Bank of Marin Bancorp

Previous wording

Net income for the second quarter of 2026 was $9.2 million, compared to net income of $8.5 million for the prior quarter. Diluted earnings per share was $0.58 for the second quarter of 2026, compared to $0.53 for the prior quarter. Net income for the six months ended June 30, 2026 was $17.8 million, compared to a net loss of $3.7 million for the same period in the prior year. Diluted earnings per share for the six months ended June 30, 2026 was $1.11, compared to diluted loss per share of $0.23 for the same period in the prior year. On a non-GAAP basis, excluding the losses on sale of securities of $13.2 million net of taxes, diluted earnings per share was $0.60 for the same period in the prior year.

Current wording

Net income for the third quarter of 2026 was $9.9 million, compared to net income of $9.2 million for the prior quarter. Diluted earnings per share was $0.62 for the third quarter of 2026, compared to $0.58 for the prior quarter. Net income for the nine months ended September 30, 2026, was $27.7 million, compared to net income of $3.9 million ($17.1 million non-GAAP) for the same period in the prior year. Diluted earnings per share for the nine months ended September 30, 2026, was $1.73, compared to diluted earnings per share of $0.24 ($1.07 non-GAAP) for the same period in the prior year.

Previous wording

•The tax-equivalent net interest margin increased to 3.38% in the second quarter of 2026 from 3.24% in the prior quarter, an improvement of 14 basis points. The increase is mostly explained by an eight basis point increase in loan yields, a seven basis point decrease in the cost of deposits, and the use of one-way sales of deposits, which improved the mix of average earnings assets, contributing to the decrease in the quarterly cost of deposits. The tax-equivalent net interest margin for the six months ended June 30, 2026 improved 51 basis points over the same period of the prior year due to the favorable impact of the securities repositioned in the second and fourth quarters of 2025, which resulted in higher yielding assets during the six months ended June 30, 2026 as well as higher average loan balances and yields. Also contributing to the improvement was the decrease in cost of deposits of seven basis points.

Current wording

•The tax-equivalent net interest margin increased to 3.48% in the third quarter of 2026 from 3.38% in the prior quarter, an improvement of 10 basis points. The increase is primarily due to the 11 basis point increase in average loan yields, a four basis point decrease in cost of deposits, and the use of one-way sales of deposits in which we earn fee income through the sale of excess liquidity to deposit networks, which improved the mix of average assets and liabilities. In addition, newly funded loans were originated at a weighted average rate of 12 basis points higher than prior quarter. The tax-equivalent net interest margin for the nine months ended September 30, 2026, improved 51 basis points over the same period of the prior year due to the favorable impact of the securities repositioned in both 2024 and 2025, which resulted in higher yielding assets during the nine months ended September 30, 2026, higher average loan balances and yields, and an 11 basis point decrease in the cost of deposits.

Previous wording

•The average cost of interest bearing deposits decreased from 2.10% to 2.04% and the average cost of total deposits decreased from 1.35% to 1.28% in the second quarter of 2026 compared to the prior quarter primarily due to targeted rate cuts. The average cost of interest bearing deposits decreased from 2.26% to 2.07% and the average cost of total deposits decreased from 1.39% to 1.32% for the first six months of 2025 compared to 2026. Non-interest bearing deposits continued to make up a strong portion of total deposits at 36.7% as of June 30, 2026 and December 31, 2025.

Current wording

•The average cost of interest-bearing deposits decreased from 2.04% to 2.03% and the average cost of total deposits decreased from 1.28% to 1.24% in the third quarter of 2026 compared to the prior quarter primarily due to the increase in average noninterest-bearing deposits and the increase in average one-way sales of interest-bearing deposits which improved the average deposit cost mix. The average cost of interest-bearing deposits decreased from 2.26% to 2.06% and the average cost of total deposits decreased from 1.40% to 1.29% for the first nine months of 2026 compared to the same period in 2025. Noninterest-bearing deposits continued to make up a strong portion of total deposits at 37.8% as of September 30, 2026 and 36.7% at December 31, 2025.

Previous wording

•Total deposits were $3.370 billion as of June 30, 2026, compared to $3.416 billion as of December 31, 2025, a decrease of $45.6 million. The decrease was primarily attributable to a small number of relationships and reflected seasonal customer activity and investment decisions, rather than broader changes in deposit trends. In addition, seasonal tax-related outflows contributed to the second quarter decrease.

Current wording

•Total deposits were $3.395 billion as of September 30, 2026, compared to $3.416 billion as of December 31, 2025, a decrease of $20.3 million. The decrease was primarily attributable to a small number of relationships, and we believe reflected seasonal customer activity and investment decisions, rather than broader changes in deposit trends.

Previous wording

•Net available contingent funding sources, including unrestricted cash, unencumbered available-for-sale securities and total available borrowing capacity was $2.177 billion, or 65% of total deposits and 214% of estimated uninsured and/or uncollateralized deposits as of June 30, 2026.

Current wording

•Net available contingent funding sources, including unrestricted cash, unencumbered available-for-sale securities and total available borrowing capacity was $2.162 billion, or 64% of total deposits and 178.5% of estimated uninsured and/or uncollateralized deposits as of September 30, 2026.

Previous wording

•During the quarter, we continued working to improve credit quality. Non-accrual loans continued to decline to 0.40% of total loans at June 30, 2026 from 0.41% at March 31, 2026 and 1.27% at December 31, 2025. The ratio of classified to total loans ended the second quarter at 0.95%, compared to 0.85% at March 31, 2026 and 1.51% at December 31, 2025.

Current wording

•Non-accrual loans were 0.45% of total loans at September 30, 2026, compared to 1.27% at December 31, 2025. The ratio of classified to total loans at September 30, 2026, was 1.63% compared to 1.51% at December 31, 2025.

Previous wording

•The Bank recorded a reversal of the provision for credit losses on loans of $320 thousand in the six months ended June 30, 2026, compared to a provision for credit losses on loans of $75 thousand in the six months ended June 30, 2025. The allowance for credit losses was 1.07%, 1.08% and 1.42% of total loans at June 30, 2026, March 31, 2026 and December 31, 2025, respectively.

Current wording

•The Bank recorded a provision for credit losses on loans of $180 thousand in the nine months ended September 30, 2026, compared to a provision for credit losses on loans of $75 thousand in the nine months ended September 30, 2025. The allowance for credit losses was 1.07%, 1.07% and 1.42% of total loans at September 30, 2026, June 30, 2026, and December 31, 2025, respectively.

Previous wording

The following table summarizes GAAP and non-GAAP results for return on average assets ("ROA"), return on average equity ("ROE") and the efficiency ratio for comparable periods. All 2025 GAAP ratios were significantly impacted by the securities sales in the second and fourth quarters of 2025. Non-GAAP ratios exclude the loss on sale of securities, with all other factors unchanged. See Reconciliation of GAAP and Non-GAAP Financial Measures below.

Current wording

Return on average assets ("ROA"), return on average equity ("ROE"), return on average tangible common equity ("ROTCE") and the efficiency ratio improved on a GAAP and non-GAAP basis from the prior quarter and prior year, as shown below. The nine months ended September 30, 2025 GAAP ratios were significantly impacted by the securities sales in the second quarter of 2025. Non-GAAP ratios exclude the loss on sale of securities, with all other factors unchanged. See Reconciliation of GAAP and Non-GAAP Financial Measures below.

Previous wording

•ROA and ROE for the six months ended June 30, 2026 was 0.91%, and 9.03%, respectively, and increased on a non-GAAP basis from the same period in the prior year primarily due to increased non-GAAP net income. The efficiency ratio on a non-GAAP basis, was 64.82% for the six months ended June 30, 2026 and was 74.42% for the same period in the prior year. All GAAP and non-GAAP ratios improved year over year due to the improved investment securities performance post-restructuring, increased loan yields and reduced deposit costs, combined with continued prudent expense management.

Current wording

•All GAAP and non-GAAP ratios improved quarter over quarter and year over year due to the improved investment securities performance post-repositioning, increased loan yields and reduced deposit costs, combined with continued prudent expense management.

Previous wording

•Capital was above well-capitalized regulatory thresholds with Bancorp's and the Bank's total risk-based capital ratios of 15.58% and 14.61%, respectively, as of June 30, 2026. Our capital plan and point-in-time capital stress tests indicate that Bank of Marin and Bancorp capital ratios should remain above regulatory well-capitalized and internal policy minimums throughout a five-year forecast horizon and across stress scenarios such as additional unrealized losses on the investment portfolio, additional deposit growth or decline, loan credit quality deterioration, and potential share repurchases.

Current wording

•Capital remained above well-capitalized regulatory thresholds with Bancorp's and the Bank's total risk-based capital ratios of 15.59% and 14.83%, respectively, as of September 30, 2026. Bancorp's and the Bank's Tier 1 leverage to average assets ratios were 9.04% and 9.69%, respectively, as of September 30, 2026. Our capital plan and point-in-time capital stress tests indicate that Bank of Marin and Bancorp capital ratios should remain above regulatory well-capitalized and internal policy minimums throughout a five-year forecast horizon and across stress scenarios such as additional unrealized losses on the investment portfolio, additional deposit growth or decline, loan credit quality deterioration, and potential share repurchases.

Previous wording

•Bancorp's tangible common equity to tangible assets ("TCE ratio") was 8.52% as of June 30, 2026, and the Bank's TCE ratio was 9.03%. Bancorp's TCE ratio, net of after-tax unrealized losses on held-to-maturity securities as if the losses were realized 1, was 8.26% as of June 30, 2025.

Current wording

•Bancorp's tangible common equity to tangible assets ("TCE ratio") was 8.05% as of September 30, 2026, and the Bank's TCE ratio was 8.69%. Bancorp's TCE ratio was 8.35% as of December 31, 2025, and the Bank's TCE ratio was 8.59% as of December 31, 2025.

Previous wording

•The Board of Directors declared a cash dividend of $0.25 per share on July 23, 2026, which represents the 85 th consecutive quarterly dividend paid by Bancorp. The dividend is payable on August 13, 2026, to shareholders of record at the close of business on August 6, 2026.

Current wording

•The Board of Directors declared a cash dividend of $0.25 per share on October 22, 2026, which represents the 86th consecutive quarterly dividend declared by Bancorp. The dividend is payable on November 12, 2026, to shareholders of record at the close of business on November 5, 2026.

Previous wording

Net interest margin is expressed as net interest income divided by average interest-earning assets. Net interest rate spread is the difference between the average rate earned on total interest-earning assets and the average rate incurred on total interest-bearing liabilities. Both of these measures are reported on a taxable-equivalent basis. Net interest margin is the higher of the two because it reflects interest income earned on assets funded with non-interest-bearing sources of funds, which include demand deposits and stockholders’ equity.

Current wording

Net interest margin is expressed as net interest income divided by average interest-earning assets. Net interest rate spread is the difference between the average rate earned on total interest-earning assets and the average rate incurred on total interest-bearing liabilities. Both of these measures are reported on a taxable-equivalent basis. Net interest margin is the higher of the two because it reflects interest income earned on assets funded with noninterest-bearing sources of funds, which include demand deposits and stockholders’ equity.

Previous wording

The tax-equivalent net interest margin was 3.38% for the second quarter of 2026, compared to 3.24% for the prior quarter. The increase is mostly explained by the increase in average loan yields and the decrease in cost of deposits noted above, and the use of one-way sales of deposits, which improved the mix of average earning assets. The spot rate of deposits at March 31, 2026 of 1.31% dropped to 1.28% at June 30, 2026.

Current wording

The tax-equivalent net interest margin increased 10 basis points to 3.48% for the third quarter of 2026, from 3.38% for the prior quarter. The increase is primarily due to the 11 basis point increase in average loan yields, a four basis point decrease in the cost of deposits, and the use of one-way sales of deposits, which improved the mix of assets and liabilities. Newly funded loans were originated at a weighted average rate of 12 basis points higher than prior quarter.

Previous wording

Net interest income totaled $61.1 million for the six months ended June 30, 2026, compared to $49.1 million for the same period in the prior year. The $12.0 million increase from the prior year was primarily due to higher yields in reinvested securities and loans.

Current wording

Net interest income totaled $92.5 million for the nine months ended September 30, 2026, compared to $76.3 million for the same period in the prior year. The $16.2 million increase from the prior year was primarily due to higher yields in reinvested securities and loans.

Previous wording

The tax-equivalent net interest margin was 3.31% for the six months ended June 30, 2026, compared to 2.80% for the same period in the prior year. The increase of 51 basis points was primarily attributed to the investment securities restructuring performed in both 2024 and 2025 contributing 53 basis points and lower deposit costs and the mix of deposits contributing six basis points, and higher average loan balances and yields. These were partially offset by the impact of the subordinated debt, detracting nine basis points. The spot rate of deposits at June 30, 2025 of 1.29% dropped to 1.28% at June 30, 2026.

Current wording

The tax-equivalent net interest margin was 3.37% for the nine months ended September 30, 2026, compared to 2.86% for the same period in the prior year. The increase of 51 basis points was primarily attributed to the investment securities repositionings performed in both 2024 and 2025 contributing 46 basis points and lower deposit costs and the mix of deposits contributing 10 basis points, and higher average loan balances and yields contributing nine basis points. These were partially offset by the impact of the subordinated debt, subtracting nine basis points and the reduction in interest-earning deposits at the Federal Reserve Bank, subtracting five basis points.

Previous wording

Primarily due to declining inflation, the Federal Reserve lowered the target for the federal funds rate by 100 basis points, to a range of 4.25% to 4.50% in the later months of 2024. Following a pause of approximately nine months, the FOMC resumed decreasing rates in September 2025, and made a total of three rate decreases in 2025 ending the year at a range of 3.50% to 3.75%.

Current wording

Primarily due to declining inflation, the Federal Reserve lowered the target for the federal funds rate by 100 basis points, to a range of 4.25% to 4.50% in the later months of 2024. Following a pause of approximately nine months, the FOMC resumed decreasing rates in September 2025, and made a total of three rate decreases in 2025 ending the year at a range of 3.50% to 3.75%. During the second and fourth quarters of 2025, the Bank sold additional securities with relatively low yields and redeployed the proceeds to further reposition our balance sheet, by investing in higher yielding securities.

Previous wording

During the second and fourth quarters of 2025, the Bank sold additional securities with relatively low yields and redeployed the proceeds to further reposition our balance sheet, by investing in higher yielding securities. Management and the Board are continuously monitoring and analyzing the impact of market rates on the Company's financial condition and results of operations to enhance performance, safety and soundness and returns to shareholders. See ITEM 3. Quantitative and Qualitative Disclosure about Market Risk for further information.

Current wording

Management and the Board are continuously monitoring and analyzing the impact of market rates on the Company's financial condition and results of operations to enhance performance, safety and soundness and returns to shareholders. See ITEM 3. Quantitative and Qualitative Disclosure about Market Risk for further information.

Previous wording

We recorded a reversal of the provision for credit losses on loans of $320 thousand in the second quarter of 2026, driven by lower loan balances and improved credit quality in the non-owner occupied commercial real estate portfolio. This compared to no provision in the prior quarter. Non-accrual loans declined during the quarter to $8.5 million, or 0.40% of the loan portfolio, at June 30, 2026, compared to $8.6 million or 0.41% at March 31, 2026, and $26.9 million, or 1.27%, at December 31, 2025.

Current wording

We recorded a provision for credit losses on loans of $500 thousand in the third quarter of 2026, driven by higher loan balances. This compared to the reversal of the provision for credit losses on loans of $320 thousand in the prior quarter driven by lower loan balances and improved credit quality in the non-owner occupied commercial real estate portfolio. Non-accrual loans increased during the quarter to $9.7 million, or 0.45% of the loan portfolio, at September 30, 2026, compared to $26.9 million, or 1.27%, at December 31, 2025.

Previous wording

We recorded a reversal of the provision for credit losses on loans of $320 thousand in the six months ended June 30, 2026, and recorded a provision for credit losses on loans of $75 thousand in the six months ended June 30, 2025.

Current wording

We recorded a provision for credit losses on loans of $180 thousand in the nine months ended September 30, 2026, and recorded a provision for credit losses on loans of $75 thousand in the nine months ended September 30, 2025.

Previous wording

Non-interest income was $3.2 million for the second quarter of 2026, compared to $3.8 million for the prior quarter. The decrease of $665 thousand from the prior quarter was primarily attributable to a decrease in dividend income on FHLB stock of $656 thousand which included the $479 thousand special dividend received in the first quarter. There was also bank owned life insurance death benefits of $479 thousand received in the first quarter, compared to $59 thousand in the second quarter. These were partially offset by the increase in fee income within other income of $377 thousand due to one-way sales of deposits in the quarter.

Current wording

Non-interest income was $3.7 million for the third quarter of 2026, compared to $3.2 million for the prior quarter. The increase of $501 thousand was primarily due to a $251 thousand increase in service charges on business deposit accounts following the July 1 implementation of an updated pricing strategy designed to better align pricing with service levels. There was also a $199 thousand special dividend received in the quarter on the Federal Home Loan Bank stock. Additionally, within other income there was a $103 thousand increase to $489 thousand from $386 thousand in the prior quarter in one-way sales fee income, earned from placing customer deposit balances with third-party deposit network programs. These were partially offset by the decrease in earnings on bank-owned life insurance death benefits of $59 thousand.

Previous wording

Non-interest income was $7.0 million for the first six months ended June 30, 2026, compared to a loss of $12.7 million for the same period of the prior year. The prior year included $18.7 million in pre-tax losses on the sale of investment securities. Excluding those losses, non-interest income increased $1.0 million primarily due to an increase of $317 thousand earned in dividends including a special dividend on Federal Home Loan Bank stock received, an increase of $232 thousand earned on bank-owned life insurance death benefits, and increased fees on one-way sales of deposits of $395 thousand included in other income in 2026.

Current wording

Non-interest income was $10.7 million for the first nine months ended September 30, 2026, compared to a loss of $10.0 million ($8.7 million income, non-GAAP) for the same period of the prior year. The prior year included $18.7 million in pre-tax losses on the sale of investment securities. Excluding those losses, non-interest income increased $1.9 million primarily due to an increase of $884 thousand to $885 thousand from $1 thousand in prior year in one-way sales fee income within other income, $349 thousand earned in dividends including a special dividend on Federal Home Loan Bank stock received, and an increase of $295 thousand earned on service charges on deposit accounts.

Previous wording

Non-interest expense totaled $21.6 million for the second quarter of 2026, compared to $22.5 million for the prior quarter, a decrease of $942 thousand. This was primarily due to a decrease of $785 thousand in salaries and related benefits. Expenses decreased due to incentive bonus accruals, 401(k) contribution matching, profit sharing accruals, and stock-based compensation grants that occurred in the first quarter and were not repeated in the second quarter. There were also decreases of $247 thousand in charitable contributions because the majority of annual giving occurs in the first quarter, and $175 thousand in FDIC insurance. This was partially offset by an increase of $278 thousand in professional services expense in the second quarter of 2026 mostly related to audit, operations, compliance, information security and accounting fees.

Current wording

Non-interest expense totaled $20.6 million for the third quarter of 2026, compared to $21.6 million for the prior quarter, a decrease of $1.0 million. This was primarily due to a decrease of $465 thousand in salaries and related benefits which included an adjustment to the incentive accrual as well as the impact of a decreased average number of full-time equivalent employees at the end of the third quarter. There were also decreases of $239 thousand in FDIC insurance mostly due to the improved net income ratio, $263 thousand in other expenses, and $132 thousand in professional services expense mostly related to audit, operations, compliance, information security and accounting fees. This was partially offset by an increase of $84 thousand in data processing expenses due to annual fees paid in the current quarter.

Previous wording

Non-interest expense totaled $44.1 million for the first six months ending June 30, 2026, compared to $41.0 million for the same period of 2025, an increase of $3.1 million. This was primarily due to an increase of $1.9 million in salaries and benefits. Expenses increased due to a higher full-time employee count and annual salary increases. There were also increases of $619 thousand in professional services expense and $476 thousand in FDIC insurance in the first six months of 2026.

Current wording

Non-interest expense totaled $64.7 million for the first nine months ending September 30, 2026, compared to $61.3 million for the same period of 2025, an increase of $3.4 million. This was primarily due to an increase of $2.0 million in salaries and benefits. Expenses increased due to a higher full-time employee count and annual salary increases. There were also increases of $743 thousand in professional services expense and $333 thousand in FDIC insurance in the first nine months of 2026.

Previous wording

The income tax provision for the second quarter of 2026 totaled $3.4 million at an effective tax rate of 27.0%, compared to a provision of $3.1 million at an effective tax rate of 26.6% in the prior quarter. The increase in the provision for income taxes in the second quarter of 2026 reflected higher pre-tax income as compared to the prior quarter. The increase in the effective tax rate in the second quarter of 2026 was primarily driven by the treatment of certain permanent tax differences, which had a greater proportional effect given the lower pre‑tax income in the prior quarter.

Current wording

The income tax provision for the third quarter of 2026 totaled $3.7 million at an effective tax rate of 27.4%, compared to a provision of $3.4 million at an effective tax rate of 27.0% in the prior quarter. The increase in the provision for income taxes in the third quarter of 2026 reflected higher pre-tax income as compared to the prior quarter. The increase in the effective tax rate in the third quarter of 2026 was primarily driven by the slight decrease of certain permanent tax adjustments, primarily within tax-exempt loan interest income.

Previous wording

The income tax provision for the first six months of 2026 totaled $6.5 million at an effective tax rate of 26.8%, compared to an income tax benefit of $1.1 million at an effective tax rate of 22.4% for the first six months of 2025. The increase in the provision for incomes taxes and effective tax rate in the first six months of 2026, as compared to the same period a year ago, was primarily due to an increase of $29.0 million in pre-tax income.

Current wording

The income tax provision for the first nine months of 2026 totaled $10.3 million at an effective tax rate of 27.0%, compared to an income tax provision of $1.0 million at an effective tax rate of 21.0% for the first nine months of 2025. The increase in the provision for income taxes and effective tax rate in the first nine months of 2026, as compared to the same period a year ago, was primarily due to an increase of $33.1 million in pre-tax income.

Previous wording

Total cash, cash equivalents and restricted cash were $279.6 million at June 30, 2026, an increase of $54.3 million compared to $225.3 million at December 31, 2025, driven by proceeds from paydowns and maturities of investment securities of $137.9 million, loan payoffs and paydowns of $101.8 million, and $40.4 million in amortization of principal, partially offset by $123.6 million in loan fundings, purchases of investment securities of $65.2 million, $45.6 million from net decrease of deposits, and dividends of $8.1 million to shareholders.

Current wording

Total cash, cash equivalents and restricted cash were $265.3 million at September 30, 2026, an increase of $40.0 million compared to $225.3 million at December 31, 2025, driven by proceeds from paydowns and maturities of investment securities of $189.2 million, loan payoffs and paydowns of $133.4 million, $62.6 million in amortization of principal, and $29.5 million in increased cash from operations, partially offset by $187.2 million in loan fundings, purchases of investment securities of $124.1 million, the loan pool purchase of $31.1 million, $20.3 million from a net decrease in deposits, and dividends of $12.1 million to shareholders.

Previous wording

The investment securities portfolio totaled $1.243 billion at June 30, 2026, a decrease of $85.0 million from $1.328 billion at December 31, 2025. The decrease was primarily due to principal repayments and calls/maturities totaling $137.9 million, partially offset by purchases of AFS securities of $65.2 million.

Current wording

The investment securities portfolio totaled $1.215 billion at September 30, 2026, a decrease of $112.6 million from $1.328 billion at December 31, 2025. The decrease was primarily due to principal repayments and calls/maturities totaling $189.2 million, and an increase of $47.7 million in unrealized losses on available-for-sale ("AFS") securities, partially offset by purchases of AFS securities of $124.1 million.

Previous wording

The portfolio is eligible for pledging to FHLB or the Federal Reserve as collateral for borrowing, and is comprised of high credit quality investments with an average effective duration of 2.91. The portfolio generates cash flows monthly from interest, principal amortization and payoffs, which supports the Bank's liquidity. Those cash flows totaled $92.1 millionand $73.4 million in the second quarter of 2026 and the first quarter of 2026, respectively. Refer to Note 4, Investment Securities, to the consolidated financial statements in this Form 10-Q.

Current wording

The portfolio is eligible for pledging to FHLB or the Federal Reserve as collateral for borrowing and is comprised of high credit quality investments with a weighted average effective duration of 3.0. The portfolio generates cash flows monthly from interest, principal amortization and payoffs, which supports the Bank's liquidity. Those cash flows totaled $64.4 million and $92.1 million in the third quarter of 2026 and the second quarter of 2026, respectively. Refer to Note 4, Investment Securities, to the consolidated financial statements in this Form 10-Q.

Previous wording

Loans totaled $2.101 billion as of June 30, 2026, compared to $2.121 billion as of December 31, 2025 with a decrease of $19.9 million. See the rollforward of loan balances below.

Current wording

Loans totaled $2.144 billion as of September 30, 2026, compared to $2.121 billion as of December 31, 2025 with an increase of $23.5 million. See the rollforward of loan balances below.

Previous wording

For the six months ending June 30, 2026, loans originated were $178.9 million ($123.6 million funded) compared to $132.8 million ($98.0 million funded) in the same period of the prior year. The second quarter of 2026 originations exceeded both prior quarter and prior year's second quarter.

Current wording

For the nine months ending September 30, 2026, loans originated were $281.3 million ($187.2 million funded) compared to $232.5 million ($167.0 million funded) in the same period of the prior year.

Previous wording

Payoffs in the six months ended June 30, 2026 were $101.8 million, compared to $59.9 million in the prior year including a significant increase in the second quarter of 2026 mostly related to planned exits and customer asset sales. In addition, net utilization of credit lines increased to $15.1 million during the six months ended June 30, 2026, compared to the net decrease in utilization of credit lines of $6.6 million in the prior year.

Current wording

Payoffs in the nine months ending September 30, 2026 were $133.4 million, compared to $95.9 million in the prior year, including a significant increase in the second quarter of 2026, mostly related to planned exits and customer asset sales. In addition, net utilization of credit lines increased to $17.6 million during the nine months ended September 30, 2026, compared to the net decrease in utilization of credit lines of $3.2 million in the prior year.

Previous wording

There were significant improvements to our credit quality in the first six months of 2026 including non-accrual balances, classified loan balances and past due loan balances. Non-accrual loans declined by $18.4 million during that time to $8.5 million, or 0.40% of total loans, compared to $26.9 million, or 1.27%, at December 31, 2025. The reduction was driven primarily by the sale of two non-owner occupied commercial real estate loans totaling $16.3 million in the first quarter of 2026 with continued payoffs in the second quarter.

Current wording

There were significant improvements to non-accrual balances in the first nine months of 2026 which declined by $17.2 million during that time to $9.7 million, or 0.45% of total loans, compared to $26.9 million, or 1.27%, at December 31, 2025. The reduction was driven primarily by the sale of two non-owner occupied commercial real estate loans totaling $16.3 million in the first quarter of 2026 with continued payoffs in the second and third quarters.

Previous wording

Classified loans declined by $12.2 million during the first six months of 2026 to $19.9 million from $32.1 million at December 31, 2025. The improvement was driven primarily by the sale of the two non‑owner occupied commercial real estate loans previously discussed, along with payoffs totaling $2.6 million. These positive trends were partially offset by downgrades totaling $8.0 million into the classified category, $2.2 million of which occurred in the second quarter. The Bank remains disciplined and proactive in our credit management approach with close monitoring and active resolution efforts across the portfolio.

Current wording

Classified loans increased by $2.9 million during the first nine months of 2026 to $35.0 million from $32.1 million at December 31, 2025. This was driven primarily by downgrades totaling $26.8 million including a $14.1 million owner-occupied commercial real estate relationship downgraded in the third quarter facing a borrower-specific challenge. The loan is well-collateralized, the borrower is paying as agreed, and there is no expected loss potential. Partially offsetting the increase were the sales of the two non‑owner occupied commercial real estate loans in the first quarter, referenced above, reducing the balance by $16.3 million, payoffs of $5.8 million, and upgrades and paydowns of $775 thousand and $617 thousand, respectively. The Bank remains disciplined and proactive in our credit management approach with close monitoring and active resolution efforts across the portfolio.

Previous wording

Accruing loans past due 30 to 89 days totaled$2.0 million at June 30, 2026, down from$2.8 million at December 31, 2025.

Current wording

Accruing loans past due 30 to 89 days totaled $2.6 million at September 30, 2026, down from $2.8 million at December 31, 2025.

Previous wording

Loans designated as special mention, which are not considered adversely classified, decreased to $100.9 million at June 30, 2026 compared to $118.0 million at December 31, 2025. The $17.1 million net decrease reflects $22.5 million in payoffs, $12.0 million in upgrades, $5.7 million in downgrades out of the category and $2.0 million in contractual amortization and payoffs, partially offset by $24.6 million that migrated into special mention.

Current wording

Loans designated as special mention, which are not considered adversely classified, decreased to $65.1 million at September 30, 2026, compared to $118.0 million at December 31, 2025. The $53.0 million net decrease reflects $27.6 million in upgrades, $24.3 million in payoffs, $23.3 million in downgrades out of the category and $2.4 million in contractual amortization and payoffs, partially offset by $24.6 million that migrated into special mention.

Previous wording

Net charge-offs totaled $7.3 million in the first six months of 2026 compared to $877 thousand in the prior year during the same time period. Approximately $7.2 million of the charge‑offs were related to the two non-accrual loans that were sold in the first quarter of 2026. These charge‑offs were fully offset by specific reserves that were already in place for the two loans.

Current wording

Net charge-offs totaled $7.3 million in the first nine months of 2026 compared to $878 thousand in the prior year during the same time period. Approximately $7.2 million of the charge‑offs were related to the two non-accrual

Previous wording

During the first six months of 2026, total liabilities decreased by $50.1 million to $3.460 billion. Deposits totaled $3.370 billion at June 30, 2026, a decrease of $45.6 million, compared to $3.416 billion at December 31, 2025.

Current wording

During the first nine months of 2026, total liabilities decreased by $22.8 million to $3.487 billion. Deposits totaled $3.395 billion at September 30, 2026, a decrease of $20.3 million, compared to $3.416 billion at December 31, 2025.

Previous wording

The majority of the decrease in deposits was due to a decrease of $179.8 million in interest bearing transaction accounts, $47.5 million in time accounts and $17.1 million in non-interest bearing deposits, partially offset by an increase of $205.5 million in money market deposits. The decrease was primarily attributable to a small number of relationships and reflected seasonal customer activity and investment policy decisions, rather than broader changes in deposit trends. In addition, seasonal tax-related outflows contributed to the second quarter decrease. Interest bearing transaction accounts decreased while money market accounts increased primarily as a result of the transfer of approximately $170 million in reciprocal deposits during the second quarter. As of June 30, 2026, total one-way sales decreased to zero although the Bank strategically sold an average of $94.7 million during the second quarter which enhanced non-interest income and net interest margin. Non-interest bearing deposits continued to make up a strong 36.7% of total deposits at June 30, 2026, consistent with December 31, 2025.

Current wording

Interest-bearing transaction accounts decreased by $170.2 million while money market accounts increased by $191.8 million as a result of the transfer of approximately $170 million in reciprocal deposits between account types in the second quarter. The overall decrease in deposits was primarily attributable to a small number of relationships and reflected seasonal customer activity and investment policy decisions, rather than broader changes in deposit trends. As of September 30, 2026, total one-way sales balances were zero although the Bank strategically sold an average of $130.6 million during the third quarter and $93.7 million during the second quarter, which enhanced non-interest income and net interest margin. Noninterest-bearing deposits continued to make up a strong 37.8% of total deposits at September 30, 2026, an increase from 36.7% at December 31, 2025.

Previous wording

The Bank had no outstanding short-term borrowings at June 30, 2026 and December 31, 2025. Net available funding sources, including unrestricted cash, unencumbered available-for-sale securities, and total available borrowing capacity was $2.177 billion, or 65% of total deposits and 214% of estimated uninsured and/or uncollateralized deposits as of June 30, 2026.

Current wording

The Bank had no outstanding short-term borrowings at September 30, 2026, and December 31, 2025. Net available funding sources, including unrestricted cash, unencumbered available-for-sale securities, and total available borrowing capacity was $2.162 billion, or 64% of total deposits and 178.5% of estimated uninsured and/or uncollateralized deposits as of September 30, 2026.