# Eagle Financial Services Inc: Form 10-Q for the period ended Jun 30, 2026

- Company: [Eagle Financial Services Inc](/companies/efsi.md) (CIK 880641)
- Form: 10-Q
- Filed: 2026-08-10
- Accepted by EDGAR: Aug 10, 2026, 18:30 ET
- Period: 2026-06-30
- Accession: 0000880641-26-000023
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/880641/000088064126000023/efsi-20260630.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/880641/000088064126000023/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2026-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Income tax | 3 months, 2026-04-01 to 2026-06-30 | $1.5m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2026-01-01 to 2026-06-30 | $2.5m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2026-04-01 to 2026-06-30 | $5.0m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2026-01-01 to 2026-06-30 | $8.7m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2026-04-01 to 2026-06-30 | $0.92 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2026-01-01 to 2026-06-30 | $1.61 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2026-04-01 to 2026-06-30 | $0.92 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2026-01-01 to 2026-06-30 | $1.61 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2026-04-01 to 2026-06-30 | 5,412,016 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2026-01-01 to 2026-06-30 | 5,412,018 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2026-01-01 to 2026-06-30 | −$8.2m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 6 months, 2026-01-01 to 2026-06-30 | $491.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 6 months, 2026-01-01 to 2026-06-30 | $3.4m | us-gaap:PaymentsOfDividendsCommonStock |
| Total assets | at 2026-06-30 | $1.85bn | us-gaap:Assets |
| Total liabilities | at 2026-06-30 | $1.65bn | us-gaap:Liabilities |
| Long-term debt | at 2026-06-30 | $29.6m | us-gaap:LongTermDebt |
| Shareholders' equity | at 2026-06-30 | $193.9m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 79,340 characters.

The purpose of this discussion is to focus on certain information relevant to the Company’s financial condition, results of operations, liquidity and capital resources. This discussion should be read in conjunction with the Company’s Audited Consolidated Financial Statements and notes thereto included in the 2025 Form 10-K, and in conjunction with the Unaudited Consolidated Financial Statements and notes thereto presented in Part I, Item 1, Financial Statements, of this Form 10-Q. Operating results for the three and six months ended June 30, 2026 are not necessarily indicative of the results for the full-year ending December 31, 2026 or any future period.

GENERAL

Eagle Financial Services, Inc. is a bank holding company which owns 100% of the stock of Bank of Clarke (the “Bank” and, collectively with Eagle Financial Services, Inc., the “Company”, “we”, “us” or “our”). Accordingly, the results of operations for the Company are dependent upon the operations of the Bank.

The Bank conducts a commercial banking business which consists of attracting deposits from the general public and investing those funds in commercial, consumer and real estate loans and mortgage-backed securities, municipal and U.S. government agency securities. The Bank’s deposits are insured by the Federal Deposit Insurance Corporation to the maximum extent permitted by law.

The Company strives to be an outstanding financial institution in its market by: building solid sustainable relationships with its customers, employees, communities, and shareholders; offering best-in-class products and services; and being the leader in the markets it serves.

At June 30, 2026, the Company had total assets of $1.85 billion, net loans of $1.48 billion, total deposits of $1.60 billion, and shareholders’ equity of $193.9 million.

The Company has continued to build on its strategic actions taken during 2025, which was marked by a successful capital raise and balance sheet repositioning of its investment securities portfolio. These actions strengthened its balance sheet and improved its forward earnings profile. Our vision for 2026 is about disciplined growth with smart investment and continued focus on people and technology, which we believe will lead to stronger core earnings and a balance sheet positioned for more consistent results.

CRITICAL ACCOUNTING ESTIMATES

The financial statements of the Company are prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"), which requires us to make estimates and assumptions. These estimates, assumptions and judgments are based on information available as of the date of the financial statements; accordingly, as this information changes, the financial statements may reflect different estimates, assumptions and judgments. Certain policies inherently rely more extensively on the use of estimates, assumptions and judgments and as such may have a greater possibility of producing results that could be materially different than originally reported.

Our most significant policies are described in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations and Note 1 to our audited financial statements for the year ended December 31, 2025, included in the Company's 2025 Annual Report on Form 10-K filed with the SEC. There have been no changes since that time.

NON-GAAP FINANCIAL MEASURES

This report refers to certain financial measures that are computed under a basis other than GAAP ("non-GAAP"). The Company uses certain non-GAAP financial measures, including non-GAAP net income, non-GAAP noninterest income, non-GAAP earnings per share, non-GAAP return on average equity and average assets, tax-equivalent net interest income and efficiency ratio, to provide meaningful supplemental information regarding the Company's operational performance and to enhance investors' overall understanding of such financial performance. The methodology for determining these non-GAAP measures may differ among companies. Non-GAAP measures are supplemental and not a substitute for, or more important than, financial measures prepared in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures which may be presented by other companies.

The Company executed significant non-recurring transactions during the second quarter of 2026 and the first quarter of 2025 that significantly impacted the Company's operating results for the respective periods. In May 2026, the Company sold its membership interest in Bearing Insurance Group, LLC ("Bearing") to an unaffiliated third party and recognized a pre-tax gain of $3.5 million. During the first quarter of 2025, the Company executed balance sheet repositioning transactions and recorded a realized loss on the sale of the available for sale securities totaling $12.4 million. These transactions significantly impacted the Company's operating results and certain performance metrics and ratios for the three months ended June 30, 2026 and the six months ended June 30, 2026 and 2025.

The following table reconciles the GAAP reported measure to the adjusted non-GAAP measure to show the impact of significant non-recurring transactions for the periods presented:

*(dollars in thousands except for per share data)*

|  | Three Months Ended June 30, 2026 | 2025 | Six Months Ended June 30, 2026 | 2025 |
| --- | ---: | ---: | ---: | ---: |
| GAAP Net income (loss) | $4,981 | $5,270 | $8,721 | $(1,704) |
| Adjustments to net income (loss): |  |  |  |  |
| Loss on sales of securities | — | — | — | 12,425 |
| (Gain) on sale of other assets | (3,486) | — | (3,486) | — |
| Tax effect of adjustments to net income (loss) | 732 | — | 732 | (2,609) |
| Non-GAAP Net income | $2,227 | $5,270 | $5,967 | $8,112 |
| GAAP Noninterest income (loss) | $8,590 | $4,917 | $13,518 | $(3,637) |
| Adjustments to noninterest income (loss): |  |  |  |  |
| Loss on sales of securities | — | — | — | 12,425 |
| (Gain) on sale of other assets | (3,486) | — | (3,486) | — |
| Non-GAAP Noninterest income | $5,104 | $4,917 | $10,032 | $8,788 |
| Earnings (loss) per share, basic and diluted (GAAP) | $0.92 | $0.98 | $1.61 | $(0.34) |
| Effect of adjustments to net income | (0.51) | — | (0.51) | 1.97 |
| Non-GAAP Earnings per share, basic and diluted | $0.41 | $0.98 | $1.10 | $1.63 |
| Annualized return on average equity | 10.35% | 11.93% | 9.18% | (2.19)% |
| Effect of adjustments to net income | (5.72)% | —% | (2.90)% | 12.62% |
| Non-GAAP Annualized return on average equity | 4.63% | 11.93% | 6.28% | 10.43% |
| Annualized return on average assets | 1.08% | 1.09% | 0.95% | (0.18)% |
| Effect of adjustments to net income | (0.60)% | —% | (0.30)% | 1.03% |
| Non-GAAP Annualized return on average assets | 0.48% | 1.09% | 0.65% | 0.85% |

43

For additional information and calculations of tax-equivalent net interest income and efficiency ratio, see the sections entitled "Tax-Equivalent Net Interest Income" and "Efficiency Ratio" below.

FORWARD LOOKING STATEMENTS

This report contains statements that are "forward looking statements." The Company may also make forward looking statements in other documents that are filed with the Securities and Exchange Commission, in our annual reports to shareholders, in press releases and other written materials, and in oral statements made by our officers, directors, or employees. Forward looking statements include statements regarding our expectations, intentions, and objectives, or other expressions that predict or indicate future events and trends and which do not relate to historical matters. The words “believe,” “expect,” “may,” “will,” “should,” "could," “projects,” “contemplates,” “anticipates,” “forecasts,” “intends,” or other similar words or terms are intended to identify forward looking statements. You should not rely on forward looking statements, as they involve known and unknown risks, uncertainties, and other factors, some of which are beyond our control. These risks, uncertainties, and other factors may cause our actual results, performance, or achievements to be materially different than the anticipated future results, performance, or achievements expressed or implied by the forward looking statements.

Some of the factors that might cause these differences include the following:

- difficult market conditions in our industry;
- the ability to successfully manage growth or implement growth strategies if the Bank is unable to identify attractive markets, locations or opportunities to expand in the future or if the Bank is unable to successfully integrate new branches, business lines or other growth opportunities into its existing operations;
- competition with other banks and financial institutions, and companies outside of the banking industry, including those companies that have substantially greater access to capital and other resources;
- the successful management of interest rate risk;
- risks inherent in making loans such as repayment risks and fluctuating collateral values;
- the Company's ability to successfully resolve non-performing assets;
- changes in general economic and business conditions in the Bank’s market area;
- reliance on the Bank’s management team, including the ability to attract and retain key personnel;
- changes in interest rates and interest rate policies;
- maintaining capital levels adequate to support growth;
- maintaining cost controls and asset qualities as new branches are opened or acquired;
- demand, development and acceptance of new products and services;
- deposit flows;
- the Bank's ability to manage liquidity;
- the cost and availability of secondary funding sources;
- effects of soundness of other financial institutions;
- problems with technology utilized by the Bank;
- changing trends in customer profiles and behavior;
- geopolitical conditions, including acts or threats of terrorism, international hostilities, or actions taken by the U.S. or other governments in response to acts or threats of terrorism and/or military conflicts, which could impact business and economic conditions in the U.S. and abroad;
- the economic impact of duties, tariffs or other barriers or restrictions on trade, any retaliatory counter measures, or the volatility and uncertainty arising there from;
- political developments, including government shutdowns, and other significant disruptions and changes in the funding, size, scope, and efficiencies of the federal government, its agencies and services;
- the Company's potential exposure to fraud, negligence, computer theft, and cyber-crime;
- potential impact on us of existing and future legislation and regulations;
- changes in accounting policies and banking and other law and regulations; and
- other factors described in Item 1A., "Risk Factors," in the Company's 2025 Form 10-K.

You should carefully review all of these factors and you should be aware that there may be other factors that cause these differences. These forward looking statements were based on information, plans, and estimates at the date of this report, and we assume no obligation to update any forward looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes.

RESULTS OF OPERATIONS

#### Summary

The following tables present a summarized consolidated statement of operations for the periods indicated:

*(dollars in thousands)*

|  | Three Months Ended June 30, 2026 | 2025 | Change $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Net interest income | $16,970 | $15,698 | $1,272 | 8% |
| Noninterest income | 8,590 | 4,917 | 3,673 | 75% |
| Net revenues | 25,560 | 20,615 | 4,945 | 24% |
| Provision for credit losses | 3,503 | 668 | 2,835 | 424% |
| Noninterest expense | 15,531 | 13,399 | 2,132 | 16% |
| Income before income taxes | 6,526 | 6,548 | (22) | 0% |
| Income tax expense | 1,545 | 1,278 | 267 | 21% |
| Net income | $4,981 | $5,270 | $(289) | (5)% |
| Adjusted net income (non-GAAP) (1) | $2,227 | $5,270 | $(3,043) | (58)% |

(1) Adjusted to exclude the gain on sale of other assets in connection with the Company's sale of its membership interest in Bearing during the three months ended June 30, 2026. See "Non-GAAP Financial Measures" for a reconciliation to comparable measures calculated in accordance with GAAP.

*(dollars in thousands)*

|  | Six Months Ended June 30, 2026 | 2025 | Change $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Net interest income | $32,873 | $29,034 | $3,839 | 13% |
| Noninterest income (loss) | 13,518 | (3,637) | 17,155 | 472% |
| Net revenues | 46,391 | 25,397 | 20,994 | 83% |
| Provision for credit losses | 5,464 | 1,901 | 3,563 | 187% |
| Noninterest expense | 29,743 | 25,988 | 3,755 | 14% |
| Income (loss) before income taxes | 11,184 | (2,492) | 13,676 | 549% |
| Income tax expense (benefit) | 2,463 | (788) | 3,251 | 413% |
| Net income (loss) | $8,721 | $(1,704) | $10,425 | 612% |
| Adjusted net income (non-GAAP) (1) | $5,967 | $8,112 | $(2,145) | (26)% |

(1) Adjusted to exclude the gain on sale of other assets in connection with the Company's sale of its membership interest in Bearing and the loss on sale of securities in connection with the Company's balance sheet repositioning transactions recognized during the six months ended June 30, 2026 and 2025, respectively. See "Non-GAAP Financial Measures" for a reconciliation to comparable measures calculated in accordance with GAAP.

The Company's net income decreased during the three months ended June 30, 2026, compared to the three months ended June 30, 2025 primarily due to a higher provision for credit losses and increased noninterest expenses, mostly offset by an increase in noninterest income and improved net interest income.

During the six months ended June 30, 2026 the Company's net income increased compared to the six months ended June 30, 2025 primarily due to loss on the sale of available for sale securities totaling $12.4 million, or $9.8 million, net of tax, recognized during the prior year period. The 2026 year-to-date period also increased due to improved net interest income and gain on sale of other assets, which was mostly offset by higher noninterest expenses and provision for credit losses over the corresponding 2025 period.

The following table presents a summary of performance metrics and ratios for the periods indicated:

|  | Three Months Ended June 30, 2026 | 2025 | Six Months Ended June 30, 2026 | 2025 |
| --- | ---: | ---: | ---: | ---: |
| Earnings per share, basic and diluted | $0.92 | $0.98 | $1.61 | $(0.34) |
| Adjusted earnings per share, basic and diluted (non-GAAP)(1) | $0.41 | $0.98 | $1.10 | $1.63 |
| Return on average assets | 1.08% | (0.18)% | 0.95% | (0.18)% |
| Adjusted return on average assets (non-GAAP)(1) | 0.48% | 1.09% | 0.65% | 0.85% |
| Return on average equity | 10.35% | 11.93% | 9.18% | (2.19)% |
| Adjusted return on average equity (non-GAAP)(1) | 4.63% | 11.93% | 6.28% | 10.43% |

(1) Adjusted to exclude the gain on sale of other assets in connection with the Company's second quarter 2026 sale of its membership interest in Bearing and the loss on sale of securities in connection with the Company's balance sheet repositioning transactions during the first quarter of 2025. See "Non-GAAP Financial Measures" for a reconciliation to comparable measures calculated in accordance with GAAP.

Return on average equity ("ROE") measures the utilization of shareholders’ equity in generating net income. This measurement is affected by the same factors as ROA with consideration to how much of the Company’s assets are funded by shareholders.

Return on average assets ("ROA") measures how efficiently the Company uses its assets to produce net income. Factors reflected within this efficiency include the Company’s asset mix, funding sources, pricing, fee generation, and cost control.

#### Average Balances, Income and Expenses, Yields and Rates (Tax-Equivalent Basis)

The following table shows average balance, interest, and yield/rate information, as well as net interest margin on a tax- equivalent basis for the three months ended June 30, 2026 and 2025 (dollars in thousands):

| Assets: Securities: | June 30, 2026 Average Balance | Interest Income/ Expense | Average Yield/ Rate (2) | June 30, 2025 Average Balance | Interest Income/ Expense | Average Yield/ Rate (2) |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Taxable | $116,041 | $1,255 | 4.34% | $115,712 | $1,260 | 4.37% |
| Total Securities | $116,041 | $1,255 | 4.34% | $115,712 | $1,260 | 4.37% |
| Loans: |  |  |  |  |  |  |
| Taxable | 1,478,699 | 21,675 | 5.88% | 1,419,117 | 20,309 | 5.74% |
| Non-accrual | 15,113 | — | —% | 16,337 | — | —% |
| Tax-Exempt (1) | 7,002 | 87 | 4.98% | 9,999 | 126 | 5.04% |
| Total Loans | $1,500,814 | $21,762 | 5.82% | $1,445,453 | $20,435 | 5.67% |
| Federal funds sold and interest-bearing deposits in other banks | 147,832 | 1,376 | 3.73% | 281,749 | 3,146 | 4.48% |
| Total earning assets | $1,764,687 | $24,393 | 5.54% | $1,842,914 | $24,841 | 5.41% |
| Allowance for credit losses on loans | (17,761) |  |  | (15,439) |  |  |
| Total non-earning assets | 103,429 |  |  | 105,484 |  |  |
| Total assets | $1,850,355 |  |  | $1,932,959 |  |  |
| **Liabilities and Shareholders' Equity:** |  |  |  |  |  |  |
| Interest-bearing deposits: |  |  |  |  |  |  |
| NOW accounts | $313,794 | $1,684 | 2.15% | $303,498 | $1,632 | 2.16% |
| Money market accounts | 291,872 | 1,578 | 2.17% | 273,415 | 1,521 | 2.23% |
| Savings accounts | 122,424 | 32 | 0.10% | 130,166 | 36 | 0.11% |
| Time deposits: |  |  |  |  |  |  |
| $250,000 and more | 169,195 | 1,589 | 3.77% | 174,030 | 1,911 | 4.41% |
| Less than $250,000 | 247,613 | 2,167 | 3.51% | 310,108 | 3,163 | 4.09% |
| Total interest-bearing deposits | $1,144,898 | $7,050 | 2.47% | $1,191,217 | $8,263 | 2.78% |
| Federal funds purchased | — | — | —% | 2 | — | NM |
| Federal Home Loan Bank advances | — | — | —% | 40,824 | 499 | 4.90% |
| Subordinated debt, net | 29,602 | 355 | 4.81% | 29,535 | 355 | 4.82% |
| Total interest-bearing liabilities | $1,174,500 | $7,405 | 2.53% | $1,261,578 | $9,117 | 2.90% |
| Noninterest-bearing liabilities: |  |  |  |  |  |  |
| Demand deposits | 460,963 |  |  | 473,911 |  |  |
| Other Liabilities | 21,852 |  |  | 20,286 |  |  |
| Total liabilities | $1,657,315 |  |  | $1,755,775 |  |  |
| Shareholders' equity | 193,040 |  |  | 177,184 |  |  |
| Total liabilities and shareholders' equity | $1,850,355 |  |  | $1,932,959 |  |  |
| Net interest income |  | $16,988 |  |  | $15,724 |  |
| Net interest spread |  |  | 3.01% |  |  | 2.51% |
| Interest expense as a percent of average earning assets |  |  | 1.68% |  |  | 1.98% |
| Net interest margin (non-GAAP) (3) |  |  | 3.86% |  |  | 3.42% |

(1) Income and yields are reported on a tax-equivalent basis using a federal tax rate of 21% (Non-GAAP).

(2) Annualized.

(3) Refer to section entitled "Tax-Equivalent Net Interest Income" for the reconciliation of tax-equivalent net interest income.

#### NM - Not Meaningful

The following table shows average balance, interest, and yield/rate information, as well as net interest margin on a tax- equivalent basis for the six months ended June 30, 2026 and 2025 (dollars in thousands):

| Assets: Securities: | June 30, 2026 Average Balance | Interest Income/ Expense | Average Yield/ Rate (2) | June 30, 2025 Average Balance | Interest Income/ Expense | Average Yield/ Rate (2) |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Taxable | $119,068 | $2,561 | 4.34% | $116,535 | $2,104 | 3.64% |
| Tax-Exempt (1) | — | — | —% | 175 | 4 | 4.49% |
| Total Securities | $119,068 | $2,561 | 4.34% | $116,710 | $2,108 | 3.64% |
| Loans: |  |  |  |  |  |  |
| Taxable | 1,458,305 | 42,314 | 5.85% | 1,430,666 | 40,180 | 5.66% |
| Non-accrual | 14,825 | — | —% | 10,182 | — | —% |
| Tax-Exempt (1) | 7,224 | 181 | 5.05% | 10,064 | 253 | 5.06% |
| Total Loans | $1,480,354 | $42,495 | 5.79% | $1,450,912 | $40,433 | 5.62% |
| Federal funds sold and interest-bearing deposits in other banks | 172,820 | 3,183 | 3.71% | 263,367 | 5,830 | 4.46% |
| Total earning assets | $1,772,242 | $48,239 | 5.49% | $1,830,989 | $48,371 | 5.33% |
| Allowance for credit losses on loans | (16,733) |  |  | (15,334) |  |  |
| Total non-earning assets | 103,234 |  |  | 104,113 |  |  |
| Total assets | $1,858,743 |  |  | $1,919,768 |  |  |
| **Liabilities and Shareholders' Equity:** |  |  |  |  |  |  |
| Interest-bearing deposits: |  |  |  |  |  |  |
| NOW accounts | $313,058 | $3,351 | 2.16% | $289,558 | $3,095 | 2.16% |
| Money market accounts | 289,426 | 3,093 | 2.16% | 273,776 | 3,033 | 2.23% |
| Savings accounts | 122,523 | 65 | 0.11% | 131,528 | 73 | 0.11% |
| Time deposits: |  |  |  |  |  |  |
| $250,000 and more | 170,710 | 3,235 | 3.82% | 180,006 | 4,026 | 4.51% |
| Less than $250,000 | 256,115 | 4,531 | 3.57% | 310,799 | 6,540 | 4.24% |
| Total interest-bearing deposits | $1,151,832 | $14,275 | 2.50% | $1,185,667 | $16,767 | 2.85% |
| Federal funds purchased | 3 | — | NM | 5 | — | NM |
| Federal Home Loan Bank advances | 14,144 | 344 | 4.90% | 75,497 | 1,807 | 4.83% |
| Subordinated debt, net | 29,594 | 709 | 4.83% | 29,526 | 709 | 4.84% |
| Total interest-bearing liabilities | $1,195,573 | $15,328 | 2.59% | $1,290,695 | $19,283 | 3.01% |
| Noninterest-bearing liabilities: |  |  |  |  |  |  |
| Demand deposits | 449,169 |  |  | 450,559 |  |  |
| Other Liabilities | 22,469 |  |  | 21,671 |  |  |
| Total liabilities | $1,667,211 |  |  | $1,762,925 |  |  |
| Shareholders' equity | 191,532 |  |  | 156,843 |  |  |
| Total liabilities and shareholders' equity | $1,858,743 |  |  | $1,919,768 |  |  |
| Net interest income |  | $32,911 |  |  | $29,088 |  |
| Net interest spread |  |  | 2.90% |  |  | 2.32% |
| Interest expense as a percent of average earning assets |  |  | 1.74% |  |  | 2.12% |
| Net interest margin (non-GAAP) (3) |  |  | 3.74% |  |  | 3.20% |

(1) Income and yields are reported on a tax-equivalent basis using a federal tax rate of 21% (Non-GAAP).

(2) Annualized.

(3) Refer to section entitled "Tax-Equivalent Net Interest Income" for the reconciliation of tax-equivalent net interest income.

#### NM - Not Meaningful

#### Tax-Equivalent Net Interest Income

The following table reconciles tax-equivalent net interest income, which is not a measurement under GAAP, to net interest income. Tax-equivalent net interest income (Non-GAAP) is calculated by adding the tax benefit on certain securities and loans, whose interest is tax-exempt, to total interest income then subtracting total interest expense. The tax rate used to calculate the tax benefit was 21% for 2026 and 2025.

*(in thousands)*

| GAAP Financial Measurements: | Three Months Ended June 30, 2026 | 2025 | Six Months Ended June 30, 2026 | 2025 |
| --- | ---: | ---: | ---: | ---: |
| Interest Income - Loans | $21,744 | $20,409 | $42,457 | $40,380 |
| Interest Income - Securities and Other Interest-Earnings Assets | 2,631 | 4,406 | 5,744 | 7,937 |
| Interest Expense - Deposits | 7,050 | 8,263 | 14,275 | 16,767 |
| Interest Expense - Borrowings | 355 | 854 | 1,053 | 2,516 |
| **Total Net Interest Income** | $16,970 | $15,698 | $32,873 | $29,034 |
| **Non-GAAP Financial Measurements:** |  |  |  |  |
| Add: Tax Benefit on Tax-Exempt Interest Income - Loans (1) | $18 | $26 | $38 | $53 |
| Add: Tax Benefit on Tax-Exempt Interest Income - Securities (1) | — | $— | — | 1 |
| **Total Tax Benefit on Tax-Exempt Interest Income** | $18 | $26 | $38 | $54 |
| **Tax-Equivalent Net Interest Income** | $16,988 | $15,724 | $32,911 | $29,088 |

(1) Tax benefit was calculated using the federal statutory tax rate of 21%.

#### Net Interest Income

Net interest income is our primary source of revenue, representing the difference between interest and fees earned on interest-earning assets and the interest paid on deposits and other interest-bearing liabilities. The level of net interest income is impacted primarily by variations in the volume and mix of these assets and liabilities, as well as changes in interest rates.

The year-over-year improvements in net interest income, tax-equivalent net interest income, net interest spread, and net interest margin demonstrate the benefits of the balance sheet repositioning strategy completed in March 2025, in which the Company raised capital, increased cash on hand and replaced lower-yielding investment securities with higher yielding securities. The Company has deployed capital to reduce its reliance on wholesale borrowings and for meaningful loan growth.

The increase in net interest income during the three and six months ended June 30, 2026 primarily reflects decreases in the average balances of interest-bearing liabilities and reductions in the average rates paid while being partially offset by lower income from interest-earning assets, namely federal funds sold and interest-bearing deposits in other banks.

Net interest income, on a tax-equivalent basis, was $17.0 million and $15.7 million for the three months ended June 30, 2026 and 2025, respectively, an increase of $1.3 million, or 8.0%. For the six months ended June 30, 2026 and 2025, tax-equivalent net interest income was $32.9 million and $29.1 million, respectively, an increase of $3.8 million, or 13.1%.

The Company's net interest spread and net interest margin increased 50 basis points and 44 basis points, respectively, for the three months ended June 30, 2026 compared to the three months ended June 30, 2025. For the six months ended June 30, 2026, the Company's net interest spread and net interest margin increased 58 basis points and 54 basis points, respectively, compared to six months ended June 30, 2025. Ongoing margin pressures include loan demand unpredictability, deposit competition, and elevated funding costs.

Total average balance of securities increased by $329 thousand and $2.4 million for the three and six months ended June 30, 2026, respectively, from the average balance in the prior year periods. The average yield on securities decreased three basis points during the three months ended June 30, 2026 compared to the three months ended June 30, 2025. During the six months ended June 30, 2026, the average yield on securities increased 70 basis points compared to the six months ended June 30, 2025, reflecting the sale of lower-yielding securities and reinvestment into higher-yielding securities in the first quarter of 2025.

The total average loan balances for the three months ended June 30, 2026 increased $55.2 million and for the six months ended June 30, 2026 increased $29.4 million compared to the same periods in 2025. The increase in average balances reflect strong growth in commercial real estate, construction, commercial and industrial, and home equity lines of credit loan portfolios, offset by continued amortization of the marine loan portfolio. The year-to-date change was also impacted by the sale of a pool of mortgage loans totaling $18.8 million early in the first quarter of 2025.

Total average balance of federal funds sold and interest-bearing deposits in other banks decreased $133.9 million and $90.5 million during the three and six months ended June 30, 2026, respectively, compared to the three and six months ended June 30, 2025, largely due to loan growth and the payoff of maturing borrowings.

Total average interest-bearing deposit balances for three and six months ended June 30, 2026 decreased $46.3 million and $33.8 million from the same periods in 2025. For the three months ended June 30, 2026, average balances of time deposits and savings accounts decreased $67.3 million and $7.7 million, respectively, partially offset by NOW and money market accounts which increased $10.3 million and $18.5 million, respectively. The average rate paid on interest-bearing deposits decreased 31 basis points and 35 basis points during the three and six months ended June 30, 2026, respectively, compared to the three and six months ended June 30, 2025 reflecting lower average rates paid on time deposits.

The average balance of FHLB advances decreased $40.8 million and $61.4 million during the three and six months ended June 30, 2026, respectively, compared to the three and six months ended June 30, 2025 due to maturing advances that were not replaced with new borrowings. During March 2026, the Company's remaining FHLB borrowings were fully paid down, which materially reduced our reliance on wholesale funding.

#### Volume and Rate Analysis (Tax-Equivalent Basis)

Interest income and expense are affected by fluctuation in interest rates, by changes in the volume of earning assets and interest-bearing liabilities, and by the interaction of rate and volume factors. Changes attributable to both volume and rate have been allocated proportionately based on the relationship of the absolute dollar amount of change in each.

The following table provides information about changes in rate and volume (dollars in thousands):

| Earning Assets: Securities: | Three Months Ended June 30, 2026 from 2025 Increase (Decrease) Due to: Volume | Rate | Total | Six Months Ended June 30, 2026 from 2025 Increase (Decrease) Due to: Volume | Rate | Total |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Taxable | $4 | $(9) | $(5) | $46 | $411 | $457 |
| Tax-exempt | — | — | — | (2) | (2) | (4) |
| Loans: |  |  |  |  |  |  |
| Taxable | 864 | 502 | 1,366 | 780 | 1,354 | 2,134 |
| Tax-exempt | (37) | (2) | (39) | (71) | (1) | (72) |
| Federal funds sold and interest-bearing deposits in other banks | (1,309) | (461) | (1,770) | (1,778) | (869) | (2,647) |
| Total earning assets | $(478) | $30 | $(448) | $(1,025) | $893 | $(132) |
| **Interest-Bearing Liabilities:** |  |  |  |  |  |  |
| NOW accounts | $60 | $(8) | $52 | $256 | $— | $256 |
| Money market accounts | 95 | (38) | 57 | 133 | (73) | 60 |
| Savings accounts | (2) | (2) | (4) | (8) | — | (8) |
| Time deposits: |  |  |  |  |  |  |
| $250,000 and more | (52) | (270) | (322) | (200) | (591) | (791) |
| Less than $250,000 | (585) | (411) | (996) | (1,058) | (951) | (2,009) |
| Total interest-bearing deposits | $(484) | $(729) | $(1,213) | $(877) | $(1,615) | $(2,492) |
| Federal Home Loan Bank advances | (249) | (250) | (499) | (1,490) | 27 | (1,463) |
| Total interest-bearing liabilities | $(733) | $(979) | $(1,712) | $(2,367) | $(1,588) | $(3,955) |
| Change in net interest income | $255 | $1,009 | $1,264 | $1,342 | $2,481 | $3,823 |

#### Provision for Credit Losses

The provision for credit losses results from management's review of the adequacy of the allowance for credit losses. The allowance for credit losses is management’s estimate, at the reporting date, of expected lifetime credit losses and includes consideration of current forecasted economic conditions. Estimating the amount required to maintain an adequate allowance for credit losses involves a high degree of judgment.

The following table presents the provision for credit losses:

*(dollars in thousands)*

|  | Three Months Ended June 30, 2026 | 2025 | $% Change | Change | Six Months Ended June 30, 2026 | 2025 | $% Change | Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Provision for credit losses on loans | $3,207 | $856 | $2,351 | 275% | $5,179 | $2,002 | $3,177 | 159% |
| Provision for credit losses on unfunded commitments | 296 | (188) | 484 | (257)% | 285 | (101) | 386 | (382)% |
| Provision for credit losses | $3,503 | $668 | $2,835 | 424% | $5,464 | $1,901 | $3,563 | 187% |

The increase in the provision for credit losses for the three and six months ended June 30, 2026 and 2025 included the impact of a change in historical loss factors driven by charge-offs, higher qualitative factors adjustments including forecasted economic conditions and loan growth, and higher specific reserve allocations on individually evaluated nonaccrual loans.

For both the three and six months ended June 30, 2026, net charge-offs totaled $2.2 million, compared to net charge-offs totaling $159 thousand and $1.1 million during the three and six months ended June 30, 2025, respectively. The higher qualitative factor adjustment was primarily driven by loan growth in the commercial and industrial and construction loan portfolios.

Specific reserve allocations totaled $3.1 million at June 30, 2026, compared to $1.5 million at June 30, 2025, primarily reflecting new or increased allocations on commercial loan relationships during the first half of 2026. At June 30, 2026, five commercial loan relationships comprised $2.7 million, or 89%, of the total specific reserve allocation, including two commercial and industrial relationships, two multi-family commercial real estate relationships, and one relationship with both commercial and industrial and commercial real estate exposure. The $1.6 million increase from June 30, 2025 was primarily attributable to four commercial loan relationships for which specific allocations were recorded based on updated collateral information and one new nonaccrual relationship added during the second quarter of 2026, partially offset by charge-off of loan balances with previously established specific reserve balances.

#### Noninterest Income

Total noninterest income (loss) was $8.6 million and $4.9 million for the three months ended June 30, 2026 and 2025, respectively, and $13.5 million and $(3.6) million for the six months ended June 30, 2026 and 2025, respectively. Management reviews the activities which generate noninterest income on an ongoing basis. The following table provides the components of noninterest income for the three and six months ended June 30, 2026 and 2025, which are included within the respective Consolidated Statements of Operations headings.

*(dollars in thousands)*

|  | Three Months Ended June 30, 2026 | 2025 | $ Change | % Change | Six Months Ended June 30, 2026 | 2025 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Wealth management fees | $2,197 | $1,650 | $547 | 33% | $3,979 | $3,331 | $648 | 19% |
| Service charges on deposit accounts | 563 | 517 | 46 | 9% | 1,119 | 1,009 | 110 | 11% |
| Other service charges and fees | 1,028 | 1,060 | (32) | (3)% | 1,949 | 2,032 | (83) | (4)% |
| (Loss) on sale of securities | — | — | — | —% | — | (12,425) | 12,425 | NM |
| (Loss) on disposal of bank premises and equipment | (4) | — | (4) | 100% | (4) | (16) | 12 | (75)% |
| Gain on sale of loans | 646 | 1,104 | (458) | (41)% | 1,658 | 1,533 | 125 | 8% |
| Gain on sale of other assets | 3,486 | — | 3,486 | 100% | 3,486 | — | 3,486 | 100% |
| Small business investment company income | 110 | 133 | (23) | (17)% | 376 | 153 | 223 | 146% |
| Bank owned life insurance income | 289 | 278 | 11 | 4% | 573 | 551 | 22 | 4% |
| Other operating income | 275 | 175 | 100 | 57% | 382 | 195 | 187 | 96% |
| Total noninterest income (loss) | $8,590 | $4,917 | $3,673 | 75% | $13,518 | $(3,637) | $17,155 | (472)% |

#### NM - Not Meaningful

Wealth management fee income increased from 2025 to 2026. Wealth management fee income is comprised of income from fiduciary activities as well as commissions from the sale of non-deposit investment products. The amount of income from fiduciary activities is determined by the number of active accounts and total assets under management. Since June 30, 2025, assets under management increased $55.0 million, or 10.1%, to $599.0 million, reflecting increases in market value and new business accounts. Additionally, per transaction fees for estates and other services have also contributed to the year over year increase in revenue. Partially offsetting these increases was a decrease in investment sales commissions.

Service charges on deposit accounts increased during the three and six months ended June 30, 2026 compared to the same period in 2025. The increase is mainly driven by higher overdraft charges and account analysis income.

The Company executed balance sheet repositioning transactions within its investment securities portfolio during March 2026. The sale of $99.2 million of available for sale debt securities, with a fair value of $86.8 million, resulted in a net pre-tax loss of $12.4 million during the six months ended June 30, 2025. There were no sales of available for sale debt securities in the three and six months ended June 30, 2026.

Gain on sale of loans decreased during the three months ended June 30, 2026 compared to 2025 reflecting a decrease attributable to SBA loans due to a lower volume sold, partially offset by an increase attributable to a higher volume of mortgage loans sold. The Company sold $28.2 million in loans on the secondary market during the three months ended June 30, 2026, consisting of mortgage loans totaling $24.3 million and SBA commercial loans totaling $3.9 million. This compares to sales of $25.5 million during the three months ended June 30, 2025, consisting of $17.1 million mortgage loans and $8.4 million SBA loans.

Gain on sale of loans increased during the six months ended June 30, 2026 when compared to the same period in 2025. The 2026 year-to-date volume of sales declined, however, $18.3 million of portfolio mortgage loans sold during the six months ended June 30, 2025 were priced at par, which had a minimal impact on income. Excluding the portfolio loan sale, sold loan volume increased during the six months ended June 30, 2026. The Company sold $52.3 million loans on the secondary market, consisting of $40.9 million of mortgage loans and $11.4 million of SBA commercial loans during the six months ended June 30, 2026. This compares to total loan sales of $60.7 million, consisting of $32.0 million of mortgage loans originated for sale, $9.9 million SBA commercial loans, and a pool of $18.8 million residential mortgage loans held for investment during the six months ended June 30, 2025.

Gain on sale of other assets increased during the three months ended June 30, 2026. The Company sold its membership interest in Bearing to an unaffiliated third party. A pre-tax gain of $3.5 million was recognized from this sale and is recorded in gain on sale of other assets.

Income from holdings in small business investment companies increased during the six months ended June 30, 2026 compared to the same period in 2025. The increase during the current year period is mainly attributed to higher cash distributions received, based on the results of their performance and difference in timing of distributions.

Other operating income increased for the three and six months ended June 30, 2026 compared to the same periods in 2025 primarily due to $80 thousand cash distribution received during the quarter from the Company's investment in housing equity fund.

#### Noninterest Expenses

Total noninterest expenses increased $2.1 million, or 16%, for the three months ended June 30, 2026 and $3.8 million, or 14%, for the six months ended June 30, 2026 compared to the same periods in 2025. The following table presents the components of noninterest expense for the three and six months ended June 30, 2026 and 2025, which are included within the respective Consolidated Statements of Operations headings.

*(dollars in thousands)*

|  | Three Months Ended June 30, 2026 | 2025 | $ Change | % Change | Six Months Ended June 30, 2026 | 2025 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Salaries and employee benefits | $9,212 | $7,845 | $1,367 | 17% | $17,441 | $15,024 | $2,417 | 16% |
| Occupancy expenses | 613 | 598 | 15 | 3% | 1,279 | 1,260 | 19 | 2% |
| Equipment expenses | 451 | 401 | 50 | 12% | 913 | 824 | 89 | 11% |
| Advertising and marketing expenses | 295 | 152 | 143 | 94% | 486 | 335 | 151 | 45% |
| Stationery and supplies | 30 | 35 | (5) | (14)% | 76 | 77 | (1) | (1)% |
| ATM network fees | 326 | 332 | (6) | (2)% | 653 | 694 | (41) | (6)% |
| Other real estate owned expense (gain), net | — | — | — | —% | (5) | — | (5) | 100% |
| Loss on sale of repossessed assets | — | — | — | —% | 39 | 133 | (94) | (71)% |
| FDIC assessment | 169 | 254 | (85) | (33)% | 396 | 576 | (180) | (31)% |
| Computer software expense | 422 | 325 | 97 | 30% | 776 | 607 | 169 | 28% |
| Bank franchise tax | 530 | 381 | 149 | 39% | 1,011 | 748 | 263 | 35% |
| Professional fees | 551 | 641 | (90) | (14)% | 1,155 | 1,204 | (49) | (4)% |
| Data processing fees | 591 | 633 | (42) | (7)% | 1,077 | 1,183 | (106) | (9)% |
| Loan servicing expense | 260 | 262 | (2) | (1)% | 529 | 499 | 30 | 6% |
| Other operating expenses | 2,081 | 1,540 | 541 | 35% | 3,917 | 2,824 | 1,093 | 39% |
| Total noninterest expenses | $15,531 | $13,399 | $2,132 | 16% | $29,743 | $25,988 | $3,755 | 14% |

Salaries and employee benefits increased during the three and six months ended June 30, 2026 over 2025, primarily reflecting increases in salaries due to investments in staffing and higher annual incentive compensation plan accruals as certain performance metrics were attained. Further contributing to the increases were higher stock-based compensation expense and employee medical insurance costs. The Company's number of full-time equivalent employees ("FTE's") has increased from 244 at June 30, 2025 to 259 at June 30, 2026.

Advertising and marketing expenses increased during the three and six months ended June 30, 2026 compared to 2025 mainly due to higher business development and digital marketing campaigns.

FDIC assessment expense, which is based in part on asset size and capital levels, decreased during the three and six months ended June 30, 2026 compared to the same periods in 2025. The decreased expense primarily reflects an improvement in the financial ratio portions of the assessment rate reflecting a stronger capital position largely due to improved net income during 2026 and the capital raise completed in early 2025.

Computer software expenses increased $97 thousand and $169 thousand during the three and six months ended June 30, 2026 respectively, compared to the same period in 2025 reflecting ongoing investments in technology to enhance systems security and improve operational efficiencies.

Bank Franchise tax increased during the three and six months ended June 30, 2026 compared to the same period in 2025 due to a higher estimate for 2026, reflective of the Bank's capital level.

Data processing fees decreased during the three and six months ended June 30, 2026 compared to the same period in 2025 reflecting core provider contract price discounts in 2026.

Other operating expenses increased by $541 thousand, or 35%, and $1.1 million, or 39%, during the three and six months ended June 30, 2026, respectively, compared to the three and six months ended June 30, 2025. The increases largely reflect higher expenses related to volume based costs, loan collection, and other loan costs as well as higher charitable contributions primarily driven by the Bank's matching of donations from a very successful "Give with BOC" campaign. Partially offsetting this was a decline in fraudulent transaction activity costs in 2026 compared to 2025.

#### Efficiency Ratio

The efficiency ratio of the Company was 70.29% and 64.91% for the three months ended June 30, 2026 and 2025, respectively and 69.16% and 68.23% for the six months ended June 30, 2026 and 2025. The decline in the efficiency ratio during the 2026 periods reflects increases in noninterest expenses, partially offset by increases in net interest income. The efficiency ratio is not a measurement under GAAP. It is calculated by dividing noninterest expense by the sum of tax equivalent net interest income and noninterest income. The Company adjusts for non-recurring items such as gains and losses on the investment portfolio and other gains/losses from OREO, repossessed or other assets, disposals of bank premises and equipment, etc. The tax rate utilized is 21%. The Company calculates and reviews this ratio as a means of evaluating operational efficiency.

The calculation of the efficiency ratio for the three and six months ended June 30, 2026 and 2025 was as follows:

*(in thousands)*

*(in thousands)*

| Summary of Operating Results: | Three Months Ended June 30, 2026 | 2025 | Six Months Ended June 30, 2026 | 2025 |
| --- | ---: | ---: | ---: | ---: |
| Noninterest expenses (GAAP) | $15,531 | $13,399 | $29,743 | $25,988 |
| Less: Loss on sale of repossessed assets | — | — | 39 | 133 |
| Adjusted noninterest expenses (Non-GAAP) | $15,531 | $13,399 | $29,704 | $25,855 |
| Net interest income | 16,970 | 15,698 | 32,873 | 29,034 |
| Noninterest income (loss) (GAAP) | 8,590 | 4,917 | 13,518 | (3,637) |
| Less: (Loss) on the sale and disposal of premises and equipment | (4) | — | (4) | (16) |
| Less: Gain on the sale of other assets | 3,486 | — | 3,486 | — |
| Less: (Loss) on the sale of securities | — | — | — | (12,425) |
| Adjusted noninterest income (Non-GAAP) | $5,108 | $4,917 | $10,036 | $8,804 |
| Tax equivalent adjustment (1) | 18 | 26 | 38 | 54 |
| Total net interest income and noninterest income, adjusted (Non-GAAP) | $22,096 | $20,641 | $42,947 | $37,892 |
| Efficiency ratio | 70.29% | 64.91% | 69.16% | 68.23% |

(1) Includes tax-equivalent adjustments on loans and securities using the federal statutory tax rate of 21%.

#### Income Taxes

The following table presents the Company's income tax provision (benefit) and effective tax rate for the periods indicated:

*(dollars in thousands)*

|  | Three Months Ended June 30, 2026 | 2025 | Six Months Ended June 30, 2026 | 2025 |
| --- | ---: | ---: | ---: | ---: |
| Income tax expense (benefit) | $1,545 | $1,278 | $2,463 | $(788) |
| Effective income tax rate | 23.67% | 19.52% | 22.02% | (31.62)% |

56

Income tax expense for the three months ended June 30, 2026 was comprised of federal and state income taxes of $1.5 million and $65 thousand, respectively. For the three months ended June 30, 2025, the Company recognized income tax expense of $1.3 million, comprised of federal and state income taxes of $1.2 million and $56 thousand, respectively.

For the six months ended June 30, 2026, income tax expense was comprised of federal and state income taxes of $2.4 million and $109 thousand, respectively. For the six months ended June 30, 2025, the Company recognized a net income tax benefit of $846 thousand, which represented a federal income tax benefit partially offset by state income taxes of $58 thousand.

Income tax expense increased during the second quarter 2026 compared to the 2025 period due to an adjustment to the proportional amortization expense for investments in qualified rehabilitation credits and tax credits on qualified affordable housing project investments of $174 thousand. This adjustment was based on final 2025 income tax results.

The increase in income tax expense during the six months ended June 30, 2026 compared to the six months ended June 30, 2025 reflects the level of net income recognized during the first half of 2026 compared to a net loss recognized during the 2025 period as well as the proportional amortization expense adjustment recorded during the second quarter of 2026.

The effective tax rate for the three and six months ended June 30, 2026 was also impacted by the proportional amortization expense adjustment, causing it to exceed the statutory rate of 21%. The effective tax rate for the three and six months ended June 30, 2025 was below the statutory rate of 21% due primarily to the recognition of tax-exempt life insurance income and the Company's net loss position for the six months ended June 30, 2025.

For the three and six months ended June 30, 2025, the effective tax rate was also impacted by the March 2025 balance sheet repositioning transaction previously discussed in the "Non-GAAP Financial Measures" section above.

#### Business Segments

The Company has three reportable operating segments: community banking, marine lending and wealth management. See Note 16 to the Consolidated Financial Statements.

The following table presents a summarized statement of operations for the community banking business segment for the three and six months ended June 30, 2026 and 2025:

*(dollars in thousands)*

|  | For the Three Months Ended June 30, 2026 | 2025 | $ Change | % Change | For the Six Months Ended June 30, 2026 | 2025 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Interest Income | $22,254 | $22,158 | $96 | 0% | $43,848 | $42,954 | $894 | 2% |
| Interest Expense | 6,314 | 7,724 | (1,410) | (18)% | 13,069 | 16,340 | (3,271) | (20)% |
| Net interest income | $15,940 | $14,434 | $1,506 | 10% | $30,779 | $26,614 | $4,165 | 16% |
| Gain on sales of loans | 646 | 1,104 | (458) | (41)% | 1,658 | 1,533 | 125 | 8% |
| (Loss) on the sale of securities | — | — | — | —% | — | (12,425) | 12,425 | NM |
| Other noninterest income | 5,704 | 2,120 | 3,584 | 169% | 7,795 | 3,838 | 3,957 | 103% |
| Net Revenue | 22,290 | 17,658 | 4,632 | 26% | 40,232 | 19,560 | 20,672 | 106% |
| Provision for credit losses | 2,975 | 794 | 2,181 | 275% | 4,917 | 2,171 | 2,746 | 126% |
| Noninterest expense | 14,372 | 12,339 | 2,033 | 16% | 27,699 | 24,051 | 3,648 | 15% |
| Income (Loss) before taxes | 4,943 | 4,525 | 418 | 9% | 7,616 | (6,662) | 14,278 | (214)% |
| Income tax expense (benefit) | 1,213 | 855 | 358 | 42% | 1,738 | (1,651) | 3,389 | 205% |
| Net Income (Loss) | $3,730 | $3,670 | $60 | 2% | $5,878 | $(5,011) | $10,889 | (217)% |

57

Net interest income increased during the three and six months ended June 30, 2026 compared to the three and six months ended June 30, 2025 primarily due to income earned on: i) non-marine loans; ii) reduction in time deposit interest expense due primarily to lower average rates paid; and iii) reduction in borrowings interest expense as FHLB advances have matured. These increases were partially offset by a decrease in the level of interest-earning deposits balances in other banks as cash was deployed to payoff the Company's remaining FHLB advances, as well as an increase in customer NOW and money market deposit balances. For the six months ended June 30, 2026, net interest income increased over six months ended June 30, 2025 due the investment securities portfolio, which was restructured in the first quarter of 2025 to sell and replace lower yielding investments with higher yielding securities.

Provision for credit losses reflects an increase in historical loss factors due to net charge-offs totaling $1.9 million and $1.8 million for the three and six months ended June 30, 2026, respectively, as well as specific reserves of $3.1 million. Provision for credit losses for the three and six months ended June 30, 2025 reflects net charge-offs totaling $45 thousand and $936 thousand, respectively, as well as specific reserves of $1.5 million. The increase in the specific reserve was primarily attributable to four commercial loan relationships for which new specific allocations were recorded during the first half of 2026 driven by updated collateral information and a new nonaccrual relationship added during the second quarter of 2026.

Other noninterest income increased during the three and six months ended June 30, 2026 over the three and six months ended June 30, 2025 primarily due to the Company's sale of its membership interest in Bearing to an unaffiliated third party. A pre-tax gain on the sale in the amount of $3.5 million was recognized as a gain on sale of other assets during the second quarter of 2026.

Loss on the sale of securities during the six months ended June 30, 2025 resulted from the Company's execution of balance sheet repositioning transactions within its investment securities portfolio in March 2025. Available for sale debt securities totaling $99.2 million, with a fair value of $86.8 million, were sold and a pre-tax loss of $12.4 million was recognized.

The increase in income tax expense during the six months ended June 30, 2026 was due to the Company's net income compared to its net loss recorded during six months ended June 30, 2025, which was directly related to the recognized loss on the sale of securities during the 2025 period.

The following table presents a summarized statement of operations for the marine lending segment for the three and six months ended June 30, 2026 and 2025:

*(dollars in thousands)*

|  | For the Three Months Ended June 30, 2026 | 2025 | $ Change | % Change | For the Six Months Ended June 30, 2026 | 2025 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Interest Income | $2,121 | $2,657 | $(536) | (20)% | $4,353 | $5,363 | $(1,010) | (19)% |
| Interest Expense (1) | 736 | 1,038 | (302) | (29)% | 1,550 | 2,234 | (684) | (31)% |
| Net interest income | $1,385 | $1,619 | $(234) | (14)% | $2,803 | $3,129 | $(326) | (10)% |
| Net Revenue | 1,385 | 1,619 | (234) | (14)% | 2,803 | 3,129 | (326) | (10)% |
| Provision for (recovery of) credit losses | 528 | (126) | 654 | (519)% | 547 | (270) | 817 | (303)% |
| Noninterest expense | 91 | 126 | (35) | (28)% | 184 | 230 | (46) | (20)% |
| Income before taxes | 766 | 1,619 | (853) | (53)% | 2,072 | 3,169 | (1,097) | (35)% |
| Income tax expense | 161 | 339 | (178) | (53)% | 435 | 665 | (230) | (35)% |
| Net Income | $605 | $1,280 | $(675) | (53)% | $1,637 | $2,504 | $(867) | (35)% |

(1) Allocation of interest expense is a function of the Bank's internal cost of funds rate and the average loan balance of the marine lending portfolio.

Net revenues declined due to pay downs in the portfolio, which are not being replaced with new loan originations. The marine loan portfolio totaled $159.2 million and $196.4 million at June 30, 2026 and June 30, 2025, respectively.

Provision for credit losses increased primarily due to an increase in the historical loss factor, which was partially offset by declining loan balances during the three and six months ended June 30, 2026 compared to the three and six months ended June 30, 2025. Net charge-offs were $367 thousand for the three and six months ended June 30, 2026 and $114 thousand for the three and six months ended June 30, 2025.

The following table presents a summarized statement of operations for the wealth management segment for the three and six months ended June 30, 2026 and 2025:

*(dollars in thousands)*

|  | For the Three Months Ended June 30, 2026 | 2025 | $ Change | % Change | For the Six Months Ended June 30, 2026 | 2025 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Interest Income | $— | $— | $— | —% | $— | $— | $— | —% |
| Interest Expense | — | — | — | —% | — | — | — | —% |
| Net Interest Income | $— | $— | $— | —% | $— | $— | $— | —% |
| Other noninterest income | $2,240 | $1,693 | $547 | 32% | $4,065 | $3,417 | $648 | 19% |
| Net Revenue | 2,240 | 1,693 | 547 | 32% | 4,065 | 3,417 | 648 | 19% |
| Provision for credit losses | — | — | — | —% | — | — | — | —% |
| Noninterest expense | 908 | 776 | 132 | 17% | 1,583 | 1,459 | 124 | 8% |
| Income before taxes | 1,332 | 917 | 415 | 45% | 2,482 | 1,958 | 524 | 27% |
| Income tax expense | 279 | 192 | 87 | 45% | 521 | 411 | 110 | 27% |
| Net Income | $1,053 | $725 | $328 | 45% | $1,961 | $1,547 | $414 | 27% |

Net revenue increased during the three and six months ended June 30, 2026 over the 2025 periods due to increases in trust services income reflecting fees earned on a higher level of assets under management and estate settlements, partially offset by a decrease in investment sales revenue. Assets under management were $599.0 million and $544.1 million at June 30, 2026 and 2025, respectively.

FINANCIAL CONDITION

Select financial condition data is presented in the following table:

*(dollars in thousands)*

|  | June 30, 2026 | December 31, 2025 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Securities available for sale | $112,466 | $119,543 | $(7,077) | (6)% |
| Loans | 1,499,351 | 1,473,077 | 26,274 | 2% |
| Allowance for credit losses | (18,306) | (15,320) | (2,986) | 19% |
| Total assets | 1,847,365 | 1,888,626 | (41,261) | (2)% |
| Total deposits | 1,601,935 | 1,607,360 | (5,425) | (0)% |
| FHLB advances | — | 40,000 | (40,000) | (100)% |
| Total shareholders' equity | 193,905 | 188,839 | 5,066 | 3% |

#### Securities

The carrying amounts of the Company's available for sale securities are as follows:

*(dollars in thousands)*

|  | June 30, 2026 Amount | Percent | December 31, 2025 Amount | Percent |
| --- | ---: | ---: | ---: | ---: |
| Obligations of U.S. government corporations and agencies | $7,010 | 6% | $7,444 | 6% |
| U.S. Treasury securities | 9,964 | 9% | 10,001 | 8% |
| Mortgage-backed securities | 69,859 | 62% | 75,129 | 63% |
| Collateralized mortgage obligations | 21,530 | 19% | 22,495 | 19% |
| Subordinated debt | 4,103 | 4% | 4,474 | 4% |
| Total securities available for sale at fair value | $112,466 | 100% | $119,543 | 100% |

Total securities available for sale decreased $7.1 million, or 5.92% during the six months ended June 30, 2026. The Company purchased $10.3 million of securities during the six months ended June 30, 2026 and had total maturities, calls, and principal repayments of $16.3 million. There were no sales during the six months ended June 30, 2026.

Net unrealized loss on available for sale securities was $7.7 million at June 30, 2026 as compared to a net unrealized loss of $6.7 million at December 31, 2025. Unrealized gains or losses on available for sale securities are reported within shareholders’ equity, net of the related deferred tax effect, as accumulated other comprehensive income (loss).

The primary cause of the unrealized losses at June 30, 2026 and December 31, 2025 was changes in market interest rates, rather than other market conditions or credit concerns of the issuers over the time between purchase and measurement periods. Since the losses can be primarily attributed to changes in market interest rates and conditions and not expected cash flows or an issuer’s financial condition and management does not intend to sell and it is likely that management will not be required to sell the securities prior to their anticipated recovery, the Company concluded a credit loss did not exist.

#### Loan Portfolio

The Company’s primary use of funds is supporting lending activities from which it derives the greatest amount of interest income. Details of the Company's loan portfolio are presented below:

*(dollars in thousands)*

| Mortgage real estate loans: | June 30, 2026 Amount | Percent to Total Loans | December 31, 2025 Amount | Percent to Total Loans |
| --- | ---: | ---: | ---: | ---: |
| HELOCs | $59,973 | 4% | $58,640 | 4% |
| Residential First Lien - Investor | 107,456 | 7% | 107,307 | 7% |
| Residential First Lien - Owner Occupied | 177,739 | 12% | 178,807 | 12% |
| Residential Junior Liens | 10,117 | 1% | 10,724 | 1% |
| Total residential real estate loans | 355,285 | 24% | 355,478 | 24% |
| Commercial - Owner Occupied | 329,817 | 22% | 298,853 | 20% |
| Commercial - Non-Owner Occupied & Multifamily | 397,617 | 26% | 398,926 | 27% |
| Total commercial real estate loans | 727,434 | 48% | 697,779 | 47% |
| Construction & Secured by Farmland | 95,454 | 6% | 82,336 | 6% |
| Total mortgage real estate loans | 1,178,173 | 78% | 1,135,593 | 77% |
| Commercial and industrial loans | 118,059 | 8% | 113,224 | 8% |
| Marine loans | 159,246 | 11% | 175,639 | 12% |
| Consumer loans | 28,052 | 2% | 28,742 | 2% |
| Other loans | 12,003 | 1% | 14,264 | 1% |
| Total loans | 1,495,533 | 100% | 1,467,462 | 100% |
| Net deferred loans costs and premiums | 3,818 |  | 5,615 |  |
| Gross loans | $1,499,351 |  | $1,473,077 |  |

Gross loans were $1.50 billion and $1.47 billion at June 30, 2026 and December 31, 2025, respectively. This represents an increase of $26.3 million, or 1.78%, during the six months ended June 30, 2026. The ratio of gross loans to deposits increased during the six months ended June 30, 2026 from 91.65% at December 31, 2025 to 93.60% at June 30, 2026 reflecting the increase in gross loans and a 0.34% decrease in deposits during the same time period.

The loan portfolio consists primarily of loans for owner-occupied single-family dwellings and loans secured by commercial real estate. The decline in gross loans is primarily attributable to SBA loan sales, marine loan portfolio paydowns, and significant payoffs of matured commercial and industrial and municipal notes. This decline was partially offset by growth within the commercial real estate loan portfolio.

During the six months ended June 30, 2026, through the normal course of business, $52.3 million in loans were sold, consisting of $40.9 million in mortgage loans originated for sale and $11.4 million of SBA commercial loans.

Commercial real estate loans increased during the six months ended June 30, 2026 reflecting growth in the owner occupied and construction portfolios. The Company experienced steady activity across commercial business lines reflecting its focus on relationship-based lending in its core markets.

Marine loans are declining due to normal paydowns and payoffs only as the Company is no longer accepting new marine business. At present, the Company expects to hold the remaining outstanding loans until they are ultimately repaid.

#### Allowance for Credit Losses on Loans

The purpose of, and the methods for, measuring the allowance for credit losses on loans are discussed in Note 1 to the Consolidated Financial Statements in the 2025 Form 10-K.

The following table presents the activity in the allowance for credit losses on loans and related ratios for the periods indicated:

*(dollars in thousands)*

|  | Three Months Ended June 30, 2026 | 2025 | Six Months Ended June 30, 2026 | 2025 |
| --- | ---: | ---: | ---: | ---: |
| Balance at beginning of period | $17,326 | $15,282 | $15,320 | $15,027 |
| Charge-Offs |  |  |  |  |
| Construction & secured by farmland | — | — | — | — |
| Residential real estate | — | (30) | — | (30) |
| Commercial real estate | (1,586) | — | (1,586) | (971) |
| Commercial | (253) | (85) | (335) | (134) |
| Marine | (369) | (114) | (369) | (114) |
| Consumer | (14) | (57) | (40) | (90) |
| Other | (47) | (49) | (94) | (72) |
| Total charge-offs | (2,269) | (335) | (2,424) | (1,411) |
| Recoveries |  |  |  |  |
| Construction & secured by farmland | 2 | 1 | 3 | 3 |
| Residential real estate | 5 | 99 | 150 | 252 |
| Commercial real estate | — | — | — | — |
| Commercial | 12 | 63 | 37 | 78 |
| Marine | 2 | — | 2 | — |
| Consumer | 12 | 5 | 21 | 13 |
| Other | 9 | 8 | 18 | 15 |
| Total recoveries | 42 | 176 | 231 | 361 |
| Net (charge-offs) | (2,227) | (159) | (2,193) | (1,050) |
| Provision for credit losses on loans | 3,207 | 856 | 5,179 | 2,002 |
| Balance at end of period | $18,306 | $15,979 | $18,306 | $15,979 |
| Net (charge-offs) to average loans (annualized) | (0.60)% | (0.04)% | (0.59)% | (0.29)% |
| Allowance for credit losses on loans as a percentage of gross loans | 1.22% | 1.11% | 1.22% | 1.11% |

During the six months ended June 30, 2026, the Company recorded charge-offs of $2.4 million primarily due to a $1.6 million partial write-down of a single multifamily relationship to the fair value of the underlying collateral, net of estimated selling costs. The remaining charge-offs were attributable to smaller relationships, including marine vessels and commercial loans secured by equipment as well as writeoffs of overdraft and credit card accounts.

Recoveries recognized during the six months ended June 30, 2026 totaled $231 thousand, primarily due to a recovery on a residential mortgage loan.

During the six months ended June 30, 2025, charge-offs were primarily related to a non-owner occupied commercial loan relationship consisting of four residential multifamily income producing properties totaling $971 thousand. Recoveries were $361 thousand resulting in net charge-offs of $1.1 million for the six months ended June 30, 2025.

The increase of 11 basis points in the allowance for credit losses on loans to gross loans ratio largely reflects the increase in specific reserve allocations required at June 30, 2026. The increase was also attributable to changes in historical loss ratios, primarily within the marine and non‑owner occupied commercial real estate portfolios and higher qualitative factors due to loan growth in the commercial and industrial and construction loan portfolios.

Management believes that the allowance for credit losses on loans is currently adequate to absorb the current expected losses in the loan portfolio.

#### Credit Risk, Nonperforming Assets and Other Assets

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually to classify the loans as to credit risk on a quarterly basis. The following table presents credit risk ratings as of June 30, 2026 and December 31, 2025:

*(dollars in thousands)*

| Risk categories | June 30, 2026 Amount | Percent to Total Loans | December 31, 2025 Amount | Percent to Total Loans |
| --- | ---: | ---: | ---: | ---: |
| Pass | $1,429,734 | 96% | $1,396,752 | 95% |
| Special Mention | 44,068 | 3% | 54,752 | 4% |
| Classified | 21,731 | 1% | 15,958 | 1% |
| Total loans | $1,495,533 | 100% | $1,467,462 | 100% |

Loans risk rated as special mention, which exhibit negative trends and potential weaknesses, include loans with stale financial information. Of the total special mention loans, $28.6 million had stale financial information at June 30, 2026 compared to $35.7 million at December 31, 2025. The reduction in total special mention loans was largely due to upgrades upon receipt and review of current financial information and the migration of one relationship to classified. Partially offsetting the decrease were additions for potential credit weakness reflecting insufficient debt service coverage ratio, reduction in income, bankruptcy notice, as well as the lack of current financial information required to complete annual reviews.

Loans risk rated as classified, include substandard, doubtful, and loss loans increased primarily due to two commercial real estate relationships and was partially offset by a $1.6 million partial write-down to an already existing classified multi-family relationship. The additions to classified include a $3.6 million multifamily loan which moved to nonaccrual status during the second quarter, and a $4.1 million non-owner occupied office building that is active and accruing, however was downgraded from special mention to classified during the first quarter of 2026 due to cash flow concerns.

All other loans were classified as pass, exhibiting acceptable history of profits, cash flow ability and liquidity.

Nonperforming assets and related ratios are detailed in the table below:

*(dollars in thousands)*

|  | June 30, 2026 | December 31, 2025 |
| --- | ---: | ---: |
| Nonaccrual loans | $16,146 | $14,398 |
| Loans past due 90 days or more and accruing interest | 20 | 60 |
| Other real estate owned and repossessed assets | 302 | 135 |
| Total nonperforming assets | $16,468 | $14,593 |
| Allowance for credit losses on loans | $18,306 | $15,320 |
| Gross loans | $1,499,351 | $1,473,077 |
| Allowance for credit losses on loans to nonperforming assets | 111% | 105% |
| Allowance for credit losses on loans to total gross loans | 1.22% | 1.04% |
| Allowance for credit losses on loans to nonaccrual loans | 113% | 106% |
| Nonaccrual loans to total gross loans | 1.08% | 0.98% |
| Non-performing assets to period end gross loans, other real estate owned and repossessed assets | 1.10% | 0.99% |

63

Nonperforming assets increased by $1.9 million during the six months ended June 30, 2026, primarily reflecting the addition of of a $3.6 million multi-family loan to nonaccrual status, partially offset by paydowns, a $1.6 million partial write-down to an existing nonaccrual multi-family relationship as well as a change in repossessed assets.

Total past due loans, as disclosed in Note 5 to the Consolidated Financial Statements, increased by $11.1 million and totaled $28.0 million at June 30, 2026 compared to $16.9 million at December 31, 2025. The increase in past due loans primarily reflects loans secured by commercial real estate in the past due 30-59 days category. One owner occupied commercial real estate relationship consisting of two loans totaling $5.2 million and two non-owner occupied commercial real estate loans totaling $7.7 million became past due during the six months ended June 30, 2026, while a $1.9 million non-owner occupied commercial real estate loan moved into current status during the six months ended June 30, 2026. The loans that primarily drove the increase in past due balances are rated special mention and classified.

Nonaccrual loans are risk rated as classified and comprised the majority of the classified loan balance as previously described. Management evaluates the financial condition of borrowers and the value of any collateral on nonaccrual loans. The results of these evaluations are used to estimate the amount of losses which may be realized on the disposition of these nonaccrual loans and are reflected in the allowance for credit losses on loans. At June 30, 2026 total specific reserves of $3.1 million were required primarily reflecting five commercial loan relationships, compared to specific reserves of $467 thousand at December 31, 2025.

Loans are placed on nonaccrual status when collection of principal and interest is doubtful, generally when a loan becomes 90 days past due. There are three negative implications for earnings when a loan is placed on non-accrual status. First, all interest accrued but unpaid at the date that the loan is placed on non-accrual status is either deducted from interest income or written off as a loss. Second, accruals of interest are discontinued until it becomes certain that both principal and interest can be repaid. Finally, there may be actual losses to principal that require additional provisions for credit losses to be charged against earnings.

For real estate loans, upon foreclosure, the balance of the loan is transferred to OREO and carried at the fair value of the property based on current appraisals and other current market trends, less estimated selling costs. If a write down of the OREO property is necessary at the time of foreclosure, the amount is charged-off to the allowance for credit losses. A review of the recorded property value is performed in conjunction with normal quarterly reviews, and if market conditions indicate that the recorded value exceeds the fair value, additional write downs of the property value are charged directly to operations.

#### Deposits

Total deposits were $1.60 billion and $1.61 billion at June 30, 2026 and December 31, 2025, respectively. This represents a marginal decrease of $5.4 million or 0.34% during the six months ended June 30, 2026.

The following table provides the composition of total deposits at June 30, 2026 and December 31, 2025.

*(dollars in thousands)*

|  | June 30, 2026 | December 31, 2025 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Noninterest bearing demand deposits | $463,086 | $432,171 | $30,915 | 7% |
| NOW accounts | 308,119 | 322,687 | (14,568) | (5)% |
| Money market accounts | 291,905 | 282,828 | 9,077 | 3% |
| Regular savings accounts | 120,690 | 123,030 | (2,340) | (2)% |
| Time deposits less than $250,000 | 238,824 | 262,390 | (23,566) | (9)% |
| Time deposits $250,000 and more | 179,311 | 184,254 | (4,943) | (3)% |
| Total deposits | $1,601,935 | $1,607,360 | $(5,425) | (0)% |
| Core deposits (1) | $1,334,550 | $1,304,733 | 29,817 | 2% |
| Core deposits as a percent of total deposits | 83% | 81% |  |  |
| Non-core deposits (2) | $267,385 | $302,627 | (35,242) | (12)% |
| Non-core deposits as a percent of total deposits | 17% | 19% |  |  |

(1) Core deposits consist of checking accounts, NOW accounts, money market accounts, regular savings accounts and time deposits less than $250,000, excluding wholesale or brokered deposits.

(2) Non-core deposits consist of brokered deposits, CDARs and time deposits of $250,000 or more.

Total deposits remained relatively stable with a decrease in non-core deposits of $35.2 million, reflecting runoff of higher cost deposits, partially offset by core deposits which increased $29.8 million during the six months ended June 30, 2026. The increase in core deposits was in line with management's effort to grow these deposits to support loan expansion.

In general, deposit pricing is done in response to monetary policy actions and yield curve changes. Local competition for funds also affects the cost of time deposits. Marketing efforts, including rate specials and emphasis on customer relationships are utilized to maintain maturing accounts and to acquire new time deposit accounts. At June 30, 2026, over 86% of deposits were fully FDIC insured.

CAPITAL RESOURCES

The Bank continues to be a well capitalized financial institution. Total shareholders’ equity at June 30, 2026 was $193.9 million, reflecting a percentage of total assets of 10.50%, as compared to $188.9 million and 10.00% at December 31, 2025. The $5.0 million increase in shareholders’ equity was primarily due to net operating income of $8.7 million earned during the six months ended June 30, 2026, partially offset by an increase in unrealized losses on available for sale securities amounting to $816 thousand, net of tax and dividends declared of $3.4 million. During each of the six months ended June 30, 2026 and 2025, the Company declared dividends of $0.62 per share. The Company has a Dividend Investment Plan that allows shareholders to reinvest dividends in Company stock.

At June 30, 2026, the Bank met all capital adequacy requirements and had regulatory capital ratios in excess of the levels established for well-capitalized institutions. The Bank monitors these ratios on a quarterly basis and has several strategies, including without limitation the issuance of common stock, to ensure that these ratios remain above regulatory minimums. The Bank's capital amounts and ratios are presented using the Federal Reserve's risk-based capital framework.

The risk-based capital rules require the Bank to comply with the following minimum capital ratios: (i) a common equity Tier 1 capital ratio of 4.5% of risk-weighted assets; (ii) a Tier 1 capital ratio of 6.0% of risk-weighted assets; (iii) a total capital ratio of 8.0% of risk-weighted assets; and (iv) a leverage ratio of 4.0% of total assets. In addition, a capital conservation buffer requirement of 2.5% was effective January 1, 2019. The capital conservation buffer is designed to absorb losses during periods of economic stress. Banking institutions with any ratio (excluding the leverage ratio) above the minimum but below the conservation buffer will face constraints on dividends, equity repurchases, and compensation based on the amount of the shortfall. The capital conservation buffer rule requires the Bank to maintain (i) a minimum ratio of common equity Tier 1 to risk-weighted assets of at least 4.5%, plus a 2.5% “capital conservation buffer” (which is added to the 4.5% common equity Tier 1 ratio, effectively resulting in a minimum ratio of common equity Tier 1 to risk-weighted assets of at least 7.0%), (ii) a minimum ratio of Tier 1 capital to risk-weighted assets of at least 6.0%, plus the 2.5% capital conservation buffer (which is added to the 6.0% Tier 1 capital ratio, effectively resulting in a minimum Tier 1 capital ratio of 8.5%), (iii) a minimum ratio of total capital to risk-weighted assets of at least 8.0%, plus the 2.5% capital conservation buffer (which is added to the 8.0% total capital ratio, effectively resulting in a minimum total capital ratio of 10.5%), and (iv) a minimum leverage ratio of 4.0%, calculated as the ratio of Tier 1 capital to average assets.

At June 30, 2026 and December 31, 2025, the Bank's regulatory capital and related ratios were as follows:

*(dollars in thousands)*

| Tier 1 Capital: | June 30, 2026 | December 31, 2025 |
| --- | ---: | ---: |
| Common stock | $1,682 | $1,682 |
| Capital surplus | 9,773 | 9,773 |
| Retained earnings | 217,015 | 211,730 |
| Nonmortgage servicing assets | (757) | (637) |
| Total Tier 1 capital | $227,713 | $222,548 |
| Common equity tier 1 capital | $227,713 | $222,548 |
| Tier 2 Capital: |  |  |
| Allowable portion of allowance for credit losses and reserve for off-balance sheet commitments | $18,918 | $15,128 |
| Total Tier 2 capital | $18,918 | $15,128 |
| Total risk-based capital | $246,631 | $237,676 |
| Risk weighted assets | $1,593,125 | $1,530,835 |
| Capital Ratios: |  |  |
| Common equity Tier 1 capital ratio | 14.29% | 14.54% |
| Tier 1 risk-based capital ratio | 14.29% | 14.54% |
| Total risk-based capital ratio | 15.48% | 15.53% |
| Tier 1 leverage ratio | 12.27% | 11.68% |

Pursuant to the Federal Reserve’s Small Bank Holding Company and Savings and Loan Holding Company Policy Statement, qualifying bank holding companies with total consolidated assets of less than $3 billion, such as the Company, are not subject to consolidated regulatory capital requirements.

LIQUIDITY

Liquidity management involves meeting the present and future financial obligations of the Company with the sale or maturity of assets or with the occurrence of additional liabilities. Liquidity needs are met with cash on hand, deposits in banks, federal funds sold, unpledged securities classified as available for sale and loans maturing within one year. At June 30, 2026, liquid assets totaled $345.3 million as compared to $423.4 million at December 31, 2025. These amounts represented 20.88% and 24.91% of total liabilities at June 30, 2026 and December 31, 2025, respectively. The decrease during the first half of 2026 was primarily due to lower levels of deposits with other institutions and federal funds sold as well as a decrease in balance of loans maturing within one year, partially offset by an increase in available for sale securities.

The Company generally attempts to minimize liquidity demand by primarily utilizing core deposits to fund asset growth. Securities provide a constant source of liquidity through paydowns and maturities. Also, the Company maintains short-term borrowing arrangements, including the Federal Reserve discount window and federal funds lines of credit with larger financial institutions as additional sources of liquidity. The Bank’s membership with the Federal Home Loan Bank of Atlanta provides a source of borrowings with numerous rate and term structures. The Company’s senior management monitors the liquidity position regularly and attempts to maintain a position which utilizes available funds most efficiently.

OFF-BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS

There have been no material changes in off-balance sheet arrangements and contractual obligations as reported in the 2025 Form 10-K.

## Market risk

As filed, 132 characters.

There have been no material changes in Quantitative and Qualitative Disclosures about Market Risk as reported in the 2025 Form 10-K.

## Controls and procedures

As filed, 1,657 characters.

Disclosure Controls and Procedures

The Company, under the supervision and with the participation of management, including the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of its disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effective as of June 30, 2026 to ensure that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and that such information is accumulated and communicated to the Company’s management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Internal Control over Financial Reporting

Management is also responsible for establishing and maintaining adequate internal control over the Company’s financial reporting (as defined in Rule 13a-15(f) promulgated under the Securities Exchange Act of 1934, as amended). The Company is currently using the 2013 COSO Framework.

There were no changes in the Company’s internal control over financial reporting during the Company’s three months ended June 30, 2026 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Filed Aug 10, 2026.
Source: SEC EDGAR, the filing index for accession 0000880641-26-000023. Last ingested by Listed: Oct 24, 2026, 14:58 ET. No prices; not investment advice.