Landmark Bancorp Inc: Form 10-Q for the period ended Jun 30, 2026

Overview. Landmark Bancorp, Inc. is a financial holding company incorporated under the laws of the State of Delaware and is engaged in the banking business through its wholly owned subsidiary, Landmark National Bank, and in the insurance business through its wholly owned subsidiary, Landmark Risk Management, Inc. References to the “Company,” “we,” “us,” and “our” refer collectively to Landmark Bancorp, Inc., Landmark National Bank and Landmark Risk Management, Inc. The Company is listed on the Nasdaq Global Market under the symbol “LARK.” The Bank is dedicated to providing quality financial and banking services to its local communities. Our strategy includes continuing a tradition of holding and acquiring quality assets while growing our commercial, commercial real estate (“CRE”) and agriculture loan portfolios. We are committed to developing relationships with our borrowers and providing a total banking service.

The Bank is principally engaged in the business of attracting deposits from the general public and using such deposits, together with borrowings and other funds, to originate one-to-four family residential real estate, construction and land, CRE, commercial, agriculture, municipal and consumer loans. Although not our primary business function, we invest in certain investment and mortgage-related securities using deposits and other borrowings as funding sources.

Landmark Risk Management, Inc., which was formed and began operations in 2017, is a Nevada-based captive insurance company which provides property and casualty insurance coverage to the Company and the Bank for which insurance may not be currently available or economically feasible in the current insurance marketplace. Landmark Risk Management, Inc. is subject to the regulations of the State of Nevada and undergoes periodic examinations by the Nevada Division of Insurance.

Our results of operations depend generally on net interest income, which is the difference between interest income from interest-earning assets and interest expense on interest-bearing liabilities. Net interest income is affected by regulatory, economic and competitive factors that influence interest rates, loan demand and deposit flows. In addition, we are subject to interest rate risk to the degree that our interest-earning assets mature or reprice at different times, or at different speeds, than our interest-bearing liabilities. Our results of operations are also affected by non-interest income, such as service charges, loan fees, gains from the sale of newly originated loans, gains or losses on investments and certain other non-interest related items. Our principal operating expenses, aside from interest expense, consist of compensation and employee benefits, occupancy costs, professional fees, data processing expenses and provision for credit losses.

We are significantly impacted by prevailing economic conditions, including federal monetary and fiscal policies, and federal regulations of financial institutions. Deposit balances are influenced by numerous factors such as competing investments, the level of income and the personal rate of savings within our market areas. Factors influencing lending activities include the demand for housing and the interest rate pricing competition from other lending institutions.

Currently, our business consists of ownership of the Bank, with its main office in Manhattan, Kansas and 27 additional branch offices in central, eastern, southeast and southwest Kansas, one loan production office in Kansas City, Missouri and our ownership of Landmark Risk Management, Inc.

In July 2026, we declared our 100th consecutive quarterly dividend, and we currently have no plans to change our dividend strategy given our current capital and liquidity position. However, while we have achieved a strong capital base and expect to continue operating profitably, our future dividend practice is dependent upon the performance of the economy and the Company’s overall performance. In addition, as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025, we will not be permitted to make capital distributions (including for dividends and repurchases of stock) or pay discretionary bonuses to executive officers without restriction if we do not maintain 2.5% in Common Equity Tier 1 Capital attributable to a capital conservation buffer, a standard we exceeded at June 30, 2026.

Critical Accounting Policies. Critical accounting policies are those which are both most important to the portrayal of our financial condition and results of operations and require our management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Our critical accounting policies relate to the allowance for credit losses and the accounting for business combinations, each of which involve significant judgment by our management. There have been no material changes to the critical accounting policies included under Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the Securities and Exchange Commission on April 14, 2026.

Summary of Results. During the second quarter of 2026, we recorded net earnings of $5.4 million, which was an increase of $1.0 million, or 22.4%, from net earnings of $4.4 million in the second quarter of 2025. During the first six months of 2026, we recorded net earnings of $10.5 million, which was an increase of $1.4 million, or 14.9%, from $9.1 million in the first six months of 2025. The increase in net earnings during both periods was primarily related to an increase in net interest income which was driven by growth in interest income on loans due to increased average loan balances and lower interest expense due to lower short-term interest rates and lower borrowing balances.

The following table summarizes earnings and key performance measures as of or for the periods presented:

(Dollars in thousands, except per share amounts)

(1) Per share values for the periods ended June 30, 2025 have been adjusted to give effect to the 5% dividend paid during 2025.

(2) Ratios have been annualized and are not necessarily indicative of the results for the entire year.

(3) Net interest margin is presented on a fully tax equivalent basis, using a 21% federal tax rate.

Interest Income. Interest income of $20.3 million for the quarter ended June 30, 2026 represented an increase of $153,000, or 0.8%, compared to the same period of 2025. Interest income on investment securities increased $189,000, or 6.6%, to $3.1 million for the second quarter of 2026, as compared to $2.9 million in the same period of 2025. The increase in interest income on investment securities was primarily the result of an increase in yields, which increased from 3.34% in the second quarter of 2025 to 3.66% in the second quarter of 2026. Partially offsetting the increase in yields was a decrease in the average balances of investment securities, which decreased from $363.9 million in the second quarter of 2025 to $349.8 million in the second quarter of 2026. Interest income on loans decreased $39,000, or 0.2%, to $17.1 million for the quarter ended June 30, 2026, compared to the same period of 2025, due to higher average balances, partially offset by lower yields. Average loan balances increased $8.6 million from the second quarter of 2025. The yield on loans decreased from 6.37% in the second quarter of 2025 to 6.31% in the second quarter of 2026.

Interest income of $40.5 million for the six months ended June 30, 2026 represented an increase of $1.1 million, or 2.7%, compared to the same period of 2025. Interest income on loans increased $826,000, or 2.5%, to $34.4 million for the six months ended June 30, 2026, compared to the same period of 2025 due to an increase in our average loan balances, which increased $26.7 million during the first six months of 2026 compared to the same period in 2025. The increase in average balances was partially offset by a decrease in yields on loans which decreased one basis point from 6.36% in the six months ended June 30, 2025 to 6.35% during the six months ended June 30, 2026. Interest income on investment securities increased $219,000, or 3.8%, to $6.0 million for the first six months of 2026, as compared to $5.8 million in the same period of 2025. The increase in interest income on investment securities was primarily the result of an increase in yields, which increased from 3.32% in the first six months of 2025 to 3.61% in the first six months of 2026. Partially offsetting the higher yields was a decrease in the average balances of investment securities which decreased from $370.8 million in the first six months of 2025 to $350.3 million in the first six months of 2026.

Interest Expense. Interest expense during the quarter ended June 30, 2026 decreased $1.2 million to $5.2 million, as compared to the same period of 2025. Interest expense on interest-bearing deposits decreased $795,000 to $4.3 million for the quarter ended June 30, 2026, as compared to the same period of 2025. Our total cost of interest-bearing deposits decreased from 2.14% in the second quarter of 2025 to 1.82% in the second quarter of 2026, as a result of lower rates on our deposits. The lower rates on interest-bearing deposits was coupled with a decrease in average interest-bearing deposit balances, which decreased from $965.2 million in the second quarter of 2025 to $958.4 million in the second quarter of 2026. For the second quarter of 2026, interest expense on borrowings decreased $449,000 to $822,000, as compared to the same period of 2025, due to a decrease in our average borrowings and repurchase agreements which decreased $29.7 million from the second quarter of 2025 to the second quarter of 2026. Also contributing to lower interest expense was a decrease in rates, which decreased from 4.98% in the second quarter of 2025 to 4.54% in the same period of 2026.

Interest expense during the six months ended June 30, 2026 decreased $2.2 million to $10.4 million, as compared to the same period of 2025. Interest expense on interest-bearing deposits decreased $1.4 million to $9.0 million for the six months ended June 30, 2026, as compared to the same period of 2025. Our total cost of interest-bearing deposits decreased from 2.15% in the first six months of 2025 to 1.86% in the first six months of 2026, as a result of lower rates on our deposits. The impact from lower rates was coupled with a decrease in average interest-bearing deposit balances, which decreased from $972.5 million in the first six months of 2025 to $970.7 million in the first six months of 2026. For the first six months of 2026, interest expense on borrowings decreased $822,000 to $1.4 million, as compared to the same period of 2025, due to a decrease in our average borrowings and repurchase agreements which decreased $28.5 million from the first six months of 2025 to the first six months of 2026. Also contributing to lower interest expense was a decrease in rates, which decreased from 5.03% in the first six months of 2025 to 4.66% in the same period of 2026.

Net Interest Income. Net interest income increased $1.4 million, or 10.2%, to $15.1 million for the second quarter of 2026, as compared to the second quarter of 2025. The increase in net interest income was primarily a result of a decrease in interest expense, coupled with an increase in interest income on investment securities. Compared to the same period last year, average interest-bearing liability balances declined $36.5 million coupled with lower rates decreased interest expense. Net interest margin, on a tax-equivalent basis, expanded 39 basis points from 3.83% in the second quarter of 2025, to 4.22% in the second quarter of 2026.

Net interest income increased $3.3 million, or 12.3%, to $30.1 million for the six months ended June 30, 2026, as compared to the same period of 2025. The increase in net interest income was primarily a result of a decrease in interest expense, coupled with an increase in loan interest income. Compared to the same period last year, average interest-bearing liability balances declined $30.3 million coupled with lower rates decreased interest expense. The increase in loan interest income was driven by growth in average loans. The accretion of purchase accounting adjustments increased net interest income by $346,000 in the first six months of 2026 compared to an increase of $380,000 in the first six months of 2025, and was primarily related to fair value adjustments on loans acquired in the Freedom Bank transaction completed in 2022. Compared to the same period last year, net interest margin, on a tax-equivalent basis, was 3.80% in the first six months of 2025, compared to 4.23% in the first six months of 2026.

Average Assets/Liabilities. The following table reflects the tax-equivalent yields earned on average interest-earning assets and costs of average interest-bearing liabilities (derived by dividing income or expense by the monthly average balance of assets or liabilities, respectively) as well as “net interest margin” (which reflects the effect of the net earnings balance) for the periods shown:

(Dollars in thousands)

(1) Income on tax exempt securities is presented on a fully tax-equivalent basis, using a 21% federal tax rate.

(2) Includes loans classified as non-accrual. Income on tax-exempt loans is presented on a fully tax-equivalent basis, using a 21% federal tax rate.

(3) Interest rate spread represents the difference between the average yield earned on interest-earning assets and the average rate paid on interest-bearing liabilities.

(4) Net interest margin represents annualized, tax-equivalent net interest income divided by average interest-earning assets.

31

(Dollars in thousands)

(1) Income on tax exempt securities is presented on a fully tax-equivalent basis, using a 21% federal tax rate.

(2) Includes loans classified as non-accrual. Income on tax-exempt loans is presented on a fully tax-equivalent basis, using a 21% federal tax rate.

(3) Interest rate spread represents the difference between the average yield earned on interest-earning assets and the average rate paid on interest-bearing liabilities.

(4) Net interest margin represents annualized, tax-equivalent net interest income divided by average interest-earning assets.

32

Rate/Volume Table. The following table describes the extent to which changes in tax-equivalent interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities affected the Company’s interest income and expense for the periods indicated. The table distinguishes between (i) changes attributable to rate (changes in rate multiplied by prior volume), (ii) changes attributable to volume (changes in volume multiplied by prior rate), and (iii) net change (the sum of (i) and (ii)). The net changes attributable to the combined effect of volume and rate that cannot be segregated have been allocated proportionately to the change due to volume and the change due to rate.

(Dollars in thousands)

(Dollars in thousands)

Provision for Credit Losses. During the second quarter of 2026, we recorded a $500,000 provision for credit losses, compared to a $1.0 million provision for credit losses recorded in the same period of 2025. The provision for credit losses recorded in the second quarter of 2026 was primarily due to lower reserves against individually evaluated loans on non-accrual as compared to the second quarter of 2025. We recorded net loan charge-offs of $452,000 during the second quarter of 2026, compared to net loan charge-offs of $40,000 during the second quarter of 2025.

During the first six months of 2026, we recorded a $1.1 million provision for credit losses compared to a $1.0 million provision for credit losses recorded in the first six months of 2025. The provision for credit losses during the first six months of 2026 consisted of a $1.0 million provision to the allowance for credit losses on loans and a $70,000 credit provision to the allowance for unfunded loan commitments. We recorded net loan charge-offs of $801,000 during the first six months of 2026, compared to net loan charge-offs of $63,000 during the first six months of 2025.

For further discussion of the allowance for credit losses, refer to the “Asset Quality and Distribution” section below.

Non-interest Income. Total non-interest income was $4.1 million in the second quarter of 2026, an increase of $469,000, or 12.9%, from the same period in 2025. The increase in non-interest income during the second quarter of 2026 compared to the same period in the prior year was primarily due to an increase of $501,000 in gains on sales of one-to-four family residential real estate loans due to an increase in the volume of loans sold in the secondary market.

Total non-interest income was $7.9 million in the first six months of 2026, an increase of $875,000, or 12.5%, from the same period in 2025. The increase in non-interest income during the first six months of 2026 compared to the same period in the prior year was primarily due to an increase of $824,000 in gains on sales of one-to-four family residential real estate loans due to an increase in the volume of loans sold in the secondary market. Additionally, there was an increase of $108,000 in bank-owned life insurance income due to the accrual of death benefits during 2026.

Non-interest Expense. Non-interest expense totaled $12.0 million for the second quarter of 2026, an increase of $1.0 million, or 9.1%, over the same quarter of 2025. The increase in non-interest expense in the second quarter of 2026 compared to the same period last year was mainly due to increases of $711,000 in professional fees and $335,000 in compensation and benefits expense. The increase in professional fees was driven by higher consulting expenses for talent development, risk assessment, and forensic accounting engagements. The increase in compensation and benefits expense was attributable to an increase in the number of employees in the current year, coupled with higher benefits expense as compared to the prior year.

Non-interest expense totaled $23.9 million for the first six months of 2026, an increase of $2.1 million, or 9.8%, over the same period of 2025. The increase in non-interest expense in the first six months of 2026 compared to the same period in the prior year was mainly due to increases of $743,000 in other expense, $730,000 in professional fees and $504,000 in compensation and benefits expense. The increase in other expense was driven by $433,000 of fraud losses recognized during the first quarter of 2026, related to the previously disclosed fraudulent activity by a non-executive officer of the Bank. The increase in fraud losses was coupled with increased insurance loss reserves of our captive insurance subsidiary and increased advertising expense. The increase in professional fees was driven by higher consulting expenses for talent development, risk assessment, and forensic accounting engagements. The increase in compensation and benefits expense was attributable to an increase in the number of employees in the current year, coupled with higher benefits expense as compared to the prior year.

Income Tax Expense. During the second quarter of 2026, we recorded income tax expense of $1.3 million, compared to income tax expense of $944,000 during the same period of 2025. Our effective tax rate increased from 17.7% in the second quarter of 2025 to 19.7% in the second quarter of 2026. The increase in the effective tax rate was due to higher earnings before taxes while tax exempt income decreased slightly.

During the first six months of 2026, we recorded income tax expense of $2.6 million, compared to income tax expense of $2.0 million during the same period of 2025. Our effective tax rate increased from 17.7% in the first half of 2025 to 19.8% in the first half of 2026. The increase in the effective tax rate was due to higher earnings before taxes while tax exempt income decreased slightly.

Financial Condition. Economic conditions in the United States remained sluggish during the first six months of 2026 as elevated inflation levels, high interest rates, and conflicts in the Middle East continued to impact the economy. Although interest rates decreased slightly in the second half of 2025, sustained high interest rates have impacted financial institutions generally, resulting in continued higher costs of funding and lower fair values for investment securities. We maintain strong capital and liquidity, and a stable, conservative deposit portfolio with a majority of our deposits being core customer-based and insured by the Federal Deposit Insurance Corporation (“FDIC”). We spend significant time each month monitoring our interest rate and concentration risks through our asset/liability management and lending strategies that involve a relationship-based banking model offering stability and consistency. The State of Kansas and the geographic markets in which the Company operates have also been impacted by economic headwinds. Supply chain constraints, labor shortages and geopolitical events have contributed to the rising inflation levels which are impacting all areas of the economy both nationally and locally. The Company’s allowance for credit losses continues to factor in estimates of the economic impact of these conditions and other qualitative factors on our loan portfolio. However, our loan portfolio is diversified across various types of loans and collateral throughout the markets in which we operate. Aside from a few problem loans that management is working to resolve, our asset quality has remained strong over the past few years. While further increases in problem assets may arise, management believes its efforts to run a high-quality financial institution with a sound asset base will continue to create a strong foundation for continued growth and profitability in the future.

Asset Quality and Distribution. Our primary investing activities are the origination of one-to-four family residential real estate, construction and land, CRE, commercial, agriculture, municipal and consumer loans and the purchase of investment securities. Total assets were $1.6 billion at both December 31, 2025 and June 30, 2026.

The allowance for credit losses is established through a provision for credit losses based on our economic projections. At June 30, 2026, our allowance for credit losses on loans totaled $12.7 million, or 1.15% of gross loans outstanding, compared to $12.5 million, or 1.12% of gross loans outstanding, at December 31, 2025. The increase in our allowance for credit losses on loans as a percentage of gross loans outstanding was primarily due to higher reserves against individually evaluated loans on non-accrual due to an increase in loans on non-accrual as of June 30, 2026. The balance of our allowance for credit losses reflects current and projected economic conditions and other qualitative factors.

As of June 30, 2026 and December 31, 2025, approximately $25.7 million and $27.2 million, respectively, of loans were considered classified and assigned a risk rating of special mention, substandard or doubtful. These ratings indicate that these loans were identified as potential problem loans having more than normal risk and raised doubts as to the ability of the borrowers to comply with present loan repayment terms. Even though borrowers were experiencing moderate cash flow problems as well as some deterioration in collateral value, management believed the allowance for credit losses was sufficient to cover expected losses related to such loans at June 30, 2026 and December 31, 2025, respectively.

Loans past due 30-89 days and still accruing interest totaled $6.3 million, or 0.57% of gross loans, at June 30, 2026, compared to $4.3 million, or 0.38% of gross loans, at December 31, 2025. The increase in past due loans was primarily related to loans in our commercial and one-to-four family residential real estate loan portfolios. At June 30, 2026, $13.1 million in loans were on non-accrual status, or 1.18% of gross loans, compared to $10.0 million, or 0.90% of gross loans, at December 31, 2025. The increase in non-accrual loans was primarily related to loans in our agriculture loan portfolio. Non-accrual loans consist of loans 90 or more days past due and certain individually evaluated loans. There were no loans 90 days delinquent and accruing interest at either June 30, 2026 or December 31, 2025.

As part of our credit risk management strategy, we continue to manage the loan portfolio to identify problem loans and have placed additional emphasis on CRE and commercial loan relationships. We are working to resolve the remaining problem credits or move the non-performing credits out of the loan portfolio. At both June 30, 2026 and December 31, 2025, we had no real estate owned.

Liability Distribution. Our primary ongoing sources of funds are deposits, FHLB borrowings, proceeds from principal and interest payments on loans and investment securities and proceeds from the sale of mortgage loans and investment securities. While maturities and scheduled amortization of loans are a predictable source of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates and economic conditions. We experienced a decrease of $83.9 million, or 6.0% in total deposits during the first six months of 2026, to $1.3 billion at June 30, 2026. The decrease in deposits was primarily due to a decrease in brokered deposits, coupled with a seasonal decrease in our public fund deposit accounts.

Non-interest-bearing deposits at June 30, 2026 were $380.5 million, or 29.2% of deposits, compared to $364.7 million, or 26.3% of deposits, at December 31, 2025. Money market and checking deposit accounts were 45.7% of our deposit portfolio and totaled $596.1 million at June 30, 2026, compared to $651.0 million, or 46.9% of deposits, at December 31, 2025. The decrease in money market and checking deposit accounts included a decline of $40.1 million in brokered deposits from $40.1 million at December 31, 2025 to a balance of $29,000 at June 30, 2026. Savings accounts were $151.0 million, or 11.6%, of deposits at June 30, 2026, compared to $151.4 million, or 10.9% of deposits, at December 31, 2025. Certificates of deposit totaled $177.4 million, or 13.6% of deposits, at June 30, 2026, compared to $221.8 million, or 16.0% of deposits, at December 31, 2025. The decrease in certificates of deposit was primarily related to lower brokered certificates of deposits, which decreased from $57.9 million at December 31, 2025 to $12.7 million at June 30, 2026.

Overdraft deposits consist of non-interest-bearing deposits, money market and checking deposit accounts with negative balances. These overdraft balances totaled $443,000 as of June 30, 2026 and $297,000 as of December 31, 2025 and were presented as loans on the balance sheet.

Total deposits include estimated uninsured deposits of $462.3 million and $490.9 million as of June 30, 2026 and December 31, 2025, respectively. This represented approximately 35.4% of our total deposits at June 30, 2026 and 35.3% of our deposits at December 31, 2025. Over 98.6% of the Company’s total deposits were considered core deposits at June 30, 2026. These deposit balances are from retail, commercial and public fund customers located in the markets where the Company has bank branch locations.

Certificates of deposit at June 30, 2026 scheduled to mature in one year or less totaled $168.2 million. Historically, maturing deposits have generally remained with the Bank, and we believe that a significant portion of the deposits maturing in one year or less will remain with us upon maturity in some type of deposit account.

Total borrowings increased $72.9 million to $106.7 million at June 30, 2026, from $33.7 million at December 31, 2025. The increase in total borrowings was primarily due to an increase in FHLB line of credit borrowings.

Cash Flows. During the six months ended June 30, 2026, our cash and cash equivalents increased by $5.3 million. Our operating activities provided net cash of $10.2 million during the first six months of 2026 primarily as a result of net earnings. Our investing activities provided net cash of $8.5 million during the first six months of 2026, primarily due to maturities of investment securities and a decrease in loans. Financing activities used net cash of $13.5 million during the first six months of 2026, primarily as a result of a decrease in deposit balances.

Liquidity. Our most liquid assets are cash and cash equivalents and investment securities available-for-sale. The levels of these assets are dependent on the operating, financing, lending and investing activities during any given year. These liquid assets totaled $373.0 million at June 30, 2026 and $372.4 million at December 31, 2025. During periods in which we are not able to originate a sufficient amount of loans and/or periods of high principal prepayments, we generally increase our liquid assets by investing in short-term, high-grade investments or holding higher balances of cash and cash equivalents.

Liquidity management is both a daily and long-term function of our strategy. Excess funds are generally invested in short-term investments. Excess funds are typically generated as a result of increased deposit balances, while uses of excess funds are generally deposit withdrawals and loan advances. In the event we require funds beyond our ability to generate them internally, additional funds are generally available through the use of FHLB advances, a line of credit with the FHLB, other borrowings or through pledging or sales of investment securities. While the sale of available-for-sale investment securities would result in losses due to the current interest environment, pledging these securities as collateral would not result in a loss. At June 30, 2026, we had $82.4 million of outstanding borrowings under our line of credit with the FHLB. At June 30, 2026, we had collateral pledged to the FHLB that would allow us to borrow $173.4 million, subject to FHLB credit requirements and policies. At June 30, 2026, we had no borrowings through the Federal Reserve discount window, while our borrowing capacity with the Federal Reserve was $37.2 million. We also have various other federal funds agreements, both secured and unsecured, with correspondent banks totaling approximately $35.0 million in available credit under which we had no outstanding borrowings at June 30, 2026. At June 30, 2026, we had subordinated debentures totaling $21.7 million and $1.6 million of repurchase agreements. At June 30, 2026, the Company had no borrowings against a $5.0 million line of credit from an unrelated financial institution maturing on November 1, 2026, with an interest rate that adjusts daily based on the prime rate less 0.50%. This line of credit has covenants specific to capital and other financial ratios, which the Company was in compliance with at June 30, 2026. The Company also has outstanding borrowings of $1.0 million from the same unrelated financial institution at a fixed rate of 6.15%. This borrowing matures on September 1, 2027 and requires quarterly principal and interest payments. The original $10.0 million of borrowings was used to fund part of the acquisition of Freedom Bancshares, Inc., which was completed in 2022.

Off Balance Sheet Arrangements. As a provider of financial services, we routinely issue financial guarantees in the form of financial and performance standby letters of credit. Standby letters of credit are contingent commitments issued by us generally to guarantee the payment or performance obligation of a customer to a third party. While these standby letters of credit represent a potential outlay by us, a significant amount of the commitments may expire without being drawn upon. We have recourse against the customer for any amount the customer is required to pay to a third party under a standby letter of credit. The letters of credit are subject to the same credit policies, underwriting standards and approval process as loans made by us. Most of the standby letters of credit are secured, and in the event of nonperformance by the customers, we have the right to the underlying collateral, which could include CRE, physical plant and property, inventory, receivables, cash and marketable securities. The contract amount of these standby letters of credit, which represents the maximum potential future payments guaranteed by us, was $2.2 million at June 30, 2026.

At June 30, 2026, we had outstanding loan commitments, excluding standby letters of credit, of $195.0 million. We anticipate that sufficient funds will be available to meet current loan commitments. These commitments consist of unfunded lines of credit and commitments to finance real estate loans.

Capital. The Company and the Bank are subject to various regulatory capital requirements administered by federal banking regulators. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by federal banking regulators that, if undertaken, could have a direct material effect on the Company’s and Bank’s business. Banking organizations are required to maintain minimum capital levels as follows: a ratio of common equity Tier 1 capital equal to 4.5% of risk-weighted assets, a ratio of Tier 1 capital equal to 6.0% of risk-weighted assets, a ratio of total capital equal to 8.0% of risk-weighted assets, and a leverage ratio of Tier 1 capital to total quarterly average assets equal to 4.0% in all circumstances. Regulations also include a capital conservation buffer of 2.5% that is added to these minimum requirements for capital adequacy purposes. A banking organization with a conservation buffer of less than the required amount is subject to limitations on capital distributions, including the amount of dividends that it may pay without prior regulatory approval, stock repurchases and certain discretionary bonus payments to executive officers. Management believes that the Company and the Bank met all capital adequacy requirements to which they were subject as of June 30, 2026 and December 31, 2025, as discussed in more detail in Note 11 of the Consolidated Financial Statements.

Dividends. During the quarter ended June 30, 2026, we paid a quarterly cash dividend of $0.21 per share to our stockholders.

The payment of dividends by any financial institution or its holding company is affected by the requirement to maintain adequate capital pursuant to applicable capital adequacy guidelines and regulations. As discussed above, banking organizations must maintain a capital conservation buffer of 2.5% that is added to certain regulatory minimum requirements for capital adequacy purposes in order to pay dividends and make other capital distributions. As described above, the Bank exceeded its minimum capital requirements under applicable guidelines as of June 30, 2026. The National Bank Act also imposes limitations on the amount of dividends that a national bank may pay without prior regulatory approval. Generally, the amount is limited to the bank’s current year net earnings plus the adjusted retained earnings for the two preceding years. As of June 30, 2026, approximately $23.5 million was available to be paid as dividends to the Company by the Bank without prior regulatory approval.

Additionally, our ability to pay dividends is limited by the subordinated debentures that are held by three business trusts that we control. Interest payments on the debentures must be paid before we pay dividends on our capital stock, including our common stock. We have the right to defer interest payments on the debentures for up to 20 consecutive quarters. However, if we elect to defer interest payments, all deferred interest must be paid before we may pay dividends on our capital stock.

As a financial institution, our primary component of market risk is interest rate volatility. Interest rate risk is defined as the exposure of net interest income and fair value of financial instruments (interest-earning assets, deposits and borrowings) to movements in interest rates. Our results of operations depend to a large degree on our net interest income and ability to manage interest rate risk. Major sources of interest rate risk include timing differences in the maturity and re-pricing characteristics of assets and liabilities, changes in the shape of the yield curve, changes in customer behavior and changes in relationships between rate indices (basis risk). Our management measures these risks and their impacts in several ways, including through the use of income simulations and valuation analyses. Multiple interest rate scenarios are used in this analysis which include changes in interest rates, spread narrowing and widening, yield curve twists and changes in assumptions about customer behavior in various interest rate scenarios. A mismatch between maturities, interest rate sensitivities and prepayment characteristics of assets and liabilities results in interest-rate risk. Like most financial institutions, we have material interest-rate risk exposure to changes in both short-term and long-term interest rates, as well as variable interest rate indices. Interest rates in the financial markets affect our decisions relating to pricing our assets and liabilities, which impact net interest income, a significant cash flow source for us. As a result, a substantial portion of our risk management activities relates to managing interest rate risk.

Our Asset/Liability Management Committee (“ALCO”) monitors the interest rate sensitivity of our balance sheet using earnings simulation models and interest sensitivity analyses. We have set policy limits of interest rate risk to be assumed in the normal course of business and monitor such limits through our simulation process. We endeavor to manage our interest rate sensitivity position within our established guidelines, and assess our position quarterly. The ALCO formulates strategies based on perceived levels of interest rate risk. In determining the appropriate level of interest rate risk, the ALCO considers the impact on earnings and capital of the current outlook for interest rates, potential changes in interest rates, regional economies, liquidity, business strategies and other factors. The ALCO meets regularly to review, among other things, the sensitivity of assets and liabilities to interest rate changes, the book and market values of assets and liabilities, unrealized gains and losses, purchase and sale activities, commitments to originate loans and the maturities of investments and borrowings. Additionally, the ALCO reviews liquidity, cash flow flexibility, maturities of deposits and consumer and commercial deposit activity. Management employs methodologies to manage interest rate risk, which include an analysis of relationships between interest earning assets and interest-bearing liabilities and an interest rate shock simulation model.

For additional information regarding the Company’s market risk, see the information set forth under Part II, Item 7A “Quantitative and Qualitative Disclosures About Market and Interest Rate Risk” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995

Forward-Looking Statements

This document (including information incorporated by reference) may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 with respect to our financial condition, results of operations, plans, objectives, future performance and business. Forward-looking statements, which may be based upon beliefs, expectations and assumptions of our management and on information currently available to management, are generally identifiable by the use of words such as “believe,” “expect,” “anticipate,” “plan,” “intend,” “estimate,” “may,” “will,” “would,” “could,” “should” or other similar expressions, including the negatives of such expressions. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on the Company’s current beliefs, expectations, and assumptions regarding its business, future plans and strategies, projections, anticipated events and trends, the economy, and other future conditions. Actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Additionally, all statements in this document, including forward-looking statements, speak only as of the date they are made, and we undertake no obligation to update any statement in light of new information or future events. Because forward-looking statements relate to the future, they are subject to inherent known and unknown uncertainties, risks, changes in circumstances, and other factors that are difficult to predict and many of which may be out of our control.

Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on operations and future prospects of us and our subsidiaries include, but are not limited to, the following:

• The strength of the local, state, national and international economies, and financial markets, including the effects of inflationary pressures and future monetary policies of the Federal Reserve in response thereto and changes in global energy market conditions;
• effects on the U.S. economy resulting from actions taken by the federal government, including the threat or implementation of tariffs, immigration enforcement, executive orders, and changes in foreign policy;
• Changes in interest rates and prepayment rates of our assets;
• Increased competition in the financial services sector and the inability to attract new customers, including from non-bank competitors such as credit unions and fintech companies;
• Timely development and acceptance of new products and services;
• Rapid and expensive technological changes implemented by us and other parties in the financial services industry, including third-party vendors, which may be more difficult to implement or more expensive than anticipated or which may have unforeseen consequence to us and our customers, including the development and implementation of tools incorporating artificial intelligence;
• Our risk management framework;

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• Interruptions in information technology and telecommunications systems and third-party services;
• The economic effects of severe weather, natural disasters, widespread disease or pandemics, or other external events;
• The loss of key executives or employees;
• Changes in consumer spending;
• Integration of acquired businesses;
• The commencement, cost and outcome of litigation and other legal proceedings and regulatory actions against us or to which we may become subject;
• Changes in accounting policies and practices, such as the implementation of the current expected credit losses accounting standard;
• Past and any future terrorist attacks, military conflicts, acts of war, changes in foreign relations, or other adverse external events, including ongoing conflicts in the Middle East, wars in Iran and Ukraine, and other international military conflicts that can increase levels of political and economic unpredictability, contribute to rising energy and commodity prices, affect global supply chains, increase the volatility of financial markets, and other matters beyond our control;
• The ability to manage credit risk, forecast loan losses and maintain an adequate allowance for loan losses;
• Fluctuations in the value of securities held in our securities portfolio;
• Concentrations within our loan portfolio and large loans to certain borrowers (including CRE loans);
• The concentration of large deposits from certain clients who have balances above current FDIC insurance limits and may withdraw deposits to diversify their exposure;
• The level of non-performing assets on our balance sheets;
• The ability to raise additional capital;
• The occurrence of fraudulent activity, breaches or failures of our or our third party vendors’ information security controls or cybersecurity-related incidents, including as a result of sophisticated attacks using artificial intelligence and similar tools or as a result of insider fraud;
• Emerging issues related to the development and use of artificial intelligence that could give rise to legal or regulatory action, damage our reputation, or otherwise materially harm our business or customers;
• Declines in real estate values;
• The effects of fraud on the part of our employees, customers, vendors or counterparties;
• The availability of future equity or debt issuances and other capital raising opportunities on favorable terms; and
• Our success at managing and responding to the risks involved in the foregoing items.

These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Additional information concerning us and our business, including other factors that could materially affect our financial results, is included in our filings with the Securities and Exchange Commission, including the “Risk Factors” section in our Annual Report on Form 10-K for the year ended December 31, 2025 filed with the SEC on April 14, 2026.

An evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of June 30, 2026. Based on that evaluation, the Company’s management, including the Chief Executive Officer and Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were effective as of June 30, 2026 to ensure that the information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act was recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

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

There have been no material changes in the risk factors set forth under Part I, Item 1A “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.