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

As of December 31, 2024,2025, we had $2.65$3.01 billion of commercial real estate loans, consisting of $1.1$1.17 billion of loans secured by nonowner occupied nonfarm nonresidential properties, $1.43$1.59 billion of loans secured by multifamily residential properties, $42.0$45.2 million of 1-4 family construction loans and $97.3$216.2 million of construction and land development loans. Additionally, we had $196.6$227.1 million in loans whose purpose was to finance commercial real estate projects, but were secured by other types of collateral. Commercial real estate secured loans represented 68.5%69.9% of our total gross loan portfolio and 462.0%473.1% of the Bank’s total risk-based capital at December 31, 2024.2025. Accordingly, pursuant to guidance issued by the federal bank regulatory agencies, we are required to have heightened risk management practices in place to account for the heightened degree of risk associated with commercial real estate lending and may be required to maintain capital in excess of regulatory minimums. The market value of real estate securing our commercial real estate loans can fluctuate in a short period of time as a result of interest rates and market conditions. Adverse developments affecting real estate values in our market area could increase the credit risk associated with our loan portfolio. Additionally, the repayment of commercial real estate loans generally is dependent, in large part, on sufficient income from the properties securing the loans to cover operating expenses and debt service. Economic events, including changes in interest rates, decreases in office occupancy due to the shift to remote work environments followingand thedevelopments COVID-19in pandemic,artificial intelligence, or governmental regulations outside of the control of the borrower or lender could negatively impact the future cash flow and market values of the affected properties. If the loans that are collateralized by real estate become troubled during a time when market conditions are declining or have declined, then we may not be able to realize the full value of the collateral that we anticipated at the time of originating the loan, which could force us to take charge-offs or require us to increase our provision for credit losses, which could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

At December 31, 2024,2025, approximately 85.7%85.8% of our total gross loan portfolio was comprised of loans with real estate as a primary component of collateral. As a result, adverse developments affecting real estate values in our market area could increase the credit risk associated with our 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. Adverse changes affecting real estate values, such as decreasesshifts in market demand for office occupancy (including as a result of the shift to remote work environments following the COVID-19 pandemic),space, and the liquidity of real estate in one or more of our markets could increase the credit risk associated with our loan portfolio, significantly impair the value of property pledged as collateral on loans and affect our ability to sell the collateral upon foreclosure without a loss or additional losses, which could result in losses that would adversely affect our profitability. Such declines and losses would have a material adverse effect on our business, financial condition, results of operations and growth prospects.

Unlike larger banks that are more geographically diversified, we conduct our operations primarily in the Twin Cities MSA. Because of the geographic concentration of our operations in the Twin Cities MSA, if the local economy weakens, our growth and profitability could be constrained. Weak economic conditions are characterized by, among other indicators, deflation, elevated levels of unemployment, fluctuations in debt and equity capital marketsmarkets, and lower home sales and commercial activity. Adverse business conditions arising from state or local regulations such as rent control, housing policies, or taxation, could also lead to a weaker local economy. These factors could negatively affect the volume of loan originations, increase the level of nonperforming assets, increase the rate of foreclosures and reduce the value of the properties securing our loans. Any regional or local economic downturn that affectsin the Twin Cities MSAMSA, could negatively impact our operations and profitability. Because our business is more geographically concentrated than that of certain competitors, these conditions may affect us and our profitability more significantly and more adversely than those of our competitors whose operations are less geographically focused.adversely.

As a bank, our business requires us 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, we are exposed to the risk that our 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, changes in economic and industry conditions and inherent in dealing with individual borrowers, including the risk that a borrower may not provide information to us about its business in a timely manner, or may present inaccurate or incomplete information to us, as well as risks relating to the value of collateral. To manage our credit risk, we must, among other actions, maintain disciplined and prudent underwriting standards and ensure that our lendersbankers 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 our employees in underwriting and monitoring loans or our inability to adequately adapt policies and procedures to changes in economic or any other conditions affecting borrowers and the quality of our loan portfolio, may result in loan defaults, foreclosures and charge-offs and may necessitate that we significantly increase our allowance for credit losses, each of which could adversely affect our net income. As a result, our inability to successfully manage credit risk could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

Continued elevatedElevated levels of inflation could adversely impact our clients’ businesses, adversely impacting our business, financial condition, results of operations and growth prospects.

The United States has experienced elevated levels of inflation in recent years, with an annual increase in the consumer price index ofincreasing approximately 2.9%2.7% as of the end of 2024.2025, Thesebefore elevatedseasonal levelsadjustment. ofElevated inflation couldcan have complex and potentially adverse effects on our clients’ business, financial condition, results of operationsoperations, and growth prospects,prospects. someProlonged ofinflationary which could be materially adverse. For example, inflation-related increases in our interest expensepressures may not be offset by corresponding increases in our interest income, while inflation-driven increases in our levels of noninterest expense could negatively impact our results of operations. Continued elevated levels of inflation could also causecontribute to increased volatility and uncertainty in the broader business environment, which could adverselynegatively affectimpact loan demand and impair our clients’ ability to repay indebtedness. It is also 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 our business. The duration and severity of the current inflationary period cannot be estimated with precision.

Our growth over the last several years has been partially attributable to our ability to cultivate relationships with certain individuals and businesses that have resulted in a concentration of large loans to a small number of borrowers. As of December 31, 2024,2025, our 10 largest borrowing relationships accounted for approximately 18.2%15.3% of our total gross loan portfolio. We have established an informal, internal limit on a single loan to finance one transaction, but we may, under certain circumstances, consider going above this internal limit in situations where management’s understanding of the industry, the borrower’s financial condition, overall credit quality and property fundamentals are commensurate with the increased size of the loan. Along with other risks inherent in these loans, such as the deterioration of the underlying businesses or property securing these loans, this high concentration of borrowers presents a risk to our lending operations. If any one of these borrowers becomes unable to repay its loan obligations as a result of business, economic or market conditions, or personal circumstances, such as divorce or death, our nonaccruing loans and our provision for credit losses could increase significantly, which could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

Our nonperforming assets adversely affect our net interest income in various ways. We do not record interest income on nonaccrual loans or foreclosed assets, thereby adversely affecting our net income and returns on assets and equity. When we take collateral in foreclosure and similar proceedings, we are required to mark the collateral to its then-fair market value, which may result in a loss. These nonperforming loans and foreclosed assets also increase our risk profile and the level of capital our regulators believe is appropriate for us to maintain in light of such risks. The resolution of nonperforming assets requires significant time commitments from management, which increases our loan administration costs and adversely affects our efficiency ratio (a non-GAAPnon-Generally Accepted Accounting Principles (“GAAP”) financial measure) and can be detrimental to the performance of their other responsibilities, and may also involve additional financial resources. If we experience increases in nonperforming loans and nonperforming assets, our net interest income may be negatively impacted and our loan administration costs could increase, each of which could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

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, clients 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. 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 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.

We use certain non-core, wholesale funding sources, including brokered deposits, federal funds purchased, and FHLB advances. As of December 31, 2024,2025, we had approximately $825.8$810.5 million of brokered deposits, which represented approximately 20.2%18.8% of our total deposits and $359.5$399.5 million of FHLB advances. Unlike traditional deposits from our local clients, there is a higher likelihoodpotential that the wholesale deposits will not remain with us after maturity. Although we are increasing our efforts to reduce our reliance on non-core funding sources, we may not be able to maintain our market share of core-depositcore deposit funding in our highly competitive market area. Local deposits, such as retail certificates of deposit, are more difficult to replace than brokered deposits due to the smaller depositor base. If we are unable to domaintain so,core deposit funding in our market area, we may be forced to increase the amounts of wholesale funding sources. The cost of these funds can be volatile and may exceed the cost of core deposits in our market area, which could have a material adverse effect on our net interest income. In addition, our maximum borrowing capacity from the FHLB is based on the amount of mortgage and commercial loans we can pledge. As of December 31, 2024,2025, our advances from the FHLB were collateralized by $1.54$1.62 billion of real estate and commercial loans. We are also eligible to borrow from the Federal Reserve discount window with borrowing availability of approximately $1.03 billion as of December 31, 2025, consisting of $254.3 million of securities and $963.5 million of loans pledged as collateral. If we are unable to pledge sufficient collateral to secure funding from the FHLB,FHLB or FRB, we may lose access to this source of liquidity that we have historically relied upon. If we are unable to access any of these types of funding sources or if our costs related to them increases, our 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 and other relationships, as well as reputational connections. 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 we interact on a daily basis or key funding providers such as the FHLB, which could have a material adverse effect on our access to liquidity. In addition, our credit risk may increase when the collateral held by us cannot be realized upon or is liquidated at prices not sufficient to recover the full amount of the loan or derivative exposure due to us. Any such losses could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

OurWe businessoutsource isto third parties many of our major systems, such as data processing and mobile and online banking, and are highly dependent on the successful and uninterrupted functioning of our information technology and telecommunications systems, third party servicers, accounting systems, mobile and online banking platforms and financial intermediaries. We outsource to third parties many of our major systems, such as data processing and mobile and online banking. The failure of these systems, or the termination of a third party software license or service agreement on which any of these systems is based, could interrupt our operations. Because our information technology and telecommunications systems interface with and depend on third party systems, we could experience service denials if demand for such services exceeds capacity or such third party systems fail or experience interruptions. A system failure or service denial could result in a deterioration of our ability to process loans or gather deposits and provide customer service, compromise our ability to operate effectively, result in potential noncompliance with applicable laws or regulations, damage our reputation, result in a loss of customer business or subject us 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 our operations or adversely affect our reputation.

We plan to grow our business organically but remain open to considering potential bank or other acquisition opportunities that fit within our overall strategy and that we believe make financial and strategic sense, such as the recent acquisition of FMCB.FMCB in late 2024. In the event that we pursue additional strategic acquisitions, we may have difficulty completing them and may not realize the anticipated benefits of any transaction we complete. For example, we may not be successful in realizing anticipated cost savings or in preventing disruptions in service to existing client relationships of the acquired institution. Our potential acquisition activities could require us to deploy a substantial amount of cash, other liquid assets or incur additional debt. In addition, if goodwill recorded in connection with future acquisitions were determined to be impaired, then we would be required to recognize a charge against our earnings, which could materially and adversely affect our results of operations during the period in which the impairment was recognized.

While we do not offer products relating to digital assets, including cryptocurrencies, stablecoins and other similar assets, there has been a significant increase in digital asset adoption within the United States and globally over the past several years. In 2025, President Trump signed the GENIUS Act into law. This act creates a Federal regulatory system for stablecoins, requiring, among other things, a 100% reserve backing with liquid assets, public disclosure of the compositions of the reserves, and alignment with State and Federal stablecoin networks. Certain characteristics of digital asset transactions, such as the speed with which such transactions can be conducted, the ability to transact without the involvement of regulated intermediaries, the ability to engage in transactions across multiple jurisdictions, and the anonymous nature of the transactions, are appealing to certain consumers notwithstanding the various risks posed by such transactions. Accordingly, digital asset service providers—many of which, at present are not subject to the same degree of scrutiny and oversight as banking organizations and other financial institutions—are becoming active competitors to more traditional financial institutions.

Certain accounting policies are critical to presenting our financial condition and results of operations. They require management to make difficult, subjective or complex judgments about matters that are uncertain. Materially different amounts could be reported under different conditions or using different assumptions or estimates. These critical accounting policies include policies related to the allowance for credit losses, investment securities impairment, fair value of financial instruments and deferred tax assets.losses. See “Note 1 – Description of the Business and Summary of Significant Accounting Policies” of the Company’s Consolidated Financial Statements included as part of this Annual Report on Form 10-K for further information. Because of the uncertainty of estimates involved in these matters, we may be required to do one or more of the following: significantly increase the allowance for credit losses or sustain credit losses that are significantly higher than the reserve provided,provided. experience additional impairment in our securities portfolio, change the carrying value of our financial instruments and the amount of revenue or loss recorded, or record a valuation allowance against our deferred tax assets. Any of theseThis could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

Our business is subject to increased litigation and regulatory risks as a result of a number of factors, including the highly regulated nature of the financial services industry. In the normal course of business, from time to time, we have in the past and may in the future be named as a defendant in various legal actions, including arbitrations, class actions and other litigation, arising in connection with our current or prior business activities. Legal actions could include claims for substantial compensatory or punitive damages or claims for indeterminate amounts of damages. We may also, from time to time, be the subject of subpoenas, requests for information, reviews, investigations and proceedings (both formal and informal) by governmental agencies regarding our current or prior business activities. Any such legal or regulatory actions may subject us to substantial compensatory or punitive damages, significant fines, penalties, obligations to change our business practices or other requirements resulting in increased expenses, diminished income and damage to our reputation. Our involvement in any such matters, whether tangential or otherwise and even if the matters are ultimately determined in our favor, could also cause significant harm to our reputation and divert management attention from the operation of our 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 our business, reputation, financial condition, results of operations and growth prospects.

Financial institutions have generally been subjected to increased scrutiny from regulatory authorities, especially following the bank failures in 2023. This increased regulatory burden has resulted in higher costs of doing business and may continue to do so. It may also lead to decreases in our revenues and net income, reductions in our ability to compete effectively to attract and retain clients, or may make it less attractive for us to continue providing certain products and services. Any future changes in federal and state laws and regulations, as well as the interpretation and implementation of such laws and regulations, could affect us in substantial and unpredictable ways, including those listed above or other ways that could have a material adverse effect on our business, financial condition, results of operations and growth prospects. In addition, political developments, including recent changes in laws and regulations, as well as changes in staffing at the regulatory agencies, introduced by the Trump Administration in the United States, add uncertainty to the implementation, scope and timing of regulatory reforms.

It is currently expected that during 2025,2026, the Federal Open Market Committee of the Federal Reserve,Reserve or(“FOMC”) FOMC,may couldexecute additional interest rate cuts in an effort to move closer to its view of neutral levels of its benchmark rate. However, this outlook remains uncertain, as policy views within the FOMC continue to maintainvary relativelyand elevatedfuture levelsactions will depend on prevailing economic conditions and expected personnel changes to the composition of interestthe ratescommittee. to reduceIn the ratefourth quarter of inflation towards its target level of 2%. Beginning in 2022,2025, the FOMC increaseddecreased the target range for the federal funds rate from 0.00% to 0.25% to a range of 5.25%3.50% to 5.50%3.75%, throughfollowing Augusta 2024. Since August 2024, and through the endseries of 2024,significant theincreases FOMC decreased the federal funds target rate 1.00% to a range of 4.25% to 4.50%. While the FOMC has signaled that further rate cuts may occurbeginning in 2025,2022. levelsLevels of inflation or weakness in the jobs market will ultimately impact the path of the federal funds rate. Although the FOMC may decide to further decrease the targeted federal funds rates,rate, overall interest rates may behave differently, which may impact the national economy. In addition, our net interest income could be affected if the rates we pay on deposits and borrowings remain elevated. Elevated interest rates also may reduce 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 our business, financial condition, liquidity, results of operations, and growth prospects.

A large percentageAll of our investment securities classified as available-for-sale have fixed interest rates. As is the case with many financial institutions, our emphasis on increasing the development of core non-maturity deposits has resulted in our interest-bearing liabilities having a shorter duration than our interest-earning assets. This imbalance can create significant earnings volatility because interest rates change over time. As interest rates have increaseddeclined from elevated levels toward more neutral conditions in recent years, our cost of funds has increasedalso moredecreased, rapidlyresulting thanin improved alignment with the yields on a substantialsignificant portion of our interest-earning assets. In addition, the market value of our fixed-rate assets, for example, our investment securities, has declinedimproved since 20222024 when the FOMC began increasingdecreasing interest rates,rates. whichThe effects haveof these rate decreases has not been fully mitigatedrealized bybut recentwe FOMCare ratebeginning cuts.to see improvements in our investment securities portfolio. In line with the foregoing, we have experienced and may continue to experience ana elevatedlower level of the cost of interest-bearing liabilities, primarily due to higherlower rates we pay on some of our deposit products to stay competitive within our market and higher borrowing costs from the elevated level of the federal funds rate.products.

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 fight elevated levels of inflation. The Federal Reserve is mandated to pursue the goals of maximum employment and price stability, and throughout 2022 and 2023 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. Following a period of no action on interest rates, the FOMC began easing monetary policy by cutting the federal funds rate in September of 2024.2024 and continued to cut rates through the end of 2025. Monetary policy in recent years has resulted in a significant structural change in prevailing interest rates and, while this has had a negative effect onduring years of higher interest rates, we are beginning to see improvements in our net interest income,income it also harmedand the value of our available for sale investment securities portfolio, which had $27.7$7.3 million in unrealized losses, net of tax, in our available for sale investment securities portfolio as of December 31, 2024.2025. ThisThe decline$20.5 million improvement in market value from December 31, 2024 has negativelypositively affected our tangible book value. HigherA neutral level of interest rates can also negativelymore positively affect our clients’ businesses and financial condition, and the value of collateral securing loans in our portfolio.

Given the complex factors affecting the strength of the U.S. economy, including uncertainties regarding the persistence of inflation, geopolitical developments such as ongoinginternational conflicts in the Middle East and between Russia and Ukraine,tariffs, changing labor market conditions as well as fiscal policy and newthe presidentialTrump administrationAdministration priorities, there is a meaningful risk that the Federal Reserve and other central banks may keep interest rates at or near their current elevatedneutral levels, thereby limiting economic growth and potentially causing an economic recession or other political instability. As noted above, this could decrease loan demand, harm the credit characteristics of our existing loan portfolio and decrease the value of collateral securing loans in the portfolio.

We do not intend to pay cash dividends on our common stock in the foreseeable future. Consequently, yourthe ability of shareholders to achieve a return on yourtheir investment will depend on appreciation in the price of our common stock.

Holders of our common stock are entitled to receive only such dividends as our board of directors may declare out of funds legally available for such payments. We expect that we will retain all earnings, if any, for operating capital, and we do not expect our board of directors to declare any dividends on our common stock in the foreseeable future. Even if we have earnings in an amount sufficient to pay cash dividends, our board of directors may decide to retain earnings for the purpose of funding growth. We cannot assure you that cash dividends on our common stock will ever be paid. You should not purchase shares of common stock offered hereby if you need or desire dividend income from this investment.

In addition, we are a financial holding company, and our 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 “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.

We are generally not restricted from issuing additional shares of our common stock, up to the 75,000,000 shares of common stock authorized in our secondthird amended and restated articles of incorporation, which could be increased by a vote of the holders of a majority of our shares of common stock. We may issue additional shares of our 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 we choose to raise capital by issuing and selling shares of our common stock for any reason, the issuance would have a dilutive effect on the holders of our common stock and could have a material negative effect on the market price of our common stock.

On August 17, 2022, the Company’s board of directors approved a stock repurchase program (the “2022 Stock Repurchase Program”) which authorizes the Company to repurchase up to $25.0 million of its common stock, subject to certain limitations and conditions. On July 23,22, 2024,2025, the Company’s board of directors extended the expiration date of the program2022 Stock Repurchase Program from August 16,20, 20242025 to August 20,26, 2025.2026. The 2022 Stock Repurchase Program does not obligate the Company to repurchase any shares of its common stock, and other than repurchases that have been completed to date, there is no assurance that the Company will do so. Under the 2022 Stock Repurchase Program, the Company may repurchase shares of common stock from time to time in open market or privately negotiated transactions. The extent to which the Company repurchases its shares, and the timing of such repurchases, will depend upon a variety of factors, including general market and economic conditions, regulatory requirements, availability of funds, and other relevant considerations, as determined by the Company. The Company may, in its discretion, begin, suspend or terminate repurchases at any time prior to the Program’s expiration, without any prior notice. Even if fully implemented, we cannot guarantee that the program will enhance long-term shareholder value.

The Company is a financial holding company headquartered in St. Louis Park, Minnesota. The principal sources of funds for loans and investments are transaction, savings, time, and other deposits, and short-term and long-term borrowings. The Company’s principal sources of income are interest and fees collected on loans, interest and dividends earned on investment securities and service charges. The Company’s principal expenses are interest paid on deposit accounts and borrowings, employee compensation and other overhead expenses. The Company’s simple, efficient business model of providing responsive support and unconventionalsimple experiencessolutions to clients continues to be the underlying principle that drives the Company’s profitable growth.

The amount of each allowance account represents management's best estimate of current expected credit losses on such financial instruments using relevant available information, from internal and external sources, relating to past events, current conditions and reasonable and supportable forecasts. The allowance for credit losses on loans and leases is measured on a collective basis for portfolios of loans when similar risk characteristics exist. Loans that do not share risk characteristics are evaluated for expected credit losses on an individual basis and excluded from the collective evaluation. For determining the appropriate allowance for credit losses on a collective basis, the loan portfolio is segmented into pools based upon similar risk characteristics and a lifetime loss-rate model is utilized. Management qualitatively adjusts model results for reasonable and supportable forecasts and risk factors that are not considered within the modeling processes but are relevant in assessing the expected credit losses within the loan segment. These qualitative factor adjustments may increase or decrease management's estimate of expected credit losses by a calculated percentage or amount based upon the estimated level of risk. Due to the subjective nature of these estimates the various components of the calculation require significant management judgment and certain assumptions are highly subjective. Volatility in certain credit metrics and variations between expected and actual outcomes are likely.

Net income was $40.0$46.1 million for the year ended December 31, 2023,2025, compared to net income of $53.4$32.8 million for the year ended December 31, 2022.2024. Earnings per diluted common share for the year ended December 31, 20232025 were $1.27,$1.49, compared to $1.72$1.03 per diluted common share for the year ended December 31, 2022.2024. ROAAdjusted net income (a non-GAAP financial measure) was 0.89%$46.9 and 1.38%million for the yearsyear ended December 31, 20232025, andcompared 2022,to respectively.$33.1 ROE was 9.73% and 13.90%million for the yearsyear ended December 31, 20232024. andAdjusted 2022,earnings respectively.per diluted common share (a non-GAAP financial measure) were $1.52 for the year ended December 31, 2025, compared to $1.04 for the year ended December 31, 2024.

InterestNet expenseinterest on borrowingsincome was $21.1$132.4 million for the year ended December 31, 2023,2025, an increase of $10.5$30.2 million,million compared to $10.6$102.2 million for the year ended December 31, 2022.2024. ThisThe increase in net interest income was primarily due to thehigher increased utilization of federal funds purchasedcash and FHLBsecurities advancesbalances, growth and higher yields in the risingloan interestportfolio, ratelower environment.rates paid on deposits, and purchase accounting accretion, offset partially by growth in deposit balances.

The provision for credit losses foron off-balanceloans sheetand credit exposuresleases was a negative provision of $2.2$5.7 million for the year ended December 31, 2023,2025, compared to $-0-$2.9 million for the year ended December 31, 2022.2024. The negativeincrease in the provision for thecredit yearlosses endedon Decemberloans 31,and 2023leases was due to a reduction in outstanding unfunded commitments primarily attributable to growth in the migrationloan ofportfolio unfundedand commitmentsan toincrease fundedin loans,historical asloss well as a moderation of volume of newly originated projects with unfunded commitments.rates. The allowance for credit losses on off-balanceloans sheetand creditleases exposuresto total loans was $3.01.31% million as ofat December 31, 2023,2025, compared to $360,0001.35% as ofat December 31, 2022.2024.

Noninterest income was $6.5$10.9 million for the year ended December 31, 2023,2025, an increase of $3.5 million, or 48.1%, compared to $6.3$7.4 million for the year ended December 31, 2022, an increase of $161,000, or 2.5%.2024. The increase was primarily due to increaseshigher inswap fees, investment advisory fees, and customer service fees, bank-owned life insurance income and FHLB prepayment income, offset partially by lower swap fees and other income.fees.

The following table presents the major components of noninterest income for the yearperiods ended December 31, 2024, compared to the year ended December 31, 2023, and for the year ended December 31, 2023, compared to the year ended December 31, 2022indicated:

The Company had 290322 full-time equivalent employees at December 31, 2024,2025, compared to 255290 employees at December 31, 2023.2024. The increase during the year was largely driven by the additionhiring of 25key newtalent employeesin fromroles across the acquisition of FMCB.organization.

The following table presents the major components of noninterest expense for the yearperiods ended December 31, 2024, compared to the year ended December 31, 2023, and for the year ended December 31, 2023, compared to the year ended December 31, 2022indicated:

Income tax expense was $13.9 million for the year ended December 31, 2025, compared to $9.9 million for the year ended December 31, 2024, compared to $12.6 million for the year ended December 31, 2023.2024. The effective combined federal and state income tax rate for both the yearyears ended December 31, 2025 and December 31, 2024 was 23.2%, compared to 23.9% for the year ended December 31, 2023.23.2%.

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. Annualized results for these interim periods 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 Securities and Exchange Commission, or the SEC, on February 26, 2026.

Net income was $17.4$14.0 million for the firstsecond quarter of 2026, compared to net income of $9.6$11.5 million for the firstsecond quarter of 2025. Earnings per diluted common share for the firstsecond quarter of 2026 were $0.58,$0.45, compared to $0.31$0.38 per diluted common share for the firstsecond quarter of 2025. Adjusted net income, a non-GAAP financial measure, was $12.6 million for the first quarter of 2026, compared to $10.1 million for the first quarter of 2025. Adjusted earnings per diluted common share, a non-GAAP financial measure, for the first quarter of 2026 were $0.41, compared to $0.32 per diluted common share for the first quarter of 2025.

The following table presents, for the three and six months ended MarchJune 31,30, 2026 and 2025, the average balances of each principal category of assets, liabilities and shareholders’ equity, and an analysis of net interest income. The average balances are principally daily averages and, for loans, include both performing and nonperforming balances. Interest income on loans includes the effects of net deferred loan origination fees and costs accounted for as yield adjustments. These tables are presented on a tax-equivalent basis, if applicable.

Increases and decreases in interest income and interest expense result from changes in average balances (volume) of interest earning assets and interest bearing liabilities, as well as changes in average interest rates. The following table presents the effect that these factors had on the interest earned on interest 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 changes not attributable specifically to either volume or rate have been allocated to the changes due to volume. The following tabletables presentspresent the changes in the volume and rate of interest bearing assets and liabilities for the three months ended MarchJune 31,30, 2026, compared to the three months ended MarchJune 31,30, 2025, and for the six months ended June 30, 2026, compared to the six months ended June 30, 2025:

Net interest income was $36.6$38.6 million for the firstsecond quarter of 2026, an increase of $6.4$6.1 million compared to net interest income of $30.2$32.5 million for the firstsecond quarter of 2025. The increase in net interest income was primarily due to growth in the loan portfolio and lower rates paid on deposits, lower FHLB advance balances at lower yields, and growth in the loan portfolio, offset partially by lower cash and investment securities balances.balances following the sale of $208.5 million of securities in the first quarter of 2026, and higher balances and rates paid on subordinated debt.

Net interest margin (on a fully tax-equivalent basis), a non-GAAP financial measure, for the firstsecond quarter of 2026 was 2.99%,3.07%, a 4845 basis point increase from 2.51%2.62% in the firstsecond quarter of 2025. Core net interest margin (on a fully tax-equivalent basis), a non-GAAP financial measure which excludes the impact of loan fees and purchase accounting accretion attributable to the acquisition of FMCB, was 2.86%2.94% for the firstsecond quarter of 2026, a 4945 basis point increase from 2.37%2.49% in the firstsecond quarter of 2025. The increase in net interest margin (on a fully tax-equivalent basis) was primarily due to lower rates paid on deposits, growth inand repricing of the loan portfolio at higher yields,yields and a decrease in average earning assets due to investment securities sales, offset partially by lower cashrates andpaid investmenton securities balances.deposits.

Average interest earning assets were $5.08$5.14 billion for the firstsecond quarter of 2026, an increase of $151.1$125.7 million, or 3.1%,2.5%, compared to $4.93$5.02 billion for the firstsecond quarter of 2025. The increase in average interest earning assets was primarily due to growth in the loan portfolio, offset partially by lower cash and investment securities balances. Average interest bearing liabilities were $3.83$3.89 billion for the firstsecond quarter of 2026, an increase of $56.4$46.0 million, or 1.5%,1.2%, compared to $3.77$3.85 billion for the firstsecond quarter of 2025. The increase in average interest bearing liabilities was primarily due to higher deposit balances, federal funds purchased, and subordinated debentures, offset partially by a decrease in FHLB advances and notes payable.advances.

Average interest earning assets produced a tax-equivalent yield of 5.65%5.73% for the firstsecond quarter of 2026, compared to 5.43%5.56% for the firstsecond quarter of 2025. The increase in the yield on interest earning assets was primarily due to growth and repricing of the loan portfolio at accretive yields. The average rate paid on interest bearing liabilities was 3.53%3.51% for the firstsecond quarter of 2026, compared to 3.82%3.83% for the firstsecond quarter of 2025. The decrease was primarily due to lower rates paid on deposits,deposits offsetfollowing partiallyinterest byrate highercuts balancesin and rates paid on subordinated debentures and higher rates paid on FHLB advances.2025.

Interest Income. Total interest income, on a tax-equivalent basis, was $70.7$73.5 million for the firstsecond quarter of 2026, compared to $66.0$69.5 million for the firstsecond quarter of 2025. The $4.7$4.0 million, or 7.2%,5.7%, increase in total interest income, on a tax-equivalent basis, was primarily due to growth and repricing of the loan portfolio.portfolio at higher yields.

Interest income on the investment securities portfolio, on a tax-equivalent basis, decreased $2.2$1.9 million for the firstsecond quarter of 2026, compared to the firstsecond quarter of 2025, primarily due to a $178.4$162.1 million, or 22.2%,21.1%, decrease in average balances between the two periods. The decrease in securities was due to the Company selling $208.5 million of securitessecurities for a pre-tax gain of $7.3 million.million in the first quarter of 2026.

Interest income on loans, on a tax-equivalent basis, was $62.1$64.5 million for the firstsecond quarter of 2026, compared to $54.0$58.1 million for the firstsecond quarter of 2025. The $8.1$6.4 million, or 15.0%,11.0%, increase was primarily due to growth and repricing of the loan portfolio.

The aggregate loan yield, on a tax-equivalent basis, was 5.81%5.91% in the firstsecond quarter of 2026, a 2017 basis point increase, compared to 5.61%5.74% in the firstsecond quarter of 2025. Core loan yield, a non-GAAP financial measure,measure which excludes the impact of loan fees and purchase accounting accretion attributable to the acquisition of FMCB, continued to rise as new loans originated at higher yields and the existing portfolio repriced in the higher interest rate environment.

Interest Expense. Interest expense was $33.3$34.1 million for the firstsecond quarter of 2026, a decrease of $2.2$2.7 million, or 6.1%,7.2%, from $35.5$36.7 million for the firstsecond quarter of 2025. The decrease was primarily due to lower rates paid on deposits, offset partially by higher balances and rates paid on subordinated debentures and higher rates on FHLB advances.debentures.

Interest expense on deposits was $28.8$29.7 million for the firstsecond quarter of 2026, a decrease of $3.3$2.8 million, or 10.3%,8.6%, from $32.1$32.5 million for the firstsecond quarter of 2025. The decrease in interest expense on deposits was primarily due to lower rates paid on deposits and lower average balancebalances inof time deposits and brokered deposits. The cost of total deposits was 2.79%2.80% in the firstsecond quarter of 2026, a 3936 basis point decrease, compared to 3.18%3.16% in the firstsecond quarter of 2025. The decrease was primarily due to lower rates paid on deposits following interest rate cuts in 2025, lower average brokered deposit balances,2025 and an increase in noninterest bearing deposits.

Interest expense on borrowings was $4.5$4.4 million for the firstsecond quarter of 2026, an increase of $1.1 million,$130,000, compared to $3.4$4.2 million for the firstsecond quarter of 2025. The increase was primarily due to higher balances and rates on subordinated debentures due to the subordinated debt refinancerefinancing in the second quarter of 2025 and higher rates paid on FHLB advances.2025.

The provision for credit losses on loans and leases was $1.4 million$550,000 for the firstsecond quarter of 2026, compared to $1.5$2.0 million for the firstsecond quarter of 2025. The provision for credit losses on loans and leases was $1.9 million for the six months ended June 30, 2026, compared to $3.5 million for the six months ended June 30, 2025. The provision for credit losses on loans and leases recorded in the firstsecond quarter of 2026 was primarily attributable to growth in the loan portfolio.portfolio, offset partially by changes to qualitative factors. The allowance for credit losses on loans and leases to total loans was 1.31%1.30% at MarchJune 31,30, 2026, compared to 1.34%1.35% at MarchJune 31,30, 2025.

The provision for credit losses for off-balance sheet credit exposures was $-0- for each of the second quarter of 2026 and 2025. No provision was recorded during the second quarter of 2026 due to unfunded commitments remaining stable as the migration to funded loans was offset by the volume of newly originated loans with unfunded commitments. The provision for credit losses for off-balance sheet credit exposures was a negative provision of $150,000 for the firstsix quartermonths ofended June 30, 2026, compared to a provision of $-0- for the firstsix quartermonths ofended June 30, 2025. A negative provision was recorded during the first quarter of 2026 due to a decrease in unfunded commitments. The allowance for credit losses on off-balance sheet credit exposures was $3.9 million as of MarchJune 31,30, 2026, compared to $4.0 million as of December 31, 2025.

Noninterest income was $9.6$2.3 million for the firstsecond quarter of 2026, a decrease of $1.3 million from $3.6 million for the second quarter of 2025. The decrease was primarily due to lower swap fees, net gain on sale of securities, and FHLB prepayment income. Noninterest income was $11.9 million for the six months ended June 30, 2026, an increase of $7.5$6.2 million from $2.1$5.7 million for the firstsix quartermonths ofended June 30, 2025. The increase was primarily due to higher net gainsgain on the sale of securities, swap fees and other income, offset partially by lower letter of creditswap fees and investmentFHLB advisoryprepayment fees.income.

Noninterest expense was $22.2$21.9 million for the firstsecond quarter of 2026, an increase of $4.0$3.0 million from $18.1$18.9 million for the firstsecond quarter of 2025. The increase was primarily attributable to increases in salaries and employee benefits, an FHLB advance prepayment penalty,benefits and marketinginformation and advertisingtechnology expense.

The Company had 337355 full-time equivalent employees at the end of the firstsecond quarter of 2026, compared to 292308 at the end of the firstsecond quarter of 2025. The increase was largely driven by the hiring of key talent across the organization.organization amidst continued M&A disruption.

The efficiency ratio (on a fully tax-equivalent basis) was 56.3%53.0% for the firstsecond quarter of 2026, compared to 55.5%52.6% for the firstsecond quarter of 2025. The efficiency ratio was 54.6% and 53.9%, respectively, for the six months ended June 30, 2026 and June 30, 2025. The Company’s efficiency ratio has remained consistently below the industry median due in part to its “branch-light” model.

Income tax expense was $5.4$4.4 million for the firstsecond quarter of 2026, compared to $3.0$3.6 million for the firstsecond quarter of 2025. The effective combined federal and state income tax rate for the firstsecond quarter of 2026 was 23.8%,24.1%, compared to 23.9% for the firstsecond quarter of 2025. Income tax expense was $9.9 million for the six months ended June 30, 2026, compared to $6.6 million for the six months ended June 30, 2025. The effective combined federal and state income tax rate for each of the six months ended June 30, 2026 and 2025 was 23.9%. The effective tax rate remained stable across both periods.

Total assets at MarchJune 31,30, 2026 were $5.34$5.39 billion, a decrease of $71.6$17.3 million, or 1.3%,0.3%, compared to total assets of $5.41 billion at December 31, 2025, and an increase of $198.6$93.1 million, or 3.9%,1.8%, compared to total assets of $5.14$5.30 billion at MarchJune 31,30, 2025. The year-to-date decrease was primarily due to the sale of investment securities and pre-payment of FHLB advances. The Company sold $208.5 million of securities in the first quarter of 2026 toas enhancepart of a strategic balance sheet repositioning to enhance efficiency and drive current and future earnings. The year-over-year increase was primarily due to growth in the loan portfolio, offset partially by the sale of investment securities.

Securities available for sale were $566.6$605.4 million at MarchJune 31,30, 2026, a decrease of $209.9$171.0 million, or 27.0%,22.0%, compared to $776.4 million at December 31, 2025. The decrease was primarily due to the sale of investment securities.securities Thein salesthe first quarter of securities was2026, a strategic move taken to enhance the Company’s balance sheet efficiency and positioning the Company for improved profitability moving forward.

The following table presents the amortized cost and fair value of securities available for sale, by type, at MarchJune 31,30, 2026 and December 31, 2025:

Total gross loans at MarchJune 31,30, 2026 were $4.37$4.43 billion, an increase of $58.5$116.9 million, or 5.5% annualized, over total gross loans of $4.31 billion at December 31, 2025, and an increase of $348.0$280.6 million, or 8.7%,6.8%, over total gross loans of $4.02$4.15 billion at MarchJune 31,30, 2025. Both the year-to-date and the year-over-year increases in the loan portfolio were primarily due to increased loan originations and more favorable market conditions.

The Company primarily focuses on real estate mortgage lending, which constituted 79.0%79.9% of the portfolio at MarchJune 31,30, 2026. The composition of the portfolio has remained relatively consistent with prior periods, and the Company does not expect any significant changes in the composition of the loan portfolio or the emphasis on real estate lending in the foreseeable future.

As of MarchJune 31,30, 2026, investor CRE loans totaled $3.04$3.09 billion, consisting of $1.59$1.69 billion of loans secured by multifamily residential properties, $1.19$1.17 billion of loans secured by nonowner occupied CRE, $209.4$186.2 million of construction and land development loans, and $50.6$46.5 million of 1-4 family construction loans. Investor CRE loans represented 69.5%69.9% of the total gross loan portfolio and 461.5%457.1% of the Bank’s total risk-based capital at MarchJune 31,30, 2026, compared to 69.9% and 473.1%, respectively, at December 31, 2025.

The following table provides a breakdown of CRE nonowner occupied loans by collateral types as of MarchJune 31,30, 2026 and December 31, 2025:

The following tables present time to contractual maturity and sensitivity to interest rate changes for the loan portfolio as of MarchJune 31,30, 2026 and December 31, 2025:

The following table presents information on loan classifications at MarchJune 31,30, 2026. The Company had no assets classified as doubtful or loss at MarchJune 31,30, 2026.

Loans that had potential weaknesses that warranted a watch or special mention risk rating at MarchJune 31,30, 2026 totaled $47.7$38.5 million, compared to $47.8 million at December 31, 2025. Loans that warranted a substandard risk rating at MarchJune 31,30, 2026 totaled $43.1$43.9 million, compared to $53.0 million at December 31, 2025. Management continues to actively work with these borrowers and closely monitor substandard credits.

Nonperforming loans include loans accounted for on a nonaccrual basis and loans 90 days past due and still accruing. Nonaccrual loans totaled $11.7$21.6 million as of MarchJune 31,30, 2026 and $22.0 million as of December 31, 2025. There were no loans 90 days past due and still accruing as of either MarchJune 31,30, 2026 and December 31, 2025. There were also no foreclosed assets as of either MarchJune 31,30, 2026 and December 31, 2025.

The balance of nonperforming assets can fluctuate due to changes in economic conditions. The Company has established a policy to discontinue accruing interest on a loan (that is, to place the loan on nonaccrual status) after it has become 90 days delinquent as to payment of principal or interest, unless the loan is considered to be well-collateralized and is actively in the process of collection. In addition, a loan will be placed on nonaccrual status before it becomes 90 days delinquent unless management believes that the collection of interest is expected. Interest previously accrued but uncollected on such loans is reversed and charged against current income when the receivable is determined to be uncollectible. If management believes that a loan will not be collected in full, an increase to the allowance for credit losses on loans is recorded to reflect management’s estimate of any potential exposure or loss. Generally, payments received on nonaccrual loans are applied directly to principal. There are no loans, outside of those included in the tables above, that cause management to have serious doubts as to the ability of borrowers to comply with present repayment terms. Gross income that would have been recorded on nonaccrual loans for the three and six months ended MarchJune 31,30, 2026 was $166,000 and $229,000, respectively. Gross income that would have been recorded on nonaccrual loans for the three and six months ended June 30, 2025 was $63,000$169,000 and $173,000,$342,000, respectively.

At MarchJune 31,30, 2026, the allowance for credit losses on loans and leases was $57.3$57.4 million, an increase of $834,000$975,000 from $56.4 million at December 31, 2025. Net charge-offs totaled $516,000$409,000 during the firstsecond quarter of 2026 and $11,000$1,000 during the firstsecond quarter of 2025. Net charge-offs totaled $925,000 for the six months ended June 30, 2026, and $12,000 for the six months ended June 30, 2025. The allowance for credit losses on loans and leases as a percentage of total loans was 1.31%1.30% at bothJune March 31,30, 2026 and 1.31% December 31, 2025.

Total deposits at MarchJune 31,30, 2026 were $4.31$4.35 billion, aan decreaseincrease of $14.9$25.8 million, or 1.4% annualized,0.6%, compared to total deposits of $4.32 billion at December 31, 2025, and an increase of $143.1$109.5 million, or 3.4%,2.6%, compared to total deposits of $4.16$4.24 billion at MarchJune 31,30, 2025. Core deposits, defined as total deposits excluding brokered deposits and time deposits greater than $250,000, increaseddecreased $26.2$3.6 million, or 3.2%0.2% annualized, from December 31, 2025. TheBased slighton decreasethe innature of the Company’s client base, management believes core deposits waswill duefluctuate toperiods aas decreasedeposit ingrowth noninterestis bearingnot depositsalways and time deposits, offset partially by an increase in savings and money market accounts.linear.

The Company relies on increasing the deposit base to fund loans and other asset growth. The Company is in a highly competitive market and competes for local deposits by offering attractive products with competitive rates. The Company expects to have a higher average cost of funds for local deposits compared to competitor banks due to the lack of an extensive branch network. The Company’s strategy is to offset the higher cost of funding with a lower level of operating expense. When appropriate, the Company utilizes alternative funding sources such as brokered deposits. The brokered deposit market provides flexibility in structure, optionality and efficiency not afforded in traditional retail deposit channels. As of MarchJune 31,30, 2026, total brokered deposits were $846.3$891.5 million, an increase of $35.8$81.0 million, compared to total brokered deposits of $810.5 million at December 31, 2025. Brokered deposits continue to be used as a supplemental funding source, as needed, to support loan portfolio growth.

The following table presents the average balance and average rate paid on each of the following deposit categories as of and for the three months ended MarchJune 31,30, 2026 and 2025:

The Company’s total uninsured deposits, which are the amounts of deposit accounts that exceed the FDIC insurance limit, currently $250,000, were approximately $1.15$1.14 billion, or 26.6%26.2% of total deposits, at MarchJune 31,30, 2026 and $1.29 billion, or 29.8% of total deposits, at December 31, 2025. These amounts were estimated based on the same methodologies and assumptions used for regulatory reporting purposes.

At MarchJune 31,30, 2026, the Company had outstanding FHLB advances of $336.0$326.0 million, compared to $399.5 million at December 31, 2025. During the threesix months ended MarchJune 31,30, 2026, the Company prepaid $97.5 million of fixed rate FHLB term advances with an average cost of 4.08% and incurred a prepayment fee of $982,000. The Company’s borrowing capacity at the FHLB is determined based on collateral pledged, generally consisting of loans. The Company had additional borrowing capacity under this credit facility of $784.9$745.8 million and $611.3 million at MarchJune 31,30, 2026 and December 31, 2025, respectively.

The Company has an outstanding Loan and Security Agreement and revolving note with a third party correspondent lender, which is secured by 100% of the issued and outstanding stock of the Bank. The maximum principal amount of the revolving line of credit is $40.0 million, and the facility matures on September 1, 2026. As of both MarchJune 31,30, 2026 and December 31, 2025, the Company had no outstanding balances under the revolving line of credit. The Company had two outstanding letters of credit totaling $2.7 million and $6.4 million under this facility as of MarchJune 31,30, 2026 and December 31, 2025, respectively, which reduce the availability under the facility by the amounts of the letters of credit so long as they remain outstanding.

Additionally, the Company has borrowing capacity from other sources. As of MarchJune 31,30, 2026, the Bank was eligible to use the Federal Reserve discount window for borrowings. Based on assets pledged as collateral as of the applicable date, the Bank’s borrowing availability was approximately $882.1$1.08 millionbillion and $1.03 billion at MarchJune 31,30, 2026 and December 31, 2025, respectively. As of MarchJune 31,30, 2026 and December 31, 2025, the Company had no outstanding advances from the discount window.

As of MarchJune 31,30, 2026 and December 31, 2025, the Company had subordinated debentures, net of issuance costs, of $108.8$108.9 million and $108.7 million, respectively.

The following table presents supplemental information regarding total contractual obligations at MarchJune 31,30, 2026:

Total shareholders’ equity at MarchJune 31,30, 2026 was $528.4$547.9 million, an increase of $11.3$30.8 million, or 8.9% annualized,6.0%, compared to total shareholders’ equity of $517.1 million at December 31, 2025. The increase was primarily due to net income retained and an increase in unrealized gains in the derivitivesderivatives portfolio, offset partially by an increase in unrealized losses in the securities portfolio and preferred stock dividends.