compared to $520.5 million at December 31, 2024.

Reciprocal deposits decreased $331.3 million to $1.31 billion at June 30, 2025, compared to $1.65 billion at December 31, 2024.

Reciprocal deposits as a percentage of the Bank’s liabilities at June 30, 2025 and December 31, 2024 were 24.3% and 29.3%, respectively.

For call reporting purposes, $232.9 million of reciprocal deposits were considered brokered at June 30, 2025, compared to $520.5 million at December 31, 2024.

Long-Term Debt

The Company occasionally borrows from the FHLB to meet longer term liquidity needs, specifically to fund loan growth when liquidity from deposit growth is not sufficient.

Currently, the Company has no long term borrowing with FHLB as of March 31, 2025.

Currently, the Company has no long term borrowing with FHLB as of June 30, 2025.

On August 25, 2020, the Company entered into Subordinated Note Purchase Agreements pursuant to which the Company issued and sold $25.0 million in aggregate principal amount with an initial interest rate of 5.375% of Fixed-to-Floating Rate Subordinated Notes due September 1, 2030.

As a result of the merger with Severn Bancorp, Inc., effective October 31, 2021, the Company acquired Junior Subordinated Debt Securities due in 2035 which had an outstanding principal balance of $20.6 million.

The debt balances of $18.8 million at March 31, 2025 and $18.8 million at December 31, 2024 were presented net of fair value adjustments of $1.8 million and $1.8 million, respectively.

The debt balances of $18.9 million at June 30, 2025 and $18.8 million at December 31, 2024 were presented net of fair value adjustments of $1.8 million and $1.8 million, respectively.

Additionally, as a result of the merger with The Community Financial Corporation in 2023 , the Company acquired Junior Subordinated Debt Securities, which had an outstanding principal balance of $12.4 million.

The debt b alance of $11.1 million at March 31, 2025 was presented net of a fair value adjustment of $1.3 million.

In addition, the Company acquired 4.75% fixed-to-floating rate subordinated notes with a carrying value of $19.5 million at March 31, 2025.

The notes’ aggregate balance of $19.1 million at March 31, 2025 was presented net of fair value adjustment of $396 thousand.

The debt b alance of $11.1 million at June 30, 2025 was presented net of a fair value adjustment of $1.2 million.

In addition, the Company acquired 4.75% fixed-to-floating rate subordinated notes with a carrying value of $19.5 million at June 30, 2025.

The notes’ aggregate balance of $19.3 million at June 30, 2025 was presented net of fair value adjustment of $244 thousand.

Stockholders’ Equity

($ in thousands, except per share amounts) March 31, 2025 December 31, 2024 $ Change % Change

($ in thousands, except per share amounts) June 30, 2025 December 31, 2024 $ Change % Change

Common stock, $0.01 par value per share $ 334 $ 333 $ 1 0.3 %

3 unchanged sentences

Total stockholders’ equity $ 565,194 $ 541,066 $ 24,128 4.5

Total stockholders’ equity increased $11.4 million, or 2.1%, to $552.5 million at March 31, 2025 when compared to December 31, 2024, primarily due to $13.8 million of net income and accumulated other comprehensive income of $1.2 million, partially offset by dividends declared of $4.0 million.

Total stockholders’ equity increased $24.1 million, or 4.5%, to $565.2 million at June 30, 2025 when compared to December 31, 2024, primarily due to $29.3 million of net income and a decrease in accumulated other comprehensive loss of $1.9 million, partially offset by dividends declared of $8.0 million.

USE OF NON-GAAP FINANCIAL MEASURES

8 unchanged sentences

These non-GAAP measures are included because the Company believes they may provide useful supplemental information for evaluating the underlying performance trends of the Company.

($ in thousands, except per share amounts) March 31, 2025 December 31, 2024 March 31, 2024

($ in thousands, except per share amounts) June 30, 2025 December 31, 2024 June 30, 2024

Total assets $ 6,037,874 $ 6,230,763 $ 5,864,017

15 unchanged sentences

This financial metric is expressed in the form of a percentage which is equal to net income after tax divided by the average stockholders’ equity for a specific period of time.

Three Months Ended March 31,

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

($ in thousands) 2025 2024 2025 2024

6 unchanged sentences

ROATCE is a non-GAAP measure and may not be comparable to similar non-GAAP measures used by other companies.

Three Months Ended March 31,

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

($ in thousands) 2025 2024 2025 2024

1 unchanged sentence

Core deposit intangible amortization (net of tax) (1)

1,708 1,924 3,425 3,903

Net earnings applicable to common stockholders

5 unchanged sentences

____________________________________

(1) The Company utilized an effective tax rate of 24.6% and 22.8% for the three months ended March 31, 2025 and 2024, respectively.

(1) The Company utilized an effective tax rate of 24.8% and 25.1% for the three months ended June 30, 2025 and 2024, respectively, and 24.7% and 24.1% for the six months ended June 30, 2025 and 2024, respectively.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis