What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-08-03 compared with 2026-05-04 · 331 added, 156 removed, 506 unchanged (49% of the section changed)

46 unchanged sentences

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 Financial Partners, a division of the Bank, offers full-service investment, insurance and financial planning services through 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.

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PERFORMANCE OVERVIEW

The Company’s net income for the first quarter of 2026 was $17.1 million, or $0.51 per diluted common share, compared to $15.9 million, or $0.48 per diluted common share, for the fourth quarter of 2025.

The Company had net income of $13.8 million, or $0.41 per diluted common share, for the first quarter of 2025.

First Quarter 2026 Highlights

• Net Income – Net income for the first quarter of 2026 increased $1.2 million to a record $17.1 million from $15.9 million in the fourth quarter of 2025.

Net income increased primarily due to an increase in net interest income of $2.4 million and a decrease in the provision for credit losses of $2.7 million, partially offset by lower noninterest income of $1.7 million and an increase in noninterest expense of $1.6 million.

The lower noninterest income was due to a one-time receipt of insurance proceeds in the fourth quarter of 2025.

• Return on Average Assets (“ROAA”) – The Company reported ROAA of 1.12% for the first quarter of 2026, compared to 1.02% for the fourth quarter of 2025 and 0.91% for the first quarter of 2025.

The Company’s net income for the second quarter of 2026 was $18.9 million, or $0.56 per diluted common share, compared to $17.1 million, or $0.51 per diluted common share, for the first quarter of 2026.

The Company had net income of $15.5 million, or $0.46 per diluted common share, for the second quarter of 2025.

Second Quarter 2026 Highlights

• Net Income – Net income for the second quarter of 2026 increased $1.8 million to $18.9 million, from $17.1 million in the first quarter of 2026.

Net income increased primarily due to a decrease in interest expense of $1.3 million, an increase in other noninterest income of $1.2 million and a decrease in salaries and employee benefits of $1.2 million, which were partially offset by a decrease in interest on deposits with other banks of $858 thousand and a higher provision for credit losses of $811 thousand.

Net income for the six months ended June 30, 2026 was $36.0 million, compared to $29.3 million for the six months ended June 30, 2025.

• Return on Average Assets (“ROAA”) – The Company reported ROAA of 1.24% for the second quarter of 2026, compared to 1.12% for the first quarter of 2026 and 1.03% for the second quarter of 2025.

Adjusted ROAA – non-U.S.

generally accepted accounting principles (“GAAP”) (1) , which excludes amortization of other intangible assets (net of tax), was 1.22% for the first quarter of 2026, compared to 1.11% for the fourth quarter of 2025 and 1.02% for the first quarter of 2025.

• Net Interest Margin (“NIM”) – Net interest income for the first quarter of 2026 increased $2.4 million to $52.6 million compared to the fourth quarter of 2025.

NIM increased 21 basis points (“bps”) to 3.64% during the first quarter of 2026 compared to the fourth quarter of 2025.

generally accepted accounting principles (“GAAP”) (1) was 1.34% for the second quarter of 2026, compared to 1.22% for the first quarter of 2026 and 1.15% for the second quarter of 2025.

• Net Interest Margin (“NIM”) – Net interest income (“NII”) for the second quarter of 2026 increased $364 thousand to $52.9 million compared to the first quarter of 2026.

NIM increased 6 basis points (“bps”) to 3.70% during the second quarter of 2026 compared to the first quarter of 2026.

NIM excluding accretion (1) increased for the comparable periods from 3.35% to 3.45%.

Excluding accretion interest, loan yields decreased 1 bp and funding costs decreased 8 bps for the comparable periods.

Net interest income increased due to accelerated accretion due to loan payoffs coupled with a lower cost of deposits and lower long-term borrowing expenses.

These favorable changes were partially offset by lower yields on interest-bearing deposits with other institutions.

• Book Value per Share – Book value per share increased to $18.02 at March 31, 2026 from $17.65 at December 31, 2025 and $16.55 at March 31, 2025.

• Asset Quality – Nonperforming assets were 1.10% of total assets at March 31, 2026, an increase from 0.69% at December 31, 2025 and 0.31% at March 31, 2025.

Classified assets were 1.38% of total assets at March 31, 2026, an increase when compared to 0.96% at December 31, 2025 and 0.36% at March 31, 2025.

The allowance for credit losses (“ACL”) was $58.5 million at March 31, 2026, compared to $58.8 million at December 31, 2025 and $58.0 million at March 31, 2025.

The ACL as a percentage of loans increased to 1.21% at March 31, 2026 compared to 1.20% at December 31, 2025 and remained flat compared to March 31, 2025.

• Operating Leverage – The efficiency ratio for the first quarter of 2026 was 61.97%, compared to 60.06% in the fourth quarter of 2025 and 63.64% for the first quarter of 2025.

The adjusted efficiency ratio – non-GAAP (1) , which excludes amortization of intangibles, was 58.57% for the first quarter of 2026, compared to 56.59% for the fourth quarter of 2025 and 59.25% for the first quarter of 2025.

Net interest income increased due to additional interest income from loan payoffs coupled with a lower cost of deposits.

Loan payoffs resulted in accelerated accretion and interest income recovery on nonaccrual loans.

• Capital Management – Book value per share increased to $18.44 at June 30, 2026 from $18.02 at March 31, 2026 and $16.94 at June 30, 2025.

During the quarter ended June 30, 2026, the Company announced a $30 million share repurchase program and repurchased 40,093 shares of its outstanding common stock for approximately $891 thousand.

During the second quarter of 2026, the Company declared a dividend of $0.14 per share, which represents a $0.02, or 16.7%, increase from the dividend paid in the prior quarter.

• Asset Quality – Nonperforming assets were 1.09% of total assets at June 30, 2026, a decrease from 1.10% at March 31, 2026 and an increase from 0.33% at June 30, 2025.

Classified assets were 1.41% of total assets at June 30, 2026, an increase when compared to 1.38% at March 31, 2026 and 0.37% at June 30, 2025.

The allowance for credit losses was $58.7 million at June 30, 2026, compared to $58.5 million at March 31, 2026 and at June 30, 2025.

The ACL as a percentage of loans decreased to 1.20% at June 30, 2026 compared to 1.21% at March 31, 2026 and at June 30, 2025.

• Operating Leverage – The efficiency ratio for the second quarter of 2026 was 57.76%, compared to 61.97% for the first quarter of 2026 and 60.83% for the second quarter of 2025.

The adjusted efficiency ratio – non-GAAP (1) , which excludes amortization of intangibles, was 54.49% for the second quarter of 2026, compared to 58.57% for the first quarter of 2026 and 56.73% for the second quarter of 2025.

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

____________________________________

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

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2026 AND 2025

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2026 AND 2025

Summary of Financial Results

The Company reported net income for the three months ended March 31, 2026 of $17.1 million, or $0.51 per diluted common share, compared to $13.8 million, or $0.41 per diluted common share, for the three months ended March 31, 2025.

The Company reported net income for the three months ended June 30, 2026 of $18.9 million, or $0.56 per diluted common share, compared to $15.5 million, or $0.46 per diluted common share, for the three months ended June 30, 2025.

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) 2026 2025 Change ($) Change (%)

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

As shown in the table below, taxable-equivalent NII was $52.6 million for the first quarter of 2026 and $46.0 million for the first quarter of 2025.

The increase was primarily due to a decrease in interest expense on deposits of $3.8 million, an increase in interest and fees on loans of $3.3 million and a decrease in interest expense on borrowings of $391 thousand, partially offset by a decrease in interest on deposits with other banks of $951 thousand.

The following table presents taxable-equivalent net interest income for each of the periods indicated.

Three Months Ended March 31,

As shown in the table below, taxable-equivalent NII increased $5.8 million to $53.0 million for the second quarter of 2026, compared to $47.2 million for the second quarter of 2025.

The increase in net interest income was primarily due to a decrease in interest expense on deposits of $4.4 million, an increase in interest on loans of $849 thousand and a decrease in interest expense on short-term borrowings of $589 thousand.

These favorable changes were partially offset by an increase in interest expense on long-term borrowings of $177 thousand.

The decrease in interest expense on deposits is reflective of rate reductions during 2026.

The following table presents taxable-equivalent NII for each of the periods indicated.

Three Months Ended June 30,

($ in thousands) 2026 2025 Change ($) Change (%)

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Average Balances and Yields

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 March 31, 2026 and 2025.

Three Months Ended March 31,

Three Months Ended June 30,

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

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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 $4.3 million and $3.7 million of accretion interest on loans for the three months ended March 31, 2026 and 2025, respectively.

There were $3.8 million and $4.2 million of accretion interest on loans for the three months ended June 30, 2026 and 2025, respectively.

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

There were zero and $334 thousand of amortization of deposit discounts and $79 thousand and $232 thousand of amortization of borrowing fair value adjustments for the three months ended March 31, 2026 and 2025, respectively.

There were zero and $435 thousand of amortization of deposit discounts and $79 thousand and $232 thousand of amortization of borrowing fair value adjustments for the three months ended June 30, 2026 and 2025, respectively.

All deposit discounts have been fully amortized as of December 31, 2025.

Rate and Volume Analysis

The following table presents changes in interest income and interest expense for the periods indicated.

For each category of interest-earning asset and interest-bearing liability, information is provided on changes attributable to (1) changes in volume (changes in volume multiplied by old rate);

and (2) changes in rate (changes in rate multiplied by old volume).

For each category of interest-earning asset and interest-bearing liability, information is provided on changes attributable to:

(1) changes in volume (changes in volume multiplied by old rate) and (2) changes in rate (changes in rate multiplied by old volume).

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, 2026 Compared to the Three Months Ended March 31, 2025

Three Months Ended June 30, 2026 Compared to the Three Months Ended June 30, 2025

($ in thousands) Volume Due to Rate Total

7 unchanged sentences

Taxable investment securities 5 51 56

Tax-exempt investment securities — (1) (1)

Interest-bearing deposits 283 (271) 12

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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.

The Company’s NIM increased to 3.64% for the three months ended March 31, 2026, from 3.21% for the three months ended March 31, 2025 .

Comparing the three months ended March 31, 2026 to the three months ended March 31, 2025 , the Company’s interest-earning asset yields increased to 5.44% from 5.32%, while the cost of funds repriced at a faster pace, which resulted in a decrease of 30 bps, to 1.90% from 2.20%, for the same periods.

Provision for Credit Losses (“PCL”) and ACL

The Company’s NIM increased to 3.70% for the three months ended June 30, 2026, from 3.34% for the three months ended June 30, 2025 .

Comparing the three months ended June 30, 2026 to the three months ended June 30, 2025 , the Company’s interest-earning asset yields were flat at 5.42%, while the cost of funds repriced at a faster pace, which resulted in a decrease of 36 bps, to 1.81% from 2.17%, for the same periods.

ACL and Provision for Credit Losses (“PCL”)

Refer to the discussion of the Bank’s ACL and PCL 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 three months ended June 30, 2026 was $8.8 million, a decrease of $576 thousand, or 6.1%, from $9.4 million for the three months ended June 30, 2025.

The decrease was primarily due to a decrease in mortgage banking revenue of $825 thousand and other noninterest income, partially offset by increases in service charges on deposit accounts, trust and investment fee income and interchange credits.

Noninterest Expense

Total noninterest expense was $35.7 million for the three months ended June 30, 2026, an increase of $1.3 million, or 3.7%, when compared to $34.4 million for the three months ended June 30, 2025.

The increase was primarily due to higher salaries and employee benefits expense of $720 thousand and higher software and data processing costs of $516 thousand, partially offset by the decrease in the amortization of other intangible assets of $297 thousand.

The Company reported income tax expense of $6.3 million and $5.1 million for the three months ended June 30, 2026 and 2025, respectively.

The effective tax rate was 25.09% and 24.84% for the three months ended June 30, 2026 and 2025, respectively.

RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2026 AND 2025

Summary of Financial Results

The Company reported net income for the six months ended June 30, 2026 of $36.0 million, or $1.07 diluted earnings per common share, compared to $29.3 million, or $0.88 diluted earnings per common share, for the six months ended June 30, 2025.

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

Six Months Ended June 30,

($ in thousands) 2026 2025 Change ($) Change (%)

Interest and dividend income $ 155,841 $ 152,464 $ 3,377 2.2 %

Interest expense 50,367 59,403 (9,036) (15.2)

Net interest income 105,474 93,061 12,413 13.3

Provision for credit losses 981 2,556 (1,575) (61.6)

Noninterest income 16,074 16,540 (466) (2.8)

Noninterest expense 72,724 68,157 4,567 6.7

Income before income taxes 47,843 38,888 8,955 23.0

Income tax expense 11,890 9,617 2,273 23.6

Net income $ 35,953 $ 29,271 $ 6,682 22.8

Net Interest Income

As shown in the table below, taxable-equivalent NII increased $12.4 million to $105.6 million for the six months ended June 30, 2026, compared to $93.2 million for the six months ended June 30, 2025.

The increase in net interest income was primarily due to an increase in total interest income of $3.4 million, or 2.2%, which included an increase in interest on loans of $4.1 million, or 3.0%, a decrease in interest on deposits with other banks of $939 thousand, or 18.8%, and an increase in interest income on taxable investments of $169 thousand.

The increase in interest on loans was primarily due to the increase in the average balance of loans of $70.6 million, or 1.5%.

The decrease in total interest expense was primarily due to a decrease in interest on deposits of $8.2 million and lower short-term borrowings of $1.2 million.

These were partially offset by the increase in interest expense on long-term borrowings of $384 thousand as a result of lower FHLB borrowings and subordinated debt-related expenses that were classified as short-term borrowings in 2025.

The following table presents taxable-equivalent NII for each of the periods indicated.

Six Months Ended June 30,

($ in thousands) 2026 2025 Change ($) Change (%)

Interest and dividend income

Interest on loans $ 141,270 $ 137,123 $ 4,147 3.0 %

Interest and dividends on investment securities

10,513 10,344 169 1.6

Interest on deposits with banks 4,058 4,997 (939) (18.8)

Total interest and dividend income $ 155,841 $ 152,464 $ 3,377 2.2

Interest expense

Deposits $ 47,207 $ 55,440 $ (8,233) (14.9) %

Short-term borrowings 16 1,203 (1,187) (98.7)

Long-term borrowings 3,144 2,760 384 13.9

Total interest expense $ 50,367 $ 59,403 $ (9,036) (15.2)

Taxable-equivalent adjustment $ 175 $ 161 $ 14 8.7 %

Taxable-equivalent net interest income $ 105,649 $ 93,222 $ 12,427 13.3 %

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 $ 2,594,087 $ 77,198 6.00 % $ 2,557,316 $ 73,066 5.76 %

Residential real estate 1,467,234 39,587 5.40 1,363,076 37,391 5.49

Construction 343,308 11,085 6.51 352,564 11,222 6.42

Commercial 214,909 6,337 5.95 228,535 7,349 6.48

Consumer 256,202 7,025 5.53 301,515 8,059 5.39

Credit cards 4,246 210 9.96 6,403 194 6.11

Total loans 4,879,986 141,442 5.83 4,809,409 137,281 5.74

Investment securities

Taxable 674,973 10,501 3.11 673,567 10,332 3.07

Tax-exempt (1)

647 15 4.64 653 15 4.59

Interest-bearing deposits 221,288 4,058 3.70 228,488 4,997 4.41

Total earning assets 5,776,894 $ 156,016 5.43 5,712,117 $ 152,625 5.37

Cash and due from banks 44,033 46,912

Other assets 365,058 374,641

Allowance for credit losses (58,664) (58,331)

Total assets $ 6,127,321 $ 6,075,339

Interest-bearing liabilities

Interest-bearing checking $ 757,165 $ 9,400 2.50 % $ 789,949 $ 12,722 3.25 %

Money market and savings deposits 1,778,027 16,775 1.90 1,773,637 19,595 2.23

Time deposits 1,264,087 20,912 3.34 1,233,666 23,031 3.76

Brokered deposits 7,461 120 3.24 4,888 92 3.81

Interest-bearing deposits (4)

3,806,740 47,207 2.50 3,802,140 55,440 2.94

FHLB advances 829 16 3.86 50,000 1,203 4.85

Subordinated debt and TRUPS (4)

89,053 3,144 7.12 73,971 2,760 7.52

Total interest-bearing liabilities 3,896,622 50,367 2.61 3,926,111 59,403 3.05

Noninterest-bearing deposits 1,578,695 1,555,405

Accrued expenses and other liabilities 46,207 40,594

Stockholders’ equity 605,797 553,229

Total liabilities and stockholders’ equity $ 6,127,321 $ 6,075,339

Taxable-equivalent net interest income $ 105,649 $ 93,222

Net interest spread 2.82 % 2.32 %

Net interest margin 3.67 3.28

Net interest margin excluding accretion (3)

Cost of funds 1.86 2.19

Cost of deposits 1.77 2.09

Cost of debt 7.09 6.45

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(1) All amounts are reported on a taxable-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 $8.1 million and $8.0 million of accretion interest on loans for the six months ended June 30, 2026 and 2025, respectively.

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

There were zero and $769 thousand of amortization of deposit discounts and $159 thousand and $463 thousand of amortization of borrowing fair value adjustments for the six months ended June 30, 2026 and 2025, respectively.

All deposit discounts have been fully amortized as of December 31, 2025.

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, 2026 Compared to the Six Months Ended June 30, 2025

($ in thousands) Volume Due to Rate Total

Interest income from earning assets:

Commercial real estate $ 1,088 $ 3,044 $ 4,132

Residential real estate 2,804 (608) 2,196

Construction (294) 157 (137)

Commercial (411) (601) (1,012)

Consumer (1,243) 209 (1,034)

Credit cards (106) 122 16

Taxable investment securities 35 134 169

Interest-bearing deposits (135) (804) (939)

Total interest income $ 1,738 $ 1,653 $ 3,391

Interest-bearing liabilities:

Interest-bearing checking deposits $ (384) $ (2,938) $ (3,322)

Money market and savings deposits 82 (2,902) (2,820)

Time deposits 450 (2,569) (2,119)

Brokered deposits 42 (14) 28

Advances from FHLB (942) (245) (1,187)

Subordinated debt 531 (147) 384

Total interest-bearing liabilities (221) (8,815) (9,036)

Net change in net interest income $ 1,959 $ 10,468 $ 12,427

The Company’s NIM increased from 3.28% for the six months ended June 30, 2025 to 3.67% for the six months ended June 30, 2026.

Margins were higher due to a $64.8 million increase in interest-earning asset balances and a 6 bp increase in interest-earning asset yields.

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

The increase in the average balances of interest-bearing deposits of $4.6 million was offset by a 44 basis point decrease in the associated rates paid, as well as a $49.2 million decrease in the average balance of FHLB advances and a 99 basis point decrease in the associated rates paid.

Net accretion income impacted net interest margin by 27 basis points and 24 basis points for the six months ended June 30, 2026 and 2025, respectively, which resulted in NIM excluding accretion of 3.40% and 3.04% for the same periods.

Provision for Credit Losses and ACL

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 three months ended March 31, 2026 was $7.2 million, an increase of $110 thousand from $7.1 million for the three months ended March 31, 2025.

The increase was primarily due to an increase in trust and investment fee income of $314 thousand, an increase in mortgage banking revenue of $210 thousand driven by increased mortgage servicing activity, and a $121 thousand increase in interchange credits.

These favorable changes were partially offset by a decrease in other noninterest income of $617 thousand due to the absence of one-time bank-owned life insurance income recorded in the first quarter of 2025.

Total noninterest income for the six months ended June 30, 2026 decreased $466 thousand, or 2.8%, when compared to the same period in 2025.

The decrease was primarily due to an $833 thousand decrease in other noninterest income and a $615 thousand decrease in mortgage banking revenue , partially offset by a $475 thousand increase in trust and investment fee inc ome and a $293 thousand increase in interchange credits.

Noninterest Expense

Noninterest expense of $37.1 million for the three months ended March 31, 2026 increased $3.3 million when compared to the $33.7 million for the three months ended March 31, 2025.

The increase was primarily due to higher salaries and employee benefits expense of

$3.2 million and higher software and data processing costs of $449 thousand, partially offset by the decrease in the amortization of other intangible assets of $298 thousand.

The Company reported income tax expense of $5.6 million and $4.5 million for the three months ended March 31, 2026 and 2025, respectively.

The effective tax rate was 24.58% and 24.61% for the three months ended March 31, 2026 and 2025, respectively.

Total noninterest expense for the six months ended June 30, 2026 increased $4.6 million, or 6.7%, when compared to the same period in 2025.

Noninterest expense line items increased primarily due to higher salaries and employee benefit expenses of $3.9 million and a $1.0 million increase in software and data processing expense.

These increases were partially offset by lower amortization of intangible assets of $595 thousand during the six months ended June 30, 2026 .

The Company reported income tax expense of $11.9 million and $9.6 million for the six months ended June 30, 2026 and 2025, respectively.

The effective tax rate was 24.85% and 24.73% for the six months ended June 30, 2026 and 2025, respectively.

ANALYSIS OF FINANCIAL CONDITION

Balance Sheet Summary

Total assets were $6.21 billion at March 31, 2026, a decrease of $52.8 million, or 0.8%, when compared to $6.26 billion at December 31, 2025.

Total assets were $6.15 billion at June 30, 2026 , a decrease of $107.4 million, or 1.7%, when compared to $6.26 billion at December 31, 2025 .

The decrease was primarily due to a decrease in our loan portfol io of $22.6 million and a decrease in cash and cash equivalents of $97.9 million, which were partially offset by an increase in our investment securities portfolio of $18.4 million .

The ratio of the ACL as a percentage of loans was 1.21% and 1.20% at March 31, 2026 and December 31, 2025, respectively.

The ratio of the ACL as a percentage of loans was 1.20% and 1.20% at June 30, 2026 and December 31, 2025, respectively.

Cash and Cash Equivalents

Cash and cash equivalents totaled $340.8 million at March 31, 2026 compared to $355.6 million at December 31, 2025.

Cash and cash equivalents totaled $257.7 million at June 30, 2026, compared to $355.6 million at December 31, 2025.

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

Management believes liquidity needs are satisfied by the current balance of cash and cash equivalents, readily available access to traditional and wholesale funding sources, and the portions of the investment and loan portfolios that mature within one year.

The decrease in cash and cash equivalents was primarily driven by seasonal run-off of the municipal deposits.

The decrease in cash and cash equivalents was primarily driven by seasonal run-off of municipal deposits.

Investment Securities

The investment portfolio includes debt and equity securities.

Debt securities are classified as either AFS or HTM.

Debt securities are classified as either available for sale (“AFS”) or held to maturity (“HTM”).

AFS investment securities are stated at estimated fair value based on market prices.

3 unchanged sentences

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

At March 31, 2026, 40.15% of the portfolio of debt securities was classified as AFS and 59.85% was classified as HTM, compared to 34.69% and 65.31%, respectively, at December 31, 2025.

At June 30, 2026, 43.97% of the portfolio of debt securities was classified as AFS and 56.03% was classified as HTM, compared to 34.69% and 65.31%, respectively, at December 31, 2025.

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 the investment portfolio.

Investment securities, including restricted stock and equity securities, totaled $681.8 million at March 31, 2026, an increase of $22.5 million, or 3.4%, compared to $659.4 million at December 31, 2025.

At March 31, 2026, AFS securities, carried at fair value, totaled $264.0 million compared to $220.4 million at December 31, 2025.

At March 31, 2026, AFS securities consisted of 87.37% mortgage-backed securities, 7.71% U.S.

Investment securities, including restricted stock and equity securities, totaled $677.8 million at June 30, 2026, an increase of $18.4 million, or 2.80%, compared to $659.4 million at December 31, 2025.

At June 30, 2026, AFS securities, carried at fair value, totaled $287.4 million, compared to $220.4 million at December 31, 2025.

At June 30, 2026, AFS securities consisted of 85.95% mortgage-backed securities, 7.05% U.S.

government agency securities and 7.00% corporate bonds, compared to 88.50%, 9.36% and 2.14%, respectively, at December 31, 2025.

At March 31, 2026, the gross unrealized losses on AFS securities were all related to changes in interest rates and were $7.9 million, or less than 1% of total assets and 2% of total stockholders’ equity.

At March 31, 2026, the AOCI loss was $5.3 million, compared to $4.6 million at December 31, 2025.

At March 31, 2026, HTM securities, carried at amortized cost, totaled $393.6 million, compared to $414.8 million at December 31, 2025.

At March 31, 2026, HTM securities consisted of 74.74% mortgage-backed securities, 23.49% U.S.

At June 30, 2026, the gross unrealized losses on AFS securities were all related to changes in interest rates and were $9.1 million, or less than 1% of total assets and 2% of total stockholders’ equity.

At June 30, 2026, the AOCI loss was $6.1 million, compared to $4.6 million at December 31, 2025.

At June 30, 2026, HTM securities, carried at amortized cost net of allowance, totaled $366.2 million, compared to $414.8 million at December 31, 2025.

At June 30, 2026, HTM securities consisted of 77.69% mortgage-backed securities, 20.41% U.S.

government agency securities and 1.90% other debt securities, compared to 73.06%, 25.26% and 1.68%, respectively, at December 31, 2025.

At March 31, 2026 and December 31, 2025, 96.98% and 98.18%, respectively, of the Bank’s carrying value of its investment portfolio consisted of securities issued or guaranteed by U.S.

At June 30, 2026 and December 31, 2025, 83.22% and 86.82%, 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, 2026 or December 31, 2025.

There were no speculative grade HTM securities at June 30, 2026 or December 31, 2025.

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 subordinated debt securities of other banks.

The following tables present the amortized cost of HTM securities based on their lowest publicly available credit rating as of March 31, 2026 and December 31, 2025.

March 31, 2026

The following tables present the amortized cost of HTM securities based on their lowest publicly available credit rating as of June 30, 2026 and December 31, 2025.

June 30, 2026

Investment Grade

13 unchanged sentences

The Company originates residential mortgage loans for sale on the secondary market, which are recorded at fair value.

At March 31, 2026 and December 31, 2025, the fair value of loans held for sale amounted to $24.0 million and $32.5 million, respectively.

At June 30, 2026 and December 31, 2025, the fair value of loans held for sale amounted to $30.8 million and $32.5 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.

During the three months ended March 31, 2026, the Bank repurchased no loans.

During the three months ended March 31, 2025, the Bank repurchased one loan with an aggregate value of $415 thousand.

During the three months ended June 30, 2026 and 2025 and six months ended June 30, 2026, the Bank repurchased no loans .

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

Loans Held for Investment

The following table summarizes the Company’s loan portfolio at March 31, 2026 and December 31, 2025.

($ in thousands) March 31, 2026 % of Total Loans December 31, 2025 % of Total Loans $ Change % Change

The following table summarizes the Company’s loan portfolio at June 30, 2026 and December 31, 2025.

($ in thousands) June 30, 2026 % of Total Loans December 31, 2025 % of Total Loans Change ($) Change (%)

Commercial real estate $ 2,603,014 53.37 % $ 2,643,996 53.95 % $ (40,982) (1.6) %

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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.

Non-owner occupied CRE loans, including construction loans, totaled $2.14 billion and $2.15 billion at March 31, 2026 and December 31, 2025, respectively, and as a percentage of the Bank’s Tier 1 Capital plus ACL were 332.94% and 342.55%, respectively.

Non-owner occupied CRE loans, excluding land and construction loans, totaled $1.87 billion at June 30, 2026 and $1.84 billion at December 31, 2025, and as a percentage of the Bank’s Tier 1 Capital plus ACL were 326.63% and 342.55%, respectively.

Management has extensive experience in CRE lending and has implemented and continues to maintain heightened risk management procedures, as well as strong underwriting criteria with respect to the Bank’s CRE portfolio.

3 unchanged sentences

Non-Owner Occupied CRE Loans

March 31, 2026

June 30, 2026

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

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____________________________________

(1) Other non-owner occupied CRE loans include commercial – improved loans of $160.1 million, self storage loans of $67.0 million, farm real estate loans of $46.4 million, lot/land loans of $3.3 million and other loans $89.3 million.

(2) The balances for the non-owner occupied CRE portfolio as of March 31, 2026, 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 $161.3 million, self storage loans of $66.7 million, farm real estate loans of $45.8 million, restaurant loans of $41.8 million and other loans of $42.5 million.

(2) The balances for the non-owner occupied CRE portfolio as of June 30, 2026 , 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 $30.8 million .

Owner Occupied CRE Loans

March 31, 2026

June 30, 2026

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

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____________________________________

(1) Other owner occupied CRE loans include church loans of $56.8 million, marina/boat slip loans of $17.7 million, fire/EMS building loans of $38.0 million and other loans $82.7 million.

(1) Other owner occupied CRE loans include church loans of $51.7 million, fire/EMS building loans of $37.6 million, auto service center of $34.0 million and other loans of $52.5 million.

(2) Excludes loans held for sale of $30.8 million.

Office CRE Loan Portfolio

The Bank’s office CRE loan portfolio, which includes owner occupied and non-owner occupied CRE loans, was $480.9 million, or 9.9% of total loans of $4.85 billion at March 31, 2026.

The Bank’s office CRE loan portfolio, which includes owner occupied and non-owner occupied CRE loans, was $475.9 million, or 9.8% of total loans of $4.88 billion at June 30, 2026.

The Bank’s office CRE loan portfolio included $107.9 million, or 22.7% of total office CRE loans, with medical tenants, and $68.9 million, or 14.5% of total office CRE loans, with government or government contractor tenants.

At March 31, 2026, there were 467 loans in the office CRE loan portfolio with an average and median loan size of $1.0 million and $378 thousand, respectively.

Loan-to-value (“LTV”) estimates are less than or equal to 50% for $167.3 million, or 34.8%, of the office CRE loan portfolio, and greater than 80% for $11.1 million, or 2.3%, of the office CRE loan portfolio at March 31, 2026.

At June 30, 2026, there were 463 loans in the office CRE loan portfolio, with an average and median loan size of $1.0 million and $389 thousand, respectively.

Loan-to-value (“LTV”) estimates are less than or equal to 50% for $166.2 million, or 34.9% of the office CRE loan portfolio, and greater than 80% for $13.1 million, or 2.8% of the office CRE loan portfolio at June 30, 2026.

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 March 31, 2026 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 estimates for the office CRE loan portfolio as of June 30, 2026 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.

June 30, 2026

LTV Range ($ in thousands)

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Total 463 $ 475,888 100.0 %

There were 17 office CRE loans with balances greater than $5.0 million, totaling $164.8 million at March 31, 2026, compared to 17 loans totaling $166.1 million at December 31, 2025.

There were 16 office CRE loans with balances greater than $5.0 million, totaling $147.8 million at June 30, 2026, compared to 17 loans totaling $166.1 million at December 31, 2025.

The decrease in this portfolio segment was the result of normal amortization.

Of the office CRE portfolio balance, 81.1% of the loans were secured by properties in rural or suburban areas with limited exposure to metropolitan cities and 97.5% were secured by properties with five stories or less at March 31, 2026.

Of the office CRE loans, $28.7 million were classified as special mention or substandard at March 31, 2026.

There were no charge-offs within the office CRE portfolio during the three months ended March 31, 2026 .

Of the office CRE portfolio balance, 80.8% of the loans were secured by properties in rural or suburban areas with limited exposure to metropolitan cities and 97.0% were secured by properties with five stories or less at June 30, 2026.

Of the office CRE loans, $33.7 million will mature and $10.0 million will reprice prior to December 31, 2026.

Of the office CRE loans, $17.6 million were classified as special mention or substandard at June 30, 2026.

There were no charge-offs within the office CRE portfolio during the three and six months ended June 30, 2026.

Maturity of Loan Portfolio

The following table sets forth the maturities and interest rate sensitivity of the loan portfolio at March 31, 2026.

The following table sets forth the maturities and interest rate sensitivity of the loan portfolio at June 30, 2026.

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

June 30, 2026

($ 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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Loans Related to Cannabis Business

Loan balances related to our cannabis business were $91.9 million and $86.2 million, or 1.90% and 1.76% of total gross loans, as of March 31, 2026 and December 31, 2025, respectively.

Loan balances related to the cannabis business were $91.3 million and $86.2 million, or 1.87% and 1.76% of total gross loans, as of June 30, 2026 and December 31, 2025, respectively.

Asset Quality

ACL and Provision for Credit Losses

The ACL as a percentage of loans increased to 1.21% at March 31, 2026, compared to 1.20% at December 31, 2025.

At March 31, 2026, the Company’s ACL decreased $355 thousand, to $58.5 million from $58.8 million at December 31, 2025.

The decrease in the general allowance was primarily due to loan payoffs, partially offset by unfavorable economic conditions in 2026.

The Company recorded a provision for credit losses on loans of $85 thousand for the three months ended March 31, 2026, compared to $1.0 million for the three months ended March 31, 2025, primarily due to loan growth and net charge-offs, which amounted to $847 thousand, or 0.02% of average loans, for the three months ended March 31, 2026, compared to net charge-offs of $554 thousand, or 0.01% of average loans, for the three months ended March 31, 2025.

The increase in charge-offs in 2026 was primarily due to the marine and CRE portfolio.

The ratio of annualized net charge-offs to average loans was 0.07% and 0.05% for the three months ended March 31, 2026 and 2025, respectively.

The ACL as a percentage of loans remained flat at 1.20% at June 30, 2026, compared to December 31, 2025.

At June 30, 2026, the Company’s ACL decreased $99 thousand to $58.7 million, from $58.8 million at December 31, 2025.

The Company recorded a PCL on loans in the consolidated statement of income of $896 thousand for the three months ended June 30, 2026, compared to $1.5 million for the three months ended June 30, 2025, primarily due to lower net charge-offs partially offset by loan growth.

Net charges-offs were $123 thousand for the three months ended June 30, 2026, compared to $649 thousand, or 0.01% of average loans, for the three months ended June 30, 2025.

The decrease in charge-offs in 2026 was primarily due to reduced losses in the marine and CRE portfolios.

The ratio of annualized net charge-offs to average loans was 0.01% and 0.05% for the three months ended June 30, 2026 and 2025, respectively.

The Company recorded a PCL on loans in the consolidated statement of income of $981 thousand for the six months ended June 30, 2026, compared to $2.6 million for the six months ended June 30, 2025, primarily due to lower charge-offs and a favorable economic outlook, partially offset by loan growth.

Net charge-offs were $1.0 million, or 0.02% of average loans, for the six months ended June 30, 2026, compared to net charge-offs of $1.2 million, or 0.03% of average loans, for the six months ended June 30, 2025.

The decrease in charge-offs in 2026 was primarily due to the reduced losses in the marine and CRE portfolios.

The ratio of annualized net charge-offs to average loans was 0.04% and 0.05% for the six months ended June 30, 2026 and 2025, 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 following table allocates the ACL by loan portfolio category as of the dates indicated.

The following tables allocate the ACL by loan portfolio 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.

Three Months Ended

March 31, 2026 March 31, 2025

Three Months Ended June 30,

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

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(2) ACL balance as a percent of average loan balance of each category.

The following table presents the net charge-offs or recoveries by average loan portfolio category for the three months ended March 31, 2026 and 2025.

Three Months Ended

March 31, 2026 March 31, 2025

Six Months Ended June 30,

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

ACL Balance Average Loan Balance (1)

Commercial real estate $ 20,780 $ 2,594,087 0.80 % $ 20,179 $ 2,557,316 0.79 %

Residential real estate 23,531 1,441,883 1.63 23,203 1,340,938 1.73

Construction 6,153 343,308 1.79 5,805 352,564 1.65

Commercial 3,377 214,909 1.57 2,870 228,535 1.26

Consumer 4,828 256,202 1.88 6,188 301,515 2.05

Credit cards 68 4,246 1.60 238 6,403 3.72

Total $ 58,737 $ 4,854,635 1.21 $ 58,483 $ 4,787,271 1.22

____________________________________

(1) Excludes loans held for sale.

(2) ACL balance as a percent of average loan balance of each category.

The following tables present the net charge-offs or recoveries by average loan portfolio category as of the dates indicated.

Three Months Ended June 30,

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

8 unchanged sentences

Total $ 123 $ 4,847,393 0.01 $ 649 $ 4,802,634 0.05

Six Months Ended June 30,

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

Net Charge-off (Recovery) % Net Charge-offs (Recoveries) Average Loan Balance (1)

Net Charge-off (Recovery) %

Commercial real estate $ 64 $ 2,594,087 0.00 % $ (78) $ 2,557,316 (0.01) %

Residential real estate 112 1,441,883 0.02 (3) 1,340,938 0.00

Construction (1) 343,308 0.00 (1) 352,564 0.00

Commercial 154 214,909 0.14 (85) 228,535 (0.08)

549 256,202 0.43 939 301,515 0.63

Credit cards 92 4,246 4.37 431 6,403 13.57

Total $ 970 $ 4,854,635 0.04 $ 1,203 $ 4,787,271 0.05

____________________________________

(1) Excludes loans held for sale.

2 unchanged sentences

Classified assets are substandard loans, repossessed assets and OREO.

The following tables present the Company’s classified assets by loan portfolio category at March 31, 2026 and December 31, 2025.

March 31, 2026

The following tables present the Company’s classified assets by loan portfolio category at June 30, 2026 and December 31, 2025.

June 30, 2026

($ in thousands) Classified Loans Other Real Estate Owned Repossessed Assets Total Classified Assets

15 unchanged sentences

Total $ 57,366 $ 113 $ 2,879 $ 60,358

The following table presents the Company’s total classified assets as a percentage of total assets and risk-based capital at March 31, 2026 and December 31, 2025.

March 31, 2026 December 31, 2025

The following table presents the Company’s total classified assets as a percentage of total assets and risk-based capital at June 30, 2026 and December 31, 2025.

June 30, 2026 December 31, 2025

Total classified assets as a percentage of total assets 1.41 % 0.96 %

Total classified assets as a percentage of risk-based capital 12.53 9.14

Classified assets increased $25.4 million to $85.8 million, or 1.38% of total assets, at March 31, 2026, from $60.4 million, or 0.96% of total assets, at December 31, 2025.

Classified assets increased $26.3 million to $86.6 million, or 1.41% of total assets, at June 30, 2026, from $60.4 million, or 0.96% of total assets, at December 31, 2025.

Special Mention Loans

The following table presents the Company’s special mention loans by loan portfolio category at March 31, 2026 and December 31, 2025.

($ in thousands) March 31, 2026 December 31, 2025

The following table presents the Company’s special mention loans by loan portfolio category at June 30, 2026 and December 31, 2025.

($ in thousands) June 30, 2026 December 31, 2025

Commercial real estate $ 53,741 $ 52,347

Residential real estate 19,094 19,065

Construction — —

Commercial 122 1,318

Consumer — 671

Credit cards — —

Total special mention loans $ 72,957 $ 73,401

Special mention loans increased to $97.8 million at March 31, 2026 compared to $73.4 million at December 31, 2025 and $33.5 million at March 31, 2025.

As of March 31, 2026, there were six special mention loans with individual balances greater than $5.0 million, totaling $79.1 million.

Special mention loans decreased to $73.0 million at June 30, 2026, compared to $73.4 million at December 31, 2025 .

As of June 30, 2026 , there were four special mention loans with individual balances greater than $5.0 million, totaling $53.0 million.

These loans consist primarily of multifamily commercial real estate and other commercial real estate exposures that are well-collateralized.

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Nonperforming Assets

Nonperforming assets were $68.4 million and $43.2 million, or 1.10% and 0.69% of total assets, as of March 31, 2026 and December 31, 2025, respectively.

Nonperforming assets primarily consist of two large relationships with an aggregate loan balance of $45.6 million.

These non performing loans primarily consists of multifamily and office commercial real estate based in North Carolina and Virginia.

As of March 31, 2026, these loans are well-secured by collateral and required minimal individual reserves.

When comparing March 31, 2026 to March 31, 2025, nonperforming assets increased $49.5 million, primarily due to an increase in nonaccrual loans of $49.6 million and an increase in repossessed marine and auto loans of $806 thousand, partially offset by a decrease in loans 90 days past due and accruing of $894 thousand.

Substandard loans, which include nonaccrual loans and accruing loans 90 days or more past due were $82.3 million at March 31, 2026 compared to $57.4 million at December 31, 2025 and $19.4 million at March 31, 2025.

The following table summarizes our nonperforming assets as of March 31, 2026 and December 31, 2025.

($ in thousands) March 31, 2026 December 31, 2025

Nonperforming assets were $67.2 million and $43.2 million , or 1.09% and 0.69% of total assets, as of June 30, 2026 and December 31, 2025 , respectively.

At June 30, 2026, nonperforming assets primarily consisted of three large loans with an aggregate loan balance of $44.4 million.

These nonperforming loans primarily consists of multifamily and office commercial real estate located in North Carolina and Virginia.

As of June 30, 2026 , these loans are well-secured by collateral and required minimal individual reserves.

When comparing June 30, 2026 to June 30, 2025 , nonperforming assets increased $47.6 million , primarily due to an increase in nonaccrual loans of $48.0 million , partially offset by a decrease in repossessed boats and automobiles of $274 thousand and a decrease in loans 90 days past due and accruing of $195 thousand.

Substandard loans, which include nonaccrual loans and accruing loans 90 days or more past due, were $84.3 million at June 30, 2026, compared to $57.4 million at December 31, 2025 and $19.9 million at June 30, 2025 .

The following table summarizes our nonperforming assets as of June 30, 2026 and December 31, 2025.

($ in thousands) June 30, 2026 December 31, 2025

Nonperforming assets

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Off-Balance Sheet Credit Exposure Reserve

The Company’s reserve for off-balance sheet credit exposure was $1.7 million and $2.0 million at March 31, 2026 and December 31, 2025, respectively.

The Company monitors line of credit usage and did not see substantive increases in usage or expected usage during the three months ended March 31, 2026.

The following is a breakdown of the Company’s deposit portfolio at March 31, 2026 and December 31, 2025:

($ in thousands) March 31, 2026 December 31, 2025

The Company’s reserve for off-balance sheet credit exposure was $2.2 million and $2.0 million at June 30, 2026 and December 31, 2025, respectively.

The Company monitors line of credit usage and did not see substantive increases in usage or expected usage during the three and six months ended June 30, 2026.

The following table presents the components of our deposit portfolio at June 30, 2026 and December 31, 2025.

($ in thousands) June 30, 2026 December 31, 2025

Balance % of Total Deposits Balance % of Total Deposits Change ($) Change (%)

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Total deposits $ 5,399,750 100.00 % $ 5,533,864 100.00 % $ (134,114) (2.4)

Total deposits decreased $72.2 million, to $5.46 billion at March 31, 2026 when compared to December 31, 2025.

The decrease in total deposits was primarily due to a decrease in interest-bearing checking deposits of $39.7 million, a decrease in noninterest-bearing accounts of $20.5 million and a decrease in money market and savings accounts of $19.3 million.

These decreases were partially offset by an increase in time deposits of $7.3 million.

The decrease was due to seasonal municipal deposit run offs.

Total estimated uninsured deposits were $933.0 million, or 17.1% of total deposits, at March 31, 2026 and $937.2 million, or 16.9% of total deposits, at December 31, 2025.

At March 31, 2026 there were $147.0 million included in uninsured deposits that the Bank secured using the market value of pledged collateral.

The Bank’s uninsured deposits at March 31, 2026, excluding the market value of pledged collateral, were $786.0 million, or 14.4%, of total deposits.

Total deposits decreased $134.1 million, to $5.40 billion at June 30, 2026 when compared to December 31, 2025.

The year-to-date decrease in total deposits was primarily due to a decrease in money market and savings accounts of $104.4 million, a decrease in time deposits of $19.5 million and a decrease in interest-bearing checking accounts of $19.0 million.

These decreases were partially offset by an increase in noninterest-bearing deposits of $18.9 million.

Core deposits, which exclude municipal and cannabis deposits, increased by $71.7 million, or 1.7%, during the same period.

Total estimated uninsured deposits were $975.6 million, or 18.1% of total deposits, at June 30, 2026 and $937.2 million, or 16.9% of total deposits, at December 31, 2025.

At June 30, 2026, there were $136.6 million included in uninsured deposits that the Bank secured using the market value of pledged collateral.

The Bank’s uninsured deposits at June 30, 2026, excluding the market value of pledged collateral, were $838.9 million, or 15.5% of total deposits.

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

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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, 2026, the Bank had two local municipal customer deposit relationships that exceeded 2% of total deposits, totaling $334.9 million, which represented 6.10% of total deposits of $5.49 billion.

At June 30, 2026, the Bank had one local municipal customer deposit relationship that exceeded 2% of total deposits, totaling $183.8 million, which represented 3.39% of total deposits of $5.43 billion.

At December 31, 2025, there were three customer deposit relationships that exceeded 2% of total deposits, totaling $539.0 million, which represented 9.70% of total deposits of $5.56 billion.

Deposit balances related to the cannabis business were $154.4 million and $159.4 million, or 2.83% and 2.88% of total deposits, as of March 31, 2026 and December 31, 2025, respectively.

Deposit balances related to the cannabis business were $168.5 million and $159.4 million, or 3.12% and 2.88% of total deposits, as of June 30, 2026 and December 31, 2025, respectively.

Wholesale Funding – Short-Term Borrowings

The Company borrows from the FHLB on a short-term basis to meet liquidity needs.

There were no short-term borrowings outstanding as of March 31, 2026 and December 31, 2025.

The Company’s wholesale funding, which includes FHLB advances and brokered deposits, was $11.0 million and $10.9 million at March 31, 2026 and December 31, 2025, respectively.

At March 31, 2026, the Company had $11.0 million of brokered deposits and no FHLB advances or securities sold under agreements to repurchase or overnight borrowings from correspondent banks.

There were no short-term borrowings outstanding as of June 30, 2026 and December 31, 2025.

The Company’s wholesale funding, which includes FHLB advances and brokered deposits, was $796 thousand and $10.9 million at June 30, 2026 and December 31, 2025, respectively.

At June 30, 2026, the Company had $796 thousand of brokered deposits and no FHLB advances or securities sold under agreements to repurchase or overnight borrowings from correspondent banks.

At December 31, 2025, the Company had $10.9 million of brokered deposits and no FHLB advances or securities sold under agreements to repurchase or overnight borrowings from correspondent banks.

1 unchanged sentence

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.

The Company had no long-term borrowings with the FHLB as of March 31, 2026.

The Company had no long-term borrowings with the FHLB as of June 30, 2026.

In November 2025, the Company issued $60 million in subordinated debt maturing in 2035, carrying a fixed interest rate of 6.25% through November 2030.

The proceeds were used to fully redeem two existing subordinated debt issuances totaling $44.5 million.

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

The debt balances of $19.0 million at March 31, 2026 and $19.0 million at December 31, 2025 were presented net of fair value adjustments of $1.6 million and $1.7 million, respectively.

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

The debt b alances of $11.2 million and $11.2 million were presented net of fair value adjustments of $1.1 million and $1.2 million at March 31, 2026 and December 31, 2025, respectively.

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

The debt balances of $19.1 million at June 30, 2026 and $19.0 million at December 31, 2025 were presented net of fair value adjustments of $1.6 million and $1.7 million, respectively.

Additionally, as a result of the merger with The Community Financial Corporation in 2023 , the Company assumed liability for Junior Subordinated Debentures with an outstanding principal balance of $12.4 million .

The debt b alances of $11.3 million and $11.2 million were presented net of fair value adjustments of $1.1 million and $1.2 million at June 30, 2026 and December 31, 2025, respectively.

Stockholders’ Equity

Total stockholders’ equity increased $12.8 million, or 2.2%, to $602.7 million at March 31, 2026 when compared to December 31, 2025, primarily due to $17.1 million of net income, partially offset by dividends declared of $4.0 million and an increase in accumulated other comprehensive loss of $677 thousand.

($ in thousands, except per share data) March 31, 2026 December 31, 2025 $ Change % Change

Total stockholders’ equity increased $26.2 million, or 4.4%, to $616.1 million at June 30, 2026 when compared to December 31, 2025, primarily due to $36.0 million of net income, partially offset by dividends declared of $8.7 million, an increase in accumulated other comprehensive loss of $1.5 million and $891 thousand to repurchase 40,093 shares of the Company’s common stock through the Repurchase Program.

($ in thousands, except per share data) June 30, 2026 December 31, 2025 Change ($) Change (%)

Common stock, $0.01 par value per share $ 334 $ 334 $ — — %

23 unchanged sentences

The Company derives liquidity through increased customer deposits, cash flow from the investment portfolio, loan repayments, borrowings and income from earning assets.

The net decrease in cash and cash equivalents was $14.7 million for the three months ended March 31, 2026, compared to a net decrease of $70.8 million for the three months ended March 31, 2025.

The decrease in cash and cash equivalents in the three months ended March 31, 2026 was primarily due to a $51.7 million decrease in interest-bearing deposits and a $20.5 million decrease in noninterest-bearing deposits.

The net decrease in cash and cash equivalents was $97.9 million for the six months ended June 30, 2026, compared to a net decrease of $274.9 million for the six months ended June 30, 2025.

The decrease in cash and cash equivalents during the six months ended June 30, 2026 was primarily due to a $153.0 million decrease in interest-bearing deposits, partially offset by a $28.9 million decrease in loans and an $18.9 million increase 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 funds markets.

At March 31, 2026, the Bank had approximately $1.43 billion of available liquidity, including $340.8 million in cash and cash equivalents, $328.0 million in unpledged securities, $14.7 million in secured borrowing capacity with the FRB and $777.6 million in secured borrowing capacity at the FHLB of Atlanta, partially offset by a letter of credit of $33.7 million.

At June 30, 2026, the Bank had approximately $1.9 billion of available liquidity, including $257.7 million in cash and cash equivalents, $314.4 million in unpledged securities, $25.1 million in secured borrowing capacity with the FRB and $911.9 million in secured borrowing capacity at the FHLB of Atlanta, partially offset by a letter of credit of $33.7 million.

In addition, the Bank has arrangements with other correspondent banks whereby it has $396.1 million available in federal funds lines of credit and a reverse repurchase agreement available to meet any short-term needs that 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 $777.6 million and $788.1 million at March 31, 2026 and December 31, 2025, respectively.

Through the FHLB, the Bank had available lendable collateral of approximately $911.9 million and $788.1 million at June 30, 2026 and December 31, 2025, 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 Bank has pledged investment securities with the FRB under the FRB Discount Window program.

The following table presents the Company’s liquidity in use and liquidity available as of March 31, 2026.

March 31, 2026

The following table presents the Company’s liquidity in use and liquidity available as of June 30, 2026.

June 30, 2026

($ in thousands) Liquidity in Use Liquidity Available

17 unchanged sentences

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, 2026.

The Bank was deemed “well-capitalized” under applicable regulatory capital requirements at June 30, 2026.

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

The Company and the Bank annually update its strategic plan, which includes a three-year capital plan.

The Company and the Bank annually update their strategic plan, which includes a three-year capital plan.

In developing its plan, the Company considers the impact to capital of asset growth, loan concentrations, income accretion, dividends, holding company liquidity, investment in markets and people and stress testing.

As of March 31, 2026, 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 PCA regulations.

The following tables present the applicable capital ratios for the Company and the Bank as of March 31, 2026 and December 31, 2025.

March 31, 2026 Tier 1 Leverage Ratio Common Equity Tier 1 Ratio Tier 1 Risk-Based Capital Ratio Total Risk-Based Capital Ratio

As of June 30, 2026, 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 PCA regulations.

The following tables present the applicable capital ratios for the Company and the Bank as of June 30, 2026 and December 31, 2025.

June 30, 2026 Tier 1 Leverage Ratio Common Equity Tier 1 Ratio Tier 1 Risk-Based Capital Ratio Total Risk-Based Capital Ratio

The Company 9.52 % 11.09 % 11.71 % 14.17 %

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The Bank 9.30 11.75 11.75 13.00

On February 18, 2026, the Company announced that its Board of Directors declared a cash dividend of $0.12 per share, payable on March 18, 2026, to holders of record of shares of common stock as of March 4, 2026.

On May 21, 2026, the Company announced that its Board of Directors declared a cash dividend of $0.14 per share, payable on June 17, 2026, to holders of record of shares of common stock as of June 3, 2026.

The Company has no business other than holding the stock of the Bank and does not currently have any material funding requirements, except for the payment of dividends on common stock, and the payment of interest on subordinated debentures and subordinated notes, and noninterest expense.

In May 2026, our Board of Directors authorized the repurchase of up to $30 million of our outstanding common stock over the next 12 months (the “Repurchase Program”).

During the three and six months ended June 30, 2026, the Company repurchased 40,093 shares of its common stock at an average cost of $22.22 per share, or $891 thousand in aggregate.

See Note 10 – “Regulatory Capital Requirements” in the “Notes to Consolidated Financial Statements” included in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information about the regulatory capital positions of the Bank and the Company.

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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 data) March 31, 2026 December 31, 2025

($ in thousands, except per share data) June 30, 2026 December 31, 2025

Total assets $ 6,151,431 $ 6,258,818

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Tangible book value per common share at period end 15.77 14.87

Return on Average Assets (“ROAA”)

ROAA is a financial ratio that measures the profitability of a company in relation to the average assets.

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

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

($ in thousands) 2026 2025 2026 2025

Net income $ 18,865 $ 15,507 $ 35,953 $ 29,271

Annualized net income $ 75,667 $ 62,198 $ 72,502 $ 59,027

Net income $ 18,865 $ 15,507 $ 35,953 $ 29,271

amortization of other intangible assets, net of tax 1,479 1,708 2,972 3,425

Adjusted net income – non-GAAP 20,344 17,215 38,925 32,696

Annualized adjusted net income – non-GAAP $ 81,600 $ 69,049 $ 78,495 $ 65,934

Average assets $ 6,080,508 $ 6,021,385 $ 6,127,321 $ 6,075,339

Return on average assets 1.24 % 1.03 % 1.18 % 0.97 %

Adjusted return on average assets – non-GAAP 1.34 % 1.15 % 1.28 % 1.09 %

Return on Average Common Equity (“ROACE”)

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This financial metric is expressed in the form of a percentage which is equal to net income 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) 2026 2025 2026 2025

7 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) 2026 2025 2026 2025

8 unchanged sentences

Adjusted Efficiency Ratio – Non-GAAP

Adjusted efficiency ratio – non-GAAP is computed by dividing (i) noninterest expense less amortization of other intangible assets and credit card fraud losses by (ii) the sum of taxable-equivalent NII and noninterest income less the sale and the fair value of held for sale assets, as applicable.

Adjusted efficiency ratio – non-GAAP is computed by dividing (i) noninterest expense less amortization of other intangible assets by (ii) the sum of taxable-equivalent NII and noninterest income.

Adjusted efficiency ratio – non-GAAP 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) 2026 2025 2026 2025

2 unchanged sentences

Adjusted noninterest expense $ 33,693 $ 32,138 $ 68,769 $ 63,607

Efficiency ratio 57.76 % 60.83 % 59.83 % 62.19 %

Adjusted efficiency ratio – non-GAAP 54.49 56.73 56.50 57.95

5 unchanged sentences

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