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

This section highlights specific risks that could affect the Company’s business. Although this section attempts to highlight key factors, please be aware that other risks may prove to be important in the future. New risks may emerge at any time, and Cass cannot predict such risks or estimate the extent to which they may affect the Company’s financial performance. InThis additionsection todescribes the Company’s beliefs regarding the factors discussed elsewhere or incorporated by reference in this report, the identified risks that could causematerially actualand adversely affect the Company and its business, financial condition and results toof differoperations materially includein the following:future. All references to past events are intended to be examples only rather than a complete listing or a representation regarding whether such events have occurred in the past or whether they are likely to occur in the future.

The operations of financial institutions such as the Company are dependent to a large degree on net interest income, which is the difference between interest income from loans and investments and interest expense on deposits and borrowings. Prevailing economic conditions, the fiscal and monetary policies of the federal government and the policies of various regulatory agencies all affect market rates of interest, which in turn significantly affect financial institutions’ net interest income. Fluctuations in interest rates affect Cass’ financial statements, as they do for all financial institutions. Volatility in interest rates can also result in disintermediation, which is the flow of funds away from financial institutions into direct investments, such as federal government and corporate securities and other investment vehicles, which, because of the absence of federal insurance premiums and reserve requirements, generally pay higher rates of return than financial institutions. Due in part to a higher market interest rate environment in recent periods,years, the Company's net interest margin has increased to 3.83% in 2025 from 3.42% in 2024 from2024, 3.25% in 2023,2023 and 2.74% in 2022 and 2.31% in 2021,2022, therefore increasing net interest income. AsNotwithstanding these recent increases, as discussed in greater detail in Item 7A, “Quantitative and Qualitative Disclosures about Market Risk,” a decline in market interest rates would be expected to have a negative impact on the Company’s net interest income.

In the ordinary course of business, the Company depends on the reliable operation of its computer operations and network connections from its clients to its systems. Any failure, interruption, or breach in security of these systems would cause Cass to be unable to process transactions for its clients, resulting in decreased revenues. The Company also relies on electronic communications and information systems to store sensitive customer data. Any failure, interruption, breach in security or loss of data, whatever the cause, could reduce client satisfaction with the Company’s products and servicesservices, cause reputational harm, and harm Cass’ financial results. These types of threats may derive from human error, fraud or malice on the part of external or internal parties, or may result from accidental technological failure. Further, to access the Company’s products and services, Cass’ customers may use computers and mobile devices that are beyond the Company’s security control systems. The Company’s technologies, systems, networks and software, and those of other financial institutions have been, and are likely to continue to be, the target of cybersecurity threats and attacks, which may range from uncoordinated individual attempts to sophisticated and targeted measures directed at Cass. In addition, the rapid evolution of artificial intelligence technologies may intensify our cybersecurity risks. The risk of a security breach or disruption, particularly through cyber-attack or cyber intrusion, has increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. Criminals continuously adapt their methods to circumvent existing safeguards, and emerging technologies such as artificial intelligence may further enhance their ability to perpetrate fraud. A material security problem affecting Cass could damage its reputation, deter prospects from purchasing its products and services, deter customers from using its products and services or result in liability to Cass.

Although the Company makes significant efforts to maintain the security and integrity of Cass’ information systems and havehas implemented various measures to manage the risk of a security breach or disruption, there can be no assurance that Cass’ security efforts and measures will be effective or that attempted security breaches or disruptions would not be successful or damaging. Even the most well protected information, networks, systems and facilities remain potentially vulnerable because attempted security breaches, particularly cyber-attacks and intrusions, or disruptions will occur in the future, and because the techniques used in such attempts are constantly evolving and generally are not recognized until launched against a target, and in some cases are designed not to be detected and, in fact, may not be detected. Accordingly, the Company may be unable to anticipate these techniques or to implement adequate security barriers or other preventative measures, and thus it is virtually impossible to entirely mitigate this risk. While specific “cyber” insurance coverage is maintained, which would apply in the event of various breach scenarios, the amount of coverage may not be adequate in any particular case. Furthermore, because cyber threat scenarios are inherently difficult to predict and can take many forms, some breaches may not be covered under Cass’ cyber insurance coverage. A security breach or other significant disruption of Cass’ information systems or those related to customers, merchants and third-party vendors, including as a result of cyber-attacks, could (i) disrupt the proper functioning of Cass’ networks and systems and therefore operations and/or those of certain customers; (ii) result in the unauthorized access to, and destruction, loss, theft, misappropriation or release of confidential, sensitive or otherwise valuable information of the Company or its customers; (iii) result in a violation of applicable privacy, data breach and other laws, subjecting the Company to additional regulatory scrutiny and expose Cass to civil litigation, governmental fines and possible financial liability; (iv) require significant management attention and resources to remedy the damages that result; or (v) harm Cass’ reputation or cause a decrease in the number of customers that choose to do business with the Company. The occurrence of any of the foregoing could have a material adverse effect on Cass’ business, financial condition and results of operations.

If competitors introduce new products and services embodying new technologies, includingsuch as those supportedrelated byto artificial intelligence, more quickly or more successfully than the Company, or if new industry standards and practices emerge, the Company’s existing product and service offerings, technology and systems may become obsolete. Further, if Cass fails to adopt or develop new technologies, including those supported by artificial intelligence,technologies or to adapt its products and services to emerging industry standards, Cass may lose current and future customers. Finally, Cass’ ability to adopt these technologies can also be inhibited by intellectual property rights of third parties. Any of these could have a material adverse effect on its business, financial condition and results of operations. The payment processing and financial services industries are changing rapidly and in order to remain competitive, Cass must continue to enhance and improve the functionality and features of its products, services and technologies. These changes may be more difficult or expensive than the Company anticipates.

The introduction, withdrawal, success and timing of business initiatives and strategies, including, but not limited to, the expansion of payment and processing activities to new markets, and the expansion of products and services to existing markets and opening of new bank branches,markets, may be less successful or may be different than anticipated. Such a result could adversely affect Cass’ business.

In addition, there are risks and uncertainties associated with the introduction of new products and services, including substantial investments of time and resources. The introduction and development of new products and services may not be achieved along expected timelines, or at all, and may not be successful as a result of factors beyond the Company’s control, including regulatory, competition and external market factors. Failure to successfully manage these risks in the development and implementation of new products or services, and failure to integrate such new products and services into ourthe Company's existing system of internal controls, could have a material adverse effect on ourits business, financial condition and results of operations.

The Company and the Bank areis subject to liquidity risk.

Liquidity measures the ability to meet current and future cash flow needs as they become due. The liquidity of a financial institution reflects its ability to meet loan requests, to accommodate possible outflows in deposits, and to take advantage of interest rate market opportunities and is essential to a financial institution’s business. The ability of a financial institution to meet its current financial obligations is a function of its balance sheet structure, its ability to liquidate assets, and its access to alternative sources of funds. The bank failures in 2023 exemplify the potential serious results of the unexpected inability of insured depository institutions to obtain needed liquidity to satisfy deposit withdrawal requests, including how quickly such requests can accelerate once uninsured depositors lose confidence in an institution's ability to satisfy its obligations to depositors. The Company seeks to ensure funding needs are met by maintaining a level of liquidity through asset and liability management. If the Company becomes unable to obtain funds when needed, it could have a material adverse effect on its business, financial condition, and results of operations.

Cass’ future operating results depend substantially upon the continued service of Cass’ executive officers and key personnel. Cass’ future operating results also depend in significant part upon Cass’ ability to attract and retain qualified management, financial, technical,technical (including with AI experience), marketing, sales, and support personnel. Competition for qualified personnel is intense, and the Company cannot ensure success in attracting or retaining qualified personnel. There may be only a limited number of persons with the requisite skills to serve in these positions, and it may be increasingly difficult for the Company to hire personnel over time. Cass’ business, financial condition and results of operations could be materially adversely affected by the loss of any of its key employees, by the failure of any key employee to perform in his or her current position, or by Cass’ inability to attract and retain skilled employees.

The Company and the Bank areis subject to extensive government regulation and supervision and possible enforcement or other legal actions that could detrimentally affect Cass’ business.

The Company and the Bank areis subject to extensive federal and state regulation and supervision, the primary focus of which is to protect customers, depositors, the deposit insurance fund and the safety and soundness of the banking system as a whole, and not shareholders. InRegulatory addition, since the global financial crisis, financial institutions generallyauthorities have been subject to increased scrutiny from regulatory authorities, with an increased focus on risk management and consumer compliance. This regulatory structure and heightened focus gives the regulatory authorities extensive discretion in connection with their supervisory and enforcement activities and examination policies, including policies with respect to capital levels, the timing and amount of dividend payments, the classification of assets and the establishment of adequate loan loss reserves for regulatory purposes. Failure to comply with applicable laws, regulations, policies or guidance could result in enforcement and other legal actions by federal and state authorities, including criminal and civil penalties, the loss of FDIC insurance, revocation of a banking charter, and other regulatory sanctions, as well as reputational damage, any of which could have a material adverse effect on the Company’s business, financial condition and results of operations.

Fully phased in, the Basel III Capital rules implemented stricter capital requirements and leverage limits and methods for calculating risk-weighted assets, meaning the Company is required to hold more capital against such assets. ComplyingCompliance with these more stringentregulatory capital requirements could result in management modifying its business strategy and could limit the Company’s ability to make distributions, including paying dividends, or buying back shares.

Cass has identified one accounting policy around the calculation of the allowance for credit losses as being “critical” to the presentation of its financial condition and results of operations because it requires management to make particularly subjective and/or complex judgments about matters that are inherently uncertain and because of the likelihood that materially different amounts would be reported under different conditions or using different assumptions. More information on Cass’ critical accounting policies is contained in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

In the normal course of business, Cass and its affiliates are routinely subject to examinations and challenges from federalfederal, state, and stateforeign tax authorities regarding the amount of taxes due in connection with investments it has made and the businesses in which it is engaged. Recently, federal and state taxing authorities have become increasingly aggressive in challenging tax positions taken by financial institutions. These tax positions may relate to tax compliance, sales and use, franchise, gross receipts, payroll, property and income tax issues, including tax base, apportionment and tax credit planning. The challenges made by tax authorities may result in adjustments to the timing or amount of taxable income or deductions or the allocation of income among tax jurisdictions. If any such challenges are made and are not resolved in the Company’s favor, they could have an adverse effect on Cass’ financial condition and results of operations.

General Risk FactorsRisks

The following Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to promote understanding of the results of operations and financial condition. MD&A is provided as a supplement to, and should be read in conjunction with, the consolidated financial statements and the accompanying Notes to Financial Statements (Part II, Item 8 of this Form 10-K). This section generally discusses the results of operations for 20242025 compared to 2023.2024. For discussion related to the results of operations and changes in financial condition for 20232024 compared to 20222023 refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's 20232024 Annual Report on Form 10-K filed with the SEC on FebruaryMarch 28,5, 2024.2025.

Industry-wide factors that impact the Company include the willingness of large corporations to outsource key business functions such as freight, energy, telecommunication and environmental payment and audit. The benefits that can be achieved by outsourcing transaction processing, and the management information generated by Cass’ systems can be influenced by factors such as the competitive pressures within industries to improve profitability, the general level of transportation costs,costs and deregulation of energy costs, and consolidation of telecommunication providers.costs. Economic factors that impact the Company include the general level of economic activity that can affect the volume and size of invoices processed, the ability to hire and retain qualified staff, and the growth and quality of the loan portfolio. The general level of interest rates also has a significant effect on the revenue of the Company. As discussed in greater detail in Item 7A, “Quantitative and Qualitative Disclosures about Market Risk,” a decline in the general level of interest rates can have a negative impact on net interest income and conversely, a rise in the general level of interest rates can have a positive impact on net interest income. The cost of fuelenergy is another factor that has a significant impact on the transportation sector.and facility sectors. As the price of fuelenergy goes up or down, the Company’s earnings increase or decrease with the dollar amount of transportation and facility expense invoices.

The Company continues to operate profitably, posting a 0.82%1.43% return on average assets and 8.37%14.98% return on average equity. The Company’s common equity Tier 1 capital ratio was 13.84%15.10% at December 31, 2024,2025, significantly exceeding regulatory requirements. In addition, the Company has maintained exceptional credit quality with no non-performing loans at December 31, 2024, and no loan charge-offs during the year ended December 31, 2024.2025.

The Company recorded revenue of $199.2$190.8 million in December 31, 2024,2025, up 0.8%5.3% from the prior year, largely due to increasesan increase in processing fees and net interest income, partially offset by a decrease in financial fees and thea negativeloss varianceon sale of investment securities. Operating expense decreased 3.6% in the provision for (release of) credit losses. Operating expenses increased 9.3%2025, largely driven by $7.8 million of bad debt expense experiencedin on2024 aand funding$2.0 receivable related to a facility client as well as a one-time non-cash expensemillion of $3.5bad milliondebt recovery experienced in the fourth quarter of 2024 related to the termination of its noncontributory defined-benefit pension plan.2025. Net income was $19.2$35.1 million and diluted EPS was $1.39$2.61 per share,share decreasesin 2025, increases of 36.2%83.2% forand both87.8%, respectively, from the prior year.

The Company posted a 0.82%1.43% return on average assets and 8.37%14.98% return on average equity.equity Thein Company did not have any nonperforming assets at December 31, 2024 and did not have any loan charge-offs during 2024.2025.

Processing fees increased $3.1 million,$68,000, or 3.9%,0.1%, during 20242025 largelycompared drivento 2024, due to the AcuAudit acquisition in December 2024, partially offset by a 23.7% increasedecreases in facility transactionand volumes. Transportation invoicetransportation volumes decreasedof 0.6%0.4% overand the3.6%, same period.respectively. The decline in transportation volumes iswas primarily due to the on-going freight recession.recession and the impact of tariffs. Facility expense invoice volumes were flat in 2025 after experiencing 25.4% growth in 2024.

Other income increased $965,000,$1.6 million, or 19.6%,30.8%, induring 2025 compared to 2024 largelyprimarily due to higher bank-owned life insurance revenueincome andas well as growth in TouchPoint related church management software fees.

The $13.5 million increase in net interest income in 20242025 as compared to 20232024 iswas primarily due to an increase in the net interest margin to 3.42%3.83% as compared to 3.25%3.42% in the prior year. The increaseyear, in addition to the net interest margin was partially offset by a decreaseincrease in average earning assets of $65.4$136.8 million, or 3.1%.6.8%. The yield on interest-earning assets increased 3916 basis points from 4.04% in 2023 to 4.43% in 2024 to 4.59% in 2025 while the cost of interest-bearing liabilities increaseddecreased 3555 basis points from 2.84% in 2023 to 3.19% in 2024.2024 to 2.64% in 2025.

WhileContract freight rates have recently begun graduallyto increasing,increase, volumesand, continuetogether with fuel surcharges from rising diesel prices, are contributing to declinehigher onTransportation adollars yearprocessed overand yearpaid. basis which continues to put pressure on transportation related processing fees. However, theThe increase in Transportation dollars paid dueis expected to rising freight rates and the impact of tariffs, is positively impactingincrease the overall level of average accounts and drafts payable, which results in increased interest income, and average payments in advance of funding, which results in increased financial fees.

The following paragraphs more fully discuss the results of operations and changes in financial condition for the three months ended MarchJune 31,30, 2026 (“firstsecond quarter of 2026”) compared to the three months ended MarchJune 31,30, 2025 (“firstsecond quarter of 2025”) and the six months ended June 30, 2026 ("first half of 2026") compared to the six months ended June 30, 2025 ("first half of 2025"). The following discussion and analysis should be read in conjunction with the unaudited consolidated financial statements and related notes and with the statistical information and financial data appearing in this report, as well as in the Company’s 2025 Form 10-K. Results of operations for the three and six months ended MarchJune 31,30, 2026 are not necessarily indicative of the results to be attained for any other period.

The Company has applied discontinued operations accounting in accordance with Accounting Standards Codification, or ASC, Topic 205-20, “Presentation of Financial Statements – Discontinued Operations,” to the assets and liabilities sold related to the Company's TEM Business Unit for the three and six months ended MarchJune 31,30, 2026, and 2025, as applicable. All financial information in this Quarterly Report on Form 10-Q is reported on a continuing operations basis, unless otherwise noted. See Note 2 to our consolidated financial statements for further discussion regarding discontinued operations.

The Company recorded net revenue of $49.1$49.9 million during the firstsecond quarter of 2026, an increase of 5.8%12.5% from the firstsecond quarter of 2025, primarily driven by an increase in net interest income and financial fees, partially offset by lower processing fees. Operating expense increaseddecreased 7.6%3.5% compared to the firstsecond quarter of 2025 asprimarily thedue priorto year benefited from a $2.0$1.8 million bad debt recovery. Net income was $8.8$10.6 million, aan decreaseincrease of 1.5%19.6% and diluted EPS was $0.67$0.81 per share, an increase of 1.5%22.7% from the threesecond monthquarter period ended March 31,of 2025.

Processing fees decreased $741,000,$614,000, or 4.5%3.7% over the same period in the prior year reflecting lower transportation and facility transactioninvoice volumes.

Financial fees increased $470,000,$790,000, or 4.7%,7.8%, primarily attributable to an increase in average payments in advance of funding of 2.0%19.4% compared to the prior period. The Company has recently seen increased demand for its quick pay solutions and continues to focus on the rollout of its Amplify working capital solution as well as other opportunities to increase financial fees in future quarters.

Average loans decreased $43.2$35.1 million, or 3.9%,3.1%, to $1.07$1.09 billion. The average yield on loans increased 2023 basis points to 5.81%,5.87%, primarily due to the continued maturity and subsequent re-pricing of fixed rate loans originated in the years 2021 and 2022 to current market interest rates as well as the payoff of a non-performing loan which increased the loan yield by seven basis points during the first quarter of 2026.rates.

Average investment securities increased $197.6$136.9 million, or 32.3%,20.6%, to $808.8$802.5 million. The increase was primarily driven by the utilizationpartial repositioning of availablethe liquidityportfolio arisingat fromthe anend increaseof inthe averagesecond accountsquarter andof drafts2025 payableas towell purchaseas investmentpurchases securities.of investments at current market rates. The average yield on taxable investment securities increased 6858 basis points to 3.63% and the average yield on tax-exempt investment securities increased 136113 basis points to 3.90%.4.04%.

Average short-term investments, consisting of interest-bearing deposits in other financial institutions and federal funds sold, decreasedincreased $44.2$6.9 million, or 11.5%,2.3%, to $339.7$305.8 million. The decrease is primarily a result of the increase in average investment securities, partially offset by the increase in average funding sources and decrease in average loans. The average yield on short-term investments decreased 7366 basis points to 3.38%,3.37%, primarily due to the decrease in the Federal Funds rate. The majority of these short-term investments are held at the Federal Reserve Bank.

The average balance of interest-bearing deposits increased $20.0$27.0 million, or 3.2%,4.4%, to $648.3$642.9 million. Average non-interest-bearing demand deposits increased $16.5$39.1 million, or 4.1%,10.0%, to $421.7$432.2 million. The increase in average non-interest bearing deposits is primarily due to growth within CassPay. The average rate paid on interest-bearing deposits decreased 27 basis points to 2.39%2.44% due to the reduction in short-term interest rates.

Average accounts and drafts payable increased $100.1$56.0 million, or 9.3%,5.0%, to $1.17$1.18 billion. The increase in average accounts and drafts payable was primarily driven by the increase in facilitytransportation dollar volumes of 7.4% as well as the increase in transportationfacility dollar volumes of 4.5%.2.6%.

2.Interest income on loans includes net loan fees of $102,000$121,000 and $367,000$118,000 for the firstsecond quarter of 2026 and 2025, respectively.

3.For purposes of these computations, yields3.Yields on investment securities are computed as interest income divided by the average amortized cost of the investments.

4.Interest income is presented on a tax-equivalent basis assuming a tax rate of 21% for both 2026 and 2025. The tax-equivalent adjustment was approximately $372,000$360,000 and $168,000$215,000 for the firstsecond quarter of 2026 and 2025, respectively.

2.Interest income is presented on a tax-equivalent basis assuming a tax rate of 21% for the three months ended MarchJune 31,30, 2026 and 2025.

The Company recorded a provision for credit losses and off-balance sheet credit exposures of $61,000$531,000 and $905,000$25,000 for the second quarter of 2026 and 2025, respectively. The Company recorded a provision for credit losses and off-balance sheet credit exposures of $592,000 and $930,000 for the first quarterhalf of 2026 and 2025, respectively. The amount of the provision for (release of) credit losses is derived from the Company’s quarterly Current Expected Credit Loss (“CECL”) model. The amount of the provision for (release of) credit losses will fluctuate as determined by these quarterly analyses. The provision for credit losses in the firstsecond quarter of 2026 was driven by thea specific reserve on a nonperforming commercial real estate loan and an increase in total loans of $27.5$41.8 million, or 2.6%,3.9%, as compared to December 31, 2025.

The Company experienced no loan charge-offs in the first quarterhalf of 2026 or 2025. The ACL was $13.9$14.4 million at MarchJune 31,30, 2026 and $13.6 million at December 31, 2025. The ACL represented 1.27%1.30% of outstanding loans at MarchJune 31,30, 2026 and 1.28% of outstanding loans at December 31, 2025. The allowance for unfunded commitments was $216,000$234,000 at MarchJune 31,30, 2026 and $419,000 at December 31, 2025. There were $3.1$1.6 million of nonperforming loans outstanding at MarchJune 31,30, 2026 and $7.0 million at December 31, 2025. The Company has a specific allowance for credit losses of $101,000$288,000 allocated to its non-accrual loans at MarchJune 31,30, 2026.

Total operating expenses for the second quarter of 2026 decreased $1.4 million, or 3.5%, as compared to the second quarter of 2025. Total operating expenses for the first quarterhalf of 2026 increased $2.7$1.3 million, or 7.6%,1.8%, as compared to the first quarterhalf of 2025. The following table details the components of operating expenses:

Salaries and commissions decreased $395,000,$397,000, or 2.0%,1.9%, as a result of a decrease in average full-time equivalent employees ("FTEs") of 7.9%9.0% due to automation and the ongoing consolidation within the Company's Facilities division, partially offset by merit increases. Share-based compensation and employee profit sharing increased $198,000$212,000 and $132,000,$376,000, respectively, due to the improvement in net income from continuing operations. Other benefits increaseddecreased $65,000,$858,000, or 1.3%,18.6%, due to higherthe decrease in FTEs in addition to lower health insurance costs,claims partiallyand offsetrelated byexpenses as compared to the declinesecond inquarter averageof FTEs.2025.

Equipment expense increased $138,000,$214,000, primarily due to an increase in depreciation and licensing and maintenance expense on software related to recently completed technology initiatives.

The Company recorded a bad debt recovery of $1.8 million during the first half of 2026 compared to $2.0 million during the first quarterhalf of 2025 related to a settlement agreement with a third party.2025.

Net income from discontinued operations was $93,000,$12,000, a decrease of 322,000,$3.7 million, or 77.6%99.7% over the same period in the prior year. The decrease is primarily due to the gain on sale of the TEM Business Unit of $3.6 million in the second quarter of 2025.

Total assets at MarchJune 31,30, 2026 were $2.53$2.52 billion, a decrease of $72.2$89.8 million, or 2.8%,3.4%, from December 31, 2025.

The Company experienced a decrease in cash and cash equivalents of $147.9$163.8 million, or 37.7%,41.8%, during the first quarterhalf of 2026. The change in cash and cash equivalents reflects the Company’s daily liquidity position and is primarily affectedimpacted by changes in funding sources, mainly accounts and drafts payable, deposits and short-term borrowings, cash flows in and out of loans, investment securities, accounts and drafts receivable, and payments in advance of funding.

The investment securities portfolio increaseddecreased $14.6$34.0 million, or 1.9%,4.4%, during the first quarterhalf of 2026. The increasedecrease is primarily due to purchasessales of $42.3$31.6 million, and maturities of $39.0 million, partially offset by salespurchases of $3.5$42.3 million, maturities of $19.5 million, and an increase in unrealized losses of $12.7 million Loans increased $27.5 million, or 2.6%, from December 31, 2025. The Company experienced growth in its commercial and industrial loan portfolio during the first quarter of 2026.million.

Payments in advance of funding increased $96.1$85.1 million, or 58.4%,51.7%, primarily due to a higher level of demand for the Company's quickearly paypayment solutions as well as timing of quarter end advances.

Total deposits at MarchJune 31,30, 2026 were $1.11$1.12 billion, a decrease of $94.4$83.5 million, or 7.9%,7.0%, from December 31, 2025. Given the nature of the Company's deposit base being larger commercial clients, the ending balance of deposits will fluctuate from period end to period end due to liquidity needs of these clients. Average balances are generally a more meaningful measure of deposits.

Accounts and drafts payable at MarchJune 31,30, 2026 were $1.00$1.03 billion, a decrease of $124.7$96.8 million, or 11.1%,8.6%, from December 31, 2025. Accounts and drafts payable are a stable source of funding generated by payment float from transportation and facility clients. The ending balance of accounts and drafts payable will fluctuate from period to period due to the payment processing cycle, which results in lower balances on days when payments clear and higher balances on days when payments are issued. For this reason, average balances are generally a more meaningful measure of accounts and drafts payable.

Short-term borrowings were $145.0$80.0 million at MarchJune 31,30, 2026. The Company borrowed on its lines of credit primarily to fund the $96.1$85.1 million increase in payments inas advancecompared ofto funding.December 31, 2025.

Total liabilities at MarchJune 31,30, 2026 were $2.29$2.27 billion, a decrease of $71.0$91.5 million, or 3.0%,3.9%, from December 31, 2025, reflective of the decrease in accounts and drafts payable and total deposits, partially offset by the increase in short-term borrowings.

Total shareholders’ equity at MarchJune 31,30, 2026 was $241.8$244.7 million, a $1.2$1.7 million decreaseincrease from December 31, 2025. The decreaseincrease in shareholders’ equity is a result of net income of $19.4 million, partially offset by dividends paid of $8.2 million, the repurchase of Company stock of $6.0 million, and an increase in accumulated other comprehensive loss of $3.4 million, the repurchase of Company stock of $2.9 million, and dividends paid of $4.1 million, partially offset net income of $8.8$4.2 million.

The balance of liquid assets consists of cash and cash equivalents, which include cash and due from banks, interest-bearing deposits in other financial institutions, federal funds sold and money market funds. Cash and cash equivalents totaled $244.3$228.5 million at MarchJune 31,30, 2026, a decrease of $147.9$163.8 million, or 37.7%,41.8%, from December 31, 2025. At MarchJune 31,30, 2026, these assets represented 9.6%9.1% of total assets and are the Company’s and its subsidiaries’ primary source of liquidity to meet future expected and unexpected loan demand, depositor withdrawals or reductions in accounts and drafts payable.

Secondary sources of liquidity include the investment portfolio and borrowing lines. Total investment securities were $785.3$736.8 million at MarchJune 31,30, 2026, ana increasedecrease of $14.6$34.0 million from December 31, 2025. These assets represented 31.0%29.3% of total assets at MarchJune 31,30, 2026. Of the total portfolio, 1.2% mature in one year, 8.1%8.3% mature in one to five years, and 90.7%90.5% mature in five or more years. The Company maintains a weighted average duration of its investment securities portfolio of approximately five years given the Company's asset sensitivity with approximately 70% of its funding sources being non-interest bearing.

The Bank has unsecured lines of credit at six correspondent banks to purchase federal funds up to a maximum of $83.0 million in aggregate. As of MarchJune 31,30, 2026, the Bank also has secured lines of credit with the Federal Home Loan Bank of $232.7$224.1 million collateralized by mortgage loans. The Bank had no amounts outstanding under any line of credit as of December 31, 2025.

The Company also has secured lines of credit from three banks up to a maximum of $225.0$250.0 million in aggregate collateralized by investment securities. There was $145.0$80.0 million total outstanding on the Company's lines of credit as of MarchJune 31,30, 2026.