ALRS 10-K & 10-Q changes, risk factors and insider trading

Fluctuations in interest rates may negatively affect the Company’s business and may weaken demand for some of the Company’s products. The Company’s earnings and cash flows are dependent, in part, on net interest income, which is the difference between the interest income that the Company earns on interest earninginterest-earning assets, such as loans and investment securities, and the interest expense that the Company pays on interest-bearing liabilities, such as deposits and borrowings. Changes in interest rates might also impact the values of equity and debt securities under management and administration by the retirement and benefit services and wealth businesses which may have a negative impact on the Company’s fee income. Additionally, changes in interest rates also affect the Company’s ability to fund operations with client deposits and the fair value of securities in the Company’s investment portfolio. Therefore, any change in general market interest rates, including changes in federal fiscal and monetary policies, could have a material adverse effect on the Company’s business, financial condition, results of operations and growth prospects.

It is currently expected that, during 2025,2026, the Federal Open Market Committee of the Federal Reserve (“FOMC”) will continue to closely monitor interest rates, in part to continue to reducemanage the rate of inflation to its preferred level. In the fourth quarter of 2024,2025, the FOMC decreased the target range for the federal funds rate to a range of 4.25%3.50% to 4.50%,3.75%, following a series of significant increases beginning in 2023. If the FOMC further alters the targeted federal funds rates, overall interest rates likely will continue to change, which may impact the entire national economy. Changes in interest rates directly impact the Company’s net interest income and also may affect the demand for loans and the value of fixed-rate investment securities. These effects from interest rate changes or from other sustained economic stress or a recession, among other matters, could have a material adverse effect on the Company’s business, financial condition, liquidity and results of operations.

The Company’s interest earninginterest-earning assets and interest-bearing liabilities may react in different degrees to changes in market interest rates. Interest rates on some types of assets and liabilities may fluctuate prior to changes in broader market interest rates, while rates on other types of assets and liabilities may lag behind. The result of these changes to rates may cause differing spreads on interest earninginterest-earning assets and interest-bearing liabilities. The Company cannot control or accurately predict changes in market rates of interest. As a result of the interest rate increases during 2023 and the first half of 2024, the Company experienced net interest margin compression as the Company’s interest-earning assets repriced more slowly than its interest-bearing liabilities, which had a material adverse effect on the Company’s net interest income and results of operations. The interest rate decreases in the fourth quarter of 2024 moderated, but did not materially reverse, these adverse effects on the Company’s net interest income and results of operations.

In addition, the Company could be prevented from altering the interest rates charged on loans or from maintaining the interest rates offered on deposits and money market savings accounts due to “price” competition from other banks and financial institutions with which the Company competes. As of December 31, 2024,2025, the Company had $903.5$807.9 million of non-maturity, noninterest bearing deposit accounts and $2.8 billion of non-maturity interest bearing deposit accounts. The Company does not know what market rates will be throughout 2025,2026, including the frequency and significance with which the FOMC may continue to reducechange the target range for the federal funds rate. If the Company fails to offer interest at a sufficient level to keep these non-maturity deposits, core deposits may be reduced, which would require the Company to obtain funding in other ways or risk slowing future asset growth.

A large percentage of the Company’s investment securities classified as available-for-sale has fixed interest rates. As is the case with many financial institutions, the Company’s emphasis on increasing the development of core deposits, those with no stated maturity date, has resulted in the Company’s interest-bearing liabilities having a shorter duration than interest-earning assets. This imbalance can create significant earnings volatility because interest rates change over time. As interest rates increased duringbeginning 2023in and the first half of 2024,2023, the Company’s cost of funds increased more rapidly than the yields on a substantial portion of its interest-earning assets. In addition, the market value of the Company’s fixed-rate assets, for example, investment securities, declined during those same periods. In line with the foregoing, the Company has experienced and may continue to experience an increasechanges in the cost of interest-bearing liabilities primarily due to changes in the rates the Company pays on some of its deposit products to stay competitive within the Company’s market areas and variable borrowing costs resulting from changes in the federal funds rate.

The Company may also incur significant losses from strategic balance sheet repositioning efforts or future asset sales. During the fourth quarter of 2025, the Company sold $360.1 million of available-for-sale securities as part of a strategic balance sheet repositioning, which resulted in a one-time pre-tax net loss of $68.4 million. At December 31, 2024,2025, the Company had $137.3$30.2 million of unrealized losses in its securities portfolio. If the Company is forced to liquidate any of those investments prior to maturity, including because of a lack of liquidity, it would recognize as a charge to earnings the losses attributable to those securities. The Company’s securities portfolio hashad a weighted average effective duration of 4.63.5 years,years at December 31, 2025, so the Company expects an increase in unrealized losses if interest rates remain elevated or fail to decrease significantlyincrease in 2025.2026.

In the current environment, economic and business conditions are significantly affected by U.S. monetary policy, particularly the actions of the Federal Reserve in its effort to control levels of inflation. The Federal Reserve is mandated to pursue the goals of maximum employment and price stability and, from 2022 through the first half of 2024, made a series of significant increases to the target Federal Funds rate as part of an effort to combat elevated levels of inflation affecting the U.S. economy. This has helped drive a significant increase in prevailing interest rates, however it has had a negative effect on the Company’s net interest income and has harmed the value of the Company’s securities portfolio, which had $98.5$3.6 million in unrealized losses in available-for-sale investment securities at December 31, 2024.2025. This decline in value has negatively affected the Company’s tangible book value. Higher interest rates can also negatively affect the Company’s customers’ businesses and financial condition, and the value of collateral securing loans in the Company’s portfolio. While the FOMC reduced the target range for the federal funds rate in the second half of 2024,2025, there is no guarantee that these decreases will be continued in 2025.2026.

As a bank, the Company’s business requires it to manage credit risk; however, default risk may arise from events or circumstances that are difficult to detect, such as fraud, or difficult to predict, such as catastrophic events affecting certain industries. As a lender, the Company is exposed to the risk that its borrowers will be unable to repay their loans according to their terms, and that the collateral securing repayment of their loans, if any, may not be sufficient to ensure repayment. In addition, there are risks inherent in making any loan, including risks with respect to the period of time over which the loan may be repaid, proper loan underwriting, and changes in economic and industry conditions, and risks inherent in dealing with individual borrowers, including the risk that a borrower may not provide information to the Company about its business in a timely manner, or may present inaccurate or incomplete information to the Company, as well as risks relating to the value of collateral. To manage credit risk, the Company must, among other actions, maintain disciplined and prudent underwriting standards and ensure that the Company’s bankers follow those standards. The weakening of these standards for any reason, such as an attempt to attract higher yielding loans, a lack of discipline or diligence by the Company’s employees in underwriting and monitoring loans, or the Company’s inability to adequately adapt policies and procedures to changes in economic,economic or any other conditions affecting borrowers and the quality of the Company’s loan portfolio, may result in loan defaults, foreclosures and charge-offs and may necessitate that the Company significantly increase its allowance for credit losses, each of which could adversely affect net income. As a result, the Company’s inability to successfully manage credit risk could have a material adverse effect on the Company’s business, financial condition, results of operations and growth prospects.

The Company’s business activities and credit exposure, including real estate collateral for many of its loans, are concentrated in North Dakota, Minnesota and Arizona, although the Company also pursues business opportunities nationally. As of December 31, 2024, 83.0% of the loans in the Company’s loan portfolio were made to borrowers who live in or conduct business in those states. This concentration imposes risks from lack of geographic diversification. Weak economic conditions in North Dakota, Minnesota or Arizona may affect the Company’s business, financial condition, results of operations and growth prospects, where adverse economic developments, among other things, could affect the volume of loan originations, increase the level of nonperforming assets, increase the rate of foreclosure losses on loans and reduce the value of the Company’s loans and loan servicing portfolio. Weak economic conditions are characterized by, among other indicators, state and local government deficits, deflation, elevated levels of unemployment, fluctuations in debt and equity capital markets, increased delinquencies on mortgage, consumer and commercial loans, residential and commercial real estate price declines and lower home sales and commercial activity. Any regional or local economic downturn that affects North Dakota, Minnesota, Arizona or existing or prospective borrowers or property values in such areas may affect the Company and the Company’s profitability more significantly and more adversely than the Company’s competitors whose operations are less geographically concentrated. Further, a general economic slowdown could decrease the value of the assets under administration (“AUA”) and assets under management (“AUM”) of the Company’s retirement and benefit services and wealth businesses resulting in lower fee income, and clients could potentially seek alternative investment opportunities with other providers, which could also result in lower fee income to us. The Company’s business is also significantly affected by monetary, trade and other regulatory policies of the U.S. federal government, its agencies and government-sponsored entities. Changes in any of these policies are influenced by macroeconomic conditions and other factors that are beyond the Company’s control, are difficult to predict and could have a material adverse effect on the Company’s business, financial position, results of operations and growth prospects.

The United States has experienced elevated levels of inflation in recent years, with the consumer price index climbing approximately 2.9%2.7% in 2024.2025, before seasonal adjustment. Continued elevated levels of inflation could have complex effects on the Company’s business, results of operations and financial condition, some of which could be materially adverse. For example, while the Company generally expects any inflation-related increases in the Company’s interest expense to be offset by increases in interest income, inflation-driven increases in the Company’s levels of noninterest expense could negatively impact results of operations. Continued elevated levels of inflation could also cause increased volatility and uncertainty in the business environment, which could adversely affect loan demand and the Company’s clients’ ability to repay indebtedness. It is possible that governmental responses to the current inflation environment, such as changes to monetary and fiscal policy that are too strict, or the imposition or threatened imposition of price controls, could adversely affect the Company’s business. The duration and severity of the current inflationary period cannot be estimated with precision.

At December 31, 2024,2025, approximately 80.5%79.8% of the Company’s total loan portfolio was comprised of loans with real estate as a primary component of collateral. The repayment of such loans is highly dependent on the ability of the borrowers to meet their loan repayment obligations to us, which can be adversely affected by economic downturns that can lead to (i) declines in the rents or decreases in occupancy and, therefore, in the cash flows generated by those real properties on which the borrowers depend to fund their loan payments to us, (ii) decreases in the values of those real properties, which make it more difficult for the borrowers to sell those real properties for amounts sufficient to repay their loans in full and (iii) job losses of residential home buyers, which makes it more difficult for these borrowers to fund their loan payments. As a result, adverse developments affecting real estate values in the Company’s market areas could increase the credit risk associated with the Company’s real estate loan portfolio. The market value of real estate can fluctuate significantly in a short period of time as a result of interest rates and market conditions in the area in which the real estate is located and some of these values have been negatively affected by the recent rise in prevailing interest rates. Adverse changes affecting real estate values, including decreases in office occupancy due to the shift to remote working environments following the COVID-19 pandemic and the liquidity of real estate in one or more of the Company’s markets could increase the credit risk associated with the Company’s loan portfolio, significantly impair the value of property pledged as collateral on loans and affect the Company’s ability to sell the collateral upon foreclosure without a loss or additional losses or the Company’s ability to sell those loans on the secondary market. Such declines and losses would have a material adverse effect on the Company’s business, financial condition, results of operations and growth prospects. If real estate values decline, it is also more likely that the Company would be required to increase the Company’s allowance for credit losses, which would have a material adverse effect on the Company’s business, financial condition, results of operations and growth prospects. In addition, adverse or extreme weather events, including tornadoes, wildfires, flooding and mudslides can cause damage to property pledged as collateral on loans, which could result in additional losses upon a foreclosure.

As of December 31, 2024,2025, the Company had no$0.3 million of foreclosed assets, which typically consist of properties that the Company obtains through foreclosure. Assets acquired through loan foreclosure are included in other assets and are initially recorded at estimated fair value less estimated selling costs. The estimated fair value of foreclosed assets is evaluated regularly and any decreases in value along with holding costs, such as taxes, insurance and utilities, are reported in noninterest expense.

The Company’s mortgage loan portfolio consists, in part, of home equity lines of credit.credit (“HELOC”). A large portion of home equity lines of credit are originated in conjunction with the origination of first mortgage loans eligible for sale in the secondary market, which the Company typically does not service if the loan is sold. By not servicing the first mortgage loans, the Company is unable to track any delinquency status which may indicate whether such loans are at risk of foreclosure by others. In addition, home equity lines of credit are initially offered as “revolving” lines of credit whereby the borrowers are only required to make scheduled interest payments during the initial terms of the loans, which is generally five or ten years. Thereafter, the borrowers no longer have the ability to make principal draws from the lines and the loans convert to a fully-amortizing basis, requiring scheduled principal and interest payments sufficient to repay the loans within a certain period of time, which is generally 15 or 20 years. The conversion of a home equity line of credit (“HELOC”) to a fully amortizing basis presents an increased level of default risk to the Company since the borrower no longer has the ability to make principal draws on the line, and the amount of the required monthly payment could substantially increase to provide for scheduled repayment of principal and interest. As of December 31, 2024, the unfunded commitment related to home equity lines of credit was $266.8 million.

A significant portion of the Company’s revenue results from fee-based services provided by the retirement and benefit and wealth services business. This contrasts with many other community and regional banks that rely more heavily on interest-based sources of revenue, such as loans and investment securities. For the year ended December 31, 2024,2025, noninterest income represented approximately 51.8%23.1% of the Company’s total revenue, which includes net interest income and noninterest income, a significant portion of which is derived from the Company’s retirement and benefit services business. This fee income business presents special risks not borne by other institutions that focus exclusively on banking. The level of these fees is influenced by several factors, including the number of plans and participants the Company provides retirement, advisory and other services for, the level of transactions within the plans, the investment decisions of plans and theparticipants and overall asset values of the plans whose fees are earned based on the level of assets in the plans.plans, and the number of wealth clients and the asset values of their accounts. If the Company is unable to maintain the Company’s number of plans,retirement participantsplans participants, and wealth clients, AUA and AUM at historical or greater levels, the Company’s fee income derived from this business may decline. For example, in a typical year the Company expects to experience outflows in AUA and AUM due to withdrawals, client turnover, plan terminations and mergers and acquisition activity. In 2024,2025, the Company experienced outflows of $5.4$6.5 billion in the Company’s retirement and benefit services division partially offset by inflows of $5.3$5.6 billion.

Part of the Company’s business strategy is to focus on organic growth, which includes leveraging the Company’s business lines across the Company’s entire client base, enhancing brand awareness and building the Company’s infrastructure. The success of the Company’s organic growth strategy depends on the Company’s ability to increase loans, deposits, AUM and AUA at acceptable risk levels without incurring offsetting increases in noninterest expense. The Company may not be successful in generating organic growth if the Company fails to effectively execute theits Company’s integrated One Alerusbusiness strategy, or as a result of other factors, including delays in introducing and implementing new products and services and other impediments resulting from regulatory oversight or lack of qualified personnel at the Company’s office locations. In addition, the success of the Company’s organic growth strategy will depend on maintaining sufficient regulatory capital levels, the Company’s ability to raise additional capital to implement its business plan and on favorable economic conditions in the Company’s primary market areas. Failure to adequately manage the risks associated with the Company’s anticipated organic growth could have a material adverse effect on the Company’s business, financial condition, results of operations and growth prospects.

While a key element of the Company’s business strategy is to grow the Company’s banking franchise and increase the Company’s market share through organic growth, the Company intends to take advantage of opportunities to acquire other banks and financial services companies, including wealth management and retirement administration businesses, as such opportunities present themselves. For example, in the third quarter of 2022, the Company completed the acquisition of MPB, the holding company for Metro Phoenix Bank headquartered in Phoenix, Arizona, and in the fourth quarter of 2024, the Company completed the acquisition of HMN Financial, Inc.,HMNF, the holding company for Home Federal Savings Bank headquartered in Rochester, Minnesota. Although the Company intends to continue to grow its business through organic growth and strategic acquisitions, because certain of the Company’s market areas are comprised of mature, rural communities with limited population growth, the Company anticipates that much of its future growth will be dependent on the Company’s ability to successfully implement the Company’s acquisition growth strategy. However, the Company may not be able to identify suitable acquisition targets, or may not succeed in seizing such opportunities when they arise or in integrating any such banks or financial service companies within the Company’s existing business framework following acquisition. In addition, even if suitable targets are identified, the Company expects to compete for such businesses with other potential bidders, many of which may have greater financial resources than the Company, which may adversely affect the Company’s ability to make acquisitions at attractive prices. The Company’s ability to execute on acquisition opportunities may require the Company to raise additional capital and to increase the Company’s capital position to support the growth of the Company’s franchise. It will also depend on market conditions over which the Company has no control. Moreover, certain acquisitions may require the approval of the Company’s bank regulators, and the Company may not be able to obtain such approvals on acceptable terms, if at all.

If the Company grows through acquisitions, it may expose the Companyit to financial, execution and operational risks that could have a material adverse effect on the Company’s business, financial position, results of operations and growth prospects. Acquiring other banks and financial service providers involve risks commonly associated with acquisitions, including:

In addition to the foregoing, the Company may face additional risks in acquisitions to the extent the Company acquires new lines of business or new products, or enter new geographic areas, in which the Company has little or no current experience, especially if the Company loses key employees of the acquired operations. If the Company hires a new team of employees, the Company may incur additional expenses relating to their compensation without any guarantee that such new team will be successful in generating new business. In addition, if the Company later determines that the value of an acquired business has decreased and that the related goodwill is impaired, an impairment of goodwill charge to earnings would be recognized.

In 2024,2025, the Company’s retirement and benefit services business experienced outflows of AUA and AUM of $5.4$6.5 billion, due to participant withdrawals, client turnover, plan terminations and mergers and acquisition activity. the Company believes this level of runoff is typical in the industry. To maintain and grow this business, the Company believes it needs to be an active acquirer and seek to complete acquisitions of retirement administration providers if the Company is able to find quality acquisition opportunities. If the Company is unable to source a pipeline of potential acquisitions of companies that it determines are a good strategic fit for the Company, the Company’s retirement and benefit services business may fail to grow or even shrink, which could have a material adverse effect on the Company’s business, financial condition, results of operations and growth prospects.

The Company derives a portion of its noninterest income from the origination of RRE loans and the subsequent sale of such loans into the secondary market. If the Company is unable to continue to originate and sell RRE loans at historical or greater levels, it could negatively impact the Company’s earnings. A shifting interest rate environment, general economic conditions, market volatility or other factors beyond the Company’s control could adversely affect the Company’s ability to originate RRE loans. Mortgage banking income is highly influenced by the level and direction of mortgage interest rates and real estate and refinancing activity. In a lower interest rate environment, the demand for mortgage loans and refinancing activity will tend to increase. This has the effect of increasing fee income, but could adversely impact the estimated fair value of the Company’s mortgage servicing rights as the rate of loan prepayments increase. In a higher interest rate environment, the demand for mortgage loans and refinancing activity will generally be lower. This has the effect of decreasing fee income opportunities. As a result of the higherelevated interest rate environment,environment over the past few years, the Company saw continued lower demand for mortgage loans and refinancing activity in 2024.2025. In 2024,2025, the Company originated $334.3$484.8 million of mortgage loans, compared to $364.1$334.3 million in 2023.2024.

The financial services industry is experiencing an increase in regulatory and compliance requirements related to mortgage loan originations necessitating technology upgrades and other changes. If new regulations continue to increase and the Company is unable to make conforming technology upgrades, the Company’s ability to originate mortgage loans will be reduced or eliminated. Additionally, the Company sells a large portion of its RRE loans to third partythird-party investors, and changing interest rates could affect the Company’s ability to generate suitable profits on the sale of such loans. If interest rates increase after the Company originates the loans, the Company’s ability to market those loans is impaired as the profitability on the loans decreases. These fluctuations can have an adverse effect on the revenue the Company generates from RRE loans and in certain instances, could result in a loss on the sale of the loans.

In recent periods, there continues to be a rise in electronic fraudulent activity, security breaches and cyber-attacks within the financial services industry, especially in the commercial banking sector, due to cyber criminals targeting commercial bank accounts and as a result of increasingly sophisticated methods of conducting cyber-attacks, including those employing artificial intelligence or resulting from insider fraud. Consistent with industry trends, the Company has also experienced an increase in attempted electronic fraudulent activity, security breaches and cybersecurity related incidents in recent periods. Moreover, several large corporations, including retail companies, financial institutions and third partythird-party vendors specializing in providing services to financial institutions, including MOVEit and First American Financial, have suffered major data breaches, in some cases exposing not only confidential and proprietary corporate information, but also sensitive financial and other personal information of their clients and employees and subjecting them to potential fraudulent activity. The Company is not aware of having experienced any misappropriation, loss or other unauthorized disclosure of confidential or personally identifiable information having a material impact on the Company as a result of a direct cyber security breach or other act on the Bank; however, some of the Company’s clients and third partythird-party vendors have been affected by such breaches, which could increase their risks of identity theft and other fraudulent activity that could involve client accounts at the Bank.

Information pertaining to the Company and its clients is maintained, and transactions are executed, on networks and systems maintained by the Company and certain third partythird-party partners, such as the Company’s online banking, mobile banking, record-keeping or accounting systems. The secure maintenance and transmission of confidential information, as well as execution of transactions over these systems, are essential to protect the Company and the Company’s clients against fraud and security breaches and to maintain the confidence of the Company’s clients. Breaches of information security also may occur through intentional or unintentional acts by those having access to the Company’s systems or the confidential information of the Company’s clients, including employees. In addition, increases in criminal activity levels and sophistication, advances in computer capabilities, new discoveries, vulnerabilities in third partythird-party technologies (including browsers and operating systems) or other developments could result in a compromise or breach of the technology, processes and controls that the Company uses to prevent fraudulent transactions and to protect data about us, the Company’s clients and underlying transactions, as well as the technology used by the Company’s clients to access the Company’s systems. The Company’s third partythird-party partners’ inability to anticipate, or failure to adequately mitigate, breaches of security could result in a number of negative events, including losses to the Company or its clients, loss of business or clients, damage to the Company’s reputation, the incurrence of additional expenses, disruption to the Company’s business, additional regulatory scrutiny or penalties or the Company’s exposure to civil litigation and possible financial liability, any of which could have a material adverse effect on the Company’s business, financial condition, results of operations and growth prospects.

Artificial intelligence, including generative artificial intelligence, is or may be enabled by or integrated into the Company’s products or those developed by its third partythird-party partners. As with many developing technologies, artificial intelligence presents risks and challenges that could affect its further development, adoption, and use, and therefore our business. Artificial intelligence algorithms may be flawed, for example datasets may contain biased information or otherwise be insufficient, and inappropriate or controversial data practices could impair the acceptance of artificial intelligence solutions and result in burdensome new regulations. If the analyses of those products incorporating artificial intelligence assist in producing for the Company or its third partythird-party partners are deficient, biased or inaccurate, the Company could be subject to competitive harm, potential legal liability and brand or reputational harm. The use of artificial intelligence may also present ethical issues. If the Company or its third partythird-party partners offer artificial intelligence enabled products that are controversial because of their purported or real impact on human rights, privacy, or other issues, the Company may experience competitive harm, potential legal liability and brand or reputational harm. In addition, the Company expects that governments will continue to assess and implement new laws and regulations concerning the use of artificial intelligence, which may affect or impair the usability or efficiency of products and services and those developed by the Company’s third partythird-party partners.

The Company’s business is highly dependent on the successful and uninterrupted functioning of its information technology and telecommunications systems, third partythird-party servicers, accounting systems, mobile and online banking platforms and financial intermediaries. The risks resulting from use of these systems result from a variety of factors, both internal and external. The Company is vulnerable to the impact of failures of its systems to operate as needed or intended. Such failures could include those resulting from human error, unexpected transaction volumes, intentional attacks or overall design or performance issues.

The Company outsources to third parties many of its major systems, such as data processing and mobile and online banking. In addition, the Company partners with a leading financial technology company to create an online account portal that integrates the Company’s diverse product applications into a user-friendly experience for the Company’s consumer clients. The failure of these systems, or the termination of a third partythird-party software license or service agreement on which any of these systems is based, could interrupt the Company’s operations. Because the Company’s information technology and telecommunications systems interface with and depend on third partythird-party systems, the Company could experience service denials if demand for such services exceeds capacity or such third partythird-party systems fail or experience interruptions. A system failure or service denial could result in a deterioration of the Company’s ability to process loans or gather deposits and provide customer service, compromise the Company’s ability to operate effectively, result in potential noncompliance with applicable laws or regulations, damage the Company’s reputation, result in a loss of client business or subject the Company to additional regulatory scrutiny and possible financial liability, any of which could have a material adverse effect on business, financial condition, results of operations and growth prospects. In addition, failures of third parties to comply with applicable laws and regulations, or fraud or misconduct on the part of employees of any of these third parties, could disrupt the Company’s operations or adversely affect its reputation.

It may be difficult for the Company to replace some of its third partythird-party vendors, particularly vendors providing the Company’s core banking and information services, in a timely manner if they are unwilling or unable to provide the Company with these services in the future for any reason and even if the Company is able to replace them, it may be at higher cost or result in the loss of clients. Any such events could have a material adverse effect on the Company’s business, financial condition, results of operations and growth prospects.

The financial services industry is undergoing rapid technological changes with frequent introductions of new technology-driven products and services. In addition to better serving clients, the effective use of technology increases efficiency and enables financial institutions to reduce costs. The Company’s future success will depend in part upon its, and its third partythird-party partners’, ability to address the needs of the Company’s clients by using technology to provide products and services that will satisfy client demands for convenience as well as to create additional efficiencies in operations. The widespread adoption of new technologies, including mobile banking services, artificial intelligence, cryptocurrencies and payment systems, could require the Company in the future to make substantial expenditures to modify or adapt the Company’s existing products and services as it grows and develops new products to satisfy the Company’s customers’ expectations, remain competitive and comply with regulatory guidance. The Company may experience operational challenges as it implements these new technology enhancements, which could result in the Company not fully realizing the anticipated benefits from such new technology or require the Company to incur significant costs to remedy any such challenges in a timely manner.

The Company relies, in part, on its reputation to attract clients and retain client relationships. Damage to the Company’s reputation could undermine the confidence of its current and potential clients in the Company’s ability to provide high-quality financial services. Such damage could also impair the confidence of the Company’s counterparties and vendors and ultimately affect its ability to effect transactions. In particular, the Company’s ability to attract and retain clients and employees could be adversely affected to the extent its reputation is damaged. The Company’s actual or perceived failure to address various issues could give rise to reputational risk that could cause harm to the Company and its business prospects. These issues include, but are not limited to, legal and regulatory requirements; privacy; client and other third partythird-party fraud; properly maintaining and safeguarding client and employee personal information; money laundering; illegal or fraudulent sales practices; ethical issues; appropriately addressing potential conflicts of interest; and the proper identification and disclosure of the legal, reputational, credit, liquidity and market risks inherent in the Company’s products. Failure to appropriately address any of these issues could also give rise to additional regulatory restrictions, reputational harm and legal risks, which could, among other consequences, increase the size and number of litigation claims and damages asserted or subject the Company to enforcement actions, fines and penalties and cause the Company to incur related costs and expenses. In addition, the Company’s businesses are dependent on the integrity of its relationships, asset managers and other employees. If a relationship manager, asset manager or other employee were to misappropriate any client funds or client information, the reputation of the Company’s businesses could be negatively affected, which may result in the loss of accounts and could have a material adverse effect on the Company’s business, financial condition, results of operations and growth prospects.

The Company’s use of third partythird-party vendors and its other ongoing third partythird-party business relationships is subject to increasing regulatory requirements and attention.

The Company’s use of third partythird-party vendors, including the financial technology company it partners with to create a customer portal, for certain information systems is subject to increasingly demanding regulatory requirements and attention by the Company’s federal bank regulators. Recent regulations require the Company to enhance its due diligence, ongoing monitoring and control over the Company’s third partythird-party vendors and other ongoing third partythird-party business relationships. In certain cases, the Company may be required to renegotiate the Company’s agreements with these vendors to meet these enhanced requirements, which could increase costs. The Company expects that regulators will hold the Company responsible for deficiencies in oversight and control of its third partythird-party relationships and in the performance of the parties with which the Company has these relationships. As a result, if the Company’s regulators conclude that it has not exercised adequate oversight and control over the Company’s third partythird-party vendors or other ongoing third partythird-party business relationships or that such third parties have not performed appropriately, the Company could be subject to enforcement actions, including civil money penalties or other administrative or judicial penalties or fines, as well as requirements for client remediation, any of which could have a material adverse effect on the Company’s business, financial condition, results of operations and growth prospects.

The Company operates in the highly competitive financial services industry and faces significant competition for clients from financial institutions located both within and beyond the Company’s market areas. Overall, the Company competes with national commercial banks, regional banks, private banks, mortgage companies, online lenders, savings banks, credit unions, non-bank financial services companies, other financial institutions, including investment advisory and wealth management firms, financial technology (“Fintech”) companies, digital asset service providers and securities brokerage firms, operating within or near the areas the Company serves. Many of the Company’s non-bank competitors are not subject to the same extensive regulations that govern the Company’s activities and may have greater flexibility in competing for business. The financial services industry could become even more competitive as a result of legislative, regulatory and technological changes and continued consolidation.

In addition, the Company is a financial holding company, and the Company’s ability to declare and pay dividends is dependent on certain federal regulatory considerations, including the guidelines of the Federal Reserve regarding capital adequacy and dividends.dividends, as outlined in more detail in the section “SUPERVISION AND REGULATION−Supervision and Regulation of the Company−Dividend Payments” above. It is the policy of the Federal Reserve that bank and financial holding companies should generally pay dividends on capital stock only out of earnings, and only if prospective earnings retention is consistent with the organization’s expected future needs, asset quality and financial condition.

The Company is a separate and distinct legal entity from its subsidiaries, including the Bank. The Company receives substantially all of its revenue from dividends from the Bank, which it uses as the principal source of funds to pay expenses. Various federal and state laws and regulations limit the amount of dividends that the Bank and certain of the Company’s non-bank subsidiaries may pay the Company. Such limits are also tied to the earnings of the Company’s subsidiaries.subsidiaries, as outlined in more detail in the section “SUPERVISION AND REGULATION−Supervision and Regulation of the Company−Dividend Payments” above. If the Bank does not receive regulatory approval or if its earnings are not sufficient to make dividend payments to the Company while maintaining adequate capital levels, the Company’s ability to pay its expenses and its business, financial condition or results of operations could be materially and adversely impacted.

The Company is generally not restricted from issuing additional shares of stock, up to totals of 30,000,00060,000,000 shares of common stock and 2,000,000 shares of preferred stock authorized in the Company’s certificate of incorporation, as amended, which in each case could be increased by a vote of the holders of a majority of the Company’s shares of common stock. The Company may issue additional shares of common stock in the future pursuant to current or future equity compensation plans, upon conversions of preferred stock or debt, or in connection with future acquisitions or financings. If the Company chooses to raise capital by selling shares of common stock for any reason, the issuance would have a dilutive effect on the holders of the Company’s common stock and could have a material negative effect on the market price of the Company’s common stock.

The Company’s businesses and operations, which primarily consist of lending money to clients in the form of commercial and residential mortgage loans, borrowing money from clients in the form of deposits and savings accounts, investing in securities, and providing wealth, trust andtrust, fiduciary and recordkeeping services, are sensitive to general business and economic conditions in the United States. If the United States economy weakens, the Company’s growth and profitability from the Company’s lending, deposit and investment operations could be constrained. Uncertainty about the federal fiscal policymaking process, the medium- and long-term fiscal outlook of the federal government, potential imposition of tariffs and future tax rates is a concern for businesses, consumers and investors in the United States. In addition, economic conditions and political relations in foreign countries and weakening global trade due to increased anti-globalization sentiment and tariff activity could affect the stability of global financial markets, which could hinder the economic growth of the United States. Weak economic conditions are characterized by deflation, fluctuations in debt and equity capital markets, a lack of liquidity or depressed prices in the secondary market for loans, increased delinquencies on mortgage, consumer and commercial loans, residential and commercial real estate price declines and lower home sales and commercial activity. Further, a general economic slowdown could decrease the value of the Company’s AUA and AUM resulting in lower asset-based noninterest retirement and benefits and wealth fees and clients potentially seeking alternative investment opportunities with other providers, which could result in lower fee income. All of these factors are detrimental to the Company’s business, and the interplay between these factors can be complex and unpredictable. Adverse economic conditions and government policy responses to such conditions could have a material adverse effect on the Company’s business, financial condition, results of operations and growth prospects.

The financial markets and the global economy may also be adversely affected by the current or anticipated impact of military conflict, including ongoing conflicts in the Middle East andEast, between Russia and Ukraine, and recent military actions in Venezuela, which have the potential to increase volatility in commodity and energy prices, create supply chain issues and cause instability in financial markets. Sanctions imposed by the United States and other countries in response to such conflicts could further adversely impact the financial markets and the global economy, and any economic countermeasures by the affected countries or others could exacerbate market and economic instability. The specific consequences of these or future conflicts on the Company’s business are difficult to predict at this time, but in addition to inflationary pressures affecting the Company’s operations and those of the Company’s customers and borrowers, the Company may also experience an increase in cyber-attacks against us, the Company’s customers and borrowers, service providers and other third parties.

The financial services industry is undergoing rapid change, as technology enables traditional banks to compete in new ways and non-traditional entrants to compete in certain segments of the banking market, in some cases with reduced regulation. As client preferences and expectations continue to evolve, technology has lowered barriers to entry and made it possible for banks to expand their geographic reach by providing services over the internet and for non-banks to offer products and services traditionally provided by banks, such as automatic transfer and automatic payment systems, online lending and low-cost investment advisory services. New entrants may use new technologies, advanced data and analytic tools, lower cost to serve, reduced regulatory burden or faster processes to challenge traditional banks. For example, new business models have been observed in retail payments, consumer and commercial lending, foreign exchange and low-cost investment advisory services. While the Company closely monitors business disruptors and seekseeks to adapt to changing technologies, matching the pace of innovation exhibited by new and differently situated competitors may require the Company and policy-makers to adapt at a greater pace. Because the financial services industry is experiencing rapid changes in technology, the Company’s future success will depend in part on its ability to address its clients’ needs by using technology. Client loyalty can be influenced by a competitor’s new products, especially offerings that could provide cost savings or a higher return to the client.

The Company’s most important source of funds consists of the Company’s client deposits, which can decrease for a variety of reasons, including when clients perceive alternative investments, such as bonds, treasuries or stocks, as providing a better risk/return tradeoff. Total deposits increaseddecreased in 2024,2025, however,as clients demanded higher interest rates on deposit accounts to compete with higher yielding short-term investments available. The Company’s future growth will largely depend on its ability to maintain and grow a strong deposit base and the Company’s ability to retain its largest retirement and benefit services and wealth clients, many of whom are also depositors. If clients, including the Company’s retirement and benefit services and wealth clients,clients move money out of bank deposits and into other investments, the Company could lose a relatively low-cost source of funds, which would require the Company to seek other funding alternatives, including increasing the Company’s dependence on wholesale funding sources, in order to continue to grow, thereby increasing the Company’s funding costs and reducing net interest income and net income.

Additionally, uninsured deposits have historically been viewed by the FDIC as less stable than insured deposits. According to statements made by the FDIC staff and the leadership of the federal banking agencies, customers with larger uninsured deposit account balances often are small- to mid-sized businesses that rely upon deposit funds for payment of operational expenses and, as a result, are more likely to closely monitor the financial condition and performance of their depository institutions. As a result, in the event of financial distress, uninsured depositors historically have been more likely to withdraw their deposits. If a significant portion of our deposits were to be withdrawn within a short period of time such that additional sources of funding would be required to meet withdrawal demands, the Company may be unable to obtain funding at favorable terms, which may have an adverse effect on our net interest margin. Moreover, obtaining adequate funding to meet our deposit obligations may be more challenging during periods of higher prevailing interest rates, such as the present period.rates. Our ability to attract depositors during a time of actual or perceived distress or instability in the marketplace may be limited. Further, interest rates paid for borrowings generally exceed the interest rates paid on deposits. This spread may be exacerbated by higher prevailing interest rates. In addition, because our available for sale (“AFS”) securities lose value when interest rates rise, after-tax proceeds resulting from the sale of such assets may be diminished during periods when interest rates are elevated. Under such circumstances, we may be required to access funding from sources such as the Federal Reserve’s discount window in order to manage our liquidity risk.

Other primary sources of funds consist of cash from operations, investment security maturities and sales and proceeds from the issuance and sale of the Company’s equity and debt securities to investors. Additional liquidity is provided by the ability to borrow from the Federal Reserve and the FHLB. The Federal Reserve established the Bank Term Funding Program (“BTFP”) in March of 2023, offering qualifying banks loans of up to one year in length collateralized by qualifying assets, including U.S. securities valued at par, to serve as a source of additional liquidity against high-quality securities and reducing an institution’s need to quickly sell high-quality securities to meet liquidity needs. The Federal Reserve has since announced that it is ending the BTFP, and ceased making new loans under the program on March 11, 2024. The Company repaid its outstanding borrowings under the BTFP late in the third quarter of 2024. The Company may also borrow from third partythird-party lenders from time to time. The Company’s access to funding sources in amounts adequate to finance or capitalize the Company’s activities or on terms that are acceptable to the Company could be impaired by factors that affect the Company directly or the financial services industry or economy in general, such as disruptions in the financial markets or negative views and expectations about the prospects for the financial services industry. Economic conditions and a loss of confidence in financial institutions may increase the Company’s cost of funding and limit access to certain customary sources of capital, including inter-bank borrowings, repurchase agreements and borrowings from the discount window of the Federal Reserve. There is also the potential risk that collateral calls with respect to the Company’s repurchase agreements could reduce the Company’s available liquidity. At December 31, 2024,2025, the Company’s borrowed funds decreasedincreased to $239.0$308.8 million, compared to $314.2$239.0 million at December 31, 2023.2024. The balance of borrowed funds as of December 31, 20242025 included $200.0$250.0 million in FHLB advances and $39.0$58.8 million in federal funds purchased. Despite the decreaseincrease in borrowings, the Company’s cost of funds increased anddecreased in 2024 as2025 compared to 2023,2024, as a result of the increasedlower interest rate environment.

The Company depends primarily on core deposits from its clients, which consist of noninterest bearing deposits, interest bearing checking accounts, certificates of deposit less than $250,000 and money market savings accounts, as the Company’s primary source of funding for lending activities. The Company’s future growth will largely depend on its ability to maintain and grow this strong, core deposit base and the Company’s ability to retain its retirement and benefit and wealth clients, many of whom are also depositors. Deposit and account balances can decrease when clients perceive alternative investments, such as the stock market or real estate, as providing a better risk/return tradeoff. If clients, including the Company’s retirement and benefit and wealth clients,clients move money out of bank deposits or money market accounts and into investments (or similar deposit products at other institutions that may provide a higher rate of return), the Company could lose a relatively low-cost source of funds, increasing funding costs and reducing net interest income and net income.

The Company supplements its core deposit funding with non-core, short-term funding sources, including FHLB advances and fed funds purchased. As of December 31, 2024,2025, the Company had $200.0$250.0 million FHLB advances and $39.0$58.8 million of fedfederal funds purchased from the FHLB. The Company’s maximum borrowing capacity from the FHLB is based on the amount of mortgage and commercial loans the Company can pledge. As of December 31, 2024,2025, the Company’s advances from the FHLB were collateralized by $1.4$1.3 billion of real estate loans. If the Company is unable to pledge sufficient qualifying collateral to secure funding from the FHLB, it may lose access to this source of liquidity. If the Company is unable to access any of these types of funding sources or if its costs related to them increases, the Company’s liquidity and ability to support demand for loans could be materially adversely affected.

Financial services institutions that deal with each other are interconnected as a result of trading, investment, liquidity management, clearing, counterparty ,counterparty, reputational and other relationships. Concerns about, or a default by, one institution could lead to significant liquidity problems and losses or defaults by other institutions, as the commercial and financial soundness of many financial institutions is closely related as a result of these credit, trading, clearing and other relationships. Even the perceived lack of creditworthiness of, or questions about, a counterparty may lead to market-wide liquidity problems and losses or defaults by various institutions. For example, certain community banks experienced deposit outflows following the bank failures in 2023. This systemic risk may adversely affect financial intermediaries with which the Company interacts on a daily basis or key funding providers such as the FHLB, any of which could have a material adverse effect on the Company’s access to liquidity or otherwise have a material adverse effect on its business, financial condition, results of operations and growth prospects.

The Company’s business is subject to increased litigation and regulatory risks because of a number of factors, including the highly regulated nature of the financial services industryand retirement benefits industries and the focus of state and federal prosecutors on banks and the financial services industry generally. This focus has only intensified since the financial crisis, with regulators and prosecutors focusing on a variety of financial institution practices and requirements, including foreclosure practices, compliance with applicable consumer protection laws, classification of “held for sale” assets and compliance with anti-money laundering statutes, the Bank Secrecy Act and sanctions administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury (“OFAC”).

The Company may also, from time to time, be the subject of subpoenas, requests for information, reviews, investigations and proceedings (both formal and informal) by governmental,governmental agencies, including the DOL, agencies regarding the Company’s current or prior business activities. Any such legal or regulatory actions may subject the Company to substantial compensatory or punitive damages, significant fines, penalties, obligations to change the Company’s business practices or other requirements resulting in increased expenses, diminished income and damage to the Company’s reputation. The Company’s involvement in any such matters, whether tangential or otherwise and even if the matters are ultimately determined in the Company’s favor, could also cause significant harm to the Company’s reputation and divert management attention from the operation of the Company’s business. Further, any settlement, consent order or adverse judgment in connection with any formal or informal proceeding or investigation by government agencies may result in litigation, investigations or proceedings as other litigants and government agencies begin independent reviews of the same activities. As a result, the outcome of legal and regulatory actions could have a material adverse effect on the Company’s business, reputation, financial condition, results of operations and growth prospects.

Moreover, U.S. authorities have been increasingly focused on “conduct risk,” a term that is used to describe the risks associated with behavior by employees and agents, including third partythird-party vendors, that could harm clients, consumers, investors or the markets, such as failures to safeguard consumers’ and investors’ personal information, failures to identify and manage conflicts of interest and improperly creating, selling and marketing products and services. In addition to increasing compliance risks, this focus on conduct risk could lead to more regulatory or other enforcement proceedings and litigation, including for practices which historically were acceptable but are now receiving greater scrutiny. Further, while the Company takes numerous steps to prevent and detect conduct by employees and agents that could potentially harm clients, investors or the markets, such behavior may not always be deterred or prevented. Banking regulators have also focused on the overall culture of financial services firms. In addition to regulatory restrictions or structural changes that could result from perceived deficiencies in the Company’s culture, such focus could also lead to additional regulatory proceedings. For additional information, see Note 16 (Legal Contingencies) to the Company’s audited consolidated financial statements included in Item 8 of this Form 10-K.

Some of the services the Company provides, such as retirement plan administration, trust and investment services, require the Company to act as fiduciary for its clients and others. From time to time, third parties or government agencies may initiate audits or investigations, make claims and take legal action against the Company pertaining to the performance of its fiduciary responsibilities. For example, the Company previously sold its ESOP fiduciary services business, but remains subject to a number of lawsuits, including by the DOL and third parties, that are typical in that industry related to the Company’s ESOP fiduciary services. For additional information, see Note 16 (Legal Contingencies) to the Company’s audited consolidated financial statements included in Item 8 of this Form 10-K.

As of December 31, 2024, the Company had goodwill of $85.6 million, or 17.3% of the Company’s total stockholders’ equity. In its most recent acquisition of HMNF, completed in October 2024, the Company recorded $38.9 of goodwill. The excess purchase consideration over the fair value of net assets from acquisitions, or goodwill, is evaluated for impairment at least annually and on an interim basis if an event or circumstance indicates that it is more likely than not that an impairment has occurred. In testing for impairment, the Company conducts a qualitative assessment, and the Company also estimates the fair value of net assets based on analyses of its market value, discounted cash flows and peer values. Consequently, the determination of the fair value of goodwill is sensitive to market-based economics and other key assumptions. Variability in market conditions or in key assumptions could result in impairment of goodwill, which is recorded as a non-cash adjustment to income. An impairment of goodwill could have a material adverse effect on the Company’s business, financial condition, results of operations and growth prospects.

The Company’s retirement and benefit services and wealth businesses are highly regulated, primarily at the federal level. The failure of any of the Company’s businesses that provide retirement plan administration, investment management or wealth and trust services to comply with applicable laws or regulations could result in corrective payments, fines, suspensions of individual employees or other sanctions. The Company is also subject to the provisions and regulations of ERISA, to the extent that the Company acts as a “fiduciary” under ERISA with respect to certain of the Company’s clients.clients, including clients who participate in “pooled employer plans” where the Company serves as “pooled plan provider.” ERISA and the applicable provisions of the federal tax laws impose a number of duties on persons who are fiduciaries under ERISA and prohibit certain transactions involving the assets of each ERISA plan which is a client, as well as certain transactions by the fiduciaries (and certain other related parties) to such plans. ERISA also gives the DOL broad authority to examine and investigate the operation and conduct of plans and fiduciaries. Changes in these laws or regulations or governmental enforcement initiatives could have a material adverse effect on the Company’s business, financial condition, results of operations and growth prospects.

The Company’s primary banking market areas are the states of North Dakota, Minnesota, specifically, the Twin Cities MSA and Rochester MSA, and Arizona, specifically, the Phoenix MSA. In addition to the Company’s offices located in the Company’s banking markets, its retirement and benefit services business administers plans in all 50 states through offices located in Michigan, Minnesota and Colorado.

As of December 31, 2024,2025, the Company had $5.3$5.2 billion of total assets, $4.0 billion of total loans, $4.4$4.2 billion of total deposits, $495.4$564.9 million of stockholders’ equity, $40.7$44.9 billion of AUAassets under administration/AUMmanagement in the Company’s retirement and benefit services segment, and $4.6$4.9 billion of AUAassets under administration/AUMmanagement in the Company’s wealth segment.

Net income for the year ended December 31, 20242025 was $17.8$17.4 million, ana increasedecrease of $6.1$0.3 million, or 52.0%,1.9%, compared to $11.7$17.8 million for the year ended December 31, 2023.2024. Diluted earnings per common share were $0.83$0.68 in 2024,2025, compared to $0.58$0.83 in 2023.2024. Return on average total assets was 0.39%0.33% in 2024,2025, compared to 0.31%0.39% for 2023.2024. The increasedecrease in net income was primarily driven by a $34.7$63.1 million increasedecrease in noninterest income and a $19.2$20.6 million increase in noninterest expense, offset by a $65.5 million increase in net interest income, partially offset by a $30.5 million increase in noninterest expenseincome and a $16.1$17.6 million increasedecrease in provision for credit losses expense. Noninterest income increaseddecreased primarily due to the $24.6$68.4 million loss on investment securities recognized in connection with a strategic balance sheet repositioning in the fourth quarter of 2023, as well as a $4.3 million increase in wealth revenue.2025. The increase in net interest income was dueprimarily todriven increased income on higherby earning assets,assets acquired in the HMNF acquisition, organic loan growth,growth at higher yields, lower cost of funds, and lowerpurchase averageaccounting rates paid on deposit balances.accretion. The increase in noninterest expense was primarily due to ana $11.0$10.1 million increase in compensation expenseexpense, a $4.2 million increase in occupancy and equipment expense, a $3.8 million increase in employee taxes and benefits expense, and a $12.9$3.7 million increase in intangible amortization expense, partially offset by a $8.5 million decrease in professional fees and assessments, primarilyas drivena byresult acquisition-relatedof expenses.the completion of the HMNF acquisition.

Net interest income totaled $107.0$172.5 million in 2024,2025, an increase of $19.2$65.5 million, or 21.9%,61.1%, from 2023.2024. Net interest margin increased 1097 basis points to 3.53% in 2025, from 2.56% in 2024, from 2.46% reported in 2023.2024. The increase in net interest margin was primarily the result of a $56.7$58.1 million increase in interest income on interestinterest-earning earningassets assets, partially offset byand a $37.5$7.4 million increasedecrease in interest expense on interest-bearing liabilities. The increase in the interest income earned on interest-bearinginterest-earning assets was driven by a 5435 basis point increase in the average rate earned on loans as well as a $563.9$948.0 million increase in the average balance of total loans, driven by strong organic growth at higher yields and increased loan balances from the acquisition of HMNF.HMNF and strong organic growth at higher yields. The increasedecrease in interest expense on interest-bearing liabilities was driven by a 5770 basis point increasedecrease in the average rate paid on interest-bearing liabilitiesliabilities, aspartially welloffset asby a $637.4$562.3 million increase in the average balance of interest-bearing liabilities, driven primarily by the acquisition of HMNF and organic deposit growth.HMNF.

Increases and decreases in interest income and interest expense result from changes in average balances (volume) of interest earninginterest-earning assets and interest-bearing liabilities, as well as changes in average interest rates. The following table shows the effect that these factors had on the interest earned on interest earninginterest-earning assets and the interest incurred on interest-bearing liabilities. The effect of changes in volume is determined by multiplying the change in volume by the previous period’s average rate. Similarly, the effect of rate changes is calculated by multiplying the change in average rate by the previous period’s volume.

The Company recorded a provision for credit losses expense of $0.6 million for the year ended December 31, 2025, compared to a provision for credit losses expense of $18.1 million for the year ended December 31, 2024, compared to a provision for credit losses expense of $2.1 million for the year ended December 31, 2023.2024. The provision for credit losses expense for the year ended December 31, 20242025 included $18.1$4.2 million in provision for credit losses on loans, $0.1($3.6) million in provision release for credit losses on unfunded commitmentscommitments, and ($0.1$8) millionthousand recovery for credit losses on investment securities held-to-maturity (“HTM”). The CECL accounting standard requires the Company to recognize losses over the expected life of the loan as opposed to the losses expected to already have been incurred. The increasedecrease in provision for credit losses was primarily a result of a $7.3 million day one provision in connection with the acquisition of HMNF alongin with strong organic loan growth2024 and increaseda nonaccrualreduction loans.in the unfunded commitment reserve of $3.6 million.

Total noninterest income increaseddecreased $34.7$63.1 million, or 43.3%,54.9%, to $51.9 million in 2025, from $114.9 million in 2024, from $80.2 million for 2023.2024. The increasedecrease in noninterest income was primarilyalmost entirely driven by the strategic balance sheet repositioning transaction in the fourth quarter of 2023,2025, which resulted in a $24.6$68.4 million loss on the sale of investment securities. Wealth revenue increased $4.3$2.1 million in 20242025 primarily driven by an increase in assets under administration/management of 13.9%. Other noninterest income increased $4.3 million in 2024 primarily as a result of a $3.9 million gain on the sale of fixed assets driven by the sale of two branches during the year.5.9%.

Noninterest income as a percent of total operating revenue, which consists of net interest income plus noninterest income, was 51.78%23.12% in 2024,2025, updown from 47.7%51.78% the prior year. The increasedecrease in 20242025 was dueprimarily todriven by the strategic balance sheet repositioning transaction in the fourth quarter of 2025, which resulted in a 43.3%$68.4 increasemillion loss on the sale of investment securities. Excluding the $68.4 million loss on the sale of investment securities associated with the strategic balance sheet repositioning transaction in the fourth quarter of 2025, adjusted noninterest income andas a 21.9%percent increaseof intotal operating revenue, which consists of net interest income.income plus noninterest income, was 41.08% in 2025.

For the year ended December 31, 2025, the Company recognized income tax expense of $5.2 million on $22.6 million of pre-tax income, resulting in an effective tax rate of 22.8%. For the year ended December 31, 2024, the Company recognized income tax expense of $5.4 million on $23.2 million of pre-tax income, resulting in an effective tax rate of 23.2%. For the year ended December 31, 2023, the Company recognized an income tax expense of $4.2 million on $15.9 million of pre-tax income, resulting in an effective tax rate of 26.2%. The decrease in the effective tax rate was primarily driven by items related to the acquisition of HMNF in 2024 and increased tax-exempt income.

The retirement and benefit services business provides the following services nationally: record-keeping and administration services to qualified and other types of retirement plans, investment fiduciary services to retirement plans, health savings accounts, flexible spending accounts, and COBRA recordkeeping and administration services. The division services approximately 8,6008,800 retirement plans and more than 500,200495,000 plan participants and operates within the Company’s banking markets, as well as East Lansing, Michigan, and Lakewood, Colorado.

Total AUA and AUM for the retirement and benefit services segment was $40.7$44.9 billion at December 31, 2024,2025, an increase of $4.0$4.2 billion, or 11.0%,10.3%, compared to the total at December 31, 2023.2024. The increase was primarily driven by an increase of $4.1$5.1 billion in market impact, driven by improved bond and equity markets.

Total AUA and AUM for the wealth segment was $3.4$4.9 billion, excluding $892.3 million of brokerage assets,billion at December 31, 2024,2025, an increase of $0.3 million,billion, or 8.1%,5.9%, compared to the total at December 31, 2023.2024. The increase was driven by a $0.3$0.7 millionbillion increase in market impact driven by improved bond and equity markets.

At December 31, 2024,2025, the total fair value of investment securities was $825.0$742.1 million compared to $745.4$825.0 million at December 31, 2023.2024. The fair value of investment securities as a percentage of total assets was 15.7%14.2% and 19.1%,15.7%, as of December 31, 20242025 and December 31, 2023,2024, respectively. The increasedecrease in investment securities was primarily due to investmentprincipal paydowns on mortgage securities acquiredand in the HMNF transaction in the fourth quarter of 2024.maturities. Securities with a carrying value of $340.2$115.1 million were pledged at December 31, 2024,2025, to secure public deposits and for other purposes required or permitted by law.

The net pre-tax unrealized market value loss on the AFS investment portfolio as of December 31, 20242025 was $98.5$3.6 million, as compared to a $98.0$98.5 million loss as of December 31, 2023.2024. The slight increasedecrease was aprimarily resultdue ofto additionalthe $68.4 million loss on investment securities acquiredrecognized in connection with the strategic balance sheet repositioning in the HMNFfourth transaction,quarter partiallyof offset2025, byas well as improved markets.market conditions.

As of December 31, 20242025 and December 31, 2023,2024, the Company held 59 tax-exempt state and local municipal securities totaling $28.1 million, and 68 tax-exempt state and local municipal securities totaling $30.0 million and held 75 tax-exempt state and local municipal securities totaling $35.0 million, respectively. Other than the aforementioned investments, at December 31, 20242025 and December 31, 2023,2024, there were no holdings of securities of any one issuer, other than the U.S. government and its agencies, in an amount greater than 10% of stockholders’ equity.

The Company’s AFS debt securities that are in an unrealized loss position are assessed to determine if an allowance should be recorded or if a write-down is required in accordance with ASU 2016-13. As of and for the years ended years ended December 31, 20242025 and 2023,2024, the Company did not record any allowances on or write-down any of the AFS debt securities in an unrealized loss position. Refer to Note 1 (Significant Accounting Policies) to the Company’s audited consolidated financial statements included in Item 8 of this Form 10-K for additional details of the Company’s assessment of the allowance for AFS investments as of and for the year ended December 31, 2024.2025.

In accordance with ASU 2016-13, in each reporting period the Company’s HTM debt securities are assessed to determine if any allowance should be recorded or if a write-down is required. As of and for the years ended December 31, 20242025 and 2023,2024, the Company recorded an allowance of $131$123 thousand and $213,$131 thousand, respectively, and did not write-down any HTM debt securities. Refer to Note 1 (Significant Accounting Policies) to the Company’s audited consolidated financial statements included in Item 8 of this Form 10-K for additional details of the Company’s assessment of the allowance for HTM investments as of and for the years ended December 31, 20242025 and 2023.2024.

Total loans outstanding were $4.0 billion as of December 31, 2024,2025, an increase of $1.2$55.5 billion,million, or 44.7%,1.4%, from December 31, 2023.2024. The increase in total loans was primarily driven by a combination$45.8 ofmillion organicincrease loanin growthconsumer loans and loansa acquired$9.7 million increase in thecommercial HMNF transaction.loans. The fair value of net loans acquired in the HMNF transaction, which was completed on October 9, 2024, was $786.2 million. Additionally, the Company continued to invest in talent to support organic loan growth and added an equipment finance team in 2024. Loan growth included increases of $786.1 million in CRE loans, $280.1 million in RRE loans, and $104.5 million in C&I loans.

CRE loans may be adversely affected by conditions in the real estate markets or in the general economy. The Company does not monitor the CRE portfolio for attributes such as loan to value ratios, occupancy rates, and net operating income, as these characteristics are assessed and evaluated on an individual loan basis. Portfolio stress testing is completed based on property type and takes into consideration changes to net operating income and capitalization rates. The Company does not have exposure to the office building sector in central business districts as the office portfolio is generally diversified in suburban markets with acceptable occupancy levels. As of December 31, 2024,2025, at 331%,303.4%, the Company’sBank's applicable investor CRE loans, as a percentage of its risk-based capital, slightly exceeded the regulatory guideline limit of 300%. Robust concentration management processes are in place to monitor this level of exposure. Quarterly, Bank management and its Board of Directors review the level of investor real estate assets, taking into consideration geographic location, detailed market analysis by property type, portfolio performance, and asset quality trends. Construction loans at 59%49.3% were below the regulatory guideline limit of 100%.

The Company’s consumer mortgage loans have minimal direct exposure to subprime mortgages as the loans are underwritten to conform to secondary market standards. Volume in this portion of the loan portfolio increased over the last year due primarily to the acquisition of HMNF. As of December 31, 2024,2025, the Company’s consumer mortgage portfolio was $1.2 billion, which represented a $280.1$45.0 million, or 31.8%,3.9%, increase from $881.0$1.2 millionbillion as of December 31, 2023.2024. Market interest rates, expected duration, and the Company’s overall interest rate sensitivity profile continue to be the most significant factors in determining whether the Company chooses to retain versus sell portions of new consumer mortgage originations.

Criticized loans represented 4.97%3.68% and 2.23%4.97% of total loans as of December 31, 20242025 and 2023,2024, respectively. The increasedecrease in criticized loans in 20242025 was driven by normalizationstabilization of credit quality, the increase in nonperforming loans,quality and the acquisitionsale of a pool of hospitality loans early in the HMNFthird transaction.quarter Criticizedof assets acquired from HMNF were identified and accounted for at closing.2025.

The allowance for credit losses to nonperforming loans ratio decreased 315565 basis points from December 31, 2023.2024. The decrease was primarily the result of ana $6.2 million increase in nonperforming loans for the year ended December 31, 2024.2025. The increase in nonperforming loans was primarily driven by one construction, landcommercial and developmentindustrial loanrelationship of $25.0$12.2 million moving to nonaccrual status in the secondthird quarter of 2024.2025. DuringIn addition, two CRE – Multifamily relationships were moved to nonaccrual status in the third and fourth quartersquarter of 2024,2025, managementtotaling elected$19.4 tomillion. make protectiveProtective advances totaling $5.4 million were made in order for construction to continue on thea project.CRE Management– isConstruction, activelyland workingand withdevelopment loan totaling $33.6 million. Relief included the borrowerpayoff onof strategiesa toCRE complete– construction,Non-owner preserveoccupied value,relationship in the first quarter of 2025 and supporta repaymentcommercial ofand the loan. One large RREindustrial relationship and one CRE non-owner occupied loan moving to nonaccrual status duringin the third quarter of 20242025 alsototaling contributed$8.0 $13.6million, as well as an $8.5 million tocommercial theand increase. A further $1.5 million of the increase in the fourth quarter of 2024 was driven by loans acquired from HMNF. Nonperforming assets included oneindustrial loan overwhich had been 90 days past due andat stillDecember on31, accrual.2024 This loanthat was renewedpaid subsequentcurrent toin year2025. end.The allowance for credit losses at December 31, 2025 also increased by $2.0 million over the allowance at December 31, 2024.

In the ordinary course of business, the Company enters into commitments to extend credit, including commitments under credit arrangements, commercial letters of credit, and standby letters of credit. Such financial instruments are recorded when they are funded. A reserve for unfunded commitments is established using historical loss data and utilization assumptions. This reserve is located under accrued expenses and other liabilities on the Consolidated Balance Sheets. The provision release for unfunded commitments for the year ended December 31, 2025 was $3.6 million. The expense for provision for unfunded commitments was $0.1 million and $2.2 million for the years ended yearsyear ended December 31, 2024 andwas 2023,$0.1 respectively.million.

Total deposits were $4.4$4.2 billion as of December 31, 2024,2025, ana increasedecrease of $1.3$186.4 billion,million, or 41.4%,4.3%, from December 31, 2023.2024. Interest-bearingNoninterest-bearing deposits increaseddecreased $1.1$95.6 billionmillion whileand noninterest-bearinginterest-bearing deposits increaseddecreased $175.4$90.8 million. The increasedecrease in interest-bearing deposits consisted of increasesdecreases of $432.6$130.4 million in time deposits and $36.6 million in money market and savings, $379.5partially offset by an increase of $76.1 million in interest-bearing demand deposits, and $295.4 million in time deposits. The increasedecrease in totalinterest-bearing deposits was primarily driven by thea recentdecrease acquisitionin high-cost time deposits, which included $22.2 million of HMNF,brokered expandedCDs that matured in 2025 and newwere commercialnot deposit relationships, and synergistic deposit growth.renewed.

Interest-bearing deposit costs were 3.21%2.63% and 2.44%3.21% for the years ended December 31, 20242025 and 2023,2024, respectively. The increasedecrease in interest-bearing deposit costs was the result of a risingdeclining interest rate environment and a highly competitive deposit environment.

Long-term debt is utilized to fund longer term assets and as a source of regulatory capital. At December 31, 2024,2025, the Company had a $50.0 million outstanding 3.50% Fixed Rate Subordinated Note due 2031 (the “Subordinated Note”). The Subordinated Note currently bears interest at a fixed rate of 3.50% per year, payable annually through March 31, 2026. At the fifth anniversary of the issuance date of the Subordinated Note, on March 30, 2026, the interest rate will reset to a fixed interest rate equal to the FHLB rate, plus 2.0%, with a minimum annual fixed rate of not less than 3.5%. The Subordinated Note matures on March 30, 2031, and the Company has the option to redeem or prepay any or all of the Subordinated Note without premium or penalty anyat the time of interest payment beginning or after March 31, 2026, or at any time in the event of certain changes that affect the deductibility of interest for tax purposes or the treatment of the notes as Tier 2 Capital.

As of December 31, 2024,2025, the Company had off balance sheet liquidity of $2.3$2.2 billion, compared to $1.6$2.3 billion as of December 31, 2023.2024. Off balance sheet liquidity includes FHLB borrowing capacity, Federal Reserve Bank discount window capacity, federal fund lines, and brokered deposit capacity.

The Bank is a member of the FHLB, which provides short and long term funding to its members through advances collateralized by real estate related assets and other select collateral, most typically in the form of debt securities. The actual borrowing capacity is contingent on the amount of collateral available to be pledged to the FHLB. As of December 31, 2024,2025, the Company had $2.4$2.1 billion of collateral pledged to the FHLB. Based on this collateral the Company is eligible to borrow up to $2.4$1.3 billion and had $1.2$1.0 billion of available capacity as of December 31, 2024.2025. As of December 31, 2025, the Company had borrowing capacity through the Federal Reserve Bank discount window of $40.6 million. In addition, the Company can borrow up to $92.0$127.0 million through unsecured lines of credit the Company has established with fourfive other banks.

The following discussion explains the Company’s financial condition and results of operations as of and for the three and six months ended MarchJune 31,30, 2026 and 2025. Annualized results for this interim period may not be indicative of results for the full year or future periods. The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes presented elsewhere in this report and the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on March 4, 2026.

On FebruaryMay 25,21, 2026, the Board of Directors of the Company declared a quarterly cash dividend of $0.21$0.22 per share of common stock. This dividend was paid on AprilJuly 10, 2026, to stockholders of record at the close of business on MarchJune 27,26, 2026.

The Company’s West Fargo, North Dakota branch is listed for sale for $3.8 million and is expected to sell within the next 12 months. At MarchJune 31,30, 2026, the facility had a carrying value of approximately $0.4 million. The Company expects to record a gain on the sale upon closing, as the expected sale price is greater than the property’s carrying value.

Net income for the three months ended MarchJune 31,30, 2026,2026 was $23.0$20.9 million, or $0.89$0.81 per diluted common share, a $9.7$0.6 million, or 72.5%,3.0%, increase compared to $13.3$20.3 million, or $0.52$0.78 per diluted common share, for the three months ended MarchJune 31,30, 2025. Earnings for the firstsecond quarter of 2026 compared to the firstsecond quarter of 2025 increased primarily due to an increase in net interest income of $3.8$4.7 millionmillion, andpartially aoffset decreaseby an increase in thenoninterest provisionexpense for (recovery of) credit losses of $5.7$4.4 million.

Net interest income is the difference between interest income and yield related fees earned on assets and interest expense paid on liabilities. Net interest margin is the difference between the yield on interest earning assets and the cost of interest-bearing liabilities as a percentage of interest earning assets. Net interest margin is presented on a tax-equivalent basis, which means that tax-free interest income has been adjusted to a pre-tax-equivalent income, assuming a federal income tax rate of 21% for the three and six months ended MarchJune 31,30, 2026 and 2025.

Net interest income for the three months ended MarchJune 31,30, 2026 was $44.9$47.7 million, an increase of $3.8$4.7 million, or 9.1%,10.9%, compared to $41.2$43.0 million for the three months ended MarchJune 31,30, 2025. The increase in net interestInterest income increased for the firstsecond quarter of 2026 compared to the firstsecond quarter of 2025 was primarily duedriven toby higher interest income on investment securities following the strategic balance sheet repositioning in the fourth quarter of 2025, partially offset by less purchase accounting accretion. Interest expense decreased $5.0$4.5 million, or 18.4%,16.3%, from the firstsecond quarter of 2025, as the average rates paid on deposits and borrowings declined.declined primarily driven by Federal Reserve rate cuts in the second half of 2025.

Net interest margin (on a tax-equivalent basis), a non-GAAP financial measure, was 3.97% for the three months ended MarchJune 31,30, 2026 was, 3.77%,a compared20 tobasis 3.41%point increase from 3.51% for the same period in 2025. The increase was mainly attributable to lowera costone-time of$1.6 fundsmillion interest income recovery on a nonaccrual loan resolution, higher purchase accounting accretion and higher yieldsloan onyields, investmentpartially securities.offset by the impact of the subordinated debt refinancing and higher borrowing balances.

The following tabletables presentspresent average balance sheet information, interest income, interest expense and the corresponding average yields on assets, average yields earned, and rates paid for the three and six months ended MarchJune 31,30, 2026 and 2025. The Company derived these yields and rates by dividing income or expense by the average balance of the corresponding assets or liabilities. The Company derived average balances from the daily balances throughout the periods indicated. Average loan balances include loans that have been placed on nonaccrual status, while interest previously accrued on these loans is reversed against interest income. In these tables, adjustments are made to the yields on tax‑exempt assets in order to present tax‑exempt income and fully taxable income on a fully taxable equivalent (“FTE”) basis.

The Company recorded a provision release of $4.9$4.4 million for the firstsix quartermonths ofended June 30, 2026, compared to a provision for credit losses of $0.9 million for the firstsix quartermonths ofended June 30, 2025. The provision release in the first quarter of 2026 was primarily driven by changes to loan balances and loan mix, largely due to decreases in balances in the commercial real estate construction, land and development pool, which is reserved at a higher rate than most other loan pools, in addition to decreases in reserves on individually evaluated loans.

The following table presents the Company’s noninterest income for the three and six months ended MarchJune 31,30, 2026 and 2025:

Total noninterest income for the three months ended MarchJune 31,30, 2026 was $30.8$32.9 million, an increase of $3.2$1.2 million, or 11.6%,3.7%, from the three months ended MarchJune 31,30, 2025. The increase was driven by an increase in mortgageother bankingnoninterest andincome, retirement and benefit services revenues.revenue, Mortgageand bankingservice revenuecharges on deposit accounts, partially offset by a decrease in the gain on sale of non-mortgage loans. Other noninterest income increased $2.0$1.7 million, or 131.5%, in the first quarter of 202686.1%, compared to the firstsecond quarter of 2025, dueprimarily todriven anby increasea gain on the sale of a property in the mortgageRochester, servicingMinnesota asset valuation, as well asmarket, increased originationswap volumefee income, and improvedmutual gainfund oninvestment salegains margin.related to the underlying assets of the deferred compensation plans. Retirement and benefit services revenue increased $1.3 million, or 8.1%,8.3%, in the firstsecond quarter of 2026 compared to the firstsecond quarter of 2025, primarily driven by bothrecurring asset-basedannual andincome. transaction-basedService fees.charges on deposit accounts increased $0.4 million, or 62.6%, compared to the second quarter of 2025, primarily due to a reclassification of fees from other noninterest income to service charges on deposit accounts revenue in the first quarter of 2026. Gain on sale of non-mortgage loans decreased $2.1 million, or 100.0%, compared to the second quarter of 2025 due to a $2.1 million gain on the sale of a PCD hospitality loan during the second quarter of 2025.

The following table presents noninterest expense for the three and six months ended MarchJune 31,30, 2026 and 2025:

Total noninterest expense for the three months ended MarchJune 31,30, 2026 was $50.4$52.9 million, a $27.0$4.4 thousand,million, or 0.1%,9.2%, increase compared to $50.4$48.4 million for the three months ended MarchJune 31,30, 2025. The underlying changes were driven by increases in compensation, professional fees and assessments, and occupancyother and equipment expense, offset by decreases in employee taxes and benefits and intangible amortizationnoninterest expense. Compensation increased $1.1$1.8 million, or 4.9%,7.4%, from the first quarter of 2025, primarily due to higher annual bonusmerit expense.increases, as well as increases in the deferred compensation plan liabilities driven by mutual fund investment gains related to the underlying assets of the plans. Professional fees and assessments increased $0.8$1.4 million, or 26.8%, from the first quarter of 2025,61.7%, primarily due to athe reclassification of consulting services and other third-party vendor expenses from business services, software and technology expense to professional fees and assessments. Occupancyassessments, andas equipmentwell as an increase in legal fees. Other noninterest expense increased $0.5 $1.5 million, or 17.9%, from the first quarter of 2025, primarily driven by facility investments and the strategic realignment of locations from owned to leased space. In the first quarter of 2026, employee taxes and benefits decreased $1.1 million, or 14.5%, from the first quarter of 2025, primarily104.3%, due to loweran claims on group insurance. Intangible amortization expense decreased $0.7 million, or 27.2%,increase in theother firstreal quarterestate ofowned 2026,balances primarilyand duerelated toholding thecosts, annualas resetwell ofas theincreased $33.5corporate millioninsurance core deposit intangible recorded in connection with the HMNF acquisition in the fourth quarter of 2024.costs.

For the three months ended MarchJune 31,30, 2026, the Company recognized income tax expense of $7.3$6.4 million on $30.3$27.3 million of pre-tax income, resulting in an effective tax rate of 24.1%,23.5%, compared to income tax expense of $4.2$6.1 million on $17.6$26.4 million of pre-tax income for the three months ended MarchJune 31,30, 2025, resulting in an effective tax rate of 24.2%.23.2%.

The following table presents the banking segment income statement, inclusive of corporate administration income, for the three and six months ended MarchJune 31,30, 2026 and 2025:

The following table presents the retirement and benefit services segment income statement for the three and six months ended MarchJune 31,30, 2026 and 2025:

The following table presents the wealth advisory services segment income statement for the three and six months ended MarchJune 31,30, 2026 and 2025:

Total assets were $5.3 billion as of MarchJune 31,30, 2026, an increase of $57.9$58.6 million, or 1.1%, compared to December 31, 2025. The increase was primarily due to an increase of $61.6$41.8 million in cash and cash equivalents andequivalents, an increase of $8.0$20.1 million in available-for-sale investment securities, an increase of $8.5 million in other assets, and an increase of $4.8 million in loans held for sale, partially offset by a decrease of $13.3$4.8 million in loans held for investment.

The following table presents the fair value composition of the Company’s investment securities portfolio as of MarchJune 31,30, 2026 and December 31, 2025:

The investment securities presented in the following table are reported at fair value and by contractual maturity as of MarchJune 31,30, 2026. Actual timing may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Additionally, residential mortgage backed securities and collateralized mortgage obligations receive monthly principal payments, which are not reflected below. The yields below are calculated on a tax-equivalent basis, assuming a 21.0% income tax rate.

Total loans outstanding were $4.0 billion as of MarchJune 31,30, 2026, a decrease of $13.3$13.8 million, or 0.3%, from December 31, 2025. The decrease was primarily driven by a $28.3$41.6 million decrease in consumer loans, partially offset by a $15.1$27.9 million increase in commercial loans.

The Company’s RRE loans have minimal direct exposure to subprime mortgages as the loans are underwritten to conform to secondary market standards. As of MarchJune 31,30, 2026, the Company’s RRE portfolio was $1.2 billion, representing a $23.8$41.0 million, or 2.0%,3.4%, decrease from December 31, 2025. Market interest rates, expected duration, and the Company’s overall interest rate sensitivity profile continue to be the most significant factors in determining whether the Company chooses to retain versus sell portions of new consumer mortgage originations.

The following table presents the maturities and types of interest rates for the loan portfolio as of MarchJune 31,30, 2026:

The table below presents criticized loans outstanding by loan portfolio segment as of MarchJune 31,30, 2026 and December 31, 2025:

The following table presents information regarding nonperforming assets as of MarchJune 31,30, 2026 and December 31, 2025:

Interest income lost on nonaccrual loans was approximately $1.0$0.4 million and $1.1 million for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively. There was no interest income included in net interest income related to nonaccrual loans for the threesix months ended MarchJune 31,30, 2026 and 2025.

The following tabletables presentspresent information concerning the components of the ACL for the periods presented:

In the ordinary course of business, the Company enters into commitments to extend credit, including commitments under credit arrangements, commercial letters of credit, and standby letters of credit. Such financial instruments are recorded when they are funded. An ACL on off-balance sheet credit exposures is measured using similar internal and external assumptions as the ACL on loans. This allowance is located in accrued expenses and other liabilities on the consolidated balance sheets. The ACL for unfunded commitments was $3.4$3.5 million and $6.0$4.8 million as of MarchJune 31,30, 2026 and 2025, respectively.

Total deposits were $4.3$4.2 billion as of MarchJune 31,30, 2026, ana increasedecrease of $155.9$0.1 million, or 3.7%,0.0%, from December 31, 2025. Interest-bearing deposits increased $106.2$48.2 million during this period, while noninterest-bearing deposits increaseddecreased $49.7$48.3 million. The increasedecrease in total deposits was driven by growth in commercial deposits due to new and expanded client relationships and funding structure diversification through the utilization of callable brokered CDs. This growth was partially offset byseasonal outflows from our public funds depositors, which reached a typical seasonal low in the third quarter of 2025.depositors.

The following table presents the composition of the Company’s deposit portfolio as of MarchJune 31,30, 2026 and December 31, 2025:

The following table presents the average balances and rates of the Company’s deposit portfolio for the three months ended MarchJune 31,30, 2026 and 2025:

The following table presents the composition of the Company’s deposit portfolio by client segment as of MarchJune 31,30, 2026 and December 31, 2025:

The following table presents the contractual maturity of time deposits, including certificate of deposit account registry services and IRA deposits of $250,000 and over, that were outstanding as of MarchJune 31,30, 2026:

The Company’s total uninsured deposits, which are amounts of deposit accounts that exceed the FDIC insurance limit, currently $250,000, were approximately $1.4$1.5 billion at bothJune March 31,30, 2026 and approximately $1.4 billion December 31, 2025. These amounts were estimated based on the same methodologies used for regulatory reporting purposes.

Borrowings as of MarchJune 31,30, 2026 and December 31, 2025 were as follows:

Stockholders’ equity increased $9.8$18.2 million, or 1.7%,3.2%, to $574.7$583.1 million as of MarchJune 31,30, 2026, compared to $564.9 million as of December 31, 2025. Tangible common equity to tangible assets, a non-GAAP financial measure, increased to 8.85%9.05% as of MarchJune 31,30, 2026, from 7.43%8.72% as of December 31, 2025. Common equity tier 1 capital to risk weighted assets increased to 10.60%10.81% as of MarchJune 31,30, 2026, from 10.28% as of December 31, 2025.

At MarchJune 31,30, 2026 and December 31, 2025, the Company met all the capital adequacy requirements to which the Company was subject. The table below presents the Company’s and the Bank’s regulatory capital ratios and the Company’s tangible common equity to tangible assets ratio as of MarchJune 31,30, 2026 and December 31, 2025:

The regulatory capital ratios for the Company and the Bank, as of MarchJune 31,30, 2026, as shown in the above table, were at levels above the regulatory minimums to be considered “well capitalized.” See “NOTE 19 Regulatory Matters” of the consolidated financial statements for additional information.

A summary of the contractual amounts of the Company’s exposure to off‑balance sheet agreements as of MarchJune 31,30, 2026 and December 31, 2025, was as follows:

As of MarchJune 31,30, 2026, the Company had on balance sheet liquidity of $413.2$400.7 million, compared to $568.8 million as of December 31, 2025. On balance sheet liquidity includes cash and cash equivalents, federal funds sold, unencumbered securities available‑for‑sale, and over collateralized securities pledging positions available-for-sale.

As of Marchboth June 30, 2026 and December 31, 2026,2025, the Company had off balance sheet liquidity of $2.3 billion, compared to $2.2 billion as of December 31, 2025.billion. Off balance sheet liquidity includes FHLB borrowing capacity, federal funds lines, and brokered deposit capacity.

The Bank is a member of the FHLB, which provides short‑ and long‑term funding to its members through advances collateralized by real estate related assets and other select collateral, most typically in the form of debt securities. Actual borrowing capacity is contingent on the amount of collateral available to be pledged to the FHLB. As of MarchJune 31,30, 2026, the Company did not have any federal funds purchased, and had $200.0$345.0 million in short-term borrowings from the FHLB. As of MarchJune 31,30, 2026, the Company had $2.1$2.0 billion of collateral pledged to the FHLB and, based on this collateral, the Company was eligible to borrow up to an additional $1.1$1.0 billion from the FHLB. In addition, the Company can borrow up to $127.0$125.0 million through the unsecured lines of credit the Company has established with five other correspondent banks.

In addition, because the Bank is “well capitalized,” the Company can accept wholesale deposits up to 20.0% of total assets based on current policy limits, or $1.1 billion, as of MarchJune 31,30, 2026. Management believed that the Company had adequate resources to fund all of the Company’s commitments as of MarchJune 31,30, 2026 and December 31, 2025.