John Marshall Bancorp JMSB Form 10-Q filing Q2 FY2026

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PART I —FINANCIAL INFORMATION

Item 1. Financial Statements

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*Derived from audited consolidated financial statements.

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The accompanying notes are an integral part of these consolidated financial statements.

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JOHN MARSHALL BANCORP, INC.

Consolidated Statements of Income

(In thousands, except per share data)

(Unaudited)

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The accompanying notes are an integral part of these consolidated financial statements.

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JOHN MARSHALL BANCORP, INC.

Consolidated Statements of Comprehensive Income

(In thousands)

(Unaudited)

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The accompanying notes are an integral part of these consolidated financial statements.

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JOHN MARSHALL BANCORP, INC.

Consolidated Statements of Shareholders’ Equity

For the Three Months Ended June 30, 2026 and 2025

(In thousands, except share and per share data)

(Unaudited)

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The accompanying notes are an integral part of these consolidated financial statements.

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JOHN MARSHALL BANCORP, INC.

Consolidated Statements of Shareholders’ Equity

For the Six Months Ended June 30, 2026 and 2025

(In thousands, except share and per share data)

(Unaudited)

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The accompanying notes are an integral part of these consolidated financial statements.

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JOHN MARSHALL BANCORP, INC.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

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The accompanying notes are an integral part of these consolidated financial statements.

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JOHN MARSHALL BANCORP, INC.

Notes to Consolidated Financial Statements

(Dollars in thousands, unless otherwise stated)

(Unaudited)

Note 1— Nature of Business and Summary of Significant Accounting Policies

Nature of Banking Activities

John Marshall Bancorp, Inc. (the “Company”), headquartered in Reston, Virginia, became the registered bank holding company under the Bank Holding Company Act of 1956 for its wholly-owned subsidiary, John Marshall Bank (the “Bank”), on March 1, 2017. This reorganization was completed through a one-for-one share exchange in which the Bank’s shareholders received one share of voting common stock of the Company in exchange for each share of the Bank’s voting common stock. The Company was formed on April 21, 2016 under the laws of the Commonwealth of Virginia. The Bank was formed on April 5, 2005 under the laws of the Commonwealth of Virginia and was chartered as a bank on February 9, 2006, by the Virginia Bureau of Financial Institutions. The Bank is a member of the Federal Reserve System and is subject to the rules and regulations of the Virginia Bureau of Financial Institutions, the Board of Governors of the Federal Reserve System (the “Federal Reserve”) and the Federal Deposit Insurance Corporation (“FDIC”). The Bank opened for business on April 17, 2006 and provides banking services to its customers primarily in the Washington, D.C. metropolitan area.

Basis of Presentation

The accounting and reporting policies of John Marshall Bancorp, Inc. conform to generally accepted accounting principles in the United States of America (“GAAP”) and reflect practices of the banking industry. The accompanying unaudited consolidated financial statements have been prepared in accordance with GAAP for interim financial reporting and with applicable quarterly reporting regulations of the U.S. Securities and Exchange Commission (“SEC”). They do not include all of the information and notes required by GAAP for complete financial statements. As such, these consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto as of and for the year ended December 31, 2025, included in the Company’s 2025 Annual Report on Form 10-K filed with the SEC on March 13, 2026.

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All significant intercompany accounts and transactions between the Company and the Bank have been eliminated. In preparing financial statements in conformity with GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan credit losses.

In the opinion of management, all adjustments, consisting only of normal recurring adjustments, which are necessary for a fair presentation of the results of operations in these financial statements, have been made. The results of operations for the three and six months ended June 30, 2026 are not necessarily indicative of the results to be expected for any other interim period or for the full year. All amounts and disclosures included in this quarterly report as of December 31, 2025, were derived from the Company’s audited consolidated financial statements.

Segment Reporting

The Company has one operating segment, the Bank, and has determined that it meets the aggregation criteria of ASC 280 Segment Reporting, as its current operating model is structured whereby all product offerings are managed through similar processes and platforms that are collectively reviewed by the Company’s President/Chief Executive Officer and Chief Financial Officer, who have been identified as the chief operating decision makers (“CODMs”).

The CODMs regularly assess performance of the aggregated single operating and reporting segment and decide how to allocate resources based on net income calculated on the same basis as is reported in the Company’s consolidated statements of income and comprehensive income. The CODMs are also regularly provided with expense information at a level consistent with that disclosed in the Company’s statements of income and comprehensive income.

Significant Accounting Policies and Estimates

Application of the principles of GAAP and practices within the banking industry requires management to make estimates, assumptions, and judgments that affect the amounts reported in the financial statements and accompanying notes. 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.

The Company's significant accounting policies followed in the preparation of the unaudited consolidated financial statements are disclosed in Note 1 of the audited financial statements and notes for the year ended December 31, 2025 and are contained in the Company's 2025 Annual Report on Form 10-K. There have been no significant changes to the application of significant accounting policies since December 31, 2025.

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Recent Accounting Pronouncements

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ASU 2024-03: In November 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2024-03, “Income Statement—Reporting Comprehensive Income— Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses.” ASU 2024-03 requires public companies to disclose, in the notes to the financial statements, specific information about certain costs and expenses at each interim and annual reporting period. This includes disclosing amounts related to employee compensation, depreciation, and intangible asset amortization. In addition, public companies will need to provide qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively. ASU 2024-03 is effective for public business entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Implementation of ASU 2024-03 may be applied prospectively or retrospectively. The Company does not expect the adoption of ASU 2024-03 to have a material impact on its consolidated financial statements.

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ASU 2025-08: In November 2025, the FASB issued ASU 2025-08, “Financial Instruments—Credit Losses (Topic 326): Purchased Loans.” The amendments in this ASU expand the population of acquired financial assets accounted for using the gross-up approach. Acquired loans (excluding credit cards) are deemed purchased seasoned loans and accounted for using the gross-up approach upon acquisition if criteria established by the new guidance are met. This change aims to enhance comparability, consistency, and better reflect the economics of acquiring financial assets. This ASU is effective for annual reporting periods beginning after December 15, 2026, and for interim reporting periods within those annual reporting periods. Early adoption is permitted in an interim or annual reporting period in which financial statements have not yet been issued or made available for issuance. If an entity adopts this ASU in an interim reporting period, it should apply it as of the beginning of that interim reporting period or the beginning of the annual reporting period that includes that interim reporting period. The Company does not expect the adoption of ASU 2025-08 to have a material impact on its consolidated financial statements.

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ASU 2025-12: In December 2025, the FASB issued ASU 2025-12, “Codification Improvements.” The amendments in this ASU update the FASB Accounting Standards Codification (“ASC”) for a broad range of Topics arising from technical corrections, unintended application of the Codification, clarifications, and other minor improvements. The amendments in this ASU are effective for annual periods beginning after December 15, 2026, and interim periods within those annual periods. Early adoption is permitted in both interim and annual periods in which financial statements have not yet been issued or made available for issuance. If an entity adopts the amendments in this ASU in an interim period, it must adopt them as of the beginning of the annual period that includes that interim period. An entity may elect to early adopt the amendments on an issue-by-issue basis. The Company does not expect the adoption of ASU 2025-12 to have a material impact on its consolidated financial statements.

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Note 2— Investment Securities

Available-for-Sale

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Each of the securities in the Company’s available-for-sale investment portfolio is either covered by the explicit or implied guarantee of the United States government or one of its agencies or rated investment grade or higher. All available-for-sale securities were current with no securities past due or on nonaccrual as of June 30, 2026 or December 31, 2025.

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The following tables summarize the amortized cost and fair value of securities available-for-sale and the corresponding amounts of gross unrealized gains and losses at June 30, 2026 and December 31, 2025.

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The Company did not sell or recognize any gain or loss for any securities for the three and six months ended June 30, 2026 and 2025.

Available-for-sale securities having a market value of $81.3 million and $54.8 million at June 30, 2026 and December 31, 2025, respectively, were pledged to secure public deposits. These securities had an amortized cost of $87.2 million and $58.6 million at June 30, 2026 and December 31, 2025, respectively.

The following tables summarize the fair value of securities available-for-sale at June 30, 2026 and December 31, 2025 and the corresponding amounts of gross unrealized losses. Management uses the valuations as of month-end in determining when securities are in an unrealized loss position. Therefore, a security’s market value could have exceeded its amortized cost on other days during the prior twelve-month period.

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The Company had 149 and 137 securities in an unrealized loss position as of June 30, 2026 and December 31, 2025, respectively. The Company has evaluated available-for-sale securities in an unrealized loss position for credit related impairment at June 30, 2026 and December 31, 2025 and concluded no impairment existed based on a combination of factors, which included: (1) the securities are of high credit quality, (2) unrealized losses are primarily the result of market volatility and increases in market interest rates, (3) the contractual terms of the investments do not permit the issuer(s) to settle the securities at a price less than the par value of each investment, (4) issuers continue to make timely principal and interest payments, and (5) the Company does not intend to sell any of the investments and the accounting standard of “more likely than not” has not been met for the Company to be required to sell any of the investments before recovery of its amortized cost basis. As such, there was no allowance for credit losses on available-for-sale securities at June 30, 2026.

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The table below summarizes the contractual maturities of our available-for-sale investment securities as of June 30, 2026. Issuers may have the right to call or prepay certain obligations, and as such, the expected maturities of our securities may occur sooner than the scheduled contractual maturities presented below.

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In the prevailing rate environments as of both June 30, 2026 and December 31, 2025, the Company’s available-for-sale investment portfolio had an estimated weighted average remaining life of approximately 3.5 years and 3.1 years, respectively.

Held-to-Maturity

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Each of the securities in the Company’s held-to-maturity investment portfolio is either covered by the explicit or implied guarantee of the United States government or one of its agencies or rated investment grade or higher. All held-to-maturity securities were current with no securities past due or on nonaccrual as of June 30, 2026 or December 31, 2025.

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The following tables summarize the amortized cost and fair value of securities held-to-maturity and the corresponding amounts of gross unrealized losses at June 30, 2026 and December 31, 2025, respectively.

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Held-to-maturity securities having a market value of $52.9 million and $45.2 million at June 30, 2026 and December 31, 2025, respectively, were pledged to secure public deposits. These securities had an amortized cost of $59.0 million and $49.8 million at June 30, 2026 and December 31, 2025, respectively.

The Company evaluates the credit risk of its held-to-maturity securities on at least a quarterly basis. The Company estimates expected credit losses on held-to-maturity securities on an individual basis based on a probability of default/loss given default methodology primarily using security-level credit ratings. The primary indicators of credit quality for the Company’s held-to-maturity portfolio are security type and credit rating, which is influenced by a number of factors including obligor cash flow, geography, seniority, and others. The Company’s held-to-maturity securities with credit risk were comprised of municipal bonds and had a credit rating of AA or better as of June 30, 2026. All other held-to-maturity securities are covered by the explicit or implied guarantee of the United States government or one of its agencies. The Company did not have an allowance for credit losses on held-to-maturity securities as of June 30, 2026 or December 31, 2025.

The table below summarizes the contractual maturities of our held-to-maturity investment securities as of June 30, 2026. Issuers may have the right to call or prepay certain obligations and as such, the expected maturities of our securities may occur sooner than the scheduled contractual maturities presented below.

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In the prevailing rate environments as of June 30, 2026 and December 31, 2025, the Company’s held-to-maturity investment portfolio had an estimated weighted average remaining life of approximately 4.9 years and 5.2 years, respectively.

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Restricted Securities

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The table below summarizes the carrying amounts of restricted securities as of June 30, 2026 and December 31, 2025.

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Equity Securities

The Company held equity securities with readily determinable fair values totaling $3.1 million and $2.8 million at June 30, 2026 and December 31, 2025, respectively. These securities consist of mutual funds held in a trust and were obtained for the purpose of economically hedging changes in the Company’s nonqualified deferred compensation liability. Changes in the fair value of these securities are reflected in earnings. A gain of $262 thousand and $182 thousand were recorded in non-interest income in the Consolidated Statements of Income for the three months ended June 30, 2026 and June 30, 2025, respectively. A gain of $249 thousand and $206 thousand were recorded in non-interest income in the Consolidated Statements of Income for the six months ended June 30, 2026 and June 30, 2025, respectively.

Note 3— Loans

The following table presents the composition of the Company’s loan portfolio as of June 30, 2026 and December 31, 2025.

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Portfolio Segments

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The Company currently manages its loan products and the respective exposure to credit losses by the following specific portfolio segments which are levels at which the Company develops and documents its systematic methodology to determine the allowance for loan credit losses attributable to each respective portfolio segment. These segments are:

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• Real estate - commercial loans – The real estate commercial loans category contains commercial mortgage loans secured by owner occupied, non-owner occupied, and multifamily real estate.
• Real estate - construction and land development loans – The real estate construction and land development loans category contains residential and commercial construction loan financing to builders and developers and to consumers building their own homes.
• Real estate - residential loans – The real estate residential mortgage loans category contains permanent mortgage loans principally to consumers secured by residential real estate.
• Commercial loans – The commercial loans category contains business purpose loans made to provide funds for the financing of equipment, receivables, contract administration expenses, and other general corporate needs of commercial businesses.
• Consumer loans – The consumer loans category contains personal loans such as installment loans and lines of credit.

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Loan Servicing Rights

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Under the U.S. Small Business Administration (“SBA”) 7(a) program, the Bank can sell in the secondary market the guaranteed portion of its SBA 7(a) loans and retain the related unguaranteed portion of these loans, as well as the servicing on such loans, for which it is paid a fee. The Company generally offers SBA 7(a) loans within a range of $50 thousand to $2.0 million. SBA 7(a) loans are fixed or adjustable-rate loans based on the Prime Rate. Under the SBA 7(a) program, the loans carry an SBA guaranty for up to 85% of the loan. Typical maturities for this type of loan vary but can be up to ten years. The Company holds rights to service the guaranteed portion of SBA loans sold in the secondary market. Management has elected the amortization method to account for loan servicing rights. The loan servicing spread is generally a minimum of 1.00% on all SBA 7(a) loans.

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Loan servicing rights are capitalized at estimated fair value when acquired through the origination of loans that are subsequently sold with the servicing rights retained. Loan servicing rights are amortized to servicing income on loans sold approximately in proportion to and over the period of estimated net servicing income. The value of loan servicing rights at the date of the sale of loans is estimated based on the discounted present value of expected future cash flows using key assumptions for servicing income and costs and expected prepayment rates on the underlying loans.

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The carrying value of loan servicing rights are periodically evaluated for impairment by comparing actual cash flows and estimated future cash flows from the loan servicing assets to those estimated at the time that the loan servicing assets were originated. Fair values are estimated using discounted expected future cash flows based on current market rates of interest. For purposes of measuring impairment, the loan servicing rights must be stratified by one or more predominant risk characteristics of the underlying loans. The Company stratifies its capitalized loan servicing rights based on product type and term of the underlying loans. The amount of impairment recognized is the amount, if any, by which the amortized cost of the loan servicing rights exceeds their carrying value. Impairment, if deemed temporary, is recognized through a valuation allowance to the extent that fair value is less than the recorded amount.

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At June 30, 2026 and December 31, 2025, the total outstanding principal balance of Bank’s SBA 7(a) loan servicing portfolio, which is not included in the Company’s consolidated financial statements, totaled $9.4 million and $9.8 million, respectively. At June 30, 2026 and December 31, 2025, SBA servicing rights of $116 thousand and $138 thousand were recorded in other assets in the Consolidated Balance Sheets, respectively. There was no valuation allowance on loan servicing rights at June 30, 2026 or December 31, 2025.

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Note 4— Allowance for Loan Credit Losses

The following tables present the activity in the allowance for loan credit losses for the six months ended June 30, 2026 and 2025.

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There were no collateral dependent or individually evaluated loans as of June 30, 2026, December 31, 2025, or June 30, 2025.

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Delinquency Information

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The following tables present a summary of past due and nonaccrual loans by segment as of June 30, 2026 and December 31, 2025.

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As of June 30, 2026, the Company had one loan that was 90 days past due and still accruing interest. This represented the guaranteed portion of a commercial business SBA 7(a) loan. The Company had no non-accrual loans or other real estate owned assets as of June 30, 2026.

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Credit Quality Indicators

The Company assesses credit quality indicators based on internal risk rating of loans. Each loan is evaluated at least annually with more frequent evaluation of more severely criticized loans. The indicators that determine the rating for loans as of the date presented are based on the most recent credit review performed. Internal risk rating definitions are:

Pass: These include satisfactory loans that have acceptable levels of risk.

Special Mention: Loans classified as special mention have a potential weakness that requires close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Company’s credit position at some future date. These credits do not expose the Company to sufficient risk to warrant further adverse classification.

Substandard: A substandard asset is inadequately protected by the current worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified as substandard must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

Doubtful: Loans classified as doubtful have all the weaknesses inherent in a substandard asset with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loss: Loans classified as loss are considered uncollectible and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this basically worthless asset even though partial recovery may be received in the future.

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The Company has a portfolio of smaller homogenous loans that are not individually risk rated and include residential permanent and construction mortgages, home equity lines of credit, and consumer installment loans. For these loans, management uses payment status as the primary credit quality indicator. The payment status of these loans is then translated into an internal risk rating. The following table summarizes the translation of past due status to risk rating for loans that are not individually risk rated.

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The following table presents the Company’s recorded investment in loans by credit quality indicator by year of origination as of June 30, 2026.

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The following table presents the Company’s recorded investment in loans by credit quality indicator by year of origination as of December 31, 2025.

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Revolving loans that are converted to term loans are treated as new originations in both tables above and are presented by year of origination.

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Modifications with Borrowers Experiencing Financial Difficulty

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The allowance for loan credit losses incorporates an estimate of lifetime expected credit losses and is recorded on each asset upon asset origination. The starting point for the estimate of the allowance for loan credit losses is historical loss information, which includes losses from modifications of receivables to borrowers experiencing financial difficulty. The Company may provide concessions to borrowers experiencing financial difficulty to minimize the economic loss and improve long-term loan performance and collectability. An assessment of whether a borrower is experiencing financial difficulty is made on the date of a modification. The Company did not make any loan modifications to borrowers experiencing financial difficulty during the six months ended June 30, 2026 and 2025. There were also no instances of defaults on loans that occurred during the six months ended June 30, 2026 and 2025 for loans that had been modified during the previous 12 months. Because the effect of most modifications made to borrowers experiencing financial difficulty is already included in the allowance because of the measurement methodologies used to estimate the allowance, a change to the allowance is generally not recorded upon modification.

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Unfunded Commitments

The Company maintains an allowance for off-balance sheet credit exposures such as unfunded balances for existing lines of credit, commitments to extend future credit, as well as both standby and commercial letters of credit when there is a contractual obligation to extend credit and when this extension of credit is not unconditionally cancellable by the Company. The allowance for off-balance sheet credit exposures is adjusted as a provision for (or recovery of) credit losses in the Consolidated Statements of Income. The estimate includes consideration of the likelihood that funding will occur, which is based on a historical funding study derived from internal information, and an estimate of expected credit losses on commitments expected to be funded over its estimated life, which are the same loss rates that are used in computing the allowance for loan credit losses. The allowance for credit losses for unfunded loan commitments of $1.1 million and $1.3 million at June 30, 2026 and December 31, 2025, respectively, is separately classified within Other Liabilities on the Consolidated Balance Sheets. The recovery of the provision for credit losses recorded during the six months ended June 30, 2026 was primarily due to a decrease in unfunded commitments.

The following table presents the balance and activity in the allowance for credit losses for unfunded loan commitments for the six months ended June 30, 2026 and 2025.

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Note 5— Derivatives

The Company enters into interest rate swap agreements (“swaps”) with commercial loan customers to provide a facility for customers to manage their interest rate risk. These swaps are matched in exact offsetting terms with swaps that the Company enters into with an independent third party. These swaps qualify as derivatives, but are not designated as hedging instruments.

The following tables summarize the Company’s swaps at June 30, 2026 and December 31, 2025.

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The estimated fair value of the swaps at June 30, 2026 and December 31, 2025 was recorded in other assets and liabilities in the Consolidated Balance Sheets. The associated net gains and losses on the swaps are recorded in other income in the Consolidated Statements of Income.

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Note 6— Deposits and Borrowings

The following table shows the components of the Company’s funding sources.

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(1) Overdraft demand deposits reclassified to loans totaled $3 thousand at June 30, 2026 and $118 thousand at December 31, 2025.

(2) The aggregate amount of certificates of deposit with a minimum denomination of $250,000 was $371.0 million and $337.6 million at June 30, 2026 and December 31, 2025, respectively.

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The Company obtains certain deposits through the efforts of third-party brokers. Brokered deposits totaled $321.6 million and $301.9 million at June 30, 2026 and December 31, 2025, respectively, and were included primarily in time deposits on the Company’s Consolidated Balance Sheets. At June 30, 2026, there were no depositors that represented 5% or more of the Company’s total deposits.

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The following table presents the carrying value and interest rate ranges for the Company’s long-term debt as of June 30, 2026 and December 31, 2025.

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The Company completed a private placement of a $25.0 million fixed-to-floating subordinated note on June 15, 2022. Subject to limited exceptions permitting earlier redemption, the note is callable, in whole or in part, commencing July 1, 2027. Unless redeemed earlier, the note will mature on July 1, 2032. The note bears interest at a fixed rate of 5.25% to but excluding July 1, 2027, and will bear interest at a floating rate equal to the three-month Secured Overnight Financing Rate plus 245 basis points thereafter. The note is carried at its principal amount, less unamortized issuance costs.

The Company, from time to time, uses Federal Home Loan Bank of Atlanta (“FHLB”) advances as a source of funding and to manage interest rate risk. FHLB advances are secured by a blanket floating lien on all real estate mortgage loans secured by 1-to-4 family residential, multi-family and commercial real estate properties. The interest rates on three outstanding advances range from 3.61% to 3.98%. At June 30, 2026, these three outstanding FHLB advances totaled $56.0 million. Available FHLB borrowing capacity based on collateral value amounted to approximately $469.0 million as of June 30, 2026.

The Company also has the capacity to borrow up to $125.1 million at the Federal Reserve discount window of which none had been drawn upon at June 30, 2026. The Bank had loans pledged at the Federal Reserve discount window totaling $175.9 million as of June 30, 2026.

The Company also has unsecured federal funds lines of credit with correspondent banks available for overnight borrowing of $70 million as of June 30, 2026. The Company had drawn $40.0 million of the federal funds lines of credit as of June 30, 2026.

The following table shows the carrying amount of the Company’s time deposits by contractual maturity as of June 30, 2026.

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Note 7— Commitments and Contingencies

The Company is party to financial instruments with off balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, standby letters of credit and financial guarantees. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheet. The contract or notional amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments. The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit and financial guarantees written is represented by the contractual notional amount of those instruments.

The Company uses the same credit policies in making commitments and conditional obligations as it does for on balance sheet instruments.

The following table summarizes the contract or notional amount of the Company’s exposure to off-balance sheet risk as of June 30, 2026 and December 31, 2025.

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Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer’s credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary upon extension of credit, is based on management’s credit evaluation of the counterparty. Collateral held varies but may include accounts receivable, inventory, property and equipment, income-producing commercial properties, and other real estate properties.

Unfunded commitments under lines of credit are commitments for possible future extensions of credit to existing customers. Those lines of credit may not be drawn upon to the total extent to which the Company is committed.

Standby letters of credit written are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing, and similar transactions. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.

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Note 8— Fair Value Measurements

Determination of Fair Value

The Company determines the fair values of its financial instruments based on the fair value hierarchy established by ASC Topic 820 – Fair Value Measurement, which defines fair value as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market and in an orderly transaction between market participants on the measurement date.

The fair value measurements and disclosures topic specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions.

Fair Value Hierarchy

In accordance with this guidance, the Company groups its assets and liabilities measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.

Level 1 - Valuation is based on quoted prices in active markets for identical assets and liabilities that the reporting entity has the ability to access at the measurement date. Level 1 assets and liabilities generally include debt and equity securities that are traded in an active exchange market. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.

Level 2 - Valuation is based on inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. The valuation may be based on quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability.

Level 3 - Valuation is based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which determination of fair value requires significant management judgment or estimation.

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

Assets Measured at Fair Value on a Recurring Basis

In accordance with ASC Topic 820, the following describes the valuation techniques used by the Company to measure certain financial assets recorded at fair value on a recurring basis in the financial statements.

Securities Available-for-sale and Equity Securities

Securities available-for-sale and equity securities with readily determinable fair values are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted market prices, when available (Level 1). If quoted market prices are not available, fair values are measured utilizing independent valuation techniques of identical or similar securities for which significant assumptions are derived primarily from or corroborated by observable market data (Level 2). If the inputs used to provide the evaluation for certain securities are unobservable and/or there is little, if any, market activity then the security would fall to the lowest level of the hierarchy (Level 3).

The Company’s investment portfolio is primarily valued using fair value measurements that are considered to be Level 2. The Company has contracted with a third-party portfolio accounting service vendor for valuation of its portfolio of debt securities. The vendor’s primary source for security valuation is ICE Data Services, which evaluates securities based on market data. ICE Data Services utilizes evaluated pricing models that vary by asset class and include available trade, bid, and other market information. Generally, the methodology includes broker quotes, proprietary models, vast descriptive terms and conditions databases, as well as extensive quality control programs.

The vendor utilizes proprietary valuation matrices for valuing all municipals securities. The initial curves for determining the price, movement, and yield relationships within the municipal matrices are derived from industry benchmark curves or sourced from a municipal trading desk. The securities are further broken down according to issuer, credit support, state of issuance and rating to incorporate additional spreads to the industry benchmark curves.

Interest Rate Swap Agreements

Interest rate swap agreements are measured by alternative pricing sources using a discounted cash flow method that incorporates current market interest rates. Based on the complex nature of interest rate swap agreements, the markets these instruments trade in are not as efficient and are less liquid than that of the more mature Level 1 markets. These characteristics classify interest rate swap agreements as Level 2 in the fair value hierarchy.

The following tables summarize the fair value of assets measured at fair value on a recurring basis as of June 30, 2026 and December 31, 2025.

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Assets Measured at Fair Value on a Non-recurring Basis

Under certain circumstances, the Company makes adjustments to fair value for assets and liabilities although they are not measured at fair value on an ongoing basis. The following describes the valuation techniques used by the Company to measure certain assets recorded at fair value on a non-recurring basis in the financial statements:

Collateral Dependent Loans

In accordance with ASC 326, loans that do not share risk characteristics are evaluated on an individual basis. The Company designates individually evaluated loans on nonaccrual status as collateral dependent loans, as well as other loans that management of the Company designates as having higher risk and loans for which the repayment is expected to be provided substantially through the operation or sale of the collateral. The measurement of loss associated with collateral dependent loans can be based on either the observable market price of the loan or the fair value of the collateral. Collateral may be in the form of real estate or business assets including equipment, inventory, and accounts receivable. The vast majority of the Company’s collateral is real estate. The value of real estate collateral is determined utilizing a market valuation approach based on an appraisal, of one year or less, conducted by an independent, licensed appraiser using observable market data (Level 2). However, if the collateral is a house or building in the process of construction, or if an appraisal of the property is more than one-year-old and not solely based on observable market comparables, or management determines the fair value of the collateral is further impaired below the appraised value, then a Level 3 valuation is considered to measure the fair value. The value of business equipment is based upon an outside appraisal, of one year or less, if deemed significant, or the net book value on the applicable business’s financial statements if not considered significant using observable market data. Likewise, values for inventory and accounts receivables collateral are based on financial statement balances or aging reports (Level 3). Any fair value adjustments are recorded in the period incurred as provision for credit losses on the Consolidated Statements of Income. As of both June 30, 2026 and December 31, 2025, there were no collateral dependent loans evaluated for the allowance of credit losses on an individual basis.

Other Real Estate Owned (“OREO”)

OREO is carried at the lower of cost or fair value less selling costs. Fair value is based upon independent market prices, appraised values of the collateral or management’s estimation of the value of the collateral. When the fair value of the collateral is based on an observable market price or a current appraised value using observable market data, the Company records the property as Level 2. When an appraised value using observable market data is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Company records the property as Level 3 valuation. Any fair value adjustments are recorded in the period incurred and expensed against current earnings. The Company had no OREO as of June 30, 2026 or December 31, 2025.

The following tables present the carrying value and estimated fair value, including the level within the fair value hierarchy, of the Company’s financial instruments as of June 30, 2026 and December 31, 2025.

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Note 9— Earnings per Common Share

Earnings per common share is calculated in accordance with ASC 260 - Earnings Per Share, which provides that unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method.

Under the two-class method, basic earnings per common share is computed by dividing net earnings allocated to common stock by the weighted-average number of voting common shares outstanding during the applicable period, excluding outstanding participating securities. Diluted earnings per common share is computed using the weighted-average number of shares determined for the basic earnings per common share computation plus the dilutive effect of stock compensation using the treasury stock method.

The following table summarizes the computation of earnings per share for the three and six months ended June 30, 2026 and 2025.

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The Company had no outstanding stock options during the three and six months ended June 30, 2026. All stock options outstanding during the three and six months ended June 30, 2025 were included in computing diluted earnings per share for the three and six months ended June 30, 2025, as none had anti-dilutive effects.

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Note 10— Stock Based Compensation Plan

The Company’s share-based compensation plan, approved by stockholders on June 17, 2025 (“2025 Plan”), provides for the grant of share-based awards in the form of incentive stock options, non-incentive stock options, restricted stock awards and restricted stock units to directors and employees. The Company reserved 425,000 shares of voting common stock for issuance under the 2025 Plan, of which 381,863 was available for grant in future periods as of June 30, 2026. Stock options to be granted under the 2025 Plan typically vest over five years and expire 10 years from the grant date. Under the 2025 Plan, the exercise price of options may not be less than 100% of fair market value at the grant date with a maximum term for an option award of 10 years from the grant date. The Company’s

Compensation Committee administers the 2025 Plan and has the authority to determine the terms and conditions of each award thereunder.

The Company’s previous share-based compensation plan, the 2015 Stock Option Plan (“2015 Plan”), provided for the grant of share-based awards in the form of incentive stock options, non-incentive stock options, restricted stock and restricted stock units to directors and employees. The 2015 Plan provided for awards of up to 976,211 shares of voting common stock. The 2015 Plan expired on April 28, 2025 and was replaced by the 2025 Plan. Share-based awards outstanding prior to April 28, 2025 were granted under the 2015 Plan and are subject to the provisions of the 2015 Plan.

There were no options granted during the six months ended June 30, 2026 and June 30, 2025. The Company had no outstanding options as of June 30, 2026.

The Company did not record any share-based compensation expense applicable to the Company’s share-based compensation plans for stock options during the three and six months ended June 30, 2026 and June 30, 2025.

The table below provides a summary of the restricted stock award activity for the six months ended June 30, 2026.

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Compensation expense for restricted stock grants is recognized over the vesting period of the awards based on the fair value of the Company’s voting common stock at issue date. The fair value of the stock was determined using the closing stock price on the day of grant. The restricted stock grants vest over two to five years. The Company awarded restricted stock grants for 1,250 shares of common stock during the six months ended June 30, 2025.

Share-based compensation expense applicable to the Company’s share-based compensation plans for restricted stock grants was $141 thousand and $120 thousand for the three months ended June 30, 2026 and June 30, 2025, respectively. The total fair value of the shares, which vested during the three months ended June 30, 2026 and June 30, 2025, was $8 thousand and $6 thousand, respectively.

Share-based compensation expense applicable to the Company’s share-based compensation plans for restricted stock grants was $282 thousand and $238 thousand for the six months ended June 30, 2026 and 2025, respectively. The total fair value of the shares, which vested during the six months ended June 30, 2026 and 2025, was $40 thousand and $56 thousand, respectively.

Unrecognized share-based compensation expense related to nonvested restricted stock grants amounted to $1.1 million as of June 30, 2026. This amount is expected to be recognized over a weighted-average period of 1.90 years.

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Note 11— Regulatory Capital

The Company is a bank holding company with less than $3 billion in assets and does not (i) have significant off balance sheet exposure, (ii) engage in significant non-banking activities, or (iii) have a material amount of securities registered under the Securities Exchange Act of 1934, as amended. As a result, the Company qualifies as a small bank holding company under the Federal Reserve’s Small Bank Holding Company Policy Statement and is currently not subject to consolidated regulatory capital requirements.

The Bank is subject to capital adequacy standards adopted by the Federal Reserve, including the capital rules that implemented the Basel III regulatory capital reforms developed by the Basel Committee on Banking Supervision. Failure to meet minimum capital requirements can initiate certain mandatory – possibly additional discretionary – actions by regulators that, if undertaken, could have a direct material effect on the financial statements. Under capital adequacy guidelines, the Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Management believes that the Bank met all capital adequacy requirements to which it was subject as of June 30, 2026 and December 31, 2025.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier 1 capital to risk-weighted assets, common equity Tier 1 to risk-weighted assets, and Tier 1 capital to average assets.

In addition to the minimum regulatory capital required for capital adequacy purposes, the Bank is required to maintain a minimum capital conservation buffer above those minimums in the form of common equity. The capital conservation buffer is designed to absorb losses during periods of economic stress. Banking institutions with a ratio of common equity Tier 1 to risk-weighted assets above the minimum but below the conservation buffer will face constraints on dividends, equity repurchases, and discretionary compensation paid to certain officers, based on the amount of the shortfall. The capital conservation buffer was 2.5% at June 30, 2026, and is applicable for the common equity Tier 1, Tier 1, and total capital ratios.

As of June 30, 2026, the most recent notification from the Federal Reserve Bank of Richmond (“Federal Reserve Bank”) categorized the Bank as “well capitalized” under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the institution must maintain minimum total risk-based, common equity Tier 1, Tier 1 risk-based, and Tier 1 leverage ratios as set forth in the table below. There are no conditions or events since the notification that management believes have changed the Bank’s category.

The table below provides a summary of the Bank’s capital ratios as of June 30, 2026 and December 31, 2025.

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(1) Including capital conservation buffer.

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Note 12— Revenue

Certain of the Company’s non-interest revenue streams are derived from short-term contacts associated with services provided to deposit account holders as well as other ancillary services, which are accounted for in accordance with ASC 606 – Revenue Recognition. For most of these revenue streams, the duration of the contract does not extend beyond the services performed. Due to the short duration of most customer contracts that generate non-interest income, no significant judgments must be made in the determination of the amount and timing of revenue recognized.

The following table shows the components of non-interest income for the three and six months ended June 30, 2026 and 2025.

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(1) Income within the scope of ASC 606.

(2) Includes other operating income within the scope of ASC 606 amounting to $47 thousand and $52 thousand for the three and six months ended June 30, 2026, respectively and $4 thousand for both the three and six months ended June 30, 2025. Includes no other operating income related to swap fee income on a back-to-back loan swaps for both the six months ended June 30, 2026 and June 30, 2025, respectively, which is outside the scope of ASC 606.

A description of the Company’s revenue streams accounted for under ASC 606 follows:

Service charges on deposit accounts

Service charges on deposit accounts consist of overdrawn account fees and account service fees. Overdrawn account fees are recognized at the point in time that the overdraft occurs. Account service fees consist primarily of account analysis and other maintenance fees and are earned over the course of a month, representing the period over which the Company satisfies the performance obligation. Payment for service charges on deposit accounts is received immediately or in the following month through a direct charge to customers’ accounts.

Other service charges and fees

Other service charges and fees are primarily comprised of interchange income and other charges and fees. Interchange income is earned whenever the Company’s debit and credit cards are processed through card payment networks such as Visa. Other charges and fees include revenue from processing wire transfers, cashier’s checks, and other transaction-based services. The Company’s performance obligation for these charges and fees is largely satisfied, and related revenue recognized, when the services are rendered or upon completion. Payment is typically received immediately or in the following month.

Net gains (losses) on premises and equipment

The Company records a gain or loss on the disposition of premises and equipment when control of the property transfers or is involuntarily converted to a monetary asset (e.g., insurance proceeds). This income is reflected in other operating income on the Company’s Consolidated Statements of Income.

Insurance commissions

The Company performs the function of an insurance intermediary by introducing the policyholder and insurer and is compensated in the form of a commission for placement of an insurance policy based on a percentage of premiums issued and maintained during the period. Revenue is recognized when received.

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Note 13— Other Operating Expenses

The following table shows the components of other operating expenses for the three and six months ended June 30, 2026 and June 30, 2025.

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Note 14— Accumulated Other Comprehensive Income (Loss)

The following table presents the changes in accumulated other comprehensive income (loss), by category, net of tax for the six months ended June 30, 2026 and June 30, 2025.

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The Company did not have any items reclassified out of accumulated other comprehensive income (loss) to net income during the six months ended June 30, 2026 and 2025.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of the consolidated financial condition and results of operations of the Company and its subsidiary should be read in conjunction with the consolidated financial statements and related notes presented in Item 1, Financial Statements, of this Form 10-Q. Historical results of operations and the percentage relationships among any amounts included, and any trends that may appear, may not indicate results of operations or trends in operations for any future periods.

Use of Non-GAAP Financial Measures

This discussion and analysis contains financial information determined by methods other than in accordance with generally accepted accounting principles in the United States of America (“GAAP”). Management believes that the supplemental non-GAAP information provides a better comparison of period-to-period operating performance. Additionally, the Company believes this information is utilized by regulators and market analysts to evaluate a company’s financial condition and therefore, such information is useful to investors. The non-GAAP measure used in this report is tax-equivalent net interest income.

These disclosures should not be viewed as a substitute for or more important than financial results in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures which may be presented by other companies. Where the non-GAAP financial measure is used, the comparable GAAP financial measure, as well as reconciliation to that comparable GAAP financial measure, as well as a statement of the company’s reasons for utilizing the non-GAAP financial measure, can be found within this discussion and analysis.

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Critical Accounting Policies and Estimates

The Company’s accounting and reporting policies conform to GAAP, as well as general practices within the banking industry. Application of these principles requires management to make estimates, assumptions, and judgments that affect the amounts reported in the financial statements and accompanying notes. 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 accounting 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 on March 13, 2026.

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Selected Financial Data

The following table contains selected historical consolidated financial data as of the dates and for the periods shown. The selected balance sheet data as of June 30, 2026 and 2025 and the selected income statement data for the three and six months ended June 30, 2026 and June 30, 2025 have been derived from our consolidated financial statements.

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N/M – Not meaningful

(1) ROAA is calculated by dividing year-to-date net income annualized by year-to-date average assets.

(2) ROAE is calculated by dividing year-to-date net income annualized by year-to-date average equity.

(3) Non-interest expense to average assets is calculated by dividing year-to-date annualized non-interest expense by year-to-date average assets.

(4) The efficiency ratio is calculated by dividing non-interest expense by the sum of net interest income and non-interest income.

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Results of Operations - Six months ended June 30, 2026 and June 30, 2025

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Overview

The Company reported net income of $13.1 million for the six months ended June 30, 2026, an increase of $3.2 million or 32.4% when compared to the six months ended June 30, 2025. Diluted earnings per common share were $0.93 for the six months ended June 30, 2026, compared to diluted earnings per common share of $0.69 for the six months ended June 30, 2025, representing a 34.8% increase.

Net interest income for the six months ended June 30, 2026 increased $4.8 million or 16.6% compared to the same period of 2025, driven primarily by the increases in average balances and yields of the loan portfolio in combination with the decrease in rates of interest-bearing deposits.

The Company recorded a $281 thousand provision for credit losses for the six months ended June 30, 2026 compared to a $707 thousand provision for credit losses for the six months ended June 30, 2025. Additional discussion of the provision for credit losses is included below under the heading Provision for Credit Losses.

Non-interest income increased $716 thousand during the six months ended June 30, 2026 compared to the same period of 2025. The increase was primarily driven by a $835 thousand gain as a result of the sale of an unaffiliated company in which the Company held an equity investment unit, in combination with a $51 thousand increase in other income, driven by the receipt of a class action settlement claim from a health insurance carrier, and a $43 thousand increase in mark-to-market adjustments on investments related to the Company’s non-qualified deferred compensation plan. These increases were partially offset by a $153 thousand decrease in bankers insurance commission coupled with a $91 thousand decline in gain on sale of SBA 7(a) loans, due to lower sales volumes.

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Non-interest expense increased $1.9 million or 11.2% for the six months ended June 30, 2026 compared to the six months ended June 30, 2025 predominantly due to a $1.5 million or 14.6% increase in salaries and employee benefits, as a result of increases in incentive compensation, higher mark-to-market adjustments on the Company’s non-qualified deferred compensation plan and the impact of the annual salary merit increase. Other expenses increased $302 thousand or 6.2% for the six months ended June 30, 2026 compared to the six months ended June 30, 2025. Increases were primarily in state franchise tax and FDIC insurance, due to higher assessment bases, and an increase in marketing expense. Furniture and equipment expenses increased $62 thousand or 9.8% for the six months ended June 30, 2026 compared to the same period in 2025. The increase was due to investment and maintenance in technology.

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The ROAA for the six months ended June 30, 2026 and 2025 was 1.13% and 0.89%, respectively. The ROAE for the six months ended June 30, 2026 and 2025 was 9.77% and 7.91%, respectively.

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Net Interest Income and Net Interest Margin

The following table presents the average balance for each principal balance sheet category, and the amount of interest income or expense associated with that category, as well as corresponding average yields earned and rates paid for the six months ended June 30, 2026 and 2025.

Average Balance Sheets and Interest Rates on Interest-Earning Assets and Interest-Bearing Liabilities

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(1) Income and yields for all periods presented are reported on a tax-equivalent basis using the federal statutory tax rate of 21%.

(2) Non-accrual loans are included in the average balances.

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Tax-equivalent net interest income 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 following table, “Tax-Equivalent Net Interest Income,” reconciles net interest income to tax-equivalent net interest income, which is a non-GAAP measure.

Tax-Equivalent Net Interest Income

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

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Tax-equivalent net interest income increased $4.8 million or 16.7% for the six months ended June 30, 2026, compared to the six months ended June 30, 2025. The increase in fully tax-equivalent net interest income was driven by the increase in average balances and yields of the loan portfolio in combination with a decrease in the cost of interest-bearing deposits.

The net interest margin was 2.93% for the six months ended June 30, 2026, compared to 2.63% for the six months ended June 30, 2025. The 30 basis points increase in net interest margin was due to a combination of a 29 basis point decrease in the cost of interest-bearing liabilities and a nine basis point increase in yields in interest-earning assets coupled with higher average loan balances.

The cost of interest-bearing liabilities was 3.14% for the six months ended June 30, 2026 compared to 3.43% for the six months ended June 30, 2025. Rates declined across all deposit categories, most notably in time deposits, money market accounts, and NOW deposit accounts, which declined 36 basis points, 32 basis points, and 22 basis points, respectively. Total cost of borrowings declined from 4.55% in the prior year period to 4.48% in the current year period, mainly as a result of refinancing a maturing Federal Home Loan Bank of Atlanta (“FHLB”) advance at a lower rate of interest during the first quarter of 2026.

The loan portfolio’s yield for the six months ended June 30, 2026 was 5.50% compared to 5.41% for the six months ended June 30, 2025, as variable rate loans repriced at higher prevailing rates subsequent to the second quarter of 2025. Average loans increased $108.2 million between the six months ended June 30, 2026 and 2025, which was primarily attributable to origination volume in the construction & development and residential mortgage loan portfolios subsequent to June 30, 2025.

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The yield on interest-bearing deposits due from banks for the six months ended June 30, 2026 was 3.72% compared to 4.48% for the six months ended June 30, 2025. The decrease of 76 basis points was due to three fed funds rate cuts totaling 75 basis points, which occurred after June 30, 2025.

The following table presents the effects of changing rates and volumes on tax-equivalent net interest income for the periods indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The net column represents the sum of the prior columns. For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated to volume.

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Rate/Volume Analysis

(1) Income and yields for all periods presented are reported on a tax-equivalent basis using the federal statutory tax rate of 21%.

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Interest Income

Interest income increased by $3.7 million or 6.7% to $58.9 million on a fully tax-equivalent basis for the six months ended June 30, 2026 compared to $55.2 million for the six months ended June 30, 2025, driven by both an increase in rates and volume on interest-earning assets, primarily attributable to the Company’s loan portfolio.

Fully tax-equivalent interest income on loans increased $3.8 million or 7.6% as a result of increases in rates and volume. Average loans increased $108.2 million between the six months ended June 30, 2026 and 2025, which was primarily attributable to origination volume in the construction & development and residential mortgage loan portfolios subsequent to June 30, 2025.

Fully tax-equivalent interest income on investment securities increased $322 thousand or 13.6%, as a result of higher securities rates. The yield on investment securities increased to 2.39% for the six months ended June 30, 2026 as compared to 2.07% for the six months ended June 30, 2025.

Interest income on interest-bearing deposits in other banks decreased $421 thousand or 15.3% as a result of a 76 basis point decline in yield, which was directly related to three fed funds rate cuts totaling 75 basis points since June 30, 2025.

Interest Expense

Interest expense decreased $1.1 million to $25.0 million for the six months ended June 30, 2026 compared to $26.1 million for the six months ended June 30, 2025, primarily due to a decrease in rates on interest-bearing deposits, partially offset by an increase in volume of interest-bearing deposits. The decrease in rates on deposits was mainly a result of the repricing of the Company’s interest-bearing deposit accounts in conjunction with the decrease in federal funds benchmark interest rates that took place starting in September of 2025.

Provision for Credit Losses

The Company recorded a $281 thousand provision for credit losses for the six months ended June 30, 2026 compared to a $707 thousand provision for credit losses for the six months ended June 30, 2025. The provision for credit losses for the six months ended June 30, 2026 that is directly attributable to the funded loan portfolio was $528 thousand, while unfunded commitments provision was a recovery of $247 thousand.

The provision for credit losses during the six months ended June 30, 2026 was primarily a result of changes in the composition and volume of the loan portfolio in combination with the impact of charge-offs of three commercial SBA 7(a) loans recorded during the second quarter of 2026. See “Asset Quality” below for additional information on the credit quality of the loan portfolio.

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Non-interest Income

The Company’s recurring sources of non-interest income consist primarily of interchange income, gains on sale of government guaranteed loans, service charges on deposit accounts and insurance commissions. Generally speaking, loan fees are included in interest income on the loan portfolio and not reported as non-interest income.

The following table summarizes non-interest income for the six months ended June 30, 2026 and 2025.

N/M – Not meaningful

Non-interest income increased $716 thousand or 70.8% during the six months ended June 30, 2026 compared to the same period of 2025. The increase was primarily attributable to a $835 thousand gain as a result of the sale of an unaffiliated company in which the Company held an equity investment unit, in combination with a $53 thousand increase in other charges and fees due to higher early termination fees on customer’s time deposits, and a $48 thousand increase in other operating income driven by the receipt of a class action settlement claim from a health insurance carrier. These increases were partially offset by a $153 thousand decrease in bankers insurance commission coupled with a $91 thousand decline in gain on sale of SBA 7(a) loans, due to lower sales volume.

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Non-interest Expense

Generally, non-interest expense is composed of all employee expenses and costs associated with operating our facilities, obtaining and retaining customer relationships and providing banking services. The largest component of non-interest expense is salaries and employee benefits. Non-interest expense also includes operational expenses, such as occupancy and equipment expenses, data processing expenses, professional fees, advertising expenses and other general and administrative expenses, including FDIC assessments, and Virginia state franchise taxes.

The following table summarizes non-interest expense for the six months ended June 30, 2026 and 2025.

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Non-interest expense increased $1.9 million or 11.2% during the six months ended June 30, 2026 compared to the same period in 2025. The increase was primarily due to a $1.5 million increase in salaries and employee benefits, as a result of increases in incentive compensation tied to performance, higher mark-to-market adjustments on the Company’s non-qualified deferred compensation plan and the impact of the annual salary merit increase. Incentive compensation accruals can fluctuate materially from period to period, based upon the Company’s financial performance and conditions measured against, among other evaluation criteria, our strategic plan and budget. At the end of each year, the ultimate determination of the incentive compensation is approved by the Board of Directors. Advertising expense increased $93 thousand mainly due to various public relations and advertising initiatives. State franchise taxes increased $91 thousand due to a higher assessment base, mainly a result of the growth of the Company’s shareholder’s equity during the period.

Income Taxes

Income tax expense increased $902 thousand or 31.6% to $3.8 million for the six months ended June 30, 2026 compared to $2.9 million for the six months ended June 30, 2025. Our effective tax rate for the six months ended June 30, 2026 was 22.3% compared to 22.4% for the same period ended June 30, 2025.

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Results of Operations – Three Months Ended June 30, 2026 and June 30, 2025

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Overview

The Company reported net income of $7.0 million for the three months ended June 30, 2026, an increase of $1.9 million or 37.5% when compared to $5.1 million for the three months ended June 30, 2025. Diluted earnings per common share were $0.50 for the three months ended June 30, 2026, compared to diluted earnings per common share of $0.36 for the three months ended June 30, 2025, an increase of 38.9%.

Net interest income for the three months ended June 30, 2026 increased $2.4 million or 16.1% to $17.3 million compared to $14.9 million for the three months ended June 30, 2025, as a result of higher average balances and yields of loans coupled with the lower cost of interest-bearing deposits. During the same period, interest income increased $1.9 million or 6.8%, driven by higher interest income on loans, while interest expense declined by $0.5 million or 3.9%, predominantly due to lower interest expense on interest-bearing deposit categories. The annualized net interest margin for the three months ended June 30, 2026 was 2.99% as compared to 2.69% for the same period in 2025.

The Company recorded a $258 thousand provision for credit losses for the three months ended June 30, 2026 compared to $537 thousand for the three months ended June 30, 2025. Additional discussion of the provision for credit losses is included below under the heading Provision for Credit Losses.

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Non-interest income increased $936 thousand or 184.6% during the second quarter of 2026 compared to the second quarter of 2025, which was primarily attributable to a $835 thousand gain as a result of the sale of an unaffiliated company in which the Company held an equity investment unit. Excluding this gain, non-interest income increased $101 thousand or 19.9% during the most recent quarter as compared to the prior year quarter, as a result of a $80 thousand increase in mark-to-market adjustments on investments related to the Company’s non-qualified deferred compensation plan, a $50 thousand increase in other fee income due to higher early termination fees on customers’ time deposits, and a $43 thousand increase in other income, as a result of receipt of a class action settlement claim from a health insurance carrier. These increases were partially offset by a $61 thousand decrease in gain on sale of SBA 7(a) loans.

Non-interest expense increased $1.2 million or 14.2% during the second quarter of 2026 compared to the second quarter of 2025 primarily resulting from an increase in salaries and employee benefits and higher marketing expense. Salaries and employee benefits increased $979 thousand, as a result of increases in incentive compensation, higher mark-to-market adjustments on the Company’s non-qualified deferred compensation plan and the impact of the annual salary merit increase. Marketing expense increased $130 thousand mainly due to various public relations and advertising initiatives.

The ROAA for the three months ended June 30, 2026 and June 30, 2025 were 1.20% and 0.91%, respectively. The ROAE for the three months ended June 30, 2026 and June 30, 2025 were 10.34% and 8.06%, respectively.

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Net Interest Income and Net Interest Margin

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The following table presents the average balance for each principal balance sheet category, and the amount of interest income or expense associated with that category, as well as corresponding average yields earned and rates paid for the three months ended June 30, 2026 and June 30, 2025.

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Average Balance Sheets and Interest Rates on Interest-Earning Assets and Interest-Bearing Liabilities

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(1) Income and yields for all periods presented are reported on a tax-equivalent basis using the federal statutory tax rate of 21%.

(2) Non-accrual loans are included in the average balances.

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Tax-equivalent net interest income 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 following table, “Tax-Equivalent Net Interest Income,” reconciles net interest income to tax-equivalent net interest income, which is a non-GAAP measure.

Tax-Equivalent Net Interest Income

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

Tax-equivalent net interest income increased $2.4 million or 16.1% for the three months ended June 30, 2026, compared to the three months ended June 30, 2025, driven primarily by higher average balances and yields of the loan portfolio coupled with the lower rates on interest-bearing deposits.

The net interest margin was 2.99% for the three months ended June 30, 2026, compared to 2.69% for the three months ended June 30, 2025. The 30 basis point increase in net interest margin was primarily due to a 26 basis point reduction in rates on interest-bearing deposits and an 11 basis point increase in yields on the Company’s loans. In addition, average loans increased $110.5 million between the three months ended June 30, 2025 and the three months ended June 30, 2026, which was primarily attributable to origination volume in the construction & development and residential mortgage loan portfolios subsequent to June 30, 2025.

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The loan portfolio’s yield for the three months ended June 30, 2026 was 5.53% compared to 5.42% for the three months ended June 30, 2025. The increase of 11 basis points was primarily attributable to an increase in yield on the Company’s commercial real estate portfolio along with higher average loan balances.

The yield on interest-bearing deposits due from banks for the three months ended June 30, 2026 was 3.73% compared to 4.48% for the three months ended June 30, 2025. The decrease of 75 basis points was directly attributable to three fed funds rate cuts totaling 75 basis points over the preceding twelve months.

The cost of interest-bearing liabilities was 3.13% for the three months ended June 30, 2026 compared to 3.38% for the three months ended June 30, 2025. Rates declined across all deposit categories, most notably in time deposits, money market accounts, and savings accounts, which declined by 35 basis points, 28 basis points, and 18 basis points, respectively.

The following table presents the effects of changing rates and volumes on tax-equivalent net interest income for the periods indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The net column represents the sum of the prior columns. For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated to volume.

Rate/Volume Analysis

(1) Income and yields for all periods presented are reported on a tax-equivalent basis using the federal statutory tax rate of 21%.

Interest Income

Interest income increased $1.9 million or 6.9% to $29.8 million on a fully tax-equivalent basis for the three months ended June 30, 2026 compared to $27.9 million for the three months ended June 30, 2025, driven primarily by higher average balances and yields on the Company’s loan portfolio.

Fully tax-equivalent interest income on loans increased $2.0 million or 8.0% as a result of volume and rates increases. Average loans increased $110.5 million between the three months ended June 30, 2026 and the three months ended June 30, 2025, which was primarily attributable to origination volume in the construction & development and residential mortgage loan portfolios subsequent to June 30, 2025.

Fully tax-equivalent interest income on investment securities increased $195 thousand or 16.2% primarily as a result of an increase in rates. The yield on investment securities increased to 2.46% at June 30, 2026 from 2.11% at June 30, 2025.

Interest income on interest-bearing deposits in other banks decreased $293 thousand or 20.6% as a result of a decreases in rates and average balances. The yield on interest-bearing deposits in other banks decreased from 4.48% to 3.73% between June 30, 2025 and June 30, 2026 and average balances declined $6.1 million during the same period.

Interest Expense

Interest expense decreased $502 thousand or 3.9% to $12.4 million for the three months ended June 30, 2026 compared to $12.9 million for the three months ended June 30, 2025, primarily due to a decrease in rates on interest-bearing deposits, partially offset by an increase in volume of interest-bearing deposits. The decrease in rates on deposits was mainly a result of the repricing of the Company’s deposit accounts in conjunction with the decrease in federal funds benchmark interest rates that took place starting in September of 2025.

Provision for Credit Losses

The Company recorded a $258 thousand provision for credit losses for the three months ended June 30, 2026 compared to $537 thousand for the three months ended June 30, 2025. The provision for credit losses for the three months ended June 30, 2026 that is directly attributable to the funded loan portfolio was $385 thousand, while provision for credit losses on unfunded loan commitments was a recovery of $127 thousand.

The provision for credit losses on funded loans during the most recent quarter reflected the growth of the Company’s loan portfolio, and the related change in the portfolio mix, in combination with the impact of charge-offs of three commercial SBA 7(a) loans during the three months ended June 30, 2026. Recovery of the provision for credit losses on unfunded loan commitments was due to lower amount of available loan commitments at June 30, 2026 as compared to December 31, 2025.

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See “Asset Quality” section below for additional information on the credit quality of the loan portfolio.

Non-interest Income

The following table summarizes non-interest income for the three months ended June 30, 2026 and June 30, 2025.

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N/M – Not meaningful

Non-interest income was $1.4 million for the three months ended June 30, 2026 compared to $507 thousand for the same period in the prior year. The $936 thousand increase in non-interest income was primarily attributable to a $835 thousand gain as a result of the sale of an unaffiliated company in which the Company held an equity investment unit. Excluding this gain, non-interest income increased $101 thousand or 19.9% during the most recent quarter as compared to the prior year quarter, as a result of an $80 thousand increase in mark-to-market adjustments on investments related to the Company’s non-qualified deferred compensation plan, a $55 thousand increase in other charges and fees due to higher early termination fees on customers’ time deposits, and a $43 thousand increase in other income, as a result of receipt of a class action settlement claim from a health insurance carrier. These increases were partially offset by a $61 thousand decrease in gain on sale of SBA 7(a) loans, due to lower sales volume.

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Non-interest Expense

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The following table summarizes non-interest expense for the three months ended June 30, 2026 and June 30, 2025.

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Non-interest expense increased $1.2 million or 14.2% during the second quarter of 2026 compared to the second quarter of 2025 primarily resulting from an increase in salaries and employee benefits and higher marketing expense. Salaries and employee benefits increased $979 thousand, as a result of increases in incentive compensation, higher mark-to-market adjustments on the Company’s non-qualified deferred compensation plan and the impact of the annual salary merit increase. Incentive compensation accruals can fluctuate materially from quarter to quarter, based upon the Company’s financial performance and conditions measured against, among other evaluation criteria, our strategic plan and budget. At the end of each year, the ultimate determination of the incentive compensation is approved by the Board of Directors. Marketing expense increased $130 thousand mainly due to various public relations and advertising initiatives. These increases were partially offset by a $70 thousand decrease in professional fees as the Company incurred additional expenses related to the use of external advisors to assist the Company with various regulatory filings during the three months ended June 30, 2025.

Income Taxes

Income tax expense increased $530 thousand to $2.0 million for the three months ended June 30, 2026 compared to $1.5 million for the three months ended June 30, 2025. Our effective tax rate for the three months ended June 30, 2026 was 22.3% compared to 22.5% for the same period ended June 30, 2025.

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Discussion and Analysis of Financial Condition

Assets, Liabilities, and Shareholders’ Equity

The Company’s total assets increased $69.9 million or 3.0% to $2.40 billion at June 30, 2026 compared to $2.33 billion at December 31, 2025. The increase in total assets was predominantly attributable to an increase in the Company’s loan portfolio and interest-bearing deposits in banks, which grew by $39.6 million and $29.1 million, respectively. All other asset categories stayed relatively unchanged since December 31, 2025.

The Company’s total liabilities increased $61.7 million or 3.0% to $2.13 billion at June 30, 2026 compared to $2.07 billion at December 31, 2025. The increase in total liabilities was due to a combination of a $40.0 million increase in federal funds purchased and a $20.7 million increase in deposits, driven by an $18.8 million increase in non-interest bearing deposits.

Shareholders’ equity increased $8.1 million or 3.0% to $273.8 million at June 30, 2026 compared to $265.6 million at December 31, 2025. The increase in shareholders’ equity was primarily attributable to net income earned during the current year, partially offset by cash dividends paid and a reduction of additional paid-in capital due to the Company’s share repurchases during the six months ended June 30, 2026. Book value per share was $19.40 as of June 30, 2026 compared to $18.69 as of December 31, 2025, an increase of 3.8%. During the six months ended June 30, 2026, the Company repurchased 103,507 shares of its common stock at a weighted average price of $19.69.

Investment Securities

The Company maintains a primarily fixed income investment securities portfolio that had a total carrying value of $213.7 million at June 30, 2026 and $212.3 million at December 31, 2025. The investment portfolio provides liquidity, interest income, credit risk diversification, means to manage interest rate sensitivity and collateral for secured public funds and secured credit lines. Investment securities are classified as available-for-sale or held-to-maturity based on management’s investment strategy and management’s assessment of the intent and ability to hold the securities until maturity. Investment securities that we may sell prior to maturity in response to changes in management’s investment strategy, liquidity needs, interest rate risk profile or for other reasons are classified as available-for-sale. The Company also had restricted stock and equity securities within its investment securities portfolio with total carrying values of $7.7 million and $3.1 million, respectively, at June 30, 2026 compared to $7.6 million and $2.8 million, respectively, at December 31, 2025.

During the six months ended June 30, 2026, the Company purchased 16 agency mortgage-backed fixed income securities, designated as available-for-sale, with the total carrying amount of $32.7 million and a weighted average purchase yield of 4.25%. The Company did not sell any fixed income investment securities during the six months ended June 30, 2026. The Company had $30.7 million in maturities and principal repayments on securities during the six months ended June 30, 2026, which were comprised of $13.3 million of U.S. Treasuries, $12.1 million of U.S. agency mortgage-backed securities, $3.3 million of U.S. agency collateralized mortgage obligation securities and $2.0 million of U.S. government and federal agencies securities.

The following table summarizes the amortized cost and fair value of the Company’s fixed income investment portfolio as of June 30, 2026 and December 31, 2025, respectively.

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In the prevailing rate environments as of June 30, 2026 and December 31, 2025, the Company’s fixed income investment portfolio had an estimated weighted average remaining life of approximately 4.0 years and 3.9 years, respectively. The available-for-sale investment portfolio had an estimated weighted average remaining life of approximately 3.5 years and 3.1 years at June 30, 2026 and December 31, 2025, respectively. The held-to-maturity investment portfolio had an estimated weighted average remaining life of approximately 4.9 years and 5.2 years as of June 30, 2026 and December 31, 2025, respectively.

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The following table summarizes the maturity composition of our fixed income investment securities as of June 30, 2026, including the weighted average yield of each maturity band. Maturities are based on the final contractual payment date, and do not reflect the effect of scheduled principal repayments, prepayments, or early redemptions that may occur. The weighted-average yield below represents the effective yield for the investment securities and is calculated based on the amortized cost of each security.

Loan Portfolio

Gross loans, net of unearned income, increased $39.6 million to $2.01 billion as of June 30, 2026 compared to $1.98 billion as of December 31, 2025. An increase in loans from December 31, 2025, was primarily attributable to growth in commercial real estate and residential real estate loans. The Company continues to maintain its disciplined underwriting standards while prudently pursuing loan growth opportunities that provide acceptable risk-adjusted returns.

The following table presents the Company’s composition of loans held for investment, net of deferred fees and costs, in dollar amounts and as a percentage of total gross loans as of June 30, 2026 and December 31, 2025.

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Asset Quality

The Company maintains policies and procedures to promote sound underwriting and to mitigate credit risk. The Chief Credit Officer is responsible for establishing credit risk policies and procedures, including underwriting and hold guidelines and credit approval authority, and monitoring credit exposure and performance of the Company’s lending-related transactions.

The Company’s asset quality remained strong during the quarter ended June 30, 2026. The Company did not have any non-accrual loans and had no other real estate owned assets as of June 30, 2026. A commercial SBA 7(a) loan previously designated as non-accrual at March 31, 2026, was paid in full by the SBA on June 2, 2026. A loan is placed on nonaccrual status when (i) the Company is advised by the borrower that scheduled principal or interest payments cannot be met, (ii) when management’s best judgment indicates that payment in full of principal and interest can no longer be expected, or (iii) when any such loan or obligation becomes delinquent for 90 days, unless it is both well-secured and in the process of collection.

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During the six months ended June 30, 2026, the Company charged-off three commercial SBA 7(a) loans in the total amount of $172 thousand. These charge-offs represented the unguaranteed portions of the loans and we expect the SBA to fully pay the guaranteed portions.

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The following table summarizes the Company’s asset quality as of June 30, 2026 and December 31, 2025.

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Allowance for Loan Credit Losses

Refer to the discussion in Note 1 of the audited financial statements and notes for the year ended December 31, 2025 contained in the Company’s 2025 Annual Report on Form 10-K for management’s approach to estimating the allowance for loan credit losses.

The Company recorded $172 thousand and $137 thousand of net charge-offs during the three and six months ended June 30, 2026, respectively, and had no net charge-offs or recoveries during the three or six months ended June 30, 2025. At June 30, 2026, the allowance for loan credit losses was $20.2 million or 1.00% of outstanding loans, net of unearned income, compared to $19.8 million or 1.00% of outstanding loans, net of unearned income, at December 31, 2025. The increase in the allowance for credit losses during the most recent quarter was predominantly driven by loan portfolio growth and the associated change in the portfolio mix. Management believes the current allowance for credit losses is appropriate given the composition and performance of the loan portfolio.

The following table summarizes the Company’s loan loss experience by loan portfolio for the three and six months ended June 30, 2026 and June 30, 2025.

• (charge-off)
• (charge-offs)
• (charge-off)_

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N/M – Not meaningful

(1) The net (charge-off) recovery rate is calculated by dividing annualized total net (charge-offs) recoveries during the period by average gross loans, net of unearned income, outstanding during the period.

(2) The allowance coverage ratio is calculated by dividing the allowance for loan credit losses at the end of the period by loans, net of unearned income at the end of the period.

(3) The allowance to nonaccrual loans ratio is calculated by dividing the allowance for loan credit losses at the end of the period by nonaccrual loans at the end of the period.

• (charge-off)
• (charge-offs)
• (charge-off)_

N/M – Not meaningful

(1) The net (charge-off) recovery rate is calculated by dividing annualized total net (charge-offs) recoveries during the period by average gross loans, net of unearned income, outstanding during the period.

(2) The allowance coverage ratio is calculated by dividing the allowance for loan credit losses at the end of the period by gross loans, net of unearned income at the end of the period.

(3) The allowance to nonaccrual loans ratio is calculated by dividing the allowance for loan credit losses at the end of the period by nonaccrual loans at the end of the period.

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The following tables summarize the allowance for loan credit losses by portfolio with a comparison of the percentage composition in relation to total allowance for loan credit losses and total loans as of June 30, 2026 and December 31, 2025.

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Management believes that the allowance for loan credit losses is adequate to absorb lifetime expected credit losses inherent in the portfolio as of June 30, 2026. There can be no assurance, however, that adjustments to the provision for (recovery of) credit losses will not be required in the future. Changes in the economic assumptions underlying management’s estimates and judgments; adverse developments in the economy, on a national basis or in the Company’s market area; or changes in the circumstances of particular borrowers are criteria that could change and make adjustments to the provision for (recovery of) credit losses necessary.

Deposits

Total deposits increased $20.7 million or 1.0% to $1.99 billion as of June 30, 2026 compared to $1.97 billion as of December 31, 2025.

Non-interest bearing demand deposits increased $18.8 million or 4.3% to $451.5 million as of June 30, 2026 compared to $432.7 million at December 31, 2025. Non-interest bearing demand deposits represented 22.7% and 21.9% of total deposits at June 30, 2026 and December 31, 2025, respectively.

Interest-bearing deposits, which include NOW accounts, regular savings accounts, money market accounts, and time deposits, increased $1.9 million or 0.1% to $1.54 billion as of June 30, 2026 compared to $1.54 billion as of December 31, 2025. Interest-bearing deposits represented 77.3% and 78.1% of total deposits at June 30, 2026 and December 31, 2025, respectively.

The Company focuses on funding asset growth with deposit accounts, with an emphasis on core deposit growth, as its primary source of deposits. Core deposits consist of checking accounts, NOW accounts, money market accounts, regular savings accounts, time deposits, reciprocal IntraFi Demand® deposits, reciprocal IntraFi Money Market® deposits and reciprocal IntraFi CD® deposits. Core deposits totaled $1.67 billion or 83.9% of total deposits and $1.67 billion or 84.7% of total deposits at June 30, 2026 and December 31, 2025, respectively.

The following table sets forth the average balances of deposits and the average interest rates paid for the three months ended June 30, 2026 and 2025.

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The following table sets forth the average balances of deposits and the average interest rates paid for the six months ended June 30, 2026 and 2025.

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The following table sets forth the maturity ranges of certificates of deposit with balances of $250,000 or more as of June 30, 2026.

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The total amount of our uninsured deposits (deposits in excess of $250,000, as calculated in accordance with FDIC regulations) was estimated at $893.0 million at June 30, 2026 and $853.4 million at December 31, 2025. Included in these amounts were $189.2 million and $161.8 million of public fund deposits that are collateralized as of June 30, 2026 and December 31, 2025, respectively. Deposits that were not insured or not collateralized represented 35.2% and 35.1% of total deposits at June 30, 2026 and December 31, 2025, respectively.

Capital Resources

The Company is a bank holding company with less than $3 billion in assets and does not (i) have significant off balance sheet exposure, (ii) engage in significant non-banking activities, or (iii) have a material amount of securities registered under the Securities Exchange Act of 1934, as amended (“Exchange Act”). As a result, the Company qualifies as a small bank holding company under the Federal Reserve’s Small Bank Holding Company Policy Statement and is currently not subject to consolidated regulatory capital requirements.

The Bank is subject to capital adequacy standards adopted by the Federal Reserve, including the capital rules that implemented the Basel III regulatory capital reforms developed by the Basel Committee on Banking Supervision.

Note 11 to the Consolidated Financial Statements, included in Item 1 of this Form 10-Q, contains additional discussion and analysis regarding the Company and Bank’s regulatory capital requirements.

Shareholders’ equity increased $8.1 million or 3.1% to $273.8 million at June 30, 2026 compared to $265.6 million at December 31, 2025. During the six months ended June 30, 2026, the increase in shareholders’ equity was primarily attributable to a $10.6 million increase in retained earnings, partially offset by a $1.8 million decrease in additional paid-in capital due to the Company’s share repurchases coupled with a $0.6 million increase in accumulated other comprehensive loss on the Company’s available-for-sale securities. Book value per share was $19.40 as of June 30, 2026 compared to $18.69 as of December 31, 2025.

In August of 2025, the Company’s Board of Directors authorized the extension of the Company’s stock repurchase program that was originally adopted in August of 2021. Under the stock repurchase program, the Company may repurchase up to 700,000 shares of its common stock, par value of $0.01 per share, or approximately 5% of its outstanding shares of common stock. The stock repurchase program will expire on August 31, 2026, or earlier if all the authorized shares have been repurchased. The Company did not repurchase any shares of its outstanding common stock during the three months ended June 30, 2026 and repurchased 103,507 shares of its outstanding common stock during the six months ended June 30, 2026.

Liquidity

Liquidity reflects a financial institution’s ability to fund assets and meet current and future financial obligations. Liquidity is essential in all banks to meet customer withdrawals, compensate for balance sheet fluctuations, and provide funds for growth. Monitoring and managing both liquidity measurements is critical in developing prudent and effective balance sheet management. Management conducts liquidity stress testing on a quarterly basis to prepare for unexpected adverse scenarios and contemporaneously develops mitigating strategies to reduce losses in the event of an economic downturn.

The Company’s principal source of liquidity and funding is its deposit base. The level of deposits necessary to support the Company’s lending and investment activities is determined through monitoring loan demand.

In addition to the liquidity provided by balance sheet cash flows, the Company supplements its liquidity with additional sources such as secured borrowing credit lines with the FHLB and the Federal Reserve Bank. Specifically, the Company has pledged a portion of its commercial real estate and residential real estate loan portfolios to the FHLB and commercial loans to the Federal Reserve Bank. Based on collateral pledged as of June 30, 2026, the remaining FHLB available borrowing capacity was $469.0 million. Additional borrowing capacity with the Federal Reserve Bank was approximately $125.1 million as of June 30, 2026.

At June 30, 2026, the Company had three outstanding FHLB advances totaling $56.0 million with interest rates ranging from 3.61% to 3.98%.

Total liquidity, defined as cash and cash equivalents, unencumbered securities at fair value, and available secured borrowing capacity, was $827.2 million at June 30, 2026 compared to $827.0 million at December 31, 2025.

In addition to available secured borrowing capacity, the Company had available federal funds lines with correspondent banks of $70.0 million at June 30, 2026.

Off-Balance Sheet Arrangements

The Company enters into certain off-balance sheet arrangements in the normal course of business to meet the financing needs of its customers. These off-balance sheet arrangements include commitments to extend credit, standby letters of credit and financial guarantees which would impact the Company’s liquidity and capital resources to the extent customers accept and or use these commitments. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheet. With the exception of these off-balance sheet arrangements, the Company has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources, that is material to investors. For further information, see Note 7 to the Consolidated Financial Statements, included in Item 1 of this Form 10-Q, for further discussion of the nature, business purpose and elements of risk involved with these off-balance sheet arrangements.