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

An investment in our securities involves risks. You should carefully consider the risks and uncertainties described below, together with the other information in this Annual Report on Form 10-K, including our consolidated financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The occurrence of any of the following risks, alone or in combination with other events or circumstances, could materially adversely affect our business, financial condition, results of operations, liquidity, capital, reputation, and the trading price of our common stock.

The Bank is subject to the Formal Agreement, and failure to satisfy its requirements could result in additional supervisory or enforcement actions, restrictions on our business, and other material adverse consequences.

On January 17, 2025, the Bank entered into the Formal Agreement. The OCC found unsafe or unsound practices and violations of law, rule, or regulation relating to, among other things, strategic planning, capital planning, BSA/AML risk management, payment activities oversight, credit administration, and concentration risk management. The Formal Agreement requires the Bank to implement extensive corrective actions relating to capital, liquidity, governance, strategic planning, BSA/AML, payments oversight, credit administration, concentration risk, and related reporting and controls.

Compliance with the Formal Agreement requires substantial management attention, Board oversight, personnel, systems, and expense. There can be no assurance that our remediation efforts will be completed on the timelines we expect, that they will be viewed by the OCC as satisfactory, or that the OCC will terminate the Formal Agreement within any particular period. If we fail to satisfy the requirements of the Formal Agreement, or if the OCC determines that our corrective actions are not sufficiently effective or sustainable, we could be subject to additional supervisory or enforcement actions, restrictions on growth or activities, limitations on dividends or other capital actions, objections to new products, services, or personnel changes, civil money penalties, receivership, or other adverse consequences. Any of these outcomes could materially adversely affect our business, financial condition, results of operations, reputation, and strategic flexibility.

The Bank is in “troubled condition” for regulatory purposes, which may subject us to heightened scrutiny, limit our flexibility, and adversely affect our business and growth prospects.

2025 FORM 10-K 9

The Formal Agreement provides that, as a result of the Agreement, the Bank is in “troubled condition,” a regulatory designation that applies, among other circumstances, when a national bank is subject to a formal written agreement requiring action to improve its financial condition, unless otherwise informed in writing by the OCC. The Formal Agreement also provides that the Bank is not an “eligible bank” for certain purposes unless otherwise informed in writing by the OCC. This status may increase supervisory scrutiny and may affect our ability to pursue acquisitions, branches, new business activities, new offices, product launches, strategic deviations, or other corporate actions on the timeline or in the manner we would otherwise prefer. It may also adversely affect counterparties’, customers’, investors’, and employees’ perceptions of the Bank and could make it more difficult or more expensive for us to attract deposits, retain or recruit key personnel, raise capital, obtain regulatory approvals, or pursue aspects of our strategic plan.

Our business is undergoing a substantial strategic repositioning and we may not successfully execute the transition to our revised business model.

During 2025, we substantially reconstituted our management team and Board, recapitalized the Company, and began repositioning the Bank around targeted client segments, including high net worth individuals, family offices, entrepreneurs, investors, business leaders and the businesses that serve them, digital payments and related institutional banking clients, and certain underbanked but creditworthy customers. The strategic plan contemplates narrowing certain legacy activities, reducing or eliminating certain non-core products, replacing portions of the legacy portfolio, and building enhanced risk management, reporting, and operating capabilities.

Our repositioning may not succeed, may take longer than expected, or may expose us to execution risk, operational disruption, client attrition, elevated expenses, and financial underperformance. We may not achieve the revenue mix, deposit mix, credit performance, operating efficiency, or risk-adjusted returns contemplated by management. If the repositioning is unsuccessful, our business, financial condition, and results of operations could be materially adversely affected.

Our remediation efforts are extensive and ongoing and they may not be effective, timely, or sustainable.

The Formal Agreement requires corrective action across a broad range of areas, including strategic planning, capital planning, BSA/AML, customer identification, program manager due diligence and monitoring, suspicious activity monitoring and look-back reviews, BSA/AML risk assessment, BSA staffing and training, payment activities oversight, credit administration, concentration risk management, and liquidity risk management.

These remediation efforts are complex and interdependent. They require timely design, implementation, documentation, testing, governance, and sustained effectiveness. Even if corrective actions are adopted, they may not operate as intended, may reveal additional gaps, may require costly redesign, or may be challenged by staffing turnover, data quality issues, vendor limitations, or business growth. If our remediation efforts are delayed, ineffective, or not sustained over time, we could remain subject to heightened supervisory concerns and additional restrictions or enforcement action.

We are subject to numerous laws and governmental regulations and to regular examinations by regulators of our business and compliance with laws and regulations, and our failure to comply with such laws and regulations or to adequately address any matters identified during our examinations could materially and adversely affect us.

Federal banking agencies regularly conduct comprehensive examinations of our business, including our compliance with applicable laws, regulations and policies. Examination reports and ratings (which often are not publicly available) and other aspects of this supervisory framework can materially impact the conduct, organic and acquisition growth and profitability of our business. Our regulators have extensive discretion in their supervisory and enforcement activities and have imposed and may in the future impose a variety of remedial actions if, as a result of an examination, they determined that our financial condition, capital resources, asset quality, earnings prospects, management, liquidity or other aspects of any of our operations had become unsatisfactory, or that we or our management were in violation of any law, regulation or policy. Examples of those actions could include requiring affirmative actions to correct any conditions resulting from any asserted violation of law, issuing administrative orders that can be judicially enforced, enjoining unsafe or unsound practices, directing increases in our capital, assessing civil monetary penalties against our officers or directors, removing officers and directors and, if a conclusion was reached that the offending conditions cannot be corrected, or there is an imminent risk of loss to depositors, terminating our deposit insurance. Other actions, formal or informal, that may be imposed could restrict our growth, including regulatory denials to expand branches, relocate, add or restructure subsidiaries and affiliates, expand into new financial activities or merge with or purchase other financial institutions. The timing of these examinations, including the timing of the resolution of any issues identified by our 2025 FORM 10-K 10 regulators in the examinations and the final determination by them with respect to the imposition of any remedial actions, conditions or limitations on our business operations, is generally not within our control. We also could suffer reputational harm in the event of any perceived or actual noncompliance with certain laws and regulations. If we become subject to such regulatory actions, we could be materially and adversely affected.

Regulations addressing consumer privacy and data use and security could increase our costs and impact our reputation.

We are subject to federal, state and local laws related to consumer privacy and data use and security, including information safeguard rules under the Gramm-Leach-Bliley Act. These rules require financial institutions to develop, implement, and maintain a written, comprehensive information security program containing safeguards that are appropriate to the financial institution’s size and complexity, the nature and scope of the financial institution’s activities, and the sensitivity of any customer information at issue. The United States has experienced a heightened legislative and regulatory focus on privacy and data security, including requirements as to consumer notification in the event of data breaches and certain types of security breaches. Additional regulations in these areas may increase compliance costs, which could negatively impact earnings. In addition, failure to comply with the privacy, data use and security laws and regulations to which we are subject, including by reason of inadvertent disclosure of confidential information, could result in fines, sanctions, penalties, reputational harm, loss of consumer confidence, and other adverse consequences, any of which could have a material adverse effect on our results of operations and business.

Market developments have significantly impacted the insurance fund of the FDIC. As a result, the Bank may be required to pay higher premiums, or special assessments, that could adversely affect earnings. Our designation as a troubled institution operating under the Formal Agreement may also subject us to elevated FDIC and other regulatory fees. The amount of premiums the FDIC requires for the insurance coverage it provides is outside the Bank’s control. If there are additional banks or financial institution failures, the Bank may be required to pay higher FDIC premiums than are currently assessed. Increases in FDIC insurance premiums, including any future increases or required prepayments, may materially adversely affect the Bank’s results of operations.

Patriot is subject to laws, regulations, and standards relating to corporate governance and public disclosure, SEC rules and regulations, and NASDAQ rules. These laws, regulations, and standards are subject to varying interpretations, and as a result, their practical application may evolve over time as new guidance is provided by regulatory and governing bodies. Due to the evolving legal and regulatory environment, compliance may become more difficult and result in higher costs. The Company is committed to maintaining high standards of corporate governance and public disclosure. As a result, the Company’s efforts to comply with evolving laws, regulations and standards have resulted in, and are likely to continue to result in, increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities. The Company’s reputation may be harmed, if it does not continue to comply with these laws, regulations and standards.

Litigation and regulatory actions, including enforcement actions, could subject us to significant fines, penalties, judgments or other requirements resulting in increased expenses or restrictions on our business activities.

Our business is subject to litigation and regulatory risks as a result of a number of factors, including the highly regulated nature of the financial services industry and the focus of state and federal prosecutors on banks and the financial services industry generally. Legal or regulatory actions may subject us to substantial compensatory or punitive damages, significant fines, penalties, obligations to change our business practices or other requirements resulting in increased expenses, operational burdens, diminished income and damage to our reputation. Our involvement in any such matters, even if the matters are ultimately determined in our favor, could also cause significant harm to our reputation and divert management attention from the operation of our business. Further, any settlement, consent order or adverse judgment in connection with any formal or informal proceeding or investigation by government agencies may result in litigation, investigations or proceedings as other litigants and government agencies begin independent reviews of the same activities. As a result, the outcome of legal and regulatory actions could be material to our business, results of operations, financial condition and cash flows, depending on, among other factors, the level of our earnings for that period and could have a material adverse effect on our business, financial condition or results of operations.

We depend on a new management team and Board, and our failure to have prudent change management including to retain, integrate, and effectively align new leadership could impair execution of our strategy and remediation efforts.

2025 FORM 10-K 11

In 2025, the Company replaced or added leadership in numerous key roles, including Chief Executive Officer, President, Chief Credit Officer, Chief Financial Officer, Chief Risk Officer, and leadership in operations, treasury management, BSA, legal, relationship management, accounting, finance, technology, and reporting. Our strategic and remediation efforts depend heavily on these leaders’ ability to work effectively together, establish sound controls, implement new policies and reporting, attract additional talent, and maintain constructive regulatory relationships.

Competition for experienced banking, risk, BSA/AML, payments, and technology personnel is significant. If we lose key executives or fail to recruit, integrate, incentivize, and retain qualified personnel, our remediation, growth, and risk management efforts could be delayed or impaired, and our financial condition and results of operations could be materially adversely affected.

Risks Relating to Institutional Banking, Digital Payments and BSA/AML

Our institutional banking and digital payments activities involve heightened operational, compliance, fraud, and BSA/AML risks.

A significant part of our revised strategy and non-interest income profile depends on institutional banking and digital payments activities, including sponsor-bank services, ACH and money movement, debit and credit card-related services, and products and services provided to and through program managers and other non-depository financial institutions. Institutional Banking is currently the largest driver of non-interest income and the Bank has increased annualized digital payments revenue since recapitalization.

These activities present elevated risks relative to traditional community banking, including fraud, sanctions, money laundering, transaction monitoring, third-party oversight, operational processing failures, consumer complaints, settlement and reconciliation issues, and reputational risk. The Formal Agreement specifically requires enhanced oversight of prepaid cards, ACH and wire activity, suspicious activity review, program manager due diligence, and BSA staffing and training. If we fail to identify, measure, monitor, and control these risks, we could face losses, customer attrition, litigation, regulatory criticism, enforcement action, and restrictions on our ability to grow or continue these activities.

Deficiencies in our BSA/AML, sanctions, customer identification, or suspicious activity monitoring programs could result in enforcement action, penalties, losses, and reputational damage.

Banking regulations require compliance with BSA/AML laws and regulations. The Bank was not in compliance with these regulations and therefore entered into the Formal Agreement with the OCC which requires a detailed BSA/AML action plan and corrective action relating to customer identification for reloadable prepaid cards, program manager due diligence and monitoring, suspicious activity monitoring and reporting, suspicious activity look-back, BSA/AML risk assessment, and BSA staffing and training. These requirements reflect supervisory findings that our BSA/AML framework required significant enhancement.

If our BSA/AML, sanctions, or fraud-monitoring controls are inadequate, if third-party program managers fail to perform as expected, if transaction monitoring rules or case management processes are ineffective, or if we fail to identify and report suspicious activity on a timely basis, we may be subject to additional enforcement actions, penalties, remediation costs, activity restrictions, customer losses, and significant reputational harm. The review or amendment of prior suspicious activity determinations could also create operational burden, increased expense, and heightened supervisory attention.

Our reliance on third-party program managers, fintech relationships, vendors, and other counterparties exposes us to significant third-party risk.

Our institutional banking, digital payments, treasury, and technology activities depend on third-party relationships, including program managers, processors, technology providers, monitoring vendors, and other counterparties. The Formal Agreement requires risk-based due diligence, ongoing monitoring, periodic reviews, and in some cases on-site visits and review of independent audit reports for program managers.

Third parties may fail to comply with law, contract, or our policies; may have inadequate controls; may experience financial distress, fraud, cyber incidents, operational failures, or business interruption; or may not provide us with timely and accurate data. Because regulators increasingly expect banks to manage third-party risk as if the activity were conducted internally, failures by our vendors or partners could expose us to losses, remediation costs, litigation, regulatory criticism, and reputational damage even where the immediate failure occurred outside the Bank.

2025 FORM 10-K 12

Digital Payments and Institutional Banking Deposits can be highly concentrated and have significant volatility which could result in heightened Liquidity Risks to the Bank.

Digital Payments and Digital Payments deposits can be highly concentrated with individual decision makers in control of large deposits. Additionally, many of these deposits are short term, unpredictable, or volatile by their nature and can be withdrawn on demand. These factors contribute to the Bank’s liquidity risk and if not managed appropriately can result in the liquidation of assets, the inability to hold long-term assets, and other adverse impacts up to and including insolvency.

Our reliance on Program Managers increases our exposure to risks from third party negligence or misconduct.

Our digital payments business relies on third party program managers to provide certain marketing, banking and treasury management services to our clients on behalf of the Bank. The Bank oversees the activities of its Program Managers, however errors, negligence, or malfeasance by the program managers can pose significant risks to the Bank and can subject the Bank to material liabilities, losses, and other risks such as violations of regulations and law.

2025 FORM 10-K 21

The Company determines its allowance for credit losses (“ACL”) under the current expected credit loss (“CECL”) methodology in ASC 326, which requires management to estimate expected credit losses over the remaining contractual life of financial assets carried at amortized cost, adjusted for expected prepayments when appropriate. The ACL is established through a provision for credit losses charged to earnings and is reduced by charge-offs, net of recoveries. The Company also maintains a reserve for unfunded lending commitments for those commitments that are not unconditionally cancellable.

The ACL is a critical accounting estimate because it requires significant management judgment and is sensitive to changes in assumptions, forecasts, and portfolio conditions. The estimate incorporates both quantitative and qualitative factors, including historical loss experience, portfolio composition, delinquency trends, internal risk ratings, nonperforming asset levels, collateral values, the financial condition of borrowers, and reasonable and supportable forecasts of macroeconomic conditions. For collateral-dependent loans, expected credit losses may depend significantly on the fair value of collateral, less estimated selling costs where applicable.

Loans that do not share similar risk characteristics with other loans are evaluated individually. For loans evaluated on a collective basis, the Company segments the portfolio by loan type and other relevant risk characteristics and applies estimation methodologies that incorporate historical loss information, current conditions, and reasonable and supportable economic forecasts. Following the forecast period, the Company reverts to historical loss information over an appropriate reversion period. Management also applies qualitative adjustments, as needed, to reflect factors not fully captured in the quantitative model.

The ACL estimate is particularly sensitive to changes in economic forecasts, borrower performance, collateral values, portfolio mix, and the credit quality of the Company’s loans. Changes in these assumptions or in the condition of the loan portfolio could result in material changes to the ACL and the related provision for credit losses in future periods.

The Company’s ACL methodology and the judgments used in determining the ACL are described more fully in the Notes to Consolidated Financial Statements included in Item 8.

The Company’s total assets increased $75.5 million, or 7.5%, from $1.01 billion at December 31, 2024 to $1.09 billion at December 31, 2025. This was primarily reflected as a $140.2 million increase in investment securities and a $44.5 million increase in cash, cash equivalents and restricted cash, which was partially offset by a $114.4 million decline in loans receivable. The change in asset mix reflected the Company’s continued balance sheet repositioning during 2025, including reduced loan exposure, increased liquidity, and deployment of funds into investment securities.

2025 FORM 10-K 22

The higher liquidity position improved the Bank’s funding flexibility and supported the Company’s balance sheet repositioning during 2025.

Gross loans receivable decreased $114.9 million, or 16.2%, to $592.6 million at December 31, 2025 from $707.5 million at December 31, 2024. The decline reflected the Company’s continued balance sheet repositioning during 2025, including restricted loan originations during the first three quarters of the year, portfolio runoff, loan sales and efforts to reduce risk and improve liquidity. The Company sold 1539 loans with an unpaid principal balance of $67.8 million during 2025. Net loans receivable decreased to $585.7 million at December 31, 2025 from $700.2 million at December 31, 2024.

As of December 31, 2025, the net loan-to-deposit ratio was 60.6%, compared to 72.4% at December 31, 2024, and the net loan to total assets ratio was 53.8%, compared to 69.2% at December 31, 2024. These declines reflected lower loan balances and higher deposits and liquidity during 2025.

2025 FORM 10-K 23

Commercial real estate and commercial and industrial loans represented approximately 83.2% of total gross loans at December 31, 2025. Accordingly, the Company’s credit performance remains significantly influenced by borrower operating performance, collateral values, and economic conditions in the markets and customer segments served by the Bank. For purposes of internal and regulatory CRE concentration monitoring, owner-occupied CRE loans are excluded from CRE totals and classified as commercial and industrial loans, although owner-occupied CRE loans are included in the CRE portfolio presentation above.

The Company estimates its ACL under the CECL methodology in ASC 326.

The following table summarizes activity in the ACL:

2025 FORM 10-K 24

Although the ACL decreased to $6.8 million at December 31, 2025 from $7.3 million at December 31, 2024, the ACL-to-total loans ratio increased to 1.15% from 1.03%, primarily because gross loans declined during 2025. The 2024 ACL balance and related coverage ratios were also affected by significant charge-offs of reserved commercial real estate and consumer loans during 2024.

Non-accrual loans decreased $1.5 million, to $24.4 million at December 31, 2025 from $25.9 million at December 31, 2024. Total nonperforming assets decreased $4.4 million to $24.4 million from $28.7 million, primarily reflecting the resolution of certain troubled loans and the sale of the sole OREO asset during 2025.

At December 31, 2025, non-accrual loans were comprised of 151 borrowers, compared to 335 borrowers at December 31, 2024. At December 31, 2025, 9 loans were individually evaluated and a specific reserve of $2.1 million was established, compared to 14 individually evaluated loans and a specific reserve of $463 thousand at December 31, 2024. The increase in specific reserves on individually evaluated loans reflected enhanced loan-level analysis performed during 2025 on certain credits within the portfolio, which resulted in refined reserve estimates for those loans. Individually evaluated loans are measured based on collateral value or discounted expected cash flows, as applicable.

Nonperforming assets to total assets improved to 2.24% at December 31, 2025 from 2.84% at December 31, 2024. Nonperforming loans to total loans, net increased to 4.16% from 3.69%, primarily because total loans declined during 2025.

2025 FORM 10-K 25

Loans held for sale totaled $24.5 million at December 31, 2025, compared to $15.7 million at December 31, 2024.

These balances primarily consist of credit card receivables originated for certain digital payments customers and sold shortly after origination to a third party. These loans are fully cash-secured by deposits and are typically sold within three days at par value.

Our reliance on third-party vendors, program managers, fintech service providers, and other counterparties exposes us to significant third-party risk.

Our institutional banking, digital payments, treasury, compliance, regulatory reporting, audit, and technology activities depend on third-party relationships, including program managers, processors, technology providers, compliance and monitoring vendors, professional service providers, and other counterparties. Banking regulators expect banks to maintain risk-based due diligence, ongoing monitoring, periodic reviews, and appropriate oversight of significant third-party relationships.

Third parties may fail to comply with law, contract, or our policies; may have inadequate controls; may experience financial distress, fraud, cyber incidents, operational failures, or business interruption; or may not provide us with timely and accurate data. Because regulators increasingly expect banks to manage third-party risk as if the activity were conducted internally, failures by our vendors or partners could expose us to losses, remediation costs, litigation, regulatory criticism, and reputational damage even where the immediate failure occurred outside the Bank.

From time to time, we receive reports from vendors, regulators, or other third parties concerning cybersecurity, privacy, or other data incidents that may involve Bank or customer information maintained by third parties. We investigate and evaluate such matters to determine their nature and scope and any appropriate response. Such incidents could require significant and costly notification, remediation, investigation, or other response measures and could result in regulatory inquiries, litigation, or other liabilities. Although we may have contractual indemnification rights against responsible third parties and insurance coverage for certain losses, such rights and coverage may be insufficient, subject to limitations or exclusions, or exceed the financial resources of the responsible party or applicable policy limits. Any such incident could materially adversely affect our business, financial condition, and results of operations.

The Company continued to execute its strategic plan during the six months ended June 30, 2026, with a focus on balance sheet growth, capital optimization, and risk management. Significant regulatory milestones were achieved during and shortly after the quarter. On June 30, 2026, when the OCC formally terminated its Formal Agreement with the Bank, resulting in the Bank's reclassification from "adequately capitalized" to "well capitalized" under applicable regulatory standards. On July 7, 2026, the OCC also notified the Bank that it no longer considered the Bank to be in “troubled condition” for purposes of applicable law and regulation.

At June 30, 2026, securities of $132.7 million were pledged to the FHLB or FRB at June 30, 2026, compared to $15.1 million at December 31, 2025. Of the June 30, 2026 amount, approximately $98.1 million was pledged to the FHLB to support available borrowing capacity, with no FHLB borrowings outstanding at quarter-end. Approximately $34.6 million was pledged to the FRB in connection with requirements applicable to the Bank while it was considered to be in troubled condition; no FRB borrowings were outstanding at June 30, 2026.

For the three months ended June 30, 2026, net charge-offs decreased $0.7 million to $0.1 net recovery, compared to $(0.5) million and 0.08% for the three months ended June 30, 2025.

Average loans increased by approximately $180 million to $837.3 million for the three months ended June 30, 2026 from $657.7 million for the three months ended June 30, 2025. For the six-month period, the average loan balance increased $99.4 million, from $684.0 million in 2025 to $783.4 million in 2026. The increase reflects new loan originations under the Bank's targeted lending initiatives, as well as continued purchases of residential and commercial real estate loans.

Loans held for sale totaled $23.7 million at June 30, 2026, compared to $24.5 million at December 31, 2025. These balances primarily consist of credit card receivables originated for certain digital payments customers and sold shortly after origination to third parties. During the second quarter of 2026, certain credit card receivables that had been expected to be sold remained on the Company’s balance sheet after the anticipated sale was not completed. The Company recorded a valuation allowance of approximately $5.5 million on these receivables during the quarter to reflect their estimated fair value. The Company also recognized approximately $5.3 million of other income during the quarter related to contractual indemnification rights associated with the same program manager relationship.

The Company reported a net deferred tax asset of approximately $731 thousand at June 30, 2026, compared with a net deferred tax liability of $783 thousand at December 31, 2025. During the second quarter of 2026, management concluded that a portion of the Company’s deferred tax assets met the more-likely-than-not realization threshold and released approximately $1.2 million of the related valuation allowance, resulting in a corresponding discrete income tax benefit. The Company continues to maintain a substantial valuation allowance against its remaining deferred tax assets.

Management will continue to evaluate the realizability of its deferred tax assets based on all available positive and negative evidence. Changes in operating results, expected taxable income, strategic actions, applicable tax-law limitations or other relevant factors could result in additional changes to the valuation allowance and affect future income tax expense or benefit. See Note 14, Income Taxes, for additional information.

Total borrowings were $16.5 million at June 30, 2026, compared to $16.4 million at December 31, 2025, relatively unchanged. Subordinated debt and junior subordinated debt remained substantially stable at $8.3 million and $8.2 million, respectively. No FHLB, FRB, or correspondent bank advances were outstanding at June 30, 2026. The Bank maintained standby letters of credit issued by the FHLB for the benefit of Mastercard in connection with card settlement requirements of $70.5 million at June 30, 2026 and $55.0 million at December 31, 2025, which reduced available FHLB borrowing capacity.

Total shareholders' equity decreased to $88.9 million at June 30, 2026 from $94.7 million at December 31, 2025, a decrease of $5.8 million. The decrease was primarily driven by a $4.3 million increase in accumulated other comprehensive loss, reflecting higher unrealized losses on available-for-sale securities, and a year-to-date net loss of $1.6 million.

Average Balances

Average Balances

The following tables present daily average balance sheets, interest income, interest expense and the corresponding yields earned and rates paid for the six months ended June 30, 2026 and 2025:

Net interest income for the three months ended June 30, 2026 was $9.0 million, compared to $4.2 million for the same period in 2025, an increase of $4.8 million, or approximately 114%. For the six months ended June 30, 2026, net interest income was $16.0 million, compared to $8.1 million for the six months ended June 30, 2025. The increase reflects significant growth in the loan portfolio, a higher-yielding investment securities portfolio, and relatively stable funding costs.

Interest and fees on loans increased $3.1 million for the quarter and $3.2 million year-to-date, driven by substantial loan portfolio growth since year-end 2025.

Total interest expense increased $152 thousand for the quarter and decreased $794 thousand year-to-date, as the elimination of senior note interest expense following the March 2025 debt conversion partially offset volume-driven increases in deposit interest costs.

Net interest margin of 3.03% for the three months ended June 30, 2026, compared to 1.85% for the three months ended June 30, 2025. For the six months ended June 30, 2026 and 2025, net interest margin was 2.75% and 1.74%, respectively.

The Company recorded $590 thousand in provision for credit losses for the three months ended June 30, 2026, compared to $1.5 million for the same period in 2025. For the six months ended June 30, 2026 and 2025, provision for credit losses was $409 thousand and $2.3 million, respectively. The lower provision in 2026 reflects a broadly improving credit quality profile in the loan portfolio following actions taken during 2025 to address higher-risk legacy assets, including increased provisioning and loan sales, partially offset by growth in new originations. As noted above, the initial ACL of $925 thousand on purchased loans was recorded under ASU 2025-08 as an adjustment to amortized cost rather than through provision expense.

Non-interest income for the three months ended June 30, 2026 was $3.1 million, compared to $2.0 million for the same period in 2025, an increase of $1.1 million. For the six months ended June 30, 2026, non-interest income was $6.3 million, compared to $4.8 million for the prior-year period.

The primary driver was Digital Payments income, which increased $0.4 million to $2.6 million for the quarter and $1.5 million to $5.3 million year-to-date. The increase primarily reflected higher transaction volumes from certain existing program managers, partially offset by the Bank’s risk-based reduction of activity with other program manager relationships. This growth was partially offset by a decline in deposit fees and service charges and lower loan-related fee income compared to the prior year.

Non-interest expense for the three months ended June 30, 2026 was $12.8 million, compared to $9.7 million for the same period in 2025, an increase of $3.1 million. For the six months ended June 30, 2026, non-interest expense was $25.1 million, compared to $18.5 million for the prior-year period. Salaries and benefits increased $1.1 million for the quarter and $3.4 million year-to-date, reflecting investments in new leadership and management talent as well as higher equity-based compensation expense. A significant portion of the equity-based compensation relates to awards with relatively short vesting periods, which resulted in elevated expense recognition during the period.

Professional and outside services increased $1.3 million for the quarter and $1.8 million year-to-date, driven largely by legal, compliance, advisory and other remediation-related costs associated with the Bank’s former Formal Agreement with the OCC. Occupancy and equipment increased $0.4 million for the quarter and $0.5 million year-to-date, reflecting the opening of a new Beverly Hills, California office in the first quarter of 2026.

Income Taxes

For the three months ended June 30, 2026, the Company recorded an income tax benefit of $1.5 million, compared to a benefit of $49 thousand for the three months ended June 30, 2025. The 2026 benefit reflects the partial release of the valuation allowance on deferred tax assets, which resulted in the recognition of a $3.3 million deferred tax asset. For the six months ended June 30, 2026, the income tax benefit was $1.5 million, compared to $48 thousand for the same period in 2025.