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

–Our business and operations may be adversely affected in numerous and complex ways by external business disruptors in the financial services industry –The development and use of Artificial Intelligence ("AI") presents risks and challenges that may adversely impact the Company’s business.

–Our largest trust client accounts for 37.8%36.8% of our total assets under management.management and 4.6% of our total Trust and investment management fees.

–We face a risk of noncompliance and enforcement action with Anti-Money Laundering and Combating the Financing of Terrorism ("AML/CFT") laws and regulations.

The credit performance of our loan portfolios significantly affects our financial results and condition. If the current economic environment were to deteriorate, more of our customers may have difficulty in repaying their loans or other obligations which could result in a higher level of credit losses and provision for credit losses. We reserve for credit losses by establishing an allowance through a charge to earnings. The amount of this allowance is based on our assessment of lifetime expected credit losses inherent in our various loan and other portfolios carried at amortized cost as well as off-balance sheet credit exposures such as undrawn commitments to lend. The process for determining the amount of the allowance is critical to our financial results and condition. It requires difficult, subjective and complex judgments about the future, including forecasts of economic or market conditions that might impair the ability of our borrowers to repay their loans. We might increase the allowance because of changing economic conditions, including falling home prices and higher unemployment, lower U.S. Gross Domestic Product ("GDP") estimates, or other factors. For example, changes in borrower behavior or the regulatory environment also could influence recognition of credit losses in the portfolio and our allowance for credit losses. While we believe that our allowance for credit losses was appropriate at December 31, 2024,2025, there is no assurance that it will be sufficient to cover future credit losses. In the event of a deterioration in economic conditions, we may be required to increase our allowance in future periods, which would reduce our earnings.

Our largest trust client accounts for 37.8%36.8% of our total assets under management.management and 4.6% of our total Trust and investment management fees.

As of December 31, 2024,2025, our largest trust client accounted for, in the aggregate, 37.8%36.8% of our total assets under management and 3.8%4.6% of our non-interesttotal income.Trust and investment management fees. As a result, a material decrease in the volume of those trust assets by that client could materially reduce our assets under management, which would adversely affect our non-interest income and, therefore, our results of operations.

Since we commenced our banking business in 2004, we have grown our banking franchise and now have twentynineteen locations in Colorado, Arizona, Wyoming, Montana, and California including a centralized operations center in downtown Denver. We plan to continue to grow our banking business both organically and through acquisitions of other banks and financial service providers, which may include entry into new markets. However, the implementation of our growth strategy poses a number of risks for us, including that:

The preparation of our consolidated financial statements in conformity with GAAP requires our management to make significant estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of income and expense during the reporting periods. Critical estimates are made by management in determining, among other things, the allowance for credit losses, amounts of impairment of assets, fair values, intangibles, and valuation of income taxes. If our underlying estimates and assumptions prove to be incorrect, our financial condition and results of operations may be materially adversely affected. Additionally, the adoption of CECL methodology for determining our allowance for credit losses in 2023 has increased the complexity, and associated risk, of the analysis and processes relying on management judgment.

TheSevere riskweather, natural disasters, acts of anotherwar pandemicor terrorism, pandemics, and other adverse external events could adverselysignificantly impact our business and financial results.customers.

The FDIC and the Federal Reserve have promulgated joint guidance on sound risk management practices for financial institutions with concentrations in commercial real estate lending. Under the guidance, a financial institution that is actively involved in commercial real estate lending should perform a risk assessment to identify potential concentrations in commercial real estate lending. A financial institution may have such a concentration if, among other factors: (i) total outstanding loans for construction, land development, and other land represent 100% or more of total risk-based capital ("CRE 1 Concentration"); or (ii) total outstanding loans for construction, land development and other land and loans secured by multifamily and non-owner occupied non-farm, non-residential properties (excluding loans secured by owner-occupied properties) represent 300% or more of total risk-based capital ("CRE 2 Concentration") and the institution’s commercial real estate loan portfolio has increased by 50% or more during the prior 36-month period. In such an instance, management should employ heightened risk management practices, including board and management oversight and strategic planning, development of underwriting standards, risk assessment and monitoring through market analysis and stress testing. As of December 31, 2024,2025, our CRE 1 Concentration level was 115.5%64.0% and our CRE 2 Concentration level was 225.9%.277.2%. We may, at some point, be considered to have a concentration in the future, or our risk management practices may be found to be deficient, which could result in increased reserves and capital costs as well as potential regulatory enforcement action.

We face a risk of noncompliance and enforcement action with Anti-Money Laundering and Combating the Financing of Terrorism ("AML/CFT") laws and regulations.

Such legal and regulatory activities could result in significant penalties and other negative impacts on our businesses and results of operations. At any given time, we can be involved in defending legal and regulatory proceedings and are subject to numerous governmental and regulatory examinations, investigations and other inquiries. The frequency with which such proceedings, investigations and inquiries are initiated have increased over the last few years, and the global judicial, regulatory and political environment generally remains hostile to financial institutions. For example, the U.S. Department of Justice ("DOJ"), conditions the granting of cooperation credit in civil and criminal investigations of corporate wrongdoing on the company involved having provided to investigators all relevant facts relating to the individuals responsible for the alleged misconduct. The complexity of the federal and state regulatory and enforcement regimes in the U.S., means that a single event or issue may give rise to a large number of overlapping investigations and regulatory proceedings, either by multiple federal and state agencies in the U.S. or by multiple regulators and other governmental entities in different jurisdictions. Moreover, U.S. authorities have been increasingly focused on "conduct risk," a term that is used to describe the risks associated with behavior by employees and agents, including third-party vendors, that could harm clients, consumers, investors or the markets, such as failures to safeguard consumers’ and investors’ personal information, failures to identify and manage conflicts of interest and improperly creating, selling and marketing products and services. In addition to increasing compliance risks, this focus on conduct risk could lead to more regulatory or other enforcement proceedings and litigation, including for practices which historically were acceptable but are now receiving greater scrutiny. Further, while we take numerous steps to prevent and detect conduct by employees and agents that could potentially harm clients, investors or the markets, such behavior may not always be deterred or prevented. Banking regulators have also focused on the overall culture of financial services firms. In addition to regulatory restrictions or structural changes that could result from perceived deficiencies in our culture, such focus could also lead to additional regulatory proceedings.

We offer our services through a branded network of boutique private trust bank offices, which we believe are strategically located in affluent and high-growth markets in locations across Colorado, Arizona, Wyoming, Montana, and California. Our profit centers, which are comprised of private bankers, lenders, wealth plannersplanners, and portfolio managers, under the leadership of a local chairman and/or president, are also supported centrally by teams providing management services such as operations, risk management, credit administration, marketing, technology support, human capital, and accounting/finance services, which we refer to as support centers.

From 2004, when we opened our first profit center, until December 31, 2024,2025, we have expanded our footprint into fourteen full service profit centers, fivefour loan production offices, and one trust office located across five states. As of and for the year ended December 31, 2024,2025, we had $2.92$3.15 billion in total assets, $90.1$96.9 million in total revenues, and provided fiduciary and advisory services on $7.32$7.28 billion of assets under management ("AUM").

As a financial institution, we manage and evaluate various aspects of both our results of operations and our financial condition. We evaluate the comparative levels and trends of the line items in our Consolidated Balance Sheets and Statements of Income as well as various financial ratios that are commonly used in our industry. The primary factors we use to evaluate our results of operations include net interest income, non-interest incomeincome, and non-interest expense.

•Net gain on mortgage loans—gain on originating and selling mortgages and origination fees, less commissions to loan originators, document review, and other costs specific to originating and selling the loan. The market adjustments for interest rate lock commitments ("IRLC"), mortgage derivatives, and gains and losses incurred on the mandatory trading of loans are also included in this line item. Net gain on mortgage loans is primarily impacted by the amount of loans sold, the type of loans sold, and market conditions.

•Bank fees—income generated through bank-related service charges such as: electronic transfer fees, treasury management fees, bill pay fees, servicing fees for Main Street Lending Program (“MSLP”), loan prepayment penalty fees, loan interest rate swap fees, and other banking fees. Banking fees are primarily impacted by the level of business activities and cash movement activities of our clients.

•Other—includes costs related to operational expenses associated with office supplies, postage, travel expenses, meals and entertainment, dues and memberships, costs to maintain or prepare other real estate owned ("OREO") for sale, changes in OREO valuations subsequent to the initial acquisition when updated fair values are lower than the cost basis, director compensation and travel, and other general corporate expenses that do not fit within one of the specific non-interest expense lines described above. Other operational expenses are generally impacted by our business activities and needs.

The year ended December 31, 20242025 compared with the year ended December 31, 2023.2024. We reported Net income available to common shareholders of $8.5$13.2 million for the year ended December 31, 2024,2025, compared to $5.2$8.5 million of Net income available to common shareholders for the year ended December 31, 2023,2024, a $3.2$4.7 million, or 63.5%55.3% increase. For the year ended December 31, 2024,2025, our Income before income taxes was $11.6$17.1 million, a $4.5$5.5 million, or 63.4%,47.5%, increase from the year ended December 31, 2023.2024. The increase was primarily driven by aan $1.6$11.0 million increase in Net interest income, afterpartially provisionoffset by a $3.1 million increase in Provision for credit losses andlosses, a $5.8$1.3 million increase in Non-interest income,expense, partially offset byand a $2.9$1.1 million increasedecrease in Non-interestnon-interest expense.income.

•The increase in Net interest income, after provision for credit lossesincome was primarily driven by ana 27 basis point increase in Totalnet interest margin and dividend income due to an increase in total average interest-earninginterest-earnings assetsassets. andThe averageincrease yieldin andnet interest margin was primarily due to a 31 basis point decrease in the Provision for credit losses predominately due to decreases in individually analyzed and pooled loan reserves, offset partially by an increase in Total interest expense due to an increase in total averagecost interest-bearingof liabilities and average rate.funds.

•The increasedecrease in Non-interest income was due to an increase in Net gain on mortgage loansprimarily driven by higher average gain on sale margins and origination volumes, increasedecreases in Risk management and insurance fees due to ana increasedecrease in new insurance client agreements, decreaseTrust and investment management fees due to lower investment agency and managed trust fees, and Bank fees due to a large prepayment penalty fee collected in impairment2024, topartially theoffset carryingby valuean of a contingent consideration asset, and decreaseincrease in Net lossgain on loans accounted for under the fair value option recorded.due to lower charge-offs and overall improved performance of the portfolio.

The year ended December 31, 20242025 compared with the year ended December 31, 2023.2024. For the year ended December 31, 2024,2025, Net interest income, before Provision for credit losses, was $64.3$75.4 million, aan decreaseincrease of $6.8$11.0 million, or 9.6%,17.2%, compared to the year ended December 31, 2023.2024. ThisThe decreaseincrease was primarily driven by a $174.2$142.9 million increase in average interest-bearinginterest-earning deposit balancesassets and a 54 basis point increase in average rates paid on Interest-bearing deposits, offset partially by a 27 basis point increase in thenet averageinterest yieldmargin. on loans and a $53.7 millionThe increase in Interest-bearing deposits in other financial institutions. For the year ended December 31, 2024, our net interest margin was 2.37%primarily anddriven ourby neta interest32 spreadbasis waspoint 1.50%.decrease Forin thedeposit year ended December 31, 2023, our net interest margin was 2.62% and our net interest spread was 1.71%.costs.

Interest expense on DepositsInterest-bearing increaseddeposits decreased $3.1 million, or 3.7%, during the year ended December 31, 2024.2025, primarily due to lower rates, partially offset by a $214.7 million increase in average interest-bearing deposits. Average interest-bearing deposit rates were 4.07% and 3.53%3.54% for the yearsyear ended December 31, 20242025, andcompared 2023.to 4.07% for the year ended December 31, 2024. The increasedecrease in the average Interest-bearing depositdeposits ratesrate was primarily attributable to reducing deposit rates commensurate with the continued elevated interestshort-term rate environmentdecreases. andThe highlyincrease competitivein average interest-bearing deposits was primarily driven by growth in money market deposit market.accounts.

(1)Average balance represents daily averages, unless otherwise noted.averages.

We have a dedicated problem loan resolution team comprised of associates from our credit, senior leadership, risk, and accounting teams that meets frequently to ensure that watch list and problem credits are identified early and actively managed. We work to identify potential losses in a timely manner and proactively manage the problem credits to minimize losses. For the years ended December 31, 20242025 and 2023,2024, we recorded $1.9$5.0 million and $10.4$1.9 million Provision for credit losses, respectively. The provision recorded for the year ended December 31, 20242025 was primarily due to relatedloan provisioning on $9.0 million of netgrowth, charge-offs, $3.5 million decrease in provisions on individually analyzed loans, $2.1 million release of provisions on pooled loans, and $1.5specific million provision releases related to off-balance sheet commitments. The release of provisionreserves related to individually analyzed loans was predominately due to the migration of one loan relationship out of non-performing loans and into OREO, pay downs on non-performing loans, andpartially charge-offs.offset Theby releasefavorable ofmix provisionshifts related to pooled loans was predominately due to net pay downs, changes inwithin our portfolio mix, as well as modest macroeconomic forecast improvements. The release of provision related to off-balance sheet commitments for the year ended December 31, 2024 was predominately due to decreases in non-cancellable commitments..portfolio.

The year ended December 31, 20242025 compared with the year ended December 31, 2023.2024. For the year ended December 31, 20242025 compared to the year ended December 31, 2023,2024, Non-interest income increaseddecreased $5.7$1.1 million, or 26.1%,4.0%, to $27.7$26.6 million. The increasedecrease in non-interest income was primarily due to a $2.1 million increase in Net gain on mortgage loans driven by higher average gain on sale margins and origination volumes, $0.7 million increasedecreases in Risk management and insurance feesfees, dueTrust toand investment management fees, and Bank fees, partially offset by an increase in insurance client agreements, $0.9 million decrease in impairment to the carrying value of a contingent consideration asset, and $1.0 million decrease in Net lossesgain on loans accounted for under the fair value option.

Trust and investment management fees—ForThe the year ended December 31, 2024 compared to the same perioddecrease in 2023, our Trust and investment management fees increasedof by $0.4$0.7 million, or 2.2%, to $19.2 million. The increase3.9%, was primarily attributable to anlower increaseinvestment inagency assetsand undermanaged managementtrust due to an increase in market values.fees.

RiskBank managementFees— and insurance fees—The increasedecrease in Risk management and insuranceBank fees of $0.7 million, or 81.1%, to $1.7 million33.9%, was primarily driven by ana increaselarge loan prepayment penalty fee collected in insurance client agreements.2024.

Net gain (loss) on loans accounted for under the fair value option—The Company elected the fair value option on certain loans purchased in 2022. The decreaseincrease in Net lossgain on loans accounted for under the fair value option of $1.0 million, or 50.3%100.6%, was primarily attributable to lower charge-offs and overall improved performance of the portfolio.

OccupancySalaries and equipmentemployee benefits—The increase in OccupancySalaries and equipmentemployee benefits of $0.7$1.1 million, or 9.0%,2.4%, was primarily driven by additionalsalary rent expense related to the extension of a lease in 2024.increases.

Professional services—The increasedecrease in Professional services of $0.3 million, or 4.1%,3.3%, was primarily driven by increaseddecreases legalin fees,FDIC insurance fees and audit fees, andpartially FDICoffset insurance costs due toby an increase in ourrecruiting assessment rate.expenses.

Data processing—The decreaseincrease in Data processing of $0.4$0.6 million, or 7.9%14.6%, was primarily driven by lower system costs relatedupgrades to our trustdigital andbanking investment management system.platform.

The Company recorded an income tax provision of $3.1$3.9 million and $1.8$3.1 million for the years ended December 31, 20242025 and 2023,2024, respectively, reflecting an effective tax rate 26.8%of 22.8% and 26.0%,26.8%, respectively.

The Wealth Management segment reported Income before income taxes of $10.6$16.4 million for the year ended December 31, 2024,2025, compared to $9.7$10.6 million for the same period in 2023.2024. The majority of our assets and liabilities are on the Wealth Management segment balance sheetsheet. and theThe increase in Income before income taxes iswas primarily attributable to an increasesincrease in Net interest income, after provision for credit losses and Non-interest income,losses, partially offset by increasesan increase in Non-interest expense. The increase in Net interest income, after provision for credit losses was driven by a decrease in Provision for credit losses primarily due to a decrease in provisions related to individually analyzed loans and an increase in Total interest and dividend income due to an increase in total average interest-earning assets and average yield, offset partially by an increase in Total interest expense due to an increase in total average interest-bearing liabilities and average rate. The increase in Non-interest incomelosses, was primarily driven by increases in Risknet managementinterest margin and insuranceaverage feesinterest-earning andassets, apartially decreaseoffset by an increase in Net loss on loans accountedProvision for undercredit the fair value option recorded.losses. The increase in Non-interest expense was primarily driven by increases in TechnologySalaries and informationemployee systems expenses, Occupancybenefits and equipmentData costs,processing, andpartially Otheroffset expenses.by a decrease in Professional services.

The Mortgage segment reported Income before income tax of $1.0$0.7 million for the year ended December 31, 2024,2025, compared to a loss before income tax of $2.6$1.0 million for the same period in 2023.2024. The increasedecrease in Income before income taxes was primarily driven by an increase in Non-interest income and a decrease in Non-interestNet expense.gain on mortgage loans. The increasedecrease in Non-interestNet incomegain on mortgage loans was primarily driven by higher average gain on salelower margins and origination volume. The decrease in Non-interest expense was primarily due to lowera Salarieshighly andcompetitive employeemortgage benefits.market.

Cash and cash equivalents decreased by $18.4$37.7 million, or 7.2%,15.8%, to $236.0$200.3 million as of December 31, 20242025 compared to December 31, 2023.2024. The decrease was a result of decreasesthe increase in BorrowingsLoans and Deposits,debt securities, partially offset partially by thean decreaseincrease in Loans.Deposits.

OtherAvailable-for-sale realdebt estatesecurities owned,were net increased by $35.9$45.6 million as of December 31, 20242025, compared to $0.0 as of December 31, 2023.2024. The increase was due to the migrationpurchase of aresidential largemortgage-backed relationshipsecurities outissued ofby loansU.S. government agencies and intosponsored OREO.enterprises.

OtherHeld-to-maturity assetsdebt securities increased by $5.5$19.2 million, or 6.5%,25.4%, to $89.8$95.0 million as of December 31, 20242025 compared to December 31, 2023.2024. The increase was driven by a $10.2 million increase in our lease assets primarily due to anthe extensionpurchase of aresidential lease,and offsetcommercial partiallymortgage-backed securities issued by aU.S. $3.3government millionagencies decreaseand insponsored Deferred tax assets, net.enterprises.

OtherLoans, liabilitiesnet of allowance increased $17.3by $221.7 million, or 67.4%,9.2%, to $42.9$2.63 millionbillion as of December 31, 20242025 compared to December 31, 2023.2024. The increase was primarily duedriven toby a $9.6 million increasegrowth in payablesthe relatedNon-owner tooccupied participatedcommercial non-performingreal assetsestate, 1-4 family residential, Cash, securities, and aOther, $10.1and millionOwner increaseoccupied incommercial ourreal leaseestate liabilityportfolios, due to an extension of a lease,partially offset partially by a $1.5 million decrease in the unfundedConstruction commitmentand liabilitydevelopment due to decreases in noncancellable commitments.portfolio.

TotalMortgage shareholders’loans equityheld for sale increased $9.6by $14.7 million, or 3.9%,57.8%, to $252.3$40.2 million as of December 31, 2025 compared to December 31, 2024. The increase was primarily due to Net income for the yeartiming of loan originations and a $0.7 million increase in Additional paid-in capital driven by stock-based compensation expense.sales.

The following discussion and analysis is intended to assist readers in understanding our financial condition and results of operations for the three and six months ended MarchJune 31,30, 2026 and should be read in conjunction with our consolidated financial statements and the accompanying notes thereto included in this Quarterly Report on Form 10-Q (this "Form 10-Q") and in our Annual Report on Form 10-K filed with the SEC on February 27, 2026. Unless we state otherwise or the context otherwise requires, references in this Form 10-Q to "we," "our," "us," "the Company," and "First Western" refer to First Western Financial, Inc. and its consolidated subsidiaries, including First Western Trust Bank, which we sometimes refer to as "the Bank" or "our Bank."

From 2004, when we opened our first profit center, until MarchJune 31,30, 2026, we have expanded our footprint into fourteen full service profit centers, fourtwo loan production offices, and one trust office located across five states. As of and for the threesix months ended MarchJune 31,30, 2026, we had $3.24 billion in total assets, $28.3$56.9 million in Total income before non-interest expense, and provided fiduciary and advisory services on $7.24$7.28 billion of AUM.

•Net gain on mortgage loans—gain on originating and selling mortgages and origination fees, less commissions to loan originators, document review, and other costs specific to originating and selling the loan. The market adjustments for interest rate lock commitments (IRLC),IRLC, mortgage derivatives, and gains and losses incurred on the mandatory trading of loans are also included in this line item. Net gain on mortgage loans is primarily impacted by the amount of loans sold, the type of loans sold, and market conditions.

Financial institution regulators have established guidelines for minimum capital ratios for banks and bank holding companies. The Company has adopted the Basel III regulatory capital framework. As of MarchJune 31,30, 2026, the Bank’s capital ratios exceeded the current well capitalized regulatory requirements established under Basel III.

The three months ended MarchJune 31,30, 2026 compared with the three months ended MarchJune 31,30, 2025. We reported Net income available to common shareholders of $6.2$5.7 million for the three months ended MarchJune 31,30, 2026, compared to $4.2$2.5 million of Net income available to common shareholders for the three months ended MarchJune 31,30, 2025, a $2.0$3.2 million, or 47.6%128.0% increase. For the three months ended MarchJune 31,30, 2026, our Income before income tax was $8.1$7.4 million, a $2.7$4.1 million, or 51.3%124.2% increase from the three months ended MarchJune 31,30, 2025. The increase was primarily driven by a $3.4$3.9 million increase in Net interest income and a $0.8$2.2 million decrease in Provision for credit losses, partially offset by a $0.8$2.1 million increase in Non-interest expense and a $0.7 million decrease in Non-interest income.expense.

•The increase in Net interest income was driven by a 2023 basis point increase in net interest margin and an increase in average interest-earninginterest-earnings assets. The increase in net interest margin was primarily due to a 2326 basis point decrease in total cost of funds as a result of reducing deposit rates commensurate with the short-term rate decreases in 2025 and runoff of higher cost deposit accounts.

•The increase in Non-interest expense was primarily driven by anincreases in Salaries and employee benefits and Technology and information systems, partially offset by a decrease in Professional services. The increase in Salaries and employee benefits was primarily due to salaryan increasesincrease in average headcount and an increase in bonus accruals as a result of balance sheet growth and improved earnings,earnings. partiallyThe offsetincrease byin Technology and information systems was primarily attributable to a $0.4 million nonrecurring charge related to the write-off of certain previously capitalized technology assets. The decrease in OccupancyProfessional services was primarily driven by decreases in legal expenses, recruiting expenses, and equipmentFDIC expenseinsurance primarily due to a decrease in variable lease expenses.fees.

•The decrease in Non-interest income was primarily driven by decreases in Net gain on other real estate owned due to the sale of two OREO properties in the first quarter of 2025 at a net gain, Other primarily due to changes in interest rate swap fair values, and Net gain on loans held for sale, partially offset by an increase in NetTrust gainand oninvestment mortgagemanagement loansfees dueprimarily todriven anby increaseincreases in originationfee volume.income from Investment Agency and Managed Trust accounts.

The three months ended MarchJune 31,30, 2026 compared with the three months ended MarchJune 31,30, 2025. For the three months ended MarchJune 31,30, 2026, Net interest income, before the Provision for credit losses, was $20.9$21.8 million, an increase of $3.4$3.9 million, or 19.7%,21.8%, compared to the three months ended MarchJune 31,30, 2025. The increase was primarily driven by a 2023 basis point increase in net interest margin and a $300$322 million increase in average interest-earning assets. The increase in net interest margin was primarily driven by a 2326 basis point decrease in total cost of funds.

Total interest and dividend income increased $3.9$4.4 million, or 10.5%,11.6%, during the three months ended MarchJune 31,30, 2026 compared to the same period in 2025, primarily due to a $300$322 million increase in average interest-earning assets, partially offset by a 32 basis point decrease in the average interest-earning assets yield. The increase in average interest-earning assets was primarily driven by increases in average loans of $277$268.6 million and debt securities of $62.9$82.3 million, partially offset by a decrease in average interest-bearinginterest-bearings deposits in other financial institutions of $54.5$29.3 million. The decrease in the average interest-earning assets yield was primarily driven by ana 8174 basis point decrease in yield from interest-bearing deposits in other financial institution yieldinstitutions due to the lower interest rate environment, partially offset by a 64 basis point increaseincreases in average debt securitiessecurity yield.and loan yields of 58 basis points and 2 basis points, respectively.

Interest expense on Interest-bearing deposits increased $0.5$0.8 million, or 2.7%,4.2%, during the three months ended MarchJune 31,30, 2026 compared to the same period in 2025, primarily due to a $297$320 million increase in average interest-bearing deposits, partially offset by lower deposit rates. The increase in average interest-bearing deposits was primarily driven by an increaseincreases in money market deposit accounts,accounts partially offset by a decrease inand time deposits.deposit accounts. Average interest-bearing deposit rates were 3.23%3.22% for the three months ended MarchJune 31,30, 2026, compared to 3.59%3.57% for the three months ended MarchJune 31,30, 2025. The decrease in the average Interest-bearinginterest-bearing depositsdeposit raterates was primarily attributable to reducing deposit rates commensurate with the short-term rate decreases in 2025 and runoff of higher cost deposit accounts.

We have a dedicated problem loan resolution team comprised of associates from our credit, senior leadership, risk, and accounting teams that meets frequently to ensure that watch list and problem credits are identified early and actively managed. We work to identify potential losses in a timely manner and proactively manage the problem credits to minimize losses. For the three and six months ended MarchJune 31,30, 2026, we recorded a $0.7$0.5 million and $1.2 million Release of provision for credit losseslosses, respectively, compared to a $0.1$1.8 million and $1.9 million Provision for credit losses for the three and six months ended MarchJune 31,30, 2025.2025, respectively. The release of provision recorded for the threesix months ended MarchJune 31,30, 2026 was primarily driven by decreasedreductions provisionin onspecific reserves due to a credit resolution of an individually analyzed loans.loan and pay downs, partially offset by loan growth.

The three months ended MarchJune 31,30, 2026 compared with the three months ended MarchJune 31,30, 2025. For the three months ended MarchJune 31,30, 2026 compared with the three months ended MarchJune 31,30, 2025, Non-interest income decreasedincreased $0.7$0.1 million, or 9.4%,1.3%, to $6.7$6.4 million. The decreaseincrease in Non-interest income during the three months ended MarchJune 31,30, 2026 was primarily driven by decreasesincreases in Net gain on other real estate owned, Other,Trust and Netinvestment gainmanagement onfees loansand heldBank for sale,fees, partially offset by ana increasedecrease in Net gain on mortgage loans.

NetTrust gainand oninvestment mortgagemanagement loansfees—The increase in NetTrust gainand oninvestment mortgagemanagement loansfees of $0.4$0.2 million, or 36.6%,5.1%, and $0.3 million, or 3.3%, for the three and six months ended MarchJune 31,30, 20262026, respectively, was primarily attributabledriven toby an increaseincreases in originationfee volume.income from Investment Agency and Managed Trust accounts.

BankNet feesgain on mortgage loans—The decrease in BankNet feesgain on mortgage loans of $0.1$0.3 million, or 27.7%,23.7%, for the three months ended MarchJune 31,30, 2026,2026 was primarily attributable to alower decreasemargins. The increase in MainNet Streetgain Lendingon Programmortgage (MSLP)loans servicingof fees$0.1 asmillion, or 4.9%, for the lastsix MSLPmonths loanended exitedJune the30, Bank’s2026 loanwas portfolioprimarily inattributable theto firsthigher quarterorigination ofvolume, 2025.partially offset by lower margins.

Other—The decrease in Other of $0.3 million, or 254.5%,143.9%, for the six months ended June 30, 2026 was primarily attributable to changes in interest rate swap fair values.

The three months ended MarchJune 31,30, 2026 compared with the three months ended MarchJune 31,30, 2025. For the three months ended MarchJune 31,30, 2026 compared with the three months ended MarchJune 31,30, 2025, Non-interest expense increased $0.8$2.1 million, or 4.1%,11.1%, to $20.2$21.2 million. The increase in Non-interest expense during the three months ended MarchJune 31,30, 2026 was driven primarily by an increaseincreases in Salaries and employee benefits,benefits and Technology and information systems, partially offset by decreasesa decrease in OccupancyProfessional and equipment and Other.services.

Salaries and employee benefits—The increase in Salaries and employee benefits of $1.5$2.0 million, or 12.7%,18.3%, and $3.5 million, or 15.4% for the three and six months ended MarchJune 31,30, 20262026, respectively, was primarily driven by an increase in average headcount and an increase in bonus accruals as a result of balance sheet growth and improved earnings.

Occupancy and equipment—The decrease in Occupancy and equipment of $0.3$0.2 million, or 14.7%,10.8%, and $0.5 million, or 12.4%, for the three and six months ended MarchJune 31,30, 2026 was driven by a decrease in variable lease expenses.

Professional services—The decrease in Professional services of $0.1$0.4 million, or 6.3%,19.7%, and $0.5 million, or 13.3%, for the three and six months ended MarchJune 31,30, 2026, respectively, was primarily driven by decreases in legal expensesexpenses, recruiting expenses, and FDIC insurance fees.

OtherData processing—The decreaseincrease in OtherData processing of $0.2 million, or 13.1%,16.6%, and $0.3 million, or 11.2%, for the three and six months ended MarchJune 31,30, 2026, respectively, was primarily driven by aupgrades fraudto lossour inconsumer thedigital firstbanking quarter of 2025.platform.

The Company recorded an income tax provision of $1.9$1.7 million and $1.2$0.8 million for the three months ended MarchJune 31,30, 2026 and 2025, respectively, reflecting an effective tax rate of 23.4%22.6% and 21.9%,24.5%, respectively. The Company recorded an income tax provision of $3.6 million and $2.0 million for the six months ended June 30, 2026 and 2025, respectively, reflecting an effective tax rate of 23.0% and 22.9%, respectively.

The Wealth Management segment reported Income before income tax of $7.8$7.7 million for the three months ended MarchJune 31,30, 2026, compared to $5.3$3.1 million for the same period in 2025, as well as Income before income tax of $15.5 million for the six months ended June 30, 2026, compared to $8.4 million for the same period in 2025. The majority of our assets and liabilities are on the Wealth Management segment balance sheet. The increase in Income before income taxes for the three monthsmonth period ended MarchJune 31,30, 2026 was driven primarily by increases in Net interest income, after provision for credit losses and Non-interest income, partially offset by an increase in Non-interest expense. The increase in Income before income taxes for the six month period ended June 30, 2026 was driven primarily by an increase in Net interest income, after provision for credit losses, partially offset by an increase in Non-interest expense and a decrease in Non-interest income. The increase in Net interest income, after provision for credit losses was primarily driven by increases in net interest margin and average interest-earning assets, as well as a release of provision for credit losses primarily driven by a decreased ACL on individually analyzed loans. The increase in Non-interest expense was primarily driven by an increase in Salaries and employee benefits, partially offset by a decrease in Occupancy and equipment. The decrease in Non-interest income was primarily driven by decreases in Net gain on other real estate owned and Net gain on loans held for sale.

The Mortgage segment reported IncomeLoss before income taxtaxes of $0.3 million for the three months ended MarchJune 31,30, 2026, compared to $21$0.3 thousandmillion of Income before income taxes for the same period in 2025, as well as Income before income taxes of $0.0 million for the six months ended June 30, 2026, compared to $0.3 million for the same period in 2025. The increasedecrease in Income before taxes for the three month period ended MarchJune 31,30, 2026 was primarily driven by ana increasedecrease in Net gain on mortgage loans, which was primarily driven by higherlower originationmargins, volume,and asan wellincrease asin Salaries and employee benefits. The decrease in Income before taxes for the six month period ended June 30, 2026 was primarily driven by an increase in Salaries and employee benefits, partially offset by an increase in Total interest and dividend income, partially offset by an increase in Salaries and employee benefits.income.

Cash and cash equivalents increaseddecreased by $63.8$25.4 million, or 31.8%,12.7%, to $264.1$174.9 million as of MarchJune 31,30, 2026 compared to December 31, 2025. The increasedecrease was a result of the increaseincreases in Deposits,Debt securities and Loans and a decrease in Borrowings, partially offset by thean increase in Loans and decrease in Borrowings.Deposits.

Held-to-maturityAvailable-for-sale debt securities increased by $0.1$44.0 million, or 0.1%,96.5%, to $95.0$89.6 million as of MarchJune 31,30, 2026 compared to December 31, 2025. The increase was primarily due to the purchase of corporateresidential bonds,mortgage-backed securities issued by U.S. government agencies and sponsored enterprises, partially offset by principal pay downs.

MortgageHeld-to-maturity loansdebt heldsecurities forincreased sale,by at fair value decreased $11.8$21.8 million, or 29.2%,23.0%, to $28.4$116.8 million as of MarchJune 31,30, 2026 compared to December 31, 2025. The decreaseincrease was primarily due to the timingpurchase of loan originationscorporate and sales.municipal bonds, offset by principal pay downs.

BorrowingsMortgage loans held for sale, at fair value decreased $12.8$15.5 million, or 11.9%,38.6%, to $94.8$24.7 million as of MarchJune 31,30, 2026 compared to December 31, 2025. The decrease was primarily drivendue byto the pay down on the Company's FHLB linetiming of creditloan inoriginations theand first quarter of 2026.sales.

Other liabilitiesBorrowings decreased $4.3$26.3 million, or 12.2%,24.5%, to $30.9$81.3 million as of MarchJune 31,30, 2026 compared to December 31, 2025. The decrease was primarily due to to decreases in salaries payable driven by the timingpay down of 401KFHLB match payouts and incentive compensation payments and an increase in interest rate swap fair values resulting from an increase in forward interest rates.borrowings.

Total shareholders’ equity increased $7.8$15.0 million, or 2.9%,5.7%, from December 31, 2025 to $273.4$280.6 million as of MarchJune 31,30, 2026. The increase was primarily due to Net income for the quarter and aan decreaseincrease in Accumulated other comprehensive lossgain primarily driven by an increase in cash flow hedge fair values.

Debt securities we intend to hold for an indefinite period of time, but not necessarily to maturity, are classified as available-for-sale and are recorded at fair value using current market information from a third-party pricing service, with unrealized gains and losses excluded from earnings and reported in OCI, net of tax. The carrying values of our debt securities classified as available-for-saleAFS are adjusted for unrealized gain or loss, and any gain or loss is reported on an after-tax basis as a component of OCI in shareholders’ equity. As of MarchJune 31,30, 2026 and December 31, 2025, investments in debt securities classified as available-for-saleAFS totaled $41.9$89.6 million and $45.6 million, respectively.

Debt securities for which we have the intent and ability to hold to their maturity are classified as HTM debt securities and are recorded at amortized cost. Debt securities HTM are carried at cost, adjusted for the amortization of premiums and the accretion of discounts using the level-yield method over the remaining period until maturity. As of MarchJune 31,30, 2026 and December 31, 2025, investments in debt securities classified as HTM totaled $116.8 million and $95.0 million.million, respectively.

Management measures expected credit losses on debt securities on a collective basis by major security type. The majority of our HTM investment portfolio consists of debt securities issued by U.S. government entities and agencies and we consider the risk of credit loss to be zero and, therefore, we do not record an ACL. The Company's non-government backed debt securities include private label MBS as well asMBS, corporate bonds, and municipal bonds. The ACL on HTM debt securities was $0.2 million and $0.1 million as of MarchJune 31,30, 2026 and December 31, 2025.2025, respectively. There was no ACL on AFS debt securities as of MarchJune 31,30, 2026 and December 31, 2025.

In addition to originating loans for our own portfolio, we conduct mortgage banking activities in which we originate and sell servicing-released, whole loans in the secondary market. Our mortgage banking loan sale activities are primarily directed at originating single family mortgages that are priced and underwritten to conform to previously agreed-upon criteria before loan funding and are delivered to the investor shortly after funding. The level of future loan originations, loan sales, and loan repayments depends on overall credit availability, the interest rate environment, the strength of the general economy, local real estate markets and the housing industry, and conditions in the secondary loan sale market. The amount of gain or loss on the sale of loans is primarily driven by market conditions and changes in interest rates, as well as our pricing and asset liability management strategies. As of MarchJune 31,30, 2026 and December 31, 2025, we had Mortgage loans held for sale of $28.4$24.7 million and $40.2 million, respectively, of residential mortgage loans we originated.