SAUL CENTERS, INC.

CONSOLIDATED BALANCE SHEETS

CONSOLIDATED STATEMENTS OF OPERATIONS

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENTS OF CASH FLOWS

1. Organization, Basis of Presentation

Saul Centers, Inc. ("Saul Centers") was incorporated under the Maryland General Corporation Law on June 10, 1993, and operates as a real estate investment trust (a "REIT") under the Internal Revenue Code of 1986, as amended (the "Code"). The Company is required to annually distribute at least 90% of its REIT taxable income (excluding net capital gains) to its stockholders and meet certain organizational and other requirements. Saul Centers, together with its wholly-owned subsidiaries and limited partnerships of which Saul Centers or one of its subsidiaries is the sole general partner, are referred to collectively as the "Company." B. Francis Saul II serves as Chairman of the Board of Directors (the "Board") and Chief Executive Officer of Saul Centers.

The Company, which conducts all of its activities through its subsidiaries, Saul Holdings Limited Partnership, a Maryland limited partnership (the "Operating Partnership"), andtwo subsidiary limited partnerships (the "Subsidiary Partnerships," and, collectively with the Operating Partnership, the "Partnerships"), engages in the ownership, operation, management, leasing, acquisition, renovation, expansion, development and financing of community and neighborhood shopping centers and mixed-use properties, primarily in the Washington, DC/Baltimore metropolitan area.

As of June 30, 2026, the Company's properties (the "Current Portfolio Properties") consisted of 50 shopping center properties (the "Shopping Centers"), nine mixed-use properties, which are comprised of office, retail and multi-family residential uses (the "Mixed-Use Properties") andthree (non-operating) land and development properties.

Because the Current Portfolio Properties are located primarily in the Washington, DC/Baltimore metropolitan area, the Company is subject to a concentration of market risk related to these properties. The Shopping Centers, a majority of which are anchored by one or more major tenants and 34 of which are anchored by a grocery store, offer primarily day-to-day necessities and services. Giant Food, a tenant at 11 Shopping Centers, individually accounted for 4.3% of the Company's total revenue for the six months ended June 30, 2026. No other tenant individually accounted for 2.5% or more of the Company's total revenue, excluding lease termination fees, for the six months ended June 30, 2026.

The accompanying consolidated financial statements of the Company include the accounts of Saul Centers and its subsidiaries, including the Partnerships, which are majority owned by Saul Centers. Substantially all assets and liabilities of the Company as of June 30, 2026 and December 31, 2025, are comprised of the assets and liabilities of the Operating Partnership. Debt arrangements subject to recourse are described in Note 5. All significant intercompany balances and transactions have been eliminated in consolidation.

The Operating Partnership is a variable interest entity ("VIE") because the limited partners do not have substantive kick-out or participating rights. The Company is the primary beneficiary of the Operating Partnership because it has the power to direct its activities and the right to absorb 68.0% of its net income. Because the Operating Partnership is consolidated into the financial statements of the Company, its classification as a VIE has no impact on the consolidated financial statements of the Company.

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, all adjustments necessary for the fair presentation of the financial position and results of operations of the Company for the interim periods have been included. All such adjustments are of a normal recurring nature. These consolidated financial statements and the accompanying notes should be read in conjunction with the audited consolidated financial statements of the Company for the year ended December 31, 2025, which are included in its Annual Report on Form 10-K for the year ended December 31, 2025 ("2025 10-K"). Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been omitted pursuant to applicable instructions. The results of operations for interim periods are not necessarily indicative of results to be expected for the year.

2. Summary of Significant Accounting Policies

Our significant accounting policies disclosed in our 2025 10-K have not changed significantly in number or composition.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. The most significant estimates and assumptions relate to impairment of real estate properties and collectibility of operating lease receivables. Actual results could differ from those estimates.

Consolidated Statements of Cash Flows - Supplemental Disclosures

The following tables provide supplemental disclosures related to the Consolidated Statements of Cash Flows:

Restricted cash is included in other assets on the Consolidated Balance Sheets and consists primarily of (a) cash escrowed under various loan agreements, (b) cash accounts holding certain tenant security deposits and (c) utility deposits.

Accounts Receivable, Accrued Income and Allowance for Doubtful Accounts

Accounts receivable are primarily comprised of rental and reimbursement billings due from tenants, and straight-line rent receivables representing the cumulative amount of adjustments necessary to present rental income on a straight-line basis. Individual leases are assessed for collectibility and, upon the determination that the collection of rents is not probable, accrued rent and accounts receivable are charged off, and the charge off is reflected as an adjustment to rental revenue. Revenue from leases where collection is not probable is recorded on a cash basis until collectibility is determined to be probable. We also assess whether operating lease receivables, at the portfolio level, are appropriately valued based upon an analysis of balances outstanding, effects of tenant bankruptcies, historical levels of bad debt and current economic trends. Evaluating and estimating uncollectible lease payments and related receivables requires a significant amount of judgment by management and is based on the best information available to management at the time of evaluation.

Recently Issued Accounting Pronouncements

In November 2024, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2024-03 "Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (subtopic 220-40): Disaggregation of Income Statement Expenses," as amended by ASU 2025-01 ("ASU 2024-03"). ASU 2024-03 requires public business entities to provide additional disclosures that disaggregate certain income statement expense captions into specified categories. ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. The Company is evaluating the impact that ASU 2024-03 will have on the Company's financial position or results of operations and disclosures.

In December 2025, FASB issued ASU 2025-11, “Interim Reporting (Topic 270) Narrow-Scope Improvements” (“ASU 2025-11”), which requires entities that present interim financial statements to follow clarified guidance on the form, content, and required disclosures of those interim financial statements, including disclosure of events since the end of the last annual reporting period that have a material impact on the entity. The amendments in ASU 2025-11 will be effective for interim periods within annual periods beginning after December 15, 2027. Early adoption is permitted and is effective on either a prospective basis or retrospective basis. The Company is evaluating the impact that ASU 2025-11 will have on the Company's financial position or results of operations and disclosures.

3. Real Estate

Construction In Progress

Construction in progress includes land, preconstruction and development costs of active projects. Preconstruction costs include legal, zoning and permitting costs and other project carrying costs incurred prior to the commencement of construction. Development costs include direct construction costs and indirect costs incurred subsequent to the start of construction such as architectural, engineering, construction management and carrying costs consisting of interest, real estate taxes and insurance.

Construction in progress as of June 30, 2026 and December 31, 2025, is composed of the following:

During the six months ended June 30, 2026, including capitalized interest, $2.9 million relating to Hampden House was placed in service.

Leases

We lease Shopping Centers and Mixed-Use Properties to lessees in exchange for monthly payments that cover rent and, where applicable, reimbursement for property taxes, insurance, and certain property operating expenses. Our leases have been determined to be operating leases and generally range in term fromone to 15 years.

Some of our leases have termination options and/or extension options. Termination options allow the lessee and/or lessor to terminate the lease prior to the end of the lease term, provided certain conditions are met. Termination options generally require advance notification from the lessee and/or lessor and payment of a termination fee. Termination fees are recognized as revenue over the modified lease term. Extension options are subject to terms and conditions stated in the lease.

An operating lease right-of-use asset and corresponding lease liability related to our headquarters sublease are reflected in other assets and other liabilities, respectively. The sublease expires on February 28, 2027. The right-of-use asset and corresponding lease liability totaled $0.5 million and $0.6 million, respectively, at June 30, 2026 and $0.9 million and $1.0 million, respectively, at December 31, 2025.

Deferred Leasing Costs

Deferred leasing costs primarily consist of initial direct costs incurred in connection with successful property leasing and amounts attributed to in-place leases associated with acquired properties. Such amounts are capitalized and amortized, using the straight-line method, over the term of the lease or the remaining term of an acquired lease. Initial direct costs primarily consist of leasing commissions, which are incremental costs paid to third-party brokers and internal lease commissions that are incremental to obtaining a lease that would not have been incurred if the lease had not been obtained, and tenant lease incentives. Unamortized deferred leasing costs are charged to expense if the applicable lease is terminated prior to expiration of the initial lease term. Collectively, deferred leasing costs totaled $25.9 million and $25.8 million, net of accumulated amortization of $58.9 million and $57.5 million, as of June 30, 2026 and December 31, 2025, respectively. Amortization expense, included in depreciation and amortization of deferred leasing costs in the Consolidated Statements of Operations, totaled $1.0 million for each of the three months ended June 30, 2026 and 2025, and $2.1 million and $2.0 million for the six months ended June 30, 2026 and 2025, respectively. Amortization of tenant lease incentives, included as a reduction of rental revenue in the Consolidated Statements of Operations, totaled $0.1 million for each of the three months ended June 30, 2026 and 2025, and $0.2 million for each of the six months ended June 30, 2026 and 2025.

Real Estate Investment Properties

Depreciation is calculated using the straight-line method and estimated useful lives of generally between 35 and 50 years for base buildings, or a shorter period if management determines that the building has a shorter useful life, and up to 20 years for certain other improvements that extend the useful lives. Leasehold improvement expenditures are capitalized when certain criteria are met, including when the Company supervises construction and will own the improvements. Tenant improvements are amortized, over the shorter of the lives of the related leases or the useful life of the improvements, using the straight-line method. Depreciation expense in the Consolidated Statements of Operations totaled $15.0 million and $13.1 million for the three months ended June 30, 2026 and 2025, respectively, and $29.9 million and $26.6 million for the six months ended June 30, 2026 and 2025, respectively. Repairs and maintenance expense, which is included in property operating expenses in the Consolidated Statements of Operations, totaled $5.3 million and $4.8 million for the three months ended June 30, 2026 and 2025, respectively, and $12.5 million and $11.8 million for the six months ended June 30, 2026 and 2025, respectively.

The Company did not recognize an impairment loss on any of its real estate during the six months ended June 30, 2026 or 2025.

4. Noncontrolling Interests - Holders of Convertible Limited Partnership Units in the Operating Partnership

As of June 30, 2026, the B. F. Saul Company and certain other affiliated entities, each of which is controlled by B. Francis Saul II and his family members (collectively, the "Saul Organization"), held an aggregate 30.7% limited partnership interest in the Operating Partnership represented by approximately 11.0 million convertible limited partnership units. As of December 31, 2025, the Saul Organization held an aggregate 30.1% limited partnership interest in the Operating Partnership represented by approximately 10.6 million convertible limited partnership units. These units are convertible into shares of Saul Centers' common stock, at the option of the unit holder, on aone-for-one basis provided that, in accordance with the Company's Articles of Incorporation, the rights may not be exercised at any time that the Saul Organization beneficially owns or will own after the conversion, directly or indirectly, in the aggregate more than 39.9% of the value of the outstanding common stock and preferred stock of Saul Centers, excluding shares credited to directors' deferred fee accounts (See Note 8). As of June 30, 2026, approximately 752,000 units held by the Saul Organization could be converted into shares of Saul Centers common stock. As of December 31, 2025, approximately 1,349,000 units held by the Saul Organization could have been converted into shares of Saul Centers common stock.

As of each of June 30, 2026 and December 31, 2025, a third-party investor held a 1.3% limited partnership interest in the Operating Partnership represented by 469,740 convertible limited partnership units. At the option of the unit holder, these units are convertible into shares of Saul Centers' common stock on aone-for-one basis; provided that, in lieu of the delivery of Saul Centers' common stock, Saul Centers may, in its sole discretion, deliver cash in an amount equal to the value of such Saul Centers' common stock.

The impact of the aggregate 32.0%, as of June 30, 2026, and 31.4%, as of December 31, 2025, limited partnership interest in the Operating Partnership held by parties other than Saul Centers is reflected as Noncontrolling Interests in the accompanying consolidated financial statements. Weighted average fully diluted partnership units and common stock outstanding for the three months ended June 30, 2026 and 2025, were approximately 35.8 million and 34.9 million, respectively, and for the six months ended June 30, 2026 and 2025, were approximately 35.7 million and 34.8 million, respectively.

5. Notes Payable, Bank Credit Facility, Interest and Amortization of Deferred Debt Costs

The principal amount of the Company's outstanding debt totaled approximately $1.6 billion at June 30, 2026, of which approximately $1.5 billion was fixed-rate debt and approximately $129.0 million was unhedged variable rate debt outstanding under the Credit Facility (hereinafter defined). The net carrying amount of the properties collateralizing our mortgage loans totaled approximately $1.6 billion as of June 30, 2026.

At December 31, 2025, the principal amount of the Company's outstanding debt totaled approximately $1.6 billion, of which $1.4 billion was fixed rate debt and $189.0 million was unhedged variable rate debt outstanding under the Credit Facility. The net carrying amount of the properties collateralizing our mortgage loans totaled approximately $1.6 billion as of December 31, 2025.

At each of June 30, 2026 and December 31, 2025, the Company had a $600.0 million credit facility (the "Credit Facility") comprised of a $460.0 million revolving credit facility (the "Revolving Credit Facility") and a $140.0 million term loan (the "Term Loan"). Below is a summary of the terms of the Credit Facility.

At June 30, 2026, based on the value of the Company's unencumbered properties calculated in accordance with the terms of the Credit Facility, approximately $158.1 million was available and undrawn under the Credit Facility, $229.0 million was outstanding and approximately $464,000 was committed for letters of credit. As of June 30, 2026, the applicable spread for borrowings was 150 basis points for the Revolving Credit Facility and 145 basis points for the Term Loan.

At December 31, 2025, based on the value of the Company's unencumbered properties calculated in accordance with the terms of the Credit Facility, approximately $96.2 million was available and undrawn under the Credit Facility, $289.0 million was outstanding and approximately $185,000 was committed for letters of credit. As of December 31, 2025, the applicable spread for borrowings was 140 basis points related to the Revolving Credit Facility and 135 basis points related to the Term Loan.

On May 7, 2026, the Company closed on a 15-year, non-recourse, $40.0 million mortgage secured by Severna Park Shopping Center. The loan matures in 2041, bears interest at a fixed rate of 5.80%, requires monthly principal and interest payments of $252,900 based on a 25-year amortization schedule and requires a final payment of approximately $23.2 million at maturity. Proceeds were used to repay the remaining principal balance on the existing mortgage of approximately $20.8 million and reduce the outstanding balance of the Credit Facility.

On April 28, 2026, the Company closed on a 15-year, non-recourse, $105.0 million mortgage secured by Clarendon Center. The loan matures in 2041, bears interest at a fixed-rate of 6.27%, requires monthly principal and interest payments of $694,000 based on a 25-year amortization schedule and requires a final payment of $62.4 million at maturity. Proceeds were used to repay the remaining principal balance on the existing mortgage of approximately $70.0 million and reduce the outstanding balance of the Credit Facility.

On March 26, 2026, the Company closed on an approximate 3.5-year, non-recourse, $8.5 million supplemental mortgage secured by Great Falls Center. The loan is coterminous with the existing loan, matures in 2029, bears interest at a fixed-rate of 5.47%, requires monthly principal and interest payments of $52,000 based on a 25-year amortization schedule and requires a final payment of $8.0 million at maturity. Proceeds were used to reduce the outstanding balance of the Credit Facility.

On August 23, 2022, the Company entered intotwo floating-to-fixed interest rate swap agreements to manage the interest rate risk associated with $100.0 million of its variable-rate debt. The effective date of each swap agreement is October 3, 2022 and each has a $50.0 million notional amount. One agreement terminates on October 1, 2027 and effectively fixes SOFR at 2.96%. The other agreement terminates on October 1, 2030 and effectively fixes SOFR at 2.91%. Because the interest-rate swaps effectively fix SOFR for $100.0 million of variable-rate debt, unless otherwise indicated, $100.0 million of variable-rate debt is treated as fixed-rate debt for disclosure purposes. The Company has designated the agreements as cash flow hedges for accounting purposes.

The Operating Partnership is the guarantor of a portion of the Thruway mortgage (totaling $17.5 million of the $68.0 million outstanding balance at June 30, 2026).

The Company provides a repayment guaranty of 100% of the loan secured by Twinbrook Quarter Phase I. Such guaranty is expected to be reduced in the future as the development achieves certain metrics. As of June 30, 2026, the loan balance and the amount guaranteed were $143.4 million. The Company also provides the lender with a 100% construction completion guaranty.

The Company provides a limited repayment guaranty of $26.6 million for the loan secured by Hampden House. Such guaranty is expected to be reduced in the future as the development achieves certain metrics. During the second quarter, the remaining undrawn loan proceeds of approximately $12.8 million were fully funded into escrow. As of June 30, 2026, the escrow balance was $11.8 million and the loan balance was $133.0 million. The Company also provides the lender with a 100% construction completion guaranty.

All other notes payable are non-recourse.

At June 30, 2026, future principal payments of debt, including scheduled maturities and amortization, for years ending December 31, were as follows:

Deferred debt costs consist of fees and costs incurred to obtain long-term financing, construction financing and the Credit Facility. These fees and costs are being amortized on a straight-line basis over the terms of the respective loans or agreements, which approximates the effective interest method. Deferred debt costs totaling $23.5 million and $24.0 million, net of accumulated amortization of $10.9 million and $9.9 million, at June 30, 2026 and December 31, 2025, respectively, are reflected as a reduction of the related debt in the Consolidated Balance Sheets.

Interest expense, net and amortization of deferred debt costs for the three and six months ended June 30, 2026 and 2025, were as follows:

6. Equity

The Consolidated Statements of Operations reflect noncontrolling interests of $2.8 million and $3.5 million for the three months ended June 30, 2026 and 2025, respectively, and $5.7 million and $6.5 million for the six months ended June 30, 2026 and 2025, respectively, representing income attributable to limited partnership units not held by Saul Centers.

At June 30, 2026 and December 31, 2025, the Company had outstanding 3.0 million depositary shares, each representing 1/100th of a share of 6.125% Series D Cumulative Redeemable Preferred Stock (the "Series D Stock"). The depositary shares are redeemable at the Company's option, in whole or in part, at the $25.00 liquidation preference, plus accrued but unpaid dividends to, but not including, the redemption date. The depositary shares pay an annual dividend of $1.53125 per share, equivalent to 6.125% of the $25.00 liquidation preference. The Series D Stock has no stated maturity, is not subject to any sinking fund or mandatory redemption and is not convertible into any other securities of the Company except in connection with certain changes in control or delisting events. Investors in the depositary shares generally have no voting rights, but will have limited voting rights if the Company fails to pay dividends for six or more quarters (whether or not declared or consecutive) and in certain other events.

At June 30, 2026 and December 31, 2025, the Company had outstanding 4.4 million depositary shares, each representing 1/100th of a share of 6.000% Series E Cumulative Redeemable Preferred Stock (the "Series E Stock"). The depositary shares are redeemable at the Company's option, in whole or in part, at the $25.00 liquidation preference, plus accrued but unpaid dividends to, but not including, the redemption date. The depositary shares pay an annual dividend of $1.50 per share, equivalent to 6.000% of the $25.00 liquidation preference. The Series E Stock has no stated maturity, is not subject to any sinking fund or mandatory redemption and is not convertible into any other securities of the Company except in connection with certain changes in control or delisting events. Investors in the depositary shares generally have no voting rights, but will have limited voting rights if the Company fails to pay dividends for six or more quarters (whether or not declared or consecutive) and in certain other events.

Per Share Data

Per share data for net income (basic and diluted) is computed using weighted average shares of common stock. Convertible limited partnership units, unvested restricted stock awards, and stock options are the Company's potentially dilutive securities. For all periods presented, the convertible limited partnership units are non-dilutive. The following table sets forth, for the indicated periods, weighted averages of the number of common shares outstanding, basic and diluted, the effect of dilutive options and unvested restricted stock awards, and the number of options that are not dilutive because the average price of the Company's common stock was less than the exercise prices. The treasury stock method was used to measure the effect of the dilution.

7. Related Party Transactions

The Chairman and Chief Executive Officer, the President and Chief Operating Officer, the Executive Vice President-Chief Legal and Administrative Officer and the Executive Vice President-Chief Accounting Officer and Treasurer of the Company are also officers of various members of the Saul Organization and their management time is shared with the Saul Organization. Their annual compensation is fixed by the Compensation Committee of the Board (the "Compensation Committee"), with the exception of the Executive Vice President-Chief Accounting Officer and Treasurer whose share of annual compensation allocated to the Company is determined by the shared services agreement (described below).

The Company has entered into a shared services agreement (the “Agreement”) with the Saul Organization that provides for the sharing of certain personnel and ancillary functions such as information technology, payroll services, human resources and benefits administration, accounting services, and in-house legal services. The method for determining the cost of the shared services is provided for in the Agreement and is based upon head count, estimates of usage or estimates of time incurred, as applicable. Senior management has determined that the final allocations of shared costs are reasonable. The terms of the Agreement and the payments made thereunder are reviewed annually by the Audit Committee of the Board of Directors, which consists entirely of independent directors. Billings by the Saul Organization for the Company’s share of these ancillary costs and expenses, including rental expense for the Company’s headquarters lease, net of billings by the Company to the Saul Organization, totaled approximately $2.9 million and $3.0 million for the three months ended June 30, 2026 and 2025, respectively, and $6.2 million and $6.1 million for the six months ended June 30, 2026 and 2025, respectively. The amounts are expensed when incurred and are primarily reported as general and administrative expenses in the Consolidated Statements of Operations or capitalized to specific development projects. As of June 30, 2026 and December 31, 2025, accounts payable, accrued expenses and other liabilities included approximately $1.1 million and $1.3 million, respectively, representing amounts due to the Saul Organization for the Company's share of these ancillary costs and expenses.

The Company subleases its corporate headquarters space from a member of the Saul Organization. The sublease commenced in March 2002, expires in 2027, and provides for base rent increases of 3% per year, with payment of a pro-rata share of operating expenses over a base year amount. The Agreement requires each party to pay an allocation of total rental payments based on a percentage proportionate to the number of employees employed by each party. The Company's rent expense for its headquarters location was $237,900 and $220,600 for the three months ended June 30, 2026 and 2025, respectively, and $465,200 and $436,200 for the six months ended June 30, 2026 and 2025, respectively, and is included in general and administrative expense.

The B. F. Saul Insurance, Inc., a subsidiary of the B. F. Saul Company and a member of the Saul Organization, is a general insurance agency that receives commissions and fees in connection with the Company's insurance program. Such commissions and fees amounted to $152,700 and $122,400 for the three months ended June 30, 2026 and 2025, respectively, and $280,300 and $218,300 for the six months ended June 30, 2026 and 2025, respectively.

The Company participates in a multiemployer 401K plan with entities in the Saul Organization which covers those full-time employees who meet the requirements as specified in the plan. Company contributions, which are included in general and administrative expense or property operating expenses in the Consolidated Statements of Operations, at the discretionary amount of up to 6% of the employee's cash compensation, subject to certain limits, were $123,400 and $117,300 for the three months ended June 30, 2026 and 2025, respectively, and $255,000 and $245,400 for the six months ended June 30, 2026 and 2025, respectively. All amounts contributed by employees and the Company are fully vested.

The Company also participates in a multiemployer nonqualified deferred compensation plan with entities in the Saul Organization which covers those full-time employees who meet the requirements as specified in the plan. According to the plan, which can be modified or discontinued at any time, participating employees defer 2% of their compensation in excess of a specified amount. The Company credited to employee accounts $81,500 and $70,500 for the three months ended June 30, 2026 and 2025, respectively, and $141,400 and $125,200 for the six months ended June 30, 2026 and 2025, respectively, which is the sum of accrued earnings and up tothree times the amount deferred by employees and is included in general and administrative expense. All amounts contributed by employees and credited by the Company are fully vested. The cumulative unfunded liability under this plan was $3.1 million and $2.9 million, at June 30, 2026 and December 31, 2025, respectively, and is included in accounts payable, accrued expenses and other liabilities in the Consolidated Balance Sheets.

8. Share-based Employee Compensation, Stock Option Plans, and Deferred Compensation Plan for Directors

In 2004, the Company established a stock incentive plan (the "Options Plan"), as amended. Under the Options Plan, options were granted at an exercise price not less than the market value of the common stock on the date of grant and expireten years from the date of grant. Officer options vest ratably over four years following the grant and are charged to expense using the straight-line method over the vesting period. Director options vest immediately and are charged to expense as of the date of grant. The Options Plan was replaced with the Incentive Plan (as defined below) in May 2024.

The Company uses the fair value method to value and account for stock options. The fair value of options granted is determined at the time of the grant using the Black-Scholes model, a widely used method for valuing share-based employee compensation, and the following assumptions: (1) Expected Volatility determined using the most recent trading history of the Company's common stock (month-end closing prices) corresponding to the average expected term of the options; (2) Average Expected Term of the options based on prior exercise history, scheduled vesting and the expiration date; (3) Expected Dividend

Yield determined by management after considering the Company's current and historic dividend yield, the Company's yield in relation to other retail REITs and the Company's market yield at the grant date; and (4) a Risk-free Interest Rate based upon the market yields of US Treasury obligations with maturities corresponding to the average expected term of the options at the grant date. The Company amortizes the value of options granted ratably over the vesting period and includes the amounts as compensation expense in general and administrative expenses.

Stock option expense totaling $0.1 million for each of the three months ended June 30, 2026 and 2025, and $0.2 million and $0.3 million for the six months ended June 30, 2026 and 2025, respectively, is included in general and administrative expense in the Consolidated Statements of Operations. As of June 30, 2026, the estimated future expense related to unvested stock options was approximately $0.2 million.

The table below summarizes the option activity for the six months ended June 30, 2026:

The intrinsic value of stock options outstanding or exercisable measures the price difference between the options' exercise price and the closing share price quoted by the New York Stock Exchange as of the date of measurement. During the three and six months ended June 30, 2026,8,750 options were exercised. No options were exercised during the three and six months ended June 30, 2025. At June 30, 2026, the final trading day of the 2026 second quarter, the closing share price of $37.39 was lower than the exercise price of 0.8 million outstanding options granted from 2017 through 2022. The weighted average remaining contractual life of the Company's outstanding and exercisable options is 4.2 years and 4.1 years, respectively.

On May 17, 2024, following shareholder approval, the Company established the Saul Centers, Inc. 2024 Stock Incentive Plan (the "Incentive Plan"), under which various equity incentives may be granted. Grants are split between time-vested and performance-based depending on to whom they are granted. Grants of time-vested restricted stock awards granted to officers will vest on an annual basis over five years. The performance-based restricted stock awards granted to officers will vest on the fifth anniversary of the award's grant date. The performance measurement for the performance-based awards is the Company's annual actual funds from operations compared to the annual funds from operations target established by the Board. Performance-based awards are earned on a sliding scale from 50% to 150% of the number of shares granted as the Company's actual funds from operations scales from 90% to 110% of the Board's established target, with a minimum result of 90% of the target required for the award to vest, in accordance with the Incentive Plan. Grants of time-vested restricted stock awards granted to non-employee directors vest on an annual basis over three years.

The Company uses the fair value method to value and account for restricted stock grants. The fair value of granted restricted stock is determined at the time of the grant using a discounted cash flow analysis, and the following assumptions: (1) Expected Dividend Yield determined by management after considering the Company's current and historic dividend yield, the Company's yield in relation to other retail REITs and the Company's market yield at the grant date; (2) the closing price of the Company's common stock on the date of the grant; (3) estimated forfeitures; and (4) a present value discount rate equal to the Expected Dividend Yield. The Company amortizes the value of granted restricted stock ratably over the vesting period and includes the amounts as compensation expense in general and administrative expenses. For accounting purposes, (a) time-vested restricted stock awards are treated as having been granted on the date the Board authorizes the grant and (b) performance-based restricted stock awards are treated as having been granted on the date the Board establishes the performance target.

Dividends on restricted stock awards will accrue commencing on the grant date and will be paid when the underlying shares vest. Restricted stock awards are measured at fair value, adjusted for estimated forfeitures and estimated or actual results of the Company compared to the Board-established targets. The cost of restricted stock compensation is charged to expense ratably from the grant date through the vesting date and will be adjusted periodically for changes in forfeiture estimates and, for performance-based awards, the impact of revised expectations of the Company's results compared to the Board-established targets.

Restricted stock compensation expense totaled $0.5 million and $0.3 million for the three months ended June 30, 2026 and 2025, respectively, and $0.9 million and $0.5 million, for the six months ended June 30, 2026 and 2025, respectively, which is included in general and administrative expense in the Consolidated Statements of Operations. As of June 30, 2026, the estimated future expense related to unvested restricted stock awards was approximately $7.4 million.

The table below summarizes the restricted stock activity for the six months ended June 30, 2026:

The Company recognized stock compensation expense, inclusive of both stock options and restricted stock, totaling approximately $0.6 million and $0.4 million for the three months ended June 30, 2026 and 2025, respectively, and approximately $1.1 million and $0.8 million, for the six months ended June 30, 2026 and 2025, respectively. As of June 30, 2026, estimated future total stock-based compensation expense related to unvested awards that are granted for accounting purposes under both plans is approximately $7.6 million. On a weighted average basis, this expense is expected to be recognized over the next 3.6 years.

Pursuant to the Incentive Plan, the Compensation Committee established a Deferred Compensation Plan for Directors for the benefit of the Company's directors and their beneficiaries. Annually, directors are given the ability to make an election to defer all or part of their fees and have the option to have their fees paid in cash, in shares of common stock or in a combination of cash and shares of common stock upon separation from the Board. If a director elects to have his/her fees paid in stock, fees earned during a calendar quarter are aggregated and divided by the closing market price of the Company's common stock on the last trading day of the quarter to determine the number of shares to be credited to the director. The Company credited directors' deferred fee accounts with 4,888 and 6,166 shares for the six months ended June 30, 2026 and 2025, respectively, and issued 3,691 and 9,189 shares, respectively. As of June 30, 2026 and December 31, 2025, the directors' deferred fee accounts comprise 101,689 and 100,492 shares, respectively.

9. Fair Value of Financial Instruments

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and other liabilities are reasonable estimates of their fair value. The aggregate fair value of the notes payable with fixed-rate payment terms was determined using Level 2 data in a discounted cash flow approach, which is based upon management's estimate of borrowing rates and loan terms currently available to the Company for fixed-rate financing, would be approximately $1.29 billion and $1.24 billion, respectively, compared to the principal balance of $1.50 billion and $1.44 billion at June 30, 2026 and December 31, 2025, respectively. A change in any of the significant inputs may lead to a change in the Company's fair value measurement of its debt.

10. Derivatives and Hedging Activities

The Company's objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish these objectives, the Company primarily uses floating-to-fixed interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

The change in the fair value of derivatives designated and qualified as cash flow hedges is recorded in other comprehensive income and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During 2026 and 2025, such derivatives were used to hedge the variable cash flows associated with certain variable-rate debt.

Amounts reported in other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on the Company's variable-rate debt. During the next twelve months, the Company estimates that approximately $1.0 million will be reclassified from other comprehensive income and reflected as a decrease to interest expense.

The Company carries its interest-rate swaps at fair value. The Company has determined the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy with the exception of the impact of counter-party risk, which was determined using Level 3 inputs and is not significant. Derivative instruments are classified within Level 2 of the fair value hierarchy because their values are determined using third-party pricing models that contain inputs that are derived from observable market data. Valuation models require a variety of inputs, including contractual terms, market prices, yield curves, credit spreads, measures of volatility, and correlations of such inputs. As of June 30, 2026, the fair value of the interest-rate swaps was approximately $2.5 million and is included in Other assets in the Consolidated Balance Sheets. The change in value during the period is reflected in Other Comprehensive Income in the Consolidated Statements of Comprehensive Income.

The table below details the fair value and location of the interest rate swaps as of June 30, 2026 and December 31, 2025.

The table below details the location in the financial statements of the gain or loss recognized on interest rate derivatives designated as cash flow hedges for the three and six months ended June 30, 2026 and 2025. All gains and losses reclassified from Other Comprehensive Income ("OCI") into income were recognized within interest expense, net and amortization of deferred debt costs for the periods presented.

11. Commitments and Contingencies

Neither the Company nor the Current Portfolio Properties are subject to any material litigation, nor, to management's knowledge, is any material litigation currently threatened against the Company, other than routine litigation and administrative proceedings arising in the ordinary course of business. Management believes that these items, individually or in the aggregate, will not have a material adverse impact on the Company or the Current Portfolio Properties.

The Company is involved in various claims and litigation matters arising in the ordinary course of business, some of which involve claims for damages. Many of these matters are covered by insurance, although they may nevertheless be subject to deductibles or retentions. Although the ultimate liability for these matters cannot be determined, based upon information currently available, management believes the resolution of such claims and litigation will not have a material adverse effect on the Company's consolidated financial statements.

12. Business Segments

The Company's operating segments conform with our method of internal reporting and the way the Chief Executive Officer, who is also the Chief Operating Decision Maker ("CODM"), evaluates financial results, allocates resources and manages the business. The Company has identified each property as an operating segment. The properties have been aggregated intotwo reportable business segments: Shopping Centers and Mixed-Use Properties. The accounting policies of the segments are the same as those described in the summary of significant accounting policies (see Note 2). All properties within each segment generate similar types of revenues and expenses related to tenant rent, expense reimbursements and operating expenses. Although services are provided to a variety of tenants, the types of services provided to them are similar within each segment. The properties within each reportable segment have similar economic characteristics, and the nature of the products and services provided to our tenants and the method to distribute such services are consistent throughout each reportable segment. Certain reclassifications have been made to prior year information to conform to the 2026 presentation.

The CODM measures and evaluates the performance of our operating segments based on property net operating income ("NOI"), and considers this metric when allocating operating and capital resources to each segment. NOI includes property revenue and other revenue and deducts property operating expenses and real estate taxes. Total property revenue includes most components of rental revenue, except straight-line rent and amortization of above/below market lease premiums and discounts, plus parking revenues and lease termination fee revenue. NOI also excludes interest expense, depreciation and amortization, general and administrative expense, and gains and losses.

The following tables summarize NOI and total assets for each of our reportable segments:

(1) Revenue adjustments are straight-line base rent and amortization of premiums and discounts related to above/below market leases.

(2) Other expenses include payroll, utilities, insurance, legal, parking, advertising, and other.

(3) Other assets include cash, cash equivalents, restricted cash, swap assets and an operating lease right-of-use-asset.

(1) Revenue adjustments are straight-line base rent and amortization of premiums and discounts related to above/below market leases.

(2) Other expenses include payroll, utilities, insurance, legal, parking, advertising, and other.

(3) Other assets include cash, cash equivalents, restricted cash, swap assets and an operating lease right-of-use asset.

13. Subsequent Events

The Company has reviewed all events and transactions for the period subsequent to June 30, 2026, and determined there are no subsequent events required to be disclosed.