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

This discussion and analysis is intended to assist in the understanding of our financial performance through a discussion of our financial condition as of MarchJune 31,30, 2026 (unaudited) and as compared to our financial condition as of December 31, 2025 (audited) and our results of operations for the three and six month periods ended MarchJune 31,30, 2026 and 2025 (unaudited). This section should be read in conjunction with the unaudited consolidated financial statements and notes thereto appearing in Part 1 Item 1 of this Quarterly Report on Form 10-Q.

Our primary sources of funds consist of attracting deposits from the general public and using those funds and other sources to originate loans to our customers and invest in securities. As of MarchJune 31,30, 2026, we had total assets of $477.2$480.0 million, including $288.6$282.3 million in net loans and $103.7$100.9 million of investment securities available-for-sale, and investment securities held-to-maturity of $27.2$25.9 million, total deposits of $312.0$312.6 million and total stockholders’ equity of $161.1 million. For the three months ended MarchJune 31,30, 2026, we had a net income of $96,000 compared to a net income of $118,000 for the three months ended June 30, 2025. For the six months ended June 30, 2026, we had a net loss of $118,000$22,000 compared to a net loss of $166,000$47,000 for the threesix months ended MarchJune 31,30, 2025.

Comparison of Financial Condition as of MarchJune 31,30, 2026 and December 31, 2025

Total Assets. Total assets decreased $12.2$9.4 million or 2.5%1.9% to $477.2$480.0 million as of MarchJune 31,30, 2026 compared to $489.4 million as of December 31, 2025. The decrease resulted primarily from decreases in cash and cash equivalents of $34.1$22.2 million, investment securities available-for-sale of $3.0$5.8 million, and investment securities held to maturity of $1.2$2.5 million. These decreases were offset by increases in loans receivable, net of $20.7$14.3 million, and Bank Owned Life Insurance of $5.2$5.4 million, and other assets of $1.1 million.

Cash and Cash Equivalents. Cash and cash equivalents decreased $34.1$22.2 million, or 71.7%,46.7%, to $13.5$25.4 million as of MarchJune 31,30, 2026 compared to $47.6 million as of December 31, 2025. The decrease was primarily the result of funding commercial loan originations and purchasing additional BOLI.BOLI to enhance the yield on interest earning assets.

Investment Securities Available-for-Sale. Investment securities available-for-sale decreased $3.0$5.8 million, or 2.8%,5.4%, to $103.7$100.9 million as of MarchJune 31,30, 20262026, from $106.7 million as of December 31, 2025 as a result of maturities and paydowns. The resulting liquidity from the decrease was used to fund the increase in our loan portfolio.portfolio originations.

Investment Securities Held-to-Maturity. Investment securities held-to-maturity decreased $1.2$2.5 million, or 4.2%,8.6%, to $27.2$25.9 million as of MarchJune 31,30, 20262026, from $28.4 million as of December 31, 2025 as a result of maturities and paydowns. The liquidity from the decrease was used to fund the increase in our loan portfolio.

LoansOther Receivable,Assets. Net.Other Loans receivable, netassets increased $20.7$1.1 million, or 7.7%,65.4%, to $288.6$2.9 million as of MarchJune 31,30, 2026 from $267.9$1.7 million as of December 31, 2025. The increase reflectswas primarily due to an increase in other investments purchased to enhance the continued emphasisyield on growinginterest theearning commercial loan portfolio.assets.

AllowanceLoans forReceivable, CreditNet. Losses.Loans Asreceivable, of March 31, 2026, the allowance for credit losses on loans (“ACL”)net increased $135,000$14.3 million, or 5.0%,5.4%, to $2.8$282.2 million as of MarchJune 31,30, 20262026, from $2.7$267.9 million as of December 31, 2025,2025. dueThe increase includes $28.6 million in net commercial loan growth offset by a $13.8 million decrease in one to anfour increaseresidential inloans theand provision as a result of the growth in the loan portfolio.participations.

BankAllowance Ownedfor LifeCredit Insurance.Losses. BankAs Ownedof LifeJune Insurance30, 2026, the allowance for credit losses on loans (“ACL”) increased $5.2 million,$270,000 or 34.7%,10.1%, to $20.1$3.0 million as of March,June 31,30, 20262026, from $14.9$2.7 million as of December 31, 2025, due primarilyto toan increase in the purchaseprovision for credit loss as a result of additionalthe policies.growth in the commercial loan portfolio.

Deposits.Bank DepositsOwned decreasedLife $9.6Insurance. Bank Owned Life Insurance increased $5.4 million, or 3.0%,36.2%, to $312.0$20.3 million as of MarchJune 31,30, 20262026, from $321.6$14.9 million as of December 31, 20252025, due primarily to the maturitypurchase of certificatesadditional of deposit that did not renew duepolicies to enhance the yield on interest rateearning environment.assets.

Total Stockholders’ Equity. Total stockholders’ equity for the first threesix months of 2026 decreased $283,000,$223,000, or 0.2%,0.1%, to $161.1 million from $161.4 million as of December 31, 2025. The decrease was due primarily to an increase in accumulated other comprehensive loss of $257,000$397,000 during the first threesix months of 2026 due to theinterest rate environment for available-for-sale assets.environment.

Comparison of Operating Results for Three and Six Months Ended MarchJune 31,30, 2026 and MarchJune 31,30, 2025

General. For the three months ended MarchJune 31,30, 2026 compared to the same period in 2025, net income decreased $22,000, or 18.6%, to net income of $96,000 compared to a net income of $118,000 for the same period in 2025. The primary reason for the decrease in net income was an increase of $1.3 million in total noninterest expense, offset by an increase of $414,000 in interest income, an increase of $179,000 in noninterest income, a decrease of $650,000 in interest expense, and a decrease in tax expense of $22,000. For the six months ended June 30, 2026 compared to the same period in 2025, net loss decreased $48,000,by $25,000, or 28.7%,46.8%, to a net loss of $118,000 for the three months ended March 31, 2026$22,000 compared to a net loss of $166,000$47,000 for the same period in 2025. The primary reasonsreason for the decrease in net loss was an increase of $578,000 in total interest income and a decrease$890,000 in interest expense on deposits of $614,000, offset byincome, a decrease of $20,000$1.3 million in noninterestinterest incomeexpense, and an increase of $1.1$260,000 in noninterest income offset by an increase of $2.4 million in noninterest expense.

Interest Income. Interest income increased $578,000,$414,000, or 12.3%,8.3%, to $5.3$5.4 million for the three months ended MarchJune 31,30, 2026 compared to $4.7$5.0 million for the same period in 2025. The increase in interest income was due to a $614,000$626,000 increase in interest income on loans receivable as a result of the growth in the commercial loan portfolio. The increase was partially offset by a $134,000$114,000 decrease in interest income on investment securities due to a decrease in account balances as a result of maturities and paydowns. Other interest income increaseddecreased by $98,000.$98,000 due to lower average yields on cash and cash equivalents. The excess liquidity generated from the decrease in investment securities and cash account balances was used to fund the growth in the commercial loan portfolio. Interest income increased $890,000, or 9.1%, to $10.7 million for the six months ended June 30, 2026, compared to $9.8 million for the same period in 2025. The increase in interest income for the six month period was due to a $1.1 million increase in interest income on loans receivable in the commercial loan portfolio. The increase was partially offset by $237,000 decrease in interest income on investments due to a decrease in balances as a result of maturities and paydowns. Other interest income decreased by $13,000 due to lower average yields on cash and cash equivalents.

Interest Expense on Deposits. Interest expense on deposits decreased $614,000,$650,000, or 36.2%,40.1%, to $1.1$983,000 for the three months ended June 30, 2026, compared to $1.6 million for the three months ended MarchJune 31, 2026 compared to $1.7 million for the three months ended March 31,30, 2025. The decrease was primarily caused by the decrease in the amount of deposits asand in interest ratesrates. remainedInterest relativelyexpense unchanged.on deposits decreased $1.3 million, or 38.3%, to $2.0 million for the six months ended June 30, 2026, compared to $3.3 million for the six months ended June 30, 2025. The decrease was primarily similarly caused by the decrease in deposits and interest rates.

Provision for Credit Losses. The provision for credit losses was flat at $135,000 for both the three months ended MarchJune 31,30, 2026 and 2025, and at $270,000 for both the six months ended June 30, 2026 and 2025. The additional provision expense was recorded primarily due to the growth in the loan portfolio.

Noninterest Expense. Noninterest expense increased $1.1$1.3 million, or 32.3%,39.5%, to $4.5 million for the three months ended MarchJune 31,30, 2026 compared to $3.4$3.2 million for the three months ended MarchJune 31,30, 2025. The increase was primarily caused by the increase in compensation expense due to theannual payment of additional bonusesraises and compensationbonuses, adjustmentsaudit, duringconsulting and legal expenses. Noninterest expense increased $2.4 million, or 35.8%, to $9.1 million for the quarter.six months ended June 30, 2026, compared to $6.7 million for the six months ended June 30, 2025. The increase was primarily caused by the increase in compensation, audit, consulting and legal expenses.

Tax Expense (benefit). Tax expense (benefit) decreased $21,000,$22,000, or 27.3%,30.5%, to $56,000$50,000 for the three months ended MarchJune 31,30, 2026, from $77,000$72,000 for the same period in 2025. The major factor in the decrease was the lower net income between the periods. Tax benefit increased $1,000, or 20.0%, to a benefit of $6,000 for the six months ended June 30, 2026, from a benefit of $5,000 for the same period in 2025, primarily as a result of the lower net loss between the periods.

Liquidity describes our ability to meet the financial obligations that arise in the ordinary course of business. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. Our primary sources of funds are deposits, principal and interest payments on loans and securities, and proceeds from maturities of securities. We also have the ability to borrow from the FHLB of Chicago.Chicago and Bankers Bank. As of MarchJune 31,30, 2026, we had no outstanding advances from the FHLB of Chicago,advances, and had the capacity to borrow approximately $65.7$57.9 million from the FHLB of Chicago.Chicago and $23.0 million from Bankers Bank.

Our cash flows are comprised of three primary classifications: cash flows provided by (used in) operating activities, investing activities, and financing activities. Net cash provided by (used in) operating activities was ($821,000$1.3 million) and $905,000$2.7 million for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively. Net cash provided by (used in) investing activities, which consists primarily of changechanges in loans receivable, was ($22.1$11.9 million) and $2.3$5.8 million for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively. Net cash provided by (used in) financing activities, which primarily consists of changechanges in deposits, was ($11.2$9.0 million) and $12.6 million$18,000 for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively.

As of MarchJune 31,30, 2026, Hoyne Savingsthe Bank was considered well capitalized under the regulatory framework for prompt corrective action. During the year ended December 31, 2023, Hoyne Savingsthe Bank elected to begin using the Community Bank Leverage Ratio Framework (the “CBLRF”). Under CBLRF, if a qualifying depository institution or depository institution holding company elects to use such measure, such institution or holding company will be considered well capitalized if its ratio of Tier 1 capital to average total consolidated assets (i.e., leverage ratio) exceeds 9.0% subject to a limited two-quarter grace period, during which the leverage ratio cannot go 100 basis points below the then- applicable threshold, and will not be required to calculate and report risk-based capital ratios. Hoyne SavingsThe Bank’s Tier 1 capital to average assets for the leverage ratio was 27.8%27.3% and 24.8% as of MarchJune 31,30, 2026 and December 31, 2025, respectively. Additionally, as of MarchJune 31,30, 2026, wethe Bank exceeded all of ourapplicable regulatory capital requirementsrequirements, withincluding athe Tier 1 leverage capital level by $90.0$85.3 million, or 18.8%.18.3%.

Off-Balance Sheet Arrangements. As of MarchJune 31,30, 2026, we had $57.5$71.7 million of outstanding commitments to originate loans. We had unfunded construction loans as of MarchJune 31,30, 2026 of $14.0$12.9 million. Certificates of deposit that are scheduled to mature in less than one year from MarchJune 31,30, 2026, totaled $147.4$138.2 million. Management expects that a substantial portion of the maturing certificates of deposit will be renewed. However, if a substantial portion of these deposits isare not retained, we may utilize FHLB of Chicago advances or raise interest rates on deposits to attract new accounts, which may result in higher levels of interest expense.

Commitments. The following table summarizes our outstanding commitments to originate loans and to advance additional amounts pursuant to outstanding letters of credit, lines of credit and undisbursed construction loans as of MarchJune 31,30, 2026.

Contractual Cash Obligations. The following table summarizes our contractual cash obligations as of MarchJune 31,30, 2026.

Net Portfolio Value Analysis. Our interest rate sensitivity is monitored by management through the use of models which generate estimates of the change in its net portfolio value analysis (“NPV”) over a range of interest rate scenarios. NPV represents the market value of portfolio equity, which is different from book value, and is equal to the market value of assets minus the market value of liabilities (that is, the difference between incoming and outgoing discounted cash flows of assets and liabilities) with adjustments made for off-balance sheet items. The NPV ratio, under any interest rate scenario, is defined as the NPV in that scenario divided by the market value of assets in the same scenario. Management reviews the quarterly reports from third-party industry sources, which show the impact of changing interest rates on net portfolio value. The following table sets forth our NPV as of MarchJune 31,30, 2026 and reflects the changes to NPV as a result of immediate and sustained changes in interest rates as indicated.

Net Interest Income Analysis. In addition to modeling changes in NPV, we also analyze potential changes to net interest income (“NII”) for a twelve-month period under rising and falling interest rate scenarios. The following table shows our NII model as of MarchJune 31,30, 2026.

The table above indicates that as of MarchJune 31,30, 2026, in the event of an immediate and sustained 300 basis point increase in interest rates, our net interest income for the twelve months ending MarchJune 31,30, 2027 would be expected to decrease by $1.2$1.0 million, or 6.3%5.2% to $17.6$18.8 million.