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

We are subject to a number of risks potentially affecting our business, financial condition, results of operations and cash flows. As a company offering banking and other financial services, certain elements of risk are inherent in our transactions and operations and are present in the business decisions we make. We, therefore, encounter risk as part of the normal course of our business, and we design risk management processes to help manage these risks. Our success is dependent on our ability to identify, understand and manage the risks presented by our business activities so that we can appropriately balance revenue generation and profitability. These risks include, but are not limited to, credit risk, capital risk, market risks, liquidity risks, cyber risk, interest rate risks, operational risks, model risks, technology, compliance, regulatory and legal risks, and strategic and reputational risks. We discuss our principal risk management processes and, in appropriate places, related historical performance in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section included in Part II, Item 7 in this Annual Report on Form 10-K.

You should carefully consider the following risk factors, as well as the other information set forth in this Annual Report on Form 10-K, in evaluating whether to make or retain an investment in our common stock. If any of the following risks actually occur, our business, financial condition or results of operations would likely be materially adversely affected. In such case, the trading price of our common stock would likely decline due to any of these risks, and you may lose all or part of your investment. The following risks are not the only risks we face. Additional risks that are not presently known or that we presently deem to be immaterial also could have a material adverse effect on our future business, financial condition, results of operations and cash flows.

Summary of Material Risk Factors

This section summarizes some of the material risks potentially affecting our business, financial condition, results of operations and cash flows. These material risks and others risks are discussed in more detail further below in this section. You should consider this summary together with the more detailed information provided below.

There are various risks associated with our acquisition growth strategy, any of which could have a material adverse effect on our business.

Risks Related to our Acquisition Strategy

We may fail to realize all of the anticipated benefits of the Provident Acquisition, or those benefits may take longer to realize than expected. We may also encounter significant difficulties in integrating with Provident.

The success of the Provident Acquisition, including anticipated benefits and cost savings, will depend, in part, on the our ability to successfully integrate the operations of Provident in a manner that results in various benefits and that does not materially disrupt existing customer relationships or result in decreased revenues due to loss of customers.

The process of integrating operations could result in a loss of key personnel or cause an interruption of, or loss of momentum in, the activities of one or more of the combined company’s businesses. Inconsistencies in standards, controls, procedures and policies could adversely affect the combined company. The diversion of management’s attention and any delays or difficulties encountered in connection with the Provident Acquisition and the integration of Provident’s operations could have an adverse effect on the business, financial condition, operating results and future prospects of the combined company. If the bank experiences difficulties in the integration process, including those listed above, we may fail to realize the anticipated benefits and synergies of the Provident Acquisition in a timely manner or at all.

Our future results will suffer if we do not effectively manage expanded operations following the Provident Acquisition.

Following the Provident Acquisition, the size and operation scope of the combined Company’s business has increased beyond its current size and scope. The Provident Acquisition has increased the combined Company’s asset size and will further increase the breadth and complexity of the combined Company’s business with the addition of new business lines in which we have not previously engaged, and exposure to industry sectors which the Company has not historically served. The size and scope of the combined Company’s commercial loan portfolio has also increased in size as a result of the Provident Acquisition. The commercial loan portfolio acquired from Provident includes loans that are concentrated in industry sectors that are relatively new to the Company. The Company’s future success depends, in part, on the Company’s ability to manage this expanded business, which poses challenges for management, including challenges related to the management and monitoring of new operations and associated increased costs and complexity. There can be no assurances that the Company will be successful in this regard or that the expected operating efficiencies, cost savings and other benefits currently anticipated from the Provident Acquisition will be realized.

The Company may be unsuccessful identifying and competing for acquisitions.

The Company will continue to look for acquisition opportunities of banks and financial institutions that meet our criteria, some of which may be material to the Company’s business and financial performance and could involve significant cash expenditures or result in a material increase in the number of shares of the Company’s common stock that are outstanding. The Company may face competition from other financial services institutions, some of which may have greater financial resources, when considering acquisition opportunities. Accordingly, attractive opportunities may not be available, and there can be no assurance that the Company will be successful in identifying, completing or integrating future acquisitions. The Company may not be able to acquire other institutions on acceptable terms. The ability to grow may be limited if the Company is unable to successfully make acquisitions in the future.

The Company may be unsuccessful in retaining our personnel or the personnel of any company we acquire.

The success of any merger or acquisition that we pursue will depend in part on the Company’s ability to retain the key employees currently employed by the Company and employees who join the Company from the acquired company. If the Company is unable to retain key employees, including management, who are critical to the successful integration and future operations of the combined company, the Company could face disruptions in its operations, loss of existing customers, loss of key information, expertise or know-how and unanticipated additional recruitment costs.

In addition, if key employees terminate their employment, the Company’s business activities may be adversely affected, and management’s attention may be diverted from successfully integrating the Company and the acquired company to hiring suitable replacements, all of which may cause the Company’s business to suffer. In addition, the Company may not be able to locate or retain suitable replacements for any key employees who leave the combined company.

The Company has incurred and expects to continue to incur costs related to the acquisition and integration of Provident.

The Company incurs significant, non-recurring costs when it agrees to acquire other businesses. In addition, the Company incurs integration costs following the completion of acquisitions as it integrates the acquired business, including facilities and systems consolidation costs and employment-related costs. The Company may also incur additional costs to retain key employees of the Company and the acquired business. There can be no assurances that the expected benefits and efficiencies related to the integration of the acquired businesses will be realized to offset these transaction and integration costs over time.

Regulatory approvals related to proposed business acquisitions may not be received, may take longer to receive than expected, or may impose burdensome conditions, which could impose additional costs and could delay or prevent completion of the acquisition.

Before a merger or acquisition may be completed, certain approvals or consents must be obtained from various bank regulatory and other authorities of the United States and the Commonwealth of Massachusetts. These governmental entities, including the Federal Reserve Board, the FDIC and the Massachusetts Division of Banks, may impose conditions on the completion of the transaction, require changes to the terms of the transaction or require divestitures or place restrictions on our conduct after the completion of the transaction. Any such conditions or changes could have the effect of delaying completion of the transaction or imposing additional costs on or limiting the financial performance of the Company following the completion of the transaction, any of which might have a material adverse effect on the Company.

The degree of scrutiny that our regulators give to mergers and acquisitions can change from time to time. In general, we anticipate that as the Company increases in size and complexity, our proposed mergers and acquisitions will receive greater regulatory scrutiny and the time that regulators will take to process the applications will increase.

In September 2024, the Department of Justice’s Antitrust Division and the FDIC announced that each respective agency has withdrawn the 1995 Bank Merger Competitive Review Guidelines (the “1995 Guidelines”). The Department of Justice’s Antitrust Division announced that it will instead evaluate the bank mergers using its 2023 Merger Guidelines that apply across all industries. As of the date of this Annual Report on Form 10-K, the Federal Reserve Board has not released any new guidance on its approach to bank merger reviews, nor has it withdrawn from the 1995 Guidelines. Past statements from the Federal Reserve Board staff indicate that the Federal Reserve Board is not actively planning to alter its approach to bank merger reviews. The 2023 Merger Guidelines set forth more stringent concentration limits than the 1995 Bank Merger Guidelines. The 2023 Merger Guidelines provide additional, largely qualitative grounds on which the Department of Justice could object to a transaction beyond traditional local market concentration.

At this time, we are unable to predict whether the actions taken by the FDIC and the Department of Justice will have a material adverse effect on our ability to acquire or merge with banking companies in our market area.

To the extent that we acquire other companies, our business may be negatively impacted by certain risks inherent with such acquisitions.

A significant component of our business strategy is to grow through acquisitions of other financial institutions or business lines as opportunities arise. Although we have been successful with this strategy in the past, we may not be able to grow our business in the future through acquisitions for a number of reasons, including:

We anticipate that whenever we acquire a business, a portion of the purchase price of the acquisition will be allocated to goodwill and other identifiable intangible assets, and our subsequent evaluation of that goodwill, at least annually, will be a critical accounting estimate. Under current accounting rules, at the time we complete an acquisition, the excess of the purchase price over the fair value of the net identifiable tangible and intangible assets acquired will determine the amount of the purchase price that is allocated to goodwill acquired, and subsequently, if we determine that goodwill or intangible assets are impaired, we would be required to write down the value of these intangible assets. If such a write-down occurs, it may have a material adverse effect on our financial condition and operating results.

All of these and other potential risks may serve as a diversion of our management’s attention from other business concerns, and any of these factors could have a material adverse effect on our business. Moreover, acquisitions typically involve the payment of a premium over book and market values, and therefore, some dilution of our tangible book value and net income per share may occur in connection with any future transaction.

The guidance assists banks in developing risk management practices and capital levels commensurate with the level and nature of real estate concentrations. The guidance states that 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.

Changes in the secondary mortgage market may impede our ability to collect repayment on the mortgage warehouse facility lines.

Mortgage warehouse loans are facility lines to non-bank mortgage origination companies. The underlying collateral of these facility lines are residential real estate loans. Loans are originated by the mortgage companies for sale into secondary markets. The primary source of repayment of the facility lines is the cash flow upon sale of the loans. Changes in the secondary mortgage market may impede the mortgage companies’ ability to sell the loans and repay their facility lines. Such events could result in an increase to our provision for credit losses, which could decrease our net income.

Moreover, a significant decline in general economic conditions, caused by inflation, recession, acts of terrorism, an outbreak of hostilities or other international or domestic calamities, unemployment, public health crises or other factors beyond our control could further impact these local economic conditions and could further negatively affect the financial results of our banking operations.

On December 18, 2025, President Trump signed an executive order directing the Department of Justice to move cannabis from a Schedule I to a Schedule III substance, a category for substances with accepted medical use and lower abuse potential. While not full legalization, the change is designed to ease financial and tax burdens on the cannabis industry, including, to some extent, banking access. Schedule III classification allows state-legal cannabis businesses to deduct ordinary business expenses under IRS Code Section 280E, which is expected to boost cash flow and profitability and it aims to encourage banks and financial institutions to work with the cannabis industry, as the risk of violating federal Anti-Money Laundering laws is reduced.

The judicial foreclosure process is protracted, which delays our ability to resolve non-performing loans through the sale of the underlying collateral.

A significant amount of our commercial and industrial and commercial real estate, including multi-family residential real estate loans, are adjustable-rate loans and a decrease in the general level of interest rates may adversely affect our interest income levels. Changes in interest rates, prepayment speeds and other factors may also cause the value of our loans held for sale to change.

When market rates of interest change, the interest we receive on our assets and the interest we pay on our liabilities will fluctuate. This can cause decreases in our spread and can adversely affect our income. For the past several years, we have been asset sensitive, which indicates that assets generally reprice faster than liabilities. In a falling rate environment, asset sensitivity is not preferable as it results in deterioration to our net interest margin.

There are no perfect hedging strategies, and interest rate hedging may fail to protect us from loss. Moreover, hedging activities could result in losses if the event against which we hedge does not occur. Additionally, interest rate hedging could fail to protect us or adversely affect us because, among other things:

A return of recessionary conditions and/or negative developments in the domestic and international credit markets may significantly affect the markets in which we do business, the value of our loans, investments, and collateral securing our loans, and our ongoing operations, costs and profitability. Any of these negative events may result in higher-than-expected loan delinquencies, increase our levels of nonperforming and classified assets, and reduce demand for our products and services, which may cause us to incur losses and may adversely affect our capital, liquidity and financial condition.

Any of these factors could require us to recognize further impairments in the value of our AFS securities portfolio, which may have an adverse effect on our results of operations in future periods.

Factors beyond our control can significantly influence the fair value of AFS securities in our portfolio and can cause potential adverse changes to the fair value of these AFS securities. These factors include, but are not limited to, rating agency actions with respect to individual AFS securities, defaults by the issuer or with respect to the underlying AFS securities, and changes in market interest rates and continued instability in the capital markets.

Our results of operations depend primarily on our net interest income.

On November 15, 2025 we completed our previously announced Provident Acquisition, which resulted in the addition of approximately $1.40 billion in total assets, $1.18 billion of total net loans and $1.14 billion in total deposits, all at fair value. Provident, a Massachusetts corporation, was a federally registered bank holding company headquartered in Amesbury, Massachusetts. BankProv, a Massachusetts-chartered bank, founded in 1828, was a wholly-owned subsidiary of Provident that operated through a network of 7 full-service banking offices in northeastern Massachusetts and southern New Hampshire, as well as a mortgage warehouse lending center in Ponte Vedra Beach, Florida.

In accordance with the terms of the definitive merger agreement, through which we agreed to acquire Provident through a merger with the Company as the surviving entity, each share of Provident common stock was exchanged for 0.691 shares of the Company’s common stock or $13.00 in cash, subject to allocation procedures to ensure that the total number of shares of Provident common stock that receive the stock consideration represents 50% of the total number of shares of Provident common stock outstanding immediately prior to the completion of the acquisition.

The transaction qualified as a tax-free reorganization for Federal income tax purposes and provided Provident shareholders with a tax-free exchange of their shares of Provident common stock in exchange for the Company’s common stock as the consideration they received in the merger. We issued 5.9 million shares of our common stock in the exchange and paid $111.8 million in cash, which resulted in a transaction value of approximately $226.5 million based upon the closing price of our common stock on November 14, 2025 of $19.29 per share.

ACL – The ACL represents management’s best estimate of credit losses over the remaining life of loans measured at amortized cost and unfunded lending commitments at the consolidated balance sheet date and is established through a provision for credit losses charged to net income. The allocation methodology applied by the Company includes allocations for individually evaluated loans and loss factor allocations for all remaining loans through a quantitative model with an assessment of certain qualitative factors.

Management uses a methodology to systematically estimate the amount of expected lifetime losses in the loan portfolio. Expected lifetime losses are estimated on a collective basis for loans sharing similar risk characteristics and are determined using a quantitative model combined with an assessment of certain qualitative factors designed to address forecast and model risk inherent in the quantitative model output. Loss estimates within the collectively assessed population are based on a combination of pooled assumptions and loan-level characteristics. The weighted average remaining maturity (“WARM”) method is the primary credit loss estimation methodology used by the Company and involves estimating future cash flows and expected credit losses for pools of loans using their expected remaining WARM.

The quantitative model estimates expected credit losses using loan level data over the estimated life of the exposure, considering the effect of prepayments. Economic forecasts, one of the most significant judgments influencing the ACL, are incorporated into the estimate over a reasonable and supportable forecast period of two years, beyond which is a reversion to our historical loss average which occurs over a period of four quarters.

Qualitative adjustments to quantitative loss factors, either negative or positive, may include considerations of economic conditions including economic forecasts as detailed above, volume and severity of past due loans, value of underlying collateral, experience, depth, and ability of management, and concentrations of credit.

The methodology includes evaluation and consideration of several factors which could affect potential credit losses.

While management uses the best information available to make its evaluation, future adjustments to the ACL may be necessary if there are significant changes in economic conditions or circumstances underlying the collectability of loans. Because each of the criteria used is subject to change, the allocation of the ACL is made for analytical purposes and is not necessarily indicative of the trend of future credit losses in any particular loan category. The total ACL is available to absorb losses from any segment of the loan portfolio. Management believes the allowance for ACL was adequate at December 31, 2025. The allowance analysis is reviewed by the board of directors on a quarterly basis in compliance with regulatory requirements.

For additional information on our ACL, refer to Note 4, “Loans Receivable and ACL” within the Notes to the Consolidated Financial Statements included in Part II, Item 8 in this Annual Report on Form 10-K.

Goodwill and Other Intangible Assets – Acquisitions of businesses are accounted for using the acquisition method of accounting. Accordingly, the net assets of the companies acquired are recorded at their fair values at the date of acquisition. Goodwill represents the excess of purchase price over the fair value of net assets acquired. Other intangible assets represent acquired assets that lack physical substance but can be distinguished from goodwill because of contractual or other legal rights, or because the asset is capable of being sold or exchanged either on its own, or in combination with a related contract, asset, or liability.

The Company evaluates goodwill for impairment at least annually, or more often if warranted, using a qualitative assessment. If the qualitative assessment indicates potential impairment, management will perform a quantitative impairment test. The quantitative impairment test compares the book value to the fair value of each reporting segment. If the book value exceeds the fair value, an impairment is charged to net income. Management has identified one reporting segment for purposes of testing goodwill for impairment: the banking business.

Other intangible assets, all of which are definite-lived, are stated at cost, less accumulated amortization. The Company evaluates other intangible assets for impairment at least annually, or more frequently based on specific events or changes in circumstances. The Company considers factors including, but not limited to, changes in legal factors and business climate that could affect the value of the intangible asset. Any impairment losses are charged to net income. The Company amortizes other intangible assets over their respective estimated useful lives. The estimated useful lives of core deposit intangible assets are ten years. The Company reassesses the useful lives of other intangible assets at least annually, or more frequently based on specific events or changes in circumstances.

Our discount rate was based upon the estimated cost of equity under the Capital Asset Pricing Model, which considers the risk-free interest rate, market risk premium, size premium, company specific premium and beta specific to a particular reporting unit.

For additional information on our goodwill and other intangibles, refer to Note 7, “Goodwill and Other Intangible Assets” within the Notes to the Consolidated Financial Statements included in Item 8 in this Annual Report on Form 10-K.

Business Combinations – Acquisitions of businesses are accounted for using the acquisition method of accounting. In accordance with applicable accounting guidance, we recognize assets acquired and liabilities assumed at their respective fair values as of the date of acquisition, with the related transaction costs expensed in the period incurred.

We use third party valuation specialists to assist in the determination of fair value of certain assets and liabilities at the merger date, including loans and core deposit intangibles.

While we use our best estimates and assumptions to accurately value assets acquired and liabilities assumed on the acquisition date, the estimates are inherently uncertain.

For further discussion of our methodology for estimating the fair value of acquired assets and assumed liabilities in connection with our Provident Acquisition, see Note 2, “Acquisition” within the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

The ACL on PCD loans and PSLs is recognized within business combination accounting.

For further discussion of our accounting policies for estimating credit losses on acquired loans, see Note 1, “Summary of Significant Accounting Policies” within the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

Positions taken on tax returns that do not meet that threshold are not recognized in the Company’s provisions for income taxes. The measurement of uncertain tax positions is adjusted when new information is available, or when an event occurs that requires a change. The Company’s policy is to analyze its tax positions for all open tax years. Interest and penalties, if any, associated with uncertain tax positions, are classified as additional income tax expense in the consolidated statements of income (see Note 11).

Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies’ non-GAAP financial measures having the same or similar names.

(1) These amounts are included in income tax expense and reflect amounts related to 2025 and 2024 BOLI surrender taxes and penalties and 2023 compensation and writedown for future LTIP vesting amounts that are not expected to be deductible on a tax return, respectively. These amounts are not included in the calculation of the tax impact on the non-GAAP adjustments.

AFS Securities. AFS securities increased $40.8 million, or 17.9%, to $269.0 million at December 31, 2025 from $228.2 million at December 31, 2024 from purchases of U.S. treasury and mortgage-backed securities and the $24.5 million in securities acquired from the Provident acquisition, which were sold upon closing and redeployed into U.S. treasury and mortgage-backed securities.

The following tables contains information regarding the loan portfolio segments acquired from Provident and our organic loan portfolio growth during the year ended December 31, 2025:

(1) Loans acquired at fair value

Non-public Investments. Non-public investments primarily consist of equity investments and FHLB stock and FRB stock holdings. These assets increased $9.4 million, or 38.5%, to $33.7 million as of December 31, 2025 from $24.4 million as of December 31, 2024. The increase resulted primarily from an low-income housing tax credit (“LIHTC”) equity investment of $6.7 million acquired from Provident, as well as increased FHLB stock holdings of $3.6 million correlated to the increase in outstanding FHLB borrowings at December 31, 2025.

BOLI. During the year ended December 31, 2025, the Company received proceeds on surrendered BOLI policies of $48.8 million and acquired $47.1 million in BOLI policies from Provident, resulting in an increase of $1.6 million, or 1.5%, in BOLI to $104.3 million at December 31, 2025 from $102.8 million at December 31, 2024. The Company surrendered BOLI policies in September 2024 and the proceeds were received during the year ended December 31, 2025. The Company also surrendered $28.4 million of BOLI policies from the Provident Acquisition, the proceeds from which have not been received. The Company recorded an increase in the cash surrender value of the BOLI policies of $3.3 million during the year ended December 31, 2025, compared to an increase in the cash surrender value of the BOLI policies of $2.3 million during the year ended December 31, 2024, primarily the result of the surrender and redeployment of BOLI policies at a higher yield during the year ended December 31, 2025, along with a higher average balance during 2025.

Loans to borrowers in the cannabis loan industry increased $137.6 million, or 34.0%, to $542.4 million as of June 30, 2026 from $404.8 million as of December 31, 2025. Of those totals, $374.2 million and $228.8 million at June 30, 2026 and December 31, 2025, respectively, were direct loans to cannabis companies and were collateralized by real estate Collateral dependent loans increased $42.0 million, or 99.9%, to $84.1 million as of June 30, 2026, from $42.0 million as of December 31, 2025, primarily driven by one CRE relationship that is well collateralized, paying as expected and with no required specific reserve.

FHLB Borrowings. FHLB borrowings decreased $15.0 million, or 7.6%, to $181.2 million as of June 30, 2026 from $196.2 million as of December 31, 2025, primarily driven by deposit growth outpacing loan growth.

Shareholders’ Equity. Total shareholders’ equity decreased $16.9 million, or 2.0%, to $842.0 million as of June 30, 2026 from $858.9 million as of December 31, 2025, due to the $43.0 million decrease in additional paid-in capital resulting from the completion of our share repurchase program in which we repurchased a total of 2,207,236 shares during the six months ended June 30, 2026 at an all-in weighted average cost of $20.96 per share totaling $46.3 million, together with a $4.8 million, or 153.9%, increase in other comprehensive loss as a result of the interest rate environment negatively impacting the value of our AFS securities portfolio and our balance sheet hedges, partially offset by net income of $36.1 million during the six months ended June 30, 2026.

Net Income. Net income increased $6.5 million, or 44.9%, to $21.1 million, or $0.53 per diluted common share, for the quarter ended June 30, 2026, compared to net income of $14.6 million, or $0.39 per diluted common share, for the quarter ended June 30, 2025. Net interest income increased $22.1 million, or 47.1%, and noninterest income increased $1.3 million, or 29.9%, partially offset by increased noninterest expense of $14.6 million, or 49.7%, and increased income tax expense of $2.2 million, or 53.9%.

Operating net income, excluding one-time charges, amounted to $21.9 million, or $0.55 per basic and diluted share for the quarter ended June 30, 2026 compared to operating net income, excluding one-time charges, of $15.0 million, or $0.40 per basic and diluted share, for the quarter ended June 30, 2025, which represents an increase of $6.8 million, or 45.4%.

The material one-time charges for the quarter ended June 30, 2026 were:

The material one-time charges for the quarter ended June 30, 2025 were:

Average interest-earning assets increased $1.99 billion, or 40.2%, to $6.93 billion for the quarter ended June 30, 2026 from $4.94 billion for the quarter ended June 30, 2025. The yield on interest-earning assets decreased 1 basis point to 6.47% for the quarter ended June 30, 2026 from 6.48% for the quarter ended June 30, 2025.

Interest and dividend income included $2.0 million of fair value mark accretion related to the acquisition of Provident, representing 1.8% or 5 basis points of net interest margin, during the three months ended June 30, 2026. The Company recorded no fair value mark accretion during the three months ended June 30, 2025.

Interest Expense. Total interest expense increased $9.8 million, or 29.9%, to $42.6 million for the quarter ended June 30, 2026 from $32.8 million for the quarter ended June 30, 2025.

Interest expense on deposits increased $9.0 million, or 28.4%, to $40.7 million for the quarter ended June 30, 2026 from $31.7 million for the quarter ended June 30, 2025. The increase in interest expense on deposits was primarily driven by an increase in the average balance of certificates of deposit and individual retirement accounts of $629.6 million, or 32.0%, to $2.59 billion for the quarter ended June 30, 2026 from $1.96 billion for the quarter ended June 30, 2025 and an increase in the average balance of money market accounts of $610.2 million, or 56.0%, to $1.70 billion for the quarter ended June 30, 2026 from $1.09 billion for the quarter ended June 30, 2025, partially offset by a decrease in the weighted average rate on certificates of deposit and individual retirement accounts of 42 basis points to 3.91% for the quarter ended June 30, 2026 from 4.34% for the quarter ended June 30, 2025.

Interest expense on borrowings increased $810,000, or 70.4%, to $2.0 million for the quarter ended June 30, 2026 from $1.2 million for the quarter ended June 30, 2025, primarily from the increase in the average balance of FHLB borrowings of $105.6 million, or 102.1%, to $209.0 million during the quarter ended June 30, 2026 from $103.4 million for the quarter ended June 30, 2025.

Net Interest Income. Net interest income increased $22.1 million, or 47.1%, to $69.1 million for the quarter ended June 30, 2026 from $47.0 million for the quarter ended June 30, 2025, primarily due to a $1.99 billion, or 40.2%, increase in the average balance of interest-earning assets to $6.93 billion for the quarter ended June 30, 2026 from $4.94 billion for the quarter ended June 30, 2025 and a decrease in the weighted average rate on interest-bearing liabilities of 36 basis points to 3.16% for the quarter ended June 30, 2026 from 3.52% for the quarter ended June 30, 2025. These increases were partially offset by an increase in the average balance of interest-bearing liabilities of $1.67 billion, or 44.5%, to $5.42 billion at June 30, 2026 from $3.75 billion at June 30, 2025.

Provision for Credit Losses. Based on management’s analysis of the adequacy of the ACL, a provision of $3.2 million was recorded for the quarter ended June 30, 2026, of which $3.0 million related to the provision for credit losses on loans, compared to a provision of $3.2 million for the quarter ended June 30, 2025, which included a $4.2 million provision for credit losses on loans. The decrease in the provision for credit losses on loans was primarily driven by prior quarter reserve increases from updated peer proxies to better reflect geographic composition and construction to permanent amortization adjustments, partially offset by current quarter other consumer charge-off replenishment and higher C&I impaired reserves. The provision for credit losses on unfunded commitments increased $1.2 million during the three months ended June 30, 2026 as a result of an increase in unfunded commitments during the quarter ended June 30, 2026.

Noninterest Income. Noninterest income increased $1.3 million, or 29.9%, to $5.6 million for the quarter ended June 30, 2026 from $4.3 million for the quarter ended June 30, 2025. The increase resulted primarily from increased customer service fees of $1.1 million, or 44.1%, due to higher cash management, loan and debit card fees.

The table below sets forth our noninterest income for the quarters ended June 30, 2026 and 2025:

Noninterest Expense. Noninterest expense increased $14.6 million, or 49.7%, to $44.0 million for the quarter ended June 30, 2026 from $29.4 million for the quarter ended June 30, 2025. Salaries and employee benefit expenses increased $7.0 million, or 37.6%, resulting primarily from a $4.1 million increase in employee compensation, a $1.1 million increase in medical and dental benefits and a $541,000 increase in employee bonus expense, all due to headcount increases related to the Provident acquisition and the Company’s continued organic growth, and a $525,000 increase in stock-based compensation as a result of the grants made during the current year.

Data processing expenses increased $2.4 million, or 96.5% primarily driven by our continued investment in technology and systems in support of upcoming revenue initiatives, requiring the operation of systems in parallel for a period of time while new systems are implemented. General and administrative expenses increased $2.1 million, or 98.6%, primarily driven by our acquisition of Provident resulting in $855,000 in additional core deposit intangible amortization expense, in addition to $319,000 in increased tax credit amortization expense, $169,000 in increased education and training expenses, $144,000 in increased utilities expenses and $124,000 in increased bank supplies expense all driven by our acquisition of Provident. Occupancy and equipment expenses increased $1.0 million, or 68.5%, primarily driven by our acquisition of Provident, as well as the opening of two new branches.

The table below sets forth our noninterest expense for the quarters ended June 30, 2026 and 2025:

Income Tax Expense. Income tax expense increased $2.2 million, or 53.9%, to $6.4 million for the quarter ended June 30, 2026 from $4.1 million for the quarter ended June 30, 2025. The effective tax rate was 23.2% and 22.1% for the quarters ended June 30, 2026 and 2025, respectively. The increase in tax expense was from higher pre-tax income during the quarter ended June 30, 2026 compared to June 30, 2025.

Average Balances and Yields. The following table sets forth average balance sheets, average yields and costs, and certain other information for the periods indicated. No tax-equivalent yield adjustments have been made, as the effects would be immaterial. Non-accrual loans were included in the computation of average balances. All average balances are daily average balances. The yields set forth below include the effect of deferred fees, discounts, and premiums that are amortized or accreted to interest income or interest expense; such fees, discounts and premiums were not material for the periods presented.

Rate/Volume Analysis. The following table presents the effects of changing rates and volumes on our net interest income for the periods indicated. The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The total column represents the sum of the prior columns. For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately based on the changes due to volume and the changes due to rate. There were no out-of-period items or adjustments required to be excluded from the table below.

Comparison of Operating Results for the Six Months Ended June 30, 2026 and 2025

Net Income. Net income increased approximately $8.9 million, or 32.6%, to $36.1 million, or $0.90 per diluted common share, for the six months ended June 30, 2026, compared to net income of $27.2 million, or $0.72 per diluted common share, for the six months ended June 30, 2025. The increase was primarily due to increased net interest income of $43.5 million, or 48.0%, partially offset by increased noninterest expense of $28.6 million, or 49.3%, and increased provision for credit losses of $5.2 million, or 120.4%.

Operating net income, excluding one-time charges, amounted to $37.7 million, or $0.94 per diluted share, for the six months ended June 30, 2026 compared to operating net income, excluding one-time charges, of $28.7 million, or $0.76 per diluted share, for the six months ended June 30, 2025, an increase of $8.9 million, or 31.1%.

The material one-time charges for the six months ended June 30, 2026 were:

The material one-time charges for the six months ended June 30, 2025 were:

Interest and Dividend Income. Interest and dividend income increased $60.8 million, or 38.8%, to $217.5 million for the six months ended June 30, 2026 from $156.7 million for the six months ended June 30, 2025, primarily due to a $60.5 million, or 41.4%, increase in interest and fees on loans, reflecting the Provident acquisition and the growth of our commercial and construction loan portfolios. The increase in interest and fees on loans was primarily due to an increase of $1.81 billion, or 40.9%, in the average balance of the loan portfolio to $6.23 billion for the six months ended June 30, 2026 from $4.42 billion for the six months ended June 30, 2025 reflecting the Provident acquisition, which was completed on November 14, 2025, and the growth of our commercial and construction loan portfolios.

Average interest-earning assets increased $1.89 billion, or 38.5%, to $6.81 billion for the six months ended June 30, 2026 from $4.92 billion for the six months ended June 30, 2025. The yield on interest-earning assets increased 1 basis point to 6.44% for the six months ended June 30, 2026 from 6.43% for the six months ended June 30, 2025.

Interest Expense. Total interest expense increased $17.3 million, or 26.1%, to $83.5 million for the six months ended June 30, 2026 from $66.2 million for the six months ended June 30, 2025. Interest expense on deposit accounts increased $16.3 million, or 25.6%, to $80.3 million for the six months ended June 30, 2026 from $63.9 million for the six months ended June 30, 2025. The increase was primarily due to an increase in the average balance of certificate of deposit and individual retirement accounts of $574.1 million, or 29.1%, to $2.55 billion for the six months ended June 30, 2026 from $1.97 billion for the six months ended June 30, 2025, an increase in the average balance of money market accounts of $624.3 million, or 57.7% to $1.71 billion for the six months ended June 30, 2026 from $1.08 billion for the six months ended June 30, 2025 and an increase in the average balance of FHLB borrowings of $75.1 million, or 77.2%, to $172.4 million for the six months ended June 30, 2026 from $97.3 million for the six months ended June 30, 2025, partially offset by a decrease in the weighted average rate on certificate of deposit and individual retirement accounts of 51 basis points to 3.95% for the six months ended June 30, 2026 from 4.46% for the six months ended June 30, 2025.

Net Interest Income. Net interest income increased $43.5 million, or 48.0%, to $134.0 million for the six months ended June 30, 2026 from $90.5 million for the six months ended June 30, 2025, primarily due to a $1.89 billion, or 38.5%, increase in the average balance of interest-earning assets to $6.81 billion for the six months ended June 30, 2026 from $4.92 billion for the six months ended June 30, 2025 and a decrease in the weighted average rate on interest-bearing liabilities of 40 basis points to 3.17% for the six months ended June 30, 2026 from 3.57% for the six months ended June 30, 2025. These increases were offset partially by an increase in the average balance of interest-bearing liabilities of $1.57 billion, or 41.9%, to $5.30 billion for the six months ended June 30, 2026 from $3.74 billion for the six months ended June 30, 2025.

Provision for Credit Losses. Based on management’s analysis of the adequacy of the ACL, a provision of $9.5 million was recorded for the six months ended June 30, 2026, of which $9.4 million related to the provision for credit losses on loans, compared to a provision of $4.3 million for the six months ended June 30, 2025, which included a $5.2 million provision for credit losses on loans. The increase of $4.2 million, or 80.6%, in the provision for credit losses on loans was primarily driven by loan growth, additional specific reserves on PCD loans from our acquisition of Provident, larger peer commercial real estate credit losses impacting quantitative reserves, and an elevated qualitative factor risk grade for the commercial and industrial loan portfolio. The provision for credit losses on unfunded commitments increased $1.0 million, or 116.6%, during the six months ended June 30, 2026 as a result of increased unfunded commitments.